Financial Statements
2008 Free Cash Flow
DENVER and MONTREAL, Feb. 10 /PRNewswire-FirstCall/ -- Molson Coors
Brewing Company (NYSE: TAP; TSX) today reported higher worldwide beer volume
and underlying income for the full year ending December 28, 2008. For the
fiscal fourth quarter of 2008, pro forma worldwide beer volume and underlying
income declined due to unfavorable foreign currency and slowing industry
trends.
"We looked at this past year as an opportunity to continue to strengthen
our financial base and position ourselves for long-term growth," said Peter
Swinburn, Molson Coors president and chief executive officer. "In 2008, we
invested substantially in our strategic brands, increased global beer volume,
achieved higher pricing in all of our markets, and exceeded our cost-reduction
targets, all while successfully executing major strategic initiatives like the
launch of MillerCoors."
"Our lower fourth quarter financial results reflect the combined
challenges of a much stronger U.S. dollar versus a year ago, significant
commodity inflation, and lower sales volume in our major markets. Foreign
currency movements alone accounted for more than 55% of the year-over-year
decline in fourth quarter profit, and input cost inflation across all of our
businesses added another $41 million of headwinds to the quarter."
"In this economic environment, we remain committed to building great beer
brands while diligently reducing our costs," Swinburn added. "We are
benefiting from strategic initiatives in each of our businesses to improve
long-term performance. While our Canada team is balancing its brand and
pricing priorities, our U.K. team is ramping up its contract brewing
arrangement and the Magners draught cider business. At the same time,
MillerCoors is delivering synergies ahead of schedule in the U.S. and taking
important steps to strengthen its top-line."
"As we enter 2009, we remain focused on the fundamentals that drive our
business regardless of the economic environment: building great beer brands,
increasing revenue per barrel, delivering cost savings, generating free cash,
and growing long-term returns to shareholders."
Fourth Quarter Highlights
Key operating and financial highlights for the Company's fiscal fourth
quarter ended December 28, 2008, compared to the fiscal fourth quarter ended
December 30, 2007, include the following:
- Worldwide beer volume declined 4.2 percent on a pro forma basis.
- Molson Coors net income decreased 44.1 percent to $96.8 million for the
fourth quarter.
- Underlying after-tax income(1) decreased 21.0 percent to $105.1 million,
or $0.57 per diluted share.
- Foreign currency movements drove over 55 percent, or $23 million, of the
$41.0 million decline in fourth quarter underlying pretax income.
- Excluding the impact of foreign currency, the Company's underlying
income declined approximately seven percent in the quarter.
Full Year 2008 Highlights
Key operating and financial highlights for the Company's fiscal year ended
December 28, 2008, compared to the fiscal year ended December 30, 2007,
include the following:
- Worldwide beer volume grew 4.0 percent on a reported basis.
- Net income decreased 22.0 percent to $388.0 million.
- Underlying after-tax income(1) increased 1.0 percent to $512.6 million,
or $2.76 per diluted share.
- For the full year 2008, foreign currency movements decreased total
underlying pretax income by approximately $16 million.
- As of December 28, 2008, cash and cash equivalents totaled $216 million,
and total owned debt was $1.75 billion, excluding approximately $82
million of non-owned joint venture debt.
(1) The Company calculates non-GAAP underlying income by excluding special
and other one-time items from the nearest U.S. GAAP earnings measure.
To calculate underlying income in the fourth quarter of 2008, the
Company excluded one-time expenses, particularly related to
MillerCoors and the Foster's cash-settled total-return swap, as well
as a net special credit of $2.1 million pretax. To calculate
underlying income for the full year 2008, the Company excluded net
special items of $133.9 million, as well as one-time expenses related
to MillerCoors and debt extinguishment costs. For further details,
please see the section "Special and Other One-Time Items" below, along
with tables for reconciliations to the nearest U.S. GAAP measures.
All $ amounts are in U.S. Dollars.
The Company's effective tax rate for the full year 2008 was 20 percent on
both a reported and an underlying basis. In the fourth quarter, the Company's
effective tax rate for income from continuing operations was 20 percent on a
reported basis, and 22 percent on an underlying basis. The Company estimates
that its full-year 2009 effective tax rate will be in the range of 16 percent
to 20 percent on an underlying basis.
