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| 8-K - FORM 8-K - BEAM INC | d8k.htm |
 VERSION 08/10/11
PRIMED TO ACCELERATE
PROFITABLE GROWTH
September 7, 2011
Exhibit 99.1 |
 2
Disclaimer
Please note that the information included in this presentation contains
statements relating to future results, which are forward-looking statements
as that term is defined in the Private Securities Litigation Reform Act of
1995. We caution you that these forward-looking statements speak only
as of the date hereof and we have no obligation to update them. Actual
results may differ materially from those projected as a result of certain risks
and uncertainties, including the risks described under the headings “Risk
Factors”
and “Forward-looking Statements”
in our securities filings. There
can be no assurance that any of the projected results will be achieved as
anticipated or at all. Beam does not endorse or adopt the analyst
estimates in this presentation. This presentation includes measures not
derived in accordance with generally accepted accounting principles
(“GAAP”), such as adjusted pro forma diluted earnings per share,
adjusted pro forma operating income, adjusted pro forma return on
invested capital before charges/gains, and ratio of net debt/EBITDA.
These measures should not be considered as substitutes for GAAP
measures and may be inconsistent with similar measures presented
by
other companies. |
 3
Presenters
Matt Shattock
President & Chief Executive Officer
Bob Probst
Chief Financial Officer |
 4
Beam Is A Pure-Play Spirits Industry Leader With Compelling
Growth Prospects
1.
Leader With The Scale And Agility To Outperform
2.
Strong Positions In An Attractive Industry
3.
Focused Strategy And Investments
4.
Driving Momentum In The Marketplace
5.
Primed To Deliver Long-Term Shareholder Value |
 5
Beam Is The Future Of Fortune Brands
•
Golf sold and net proceeds of $1.1B used to pay down debt
•
Home & Security, Inc. to be spun off tax-free to shareholders
-
$500MM tax-free dividend to Beam to pay down debt
•
FO to become pure-play spirits company
-
NYSE “BEAM”
on October 4, 2011 with “when-
issued”
trading beginning
on or about September 16, 2011
•
Fortune Brands separating businesses to maximize shareholder value
•
Creating a leading global pure-play spirits company
Pre-Separation
Pre-Separation
Post-Separation
Post-Separation
Shareholders
Golf
Spirits
Home & Security
FO
Shareholders
Beam Inc.
(RemainCo)
Fortune Brands
Home & Security, Inc.
(SpinCo) |
 6
Beam Is The World’s 4th Largest Premium Spirits Company
Successful flavored
vodka launch
#1 Bourbon worldwide
#1 super-premium
Bourbon worldwide
#2 Tequila worldwide
#3 Canadian Whiskey
worldwide
#1 Scotch in India;
#2 in Brazil
#1 Cognac in UK;
#3 in US
#1 Single-Malt Islay
Scotch worldwide
Impact Top 100
premium spirit
#1 small batch Bourbon
Fast growing super-
premium Tequila
Top 5 super-premium
Vodka in US
Fast growing premium
Rum
Fastest growing spirits
brand in US
#1 Liqueur in US
Impact Top 100
premium spirit
#1 Liqueur in UK
on-trade
Fast growing
Tequila in US |
 7
Experienced Leadership Team Drawn From Spirits And CPG
At Beam
At Beam
Prior
Prior
2 years
Led key
businesses for
Cadbury and
Unilever
3 years
Led financial
operations
inside Baxter
and Diageo
9 years
Sales and GM
business builder at
Allied Domecq,
Wine.com and
LVMH
12 years
Developed and
emerging markets
GM formerly with
Coca-Cola Amatil
1 year
International
GM at Yum!
Brands,
PepsiCo and
P&G
SVP, Global Operations
& Supply Chain
SVP, Human Resources
At Beam
At Beam
Prior
Prior
2 years
Brand marketer
and GM at
Unilever and
Seagram
16 years
Supply chain
expert at Allied
Domecq and
Bass Brewers
2 years
International
HR leader at
Campbell’s
and WalMart
SVP, CFO
Bob Probst
President & CEO
Matt Shattock
President, NA
Bill Newlands
President, APAC/SA
Phil Baldock
President, EMEA
Albert Baladi
SVP Global CMO
Kevin George
Ian Gourlay
VP, Investor Relations
19 years
Experienced IR and
value-based
planning at Fortune
Brands, Marakon
and Bain &
Company
Tony Diaz
Mindy Mackenzie
SVP, Corporate
Development
8 years
International
business
developer and
GM at
Seagram and
PWC
Donard Gaynor
SVP, General Counsel
25 years
Experienced
General
Counsel of
Beam, formerly
with Fortune
Brands
Kent Rose
SVP, Communications
& Public Affairs
13 years
Communications/
public affairs
leader at Fortune
Brands and
former U.S.
