U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (NO FEE REQUIRED)
For the transition period from ------------------ to ------------------
Commission file number 0-8251
ADOLPH COORS COMPANY
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(Exact name of registrant as specified in its charter)
Colorado 84-0178360
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Golden, Colorado 80401
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 279-6565
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
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Securities registered pursuant to Section 12(g) of the Act:
Class B Common Stock (non-voting), no par value
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(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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. (X)
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 March 14, 1996:
Class A Common Stock - 1,260,000 shares
Class B Common Stock - 36,753,476 shares
PART I
ITEM 1. Business
(a) General Development of Business
Founded in 1873, Adolph Coors Company ("ACC" or the "Company") is the holding
company for Coors Brewing Company ("CBC"). CBC produces and markets beer and
other malt-based beverages. The Company's business was conducted as a
partnership or sole proprietorship until 1913, when it incorporated under the
laws of the State of Colorado. During the 1980's, the Company developed a
number of technology-based businesses. At the end of 1992, ACC spun off its
aluminum, packaging, ceramics and other technology businesses in a tax-free
distribution to shareholders. The spin-off was accomplished through a
dividend of the shares of common stock in a new public company, ACX
Technologies, Inc. (ACX)(NYSE:ACX).
CBC owns Coors Distributing Company and a number of smaller subsidiaries,
including Coors Transportation Company; Coors Energy Company; The Wannamaker
Ditch Company; The Rocky Mountain Water Company; CBC International, Inc.
(CBCI); Coors Global, Inc. (CGI); Coors Intercontinental, Inc. (CII) and
Coors Japan Company, Ltd. In 1992, substantially all of the assets of Coors
Energy Company and Coors Transportation Company were sold.
CBC and three of its subsidiaries, CBCI, CGI and CII own Coors Brewing
International C.V. (CV) which owns Coors Brewing Iberica S.A. (Coors Iberica)
and Coors Services, S.A. Coors Services, S.A. was established in 1995 to
provide management and administrative services to the CV. The CV conducts sales
and marketing in Europe, Eastern Europe, the Middle East and Africa.
Some of the statements that follow relate to the Company's future products
and business plans, financial results, performance and events which are
forward-looking based on current expectations. Actual results may differ
materially from the forward-looking statements.
(b) Financial Information About Industry Segments
The Company has continuing operations in a single industry segment, the
production and marketing of beer and other malt-based beverages.
(c) Narrative Description of Business
Coors Brewing Company - General
CBC is engaged in the production and marketing of high quality malt-based
beverage products. CBC places a priority on higher-margin products in the
premium and above-premium categories and has a number of distinctive brands
that satisfy consumer demands and taste trends. Most of CBC's sales are in
U.S. markets; however, CBC is committed to building profitable sales in
international markets. Sales of malt beverage products were 20.3 million
barrels in 1995, 20.4 million barrels in 1994 and 19.8 million barrels in
1993.
Marketing
Principal products and services: There are currently 26 products in the CBC
brand portfolio. CBC produces seven premium products in the Coors family of
brands, including Coors Light, Original Coors, Coors Artic Ice, Coors Artic
Ice Light, Coors Extra Gold, Coors Dry and Coors Cutter, a non-alcoholic
brew.
CBC produces and markets Zima Clearmalt, an innovative malt-based beverage
in the above-premium category. CBC, through UniBev, Ltd. (UniBev), an
operating unit which focuses on specialty and import beers, offers beers in
the specialty, above-premium category, including Winterfest; Herman Joseph's;
Memphis Brown; and Blue Moon, Honey Blonde Ale, Blue Moon Nut Brown Ale,
Blue Moon Belgian White Ale, Blue Moon Raspberry Cream Ale and Blue Moon
Harvest Pumpkin Ale, a seasonal product.
Through UniBev, CBC also sells a number of import or licensed products,
including George Killian's Irish Red, George Killian's Irish Brown Ale,
George Killian's Wilde Honey Ale, Castlemaine XXXX and Steinlager. Through
a joint venture, CBC also produces Cass Fresh, a product distributed in
South Korea.
CBC sells products in the popular-priced category: Keystone, Keystone Light,
Keystone Dry, Keystone Ice and Keystone Amber Light. Coors malt beverage
products are sold in most states with the exception of Coors Dry and Memphis
Brown, which are in limited distribution. A number of Coors products are
exported or produced and sold in overseas markets. International sales are
described in greater detail below.
New products/opportunities: In 1995, CBC introduced a new product, Killian's
Irish Brown Ale. Killian's Irish Brown Ale joined Killian's Irish Red in
establishing an "Irish family of brands" marketed by UniBev. UniBev also
distributes Steinlager in the U.S.; Steinlager is the number-one premium
beer in New Zealand and is distributed by Coors under license from Lion
Nathan International of New Zealand.
In the first quarter of 1995, CBC announced a limited market distribution
arrangement between UniBev and F.X. Matt Company of Utica, New York. UniBev
started a distribution test of a number of F.X. Matt's Saranac brands,
including Saranac Adirondack Amber, Saranac Golden Pilsner, Saranac Black
and Tan, Saranac Black Forest and Saranac Pale Ale.
Blue Moon Brewing Company (Blue Moon) is an operating unit of CBC created
during 1995 to support a new product line of unique, specialty brews. These
products are contract-brewed by F.X. Matt Company and marketed by UniBev.
Blue Moon introduced three year-round products in 1995: Blue Moon Honey Blonde
Ale, Nut Brown Ale and Belgian White Ale. In 1995, Blue Moon introduced one
seasonal product, Blue Moon Harvest Pumpkin Ale.
Three seasonal beers marketed by UniBev in 1994, Eisbock, Weizenbier and
Oktoberfest, were discontinued in 1995.
Coors Red Light was introduced nationwide during 1995. Red Light was designed
for consumers who liked some attributes of specialty beers, but found them
too heavy or bitter. Since this segment of the market did not develop as
anticipated, Coors discontinued Red Light early in 1996.
In early 1995, Coors introduced Coors Special Lager. This product was a
traditional full flavored lager containing only 89 calories. The product did
not meet expectations and was discontinued early in 1996.
In view of heightened consumer interest in craft-brewed products, Coors
Brewing Company reintroduced Herman Joseph's beer in late 1995. Herman Joseph's
beer is a special premium beer for consumers who want craft-brewed flavor
without the heavy taste or usual high cost of craft-brewed beers.
Zima Gold brand was introduced in 1995. Zima Gold brand was developed as an
alternative beverage with a bold, distinctive taste. Unfortunately, the success
of this product was not as expected and the product was withdrawn later in
the year.
In the spring of 1995, CBC celebrated the grand-opening of Coors Field ballpark
in Denver, Colorado by opening the first "brewery in a ballpark." This brewery,
with an annual capacity of approximately 4,000 barrels, is named The SandLot
Brewery at Coors Field and brews a full spectrum of specialty beers. The
SandLot Brewery is open year round.
In 1993, CBC announced that it would produce and market Castlemaine XXXX (an
Australian lager) in the U.S. through a joint venture with Lion Nathan
International of New Zealand. In 1994, CBC expanded its relationship with
Lion Nathan to include exclusive U.S. distribution of Steinlager, which has
been the best-selling premium beer in New Zealand.
Brand names, trademarks, patents and licenses: Trademarks owned by CBC include:
Original Coors, Coors Light, Coors Artic Ice, Coors Artic Ice Light, Coors
Extra Gold, Coors Dry, Coors Cutter, Zima Clearmalt, Winterfest, Keystone,
Keystone Light, Keystone Dry, Keystone Ice, Keystone Amber Light, Coors Red
Light, Coors Special Lager, Herman Joseph's and Blue Moon. CBC recognizes
that consumer knowledge of and loyalty to its brand names and trademarks is
extremely important to the long-term success of the Company. CBC also holds a
number of patents on innovative processes related to can-making, can-decorating
and other technical operations. The Company derives revenue from royalties
and licenses, but does not consider its business to be substantially
dependent upon such revenue.
Brand performance: Coors Light is the best selling brand in CBC's product
portfolio. For the past three years, Coors Light has accounted for
approximately two-thirds of CBC's total sales volume. CBC's next highest
volume brand is Original Coors. Products in the premium and above-premium
categories make up approximately 87% of CBC's volume.
Domestic sales operations: CBC's highest volume sales are in the states of
California, Texas, Pennsylvania, New York and New Jersey, comprising 47% of
total domestic volume.
In 1994, CBC reorganized its field sales department into eight field business
areas (FBAs) to enable CBC to become more familiar with its customers and to
anticipate and respond more quickly to their needs.
International marketing/partnerships: CBC intends to increase its presence in
international markets. The potential exists for financial returns that may
be superior to those in the domestic market. With the establishment of
production capacity in foreign locations, building market share and
distribution is now the first priority.
CBC, through its U.S. and foreign production facilities, exports its products
to a number of markets outside the United States, including American Samoa,
Australia, Austria, the Bahamas, Bahrain, Belgium, Bermuda, Cayman Islands,
Columbia, Cyprus, Dominican Republic, France, Greece, Guam, Guatemala,
Holland, Ireland, Italy, Jamaica, Japan, Panama, Palau, Puerto Rico, Russia,
St. Maarten, Saipan, Singapore, Sweden, Switzerland, the Turks and Caicos
Islands, the U.S. and British Virgin Islands and Zimbabwe. CBC also exports its
products to U.S. military bases worldwide. While export volumes do not
presently account for a significant portion of CBC's sales, they are
significantly more profitable, on a per barrel basis, than domestic sales.
CBC has existing licensing agreements with a number of international brewers.
CBC licenses Molson Breweries of Canada Limited (Molson) to brew and
distribute Original Coors and Coors Light in Canada, where Coors Light is the
best selling light beer.
In 1992, Miller Brewing Company (Miller) increased its ownership in Molson
to 20%. As a result of this and other matters which had arisen between CBC and
Molson, CBC initiated two legal actions related to its contractual arrangements
with Molson. These legal actions are ongoing and have not impacted the
success of CBC's brands in Canada. In connection with its agreement with
Molson, in March 1996, the Company received past due royalties and interest
income totalling $5.7 million (net of $0.6 million of withholding taxes). The
obligation of Molson to make this payment to CBC will be a subject of
arbitration proceedings that are scheduled to begin in May 1996.
In July 1995, because of differences in business goals, CBC and Asahi
Breweries, Ltd. (Asahi) agreed to terminate the licensing of the Coors
brand to Asahi in Japan. The Coors brand had been one of the top three
foreign premium brands in Japan for the past eight years. As a substitute
for its licensing agreement with Asahi, CBC established a subsidiary company,
Coors Japan Company, Ltd. (Coors Japan). The new subsidiary is based in
Tokyo, Japan and has assumed responsibility for the distribution, sales
and marketing of Coors products. The establishment of Coors Japan represents
an important step in CBC's long-term international strategy in Japan.
In September 1992, a joint venture between CBC and Scottish Courage, formerly
Scottish & Newcastle Breweries of Scotland, began brewing and distributing
Coors Extra Gold in the United Kingdom. Coors Extra Gold was introduced in
Scotland and northwest England in August 1992. In 1993, distribution was
expanded to include the remainder of Great Britain. In 1993, CBC introduced
Coors Extra Gold in Ireland. The brand is brewed by Scottish Courage in the
U.K. and distributed under license to Murphy Brewery Ireland Ltd., Dublin, a
subsidiary of Heineken. Coors Extra Gold was rated overall Best Draught Lager
at the 1994 Brewing Industry International Awards in England.
Beginning in 1991, CBC established a joint venture with Jinro Limited of
the Republic of Korea. CBC owns one-third of the joint venture, Jinro-Coors
Brewing Company,; Jinro Limited holds the remaining two-thirds. In the
second quarter of 1994, Jinro-Coors completed construction of a
1.8-million-barrel brewery in South Korea and began to produce the Cass
Fresh brand. In 1995, the brewing capacity was expanded to approximately 3.6
million barrels.
In its first few months, the Cass Fresh brand captured a 10% share of the
South Korean beer market. Presently, the brand represents 13% of the market
in South Korea. In October of 1994, Jinro-Coors launched Coors Extra Gold
brand in the South Korean market. Volume and sales of Jinro-Coors Brewing
Company are not included in CBC's financial results.
In March 1994, Coors Iberica purchased a 500,000-hectoliter brewery in
Zaragoza, Spain. The brewery was purchased from El Aguila S.A., of Madrid,
Spain. El Aguila S.A. is 51% owned by Amsterdam-based Heineken, N.V., the
world's second-largest brewer. The total investment by CBC in Spain is
expected to exceed $50 million, including the initial purchase price and
future spending on operations and marketing. CBC will contract brew
El Aguila products through 1998.
Coors Iberica brews the Coors Gold brand for sale in Spain and the Coors
Extra Gold brand for export to Austria, Belgium, Cyprus, France, Greece,
Holland, Ireland, Italy, Russia, Spain, Sweden, Switzerland, and Zimbabwe.
Distribution of Coors products in Spain is managed by El Aguila. Sales and
marketing are managed jointly by Coors Iberica and El Aguila. This
arrangement provides significant advantages over direct export of products
from U.S. facilities. Volume and sales from the Zaragoza brewery are
included in CBC's financial results.
In early 1996, ACC established a foreign sales corporation, Coors Export
Ltd., to take advantage of favorable U.S. tax laws involving foreign sales.
Product distribution: Delivery to retail markets in the United States is
accomplished through a national network of 575 independent distributors
and 4 distributors owned and operated by CBC's subsidiary, Coors
Distributing Company. Some distributors have multiple branches. The total
number of distributor locations in the U.S., including branch operations,
is 633. Delivery to export/international markets is accomplished via
licensing and distribution agreements with independent distributors.
In order to ensure the highest product quality, CBC has one of the
industry's most extensive distributor monitoring programs. This program
is designed to ensure that guidelines for proper refrigeration and rotation
of CBC's malt beverage products at both the wholesale and retail levels are
followed. Distributors are responsible for maintaining proper rotation of
the products at retail accounts and are required to replace CBC's malt
beverage products if sales to consumers have not occurred within a
prescribed time period.
No single distributor accounted for more than 5% of 1995 total sales.
Transportation
The number and geographic location of CBC's brewing operations require its
malt beverage products to be shipped a greater distance than most
competitors' products. Major competitors have multiple breweries and,
therefore, incur lower transportation costs than CBC to deliver products to
distributors. By packaging some products in Memphis, Tennessee, and Elkton,
Virginia, CBC is able to achieve more efficient product distribution and a
reduction of freight costs for certain markets. During 1995, 29% of total CBC
products sold were first shipped in CBC's insulated rail tank cars from Golden
and then blended, finished and packaged at the Memphis and Shenandoah plants.
CBC's Golden facilities are served by Burlington Northern, Inc., which
transports approximately 67% of CBC products packaged at the Golden facility
to Denver. From Denver the products are shipped by various railroad lines
to satellite redistribution centers and distributors throughout the country.
The rail cars assigned to CBC are specially built and insulated to maintain
temperature in route.
CBC is able to maintain high rail volume by use of 20 satellite
redistribution centers strategically located throughout the country. These
centers, operated by public warehouse companies and CBC, transfer CBC's malt
beverage products from rail cars to trucks for shipment to distributors. In
1995, approximately 75% of total rail car volume of packaged product from
Golden moved through the satellite redistribution centers.
CBC is heavily dependent upon rail distribution of its products, as noted
above. Any disruption by strike would impact CBC more than its major
competitors but the risk of such disruption appears unlikely.
The remaining 33% of CBC volume packaged in Golden is shipped by truck and
intermodal (piggyback) directly to distributors. Transportation vehicles are
also refrigerated or insulated to keep CBC's malt beverage products at
proper temperatures while in transit.
Operations
Production/packaging capacity: CBC currently has three domestic production
facilities. It owns and operates the world's largest single-site brewery in
Golden, Colorado; a packaging and brewing facility in Memphis, Tennessee;
and a packaging plant and distribution facility near Elkton, Virginia
(referred to as the Shenandoah facility).
The Golden brewery is the source location for all brands with the Coors
name, except for Coors Cutter. Most (66%) of CBC's beer is packaged in
Golden. The remainder is shipped in bulk from the Golden brewery to the
Shenandoah and Memphis facilities for blending, finishing and packaging.
The Memphis facility is currently packaging all products for export from the
United States and is brewing and packaging Zima Clearmalt, Castlemaine XXXX,
Killian's Wilde Honey Ale, Memphis Brown and Coors Cutter. Depending on
product mix and market opportunities, the full utilization of brewing
capacity in Memphis may or may not require additions to plant and equipment.
The Shenandoah facility, which currently packages certain CBC products for
distribution into eastern markets, can be expanded if necessary.
At the end of 1995, CBC had approximately 25 million barrels of annual
brewing capacity and 30 million barrels of annual packaging capacity.
Current capacity figures are dependent on product mix and may change with
shifting consumer preferences for specific brands and/or packages. The
increasing proliferation of products and packages creates logistical challenges
for CBC as well as for most other brewers. CBC's three facilities provide
sufficient brewing and packaging capacity to meet foreseeable consumer demand.
Significant portions of CBC's aluminum can, end, glass bottle and malt
requirements are produced in owned facilities or facilities shared with
joint venture partners. CBC has arranged for sufficient supplies for its
container requirements with its joint venture partners. CBC has sufficient
malting facilities to fulfill its current and projected requirements.
Container manufacturing facilities: CBC owns a can manufacturing facility,
which produces approximately 3.6 billion aluminum cans per year. In addition,
CBC owns an aluminum can end manufacturing facility, which provides aluminum
ends and tabs to CBC. Together, container assets comprise approximately 11.5%
of CBC's property assets. In May of 1994, CBC and American National Can
Company began a container joint venture to produce beverage can ends at the
CBC end manufacturing facility for sale to CBC and to outside customers. This
joint venture was expanded in the third quarter of 1994 to include can
manufacturing. The joint venture has an initial term of seven years and can
be extended for two additional three-year terms. Over time, the joint venture
is intended to improve utilization of both facilities and to enhance the
return on this investment. In 1995, substantially all of the cans produced
were purchased by CBC. The joint venture is committed to supplying 100% of
the CBC Golden facility's can and end requirements.
In June 1995, CBC and Anchor Glass Container Corporation (Anchor)
established a long-term joint venture, the Rocky Mountain Bottle Company,
to produce glass bottles at the CBC glass manufacturing facility. The joint
venture is intended to lower unit costs, increase output and create
efficiencies at the glass plant. CBC contributed approximately $16.2 million in
machinery, equipment and certain personal property to the formation of the
bottle partnership. The partnership has an initial term of 10 years and can
be extended for additional two-year periods.
In 1995, the bottle manufacturing plant produced approximately 778 million
bottles for use by CBC. There were no outside sales. Bottles manufactured by
CBC are made with an average recycled content of 35%. To assist in its goal
of manufacturing bottles with recycled material, CBC has constructed a glass
recycling facility in Wheat Ridge, Colorado. Construction of the facility
was completed in mid-1994 and doubled the amount of glass the facility can
recycle annually. The recycling facility is operated by the Rocky Mountain
Bottle Company.
Other facilities: CBC owns waste treatment facilities, which process waste
from CBC's manufacturing operations as well as municipal waste from the City
of Golden.
In September 1995, CBC sold its power plant equipment and support facilities
to Trigen-Nations Energy Corporation, L.L.L.P. (Trigen) for $22 million. CBC
has agreed to purchase from Trigen the electricity and steam needed to
operate the brewery's Golden facilities. The 25-year agreement provides for
significant improvements by Trigen.
CBC continues to improve asset utilization by divestiture of non-core
assets and by continued improvement of capacity utilization through joint
ventures and alliances. Joint venture partnerships for the malting
operation are being considered.
Capital expansion: In 1995, the Company spent approximately $146 million
on capital expenditures. While management plans to invest appropriately in
order to ensure the ongoing productivity and efficiency of CBC assets, a
priority will be given to those projects which the Company believes
offer returns on investment in excess of CBC's cost of capital. CBC
expects its capital expenditures for 1996 to be approximately $100 million.
Raw Materials/Sources and Availability
CBC uses all natural ingredients in the production of its beers. CBC has one
of the longest beer brewing cycles in the industry. CBC adheres to strict
formulation and quality standards in selecting its raw materials. CBC
believes it has sufficient access to raw materials and packaging materials
to continue to meet its quality and production requirements.
Barley, barley malt, starch and hops: CBC uses a proprietary strain of
barley, developed by CBC's agronomists, in most of its malt beverage
products. Virtually all of this barley is grown on irrigated farmland in
the western United States under contractual agreements with area farmers.
CBC's malting facility in Golden, Colorado, produces malt for all CBC products
except Zima Clearmalt. CBC maintains inventory levels in owned locations
sufficient to continue production in the event of any disruption in supply
of barley or malt.
Rice and refined cereal starch, which are interchangeable in CBC's brewing
process, are purchased from outside suppliers. Foreign and domestic hops
are also purchased. Again, adequate inventories are maintained to
continue production through any foreseeable disruption in supply.
Water: CBC utilizes naturally filtered water from underground aquifers
to brew malt beverages at its Golden facility. Water from private deep
wells is used for final blending and packaging operations for malt beverages
packaged at plants located outside Colorado. Water quality and composition
were primary factors in all facility site selections. Water from CBC's
sources in Golden, Memphis and Shenandoah is ideally balanced with minerals and
dissolved solids to brew high-quality malt beverages.
CBC continually monitors the quality of all the water used in its brewing
and packaging processes for compliance with CBC's own stringent quality
standards as well as applicable federal and state water standards. CBC owns
water rights believed to be adequate to meet all of CBC's present
requirements for both brewing and industrial uses; however, it continues to
acquire water rights and add water reservoir capacity, as appropriate, to
provide for long-term strategic growth plans and to sustain brewing
operations in the event of a prolonged drought.
Packaging materials: During 1994 and 1995, approximately 57% of CBC's malt
beverage products were packaged in aluminum cans.
Approximately 39% of the cost of malt beverage products packaged in cans is
the cost of the aluminum can. CBC's aluminum requirements for cans and ends
are purchased through CBC's joint venture agreement with American National
Can Company (ANC), including purchases from Golden Aluminum Company, a
subsidiary of ACX. Aluminum cans for CBC's malt beverage products packaged
at the Memphis plant were purchased from an outside supplier.
Glass bottles were used to package approximately 31% of CBC's malt beverage
products in 1995. Approximately half of all bottles were produced in CBC's
bottle manufacturing plant, which is now part of the Rocky Mountain Bottle
Company, a joint venture with Anchor. Beginning in 1996, CBC will purchase
all of its glass bottles from either the Rocky Mountain Bottle Company or
directly from Anchor, a preferred supplier.
The remainder of the malt beverages sold during 1995 was packaged in
quarter- and half-barrel stainless steel kegs and two different sizes of
a plastic sphere called "The Party Ball," an innovation in packaging
introduced by CBC in 1988.
Most of the secondary packaging for CBC's products, including bottle labels
and paperboard products, is supplied by Graphic Packaging Corporation, an
ACX subsidiary.
Aluminum costs in 1995 rose dramatically, driving up cost of goods sold.
See related discussion in the Management's Discussion and Analysis.
Aluminum costs are expected to decline slightly in 1996 because of
modifications in the can-making process and lower aluminum prices.
Supply contracts with ACX companies: At the time of the spin-off of ACX,
in 1992, CBC negotiated long-term supply contracts with operating subsidiaries
of ACX for aluminum and packaging materials. These contracts, negotiated at
market prices, were to be in effect through 1997. The aluminum contracts were
cancelled in 1995. See discussion under Item 11, Compensation Committee
Interlocks and Insider Participation for further details.
Energy: With sale of the power plant equipment to Trigen, CBC now purchases
electricity and steam for its Golden manufacturing facilities from Trigen.
Coors Energy Company supplies Trigen with coal for its steam generator
system. CBC does not anticipate future energy supply problems.
Seasonality of the Business
The beer industry is subject to seasonal fluctuation. CBC's sales volumes
are normally at their lowest in the first and fourth quarters and highest
in the second and third quarters. The Company's fiscal year is a 52- or 53-week
year that ends on the last Sunday in December. The 1995 fiscal year was
53 weeks in length while 1996 will be 52 weeks long. Additionally, the
Company will change its reporting to a 12-period fiscal year from the
13-period fiscal year that was used in 1995, 1994 and prior years. The
12-period fiscal year is composed of four 13-week quarters compared to
the former 13-period fiscal year which had three 12-week quarters and one
16-week quarter (third quarter). The change to 13-week quarters creates a
fiscal year that is more comparable to the reporting practices of the
Company's competitors.
Research and Development
CBC's research and development expenditures are primarily related to new
product and package development, brewing process and ingredients, brewing
equipment, improved manufacturing techniques for packaging supplies, and
environmental improvements in CBC's processes and packaging materials.
The focus of these programs is to improve the quality and value of its
malt beverage products while reducing costs through more efficient
processing and packaging techniques, equipment design, and improved
varieties of raw materials. CBC's research and development dollars are being
strategically applied to short-term as well as long-term opportunities.
Approximately $15.4 million, $13.3 million and $13.0 million was spent on
research and project development in 1995, 1994 and 1993, respectively.
To support the development of new products, CBC maintains a fully-equipped
pilot brewery within the Golden facility, with a 6,500-barrel annual capacity.
This on-site resource enables CBC to brew small batches of innovative products
without interrupting ongoing production and operations in the main brewery.
