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 12, 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 July 14,1994:
Class A Common Stock - 1,260,000 shares
Class B Common Stock - 37,038,439 shares
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Twelve weeks ended
----------------------
June 12, June 13,
1994 1993
--------- ---------
(In thousands, except per share data)
<S> <C> <C>
SALES $ 527,088 $ 506,634
Less - beer excise taxes ( 94,872) ( 93,766)
--------- ---------
NET SALES 432,216 412,868
--------- ---------
Costs and expenses:
Cost of goods sold 254,637 257,539
Marketing, general and administrative 127,693 115,803
Research and project development 3,313 2,833
--------- ---------
Total operating expenses 385,643 376,175
--------- ---------
OPERATING INCOME 46,573 36,693
Other income (expense) - net ( 2,567) ( 2,904)
--------- ---------
Income before income taxes 44,006 33,789
Income tax expense 20,100 14,900
--------- ---------
NET INCOME $ 23,906 $ 18,889
========= =========
NET INCOME PER SHARE OF COMMON STOCK $ 0.63 $ 0.50
========= =========
Weighted average number of outstanding
shares of common stock 38,276 37,871
========= =========
Cash dividends declared per share
of common stock $ 0.125 $ 0.125
========= =========
</TABLE>
<PAGE>
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Twenty-four weeks ended
----------------------
June 12, June 13,
1994 1993
--------- ---------
(In thousands, except per share data)
<S> <C> <C>
SALES $ 917,335 $ 872,010
Less - beer excise taxes ( 166,666) ( 163,159)
--------- ---------
NET SALES 750,669 708,851
--------- ---------
Costs and expenses:
Cost of goods sold 465,889 456,444
Marketing, general and administrative 220,619 198,550
Research and project development 5,510 5,435
--------- ---------
Total operating expenses 692,018 660,429
--------- ---------
OPERATING INCOME 58,651 48,422
Other income (expense) - net ( 2,411) ( 6,278)
--------- ---------
Income before income taxes 56,240 42,144
Income tax expense 25,400 18,600
--------- ---------
NET INCOME $ 30,840 $ 23,544
========= =========
NET INCOME PER SHARE OF COMMON STOCK $ 0.81 $ 0.62
========= =========
Weighted average number of outstanding
shares of common stock 38,246 37,810
========= =========
Cash dividends declared per share
of common stock $ 0.250 $ 0.250
========= =========
</TABLE>
<PAGE>
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 12, December 26,
1994 1993
---------- -----------
(In thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 44,523 $ 82,211
Accounts and notes receivable 117,100 75,967
Inventories:
Finished 80,967 56,878
In process 31,273 24,402
Raw materials 34,822 56,370
Packaging materials 4,891 9,581
---------- ----------
Total inventories 151,953 147,231
Other assets 76,348 78,339
---------- ----------
Total current assets 389,924 383,748
---------- ----------
PROPERTIES, at cost, less accumulated
depreciation, depletion and amortiza-
tion of $1,160,569 in 1994
and $1,118,292 in 1993 900,286 884,102
OTHER ASSETS 96,026 83,094
---------- ----------
TOTAL ASSETS $1,386,236 $1,350,944
========== ==========
</TABLE>
<PAGE>
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 12, December 26,
1994 1993
---------- -----------
(In thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 50,000 $ 50,000
Accounts payable 110,694 121,376
Federal and state income taxes 7,803 4,157
Accrued expenses and other liabilities 205,744 201,018
---------- ----------
Total current liabilities 374,241 376,551
---------- ----------
LONG-TERM DEBT 175,000 175,000
DEFERRED TAX LIABILITY 68,317 53,430
OTHER LONG-TERM LIABILITIES 113,852 114,036
---------- ----------
Total liabilities 731,410 719,017
---------- ----------
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 56,082 54,928
Retained earnings 605,721 584,444
Other 334 40
---------- ----------
674,397 651,672
Less - treasury stock, at cost,
Class B shares, 9,179,262 in
1994 and 9,260,779 in 1993 19,571 19,745
---------- ----------
Total shareholders' equity 654,826 631,927
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,386,236 $1,350,944
========== ==========
</TABLE>
<PAGE>
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the twenty-four weeks ended
--------------------------
June 12, June 13,
1994 1993
--------- ---------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 30,840 $ 23,544
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation, depletion and
amortization 54,647 54,314
Change in accumulated deferred
income taxes 14,887 850
(Gain) Loss on sale or abandonment
of properties ( 462) 2,154
Change in current assets and current
liabilities ( 50,183) 2,311
Change in non-current assets and
liabilities 663 6,297
--------- ---------
Net cash provided by
operating activities 50,392 89,470
