Press Release

Brown-Forman Reports 4% Second Quarter Operating Income Growth in Challenging Economic Environment; EPS Growth of 13%

Company Release - 12/5/2008 7:00 AM ET

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Brown-Forman Corporation (NYSE:BFB)(NYSE:BFA) reported that diluted earnings per share from continuing operations1 increased 13% to $0.94 and operating income increased 4% to $222 million for its fiscal 2009 second quarter. For the first six months of the fiscal year, diluted earnings per share increased 5% to $1.52, while operating income decreased 2% to $362 million. Adjusting for items in Schedule A of this press release, underlying2 operating income grew 5% for the second quarter and 4% for the first half of fiscal 2009.

Commenting on the first half, Paul Varga, chief executive officer said, "We are pleased with our results, particularly in the second quarter where we saw improvement during a challenging economic environment. We believe our first half performance is a testimony to the stability of our company, the strength and resiliency of our brands and people, and the quality of our cash flows and balance sheet."

Reported net sales for the six months ended October 31, 2008 were $1.7 billion, an increase of 6% when compared with the first half of last year. Adjusting for estimated changes in global trade inventories, the Australian ready-to-drink excise tax increase, discontinued agency relationships, and changes in foreign exchange rates, underlying net sales grew 5% versus the same prior year period. For the second quarter, reported net sales grew 5% and underlying net sales grew 6%.

    --  The Jack Daniel's Family of Whiskey Brands, excluding the ready-to-drink
        products, increased both reported and constant currency3 net sales in
        the mid-single digits for the first half of the fiscal year, primarily
        reflecting shipment growth. Global depletions4 increased in the
        mid-single digits for the first six months of fiscal 2009 as gains in
        the U.S., Eastern Europe, Australia, and Latin America were partially
        offset by declines in some Western European markets, including Germany,
        the U.K., and Spain. Jack Daniel's Tennessee Whiskey reported net sales
        increased at mid-single digit rates and constant currency net sales grew
        at low single digit rates for the first half of fiscal 2009. Gentleman
        Jack's net sales grew at a strong double-digit rate on both a reported
        and a constant currency basis for the six month period.
    --  Jack Daniel's & Cola reported and constant currency global net sales
        grew in the mid-single digits through October. While depletions
        increased slightly in the second quarter, they were down for the first
        half due to a substantial increase in ready-to-drink excise taxes in
        Australia that became effective in April 2008. Double-digit depletion
        gains in Germany partially offset losses in Australia.
    --  Finlandia net sales increased by double digits on both a reported and a
        constant currency basis for the six month period, reflecting higher
        shipments and pricing gains. Global depletions grew in the high single
        digits, led by continued double-digit growth in Eastern Europe.
    --  Southern Comfort net sales declined in the low single digits on a
        reported basis and in the mid-single digits on a constant currency basis
        during the first half of fiscal 2009. Depletion trends showed modest
        improvement during the second quarter, particularly in the U.S., where
        they increased in the low single digits.
    --  Second quarter growth rates for the company's faster growing,
        super-premium brands remained strong but their growth rates slowed
        somewhat since the first quarter and last fiscal year. Reported and
        constant currency net sales for Sonoma-Cutrer, Bonterra, Woodford
        Reserve, and the Casa Herradura portfolio grew at double-digit rates for
        the six month period; reported and constant currency net sales grew in
        the high single digits for Chambord and in the mid-single digits for
        Tuaca.

For the first six months of the year, reported gross profit declined 2%, while underlying gross profit increased 2% after adjusting for the non-cash agave inventory charge and foreign exchange rate movements. Underlying gross profit growth lagged underlying net sales trends, due in part to increased value-added packaging costs and higher grain and fuel costs when compared to the same period last year. For the second quarter, reported gross profit declined 1% and underlying gross profit increased 3%.

Reported advertising investments were flat for the first half of the year compared to the same period last year. Adjusting for spending behind discontinued agency brands last year and foreign exchange movements, underlying advertising investments increased 1% for the first six months of fiscal 2009. The company continued to reallocate spending to those brands, markets, and channels where it believes the consumer and trade are most responsive to the investments, which included increased spending for value-added packaging that is reflected in cost of goods. Selling, general, and administrative (SG&A) expenses decreased 2% when compared with the first half of last year as the company continued to benefit from cost savings initiatives. Adjusting for transition costs related to the fiscal 2007 Casa Herradura acquisition, SG&A decreased 1%.

