Brown-Forman Reports Excellent First Half Perforfmance; Expects Strong Underlying Results To Continue In Second Half

Today Brown-Forman Corporation (NYSE: BFA) (NYSE: BFB) reported strong results for its fiscal 2012 second quarter and first half ended October 31, 2011. Net sales for the quarter on a reported basis were $1.0 billion, up 12%, and diluted earnings per share grew 4% to $1.09. For the first six months of the fiscal year, net sales increased 12% to $1.9 billion, and diluted earnings were up 5% to $1.90 per share. Excluding the net effect of the Hopland based wine business ¹ , diluted earnings per share were up 8% for the quarter and 11% for the first half. Reported operating income rose 5% to $246 million for the fiscal 2012 second quarter and increased 6% to $432 million for the first six months.

First half reported net sales benefitted from underlying ² growth and higher estimated net distributor inventory levels, the latter of which was attributable to several factors, including advanced buying ahead of anticipated price increases in several markets, the timing of promotional activities, and pipeline fill associated with product innovations. The company expects distributor inventories will rebalance in the second half of the fiscal year, reducing the growth rate in reported net sales. However, the company anticipates underlying net sales growth for the full fiscal year in the high single digits.

Importantly, underlying trends continued to accelerate in the quarter as shown in the table below:

		Growth in Underlying				Growth in Reported
		Net Sales		Operating Income		Net Sales		Operating Income
Fiscal 2012 YTD		9 %		8 %		12 %		6 %
2 nd Quarter		10 %		9 %		12 %		5 %
1 st Quarter		7 %		7 %		13 %		8 %
Fiscal 2011 YTD		4 %		6%		6 %		20 %

Brown-Forman’s Chief Executive Officer, Paul Varga stated, “We delivered an excellent quarter and strong first half as we accelerated our growth in underlying net sales and operating income versus fiscal 2011. Performance was led by the Jack Daniel’s trademark, which grew volumes globally at a double-digit rate, and drove the company’s widespread geographic growth. This performance was aided by compelling portfolio innovation, particularly in the Jack Daniel’s Family, growth in our super-premium brands, and continued international growth of the brand portfolio. Each of these is an important contributing element to our long-term growth strategy.” Varga continued, “While we expect the strengthening of the U.S. dollar to dampen our reported earnings, we anticipate the continuation of our strong underlying results for the remainder of our fiscal year.”