Beam Reports 2012 Fourth Quarter and Full Year Results
Power Brands and Rising Stars Lead Continued Market Outperformance
in Fourth Quarter and Full Year
Earnings Growth Exceeds 2012 Target
Targeting High-Single-Digit Growth in EPS Before Charges/Gains in
2013
DEERFIELD, Ill.--(BUSINESS WIRE)--
Beam Inc. (NYSE: BEAM), a leading global premium spirits company, today
reported results for the fourth quarter and full year 2012.
For the full year 2012, reported net sales increased 7% to a record $2.5
billion. Sales for the year were up 6% on a comparable basis,
significantly outperforming the company’s global market. Growth of the
company’s premium global Power Brands and broad-based growth across
geographies fueled the full-year comparable sales performance. New
product innovations, higher pricing in select categories, and trading up
by consumers contributed to favorable price/mix and margin enhancement.
On a reported basis (GAAP), full-year diluted earnings per share from
continuing operations were $2.48 versus $0.85 in 2011. Full-year diluted
EPS before charges/gains was $2.40, up 13%, exceeding the company’s 2012
target for low-double-digit growth and ahead of the company’s long-term
target of high-single-digit growth. Reported earnings comparisons
largely reflect the impact of costs in 2011 associated with the
separation of Fortune Brands’ businesses.
For the fourth quarter, reported net sales increased 11% and net sales
were up 5% on a comparable basis. Comparable sales growth reflected
strong results in the core markets of the United States, Australia and
Germany. Diluted EPS before charges/gains for the quarter was $0.67,
down 3%, reflecting the company’s previously projected 20% increase in
brand-building investment. Diluted EPS from continuing operations for
the quarter was up 36% on a reported basis.
Bourbon, Premium Innovations and Pricing
Benefit Q4 Results
“We closed the year with another strong sales quarter as we continued to
outperform our market,” said Matt Shattock, president and chief
executive officer of Beam. “We exceeded our expectations with
better-than-anticipated global sales of Bourbon and higher-than-expected
accretion from the Pinnacle acquisition. We also benefited from premium
innovations across categories that improved product mix, as well as
higher pricing in select categories. As we called out three months ago,
Q4 EPS before charges/gains was modestly lower due to our substantial
increase in brand investment in the quarter to support long-term growth.”
Excellent Results in First Full Year as Beam
“Beam continued to deliver excellent results in its first full year as a
focused pure-play spirits company,” Shattock continued. “We created
value through the long-term growth algorithm we outlined a year ago:
growing sales faster than our market, operating income faster than
sales, and EPS faster still. In 2012, we exceeded our expectations at
both the top and bottom lines as we increased comparable sales at
roughly twice the rate of our global market, and grew EPS before
charges/gains ahead of our target for the year. Full-year sales growth
was balanced across our three regional segments, fueled by double-digit
global growth for our Power Brands and Rising Stars, and we improved
margins with premium innovations and higher pricing.
“We are particularly pleased that we outperformed in 2012 even as we
increased investment in the competitive position and long-term growth of
our business. These investments included a double-digit increase in
brand-building investment, as well as higher capital expenditures to
produce more aged spirits to meet future demand. In 2012, we further
strengthened our core equities with impactful brand communication on
television and in digital media; we accelerated our growth with
innovative new products while also opening our new Global Innovation
Center; we continued to strengthen our premium portfolio by adding a
Power Brand in vodka and entering Irish Whiskey; and we enhanced our
routes to market across fast-growing economies like China as well as in
developed markets such as Japan.
“Beam generated higher-than-expected free cash flow of $337 million, and
we ended the year with a net-debt-to-EBITDA ratio of 2.8 times, better
than we had targeted. We’re also pleased that our 2012 acquisitions were
five cents per share accretive to our full year results,” Shattock said.
“We believe our investments and stronger balance sheet enhance Beam’s
prospects to deliver sustainable, profitable long-term growth.”
Financial Highlights for the Full Year 2012:
Income from continuing operations was $398.2 million, or $2.48 per
diluted share, versus $0.85 per diluted share in 2011.
Excluding charges and gains, diluted EPS from continuing operations
was $2.40, up 13% from $2.12 in 2011.
Reported net sales were a record $2.5 billion (excluding excise
taxes), up 7%.
On a comparable basis, which adjusts for foreign exchange and
acquisitions/divestitures, net sales were up 6%.
Comparable net sales by segment: North America +7%; Europe/Middle
East/Africa (EMEA) +5%; Asia Pacific/South America (APSA) +5%.
Operating income was $575.9 million, up 46%.
Operating income before charges/gains was $631.9 million, up 10%.
The company generated free cash flow of $336.8 million and an
earnings-to-free-cash conversion rate of 87%.
Return on invested capital before charges/gains (rolling 12 months)
was 7% and was 23% excluding intangibles.
The company’s net-debt-to-EBITDA ratio was 2.8 times at year end.
Financial Highlights for the Fourth Quarter:
Income from continuing operations was $126.8 million, or $0.79 per
diluted share, versus $0.58 in the year-ago quarter.
Excluding charges and gains, diluted EPS from continuing operations
was $0.67, down 3% from $0.69.
Reported net sales were $709.1 million (excluding excise taxes), up
11%.
On a comparable basis, which adjusts for foreign exchange and
acquisitions/divestitures, net sales were up 5%.
Comparable net sales by segment: North America +8%; Europe/Middle
East/Africa (EMEA) +4%; Asia Pacific/South America (APSA) -2%.
Results in North America benefited from the timing of sales in
Mexico, while lower results in India adversely impacted sales in
APSA.
Operating income was $156.7 million, up 15%.
Operating income before charges/gains was $177.3 million, up 3%.
Establishing 2013 Earnings Growth Target
The company announced that it is targeting to deliver high-single-digit
growth in diluted earnings per share before charges/gains for 2013
against its 2012 base of $2.40 per share.
“We enter 2013 with an assumption that our global spirits market will
grow value approximately 3%, consistent with what we saw in 2012,”
Shattock said. “We’ll face headwinds including higher raw materials
costs and challenging comparisons in India as we reposition our business
there, and we’re not currently assuming material new pricing in 2013. At
the same time, we anticipate benefiting from several favorable dynamics:
the strength of the bourbon category, our innovations and brand-building
initiatives, strong growth in emerging markets, our efficiency and
effectiveness agenda, and an additional five cents per share of
accretion from our 2012 acquisitions. Incorporating these factors, we’re
targeting for 2013 to outperform our market at the top line and deliver
growth in diluted EPS before charges/gains at a high-single-digit rate.
With regard to phasing, we will face our most challenging comparison of
the year in the first quarter as we cycle against new-product launches
and route-to-market changes that helped drive comparable sales up 13% in
Q1 of 2012.
“We believe that Beam is well positioned to deliver sustainable,
profitable long-term growth as we continue to invest in fast-growing
categories, fast-growing new products, and fast-growing markets. We feel
good about our prospects for continued outperformance in 2013.”
The company expects to generate free cash flow for 2013 in the range of
$300-350 million, which incorporates continued investment to increase
distillation capacity and produce more aged spirits to support long-term
growth.
“While we have sustained investments in long-term value creation, we’ve
also continued our track record of delivering immediate value to
shareholders with the 10% increase in our dividend we announced
recently,” Shattock concluded.
