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 31, 1996
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 May 13, 1996:
Class A Common Stock - 1,260,000 shares
Class B Common Stock - 36,751,976 shares
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Thirteen weeks ended
-----------------------
March 31, March 26,
1996 1995
--------- ---------
(In thousands, except per share data)
SALES $ 448,428 $ 429,510
Less - federal and state excise taxes ( 79,699) ( 81,117)
--------- ---------
NET SALES 368,729 348,393
--------- ---------
Costs and expenses:
Cost of goods sold 260,777 236,964
Marketing, general and administrative 108,112 107,354
Research and project development 2,363 3,599
--------- ---------
Total operating expenses 371,252 347,917
--------- ---------
OPERATING INCOME (LOSS) ( 2,523) 476
Other income (expense) - net ( 2,584) ( 2,041)
--------- ---------
Income (loss) before income taxes ( 5,107) ( 1,565)
Income tax expense (benefit) ( 2,100) ( 648)
--------- ---------
NET INCOME (LOSS) ($ 3,007) ($ 917)
========= =========
NET INCOME (LOSS) PER SHARE OF COMMON STOCK ($ 0.08) ($ 0.02)
========= =========
Weighted average number of outstanding
shares of common stock 38,012 38,328
========= =========
Cash dividends declared and paid per share
of common stock $ 0.125 $ 0.125
========= =========
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31, December 31,
1996 1995
----------- -----------
(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 16,245 $ 32,386
Accounts and notes receivable 118,088 116,755
Inventories:
Finished 50,633 58,486
In process 28,010 28,787
Raw materials 26,982 37,298
Packaging materials 17,545 14,854
----------- -----------
Total inventories 123,170 139,425
Other assets 68,745 73,954
----------- -----------
Total current assets 326,248 362,520
----------- -----------
PROPERTIES, at cost, less accumulated
depreciation, depletion and amortization
of $1,244,941 in 1996 and $1,219,473
in 1995 876,250 887,409
OTHER ASSETS 138,500 136,928
----------- -----------
TOTAL ASSETS $ 1,340,998 $ 1,386,857
=========== ===========
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31, December 31,
1996 1995
----------- -----------
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 36,000 $ 36,000
Accounts payable 125,878 132,349
Accrued expenses and other liabilities 124,598 155,314
----------- -----------
Total current liabilities 286,476 323,663
----------- -----------
LONG-TERM DEBT 195,000 195,000
DEFERRED TAX LIABILITY 69,190 69,916
OTHER LONG-TERM LIABILITIES 103,307 103,262
----------- -----------
Total liabilities 653,973 691,841
----------- -----------
SHAREHOLDERS' EQUITY:
Capital stock:
Preferred stock, non-voting, $1 par
value (authorized: 25,000,000 shares;
issued: none) -- --
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, $0.24 stated value (authorized:
100,000,000 shares; issued: 36,753,476
in 1996 and 36,736,512 in 1995) 8,751 8,747
----------- -----------
Total capital stock 10,011 10,007
Paid-in capital 34,003 33,719
Retained earnings 639,799 647,530
Foreign currency translation adjustment 3,212 3,760
----------- -----------
Total shareholders' equity 687,025 695,016
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,340,998 $ 1,386,857
=========== ===========
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the thirteen weeks ended
----------------------------
March 31, March 26,
1996 1995
----------- ----------
(In thousands)
Cash flows from operating activities:
Net income (loss) ($ 3,007) ($ 917)
Adjustments to reconcile net income
(loss) to net cash (used) provided by
operating activities:
Depreciation, depletion and
amortization 28,905 30,179
Change in accumulated deferred
income taxes ( 726) 2,089
(Gain) loss on sale or abandonment
of properties 1,528 ( 1,959)
Change in current assets and current
liabilities ( 18,437) ( 55,813)
Change in non-current liabilities
and other ( 1,886) ( 975)
---------- ----------
Net cash (used) provided by
operating activities 6,377 ( 27,396)
---------- ----------
Cash flows from investing activities:
Additions to properties ( 20,459) ( 32,573)
Proceeds from sale of properties 1,523 2,492
Other 1,429 ( 938)
---------- ----------
Net cash used in investing
activities ( 17,507) ( 31,019)
---------- ----------
Cash flows from financing activities:
