Beam (BEAM)
Q4 2012 Earnings Call
February 01, 2013 10:00 am ET
Executives
Matthew John Shattock - Chief Executive Officer, President, Director, Member of Executive Committee and Member of Corporate Responsibility Committee
Robert F. Probst - Chief Financial Officer and Senior Vice President
Analysts
Dara W. Mohsenian - Morgan Stanley, Research Division
William B. Chappell - SunTrust Robinson Humphrey, Inc., Research Division
Bryan D. Spillane - BofA Merrill Lynch, Research Division
Judy E. Hong - Goldman Sachs Group Inc., Research Division
Ian Shackleton - Nomura Securities Co. Ltd., Research Division
Vivien Azer - Citigroup Inc, Research Division
Timothy S. Ramey - D.A. Davidson & Co., Research Division
Ann H. Gurkin - Davenport & Company, LLC, Research Division
John A. Faucher - JP Morgan Chase & Co, Research Division
Kenneth Perkins - Morningstar Inc., Research Division
Anthony Garcia
Presentation
Operator
Good morning. My name is Andrea, and I will be your conference operator today. At this time, I would like to welcome everyone to Beam's Fourth Quarter and Full Year Earnings Conference Call. [Operator Instructions] Thank you. Now I would like to turn the call over to Matt Shattock, President and CEO of Beam. Sir, you may begin your conference.
Matthew John Shattock
Thank you, Andrea. Good morning. Bob Probst and I would like to welcome you to our discussion of Beam's 2012 fourth quarter and full year results. Before we begin, please note that our presentation includes forward-looking statements. These statements are subject to risks and uncertainties, including those listed in the cautionary language at the end of our news release and in our SEC filings, and our actual results could differ materially from those currently anticipated. This presentation also includes certain non-GAAP measures that are reconciled to the most closely comparable GAAP measures in our news release or in the supplemental information linked to the Webcast and Presentations page on our website.
Now in a few minutes, Bob will cover our results for the quarter and the year in some detail. But first, I'd like to discuss 3 themes to set the context for today's discussion: first, our strong performance in our first full year as Beam; second, the actions we have taken during that period to further strengthen Beam's competitive position in our industry; and third, why we feel good about our prospects in 2013 and beyond.
So I'll begin with a few words about 2012. We're pleased that Beam continued to deliver excellent results in its first full year as a pure-play spirits company. Beam is growing on growth by delivering against our long-term algorithm that we outlined a year ago, growing sales faster than our market, ROI faster than sales and EPS faster still.
In 2012, we grew comparable sales 6%, which is roughly twice the rate of our global market. We grew operating income before charges and gains faster than sales at 10%. And we grew EPS before charges and gains even faster, up to 13%, exceeding both our earnings target for 2012 and our long-term goal.
We generated free cash flow of $337 million during a year in which we invested significantly in our assets to support the future growth of our aged spirits and invested in new assets in Kentucky. And we closed the year with another strong sales quarter and full year top line growth across our 3 segments. Our market outperformance was driven by double-digit growth for our global Power Brands and Rising Stars, and we improved margins with premium innovations and higher pricing.
Beam is delivering these results by continuing to execute consistently against our proven growth strategy, creating famous brands with a focused portfolio of strong consumer equities, building winning markets with an excellent sales and distribution network across our industry's most profitable and growing markets and fueling our growth through relentless focus on driving effectiveness and efficiency across our business.
Moving to my second theme, it is noteworthy that we achieved these results while making significant investments to strengthen Beam's competitive position and long-term growth in several critical areas. Foremost amongst these is our broad portfolio of premium brands, which we supported for the third consecutive year of double-digit increased investment in brand equity building and innovations. The core of our portfolio strength lies in our heartland Bourbon category. Bourbon is continuing to experience strong global growth, led by the U.S. where it's been the fastest-growing large category for the past 2 years across core markets from Australia to Germany and many developed and emerging markets in between.
Beam has the broadest Bourbon portfolio in the industry. Brands like Jim Beam and Maker's Mark have been our first priorities for investment and delivered excellent global growth as a result. And with this heritage, flavor profile and versatility, we believe America's native spirit has a bright future around the world.
Another aspect of our portfolio strength lies in our leading brands in scotch, cognac and tequila, with Teacher's, Courvoisier and Sauza, the world's #2 premium tequila. These brands give us robust premium growth platforms in the fast-growing emerging markets and have enabled us to penetrate each of our priority emerging markets through the Western spirits category most aligned to local consumer preference.
The other dimension of our portfolio that is of growing importance is our competence in building and growing what we call lifestyle beverages that tap into prevailing consumer trends such as the appeal of low calorie, the reward of familiar and indulgent flavors and the convenience of ready-to-serve and ready-to-drink formats. As a result, we've been able to attract new consumers to our brands through innovations like Canadian Club RTD products, which has emerged as a challenger to beer, and also into new categories like vodka and ready-to-serve through the acquisitions of Pinnacle and Skinnygirl. We're delighted by the performance of these new assets, which both grew strong double digits in 2012. Skinnygirl and Pinnacle have enhanced the breadth of our portfolio and are excellent platforms for continued innovation.
We're particularly pleased that our investments in talent and capabilities are paying off in best-in-class marketing to support our brand portfolio. Advertising Age recently named Beam one of the top 10 U.S. marketers of 2012 across all industries, and Jim Beam shared top honors for setting the spirits industry standard in the use of digital media in the Digital IQ Index.
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