Key Brand Performance
Comparable net sales growth, full year 2012:
Comparable Net Sales Growth (1)
Power Brands
+10%
Jim Beam
+10%
Maker’s Mark
+15%
Sauza
+10%
Pinnacle
+19%*
Courvoisier
+12%
Canadian Club
+6%
Teacher’s
+1%
Rising Stars
+10%
Laphroaig
+15%
Knob Creek
+24%
Basil Hayden’s
+35%
Kilbeggan
+1%
Cruzan
+12%
Hornitos
-2%
EFFEN
-22%
Pucker Vodka
-5%
Skinnygirl
+19%
Sourz
+1%
Local Jewels
-1%
Value Creators
-1%
Total (2)
+6%
Results include ready-to-drink products
(1)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.
(2)Total represents consolidated Beam comparable net sales
(excluding excise taxes), including non-branded sales.
*Reflects seven months of performance for Pinnacle since
acquisition.
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, Skinnygirl
Cocktails, Cruzan Rum, Hornitos Tequila, Knob Creek Bourbon, Laphroaig
Scotch Whisky, Kilbeggan Irish Whiskey, Larios Gin, Whisky DYC and
DeKuyper Cordials. 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 3,400 passionate associates worldwide generated
2012 sales of $2.5 billion (excluding excise taxes), volume of 38
million 9-liter equivalent 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.
Forward-Looking Statements
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; competitive innovation and marketing pressures, including
price; changes in consumer preferences and trends; financial and
integration risks associated with acquisitions, joint ventures, and
alliances, as well as potential divestitures; the price and availability
of raw materials and energy; risks associated with doing business
outside the United States, including changes in laws, governmental
regulations and policies, compliance with anti-corruption statutes,
civil and political unrest, and local labor conditions; our ability to
manage organizational productivity and global supply chains effectively;
the impact of excise tax increases and customs duties on our products or
changes to government financial incentives; fluctuations in currency
exchange rates; our ability to reach agreement on, maintain or
renegotiate key agreements; potential liabilities, costs and
uncertainties of litigation; our ability to attract and retain qualified
personnel; changes to laws and regulations; downgrades of the Company’s
credit ratings; dependence on performance of distributors, promoters and
other marketing arrangements; product quality issues; costs of certain
employee and retiree benefits and returns on pension assets; tax law
changes or interpretation of existing tax laws; ability to secure and
maintain rights to intellectual property, including trademarks, trade
dress and tradenames; impairment in the carrying value of goodwill or
other acquired intangible assets; disruptions at production facilities
and supply/demand forecasting uncertainties; breaches of data security;
and other risks and uncertainties described from time to time in the
Company’s filings with the Securities and Exchange Commission.
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, free cash flow,
earnings-to-free-cash conversion rate, and net-debt-to-EBITDA ratio.
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.
Reconciliations 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.
Beam Inc.
Consolidated Income Statement
(Unaudited)
Three Months Ended December 31,
Year Ended December 31,
(In millions, except per share amounts)
2012
2011
% Change
2012
2011
% Change
Sales
$
876.5
$
788.6
$
3,070.1
$
2,871.7
Less: Excise taxes
(167.4
)
(151.1
)
(604.2
)
(560.6
)
Net sales
709.1
637.5
11.2
%
2,465.9
2,311.1
6.7
%
Cost of goods sold
303.8
273.1
11.2
%
1,027.5
987.8
4.0
%
Gross profit
405.3
364.4
11.2
%
1,438.4
1,323.3
8.7
%
Advertising and marketing expense
116.5
97.0
20.1
%
398.7
358.7
11.2
%
Selling, general and administrative expense
111.5
95.8
16.4
%
412.9
430.0
-4.0
%
Amortization of intangible assets
4.4
4.1
7.3
%
17.2
16.3
5.5
%
Restructuring charges
0.6
2.0
4.3
7.7
Business separation costs
-
(2.0
)
13.8
83.8
Asset impairment charges
15.6
31.3
15.6
31.3
Operating income
156.7
136.2
15.1
%
575.9
395.5
45.6
%
Interest expense
29.1
30.9
-5.8
%
109.0
117.4
-7.2
%
Loss on early extinguishment of debt
-
15.2
-
149.2
Other income
(4.8
)
(5.8
)
(35.1
)
(40.4
)
Income from continuing operations
before income taxes
132.4
95.9
38.1
%
502.0
169.3
196.5
%
Income taxes
5.6
4.7
103.8
36.0
Income from continuing operations
126.8
91.2
39.0
%
398.2
133.3
198.7
%
Income (loss) from discontinued operations, net of tax
Management believes that the non-GAAP measures used in this
release provide investors with important perspectives into the
Company’s ongoing business performance by excluding certain items,
referred to as “charges / gains,” that management believes are not
indicative of the Company's underlying results for purposes of
analyzing the Company's performance on a year-over-year basis. The
Company’s definition of charges / gains includes asset impairment
charges, restructuring charges, other charges related to
restructuring initiatives that cannot be reported as restructuring
under GAAP, acquisition and integration related costs, dividend
distribution gains from the wind down of our former Maxxium
investment, costs associated with the sale of the Company's golf
business and spin-off of the Company's home and security business
(together, the "Separation"), the one-time sales and margin impact
of transitioning to our long-term distribution agreement in
Australia, tax indemnification payments received from the seller
of an acquired business and unusual tax matters that management
does not consider indicative of ongoing operations. Charges/gains
excluded from GAAP results also include other items which
management believes are not indicative of the Company's underlying
operating performance for purposes of evaluating past and future
performance; such items are excluded from GAAP results to improve
comparability between periods. In addition, the 2011 period
includes adjustments to reflect Beam as a standalone company at
January 1, 2011, including adjustments to interest expense
(reflecting the debt reduction related to the Separation at
January 1, 2011), an estimated standalone company effective tax
rate and an estimated standalone company corporate cost structure,
as described in more detail in the Company's fourth quarter 2011
earnings release.
Additional non-GAAP measures included in this release are
identified as “comparable,” “adjusted” and “constant currency.”
The Company does not intend for this information to be considered
in isolation or as a substitute for the related GAAP measures.
Other companies may define the measures differently.
Reconciliations of non-GAAP measures to the most closely
comparable GAAP measures, together with a further explanation as
to why management believes the non-GAAP measures provide useful
information, are included on the following pages.
Beam Inc.
