Press Release
Molson Coors Reports Higher Net Income and Earnings per Share on Higher Net Sales and Volume for 2007 Second Quarter
August 07, 2007
DENVER, Colo., and MONTREAL, Quebec – Molson Coors Brewing Company (NYSE: TAP; TSX) today reported higher consolidated sales volume, net income and earnings per share for the Companys fiscal 2007 second quarter.
Key results for the Companys fiscal second quarter ended July 1, 2007, compared to the fiscal second quarter ended June 25, 2006, include the following:
- Net sales increased 5.9 percent to $1.68 billion.
- Sales volume of 11.5 million barrels, or 13.5 million hectoliters (HLs), grew 0.7 percent; total Company sales to retail (STRs) down 0.7 percent. Canada STRs up 1.1 percent, US STRs up 1.6 percent, UK STRs down 7.5 percent.
- Cost of goods sold increased 5.1 percent to $966.9 million.
- Marketing, general and administrative expenses rose 1.9 percent to $456.9 million.
- Net income was $185.0 million.
- Income from continuing operations (after tax) was $184.3 million.
- Excluding special and other one-time items, income from continuing operations (after tax) was $176.1 million, or $1.94 per diluted share, up 44.9 percent compared to $121.6 million, or $1.40 per diluted share, in the second quarter 2006. (See “Special and Other One-Time Items” and “Discontinued Operations” below.)
All $ amounts in US dollars. See tables below for reconciliations to nearest US GAAP measures.
Leo Kiely, Molson Coors president and chief executive officer, said, “We were pleased with our Companys performance during the second quarter. We were especially pleased that we continued to grow overall volume and achieved share gains in our two largest markets. We remained focused on building our strategic brands, led by Coors Light. In addition, we delivered on cost reduction plans across our global enterprise, offsetting a significant portion of our cost inflation challenges.”
Through the end of the second quarter 2007, the Companys year-to-date savings from merger synergies and next-generation cost savings programs totaled $78 million. Foreign exchange rate movements increased total-company pretax income by approximately $7 million in the second quarter 2007. The Companys effective tax rate during the second quarter 2007 for income from continuing operations was 13 percent, or 20 percent excluding special and other one-time items, compared to negative 3 percent and positive 31 percent, respectively, during the second quarter a year ago.
Following are the Companys 2007 second quarter results by business segment:
Canada Business
Canada business pretax income was $146.2 million, excluding special and other one-time items, a 1.9 percent increase compared to the second quarter 2006. Canada sales volume increased 4.0 percent, driven by a 1.1 percent increase in sales to retail and the inclusion of the higher volume week leading into the Canada Day weekend in the second quarter 2007 versus its inclusion in the third quarter 2006. During the second quarter 2007, the Companys Canada business grew quarterly market share for the first time in nearly four years. Strong growth in Coors Light, Rickards, Creemore, Carling and the Companys partner import brands was partially offset by a decline in other premium, discount and unsupported brands. Canada business net sales increased approximately 5 percent in local currency. Net sales per barrel increased approximately 1 percent in local currency compared to the second quarter 2006.
Cost of goods sold per barrel increased approximately 6 percent in local currency, driven by growth of the Companys higher-cost super-premium partner import brands and the mark-to-market adjustments of certain foreign currency hedge positions. Synergies and other cost reduction initiatives more than offset the Canada business cost of goods increase related to inflation. Reductions in general and administrative expenses more than offset increased brand investments, resulting in a decrease of 1% in marketing, general and administrative expenses in local currency.
United States Business
US business pretax income was $98.1 million, up 39.1
percent compared to the second quarter 2006, excluding special charges a year ago, driven by sales volume growth, higher net pricing and results of the Companys merger synergies and other cost saving initiatives. Sales volume and net sales in the US business increased 3.1 percent and 5.4 percent, respectively, from the second quarter 2006, while net sales per barrel increased 2.2 percent. US business 50-state sales to retail grew 2.0 percent, driven by a low-single-digit growth by Coors Light and double-digit growth of Blue Moon and mid-single-digit growth of Keystone Light.
US business cost of goods per barrel decreased 0.5 percent driven by cost-saving initiatives and lower depreciation expense, largely offset by higher commodity, transportation and packaging material costs. Synergies and other cost savings offset about two-thirds of cost of goods inflation in the US business. Marketing, general and administrative expenses were down 0.9 percent, with higher brand-building and sales investments more than offset by decreases in general and administrative costs.
Europe Business
Excluding special items, Europe business pretax income was $38.9 million, up 5.1 percent from the second quarter 2006, driven by higher sales per barrel, continued progress on cost saving initiatives, higher pension income and an approximately 9 percent appreciation in the British pound versus the US dollar. Europe business owned-brand sales volume decreased 7.5 percent compared to the second quarter 2006. Lower volumes were largely attributable to cycling increased sales during the World Cup soccer tournament a year ago, as well as unusually poor weather in the second quarter 2007. Europe business year-over-year results also were negatively impacted by a $5.5 million gain on sale of real estate in the second quarter 2006. UK owned-brand net sales per barrel increased slightly more than 4 percent in local currency compared to the second quarter 2006. Cost of goods sold per barrel for the Companys owned brands decreased approximately 1 percent in local currency during the quarter. Marketing, general and administrative expenses in the UK decreased approximately 1 percent in local currency, with higher marketing spend in the second quarter more than offset by reductions in general and administrative costs.
