Louisville, KY, March 7, 2018 – Brown-Forman Corporation (NYSE: BFA, BFB) reported financial results for its third quarter and the first nine months of fiscal 2018, ended January 31, 2018. For the third quarter, the company’s reported net sales1 increased 9% to $878 million (+6% on an underlying basis2) compared to the same prior-year period. Reported operating income increased 11% in the quarter to $304 million (+5% on an underlying basis) and diluted earnings per share of $0.39 increased 4%. Earnings per share incorporates the five for four stock split implemented on February 28, 2018, and was negatively impacted by $0.05 due to the net impact of U.S. tax reform.

For the first nine months of the fiscal year, the company’s reported net sales increased 9% to $2,515 million (+7% on an underlying basis) compared to the same prior-year period. Reported net sales growth benefited by two percentage points from foreign exchange and one percentage point from changes in distributor inventories. Reported operating income increased 15% year-to-date to $894 million (+11% on an underlying basis) and diluted earnings per share of $1.25 increased 17%.

Paul Varga, the company’s Chief Executive Officer said, “Brown-Forman’s business momentum continued through the third quarter, resulting in year-to-date underlying net sales and operating income growth of 7% and 11%, respectively, and even stronger on a reported basis. The results were well-balanced by geography and driven by 8% underlying net sales growth for our Jack Daniel’s led American whiskey portfolio. Our accelerated rates of growth keep us on track to deliver high quality, top-tier results in fiscal 2018. We are reaffirming our underlying outlook for net sales growth of 6-7% and operating income of 8-9%, and adjusting our EPS range to account for tax reform and related items.”

Year-to-date Fiscal 2018 Highlights
• Underlying net sales grew 7% (+9% reported), with balanced geographic3 and portfolio3 contribution:
◦ Emerging markets grew underlying net sales by 15% (+19% reported)
◦ The United States grew underlying net sales by 5% (+7% reported) and non-US developed markets grew underlying net sales by 6% (+9% reported)
◦ The Jack Daniel’s family of brands grew underlying net sales 7% (+10% reported), including 5% growth (+7% reported) for Jack Daniel’s Tennessee Whiskey
◦ The company’s super- and ultra-premium American whiskey brands grew underlying net sales +16% (+21% reported), including 22% growth from Woodford Reserve (+25% reported)
◦ Herradura and el Jimador grew underlying net sales 20% and 9% (+19% and +13%, reported)
• Underlying operating income grew 11% (+15% reported)
• The company reaffirmed its fiscal 2018 underlying outlook for net sales growth of 6% to 7% and operating income growth of 8% to 9%. Split-adjusted fiscal 2018 EPS of $1.43 to $1.48 includes an expected full year negative impact due to tax reform of $0.03 and a negative impact of $0.10 from creating the previously announced charitable foundation during the fourth quarter.
Year-to-date Fiscal 2018 Performance By Market

Year-to-date underlying net sales grew 5% (+7% reported) in the United States. The increase in sales growth was driven by broad-based gains from the Jack Daniel’s family of brands, including Tennessee Whiskey, Tennessee Honey, Tennessee Fire, Gentleman Jack and the portfolio of RTDs/RTP (RTDs). The company also continued to roll-out Jack Daniel’s Tennessee Rye in the United States, with a solid initial response from our trade partners and consumers. The company’s American whiskey portfolio continues to grow rapidly in the United States, including strong double-digit underlying net sales gains from Woodford Reserve and Old Forester. Herradura and el Jimador tequila also grew underlying net sales double-digits in the United States as both brands maintained their solid momentum in the on and off-premise.

Sales in the company’s developed markets outside of the United States remained robust, delivering year-to-date underlying net sales growth of +6% (+9% reported). The United Kingdom and Germany grew underlying net sales by +6% (+10% reported) and +11% (+16% reported), respectively. Australia’s underlying net sales jumped 10% (+10% reported). Japan was the only one of our top ten markets that declined, due primarily to volume declines in Early Times. France’s underlying net sales increased +5% (+10% reported) and Canada grew +2% (+4% reported). After launching our owned distribution in Spain last summer, results have continued to accelerate, resulting in double-digit year-to-date underlying net sales growth.