Regulations
Federal laws and regulations govern the operations of breweries; the federal
government and all states regulate trade practices, advertising and marketing
practices, relationships with distributors and related matters. Governmental
entities also levy various taxes, license fees and other similar charges and
may require bonds to ensure compliance with applicable laws and regulations.
There are a number of emerging regulatory issues that could impact business
operations over the next few years, including potential increases in state
and federal excise taxes, restrictions on the advertising and sale of alcohol
beverages, new packaging regulations and others.
Federal excise taxes on malt beverages are presently $18.00 per barrel. State
excise taxes are also levied at rates that ranged in 1995 from a high of
$32.65 per barrel in Alabama to a low of $0.62 per barrel in Wyoming, with
an average of $7.19 per barrel. In 1995, CBC paid more than $385 million in
federal and state excise taxes. A substantial increase in federal excise
taxes would have a negative impact on the entire industry and could have a
material effect on CBC sales and profitability. CBC is vigorously opposed to
any additional increases in federal and/or state excise taxes and will work
diligently to ensure that its view is adequately represented in the ongoing
debate.
Environmental
Compliance with the provisions of federal, state and local environmental laws
and regulations did not have a material effect on the capital expenditures,
earnings or competitive position of the Company during 1995.
The Company also continues its commitment to programs directed toward efficient
use of resources, waste reduction and pollution prevention. Programs
currently underway include recycling initiatives, down-weighting of product
packages, and, where practicable, increasing the recycled content of product
packaging materials, paper and other supplies. A number of employee task
forces throughout CBC continually seek effective ways to control hazardous
materials and to develop new ways to reduce emissions and waste.
Employees and Employee Relations
The Company has approximately 6,200 full-time employees, 1,800 of whom are
salaried.
In July 1995, employees at CBC's Elkton, Virginia facility, rejected a
Teamsters bid to serve as the collective bargaining agent for workers at the
plant. Of CBC's three production facilities, only the Memphis, Tennessee, plant
workers are represented by a labor union (Teamsters).
Foreign Operations
The Company's foreign operations and export sales are not yet a material part
of its business. The Company is committed to expanding its foreign operations
through export sales, licensing agreements and joint ventures.
Brewing Company Subsidiaries
Coors Distributing Company (CDC) is CBC's largest subsidiary. CDC owns and
operates distributorships in five markets across the United States. CDC
operations in 1995 accounted for approximately 5.2% of CBC's total beer sales.
In late 1992, Coors Energy Company (CEC) became a subsidiary of CBC. During
1992, CEC sold substantially all of its oil and gas exploration and production
assets. CEC owned a transmission pipeline to bring natural gas to various
CBC facilities in Colorado. This pipeline was sold to Trigen in September
1995 as part of the power plant sale. Through a subsidiary, CEC continues
to operate a gas transmission pipeline to provide for the energy needs of
CBC's Shenandoah facility. In early 1995, CEC divested a portion of its
Colorado coal reserves (see Note 12 to the financial statements in Item 8).
In 1992, CBC sold substantially all of the assets and operations of Coors
Transportation Company.
Other subsidiary operations of CBC include The Wannamaker Ditch Company and The
Rocky Mountain Water Company (both carry process water from nearby Clear Creek
to various CBC reservoirs in Golden).
Coors Japan Company, Ltd. was also established in 1995 and is a direct
subsidiary of CBC. See discussion of this subsidiary presented above under
International Marketing/Partnerships.
Competitive conditions
Known trends and competitive conditions: Industry and competitive information
was compiled from the following industry sources: Beer Marketer's Insights and
The Wall Street Journal. While management believes these sources are reliable,
the Company cannot guarantee the absolute accuracy of these numbers and
estimates.
1995 Industry overview: The beer industry in the United States is highly
competitive. Industry volume growth in domestic markets has been below 1% a
year for the past several years. In 1995, domestic shipments are estimated to
be down 1.1% from 1994. For the past several years, brewers have attempted to
gain market share through competitive pricing. In 1995, price promotions and
price discounting continued to erode net price realizations for brewers.
While projected increases in raw materials costs throughout the industry could
result in modest price increases and some relief from price discounting in the
near term, it is possible that competitors will continue to concentrate on
market share gains instead of profitability, which will place continued
downward pressure on pricing. Industry growth is increasingly dependent on
introductions of new, higher-margin products including imports, specialty
brews, and other innovative brands and expansion into international markets.
A number of important trends continued in the U.S. beer market in 1995. The
first was a trend toward "trading up." Consumers continued to move away from
lower-priced brands to higher-priced brands, including specialty products and
imports in the above-premium category. This caused a related shift in
packaging preferences, toward glass bottles and away from aluminum cans.
Concurrent with the shift in consumer preference is the recent proliferation of
microbreweries.
To capitalize on the trend toward specialty products and craft-brewed beers,
brewers are introducing new products at an accelerating rate. This
proliferation of products creates unique challenges in operations, logistics
and marketing for all brewers, distributors and retailers.
CBC competitive position: CBC's malt beverage products compete with numerous
above-premium, premium, low-calorie, popular-priced, non-alcohol and
imported brands produced by national, regional, local and international
brewers. More than 89% of domestic volume is attributable to the top six
domestic brewers, Anheuser-Busch, Inc. (AB), Philip Morris, Inc. through its
subsidiary Miller Brewing Company (Miller), CBC, The Stroh Brewery Company,
G. Heileman Brewing, and S & P Company. CBC competes most directly with AB and
Miller, the dominant companies in the industry. CBC is the nation's third-
largest brewer and, according to Beer Marketer's Insights (BMI) estimates,
accounted for approximately 10.1% of the total 1995 U.S. brewing industry
shipments of malt beverages (including exports and U.S. shipments of
imports). This compares to Miller's 22.6% share and AB's 44.1% share.
Given its position in the industry, CBC continues to face significant
competitive disadvantages related to economies of scale. In addition to lower
transportation costs achieved by major competitors with multiple breweries,
these larger brewers also recognize economies of scale in advertising
expenditures. CBC, in an effort to achieve and maintain national advertising
exposure, must spend substantially more per barrel of beer sold than its
major competitors. On a per barrel basis, the Company estimated that CBC spends
nearly 75% more on advertising than AB; however, the gap between CBC's
and Miller's spending (on a per barrel basis) appears to be narrowing. A
significant level of advertising expenditure is necessary for CBC to hold
and increase its share of the U.S. beer market. This, coupled with ongoing
price competition, puts more pressure on CBC's margins in comparison to those
of CBC's principal competitors.
On February 29, 1996, The Stroh Brewery Company announced that it had signed a
letter of intent with G. Heileman Brewing Company, Inc. to acquire all of
Heileman's assets. As a result of the transaction, expected to be completed by
July 1996, Stroh would acquire five Heileman breweries and all Heileman brands.
ITEM 2. Properties
The Company's major facilities are set out below:
<TABLE>
<CAPTION>
Facility Location Product
<S> <C> <C>
Brewery/Packaging Golden, Colorado Malt Beverages/Packaged
Malt Beverages
Packaging Elkton, Virginia Packaged Malt Beverages
Brewery/Packaging Memphis, Tennessee Malt Beverages/Packaged
Malt Beverages
Brewery/Packaging Zaragoza, Spain Malt Beverages/Packaged
Malt Beverages
Can and End Plants Golden, Colorado Aluminum Cans and Ends
Bottle Plant Wheat Ridge, Colorado Glass Bottles
Distribution Warehouse Anaheim, California Wholesale Beer Distribution
Distribution Warehouse Boise, Idaho Wholesale Beer Distribution
Distribution Warehouse Denver, Colorado Wholesale Beer Distribution
Distribution Warehouse Oklahoma City, Oklahoma Wholesale Beer Distribution
Distribution Warehouse* San Bernardino, California Wholesale Beer Distribution
* Leased
</TABLE>
The original brewery site at Golden, which is approximately 2,400 acres,
contains brewing, packaging and can manufacturing facilities, as well as
gravel deposits and water-storage facilities.
CBC's can and end plants are operated by a joint venture between CBC and
American National Can Company.
CBC and Anchor Glass Container Corporation formally established a long-term
partnership, the Rocky Mountain Bottle Company, to produce glass bottles at the
CBC glass manufacturing facility in Wheat Ridge, Colorado.
The Company owns 2,700 acres of land in Rockingham County, Virginia, where the
Shenandoah facility is located, and 132 acres in Shelby County, Tennessee,
where the Memphis plant is located.
All of the Company's facilities are well maintained and suitable for their
respective operations. In 1995, CBC estimates the brewing facilities operated
at approximately 81% of the 1996 brewing capacity and the packaging facilities
operated at approximately 67% of the 1996 packaging capacity. Annual production
capacity can vary due to product mix, packaging mix and seasonality.
A CEC subsidiary continues to operate a gas transmission pipeline to provide
for the energy needs of the Shenandoah facility.
ITEM 3. Legal Proceedings
See the Environmental section of Management's Discussion and Analysis for a
discussion of the Company's obligation for potential remediation costs at the
Lowry Landfill Superfund site and related legal proceedings.
The Company is party to numerous other legal proceedings arising from its
business operations. In each proceeding, the Company is vigorously defending
the allegations. Although the eventual outcome of the various proceedings
cannot be predicted, no single such proceeding, and no group of such similar
matters, is expected to result in liability that would be material to the
Company's financial position or results of operations.
ITEM 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter ended December 31, 1995.
PART II
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Adolph Coors Company Class B common stock is traded on the over-the-counter
market and is included in the NASDAQ Stock Market National Market (NNM)
listings, under the symbol "ACCOB." Daily stock prices are listed in major
newspapers, generally alphabetically under "CoorsB."
The approximate number of record security holders by class of stock at
March 14, 1996 is listed below:
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
<S> <C>
Class A Common Stock, voting, All shares of this class are
$1 par value held by the Adolph Coors, Jr. Trust
Class B Common Stock, non-voting,
no par value 5,168
Preferred Stock, non-voting, None issued
$1 par value
</TABLE>
The range of the high and low quotations and the dividends paid per share on
the Class B Common Stock for each quarter of the past two years are shown
below. The Company expects to continue paying comparable dividends in the
future:
<TABLE>
<CAPTION>
1995
Market Price
High Low Dividends
<S> <C> <C> <C>
First Quarter 17 1/4 15 1/2 $ 0.125
Second Quarter 18 1/8 15 1/8 $ 0.125
Third Quarter 18 3/8 15 1/8 $ 0.125
Fourth Quarter 23 1/4 17 $ 0.125
</TABLE>
<TABLE>
<CAPTION>
1994
Market Price
High Low Dividends
<S> <C> <C> <C>
First Quarter 19 1/4 14 7/8 $ 0.125
Second Quarter 20 1/4 17 1/2 $ 0.125
Third Quarter 20 7/8 16 7/8 $ 0.125
Fourth Quarter 19 14 3/4 $ 0.125
</TABLE>
ITEM 6. Selected Financial Data
Following is selected financial data for ACC for the nine years ended
December 31, 1995:
<TABLE>
<CAPTION>
(In thousands, except per share data)
1995 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Barrels of Malt Beverages Sold 20,312 20,363 19,828 19,569
- -------------------------------------------------------------------------------
Summary of Operations
Net sales $1,675,379 $1,662,671 $1,581,811 $1,550,788
- -------------------------------------------------------------------------------
Cost of goods sold 1,091,763 1,062,789 1,036,864 1,035,544
Marketing, general
and administrative 503,503 492,403 454,130 429,573
Research and project
development 15,385 13,265 13,008 12,370
Special (credits) charges (15,200) (13,949) 122,540 --
- -------------------------------------------------------------------------------
Total operating expenses 1,595,451 1,554,508 1,626,542 1,477,487
- -------------------------------------------------------------------------------
Operating income (loss) 79,928 108,163 (44,731) 73,301
Other (income) expense
- net 6,650 3,943 12,099 14,672
- -------------------------------------------------------------------------------
Income (loss) before
income taxes 73,278 104,220 (56,830) 58,629
Income tax expense
(benefit) 30,100 46,100 (14,900) 22,900
- -------------------------------------------------------------------------------
Income (loss) from
continuing operations $ 43,178 $ 58,120 $ (41,930) $ 35,729
- -------------------------------------------------------------------------------
Per share of common stock $ 1.13 $ 1.52 $ (1.10) $ 0.95
Income (loss) from
continuing operations as a
percentage of net sales 2.6% 3.5% (2.6%) 2.3%
===============================================================================
Financial Position
Working capital $ 38,857 $ (25,048) $ 7,197 $ 112,302
Properties - net $ 887,409 $ 922,208 $ 884,102 $ 904,915
Total assets** $1,386,857 $1,371,576 $1,350,944 $1,373,371
Long-term debt $ 195,000 $ 131,000 $ 175,000 $ 220,000
Other long-term
liabilities $ 33,435 $ 30,884 $ 34,843 $ 52,291
Shareholders' equity** $ 695,016 $ 674,201 $ 631,927 $ 685,445
Net book value per share
of common stock** $ 18.21 $ 17.59 $ 16.54 $ 18.17
Total debt to total
capitalization 24.9% 20.6% 26.3% 24.3%
Return on average
shareholders' equity 6.3% 8.9% (6.4%) (0.2%)
==============================================================================
Other Information
Dividends $ 19,066 $ 19,146 $ 19,003 $ 18,801
Per share of common
stock $ 0.50 $ 0.50 $ 0.50 $ 0.50
Average number of
common shares
outstanding 38,170 38,283 37,989 37,561
Gross profit $ 583,616 $ 599,882 $ 544,947 $ 515,244
Capital expenditures $ 145,797 $ 160,314 $ 120,354 $ 115,450
Depreciation, depletion
and amortization $ 122,830 $ 120,793 $ 118,955 $ 114,780
Full-time employees 6,200 6,300 6,200 7,100
Total taxes $ 466,740 $ 472,854 $ 401,667 $ 437,089
Market price range of
common stock:
High $ 23 1/4 $ 20 7/8 $ 23 1/8 $ 22 7/8
Low $ 15 1/8 $ 14 3/4 $ 15 $ 15 1/2
</TABLE>
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Barrels of Malt
Beverages Sold 19,521 19,297 17,698 16,534 15,658
- ------------------------------------------------------------------------------
Summary of Operations
Net sales $1,529,986 $1,478,287 $1,367,718 $1,273,745 $1,169,983
- ------------------------------------------------------------------------------
Cost of goods sold 1,039,207 980,766 909,339 825,071 750,941
Marketing, general
and administrative 434,141 398,889 386,991 369,006 329,313
Research and project
development 14,252 10,196 10,853 11,125 11,105
Special (credits)
charges 29,599 30,000 41,670 -- --
- ------------------------------------------------------------------------------
Total
operating expenses 1,517,199 1,419,851 1,348,853 1,205,202 1,091,359
- ------------------------------------------------------------------------------
Operating
income (loss) 12,787 58,436 18,865 68,543 78,624
Other (income) expense
- net 4,403 5,903 2,546 (6,471) (6,022)
- ------------------------------------------------------------------------------
Income (loss) before
income taxes 8,384 52,533 16,319 75,014 84,646
Income tax expense
(benefit) (8,700) 20,300 9,100 28,700 33,500
- ------------------------------------------------------------------------------
Income (loss) from
continuing
operations $ 17,084 $ 32,233 $ 7,219 $ 46,314 $ 51,146
- ------------------------------------------------------------------------------
Per share of
common stock $ 0.46 $ 0.87 $ 0.20 $ 1.26 $ 1.40
Income (loss) from
continuing
operations as a
percentage of
net sales 1.1% 2.2% 0.5% 3.6% 4.4%
==============================================================================
Financial Position
Working capital $ 110,443 $ 201,043 $ 193,590 $ 196,687 $ 242,406
Properties - net $ 933,692 $1,171,800 $1,012,940 $1,033,012 $ 975,781
Total assets** $1,844,811 $1,761,664 $1,530,783 $1,570,765 $1,456,493
Long-term debt $ 220,000 $ 110,000 -- -- --
Other long-term
liabilities $ 53,321 $ 58,011 $ 16,138 $ 19,367 $ 26,376
Shareholders'
equity** $1,099,420 $1,091,547 $1,060,900 $1,062,064 $1,031,811
Net book value
per share of
common stock** $ 29.33 $ 29.20 $ 28.75 $ 29.00 $ 28.19
Total debt to total
capitalization 19.5% 9.2% 2.0% 1.7% 0.4%
Return on average
shareholders'
equity 2.3% 3.6% 1.2% 4.5% 4.8%
=============================================================================
Other Information
Dividends $ 18,718 $ 18,591 $ 18,397 $ 18,311 $ 18,226
Per share of common
stock $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.50
Average number of
common shares
outstanding 37,413 37,148 36,781 36,621 36,497
Gross profit $ 490,779 $ 497,521 $ 458,379 $ 448,674 $ 419,042
Capital
expenditures $ 241,512 $ 183,368 $ 149,616 $ 157,995 $ 199,541
Depreciation,
depletion and
amortization $ 108,367 $ 98,081 $ 122,439 $ 111,432 $ 99,422
Full-time
employees 7,700 7,000 6,800 6,900 6,800
Total taxes $ 405,789 $ 251,606 $ 236,740 $ 236,683 $ 234,352
Market price
range of
common stock:
High $ 24 1/4 $ 27 3/8 $ 24 3/8 $ 21 $ 30
Low $ 17 3/8 $ 17 1/8 $ 17 3/8 $ 16 1/2 $ 16 1/4
*Numbers in italics include results of discontinued operations.
**Reflects the dividend of ACX Technologies, Inc. to shareholders during 1992.
</TABLE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
INTRODUCTION Adolph Coors Company ("ACC" or the "Company") is the holding
company for Coors Brewing Company ("CBC"). CBC produces and markets quality
malt-based beverages.
The following summarizes the significant factors affecting the consolidated
results of operations and liquidity and capital resources of ACC during the
three year period ended December 31, 1995. Unusual or nonrecurring items make
it more difficult to evaluate the Company's ongoing operations. Consequently,
consolidated financial results for each year are first reviewed separately
including the effects of special and nonrecurring items. Then consolidated
financial results are reviewed excluding these special and nonrecurring items.
This analysis should be read in conjunction with the financial statements and
notes to the financial statements included in this annual report.
CONSOLIDATED RESULTS OF OPERATIONS FOR FISCAL YEARS 1995, 1994 AND 1993
Summary of operating results:
<TABLE>
<CAPTION>
For the years ended
December 31, December 25, December 26,
1995 1994 1993
(In thousands, except earnings per share)
<S> <C> <C> <C>
Operating Income (Loss)
As reported $79,928 $108,163 ($44,731)
Excluding Special items 64,728 94,214 77,809
Net Income (Loss)
As reported 43,178 58,120 (41,930)
Excluding Special items 33,944 49,720 33,600
Earnings (Loss) per Share
As reported $1.13 $1.52 ($1.10)
Excluding Special items $0.89 $1.30 $0.88
</TABLE>
1995 Consolidated Results of Operations: For the 53-week fiscal year ended
December 31, 1995, ACC reported net income of $43.2 million, or $1.13 per
share. In the fourth quarter, ACC recorded a net special credit which included
a gain from the curtailment of certain postretirement benefits. Partially
offsetting this credit were severance charges for a limited work force
reduction. The net effect of these two items was a special credit of $15.2
million pretax, or $0.24 per share after tax. Without the net special credit,
ACC would have reported net income of $33.9 million, or $0.89 per share.
1994 Consolidated Results of Operations: For the 52-week fiscal year ended
December 25, 1994, ACC reported net income of $58.1 million, or $1.52 per
share. Two nonrecurring items in 1994 resulted in a net special credit to
ACC. The Company reached a settlement with a number of its insurance carriers
which enabled it to recover a portion of the costs associated with the Lowry
Landfill Superfund site. This was partially offset by a write-down of
distributor assets. The effect of these two items was a net special credit of
approximately $13.9 million pretax, or $0.22 per share after tax. Without the
net special credit, ACC would have reported 1994 net income of $49.7 million,
or $1.30 per share.
1993 Consolidated Results of Operations: For the 52-week fiscal year ended
December 26, 1993, the Company reported a net loss of $41.9 million, or $1.10
per share. The Company recorded special charges of $122.5 million in the fourth
quarter primarily related to the costs of a significant restructuring intended
to reduce costs and improve performance. The net loss was also the result of
an after-tax charge of $3.2 million, or $0.08 per share, related to the 1993
retroactive increase of 1% in the federal corporate income tax rate, and
the related revaluation of deferred income tax liability. Excluding these
special charges, the Company's net income would have been $33.6 million, or
$0.88 per share.
The 1993 restructuring charge, which totalled $109.5 million pretax, included
$70.2 million for voluntary separation and enhanced early retirement
packages designed to reduce CBC's white collar work force. Of the remaining
$39.3 million, approximately $22.0 million related to workplace redesign and
other profit improvement initiatives, and approximately $17.3 million
related to asset write-downs. Substantially all of the charges related to
voluntary separation and enhanced early retirement packages were paid in
1993; other costs related to workplace redesign and other profit improvement
initiatives were accrued in 1993 and substantially all were paid in 1994 and
1995. Special charges related to the write down of certain distributor assets
and a provision for environmental enhancements totalled $13.0 million.
Together the aggregate impact of the special charges was $1.98 per share.
Trend summary: percentage increase/(decrease) 1995, 1994 and 1993:
The table below reflects trends in operating results, excluding special and
non-recurring items.
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Volume (0.3%) 2.7% 1.3%
Net sales 0.8% 5.1% 2.0%
Avg. price increase 1.0% 0.3% 1.1%
Gross profit (2.7%) 10.1% 5.8%
Operating income (31.3%) 21.1% 6.1%
Advertising expense 0.9% 20.1% 8.8%
General and Administrative 2.2% (9.7%) 2.2%
</TABLE>
CONSOLIDATED RESULTS OF CONTINUING OPERATIONS: 1995 VS. 1994, 1994 VS. 1993
Excluding special and non-recurring items.
1995 vs. 1994
Although total barrel sales declined by 0.3%, net sales increased by 0.8% in
1995 from 1994 because of fourth quarter price increases in a few high volume
states and, to a lesser extent, because of volume increases in higher priced
international markets. Also impacting net sales was an unfavorable change in
product mix - primarily lower Zima Clearmalt volumes. Zima volumes declined
approximately 49% in 1995 versus the national rollout volumes of 1994.
Gross profit decreased $16.3 million and it also decreased as a percent of net
sales to 34.8% from 36.1% in 1994. This decrease was primarily the result of
increased aluminum and other packaging costs and the lower sales volume of
Zima Clearmalt, which has a higher gross profit percentage than other brands.
Other unfavorable factors included non-recurring costs from the sale of the
Company's power plant equipment and support facilities, costs associated with
the Rocky Mountain Bottle Company plant and the write off of obsolete
packaging supplies. These costs were offset in part by incremental container
joint venture income (see Note 10 to the financial statements contained in
Item 8).
Operating income declined 31.3% in 1995 from 1994. This was caused by the lower
gross profit discussed above as well as expense increases of 2.3% in
marketing (including advertising), 2.2% in general and administrative (G & A)
and 16.0% in research and project development. The increase in marketing
expense was caused primarily by the Company's efforts to strengthen the
domestic and international sales organizations. Advertising expense in total
was relatively unchanged from 1994 although a significant amount of the
expense was redirected from Zima, Artic Ice and Artic Ice Light to Coors
Light and new brand introductions. The G & A increase over 1994 was caused
by labor cost increases and continuing efforts to develop and execute
the Company's performance initiatives. Research and project development
increases over 1994 were the result of an increase in the numbers of new
products and packages being considered.
Net non-operating expense increased to $6.7 million in 1995 compared to $3.9
million in 1994. Although $44 million in principal payments were made in 1995
on ACC's medium-term notes, interest expense was 3.5% higher in 1995 versus
1994 due to the additional $100 million placement of Senior Notes in the
third quarter of 1995. Income from miscellaneous items was $2.1 million
higher in 1994 than 1995 due to a gain on the sale of a distributorship and
other investments.
The Company's effective tax rate declined in 1995 to 41.6% from 45.0%. The 1994
rate was higher than the 1995 rate primarily due to the effect of a valuation
allowance for a tax loss carryforward. Also contributing to the decline were
some non-recurring, non-taxable income items in 1995. The 1995 effective tax
rate was higher than the statutory tax rate because of non-deductible expenses.
Net income in 1995 was $33.9 million, or $0.89 per share, compared to $49.7
million, or $1.30 per share, in 1994, representing a 31.5% decline in
earnings per share.
1994 vs. 1993
Net sales increased by 5.1% in 1994 from 1993. This increase was due to a 2.7%
increase in volume and a shift in product mix to products in the premium and
above-premium price categories. Gross profit improved to 36.1% of net sales as
compared to 34.5% in 1993. This improvement was primarily the result of
increased volume, improved brand mix profitability, operational efficiencies
and lower aluminum costs.
Operating income improved 21.1% in 1994 over 1993. Although marketing
expense (including advertising) grew substantially in 1994, general and
administrative (G&A) expense declined by 9.7%. The increase in marketing
expense was primarily due to the national rollout of Zima Clearmalt and the
introduction and expansion of Coors Artic Ice and Coors Artic Ice Light. The
decline in G&A expense resulted from the restructuring effort that was begun
in 1993 to reduce overhead costs. Research and project development expense
was essentially unchanged in 1994 as compared to 1993.
