U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter ended October 1, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) Commission file number 0-8251 ADOLPH COORS COMPANY (Exact name of registrant as specified in its charter) COLORADO 84-0178360 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Golden, Colorado 80401 (Address of principal executive offices) (Zip Code) 303-279-6565 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None Securities registered pursuant to Section 12(g) of the Act: Class B Common Stock (non-voting), no par value (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] State the aggregate market value of the voting stock held by non-affiliates of the registrant: All voting shares are held by Adolph Coors, Jr. Trust. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of November 9, 1995: Class A Common Stock - 1,260,000 shares Class B Common Stock - 36,643,240 shares
PART I. FINANCIAL INFORMATION Item 1. Financial Statements <TABLE> <CAPTION> ADOLPH COORS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME Sixteen weeks ended ---------------------- October 1, October 2, 1995 1994 --------- --------- (In thousands, except per share data) <S> <C> <C> SALES $ 698,330 $ 683,964 Less - beer excise taxes ( 130,448) ( 128,383) --------- --------- NET SALES 567,882 555,581 --------- --------- Costs and expenses: Cost of goods sold 359,238 358,679 Marketing, general and administrative 163,663 159,979 Research and project development 4,656 4,217 --------- --------- Total operating expenses 527,557 522,875 --------- --------- OPERATING INCOME 40,325 32,706 Other expense - net 2,298 1,266 --------- --------- Income before income taxes 38,027 31,440 Income tax expense 15,400 14,100 --------- --------- NET INCOME $ 22,627 $ 17,340 ========= ========= NET INCOME PER SHARE OF COMMON STOCK $ 0.59 $ 0.45 ========= ========= Weighted average number of outstanding shares of common stock 38,115 38,306 ========= ========= Cash dividends declared and paid per share of common stock $ 0.125 $ 0.125 ========= ========= </TABLE>
<TABLE> <CAPTION> ADOLPH COORS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME Forty weeks ended ---------------------- October 1, October 2, 1995 1994 --------- --------- (In thousands, except per share data) <S> <C> <C> SALES $1,592,335 $1,601,299 Less - beer excise taxes ( 298,354) ( 295,049) --------- --------- NET SALES 1,293,981 1,306,250 --------- --------- Costs and expenses: Cost of goods sold 829,844 824,568 Marketing, general and administrative 383,209 380,598 Research and project development 11,346 9,727 --------- --------- Total operating expenses 1,224,399 1,214,893 --------- --------- OPERATING INCOME 69,582 91,357 Other expense - net 5,283 3,677 --------- --------- Income before income taxes 64,299 87,680 Income tax expense 26,400 39,500 --------- --------- NET INCOME $ 37,899 $ 48,180 ========= ========= NET INCOME PER SHARE OF COMMON STOCK $ .99 $ 1.26 ========= ========= Weighted average number of outstanding shares of common stock 38,250 38,270 ========= ========= Cash dividends declared and paid per share of common stock $ 0.375 $ 0.375 ========= ========= </TABLE>
<TABLE> <CAPTION> ADOLPH COORS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET October 1, December 25, 1995 1994 ---------- ----------- (In thousands) ASSETS <S> <C> <C> CURRENT ASSETS: Cash and cash equivalents $ 12,671 $ 27,168 Accounts and notes receivable 119,306 106,327 Inventories: Finished 63,190 67,500 In process 28,210 22,918 Raw materials 32,680 38,108 Packaging materials 12,884 13,078 ---------- ---------- Total inventories 136,964 141,604 Other assets 78,494 80,067 ---------- ---------- Total current assets 347,435 355,166 ---------- ---------- PROPERTIES, at cost, less accumulated depreciation, depletion and amortiza- tion of $1,208,434 in 1995 and $1,220,836 in 1994 890,386 922,208 OTHER ASSETS 126,479 94,202 ---------- ---------- TOTAL ASSETS $1,364,300 $1,371,576 ========== ========== </TABLE>
