Denver, Colorado and Montreal, Quebec - May 6 2008 - Molson Coors Brewing Company today reported higher sales volume, net sales and earnings per share for the fiscal first quarter ending March 30, 2008.
First Quarter Highlights
Key results for the Company's fiscal first quarter ended March 30, 2008, compared to the fiscal first quarter ended April 1, 2007, include the following:
- Net sales increased 10.4 percent to $1.36 billion.
- Net sales per barrel increased 7.4 percent.
- Sales volume increased 2.8 percent to 9.1 million barrels, or 10.7 million hectoliters (HLs).
- Total Company sales-to-retail (STRs) rose 4.6 percent. U.S. STRs rose 6.6 percent, while Canada STRs were up 2.5 percent. U.K. sales volume increased 1.0 percent.
- Cost of goods sold per barrel increased 5.5 percent.
- Marketing, general and administrative expenses rose 10.0 percent to $436.6 million.
- After-tax income from continuing operations, a U.S. GAAP earnings measure, was $46.1 million, up 140.1 percent from $19.2 million in the first quarter of 2007. This increase was attributable to strong business performance in the U.S. and Canada and a lower effective tax rate, partially offset by accelerated incentive compensation expense and one-time debt extinguishment costs.
- Underlying after-tax earnings were $59.1 million, or $0.32 per diluted share, a 135.5 percent increase compared to $25.1 million, or $0.14 per diluted share, in the first quarter 2007. The company calculates non-GAAP underlying earnings by excluding special and other one-time items from the nearest U.S. GAAP earnings measure. To calculate underlying earnings in the first quarter of 2008, the company excluded net special charges of $7.3 million pretax and one-time debt extinguishment costs of $12.4 million pretax. (See "Special and Other One-Time Items" and "Discontinued Operations" below.)
- Based on the strong performance by the Company during the past four quarters, Molson Coors successfully met the financial target for the Company's primary long-term incentive compensation plan in the first quarter. This achievement had the effect of accelerating $25 million, or $0.10 per share, of non-cash expense related to the incentive plan into the first quarter.
All $ amounts are in U.S. Dollars. See tables below for reconciliations to nearest U.S. GAAP measures.
Leo Kiely, Molson Coors president and chief executive officer, said, "We are very pleased with our first quarter results, which reflect continued strong momentum. Across the board, our teams have remained focused on creating profitable growth by building brands and reducing costs. Based on the strength of our brands, sales execution and cost-reduction initiatives, our U.S. and Canadian businesses once again delivered positive pricing and strong sales-to-retail and bottom-line growth. In the U.K., where challenging conditions still dominate the brewing industry, our team grew overall market share and net pricing.
Mr. Kiely underlined: "The disciplined focus on building our brands and reducing costs has enabled us to achieve our long-term profit target much earlier than expected. Reaching this milestone in financial performance is a testament to the hard work and dedication of leaders throughout the company, who have consistently delivered results above expectations to the benefit of our shareholders."
During the quarter, Molson Coors achieved approximately $29 million in cost reductions as part of its three-year, $250 million Resources for Growth program. Foreign exchange rate movements increased total-company pretax income by approximately $4 million in the quarter.
The Company's effective tax rate during the first quarter 2008 for income from continuing operations was negative 12 percent including special items and positive 2 percent on an underlying basis, compared to positive 19 percent and 21 percent, respectively, during the first quarter a year ago. The Company's first quarter 2008 tax rate was reduced by the release of unrecognized tax benefits during the quarter due to certain tax years closing or being effectively settled. The Company now estimates that its full-year 2008 effective tax rate will be in the range of 14 percent to 18 percent on an underlying basis.
Business Segments
On March 5, 2008, Molson Coors Brewing Company announced the appointment of Dave Perkins as President, Global Brand and Market Development, with responsibility for growth and expansion of the Company's business and brand portfolios in global development markets. As a result of this decision, the Company's current business in Asia, Continental Europe, Mexico and the Caribbean (not including Puerto Rico) are now included in Global Markets and Corporate. In order to reflect this change, the former Europe segment has been re-named and now includes only the United Kingdom and Republic of Ireland. The U.S. segment now represents only the United States and Puerto Rico.
