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Brown-Forman Reports Strong First Quarter Earnings Due to Continued International Growth


Reported Earnings up 1%; Underlying Growth Continues at a Double-Digit Rate

Brown-Forman Corporation reported diluted earnings per share for its first quarter ended July 31, 2007 of $0.77, up 1% from the $0.76 earned in the first quarter last year. Underlying earnings per share for the quarter were up 10%, after adjusting for the following items: $0.05 per share of dilution associated with acquisitions; a $0.04 per share benefit from favorable foreign currency fluctuations; a $0.04 per share net impact of changes in global trade inventory levels; and a $0.01 per share absence of interest income earned in last year’s first quarter on proceeds from the sale of Lenox (which were distributed to shareholders in May 2007). This 10% underlying growth in earnings for the first quarter reflects accelerating trends for the company’s premium global brands internationally and continued gains from the company’s super-premium developing brands.

(1) All financial and statistical information included in this press release reflects continuing operations of the company for all periods presented unless otherwise indicated.

(2) Underlying earnings per share represent diluted reported earnings per share in accordance with GAAP, adjusted for certain items. A reconciliation from reported to underlying earnings per share (a non-GAAP measure) for the full year, and the reasons why management believes these adjustments to be useful to the reader, are included in Schedule A of this press release.

Paul Varga, chief executive officer said, “These financial results represent a great start to our fiscal year and a nice continuation of our strong underlying growth. We are encouraged by healthy consumer demand for our premium global brands, including Jack Daniel’s Tennessee Whiskey, Southern Comfort, and Finlandia, particularly in
international markets. Our integration and early work with the recently acquired Casa Herradura brands are on track and we remain optimistic about the company’s overall growth prospects.”

(3) References to Casa Herradura include all brands (el Jimador, Herradura, New Mix, Antiguo, Suave 35 and other brands) and operations acquired in January 2007.

First quarter net sales grew $106 million, up 17% over the prior-year period. Gross profit increased $42 million, up 12% from the first quarter of last year. Continuing consumer demand for the company’s premium global brands, the addition of acquired brands, and a weaker U.S. dollar contributed to these strong results. The company’s overall gross margin as a percent of net sales declined due in part to the addition of Casa Herradura results.

Advertising expenses in the quarter were up $13 million, or 16%, over last year’s first quarter due to incremental investments behind the company’s premium global brands, new investments in support of acquired brands, and a weaker U.S. dollar. SG&A expenses increased approximately $15 million, or 12%, compared to the same prior year period, due primarily to the addition of acquired brands. Operating income increased $13 million, up 9% over the first quarter last year.

Jack Daniel’s global depletions registered mid-single digit gains in the quarter, led by double-digit growth outside of the U.S. The brand’s international volume expansion reflected strong growth in the U.K., France, Australia, Asia, and Eastern Europe. In the U.S., Jack Daniel’s volume growth rate moderated slightly, increasing at a low-single digit rate for the three-month period. Global volumes for Southern Comfort grew at a mid-single digit rate in the quarter, as double-digit gains in the U.K., South Africa, and Germany offset modest declines in the U.S. Worldwide Finlandia volumes accelerated in the quarter, as double-digit increases reflect continued expansion in Eastern Europe. Depletions for our super-premium developing brands, including Woodford Reserve and Chambord, increased at a double-digit rate in the quarter. Volumes for our mid-priced regional brands were up mid-single digits, as solid growth for Fetzer Valley Oaks, Korbel, and Bonterra more than offset declines for Canadian Mist, Bolla, and Early Times.

(4)Depletions are shipments from wholesale distributors to retail customers, and are commonly regarded in the industry as an approximate measure of consumer demand.


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