I know these can be a little dry, but it’s a slow news day and we’re snow-bound…so here goes….this from Molson Coors:
Fourth Quarter 2013 Highlights (1)(2)
- Worldwide beer volume: 14.079 million hectoliters, increased 0.1%
- Net sales: $1.03 billion, decreased 0.2%
- Underlying after-tax income: $125.8 million, decreased 0.2% ($0.68 per diluted share)
- U.S. GAAP net income from continuing operations attributable to MCBC: $131.2 million, increased 118.3% ($0.71 per diluted share)
- Underlying EBITDA (earnings before interest, taxes, depreciation and amortization): $313.8 million, increased 2.4%
Full Year 2013 Highlights (1)(2)
- Worldwide beer volume: 59.738 million hectoliters, increased 8.5%
- Net sales: $4.21 billion, increased 7.4%
- Underlying after-tax income: $727.1 million, increased 2.3% ($3.95 per diluted share)
- U.S. GAAP net income from continuing operations attributable to MCBC: $565.3 million, increased 28.0% ($3.07 per diluted share)
- Underlying EBITDA (earnings before interest, taxes, depreciation and amortization): $1.47 billion, increased 5.1%
- Underlying Free Cash Flow: $892.0 million, increased 3.2%
February 13, 2014 07:30 AM Eastern Standard Time
DENVER & MONTREAL--Molson Coors Brewing Company (NYSE: TAP; TSX: TPX) today announced a 16 percent increase in its dividend for the first quarter of 2014 and reported 0.2 percent lower underlying after-tax income for the fourth quarter 2013, due to a higher underlying effective tax rate. Underlying fourth quarter pretax income increased 6.5 percent, driven by improved performance in the U.S. and Europe, along with less underlying interest expense versus a year ago. U.S. GAAP net income from continuing operations attributable to MCBC for the fourth quarter increased 118.3 percent due to lower U.S. GAAP income tax expense and higher non-core gains, along with improved financial results in the U.S. and Europe. (See Special and Other Non-Core Items below for details.) Worldwide beer volume increased 0.1 percent. Net sales declined 0.2 percent in the fourth quarter of 2013, driven by unfavorable foreign exchange.
Molson Coors president and chief executive officer Peter Swinburn said, "In the 4th quarter, Molson Coors increased underlying pretax earnings 6.5 percent, expanded pretax margins and generated substantial underlying EBITDA and free cash flow. Underlying after-tax income declined less than one percent due to a higher tax rate in the quarter. For full year 2013, we grew underlying after-tax earnings and EBITDA and exceeded our targets for cost savings, cash generation and debt reduction. The funded status of our pension plans improved by $448 million -- including our portion of MillerCoors -- and we paid down $114 million of cross-currency net liabilities. Regionally, our U.S. business improved results, especially late in the year, Europe performed well in a difficult environment, Canada struggled, and International made significant progress toward its goal of profitability by 2016. Particular challenges included Miller Lite in the U.S. and Coors Light in Canada, along with commercial performance in Serbia. Nonetheless, our focus on building our core brands, growing the above-premium segment of our portfolio, and driving sales revenue from innovation delivered significantly improved results this year. Our overall brand performance was strong, and strategically we are gaining momentum in the areas that will have the most impact on our financial results as markets begin to improve."
Swinburn added, "Our U.S. GAAP after-tax income increased 118 percent in the fourth quarter and 28 percent for the year, primarily due to a lower U.S. GAAP effective tax rate and higher non-core gains, along with improved financial results in the U.S. and Europe. Also, in recognition of the substantial progress we have made in paying down debt, our board has authorized an increase in our quarterly dividend from 32 cents per share to 37 cents per share, beginning in the first quarter of 2014. This 16 percent increase results in an annual dividend amount of $1.48 per share, which represents a payout ratio of 18.4 percent of 2013 underlying EBITDA. Equally important, our company is adopting for the first time a dividend payout ratio target of 18 percent to 22 percent of trailing underlying EBITDA, which we anticipate will keep our dividend in a competitive range for global beer companies for the foreseeable future."
