Beam Reports 2012 Fourth Quarter and Full Year Results

DEERFIELD, Ill.–(BUSINESS WIRE)–

Beam Inc. (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:

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 SP
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

(0.5

)

(2.7

)

(15.8

)

782.2

Net income

126.3

88.5

42.7

382.4

915.5

-58.2

Less: Noncontrolling interests – discontinued operations

–

4.1

Net income attributable to Beam Inc.

126.3

88.5

42.7

382.4

911.4

-58.0

Basic earnings (loss) per common share:

Continuing operations

0.79

0.59

33.9

2.51

0.86

191.9

Discontinued operations

–

(0.02

)

(0.10

)

5.03

Net income

0.79

0.57

38.6

2.41

5.89

-59.1

Diluted earnings (loss) per common share:

Continuing operations

0.79

0.58

36.2

2.48

0.85

191.8

Discontinued operations

–

(0.02

)

(0.10

)

4.93

Net income

0.79

0.56

41.1

2.38

5.78

-58.8

Weighted-average common shares outstanding

Basic

159.4

155.8

2.3

158.3

154.6

2.4

Diluted

161.2

158.7

1.6

160.8

157.8

1.9

Beam Inc.

Condensed Consolidated Balance Sheet

(Unaudited)

(In millions)

December 31,

2012

2011

Assets

Cash and cash equivalents

365.7

218.3

Accounts receivable

455.7

385.8

Inventories

Maturing spirits

1,425.2

1,283.2

Finished products

179.6

167.3

Raw materials, supplies and work in process

132.1

101.0

Total inventories

1,736.9

1,551.5

Other current assets

297.9

278.8

Total current assets

2,856.2

2,434.4

Property, plant and equipment

787.9

729.7

Goodwill and other intangible assets

4,879.1

4,202.9

Other assets

106.5

124.8

Total assets

8,629.7

7,491.8

Liabilities and Equity

Short-term debt, including current

portion of long-term debt

480.1

28.4

Accounts payable

264.0

206.1

Long-term debt

2,024.9

1,902.1

Other liabilities

1,248.6

1,255.5

Total liabilities

4,017.6

3,392.1

Total equity

4,612.1

4,099.7

Total liabilities and equity

8,629.7

7,491.8

Beam Inc.

Use of Non-GAAP Financial Information

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

Net sales

709.1

–

709.1

637.5

–

637.5

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

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

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

132.4

20.6

95.9

53.0

Income taxes

5.6

39.2

4.7

35.0

Effective tax rate

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

–

0.5

–

(0.5

)

(0.5

)

(0.2

)

(0.3

)

–

Other charges (a)

0.5

(3.6

)

–

3.1

1.1

2.0

0.01

Acquisition/integration related costs (b)

(0.2

)

(1.1

)

(1.1

)

–

2.4

0.9

1.5

0.01

Asset impairment (c)

–

(15.6

)

15.6

4.7

10.9

0.07

Income tax adjustment (d)

–

32.7

(32.7

)

(0.21

)

0.3

(4.7

)

(0.6

)

(15.6

)

20.6

39.2

(18.6

)

(0.12

)

Restructuring charges (a)

–

(2.0

)

–

2.0

–

2.0

–

2.0

0.01

Other charges (a)

(7.1

)

1.9

–

5.2

–

5.2

–

5.2

0.03

Separation costs (e)

–

2.0

–

(2.0

)

–

(2.0

)

–

(2.0

)

(0.01

)

Standalone company adjustment (f)

–

(4.0

)

4.0

–

4.0

0.03

Asset impairment (c)

–

(31.3

)

31.3

–

31.3

–

31.3

0.19

Loss on early extinguishment of debt (g)

–

(15.2

)

15.2

–

15.2

0.10

Maxxium distribution (h)

–

2.7

(2.7

)

–

(2.7

)

(0.02

)

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)

(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)

(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)

(f)

Adjustment to the Company’s interest expense to assume that the
Separation-related debt extinguishments had occurred on January 1,
2011.

(g)

(h)

Adjustment to eliminate a gain related to a dividend distribution
received in connection with the wind down of our former Maxxium
investment.

