Beam Reports Second Quarter Results

DEERFIELD, Ill.–(BUSINESS WIRE)–

Beam Inc. (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):

Comparable

Net Sales Growth (1)

Power Brands

+12%

Jim Beam

+11%

Maker’s Mark

Sauza

+6%

Pinnacle

newly acquired

Courvoisier

+21%

Canadian Club

-2%

Teacher’s

+3%

Rising Stars

+19%

Laphroaig

+3%

Knob Creek

+9%

Basil Hayden

+33%

Kilbeggan

+71%

Cruzan

+7%

Hornitos

-7%

EFFEN

-14%

Pucker Vodka

+17%

Skinnygirl

+81%

Sourz

+15%

Local Jewels

-2%

Value Creators

+2%

Total (2)

+8%

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 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 and credit market instability, particularly in Europe;
customer defaults and related bad debt expense; competitive market
pressures (including pricing pressures); changes in customer preferences
and trends; risks pertaining to strategic acquisitions and joint
ventures, particularly financial and integration risks; any possible
downgrades of the company’s credit ratings; commodity and energy price
volatility; risks associated with doing business outside the United
States, including currency exchange rate risks; inability to attract and
retain qualified personnel; the impact of excise tax increases and
customs duties on distilled spirits; the status of the U.S. rum excise
tax cover-over program; dependence on performance of distributors and
other marketing arrangements; costs of certain employee and retiree
benefits and returns on pension assets; tax law changes and/or
interpretation of existing tax laws; potential liabilities, costs and
uncertainties of litigation; ability to secure and maintain rights to
trademarks and trade names; impairment in the carrying value of goodwill
or other acquired intangible assets; disruptions at production
facilities; risks related to the Home Security spin-off; and other
risks and uncertainties described from time to time in the Company’s
Securities and Exchange Commission filings.

Use of Non-GAAP Financial Information

This press release includes measures not derived in accordance with
generally accepted accounting principles (“GAAP”), including comparable
net sales, diluted EPS before charges/gains, operating income before
charges/gains, adjusted return on invested capital, and
earnings-to-free-cash-conversion rate. These measures should not be
considered in isolation or as a substitute for any measure derived in
accordance with GAAP, and may also be inconsistent with similar measures
presented by other companies. Reconciliation of these measures to the
most closely comparable GAAP measures, and reasons for the company’s use
of these measures, are presented in the attached pages.

Beam Inc.

Consolidated Income Statement

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

(In millions, except per share amounts)

2012

2011

% Change

2012

2011

% Change

Sales

752.4

702.7

1,415.3

1,375.8

Less: Excise taxes

(156.9

)

(132.3

)

(286.0

)

(281.4

)

Net sales

595.5

570.4

4.4

1,129.3

1,094.4

3.2

Cost of goods sold

248.6

241.7

2.9

467.7

471.3

-0.8

Gross profit

346.9

328.7

5.5

661.6

623.1

6.2

Advertising and marketing expense

98.0

99.3

-1.3

174.7

165.8

5.4

Selling, general and administrative expense

104.7

97.8

7.1

205.1

198.5

3.3

Amortization of intangible assets

4.3

4.1

4.9

8.5

8.0

6.3

Restructuring charges

0.4

(0.2

)

2.7

1.9

Business separation costs

13.8

8.0

13.8

17.2

Operating income

125.7

119.7

5.0

256.8

231.7

10.8

Interest expense

26.9

29.1

-7.6

51.4

60.0

-14.3

Other (income) expense

(22.5

)

3.0

(28.4

)

3.1

Income from continuing operations

before income taxes

121.3

87.6

38.5

233.8

168.6

38.7

Income tax expense

20.0

25.2

54.1

44.5

Income from continuing operations

101.3

62.4

62.3

179.7

124.1

44.8

Income (loss) from discontinued operations, net of tax

(0.8

)

267.6

(0.1

)

289.1

Net income

100.5

330.0

-69.5

179.6

413.2

-56.5

Less: Noncontrolling interests – discontinued operations

–

1.4

–

3.4

Net income attributable to Beam Inc.

100.5

328.6

-69.4

179.6

409.8

-56.2

Basic earnings (loss) per common share:

Continuing operations

0.64

0.40

60.0

1.14

0.80

42.5

Discontinued operations

(0.01

)

1.73

–

1.86

Net income

0.63

2.13

-70.4

1.14

2.66

-57.1

Diluted earnings (loss) per common share:

Continuing operations

0.63

0.40

57.5

1.12

0.79

41.8

Discontinued operations

(0.01

)

1.69

–

1.82

Net income

0.62

2.09

-70.3

1.12

2.61

-57.1

Weighted-average common shares outstanding

Basic

158.0

154.3

2.4

157.5

154.0

2.3

Diluted

160.8

157.3

2.2

160.2

156.9

2.1

Beam Inc.

