Molson Coors Reports 2006 Third Quarter Results

October 31, 2006

DENVER and MONTREAL, Oct. 31 /PRNewswire-FirstCall/ -- Molson Coors Brewing Company (NYSE: TAP; TSX) released today its financial results for the third quarter ending September 24, 2006. Net sales, net income and earnings per share all increased in the quarter compared to the same period a year ago.

All of the Company's operating segments achieved pretax profit growth, with solid core brand volume performance during the quarter. Key results for the Company's third quarter 2006, compared to the same period a year ago, include the following (all $ amounts in U.S. dollars):

  • Net sales increased 3.3 percent to $1.58 billion.
  • Sales volume of 11.2 million barrels, or 13.2 million hectoliters (hls), was unchanged.
  • Cost of goods sold increased 2.8 percent to $907.3 million.
  • Marketing, general and administrative expense rose 0.8 percent to $434.1 million.
  • Net income increased 25.5 percent to $135.8 million, or $1.56 per diluted share.
  • Excluding special items, income from continuing operations (after-tax)(1) was $139.5 million, or $1.61 per diluted share, down 8.4 percent from the third quarter 2005.
  • Excluding a one-time tax benefit of $0.51 per share in the third quarter of 2005, third quarter 2006 after-tax income from continuing operations excluding special items increased 28.3 percent.

(See tables below for reconciliations to nearest U.S. GAAP measures.)

Leo Kiely, Molson Coors president and chief executive officer, said, "Our third quarter results demonstrate consistent progress strengthening the fundamentals of our company, even while we face tough competitive and cost pressures in all of our markets. All three of our businesses grew pretax earnings at double-digit rates. Our Canadian teams continue to achieve strong profit growth driven by solid strategic brand performance and cost reductions. In the U.S., volume gains, synergy achievements and improved industry pricing contributed to double-digit profit growth in the quarter. U.S. volume gains were driven by Coors Light, which grew for the sixth consecutive quarter. In the U.K., our teams are doing impressive work in a very competitive market, focusing on the factors they can control to minimize the impact of margin pressures and other challenging trends in the U.K. beer industry.

"On pricing -- an area that is key to profitability in all of our businesses -- we have strategies that are driven by our own business priorities, which include building brands and ensuring our brand equities remain strong. With that in mind, our teams on the frontline are making prudent tactical pricing decisions necessary to be competitive by market, channel and package."

During the quarter, Molson Coors achieved approximately $25 million in additional synergies and other cost savings. These savings were more than offset, however, by commodity and energy-related cost inflation. Favorable foreign exchange rates increased total-company pretax income by approximately $8.5 million in the quarter.

The Company's effective tax rate during the third quarter 2006 was 31 percent including special items and 32 percent excluding special items, compared to 5 percent and 11 percent, respectively, during the third quarter a year ago. The low third quarter 2005 tax rates were attributable to a one-time $43.5 million benefit from releasing deferred tax liabilities related to the Company's U.K. business with the election of APB 23 tax treatment for that operation.

Canada Business

Canada operating income of $155.1 million in the third quarter 2006 increased 12.2 percent from the third quarter 2005 due to positive beer pricing, lower overall costs and an approximately 7 percent favorable movement in foreign exchange rates. Canada sales volume of 2.3 million barrels (2.7 million hls) was down 2.5 percent from the same period a year ago while net sales were up 6.1 percent from third quarter of 2005. Net revenue per barrel was up about 1 percent in local currency compared to the third quarter 2005. Cost of goods sold and marketing, general and administrative costs declined in local currency compared to the same period a year ago. Sales to retail decreased 1.7 percent during the quarter compared to third quarter 2005. Double-digit growth in Coors Light, Rickard's and the Company's partner import brands was offset by a decline in other premium, discount and unsupported brands stemming from intense competitive pricing pressure in key provinces, along with the impact of the discontinuation of Molson Kick and A Marca Bavaria in fall 2005.

Synergies and other cost reduction initiatives offset about one-third of the Canada business cost of goods inflation. Canada segment other income was up $12.9 million compared to the third quarter a year ago, driven by improved financial performance by the Montreal Canadiens Hockey Club and a $9.0 million benefit related to a reduction in the Company's financial guarantee obligations to the team in the third quarter.

United States Business

In the third quarter 2006, sales volume and net sales in the U.S. business increased 3.0 percent and 6.0 percent, respectively, from the third quarter a year ago. U.S. sales to retail increased 1.4 percent during the quarter compared to the same period in 2005, driven largely by a low-single-digit increase in Coors Light volume and a low double-digit increase in Keystone Light. Excluding the company's Caribbean business, U.S. 50-states sales to retail increased 1.8 percent from a year ago, well ahead of the domestic U.S. beer industry.

