Louisville, KY, August 30, 2017 – Brown-Forman Corporation (NYSE:BFA, BFB) reported financial results for its first quarter of fiscal 2018, ended July 31, 2017. For the first quarter, the company’s reported net sales1 increased 9% to $723 million (+6% on an underlying basis2) compared to the same prior-year period. Reported operating income increased 14% in the quarter to $244 million (+12% on an underlying basis). Diluted earnings per share of $0.46 increased 27%.

Paul Varga, the company’s Chief Executive Officer said, “Fiscal 2018 is off to a strong start with 6% growth in underlying net sales and 12% growth in underlying operating income, both metrics representing a nice acceleration versus the company’s solid fiscal 2017 underlying results. We continue to foresee growth potential for our brands, most notably in American Whiskey, and accordingly, we intend to invest against this opportunity with ever-improving prioritization, competitiveness, effectiveness, and efficiency.”

Varga added, “With only one quarter behind us, we are reaffirming our outlook for 6-8% underlying operating income growth while raising our EPS range to $1.85 – $1.95 due to expected full year benefits from our tax rate and foreign exchange.”

First Quarter Fiscal 2018 Highlights
• Underlying net sales increased 6%, the fourth consecutive quarterly improvement in growth:
◦ Emerging markets continued to improve in the quarter, growing underlying net sales 19% (+27% reported)
◦ Developed markets grew underlying net sales by 3% (+7% reported), including 5% growth in the United States (+10% reported)
◦ The Jack Daniel’s family of brands delivered broad-based growth, with underlying net sales up 6% (+10% reported), including underlying growth of 4% (+9% reported) for Jack Daniel’s Tennessee Whiskey
◦ The company’s super- and ultra-premium American whiskey brands3 experienced strong underlying net sales growth, including 16% growth from Woodford Reserve (+10% reported)
◦ Herradura grew underlying net sales 18% (+11% reported), el Jimador +13% (+19% reported) and New Mix RTDs grew double-digits.
• Underlying operating income grew 12%, and reported operating margin expanded from 32.2% to 33.7%
◦ Underlying SG&A declined 1% (-1% reported)
• The company reaffirmed full year expectations for 4-5% underlying net sales growth and 6-8% underlying operating income growth, and increased the FY18 EPS outlook to $1.85-$1.95.

First Quarter of Fiscal 2018 Performance By Market
Year-to-date underlying net sales grew 5% (+10% reported) in the United States. Sales growth was driven by continued gains for the Jack Daniel’s family of brands, including Tennessee Whiskey, Tennessee Honey, Tennessee Fire and Gentleman Jack. The company’s bourbon brands delivered sustained growth, including double-digit underlying net sales growth from Woodford Reserve and Old Forester. Herradura and el Jimador tequila grew underlying net sales mid-teens in the United States as the company continues to invest behind building consumer brand awareness for both of these 100% agave tequilas.

Underlying net sales in the company’s developed markets outside of the United States were flat in the first quarter (+2% reported). Australia’s 17% (+12% reported) underlying net sales growth was fueled by buy-ins in advance of excise tax driven price increases. Japan’s underlying net sales declined due to comparisons with the prior year’s buy-ins related to last year’s large price increases. Declines in other large developed markets were also negatively impacted by timing, including the United Kingdom and Germany, but the company expects these markets to normalize in the second quarter as the comparisons ease considerably.

Underlying net sales in the emerging markets continued to accelerate from last year’s sluggish start to the year, delivering 19% growth in the first quarter (+27% reported). The company’s two largest emerging markets, Mexico and Poland, grew underlying and reported net sales double-digits, with results in both countries driven by solid growth for the Jack Daniel’s family of brands. Mexico also benefited from continued growth of New Mix RTDs, el Jimador, and Herradura. Underlying and reported net sales in the company’s other emerging markets, such as Russia, Turkey, Brazil, China, and Ukraine experienced strong double-digit rates of growth. Results were propelled by improving consumer demand in a more stable exchange rate environment, while also benefiting from easy comparisons to a soft prior year period.

Travel Retail continues to deliver solid rates of growth, with underlying net sales up 12% (+4% reported). The company is driving improved rates of growth through increased focus on key global accounts. Results also benefited from higher passenger volumes in markets such as Russia, Turkey and Brazil.