Issuance of stock under stock plans 287 31
Dividends paid ( 4,751) ( 4,791)
Short-term borrowings -- 44,500
---------- ----------
Net cash (used) provided by
financing activities ( 4,464) 39,740
---------- ----------
Cash and cash equivalents:
Net decrease in cash and cash
equivalents ( 15,594) ( 18,675)
Effect of exchange rate changes on
cash and cash equivalents (547) 87
Balance at beginning of year 32,386 27,168
---------- ----------
Balance at end of quarter $ 16,245 $ 8,580
========== ==========
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Quarterly Calendar Change:
- --------------------------
In 1996, Adolph Coors Company (ACC or the Company) changed its reporting
calendar to a 12-period fiscal year from the 13-period fiscal year that was
used in 1995 and prior years. The 1996 fiscal year is composed of four
13-week quarters. The 1995 fiscal year, prior to restatement, was composed of
a 12-week first quarter, a 12-week second quarter, a 16-week third quarter
and a 13-week fourth quarter. After restatement, the first, second and third
quarters of 1995 were 13-weeks and the fourth quarter of 1995 was 14-weeks.
The principal reason for the change was to create fiscal quarters that are
similar to a calendar year and thus more comparable to the reporting
practices of other consumer-product companies. The 1995 financial information
has been restated to conform with 1996 presentation. The restatement of the
Consolidated Income Statements for the four individual quarters of 1995 is
included as a part of this filing.
Sales and Volume:
- -----------------
The Company reported net sales of $368.7 million for the first quarter of 1996,
a 5.8% increase from the same period a year earlier. ACC's principal
subsidiary, Coors Brewing Company (CBC), reported malt beverage sales of
4,273,000 barrels in the first quarter of 1996, compared to 4,250,000 barrels
sold in the first quarter of 1995, an increase of 0.5%. The 1996 net sales
increase was primarily due to price increases which occurred in the fourth
quarter of 1995 and the first quarter of 1996. Also contributing to
increased net sales were lower price promotions and proportionally higher
export sales, which offer greater net revenue per barrel than domestic volume.
Gross Profit:
- -------------
Gross profit decreased $3.5 million, or 3.1%, for the first quarter of 1996
compared to the first quarter of 1995. Gross profit as a percent of net sales
decreased to 29.3% in the first quarter of 1996 from 32.0% a year earlier. The
decline in gross profit for the first quarter of 1996 was primarily the result
of an increase in cost of goods sold related to one-time costs associated with
depleting and abandoning old packaging inventories and preparation of the
Company's operations for the summer season. The costs of preparing for the peak
summer season included costs of new brands and packages, packaging equipment
overhauls and the abandonment of certain equipment in the Company's container
operations. Additionally, gross profit was lower because of increases in
utilities and costs of paper packaging, primarily corrugated.
Operating Income:
- -----------------
The Company reported an operating loss of $2.5 million in the first quarter of
1996 compared to operating income of $0.5 million a year earlier. The decrease
in operating income was primarily the result of lower gross profit.
Marketing, general and administrative expenses increased $0.8 million over the
first quarter of 1995. While total marketing expenses decreased slightly, the
mix of spending reflected a shift to Original Coors and Coors Light from
Zima, Artic Ice and Artic Ice Light. Selling expenses increased in the first
quarter of 1996 compared to the first quarter of 1995 primarily because of
increased field sales staffing, training and on-premise business development.
Other general and administrative expenses for the first quarter of 1996 were
substantially unchanged compared to a year earlier. Research and project
development expenses decreased $1.2 million or 34% compared to the first
quarter of 1995 due to a planned reduction in project development expense
for facilities and equipment. First quarter 1996, expense for the research
of new products, packages and other materials was unchanged from a year earlier.
