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 June 11, 1995
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 July 19, 1995:
Class A Common Stock - 1,260,000 shares
Class B Common Stock - 37,160,679 shares
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Twelve weeks ended
----------------------
June 11, June 12,
1995 1994
---------- ---------
(In thousands, except per share data)
SALES $ 491,377 $ 527,088
Less - beer excise taxes ( 91,866) ( 94,872)
--------- ---------
NET SALES 399,511 432,216
--------- ---------
Costs and expenses:
Cost of goods sold 248,473 254,637
Marketing, general and administrative 120,450 127,693
Research and project development 3,368 3,313
--------- ---------
Total operating expenses 372,291 385,643
--------- ---------
OPERATING INCOME 27,220 46,573
Other expense - net 1,105 2,567
--------- ---------
Income before income taxes 26,115 44,006
Income tax expense 10,935 20,100
--------- ---------
NET INCOME $ 15,180 $ 23,906
========= =========
NET INCOME PER SHARE OF COMMON STOCK $ 0.40 $ 0.63
========= =========
Weighted average number of outstanding
shares of common stock 38,352 38,276
========= =========
Cash dividends declared per share
of common stock $ 0.125 $ 0.125
========= =========
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Twenty-four weeks ended
----------------------
June 11, June 12,
1995 1994
---------- ---------
(In thousands, except per share data)
SALES $ 894,005 $ 917,335
Less - beer excise taxes ( 167,906) ( 166,666)
--------- ---------
NET SALES 726,099 750,669
--------- ---------
Costs and expenses:
Cost of goods sold 470,606 465,889
Marketing, general and administrative 219,546 220,619
Research and project development 6,690 5,510
--------- ---------
Total operating expenses 696,842 692,018
--------- ---------
OPERATING INCOME 29,257 58,651
Other expense - net 2,985 2,411
--------- ---------
Income before income taxes 26,272 56,240
Income tax expense 11,000 25,400
--------- ---------
NET INCOME $ 15,272 $ 30,840
========= =========
NET INCOME PER SHARE OF COMMON STOCK $ 0.40 $ 0.81
========= =========
Weighted average number of outstanding
shares of common stock 38,340 38,246
========= =========
Cash dividends declared per share
of common stock $ 0.250 $ 0.250
========= =========
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 11, December 25,
1995 1994
---------- -----------
(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 12,263 $ 27,168
Accounts and notes receivable 128,125 106,327
Inventories:
Finished 66,650 67,500
In process 32,468 22,918
Raw materials 16,288 38,108
Packaging materials 18,098 13,078
---------- ----------
Total inventories 133,504 141,604
Other assets 70,600 80,067
---------- ----------
Total current assets 344,492 355,166
---------- ----------
PROPERTIES, at cost, less accumulated
depreciation, depletion and amortiza-
tion of $1,277,800 in 1995
and $1,220,836 in 1994 928,723 922,208
OTHER ASSETS 102,061 94,202
---------- ----------
TOTAL ASSETS $1,375,276 $1,371,576
========== ==========
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 11, December 25,
1995 1994
---------- -----------
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 44,000 $ 44,000
Short-term borrowings 51,600 --
Accounts payable 122,908 164,430
Accrued expenses and other liabilities 154,606 171,784
---------- ----------
Total current liabilities 373,114 380,214
---------- ----------
LONG-TERM DEBT 131,000 131,000
DEFERRED TAX LIABILITY 73,010 71,660
OTHER LONG-TERM LIABILITIES 115,427 114,501
---------- ----------
Total liabilities 692,551 697,375
---------- ----------
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 57,462 56,758
Retained earnings 629,101 623,418
Other 3,256 1,238
---------- ----------
702,079 693,674
Less - treasury stock, at cost,
Class B shares, 9,070,027 in
1995 and 9,133,060 in 1994 19,354 19,473
---------- ----------
Total shareholders' equity 682,725 674,201
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,375,276 $1,371,576
========== ==========
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the twenty-four weeks ended
--------------------------
June 11, June 12,
1995 1994
--------- ---------
(In thousands)
Cash flows from operating activities:
Net income $ 15,272 $ 30,840
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation, depletion and
amortization 56,964 54,647
Change in accumulated deferred
income taxes 1,350 14,887
(Gain) Loss on sale or abandonment
of properties 1,542 ( 462)
Change in current assets and current
liabilities ( 66,622) ( 50,183)
Change in non-current assets and
liabilities ( 6,758) 663
--------- ---------
Net cash provided by
operating activities 1,748 50,392
--------- ---------
Cash flows from investing activities:
Additions to properties ( 62,685) ( 72,257)
Proceeds from sale of properties 514 1,993
Additions to intangible assets -- ( 13,852)
Other ( 2,419) ( 513)
--------- ---------
Net cash (used in)
investing activities ( 64,590) ( 84,629)
--------- ---------
Cash flows from financing activities:
Exercise of stock options, net of related
notes receivable 823 1,328
Dividends paid ( 4,791) ( 4,779)
Short-term borrowings 51,600 --
Other ( 147) --
--------- ---------
Net cash (used in) provided by
financing activities 47,485 ( 3,451)
--------- ---------
Cash and cash equivalents:
Net (decrease) in cash
and cash equivalents ( 15,357) ( 37,688)
Effect of exchange rate changes 452 --
Balance at beginning of year 27,168 82,211
--------- ---------
Balance at end of quarter $ 12,263 $ 44,523
========= =========
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 $399.5 million and $726.1
million for the second quarter and first half of 1995, representing 7.6% and
3.3% decreases, respectively, from the comparable periods in the prior year.
