Brown Forman Corp · 10-K · For 4/30/02

Filed On 7/26/02 3:58pm ET   ·   SEC File 2-26821   ·   Accession Number 14693-2-16

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 United States
Securities and Exchange Commission
Washington, D.C. 20549
 FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2002
Commission file number 1-123

BROWN-FORMAN CORPORATION
(Exact name of registrant as specified in its charter)

             Delaware                                   61-0143150
  (State or other jurisdiction of                        (IRS Employer
       incorporation or organization)                      Identification No.)

    850 Dixie Highway                                    40210
      Louisville, Kentucky                                (Zip Code)
(Address of principal executive offices)                                  

 Registrant's telephone number, including area code (502) 585-1100

Securities registered pursuant to Section 12(b) of the Act:                     

                                                       Name of Each Exchange
           Title of Each Class                         on Which Registered
             -------------------                        ----------------------
Class A Common Stock (voting) $0.15 par value            New York Stock Exchange

Class B Common Stock (nonvoting) $0.15 par value         New York Stock Exchange

Securities registered pursuant to                                               
Section 12(g) of the Act:                              None                 

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was     
required to file such reports), and (2) has been subject to such filing         
requirements for the past 90 days.                                              

Yes |X| No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405  
of Regulation S-K is not contained herein, and will not be contained, to the    
best of registrant's knowledge, in definitive proxy or information statements   
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]                                                                  

The aggregate market value, at April 30, 2002, of the voting and nonvoting      
equity held by nonaffiliates of the registrant was approximately $2,700,000,000.

The number of shares outstanding for each of the registrant's classes of        
Common Stock on June 30, 2002 was:                                              
Class A Common Stock (voting)            28,891,260                   
Class B Common Stock (nonvoting)         39,498,469                   

 DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 2002 Annual Report to Stockholders are incorporated
by reference into Parts I, II, and IV of this report.  Portions of the Proxy    
Statement of Registrant for use in connection with the Annual Meeting of        
Stockholders to be held July 25, 2002 are incorporated by reference into Part   
III of this report.                                                             

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PART I
Item 1.  Business                                                               

(a)  General development of business:                                           

Brown-Forman Corporation ("we," "us," or "our" below) was incorporated under the
laws of the State of Delaware in 1933,  successor to a business  founded in 1870
as  a  partnership  and  subsequently   incorporated   under  the  laws  of  the
Commonwealth of Kentucky in 1901. Our principal executive offices are located at
850 Dixie Highway, Louisville, Kentucky 40210                                   
(mailing address: P.O. Box 1080, Louisville, Kentucky 40201-1080).              

(b)  Financial information about industry segments:                             

Information  regarding net sales,  operating income, and total assets of each of
our  business  segments  is  in  Note  12 of  Notes  to  Consolidated  Financial
Statements  on  page  35 of  our  2002  Annual  Report  to  Stockholders,  which
information is incorporated into this report by reference in response to Item 8.

(c) Narrative description of business:                                          

The following is a description of our operations.                               

Wine and Spirits Segment                                                        
------------------------                                                        
Wine  and  Spirits  operations  include  manufacturing,   bottling,   importing,
exporting,  and  marketing a wide variety of  alcoholic  beverage  brands.  This
Segment also manufactures and markets new and used oak barrels.                 

The Segment's brands consist of the following:                                  

Jack Daniel's Tennessee Whiskey                                       
Southern Comfort                                                      
Canadian Mist Canadian Whisky                                         
Early Times Kentucky Whisky                                           
Finlandia Vodkas*                                                     
Old Forester Kentucky Straight Bourbon Whisky                         
Glenmorangie Single Highland Malt Scotch Whiskies*                    
Jack Daniel's Country Cocktails                                       
Gentleman Jack Rare Tennessee Whiskey                                 
Jack Daniel's Single Barrel Tennessee Whiskey                         
Woodford Reserve Kentucky Straight Bourbon Whiskey                    
Fetzer Vineyards California Wines                                     
Korbel California Champagnes, Wines and Brandy*                       
Bolla Italian Wines                                                   
Sonoma-Cutrer Chardonnay Wines                                        
Bonterra Vineyards California Wines                                   
Jekel Vineyards California Wines                                      
Fontana Candida Italian Wines                                         
Don Eduardo Tequilas*                                                 
Ardberg Single Islay Malt Scotch Whisky*                              
Usher's Scotch Whisky*                                                
McPherson Australian Wines*                                           

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Mariah California Wines                                               
Chateau Tahbilk Australian Wines                                      
Tuaca Liqueur*                                                        
Pepe Lopez Tequilas                                                   
Bel Arbor California Wines                                            
Glen Moray Single Speyside Malt Scotch Whisky*                        
Michel Picard French Wines*                                           
Owen's Estate Australian Wines*                                       
Geoff Merrill Reserve Australian Wines*                               
Appleton Estate Jamaica Rum*                                          
Amarula Cream Liqueur*                                                

* Brands represented in the U.S and other select markets by Brown-Forman

Statistics  based  on  case  sales,   published  annually  by  a  leading  trade
publication,  rank Jack  Daniel's as the largest  selling  bourbon or  Tennessee
whiskey  in the  United  States,  Canadian  Mist as the  second-largest  selling
Canadian whisky in the United States,  and Southern Comfort as the third-largest
selling cordial in the United States.                                           

A leading industry trade publication  reported Korbel  California  Champagnes as
the  largest  selling  premium  champagne  in  the  United  States.  This  trade
publication also reported that Fetzer was ranked  seventeenth among all domestic
table wines, and second in the $7 to $10 price segment.  Among numerous imported
wines,  Bolla  Italian  Wine is the leading  premium  Italian  table wine in the
United States, and ranks fourth among imported wines in the $7 to $10 segment.  

We believe the statistics used to rank these products are reasonably accurate.  

Our  strategy  with  respect to the Wine and  Spirits  Segment is to market high
quality products that satisfy the preferences of consumers of legal drinking age
and to support  those  products  with  extensive  international,  national,  and
regional  marketing  programs.  These  programs are intended to extend  consumer
brand recognition and brand loyalty.                                            

Sales  managers  and  representatives  or brokers  represent  the Segment in all
states. The Segment distributes its spirits products domestically either through
state agencies or through  wholesale  distributors.  The contracts that  we have
with many of our  distributors  have formulas which determine  reimbursement  to
distributors  if we  terminate  them;  the  amount  of  reimbursement  is  based
primarily  on the  distributor's  length  of  service  and a  percentage  of its
purchases  over time.  Some  states  have  statutes  which  limit our ability to
terminate distributor contracts.                                                

Jack  Daniel's  Tennessee  Whiskey,   Southern  Comfort,  and  Fetzer  Vineyards
California  Wines are the  principal  products  exported by the  Segment.  These
brands  are  sold  through  contracts  with  brokers  and  distributors  in most
countries.                                                                      

The principal  raw  materials  used in  manufacturing  and  packaging  distilled
spirits are corn, rye, malted barley, glass, cartons, and wood for new white oak
barrels,  which are used for storage of bourbon and Tennessee  whiskey.  None of
these raw  materials is  in short  supply,  and there are adequate  sources from
which they may be obtained.                                                     
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The  principal  raw  materials  used in the  production  of wines are grapes and
packaging  materials.  Grapes  are  primarily  purchased  under  contracts  with
independent  growers and, from time to time,  are adversely  affected by weather
and other forces which may limit  production.  We believe that our relationships
with our growers are good.                                                      

Due to aging  requirements,  production  of whiskeys is scheduled to meet demand
three to five  years in the  future.  Accordingly,  inventories  are  larger  in
relation  to sales  and  total  assets  than  would  be  normal  for most  other
businesses.                                                                     

The  industry  is  highly  competitive  and there  are many  brands  sold in the
consumer market. Trade information indicates that we are one of the largest wine
and spirit suppliers in the United States in terms of revenues.                 