Senate
Leadership aide
Clarkson Hine |
 8
A Series Of Strategic Investments Has Transformed Beam From
A Solid Performer To An Outperforming Industry Leader
Portfolio
Transformation
Enhanced
Routes To Market
Focused
Brand Investment
•
Transformational ~$5B
Allied Domecq
acquisition
•
International from
~25% to ~50%
•
11 of top 14 brands
added in past six years
•
Sold lower return wine
business for ~$1B
•
Direct control from 8% to
75+% of worldwide sales
•
~$60M investment
•
Strategically aligned
distributors; intimacy
with customers
•
~$50M incremental brand
investment over past two
years
•
Impactful communication
building brand equity
•
Record setting innovation
2005-2007
2008-2009
2010-2011 |
     9
Our Unique Combination Of Scale With Agility Is A
Competitive Advantage
Scale
from
leading portfolio
of brands and
market positions
•
Robust portfolio in
key categories
•
10 of the world’s
top 100 premium
brands
•
Strength around
the world
Agility
from high
performance
organization that’s
simple, smart, and
fast
•
Closer to customers
and consumers
•
Empowered teams
and entrepreneurial
culture
•
CPG brand builders,
innovators and
thought leaders
These advantages, combined with our strategy,
will position us to outperform our industry
Scale
Scale
Agility
Source: IMPACT |
     10
One Of The Most Profitable Spirits Companies Built To Create
Shareholder Value
Strong sales
growth and
momentum
Strong sales
growth and
momentum
Competitive
EBITDA
margins
Competitive
EBITDA
margins
High cash
conversion
rate
High cash
conversion
rate
+
+
Sustainable
profitable growth
and strong
shareholder
value creation
Sustainable
profitable growth
and strong
shareholder
value creation
= |
 11
Beam Is A Pure-Play Spirits Industry Leader With Compelling
Growth Prospects
1.
Leader With The Scale And Agility To Outperform
2.
Strong Positions In An Attractive Industry
3.
Focused Strategy And Investments
4.
Driving Momentum In The Marketplace
5.
Primed To Deliver Long-Term Shareholder Value |
 12
Spirits Is One Of The Most Attractive Global Consumer
Categories
Global
Value
–
Western-Style
Spirits
($B)
1
Large and Growing Market
Favorable Dynamics:
Beam Has #4 Global Position
2010
Global
Volume
–
Western-Style
Spirits
(M
9-L
Cases)
1
Growing Middle Class
in Emerging Markets
Consumers Responsive
to Innovation
Trend Towards
Premiumization
High Brand Loyalty
Stable Cash Flows &
Recession Resilience
San
Miguel
Brown-
Forman
UB
Group
Beam
Bacardi
Pernod
Ricard
Diageo
La
Martin-
iquaise
The
Edrington
Group
William
Grants
Heaven
Hill
Sazerac
100M
80
60
40
20
0
Cuervo
Campari
Tand-
uay
Top 15 companies = ~66% share of
Western-style spirits market
$100B
80
60
40
20
0
2015E
2014E
2013E
2011E
2010
2009
2008
2012E
2005
2006
2007
Consistent
low-to-mid
single digit
growth
(1)
Western-style spirits exclude local distilled spirits, economy brandy, and
economy vodka in Eastern Europe Source: Euromonitor, IWSR, internal
analysis |
 13
Beam Has A Balanced Global Business Focused On The
Industry’s Current And Future Profit Pools
•
#2 portfolio in US –
world’s most profitable spirits market
•
#2 portfolio and #1 brand in Australia –
second largest Bourbon market
•
#2 Tequila in North America
•
#1 Cognac in UK with opportunity in emerging markets
•
#1 Scotch in India and #2 in Brazil
•
Emerging markets drive ~15% of sales and increasing
2010-2015
Projected
Global
Value
Growth
–
Western-Style
Spirits
($B)
1
Beam Top 11 Market
(1)
Western-style spirits exclude local distilled spirits, economy brandy, and
economy vodka in Eastern Europe Source: Euromonitor, IWSR, internal
analysis 1
0
GER
CAN
MEX
AUS
BRA
FRA
VEN
RUS
UK
IND
CHI
USA
2
$4B
3 |
 14
The #2
Spirits Supplier
in the US
Beam Enjoys An Advantaged Position In The US,
The Single Largest Profit Pool
2010
Global
Value
–
Western-Style
Spirits
($B)
1
US Spirits Category Revenue Share of Total Alcohol Category
US Spirits Volume Rank (9-L Cases)
1. Diageo
4. Bacardi
2.