Reconciliations of GAAP to Non-GAAP Measures (Unaudited)
($ in millions, except per share)
Three Months Ended December 31, 2012
Three Months Ended December 31, 2011
% Increase
GAAP
Adjustments (See Detail Below)
Before Charges/ Gains (Non-GAAP)
GAAP
Adjustments (See Detail Below)
Before Charges/ Gains (Non-GAAP)
GAAP
Before Charges/ Gains (Non-GAAP)
Net sales
$
709.1
-
$
709.1
$
637.5
-
$
637.5
11.2
%
11.2
%
Cost of goods sold
303.8
0.3
273.1
(7.1
)
Gross profit
405.3
(0.3
)
405.0
364.4
7.1
371.5
11.2
%
9.0
%
Gross profit margin
57.2
%
57.1
%
57.2
%
58.3
%
-
(120)bps
Advertising and marketing expense
116.5
-
97.0
-
Selling, general and administrative expense
111.5
(4.7
)
95.8
1.9
Amortization of intangible assets
4.4
-
4.1
-
Restructuring charges
0.6
(0.6
)
2.0
(2.0
)
Business separation costs
-
-
(2.0
)
2.0
Asset impairment charges
15.6
(15.6
)
31.3
(31.3
)
Operating income
156.7
20.6
177.3
136.2
36.5
172.7
15.1
%
2.7
%
Operating income margin
22.1
%
25.0
%
21.4
%
27.1
%
(30) bps
(210)bps
Interest expense
29.1
-
30.9
(4.0
)
Loss on early extinguishment of debt
-
-
15.2
(15.2
)
Other income
(4.8
)
-
(5.8
)
2.7
Income from continuing operations before income taxes
132.4
20.6
95.9
53.0
Income taxes
5.6
39.2
4.7
35.0
Effective tax rate
4.2
%
29.3
%
4.9
%
26.7
%
Income from continuing operations
$
126.8
(18.6
)
$
108.2
$
91.2
18.0
$
109.2
39.0
%
-0.9
%
Diluted EPS - continuing operations
$
0.79
(0.12
)
$
0.67
$
0.58
0.11
$
0.69
36.2
%
-2.9
%
Adjustments Detail by Applicable
Financial Statement Line Items
Three months ended December 31, 2012
Cost of goods sold
SG&A expense
Restructuring charges
Asset Impairment
Operating income
Pre-tax income -cont. operations
Income taxes
Income from cont. operations
Diluted EPS - cont. operations
1
Restructuring charges (a)
$
-
$
-
$
0.5
$
-
$
(0.5
)
$
(0.5
)
$
(0.2
)
$
(0.3
)
$
-
2
Other charges (a)
0.5
(3.6
)
-
-
3.1
3.1
1.1
2.0
0.01
3
Acquisition/integration related costs (b)
(0.2
)
(1.1
)
(1.1
)
-
2.4
2.4
0.9
1.5
0.01
4
Asset impairment (c)
-
-
-
(15.6
)
15.6
15.6
4.7
10.9
0.07
5
Income tax adjustment (d)
-
-
-
-
-
-
32.7
(32.7
)
(0.21
)
$
0.3
$
(4.7
)
$
(0.6
)
$
(15.6
)
$
20.6
$
20.6
$
39.2
$
(18.6
)
$
(0.12
)
Three months ended December 31, 2011
Cost of goods sold
SG&A expense
Restructuring charges
Separation costs
Asset Impairment
Operating income
Interest, debt extinguish- ment
loss & other exp.
Pre-tax income- cont. operations
Income taxes
Income from cont. operations
Diluted EPS - cont. operations
1
Restructuring charges (a)
$
-
$
-
$
(2.0
)
$
-
$
-
$
2.0
$
-
$
2.0
$
-
$
2.0
$
0.01
2
Other charges (a)
(7.1
)
1.9
-
-
-
5.2
-
5.2
-
5.2
0.03
3
Separation costs (e)
-
-
-
2.0
-
(2.0
)
-
(2.0
)
-
(2.0
)
(0.01
)
4
Standalone company adjustment (f)
-
-
-
-
-
-
(4.0
)
4.0
-
4.0
0.03
5
Asset impairment (c)
-
-
-
-
(31.3
)
31.3
-
31.3
-
31.3
0.19
6
Loss on early extinguishment of debt (g)
-
-
-
-
-
-
(15.2
)
15.2
-
15.2
0.10
7
Maxxium distribution (h)
-
-
-
-
-
-
2.7
(2.7
)
-
(2.7
)
(0.02
)
8
Income tax adjustment (d)
-
-
-
-
-
-
-
-
35.0
(35.0
)
(0.22
)
$
(7.1
)
$
1.9
$
(2.0
)
$
2.0
$
(31.3
)
$
36.5
$
(16.5
)
$
53.0
$
35.0
$
18.0
$
0.11
(a)
The 2012 restructuring credit of $0.5 million represents the
reversal of restructuring accruals that were determined to be no
longer required, while the $2 million of restructuring charges in
2011 relates to organizational streamlining projects. In 2012,
other SG&A charges include $3.6 million of legal, forensic
accounting and other fees related to our internal investigation
with respect to our India operations. Other cost of goods sold
for 2012 includes a $0.5 million gain on the sale of assets in
connection with our 2011 project to centralize bottling operations
in Kentucky. In 2011, the cost of goods sold adjustment includes
$4.5 million of charges primarily associated with the streamlining
of our bottling operations in Kentucky and $2.6 million of charges
related to the impact of certain non-income tax matters. In 2011,
the SG&A expense adjustment includes $3.8 million of credits
related to certain non-income tax related matters, partially
offset by $1.9 million of organizational streamlining charges.
(b)
The 2012 adjustments relate to the acquisition and integration of
the Pinnacle and Calico Jack assets ("Pinnacle") and Cooley
business, consisting primarily of expenses incurred in connection
with integrating these businesses into the Company's existing
operational structure (e.g., distributor termination fees,
accelerated depreciation, employee retention, and other
organizational streamlining expenses).
(c)
The adjustments in 2012 and 2011 relate to the non-cash impairment
of tradenames in Spain.
(d)
The income tax adjustments in the 2012 period primarily related to a
$22 million foreign tax credit related to the repatriation of
foreign earnings and a $9 million net benefit related to the
resolution of U.S. and foreign tax audit examinations for certain
years. The adjustment in the 2011 period is to eliminate income tax
related matters (related to resolution of routine foreign and US
income tax audit examinations) and to adjust income tax expense to
Beam's estimated effective tax rate as a standalone Spirits business.
(e)
Adjustment relates to the reversal of Separation-related accruals
that were determined to be no longer required.
(f)
Adjustment to the Company's interest expense to assume that the
Separation-related debt extinguishments had occurred on January 1,
2011.
(g)
Adjustment to eliminate loss on early extinguishment of debt
related to the Separation.
(h)
Adjustment to eliminate a gain related to a dividend distribution
received in connection with the wind down of our former Maxxium
investment.
bps - basis points
Beam Inc.
