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 October 2, 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 November 11, 1994:
Class A Common Stock - 1,260,000 shares
Class B Common Stock - 37,066,134 shares
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Sixteen weeks ended
----------------------
October 2, October 3,
1994 1993
--------- ---------
(In thousands, except per share data)
<S> <C> <C>
SALES $ 683,964 $ 660,107
Less - beer excise taxes ( 128,383) ( 124,480)
--------- ---------
NET SALES 555,581 535,627
--------- ---------
Costs and expenses:
Cost of goods sold 358,679 349,149
Marketing, general and administrative 159,979 158,288
Research and project development 4,217 4,506
--------- ---------
Total operating expenses 522,875 511,943
--------- ---------
OPERATING INCOME 32,706 23,684
Other expense - net 1,266 3,696
--------- ---------
Income before income taxes 31,440 19,988
Income tax expense 14,100 10,400
--------- ---------
NET INCOME $ 17,340 $ 9,588
========= =========
NET INCOME PER SHARE OF COMMON STOCK $ 0.45 $ 0.25
========= =========
Weighted average number of outstanding
shares of common stock 38,306 38,101
========= =========
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>
Forty weeks ended
----------------------
October 2, October 3,
1994 1993
--------- ---------
(In thousands, except per share data)
<S> <C> <C>
SALES $1,601,299 $1,532,117
Less - beer excise taxes ( 295,049) ( 287,639)
--------- ---------
NET SALES 1,306,250 1,244,478
--------- ---------
Costs and expenses:
Cost of goods sold 824,568 805,593
Marketing, general and administrative 380,598 356,838
Research and project development 9,727 9,941
--------- ---------
Total operating expenses 1,214,893 1,172,372
--------- ---------
OPERATING INCOME 91,357 72,106
Other expense - net 3,677 9,974
--------- ---------
Income before income taxes 87,680 62,132
Income tax expense 39,500 29,000
--------- ---------
NET INCOME $ 48,180 $ 33,132
========= =========
NET INCOME PER SHARE OF COMMON STOCK $ 1.26 $ 0.87
========= =========
Weighted average number of outstanding
shares of common stock 38,270 37,926
========= =========
Cash dividends declared per share
of common stock $ 0.375 $ 0.375
========= =========
</TABLE>
<PAGE>
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
October 2, December 26,
1994 1993
---------- -----------
(In thousands)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 25,359 $ 82,211
Accounts and notes receivable 99,782 75,967
Inventories:
Finished 69,067 56,878
In process 27,698 24,402
Raw materials 43,798 56,370
Packaging materials 6,095 9,581
---------- ----------
Total inventories 146,658 147,231
Other assets 78,187 78,339
---------- ----------
Total current assets 349,986 383,748
---------- ----------
PROPERTIES, at cost, less accumulated
depreciation, depletion and amortiza-
tion of $1,191,498 in 1994
and $1,118,292 in 1993 899,500 884,102
OTHER ASSETS 103,377 83,094
---------- ----------
TOTAL ASSETS $1,352,863 $1,350,944
========== ==========
</TABLE>
<PAGE>
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
October 2, December 26,
1994 1993
---------- -----------
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 44,000 $ 50,000
Accounts payable 108,043 121,376
Federal and state income taxes 6,381 4,157
Accrued expenses and other liabilities 209,039 201,018
---------- ----------
Total current liabilities 367,463 376,551
---------- ----------
LONG-TERM DEBT 131,000 175,000
DEFERRED TAX LIABILITY 65,438 53,430
OTHER LONG-TERM LIABILITIES 119,871 114,036
---------- ----------
Total liabilities 683,772 719,017
---------- ----------
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 56,741 54,928
Retained earnings 618,269 584,444
Other 1,296 40
---------- ----------
688,566 651,672
Less - treasury stock, at cost,
Class B shares, 9,133,866 in
1994 and 9,260,779 in 1993 19,475 19,745
---------- ----------
Total shareholders' equity 669,091 631,927
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,352,863 $1,350,944
========== ==========
</TABLE>
<PAGE>
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the forty weeks ended
--------------------------
October 2, October 3,
1994 1993
--------- ---------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 48,180 $ 33,132
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation, depletion and
amortization 91,964 90,972
Change in accumulated deferred
income taxes 12,008 ( 2,519)
(Gain) Loss on sale or abandonment
of properties 882 3,534
Change in current assets and current
liabilities ( 26,400) 75,174
Change in non-current assets and
non-current liabilities 2,126 ( 12,607)
--------- ---------
Net cash provided by
operating activities 128,760 187,686
--------- ---------
Cash flows from investing activities:
Additions to properties ( 110,939) ( 87,865)
Proceeds from sale of properties 2,999 1,466
Additions to intangible assets ( 16,525) --
Other 1,125 ( 538)
--------- ---------
Net cash (used in)
investing activities ( 123,340) ( 86,937)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term debt -- 5,000