The wine and spirits  industry is regulated  by the Bureau of Alcohol,  Tobacco,
and  Firearms  of  the  United  States  Treasury   Department  with  respect  to
production,  blending,  bottling, sales, advertising,  and transportation of its
products.  Also, each state regulates  advertising,  promotion,  transportation,
sale, and distribution of such products.                                        

Under  federal  regulations,  whiskey  must be aged for at least two years to be
designated  "straight  whiskey."  The Segment ages its  straight  whiskeys for a
minimum of three to five years. Federal regulations also require that "Canadian"
whisky must be  manufactured in Canada in compliance with Canadian laws and must
be aged in Canada for at least three years.                                     

Consumer Durables Segment                                                       
-------------------------                                                       
The Consumer Durables Segment includes the manufacturing and/or marketing of the
following:                                                                      

Fine China Dinnerware                                                 
Casual Dinnerware and Glassware                                       
Crystal Stemware and Barware                                          
China and Crystal Giftware                                            
Collectibles, Home Decor and Jewelry                                  
Sterling Silver, Silver-Plated and Metal Giftware                     
Sterling Silver and Stainless Steel Flatware                          
Contemporary Tabletop, Houseware and Giftware                         
Luggage                                                               
Business Cases                                                        
Personal Leather Accessories                                          

Segment products are sold directly to consumers  through  company-owned  stores,
direct mail, catalog, and the Internet. Also, products are sold in the wholesale
channel by segment-employed  sales  representatives  under various  compensation
arrangements,  and  where  appropriate  to the class of  trade,  by  specialized
independent commissioned sales representatives and independent distributors.    

The  Segment's  products are marketed  domestically  through  authorized  retail
stores consisting of department  stores specialty stores,  and jewelry shops and
through  retail stores  operated by the Segment.  Products are also  distributed
domestically through the institutional,  incentive,  premium,  business gift and
military  exchange  classes of trade,  and  internationally  through  authorized
retailers,  duty free stores  and/or  distributors  in select  foreign  markets.
Specially  created  collectible  jewelry and home decor products are distributed
both domestically and in the United Kingdom through the direct response channel,
including mail-order, catalogs and the Internet.                                

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Fine  china  dinnerware,  crystal  stemware,  barware  and  giftware,  stainless
flatware, and silver-plated and metal giftware are marketed under both the Lenox
and Gorham trademarks.  Contemporary  tabletop,  houseware and giftware products
are marketed under the Dansk trademark. Premium casual dinnerware and fine china
giftware are marketed under the Lenox  trademark.  Sterling  silver flatware and
sterling  giftware  are  marketed  under the Gorham and Kirk Stieff  trademarks.
Luggage, business cases, and personal leather accessories are marketed under the
Hartmann and Wings trademarks. The direct response sales in the United States of
specially  designed  collectible  jewelry and home decor  products  are marketed
under the Lenox trademark,  while such sales abroad are marketed primarily under
the Brooks & Bentley trademark.                                                 

The Lenox, Gorham, and Hartmann brand names hold significant  positions in their
industries.  The Segment has granted licenses for the use of the Lenox trademark
on fine table linens and lamps and other electrical  lighting products,  subject
to the terms of licensing agreements.                                           

We believe the Segment is the largest domestic manufacturer and marketer of fine
china dinnerware and the only significant domestic  manufacturer of fine quality
china giftware.  The Segment is also a leading  manufacturer  and distributor of
fine quality  luggage,  business cases, and personal  leather  accessories.  The
Segment  competes  with a number of other  suppliers  and is  subject to intense
foreign  competition in the  distribution  of its fine china,  contemporary  and
casual  dinnerware,  crystal  stemware and  giftware,  stainless  flatware,  and
luggage products in the wholesale  channel.  In the retail channel,  the Segment
also faces intense  competition  from lifestyle and home  specialty  stores that
market their own brands.                                                        

In the Segment's china and stainless businesses,  competition is based primarily
on quality,  design, brand, style, product appeal,  consumer  satisfaction,  and
price. In its luggage,  business case and personal leather accessories business,
competition is based primarily on brand awareness,  quality,  design, style, and
price.  In  its  direct   response/mail-order   business,   the  most  important
competitive  factors  are the brand,  product  appeal,  design,  sales/marketing
program, service, and price. In its crystal, sterling silver, silver-plated, and
metal  giftware  businesses,  competition  is based  primarily  on  price,  with
quality,  design,  brand, style, product appeal, and consumer  satisfaction also
being factors.                                                                  

Clay and feldspar are the  principal  raw materials  used to  manufacture  china
products. Gold and platinum are significant raw materials used to decorate china
products. Fine silver is the principal raw material used to manufacture sterling
silver giftware and flatware products.  Leather and nylon, tweed and wool fabric
are the principal raw materials used to manufacture luggage,  business cases and
personal leather  accessories.  It is anticipated that raw materials used by the
Segment will be in adequate  supply.  However,  the  acquisition  price of gold,
platinum,  and fine silver is  influenced  significantly  by worldwide  economic
events and commodity trading.                                                   

Segment revenues are  traditionally  greater in the second and third quarters of
the fiscal year, primarily because of seasonal holiday buying.                  

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Other Information                                                               
-----------------                                                               
As of April 30, 2002, we employ  approximately  7,000 persons,  including  1,600
employed on a part-time or temporary basis.                                     

We are an equal opportunity  employer and we recruit and place employees without
regard to race, color, national or ethnic origin, gender, age, religion, veteran
status, sexual preference, or disability.                                       

We believe our employee relations are good.                                     

For  information  on the effects of compliance  with federal,  state,  and local
environmental regulations, refer to Note 14, "Environmental Matters," on page 35
of our 2002 Annual Report to  Stockholders,  which  information is  incorporated
into this report by reference in response to Item 8.                            

Item 2.  Properties                                                             

The corporate offices consist of office buildings,  including renovated historic
structures, all located in Louisville, Kentucky.                                

Significant properties by business segments are as follows:                     

Wine and Spirits Segment                                                        
------------------------                                                        
The  facilities  of the Wine and  Spirits  Segment  are shown  below.  The owned
facilities are held in fee simple.                                              

Owned facilities:                                                               
-  Production facilities:                                                       
-   Lynchburg, Tennessee                            
-   Louisville, Kentucky                            
-   Collingwood, Ontario                            
-   Shively, Kentucky                               
-   Woodford County, Kentucky                       
-   Frederiksted, St. Croix, U.S. Virgin Islands    
-   Mendocino County, California                    
-   Monterey County, California                     
-   Sonoma County, California                       
-   Pedemonte, Italy                                
-   Soave, Italy                                    

-  Warehousing facilities:                                                      
-   Lynchburg, Tennessee                            
-   Louisville, Kentucky                            
-   Collingwood, Ontario                            
-   Shively, Kentucky                               
-   Woodford County, Kentucky                       
-   Mendocino County, California                    
-   Monterey County, California                     
-   Sonoma County, California                       
-   Pedemonte, Italy                                
-   Soave, Italy                                    

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Leased facilities:                                                              
-  Production and bottling facility in Dublin, Ireland                          
-  Wine production and warehousing facility in Mendocino County, California     
-  Vineyards in Mendocino, Monterey and San Luis Obispo Counties, California    

We believe that the productive capacities of the Wine and Spirits Segment are   
adequate for the business, and that the facilities are maintained in a good     
state of repair.                                                                

Consumer Durables Segment                                                       
-------------------------                                                       
The  facilities  of the Consumer  Durables  Segment are shown  below.  The owned
facilities are held in fee simple.                                              

Owned facilities:                                                               
-   Office facilities:                                                          
-    Lenox corporate - Lawrenceville, New Jersey      
  -    Headquarters for Lenox Direct Response/Collectibles
                 Division (includes retail store and warehouse) - Langhorne,
Pennsylvania                              

-   Production and office facilities (each of which includes a retail store):   
      -    Lenox - Pomona, New Jersey; Oxford, North Carolina; and
Kinston, North Carolina     
-    Lenox/Gorham - Smithfield, Rhode Island          
-    Hartmann - Lebanon, Tennessee                    

-   Warehousing facilities:                                                     
-    Lenox/Dansk/Gorham  -  Williamsport, Maryland    

Leased facilities:                                                              
-   Office facilities:                                                          
-    Dansk headquarters - White Plains, New York      
        -    Norfolk and DID, Inc. headquarters - Wilmington, Delaware
-    Brooks & Bentley headquarters - Kent, England    
-    Hartmann (includes showroom) - New York, New York

-   Warehousing facilities:                                                     
           -    Lenox - South Brunswick, New Jersey (includes retail store);
                        Oxford, North Carolina;  and Kinston, North Carolina
-    Lenox/Dansk/Gorham  -  Williamsport, Maryland    
 -    Lenox Direct Response/Collectibles - Bristol Twp.,
                                          Pennsylvania
-    Hartmann - Lebanon, Tennessee                    

-   Retail stores:                                                              
             -    The Segment operates 54 Lenox stores in 28 states and 55 Dansk
             stores in 28 states.  In addition, the Segment operates 5
Hartmann luggage outlet stores in 5 states. 