Brown-Forman's balance sheet remained strong and the company continued to operate during the six month period with an "A2" rating from Moody's and an "A" rating from Standard & Poor's.

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 over the next 12 months, subject to market conditions. Under this plan, 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.

Full-Year Outlook

Due to an estimated $0.12 per share net gain on the expected sale of Bolla and Fontana Candida, the company is increasing its fiscal 2009 full year earnings per share guidance to a range of $3.00 to $3.20, representing growth of 6% to 13% over prior-year earnings per share of $2.84. The guidance also includes the expectation of maintaining year-to-date trends for Jack Daniel's, Southern Comfort, and Finlandia. A weaker than anticipated consumer and trade environment, due to the current global economic conditions, could have a significant impact on the company's ability to maintain these trends. This outlook also incorporates expectations for continued tight management of discretionary operating expenses, a lower effective tax rate in the second half of the year as compared to the first half, and the assumption that today's stronger dollar relative to the company's major foreign currencies will continue for the balance of the year.

Brown-Forman will host a conference call to discuss the results at 9:30 a.m. (EST) 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 9:30 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, www.brown-forman.com, 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 73923858.

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.

In addition to the earnings release and conference call, Brown-Forman will also hold an analyst meeting starting at 1:00 p.m. on December 5 and a live audio Web cast of the company presentations and question and answer session with analysts will be available via www.brown-forman.com, through a link to Investor Relations/Events and Presentations. Copies of the slides presented at the analyst meeting will also be available via the Web site.

Brown-Forman Corporation is a producer and marketer of fine quality beverage alcohol brands, including Jack Daniel's, Southern Comfort, Finlandia, Canadian Mist, Fetzer, Korbel, Gentleman Jack, el Jimador, Tequila Herradura, Sonoma-Cutrer, Chambord, Tuaca, Woodford Reserve, and Bonterra.

Important Note on Forward-Looking Statements:

This release contains statements, estimates, or projections that constitute "forward-looking statements" as defined under U.S. federal securities laws. Generally, the words "expect," "believe," "intend," "estimate," "will," "anticipate," and "project," and similar expressions identify a forward-looking statement, which speaks only as of the date the statement is made. 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. We believe that the expectations and assumptions with respect to our forward-looking statements are reasonable. But by their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors that in some cases are out of our control. These factors could cause our actual results to differ materially from Brown-Forman's historical experience or our present expectations or projections. Here is a non-exclusive list of such risks and uncertainties:

    --  Continuation of the U.S. or global economic downturn or ongoing turmoil
        in world financial markets (and related credit and capital market
        instability and illiquidity; decreased consumer and trade spending;
        higher unemployment; supplier, customer and consumer credit problems,
        etc.);
    --  pricing, marketing and other competitive activity focused against our
        major brands;
    --  continued or further decline in consumer confidence or spending, whether
        related to U.S. and global economic conditions, war, natural disasters,
        terrorist attacks or other factors;
    --  tax increases, changes in tax rules (e.g., LIFO treatment for
        inventory), tariff barriers and/or other restrictions affecting beverage
        alcohol, whether at the U.S. federal or state level or in other major
        markets around the world, and the unpredictability or suddenness with
        which they can occur;
    --  limitations and restrictions on distribution of products and alcohol
        marketing, including advertising and promotion, as a result of stricter
        governmental policies adopted either in the United States or in our
        other major markets;
    --  fluctuations in the U.S. Dollar against foreign currencies, especially
        the British Pound, Euro, Australian Dollar, Polish Zloty and the South
        African Rand;
    --  reduced bar, restaurant, hotel and other on-premise business, including
        consumer shifts to discount stores and other price sensitive purchases
        and venues;
    --  longer-term, a change in consumer preferences, societal attitudes or
        cultural trends that results in the reduced consumption of our premium
        spirits brands or our ready-to-drink products;
    --  distribution arrangement changes in major markets that limit our ability
        to market or sell our products;
    --  adverse impacts as a consequence of our acquisitions, acquisition
        strategies, integration of acquired businesses, or conforming them to
        the company's trade practice standards, financial controls environment
        and U.S. public company requirements;
    --  price increases in energy or raw materials, such as grapes, grain,
        agave, wood, glass, and plastic;
    --  changes in climate conditions, agricultural uncertainties, our
        suppliers' financial hardships or other supply limitations that
        adversely affect supply, price, availability, quality, or health of
        grapes, agave, grain, glass, closures or wood;
    --  negative public media related to our company, brands, personnel,
        operations, business performance or prospects;
    --  counterfeit production, tampering, or contamination of our products and
        any resulting negative effect on our sales, intellectual property
        rights, or brand equity;
    --  adverse developments stemming from state or federal investigations of
        beverage alcohol industry marketing or trade practices of suppliers,
        distributors or retailers; and
    --  impairment in the recorded value of inventory, fixed assets, goodwill or
        other acquired intangibles.

