U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter ended March 20, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission file number 0-8251
ADOLPH COORS COMPANY
(Exact name of registrant as specified in its charter)
COLORADO 84-0178360
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Golden, Colorado 80401
(Address of principal executive offices) (Zip Code)
303-279-6565
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Class B Common Stock (non-voting), no par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant: All voting shares are held by Adolph Coors, Jr. Trust.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of April 25, 1994:
Class A Common Stock - 1,260,000 shares
Class B Common Stock - 37,019,044 shares
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Twelve weeks ended
----------------------
March 20, March 21,
1994 1993
--------- ---------
(In thousands, except per share data)
SALES $ 390,247 $ 365,376
Less - beer excise taxes ( 71,794) ( 69,393)
--------- ---------
NET SALES 318,453 295,983
--------- ---------
Costs and expenses:
Cost of goods sold 211,252 198,905
Marketing, general and administrative 92,926 82,747
Research and project development 2,197 2,602
--------- ---------
Total operating expenses 306,375 284,254
--------- ---------
OPERATING INCOME 12,078 11,729
Other income (expense) - net 156 ( 3,374)
--------- ---------
Income before income taxes 12,234 8,355
Income tax expense 5,300 3,700
--------- ---------
NET INCOME $ 6,934 $ 4,655
========= =========
NET INCOME PER SHARE OF COMMON STOCK $ 0.18 $ 0.12
========= =========
Weighted average number of outstanding
shares of common stock 38,215 37,749
========= =========
Cash dividends declared and paid per share
of common stock $ 0.125 $ 0.125
========= =========
/TABLE
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 20, December 26,
1994 1993
---------- ------------
(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 73,288 $ 82,211
Accounts and notes receivable 81,850 75,967
Inventories:
Finished 60,362 56,878
In process 30,490 24,402
Raw materials 46,952 56,370
Packaging materials 14,770 9,581
---------- ----------
Total inventories 152,574 147,231
Other assets 75,078 78,339
---------- ----------
Total current assets 382,790 383,748
---------- ----------
PROPERTIES, at cost, less accumulated
depreciation, depletion and amortiza-
tion of $1,139,593 in 1994
and $1,118,292 in 1993 876,655 884,102
OTHER ASSETS 82,608 83,094
---------- ----------
TOTAL ASSETS $1,342,053 $1,350,944
========== ==========
/TABLE
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 20, December 26,
1994 1993
----------- ------------
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 50,000 $ 50,000
Accounts payable 81,598 121,376
Federal and state income taxes 10,046 4,157
Accrued expenses and other liabilities 229,341 201,018
---------- ----------
Total current liabilities 370,985 376,551
---------- ----------
LONG-TERM DEBT 175,000 175,000
DEFERRED TAX LIABILITY 51,868 53,430
OTHER LONG-TERM LIABILITIES 109,209 114,036
---------- ----------
Total liabilities 707,062 719,017
---------- ----------
SHAREHOLDERS' EQUITY:
Capital stock:
Preferred stock, non-voting, $1 par
value, 25,000,000 shares authorized
and no shares issued -- --
Class A common stock, voting, $1
par value, authorized and issued
1,260,000 shares 1,260 1,260
Class B common stock, non-voting,
no par value, 100,000,000 authorized
and 46,200,000 shares issued 11,000 11,000
---------- ----------
12,260 12,260
Paid-in capital 55,717 54,928
Retained earnings 586,599 584,444
Other 40 40
---------- ----------
654,616 651,672
Less - treasury stock, at cost,
Class B shares, 9,205,189 in
1994 and 9,260,779 in 1993 19,625 19,745
---------- ----------
Total shareholders' equity 634,991 631,927
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,342,053 $1,350,944
========== ==========
/TABLE
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the twelve weeks ended
-----------------------
March 20, March 21,
1994 1993
--------- ---------
(In thousands)
Cash flows from operating activities:
Net income (loss) $ 6,934 $ 4,655
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation, depletion and
amortization 27,078 27,115
Change in accumulated deferred
income taxes ( 1,562) 330
(Gain) Loss on sale or abandonment
of properties ( 616) 954
Change in current assets and current