-   Showrooms:                                                                  
       -    Lenox/Dansk/Gorham - New York, New York;  Dallas, Texas;
Atlanta, Georgia;                           

The lease terms expire at various dates and are generally renewable.            

We believe that the Segment's  facilities are in good condition and are adequate
for the business.                                                               

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Item 3.  Legal Proceedings                                                      

None.                                                                           

Item 4.  Submission of Matters to a Vote of Security Holders                    

None.                                                                           

Executive Officers of the Registrant                                            

                                        Principal Occupation and
Name                         Age             Business Experience      
  ----                         ---       ---------------------------------

Owsley Brown II                    59       Chairman and Chief Executive Officer
                                  of the company since 1995.

William M. Street                  63       President of the company since      
                                          November 2000.  Vice Chairman from
                                          1987 to 2000.  President and Chief
                                         Executive Officer of Brown-Forman
                                          Beverages Worldwide (a division of
                                 Brown-Forman) since 1994.

Phoebe A. Wood                     49       Executive Vice President and Chief  
                                        Financial Officer of the company
                                            since February 2001.  Vice President
                                       and Chief Financial Officer for
                                     Propel, Inc. (a subsidiary of
                                     Motorola) from August 2000 to
                                       February 2001.  Vice President,
                                         Finance, Planning and Control for
                                            ARCO Alaska, Inc. from 1996 to 2000.

Michael B. Crutcher                58       Senior Vice President, General      
                                          Counsel, and Secretary since 1989.

Donald C. Berg                     47       Senior Vice President and           
                                         Director of Corporate Development
                                    and Strategy since May 2001.
                                            President of the company's Advancing
                                            Markets Group (AMG) from August 1999
                                           to May 2001.  Senior Vice President
                                         and Managing Director of AMG from
                                   August 1997 to August 1999.

Lois A. Mateus                     55       Senior Vice President of Corporate  
                                    Communications and Corporate
                            Services since 1988.

James S. Welch, Jr.                43       Senior Vice President and Executive 
                                         Director of Human Resources since
                                            March 1999.  Vice President of Human
                                            Resources for Brown-Forman Beverages
                                            Worldwide from January 1998 to March
                                    1999.  Vice President of the
                                           company's Business Consulting Group
                                  from 1995 to January 1998.

Stanley E. Krangel                 51       President of Lenox, Incorporated    
                                            (a subsidiary of Brown-Forman) since
                                      June 1998.  President of Lenox
                                           Collections from 1995 to June 1998.

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 PART II

Item 5.  Market for the Registrant's Common Equity and Related Stockholder      
Matters                                                       

Except as presented below, for the information required by this item refer to   
the section entitled "Quarterly Financial Information" appearing on the         
"Highlights" page of the 2002 Annual Report to Stockholders, which information  
is incorporated into this report by reference.                                  

Holders of record of Common Stock at April 30, 2002:                            
Class A Common Stock (Voting)               3,734             
Class B Common Stock (Nonvoting)            4,453             

The  principal market for Brown-Forman common shares is the New York Stock      
Exchange.                                                                       

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Equity Compensation Plan Information

The  company  maintains  two  plans  that may  grant  equity  compensation:  the
shareholder-approved  Brown-Forman  Omnibus  Compensation Plan (described in the
proxy statement) and the Non-Employee  Directors'  Compensation  Plan (described
below).  Both of these plans  require the company to fund all equity awards with
stock  purchased on the open market,  so the equity of existing  shareholders is
not diluted.                                                                    

                                                        [Enlarge/Download Table]

                         Number of securities to           Weighted-average           Number of securities   
                        be issued upon exercise of         exercise price of         remaining available for 
                           outstanding options,           outstanding options,        future issuance under  
Plan Category              warrants and rights         warrants and rights(Note 1)  equity compensation plans
                                                                                                             
Equity compensation                                                                                          
plans approved by                                                                                            
security holders                2,010,442                        $68.428                    1,282,424        

Equity compensation                                                                                          
plans not approved by                                                                                        
security holders                   60,332                        $59.012                    *(Note 2)        

Total                           2,070,774                        $68.154                       N/A           

<FN>                                                                                                         
Note 1: The difference in weighted-average exercise price between plans is                                   
        primarily due to a premium-priced, broad-based grant made to employees                               
        under the shareholder-approved plan. In most cases, grant dates and                                  
        grant prices are the same under both plans.                                                          
Note 2: This plan, which provides equity compensation for non-employee                                       
        directors, does not specify a specific maximum number of option shares                               
        that may be awarded. However, the company has filed with the Securities                              
        and Exchange Commission a registration statement covering the issuance                               
        of 150,000 shares under this plan.                                                                   
</FN>                                                                                                        

In order to align the  interests of the  company's  directors  with those of its
shareholders,  the  company  may  grant  stock  options  and  other  stock-based
incentive  awards  to  non-employee   directors  pursuant  to  the  Brown-Forman
Non-Employee  Directors'  Compensation  Plan (the Plan).  The Plan  requires the
company to buy all shares needed to satisfy the options and awards granted under
the Plan, so there is no dilution of the equity of existing shareholders.  Stock
options are granted at an exercise  price of not less than the fair market value
of the  underlying  stock  on the  date of the  grant.  The  Plan  administrator
determines  the dates on which the options may be exercised  and other terms and
restrictions,  which may vary by  award.  The Plan  administrator  also sets the
expiration  date,  which cannot be more than ten years from the grant date.  All
options  currently  outstanding  under the Plan are  exercisable  and expire ten
years after they were  granted.  No other  stock-based  awards have been granted
under the Plan.                                                                 

In fiscal  2002,  each  director  who was not an employee  received  options for
$25,000 worth of Class B common stock (1,292  options with a per share  exercise
price of $68.33 each).  In addition,  directors were allowed to elect in advance
of their  one-year term to receive  their  retainer in the form of an equivalent
value of stock options issued at the start of their terms.                      

Item 6.  Selected Financial Data                                                

For the  information  required  by this  item,  refer  to the  section  entitled
"Selected  Financial  Data"  appearing  on page 17 of the 2002 Annual  Report to
Stockholders, which information is incorporated into this report by reference.  

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Item 7.  Management's Discussion and Analysis of Financial Condition and Results
of Operations                                                 

For the  information  required  by this  item,  refer  to the  section  entitled
"Management's  Discussion and Analysis"  appearing on pages 18 through 24 of the
2002  Annual  Report  to  Stockholders,  and  the  section  entitled  "Important
Information  Regarding  Forward-Looking  Statements" appearing on page 38 of the
2002 Annual Report to Stockholders,  which information is incorporated into this
report by reference.                                                            

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk            

For the information required by this item, refer to the section entitled "Market
Risks"  appearing on page 24 of the 2002 Annual  Report to  Stockholders,  which
information is incorporated into this report by reference.                      

Item 8.  Financial Statements and Supplementary Data                            

For the information  required by this item, refer to the Consolidated  Financial
Statements,  Notes to Consolidated  Financial Statements,  Report of Independent
Accountants,  and Report of  Management  appearing on pages 25 through 37 of the
2002 Annual Report to Stockholders,  which information is incorporated into this
report by reference. For selected quarterly financial information,  refer to the
section entitled "Quarterly Financial Information" appearing on the "Highlights"
page  of  the  2002  Annual  Report  to  Stockholders,   which   information  is
incorporated into this report by reference.                                     

