U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 29, 1996
OR
o 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
(Exact name of registrant as specified in its charter)
Colorado 84-0178360
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Golden, Colorado 80401
(Address of principal executive offices) (Zip Code)
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
Securities registered pursuant to Section 12(g) of the Act:
Class B Common Stock (non-voting), no par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
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 15, 1997:
Class A Common Stock - 1,260,000 shares
Class B Common Stock - 36,141,116 shares
PART I
ITEM 1. Business
(a) General Development of Business
Founded in 1873 and incorporated in Colorado in 1913, Adolph
Coors Company (ACC or the Company) is the holding company for
Coors Brewing Company (CBC), the third-largest U.S. brewer.
CBC owns Coors Distributing Company (CDC) and several smaller
subsidiaries, including Coors Transportation Company; Coors
Energy Company (CEC); The Wannamaker Ditch Company and The Rocky
Mountain Water Company, which carry process water from nearby
Clear Creek to various CBC reservoirs in the Golden area; Coors
Brewing Company International, Inc. (CBCI); Coors Global, Inc.
(Global); Coors Intercontinental, Inc. (Intercontinental); and
Coors Japan Company, Ltd. (Coors Japan).
CDC owns and operates distributorships in several markets across
the United States. CDC's 1996 operations accounted for
approximately 5.6% of CBC's total beer sales.
Through a subsidiary, CEC continues to operate a gas transmission
pipeline that provides energy to CBC's Shenandoah facility.
CBC, CBCI, Global, and Intercontinental own Coors Brewing
International C.V. (the CV), which in turn owns Coors Brewing
Iberica, S.A. (Coors Iberica) and Coors Services, S.A. Established in 1995,
Coors Services, S.A. provides management and administrative services to
CBC. The CV acts as a holding company and a finance subsidiary.
Some of the following statements describe the Company's
expectations of future products and business plans, financial
results, performance, and events. Actual results may differ
materially from these forward-looking statements.
(b) Financial Information About Industry Segments
The Company has continuing operations in a single industry
segment, the production and marketing of malt-based beverages.
(c) Narrative Description of Business
Coors Brewing Company - General
CBC produces and markets high-quality malt-based beverages. CBC
concentrates on distinctive premium and above-premium brands that
provide higher-than-average margins. Most of CBC's sales are in
U.S. markets; however, the Company is committed to building
profitable sales in international markets. Sales of malt
beverages totaled 20 million barrels in 1996, 20.3 million
barrels in 1995, and 20.4 million barrels in 1994. (See Item 7
for discussion of changes in volume.)
Marketing
Principal products and services: CBC currently has 26 brands in
its portfolio, of which seven are premium products which make up
the Coors family of beers: Coors Light; Original Coors; Coors
Artic Ice; Coors Artic Ice Light; Coors Extra Gold; Coors
Dry; and Coors Cutter, a non-alcoholic brew.
CBC also produces and markets Zima, an innovative malt-based, above-premium
beverage, and Herman Joseph's, a special premium beer with a craft-brewed
flavor without the heavy taste or high price of craft-brewed beers.
Through UniBev, Ltd. (UniBev), an operating unit focusing on
specialty and import beers, CBC offers specialty, above-premium
beers, including Winterfest; Blue Moon Honey Blonde Ale; Blue
Moon Nut Brown Ale; Blue Moon Belgian White Ale; Blue Moon
Raspberry Cream Ale; Blue Moon Abbey Ale; and Blue Moon Harvest
Pumpkin Ale, a seasonal product. Also through UniBev, CBC sells
several imported and/or licensed products, including George
Killian's Irish Red, George Killian's Irish Brown Ale, George
Killian's Irish Honey Ale, and Steinlager. Steinlager is New
Zealand's number-one premium beer and is distributed under
license from Lion Nathan International of New Zealand.
Through a foreign joint venture, CBC also produces Cass Fresh,
which is distributed in South Korea.
CBC also sells popular-priced products, including Keystone,
Keystone Light, Keystone Dry, Keystone Ice, and Keystone Amber Light.
CBC's beverages are sold in most states, except for Coors Dry
which is in limited distribution. CBC exports or produces and sells
many products overseas, which are described in greater detail below.
In 1995, CBC celebrated the grand opening of Coors Fieldr
ballpark in Denver, Colorado, by opening The SandLot Brewery at
Coors Field, the first brewery in a ballpark. This brewery, which
is open year-round, makes a variety of specialty beers and has an
annual capacity of approximately 4,000 barrels.
New products/opportunities: In 1996, CBC introduced Killian's
Irish Honey Ale, which joined Killian's Irish Red and Killian's
Irish Brown Ale in establishing the Irish family of brands.
Blue Moon Brewing Company (Blue Moon), an operating unit within
UniBev created during 1995, supports a product line of unique specialty
brews that are contract-brewed by Hudepohl Schoenling and marketed by
UniBev. Blue Moon introduced one new products in 1996, Blue Moon Raspberry
Cream Ale, and one in early 1997, Blue Moon Abbey Ale.
During 1996, Memphis Brown (which was introduced in early 1996),
Coorsr Red Light, Coors Special Lager, and Castlemaine XXXX
were discontinued because the market performances of these
products did not meet expectations.
Brand names, trademarks, patents, and licenses: CBC owns
trademarks on all brands it produces and recognizes that consumer
knowledge of and loyalty to its brand names and trademarks are
vital to CBC's long-term success. It also holds several patents,
with expiration dates ranging from 1997 to 2017, on innovative
processes related to product formulae, can making, can
decorating, and certain other technical operations. CBC receives
revenue from royalties and licenses, but its business is not
substantially dependent upon such revenue.
Brand performance: Coors Light is CBC's best-selling brand and
has generated approximately two-thirds of its total sales volume
for the past three years. CBC's second-most-popular brand is
Original Coors. Premium and above-premium beers account for
approximately 88% of CBC's total sales volume.
Domestic sales: The Company's highest-volume states are
California, Texas, Pennsylvania, New York, and New Jersey,
comprising 45% of total domestic volume.
Eight geographic field business areas manage domestic sales. This
geographic segmentation allows CBC to better anticipate and
respond quickly to wholesaler and consumer needs.
International business: CBC is committed to increasing its
international presence through export sales, licensing
agreements, joint ventures, and foreign production facilities.
Through its U.S. and foreign production facilities, CBC markets
its products to approximately 40 international markets and to
U.S. military bases worldwide. Export sales are significantly
more profitable, on a per-barrel-basis, than domestic sales.
Under an interim agreement, Molson Breweries of Canada Limited
(Molson) brews and distributes Original Coors and Coors Light in
Canada (see below). After Molson permitted Miller Brewing Company
(Miller) to purchase a 20% ownership interest in Molson in 1993,
CBC initiated two legal actions regarding its licensing
arrangement with Molson. These actions have not impacted the
success of CBC's brands in Canada, where Coors Light is the best-
selling light beer. On October 18, 1996, an arbitration panel
ruled that the licensing agreement terminated in 1993 when Miller
acquired its ownership interest in Molson. This ruling returns
Canadian rights to all CBC brands to CBC and requires Molson to
compensate CBC for the period beginning April 2, 1993. Although
CBC believes the compensation awarded will be significant, that
compensation cannot be quantified until the next phase of
arbitration is completed during 1997.
Also in its ruling, the arbitration panel found that Molson had
underpaid royalties from January 1, 1991, to April 1, 1993. Thus,
Molson paid CBC $6.1 million in cash (net of $680,000 of
withholding taxes) during 1996 to cover the unpaid royalties plus
interest. In January 1997, Molson filed an appeal to this phase
of the arbitration. Management believes the appeal is without merit.
CBC and Molson have agreed that Molson will continue to brew and
distribute CBC's products for an interim period ending no earlier
than July 1, 1997. Income from the interim agreement is based upon actual
CBC brand sales volume in Canada and is reported as gross sales in the
accompanying financial statements. Management continues to work on CBC's
options for future business in Canada and believes these opportunities
could provide greater financial returns than were available under the
terminated licensing agreement with Molson.
Coors Japan, the exclusive importer of Coors products into Japan
and based in Tokyo, distributes, markets, and sells CBC's
products in Japan, where the Coors brand has been one of the top
three foreign premium brands for nine years.
Since September 1992, a joint venture between CBC and Scottish Courage
has brewed and/or distributed Coors Extra Gold in the United Kingdom and
Ireland. Coors Extra Gold was rated overall Best Draught Lager at the
1994 Brewing Industry International Awards in England.
Beginning in 1991, CBC formed Jinro-Coors Brewing Company (JCBC),
a joint venture with Jinro Limited of the Republic of Korea. CBC
owns one-third of JCBC, while Jinro Limited owns the remaining
two-thirds. JCBC began production of Cass Fresh in its South
Korean brewery in the second quarter of 1994. JCBC's brewing
capacity was expanded to approximately 3.6 million barrels in
1995. Currently, Cass Fresh represents 20% of the South Korean
market. JCBC's financial results are not included in CBC's
financial statements, as CBC's investment is accounted for under
the cost basis of accounting, since it does not have the ability
to significantly influence JCBC's business operations. CBC holds
a put option on its $22 million investment in JCBC, which
entitles CBC to require Jinro Limited to purchase CBC's
investment at the greater of cost or market value through March
1999. JCBC began production of Cass Fresh in its brewery in the second
quarter of 1994 and achieved a 20% share of the Korean market by the
end of 1996. JCBC also achieved positive operating income in 1996 but
has not yet been profitable due to debt service costs.
In March 1994, Coors Iberica purchased a 500,000-hectoliter
brewery in Zaragoza, Spain, from El Aguila S.A. of Madrid, Spain,
which is owned 51% by Amsterdam-based Heineken, N.V. (the world's
second-largest brewer). CBC's total investment in Spain is
expected to exceed $50 million, including the initial purchase
price and future operations and marketing expenditures. CBC will
contract-brew El Aguila products through 1998.
Coors Iberica brews Coors Gold for sale in Spain and the Coors
Extra Gold brand for export to approximately 20 international
markets. Coors Iberica also brews Coors Light for export to the
United Kingdom and Ireland. El Aguila distributes Coors products
in Spain, while Coors Iberica and El Aguila jointly manage sales
and marketing. This arrangement provides advantages over
exporting products directly from U.S. facilities. Financial results
of the Zaragoza brewery are included in ACC's financial statements.
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: A national network of 571 independent
distributors and four distributorships owned and operated by CDC
deliver CBC products to U.S. retail markets. Some distributors
operate multiple branches, bringing the total number of U.S.
distributor/branch locations to 625. Independent distributors
deliver CBC products to some export/international markets under
certain licensing and distribution agreements.
To ensure the highest product quality, CBC monitors distributors'
methods of handling Coors products. This monitoring helps ensure
adherence to proper refrigeration and rotation guidelines for
CBC's malt beverages at both wholesale and retail locations.
Distributors are required to replace CBC products if consumer
sales have not occurred within prescribed time frames.
Transportation
Given the location of its three production facilities in the
U.S., CBC must ship its products a greater distance than most
competitors. By packaging some products in the Memphis and
Shenandoah facilities, CBC achieves more efficient product
distribution and reduced freight costs to certain markets. Major
competitors have multiple breweries from which to deliver
products, thereby incurring lower transportation costs than CBC.
Burlington Northern, Inc. transports approximately 68% of the
products packaged at CBC's Golden facility to Denver. From there,
various railroads ship the products to satellite redistribution
centers and distributors throughout the country. The railcars assigned to
CBC are specially built and insulated to keep Coors products cold en route.
CBC currently uses 18 strategically located satellite
redistribution centers to transfer its products from railcars to
trucks for shipment to distributors. In 1996, approximately 73%
of total railcar volume of packaged product from Golden moved
through the satellite redistribution centers.
As noted above, CBC relies heavily upon rail distribution of its
products. Any disruption by strike would impact CBC more than its
major competitors, but, in management's opinion, the risk of such
disruption appears very low.
The remaining 32% of products 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 beverages 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 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. Approximately 65% of CBC's
beer is packaged in Golden; substantially all of the remainder is
shipped in bulk from the Golden brewery to the Memphis and
Shenandoah facilities for blending, finishing, and packaging.
The Memphis facility currently packages all products exported
from the United States and brews and packages Zima, Killian's
Irish Honey Ale, 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 currently packages certain CBC products
for distribution to Eastern markets and could be expanded, if necessary.
At the end of 1996, CBC had approximately 25 million barrels of
annual brewing capacity and 30 million barrels of annual
packaging capacity. Current capacity depends upon product mix and
may change with shifting consumer preferences for specific brands
and/or packages. CBC's three facilities provide sufficient
brewing and packaging capacity to meet foreseeable consumer
demand. The proliferation of products and packages creates
logistical challenges for CBC, as well as for the industry.
Most of CBC's aluminum can, end, glass bottle, and malt
requirements are produced in owned facilities or facilities
operated by joint ventures in which CBC is a partner. CBC has
arranged for sufficient container supplies with its joint venture
partners and 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, and an aluminum can end manufacturing facility, which
provides CBC aluminum ends and tabs. Total container assets
comprise approximately 10.2% of CBC's properties. In 1994, CBC
and American National Can Company (ANC) formed a joint venture to
produce beverage cans and ends at CBC's manufacturing facilities
for sale to CBC and outside customers. The joint venture's
initial term is seven years but can be extended for two
additional three-year terms. The joint venture has improved the
technology and utilization of both facilities and has enhanced
this investment's return. In 1996, CBC purchased approximately
96% of the cans produced. The joint venture is committed to
supplying 100% of the Golden facility's can and end requirements.
In June 1995, CBC and Anchor Glass Container Corporation (Anchor)
established a joint venture partnership, the Rocky Mountain Bottle Company
(RMBC), to produce glass bottles at the CBC glass manufacturing facility.
The joint venture has lowered unit costs, increased output, and created
efficiencies at the glass plant. CBC contributed approximately $16.2
million in machinery, equipment, and certain personal property to RMBC. The
partnership's initial term is 10 years and can be extended for
additional two-year periods.
In 1996, RMBC produced approximately 783 million bottles; CBC
purchased approximately 97% of the bottles produced. To assist in
its goal of manufacturing bottles with recycled material, CBC
constructed a glass recycling facility in Wheat Ridge, Colorado,
in 1994 and doubled the amount of glass the facility can recycle
annually. RMBC operates the recycling facility.
Anchor declared bankruptcy in September 1996. Effective February
5, 1997, Owens-Brockway Glass Container, Inc. (Owens) replaced
Anchor as CBC's partner in RMBC as a result of Anchor's
bankruptcy declaration and the related sale of certain Anchor
assets to Owens and Consumers Packaging, Inc. Further, Owens has
replaced Anchor as the 100% preferred supplier of bottles to CBC
for bottle requirements not met by RMBC.
Other facilities: CBC owns waste treatment facilities, which process
waste from CBC's manufacturing operations and 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 approximately $22 million. CBC has agreed to
purchase from Trigen the electricity and steam needed to operate
its Golden facilities. This 25-year agreement also requires that
significant capital improvements be made by Trigen.
CBC continues to improve asset utilization by divesting non-core
assets and by continuing to improve capacity utilization through
joint ventures and alliances. Joint venture partnerships and certain other
outsourcing arrangements for malting operations are being explored. If
appropriate outsourcing arrangements are not made, CBC may have to invest
in significant capital improvements for its malting operations.
Capital expansion: In 1996, the Company spent approximately $63
million in capital expenditures. While management plans to invest
appropriately in order to ensure ongoing productivity and
efficiency of CBC assets, priority will be given to those
projects the Company believes offer returns in excess of CBC's
cost of capital. The Company expects its capital expenditures for
1997 to be approximately $85 million.
Raw Materials/Sources and Availability
CBC's beers are made with all natural ingredients, and its
brewing cycle is one of the longest in the industry. CBC adheres
to strict formulation and quality standards in selecting its raw
materials and believes it has sufficient access to raw materials
and packaging supplies to meet its quality and production requirements.
Barley, barley malt, starch, and hops: CBC uses a proprietary
strain of barley, developed by its agronomists, in most of its
malt beverages. 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
produces malt for all CBC products, except Zima and Blue Moon.
CBC maintains inventory levels in owned locations sufficient to continue
production in the event of any disruption in barley or malt supplies.
Rice and refined cereal starch (which are interchangeable in
CBC's brewing process) and foreign and domestic hops are purchased
from outside suppliers. Adequate inventories are maintained to continue
production through any foreseeable disruption in supply.
Water: CBC uses naturally filtered water from underground
aquifers to brew malt beverages at its Golden facility. Water
from private deep wells is used for brewing, final blending, and
packaging operations 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 its 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 its 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 1996, approximately 58% of CBC's
malt beverages were packaged in aluminum cans. Approximately 39%
of the cost of malt beverages packaged in cans is the cost of the
aluminum can. CBC purchases most of its cans and ends from the
joint venture with ANC. Aluminum cans for products packaged at
the Memphis plant are purchased from an outside supplier.
Glass bottles were used to package approximately 30% of CBC's beverages
in 1996; about half of these bottles were produced by RMBC.
The remainder (12%) of the malt beverages sold during 1996 was
packaged in quarter- and half-barrel stainless steel kegs and two
different sizes of a plastic sphere called "The Party Ball," a
packaging innovation introduced by CBC in 1988.
Graphic Packaging Corporation, a subsidiary of ACX Technologies,
Inc. (ACX), supplies much of the secondary packaging for CBC's
products, including bottle labels and paperboard products.
Supply contracts with ACX companies: When ACX was spun off from
ACC in 1992, CBC negotiated long-term supply contracts with
certain ACX subsidiaries for aluminum, starch, and packaging
materials. These contracts, negotiated at market prices, were to
be in effect through 1997. The aluminum contracts were canceled
in 1995, and the starch contract was extended in 1997 to run
through 1999. The contract for packaging materials was modified
in 1997 and extended until at least 1999. See Item 11, Compensation
Committee Interlocks and Insider Participation for further details.
Energy: CBC purchases electricity and steam for its Golden
manufacturing facilities from Trigen. CEC 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 sales 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 1996 fiscal year was 52 weeks long,
while fiscal 1995 was 53 weeks long.
Research and Project Development
CBC's research and project development expenditures relate
primarily to new products and packages; brewing processes,
ingredients, and equipment; packaging supplies; and environmental
improvements and cost reductions in processes and packaging
materials. These activities are meant to improve the quality and
value of CBC's products while reducing costs through more
efficient processing and packaging techniques and equipment
design, as well as improved varieties of raw materials.
Approximately $12.8 million, $15.4 million, and $13.3 million
were spent on research and development in 1996, 1995, and 1994,
respectively. The Company expects to spend approximately $13
million on research and project development in 1997.
To support new product development, CBC maintains a fully
equipped pilot brewery, with a 6,500-barrel annual capacity,
within the Golden facility enabling 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, distributor relationships,
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.
A number of emerging regulatory issues could impact the Company's
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 taxes, and others.
Federal excise taxes on malt beverages are currently $18 per
barrel. State excise taxes also are levied at rates that ranged
in 1996 from a high of $32.65 per barrel in Alabama to a low of
$0.62 per barrel in Wyoming, with an average of $7.67 per barrel.
In 1996, CBC paid approximately $379 million in federal and state
excise taxes. A substantial increase in federal or state excise
taxes would have a negative impact on sales and profitability of
the entire industry, including CBC. CBC is vigorously opposed to
any increases in federal and/or state excise taxes and will work
diligently to ensure that its view is represented adequately.