liabilities ( 13,432) ( 7,626)
Change in non-current liabilities
and other ( 4,629) 2,601
--------- ---------
Net cash provided by
operating activities 13,773 28,029
--------- ---------
Cash flows from investing activities:
Additions to properties ( 20,727) ( 24,270)
Proceeds from sale of properties 1,719 74
Other 182 29
--------- ---------
Net cash (used in)
investing activities ( 18,826) ( 24,167)
--------- ---------
Cash flows from financing activities:
Exercise of stock options, net of related
notes receivable 909 708
Dividends paid ( 4,779) ( 4,718)
Other -- ( 11)
--------- ---------
Net cash (used in)
financing activities ( 3,870) ( 4,021)
--------- ---------
Cash and cash equivalents:
Net increase (decrease) in cash
and cash equivalents ( 8,923) ( 159)
Balance at beginning of year 82,211 39,669
--------- ---------
Balance at end of quarter $ 73,288 $ 39,510
========= =========
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Sales and Volume:
- -----------------
Adolph Coors Company (ACC) reported net sales of $318.5 million for the first
quarter of 1994 which represents a 7.6% increase from the comparable period
in the prior year. ACC's single direct subsidiary, Coors Brewing Company
(CBC), had malt beverage sales of 3,907,000 barrels in the first quarter of
1994 compared to 3,742,000 barrels sold in the first quarter of 1993, an
increase of 4.4%. The improved sales volume resulted from increased sales of
Coors Light and Killian's Irish Red, and the national expansion of Zima (TM)
Clearmalt(TM). New product introductions for the quarter included the
distribution of Coors Artic Ice (TM) into nine lead markets and the
nationwide introduction of Eisbock, a full-bodied spring seasonal beer.
Gross Profit:
- -------------
Gross profit as a percentage of net sales for the first quarter of 1994
improved to 33.7% from 32.8% for the same period a year earlier. These
improvements were primarily a result of increased volume, operational
efficiencies, shop floor performance initiatives and lower aluminum costs.
Operating Income:
- -----------------
Operating income for the first quarter increased 3.0% to $12.1 million
compared to $11.7 million for the first quarter of 1993. Higher operating
income was the result of sales volume increases offset in part by increased
marketing, general and administrative expenses of 12.3% for the first
quarter. The increase in marketing, general and administrative expense was
primarily because of marketing spending in support of Zima Clearmalt's
national rollout and the introductions of Coors Artic Ice and Eisbock.
Non-Operating Expenses:
- -----------------------
Other (income) expense-net changed significantly to $0.2 million income in
the first quarter of 1994 from $3.4 million expense for the first quarter of
1993. The primary contributor to this change was a one-time, pre-tax gain of
approximately $2.1 million on the sale of a company-owned distributorship.
Additionally, first quarter 1994 royalty income and net interest expense were
improved over a year ago. Net interest expense declined from $3.5 million in
the first quarter of 1993 to $3.0 million in the first quarter of 1994 due to
higher interest income and higher capitalized interest.
Effective Tax Rate:
- -------------------
The consolidated effective tax rate for the first quarter decreased to 43.3%
compared to 44.3% for the same period of 1993. The decrease is primarily due
to higher pre-tax income relative to smaller increases of non-deductible
expenses and losses. Further offsetting the effective tax rate decrease was
the 1993 federal income tax rate increase from 34% to 35% which was not yet
in effect during the first quarter of last year.
Net Income:
- -----------
Consolidated net income for the first quarter was $6.9 million, or $0.18 per
share compared to $4.7 million, or $0.12 per share a year earlier.
Working Capital Changes:
- ------------------------
Consolidated working capital at March 20, 1994 increased $4.6 million from
year-end 1993, primarily because of seasonal increases in both accounts
receivable and inventories and a decrease in accounts payable. These changes
were offset by an increase in federal and state income taxes and accrued
expenses and other liabilities. Accrued expenses were higher due to deferred
advertising increases. Higher taxes payable was due to the timing of tax
payments and improved first quarter pre-tax income.
