Exhibit 99.1
MOLSON COORS REPORTS 2006 SECOND QUARTER RESULTS
DENVER and MONTREAL, Aug. 1 /PRNewswire-FirstCall/ -- Molson Coors Brewing
Company (NYSE: TAP; TSX) released today its financial results for the second
quarter ending June 25, 2006. Net sales, income from continuing operations
(after-tax) (1), net income and earnings per share increased in the quarter
compared to the same period a year ago.
Second quarter 2006 net sales of $1.58 billion increased 2.3 percent from
the second quarter 2005. Sales volume grew 2.3 percent to 11.4 million barrels,
or 13.4 million hectoliters (hls), compared to the second quarter a year ago.
All $ amounts in U.S. dollars.
Cost of goods sold in the second quarter was $920.0 million, an increase of
2.7 percent over the same quarter last year. Marketing, general and
administrative expense rose 0.4 percent to $448.3 million in the second quarter
2006. During the quarter, Molson Coors continued to implement merger-related
synergies and cost cutting programs across the Company. In total, Molson Coors
achieved approximately $27 million in synergies and other cost savings during
the quarter. These savings were more than offset, however, by commodity and
energy-related cost inflation, which adversely affected each of the Company's
businesses.
Net income during the second quarter 2006 increased to $156.2 million, or
$1.81 per diluted share, from $38.5 million, or $0.45 per diluted share, a year
ago. Excluding special items, income from continuing operations was $173.9
million, or $2.01 per diluted share, up 51.8 percent from the second quarter
2005. (See tables below for reconciliations to nearest U.S. GAAP measures.)
Higher income from continuing operations was driven primarily by Canadian income
tax rate reductions, which significantly lowered the Company's effective tax
rate, along with solid sales growth and progress on cost-reduction initiatives,
both of which drove higher operating income in the quarter. The Company's
effective tax rate during the second quarter 2006 was minus three percent
including special items and positive three percent excluding special items, down
from 27 percent and 33 percent, respectively, a year ago. The tax rate declined
largely because of the benefit of a two-percentage-point reduction in the
general corporate income tax rate in Canada, as well as minor changes in several
provincial income tax rates. The non-recurring tax rate reduction increased
earnings from continuing operations by approximately 60 cents per share in the
second quarter.
Leo Kiely, Molson Coors president and chief executive officer, said,
"Overall, our second quarter results demonstrate that we are continuing to make
solid, steady progress strengthening the fundamentals of Molson Coors Brewing
Company. We grew sales volume in all three of our businesses, led by the
strength of our strategic brands -- the ones that receive the most investment --
that are the future growth engines of our company. We combined this top-line
growth with continued progress on our cost-reduction programs to achieve higher
operating income and margins in the quarter. Our results also benefited from
lower general tax rates enacted in Canada, which provide a one-time reduction in
book tax rate this quarter and a long-term reduction of about two percentage
points in our book and cash tax rates when fully implemented in 2010. These
positive results allowed us to more than overcome a significant rise in
commodity and energy cost inflation that we and other brewers are facing
globally.
"Our Canadian team grew profitability nearly 34 percent in the quarter on
the strength of our strategic brands in this key market, in particular Coors
Light, Rickard's and our partner import brands. This business faced heavy
competitive and cost pressure and still achieved impressive results, including
growing Coors Light and other strategic brands at double-digit rates in the
quarter. Our U.S. business performed well on the top line, with solid volume
growth and pricing, especially for Coors Light relative to its competitors.
Cost-reduction initiatives in this business helped to offset very high cost
inflation, which drove the U.S. profit decline in the second quarter.
Importantly, we are on track with two major U.S. cost reduction initiatives --
the closure of our Memphis brewery in early September and completion of our new
brewery in Elkton, Va., in early 2007 -- as well as other productivity projects
in the U.S. Due to these initiatives and our expectation that commodity cost
increases will moderate in the second half of this year, we currently anticipate
a full-year 2006 increase in U.S. cost of goods sold of three to five percent
per barrel. In the U.K., despite an extremely difficult business and commodity
inflation environment, our team achieved strong double-digit earnings growth by
growing our market-leading Carling brand --- which accounts for more than
three-fourths of our annual Europe volume --- and cutting costs significantly."