First Quarter of Fiscal 2018 Performance By Brand
The company’s underlying net sales growth was led by the Jack Daniel’s family, up 6% (+10% reported). Jack Daniel’s Tennessee Whiskey experienced 4% underlying net sales growth (+9% reported) globally, as an acceleration in the emerging markets offset a soft start in the developed markets outside of the United States. Jack Daniel’s Tennessee Honey’s underlying net sales grew 3% globally (+3% reported) as it entered its seventh year in the marketplace. Gentleman Jack, the largest super-premium American whiskey brand in markets outside of the United States according to IWSR, grew underlying net sales 8% (+7% reported). Jack Daniel’s Tennessee Fire’s underlying net sales grew 14% (+21% reported), as the brand continues to benefit from its global rollout, as well as solid growth in the United States. Jack Daniel’s RTD/RTP business grew underlying net sales 22% (+24% reported) due to continued organic growth in this business, new product innovation such as Jack Daniel’s American Serve and Jack Daniel’s Cider, as well as buy-ins ahead of a price increase in Australia.

Brown-Forman’s portfolio of super- and ultra-premium whiskey brands, including Woodford Reserve, Jack Daniel’s Single Barrel, and Gentleman Jack, delivered double-digit rates of aggregate growth. Woodford Reserve grew underlying net sales 16% (+10% reported), and Old Forester grew even faster.

Finlandia vodka grew underlying net sales 6% (+17% reported), helped by improved results in Poland against a very competitive environment, strong growth in Russia, and gains in Travel Retail.

el Jimador grew underlying net sales by 13% (+19% reported), fueled by strong and accelerating takeaway trends in the United States, and better results in Mexico following the multi-year price increases as the brand has been repositioned at a more premium level. New Mix’s underlying net sales increased double-digits as takeaway trends remained strong. Herradura grew underlying net sales by 18% (+11% reported), driven by double-digit gains in both the United States and Mexico.

Other P&L Items
Company-wide price/mix contributed two percentage points to underlying net sales growth, with higher volumes accounting for the other four percentage points of growth. Year-to-date underlying gross profit grew 6% while reported gross profit increased 9%. The last three years of foreign exchange headwinds on net sales growth diminished in the quarter, and foreign exchange is now expected to be a slight positive in fiscal 2018.

First quarter underlying A&P spend increased 6% (+8% reported), as the company invested significantly behind the Jack Daniel’s family of brands, as well as the continued development of the fast growing bourbon and tequila brands. Cost discipline helped drive a continued decline in underlying SG&A, down 1% (-1% reported). The company delivered underlying operating income growth of 12% (+14% reported) during the first quarter, as operating margin expanded by 150 basis points to 33.7%.

Financial Stewardship
On July 27, 2017, Brown-Forman declared a regular quarterly cash dividend of $0.1825 per share on the Class A and Class B common stock, resulting in an annualized cash dividend of $0.73 per share. The quarterly cash dividend is payable on October 2, 2017 to stockholders of record on September 7, 2017. Brown-Forman has paid regular quarterly cash dividends for 72 consecutive years and has increased the dividend for 33 consecutive years.

Fiscal Year 2018 Outlook
The global economy remains volatile, particularly in the emerging markets, and the competitive landscape has intensified in the developed world, making it difficult to accurately predict future results. Assuming no deterioration in current trends, the company anticipates:

1. Underlying net sales growth of 4% to 5%, led by our premium American whiskey and tequila brands, including disciplined innovation for Jack Daniel’s RTDs, as well as the launch of Jack Daniel’s Tennessee Rye and Slane Irish Whiskey.

2. Flat underlying SG&A as the company expects to continue its disciplined approach to managing costs.

3. Underlying operating income growth of 6% to 8%.

4. Diluted earnings per share of $1.85 to $1.95, which now incorporates a tax rate of approximately 28% and a slightly favorable impact from foreign exchange.

Conference Call Details
Brown-Forman will host a conference call to discuss the results at 10:00 a.m. (EDT) today. All interested parties in the United States are invited to join the conference call by dialing 888-624-9285 and asking for the Brown-Forman call. International callers should dial +1-706-679-3410. The company suggests that participants dial in ten minutes in advance of the 10:00 a.m. (EDT) start of the conference call. A live audio broadcast of the conference call, and the accompanying presentation slides, will also be available via Brown-Forman’s Internet website, http://www.brown-forman.com/, through a link to “Investors/Events & Presentations.” For those unable to participate in the live call, information regarding the digital audio recording of the conference call and the presentation slides will also be on the website. The replay will be available for at least 30 days following the conference call.

For nearly 150 years, Brown-Forman Corporation has enriched the experience of life by responsibly building fine quality beverage alcohol brands, including Jack Daniel’s Tennessee Whiskey, Jack Daniel’s & Cola, Jack Daniel’s Tennessee Honey, Jack Daniel’s Tennessee Fire, Gentleman Jack, Jack Daniel’s Single Barrel, Finlandia, Korbel, el Jimador, Woodford Reserve, Old Forester, Canadian Mist, Herradura, New Mix, Sonoma-Cutrer, Early Times, Chambord, BenRiach, GlenDronach and Slane. Brown-Forman’s brands are supported by over 4,700 employees and sold in more than 165 countries worldwide. For more information about the company, please visit http://www.brown-forman.com/.

