Sustained Global Growth for Bourbon and Innovations Helps
Drive Continued Market Outperformance
Diluted EPS before Charges/Gains Increases at Solid
Company Reaffirms Full-Year Earnings Target
Deerfield, Illinois, November 2, 2012 - Beam Inc. (NYSE:
BEAM), a leading global premium spirits company, today
reported strong results for the third quarter of 2012.
Net sales increased 8% and were up 4% on a comparable
basis, even with a challenging comparison to strong North
America sales in the year-ago quarter. Comparable
sales growth was broad-based and benefited from innovations
that improved product mix, higher pricing, and increased
volumes. Comparable sales grew across the
company's three segments, with particularly strong
growth for the company's global Power Brands in core
On a reported basis (GAAP), diluted earnings per share from
continuing operations were $0.57 versus a loss of $0.53 in
the year-ago quarter. Diluted EPS before
charges/gains was $0.62, up 17%, with leverage delivered by
sustained top-line outperformance, improved price/mix, and
lower interest expense.
Through the first three quarters of 2012, reported net
sales increased 5% and were up 7% on a comparable basis.
Diluted EPS before charges/gains is up 21% year to
date, and is up 526% on a reported basis. Reported
earnings comparisons reflect the impact of costs in 2011
associated with the separation of Fortune Brands'
Stronger Portfolio, Market Position and Earnings Growth
"One year after becoming a pure-play spirits company,
Beam is creating value with a stronger brand portfolio, a
stronger industry position, and stronger earnings
growth," said Matt Shattock, president and chief
executive officer of Beam Inc. "With momentum
from our investments in brand building, enhanced routes to
market that leverage our broad brand portfolio, and
synergy-driven acquisitions, we've exceeded our
long-term goal over the past year by increasing sales at
approximately twice the growth rate of our global market
footprint. Our global growth is supported by our
strengthened #2 position in the United States, the
world's most profitable market, and fast growth in key
categories and geographies around the world."
"Against this backdrop, Beam delivered
better-than-expected third-quarter results as we
outperformed our global market despite a challenging
comparison to the timing of year-ago sales in North
America. The sustained rapid growth of the global
Bourbon category, excellent consumer response to our
innovations and high-impact marketing, and timing of
expenses helped drive upside to our expectations. Our newly
acquired Pinnacle Vodka grew 23% in its first full quarter,
and market outperformance in our EMEA and APSA segments
further supported our results. Favorable price and
product mix helped improve margins in the quarter."
Financial Highlights for the Third Quarter and Year to
Income from continuing operations was $91.7 million for
the third quarter, or $0.57 per diluted share, compared
to a loss of $82.0 million ($0.53 per share), for the
third quarter of 2011.
For the year to date (nine months), income from
continuing operations was $271.4 million, or $1.69
per diluted share, up from $0.27 in 2011.
Excluding charges and gains, diluted EPS from continuing
operations was $0.62 for the third quarter, up 17% from
$0.53 in the year-ago quarter.
For the year-to-date period, diluted EPS before
charges/gains was $1.73, up 21% from $1.43.
Reported net sales for the third quarter were $627.5
million (excluding excise taxes), up 8%.
For the year-to-date period, reported net sales
On a comparable basis, which adjusts for foreign exchange
and acquisitions/divestitures, net sales were up 4% for
the third quarter and up 7% for the year-to-date period.
Comparable net sales by segment: North America +2% in
Q3 and +7% YTD; Europe/Middle East/Africa (EMEA) +5%
in Q3 and +5% YTD; Asia Pacific/South America (APSA)
+10% in Q3 and +8% YTD.
Operating income for the third quarter was $162.4
million, up 488%.
For the year-to-date period, operating income
Operating income before charges/gains for the quarter was
$165.0 million, up 16%.
For the year-to-date period, operating income before
charges/gains increased 14%.
Return on invested capital before charges/gains (rolling
12 months) was 7% and was 23% excluding intangibles.
Investing in Future Growth and Reaffirming 2012 Earnings
"Our continued strong performance, the health of the
global spirits market and robust demand for Bourbon
together reinforce our confidence in the strategy we
discussed three months ago to increase investments in the
second half of 2012 to support long-term growth. We
are executing this strategy by stepping up
brand-equity-building investment by a double-digit rate for
a third consecutive year in 2012, and accelerating the
laydown of more aged spirits to support future
demand," Shattock said.
"As we had planned, the lion's share of these
increased strategic investments will come in the fourth
quarter. In fact, we anticipate that our
fourth-quarter brand investment will be more than 20%
higher than last year as we seek to further enhance our
brand equities and fuel successful high-return advertising
in the key holiday selling season, particularly in priority
categories like Bourbon and core markets like the United
States. While the timing of this increased investment
will likely cause fourth quarter earnings to be down versus
the prior-year period, we believe these are the right
investments for the long-term momentum of our business.