<TABLE> <CAPTION> ADOLPH COORS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET October 1, December 25, 1995 1994 ---------- ----------- (In thousands) LIABILITIES AND SHAREHOLDERS' EQUITY <S> <C> <C> CURRENT LIABILITIES: Current portion of long-term debt $ 36,000 $ 44,000 Accounts payable 101,514 164,430 Accrued expenses and other liabilities 156,344 171,784 ---------- ---------- Total current liabilities 293,858 380,214 ---------- ---------- LONG-TERM DEBT 195,000 131,000 DEFERRED TAX LIABILITY 66,767 71,660 OTHER LONG-TERM LIABILITIES 116,915 114,501 ---------- ---------- Total liabilities 672,540 697,375 ---------- ---------- SHAREHOLDERS' EQUITY: Capital stock: Preferred stock, non-voting, $1 par value, 25,000,000 shares authorized and no shares issued -- -- Class A common stock, voting, $1 par value, authorized and issued 1,260,000 shares 1,260 1,260 Class B common stock, non-voting, no par value, 100,000,000 authorized and 46,200,000 shares issued 11,000 11,000 ---------- ---------- 12,260 12,260 Paid-in capital 58,290 56,758 Retained earnings 646,993 623,418 Other 2,893 1,238 ---------- ---------- 720,436 693,674 Less - treasury stock, at cost, Class B shares, 9,568,124 in 1995 and 9,133,060 in 1994 28,676 19,473 ---------- ---------- Total shareholders' equity 691,760 674,201 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,364,300 $1,371,576 ========== ========== </TABLE>
<TABLE> <CAPTION> ADOLPH COORS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS For the forty weeks ended -------------------------- October 1, October 2, 1995 1994 --------- --------- (In thousands) <S> <C> <C> Cash flows from operating activities: Net income $ 37,899 $ 48,180 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 94,181 91,964 Change in accumulated deferred income taxes ( 4,893) 12,008 Loss on sale or abandonment of properties 2,800 882 Change in current assets and current liabilities ( 84,844) ( 26,400) Change in non-current assets and non-current liabilities ( 15,365) 2,126 --------- --------- Net cash provided by operating activities 29,778 128,760 --------- --------- Cash flows from investing activities: Additions to properties ( 100,177) ( 110,939) Proceeds from sale of properties 23,750 2,999 Additions to intangible assets ( 2,369) ( 16,525) Other 359 1,125 --------- --------- Net cash used in investing activities ( 78,437) ( 123,340) --------- --------- Cash flows from financing activities: Proceeds from long-term debt 100,000 -- Exercise of stock options 253 2,083 Additions to treasury stock ( 9,456) -- Dividends paid ( 14,324) ( 14,355) Payment of current portion of long-term debt( 44,000) ( 50,000) Other 1,384 -- --------- --------- Net cash provided by (used in) financing activities 33,857 ( 62,272) --------- --------- Cash and cash equivalents: Net (decrease) in cash and cash equivalents ( 14,802) ( 56,852) Effect of exchange rate changes 305 -- Balance at beginning of year 27,168 82,211 --------- --------- Balance at end of quarter $ 12,671 $ 25,359 ========= ========= </TABLE> Item 2. Management's Discussion and Analysis of Consolidated Financial Condition and Consolidated Results of Operations Sales and Volume: - ---------------- Adolph Coors Company (ACC or the Company) reported net sales of $567.9 million and $1,294.0 million for the third quarter and first forty weeks of 1995, respectively, representing a 2.2% increase and .9% decrease, respectively, from the comparable periods in the prior year. ACC had malt beverage barrel sales of 6,905,000 for the third quarter of 1995, an increase of 0.3% when compared to malt beverage sales of 6,884,000 barrels for the third quarter of 1994. Increased net sales in the third quarter of 1995 were attributable to slightly higher volume and pricing, as well as proportionately higher export sales, which offer higher net revenue than domestic volume. Malt beverage sales for the first forty weeks of 1995 declined 1.4% to 15,731,000 barrels from 15,957,000 for the same period of 1994. The decrease in sales volume for the first forty weeks of 1995 resulted primarily from a decrease in sales of Zima Clearmalt. This was offset in part by a slight net increase in sales of other premium beer products, primarily Coors Light, whose domestic sales increased 3% in the first three quarters of 1995 when compared to 1994. Gross Profit: - ------------ Gross profit as a percentage of net sales for the third quarter of 1995 increased to 36.7% from 35.4% for the same period a year earlier. The improvement for the third quarter of 1995 was primarily due to the absence of costs associated with a limited voluntary product withdrawal in 