Following are the Company's 2008 first quarter results by business segment:
Canada Business
The Canada business recorded a 41.5 percent increase in underlying pretax income to $64.1 million, driven by positive net pricing and a $9 million benefit from favorable foreign currency.
Canadian sales-to-retail increased 2.5 percent during the quarter. The sales-to-retail increase was driven by strong growth by Molson's Strategic brands, including continued double-digit growth from Coors Light, Creemore and Carling during the quarter. In addition, Molson's partner import brands achieved double-digit growth in the quarter and benefited from the addition of Modelo brands to the Molson portfolio in the western provinces following the startup of the Modelo Molson Import joint venture on January 1, 2008. This joint venture was created to import, distribute and market the Modelo portfolio across all of Canada. The Company's national market share increased by one-half share point compared to the previous year entirely due to the addition of the Modelo brands in western Canada.
The Modelo joint venture, which is recorded on an equity basis, replaces a distribution contract for the Modelo brands in eastern Canada. With the exception of Molson Coors' half of the new joint venture's equity income, Modelo brand results are now excluded from Canada results. The change in the Modelo business arrangement, together with the 2007 termination of a U.S. production contract for Foster's, affects the comparability of results with the first quarter of 2007.
Canada sales volume decreased 8.6 percent in the quarter ending March 30, 2008, due entirely to the change in our Modelo arrangement and the termination of the Foster's contract. Excluding these factors, comparable Canada sales volume increased slightly over the first quarter 2007. Net sales per barrel increased 6.4 percent in local currency during the quarter driven by higher net pricing and by mix impacts from the volume factors described above. Cost of goods sold per barrel increased 2.0 percent in local currency, driven by inflation increases that were nearly two-thirds offset by cost savings from the Resources for Growth initiative. Marketing, general and administrative expenses decreased 5.1 percent in local currency during the quarter, driven by lower overhead from cost savings initiatives and amortization expense, along with the transfer of Modelo brand spending to the Modelo joint venture.
United States Business
Underlying U.S. pretax income increased 36.0 percent to $61.9 million, driven by strong sales volume growth, higher net pricing and continued savings from cost initiatives. Total U.S. segment sales to retail grew 6.6 percent in the quarter, despite a decline in the challenged Puerto Rico market. The increase was primarily due to mid-single-digit growth of Coors Light, and double-digit growth by Blue Moon, Keystone Light and Coors Banquet. Each of the Company's four largest U.S. brands, representing more than 93% of its U.S. volume base, achieved accelerated sales and market-share gains in the quarter. The strength of our U.S. portfolio spanned the country, resulting in significant market share gains and sales-to-retail growth in all major channels and in 47 out of 50 states -- and double-digit growth in 15 of these states. Total sales volume to wholesalers grew 7.4 percent. Net sales per barrel increased 3.4 percent in the first quarter, driven primarily by positive net pricing.
The U.S. business continued to benefit from disciplined cost performance. Cost of goods sold per barrel in the U.S. business increased by only 1.6 percent. This change was driven by higher transportation and packaging material costs, partially offset by operations cost savings initiatives. Marketing, general and administrative expense increased 9.6 percent during the quarter, primarily due to accelerated amortization of long-term incentive expense.
United Kingdom Business
The U.K. business reported an underlying pretax loss of $2.0 million in the first quarter of 2008, a $0.7 million improvement versus the first quarter 2007. The improvement was driven by increased off-premise volume and supply chain savings, offset in part by higher pension costs and lower on-premise volume.
U.K. owned brand volumes increased 1.0 percent in the first quarter, driven by a 17 percent increase in off-premise volume, leading to an increase in overall market share. The increase in off-premise volume was partly driven by a combination of the Easter holiday falling in the first quarter this year and customers buying in advance of an increase in beer excise tax. U.K. net revenue per barrel in local currency increased 4.0 percent during the quarter, driven equally by higher net pricing and by increased factored brand sales following the 2007 acquisition of Camerons. The Company achieved its fifth consecutive quarter of year-on-year growth in owned-brand pricing in the U.K.
Cost of goods sold per barrel in local currency increased 4.6 percent in the first quarter, due primarily to higher factored brand sales, pension expense and commodity inflation, offset in part by cost saving initiatives. Marketing, general and administrative expense increased 3.5 percent in local currency.