Condensed Consolidated Balance Sheet

(Unaudited)

(In millions)

June 30,

December 31,

2012

2011

Assets

Cash and cash equivalents

109.3

218.3

Accounts receivable

422.8

385.8

Inventories

Maturing spirits

1,353.9

1,283.2

Finished products

201.8

167.3

Raw materials, supplies and work in process

132.6

101.0

Total inventories

1,688.3

1,551.5

Other current assets

264.3

278.8

Total current assets

2,484.7

2,434.4

Property, plant and equipment

758.1

729.7

Goodwill and other intangible assets

4,823.9

4,202.9

Other assets

133.7

124.8

Total assets

8,200.4

7,491.8

Liabilities and Equity

Short-term debt, including current

portion of long-term debt

299.8

28.4

Accounts payable

137.2

170.1

Long-term debt

2,213.4

1,902.1

Other liabilities

1,221.7

1,291.5

Total liabilities

3,872.1

3,392.1

Total equity

4,328.3

4,099.7

Total liabilities and equity

8,200.4

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 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 (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 a business and other unusual income
tax matters. 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.

Beam Inc.

Reconciliations of GAAP to Non-GAAP Measures (Unaudited)

($ in millions, except per share)

Three Months Ended June 30, 2012

Three Months Ended June 30, 2011

% Increase

Adjustments

(See Detail

GAAP

Below)

(Non-GAAP)

GAAP

(Non-GAAP)

GAAP

(Non-GAAP)

Net sales

595.5

–

595.5

570.4

–

570.4

4.4

Cost of goods sold

248.6

(0.2

)

241.7

(1.4

)

Gross profit

346.9

0.2

347.1

328.7

1.4

330.1

5.5

5.1

Advertising and marketing expense

98.0

–

99.3

–

Selling, general and administrative expense

104.7

(11.5

)

97.8

(10.2

)

Amortization of intangible assets

4.3

–

4.1

–

Restructuring charges

0.4

(0.4

)

(0.2

)

0.2

Business separation costs

13.8

(13.8

)

8.0

(8.0

)

Operating income

125.7

25.9

151.6

119.7

19.4

139.1

5.0

9.0

Interest expense

26.9

–

29.1

1.9

Other (income) expense

(22.5

)

18.0

3.0

(0.1

)

Income from continuing operations

before income taxes

121.3

7.9

87.6

17.6

Income tax expense

20.0

15.6

25.2

1.9

Effective tax rate

16.5

27.6

28.8

25.8

Income from continuing operations

101.3

(7.7

)

93.6

62.4

15.7

78.1

62.3

19.8

Diluted EPS – continuing operations

0.63

(0.05

)

0.58

0.40

0.10

0.50

57.5

16.0

Restructuring charges (a)

–

0.2

–

(0.2

)

–

(0.2

)

–

(0.2

)

–

Other charges (a)

–

(0.2

)

–

0.2

–

0.2

–

0.2

–

Acquisition and integration related (b)

(0.2

)

(11.3

)

(0.6

)

–

12.1

–

12.1

4.5

7.6

0.05

Separation costs (c)

–

(13.8

)

13.8

–

13.8

5.3

8.5

0.05

Tax indemnification (d)

–

(18.0

)

–

(18.0

)

(0.11

)

Income tax adjustment (e)

–

5.8

(5.8

)

(0.04

)

(0.2

)

(11.5

)

(0.4

)

(13.8

)

25.9

7.9

15.6

(7.7

)

(0.05

)

Pre-tax

income –

cont.
operations

Restructuring charges (a)

–

0.2

–

(0.2

)

–

(0.2

)

–

(0.2

)

–

Other charges (a)

(1.4

)

–

1.4

–

1.4

–

1.4

0.01

Separation costs (c)

–

(8.0

)

8.0

–

8.0

–

8.0

0.05

Standalone company adjustment (f)

–

(10.2

)

–

10.2

1.9

8.3

–

8.3

0.05

Income tax adjustments (e)

–

(0.1

)

0.1

1.9

(1.8

)

(0.01

)

(1.4

)

(10.2

)

0.2

(8.0

)

19.4

1.8

17.6

1.9

15.7

0.10

(a)

Adjustment to eliminate restructuring and other charges (and
credits) primarily related to facility consolidations, supply chain
and distribution and other organizational streamlining initiatives.