5. Pernod Ricard
3. Sazerac
6. Brown-Forman
Spirits Taking Share in
US Alcohol Beverage
Market
US is Larger Than
Next Five Markets
Combined
(1)
Western-style spirits exclude local distilled spirits, economy brandy, and
economy vodka in Eastern Europe Source: Euromonitor, DISCUS, IWSR
GER
FRA
UK
USA
15
10
5
0
MEX
RUS
JAP
CHI
AUS
CAN
VEN
SPA
$20B
28
29%
26
32%
33%
30
32
34%
2010
2005
2000 |
 15
Beam Is Now The Fastest Growing Major Spirits Company In
The US
Key Growth Drivers
(1)
Rolling 13 week average Food, Drug, and Liquor Plus. Includes Skinnygirl sales
since launch in 1H 2010
Source: Nielsen
Brand
Investment
Successful
Innovation
Customer /
Distributor
Alignment
Revenue
Management
Bolt-on
Acquisition
Growing Value Market Share
1 |
 16
Beam Is A Pure-Play Spirits Industry Leader With Compelling
Growth Prospects
1.
Leader With The Scale And Agility To Outperform
2.
Strong Positions In An Attractive Industry
3.
Focused Strategy And Investments
4.
Driving Momentum In The Marketplace
5.
Primed To Deliver Long-Term Shareholder Value |
 17
We Are Deploying A Focused Strategy To Outperform
Our Markets
FUELING
OUR
GROWTH
CREATING
FAMOUS
BRANDS
BUILDING
WINNING
MARKETS
OUR VISION:
Crafting The Spirits That Stir The World |
 18
Creating Famous Brands To Drive
Shareholder Value
Focusing on Core
Equities
Accelerating Growth
Through Innovation
Enhancing Portfolio with
Acquisitions
Creating
Famous
Brands
Building
Winning
Markets
Fueling
Our
Growth |
 19
Focusing Investment On Our Most Powerful
And Fastest Growing Brands
Power Brands
Power Brands
Rising Stars
Rising Stars
Local Jewels
Local Jewels
Value Creators
Value Creators
(1)
% of sales based on net sales excluding excise tax
Creating
Famous
Brands
Building
Winning
Markets
Fueling
Our
Growth |
 20
Increasing Consumer Advertising And
Investing Against Our Strategic Priorities
Creating
Famous
Brands
Building
Winning
Markets
Fueling
Our
Growth
100%
50
40
30
20
10
0
Digital Media
100%+
Power Brands/
Rising Stars
40%+
Consumer Advertising
50%+
Total BI
30%+
Percent Increase in Brand Investment 2009 to 2011 |
     21
Industry-Leading Breadth In Bourbon And Tequila Captures
All Consumer Needs, Occasions, And Price Points
Bourbon
Bourbon
Tequila
Tequila
Spirits
$$$$
$
RTD/RTS
Creating
Famous
Brands
Building
Winning
Markets
Fueling
Our
Growth |
 22
Accelerating Innovations To Turbo-Charge
Our Sales And Profit Growth
2009
2010
2011
Creating
Famous
Brands
Building
Winning
Markets
Fueling
Our
Growth
•
Innovation: “Borrow and Build”
strategic role
•
Speed and technology a competitive advantage
Record year of innovation in 2010 –
one quarter of our growth
Continuing momentum in 2011 |
 23
High-Return Acquisitions Enhance
Beam’s Portfolio
•
Bolt-on acquisitions have enhanced shareholder value
-
Disciplined investment in fast growing categories and segments
-
Leverage from brand building, route to market, and supply chain
2008
2009
2010
2011
Creating
Famous
Brands
Building
Winning
Markets
Fueling
Our
Growth |
 24
Building
Winning
Markets:
Three
Regions
Positioned To Deliver Sustained Profitable Growth
North America
North America
Asia Pacific / South America
Asia Pacific / South America
Europe / Middle East / Africa
Europe / Middle East / Africa
Creating
Famous
Brands
Building
Winning
Markets
Fueling
Our
Growth
(1)
Percent of sales based on net sales excluding excise tax
|
    25
Our Winning Markets Strategy Is Supported
By Three Core Capabilities
Local Consumer
Activation
Local Consumer
Activation
•
Market-specific brand
activation
•
Consumer insight/media
planning
Strategic Distribution
Partnerships