Item 9.  Changes in and Disagreements with Accountants on Accounting and        
Financial Disclosure                                          

None.                                                                           

PART III

Item 10.  Directors and Executive Officers of the Registrant                    

For the information  required by this item,  refer to the following  sections of
our definitive proxy statement for the Annual Meeting of Stockholders to be held
July 25, 2002, which  information is incorporated into this report by reference:
(a)  "Election of  Directors"  on page 4 through the fourth  paragraph on page 5
(for  information  on  directors);  and (b) the  last  paragraph  on page 7 (for
information on delinquent  Section 16 filings).  Also, see the information  with
respect to "Executive  Officers of the Registrant"  under Part I of this report,
which information is incorporated herein by reference.                          

Item 11.  Executive Compensation                                                

For the information  required by this item,  refer to the following  sections of
our definitive proxy statement for the Annual Meeting of Stockholders to be held
July 25, 2002, which  information is incorporated into this report by reference:
(a)  "Executive  Compensation"  on pages 10 through  13;  (b)  "Retirement  Plan
Descriptions" on page 14; and (c) "Director Compensation" on page 15.           

Item 12.  Security Ownership of Certain Beneficial Owners and Management        

For the information  required by this item, refer to the section entitled "Stock
Ownership"  appearing on pages 6 through 7 of our definitive proxy statement for
the Annual Meeting of Stockholders to be held July 25, 2002,  which  information
is incorporated into this report by reference.                                  

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Item 13.  Certain Relationships and Related Transactions                        

For the  information  required  by this  item,  refer  to the  section  entitled
"Transactions  with  Management"  appearing on page 17 of our  definitive  proxy
statement for the Annual Meeting of Stockholders to be held July 25, 2002, which
information is incorporated into this report by reference.                      

 PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K      

(a)  1 and 2 - Index to Consolidated Financial Statements and Schedule:         

                                                        [Enlarge/Download Table]
                                                                                      Reference              
                                                                                                   Annual    
                                                                          Form 10-K               Report to  
                                                                        Annual Report            Stockholders
                                                                            Page                   Page(s)   
                                                                                                             
Incorporated by reference to our Annual                                                                      
     Report to Stockholders for the year                                                                     
         ended April 30, 2002:                                                                               

     Consolidated Statement of Income for the                                                                
         years ended April 30, 2000, 2001, and 2002*                            --                   25      
     Consolidated Balance Sheet at April 30, 2000, 2001, and 2002*              --                 26 - 27   
     Consolidated Statement of Cash Flows for the                                                            
         years ended April 30, 2000, 2001, and 2002*                            --                   28      
     Consolidated Statement of Stockholders' Equity                                                          
         for the years ended April 30, 2000, 2001, and 2002*                    --                   29      
     Notes to Consolidated Financial Statements*                                --                 30 - 36   
     Report of Management*                                                      --                   37      
     Report of Independent Accountants*                                         --                   37      
     Important Information Regarding Forward-Looking Statements                 --                   38      

Consolidated Financial Statement Schedule:                                                                   
     Report of Independent Accountants on Financial Statement Schedule          S-1                  --      
     II - Valuation and Qualifying Accounts                                     S-2                  --      


All other  schedules for which  provision is made in the  applicable  accounting
regulations of the Securities and Exchange  Commission  have been omitted either
because  they are not  required  under the  related  instructions,  because  the
information  required is included in the consolidated  financial  statements and
notes thereto, or because they are inapplicable.                                

*  Incorporated by reference to Item 8 in this report.                          

(a)    3 - Exhibits: Filed with this report:                                    

Exhibit Index                                                                   
-------------                                                                   
  13      Brown-Forman Corporation's Annual Report to Stockholders for the
        year ended April 30, 2002, but only to the extent set forth in
           Items 1, 5, 6, 7, 7A and 8 of this Annual Report on Form 10-K for
the year ended April 30, 2002.                        

21      Subsidiaries of the Registrant.                               

23      Consent of PricewaterhouseCoopers LLP independent accountants.

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Previously Filed:                                                               
Exhibit Index                                                                 
-------------                                                                   
3(a)     Restated Certificate of Incorporation of registrant, which is  
    incorporated into this report by reference to Brown-Forman
Corporation's Form 10-K filed on July 19, 1994.       

  3(b)     Certificate of Amendment to Restated Certificate of Incorporation
            of registrant, which is incorporated into this report by reference
         to Brown-Forman Corporation's Form 10-K filed on July 19, 1994.

3(c)     Certificate of Ownership and Merger of Brown-Forman Corporation
            into Brown-Forman, Inc., which is incorporated into this report by
             reference to Brown-Forman Corporation's Form 10-K filed on July 19,
1994.                                                 

3(d)     Certificate of Amendment to Restated and Amended Certificate of
          Incorporation of Brown-Forman Corporation, which is incorporated
          into this report by reference to Brown-Forman Corporation's Form
10-K filed on July 19, 1994.                          

3(e)     The by-laws of registrant, as amended on May 25, 2000, which is
    incorporated into this report by reference to Brown-Forman
Corporation's Form 8-K filed on May 31, 2000.         

4      The Form of Indenture dated as of March 1, 1994 between      
             Brown-Forman Corporation and The First National Bank of Chicago, as
         Trustee, which is incorporated into this report by reference to
          Brown-Forman Corporation's Form S-3 (Registration  No. 33-52551)
filed on March 8, 1994.                               

   10(a)    A description of the Brown-Forman Omnibus Compensation Plan, which
          is incorporated into this report by reference to the Appendix of
            the registrant's definitive proxy statement for the Annual Meeting
of Stockholders held on July 27, 1995.                

10(b)    Brown-Forman Corporation Restricted Stock Plan, which is       
    incorporated into this report by reference to Brown-Forman
Corporation's Form 10-K filed on July 19, 1994.       

    10(c)    Brown-Forman Corporation Supplemental Excess Retirement Plan, which
       is incorporated into this report by reference to Brown-Forman
Corporation's Form 10-K filed on July 23, 1990.       

  10(d)    Brown-Forman Corporation Stock Appreciation Rights Plan, which is
    incorporated into this report by reference to Brown-Forman
Corporation's Form 10-K filed on July 23, 1990.       

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10(e)    A description of the Brown-Forman Savings Plan, which is       
      incorporated into this report by reference to page 10 of the
           registrant's definitive proxy statement for the Annual Meeting of
Stockholders held on July 25, 1996.                   

10(f)    A description of the Brown-Forman Flexible Reimbursement Plan, 
           which is incorporated into this report by reference to page 10 of
            the registrant's definitive proxy statement for the Annual Meeting
of Stockholders held on July 25, 1996.                

10(g)    A description of the Brown-Forman Non-Employee Director        
      Compensation Plan, which is incorporated into this report by
            reference to Brown-Forman Corporation's Form S-8 (Registration No.
333-38649) filed on October 24, 1997.                 

  10(h)    Credit Agreement dated as of October 29, 1997, among Brown-Forman
           Corporation and a group of United States and international banks,
          which is incorporated into this report by reference to Amendment
             No. 1 to Brown-Forman Corporation's Form 10-Q filed on December 15,
1997.                                                 

(b) Reports on Form 8-K:                                                        

  On July 19, 2001, the Registrant filed a report on Form 8-K announcing its
  purchase of 96,831 shares of its Class A Common Stock and 93,085 shares of
its Class B Common Stock in a private transaction.                      

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SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.                       