Trends in the emerging markets remained strong, despite increasingly difficult comparisons. Underlying net sales in the emerging markets jumped 15% (+19% reported) year-to-date. The company’s two largest emerging markets, Mexico and Poland, both grew underlying net sales by 10% (+13% and +25% reported, respectively), fueled by strong demand for the Jack Daniel’s family of brands as well as growth of tequilas in Mexico. In emerging markets excluding Mexico and Poland, underlying net sales grew in the high teens, as economic conditions have improved and currencies have stabilized. Russia, Turkey, Brazil, Thailand, China and Ukraine grew underlying net sales well into the double-digits.

Travel Retail continued to deliver solid rates of growth, with underlying net sales up 11% (+17% reported) through the first nine months of the fiscal year. Jack Daniel’s Tennessee Whiskey is growing well across travel retail, and other brands, such as Gentleman Jack and Woodford Reserve are growing quickly as the company brings this great super-premium American whiskey portfolio to new markets through this channel. Passenger volumes are also continuing to improve, including Russian travelers, and foreign exchange volatility has lessened.

Year-to-date Fiscal 2018 Performance By Brand

The company’s underlying net sales growth was led by the Jack Daniel’s family, up 7% (+10% reported). Jack Daniel’s Tennessee Whiskey experienced 5% underlying net sales growth (+7% reported) globally, with strong volume gains in markets outside of the United States. Jack Daniel’s Tennessee Honey’s underlying net sales grew 9% (+11% reported). Gentleman Jack also grew underlying net sales 9% (+11% reported), as the new advertising campaign and increased media spend is bolstering results. Jack Daniel’s Tennessee Fire’s underlying net sales grew 15% (+22% reported), as the brand continues to benefit from its global rollout and U.S. on-premise momentum. Jack Daniel’s RTD business has delivered strong underlying net sales growth, up 14% (+17% reported). This growth has been helped by innovation, including Jack Daniel’s Cider, Jack Daniel’s American Serve, Jack Daniel’s Lynchburg Lemonade and Southern Peach Country Cocktails.

Brown-Forman’s portfolio of super- and ultra-premium American whiskey brands, including Woodford Reserve, Jack Daniel’s Single Barrel and Gentleman Jack, delivered 16% underlying net sales growth (+21% reported). Woodford Reserve grew underlying net sales 22% (+25% reported). Old Forester grew well into the double-digits, powered by a shift in product mix to more premium offerings and volumetric gains.

Finlandia vodka grew underlying net sales 7% (+14% reported). Russia’s results grew nicely due to the combination of better takeaway trends and buy-ins in advance of a route-to-consumer change. This strength was partially offset by a continued pressure in Poland due to the extremely competitive marketplace.

el Jimador grew underlying net sales by 9% (+13% reported), fueled by strong takeaway trends in the United States as the company continues to invest in building brand awareness. Herradura grew underlying net sales by 20% (+19% reported). Both the United States and Mexico experienced double-digit gains, and Mexico benefited from continued growth of Herradura Ultra. New Mix’s underlying net sales growth increased at a high single-digit rate.

Other P&L Items

Company-wide price/mix contributed two percentage points to the 7% year-to-date underlying net sales growth (+9% reported). Underlying gross profit grew 7% (+10% reported). As expected, higher cost of goods began to materialize, resulting in modest pressure on underlying gross margins during the third quarter, although year-to-date reported gross margins remain up slightly due to an increase in volumes of higher margin brands and foreign exchange tailwinds. The company expects higher costs in the fourth quarter, due in part to the phasing of expenses during fiscal 2018.

Year-to-date underlying A&P spend increased 5% (+8% reported), as the company continued to invest in the Jack Daniel’s family of brands, the fast growing bourbon and tequila brands, as well as brands such as Slane Irish whiskey. Underlying SG&A was flat compared to the prior year (+2% reported) as the company maintained its focus on tightly managing costs, including leveraging its assets and prior investments.

The company delivered underlying operating income growth of 11% (+15% reported) during the first nine months of the year, and operating margin expanded by 170 basis points to 35.5%, buoyed by the favorable phasing of year-to-date operating expenses. Operating expenses are expected to be higher in the fourth quarter, resulting in a more modest operating margin expansion for the full fiscal year.

U.S. Tax Reform/Other

Tax reform reduces the U.S. corporate income tax rate from 35% to 21%. Given the company’s fiscal year ends on April 30, 2018, the lower U.S. corporate tax rate will phase in to the company’s results over two fiscal years, resulting in a 30.4% statutory rate for fiscal 2018, and then dropping to 21% for fiscal 2019.

