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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000024545-02-000003.txt : 20020415
<SEC-HEADER>0000024545-02-000003.hdr.sgml : 20020415
ACCESSION NUMBER: 0000024545-02-000003
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 6
CONFORMED PERIOD OF REPORT: 20011230
FILED AS OF DATE: 20020329
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: COORS ADOLPH CO
CENTRAL INDEX KEY: 0000024545
STANDARD INDUSTRIAL CLASSIFICATION: MALT BEVERAGES [2082]
IRS NUMBER: 840178360
STATE OF INCORPORATION: CO
FISCAL YEAR END: 1228
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-14829
FILM NUMBER: 02592386
BUSINESS ADDRESS:
STREET 1: P.O. BOX 4030, MAIL #NH375
CITY: GOLDEN
STATE: CO
ZIP: 80401
BUSINESS PHONE: 3032773271
</SEC-HEADER>
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<TEXT>
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 (NO FEE REQUIRED)
For the fiscal year ended December 30, 2001
OR
o 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)
311 Tenth Street, 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
Class B Common Stock (non-voting), New York Stock Exchange
no par value
Securities registered pursuant to Section 12(g) of the Act:
None
(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. ()
State the aggregate market value of the voting stock held by non-affiliates
of the registrant: N/A. 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 15, 2002:
Class A Common Stock - 1,260,000 shares
Class B Common Stock - 34,750,352 shares
PART I
ITEM 1. Business
(a) General Development of Business
Since our founding in 1873, we have been committed to producing the highest
quality beers. Our portfolio of brands is designed to appeal to a wide
range of consumer taste, style and price preferences. Historically, our
beverages have been sold throughout the United States and in select
international markets. Unless otherwise noted in this report, any
description of us includes both Adolph Coors Company (ACC) and Coors
Brewing Company (CBC), ACC's wholly owned subsidiary, but does not include
Coors Brewers Limited as it was acquired in February, 2002.
Recent General Business Developments
Carling Brewers: In February 2002, we completed the acquisition of the
Carling business from Interbrew S.A. for 1.2 billion British pounds sterling
(approximately $1.7 billion), plus associated fees and expenses. The purchase
price is subject to adjustment based on the value of certain items, as
defined in the purchase agreement, as of the acquisition date. The Carling
business, (subsequently renamed Coors Brewers Limited) includes the majority
of the assets that previously made up Bass Brewers, including the Carling,
Worthington and Caffrey's brand beers; the United Kingdom (U.K.)
distribution rights to Grolsch (via a joint venture with Grolsch N.V.);
several other beer and flavored-alcohol beverage (FAB) brands; related
brewing and malting facilities in the U.K.; and a 49.9% interest in the
distribution logistics provider Tradeteam. The brand rights for Carling,
which is the largest acquired brand by volume, are mainly for territories
in Europe.
Coors Brewers, with its headquarters in Burton-on-Trent, England, is the
U.K.'s second-largest beer company, with 2001 volume of approximately 9
million barrels (excluding factored brands), or l9%, of the U.K. beer
market, which is Western Europe's second-largest market. The Coors Brewers
business is almost exclusively in England and Wales.
The Coors Brewers brand portfolio consists of 20 U.K. beer brands and four
FAB brands with strong offerings in each of its target segments. Its
mainstream lager, Carling, is currently the number-one beer sold in the
U.K. based on volume. Grolsch is the U.K.'s fastest growing premium lager,
with volume increasing fourfold since 1994. Coors Brewers leading position
in the ale segment is driven by a combination of Worthington, the U.K.'s
number-two mainstream ale brand in the On Trade (on-premise) channel, and
Caffrey's, the U.K.'s leading premium ale by volume. In addition, Coors
Brewers is the only U.K. brewer with a successful range of internally
developed FABs.
Like other brewers, Coors Brewers wholesales a range of beers, wines,
spirits and soft drinks (factored products) to enhance service and
profitability by offering a wide range of products to its On Trade
customers.
Coors Brewers currently operates four breweries in the U.K. with production
capacity of more than 12 million barrels. The Burton-on-Trent brewery has
the largest capacity and is located in the Midlands, in central England,
which facilitates cost-efficient distribution throughout the U.K. Other
breweries are located in Tadcaster (Yorkshire), Cape Hill (Birmingham) and
Alton (Hampshire). Two of the breweries have can and bottle packaging
facilities, and there is a broad range of brewing and packaging operations
across the four sites. Additionally, the company operates three malting
facilities located in Burton, Shobnall and Alloa.
In March 2002, we announced plans to close our Cape Hill brewery and Alloa
malting facility. A majority of the production at the Cape Hill brewery
relates to brands that were retained by Interbrew. The production at the
Alloa malting facility will be moved to one of the other existing malting
facilities. These closures will remove excess capacity from the Coors
Brewers system.
The Coors Brewers distribution operation is run by Tradeteam, a joint
venture with Exel Logistics in which Coors Brewers owns 49.9%. Tradeteam
operates a system of satellite warehouses and the transportation fleet for
deliveries between the Coors Brewers breweries and customers. Additionally,
Tradeteam manages the transportation of certain raw materials such as malt
to the Coors Brewers breweries.
EDS Information Services, LLC (EDS): During the third quarter of 2001, we
finalized our contract with EDS to outsource certain functions of our
information technology infrastructure. We believe this new arrangement will
allow us to focus on our core business while having access to the expertise
and resources of a world-class information technology provider.
Ball Corporation: Effective January 1, 2002, we became an equal member
with Ball Corporation (Ball) in a Colorado limited liability company, Rocky
Mountain Metal Container, LLC (RMMC). Also effective on January 1, 2002, we
entered into a can and end supply agreement with RMMC (the Supply
Agreement). Under that Supply Agreement, RMMC will supply us with
substantially all of the can and end requirements for our Golden brewery.
RMMC will manufacture these cans and ends at our existing manufacturing
facilities, which RMMC is operating under a use and license agreement. We
have the right to purchase Ball's interest in RMMC under certain
conditions. If we do not exercise that right, Ball may have the right to
purchase our interest in RMMC. Our prior joint venture was with American
National Can Company (subsequently acquired by Rexam LLC). In August 2001,
we purchased Rexam's interest in the joint venture.
Molson USA, LLC: In January 2001, we entered into a joint venture
agreement with Molson, Inc. and paid $65 million for a 49.9% interest in
the joint venture. The joint venture, Molson USA, LLC (MUSA), was formed to
import, market and sell Molson's brands of beer in the United States,
including Molson Canadian, Canadian Light, Molson Golden and Molson Ice.
Under the agreement, the joint venture owns the exclusive right to import
Molson brands into the United States. Additionally, any Molson brands that
may be developed in the future for import into the United States are
covered under the agreement. We are responsible for the sales activities in
the United States for the brands and products that are manufactured in
Canada by Molson under the agreement. Decisions related to marketing of the
brands are made both by Molson and us through the joint venture.
Coors Canada: In January 1998, we formed Coors Canada, a partnership
arrangement, with Molson, Inc. in Canada to distribute Coors products in
Canada. We own 50.1% of this partnership through our 100% ownership of
Coors Canada, Inc. In December 2000, we entered into a five year brewing
and packaging arrangement with Molson in which we will have access to some
of Molson's available production capacity in Canada. The Molson capacity
available to us under this arrangement in 2001 was 250,000 barrels, none of
which was used by us. Starting in 2002, available capacity increases to
500,000 barrels. Currently, we pay Molson a fee for holding this capacity
aside for our future use.
Spain: In 2000, we closed our brewery in Zaragoza, Spain, and sales
operation in Madrid, Spain. In 2001, the plant and related fixed assets
were sold.
Some of the following statements describe our expectations of future
products and business plans, financial results, performance and events.
Actual results may differ materially from these forward-looking statements.
Please see Item 7, Management's Discussion and Analysis - Cautionary
Statement Pursuant to Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995, for factors that may negatively impact our
performance. The following statements are expressly made subject to those
and other risk factors.
(b) Financial Information About Industry Segments
We have one reporting segment, which is focused on the malt beverage
business. See Item 8, Financial Statements and Supplementary Data, for
financial information relating to our operations.
We are still evaluating the impact of acquiring the Coors Brewers business
on our segment reporting for 2002. At this time, we anticipate having two
reportable operating segments: the Americas and Europe.
(c) Narrative Description of Business
As noted above in Item 1(a), General Development of Business, Recent
General Business Developments, we acquired the Carling business portion of
Bass Brewers in February 2002. Except where otherwise noted, the
disclosures in this Item (c) relate to the business of Coors Brewing
Company as it pertains to our one reporting segment that existed as of
December 30, 2001.
Coors Brewing Company - General
We produce, market and sell high-quality malt-based beverages. Our
portfolio of brands is designed to appeal to a wide range of consumer
taste, style and price preferences. Our beverages are sold throughout the
United States and in select international markets. Coors Light has
accounted for more than 70% of our sales volume in each of the last four
years. Premium and above-premium products accounted for more than 85% of
our total sales volume in each of the last four years. Most of our sales
are in U.S. markets; however, we are committed to building profitable sales
in international markets. Our goal is to continue growing our business and
increasing our profitability, both domestically and internationally, by
focusing on the following key strategies:
- producing the highest quality products;
- focusing on high-growth, high-margin segments;
- investing in high-potential markets and brands;
- improving our wholesale distribution network;
- reducing costs and improving productivity;
- building organizational excellence; and,
- pursuing strategic opportunities.
Our sales of malt beverages totaled 22.7 million barrels in 2001, 23.0
million barrels in 2000 and 22.0 million barrels in 1999. The barrel sales
figures for each year do not include barrel sales of a non-consolidated
Canadian partnership. An additional 1.3 million, 1.2 million and 1.0
million barrels were sold by this non-consolidated entity in 2001, 2000 and
1999, respectively. See Item 7, Management's Discussion and Analysis, for
discussion of changes in volume.
Our Products
Our top-selling brand is Coors Light, a premium beer, and our other
products include an additional 10 brands. Our other premium beers include
Coors Original and Coors Non-Alcoholic. We also offer a selection of
above-premium beers including George Killian's Irish Red Lager and Blue
Moon Belgian White Ale. In addition, we offer Zima and Zima Citrus,
alternative malt-based beverages that are light, refreshing products and
have long competed in the malternative category. We also compete in the
lower-priced segment of the beer market, called the popular-priced segment,
with Extra Gold and our Keystone family of beers - Keystone Premium,
Keystone Light and Keystone Ice.
In 2001, the Coors Dry and Winterfest brands, were phased out because of
greater emphasis and focus on other brands.
We own and operate The SandLot Brewery at Coors Field ballpark in Denver,
Colorado. This brewery, which is open year-round, makes a variety of
specialty beers and has an annual capacity of approximately 4,000 barrels.
Sales and Distribution
By federal law, beer must be distributed in the United States through a
three-tier system consisting of manufacturers, distributors and retailers.
Currently, a national network of 494 distributors delivers our U.S.
manufactured products to U.S. retail markets. Of these, 492 are independent
businesses and the other two are owned and operated by one of our
subsidiaries. Some distributors operate multiple branches, bringing the
total number of U.S. distributor and branch locations to 562 for the year
ended December 30, 2001. As a result of our new Molson USA joint venture,
we have an additional 237 domestic distributors, including branches, that
distribute Molson brands (but not Coors brands) within the United States.
Additional independent distributors deliver our products to some
international markets under licensing and distribution agreements.
In the past three years, consolidation among U.S. wholesalers has
accelerated. As a result of this trend, approximately 45% of our U.S.
distributors (which sell nearly 40% of our volume) now also distribute
Miller Brewing Company products. We view this consolidation trend
positively because it generally improves the economics of the combined
distributorships, which allows them to compete more effectively against the
market leader's distributors.
We establish standards and monitor distributors' methods of handling our
products to ensure the highest product quality and freshness. Monitoring
ensures adherence to proper refrigeration and rotation guidelines for our
products at both wholesale and retail locations. Distributors are required
to remove our products from retailer outlets if they have not sold within a
certain period of time.
Our highest volume states are California, Texas, Pennsylvania, New York and
New Jersey, which together comprised 44% of our total domestic volume in
2001.
We have more than 300 full-time salespeople throughout the United States.
Our salespeople work closely with our distributors to assure that they
focus appropriately on our product and to assist them in implementing
industry best practices to improve efficiency and performance. Our sales
function is organized into two regions that manage a total of six
geographic field business areas responsible for overseeing domestic sales.
We believe this structure enables our salespeople to better anticipate
wholesaler and consumer needs and to respond to those needs locally, with
greater speed.
In addition, we have a team of category managers responsible for assisting
leading U.S. retailers, such as large supermarket chains, with managing
their beer offerings. Our category managers work with retailers to enhance
overall beer sales through optimizing space allocation, merchandising
displays, promotional campaigns and product distribution throughout each
retailer's chain. We believe that our success in category management
enhances our competitive position.
Manufacturing, Production and Packaging
Brewing Process and Raw Materials
Our ingredients and brewing process make our beers unlike any other beers
in the world. We also use unique packaging materials developed to
accommodate our cold packaging and shipping.
We use the highest quality ingredients to produce our beers. We adhere to
strict formulation and quality standards in selecting our raw materials. We
believe we have sufficient access to raw materials to meet our quality and
production requirements.
Along with water, barley is the fundamental ingredient in beer. Barley is
so important to the quality and taste of our products that we started
developing our own strains of barley in 1937. We use proprietary strains of
barley, developed by our own barley breeders and agronomists, for most of
our malt beverages. Virtually all of this barley is grown on irrigated
farmland in the western United States under contracts with area growers.
The growers use only our proprietary barley seed developed by us to produce
our malting barley. We are the only major brewer in the United States to
exclusively use two-row barley rather than the six-row barley that is more
commonly used among brewers. Two-row barley allows the seed ample room to
grow and develop, which we believe produces a more consistent, higher-
quality crop and better tasting beer. Our malting facility in Golden
produces approximately 80% of all of our malt requirements for our U.S.
products. We also have our own barley malted by third parties under
contract. We maintain inventory levels in facilities that we own. Our
inventories are sufficient to continue production in the event of any
foreseeable disruption in barley supply and currently exceed a 14-month
supply.
We use naturally filtered water from underground aquifers to brew malt
beverages at our Golden facility. Water quality and composition have been
primary factors in all facility site selections. Water from our sources
contains minerals that help brew high-quality malt beverages.
We continually monitor the quality of the water used in our brewing process
for compliance with our own stringent quality standards, which exceed
federal and state water standards. We own water rights that we believe are
more than sufficient to meet all of our present and foreseeable
requirements for both brewing and industrial uses. We acquire water rights,
as appropriate, to provide flexibility for long-term strategic growth needs
and also to sustain brewing operations in case of a prolonged drought.
We take an average of 55 days -- significantly longer than our major
competitors -- to brew, age, finish and package our beers. We believe this
unique process creates a smoother, more drinkable product. We were the
first brewer to introduce a cold-filter process to preserve taste. We keep
the product cold -- from the brewhouse through packaging to retail -- by
using insulated containers for transport and by requiring our distributors
to hold our products in temperature-controlled warehouses.
Brewing and Packaging Facilities
We have three domestic production facilities. We own and operate the
world's largest single-site brewery in Golden, Colorado. In addition, we
own and operate a packaging and brewing facility in Memphis, Tennessee, and
a packaging facility located in the Shenandoah Valley in Virginia.
We brew Coors Light, Coors Original, Extra Gold, Killian's and the Keystone
brands in Golden. Approximately 60% of our beer volume brewed in Golden is
also packaged there. The remainder is shipped in bulk from the Golden
brewery to either our Memphis facility or to our Shenandoah facility for
packaging.
The Memphis facility packages all products exported from the United States.
It also brews and packages our Zima, Zima Citrus, Coors Non-Alcoholic and
Blue Moon brands for domestic and international distribution. Coors Light
is brewed in Memphis for export only.
Our Shenandoah facility packages Coors Light, Keystone Light and a small
portion of Killian's volume for distribution to eastern U.S. markets.
To continue the brand growth that we have experienced over the past several
years, we increased our 2001 capital expenditures to expand our brewing and
packaging capacity. In particular, we added a third bottle line to our
Shenandoah facility and have added brewing capacity to our Memphis facility
to meet growing demand and to lower our production and distribution costs
to markets in the northeastern United States. We are improving
manufacturing processes in Golden, which will increase brewing and
packaging capacity in our largest facility. We also anticipate that further
increasing brewing and packaging capacity at our Memphis facility will be
an important part of our mid- and long-term capacity plan. Please see Item
7, Management's Discussion and Analysis - Liquidity and Capital Resources,
for more information about our planned capital expenditures.
Energy
We purchase electricity and steam for our Golden manufacturing facilities
from Trigen-Nations Energy Corporation, L.L.L.P. (Trigen). Coors Energy
Company, our wholly owned subsidiary, buys coal, which it sells to Trigen
for Trigen's steam generator system, and purchases gas for our Shenandoah
and Golden operations.
Packaging Materials
Aluminum cans: Approximately 60% of our products were packaged in aluminum
cans in 2001. A substantial portion of those cans were purchased from a
joint venture between Coors and Rexam LLC, which operated at our
manufacturing facilities. In August 2001, we purchased Rexam's interest in
the joint venture.
We own the manufacturing facilities that produced the majority of our
aluminum can, end and tab requirements. In 2001, we purchased all of the
cans, and most of the ends, produced by these facilities which were
operated in 2001 through the joint venture with Rexam. In addition, we
purchased certain specialized cans and some cans for products packaged at
our Memphis and Shenandoah plants directly from Rexam LLC.
In 2001, we replaced our joint venture with Rexam by forming RMMC with
Ball. Effective January 1, 2002, RMMC will operate our existing can and end
facilities in Golden, Colorado, one of the largest aluminum can
manufacturing facilities in the world. RMMC is structured and has an
incentive to reduce manufacturing costs, as well as provide improved
sourcing patterns, particularly to our Shenandoah and Memphis facilities.
In addition to our supply agreement with RMMC, we also have commercial
supply agreements with Ball and Rexam to purchase cans and ends in excess
of those that are supplied through RMMC.
Glass bottles: We used glass bottles for approximately 29% of our products
in 2001. We operate a production joint venture with Owens-Brockway Glass
Container, Inc. (Owens), the Rocky Mountain Bottle Company (RMBC), to
produce glass bottles at our glass manufacturing facility. The initial term
of the joint venture expires in 2005 and can be extended for additional
two-year periods. In 2001, we purchased all of the bottles produced by
RMBC, approximately 1.1 billion bottles, which fulfilled about half of our
bottle requirements. The remaining bottle requirements were met through a
supply contract with Owens.
Other packaging: The remaining 11% of the volume we sold in 2001 was
packaged in quarter- and half-barrel stainless steel kegs purchased from
third-party suppliers.
We purchase most of our paperboard and label packaging from a subsidiary of
Graphic Packaging International Corporation (GPIC). These products include
paperboard, multi-can pack wrappers, bottle labels and other secondary
packaging supplies. We have begun negotiations to renew this contract which
expires in 2002. We expect it to be renewed prior to expiration. William K.
Coors and Peter H. Coors serve as co-trustees of a number of Coors family
trusts that collectively control GPIC. Please read Item 13, Certain
Relationships and Related Transactions, for more information regarding
GPIC.
Product Shipment
We ship our products greater distances than most of our competitors. By
packaging more of our products in our Memphis and Shenandoah facilities, we
reduce freight costs to certain markets.
In 2001, approximately 64% of our products were shipped by truck and
intermodal directly to distributors or to our satellite redistribution
centers. Transportation vehicles are refrigerated or properly insulated to
keep our malt beverages cold while in transit. The remaining 36% of the
products packaged at our production facilities were shipped by railcar to
either satellite redistribution centers or directly to distributors
throughout the country. Railcars assigned to us are specially built and
insulated to keep our products cold en route.
At December 30, 2001, we had 11 strategically located satellite
redistribution centers, which we use to receive product from production
facilities and to prepare shipments to distributors. Subsequent to year-
end, we have 10 satellite redistribution centers resulting from the
consolidation of two of our western distribution centers. In 2001,
approximately 50% of packaged products were shipped directly to
distributors and 50% moved through the satellite redistribution centers.
International Business
We market our products in select international markets and to U.S. military
bases worldwide.
Europe
See discussion regarding the acquisition of the Carling business in England
and Wales at Item 1(a), General Development of Business, Recent General
Business Developments.
Exclusive of the new Coors Brewers business, our efforts in Europe,
relating to our U.S. brands, are focused on marketing Coors Light in the
Republic of Ireland. Additionally, we are testing Coors Light in Scotland
and Northern Ireland, and we will assess the feasibility of expanding the
sale of Coors Light to the balance of the U.K.
During 2000, we closed our brewery and commercial operations in Spain. In
2001, we sold the related land, buildings and equipment. This brewery
produced beer for Spain and other European markets. Beginning in late 2000,
we began sourcing beer for our remaining European markets from our Memphis
plant. The beer is then packaged for distribution under contract in the
U.K. by Thomas Hardy Packaging Limited.
We are developing plans for integrating our current European business with
Coors Brewers.
Canada
Coors Canada, our partnership with Molson, manages all marketing activities
for our products in Canada. We own 50.1% of this partnership and Molson
owns the remaining 49.9%. The partnership contracts with a Molson
subsidiary for the brewing, distribution and sale of products. This non-
consolidated entity had sales of 1.3 million, 1.2 million and 1.0 million
barrels in 2001, 2000 and 1999, respectively, and partnership net revenue
per barrel was $22.79 in 2001, $21.99 in 2000 and $20.52 in 1999. Coors
Light currently has a market share of more than 7% and is the number-one
light beer -- and the number-four beer brand overall -- in Canada.
Puerto Rico and the Caribbean
In Puerto Rico, we market and sell Coors Light through an independent local
distributor. A local team of our employees manages marketing and
promotional efforts in this market. Coors Light is the number one brand in
the Puerto Rico market with more than a 55% market share in 2001.
We also sell our products in several other Caribbean markets, including the
U.S. Virgin Islands, through local distributors.
Japan
Coors Japan Company, Ltd., our Tokyo-based subsidiary, is the exclusive
importer and marketer of our products in Japan. The Japanese business is
currently focused on Zima and Coors Original. Coors Japan sells our
products to independent distributors in Japan.
China
In August 2001, we formed a new subsidiary, Coors Beer & Beverages (Suzhou)
Co., Ltd., to market and distribute Coors Original in China. In October
2001, we commenced a brewing agreement with Lion Nathan Beer and Beverages
(Suzhou) Co. Ltd. to supply the China market.
Prior to October 2001, we marketed Coors Original beer under a licensing
arrangement with Carlsberg-Guangdong. This arrangement was mutually
terminated as permitted by its terms in October 2001.
Seasonality of the Business
The beer industry is subject to seasonal sales fluctuation. Our sales
volumes are normally at there lowest in the first and fourth quarters and
highest in the second and third quarters. Our fiscal year is a 52- or 53-
week year that ends on the last Sunday in December. The 2001 and 1999
fiscal years were both 52 weeks, while the 2000 fiscal year was 53 weeks.
Research and Development
Our research and development activities relate primarily to creating and
improving products and packages. These activities are designed to refine
the quality and value of our products and to reduce costs through more
efficient processing and packaging techniques, equipment design and
improved raw materials. We spent approximately $16.5 million, $16.9 million
and $16.5 million for research and development in 2001, 2000 and 1999,
respectively. We expect to spend approximately $16 million on research and
product development in 2002.
To support new product development, we maintain a fully equipped pilot
brewery within the Golden facility. This facility has a 6,500-barrel annual
capacity and enables us to brew small batches of innovative products
without interrupting ongoing operations in the main brewery.
Intellectual Property
We own trademarks on the majority of the brands we produce and we have
licenses for the remainder. We also hold several patents on innovative
processes related to product formula, can making, can decorating and
certain other technical operations. These patents have expiration dates
ranging from 2002 to 2021. These expirations are not expected to have a
significant impact on our business.
Regulation
Our business is highly regulated by federal, state and local government
entities. These regulations govern many parts of our operations, including
brewing, marketing and advertising, transportation, distributor
relationships, sales and environmental issues. To operate our facilities,
we must obtain and maintain numerous permits, licenses and approvals from
various governmental agencies, including the U.S. Treasury Department;
Bureau of Alcohol, Tobacco and Firearms; the U.S. Department of
Agriculture; the U.S. Food and Drug Administration; state alcohol
regulatory agencies as well as state and federal environmental agencies.
Internationally, our business is also subject to regulations and
restrictions imposed by the laws of the foreign jurisdictions in which we
sell our products.
Governmental entities also levy taxes and may require bonds to ensure
compliance with applicable laws and regulations. Federal excise taxes on
malt beverages are currently $18 per barrel. State excise taxes also are
levied at rates that ranged in 2001 from a high of $32.65 per barrel in
Alabama to a low of $0.62 per barrel in Wyoming, with an average of $7.91
per barrel. In 2001, we incurred approximately $413 million in federal and
state excise taxes. We realize that from time to time Congress and state
legislatures consider various proposals to increase or decrease excise
taxes on the production and sale of alcohol beverages, including beer. The
last significant increase in federal excise taxes on beer was in 1991, when
these taxes doubled.
Environmental Matters
We are subject to the requirements of federal, state, local and foreign
environmental and occupational health and safety laws and regulations.
Compliance with these laws and regulations did not materially affect our
2001 capital expenditures, earnings or competitive position, and we do not
anticipate that they will do so in 2002.
We are also required to obtain environmental permits from governmental
authorities for certain of our operations. We cannot provide assurance that
we have been or will be at all times in complete compliance with, or have
obtained, all such permits. These authorities can modify or revoke our
permits and can enforce compliance through fines and injunctions. We are
not in violation of any of our permits and, we believe, we have obtained or
are in the process of obtaining all necessary permits, to the best of our
knowledge.
We continue to promote the efficient use of resources, waste reduction and
pollution prevention. We currently conduct several programs including
recycling bottles and cans and, where practical, increasing the recycled
content of product packaging materials, paper and other supplies.
See also Item 7, Management's Discussion and Analysis - Contingencies, for
additional discussion of our environmental contingencies.
Employees and Employee Relations
We have approximately 5,500 employees, excluding Coors Brewers Limited.
Memphis hourly employees, who constitute about 8% of our total work force,
are represented by the Teamsters union and are the only significant
employee group at any of our three domestic production facilities having
union representation. The Memphis union contract was renegotiated in early
2001. The new contract expires in 2005. We believe our people are
absolutely key to our success and that relations with our employees are
good.
Competitive Conditions
Known trends and competitive conditions: Industry and competitive
information in this section and elsewhere in this report was compiled from
various industry sources, including beverage analyst reports, Beer
Marketer's Insights, Beer Marketer Survey, Impact Databank and The Beer
Institute. While management believes that these sources are reliable, we
cannot guarantee the complete accuracy of these numbers and estimates.
2001 industry overview: The beer industry in the United States is extremely
competitive. Industry volume growth has averaged less than 1% annually
since 1991. Therefore, growing or even maintaining market share requires
substantial and consistent investments in marketing and sales. In a very
competitive year, U.S. beer industry shipments increased less than 1% in
2001, after growing 0.8% in 2000. In recent years, brewers have focused on
marketing, promotions and innovative packaging in an effort to gain market
share with less use of price discounting strategies.
The industry's pricing environment continued to be positive in 2001, with
modest price increases on specific packages in select markets. As a result,
revenue per barrel improved for major U.S. brewers during the year.
However, for the industry in general, many raw material prices increased in
2001, including aluminum, glass and energy. In addition, consumer demand
continued to shift away from short bottles and toward longneck bottles,
which cost significantly more to make and ship than short bottles.
A number of important trends affected the U.S. beer market in 2001. The
first was a continuing sales shift toward lighter, more-refreshing
beverages. Virtually all of the growth in the category was achieved by
American-style light lagers (domestic and imported) and new alternative
malt beverages. More than 80% of our annual unit volume in 2001 was in
light beers. The second trend was toward "trading up," as consumers
continued to move away from lower-priced brands to higher-priced brands,
including imports and alternative malt beverages. Import beer shipments
rose nearly 10% in 2001. Long-term industry sales trends toward lighter,
more-upscale beers generally play to our strengths.
The U.S. brewing industry has experienced significant consolidation in the
past several years, which has removed excess capacity. Several competitors
have exited the beer business, sold brands or closed inefficient, outdated
brewing facilities. In 2001, beer industry consolidation at the wholesaler
level maintained a quick pace. This consolidation generally improves
economics for the combining wholesalers and their suppliers.
U.S. demographics continued to improve for the beer industry, with the
number of consumers reaching legal drinking age continuing to increase in
2001, according to U.S. Census Bureau assessments and projections. These
same projections anticipate that the 21 to 24 age group will continue to
grow for most of this decade. This trend is important to the beer industry
because young adults tend to consume more beer per capita than other
demographic groups.
Our competitive position: Our malt beverages compete with numerous above-
premium, premium, low-calorie, popular-priced, non-alcoholic and imported
brands. These competing brands are produced by national, regional, local
and international brewers. In 2001, approximately 80% of U.S. beer
shipments were attributed to the top three domestic brewers: Anheuser-
Busch, Inc.; Philip Morris, Inc., through its subsidiary Miller Brewing
Company; and Coors Brewing Company. We compete most directly with Anheuser
and Miller, the dominant companies in the U.S. industry. According to Beer
Marketer's Insights estimates, we are the nation's third-largest brewer,
selling approximately 11.1% of the total 2001 U.S. brewing industry
shipments of malt beverages (including exports and U.S. shipments of
imports). This compares to Anheuser's 48.6% share and Miller's 19.6% share.
Our beer shipments to wholesalers decreased 1.2% in 2001, primarily because
fiscal 2000 was 53 weeks, while fiscal 2001 was 52 weeks. On a comparable-
calendar basis, our 2001 beer shipments were down 0.1% from a year earlier
because of slower sales of our products other than Coors Light and Keystone
Light. By comparison, Anheuser's domestic shipments increased 1.2% in 2001
and Miller's declined 2.4%. More than 85% of our unit volume was in the
premium and above-premium price categories, the highest proportion among
the major domestic brewers.
We continue to face competitive disadvantages related to economies of
scale. Besides lower transportation costs achieved by competitors with
multiple, geographically dispersed breweries, these larger brewers also
benefit from economies of scale in advertising spending because of their
greater unit sales volumes. To achieve and maintain national advertising
exposure and grow our U.S. market share, we generally spend substantially
more per barrel to market our products than our major competitors.
Although our results are primarily driven by U.S. sales, international
operations have increased in importance in recent years, including in
Canada, where Coors Light is the number-one light beer. We anticipate that
the acquisition of Coors Brewers will substantially increase the
contribution of our international operations to our total results. See Item
1.(a), General Development of Business, Recent general business
developments and Note 17, Subsequent Event, in the Notes to the
Consolidated Financial Statements, for discussion relative to the Carling
acquisition.
(d) Financial Information About Foreign and Domestic Operations and Export
Sales
See Item 8, Financial Statements and Supplementary Data, for discussion of
sales, operating income and identifiable assets attributable to our country
of domicile, the United States, and all foreign countries.
ITEM 2. Properties
As of December 30, 2001, our major facilities were:
Facility Location Product
Brewery/packaging Golden, CO Malt beverages/packaged
malt beverages
Packaging Elkton, VA (Shenandoah) Packaged malt beverages
Brewery/packaging Memphis, TN Malt beverages/packaged
malt beverages
Can and end plants Golden, CO Aluminum cans and ends
Bottle plant Wheat Ridge, CO Glass bottles
Distribution warehouse Meridian, ID Wholesale beer distribution
Denver, CO
Glenwood Springs, CO
In 2001, we sold our distribution operations in Anaheim, California, and
Oklahoma City, Oklahoma, but retained ownership of the facilities. We are
in the process of selling the land and buildings associated with these
previously owned distributors and in the short-term are leasing these
facilities to the buyers of the distributor operations. Also in 2001, we
sold the entire San Bernardino, California, distribution operation and
facility. We own all of our remaining distribution facilities except our
Glenwood Springs, Colorado, distribution warehouse that is leased. The
lease was due to expire on September 30, 2002, and has been renegotiated
for an additional five-year period commencing October 1, 2002, and
terminating on September 30, 2007.
We own approximately 1,900 acres of land in Golden, Colorado, which include
brewing, packaging, can manufacturing and related facilities, as well as
gravel deposits and water storage facilities. We own 2,200 acres of land in
Rockingham County, Virginia, where the Shenandoah facility is located, and
132 acres in Shelby County, Tennessee, where the Memphis facility is
located.
We own waste treatment facilities in Golden and Shenandoah that process
waste from our manufacturing operations. The Golden facility also processes
waste from the City of Golden.
We believe that all of our facilities are well maintained and suitable for
their respective operations.
After being capacity constrained in our operations during peak season in
recent years, in 2001 we spent $244.5 million on capital improvement
projects, approximately two-thirds of which was related to improving
production capacity, flexibility and efficiency. With these important
capabilities in place, we now have ample capacity in brewing, packaging and
warehousing to more efficiently meet expected growth in consumer demand for
our products, including during the peak summer selling season. During 2002,
we currently anticipate capital spending in the range of $135 to $145
million in our North American business. Combined with the capacity work
completed in 2001, this level of capital spending will allow us to grow
this business and improve its efficiency in the years ahead. As a result,
we currently plan capital spending for our North American business in the
range of 2002 levels for at least the next several years.
ITEM 3. Legal Proceedings
We were one of a number of entities named by the Environmental Protection
Agency (EPA) as a potentially responsible party (PRP) at the Lowry
Superfund site. This landfill is owned by the City and County of Denver
(Denver), and was managed by Waste Management of Colorado, Inc. (Waste). In
1990, we recorded a special pretax charge of $30 million, a portion of
which was put into a trust in 1993 as part of an agreement with Denver and
Waste to settle the outstanding litigation related to this issue.
Our settlement was based on an assumed cost of $120 million (in 1992
adjusted dollars). It requires us to pay a portion of future costs in
excess of that amount.
In January 2002, in response to the EPA's five-year review conducted in
2001, Waste provided us with updated annual cost estimates through 2032. We
have reviewed these cost estimates in the assessment of our accrual related
to this issue. In determining that the current accrual is adequate, we
eliminated certain costs included in Waste's estimates, primarily trust
management costs that will be accrued as incurred, certain remedial costs
for which technology has not yet been developed and income taxes which we
do not believe to be an included cost in the determination of when the $120
million threshold is reached. We generally used a 2% inflation rate for
future costs, and discounted certain operations and maintenance costs at
the site that we deemed to be determinable, at a 5.46% risk-free rate of
return. Based on these assumptions, the present value and gross amount of
discounted costs are approximately $1 million and $4 million, respectively.