Kiely added, "We are making excellent progress toward one of our key goals
for 2006 to generate more than $300 million of free cash flow available for debt
pay down. In early July, we paid off the last of the debt related to the merger
special dividend, so that substantially all of our debt is now of equal credit
standing. We achieved our goal of paying down the special dividend debt more
than seven months ahead of our original target. During the past 17 months, we
have used free cash flow to repay US$536 million of special dividend principal
and related interest."
Canada Business
Pretax income in Canada during the second quarter 2006 increased 33.7
percent from the second quarter 2005 due to higher sales volume, lower costs and
an approximately 10 percent favorable movement in foreign exchange rates. Canada
sales volume of 2.3 million barrels (2.6 million hls) was up 1.6 percent from
the same period a year ago. Canada business net sales were up 13.2 percent from
second quarter of 2005. Cost of goods sold and marketing, general and
administrative costs declined in local currency compared to the same period a
year ago. Sales to retail decreased 0.4 percent during the quarter compared to
second quarter 2005. Strong double-digit growth in Coors Light and Rickard's, as
well as strong single-digit growth by the Company's partner import brands, was
offset by the discontinuation of Molson Kick and A Marca Bavaria and a decline
in other premium and discount brands stemming from intense competitive pricing
pressure in key provinces.
Synergies and other cost reduction initiatives offset about two-thirds of
the Canada business cost of goods inflation, while additional reductions were
achieved in marketing, general and administrative expenses.
United States Business
In the second quarter 2006, sales volume and net sales in the U.S. business
increased 1.5 percent and 2.8 percent, respectively, from the second quarter a
year ago. U.S. sales to retail increased 2.3 percent during the quarter compared
to the same period in 2005, driven largely by a low single-digit increase in
Coors Light volume, a high single-digit increase in Keystone Light and a strong
double-digit increase in Blue Moon. Excluding the company's Caribbean business,
which suffered from a local government shut-down in Puerto Rico during the
second quarter, U.S. 50-states volume grew 3.0 percent from a year ago, about
double the rate of growth for the total U.S. beer industry.
Including special charges, U.S. pretax income of $44.1 million decreased
44.0 percent compared to second quarter 2005. Excluding special charges, U.S.
pretax income decreased 20.6 percent to $70.5 million compared to the same
period a year ago driven by sales volume growth and higher net pricing, more
than offset by higher packaging material, transportation, energy and labor
costs. The Company's cost saving initiatives and merger synergies more than
offset non-commodity cost inflation, but commodity, freight and energy inflation
drove higher U.S. cost of goods per barrel and lower profit.
Europe Business
Including special items, Europe business pretax income during the second
quarter 2006 increased 28.2 percent from second quarter 2005. Excluding special
items, pretax income for the Europe business increased 36.4 percent during the
quarter, due to Carling volume growth, progress on cost initiatives and a $5.5
million gain on the sale of real estate, which represented about half of the
increase, partially offset by continuing industry pricing pressures and
unfavorable trends in sales mix. In the second quarter 2006, Europe business
sales volume increased by 5.1 percent compared to the same period a year ago,
with Carling sales volume increasing at a high-single-digit percentage rate, due
to the 2006 World Cup soccer tournament, the timing of the Easter holiday and
account gains with retail pub chains.
Cost of goods sold per barrel for the Company's owned brands decreased
approximately 10 percent during the quarter, while marketing, general and
administrative costs decreased by about 12 percent, both in local currency. Net
sales per barrel decreased 14.9 percent from the second quarter of 2005. About
half of the decline was due to a change in contractual arrangements on certain
factored brand sales, which reduced both net sales and cost of goods sold by
$21.2 million, with no impact on profits. The balance of the decline in Europe
business net sales per barrel was primarily attributable to unfavorable
owned-brand net pricing and sales mix.