Reconciliations of GAAP to Non-GAAP Measures (Unaudited)
($ in millions, except per share)
Year Ended December 31, 2012
Year Ended December 31, 2011
% Increase
GAAP
Adjustments (See Detail Below)
Before Charges/ Gains (Non-GAAP)
GAAP
Adjustments (See Detail Below)
Before Charges/ Gains (Non-GAAP)
GAAP
Before Charges/ Gains (Non-GAAP)
Net sales
$
2,465.9
-
$
2,465.9
$
2,311.1
(46.3
)
$
2,264.8
6.7
%
8.9
%
Cost of goods sold
1,027.5
(0.8
)
987.8
(38.3
)
Gross profit
1,438.4
0.8
1,439.2
1,323.3
(8.0
)
1,315.3
8.7
%
9.4
%
Gross profit margin
58.3
%
58.4
%
57.3
%
58.1
%
100 bps
30 bps
Advertising and marketing expense
398.7
-
358.7
-
Selling, general and administrative expense
412.9
(21.5
)
430.0
(61.9
)
Amortization of intangible assets
17.2
-
16.3
-
Restructuring charges
4.3
(4.3
)
7.7
(7.7
)
Business separation costs
13.8
(13.8
)
83.8
(83.8
)
Asset impairment charges
15.6
(15.6
)
31.3
(31.3
)
Operating income
575.9
56.0
631.9
395.5
176.7
572.2
45.6
%
10.4
%
Operating income margin
23.4
%
25.6
%
17.1
%
25.2
%
N/M
40 bps
Interest expense
109.0
-
117.4
2.5
Loss on early extinguishment of debt
-
-
149.2
(149.2
)
Other income
(35.1
)
19.9
(40.4
)
37.3
Income from continuing operations before income taxes
502.0
36.1
169.3
286.1
Income tax expense
103.8
48.7
36.0
84.9
Effective tax rate
20.7
%
28.3
%
21.3
%
26.5
%
Income from continuing operations
$
398.2
(12.6
)
$
385.6
$
133.3
201.2
$
334.5
198.7
%
15.3
%
Diluted EPS - continuing operations
$
2.48
(0.08
)
$
2.40
$
0.85
1.27
$
2.12
191.8
%
13.2
%
Adjustments Detail by Applicable
Financial Statement Line Items
Year Ended December 31, 2012
Cost of goods sold
SG&A expense
Restructuring charges
Separation costs
Asset Impair- ment
Operating income
Other (income) expense
Pre-tax income- cont. operations
Income tax expense
Income from cont. operations
Diluted EPS - cont. operations
1
Restructuring charges (a)
$
-
$
-
$
(1.0
)
$
-
$
-
$
1.0
$
-
$
1.0
$
0.2
$
0.8
$
-
2
Other charges (a)
0.3
(4.2
)
-
-
-
3.9
-
3.9
1.4
2.5
0.01
3
Acquisition/integration related costs (b)
(1.1
)
(17.3
)
(3.3
)
-
-
21.7
-
21.7
4.6
17.1
0.11
4
Separation costs (c)
-
-
-
(13.8
)
-
13.8
-
13.8
5.3
8.5
0.05
5
Asset impairment (d)
-
-
-
(15.6
)
15.6
-
15.6
4.7
10.9
0.07
6
Maxxium distribution (e)
-
-
-
-
-
-
1.9
(1.9
)
-
(1.9
)
(0.01
)
7
Tax indemnification (f)
-
-
-
-
-
-
18.0
(18.0
)
-
(18.0
)
(0.11
)
8
Income tax adjustment (g)
-
-
-
-
-
-
-
-
32.5
(32.5
)
(0.20
)
$
(0.8
)
$
(21.5
)
$
(4.3
)
$
(13.8
)
$
(15.6
)
$
56.0
$
19.9
$
36.1
$
48.7
$
(12.6
)
$
(0.08
)
Year Ended December 31, 2011
Net sales
Cost of goods sold
SG&A expense
Restructuring charges
Separation costs
Asset Impair- ment
Operating income
Interest, debt extinguish- ment
loss & other exp.
Pre-tax income -cont. operations
Income tax expense
Income from cont. operations
Diluted EPS - cont. operations
1
Restructuring charges (a)
$
-
$
-
$
-
$
(7.7
)
$
-
$
-
$
7.7
$
-
$
7.7
$
-
$
7.7
$
0.05
2
Other charges (a)
-
(15.6
)
(0.9
)
-
-
-
16.5
-
16.5
-
16.5
0.10
3
Acquisition/integration related costs (b)
-
-
(25.0
)
-
-
-
25.0
-
25.0
-
25.0
0.16
4
Separation costs (c)
-
-
-
-
(83.8
)
-
83.8
-
83.8
-
83.8
0.53
5
Asset impairment (d)
-
-
-
-
-
(31.3
)
31.3
-
31.3
-
31.3
0.20
6
Australia distribution one-time sale (h)
(46.3
)
(22.7
)
-
-
-
-
(23.6
)
-
(23.6
)
-
(23.6
)
(0.15
)
7
Standalone company adjustment (i)
-
-
(36.0
)
-
-
-
36.0
2.5
33.5
-
33.5
0.21
8
Loss on early extinguishment of debt (j)
-
-
-
-
-
-
-
(149.2
)
149.2
-
149.2
0.94
9
Maxxium distribution (e)
-
-
-
-
-
-
-
10.2
(10.2
)
-
(10.2
)
(0.06
)
10
Tax indemnifications (f)
-
-
-
-
-
-
-
27.1
(27.1
)
-
(27.1
)
(0.17
)
11
Income tax adjustments (g)
-
-
-
-
-
-
-
-
-
84.9
(84.9
)
(0.54
)
$
(46.3
)
$
(38.3
)
$
(61.9
)
$
(7.7
)
$
(83.8
)
$
(31.3
)
$
176.7
$
(109.4
)
$
286.1
$
84.9
$
201.2
$
1.27
(a)
Restructuring charges of $1 million and $7.7 million in 2012 and
2011, respectively, primarily relate to facility consolidations,
supply chain and distribution and other organizational
streamlining activities. In 2012, other SG&A charges primarily
include $3.6 million of charges associated with our internal
investigation with respect to our India operations. In 2011, the
other charges include adjustments primarily related to facility
consolidations, supply chain and distribution and other
organizational streamlining initiatives.
(b)
The 2012 adjustments relate to the acquisition and integration of
Pinnacle and Cooley as well as 2012 tax on earnings distributed
within certain of Beam's foreign tax jurisdictions incurred in
connection with funding a portion of the capital requirement for the
Cooley acquisition. The 2012 acquisition related adjustments
impacting SG&A expense consist of: transaction-related expenses of
$5 million, contract termination expenses of $10 million and
integration related expenses of $2 million. In addition, acquisition
related adjustments include amounts charged to costs of goods sold
and restructuring charges that primarily relate to accelerated
depreciation and employee retention. The 2011 adjustment relates to
acquisition related contingent consideration accrued in September
2011.
(c)
The adjustment in 2012 primarily relates to a $15.1 million pension
settlement charge associated with a required $29 million lump sum
distribution paid to former Fortune Brands executives in July 2012,
partially offset by a decrease in accrued liabilities for estimated
costs to complete the Separation. The adjustment in the 2011 period
is to eliminate nonrecurring business separation costs incurred to
implement the Separation, principally transaction and professional
advisory fees, severance and other employee related costs and
certain other costs incurred in connection with the Separation.
(d)
The adjustments in 2012 and 2011 relate to the non-cash impairment
of tradenames in Spain.
(e)
Adjustment to eliminate a gain related to a dividend distribution
received in connection with the wind down of our former Maxxium
investment.
(f)
Nontaxable reimbursement received from seller of an acquired
business for resolution of certain tax matters for years prior to
our ownership.
(g)
In 2012, the income tax adjustments primarily include a $22
million foreign tax credit related to the repatriation of foreign
earnings, a $17 million net benefit arising from the resolution of
certain foreign and US federal and state tax return matters, and
$6 million of expense related to our annual reconciliation of the
2011 income tax filing to the 2011 provision for income taxes. The
adjustment in the 2011 period is the combined amount required to
eliminate income tax matters related to the resolution of foreign
and US income tax audit examinations and to adjust income tax
expense to Beam's estimated effective tax rate as a standalone
Spirits business.
(h)
Adjustment to eliminate the one-time net sales and related cost of
goods sold impact associated with transition to a new long-term
distribution agreement in Australia in 2011.
(i)
Adjustments to reflect estimated expenses as a standalone Spirits
business, including: (1) $36.0 million operating expense adjustment
to reflect a lower corporate cost structure, and (2) $2.5 million
interest expense adjustment to assume the Separation-related debt
reduction had been completed as of January 1, 2011. The Company
estimated its lower corporate cost structure based on analysis and
projections of costs expected to be incurred by the Company had the
Separation occurred at January 1, 2011.
(j)
Adjustment to eliminate loss on early extinguishment of debt
related to the Separation.
N/M - not meaningful
bps - basis points
Beam Inc.