We did not assume any future recoveries from insurance companies in the
estimate of our liability.
There are a number of uncertainties at the site, including what additional
remedial actions will be required by the EPA, and what costs are included
in the determination of when the $120 million threshold is reached. Because
of these issues, the estimate of our liability may change as facts further
develop, and we may need to increase the reserve. While we cannot predict
the amount of any such increase, an additional accrual of as much as $25
million is reasonably possible based on our preliminary evaluation, with
additional cash contributions beginning as early as 2013.
We were one of several parties named by the EPA as a PRP at the Rocky Flats
Industrial Park site. In September 2000, the EPA entered into an
Administrative Order on Consent with certain parties, including our
company, requiring implementation of a removal action. Our projected costs
to construct and monitor the removal action are approximately $300,000. The
EPA will also seek to recover its oversight costs associated with the
project, which are not possible to estimate at this time. However, we
believe they would be immaterial to our operating results, cash flows and
financial position.
In August 2000, an accidental spill into Clear Creek at our Golden,
Colorado, facility caused damage to some of the fish population in the
creek. A settlement reached in February 2001 with the Colorado Department
of Public Health and Environment was modified based on public comment,
including comments by the EPA. As a result, permit violations that occurred
several years prior to the accidental spill were included in the
settlement, as well as economic benefit penalties related to those prior
violations. A total civil penalty of $100,000 was assessed in the final
settlement with the Department reached in August 2001. In addition, we will
undertake an evaluation of our process wastewater treatment plant. On
December 21, 2001, we settled with the Colorado Division of Wildlife for
the loss of fish in Clear Creek. We have agreed to construct, as a pilot
project, a tertiary treatment wetland area to evaluate the ability of a
wetland to provide additional treatment to the effluent from our waste
treatment facilities. We will also pay for the stocking of game fish in the
Denver metropolitan area and the cost of two graduate students to assist in
the research of the pilot project. The anticipated costs of the project are
estimated to be approximately $500,000. The amounts of these settlements
have been fully accrued as of December 30, 2001.
From time to time, we have been notified that we are or may be a PRP under
the Comprehensive Environmental Response, Compensation and Liability Act or
similar state laws for the cleanup of other sites where hazardous
substances have allegedly been released into the environment. We cannot
predict with certainty the total costs of cleanup, our share of the total
cost (if any), the extent to which contributions will be available from
other parties, the amount of time necessary to complete the cleanups or
insurance coverage.
In addition, we are aware of groundwater contamination at some of our
properties in Colorado resulting from historical, ongoing or nearby
activities. There may also be other contamination of which we are currently
unaware.
While we cannot predict our eventual aggregate cost for our environmental
and related matters in which we are currently involved, we believe that any
payments, if required, for these matters would be made over a period of
time in amounts that would not be material in any one year to our operating
results, cash flows or our financial or competitive position. We believe
adequate reserves have been provided for losses that are probable and
estimable.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
PART II
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Our Class B non-voting common stock has traded on the New York Stock
Exchange since March 11, 1999, under the symbol "RKY" and prior to that was
quoted on the NASDAQ National Market under the symbol "ACCOB."
The approximate number of record security holders by class of stock at
March 15, 2002, is as follows:
Title of class Number of record security holders
Class A common stock, voting, All shares of this class are
no par value held by the Adolph Coors, Jr. Trust
Class B common stock, non-voting,
no par value 2,916
Preferred stock, non-voting,
no par value None issued
The following table sets forth the high and low sales prices per share of
our Class B common stock as reported by the New York Stock Exchange:
2001
Market price
High Low Dividends
First quarter $78.25 $61.375 $ 0.185
Second quarter $67.11 $49.39 $ 0.205
Third quarter $52.40 $43.59 $ 0.205
Fourth quarter $59.27 $43.83 $ 0.205
2000
Market price
High Low Dividends
First quarter $53.75 $37.375 $ 0.165
Second quarter $66.50 $42.4375 $ 0.185
Third quarter $67.625 $57.125 $ 0.185
Fourth quarter $82.3125 $58.9375 $ 0.185
ITEM 6. Selected Financial Data
The table below summarizes selected financial information for us for the 5
years ended as noted. For further information, refer to our consolidated
financial statements and notes thereto presented under Item 8, Financial
Statements and Supplementary Data.
2001 2000(1) 1999
Consolidated Statement of
Operations Data: (in thousands, except per share)
Gross sales $2,842,752 $2,841,738 $2,642,712
Beer excise taxes (413,290) (427,323) (406,228)
Net sales 2,429,462 2,414,415 2,236,484
Cost of goods sold (1,537,623) (1,525,829) (1,397,251)
Gross profit 891,839 888,586 839,233
Other operating expenses:
Marketing, general and administrative (717,060) (722,745) (692,993)
Special (charges) credits (23,174) (15,215) (5,705)
Other operating expenses (740,234) (737,960) (698,698)
Operating income 151,605 150,626 140,535
Other income (expense)-net 46,408 18,899 10,132
Income before income taxes 198,013 169,525 150,667
Income tax expense (75,049) (59,908) (58,383)
Income from continuing operations $ 122,964 $ 109,617 $ 92,284
Per share of common stock - basic $ 3.33 $ 2.98 $ 2.51
Per share of common stock - diluted $ 3.31 $ 2.93 $ 2.46
Consolidated Balance Sheet Data:
Cash and cash equivalents and
short-term and long-term marketable
securities $ 309,705 $ 386,195 $ 279,883
Working capital $ 88,984 $ 118,415 $ 220,117
Properties, at cost, net $ 869,710 $ 735,793 $ 714,001
Total assets $1,739,692 $1,629,304 $1,546,376
Long-term debt (4) $ 20,000 $ 105,000 $ 105,000
Other long-term liabilities (4) $ 47,480 $ 45,446 $ 52,579
Shareholders' equity $ 951,312 $ 932,389 $ 841,539
Cash Flow Data:
Cash provided by operations $ 193,396 $ 280,731 $ 211,324
Cash used in investing activities $ (196,749) $ (297,541) $ (121,043)
Cash used in financing activities $ (38,844) $ (26,870) $ (87,687)
Other Information:
Barrels of malt beverages sold 22,713 22,994 21,954
Dividends per share of common stock $ 0.800 $ 0.720 $ 0.645
EBITDA (2) $ 300,208 $ 298,112 $ 273,213
Capital expenditures $ 244,548 $ 154,324 $ 134,377
Total debt to total capitalization (3) 9.9% 10.1% 11.1%
(1) 53-week year versus 52-week year.
(2) EBITDA is not a measure of financial performance under generally accepted
accounting principles. EBITDA is defined as earnings before interest, taxes,
depreciation and amortization and excludes special (charges) credits, which are
shown above, and gains on sales of distributorships in 2001 and 2000.
(3) Total capitalization is defined as total debt plus shareholders' equity.
(4) See Note 17, Subsequent Events, in the Notes to the Consolidated Financial
Statements for discussion of debt incurred relative to the Carling acquisition.
1998 1997
Consolidated Statement of
Operations Data: (in thousands, except per share)
Gross sales $2,463,655 $2,378,143
Beer excise taxes (391,789) (386,080)
Net sales 2,071,866 1,992,063
Cost of goods sold (1,333,026) (1,302,369)
Gross profit 738,840 689,694
Other operating expenses:
Marketing, general and administrative (615,626) (573,818)
Special (charges) credits (19,395) 31,517
Other operating expenses (635,021) (542,301)
Operating income 103,819 147,393
Other income (expense)-net 7,281 (500)
Income before income taxes 111,100 146,893
Income tax expense (43,316) (64,633)
Income from continuing operations $ 67,784 $ 82,260
Per share of common stock - basic $ 1.87 $ 2.21
Per share of common stock - diluted $ 1.81 $ 2.16
Consolidated Balance Sheet Data:
Cash and cash equivalents and
short-term and long-term marketable
securities $ 287,672 $ 258,138
Working capital $ 165,079 $ 158,048
Properties, at cost, net $ 714,441 $ 733,117
Total assets $1,460,598 $1,412,083
Long-term debt (4) $ 105,000 $ 145,000
Other long-term liabilities (4) $ 56,640 $ 23,242
Shareholders' equity $ 774,798 $ 736,568
Cash Flow Data:
Cash provided by operations $ 198,215 $ 273,803
Cash used in investing activities $ (146,479) $ (141,176)
Cash used in financing activities $ (60,661) $ (72,042)
Other Information:
Barrels of malt beverages sold 21,187 20,581
Dividends per share of common stock $ 0.600 $ 0.550
EBITDA (2) $ 243,977 $ 236,984
Capital expenditures $ 104,505 $ 60,373
Total debt to total capitalization (3) 15.8% 19.0%
(1) 53-week year versus 52-week year.
(2) EBITDA is not a measure of financial performance under generally accepted
accounting principles. EBITDA is defined as earnings before interest, taxes,
depreciation and amortization and excludes special (charges) credits, which are
shown above, and gains on sales of distributorships in 2001 and 2000.
(3) Total capitalization is defined as total debt plus shareholders' equity.
(4) See Note 17, Subsequent Events, in the Notes to the Consolidated Financial
Statements for discussion of debt incurred relative to the Carling acquisition.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
INTRODUCTION
As noted in Item 1(a) General Development of Business, Recent General
Business Developments, we acquired the Carling business in England and
Wales from Interbrew S.A. on February 2, 2002. Because the acquisition was
finalized in 2002, the operating results and financial position of the
Carling business are not included in our 2001, 2000 or 1999 results
discussed below. This acquisition will have a significant impact on our
future operating results and financial condition. The Carling business,
which was subsequently renamed Coors Brewers Ltd., generated sales volume
of approximately 9 million barrels in 2001. Since 1995, business has, on
average, grown its volumes by 1.9% per annum, despite an overall decline in
the U.K. beer market over the same period. This acquisition was funded
through cash and third-party debt. The borrowings will have a significant
impact on our capitalization, interest coverage and free cash flow trends.
See further discussion of this impact in the Liquidity and Capital
Resources section below.
Critical Accounting Policies
Our discussions and analysis of financial condition and results of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related
disclosures of contingent assets and liabilities. On an on-going basis, we
evaluate the continued appropriateness of our accounting policies and
estimates, including those related to customer programs and incentives, bad
debts, inventories, product retrieval, investments, intangible assets,
income taxes, pension and other post-retirement benefits and contingencies
and litigation. We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ materially from
these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect our more
significant estimates and judgments used in the preparation of our
consolidated financial statements:
Revenue recognition: Revenue is recognized upon shipment of our product to
distributors. If we believe that our products do not meet our high quality
standards, we retrieve those products and they are destroyed. Any retrieval
of sold products is recognized as a reduction of sales at the value of the
original sales price and is recorded at the time of the retrieval. Using
historical results and production volumes, we estimate the costs that are
probable of being incurred for product retrievals and record those costs in
Cost of goods sold in the Consolidated Income Statements each period.
Valuation allowance: We record a valuation allowance to reduce our
deferred tax assets to the amount that is more likely than not to be
realized. While we consider future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for the valuation
allowance, in the event we were to determine that we would be able to
realize our deferred tax assets in the future in excess of its net recorded
amount, an adjustment to the deferred tax asset would increase income in
the period such determination was made. Likewise, should we determine that
we would not be able to realize all or part of our net deferred tax asset
in the future, an adjustment to the deferred tax asset would be charged to
income in the period such determination was made.
Allowance for obsolete inventory: We write down our inventory for
estimated obsolescence or unmarketable inventory equal to the difference
between the cost of inventory and the estimated market value based upon
assumptions about historic usage, future demand and market conditions. If
actual market conditions are less favorable than those projected by
management, additional inventory write-downs may be required.
Reserves for insurance deductibles: We carry deductibles for workers'
compensation, automobile and general liability claims up to a maximum
amount per claim. The undiscounted estimated liability is accrued based on
an actuarial determination. This determination is impacted by assumptions
made and actual experience.
Contingencies, environmental and litigation reserves: When we determine
that it is probable that a liability for environmental matters or other
legal actions has been incurred and the amount of the loss is reasonably
estimable, an estimate of the required remediation costs is recorded as a
liability in the financial statements. Costs that extend the life, increase
the capacity or improve the safety or efficiency of company-owned assets or
are incurred to mitigate or prevent future environmental contamination may
be capitalized. Other environmental costs are expensed when incurred.
Goodwill and intangible asset valuation: Goodwill and other intangible
assets, with the exception of the pension intangible asset and water
rights, are amortized on a straight-line basis over the estimated future
periods to be benefited, generally 40 years for goodwill and up to 20 years
for trademarks, naming and distribution rights. We periodically evaluate
whether events and circumstances have occurred that indicate the remaining
estimated useful life of goodwill and other intangibles may warrant
revision or that their remaining balance may not be recoverable. In
evaluating impairment, we estimate the sum of the expected future cash
flows, undiscounted and without interest charges, derived from these
intangibles over their remaining lives. In July 2001, the Financial
Accounting Standards Board's issued of Statement of Financial Accounting
Standard (SFAS) No. 142, Goodwill and Other Intangible Assets. SFAS 142
will be effective for us beginning in the first quarter of 2002, and
requires goodwill and intangible assets that have indefinite lives to not
be amortized but be reviewed annually for impairment, or more frequently if
impairment indicators arise. Although we have yet to complete our analysis
of these assets and the related amortization expense under the new rules,
we anticipate that a significant part of the goodwill and other intangible
assets on our books at year-end will no longer be subject to amortization.
Our analysis has not identified any goodwill or other intangible assets
that would be considered impaired under SFAS 142.
In 2000, the Financial Accounting Standards Board's Emerging Issues Task
Force issued a pronouncement stating that shipping and handling costs
should not be reported as a reduction to gross sales within the income
statement. As a result of this pronouncement, our finished product freight
expense, which is incurred upon shipment of our product to our
distributors, is now included within Cost of goods sold in our accompanying
Consolidated Statements of Income. Prior to 2000, this expense had
previously been reported as a reduction to gross sales; fiscal year 1999
financial statements have been reclassified for consistent presentation of
where freight expense is reported.
Summary of operating results:
Fiscal year ended
December 30, December 31, December 26,
2001 2000 1999
(In thousands, except percentages)
Gross sales $2,842,752 $2,841,738 $2,642,712
Beer excise taxes (413,290) (427,323) (406,228)
Net sales 2,429,462 100% 2,414,415 100% 2,236,484 100%
Cost of goods sold (1,537,623) 63% (1,525,829) 63% (1,397,251) 62%
Gross profit 891,839 37% 888,586 37% 839,233 38%
Other operating expenses:
Marketing, general
and administrative (717,060) 30% (722,745) 30% (692,993) 31%
Special charges (23,174) 1% (15,215) 1% (5,705) --
Total other operating
expenses (740,234) 31% (737,960) 31% (698,698) 31%
Operating income 151,605 6% 150,626 6% 140,535 7%
Other income - net 46,408 2% 18,899 1% 10,132 --
Income before taxes 198,013 8% 169,525 7% 150,667 7%
Income tax expense (75,049) 3% (59,908) 2% (58,383) 3%
Net income $ 122,964 5% $ 109,617 5% $ 92,284 4%
CONSOLIDATED RESULTS OF OPERATIONS - 2001 VS. 2000 AND 2000 VS. 1999
This discussion summarizes the significant factors affecting our
consolidated results of operations, liquidity and capital resources for the
three-year period ended December 30, 2001, and should be read in
conjunction with the financial statements and notes thereto included
elsewhere in this report. Our fiscal year is the 52 or 53 weeks that end on
the last Sunday in December. Our 2001 and 1999 fiscal years each consisted
of 52 weeks whereas our 2000 fiscal year consisted of 53 weeks.
2001 VS. 2000:
Gross and Net Sales
Our gross and net sales were $2,842.8 million and $2,429.5 million,
respectively, for the 52-week fiscal year ended December 30, 2001,
resulting in a $1.1 million and $15.1 million increase over our 2000 gross
and net sales of $2,841.7 million and $2,414.4 million, respectively. Net
revenue per barrel increased 1.9% over 2000. Sales volume totaled
22,713,000 barrels in 2001, a 1.2% decrease from 2000. Excluding the extra
week in fiscal year 2000, net sales volume decreased 0.1% in 2001. The
relatively soft volume in 2001 resulted from the following factors: our
competitors' introduction of new flavored malt-based beverages which
garnered some attention from distributors and retailers and lessening some
attention from core beer brands; unseasonably cold weather early in the
year in most parts of the United States; and weak economic conditions in
some of our key markets, including California and Texas. The increase in
net sales and net revenue per barrel over last year was due to higher
domestic pricing of approximately 2% and less promotional discounting,
partially offset by a mix shift away from higher-priced brands and
geographies. Excise taxes as a percent of gross sales were 14.5% in 2001
compared with 15.0% in 2000. The decline was mainly due to the change in
our geographic sales mix.
Cost of Goods Sold and Gross Profit
Cost of goods sold increased by 0.8% to $1,537.6 million from $1,525.8
million in 2000. Cost of goods sold as a percentage of net sales was 63.3%
in 2001 compared with 63.2% in 2000. On a per barrel basis, cost of goods
sold increased 2% over 2000. This increase was primarily due to higher
packaging material costs for aluminum cans and glass bottles, in addition
to higher raw materials, energy and labor costs. The continuing shift in
our package mix toward more expensive longneck bottles also increased costs
slightly. These increases were partially offset by distribution
efficiencies from new information systems and processes designed to reduce
transportation costs, the benefits from not incurring the 53rd week of costs
and closing our Spain brewing and commercial operations in 2000.
Gross profit as a percentage of net sales of 36.7% in 2001 was virtually
unchanged from prior year's 36.8%.
Marketing, General and Administrative Expenses
Marketing, general and administrative expenses were $717.1 million in 2001
compared with $722.7 million in 2000. The $5.6 million decrease was mostly
due to lower costs for advertising and promotions and the favorable impact
from the sale of our company-owned distributorships which resulted in less
advertising and overhead costs. In addition, overhead expenses declined due
to 52 weeks in 2001 versus 53 weeks in the prior year. These favorable
variances were partially offset by higher costs related to information
systems, market research and professional fees.
Special Charges
Our net special charges were $23.2 million in 2001 compared to special
charges of $15.2 million in 2000. The following is a summary of special
charges incurred during these years:
Information technology: We entered into a contract with EDS Information
Services, LLC (EDS), effective August 1, 2001, to outsource certain
information technology functions. We incurred outsourcing costs during the
year of approximately $14.6 million. These costs were mainly related to a
$6.6 million write-down of the net book value of information technology
assets that were sold to and leased back from EDS, $5.3 million of one-time
implementation costs and $2.7 million of employee transition costs and
professional fees associated with the outsourcing project. We believe this
new arrangement will allow us to focus on our core business while having
access to the expertise and resources of a world-class information
technology provider.
Restructure charges: In the third quarter of 2001, we recorded $1.6
million of severance costs for approximately 25 employees, primarily due to
the restructuring of our purchasing organization. During the fourth quarter
of 2001, we announced plans to restructure certain production areas. These
restructurings, which began in October 2001 and have continued through
April 2002, will result in the elimination of approximately 90 positions.
As a result, we recorded associated employee termination costs of
approximately $4.0 million in the fourth quarter. Similar costs of
approximately $0.4 million related to employee terminations in other
functions were also recorded in the fourth quarter. We expect all 2001
severance to be paid by the second quarter of 2002. We continue to evaluate
our entire supply chain with the goal of becoming a more competitive and
efficient organization.
Can and end plant joint venture: In the third quarter of 2001, we recorded
$3.0 million of special charges related to the dissolution of our existing
can and end joint venture as part of the restructuring of this part of our
business that will allow us to achieve operational efficiencies. Effective
January 1, 2002, we entered into a partnership agreement with Ball
Corporation, one of the world's leading suppliers of metal and plastic
packaging to the beverage and food industries, for the manufacture and
supply of aluminum cans and ends for our domestic business.
Property abandonment: In 2001, we recorded a $2.3 million charge for a
portion of certain production equipment that was abandoned and will no
longer be used.
Spain closure: In 2000, we recorded a total pretax special charge of $20.6
million related to the closure of our Spain brewing and commercial
operations. Of the total charge, $11.3 million related to severance and
other related closure costs for approximately 100 employees, $4.9 million
related to a fixed asset impairment charge and $4.4 million for the write-
off of our cumulative translation adjustments previously recorded to equity
related to our Spain operations. All severance and related closure costs
were paid by July 1, 2001, out of current cash balances. The closure
resulted in savings of approximately $7 million in 2001 and only modest
savings in 2000. These savings were invested back into our domestic and
international businesses. In December 2001, the plant and related fixed
assets were sold for approximately $7.2 million resulting in a net gain,
before tax, of approximately $2.7 million.
Insurance settlement: In 2000, we received an insurance claim settlement
of $5.4 million that was credited to special charges.
Operating Income
As a result of the factors noted above, operating income was $151.6 million
for the year ended December 30, 2001, an increase of $1.0 million or 0.7%
over operating income of $150.6 million for the year ended December 31,
2000. Excluding special charges, operating income was $174.8 million, an
$9.0 million or 5.4% increase over operating earnings of $165.8 million in
2000.
Other Income (Expense), Net
Other income (expense), net consists of items such as interest income,
equity income on certain unconsolidated affiliates and gains and losses
from divestitures and foreign currency exchange transactions. Net other
income was $46.4 million in 2001 compared with income of $18.9 million in
2000. The $27.5 million increase was mainly due to $27.7 million of gains
recognized from the sale of company-owned distributorships coupled with a
$2.0 million gain from the sale of certain non-essential water rights. In
addition, as part of our tax strategy to utilize certain capital loss
carryforwards, we recognized gains of $4.0 million from the sale of
marketable securities. Partially offsetting these gains were net foreign
currency exchange losses of $0.3 million primarily related to a derivative
transaction performed in anticipation of the Carling acquisition, a write-
off of mineral land reserves of $1.0 million, an equity loss from the
Molson USA joint venture of $2.2 million and goodwill amortization of $1.6
million related to this investment.
Income Taxes
Our reported effective tax rate for 2001 was 37.9% compared to 35.3% in
2000. In 2000, our rate was affected by the favorable settlement of certain
tax issues related to the Spain brewery closure, the resolution of an
Internal Revenue Service audit and reduced state tax rates. Excluding the
impact of special charges, our effective tax rate for 2001 was 37.9%
compared to 38.0% in 2000.
Net Income
Net income for the year increased $13.3 million, or 12.2%, over the prior
year. For 2001, net income was $123.0 million, or $3.33 per basic share
($3.31 per diluted share), which compares to net income of $109.6 million,
or $2.98 per basic share ($2.93 per diluted share), for 2000. Adjusting for
the impact of share repurchases of approximately 1,500,000 shares, net
income per share, would have been $3.29 per basic share ($3.27 per diluted
share) in 2001. Excluding special charges and gains on sales of
distributorships, after-tax earnings for 2001 were $120.2 million, or $3.26
per basic share ($3.23 per diluted share). This was a $6.3 million or 5.5%
increase over 2000 of $113.9 million, or $3.10 per basic share ($3.04 per
diluted share).
2000 VS. 1999:
Gross and Net Sales
Our gross and net sales for 2000 were $2,841.7 million and $2,414.4
million, respectively, resulting in a $199.0 million and $177.9 million
increase over our 1999 gross and net sales of $2,642.7 million and $2,236.5
million, respectively. Net revenue per barrel was 3.1% higher than 1999.
Gross and net sales were favorably impacted by a 4.7% increase in barrel
unit volume. We sold 22,994,000 barrels of beer and other malt beverages in
2000 compared to sales of 21,954,000 barrels in 1999. Net sales in 2000
were also favorably impacted by a continuing shift in consumer preferences
toward higher-net-revenue products, domestic price increases and a longer
fiscal year (2000 consisted of 53 weeks versus 52 weeks in 1999). Excluding
our 53rd week, unit volume was up approximately 4.1% compared to the 52-week
period ended December 26, 1999. Excise taxes as a percent of gross sales
decreased slightly in 2000 compared to 1999 primarily as a result of a
shift in the geographic mix of our sales.
Cost of Goods Sold and Gross Profit
Cost of goods sold was $1,525.8 million in 2000, an increase of 9.2%
compared to $1,397.3 million in 1999. Cost of goods sold as a percentage of
net sales was 63.2% for 2000 compared to 62.5% for 1999. On a per barrel
basis, cost of goods sold increased 4.3% in 2000 compared to 1999. This
increase was primarily due to an ongoing mix shift in demand toward more
expensive products and packages, including longneck bottles and import
products sold by Coors-owned distributors, as well as higher aluminum,
energy and freight costs. Cost of goods sold also increased as a result of
higher labor costs in 2000 from wage increases and overtime incurred during
our peak season to meet unprecedented demand for our products, higher
depreciation expense because of higher capital expenditures and additional
fixed costs as a result of our 53rd week in 2000.
Gross profit for 2000, was $888.6 million, a 5.9% increase over gross
profit of $839.2 million for 1999. As a percentage of net sales, gross
profit decreased to 36.8% in 2000 compared to 37.5% of net sales in 1999.
Marketing, General and Administrative Expenses
Marketing, general and administrative costs were $722.7 million in 2000
compared to $693.0 million in 1999. The $29.7 million or 4.3% increase over
the prior year was primarily due to higher spending on marketing and
promotions, both domestically and internationally. We continued to invest
behind our brands and sales forces -- domestic and international -- during
2000, which included reinvesting incremental revenues that were generated
from the volume and price increases achieved and discussed earlier. Our
2000 corporate overhead and information technology spending was also up
slightly over 1999.
Special Charges
In 2000, our net special charges were $15.2 million. We incurred a total
special charge of $20.6 million triggered by our decision to close our
Spain brewery and commercial operations. Of the approximately $20.6 million
charge, approximately $11.3 million related to severance and other related
closure costs for approximately 100 employees, approximately $4.9 million
related to a fixed asset impairment charge and approximately $4.4 million
for the write-off of our cumulative translation adjustments previously
recorded to equity related to our Spain operations. In 2000, approximately
$9.6 million of severance and other related closure costs were paid with
the remaining $1.7 million reserve being paid during the first quarter of
2001. These payments were funded from current cash balances. Closing our
Spain operations eliminated annual operating losses of approximately $7.0
million to $8.0 million. The anticipated payback period is less than three
years. We intend to invest much of the annual savings into our domestic and
international businesses. The closure resulted in small savings in 2000.
The Spain closure special charge was partially offset by an unrelated
insurance claim settlement credit of $5.4 million.
In 1999, we recorded a special charge of $5.7 million. The special charge
included $3.7 million for severance costs from the restructuring of our
engineering and construction units and $2.0 million for distributor network
improvements. Approximately 50 engineering and construction employees
accepted severance packages under this reorganization. Amounts paid related
to this restructuring were approximately $0.2 million, $2.3 million and
$0.9 million during 2001, 2000 and 1999, respectively.
Operating Income
As a result of these factors, our operating income was $150.6 million for
the year ended December 31, 2000, an increase of $10.1 million or 7.2% over
operating income of $140.5 million for the year ended December 26, 1999.
Excluding special charges, operating earnings were $165.8 million for 2000,
an increase of $19.6 million or 13.4% over operating earnings of $146.2
million for 1999.
Other Income (Expense), Net
Net other income was $18.9 million for 2000, compared with net other income
of $10.1 million for 1999. The significant increase in 2000 was primarily
due to higher net interest income, resulting from higher average cash
investment balances with higher average yields and lower average debt
balances in 2000 compared to 1999.
Income Taxes
Our reported effective tax rate for 2000, was 35.3% compared to 38.8% for
1999. The primary reasons for the decrease in our effective rate were the
realization of a tax benefit pertaining to the Spain brewery closure, the
resolution of an Internal Revenue Service audit and reduced state tax
rates. Excluding the impact of special charges, our effective tax rate for
the year ended December 31, 2000, was 38.0%, compared to 38.8% for the year
ended December 26, 1999.
Net Income
Net income for the year increased $17.3 million or 18.7% over the prior
year. For 2000, net income was $109.6 million, or $2.98 per basic share
($2.93 per diluted share), which compares to net income of $92.3 million,
or $2.51 per basic share ($2.46 per diluted share), for 1999. Excluding
special charges and gains of sales of distributorships, after-tax earnings
for 2000, were $113.9 million, or $3.10 per basic share ($3.04 per diluted
share). This was an $18.1 million or 18.9% increase over after-tax
earnings, excluding special charges, of $95.8 million, or $2.61 per basic
share ($2.56 per diluted share), for 1999.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are cash provided by operating activities,
marketable securities and external borrowings, including a new revolving
credit facility that became effective after year-end. At the end of 2001,
our cash and cash equivalents and marketable securities totaled $309.7
million, down from $386.2 million at the end of 2000. Additionally, cash
and cash equivalents declined from $119.8 million in 2000 to $77.1 million
in 2001. At December 30, 2001, working capital was $89.0 million compared
to $118.4 million at December 31, 2000. The decrease in cash and cash
equivalents was primarily due to the following: the payment of $65 million
for the purchase of a 49.9% interest in Molson USA, LLC, a joint venture
with Molson, Inc.; higher capital expenditures of $244.5 million; and $72.3
million of stock repurchases. Proceeds from the sale of our company-owned
distributorships positively impacted our cash balance. The decrease in
working capital was due to the reclassification of $80 million of debt from
long term to current, as this amount is due in July 2002; higher accounts
payable resulting mostly from increased capital expenditures, higher cash
overdraft balances (which are classified as financing activities in the
Consolidated Statements of Cash Flows), coupled with liabilities assumed
relative to our purchase of Rexam's interest in our prior can joint
venture. Lower sales in 2001, driven primarily by a slight softening in
demand, resulted in a decrease in accounts receivable. Inventories
increased due to an inventory transfer from our prior can joint venture
related to our purchase of Rexam's interest in that joint venture. At
December 30, 2001, our total investment in marketable securities was $232.6
million, all of which were classified as current assets. At December 31,
2000, the amount in current was $72.8 million. In January 2002, these
securities were sold, resulting in a net gain of $4.0 million, of which
approximately half of these proceeds were used in the Carling acquisition
and the remaining amount was applied towards operating cash requirements.
In March 2002, all obligations under the terms of our Colorado Industrial
Revenue bonds were prepaid totaling approximately $5.0 million and the debt
was terminated. As part of the settlement and indemnification agreement
related to the Lowry Superfund site with the City and County of Denver and
Waste Management of Colorado, Inc., we agreed to post a letter of credit
equal to the present value of our share of future estimated costs if
estimated future costs exceed a certain amount and our long-term credit
rating falls to a certain level. The future estimated costs now exceed the
level provided in the agreement, however, our credit rating remains above
the level that would require this letter of credit to be obtained. Based on
our preliminary evaluation, should our credit rating fall below the level
stipulated by the agreement, it is reasonably possible that the letter of
credit that would be issued could be for as much as $10 million. For more
information on the Lowry Superfund site see the Environmental Contingencies
section below.
We believe that cash flows from operations, cash from the sale or maturity
of marketable securities, all of which are highly liquid, and cash provided
by short-term borrowings through our revolver financing, when necessary,
will be sufficient to meet our ongoing operating requirements, scheduled
principal and interest payments on debt, dividend payments and anticipated
capital expenditures. However, our liquidity could be significantly
impacted by a decrease in demand for our products, which could arise from
competitive circumstances, a decline in the societal acceptability views of
alcohol beverages, any shift away from light beers and any of the other
factors we describe in the section titled "Risk Factors". We also have
recently entered into new credit facilities in connection with the
acquisition of the Coors Brewers business. These facilities contain
financial and operating covenants, and provide for scheduled repayments,
that could impact our liquidity on an ongoing basis.
Operating Activities
The net cash provided by operating activities for each of the three years
presented reflects our net income adjusted for non-cash items. Net cash
provided by operating activities was $193.4 million for 2001, compared to
$280.7 million and $211.3 million for 2000 and 1999, respectively.
Operating cash flows were $87.3 million lower in 2001 than in 2000 as
higher net income of $13.3 million was more than offset by a decline in
cash distributions received from our joint venture entities and lower
depreciation expense. Also in 2001, we realized significant gains on the
sale of properties and securities, and our net deferred tax liability
decreased from year-end 2000 mainly due to the realization of certain tax
benefits. The gains from the sale of properties were mainly due to the sale
of three company-owned distributorships for $27.7 million. Operating cash
flows in 1999 were $67.4 million lower than in 2000 because of a $48.0
million contribution we made to our defined benefit pension plan in January
1999 with no similar contribution being made in 2000. The 1999 contribution
was made as a result of benefit improvements made to our defined benefit
pension plan that resulted in an increase in the projected benefit
obligation of approximately $48.0 million. The remaining increase in 2000
operating cash flow was due to higher net income, higher depreciation
expense, the non-cash portion of the special charge related to Spain,
higher cash distributions received from our joint venture entities and
working capital changes. The increase in distributions received was a
result of higher earnings of the joint ventures in 2000 compared to 1999.
The fluctuations in working capital were primarily due to timing between
the two years; our accounts receivable were lower at December 31, 2000, as
a result of the 53rd week in 2000, which tends to be our slowest week, and
our accounts payable were higher at December 31, 2000, due to increased
capital expenditures at the end of 2000 compared to 1999. These increases
in operating cash flows were partially offset by increases in the equity
earnings of our joint ventures and gains on sale of properties.
Investing Activities
During 2001, we used $196.7 million in investing activities compared to a
use of $297.5 million in 2000 and $121.0 million in 1999. The $100.8
million decrease from 2000 to 2001 was primarily due to proceeds from the
sale of properties, mainly three of our company-owned distributorships, and
lower net investment activity in 2001. In 2001, our net cash proceeds from
marketable securities activity was $39.9 million compared to a net cash use
of $148.6 million in 2000. In 2000, we shifted to investing in longer-term
marketable securities by investing cash from short-term investment
maturities into longer term corporate, government agency and municipal debt
instruments, all of which are highly liquid. This change in investment
strategy resulted in a higher cash outflow for purchases of securities in
2000 compared to 2001. Cash used in 2001 for investing activities consisted
of the $65 million payment made to acquire our 49.9% interest in Molson
USA, a joint venture with Molson, Inc. and increased capital expenditures
of $244.5 million compared to $154.3 in 2000. A significant portion of our
2001 capital expenditures were for capacity-related projects that were
started late in 2000 and in early 2001. Net cash used in investing was
$176.5 million higher in 2000 compared to 1999 mostly due to our change in
investment strategy in 2000 which resulted in a higher net cash outflow for
purchases of securities in 2000 compared to 1999 of $159.6 million, coupled
with higher capital expenditures.