Strategic Distribution
Partnerships
•
Performance-based
contracts
•
Amplify our scale
Enhanced Customer
Relationships
Enhanced Customer
Relationships
•
Closer to customers and
consumers
•
Account and category
management capability
Creating
Famous
Brands
Building
Winning
Markets
Fueling
Our
Growth |
 26
Fueling
Our
Growth
Through
Disciplined
Cost Management
Supply Chain
Supply Chain
Sales & Marketing
Sales & Marketing
Corporate Office
Corporate Office
Creating
Famous
Brands
Building
Winning
Markets
Fueling
Our
Growth
(1)
% of sales based on net sales excluding excise tax
(2)
Includes pro forma public company costs of ~$35MM |
    27
Three Levers That Help Sustain High Margins
And Drive Brand Investment
Manufacturing
Optimization
Manufacturing
Optimization
Design To Value
Design To Value
Organization
Effectiveness
Organization
Effectiveness
Bottling Consolidation
•
Closing Cincinnati plant;
insourcing volume
•
Reducing overhead,
improving logistics, and
leveraging scale
Product Changes
•
Liquid and packaging
specifications
•
Reduced direct costs/
working capital without
sacrificing quality
Regional Realignment
•
Five regions down to
three; corporate
functions streamlined
•
10% workforce reduction
since 2009
Creating
Famous
Brands
Building
Winning
Markets
Fueling
Our
Growth |
 28
Beam Is A Pure-Play Spirits Industry Leader With Compelling
Growth Prospects
1.
Leader With The Scale And Agility To Outperform
2.
Strong Positions In An Attractive Industry
3.
Focused Strategy And Investments
4.
Driving Momentum In The Marketplace
5.
Primed To Deliver Long-Term Shareholder Value |
  29
Expanding Power Brands In Core Markets
•
Grow loyalty
•
Expand usage
•
Leverage innovation
Result:
•
Expect to surpass 1MM US
cases in 2011
•
Sustained double-digit growth
•
Impact
Hot Brand
Maker’s Mark -
US
Maker’s Mark -
US
Source: IMPACT, internal analysis |
  30
Expanding Power Brands In Core Markets
Jim Beam -
Germany
Jim Beam -
Germany
•
Communicate quality
•
Access consumer passions
•
Drive trial
Result:
•
#1 whiskey in Germany
•
Double-digit sales growth YTD
•
~350,000 consumers took
“Taste Challenge”; 70%+
preference for Jim Beam
Source: Nielsen, internal analysis |
  31
•
Win in premium Tequila
•
Drive awareness
•
Engage consumers
Result:
•
Double-digit increase in shipments
•
9 point increase in awareness
among target
•
24% sales growth in Plata Tequila
•
Double-digit growth in velocity
Turning Rising Stars Into Power Brands
Hornitos -
US
Hornitos -
US
Source: Nielsen, Internal analysis |
  32
Driving Growth Through Innovation
Canadian Club RTD -
Australia
Canadian Club RTD -
Australia
•
Brand renovation
•
Recruitment
•
New usage
Result:
•
Fastest growing RTD in Australia
•
CC RTD up +80% YTD vs. LY
•
CC brand on track to becoming
1M RTD case brand in 2012
Source: Aztec, internal analysis |
  33
Seeding Power Brands In Emerging Markets
Teacher’s -
India
Teacher’s -
India
•
Enhance premium image
•
Recruitment
•
Improve mix
Result:
•
Sales up 32% in 2010
•
In 2010, surpassed Johnnie
Walker as the #1 Scotch in India
•
35% share of Scotch category in
India; 45% share in Delhi
Source: Nielsen, Internal analysis |
  34
Skinnygirl
Skinnygirl
Leveraging Bolt-On Acquisitions
•
Increase distribution
•
Grow penetration
•
Expand offering
Result:
•
Distribution up ~80 points
since the acquisition¹
•
Fastest growing spirits brand in
the US
•
#1 brand in dollar sales gains in
last 13 weeks
(1)
Based on %ACV distribution where legal for full proof spirits
Source: Nielsen, internal analysis |
 35
Beam Is A Pure-Play Spirits Industry Leader With Compelling
Growth Prospects
1.