Non-Operating Expenses:
- -----------------------
Net interest expense increased $0.9, or 42%, compared to the first quarter of
1995. The increase in interest expense was primarily due to a $56-million net
increase in long-term debt that was the result of a $100-million private
placement of Senior Notes and a $44-million scheduled principal payment on the
Company's medium-term notes. Both transactions occurred in the third quarter of
1995.
Effective Tax Rate:
- -------------------
The consolidated effective tax rate for the first quarter of 1996 was 41.1%
compared to 41.4% for the same period in 1995.
Net Income:
- -----------
The consolidated net loss for the first quarter of 1996 was $3.0 million ($0.08
per share) compared to $0.9 million loss ($0.02 per share) a year earlier.
Working Capital Changes:
- ------------------------
Consolidated working capital at March 31, 1996, increased $0.9 million from
year-end 1995, primarily because of a $30.7 million decrease in accounts payable
and accrued expenses. These decreases were largely offset by a reduction in
inventories that was caused by seasonal decreases in finished goods and raw
materials (primarily barley). The reductions in accounts payable and accrued
expenses reflect seasonal decreases in year-end vendor payables as well as a
contribution to the Company's retirement plan.
Cash (Used) Provided by Operating Activities:
- ---------------------------------------------
Net cash provided by operating activities for the first quarter of 1996 was $6.4
million compared to $27.4 million of net cash used in operating activities in
1995. The principal difference between the two time periods was the greater use
of cash in the first quarter of 1995 to pay accounts payable outstanding at
the end of 1994. Accounts payable were unusually high at the end of 1994 due
to amounts owed to advertising agencies and the American National Can joint
venture.
Cash Used in Investing Activities:
- ----------------------------------
Property additions in the first quarter of 1996 declined $12.1 million to $20.5
million compared to the same period a year ago. The decrease reflects the impact
of lower 1996 annual planned capital expenditures (including contributions to
the container joint ventures for capital improvements) of approximately $100
million compared with annual capital expenditures of $145.8 million in 1995.
The expected decrease for 1996 is the result of the completion of several
plant capacity projects in 1995 and reflects the Company's intention to
manage capital expenditures and cash more aggressively through a variety of
means, including asset sales, lease financing and joint ventures. In addition
to the Company's 1996 planned capital expenditures, strategic investments
will be considered on a case-by-case basis.
Cash (Used) Provided by Financing Activities:
- ---------------------------------------------
The principal financing activity in the first quarter of 1996 was $4.8 million
of dividends paid to shareholders. A similar amount was paid to shareholders in
the first quarter of 1995. The 1995 financing activities also included $44.5
million in short-term borrowings under ACC's line of credit and were primarily
used to reduce accounts payable.
Significant Events:
- -------------------
In connection with its pending legal proceedings with Molson Breweries of Canada
Limited, the Company received a cash payment for past due royalties and interest
totaling $5.7 million (net of $0.6 million of withholding taxes) during the
first quarter of 1996. The obligation of Molson to make this payment will be
a subject of the arbitration proceedings that are scheduled to begin in May
1996. The Company expects final resolution of this issue in 1996.
Outlook:
- --------
The first quarter, with historically lower volume, has not generally been a good
indicator of annual results. The second and third quarters, which include the
peak summer volume months, traditionally generate the greatest share of the
Company's annual operating income. Therefore, as previously disclosed, the
Company believes 1996 annual financial performance can improve over 1995. In
order to improve its financial performance, the Company must increase premium
beverage volume, achieve modest price increases for its products and reduce its
overall cost structure.
Consistent with industry pricing trends, the Company raised prices in most of
its U.S. markets in the fourth quarter of 1995 and the first quarter of 1996.
Although the Company continues to believe that industry prices will more closely
track inflation in 1996, it cannot predict the degree to which pricing will be
eroded by discounting or the impact that higher prices will have on total volume
or consumers trading down to lower-margin products.
Trends early in 1996 indicate that packaging and commodities costs will be
stable. Additionally, benefits are expected from 1995 cost structure
improvements that included outsourcing, certain restructuring efforts,
selected payroll-related changes and additional container efficiencies.