--------- ---------
Cash flows from investing activities:
Additions to properties ( 72,257) ( 54,264)
Proceeds from sale of properties 1,993 209
Additions to intangible assets ( 13,852) --
Other ( 513) ( 917)
--------- ---------
Net cash (used in)
investing activities ( 84,629) ( 54,972)
--------- ---------
Cash flows from financing activities:
Exercise of stock options, net of related
notes receivable 1,328 2,907
Dividends paid ( 9,563) ( 9,460)
Other 4,784 4,731
--------- ---------
Net cash (used in)
financing activities ( 3,451) ( 1,822)
--------- ---------
Cash and cash equivalents:
Net increase (decrease) in cash
and cash equivalents ( 37,688) 32,676
Balance at beginning of year 82,211 39,669
--------- ---------
Balance at end of quarter $ 44,523 $ 72,345
========= =========
</TABLE>
<PAGE>
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 $432.2 million and $750.7
million for the second quarter and first half of 1994 which represents a 4.7%
and 5.9% increase, respectively, from the comparable periods in the prior
year. ACC's single direct subsidiary, Coors Brewing Company (CBC), had malt
beverage sales of 5,166,000 barrels for the second quarter of 1994 compared to
5,113,000 barrels sold in the second quarter of 1993, an increase of 1.0%.
The improved sales volume resulted primarily from increased sales of Zima (TM)
Clearmalt (TM) following its national expansion. New product announcements
for the quarter included the nationwide introduction of Weizenbier, a
specialty wheat beer for the summer season and the expansion of Coors Artic
Ice (TM) into additional markets. Coors Artic Ice is now available in
thirty-three percent of the United States.
Malt beverage sales for the first half of 1994 rose 2.5% to 9,073,000 barrels
from 8,855,000 for the same period of 1993. The improved sales volume
resulted primarily from the geographical expansion of Zima Clearmalt
distribution.
Gross Profit:
- - -------------
Gross profit as a percentage of net sales for the second quarter of 1994
improved to 41.1% from 37.6% for the same period a year earlier. Gross
profit as a percentage of net sales for the first half of 1994 improved to
37.9% from 35.6% for the first half of 1993. The improvements for both of
these periods were primarily a result of increased volume, operational
efficiencies and lower glass and aluminum costs.
Operating Income:
- - -----------------
Operating income for the second quarter of 1994 increased 26.9% to $46.6
million compared to $36.7 million for the second quarter of 1993. Operating
income for the first half of 1994 increased 21.1% to $58.7 million from $48.4
million for the first half of 1993. Higher operating income was the result
of sales volume increases offset in part by increased marketing, general and
administrative expenses of 10.3% and 11.1% for the second quarter and first
half of 1994, respectively. The increase in marketing, general and
administrative expense was primarily because of marketing spending in support
of Zima Clearmalt's national rollout and Coors Artic Ice. Marketing expense
increases were partially offset by decreased general and administrative
expenses that were the result of a company-wide effort begun in 1993 to
reduce costs.
Non-Operating Expenses:
- - -----------------------
Other income (expense) - net was expense of $2.6 million for the
second quarter of 1994 compared to $2.9 million expense for the same period
a year earlier. Net interest expense during the second quarter of 1994 was
$3.0 million compared to $3.1 million a year ago.
Other income (expense) - net decreased $3.9 million to $2.4 million expense
in the first half of 1994 from $6.3 million for the same period a year
earlier. The principal contributors to the decrease for the first half of 1994
from the first half of 1993 include higher royalty income and a one-time,
pre-tax gain of approximately $2.1 million on the sale of a company-owned
distributorship. Additionally, net interest expense declined to $6.1 million
in the first half of 1994 from $6.6 million in the first half of 1993
primarily due to higher capitalized interest.
Effective Tax Rate:
- - -------------------
The consolidated effective tax rate for the second quarter and first half of
1994 increased to 45.7% and 45.2%, respectively, compared to 44.1% and 44.1%
for the same periods of 1993. The increases result primarily from the
federal income tax rate increase to 35% from 34% which was not yet in effect
during the second quarter of last year.
Net Income:
- - -----------
Consolidated net income for the second quarter and first half of 1994 was
$23.9 million, or $0.63 per share and $30.8 million, or $0.81 per share
compared to $18.9 million, or $0.50 per share and $23.5 million, or $0.62 per
share for the same periods a year earlier.