For the full year 2008, Molson Coors achieved $87 million of cost savings
as part of its Resources for Growth (RFG) cost savings program, which exceeded
the Company's 2008 goal by approximately $10 million. In the first two years
of its three-year, $250 million RFG program, Molson Coors has delivered $178
million of cost savings. In the fourth quarter alone, the Company delivered
$22 million of RFG cost reductions.
MillerCoors is well on its way to deliver its stated goal of $500 million
of annual cost synergies by the third year of combined operations. For the
quarter, MillerCoors delivered $26 million in synergies, for a total of $28
million since combining operations. The timing to achieve the company's
original goal of $50 million in synergies in the first 12 months of operations
has accelerated, and MillerCoors now expects to realize $128 million of
synergies by June 30, 2009. By the end of calendar year 2009, MillerCoors
expects to achieve a total of $238 million in synergies surpassing its
original forecast of $225 million. While the timing of synergy delivery has
accelerated, MillerCoors' goal remains $500 million in three years.
The Company's total worldwide beer volume was 10.653 million barrels in
the quarter, down 4.2 percent versus the prior year on a pro forma basis.
Fourth quarter volume increased 1.2 percent when compared to reported volume a
year ago, as shown in Table 1 below. Full year 2008 volume increased 4.0
percent versus a year ago on a reported basis to 43.693 million barrels, as
shown in Table 2 below.
Table 1: Molson Coors 2008 Fourth Quarter Worldwide Beer Volume
Thirteen Weeks Ended Thirteen Weeks Ended
December December % December December %
28, 2008 30, 2007 Change 28, 2008 30, 2007 Change
Actual Pro forma(1) Actual Actual
Volume in U.S.
barrels (000):
Financial volume 4,202 4,537 (7.4%) 4,202 10,463 (59.8%)
Royalty volume 82 63 30.2% 82 63 30.2%
Owned volume 4,284 4,600 (6.9%) 4,284 10,526 (59.3%)
Proportionate
share of equity
investment sales-
to-retail (2) 6,369 6,516 (2.3%) 6,369 - 100.0%
Total worldwide
beer volume 10,653 11,116 (4.2%) 10,653 10,526 1.2%
(1) Reflects the reduction of the U.S. segment volume reported for the 13
weeks ended December 31, 2007.
(2) Reflects the addition of Molson Coors Brewing Company's proportionate
share of MillerCoors and Molson Modelo sales-to-retail for the periods
presented, adjusted for comparable trading days.
Table 2: Molson Coors 2008 Full Year Worldwide Beer Volume
Fifty Two Weeks Ended
December 28, December 30,
2008 2007 % Change
Actual Actual
Volume in U.S. barrels (000):
Financial volume 29,656 41,796 (29.0%)
Royalty volume 256 214 19.6%
Owned volume 29,912 42,010 (28.8%)
Proportionate share of equity
investment sales-to-
retail (1) 13,781 - 100.0%
Total worldwide beer volume 43,693 42,010 4.0%
(1) Reflects the addition of Molson Coors Brewing Company's proportionate
share of MillerCoors and Molson Modelo sales-to-retail for the periods
presented, adjusted for comparable trading days.
Business Segments
Following are the Company's 2008 fourth quarter results by business
segment:
Canada Business
The Canada business earned underlying pretax income of $99.8 million in
the fourth quarter, a 23.0 percent decrease from the same period last year.
This profit decline was driven by a 19 percent depreciation of the Canadian
dollar, which reduced the Canada segment underlying income by approximately
$18 million. In local currency, Canada underlying pretax income was five
percent lower than the fourth quarter 2007 due to lower sales volume,
increased competitive discounting in Quebec and continued cost inflation,
partially offset by favorable front-line pricing across Canada.
On a comparable basis(2), Canada sales-to-retail decreased 0.6 percent in
the fourth quarter versus last year, resulting in a market-share decrease of
less than one-half share point versus a year ago. Low-single-digit growth of
Molson's strategic brands, led by double-digit growth of Coors Light and
continued strong growth by Carling, Creemore, and our import brands was offset
by lower sales of non-strategic brands. The Canadian beer industry slowed in
the quarter, with sales growth of approximately 0.5 percent versus a year ago.
