Molson Coors Reports 2005 Second Quarter Results

August 02, 2005

DENVER, and MONTREAL, Aug. 2 /PRNewswire-FirstCall/ -- Molson Coors Brewing Company (NYSE: TAP; TSX) today announced higher consolidated net sales and sales volume, and lower net income for the second quarter of 2005 compared to the second quarter of 2004. Higher consolidated sales volume and net sales were attributable to the inclusion of Molson Inc. results in the second quarter of 2005 but not in the second quarter of 2004. Lower net income of $38.5 million, or $0.45 per share, was primarily attributable to special charges totaling $87.7 million in the second quarter 2005.

For the 13-week second quarter ended June 26, 2005, the company reported net sales of $1.6 billion and sales volume of 12,799,000 barrels, or 15,019,100 hectoliters (hl). Excluding special items and merger-related amortization expense, the company reported after-tax income of $105.1 million*, or $1.22 per share, for the 2005 second quarter, down 12.4 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 during the second quarter 2005 was 53.0 percent, or 37.5 percent excluding special items and merger-related amortization.

The company plans to file an amended first quarter 2005 Form 10-Q later this week to correct the initial recording of a U.S. deferred tax asset as part of the purchase accounting for its U.K. acquisition in 2002. Due to the change, the company will restate its first quarter 2005 tax provision and earnings. The company still expects its long-term effective tax rate excluding Brazil losses to be in the range of 25 to 30 percent.

The company's restated first quarter 2005 net loss was $75.7 million, or $0.88 per share, on a pro forma basis. Excluding special items and merger- related amortization expense, after-tax income was $7.0 million, or $0.08 per share, on a pro forma basis, down 86 percent from a year ago.*

On a consolidated pro forma basis, compared to the second quarter 2004, the company's second quarter 2005 results included:

     * Sales to retail                                  (3.8%)
     * Sales volume                                     (3.1%)
     * Net sales                                        (1.3%)
     * Operating income                                (49.0%)
     * Earnings per share                              (65.2%)
     * After-tax income, excluding special items
        and merger-related amortization expenses       (12.4%)

Leo Kiely, Molson Coors president and chief executive officer, said, "Overall, our second quarter results were mixed, with some trend improvements in our two largest markets -- Canada and the U.S. -- and continuing challenges in both our Europe and Brazil segments. In Canada, our year-over-year sales to retail increased 2.1 percent during the second quarter, which was our best retail sales performance in the last seven quarters in Canada, with Coors Light growing more than 10 percent from a year ago. In the U.S., Coors Light sales to retail were up slightly compared to a year ago. In addition, the U.S. pricing environment was still favorable, despite competitive discounting activity in some key markets on select brands and packages.

"We also faced some headwinds during the second quarter, especially in our Europe segment, which was significantly challenged by a weak U.K. beer industry, increased competitive discounting and margin pressure from unfavorable brand and channel mix changes. In Brazil, cost and pricing trends have improved, but continued sales declines and operating losses challenged this business.

"For the remainder of the year, we will focus on making even more progress improving our sales trends in Canada and the U.S. In the U.K., we are working to restore volume momentum with targeted sales efforts in both the on-premise and off-premise channels while maintaining the strength of our U.K. brand equities. We're also accelerating a number of U.K. cost reduction initiatives. Across the enterprise, we will continue our work integrating the operations and organization of the combined Molson and Coors business as we build a more competitive and profitable global beer company."

Canada Segment

Canada segment comparable sales to retail were up 2.1 percent during the second quarter 2005 compared to a year ago largely due to favorable weather and stronger sales and marketing programs versus a year ago. Sales volume of 2,218,000 barrels (2,602,600 hl) was down 2.8 percent on a comparable basis from a year ago primarily due to a reduction in trade inventories and one fewer shipping day compared to last year, along with lower export volume. Canada segment net sales were up approximately 6 percent on a pro forma basis from the second quarter of 2004 driven by favorable foreign exchange rates. Operating income in Canada during the second quarter 2005 decreased 11.9 percent on a pro forma basis from the prior year due to lower sales volume, incremental investments in core brands and higher non-headcount-related general and administrative expenses.