Corporate Expenses
The Companys Corporate general and administrative expenses totaled $30.3 million in the second quarter 2007, an increase of $2.0 million from the second quarter 2006 due to debt-restructure fees and investments in cost-saving projects. The Companys recent convertible offering and associated debt tender are expected to reduce future interest payments by approximately $15 million annually. In the second quarter 2007, net interest expense, excluding interest income from trade loans in the UK, was $27.8 million, $12.0 million lower than a year ago due primarily to lower average net debt balances in 2007 and lower expense related to adjusting Ontario Beer Store interest rate swaps to market value.
Special and Other One-time Items
During the second quarter 2007 the Company reported net special charges of $25.4 million including a $24.1 million charge in Canada related to the impairment of the value of the Companys Fosters US license agreement, and $1.2 million in special restructuring expenses in the Europe business supply chain.
One-time items during the second quarter 2007 included other income from a $16.7 million gain on the sale of the Companys equity interest in the House of Blues Canada business. In addition, one-time tax benefits reduced the Companys reported tax expense by $11.5 million in the second quarter 2007. The non-recurring tax benefits were related to revaluation of the Companys deferred tax assets and liabilities for a one-half percentage-point reduction in the Canada corporate income tax rate, as well as a one-time adjustment to reduce the Companys liabilities for unrecognized tax benefits.
In the second quarter a year ago, the Company had reported net special charges totaling $25.8 million and a one-time tax benefit of $52.3 million from reductions in Canada federal and provincial corporate income tax rates.
Discontinued Operations
The Company reports results for its former Brazilian unit, Cervejarias Kaiser (“Kaiser”) as discontinued operations. The Company reported net income of $0.6 million from discontinued operations during the quarter arising from favorable foreign currency exchange rates that more than offset a small increase in the indemnity estimates related to Kaiser.
2007 Second Quarter Earnings Conference Call
Molson Coors Brewing Company will conduct an earnings conference call with financial analysts and investors at noon Eastern Time today to discuss the Companys 2007 second quarter 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 Follow-up Session with financial analysts at 3:00 p.m. Eastern Time. Both webcasts will be accessible via the Companys website, www.molsoncoors.com. Online replays of the webcasts will be available until 11:59 p.m. Eastern Time on September 30, 2007.
Reconciliations to Nearest US GAAP Measures
Molson Coors Brewing Company
2007 Second Quarter 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) | 2nd Q 2007 | 2nd Q 2006 |
| US GAAP: After-tax income (loss) from continuing operations | $184.3 | $157.6 |
| Per diluted share | $2.03 | $1.82 |
| Add back: Pretax special items - net | 25.4 | 25.8 |
| Minus: Gain on sale of House of Blues Canada equity | (16.7) | - |
| Minus: Tax effect on special items and gain on sale of | (5.5) | (9.6) |
| Minus: One-time tax benefits | (11.5) | (52.3) |
| Non-GAAP: After-tax income (loss) from continuing | $176.1 | $121.6 |
| Per diluted share | $1.94 | $1.40 |
Molson Coors Brewing Company
2007 Second Quarter Pretax Income From Continuing Operations, Excluding Special and Other One-time Items
(Note: Some numbers may not sum due to rounding.)
| (In millions of $US) | Business | Total | |||
|
| Canada | US | Europe | Corporate | Consolidated |
| US GAAP: 2007 2nd Q pretax income (loss) from continuing operations - reported | $138.8 | $98.1 | $37.7 | ($57.5) | $217.1 |
| Add back: Pretax special charges/credits – net | 24.1 | — | 1.2 | — | 25.4 |
| Minus: Gain on sale of House of Blues Canada equity investment (other income) | (16.7) |
|
|
| (16.7) |
| Non-GAAP: 2007 2nd Q Pretax income (loss) from continuing operations, excluding special and other one-time items | $146.2 | $98.1 | $38.9 | ($57.5) | $225.8 |
| Percent change 2007 2nd Q vs. 2006 2nd Q pretax from continuing operations, excluding special and other one-time items | 1.9% | 39.1% | 5.1% | (15.6%) | 23.4% |
| US GAAP: : 2006 2nd Q pretax income (loss) from continuing operations | $143.5 | $44.1 | $38.9 | ($69.4) | $157.1 |
| Plus (Minus): Pretax special items – net | — | 26.4 | (1.9) | 1.3 | 25.8 |
| Non-GAAP: : 2006 2nd Q Pretax income (loss) from continuing operations, excluding special and other one-time items | $143.5 | $70.5 | $37.0 | 182.9 | |
Pretax and After-tax Income (Loss) From Continuing Operations, Excluding Special and Other One-time Items 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 Pretax and After-tax Income (Loss) From Continuing Operations, Excluding Special and Other One-time Items 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, which can vary substantially from company to company depending upon accounting methods and book value of assets and capital structure. Our management uses Pretax and After-tax Income (Loss) From Continuing Operations, Excluding Special and Other One-time Items 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.
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,” “expected,” “improving sales trends” and “on track.” It also includes financial information, of which, as of the date of this press release, the Companys 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 Companys projections and expectations are disclosed in the Companys 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 update forward-looking statements, whether as a result of new information, future events or otherwise.
Molson Coors Brewing Company is one of the worlds largest brewers. It brews, markets and sells a portfolio of leading premium quality brands such as Coors Light, Molson Canadian, Molson Dry, Carling, Coors, and Keystone Light. It operates in Canada, through Molson Canada; in the US, through Coors Brewing Company; in the UK, Europe and Asia, through Coors Brewers Limited. For more information on Molson Coors Brewing Company, visit the companys website, www.molsoncoors.com
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