Including special charges, U.S. pretax income was $48.8 million. Excluding special charges, U.S. pretax income increased 10.7 percent to $74.3 million compared to the same period a year ago driven by sales volume growth, higher net pricing and the Company's cost saving initiatives and merger synergies.

Europe Business

Including special items, Europe business pretax income during the third quarter 2006 was $34.6 million. Excluding special items, pretax income for the Europe business was $36.9 million, a 27.6 percent increase from the third quarter of 2005, driven by cost savings initiatives in supply chain and overheads. In the third quarter 2006, Europe business owned-brand sales volume decreased by 4.4 percent compared to the same period a year ago. The Company's market-leading Carling brand continued to outperform the U.K. beer industry, though the brand's volume declined at a low-single-digit rate, primarily due to lower sales following the World Cup this year, the cycling of distribution gains in multiple pub chains a year ago and declines in the overall on-premise market.

Net sales per barrel decreased about 4.7 percent in local currency compared to the third quarter of 2005. About 3 percentage points of the decline was due to unfavorable owned-brand net pricing and sales mix, while the balance of the decline was largely attributable to declining factored brand volumes and a change in invoicing arrangements on certain factored brand sales. The invoicing change reduced both net sales and cost of goods sold by about $5.8 million with no impact on gross profits in the third quarter 2006. Cost of goods sold per barrel for the Company's owned brands decreased approximately 5 percent during the quarter, while marketing, general and administrative costs decreased by about 14 percent, both in local currency.

Corporate Expenses

The Company's Corporate general and administrative expenses totaled $27.2 million in the third quarter, up $4.1 million from a year ago. About half of the increase was due to the Company's stock-based long-term incentive plan, including the effect of expensing equity-based compensation. The balance of the increase was for severance payments and other labor-related costs.

Interest expense, excluding interest income from trade loans in the U.K., was $31.2 million in the third quarter, 9.4 percent lower than the interest expense a year ago due to debt repayments, including repaying $208 million of special dividend debt, during the past year and lower expense related to recording Ontario Beer Store interest rate swaps at market value.

(1)Discontinued Operations

Net income from discontinued operations during the third quarter of 2006 was $13.4 million, which reflects a reduction in the fair value of indemnity guarantees related to the Brazil Kaiser business. These liabilities were reduced because Kaiser participated in federal and state amnesty programs in Brazil to settle a significant portion of the Company's previously recorded tax-related liabilities.

Special Charges

During the third quarter 2006 the company reported special charges totaling $28.5 million pretax, or $0.20 per diluted share after-tax, primarily related to the following:

  • U.S. results included a $25.5 million pretax special charge related primarily to the closure of the Company's Memphis brewery, which was completed on September 6. These charges include accelerated depreciation of Memphis assets, severance and other plant closure costs.
  • In Europe, a $2.3 million special charge was attributable to restructuring costs in the Company's U.K. supply chain and other areas.
  • The Corporate special charge of $0.7 million was attributable to the cost of benefits for the Coors executives who left immediately following the merger last year under a change of control agreement.

2006 Third 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 Company's 2006 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 Follow-up 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 December 31, 2006.

    Reconciliations to Nearest U.S. GAAP Measures

    Molson Coors Brewing Company
    2006 Third Quarter After-tax Income From Continuing Operations, Excluding
     Special Items
    (Note: Some numbers may not sum due to rounding.)

    (In millions of $US, except per share data)     3rd Q 2006     3rd Q 2005
    U.S. GAAP:  After-tax income from
     continuing operations:                            $122.4         $131.0
          Per diluted share                             $1.41          $1.52
    Add back: Pretax special items - net                 28.5           33.5
    Minus:  Tax effect on special items                 (11.3)         (12.2)
    Non-GAAP:   After-tax income from
     continuing operations, excluding special items:   $139.5         $152.3
          Per diluted share                             $1.61          $1.77
    Percent change from 2005 results from
     continuing operations, excluding special items     (8.4%)

    Minus:  One-time tax benefit reported in
     3rd Q 2005                                            --          (43.5)
    Non-GAAP:  After-tax income from continuing
     operations, excluding special items and
     one-time tax benefit                               139.5          108.7
          Per diluted share:                            $1.61          $1.27
    Percent change from 2005 results from
     continuing operations, excluding special items
     and one-time tax benefit                           28.3%



    Molson Coors Brewing Company
    2006 Third Quarter Pretax Income From Continuing Operations, Excluding
     Special Items
    (Note: Some numbers may not sum due to rounding.)