Financing Activities
Net cash used in financing activities was $38.8 million in 2001, consisting
primarily of $72.3 million for purchases of our Class B common stock under
our stock repurchase program, dividend payments of $29.5 million on our
Class B common stock, partially offset by cash inflows of $51.6 million
related to an increase in cash overdrafts over year-end 2000; and $10.7
million associated with the exercise of stock options under our stock
option plans.
During 2000, we used approximately $26.9 million in financing activities,
primarily for dividend payments of $26.6 million on our Class B common
stock and $20.0 million for purchases of our Class B common stock under our
stock repurchase program. These cash uses were partially offset by cash
inflows of $17.2 million related to the exercise of stock options under our
stock option plans.
During 1999, we used $87.7 million in financing activities consisting
primarily of principal payments of $40.0 million on our medium-term notes,
net purchases of $11.0 million for Class B common stock, dividend payments
of $23.7 million and a decrease in cash overdrafts of $11.3 million.
Debt Obligations
At December 30, 2001, we had $100 million in unsecured Senior Notes
outstanding, $80 million of which is due in July 2002. The remaining $20
million is due in 2005. Fixed interest rates on these notes range from
6.76% to 6.95%. Interest is paid semiannually in January and July. No
principal payments were due or made on our debt in 2001 or 2000.
Our affiliate, RMMC has planned capital improvements of approximately $50.0
million over the first three years of its operations. RMMC will fund these
improvements using third-party financing. This debt will be secured by the
joint venture's various supply and access agreements with no recourse to
either Coors or Ball. This debt will not be included in our financial
statements.
In connection with our acquisition of the Coors Brewers business, we
entered into new senior unsecured credit facilities under which we borrowed
$800 million of term debt and $750 million of short-term bridge debt. The
new facilities also provide up to $300 million of revolving borrowing, none
of which has been drawn to date. For more information about our senior
unsecured credit facilities, see Note 17, Subsequent Event, in the Notes to
the Consolidated Financial Statements.
Subsequent to our acquisition of the Coors Brewers business from Interbrew
S.A., Standard and Poor's (S&P) affirmed its BBB+ corporate rating while
Moody's downgraded our senior unsecured rating to Baa2 from Baa1. The
Moody's downgrade reflects the large size of the acquisition relative to
our existing business, and the competitive challenges we continue to face
in the U.S. market. It also reflects the significant increase in debt that
will result, as well as the decrease in our financial flexibility. The
rating continues to reflect our successful franchise in the U.S. market,
the Coors Brewers strong position in the U.K. market and the product and
geographic diversification that Coors Brewers adds.
Our debt-to-total capitalization ratio declined to 9.9% at the end of 2001,
from 10.1% at year-end 2000 and 11.1% at year-end 1999. At February 2,
2002, following the acquisition of the Coors Brewers business, our debt-to-
total capitalization ratio was approximately 63%.
Revolving Line of Credit
In addition to the Senior Notes, at December 30, 2001, we had an unsecured,
committed credit arrangement totaling $200 million, all of which was
available as of December 30, 2001. This line of credit had a five-year term
expiring in 2003. A facilities fee was paid on the total amount of the
committed credit. Under the arrangement, we were required to maintain a
certain debt-to-total capitalization ratio and were in compliance at year-
end 2001. In February 2002, this credit facility was terminated and
replaced by the credit agreements associated with the purchase of Coors
Brewers.
Financial Guarantees
We have a 1.1 million yen financial guarantee outstanding on behalf of our
subsidiary, Coors Japan. This subsidiary guarantee is primarily for two
working capital lines of credit and payments of certain duties and taxes.
One of the lines provides up to 500 million yen and the other provides up
to 400 million yen (approximately $6.8 million in total as of December 30,
2001) in short-term financing. As of December 30, 2001, the approximate yen
equivalent of $3.0 million was outstanding under these arrangements and is
included in Accrued expenses and other liabilities in the accompanying
Consolidated Balance Sheets.
Advertising and Promotions
As of December 30, 2001, our aggregate commitments for advertising and
promotions, including marketing at sports arenas, stadiums and other venues
and events, were approximately $91.5 million over the next eight years.
Stock Repurchase Plan
In November 2000, the board of directors authorized the extension of our
stock repurchase program through 2001. The program authorizes repurchases
of up to $40 million of our outstanding Class B common stock. In the third
quarter of 2001, our board of directors increased the amount authorized for
stock repurchases in 2001 from $40 million to $90 million. The authorized
increase was in response to the market conditions following the events of
September 11, 2001. Repurchases were financed by funds generated from
operations or by our cash and cash equivalent balances. During 2001, we
used $72.3 million to repurchase common stock under this stock purchase
program. Even though the board of directors extended the program in
November 2001, and authorized the repurchase during 2002 of up to $40
million of stock, we have decided to suspend our share repurchases until
debt levels resulting from the acquisition of the Coors Brewers business
from Interbrew are reduced.
Capital Expenditures
After being capacity constrained in our operations during peak season in
recent years, in 2001 we spent $244.5 million on capital improvement
projects, approximately two-thirds of which was related to improving
production capacity, flexibility and efficiency. With these important
capabilities in place, we now have ample capacity in brewing, packaging and
warehousing to more efficiently meet expected growth in consumer demand for
our products, including during the peak summer selling season. During 2002,
we currently anticipate capital spending in the range of $135 to $145
million in our North American business. Combined with the capacity work
completed in 2001, this level of capital spending will allow us to grow
this business and improve its efficiency in the years ahead. As a result,
we currently plan capital spending for our North American business in the
range of 2002 levels for at least the next several years.
Molson USA, LLC
On January 2, 2001, we entered into a joint venture partnership agreement
with Molson, Inc. and paid $65 million for a 49.9% interest in the joint
venture. The joint venture, known as Molson USA, LLC, was formed to import,
market, sell and distribute Molson's brands of beer in the United States.
We used a portion of our current cash balances to pay the $65 million
acquisition price.
Pension Plan Assets
In 2001, the funded position of the Coors Retirement Plan was eroded
somewhat due to the combined effects of a lower discount rate and a
challenging investment environment. This resulted in the recognition of an
additional minimum liability, resulting from the excess of our accumulated
benefit obligation over the fair value of plan assets. For pension plans
with accumulated obligations in excess of plan assets, the projected
benefit obligation was $659.1 million and the accumulated benefit
obligation was $567.2 million. The amounts recognized in the consolidated
statement of financial position for accrued pension liability, additional
minimum liability, accumulated other comprehensive loss, prepaid benefit
cost and intangible asset in 2001 are $61.9 million, $29.8 million, $13.7
million ($8.5 million, net of tax), $21.5 million and $48.3 million,
respectively. For further information regarding pension plan assets, refer
to Note 7, Employee Retirement Plans, and Note 13, Other Comprehensive
Income, in Item 8, Financial Statements and Supplementary Data.
Contractual Obligations and Commercial Commitments
Contractual cash obligations(2):
Payments due by period
Less than 1-3 4-5 After
Total 1 year years years 5 years
(in thousands)
Long term debt $ 105,000 $85,000 $ 20,000 $ -- $ --
Capital lease
obligations 9,377 4,298 5,079 -- --
Operating leases 30,763 7,069 11,832 9,393 2,469
Other long term
obligations(1) 1,283,015 657,757 455,363 153,395 16,500
Total obligations $1,428,155 $754,124 $492,274 $162,788 $18,969
Other commercial commitments(2):
Amount of commitment expiration per period
Total amounts Less than 1-3 4-5 After
committed 1 year years years 5 years
(in thousands)
Standby letters of
credit $ 5,751 $ 5,336 415 -- --
Guarantees 3,038 3,038 -- -- --
Total commercial
commitments $ 8,789 $ 8,374 $ 415 $ -- $ --
(1) See Note 15, Commitments and Contingencies, in the Notes to the
Consolidated Financial Statements for more information.
(2) Amounts do not include commitments related to the acquisition of the
Coors Brewers business, see Note 17, Subsequent Event, in the Notes to
the Consolidated Financial Statements.
Cautionary Statement Pursuant to Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995
This report contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. You can identify these statements by forward-looking
words such as "expect," "anticipate," "plan," "believe," "seek,"
"estimate," "outlook," "trends," "industry forces," "strategies," "goals"
and similar words. Statements that we make in this report that are not
statements of historical fact may also be forward-looking statements. In
particular, statements that we make under the headings "Narrative
Description of Business," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and "Outlook for 2002"
relating to our overall volume trends, consumer preferences, pricing trends
and industry forces, cost reduction strategies and anticipated results, our
expectation for funding our 2002 capital expenditures and operations, our
debt service capabilities, our shipment level and profitability, increased
market share and the sufficiency of capital to meet working capital,
capital expenditures requirements and our strategies are forward-looking
statements. Forward-looking statements are not guarantees of our future
performance and involve risks, uncertainties and assumptions that may cause
our actual results to differ materially from the expectations we describe
in our forward-looking statements. There may be events in the future that
we are not able to predict accurately, or over which we have no control.
You should not place undue reliance on forward-looking statements. We do
not promise to notify you if we learn that our assumptions or projections
are wrong for any reason. You should be aware that the factors we discuss
in "Risk Factors" and elsewhere in this report could cause our actual
results to differ from any forward-looking statements.
Our actual results for future periods could differ materially from the
opinions and statements expressed with respect to future periods. In
particular, our future results could be affected by factors related to our
acquisition of the Coors Brewers business in the U.K., including
integration problems, unanticipated liabilities and the substantial amount
of indebtedness incurred to finance the acquisition, which could, among
other things, hinder our ability to adjust rapidly to changing market
conditions, make us more vulnerable in the event of a downturn and place us
at a competitive disadvantage relative to less leveraged competitors.
To improve our financial performance, we must grow premium beverage volume,
achieve modest price increases for our products and control costs. The most
important factors that could influence the achievement of these goals and
cause actual results to differ materially from those expressed in the
forward looking statements, include, but are not limited to, the matters we
discussed in "Risk Factors".
OUTLOOK FOR 2002
Overall, 2001 represented a challenging year for our company, particularly
in the area of sales growth. However, in the fourth quarter of 2001, we
began to see improved sales trends in our business and in the beer
industry.
We are cautiously optimistic that improved U.S. industry growth, when
combined with our new advertising and sales efforts, will allow us in 2002
to achieve our long-standing goal of growing our unit volume 1% to 2%
faster than the U.S. beer industry. Despite widespread U.S. economic
weakness, the industry pricing environment continued to be favorable late
in 2001 and early in 2002. An increase in the level of promotional
discounting or the degree of value-pack activity could have an unfavorable
impact on sales and margins. Geographic and product mix continued to have a
modest negative impact on net sales per barrel late in 2001, with sales
shifting toward lower-revenue geographies and products. Also important, the
comparative net-sales-per-barrel impact of the sale of company-owned U.S.
distributorships that we experienced in the fourth quarter of 2001 -- a
reduction of about 2.5 % -- is likely to continue for the next three
quarters, with slight easing in the third quarter of 2002 and significant
easing in the fourth quarter. The disposition of Coors-owned
distributorships reduces the growth in our sales per barrel primarily
because the volumes sold by these distributorships represents much higher
revenue-per-barrel business than our average and because the non-Coors
brand volumes (for example, import beers) sold by these distributorships
are not included in our reported unit volume.
The current outlook for U.S. cost of goods is more encouraging than we have
seen in the past few years. Following are the five cost factors that we
think will be most important in 2002:
- - First, we are beginning to achieve significant operating efficiencies.
Our operations teams have begun to achieve success in a number of areas,
particularly with distribution costs and related supply-chain work. Some
of these savings have started to become significant, especially in the
fourth quarter of 2001. During the past two years, we have been focused
on adding production capacity, culminating with the start-up of the new
bottle line in our Shenandoah facility this spring. Now, we will focus on
utilizing the capacity we have in the most efficient way possible.
- - Second, input costs, including packaging materials, agricultural
commodities and fuel, are stabilizing. Early in 2002, the outlook is for
approximately flat can costs, assuming aluminum ingot prices stay near
their current levels. We anticipate modestly higher glass bottle costs,
with little change in paper packaging rates and agricultural commodity
costs in 2002. Fuel costs are always difficult to forecast, but the
outlook at this point is about the same as in 2001. Changes in oil or
natural gas prices could alter this outlook.
- - Third, mix shifts will also affect costs, but probably less than in the
past few years. Aside from changes in raw material rates, we plan to
spend more on glass in 2002 because of the continuing shift in our
package mix toward longneck bottles (LNNRs), which cost more and are less
profitable than most of our other package configurations. We anticipate
increasing LNNRs to more than 80% of our bottle mix this year. This
represents a significant slowdown in this mix shift toward LNNRs as we
complete the phase-out of the shorter convenience bottles.
- - Fourth, labor-related costs are expected to increase due to higher
pension and health care costs, as well as higher crewing related to
capacity expansion projects completed in 2001.
- - Fifth, we anticipate that the sale of our distributorships in 2001 will
be the largest single factor affecting reported cost of goods in 2002.
The fourth quarter 2001 impact of about (3%) offers the best template for
the first three quarters of 2002, with this factor essentially
normalizing early in the fourth quarter of 2002. The disposition of
Coors-owned distributorships reduces the growth in our cost of goods sold
per barrel primarily because the volumes sold by these distributorships
represents much higher cost-per-barrel business than our average and
because the non-Coors brand volumes (for example, import beers) sold by
these distributorships are not included in our reported unit volume.
Bringing together all of these factors, we plan to continue to make
progress in reducing costs in key areas of our company in 2002. Overall, we
see substantial additional potential to reduce our cost of doing business.
Marketing and sales spending in North America is expected to increase in
2002. We continue to focus on reducing costs so that we can invest in our
brands and sales efforts incrementally. Additional sales and marketing
spending is determined on an opportunity-by-opportunity basis. Incremental
revenue generated by price increases is likely to be spent on advertising
and marketplace support because the competitive landscape has shifted
during the past four years toward much more marketing, promotional and
advertising spending. General and administrative costs are expected to
increase due to higher labor benefit costs and spending on systems to
support our supply chain initiatives.
Interest expense will greatly exceed interest income in 2002 due to the
additional debt we incurred to complete the Carling acquisition. We also
reduced cash balances to complete this transaction. We will be keenly
focused on generating cash and paying down debt for the next few years.
In 2002, we have planned capital expenditures (excluding capital
improvements for our container joint ventures, which will be recorded on
the books of the respective joint ventures) for our North American business
in the range of approximately $135 to $145 million for improving and
enhancing our facilities, infrastructure, information systems and
environmental compliance. This capital spending plan is down from $244.5
million in 2001. All of the planned reduction for 2002 is the result of
completing capacity-related projects in 2001. Based on preliminary
analysis, we anticipate 2002 capital spending in our U.K. business will be
in the range of $80 to $90 million.
The impact of Coors Brewers on our 2002 outlook will depend substantially
on business plans being developed in early 2002.
CONTINGENCIES
Environmental: We were one of a number of entities named by the
Environmental Protection Agency (EPA) as a potentially responsible party
(PRP) at the Lowry Superfund site. This landfill is owned by the City and
County of Denver (Denver), and was managed by Waste Management of Colorado,
Inc. (Waste). In 1990, we recorded a special pretax charge of $30 million,
a portion of which was put into a trust in 1993 as part of an agreement
with Denver and Waste to settle the outstanding litigation related to this
issue.
Our settlement was based on an assumed cost of $120 million (in 1992
adjusted dollars). It requires us to pay a portion of future costs in
excess of that amount.
In January 2002, in response to the EPA's five-year review conducted in
2001, Waste provided us with updated annual cost estimates through 2032. We
have reviewed these cost estimates in the assessment of our accrual related
to this issue. In determining that the current accrual is adequate, we
eliminated certain costs included in Waste's estimates, primarily trust
management costs that will be accrued as incurred, certain remedial costs
for which technology has not yet been developed and income taxes which we
do not believe to be an included cost in the determination of when the $120
million threshold is reached. We generally used a 2% inflation rate for
future costs, and discounted certain operations and maintenance costs at
the site that we deemed to be determinable, at a 5.46% risk-free rate of
return. Based on these assumptions, the present value and gross amount of
discounted costs are approximately $1 million and $4 million, respectively.
We did not assume any future recoveries from insurance companies in the
estimate of our liability.
There are a number of uncertainties at the site, including what additional
remedial actions will be required by the EPA, and what costs are included
in the determination of when the $120 million threshold is reached. Because
of these issues, the estimate of our liability may change as facts further
develop, and we may need to increase the reserve. While we cannot predict
the amount of any such increase, an additional accrual of as much as $25
million is reasonably possible based on our preliminary evaluation, with
additional cash contributions beginning as early as 2013.
We were one of several parties named by the EPA as a PRP at the Rocky Flats
Industrial Park site. In September 2000, the EPA entered into an
Administrative Order on Consent with certain parties, including our
company, requiring implementation of a removal action. Our projected costs
to construct and monitor the removal action are approximately $300,000. The
EPA will also seek to recover its oversight costs associated with the
project which are not possible to estimate at this time. However, we
believe they would be immaterial to our operating results, cash flows and
financial position.
In August 2000, an accidental spill into Clear Creek at our Golden,
Colorado, facility caused damage to some of the fish population in the
creek. A settlement reached in February 2001 with the Colorado Department
of Public Health and Environment was modified based on public comment,
including comments by the EPA. As a result, permit violations that occurred
several years prior to the accidental spill were included in the
settlement, as well as economic benefit penalties related to those prior
violations. A total civil penalty of $100,000 was assessed in the final
settlement with the Department reached in August 2001. In addition, we will
undertake an evaluation of our process wastewater treatment plant. On
December 21, 2001, we settled with the Colorado Division of Wildlife for
the loss of fish in Clear Creek. We have agreed to construct, as a pilot
project, a tertiary treatment wetlands area to evaluate the ability of a
wetlands to provide additional treatment to the effluent from our waste
treatment facilities. We will also pay for the stocking of game fish in the
Denver metropolitan area and the cost of two graduate students to assist in
the research of the pilot project. The anticipated costs of the project are
estimated to be approximately $500,000. The amounts of these settlements
have been fully accrued as of December 30, 2001.
From time to time, we have been notified that we are or may be a PRP under
the Comprehensive Environmental Response, Compensation and Liability Act or
similar state laws for the cleanup of other sites where hazardous
substances have allegedly been released into the environment. We cannot
predict with certainty the total costs of cleanup, our share of the total
cost, the extent to which contributions will be available from other
parties, the amount of time necessary to complete the cleanups or insurance
coverage.
In addition, we are aware of groundwater contamination at some of our
properties in Colorado resulting from historical, ongoing or nearby
activities. There may also be other contamination of which we are currently
unaware.
While we cannot predict our eventual aggregate cost for our environmental
and related matters in which we are currently involved, we believe that any
payments, if required, for these matters would be made over a period of
time in amounts that would not be material in any one year to our operating
results, cash flows or our financial or competitive position. We believe
adequate reserves have been provided for losses that are probable and
estimable.
Litigation: We are also named as a defendant in various actions and
proceedings arising in the normal course of business. In all of these
cases, we are denying the allegations and are vigorously defending
ourselves against them and, in some instances, have filed counterclaims.
Although the eventual outcome of the various lawsuits cannot be predicted,
it is management's opinion that these suits will not result in liabilities
that would materially affect our financial position, results of operations
or cash flows.
Risk Factors
You should carefully consider the following factors and the other
information contained within this document:
We have a substantial amount of indebtedness.
Because of the acquisition of the Coors Brewers business, we will have
indebtedness that is substantial in relation to our stockholders' equity.
As of February 2, 2002, we have total debt of more than $1.7 billion.
Furthermore, our debt agreements permit us to incur additional indebtedness
in the future. Our consolidated indebtedness may have the effect,
generally, of restricting our flexibility in responding to changing market
conditions and could make us vulnerable in the event of a general downturn
in economic conditions or our business.
Our substantial indebtedness could have important consequences to us,
including:
- - a substantial portion of our cash flow from operations must be
dedicated to the payment of principal and interest on our debt,
reducing the funds available to us for other purposes including
expansion through acquisitions, marketing spending and expansion of
our product offerings; and
- - we may be more leveraged than some of our competitors, which may
place us at a competitive disadvantage.
Our ability to make scheduled payments or to refinance our obligations with
respect to our indebtedness will depend on our financial and operating
performance, which, in turn, is subject to prevailing economic conditions
and to financial, business and other factors beyond our control.
Our ability to successfully integrate the Coors Brewers business and to
implement our business strategy with respect to the Coors Brewers business
could have a material adverse effect on our financial results.
While we believe that the acquisition of the Coors Brewers business will
provide us with significant opportunities to increase our revenues, there
can be no assurances that these benefits will be realized or that we will
not face difficulty in integrating the Coors Brewers business. Acquisitions
involve a number of special risks, including the risk that acquired
businesses will not achieve the results we expect, the risk that we may not
be able to retain key personnel of the acquired business, unanticipated
events or liabilities, and the potential disruption of our business.
If we are unable to successfully integrate the Coors Brewers business, we
may not realize anticipated revenue growth, which may negatively impact our
profitability. The occurrence of any of the events referred to in the risks
described above or other unforeseen developments in connection with the
acquisition and integration of the Coors Brewers business could materially
and adversely affect our results of operations.
In addition, we have not previously operated a business the size of Coors
Brewers in the U.K. If we are unable to retain key personnel of the
acquired business, we may be unable to realize the benefits that we expect
from the acquisition. If the costs of operating the acquired business are
higher than we expect, our business, financial position and results of
operations may be adversely affected.
Loss of the Coors Brewers Limited management team could negatively impact our
ability to successfully operate the U.K. business.
The successful operation and integration of the Coors Brewers business is
dependent, to a great extent, upon retention of the current management team.
Although current management has committed to staying with us, the loss of one
or more members could have a material adverse impact on the success of the
Coors Brewers business until proper replacements could be found.
Our success depends largely on the success of one product in the U.S. and in
the U.K. the failure of which would materially adversely affect our financial
results.
Although we currently have 11 products in our U.S. portfolio, Coors Light
represented more than 70% of our sales volume for 2001. A key factor in our
growth is based on consumer taste preferences that are beyond our control.
Our primary competitors' portfolios are more evenly diversified than ours.
As a consequence, if consumer tastes shift to another style of beer, the
loss of sales from Coors Light would have a disproportionately negative
impact on our business compared to the business of our principal
competitors. We cannot assure that the Coors Light brand will maintain
market share or continue to grow.
We cannot provide assurance that our acquisition of Coors Brewers will
mitigate our reliance on a single product to any significant degree or
offset the impact of any potential loss of market share or sales of Coors
Light. Moreover, Carling lager is the best-selling brand in the U.K. and
represented more than 50% of the Coors Brewers sales volume in the U.K.
Consequently, any material shift in consumer preferences in the U.K. away
from Carling would have a disproportionately negative impact on that
business.
Because our primary production facility in the U.S. and the Coors Brewers
production facilities in the U.K. are each located at a single site, we are
more vulnerable than our competitors to transportation disruptions and natural
disasters.
Our primary U.S. production facilities are located in Golden, Colorado,
where we brew more than 90% of our volume in the U.S. and package
approximately 60% of our products sold in the U.S. Our centralized
operations in the U.S. require us to ship our products greater distances
than our competitors. We ship approximately 64% of our products by truck
and intermodal directly to distributors and satellite redistribution
centers. The remaining 36% of our products are transported by railcar to
distributors and satellite redistribution centers. If our transportation
system in the U.S. is disrupted as a result of labor strikes, work
stoppages, or for any other reason, our business and financial results
would be negatively impacted.
The Coors Brewers production facilities in the U.K. are located in Burton-
on-Trent, England. Although these facilities are composed of two breweries,
they are located side-by-side. These two breweries account for the majority
of our production in the U.K.
Because these operations are both centralized, we would experience
proportionately greater disruption and losses than our competitors if these
primary production facilities in the U.S. or the U.K. were damaged by
natural disasters or other catastrophes.
We are significantly smaller than our two primary competitors in the U.S., and
we are more vulnerable than our competitors to cost and price fluctuations.
The beer industry is highly competitive. At the retail level, we compete on
the basis of quality, taste, advertising, price, packaging innovation and
retail execution by our distributors. Competition in our various markets
could cause us to reduce pricing, increase capital and other expenditures
or lose market share, any of which could have a material adverse effect on
our business and financial results.
In the U.S., we compete primarily with Anheuser-Busch Companies, Inc. and
Miller Brewing Co., the top two brewers in the U.S. Both of our primary
competitors have substantially greater financial, marketing, production,
distribution and other resources than we have. As a consequence, we face
significant competitive disadvantages related to their greater economies of
scale. To remain competitive, we must spend substantially more per barrel
on advertising due to our smaller scale. In addition, we are subject to
being outspent by our competitors in advertising, promotions and
sponsorships. Aggressive marketing campaigns by our competitors could
requires us to spend additional amounts on marketing or cause us to lose
market share, which would adversely affect our profit margins.
The concentration of our operations at one location contributes to higher
costs per barrel than our primary competitors due to a number of factors.
These factors include, but are not limited to, higher transportation costs
and the need to maintain satellite redistribution centers. Our primary
competitors have multiple geographically dispersed breweries and packaging
facilities. Therefore, they have lower transportation costs and less need
for satellite redistribution centers. As a result of our higher costs per
barrel and resulting lower margins, we are more vulnerable to cost and
price fluctuations than our major competitors. Any significant increase in
costs, such as fuel or packaging costs, or significant decrease in prices
that we can charge for our products, would have a disproportionately
material adverse effect on our business, operations and financial
condition.
We are vulnerable to the pricing actions of our primary competitors, which are
beyond our control.
An improved pricing environment over the past several years has allowed us
to make moderate, consistent increases in beer prices. These pricing
increases have contributed to our improved profitability. The market may
not continue to accept price increases, and our competitors may move away
from price increases and implement competitive strategies that involve
price discounting. Any material negative change in the current pricing
environment could have a material adverse affect on our results of
operations.
If any of our suppliers are unable or unwilling to meet our requirements, we
may be unable to promptly obtain the materials we need to operate our business.
We purchase most of our paperboard and label packaging for our U.S.
products from Graphic Packaging International Corporation. William K. Coors
and Peter H. Coors serve, along with other Coors family members, as co-
trustees of a number of Coors family trusts which collectively control both
Graphic Packaging and us. Graphic Packaging supplies unique packaging to us
that is not currently produced by any other supplier. Our agreement with
Graphic Packaging expires in 2002. We have begun negotiations to extend
this agreement. Because we do not believe there is another readily
available source for this packaging, the loss of Graphic Packaging as our
supplier without sufficient time to develop an alternative source for our
packaging requirements, or a significant increase in prices charged by
Graphic Packaging, would likely have a material adverse effect on our
business.
We are dependent on our suppliers for all of the raw materials used in our
products as well as for all packaging materials. We currently purchase
nearly all of our aluminum cans in the U.S. from our joint venture with
Ball Corporation and more than half of our glass bottles from our joint
venture with Owens-Brockway Glass Container, Inc.. We also have agreements
to purchase substantially all of our remaining can and bottle needs from
these joint venture partners.
Coors Brewers has only a single source for their can supply. The loss of
this supplier without sufficient time to develop an alternative source
would likely have a material adverse effect on their business.
As with most agricultural products, the supply and price of raw materials
used to produce our products can be affected by a number of factors beyond
our control, including frosts, droughts, other weather conditions, economic
factors affecting growth decisions, various plant diseases and pests. To
the extent that any of the foregoing affects the ingredients we use to
produce our products, our results of operations could be materially and
adversely affected.
The government may adopt regulations that could increase our costs or our
liabilities or could limit our business activities.
Our business is highly regulated by national and local government entities.
These regulations govern many parts of our operations, including brewing,
marketing and advertising, transportation, distributor relationships, sales
and environmental issues. We cannot assure you that we have been or will at
all times be in compliance with all regulatory requirements or that we will
not incur material costs or liabilities in connection with regulatory
requirements. The beer industry could be subjected to changes or additions
to governmental regulations. For example, we could face new labeling or
packaging requirements or restrictions on advertising and promotions that
could adversely affect the sale of our products.
Governmental entities also levy taxes and may require bonds to ensure
compliance with applicable laws and regulations. Various legislative
authorities in both the U.S. and the U.K. from time to time consider
various proposals to impose additional excise taxes on the production and
sale of alcohol beverages, including beer. The last significant increase in
federal excise taxes on beer was in 1991 when Congress doubled federal
excise taxes on beer. We cannot assure you that the operations of our
breweries and other facilities will not become subject to increased
taxation by federal, state or local authorities. Any significant increases
could have a materially adverse impact on our financial results.
If the social acceptability of our products declines, or if litigation is
directed at the alcohol beverage industry, our sales volumes could decrease and
our business could be materially adversely affected.
In recent years, there has been increased social and political attention
directed to the alcohol beverage industry. We believe that this attention
is the result of public concern over alcohol-related problems, including
drunk driving, underage drinking and health consequences from the misuse of
alcohol. If the social acceptability of beer were to decline significantly,
sales of our products could materially decrease. Similarly, recent
litigation against the tobacco industry has directed increased attention to
the alcohol beverage industry. If our industry were to become involved in
litigation similar to that of the tobacco industry, our business could be
materially adversely affected.
Any significant shift in packaging preferences in the beer industry could
disproportionately increase our costs and could limit our ability to meet
consumer demand.
Any significant shift in packaging preferences by retailers and consumers
could disproportionately increase our costs and may affect our ability to
meet consumer demand, which could have a material adverse effect on our
results of operations. Reconfiguring our packaging facilities to produce
different types or amounts of packaging than we currently produce would
likely increase our costs. In addition, we may not be able to complete any
necessary changes quickly enough to keep pace with shifting consumer
preferences. Our primary competitors are larger and may be better able to
accommodate a packaging preference shift. If we are not able to respond
quickly to a packaging preference shift, our sales and market share could
decline.
We depend on independent distributors to sell our products and we cannot
provide any assurance that these distributors will effectively sell our
products.
We sell all of our products in the U.S. to wholesale distributors for
resale to retail outlets. We are highly dependent on independently-owned
distributors. Distributors that we own account for less than 5% of our
total domestic volume. Some of our distributors are at a competitive
disadvantage because they are significantly smaller than the largest
distributors in their markets. Our distributors also sell products that
compete with our products. We cannot control or provide any assurance that
these distributors will not give our competitors' products higher priority,
thereby reducing their efforts to sell our products. In addition, the
regulatory environment of many states makes it very difficult to change
distributors. In most cases, poor performance by a distributor is not
grounds for replacement. Consequently, if we are not allowed or are unable
to replace unproductive or inefficient distributors, our business,
financial position, and results of operation may be adversely affected.
Unlike the U.S., in the U.K. Coors Brewers wholesales its products directly
to retail outlets and is not dependent upon wholesalers. In the U.K., Coors
Brewers distributes its products through Tradeteam, its joint venture with
Exel Logistics. Tradeteam operates a system of satellite warehouses and a
transportation fleet for delivery between Coors Brewers and customers.
Coors Brewers is reliant exclusively upon Tradeteam for these services.
Because our sales volume is more concentrated in a few geographic areas in the
U.S., any loss of market share in the states where we are concentrated would
have a material adverse effect on our results of operations.
Although we sell beer nationwide and in select international markets, only
a few states, California, Texas, Pennsylvania, New York and New Jersey,
together represented 44% of our total domestic volume in 2001. We have
relatively low market share in the Midwest and Southeast regions of the
U.S. Any loss of market share in our core states could have a material
adverse effect on our results of operations.
We are subject to environmental regulation by federal, state and local
agencies, including laws that impose liability without regard to fault.
Our operations are subject to federal, state, local, and foreign
environmental laws and regulations regarding, among other things, the
generation, use, storage, disposal, emission, release and remediation of
hazardous and non-hazardous substances, materials or wastes as well as the
health and safety of our employees. Under certain of these laws, namely the
Comprehensive Environmental Response, Compensation and Liability Act and
its state counterparts, we could be held liable for investigation and
remediation of hazardous substance contamination at our currently or
formerly owned or operated facilities or at third-party waste disposal
sites, as well as for any personal or property damage arising out of such
contamination regardless of fault. From time to time, we have been notified
that we are or may be a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act.
Although we believe that none of the sites in which we are currently
involved will materially affect our business, financial condition or
results of operations, we cannot predict with certainty the total costs of
cleanup, our share of the total costs, the extent to which contributions
will be available from other parties, the amount of time necessary to
complete the cleanups or insurance coverage. In addition, we could be named
a potentially responsible party at sites in the future and the costs
associated with such future sites may be material.
Environmental laws and regulations are complex and change frequently. While
we have budgeted for future capital and operating expenditures to maintain
compliance with these environmental laws and regulations, we cannot assure
you that we will not incur any environmental liability or that these
environmental laws and regulations will not change or become more stringent
in the future in a manner that could have a material adverse effect on our
business, financial condition or results of operations.
Consolidation of pubs and growth in the size of pub chains in the U.K. could
result in less bargaining strength on pricing.
The trend toward consolidation of pubs, away from independent pub and club
operations, is increasing in the U.K. One result of this trend is that
these pub chains are larger entities, and could have stronger price
negotiating power, than independent businesses. If the trend continues, it
could impact Coors Brewers' ability to obtain favorable pricing both on-
trade and off-trade (due to spillover effect of reduced negotiating
leverage) and could reduce profit margins for us and industry wide for
brewers.
We may experience labor disruptions in the U.K.
Approximately, 31% of the Coors Brewers 3,150 employees are unionized
compared to approximately 8% of our 5,500 employees in the U.S. Although we
believe relations with our employees are very good both in the U.S. and in
the U.K., the Coors Brewers operations could be affected to a somewhat
greater degree by labor strikes, work stoppages or other similar employee-
related issues.
ITEM 7a. Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business, we are exposed to fluctuations in
interest rates, the value of foreign currencies and production and
packaging materials prices. To manage these exposures when practical, we
have established policies and procedures that govern the management of
these exposures through the use of a variety of financial instruments. By
policy, we do not enter into such contracts for the purpose of speculation.
Our objective in managing our exposure to fluctuations in interest rates,
foreign currency exchange rates and production and packaging materials
prices is to decrease the volatility of earnings and cash flows associated
with changes in the applicable rates and prices. To achieve this objective,
we primarily enter into forward contracts, options and swap agreements
whose values change in the opposite direction of the anticipated cash
flows. We do not hedge the value of net investments in foreign-currency-
denominated operations and translated earnings of foreign subsidiaries. Our
primary foreign currency exposures were the Canadian dollar (CAD), the
Japanese yen (YEN) and the British pound (GBP).