Cash Provided by Operating Activities:
- --------------------------------------
Net cash provided by consolidated operating activities for the first quarter
of 1994 was $13.8 million, down from $28.0 million for the same period a year
ago. This decrease resulted primarily from the increases in accounts
receivable and inventories, plus a decrease in current liabilities, deferred
taxes and other long-term liabilities.
Cash Used in Investing Activities:
- ----------------------------------
Cash flows used in investing activities for the first quarter of 1994
decreased by $5.3 million from the comparable period last year because of
lower property additions and higher proceeds from sale of properties in 1994.
Cash Used in Financing Activities:
- -----------------------------------
Cash flows used in financing activities were relatively unchanged from the
same period a year ago. The principal activity was dividends paid to
shareholders.
Outlook:
- --------
The Company expects continued pricing pressure and minimal industry growth
for 1994. CBC volume and net sales are expected to increase due to the
growth of Coors Light and Zima's national expansion. Marketing expenditures
are also expected to increase over the same period a year ago due to the Zima
expansion and the introductions of new products including Coors Artic Ice and
Eisbock.
At the end of March, CBC finalized the purchase of a 500,000 barrel brewery
in Zaragoza, Spain from El Aguila S.A. of Madrid, Spain. The purchase will
allow Coors to begin production of beers in Europe, reducing CBC's reliance
on exports for European sales. The total investment by CBC in the Spanish
brewery during the next five years is expected to exceed $50 million,
including purchase price and future spending on operations and product
marketing. Coors Extra Gold will be brewed in this facility for distribution
initially in Spain and later for other European countries.
In April, UniBev, Ltd., a division of CBC that focuses on the import and
specialty beer market, announced that it had signed an agreement with New
Zealand-based Lion Nathan Ltd. to import and market Steinlager beer in the
United States, beginning in July. Steinlager is presently imported to the
U.S. by Molson U.S.A. Steinlager is Lion Nathan's flagship brand and leading
export. CBC has brewed and distributed Lion Nathan's Castlemaine XXXX in the
U.S. since September 1993.
These statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Form 10-K for the year ended
December 26, 1993. The accompanying financial statements have not been
examined by independent accountants in accordance with generally accepted
auditing standards, but in the opinion of management of Adolph Coors Company,
such financial statements include all adjustments necessary to summarize
fairly the Company's financial position and results of operations. The
results of operations for the 12 weeks ended March 20, 1994, may not
be indicative of results that may be expected for the year ending
December 25, 1994.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In January 1992, ACC and CBC (as well as two former affiliates that are now
subsidiaries of ACX Technologies, Inc.) were sued by TransRim Enterprises
(USA) Ltd. in Federal District Court for the District of Colorado. TransRim
alleged that the defendants misused confidential information and breached an
implied contract to proceed with a joint venture project to build and operate
a paper board mill. TransRim initially claimed damages totaling $159 million
based on a number of theories, some of which were removed from the case on
defendants' summary judgment motions. TransRim sought damages for unjust
enrichment from alleged savings to CBC in purchases of paper board from other
suppliers. Trial to a jury was held in April 1994 and the jury returned a
verdict in favor of all defendants on all claims.
Item 5. Other Information
On April 28, 1994 the company announced the appointments of Robert W. Ehret
to the position of Vice President of Human Resources, and Carl L. Barnhill to
the position of Vice President of Sales. Both positions will report to W.
Leo Kiely III, Coors Brewing Company President and Chief Operating Officer.
Item 6. Exhibits and Reports on Form 8-K.
(b) Reports on Form 8-K
None.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADOLPH COORS COMPANY
By /s/ Robert J. Diaz
--------------------------------
Robert J. Diaz
Vice President, Controller
Coors Brewing Company
(Principal Financial Officer)
(Principal Accounting Officer)
April 29, 1994