Leader With The Scale And Agility To Outperform
2.
Strong Positions In An Attractive Industry
3.
Focused Strategy And Investments
4.
Driving Momentum In The Marketplace
5.
Primed To Deliver Long-Term Shareholder Value |
 36
Our Strategic Investments Position Us To Create Sustained
Shareholder Value
2010 Base
1
Long-Term Goal
$2.7B
Outperform our
low-to-mid single-digit market
$552MM
Grow faster than sales
$1.92
High-single-digit rate
2
>100%
90%+
7% / 24%
Double-digit / High-twenties
Sales
Operating Income
Diluted EPS
Earnings-to-Free-Cash-Flow
Conversion Rate
3
ROIC /
ROIC ex. Intangibles
(1)
Adjusted pro forma –
see appendix for GAAP reconciliations
(2)
Achievable without benefit of acquisitions
(3)
Defined as the quantity cash flow from operations less net capital expenditures
divided by net income |
 37
Our Long-Term Profit Algorithm Is Driven By Sustainable,
Profitable, Top-Line Growth
Targeting broad, sustainable, top-line growth driven by our strategic
priorities
•
~50% of growth from Power Brands and Rising Stars in Core Markets
•
~25% of growth from expanding Power Brands in Emerging Markets
•
~25% of growth from innovation
Sharply focused on operating income growth ahead of sales growth
•
Aggressive cost reduction to offset cost headwinds
•
Sustain strong brand investment levels as mid-teens % of sales
•
Leverage fixed costs
Focused on outperforming |
    38
Long-Term Performance Will Be Underpinned By A Strong
Balance Sheet And Attractive Cash Flows
Attractive Cash
Generation
Attractive Cash
Generation
Strong and
Flexible
Balance Sheet
Strong and
Flexible
Balance Sheet
•
Strong capital structure at outset
•
Investment-grade credit rating target
•
Adjusted
pro
forma
net
debt
/
EBITDA
1
of
~2.5x
•
$750mm revolver capacity
•
EBITDA at 30%+ of net sales excluding excise tax
•
Capital expenditures (including cooperage) target of 5% of net
sales excluding excise tax
•
90%+ earnings conversion to free cash flow
Disciplined,
Return-Driven
Use of Cash
Disciplined,
Return-Driven
Use of Cash
•
First priority to fund highest return internal growth
•
Evaluate high-return acquisitions versus share repurchase
•
Attractive $0.76 dividend competitive with beverage peers
(1)
Targeted year-end 2011 ratio on trailing basis; see appendix for
reconciliation. |
 39
Beam Is Positioned To Drive Strong, Profitable Long-Term Growth
Attractive
Attractive
Growth
Growth
Industry
Industry
#4 Global
#4 Global
Player
Player
Driving Growth
Driving Growth
Through
Through
Investment &
Investment &
Innovation
Innovation
Strategic
Strategic
Distribution
Distribution
Partnerships
Partnerships
Talented &
Talented &
Empowered
Empowered
Organization
Organization
10 of Top 100
10 of Top 100
Global Premium
Global Premium
Brands
Brands
Category &
Category &
Geographic
Geographic
Portfolio Strength
Portfolio Strength
Strong Growth,
Strong Growth,
Cash Flows,
Cash Flows,
& Financial
& Financial
Flexibility
Flexibility
Scale
with
Agility
Driving
Shareholder Value
Creation |
  40
Primed To Accelerate Profitable Growth
Portfolio
Transformation
Enhanced
Routes To Market
2005-2007
2008-2009
Focused
Brand Investment
2010-2011
Accelerate
Profitable Growth
•
Sustain our marketplace momentum
•
Grow profit faster than sales
•
Continue our strong stewardship of capital
2012 |
 VERSION 08/10/11
September 7, 2011
PRIMED TO ACCELERATE
PROFITABLE GROWTH |
 42
Appendix
•
Page 43 –
Beam Fact sheet
•
Page 44 -
Note on Use of Non-GAAP Financial Information
•
Page 45 -
Notes to Adjusted Pro Forma Financial Information
•
Page 46 -
Reconciliation of Adjusted Pro Forma Operating Income
•
Page 47 -
Reconciliation of Adjusted Pro Forma Diluted EPS
•
Page 48 -
Reconciliation of Adjusted Pro Forma ROIC
•
Page 49 -
Reconciliation of Adjusted Pro Forma Net Debt / EBITDA
•
Page 50 -
Schedule of Supplemental Release of Additional Beam Inc.