Environmental
Compliance with federal, state, and local environmental laws and
regulations did not materially affect the Company's 1996 capital
expenditures, earnings, or competitive position.
The Company continues to promote the efficient use of resources,
waste reduction, and pollution prevention. Programs currently
under way include recycling, down-weighting of product packages,
and, where practical, increasing the recycled content of product
packaging materials, paper, and other supplies. Several employee
task forces continually seek effective ways to control hazardous
materials and to reduce emissions and waste.
Employees and Employee Relations
The Company has approximately 5,800 full-time employees. Of CBC's
three domestic production facilities, only the Memphis plant
workers have union representation (Teamsters). In general,
relations with employees have been satisfactory.
Competitive Conditions
Known trends and competitive conditions: Industry and
competitive information was compiled from the following industry
sources: Beer Marketer's Insights and The Maxwell Consumer Report.
While management believes these sources are reliable, the Company
cannot guarantee the absolute accuracy of these numbers and estimates.
1996 industry overview: The beer industry in the United States
is highly competitive. Industry volume growth has averaged less
than 1% a year since 1991. Domestic beer industry shipments in
1996 increased an estimated 1.4%. By contrast, 1995 domestic
shipments were down 1.1% from the year before. In recent years,
brewers have attempted to gain market share through competitive
pricing, marketing, promotions, and innovative packaging. In
1996, price promotions and price discounting continued to limit
growth in net price realizations for brewers, although not as
much as in 1995. It is estimated that more than 60% of the beer
sold for consumption off-premise in 1996 was sold on promotion.
Early indications point toward smaller growth in net price
realizations in 1997 than in 1996. It is possible that competitors
will concentrate primarily on market share gains in 1997 instead
of profitability, which will place additional downward pressure
on pricing. Unit volume growth for major U.S. brewers continues
to depend on growth in light beer sales, introductions of new
products, and expansion into international markets.
A number of important trends continued in the U.S. beer market in
1996. 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. While microbreweries continued to benefit from this
trend, their growth rate as a group slowed in the second half of 1996.
To capitalize on the trend toward specialty products and craft-
brewed beers, brewers continued to introduce new specialty
brands, but at a slower rate than in 1995. At the end of 1996,
there were nearly 1,100 brands of beer in the United States, up
from 675 in 1991. This proliferation of products creates unique
challenges in operations, logistics, and marketing for all
brewers, distributors, and retailers.
The U.S. brewing industry also continues to consolidate. In 1996,
the Stroh Brewery Company acquired the brands and assets of G.
Heileman Brewing Company Inc., moving Stroh closer to CBC in
total unit sales. It is important to note, however, that Stroh
competes primarily in the subpremium category of the industry,
unlike CBC, which among major U.S. brewers has the highest volume
percentage in the premium and above-premium categories.
CBC competitive position: CBC's malt beverages compete with
numerous above-premium, premium, low-calorie, popular-priced, non-
alcohol, and imported brands produced by national, regional,
local, and international brewers. Nearly 88% of domestic volume
is attributable to the top five domestic brewers: Anheuser-
Busch, Inc. (AB); Philip Morris, Inc., through its subsidiary
Miller Brewing Company (Miller); CBC; The Stroh Brewery Company
(now including 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 estimates, accounted for
approximately 9.9% of the total 1996 U.S. brewing industry shipments
of malt beverages (including exports and U.S. shipments of imports).
This compares to AB's 45.2% share and Miller's 21.8% share.
Given its industry position, CBC continues to face significant
competitive disadvantages related to economies of scale. Besides
lower transportation costs achieved by competitors with multiple
breweries, these larger brewers also recognize economies of scale
in advertising expenditures because of their greater volume. CBC,
in an effort to achieve and maintain national advertising
exposure, must spend substantially more per barrel of beer sold
than its major competitors. Significant levels of advertising are
necessary for CBC to hold and increase its U.S. market share.
This, coupled with ongoing price competition, puts more pressure
on CBC's margins in comparison to those of CBC's principal competitors.
ITEM 2. Properties
The Company's major facilities are:
Facility Location Product
Brewery/packaging Golden, CO Malt beverages/packaged
malt beverages
Packaging Elkton, VA Packaged malt beverages
Brewery/packaging Memphis, TN Malt beverages/packaged
malt beverages
Brewery/packaging Zaragoza, Spain Malt beverages/packaged
malt beverages
Can and end plants Golden, CO Aluminum cans and ends
Bottle plant Wheat Ridge, CO Glass bottles
Distribution warehouse Anaheim, CA Wholesale beer distribution
Meridian, ID
Denver, CO
Oklahoma City, OK
Tulsa, OK
San Bernardino, CA*
* Leased.
The original brewery site at Golden, which is approximately 2,400
acres, contains brewing, packaging, can manufacturing and related
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 ANC.
CBC's bottle plant is operated by a joint venture between CBC and
Owens-Brockway Glass Container, Inc.
The distribution warehouses are held by CDC.
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 facility is located.
All of the Company's facilities are well-maintained and suitable
for their respective operations. In 1996, CBC estimates that its
brewing facilities operated at approximately 79% of the 1997
brewing capacity and its packaging facilities operated at
approximately 66% of the 1997 packaging capacity. Annual production
capacity can vary due to product and packaging mix and seasonality.
ITEM 3. Legal Proceedings
See the Environmental section of Item 7 Management's Discussion
and Analysis of Financial Condition and Results of Operations 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 are 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
None.
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
Adolph Coors Company's (ACC's) Class B common stock is traded
over the counter and is included in the NASDAQ National Market
listings with the ticker 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 15, 1997 is as follows:
Title of class Number of record holders
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 4,943
Preferred stock, non-voting, None issued
$1 par value
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:
1996
Market price
High Low Dividends
First quarter 24 1/4 17 3/4 $ 0.125
Second quarter 19 7/8 16 3/4 $ 0.125
Third quarter 23 3/4 17 1/2 $ 0.125
Fourth quarter 22 3/4 17 1/2 $ 0.125
1995
Market price
High Low Dividends
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
ITEM 6. Selected Financial Data
Following is ACC's selected financial data for 10 years ended December
29, 1996:
(In thousands, except
per share) 1996 1995 1994 1993 1992
Barrels of malt
beverages sold 20,045 20,312 20,363 19,828 19,569
Summary of Operations:
Net sales $1,732,233 $1,679,586 $1,667,208 $1,586,370 $1,555,243
Cost of goods sold 1,117,866 1,095,520 1,067,326 1,041,423 1,039,999
Marketing, general
and administrative 514,246 503,503 492,403 454,130 429,573
Research and project
development 12,761 15,385 13,265 13,008 12,370
Special charges (credits) 6,341 (15,200) (13,949) 122,540 --
Total operating expenses 1,651,214 1,599,208 1,559,045 1,631,101 1,481,942
Operating income (loss) 81,019 80,378 108,163 (44,731) 73,301
Other expense
- net 6,044 7,100 3,943 12,099 14,672
Income (loss) before
income taxes 74,975 73,278 104,220 (56,830) 58,629
Income tax expense
(benefit) 31,550 30,100 46,100 (14,900) 22,900
Income (loss) from
continuing operations $ 43,425 $ 43,178 $ 58,120 $ (41,930)$ 35,729
Per share of common
stock $ 1.14 $ 1.13 $ 1.52 $ (1.10)$ 0.95
Income (loss) from
continuing operations as a
percentage of net sales 2.5% 2.6% 3.5% (2.6%) 2.3%
Financial Position:
Working capital $ 124,194 $ 36,530 $ (25,048)$ 7,197 $ 112,302
Properties - net $ 814,102 $ 887,409 $ 922,208 $ 884,102 $ 904,915
Total assets* $1,362,536 $1,384,530 $1,371,576 $1,350,944 $1,373,371
Long-term debt $ 176,000 $ 195,000 $ 131,000 $ 175,000 $ 220,000
Other long-term
liabilities $ 32,745 $ 33,435 $ 30,884 $ 34,843 $ 52,291
Shareholders' equity* $ 715,487 $ 695,016 $ 674,201 $ 631,927 $ 685,445
Net book value per share
of common stock* $ 18.83 $ 18.21 $ 17.59 $ 16.54 $ 18.17
Total debt to total
capitalization 21.2% 24.9% 20.6% 26.3% 24.3%
Return on average
shareholders' equity 6.2% 6.3% 8.9% (6.4%) (0.2%)
Other Information:
Dividends $ 18,983 $ 19,066 $ 19,146 $ 19,003 $ 18,801
Per share of common
stock $ 0.50 $ 0.50 $ 0.50 $ 0.50 $ 0.50
Average number of common
shares outstanding 37,991 38,170 38,283 37,989 37,561
Gross profit $ 614,367 $ 584,066 $ 599,882 $ 544,947 $ 515,244
Capital expenditures $ 64,799 $ 145,797 $ 160,314 $ 120,354 $ 115,450
Depreciation, depletion,
and amortization $ 121,121 $ 122,830 $ 120,793 $ 118,955 $ 114,780
Full-time employees 5,800 6,200 6,300 6,200 7,100
Total taxes $ 459,502 $ 466,740 $ 472,854 $ 401,667 $ 437,089
Market price range of
common stock:
High $ 24 1/4 $ 23 1/4 $ 20 7/8 $ 23 1/8 $ 22 7/8
Low $ 16 3/4 $ 15 1/8 $ 14 3/4 $ 15 $ 15 1/2
1991 1990 1989 1988 1987
Barrels of malt
beverages sold 19,521 19,297 17,698 16,534 15,658
Summary of Operations:
Net sales $1,534,948 $1,482,422 $1,371,406 $1,277,619 $1,172,546
Cost of goods sold 1,044,169 984,901 913,027 828,945 753,504
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 charges 29,599 30,000 41,670 -- --
Total operating expenses 1,522,161 1,423,986 1,352,541 1,209,076 1,093,922
Operating income 12,787 58,436 18,865 68,543 78,624
Other expense (income)
- net 4,403 5,903 2,546 (6,471) (6,022)
Income before
income taxes 8,384 52,533 16,319 75,014 84,646
Income tax (benefit)
expense (8,700) 20,300 9,100 28,700 33,500
Income 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 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
Note: Numbers in italics include results of discontinued operations.
*Reflects the dividend of ACX Technologies, Inc. to shareholders during 1992.
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
INTRODUCTION
ACC is the holding company for Coors Brewing Company (CBC), which
produces and markets high-quality malt-based beverages.
This discussion summarizes the significant factors affecting ACC's
consolidated results of operations, liquidity, and capital resources
for the three-year period ended December 29, 1996, and should be read
in conjunction with the financial statements and the notes thereto
included elsewhere in this report.
ACC's fiscal year is a 52- or 53-week year that ends on the last Sunday in
December. The 1996 fiscal year was 52 weeks long, while fiscal 1995
was 53 weeks long.
Certain unusual or nonrecurring items impacted ACC's financial results
for 1996, 1995, and 1994, making clear evaluation of its ongoing
operations somewhat complicated. These items are summarized below.
Summary of operating results:
For the years ended
December 29, December 31, December 25,
1996 1995 1994
(In thousands, except earnings per share)
Operating income:
As reported $81,019 $80,378 $108,163
Excluding special items 87,360 65,178 94,214
Net income:
As reported 43,425 43,178 58,120
Excluding special items 47,299 33,944 49,720
Earnings per share:
As reported $1.14 $1.13 $1.52
Excluding special items $1.24 $0.89 $1.30
1996: For the 52-week fiscal year ended December 29, 1996, ACC
reported net income of $43.4 million, or $1.14 per share. During 1996,
the Company received royalties and interest from Molson Breweries of
Canada Limited (Molson) in response to the October 1996 arbitration
ruling that Molson had underpaid royalties from January 1, 1991, to
April 1, 1993. Further, ACC recorded a gain from the 1995 curtailment
of certain postretirement benefits, charges for Molson-related
legal expenses, and severance expenses for a limited work force
reduction. The net effect of these special items was a pretax charge of
$6.3 million, or $0.10 per share, after tax. Without this net special charge,
ACC would have reported net earnings of $47.3 million, or $1.24 per share.
1995: 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, the Company recorded a gain from the curtailment of certain
postretirement benefits and a severance charge for a limited work force
reduction. The net effect of these special items was a pretax credit of
$15.2 million, or $0.24 per share, after tax. ACC would have reported net
income of $33.9 million, or $0.89 per share, without this net special credit.
1994: For the 52-week fiscal year ended December 25, 1994, ACC
reported net income of $58.1 million, or $1.52 per share. During 1994,
the Company recovered some of the costs associated with the Lowry
Landfill Superfund site and wrote down certain distributor assets. The
net effect of these special items was a pretax credit of $13.9 million,
or $0.22 per share, after tax. Without this net special credit, ACC
would have reported net income of $49.7 million, or $1.30 per share.
Trend summary - percentage increase (decrease) for 1996, 1995, and 1994:
The following table summarizes trends in operating results, excluding
special items.
1996 1995 1994
Volume (1.3%) (0.3%) 2.7%
Net sales 3.1% 0.7% 5.1%
Average price 2.1% 1.0% 0.3%
increase
Gross profit 5.2% (2.6%) 10.1%
Operating 34.0% (30.8%) 21.1%
income
Advertising 0.5% 0.9% 20.1%
expense
General and 13.5% 2.2% (9.7%)
administrative
CONSOLIDATED RESULTS OF CONTINUING OPERATIONS - 1996 VS. 1995 AND 1995
VS. 1994 (EXCLUDING SPECIAL ITEMS)
1996 vs. 1995: Even though unit volume decreased 1.3%, net sales
increased 3.1% in 1996 from 1995. The decrease in unit volume is caused
by a shorter fiscal year in 1996; 1996 consisted of 52 weeks versus 53
weeks in 1995. On a comparable-calendar basis, 1996 sales volume was
essentially unchanged from 1995. Net sales increased in 1996 from 1995
due to price increases; lower price promotion expenses; reduced freight
charges as a result of direct shipments to certain markets; increased
international sales, which generate higher revenue per barrel than
domestic sales; the impact of CBC's interim agreement with Molson; and
the slight reductions in excise taxes with the increase in export
sales. Lower Zima and Artic Ice volumes and greater proportionate
Keystone volumes negatively impacted net sales per barrel in 1996.
Gross profit in 1996 rose 5.2% to $614.4 million from 1995 due to the
3.1% increase in net sales, as discussed above, offset in part by a
2.0% increase in cost of goods sold. Cost of goods sold increased due
to cost increases in paper and glass packaging materials; abandonments
of certain capital projects; cost increases for certain new contract-
brewing arrangements; and cost increases for Japanese operations, which
began in the fourth quarter of 1995. Total gross profit was impacted
positively in 1996 by decreases in brewing material costs; changes in
brand mix (specifically, increases in Coors Light volume offset in part
by decreases in Zima volume and increases in Keystone volume); and
slightly favorable labor costs. Additionally, 1995 gross profit
included the cost of the Zima Gold termination and withdrawal.
Operating income increased 34.0% to $87.4 million in 1996 from 1995
primarily due to the 5.2% increase in gross profit, as discussed
earlier; the 17.1% decrease in research and development expenses;
offset partially by the 13.5% increase in general and administrative
(G&A) expenses. Although marketing expenses were relatively unchanged
from 1995, the focus of such spending was redirected from Zima and
Artic Ice to Original Coors and Coors Light. G&A expenses increased due
to continued investments made in domestic and foreign sales
organizations; incentive compensation increases; increases in officers'
life insurance expenses; increases in costs of operating
distributorships (a distributorship was acquired in 1995); and
increases in administrative costs for certain foreign operations.
Research and development expenses decreased due to the planned
reduction in the number of capital projects in 1996.
Net non-operating expenses in 1996 declined 14.9% from 1995 because of
a 47.5% increase in net miscellaneous income offset in part by a 5.4%
increase in net interest expense. Increased royalties earned on certain
can-decorating technologies caused the increase in miscellaneous
income. Additionally, even though the Company repaid $38 million in
principal on its medium-term notes and incurred no interest charges on
its line of credit (no amounts were borrowed against the line of credit
during 1996), net interest expense increased due to interest incurred
on the private placement Senior Notes and reductions in the amount of
interest capitalized on capital projects.
The Company's effective tax rate increased to 41.8% in 1996 from 41.6%
in 1995 primarily due to changes in cash surrender values of officers'
life insurance. Further, the 1996 effective tax rate exceeded the
statutory rate because of the effects of certain non-deductible
expenses and foreign investments.
Net earnings for 1996 were $47.3 million, or $1.24 per share, compared
to $33.9 million, or $0.89 per share, for 1995, representing a 39.3%
increase in earnings per share.
1995 vs. 1994: Although total unit volume declined 0.3%, 1995 net
sales increased 0.7% 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. Lower Zima
volumes negatively impacted net sales; Zima volumes declined
approximately 49% in 1995 versus 1994's national rollout volumes.
In 1995, gross profit decreased $15.8 million and also decreased as a
percentage of net sales, down to 34.8% from 36.0% in 1994. This
decrease was primarily due to significant increases in aluminum and
other packaging costs and reduced Zima sales volume, which has a higher
gross profit margin than other brands. Non-recurring costs from the
sale of the power plant equipment and support facilities, the operation
of the RMBC plant, and the write-off of obsolete packaging supplies
also impacted gross profit unfavorably; however, container joint
venture income partially offset these costs (see Note 10 to the
financial statements in Item 8).
From 1994 to 1995, operating income declined 30.8% because of the
decrease in gross profit, as discussed previously; a 2.3% increase in
marketing expenses, including advertising; a 2.2% increase in G&A
expenses; and a 16.0% increase in research and development expenses.
The Company's efforts to strengthen the domestic and international
sales organizations increased marketing expenses. Total advertising
expense was relatively unchanged from 1994; however, the focus was
redirected from Zima, Artic Ice, and Artic Ice Light to Coors Light and
new brand introductions. Labor cost increases and continuing efforts to
develop and execute ACC's performance initiatives caused the increase
in G&A expenses. The increase in the numbers of new products and
packages being considered increased research and development expenses.
Net non-operating expense increased $3.2 million in 1995 compared to
1994. Although ACC paid $44 million in principal on its medium-term
notes, interest expense increased 3.5% in 1995 over 1994 due to the
additional $100 million placement of Senior Notes in the third quarter
of 1995. Further, miscellaneous income decreased 42.8% in 1995 due to
non-recurring gains recognized in 1994 on sales of a distributorship
and certain other investments.
The Company's effective tax rate declined in 1995 to 41.6% from 45.0%
in 1994, primarily due to the effect of a valuation allowance for a tax
loss carryforward and some non-recurring, non-taxable income items in
1995. The 1995 effective tax rate exceeded the statutory rate because
of certain non-deductible expenses.
Net earnings for 1995 were $33.9 million, or $0.89 per share, compared
to $49.7 million, or $1.30 per share, for 1994, representing a 31.5%
decline in earnings per share.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash provided by
operating activities and external borrowings. As of December 29, 1996,
ACC had working capital of $124.2 million, and its net cash position
was $110.9 million compared to $32.4 million as of December 31, 1995,
and $27.2 million as of December 25, 1994. The Company believes that
cash flows from operations and short-term borrowings will be sufficient
to meet its ongoing operating requirements; scheduled principal and
interest payments on indebtedness; dividend payments; and anticipated
capital expenditures of approximately $85 million for production equipment,
information systems, repairs and upkeep, and environmental compliance.
