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Brown-Forman Delivers Strong Fiscal 2010 Underlying Earnings Growth in a Difficult Environment; Forecasts Continued Underlying Growth in Fiscal 2011

Louisville, KY, June 9, 2010 – On the heels of a strong fiscal 2010, Brown-Forman anticipates delivering continued growth in fiscal 2011.  Paul Varga, the company’s chief executive officer stated, “I am proud of what the company accomplished this year.  Reported operating income grew 7% for the year.  Diluted earnings per share grew 5% to $3.02, driven by what we believe to be top-tier underlying  operating income growth of 6% in some of the most challenging economic, consumer, and competitive conditions in memory.  Despite the challenging environment, our year-over-year underlying gross profit and operating income growth rates improved compared to fiscal 2009.  I congratulate our employees and partners on the resourcefulness they demonstrated to position our brands for success in both the short and long term.”

Looking ahead to fiscal 2011, the company expects to continue to capitalize on the world of opportunity for growing its business both in the U.S. and internationally.  The development of existing brands, portfolio expansion, marketing innovation, and improved route-to-market capabilities are expected to be key contributors to strong underlying performance in fiscal 2011.

Brown-Forman will expand the reach of its current portfolio of brands, led by its flagship brand Jack Daniel’s.  The company sees opportunities to increase Jack Daniel’s market share in developed markets, such as France where Jack Daniel’s Tennessee Whiskey has only a 2% share of the whiskey category, and emerging markets such as Russia, Poland, and Mexico where the whiskey category is in early stages of development.  During fiscal 2011, the company also intends to expand the presence of many of its Jack Daniel’s family, including Gentleman Jack, Jack Daniel’s Single Barrel and Jack Daniel’s ready-to-drinks.

Brand innovations also contribute to the company’s expectations for continued underlying growth.  For example, the company believes primary packaging is particularly important in an environment where the off-premise channel remains stronger than the on-premise, as consumers interact more directly with the bottle at retail establishments.  New packaging is expected to invigorate the consumer appeal of several Brown-Forman brands, including Southern Comfort and Chambord.  In addition, Brown-Forman will introduce several line extensions in the U.S. to drive fiscal 2011 underlying growth.  Two such line extensions are Southern Comfort Lime and Southern Comfort Lemonade.  Rolling out now, these premixed cocktails will allow consumers to conveniently enjoy their favorite drinks at home.  In fiscal 2011, Brown-Forman will implement a number of new route-to-market changes, including new direct investments in distribution in Germany, Canada, and Brazil.

The company’s expectations for fiscal 2011 build on its strong underlying performance in fiscal 2010.  Brown-Forman delivered record earnings per share in fiscal 2010 of $3.02, an increase of 5% over fiscal 2009.  The company also set a new performance bar with operating income of $710 million, a growth of 7% over the prior year.  Underlying operating income grew 6%.

Brown-Forman’s fiscal 2010 earnings were driven by the company’s further diversification into brands and regions beyond Jack Daniel’s Tennessee Whiskey and the U.S.  Within the Jack Daniel’s brand family, the ready-to-drink line extensions, Jack Daniel’s Single Barrel, and Gentleman Jack each grew reported and constant currency  net sales more than 20% in fiscal 2010.  While these brands increased their prominence, the Jack Daniel’s Tennessee Whiskey brand also grew reported and constant currency net sales 4% and 3%, respectively.  Beyond the Jack Daniel’s family, the company’s Southern Comfort ready-to-pour brands, el Jimador, Woodford Reserve, Korbel, Antiguo, and Pepe Lopez made strong gains in constant currency net sales. Expanding the geographic breadth of Brown-Forman in fiscal 2010, Australia, Germany, France, and Turkey each delivered significant constant currency net sales growth.

Lower total operating expenses also contributed to the company’s full year operating income growth driven in part by media deflation.  Brown-Forman believes it effectively optimized its mix of total investment behind many brands by capitalizing on its organizational flexibility and reallocating resources among brands, geographies, and channels in ways that enabled the company to effectively and efficiently reach consumers around the world.  For example, the company reallocated spending from on-premise to off-premise activities as well as from traditional and national media to digital and local media campaigns.  Some of the brand-building activities employed to stay relevant affected line items of the income statement other than what is traditionally captured as advertising.  For example, targeted price promotions reduced net sales, and value-added packaging increased cost of goods sold.  Taking into consideration this total investment approach to brand building, the company increased its brand-building spend by 5% for the year, excluding incremental costs associated with product re-formulation or primary packaging.