This represents a deceleration versus earlier in 2008 and was driven by poor
weather, a softening economy, and an acceleration of Quebec industry volume to
the 3rd quarter ahead of a 4th quarter price increase.
On a comparable basis, Canada sales volume decreased 2.1 percent during
the fourth quarter to 1.8 million barrels. Comparable net sales per barrel
increased 3.5 percent in local currency, half driven by favorable net pricing,
led by front-line pricing in Quebec and Ontario, and half driven by favorable
sales mix, including increased sales volume of partner import brands.
Cost of goods sold per barrel increased 9.2 percent on a comparable basis
in local currency, due to a six percent increase in commodity and packaging
materials, a 1.5 percent increase in fuel and distribution costs, and a 3.5
percent increase due to a sales mix shift toward higher-cost partner import
brands, partially offset by two percentage points of savings from the
Resources for Growth initiatives. Comparable marketing, general and
administrative expenses increased approximately 1.3 percent in local currency
due to higher pension and other overhead expenses.
Other income in the fourth quarter increased $4.5 million, driven by
pretax gains from foreign currency hedges.
(2) Except where otherwise indicated, comparable Canada results exclude
the effect of establishing the Modelo Molson joint venture in 2008, as
well as the reporting effects of discontinuing the Company's Foster's
U.S. contract in 2007. Results for the Modelo Molson joint venture,
which sells the Modelo brands across Canada, are recorded under the
equity method of accounting. Beginning in 2008, Modelo brand results
are no longer reported on a line-item basis in the Company's Canada
results, affecting the comparability of results with 2007. Beginning
in 2008, Modelo Molson sales volumes are excluded from financial
volume. In addition, Molson Coors now includes its 50% ownership
share of Modelo Molson sales-to-retail in its consolidated worldwide
beer volume for both the current year and prior year. Comparable
results exclude the year-over-year impact for beer sales to
MillerCoors. With the completion of the MillerCoors joint venture,
the financial impact of our brand exports to the U.S. will no longer
be treated as inter-company sales and eliminated upon consolidation of
total Molson Coors results. Sales volume for these U.S. exports will
be excluded from Canada results and are now be reported by
MillerCoors.
United States Business (MillerCoors)(3)
Molson Coors underlying U.S. segment pretax income decreased 21.2 percent
to $56.2 million in the fourth quarter, as a result of year-over-year timing
differences in sales and marketing spending, along with the impact of changes
in accounting policies. U.S. segment results include the Company's 42% share
of MillerCoors net income and various adjustments for the equity income
calculation under U.S. GAAP, as shown in Table 8 below.
MillerCoors Operating and Financial Highlights (U.S. GAAP)
Underlying net income, excluding special items, for the quarter increased
16.5 percent to $135 million from the prior year pro forma result, driven
primarily by strong pricing and cost management, which more than offset
increases in commodity costs and a reduction in shipment volume.
During the period, MillerCoors sales-to-retailers (STRs) declined 2.3
percent, reflecting a weaker quarter for the industry and softness in Miller
Lite and certain above-premium brands. Five out of six MillerCoors priority
brands increased STRs in the fourth quarter:
o Coors Light STRs increased 1.0 percent, posting its fourteenth
consecutive quarter of growth,
o MGD 64 STRs continued to deliver strong growth since its national
launch,
o Blue Moon STRs were up double digits,
o Keystone Light delivered strong double-digit growth, while Miller
High Life STRs increased marginally, and
o Miller Lite STRs declined 7.5 percent with particularly strong net
pricing growth for the quarter.
Domestic sales-to-wholesalers (STWs) dropped 4.3 percent, driven largely
by a reduction in distributor inventory levels and lower sales to retail.
Third-party contract brewing volumes declined 6 percent.
MillerCoors total net sales increased by 3.1 percent to $1.740 billion
versus the prior pro forma quarter. Excluding contract brewing, domestic net
sales increased 3.4 percent to $1.622 billion. Pricing remained strong as
domestic net sales per barrel, excluding contract brewing and company-owned
distributor sales, increased 8.0 percent versus the prior year driven by
strong front line pricing, reductions in discounting and favorable mix.