Operating activities: Net cash provided by operating activities was
$195.1 million for 1996, $90.1 million for 1995, and $186.4 million for
1994. The increase in cash flows provided by operating activities in
1996 compared to 1995 was primarily attributable to decreases in
inventories; moderate decreases (relative to significant decreases in
1995) in accounts payable and accrued expenses and other liabilities;
and decreases in accounts and notes receivable. The decrease in
inventories primarily resulted from a higher proportion of shipments
directly to distributors rather than shipments through its satellite
redistribution centers. The moderate decreases in accounts payable and
accrued expenses and other liabilities relative to 1995 reflects the
significant payment of obligations to various suppliers, including
advertising agencies, in 1995. Accounts and notes receivable declined
because sales were lower during the last 12 to 16 days of 1996 than during
the same period of 1995. CBC's credit terms are generally 12 to 16 days.
The 1995 decrease in cash flows 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
obligations 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 ANC. Other liabilities declined in 1995
primarily due to the payment of obligations for the Lowry site and 1993
restructuring accruals. Accounts and notes receivable increased in 1995
because of an increase in international credit sales, which was
partially offset by decreased receivables from the container joint
venture. Other assets increased primarily due to increased investments
and equity in the container joint ventures.
Investing activities: During 1996, ACC spent $56.9 million on
investing activities compared to $116.2 million in 1995 and $174.7
million in 1994. Capital expenditures decreased to $64.8 million in
1996 from $145.8 million in 1995 and $160.3 million in 1994. In 1996,
capital expenditures focused on information systems and expansion of
packaging capacity, while 1995 expenditures focused on upgrades and
expansion of Golden-based facilities - particularly bottling capacity.
In 1994, capital expenditures focused on expansion of facilities
(primarily bottling capacity) and the purchase of a brewery in
Zaragoza, Spain. Proceeds from property sales were $8.1 million in
1996, compared to $44.4 million in 1995 and $4.4 million in 1994. The
Company primarily sold distribution rights in 1996. Proceeds from
property sales in 1995 were unusually high because of the sale of the
power plant equipment and support facilities for $22.0 million and
certain bottleline machinery and equipment, under a sale-leaseback
transaction, for $17.0 million. Intangible assets and other items
declined $0.2 million in 1996 compared to increases of $14.8 million in
1995 and $18.7 million in 1994. Purchases of distributorships increased
intangible assets in 1995 and 1994.
Financing activities: ACC spent $59.3 million on financing activities
during 1996 due primarily to principal payments on its medium-term
notes of $38.0 million, purchases of Class B common stock for $3.0
million, and dividend payments of $19.0 million.
During 1995, the Company generated $31.0 million of cash from financing
activities due to the receipt of $100 million from a private placement
of Senior Notes, which was offset by principal payments on medium-term
notes of $44 million, purchases of Class B common shares of $9.9
million, and dividend payments of $19.1 million.
ACC spent $67.0 million on financing activities in 1994. These
activities included principal repayments on medium-term notes of $50
million and dividend payments of $19.1 million.
Debt obligations: As of December 29, 1996, ACC had $88 million
outstanding in medium-term notes. With cash on hand, the Company repaid
principal of $38 million on these notes in 1996. 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 these notes range
from 8.63% to 9.05%. Aggregate annual maturities on outstanding notes
are $17 million in 1997, $31 million in 1998, and $40 million in 1999.
In the third quarter of 1995, ACC 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 to repay principal on the medium-term notes.
The Company's debt-to-total capitalization ratio was 21.2% at the end
of 1996, 24.9% at the end of 1995, and 20.6% at the end of 1994.
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 totaling $144 million. From time to time, this
line of credit is used for working capital requirements and general
corporate purposes. As of December 29, 1996, the full $144 million was
available. For 1996, ACC met the two financial covenants under this
line of credit: a minimum tangible net worth requirement and a debt-to-
total capitalization requirement.
Hedging activities: As of December 29, 1996, 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 of changes in
the underlying foreign exchange rate. Any variation in the exchange
rate accruing to the contract would be directly offset by an equal
change in the related obligation. Therefore, after execution of the
contract, variations in exchange rates would not impact the Company's
financial statements. ACC's hedging activities and hard currency
exposures are minimal. The Company does not enter into derivative
financial instruments for speculation or trading purposes.
Stock repurchase plan: On December 20, 1996, the board of directors
authorized the repurchase of up to $40 million of ACC's outstanding
Class B common stock during 1997. Repurchases will be financed by funds
generated from operations or short-term borrowings.
OUTLOOK 1997
Following industry pricing trends, CBC raised prices in the first
quarter of 1997 in the majority of its U.S. markets. The increases in
1997 were smaller than those achieved in 1996. Additionally, several
key markets, most notably Texas, did not absorb a 1997 price increase.
CBC continues to be pressured by the industry pricing environment; 1997
price increases are expected to be smaller than those in 1996. There is also
uncertainty as to the degree to which these increases may be eroded by
price discounting and the degree to which these increases may impact volume.
International income is expected to be up in 1997 primarily due to the
Company's Canadian business. The Company's interim agreement with Molson,
which expires no earlier than July 1, 1997, provides for greater
earnings to the Company than royalties recognized under the terminated
licensing agreement with Molson. Management continues to work on CBC's
options for future business in Canada.
For fiscal 1997, raw material costs are expected to be up slightly.
CBC continues to pursue improvements in its operations and technology
functions to deliver cost reductions over time.
Total net interest expense is expected to be lower in 1997 resulting
from CBC's more favorable cash position and its lower outstanding debt
relative to its 1996 financial position. Additional outstanding common
stock may be repurchased in 1997 as approved by the ACC board of
directors in December 1996.
Overall, sales, marketing, and G&A expenses are likely to be up
slightly in 1997. Management continues to monitor CBC's market
opportunities and invest behind its brands and its sales efforts
accordingly. Incremental sales and marketing spending will be
determined on an opportunity-by-opportunity basis.
The effective tax rate for 1997 is not expected to deviate materially
from the 1996 rate.
In 1997, CBC has planned capital expenditures (including contributions
to its container joint ventures for capital improvements) of approximately
$85 million. In addition to CBC's 1997 capital expenditures, incremental
strategic investments will be considered on a case-by-case basis.
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 1997;
overall and brand-specific volume trends; pricing trends and industry
forces; cost reduction strategies and their results; targeted goals for
return on invested capital; the Company's expectations for funding its
1997 capital expenditures and operations; and other statements of
expectations, beliefs, future plans and strategies, anticipated events
or trends, and similar expressions concerning matters that are not
historical facts. These forward-looking statements 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 influence the achievement of these goals - and cause actual
results to differ materially from those expressed in the forward-
looking statements - include, but are not limited to, the following:
- - the inability of the Company and its distributors to develop and
execute effective marketing and sales strategies for Coors products;
- - the Company's inability to develop its Canadian business more
profitably than under previous arrangements;
- - the potential erosion of recent price increases through discounting
or a higher proportion of sales in multi-packs;
- - a potential shift in consumer preferences toward lower-priced
products in response to price increases;
- - a potential shift in consumer preferences away from the premium light
beer category including Coors Light;
- - the intensely competitive, slow-growth nature of the beer industry;
- - demographic trends and social attitudes that can reduce beer sales;
- - the continued growth in the popularity of microbrews and other
specialty beers;
- - increases in the cost of aluminum, paper packaging, and other raw materials;
- - the Company's inability to reduce manufacturing, freight, and
overhead costs to more competitive levels;
- - 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;
- - increases in rail transportation rates or interruptions of rail service;
- - potential impact of industry consolidation; and
- - 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 the Company's other
filings 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 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 cleanup 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 PRPs 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. Further, the Company agreed to pay a
specified share of costs if total remediation costs exceeded this
amount. The Company remitted its agreed share, based on the $120
million assumption, to a trust for payment of site remediation,
operating, and maintenance costs.
The City and County of Denver; Waste Management of Colorado, Inc.; and
Chemical Waste Management, Inc. are expected to implement site
remediation. The EPA's projected costs to meet the announced
remediation objectives and requirements are below the $120 million
assumption used for ACC'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, and, as a result, the Company recognized a special
pretax credit of $18.9 million in the fourth quarter of 1994.
From time to time, ACC also is notified that it is or may be a PRP
under the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA) or similar state laws for 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 be immaterial to its financial position and results of
operations for 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 Company's eventual aggregate cost
for environmental and related matters, management believes that any
payments, if required, for these matters would be made over a period of
time in amounts that would not be material in any one year to the
Company's results of operations or its financial or competitive position.
The Company believes adequate disclosures have been provided for losses
that are reasonably possible. Further, as the Company continues to focus
on resource conservation, waste reduction, and pollution prevention, it
believes that potential future liabilities will be reduced.
ITEM 8. Financial Statements and Supplementary Data
Index to Financial Statements Page(s)
Consolidated Financial Statements:
Report of Independent Accountants 27
Consolidated Statements of Income for each of
the three years in the period ended December 29, 1996 28
Consolidated Balance Sheets at December 29, 1996
and December 31, 1995 29-30
Consolidated Statements of Cash Flows for each of
the three years in the period ended December 29, 1996 31
Consolidated Statements of Shareholders' Equity
for each of the three years in the period ended
December 29, 1996 32
Notes to Consolidated Financial Statements 33-51
Report of Independent Accountants
To the Board of Directors and Shareholders of Adolph Coors Company:
In our opinion, the accompanying consolidated balance sheets and
related consolidated statements of income, shareholders' equity and
cash flows present fairly, in all material respects, the financial
position of Adolph Coors Company and its subsidiaries at December 29,
1996, and December 31, 1995, and the results of their operations and
their cash flows for each of the three years in the period ended
December 29, 1996, 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 18, 1997
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the years ended
December 29, December 31, December 25,
1996 1995 1994
(In thousands, except per share data)
Sales - domestic and international $2,111,544 $2,064,802 $2,044,867
Less beer excise taxes 379,311 385,216 377,659
Net sales 1,732,233 1,679,586 1,667,208
Costs and expenses:
Cost of goods sold 1,117,866 1,095,520 1,067,326
Marketing, general
and administrative 514,246 503,503 492,403
Research and project development 12,761 15,385 13,265
Special charges (credits) (Note 9) 6,341 (15,200) (13,949)
Total 1,651,214 1,599,208 1,559,045
Operating income 81,019 80,378 108,163
Other income (expense):
Interest income 2,821 1,345 1,546
Interest expense (13,907) (11,863) (11,461)
Miscellaneous - net 5,042 3,418 5,972
Total (6,044) (7,100) (3,943)
Income before income taxes 74,975 73,278 104,220
Income tax expense (Note 5) 31,550 30,100 46,100
Net income $ 43,425 $ 43,178 $ 58,120
Net income per common share $ 1.14 $ 1.13 $ 1.52
Weighted average number of outstanding
common shares 37,991 38,170 38,283
See notes to consolidated financial statements.
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 29, December 31,
1996 1995
(In thousands)
Assets
Current assets:
Cash and cash equivalents $ 110,905 $ 32,386
Accounts and notes receivable:
Trade, less allowance for doubtful accounts
of $275 in 1996 and $30 in 1995 86,421 89,579
Affiliates 14,086 16,329
Other 13,836 10,847
Inventories:
Finished 43,477 58,486
In process 23,157 28,787
Raw materials 40,737 37,298
Packaging materials, less allowance for
obsolete inventories of $1,046 in 1996
and $1,000 in 1995 13,699 14,854
121,070 139,425
Other supplies, less allowance for obsolete
supplies of $2,273 in 1996 and $1,942 in 1995 36,103 39,364
Prepaid expenses and other assets 24,794 13,634
Deferred tax asset (Note 5) 9,427 18,629
Total current assets 416,642 360,193
Properties, at cost less accumulated
depreciation, depletion, and amortization
of $1,313,709 in 1996 and $1,219,473
in 1995 (Note 2) 814,102 887,409
Excess of cost over net assets of businesses
acquired, less accumulated amortization
of $4,778 in 1996 and $4,097 in 1995 21,374 26,470
Other assets (Note 10) 110,418 110,458
Total assets $1,362,536 $1,384,530
December 29, December 31,
1996 1995
Liabilities and Shareholders' Equity (In thousands)
Current liabilities:
Current portion of long-term debt (Note 4) $ 17,000 $ 36,000
Accounts payable:
Trade 110,696 118,207
Affiliates 12,424 14,142
Accrued salaries and vacations 39,482 37,178
Taxes, other than income taxes 30,976 39,788
Federal and state income taxes (Note 5) 8,983 9,091
Accrued expenses and other liabilities 72,887 69,257
Total current liabilities 292,448 323,663
Long-term debt (Note 4) 176,000 195,000
Deferred tax liability (Note 5) 76,083 67,589
Postretirement benefits (Note 8) 69,773 69,827
Other long-term liabilities 32,745 33,435
Total liabilities 647,049 689,514
Commitments and contingencies
(Notes 3, 4, 5, 6, 7, 8, 10, and 12)
Shareholders' equity (Notes 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: 36,662,404 in 1996 and
36,736,512 in 1995) 8,729 8,747
Total capital stock 9,989 10,007
Paid-in capital 31,436 33,719
Retained earnings 671,972 647,530
Foreign currency translation adjustment 2,090 3,760
Total shareholders' equity 715,487 695,016
Total liabilities and shareholders' equity $1,362,536 $1,384,530
See notes to consolidated financial statements.
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended
December 29, December 31, December 25,
1996 1995 1994
(In thousands)
Cash flows from operating activities:
Net income $ 43,425 $ 43,178 $ 58,120
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion, and
amortization 121,121 122,830 120,793
Deferred income taxes 17,696 3,610 20,071
Loss on sale or abandonment of
properties and intangibles 12,535 1,274 808
Change in operating assets and
liabilities:
Accounts and notes receivable 2,232 (9,952) (30,264)
Inventories 18,076 2,135 5,627
Other assets (8,086) (16,659) (5,899)
Accounts payable (8,175) (32,180) 43,054
Accrued expenses and other
liabilities (3,712) (24,139) (25,884)
Net cash provided by
operating activities 195,112 90,097 186,426
Cash flows from investing activities:
Additions to properties (64,799) (145,797) (160,314)
Proceeds from sale of properties
and intangibles 8,098 44,448 4,382
Additions to intangible assets (313) (11,802) (16,876)
Other 102 (3,021) (1,863)
Net cash used in investing
activities (56,912) (116,172) (174,671)
Cash flows from financing activities:
Proceeds from long-term debt -- 100,000 --
Principal payment of long-term debt (38,000) (44,000) (50,000)
Issuance of stock under stock plans 649 4,117 2,102
Purchase of stock (2,950) (9,936) --
Dividends paid (18,983) (19,066) (19,146)
Other -- (116) 24
Net cash (used in) provided
by financing activities (59,284) 30,999 (67,020)
Cash and cash equivalents:
Net increase (decrease) in cash
and cash equivalents 78,916 4,924 (55,265)
Effect of exchange rate changes on
cash and cash equivalents (397) 294 222
Balance at beginning of year 32,386 27,168 82,211
Balance at end of year $ 110,905 $ 32,386 $ 27,168
See notes to consolidated financial statements.
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Foreign
Common stock currency
issued Paid-in Retained translation
Class A Class B capital earnings adjustment Total
(In thousands, except per share data)
Balances, December 26, 1993 $ 1,260 $ 8,795 $37,388 $584,444 $40 $631,927
Shares issued under stock
plans 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)
Balances, December 25, 1994 1,260 8,825 39,460 623,418 1,238 674,201
Shares issued under stock
plans 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)
Balances, December 31, 1995 1,260 8,747 33,719 647,530 3,760 695,016
Shares issued under stock
plans 16 633 649
Purchase of stock (34) (2,916) (2,950)
Other (1,670) (1,670)
Net income 43,425 43,425
Cash dividends-$0.50 per share (18,983) (18,983)
Balances, December 29, 1996 $ 1,260 $ 8,729 $31,436 $671,972$2,090 $715,487
See notes to consolidated financial statements.
ADOLPH COORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1:
Summary of Significant Accounting Policies
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.
Nature of operations: The Company is a multinational 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 is
produced, marketed, and distributed under varying business arrangements
including export, direct investment, joint ventures, and licensing.
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 29, 1996,
a 52-week period; December 31, 1995, a 53-week period; and
December 25, 1994, a 52-week period.
Concentration of credit risk: The majority of the accounts
receivable balances are 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.
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 $43.1 million and $42.2 million
at December 29, 1996, and December 31, 1995, respectively. During
1996 and 1995, total inventory costs and quantities were reduced
resulting in LIFO liquidations, the effects of which were not material.
Properties: Land, buildings, and equipment are stated at cost.
Depreciation is provided principally on the straight-line method
over the following estimated useful lives: buildings and
improvements, 10 to 45 years; and 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.
The Company continually evaluates its assets to assess their
recoverability from future operations using undiscounted cash
flows. Impairment would be recognized in operations if permanent
diminution in value occurs.
Hedging transactions: The Company periodically enters into short-
term 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 29, 1996, 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 of changes
in the underlying foreign exchange rate. Any variation in the
exchange rate accruing to the contract would be directly offset
by an equal change in the related obligation. Therefore, after
the execution of the contract, variations in exchange rates would
not impact the Company's financial statements. The Company's
hedging activities and hard currency exposures are minimal. The
Company does not enter into derivative financial instruments for
speculation or trading purposes.
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.
Advertising: Advertising costs, included in marketing, general
and administrative, are expensed when the advertising first takes
place. Advertising expense was $331.9 million, $330.4 million,
and $327.6 million for years 1996, 1995, and 1994, respectively.
The Company had $10.9 million and $8.9 million of prepaid
advertising production costs reported as assets at December 29,
1996, and December 31, 1995, respectively.
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 estimated reasonably.
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.
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 non-cash transaction
that is not reflected as an investing activity in the Statement
of Cash Flows. Income taxes paid were $13.2 million in 1996,
$15.8 million in 1995, and $31.0 million in 1994.
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.
Reclassifications: Certain reclassifications have been made to the 1995
and 1994 financial statements to conform with the 1996 presentation.
NOTE 2:
Properties
The cost of properties and related accumulated depreciation,
depletion, and amortization consists of the following:
As of
December 29, December 31,
1996 1995
(In thousands)
Land and improvements $ 98,666 $ 98,404
Buildings 477,184 470,677
Machinery and equipment 1,511,665 1,436,254
Natural resource properties 10,423 10,954
Construction in progress 29,873 90,593
2,127,811 2,106,882
Less accumulated depreciation,
depletion, and amortization 1,313,709 1,219,473
Net properties $ 814,102 $ 887,409
At December 29, 1996 and December 31, 1995, properties included
$21.5 million and $7.5 million in unamortized internally-
developed and purchased software costs, respectively. Amortization
expense related to this software totaled $5.0 million, $2.2 million,
and $1.1 million for 1996, 1995, and 1994, respectively.
Interest capitalized, expensed, and paid was as follows:
For the years ended
December 29, December 31, December 25,
1996 1995 1994
(In thousands)
Interest costs $17,057 $18,433 $17,761
Interest capitalized (3,150) (6,570) (6,300)
Interest expensed $13,907 $11,863 $11,461
Interest paid $17,711 $16,613 $21,169
NOTE 3:
Leases
The Company leases certain office facilities and operating
equipment under cancelable and non-cancelable agreements
accounted for as operating leases. At December 29, 1996, the
minimum aggregate rental commitment under all non-cancelable
leases was (in thousands): 1997, $9,684; 1998, $5,290; 1999,
$3,242; 2000, $1,906; and $13,734 for years thereafter. Total
rent expense was (in thousands) $11,680, $10,376, and $11,231 for
years 1996, 1995, and 1994, respectively.
