Molson Coors Brewing Co
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MOLSON COORS BREWING CO FORM 10-K (Annual Report) Filed 3/28/1994 For Period Ending 12/26/1993 Address P.O. BOX 4030, MAIL #NH375 GOLDEN, Colorado 80401 Telephone 303-277-3271 CIK 0000024545 Industry Beverages (Alcoholic) Sector Consumer/Non-Cyclical Fiscal Year 12/28 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 26, 1993 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to Commission file number 0-8251 ADOLPH COORS COMPANY (Exact name of registrant as specified in its charter) Colorado 84-0178360 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Golden, Colorado 80401 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (303) 279-6565 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None Securities registered pursuant to Section 12(g) of the Act: Class B Common Stock (non-voting), no par value (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X State the aggregate market value of the voting stock held by non-affiliates of the registrant: All voting shares are held by Adolph Coors, Jr. Trust. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of March 18, 1994: Class A Common Stock - 1,260,000 shares Class B Common Stock - 36,994,811 shares PART I ITEM 1. Business (a) General Development of Business Founded in 1873, Adolph Coors Company ("ACC" or the "Company") through its principal operating subsidiary, Coors Brewing Company ("CBC" or the "company"), produces and markets beer and other malt-based beverages. The Company's business was conducted as a partnership or sole proprietorship until 1913, when it incorporated under the laws of the State of Colorado. During the 1980's, the Company developed a number of technology-based businesses. At the end of 1992, ACC spun off its aluminum, packaging, ceramics and other technology businesses in a tax-free distribution to shareholders. The spin-off was accomplished through a dividend of the shares of common stock in a new public company, ACX Technologies, Inc. ("ACX Technologies" or "ACXT"). ACXT owns Graphic Packaging Corporation, Golden Aluminum Company, Coors Porcelain Company (dba Coors Ceramics Company) and a number of developmental businesses which were formerly owned by ACC. CBC remains as the single direct subsidiary of ACC. CBC owns Coors Distributing Company, and a number of smaller subsidiaries, including Ford Street Management Company; Wannamaker Ditch Company; Rocky Mountain Water Company; CBC International, Inc.; Coors Energy Company; and Coors Transportation Company. In 1992, substantially all of the assets of Coors Energy Company and Coors Transportation Company were sold. (b) Financial Information About Industry Segments The Company has continuing operations in a single industry segment, the production and marketing of beer and other malt-based beverages. (c) Narrative Description of Business Coors Brewing Company - General CBC is engaged in the production and marketing of high quality malt-based beverage products. CBC has a number of distinctive brands that satisfy developing consumer demands and trends. The company's malt-based beverage products include a number of premium, specialty and import beers, a premium Clearmalt beverage, popular-priced and value-added beers and non-alcoholic brews. Sales of malt beverage products totaled 19.8 million barrels in 1993, a 1.3% increase compared to 19.6 million barrels in 1992. Due to the seasonality of the beer industry, CBC's sales volumes are normally at their lowest in the first and fourth quarters and highest in the second and third quarters. The fiscal year of the Company is a 52- or 53-week period ending on the last Sunday in December. In 1993, company management focused on the need to balance volume gains with improved returns to shareholders and a number of steps were taken toward that end. Highlights for 1993 include the following: additions of new senior management personnel; profitability improvement initiatives; initial restructuring of field sales operations to drive decision-making and accountability closer to the retail level; the announcement and/or introduction of seven new products; and the announcement of an agreement in principle to purchase a 500,000 barrel brewery in Spain. The company also revised its executive compensation plan to strengthen the link between incentive compensation and improved returns, beginning in 1994. The profitability improvement initiatives included a reduction in general and administrative expense accomplished by means of voluntary retirement and severance packages and other initiatives. The company recorded a restructuring charge of $109.5 million in the fourth quarter of 1993, resulting in a net loss for the year. The restructuring charge includes $70.2 million for voluntary separation incentives and $39.3 million for workplace redesign, asset write-downs and other expenses related to the profit improvement initiatives. In addition, other special charges unrelated to the profit improvement initiatives totalled $13 million, primarily for the write-down of certain distributor assets and a provision for environmental enhancements. A total of 679 employees elected to accept one of the voluntary packages. Marketing and Operations Product portfolio: There are 17 products in the CBC brand portfolio. The company produces and markets 11 products in the premium/super- premium malt beverage category, including Original Coors, Coors Light, Coors Extra Gold, Coors Dry, Coors Artic Ice, non-alcoholic Coors Cutter, Zima Clearmalt, Killian's Irish Red Lager, Winterfest, Eisbock and Castlemaine XXXX. CBC also distributed a non-alcoholic beverage called Moussy under license with Sibra Holding S.A., of Switzerland. CBC offers three products in the popular-priced category: Keystone, Keystone Light and Keystone Dry. In 1993, the company introduced two value-added beers, Shulers and Shulers Light. Original Coors, Coors Light, Coors Extra Gold, Coors Dry, Coors Cutter and the Keystone brands are marketed nationwide. Distribution of Zima is being expanded nationwide in 1994. With the exception of Coors Artic Ice, Schulers and Schulers Light, which are in limited introductory markets, other Coors malt beverage products are sold in most states. Brand performance: Coors Light is the biggest selling brand in CBC's product portfolio, accounting for approximately two -thirds of the company's total sales. Other brands with improved volume in 1993 were Killian's Irish Red and Zima. Zima is a clear, lightly carbonated alcohol beverage that offers consumers an innovative alternative to their traditional alcohol beverage choices. Based on positive consumer response, Zima, introduced into 3 test markets in the fall of 1992, was expanded into an additional 30% of the U.S. in April and October of 1993. In December, CBC announced its plans to expand distribution of Zima nationally in the first quarter of 1994. The volume decline of the Original Coors brand moderated in 1993 as this brand maintained sales to its core group of loyal customers. The company also gained incremental volume in 1993 from the test marketing of two new, value-added beers, Shulers and Shulers Light, as well as the U.S. introduction of Castlemaine XXXX, as part of a joint venture with Lion Nathan International of New Zealand. New products/opportunities: CBC has announced plans for the national expansion of Zima during the first quarter of 1994. The company has also introduced to nine test markets the first domestically brewed ice beer using proprietary ice brewing technology licensed from Labatt Breweries of Canada. Unlike other domestic brewers of ice beer, Coors utilizes a patented ice machine from the Netherlands that takes beer to its freezing point by regulating the temperature to about minus four degrees celsius. Named Coors Artic Ice, this new product is the only U.S.- brewed ice beer to be brewed cold, shipped cold and sold cold. In order to tap into the fast-growing popularity of special-occasion brews, UniBev Limited, an arm of CBC that focuses on the import and specialty beer market, will introduce three new seasonal beers to complement the well-established Coors Winterfest brand. Each of these beers -- Eisbock a springtime bock, a summertime wheat beer and a fall Oktoberfest beer -- will be brewed in limited quantities for their respective seasons. Domestic sales: The company's highest volume sales are in the states of California, Texas, Pennsylvania and a number of eastern states. CBC utilizes a field sales force made up of regional directors, division managers and area sales managers to ensure maximum customer contact and satisfaction. Field staff operated out of four regional offices that offered training, marketing and merchandising support and customer service. In May of 1993, in an effort to increase its share of the growing import and specialty beer market, CBC announced the formation of UniBev Limited, a new arm of the company's International Import Division.