Net non-operating expenses decreased to $3.9 million in 1994 compared to $12.1
million in 1993. Income from miscellaneous items increased by $4.9 million due
to a gain on the sale of investments and higher royalty income related to
licensed can-making and can-decorating technology. Net interest expense
decreased $3.3 million because of the $50 million principal payment in June
1994 on ACC's medium-term notes.
The Company's effective tax rate declined in 1994 to 45.0% from 48.9% in 1993.
The decline was largely attributable to the revaluation of ACC's deferred tax
liability in 1993 related to the 1993 1% increase in the federal corporate
income tax rate. The 1994 effective tax rate was higher than the statutory tax
rate because of non-deductible expenses and a valuation allowance for a tax
loss carryforward.
Net income was $49.7 million, or $1.30 per share, in 1994 compared to $33.6
million, or $0.88 per share, representing a 47.7% improvement in earnings per
share.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's primary sources of liquidity are cash provided from operating
activities and external borrowing. The Company continues to be in a strong
position to generate cash internally because of a strong working capital
position and the expectation of a continued ability to generate significant
amounts of cash from operating activities. The Company's 1995 net cash
position was $32.4 million, a slight increase compared to $27.2 million in
1994. The Company's 1994 net cash position decreased significantly from $82.2
million in 1993.
Anticipated capital expenditures in 1996 are expected to be approximately $100
million, significantly below 1995 expenditures. Because of this reduction,
the Company believes that cash flows from operations and short-term borrowings
are adequate to meet its ongoing operating requirements, scheduled principal
debt repayments and debt service costs, anticipated capital expenditures and
dividend payments.
Operating Activities
Including net special credits/charges, net cash provided by operations was
$90.1 million in 1995, $186.4 million in 1994 and $168.5 million in 1993.
The 1995 decrease in cash from operations was primarily due to lower net
income, significantly lower accounts payable and other liabilities and
increases in accounts and notes receivable and other assets. The reduction in
accounts payable reflects the payment of amounts owed to various suppliers
including advertising agencies. Some of these amounts were particularly high at
the end of 1994 due to new or markedly different supplier relationships such as
the new container joint venture between CBC and American National Can. Accounts
and notes receivable was higher in 1995 because of an increase in international
sales which was offset in part by decreased receivables from the container
joint venture. Accrued expenses declined in 1995 primarily due to the payment
of items related to the Lowry and 1993 restructuring accruals. Other assets
increased primarily due to increased investment and equity in the container
joint ventures.
The 1994 increase in cash from operations was primarily due to higher net
income, higher accumulated deferred income taxes, and higher depreciation
offset in part by an increase in accounts and notes receivable, a decrease in
accrued expenses and other liabilities (primarily due to the payment of
obligations related to the 1993 restructuring) and an increase in accounts
payable. Accumulated deferred income taxes increased $18.2 million in 1994.
This was caused by the 1994 payment of various restructuring accruals which
were not tax deductible in 1993. The increase in accounts and notes
receivable reflected higher 1994 sales and amounts owed to CBC by the
container joint venture that was formed in 1994. Higher accounts payable
were partly due to amounts owed to the container joint venture for purchases
by CBC.
Investing Activities (including capital expenditures)
In 1995 the Company spent $116.2 million on investment activities, compared
with $174.7 million in 1994 and $119.3 million in 1993. Capital expenditures
(additions to properties) were $145.8 million in 1995 versus $160.3 million
in 1994 and $120.4 million in 1993. Intangible assets increased $11.8 million
and $16.9 million in 1995 and 1994, respectively, due principally to the
purchase of distributorships. In 1995, capital expenditures were focused
on upgrades and expansion of Golden-based facilities - particularly bottling
capacity. Proceeds from the sale of properties was $44.4 million in 1995 versus
$4.4 million in 1994 and $2.3 million in 1993. The principal assets sold in
1995 included the Company's power plant equipment and support facilities for
$22.0 million and certain bottleline machinery and equipment for $17.0
million. The bottleline assets were sold in a sale-leaseback transaction.
In 1994, capital expenditures focused on expansion of facilities
(primarily bottling capacity) and the purchase of a brewery in Zaragoza,
Spain. In 1993, capital expenditures were made for expansion of capacity in
Memphis for Zima Clearmalt, routine maintenance and incremental upgrades
to all production facilities.
Net Cash Used/Provided by Financing Activities
The Company generated $31.0 million of cash in financing activities in 1995.
In the third quarter of 1995, the Company received $100 million from a private
placement of Senior Notes. Also in the third quarter, the Company made
principal payments totalling $44 million on its medium-term notes. In
addition, the Company made two separate purchases of Class B common shares
totalling $9.9 million. The shares were purchased, based on a first right of
refusal, from an estate and a trust of members of the extended Coors family.
The Company paid dividends of $19.1 million.
The Company used $67.0 million of cash in financing activities in 1994. At the
beginning of the third quarter of 1994, the Company made its first principal
payment on its medium-term notes, in the amount of $50 million. In addition,
the Company paid dividends of $19.1 million.
In 1993, the Company used $6.6 million of cash in financing activities. The
Company paid $19 million in dividends. The Company received cash through the
exercise of stock options and the proceeds from industrial development bonds
for an expansion project.
Debt Securities
As of December 31, 1995, the Company had $126.0 million outstanding in
medium-term notes. Principal payments of $44 million in 1995 and $50 million
in 1994 were funded by a combination of cash on hand and borrowings. Fixed
interest rates on the Company's medium-term notes range between 8.63% and
9.15%. Aggregate annual maturities for the remaining outstanding notes are
$36 million in 1996, $19 million in 1997, $31 million in 1998 and $40
million in 1999.
In the third quarter of 1995, the Company completed a $100 million private
placement of Senior Notes at fixed interest rates ranging from 6.76% to 6.95%
per annum. The repayment schedule is $80 million in 2002 and $20 million in
2005. The proceeds from this borrowing were used primarily to reduce debt
under the revolving line of credit and for principal payments due on the
medium-term notes in the third quarter.
The Company's debt-to-total capitalization ratios was 24.9% at the end of 1995,
20.6% at the end of 1994 and 26.3% at the end of 1993.
Revolving Line of Credit
In addition to the medium-term notes and the private placement Senior Notes,
the Company has an unsecured, committed revolving line of credit totalling $144
million. From time to time this line of credit is used for working capital
requirements and general corporate purposes. As of December 31, 1995, the
full $144 million was available. For 1995, the Company met its two financial
covenants under the committed revolving line of credit: a minimum tangible net
worth test and a debt-to-total capitalization test.
Hedging Activities
As of December 31, 1995, hedging activities consisted exclusively of hard
currency forward contracts to directly offset hard currency exposures. These
irrevocable contracts eliminated the risk to financial position and results
of operations from changes in foreign exchange rates. Any variation in the
exchange rate that would accrue to the contract would be directly offset by
an equal change in the related obligation. Therefore, after the contract
entrance date, variation in the exchange rate would have no additional impact
on the Company's financial statements. ACC's hedging activities are minimal
and hard currency exposures are not material. The Company does not enter into
derivative financial instruments for trading or speculative purposes.
OUTLOOK 1996:
The Company will report 1996 results based on a 52-week fiscal year versus
the 53-week year used in 1995. Additionally, the Company will change its
reporting 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, compared to prior years, which had three 12-week quarters and one
16-week quarter (the third quarter). The change in quarter length will require
restatement of the 1995 quarterly results in order to make the results of 1996
comparable. The change to 13-week quarters creates a fiscal year that is
similar to a calendar year and more comparable to the reporting practices of
other consumer-product companies.
For the first quarter of 1996, the Company has announced that it expects to
report a net loss somewhat greater than the net loss of $0.02 per share posted
for the restated first quarter of 1995. Volume and profitability in the first
quarter are typically low and generally not indicative of results for the year.
The Company continues to believe that 1996 financial performance can improve
over 1995.
Following industry pricing trends, the Company raised prices in several key
U.S. markets in the fourth quarter of 1995, and price increases have gone into
effect in many of the remaining states in the middle of 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. While the Company continues to believe that initiatives in its
operations and technology areas have the potential to deliver substantial cost
reductions over time, significant savings are not likely to be realized before
the second half of 1996.
Total interest expense in the first half of the year will be higher than in the
same period of 1995 by approximately $2.7 million primarily as a result of the
$100 million private debt placement that closed in July 1995.
The increasing efficiencies from the can, end and glass joint ventures should
continue to provide income to the Company. Marketing, general and
administrative costs are expected to remain basically unchanged for 1996.
The Company's effective tax rate is expected to remain near the 1995 rate of
41% assuming increased pre-tax income, decreased non-taxable income items and
continued non-deductible items.
In 1996, the Company has planned capital expenditures (including contributions
to its container joint ventures for capital improvements) of approximately $100
million compared with capital expenditures that averaged $142.2 million over
the previous 3 years. The decline reflects the completion of several plant
acquisition and capacity expansion projects, along with the Company's intention
to manage capital expenditures and cash more aggresively through a variety of
means, including asset sales, lease financing and joint ventures. In addition
to the Company's 1996 planned capital expenditures, incremental strategic
investments will be considered on a case by case basis.
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 totalling $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.
Cautionary Statement Pursuant to Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995
This report contains "forward-looking statements" within the meaning of the
federal securities laws. These forward-looking statements include, among
others, statements concerning the Company's outlook for 1996, overall and
brand-specific volume trends, pricing trends and forces in the industry,
cost reduction strategies and their results, targeted goals for return on
investment capital, the Company's expectations as to funding its capital
expenditures and operations during 1996, and other statements of
expectations, beliefs, future plans and strategies, anticipated events or
trends and similar expressions concerning matters that are not historical
facts. The forward-looking statements in this report are subject to risks
and uncertainties that could cause actual results to differ materially from
those expressed in or implied by the statements.
To improve its financial performance, the Company must grow premium beverage
volume, achieve modest price increases for its products and reduce its
overall cost structure. The most important factors that could prevent the
Company from achieving these goals - and cause actual results to differ
materially from those expressed in the forward-looking statement - 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
- - the intensely competitive, no-growth nature of the beer industry
- - demographic trends and social attitudes that can reduce beer sales
- - continued rapid growth in the popularity of microbrews and other specialty
beers
- - 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
- - changes in significant government regulations affecting environmental
compliance, income taxes and advertising or other marketing efforts for
the Company's products
- - increases in federal or state beer excise taxes
- - changes in rail transportation rates or interruption of rail service
- - potential impact of industry consolidation
- - risks associated with investments and operations in foreign countries,
including those related to foreign regulatory requirements, exchange rate
fluctuations and local political, social and economic factors
These and other risks and uncertainties affecting the Company are discussed in
greater detail in this report and in other filings by the Company with the
Securities and Exchange Commission.
ENVIRONMENTAL:
The Company was one of numerous parties named by the Environmental Protection
Agency (EPA) as a "potentially responsible party" (PRP) for the Lowry Landfill
Superfund site, a legally permitted landfill owned by the City and County of
Denver. In 1990, the Company recorded a special pretax charge of $30 million
for potential clean-up costs of the site.
The City and County of Denver, Waste Management of Colorado, Inc. and Chemical
Waste Management, Inc. brought litigation in 1991 in U.S. District Court
against the Company and 37 other PRP's to determine the allocation of costs
of Lowry site remediation. In 1993, the Court approved a settlement agreement
between the Company and the plaintiffs, resolving the Company's liabilities
for the site. The Company agreed to initial payments based on an assumed
present value of $120 million in total site remediation costs. In addition, the
Company agreed to pay a specified share of costs if total remediation costs
are in excess of this amount. Payments representing the Company's agreed
share based on the $120 million assumption were made into a trust to be
applied to costs of site remediation and operating and maintenance costs.
The City and County of Denver, Waste Management of Colorado and Chemical Waste
Management, Inc. are expected to implement remediation of the site. The EPA's
projected costs to meet the announced remediation objectives and requirements
are below the $120 million total assumed as a basis for the Company's
settlement. The Company has no reason to believe that total remediation costs
will result in additional liability to the Company.
In 1991, the Company filed suit against certain of its former and current
insurance carriers, seeking recovery of past defense costs and investigation,
study and remediation costs. Settlements were reached during 1993 and 1994
with all defendants. As a result, in the fourth quarter of 1994, the Company
recognized a special pretax credit of $18.9 million.
The Company has also been notified that it is or may be a PRP under the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)
or similar state laws with respect to the cleanup of other sites where
hazardous substances have allegedly been released into the environment. The
Company cannot predict with certainty the total costs of cleanup, its share of
the total cost or the extent to which contributions will be available from
other parties, the amount of time necessary to complete the cleanups, or
insurance coverage. However, based on investigations to date, the Company
believes that any liability would not be material to the financial condition of
the Company with respect to these sites. There can be no certainty, however,
that the Company will not be named as a PRP at additional CERCLA sites in the
future, or that the costs associated with those additional sites will not be
material.
While it is impossible to predict the eventual aggregate cost to the Company
for environmental and related matters, management believes that any payments,
if required, for these matters would be made over a period of years in amounts
that would not be material in any one year to the consolidated results of
operations or to the financial or competitive position of the Company. The
Company believes adequate disclosures have been provided for losses that are
reasonably possible. Furthermore, as the Company continues to focus attention
on resource conservation, waste reduction and pollution prevention, it is the
Company's belief that potential future liabilities will be reduced.
ACCOUNTING CHANGES:
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to Be Disposed Of," which requires losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. Statement No. 121 also addresses the
accounting for long-lived assets that are expected to be disposed. The Company
will adopt Statement No. 121 in the first quarter of 1996 and, based on current
circumstances, does not believe the effect of adoption will be material.
In October 1995, the FASB issued Statement No. 123,"Accounting for Stock-Based
Compensation," which requires that the Company's financial statements include
certain disclosures about stock-based employee compensation arrangements. As
allowed by Statement No. 123, the Company will continue to apply the
accounting provisions of APB Opinion 25; accordingly the adoption of
Statement No. 123 will have no effect on future reported net income or
earnings per share.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Index to Financial Statements
Page(s)
Consolidated Financial Statements:
<S> <C>
Report of Independent Accountants 26
Consolidated Statement of Income for each of
the three years ended December 31, 1995 27
Consolidated Balance Sheet at December 31, 1995
and December 25, 1994 28-29
Consolidated Statement of Cash Flows for each of
the three years ended December 31, 1995 30
Consolidated Statement of Shareholders' Equity
for each of the three years ended December 31, 1995 31
Notes to Consolidated Financial Statements 32-47
</TABLE>
Report of Independent Accountants
To the Board of Directors and Shareholders of Adolph Coors Company
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14 (a)(1) and (2) on page 62 present fairly, in all
material respects, the financial position of Adolph Coors Company and its
subsidiaries at December 31, 1995, and December 25, 1994, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
Denver, Colorado
February 16, 1996
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
For the years ended
December 31, December 25, December 26,
1995 1994 1993
(In thousands, except per share data)
<S> <C> <C> <C>
Sales $2,060,595 $2,040,330 $1,946,592
Less - federal and state excise tax 385,216 377,659 364,781
--------- --------- ---------
Net sales 1,675,379 1,662,671 1,581,811
--------- --------- ---------
Costs and expenses:
Cost of goods sold 1,091,763 1,062,789 1,036,864
Marketing, general and administrative 503,503 492,403 454,130
Research and project development 15,385 13,265 13,008
Special (credits) charges (Note 9) (15,200) (13,949) 122,540
--------- --------- ---------
Total 1,595,451 1,554,508 1,626,542
--------- --------- ---------
Operating income (loss) 79,928 108,163 (44,731)
Other income (expense):
Interest income 1,345 1,546 2,580
Interest expense (11,863) (11,461) (15,780)
Miscellaneous-net 3,868 5,972 1,101
--------- --------- ---------
Total (6,650) (3,943) (12,099)
--------- --------- ---------
Income (loss) before income taxes 73,278 104,220 (56,830)
Income tax expense (benefit) (Note 5) 30,100 46,100 (14,900)
--------- --------- ---------
Net income (loss) $ 43,178 $ 58,120 $ (41,930)
========= ========= =========
Net income (loss) per
share of common stock $ 1.13 $ 1.52 $ (1.10)
========= ========= =========
Weighted average number of outstanding
shares of common stock 38,170 38,283 37,989
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, December 25,
1995 1994
(In thousands)
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 32,386 $ 27,168
Accounts and notes receivable:
Trade, less allowance for doubtful accounts
of $30 in 1995 and $24 in 1994 89,579 81,454
Affiliates 16,329 17,000
Other 10,847 7,873
Inventories:
Finished 58,486 67,500
In process 28,787 22,918
Raw materials 37,298 38,108
Packaging materials, less allowance for
obsolete inventories of $1,000 in 1995 14,854 13,078
--------- ----------
139,425 141,604
Other supplies 39,364 38,340
Prepaid expenses and other assets 13,634 13,638
Prepaid income taxes (Note 5) -- 1,779
Deferred tax asset (Note 5) 20,956 26,310
--------- ----------
Total current assets 362,520 355,166
Properties, at cost, less accumulated
depreciation, depletion and amortiza-
tion of $1,219,473 in 1995
and $1,220,836 in 1994 (Note 2) 887,409 922,208
Excess of cost over net assets of businesses
acquired, less accumulated amortization
of $4,097 in 1995 and $3,307 in 1994 26,470 20,509
Other assets 110,458 73,693
--------- ---------
Total assets $1,386,857 $1,371,576
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
December 31, December 25,
Liabilities and Shareholders' Equity 1995 1994
(In thousands)
<S> <C> <C>
Current liabilities:
Current portion of long-term debt (Note 4) $ 36,000 $ 44,000
Accounts payable:
Trade 118,207 156,667
Affiliates 14,142 8,024
Accrued salaries and vacations 37,178 41,567
Taxes, other than income taxes 39,788 47,060
Federal and state income taxes (Note 5) 9,091 --
Accrued expenses and other liabilities 69,257 82,896
--------- ---------
Total current liabilities 323,663 380,214
--------- ---------
Long-term debt (Note 4) 195,000 131,000
Deferred tax liability (Note 5) 69,916 71,660
Postretirement benefits (Note 8) 69,827 83,617
Other long-term liabilities 33,435 30,884
--------- ---------
Total liabilities 691,841 697,375
--------- ---------
Commitments and contingencies
(Notes 3, 4, 5, 6, 7, 8, 10 and 12)
Shareholders' equity (Notes 1, 6 and 11):
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: 36,736,512 in 1995 and
37,066,940 in 1994) 8,747 8,825
--------- ---------
Total capital stock 10,007 10,085
Paid-in capital 33,719 39,460
Retained earnings 647,530 623,418
Foreign currency translation adjustment 3,760 1,238
--------- ----------
Total shareholders' equity 695,016 674,201
--------- ----------
Total liabilities and shareholders' equity $1,386,857 $1,371,576
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended
December 31, December 25, December 26,
1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 43,178 $ 58,120 $ (41,930)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation, depletion and
amortization 122,830 120,793 118,955
Change in accumulated deferred
income taxes (1,744) 18,230 (26,297)
Loss on sale or abandonment of
properties 1,274 808 20,387
Change in operating assets and
liabilities:
Accounts and notes receivable (9,952) (30,264) 32,632
Inventories 2,135 5,627 5,101
Other assets (11,305) (4,058) 7,803
Accounts payable (32,180) 43,054 13,950
Accrued liabilities and other (24,139) (25,884) 37,892
-------- -------- -------
Net cash provided by operating
activities 90,097 186,426 168,493
-------- -------- -------
Cash flows from investing activities:
Additions to properties (145,797) (160,314) (120,354)
Proceeds from sale of properties 44,448 4,382 2,268
Change in other intangible assets (11,802) (16,876) --
Other (3,021) (1,863) (1,238)
-------- -------- --------
Net cash used by investing
activities (116,172) (174,671) (119,324)
-------- -------- --------
Cash flows from financing activities:
Proceeds from long-term debt 100,000 -- 5,000
Principal payment of long-term debt (44,000) (50,000) --
Issuance of stock under stock plans 4,117 2,102 7,375
Purchase of stock (9,936) -- --
Dividends paid (19,066) (19,146) (19,003)
Other (116) 24 1
-------- -------- -------
Net cash (used) provided by
financing activities 30,999 (67,020) (6,627)
-------- -------- -------
Cash and cash equivalents:
Net increase (decrease) in cash
and cash equivalents 4,924 (55,265) 42,542
Effect of exchange rate changes on
cash and cash equivalents 294 222 --
Balance at beginning of year 27,168 82,211 39,669
--------- --------- ----------
Balance at end of year $ 32,386 $ 27,168 $ 82,211
========= ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION> Foreign
Common stock currency
issued Paid-in Retained translation
Class A Class B capital earnings adjustment Total
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 27, 1992 1,260 $ 8,683 $30,125 $645,377 $ 0 $685,445
Shares issued under
stock plans
(Note 6) 112 7,263 7,375
Other 40 40
Net loss (41,930) (41,930)
Cash dividends-$0.50
per share (19,003) (19,003)
- ------------------------------------------------------------------------------
Balance at
December 26, 1993 1,260 8,795 37,388 584,444 40 631,927
Shares issued under
stock plans
(Note 6) 30 2,072 2,102
Other 1,198 1,198
Net income 58,120 58,120
Cash dividends-$0.50
per share (19,146) (19,146)
- ------------------------------------------------------------------------------
Balance at
December 25, 1994 1,260 8,825 39,460 623,418 1,238 674,201
Shares issued under
stock plans
(Note 6) 59 4,058 4,117
Purchase of stock (137) (9,799) (9,936)
Other 2,522 2,522
Net income 43,178 43,178
Cash dividends-$0.50
per share (19,066) (19,066)
- ------------------------------------------------------------------------------
Balance at
December 31, 1995 $1,260 $ 8,747 $33,719 $647,530 $3,760 $695,016
===============================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
ADOLPH COORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1:
Summary of Accounting Policies
Fiscal year: The fiscal year of the Company is a 52- or 53-week period ending
on the last Sunday in December. Fiscal years for the financial statements
included herein ended December 31, 1995, a 53-week period, and December 25,
1994, and December 26, 1993, both 52-week periods.
Principles of consolidation: The consolidated financial statements include
the accounts of Adolph Coors Company (ACC), its principal subsidiary,
Coors Brewing Company (CBC), and the majority-owned and controlled
domestic and foreign subsidiaries of both ACC and CBC (collectively
referred to as "the Company"). All significant intercompany accounts and
transactions have been eliminated. The equity method of accounting is used
for the Company's 50% or less owned affiliates over which the Company has
the ability to exercise significant influence (See Note 10). The Company
has other investments which are accounted for at cost.
Certain reclassifications have been made to the 1993 and 1994 financial
information presented in the financial statements to be consistent
with 1995 presentation.
Nature of operations: The Company is a multi-national brewer and marketer of
beer and other malt-based beverages. The vast majority of the Company's
volume is sold in the United States to independent wholesalers. The
Company's international volume, which is sold in over 30 countries, is
produced, marketed and distributed under varying business arrangements
including export, direct-investment, joint ventures and licensing.
Inventories: Inventories are stated at the lower of cost or market. Cost
is determined by the last-in, first-out (LIFO) method for substantially
all inventories.
Current cost, as determined principally on the first-in, first-out method,
exceeded LIFO cost by $42.2 million and $41.7 million at December 31, 1995
and December 25, 1994, respectively. During 1995 and 1994, total
inventory costs and quantities were reduced, resulting in LIFO liquidations,
the effects of which were not material.
Properties: Land, buildings and equipment are capitalized at cost. Depreciation
is provided principally on the straight-line method over the following
estimated useful lives: buildings and improvements, 10 to 45 years; machinery
and equipment, 3 to 20 years. Accelerated depreciation methods are generally
used for income tax purposes. Expenditures for new facilities and improvements
that substantially extend the capacity or useful life of an asset are
capitalized. Start-up costs associated with manufacturing facilities, but not
related to construction, are expensed as incurred. Ordinary repairs and
maintenance are expensed as incurred (Note 2).
Excess of cost over net assets of businesses acquired: The excess of cost
over the net assets of businesses acquired in transactions accounted for
as purchases is being amortized on a straight-line basis, generally
over a 40-year period.
Hedging transactions: The Company periodically enters into forward, future and
option contracts for foreign currency and commodities to hedge its exposure
to exchange rates and price fluctuations for raw materials and fixed assets
used in the production of beer. The gains and losses on these contracts are
deferred and recognized in cost of sales as part of the product cost.
As of December 31, 1995, hedging activities consisted exclusively of hard
currency forward contracts to directly offset hard currency exposures.
These irrevocable contracts eliminated the risk to financial position
and results of operations from changes in the underlying foreign exchange
rate. Any variation in the exchange rate that would accrue to the contract
would be directly offset by an equal change in the related obligation.
Therefore, after the contract entrance date, variation in the exchange rate
would have had no additional impact on the Company. The Company's hedging
activities are minimal and hard currency exposures are not material.
Concentration of credit risk: The majority of the accounts receivable
balances as of December 31, 1995, and December 25, 1994, were from malt
beverage distributors. The Company secures substantially all of this credit
risk with purchase money security interests in inventory and proceeds,
personal guarantees and/or letters of credit.
Statement of Cash Flows: The Company defines cash equivalents as highly
liquid investments with original maturities of 90 days or less. The fair
value of these investments approximate their carrying value. The Company's
1995 investment in the Rocky Mountain Bottle Company was a $16.2 million
noncash transaction that is not reflected as an investing activity in the
Statement of Cash Flows. Income taxes paid were $15.8 million in 1995,
$31.0 million in 1994 and $15.4 million in 1993.
