DENVER and MONTREAL, Nov. 1 - Molson Coors Brewing Company (NYSE: TAP; TSX) today announced higher consolidated net sales and sales volume, and higher net income for the third quarter of 2005 compared to the third quarter of 2004. Higher consolidated sales volume, net sales and net income were attributable to including Molson Inc. results in the third quarter of 2005 but not in the third quarter of 2004. Net income in the third quarter was $108.2 million.
For the 13-week third quarter ended September 25, 2005, the company reported net sales of $1.6 billion and sales volume of 12.8 million barrels, or 15.1 million hectoliters (hl). Excluding special items, the company reported after-tax income of $129.5 million* (or $1.51 per share) for the third quarter, down 4.1 percent from 2004 on a pro forma basis. Excluding special items and merger-related amortization expense, after-tax income was $139.1 million* (or $1.62 per share), down 3.7 percent from 2004 on a pro forma basis. (*See table below for reconciliation to nearest U.S. GAAP measure.)
The company's effective tax rate for the third quarter 2005 was 6.4 percent, or 13.1 percent excluding special items, and 15.0 percent excluding special items and merger-related amortization. For comparative purposes, pro forma third quarter 2004 results reflect the same effective tax rates as 2005 third quarter results.
On a consolidated pro forma basis, compared to the third quarter 2004, the company's third quarter 2005 results included:
* Sales to retail 0.0%
* Sales volume +0.3%
* Net sales +0.3%
* Gross profit +4.7%
* Operating income (5.0%)
* Pretax income (16.6%)
* Net income (18.2%)
* After-tax income, excluding special items (4.1%)
* Diluted earnings per share, excluding special items (3.8%)
* After-tax income, excluding special items
and merger-related amortization expenses (3.7%)
* Diluted earnings per share, excluding special items
and merger-related amortization expenses (3.4%)
Leo Kiely, Molson Coors president and chief executive officer, said, "Our third quarter financial results reflected encouraging volume and financial performance in Canada and the U.S., despite extensive competitive price discounting in some of our largest markets and significant input cost inflation. We made good progress on cost reduction initiatives across the company, which aided financial results in the quarter, and we increased investments in marketing and sales programming. At the same time, substantial market challenges in the U.K. reduced the financial performance of our Europe business. Our Brazil operation continued to report operating losses, but at a significantly reduced level.
"In Canada, our year-over-year sales to retail increased 1.5 percent on a comparable basis during the third quarter, led by Coors Light which grew at a double-digit percentage rate versus a year ago. In the U.S., sales to retail were up slightly compared to prior year, driven by low-single-digit growth of Coors Light. However, our revenue per barrel was impacted negatively by a substantial increase in price discounting in several U.S. markets in the quarter.
"Although third quarter volume improved in our Europe segment well ahead of the U.K. beer market, this business continued to be challenged by competitive price discounting and margin pressure from unfavorable changes in channel and sales mix. We were encouraged, however, by strong volume performance of our U.K. industry-leading brand, Carling, which grew at a mid- single-digit percentage rate in the quarter. In Brazil, cost and pricing trends improved in the third quarter, but volume declines and operating losses continued to be significant challenges."
Canada Segment
Canada segment comparable sales to retail were up 1.5 percent during the third quarter 2005 compared to prior year largely due to favorable weather and stronger, more integrated sales and marketing programs. Overall industry sales to retail grew an estimated 3.5 percent in the quarter from a year earlier. Sales volume of 2.4 million barrels (2.8 million hl) was up 4.0 percent on a comparable basis versus prior year. Canada segment net sales increased 14.0 percent on a pro forma basis from the third quarter of 2004 driven by favorable foreign exchange rates, higher volume and increased pricing in select markets. Excluding a $13.9 million pretax special charge in 2004 (described below), operating income in Canada during the third quarter 2005 increased 11.2 percent on a pro forma basis versus prior year.
United States Segment
In the third quarter 2005, comparable U.S. segment sales volume decreased 0.3 percent. On a pro forma basis, the company reported no change in U.S. segment net sales compared to the third quarter a year ago. U.S. segment sales to retail increased 0.1 percent on a pro forma basis during the quarter, driven by low-single-digit percentage growth by Coors Light and a strong double-digit increase in Blue Moon, offset by declines in other brands, primarily the Coors brand and Aspen Edge.
Including a special charge of $37.1 million (described below), third quarter U.S. operating income of $31.2 million was 48.1 percent lower on a pro forma basis versus prior year. Excluding the special charge, U.S. operating income increased 13.8 percent on a pro forma basis, driven by lower overhead and manufacturing costs, partially offset by higher packaging materials and energy costs.