In December 2001, we entered into a foreign currency forward sale agreement
to hedge our exposure to fluctuations in the British pound exchange rate
related to acquisition of certain Coors Brewers' assets. Also in
anticipation of the Carling acquisition, we entered into a commitment with
a lender for the financing of this transaction. Included within the
commitment letter is a foreign currency written option which reduced our
exposure on the U.S. dollar borrowing to fund the Coors Brewers
transaction. The derivatives resulting from these agreements do not qualify
for hedge accounting and, accordingly, were marked to market at year-end.
The associated $0.3 million net expense was recorded in other income in the
accompanying Consolidated Statements of Income.
Subsequent to year-end, the foreign currency swap settled on January 12,
2002, and the written option included in the loan commitment expired on
February 11, 2002, resulting in a combined loss and amortization expense of
$1.2 million to be realized during the first quarter of 2002.
Derivatives are either exchange-traded instruments that are highly liquid,
or over-the-counter instruments with highly rated financial institutions.
No credit loss is anticipated because the counterparties to over-the-
counter instruments generally have long-term ratings from S&P or Moody's
that are no lower than A or A2, respectively. Additionally, most
counterparty fair value positions favorable to us and in excess of certain
thresholds are collateralized with cash, U.S. Treasury securities or
letters of credit. We have reciprocal collateralization responsibilities
for fair value positions unfavorable to us and in excess of certain
thresholds. At December 30, 2001, we had zero counterparty collateral and
had none outstanding.
A sensitivity analysis has been prepared to estimate our exposure to market
risk of interest rates, foreign currency exchange rates and commodity
prices. The sensitivity analysis reflects the impact of a hypothetical 10%
adverse change in the applicable market interest rates, foreign currency
exchange rates and commodity prices. The volatility of the applicable rates
and prices are dependent on many factors that cannot be forecast with
reliable accuracy. Therefore, actual changes in fair values could differ
significantly from the results presented in the table below. See Item 8,
Financial Statements and Supplementary Data, Note 1, Summary of Accounting
Policies, and Note 12, Derivative Instruments, in the Notes to the
Consolidated Financial Statements for further discussion.
The following table presents the results of the sensitivity analysis of our
derivative and debt portfolio:
As of As of
Estimated fair value volatility December 30, 2001 December 31, 2000
(In millions)
Foreign currency risk:
forwards, option $(22.2) $ (3.0)
Interest rate risk: swaps, debt $ (0.4) $ (1.3)
Commodity price risk: swaps, options $(12.2) $ (9.1)
ITEM 8. Financial Statements and Supplementary Data
Index to Financial Statements
Page(s)
Consolidated Financial Statements:
Report of Independent Accountants 49
Consolidated Statements of Income and Comprehensive
Income for each of the three years in the period
ended December 30, 2001 50
Consolidated Balance Sheets at December 30, 2001,
and December 31, 2000 51-52
Consolidated Statements of Cash Flows for each of
the three years in the period ended December 30, 2001 53
Consolidated Statements of Shareholders' Equity
for each of the three years in the period ended
December 30, 2001 54
Notes to Consolidated Financial Statements 55-88
Report of Independent Accountants
To the Board of Directors and Shareholders of Adolph Coors Company:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income and comprehensive income of
shareholders' equity and of cash flows present fairly, in all material
respects, the financial position of Adolph Coors Company and its
subsidiaries at December 30, 2001, and December 31, 2000, and the results
of their operations and their cash flows for each of the three years in the
period ended December 30, 2001, in conformity with accounting principles
generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with auditing standards generally accepted in the United States of America
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Denver, Colorado
February 6, 2002
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the years ended
December 30, December 31, December 26,
2001 2000 1999
(In thousands, except per share data)
Sales - domestic and international $ 2,842,752 $ 2,841,738 $ 2,642,712
Beer excise taxes (413,290) (427,323) (406,228)
Net sales (Note 14) 2,429,462 2,414,415 2,236,484
Cost of goods sold (1,537,623) (1,525,829) (1,397,251)
Gross profit 891,839 888,586 839,233
Other operating expenses:
Marketing, general and
administrative (717,060) (722,745) (692,993)
Special charges (Note 9) (23,174) (15,215) (5,705)
Total other operating expenses (740,234) (737,960) (698,698)
Operating income 151,605 150,626 140,535
Other income (expense):
Gain on sales of distributorships 27,667 1,000 --
Interest income 16,409 21,325 11,286
Interest expense (2,006) (6,414) (4,357)
Miscellaneous - net 4,338 2,988 3,203
Total 46,408 18,899 10,132
Income before income taxes 198,013 169,525 150,667
Income tax expense (Note 5) (75,049) (59,908) (58,383)
Net income (Note 7) 122,964 109,617 92,284
Other comprehensive income (expense),
net of tax (Note 13):
Foreign currency translation
adjustments 14 2,632 (3,519)
Unrealized (loss) gain on available-
for-sale securities 3,718 1,268 (397)
Unrealized (loss) gain on derivative
instruments (6,200) (1,997) 6,835
Minimum pension liability
adjustment (8,487) -- --
Reclassification adjustments (4,898) 366 --
Comprehensive income $ 107,111 $ 111,886 $ 95,203
Net income per share - basic $ 3.33 $ 2.98 $ 2.51
Net income per share - diluted $ 3.31 $ 2.93 $ 2.46
Weighted-average shares - basic 36,902 36,785 36,729
Weighted-average shares - diluted 37,177 37,450 37,457
See notes to consolidated financial statements.
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 30, December 31,
2001 2000
(In thousands)
Assets
Current assets:
Cash and cash equivalents $ 77,133 $ 119,761
Short-term marketable securities 232,572 72,759
Accounts and notes receivable:
Trade, less allowance for doubtful accounts
of $91 in 2001 and $139 in 2000 94,985 104,484
Affiliates 223 7,209
Other, less allowance for certain claims of
$111 in 2001 and $104 in 2000 13,524 15,385
Inventories:
Finished 32,438 40,039
In process 23,363 23,735
Raw materials 41,534 37,570
Packaging materials, less allowance for
obsolete inventories of $2,188 in 2001
and $1,993 in 2000 17,788 8,580
Total inventories 115,123 109,924
Maintenance and operating supplies,
less allowance for obsolete supplies
of $2,182 in 2001 and $1,621in 2000 23,454 23,703
Prepaid expenses and other assets 21,722 19,847
Deferred tax asset (Note 5) 27,793 24,679
Total current assets 606,529 497,751
Properties, at cost and net (Notes 2 and 14) 869,710 735,793
Goodwill and other intangibles, less
accumulated amortization of $9,049 in
2001 and $12,981 in 2000 (Notes 1 and 7) 86,289 54,795
Investments in joint ventures, less
accumulated amortization of $1,625 in
2001 (Note 10) 94,785 56,342
Long-term marketable securities -- 193,675
Other assets 82,379 90,948
Total assets $1,739,692 $1,629,304
See notes to consolidated financial statements.
December 30, December 31,
2001 2000
Liabilities and Shareholders' Equity (In thousands)
Current liabilities:
Accounts payable:
Trade $ 219,381 $ 186,105
Affiliates 3,112 11,621
Accrued salaries and vacations 56,767 57,041
Taxes, other than income taxes 31,271 32,469
Accrued expenses and other
liabilities (Notes 3 and 4) 122,014 92,100
Current portion of long-term debt (Note 4) 85,000 --
Total current liabilities 517,545 379,336
Long-term debt (Note 4) 20,000 105,000
Deferred tax liability (Note 5) 61,635 89,986
Deferred pension and
postretirement benefits (Note 7, 8 and 13) 141,720 77,147
Other long-term liabilities (Note 3) 47,480 45,446
Total liabilities 788,380 696,915
Commitments and contingencies
(Notes 3, 4, 5, 6, 7, 8, 10 and 15)
Shareholders' equity (Notes 6, 11 and 13):
Capital stock:
Preferred stock, non-voting, no par
value (authorized: 25,000,000
shares; issued and outstanding: none) -- --
Class A common stock, voting, no
par value (authorized, issued and
outstanding: 1,260,000 shares) 1,260 1,260
Class B common stock, non-voting,
no par value, $0.24 stated value
(authorized: 200,000,000 shares;
issued and outstanding: 34,689,410
in 2001 and 35,871,121 in 2000) 8,259 8,541
Total capital stock 9,519 9,801
Paid-in capital -- 11,332
Unvested restricted stock (597) (129)
Retained earnings 954,981 908,123
Accumulated other comprehensive income (12,591) 3,262
Total shareholders' equity 951,312 932,389
Total liabilities and shareholders' equity $1,739,692 $1,629,304
See notes to consolidated financial statements.
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended
December 30, December 31, December 26,
2001 2000 1999
Cash flows from operating activities: (In thousands)
Net income $ 122,964 $ 109,617 $ 92,284
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in net earnings of joint ventures (43,630) (42,395) (36,958)
Distributions from joint ventures 39,453 55,379 30,280
Impairment and non-cash portion
of special charges 6,591 11,068 4,769
Depreciation, depletion and amortization 121,091 129,283 123,770
Gains on sales of securities (4,042) -- --
Net (gain) loss on sale or abandonment of
properties and intangibles, net (30,467) (4,729) 2,471
Deferred income taxes (19,176) 6,870 20,635
Change in operating assets and liabilities:
Accounts and notes receivable (836) 21,696 (19,159)
Affiliate accounts receivable 6,986 6,564 (1,877)
Inventories (5,199) (3,087) (4,373)
Prepaid expenses and other assets (6,024) 3,107 (49,786)
Accounts payable (36,053) 988 59,082
Affiliate accounts payable 8,509 12,650 (12,565)
Accrued expenses and other liabilities 33,229 (26,280) 2,751
Net cash provided by operating
activities 193,396 280,731 211,324
Cash flows from investing activities:
Purchases of investments (228,237) (356,741) (94,970)
Sales and maturities of investments 268,093 208,176 105,920
Additions to properties and intangible
assets (244,548) (154,324) (134,377)
Proceeds from sales of properties
and intangible assets 63,529 6,427 3,821
Investment in Molson USA, LLC (65,000) -- --
Other 9,414 (1,079) (1,437)
Net cash used in investing activities(196,749) (297,541) (121,043)
Cash flows from financing activities:
Issuances of stock under stock plans 10,701 17,232 9,728
Purchases of treasury stock (72,345) (19,989) (20,722)
Dividends paid (29,510) (26,564) (23,745)
Payments of long-term debt -- -- (40,000)
Overdraft balances 51,551 4,686 (11,256)
Other 759 (2,235) (1,692)
Net cash used in financing activities (38,844) (26,870) (87,687)
Cash and cash equivalents:
Net (decrease) increase in cash and cash
equivalents (42,197) (43,680) 2,594
Effect of exchange rate changes on
cash and cash equivalents (431) (367) 1,176
Balance at beginning of year 119,761 163,808 160,038
Balance at end of year $ 77,133 $ 119,761 $ 163,808
See notes to consolidated financial statements.
ADOLPH COORS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Accumulated
other
Common stock Unvested compre-
issued Paid-in Restricted Retained hensive
Class A Class B capital Stock earnings income Total
(In thousands, except per share data)
Balances at
December 27,
1998 $ 1,260 $ 8,428 $ 10,505 $ -- $756,531 $ (1,926) $774,798
Shares issued
under stock plans,
including related
tax benefit 110 15,895 16,005
Purchases of stock (95) (20,627) (20,722)
Other comprehensive
income 2,919 2,919
Net income 92,284 92,284
Cash dividends-
$0.645 per share (23,745) (23,745)
Balances at
December 26,
1999 1,260 8,443 5,773 -- 825,070 993 841,539
Shares issued
under stock plans,
including related
tax benefit 181 25,465 (129) 25,517
Purchases of stock (83) (19,906) (19,989)
Other comprehensive
income 2,269 2,269
Net income 109,617 109,617
Cash dividends-
$0.72 per share (26,564) (26,564)
Balances at
December 31,
2000 1,260 8,541 11,332 (129) 908,123 3,262 932,389
Shares issued
under stock plans,
including related
tax benefit 75 13,463 (651) 780 13,667
Amortization of
restricted stock 183 (183) --
Purchases of stock (357) (24,795) (47,193) (72,345)
Other comprehensive
income (15,853) (15,853)
Net income 122,964 122,964
Cash dividends-
$0.80 per share (29,510) (29,510)
Balances at
December 30,
2001 $ 1,260 $ 8,259 $ -- $ (597) $954,981 $(12,591) $951,312
See notes to consolidated financial statements.
ADOLPH COORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1:
Summary of Significant Accounting Policies
Principles of consolidation: Our consolidated financial statements include
our accounts and our majority-owned and controlled domestic and foreign
subsidiaries. All significant intercompany accounts and transactions have
been eliminated. The equity method of accounting is used for our
investments in affiliates where we have the ability to exercise significant
influence (see Note 10, Investments). We have other investments that are
accounted for at cost.
Nature of operations: We are a multinational brewer, marketer and seller
of beer and other malt-based beverages. The vast majority of our volume is
sold in the United States to independent wholesalers. Our international
volume is produced, marketed and distributed under varying business
arrangements including export, direct investment, joint ventures and
licensing.
Fiscal year: Our fiscal year is a 52- or 53-week period ending on the last
Sunday in December. Fiscal years ended December 30, 2001, and December 26,
1999, were both 52-week periods. Fiscal year ended December 31, 2000, was a
53-week period.
Use of estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions. These estimates and assumptions affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications: Certain reclassifications have been made to the 2000
and 1999 financial statements to conform with the 2001 presentation.
Cash and cash equivalents: Cash equivalents represent highly liquid
investments with original maturities of 90 days or less. The fair value of
these investments approximates their carrying value.
Investments in marketable securities: We invest our excess cash on hand in
interest-bearing marketable securities, which include corporate, government
agency and municipal debt instruments that are investment grade. All of
these securities were considered to be available-for-sale. These securities
have been recorded at fair value, based on quoted market prices, through
other comprehensive income. Unrealized gains, recorded in Accumulated other
comprehensive income, relating to these securities totaled $6.0 million and
$2.0 million at December 30, 2001, and December 31, 2000, respectively. Net
gains recognized on sales for available-for-sale securities were $4.0
million in 2001. Net gains realized on sales of available-for-sale
securities were immaterial in 2000 and 1999. The cost of securities sold is
based on the specific identification method. At December 30, 2001, all
$232.6 million of these securities were classified as current assets. In
January 2002, all of these securities were sold, at a gain of $4.0 million.
Approximately half of the related funds were used in the Carling
acquisition and the remaining funds were used to cover general operating
cash requirements.
Concentration of credit risk: The majority of our accounts receivable
balances are from malt beverage distributors. We secure substantially all
of this credit risk with purchase money security interests in inventory and
proceeds, personal guarantees and/or letters of credit.
Inventories: Inventories are stated at the lower of cost or market. Cost
is determined by the last-in, first-out (LIFO) method for substantially all
inventories. Current cost, as determined principally on the first-in,
first-out method, exceeded LIFO cost by $41.5 million and $42.9 million at
December 30, 2001, and December 31, 2000, respectively.
Properties: Land, buildings and machinery and equipment are stated at
cost. Depreciation is provided principally on the straight-line method over
the following estimated useful lives: buildings and improvements, 10 to 40
years; and machinery and equipment, 3 to 20 years. Certain equipment held
under capital lease is classified as equipment and amortized using the
straight-line method over the lease term and the related obligation is
recorded as a liability. Lease amortization is included in depreciation
expense. Accelerated depreciation methods are generally used for income tax
purposes. Expenditures for new facilities and improvements that
substantially extend the capacity or useful life of an asset are
capitalized. Start-up costs associated with manufacturing facilities, but
not related to construction, are expensed as incurred. Ordinary repairs and
maintenance are expensed as incurred.
Goodwill and other intangible assets: Goodwill and other intangible
assets, with the exception of the pension intangible asset and water
rights, were amortized on a straight-line basis over the estimated future
periods to be benefited, generally 40 years for goodwill and up to 20 years
for trademarks, naming and distribution rights whose related weighted
average life is 14 years. Please see the Recent accounting pronouncement
section below for information regarding the impact of the Financial
Accounting Boards' Statement of Financial Accounting Standard (SFAS) No.
142, Goodwill and Other Intangible Assets on this policy.
System development costs: We capitalize certain system development costs
that meet established criteria, in accordance with Statement of Position
(SOP) 98-1, Accounting for the Costs of Computer Systems Developed or
Obtained for Internal Use. Amounts capitalized in Machinery and equipment
are amortized to expense on a straight-line basis over three to five years.
At December 30, 2001 and December 31, 2000 amounts capitalized were $8.4
million and $3.2 million, respectively. Related amortization expense was
$2.2 million and $0.8 million for fiscal years 2001 and 2000, respectively.
There were no amounts capitalized in 1999. System development costs not
meeting the criteria in SOP 98-1, including system reengineering, are
expensed as incurred.
Overdraft balances: Under our cash management system, checks issued
pending clearance that result in overdraft balances for accounting purposes
are included in the Trade accounts payable balance. The amounts
reclassified were $70.5 million and $18.9 million at December 30, 2001 and
December 31, 2000, respectively.
Derivative instruments: Our objective in managing our exposure to
fluctuations in interest rates, foreign currency exchange rates and
production and packaging materials prices is to decrease the volatility of
earnings and cash flows associated with changes in the applicable rates and
prices. To achieve this objective, we primarily enter into forward
contracts, options and swap agreements whose values change in the opposite
direction of the anticipated cash flows. Derivative instruments, which we
designate as hedges of forecasted transactions and which qualify for hedge
accounting treatment under Statement of Financial Accounting Standard
(SFAS) No. 133, Accounting for Derivative Instruments and Hedging
Activities (which we adopted on January 1, 1999), are considered cash flows
hedges, and the effective portion of any gains or losses are included in
Accumulated other comprehensive income until earnings are affected by the
variability of cash flows. Any remaining gain or loss is recognized in
current earnings. In calculating effectiveness for SFAS 133 purposes, we do
not exclude any component of the derivative instruments' gain or loss from
the calculation. The cash flows of the derivative instruments are expected
to be highly effective in achieving offsetting fluctuations in the cash
flows of the hedged risk. If it becomes probable that a forecasted
transaction will no longer occur, the derivative will continue to be
carried on the balance sheet at fair value, and the gains and losses that
were accumulated in other comprehensive income will be recognized
immediately in earnings. If the derivative instruments are terminated prior
to their expiration dates, any cumulative gains and losses are deferred and
recognized in earnings over the remaining life of the underlying exposure.
If the hedged assets or liabilities are sold or extinguished, we recognize
in earnings the gain or loss on the designated financial instruments
concurrent with the sale or extinguishment of the hedged assets or
liabilities. Cash flows from our derivative instruments are classified in
the same category as the hedged item in the Consolidated Statements of Cash
Flows. See Note 12, Derivative Instruments, for additional information
regarding our derivative holdings.
Impairment policy: When events or changes in circumstances indicate that
the carrying amount of long-lived assets, including goodwill or other
intangible assets, may not be recoverable, an evaluation is performed to
determine if an impairment exists. We compare the carrying amount of the
assets to the undiscounted expected future cash flows. If this comparison
indicates that an impairment exists, the assets are written down to fair
value. Fair value would typically be calculated using discounted expected
future cash flows. All relevant factors are considered in determining
whether impairment exits.
Revenue recognition: Revenue is recognized upon shipment of our product to
our distributors.
Freight expense: In 2000, the Financial Accounting Standards Board's
Emerging Issues Task Force issued a pronouncement stating that shipping and
handling costs should not be reported as a reduction to gross sales within
the income statement. As a result of this pronouncement, our finished
product freight expense, which is incurred upon shipment of our product to
our distributors, is now included within Cost of goods sold in our
accompanying Consolidated Statements of Income. This expense had previously
been reported as a reduction to gross sales; financial statements for all
periods presented herein have been reclassified to reflect this change.
Advertising: Advertising costs, included in Marketing, general and
administrative, are expensed when the advertising is run. Advertising
expense was $465.2 million, $477.3 million and $443.4 million for years
2001, 2000 and 1999, respectively. Prepaid advertising costs of $30.4
million ($5.6 million in current and $24.8 million in long term) and
$36.2 million ($7.4 million in current and $28.8 million in long term) were
included in the Consolidated Balance Sheets at December 30, 2001, and
December 31, 2000, respectively.
Research and development: Research and project development costs, included
in Marketing, general and administrative, are expensed as incurred. These
costs totaled $16.5 million, $16.9 million and $16.5 million in 2001, 2000
and 1999, respectively.
Environmental expenditures: Environmental expenditures that relate to an
existing condition caused by past operations, which contribute to current
or future revenue generation, are capitalized; whereas expenditures that do
not contribute to current or future revenue generation are expensed.
Liabilities are recorded when environmental assessments and/or remedial
efforts are probable and the costs can be estimated reasonably.
Statement of Cash Flows: During 2001 and 1999, we issued restricted common
stock under our management incentive program. The non-cash impact of these
issuances, net of forfeitures and tax withholding, was $1.2 million and
$0.7 million in 2001 and 1999, respectively. We did not issue any
restricted stock under this plan in 2000,however, restricted forfeitures
and tax withholding resulted in a non-cash decrease to the equity accounts
of $5.8 million. Also during 2001, 2000 and 1999, equity was increased by
the tax benefit on the exercise of stock options under our stock plans of
$4.4 million, $14.2 million and $7.0 million, respectively. Income taxes
paid were $83.2 million in 2001, $49.6 million in 2000 and $42.4 million in
1999. See Note 15, Other Comprehensive Income, for other non-cash items.
Recent accounting pronouncements: In July 2001, the Financial Accounting
Standards Board issued SFAS 141, Business Combinations. SFAS 141 requires
that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. In connection with the Carling
acquisition, we will adopt SFAS 141 (See Note 17, Subsequent Event).
In July 2001, the Financial Accounting Standards Board issued SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS 142, which will be effective for
us beginning in the first quarter of fiscal 2002, and requires goodwill and
intangible assets that have indefinite lives to not be amortized but to be
reviewed annually for impairment, or more frequently if impairment
indicators arise. During 2001, we recorded approximately $3 million of
amortization related to goodwill and other intangible assets. Although we
have yet to complete our analysis of these assets and the related
amortization expense under the new rules for 2002, we anticipate that a
significant part of the goodwill and other intangible assets on our books
at the end of the year will no longer be subject to amortization. Our
analysis to date has not identified any goodwill or other intangible assets
that will be considered impaired under SFAS 142.
In June 2001, the Financial Accounting Standards Board issued SFAS No. 143,
Accounting for Asset Retirement Obligations, which addresses accounting and
financial reporting for obligations associated with the retirement of
tangible long-lived assets. This statement is effective for us beginning in
the second quarter of 2002, and we are evaluating the impact, if any, that
the implementation will have on our financial statements.
In August 2001, the Financial Accounting Standards Board issued SFAS No.
144, Impairment or Disposal of Long-Lived Assets, which addresses
accounting and financial reporting for the impairment or disposal of long-
lived assets. This statement is effective for us beginning in the first
quarter of 2002, and we are evaluating the impact, if any, that the
implementation will have on our financial statements.
NOTE 2:
Properties
The cost of properties and related accumulated depreciation, depletion and
amortization consists of the following:
As of
December 30, December 31,
2001 2000
(In thousands)
Land and improvements $ 94,321 $ 93,507
Buildings 506,537 508,443
Machinery and equipment 1,783,527 1,731,463
Natural resource properties 6,798 7,373
Construction in progress 141,663 91,964
2,532,846 2,432,750
Less accumulated depreciation,
depletion and amortization (1,663,136) (1,696,957)
Net properties $ 869,710 $ 735,793
In 2001, we sold our distribution operations in Anaheim and San Bernardino,
California, and Oklahoma City, Oklahoma for total proceeds of $59.4
million, resulting in a net gain, before tax, of approximately $27.7
million. We are in the process of selling the land and buildings associated
with these previously owned distributors and in the short-term are leasing
these facilities to the buyers of the distributor operations.
Interest incurred, capitalized, expensed and paid were as follows:
For the years ended
December 30, December 31, December 26,
2001 2000 1999
(In thousands)
Interest incurred $ 8,653 $ 9,567 $ 8,478
Interest capitalized (6,647) (3,153) (4,121)
Interest expensed $ 2,006 $ 6,414 $ 4,357
Interest paid $ 7,570 $ 7,664 $ 9,981
NOTE 3:
Leases
We lease certain office facilities and operating equipment under cancelable
and non-cancelable agreements accounted for as capital and operating
leases. In 2001, information and technology equipment, included in
properties, totaling $10.2 million was sold and leased back under a non-
cash capital lease agreement with EDS Information Services, LLC. Capital
lease amortization of $1.8 million for 2001 was included in accumulated
amortization. Current and long term capital lease obligations are included
in Accrued expenses and other liabilities and Other long term liabilities,
respectively, in the Consolidated Balance Sheets. Future minimum lease
payments under scheduled capital and operating leases that have initial or
remaining non-cancelable terms in excess of one year are as follows (in
thousands):
Capital Operating
Fiscal year leases leases
(In thousands)
2002 $ 4,298 $ 7,069
2003 4,688 6,173
2004 391 5,659
2005 -- 4,868
2006 -- 4,525
Thereafter -- 2,469
Total 9,377 $ 30,763
Amounts representing interest (986)
Obligations under capital lease 8,391
Obligation due within one year (3,621)
Long-term obligations under capital leases $ 4,770
Total rent expense was (in thousands) $11,763, $11,502 and $10,978 for the
years 2001, 2000 and 1999, respectively.
NOTE 4:
Debt
Long-term debt consists of the following:
As of
December 30, 2001 December 31, 2000
Carrying Fair Carrying Fair
value value value value
(In thousands)
Senior Notes $20,000 $20,850 $100,000 $100,300
Industrial development bonds -- -- 5,000 5,000
$20,000 $20,850 $105,000 $105,300
Fair values were determined using discounted cash flows at current interest
rates for similar borrowings.
Senior Notes: At December 30, 2001, we had $100 million in unsecured
Senior Notes at fixed interest rates ranging from 6.76% to 6.95% per annum.
Interest on the notes is due semiannually in January and July. The
principal amount of the Notes outstanding is payable as follows: $80
million in July of 2002, classified as current in Current portion of long-
term debt, and $20 million in July of 2005, classified as Long-term debt.
The terms of our private placement Notes allow for maximum liens,
transactions and obligations. We were in compliance with these requirements
at year-end 2001. No principal payments were due or made in 2001 or 2000.
Colorado Industrial Revenue Bonds (IRB): We were obligated to pay the
principal, interest and premium, if any, on the $5 million, City of Wheat
Ridge, IRB (Adolph Coors Company Project) Series 1993. The bonds were
scheduled to mature in 2013 and were secured by a letter of credit. At
December 30, 2001, they were variable rate securities with interest payable
on the first of March, June, September and December. The interest rate on
December 30, 2001, was approximately 3%. We were required to maintain a
minimum tangible net worth and a certain debt-to-total capitalization ratio
under the bond agreements. At December 30, 2001, we were in compliance with
these requirements. In March 2002, all obligations under the terms of the
IRB were prepaid and the debt was terminated.
Line of credit: At December 30, 2001, we had an unsecured, committed
credit arrangement totaling $200 million, all of which was available as of
December 30, 2001. This line of credit had a five-year term which was
scheduled to expire in 2003. A facilities fee was paid on the total amount
of the committed credit. Under the arrangement, we were required to
maintain a certain debt-to-total capitalization ratio and were in
compliance at year-end 2001. In February 2002, this credit facility was
terminated and replaced by the credit agreements associated with the
Carling acquisition.
Financial guarantees: We have a 1.1 million yen financial guarantee
outstanding on behalf of our subsidiary, Coors Japan. This subsidiary
guarantee is primarily for two working capital lines of credit and payments
of certain duties and taxes. One of the lines provides up to 500 million
yen and the other provides up to 400 million yen (approximately $6.8
million in total as of December 30, 2001) in short-term financing. As of
December 30, 2001, the approximate yen equivalent of $3.0 million was
outstanding under these arrangements and is included in Accrued expenses
and other liabilities in the accompanying Consolidated Balance Sheets.
Subsequent event: Please refer to Note 17 for additional information
regarding the debt obligations that have resulted from our acquisition of
Coors Brewers.
NOTE 5:
Income Taxes
Income tax expense (benefit) includes the following current and deferred
provisions:
For the years ended
December 30, December 31, December 26,
2001 2000 1999
(In thousands)
Current:
Federal $ 74,140 $ 29,573 $ 24,088
State 13,841 9,230 5,119
Foreign 1,878 52 1,567
Total current tax expense 89,859 38,855 30,774
Deferred:
Federal (16,171) 6,669 19,035
State (3,005) 283 3,460
Foreign -- (82) (1,860)
Total deferred tax
(benefit) expense (19,176) 6,870 20,635
Other:
Allocation to paid-in capital 4,366 14,183 6,974
Total income tax expense $ 75,049 $ 59,908 $ 58,383
Our income tax expense varies from the amount expected by applying the
statutory federal corporate tax rate to income as follows:
For the years ended
December 30, December 31, December 26,
2001 2000 1999
Expected tax rate 35.0% 35.0% 35.0%
State income taxes, net of
federal benefit 3.6 3.7 3.7
Effect of foreign investments (0.5) (3.1) 1.1
Non-taxable income (0.1) (0.2) (0.8)
Other, net (0.1) (0.1) (0.2)
Effective tax rate 37.9% 35.3% 38.8%
Our deferred taxes are composed of the following:
As of
December 30, December 31,
2001 2000
(In thousands)
Current deferred tax assets:
Deferred compensation and other
employee related $ 14,046 $ 14,212
Balance sheet reserves and accruals 11,607 10,467
Write-off of foreign account receivable 7,002 7,002
Valuation allowance (7,002) (7,002)
Total current deferred tax assets 25,653 24,679
Current deferred tax liabilities:
Balance sheet reserves and accruals 2,140 --
Net current deferred tax assets $ 27,793 $ 24,679
Non-current deferred tax assets:
Deferred compensation and other
employee related $ 19,106 $ 9,602
Balance sheet reserves and accruals 1,980 8,410
Retirement benefits 10,507 11,365
Environmental accruals 2,200 2,274
Deferred foreign losses 1,087 1,395
Partnership investments -- 3,297
Total non-current deferred tax assets 34,880 36,343
Non-current deferred tax liabilities:
Depreciation and capitalized interest 96,515 110,225
Deferred tax on foreign investment -- 16,104
Total non-current deferred tax liabilities 96,515 126,329
Net non-current deferred tax liabilities $ 61,635 $ 89,986
The current deferred tax assets related to the foreign accounts receivable
have been reduced by a valuation allowance because management believes it
is more likely than not that such benefits will not be fully realized.
In 2000, we realized a tax benefit pertaining to the Spain brewery closure.
We also resolved substantially all of the issues raised by the Internal
Revenue Service examination of our federal income tax returns through 1998.
One issue relating to the tax treatment of a Korean investment is currently
being appealed to the Internal Revenue Service appeals office. The Internal
Revenue Service is currently examining the federal income tax returns for
1999 through 2000. In the opinion of management, adequate accruals have
been provided for all income tax matters and related interest.
NOTE 6:
Stock Option, Restricted Stock Award and Employee Award Plans
At December 30, 2001, we had three stock-based compensation plans, which
are described in greater detail below. We apply Accounting Principles Board
Opinion No. 25 and related interpretations in accounting for our plans.
Accordingly, as the exercise prices upon grant are equal to quoted market
values, no compensation cost has been recognized for the stock option
portion of the plans. Had compensation cost been determined for our stock
option portion of the plans based on the fair value at the grant dates for
awards under those plans consistent with the alternative method set forth
under Financial Accounting Standards Board Statement No. 123, our net
income and earnings per share would have been reduced to the pro forma
amounts indicated below:
For the years ended
December 30, December 31, December 26,
2001 2000 1999
(In thousands, except per share data)
Net income As reported $122,964 $109,617 $ 92,284
Pro forma $106,420 $ 96,164 $ 82,222
Earnings per share - As reported $ 3.33 $ 2.98 $ 2.51
basic Pro forma $ 2.88 $ 2.61 $ 2.24
Earnings per share - As reported $ 3.31 $ 2.93 $ 2.46
diluted Pro forma $ 2.86 $ 2.57 $ 2.20
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions:
2001 2000 1999
Risk-free interest rate 5.01% 6.72% 5.03%
Dividend yield 0.96% 1.27% 1.09%
Volatility 30.70% 31.41% 30.66%
Expected term (years) 5.40 6.20 7.80
Weighted average fair market value $ 20.65 $ 20.17 $ 23.28
1990 Plan: The 1990 Equity Incentive Plan (1990 EI Plan) provides for two
types of grants: stock options and restricted stock awards. The stock
options have a term of 10 years with exercise prices equal to fair market
value on the day of the grant, and one-third of the stock option grant
vests in each of the three successive years after the date of grant. Total
authorized shares of Class B common stock for issuance under the 1990 EI
Plan were 10.8 million shares.
A summary of the status of our 1990 EI Plan as of December 30, 2001,
December 31, 2000, and December 26, 1999, and changes during the years
ending on those dates is presented below:
Options
exercisable
at year-end
Weighted- Weighted-
Options average average
available Outstanding exercise exercise
for grant options price Shares price
As of December 27, 1998 3,980,243 2,330,217 $24.47 630,457 $19.06
Granted (917,951) 917,951 57.86
Exercised -- (494,424) 21.54
Forfeited 110,289 (110,289) 38.00
As of December 26, 1999 3,172,581 2,643,455 36.05 881,161 23.26
Transferred 716,886 -- --
Granted (1,179,094) 1,179,094 51.37
Exercised -- (900,804) 23.80
Forfeited 160,148 (160,148) 47.76
As of December 31, 2000 2,870,521 2,761,597 45.91 910,548 35.21
Authorized 2,033,114 -- --
Granted (1,660,150) 1,660,150 67.28
Exercised -- (331,758) 32.38
Forfeited 268,709 (268,709) 59.50
As of December 30, 2001 3,512,194 3,821,280 $55.41 1,374,961 $43.68
The following table summarizes information about stock options outstanding
at December 30, 2001:
Options outstanding Options exercisable
Weighted-
average Weighted- Weighted-
Range of remaining average average
exercise contractual exercise exercise
prices Shares life (years) price Shares price
$16.75-$22.00 239,855 4.8 $20.12 239,855 $20.12
$26.88-$33.41 325,468 6.0 $33.35 325,468 $33.35
$37.22-$59.25 1,796,429 7.8 $53.07 792,237 $54.51
$63.16-$75.22 1,459,528 9.1 $69.00 17,401 $68.99
$16.75-$75.22 3,821,280 8.0 $55.41 1,374,961 $43.68
We issued 10,750 shares and 4,953 shares of restricted stock in 2001 and
1999, respectively, under the 1990 EI Plan. No restricted shares were
issued under this plan in 2000. For the 2001 shares, the vesting period is
three years from the date of grant. For the 1999 shares, the vesting period
is two years from the date of grant. The compensation cost associated with
these awards is amortized over the vesting period. Compensation cost
associated with these awards was immaterial in 2001, 2000 and 1999.