(b)

Adjustment related to the acquisition and integration of the
Pinnacle and Calico Jack assets (“Pinnacle”), primarily consisting
of transaction-related fees (investment bank, professional advisory,
consulting and other transaction and integration-related fees) of
$4.7 million and contract termination fees of $6.6 million, which
the Company incurred to align the distribution of the acquired
brands with the Company’s existing distribution structure. Contract
termination fees are primarily based on actual settlement
agreements, but where a settlement agreement has not been reached
the Company recorded an estimated liability.

(c)

Adjustment to eliminate external costs directly related to
implementing the Separation in 2011. The separation costs in the
second quarter of 2012 include 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. The
settlement charge primarily consists of the recognition of pension
losses previously deferred in accumulated other comprehensive income
and the $29 million distribution was the amount of the executives’
unfunded pension benefit. The pension settlement charge was
partially offset by reversal of Separation-related reserves that
were determined to be no longer necessary.

(d)

Nontaxable reimbursement received from seller of a business for
resolution of certain tax matters for years prior to our ownership.

(e)

The adjustment in the 2012 period is to eliminate income tax matters
related to the resolution of foreign tax audit examinations. The
adjustment in the 2011 period is the amount required to adjust
income tax expense to Beam’s estimated effective tax rate as a
standalone Spirits business.

(f)

Adjustments to reflect estimated expenses as a standalone Spirits
business, including: (1) $10.2 million operating expense
adjustment to reflect a lower corporate cost structure, and (2)
$1.9 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 January 1, 2011.

Beam Inc.

Reconciliations of GAAP to Non-GAAP Measures (Unaudited)

($ in millions, except per share)

Six Months Ended June 30, 2012

Six Months Ended June 30, 2011

% Increase

GAAP

Before
Charges/
Gains

(Non-GAAP)

GAAP

Before Charges/ Gains

GAAP

Before
Charges/
Gains

(Non-GAAP)

Net sales

1,129.3

–

1,129.3

1,094.4

(46.3

)

1,048.1

3.2

7.7

Cost of goods sold

467.7

)

471.3

(28.7

)

Gross profit

661.6

623.1

(17.6

)

605.5

6.2

9.3

Advertising and marketing expense

174.7

–

165.8

–

Selling, general and administrative expense

205.1

)

198.5

(24.0

)

Amortization of intangible assets

8.5

–

8.0

–

Restructuring charges

2.7

(2.7

)

1.9

(1.9

)

Business separation costs

13.8

(13.8

)

17.2

(17.2

)

Operating income

256.8

32.8

289.6

231.7

25.5

257.2

10.8

12.6

Interest expense

51.4

–

60.0

2.0

Other (income) expense

(28.4

)

19.9

3.1

1.1

Income from continuing operations

before income taxes

233.8

12.9

168.6

22.4

Income tax expense

54.1

14.6

44.5

4.7

Effective tax rate

23.1

27.8

26.4

25.8

Income from continuing operations

179.7

(1.7

)

178.0

124.1

17.7

141.8

44.8

25.5

Diluted EPS – continuing operations

1.12

(0.01

)

1.11

0.79

0.11

0.90

41.8

23.3

SGA expense

Restructuring charges (a)

–

(2.1

)

–

2.1

–

2.1

0.8

1.3

0.01

Other charges (a)

(0.2

)

(0.8

)

–

1.0

–

1.0

0.3

0.7

–

Acquisition and integration related (b)

(0.2

)

(15.1

)

(0.6

)

–

15.9

–

15.9

2.4

13.5

0.08

Separation costs (c)

–

(13.8

)

13.8

–

13.8

5.3

8.5

0.05

Maxxium distribution (d)

–

(1.9

)

–

(1.9

)

(0.01

)

Tax indemnification (e)

–

(18.0

)

–

(18.0

)

(0.11

)

Income tax adjustment (f)

–

5.8

(5.8

)

(0.03

)

(0.4

)

(15.9

)

(2.7

)

(13.8

)

32.8

12.9

14.6

(1.7

)

(0.01

)

Net sales

SGA expense

Income tax expense

Restructuring charges (a)

–

(1.9

)

–

1.9

–

1.9

–

1.9

0.01

Other charges (a)

–

(6.0

)

0.6

–

5.4

–

5.4

–

0.04

Separation costs (c)