1 All per share amounts have been adjusted to reflect the October 27, 2008 Class B common stock distribution. For every four shares of Class A or Class B common stock, one Class B share was issued. All financial and statistical information contained in this press release relates to the continuing operations of the company unless otherwise stated.

2 Underlying growth represents the percentage growth in reported financial results in accordance with GAAP, adjusted for certain items. A reconciliation from reported to underlying net sales, gross profit, advertising expense, SG&A, and operating income (non-GAAP measures) growth for the quarter and the first six months of the fiscal year, and the reasons why management believes these adjustments to be useful to the reader, are included in Schedule A and the notes to this press release.

3 Constant currency represents reported net sales with the cost/benefit of currency movements removed. Management uses the measure to understand the growth of the business on a constant dollar basis, as fluctuations in exchange rates can distort the underlying growth of the business both positively and negatively.

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


Brown-Forman Corporation

Unaudited Consolidated Statements of Operations

(Dollars in millions, except per share amounts)

                                                Three Months Ended

                                                October 31,

                                                2007       2008       Change

Continuing Operations

 Net sales                                      $ 893.4    $ 934.7    5  %

 Excise taxes                                   177.8      196.8      11 %

 Cost of sales                                  245.6      271.2      10 %

  Gross profit                                  470.0      466.7      (1 %)

 Advertising expenses                           112.6      110.0      (2 %)

 Selling, general, and administrative expenses  146.7      139.9      (5 %)

 Amortization expense                           1.3        1.3

 Other (income), net                            (3.2    )  (6.2    )

  Operating income                              212.6      221.7      4  %

 Interest expense, net                          12.2       7.9

  Income before income taxes                    200.4      213.8      7  %

 Income taxes                                   70.9       70.6

  Net income                                    $ 129.5    $ 143.2    11 %

 Earnings per share:

  Basic                                         0.84       0.95       13 %

  Diluted                                       0.83       0.94       13 %

Discontinued Operations

 Net loss                                       $ (0.1  )  $ -

 Loss per share:

  Basic                                         -          -

  Diluted                                       -          -

Total Company

 Net income                                     $ 129.4    $ 143.2    11 %

 Earnings per share:

  Basic                                         0.84       0.95       13 %

  Diluted                                       0.83       0.94       13 %




Brown-Forman Corporation

Unaudited Consolidated Statements of Operations

(Dollars in millions, except per share amounts)

                                                Six Months Ended

                                                October 31,

                                                2007         2008         Change

Continuing Operations

 Net sales                                      $ 1,632.5    $ 1,724.7    6  %

 Excise taxes                                   329.8        373.0        13 %

 Cost of sales                                  441.7        504.2        14 %

  Gross profit                                  861.0        847.5        (2 %)

 Advertising expenses                           206.5        207.0        0  %

 Selling, general, and administrative expenses  289.7        284.2        (2 %)

 Amortization expense                           2.6          2.6

 Other (income), net                            (5.9      )  (8.6      )

  Operating income                              368.1        362.3        (2 %)