1991 Plan: The Equity Compensation Plan for Non-Employee Directors (EC
Plan) provides for two grants of the company's stock: the first grant is
automatic and equals 20% of the director's annual retainer, and the second
grant is elective and covers all or any portion of the balance of the
retainer. A director may elect to receive his or her remaining 80% retainer
in cash, restricted stock or any combination of the two. Grants of stock
vest after completion of the director's annual term. The compensation cost
associated with the EC Plan is amortized over the director's term.
Compensation cost associated with this plan was immaterial in 2001, 2000
and 1999. Common stock reserved for the 1991 plan as of December 30, 2001,
was 28,273 shares.
1995 Supplemental Compensation Plan: This supplemental compensation plan
covers substantially all our employees. Under the plan, management is
allowed to recognize employee achievements through awards of Coors Stock
Units (CSUs) or cash. CSUs are a measurement component equal to the fair
market value of our Class B common stock. CSUs have a one-year holding
period after which the recipient may redeem the CSUs for cash, or, if the
holder has 100 or more CSUs, for shares of our Class B common stock. No
awards were made under this plan in 2001 or 2000. Awards under the plan in
1999 were immaterial. There are 84,000 shares authorized under this plan.
The number of shares of common stock available under this plan as of
December 30, 2001, was 83,707 shares.
NOTE 7:
Employee Retirement Plans
We maintain several defined benefit pension plans for the majority of our
employees. Benefits are based on years of service and average base
compensation levels over a period of years. Plan assets consist primarily
of equity, interest-bearing investments and real estate. Our funding policy
is to contribute annually not less than the ERISA minimum funding
standards, nor more than the maximum amount that can be deducted for
federal income tax purposes. Total expense for all these plans was $18.6
million in 2001, $14.7 million in 2000 and $11.6 million in 1999. These
amounts include our matching for the savings and investment (thrift) plan
of $6.4 million in 2001, $7.3 million in 2000 and $6.1 million in 1999. The
increase in pension expense from 2000 to 2001 is primarily due to the
decline in the market value of plan investments. In 2001, the funded
position of the Coors Retirement Plan declined somewhat due to the combined
effects of a lower discount rate and a challenging investment environment.
This resulted in the recognition of an additional minimum liability,
resulting from the excess of our accumulated benefit obligation over the
fair value of plan assets. The amounts recognized in the consolidated
statement of financial position for accrued pension liability, additional
minimum liability, accumulated other comprehensive loss, prepaid benefit
cost and intangible asset in 2001 are $61.9 million, $29.8 million, $8.5
million (net of tax), $21.5 million and $48.3 million, respectively.
Note that the settlement rates shown in the table on the following page
were selected for use at the end of each of the years shown. Pension
expense is actuarially calculated annually based on data available at the
beginning of each year, which includes the settlement rate selected and
disclosed at the end of the previous year.
For the years ended
December 30, December 31, December 26,
2001 2000 1999
(In thousands)
Components of net periodic
pension cost:
Service cost-benefits earned
during the year $ 17,913 $ 16,467 $ 16,456
Interest cost on projected
benefit obligation 46,374 44,192 38,673
Expected return on plan assets (58,342) (58,108) (52,173)
Amortization of prior service cost 5,945 5,906 4,161
Amortization of net transition amount 241 (1,690) (1,690)
Recognized net actuarial loss 110 590 75
Net periodic pension cost $ 12,241 $ 7,357 $ 5,502
The changes in the projected benefit obligation and plan assets and the
funded status of the pension plans are as follows:
As of
December 30, December 31,
2001 2000
(In thousands)
Actuarial present value of accumulated
benefit obligation: $567,155 $537,791
Change in projected benefit obligation:
Projected benefit obligation at
beginning of year $ 614,420 $ 548,428
Service cost 17,913 16,467
Interest cost 46,374 44,192
Amendments -- 871
Actuarial loss 10,116 31,974
Benefits paid (29,717) (27,512)
Projected benefit obligation at end of year $ 659,106 $ 614,420
Change in plan assets:
Fair value of assets at beginning of year $ 578,500 $ 627,153
Actual return on plan assets (25,047) (20,376)
Employer contributions 7,306 2,561
Benefits paid (29,717) (27,512)
Expenses paid (4,042) (3,326)
Fair value of plan assets at end of year $ 527,000 $ 578,500
Reconciliation of funded status:
Funded status -- (shortfall) excess $(132,106) $ (35,920)
Unrecognized net actuarial loss (gain) 105,082 7,722
Unrecognized prior service cost 47,841 53,680
Unrecognized net transition amount 722 962
Net amount recognized $ 21,539 $ 26,444
As of
December 30, December 31,
2001 2000
(In thousands)
Amounts recognized in the statement of
financial position consist of:
Non-current prepaid benefit cost $ 21,539 $ 26,444
Non-current accrued benefit liability cost (61,959) --
Non-current intangible asset 48,291 --
Accumulated other comprehensive income 13,668 --
Net amount recognized $ 21,539 $ 26,444
2001 2000 1999
Weighted average assumptions as of year-end:
Discount rate 7.25% 7.75% 8.00%
Rate of compensation increase 4.10% 4.75% 5.25%
Expected return on plan assets 10.50% 10.50% 10.50%
NOTE 8:
Non-Pension Postretirement Benefits
We have postretirement plans that provide medical benefits and life
insurance for retirees and eligible dependents. The plans are not funded.
The obligation under these plans was determined by the application of the
terms of medical and life insurance plans, together with relevant actuarial
assumptions and health care cost trend rates ranging ratably from 8.50% in
2001 to 5.00% in 2007. The discount rate used in determining the
accumulated postretirement benefit obligation was 7.25%, 7.75% and 8.00% at
December 30, 2001, December 31, 2000, and December 26, 1999, respectively.
The changes in the benefit obligation and plan assets and the funded status
of the postretirement benefit plan are as follows:
For the years ended
December 30, December 31, December 26,
2001 2000 1999
(In thousands)
Components of net periodic
postretirement benefit cost:
Service cost -- benefits earned
during the year $ 1,447 $ 1,477 $ 1,404
Interest cost on projected
benefit obligation 6,782 5,613 5,112
Recognized net actuarial gain (19) (51) (138)
Net periodic postretirement
benefit cost $ 8,210 $ 7,039 $ 6,378
As of
December 30, December 31,
2001 2000
(In thousands)
Change in projected postretirement
benefit obligation:
Projected benefit obligation at beginning of year $ 77,750 $ 72,400
Service cost 1,447 1,477
Interest cost 6,782 5,613
Actuarial loss 21,476 3,264
Benefits paid (5,300) (5,004)
Projected postretirement benefit
obligation at end of year $ 102,155 $ 77,750
Change in plan assets:
Employer contributions $ 5,300 $ 5,004
Benefits paid (5,300) (5,004)
Fair value of plan assets at end of year $ -- $ --
Funded status -- shortfall $(102,155) $(77,750)
Unrecognized net actuarial (gain) loss 16,813 (4,662)
Unrecognized prior service cost 281 261
Accrued postretirement benefits (85,061) (82,151)
Less current portion 5,300 5,004
Long-term postretirement benefits $ (79,761) $(77,147)
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change
in assumed health care cost trend rates would have the following effects:
One-percentage- One-percentage-
point increase point decrease
(In thousands)
Effect on total of service and interest
cost components $ 528 $ (470)
Effect on postretirement benefit obligation $4,777 $(4,323)
NOTE 9:
Special Charges (Credits)
Our annual results for 2001, 2000 and 1999 include net pretax special
charges of $23.2 million, $15.2 million and 5.7 million, respectively. The
following is a summary of special charges incurred during those years:
Information technology: We entered into a contract with EDS Information
Services (EDS), effective August 1, 2001, to outsource certain information
technology functions. We incurred outsourcing transition costs in the year
of approximately $14.6 million. These costs were mainly related to a $6.6
million write-down of the net book value of information technology assets
that were sold to and leased back from EDS, $5.3 million of one-time
implementation costs and $2.7 million of employee transition costs and
professional fees associated with the outsourcing project. We believe this
arrangement will allow us to focus on our core business while having access
to the expertise and resources of a world-class information technology
provider.
Restructure charges: In 2001, we incurred total restructuring special
charges of $6.0 million. In the third quarter of 2001, we recorded $1.6
million of severance costs for approximately 25 employees, primarily due to
the restructuring of our purchasing organization. During the fourth quarter
of 2001, we announced plans to restructure certain production areas. These
restructurings, which began in October 2001 and have continued through
April 2002, will result in the elimination of approximately 90 positions.
As a result of these plans, we recorded associated employee termination
costs of approximately $4.0 million in the fourth quarter. Similar costs of
approximately $0.4 million related to employee terminations in other
functions were also recorded in the fourth quarter. We paid $3.8 million of
this severance in 2001 and expect the remaining severance to be paid by the
second quarter of 2002, out of current cash balances.
In 1999, we recorded a special charge of $5.7 million. The special charge
included $3.7 million for severance costs from the restructuring of our
engineering and construction units and $2.0 million for distributor network
improvements. Approximately 50 engineering and construction employees were
severed under this reorganization. During 2001, 2000 and 1999,
approximately $0.2 million, $2.3 million and $0.9 million, respectively, of
severance costs were paid and no further amounts are due.
Can and end plant joint venture: In the third quarter of 2001, we recorded
$3.0 million of special charges related to the dissolution of our existing
can and end joint venture as part of the restructuring of this part of our
business.
Property abandonment: In 2001, we recorded a $2.3 million charge for a
portion of certain production equipment that was abandoned and will no
longer be used.
Spain closure: In 2000, we incurred a total special charge of $20.6
million triggered by our decision to close our Spain brewery and commercial
operations. Of the total charge, $11.3 million related to severance and
other related closure costs for approximately 100 employees, $4.9 million
related to a fixed asset impairment charge and $4.4 million for the write-
off of our cumulative translation adjustments previously recorded to equity
related to our Spain operations. In 2000, approximately $9.6 million of
severance and other related closure costs were paid with the remaining $1.7
million reserve being paid during the first quarter of 2001. These payments
were funded from current cash balances. In December 2001, the plant and
related fixed assets were sold for approximately $7.2 million resulting in
a net gain, before tax, of approximately $2.7 million.
Insurance settlement: In 2000, we received an insurance claim settlement of
$5.4 million that was credited to special charges.
NOTE 10:
Investments
Equity method investments
We have investments in affiliates that are accounted for using the equity
method of accounting. These investments aggregated $94.8 million and $56.3
million at December 30, 2001, and December 31, 2000, respectively.
Summarized condensed balance sheet information for our equity method
investments are as follows:
As of
December 30, December 31,
2001 2000
(In thousands)
Current assets $59,234 $75,464
Non-current assets $53,307 $87,353
Current liabilities $31,031 $34,907
Non-current liabilities $ 231 $ 264
Summarized condensed income statement information for our equity method
investments are as follows:
For the years ended
December 30, December 31, December 26,
2001 2000 1999
(In thousands)
Net sales $544,341 $490,227 $449,238
Gross profit $177,211 $132,805 $116,970
Net income $ 80,127 $ 77,575 $ 68,375
Company's equity in net income $ 43,630 $ 42,395 $ 36,958
Coors Canada: Coors Canada, Inc. (CCI), one of our wholly owned
subsidiaries, formed a partnership, Coors Canada, with Molson, Inc. to
market and sell our products in Canada. Coors Canada began operations
January 1, 1998. CCI and Molson have a 50.1% and 49.9% interest,
respectively. CCI's investment in the partnership is accounted for using
the equity method of accounting due to Molson's participating rights in the
partnership's business operations. The partnership agreement has an
indefinite term and can be canceled at the election of either partner.
Under the partnership agreement, Coors Canada is responsible for marketing
our products in Canada, while the partnership contracts with Molson Canada
for brewing, distribution and sales of these brands. Coors Canada receives
an amount from Molson Canada generally equal to net sales revenue generated
from our brands less production, distribution, sales and overhead costs
related to these sales. CCI received distributions from the partnership of
a U.S. dollar equivalent of approximately $27.9 million, $25.8 million and
$21.0 million for 2001, 2000 and 1999, respectively. Our share of net
income from this partnership, which was approximately $29.2 million, $25.4
million and $21.5 million for 2001, 2000 and 1999, respectively, is
included in Sales on the accompanying Consolidated Statements of Income.
Also see discussion in Note 14, Segment and Geographic Information.
In December 2000, we entered into a five year brewing and packaging
arrangement with Molson in which we will have access to some of Molson's
available production capacity in Canada. The Molson capacity available to
us under this arrangement in 2001 was 250,000 barrels, none of which was
used by us. Starting in 2002, this available capacity increases up to
500,000 barrels. Currently, we pay Molson a fee for holding this capacity
aside for our future use. The annual fee, starting in 2002, is 1.5 million
Canadian dollars, which results in an annual commitment of approximately $1
million. As of December 30, 2001, we are fully accrued for all fees
required under the terms of this agreement.
Molson USA, LLC: In January 2001, we entered into a joint venture
partnership agreement with Molson, Inc. and paid $65 million for our 49.9%
interest in the joint venture. The joint venture, Molson USA, LLC, has been
formed to import, market, sell and distribute Molson's brands of beer in
the United States. Approximately, $63.9 million of our initial investment
was considered goodwill, which was being amortized on a straight-line basis
over a life of 40 years. Amortization expense in 2001 was $1.6 million.
(Please refer to the Recent accounting pronouncement section of Note 1 for
discussion regarding changes in accounting for Goodwill and Other
Intangible Assets). During 2001, we received no distributions from the
partnership and our share of the net loss was approximately $2.2 million.
This net loss is included in Other income (expense) on the accompanying
Consolidated Statements of Income. As a result of the 2001 operating loss,
we considered whether our investment was impaired under Accounting
Principles Board Opinion No. 18, The Equity Method of Accounting for
Investments in Common Stock, and determined that it was not. Any potential
decline in value during the year cannot be determined to be other than
temporary based on our short experience with the joint venture and our
continuing commitment to its success. The recoverability of our investment
in the joint venture will be further evaluated during 2002.
Rocky Mountain Bottle Company: We operate a 50/50 production joint venture
with Owens-Brockway Glass Container, Inc. (Owens), the Rocky Mountain
Bottle Company (RMBC), to produce glass bottles at our glass manufacturing
facility. The initial term of the joint venture expires in 2005 and can be
extended for additional two-year periods. RMBC has a contract to supply our
bottle requirements and Owens has a contract to supply the majority of our
bottles for our bottle requirements not met by RMBC. In 2001, we purchased
all of the bottles produced by RMBC, approximately 1.1 billion bottles.
The expenditures under this agreement in 2001, 2000 and 1999 were
approximately $92 million, $86 million and $69 million, respectively. Cash
distributions received from this joint venture were $9.1 million and $20.3
million in 2001 and 2000, respectively. No distributions were received in
1999. Our share of net income from this partnership was $10.9 million, $9.8
million and $9.0 million in 2001, 2000 and 1999, respectively, and is
included within Cost of goods sold on the accompanying Consolidated
Statements of Income.
Valley Metal Container Partnership: In 1994, we formed a 50/50 production
joint venture with American National Can Company (ANC), called Valley Metal
Container Partnership, to produce beverage cans and ends at our
manufacturing facilities for sale to us and outside customers. ANC was
subsequently acquired by Rexam LLC. We purchased Rexam's interest in the
joint venture at the end of its term in August 2001. The aggregate amount
paid to the joint venture for cans and ends in 2001, 2000 and 1999 was
approximately $149 million, $230 million and $223 million, respectively.
The 2001 amount reflects only what was paid to the joint venture prior to
its expiration in August. In addition, we received cash distributions from
this joint venture of $2.5 million, $8.5 million and $7.5 million in 2001,
2000 and 1999, respectively. Our share of net income from this joint
venture was $5.7 million, $7.2 million and $6.0 million for 2001, 2000 and
1999, respectively, and is included within Cost of goods sold on the
accompanying Consolidated Statements of Income.
Rocky Mountain Metal Container: Effective January 1, 2002, we became an
equal member with Ball Corporation (Ball) in a Colorado limited liability
company, Rocky Mountain Metal Container, LLC (RMMC). Also effective on
January 1, 2002, we entered into a can and end supply agreement with RMMC
(the Supply Agreement). Under that Supply Agreement, RMMC agreed to supply
us with substantially all of the can and end requirements for our Golden
Brewery. RMMC will manufacture these cans and ends at our existing
manufacturing facilities, which RMMC is operating under a use and license
agreement. We have the right to purchase Ball's interest in RMMC under
certain conditions. If we do not exercise that right, Ball may have the
right to purchase our interest in RMMC. RMMC plans to reduce manufacturing
costs, and has planned capital improvements to the facilities in the amount
of approximately $50 million over the first three years of its operations.
RMMC will fund such improvements with third party financing. RMMC's debt
will not be included on our financial statements.
Graphic Packaging International Corporation: In 1992, we spun off our
wholly owned subsidiary, ACX Technologies, Inc., which has subsequently
changed its name to Graphic Packaging International Corporation (GPIC). We
are also a limited partner in a real estate development partnership in
which a subsidiary of GPIC is the general partner. The partnership owns,
develops, operates and sells certain real estate previously owned directly
by us. We received cash distributions of $0.8 million and $1.8 million in
2000 and 1999, respectively. We did not receive income in 2001 or 2000. We
received income of $0.5 million in 1999.
Cost investments
Colorado Rockies Baseball: In 1991, we entered into an agreement with
Colorado Baseball Partnership 1993, Ltd. for an investment and multiyear
signage and advertising package. This commitment, totaling approximately
$30 million, was finalized upon the awarding of a National League baseball
franchise to Colorado in 1991. The initial investment as a limited partner
has been paid. We believe that the carrying amount is not in excess of fair
value. During 1998, the agreement was modified to extend the term and
expand the conditions of the multiyear signage and advertising package. The
recognition of the liability under the multiyear signage and advertising
package began in 1995 with the opening of Coors Fieldr. This liability is
included in the total advertising and promotion commitment discussed in
Note 15, Commitments and Contingencies.
NOTE 11:
Stock Activity and Earnings Per Share
Capital stock: Both classes of common stock have the same rights and
privileges, except for voting, which (with certain limited exceptions) is
the sole right of the holder of Class A stock.
Activity in our Class A and Class B common stock, net of forfeitures, for
each of the three years ended December 30, 2001, December 31, 2000, and
December 26, 1999, is summarized below:
Common stock
Class A Class B
Balances at December 27, 1998 1,260,000 35,395,306
Shares issued under stock plans -- 478,390
Purchases of stock -- (411,662)
Balances at December 26, 1999 1,260,000 35,462,034
Shares issued under stock plans -- 817,395
Purchases of stock -- (408,308)
Balances at December 31, 2000 1,260,000 35,871,121
Shares issued under stock plans -- 324,926
Purchases of stock -- (1,506,637)
Balances at December 30, 2001 1,260,000 34,689,410
At December 30, 2001, December 31, 2000, and December 26, 1999, 25 million
shares of no par value preferred stock were authorized but unissued.
The board of directors authorized the repurchase during 2001, 2000 and 1999
of up to $40 million each year of our outstanding Class B common stock on
the open market. In September 2001, the board of directors increased the
authorized 2001 expenditure limit for the repurchase of outstanding shares
of Class B common stock to $90 million. During 2001, 2000 and 1999,
1,500,000 shares, 308,000 shares and 232,300 shares, respectively, were
repurchased for approximately $72.3 million, $17.6 million and $12.2
million, respectively, under this stock repurchase program. In addition to
the repurchase program, we purchased 41,845 restricted shares for $2.4
million in 2000 and 164,117 restricted shares for $8.5 million in 1999.
Pursuant to our by-laws restricted shares must first be offered to us for
repurchase. Even though in November 2001, the board of directors extended
the program and authorized the repurchase during 2002 of up to $40 million
of stock, we decided to suspend our share repurchases until we reduce debt
levels resulting from the acquisition of the Coors Brewers business from
Interbrew. See discussion of the Carling acquisition in Note 17, Subsequent
Event.
Earnings per share: Basic and diluted net income per common share were
arrived at using the calculations outlined below:
For the years ended
December 30, December 31, December 26,
2001 2000 1999
(In thousands, except per share data)
Net income available to
common shareholders $122,964 $109,617 $92,284
Weighted-average shares
for basic EPS 36,902 36,785 36,729
Effect of dilutive securities:
Stock options 266 606 640
Contingent shares not included in
shares outstanding for basic EPS 9 59 88
Weighted-average shares
for diluted EPS 37,177 37,450 37,457
Basic EPS $3.33 $2.98 $2.51
Diluted EPS $3.31 $2.93 $2.46
The dilutive effects of stock options were arrived at by applying the
treasury stock method, assuming we were to repurchase common shares with
the proceeds from stock options exercised. Stock options to purchase
2,199,173 and 6,555 shares of common stock were not included in the
computation of 2001 and 2000 earnings per share, respectively, because the
stock options' exercise prices were greater than the average market price
of the common shares.
NOTE 12:
Derivative Instruments
In the normal course of business, we are exposed to fluctuations in
interest rates, foreign currency exchange rates and production and
packaging materials prices. To manage these exposures when practical, we
have established policies and procedures that govern the management of
these exposures through the use of a variety of financial instruments, as
noted in detail below. By policy, we do not enter into such contracts for
the purpose of speculation.
Our derivative activities are subject to the management, direction and
control of the Financial Risk Management Committee (FRMC). The FRMC is
composed of the chief financial officer and other senior financial
management of the company. The FRMC sets forth risk management philosophy
and objectives through a corporate policy; provides guidelines for
derivative-instrument usage; and establishes procedures for control and
valuation, counterparty credit approval and the monitoring and reporting of
derivative activity.
At December 30, 2001, and December 31, 2000, we had certain forward
contracts, options and swap agreements outstanding. Substantially all of
these instruments have been designated as cash flow hedges and these
instruments hedge a portion of our total exposure to the variability in
future cash flows relating to fluctuations in foreign exchange rates and
certain production and packaging materials prices.
The following table summarizes the aggregate notional principal amounts,
fair values and maturities of our derivative financial instruments
outstanding on December 30, 2001, and December 31, 2000 (in thousands):
Notional
principal
amounts(USD) Fair values Maturity
December 30, 2001
Foreign currency management
Option(1) 1,705,000 (1,023) 02/02
Forwards 217,370 2,336 01/02-04/03
Commodity pricing management
Swaps 132,477 (10,563) 02/02-02/04
December 31, 2000
Foreign currency management
Forwards 28,958 1,054 01/01-01/02
Commodity pricing management
Swaps 86,621 4,574 02/01-08/02
(1) The foreign exchange option for $1.7 billion notional was purchased to
hedge our exposure to fluctuations in the British pound exchange rate
related to acquisition of certain Coors Brewers assets.
Maturities of derivative financial instruments held on December 30, 2001,
are as follows (in thousands):
2002(2) 2003 2004
($6,473) ($3,053) ($123)
(2) Amount includes the estimated deferred net loss of $6.1 million that is
expected to be recognized over the next 12 months, on certain forward
foreign exchange contracts and production and packaging materials
derivative contracts, when the underlying forecasted cash flow transactions
occur.
In December 2001, we entered into a foreign currency forward sale agreement
to hedge our exposure to fluctuations in the British pound exchange rate
related to acquisition of certain Coors Brewers assets. Also, in
anticipation of the Carling acquisition, we entered into a commitment with
a lender for the financing of this transaction. Included within the
commitment letter is a foreign currency written option which reduced our
exposure on the U.S. dollar borrowing to fund the Coors Brewers
transaction. The derivatives resulting from these agreements do not qualify
for hedge accounting and, accordingly, were marked to market at year-end.
The associated $0.3 million net expense was recorded in other income in the
accompanying Consolidated Statements of Income.
Subsequent to year-end, the foreign currency swap settled on January 12,
2002, and the written option included in the loan commitment expired on
February 11, 2002, resulting in a combined loss and amortization expense of
$1.2 million to be realized during the first quarter of 2002.
During 2000, we had certain interest rate swap agreements outstanding to
help manage our exposure to fluctuations in interest rates. These swap
agreements were not designated as hedges and accordingly, all gains and
losses on these agreements were recorded in interest income in the
accompanying Consolidated Statements of Income. We did not have any
interest rate swap agreements outstanding during 2001, at December 30, 2001
or at December 31, 2000.
During 2001 and 2000, there were no significant gains or losses recognized
in earnings for hedge ineffectiveness or for discontinued hedges as a
result of an expectation that the forecasted transaction would no longer
occur.
Derivatives are either exchange-traded instruments that are highly liquid,
or over-the-counter instruments with highly rated financial institutions.
No credit loss is anticipated as the counterparties to over-the-counter
instruments generally have long-term ratings from S&P or Moody's, that are
no lower than A or A2, respectively. Additionally, most counterparty fair
value positions favorable to us and in excess of certain thresholds are
collateralized with cash, U.S. Treasury securities or letters of credit. We
have reciprocal collateralization responsibilities for fair value positions
unfavorable to us and in excess of certain thresholds. At December 30,
2001, we had zero counterparty collateral and had none outstanding.
Note 13:
Other Comprehensive Income
Unrealized
gain
(loss) on
available-
for-sale
Foreign securities Minimum Accumulated
currency and pension other
translation derivative liability comprehensive
adjustments instruments adjustment income
(In thousands)
Balances, December 27, 1998 $(2,366) $ 440 $ -- $ (1,926)
Foreign currency translation
adjustments (5,745) (5,745)
Unrealized loss on available-
for-sale securities (648) (648)
Unrealized gain on derivative
instruments 11,159 11,159
Tax benefit (expense) 2,226 (4,073) (1,847)
Balances, December 26, 1999 (5,885) 6,878 -- 993
Foreign currency translation
adjustments 4,460 4,460
Unrealized gain on available-
for-sale securities 2,045 2,045
Unrealized loss on derivative
instruments (3,221) (3,221)
Reclassification adjustment--
available-for-sale securities
and derivative instruments (4,058) (4,058)
Reclassification adjustment--
accumulated translation
adjustment - closure of Spain
operations 4,434 4,434
Tax (expense) benefit (3,380) 1,989 (1,391)
Balances, December 31, 2000 (371) 3,633 -- 3,262
Foreign currency translation
adjustments 22 22
Unrealized gain on available-
for-sale securities 5,997 5,997
Unrealized loss on derivative
instruments (10,000) (10,000)
Minimum pension liability adjustment (13,668) (13,668)
Reclassification adjustment--
available-for-sale securities (4,042) (4,042)
Reclassification adjustment--
derivative instruments (3,858) (3,858)
Tax (expense) benefit (8) 4,523 5,181 9,696
Balances, December 30, 2001 $ (357) $(3,747) $ (8,487) $(12,591)
NOTE 14:
Segment and Geographic Information
We have one reporting segment relating to the continuing operations of
producing, marketing and selling malt-based beverages. Our operations are
conducted in the United States, the country of domicile, and several
foreign countries, none of which is individually significant to our overall
operations. The net revenues from external customers, operating income and
pretax income attributable to the United States and all foreign countries
for the years ended December 30, 2001, December 31, 2000, and December 26,
1999, are as follows:
2001 2000 1999
(In thousands)
United States and its territories:
Net revenues $2,353,843 $2,331,693 $2,177,407
Operating income $ 133,361 $ 163,563 $ 148,823
Pretax income $ 182,317 $ 185,082 $ 161,281
Other foreign countries:
Net revenues $ 75,619 $ 82,722 $ 59,077
Operating income (loss) $ 18,244 $ (12,937) $ (8,288)
Pretax income (loss) $ 15,696 $ (15,557) $ (10,614)
Included in 2001, 2000 and 1999 foreign revenues are earnings from CCI, our
investment accounted for using the equity method of accounting (see Note
10, Investments). Included in operating income and pretax income are net
special charges of $23.2 million, $15.2 million and $5.7 million, for 2001,
2000 and 1999, respectively (see Note 9, Special Charges). The 2001 net
special charge included a charge of $25.9 million related to the United
States and its territories and a credit of $2.7 million related to other
foreign countries. The 2000 net special charge included a credit of $5.4
million related to the United States and its territories and a charge of
$20.6 million related to other foreign countries. The special charges
recorded in 1999 related entirely to the United States and its territories.
The net long-lived assets, including Property, Goodwill and other
intangible assets, located in the United States and its territories and all
other foreign countries as of December 30, 2001, December 31, 2000 and
December 26, 1999 are as follows:
2001 2000 1999
(In thousands)
United States and its territories $955,615 $786,966 $758,875
Other foreign countries 384 3,622 8,939
Total $955,999 $790,588 $767,814
The total net export sales (in thousands) during 2001, 2000 and 1999 were
$205,187, $202,832 and $185,260, respectively.
We are currently evaluating the impact the Carling acquisition will have on
our number of reporting segments for 2002. At this time, we anticipate
having two reportable operating segments: the Americas and Europe. See Note
17, Subsequent Event, for discussion of the Carling acquisition.
NOTE 15:
Commitments and Contingencies
Insurance: It is our policy to be self-insured for certain insurable risks
consisting primarily of employee health insurance programs, as well as
workers' compensation, general liability and property insurance
deductibles. During 2001, we fully insured future risks for long-term
disability, and, in most states, workers' compensation, but maintained a
self-insured position for workers' compensation for certain self-insured
states and for claims incurred prior to the inception of the insurance
coverage in Colorado in 1997.
Letters of credit: As of December 30, 2001, we had approximately $5.8
million outstanding in letters of credit with certain financial
institutions. These letters expire in March 2003. These letters of credit
are being maintained as security for performance on certain insurance
policies and for operations of underground storage tanks, as well as to
collateralize principal and interest on industrial revenue bonds issued by
us.
As part of the settlement and indemnification agreement related to the
Lowry landfill site with the City and County of Denver and Waste Management
of Colorado, Inc., we agreed to post a letter of credit equal to the
present value of our share of future estimated costs if estimated future
costs exceed a certain amount and our long-term credit rating falls to a
certain level. Although future estimated costs now exceed the level
provided in the agreement, our credit rating remains above the level that
would require this letter of credit to be obtained. Based on our
preliminary evaluation, should our credit rating fall below the level
stipulated by the agreement, it is reasonably possible that the letter of
credit that would be issued could be for as much as $10 million. For
additional information see the Environmental section below.
Financial guarantees: We have a 1.1 million yen financial guarantee
outstanding on behalf of our subsidiary, Coors Japan. This subsidiary
guarantee is primarily for two working capital lines of credit and payments
of certain duties and taxes. One of the lines provides up to 500 million
yen and the other provides up to 400 million yen (approximately $6.8
million in total as of December 30, 2001) in short-term financing. As of
December 30, 2001, the approximate yen equivalent of $3.0 million was
outstanding under these arrangements and is included in Accrued expenses
and other liabilities in the accompanying Consolidated Balance Sheets.
Power supplies: Coors Energy Company (CEC), a fully owned subsidiary of
ours, entered into a 10-year agreement to purchase 100% of the brewery's
coal requirements from Bowie Resources Ltd. (Bowie). The coal then is sold
to Trigen-Nations Energy Corporation, L.L.L.P. (Trigen).
We have an agreement to purchase the electricity and steam needed to
operate the brewery's Golden facilities through 2020 from Trigen. Our
financial commitment under this agreement is divided between a fixed, non-
cancelable cost of approximately $14.6 million for 2002, which adjusts
annually for inflation, and a variable cost, which is generally based on
fuel cost and our electricity and steam use. Total purchases, fixed and
variable, under this contract in 2001, 2000 and 1999 were $29.8 million,
$28.4 million and $26.3 million, respectively.
Supply contracts: We have various long-term supply contracts with
unaffiliated third parties and our joint ventures to purchase materials
used in production and packaging, such as starch, cans and glass. The
supply contracts provide that we purchase certain minimum levels of
materials for terms extending through 2005. The approximate future purchase
commitments under these supply contracts are:
Fiscal year Amount
(In thousands)
2002 $ 478,800
2003 195,750
2004 195,750
2005 93,500
Total $ 963,800
Our total purchases under these contracts in 2001, 2000 and 1999 were
approximately $243.3 million, $235.0 million and $177.9 million,
respectively.
Brewing and packaging contract: In December 2000, we entered into a five
year brewing and packaging arrangement with Molson in which we will have
access to some of Molson's available production capacity in Canada. The
Molson capacity available to us under this arrangement in 2001 was 250,000
barrels, none of which was used by us. Starting in 2002, this available
capacity increases up to 500,000 barrels. Currently, we pay Molson a fee
for holding this capacity aside for our future use. The annual fee starting
in 2002 is 1.5 million Canadian dollars which results in an annual
commitment of approximately $1 million. As of December 30, 2001, we are
fully accrued for all fees required under the terms of this agreement.
Third-party logistics contract: We are consolidating our California and
Colorado finished goods warehouse network and EXEL, Inc. is providing
warehouse services in Ontario, California, for us under a seven-year
operating agreement. The operating costs which total $2.6 million have been
agreed to for the first year of operation. We will be conducting an annual
review of the scope of services with EXEL to determine pricing for the
following years. Any increases are limited to 3% annually.
Graphic Packaging International Corporation: We have a packaging supply
agreement with a subsidiary of Graphic Packaging International Corporation
(GPIC) under which we purchase a large portion of our paperboard
requirements. We have begun negotiations to extend the term of this
contract which expires in 2002. We expect it to be renewed prior to
expiration. Our purchases under the packaging agreement in 2001, 2000 and
1999 totaled approximately $125 million, $112 million and $107 million,
respectively. We expect purchases in 2002 under the packaging agreement to
be approximately $118 million. Related accounts receivable balances
included in Affiliates Accounts Receivable on the Consolidated Balance
Sheets were immaterial in 2001 and 2000. Related accounts payable balances
included in Affiliates Accounts Payable on the Consolidated Balance Sheets
were $0.5 million and $1.3 million in 2001 and 2000, respectively. William
K. Coors is a trustee of family trusts that collectively own all of our
Class A voting common stock, approximately 31% of our Class B common stock,
approximately 42% of GPIC's common stock and 100% of GPIC's series B
preferred stock, which is currently convertible into 48,484,848 shares of
GPIC's common stock. If converted, the trusts would own approximately 78%
of GPIC's common stock. Peter H. Coors is also a trustee of some of these
trusts.
