Brown-Forman Fiscal Year Sales Off To A Good Start; Confirms Full Year Guidance

Louisville, KY, September 1, 2010 – Brown-Forman confirms its guidance for fiscal 2011 following its first quarter performance.  Improving upon its full year fiscal 2010 performance, the company grew underlying  net sales 3% and reported net sales 1%, to $745 million during the quarter.  Paul Varga, the company’s chief executive officer stated, “In what remains a sluggish environment, we performed within our expectations for our first quarter.  Continuing our trends of the prior two quarters, we posted good underlying growth in sales and gross profit.  This growth was driven by a strong net sales performance internationally.”  

Operating income for the three months ended July was $173 million and earnings per share were $0.76.  An increase in operating expenses, including planned strategic investments in  selling, general, and administrative spending concentrated in the first part of the fiscal year, incremental pension expenses, and higher brand spending resulted in a modest decline in underlying operating income for the quarter when compared to the same period last year.  Commenting further, Varga said, “We expect net sales to continue to grow in line with trends of the prior two quarters, operating expenses to moderate later in the year, and underlying operating income to grow in the mid-single digits for the full fiscal year.”

Brown-Forman’s net sales growth was broad based.  Key brand contributions to growth came from the Jack Daniel’s family, el Jimador, New Mix, Sonoma-Cutrer, Woodford Reserve, Tequila Herradura, and Finlandia, while Southern Comfort declined.  The company’s international growth continued as gains in several markets including Australia, Germany, Mexico, the U.K., and Turkey drove top-line growth and offset soft performance in the U.S.  The company continued its introduction and expansion of brand and marketing innovations during the quarter.  New packages for the Southern Comfort family, Chambord, and Tuaca are now on retail shelves.  Shipments of Chambord Vodka and Southern Comfort Lime also began during the quarter.  These and other innovations are expected to increase brand awareness and to contribute to incremental sales, although their near-term impact is projected to be relatively minor.  For fiscal 2011, Brown-Forman expects to continue its solid underlying growth in net sales of the last few quarters and to benefit from broad-based sales growth through its portfolio development and geographic expansion.

Planned and timing related increases in operating expenses offset the growth in net sales for the first quarter as underlying operating income decreased 1% while reported operating income was down 10%, primarily due to the negative impact of foreign exchange.  Total operating expenses were up 8% as reported advertising expense was flat and reported selling, general, and administrative expense increased 13%.  Excluding the effect of the stronger U.S. dollar, underlying advertising expense increased 2%.  The company continued to optimize its mix of total brand investment by reallocating resources among brands, geographies, and channels that enable it to effectively and efficiently reach consumers around the world.  Off-premise activities and international markets continued to receive increased focus.  Brown-Forman expects to remain flexible in directing brand spending and resources to activities that support the business in the current environment while positioning the company for long-term growth.

Reported selling, general, and administrative expense was affected by costs associated with changes to the company’s route-to-market, particularly in Germany and Brazil where the company is developing its own distribution capabilities.  Also during the quarter, Brown-Forman recognized an incremental $5 million of pension expense compared to the same period last year, driven by a reduction in the discount rate.  This incremental pension expense is expected to recur each quarter throughout the year.  In addition, while Brown-Forman is still benefiting from the reduced cost base following its fiscal 2009 early retirement program and
reduction in force, expenses were higher due to the timing of various strategic investments around the world.  These investments are expected to contribute to the continued global expansion of the company.  Despite the first quarter decline in operating income, Brown-Forman believes it will grow its underlying operating income during fiscal 2011 in the mid-single digits.

During the quarter, the company repurchased a combined total of $47 million of Class A and Class B shares as part of its $250 million authorization which expires on December 1, 2010.  Through August 31, 2010, total program repurchases were $53 million. In July 2010, Brown-Forman declared a regular quarterly cash dividend of $0.30 per share on Class A and Class B common stock.  The cash dividend is payable on October 1, 2010 to stockholders of record on September 7, 2010.