                                BROWN-FORMAN CORPORATION
                              (Registrant)

                           /s/ OWSLEY BROWN II
                                            ------------------------------------
Date:  July 25, 2002                         By:  Owsley Brown II               
                                             Chairman of the Board and
                                           Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this       
report has been signed below by the following persons on behalf of the          
registrant and in the capacities on July 25, 2002 as indicated:                 

                                                        [Enlarge/Download Table]

                                                                                                                       
/s/ JERRY E. ABRAMSON                    /s/ RICHARD P. MAYER                 /s/ OWSLEY BROWN II                      
---------------------------------------  ---------------------------------    -----------------------------------------
By:    Jerry E. Abramson                 By:  Richard P. Mayer                By:  Owsley Brown II                     
       Director                               Director                             Director, Chairman of the Board     
                                                                                    and Chief Executive Officer        

/s/ BARRY D. BRAMLEY                     /s/ STEPHEN E. O'NEIL                                                         
---------------------------------------  ---------------------------------                                             
By:   Barry D. Bramley                   By:  Stephen E. O'Neil                                                        
      Director                           Director                                                                      

/s/ GEO. GARVIN BROWN III                /s/ DACE BROWN STUBBS                /s/ OWSLEY BROWN FRAZIER                 
---------------------------------------  ---------------------------------    -----------------------------------------
By:   Geo. Garvin Brown III              By:  Dace Brown Stubbs               By:  Owsley Brown Frazier                
      Director                                Director                             Director, Former Vice Chairman      
                                                                                    of the Board                       

/s/ DONALD G. CALDER                                                                                                   
---------------------------------------                                                                                
By:   Donald G. Calder                                                                                                 
      Director                                                                                                         

/s/ LAWRENCE K. PROBUS                   /s/ PHOEBE A. WOOD                   /s/ WILLIAM M. STREET                    
---------------------------------------  ---------------------------------    -----------------------------------------
By:   Lawrence K. Probus                 By:  Phoebe A. Wood                  By:  William M. Street                   
      Senior Vice President                   Executive Vice President and         Director, President                 
      (Principal Accounting Officer)           Chief Financial Officer                                                 
                                               (Principal Financial Officer)                                           


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REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE 

To the Board of Directors                                                       
of Brown-Forman Corporation                                                     

Our audits of the consolidated  financial  statements  referred to in our report
dated May 23,  2002  appearing  in the 2002  Annual  Report to  Shareholders  of
Brown-Forman   Corporation  and  Subsidiaries  (which  report  and  consolidated
financial statements are incorporated by reference in this Annual Report on Form
10-K) also included an audit of the financial  statement schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion,  this financial  statement  schedule
presents  fairly,  in all material  respects,  the information set forth therein
when read in conjunction with the related consolidated financial statements.    

/s/ PricewaterhouseCoopers LLP                                                  
Louisville, Kentucky                                                            
May 23, 2002                                                                    

S-1 

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 BROWN-FORMAN CORPORATION AND SUBSIDIARIES
 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended April 30, 2000, 2001, and 2002
(Expressed in thousands)

                                                        [Enlarge/Download Table]


                      Col. A           Col. B       Col. C       Col. D      Col. E    
                      ------           ------       ------       ------      ------    
                                                  Additions                            
                                     Balance at   Charged to                Balance at 
                                     Beginning       Costs                      End    
                   Description       of Period   and Expenses  Deductions    of Period 
                   -----------       ----------  ------------  ----------   ---------- 
                                                                                       

2000                                                                                   
    Allowance for Doubtful Accounts     $11,159     $  5,833    $ 5,346(1)      $11,646

2001                                                                                   
    Allowance for Doubtful Accounts     $11,646     $  6,083    $ 5,469(1)      $12,260

2002                                                                                   
    Allowance for Doubtful Accounts     $12,260     $  8,677    $ 5,316(1)      $15,621
    Accrued Restructuring Costs            --         16,800      3,762(2)       13,038


(1) Doubtful accounts written off, net of recoveries.                         
(2) Employee termination benefit payments                                     

S-2 

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                                                                    Exhibit 13

HIGHLIGHTS

(Expressed in millions, except per share amounts and ratios)                    
--------------------------------------------------------------------------------
Year Ended April 30,                              2001        2002     % Change 
--------------------------------------------------------------------------------

Net Sales                                        $2,180      $2,208        1%   
Gross Profit                                     $1,153      $1,133       (2%)  
Operating Income                                 $  374      $  353       (6%)  
Net Income                                       $  233      $  228       (2%)  
Earnings Per Share - Basic and Diluted           $ 3.40      $ 3.33       (2%)  
Cash Dividends Paid Per Common Share             $ 1.28      $ 1.36        6%   
EBITDA                                           $  438      $  407       (7%)  
Business Value Added                             $  108      $   94      (13%)  
Return on Average Invested Capital                 17.9%       15.9%            
Return on Average Common Stockholders' Equity      21.0%       18.5%            
Gross Margin                                       52.9%       51.3%            
Operating Margin                                   17.1%       16.0%            

 QUARTERLY FINANCIAL INFORMATION
(Expressed in millions, except per share amounts)                               

                                                        [Enlarge/Download Table]
------------------------------------------------------------------------------------------------------------------------------------
                                                       Earnings                                                                     
                                                      Per Share-  Cash Dividends             Market Price (High-Low)                
                     Net        Gross        Net      Basic and      Paid Per                   Per Common Share                    
                    Sales       Profit      Income     Diluted     Common Share         Class A                   Class B           
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
Fiscal 2002        $2,208      $1,133       $ 228       $3.33         $ 1.36        $78.45 - $60.25          $79.14  - $58.90       
Quarters                                                                                                                            
   First              470         248          39        0.57           0.33         69.50 -  61.21           69.50  -  60.70       
   Second             644         329          80        1.17           0.33         68.60 -  60.25           68.56  -  59.08       
   Third              570         282          58        0.84           0.35         67.40 -  60.26           66.46  -  58.90       
   Fourth             524         274          51        0.75           0.35         78.45 -  65.50           79.14  -  64.76       

Fiscal 2001        $2,180      $1,153       $ 233       $3.40         $ 1.28        $71.00 - $49.00          $72.00  - $50.00       
Quarters                                                                                                                            
   First              466         255          43        0.62           0.31         57.50 -  49.00           60.94  -  50.00       
   Second             647         340          80        1.17           0.31         60.75 -  49.75           61.19  -  50.44       
   Third              559         290          56        0.82           0.33         68.75 -  59.00           69.25  -  58.75       
   Fourth             508         268          54        0.79           0.33         71.00 -  58.00           72.00  -  57.65       

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 FINANCIAL TABLE OF CONTENTS

17
 Selected Financial Data

18
Management's Discussion and Analysis

25
Consolidated Statement of Income

26
Consolidated Balance Sheet

28
Consolidated Statement of Cash Flows

29
Consolidated Statement of Stockholders' Equity

30
Notes to Consolidated Financial Statements

37
Report of Management

37
 Report of Independent Accountants

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 SELECTED FINANCIAL DATA

Year Ended April 30,                                                            
(Expressed in millions, except per share amounts and ratios)                    

                                                        [Enlarge/Download Table]
                                                                                                                         
Operations                        1993     1994     1995     1996     1997     1998     1999     2000     2001     2002  
----------                       ------   ------   ------   ------   ------   ------   ------   ------   ------   ------ 
Net Sales                        $1,644    1,606    1,672    1,793    1,824    1,906    2,009    2,134    2,180    2,208 

Gross Profit                     $  777      768      815      864      885      956    1,019    1,103    1,153    1,133 

Operating Income                 $  255      240      268      274      287      307      322      348      374      353 

Net Income                       $  156      129      149      160      169      185      202      218      233      228 

Weighted Average Shares used to                                                                                          
calculate Earnings Per Share                                                                                             
- Basic                            82.7     78.7     69.0     69.0     69.0     68.9     68.6     68.5     68.5     68.3 
- Diluted                          82.7     78.7     69.0     69.0     69.0     69.0     68.7     68.6     68.6     68.5 

Earnings Per Share                                                                                                       
 - Basic and Diluted             $ 1.88     1.63     2.15     2.31     2.45     2.67     2.93     3.18     3.40     3.33 

Cash Dividends Paid                                                                                                      
Per Common Share                 $ 0.86     0.93     0.97     1.02     1.06     1.10     1.15     1.21     1.28     1.36 

Invested Capital                                                                                                         
----------------                                                                                                         
Average Invested Capital         $  925      900      835      875      929      948    1,049    1,238    1,357    1,470 

Average Common                                                                                                           
Stockholders' Equity             $  765      629      493      578      671      756      854      974    1,110    1,235 

Total Assets                     $1,311    1,234    1,286    1,381    1,428    1,494    1,735    1,802    1,939    2,016 

Long-Term Debt                   $  154      299      247      211       63       50       53       41       40       40 