ACC's single direct subsidiary, Coors Brewing Company (CBC), had malt
beverage barrel sales of 4,842,000 for the second quarter of 1995 compared to
5,166,000 barrels sold in the second quarter of 1994, a decrease of 6.3%.
Malt beverage sales for the first half of 1995 declined 2.7% to 8,826,000
barrels from 9,073,000 for the same period of 1994. This decrease in sales
volume for the first half of 1995 resulted primarily from a decrease in sales
of Zima Clearmalt offset in part by a slight increase in sales of premium-
and-above beer products.
Gross Profit:
- ------------
Gross profit as a percentage of net sales for the second quarter of 1995
declined to 37.8% from 41.1% for the same period a year earlier. Gross
profit as a percentage of net sales for the first half of 1995 declined to
35.2% from 37.9% for the first half of 1994. These declines, for the quarter
and the year, resulted primarily from increased aluminum and other packaging
costs and lower sales volume of Zima Clearmalt, which has a higher gross
profit percentage than other brands.
Operating Income:
- ----------------
Operating income for the second quarter of 1995 decreased 41.6% to $27.2
million compared to $46.6 million for the second quarter of 1994. Operating
income for the first half of 1995 decreased 50.1% to $29.3 million from $58.7
million in 1994. Lower operating income was the result of a decline in gross
profit of $26.5 million and $29.3 million for the second quarter and first
half of 1995, respectively, and slightly higher research and development
costs, offset in part by lower marketing, general and administrative expenses
of 5.7% and .5% for the second quarter and first half of 1995, respectively.
The decrease in marketing, general and administrative expense was primarily
due to a decrease in marketing expense for 1995, when compared to 1994's
costs which included Zima's national expansion. The decrease in marketing
expense was partially offset by a 4.7% increase in general and administrative
expense from 1994. General and administrative expense for the first half of
1994 benefited from planned but unfilled positions resulting from the 1993
reduction in the Company's white-collar work force. Subsequent to the second
quarter of 1994 the majority of these positions were filled.
Non-Operating Expenses:
- ----------------------
Other expense - net was $1.1 million for the second quarter of 1995 compared
to $2.6 million for the same period a year earlier. The decline was
primarily due to lower net-interest expense and a gain on the sale of
properties. This decline in net interest expense resulted from the payment
of $50.0 million of principal on ACC's medium-term notes in the third quarter
of 1994.
Other expense - net was $3.0 million for the first half of 1995 compared to
$2.4 million for the same period a year earlier. The net increase of $.6
million is primarily the result of the benefit of a one-time pre-tax gain of
approximately $2.1 million on the sale of a company-owned distributorship in
1994 offset by lower net interest expense resulting from the scheduled 1994
payment of principal on ACC's medium-term notes.
Effective Tax Rate:
- ------------------
The consolidated effective tax rate for the second quarter and first half of
1995 decreased to 41.9% compared to 45.7% and 45.2%, respectively, for the
same periods of 1994. The 1994 effective tax rate included a valuation
allowance for a deferred tax asset, whereas the 1995 effective tax rate does
not include such an allowance.
Net Income:
- ----------
Consolidated net income for the second quarter and first half of 1995 was
$15.2 million, or $0.40 per share and $15.3 million, or $0.40 per share.
This compares to $23.9 million, or $0.63 per share and $30.8 million, or
$0.81 per share for the same periods a year earlier.