Net income per common share: Net income per common share is based on the
weighted average number of shares of common stock outstanding during each year.
Environmental expenditures: Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate. Expenditures that
relate to an existing condition caused by past operations, which do not
contribute to current or future revenue generation, are expensed. Liabilities
are recorded when environmental assessments and/or remedial efforts are
probable and the costs can be reasonably estimated.
Advertising: Advertising costs, included in marketing, general and
administrative, are expensed when the advertising first takes place.
Advertising expense was $330.4 million, $327.6 million and $272.5 million
for the years ended December 31, 1995, December 25, 1994 and December 26,
1993, respectively. The Company had $8.9 million and $5.0 million of prepaid
advertising production costs reported as assets at December 31, 1995 and
December 25, 1994, respectively.
Use of estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from those estimates.
New accounting standards: In March 1995, the Financial Accounting Standards
Board (FASB) issued Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of," which requires
losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying
amount. Statement No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed. The Company will adopt Statement
No. 121 in the first quarter of 1996 and, based on current circumstances,
does not believe the effect of adoption will be material.
In October 1995, the FASB issued Statement No. 123, "Accounting for Stock-Based
Compensation," which requires that the Company's financial statements include
certain disclosures about stock-based employee compensation arrangements. As
allowed by Statement No. 123, the Company will continue to apply the accounting
provisions of APB Opinion 25; accordingly the adoption of Statement No. 123
will have no effect on future reported net income or earnings per share.
NOTE 2:
Properties
The cost of properties and related accumulated depreciation, depletion and
amortization consists of the following:
<TABLE>
<CAPTION>
As of
December 31, December 25,
1995 1994
(In thousands)
<S> <C> <C>
Land and improvements $ 98,404 $ 96,995
Buildings 470,677 454,679
Machinery and equipment 1,436,254 1,488,060
Natural resource properties 10,954 16,125
Construction in progress 90,593 87,185
--------- ---------
2,106,882 2,143,044
Less accumulated depreciation, depletion
and amortization 1,219,473 1,220,836
--------- ---------
Net Properties $ 887,409 $ 922,208
========= =========
</TABLE>
Interest capitalized, expensed and paid was as follows:
<TABLE>
<CAPTION>
For the years ended
December 31, December 25, December 26,
1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Interest costs $18,433 $17,761 $20,580
Interest capitalized (6,570) (6,300) (4,800)
------- -------- --------
Interest expensed $11,863 $11,461 $15,780
======= ======== ========
Interest paid $16,613 $21,169 $20,172
======= ======== ========
</TABLE>
NOTE 3:
Leases
The Company leases certain office facilities and operating equipment under
cancellable and noncancellable agreements accounted for as operating leases.
At December 31, 1995, the minimum aggregate rental commitment under all
noncancellable leases was (in thousands): 1996, $7,866; 1997, $5,515; 1998,
$4,116; 1999, $3,310; 2000, $2,948; and $15,210 for years thereafter. Total
rent expense was (in thousands) $10,376, $11,231 and $15,006 for the years
ended December 31, 1995, December 25, 1994 and December 26, 1993, respectively.
NOTE 4:
Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
As of
December 31, 1995 December 25, 1994
Carrying Fair Carrying Fair
Value Value(a) Value Value(a)
(in thousands)
<S> <C> <C> <C> <C>
Medium-Term Notes $126,000 $134,000 $170,000 $182,000
Senior Notes 100,000 106,000 -- --
Industrial Development Bonds 5,000 4,000 5,000 4,000
------- ------- ------- -------
TOTAL 231,000 244,000 175,000 186,000
Less Current Portion 36,000 37,000 44,000 43,000
------- ------- ------- -------
$195,000 $207,000 $131,000 $143,000
======= ======= ======= =======
</TABLE>
(a) Fair values were determined using discounted cash flows at current interest
rates.
As of December 31, 1995, the Company had outstanding $126 million of unsecured
medium-term notes. Interest is due semi-annually in April and October at fixed
interest rates ranging from 8.63% to 9.15% per annum. Aggregate annual
maturities for the notes issued are $36 million in 1996, $19 million in
1997, $31 million in 1998 and $40 million in 1999.
On July 14, 1995, the Company completed a $100 million private placement of
unsecured Senior Notes at fixed interest rates ranging from 6.76% to 6.95%
per annum. Interest on the notes is due semi-annually in January and July.
The Notes are payable as follows: $80 million in 2002 and $20 million in 2005.
The Company is obligated to pay the principal, interest and premium, if any, on
the $5 million, City of Wheat Ridge, Colorado Industrial Development Bonds
(Adolph Coors Company Project) Series 1993. The bonds mature in 2013 and are
secured by a letter of credit. They are currently variable rate securities
with interest payable on the first of March, June, September and December.
The weighted average interest rate during 1995 was 4.1%.
The Company has an unsecured committed credit arrangement totalling $144
million, and as of December 31, 1995, all $144 million was available. This
line of credit has a three-year term through December 12, 1998, and is
subject to the Company maintaining certain financial ratios. Fees paid
under this line of credit include a facilities fee on the total amount of
the committed credit and a commitment fee which is based on the undrawn portion
of the line of credit. The only restriction for withdrawal is that the Company
meet specific covenant criteria. The Company was in compliance with the
covenants for all years presented. As of December 31, 1995, the Company
also had approximately $100 million of uncommitted credit arrangements
available, of which none was outstanding. The Company pays no commitment fees
for these uncommitted arrangements, which are on a funds-available basis.
Interest rates are negotiated at the time of borrowing.
NOTE 5:
Income Taxes
The provision (benefit) for income taxes was as follows:
<TABLE>
<CAPTION>
For the years ended
December 31, December 25, December 26,
1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Current:
Federal $ 24,275 $ 19,875 $ 14,479
State and Foreign 2,215 6,154 2,471
-------- -------- --------
Total current tax expense 26,490 26,029 16,950
-------- -------- --------
Deferred:
Federal 6,062 16,804 (27,890)
State and Foreign (2,452) 3,267 (3,960)
-------- -------- --------
Total deferred tax expense (benefit) 3,610 20,071 (31,850)
-------- -------- --------
Total income tax expense (benefit) $ 30,100 $ 46,100 $ (14,900)
======== ======== ========
</TABLE>
Income taxes as reflected in the Consolidated Statement of Income differ from
the amounts computed by applying the statutory federal corporate tax rate to
income as follows:
<TABLE>
<CAPTION>
For the years ended
December 31, December 25, December 26,
1995 1994 1993
<S> <C> <C> <C>
Expected tax rate 35.0% 35.0% (35.0%)
State income taxes
(net of federal income
tax benefit) 4.7 5.1 (1.7)
Revaluation of deferred income tax
liability -- 0.8 4.4
Effect of foreign investments .6 (0.2) 2.6
Non-deductible expenses and losses .8 1.3 2.7
Other - net -- 2.2 0.8
---- ---- ----
Effective tax rate 41.1% 44.2% (26.2%)
==== ==== ====
</TABLE>
The deferred tax assets (liabilities) are composed of the following:
<TABLE>
<CAPTION>
As of
December 31, December 25,
1995 1994
(In thousands)
<S> <C> <C>
Tax in excess of book
depreciation and amortization $(121,260) $(126,090)
(Gain) loss on sale or write-down of 3,453 (2,954)
assets
Deferred compensation and other
employee related 18,370 12,614
Change in balance sheet reserves
and accruals 14,622 26,791
Environmental accruals 2,327 6,823
Alternative minimum tax -- 3,164
Capitalized interest (3,002) (2,516)
Other employee postretirement
benefits (Note 8) 29,239 34,054
Deferred foreign losses 4,779 737
Other - net 2,512 2,027
-------- --------
Net deferred tax liability $ (48,960) $ (45,350)
======== ========
</TABLE>
The Company has recorded a net deferred tax asset of $4.8 million reflecting
the benefit of $17.5 million in loss carryforwards from some of the Company's
foreign operations. The loss carryforwards expire in varying amounts in 1999
and 2000. Realization is dependent on generating sufficient taxable
income prior to expiration of the loss carryforwards. Although realization
is not assured, management believes it is more likely than not that all of the
deferred tax asset will be realizable; however, such realization could be
reduced in the near term if estimates of future taxable income during the
carryforward period are reduced.
The Internal Revenue Service is currently examining the federal income tax
returns for the fiscal years 1991 and 1992. In the opinion of management,
adequate accruals have been provided for all income tax matters and related
interest.
The Company and ACX (See Note 12), are parties to a tax sharing agreement that
provides for, among other things, the treatment of tax matters for periods
prior to the distribution of ACX stock and responsibility for adjustments
as a result of audits by taxing authorities and is designed to preserve
the status of the distribution as tax-free.
NOTE 6:
Stock Option, Restricted Stock Award and Employee Award Plans
Under the Company's stock option plans, officers and other key employees may be
granted options which allow for the purchase of shares of the Company's Class
B common stock. The option price on outstanding options is equal to the fair
market value of the stock at the date of grant. The 1983 non-qualified
Adolph Coors Company Stock Option Plan, as amended, provides for options
to be granted at the discretion of the board of directors. These options
expire 10 years from date of grant. No options have been granted under this
plan since 1989. At this time, the board of directors has decided not to grant
additional options under this plan.
The 1990 Equity Incentive Plan (1990 EI Plan) that became effective
January 1, 1990, as amended, provides for two types of grants: stock options
and restricted stock awards. The stock options have a term of 10 years
with exercise prices equal to fair market value on the day of the grant.
Prior to 1994, one-third of the stock option grant was vested in each of the
three successive years after the date of grant. Effective January 1, 1994,
stock options vest at 10% for each one dollar increase in fair market value of
ACC stock from date of grant, with a one year holding period, or vest 100%
after nine years. Once a portion has vested, it is not forfeited even if
the fair market value drops. Vesting in the restricted stock awards is
over a three-year period from the date of grant. The compensation cost
associated with these awards is amortized to expense over the vesting period.
No restricted shares have been earned or issued under the 1990 Equity Incentive
Plan since 1993.
In 1991, the Company adopted an Equity Compensation Plan for Non-Employee
Directors (EC Plan). The EC Plan provides for two grants of the Company's
stock; the first grant is automatic and equals 20% of the Director's
annual retainer and the second grant is elective and covers all or any
portion of the balance of the retainer. A director may elect to receive
his remaining 80% retainer in cash or restricted stock or any combination of
the two. Grants of stock vest after completion of the director's annual term.
The compensation cost associated with the EC Plan is amortized over the
Director's term.
Changes in stock options are as follows:
<TABLE>
<CAPTION>
Price range
Shares per share
<S> <C> <C>
Outstanding at December 27, 1992 1,290,400 $10.82-$22.75
Granted 83,000 $16.44-$16.50
Cancelled (60,100) $13.24-$21.35
Exercised (465,000) $10.82-$18.36
- -------------------------------------------------------------------------------
Outstanding at December 26, 1993 848,300 $13.24-$22.75
Granted 530,700 $16.25
Cancelled (65,700) $14.45-$18.36
Exercised (126,900) $13.24-$18.36
- -------------------------------------------------------------------------------
Outstanding at December 25, 1994 1,186,400 $13.24-$22.75
Granted 600,600 $16.75
Cancelled (78,400) $15.85-$18.36
Exercised (253,900) $13.24-$18.36
- -------------------------------------------------------------------------------
Outstanding at December 31, 1995 1,454,700 $13.24-$22.75
=========
Options exercisable at:
December 25, 1994 643,700
December 31, 1995 681,400
===============================================================================
</TABLE>
In 1995, the Company adopted a supplemental compensation plan which covers
substantially all Company employees. Under the plan, management is allowed to
recognize employee achievements through awards of Coors Stock Units (CSU's)
or cash (at the employee's discretion). CSU's are a measurement component
equal to the fair market value of the Company's Class B common stock. CSU's
have a six-month holding period after which the recipient may redeem the CSU
for cash, or, if the holder has 100 or more CSU's, in shares of the Company's
Class B common stock. Awards under the plan in 1995 were immaterial.
Common stock reserved for options, restricted stock awards and employee awards
totalled 4,424,600 shares as of December 31, 1995, and 1,866,800 shares as of
December 25, 1994.
NOTE 7:
Employee Retirement Plans
The Company maintains several defined benefit pension plans for the majority of
its employees. Benefits are based on years of service and average base
compensation levels over a period of years. Plan assets consist primarily
of equity, interest- bearing investments and real estate. The Company's
funding policy is to contribute annually not less than the ERISA minimum
funding standards, nor more than the maximum amount that can be deducted for
federal income tax purposes. Total expense for these plans, as well as a
savings and investment (thrift) plan, was $22.7 million in 1995, $29.5
million in 1994 and $39.9 million in 1993. The decrease in 1995 pension
expense versus 1994 was caused primarily by an increase in the discount
rate (settlement rate) from the 1994 rate of 8.5% to the 1995 rate of 7.25%.
the decrease in pension expense in 1994 versus 1993 was caused primarily by the
early retirement program and plan changes in 1993 with some offset from the
discount rate increase from 7.25% in 1993 to 8.5% in 1994. The 1993
service cost includes $16.5 million for the early retirement program which
was included in restructuring costs (Note 9).
<TABLE>
<CAPTION>
For the years ended
December 31, December 25, December 26,
1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Service cost-benefits earned during
the year $ 9,858 $ 12,517 $ 27,089
Interest cost on projected benefit
obligations 29,285 28,377 24,332
Actual gain on plan assets (69,346) (872) (35,329)
Net amortization and deferral 47,005 (16,351) 16,929
------- ------- -------
Net pension expense $ 16,802 $ 23,671 $ 33,021
======= ======= =======
</TABLE>
The funded status of the pension plans and amounts recognized in the
Consolidated Balance Sheet are as follows:
<TABLE>
<CAPTION>
As of
December 31, December 25,
1995 1994
(In thousands)
<S> <C> <C>
Actuarial present value of accumulated plan benefits,
including vested benefits of $311,366 in 1995 and
$264,319 in 1994 $341,595 $278,489
------- -------
Projected benefit obligations for
service rendered to date $423,614 $343,628
Plan assets available for benefit 330,823 261,982
------- -------
Plan assets less than projected benefit obligations 92,791 81,646
Unrecognized net loss (62,492) (50,211)
Prior service cost not yet recognized (20,897) (23,062)
Unrecognized net asset being recognized over 15 years 7,491 9,181
------- -------
Net accrued pension liability $ 16,893 $ 17,554
======= =======
</TABLE>
Significant assumptions used in determining the valuation of the projected
benefit obligations as of the end of 1995, 1994 and 1993 were:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Settlement rate 7.25% 8.50% 7.25%
Increase in compensation levels 5.00% 5.00% 5.00%
Rate of return on plan assets 9.75% 9.50% 9.50%
</TABLE>
NOTE 8:
Non-Pension Postretirement Benefits
The Company has postretirement plans that provide medical benefits and life
insurance for retirees and eligible dependents. The plans are not funded.
This obligation was determined by the application of the terms of medical
and life insurance plans, together with relevant actuarial assumptions and
health care cost trend rates ranging ratably from 10.5% in 1995 to 4.5%
in the year 2007. The effect of an annual 1% increase in trend rates would
increase the accumulated postretirement benefit obligation by approximately
$4.7 million and $8.5 million in 1995 and 1994, respectively. The effect of a
1% increase in trend rates also would have increased the ongoing annual cost
by $0.7 million and $1.2 million in 1995 and 1994, respectively. The discount
rate used in determining the accumulated postretirement benefit obligation
was 7.25% and 8.5% at December 31, 1995, and December 25, 1994, respectively.
Net periodic postretirement benefit cost included the following:
<TABLE>
<CAPTION>
For the years ended
December 31, December 25, December 26,
1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Service cost-benefits attributed to
service during the period $ 2,281 $ 3,097 $ 10,163
Interest cost on accumulated post-
retirement benefit obligation 6,426 6,698 5,311
Amortization of net loss (gain) (560) 78 (239)
------- ------- -------
Net periodic postretirement benefit cost $ 8,147 $ 9,873 $ 15,235
======= ====== =======
</TABLE>
The 1994 decrease in plan expense resulted principally from the 1993 early
retirement program. Included in the 1993 service cost is $7.7 million which
was the result of the early retirement program. That 1993 expense has been
included in restructuring costs (Note 9).
The status of the plan was as follows:
<TABLE>
<CAPTION>
As of
December 31, December 25,
1995 1994
(In thousands)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 35,465 $ 32,989
Fully eligible active plan participants 11,146 11,508
Other active plan participants 22,935 32,221
------- -------
Accumulated postretirement obligation 69,546 76,718
Unrecognized net gain 975 2,999
Unrecognized prior service cost 2,871 7,680
------- ------
Accrued postretirement benefit obligation
in the Consolidated Balance Sheet 73,392 87,397
Less current portion 3,565 3,780
------- -------
$ 69,827 $ 83,617
======= =======
</TABLE>
Effective November 29, 1995, changes were made to post-retirement life
insurance and medical benefits which resulted in a curtailment gain of
$18.6 million and a decrease in current year expense of $0.1 million.
NOTE 9:
Special (Credits) Charges
Fourth quarter results for 1995 include a pretax net special credit of $15.2
million which is shown as a separate item in the accompanying Consolidated
Statement of Income and resulted in income of $0.24 per share after tax.
The net credit is primarily the result of a gain for the curtailment of
certain postretirement benefits other than pensions (see Note 8). Offsetting
a portion of this curtailment gain are severance charges for limited reductions
of the Company's work force.
Fourth quarter results for 1994 include a net special credit of $13.9 million
and resulted in income of $0.22 per share after tax. Two nonrecurring items
contributed to the net credit. First, the Company reached a settlement with a
number of its insurance carriers which enabled it to recover a portion of the
costs associated with the Lowry Landfill Superfund site (see Note 10).
Offsetting this was an impairment reserve for the write down of certain
distributor assets.
Fourth quarter results for 1993 include several special charges which
aggregated $122.5 million pretax, or $1.98 per share after tax. A
restructuring charge, which totaled $109.5 million, or $1.77 per share
after tax, resulted from the Company's announcement in July 1993 of a
restructuring program designed to reduce costs, improve operating efficiencies
and increase shareholder value. The restructuring charge includes $70.2
million for voluntary severance and enhanced early retirement incentives
designed to reduce the Company's white-collar work force, as well as
$39.3 million for workplace redesign, asset write-downs and other expenses
related to profit improvement initiatives. Substantially all of the payments
for voluntary severance and enhanced early retirement incentives occurred in
1993. Of the $39.3 million, approximately $22 million related to workplace
redesign and other expenses related to profit improvement initiatives,
and approximately $17.3 million related to asset write-downs. Substantially
all costs related to workplace redesign and other profitability improvement
initiatives accrued in 1993 were paid in 1994. Other special charges unrelated
to the profit improvement initiatives totalled $13.0 million for the write
down of certain distributor assets and a provision for environmental
enhancements.
The 1993 restructuring charge and subsequent activity are summarized as follows:
<TABLE>
<CAPTION>
Workplace Asset
Personnel Redesign Write-downs Total
<S> <C> <C> <C> <C>
1993 Charges $ 70,240 $ 22,000 $ 17,300 $109,540
1993 Payments and writedowns 57,924 3,600 17,300 78,824
------- ------- ------- -------
Balance as of December 26, 1993 12,316 18,400 -- 30,716
1994 Payments 3,045 16,480 -- 19,525
------- ------- ------- -------
Balance as of December 25, 1994 9,271 1,920 -- 11,191
1995 Payments 4,623 1,920 -- 6,543
------- ------- ------- -------
4,648 -- -- 4,648
======= ======= ======= =======
</TABLE>
The majority of the remaining personnel accruals relate to obligations under
deferred compensation arrangements and postretirement benefits other than
pensions.
NOTE 10:
Equity Investments
The Company has 50% or less owned investments in affiliates that are
accounted for on the equity method. The Company's investments aggregated
$42.3 million and $7.5 million at December 31, 1995 and December 25, 1994,
respectively. These investment amounts are included in other assets on the
Company's Consolidated Balance Sheet.
Summarized balance sheet and income statement information for the Company's
equity investments are as follows:
Summarized balance sheet
<TABLE>
<CAPTION>
As of
December 31, December 25,
1995 1994
(In thousands)
<S> <C> <C>
Current assets $ 61,370 $ 18,872
Non-current assets 58,011 11,186
Current liabilities 37,432 19,084
Non-current liabilities 2,228 2,299
</TABLE>
Summarized statement of operations
<TABLE>
<CAPTION>
For the years ended
December 31, December 25, December 26,
1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Net sales $ 363,864 $ 49,187 $ 5,199
Gross profit 44,890 4,032 (7,428)
Operating income (loss) 32,039 (1,383) (8,677)
Company's equity in operating
income (loss) 13,687 1,112 (4,338)
</TABLE>
In 1995, CBC and Anchor Glass Container Corporation (Anchor) entered into
a ten-year, 50/50 partnership, to produce glass bottles at the CBC glass
manufacturing facility for sale to CBC and outside customers. Under the
agreement, CBC agreed to contribute machinery, equipment and certain
personal property with an approximate net book value of $16.2 million and
Anchor agreed to contribute technology and capital which would be used to
modernize and expand the capacity of the plant. Also under the agreement,
CBC agreed to reimburse certain annual operating costs of the facility and
to purchase an annual quantity of bottles which together represent a 1996
commitment of approximately $53 million. The expenditures under this
agreement in 1995 were approximately $23 million. Additionally, the companies
entered into another agreement that made Anchor a long-term, preferred
supplier for CBC, satisfying 100% of CBC's other glass requirements.
In 1994, CBC and American National Can Company formed a 50/50 joint venture to
produce beverage cans and ends at CBC manufacturing facilities for sale to CBC
and outside customers. The agreement has an initial term of seven years and
can be extended two additional three-year periods. Additionally, the
agreement requires CBC to purchase 100% of its can and end needs from the
joint venture at contracted unit prices and to pay an annual fee for certain
operating costs. The aggregate amount paid to the joint venture for cans and
ends in 1995 was approximately $238 million. In 1994, the aggregate amount
paid to the joint venture for ends was approximately $31 million. The estimated
cost in 1996 under this agreement for cans and ends is $223 million.
NOTE 11:
Stock Activity
Common stock: Both classes of common stock have the same rights and privileges,
except for voting, which is the sole right of the holder of Class A stock.
The revised Colorado Business Corporation Act, which became effective in
July 1994, eliminated the concept of treasury stock for Colorado
corporations. Pursuant to that revision, the 9,463,488 shares at
December 31, 1995, and the 9,133,060 shares at December 25, 1994, that were
previously classified as treasury shares, were restored to status of
"authorized but unissued". The elimination of the treasury stock amounts in
the Company's consolidated balance sheet caused a reclassification of equal
amounts which reduced the balances of Class B common stock and
paid-in-capital. The amounts for Class B common stock were reduced by a
stated value of $0.24 per share or, $2.3 million and $2.2 million at
December 31, 1995 and December 25, 1994, respectively. Similarly, the amounts
for paid-in-capital were reduced by $26.6 million and $17.3 million at December
31, 1995 and December 25, 1994, respectively.
Activity in the Company's Class A and Class B common stock for each of the
three years ended December 31, 1995, December 25, 1994 and December 26,
1993 is summarized below:
<TABLE>
<CAPTION>
Common Stock
Class A Class B
<S> <C> <C>
Balance at December 27, 1992 1,260,000 36,466,519
Shares issued under stock plans -- 472,702
--------- ----------
Balance at December 26, 1993 1,260,000 36,939,221
Shares issued under stock plans -- 127,719
--------- ----------
Balance at December 25, 1994 1,260,000 37,066,940
Shares issued under stock plans -- 248,778
Purchase of stock -- (579,206)
--------- ----------
Balance at December 31, 1995 1,260,000 36,736,512
========= ==========
</TABLE>
At December 31, 1995, December 25, 1994 and December 26, 1993, 25,000,000
shares of $1.00 par value preferred stock were authorized but unissued.
NOTE 12:
Commitments and Contingencies
It is the policy of the Company to act as a self-insurer for certain insurable
risks consisting primarily of employee health insurance programs, workers'
compensation and general liability contract deductibles.
In 1995, a subsidiary of CBC, Coors Energy Company (CEC), sold a portion of
its coal reserves to Bowie Resources Ltd. (Bowie). CEC also entered into a
ten-year agreement to purchase 100% of the coal requirements from Bowie. The
coal is then sold to Trigen-Nations Energy Corporation, L.L.L.P. (Trigen).
In September 1995, CBC concluded the sale of its power plant and support
facilities to Trigen. In conjunction with this sale, CBC agreed to purchase
the electricity and steam needed to operate the brewery's Golden facilities.
CBC's financial commitment under this agreement is divided between a fixed,
non-cancellable cost of approximately $15.7 million for 1996, which increases
annually for inflation, and a variable cost which is generally based on CBC's
electricity and steam use. The 25-year agreement also provides for a
significant investment by Trigen to upgrade the facilities.
At the end of 1992, the Company distributed to its shareholders the common
stock of ACX Technologies, Inc. ("ACX" or "ACX Technologies"). ACX was formed
in late 1992 to own the ceramics, aluminum, packaging and technology-based
development businesses which were then owned by ACC. Joseph Coors and William
K. Coors are both directors of ACC and ACX and serve as trustees of one or more
family trusts that collectively own all of the voting stock of ACC and a
majority of the common stock of ACX. ACC and ACX, or their subsidiaries, have
certain business relationships and have engaged in certain relationships with
one another as described below.