Corporate Expenses
The Company's Corporate general and administrative expenses totaled $28.3
million in the second quarter, up $11.7 million from a year ago. About $4.7
million of the increase was due to the Company's stock-based long-term incentive
plan, including the effect of the Company adopting FAS123R accounting treatment
for expensing equity-based compensation. Another $3.1 million of the increase
was related to non-recurring expenses, such as severance costs and
merger-related legal fees. The balance of the increase was related to
establishing a corporate center and substantial investments in projects to drive
future cost reductions throughout the enterprise.
Interest expense, excluding interest income from trade loans in the U.K.,
was $39.8 million in the second quarter, 28.0 percent higher than the interest
expense a year ago due to expenses related to adjusting Ontario Beer Store
(Brewers Retail Inc.) interest rate swaps to market value, the high percentage
of long-term debt versus a short-term bridge loan that the Company had in place
a year ago, and higher market interest rates in 2006, partially offset by the
benefit of lower debt levels this year. Without the $4.6 million in Beer Store
swaps -- which now have been restructured and will not drive volatility on the
Company's income statement -- interest expense would have been $35.2 million in
the second quarter 2006.
(1)Discontinued Operations
Following the Company's sale of a 68 percent equity interest in its
Brazilian unit, Cervejarias Kaiser ("Kaiser") in January 2006, the Company now
reports results for its former Brazil business as discontinued operations. In
the second quarter of 2006, the Brazil discontinued operations reported an
after-tax loss of $1.4 million, which reflects the net impact of foreign
exchange and other adjustments to the Company's Kaiser-sale-related indemnity
guarantees. Under cost-method accounting for the Company's remaining interest in
Kaiser, Brazil operating results are no longer reported by Molson Coors. In the
second quarter a year ago, the Brazil business reported an after-tax loss of
$56.9 million.
Special Items
The Company reported special items totaling $25.8 million, or $0.19 per
diluted share after-tax, during the second quarter 2006, primarily related to
the following:
* U.S. results included a $26.4 million pretax special charge related
primarily to the scheduled closure of the Company's Memphis brewery in
early September. These charges include accelerated depreciation of
Memphis assets and limited restructuring and project expenses.
* In Europe, the $1.9 million special credit is due primarily to a $5.3
million benefit related to a reduction in the liabilities recorded for
the Company's U.K. pension plan. Recognition of this benefit in the
second quarter was triggered by cost-reduction initiatives that have
reduced the Company's staffing levels nearly 10 percent over the past
year. This benefit was partially offset by additional restructuring costs
in supply chain and other areas. This restructuring work is now
substantially complete, with a payback period of approximately one year.
* The Corporate special charge of $1.3 million is due to the quarterly
adjustment to the cost of providing a floor price under the options for
the Coors executives who left the Company under the change of control
immediately following the merger last year.
For the second quarter of 2005, the Company reported pretax special charges
totaling $41.0 million primarily related to post-merger severance payments and
benefits and accelerated depreciation of the Memphis brewery.
2006 Second Quarter Earnings Conference Call
Molson Coors Brewing Company will conduct an earnings conference call with
financial analysts and investors at noon Eastern Time today to discuss the
Company's 2006 second quarter financial results. The Company will provide a live
webcast of the earnings call. Approximately two hours after the conclusion of
the earnings call, the Company also will host an online, real-time webcast of an
Investor Relations Follow-up Session with financial analysts at 3:00 p.m.
Eastern Time. Both webcasts will be accessible via the Company's website,
www.molsoncoors.com . Online replays of the webcasts will be available until
11:59 p.m. Eastern Time on September 24, 2006.