Europe Segment
In the third quarter 2005, Europe segment sales volume increased 3.4 percent compared to a year ago. Net sales per barrel decreased 18.6 percent from the third quarter of 2004, primarily because of a change in contractual arrangements with a major customer for the sale of non-owned, or factored, brand sales. This contract change reduced both net sales and cost of goods sold by $60 million in the third quarter, with no impact on profits. Owned brand revenue per barrel in the U.K. decreased approximately 3 percent in local currency as a result of lower pricing and adverse channel and sales mix. In addition, unfavorable foreign exchange rates reduced net sales approximately 1 percent.
Although U.K. beer industry volume grew in the third quarter against a soft quarter a year ago, the industry continued to be challenged by lower consumer spending and higher levels of competitor discounting in both the on-premise and off-premise channels. As a result, Europe segment operating income during the third quarter 2005 decreased 24.2 percent from the prior year.
Brazil Segment
Brazil segment net sales during the third quarter increased 27.0 percent on a pro forma basis from the third quarter of 2004, driven by favorable beer pricing and a 19.3 percent appreciation of the Brazilian real versus the U.S. dollar. Sales volume of 1.6 million barrels (1.9 million hl) declined 7.6 percent on a comparable basis versus a year ago. The Brazil business continued to improve operating trends during the third quarter, with a pro forma operating loss 26.4 percent smaller than a year ago.
Molson Coors Brewing Company continues to assess the future of its Brazil operations and evaluate a full range of strategic options for the future of this business, a process that includes discussions with third parties regarding the Kaiser business.
Special Items
The company reported the following special items totaling $33.5 million, or $0.25 per share after-tax, during the third quarter 2005:
* U.S. segment special charges of $37.1 million were primarily related to
closing the company's Memphis brewery, including charges for a
$25 million reserve for an estimated final contribution to the
multi-employer Memphis pension plan, from which the company anticipates
withdrawing in 2007. U.S. special charges also include accelerated
Memphis asset depreciation of $10.9 million and limited restructuring
expenses.
* In Europe, a $0.6 million net special charge includes restructuring
expenses related to cost-reduction initiatives, largely offset by gains
on the sale of surplus real estate previously used in operations.
* A corporate segment special credit of $4.2 million was attributable to
stock option income resulting from the quarterly adjustment to the cost
of providing a floor price under options for Coors executives who left
under a change-of-control provision following the merger of Molson and
Coors.
In addition, 2004 pro forma Canada results included a $13.9 million pretax special charge in the 3rd quarter of 2004 attributable to merger-related costs and restructuring charges.
Merger Synergies Update
In the third quarter 2005, Molson Coors synergy teams continued to pursue aggressively $175 million of merger-related pretax cost synergies that the company has committed to capturing in stages over the next three years. Since the completion of the merger on February 9, 2005, the company has captured approximately $37 million in cost synergies, with the savings mostly in overhead and procurement costs. The company is confident that it will capture at least $50 million in merger-related cost synergies in 2005.
Molson Coors Brewing Company will conduct an earnings conference call with financial analysts and investors at noon Eastern Time today to discuss the company's third quarter financial results. The company will provide a live webcast of the earnings call. Approximately two hours after the conclusion of the earnings call, the company also will host an online, real-time webcast of an Investor Relations Working Session with financial analysts at 3:00 p.m. Eastern Time. Both webcasts will be accessible via the company's website, http://www.molsoncoors.com.
Online replays of the webcasts will be available until 11:59 p.m. Eastern Time on December 31, 2005.
*Molson Coors Brewing Company After-tax Income Excluding Special Items and Merger-related Amortization
Reconciliation to Nearest U.S. GAAP Measure
(In millions of $US)
2005 Third Quarter
U.S. GAAP: Net income - reported $108.2
Add back Pretax special items - net 33.5
Minus: Tax effect on special items (12.2)
Minus: Minority interest in special items --
Non-GAAP: After-tax income, excluding special items $129.5
Add back: Pretax merger-related amortization expense 14.7
Minus: Tax effect on merger-related amortization (5.1)
Non-GAAP: After-tax income, excluding special items and
merger-related amortization $139.1
After-tax Income Excluding Special Items and Merger-related Amortization should be viewed as a supplement to -- not a substitute for -- our results of operations presented on the basis of accounting principles generally accepted in the United States. We believe that After-tax Income Excluding Special Items and Merger-related Amortization is used by and is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to evaluate our performance without regard to items such as special items and amortization expense, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired. Our management uses After-tax Income Excluding Special Items and Merger-related Amortization: as a measure of operating performance to assist in comparing performance from period to period on a consistent basis; as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations; and in communications with the board of directors, stockholders, analysts and investors concerning our financial performance.