CBC is a limited partner in a limited partnership with an ACX subsidiary as
general partner. The partnership owns, develops, operates and sells
certain real estate previously owned directly by CBC or ACC. Each partner is
obligated to make additional contributions of up to $500,000 upon call of
the general partner. Distributions are allocated equally between the
partners until CBC recovers its investment, and thereafter 80% to the general
partner and 20% to CBC.
In 1992, CBC entered into market-based, long-term supply contracts with certain
ACX subsidiaries to provide packaging, aluminum and starch products to CBC.
Under the packaging supply agreement, CBC agreed to purchase from an ACX
subsidiary substantially all of CBC's paper packaging requirements through
1997. Under the aluminum supply agreement, which was cancelled effective
at the end of 1995, CBC agreed to purchase from an ACX subsidiary all of
CBC's requirements for aluminum end stock and a substantial amount of CBC's tab
stock needs, as well as substantial amounts of can body stock. Since late
1994, American National Can Company (ANC) has acted as the purchasing agent
for the CBC/ANC end and can joint venture (Note 10). ANC has ordered tab
stock from the ACX subsidiary for use by CBC in 1996. CBC also expects to
receive limited quantities of can body stock in 1996 from the ACX subsidiary
through purchases by ANC. Commitments for aluminum purchases beyond 1996
have not yet been determined. Under the starch supply agreement, CBC
agreed to purchase from an ACX subsidiary 100 million pounds of refined
corn starch annually through 1997. Total purchases by CBC under these
supply agreements in 1995 were approximately $240 million. Purchases by CBC in
1996 under the packaging and starch supply agreements together with the
aluminum purchase orders currently in place, are estimated to total
approximately $145 million.
In 1992, ACC and CBC (as well as two former affiliates that are now
subsidiaries of ACX) 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 totalling $159 million
based on a number of theories, some of which were removed from the case by
the judge granting the defendants'motion for the partial summary judgement.
Trial by a jury was held in April, 1994, and the jury returned a verdict
in favor of all defendants to all claims. TransRim filed an appeal to the
U.S. Court of Appeals, 10th Judicial Circuit, which upheld the verdict in a
decision rendered April 7, 1995. TransRim's petition to have the 10th
Circuit rehear the appeal was denied.
In 1991, the Company became aware that Mutual Benefit Life Insurance Company
(MBLIC) had been placed under the control of the State of New Jersey. The
Company is a holder of several life insurance policies and annuities through
MBLIC. The cash surrender value under these policies is approximately $7.8
million. Policyholders have been notified that all claims, benefits and
annuity payments will continue to be paid in full; however, at this time
policyholders are able to only partially redeem their policies for cash.
In 1991, CBC entered into an agreement with Colorado Baseball Partnership
1993, Ltd. for an equity investment and multi-year signage and advertising
package. This commitment, totalling approximately $30 million, was
finalized upon the awarding of a National League baseball franchise to
Colorado in 1991. The initial investment as a limited partner has been paid.
The recognition of liability under the multi-year signage and advertising
package began in 1995 with the opening of Coors Field.
In 1991, the City and County of Denver, Waste Management of Colorado, Inc.
and Chemical Waste Management, Inc. brought litigation in U.S. District
Court against the Company and 37 other Potentially Responsible Parties
(PRP) to determine the allocation of costs of Lowry site remediation.
In 1993, the Court approved a settlement agreement between the Company and the
plaintiffs, resolving the Company's liabilities for the site. The Company
agreed to initial payments based on an assumed present value of $120 million in
total site remediation costs. In addition, the Company agreed to pay a
specified share of costs if total remediation costs are in excess of this
amount. Payments representing the Company's agreed share based on the $120
million assumption were made into a trust to be applied to costs of site
remediation and operating and maintenance costs. None of these payments were
material to the Company's cash flow or financial position.
The City and County of Denver, Waste Management of Colorado, Inc. and Chemical
Waste Management are expected to implement remediation of the site. The
Environmental Protection Agency's projected costs to meet the announced
remediation objectives and requirements are below the $120 million total
assumed as a basis for the Company's settlement. The Company has no reason to
believe that total remediation costs will result in additional liability to
the Company.
In 1991, the Company filed suit against certain of its former and current
insurance carriers, seeking recovery of past defense costs and investigation,
study and remediation costs. Settlements were reached during 1993 and 1994
with all defendants. As a result, in the fourth quarter of 1994, the
Company recognized a special pretax credit of $18.9 million (Note 9).
The Company also is named as defendant in various actions and proceedings
arising in the normal course of business. In all of these cases, the Company
is denying the allegations and is vigorously defending against them and, in
some instances, has filed counterclaims. Although the eventual outcome of the
various lawsuits cannot be predicted, it is management's opinion these suits
will not result in liabilities to that would materially affect the Company's
financial position or results of operations.
NOTE 13:
Quarterly Financial Information (Unaudited)
The following summarizes selected quarterly financial information for each of
the two years in the period ended December 31, 1995.
During 1994 and 1995, the first and second quarters were 12 weeks and the third
quarters were 16 weeks. During 1994, the fourth quarter was 12 weeks; during
1995 the fourth quarter was 13 weeks.
In the fourth quarter of 1995 and 1994, certain adjustments were made which
were of a normal and recurring nature. As described in Note 9, income in the
fourth quarter of 1995 was increased by a special pretax credit of $15.2
million or $0.24 per share, and income in the fourth quarter of 1994 was
increased by a special pretax credit of $13.9 million or $0.22 per share.
ADOLPH COORS COMPANY AND SUBSIDIARIES
QUARTERLY FINANCIAL STATEMENT (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth Year
(In thousands, except per share data)
1995
<S> <C> <C> <C> <C> <C>
Net sales $326,588 $399,511 $567,882 $381,398 $1,675,379
Gross profit 104,455 151,038 208,644 119,479 583,616
Net income 92 15,180 22,627 5,279 43,178
Net income per share of
common stock 0.00 0.40 0.59 0.14 1.13
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth Year
(In thousands, except per share data)
1994
<S> <C> <C> <C> <C> <C>
Net sales $318,453 $432,216 $555,581 $ 356,421 $1,662,671
Gross profit 107,201 177,579 196,902 118,200 599,882
Net income 6,934 23,906 17,340 9,940 58,120
Net income per share of
common stock 0.18 0.63 0.45 0.26 1.52
</TABLE>
ITEM 9. Disagreements on Accounting and Financial Disclosure
Within the last two fiscal years there have been no changes in the
Company's independent accountants or disagreements on material accounting
and financial statement disclosure matters.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
(a) Directors.
JOSEPH COORS (Age 78) is Vice Chairman of Adolph Coors Company and has served
in that capacity since 1975. He has served as a Director since 1942. He retired
from day-to-day operations in December 1987. He serves as a member of the
Executive Committee, the Debt Pricing Committee, and the Audit Committee.
He is also a Director of Coors Brewing Company and ACX Technologies, Inc.
PETER H. COORS (Age 49) is Vice President of Adolph Coors Company and
Chief Executive Officer and Vice Chairman of Coors Brewing Company and has
served in that capacity since 1993. He has served as a Director of Adolph
Coors Company since 1973. Prior to 1993, he served as Executive Vice
President of Adolph Coors Company and Chairman of the Brewing Group. In
December 1993, he was named interim treasurer. He is also a member of the Board
of Directors of Coors Brewing Company. He serves as a member of the Debt
Pricing Committee and the Executive Committee. In his career at Coors
Brewing Company, he has served in a number of different positions,
including Divisional President of Sales Marketing and Administration and
Secretary (1982-1985), Senior Vice President, Sales and Marketing (1978-1982),
Vice President (1976-1978), and Assistant Secretary and Assistant Treasurer
(1974-1976).
WILLIAM K. COORS (Age 79) is Chairman of the Board and President of Adolph
Coors Company and has served in such capacities since 1970 and 1989,
respectively. He has served as a Director since 1940. He serves as
Chairman of the Debt Pricing Committee and the Executive Committee. He is
also a director and Chairman of the Board of Coors Brewing Company and
ACX Technologies, Inc.
J. BRUCE LLEWELLYN (Age 68) has served as a Director and member of the Audit
Committee since 1989. In 1993, he was named chairman of the Audit Committee.
He also serves on the Compensation Committee. He is a member of the Board of
Directors of Coors Brewing Company. He is an attorney and involved in the
management of several businesses in which he is an investor. He is
presently the Chairman of the Board and Chief Executive Officer of
Philadelphia Coca Cola Bottling, Inc. He is also a Director of Chemical Bank,
Essence Communications, Inc., and the Black Shopping Network, Inc.
LUIS G. NOGALES (Age 52) has served as a Director since 1989. He became a
member of the Audit Committee in 1992. He has served as a member of the
Compensation Committee since 1989 and was named chairman in May 1994. He is
a member of the Board of Directors of Coors Brewing Company. He is
chairman and chief executive officer of Embarcadero Media, Inc., a media
(radio) acquisition company in Los Angeles. In the past he was president of
Nogales Partners (1989 to 1993), a media acquisition firm, general partner
of Nogales Castro Partners (1989-1990), President of Univision, the
nation's largest Spanish language television network (1986-1988), and
Chairman and Chief Executive Officer of United Press International (1983-
1986). From 1981-1983 he served as Senior Vice President of Fleishman-Hillard,
Inc. He is also a Director of Southern California Edison Company, SCEcorp,
and Kaufman and Broad.
WAYNE R. SANDERS (Age 48) joined the Company as a Director in February of
1995,and serves on the Compensation Committee. He is chairman of the board and
chief executive officer of Kimberly Clark (K-C) Corporation in Dallas.
Sanders joined K-C in 1975 as a Senior Financial Analyst. For the past
20 years, he has served in a number of positions with K-C. He was named to
his current position in 1992. Prior to that, he served as president and chief
executive officer (1991); president, World Consumer, Nonwovens and Service
and Industrial Operations (1990). He was elected to K-C's board of
directors in August 1989.
The Company is currently searching for one additional independent director.
(b) Executive Officers.
Of the above directors, Peter H. Coors and William K. Coors are executive
officers of Adolph Coors Company. The following also were executive
officers of Adolph Coors Company (as defined by SEC rules) at March 1, 1996:
ALVIN C. BABB (Age 63) is Senior Vice President of Operations and Technology
for CBC and has served in that capacity since 1983. Prior to that, he served as
Group Vice President of Brewery Operations (1982-1983), Senior Vice
President of Brewery Operations (1981-1982) and Senior Vice President of
Plant Operations (1978-1981). He has been with CBC for more than 40 years.
He is a member of the Master Brewing Association of America.
CARL L. BARNHILL (Age 47) joined CBC in May of 1994 as Senior Vice President of
Sales. Barnhill brings more than 20 years of marketing experience with consumer
goods companies. Most recently, he was Vice President of Selling Systems
Development for the European and Middle East division of Pepsi Foods
International. Prior to joining Pepsi in 1993, he spent 16 years with
Frito-Lay in various upper-level sales and marketing positions.
ROBERT W. EHRET (Age 51) joined CBC in May of 1994 as Senior Vice President,
Human Resources. Prior to joining CBC, Ehret served as Senior Vice President
of Human Resources for A.C. Nielsen. From 1983 to 1989, Ehret worked
for PepsiCo Inc. as Director of Employee Relations and Personnel Director
for two of PepsiCo's international divisions based in Tokyo and London.
He also worked in various Human Resource capacities at Celanese Corporation.
W. LEO KIELY, III (Age 49) became President and Chief Operating Officer of CBC
as of March 1, 1993. Prior to joining CBC, he served as division vice president
and then division president of the Frito-Lay, Inc. subsidiary of PepsiCo
in Plano, Texas. From 1989-1991, he served as senior vice president of field
operations, overseeing the operations of Frito-Lay's four regional business
teams. From 1984-1989, he was the vice president of sales and marketing for
Frito-Lay.
ROBERT D. KLUGMAN (Age 48) was named CBC's Senior Vice President of Corporate
Development in May 1994. Prior to that he was Vice President of Corporate
Development in 1993. Prior to that, he was Vice President of Brand
Marketing, a position he held from 1981 - 1987, and again from 1990 - 1993.
From 1987 to 1990 he was Vice President of International, Development and
Marketing Services. Before joining CBC, Klugman was a Vice President of
Client Services at Leo Burnett USA, a Chicago-based advertising agency.
MICHAEL A. MARRANZINO (Age 48) has served as CBC's Senior Vice President and
Chief International Officer since 1994. Prior to that, he served as
Vice President and Director of International Marketing. He has been with
CBC since 1976, and has held positions in the sales and marketing area,
including director of development, director for Coors and Coors Extra Gold
brands, director of sales and marketing operations, director of field sales and
director of sales operations.
M. CAROLINE TURNER (Age 46) was named Vice President and Assistant Secretary of
ACC and Vice President, General Counsel and Assistant Secretary of CBC
in January, 1996. Prior to that, she was Vice President and Assistant
Secretary of ACC and Vice President, Chief Legal Officer and Assistant
Secretary of CBC. In the past she served as Vice President, Chief Legal Officer
(1991-1992) and Director, Legal Affairs (1986-1991) of ACC. Prior to
joining the Company, she was a partner with the law firm of Holme
Roberts & Owen (1983-1986), an associate for Holme Roberts and Owen
(1977-1982) and a clerk in the U.S. 10th Circuit Court of Appeals (1976-
1977).
WILLIAM H. WEINTRAUB (Age 53) was named CBC's Senior Vice President of
Marketing in 1994. He joined CBC as Vice President of Marketing in
July, 1993. Prior to joining CBC, he directed all marketing and
advertising for Tropicana Products as Senior Vice President. From 1982 -
1991, Weintraub was with the Kellogg Company, with responsibility for
marketing and sales. He also held a number of positions at Proctor &
Gamble from 1967 - 1982.
TIMOTHY V. WOLF (Age 42) was named Vice President, Treasurer and Chief
Financial Officer of ACC and Senior Vice President and Chief Financial
Officer of CBC in February 1995. Wolf came to CBC from Hyatt Hotels
Corporation, where he served as Senior Vice President of Planning and
Human Resources from 1993 to 1994. From 1989 to 1993, he served in several
executive positions for The Walt Disney Company including Vice President,
Controller and Chief Accounting Officer.
ACC and CBC employ a number of other officers who are not considered executive
officers of the Registrant as defined under SEC regulations.
Terms for all officers and directors are for a period of one year, except that
vacancies may be filled and additional officers elected at any regular or
special meeting. Directors are elected at the Annual Shareholders' Meeting
held in May. There are no arrangements or understandings between any
officer or director pursuant to which any officer or director was elected
as such.
(d) Family Relationships.
William K. Coors and Joseph Coors are brothers. Peter H. Coors is a son of
Joseph Coors.
(e) Section 16 Disclosures.
All filing and disclosure requirements were met in 1995.
ITEM 11. Executive Compensation
I. SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
AWARDS PAYOUTS
NAME & PRINCIPAL YEAR SALARY BONUS OTHER RESTRICTED SECURTIES LTIP ALL
POSITION ($) ($)(a) ANNUAL STOCK UNDERLYING PAYOUTS OTHER
COMP ($)(b) OPTIONS ($)(e) COMP
($)(c) (#)(d) ($)(f)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William K. Coors, 1995 285,028 0 0 0 0 0 34,095
Chairman
of the Board, 1994 275,020 2,714 0 0 0 0 86,219
CEO of Adolph
Coors Company 1993 256,000 1,938 0 0 0 0 65,539
Peter H. Coors,
Vice Chairman 1995 506,248 0 0 0 29,328 0 89,976
& CEO of Coors
Brewing 1994 483,328 281,262 0 0 28,820 0 9,102
Company 1993 465,688 44,185 13,041 49,312 30,000 0 8,622
W. Leo Kiely III,
President 1995 399,376 0 0 0 23,843 0 8,458
& COO of
Coors Brewing 1994 384,400 230,858 0 0 23,655 0 5,151
Company 1993 310,000 187,251 309,121 16,500 10,000 0 6,198
Alvin C. Babb,
Senior VP, 1995 300,736 0 0 0 13,466 0 14,861
Operations
& Technology of 1994 289,552 133,214 0 0 13,364 0 13,451
Coors Brewing
Company 1993 278,800 27,333 11,538 4,931 3,000 0 15,239
Timothy V. Wolf,
Senior VP, 1995 280,000 124,000 304,130 0 13,881 0 3,900
Treasurer &
CFO of Coors 1994
Brewing Company 1993
</TABLE>
(a) Amounts awarded under the Management Incentive Compensation Program.
(b) No restricted stock grants were made in 1995 or 1994.
In 1993, restricted stock was granted to three of the named officers.
The number of grants and their values at December 31, 1995 are as follows:
Peter H. Coors - 3,000 shares valued at $66,375; W. Leo Kiely III - 1,000
shares valued at $22,125; and Alvin C. Babb - 300 shares valued at $6,638.
Restricted stock awards granted in 1993 have a three-year vesting period
based on year of grant and expire with termination of employment. Dividends
are paid to the holders of the grants during the vesting period.
(c) In 1995, Timothy V. Wolf received perquisites including moving and
relocation expenses of $293,450. In 1994, none of the named executives
received perquisites in excess of the lesser of $50,000 or 10% of salary
plus bonus. In 1993, W. Leo Kiely III received perquisites, including
moving expenses of $299,639.
(d) See discussion under Item 11, Part II for options issued in 1995.
(e) See discussion under Item 11, Part IV for the long term incentive program.
(f) The amounts shown in this column are attributable to the officer life
insurance other than group life, 401(k) plans and the excess of fair
market value over option price for stock options exercised in 1995. The
named executives receive officer life insurance provided by the Company
until retirement. At the time of retirement, the officer's life insurance
program terminates and for some of the officers, the salary continuation
agreement becomes effective. The officer's life insurance provides six
times the executive base salary until retirement, at which time the
Company becomes the beneficiary. The 1995 annual benefit for each
executive: William K. Coors - $34,095; Peter H. Coors - $5,566;
W. Leo Kiely III - $3,958; Alvin C. Babb - $10,361. The Company's 50%
match on the first 6% of salary contributed by the officer to ACC's
qualified 401(k) plan was $4,500 for Peter H. Coors; $4,500 for
W. Leo Kiely III; $4,500 for Alvin C. Babb; and $3,900 for Timothy V.
Wolf. Peter H. Coors exercised stock options in 1995. See discussion in
Item 11, Part III for stock option exercises in 1995.
In response to Code Section 162 of the Revenue Reconciliation Act of 1993,
the Company appointed a special compensation committee to approve and monitor
performance criteria in certain performance based executive compensation
plans for 1995.
II. OPTION/SAR GRANTS TABLE
OPTION Grants in Last Fiscal Year
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
AT ASSUMED RATES OF STOCK PRICE
APPRECIATION FOR OPTION TERM
NUMBER OF % OF TOTAL EXERCISE OR
SECURITIES OPTIONS BASE PRICE
UNDERLYING GRANTED TO ($/SHARE)
OPTIONS EMPLOYEES IN EXPIRATION
GRANTED FISCAL YEAR DATE 5% 10%
NAME (#)(a)
<S> <C> <C> <C> <C> <C> <C>
Peter H. Coors 29,328 5% $16.75 01/03/05 $565,716 $1,191,789
W. Leo Kiely III 23,843 4% $16.75 01/03/05 $459,915 $968,897
Alvin C. Babb 13,466 2% $16.75 01/03/05 $259,750 $547,212
Timothy V. Wolf 13,881 2% $16.75 01/03/05 $267,755 $564,076
</TABLE>
(a) Grants vest one year from the date of grant and at a rate of one-tenth for
each one dollar increment in fair market value (FMV) of the stock over the
exercise price. For example, when the FMV reaches $17.75, 10% of the grant
is vested; when it reaches $18.75, 20% is vested; etc. FMV is calculated by
averaging the high and low stock price for each day. Once a portion has
vested, it is not forfeited even if the FMV drops. If not sooner, the grant is
100% vested after 9 years. At December 31, 1995, the 1995 grants were 0 %
vested because of the one year vesting requirement. The 1995 grants were 60%
vested on January 3, 1996.
III. OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
Aggregated Option/SAR Exercises in Last Fiscal Year, and FY-End Option/SAR Value
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY
ACQUIRED VALUE AT FY-END (#) OPTIONS AT FY-END ($)
ON REALIZED
NAME EXERCISE (a)($) Exercis Unexercis Exercis Unexercis-
-able -able -able -able
<S> <C> <C> <C> <C> <C> <C>
Peter H. Coors 19,846 79,910 160,126 50,856 $1,033,136 $282,239
W. Leo Kiely III 0 0 20,858 36,640 120,876 202,504
Alvin C. Babb 0 0 29,997 19,813 190,228 109,477
Timothy V. Wolf 0 0 0 13,881 0 74,615
</TABLE>
(a) Values stated are the bargain element recognized in 1995, which is the
difference between the option price and the market price at the time of
exercise.
IV. LONG-TERM INCENTIVE PLAN AWARDS TABLE
<TABLE>
<CAPTION>
POTENTIAL FUTURE PAYOUTS UNDER NON-STOCK
PRICE-BASED PLANS
NAME NUMBER OF PERFORMANCE OR
SHARES, UNITS OTHER PERIOD UNTIL
OR OTHER RIGHTS MATURATION OR THRESHOLD TARGET MAXIMUM
(#) PAYOUT ($ or #) ($ or #) ($ or #)
<S> <C> <C> <C> <C> <C>
Peter H. Coors 150% of 1-1-94 1994 - 1996 8,646* 129,691* 259,382*
salary at target
W. Leo Kiely III 140% of 1-1-94 1994 - 1996 7,097* 99,353* 198,706*
salary at target
Alvin C. Babb 100% of 1-1-94 1994 - 1996 $28,956** $289,552**$579,104**
salary at target
Timothy V. Wolf 100% of 2-7-95 1994 - 1996 3,418*** 34,184*** 68,367***
salary at target (prorated)
</TABLE>
* Number of options to be granted at $16.25.
** Award of 1/2 restricted shares and 1/2 cash.
*** Number of options to be granted at $16.4375.
Under the Long-Term Incentive Plan (LTIP), payout targets are dependent on
cumulative Return on Invested Capital (ROIC), which is defined as earnings
before interest expense and after tax, divided by debt plus equity. The
LTIP cycle is three years, with any payout at the beginning of the fourth
year. Under the first cycle, the earliest potential payout is for
1994-1996. Participants elect the form of payout from three options. The first
option is to receive one-half of the payout in cash, one-half in shares of
restricted stock. Restricted shares will be fully vested, but will be
restricted from sale for a period of five years. The second option allows
the participant to use the cash portion of payout to purchase discounted
shares of stock (based on 75% of the fair market value of the stock at the
time of payout.) Shares purchased under this option are fully vested, but
cannot be sold for a period of three years. The third option allows the
participant to elect a percentage (a multiple of 10, but not more than
100) of the total award amount to be received in the form of stock options; the
number of options to be three times the total award amount divided by the fair
market value of the stock at the time the participant enters the LTIP.
The options will be fully vested and have a ten-year term. The remainder
of the award, if the percentage elected is less than 100%, will be awarded
one-half in cash, one-half in restricted shares of stock. All shares will
receive dividends during the restriction period.
V. PENSION PLAN TABLE
The following table sets forth annual retirement benefits for representative
years of service and average annual earnings.
<TABLE>
<CAPTION>
AVERAGE ANNUAL
COMPENSATION YEARS OF SERVICE
10 20 30 40
<S> <C> <C> <C> <C>
$ 125,000 $ 21,875 $ 43,750 $ 65,625 $ 71,875
150,000 26,250 52,500 78,750 86,250
175,000* 30,625 61,250 91,875 100,625
200,000* 35,000 70,000 105,000 115,000
225,000* 39,375 78,750 118,125 129,375*
250,000* 43,750 87,500 131,250* 143,750*
275,000* 48,125 96,250 144,375* 158,125*
300,000* 52,500 105,000 157,500* 172,500*
325,000* 56,875 113,750 170,625* 186,875*
350,000* 61,250 122,500* 183,750* 201,250*
375,000* 65,625 131,250* 196,875* 215,625*
400,000* 70,000 140,000* 210,000* 230,000*
425,000* 74,375 148,750* 223,125* 244,375*
450,000* 78,750 157,500* 236,250* 258,750*
475,000* 83,125 166,250* 249,375* 273,125*
500,000* 87,500 175,000* 262,500* 287,500*
</TABLE>
*Maximum permissible benefit under ERISA from the qualified retirement income
plan for 1995 was $120,000 and annual compensation in excess of $150,000 is not
considered for benefits under the qualified plan. The Company has a
non-qualified supplemental retirement plan to provide full accrued benefits to
all employees in excess of IRS maximums.
Annual average compensation covered by the qualified and non qualified
retirement plans and credited years of service for individuals named in Item
11(a) are as follows: William K. Coors - $257,016 and 56 years; Peter H.
Coors - $470,088 and 24 years; and Alvin C. Babb - $289,696 and 42 years;
W. Leo Kiely III - $386,493 and 2 years; Timothy V. Wolf - $312,538
and 1 year.
The Company's principal retirement income plan is a defined benefit plan. The
amount of contribution for officers is not included in the above table since
total plan contributions cannot be readily allocated to individual employees.