NOTE 4:
Debt
Long-term debt consists of the following:
As of
December 29, 1996 December 31, 1995
Carrying Fair Carrying Fair
value value value value
(In thousands)
Medium-term notes $ 88,000 $ 94,000 $126,000 $134,000
Senior notes 100,000 101,000 100,000 106,000
Industrial development bonds 5,000 5,000 5,000 4,000
Total 193,000 200,000 231,000 244,000
Less current portion 17,000 17,000 36,000 37,000
$176,000 $183,000 $195,000 $207,000
Fair values were determined using discounted cash flows at
current interest rates for similar borrowings.
As of December 29, 1996, the Company had outstanding $88 million
of unsecured medium-term notes. Interest is due semiannually in
April and October at fixed interest rates ranging from 8.63% to
9.05% per annum. Aggregate annual maturities for the notes issued
are $17 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 semiannually 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 interest rate on December 29, 1996 was 4.3%.
The Company has an unsecured, committed credit arrangement
totaling $144 million and as of December 29, 1996, had all $144
million available. This line of credit has a three-year term
through December 12, 1998. 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 29, 1996, 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
Income tax expense includes the following current and deferred provisions:
For the years ended
December 29, December 31, December 25,
1996 1995 1994
(In thousands)
Current:
Federal $ 8,878 $ 24,275 $ 19,875
State and foreign 4,976 2,215 6,154
Total current tax expense 13,854 26,490 26,029
Deferred:
Federal 12,154 6,062 16,804
State and foreign 5,542 (2,452) 3,267
Total deferred tax expense 17,696 3,610 20,071
Total income tax expense $ 31,550 $ 30,100 $ 46,100
The Company's income tax expense varies from the amount expected by
applying the statutory federal corporate tax rate to income as follows:
For the years ended
December 29, December 31 December 25,
1996 1995 1994
Expected tax rate 35.0% 35.0% 35.0%
State income taxes, net of
federal benefit 4.3 4.7 5.1
Revaluation of deferred
income tax liability -- -- 0.8
Effect of foreign investments 1.6 .6 (0.2)
Non-deductible expenses and losses 1.9 .8 1.3
Other, net (0.8) -- 2.2
Effective tax rate 42.0% 41.1% 44.2%
The Company's deferred taxes are composed of the following:
As of
December 29, December 31,
1996 1995
Current deferred tax assets: (In thousands)
Deferred compensation and other
employee related $ 11,865 $ 11,491
Change in balance sheet reserves
and accruals 9,051 8,216
Other 2,054 1,583
Total current deferred tax assets 22,970 21,290
Current deferred tax liabilities:
Change in balance sheet reserves
and accruals 4,545 2,398
Other 8,998 263
Total current deferred tax liabilities 13,543 2,661
Net current deferred tax assets $ 9,427 $ 18,629
Non-current deferred tax assets:
Book in excess of tax depreciation
and amortization $ 7,895 $ 7,848
Loss on sale or write-down of assets 6,297 4,851
Deferred compensation and other
employee related 7,077 7,066
Change in balance sheet reserves
and accruals 9,006 8,851
Other employee postretirement
benefits 27,724 29,239
Environmental accruals 2,308 2,327
Deferred foreign losses -- 4,779
Other 3,403 2,841
Total non-current deferred tax assets 63,710 67,802
Non-current deferred tax liabilities:
Tax in excess of book
depreciation and amortization 132,339 130,091
Capitalized interest 5,708 3,002
Other 1,746 2,298
Total non-current deferred tax liabilities 139,793 135,391
Net non-current deferred tax liabilities $ 76,083 $ 67,589
The Internal Revenue Service currently is examining the federal
income tax returns for fiscal years 1991 through 1995. In the
opinion of management, adequate accruals have been provided for
all income tax matters and related interest.
The Company and ACX 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 the
assignment of responsibility for adjustments as a result of
audits by taxing authorities and is designed to preserve the
status of the distribution as tax-free (see Note 12).
NOTE 6:
Stock Option, Restricted Stock Award, and Employee Award Plans
At December 29, 1996, the Company has four stock-based
compensation plans, which are described in greater detail below.
The Company applies APB Opinion No. 25 and related
interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for the stock option
portion of the plans. Had compensation cost been determined for
the Company's stock option portion of the plans based on the fair
value at the grant dates for awards under those plans consistent
with the alternative method set forth under FASB Statement No.
123, the Company's net income and earnings per share would have
been reduced to the pro forma amounts indicated below:
1996 1995
(In thousands, except
per share data)
Net income As reported $ 43,425 $ 43,178
Pro forma $ 42,793 $ 41,799
Net income per common share As reported $ 1.14 $ 1.13
Pro forma $ 1.13 $ 1.10
The weighted-average fair value of options
granted under the 1990 Equity Incentive Plan
during the year is: $ 7.21 $ 6.21
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 1996
and 1995, respectively: dividend yield of 2.535% and 2.78%;
expected volatility of 26.7% for both years, risk-free interest
rates of 5.74% and 7.93% for the 1990 Plan options, and expected
lives of 10 and nine years for the 1990 Plan options.
1983 Plan: The 1983 non-qualified Adolph Coors Company Stock
Option Plan, as amended, (the 1983 Plan) 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.
A summary of the status of the Company's 1983 Plan as of December
29, 1996, December 31, 1995, and December 25, 1994, and changes
during the years ending on those dates is presented below:
Options exercisable
at year end
Weighted- Weighted-
average average
exercise exercise
Shares price Shares price
Outstanding at December 26, 1993 538,568 $15.84
Exercised 109,630 15.21
Forfeited 17,837 18.06
Outstanding at December 25, 1994 411,101 15.92 411,101 $15.92
Exercised 228,636 15.24
Forfeited 13,811 18.02
Outstanding at December 31, 1995 168,654 16.66 168,654 16.66
Exercised 100,231 16.54
Forfeited 18,908 21.97
Outstanding at December 29, 1996 49,515 14.85 49,515 14.85
Common stock reserved for options under the 1983 Plan as of
December 29, 1996, December 31, 1995, and December 25, 1994 was
712,998 shares, 694,090 shares, and 680,279 shares, respectively.
1990 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 $1 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.
A summary of the status of the Company's 1990 EI Plan as of
December 29, 1996, December 31, 1995, and December 25, 1994, and
changes during the years ending on those dates is presented below:
Options exercisable
at year end
Weighted- Weighted-
average average
exercise exercise
Shares price Shares price
Outstanding at December 26, 1993 309,698 $15.57
Granted 530,693 16.25
Exercised 17,288 15.08
Forfeited 47,855 16.07
Outstanding at December 25, 1994 775,248 16.02 232,635 $15.44
Granted 600,561 16.75
Exercised 25,190 14.98
Forfeited 64,567 16.57
Outstanding at December 31, 1995 1,286,052 16.35 512,708 15.95
Granted 614,674 21.27
Exercised 107,327 16.26
Forfeited 70,035 18.84
Outstanding at December 29, 1996 1,723,364 18.01 846,273 16.30
Common stock reserved for options under the 1990 EI Plan as of
December 29, 1996, December 31, 1995, and December 25, 1994 was
3,105,844 shares, 3,650,483 shares, and 1,186,477 shares, respectively.
In 1996, 45,390 shares of restricted stock were issued under the
1990 EI Plan. 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. Compensation cost associated with these awards
was immaterial in 1996 and 1995.
1991 Plan: In 1991, the Company adopted the 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, 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. Compensation
cost associated with this plan was immaterial in 1996 and 1995.
1995 Supplemental Compensation Plan: In 1995, the Company adopted
a supplemental compensation plan that covers substantially all
its employees. Under the plan, management is allowed to recognize
employee achievements through awards of Coors Stock Units (CSUs)
or cash. CSUs are a measurement component equal to the fair market value
of the Company's Class B common stock. CSUs have a six-month holding period
after which the recipient may redeem the CSUs for cash, or, if the holder
has 100 or more CSUs, shares of the Company's Class B common stock.
Awards under the plan in 1996 and 1995 were immaterial.
Common stock reserved for this plan as of December 29, 1996, and
December 31, 1995, was 83,707 shares and 84,000 shares, respectively.
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 all these
plans was $24.8 million in 1996, $22.7 million in 1995, and $29.5
million in 1994. These amounts include the Company's matching for
the savings and investment (thrift) plan of $5.7 million for
1996, $5.7 million for 1995, and $5.8 million for 1994. The
increase in 1996 pension expense versus 1995 was caused primarily
by a decrease in the discount rate (settlement rate) from the
1995 rate of 8.5% to the 1996 rate of 7.25%. The decrease in
pension expense in 1995 versus 1994 was caused primarily by an
increase in the discount rate (settlement rate) from the 1994
rate of 7.25% to the 1995 rate of 8.5%. Pension expense in years
1994 and 1996 were calculated at the same 7.25% discount
(settlement) rate, but expense in 1996 was significantly lower
than 1994 because consistent contributions and strong investment
returns have boosted asset levels, which results in higher
actuarially assumed returns and lower pension expense.
Note that the settlement rates shown in the table were selected
for use at the end of each of the years shown. Actuaries
calculate pension expense annually based on data available at the
beginning of each year, which includes the settlement rate
selected and disclosed at the end of the previous year.
For the years ended
December 29, December 31, December 25,
1996 1995 1994
(In thousands)
Service cost-benefits earned
during the year $ 12,729 $ 9,858 $ 12,517
Interest cost on projected
benefit obligations 31,162 29,285 28,377
Actual gain on plan assets (65,504) (69,346) (872)
Net amortization and deferral 40,691 47,005 (16,351)
Net pension expense $ 19,078 $ 16,802 $ 23,671
The funded status of the pension plans and amounts recognized in
the accompanying balance sheets are as follows:
As of
December 29, December 31,
1996 1995
(In thousands)
Actuarial present value of accumulated plan benefits,
including vested benefits of $332,444 in 1996 and
$311,366 in 1995 $350,506 $341,595
Projected benefit obligations for
services rendered to date $422,516 $423,614
Plan assets available for benefits 394,206 330,823
Plan assets less than projected benefit obligations 28,310 92,791
Unrecognized net gain (loss) 2,359 (62,492)
Prior service cost not yet recognized (18,851) (20,897)
Unrecognized net assets being recognized
over 15 years 5,800 7,491
Net accrued pension liability $ 17,618 $ 16,893
Significant assumptions used in determining the valuation of the
projected benefit obligations as of the end of 1996, 1995, and 1994 were:
1996 1995 1994
Settlement rate 7.75% 7.25% 8.50%
Increase in compensation levels 5.00% 5.00% 5.00%
Rate of return on plan assets 10.25% 9.75% 9.50%
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.
The obligation under these plans 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 10.0% in 1996 to 5.0% in the year 2007. The effect of an annual 1%
increase in trend rates would increase the accumulated postretirement
benefit obligation by approximately $1.9 million and $4.7 million in 1996
and 1995, respectively. The effect of a 1% increase in trend rates also
would have increased the ongoing annual cost by $0.6 million and $0.7 million
in 1996 and 1995, respectively. The discount rate used in determining the
accumulated postretirement benefit obligation was 7.75% and 7.25% at
December 29, 1996, and December 31, 1995, respectively.
Net periodic postretirement benefit cost included the following:
For the years ended
December 29, December 31, December 25,
1996 1995 1994
(In thousands)
Service cost-benefits attributed to
service during the period $ 2,065 $ 2,281 $ 3,097
Interest cost on accumulated
postretirement benefit obligation 5,082 6,426 6,698
Amortization of net loss (gain) (310) (560) 78
Net periodic postretirement benefit cost $ 6,837 $ 8,147 $ 9,873
Effective November 29, 1995, changes were made to postretirement
life insurance and medical benefits which resulted in a
curtailment gain of $3.3 million and $18.6 million in 1996 and
1995, respectively. The 1996 decrease in plan expense resulted
principally from the curtailment of these benefits.
The status of the postretirement benefit plan was as follows:
As of
December 29, December 31,
1996 1995
(In thousands)
Retirees $ 39,780 $ 35,465
Fully eligible active plan participants 5,014 11,146
Other active plan participants 17,883 22,935
Accumulated postretirement obligation 62,677 69,546
Unrecognized net gain 8,452 975
Unrecognized prior service cost 2,209 2,871
Accrued postretirement benefit obligation 73,338 73,392
Less current portion 3,565 3,565
$ 69,773 $ 69,827
NOTE 9:
Special Charges (Credits)
The annual results for 1996 include a pretax net special charge
of $6.3 million which resulted in expense of $0.10 per share
after tax. Second quarter results include a $5.2 million pretax
charge for the ongoing Molson legal proceedings and severance
costs for restructuring the Company's engineering and
construction operations. Results of the third quarter include a
$6.7 million pretax credit for underpaid past royalties and
interest from Molson (net of related legal expenses) and income
from the continuing effect of changes made in payroll-related
practices during 1995. Fourth quarter results include a $7.9
million pretax charge for Molson-related legal expenses, partially
offset by underpaid past royalties from Molson and the continuing effect
of changes made in payroll-related practices during 1995.
Fourth quarter results for 1995 include a pretax net special
credit of $15.2 million which resulted in income of $0.24 per
share after tax. The net credit was 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 pretax 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. Offsetting this
was a write-down for impairment of certain distributor assets.
In 1993, the Company restructured certain of its operations. This
restructuring charge and subsequent activity are summarized as follows:
Workplace
Personnel redesign Total
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
Balance as of December 31, 1995 4,648 -- 4,648
1996 payments 647 -- 647
Balance as of December 29, 1996 $ 4,001 $ -- $ 4,001
The majority of the remaining personnel accruals relate to
obligations under deferred compensation arrangements and
postretirement benefits other than pensions.
NOTE 10:
Investments
Equity investments: The Company has 50% or less owned investments
in affiliates that are accounted for using the equity method of
accounting. The Company's investments aggregated $47.6 million
and $42.3 million at December 29, 1996, and December 31, 1995,
respectively. These investment amounts are included in other
assets on the Company's consolidated balance sheets.
Summarized condensed balance sheet and income statement
information for the Company's equity investments are as follows:
Summarized condensed balance sheet
As of
December 29, December 31,
1996 1995
(In thousands)
Current assets $ 69,975 $ 61,370
Non-current assets 79,162 58,011
Current liabilities 38,186 37,432
Non-current liabilities 4,236 2,228
Summarized condensed statement of operations
For the years ended
December 29, December 31, December 25,
1996 1995 1994
(In thousands)
Net sales $ 357,273 $ 363,864 $ 49,187
Gross profit 37,372 44,890 4,032
Operating income (loss) 19,289 32,039 (1,383)
Company's equity in operating
income 11,630 13,687 1,112
The Company's share of operating income of these non-consolidated
affiliates is primarily included in cost of goods sold on the
Company's consolidated statements of income.
In 1995, CBC and Anchor Glass Container Corporation (Anchor)
formed a 50/50 joint venture to produce glass bottles at the CBC
glass manufacturing facility for sale to CBC and outside
customers. In 1996, Owens-Brockway Glass Container, Inc. (Owens)
purchased certain Anchor assets and assumed Anchor's role in the
partnership. The agreement has an initial term of 10 years and
can be extended for additional two-year periods. Under the terms
of the agreement, CBC agreed to contribute machinery, equipment,
and certain personal property with an approximate net book value
of $16.2 million and Owens 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 1997
commitment of approximately $59 million. The expenditures under
this agreement in 1996 and 1995 were approximately $54 million
and $23 million, respectively. Additionally, the companies
entered into another agreement that made Owens a long-term, preferred
supplier for CBC, satisfying 100% of CBC's other glass requirements.
In 1994, CBC and American National Can Company (ANC) 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 for 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 1996 and 1995 was
approximately $217 million and $238 million, respectively. In
1994, the aggregate amount paid to the joint venture for ends was
approximately $31 million. The estimated cost in 1997 under this
agreement for cans and ends is $205 million. Additionally, during
1996, CBC received a $5 million distribution from this joint venture.
Cost investments: CBC invested approximately $22 million in Jinro-
Coors Brewing Company (JCBC) in 1992 for a 33% interest. At that
time and thereafter, it has accounted for this investment under
the cost basis of accounting given that CBC does not have the
ability to exercise significant influence over JCBC and that
CBC's investment in JCBC is considered temporary. This investment
includes a put option, whereby Jinro Limited, the 67% owner of
JCBC guarantees CBC's investment. The put option, which is held
for other than trading purposes, entitles CBC to require Jinro
Limited to purchase CBC's investment at the greater of cost or market value
in Korean Won through March 1999. JCBC achieved positive operating income
in 1996 but has not yet been profitable due to debt service costs.
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, shares that
were previously classified as treasury shares were restored to
status of "authorized but unissued." This elimination of treasury
stock in the Company's consolidated balance sheets reduced the balances
of Class B common stock and paid-in capital. At December 31, 1995, the
Class B common stock was reduced by $2.3 million to a stated value of
$0.24 per share, and paid-in capital was reduced by $26.6 million.
Activity in the Company's Class A and Class B common stock for
each of the three years ended December 29, 1996, December 31,
1995, and December 25, 1994, is summarized below:
Common stock
Class A Class B
Balances at December 26, 1993 1,260,000 36,939,221
Shares issued under stock plans -- 127,719
Balances at December 25, 1994 1,260,000 37,066,940
Shares issued under stock plans -- 248,778
Purchase of stock -- (579,206)
Balances at December 31, 1995 1,260,000 36,736,512
Shares issued under stock plans -- 256,897
Purchase of stock -- (331,005)
Balances at December 29, 1996 1,260,000 36,662,404
At December 29, 1996, December 31, 1995, and December 25, 1994,
25,000,000 shares of $1 par value preferred stock were authorized but unissued.
On December 20, 1996, the board of directors authorized the repurchase of
up to $40 million of ACC's outstanding Class B common stock during 1997.
As of March 14, 1997, the Company has repurchased 413,000 shares for
approximately $8.9 million under this stock repurchase program. Additionally,
subsequent to year end, the Company purchased 150,000 shares of Class B
common stock for $3.2 million from a director of the Company.
NOTE 12:
Commitments and Contingencies
Molson: On October 18, 1996, an arbitration panel ruled that the
licensing agreement terminated in 1993 when Miller acquired its
ownership interest in Molson. This ruling returns Canadian rights
to all CBC brands to CBC and requires Molson to compensate CBC
for the period beginning April 2, 1993. Although CBC believes the
compensation awarded will be significant, that compensation
cannot be quantified until the next phase of arbitration is
completed during 1997. Accordingly, no such compensation has been
reflected in the 1996 financial statements.
Also in its ruling, the arbitration panel found that Molson had
underpaid royalties from January 1, 1991, to April 1, 1993. Thus,
Molson paid CBC $6.1 million in cash (net of $680,000 of
withholding taxes) during 1996 to cover the unpaid royalties plus
interest. In January 1997, Molson filed an appeal to this phase
of the arbitration. Management believes the appeal is without merit.
CBC and Molson have agreed that Molson will continue to brew and distribute
CBC's products for an interim period ending no earlier than July 1, 1997.