–

(17.2

)

17.2

–

17.2

–

17.2

0.11

Australia distribution one-time sale (g)

(46.3

)

(22.7

)

–

(23.6

)

–

(23.6

)

–

(23.6

)

(0.15

)

Standalone company adjustment (h)

–

(24.6

)

–

24.6

2.0

22.6

–

22.6

0.14

Tax indemnifications (e)

–

1.1

(1.1

)

–

(1.1

)

(0.01

)

Income tax adjustments (f)

–

4.7

(4.7

)

(0.03

)

(46.3

)

(28.7

)

(24.0

)

(1.9

)

(17.2

)

25.5

3.1

22.4

4.7

17.7

0.11

(a)

Adjustment to eliminate restructuring and other charges (and
credits) primarily related to facility consolidations, supply chain
and distribution and other organizational streamlining initiatives.

(b)

(c)

Adjustment to eliminate external costs directly related to
implementing the Separation in 2011. The 2012 period includes a
$15.1 million pension settlement charge related to former Fortune
Brands executives as further described in the explanation of
adjustments for the three months ended June 30, 2012 on the
preceding page.

(d)

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

(e)

Nontaxable reimbursement received from seller of a business for
resolution of certain tax matters for years prior to our ownership.

(f)

The adjustment in the 2012 period is to eliminate income tax matters
related to the resolution of foreign tax audit examinations. The
adjustment in the 2011 period is the combined amount required to
eliminate income tax matters related to the resolution of foreign
tax audit examinations and to adjust income tax expense to Beam’s
estimated effective tax rate as a standalone Spirits business.

(g)

Adjustment to eliminate the one-time sales and margin impact
associated with transition to a new long-term distribution agreement
in Australia in 2011.

(h)

Adjustments to reflect estimated expenses as a standalone Spirits
business, including: (1) $24.6 million operating expense adjustment
to reflect a lower corporate cost structure, and (2) $2.0 million
interest expense adjustment to assume the Separation-related debt
reduction had been completed as of January 1, 2011. See the
preceding page for additional information related to estimated
standalone costs.

Beam Inc.

Segment Information ^(a)

(Unaudited)

(In millions)

Constant Currency (Non-GAAP)

2012

Change

Adjusted

Change

2012

2011

Reported

Adjusted

North America

370.1

334.1

10.8

373.4

11.8

Europe, Middle East, Africa (“EMEA”)

111.7

119.1

-6.2

123.8

3.9

Asia Pacific / South America (“APSA”)

113.7

117.2

-3.0

115.9

-1.1

Segment net sales

595.5

570.4

4.4

613.1

7.5

Foreign exchange

–

(17.6

)

n/m

Total net sales

595.5

570.4

4.4

595.5

4.4

Constant Currency (Non-GAAP)

2012

Change

Adjusted

Change

2012

2011

Reported

Amount^(b)

Adjusted

North America

105.4

95.1

10.8

104.2

9.6

EMEA

23.4

24.6

-4.9

26.3

6.9

APSA

22.8

19.4

17.5

20.5

5.7

Segment operating income

151.6

139.1

9.0

151.0

8.6

Deduct:

Foreign exchange

–

(0.6

)

25.9

19.4

25.9

Total operating income

125.7

119.7

5.0

125.7

5.0

(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 June 30, 2012

EMEA

APSA

Net Sales (GAAP)

)

Foreign currency impact

Acquisitions/divestitures

)

–

)

Comparable Net Sales (Non-GAAP)

)

Beam Inc.

Segment Information ^(a)

(Unaudited)

(In millions)

Constant Currency (Non-GAAP)

2012

Six Months Ended June 30,

Change

Adjusted

Change

2012

2011

Reported

Amount ^(b)

Adjusted

North America

679.4

608.8

11.6

683.9

12.3

Europe, Middle East, Africa (“EMEA”)

219.0

214.9

1.9

234.1

8.9

Asia Pacific / South America (“APSA”)

230.9

224.4

2.9

228.5

1.8

Segment net sales

1,129.3

1,048.1

7.7

1,146.5

9.4

Foreign exchange

–

(17.2

)

n/m

Australia distribution one-time sale

–

46.3

–

n/m

Total net sales

1,129.3

1,094.4

3.2

1,129.3

3.2

Constant Currency (Non-GAAP)

2012

Six Months Ended June 30,

Change

Adjusted

Change

2012

2011

Reported

Amount^(b)

Adjusted

North America

204.0

178.0

14.6

202.4

13.7

EMEA

40.8

45.0

-9.3

43.5

-3.3

APSA

44.8

34.2

31.0

37.2

8.8

Segment operating income

289.6

257.2

12.6

283.1

10.1

Deduct:

Foreign exchange

–

(6.5

)

32.8

25.5

32.8

Total operating income

256.8

231.7

10.8

256.8

10.8

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

Six Months Ended June 30, 2012

EMEA

APSA

Segment Total

Net Sales (GAAP)

Foreign currency impact

)

Acquisitions/divestitures

)

–

)

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
for certain items. 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 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.