Cost of Goods Sold (COGS) per barrel increased by 5.2 percent, as cost
savings initiatives were more than offset by increasing commodity costs.
Fourth quarter results were only minimally improved by significant recent
commodity price reductions as materials were largely hedged through calendar
year 2008 and 2009 prior to the reductions.
Marketing, general and administrative expenses increased by 6.1 percent to
$514 million, driven primarily by integration costs of $10 million and higher
spending on the launch of MGD 64, Coors Light media, increased sales and
tactical spending.
(3) MillerCoors, a U.S. joint venture of Molson Coors Brewing Company and
SABMiller plc, was launched on July 1, 2008. MillerCoors is 42
percent owned by Molson Coors, and is accounted for using the equity
method. Molson Coors' interest in MillerCoors' results, along with
certain adjustments under U.S. GAAP, are reflected in "Equity
Investment Income in MillerCoors." Historical period results have not
been reclassified to conform to this presentation, so year-over-year
comparisons of consolidated and U.S. segment volume, net sales, cost
of goods sold, and marketing, general and administrative results are
less meaningful. For comparability, the parent companies of
MillerCoors have provided a full income statement for fourth quarter
2008, along with pro forma results for the prior year period. This
release also includes reconciliation from MillerCoors Net Income to
Molson Coors Brewing Company Equity Investment Income in MillerCoors
(see Table 8) and Non-GAAP U.S. Segment Underlying Pretax Income (see
Table 7).
United Kingdom Business
The U.K. business reported underlying pretax income of $30.6 million in
the fourth quarter, a 23.6 percent decrease over the same quarter last year.
A 23 percent decline in the value of the British pound versus the U.S. dollar
reduced underlying pretax income by approximately $9 million. Excluding the
effect of foreign currency, the U.K. underlying pretax income was virtually
unchanged versus last year in local currency. Strong pricing growth, the ramp
up of our contract brewing arrangement, and reduced marketing spending were
offset by lower volumes, higher input cost inflation, and higher pension and
bad-debt costs.
U.K. owned-brand volume decreased 9.4 percent during the quarter, while
the beer industry declined 8.3 percent, reflecting a weak economy in the U.K.
The Company grew share in the on-premise channel during the quarter, but
under-performed the market in the off-premise, as it took a tougher stance
with customers on pricing.
In local currency, comparable U.K. net sales per barrel of owned products
increased 10.4 percent, nearly two-thirds driven by higher net pricing, with
the balance of the increase attributable to a one-time reduction in volume-
related payments to customers, and positive sales mix.
Comparable cost of goods sold per barrel for owned brands increased 6.8
percent in local currency in the fourth quarter, due primarily to higher
energy and materials cost inflation and higher pension costs, partly offset by
results of cost-reduction initiatives. Marketing, general and administrative
expense increased 5.2 percent in local currency due to higher bad debt charges
and pension expense, partially offset by decreased marketing expenses in line
with the trading environment.
Global Markets and Corporate
Our Global Markets team continues to take a disciplined approach to
building our brands in international markets. The Global Markets grew volume
nearly 20 percent driven by the growth of Coors Light in China and Europe.
Marketing, general and administrative expense for Global Markets was $10.3
million in the quarter, virtually unchanged versus a year ago.
Corporate general and administrative expense was $23.2 million in the
fourth quarter, a decrease of $7.6 million, or 24.8 percent, due to lower
incentive compensation and project spending.
Net interest expense was $19.6 million in the fourth quarter, a decrease
of $7.6 million compared to a year ago. Also in the quarter, Corporate other
expense was driven by a one-time mark-to-market expense related to the
Foster's cash-settled total-return swap. The underlying pretax loss for
Global Markets and Corporate was $50.3 million, a 21.0 percent improvement
versus the fourth quarter of 2007.
Special and Other One-Time Items
During the fourth quarter 2008, the Company reported a net special credit
of $2.1 million pretax, which was composed primarily of a $10.4 million
curtailment gain related to closing a pension plan in the U.K., partially
offset by Edmonton Brewery closure costs of $4.2 million, an asset impairment
charge of $1.7 million, and MillerCoors readiness and deal costs of $1.4
million.