1994, 1995 incremental container joint venture income, market price increases and productivity gains arising from restructuring efforts. Gross profit as a percentage of net sales for the first forty weeks of 1995 declined to 35.9% from 36.9% for the first forty weeks of 1994. The decline in gross profit for the first forty weeks of 1995 resulted primarily from increased aluminum and other packaging costs and lower sales volumes of Zima Clearmalt, which has a higher gross profit percentage than other brands. Although ACC's cost of aluminum will remain at its current level for the remainder of 1995, based on a recent downward trend in the aluminum market, aluminum costs should improve in 1996. Operating Income: - ---------------- Operating income for the third quarter of 1995, increased 23.3% to $40.3 million compared to $32.7 million for the third quarter of 1994. Operating income for the first forty weeks of 1995 declined 23.8% to $69.6 million from $91.4 million in 1994. Higher operating income in the third quarter of 1995 and lower operating income for the first forty weeks of 1995 relative to comparable periods in 1994 were primarily a result of related fluctuations in gross profit (see explanation of gross profit above). Marketing, general and administrative expenses increased 2.3% and .7% for the third quarter and first forty weeks of 1995, respectively. The increases for both time periods were caused by the Company's efforts to strengthen the sales organization and to enhance the Company's performance initiatives. Research and development costs increased 10.4% and 16.6% for the third quarter and first forty weeks of 1995, respectively. These costs were higher as a result of an increase in the new products and packages being considered by the Company. Non-Operating Expense: - --------------------- Other expense - net was $2.3 million for the third quarter of 1995, compared to $1.3 million for the same period a year earlier. Interest expense was higher in the third quarter of 1995 compared to a year ago because of increased long-term debt following a private placement of debt early in the third quarter of 1995. Other expense - net was $5.3 million for the first forty weeks of 1995 compared to $3.7 million for the same period a year earlier. This increase was primarily due to a 1994 pre-tax gain of approximately $2.1 million from the sale of a company-owned distributorship. Effective Tax Rate: - ------------------ The consolidated effective tax rate for the third quarter and first forty weeks of 1995 decreased to 40.5% and 41.1%, compared to 44.8% and 45.1%, respectively, for the same periods of 1994. This decline from 1994 relates largely to the tax accounting for foreign operations and non-recurring, non- taxable income. Net Income: - ---------- Consolidated net income for the third quarter and first forty weeks of 1995 was $22.6 million, or $0.59 per share, and $37.9 million, or $0.99 per share, respectively. This compares to $17.3 million, or $0.45 per share, and $48.2 million, or $1.26 per share, for the same periods a year earlier. Working Capital Changes: - ----------------------- Consolidated working capital at October 1, 1995, increased $78.6 million from year end 1994 primarily due to a $62.9 million decrease in accounts payable. Also contributing to the working capital increase was an increase in accounts receivable and decreases in the current portion of long-term debt, federal excise taxes payable and federal income taxes payable. Offsetting these items was a $14.5 million decline of cash and cash equivalents. The decline in accounts payable was caused by the payment of amounts owed to suppliers, including the container joint venture and advertising agencies. The increase in accounts receivable was caused by seasonality and increased direct shipments to distributors. Direct shipments carry longer credit terms than shipments through satellite redistribution centers. Cash Flows From Operating Activities: - ------------------------------------ Net cash provided by operating activities for the first forty weeks of 1995 was $29.8 million, down $99.0 million from $128.8 million for the same period a year ago. Accounts payable decreased by $62.9 million in 1995, compared to a $13.3 million decrease in 1994. Higher accounts payable at year end 1994 were due