Working Capital Changes:
- -----------------------
Total current liabilities exceeded total current assets by $28.6 million at
June 11, 1995. While there has not been a significant change in working
capital position since year end 1994, ACC has incurred short-term borrowings
of $51.6 million under a line of credit. The $51.6 million of short-term
borrowings and a $14.9 million decline in cash and equivalents relate to the
decrease in accounts payable from the end of 1994. Other working capital
component changes since year end 1994 include seasonal increases in accounts
receivable, in process inventories and packaging material inventories offset
by declines in other current assets and raw materials. The decline in other
current assets relates primarily to a decline in prepaid income and VAT
taxes. The decrease in raw materials relates to seasonal usage of barley.
Cash Flows from Operating Activities:
- ------------------------------------
Net cash provided by consolidated operating activities for the first half of
1995 was $1.8 million, down from $50.4 million for the same period a year
ago. This decrease resulted primarily from changes relative to 1994 in net
income, accumulated deferred income taxes, accounts receivable and accounts
payable balances.
Deferred income taxes increased by $14.9 million in 1994 compared to a $1.4
million increase in 1995. The 1994 increase in deferred taxes related to the
reversal of several temporary differences which were not deductible in 1993.
Accounts receivable and notes receivable increased by $41.1 million in 1994
compared to a $21.8 million increase in 1995. The 1994 increase in accounts
and notes receivable relates to a substantial build in inventories at CBC's
distributors from the end of 1993.
Accounts payable decreased by $10.7 million in 1994 compared to a decrease of
$41.5 million in 1995. Higher accounts payable at year end 1994 were due
primarily to amounts owed by CBC to the can and end joint venture between CBC
and American National Can.
Cash Flows from Investing Activities:
- ------------------------------------
Cash flows used in investing activities for the first half of 1995 decreased
$20.0 million from the comparable period last year. Higher property and
intangible asset additions in 1994 were the result of purchases of a brewery
in Spain and a distributorship in California.
Cash Flows from Financing Activities:
- ------------------------------------
Cash flows provided by financing activities reflects a substantial increase
in short-term borrowings under ACC's line of credit. The other principal
activity was dividends paid to shareholders.
On July 14, 1995, ACC completed a $100 million private placement of debt with
$80.0 million having a 7-year maturity and $20.0 million having a 10-year
maturity. Interest will be paid on a semi-annual basis at rates between
6.76% and 6.95%. The proceeds will be used to repay $44.0 million of
publicly-held medium-term notes and to fund seasonal working capital needs.
Outlook:
- -------
In late March 1995, CBC and Anchor Glass Container Corporation entered into
a long-term partnership to produce glass bottles at the Coors glass
manufacturing facility. The partnership, Rocky Mountain Bottle
Company, will modernize the plant and expand its capacity by one-third.
The necessary licenses and environmental permits were obtained in late June
1995. In addition to the Rocky Mountain Bottle Company partnership, the
companies entered into another agreement that will make Anchor Glass a long-
term, preferred supplier for CBC.
In July, 1995, CBC announced an agreement in principal with Trigen/Nations to
sell its power plant equipment and support facilities for approximately $22.0
million. The agreement in principle also provides for a significant
investment by Trigen/Nations to upgrade the facilities. In return, Coors
will enter into a long-term arrangement with Trigen/Nations to purchase the
electricity and steam needed to operate the brewery's Golden facilities,
including the can, end and glass manufacturing operations.
As previously disclosed, the Company expects a continuation of a significant
increase in cost of goods sold (COGS) in 1995 over 1994 primarily due to
increased costs of aluminum and other packaging materials.
The Company expects that volume gains, modest price increases, productivity
gains arising from restructuring efforts and benefits derived from the
Company's joint venture with American National Can Company will offset in
part increases in COGS. These offsets are expected to benefit the third and
fourth quarters.
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 25, 1994. The accompanying financial statements have not been
examined by the Company's 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 present fairly the Company's financial position and results of
operations. The results of operations for the 24 weeks ended June 11, 1995,
may not be indicative of results that may be expected for the year ending
December 31, 1995.
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 dismissed from the case by
the judge granting the defendants' motion for partial summary judgment. A
jury trial was held in April 1994, and the jury returned a verdict in favor
of all defendants on all claims. The U.S. Court of Appeals, 10th Judicial
Circuit, upheld the verdict in a decision rendered April 7, 1995. TransRim's
petition to have the 10th Circuit rehear the appeal has been denied.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
The Exhibit filed as part to this report is listed below.
Exhibit No. Description
----------- -----------
10.6 Adolph Coors Company Equity Incentive Plan.
Amended and restated, effective May 31, 1995.
10.12 Adolph Coors Company Equity Compensation Plan for
Non-Employee Directors. Amended and restated,
effective February 16, 1995.
(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/ Timothy V. Wolf
--------------------------------
Timothy V. Wolf
Vice President, Treasurer,
Chief Financial Officer
(Principal Financial Officer)
(Principal Accounting Officer)
July 26, 1995