 Interest expense, net                          23.4         15.4

  Income before income taxes                    344.7        346.9        1  %

 Income taxes                                   119.9        115.5

  Net income                                    $ 224.8      $ 231.4      3  %

 Earnings per share:

  Basic                                         1.46         1.54         5  %

  Diluted                                       1.44         1.52         5  %

Discontinued Operations

 Net loss                                       $ (0.2    )  $ -

 Loss per share:

  Basic                                         -            -

  Diluted                                       -            -

Total Company

 Net income                                     $ 224.6      $ 231.4      3  %

 Earnings per share:

  Basic                                         1.46         1.54         5  %

  Diluted                                       1.44         1.52         6  %




Brown-Forman Corporation

Unaudited Condensed Consolidated Balance Sheets

(Dollars in millions)

                                            April 30,  October 31,

                                            2008       2008

Assets:

Cash and cash equivalents                   $118.9     $326.8

Accounts receivable, net                    453.2      534.4

Inventories                                 684.5      683.0

Other current assets                        199.4      228.8

 Total current assets                       1,456.0    1,773.0

Property, plant, and equipment, net         501.4      486.1

Goodwill                                    688.0      671.7

Other intangible assets                     698.8      687.6

Prepaid pension cost                        22.8       25.7

Other assets                                38.0       36.5

 Total assets                               $3,405.0   $3,680.6

Liabilities:

Accounts payable and accrued expenses       $379.7     $370.9

Accrued income taxes                        14.7       8.3

Short-term borrowings                       585.3      783.9

Current portion of long-term debt           4.3        3.2

 Total current liabilities                  984.0      1,166.3

Long-term debt                              417.0      412.3

Deferred income taxes                       88.8       105.6

Accrued postretirement benefits             121.2      117.9

Other liabilities                           68.8       66.3

 Total liabilities                          1,679.8    1,868.4

Stockholders' equity                        1,725.2    1,812.2

Total liabilities and stockholders' equity  $3,405.0   $3,680.6




Brown-Forman Corporation

Unaudited Condensed Consolidated Statements of Cash Flows

(Dollars in millions)

                                                      Six Months Ended

                                                      October 31,

                                                      2007       2008

Cash provided by operating activities                 $ 198.0    $ 116.2

Cash flows from investing activities:

 Acquisition of brand names and trademarks            (12.0   )  -

 Sale of short-term investments                       85.6       -

 Additions to property, plant, and equipment          (24.2   )  (26.3   )

 Other                                                (1.4    )  (1.9    )

  Cash provided by (used for) investing activities    48.0       (28.2   )

Cash flows from financing activities:

 Net (repayment) issuance of debt                     (61.3   )  218.2

 Acquisition of treasury stock                        (22.6   )  (0.3    )

 Special distribution to stockholders                 (203.7  )  -

 Dividends paid                                       (74.7   )  (82.2   )

 Other                                                20.3       (0.8    )

  Cash used for financing activities                  (342.0  )  134.9

Effect of exchange rate changes on cash and cash      5.9        (15.0   )
equivalents

Net (decrease) increase in cash and cash equivalents  (90.1   )  207.9

Cash and cash equivalents, beginning of period        282.8      118.9

Cash and cash equivalents, end of period              $ 192.7    $ 326.8




Brown-Forman Corporation

Supplemental Information (Unaudited)

(Dollars in millions, except per share amounts)

                                                           Three Months Ended

                                                           October 31,

                                                           2007       2008

Gross margin                                               52.6    %  49.9    %

Operating margin                                           23.8    %  23.7    %

Effective tax rate                                         35.4    %  33.0    %

Cash dividends paid per common share                       $ 0.242    $ 0.272

Shares (in thousands) used in the calculation of earnings
per share

 Basic                                                     154,138    150,661

 Diluted                                                   155,668    151,828

                                                           Six Months Ended

                                                           October 31,

                                                           2007       2008

Gross margin                                               52.7    %  49.1    %

Operating margin                                           22.5    %  21.0    %

Effective tax rate                                         34.8    %  33.3    %

Cash dividends paid per common share                       $ 0.484    $ 0.544

Shares (in thousands) used in the calculation of earnings
per share

 Basic                                                     154,068    150,630

 Diluted                                                   155,594    151,880

These figures have been prepared in accordance with

the company's customary accounting practices.