Advertising and promotions: We have various long-term non-cancelable
commitments for advertising and promotions, including marketing at sports
arenas, stadiums and other venues and events. At December 30, 2001, the
future commitments are as follows:
Fiscal year Amount
(In thousands)
2002 $ 40,909
2003 11,512
2004 10,618
2005 9,221
2006 7,933
Thereafter 11,299
Total $ 91,492
Environmental: We were one of a number of entities named by the
Environmental Protection Agency (EPA) as a potentially responsible party
(PRP) at the Lowry Superfund site. This landfill is owned by the City and
County of Denver (Denver), and was managed by Waste Management of Colorado,
Inc. (Waste). In 1990, we recorded a special pretax charge of $30 million,
a portion of which was put into a trust in 1993 as part of an agreement
with Denver and Waste to settle the outstanding litigation related to this
issue.
Our settlement was based on an assumed cost of $120 million (in 1992
adjusted dollars). It requires us to pay a portion of future costs in
excess of that amount.
In January 2002, in response to the EPA's five-year review conducted in
2001, Waste provided us with updated annual cost estimates through 2032. We
have reviewed these cost estimates in the assessment of our accrual related
to this issue. In determining that the current accrual is adequate, we
eliminated certain costs included in Waste's estimates, primarily trust
management costs that will be accrued as incurred, certain remedial costs
for which technology has not yet been developed and income taxes which we
do not believe to be an included cost in the determination of when the $120
million threshold is reached. We generally used a 2% inflation rate for
future costs, and discounted certain operations and maintenance costs at
the site that we deemed to be determinable, at a 5.46% risk-free rate of
return. Based on these assumptions, the present value and gross amount of
discounted costs are approximately $1 million and $4 million, respectively.
We did not assume any future recoveries from insurance companies in the
estimate of our liability.
There are a number of uncertainties at the site, including what additional
remedial actions will be required by the EPA, and what costs are included
in the determination of when the $120 million threshold is reached. Because
of these issues, the estimate of our liability may change as facts further
develop, and we may need to increase the reserve. While we cannot predict
the amount of any such increase, an additional accrual of as much as $25
million is reasonably possible based on our preliminary evaluation, with
additional cash contributions beginning as early as 2013.
We were one of several parties named by the EPA as a PRP at the Rocky Flats
Industrial Park site. In September 2000, the EPA entered into an
Administrative Order on Consent with certain parties, including our
company, requiring implementation of a removal action. Our projected costs
to construct and monitor the removal action are approximately $300,000. The
EPA will also seek to recover its oversight costs associated with the
project which are not possible to estimate at this time. However, we
believe they would be immaterial to our operating results, cash flows and
financial position.
In August 2000, an accidental spill into Clear Creek at our Golden,
Colorado, facility caused damage to some of the fish population in the
creek. A settlement reached in February 2001 with the Colorado Department
of Public Health and Environment was modified based on public comment,
including comments by the EPA. As a result, permit violations that occurred
several years prior to the accidental spill were included in the
settlement, as well as economic benefit penalties related to those prior
violations. A total civil penalty of $100,000 was assessed in the final
settlement with the Department reached in August 2001. In addition, we will
undertake an evaluation of our process wastewater treatment plant. On
December 21, 2001, we settled with the Colorado Division of Wildlife for
the loss of fish in Clear Creek. We have agreed to construct, as a pilot
project, a tertiary treatment wetlands area to evaluate the ability of a
wetlands to provide additional treatment to the effluent from our waste
treatment facilities. We will also pay for the stocking of game fish in the
Denver metropolitan area and the cost of two graduate students to assist in
the research of the pilot project. The anticipated costs of the project are
estimated to be approximately $500,000. The amounts of these settlements
have been fully accrued as of December 30, 2001.
From time to time, we have been notified that we are or may be a PRP under
the Comprehensive Environmental Response, Compensation and Liability Act or
similar state laws for the cleanup of other sites where hazardous
substances have allegedly been released into the environment. We cannot
predict with certainty the total costs of cleanup, our share of the total
cost, the extent to which contributions will be available from other
parties, the amount of time necessary to complete the cleanups or insurance
coverage.
In addition, we are aware of groundwater contamination at some of our
properties in Colorado resulting from historical, ongoing or nearby
activities. There may also be other contamination of which we are currently
unaware.
While we cannot predict our eventual aggregate cost for our environmental
and related matters in which we are currently involved, we believe that any
payments, if required, for these matters would be made over a period of
time in amounts that would not be material in any one year to our operating
results, cash flows or our financial or competitive position. We believe
adequate reserves have been provided for losses that are probable and
estimable.
Litigation: We are also named as a defendant in various actions and
proceedings arising in the normal course of business. In all of these
cases, we are denying the allegations and are vigorously defending
ourselves against them and, in some instances, have filed counterclaims.
Although the eventual outcome of the various lawsuits cannot be predicted,
it is management's opinion that these suits will not result in liabilities
that would materially affect our financial position, results of operations
or cash flows.
Restructuring: At December 30, 2001, we had a $2.2 million liability
related to personnel accruals as a result of a restructuring of operations
that occurred in 1993. These accruals relate to obligations under deferred
compensation arrangements and postretirement benefits other than pensions.
For the restructuring liabilities incurred during 2001, 2000 and 1999, see
discussion in Note 9, Special Charges.
Labor: Approximately 8% of our work force, located principally at the
Memphis brewing and packaging facility, is represented by a labor union
with whom we engage in collective bargaining. A labor contract prohibiting
strikes was negotiated in early 2001. The new contract expires in 2005.
NOTE 16:
Quarterly Financial Information (Unaudited)
The following summarizes selected quarterly financial information for each
of the two years in the period ended December 30, 2001.
Income in 2001 was decreased by a net special pretax charge of $23.2
million and income in 2000 was decreased by a net special pretax charge of
$15.2 million. Refer to Note 9 for a further discussion of special charges.
During the fourth quarter of 2000, we reduced our total expenses by
approximately $3.1 million when certain estimates for employee benefits and
other liabilities were adjusted based upon updated information that we
received in the normal course of business.
First Second Third Fourth Year
2001 (In thousands, except per share data)
Gross sales $637,828 $809,729 $742,654 $652,541 $2,842,752
Beer excise taxes (94,128) (117,029) (107,991) (94,142) (413,290)
Net sales 543,700 692,700 634,663 558,399 2,429,462
Cost of goods sold (351,153) (424,880) (402,306) (359,284) (1,537,623)
Gross profit $192,547 $267,820 $232,357 $199,115 $ 891,839
Net income $ 18,328 $ 49,852 $ 38,916 $ 15,868 $ 122,964
Net income per
common share--basic $ 0.49 $ 1.34 $ 1.05 $ 0.44 $ 3.33
Net income per
common share--diluted $ 0.49 $ 1.33 $ 1.05 $ 0.44 $ 3.31
First Second Third Fourth Year
2000 (In thousands, except per share data)
Gross sales $596,789 $788,921 $773,535 $682,493 $2,841,738
Beer excise taxes (91,360) (119,108) (116,459) (100,396) (427,323)
Net sales 505,429 669,813 657,076 582,097 2,414,415
Cost of goods sold (326,919) (404,570) (413,314) (381,026) (1,525,829)
Gross profit $178,510 $265,243 $243,762 $201,071 $ 888,586
Net income $ 14,819 $ 48,344 $ 34,492 $ 11,962 $ 109,617
Net income per
common share--basic $ 0.40 $ 1.32 $ 0.94 $ 0.32 $ 2.98
Net income per
common share--diluted $ 0.40 $ 1.29 $ 0.92 $ 0.32 $ 2.93
NOTE 17:
Subsequent Event
On February 2, 2002, we acquired 100% of the outstanding shares of Bass
Holdings Ltd. and certain other intangible assets from Interbrew S.A. as
well as paying off certain intercompany loan balances with Interbrew for a
total purchase price of 1.2 billion British pounds sterling (approximately
$1.7 billion), plus associated fees and expenses and a restructuring
provision. The purchase price is subject to adjustment based on the value
of working capital, certain intercompany trade balances and undistributed
earnings from joint ventures as of the acquisition date. This acquisition
resulted in us obtaining the United Kingdom (U.K.) based Carling business. The
Carling Brewers' business, subsequently renamed Coors Brewers Limited,
includes the majority of the assets that previously made up Bass Brewers,
including the Carling, Worthington and Caffrey's brand beers; the U.K.
distribution rights to Grolsch (via a joint venture with Grolsch N.V.);
several other beer and flavored-alcoholic beverage brands; related brewing
and malting facilities in the U.K.; and a 49.9% interest in the distribution
logistics provider, Tradeteam. Coors Brewers is the second-largest brewer in
the U.K. and Carling lager is the best-selling beer brand in the U.K. The brand
rights for Carling, which is the largest acquired brand by volume, are
mainly for territories in Europe. The addition of Coors Brewers reduces our
reliance on one product in North America and also creates a broader, more
diversified company in a consolidating global beer market.
The following table summarizes the preliminary estimated fair values of the
assets acquired and liabilities assumed at the date of acquisition. We are
in the process of obtaining third-party valuations of certain tangible and
intangible assets and of pension and other liabilities, and analyzing other
market or historical information for certain estimates. We are also
finalizing the tax and financing structure of the acquired business and
evaluating certain restructuring plans. Accordingly, the allocation of the
purchase price is subject to change. Also, as noted above, the purchase
price is subject to further adjustments, which have not yet been finalized
with Interbrew. These adjustments will result in further change to the
purchase price allocation.
As of February 2, 2002
(In millions)
Current assets $ 547
Property, plant and equipment 445
Other assets 444
Intangible assets 415
Goodwill 532
Total assets acquired 2,383
Current liabilities (428)
Non-current liabilities (238)
Total liabilities assumed (666)
Net assets acquired $ 1,717
Of the $415 million of acquired intangible assets, approximately $389
million has been assigned to brand names and distribution rights. The
remaining $26 million was assigned to patents and technology and
distribution channels. The respective lives of these assets and the
resulting amortization is still being evaluated.
In March 2002, we announced plans to close our Cape Hill brewery and Alloa
malting facility. A majority of the production at the Cape Hill brewery
relates to brands that were retained by Interbrew. The production at the
Alloa malting facility will be moved to one of the other existing malting
facilities. The plan to close these sites and the associated exit costs
have been reflected in the purchase price allocation above.
We funded the acquisition with approximately $150 million of cash on hand
and approximately $1.55 billion of combined debt as described below at the
prevailing exchange rate:
Facility
Currency Balance
Term Denomination (In millions)
5 year Amortizing term loan USD $ 478
5 year Amortizing term loan (228 million pounds) GBP 322
9 month Bridge facility USD 750
$ 1,550
In conjunction with the term loan and bridge facility, we incurred
financing fees of approximately $9 million and $500,000, respectively.
These fees will be amortized over the respective term of the borrowing.
There is an additional financing fee on the bridge facility of
approximately $1.1 million if the facility is not repaid by May 15, 2002.
We expect to refinance our nine month bridge facility through issuance of
long-term financing prior to maturity.
Amounts outstanding under both our term loan and our bridge facility bear
interest, at our option, at a rate per annum equal to either an adjusted
LIBOR or an alternate rate, in each case plus an additional margin. The
additional margin is set based upon our investment grade. If our investment
grade changes, the additional margin is subject to adjustment. Interest is
payable quarterly unless the selected LIBOR is for a time period less than
90 days, in which case the interest is payable in the time period
corresponding to the selected LIBOR.
Our term loan is payable quarterly in arrears beginning March 28, 2003,
pursuant to the amortization schedule below, and matures February 1, 2007.
Amortization
rate of term
Year of annual payments loans
2003 15%
2004 20%
2005 25%
2006 30%
2007 10%
100%
We and all of our existing and future, direct and indirect, domestic
subsidiaries, other than immaterial domestic subsidiaries, have guaranteed
our term loan.
Our term loan requires us to meet certain periodic financial tests,
including maximum total leverage ratio and minimum interest coverage ratio.
There are also certain restrictions on indebtedness, liens and guarantees;
mergers, consolidations and some types of acquisitions and assets sales;
dividends and stock repurchases; and certain types of business in which we
can engage. We expect to timely repay this facility in accordance with its
terms.
ITEM 9. Disagreements on Accounting and Financial Disclosure
None.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
(a) Directors
WILLIAM K. COORS (Age 85) is Chairman of the Board of Adolph Coors Company
(ACC) and has served in such capacity since 1970. He has served as
a director since 1940. He was President from 1989 until May 11,
2000. He is the Chairman of the Executive Committees of ACC and
Coors Brewing Company (CBC). He is also a director of CBC and
Graphic Packaging International Corporation. He is the uncle of
Peter H. Coors.
PETER H. COORS (Age 55) is President of ACC and chairman of CBC. He was
Chief Executive Officer from December 1992 to May 2000. He has been
a director of ACC and CBC since 1973. Prior to 1993, he served as
Executive Vice President and Chairman of the brewing division,
before it was organized as CBC. He served as interim treasurer and
Chief Financial Officer of ACC from December 1993 to February 1995.
He has served in a number of different executive and management
positions for CBC. Since March 1996, he has been a director of U.S.
Bancorp. He also has been a director of Energy Corporation of
America since March 1996, and was appointed to the board of H.J.
Heinz & Co. in 2001. He is the nephew of William K. Coors.
W. LEO KIELY III (Age 55) was appointed President and Chief Operating
Officer of CBC as of March 1, 1993, and was named Chief Executive
Officer of CBC in May 2000. He also is a vice president of ACC, and
has been a director of ACC and CBC since August 1998. Prior to
joining CBC, he held executive positions with Frito-Lay, Inc., a
subsidiary of PepsiCo in Plano, Texas. He also serves on the board
of directors of Sunterra Resorts, Inc. and the SEI Center for
Advanced Studies Board for the Wharton School of Finance.
FRANKLIN W. HOBBS (Age 54) was appointed a director of ACC and CBC in 2001
and is a member of the Compensation and Human Resources Committee.
He graduated from Harvard College and Harvard Business School and
is currently the Chief Executive Officer and director for the
investment bank, Houlihan Lokey Howard & Zukin. He served in roles
of increasing responsibility at the investment bank, Dillon, Read &
Co., Inc. from 1972 through 2000, finally serving as chairman of
UBS Warburg following a series of mergers between Dillon Read, and
SBC Warburg, and later with Union Bank of Switzerland. He also
serves on the board of directors of Lord Abbett Group of Mutual
Funds and the Board of Overseers at Harvard College.
PAMELA H. PATSLEY (Age 45) has served as a director of both ACC and CBC
since November 1996. She chairs the Audit Committee and is a member
of the Compensation and Human Resources Committee. In March 2000,
she became Senior Executive Vice President of First Data Corp. and
president of First Data Merchant Services, First Data Corp.'s
merchant processing enterprise, which also includes the TeleCheck
check guarantee and approval business. Prior to joining First Data,
She served as President, Chief Executive Officer and director of
Paymentech. She began her Paymentech career as a founding officer
of First USA, Inc. when it was established in 1985. Before joining
First USA, she was with KPMG Peat Marwick.
WAYNE R. SANDERS (Age 54) has served as a director of ACC and CBC since
February 1995. He is a member of the Compensation and Human
Resources Committee and the Audit Committee. He is Chairman of the
Board and since 1991 has been Chief Executive Officer of Kimberly-
Clark Corporation in Dallas. He joined Kimberly-Clark in 1975 and
has served in a number of positions. He was elected to Kimberly-
Clark's board of directors in August 1989. He is also a director of
Texas Instruments Incorporated and Chase Bank of Texas.
ALBERT C. YATES (Age 59) has served as a director of ACC and CBC since
August 1998. He was appointed chairman of the Compensation and
Human Resources Committee in November 2001 and is a member of the
Audit Committee. He is President of Colorado State University in
Fort Collins, Colorado, and Chancellor of the Colorado State
University System. He was a member of the board of the Federal
Reserve Board of Kansas City-Denver Branch and has served on the
board of First Interstate Bank.
Luis G. Nogales retired from the boards of ACC and CBC in November 2001.
Joseph Coors retired from our board in May 2000 and was elected a director
emeritus.
(b) Executive Officers
Of the above directors, William K. Coors, Peter H. Coors and W. Leo Kiely
III are executive officers of ACC and CBC. The following also were
executive officers of ACC and/or CBC at March 1, 2002:
RONALD G. ASKEW (Age 47) was appointed Chief Marketing Officer of CBC in
October 2001. He was a founder and served as chief executive
officer of The Integer Group, in Denver, Colorado, a marketing and
advertising agency that services large accounts including Coors
Brewing Company, from 1993 to October 2001. Before forming The
Integer Group, he was director of account services for Tracy-Locke
Advertising and DDB Worldwide in Dallas. He also served as a vice
president for Frito-Lay, Inc. in marketing and new business
development.
DAVID G. BARNES (Age 40) joined us in March 1999 as Vice President and
Treasurer of ACC, and Vice President of Finance and Treasurer of
CBC. From 1994 to 1999, he was Vice President of Finance and
Development for Tricon Global Restaurants. At Tricon, he also held
positions as Vice President of Mergers and Acquisitions and Vice
President of Planning. From 1990 to 1994, he worked at Asea Brown
Boveri in various strategy, planning and development roles of
increasing responsibility. He started his career at Bain and
Company as a consultant for five years.
CARL L. BARNHILL (Age 53) joined CBC in May 1994 as Senior Vice President
of Sales. He has more than 20 years of marketing experience with
consumer goods companies. Previously, he was Vice President of
Selling Systems Development for the European and Middle East
division of Pepsi Foods International. Prior to joining Pepsi in
1993, he spent 16 years with Frito-Lay, Inc. in various senior
sales and marketing positions.
PETER M. R. KENDALL (Age 55) joined us in January 1998 as Senior Vice
President and Chief International Officer of CBC. In 2002, he was
appointed Chief Executive Officer of Coors Brewers Limited, our
principal United Kingdom subsidiary, and is also Senior Vice
President, U.K. and Europe. He is also a vice president of ACC.
Before joining Coors, he was Executive Vice President of Operations
and Finance for Sola International, Inc., a manufacturer and
marketer of eyeglass lenses in Menlo Park, California. From 1995 to
1996, he was President of International Book Operations for McGraw
Hill Companies. From 1981-1994, he worked in leadership positions
for Pepsi International, PepsiCo and PepsiCo Wines and Spirits.
Prior to working for Pepsi, he spent six years at McKinsey & Co. in
New York.
ROBERT D. KLUGMAN (Age 54) was named our Senior Vice President of Corporate
Development of CBC in May 1994. In 2002, he was named Senior Vice
President of International and Corporate Development, following the
acquisition of the Carling Brewers' business from Interbrew S.A. He
also serves as a vice president of ACC. Prior to that, he was Vice
President of Brand Marketing, and also served as Vice President of
International, Development and Marketing Services. Before joining
us, he was a Vice President of Client Services at Leo Burnett USA,
a Chicago-based advertising agency.
KATHERINE L. MACWILLIAMS (Age 46) joined Coors Brewing Company in April
1996 as Vice President and Treasurer. In 1999, she was named Vice
President, International Finance, and in April 2001, Vice
President, International and Control. Prior to joining Coors, she
served as Vice President of Capital Markets for UBS Securities in
New York. In addition, she has held a wide range of financial
positions with The First National Bank of Chicago, Sears Roebuck
and Co. and Ford Motor Company. She is a past board member (1989 to
1992) of the International Swaps and Derivatives Association, Inc.
and a current director (since January 1997) of the Selected family
of mutual funds, where she chairs the Audit Committee.
ROBERT M. REESE (Age 52) joined the company in December 2001 as Vice
President and Chief Legal Officer. He also serves as Senior Vice
President and Chief Legal Officer of CBC. Prior to joining us, he
was associated with Hershey Foods Corporation from 1978 to 2001,
serving most recently as Senior Vice President of Public Affairs,
General Counsel and Secretary.
MARA SWAN (Age 42) was appointed Senior Vice President and Chief People
Officer of CBC in March 2002. She joined Coors in November 1994 as
a director of human resources responsible for the sales and
marketing area and most recently was Vice President, Human
Resources. Prior to that, she worked for 11 years at Miller Brewing
Company in Milwaukee where she held various positions in human
resources. Her most recent assignments at Miller included human
resources manager for operations and personnel services manager for
marketing.
RONALD A. TRYGGESTAD (Age 45) was named Vice President and Controller of
CBC and Controller of ACC in May 2001. He joined the company in
December 1997 as the director of tax. Prior to joining CBC, he was
with Total Petroleum, Inc. from 1994 to 1997, serving there as
Director of Tax and Internal Audit. He also worked for Shell Oil
Company from 1990 through 1993, and Price Waterhouse from 1982
through 1989.
TIMOTHY V. WOLF (Age 48) was named Vice President and Chief Financial
Officer of ACC and Senior Vice President and Chief Financial
Officer of CBC in February 1995. Prior to CBC, he served as Senior
Vice President of Planning and Human Resources for Hyatt Hotels
Corporation from 1993 to 1994 and in several executive positions
for The Walt Disney Company, including vice president, controller
and chief accounting officer, from 1989 to 1993. Prior to Disney,
he spent 10 years in various financial planning, strategy and
control roles at PepsiCo. He currently serves on the Science and
Technology Commission for the state of Colorado.
Caroline Turner, former Senior Vice President and General Counsel, and
William Weintraub, former Senior Vice President of Marketing, both retired
from the company in 2001.
Olivia Thompson, former Controller, was named Vice President of Process
Development in 2001, reporting to Leo Kiely.
Terms for all officers and directors are for a period of one year, except
that vacancies may be filled and additional officers elected at any regular
or special meeting. Directors of ACC are elected at the annual meeting of
the Class A voting shareholder held in May. There are no arrangements or
understandings between any officer or director pursuant to which any
officer or director was elected.
Based upon our review of Forms 3, 4 and 5 filed by certain beneficial
owners of our Class B common stock, we have determined that there was a
failure to file a Form 5 on a timely basis with the SEC as required under
Section 16(a) of the Securities Exchange Act of 1934 for one transaction on
behalf of Pamela Patsley, Wayne Sanders, Luis Nogales, Albert Yates, David
Barnes and Peter Kendall, and a Form 4 for one transaction on behalf of
Peter Coors. Forms 5 were filed immediately when the omissions were
discovered in March 2002. We are not aware of any failure by the Section 16
reporting persons to file a required form pursuant to Section 16.
ITEM 11. Executive Compensation
I. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG -TERM COMPENSATION
AWARDS PAYOUTS
OTHER SECURITIES ALL
ANNUAL RESTRICTED UNDERLYING LTIP OTHER
NAME & PRINCIPAL SALARY BONUS COMP STOCK OPTIONS PAYOUTS COMP
POSITION YEAR ($) ($)(1) ($) ($)(2) (#)(3) ($) ($)(4)
Peter H. Coors, 2001 760,500 452,272 0 0 125,000 0 78,699
President of 2000 726,750 563,760 0 0 170,908 0 78,699
Adolph Coors 1999 655,765 380,291 0 0 62,751 0 55,504
Company,
Chairman of Coors
Brewing Company
W. Leo Kiely 2001 686,456 407,423 0 0 120,000 0 57,139
III, Vice 2000 569,250 428,644 0 0 103,708 0 57,139
President of 1999 516,750 304,722 0 0 87,429 0 41,723
Adolph Coors
Company & CEO of
Coors Brewing
Company
Timothy V. Wolf, 2001 371,000 163,899 0 0 20,000 0 11,835
CFO of Adolph 2000 360,500 189,525 0 0 35,024 0 11,835
Coors Company, 1999 343,020 160,022 0 0 28,790 0 11,535
Senior VP & CFO
of Coors Brewing
Company
Peter M. R. 2001 358,280 133,647 0 0 25,000 0 30,171
Kendall, Senior 2000 348,140 180,758 0 0 33,823 0 30,171
VP of Coors 1999 331,500 139,317 0 0 27,844 0 29,871
Brewing Company,
CEO of Coors
Brewers Limited
Carl L. 2001 343,200 128,022 0 0 30,000 0 14,275
Barnhill, 2000 336,600 180,758 0 0 33,022 0 14,275
Senior VP of 1999 311,280 139,317 0 0 25,064 0 19,601
Sales of Coors
Brewing Company
William H. 2001 364,000 135,781 0 0 25,000 0 21,355
Weintraub(5), 2000 357,000 186,244 0 0 35,024 0 21,355
Senior VP of 1999 327,376 145,123 0 0 26,109 0 21,055
Marketing of
Coors Brewing
Company
(1) Amounts awarded under the Management Incentive Compensation Program.
(2) In 2001, the shares of restricted stock which were granted in 1998
vested. The values at the vesting dates were as follows: Peter H. Coors,
$285,226; W. Leo Kiely III, $146,594; Timothy V. Wolf, $72,885; Peter M. R.
Kendall, $311,287; Carl L. Barnhill, $117,495 and William H. Weintraub,
$70,071. No restricted stock grants were made to any of the named
executives during 1999 to 2001.
(3) See discussion under Item 11, Part II, for options issued in 2001.
(4) The amounts shown in this column are attributable to the officer life
insurance other than group life, as well as 401(k) match.
(5) William H. Weintraub, former Senior Vice President of Marketing,
retired from the company in 2001.
We provide term officer life insurance for all the named active executives.
The officer's life insurance provides six times the executive base salary
until retirement when the benefit terminates. The 2001 annual benefit for
each executive was: Peter H. Coors, $73,599; W. Leo Kiely III, $52,039;
Timothy V. Wolf, $6,735; Peter M. R. Kendall, $25,071; Carl L. Barnhill,
$9,175 and William H. Weintraub, $16,255.
Our 50% match on the first 6% of salary contributed by the officer to ACC's
qualified 401(k) plan was $5,100 each for Peter H. Coors, W. Leo Kiely III,
Timothy V. Wolf, Peter M. R. Kendall, Carl L. Barnhill and William H.
Weintraub. Peter H. Coors, W. Leo Kiely III, Peter M.R. Kendall and William
H. Weintraub exercised stock options in 2001. See discussion in Item 11,
Part III, for stock option exercises in 2001.
In response to Code Section 162 of the Revenue Reconciliation Act of 1993,
we appointed a special compensation committee of the board to approve and
monitor performance criteria in certain performance-based executive
compensation plans for 2001.
II. OPTION/SAR GRANTS TABLE
Option Grants in Last Fiscal Year
POTENTIAL REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED RATES OF STOCK
PRICE APPRECIATION FOR
OPTION TERM
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#)(1) YEAR ($/SHARE) DATE 5% 10%
Peter H. Coors 125,000 7.53% $69.0950 02/16/11 $5,431,684 $13,764,954
W. Leo Kiely
III 120,000 7.23% $69.0950 02/16/11 $5,214,417 $13,214,356
Timothy V.
Wolf 20,000 1.20% $69.0950 02/16/11 $ 869,069 $2,202,393
Peter M. R.
Kendall 25,000 1.51% $69.0950 02/16/11 $1,086,337 $2,752,991
Carl L.
Barnhill 30,000 1.80% $69.0950 02/16/11 $1,303,604 $3,303,589
William H.
Weintraub 25,000 1.51% $69.0950 02/16/11 $1,086,337 $2,752,991
(1) Grants vest one-third in each of the three successive years after the
date of grant. As of December 30, 2001, no 2001 grants were vested because
of the one-year vesting requirement; however, they will vest 33-1/3% on the
one-year anniversary of the grant dates.
III. OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Value
SHARES NUMBER OF SECURITIES
ACQUIRED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ON VALUE OPTIONS IN-THE-MONEY
EXERCISE REALIZED AT FY-END (#) OPTIONS AT FY-END
(#) (1) Exer- Unexer- Exer- Unexer-
cisable cisable cisable cisable
Peter H. Coors 7,047 $ 35,253 191,702 244,983 $2,475,341 $ 461,563
W. Leo Kiely III 15,000 $ 468,989 223,973 218,283 $3,977,910 $ 293,723
Timothy V. Wolf 0 $ 0 47,948 52,947 $ 416,833 $ 108,787
Peter M. R.
Kendall 17,512 $ 591,314 29,837 56,830 $ 52,531 $ 105,055
Carl L. Barnhill 0 $ 0 58,788 60,369 $ 917,632 $ 102,565
William H.
Weintraub 22,074 $ 704,514 23,427 57,053 $ 37,261 $ 108,787
(1) Values stated are the bargain element realized in 2001, which is the
difference between the option price and the market price at the time of
exercise.
IV. PENSION PLAN TABLE
The following table sets forth annual retirement benefits for
representative years of service and average annual earnings.
AVERAGE ANNUAL YEARS OF SERVICE
COMPENSATION 10 20 30 40
$125,000 $25,000 $50,000 $75,000 $100,000
150,000 30,000 60,000 90,000 120,000
175,000(1) 35,000 70,000 105,000 140,000
200,000(1) 40,000 80,000 120,000 160,000(1)
225,000(1) 45,000 90,000 135,000 180,000(1)
250,000(1) 50,000 100,000 150,000(1) 200,000(1)
275,000(1) 55,000 110,000 165,000(1) 220,000(1)
300,000(1) 60,000 120,000 180,000(1) 240,000(1)
325,000(1) 65,000 130,000 195,000(1) 260,000(1)
350,000(1) 70,000 140,000 210,000(1) 280,000(1)
375,000(1) 75,000 150,000(1) 225,000(1) 300,000(1)
400,000(1) 80,000 160,000(1) 240,000(1) 320,000(1)
425,000(1) 85,000 170,000(1) 255,000(1) 340,000(1)
450,000(1) 90,000 180,000(1) 270,000(1) 360,000(1)
475,000(1) 95,000 190,000(1) 285,000(1) 380,000(1)
500,000(1) 100,000 200,000(1) 300,000(1) 400,000(1)
525,000(1) 105,000 210,000(1) 315,000(1) 420,000(1)
550,000(1) 110,000 220,000(1) 330,000(1) 440,000(1)
575,000(1) 115,000 230,000(1) 345,000(1) 460,000(1)
600,000(1) 120,000 240,000(1) 360,000(1) 480,000(1)
(1) Maximum permissible benefit under ERISA from the qualified retirement
income plan for 2001 was $140,000. Annual compensation exceeding $170,000
is not considered in computing the maximum permissible benefit under the
qualified plan. We have a non-qualified supplemental retirement plan to
provide full accrued benefits to all employees in excess of Internal
Revenue Service maximums.
Annual compensation covered by the qualified and non-qualified retirement
plans and credited years of service for the named executive officers are as
follows: William K. Coors, $345,602 and 62 years; Peter H. Coors, $742,500
and 30 years; W. Leo Kiely III, $686,456 and 8 years; Timothy V. Wolf,
$371,000 and 7 years; Peter M. R. Kendall, $358,280 and 4 years; Carl L.
Barnhill, $343,200 and 7 years; and William H. Weintraub, $364,000 and 8
years.
Our principal retirement income plan is a defined benefit plan. The amount
of contribution for officers is not included in the above table since total
plan contributions cannot be readily allocated to individual employees.
Covered compensation is defined as the total base salary (average of three
highest consecutive years out of the last 10) of employees participating in
the plan, including commissions but excluding bonuses and overtime pay.
Compensation also includes amounts deferred by the individual under
Internal Revenue Code Section 401(k) and any amounts deferred into a plan
under Internal Revenue Code Section 125. Normal retirement age under the
plan is 65. An employee with at least 5 years of vesting service may retire
as early as age 55. Benefits are reduced for early retirement based on an
employee's age and years of service at retirement; however, benefits are
not reduced if (1) the employee is at least age 62 when payments commence;
or (2) the employee's age plus years of service equal at least 85 and the
employee has worked for us at least 25 years. The amount of pension
actuarially accrued under the pension formula is based on a single life
annuity.
In addition to the annual benefit from the qualified retirement plan, Peter
H. Coors is covered by a salary continuation agreement. This agreement
provides for a lump sum cash payment to the officer upon normal retirement
in an amount actuarially equivalent in value to 30% of the officer's last
annual base salary, payable for the remainder of the officer's life, but
not less than 10 years. The interest rate used in calculating the lump sum
is determined using 80% of the annual average yield of the 10-year Treasury
constant maturities for the month preceding the month of retirement. Using
2001 eligible salary amounts as representative of the last annual base
salary, the estimated lump sum amount for Peter H. Coors would be based
upon an annual benefit of $222,750, paid upon normal retirement.
V. COMPENSATION OF DIRECTORS
We adopted the Equity Compensation Plan for Non-Employee Directors (EC
Plan) effective as amended and restated August 14, 1997. The EC Plan
provides for two grants of ACC's Class B common stock (non-voting) to non-
employee (NE) directors. The first grant is automatic and equals 20% of the
annual retainer. The second grant is elective and allows the NE directors
to take a portion, or all, of the remaining annual retainer in stock.
Amounts of both grants are determined by the fair market value of the
shares on the date of grant. Shares received under either grant may not be
sold or disposed of before completion of the annual term. We reserved
50,000 shares of stock to be issued under the EC Plan. The NE directors'
annual retainer is $36,000.
In 2001, the NE members of the board of directors, excluding Franklin
Hobbs, were paid 50% of the $36,000 annual retainer for the 2000-2001 term
and 50% of the $36,000 annual retainer for the 2001-2002 term, as well as
reimbursement of expenses incurred to perform their duties as directors.
Franklin Hobbs, who joined the board in December 2001, elected to receive
his compensation entirely in stock. He received a grant of 278 shares
valued at $15,000 which will become unrestricted in May 2002. Directors who
are our full-time employees receive $18,000 annually. All directors are
reimbursed for any expenses incurred while attending board or committee
meetings and in connection with any other company business.
VI. EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Except for agreements with certain of our executive officers, including the
named active executive officers, relating to their employment upon a change
of control of our company, we have no agreements with executives or
employees providing employment for a set period. The change in control
agreements, which apply to certain officers of Coors Brewing Company,
generally provide that for a period of two years following a change of
control as defined in the agreements, the officer will be entitled to
certain compensation upon certain triggering events. These events include
termination without cause, resignation for good reason or resignation by
the officer for any reason during a 30 day window beginning one year after
a change of control. Upon a triggering event, officers would be paid a
multiple of their annual salary and bonus, plus health, pension and life
insurance benefits for additional years. For the chairman and the chief
executive officer, the compensation would equal three times annual salary
and bonus, plus benefits for the equivalent of three years coverage, plus
three years credit for additional service toward pension benefits. All
other officers, including named active officers, who are party to these
agreements would receive two times annual salary and bonus, plus two years
equivalent benefit coverage, plus credit for two years additional service
toward pension benefits.