Beam Inc.

Reconciliations of GAAP to Non-GAAP Measures (Unaudited)

($ in millions)

Three Months Ended June 30,

Six Months Ended June 30,

2012

2011

2012

2011

GAAP income from continuing operations

101.3

62.4

179.7

124.1

Add (deduct):

Other (income) / expense

(22.5

)

3.0

(28.4

)

3.1

Interest expense

26.9

29.1

51.4

60.0

Depreciation expense

24.8

21.9

49.4

43.9

Amortization expense

4.3

4.1

8.5

8.0

Income tax expense

20.0

25.2

54.1

44.5

25.9

19.4

32.8

25.5

EBITDA before charges/gains (Non-GAAP)

180.7

165.1

347.5

309.1

(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 June 30,

Six Months Ended June 30,

2012

2011

2012

2011

76.8

212.8

25.2

6.5

Add (deduct):

Spirits capital expenditures, net of disposition proceeds

(34.9

)

(38.7

)

(58.0

)

(61.8

)

Cash used for discontinued operations (b)

3.2

–

22.1

–

Cash (provided by) used by discontinued businesses (c)

–

(148.5

)

–

21.1

Adjusted free cash flow (Non-GAAP)

45.1

25.6

(10.7

)

(34.2

)

(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) Represents cash used primarily for settlement of liabilities of
divested businesses and payment of incentive compensation and
severance benefits to former Fortune Brands executives.

ROIC

Unadjusted

404

6,453

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

(27

)

ROIC before charges/gains (Non-GAAP)

447

6,426

Impact of excluding goodwill and intangibles

(4,399

)

ROIC before charges/gains and excl. goodwill and intangibles
(Non-GAAP)

458

2,027

(a) ROIC is income from continuing operations plus after-tax
interest expense and debt extinguishment loss plus preferred
dividends 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 June 30, 2012; invested capital for
periods prior to the Separation was adjusted to assume Beam was a
standalone company for those periods. 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

Six Months Ended June 30, 2012

(Unaudited)

Foreign

Australia

Currency

Distribution

Non-GAAP –

Exchange

Agreement

Margin

Acquisitions/

Comparable

Rates

Change

Structure

Divestitures

Basis

Power Brands

)

Jim Beam

)

–

Maker’s Mark

–

Sauza (a)

–

Courvoisier

–

Canadian Club

(13

)

–

)

Teacher’s

)

–

Rising Stars

–

)

Laphroaig

)

–

Knob Creek

–

Basil Hayden

–

Kilbeggan

–

Cruzan

–

Hornitos

)

–

)

EFFEN

(14

)

–

(14

)

Pucker Vodka

–

Skinnygirl

–

)

Sourz

–

Local Jewels

)

–

)

Value Creators

)

Net sales (b)

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

June 30, 2012

GAAP debt / operating cash flow

5.3

Impact of using net debt rather than GAAP total debt (a)

(0.2

)

Impact of using adjusted EBITDA rather than GAAP operating cash flow

(1.5

)

Net debt / EBITDA before charges/gains

3.6

Adjusted Earnings to Free Cash Flow Conversion Rate is calculated as
the ratio of Adjusted Free Cash Flow to Adjusted Income from
Continuing Operations. Adjusted Free Cash Flow is cash from
operations less net capital expenditures plus operating cash
outflows related to discontinued operations. Adjusted Income from
Continuing Operations is adjusted for “charges/gains” (as previously
defined). This is a non-GAAP measure. For the full year 2012, the
Company expects an Adjusted Earnings to Free Cash Flow Conversion
Rate of approximately 80%. However, given uncertainty with respect
to potential nonrecurring items that may impact earnings and/or free
cash flow, the Company cannot estimate a full-year GAAP Earnings to
Free Cash Flow Conversion Rate; therefore, a GAAP to Non-GAAP
reconciliation is not included.

Beam Reports Second Quarter Results

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