Brown-Forman Corporation (BF.B)
F4Q10 (Qtr End 04/30/10) Earnings Call
June 9, 2010 10:00 am ET
Ben Marmor – Director, IR
Don Berg – EVP and CFO
Paul Varga – Chairman and CEO
Viviane Azar [ph]
Lauren Torres – HSBC
Ann Gurkin – Davenport & Co.
Thomas Russo – Gardner Russo & Gardner
Kevin Dreyer – Gabelli & Company, Inc.
Lindsay Drucker Mann – Goldman Sachs
Previous Statements by BF.B
» Brown-Forman Corporation F3Q10 (Qtr End 01/31/10) Earnings Call Transcript
» Brown-Forman Corporation F2Q10 (Qtr End 31/10/2009) Earnings Call Transcript.
» Brown-Forman Corporation F4Q09 (Qtr End 04/30/09) Earnings Call Transcript
Good morning, my name is Junell and I will be your conference operator. At this time, I would like to welcome everyone to the fourth quarter fiscal 2010 year-end conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions)
Thank you. Mr. Marmor, please begin your conference.
Thank you. Good morning, everyone and thank you for joining us for Brown-Forman's fiscal 2010 earnings call. This is Ben Marmor, the Director of Investor Relations at Brown-Forman. Joining me today are Paul Varga, our President and Chief Executive Officer; Don Berg, Executive Vice President and Chief Financial Officer, and Jane Morreau, Senior Vice President, Finance. Don will begin our call this morning with a few remarks about recent trends and other factors affecting our performance and guidance. Paul will provide additional strategic commentary about our performance.
As always, this morning's conference call contains forward-looking statements based on our current expectations. Numerous risks and uncertainties may cause actual results to differ materially from those anticipated or projected in these statements. Many of the factors that will determine future results are beyond the Company's ability to control or predict. You should not place undue reliance on any forward-looking statements and the Company undertakes no obligation to update any of these statements whether due to new information, future events or otherwise.
This morning, we issued a press release containing our results for the fiscal 2010. The release can be found on our Web site under the section titled Investor Relations. We have listed in the press release a number of the risk factors that you should consider in conjunction with our forward-looking statements. Other significant risk factors are described in our Form 10-K, Form 8-K and Form 10-Q reports filed with the Securities and Exchange Commission. During this call, we also will be discussing certain non-GAAP financial measures. These measures and the recent management believe they provide useful information to investors regarding the Company's financial conditions and results of operations are contained in the press release.
And with that I will turn the call over to Don.
Thanks, Ben and good morning, everyone. This morning we issued our fiscal 2010 earnings release. That also included our current expectations for fiscal 2011. Fiscal 2010 was a record year for Brown-Forman with earnings per share of 5% to $3.02. Given the difficult environment we are quite proud of the success.
Looking forward, we expect to build on this success with another year of underlying operating income growth in fiscal 2011 which will result in growth through portfolio expansion, innovation, investment in our brands and the capabilities of our strong route to market strategy.
During our fiscal 2010, we had a strong total shareholder return of 28% but importantly, over the two year that encompass the recession we were among the top performers in the industry and outpace the S&P 500 by delivering a 6% compounded annual total shareholder return while the index declined 5% per year.
We’ve long had a theme that Brown-Forman continues to be a great long-term investment for our shareholders and we believe that both our performance in fiscal 2010 and our expectations for fiscal 2011 continue to uphold that tradition.
Our earnings release was fairly extensive in recapping our record year so let me spend some time this morning discussing more recent trends including pricing, premiumization innovation, business conditions in the on-premise channel and trends and various regional operating environments. I will also provide some color around how we think about the brick markets, our route to market strategy, foreign exchange sensitivities and our tax rate.
With these comments and recent trends, and how we think about the business, alongside our earnings release we believe you will be confident in the continued health of our business and our position to realize a significant opportunity for growth that exist in the world today.
Let me start with pricing and premiumization trend. Our fiscal 2010 was a difficult and challenging year for pricing. Consumers trading down and aggressive discounting of our competitors significantly reduced our ability to increase prices. When compared to the prior few years, we were more limited in our ability to take price in fiscal 2010. And we ended the year flat on an underlying pricing basis.
While we did continue to seek opportunities to increase price, we also increased discounting in a targeted way during the year as we felt that important for our consumers that were hit hardest by the recession to continue to participate in our brand franchises. We look at this approach as investing in our consumers which we felt added to our overall brand building efforts.
We are planning for fiscal 2011 to remain competitive in terms of pricing. But are hopeful that discounting in the industry will be less pervasive. For the longer-term, pricing will remain a key tool of ours as we believe consumers will continue to want to enjoy premium products.
On a similar note, fiscal 2010 was marked by consumers trading down to lower price brands, particularly, earlier in the year bucking in the prior few years trend of higher price categories growing the fastest. Syndicated data throughout much of our fiscal year show that lower price categories experience the fastest growth rate while brands with high price points experienced decline.