United States Segment

In the second quarter 2005, sales volume and net sales in the U.S. segment increased 0.5 percent and 2.7 percent, respectively, on a pro forma basis from the second quarter a year ago. U.S. sales to retail decreased 2.6 percent on a pro forma basis during the quarter, driven largely by the lapping of the 2004 nationwide rollout of the company's Aspen Edge brand. Coors Light sales to retail increased slightly in the second quarter 2005, the first such increase for Coors Light in the U.S. in nine quarters. Including a special charge of $10.0 million, U.S. operating income of $78.8 million increased 3.8 percent on a pro forma basis compared to a year earlier, driven by positive pricing and lower manufacturing costs, partially offset by higher materials and energy costs. Excluding the special charge, U.S. operating income increased 17 percent on a pro forma basis.

Europe Segment

In the second quarter 2005, Europe segment sales volume decreased by 5.8 percent compared to a year ago, with Carling sales volume declining less than 2.0 percent. Net sales per barrel decreased 10.5 percent from the second quarter of 2004, primarily because of a change in contractual arrangements on some factored brand sales, which reduced both net sales and cost of goods sold by $65 million, with no impact on profits.

The U.K. beer industry as a whole was impacted negatively by lower consumer spending. The company's U.K. sales volume declines during the quarter were further driven by unusually high levels of competitor discounting in both the on-premise and off-premise channels, as well as the lapping of higher second quarter 2004 sales volume, which benefited from the Euro 2004 soccer tournament. Including a special credit of $3.2 million, Europe segment operating income during the second quarter 2005 decreased 37.2 percent from the prior year.

Brazil Segment

Brazil segment net sales during the second quarter increased nearly 20 percent on a pro forma basis from the second quarter of 2004, driven by favorable beer pricing and a 16 percent appreciation of the Brazilian real versus the U.S. dollar. Sales volume of 1,637,000 barrels (1,920,950 hl) declined 11.7 percent on a comparable basis versus a year ago. Excluding special charges, the Brazil segment reduced operating losses by approximately half on a pro forma basis from the second quarter 2004. The company cannot recognize a tax benefit from the operating losses generated by the Brazil segment, which caused a 26 percentage point increase in the company's effective tax rate in the second quarter. The company has made solid progress in its detailed assessment of its Brazil operations and evaluation of options for the future of the business.

Special Items

The company reported special charges totaling $87.7 million during the second quarter 2005, including:

* Brazil results include a $46.7 million special charge to increase contingent liabilities due to developments in the quarter that indicate a higher probability of future payments in certain transactional tax disputes.

* Corporate segment special charges were $34.2 million, primarily due to severance payments and benefits for executives who left the company following the merger, including the cost of providing a price per share floor under stock options for some of these executives.

* In the U.S., special charges of $10.0 million were primarily for accelerated depreciation of the Memphis brewery, which will be closed by early 2007.

* In Europe, a special credit of $3.2 million was due to one-time development profits on real estate formerly held by the company.

Synergies Update

In the second quarter 2005, Molson Coors synergy teams continued to pursue aggressively $175 million of pretax cost synergies that the company has committed to capturing over the next three years. Since the completion of the merger on February 9, 2005, the company has captured approximately $15 million in cost synergies, with the savings mostly in overhead costs. The company believes it is on track to capture the $50 million cost synergy commitment for 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 second 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, www.molsoncoors.com. Online replays of the webcasts will be available until 11:59 p.m. Eastern Time on September 30, 2005.

     *Molson Coors Brewing Company
     After-tax Income Excluding Special Items and
     Merger-related Amortization
     Reconciliation to Nearest U.S. GAAP Measure
     (In thousands of $US)

     2005 Second Quarter

     U.S. GAAP:    Net income -- reported                         $38,546
     Add back:     Special items                                   87,673
     Add back:     Merger-related amortization expense             14,043
     Minus:        Tax effect on special items                    (21,918)
     Minus:        Tax effect on merger-related amortization       (5,266)
     Minus:        Minority interest in special items              (7,964)
     Non-GAAP:     After-tax income, excluding special
                   items and merger-related amortization         $105,114


     2005 First Quarter
     Reported U.S. GAAP loss                                       $(46,538)
     Adjustment to restate tax benefit                               12,354
     Restated GAAP loss                                             (34,184)
     Pre-merger results of Molson, Inc., net of tax  (1)            (41,513)
     Pro forma net loss, restated                                   (75,697)
     Add back:     Special items  (2)                                83,849
     Add back:     Merger-related amortization  (2)                  15,959
     Minus:        Tax effect on special items  (2)                 (11,765)
     Minus:        Tax effect on merger-related amortization (2)     (1,506)
     Minus:        Minority interest in special items (2)            (3,854)
     Pro forma net income, excluding special items                   $6,986

     (1)  Includes fair value and other pro forma adjustments estimated for
          the pre-merger period.
     (2)  Amounts indicated are for the full thirteen weeks ended
          March 27, 2005.