Segment Information (a)
(Unaudited)
(In millions)
Constant Currency (Non-GAAP)
Three Months Ended
%
2012
%
December 31,
Change
Adjusted
Change
Net Sales
2012
2011
Reported
Amount (b)
Adjusted
North America
$
391.1
$
325.4
20.2
%
$
389.7
19.8
%
Europe, Middle East, Africa ("EMEA")
177.2
171.0
3.6
%
179.7
5.1
%
Asia Pacific / South America ("APSA")
140.8
141.1
-0.2
%
137.8
-2.3
%
Segment net sales
709.1
637.5
11.2
%
707.2
10.9
%
Foreign exchange
-
-
1.9
n/m
Total net sales
$
709.1
$
637.5
11.2
%
$
709.1
11.2
%
Constant Currency (Non-GAAP)
Three Months Ended
%
2012
%
December 31,
Change
Adjusted
Change
Operating Income
2012
2011
Reported
Amount (b)
Adjusted
North America
$
83.7
$
91.9
-8.9
%
$
83.6
-9.0
%
EMEA
54.9
50.5
8.7
%
54.6
8.1
%
APSA
38.7
30.3
27.7
%
36.9
21.8
%
Segment operating income
177.3
172.7
2.7
%
175.1
1.4
%
Deduct:
Foreign exchange
-
-
(2.2
)
Restructuring and other charges / gains (see detail above)
20.6
36.5
20.6
Total operating income
$
156.7
$
136.2
15.1
%
$
156.7
15.1
%
(a) The Company evaluates its segment net sales and operating income
before charges / gains (as previously defined) that are not
considered indicative of the segments’ underlying operating
performance. Consequently, segment results presented in accordance
with GAAP exclude such items. Segment sales and operating income are
also presented on a constant currency basis, which is a non-GAAP
measure. The Company uses this measure to understand underlying
growth of the segments as fluctuations in exchange rates can impact
the underlying growth rate of the segments.
(b) Foreign exchange translation effects calculated by translating
current year results at prior year exchange rates and excluding
hedge impacts.
Reconciliation of Percentage Change in
GAAP Net Sales to Percentage Change in Comparable Net Sales
(Unaudited)
Three Months Ended December 31, 2012
North America
EMEA
APSA
Segment Total
%
%
%
%
Net Sales (GAAP)
20
4
-
11
Foreign currency impact
-
1
(2)
-
Acquisitions/divestitures
(12)
(1)
-
(6)
Comparable Net Sales (Non-GAAP)
8
4
(2)
5
Comparable net sales growth rate represents the percentage increase
or decrease in reported net sales in accordance with GAAP, adjusted
to eliminate the impacts of foreign exchange and
acquisitions/divestitures. The Company believes that comparable net
sales growth is useful in evaluating the Company's sales growth
year-over-year because it excludes items that are not indicative of
underlying sales performance.
Beam Inc.
Segment Information (a)
(Unaudited)
(In millions)
Constant Currency (Non-GAAP)
%
2012
%
Year Ended December 31,
Change
Adjusted
Change
Net Sales
2012
2011
Reported
Amount (b)
Adjusted
North America
$
1,450.6
$
1,271.5
14.1
%
$
1,455.9
14.5
%
Europe, Middle East, Africa ("EMEA")
512.7
505.9
1.3
%
541.1
7.0
%
Asia Pacific / South America ("APSA")
502.6
487.4
3.1
%
501.1
2.8
%
Segment net sales
2,465.9
2,264.8
8.9
%
2,498.1
10.3
%
Foreign exchange
-
-
(32.2
)
n/m
Australia distribution one-time sale
-
46.3
-
n/m
Total net sales
$
2,465.9
$
2,311.1
6.7
%
$
2,465.9
6.7
%
Constant Currency (Non-GAAP)
%
2012
%
Year Ended December 31,
Change
Adjusted
Change
Operating Income
2012
2011
Reported
Amount (b)
Adjusted
North America
$
393.5
$
360.9
9.0
%
$
389.9
8.0
%
EMEA
123.6
120.3
2.7
%
128.9
7.1
%
APSA
114.8
91.0
26.2
%
104.2
14.5
%
Segment operating income
631.9
572.2
10.4
%
623.0
8.9
%
Deduct:
Foreign exchange
-
-
(8.9
)
Adjustment for charges / gains (see detail above)
56.0
176.7
56.0
Total operating income
$
575.9
$
395.5
45.6
%
$
575.9
45.6
%
(a) The Company evaluates its segment net sales and operating income
before charges / gains (as previously defined) that are not
considered indicative of the segments’ underlying operating
performance. Consequently, segment results presented in accordance
with GAAP exclude such items. Segment sales and operating income are
also presented on a constant currency basis, which is a non-GAAP
measure. The Company uses this measure to understand underlying
growth of the segments as fluctuations in exchange rates can impact
the underlying growth rate of the segments.
(b) Foreign exchange translation effects calculated by translating
current year results at prior year exchange rates and excluding
hedge impacts.
Reconciliation of Percentage Change in
GAAP Net Sales to Percentage Change in Comparable Net Sales
(Unaudited)
Year Ended December 31, 2012
North America
EMEA
APSA
Segment Total
%
%
%
%
Net Sales (GAAP)
14
1
3
9
Foreign currency impact
-
6
-
1
Acquisitions/divestitures
(7)
(2)
-
(4)
Ongoing impact - Australia distribution margin
-
-
2
-
Comparable Net Sales (Non-GAAP)
7
5
5
6
Comparable net sales growth rate represents the percentage increase
or decrease in reported net sales in accordance with GAAP, adjusted
to eliminate the impacts of foreign exchange,
acquisitions/divestitures and the transition to the new Australia
distribution agreement. The Company believes that comparable net
sales growth is useful in evaluating the Company's sales growth
year-over-year because it excludes items that are not indicative of
underlying sales performance.
Beam Inc.
Reconciliations of GAAP to Non-GAAP Measures (Unaudited)
($ in millions)
Earnings Before Interest, Taxes,
Depreciation and Amortization ("EBITDA") (a)
Three Months Ended December 31,
Year Ended December 31,
2012
2011
2012
2011
GAAP income from continuing operations
$
126.8
$
91.2
$
398.2
$
133.3
Add (deduct):
Other income
(4.8
)
(5.8
)
(35.1
)
(40.4
)
Interest expense
29.1
30.9
109.0
117.4
Loss on early extinguishment of debt
-
15.2
-
149.2
Depreciation expense
26.9
22.9
101.9
90.1
Amortization expense
4.4
4.1
17.2
16.3
Income tax expense
5.6
4.7
103.8
36.0
Adjustment for charges / gains (see detail above)
20.6
36.5
56.0
176.7
EBITDA before charges/gains (Non-GAAP)
$
208.6
$
199.7
$
751.0
$
678.6
(a) The Company defines EBITDA as income from continuing operations
before interest expense, income taxes, depreciation and amortization
expense and other income/expense. EBITDA before charges/gains is
EBITDA less charges/gains (as previously defined).
Free Cash Flow & Cash Conversion Rate (a)
Three Months Ended December 31,
Year Ended December 31,
2012
2011 (b)
2012
2011 (b)
GAAP cash provided by operating activities
$
265.6
$
137.1
$
378.2
$
454.4
Add (deduct):
Spirits capital expenditures, net of disposition proceeds
(35.7
)
(56.7
)
(125.0
)
(164.7
)
Cash used for discontinued operations (c)
3.6
28.2
83.6
28.2
Cash provided by discontinued businesses (d)
-
-
-
(80.0
)
Adjusted free cash flow (Non-GAAP)
$
233.5
$
108.6
$
336.8
A
$
237.9
Net income before charges/gains (see above)
$
385.6
B
Cash Conversion Rate
87
%
A/B
(a) Free cash flow is defined as GAAP cash flow from operations less
capital expenditures for property, plant and equipment additions
(net of disposition proceeds), adjusted for operating cash flow
related to discontinued operations. Management believes free cash
flow provides investors with an important perspective on the cash
available for dividends, debt repayment, and acquisitions after
making the capital investments required to support ongoing business
operations and long term value creation. Management uses free cash
flow to assess business performance and overall liquidity.
