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Brown-Forman Reports Strong First Half Results

In tequilas, Herradura grew underlying net sales by 7% as the brand enjoyed solid growth in the United States and Mexico. El Jimador’s underlying net sales grew 2% as the Mexican marketplace for mainstream tequilas remained competitive. New Mix RTDs’ underlying net sales decline of 16% in the first half of the year was negatively impacted by inventory adjustments following price increases taken at the end of fiscal 2013.

Southern Comfort’s family of brands’ underlying net sales declined 4%. Sales growth of 1% outside of the United States was more than offset by declines in the United States, where the competitive environment for liqueurs remained challenging, particularly in the on-premise.

Sonoma-Cutrer grew underlying net sales mid single-digits as the brand continued to enjoy strong brand loyalty and pricing power as the #1 selling super-premium chardonnay. Korbel grew underlying net sales by 8%.

Underlying global A&P spend increased 8% in the first half (8% reported) as the company continued to invest significantly behind its brand-building activities. The company has seen near-term success from the increased media spend behind Gentleman Jack and Woodford Reserve, as well as supporting the global rollout of Jack Daniel’s Tennessee Honey. Underlying SG&A increased 4% (3% reported), helped by the favorable timing of expenses. Underlying operating income grew 13% year-to-date, with operating margins up 115bps.

Dividends and Share Buyback

On November 21, 2013, Brown-Forman declared a regular quarterly cash dividend of $0.29 per share on Class A and Class B common stock, a 13.7% increase over the prior dividend, indicating an annualized cash dividend of $1.16 per share. This marked Brown-Forman’s 68th consecutive year of paying quarterly dividends and the 30th consecutive year it increased the dividend. The cash dividend is payable on December 27, 2013, to stockholders of record on December 4, 2013.

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