Adjusted Pro Forma Financial Information |
 Facts
about Beam Crafting the Spirits that Stir the World
Net
Sales
(1)
(2010,
includes
$571M
excise
taxes)
$2,666 million
Operating
Income
(1)
(2010,
$112M
depreciation
&
amortization)
$552 million
Earnings
Per
Share
(1)
(2010,
diluted)
$1.92
Earnings
Conversion
to
Free
Cash
Flow
(1)
(2010,
before
dividends)
>100%
Dividend
(2)
(6/30/11,
154.5M
actual
basic
shares
&
157.5M
diluted)
$0.76
Net
Debt
(6/30/11,
net
of
$287M
cash)
$3.6B
before
$1.7B
debt
reduction
(3)
Number of Associates
3,100 worldwide
Headquarters
Deerfield, Illinois
President & CEO / Chairman
Matt Shattock / David Mackay
Stock
(effective
Oct.
4,
2011
with
“when-issued”
trading
~Sept.
16,
2011)
Traded on the New York
Stock Exchange (ticker
symbol BEAM); S&P 500 Index and
the MSCI World Index
Who We Are:
Beam is a leader in the dynamic spirits industry…with a unique combination of
scale and agility…and a focused strategy…that position us well to
outperform and consistently deliver strong, profitable, long-term
growth. •
#4 premium spirits company in the world and #2 in the U.S.
•
3 regions:
o
North
America
(~55%
of
sales
(4)
)
•
EMEA
(~25%)
•
Asia
Pacific/Latin
America
(~20%)
•
Global volumes: 33 million 9-liter cases
•
Portfolio includes 10
of the world’s top 100 premium spirits brands
o
Power
Brands:
Jim
Beam
bourbon,
Maker’s
Mark
bourbon,
Sauza
tequila,
Courvoisier
cognac, Canadian Club whisky,
Teacher’s scotch
o
Rising
Star
brands:
Skinnygirl
cocktails,
Laphroaig
single-malt
scotch,
Knob
Creek
bourbon,
Hornitos tequila, Cruzan rum, EFFEN vodka, Pucker Flavored Vodka, Sourz liqueur
o
Local
Jewels
include:
DeKuyper
cordials
(United
States)
,
Whisky
DYC
(Spain)
,
Larios
gin
(Spain)
How We Compete:
We seek to outperform with a strategy focused on three simple strategic platforms
– •
Create Famous Brands •
Build Winning Markets •
Fuel Our Growth
Our Long-term Goals:
•
Outperform our global spirits market •
Grow operating income faster than sales
•
Grow EPS at high-single-digit rate •
Convert 90%+ earnings to free cash flow •
Achieve 10%+ ROIC
(1) Adjusted pro forma, see GAAP reconciliations.
(2) Indicated annual rate.
(3) Assumed resulting from separation plan.
(4) Excluding excise taxes.
43 |
 44
Note on Use of Non-GAAP Financial Information
This
presentation
includes
measures
not
derived
in
accordance
with
generally
accepted
accounting
principles
(“GAAP”),
such
as
adjusted
pro
forma
diluted
earnings
per
share,
adjusted
pro
forma
operating
income,
adjusted
pro
forma
return
on
invested
capital
before
charges/gains
and
net
debt
/
EBITDA.
