BEAM REPORTS SECOND QUARTER RESULTS
- Beam Continues Market Outperformance, Driven by Innovations and Bourbon Brands
- Company Delivers Solid Double-Digit Growth in Earnings per Share from Continuing Operations
- Beam Raises Full-Year Earnings Growth Target to Low-Double-Digit Rate
Deerfield, Illinois, August 2, 2012 - Beam Inc. (NYSE: BEAM), a leading global premium spirits company, today reported strong results for the second quarter of 2012 and increased its earnings target range for the full year.
Net sales increased 4% and were up 5% on a comparable basis despite a challenging comparison to results in the year-ago quarter. Strong growth in North America and demand for the company's Bourbon brands and innovations across categories helped drive the sales increase.
Diluted earnings per share from continuing operations were $0.63, up 58% on a reported basis (GAAP). Excluding charges/gains, diluted EPS from continuing operations was $0.58, up 16%, benefiting from volume growth, targeted price increases, and below-the-line items such as lower interest expense.
For the first half of 2012, net sales increased 8% on a comparable basis, with one-third of the increase driven by sales of new product innovations. On a reported basis, net sales grew 3% reflecting the adverse impact on comparisons of the initial sale of inventory in the first quarter of 2011 for the start-up of the company's Australia distribution agreement. Diluted EPS before charges/gains from continuing operations is up 23% year to date, and is up 42% on a reported basis.
Growth Strategy Delivering Results Ahead of Expectations
"Beam continued its momentum with quarterly results that exceeded our expectations, even as we lapped a very strong year-ago quarter that was boosted by our 2011 new product launches," said Matt Shattock, president and chief executive officer of Beam. "Our strong top-line results were driven by our Power Brands and Rising Stars - led by Jim Beam, Maker's Mark and Skinnygirl - and record quarterly sales from new products that improved our product mix. Sales in North America were particularly strong, while the top line in our EMEA and APSA regions in the quarter was adversely impacted by the timing of sales. Beam's profits grew faster than sales, and earnings per share grew at a solid double-digit rate.
"As we execute our successful growth strategy, we're encouraged by several dynamics that benefited Beam in the quarter, including the strong sell-in for our innovations, impactful brand activation in markets around the world, and strong worldwide demand for Bourbon. The Pinnacle Vodka acquisition is also off to a good start."
Financial Highlights for the Second Quarter and Year to Date:
- Income from continuing operations was $101.3 million for the second quarter, or $0.63 per diluted share, compared to $62.4 million, or $0.40 per share, for the second quarter of 2011.
- For the first half, income from continuing operations was $179.7 million, or $1.12 per diluted share, up 42% from $0.79 in 2011.
- Excluding charges and gains, diluted EPS from continuing operations was $0.58 for the second quarter, up 16% from $0.50 in the year-ago quarter.
- Diluted EPS before charges/gains was $1.11 for the first half, up 23% from $0.90.
- Reported net sales for the second quarter were $595.5 million (excluding excise taxes), up 4%.
- Reported net sales increased 3% for the first half of 2012.
- On a comparable basis, which adjusts for foreign exchange and acquisitions/divestitures, net sales were up 5% for the second quarter and up 8% for the first half.
- Comparable net sales by region: North America +8% in Q2 and +10% YTD; Europe/Middle East/Africa (EMEA) +1% in Q2 and +5% YTD; Asia Pacific/South America (APSA) down 1% in Q2 and +7% YTD.
- Operating income for the second quarter was $125.7 million, up 5%.
- Operating income for the first half increased 11%.
- Operating income before charges/gains for the quarter was $151.6 million, up 9%.
- For the first half of 2012, operating income before charges/gains increased 13%.
- Return on invested capital before charges/gains (rolling 12 months) was 7% and was 23% excluding intangibles.
Raising 2012 Earnings Target While Accelerating Investment in Long-Term Growth
"Beam enters the back half of 2012 with confidence," Shattock continued. "While we'll face some tough comparisons, we expect the underlying strength of our core business, augmented by our acquisitions, will deliver continued marketplace outperformance. As a result, we're raising our 2012 earnings target. We're now targeting diluted earnings per share before charges/gains to grow at a low-double-digit rate, up from our previous target range of high-single digits.
"In addition, consistent with our focus on high-return organic growth opportunities, we intend to make stepped up investments in two key areas to fuel our momentum and further enhance our prospects for long-term profitable growth: First, we will upweight marketing investment in the second half behind our most exciting brands and innovations; And second, we are accelerating investment to lay down more aged spirits to support future worldwide demand for our Bourbon, Scotch and Cognac brands. These investments, which include expanding our distillation and warehouse capacity, come on top of our sustained investment in new-product innovation, including our new Global Innovation Center in Kentucky which we'll open in the fourth quarter.
"Our confidence in boosting our level of investment is reinforced by the effectiveness of our growth strategy and the resilience of our global spirits market. Given the strength we've seen in the first half, we now expect our market will grow value in 2012 slightly above our previous estimate of 3%. Our expectation reflects uncertainty in international economies that is being offset by strength in our heartland U.S. spirits market.
"Looking to the balance of the year, we expect that EPS growth will moderate in the second half versus the first half reflecting our accelerated investments, and as we've previously indicated, third-quarter EPS growth will also be tempered by an unfavorable comparison due to replenishment of customer inventories for Skinnygirl in the prior-year quarter. At the same time, we now expect our 2012 acquisitions to be a few cents accretive to this year's earnings per share, rather than neutral," Shattock said.
The company also noted that it expects the deployment of free cash to barrel more aged spirits will result in an earnings-to-free-cash-conversion rate for 2012 of approximately 80% versus its long-term target in the 90% range.
Key Brand Performance
Comparable net sales growth, year-to-date 2012 (January - June):
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.
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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.