Global Markets and Corporate
Marketing, general and administrative expenses for Global Markets and Corporate increased $7.8 million to $37.3 million in the first quarter 2008, including $28.9 million in Corporate general and administrative expenses. The increase compared to a year ago was driven by accelerated long-term incentive plan expense. Net interest expense was $26.7 million in the first quarter 2008, a decrease of $2.5 million compared to a year ago. The pretax underlying loss for Global Markets and Corporate of $58.3 million, an increase of 13.0 percent, was due to accelerated long-term incentive plan expense in the first quarter of 2008.
Special and Other One-Time Items
During the first quarter 2008 the Company reported net special charges of $7.3 million, primarily due to MillerCoors joint venture planning and employee retention costs, the cost to transition our shared services to a third-party supplier, U.K. supply chain restructuring charges, and Edmonton brewery closure costs. These expenses were largely offset by a gain on the sale of a company-owned U.S. distributorship.
Molson Coors also recorded one-time debt extinguishment costs of $12.4 million to repurchase $180 million of the Company's 6-3/8% Senior Notes due 2012.
These special and other one-time items have been excluded from underlying earnings in the first quarter 2008.
Discontinued Operations
The Company reports results for its former Brazilian unit, Cervejarias Kaiser ("Kaiser"), as discontinued operations. The Company reported a net loss of $9.0 million from discontinued operations during the quarter, arising from an increase in the fair value of indemnity guarantees related to the Kaiser business. These liabilities increased during the first quarter 2008 due to unfavorable foreign exchange movements.
2008 First Quarter Underlying After-Tax Earnings
(After-Tax Income from Continuing Operations, Excluding Special and Other
One-Time Items)
(Note: Some numbers may not sum due to rounding.)
(In millions of $US, except per share data) 2008 1st Q 2007 1st Q
--------------------------------------------------------------------------
U.S. GAAP: After-tax income from
continuing operations: $46.1 $19.2
Per diluted share: $0.25 $ 0.11
Add back: Pretax special items - net 7.3 8.2
Add back: Other one-time items 12.4 -
Minus: Tax effect on special items
and other one-time items (6.7) (2.4)
Non-GAAP: Underlying after-tax income: $59.1 $25.1
Per diluted share: $0.32 $0.14
--------------------------------------------------------------------------
2008 First Quarter Underlying Pretax Earnings
(Pretax Income from Continuing Operations, Excluding Special and Other One-
Time Items)
(Note: Some numbers may not sum due to rounding.)
Business Total
--------------------------------------------------------------------------
Global
Markets
and Consoli-
(In millions of $US) Canada U.S. U.K. Corporate dated
--------------------------------------------------------------------------
U.S. GAAP: 2008 1st Q pretax
income (loss) from continuing
operations - reported 62.7 69.9 (4.1) (82.5) 46.0
Add back: Pretax special
items - net 1.4 (8.0) 2.1 11.8 7.3
Add back: Debt extinguishment
costs - - - 12.4 12.4
Non-GAAP: 2008 1st Q underlying
pretax income (loss) 64.1 61.9 (2.0) (58.3) 65.7
--------------------------------------------------------------------------
Percent change 2008 1st Q vs.
