Deerfield, Illinois, May 2, 2013 - Beam Inc. (NYSE: BEAM), a leading global premium spirits company, today reported results for the first quarter of 2013. Reported net sales increased 8%, benefiting from strong commercial performance and the acquisition of Pinnacle Vodka. On a comparable basis, net sales increased 3%, reflecting the comparison to the year-ago quarter when new product introductions and route-to-market transitions helped comparable net sales increase 13%.
Operating income increased 37%, benefiting from factors including favorable product mix and the timing of expenses. Diluted earnings per share from continuing operations were $0.72, up 47%. Diluted EPS before charges/gains increased 21% to $0.64.
"We're pleased with Beam's strong start to 2013," said Matt Shattock, president and chief executive officer of Beam. "Even as we lapped our most challenging quarterly sales growth comparison of the year, our brands sustained their momentum in the marketplace and continued to outperform. We delivered above-market growth in North America, led by our heartland United States market, and we also continued to benefit from our sustained strength in Bourbon and successful innovations across our portfolio in key markets around the world."We're pleased with Beam's strong start to 2013," said Matt Shattock, president and chief executive officer of Beam. "Even as we lapped our most challenging quarterly sales growth comparison of the year, our brands sustained their momentum in the marketplace and continued to outperform. We delivered above-market growth in North America, led by our heartland United States market, and we also continued to benefit from our sustained strength in Bourbon and successful innovations across our portfolio in key markets around the world.
While sales were in line with our expectations, we delivered better-than-expected leverage at the bottom line, which we anticipate will reverse in the next couple of quarters. Margins benefited from factors we called out last quarter: the timing of raw materials-related costs, favorable product mix, and the carryover benefit of previously implemented price increases. Mix was better than expected due to strong demand for our premium innovations and our high-end whiskies, led by Maker's Mark. The bottom line further benefited from an advertising shift to the second and third quarters." The company continues to expect that brand investment will rise at a rate in line with sales growth for the full year.
Financial Highlights for the First Quarter:
Confidence in 2013 Outlook
"We compete in a dynamic, profitable and growing industry with excellent fundamental trends across our markets," Shattock continued. "As we look ahead, we continue to see our global market growing in the range of 3% for the year. With the success of our investments to further strengthen our premium brand equities, drive growth through innovation and enhance our routes to market, we feel very well positioned to continue outperforming our global market in 2013 and to drive sustainable, profitable long-term growth. At the bottom line, the timing of costs that was a tailwind in Q1 will be a headwind that we expect will result in a moderate EPS growth rate over the next couple of quarters.
"Our first quarter results combined with our inherent strengths reinforce our confidence in our outlook for the full year, and we're reaffirming our target to deliver high-single-digit growth in diluted EPS before charges/gains for 2013."
The company also reaffirmed its target 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.
Key Brand Performance
Comparable net sales growth, year to date (January-March):
Results include ready-to-drink products
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.
This press release contains forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to matters including market growth, our performance and the effects of the timing of expenses. 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 before charges/gains, and free cash flow. 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 measures used in this release, which are not presented in accordance with generally accepted accounting principles ("GAAP"), 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 (when applicable) asset impairment charges, gain/loss on the disposition of assets, restructuring charges, other charges related to restructuring initiatives that cannot be reported as restructuring under GAAP, acquisition and integration related costs, and distribution gains from the wind down of our former Maxxium investment. Charges / gains excluded from GAAP results may 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.
Additional non-GAAP measures included in this release include amounts identified as "comparable," "adjusted" and "constant currency," as well as "adjusted free cash flow" and "earnings before interest, income taxes, depreciation, and amortization of intangible assets (EBITDA) before charges / gains". 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.