Other Key Measures                                                                                                       
------------------                                                                                                       
Cash Flows from Operations       $  193      221      197      167      176      220      213      241      231      250 

EBITDA                           $  299      286      311      320      337      358      377      410      438      407 

Gross Margin                       47.3%    47.8%    48.8%    48.2%    48.5%    50.2%    50.7%    51.7%    52.9%    51.3%

Operating Margin                   15.5%    15.0%    16.0%    15.3%    15.8%    16.1%    16.0%    16.3%    17.1%    16.0%

Effective Tax Rate                 35.6%    37.4%    39.8%    37.8%    38.0%    37.6%    36.5%    36.5%    36.3%    34.5%

Return on Average                                                                                                        
Invested Capital                   18.0%    15.4%    19.5%    19.7%    19.4%    20.4%    19.8%    18.4%    17.9%    15.9%

Return on Average Common                                                                                                 
Stockholders' Equity               20.4%    20.4%    30.1%    27.5%    25.2%    24.3%    23.6%    22.4%    21.0%    18.5%

Total Debt to Total Capital        16.4%    43.6%    35.7%    29.6%    23.6%    16.7%    24.5%    20.3%    17.1%    13.7%

Total Cash Dividends                                                                                                     
Paid to Net Income                 45.8%    57.5%    45.3%    44.2%    43.3%    41.2%    39.3%    38.1%    37.7%    40.8%


Notes:                                                                          
1.  Includes the operations of Fetzer Vineyards and Sonoma-Cutrer Vineyards     
since their acquisitions in August 1992 and April 1999, respectively.   
2.  Fiscal 1994 net income and earnings per share were reduced by $32 million   
  and $0.41, respectively, from the cumulative effect of accounting changes.
3.  In October 1993, we sold Brown-Forman Enterprises, a credit card processing 
operation, resulting in an after-tax gain of $18 million.               
4.  Weighted average shares, earnings per share, and cash dividends paid per    
  common share have been adjusted for a 3-for-1 common stock split in fiscal
1994.                                                                   
5.  We define EBITDA as earnings before interest, taxes, depreciation and       
amortization, representing a measure of our cash flow.  It should be    
 considered in addition to, but not as a substitute for, other measures of
financial performance that are in accordance with generally accepted    
accounting principles.                                                  
6.  We define Return on Average Invested Capital as the sum of net income       
  (excluding extraordinary items) and after-tax interest expense, divided by
average invested capital.  Invested capital is the sum of all interest- 
bearing debt and preferred and common equity.                           
7.  We define Return on Average Common Stockholders' Equity as income applicable
to common stock divided by average common stockholders' equity.         
8.  We define Total Debt to Total Capital as total debt divided by the sum of   
total debt and equity.                                                  

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MANAGEMENT'S DISCUSSION AND ANALYSIS

In the discussion below, and in the Chairman's letter, we review  Brown-Forman's
consolidated  financial condition and results of operations for the fiscal years
ended April 30, 2000,  2001, and 2002. We also make  statements  relating to our
anticipated  financial  performance  and other  forward-looking  statements  and
discuss  factors that may affect the company's  future  financial  condition and
performance.  We have prepared a  non-exclusive  list of risk factors that could
cause actual results to differ materially from our anticipated results, which is
on page 38. Please read this  Management's  Discussion  and Analysis  section in
conjunction with our consolidated  financial statements for the year ended April
30,  2002  and the  related  notes,  and  the  important  information  regarding
forward-looking statements on page 38.                                          

We  have  summarized  our  significant  accounting  policies  in  Note  1 to our
consolidated financial statements. We believe that our consistent application of
these policies results in financial  statements that provide useful and reliable
information about our operating results and financial condition.                

In applying  these  accounting  policies,  we must make  estimates and judgments
about the  effects  of matters  that are  inherently  uncertain.  Areas in which
uncertainties exist include allowances for uncollectible receivables, impairment
and  amortization  of long-lived  assets,  advertising  and promotion  accruals,
self-insurance reserves, pension and postretirement benefit obligations,  income
tax  accruals,  and  litigation.  Our  actual  results  could  differ  from  our
estimates.  Despite these inherent limitations,  we believe  that the  following
discussion and the accompanying  financial  statements  provide a meaningful and
fair perspective.                                                               

 CONSOLIDATED SUMMARY OF OPERATING PERFORMANCE

Fiscal 2002 Compared to 2001

Net sales reached record levels in fiscal 2002, growing 1% or $28 million. Sales
of beverages increased 3%, due largely to higher volumes and price increases for
Jack Daniel's Tennessee Whiskey,  Southern Comfort and Finlandia Vodka. Sales of
our Consumer  Durables  segment fell 3%, however,  resulting from a recessionary
U.S. economy, exacerbated by the events of September 11.                        

International  sales  of  $391  million  were  up  6%  in  fiscal  2002  despite
unfavorable currency trends. Sales in the United States, representing 80% of our
revenues, grew slightly. A slowing U.S. economy softened sales trends during the
year,  particularly in the traditional  department store channel of our Consumer
Durables segment.                                                               

Gross profit is a key  performance  measure for us. A more  competitive  pricing
environment for wines and consumer durable  products,  cost pressures  resulting
from lower  production  levels for spirits and china  products,  and unfavorable
currency trends combined to lower our gross profit in fiscal 2002.              

Gross  margin  dropped  from  52.9% in  fiscal  2001 to 51.3%  in  fiscal  2002,
resulting from price and cost pressures previously  mentioned.  Our gross margin
remains very strong,  however,  having grown  steadily  over the past ten years.
This trend has been a particularly impressive achievement given the weakening of
foreign  currencies  against the U.S. dollar over the past several years,  which
depressed our results as reported in U.S. dollars.                              

Fiscal          Gross                                               
Year          Margin                                              
------         ------                                               
1992           47.9%                                              
1993           47.3%                                              
1994           47.8%                                              
1995           48.8%                                              
1996           48.2%                                              
1997           48.5%                                              
1998           50.2%                                              
1999           50.7%                                              
2000           51.7%                                              
2001           52.9%                                              
2002           51.3%                                              

Operating income for fiscal 2002 fell $21 million, or 6%. A $30 million decrease
for the Consumer  Durables segment caused by the  recessionary  U.S. economy and
costs to implement the Business Improvement  Initiatives  (discussed below) more
than offset a $9 million improvement for Wine and Spirits.                      

Operating Income

Dollars in Millions                                                             
            2000          2001          2002
            ----          ----          ----
Wine and Spirits              $304          $327          $336                  
Consumer Durables               44            47            17                  
            ----          ----          ----
Total                         $348          $374          $353                  
            ====          ====          ====
Total change                    +8%           +7%           -6%                 

BUSINESS  IMPROVEMENT  INITIATIVES  AND ADOPTION OF FAS 142.  Two  non-recurring
items had a net effect of lowering fiscal 2002 operating  income by $10 million,
or $0.03 per share.  As a result of adopting  Statement of Financial  Accounting
Standards  (FAS) 142 on May 1, 2001,  we no longer  amortize  goodwill and other
intangible  assets with indefinite  lives. This helped both operating income and
net  income  by  $12  million  ($0.18  per  share),  reflecting  the  fact  that
amortization was not deductible for tax purposes.  We also undertook a series of
Business  Improvement   Initiatives  in  fiscal  2002  designed  to  rationalize
capacity,   streamline   procurement  and  production  practices,   and  improve
connections with our customers.  We incurred costs of $22 million,  or $0.21 per
share,  related to these  initiatives  in fiscal 2002,  primarily to close three
manufacturing   facilities  in  our  Consumer   Durables   business.   Remaining
initiatives  being  contemplated  could lower fiscal 2003 earnings an additional
$0.08 per share. We expect these  initiatives to produce  benefits in the future
that will significantly strengthen our long-term cash flow and earnings.        