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.
Management
believes
that
these
measures
are
useful
to
investors
to
reflect
Beam’s
results
and
financial
position
as
a
stand-alone
public
company.
In
addition,
these
measures
provide
investors
with
helpful
supplemental
information
regarding
the
underlying
performance
of
Beam.
Reconciliation
of
these
measures
to
the
most
closely
comparable
GAAP
measures,
are
presented
in
the
following slides. |
 45
Notes to Adjusted Pro Forma Financial Information
The
adjusted
pro
forma
information,
which
was
derived
from
Fortune
Brands,
Inc.
consolidated
financial
statements,
is
not
intended
to
represent
what
our
operating
income
and
Diluted
EPS
would
have
been
had
the
separation
transactions
occurred
on
the
dates
set
forth
below.
The
adjusted
pro
forma
information
should
not
be
considered
indicative
of
our
future
results
of
operations
as
an
independent
spirits
company.
Adjusted
pro
forma
is
defined
as
continuing
operations
results
before
charges/gains
adjusted
to
assume
that
Beam
Inc.
was
an
independent
business
as
of
the
beginning
of
2010,
including
the
impact
of
public
company
corporate
expense,
the
business’s
underlying
tax
rate,
and
the
benefit
of
the
debt
reduction
associated
with
the
separation
plan.
It
is
also
adjusted
for
the
one-time
startup
benefit
of
the
new
Australia
spirits
distribution
agreement.
More
specifically,
the
adjusted
pro
forma
information
gives
pro
forma
effect
to
the
following:
•
The
sale
of
the
Company’s
Golf
segment
and
spin-off
of
the
Company’s
Home
&
Security
segment
as
if
both
had
occurred
on
January
1,
2010.
•
The
assumed
reduction
of
$1.7
billion
of
debt
on
January
1,
2010
using
$1.6
billion
of
proceeds
related
to
the
Golf
segment
sale
and
Home
&
Security
spin-off.
The
Company
estimates
the
annualized
interest
expense
reduction
resulting
from
this
debt
reduction
will
be
approximately
$60
million
(and
includes
the
impact
of
the
expected
settlement
of
related
interest
rate
swaps).
•
The
elimination
of
charges/gains
associated
with
(i)
restructuring
and
other
charges,
(ii)
gains/losses
on
the
sales
of
brands
and
related
assets,
(iii)
and
income
tax
related
credits
related
to
the
resolution
of
foreign
and
US
income
tax
audit
examinations.
•
The
elimination
of
non-recurring
business
separation
costs
incurred
to
implement
the
proposed
separation
of
the
Company’s
three
businesses.
•
Adjustments
to
the
Company’s
corporate
office
cost
structure
that
are
expected
to
be
made
upon
completion
of
the
separation
transactions
as
if
they
had
occurred
on
January
1,
2010.
•
The
2011
impact
of
the
Company’s
one-time
benefit
under
the
new
distribution
agreement
in
Australia.
•
An
estimated
Beam
Inc.
standalone
effective
income
tax
rate
of
approximately
25
-
26%. |
 46
Reconciliation of Adjusted Pro Forma Operating Income
(Unaudited)
(in millions)
Year ended
December 31,
June 30,
June 30,
March 31,
March 31,
December 31,
September 30,
2010
2011
2010
2011
2010
2010
2010
Adjusted Pro Forma Operating Income
$552.4
$139.1
$138.6
$118.1
$110.2
$166.4
$137.2
Home & Security spin-off
222.0
70.4
82.6
5.7
22.4
44.3
72.7
Spirits restructuring and other charges
(26.0)
(1.2)
(1.0)
(6.2)
(3.7)
(2.2)
(19.1)
Loss on sales of brands and related assets
(16.0)
-
-
-
-
(7.4)
(8.6)
Spirits Australian distribution agreement
-
-
-
23.7
-
-
-
Business separation costs
(2.3)
(10.3)
-
(9.5)
-
(2.3)
-
Standalone corporate office cost
(53.5)
(10.5)
(12.0)
(14.6)
(15.6)
(15.0)
(10.9)
Operating Income (GAAP)
(1)
$676.6
$187.5
$208.2
$117.2
$113.3
$183.8
$171.3
Depreciation and Amortization (GAAP)
$99.0
$26.0
$24.9
$25.9
$23.9
$25.1
$25.1
(1)
Amount
excludes
the
Company's
Golf
segment
which
is
included
in
discontinued
operations.
