3.	Acquisitions

Acquisitions in 2012

Pinnacle and Calico Jack brands and assets

On May 31, 2012, we acquired the Pinnacle vodka and Calico Jack rum brands and certain other related assets (collectively referred to as the “Pinnacle assets”) from White Rock Distilleries, Inc. (“White Rock”) and its shareholders for approximately $608 million, consisting of $602 million paid at closing plus a working capital adjustment of $6 million that will be paid in August 2012. In connection with the acquisition, we also paid $3 million at closing to White Rock related to post closing compensation agreements with certain employees that will be recognized as expense over the service period of the employees. We believe that our scale and distribution network will allow us to generate synergies in terms of both cost savings and revenue generation. In addition, this acquisition significantly enhanced Beam’s U.S. presence in the vodka category, which is the largest U.S. spirits category.

The following table summarizes the preliminary values of assets acquired and liabilities assumed as of the acquisition date (in millions):


	Amounts recorded as of the acquisition date
Accounts receivable	$	21.9
Inventory		21.9
Other current assets		0.7
Property, plant and equipment		11.0
Intangible assets (tradenames) (Note 10)		156.0
Other liabilities		(16.6	)

Total identifiable assets		194.9
Goodwill		413.2

	$	608.1

Goodwill is calculated as the excess of consideration paid over the net assets acquired and represents synergies, organic growth and other benefits that are expected to arise from integrating the Pinnacle assets into our operations. Goodwill was recorded to the North America segment and is expected to be deductible for tax purposes. As the acquisition was consummated shortly before the end of the current reporting period, the above amounts are preliminary and subject to change.

The following table summarizes supplemental pro forma consolidated results of operations as if we acquired the Pinnacle assets on January 1, 2011 (in millions, except per share information):


	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
Net sales	$	614.7	$	598.7	$	1,176.3	$	1,144.2
Income from continuing operations		108.0		61.4		185.4		113.1
Earnings per share – diluted – continuing operations	$	0.67	$	0.39	$	1.16	$	0.72

The supplemental pro forma consolidated results of operations were prepared using the acquisition method of accounting and are based on historical Beam and Pinnacle financial information prepared on a GAAP basis, reflecting results of the combined operations for the three and six month periods ended June 30, 2012 and 2011. The historical financial information has been adjusted to give effect to the pro forma adjustments that are: (i) directly attributable to the acquisition and (ii) factually supportable. The pro forma consolidated results are not necessarily indicative of what the Company’s consolidated results of operations actually would have been had it completed the acquisition on January 1, 2011. The pro forma consolidated results do not purport to project future results of operations of the combined company nor do they reflect the expected realization of any cost savings or revenue synergies associated with the acquisition. In addition, the pro forma consolidated results do not adjust for the impact of restructuring and other charges/gains that the Company incurred during the periods presented, other than those charges that are directly attributable to the acquisition. For further information on these restructuring and other charges, see Note 6, Business Separation Costs, and Note 7, Restructuring and Other Charges.

The pro forma consolidated results primarily reflect the following pro forma pre-tax adjustments:

•

An adjustment of amortization expense to reflect pro forma amortization expense based on the amortization of intangible assets acquired. Based on fair values and useful lives assigned (see Note 10), estimated annual amortization expense associated with the Pinnacle assets is approximately $0.4 million.

•

Additional interest expense associated with incremental debt issued by the Company to finance the acquisition of approximately $2.7 million and $4.1 million for the three months ended June 30, 2012 and 2011, respectively, and approximately $6.8 million and $8.2 million for the six months ended June 30, 2012 and 2011, respectively.

•

The elimination of approximately $12 million of costs incurred by the Company in both 2012 periods, which are directly attributable to the acquisition, and which do not have a continuing impact on the combined company’s operating results. Included in these costs are legal and financial advisory fees, and costs related to integrating the combined company (such as distributor contract termination fees and employee-related retention costs). These costs have been included in the pro forma amounts for six month period ended June 30, 2011 presented above.

•

An adjustment to reflect tax expense on the Pinnacle pre-tax earnings and the above pro forma adjustments at an assumed 38% combined federal and state tax rate.

Cooley Distillery plc

In January 2012, we acquired Cooley Distillery plc (“Cooley”), an Irish whiskey producer, for a purchase price of approximately €60 million ($75 million) plus the repayment of outstanding debt. The following table summarizes the values of assets acquired and liabilities assumed as of the acquisition date (in millions):


	Amounts recorded as of the acquisition date
Cash	$	3.5
Accounts receivable		4.9
Inventory		35.0
Property, plant and equipment		14.0
Intangible assets (tradenames)		19.3
Debt		(17.2	)
Other liabilities		(12.9	)

Total identifiable assets		46.6
Goodwill		28.4

	$	75.0

None of the goodwill, which primarily relates to the North America and EMEA segments, is expected to be deductible for tax purposes. Cooley’s results of operations, which were not material to our 2012 results, are included in our condensed consolidated financial statements from the date of acquisition. The repayment of indebtedness in connection with the transaction is included within “(decrease) increase in short-term debt, net” within the accompanying condensed consolidated statement of cash flows.

Acquisition in 2011

In March 2011, we acquired the Skinnygirl ready-to-drink cocktail business. The acquisition included inventory and identifiable intangible assets. We recorded the estimated fair value of contingent consideration, which is based on the achievement of certain sales targets, as of the acquisition date.

During the first quarter of 2012, we paid approximately $2 million of previously accrued contingent consideration based on the attainment of contractual earn-outs during 2011. The estimated fair value of remaining contingent consideration as of June 30, 2012 was approximately $26 million. The estimated fair value is considered a level 3 measurement because the probability-weighted discounted cash flow methodology used to estimate fair value includes the use of significant unobservable inputs, primarily the contractual contingent consideration sales targets and assumed probabilities. There was not a significant change in either the estimated contingent consideration fair value or the fair value inputs during 2012. In future periods, the Company may be required to record additional contingent consideration in an amount not in excess of approximately $2 million. Any change in our estimated liability for contingent consideration will increase or decrease operating income in future periods.