Reconciliations to Nearest U.S. GAAP Measures
Molson Coors Brewing Company
2006 Second Quarter After-tax Income From Continuing Operations, Excluding
Special Items
(In millions of $US, except per share data) 2nd Q 2006 2nd Q 2005
- ------------------------------------------------- ---------- ----------
U.S. GAAP: After-tax income from
continuing operations: $ 157.6 $ 95.5
Per diluted share $ 1.82 $ 1.11
Add back: Pretax special items - net 25.8 41.0
Minus: Tax effect on special items (9.5) (22.0)
Non-GAAP: After-tax income from
continuing operations, excluding special items: $ 173.9 $ 114.5
Per diluted share $ 2.01 $ 1.33
Percent change from 2005 results from continuing
operations, excluding special items 51.8%
Molson Coors Brewing Company
2006 2nd Quarter Pretax Income From Continuing Operations, Excluding
Special Items
(Note: Some numbers may not sum due to rounding.)
Business
------------------------------------------------- Total
(In millions of $US) Canada U.S. Europe Corporate Consolidated
- -------------------------------------------------- ---------- ---------- ---------- ---------- ------------
U.S. GAAP: 2006
2nd Q pretax income (loss) from continuing
operations - reported $ 143.5 $ 44.1 $ 38.9 $ (69.4) $ 157.1
Add back:
Pretax special charges/credits - net -- 26.4 (1.9) 1.3 25.8
Non-GAAP: 2006
2nd Q Pretax income (loss) from continuing
operations, excluding special items $ 143.5 $ 70.5 $ 37.0 $ (68.1) $ 182.9
Percent change 2006
2nd Q vs. 2005 2nd Q pretax from
continuing operations, excluding special
items, [inc./(dec.)] 33.7% (20.6)% 36.4% 57.0% 1.7%
U.S. GAAP: 2005
2nd Q pretax income (loss) from continuing
operations $ 107.3 $ 78.8 $ 30.4 $ (77.6) $ 138.9
Add back:
Pretax special charges/credits - net -- 10.0 (3.2) 34.2 41.0
Non-GAAP: 2005
2nd Q Pretax income (loss) from continuing
operations, excluding special items $ 107.3 $ 88.8 $ 27.1 $ (43.4) $ 179.9
Pretax and After-tax Income (Loss) From Continuing Operations, Excluding
Special Items should be viewed as a supplement to -- not a substitute for -- our
results of operations presented on the basis of accounting principles generally
accepted in the United States. We believe that Pretax and After-tax Income
(Loss) From Continuing Operations Excluding Special Items is used by and is
useful to investors and other users of our financial statements in evaluating
our operating performance because it provides them with an additional tool to
evaluate our performance without regard to items such as special items, which
can vary substantially from company to company depending upon accounting methods
and book value of assets and capital structure. Our management uses Pretax and
After-tax Income (Loss) From Continuing Operations Excluding Special Items: as a
measure of operating performance to assist in comparing performance from period
to period on a consistent basis; as a measure for planning and forecasting
overall expectations and for evaluating actual results against such
expectations; and in communications with the board of directors, stockholders,
analysts and investors concerning our financial performance.
Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning
of the federal securities laws, and language indicating trends, such as "trend
improvements," "progress," "anticipated," "improving sales trends" and "on
track." It also includes financial information, of which, as of the date of this
press release, the Company's independent auditors have not completed their
review. Although the Company believes that the assumptions upon which the
financial information and its forward-looking statements are based are
reasonable, it can give no assurance that these assumptions will prove to be
correct. Important factors that could cause actual results to differ materially
from the Company's projections and expectations are disclosed in the Company's
filings with the Securities and Exchange Commission. These factors include,
among others, changes in consumer preferences and product trends; price
discounting by major competitors; unanticipated expenses, margin impact and
other factors resulting from the recent merger; failure to realize anticipated
results from synergy initiatives; and increases in costs generally. All
forward-looking statements in this press release are expressly qualified by such
cautionary statements and by reference to the underlying assumptions. We do not
undertake to update forward-looking statements, whether as a result of new
information, future events or otherwise.