(b) Free cash flow for the 2011 periods is not intended to be a
measure of Beam Inc. "adjusted pro forma free cash flow" that would
reflect the free cash flow generated by Beam as if it were a
standalone company for the periods presented.
(c) Represents cash used primarily for settlement of liabilities of
divested businesses and payment of incentive compensation, severance
and pension benefits to former Fortune Brands executives.
(d) Represents operating cash flows of the Home & Security and Golf
businesses prior to their divestiture.
Return on Invested Capital (ROIC) from
Continuing Operations (a)
Year Ended December 31, 2012 - Income from
Continuing Operations plus After- tax
Interest
Average Invested Capital
ROIC
Unadjusted
$
469
$
6,774
7%
Add: impact of "charges/gains" (previously defined)
(13
)
18
ROIC before charges/gains (Non-GAAP)
456
6,792
7%
Impact of excluding goodwill and intangibles
11
(4,719
)
ROIC before charges/gains and excl. goodwill and intangibles
(Non-GAAP)
$
467
$
2,073
23%
(a) ROIC is income from continuing operations plus after-tax
interest expense divided by the average of invested capital (debt
less cash plus stockholders' equity plus after-tax interest
expense). Adjusted ROIC is adjusted for the amounts used to
calculate adjusted income from continuing operations. Invested
capital is a multi-point average of the 12 months ended December 31,
2012. See the page entitled "Use of Non-GAAP Financial Information"
for further information relating to the Company's use of non-GAAP
measures.
Beam Inc.
Reconciliation of GAAP Net Sales Growth to Comparable Net Sales
Growth
Year Ended December 31, 2012
(Unaudited)
Foreign
Australia
Australia
Currency
Distribution
Distribution
Non-GAAP -
GAAP
Exchange
Agreement
Margin
Acquisitions/
Comparable
Basis
Rates
Change
Structure
Divestitures
Basis
%
%
Power Brands
10
2
3
1
(6)
10
Jim Beam
3
1
5
1
-
10
Maker’s Mark
14
-
1
-
-
15
Sauza (a)
7
2
1
-
-
10
Courvoisier
8
1
2
1
-
12
Canadian Club
1
-
4
1
-
6
Teacher’s
(9)
10
1
(1)
-
1
Pinnacle
-
-
-
-
19
19
Rising Stars
11
1
-
-
(2)
10
Laphroaig
11
3
1
-
-
15
Knob Creek
24
-
-
-
-
24
Basil Hayden's
31
-
4
-
-
35
Kilbeggan
-
-
-
-
1
1
Cruzan
11
-
1
-
-
12
Hornitos
(3)
1
-
-
-
(2)
EFFEN
(22)
-
-
-
-
(22)
Pucker Vodka
(5)
-
-
-
-
(5)
Skinnygirl
21
-
-
-
(2)
19
Sourz
(3)
4
-
-
-
1
Local Jewels
(5)
4
-
-
-
(1)
Value Creators
(1)
1
3
1
(5)
(1)
Net sales (b)
7
1
2
-
(4)
6
Comparable net sales growth rate represents the percentage increase
or decrease in reported net sales in accordance with GAAP, adjusted
for certain items. The Company believes Comparable Net Sales Growth
is useful in evaluating the Company's sales growth on a
year-over-year basis exclusive of items that are not indicative of
the brands' performance such as foreign exchange impacts,
acquisitions/divestitures, the one-time impact on net sales of
transitioning to the new Australia distribution agreement as well as
the related impact on margin structure. See the page entitled "Use
of Non-GAAP Financial Information" for additional information
related to the use of Non-GAAP measures.
(a) Excludes Hornitos
(b) Net sales represents consolidated net sales (excluding excise
taxes), including non-branded sales to third parties.
Beam Inc.
Reconciliations of GAAP to Non-GAAP Measures (Unaudited)
Trailing Twelve Months
Reconciliation of Net Debt to Adjusted
EBITDA (Unaudited) (a)
December 31, 2012
GAAP debt / operating cash flow
6.6
Impact of using net debt rather than GAAP total debt (a)
(1.0
)
Impact of using adjusted EBITDA rather than GAAP operating cash flow
(2.8
)
Net debt / EBITDA before charges/gains
2.8
(a) Net debt equals total debt less cash as of December 31, 2012.
GAAP operating cash flow and EBITDA before charges /gains are based
on the year ended December 31, 2012. GAAP operating cash flow
includes discontinued operations. See the Reconciliation of Income
from Continuing Operations to EBITDA (above) for the Company's
definition of EBITDA before charges/gains.
Reconciliation of Full Year 2013 Diluted
EPS from Continuing Operations Growth Target to GAAP Target
For the full year 2013, the Company is targeting high-single-digit
growth in diluted EPS from continuing operations before
charges/gains as compared to its full year 2012 diluted EPS from
continuing operations before charges/gains ($2.40). Given the nature
of special charges/gains, the Company cannot predict such items and,
therefore, the Company's 2013 targeted diluted EPS from continuing
operations used to determine the year-over-year growth rate in
diluted EPS excludes any such items.
Comparing targeted 2013 diluted EPS from continuing operations
before charges/gains to the Company's 2012 GAAP diluted EPS from
continuing operations ($2.48) results in mid-single-digit growth
in diluted earnings per share from continuing operations. The
lower growth rate, as compared to year-over-year growth on a
before charges/gains basis, is attributable to the 2012
charges/gains described above.
Full Year 2013 Free-Cash-Flow Target
For the full year 2013, the Company is targeting free cash flow in
the range of $300 million to $350 million. Free cash flow is defined
as GAAP cash flow from operations less capital expenditures for
property, plant and equipment additions (net of disposition
proceeds), adjusted for operating cash flow related to discontinued
operations.
Management believes that the measure of free cash flow provides
investors with helpful supplemental information about the
Company's ability to fund internal growth, make acquisitions,
repay debt, pay dividends, and repurchase common stock. This
measure may be inconsistent with similar measures presented by
other companies.
Comparable Sales Increase - First Quarter
2012 Compared to First Quarter 2011
%
Net Sales (GAAP)
2
Australia Distribution Agreement Change
10
Australia Distribution Margin Structure
2
Acquisitions/Divestitures
-1
Non-GAAP - Comparable Basis
13
Beam Inc. Media Relations Clarkson Hine +1-847-444-7515 Clarkson.Hine@beamglobal.com or Investor
Relations Tony Diaz +1-847-444-7690 Tony.Diaz@beamglobal.com
Source: Beam Inc.
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Beam Inc. produces and sells branded distilled spirits products worldwide. Its principal products include bourbon whiskey, Scotch whisky, Canadian whisky, tequila, cognac, rum, cordials, and ready-to-drink pre-mixed cocktails under the Jim Beam, Maker
Press Release $BEAM Beam, Inc.
DEERFIELD, Ill.--(BUSINESS WIRE)-- Beam Inc. (NYSE: BEAM), a leading global premium spirits company, today reported results for the fourth quarter and full year 2012.