We are able to make these investments even
while reaffirming our target for Beam's diluted EPS
before charges/gains to grow at a low-double-digit rate for
the full year.
"We like our continued marketplace momentum as we
deliver growth on top of growth, and we expect to enter
2013 in a strong position. We will discuss our
earnings outlook for the year ahead next quarter,"
The company continues to expect that its 2012 acquisitions
will be accretive to full-year earnings per share by a few
cents. The company also reaffirmed that it is
targeting an earnings-to-free-cash conversion rate for 2012
in the range of approximately 80%, which incorporates the
company's previously discussed investment of free cash
flow to barrel more aged spirits.
Key Brand Performance
Comparable net sales growth, year-to-date 2012 (January -
Results include ready-to-drink products
Comparable net sales growth rate represents the
percentage increase or decrease in reported net sales in
accordance with U.S. GAAP, adjusted for certain items.
A reconciliation from reported to comparable net
sales growth rates, a non-GAAP measure, and the reasons
why management believes these adjustments are useful are
included in the attached financial tables.
Total represents consolidated Beam comparable net sales
(excluding excise taxes), including non-branded sales.
*Reflects sales growth since completion of acquisition in
About Beam Inc.
As one of the world's leading premium spirits
companies, Beam is Crafting the Spirits that Stir the
World. Consumers from all corners of the globe call
for the company's brands, including Jim Beam Bourbon,
Maker's Mark Bourbon, Sauza Tequila, Pinnacle Vodka,
Canadian Club Whisky, Courvoisier Cognac, Teacher's
Scotch Whisky, Cruzan Rum, Hornitos Tequila, Knob Creek
Bourbon, Laphroaig Scotch Whisky, Kilbeggan Irish Whiskey,
EFFEN Vodka, Pucker Flavored Vodka, Larios Gin, Whisky DYC,
DeKuyper Cordials, and Skinnygirl Cocktails. Beam is
focused on delivering superior performance with its unique
combination of scale with agility and a strategy of
Creating Famous Brands, Building Winning Markets and
Fueling Our Growth. Beam and its 3,200 passionate
associates worldwide generated 2011 sales of $2.8 billion,
volume of 34 million 9-liter cases and some of the
industry's fastest growing innovations.
Headquartered in Deerfield, Illinois, Beam is traded on the
New York Stock Exchange under the ticker symbol BEAM and is
included in the S&P 500 Index and the MSCI World Index.
For more information on Beam, its brands, and its
commitment to social responsibility, please visit www.beamglobal.com and www.drinksmart.com.
This press release contains forward-looking statements, as
that term is defined in the Private Securities Litigation
Reform Act of 1995. Readers are cautioned that these
forward-looking statements speak only as of the date
hereof, and the company does not assume any obligation to
update, amend or clarify them to reflect events, new
information or circumstances occurring after the date of
this release. Actual results may differ materially from
those projected as a result of certain risks and
uncertainties, including but not limited to: general
economic conditions and credit market instability,
particularly in Europe; customer defaults and related bad
debt expense; competitive market pressures (including
pricing pressures); changes in customer preferences and
trends; risks pertaining to strategic acquisitions and
joint ventures, particularly financial and integration
risks; any possible downgrades of the company's credit
ratings; commodity and energy price volatility; risks
associated with doing business outside the United States,
including civil and political unrest, local labor
conditions, changes in laws, governmental regulations and
policies, and compliance with anti-corruption statutes;
fluctuations in currency exchange rates; inability to
attract and retain qualified personnel; the impact of
excise tax increases and customs duties on distilled
spirits; the status of the U.S. rum excise tax cover-over
program; dependence on performance of distributors,
promoters and other marketing arrangements; costs of
certain employee and retiree benefits and returns on
pension assets; tax law changes and/or interpretation of
existing tax laws; potential liabilities, costs and
uncertainties of litigation; ability to secure and maintain
rights to trademarks and trade names; impairment in the
carrying value of goodwill or other acquired intangible
assets; disruptions at production facilities; and other
risks and uncertainties described from time to time in the
Company's Securities and Exchange Commission filings.
Use of Non-GAAP Financial Information
This press release includes measures not derived in
accordance with generally accepted accounting principles
("GAAP"), including comparable net sales, diluted
EPS before charges/gains, operating income before
charges/gains, return on invested capital, and
earnings-to-free-cash conversion rate. These measures
should not be considered in isolation or as a substitute
for any measure derived in accordance with GAAP, and may
also be inconsistent with similar measures presented by
other companies. Reconciliation of these measures to
the most closely comparable GAAP measures, and reasons for
the company's use of these measures, are presented in
the attached pages.