Income from the interim agreement is based upon actual CBC brand sales
volume in Canada and is reported as gross sales in the accompanying
financial statements.
Insurance: It is the Company's policy 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 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 $7.5
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 unable to redeem the
full value of their policies for cash. A moratorium charge would
be applied to policies that are redeemed.
Letters of credit: As of December 29, 1996, the Company has
approximately $5.5 million outstanding in letters of credit with
certain financial institutions. They generally expire within 12
months from the date of issuance, which range from March 1997 to
October 1997. These letters of credit are being maintained as
security for performance on certain insurance policies,
operations of underground storage tanks, and payments of liquor
and duty taxes and energy billings.
Additionally, the product distributor for Coors Japan advances
certain funds to Coors Japan under a contractual arrangement
between the parties. As of December 29, 1996, such advances
totaled approximately $4.3 million.
Power supplies: In 1995, Coors Energy Company (CEC), a subsidiary
of CBC, sold a portion of its coal reserves to Bowie Resources
Ltd. (Bowie). CEC also entered into a 10-year agreement to
purchase 100% of the coal requirements from Bowie. The coal then
is 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-cancelable cost of
approximately $12.5 million for 1997, which adjusts annually for
inflation, and a variable cost, which is generally based on fuel
cost and CBC's electricity and steam use.
ACX Technologies, Inc.: At the end of 1992, the Company
distributed to its shareholders the common stock of ACX. 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, Peter H. Coors, and William K. Coors,
directors of both ACC and ACX during 1996, are trustees of one or
more family trusts that collectively own all of ACC's voting
stock and approximately 47% of ACX's common stock. Joseph Coors
resigned as director of ACX in July 1996. 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.
CBC is a limited partner in a partnership in which a subsidiary
of ACX Technologies, Inc. (ACX) is the 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.
When ACX was spun off in 1992, CBC entered into market-based,
long-term supply agreements with certain ACX subsidiaries to
provide CBC packaging, aluminum, and starch products. Under the
packaging supply agreement, CBC agreed to purchase all of its
paperboard (including composite packages, labels, and certain can
wrappers) from an ACX subsidiary through 1997. In early 1997,
this contract was modified and extended until at least 1999. In
early 1997, ACX's aluminum manufacturing business was sold to a
third party. The aluminum contracts were canceled in 1995. Since
late 1994, ANC has been the purchasing agent for the joint
venture between ANC and CBC and has ordered limited quantities of
can, end, and tab stock from the now-former ACX subsidiary.
Additionally, ANC purchased a small quantity of tab stock for the
joint venture in early 1997. Under the starch supply agreement,
CBC agreed to purchase 100 million pounds of refined corn starch
annually from an ACX subsidiary through 1997. In early 1997, this
agreement was renegotiated, at slightly higher rates, and
extended through 1999. CBC's total purchases under these
agreements in 1996 were approximately $145 million. Purchases in
1997 under the packaging and starch supply agreements are
estimated to be approximately $120 million.
Investments: In 1991, CBC entered into an agreement with Colorado
Baseball Partnership 1993, Ltd. for an equity investment and
multiyear signage and advertising package. This commitment,
totaling 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 carrying value of this investment approximates its fair value
at December 29, 1996 and December 31, 1995. The recognition of
liability under the multiyear signage and advertising package
began in 1995 with the opening of Coors Field.
Environmental: 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" (PRPs) 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. Further,
the Company agreed to pay a specified share of costs if total
remediation costs exceeded this amount. The Company remitted its
agreed share, based on the $120 million assumption, to a trust
for payment of site remediation, operating, and maintenance
costs. None of these payments were material to the Company's
results of operations or financial position.
The City and County of Denver, Waste Management of Colorado,
Inc., and Chemical Waste Management, Inc. are expected to
implement site remediation. The Environmental Protection Agency's
projected costs to meet the announced remediation objectives and
requirements are below the $120 million assumption used for ACC'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,
and, as a result, the Company recognized a special pretax credit of
$18.9 million in the fourth quarter of 1994 (see Note 9).
Litigation: 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 itself 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 that these
suits will not result in liabilities 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 29, 1996.
During 1996 and 1995, the first, second, and third quarters were
12 weeks. During 1996, the fourth quarter was 12 weeks; during
1995, the fourth quarter was 13 weeks.
In the second, third, and fourth quarters of 1996 and the fourth
quarter of 1995, certain adjustments were made which were of a
normal and recurring nature. As described in Note 9, income in
1996 was decreased by a special pretax charge of $6.3 million, or
$0.10 per share, and income in the fourth quarter of 1995 was increased
by a special pretax credit of $15.2 million, or $0.24 per share.
ADOLPH COORS COMPANY AND SUBSIDIARIES
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
First Second Third Fourth Year
1996 (In thousands, except per share data)
Net sales without
international income $368,729 $502,426 $453,513 $396,498 $1,721,166
International income 1,258 1,092 1,093 7,624 11,067
Net sales, as currently
reported $369,987 $503,518 $454,606 $404,122 $1,732,233
Gross profit $107,952 $194,959 $164,156 $147,300 $ 614,367
Net (loss) income ($ 3,007) $ 23,796 $ 18,675 $ 3,961 $ 43,425
Net (loss) income per
common share ($ 0.08) $ 0.63 $ 0.49 $ 0.10 $ 1.14
First Second Third Fourth Year
(In thousands, except per share data)
1995
Net sales without
international income $348,393 $457,440 $455,352 $414,194 $1,675,379
International income 686 1,055 1,095 1,371 4,207
Net sales, as currently
reported $349,079 $458,495 $456,447 $415,565 $1,679,586
Gross profit $111,429 $174,476 $166,257 $131,904 $ 584,066
Net (loss) income ($ 917) $ 21,444 $ 16,492 $ 6,159 $ 43,178
Net (loss) income per
common share ($ 0.02) $ 0.56 $ 0.43 $ 0.16 $ 1.13
ITEM 9. Disagreements on Accounting and Financial Disclosure
None.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
(a) Directors
JOSEPH COORS (Age 79) is vice chairman of Adolph Coors Company
(ACC or the 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 is a member of
the Executive Committee and the Audit Committee. He is also a
director of Coors Brewing Company (CBC). He was a director of ACX
Technologies, Inc. (ACX) from October 1992 until his resignation
in July 1996 and now is director emeritus.
PETER H. COORS (Age 50) is vice president of ACC and chief
executive officer and vice chairman of CBC and has served
in that capacity since 1993. He has served as a director
of ACC since 1973. Prior to 1993, he served as executive
vice president of ACC and chairman of the brewing group.
He served as interim treasurer and chief financial officer
from December 1993 to February 1995. He is also a director
of CBC. He is a member of the Executive Committee. In his
career at CBC, 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). Since March 1996, he has
been a director of First Bank System.
WILLIAM K. COORS (Age 80) is chairman of the board and president
of ACC and has served in such capacities since 1970 and
1989, respectively. He has served as a director since
1940. He is the chairman of the Executive Committee. He is
also a director and chairman of the board of CBC and ACX.
J. BRUCE LLEWELLYN (Age 69) has served as a director since 1989.
He was a member of the Audit Committee until May 1996 and
is the chairman of the Compensation Committee. He is also
a director of CBC. He is an attorney and is involved in
the management of several businesses in which he is an
investor. He is currently the chairman of the board and
chief executive officer of Philadelphia Coca Cola Bottling
Co., Inc. He is also a director of Chase Manhattan Bank
and Teleport Communications Group, Inc.
LUIS G. NOGALES (Age 53) has served as a director since 1989. He
is a member of the Audit Committee and was a member of the
Compensation Committee until May 1996. He is also a
director of CBC. He is president of Nogales Partners, a
media acquisition firm (1990-present). In the past, he was
chairman and chief executive officer of Embarcadero Media
(1994-1996); 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). He is also a director of
Southern California Edison Company, International, and
Kaufman and Broad Home Corporation.
PAMELA H. PATSLEY (Age 40) joined the Company as a director in
November of 1996. She is also a director of CBC. She is a
member of the Audit Committee and the Compensation
Committee. She is president, chief executive officer and a
director of First USA Paymentech, Inc. in Dallas. She
began her career with First USA, Inc. in 1985 as a
founding officer of the company. Before joining First USA,
Patsley was with KPMG Peat Marwick. She is also a director
of First Virtual Holdings, Inc.
WAYNE R. SANDERS (Age 49) joined the Company as a director in
February of 1995. He is a member of the Compensation
Committee and is chairman of the Audit Committee. He is
also a director of CBC. 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); and as
president, World Consumer, Nonwovens and Service and
Industrial Operations (1990). He was elected to K-C's
board of directors in August 1989. He is also a director
of Texas Commerce Bank.
(b) Executive Officers
Of the above directors, Peter H. Coors and William K. Coors are
executive officers of ACC. The following also were executive
officers of ACC (as defined by Securities and Exchange Commission
(SEC) rules) at March 1, 1997:
CARL L. BARNHILL (Age 48) joined CBC in May 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.
L. DON BROWN (Age 51) joined CBC in July 1996 as senior vice
president of operations and technology. Prior to joining
CBC, he served as senior vice president of manufacturing
and engineering at Kraft Foods where his responsibilities
included manufacturing, engineering, and operations
quality functions. During his years at Kraft from 1971-
1996, he held several positions of increasing
responsibility in the manufacturing and operations areas.
ROBERT W. EHRET (Age 52) joined CBC in May 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.
W. LEO KIELY, III (Age 50) 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. He is a
director of Bell Sports Corporation and Signature Resorts, Inc.
ROBERT D. KLUGMAN (Age 49) was named CBC's senior vice president
of corporate development in May 1994. In 1993, he was vice
president of corporate development. 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 49) 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 47) was named senior vice president and
general counsel for CBC in February 1997. She has served
as vice president and assistant secretary of ACC and
assistant secretary of CBC since January 1993. In the
past, she served as vice president, general counsel and
chief legal officer of CBC (1993-1996) and 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 54) 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 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.
TIMOTHY V. WOLF (Age 43) was named vice president 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 other officers who are not considered
executive officers 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.
(c) Significant Employees
None.
(d) Family Relationships
William K. Coors and Joseph Coors are brothers. Peter H. Coors is
a son of Joseph Coors.
(e) Business Experience
See discussion above in (a) and (b).
(f) Involvement in Legal Proceedings
None.
(g) Section 16 Disclosures
None.
ITEM 11. Executive Compensation
I. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
AWARDS PAYOUTS
SECURI-
TIES LTIP ALL
NAME & YEAR SALARY BONUS OTHER RESTRICTED UNDER PAY- OTHER
PRINCIPAL ($) ($)(a) ANNUAL STOCK LYING OUTS COMP
POSITION COMP ($)(c) OPTIONS ($) ($)
($)(b) (#)(d) (e) (f)
William K. Coors, 1996 288,624 0 0 0 0 0 16,168
Chairman of the 1995 285,028 0 0 0 0 0 34,095
Board, CEO of 1994 275,020 2,714 0 0 0 0 86,219
Adolph Coors Company
Peter H. Coors, 1996 507,090 0 0 0 22,330 0 22,678
Vice Chairman & 1995 506,248 0 0 0 29,328 0 89,976
CEO of Coors 1994 483,328 281,262 0 0 28,820 0 9,102
Brewing Company
W. Leo Kiely III, 1996 400,218 0 0 0 18,154 0 8,705
President & COO 1995 399,376 0 0 0 23,843 0 8,458
of Coors Brewing 1994 384,400 230,858 0 0 23,655 0 5,151
Company
L. Don Brown, 1996 180,346 580,000 0 800,000 58,333 0 3,467
Senior VP, 1995 0 0 0 0 0 0 0
Operations & 1994 0 0 0 0 0 0 0
Technology of
Coors Brewing Company
Timothy V. Wolf, 1996 314,346 0 0 0 10,568 0 6,778
Senior VP, 1995 280,000 124,000 304,130 0 13,881 0 3,900
& CFO of Coors 1994 0 0 0 0 0 0 0
Brewing Company
(a) Amounts awarded under the Management Incentive Compensation Program.
(b) In 1996 and 1994, none of the named executives received
perquisites in excess of the lesser of $50,000 or 10% of salary
plus bonus. In 1995, Timothy V. Wolf received perquisites
including moving and relocation expenses of $293,450.
(c) In 1996, 45,390 shares of restricted stock were granted to L.
Don Brown valued at $873,758 on December 29, 1996. The restricted
stock award granted in 1996 to L. Don Brown has a three-year
vesting period from the date of grant and is based on continuous
services during the vesting period. Dividends are paid to the
holder of the grant during the vesting period. Restricted stock
granted in 1993 to Peter H. Coors and W. Leo Kiely III vested in 1996.
No restricted stock grants were made in 1995 or 1994 to any of
the other named executives.
(d) See discussion under Item 11, Part II, for options issued in 1996.
(e) See discussion under Item 11, Part IV, for the long-term incentive plan.
(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 1996.
Of the named executives, Peter H. Coors receives officer life
insurance provided by the Company until retirement. At the time
of retirement, the officer's life insurance program terminates
and 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 Company provides term life insurance for W. Leo
Kiely III, L. Don Brown, and Timothy V. Wolf. The officer's life
insurance provides six times the executive base salary until
retirement when the benefit terminates. The 1996 annual benefit
for each executive for both programs was: William K. Coors -
$16,168; Peter H. Coors - $5,933; W. Leo Kiely III - $4,205; and
Timothy V. Wolf - $2,278.
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; $3,467 for L. Don Brown; and $4,500 for
Timothy V. Wolf. Peter H. Coors exercised stock options in 1996.
See discussion in Item 11, Part III for stock option exercises in 1996.
In response to Code Section 162 of the Revenue Reconciliation Act of
1993, the Company appointed a special compensation committee to
approve and monitor performance criteria in certain performance-
based executive compensation plans for 1996.
II. OPTION/SAR GRANTS TABLE
Option Grants in Last Fiscal Year
POTENTIAL REALIZABLE
VALUE AT ASSUMED
RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR
OPTION TERM
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#)(a) YEAR ($/SHARE) DATE 5% 10%
Peter H. Coors 22,330 4% $22.00 01/02/06 $208,924 $ 623,667
W. Leo Kiely III 18,154 3% $22.00 01/02/06 $169,853 $ 507,033
L. Don Brown 58,333 10% $18.00 06/25/06 $779,108 $1,862,546
Timothy V. Wolf 10,568 2% $22.00 01/02/06 $ 98,877 $ 295,159
(a) Grants vest one year from the date of grant and at a rate of
one-tenth for each $1 increment in fair market value (FMV) of the
stock over the exercise price. For example, when the FMV reaches
$23.00, or $19.00 for L. Don Brown, 10% of the grant is vested;
when it reaches $24.00, or $20.00 for L. Don Brown, 20% is
vested; etc... FMV is calculated by averaging the high and low
stock price for each day. Once a portion has vested, it is not
forfeited even if the FMV drops. If not sooner, the grant is 100%
vested after 9 years. At December 29, 1996, the 1996 grants were
0% vested because of the one year vesting requirement; however,
they were 20% vested on January 2, 1997.
III. OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
Aggregated Option/SAR Exercises in Last Fiscal Year, and FY-End
Option/SAR Value
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ON VALUE OPTIONS AT FY-END (#) AT FY-END ($)
EXERCISE REALIZED
NAME (#) (a)($)
Exercis- Unexercis- Exercis- Unexercis-
able able able able
Peter H. Coors 5,000 12,245 188,536 39,774 $656,436 $47,932
W. Leo Kiely III 0 0 43,246 32,404 118,892 39,173
L. Don Brown 0 0 0 58,333 0 72,916
Timothy V. Wolf 0 0 9,716 14,733 24,290 10,412
(a) Values stated are the bargain element recognized in 1996, which is the
difference between the option price and the market price at the time of
exercise.
IV. LONG-TERM INCENTIVE PLAN AWARDS TABLE
The Long-Term Incentive Plan (LTIP) was canceled by the board of
directors at the November 1996 board meeting. During 1996, there
were two cycles in effect. The following describes the awards for
those cycles before cancellation.
1994-1996 Plan POTENTIAL FUTURE PAYOUTS
UNDER NON-STOCK
PRICE-BASED PLANS
NUMBER OF PERFORMANCE OR
SHARES,UNITS OR OTHER PERIOD
OTHER RIGHTS UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME (#) OR PAYOUT ($ or #) ($ or #) ($ or #)
Peter H. Coors 150% of 1-1-94 1994 - 1996 8,646(a) 129,691(a) 259,382(a)
salary at target
W. Leo Kiely III 140% of 1-1-94 1994 - 1996 7,097(a) 99,353(a) 198,706(a)
salary at target
Timothy V. Wolf 100% of 2-7-95 1994 - 1996 3,418(b) 34,184(b) 68,367(b)
salary at target (prorated)
(a) Number of options to be granted at $16.25.
(b) Number of options to be granted at $16.4375.
1996-1998 Plan POTENTIAL FUTURE PAYOUTS
UNDER NON-STOCK
PRICE-BASED PLANS
NUMBER OF PERFORMANCE OR
SHARES, UNITS OR OTHER PERIOD
OTHER RIGHTS UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME (#) OR PAYOUT ($ or #) ($ or #) ($ or #)
Peter H. Coors 150% of 1-1-96 1996 - 1998 6,699(a) 100,484(a) 200,968(a)
salary at target
W. Leo Kiely III 140% of 1-1-96 1996 - 1998 5,446(a) 76,246(a) 152,492(a)
salary at target
L. Don Brown 100% of 7-29-96 1996 - 1998 6,293(b) 62,933(b) 125,865(b)
salary at target (prorated)
Timothy V. Wolf 100% of 1-1-96 1996 - 1998 $31,000(c) $310,008(c)$620,016(c)
salary at target
(a) Number of options to be granted at $22.00.
(b) Number of options to be granted at $17.625.
(c) Award of 1/2 restricted shares and 1/2 cash.
Under the LTIP, payout targets were 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 was three years, with any payout at the
beginning of the fourth year. Under the first cycle, the earliest
potential payout was for 1994-1996. There was no payout for the 1994-1996
plan, as the Company did not achieve the required cumulative ROIC.
Participants elected the form of payout from three options. The
first option was to receive one-half of the payout in cash and
one-half in shares of restricted stock. Restricted shares were
fully vested but were restricted from sale for a period of five
years. The second option allowed 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 were fully vested but
could not be sold for a period of three years. The third option
allowed 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 were fully vested and had a 10-year term. The remainder
of the award, if the percentage elected was less than 100%, was
to be awarded one-half in cash and one-half in restricted shares of stock.
All shares were to 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.
