Molson Coors Reports Higher Net Income and Earnings Per Share on Higher Net Sales and Volume for 2007 Second Quarter

August 07, 2007
DENVER and MONTREAL, Aug 07, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Molson Coors Brewing Company (NYSE: TAP; TSX) today reported higher consolidated sales volume, net income and earnings per share for the Company's fiscal 2007 second quarter.

Key results for the Company's 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, U.S. STRs up 1.6 percent, U.K. 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 U.S. dollars. See tables below for reconciliations to nearest U.S. GAAP measures.

Leo Kiely, Molson Coors president and chief executive officer, said, "We were pleased with our Company's 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 Company's 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 Company's 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 Company's 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 Company's Canada business grew quarterly market share for the first time in nearly four years. Strong growth in Coors Light, Rickard's, Creemore, Carling and the Company's 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 Company's 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 percent in marketing, general and administrative expenses in local currency.

United States Business

U.S. 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 Company's merger synergies and other cost saving initiatives. Sales volume and net sales in the U.S. business increased 3.1 percent and 5.4 percent, respectively, from the second quarter 2006, while net sales per barrel increased 2.2 percent. U.S. 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.

U.S. 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 U.S. 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 U.S. 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. U.K. 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 Company's owned brands decreased approximately 1 percent in local currency during the quarter. Marketing, general and administrative expenses in the U.K. 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 Company's 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 Company's 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 U.K., 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 Company's Foster's U.S. 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 Company's equity interest in the House of Blues Canada business. In addition, one-time tax benefits reduced the Company's reported tax expense by $11.5 million in the second quarter 2007. The non-recurring tax benefits were related to revaluation of the Company's 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 Company's 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 Company's 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 Company's website, http://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 U.S. GAAP Measures

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

    U.S. GAAP:  After-tax income 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 investment
            (other income)                             (16.7)            --
    Minus: Tax effect on special items
            and gain on sale of House of Blues
            Canada equity investment                    (5.5)          (9.6)
    Minus: One-time tax benefits                       (11.5)         (52.3)
    Non-GAAP: After-tax income (loss)
               from continuing operations,
               excluding special and other
               one-time items:                        $176.1         $121.6

               Per diluted share:                      $1.94          $1.40



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   U.S.  Europe  Corporate    Consolidated
    U.S. 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
     items - 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%
    U.S. GAAP:  2006 2nd Q
     pretax income (loss)
     from continuing          $143.5  $44.1   $38.9   ($69.4)       $157.1
     operations

    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   ($68.1)        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 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   Twenty-Six Weeks Ended
                                 July 1,    June 25,     July 1,     June 25,
                                  2007        2006        2007         2006

    Volume in barrels            11,509      11,424      20,378       20,043

    Sales                    $2,244,024  $2,130,047  $3,895,219   $3,673,993
    Excise taxes               (567,757)   (547,022)   (990,341)    (937,122)
      Net Sales               1,676,267   1,583,025   2,904,878    2,736,871
    Cost of goods sold         (966,897)   (919,976) (1,737,059)  (1,646,644)
      Gross profit              709,370     663,049   1,167,819    1,090,227
    Marketing, general and
     administrative expenses   (456,894)   (448,281)   (853,692)    (837,139)
    Special items, net          (25,379)    (25,840)    (33,610)     (52,671)
      Operating income          227,097     188,928     280,517      200,417
    Interest expense, net       (24,967)    (36,894)    (51,285)     (68,849)
    Other income, net            14,942       5,045      16,193        2,804
      Income from continuing
       operations before
       income taxes and
       minority interests       217,072     157,079     245,425      134,372
    Income tax (expense)
     benefit                    (28,423)      4,965     (33,736)      12,403
      Income from continuing
       operations before
       minority interests       188,649     162,044     211,689      146,775
    Minority interests in net
     income of consolidated
     entities                    (4,305)     (4,402)     (8,108)      (7,703)
      Income from continuing
       operations               184,344     157,642     203,581      139,072
    Gain (loss) from
     discontinued operations,
     net of tax                     619      (1,415)    (14,211)     (13,082)
      Net income               $184,963    $156,227    $189,370     $125,990

    Basic income (loss) per
     share:
      From continuing
       operations                 $2.06       $1.83       $2.29        $1.62
      From discontinued
       operations                  0.01       (0.01)      (0.16)       (0.15)
    Basic net income per share    $2.07       $1.82       $2.13        $1.47

    Diluted income (loss) per
     share:
      From continuing
       operations                 $2.03       $1.82       $2.26        $1.61
      From discontinued
       operations                  0.01       (0.01)      (0.16)       (0.15)
    Diluted net income per
     share                        $2.04       $1.81       $2.10        $1.46

    Weighted average shares -
     basic                       89,471      85,953      88,771       85,819
    Weighted average shares -
     diluted                     90,621      86,526      90,047       86,351

    Dividends per share           $0.32       $0.32       $0.64        $0.64



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

                               Thirteen Weeks Ended    Twenty-Six Weeks Ended
                                 July 1,    June 25,      July 1,    June 25,
                                  2007        2006         2007        2006

    Volume in barrels             2,344       2,253        3,979       3,844

    Sales                      $683,857    $643,858   $1,124,395  $1,073,788
    Excise taxes               (149,321)   (147,574)    (252,006)   (248,185)
       Net sales                534,536     496,284      872,389     825,603
    Cost of goods sold         (266,025)   (235,665)    (464,566)   (424,193)
       Gross profit             268,511     260,619      407,823     401,410
    Marketing, general and
     administrative expenses   (120,473)   (118,418)    (216,790)   (214,414)
    Special items, net          (24,131)        -        (28,210)        -
       Operating income         123,907     142,201      162,823     186,996
    Other income, net            14,896       1,281       17,166       1,803
       Earnings before income
        taxes                  $138,803    $143,482     $179,989    $188,799