Paul Varga, the company’s chief executive officer stated, “In a challenging consumer and competitive environment, we delivered what we believe to be top-tier performance in underlying net sales and operating income.  We grew our underlying net sales and gross profit.  We effectively adjusted the brand-building mix for many of our brands, which helped us achieve our strong overall performance.”

Brown-Forman’s success in fiscal 2010 strengthened its already impressive financial condition.  The company reduced its net debt levels to $467 million and its ratio of total debt to total capital  to 27%, providing ample room to borrow if investment opportunities arise, while maintaining investment grade debt ratings.  The company also produced what it believes to be an industry-leading return on invested capital  approaching 17%.  The company expects to continue to improve its returns as it realizes the enormous growth opportunities ahead and effectively manages its invested capital.

During fiscal 2010, the company returned significant cash to shareholders by paying $174 million in dividends and repurchasing an aggregate $158 million Class A and Class B shares.  Brown-Forman’s total shareholder return in fiscal 2010 was 28%.  Importantly, Brown-Forman was a top performer over the volatile two-year period that encompassed the recent recession.  Building on its longer-term history of consistently beating the S&P 500, the company grew total shareholder return 6% annually over the last two years, while the S&P 500 lost 5% per annum.

Fourth Quarter
Brown-Forman’s business continued to improve in the company’s final quarter of the fiscal year as net sales growth accelerated compared to the third quarter.  Supported by improving volumetric trends for most of its brands, reported net sales grew 7% and underlying sales trends gained 3%, setting the stage for continued underlying growth in fiscal 2011.  The company remained resourceful in its approach to investing behind its brands, effectively and efficiently reaching and responding to our consumers in the challenging environment.  While advertising expenses decreased modestly in the quarter, the company’s total investment behind our brands expanded 6% for the period.  The company intends to continue to support its brands by remaining agile and adaptive to the world’s changing environment and optimizing the mix of its total brand investments.  The results during the quarter were moderated by incremental selling, general, and administrative expenses due in part to higher compensation related expense, as well as a higher effective tax rate reflecting additional tax expense related to discrete items arising during the quarter, including the impact of the Health Reform Bill.

Share Repurchase Program
As announced yesterday, the company’s Board of Directors has authorized the repurchase of up to $250 million of its outstanding Class A and Class B common shares, subject to market and other conditions. Under this plan, which expires on December 1, 2010, the company can repurchase shares from time to time for cash in open market purchases, block transactions, and privately negotiated transactions in accordance with applicable federal securities laws.

Fiscal 2011 Outlook
Brown-Forman expects a moderately better global economic environment and slightly improved consumer trends in fiscal 2011.  Due to uncertainties, including improvements or deterioration of the global economic and consumer environments, unexpected success or disruption from distribution moves, changes in distributor and retail inventory levels, consumer response to innovation activities, and the recent significant volatility in foreign exchange rates, Brown-Forman is setting a $0.40 guidance range of $2.98 to $3.38 for fiscal 2011 earnings per share.  Absent these uncertainties, the company anticipates a continuation of underlying operating income growth in the mid-single digits.

The following table details the current fiscal 2011 guidance:


EPS Roll Forward

Fiscal 2010 Reported EPS


Absence of fiscal 2010 Items:
Non-cash trademark impairment charge (Don Eduardo)
Discreet tax items



Fiscal 2010 Adjusted EPS


Incremental expected change
Share repurchase program

(0.01) to 0.39


Fiscal 2011 EPS Excluding Foreign Exchange At Recent Rates

$3.13 to $3.53

Estimated foreign exchange impact at recent rates


Fiscal 2011 EPS Guidance

$2.98 to $3.38


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 77976213.  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 “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); continuation of, or further decreases in, consumer and trade spending; 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 or further 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 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
• 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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