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Earnings per share  fell 2% to $3.33 per share.  Continued growth in our Wine   
and Spirits business was more than offset by an unfavorable currency environment
and a significant earnings decline for the Consumer Durables segment.  On a     
constant exchange basis, and adjusting for Business Improvement Initiatives and 
the adoption of FAS 142, earnings per share increased 2% over fiscal 2001, to   
$3.48 per share:                                                                

                             Fiscal 2002       %
                                    EPS         Change
                                   ------       ------
Reported EPS                                    $ 3.33        -2%               
Benefit from FAS 142                          (0.18)                      
Cost of Business Improvement Initiatives       0.21                       
Constant currency adjustment                   0.12                       
                      ------
Adjusted EPS                                    $ 3.48        +2%               
                      ======

BASIC AND DILUTED  EARNINGS PER SHARE.  We have a stock option plan described in
Note 15 of our financial  statements.  Our plan requires that we purchase shares
on the open market to satisfy stock option requirements, thereby avoiding future
dilution of earnings that would occur from issuing additional shares. We acquire
treasury  shares from time to time in anticipation  of these  requirements.  The
extent to which  diluted  shares exceed the number of basic shares is determined
by how  much our  stock  price  has  appreciated  since  options  were  granted,
irrespective  of how many  treasury  shares we have  acquired.  To  ensure  that
earnings  are not diluted by the stock  option  plan,  our  intention is to hold
enough  treasury  stock so that the number of diluted shares is always less than
the  original  69.0 million  that was  outstanding  at inception of the plan (as
adjusted for any share  repurchases  or issuances  unrelated to our stock option
plan).                                                                          

Fiscal 2001 Compared to 2000

Net sales grew 2%, or $46 million.  Sales of our Wine and Spirits  increased 2%,
as solid  growth of Jack  Daniel's  was  tempered by lower  shipments  of Korbel
Champagne  following the Millennium  boom.  Revenues from the consumer  durables
segment  improved  3%,  fueled by gains in catalog,  direct  mail,  and Internet
channels.                                                                       

Gross profit  growth of 5% outpaced the rate of sales gains,  reflecting a shift
toward  higher-margin  products,  benefits from selected  price  increases,  and
stable costs.                                                                   

Operating  income for fiscal 2001  improved  7%, or $26  million.  A $23 million
increase in profits from Wine and Spirits was driven primarily by growth of Jack
Daniel's.  Operating  income for the  Consumer  Durables  segment  increased  $3
million,  largely  attributable  to  successful  new products  sold  directly to
consumers.  In addition to the negative impact of weakening foreign  currencies,
earnings  growth was tempered by lower profits from Korbel  Champagne,  sales of
used barrels, and Hartmann luggage.                                             

Earnings  per share  reached a record  $3.40,  up 7% over fiscal  2000. A slower
growth rate in 2001 principally reflected an industry-wide  contraction in sales
of sparkling wine and used barrels,  as well as weakening foreign currencies and
a softer U.S. economy.                                                          

OTHER KEY PERFORMANCE MEASURES

Our  central  goal is to  increase  the value of our  shareholders'  investment.
Long-term  growth in the market value of our stock is a good  indication  of our
success in delivering an attractive return to shareholders.                     

Total Shareholder Return
(including dividend reinvestment) 

Fiscal                  B-F               S&P 500                   
Year                (Class B)             Index                   
------                -------             -------                   
1992                  $100                $100                    
1993                   110                 109                    
1994                   126                 115                    
1995                   144                 135                    
1996                   177                 176                    
1997                   232                 220                    
1998                   266                 310                    
1999                   352                 378                    
2000                   266                 416                    
2001                   303                 362                    
2002                   399                 317                    
10-Year Annual Growth   +15%                +12%                    

TOTAL  SHAREHOLDER  RETURN. A $100 investment in our Class B stock ten years ago
would have grown to $399 by the end of fiscal 2002, assuming reinvestment of all
dividends and ignoring personal taxes and transaction  costs. This represents an
annualized  return of 15% over the ten-year  period.  During  fiscal  2002,  the
market value of an investment in Brown-Forman rose 32% compared to a 13% decline
by the S&P 500 for the same period.                                             

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Business Value Added
Dollars in Millions                                                             
            2000          2001          2002
            ----          ----          ----
As defined                    $111          $108           $ 94                 
Adjusted for deferred taxes;                                                    
investments in Sonoma-Cutrer                                                  
and Finlandia; benefit of                                                     
FAS 142; cost of Business                                                     
Improvement Initiatives      $124          $133           $125                

BUSINESS VALUE ADDED. We also apply a measure we call Business Value Added (BVA)
to evaluate our financial performance.  We define BVA as our after-tax operating
income less a capital  charge for net operating  assets  employed.  This measure
takes into  account  not only the  profits  generated,  but also  capital  costs
required to produce those profits.  BVA grew 4% in fiscal 2000,  declining 2% in
fiscal 2001 and 13% in fiscal 2002. While favorable interest rates benefited our
cost of capital  this past year,  BVA results  have been  lowered by a change in
U.S.  tax  regulations  requiring  us to repay  approximately  $200  million  of
deferred tax liability over a five-year period ending in fiscal 2003. And though
we expect  investments in Sonoma-Cutrer  and Finlandia will enhance BVA over the
long term, they are also diluting current BVA results.  Adjusted for these items
as well as the non-recurring benefit of FAS 142 and cost of Business Improvement
Initiatives,  BVA  increased  14% in fiscal  2000 and 8% in fiscal  2001,  while
declining 5% in fiscal 2002.                                                    

Returns on average  invested  capital and  stockholders'  equity were  similarly
influenced  by these  factors.  As a result, our returns have trended lower, but
remain very healthy in the context of current capital market conditions.        

                                          2000     2001     2002
                                          ----     ----     ----
Return on Average Invested Capital                18.4%    17.9%    15.9%       
Return on Average Common Stockholders' Equity     22.4%    21.0%    18.5%       

 COMPANY OUTLOOK

We believe  Brown-Forman's  growth  prospects  remain very  positive.  Long term
demographic trends in the U.S., our largest market, suggest a growing market for
our premium Wine and Spirits brands. Although growth for Jack Daniel's moderated
in the U.S. market this past year, it remains an extremely powerful brand with a
solid U.S. consumer base and excellent prospects overseas.  In addition, we have
continued to add premium  brands to our portfolio  over the past several  years,
including Finlandia,  Sonoma-Cutrer,  Glenmorangie,  Tuaca, Amarula and Appleton
rums. We believe that these brands,  together with internally developed products
such as Woodford Reserve bourbon and Bonterra wines,  will be important  factors
in the long-term  growth of our Wine and Spirits  business.  We are  introducing
Jack  Daniel's  Original  Hard Cola in the U.S.  market  this  summer  and could
benefit if the brand is a success.                                              

Brands  that we own,  such as  Woodford  Reserve,  and  brands for which we have
international distribution rights, such as Finlandia and Glenmorangie, will help
grow our global  business  together with our established  international  brands,
Jack  Daniel's,  Southern  Comfort,  and Fetzer.  Earnings  growth from overseas
markets has been tempered because of the strong dollar; to the extent the dollar
weakens against major international currencies,  our international earnings will
benefit.                                                                        

We have recently made several meaningful distribution improvements,  including a
cost-sharing  agreement  with Bacardi in the U.K. and the  appointment of Allied
Domecq as our  distributor in Turkey.  We expect these  distribution  changes to
increase focus on our brands and spur their growth and, in the U.K., to increase
our profit margins.                                                             

The outlook is also positive for our Consumer Durables  business.  Lenox remains
the leader in the U.S. market for fine china dinnerware. A softening economy and
effects of September  11 had a very  negative  impact on orders from  department
stores,  a major channel of distribution for us. Growth of this business depends
upon our  ability  to  develop  new  distribution  channels,  including  selling
directly to the consumer.  Consumer  Durables  should  benefit from a lower cost
structure,  as a result of recent decisions to close plants, and a significantly
lower  inventory  position than last year. We believe the segment is in a better
position for future growth and should rebound as fiscal 2003 progresses.        