2007 1st Q underlying pretax
income 41.5% 36.0% -25.9 % 13.0% 79.5%
--------------------------------------------------------------------------
U.S. GAAP: 2007 1st Q pretax
income (loss) from continuing
operations 41.2 45.5 (6.8) (51.6) 28.4
Add back: Pretax special
items - net 4.1 - 4.1 - 8.2
Non-GAAP: 2007 1st Q underlying
pretax income (loss) 45.3 45.5 (2.7) (51.6) 36.6
--------------------------------------------------------------------------
MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(VOLUMES IN THOUSANDS, DOLLARS IN MILLIONS AND
PER SHARE AMOUNTS IN WHOLE DOLLARS)
(UNAUDITED)
Thirteen Weeks Thirteen Weeks
Ended Ended
-------------------------------------------------------------------------
March 30, 2008 April 1, 2007
-------------------------------------------------------------------------
Volume in barrels 9,115 8,869
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Sales $1,816.2 $1,651.2
Excise taxes (459.6) (422.6)
-------------------------------------------------------------------------
Net Sales 1,356.6 1,228.6
Cost of goods sold (835.0) (770.2)
-------------------------------------------------------------------------
Gross profit 521.6 458.4
Marketing, general and administrative
expenses (436.6) (396.8)
Special items, net (7.3) (8.2)
-------------------------------------------------------------------------
Operating income 77.7 53.4
Interest expense, net (23.9) (26.3)
Debt extinguishment costs (12.4) -
Other income, net 4.6 1.2
-------------------------------------------------------------------------
Income from continuing operations
before income taxes and minority interests 46.0 28.3
Income tax benefit (expense) 5.5 (5.3)
-------------------------------------------------------------------------
Income from continuing operations
before minority interests 51.5 23.0
Minority interests in net income of
consolidated entities (5.4) (3.8)
-------------------------------------------------------------------------
Income from continuing operations 46.1 19.2
Loss from discontinued operations, net
of tax (9.0) (14.8)
-------------------------------------------------------------------------
Net income $37.1 $4.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic income (loss) per share:
From continuing operations $0.25 $0.11
From discontinued operations (0.05) (0.08)
-------------------------------------------------------------------------
Basic net income per share $0.20 $0.03
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Diluted income (loss) per share:
From continuing operations $0.25 $0.11
From discontinued operations (0.05) (0.08)
-------------------------------------------------------------------------
Diluted net income per share $0.20 $0.03
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average shares - basic 181.0 176.1
Weighted average shares - diluted 184.5 178.2
Dividends per share $0.16 $0.16
-------------------------------------------------------------------------
-------------------------------------------------------------------------
MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CANADA SEGMENT RESULTS OF OPERATIONS
(VOLUMES IN THOUSANDS, DOLLARS IN MILLIONS)
(UNAUDITED)
Thirteen Weeks Thirteen Weeks
Ended Ended
-------------------------------------------------------------------------
March 30, 2008 April 1, 2007
-------------------------------------------------------------------------
Volume in barrels 1,494 1,635
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Sales $499.8 $440.5
Excise taxes (116.2) (102.7)
-------------------------------------------------------------------------
Net sales 383.6 337.8
Cost of goods sold (216.2) (198.5)
-------------------------------------------------------------------------
Gross profit 167.4 139.3
Marketing, general and administrative
expenses (106.6) (96.3)
Special items, net (1.4) (4.1)
-------------------------------------------------------------------------
Operating income 59.4 38.9
Other income, net 3.3 2.3
-------------------------------------------------------------------------
Earnings before income taxes and
minority interests $62.7 $41.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
UNITED STATES SEGMENT RESULTS OF OPERATIONS
(VOLUMES IN THOUSANDS, DOLLARS IN MILLIONS)
(UNAUDITED)
Thirteen Weeks Thirteen Weeks
Ended Ended
-------------------------------------------------------------------------
March 30, 2008 April 1, 2007
-------------------------------------------------------------------------
Volume in barrels 5,547 5,166
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Sales $751.4 $678.9
Excise taxes (101.4) (93.5)
-------------------------------------------------------------------------
Net sales 650.0 585.4
Cost of goods sold (392.9) (360.2)
-------------------------------------------------------------------------
Gross profit 257.1 225.2
Marketing, general and administrative
expenses (197.6) (180.3)
Special items, net 8.0 -
-------------------------------------------------------------------------
Operating income 67.5 44.9
Other income, net 2.4 0.6
-------------------------------------------------------------------------
Earnings before income taxes and
minority interests $69.9 $45.5
-------------------------------------------------------------------------
-------------------------------------------------------------------------
MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