For the full year 2012, reported net sales increased 7% to a record $2.5 billion. Sales for the year were up 6% on a comparable basis, significantly outperforming the company’s global market. Growth of the company’s premium global Power Brands and broad-based growth across geographies fueled the full-year comparable sales performance. New product innovations, higher pricing in select categories, and trading up by consumers contributed to favorable price/mix and margin enhancement. On a reported basis (GAAP), full-year diluted earnings per share from continuing operations were $2.48 versus $0.85 in 2011. Full-year diluted EPS before charges/gains was $2.40, up 13%, exceeding the company’s 2012 target for low-double-digit growth and ahead of the company’s long-term target of high-single-digit growth. Reported earnings comparisons largely reflect the impact of costs in 2011 associated with the separation of Fortune Brands’ businesses.
For the fourth quarter, reported net sales increased 11% and net sales were up 5% on a comparable basis. Comparable sales growth reflected strong results in the core markets of the United States, Australia and Germany. Diluted EPS before charges/gains for the quarter was $0.67, down 3%, reflecting the company’s previously projected 20% increase in brand-building investment. Diluted EPS from continuing operations for the quarter was up 36% on a reported basis.
Bourbon, Premium Innovations and Pricing Benefit Q4 Results
“We closed the year with another strong sales quarter as we continued to outperform our market,” said Matt Shattock, president and chief executive officer of Beam. “We exceeded our expectations with better-than-anticipated global sales of Bourbon and higher-than-expected accretion from the Pinnacle acquisition. We also benefited from premium innovations across categories that improved product mix, as well as higher pricing in select categories. As we called out three months ago, Q4 EPS before charges/gains was modestly lower due to our substantial increase in brand investment in the quarter to support long-term growth.”
Excellent Results in First Full Year as Beam
“Beam continued to deliver excellent results in its first full year as a focused pure-play spirits company,” Shattock continued. “We created value through the long-term growth algorithm we outlined a year ago: growing sales faster than our market, operating income faster than sales, and EPS faster still. In 2012, we exceeded our expectations at both the top and bottom lines as we increased comparable sales at roughly twice the rate of our global market, and grew EPS before charges/gains ahead of our target for the year. Full-year sales growth was balanced across our three regional segments, fueled by double-digit global growth for our Power Brands and Rising Stars, and we improved margins with premium innovations and higher pricing.
“We are particularly pleased that we outperformed in 2012 even as we increased investment in the competitive position and long-term growth of our business. These investments included a double-digit increase in brand-building investment, as well as higher capital expenditures to produce more aged spirits to meet future demand. In 2012, we further strengthened our core equities with impactful brand communication on television and in digital media; we accelerated our growth with innovative new products while also opening our new Global Innovation Center; we continued to strengthen our premium portfolio by adding a Power Brand in vodka and entering Irish Whiskey; and we enhanced our routes to market across fast-growing economies like China as well as in developed markets such as Japan.
“Beam generated higher-than-expected free cash flow of $337 million, and we ended the year with a net-debt-to-EBITDA ratio of 2.8 times, better than we had targeted. We’re also pleased that our 2012 acquisitions were five cents per share accretive to our full year results,” Shattock said. “We believe our investments and stronger balance sheet enhance Beam’s prospects to deliver sustainable, profitable long-term growth.”
Financial Highlights for the Full Year 2012:
Financial Highlights for the Fourth Quarter:
Establishing 2013 Earnings Growth Target
The company announced that it is targeting to deliver high-single-digit growth in diluted earnings per share before charges/gains for 2013 against its 2012 base of $2.40 per share.
“We enter 2013 with an assumption that our global spirits market will grow value approximately 3%, consistent with what we saw in 2012,” Shattock said. “We’ll face headwinds including higher raw materials costs and challenging comparisons in India as we reposition our business there, and we’re not currently assuming material new pricing in 2013. At the same time, we anticipate benefiting from several favorable dynamics: the strength of the bourbon category, our innovations and brand-building initiatives, strong growth in emerging markets, our efficiency and effectiveness agenda, and an additional five cents per share of accretion from our 2012 acquisitions. Incorporating these factors, we’re targeting for 2013 to outperform our market at the top line and deliver growth in diluted EPS before charges/gains at a high-single-digit rate. With regard to phasing, we will face our most challenging comparison of the year in the first quarter as we cycle against new-product launches and route-to-market changes that helped drive comparable sales up 13% in Q1 of 2012.
“We believe that Beam is well positioned to deliver sustainable, profitable long-term growth as we continue to invest in fast-growing categories, fast-growing new products, and fast-growing markets. We feel good about our prospects for continued outperformance in 2013.”
The company expects to generate free cash flow for 2013 in the range of $300-350 million, which incorporates continued investment to increase distillation capacity and produce more aged spirits to support long-term growth.
“While we have sustained investments in long-term value creation, we’ve also continued our track record of delivering immediate value to shareholders with the 10% increase in our dividend we announced recently,” Shattock concluded.
Key Brand Performance
Comparable net sales growth, full year 2012:
Comparable
Net Sales
Growth (1)
Results include ready-to-drink products
(1) 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.
(2) Total represents consolidated Beam comparable net sales (excluding excise taxes), including non-branded sales.
* Reflects seven months of performance for Pinnacle since acquisition.
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, Skinnygirl Cocktails, Cruzan Rum, Hornitos Tequila, Knob Creek Bourbon, Laphroaig Scotch Whisky, Kilbeggan Irish Whiskey, Larios Gin, Whisky DYC and DeKuyper Cordials. 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 3,400 passionate associates worldwide generated 2012 sales of $2.5 billion (excluding excise taxes), volume of 38 million 9-liter equivalent 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.
Forward-Looking Statements
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; competitive innovation and marketing pressures, including price; changes in consumer preferences and trends; financial and integration risks associated with acquisitions, joint ventures, and alliances, as well as potential divestitures; the price and availability of raw materials and energy; risks associated with doing business outside the United States, including changes in laws, governmental regulations and policies, compliance with anti-corruption statutes, civil and political unrest, and local labor conditions; our ability to manage organizational productivity and global supply chains effectively; the impact of excise tax increases and customs duties on our products or changes to government financial incentives; fluctuations in currency exchange rates; our ability to reach agreement on, maintain or renegotiate key agreements; potential liabilities, costs and uncertainties of litigation; our ability to attract and retain qualified personnel; changes to laws and regulations; downgrades of the Company’s credit ratings; dependence on performance of distributors, promoters and other marketing arrangements; product quality issues; costs of certain employee and retiree benefits and returns on pension assets; tax law changes or interpretation of existing tax laws; ability to secure and maintain rights to intellectual property, including trademarks, trade dress and tradenames; impairment in the carrying value of goodwill or other acquired intangible assets; disruptions at production facilities and supply/demand forecasting uncertainties; breaches of data security; and other risks and uncertainties described from time to time in the Company’s filings with the Securities and Exchange Commission.
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, free cash flow, earnings-to-free-cash conversion rate, and net-debt-to-EBITDA ratio. 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. Reconciliations 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.