The Company's most recent actuarial valuation was as of January 1, 1995, in
which the ratio of plan contributions to total compensation covered by the
plan was approximately 6.3%. Covered compensation is defined as the total base
salary (average of three highest consecutive years out of the last ten) of
employees participating in the plan, including commissions but excluding
bonuses and overtime pay. Compensation also includes amounts deferred by the
individual under Internal Revenue Code Section 401(k) and any amounts deferred
into a plan under Internal Revenue Code Section 125. Normal retirement age
under the plan is 65. An employee with at least 5 years of vesting service may
retire as early as age 55. Benefits are reduced for early retirement based on
an employee's age and years of service at retirement; however, benefits are not
reduced if (1) the employee is at least age 62 when payments commence or
(2) the employee's age plus years of service equal at least 85 and the employee
has worked for CBC at least 25 years. The amount of pension actually accrued
under the pension formula is in the form of a straight life annuity.
In addition to the annual benefit from the qualified Retirement Plan, two of
the named executives are covered by salary continuation agreements. These
agreements provide for a lump sum cash payment to the officer upon normal
retirement in an amount actuarially equivalent in value to 30% of the
officer's last annual base salary, payable for the remainder of the
officer's life, but not less than 10 years. If the officer should die after
age 55, the surviving spouse receives the remaining amount in a lump sum. The
interest rate used in calculating the lump sum is determined using 80%
of the annual average yield of the 10-year Treasury constant maturities
for the month preceding the month of retirement. Using 1995 eligible salary
amounts as representative of the last annual base salary, the estimated
annual benefit upon normal retirement for these officers would be: Peter H.
Coors - $147,400 and Alvin C. Babb - $90,200.
Compensation of Directors
The Company adopted the Equity Compensation Plan for Non-Employee Directors
(EC Plan) effective May 16, 1991. The EC Plan provides for two grants of Adolph
Coors Company's Class B (non-voting) common stock to non-employee (NE)
directors. The first grant is automatic and equals 20% of the annual
retainer. The second grant is elective and allows the NE directors to take a
portion, or all, of the remaining annual retainer in stock. Amounts of both
grants are determined by the market value of the shares on the date of grant.
Shares received under either grant may not be sold or disposed of before
completion of the annual term. The Company reserved 50,000 shares of stock to
be issued under the EC Plan. The NE directors' annual retainer is $32,000.
In 1995, the NE members of the Board of Directors were paid 50% of the $32,000
annual retainer for the 1994-1995 term and 50% of the $32,000 annual retainer
for the 1995-1996 term as well as reimbursement of expenses incurred to perform
their duties as directors. Directors who are full-time employees of the
Company receive $15,000 annually. All directors are reimbursed for any
expenses incurred while attending Board of Directors or committee meetings
and in connection with any other CBC business. In addition, Joseph Coors, as
a director and retired executive officer, is provided an office,
transportation and secretarial support from CBC.
Employment Contracts and Termination of Employment Arrangements
CBC has no agreements with executives or employees providing employment for a
set period.
Timothy V. Wolf, Senior Vice-President and Chief Financial Officer has an
agreement providing a guaranteed bonus of 40% of his base salary in 1995. If he
is terminated without cause within the first two years, he would receive
18 months of his total current annual salary (base plus bonus).
In 1993, Alvin C. Babb, Senior Vice President, Operations & Technology, and
CBC entered into an agreement providing for certain payments to Mr. Babb if
his employment terminates on or before December 31, 1996. CBC would pay
Mr. Babb an amount equal to two times his salary plus a lump-sum payment
under his salary continuation agreement using a 5% discount factor and would
pay any differential between medical benefits then provided and medical
benefits provided under CBC's 1993 medical program.
The standard severance program for officers is one year of base salary plus a
prorated portion of any earned bonus for the year of severance.
Under the Equity Incentive Plan, if there is a change in ownership of the
Company and the Company is not the surviving corporation, the new
corporation may either continue the plan with equivalent stock or
fully vest the existing options, specify a number of days for the options
to be exercised and terminate the options if they are not exercised.
<TABLE>
<CAPTION>
Total Shareholder Returns - Dividends Reinvested
Annual Return Percentage
For the Year Ended
Company/Index 1991 1992** 1993 1994 1995
<S> <C> <C> <C> <C> <C>
Adolph Coors-Class B 4.92 19.24 1.28 5.90 35.89
S&P 500 Index 30.47 7.62 10.08 1.32 37.58
Beverages (alcoholic) 37.26 (4.79) (5.19) 9.93 27.80
</TABLE>
<TABLE>
<CAPTION>
Indexed Returns*
For the Year Ended
Company/Index 1990 1991 1992 ** 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Adolph Coors-Class B 100 104.92 125.11 126.71 134.19 182.35
S&P 500 Index 100 130.47 140.41 154.56 156.60 215.45
Beverages (alcoholic) 100 137.26 130.69 123.90 136.21 174.08
</TABLE>
*Assumes that the value of the investment in ACC Common Stock and each index
was $100 on December 30, 1990 and that all dividends were reinvested.
**Results for 1992 includes $7.92 for the spin-off occurring in December 1992.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation for CBC. This report represents
the Company's compensation philosophy for fiscal year 1995. J. Bruce
Llewellyn, Luis G. Nogales and Wayne R. Sanders served on the Compensation
Committee in 1995.
Overview of Compensation Strategy for Executives
Under the supervision of the three member 1995 Compensation Committee of the
Board of Directors, the Company continued to support the philosophy that
compensation policies, plans and programs developed must enhance the
profitability of the Company by linking financial incentives of senior
CBC management with the Company's financial performance. Base salary
philosophy remained the same and all incentive programs continued to focus on
increasing shareholder value and profitability.
Annual base salaries were set at median levels found in the external market.
The Company relied on incentive compensation plans to reward officers
for superior corporate and business unit performance. A more aggressive
posture for base salaries for senior officers who have accountability for
major functions was continued. Incentive compensation strategies were tied
to Company performance and shareholder return to encourage a greater return on
invested capital and to increase share price.
The Compensation Committee's compensation strategy for CBC's CEO and other
executive officers consisted of:
- -targeting base salary to the 50th percentile of relevant, broadly-defined
external markets;
- -providing a Company-wide annual profit sharing program under which all
eligible employees share profits based on an equal percentage of payout;
- -providing an annual cash incentive award targeted at the 75th percentile
of the same external markets;
- -providing annual stock grants designed to increase shareholder return;
- -developing a long-term incentive plan designed to increase return on invested
capital.
Relationship of Performance to Specific Elements of the Compensation Strategy
Following are brief descriptions that outline details and performance measures
of each component of the 1995 executive compensation strategy.
Base Salary
The Company used compensation survey data to determine salaries competitive at
the 50th percentile for like positions in similar sized manufacturing
companies. Company size was determined by total net sales.
Salary ranges were established for executives by using the 50th percentile
market data as the mid-point, with a 50% spread between minimum and maximum.
Where the executive was paid within the range was determined by individual
performance.
Annual Profit Sharing Program
All full time and part time employees of the Company are eligible for a payout
based on annual pre-tax profit goals being met. Payouts to all employees are
based on an equal percentage of their 1995 eligible earnings. Performance
targets for 1995 were not met and no payout was made.
Annual Cash Incentive Award
In 1995, the annual Management Incentive Compensation Program (MIC) continued
with the intent to drive both Company profitability and individual performance.
Executive officers and other key management personnel were measured based
on pre-tax profit and written individual performance plans tied to Company
objectives. Payout may only occur after profit objectives are realized. The
Compensation Committee approved annual pre-tax profit objectives as well as
minimum and maximum payout levels within the program. Annual MIC targets were
not met and no payouts were made.
In 1995, the Senior Vice President, Treasurer and Chief Financial Officer, as
part of his agreement with CBC, earned a cash incentive award based on a
percentage of his 1995 base salary.
Annual Stock Option Grants
In 1995, the Committee approved granting of stock options to the executive
officers and to other key management personnel. Options were granted as a
percentage of base salary and based on the individual's level in the
organization. Options were granted with a ten year term. Option vesting
is based on a one year holding period and an increase in share value. Options
vest 10% for each one dollar increase in fair market value. All options vest
after nine years regardless of share value increase. Options were granted
through the 1990 Equity Incentive Plan (NQEI).
The NQEI Plan was administered by the Compensation Committee. That committee
was composed of non-employee, independent directors. The NQEI Plan provides
that options be granted at exercise prices equal to the fair market
value on the date the option was granted.
Long Term Incentive Plan
In 1994, the Committee established a Long Term Incentive Plan (LTIP).
Participants include all officers and selected key personnel. The plan
is on a biannual basis. Each plan has a three year measurement cycle
(first plan cycle is for years 1994 through 1996). The plan measures
cumulative return on invested capital. The Committee established both minimum
and maximum payout levels for participants as a percentage of 1994
salary and level within the organization. New participants enter the
plan on a pro rata basis based on their entry date. The plan provides
for three different options regarding payout, which must be elected before
the start of the plan cycle.
The first option of payout is to receive one-half of the payout in restricted
shares, one-half in cash. The restricted shares have a five year restriction.
The second option is to apply the cash portion of the first option to
purchase shares of Company stock at a 25% discount, with a three year
restriction on the purchased shares. The third option is to take all or part
of the payout in the form of stock options in lieu of both restricted shares
and cash in 10% increments at a three to one ratio. These options have a ten
year term with no further restrictions.
CEO Compensation for 1995
The CEO's compensation for 1995 did not reflect any of the incentive elements
of the Company's compensation strategy. While fully supportive of the executive
compensation strategy and fully committed to the Company goal of improved
profitability and an increase in shareholder value, CEO William K. Coors has
elected not to participate in the incentive programs. It is Mr. Coors'
belief that his compensation, although low relative to market and industry
standards, is adequate to support his needs and that, given his strong
commitment to corporate goals and objectives, financial incentives would not
enhance his motivation to achieve superior performance. Mr. Coors received a
4.0% increase in base salary, which was the same level as all other employees
of the Company.
Compensation Committee Interlocks and Insider Participation
Joseph Coors, J. Bruce Llewellyn, Luis G. Nogales and Wayne R. Sanders served
on the Compensation Committee during the past fiscal year. Wayne R. Sanders
replaced Joseph Coors on the Compensation Committee in May, 1995. Joseph
Coors retired as the President and Chief Operating Officer of the Company in
December, 1987.
Joseph Coors is a director of both ACC and ACX. He, along with William K.
Coors, a Director of both ACC and ACX, are trustees of one or more family
trusts that collectively own all of the voting stock of ACC and a majority of
the common stock of ACX. (See Security Ownership of Certain Beneficial
Owners and Management in Item 12). In 1995, Peter H. Coors, a director and
executive officer of ACC, resigned as a trustee of the trust holding the ACC
voting stock. ACC and ACX, or their subsidiaries, have certain business
relationships and have engaged or proposed to engage in certain transactions
with one another, as described below.
In connection with the spin-off of ACX in December of 1992, CBC entered into
market-based, long-term supply agreements with certain ACX subsidiaries to
provide packaging, aluminum and starch products to CBC. Under the packaging
supply agreement, CBC agreed to purchase from an ACX subsidiary all of
CBC's paperboard (including composite packages and label requirements as
well as a portion of CBC's requirements for can wrappers) through 1997. Under
the aluminum supply agreement, which was cancelled effective at the end
of 1995, CBC agreed to purchase from an ACX subsidiary all of CBC's
requirements for aluminum end stock and a substantial amount of CBC's tab
stock needs, as well as substantial amounts of can body stock. Since late
1994, American National Can Company (ANC), has acted as purchasing agent for
the CBC/ANC end and can joint ventures. ANC has ordered tab stock from the
ACX subsidiary for use by CBC in 1996. CBC also expects to receive limited
quantities of can body stock in 1996 from the ACX subsidiary through
purchases by ANC. Commitments for aluminum purchases beyond 1996 have not yet
been determined. Under the starch supply agreement, CBC agreed to purchase from
an ACX subsidiary 100 million pounds of refined corn starch annually through
1997. Total purchases by CBC under these supply agreements in 1995 were
approximately $240 million. Purchases by CBC in 1996 under the packaging and
starch supply agreements, together with aluminum purchase orders currently
in place, are estimated to total approximately $145 million.
In 1995, CBC sold approximately $25 million of aluminum scrap from its can
making operations to an ACX subsidiary pursuant to an agreement that
commenced at the time of the spin-off and ended by its terms at the end of
1995. The parties have not renewed that agreement for 1996 as ANC will act
in the future to sell this scrap from the joint venture operations under a
competitive bid process. Also, CBC and an ACX subsidiary are parties to an
agreement with a stated term through 1997 under which CBC sells brewery
by-products to the ACX subsidiary for resale. Payments received by CBC under
this contract were approximately $9 million in 1995; CBC estimates that
payments in 1996 will be approximately $10 million.
Also in connection with the spin-off, ACC and ACX and their subsidiaries
negotiated other agreements, including employee matters, environmental
management, tax sharing and trademark licensing. These agreements govern
certain relationships between the relevant parties as described in the
Company's Report on Form 8-K dated December 27, 1992 and contained in the
Information Statement mailed to ACC's shareholders at the time of the
spin-off. There were also numerous transitional agreements for various
services and materials entered into at the time of the spin-off that have
since ended.
In addition, certain subsidiaries of ACC and ACX are parties to other
miscellaneous market-based transactions, as described in this paragraph.
Under certain agreements entered into at the time of the spin-off, Coors
Energy has supplied natural gas to certain Colorado facilities of ACX
subsidiaries; these agreements are being assigned to Trigen in conjunction
with the power plant sale in September of 1995. Also in 1995, CBC provided
water and waste water treatment services for an ACX ceramics facility
located on property leased from CBC, CBC purchased some ceramic tooling
from an ACX subsidiary for use on CBC lines, CBC served as aggregator for
long distance telephone services for itself and certain ACX subsidiaries,
and CBC received real estate management and other services from the ACX real
estate brokerage subsidiary. CBC does not expect to continue to serve as the
aggregator of long distance services for ACX Companies after the fall of 1996
when the long distance carrier contract comes up for renewal. During 1995,
CBC received approximately $800,000 in the aggregate and paid approximately
$400,000 in the aggregate under the agreements and transactions described in
this paragraph. CBC estimates that it will receive and pay substantially
similar amounts in 1996 for continuing services and activities pursuant to
these agreements.
CBC is a limited partner in a limited partnership in which an ACX subsidiary is
the general partner. The partnership, which was formed at the time of the
spin-off, owns, develops, operates and sells certain real estate previously
owned directly by CBC or ACC. Distributions of $1 million were made to both
partners in 1995. CBC also received a special property distribution of
approximately $130,000 in 1995. Each partner is obligated to make additional
cash contributions of $500,000 upon call of the general partner. Distributions
are allocated equally between the partners until CBC receives or recovers its
investment, and thereafter 80% to the general partner and 20% to CBC.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
The following table sets forth stock ownership of persons holding in excess of
five percent of any class of voting securities, as of March 14, 1996:
<TABLE>
<CAPTION>
Name and
Address of Amount and Nature
Title of Beneficial of Beneficial Percent
Class Owner Ownership of Class
<S> <C> <C> <C>
Class A Adolph Coors, Jr. 1,260,000 shares for 100%
Common Trust, Golden benefit of William K.
Stock Colorado, William K. Coors, Joseph Coors
(voting) Coors, Joseph Coors, and May Coors Tooker
Joseph Coors, Jr., and their lineal
Jeffrey H. Coors and descendants living
May Coors Tooker, at distribution
Trustees
</TABLE>
In addition, certain officers and directors hold interests in other family
trusts, as indicated in Item 12, Section (b) (1) following.
(b) Security Ownership of Management
The following table sets forth stock ownership of the Company's directors,
and all executive officers and directors as a group, as of March 14, 1996:
<TABLE>
<CAPTION>
Exercisable
Options/
Restricted
Shares Stocks
Title of Name of Beneficially Awards Percent
Class Beneficial Owner Owned (2) Total of Class
<S> <C> <C> <C> <C> <C>
Class B Joseph Coors 1,472 (1) 372 1,844 (1) (1)
Common Peter H. Coors 49,446 (1) 190,604 240,050 (1) (1)
Stock William K. Coors 390,807 (1) 390,807 (1) (1)
(non- J. Bruce Llewellyn 4,195 1,002 5,197
voting) Luis G. Nogales 1,139 372 1,511
Wayne R. Sanders 2,000 1,632 3,632
Alvin C. Babb 400 40,412 40,812
W. Leo Kiely III 10,000 38,528 48,528
Timothy V. Wolf 1,250 8,328 9,578
All Executive
Officers and
Directors as a
Group (15 persons) 18,279,400 412,218 18,691,618 51%
</TABLE>
(1) William K. Coors and Peter H. Coors are two of the trustees of the
Adolph Coors Foundation, which owns 732,413 shares of Class B Common Stock.
William K. Coors, Joseph Coors and Peter H. Coors are trustees, in addition
to other trustees, and beneficiaries or contingent beneficiaries in certain
cases, of various trusts that own an aggregate of 16,737,111 shares of Class
B common stock. These individuals, and others, are trustees of four other
trusts owning 347,100 shares of Class B common stock. In certain of these
trusts, they act solely as trustees and have no vested or contingent
benefits. The total of these trust shares, together with other management
shares shown above, represents 51% of the total number of shares of such
class outstanding.
(2) This represents exercisable options to purchase shares under the Company's
1983 Non-Qualified Stock Option Plan and 1990 Equity Incentive Plan (as
amended in 1995) that could be exercised as of March 14, 1996. In addition,
it reflects restricted stock awards granted under the 1990 Equity Incentive
Plan. Vesting in the restricted stock is over a three year period from date
of grant for employee/ officers and at the end of the term for outside
directors. In the event of a change in control of the Company, all vesting
restrictions on the restricted stock awards would be lifted.
(c) Changes in Control.
There are no arrangements that would at some subsequent date result in a change
of control of the Company.
ITEM 13. Certain Relationships and Related Transactions
(a) & (b) For a description of certain business relationships and related
transactions see the discussion under the caption "Compensation Committee
Interlock and Insider Participation" contained in Item 11 of this report.
(c) Indebtedness of Management
Loans are made available to employees in connection with the exercise of stock
options granted under the 1983 Non-Qualified Stock Option Plan. No such loans
were made or outstanding in 1995.
There was no other indebtedness in excess of $60,000 between the Company and
any member of management or others that have a direct or indirect interest in
the Company.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements: See index of financial statements in Item 8.
(2) Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
SCHEDULE II
<TABLE>
<CAPTION>
ADOLPH COORS COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Additions
Balance at charged to Balance
beginning costs and Other at
of year expenses additions Deductions end of year
(In thousands)
Allowance for doubtful
receivables (deducted
from accounts receivable)
Year Ended
<S> <C> <C> <C> <C> <C>
December 26, 1993 $ 12 $ 493 $ -- (a) ($ 96) (b) $409
December 25, 1994 $ 409 $ -- $ -- (a) ($ 385) (b) $ 24
December 31, 1995 $ 24 $ 198 $ -- (a) ($ 192) (b) $ 30
Allowance for obsolete inventories
Year Ended
December 31, 1995 $ 0 $ 1,000 $ -- ($ --) $1,000
</TABLE>
(a) Collections of accounts previously written off and additions through
acquisition of businesses.
(b) Write off of uncollectible accounts.
(3) Exhibits:
Exhibit 3.1 Amended Articles of Incorporation. (Incorporated by reference to
Exhibit 3.1 to Form 10-K for the fiscal year ended December 30, 1990)
Exhibit 3.2 Amended By-laws. (Incorporated by reference to Exhibit 3.2 to
Form 10-Q for the fiscal quarter ended October 1, 1995)
Exhibit 4.1 Form of Indenture for Adolph Coors Company Senior Debt
Securities. (Incorporated by reference to Exhibit 4 to Registration Statement
on Form S-3 filed March 14, 1990 and amended on March 26, 1990,
file No. 33-33831). Upon request, the Company agrees to provide a copy
of any debt instrument as applicable under Regulation S-K, Item 601,
(b)(4)(iii).
Exhibit 10.1 Officers' Life Insurance Program. (Incorporated by reference to
Exhibit 10 to Form 10-K for the fiscal year ended December 28, 1980)
Exhibit 10.2* Officers and Directors Salary Continuation Agreement.
(Incorporated by reference to Exhibit 10 to Form 10-K for the fiscal year ended
December 26, 1982)
Exhibit 10.3* Adolph Coors Company 1983 Non-Qualified Stock Option Plan, as
amended effective February 13, 1992. (Incorporated by reference to Exhibit 10.3
to Form 10-K for the fiscal year ended December 29, 1991)
Exhibit 10.4* Coors Brewing Company Annual Management Incentive Compensation
Plan
Exhibit 10.5* Coors Brewing Company Long-Term Incentive Plan, 1994-1996 Plan
Cycle. (Incorporated by reference to Exhibit 10.5 to form 10-K for the fiscal
year ended December 25, 1994)
Exhibit 10.6* Adolph Coors Company 1990 Equity Incentive Plan. Amended as of
November 16, 1995.
Exhibit 10.7* Coors Brewing Company Employee Profit Sharing Program. Amended
as of January 25, 1996.
Exhibit 10.8 Adolph Coors Company Non-Employee Director Compensation Deferral
Plan. (Incorporated by reference to Exhibit 10.9 to Form 10-K for the fiscal
year ended December 31, 1989)
Exhibit 10.9 Agreement between Adolph Coors Company and a former Executive
Officer and current Director. (Incorporated by reference to Exhibit 10.10 to
Form 10-K for the fiscal year ended December 31, 1989)
Exhibit 10.10 Form of Coors Brewing Company Distributorship Agreement.
(Introduced 1989) (Incorporated by reference to Exhibit 10.11 to Form 10-K for
the fiscal year ended December 31, 1989)
Exhibit 10.11 Adolph Coors Company Water Augmentation Plan. (Incorporated by
reference to Exhibit 10.12 to Form 10-K for the fiscal year ended December 31,
1989)
Exhibit 10.12 Adolph Coors Company Equity Compensation Plan for Non- Employee
Directors (Incorporated by reference to Exhibit 10.12 to Form 10-Q for the
fiscal quarter ended June 11, 1995)
Exhibit 10.13 Distribution Agreement dated as of October 5, 1992, between the
Company and ACX Technologies, Inc. (Incorporated herein by reference to the
Distribution Agreement included as Exhibits 2, 19.1 and 19.1A to the
Registration Statement on Form 10 filed by ACX Technologies, Inc.
(file No. 0-20704) with the Commission on October 6, 1992, as amended.)
Exhibit 10.14* Employment Contracts and Termination of Employment Agreements
for W. Leo Kiely III, Alvin C. Babb and William H. Weintraub. (Incorporated by
reference to Exhibit 10.17 to Form 10-K for the fiscal year ended December 26,
1993)
Exhibit 10.15 Revolving Credit Agreement, dated as of December 12, 1994.
Exhibit 10.16* Employment Contract and Termination Agreement for Timothy V.
Wolf.
Exhibit 10.17 Adolph Coors Company Stock Unit Plan (Incorporated by reference
to Registration Statement on Form S-8 filed on June 6, 1995)
Exhibit 21 Subsidiaries of the registrant.
Exhibit 23 Consent of Independent Accountants.
*Represents a management contract.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter ended
December 31, 1995.
(c) Other Exhibits
No exhibits in addition to those previously filed and listed in Item 14 (a)
(2) are filed herein.
(d) Other Financial Statement Schedules
No additional financial statement schedules are required.
Other Matters
For the purpose of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into registrant's Registration Statements on
Form S-8 No. 33-2761 (filed January 17, 1986), 33-35035 (filed May 24, 1990),
33-40730 (filed May 21, 1991) and 33-59979 (filed June 6, 1995) and on
Form S-3 No. 33-33831 (filed March 14, 1990):
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
EXHIBIT 21
ADOLPH COORS COMPANY AND SUBSIDIARIES
SUBSIDIARIES OF REGISTRANT
The following table lists subsidiaries of the Registrant and the respective
jurisdictions of their organization or incorporation as of December 31, 1995.
All subsidiaries are included in Registrant's consolidated financial
statements, with the exception of Coors Export Ltd.
<TABLE>
<CAPTION>
State/Country of
Organization or
Name Incorporation
- ----------------------------------------------------------------------------
<S> <C>
Coors Brewing Company Colorado
CBC International, Inc. Colorado
Coors Brewing International C.V.* The Netherlands
Coors Brewing Iberica, S.A. Spain
Coors Services, S.A. Switzerland
Coors Distributing Company Colorado
Coors Energy Company Colorado
Gap Run Pipeline Company Colorado
Coors Global, Inc. Colorado
Coors Intercontinental, Inc. Colorado
Coors International, Inc. Delaware
Coors Transportation Company Colorado
The Rocky Mountain Water Company Colorado
The Wannamaker Ditch Company Colorado
Coors Japan Company, Ltd. Japan
Coors Export Ltd.** Barbados, West Indies
</TABLE>
* Organized as a partnership for foreign purposes and as a corporation for
U.S. purposes.
** Established as a subsidiary of Adolph Coors Company in early 1996.
EXHIBIT 23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 33-33831)
and in the Registration Statements on Form S-8 (No. 33-2761), (No. 33-35035),
(No. 33-40730) and (No. 33-59979) of Adolph Coors Company of our report
dated February 16, 1996 appearing on page 27 of this Form 10-K.