Based on a recovery of the U.S.  economy and benefits from Business  Improvement
Initiatives  implemented in 2002, we anticipate  earnings per share growth of 9%
to 12% in fiscal 2003. This includes an estimated $0.08 per share in expenses to
complete our Business  Improvement  Initiatives,  as well as providing  for full
investment behind our brands.                                                   

WINE AND SPIRITS SEGMENT

Summary of Operating Performance
 (Dollars in millions)
                2000        2001        2002
                ------      ------      ------
Net Sales                        $1,543      $1,573      $1,620                 
% Change                           7%          2%          3%             
Gross Profit                     $  812      $  849      $  851                 
% Change                           9%          5%          0%             
Advertising Expenses             $  206      $  214      $  214                 
% Change                           8%          4%          0%             
SG&A Expenses                    $  298      $  302      $  301                 
% Change                          14%          2%          0%             
Amortization                     $    5      $    7      $   --                 
Operating Income                 $  304      $  327      $  336                 
% Change                           7%          8%          3%             
EBITDA                           $  341      $  367      $  372                 
% Change                           8%          8%          2%             
Gross Margin                       52.6%       54.0%       52.5%                
Operating Margin                   19.7%       20.8%       20.7%                

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Our Wine and Spirits segment includes strong brands representing a wide range of
wine  varietals,  champagne,  and  distilled  spirits such as whiskey,  bourbon,
vodka, brandy,  tequila,  rum, and liqueur. This segment's largest market is the
United States,  which generally  prohibits wine and spirits  manufacturers  from
selling their products directly to consumers.  Instead,  we sell our products to
wholesale  distributors,  who then sell the products to  retailers,  who in turn
sell to  consumers.  We also use a  similar  tiered  distribution  model in most
markets outside the United States.                                              

Distributors  and  retailers  normally  keep  some  of our  products  on hand as
inventory,  making  it  possible  for  retailers  to sell  more (or less) of our
products to the  consumer  than  distributors  buy from us during any given time
period.  Because we record  revenues when we ship our products to  distributors,
our sales volumes do not  necessarily  reflect actual consumer demand during any
particular  period.  Ultimately,  of  course,  consumer  demand  determines  our
financial  results.  Thus,  it is important to consider that demand in assessing
our  performance.  Our best  approximation  of consumer  demand is based on case
sales from wholesalers to retailers, called "depletions."                       

We and our trade partners have been actively  implementing  supply chain systems
that have allowed us to reduce  inventories  over the past few years. We believe
trade  inventory  levels for most of our products at the end of fiscal 2002 were
at the lowest levels in recent history.                                         

Fiscal 2002 Compared to 2001

Net sales grew 3%, or $47 million.  On a constant  exchange basis,  revenues for
the  segment  increased  4%.  Jack  Daniel's  registered  growth  for the  tenth
consecutive year. Worldwide depletions increased 2%, with particular strength in
Western  Europe.  Jack Daniels'  depletions were  essentially  flat in the U.S.,
largely  reflecting a slowdown in  on-premise  sales.  A continued  reduction in
wholesale and retail inventories also tempered shipments during the year.       

Annual  depletions  for  Southern  Comfort  were up 2% in the U.S.,  with  gross
profits improving at a double-digit rate for the second consecutive year. Volume
and profit  trends for  Finlandia  continued to improve.  Volume  trends for our
major wine brands were strong, led by Fetzer, Bolla, and Korbel.                

Here are worldwide depletions figures for our major brands during fiscal 2002:  

Nine-Liter      Change From     
Cases         Fiscal 2001   
----------      -----------     
Spirits:                                                                        
Jack Daniel's           6,520,000           +2%                               
Canadian Mist           2,375,000            0%                               
Southern Comfort        2,130,000           +1%                               
Finlandia               1,190,000            *                                
Early Times             1,065,000           -5%                               

Wine:                                                                           
Fetzer                  3,130,000          +11%                               
Bolla                   1,670,000           +8%                               
Korbel Champagnes       1,065,000           +8%                               

*Annual percentage change is not comparable; previous period was a partial year.

Gross profit was flat compared to fiscal 2001, despite the growth in sales, as a
result of a more  competitive  pricing  environment  for our wines,  unfavorable
foreign  exchange  rates,  and  costs  incurred  for  our  Business  Improvement
Initiatives.  These same factors, which we do not expect to continue in the long
term,  caused gross  margin to decline to 52.5% from 54.0% in fiscal 2001.  On a
constant currency basis, however, gross margin was 52.9%.                       

Advertising expenses approximated fiscal 2001 expenditures, as we decided not to
increase  spending levels given  unfavorable  on-premise market conditions and a
generally  soft U.S.  economy in the  aftermath  of  September  11.  Assuming an
economic recovery in fiscal 2003, we intend to increase  advertising at a growth
rate  more  consistent   with   historical   levels.   Selling,   general,   and
administrative  expenses declined  slightly,  reflecting tight cost controls and
reduced travel.                                                                 

Operating  income for the segment  improved  3%,  primarily  reflecting  reduced
operating expenses and the benefit from adopting FAS 142. On a constant exchange
basis,  excluding  the benefit of adopting  FAS 142 as well as costs  associated
with Business Improvement  Initiatives,  the segment's operating income improved
6%.                                                                             

Fiscal 2001 Compared to 2000

Net sales  improved $30 million,  or 2%,  driven by strong  results for the Jack
Daniel's  family of brands.  Jack  Daniel's  Black Label  experienced  excellent
consumer demand around the world,  with worldwide  depletions up 6%.  Depletions
improved 3% in the United States, the brand's biggest market.  Volumes grew at a
double-digit rate in Western Europe and other important overseas markets.       

We expanded our distribution  rights to Finlandia during fiscal 2001, which also
contributed to higher  beverage  sales.  While unit volumes for Fetzer and Bolla
declined  modestly,  higher prices  yielded  increased  revenue for both brands.
Shipments of Korbel Champagnes declined significantly in fiscal 2001, reflecting
an industry-wide contraction in sales of sparkling wines.                       

Gross profit expanded 5%, or $37 million.  Gross margin  increased from 52.6% to
54.0%, continuing a long-term trend of steady improvement.                      

Advertising  expenses  grew 4% as  measured  in U.S.  dollars,  up 7% on a local
currency basis. Selling, general, and administrative expenses increased only 2%,
reflecting   continued   productivity   gains  from   process   and   technology
improvements.                                                                   

Operating  income  improved  8% in  fiscal  2001.  Strong  results  for the Jack
Daniel's  family of brands were  tempered by two adverse  industry-wide  events.
Although Korbel  Champagne  gained market share during the year, a sharp decline
in the U.S.  sparkling wine category  following the Millennium  boom resulted in
lower volumes for the brand. In addition, a slowdown in Scotch production led to
a  significant  decline in sales of used  barrels to Scotch  whisky  distillers.
Excluding Korbel and the used barrel business, segment operating income improved
13%.                                                                            

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 Business Environment for Wine and Spirits

GOVERNMENT  POLICIES,  PUBLIC  ATTITUDES:  Our  ability  to market  and sell our
beverage  alcohol  products  depends heavily on government  policy towards those
products and the attitude of society in general toward  drinking  them.  This is
true both in the United States, our largest market, and around the world.       

A small  minority  of drinkers  abuse  beverage  alcohol,  giving rise to public
issues of great significance. We strongly oppose abusive drinking and contribute
significant  resources to programs aimed at  understanding  and curbing  alcohol
abuse -  especially  drunk  driving and underage  drinking.  We also support and
abide by voluntary industry marketing and advertising  guidelines.  We and other
beverage  alcohol  producers take a prominent  role in  encouraging  responsible
consumption of our products and in warning  against  alcohol  abuse.  We support
social awareness  organizations  that fight alcohol abuse and provide  education
about beverage alcohol, often in partnership with public health officials.      

As a society,  we are more likely to curb alcohol abuse through better education
about beverage alcohol and moderate  drinking than with  restrictions on alcohol
advertising and sales or punitive  taxation.  Especially in the U.S.,  distilled
spirits are at a marked disadvantage to beer and wine in taxation,  advertising,
and the number and type of sales outlets.  Along with other distillers,  a major
goal of ours is to achieve  greater  cultural  acceptance  of our  products  and
parity with beer and wine in access to consumers.                               

LEVELING THE PLAYING FIELD: Among the objectives we seek are:                   
 - greater access to television advertising for liquor (we were disappointed
 by