Exercise of stock options, net of related
notes receivable 2,083 7,350
Dividends paid ( 14,355) ( 14,239)
Payment of current portion of long-term debt( 50,000) --
--------- ---------
Net cash (used in)
financing activities ( 62,272) ( 1,889)
--------- ---------
Cash and cash equivalents:
Net increase (decrease) in cash
and cash equivalents ( 56,852) 98,860
Balance at beginning of year 82,211 39,669
--------- ---------
Balance at end of quarter $ 25,359 $ 138,529
========= =========
</TABLE>
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 $555.6 million and $1,306.3
million for the third quarter and first forty weeks of 1994 which represents
a 3.7% and 5.0% increase, respectively, from the comparable periods in the
prior year. ACC's single direct subsidiary, Coors Brewing Company (CBC), had
malt beverage sales of 6,884,000 barrels for the third quarter of 1994
compared to 6,767,000 barrels sold in the third quarter of 1993, an increase
of 1.7%. The improved sales volume resulted primarily from increased sales
of Zima (TM) Clearmalt (TM) following its national expansion, incremental
third quarter contract production at CBC's recently acquired Spanish brewery
and the introduction of Coors Artic Ice which is now available in 54% of the
United States.
Malt beverage sales for the first forty weeks of 1994 rose 2.1% to 15,957,000
barrels from 15,623,000 for the same period of 1993. The improved sales
volume resulted primarily from the same factors that affected the third
quarter.
Gross Profit:
- - -------------
Gross profit as a percentage of net sales for the third quarter of 1994
improved to 35.4% from 34.8% for the same period a year earlier. Gross
profit as a percentage of net sales for the first forty weeks of 1994
improved to 36.9% from 35.3% for the first forty weeks of 1993. The
improvements for the third quarter and first forty weeks were primarily a
result of improved brand mix profitability, operational efficiencies and
lower glass and aluminum costs. In addition, the gross margin percentages
for the first forty weeks benefitted from increased volume during the first
half of the year. The improvements in the gross profit percentages for both
periods of 1994 helped to absorb the costs of a limited product withdrawal in
the third quarter. At the present time, management believes the reserve
established in the third quarter will be adequate to absorb all costs of
this limited product withdrawal.
Operating Income:
- - -----------------
Operating income for the third quarter of 1994 increased 38.1% to $32.7
million compared to $23.7 million for the third quarter of 1993. Operating
income for the first forty weeks of 1994 increased 26.7% to $91.4 million
from $72.1 million for the first forty weeks of 1993. Higher operating
income was the result of improved gross profit offset in part by increased
marketing, general and administrative expenses of 1.1% and 6.7% for the third
quarter and first forty weeks 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 that began in 1993 to reduce costs.
Non-Operating Expenses:
- - -----------------------
Other expense - net was $1.3 million for the third quarter of 1994 compared
to $3.7 million expense for the same period a year earlier. The principal
contributions to the decrease were a gain on the sale of investments and
higher royalty income. Net interest expense during the third quarter of 1994
was $2.3 million compared to $3.8 million a year ago due to the $50.0 million
payment of the current portion of long-term debt. The payment was made early
in the third quarter.
Other expense - net decreased $6.3 million to $3.7 million expense in the
first forty weeks of 1994 from $10.0 million expense for the same period a
year earlier. The principal contributors to the decrease for the first forty
weeks of 1994 from the first forty weeks of 1993 include higher royalty
income, a one-time, pre-tax gain of approximately $2.1 million on the sale of
a company-owned distributorship, and gains from the sale of investments.
Additionally, net interest expense declined to $8.4 million in the first
forty weeks of 1994 from $10.4 million in the first forty weeks of 1993
primarily due to higher capitalized interest and the $50.0 million payment of
the current portion of long-term debt.
Effective Tax Rate:
- - -------------------
The consolidated effective tax rate for the third quarter and first forty
weeks of 1994 decreased to 44.8% and 45.1%, respectively, compared to 52.0%
and 46.7% for the same periods of 1993. The consolidated tax rates for the
third quarter and first forty weeks of 1993 are higher than the same periods
in 1994 primarily because in the third quarter of 1993 the federal income tax
rate increased from 34% to 35% on a retroactive basis to the beginning of
1993. The retroactive application of the incremental 1% in the tax rate
resulted in a catchup adjustment in the third quarter of 1993 for the first
half of 1993 and for deferred income taxes.