PRICE WATERHOUSE LLP
Denver, Colorado
March 29, 1996
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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/ William K. Coors
- -------------------------------
William K. Coors
Chairman and President
(Chief Executive Officer)
By /s/ Timothy V. Wolf
- --------------------------------
Timothy V. Wolf
Vice President, Treasurer,
Chief Financial Officer
(Principal Financial Officer)
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following directors on behalf of the
Registrant and in the capacities and on the date indicated.
By /s/ Joseph Coors By /s/ J. Bruce Llewellyn
- ------------------------- ---------------------------
Joseph Coors J. Bruce Llewellyn
Vice Chairman
By /s/ Peter H. Coors By /s/ Luis G. Nogales
- ------------------------------ ---------------------------
Peter H. Coors Luis G. Nogales
Chief Executive Officer
Coors Brewing Company
By /s/ Wayne R. Sanders
- ------------------------------
Wayne R. Sanders
March 29, 1996
ADOLPH COORS COMPANY
EQUITY INCENTIVE PLAN
Amended and restated,
effective November 16, 1995
TABLE OF CONTENTS
Page
Section 1 Introduction 1
1.1 Establishment and Amendment 1
1.2 Purposes 1
1.3 Effective Date 1
Section 2 Definitions 1
2.1 Definitions 1
2.2 Gender and Number 2
Section 3 Plan Administration 2
3.1 General 2
3.2 Claims 3
Section 4 Stock Subject to the Plan 3
4.1 Number of Shares 3
4.2 Other Shares of Stock 3
4.3 Adjustments for Stock Split,
Stock Dividend, Etc 4
4.4 Other Distributions and Changes
in the Stock 4
4.5 General Adjustment Rules 4
4.6 Determination by the Committee, Etc 4
Section 5 Reorganization or Liquidation 4
Section 6 Participation 5
6.1 In General 5
6.2 Restriction on Award Grants
to Certain Individuals 5
Section 7 Stock Options 5
7.1 Grant of Stock Options 5
7.2 Stock Option Certificates 5
7.3 Shareholder Privileges 8
Section 8 Restricted Stock Awards 8
8.1 Grant of Restricted Stock Awards 8
8.2 Restrictions 8
8.3 Privileges of a Stockholder,
Transferability 8
8.4 Enforcement of Restrictions 8
Section 9 Purchase of Stock 9
9.1 General 9
9.2 Other Terms 9
Section 10 Other Common Stock Grants 9
Section 11 Company Right To Purchase Stock 9
11.1 Right of First Refusal 9
11.2 Marking of Certificates 10
Section 12 Change in Control 10
12.1 In General 10
12.2 Limitation on Payments 10
Section 13 Rights of Employees; Participants 11
13.1 Employment 11
13.2 Nontransferability 11
Section 14 General Restrictions 11
14.1 Investment Representations 11
14.2 Compliance with Securities Laws 11
14.3 Changes in Accounting Rules 11
Section 15 Other Employee Benefits 12
Section 16 Plan Amendment, Modification and
Termination 12
Section 17 Withholding 12
17.1 Withholding Requirement 12
17.2 Withholding With Stock 12
Section 18 Requirements of Law 12
18.1 Requirements of Law 12
18.2 Federal Securities Law Requirements 12
18.3 Governing Law 13
Section 19 Duration of the Plan 13
ADOLPH COORS COMPANY
EQUITY INCENTIVE PLAN
Amended and restated,
effective November 16, 1995
Section 1
Introduction
1.1 Establishment and Amendment. Adolph Coors Company, a Colorado
corporation (hereinafter referred to, together with its Affiliated
Corporations (as defined in subsection 2.1(a)) as the "Company" except where
the context otherwise requires), established the Adolph Coors Company Equity
Incentive Plan (the "Plan") for certain key employees of the Company. The
Plan, which permits the grant of stock options and restricted stock awards to
certain key employees of the Company, was originally effective January 1,
1990. Pursuant to the power granted in Section 16 (Section 14 prior to the
Plan's amendment and restatement), the Company hereby amends and restates the
Plan in its entirety, effective November 16, 1995.
1.2 Purposes. The purposes of the Plan are to provide the key management
employees selected for participation in the Plan with added incentives to
continue in the service of the Company and to create in such employees a more
direct interest in the future success of the operations of the Company by
relating incentive compensation to the achievement of long-term corporate
economic objectives, so that the income of the key management employees is
more closely aligned with the income of the Company's shareholders. The Plan
is also designed to attract key employees and to retain and motivate
participating employees by providing an opportunity for investment in the
Company.
1.3 Effective Date. The original effective date of the Plan (the
"Effective Date") was January 1, 1990. The Plan, each amendment to the Plan,
and each option or other award granted hereunder is conditioned on and shall
be of no force or effect until approval of the Plan by the holders of the
shares of voting stock of the Company unless the Company, on the advice of
counsel, determines that shareholder approval is not necessary.
Section 2
Definitions
2.1 Definitions. The following terms shall have the meanings set forth below:
(a) "Affiliated Corporation" means any corporation or other entity
(including but not limited to a partnership) which is affiliated with Adolph
Coors Company through stock ownership or otherwise and is treated as a common
employer under the provisions of Sections 414(b) and (c) of the Internal
Revenue Code.
(b) "Award" means an Option or a Restricted Stock Award issued
hereunder, an offer to purchase Stock made hereunder, or a grant of Stock
made hereunder.
(c) "Board" means the Board of Directors of the Company.
(d) "Committee" means a committee consisting of members of the Board
who are empowered hereunder to take actions in the administration of the
Plan. The Committee shall be so constituted at all times as to permit the
Plan to comply with Rule 16b-3 or any successor rule promulgated under the
Securities Exchange Act of 1934 (the "1934 Act"). Members of the Committee
shall be appointed from time to time by the Board, shall serve at the
pleasure of the Board and may resign at any time upon written notice to the
Board.
(e) "Effective Date" means the original effective date of the Plan,
January 1, 1990.
(f) "Eligible Employees" means those key management employees
(including, without limitation, officers and directors who are also
employees) of the Company or any division thereof, upon whose judgment,
initiative and efforts the Company is, or will become, largely dependent for
the successful conduct of their business.
(g) "Fair Market Value" means the average of the highest and lowest
prices of the Stock as reported on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") on a particular date. If there
are no Stock transactions on such date, the Fair Market Value shall be
determined as of the immediately preceding date on which there were Stock
transactions. If the price of the Stock is not reported on NASDAQ, the Fair
Market Value of the Stock on the particular date shall be as determined by
the Committee using a reference comparable to the NASDAQ system. If, upon
exercise of an Option, the exercise price is paid by a broker's transaction
as provided in section 7.2(g)(ii)(D), Fair Market Value, for purposes of the
exercise, shall be the price at which the Stock is sold by the broker.
(h) "Internal Revenue Code" means the Internal Revenue Code of 1986,
as it may be amended from time to time.
(i) "Option" means a right to purchase Stock at a stated price for a
specified period of time. All Options granted under the Plan shall be
"non-qualified stock options" whose grant is not intended to fall under the
provisions of Section 422A of the Internal Revenue Code.
(j) "Option Price" means the price at which shares of Stock subject to
an Option may be purchased, determined in accordance with subsection 7.2(b).
(k) "Participant" means an Eligible Employee designated by the
Committee from time to time during the term of the Plan to receive one or
more of the Awards provided under the Plan.
(l) "Restricted Stock Award" means an award of Stock granted to a
Participant pursuant to Section 8 that is subject to certain restrictions
imposed in accordance with the provisions of such Section.
(m) "Stock" means the no par value Class B (non-voting) Common Stock
of the Company.
(n) "Voting Stock" means the $1.00 par value Class A Common Stock of
the Company.
2.2 Gender and Number. Except when otherwise indicated by the context, the
masculine gender shall also include the feminine gender, and the definition
of any term herein in the singular shall also include the plural.
Section 3
Plan Administration
3.1 General. The Plan shall be administered by the Committee. In
accordance with the provisions of the Plan, the Committee shall, in its sole
discretion, select the Participants from among the Eligible Employees,
determine the Options, Restricted Stock Awards and other Awards to be granted
pursuant to the Plan, the number of shares of Stock to be issued thereunder
and the time at which such Options and Restricted Stock Awards are to be
granted, fix the Option Price, period and manner in which an Option becomes
exercisable, establish the duration and nature of Restricted Stock Award
restrictions, establish the terms and conditions on which an offer to
purchase Stock will be made, and establish such other terms and requirements
of the various compensation incentives under the Plan as the Committee may
deem necessary or desirable and consistent with the terms of the Plan. The
Committee shall determine the form or forms of the agreements with
Participants which shall evidence the particular provisions, terms,
conditions, rights and duties of the Company and the Participants with
respect to Awards granted pursuant to the Plan, which provisions need not be
identical except as may be provided herein. The Committee may from time to
time adopt such rules and regulations for carrying out the purposes of the
Plan as it may deem proper and in the best interests of the Company. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any agreement entered into hereunder in the
manner and to the extent it shall deem expedient and it shall be the sole and
final judge of such expediency. No member of the Committee shall be liable
for any action or determination made in good faith. The determinations,
interpretations and other actions of the Committee pursuant to the provisions
of the Plan shall be binding and conclusive for all purposes and on all
persons.
3.2 Claims.
(a) A Participant who wishes to appeal any determination of the
Committee concerning an Award granted pursuant to the Plan shall notify the
Committee in a writing, which shall state the basis for the appeal. The
appeal shall be filed with the Committee within 30 days after the date the
Participant received the notice from the Committee. The written appeal may
be filed by the Participant's authorized representative. The Committee shall
review the appeal and issue its decision within 90 days after it receives the
Participant's appeal. If the Committee needs additional time to review the
appeal, it shall notify the Participant in writing and specify when it
expects to render its decision. After completion of its review, the
Committee shall notify the Participant of its decision in writing, which
shall state the reasons for the Committee's decision.
(b) If, after the completion of the procedure set forth in the
preceding paragraph, the Participant wishes to further pursue the appeal, the
appeal shall be submitted to, and determined through, binding arbitration in
Denver, Colorado in accordance with the arbitration procedures of the
American Arbitration Association ("AAA") existing at the time the arbitration
is conducted, before a single arbitrator chosen in accordance with AAA
procedures. The decision of the arbitrator shall be enforceable as a court
judgment.
Section 4
Stock Subject to the Plan
4.1 Number of Shares. Five Million (5,000,000) shares of Stock are
authorized for issuance under the Plan in accordance with the provisions of
the Plan and subject to such restrictions or other provisions as the
Committee may from time to time deem necessary. This authorization may be
increased from time to time by approval of the Board and by the shareholders
of the Company if, in the opinion of counsel for the Company, such
shareholder approval is required. Shares of Stock that may be issued upon
exercise of Options, that are issued as Restricted Stock Awards, that are
purchased under the Plan, and that are used as incentive compensation under
the Plan shall be applied to reduce the maximum number of shares of Stock
remaining available for use under the Plan. The Company shall at all times
during the term of the Plan and while any Options are outstanding retain as
authorized and unissued Stock at least the number of shares from time to time
required under the provisions of the Plan, or otherwise assure itself of its
ability to perform its obligations hereunder.
4.2 Other Shares of Stock. Any shares of Stock that are subject to an
Option that expires or for any reason is terminated unexercised, any shares
of Stock that are subject to an Award (other than an Option) and that are
forfeited, any shares of Stock withheld for the payment of taxes or received
by the Company as payment of the exercise price of an Option and any shares
of Stock that for any other reason are not issued to an Eligible Employee or
are forfeited shall automatically become available for use under the Plan.
However, any shares of Stock that are subject to an Award (other than an
Option) and that are forfeited and any shares of Stock that are withheld for
the payment of taxes or received by the Company as payment of the exercise
price of an Option shall be available for use under the Plan.
4.3 Adjustments for Stock Split, Stock Dividend, Etc. If the Company shall
at any time increase or decrease the number of its outstanding shares of
Stock or change in any way the rights and privileges of such shares by means
of the payment of a stock dividend or any other distribution upon such shares
payable in Stock, or through a stock split, subdivision, consolidation,
combination, reclassification or recapitalization involving the Stock, then
in relation to the Stock that is affected by one or more of the above events,
the numbers, rights and privileges of the following shall be increased,
decreased or changed in like manner as if they had been issued and
outstanding, fully paid and nonassessable at the time of such occurrence:
(i) the shares of Stock as to which Awards may be granted under the Plan; and
(ii) the shares of the Stock then included in each outstanding Award granted
hereunder.
4.4 Other Distributions and Changes in the Stock. If
(a) the Company shall at any time distribute with respect to the Stock
assets or securities of persons other than the Company (excluding cash or
distributions referred to in Section 4.3),
(b) the Company shall at any time grant to the holders of its Stock
rights to subscribe pro rata for additional shares thereof or for any other
securities of the Company, or
(c) there shall be any other change (except as described in Section
4.3), in the number or kind of outstanding shares of Stock or of any stock or
other securities into which the Stock shall be changed or for which it shall
have been exchanged,and if the Committee shall in its discretion determine
that the event described in subsection (a), (b), or (c) above equitably
requires an adjustment in the number or kind of shares subject to an Option
or other Award, an adjustment in the Option Price or the taking of any other
action by the Committee, including without limitation, the setting aside of
any property for delivery to the Participant upon the exercise of an Option
or the full vesting of an Award, then such adjustments shall be made, or
other action shall be taken, by the Committee and shall be effective for all
purposes of the Plan and on each outstanding Option or Award that involves
the particular type of stock for which a change was effected.
Notwithstanding the foregoing provisions of this Section 4.4, pursuant to
Section 8.3 below, a Participant holding Stock received as a Restricted Stock
Award shall have the right to receive all amounts, including cash and
property of any kind, distributed with respect to the Stock upon the
Participant's becoming a holder of record of the Stock.
4.5 General Adjustment Rules. No adjustment or substitution provided for
in this Section 4 shall require the Company to sell a fractional share of
Stock under any Option, or otherwise issue a fractional share of Stock, and
the total substitution or adjustment with respect to each Option and other
Award shall be limited by deleting any fractional share. In the case of any
such substitution or adjustment, the total Option Price for the shares of
Stock then subject to the Option shall remain unchanged but the Option Price
per share under each such Option shall be equitably adjusted by the Committee
to reflect the greater or lesser number of shares of Stock or other
securities into which the Stock subject to the Option may have been changed,
and appropriate adjustments shall be made to Restricted Stock Awards to
reflect any such substitution or adjustment.
4.6 Determination by the Committee, Etc. Adjustments under this Section 4
shall be made by the Committee, whose determinations with regard thereto
shall be final and binding upon all parties thereto.
Section 5
Reorganization or Liquidation
If the Company is merged or consolidated with another corporation and the
Company is not the surviving corporation, or if all or substantially all of
the assets or more than 50% of the outstanding voting stock of the Company is
acquired by any other corporation, business entity or person, or in case of
a reorganization (other than a reorganization under the United States
Bankruptcy Code), including a divisive reorganization under Section 355 of
the Code, or liquidation of the Company, and if the provisions of Section 12
do not apply, the Committee, or the board of directors of any corporation
assuming the obligations of the Company, shall, as to the Plan and
outstanding Options and other Awards, either (i) make appropriate provision
for the adoption and continuation of the Plan by the acquiring or successor
corporation and for the protection of any such outstanding Options and other
Awards by the substitution on an equitable basis of appropriate stock of the
Company or of the merged, consolidated or otherwise reorganized corporation
that will be issuable with respect to the Stock, provided that no additional
benefits shall be conferred upon the Participants holding such Options and
other Awards as a result of such substitution, and the excess of the
aggregate Fair Market Value of the shares subject to the Options immediately
after such substitution over the Option Price thereof is not more than the
excess of the aggregate Fair Market Value of the shares subject to such
Options immediately before such substitution over the Option Price thereof,
or (ii) upon written notice to the Participants, provide that all unexercised
Options must be exercised within a specified number of days of the date of
such notice or they will be terminated. In the latter event, the Committee
shall accelerate the exercise dates of outstanding Options and accelerate the
restriction period and modify the performance requirements for any
outstanding Awards so that all Options and other Awards become fully vested
prior to any such event.
Section 6
Participation
6.1 In General. Participants in the Plan shall be those Eligible Employees
who, in the judgment of the Committee, are performing, or during the term of
their incentive arrangement will perform, vital services in the management,
operation and development of the Company or an Affiliated Corporation, and
significantly contribute, or are expected to significantly contribute, to the
achievement of long-term corporate economic objectives. Participants may be
granted from time to time one or more Awards; provided, however, that the
grant of each such Award shall be separately approved by the Committee, and
receipt of one such Award shall not result in automatic receipt of any other
Award. Upon determination by the Committee that an Award is to be granted to
a Participant, written notice shall be given to such person, specifying the
terms, conditions, rights and duties related thereto. Each Participant
shall, if required by the Committee, enter into an agreement with the
Company, in such form as the Committee shall determine and that is consistent
with the provisions of the Plan, specifying such terms, conditions, rights
and duties. Awards shall be deemed to be granted as of the date specified in
the grant resolution of the Committee, which date shall be the date of any
related agreement with the Participant. In the event of any inconsistency
between the provisions of the Plan and any such agreement entered into
hereunder, the provisions of the Plan shall govern.
6.2 Restriction on Award Grants to Certain Individuals. Notwithstanding
the foregoing provisions of Section 6.1, no Awards shall be granted to any
lineal descendant of Adolph Coors, Jr. without the prior written approval of
counsel to the Company as to the effect of any such grant on the possible
status of the Company as a "personal holding company" within the meaning of
Section 542 of the Internal Revenue Code.
Section 7
Stock Options
7.1 Grant of Stock Options. Coincident with or following designation for
participation in the Plan, a Participant may be granted one or more Options.
In no event shall the exercise of one Option affect the right to exercise any
other Option or affect the number of shares of Stock for which any other
Option may be exercised, except as provided in subsection 7.2(j).
7.2 Stock Option Certificates. Each Option granted under the Plan shall be
evidenced by a written stock option certificate. A stock option certificate
shall be issued by the Company in the name of the Participant to whom the
Option is granted (the "Option Holder") and shall incorporate and conform to
the conditions set forth in this Section 7.2, as well as such other terms and
conditions, not inconsistent herewith, as the Committee may consider
appropriate in each case.
(a) Number of Shares. Each stock option agreement shall state that it
covers a specified number of shares of the Stock, as determined by the
Committee.
(b) Price. The price at which each share of Stock covered by an
Option may be purchased shall be determined in each case by the Committee and
set forth in the stock option certificate.
(c) Duration of Options; Restrictions on Exercise. Each stock option
agreement shall state the period of time, determined by the Committee, within
which the Option may be exercised by the Option Holder (the "Option Period"),
and shall also set forth any installment or other restrictions on Option
exercise during such period, if any, as may be determined by the Committee.
(d) Termination of Employment, Death, Disability, Etc. Each stock
option agreement shall provide as follows with respect to the exercise of the
Option upon termination of the employment or the death of the Option Holder:
(i) If the employment of the Option Holder is terminated within
the Option Period for cause, as determined by the Company, the Option shall
thereafter be void for all purposes. As used in this subsection 7.2(d),
"cause" shall mean a gross violation, as determined by the Company, of the
Company's established policies and procedures, provided that the effect of
this subsection 7.2(d) shall be limited to determining the consequences of a
termination and that nothing in this subsection 7.2(d) shall restrict or
otherwise interfere with the Company's discretion with respect to the
termination of any employee.
(ii) If the Option Holder retires from employment by the Company
or its affiliates during the Option Period pursuant to the Company's
retirement policy, or if the Option Holder becomes disabled (as determined
pursuant to the Company's Long-Term Disability Plan), the Option may be
exercised by the Option Holder, or in the case of death by the persons
specified in subsection (iii) of this subsection 7.2(d), within thirty-six
months following his or her retirement or disability (provided that such
exercise must occur within the Option Period), but not thereafter. In any
such case, the Option may be exercised only as to the shares as to which the
Option had become exercisable on or before the date of the Option Holder's
termination of employment.
(iii) If the Option Holder dies during the Option Period while
still employed or within the three-month period referred to in (iv) below, or
within the thirty-six-month period referred to in (ii) above, the Option may
be exercised by those entitled to do so under the Option Holder's will or by
the laws of descent and distribution within fifteen months following the
Option Holder's death, (provided that such exercise must occur within the
Option Period), but not thereafter. In any such case, the Option may be
exercised only as to the shares as to which the Option had become exercisable
on or before the date of the Option Holder's death.
(iv) If the employment of the Option Holder by the Company is
terminated (which for this purpose means that the Option Holder is no longer
employed by the Company or by an Affiliated Corporation) within the Option
Period for any reason other than cause, retirement pursuant to the Company's
retirement policy, disability or the Option Holder's death, the Option may be
exercised by the Option Holder within three months following the date of such
termination (provided that such exercise must occur within the Option
Period), but not thereafter. In any such case, the Option may be exercised
only as to the shares as to which the Option had become exercisable on or
before the date of termination of employment.
(e) Transferability. Each stock option agreement shall provide that
the Option granted therein is not transferable by the Option Holder except by
will or pursuant to the laws of descent and distribution, and that such
Option is exercisable during the Option Holder's lifetime only by him or her,
or in the event of disability or incapacity, by his or her guardian or legal
representative.
(f) Agreement to Continue in Employment. Each stock option agreement
shall contain the Option Holder's agreement to remain in the employment of
the Company, at the pleasure of the Company, for a continuous period of at
least one year after the date of such stock option agreement, at the salary
rate in effect on the date of such agreement or at such changed rate as may
be fixed, from time to time, by the Company.
(g) Exercise, Payments, Etc.
(i)Each stock option agreement shall provide that the method for
exercising the Option granted therein shall be by delivery to the Corporate
Secretary of the Company of written notice specifying the number of shares
with respect to which such Option is exercised and payment of the Option
Price. Such notice shall be in a form satisfactory to the Committee and
shall specify the particular Option (or portion thereof) which is being
exercised and the number of shares with respect to which the Option is being
exercised. The exercise of the Stock Option shall be deemed effective upon
receipt of such notice by the Corporate Secretary and payment to the Company.
If requested by the Company, such notice shall contain the Option Holder's
representation that he or she is purchasing the Stock for investment purposes
only and his or her agreement not to sell any Stock so purchased in any
manner that is in violation of the Securities Act of 1933, as amended, or any
applicable state law. Such restrictions, or notice thereof, shall be placed
on the certificates representing the Stock so purchased. The purchase of
such Stock shall take place at the principal offices of the Company upon
delivery of such notice, at which time the purchase price of the Stock shall
be paid in full by any of the methods or any combination of the methods set
forth in (ii) below. A properly executed certificate or certificates
representing the Stock shall be issued by the Company and delivered to the
Option Holder. If certificates representing Stock are used to pay all or
part of the exercise price, separate certificates for the same number of
shares of Stock shall be issued by the Company and delivered to the Option
Holder representing each certificate used to pay the Option Price, and an
additional certificate shall be issued by the Company and delivered to the
Option Holder representing the additional shares, in excess of the Option
Price, to which the Option Holder is entitled as a result of the exercise of
the Option.
(ii) The exercise price shall be paid by any of the following
methods or any combination of the following methods:
(A) in cash;
(B) by certified or cashier's check payable to the order of
the Company;
(C) by delivery to the Company of certificates representing
the number of shares then owned by the Option Holder, the Fair Market Value
of which equals the purchase price of the Stock purchased pursuant to the
Option, properly endorsed for transfer to the Company; provided however, that
no Option may be exercised by delivery to the Company of certificates
representing Stock, unless such Stock has been held by the Option Holder for
more than six months; for purposes of this Plan, the Fair Market Value of any
shares of Stock delivered in payment of the purchase price upon exercise of
the Option shall be the Fair Market Value as of the exercise date; the
exercise date shall be the day of delivery of the certificates for the Stock
used as payment of the Option Price; or
(D) by delivery to the Company of a properly executed notice
of exercise together with irrevocable instructions to a broker to deliver to
the Company promptly the amount of the proceeds of the sale of all or a
portion of the Stock or of a loan from the broker to the Option Holder
necessary to pay the exercise price.
(h) Date of Grant. An option shall be considered as having been
granted on the date specified in the grant resolution of the Committee.
(i) Notice of Sale of Stock; Withholding. Each stock option agreement
shall provide that, upon exercise of the Option, the Option Holder shall make
appropriate arrangements with the Company to provide for the amount of
additional withholding required by Sections 3102 and 3402 of the Internal
Revenue Code and applicable state income tax laws, including payment of such
taxes through delivery of shares of Stock or by withholding Stock to be
issued under the Option, as provided in Section 17.
(j) Issuance of Additional Option. If an Option Holder pays all or
any portion of the exercise price of an Option with Stock, or pays all or any
portion of the applicable withholding taxes with respect to the exercise of
an Option with Stock which has been held by the Option Holder for more than
six months, the Committee shall grant to such Option Holder a new Option
covering the number of shares of Stock used to pay such exercise price and/or
withholding tax. The new Option shall have an Option Price per share equal
to the Fair Market Value of a share of Stock on the date of the exercise of
the Option and shall have the same terms and provisions as the Option, except
as otherwise determined by the Committee in its sole discretion. Effective
for Options granted on and after January 1, 1994, this section 7.2(j) shall
be null and void.
7.3 Shareholder Privileges. No Option Holder shall have any rights as a
shareholder with respect to any shares of Stock covered by an Option until
the Option Holder becomes the holder of record of such Stock, and no
adjustments shall be made for dividends or other distributions or other
rights as to which there is a record date preceding the date such Option
Holder becomes the holder of record of such Stock, except as provided in
Section 4.