Working Capital Changes:
- - ------------------------
Consolidated working capital at June 12, 1994 increased $8.5 million from
year end 1993, primarily because of a seasonal increase in accounts
receivable and inventories, a decrease in accounts payable and the
completion of the investment commitment in South Korea for the Jinro-Coors
Brewing Company. These changes were offset for the most part by a decrease
in cash and cash equivalents.
Cash Provided by Operating Activities:
- - --------------------------------------
Net cash provided by consolidated operating activities for the first half of
1994 was $50.4 million, down from $89.5 million for the same period a year
ago. This decrease resulted primarily from a $41.1 million seasonal increase
in accounts receivable in 1994 compared to a $1.6 million increase in 1993.
The normal seasonal increase in accounts receivable in 1993 was offset by a
temporary extension of credit terms at year end 1992. Partially offsetting
these items was a $7.3 million increase in net income and a $14.9 million
increase in accumulated deferred income taxes. The increase in deferred
taxes resulted from income tax temporary differences created by the early
payment of the 1994 pension contribution and by the 1994 payment of various
1993 accrued expenses. These accrued expenses were not deductible for income
tax purposes in 1993.
Cash Used in Investing Activities:
- - ----------------------------------
Cash flows used in investing activities for the first half of 1994 increased
by $29.7 million from the comparable period last year principally due to the
purchases of a brewery in Spain and a distributorship in San Bernardino,
California.
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.
Early in the third quarter of 1994, the Company made the first principal
payment on its unsecured medium-term notes. The $50.0 million payment was
funded by a combination of internally generated cash and short-term
borrowing.
Outlook:
- - --------
The Company expects continued pricing pressure and minimal industry growth
for 1994. CBC volume and net sales are expected to increase due to Zima's
national geographical expansion and to a lesser extent, Killian's continued
growth albiet at lesser rates. Gross profit percentages are expected to be
improved over 1993 for the third and fourth quarters of 1994. Generally,
CBC's gross profit percentage follows a seasonal pattern with the second
quarter gross profit percentage being higher than the third quarter and
fourth quarter gross profit percentages. CBC normally achieves greater
economies of scale in the second quarter for higher proportionate sales
volume relative to fixed manufacturing costs. Marketing expenditures are
expected to increase in the third quarter and fourth quarter of 1994 over
the same periods a year ago due to the Zima expansion and the introduction of
Coors Artic Ice. Partially offsetting the marketing increases, are expected
reductions in general and administrative expenditures in line with a
company-wide effort begun in 1993 to reduce costs.
Due to supply contracts currently in place, Alcoa's recent announcement
regarding a change in its aluminum pricing structure is not expected to
impact CBC's raw materials cost in 1994, but the change may have an adverse
impact on CBC in 1995. The ultimate impact is unknown at this time.
In May, CBC announced the opening of a 1.5 million barrel brewery in
South Korea that was built in partnership with Jinro Limited of South Korea.
The new brewery, named Jinro-Coors Brewing Company, is one-third owned by CBC
and two-thirds owned by Jinro Limited. The brewery currently produces a
local beer brand called Cass Fresh and it intends to brew and distribute a
Coors beer brand beginning the fourth quarter of 1994. The joint venture will
enable CBC to brew and distribute Coors beers in South Korea and other Far
Eastern and Asian markets.
In May, CBC announced the formation of a joint venture with American National
Can Company to produce beverage can ends at the CBC end manufacturing
facility in Golden. The joint venture will produce reduced-diameter ends for
sale on the open market and it will also continue the production of CBC's
supply of can ends. The companies expect the joint venture to increase the
facility's efficiency and volume.
In July, CBC announced an agreement in principle with Public Service Company
of Colorado to sell the brewery's electric generating assets and to supply
the steam needed to operate the assets. Coors would then purchase all of its
electricity and coal supplies from Public Service Company. The transaction
is subject to a definitive agreement. The agreement must be approved by the
board of directors of both companies as well as by the Public Utilities
Commission of Colorado. The value of the assets involved in the proposed
transaction is estimated to be between $31.0 million and $36.0 million.
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 24 weeks ended June 12, 1994, may not
be indicative of results that may be expected for the year ending
December 25, 1994.
<PAGE>
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.
TransRim sought damages for unjust enrichment from alleged savings to CBC in
purchases of paper board from paper suppliers. Trial to a jury was held in
April 1994, and the jury returned a verdict in favor of all defendants on all
claims. TransRim has filed an appeal.
Item 6. Exhibits and Reports on Form 8-K.
(b) Reports on Form 8-K
None.
<PAGE>
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)
July 22, 1994
<PAGE>
