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Brown-Forman Corp (NYSE:BF.B)
Free Cash Flow
$520 Mil (TTM As of Apr. 2014)

Brown-Forman Corp's total free cash flow for the three months ended in Apr. 2014 was $219 Mil. Its total free cash flow for the trailing twelve months (TTM) ended in Apr. 2014 was $520 Mil.

Brown-Forman Corp's free cash flow per share for the three months ended in Apr. 2014 was $1.02. Its free cash flow per share for the trailing twelve months (TTM) ended in Apr. 2014 was $2.42.

During the past 12 months, the average Free Cash Flow per Share Growth Rate of Brown-Forman Corp was 18.00% per year. During the past 3 years, the average Free Cash Flow per Share Growth Rate was 3.20% per year. During the past 5 years, the average Free Cash Flow per Share Growth Rate was 0.50% per year. During the past 10 years, the average Free Cash Flow per Share Growth Rate was 7.00% per year.

During the past 13 years, Brown-Forman Corp's highest 3-Year average Free Cash Flow per Share Growth Rate was 44.20% per year. The lowest was -12.60% per year. And the median was 6.10% per year.


Definition

Free Cash Flow is considered one of the most important parameters to measure a company’s earnings power by value investors because it is not subject to estimates of Depreciation, Depletion and Amortization (DDA). However, when we look at the Free Cash Flow, we should look from a long term perspective, because any year’s Free Cash Flow can be drastically affected by the spending on Property, Plant, & Equipment (PPE) of the business in that year. Over the long term, Free Cash Flow should give pretty good picture on the real earnings power of the company.

Brown-Forman Corp's Free Cash Flow for the fiscal year that ended in Apr. 2014 is calculated as

Free Cash Flow (A: Apr. 2014 )=Cash Flow from Operations+Cash Flow for Capital Expenditures
=649+-129
=520

Brown-Forman Corp's Free Cash Flow for the quarter that ended in Apr. 2014 is calculated as

Free Cash Flow (Q: Apr. 2014 )=Cash Flow from Operations+Cash Flow for Capital Expenditures
=259+-40
=219

Brown-Forman Corp Free Cash Flow for the trailing twelve months (TTM) ended in Apr. 2014 was 68 (Jul. 2013 ) + 73 (Oct. 2013 ) + 160 (Jan. 2014 ) + 219 (Apr. 2014 ) = $520 Mil.

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.


Explanation

Free Cash Flow is very close to Warren Buffett’s definition of Owner’s Earnings, except that in Warren Buffett’s Owner’s Earnings, the spending for Property, Plant, and Equipment is only for maintenance (replacement), while in the Free Cash Flow calculation, the cost of new Property, Plant, and Equipment due to business expansion is also deducted. There, Free Cash Flow is more conservative than Owner’s Earnings.

In Don Yacktman’s calculation of forward rate of return, he uses Free Cash Flow for the calculation. Yacktman explained the forward rate of return concept in detail in his interview with GuruFocus. Yacktman defines forward rate of return as the normalized free cash flow yield plus real growth plus inflation.

This is what Yacktman said in his March 2012 interview - when the S&P 500 was at 1400:

If the business is stable, this calculation is fairly straightforward. For instance, on the S&P 500 we would normalize earnings. We would then calculate what percentage of those earnings are not reinvested in the underlying businesses and are therefore free. Historically, for the S&P 500, this has been just under 50% of earnings. Currently, we expect the S&P to earn about 70 on a normalized basis, a number which is far below reported earnings due to our adjusting for record high profit margins. $70 X ½ / 1400 gives you a normalized free cash flow yield of approximately 2.5%.”

“The historical real growth rate of the S&P 500 (companies) is about 1.5%. Assuming an inflation rate of 2.5%, the forward rate of return on an investment in the S&P 500 is about 6.5% today (2.5% free cash flow yield plus 1.5% real growth plus 2.5% inflation).”

Therefore, as of Apr14, Brown-Forman Corp's Forward Rate of Return is

Forward Rate of Return (Apr14)=Normalized Free Cash Flow/Price+Growth rate
=2.11/70.5+0.0756
=10.55 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.


Be Aware

Free Cash Flow within a report period can be affected by management's decisions of capital spending. Therefore, it is important to look at long term when it comes to Free Cash Flow.


Related Terms

Cash Flow from Operations, Forward Rate of Return, Purchase of PPE, Cash Flow for Capital Expenditures, Price-to-Free-Cash-Flow ratio, Free Cash Flow Per Share


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Brown-Forman Corp Annual Data

Apr05Apr06Apr07Apr08Apr09Apr10Apr11Apr12Apr13Apr14
Cash Flow from Operations 396343355534491545527516537649
Cash Flow_CPEX -49-52-92-66-54-37-43-68-97-129
total_freecashflow 347291263468437508484448440520

Brown-Forman Corp Quarterly Data

Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14
Cash Flow from Operations 186174877820217093108189259
Cash Flow_CPEX -14-27-17-22-20-38-25-35-29-40
total_freecashflow 17214770561821326873160219
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