AVERAGE YEARS OF SERVICE
ANNUAL
COMPENSATION
10 20 30 40
$125,000 $21,875 $43,750 $65,625 $71,875
150,000 26,250 52,500 78,750 86,250
175,000(a) 30,625 61,250 91,875 100,625
200,000(a) 35,000 70,000 105,000 115,000
225,000(a) 39,375 78,750 118,125 129,375(a)
250,000(a) 43,750 87,500 131,250(a) 143,750(a)
275,000(a) 48,125 96,250 144,375(a) 158,125(a)
300,000(a) 52,500 105,000 157,500(a) 172,500(a)
325,000(a) 56,875 113,750 170,625(a) 186,875(a)
350,000(a) 61,250 122,500(a) 183,750(a) 201,250(a)
375,000(a) 65,625 131,250(a) 196,875(a) 215,625(a)
400,000(a) 70,000 140,000(a) 210,000(a) 230,000(a)
425,000(a) 74,375 148,750(a) 223,125(a) 244,375(a)
450,000(a) 78,750 157,500(a) 236,250(a) 258,750(a)
475,000(a) 83,125 166,250(a) 249,375(a) 273,125(a)
500,000(a) 87,500 175,000(a) 262,500(a) 287,500(a)
(a) Maximum permissible benefit under ERISA from the qualified
retirement income plan for 1996 was $120,000. Annual compensation
exceeding $150,000 is not considered in computing the maximum
permissible benefit 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
- - $267,891 and 57 years; Peter H. Coors - $483,889 and 25 years;
W. Leo Kiely III - $394,665 and 3 years; L. Don Brown - $424,685
and 1 year; and Timothy V. Wolf - $313,492 and 2 years.
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, 1996, in which
the ratio of plan contributions to total compensation covered by
the plan was approximately 7.5%. Covered compensation is defined
as the total base salary (average of three highest consecutive
years out of the last 10) 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, one of the named executives is covered by a salary
continuation agreement. This agreement provides 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 1996 eligible salary amounts as representative
of the last annual base salary, the estimated annual benefit upon
normal retirement for Peter H. Coors would be $148,000.
VI. 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 ACC'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 fair 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 1996, the NE members of the board of directors were paid 50%
of the $32,000 annual retainer for the 1995-1996 term and 50% of
the $32,000 annual retainer for the 1996-1997 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 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.
VII. EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
CBC has no agreements with executives or employees providing
employment for a set period.
Timothy V. Wolf had 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). This termination
agreement expired February 7, 1997.
L. Don Brown has an agreement providing a guaranteed bonus of 80%
of his base salary in 1996 and 1997. In addition, he received a
$200,000 signing bonus and a $100,000 transitional bonus in 1996.
If he is terminated without cause during the first two years, he would
receive 12 months of his total current annual salary (base plus bonus).
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 1990 Equity Incentive Plan (1990 EI Plan), if there is a change in
ownership of the Company, the options and restricted shares vest immediately.
VIII. 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 1996. J. Bruce Llewellyn and Wayne R. Sanders served
on the Compensation Committee for all of 1996. Luis G. Nogales
served on the Compensation Committee until May 1996. Pamela
Patsley joined the committee in November 1996.
Overview of compensation strategy for executives: Under the
supervision of the 1996 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 targeted to be competitive with the
median levels found in the external market. The Company tied
incentive compensation plans to superior corporate and business
unit performance. An aggressive posture for base salaries for
senior executives who have accountability for major functions was
continued. Incentive compensation strategies were tied to Company
performance and shareholder return to encourage a greater ROIC
and to increase share price.
The Compensation Committee's compensation strategy for CBC's CEO
and other executive officers consisted of:
- - targeting the aggregate of base salary to the 50th percentile
of relevant, broadly defined external markets;
- - 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; and
- - continuing an LTIP designed to increase ROIC.
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 1996 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 midpoint, with a 50% spread between
minimum and maximum. Where the executive was paid within the
range was determined by individual performance.
Annual cash incentive award: In 1996, the annual Management
Incentive Award program continued with the intent to drive both
Company profitability and individual performance. Executive
officers and other key management personnel were measured based
on pretax profit and written individual performance plans tied to
CBC objectives. Payout may occur only after profit objectives are
realized. The Compensation Committee approved annual pretax
profit objectives as well as minimum and maximum payout levels
within the program. There was no payout under the cash incentive
award program in 1996. However, the board approved a special
bonus, paid in restricted stock, to recognize superior
performance by select participants in the plan.
Annual stock option grants: In 1996, 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 10-year term. Option
vesting is based on a one-year holding period and an increase in
share value. Options vest 10% for each $1 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 (1990 EI Plan).
The 1990 EI Plan was administered by the Compensation Committee.
That committee was composed of NE, independent directors. The
1990 EI 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: The LTIP was canceled by the board of
directors at the November 1996 board meeting. During 1996, there
were two cycles in effect. See discussion under Item 11, Part IV,
for a description of this plan.
CEO compensation for 1996: The CEO's compensation for 1996 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
did, however, receive a minimal 2.0% increase in base salary.
IX. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
J. Bruce Llewellyn, Luis G. Nogales, Pamela H. Patsley, and Wayne
R. Sanders served on the Compensation Committee during 1996.
Joseph Coors and William K. Coors, directors of both ACC and ACX
during 1996, along with Peter H. Coors, are trustees of one or
more family trusts that collectively own all of ACC's voting
stock and approximately 47% of ACX's common stock (see Security
Ownership of Certain Beneficial Owners and Management in Item
12). Joseph Coors resigned as director of ACX in July 1996. 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.
When ACX was spun off in 1992, CBC entered into market-based,
long-term supply agreements with certain ACX subsidiaries to
provide CBC packaging, aluminum, and starch products. Under the
packaging supply agreement, CBC agreed to purchase all of its
paperboard (including composite packages, labels, and certain can
wrappers) from an ACX subsidiary through 1997. In early 1997,
this contract was modified and extended until at least 1999. In
early 1997, ACX's aluminum manufacturing business was sold to a
third party. The aluminum contracts were canceled in 1995. Since
late 1994, American National Can Company (ANC) has been the
purchasing agent for the joint venture between ANC and CBC and
has ordered limited quantities of can, end, and tab stock from
the now-former ACX subsidiary. Additionally, ANC purchased a
small quantity of tab stock for the joint venture in early 1997.
Under the starch supply agreement, CBC agreed to purchase 100
million pounds of refined corn starch annually from an ACX
subsidiary through 1997. In early 1997, this agreement was
renegotiated, at slightly higher rates, and extended through
1999. CBC's total purchases under these agreements in 1996 were
approximately $145 million. Purchases in 1997 under the packaging and
starch supply agreements are estimated to be approximately $120 million.
CBC sold small quantities of aluminum scrap to the now-former ACX
subsidiary in the amount of $240,000. CBC also agreed to sell
brewery by-products to an ACX subsidiary for resale under a
contract through 1997. In early 1997, this agreement was extended
through 1999. CBC received approximately $10 million in 1996
under this contract and estimates that 1997 receipts will be
approximately $10 million.
Also with the spin-off, ACC, ACX, and their subsidiaries
negotiated other agreements involving employee matters,
environmental management, tax sharing, and trademark licensing.
These agreements govern certain relationships between the
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.
Certain ACC and ACX subsidiaries are parties to other
miscellaneous market-based transactions. In 1996, CBC provided
water and waste water treatment services to an ACX ceramics
facility located on property leased from CBC, CBC purchased some
ceramic tooling from an ACX subsidiary, and CBC received real
estate management and other services from the ACX real estate
brokerage subsidiary through the summer of 1996. During 1996, CBC
received approximately $310,000 in total and paid approximately
$370,000 in total under these agreements and transactions. In
1997, CBC expects to pay $70,000 and receive $370,000 under these
agreements and transactions.
CBC is a limited partner in a 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 $1.5 million were made to both partners in
1996. 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 recovers its investment, and thereafter 80% to the general
partner and 20% to CBC.
X. PERFORMANCE GRAPH
TOTAL SHAREHOLDER RETURNS
(Dividends Reinvested)
Annual return percentage
(Years ending)
Company/index Dec 92(a) Dec 93 Dec 94 Dec 95 Dec 96
ACC Class B 19.24 1.28 5.90 35.89 (11.90)
Beverages (alcoholic) - 500 (4.79) (5.19) 9.93 27.80 19.96
S & P 500 index 7.62 10.08 1.32 37.58 22.96
Indexed returns
(Years ending)
Base
period
Company/index Dec 91 Dec 92 Dec 93 Dec 94 Dec 95 Dec 96
ACC Class B 100 119.24 120.77 127.89 173.79 153.11
Beverages (alcoholic) - 500 100 95.21 90.27 99.24 126.83 152.15
S & P 500 index 100 107.62 118.47 120.03 165.14 203.05
(a) Results for 1992 include $7.92 for the spin-off occurring in December 1992.
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 5% of any class of voting securities as of March 15, 1997:
Name and
address of Amount and nature
Title of beneficial of beneficial Percent
class owner ownership of class
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
Peter H. Coors, at distribution
trustees
In May 1996, Peter H. Coors, a director and executive officer of ACC, was
reappointed trustee of Adolph Coors, Jr. Trust, replacing May Coors Tooker.
In addition, certain officers and directors hold interests in
other family trusts, as indicated in Item 12, Section (b)(1).
(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 15, 1997:
Exercisable
options/
restricted
Shares stocks
Title of Name of beneficially awards Percent
class beneficial owner owned (b) Total of class
Class B Joseph Coors 1,844 (a) 339 2,183(a) (a)
common Peter H. Coors 50,035 (a) 190,224 240,259(a) (a)
stock William K. Coors 320,807 (a) -- 320,807(a) (a)
(non- J. Bruce Llewellyn 5,197 987 6,184
voting) Luis G. Nogales 1,511 339 1,850
Pamela H. Patsley -- 356 356
Wayne R. Sanders 3,632 1,635 5,267
L. Don Brown -- 45,390 45,390
W. Leo Kiely III 11,000 46,876 57,876
Timothy V. Wolf 2,000 11,828 13,828
All executive
officers and
directors as a
group (15 persons) 18,136,246 441,853 18,578,099 51%
(a) 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 three other trusts owning 267,100 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.
(b) This column represents exercisable options to purchase shares
under the Company's 1983 non-qualified Adolph Coors Company Stock
Option Plan and 1990 EI Plan (as amended in 1995) that could be
exercised as of March 15, 1997. It reflects restricted stock
awards granted under the 1990 EI 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,
the options and restricted shares vest immediately. It also
reflects a special restricted stock award made in February 1997.
This restricted stock has a one-year vesting period.
(c) Changes in Control
There are no arrangements that would later result in a change of
control of the Company.
ITEM 13. Certain Relationships and Related Transactions
(a) Transactions with Management and Others
There were no transactions that exceeded $60,000 with management
or others related to the Company.
(b) Certain Business Relationships
For a description of certain business relationships and related
transactions, see the discussion within Compensation Committee
Interlocks and Insider Participation in Item 11.
(c) Indebtedness of Management
Employee loans are made with the exercise of stock options
granted under the 1983 non-qualified Adolph Coors Company Stock
Option Plan. No such loans were made or outstanding in 1996.
No member of management or another with a direct or indirect
interest in ACC was indebted to the Company in excess of $60,000 in 1996.
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
ADOLPH COORS COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Additions
Balance at charged to Balance
beginning costs and Other at end
of year expenses additions Deductions of year
(In thousands)
Allowance for doubtful
accounts (deducted
from accounts receivable)
Year ended
December 29, 1996 $ 30 $ 393 $ -- ($ 148) (a) $ 275
December 31, 1995 $ 24 $ 198 $ -- ($ 192) (a) $ 30
December 25, 1994 $ 409 $ -- $ -- ($ 385) (a) $ 24
Allowance for obsolete
inventories and supplies
Year ended
December 29, 1996 $2,942 $4,941 $ 3 ($4,567) (a) $3,319
December 31, 1995 $2,210 $2,814 $ -- ($2,082) (a) $2,942
December 25, 1994 $2,777 $2,198 $ -- ($2,765) (a) $2,210
(a) Write-offs of uncollectible accounts or obsolete inventories and supplies.
(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* - 1983 non-qualified Adolph Coors Company
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 1996 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 February 13, 1997)
Exhibit 10.7* - Coors Brewing Company Employee Profit
Sharing Program. (Incorporated by reference
to Exhibit 10.7 to Form 10-K for the fiscal
year ended December 31, 1995)
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. (Incorporated
by reference to Exhibit 10.16 to Form 10-K
for the fiscal year ended December 31, 1995)
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 10.18* - Employment Contract and Termination
Agreement for L. Don Brown.
Exhibit 10.19* - Coors Brewing Company 1997 Annual
Management Incentive Compensation Plan.
Exhibit 10.20 - Form of Coors Brewing Company
Distributorship Agreement. (Introduced 1996)
Exhibit 21 - Subsidiaries of the Registrant.
Exhibit 23 - Consent of Independent Accountants.
*Represents a management contract.
(b) Reports on Form 8-K
A report on Form 8-K dated October 28, 1996, was submitted
announcing an arbitration panel's ruling in the Company's legal
proceedings against Molson and related parties. See further
discussion in Item 1 Business of this filing.
(c) Other Exhibits
None
(d) Other Financial Statement Schedules
None
Other Matters
To comply with the July 13, 1990, amendments governing Form S-8
under the Securities Act of 1933, ACC offers as follows, which is
incorporated by reference into ACC's Registration Statements on
Form S-8 No. 33-2761 (filed January 17, 1986); No. 33-35035
(filed May 24, 1990); No. 33-40730 (filed May 21, 1991); and No.
33-59979 (filed June 6, 1995); and on Form S-3 No. 33-33831
(filed March 14, 1990):
Even though ACC could indemnify its directors, officers, and
controlling persons for liabilities arising under the Securities
Act of 1933 under SEC regulations, the SEC has indicated that
such indemnification is against public policy and unenforceable.
If a director, officer, or controlling person requests indemnification
for liabilities arising from securities being registered (other than for
reimbursements of amounts paid for the successful defense of any lawsuit),
ACC will ask a court if such indemnification is against public policy
and will follow that court's ruling.
EXHIBIT 21
ADOLPH COORS COMPANY AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
The following table lists ACC's subsidiaries and the respective
jurisdictions of their organization or incorporation as of
December 29, 1996. All subsidiaries are included in ACC's
consolidated financial statements.
State/country of
organization or
Name incorporation
Coors Brewing Company Colorado
Coors Brewing Company International, Inc. Colorado
Coors Brewing International C.V.(a) 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
CBC 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
(a) Organized as a partnership for foreign purposes and as a corporation
for U.S. purposes.
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
18, 1997 appearing on page 27 of this Form 10-K.
PRICE WATERHOUSE LLP
Denver, Colorado
March 25, 1997
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 and
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 By /s/ Pamela H. Patsley
Wayne R. Sanders Pamela H. Patsley
March 25, 1997
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<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
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This Agreement between Coors Brewing Company ("Coors") and LEGAL
NAME, DBA TYPE DBA NAME of MARKET AREA, STATE ("Distributor"), a
TYPE OF LEGAL ENTITY organized under the laws of the State of
___________________, is made effective as of January 1, 1997.
1. PURPOSE
1.1 This Agreement sets forth the respective obligations of
Coors and Distributor regarding the sale by Coors to Distributor
of only those Coors products listed on Exhibit A (the "Products")
and Distributor's resale of the Products to retailers. Coors may
amend Exhibit A from time to time to add new products. The
purpose of this Agreement is to support and promote the
acceptance and popularity of the Products with consumers
resulting in the success of Distributor and Coors.
1.2 Distributor and Coors agree that this Agreement includes by
reference the terms of the Coors Distributor Standards Manual
(the "Standards Manual"), as amended from time to time, but no
more frequently than annually, by Coors, and the terms of the
letter confirming the appointment of Distributor (the
"Appointment Letter"). The implementation, performance and
enforcement of the terms of this Agreement and the Standards
Manual shall be subject to the duty of good faith and fair dealing.
2. APPOINTMENT
2.1 Coors hereby appoints Distributor as its sole wholesale
distributor of, and grants Distributor the right to sell the
Products only in the Market Area described in Exhibit B (the
"Market Area"). The purpose of designating the Market Area is to
establish geographic boundaries within which Distributor is
accountable for quality control of Products and within which
Coors can evaluate Distributor's performance of its obligations
under this Agreement. Except as indicated below, Coors will not
grant to any other distributor the right to sell the Products in
the Market Area.
2.2 Distributor shall not sell, deliver or transfer any Product
to any retail account outside the Market Area or to any person
Distributor knows or has reason to believe will sell or transfer
any of the Products outside the Market Area. Notwithstanding the
foregoing and where permitted by law, Distributor may, with the
prior written approval of Coors, sell one or more Products
outside the Market Area to the extent and so long as Coors shall
authorize. Nothing herein shall prohibit Distributor from
selling Products to, or purchasing Products from, another Coors
distributor for the purposes of eliminating product shortages or
inventory imbalances. Distributor shall not supply Products to
any retail account that sells, delivers or transfers Products to
other retail accounts without Coors' prior written approval and
compliance with such conditions as Coors shall require.
2.3 If the exclusive rights granted in section 2.1 are or shall
become prohibited under federal law or the laws of the state in
which the Market Area is located, then such provision shall not
apply. In that event, Coors appoints Distributor as a non-
exclusive distributor of, and grants Distributor the right to
sell the Products in, the Market Area, which shall be
Distributor's primary area of responsibility for sale of the
Products. In the event applicable law shall require appointment
of Distributor pursuant to this provision, Distributor shall
provide to Coors all information required by the Standards Manual
for sales outside of Distributor's Market Area.
2.4 Distributor hereby accepts such appointment. Distributor
acknowledges that it has paid no consideration to Coors in
exchange for this appointment.
2.5 Notwithstanding the provisions of section 2.1, if
applicable, Coors may, after giving notice to Distributor, permit
another person or persons to sell, or Coors may sell one or more
Products within the Market Area to the extent and so long as
Distributor is unable or unwilling to provide uninterrupted
service to accounts within all or any part of the Market Area,
provided, where required, permission to do so is obtained from
the appropriate state regulatory authorities.
3. TERM
3.1 This Agreement shall continue in effect from the effective
date hereof until terminated or amended pursuant to the terms hereof.
3.2 Due to the advisability of changes being made in this
Agreement from time to time, this Agreement may be amended, as follows:
3.2.1 Concurrently with the submission of a proposed
amendment of this Agreement to the Distributor, Coors will submit
to all other Coors distributors in the United States that have
signed a distributorship agreement in substantially similar form,
an amendment identical to the amendment submitted to the
Distributor, except for any change necessary in Coors' opinion to
comply with the requirements of state law and the provisions
contained in any distributor's Appointment Letter.
3.2.2 Distributor shall indicate its acceptance of all of the
terms of the proposed amendment by signing and returning to Coors
four (4) copies of the executed amendment. If four (4) copies of
the executed amendment shall not have been received by Coors
within 90 days after receipt by the Distributor, this Agreement
shall automatically terminate and both Coors and the Distributor
shall have no further right or obligation hereunder, except under
those terms which explicitly survive the termination hereof.
4. DUTIES OF DISTRIBUTOR
Distributor shall actively and aggressively solicit business from
every licensed retail account in the Market Area in order to accomplish
the purposes of this Agreement and to achieve and maintain the highest
practicable distribution of the Products in the Market Area. In particular,
Distributor shall:
4.1 Diligently perform quality control practices and procedures
throughout the Market Area, in accordance with the Standards Manual.
4.2 Achieve such reasonable performance goals as Coors, with
input from Distributor, may establish for Distributor from time
to time and communicate in writing to Distributor.
4.3 Maintain wholesale inventories at levels recommended by Coors.
4.4 Maintain sufficient working capital to operate Distributor's business
so as to comply with Distributor's obligations under this Agreement.
4.5 Know and adhere to all local, state and federal laws and
regulations applicable to Distributor's business. Distributor
shall promptly report to Coors any notice of change, suspension
or expiration of any permit or license required by any federal,
state or municipal agency.