1 Percentage growth rates are compared to prior-year periods, unless otherwise noted.
2 We present changes in certain income statement line-items that are adjusted to an “underlying” basis, which we believe assists in understanding both our performance from period to period on a consistent basis and the trends of our business. Non-GAAP “underlying” measures include changes in (a) underlying net sales, (b) underlying gross profit, (c) underlying advertising expenses, (d) underlying selling, general and administrative expenses and (e) underlying operating income. A reconciliation of these non-GAAP measures for the three-month period ended July 31, 2017, to the most closely comparable GAAP measure, and the reasons why management believes these adjustments to be useful, are included in Schedule A in this press release.
3 Super/Ultra-premium American whiskey brands include Woodford Reserve, Jack Daniel’s Single Barrel, Gentleman Jack, Sinatra Select, and No. 27 Gold.

This press release 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,” “continue,” “could,” “envision,” “estimate,” “expect,” “expectation,” “intend,” “may,” “plan,” “potential,” “project,” “pursue,” “see,” “seek,” “should,” “will,” 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 uncertainties include, but are not limited to:

• Unfavorable global or regional economic conditions, and related low consumer confidence, high unemployment, weak credit or capital markets, budget deficits, burdensome government debt, austerity measures, higher interest rates, higher taxes, political instability, higher inflation, deflation, lower returns on pension assets, or lower discount rates for pension obligations
• Risks associated with being a U.S.-based company with global operations, including commercial, political and financial risks; local labor policies and conditions; protectionist trade policies or economic or trade sanctions; compliance with local trade practices and other regulations, including anti-corruption laws; terrorism; and health pandemics
• Fluctuations in foreign currency exchange rates, particularly a stronger U.S. dollar
• Changes in laws, regulations, or policies – especially those that affect the production, importation, marketing, labeling, pricing, distribution, sale, or consumption of our beverage alcohol products
• Tax rate changes (including excise, sales, VAT, tariffs, duties, corporate, individual income, dividends, capital gains) or changes in related reserves, changes in tax rules (for example, LIFO, foreign income deferral, U.S. manufacturing and other deductions) or accounting standards, and the unpredictability and suddenness with which they can occur
• Dependence upon the continued growth of the Jack Daniel’s family of brands
• Changes in consumer preferences, consumption or purchase patterns – particularly away from larger producers in favor of smaller distilleries or local producers, or away from brown spirits, our premium products, or spirits generally, and our ability to anticipate or react to them; bar, restaurant, travel or other on-premise declines; shifts in demographic trends; unfavorable consumer reaction to new products, line extensions, package changes, product reformulations, or other product innovation
• Decline in the social acceptability of beverage alcohol products in significant markets
• Production facility, aging warehouse or supply chain disruption
• Imprecision in supply/demand forecasting
• Higher costs, lower quality or unavailability of energy, water, raw materials, product ingredients, labor or finished goods
• Route-to-consumer changes that affect the timing of our sales, temporarily disrupt the marketing or sale of our products, or result in higher implementation-related or fixed costs
• Inventory fluctuations in our products by distributors, wholesalers, or retailers
• Competitors’ consolidation or other competitive activities, such as pricing actions (including price reductions, promotions, discounting, couponing or free goods), marketing, category expansion, product introductions, or entry or expansion in our geographic markets or distribution networks
• Risks associated with acquisitions, dispositions, business partnerships or investments – such as acquisition integration, or termination difficulties or costs, or impairment in recorded value
• Inadequate protection of our intellectual property rights
• Product recalls or other product liability claims; product counterfeiting, tampering, contamination, or product quality issues
• Significant legal disputes and proceedings; government investigations (particularly of industry or company business, trade or marketing practices)
• Failure or breach of key information technology systems
• Negative publicity related to our company, brands, marketing, personnel, operations, business performance or prospects
• Failure to attract or retain key executive or employee talent
• Our status as a family “controlled company” under New York Stock Exchange rules

For further information on these and other risks, please refer to the “Risk Factors” section of our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the SEC.

Use of Non-GAAP Financial Information: This press release includes measures not derived in accordance with U.S. generally accepted accounting principles (“GAAP”), underlying net sales, underlying gross profit, underlying advertising expense, underlying SG&A, and underlying operating income. These measures should not be considered in isolation or as a substitute for any measure derived in accordance with GAAP, and also may be inconsistent with similar measures presented by other companies. Reconciliations of the underlying measures to the most closely comparable GAAP measures, and reasons for the company’s use of these measures, are presented on Schedules A and B attached hereto.

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