(Summary of Operations Attached)
Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of the federal securities laws, and language indicating trends, such as "trend improvements," "progress," "anticipated," "improving sales trends" and "on track." It also includes financial information, of which, as of the date of this press release, the company's independent auditors have not completed their review. Although the company believes that the assumptions upon which the financial information and its forward-looking statements are based are reasonable, it can give no assurance that these assumptions will prove to be correct. Important factors that could cause actual results to differ materially from the company's projections and expectations are disclosed in the company's filings with the Securities and Exchange Commission. These factors include, among others, changes in consumer preferences and product trends; price discounting by major competitors; unanticipated expenses, margin impact and other factors resulting from the recent merger; failure to realize anticipated results from synergy initiatives; and increases in costs generally. All forward-looking statements in this press release are expressly qualified by such cautionary statements and by reference to the underlying assumptions. We do not undertake to publicly update forward-looking statements, whether as a result of new information, future events or otherwise.
MOLSON COORS BREWING COMPANY
SUMMARY OF OPERATIONS - CONSOLIDATED
3rd QUARTER 2005
(Unaudited)
Thirteen Weeks Ended Thirty-nine Weeks Ended
(In thousands, except Sept. 25, Sept. 26, Sept. 25, Sept. 26,
per share amounts) 2005 2004 2005 2004
Barrels of beer and
other beverages sold 12,837 8,559 33,729 24,419
Sales $2,210,188 $1,487,828 $5,837,783 $4,272,841
Beer excise taxes (613,326) (383,522) (1,565,463) (1,094,330)
Net sales 1,596,862 1,104,306 4,272,320 3,178,511
Costs and expenses:
Cost of goods sold (935,426) (688,384) (2,575,773) (2,003,152)
Gross profit 661,436 415,922 1,696,547 1,175,359
Marketing, general
and administrative (465,461) (312,018) (1,285,173) (917,857)
Special charges - net (33,493) -- (161,866) --
Operating income 162,482 103,904 249,508 257,502
Other (expense)
income - net (6,405) 5,903 (9,393) 5,883
Interest expense -
net (40,232) (12,268) (102,105) (40,831)
Income before
income taxes 115,845 97,539 138,010 222,554
Income tax expense (7,372) (29,430) (29,097) (69,658)
Income before
minority interest 108,473 68,109 108,913 152,896
Minority interest (275) (3,967) 3,647 (11,878)
Net income (1) $108,198 $64,142 $112,560 $141,018
Net income per share
(basic) $1.27 $1.72 $1.45 $3.81
Net income per share
(diluted) $1.26 $1.68 $1.44 $3.74
Weighted average
number of shares
o/s (basic) (2) 85,323 37,341 77,405 37,054
Weighted average
number of shares
o/s (diluted) 85,900 38,125 78,059 37,754
Cash dividends
declared per share $0.32 $0.205 $0.96 $0.615
(1) Purchase accounting, which is preliminary as of September 25, 2005,
could result in additional income or loss that these results do not
reflect on an annualized basis when finalized in subsequent reporting
periods.
(2) Shares outstanding at December 26, 2004, totaled 37.7 million and
were 85.3 million at September 25, 2005, largely as a result of the
merger.
NOTE: All results prior to February 9, 2005, exclude Molson Inc., which
merged with Adolph Coors Company on that date.
