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OPERATOR: Good morning, my name is Shaday, and I will be your conference operator today. At this time I would like to welcome everyone to the third quarter fiscal 2009 conference call. (Operator instructions) Thank you. I would now like to turn the call over to Ben Marmor, Director of Investor Relations.
BEN MARMOR, AVP DIRECTOR INVESTOR RELATIONS, BROWN-FORMAN CORPORATION: Good morning, everyone and thank you for joining us for Brown-Forman's third-quarter 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, Chief Financial Officer, and Jane Morreau, Senior Vice President, Financial Management, Accounting Technology. Don will begin our call this morning with a review of our third-quarter results and Paul will follow with some strategic commentary.
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 third-quarter results for fiscal 2009. 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 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 will also be discussing certain non-GAAP financial measures. These measures and the reasons management believes 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.
DON BERG, EVP, CFO, BROWN-FORMAN CORPORATION: Thank you, Ben. Good morning, everyone. While our second quarter certainly posted robust growth, like many of our competitors have announced recently, markets conditions during our fiscal third quarter were far more challenging and tested our resiliency. I'm pleased to say, however, that despite these many challenges we continued to grow our underlying business at both the net sales and operating income lines. For the quarter, underlying sales grew 1%, and underlying operating income grew 8%. For the first nine months of fiscal 2009, we grew underlining sales 4% and underlying operating income 5%.
As you are all aware the global economy continued to slide throughout this period, affecting our business in a number of ways. First, significant strengthening of the U.S. dollar negatively impacted our results in the quarter, reducing net sales $84 million, and operating income $30 million. Second, and one we've talked about a number of times before, the move consumers are making away from the on-premise to the off-premise. Third, we also saw some acceleration of trading down in the United States, which we will talk more about in a bit. And finally, this quarter, we saw retailers, wholesalers, and distributors around the world significantly reduce their inventories in what we believe is a quest for cash and an expectation of lower future consumer demand.
On this last point, let me give you an example of what we are seeing and the magnitude of the different trends. If we take Jack Daniels in the United States, consumer takeaway using NABCA data as a proxy, was down about 3% for the third quarter. This is approximately half of our depletion decline indicating that retailers did not fully replenish their inventory. Similarly, our shipments to distributors were down about double the depletion rate, suggesting that distributors have not fully restocked their inventory levels, as well. These four themes you will hear repeatedly in our comments this morning.
We also believe that all of these trends are continuing in our fourth quarter, which we will discuss more when we talk about our guidance in a few minutes. While we believe we have adapted quickly in response to the fast-changing conditions around the world, our overall philosophy for managing our business has not changed. We continue to focus on driving our current, underlying net sales and operating income performance with a view to positioning ourselves for continued long-term success.
I will now highlight some of our specific brand and market performances. Globally, Jack Daniels depletions declined in the high singles digits in the third quarter and grew in the low single digits for the nine months. For Jack Daniels in the United States, Q3 proved difficult with depletions declining in the high single digits. However, for the first nine months, the brand's depletions were about equal to last year. As noted above we believe these softer results can be attributed in large part to inventory reductions throughout the supply chain. While take-away performance outpaced depletions, these trends were somewhat mixed during the quarter, depending on the source of information.
For the period ending February 7, 2009, Nielsen, which focuses on off-premise business, reported solid trends for Jack Daniels. With 12-month volume growths of 5%, compared to 2% for total distilled spirits, three-month volume growth of 4% versus 1% for total distilled spirits, and a one-month result of plus-3% versus 1% for TDS. On the other hand, NABCA trend through January 31, which includes results for both off and on-premise were not as strong for Jack Daniels. For the 12-month period, Jack Daniels case sales grew 1.5% compared to twice that for a total of distilled spirits. But posted a three-month trend and a one-month trend of minus 3% compared to a plus 1% for TDS.
We believe these statistics reflect how our focus at the off-premise level continues to work while we continue to see the effects of the declines in the on-premise channel. While the 12-month NABCA growth trend of 1.5% is almost identical to a year ago, the more recent performance increases our caution in our rest-of-the-year outlook. While the third quarter NABCA results for Jack Daniels were disappointing, we are encouraged by the fact that Jack Daniels outperformed most brands in its competitive set including Bacardi, Absolut, Crown Royal, Grey Goose, and Jose Cuervo.
Having said that, the NABCA results also show the trend of trading down to lower price brands, as brands such as Evan Williams, Old Crow and Ancient Age, all posted some nice growth rates in this difficult economic environment. In international markets, Jack Daniels saw overall depletion gains increasing in the low single digits when compared to third quarter of last year. During Q3, Jack Daniels depletions expanded at double digit rates in several markets including the UK, France, Poland, Romania, and Mexico, while softness continued in Spain, Italy, and Ireland.
In the eastern European region as a whole, Jack Daniels continued to post strong high, single digit depletion gains for the quarter. While we are pleased with this continued growth, the rate has slowed from the double digit level experienced earlier in the year. Talking a bit more about the UK, the depletion gains were due in part to significant successful holiday promotion activity and from a retail buy-in prior to a February price increase. We've talked in the past about the UK being one of our larger markets, seeing a shift from the on-premise to the off-premise. That shift continued during this period, however for Jack Daniels, the momentum in the off-trade began to offset on-trade declines.
Looking for a moment at France, this, our fourth largest Jack Daniels market, has continued to perform well in the third quarter and the year-to-date periods. France is a well-developed spirit market, and the largest whiskey market in the world. In spite of the economic difficulties there, Nielsen data showed the whiskey category grew 3% for the 12 months ended January, 2009. Jack Daniels during the same period grew over 15%. For the first time Jack Daniels now comprises slightly over a 2% share of the whiskey market in France. We believe this is a perfect illustration of Jack's continuing global potential and how there is plenty of share left to gain.
In Australia, according to data from the Liquor Merchants Association, Brown-Forman increased its market share. Through the first nine months for fiscal year, our brands' total share of full-strength spirits in this market increased one point from 6% to 7%. Our total share of all ready-to-drink products increased almost three points from 6% to 9% and our share of bourbon-based RTD's increased more than five...
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