VII. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Luis G. Nogales, Pamela H. Patsley, Wayne R. Sanders and Albert C. Yates
served on the Compensation and Human Resources Committee during 2001.
VIII. AUDIT COMMITTEE REPORT
The Audit Committee of our board of directors is composed of a minimum of
three independent directors and operates under a written charter adopted by
the board of directors. The Audit Committee's primary duties and
responsibilities are to:
- monitor the integrity of our financial reporting process, the system
of internal controls and significant legal matters and ethics;
- review and appraise the independence and performance of our internal
auditors and independent accountants; and
- provide an open avenue of communication for the independent
accountants, financial and senior management, internal auditors and
the board of directors.
The committee held eight meetings during the fiscal year ended December 30,
2001. Discussions were held with management and the independent auditors.
Management represented to the committee that our consolidated financial
statements were prepared in accordance with generally accepted accounting
principles. The committee has reviewed and discussed the consolidated
financial statements with our management and the independent auditors. The
committee has discussed with the independent auditors matters required to
be discussed by Statement on Auditing Standards (SAS) No. 61, Communication
with Audit Committees, as amended by SAS 90, Audit Committee
Communications.
In addition, the committee has discussed with the independent auditors the
auditors' independence, including the matters in the written disclosures
and the letter we received from the auditors, as required by Independence
Standards Board Standard No. 1, Independence Discussions with Audit
Committees. The fees billed by the auditors for non-audit services were
also considered in the discussions of independence.
In addition to ongoing discussions with management, the committee also held
a special meeting on March 22, 2002, to review the audited consolidated
financial statements for the year ended December 30, 2001. Based on the
committee's reviews and discussions referred to above, the committee
recommended that the board of directors include such financial statements
in our annual report on Form 10-K for the year ended December 30, 2001.
Submitted by the Audit Committee
Pamela H. Patsley (Chair)
Wayne R. Sanders
Albert C. Yates
IX. INDEPENDENT PUBLIC ACCOUNTANTS' FEES
Audit fees: Aggregate fees for professional services rendered by
PricewaterhouseCoopers LLP in connection with its audit of our consolidated
financial statements for fiscal year 2001 and the quarterly reviews of our
financial statements included in Forms 10-Q were $511,600.
Financial information systems design and implementation fees:
PricewaterhouseCoopers rendered no professional services to us in
connection with the design and implementation of financial information
systems in fiscal year 2001.
All other fees: Fees of $544,212 were billed for fiscal year 2001. These
were primarily for: (1) audit related fees of $99,550 for issuance of
consents, audits of our employee benefit plans and financial statements of
certain subsidiaries during the year, and audit related accounting
projects; (2) income tax compliance and related tax services of $101,207
and (3) other related fees of $343,455 for supply chain consulting and
other special project assistance.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
(a)(b) Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of March 8, 2002, as to the
beneficial ownership of Class A stock and Class B stock by beneficial
owners of more than 5% of our Class A stock and Class B stock, each
director, our named executive officers and by all directors and executive
officers as a group. Unless otherwise indicated, the person or persons
named have sole voting and investment power and that person's address is
c/o Adolph Coors Company, 311 10th Street, P.O. Box 4030, Golden, Colorado
80401. Shares of common stock subject to options currently exercisable or
exercisable within 60 days following the date of the tables are deemed
outstanding for computing the share ownership and percentage of
the person holding such options, but are not deemed outstanding for
computing the percentage of any other person.
Amount and nature of beneficial ownership
Number of Percent Percent
Class A of Number of of
Name of beneficial owner shares class(1) Class B shares class(1)
Adolph Coors, Jr. Trust,
William K. Coors,
Jeffrey H. Coors,
Peter H. Coors, J.
Bradford Coors and
Melissa E. Coors,
trustees 1,260,000(2) 100.0% 2,940,000(2) 8.5%
May K. Coors Trust(5) 0 0.0% 2,589,980 7.2%
Capital Research and
Management Company 0 0.0% 2,035,000(1,11) 5.8%
The Growth Fund of
America 0 0.0% 1,785,000(1,11) 5.1%
William K. Coors 0 0.0% 320,807(2,3) *
Peter H. Coors 0 0.0% 442,454(2,4) 1.3%
W. Leo Kiely III 0 0.0% 342,087(6) *
Franklin W. Hobbs 0 0.0% 278(7) *
Pamela H. Patsley 0 0.0% 2,372(7) *
Wayne R. Sanders 0 0.0% 6,106(7) *
Albert C. Yates 0 0.0% 1,345(7) *
Carl L. Barnhill 0 0.0% 92,913(8) *
Peter M.R. Kendall 0 0.0% 61,447(9) *
Timothy V. Wolf 0 0.0% 78,327(10) *
William H. Weintraub 0 0.0% 53,752(12) *
All directors and
executive officers as a
group, including persons
named above (18 persons) 0 0.0% 1,573,475 (2,4) 4.3%
* Less than 1%.
(1) Except as set forth above and based solely upon reports of beneficial
ownership required filed with the Securities and Exchange Commission
pursuant to Rule 13d-1 under the Securities and Exchange Act of 1934, we do
not believe that any other person beneficially owned, as of March 8, 2002,
greater than 5% of our outstanding Class A stock or Class B stock.
(2) William K. Coors and Peter H. Coors disclaim beneficial ownership of
the shares held by the Adolph Coors, Jr. Trust.
(3) This does not include 2,589,980 shares of Class B common stock owned by
the May K. Coors Trust or 1,260,000 shares of Class A common stock or
2,940,000 shares of Class B common stock owned by the Adolph Coors, Jr.
Trust, as to all of which William K. Coors disclaims beneficial ownership.
It does not include an aggregate of 5,700,114 shares of Class B common
stock owned by a number of other trusts that hold the shares for the
benefit of certain Coors family members, as to all of which William K.
Coors disclaims beneficial ownership. William K. Coors is a beneficiary of
certain of these trusts. The commission does not require disclosure of
these shares. If William K. Coors were to be attributed beneficial
ownership of the shares held by these trusts, he would beneficially own
100% of the Class A common stock and 33.3% of the Class B common stock
(4) This does not include 2,589,980 shares of Class B common stock owned by
the May K. Coors Trust or 1,260,000 shares of Class A common stock or
2,940,000 shares of Class B common stock owned by the Adolph Coors, Jr.
Trust, as to all of which Peter H. Coors disclaims beneficial ownership. It
does not include an additional aggregate of 5,700,114 shares of Class B
common stock owned by a number of other trusts that hold the shares for the
benefit of certain Coors family members, as to all of which Peter H. Coors
disclaims beneficial ownership. Peter H. Coors is a trustee or beneficiary
of certain of these trusts. The commission does not require disclosure of
these shares. This includes 2,660 shares held in the names of Peter H.
Coors's wife and some of his children, as to which he disclaims beneficial
ownership. This number includes options to purchase 303,819 shares of Class
B common stock exercisable within 60 days. If Peter H. Coors were to be
attributed beneficial ownership of the shares held by these trusts, he
would beneficially own 100% of the Class A common stock and 33.4% of the
Class B common stock.
(5) William K. Coors, Joseph Coors, Jr., Jeffrey H. Coors and Peter H.
Coors serve as co-trustees.
(6) This number includes currently exercisable options to purchase 324,639
shares of Class B common stock.
(7) These shares were issued as restricted stock under our 1991 Equity
Compensation Plan for Non-Employee directors. Vesting in the restricted
stock occurs at the end of the one-year term for outside directors. These
numbers include the following number of shares which will vest in May 2002:
Franklin W. Hobbs, 278; Pamela H. Patsley, 332; Wayne R. Sanders, 138;
Albert C. Yates, 415.
(8) This number includes currently exercisable options to purchase 88,151
shares of Class B common stock.
(9) This number includes currently exercisable options to purchase 58,727
shares of Class B common stock.
(10) This number includes options to purchase 75,887 shares of Class B
common stock currently exercisable or exercisable within 60 days.
(11) The shares held by the Capital Research and Management Company include
the 1,785,000 shares (5.1% of total outstanding) held by The Growth Fund of
America, which is managed by Capital Research and Management Company. The
source of this information is a joint Schedule 13 received by us February
14, 2002, filed by Capital Research and Management Company and The Growth
Fund of America, Inc.
(12) This number includes options to purchase 52,139 shares of Class B
common stock currently exercisable or exercisable within 60 days.
(c) Changes in Control
There are no arrangements that would later result in a change of our
control.
ITEM 13. Certain Relationships and Related Transactions
(a) Transactions with Management and Others
None.
(b) Certain Business Relationships
In 1992, we spun off our wholly owned subsidiary, ACX Technologies, Inc.,
which has subsequently changed its name to Graphic Packaging International
Corporation (GPIC). William K. Coors is a trustee of family trusts that
collectively own all of our Class A voting common stock, approximately 31%
of our Class B common stock, approximately 42% of GPIC's common stock and
100% of GPIC's series B preferred stock which is currently convertible into
48,484,848 shares of GPIC's common stock. If converted, the trusts would
own approximately 78% of GPIC's common stock. Peter H. Coors is also a
trustee of some of these trusts.
We have a packaging supply agreement with a subsidiary of GPIC under which
we purchase a large portion of our paperboard requirements. We have begun
negotiations to extend the term of this contract which expires in 2002. We
expect it to be renewed prior to expiration. Our purchases under the
packaging agreement in 2001, 2000 and 1999 totaled approximately $125
million, $112 million and $107 million, respectively. We expect purchases
in 2002 under the packaging agreement to be approximately $118 million.
Related accounts receivable balances included in Affiliates Accounts
Receivable on the Consolidated Balance Sheets were immaterial in 2001 and
2000. Related accounts payable balances included in Affiliates Accounts
Payable on the Consolidated Balance Sheets were $0.5 million and $1.3
million in 2001 and 2000, respectively.
We are also a limited partner in a real estate development partnership in
which a subsidiary of GPC is the general partner. The partnership owns,
develops, operates and sells certain real estate previously owned directly
by us. In 2001, we received no distributions from this partnership.
(c) Indebtedness of Management
No member of management or another with a direct or indirect interest in us
was indebted to us in excess of $60,000 in 2001.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements: See index of financial statements in Item 8.
(2) Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors and Shareholders of Adolph Coors Company:
Our audits of the consolidated financial statements referred to in our
report dated February 6, 2002, appearing in this Form 10-K also included an
audit of the financial statement schedule listed in Item 14(a)(2) of this
Form 10-K. In our opinion, this financial statement schedule presents
fairly, in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Denver, Colorado
February 6, 2002
SCHEDULE II
ADOLPH COORS COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Additions
Balance at charged to Balance
beginning costs and at end
of year expenses Deductions(1) of year
Allowance for doubtful (In thousands)
accounts
Year ended
December 30, 2001 $ 139 $ 119 ($ 167) $ 91
December 31, 2000 $ 55 $ 84 $ -- $ 139
December 26, 1999 $ 299 $ 53 ($ 297) $ 55
Allowance for certain
claims
Year ended
December 30, 2001 $ 104 $ 50 ($ 43) $ 111
December 31, 2000 $ 133 $ -- ($ 29) $ 104
December 26, 1999 $ 584 $ 44 ($ 495) $ 133
Allowance for obsolete
inventories and supplies
Year ended
December 30, 2001 $3,614 $3,361 ($2,605) $4,370
December 31, 2000 $3,170 $2,664 ($2,220) $3,614
December 26, 1999 $4,986 $3,778 ($5,594) $3,170
(1) Write-offs of uncollectible accounts, claims or obsolete inventories
and supplies.
(3) Exhibits:
Exhibit 2.1 -- Share Purchase Agreement between Coors Worldwide, Inc.
and Adolph Coors Company and Interbrew, S.A., Interbrew
UK Holdings Limited, Brandbrew S.A., and Golden
Acquisition Limited dated December 24, 2001 and amended
February 1, 2002 (filed by amendment pursuant to
confidential treatment request).
Exhibit 3.1 -- Amended and restated Articles of Incorporation of Adolph
Coors Company effective May 17, 2001.
Exhibit 3.2 -- By-laws, as amended and restated May 10, 2000.
(Incorporated by reference to Exhibit 3.2 to
Registration Statement on Form S-3, SEC file No. 333-
48194 filed October 27, 2000)
Exhibit 10.1* -- 2001 amendment to Adolph Coors Company 1990 Equity
Incentive Plan. (Incorporated by reference to Exhibit
10.20 to Form 10-K for the fiscal year ended December
31, 2000)
Exhibit 10.2 -- Form of Coors Brewing Company Distributorship Agreement.
(Incorporated by reference to Exhibit 10.20 to Form 10-K
for the fiscal year ended December 29, 1996)
Exhibit 10.3 -- Adolph Coors Company Equity Compensation Plan for Non-
Employee Directors (Incorporated by reference to Exhibit
10.12 to Form 10-K for the fiscal year ended December
28, 1997) and 1999 Amendment (Incorporated by reference
to Exhibit 10.12 to Form 10-K for the fiscal year ended
December 27, 1998)
Exhibit 10.4 -- Distribution Agreement, dated as of October 5, 1992,
between the Company and ACX Technologies, Inc.
(Incorporated herein by reference to the Distribution
Agreement included as Exhibits 2, 19.1 and 19.1A to the
Registration Statement on Form 10 filed by ACX
Technologies, Inc. (file No. 0-20704) with the
commission on October 6, 1992, as amended)
Exhibit 10.5* -- Adolph Coors Company Stock Unit Plan. (Incorporated by
reference to Exhibit 10.16 to Form 10-K for the fiscal
year ended December 28, 1997) and 1999 Amendment
(Incorporated by reference to Exhibit 10.16 to Form 10-K
for the fiscal year ended December 27, 1998)
Exhibit 10.6* -- 2001 amendment to Adolph Coors Company Deferred
Compensation Plan. (Incorporated by reference to Exhibit
10.17 to Form 10-K for the fiscal year ended December
31, 2000)
Exhibit 10.7* -- Coors Brewing Company 2001 Annual Management Incentive
Compensation Plan.
Exhibit 10.8 -- Adolph Coors Company Water Augmentation Plan.
(Incorporated by reference to Exhibit 10.12 to Form 10-K
for the fiscal year ended December 31, 1989)
Exhibit 10.9 -- Supply Agreement between Coors Brewing Company and
Graphic Packaging International Corporation dated
September 1, 1998. (Incorporated by reference to
Exhibit 10.1 to current report on Form 8-K filed
November 2, 1998, by ACX Technologies, Inc., SEC file
No. 001-14060)
Exhibit 10.10 -- Form of 2001 change-in-control agreements for Chairman
and for Chief Executive Officer. (Incorporated by
reference to Exhibit 10.18 to Form 10-K for the fiscal
year ended December 31, 2000)
Exhibit 10.11 -- Form of 2001 change-in-control agreements for other
officers. (Incorporated by reference to Exhibit 10.19 to
Form 10-K for the fiscal year ended December 31, 2000)
Exhibit 10.12 -- Supply agreement between Coors Brewing Company and Ball
Metal Beverage Container Corp. dated November 12, 2001
(filed pursuant to confidential treatment request).
Exhibit 10.13 -- Supply Agreement between Rocky Mountain Metal Container,
LLC and Coors Brewing Company dated November 12, 2001
(filed pursuant to confidential treatment request).
Exhibit 10.14 -- Agreement between Coors Brewing Company and EDS
Information Services, LLC effective August 1, 2001
(filed by amendment pursuant to confidential treatment
request).
Exhibit 10.15 -- Credit Agreement dated as of February 1, 2002 among
Adolph Coors Company, Coors Brewing Company, Golden
Acquisition Limited, the lenders party thereto, Deutsche
Bank Alex. Brown Inc., as Syndication Agent, JPMorgan
Chase Bank, as Administrative Agent, and J.P. Morgan
Europe Limited, as London Agent.
Exhibit 10.16 -- Bridge Credit Agreement dated as of February 1, 2002
among Adolph Coors Company, Coors Brewing Company, the
lenders party thereto, Morgan Stanley Senior Funding,
Inc., as Syndication Agent, JPMorgan Chase Bank, as
Administrative Agent, and J.P. Morgan Europe Limited, as
London Agent.
Exhibit 10.17*-- Coors Brewing Company 2002 Coors Incentive Plan.
Exhibit 21 -- Subsidiaries of the Registrant.
Exhibit 23 -- Consent of Independent Accountants.
*Represents a management contract.
(b) Reports on Form 8-K
A current report on Form 8-K dated December 24, 2001, was filed to announce
that we had executed a letter of intent with Interbrew S.A. for the
purchase of the Carling Brewers' portion of the Bass Brewers business.
A current report on Form 8-K dated February 2, 2002, was filed announcing
the close of the acquisition of the Carling Brewers' business.
(c) Other Exhibits
None.
(d) Other Financial Statement Schedules
None.
EXHIBIT 21
ADOLPH COORS COMPANY AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
The following table lists our significant subsidiaries and the respective
jurisdictions of their organization or incorporation as of December 30,
2001. All subsidiaries are included in our consolidated financial
statements.
State/country of
organization or
Name incorporation
Coors Brewing Company Colorado
Coors Distributing Company Colorado
Coors Worldwide, Inc. Colorado
Coors International Market Development, LLLP Colorado
Coors Japan Company, Ltd. Japan
Coors Canada, Inc. Canada
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-35035, 33-40730, 33-59979, 333-45869 and
333-38378) of Adolph Coors Company of our report dated February 6, 2002,
relating to the consolidated financial statements which appear in this
Annual Report on Form 10-K.
We also consent to the incorporation by reference of our report dated
February 6, 2002, relating to the financial statement schedule, which
appears in this Form 10-K.
PricewaterhouseCoopers LLP
Denver, Colorado
March 29, 2002
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ADOLPH COORS COMPANY
By /s/ William K. Coors
William K. Coors
Chairman and Director
By /s/ Peter H. Coors
Peter H. Coors
President and Director
(Principal Executive Officer)
By /s/ Timothy V. Wolf
Timothy V. Wolf
Vice President and
Chief Financial Officer
(Principal Financial Officer)
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following directors on behalf of the
Registrant and in the capacities and on the date indicated.
By /s/ W. Leo Kiely III By /s/ Franklin W. Hobbs
W. Leo Kiely III Franklin W. Hobbs
Vice President and Director
Director
By /s/ Pamela H. Patsley By /s/ Wayne R. Sanders
Pamela H. Patsley Wayne R. Sanders
Director Director
By /s/ Albert C. Yates
Albert C. Yates
Director
March 28, 2002
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1
<SEQUENCE>3
<FILENAME>amendartic.txt
<DESCRIPTION>AMENDED ARITCLES OF INCORPORATION
<TEXT>
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ADOLPH COORS COMPANY
Pursuant to the provisions of the Colorado Business Corporation Act (the
"Act"), the undersigned corporation adopts the following Second Amended and
Restated Articles of Incorporation. These articles correctly set forth the
provisions of the Articles of Incorporation, as amended, and supersede the
first Amended and Restated Articles of Incorporation and all amendments
thereto.
FIRST: The name of the Corporation is Adolph Coors Company.
SECOND: The following Second Amended and Restated Articles of
Incorporation were adopted on May 17, 2001. The Second Amended
and Restated Articles of Incorporation were adopted by a vote
of the shareholders. The number of shares voted for the Second
Amended and Restated Articles of Incorporation was sufficient
for approval.
THIRD: The Articles of Incorporation shall be amended to read in their
entirety as follows:
ARTICLE I
Name
The name of the Corporation is Adolph Coors Company.
ARTICLE II
Duration
The Corporation shall have perpetual existence.
ARTICLE III
Purposes and Powers
(a) The Corporation is organized for the purposes of engaging in
lawful acts and activities for which corporations may be organized under
the laws of the state of Colorado.
(b) Without limitation and in furtherance of the purposes set forth
above, the Corporation shall have and may exercise any and all of the
rights, powers and privileges now or hereafter conferred upon corporations
organized under and pursuant to the laws of the state of Colorado,
including the following powers:
(1) To acquire by purchase, exchange, lease, or otherwise,
and to hold, mortgage, pledge, hypothecate, exchange, sell, invest in
and dispose of, alone, or in syndicates, or otherwise in conjunction
with others, real and personal property of every kind and character,
of whatsoever nature and wheresoever situate, and any interests
therein.
(2) To acquire by purchase, exchange, or otherwise, all or
any part of, or interests in, the properties, assets, business,
goodwill of any one or more persons, firms, associations, or
corporations heretofore or hereafter engaged in any business for
which corporations may now or hereafter be organized under the laws
of the state of Colorado.
(3) To borrow or raise money without limit as to amounts; to
contract for, perform, and provide for the performance of services in
any nature which a corporation may lawfully perform; to act as a
dealer for the sale of, to enter into underwriting agreements with
respect to, to grant options with respect to, and to contract for the
disposition of, or otherwise dispose of, the Corporation's stocks,
bonds, and other securities.
(4) To invest and deal with the funds of the Corporation in
any legal manner, and to acquire by purchase of otherwise the stocks,
bonds, notes, debentures and other securities and obligations of any
corporation, association, partnership or government, and while the
owner of any such securities or obligations, to exercise all the
rights, powers and privileges of ownership, including, among other
things, the right to vote thereon for any and all purposes.
(5) To do everything necessary, proper, advisable, or
convenient for the accomplishment of the Corporation's purposes and
all other things incidental thereto or connected therewith so long as
the same shall not be prohibited by law or by these Articles of
Incorporation.
ARTICLE IV
Capital; Shareholders
(a) Authorized Capital. The aggregate number of shares of Capital
Stock which the Corporation shall have authority to issue is 226,260,000,
said shares to consist of the following:
(1) 1,260,000 shares of Class A Common Stock (Voting),
without par value ("Class A Stock");
(2) 200,000,000 shares of Class B Common Stock (Non-Voting),
without par value ("Class B Stock"); and
(3) 25,000,000 shares of Preferred Stock, without par value
("Preferred Stock").
(b) Shares Fully Paid and Nonassessable. All shares of Class A
Stock, all shares of Class B Stock and all of shares of Preferred Stock
issued by the Corporation shall be fully paid and nonassessable.
(c) Rights of Common Stock. The relative rights, privileges and
limitations of the shares of each class of Common Stock are as follows:
(1) The Class A Stock and Class B Stock shall be identical in
all respects, share for share, except with respect to the right to
vote. The right to vote for the election of directors and for all
other purposes shall be vested exclusively in the holders of Class A
Stock. The holders of Class B Stock shall not have the right to vote
at or receive any notice of meetings of shareholders except where
applicable provisions of the Act or these Articles of Incorporation
entitle holders of Class B Stock to vote. On any matter on which the
Act or these Articles of Incorporation so entitle holders of Class B
Stock to vote because the matter requires the vote of holders of both
Class A Stock and Class B Stock, the holders of Class A Stock and
Class B Stock shall vote as separate classes. In addition, the
holders of Class A Stock and Class B Stock shall have the right to
and shall vote, as separate classes, on any sale, lease, exchange or
other disposition of all or substantially all of the property and
assets of the Company on which the Colorado Corporation Code requires
approval by holders of Class A Stock.
(2) The holders of Class A Stock and the holders of Class B
Stock shall be entitled to receive such dividends as shall be
declared from time to time by the Board of Directors (the "Board")
out of funds legally available therefor, except that so long as any
shares of Class B Stock are outstanding, no dividends shall be
declared or paid on any Class A Stock unless at the same time there
shall be declared or paid, as the case may be, a dividend on Class B
Stock in an amount per share equal to the amount per share of the
dividend declared or paid on the Class A Stock.
(3) The Board may declare and distribute dividends to the
holders of Class A Stock and the holders of Class B Stock in the form
of shares of Common Stock of the Corporation. Dividends payable in
Common Stock to the holders of Class A Stock may be made in
authorized and unissued shares of Class A Stock or in authorized and
unissued shares of Class B Stock as the Board determines. Dividends
payable in Common Stock to the holders of Class B Stock may be made
in authorized and unissued shares of Class B Stock.
(4) Notwithstanding subparagraph (c)(1) of this Article IV,
at any time when, and for so long as, the Corporation has no shares
of Class A Stock outstanding, the Class B Stock shall automatically,
without further action by the Board or shareholders, be converted
into voting stock and shall have the right to vote for the election
of directors and for all other purposes, and all references in these
Articles of Incorporation to required votes of the Class A Stock
shall be deemed to refer to the Class B Stock. At such time as the
Corporation reissues one or more shares of Class A Stock, the voting
rights of the Class B Stock shall be as set forth in subparagraph
(c)(1) of this Article IV and not in this subparagraph (c)(5).
(d) Rights of Preferred Stock. The Board is authorized, subject to
limitations prescribed by law and to the provisions of this Article IV, to
provide for the issuance of shares of Preferred Stock in series and, by
filing articles of amendment pursuant to the Act (a "Statement of
Designations"), to establish the number of shares of Preferred Stock of
each series. The authority of the Board with respect to each series shall,
to the extent allowed by the Act, but subject to the qualifications,
limitations and restrictions set forth in this Article IV, include, without
limitation, the authority to establish and fix the following:
(1) The number of shares initially constituting such series
and the distinctive designation of such series;
(2) Whether such series shall have any dividend rights, and,
if so, the dividend rate on the shares of such series, the time of
payment of such dividends, whether such dividends are cumulative and
the date from which any dividends shall be cumulative;
(3) Whether any of the shares of such series shall be
redeemable, and, if so, the price (or method of determining the
price) at which and the terms and conditions upon which such shares
shall be redeemable;
(4) Whether such series shall have a sinking fund or reserve
account for the redemption or purchase of shares of such series, and,
if so, the terms and amount of such sinking fund or reserve account;
(5) The rights of the shares of such series upon the
voluntary or involuntary liquidation, dissolution or winding up of
the Corporation;
(6) Subject to subparagraph (d)(iv) of this Article IV, the
terms of voting rights of shares of that series; and
(7) Whether such series shall have conversion privileges,
and, if so, the terms and conditions of such conversion privileges
including provisions, if any, for adjustment of the conversion rate
and for payment of additional amounts by holders of shares of that
series upon exercise of such conversion privileges.
The Board is expressly authorized to vary the provisions relating to
the foregoing matters between the various series of Preferred Stock, but,
unless otherwise specified in the Statement of Designations, in all other
respects the shares of each series shall be of equal rank with each other
regardless of series. Notwithstanding the fixing of the number of shares
constituting a particular series upon the issuance thereof, unless
otherwise specified in the Statement of Designations, the Board may at any
time thereafter authorize the issuance of additional shares of the same
series or may reduce (but not below the number of shares then outstanding)
the number of shares constituting such series. In case the number of
shares of Preferred Stock is reduced, the shares representing such decrease
shall, unless otherwise specified in the Statement of Designations, be
restored to the status of authorized and unissued Preferred Stock and may
be reissued as a part of the series of which they were originally a part or
may be reclassified and reissued as part of any other series of Preferred
Stock.
Any of the terms of a series of Preferred Stock may be made dependent
upon facts ascertainable outside of these Articles of Incorporation and the
Statement of Designations creating the series, provided that the manner in
which such facts shall operate upon such series is clearly and expressly
set forth in these Articles of Incorporation or in the Statement of
Designations.
(i) Dividend Rights. A Statement of Designations may
prescribe such dividend rights, if any, for a series of Preferred
Stock as the Board shall determine. So long as any shares of
Preferred Stock are outstanding, no dividends or other distributions
(other than dividends or distributions payable in shares of Common
Stock or any other class of stock ranking junior to the Preferred
Stock as to dividends or upon liquidation) shall be declared or paid
or set aside for payment upon the Common Stock or upon any other
class of stock ranking junior to the Preferred Stock as to dividends
or upon liquidation, unless all dividends payable to holders of each
series of outstanding Preferred Stock for its current dividend
period, and in the case of cumulative dividends all past dividend
periods have been paid, are being paid or have been set aside for
payment, in accordance with the terms of the applicable Statement of
Designations. In addition, the Corporation shall not redeem,
purchase, or otherwise acquire for any consideration any Common Stock
or any other class of stock ranking junior to the Preferred Stock as
to dividends or upon liquidation, unless all dividends payable to
holders of each series of outstanding Preferred Stock for its current
dividend period, and in the case of cumulative dividends all past
dividend periods, have been paid, are being paid or have been set
aside for payment, in accordance with the terms of the applicable
Statement of Designations.
(ii) Redemption. A Statement of Designations may
prescribe such redemption rights and obligations and sinking fund
provisions, if any, with respect to a series of Preferred Stock as
the Board shall determine. Except as otherwise specified in the
Statement of Designations, shares of Preferred Stock of any series
that have been redeemed (whether through the operation of a sinking
fund or otherwise) or purchased or otherwise acquired by the
Corporation or which, if convertible, have been converted into shares
of stock of the Corporation of any other class or classes, shall be
restored to the status of authorized and unissued Preferred Stock and
may be reissued as a part of the series of which they were originally
a part or may be reclassified and reissued as part of any other
series of Preferred Stock.
(iii) Rights on Liquidation. A Statement of Designations
shall prescribe such rights on liquidation or dissolution of the
Corporation (whether voluntary or involuntary) with respect to a
series of Preferred Stock as the Board shall determine, provided
that, without limitation, the voluntary sale, lease, exchange or
transfer (for each, securities or other consideration) of all or
substantially all of the Corporation's property or assets to, or its
consolidation or merger with, any other corporation or corporations
shall not be deemed to be a liquidation or dissolution or winding up
of the Corporation, voluntary or involuntary.
(iv) Voting Rights. No series of Preferred Stock shall
be granted the right to vote on any matter, except as required by the
Act. As to those matters upon which the Preferred Stock is granted
the right to vote by the Act, a Statement of Designations may
designate the terms upon which the Preferred Stock is to vote,
including the number of votes each share of the Preferred Stock shall
be entitled to, and whether a series of Preferred Stock shall vote as
a separate class or with any other series of the Preferred Stock or
with any class or series of the Common Stock.
(v) Conversion Rights. A Statement of Designations may
provide such rights, if any, for the holders of a series of Preferred
Stock to convert their shares into any other class or series of stock
at such price or prices or at such rates of exchange and with such
adjustments as the Board shall determine. Except as otherwise
specified in the Statement of Designations, shares of Preferred Stock
of any series that have been so converted shall be restored to the
status of authorized and unissued Preferred Stock and may be reissued
as a part of the series of which they were originally a part or may
be reclassified and reissued as part of any other series of Preferred
Stock.
(e) Vote Required. Except as otherwise required by law or provided
in these Articles of Incorporation, any action that, but for this sentence,
would require the vote of two-thirds of the votes entitled to be cast on
such action, shall require only the approval of a majority of the voting
power of the votes to be cast on that action.
ARTICLE V
No Preemptive Rights
No shareholder of the Corporation shall have any preemptive or
preferential right of subscription to any shares of any class of stock of
the Corporation, whether now or hereafter authorized, or to any obligations
convertible into shares of the Corporation, issued or sold, nor any right
of subscriptions to any shares other than such right, if any, and at such
price as the Board, in its discretion from time to time may determine,
pursuant to the authority thereby conferred by the Articles of
Incorporation, and the Board may issue shares of the Corporation or
obligations of the Corporation convertible into shares without offering
such issue, either in whole or in part, to the shareholders of the
Corporation. The Board may issue stock options to directors, officers, and
employees in accordance with applicable law and without first offering such
options to shareholders of the Corporation, and no shareholder shall have
any preemptive right in, or preemptive right to subscribe to, any such
options or the underlying shares issued pursuant to such options.
ARTICLE VI
No Cumulative Voting
Cumulative voting shall not be allowed in the election of directors or for
any other purpose.
ARTICLE VII
Registered Office and Agent
The address of the Corporation's registered office in the state of
Colorado is at 12th and East Streets in Golden, Colorado 80401. The name
of the Corporation's registered agent at such address is M. Caroline
Turner.
ARTICLE VIII
Board of Directors
(a) General. The affairs of the Corporation shall be governed by a
Board of not less than three (3) directors. Subject to such limitation,
the number of directors, and the method by which the directors shall be
elected shall be set forth in the Bylaws of the Corporation.
(b) Vacancies. Any vacancies on the Board, however occurring,
shall be filled by the holders of Class A Stock or the directors elected by
holders of Class A Stock.
(c) Removal. Any director may be removed, with or without cause by
the vote of the holders of Class A Stock.
ARTICLE VIII
Limitation on Liability
To the fullest extent permitted by the Act, as the same exists or may
hereafter be amended, no director of the Corporation shall be personally
liable to the Corporation or its shareholders for monetary damages for
breach of fiduciary duty as a director, except that this provision shall
not eliminate or limit the liability of a director to the Corporation or to
its shareholders for monetary damages otherwise existing for (i) any breach
of the director's duty of loyalty to the Corporation or to its
shareholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) acts specified
in Section 7-108-403 of the Act relating to any unlawful distribution; or
(iv) any transaction from which the director directly or indirectly derived
any improper personal benefit. If the Act is hereafter amended to
eliminate or limit further the liability of a director, then, in addition
to the elimination and limitation of liability provided by the preceding
sentence, the liability of each director shall be eliminated or limited to
the fullest extent permitted by the Act as so amended. Any repeal or
modification of this Article VIII by the shareholders of the Corporation
shall be prospective only and shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such
repeal or modification.
ARTICLE IX
Indemnification
Each person who is or was a director or officer of the Corporation,
and each such person who is or was serving at the request of the
Corporation as a director or officer of another corporation, or of a
partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans maintained or sponsored by the
Corporation (including the heirs, executors, administrators and estate of
such person) shall be indemnified by the Corporation, in accordance with
the Bylaws of the Corporation, to the fullest extent permitted from time to
time by the Act or any other applicable laws as presently or hereafter in
effect. The Corporation may, to the extent authorized from time to time by
the Board, grant rights to indemnification and to the advancement of
expenses to any employee or agent of the Corporation to the fullest extent
of the provisions of this Article IX with respect to the indemnification
and advancement of expenses of directors and officers of the Corporation.
Without limiting the generality or the effect of the foregoing, the
Corporation may enter into one or more agreements with any person that
provide for indemnification greater or different than that provided in this
Article IX. No amendment or repeal of this Article IX shall adversely
affect any right or protection existing hereunder or pursuant hereto
immediately prior to such amendment or repeal.
ARTICLE X
Bylaws
The Board shall be vested with the power to alter, amend, or repeal
the Bylaws and to adopt new Bylaws. The Corporation may, in its Bylaws or
otherwise, impose restrictions on the transfer of its shares.
IN WITNESS WHEREOF, Adolph Coors Company has caused these Second
Amended and Restated Articles of Incorporation to be duly executed as of
the 17th day of May, 2001.
