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Brown-Forman Grows Reported and Underlying Operating Income 10% and Increases EPS 8% for the First Nine Months of Fiscal 2010

Louisville, KY, March 10, 2010 – Brown-Forman Corporation reported diluted earnings per share increased 8% to $2.53 and operating income rose 10% to $592 million for the first nine months of fiscal 2010.  During its fiscal 2010 third quarter ended January 31, 2010, the company’s diluted earnings per share declined 10% to $0.73 and operating income decreased 2% to $174 million.  Adjusting for the items in Schedule A of this press release, underlying operating income grew 10% for the first nine months of fiscal 2010 but declined 2% for the third quarter. 

Brown-Forman’s reported net sales for the nine months ended January 31, 2010 were $2.5 billion, 1% lower than the same prior year period, while the reported net sales increased 10% for the company’s fiscal third quarter.  Underlying net sales grew 1% for the first nine months of fiscal 2010 and were up 2% in the third quarter. 

Paul Varga, the company’s chief executive officer stated, “We are pleased to deliver underlying net sales growth for our third quarter and fiscal year-to-date.  During a challenging environment, we believe our people have been resilient, our brands have remained healthy, and our performance remains at or near the top of the industry.  While the operating environment remains both difficult and competitive, I believe we have the portfolio, the distribution assets, the people, and the innovation capacity to continue our top-tier underlying net sales performance.”

For the first nine months of fiscal 2010, strong underlying net sales gains for Brown-Forman’s ready-to-drink brands, as well as growth for Gentleman Jack, Jack Daniel’s, and el Jimador, were partially offset by underlying net sales declines of Southern Comfort, Finlandia, and some agency brands.   Geographically, underlying net sales increases in Australia, Germany, and France outpaced reductions in Poland, the U.K., and Russia.  Total continuing portfolio depletions  grew 3% over the nine month period and increased 4% during the quarter.  Schedule B contains more detailed depletion and net sales information by brand.

Brown-Forman’s fiscal 2010 first nine months gross profit grew 1% on a reported basis and increased slightly on an underlying basis.  For the third quarter, gross profit grew 11% on a reported basis and 3% on an underlying basis.  Gross margins improved slightly for the nine and three month periods when compared to the same prior year periods.  Underlying operating income outperformed underlying gross profit trends during the first nine months of fiscal 2010 as the company benefited from lower operating expenses.  Brown-Forman increased its underlying advertising spend during its fiscal third quarter as the company employed investments delayed from earlier in the fiscal year.   Underlying advertising costs for the first nine months were 10% lower when compared to the same prior year period.  Brown-Forman continued to seek efficiencies in spending and to reallocate brand investments to activities accounted for elsewhere on the income statement, such as packaging enhancements, promotional activity, and ready-to-drink product expansion.  The company’s fiscal year-to-date underlying selling, general, and administrative expense continued to benefit from a reduced cost base as a result of the company’s fiscal 2009 early retirement program and reduction in workforce, and from continued tight management of discretionary expenses along with timing-related shifts.  As expected, underlying selling, general, and administrative expenses increased during the third quarter as the company cycled against the period where it adjusted performance-related incentive expenses in the prior year following the downturn in the business.  During the third quarter, Brown-Forman recorded a non-cash trademark impairment charge of $11.6 million, or $0.07 per share on Don Eduardo, a low-volume, high-priced tequila. 

Brown-Forman has maintained an industry-leading return on average invested capital  of nearly 17%.  The company continued to operate with a strong balance sheet supported by robust cash flows from operations.  According to a report published by Standard & Poor’s in January, Brown-Forman ranked 17th out of 158 consumer products companies in the strength of its financial position.  As of January 31, 2010, the company’s net debt was $525 million, down nearly $200 million from a year ago.  The company improved its total debt to total capital ratio  to 29% from its January 31, 2009 level of 37%.  During fiscal 2010, the company repurchased a combined total of nearly $157 million Class A and Class B shares as part of program that expired on December 3, 2009.  Cash provided by operating activities for the first nine months of fiscal 2010 was approximately $425 million, a 24% increase over the same prior year period.  In January 2010, Brown-Forman approved a regular quarterly dividend of $0.30 per share on Class A and Class B common stock.  Stockholders of record on March 8, 2010, will receive the cash dividend on April 1, 2010. Brown-Forman has paid regular quarterly cash dividends for 64 consecutive years and increased them for the last 26 years.

Full-Year Outlook
We have narrowed our fiscal 2010 full-year earnings outlook to $2.98 to $3.08 per share, which incorporates the $0.07 per share non-cash trademark impairment charge. In addition, this guidance includes expectations of continued underlying net sales trends, current foreign exchange spot rates, projected costs associated with route-to-consumer enhancements, an anticipated higher effective tax rate, as well as incremental underlying investments in both advertising and selling, general, and administrative expenses.  We remain concerned about the impact on consumption trends from a soft on-premise channel, consumer trading-down, and heightened competitive activity.  While we anticipate overall operating expenses to decline for fiscal year 2010, year-to-date trends are expected to moderate as underlying investments in both advertising and selling, general, and administrative expenses are expected to be higher in the fourth quarter when compared to the same prior year period.

Brown-Forman will host a conference call to discuss the results at 10:00 a.m. (EST) 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 57578645.  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 http://localhost/.

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:

• Prolonged or deepening global economic downturn or renewed 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 reductions, 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 marketing activities
• prolonged or deeper declines in consumer confidence or spending, whether related to global economic conditions, wars, natural disasters, weather, pandemics, terrorist attacks or other factors
• changes in tax rates (including excise, sales, corporate, individual income, dividends, capital gains) or in 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, sell, price, or 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
• changes in consumer behavior including further reduction of bar, restaurant, hotel and other on-premise business; shifts to discount store purchases or shifts away from premium-priced products; other price-sensitive consumer behavior; or further reductions in travel
• 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, temporarily disrupt the marketing or sale of our products, or that 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 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
• climatic changes, agricultural uncertainties, our suppliers’ financial hardships or other factors that affect 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 any assets, including receivables, inventory, fixed assets, goodwill or other intangibles


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