4.6 Provide accurate and timely Product forecasts in accordance
with the terms of the Standards Manual.
4.7 Actively promote and market all Coors recommended packages
of each Product by following such standards for Product
distribution and execution as Coors may from time to time
provide, as found in the Standards Manual, and by cooperating in
Coors' distributor sales and marketing promotions.
4.8 Provide adequate warehouse area to receive, ship and store
Products handled by Distributor, refrigerated to the standards
set forth in the Standards Manual; and implement and maintain
delivery procedures to minimize temperature increases of the Products.
4.9 Provide uninterrupted sales and services to all retail
accounts in the Market Area except as precluded by acts of God,
war or conditions of national, state or local emergencies.
Distributor shall diligently attempt to prevent any service
interruption and to restore service as quickly as practicable
after any interruption.
4.10 Furnish to Coors, as Coors may from time to time request
during the term of this Agreement, by a date specified by Coors
reasonably in advance, a detailed business/marketing plan, in the
form and covering the matters directed by Coors.
4.11 Maintain adequate information and records of sales and
service calls and deliveries; maintain sales and inventory
reports; and maintain such other books and records as requested
by Coors for purposes of internal operational control. Maintain
and submit to Coors such marketing and sales data, organizational
and other operational records and reports as may be requested by
Coors from time to time.
4.12 Maintain and submit to Coors at least annually, no later
than 120 days after the end of Distributor's fiscal year, and
more frequently as requested by Coors, complete and accurate
financial statements, including a balance sheet as of the end of
such year or other period and related statements of income and
cash flows for the year or other such period then ended. Such
statements shall be compiled, reviewed or audited by a certified
public accountant, shall be signed by an officer of Distributor,
which signature shall constitute a representation that to the
best of the officer's knowledge and belief, the statements fairly
and accurately reflect the financial condition of Distributor's
business as of the end of the fiscal year or other period and the
results of its operations for the year or other period then
ended; and to the extent practicable, shall be prepared in
accordance with generally accepted accounting principles. If
such financial statements are not signed by an officer of
Distributor, delivery of the statements to Coors shall constitute
Distributor's representation that the financial statements
conform to these standards. Upon request, Distributor shall
provide Coors with accurate financial statements in similar form
and with the same representations for any parent entity owning
an 80% or more interest in Distributor. Distributor recognizes
that provision of such information is based upon Coors'
continuing interest in the financial soundness and viability of
Distributor's business. Except when requested by Distributor,
Coors shall maintain in confidence all financial information
submitted by Distributor under this section, provided that Coors
may use such information internally and with its consultants,
provided said consultants similarly agree to maintain the
information in confidence. Coors may also use such information
in preparing composite financial information for groups of
distributors and such information may be disclosed to other
distributors, provided the identity of any distributor whose
financial information is a part of the composite shall not be
disclosed and is not ascertainable from the composite information.
All financial information submitted by Distributor under this
section shall be maintained in the Coors "Credit Department," in
Golden, Colorado. All requests to review such information shall be
presented for approval by the "Wholesaler Network Department." Any
such information released to a "Field Business Area" ("FBA") office
shall be given only to the Area Vice President ("AVP") or other FBA
employees at the "Director" level or above.
4.13 Permit Coors' representatives to inspect all aspects of
Distributor's operations relating to the Products, including all
books and sales records at such times as Coors may reasonably
request. Distributor shall respond promptly and in good faith to
all requests by Coors for the information required under sections
4.11 and 4.12 and such additional information as shall be
reasonably requested by Coors.
4.14 Maintain a "Coverage Ratio" of no less than 1.1 to 1, unless
in the reasonable opinion of Coors, based upon factors published
by Coors from time to time, there are sound operational or
financial reasons why such ratio need not be maintained. The
"Coverage Ratio," at any point in time, is defined to be earnings
before interest expense, taxes, dividends (or additional
salaries, if applicable, e.g., for S corporations), depreciation
and amortization, all for the 12-month period ending on the last
day of the preceding month, divided by the sum of interest
expense for such preceding 12-month period and capital lease and
principal payments on debt due during the next 12-month period
commencing on the first day of the current month; all as
determined from Distributor's annual or periodic financial
statements prepared in accordance with section 4.12.
5. REPRESENTATIONS AND WARRANTIES OF DISTRIBUTOR
5.1 The representations and warranties made by Distributor in
connection with its application for the distributorship rights
granted hereunder are material inducements upon which Coors has
relied in selecting Distributor for the appointment made pursuant
to this Agreement. Distributor hereby represents and warrants
that all information contained in its application and in the
Appointment Letter are true, complete and accurate. Distributor
shall promptly notify Coors in writing of any material change in
such information.
5.2 Coors shall continually rely upon the information referred
to in section 5.1 and upon the financial, sales, statistical and
other information previously and hereafter provided by
Distributor to Coors hereunder. Distributor warrants the
continuing accuracy and completeness of all such information.
5.3 Distributor represents that it has all federal, state and
municipal permits and licenses necessary to distribute the
Products in the Market Area as contemplated hereby.
6. TERMS OF SALE
6.1 Distributor shall have the sole and exclusive right to
establish the price for resale of the Products.
6.2 All sales of Products by Coors to Distributor shall be at
such prices and on such cash or credit terms as Coors shall
establish from time to time. Coors may, from time to time, in its
sole discretion, change prices and terms and conditions of sales,
delivery and payment.
6.3 Coors reserves the right to modify or discontinue the sale
of any Product, package or container on a national, regional,
state or other basis.
6.4 Coors shall have the right to place the Distributor on
allocation when the supply of any Product is for any reason
insufficient to meet the demands of all distributors. Coors
shall not be liable to Distributor for failure to make any
delivery to Distributor or delay in any delivery if caused by
lack of supply or by any circumstances beyond the reasonable
control of Coors.
6.5 Products sold to Distributor hereunder shall be shipped from
the locations designated by Coors from time to time, and Coors
may at any time change the designated source brewery.
7. CHANGES IN MANAGEMENT
7.1 The parties acknowledge that this is a personal services
contract entered into in reliance upon and in consideration of
the personal qualifications of the "Principal Manager,"
"Operating Manager," or any "Manager" identified in Distributor's
Appointment Letter. If any person so identified as a Principal
Manager, Operating Manager or any other Manager in Distributor's
Appointment Letter, or any other person hereafter approved as a
successor to such person, ceases to serve in that capacity or to
devote full time to that function, Distributor shall give
immediate written notice to the Coors' field sales office.
7.2 Coors may, in its discretion, disapprove any proposed
successor Principal Manager, Operating Manager, or Manager if, in
its reasonable judgment, the proposed successor does not meet the
management standards established and published by Coors from time
to time. Any failure by Coors to disapprove a proposed successor
Manager shall not be construed as Coors' determination with
respect to the qualifications of such successor. Distributor and
Coors shall cooperate to identify a person meeting the management
standards and accomplishing the purposes of this Agreement.
7.3 Distributor shall prepare and update, as applicable, a succession plan
for the ownership and management of Distributor's business.
8. CHANGES IN CONTROL AND OWNERSHIP OF DISTRIBUTOR
8.1 If Distributor is a corporation, limited liability company
("LLC"), partnership or other entity, Coors' written approval
shall be obtained prior to (A) any change in the record or
beneficial ownership of 10 percent or more of Distributor's
outstanding stock, membership interests, partnership interests or
other ownership or equity interests, determined on a cumulative
basis from the effective date of the last approved ownership
change of this Agreement; (B) any change in such ownership that
results in a change in majority control of Distributor; (C) any
change in any of Distributor's principal officers, directors or
managing partners (or managers if Distributor is an LLC); or (D)
any resignation, removal or admission of any additional or
substitute general partner of Distributor or of any general
partner of a Distributor partnership.
8.2 Distributor shall not, without the prior written approval of
Coors, assign, pledge, hypothecate or otherwise encumber this
Agreement or any rights hereunder. Distributor shall not cause
or permit the assignment, pledge, encumbrance or hypothecation of
any ownership interest in Distributor, whether in the form of
stock, membership interests or otherwise. In the event Distributor shall
assign, pledge or hypothecate this Agreement or the rights hereunder
without Coors' consent, such assignment shall be void.
8.3 Distributor shall not, without the prior written approval of
Coors, change the form of business entity or permit the
occurrence of any merger, consolidation or event or series of
events that have the effect of transferring the ownership,
control or management of Distributor.
8.4 Distributor may, without Coors' consent, acquire the rights
to sell other brands of beer or other beverages in the Market
Area or elsewhere, provided the transaction by which such brands
are acquired does not involve a transaction requiring Coors'
consent or review under sections 8.1, 8.2, 8.3, 8.5 or 8.6. The
acquisition of such other brands shall not reduce Distributor's
obligations to Coors. At least 30 days prior to the closing of
an acquisition relating to other brands or products, which
acquired brands or products are likely to result in Distributor
revenues greater than 25% of Distributor's prior year total
revenues from the sale of beer or other beverages, Distributor
shall provide the applicable Coors' AVP with information and
assurances for performance in efforts, resources and manpower
such that there will be no dilution of effort as to the Products.
8.5 The sale, transfer or disposition of any portion of
Distributor's business that includes the purchase and sale of
Products (the "Sale Transaction"), whether in the form of sale of
assets, stock, membership interests or partnership interests,
merger or otherwise, including transfers by operation of law,
except as provided in section 8.9, shall be subject to Coors'
prior approval of the prospective purchaser or successor as
provided in sections 8.6 and 8.7 and to the terms of this section 8.5.
8.5.1 If Distributor desires to pursue a Sale Transaction
regardless of the form of such proposed transaction, Distributor
shall meet with Coors to discuss Distributor's plans and shall
give Coors written notice (a "Sale Notice") of Distributor's
intent to effect a Sale Transaction prior to conducting
discussions with any third party, including another of Distributor's
suppliers. If Distributor receives an unsolicited offer for a Sale
Transaction, no meeting with or notice to Coors shall be required
unless and until Distributor has the intent to sell the business.
Coors shall not be obligated to review any request for approval of a
Sale Transaction under section 8.6 until Distributor meets with Coors
to discuss such matter, gives Coors a Sale Notice and permits Coors to
exercise its rights under section 8.5.2.
8.5.2 Upon receipt of a Sale Notice from Distributor, Coors
or any affiliate or assignee of Coors (for purposes of this
Article 8 referred to as "Coors") shall have the right to
negotiate exclusively with Distributor for a Sale Transaction
that is contemplated by a Sale Notice. If, for the most recent
prior year, the Products represent less than 20% of Distributor's
total revenues attributable to beverage sales, Coors may elect to
negotiate to purchase that portion of Distributor's business
relating to the sale of Products (the "Coors' Business"). In the
event that the proposed Sale Transaction shall have created a
right in another of Distributor's suppliers (or its assignee) to
purchase all or a portion of the Distributor's business that is
the subject of the proposed Sale Transaction (such that Coors
cannot purchase the entire Sale Transaction), Coors shall also
have the right to negotiate for the Coors' Business. Within 30
days after receipt of the Sale Notice, Coors shall notify the
Distributor in writing whether or not Coors will exercise its
right to negotiate exclusively for the Sale Transaction or the
Coors' Business. If Coors elects not to so negotiate, or if
Coors fails within such 30-day period to notify Distributor of
its intent to so negotiate, then Coors' right to negotiate
exclusively shall be deemed waived. If Coors notifies
Distributor of its intent to negotiate for the Sale Transaction
or only the Coors' Business, Distributor and Coors shall
negotiate exclusively and in good faith for a period of 120 days,
commencing on Distributor's receipt of Coors' notice of its
election to negotiate. If such negotiations result in an
agreement between Distributor and Coors, the parties shall
promptly consummate closing of the transaction pursuant to such
agreement. If Coors and Distributor fail to reach an agreement
to purchase within such 120-day period, or if Coors waives its
right to negotiate, then Distributor may proceed to negotiate
with a third party; provided, however, that if, for the most
recent prior year, the Products represent less than 20% of
Distributor's total revenues attributable to beverage sales or if
the third party is another of Distributor's suppliers (or its
assignee), Coors may elect to purchase (and close contemporaneously
with the closing of a third party Sale Transaction) the Coors' Business
at its fair market value, determined according to the appraisal process
set forth in section 8.5.3.1; and, provided that completion of any
such third-party transaction shall be subject to the terms of sections
8.5.3, 8.6 and 8.7. If the resulting Sale Transaction with a third
party does not close within one year after termination or waiver of the
120-day negotiation period, Coors shall be entitled to a new Sale
Notice under section 8.5.1 and the provisions of
this section 8.5.2 shall again apply.
8.5.3 If, after Distributor and Coors have negotiated as
provided in section 8.5.2, they have not reached an agreement
under such provision, and if, within a period of one year after
the termination of the 120-day negotiation period, Distributor
receives a bona fide offer for a Sale Transaction from a third
party and such offer is (A) at a purchase price that is valued as
provided herein at equal to or less than any purchase price
previously offered by Coors, in writing, pursuant to the
negotiations under section 8.5.2; or (B) for a Sale Transaction
that is substantially different, either in form or as to the
extent of the Distributor's business being sold, from the Sale
Transaction contemplated by the Sale Notice, then, for a period
of 30 days after receipt of Distributor's written request for
Coors' approval of the proposed transfer to such third party
under section 8.6 (the "Approval Request), Coors shall have the
right to purchase that portion of Distributor's business subject
to the proposed third party Sale Transaction at the purchase
price applicable to the proposed Sale Transaction. Coors may
exercise such right by giving written notice to Distributor
within such 30-day period (the "Exercise Period"), whereupon
Distributor shall promptly execute such documents as shall be
reasonably required by Coors to complete the Sale Transaction with Coors.
8.5.3.1 In the event that the terms of the Sale Transaction to
the third party provide for a portion of the purchase price to be
paid in property, services or other consideration other than cash
(the "Non-Cash Consideration"), then the purchase price shall be
calculated including the fair market value of such property,
services or other consideration. Failing agreement by
Distributor and Coors, the fair market value shall be determined
by a single independent appraiser appointed as hereafter
described. Within 30 days after the Approval Request,
Distributor and Coors shall each appoint an independent appraiser
knowledgeable as to the valuation of such property and within 15
days thereafter those two persons shall select the independent
appraiser. The independent appraiser shall promptly determine
the fair market value of the Non-Cash Consideration. The Non-Cash
Consideration shall be paid in cash at closing by Coors in the
event Coors shall exercise the right to purchase granted by
this section 8.5.3. The costs and expenses of the three
appraisers shall be shared equally by Distributor and Coors.
8.5.3.2 The Exercise Period shall be extended until 30 days
after the completion of the reports of the independent appraiser.
If Coors fails to exercise its purchase right within the Exercise
Period or extension thereof, Distributor may proceed with the
Sale Transaction to the third party, provided that completion of
such transaction shall be subject to the terms of sections 8.6
and 8.7. If the proposed third party Sale Transaction is not
closed within one year after the termination of Coors' right to
purchase under this section 8.5.3, Coors shall be entitled to a
new Sale Notice and the provisions of section 8.5.2 and this
section 8.5.3 shall again apply.
8.6 Prior to effecting any Sale Transaction, subject to the
other provisions of this Article 8, Distributor will submit to
Coors a copy of the proposed agreement for transfer and shall
cause the prospective purchaser to submit to Coors a completed
distributorship application and such other forms and information
as may be requested by Coors. Coors shall review the application
in light of the then current market conditions in the Market
Area. Completion of the Sale Transaction shall be effected only
after: Coors has approved, in writing to Distributor, the
prospective purchaser and the terms of the Sale Transaction; the
prospective purchaser has agreed in writing to assume all of the
terms and conditions of this Agreement; all accounts between
Distributor and Coors have been settled, or adequate security has
been posted by Distributor or Coors, as the case may be, to
secure any account that is disputed; and a complete and absolute
mutual release between Distributor and Coors, covering all
matters other than product liability, shall have been executed
and delivered by each party to the other in a form satisfactory
to Distributor and Coors.
8.7 Coors has the right to do business with persons of its own
choosing and shall have complete discretion to approve any
prospective purchaser of Distributor's business. From time to
time, Coors will promulgate guidelines regarding the criteria for
evaluation of distributor candidates.
8.8 If Coors disapproves a Sale Transaction under section 8.6,
then for a period of 30 days after it gives notice to Distributor
of such disapproval, Coors or its assignee shall have the right
to purchase that portion of Distributor's business relating to
the Sale Transaction at the purchase price of the disapproved
Sale Transaction. Non-Cash Consideration shall be valued under
the procedures set forth in section 8.5.3.1. In the event that
the sale transaction involves Non-Cash Consideration, the period
within which Coors may exercise its right to purchase shall be
extended until 30 days after the completion of the report of the
independent appraiser.
8.8.1 In the alternative, if, for the most recent prior year,
the Products represent less than 20% of Distributor's total
revenues attributable to beverage sales, Coors may elect within
the same 30-day period to purchase from Distributor the Coors
Business at fair market value determined according to the
appraisal procedures set forth in section 8.5.3.1. Coors may
purchase such other assets and portion of Distributor's business
as Coors and Distributor may agree.
8.8.2 Coors shall not be entitled to exercise the purchase
rights under this section if the proposed purchaser under the
Sale Transaction is a member of Distributor's immediate family
(as defined in section 8.9) and the proposed price is
substantially below fair market value as determined by the
appraisal process under section 8.5.3.1.
8.8.3 As promptly as practicable after notice of exercise of
the purchase rights under this section, Distributor shall execute
and deliver to Coors such documents as shall be required to
complete the Sale Transaction or alternate purchase transaction.
8.9 Notwithstanding any provision of this Article 8, no approval
by Coors shall be required for any transfer of ownership in the
distributorship upon the death or incompetence of the Distributor
or its principal owner to or for the benefit of a member of
Distributor's or such principal owner's immediate family. For
the purposes of this provision and section 8.8.2, immediate family
shall be limited to parent, spouse, sibling, adult child and adopted
adult child. The provisions of Article 7 shall apply to any change in
Manager regardless of the application of this section 8.9.
9. TRADEMARKS
9.1 Distributor acknowledges that the trademarks, trade names,
service marks and other trade designations Coors uses in
connection with all Products and other products sold or licensed
to be sold by Coors are and shall remain the sole and exclusive
property of Coors. Coors reserves all rights with respect
thereto, including without limitation the right to license the
use of its trademarks and trade names, designs, brand names,
labels, promotional slogans and service marks on merchandise,
goods, items and services.
9.2 Coors hereby grants Distributor, for the term of this
Agreement only, a limited, non-assignable and non-transferable
right to use those Coors' trademarks and trade names associated
with the Products in distributing, advertising and promoting the
sale of the Products. All such usage shall be in accordance with
the policies set forth in the Distributor Standard on Trademark
Licensing contained in the Standards Manual.
9.3 Unless Distributor was operating under a name including the
name "Coors" prior to July 1, 1989, Distributor shall not include
in its business or corporate name the name "Coors" or any other
trademark or trade name of Coors without Coors' prior written
consent. If any such name is used as part of Distributor's
business or corporate name, regardless of when such usage
commenced, upon termination of this Agreement, or sale of the
distributorship or sale of the rights granted under this
Agreement, Distributor shall, at its own expense, immediately
change its name and discontinue all use and display thereof.