Corporate other expense in the quarter totaled $20.0 million, primarily
composed of a $17.9 million one-time non-cash mark-to-market cost related to
the cash-settled total-return swap the Company arranged with respect to
Foster's common stock in 2008.
During the fourth quarter of 2008, MillerCoors reported special or
exceptional items totaling $81 million, which included a Sparks' brand
impairment of $65 million, as well as integration costs. These integration
costs are part of the investment which will enable MillerCoors to meet its
stated $500 million three-year synergy plan. The Sparks' brand impairment has
been offset by a one-time adjustment in our equity method accounting and thus
had no effect on Molson Coors results.
Discontinued Operations
The Company reports results associated with its former Brazilian unit,
Cervejarias Kaiser ("Kaiser"), as discontinued operations. The Company
reported a gain of $6.1 million from discontinued operations during the
quarter primarily due to the impact of favorable foreign exchange movements on
the Kaiser indemnity estimates.
2008 Fourth Quarter Earnings Conference Call
Molson Coors Brewing Company will conduct an earnings conference call with
financial analysts and investors at 11:00 a.m. Eastern Time today to discuss
the Company's 2008 fourth quarter and full year 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 2:00 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 May 4, 2009. The company will post this
release and related financial statements today on its web site,
http://www.molsoncoors.com
Reconciliations to Nearest U.S. GAAP Measures
Molson Coors Brewing Company
Table 3: 2008 Fourth Quarter Underlying After-Tax Income
(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)
2008 4th Q 2007 4th Q
U.S. GAAP: After-tax income from continuing
operations: 90.7 176.2
Per diluted share: $0.49 $ 0.96
Add back: Pretax special items - net (2.1) 23.2
Add back: Loss on environmental liability
reserve (1) 0.8 -
Add back: Loss related to the cash-settled total
return swap (1) 17.9 -
Add back: Proportionate share of MillerCoors
pretax special items - net (2) 34.1 -
Add back: Impact of MillerCoors accounting policy
elections (2) 4.2 -
Minus: Basis amortization related to the Sparks
brand impairment (2) (27.3) -
Minus: MillerCoors variable share-based
compensation (2) (3.9) -
Minus: Other one-time items (1.0) -
Minus: One-time tax benefits - (60.4)
Minus: Tax effects related to special and other
one-time items (8.3) (6.0)
Non-GAAP: Underlying after-tax income: 105.1 133.0
Per diluted share: $0.57 $0.73
Notes:
(1) Included in Other Income (Expense)
(2) Included in Equity Income in MillerCoors, but excluded from non-GAAP
underlying pretax income.
Molson Coors Brewing Company
Table 4: 2008 Fourth Quarter Underlying Pretax Income
(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
Global
Markets &
Canada U.S. U.K. Corporate Consolidated
U.S. GAAP: 2008
4th Q pretax
income (loss)
from continuing
operations -
reported $93.7 $49.1 $40.6 $(69.7) $113.7
Add back: Pretax
special
items - net 6.1 - (9.9) 1.7 (2.1)
Add back: Loss on
environmental
liability
reserve (1) - - - 0.8 0.8
Add back: Gain
related to the
cash-settled
total return
swap (1) - - - 17.9 17.9
Add back:
Proportionate
share of
MillerCoors
pretax special
items - net (2) - 34.1 - - 34.1
Add back: Impact
of MillerCoors
accounting policy
elections (2) - 4.2 - - 4.2
Minus: Basis
amortization
related to the
Sparks brand
impairment (2) - (27.3) - - (27.3)
Minus: MillerCoors
variable share-
based
compensation (2) - (3.9) - - (3.9)
Minus: Other
one-time items - - - (1.0) (1.0)
Non-GAAP: 2008
4th Q underlying
pretax income
(loss) $99.8 $56.2 $30.6 $(50.3) $136.3
Percent change
2008 4th Q vs.