Section 8
Restricted Stock Awards
8.1 Grant of Restricted Stock Awards. Coincident with or following
designation for participation in the Plan, the Committee may grant a
Participant one or more Restricted Stock Awards consisting of shares of
Stock. The number of shares granted as a Restricted Stock Award shall be
determined by the Committee.
8.2 Restrictions. A Participant's right to retain a Restricted Stock Award
granted to him under Section 8.1 shall be subject to such restrictions,
including but not limited to his continuous employment by the Company or an
Affiliated Corporation for a restriction period specified by the Committee or
the attainment of specified performance goals and objectives, as may be
established by the Committee with respect to such Award. The Committee may
in its sole discretion require different periods of employment or different
performance goals and objectives with respect to different Participants, to
different Restricted Stock Awards or to separate, designated portions of the
Stock shares constituting a Restricted Stock Award. In the event of the
death or disability (as defined in subsection 7.2(d)) of a Participant, or
the retirement of a Participant in accordance with the Company's established
retirement policy, all employment period and other restrictions applicable to
Restricted Stock Awards then held by him shall lapse with respect to a pro
rata part of each such Award based on the ratio between the number of full
months of employment completed at the time of termination of employment from
the grant of each Award to the total number of months of employment required
for such Award to be fully nonforfeitable, and such portion of each such
Award shall become fully nonforfeitable. The remaining portion of each such
Award shall be forfeited and shall be immediately returned to the Company.
In the event of a Participant's termination of employment for any other
reason, any Restricted Stock Awards as to which the employment period or
other restrictions have not been satisfied (or waived or accelerated as
provided herein) shall be forfeited, and all shares of Stock related thereto
shall be immediately returned to the Company.
8.3 Privileges of a Stockholder, Transferability. A Participant shall have
all voting, dividend, liquidation and other rights with respect to Stock in
accordance with its terms received by him as a Restricted Stock Award under
this Section 8 upon his becoming the holder of record of such Stock;
provided, however, that the Participant's right to sell, encumber, or
otherwise transfer such Stock shall be subject to the limitations of Sections
9 and 11.2.
8.4 Enforcement of Restrictions. The Committee shall cause a legend to be
placed on the Stock certificates issued pursuant to each Restricted Stock
Award referring to the restrictions provided by Sections 8.2 and 8.3 and, in
addition, may in its sole discretion require one or more of the following
methods of enforcing the restrictions referred to in Sections 8.2 and 8.3:
(a) Requiring the Participant to keep the Stock certificates, duly
endorsed, in the custody of the Company while the restrictions remain in
effect; or
(b) Requiring that the Stock certificates, duly endorsed, be held in
the custody of a third party while the restrictions remain in effect.
Section 9
Purchase of Stock
9.1 General. From time to time the Company may make an offer to certain
Participants, designated by the Committee in its sole discretion, to purchase
Stock from the Company. The number of shares of Stock offered by the Company
to each selected Participant shall be determined by the Committee in its sole
discretion. The purchase price for the Stock shall be as determined by the
Committee in its sole discretion and may be less than the Fair Market Value
of the Stock. The Participants who accept the Company's offer shall purchase
the Stock at the time designated by the Committee. The purchase shall be on
such additional terms and conditions as may be determined by the Committee in
its sole discretion.
9.2 Other Terms. The Committee may, in its sole discretion, grant Options,
Restricted Stock, or any combination thereof, on terms and conditions
determined by the Committee, in its sole discretion, to the Participants who
purchase Stock pursuant to Section 9.1.
Section 10
Other Common Stock Grants
From time to time during the duration of this Plan, the Board may, in its
sole discretion, adopt one or more incentive compensation arrangements for
Participants pursuant to which the Participants may acquire shares of Stock,
whether by purchase, outright grants, or otherwise. Any such arrangements
shall be subject to the general provisions of this Plan and all shares of
Stock issued pursuant to such arrangements shall be issued under this Plan.
Section 11
Company Right To Purchase Stock
11.1 Right of First Refusal.
(a) In the event of the death of a Participant, or if a Participant at
any time proposes to transfer any of the Stock acquired pursuant to the Plan
to a third party, the Participant (or his personal representative or estate,
as the case may be) shall make a written offer (the "Offer") to sell all of
the Stock acquired pursuant to the Plan then owned by the Participant (or
thereafter acquired by the Participant's estate or personal representative
pursuant to any Award hereunder) to the Company at the "purchase price" as
hereinafter defined. In the case of a proposed sale of any of the Stock to
a third party, the Offer shall state the name of the proposed transferee and
the terms and conditions of the proposed transfer. In a case of a proposed
sale through or to a registered broker/dealer, the Offer shall state the name
and address of the broker. The Company shall have the right to elect to
purchase all (but not less than all) of the shares of Stock. The Company
shall have the right to elect to purchase the shares of Stock for a period of
ten (10) days after the receipt by the Company of the Offer. The provisions
of this Section 11 shall apply to proposed sales through or to a registered
broker/dealer at the prevailing market price, even if the prevailing market
price should fluctuate between the date the Company receives the Offer and
the date the Company elects to purchase the shares of Stock. In all cases,
the purchase price for the Stock shall be determined pursuant to subsection
11.1(d).
(b) The Company shall exercise its right to purchase the Stock by
given written notice of its exercise to the Participant (or his personal
representative or estate, as the case may be). If the Company elects to
purchase the Stock, payment for the shares of Stock shall be made in full by
Company check. Any such payments shall be made within ten (10) days after
the election to purchase has been exercised.
(c) If the Stock is not purchased pursuant to the foregoing
provisions, the shares of Stock may be transferred by the Participant to the
proposed transferee named in the Offer to the Company, in the case of a
proposed sale to a third party. However, if such transfer is not made within
120 days following the termination of the Company's right to purchase, a new
offer must be made to the Company before the Participant can transfer any
portion of his shares and the provisions of this Section 11 shall again apply
to such transfer. If the Company's right of first refusal under this Section
11 is created by an event other than a proposed transfer to a third party,
the shares of Stock shall remain subject to the provisions of this Section 11
in the hands of the registered owner of the Stock.
(d) The purchase price for each share of Stock purchased by the
Company pursuant to this Section 11 shall be equal to the Fair Market Value
of the Stock on the date the Company receives the Offer under subsection
11.1(a).
11.2 Marking of Certificates. Each certificate representing shares of Stock
acquired pursuant to this Plan shall bear the following legend:
The shares of stock represented by this Certificate are subject to all the
terms of the Adolph Coors Company Equity Incentive Plan, as the Plan may be
amended from time to time (the "Plan") and to the terms of a [Non-Qualified
Stock Option Agreement] [Restricted Stock Agreement] [Stock Purchase
Agreement] between the Company and the Participant (the "Agreement"). Copies
of the Plan and the Agreement are on file at the office of the Company. The
Plan and the Agreement, among other things, limit the right of the Owner to
transfer the shares represented hereby and provides that in certain
circumstances the shares may be purchased by the Company.
Section 12
Change in Control
12.1 In General. In the event of a change in control of the Company as
defined in Section 12.3, then (a) all Options shall become immediately
exercisable in full during the remaining term thereof, and shall remain so,
whether or not the Participants to whom such Options have been granted remain
employees of the Company or an Affiliated Corporation; and (b) all
restrictions with respect to outstanding Restricted Stock Awards shall
immediately lapse.
12.2 Limitation on Payments. If the provisions of this Section 12 would
result in the receipt by any Participant of a payment within the meaning of
Section 280G of the Internal Revenue Code and the regulations promulgated
thereunder and if the receipt of such payment by any Participant would, in
the opinion of independent tax counsel of recognized standing selected by the
Company, result in the payment by such Participant of any excise tax provided
for in Sections 280G and 4999 of the Internal Revenue Code, then the amount
of such payment shall be reduced to the extent required, in the opinion of
independent tax counsel, to prevent the imposition of such excise tax;
provided, however, that the Committee, in its sole discretion, may authorize
the payment of all or any portion of the amount of such reduction to the
Participant.
12.3 Definition. For purposes of the Plan, a "change in control" shall mean
any of the following:
(i) The acquisition of or the ownership of fifty percent or more
of the total Voting Stock of the Company then issued and outstanding, by any
person, or group of affiliated persons, or entities not affiliated with the
Company as of the Effective Date of this Plan, without the consent of the
Board of Directors, or
(ii) The election of individuals constituting a majority of the
Board of Directors who were not either (A) members of the Board of Directors
prior to the election or (B) recommended to the shareholders by management of
the Company, or
(iii) A legally binding and final vote of the shareholders of
the Company in favor of selling all or substantially all of the assets of the
Company.
Section 13
Rights of Employees; Participants
13.1 Employment. Nothing contained in the Plan or in any Option or
Restricted Stock Award granted under the Plan shall confer upon any
Participant any right with respect to the continuation of his or her
employment by the Company or any Affiliated Corporation, or interfere in any
way with the right of the Company or any Affiliated Corporation, subject to
the terms of any separate employment agreement to the contrary, at any time
to terminate such employment or to increase or decrease the compensation of
the Participant from the rate in existence at the time of the grant of an
Option or Restricted Stock Award. Whether an authorized leave of absence, or
absence in military or government service, shall constitute a termination of
employment shall be determined by the Committee at the time.
13.2 Nontransferability. No right or interest of any Participant in an
Option or a Restricted Stock Award (prior to the completion of the
restriction period applicable thereto), granted pursuant to the Plan, shall
be assignable or transferable during the lifetime of the Participant, either
voluntarily or involuntarily, or subjected to any lien, directly or
indirectly, by operation of law, or otherwise, including execution, levy,
garnishment, attachment, pledge or bankruptcy. In the event of a
Participant's death, a Participant's rights and interests in Options and
Restricted Stock Awards shall, to the extent provided in Sections 7, 8 and 9,
be transferable by testamentary will or the laws of descent and distribution,
and payment of any amounts due under the Plan shall be made to, and exercise
of any Options may be made by, the Participant's legal representatives, heirs
or legatees. If in the opinion of the Committee a person entitled to
payments or to exercise rights with respect to the Plan is disabled from
caring for his affairs because of mental condition, physical condition or
age, payment due such person may be made to, and such rights shall be
exercised by, such person's guardian, conservator or other legal personal
representative upon furnishing the Committee with evidence satisfactory to
the Committee of such status.
Section 14
General Restrictions
14.1 Investment Representations. The Company may require any person to whom
an Option, Restricted Stock Award, Stock is granted, or to whom Stock is
sold, as a condition of exercising such Option or receiving such Restricted
Stock Award or Stock, or purchasing such Stock, to give written assurances in
substance and form satisfactory to the Company and its counsel to the effect
that such person is acquiring the Stock subject to the Option, Restricted
Stock Award, Stock grant, or purchase of Stock, for his own account for
investment and not with any present intention of selling or otherwise
distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with Federal and applicable state
securities laws.
14.2 Compliance with Securities Laws. Each Option and Restricted Stock
Award, and Stock grant or purchase shall be subject to the requirement that,
if at any time counsel to the Company shall determine that the listing,
registration or qualification of the shares subject to such Option,
Restricted Stock Award, Stock grant or purchase upon any securities exchange
or under any state or federal law, or the consent or approval of any
governmental or regulatory body, is necessary as a condition of, or in
connection with, the issuance or purchase of shares thereunder, such Option,
Restricted Stock Award, or Stock grant or purchase may not be accepted or
exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained on
conditions acceptable to the Committee. Nothing herein shall be deemed to
require the Company to apply for or to obtain such listing, registration or
qualification.
14.3 Changes in Accounting Rules. Notwithstanding any other provision of
the Plan to the contrary, if, during the term of the Plan, any changes in the
financial or tax accounting rules applicable to Options or Restricted Stock
Awards shall occur that, in the sole judgment of the Committee, may have a
material adverse effect on the reported earnings, assets or liabilities of
the Company, the Committee shall have the right and power to modify as
necessary, any then outstanding and unexercised Options and outstanding
Restricted Stock Awards as to which the applicable employment or other
restrictions have not been satisfied.
Section 15
Other Employee Benefits
The amount of any compensation deemed to be received by a Participant as a
result of the exercise of an Option, the sale of shares received upon such
exercise, the vesting of any Restricted Stock Award, or the purchase or grant
of Stock, shall not constitute "earnings" with respect to which any other
employee benefits of such employee are determined, including without
limitation benefits under any pension, profit sharing, life insurance or
salary continuation plan.
Section 16
Plan Amendment, Modification and Termination
The Board may at any time terminate, and from time to time may amend or
modify the Plan provided, however, that no amendment or modification may
become effective without approval of the amendment or modification by the
shareholders if shareholder approval is required to enable the Plan to
satisfy any applicable statutory or regulatory requirements, or if the
Company, on the advice of counsel, determines that shareholder approval is
otherwise necessary or desirable.
No amendment, modification or termination of the Plan shall in any manner
adversely affect any Options, Restricted Stock Awards or Stock theretofore
granted or purchased under the Plan, without the consent of the Participant
holding such Options Restricted Stock Awards, or Stock.
Section 17
Withholding
17.1 Withholding Requirement. The Company's obligations to deliver shares
of Stock upon the exercise of any Option, the vesting of any Restricted Stock
Award, or the grant or purchase of Stock shall be subject to the
Participant's satisfaction of all applicable federal, state and local income
and other tax withholding requirements.
17.2 Withholding With Stock. The withholding obligation with respect to the
grant of Restricted Stock shall be satisfied by the Company's withholding
from the shares otherwise issuable to the Participant shares of Stock having
a value equal to the amount required to be withheld. The value of shares of
Stock to be withheld shall be based on the Fair Market Value of the Stock on
the date that the amount of tax to be withheld is to be determined.
Section 18
Requirements of Law
18.1 Requirements of Law. The issuance of Stock and the payment of cash
pursuant to the Plan shall be subject to all applicable laws, rules and
regulations.
18.2 Federal Securities Law Requirements. If a Participant is an officer or
director of the Company within the meaning of Section 16, Awards granted
hereunder shall be subject to all conditions required under Rule 16b-3, or
any successor rule promulgated under the 1934 Act, to qualify the Award for
any exception from the provisions of Section 16(b) of the 1934 Act available
under that Rule. Such conditions shall be set forth in the agreement with
the Participant which describes the Award.
18.3 Governing Law. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the State of
Colorado.
Section 19
Duration of the Plan.
The Plan shall terminate at such time as may be determined by the Board of
Directors, and no Option or Restricted Stock Award, or Stock shall be granted
or purchased after such termination. Options and Restricted Stock Awards
outstanding at the time of the Plan termination may continue to be exercised,
or become free of restrictions, or paid, in accordance with their terms.
Dated: ___________________________
ADOLPH COORS COMPANY
ATTEST:
____________________________ By:____________________________
EXECUTIVE COMPENSATION
1995 ANNUAL MANAGEMENT INCENTIVE COMPENSATION PLAN
PARTICIPANTS:
All employees in Paygroup 90 and other nominated individuals will participate
in an annual incentive program. Payments will be made in cash.
Participants who are newly hired or promoted into an eligible position during
the Plan year will receive a pro-rata share of the current plan based on the
number of calendar days spent in an eligible position divided by the actual
number of days during the year of the Plan.
FINANCIAL TARGETS:
Annual Company goals will be measured based on pre-tax income after incentive
plan payouts (in millions).
Minimum Target Maximum
98.1 109 163.5
ANNUAL INCENTIVE PROGRAM AWARD LEVELS AS A PERCENT OF BASE SALARY (PLUS
OFFICER FEE) AS OF 1-1-95 OR PLAN ENTRY DATE IF LATER:
Position Minimum Target Maximum
CEO/COO 10% 50% 100%
EXEC STAFF 10% 40% 80%
VP 10% 30% 60%
OTHER 10% 25% 50%
(Maximum payouts are at two times the percent of salary at target.)
ANNUAL INCENTIVE PROGRAM MEASUREMENT MIX:
All participant's bonuses will be based on two components, the achievement of
Company performance goals and the individual performance goals.
Company financial threshold must be achieved before individual performance
payout occurs. Achievement of Company financial goals creates the total bonus
pool and pays each individual the portion of the bonus based on the Company
measurement. The other portion of the bonus is based on achievement of
individual performance goals. Individual performance payouts, to reward
exceptional individual contributions, will be based on an individual
incentive multiplier of between 0 and 150% multiplied by the bonus based upon
the Company measurement.
Individual performance measurements are to be aligned as much as possible to
areas they either work in or support. The Operations Controller would be
aligned with the Operations unit. Some positions are aligned on a Company
basis only for individual performance such as HR, Risk Management etc.
Examples of individual performance measurements are; financial plan
performance, Diversity goal achievement, safety goals, cost reductions, new
product development, project achievement etc.
Individual performance goals will be agreed upon before the Plan year starts.
Each participant will meet with their immediate supervisor to develop
individual goals in support of the Company strategies. These goals will be
written and signed off by the participant and the supervisor before
implementation. All individual goals must be reviewed and approved by the COO
or the Board of Directors for the CEO. At the end of the Plan year each
supervisor must submit in writing the results of each individual performance
goal and the individual performance multiplier.
FORM AND TIMING OF PAYMENTS:
At the end of the plan year final awards will be calculated. Payments will be
made as soon as practicable after the end of the plan year.
FEDERAL, STATE AND FICA TAX WITHHOLDING:
The Company will be required to withhold all applicable federal,state and
FICA income taxes on the awards.
TAX TREATMENT:
Participants realize taxable income at the date the incentive payout is
received.
DISCLAIMER:
Coors Brewing Company reserves the right to change, amend or terminate this
Plan at any time, for any reason.
NOT EMPLOYMENT CONTRACT:
At no time is this plan to be considered an employment contract between the
participants and the Company. It does not guarantee participants the right to
be continued as an employee of the Company. It does not effect a participants
right to leave the Company or the Company's right to discharge a participant.
TERMINATION PROVISIONS:
Participants must be on the payroll as of 1-1-1996 to receive payment. Any
exceptions must be approved by the CEO.
COORS BREWING COMPANY
EMPLOYEE PROFIT SHARING PROGRAM
OBJECTIVE:
The purpose of the program is to provide the opportunity for each
employee of Coors Brewing Company to share in the Company's success
and enhance employee commitment to Company profitability.
OVERVIEW:
The program is designed to have a payout when the Company reaches
an established pre-tax target which is determined by the Board of
Directors prior to the plan year. The pre-tax profit target for
1996 is $115 million. At the threshold of $115 million of pre-tax
income, the minimum payout equals one-half weeks pay. The maximum
payout at $172.5 million in pre-tax income equals two weeks pay.
ELIGIBILITY:
All Coors Brewing Company regular active full-time and regular
part-time employees on the payroll as of December 31.
Employees represented by the International Union of Operating
Engineers, Local #9, are eligible for profit sharing as negotiated
in the 1990 contract. Memphis employees represented by Teamsters
Local #1196 will be eligible for participation effective January 1,
1993.
Employees terminated prior to December 31 will forfeit their right
to any payout.
Employees who retire or are on LOA, LTD on December 31 will receive
a pro-rata payout based on earnings received during active
employment.
No individual in another incentive plan; i.e. MIC, CIP, Sales
Bonus, Gainsharing, will be eligible for participation in the
Profit Sharing Program.
PROGRAM DESIGN:
The Company must attain pre-tax profit target prior to any payout.
Target is established by the Board of Directors prior to the plan
year.
Distribution of profit sharing will be an even percentage of payout
to all employees.
PAYOUT DISTRIBUTION:
Payouts are calculated on base earnings for the plan year which
include overtime, shift differential, holiday, vacation pay, light
duty and sick time up to 10 consecutive scheduled working days. Not
included will be tuition reimbursements or other reimbursements,
other bonuses and LOA/LTD payments.
Total individual annual earnings will be used for profit sharing
payout calculation for temporary employees who convert to regular
full-time status.
Checks will be distributed no later than 60 days following the end
of the plan year. Profit sharing payouts will be taxed at the flat
tax rate in effect at the time of the payout.
Profit sharing dollars will not be included in benefit
calculations.
PAYOUT FORMULA:
Payout percentage is derived by dividing the total payout pool of
dollars by the total eligible wages. One-half weeks pay equals nine
tenths of one percent.
January 10, 1995
Timothy V. Wolf
834 Valley Road
Glencoe, IL. 60022
Dear Tim:
It is with great pleasure that we offer you the position of Senior Vice
President and Chief Financial Officer for Coors Brewing Company. You will
be reporting to Leo Kiely at an annual base salary of $300,000. Your salary
will be reviewed annually and adjusted January 1 of each year. In addition
to your base salary, you will be paid a lump sum Officer's fee of $10,000
each July 1 (beginning July 1, 1995). You will also participate in the
Executive Compensation Program which currently has three components:
Annual Management Incentive Compensation Plan (MIC): This program
involves a cash payout based upon Company pre-tax earnings and
individual performance. The 1995 payout target is 40% of salary (base
plus Officer's fee). The potential payout range is 0-80%. We will
guarantee you a minimum of 40% of annual salary for 1995.
Long Term Incentive Plan: This is a three year plan with payout based
on cumulative return on invested capital. The current plan covers
1994, 1995, 1996 with payout in 1997. the 1997 payout target is
100% of salary (based on 1994 salary and pro-rated based on start
date). The potential payout range is 0-200% of salary. This plan
involves several options for receiving payout.
Stock Options: Currently, stock options are granted annually. Your
participation will become effective January 1, 1995. The number of
options granted is determined by dividing 75% of your salary by
the fair market value of the stock on the grant date. Vesting is
based on an increase in share price.
Additional details of our Executive Compensation Program are covered
in the enclosed plan documents.
Also enclosed is a summary of Officer benefits that are available to you
and details of our relocation program, which will include one month's gross
salary for incidental costs and third-party buy-out of your current
residence in Glencoe. As we discussed, we will be flexible regarding
temporary living arrangements/timing and travel to/from Chicago in order to
accommodate Mary and the children's schedules.
We anticipate a long and mutually rewarding relationship. However, you
should know that your employment is "at will" with no obligation on either
you or the Company to continue for a set length of time. In addition, as an
Officer of the Company, our relationship will be regulated by the Company's
bylaws.
In the very unlikely event that your employment with the Company should be
terminated for reasons other than cause during the first two years of
employment, 15 months of total salary (base plus 40% annual bonus) will be
paid to you. After your first two years of employment, you will be covered
by the standard Officer severance package, which is currently one year of
base salary.
Leo and I look forward to an anticipated start date as soon as practicable
and we are enthusiastic about your joining the Coors leadership team. (This
offer is contingent upon your successful completion of our pre-employment
drug screen, which can be scheduled at your convenience when you report to
work). If you have any questions, please contact me at 303-277-3728.
Best Regards,
Bob Ehret
Senior Vice-President, Human Resources
_____________________________________
Offer accepted: Tim Wolf Date: __________________
cc: Leo Kiely
Tom Hardy
Enclosures(6): 1995 Annual Incentive Plan (MIC)
Long Term Incentive Plan
Stock Option Plan
Benefit Summary (including Officer benefits)
Relocation summary
Inventions and Non-Disclosure Agreement
January 13, 1995
Mr. Timothy V. Wolf
834 Valley Road
Glencoe, IL 60022
Dear Tim:
We are all excited about your joining the management team at Coors Brewing
Company and look forward to you establishing a firm date for you to begin.
This letter will serve as an addendum to your signed offer letter dated
January 10, 1995.
Sale of Glencoe Home
You will participate in the normal Coors third party home purchase process.
(Please contact Nadine Detro at 303-277-3813 for details.) If the
guaranteed price doesn't not meet the equity that exists in your current
home, you will document that equity, along with major capital
improvements/modifications, and we will provide an equity protection up to
an amount of $75,000.
Mortgage Interest Differential
We will administer, consistent with the attached procedures.
Temporary Living
The Company will provide a modest, furnished condominium or apartment until
you close on your home in Glencoe. Additionally, we will reimburse
reasonable expenses for weekly commuting to and from Chicago and Denver
until your family joins you in Colorado.
Incidental Relocation Allowance
The one-month allowance will be modified to be grossed up for taxes, i.e.,
$25,833.32 net.
Severance Clause
In the very unlikely event that your employment with the Company should be
terminated for reasons other than cause during the first two years of
employment, 18 months of total salary (base plus 40% annual bonus) will be
paid to you. After your first two years of employment, you will be covered
by the standard Officer severance package, which is currently one year of
base salary.
Household Goods Movement
Special handling and/or crating will be provided for specifically requested
items.
Medical Insurance for Psychological Treatment
As per the attached explanation and enclosed Benefits on Tap brochure,
psychological treatment is reimbursable at certain levels of coverage,
depending on the choices you select.
Private School Process
We look forward to the visit of your entire family January 22-24. Let's
talk regarding details, etc. If the Rocky Mountain School turns out not to
be acceptable, resources will be provided to find suitable schools.
Leo announced your arrival internally at the "Breakfast Club" meeting
today. (He received an enthusiastic ovation!) Formal external announcements
are in the process of being drafted by Anita Russell, Director of Corporate
Communications, who will contact you directly to finalize. You and Leo
should talk on the phone regarding how best to communicate your new
position to "the street," analysts, etc.
Again, I enthusiastically look forward to the opportunity of working with
you and welcoming Mary and the boys to Colorado!
Sincerely,
Robert W. Ehret
RWE:sn
Enclosures
cc: Leo Kiely
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