Brown – Forman Corp (BF’B)

(20 October 2016)

BF’B Business Summary

Brown-Forman Corp., whose origins date back to 1870, is among the 10 largest producers of distilled spirits. With a portfolio of well-known brands, the company is best known for its popular Jack Daniel’s Tennessee Whiskey, which continues to be its largest sales and profit producer.

BF’B Fundamentals

• Price to Earnings: 18.53
• Earnings Per Share: $2.63
• Market Cap: 17.8B
• Current Ratio: 2.93
• Return on Equity: 73.98%
• Dividend Yield: 1.36%
• Debt to Common Equity Ratio: 168.5

Income Statement ($ in Millions)

• Sales decreased by $44.
• Gross Profit decreased $38.
• Operating Income decreased $14.
• Net Income decreased $12.

Cash Flow Statement ($ in Millions)

• Total Cash Flow Provided by Operating Activity decreased $697.
• Cash and Cash Equivalents at end of period decreased $136,271.
• Cash Used in Investment Activity increased by $437,721.
• Net Cash used for financing activities decreased $1,292,976.

Balance Sheet ($ in Millions)

• Total Current Assets increased by $328.
• Total Assets increased by $572.
• Total Current Liabilities increased by $83.
• Total Liabilities increased $804
• Total Stockholder’s Equity decreased $232.

Highlights from 10-Q

• On June 1, 2016, we acquired The BenRiach Distillery Company Limited (BenRiach) for aggregate consideration of approximately $407 million, consisting of a purchase price of approximately $341 million and approximately $66 million in assumed debt and transaction-related obligations that we have since paid. The acquisition, which brings three single malt Scotch whisky brands into our whiskey portfolio, includes brand trademarks, inventories, three malt distilleries, a bottling plant, and BenRiach’s headquarters in Edinburgh, Scotland.
  • The purchase price of approximately $341 million included cash of approximately $307 million paid at the acquisition date for 90% of the voting interests in BenRiach and a liability of approximately $34 million related to a put and call option agreement for the remaining 10% equity shares. Under that agreement, we may choose (or be required) to purchase the remaining 10% for approximately 24 million British pounds (approximately $34 million at the exchange rate on June 1, 2016) during the one-year period ending November 14, 2017.

Entry and Exit Points

• Entry
  • $43.75
    • It has consistent support at the $44 mark
  • Exit
    • $55.
      • There was a double top around the $54 mark this time last year.
      • Since the double top, share price has not reached higher than $52.
      • I would venture to say that $52 is the new resistance, and if share price exceeds $52 then we could see it try to hit $55.