Net Income:
- - -----------
Consolidated net income for the third quarter and first forty weeks of 1994
was $17.3 million, or $0.45 per share and $48.2 million, or $1.26 per share
compared to $9.6 million, or $0.25 per share and $33.1 million, or $0.87 per
share for the same periods a year earlier.
Working Capital Changes:
- - ------------------------
Consolidated working capital at October 2, 1994 decreased $24.7 million from
year end 1993, primarily because of a decrease in cash and cash equivalents
of $56.9 million. This change was offset by a seasonal increase in accounts
receivable, a decrease in accounts payable, the completion of the investment
commitment in South Korea for the Jinro-Coors Brewing Company and the
reduction of the current portion of long-term debt.
Cash Provided by Operating Activities:
- - --------------------------------------
Net cash provided by operating activities for the first forty weeks of 1994
was $128.8 million, down $58.9 million from $187.7 million for the same
period a year ago. This decrease resulted primarily from a $23.8 million
increase in accounts receivable in 1994 compared to an $18.6 million decrease
in 1993. The increase in accounts receivable in 1994 is due primarily to the
seasonality of the beer business and a receivable due from the new CBC/ANC
joint venture described later in this Form 10-Q. The decrease in accounts
receivable in 1993 was due primarily to a temporary extension of credit terms
to wholesalers at year end 1992. This temporary extension of credit terms
more than offset the normal seasonal increase in accounts receivable. Also
contributing to the decline in net cash provided by operating activities was
a relatively stable overall investment in total inventories in 1994, whereas,
the overall investment in total inventories declined by $9.4 million in 1993.
The liabilities for federal and state income taxes and accrued expenses
increased in 1993 significantly while these liabilities did not have the same
relative increases in 1994. Partially offsetting these items was a $15.0
million increase in net income and a $12.0 million increase in 1994 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 forty weeks of 1994
increased by $36.4 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 for the first forty weeks of 1994
increased by $60.4 million from the same period last year. 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 expansion and, to a lesser extent, Killian's continued growth at a
slower pace. The gross profit percentage is expected to be improved over
1993 in the fourth quarter of 1994. Generally, CBC's gross profit percentage
follows a seasonal pattern with the second and third quarters' gross profit
percentages being higher than the first and fourth quarters' gross profit
percentages. CBC normally achieves its greatest 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
fourth quarter of 1994 over the same period 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 that began 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 formation of a joint venture with American National
Can Company (ANC) 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 October, CBC and ANC announced the
expansion of their long-term joint venture to include the production of
beverage cans at the CBC can manufacturing facility in Golden.
In July, CBC announced an agreement in principle with Public Service Company
of Colorado (PSC) to sell the brewery's electrical power generating assets
and to supply the steam needed to operate the assets. Coors would have then
purchased all of its electricity and coal supplies from PSC. The value of
the assets involved in the proposed transaction was estimated to be between
$31.0 million and $36.0 million. In October, CBC and PSC announced that
negotiations had ended without a final agreement.
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,
the financial statements include all adjustments necessary to summarize
fairly the Company's financial position and results of operations. The
results of operations for the 40 weeks ended October 2, 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
See the company's quarterly report on the Form 10-Q for the quarter ended
June 12, 1994 for a description of pending litigation with TransRim
Enterprises (USA) Ltd.
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)
November 15, 1994
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000024545
<NAME> ADOLPH COORS COMPANY
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> DEC-25-1994
<PERIOD-END> DEC-27-1994
<CASH> 25359
<SECURITIES> 0
<RECEIVABLES> 99782
<ALLOWANCES> 0
<INVENTORY> 146658
<CURRENT-ASSETS> 349986
<PP&E> 899500
<DEPRECIATION> 0
<TOTAL-ASSETS> 1352863
<CURRENT-LIABILITIES> 367463
<BONDS> 131000
<COMMON> 12260
0
0
<OTHER-SE> 656831
<TOTAL-LIABILITY-AND-EQUITY> 1352863
<SALES> 1306250
<TOTAL-REVENUES> 1306250
<CGS> 824568
<TOTAL-COSTS> 1214893
<OTHER-EXPENSES> 3677
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 87680
<INCOME-TAX> 39500
<INCOME-CONTINUING> 48180
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48180
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.26
</TABLE>