Management believes that the non-GAAP measures used in this release provide investors with important perspectives into the Company’s ongoing business performance by excluding certain items, referred to as “charges / gains,” that management believes are not indicative of the Company's underlying results for purposes of analyzing the Company's performance on a year-over-year basis. The Company’s definition of charges / gains includes asset impairment charges, restructuring charges, other charges related to restructuring initiatives that cannot be reported as restructuring under GAAP, acquisition and integration related costs, dividend distribution gains from the wind down of our former Maxxium investment, costs associated with the sale of the Company's golf business and spin-off of the Company's home and security business (together, the "Separation"), the one-time sales and margin impact of transitioning to our long-term distribution agreement in Australia, tax indemnification payments received from the seller of an acquired business and unusual tax matters that management does not consider indicative of ongoing operations. Charges/gains excluded from GAAP results also include other items which management believes are not indicative of the Company's underlying operating performance for purposes of evaluating past and future performance; such items are excluded from GAAP results to improve comparability between periods. In addition, the 2011 period includes adjustments to reflect Beam as a standalone company at January 1, 2011, including adjustments to interest expense (reflecting the debt reduction related to the Separation at January 1, 2011), an estimated standalone company effective tax rate and an estimated standalone company corporate cost structure, as described in more detail in the Company's fourth quarter 2011 earnings release.
Additional non-GAAP measures included in this release are identified as “comparable,” “adjusted” and “constant currency.” The Company does not intend for this information to be considered in isolation or as a substitute for the related GAAP measures. Other companies may define the measures differently. Reconciliations of non-GAAP measures to the most closely comparable GAAP measures, together with a further explanation as to why management believes the non-GAAP measures provide useful information, are included on the following pages.
Adjustments
(See Detail
Below)
Before
Charges/ Gains
(Non-GAAP)
Adjustments
(See Detail
Below)
Before
Charges/ Gains
(Non-GAAP)
Before
Charges/
Gains
(Non-GAAP)
Gross profit margin
57.2
%
57.1
%
57.2
%
58.3
%
-
(120) bps
Operating income margin
22.1
%
25.0
%
21.4
%
27.1
%
(30) bps
(210) bps
Income from continuing operations before income taxes
4.2
%
29.3
%
4.9
%
26.7
%
Adjustments Detail by Applicable Financial Statement Line Items
Three months ended December 31, 2012
Cost of
goods sold
SG&A
expense
Restructuring
charges
Asset
Impairment
Operating
income
Pre-tax
income -cont.
operations
Income taxes
Income
from cont.
operations
Diluted EPS -
cont.
operations
Restructuring charges (a)
Three months ended December 31, 2011
Cost of
goods sold
SG&A
expense
Restructuring
charges
Separation
costs
Asset
Impairment
Operating
income
Interest, debt
extinguish-
ment loss &
other exp.
Pre-tax
income-
cont.
operations
Income taxes
Income
from cont.
operations
Diluted EPS -
cont.
operations
The 2012 restructuring credit of $0.5 million represents the reversal of restructuring accruals that were determined to be no longer required, while the $2 million of restructuring charges in 2011 relates to organizational streamlining projects. In 2012, other SG&A charges include $3.6 million of legal, forensic accounting and other fees related to our internal investigation with respect to our India operations. Other cost of goods sold for 2012 includes a $0.5 million gain on the sale of assets in connection with our 2011 project to centralize bottling operations in Kentucky. In 2011, the cost of goods sold adjustment includes $4.5 million of charges primarily associated with the streamlining of our bottling operations in Kentucky and $2.6 million of charges related to the impact of certain non-income tax matters. In 2011, the SG&A expense adjustment includes $3.8 million of credits related to certain non-income tax related matters, partially offset by $1.9 million of organizational streamlining charges.
The adjustments in 2012 and 2011 relate to the non-cash impairment of tradenames in Spain.
Adjustment relates to the reversal of Separation-related accruals that were determined to be no longer required.
Adjustment to eliminate loss on early extinguishment of debt related to the Separation.
bps - basis points
Adjustments
(See Detail
Below)
Before Charges/
Gains
(Non-GAAP)
Adjustments
(See Detail
Below)
Before
Charges/
Gains
(Non-GAAP)
Before
Charges/ Gains
(Non-GAAP)
Gross profit margin
58.3
%
58.4
%
57.3
%
58.1
%
100 bps
30 bps
25.2
40 bps
Income from continuing operations before income taxes
Adjustments Detail by Applicable Financial Statement Line Items
Year Ended December 31, 2012
Cost of
goods sold
SG&A
expense
Restructuring
charges
Separation
costs
Asset Impair-
ment
Operating
income
Other
(income)
expense
Pre-tax income-
cont.
operations
Income tax
expense
Income from
cont.
operations
Diluted EPS -
cont.
operations
Restructuring charges (a)
Year Ended December 31, 2011
Cost of
goods sold
SG&A
expense
Restructuring
charges
Separation
costs
Asset Impair-
ment
Operating
income
Interest, debt
extinguish-
ment loss &
other exp.
Pre-tax
income -cont.
operations
Income tax
expense
Income
from cont.
operations
Diluted EPS -
cont.
operations
Restructuring charges of $1 million and $7.7 million in 2012 and 2011, respectively, primarily relate to facility consolidations, supply chain and distribution and other organizational streamlining activities. In 2012, other SG&A charges primarily include $3.6 million of charges associated with our internal investigation with respect to our India operations. In 2011, the other charges include adjustments primarily related to facility consolidations, supply chain and distribution and other organizational streamlining initiatives.
The adjustments in 2012 and 2011 relate to the non-cash impairment of tradenames in Spain.
In 2012, the income tax adjustments primarily include a $22 million foreign tax credit related to the repatriation of foreign earnings, a $17 million net benefit arising from the resolution of certain foreign and US federal and state tax return matters, and $6 million of expense related to our annual reconciliation of the 2011 income tax filing to the 2011 provision for income taxes. The adjustment in the 2011 period is the combined amount required to eliminate income tax matters related to the resolution of foreign and US income tax audit examinations and to adjust income tax expense to Beam's estimated effective tax rate as a standalone Spirits business.
Adjustment to eliminate the one-time net sales and related cost of goods sold impact associated with transition to a new long-term distribution agreement in Australia in 2011.
Adjustment to eliminate loss on early extinguishment of debt related to the Separation.
bps - basis points
Net Sales
Operating Income
Reconciliation of Percentage Change in GAAP Net Sales to Percentage Change in Comparable Net Sales (Unaudited)
North
America
Segment
Total
Net Sales
Operating Income
Reconciliation of Percentage Change in GAAP Net Sales to Percentage Change in Comparable Net Sales (Unaudited)
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") (a)
Free Cash Flow & Cash Conversion Rate (a)
Return on Invested Capital (ROIC) from Continuing Operations (a)
Year Ended December
31, 2012 - Income
from Continuing
Operations plus After-
tax Interest
Average Invested
Capital
Reconciliation of Net Debt to Adjusted EBITDA (Unaudited) (a)
Reconciliation of Full Year 2013 Diluted EPS from Continuing Operations Growth Target to GAAP Target
Comparing targeted 2013 diluted EPS from continuing operations before charges/gains to the Company's 2012 GAAP diluted EPS from continuing operations ($2.48) results in mid-single-digit growth in diluted earnings per share from continuing operations. The lower growth rate, as compared to year-over-year growth on a before charges/gains basis, is attributable to the 2012 charges/gains described above.
Full Year 2013 Free-Cash-Flow Target
Management believes that the measure of free cash flow provides investors with helpful supplemental information about the Company's ability to fund internal growth, make acquisitions, repay debt, pay dividends, and repurchase common stock. This measure may be inconsistent with similar measures presented by other companies.
Comparable Sales Increase - First Quarter 2012 Compared to First Quarter 2011
Beam Inc.
Media Relations
Clarkson Hine
+1-847-444-7515
Clarkson.Hine@beamglobal.com
or
Investor Relations
Tony Diaz
+1-847-444-7690
Tony.Diaz@beamglobal.com
Source: Beam Inc.