Full-Year Outlook
Brown-Forman confirms its fiscal 2011 full-year earnings outlook of $2.98 to $3.38 per share.  Although current foreign exchange rate levels place expected results in the upper half of the guidance, the company remains cautious this early in the year, particularly before the important holiday period.  Many uncertainties persist including potential improvements or deterioration of the global economic and consumer environments, predominantly as they relate to the U.S. market and the Southern Comfort brand.  Additionally, unexpected success or disruption from distribution moves, changes in distributor and retail inventory levels, consumer response to innovation activities, and the volatility in foreign exchange rates could affect the company’s performance.  Brown-Forman continues to anticipate underlying operating income growth in the mid-single digits for its fiscal 2011.

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 94510131.  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.

For 140 years, Brown-Forman Corporation has enriched the experience of life by responsibly building fine quality beverage alcohol brands, including Jack Daniel’s Tennessee Whiskey, Southern Comfort, Finlandia, Jack Daniel’s & Cola, Canadian Mist, Fetzer, Korbel, Gentleman Jack, el Jimador, Tequila Herradura, Sonoma-Cutrer, Chambord, New Mix, Tuaca, Woodford Reserve, and Bonterra.  Brown-Forman’s brands are supported by nearly 4,000 employees and sold in approximately 135 countries worldwide.  For more information about the company, please visit

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 “aim,” “anticipate,” “aspire,” “believe,” “envision,” “estimate,” “expect,” “expectation,” “intend,” “may,” “potential,” “project,” “pursue,” “see,” “will,” “will continue,” 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:

• continuing or renewed pressure on global economic conditions or political, financial, or equity market turmoil (and related credit and capital market instability and  illiquidity); high unemployment; supplier, customer or consumer credit or other financial problems; inventory fluctuations at distributors, wholesalers, or retailers; bank failures or governmental nationalizations; etc.
• successful implementation and effectiveness of business and brand strategies and innovations, including distribution, marketing, promotional activity, favorable trade and consumer reaction to our product line extensions, formulation, and packaging changes
• competitors’ pricing actions (including price reductions, promotions, discounting, couponing or free goods), marketing, product introductions, or other competitive activities
• prolonged continuation or acceleration of the declines in consumer confidence or spending, whether related to economic conditions, wars, natural or other disasters, weather, pandemics, security threats, terrorist attacks or other factors
• changes in tax rates (including excise, sales, VAT, corporate, individual income, dividends, capital gains) or in related reserves, changes in tax rules (e.g., LIFO, foreign income deferral, U.S. manufacturing and other deductions) 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, sell, price, or market our products, including advertising and promotion; regulatory compliance costs
• business disruption, decline or costs related to reductions in workforce or other cost-cutting measures
• lower returns and discount rates related to pension assets, higher interest rates, or significant fluctuations in inflation rates
• fluctuations in the U.S. dollar against foreign currencies, especially the euro, British pound, Australian dollar, or Polish zloty
• changes in consumer behavior and our ability to anticipate and respond to them, including reduction of bar, restaurant, hotel or other on-premise business; shifts to discount store purchases or shifts away from premium-priced products; other price-sensitive consumer behavior; or reductions in travel
• changes in consumer preferences, societal attitudes or cultural trends that result in reduced consumption of our products
• distribution arrangement and other route-to-consumer decisions or changes that affect the timing of our sales, temporarily disrupt the marketing or sale of our products, or result in implementation-related costs
• 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 for those of third parties), sales mix shift toward lower priced or lower margin skus, or cost increases in energy or raw materials, such as grapes, grain, agave, wood, glass, plastic, or closures
• climate changes, agricultural uncertainties, environmental calamities, our suppliers’ financial hardships or other factors that affect the  availability, price, or quality of grapes, agave, grain, glass, energy, closures, plastic, or wood
• negative publicity related to our company, brands, personnel, operations, business performance or prospects
• product counterfeiting, tampering, contamination, or recalls and resulting negative effects on our sales, brand equity, or corporate reputation
• significant costs or other adverse developments stemming from litigation or domestic or foreign governmental investigations of beverage alcohol industry business, trade, or marketing practices by us, our importers, distributors, or retailers
• impairment in the recorded value of any assets, including receivables, inventory, fixed assets, goodwill or other intangibles

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