Quarterly Dividend Increased 16%
Molson Coors Brewing Company (NYSE: TAP, TAP.A) today declared an increased regular quarterly dividend of US$0.37 per share, payable March 17, 2014, to Class A and Class B shareholders of record on February 28, 2014. This dividend represents a 16 percent increase from the previous quarterly rate of US$0.32 per share and raises the annual dividend rate to $1.48 per share. In addition, Molson Coors Canada Inc. (TSX: TPX.B, TPX.A), declared a quarterly dividend of the Canadian dollar equivalent of US$0.37 per share using today’s noon spot exchange rate as reported by the Bank of Canada, payable March 17, 2014, to Class A exchangeable and Class B exchangeable shareholders of record on February 28, 2014.
Underlying EBITDA and Free Cash Flow
Underlying earnings before interest, taxes, depreciation and amortization, or underlying EBITDA, reached $313.8 million in the fourth quarter, a 2.4 percent increase from a year ago. Full year underlying EBITDA increased 5.1 percent from a year ago to $1.47 billion this year.
Underlying free cash flow for the year totaled $892.0 million. This represents an increase of $27.3 million over strong cash generation in 2012.
Cost Savings Highlights
In 2013, the company delivered more than $70 million of cost savings excluding MillerCoors, which achieved an additional $102 million of cost savings. Molson Coors benefits from 42% of MillerCoors cost savings, equal to $43 million in 2013.
Foreign Exchange
The Company’s fourth quarter underlying consolidated pretax income includes a net neutral impact from foreign currency movements. Foreign currency was approximately $2 million positive in Europe, $2 million positive in Corporate, and $4 million negative in Canada.
Effective Income Tax Rates
The Company’s fourth quarter effective income tax rate was 9 percent on a reported basis and 23 percent on an underlying basis. On an underlying basis, our effective tax rate was approximately 5 percentage points higher than prior year primarily due to an immaterial out-of-period adjustment to uncertain tax positions related to prior years.
The Company’s full year 2013 effective tax rate was 13 percent on a reported basis and 15 percent on an underlying basis. The Company estimates that its underlying effective tax rate will be in the range of 16 percent to 20 percent for full year 2014, assuming no further changes in tax laws, settlement of tax audits, or adjustments to our uncertain tax positions.
Debt
Total debt at the end of the fourth quarter was $3.80 billion, and cash and cash equivalents totaled $442.3 million, resulting in net debt of $3.36 billion, which is $686.5 million lower than at the end of 2012.
Fourth Quarter Business Segment Results
The following are the Company’s fourth quarter 2013 results by business segment:
United States Business (MillerCoors)(3)
Molson Coors underlying U.S. segment equity income increased 26.9 percent to $102.7 million in the quarter.
MillerCoors Operating and Financial Highlights
MillerCoors underlying net income for the quarter increased 30.2 percent to $241.9 million, driven by marketing and administrative cost reductions, domestic pricing and brand mix, partially offset by the impact of lower volumes and commodity and brewery inflation.
MillerCoors domestic sales to retailers (STRs) declined 1.9 percent for the quarter. Domestic sales to wholesalers (STWs) decreased 2.2 percent. Total company net revenue per hectoliter increased 2.9 percent. Domestic net revenue per hectoliter, which excludes contract brewing and company-owned-distributor sales, grew 3.1 percent primarily due to favorable net pricing and brand mix. Third-party contract brewing volumes increased 1.1 percent.
Cost of goods sold (COGS) per hectoliter increased 4.1 percent, driven by commodity and brewery inflation, lower volume and higher costs associated with brand innovation. Marketing, general and administrative (MG&A) expense decreased 12.0 percent, driven primarily by media investment phasing and lower pension and employee-benefit-related expenses.
Depreciation and amortization expenses for MillerCoors in the fourth quarter were $80.5 million, and additions to tangible and intangible assets totaled $165.9 million.
Canada Business
Canada underlying pretax income decreased 14.0 percent to $86.9 million in the quarter and decreased 9.0 percent in local currency. Despite the return of National Hockey League play, continued weak consumer demand and promotional challenges drove the decline in Canada pretax income. A decrease in the Canadian dollar versus the U.S. dollar resulted in an approximate $4 million negative foreign exchange impact in the quarter.