UNITED KINGDOM SEGMENT RESULTS OF OPERATIONS
(VOLUMES IN THOUSANDS, DOLLARS IN MILLIONS)
(UNAUDITED)
Thirteen Weeks Thirteen Weeks
Ended Ended
-------------------------------------------------------------------------
March 30, 2008 April 1, 2007
-------------------------------------------------------------------------
Volume in barrels 1,999 1,980
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Sales $551.3 $517.0
Excise taxes (240.8) (225.3)
-------------------------------------------------------------------------
Net sales 310.5 291.7
Cost of goods sold (219.0) (204.4)
-------------------------------------------------------------------------
Gross profit 91.5 87.3
Marketing, general and administrative
expenses (95.1) (90.7)
Special items, net (2.1) (4.1)
-------------------------------------------------------------------------
Operating loss (5.7) (7.5)
Interest income, net 2.8 2.9
Other expense, net (1.2) (2.2)
-------------------------------------------------------------------------
Earnings before income taxes and
minority interests $(4.1) $(6.8)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
GLOBAL MARKETS AND CORPORATE RESULTS OF OPERATIONS
(VOLUMES IN THOUSANDS, DOLLARS IN MILLIONS)
(UNAUDITED)
Thirteen Weeks Thirteen Weeks
Ended Ended
-------------------------------------------------------------------------
March 30, 2008 April 1, 2007
-------------------------------------------------------------------------
Volume in barrels 75 87
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net sales $12.5 $13.7
Cost of goods sold (6.9) (7.1)
-------------------------------------------------------------------------
Gross profit 5.6 6.6
Marketing, general and administrative
expenses (37.3) (29.5)
Special items, net (11.8) -
-------------------------------------------------------------------------
Operating loss (43.5) (22.9)
Interest expense, net (26.7) (29.2)
Debt extinguishment costs (12.4) -
Other income, net 0.1 0.5
-------------------------------------------------------------------------
Loss before income taxes and minority
interests $(82.5) $(51.6)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
(UNAUDITED)
As of
--------------------------------------------------------------------------
March 30, December 30,
2008 2007
--------------------------------------------------------------------------
Assets
Cash and cash equivalents $118.7 $377.0
Receivables, net 846.3 871.1
Total inventories, net 383.0 369.6
Other, net 141.0 159.1
--------------------------------------------------------------------------
Total current assets 1,489.0 1,776.8
Properties, net 2,643.4 2,696.2
Goodwill and intangible assets, net 8,104.4 8,385.9
Other 559.6 592.7
--------------------------------------------------------------------------
Total assets $12,796.4 $13,451.6
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Liabilities and stockholders' equity
Accounts payable $310.5 $380.7
Accrued expenses and other 1,206.4 1,350.5
Short-term borrowings and current portion of
long-term debt 34.4 4.3
--------------------------------------------------------------------------
Total current liabilities 1,551.3 1,735.5
Long-term debt 2,030.8 2,260.6
Pension and post-retirement benefits 637.4 677.8
Other 1,474.8 1,584.4
--------------------------------------------------------------------------
Total liabilities 5,694.3 6,258.3
Minority interests 45.1 43.8
Total stockholders' equity 7,057.0 7,149.5
--------------------------------------------------------------------------
Total liabilities and stockholders' equity $12,796.4 $13,451.6
--------------------------------------------------------------------------
--------------------------------------------------------------------------
MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
Thirteen Weeks Ended
-------------------------------------------------------------------------
March 30, 2008 April 1, 2007
-------------------------------------------------------------------------
Cash flows from operating activities:
Net income $37.1 $4.4
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 82.3 83.4
Change in working capital and other, net (245.6) (260.5)
-------------------------------------------------------------------------
Net cash used in operating activities (126.2) (172.7)
Cash flows from investing activities:
Additions to properties and intangible
assets (69.5) (107.0)
Proceeds from sales of assets and
businesses, net 28.3 1.0
Other, net 16.1 2.1
-------------------------------------------------------------------------
Net cash used in investing activities (25.1) (103.9)
Cash flows from financing activities:
Exercise of stock options under equity
compensation plans 23.0 144.9
Dividends paid (33.1) (28.4)
Net borrowings of debt (150.2) 80.4
Other 54.7 16.5
-------------------------------------------------------------------------
Net cash (used in) provided by financing
activities (105.6) 213.4
Cash and cash equivalents:
Net decrease in cash and cash equivalents (256.9) (63.2)
Effect of foreign exchange rate changes on
cash and cash equivalents (1.4) 0.4
Balance at beginning of year 377.0 182.2
-------------------------------------------------------------------------
Balance at end of period $118.7 $119.4
-------------------------------------------------------------------------
-------------------------------------------------------------------------