The company provides -- and management uses -- the above non-GAAP measures to give a more meaningful view of the ongoing profit performance of the company.

(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," "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
                                 2nd QUARTER 2005
                                   (Unaudited)

                                Thirteen Weeks Ended    Twenty-six Weeks Ended
    (In thousands, except per    June 26,     June 27,   June 26,     June 27,
     share amounts)                 2005        2004        2005        2004

    Barrels of beer and other
     beverages sold                12,799       8,821      20,893      15,861

    Sales                      $2,198,158  $1,549,843  $3,627,595  $2,785,013
    Excise taxes                 (586,845)   (399,631)   (952,137)   (710,808)
    Net sales                   1,611,313   1,150,212   2,675,458   2,074,205

    Costs and expenses:
      Cost of goods sold         (940,233)   (703,024) (1,640,347) (1,314,768)
    Gross profit                  671,080     447,188   1,035,111     759,437

      Marketing, general and
       administrative            (475,691)   (322,062)   (819,712)   (605,839)
      Special items               (87,673)         --    (128,373)         --
    Operating income              107,716     125,126      87,026     153,598

      Other income (expense)
       -- net                       2,886       1,835      (2,988)        (20)
      Interest expense -- net     (40,046)    (13,025)    (61,873)    (28,563)
    Income before income taxes     70,556     113,936      22,165     125,015
    Income tax expense            (37,418)    (36,495)    (21,725)    (40,228)
    Income before minority
     interests                     33,138      77,441         440      84,787
    Minority interests              5,408      (5,405)      3,922      (7,911)
    Net income (1)                $38,546     $72,036      $4,362     $76,876

    Net income per share
     (basic)                        $0.45       $1.94       $0.06       $2.08
    Net income per share
     (diluted)                      $0.45       $1.90       $0.06       $2.05

    Weighted average number of
     shares o/s (basic)  (2)       85,321      37,160      74,214      36,911
    Weighted average number of
     shares o/s (diluted)          85,928      37,862      75,124      37,568

    Cash dividends declared
     per share                      $0.32      $0.205       $0.64      $0.410


     (1) Purchase accounting, which is preliminary as of June 26, 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 June 26, 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
                                 2nd QUARTER 2005
                                   (Unaudited)

                                        Thirteen Weeks      Twenty-six Weeks
                                             Ended                Ended
                                       June 26,  June 27,  June 26,   June 27,
    (In thousands)                        2005     2004       2005      2004

    Barrels of beer and other
     beverages sold                      2,218      --        3,093       --

    Sales                             $571,299   $14,731   $810,622    $27,194
    Excise taxes                      (132,706)      --   $(175,698)      --
    Net sales                          438,593    14,731   $634,924     27,194

    Costs and expenses:
      Cost of goods sold              (218,651)      --    (352,814)       --
    Gross profit                       219,942    14,731    282,110     27,194

      Marketing, general and
       administrative                 (113,310)      198   (159,097)       234
    Operating income                   106,632    14,929    123,013     27,428

      Other income -- net                  706       --          --        --
    Earnings before income taxes      $107,338   $14,929   $123,013    $27,428



                           MOLSON COORS BREWING COMPANY
                      SUMMARY OF OPERATIONS -- UNITED STATES
                                 2nd QUARTER 2005
                                   (Unaudited)

                               Thirteen Weeks Ended    Twenty-six Weeks Ended
                                June 26,   June 27,     June 26,     June 27,
    (In thousands)                 2005       2004         2005         2004

    Barrels of beer and
     other beverages sold         6,334      6,050       11,128       10,919

    Sales                      $815,045   $762,104   $1,425,904   $1,369,040
    Excise taxes               (113,063)  (108,515)    (198,949)    (195,548)
    Net sales                   701,982    653,589    1,226,955    1,173,492

    Costs and expenses:
      Cost of goods sold       (409,994)  (385,765)    (741,421)    (716,961)
    Gross profit                291,988    267,824      485,534      456,531