2007 4th Q
underlying
pretax income
(loss) -23.0% -21.2% -23.6% -21.0% -23.1%
U.S. GAAP: 2007
4th Q pretax
income (loss)
from continuing
operations $125.9 $64.6 $38.6 $(75.1) $154.0
Add back:
Pretax special
items - net 3.7 6.7 1.4 11.4 23.2
Non-GAAP: 2007
4th Q underlying
pretax income
(loss) $129.6 $71.3 $40.0 $(63.7) $177.3
Notes:
(1) Included in Other Income (Expense)
(2) Included in Equity Income in MillerCoors, but excluded from non-GAAP
underlying pretax income.
Molson Coors Brewing Company
Table 5: 2008 Full Year Underlying After-Tax Income
(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) FY 2008 FY 2007
U.S. GAAP: After-tax income from continuing
operations: 400.1 514.9
Per diluted share: $2.16 $ 2.84
Add back: Pretax special items - net 133.9 112.2
Add back: Loss on environmental liability
reserve (1) 4.4 -
Add back: Net debt extinguishment costs 12.4 -
Add back: Loss related to the cash-settled total
return swap (1) 4.3 -
Add back: Proportionate share of MillerCoors
pretax special items - net (2) 43.6 -
Add back: Other one-time items - 7.8
Minus: Basis amortization related to the Sparks
brand impairment (2) (27.3) -
Minus: Impact of MillerCoors accounting policy
elections (2) (27.7) -
Minus: Other one-time items (1.0) -
Minus: One-time tax benefits - (84.9)
Minus: Tax effects related to special and other
one-time items (30.2) (42.6)
Non-GAAP: Underlying after-tax income: 512.6 507.4
Per diluted share: $2.76 $2.80
Notes:
(1) Included in Other Income (Expense)
(2) Included in Equity Income in MillerCoors, but excluded from non-GAAP
underlying pretax income.
Molson Coors Brewing Company
Table 6: 2008 Full Year Underlying Pretax Income
(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
Global
Markets &
Canada U.S. U.K. Corporate Consolidated
U.S. GAAP: FY
2008 pretax
income (loss)
from continuing
operations -
reported $458.4 $265.0 $85.4 $(293.6) $515.2
Add back: Pretax
special items -
net 10.9 69.3 (4.5) 58.2 133.9
Add back: Loss
on environmental
liability
reserve (1) - - - 4.4 4.4
Add back: Net
debt
extinguishment
costs - - - 12.4 12.4
Add back: Loss
related to the
cash-settled
total return
swap (1) - - - 4.3 4.3
Add back:
Proportionate
share of
MillerCoors
pretax special
items - net (2) - 43.6 - - 43.6
Minus: Basis
amortization
related to the
Sparks brand
impairment (2) - (27.3) - - (27.3)
Minus: Impact of
MillerCoors
accounting
policy
elections (2) - (27.7) - - (27.7)
Minus: Other
one-time items - - - (1.0) (1.0)
Non-GAAP: FY
2008 underlying
pretax income
(loss) $469.3 $322.9 $80.9 $(215.3) $657.8
Percent change
FY 2008 vs.
FY 2007
underlying
pretax income
(loss) -3.3% 9.1% -21.9% -6.6% 0.5%
U.S. GAAP:
FY 2007
pretax income
(loss) from
continuing
operations $427.3 $286.4 $89.5 $(268.8) $534.4
Add back:
Pretax
special
items - net 75.2 9.5 14.1 13.4 112.2
Add back:
Debt
extinguishment
costs - - - 24.5 24.5
Minus: Gain on
sale of House
of Blues equity
investment (16.7) - - (16.7)
Non-GAAP: FY
2007 underlying
pretax income
(loss) $485.8 $295.9 $103.6 $(230.9) $654.4
Notes:
(1) Included in Other Income (Expense)
(2) Included in Equity Income in MillerCoors, but excluded from non-GAAP
underlying pretax income.
MillerCoors LLC
Table 7: 2008 Fourth Quarter Underlying Net Income
(Net Income, Excluding Special Items)
(In millions of $US) Three Months Ended Six Months Ended
December 31, December 31, December 31, December 31,
2008 2007 2008 2007
Adjusted Adjusted
Pro Forma(1) Pro Forma(1)
U.S. GAAP - Net Income: $54.1 $90.7 $222.4 $238.7
Add back: Special items,
net 81.2 25.4 103.8 28.2
Non-GAAP - Underlying
Net Income: $135.3 $116.1 $326.2 $266.9
(1) The adjusted pro forma net income excludes the benefit of a $26.3
million and $43.1 million settlement received from Ball Corporation
which related to the three months ended and six months ended December
31, 2007, respectively.