Third quarter results were negatively impacted by one-time items related to U.S. tax reform, but will benefit on an ongoing basis due to the lower statutory rate. The third quarter impact included a combined negative impact to earnings per share of $0.05 due to three main items:
One-time transitional items: 3Q18 EPS Benefit/(Expense)
Repatriation tax $ (0.19 )
Re-measurement of net U.S. deferred taxes $ 0.10
Ongoing effect of U.S. tax reform $ 0.04
Total 3Q18 Tax Impact $ (0.05 )

Looking ahead to fiscal 2019, the company anticipates that the effective tax rate will be in the 21-23% range, and that the immediate annualized ongoing cash tax savings will be in the $65 to $75 million range, a portion of which will be realized in fiscal 2018.

Additionally, U.S. tax reform afforded the company an opportunity to tax efficiently fund the pension and charitable giving programs that would have otherwise been funded in future years. As a result, the company funded the pension liability of $120 million and plans to establish a $60 to $70 million foundation during the fourth quarter to support the company’s charitable giving program in the communities where Brown-Forman employees live and work. The formation of the foundation will result in a one-time negative impact to earnings per share of $0.10 in fiscal 2018, and is expected to partially reduce the P&L impact of the company’s annual giving on an ongoing basis.

In total, the company anticipates that full year, fiscal 2018’s earnings per share will be negatively impacted by roughly $0.13 due to the full year impact of tax reform and the creation of a charitable foundation.

Financial Stewardship

Through January 31, 2018, the company delivered a trailing twelve month reported operating margin of 34.4% and ROIC2,4 of 21.0%.

On January 23, 2018, Brown-Forman declared a five for four stock split, paid on February 28, 2018. Third quarter and year-to-date results are presented using the new, split-adjusted diluted share count of 484 million shares.

On January 23, 2018, Brown-Forman declared a special dividend of $1.00 on the split-adjusted Class A and Class B common stock. The special cash dividend is payable on April 23, 2018 to stockholders of record on April 2, 2018. On January 23, 2018, Brown-Forman also declared a regular quarterly cash dividend of $0.158 per share on the split-adjusted Class A and Class B common stock, equating to an annualized cash dividend of $0.632 per share. The quarterly cash dividend is payable on April 2, 2018 to stockholders of record on March 5, 2018.

Brown-Forman has paid regular quarterly cash dividends for 72 consecutive years and has increased the dividend for 34 consecutive years.

Regarding the updated outlook for fiscal 2018, Varga added, “In line with what we shared last quarter, we still anticipate that higher operating investments and cost of sales during the fourth quarter will moderate the rate of full year operating margin expansion. Notwithstanding the phasing of costs, some of which are one-time in nature, we remain on track to deliver significantly accelerated top-line growth in fiscal 2018 given the strength of our premium American whiskey portfolio. While we expect an ongoing benefit to our earnings and cash flow in future years due to tax reform, we will carefully evaluate additional opportunities to invest in the long-term growth of our business as part of our fiscal 2019 annual planning process.”

Revised Fiscal Year 2018 Outlook
The global economy has improved modestly over the last year, but emerging markets remain volatile, and the competitive landscape has intensified in the developed world, making it difficult to accurately predict future results. Assuming current trends continue, the company anticipates:

1. Underlying net sales growth of 6% to 7%.
2. A modest increase in underlying SG&A driven in part by compensation related expenses, and underlying A&P growth roughly in line with underlying net sales growth.
3. Underlying operating income growth of 8% to 9%.
4. Diluted earnings per share of $1.43 to $1.48, which now includes $0.03 of expense from tax reform, $0.10 of expense from the establishment of a foundation, and $0.03 of foreign exchange benefit.
FY18 EPS
Prior FY18 Outlook as of 2Q18a $1.90-$1.98
Split adjusted Prior Outlookb $1.52-$1.58
Underlying changes to Outlook $0.00
Foreign exchange $0.03
Tax Reformc ($0.03)
Establishment of Charitable Foundation – 4Q18d ($0.10)
Updated FY18 Outlook $1.43-$1.48
a FY18 GAAP EPS Outlook shared on 12-6-17
b Adjusted for the five for four stock split from February 28, 2018
c Includes provisional net negative effect of $0.05 in 3Q18 and ongoing tax benefit of $0.02 in 4Q18
d Foundation expected to be created in 4Q18 and result in an ongoing P&L benefit
Conference Call Details
Brown-Forman will host a conference call to discuss the results at 10:00 a.m. (EST) 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. (EST) 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/.

Important Information on Forward-Looking Statements:
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; or 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, 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 Securities and Exchange Commission.

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