      Marketing, general and
       administrative          (203,159)  (193,210)    (374,638)    (362,285)
      Special items              (9,999)        --      (17,446)          --
    Operating income             78,830     74,614       93,450       94,246

      Other (expense) income
       -- net                       (18)     1,077           58        2,283
    Earnings before
     income taxes               $78,812    $75,691      $93,508      $96,529



                           MOLSON COORS BREWING COMPANY
                          SUMMARY OF OPERATIONS -- EUROPE
                                 2nd QUARTER 2005
                                   (Unaudited)

                                Thirteen Weeks Ended   Twenty-six Weeks Ended
                                June 26,    June 27,   June 26,      June 27,
    (In thousands)                 2005       2004        2005          2004

    Barrels of beer and other
     beverages sold               2,610      2,771        4,651        4,942

    Sales                      $679,002   $773,008   $1,224,856   $1,388,779
    Excise taxes               (272,714)  (291,116)    (491,437)    (515,260)
    Net sales                   406,288    481,892      733,419      873,519

    Costs and expenses:
      Cost of goods sold       (266,956)  (317,259)    (491,010)    (597,807)
    Gross profit                139,332    164,633      242,409      275,712

      Marketing, general and
       administrative          (113,325)  (118,104)    (222,461)    (226,113)
      Special items               3,230         --         (399)         --
    Operating income             29,237     46,529       19,549       49,599

      Other (expense)
       income -- net             (2,240)       482       (6,593)      (1,994)
      Interest income -- net      3,382      3,843        6,958        8,071
    Earnings before income
     taxes                      $30,379    $50,854      $19,914      $55,676



                          MOLSON COORS BREWING COMPANY
                         SUMMARY OF OPERATIONS -- BRAZIL
                                2nd QUARTER 2005
                                   (Unaudited)

                                        Thirteen Weeks      Twenty-six Weeks
                                           Ended (1)            Ended (1)
                                       June 26,  June 27,  June 26,  June 27,
    (In thousands)                       2005      2004       2005      2004

    Barrels of beer and other
     beverages sold                     1,637       --        2,021      --

    Sales                            $132,812      $--     $166,213     $--
    Excise taxes                      (68,362)      --      (86,053)     --
    Net sales                          64,450       --       80,160      --

    Costs and expenses:
      Cost of goods sold              (44,632)      --      (55,102)     --
    Gross profit                       19,818       --       25,058      --

      Marketing, general and
       administrative                 (29,292)      --      (35,943)     --
      Special items                   (46,710)      --      (46,710)     --
    Operating loss                    (56,184)      --      (57,595)     --

      Other (expense) -- net             (308)      --         (317)     --
      Interest expense                 (9,829)      --      (10,991)     --
    Loss before income taxes         $(66,321)     $--     $(68,903)    $--


     (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 Brazil's results from March 1, 2005, through May 31, 2005,
         for the quarter and from February 9, 2005 through May 31, 2005 for
         the year to date.



                           MOLSON COORS BREWING COMPANY
                        SUMMARY OF OPERATIONS -- CORPORATE
                                 2nd QUARTER 2005
                                   (Unaudited)

                               Thirteen Weeks Ended     Twenty-six Weeks Ended
                               June 26,    June 27,       June 26,    June 27,
    (In thousands)                2005        2004           2005        2004

    Barrels of beer and other
     beverages sold                 --         --             --         --

    Sales                          $--        $--            $--        $--
    Excise taxes                    --         --             --         --
    Net sales                       --         --             --         --

    Costs and expenses:
      Cost of goods sold            --         --             --
    Gross profit                    --         --             --         --

      Marketing, general and
       administrative           (16,605)   (10,946)      (27,573)    (17,675)
      Special items             (34,194)       --        (63,818)
    Operating loss              (50,799)   (10,946)      (91,391)    (17,675)

      Other income (expense)
       -- net                     4,746        276         3,864        (309)
      Interest expense -- net   (33,599)   (16,868)      (57,840)    (36,634)
    Loss before income taxes   $(79,652)  $(27,538)    $(145,367)   $(54,618)


SOURCE
Molson Coors Brewing Company
08/02/2005

CONTACT:
Sylvia Morin, 1-514-590-6345,
or
Investor Relations,
Dave Dunnewald, 1-303-279-6565,
or
Kevin Caulfield, 1-303-277-6894,
all of Molson Coors Brewing Company
Web site: http://www.molsoncoors.com