Brown-Forman Reports Exceptional First Quarter Earnings Per Share and Operating Income Growth

Louisville, KY, September 2, 2009 – Brown-Forman Corporation reported diluted earnings per share  increased 39%, to $0.81, for its fiscal 2010 first quarter ended July 31, 2009.  Adjusting for the $0.11 per share non-cash agave charge recorded in the first quarter of fiscal 2009, diluted earnings per share grew 17% during the three-month period.  Reported operating income for the quarter increased 37%, to $192 million.  Adjusting for the items in Schedule A of this press release, underlying  operating income increased 23% for the company’s fiscal 2010 first quarter as compared to the same prior-year period. 

Paul Varga, the company’s chief executive officer stated, “The first quarter’s underlying results were driven by underlying sales growth and a decline in underlying operating expenses.  Selling, general, and administrative reductions were the largest dollar contributor to lower operating expenses, due to the timing of spending, a reduced cost base, and continued tight management of discretionary expenses.  Additionally, our underlying results benefited from seasonal shifts of advertising and promotional investment, as well as a reallocation of brand investment both within advertising and promotion and to elsewhere on the income statement, such as targeted consumer price promotions, which are captured in net sales.”

Varga continued, “We believe our underlying net sales growth and strong underlying operating income growth in the quarter continued to be in the top tier of the industry.  We will continue to strive for an appropriate balance of supporting our brands’ growth and equity while also delivering operating expense efficiencies in this challenging economic environment.” 

Brown-Forman’s reported net sales of $738 million for the quarter ended July 31, 2009 declined 7% when compared with the same prior year period.  Underlying net sales increased 2% for the quarter due to higher prices and mix, partially offset by increased consumer price promotions as underlying case volumes were flat.  The brands that drove the 2% underlying net sales growth were primarily Jack Daniel’s & Cola, Jack Daniel’s Tennessee Whiskey, el Jimador, Korbel Champagne, Gentleman Jack, and Woodford Reserve.   Australia, France, and Germany were the most significant geographical contributors to underlying net sales growth for the quarter.  Results were mixed in Central and Eastern Europe as Jack Daniel’s continued to experience good depletion  growth across the region, while Finlandia’s depletions grew in some countries but declined in others.  Brown-Forman’s results were affected by global on-premise declines and trading down by consumers.  The company’s brands experienced significant retail inventory reductions in Eastern Europe, while retail inventory levels in U.S. and Southern European markets appear to have stabilized during the first quarter for many Brown-Forman brands when compared to the previous six months.  However, some of the company’s wine and higher-margin spirit brands experienced retail inventory reductions in the U.S. during the quarter.  Sales through the travel retail channel were significantly affected by reduced consumer traffic.  Schedule B contains more detailed depletion and net sales information by brand for the quarter.

Brown-Forman’s fiscal 2010 first quarter gross profit was flat on both a reported and an underlying basis.  A shift in sales mix was the primary reason underlying gross profit trends lagged underlying net sales growth.  The company reduced its underlying advertising and promotion expense as well as its underlying selling, general, and administrative expense during the quarter.  Brown-Forman’s lower underlying advertising spend was due to seasonal shifts of advertising and promotional investment, as well as a reallocation of brand investment both within advertising expense and to activities that are reflected elsewhere on the income statement.  The company’s underlying selling, general, and administrative expense benefited from a reduced cost base as a result of the company’s fiscal 2009 early retirement program and reduction in workforce, as well as continued tight management of discretionary expenses and the timing of some investments.

Brown-Forman maintained its strong balance sheet, reducing net debt during the quarter by $30 million, to $629 million.  Cash provided by operating activities for the first quarter of fiscal 2010 was approximately $118 million, a 13% increase over the same prior year period.  During the quarter the company repurchased a combined total of $50 million Class A and Class B shares as part of its share repurchase program.  Through August 31, 2009, total program repurchases were nearly $115 million of the $250 million authorized until December 4, 2009.  Also during the quarter, Brown-Forman approved a regular quarterly cash dividend of $0.2875 per share on Class A and Class B common stock.  The cash dividend is payable on October 1, 2009 to stockholders of record on September 8, 2009. With this dividend, Brown-Forman will have paid regular quarterly cash dividends for 64 consecutive years.

Full-Year Outlook
The company’s fiscal 2010 full-year earnings outlook remains unchanged at $2.60 to $3.00 per share.  While some improvement in global economic indicators has occurred, concerns about the uncertain environment remain, including further weakness in the on-premise channel, continued trading-down by consumers, softening spirits consumption trends, potential fluctuations in both inventory levels and foreign exchange rates, and aggressive competitive activities.  Brown-Forman expects less operating expense leverage and more difficult comparables for the remainder of the year. 