Pretax and After-Tax Underlying Income 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 Underlying Income performance 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 Underlying
Income 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.
Molson Coors Brewing Company
Table 8: Reconciliation of MillerCoors Net Income to MCBC's Equity Income
in MillerCoors and Reconciliation to U.S. Segment Underlying Pretax
Income
(Note: Some numbers may not sum due to rounding.)
Thirteen Twenty-Six
Weeks Ended Weeks Ended
December 28, December 28,
(In millions of $ US) 2008 2008
MillerCoors Net Income $54.1 $222.4
Multiply: MCBC economic interest % in
MillerCoors 42% 42%
MCBC Proportionate $ Share of MillerCoors Net
Income $22.7 $93.4
Add/(Minus): Accounting policy elections (1) (4.2) 27.7
Add/(Minus): Amortization of the difference
between MCBC contributed cost basis and the
underlying equity in net assets of
MillerCoors (2) 30.7 36.7
Add/(Minus): Share-based compensation
adjustment (3) (0.1) (2.2)
Equity Income in MillerCoors (Reported) $49.1 $155.6
Add/(Minus): Proportionate share of MillerCoors
special items (4) 34.1 43.6
Add/(Minus): Portion of basis amortization
associated with Sparks brand impairment (2) (27.3) (27.3)
Add/(Minus): MillerCoors variable share-based
compensation (5) (3.9) -
Add/(Minus): Accounting policy elections (1) 4.2 (27.7)
U.S. Segment Underlying Pretax Income (Non-GAAP) $56.2 $144.3
(1) MillerCoors made its initial accounting policy elections upon
formation, impacting certain asset and liability balances. These
adjustments reflect the impact to our investment in MillerCoors, which
is based upon our contributed assets and liabilities.
(2) MCBC's net investment in MillerCoors is based on the carrying values
of the net assets it contributed to the joint venture. MCBC's
investment basis in MillerCoors is less than our underlying equity
(42%) in the total net assets of MillerCoors (contributed by both
Coors and Miller) by approximately $652.0 million. This amount is
being amortized over a period of time represented primarily by the
remaining useful lives of long-lived assets giving rise to the
difference. For non-depreciable assets, such as goodwill, no
adjustment will be recorded to the MillerCoors equity method income
unless there is an impairment. The amortization amounts include $27.3
million in both the thirteen week and twenty-six week periods
associated specifically with MillerCoors $65.1 million impairment of
the Sparks brand during the fourth quarter of 2008. Since our portion
of the Sparks brand impairment is an adjustment to arrive at the non-
GAAP measure above (footnote 4), the offsetting basis amortization
adjustment is included in the non-GAAP reconciliation as well.
(3) The net adjustment is to record all stock-based compensation
associated with preexisting equity awards to be settled in MCBC Class
B common stock held by former CBC employees now employed by
MillerCoors and eliminate all stock-based compensation impacts related
to preexisting SABMiller equity awards held by Miller employees now
employed by MillerCoors. The adjustment is to recognize the additional
58% of the stock-based compensation costs associated with those awards
recognized and reported by MCBC's U.S. business and eliminate all of
the costs associated with equity awards to be settled in SABMiller
equity.
(4) MillerCoors Q4 2008 Special Items of $81.2 million, multiplied by
MCBC's proportionate share of MillerCoors at 42%, equals
$34.1 million.
(5) Included in Equity Income in MillerCoors. This adjustment represents
the fair value mark to market component of MCBC share-based
compensation held by employees of MillerCoors.
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;
failure to realize the anticipated cost savings and other benefits from
MillerCoors; 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.
SOURCE Molson Coors Brewing Company
CONTACT: News Media, Paul de la Plante, +1-514-843-2332, or Investor
Relations, Dave Dunnewald, +1-303-279-6565, or Leah Ramsey,
+1-303-277-7205, all of Molson Coors Brewing Company
Web site: http://www.molsoncoors.com
(TAP TAP.)