    (In millions of $US)                Business                      Total
                           Canada    U.S.    Europe   Corporate   Consolidated
    U.S. GAAP:
     2006 3rd Q
     pretax income
     (loss) from
     continuing
     operations
     - reported            $161.1   $48.8     $34.6     ($59.4)      $185.1

    Add back: Pretax
     special charges           --    25.5       2.3        0.7         28.5

    Non-GAAP:
     2006 3rd Q
     Pretax income
     (loss) from
     continuing
     operations,
     excluding
     special items         $161.1   $74.3     $36.9     ($58.7)      $213.6

    Percent change
     2006 3rd Q vs.
     2005 3rd Q pretax
     from continuing
     operations,
     excluding
     special items          22.7%   10.7%     27.6%      15.0%        21.2%

    U.S. GAAP:
     2005 3rd Q
     pretax income
     (loss) from
     continuing
     operations            $131.2   $30.0     $28.4     ($46.9)      $142.8

    Add back:
     Pretax special
     charges/credits
     - net                     --    37.1       0.6       (4.2)        33.5

    Non-GAAP:
     2005 3rd Q
     Pretax income
     (loss) from
     continuing
     operations,
     excluding
     special items         $131.2   $67.1     $28.9     ($51.1)      $176.3


Pretax and After-tax Income (Loss) From Continuing Operations, Excluding Special 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 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 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," "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 update forward-looking statements, whether as a result of new information, future events or otherwise.

                  MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

                           Thirteen Weeks Ended   Thirty-Nine Weeks Ended
                          Sept. 24,    Sept. 25,    Sept. 24,   Sept. 25,
                            2006         2005         2006        2005

    Volume in barrels        11,243       11,243      31,286       30,115

    Sales                $2,126,652   $2,068,317  $5,800,645   $5,529,699
    Excise taxes           (549,828)    (541,219) (1,486,950)  (1,407,303)
      Net Sales           1,576,824    1,527,098   4,313,695    4,122,396
    Cost of goods sold     (907,305)    (882,503) (2,553,949)  (2,467,748)
      Gross profit          669,519      644,595   1,759,746    1,654,648
    Marketing, general
     and administrative
     expenses              (434,106)    (430,498) (1,271,245)  (1,214,267)
    Special charges, net    (28,453)     (33,493)    (81,124)    (115,156)
      Operating income      206,960      180,604     407,377      325,225
    Interest expense, net   (28,268)     (31,309)    (97,117)     (78,594)
    Other income
     (expense), net           6,421       (6,527)      9,225       (8,783)
      Income from
       continuing
       operations
       before income
       taxes and minority
       interests            185,113      142,768     319,485      237,848
    Income tax expense      (57,628)      (7,372)    (45,225)     (29,097)
      Income from
       continuing
       operations
       before minority
       interests            127,485      135,396     274,260      208,751
    Minority interests
     in net income of
     consolidated
     entities                (5,100)      (4,411)    (12,803)     (12,694)
      Income from
       continuing
       operations           122,385      130,985     261,457      196,057
    Gain (loss) from
     discontinued
     operations,
     net of tax              13,409      (22,787)        327      (83,497)
      Net income           $135,794     $108,198    $261,784     $112,560

    Basic income (loss)
     per share:
      From continuing
       operations             $1.42        $1.54       $3.04        $2.53
      From discontinued
       operations              0.16        (0.27)       0.01        (1.08)
    Basic net income
     per share                $1.58        $1.27       $3.05        $1.45

    Diluted income (loss)
     per share:
      From continuing
       operations             $1.41        $1.52       $3.02        $2.51
      From discontinued
       operations              0.15        (0.26)       0.01        (1.07)
    Diluted net income
     per share                $1.56        $1.26       $3.03        $1.44

    Weighted average shares
     - basic                 86,160       85,323      85,933       77,405
    Weighted average shares
     - diluted               86,783       85,900      86,496       78,059

    Cash dividends declared
     per share                $0.32        $0.32       $0.96        $0.96


    NOTE:  All results prior to February 9, 2005, exclude Molson Inc., which
    merged with Adolph Coors Company on that date.