Commenting on the first quarter, Varga concluded, “We are pleased with our good start to the year but we believe the environment will remain uncertain and challenging.  We will continue with our efforts to strike the right balance of being competitive today while developing our business for long-term growth.  We expect to deliver modest underlying growth in operating income this fiscal year and we look forward to when the environment improves and we have the opportunity to return to our longer-term trends.”

Brown-Forman will host a conference call to discuss the results at 10:00 a.m. (EDT) this morning.  All interested parties in the U.S. are invited to join the conference call by dialing 888-624-9285 and asking for the Brown-Forman call.  International callers should dial 706-679-3410 and ask for the Brown-Forman call.  No password is required.  The company suggests that participants dial in approximately ten minutes in advance of the 10:00 a.m. start of the conference call.

A live audio broadcast of the conference call will also be available via
Brown-Forman’s Internet Web site,, through a link to "Investor Relations."   For those unable to participate in the live call, a replay will be available by calling 800-642-1687 (U.S.) or 706-645-9291 (international).  The identification code is 26140274.  A digital audio recording of the conference call will also be available on the Web site approximately one hour after the conclusion of the conference call.  The replay will be available for at least 30 days following the conference call.

Brown-Forman Corporation is a producer and marketer of fine quality beverage alcohol brands, including Jack Daniel’s, Southern Comfort, Finlandia, Canadian Mist, Fetzer, Korbel, Gentleman Jack, el Jimador, Tequila Herradura, Sonoma-Cutrer, Chambord, Tuaca, Woodford Reserve, and Bonterra.

Important Information on Forward-Looking Statements:

This report contains statements, estimates, and projections that are "forward-looking statements" as defined under U.S. federal securities laws. Words such as "expect," "believe," "intend," "estimate," "will," "may," "anticipate," "project," and similar words identify forward-looking statements, which speak only as of the date we make them. Except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.  By their nature, forward-looking statements involve risks, uncertainties and other factors (many beyond our control) that could cause our actual results to differ materially from our historical experience or from our current expectations or projections. These risks and other factors include, but are not limited to:

• deepening or expansion of the global economic downturn or turmoil in financial and equity markets (and related credit and capital market instability and  illiquidity; decreased consumer and trade spending; higher unemployment; supplier, customer or consumer credit or other financial problems; inventory fluctuations at distributors, wholesalers, or retailers; bank failures or governmental nationalizations; etc.)
• competitors’ pricing actions (including price promotions, discounting, couponing or free goods), marketing, product introductions, or other competitive activities aimed at our brands
• trade or consumer reaction to our product line extensions or new marketing initiatives
• prolonged or deeper declines in consumer confidence or spending, whether related to global economic conditions, wars, natural disasters, pandemics (such as swine flu), terrorist attacks or other factors
• changes in tax rates (including excise, sales, corporate, individual income, dividends, capital gains) or related reserves, changes in tax rules (e.g., LIFO, foreign income deferral, U.S. manufacturing deduction) or accounting standards, tariffs,  or other restrictions affecting beverage alcohol, and the unpredictability and suddenness with which they can occur
• trade or consumer resistance to price increases in our products
• tighter governmental restrictions on our ability to produce and market our products, including advertising and promotion
• business disruption, decline or costs related to reductions in workforce or other cost-cutting measures
• lower returns on pension assets, higher interest rates on debt, or significant changes in recent inflation rates (whether up or down)
• fluctuations in the U.S. dollar against foreign currencies, especially the euro, British pound, Australian dollar, or Polish zloty
• continued reduction of bar, restaurant, hotel and other on-premise business; consumer shifts to discount stores to buy our products; consumer shifts away from premium-priced products; decreased travel; or other price-sensitive consumer behavior
• changes in consumer preferences, societal attitudes or cultural trends that result in reduced consumption of our products
• distribution arrangement decisions that affect the timing of our sales or limit our ability to market or sell our products
• adverse impacts resulting from our acquisitions, dispositions, joint ventures, business partnerships, or portfolio strategies
• lower profits, due to factors such as fewer used barrel sales, lower production volumes (either for our own brands or those of third parties), or cost increases in energy or raw materials, such as grapes, grain, agave, wood, glass, plastic, or closures
• climatic changes, agricultural uncertainties, our suppliers’ financial hardships or other factors that reduce the  availability or quality of grapes, agave, grain, glass, closures, plastic, or wood
• negative publicity related to our company, brands, personnel, operations, business performance or prospects
• product counterfeiting, tampering, or contamination and resulting negative effects on our sales, brand equity, or corporate reputation
• adverse developments stemming from state, federal or other governmental investigations of beverage alcohol industry business, trade, or marketing practices by us, our distributors, or retailers
• impairment in the recorded value of inventory, fixed assets, goodwill or other intangibles


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