MOLSON COORS BREWING COMPANY
SUMMARY OF OPERATIONS - CANADA
3rd QUARTER 2005
(Unaudited)
Thirteen Weeks Ended Thirty-nine Weeks Ended
Sept. 25, Sept. 26, Sept. 25, Sept. 26,
(In thousands) 2005 2004 2005 2004
Barrels of beer and
other beverages sold 2,398 -- 5,490 --
Sales $635,191 $17,765 $1,445,813 $44,959
Beer excise taxes (149,725) -- (325,423) --
Net sales 485,466 17,765 1,120,390 44,959
Costs and expenses:
Cost of goods sold (233,297) -- (586,111) --
Gross profit 252,169 17,765 534,279 44,959
Marketing, general
and administrative (113,968) 403 (273,065) 637
Operating income 138,201 18,168 261,214 45,596
Other expense - net (6,953) -- (6,953) --
Interest income - net -- -- -- --
Earnings before
income taxes $131,248 $18,168 $254,261 $45,596
MOLSON COORS BREWING COMPANY
SUMMARY OF OPERATIONS - UNITED STATES
3rd QUARTER 2005
(Unaudited)
Thirteen Weeks Ended Thirty-nine Weeks Ended
Sept. 25, Sept. 26, Sept. 25, Sept. 26,
(In thousands) 2005 2004 2005 2004
Barrels of beer and
other beverages sold 6,077 5,883 17,205 16,802
Sales $766,389 $738,887 $2,192,293 $2,107,927
Beer excise taxes (108,529) (105,077) (307,478) (300,625)
Net sales 657,860 633,810 1,884,815 1,807,302
Costs and expenses:
Cost of goods sold (403,203) (381,657) (1,144,624) (1,098,618)
Gross profit 254,657 252,153 740,191 708,684
Marketing, general
and administrative (186,371) (192,283) (561,009) (554,568)
Special charges (37,115) -- (54,561) --
Operating income 31,171 59,870 124,621 154,116
Other (expense)
income - net (1,163) 6,178 (1,105) 8,461
Interest income - net -- -- -- --
Earnings before
income taxes $30,008 $66,048 $123,516 $162,577
MOLSON COORS BREWING COMPANY
SUMMARY OF OPERATIONS - EUROPE
3rd QUARTER 2005
(Unaudited)
Thirteen Weeks Ended Thirty-nine Weeks Ended
Sept. 25, Sept. 26, Sept. 25, Sept. 26,
(In thousands) 2005 2004 2005 2004
Barrels of beer and
other beverages sold 2,767 2,676 7,418 7,618
Sales $664,077 $731,176 $1,888,933 $2,119,955
Beer excise taxes (282,965) (278,445) (774,402) (793,705)
Net sales 381,112 452,731 1,114,531 1,326,250
Costs and expenses:
Cost of goods sold (245,722) (306,727) (736,732) (904,534)
Gross profit 135,390 146,004 377,799 421,716
Marketing, general
and administrative (107,109) (109,438) (329,570) (335,551)
Special charges (561) -- (960) --
Operating income 27,720 36,566 47,269 86,165
Other expense - net (2,487) (900) (9,080) (2,894)
Interest income - net 3,150 3,757 10,108 11,828
Earnings before
income taxes $28,383 $39,423 $48,297 $95,099
MOLSON COORS BREWING COMPANY
SUMMARY OF OPERATIONS - BRAZIL
3rd QUARTER 2005
(Unaudited)
Thirteen Weeks Ended Thirty-nine Weeks Ended
Sept. 25, Sept. 26, Sept. 25, Sept. 26,
(In thousands) 2005(1) 2004 2005(1) 2004
Barrels of beer and
other beverages sold 1,595 -- 3,616 --
Sales $141,871 $-- $308,084 $--
Beer excise taxes (72,107) -- (158,160) --
Net sales 69,764 -- 149,924 --
Costs and expenses:
Cost of goods sold (52,923) -- (108,025) --
Gross profit 16,841 -- 41,899 --
Marketing, general
and administrative (34,081) -- (70,024) --
Special charges -- -- (46,710) --
Operating loss (17,240) -- (74,835) --
Other income - net 492 -- 175 --
Interest expense (7,263) -- (18,254) --
Loss before income taxes $(24,011) $-- $(92,914) $--
(1) The Brazil segment's results are reported from February 9, 2005, the
effective date of the merger with Molson, Inc. The Brazil segment is
reported one month in arrears. Accordingly, the amounts above represent
results for the period from February 9, 2005 through August 31, 2005.
MOLSON COORS BREWING COMPANY
SUMMARY OF OPERATIONS - CORPORATE
3rd QUARTER 2005
(Unaudited)
Thirteen Weeks Ended Thirty-nine Weeks Ended
Sept. 25, Sept. 26, Sept. 25, Sept. 26,
(In thousands) 2005 2004 2005 2004
Barrels of beer and
other beverages sold -- -- -- --
Sales (1) $2,660 $-- $2,660 $--
Beer excise taxes -- -- -- --
Net sales (1) 2,660 -- 2,660 --
Costs and expenses:
Cost of goods sold (1) (281) -- (281) --
Gross profit 2,379 -- 2,379 --
Marketing, general
and administrative (23,932) (10,700) (51,505) (28,375)
Special charges 4,183 -- (59,635) --
Operating loss (17,370) (10,700) (108,761) (28,375)
Other income - net 3,706 625 7,570 316
Interest expense - net (36,119) (16,025) (93,959) (52,659)
Loss before income taxes $(49,783) $(26,100) $(195,150) $(80,718)
(1) The amounts shown are reflective of revenues and costs associated
with the Company's intellectual property, including trademarks and
brands. Prior period amounts have not been reclassified due to
immateriality.