                  MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
                       CANADA SEGMENT RESULTS OF OPERATIONS
                                  (IN THOUSANDS)
                                   (UNAUDITED)

                            Thirteen Weeks Ended  Thirty-Nine Weeks Ended
                           Sept. 24,    Sept. 25,  Sept. 24,     Sept. 25,
                             2006         2005       2006          2005

    Volume in barrels         2,339        2,398       6,183        5,491

    Sales                  $673,630     $635,191  $1,747,418   $1,445,813
    Excise taxes           (158,634)    (149,725)   (406,819)    (325,423)
      Net sales             514,996      485,466   1,340,599    1,120,390
    Cost of goods sold     (237,652)    (233,297)   (661,845)    (586,111)
      Gross profit          277,344      252,169     678,754      534,279
    Marketing, general
     and administrative
     expenses              (122,223)    (113,968)   (336,637)    (273,065)
      Operating income      155,121      138,201     342,117      261,214
    Other income
     (expense), net           5,941       (6,953)      7,744       (6,953)
      Segment earnings
       before income
       taxes               $161,062     $131,248    $349,861     $254,261



                  MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
                   UNITED STATES SEGMENT RESULTS OF OPERATIONS
                                  (IN THOUSANDS)
                                   (UNAUDITED)

                           Thirteen Weeks Ended   Thirty-Nine Weeks Ended
                          Sept. 24,    Sept. 25,   Sept. 24,    Sept. 25,
                            2006         2005        2006         2005

    Volume in barrels         6,257        6,077      17,643       17,205

    Sales                  $809,833     $766,390  $2,285,209   $2,192,293
    Excise taxes           (112,448)    (108,530)   (314,771)    (307,478)
      Net sales             697,385      657,860   1,970,438    1,884,815
    Cost of goods sold     (435,908)    (403,203) (1,231,077)  (1,144,624)
      Gross profit          261,477      254,657     739,361      740,191
    Marketing, general
     and administrative
     expenses              (188,419)    (186,371)   (560,939)    (561,009)
    Special charges, net    (25,506)     (37,115)    (73,652)     (54,561)
      Operating income       47,552       31,171     104,770      124,621
    Other income
     (expense), net           1,231       (1,163)      3,135       (1,105)
      Segment earnings
       before income
       taxes                $48,783      $30,008    $107,905     $123,516



                  MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
                       EUROPE SEGMENT RESULTS OF OPERATIONS
                                  (IN THOUSANDS)
                                   (UNAUDITED)

                            Thirteen Weeks Ended   Thirty-Nine Weeks Ended
                           Sept. 24,    Sept. 25,   Sept. 24,   Sept. 25,
                             2006         2005        2006        2005

    Volume in barrels         2,647        2,768       7,460        7,419

    Sales                  $641,547     $664,076  $1,763,965   $1,888,933
    Excise taxes           (278,746)    (282,964)   (765,360)    (774,402)
      Net sales             362,801      381,112     998,605    1,114,531
    Cost of goods sold     (233,533)    (245,722)   (659,635)    (736,732)
      Gross profit          129,268      135,390     338,970      377,799
    Marketing, general
     and administrative
     expenses               (96,288)    (107,109)   (288,480)    (329,570)
    Special charges, net     (2,287)        (561)     (8,173)        (960)
      Operating income       30,693       27,720      42,317       47,269
    Interest income, net      2,941        3,150       8,630       10,108
    Other income (expense),
     net                      1,006       (2,487)      1,466       (9,080)
      Segment earnings
       before income taxes  $34,640      $28,383     $52,413      $48,297



                  MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
                     CORPORATE SEGMENT RESULTS OF OPERATIONS
                                  (IN THOUSANDS)
                                   (UNAUDITED)

                            Thirteen Weeks Ended     Thirty-Nine Weeks Ended
                            Sept. 24,    Sept. 25,   Sept. 24,    Sept. 25,
                              2006         2005        2006         2005

    Volume in barrels            --           --          --           --

    Sales                    $1,642       $2,660      $4,053       $2,660
    Excise taxes                 --           --          --           --
      Net sales               1,642        2,660       4,053        2,660
    Cost of goods sold         (212)        (281)     (1,392)        (281)
      Gross profit            1,430        2,379       2,661        2,379
    Marketing, general
     and administrative
     expenses               (27,176)     (23,050)    (85,189)     (50,623)
    Special (charges)
     credits, net              (660)       4,183         701      (59,635)
      Operating loss        (26,406)     (16,488)    (81,827)    (107,879)
    Interest expense, net   (31,209)     (34,459)   (105,747)     (88,702)
    Other (expense)
     income, net             (1,757)       4,076      (3,120)       8,355
      Segment loss
       before income
       tax                 $(59,372)    $(46,871)  $(190,694)   $(188,226)

CONTACT:
News Media
Paul de la Plante
+1-514-590-6349
Molson Coors Brewing Company

Investor Relations
Dave Dunnewald
+1-303-279-6565

Kevin Caulfield
+1-303-277-6894
Both of Molson Coors Brewing Company