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

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

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

N/M

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

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

–

(1.0

)

–

1.0

–

1.0

0.2

0.8

–

Other charges (a)

0.3

(4.2

)

–

3.9

–

3.9

1.4

2.5

0.01

Acquisition/integration related costs (b)

(1.1

)

(17.3

)

(3.3

)

–

21.7

–

21.7

4.6

17.1

0.11

Separation costs (c)

–

(13.8

)

–

13.8

–

13.8

5.3

8.5

0.05

Asset impairment (d)

–

(15.6

)

15.6

–

15.6

4.7

10.9

0.07

Maxxium distribution (e)

–

1.9

(1.9

)

–

(1.9

)

(0.01

)

Tax indemnification (f)

–

18.0

(18.0

)

–

(18.0

)

(0.11

)

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

)

Net sales

Restructuring charges (a)

–

(7.7

)

–

7.7

–

7.7

–

7.7

0.05

Other charges (a)

–

(15.6

)

(0.9

)

–

16.5

–

16.5

–

16.5

0.10

Acquisition/integration related costs (b)

–

(25.0

)

–

25.0

–

25.0

–

25.0

0.16

Separation costs (c)

–

(83.8

)

–

83.8

–

83.8

–

83.8

0.53

Asset impairment (d)

–

(31.3

)

31.3

–

31.3

–

31.3

0.20

Australia distribution one-time sale (h)

(46.3

)

(22.7

)

–

(23.6

)

–

(23.6

)

–

(23.6

)

(0.15

)

Standalone company adjustment (i)

–

(36.0

)

–

36.0

2.5

33.5

–

33.5

0.21

Loss on early extinguishment of debt (j)

–

(149.2

)

149.2

–

149.2

0.94

Maxxium distribution (e)

–

10.2

(10.2

)

–

(10.2

)

(0.06

)

Tax indemnifications (f)

–

27.1

(27.1

)

–

(27.1

)

(0.17

)

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)

(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 SGA 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)

(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)

(h)

(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)

N/M – not meaningful

Beam Inc.

Segment Information ^(a)

(Unaudited)

(In millions)

Constant Currency (Non-GAAP)

Three Months Ended

2012

December 31,

Change

Adjusted

Change

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

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.

Three Months Ended December 31, 2012

EMEA

APSA

Net Sales (GAAP)

–

Foreign currency impact

–

(2)

–

Acquisitions/divestitures

(12)

(1)

–

(6)

Comparable Net Sales (Non-GAAP)

(2)

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

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

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

(b) Foreign exchange translation effects calculated by translating
current year results at prior year exchange rates and excluding
hedge impacts.

Year Ended December 31, 2012

North America

EMEA

APSA

Segment Total

Net Sales (GAAP)

Foreign currency impact

–

Acquisitions/divestitures

(7)

(2)

–

(4)

Ongoing impact – Australia distribution margin

–

Comparable Net Sales (Non-GAAP)

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)

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).

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

237.9

Net income before charges/gains (see above)

385.6

Cash Conversion Rate

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.

ROIC

Unadjusted

469

6,774

Add: impact of “charges/gains” (previously defined)

(13

)

ROIC before charges/gains (Non-GAAP)

456

6,792

Impact of excluding goodwill and intangibles

(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

Currency

Distribution

Non-GAAP –

GAAP

Exchange

Agreement

Margin

Acquisitions/

Comparable

Basis

Rates

Change

Structure

Divestitures

Basis

Power Brands

(6)

Jim Beam

–

Maker’s Mark

–

Sauza (a)

–

Courvoisier

–

Canadian Club

–

Teacher’s

(9)

(1)

–

Pinnacle

–

Rising Stars

–

(2)

Laphroaig

–

Knob Creek

–

Basil Hayden’s

–

Kilbeggan

–

Cruzan

–

Hornitos

(3)

–

(2)

EFFEN

(22)

–

(22)

Pucker Vodka

(5)

–

(5)

Skinnygirl

–

(2)

Sourz

(3)

–

Local Jewels

(5)

–

(1)

Value Creators

(1)

(5)

(1)

Net sales (b)

–

(4)

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

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.

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.

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.

Net Sales (GAAP)

Australia Distribution Agreement Change

Australia Distribution Margin Structure

Acquisitions/Divestitures

-1

Non-GAAP – Comparable Basis

Beam Reports 2012 Fourth Quarter and Full Year Results

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