For the three month period ended |
 47
Reconciliation of Adjusted Pro Forma Diluted EPS
(Unaudited)
Year ended
December 31,
June 30,
June 30,
March 31,
March 31,
December 31,
September 30,
2010
2011
2010
2011
2010
2010
2010
Adjusted Pro forma Diluted EPS from
Continuing Ops
$1.92
$0.50
$0.46
$0.41
$0.36
$0.64
$0.47
Home & Security spin-off
1.03
0.28
0.38
(0.01)
0.07
0.25
0.33
Spirits restructuring and other charges
(0.11)
-
(0.01)
(0.03)
(0.02)
(0.01)
(0.08)
Loss on sales of brands and related assets
(0.12)
-
-
-
-
(0.05)
(0.08)
Spirits Australian distribution agreement
-
-
-
0.09
-
-
-
Business separation costs
(0.01)
(0.05)
-
(0.05)
-
(0.01)
-
Standalone corporate office cost
(0.22)
(0.04)
(0.05)
(0.06)
(0.06)
(0.06)
(0.04)
Debt paydown from separation
transactions
(0.19)
(0.04)
(0.04)
(0.05)
(0.05)
(0.04)
(0.05)
Income tax related credits
0.54
-
0.44
0.01
-
0.04
0.06
Effective income tax rate adjustment
(0.04)
-
(0.01)
0.03
(0.01)
(0.07)
0.04
Diluted EPS from Continuing Ops
(GAAP)
(1)
$2.80
$0.65
$1.17
$0.34
$0.29
$0.69
$0.65
(1)
Amount
excludes
the
Company's
Golf
segment
which
is
included
in
discontinued
operations.
Discontinued
operations
for
Golf
include
an
allocation
of
Fortune
Brands'
interest
expense
of
approximately
$11
million
annually.
For the three month period ended |
 48
Reconciliation of Adjusted Pro Forma Return On Invested Capital (ROIC)
December 31, 2010
(unaudited)
ROIC based on GAAP Net Income attributable to Fortune Brands (1)
7%
Impact of pro forma and other adjustments
-
ROIC based on Adjusted Pro Forma Net Income (1) (2)
7%
Impact of excluding intangibles
17%
ROIC based on Adjusted Pro Forma Net Income (excluding intangibles) (1) (2)
24%
(1) ROIC is Net Income plus after-tax interest expense divided by GAAP Average Invested
Capital, which is defined as net debt (total debt less
cash) plus stockholders' equity, averaged for the periods ended
December 31, 2010 and 2009.
(2) Non-GAAP Adjusted Pro Forma Net Income and Adjusted Pro Forma Average Invested
Capital is Net Income and Average Invested
Capital, respectively, adjusted for the items described in the
Notes to the Pro Forma Financial Information slide
above. |
 49
Reconciliation of Adjusted Pro Forma Net Debt / EBITDA
Year-ended
December 31,
2011
Targeted Adjusted pro forma net debt/EBITDA (1)
~2.5x
Impact of standalone corporate office cost and Australia distribution agreement
~ -
Impact of using EBITDA rather than GAAP operating cash flow
~1.5
Impact of using net debt rather than GAAP total debt (2)
~0.5
Targeted GAAP Beam debt/operating cash flow
~4.5x
(1) See the Notes to Adjusted Pro Forma Financial Information in the table above for
information related to pro forma
adjustments. (2) Net debt equals total debt less cash.
|
 50
Schedule of Supplemental Release of Additional Beam Inc.
Adjusted Pro Forma Financial Information
With
Third
Quarter
Earnings
Release
in
Early
November
2011:
•
Quarterly sales, COGS, brand investment and operating expenses
1Q10 through 3Q11 as well as September YTD 2011 and 2010
•
Balance sheets: Sept. 30, 2011 and prior year as well as Dec. 31, 2010
With
Fourth
Quarter
Earnings
Release
in
Early
February
2012:
•
Full year and quarterly full income statement as well as regional
segment sales and operating income |