MOLSON COORS BREWING COMPANY
SUMMARY OF OPERATIONS - CONSOLIDATED
2nd QUARTER and YEAR-TO-DATE 2006
(Unaudited)
Thirteen Weeks Ended Twenty-six Weeks Ended
----------------------------- -----------------------------
June 25, June 26, June 25, June 26,
(In thousands, except per share amounts) 2006 2005 2006 2005
- ---------------------------------------- ------------- ------------- ------------- -------------
Barrels of beer and other
beverages sold 11,424 11,162 20,043 18,872
Sales $ 2,130,047 $ 2,065,346 $ 3,673,993 $ 3,461,382
Beer excise taxes (547,022) (518,483) (937,122) (866,084)
Net sales 1,583,025 1,546,863 2,736,871 2,595,298
Costs and expenses:
Cost of goods sold (919,976) (895,601) (1,646,644) (1,585,245)
Gross profit 663,049 651,262 1,090,227 1,010,053
Marketing, general and
administrative (448,281) (446,399) (837,139) (783,769)
Special charges - net (25,840) (40,963) (52,671) (81,663)
Operating income 188,928 163,900 200,417 144,621
Other income (expense) - net 5,045 2,750 2,804 (2,256)
Interest expense - net (36,894) (27,701) (68,849) (47,285)
Income from continuing
operations before income
taxes and minority
interests 157,079 138,949 134,372 95,080
Income tax benefit (expense) 4,965 (37,418) 12,403 (21,725)
Income before minority
interests 162,044 101,531 146,775 73,355
Minority interest (4,402) (6,060) (7,703) (8,283)
Income from continuing
operations 157,642 95,471 139,072 65,072
Loss from discontinued
operations (net of tax) (1,415) (56,925) (13,082) (60,710)
Net Income $ 156,227 $ 38,546 $ 125,990 $ 4,362
Income from continuing
operations per share
(basic) $ 1.83 $ 1.12 $ 1.62 $ 0.88
Income from continuing
operations per share
(diluted) 1.82 1.11 1.61 0.87
Loss from discontinued
operations per share
(basic) (0.01) (0.67) (0.15) (0.82)
Loss from discontinued
operations per share
diluted) (0.01) (0.66) (0.15) (0.81)
Net Income per share
(basic) $ 1.82 $ 0.45 $ 1.47 $ 0.06
Net Income per share
(diluted) $ 1.81 $ 0.45 $ 1.46 $ 0.06
Weighted average number of
shares outstanding
(basic) 85,953 85,321 85,819 74,214
Weighted average number of
shares outstanding
(diluted) 86,526 85,928 86,351 75,124
Cash dividends declared
per share $ 0.32 $ 0.32 $ 0.64 $ 0.64
NOTE: All results prior to February 9, 2005, exclude Molson Inc., which merged
with Adolph Coors Company on that date.
MOLSON COORS BREWING COMPANY
SUMMARY OF OPERATIONS - CANADA
2nd QUARTER and YEAR-TO-DATE 2006
(Unaudited)
Thirteen Weeks Ended Twenty-six Weeks Ended
----------------------------- -----------------------------
June 25, June 26, June 25, June 26,
(In thousands) 2006 2005 2006 2005
- ---------------------------------------- ------------- ------------- ------------- -------------
Barrels of beer and other
beverages sold 2,253 2,218 3,844 3,093
Sales $ 643,858 $ 571,299 $ 1,073,788 $ 810,622
Beer excise taxes (147,574) (132,706) (248,185) (175,698)
Net sales 496,284 438,593 825,603 634,924
Costs and expenses:
Cost of goods sold (235,665) (218,651) (424,193) (352,814)
Gross profit 260,619 219,942 401,410 282,110
Marketing, general and
administrative (118,418) (113,310) (214,414) (159,097)
Operating income 142,201 106,632 186,996 123,013
Other income - net 1,281 706 1,803 --
Interest income - net -- -- -- --
Earnings before income taxes $ 143,482 $ 107,338 $ 188,799 $ 123,013
MOLSON COORS BREWING COMPANY
SUMMARY OF OPERATIONS - UNITED STATES
2nd QUARTER and YEAR-TO-DATE 2006
(Unaudited)
Thirteen Weeks Ended Twenty-six Weeks Ended