Total annual interest expense in 1996 is expected to be higher than in 1995 as
a result of the $100-million private placement of Senior Notes that closed in
July 1995.
Cautionary Statement:
- ---------------------
The "Outlook" section of this report contains "forward-looking statements"
within the meaning of the federal securities laws. These statements are
subject to risks and uncertainties that could cause actual results to differ
materially from those expressed in or implied by the statements. The most
important factors that could prevent the Company from achieving its goals -
and cause actual results to differ materially from those expressed in
forward-looking statements - include, but are
not limited to the following:
-- the ability of the Company and its distributors to develop and execute
effective marketing and sales strategies for Coors products
-- the potential erosion of recent price increases through discounting
-- a potential shift in consumer preferences toward lower-priced products
in response to price increases
-- changes in the cost of aluminum, paper packaging and other raw
materials
-- an inability to reduce the Company's manufacturing and overhead cost
structure to a more competitive level.
These and other risks and uncertainties affecting the Company are discussed in
greater detail in the Company's 1995 Form 10-K filed with the Securities and
Exchange Commission.
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
31, 1995. 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 13 weeks ended March 31, 1996, may not be indicative of
results that may be expected for the year ending December 29, 1996.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 5. Other Information
ADOLPH COORS COMPANY AND SUBSIDIARIES
SUMMARY OF OPERATIONS RESTATED FOR 1995
Thirteen Thirteen Thirteen Fourteen Fifty-three
Wks Ended Wks Ended Wks Ended Wks Ended Wks Ended
---------- ---------- ----------- --------- -----------
March 26, June 25, Sept 24, Dec 31, Dec 31,
1995 1995 1995 1995 1995
--------- ---------- ----------- ---------- ----------
(In thousands, except per share data)
Barrels of malt
beverages sold 4,250 5,542 5,540 4,980 20,312
========== ========= ========== ========= ==========
SALES $ 429,510 $ 562,550 $ 559,946 $ 508,589 $2,060,595
Less: federal
and state
excise taxes ( 81,117) ( 105,110) ( 104,594) ( 94,395) ( 385,216)
--------- -------- ------- ------- ---------
NET SALES 348,393 457,440 455,352 414,194 1,675,379
Costs and expenses:
Cost of goods sold 236,964 282,964 289,095 282,740 1,091,763
Marketing, general
and admin 107,354 132,591 133,031 130,527 503,503
Research and project
development 3,599 3,653 3,802 4,331 15,385
Special credit -- -- -- ( 15,200) ( 15,200)
--------- --------- ---------- --------- ---------
Total operating
expenses 347,917 419,208 425,928 402,398 1,595,451
-------- -------- --------- -------- ---------
OPERATING INCOME 476 38,232 29,424 11,796 79,928
Other income
(expense)-net ( 2,041) ( 1,340) ( 1,706)( 1,563) ( 6,650)
-------- -------- --------- -------- --------
Income (loss) before
income taxes ( 1,565) 36,892 27,718 10,233 73,278
Income tax expense
(benefit) ( 648) 15,448 11,226 4,074 30,100
--------- --------- --------- -------- --------
NET INCOME (LOSS) ($ 917) $ 21,444 $ 16,492 $ 6,159 $ 43,178
======== ======== ======== ======== =========
NET INCOME (LOSS)
PER SHARE OF
COMMON STOCK ($ 0.02) $ 0.56 $ 0.43 $ 0.16 $ 1.13
======== ======== ======== ======= ========
Weighted average
number of outstand-
ing shares of
common stock 38,328 38,352 38,115 37,925 38,170
======== ======== ========= ======= ========
Cash dividends
declared and paid
per share of
common stock $ 0.125 $ 0.125 $ 0.125 $ 0.125 $ 0.500
======== ========= ======= ======= =======
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/ Timothy V. Wolf
--------------------------------
Timothy V. Wolf
Vice President, Treasurer,
Chief Financial Officer
(Principal Financial Officer)
(Principal Accounting Officer)
May 14, 1996