STRs increased 2.6 percent in the fourth quarter due to the Company's change to a Gregorian calendar, which added three days to the end of the fourth quarter in 2013. These three days added approximately three percentage points to fourth quarter STRs but did not have a significant impact on pretax profit. On a comparable-calendar basis, the Canadian beer market increased volume approximately one-half percent, and our market share decreased about one-half percentage point versus a year ago. Fourth quarter sales volume for Molson Coors Canada increased 2.4 percent. Net sales per hectoliter increased 1.6 percent in local currency, driven by favorable pricing and export business results.
COGS per hectoliter increased 1.0 percent in local currency, driven by a mix shift toward higher-cost brands and packages, partially offset by cost savings. MG&A expense increased 21.1 percent in local currency, driven by the cycling of last year's NHL lockout and related reductions in marketing, sales and promotion expense in that year.
Europe Business(4)
Europe underlying pretax income increased 11.8 percent to $39.7 million driven by volume growth, positive pricing, lower supply chain costs and an approximate $2 million benefit from favorable foreign currency movements.
Europe sales volume increased 1.5 percent due to improved performance in the U.K., Romania, Hungary and the Czech Republic. This was partially offset by continued overall weak demand in the region, particularly in Serbia and Bulgaria. Europe net sales per hectoliter decreased 1.9 percent in local currency, with negative channel and package mix partially offset by positive pricing.
COGS per hectoliter decreased 3.9 percent in local currency as a result of lower supply chain costs and a mix shift to lower-cost channels and packages.
MG&A expenses increased 4.3 percent in local currency, driven by higher incentive compensation this year, along with year-over-year differences in the timing of marketing and sales.
International Business (5)
The International segment posted an underlying pretax loss of $5.6 million in the fourth quarter, versus income of $0.3 million a year ago, due to the negative impact of transferring the Carling travel and export business to the Europe segment ("Carling transfer") and of cycling one-time cost reductions last year.
Total International sales volume, including royalty volume, decreased 3.6 percent primarily due to the industry weakness in our Ukraine license market and the negative impact of the Carling transfer. This decline was partially offset by strong growth in Mexico and Latin America. Net sales per hectoliter decreased 4.7 percent, driven by the negative impact of movements in the Japanese Yen and unfavorable geographic mix.
COGS per hectoliter increased 16.6 percent, primarily due to cycling non-recurring cost reductions from last year, the addition of contract brewing volume in India and the Carling transfer. International MG&A expense increased 6.3 percent, driven by marketing investment in the Coors and Blue Moon launches in Australia and the timing of marketing investment in Japan.
Corporate
Underlying Corporate pretax expenses totaled $59.8 million for the fourth quarter. This $4.0 million decrease was driven by lower underlying interest expense due to debt repayment.
Special and Other Non-Core Items
The following special and other non-core items have been excluded from underlying pretax earnings.
During the quarter, Molson Coors special items resulted in a $34.2 million pretax charge, primarily driven by a $13.2 million loss resulting from the termination of our Tradeteam distribution agreements and subsequent sale of our 49.9% interest in Tradeteam to DHL, as well as a $17.9 million impairment charge related to the definite-lived intangible brand assets in Canada associated with the Miller licensing agreement. Additionally, we recognized a $13.6 million charge for employee-related restructuring expenses and special termination benefits for some of our defined-benefit pension plans. These charges were partially offset by a gain of $5.9 million recognized upon finalizing the sale of our interest in our MC Si'hai joint venture in China, as well as a $4.6 million net gain recognized for insurance payments received related to the floods in Europe that occurred in the second quarter of 2013.
During the quarter, MillerCoors reported $4.8 million in special charges related to restructuring and asset write-offs in connection with a Business Transformation project. Our portion of these charges is $2.0 million at our 42 percent economic ownership share.
Other non-core items resulted in a $17.6 million pretax gain, which was primarily due to a $22.3 million gain on sale of non-core assets, partially offset by $2.4 million of integration-related costs and $2.3 million of unrealized losses on our commodity hedges and other foreign currency balances.
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