----------------------------- -----------------------------
June 25, June 26, June 25, June 26,
(In thousands) 2006 2005 2006 2005
- ---------------------------------------- ------------- ------------- ------------- -------------
Barrels of beer and other
beverages sold 6,428 6,334 11,386 11,128
Sales $ 835,873 $ 815,045 $ 1,475,376 $ 1,425,904
Beer excise taxes (114,094) (113,063) (202,323) (198,948)
Net sales 721,779 701,982 1,273,053 1,226,956
Costs and expenses:
Cost of goods sold (449,960) (409,994) (795,169) (741,421)
Gross profit 271,819 291,988 477,884 485,535
Marketing, general and
administrative (203,074) (203,158) (372,520) (374,637)
Special charges - net (26,422) (10,000) (48,146) (17,447)
Operating income 42,323 78,830 57,218 93,451
Other income (expense) - net 1,775 (18) 1,904 57
Interest income - net -- -- -- --
Earnings before income taxes $ 44,098 $ 78,812 $ 59,122 $ 93,508
MOLSON COORS BREWING COMPANY
SUMMARY OF OPERATIONS - EUROPE
2nd QUARTER and YEAR-TO-DATE 2006
(Unaudited)
Thirteen Weeks Ended Twenty-six Weeks Ended
----------------------------- -----------------------------
June 25, June 26, June 25, June 26,
(In thousands) 2006 2005 2006 2005
- ---------------------------------------- ------------- ------------- ------------- -------------
Barrels of beer and other
beverages sold 2,743 2,610 4,813 4,651
Sales $ 648,579 $ 679,002 $ 1,122,418 $ 1,224,856
Beer excise taxes (285,354) (272,714) (486,614) (491,438)
Net sales 363,225 406,288 635,804 733,418
Costs and expenses:
Cost of goods sold (233,599) (266,956) (426,102) (491,010)
Gross profit 129,626 139,332 209,702 242,408
Marketing, general and
administrative (98,510) (113,326) (192,192) (222,462)
Special credits (charges) 1,917 3,231 (5,886) (398)
Operating income 33,033 29,237 11,624 19,548
Other income (expense) - net 3,027 (2,240) 460 (6,593)
Interest income - net 2,885 3,382 5,689 6,958
Earnings before income taxes $ 38,945 $ 30,379 $ 17,773 $ 19,913
MOLSON COORS BREWING COMPANY
SUMMARY OF OPERATIONS - CORPORATE
2nd QUARTER and YEAR-TO-DATE 2006
(Unaudited)
Thirteen Weeks Ended Twenty-six Weeks Ended
----------------------------- -----------------------------
June 25, June 26, June 25, June 26,
(In thousands) 2006 2005 2006 2005
- ---------------------------------------- ------------- ------------- ------------- -------------
Barrels of beer and other
beverages sold -- -- -- --
Sales (1) $ 1,737 $ -- $ 2,411 $ --
Beer excise taxes -- -- -- --
Net sales (1) 1,737 -- 2,411 --
Costs and expenses:
Cost of goods sold (1) (752) -- (1,180) --
Gross profit 985 -- 1,231 --
Marketing, general and
administrative (28,279) (16,605) (58,013) (27,573)
Special (charges) credits (1,335) (34,194) 1,361 (63,818)
Operating loss (28,629) (50,799) (55,421) (91,391)
Other (expense) income - net (1,038) 4,302 (1,363) 4,280
Interest expense - net (39,779) (31,083) (74,538) (54,243)
Loss before income taxes $ (69,446) $ (77,580) $ (131,322) $ (141,354)
(1) The amounts shown are reflective of revenues and costs associated with
the Company's intellectual property, including trademarks and brands.
Prior period amounts have not been reclassified due to immateriality.
SOURCE Molson Coors Brewing Company
-0- 08/01/2006
/CONTACT: Media, Paul de la Plante, +1-514-590-6349, or Investor
Relations, Dave Dunnewald, +1-303-279-6565, or Kevin Caulfield,
+1-303-277-6894, all of Molson Coors Brewing Company/
/Web site: http://www.molsoncoors.com /