Upon termination of this Agreement, upon sale of the
distributorship or sale of the rights granted under this
Agreement or upon written request from Coors, all rights
conferred under this Article 9 shall terminate and Distributor
shall discontinue the display and use of any trademark or trade
name of Coors or any other name resembling such trademark or
trade name. Prior to leasing, selling or transferring any
vehicle, facility, equipment, office supplies or other property
bearing any trademark or trade name of Coors, Distributor shall
remove or cause the removal of such trademark or trade name.
10. TERMINATION OF AGREEMENT
10.1 This Agreement may be terminated at any time by mutual agreement of the
parties or by Distributor upon 90 days' prior written notice to Coors.
10.2 Upon the occurrence of any of the following events, Coors
may, by giving written notice to Distributor, immediately
terminate this Agreement, without obligation to comply with the
provisions of section 10.3 and without paying any amount to
Distributor except with respect to the repurchase of
Distributor's inventory pursuant to section 10.5:
10.2.1 Revocation or non-renewal of Distributor's federal,
state or local license or permit to sell or distribute beer.
10.2.2 Suspension for a period of 14 calendar days of the
Distributor's federal, state or local license or permit to sell
or distribute beer.
10.2.3 The inability of Distributor to pay its debts as they
mature; or Distributor's liabilities exceed the fair market value
of its assets; or the filing by Distributor of a voluntary
petition seeking relief under any provision of any bankruptcy or
other law for the relief of debtors; or the filing of a petition
seeking to have distributor declared bankrupt or seeking any
reorganization or recapitalization of distributor, unless such
petition shall have been vacated within 30 days from the filing
thereof prior to the effective date of the termination of this
Agreement; or the appointment of a receiver or trustee for a
substantial portion of the property or assets of Distributor,
unless such appointment shall have been vacated within 30 days
from the date thereof and prior to the effective date of the
termination of this Agreement; or the execution by Distributor of
an assignment for the benefit of creditors; or the dissolution or
liquidation of Distributor.
10.2.4 Conviction of Distributor, any owner of Distributor or
any Manager of a felony or other crime that, in Coors' reasonable
judgment, may adversely affect the goodwill of Distributor or Coors.
10.2.5 Fraudulent conduct or misrepresentation on the part of Distributor,
any owner of Distributor, any Manager or any supervisory employee
of Distributor in dealing with Coors or the Products.
10.2.6 Distributor's failure to pay Coors for Products
purchased from Coors, when such payment is due under the terms
and conditions of sale established by Coors from time to time.
10.2.7 Intentional conduct by the managers or employees of
Distributor in permitting the Sale of Products outside the
quality standards set forth in the Standards Manual.
10.2.8 Completion of any transaction requiring Coors' prior
approval under Article 8 without obtaining such approval.
10.2.9 The cessation of the Distributor's business for five
consecutive days, unless such cessation is the result of acts of
God, war or conditions of national, state or local emergencies.
10.3 The following shall be considered "Deficiencies":
10.3.1 Failure by Distributor to comply with any of the
requirements of the Standards Manual;
10.3.2 The failure of any representation or warranty under
Article 5 hereof;
10.3.3 Failure by Distributor to comply with any of the
commitments of the Appointment Letter;
10.3.4 Failure by Distributor to achieve reasonable performance requirements
established pursuant to sections 4.1 and 4.2 of this Agreement and
the procedures set forth in the Standards Manual;
10.3.5 Failure by Distributor to make timely payment of any
other obligation owing to Coors;
10.3.6 Conduct unbecoming a reputable business person, which,
in the reasonable opinion of Coors, may adversely affect the
reputation of Coors or the reputation of the Products;
10.3.7 Failure by Distributor to submit to Coors a succession
plan, as provided in section 7.3;
10.3.8 Failure by Distributor to perform any of the other
obligations, duties or responsibilities under this Agreement.
10.4 Coors may, at any time, give Distributor written notice of a Deficiency.
10.4.1 If the Deficiency is the Distributor's failure to
achieve any sales performance requirement established by Coors
pursuant to section 4.2 and the system set forth in the Standards
Manual, then within 30 days of the Distributor's receipt of
notice thereof, a representative of Coors shall communicate with
the Distributor Manager(s) to discuss a process by which such
sales performance deficiency will be cured. Coors shall provide
assistance to the Distributor in formulating a plan and timetable
for corrective action, including participation by representatives
of Coors in the performance improvement plan described in the
Standards Manual. No later than 60 days after the initial
discussions with Coors following the notice of sales performance
deficiency, the Distributor shall provide to Coors a completed
plan, in form reasonably acceptable to Coors, describing the
process and timetable for corrective action. Thereafter, for the
duration of the time period of the cure process, Coors shall
provide special assistance to the Distributor pursuant to the
performance improvement plan described in the Standards Manual.
10.4.2 If the Deficiency relates to other than sales
performance, Coors shall specify the reasons for such notice, the
items to be corrected and the time period within which each
Deficiency must be corrected. To the extent that such Deficiency
cannot reasonably be corrected within 30 days of the receipt of
Coors' written notice of Deficiency, Distributor shall have a
period of 30 days from such notice to submit a detailed plan and
timetable of corrective action for Coors' review. Coors and
Distributor shall agree upon a reasonable timetable to correct to
Coors' satisfaction each Deficiency set forth in Distributor's
plan of corrective action, but in no event shall such period
exceed 120 days from Coors' notice of Deficiency. Distributor shall
not be permitted to cure any Deficiency which has been the subject of a
previous notice of deficiency and cure on two or more prior occasions
within the 24-month period prior to the subject deficiency.
10.4.3 If Distributor fails to cure any Deficiency set forth
in the notice from Coors under either section 10.4.1 or section
10.4.2 to Coors' reasonable satisfaction within the appropriate
period provided in section 10.4.1 or section 10.4.2 or if the
subject deficiency has been the subject of a previous notice of
deficiency and cure on two or more prior occasions within the
prior 24-month period, Coors may, by giving written notice to
Distributor, immediately terminate this Agreement. In lieu of
termination and notwithstanding the provisions of section 2.1,
Coors may elect to alter Exhibit B so as to reduce Distributor's
Market Area and/or alter Exhibit A so as to remove one or more of the
Products that the Distributor may buy and resell under this Agreement.
10.5 Promptly upon expiration or termination of this Agreement
for any reason, Distributor will sell and deliver to Coors, or as
directed by Coors, at Distributor's laid-in costs, Distributor's
inventory of Products complying with Coors' quality standards as
of the date of termination. "Laid-in costs" shall mean the
delivered purchase price paid by Distributor to Coors for such
Products, plus deposits, plus the amount of any state and local
taxes paid by Distributor in connection with the purchase of such
Products. Distributor shall separate all inventory not complying
with Coors' quality standards ("Noncomplying Inventory") and
follow Coors' instructions for disposition of such Products.
Payment by Coors shall be conditioned on Distributor's compliance
with the terms of this paragraph. All of Distributor's
Noncomplying Inventory shall be destroyed by Distributor. All
Products in the retail market more than 14 days "out of code"
shall also be destroyed and replaced by Distributor from
Distributor's remaining inventory or shall be repurchased from
the affected retailer by Distributor and destroyed, all at
Distributor's cost. If Distributor fails to locate and destroy
such Products in the retail market, Coors, at its option, may do
so and reduce the amount paid for Distributor's inventory by the
reasonable cost of such actions. Distributor shall immediately
surrender and deliver to Coors, or as directed by Coors, all
barrels, pallets, bottles, cases and supplies acquired by
Distributor from Coors, and Coors shall promptly refund
Distributor's deposits for such items to Distributor.
Distributor shall immediately surrender and deliver to Coors, or
as directed by Coors, all of Coors' signs and advertising
displays in Distributor's possession, and Coors shall reimburse
Distributor's actual costs, plus cost of delivery as directed by
Coors. Distributor and Coors shall, as promptly as practicable,
adjust all outstanding accounts, and Distributor or Coors, as the
case may be, shall immediately pay to the other any remaining
balances due. Upon termination, all unfilled orders placed by
Distributor shall be deemed canceled.
11. RESOLUTION OF DISPUTES
11.1 Except as set forth below, if any dispute between
Distributor and Coors shall occur, including without limitation a
dispute as to whether Coors has grounds to terminate this
Agreement, such dispute shall be submitted by Distributor for
informal mediation ("Mediation") of the dispute by the president
of Coors (or his designee) within 60 days of the date the dispute
shall first arise. Coors, but not Distributor, shall be bound by
the decision of the president of Coors (or his designee)
concerning the dispute. Mediation shall be a condition precedent
to Distributor's right to pursue any other remedy available under
this Agreement or otherwise available under law. Coors shall not
be required to mediate any claim against Distributor for
nonpayment of Distributor's outstanding account.
11.2 Any and all disputes between Distributor and Coors, except
nonpayment of Distributor's account, including without limitation
a dispute as to whether Coors has grounds to terminate this
Agreement, which disputes are not resolved by Mediation, shall be
submitted to binding arbitration in the city nearest to
Distributor in which there is a regional office of the American
Arbitration Association, before a single arbitrator, in
accordance with the Commercial Arbitration Rules and procedures
of the American Arbitration Association. Any and all disputes shall be
submitted to arbitration hereunder within one year from the date the
dispute first arose or shall be forever barred. Arbitration hereunder
shall be in lieu of all other remedies and procedures, provided that
either party hereto may seek preliminary injunctive relief prior to the
commencement of such Arbitration proceedings.
12. MISCELLANEOUS PROVISIONS
12.1 The provisions of this Agreement are subject to and shall be
governed by the laws of the State and other subordinate
jurisdictions in which Distributor's principal place of business
is located. The laws, rules and regulations of such jurisdiction
are hereby incorporated in this Agreement and made a part hereof
to the extent that such laws, rules and regulations are required
to be so incorporated and, to such extent, shall supersede any
conflicting provision of this Agreement, including, but not
limited to, the requirement for or length of any notice period.
12.2 The illegality or unenforceability of any provision of this
Agreement will not impair the legality or enforceability of any
other provision of this Agreement.
12.3 Failure by Coors or Distributor to enforce any term or
provision in this Agreement in any specific instance shall not
constitute a waiver by such party of any such term or provision,
and Coors and Distributor may enforce such term or provision in
any subsequent instance without limitation or penalty.
12.4 Unless otherwise indicated herein, any notice provided for
herein may be served by personal service upon either party or by
facsimile, followed by certified mail, if to Coors, to the
attention of its Senior Vice President of Sales or, should there
be a title change, the senior sales executive, at the address
indicated on the signature line hereof, and, if to Distributor,
to its Principal Manager or Operating Manager, at such address as
provided to Coors by Distributor's as its corporate address of record.
12.5 Except as stated herein, this Agreement may be amended only
by a writing executed by both parties, except that Coors may
unilaterally amend this Agreement at any time if such amendment
does not materially and adversely affect distributor and is
effective as to all distributors in its distributor network bound
by an agreement similar to this Agreement.
12.6 This Agreement, the Standards Manual, and the Appointment
Letter contain the entire agreement of the parties with respect
to the subject matter hereof; there are no other representations,
inducements, promises or agreements, oral or otherwise, between
the parties. In the event of an inconsistency between this Agree
ment and any document incorporated herein, the terms of this
Agreement shall control.
12.7 Nothing herein shall be construed to make Distributor the
joint venturer, partner, agent, servant or employee of Coors, and
Distributor shall not have the power to bind or obligate Coors
except as specifically set forth in this Agreement.
This Agreement is executed by Distributor on the ______ day of
__________________, 1997, effective as of January 1, 1997.
LEGAL NAME
DBA TYPE DBA NAME
By__________________________________
SIGNOR
Coors Brewing Company
311 10th Street - NH511
Golden, CO 80401
By__________________________________
Carl L. Barnhill
Senior Vice President, Sales
DISTRIBUTOR NO
ADOLPH COORS COMPANY
EQUITY INCENTIVE PLAN
Amended and restated,
effective February 13, 1997
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 3
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
6.3 General Restrictions on Awards 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 February 13, 1997
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 February 13, 1997.
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.
6.3 General Restrictions on Awards. Awards covering no
more than 1,000,000 shares of Stock may be granted to any
Participant under this Plan during the term of this Plan.
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:_____________________________________________
Revised
June 20, 1996
Mr. L. Don Brown
4468 Kettering Dr.
Long Grove, IL 60047
Dear Don,
It is with great pleasure that we confirm your acceptance of the
position Senior Vice President, Operations and Technology for
Coors Brewing Company. In this position, you will be a Company
Officer. You will be reporting to me at an annual base salary of
$350,000. In addition, you will receive a sign on bonus of
$200,000 payable within 30 days of your start date and a
transitional bonus of $100,000 payable by December 31, 1996.
Your salary will be reviewed annually each year. You will
participate in the Executive Compensation Program subject to
Board approval which currently consists of the following components:
Annual Management Incentive Compensation Plan(MIC): This program
involves a cash payout based upon company pre-tax earnings and
individual performance. Your 1996 payout target will be 40% of
base salary. The potential payout range is 0-80%. We will guarantee you
a payout of 80% of your annual salary for 1996 and 1997.
You will participate in the 1996 Long Term Incentive Plan. This
plan provides you with three choices for payout: 1) the normal
form is on-half in cash, one-half in restricted shares; 2) the
next option is to receive the cash portion in discounted shares;
and 3) the last option is to receive three times your payout amount
in stock options. Attached is an example of all the payout options.
1996 Long Term Incentive Plan: This is a three year plan
with payout based on cumulative return on invested capital.
The current plan covers 1996, 1997, 1998 with payout in 1999.
The 1999 payout target for your level is currently 125% of
salary. Your actual target will be based on your starting
salary and pro-rated based on your start date. The potential
payout range is 0-250% of salary.
Stock Options: Currently, stock options are granted annually and
at each Board meeting to eligible new hires. In your case, we
will provide you with a one-time mega grant determined by
accelerating the next three years annual grants into one grant of
options to purchase Coors stock. The number of options granted
will be determined by dividing 300% of your annual salary by $18
a share effective the day you begin work with us. Vesting is
based on an increase in share price, 10% for each one dollar
increase in share value. Beginning January 1, 1997, you will
participate in the annual stock option program.
You will also be granted the equivalent of $800,000 in Restricted
Shares based on the Fair Market Value (average of the high and
low) of the Stock on the date of grant. The grant date will be
the next scheduled Board meeting on August 16, 1996. These
shares will be restricted for a period of three years from the
date of grant and based upon your continued employment at Coors.
You will receive quarterly dividends on these shares when the
Board authorizes dividend payments to all shareholders.
In addition you will receive a monthly perquisite allowance of
$2,500 ($30,000 annual) for a vehicle, financial counseling, tax
preparation, legal fees, organization membership dues for the Executive
Leadership Council and country club fees. Sponsorship of a table at
the Executive Leadership council is allowable as a company expense.
Also, we will pay up to $22,000 for initiation fees at the country club
of your choice. Enclosed is a summary of Officer benefits that are
available to you and details of our relocation program.
Based on business necessity, computer and fax equipment is available
at your home as a business expense within your operating budget.
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 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, 12 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.
I look forward to an anticipated start date as soon as
practicable and we are enthusiastic about you joining the Coors
leadership team. (This offer is contingent upon you successful
completion of our pre-employment drug screen, which can be
scheduled at your convenience when you report to work). If you
have any question, please contact me at 303-277-3151.
Best regards,
W. Leo Kiely III
President and Chief Operating Officer
Offer accepted: Date:
__________________
pc: Bob Ehret
Enclosures: 1996 Annual Incentive Plan (MIC)
1996 Long Term Incentive Plans
Stock Option Plan
Incentive Plan Documents and Descriptions
Benefit Summary (including Officer benefits)
Relocation Summary
Inventions and Non-Disclosure Agreement
COORS BREWING COMPANY
EXECUTIVE COMPENSATION
1996 ANNUAL MANAGEMENT INCENTIVE COMPENSATION PLAN
PARTICIPANTS:
All employees in Paygroup 90 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 for
1996 after incentive plan payouts (in millions).
Minimum Target Maximum
103.5 115 172.5
ANNUAL INCENTIVE PROGRAM AWARD LEVELS AS A PERCENT OF BASE SALARY
AS OF 1-1-96 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:
Position Corporate Parameters Individual/Parameters
CEO/COO 100% 0%
EXEC. STAFF 100% 0%
VP/OTHER PG90 50% 50%
Company financial objectives must be met before any payout
occurs. The CEO, COO, and the Executive Staff will be measured
based on corporate financial performance. All other participants
will be evaluated based on two components, the achievement of
Company performance goals and individual performance goals.
Achievement of Company financial goals 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.
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
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 1-1-97 to receive
payment. Any exceptions must be approved by the CEO.
COORS BREWING COMPANY
1997 ANNUAL MANAGEMENT INCENTIVE COMPENSATION PLAN (MIC)
PARTICIPANTS:
All employees in Paygroup 90 will participate in an annual incentive
program known as the Management Incentive Compensation Plan (the "Plan").
Participants who are newly hired or promoted into an eligible
position during the Plan year will be eligible to receive a pro-
rata share of the incentive payment 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.
ANNUAL INCENTIVE PROGRAM TARGET LEVELS AS A PERCENT OF BASE
SALARY AS OF 1-1-97 OR PLAN ENTRY DATE IF LATER:
Total On Target
Position Bonus Potential
CEO/COO 50%
Sr. VP Staff * 40%
Sr. VP Line** 40%
Vice President 30%
Other PG90 25%
* Staff = Sr. VP, HR; Sr. VP, Corporate Development; Sr. VP,
CFO,Sr. VP, CLO
** Line = Sr. VP, Sales; Sr. VP O&T; General Manager Unibev; Sr.
VP, Chief International Officer; Sr. VP, Marketing
BONUS PAYOUT PARAMETERS:
The Chief Executive Officer (CEO) and Chief Operating Officer
(COO) will be measured on Company financial performance only. All
other participants will be evaluated based on two components, the
achievement of Company financial performance goals and individual
performance goals. The percentages of the total potential bonus are:
Company Individual
Position Component Component
CEO/COO 100% 0%
Sr. VP Staff 60% 40%
Sr. VP Line 50% 50%
Vice President 40% 60%
Other PG90 40% 60%
If the Company financial goals are achieved, each participant
will receive the portion of the bonus based on the Company
component. None of the Company portion will be paid if pre-tax
income falls below a minimum of 75% of the target financial
goal. The amount of the Company component will be reduced 2% from
target for each 1% that actual results fall below the target
pretax income goal. For each 1% the Company pretax income exceeds
the target goal, the target Company component will increase 2%.
COMPANY FINANCIAL TARGETS:
Annual Company financial goals will be measured based on pre-tax
income for 1997 after incentive plan payouts (in millions).
Minimum Target Maximum
$59.25 $79 $118.5
INDIVIDUAL PERFORMANCE GOALS:
The other portion of the bonus is based on achievement of
individual performance goals. The individual portion of the bonus
is not dependent on fulfillment of Company financial goals. Individual
performance payouts will be based on an individual incentive multiplier
of between 0 and 150%, multiplied by the amount equal to the dollar
amount of the individual performance component at target:
Above Target 125-150%
On Target 100%
Below Target 0-70%
Individual performance goals will be documented and agreed upon
by February 1 of the Plan year. Each participant will meet with
his or her 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 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 in cash 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 at its sole
discretion. This Plan supersedes all prior documentation relating
to the Annual Management Incentive Compensation Plan.
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 1-1-98 to receive
payment. Any exceptions must be approved by the CEO.