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

                               Thirteen Weeks Ended    Twenty-Six Weeks Ended
                                 July 1,    June 25,      July 1,    June 25,
                                  2007        2006         2007        2006

    Volume in barrels             6,629       6,428       11,829      11,386

    Sales                      $880,089    $835,873   $1,561,654  $1,475,376
    Excise taxes               (119,302)   (114,094)    (212,808)   (202,323)
       Net sales                760,787     721,779    1,348,846   1,273,053
    Cost of goods sold         (461,712)   (449,960)    (824,973)   (795,169)
       Gross profit             299,075     271,819      523,873     477,884
    Marketing, general and
     administrative expenses   (201,244)   (203,074)    (381,452)   (372,520)
    Special items, net                -     (26,422)         -       (48,146)
       Operating income          97,831      42,323      142,421      57,218
    Other income, net               251       1,775          898       1,904
       Earnings before income
        taxes                   $98,082     $44,098     $143,319     $59,122



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

                               Thirteen Weeks Ended   Twenty-Six Weeks Ended
                                July 1,    June 25,      July 1,    June 25,
                                 2007        2006         2007        2006

    Volume in barrels             2,536       2,743        4,570       4,813

    Sales                      $678,730    $648,579   $1,206,687  $1,122,418
    Excise taxes               (299,134)   (285,354)    (525,527)   (486,614)
       Net sales                379,596     363,225      681,160     635,804
    Cost of goods sold         (239,188)   (233,599)    (447,057)   (426,102)
       Gross profit             140,408     129,626      234,103     209,702
    Marketing, general and
     administrative expenses   (104,922)    (98,510)    (203,802)   (192,192)
    Special items, net           (1,248)      1,917       (5,400)     (5,886)
       Operating loss            34,238      33,033       24,901      11,624
    Interest income, net          2,854       2,885        5,702       5,689
    Other income (expense),
     net                            574       3,027       (1,591)        460
       Loss before income
        taxes                   $37,666     $38,945      $29,012     $17,773



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

                               Thirteen Weeks Ended    Twenty-Six Weeks Ended
                                 July 1,    June 25,      July 1,    June 25,
                                  2007        2006         2007        2006

    Net sales (1)                $1,348      $1,737       $2,483      $2,411
    Cost of goods sold (1)           28        (752)        (463)     (1,180)
       Gross profit               1,376         985        2,020       1,231
    General and administrative
     expenses                   (30,255)    (28,279)     (51,648)    (58,013)
    Special items, net              -        (1,335)         -         1,361
       Operating loss           (28,879)    (28,629)     (49,628)    (55,421)
    Interest expense, net       (27,821)    (39,779)     (56,987)    (74,538)
    Other expense, net             (779)     (1,038)        (280)     (1,363)
       Loss before income
        taxes                  $(57,479)   $(69,446)   $(106,895)  $(131,322)

    (1) The amounts shown are reflective of revenues and costs associated with
        the marketing of the Company's intellectual property, including
        trademarks and brands.



                MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                (IN THOUSANDS)
                                 (UNAUDITED)

                                                      As of
                                         July 1, 2007        December 31, 2006

    Assets

    Cash and cash equivalents                $679,970             $182,186
    Receivables, net                          867,283              828,599
    Total inventories, net                    364,983              319,538
    Other, net                                124,955              128,033
      Total current assets                  2,037,191            1,458,356

    Properties, net                         2,646,285            2,421,484
    Goodwill and intangibles assets, net    7,873,276            7,363,970
    Other                                     505,020              359,603
      Total assets                        $13,061,772          $11,603,413

    Liabilities and stockholders' equity

    Accounts payable                         $324,998             $419,650
    Accrued expenses and other              1,219,509            1,376,025
    Short-term borrowing and current
     portion of long-term debt                660,604                4,441
      Total current liabilities             2,205,111            1,800,116

    Long-term debt                          2,163,823            2,129,845
    Pension and post-retirement benefits      663,923              753,697
    Other                                   1,496,543            1,055,617
      Total liabilities                     6,529,400            5,739,275

    Minority interests                         53,548               46,782

    Total stockholders' equity              6,478,824            5,817,356
      Total liabilities and
       stockholders' equity               $13,061,772          $11,603,413



                MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (IN THOUSANDS)
                                 (UNAUDITED)

                                                Twenty-Six Weeks Ended
                                             July 1, 2007      June 25, 2006

    Cash flows from operating activities:
    Net income                                  $189,370          $125,990
      Adjustments to reconcile net income
       to net cash used in operating
       activities:
        Depreciation and amortization            167,440           228,214
        Change in working capital and
         other, net                             (308,595)         (117,039)
    Net cash provided by operating
     activities                                   48,215           237,165

    Cash flows from investing activities:
      Additions to properties and
       intangible assets                        (268,293)         (201,683)
      Proceeds from sale of assets and
       business, net                              33,283            74,151
      Other, net                                   2,737             1,009
    Net cash used in investing activities       (232,273)         (126,523)

    Cash flows from financing activities:
      Issuance of stock under equity
       compensation plans                        167,874            27,724
      Dividends paid                             (57,134)          (64,168)
      Net proceeds from (payments on) debt       599,601           (43,835)
      Other, net                                 (32,838)            7,042
    Net cash provided by (used in)
     financing activities                        677,503           (73,237)

    Cash and cash equivalents:
      Net increase in cash and cash
       equivalents                               493,445            37,405
      Effect of foreign exchange rate
       changes on cash and cash
       equivalents                                 4,339             2,773
      Balance at beginning of year               182,186            39,413
    Balance at end of period                    $679,970           $79,591


SOURCE Molson Coors Brewing Company

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