primarily to higher amounts owed to suppliers. Accumulated deferred income taxes decreased by $4.9 million in 1995, compared to an increase of $12.0 million in 1994. The increase in deferred income taxes in 1994 resulted from temporary differences created by the early payment of the 1994 pension contribution and by the 1994 payment of various 1993 accrued expenses. These accrued expenses were not deductible for income tax purposes in 1993. Other changes affecting cash flows from operations resulted from a decrease in net income to $37.9 million in 1995 from $48.2 million in 1994, as well as increases in non-current assets related to investments in the container joint venture. Cash Flows From Investing Activities: - ------------------------------------ Cash flows used in investing activities for the first forty weeks of 1995 decreased to $78.4 million in 1995 from $123.3 million in 1994. Higher property and intangible asset additions in 1994 were the result of purchases of a brewery in Spain and a distributorship in California. Proceeds from sale of properties of $23.8 million reflects the third quarter sale of the Company's power plant equipment and support facilities to Trigen/Nations for $22.0 million. Cash Flows From Financing Activities: - ------------------------------------ Cash flows provided by financing activities increased to $33.9 million in 1995 from a net cash usage of $62.3 million in 1994. This increase resulted from ACC's $100 million private placement of senior notes in the third quarter of 1995. The Company made two principal payments totalling $44.0 million on its unsecured medium-term notes during the third quarter of 1995. This compares to a payment of $50.0 million in the third quarter of 1994. In the third quarter of 1995, the Company used $9.5 million when it exercised a first right of refusal to buy approximately 550,000 Class B common shares owned by the estate of a member of the extended Coors family. This reduced the number of Class B shares outstanding from approximately 37.2 million to approximately 36.6 million. Significant Events: - ------------------ On June 30, 1995, the Company's subsidiary, Coors Brewing Company (CBC), and Anchor Glass Container Corporation formally established a long-term partnership, the Rocky Mountain Bottle Company, to produce glass bottles at the CBC glass manufacturing facility. The partnership is intended to lower unit costs, increase output and increase income to CBC. Formation of the bottle partnership required CBC to contribute approximately $16.2 million of machinery, equipment and certain personal property. Since CBC contributed no cash, the transaction was not reflected in the Statement of Cash Flows. The overall effect of the transaction reduced net properties and increased other long-term assets by $16.2 million. On September 14, 1995, CBC concluded the sale of its power plant equipment and support facilities to Trigen/Nations for $22.0 million. The agreement provides for a significant investment by Trigen/Nations to upgrade the facilities. In return, CBC has agreed to purchase the electricity and steam needed to operate the brewery's Golden facilities.
These statements should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K for the year ended December 25, 1994. The accompanying financial statements have not been examined by the Company's independent accountants in accordance with general accepted auditing standards, but in the opinion of management of Adolph Coors Company, such financial statements include all adjustments necessary to present fairly the Company's financial position and results of operations. The results of operations for the forty weeks ended October 1, 1995, may not be indicative of results that may be expected for the year ending December 31, 1995.
PART II. OTHER INFORMATION Item 1. Legal Proceedings None. Item 6. Exhibits and Reports on Form 8-K. (a) The Exhibit filed as part of this report is listed below. Exhibit No. Description ----------- ----------- 3.2 Amended By-Laws (b) Reports on Form 8-K None.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ADOLPH COORS COMPANY By /s/ Timothy V. Wolf -------------------------------- Timothy V. Wolf Vice President, Treasurer, Chief Financial Officer (Principal Financial Officer) (Principal Accounting Officer) November 15, 1995