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KEY RATING DRIVERS Credit Profile Erosion The Negative Outlook reflects the continued erosion of Brown Forman’s credit profile moncler coats for cheap driven moncler outlet kids primarily by an aggressive financial policy toward Discount Moncler Coats debt funded share repurchases and moncler outlet mall expectations that Brown Forman will fully complete its $1 billion share repurchase program in fiscal 2017, combined with the increased debt associated with the acquisition of BenRiach. Fitch views the acquisition as highly complementary and fills a gap in Brown Forman’s aged spirits portfolio. As a result, Fitch believes leverage will increase to approximately 2.1x in FY2017 before moderating in FY2018 to slightly less than 2x due to growth in EBITDA. This compares to debt/EBITDA of 1.6x for FY2016. Strong Anchor Brand, Favorable Demand Trends Brown Forman’s ratings are supported by the sizeable operating earnings discount moncler outlet and consistent cash flow generation that is derived from the strong and competitive brand portfolio of one of the largest worldwide spirits companies. Major contributors to Brown Forman’s operating earnings are its Jack Daniel’s franchise, which is the fourth largest premium spirits brand and the largest selling American whiskey brand in the world including its highly successful line extensions, Tennessee Honey and Tennessee Fire. On an moncler jacket online annual basis the Jack Daniel’s Family represents approximately half of the volume depletions for the company’s major brands. Brown Forman’s other major brands, Finlandia Vodka, Canadian Mist and El Jimador Tequila, have experienced further volume pressure during FY2016. The El Jimador Brand cheap moncler jackets outlet Family moncler coats cheap depletion volumes moncler jackets canada declined in Mexico as the my moncler outlet company continues its brand repositioning at a more premium price point via multi moncler outlet location year price increases. Brown Forman’s spirits portfolio competes primarily in the premium and super premium categories and skews toward American whiskeys. Fitch views this moncler outlet usa as a competitive strength, because the aging process and inventory investments required are a barrier to entry providing an impediment particularly for value competition. Brown moncler coats for kids Forman spirits have taken share from beer and clear spirits, with moncler outlet online store the favorable demand trends driven by flavored and higher end American whiskey. As womens moncler jackets such, Brown Forman has experienced strong category momentum for Jack Daniel’s Tennessee Honey and the higher priced Woodford Reserve Family with depletion volume growth at moncler coats for men 8% and 26%, respectively, for FY2016. Overall, the Jack Daniel’s Family depletion volumes grew by 5%. Industry demand trends should remain positive for the foreseeable future, which, when coupled with Brown Forman’s portfolio, would allow the company to grow at above average rates for the next several moncler jackets mens years. KEY ASSUMPTIONS Fitch’s key assumptions within our rating case for Brown Forman in 2016 include: Net revenue flat to slightly negative in FY2017, and growing low to mid single digits in FY2018. Underlying revenue growth is expected in Moncler Factory Outlet the 5% 6% range over the forecast period. EBITDA margins increasing in FY2017 to approximately 37.5%, and 40bps in FY2018 driven by improved moncler jackets gross margins on moncler jackets on sale the brands in the portfolio. Capital expenditures of $108 million in FY2016, growing to cheap moncler jackets over $200 million in FY2017 to support additional capex related to the BenRiach acquisition and distillery buildout moncler coats outlet for Slane Castle. Free cash flow (FCF) margins growing from 4.4% in FY2016 back to the high single digits by FY2018 driven discount moncler jackets by organic growth and capital spending declines. Leverage moderates to less than 2x as a result of EBITDA growth in FY2018 and beyond. RATING SENSITIVITIES Future developments that may, individually or collectively, cheap moncler coats for women lead to a positive rating action include: Positive rating actions are not anticipated in the intermediate term given the expected increase in leverage and the Negative Outlook. Over the longer term, a positive rating action would be based on continued strong operating performance driven by the Jack Daniel’s Brand Family combined with: Decreased leverage such that total debt to operating EBITDA is below 1.5x; FFO adjusted leverage in the low 2x range on a sustained basis. Any potential ratings upgrade, however, would be limited given Brown Forman’s dependence on the Jack Daniel’s franchise. Future developments that may, individually or collectively, lead to a negative rating action include: Total debt/EBITDA sustained above 2x; FFO adjusted leverage sustained above 3x; FCF margin sustained below moncler outlets usa 5%; A material leveraging transaction; Further aggressive shareholder based initiatives; A significant and sustained loss of market share for the Jack Daniel’s brand. LIQUIDITY Brown Forman’s cash balances, stable FCF generation and substantial credit facility capacity provide good liquidity. As of April 30, 2016, moncler outlet uk Brown Forman had $263 million of cash. FCF for FY2016 was $150 million. FCF is expected to remain in moncler coats sale a similar range in FY2017 before rising back to $200 million $300 million annually in FY2018 and beyond as organic growth in the mid single digits and expected decreases moncler outlet ny in capital spending offset the loss in cash flow from the Southern Comfort brand. Fitch expects Brown Forman will fund a moncler coats for women portion of the acquisition with offshore cash proceeds from the Southern Comfort divestiture moncler outlets uk and should provide Brown Forman an opportunity to access future foreign generated cash. The company has not drawn on its $800 million five year credit facility that matures in November 2018, which can be expanded by $400 million. The new 364 day $400 million revolving facility further bolsters liquidity and serves as another backstop to moncler jackets for women support the company’s $1.2 billion commercial paper (CP) program. CP borrowings were $271 million for the year ended April 30, 2016, which leaves available capacity of $929 million. The five year credit facility includes an interest coverage financial maintenance covenant of 3x. Brown Forman moncler jackets toronto maintains a very manageable maturity profile with $250 million coming due in 2018. Fitch rates Brown Forman as follows: Long Term Issuer Default rating (IDR) at ‘A’; Short Term IDR at ‘F1’; Commercial paper at ‘F1’; Senior unsecured notes at ‘A’; Bank credit facility at ‘A’; 364 day revolving facility at ‘A’. The Rating Outlook is Negative Contact: Primary Analyst William moncler outlet woodbury Densmore Senior Director +1 moncler outlet online 312 368 3125 Fitch Ratings, Inc. 70 W. 17 Aug moncler jacket outlet 2015) buy moncler jackets toronto here Additional Disclosures Solicitation Status here Endorsement Policy here. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S https://www.mymoncleroutlet.com CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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