Schedule A

Brown-Forman Corporation

Continuing Operations Only

Supplemental Information (Unaudited)

                                            Three Months Ended  Six Months Ended

                                            October 31, 2008    October 31, 2008

Reported net sales growth                   5  %                6  %

Estimated net change in trade inventories   (2 %)               (1 %)

Australian excise tax                       (1 %)               (1 %)

Net sales from agency brands                1  %                1  %

Impact of foreign currencies                3  %                -

Underlying net sales growth                 6  %                5  %

Reported gross profit growth                (1 %)               (2 %)

Estimated net change in trade inventories   (2 %)               -

Non-cash agave charge                       -                   3  %

Gross profit from agency brands             1  %                -

Impact of foreign currencies                5  %                1  %

Underlying gross profit growth              3  %                2  %

Reported advertising growth                 (2 %)               0  %

Advertising from agency brands              1  %                2  %

Impact of foreign currencies                2  %                (1 %)

Underlying advertising growth               1  %                1  %

Reported SG&A growth                        (5 %)               (2 %)

Impact of foreign currencies                1  %                -

SG&A from acquisitions                      2  %                1  %

Underlying SG&A growth                      (2 %)               (1 %)

Reported operating income growth            4  %                (2 %)

Estimated net change in trade inventories   (3 %)               (1 %)

Transition expenses from acquisitions       (2 %)               (1 %)

Operating income from agency brands         1  %                1  %

Impact of foreign currencies                5  %                1  %

Non-cash agave charge                       -                   6  %

Underlying operating income growth          5  %                4  %



Notes:

Estimated net change in trade inventories - Refers to the estimated financial impact of changes in wholesale trade inventories for the company's brands. We compute this effect using our estimated depletion trends and separately identify trade inventory changes in the variance analysis for our key measures. Based on the estimated depletions and the fluctuations in trade inventory levels, we then adjust the percentage variances from prior to current periods for our key measures. We believe it is important to make this adjustment in order for management and investors to understand the results of our business without distortions that can arise from varying levels of wholesale inventories.

Australian excise tax - Refers to the impact of the 70% increase in excise tax of ready-to-drink products in Australia, implemented on April 27, 2008. Since net sales are recorded including excise tax, we believe it is important to make this adjustment to better understand our underlying sales trends.

Agency brands - Refers to the impact of certain agency brands distributed in various geographies, primarily Appleton, Amarula, Durbanville Hills, and Red Bull, which exited Brown-Forman's portfolio during fiscal 2008.

Impact of foreign currencies - Refers to net gains and losses incurred by the company relating to sales and purchases in currencies other than the U.S. Dollar. We use the measure to understand the growth of the business on a constant dollar basis as fluctuations in exchange rates can distort the underlying growth of our business (both positively and negatively). To neutralize the effect of foreign exchange fluctuations, we have historically translated current year results at prior year rates. While we recognize that foreign exchange volatility is a reality for a global company, we routinely review our company performance on a constant dollar basis. We believe this allows both management and our investors to understand better our company's growth trends.

Non-cash agave charge - Refers to an abnormal number of agave plants identified during the first quarter as dead or dying. Although agricultural uncertainties are inherent in our tequila or any other business including the growth and harvesting of raw materials, we believe that the magnitude of this item distorts the underlying trends of our business. Therefore, we believe that excluding this non-cash charge allows for a better understanding of operating income growth trends.

Acquisitions -Refers to transition related expenses from the acquisition of the Casa Herradura brands in January 2007, thus making comparisons difficult to understand. We believe that excluding transition expenses related to the acquisition provides helpful information in forecasting and planning the growth expectations of the company.

The company cautions that non-GAAP measures may be considered in addition to, but not as a substitute for, the company's reported GAAP results.


    Source: Brown-Forman Corporation
Contact: Brown-Forman Corporation Phil Lynch, 502-774-7928 Vice President Director Corporate Communications and Public Relations or Ben Marmor, 502-774-6691 Assistant Vice President Director Investor Relations brown-forman@b-f.com www.brown-forman.com