ADOLPH COORS COMPANY
By: /s/ M. Caroline Turner
Name: M. Caroline Turner
Title: Vice President
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2
<SEQUENCE>4
<FILENAME>cipplan02.txt
<DESCRIPTION>CIP OPLAN
<TEXT>
COORS BREWING COMPANY
2002 COORS INCENTIVE PLAN
(CIP)
PARTICIPANTS:
All Directors and above and employees in salary bands E01 to E07 and N01 to
N11 are eligible to participate in the Coors Incentive Plan (the "Plan").
No individual in another incentive plan will be eligible for participation
in the Plan.
Participants who are newly hired or promoted into an eligible position
during the Plan year will receive a prorated share of the incentive payment
based on the number of calendar days spent in an eligible position divided
by the actual number of days during the year of the Plan.
BONUS PAYOUT PARAMETERS:
All participants will be evaluated based on at least two separate bonus
components, including the achievement of Company financial performance
goals, individual performance goals, and plant goals, if applicable.
Additionally, a multiplier will be applied based on CBC quality, as
measured by consumer complaints.
PARTICIPATION LEVELS AND PARAMETERS:
Annual incentive target percents are based on salary bands. The salary band
and applicable participation percent, as of January 1, 2002, or the new
hire/promotion date if later, is used for incentive calculations as
follows:
Position Target UK US Global Individual
CEO/Chairman 100%/80% 100%
CEO (CBL) 60% 75% 25%
Global Executives 60%/50% 75% 25%
Corporate Brewery Operations &
Technology Container
Salary Band/ Incentive Indi- Indi- Indi-
Position Target % CBC vidual CBC vidual Plant vidual Plant
Senior VP 50% 75% 25%
Group VP 45% 75% 25% 37.5% 25% 37.5% 25% 75%
VPs 40% 40% 60% 20% 60% 20% 60% 40%
Director 30% 40% 60% 20% 60% 20% 60% 40%
E07 25%
E06 20%
E05 15% 40% 60% 20% 60% 20% 60% 40%
E01-E04 10%
N01-N11 5%
All participants will be measured on some combination of Company, Plant (if
applicable), Individual and Quality performance goals, depending on their
position in the Company, in accordance with the table set forth above. Each
individual measurement component constitutes a separate bonus arrangement,
but the separate individual bonus components will be payable, to the extent
amounts are payable in accordance with the terms hereof, at the same time
as a part of one payment.
*The senior officers responsible for Coors Operations and Technology and the
senior officer responsible for Human Resources have authority to subdivide
the separate Individual bonus component to reflect other performance criteria
without the necessity of further board or shareholder approval.
COMPANY FINANCIAL TARGETS:
Annual Company financial goals will be measured based on pre-tax income
before special charges or credits for 2002 after incentive plan payouts (in
millions). The targeted financial goals based on pre-tax income for 2002
shall be established in writing by the Compensation Committee of the
Company's Board of Directors (the "Compensation Committee") within the time
parameters required by section 162(m) of the Code and the Regulations
thereunder. At the Company's sole discretion, it may choose to use
line/operational results as a substitute for certain organizational targets
in lieu of the Company financial targets, provided, however, that the Company
may not change the Company financial targets in any way with respect to
individuals who are subject to the deduction limits of section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code").
Definitions:
Pretax Income - Income before income taxes for external financial reporting
purposes as prepared by the Company's outside auditors and as shown on the
Company's Annual Report. Income is defined as Revenues (amounts received
from the sales of beer) less Costs (manufacturing costs including brewing,
packaging, raw materials, and freight, and all other costs required to run
the business including marketing, selling, support costs, interest
expense/(income), etc.). This includes both Domestic and International and
would also include the revenue and expenses associated with entering an
international market.
Special Charges (Credits) - Extraordinary items (one-time unusual events)
which are set forth on Schedule A attached hereto and hereby made a part of
this Plan or which are otherwise separately identified in the Company's
external financial statements as prepared by the Company's outside
auditors.
If the Company financial goals are achieved, each eligible participant will
receive a separate bonus based on the Company component. None of the Company
bonus portion will be paid if pre-tax income falls below a minimum of 75% of
the target financial goal. For each 1% the Company pretax income exceeds the
target goal, the Company financial target bonus will increase 2% above the
target payout level up to the maximum financial target payout of 150%. The
amount of the Company financial target bonus will be reduced 2% from target
for each 1% that actual results fall below the target pretax income goal.
For calendar year 2002, the Compensation Committee has established specific
quality goals, as set forth on Schedule B attached hereto and hereby made a
part of this Plan. Achievement of the quality goal will result in an
increase in the Company financial bonus by 10% if an Above Target rating is
achieved. An On Target rating will have no impact on bonus payouts and
Below Target will result in a decrease in the Company financial portion of
the payout by 10%. The quality objectives will be measured by percentage
reductions in consumer complaints compared to 2001, as specified on
Schedule B.
Individuals with Plant responsibility will be linked to performance measures
for hourly employees in Operations that includes an additional quality
measure, provided, however, that individuals whose compensation is subject to
the deduction limits of section 162(m) of the Code shall have their bonuses
based solely on a criteria specified herein.
Notwithstanding the foregoing, the maximum bonus that may be paid to any
individual under this Plan for calendar 2002 with respect to the Company
financial target bonus portion of the Plan shall be $2 million.
Furthermore the maximum bonus that may be paid to the Chairman of Coors
Brewing Company (the "Chairman") and to the President and Chief Executive
Officer of Coors Brewing Company (the "President") shall not exceed specified
percentages of a performance pool for 2002 which shall be equal to 0.9% of
the Company's pre-tax earnings as reported in the Company's annual report for
the year ending December 31, 2002 (the "Performance Pool"). The share of the
Performance Pool that is allocated to the Chairman is 46% and the share of
the Performance Pool that is allocated to the President is 54%. The
Compensation Committee shall have the discretion to reduce the amount payable
to either or both of the Chairman or the President; provided however, that
any reduction shall be made in accordance with the requirements of section
162(m) of the Code and shall not result in the increase in any other bonus
payable under the Plan.
INDIVIDUAL PERFORMANCE GOALS:
The individual bonus is independent of Company financial performance and is
based on achievement of individual performance goals. The individual
incentive opportunity can increase or decrease, based on performance,
according to whether an individual is Below Target (BT), On Target (OT), or
Above Target (AT), according to guidelines developed by Human Resources.
Individual performance goals will be documented and agreed upon by the later
of February 1 of the Plan year or 30 days after the start date in the Plan.
Each participant will meet with his or her immediate supervisor to develop
individual goals in support of the Company strategies. These goals will be
written and signed off by the participant and the supervisor before
implementation. At the end of the Plan year each supervisor must submit in
writing the results of each individual performance goal and the individual
performance multiplier.
PLANT PERFORMANCE:
The final portion of the bonus applies to those individuals with plant
responsibilities. This piece will be funded separately from the corporate
component, according to specific plant performance measures as identified
by Human Resources and plant senior management. Payouts will be based on
achievement against specifically identified goals.
FORM AND TIMING OF PAYMENTS:
At the end of the plan year final awards will be calculated. The payment of
the Company financial target bonus to certain individuals shall be subject to
the additional Compensation Committee certification requirements described
below. Payments will be made as soon as practicable after the end of the plan
year and after any necessary Compensation Committee certification required
under this Plan.
FEDERAL, STATE AND FICA TAX WITHHOLDING:
The Company will be required to withhold all applicable federal, state, local
and foreign income, employment and other taxes on the awards.
TAX TREATMENT:
Participants realize taxable income at the date the incentive payout is
received.
DISCLAIMER:
The Compensation Committee reserves the right to change, amend or terminate
this Plan at any time, for any reason at its sole discretion. This Plan
supersedes all prior documentation relating to the Annual Coors Incentive
Plan.
SHAREHOLDER APPROVAL:
Notwithstanding the foregoing provisions of this Plan, no bonus shall be paid
under this Plan to an employee to the extent that such payment would be non-
deductible under the provisions of section 162(m) of the Code unless and
until the stockholders of the Company have approved this Plan and the
material terms of the performance goals established under this Plan in
conformity with the requirements of section 162(m) of the Code and the
Regulations thereunder.
COMPENSATION COMMITTEE CERTIFICATION:
Prior to the payment of any amounts hereunder to an individual whose
compensation is subject to the deduction limitations of section 162(m) of the
Code, the Compensation Committee shall certify in writing the extent to which
the performance factors established by the Compensation Committee have been
satisfied and shall approve the payment of such bonuses to such individuals.
NOT EMPLOYMENT CONTRACT:
At no time is this plan to be considered an employment contract between the
participants and the Company. It does not guarantee participants the right to
be continued as an employee of the Company. It does not affect a
participant's right to leave the Company or the Company's right to discharge
a participant.
TERMINATION PROVISIONS:
Participants must be on the payroll as of 1-1-2003 to receive payment. Any
exceptions must be approved by the CEO, provided, however, that any
individual whose compensation is subject to the deduction limitations of
section 162(m) of the Code cannot receive an exception to the employment
requirement. Participants on LOA (leave of absence) will receive a prorata
share based on days worked.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3
<SEQUENCE>5
<FILENAME>micplan01.txt
<DESCRIPTION>MIC PLAN
<TEXT>
COORS BREWING COMPANY
2001 ANNUAL MANAGEMENT INCENTIVE COMPENSATION PLAN
(MIC)
PARTICIPANTS:
All Department Directors and above in salary grades E08 and E09 will
participate in an annual incentive program known as the Management Incentive
Compensation Plan (MIC).
Participants who are newly hired or promoted into an eligible position during
the Plan year will be eligible to receive a pro-rata share of the incentive
payment based on the number of calendar days spent in an eligible position
divided by the actual number of days during the year of the Plan.
ANNUAL INCENTIVE PROGRAM TARGET LEVELS AS A PERCENT OF BASE SALARY AS OF
1-1-2001 OR PLAN ENTRY DATE IF LATER:
Total On Target
Bonus
Position Potential
Chairman/CEO 80%
COO 75%
Executive Staff 50%
Vice President 40%
Other Participants 30%
BONUS PAYOUT PARAMETERS:
The Chairman, Chief Executive Officer (CEO) and Chief Operating Officer (COO)
will be measured only on Company financial performance (as modified by
quality performance noted below). All other participants will be evaluated
based on two components, the achievement of Company financial performance
goals (as modified by quality performance noted below) and individual
performance goals. The percentages of the total potential bonus are:
Company Individual
Position Component Component*
Chairman/CEO/COO 100% 0%
Executive Staff 75% 25%
Vice President 40% 60%
Other Participants 40% 60%
*The senior officer responsible for Coors Operations and Technology and the
senior officer responsible for Human Resources have authority to subdivide
the Individual Component to reflect other performance criteria without the
necessity of further board or shareholder approval.
If the Company financial goals are achieved, each participant will receive
the portion of the bonus based on the Company component. None of the Company
portion will be paid if pre-tax income falls below a minimum of 75% of the
target financial goal. The amount of the Company component will be reduced
2% from target for each 1% that actual results fall below the target pretax
income goal. For each 1% the Company pretax income exceeds the target goal,
the target Company component will increase 2% up to the maximum of the
financial goal.
For calendar year 2001 the Company has established specific quality goals.
Achievement of the quality goal will result in an increase in the financial
portion of the payout by 10% if an Above Target rating is achieved. An On
Target rating will have no impact to bonus pay outs and Below Target will
result in a decrease in the financial portion of the payout by 10%. The
quality objectives will be measured by percentage reductions in consumer
complaints:
Above Target - 6.01% or greater
On Target - 5-6%
Below Target - 4.99% or less
COMPANY FINANCIAL TARGETS:
Annual Company financial goals will be measured based on pre-tax income
before special charges or credits for 2001 after incentive plan payouts (in
millions).
Minimum Target Maximum
$157.5MM $210.0MM $315.0MM
Definitions:
Pretax Income - Income before income taxes for external reporting purposes
as shown on the Annual Report including both Domestic and International and
also including the revenue and expenses associated with entering an
international market.
Special Charges (Credits) - Extraordinary items (one-time unusual events)
which are separately identified in the Company's internal and external
financial statements and other special items as defined by management.
INDIVIDUAL PERFORMANCE GOALS:
The other portion of the bonus is based on achievement of individual
performance goals. The individual portion of the bonus is not dependent on
fulfillment of Company financial goals. Individual performance payouts will
be based on an individual incentive multiplier of between 0 and 150%,
multiplied by the amount equal to the dollar amount of the individual
performance component at target:
Above Target (125-150%)
On Target (90-110%)
Below Target (0-70%)
Individual performance goals will be documented and agreed upon by the later
of February 1 of the Plan year or 30 days after the start date in the Plan.
Each participant will meet with his or her immediate supervisor to develop
individual goals in support of the Company strategies. These goals will be
written and signed off by the participant and the supervisor before
implementation. All individual goals must be reviewed and approved by the
COO or the CEO. At the end of the Plan year each supervisor must submit in
writing the results of each individual performance goal and the individual
performance multiplier.
FORM AND TIMING OF PAYMENTS:
At the end of the plan year final awards will be calculated. Payments will
be made as soon as practicable after the end of the plan year.
FEDERAL, STATE AND FICA TAX WITHHOLDING:
The Company will be required to withhold all applicable federal, state and
FICA income taxes on the awards.
TAX TREATMENT:
Participants realize taxable income at the date the incentive payout is
received.
DISCLAIMER:
Coors Brewing Company reserves the right to change, amend or terminate this
Plan at any time, for any reason at its sole discretion. This Plan
supersedes all prior documentation relating to the Annual Management
Incentive Compensation Plan.
NOT EMPLOYMENT CONTRACT:
At no time is this plan to be considered an employment contract between the
participants and the Company. It does not guarantee participants the right
to be continued as an employee of the Company. It does not effect a
participant's right to leave the Company or the Company's right to discharge
a participant.
TERMINATION PROVISIONS:
Participants must be on the payroll as of 1-1-2002 to receive payment. The
CEO must approve any exceptions.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>6
<FILENAME>creditagre.txt
<DESCRIPTION>CREDIT AGREEMENT
<TEXT>
EXECUTION VERSION
CREDIT AGREEMENT
dated as of
February 1, 2002
among
ADOLPH COORS COMPANY
COORS BREWING COMPANY
GOLDEN ACQUISITION LIMITED
The Lenders Party Hereto
BANK ONE, N.A.
FIRST UNION NATIONAL BANK
MORGAN STANLEY SENIOR FUNDING, INC.,
as Co-Documentation Agents,
DEUTSCHE BANC ALEX. BROWN INC.,
as Syndication Agent,
JPMORGAN CHASE BANK,
as Administrative Agent
and
J.P. MORGAN EUROPE LIMITED,
as London Agent
JPMORGAN CHASE BANK
DEUTSCHE BANC ALEX. BROWN INC.
BANK ONE, N.A.
LLOYDS BANK
FIRST UNION SECURITIES, INC.
MORGAN STANLEY SENIOR FUNDING, INC.
as Co-Arrangers
and
J.P. MORGAN SECURITIES INC.
DEUTSCHE BANC ALEX. BROWN INC.,
as Joint Lead Arrangers and Joint Bookrunners
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Defined Terms 1
SECTION 1.02. Classification of Loans and Borrowings 17
SECTION 1.03. Terms Generally 17
SECTION 1.04. Accounting Terms; GAAP 17
SECTION 1.05. Exchange Rates 18
ARTICLE II
The Credits
SECTION 2.01. Commitments 18
SECTION 2.02. Loans and Borrowings 18
SECTION 2.03. Requests for Borrowings 19
SECTION 2.04. Letters of Credit 20
SECTION 2.05. Funding of Borrowings 23
SECTION 2.06. Interest Elections 23
SECTION 2.07. Termination and Reduction of Commitments 24
SECTION 2.08. Repayment of Loans; Evidence of Debt 25
SECTION 2.09. Amortization of Term Loans 25
SECTION 2.10. Prepayment of Loans 26
SECTION 2.11. Fees 27
SECTION 2.12. Interest 28
SECTION 2.13. Alternate Rate of Interest 29
SECTION 2.14. Increased Costs 29
SECTION 2.15. Break Funding Payments 30
SECTION 2.16. Taxes 30
SECTION 2.17. Payments Generally; Pro Rata Treatment;
Sharing of Set-offs 31
SECTION 2.18. Mitigation Obligations; Replacement of Lenders 32
SECTION 2.19. Designation of Additional Subsidiary Borrowers 33
SECTION 2.20. Additional Reserve Costs 33
SECTION 2.21. Redenomination of Certain Designated Foreign Currencies 33
ARTICLE III
Representations and Warranties
SECTION 3.01. Organization; Powers 34
SECTION 3.02. Authorization; Enforceability 34
SECTION 3.03. Governmental Approvals; No Conflicts 34
SECTION 3.04. Financial Condition; No Material Adverse Change 34
SECTION 3.05. Properties 35
SECTION 3.06. Litigation and Environmental Matters 35
SECTION 3.07. Compliance with Laws and Agreements 35
SECTION 3.08. Investment and Holding Company Status 35
SECTION 3.09. Taxes 36
SECTION 3.10. ERISA 36
SECTION 3.11. Disclosure 36
SECTION 3.12 Margin Stock 36
SECTION 3.13 Subsidiaries; Guarantee Requirement 36
ARTICLE IV
Conditions
SECTION 4.01. Effective Date 36
SECTION 4.02. Effectiveness of Obligations to Extend
Non-Acquisition Credit 37
SECTION 4.03. Each Credit Event 37
SECTION 4.04. Initial Credit Event for each US Subsidiary Borrower 38
ARTICLE V
Affirmative Covenants
SECTION 5.01. Financial Statements and Other Information 38
SECTION 5.02. Notices of Material Events 39
SECTION 5.03. Existence; Conduct of Business 39
SECTION 5.04. Payment of Obligations 39
SECTION 5.05. Maintenance of Properties; Insurance 40
SECTION 5.06. Books and Records; Inspection Rights 40
SECTION 5.07. Compliance with Laws 40
SECTION 5.08. Use of Proceeds 40
SECTION 5.09. Guarantee Requirement 40
SECTION 5.10. Indebtedness 40
ARTICLE VI
Negative Covenants
SECTION 6.01. Subsidiary Indebtedness 40
SECTION 6.02. Liens 41
SECTION 6.03. Sale and Leaseback Transactions 42
SECTION 6.04. Fundamental Changes 43
SECTION 6.05. Transactions with Affiliates 43
SECTION 6.06. Leverage Ratio 43
SECTION 6.07. Interest Coverage Ratio 43
ARTICLE VII
Events of Default and CAM
SECTION 7.01. Events of Default 43
SECTION 7.02. CAM Exchange 45
SECTION 7.03. Letters of Credit 45
ARTICLE VIII
Guarantee 46
ARTICLE IX
The Agents 47
ARTICLE X
Miscellaneous
SECTION 10.01. Notices 49
SECTION 10.02. Waivers; Amendments 50
SECTION 10.03. Expenses; Indemnity; Damage Waiver 50
SECTION 10.04. Successors and Assigns 51
SECTION 10.05. Survival 53
SECTION 10.06. Counterparts; Integration; Effectiveness 54
SECTION 10.07. Severability 54
SECTION 10.08. Right of Setoff 54
SECTION 10.09. Governing Law; Jurisdiction; Consent
to Service of Process 54
SECTION 10.10. WAIVER OF JURY TRIAL 55
SECTION 10.11. Headings 55
SECTION 10.12. Confidentiality 55
SECTION 10.13. Interest Rate Limitation 55
SECTION 10.14. Conversion of Currencies 55
SCHEDULES:
Schedule 2.01 -- Commitments
Schedule 2.17 -- Payment Instructions
Schedule 3.06 -- Disclosed Matters
Schedule 3.13 -- Subsidiary Guarantors
Schedule 6.01 -- Existing Indebtedness
Schedule 6.02 -- Existing Liens
EXHIBITS:
Exhibit A-1 -- Form of Borrowing Subsidiary Agreement
Exhibit A-2 -- Form of Borrowing Subsidiary Termination
Exhibit B -- Form of Assignment and Acceptance
Exhibit C -- Mandatory Costs Rate
Exhibit D -- Form of Subsidiary Guarantee Agreement
Exhibit E-1 -- Form of Opinion of Assistant Secretary of the Company
Exhibit E-2 -- Form of Opinion of US Counsel to the Company
Exhibit E-3 -- Form of Opinion of UK Counsel to the Company
CREDIT AGREEMENT dated as of February 1, 2002 among ADOLPH
COORS COMPANY, a Colorado corporation (the "Company"), COORS
BREWING COMPANY, a Colorado corporation ("CBC"), GOLDEN
ACQUISITION LIMITED, a company incorporated under the laws
of England and Wales (the "UK Borrower"), the LENDERS party
hereto, DEUTSCHE BANC ALEX. BROWN INC., as Syndication
Agent, J.P. MORGAN EUROPE LIMITED, as London Agent, and
JPMORGAN CHASE BANK, as Administrative Agent.
The Company intends to acquire (the "Acquisition") directly
or through wholly owned subsidiaries all the outstanding
shares of Bass Holdings Limited, a company incorporated
under the laws of England and Wales ("BHL"), from Interbrew
UK Holdings Limited ("Interbrew UK"), certain intellectual
property of Brandbrew S.A. ("Brandbrew") from Brandbrew,
certain export assets identified in the business purchase
agreement referred to in the Share Purchase Agreement owned
by Bass Brewers Worldwide Ltd. ("BBW") from BBW, the
Caffreys brand rights identified in the assignment agreement
made in connection with the Share Purchase Agreement from
BHL (together, the "Acquired Business"). In connection with
the Acquisition, the Company intends to loan BHL the funds
necessary to repay Indebtedness owed to Interbrew UK as
specified in the Share Purchase Agreement and to cause it to
repay such Indebtedness. The aggregate consideration for
the Acquisition and the repayment of such Indebtedness will
be approximately 1,200,000,000 in Sterling. In connection
with the Acquisition, the Company will (a) obtain
the credit facilities provided for under this Agreement and
(b) establish the Bridge Facility (such term and each other
capitalized term used but not otherwise defined herein
having the meaning assigned to it in Article I) in an
aggregate principal amount not to exceed $825,000,000.
The Borrowers have requested that the Lenders establish the
credit facilities provided for herein under which (i) the
Borrowers may obtain US Tranche Revolving Loans in US
Dollars or Sterling, in an aggregate principal amount of up
to $250,000,000, (ii) the UK Borrower may obtain UK Tranche
Revolving Loans in Sterling, and the Company, CBC and the UK
Borrower may obtain UK Tranche Revolving Loans in US
Dollars, Sterling or Euro, in an aggregate principal amount
of up to $50,000,000 and (iii) the Company, CBC and the UK
Borrower may obtain Term Loans in US Dollars or Sterling, in
an aggregate principal amount of up to $800,004,400. The
Term Loans will be used to provide a portion of the funds
required for the purchase of the Acquired Business and to
pay related fees and expenses and the Revolving Loans will
be used for working capital and general corporate purposes
(including refinancing the Company's maturing commercial
paper) and, if necessary, to fund a portion of the funds
required for the Acquisition and to pay related fees and
expenses. The Lenders are willing to establish such credit
facilities upon the terms and subject to the conditions set
forth herein. Accordingly, the parties hereto agree as
follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement,
the following terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such
Borrowing, are bearing interest at a rate determined by
reference to the Alternate Base Rate.
"Acquired Business" has the meaning assigned to such term in
the preamble hereto.
"Acquired Car Leasing Business" means the business carried
on by Bass Brewers Car Leasing.
"Acquisition" has the meaning assigned to such term in the
preamble hereto.
"Acquisition Loans" means Loans made on the Effective Date
the proceeds of which are used to fund the Acquisition or to
pay related fees and expenses.
"Adjusted LIBO Rate" means, with respect to any Eurocurrency
Borrowing for any Interest Period, an interest rate per
annum (rounded upwards, if necessary, to the next 1/100 of
1%) equal to (a) the LIBO Rate for such Interest Period
divided by (b) 1.00 minus the Statutory Reserves applicable
to such Eurocurrency Borrowing.
"Administrative Agent" means JPMorgan Chase Bank, in its
capacity as administrative agent for the Lenders hereunder,
or any successor administrative agent appointed in
accordance with Article IX.
"Administrative Questionnaire" means an Administrative
Questionnaire in a form supplied by the Administrative
Agent.
"Affiliate" means, with respect to a specified Person,
another Person that directly, or indirectly through one or
more intermediaries, Controls or is Controlled by or is
under common Control with the Person specified.
"Agents" means, collectively, the Administrative Agent and
the London Agent.
"Alternate Base Rate" means, for any
day, a rate per annum equal to the greater of (a) the Prime
Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. Any
change in the Alternate Base Rate due to a change in the
Prime Rate or the Federal Funds Effective Rate shall be
effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective
Rate, respectively.
"Applicable Agent" means (a) with respect to a Loan,
Borrowing or Letter of Credit denominated in US Dollars, and
with respect to any payment hereunder that does not relate
to a particular Loan or Borrowing, the Administrative Agent
and (b) with respect to a Loan, Borrowing or Letter of
Credit denominated in Sterling or Euro, the London Agent.
"Applicable Rate" means, for any day, with respect to any
ABR Loan or Eurocurrency Loan, or with respect to the
commitment fees payable hereunder, as the case may be, the
applicable rate per annum set forth below under the caption
"ABR Spread", "Eurocurrency Spread" or "Commitment Fee
Rate", as the case may be, based upon the ratings by S&P and
Moody's, respectively, applicable on such date to the Index
Debt:
Index Debt Ratings ABR Eurocurrency Commitment Fee
(S&P/Moody's): Spread Spread Rate
Category 1
BBB+/Baa1 or
higher 0.000% 0.875% 0.150%
Category 2
BBB/Baa2 0.000% 1.000% 0.175%
Category 3
BBB-/Baa3 0.250% 1.250% 0.200%
Category 4
BBB-/Ba1 or
BB+/Baa3 0.500% 1.500% 0.250%
Category 5
BB+/Ba1 0.750% 1.750% 0.275%
Category 6
BB/Ba2 or lower 1.250% 2.250% 0.375%
For purposes of the foregoing, (i) if either Moody's or S&P
shall not have in effect a rating for the Index Debt (other
than by reason of the circumstances referred to in the last
sentence of this definition), then such rating agency shall
be deemed to have established a rating in Category 6; (ii)
if the ratings established or deemed to have been
established by Moody's and S&P for the Index Debt shall fall
(A) within different Categories but each such rating shall
be within a Category at or above Category 4, the Applicable
Rate shall be based on the higher of the two ratings, unless
one of the ratings is two or more Categories lower than the
other, in which case the Applicable Rate shall be determined
by reference to the Category next below that of the higher
of the two ratings, (B) within Category 4, the Applicable
Rate shall be determined by reference to Category 4 and (C)
except in the case where Category 4 applies, within
different Categories but at least one of such ratings shall
be within a Category at or below Category 5, the Applicable
Rate shall be determined by reference to the lower of the
two ratings; and (iii) if the ratings established or deemed
to have been established by Moody's and S&P for the Index
Debt shall be changed (other than as a result of a change in
the rating system of Moody's or S&P), such change shall be
effective as of the date on which it is first announced by
the applicable rating agency, irrespective of when notice of
such change shall have been furnished by the Borrower to the
Agent and the Lenders pursuant to Section 5.01(f) hereof or
otherwise. Each change in the Applicable Rate shall apply
during the period commencing on the effective date of such
change and ending on the date immediately preceding the
effective date of the next such change. If the rating
system of Moody's or S&P shall change, or if either such
rating agency shall cease to be in the business of rating
corporate debt obligations, the Company and the Lenders
shall negotiate in good faith to amend this definition to
reflect such changed rating system or the unavailability of
ratings from such rating agency and, pending the
effectiveness of any such amendment, the Applicable Rate
shall be determined by reference to the rating most recently
in effect prior to such change or cessation.
"Asset Disposition" means (a) any sale, transfer or other
disposition of any capital stock of any Subsidiary to any
Person other than the Company or any Wholly Owned Subsidiary
(including, without limitation, through the merger of any
Subsidiary with or into any Person other than the Company or
any Wholly Owned Subsidiary), (b) any sale, transfer or
other disposition of any other property or asset of the
Company or any Subsidiary to any Person other than the
Company or any Wholly Owned Subsidiary, other than any sale,
transfer or other disposition of: (i) any current asset in
the ordinary course of business; (ii) any asset within 180
days after the acquisition, or completion of construction,
thereof to a Person other than the Company or a Subsidiary
who then leases such property to the Company or a
Subsidiary; (iii) the Acquired Car Leasing Business; (iv)
any Specified Asset; (v) any property or asset pursuant to a
Securitization Transaction permitted under Section 6.01(h);
and (vi) any other property or assets in the ordinary course
of business if the total consideration received by the
Company and the Subsidiaries in respect of any such sale,
transfer or other disposition, or series of related sales,
transfers or dispositions, does not exceed $5,000,000, or
(c) any casualty or other insured damage to, or any taking
under power of eminent domain or by condemnation or similar
proceeding of, assets of the Company or any Subsidiary where
the total consideration received by the Company and the
Subsidiaries in respect of such event or proceeding, or
series of events or proceedings, exceeds $5,000,000.
"Assignment and Acceptance" means an assignment and
acceptance entered into by a Lender and an assignee (with
the consent of any party whose consent is required by
Section 10.04), and accepted by the Administrative Agent, in
the form of Exhibit B or any other form approved by the
Administrative Agent.
"Attributable Debt" means, with respect to any Sale-
Leaseback Transaction, the present value (discounted at the
rate set forth or implicit in the terms of the lease
included in such Sale-Leaseback Transaction) of the total
obligations of the lessee for rental payments (other than
amounts required to be paid on account of taxes,
maintenance, repairs, insurance, assessments, utilities,
operating and labor costs and other items which do not
constitute payments for property rights) during the
remaining term of the lease included in such Sale-Leaseback
Transaction (including any period for which such lease has
been extended). In the case of any lease which is
terminable by the lessee upon payment of a penalty, the
Attributable Debt shall be the lesser of the Attributable
Debt determined assuming termination upon the first date
such lease may be terminated (in which case the Attributable
Debt shall also include the amount of the penalty, but no
rent shall be considered as required to be paid under such
lease subsequent to the first date upon which it may be so
terminated) or the Attributable Debt determined assuming no
such termination.
"BHL" has the meaning assigned to such term in the preamble
hereto.
"Board" means the Board of Governors of the Federal Reserve
System of the United States of America.
"Borrower" means the Company or any Borrowing Subsidiary.
"Borrowing" means (a) Revolving Loans of the same Type,
made, converted or continued on the same date and, in the
case of Eurocurrency Loans, as to which a single Interest
Period is in effect, or (b) Term Loans of the same Type
made, converted or continued on the same date and, in the
case of Eurocurrency Loans, as to which a single Interest
Period is in effect.
"Borrowing Minimum" means (a) in the case of a Borrowing
denominated in US Dollars, $5,000,000, (b) in the case of a
Borrowing denominated in British pound sterling, 5,000,000 and
(c) in the case of a Borrowing denominated in Euro dollars,
5,000,000.
"Borrowing Multiple" means (a) in the case of a Borrowing
denominated in US Dollars, $1,000,000, (b) in the case of a
Borrowing denominated in British pound sterling, 1,000,000 and
(c) in the case of a Borrowing denominated in Euro dollars,
1,000,000.
"Borrowing Request" means a request by a Borrower for a
Borrowing in accordance with Section 2.03.
"Borrowing Subsidiary" means CBC, the UK Borrower and any
other Subsidiary that has been designated as such pursuant
to Section 2.19 and that has not ceased to be a Borrowing
Subsidiary as provided in such Section.
"Borrowing Subsidiary Agreement" means a Borrowing
Subsidiary Agreement substantially in the form of Exhibit A-
1.
"Borrowing Subsidiary Termination" means a Borrowing
Subsidiary Termination substantially in the form of
Exhibit A-2.
"Bridge Facility" means the senior unsecured bridge credit
facility made available to the Company and CBC under the
Bridge Credit Agreement dated as of the date hereof among
the Company, CBC, the lenders named therein and JPMC, as
administrative agent, as amended from time to time. The
aggregate amount of the loans borrowed under the Bridge
Facility on the Effective Date was $750,000,000.
"Business Day" means any day that is not a Saturday, Sunday
or other day on which commercial banks in New York City are
authorized or required by law to remain closed; provided
that, (a) when used in connection with (i) a Eurocurrency
Loan or (ii) a Letter of Credit denominated in Sterling or
Euro, the term "Business Day" shall also exclude any day on
which banks are not open for dealings in deposits in the
applicable currency in the London interbank market, and
(b) when used in connection with a Loan denominated in Euro,
the term "Business Day" shall also exclude any day on which
the TARGET payment system is not open for the settlement of
payments in Euro.
"Calculation Date" means the last Business Day of each
fiscal quarter of the Company.
"CAM" means the mechanism for the allocation and exchange of
interests in Loans and other extensions of credit under the
several Tranches and Term Loans and collections thereunder
established under Section 7.02.
"CAM Exchange" means the exchange of the Lender's interests
provided for in Section 7.02.
"CAM Exchange Date" means the date on which any event
referred to in paragraph (h) or (i) of Section 7.01 shall
occur in respect of the Company or the UK Borrower.
"CAM Percentage" means, as to each Lender, a fraction,
expressed as a decimal, of which (a) the numerator shall be
the aggregate US Dollar Equivalent (determined on the basis
of Exchange Rates prevailing on the CAM Exchange Date) of
the Designated Obligations owed to such Lender (whether or
not at the time due and payable) and such Lender's
participations in undrawn amounts of Letters of Credit
immediately prior to the CAM Exchange Date and (b) the
denominator shall be the aggregate US Dollar Equivalent (as
so determined) of the Designated Obligations owed to all the
Lenders (whether or not at the time due and payable) and the
aggregate undrawn amount of undrawn Letters of Credit
immediately prior to the CAM Exchange Date.
"Capital Lease Obligations" of any Person means the
obligations of such Person to pay rent or other amounts
under any lease of (or other arrangement conveying the right
to use) real or personal property, or a combination thereof,
which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such
Person under GAAP, and the amount of such obligations shall
be the capitalized amount thereof determined in accordance
with GAAP.
"CBC" means Coors Brewing Company, a Colorado corporation.
"Change in Control" means (a) at any time when the Permitted
Holders do not beneficially own Equity Interests
representing more than 50% of the aggregate ordinary voting
power represented by the issued and outstanding Equity
Interests of the Company, the acquisition of ownership,
directly or indirectly, beneficially or of record, by any
Person or group (within the meaning of the Securities
Exchange Act of 1934 and the rules of the Securities and
Exchange Commission thereunder as in effect on the date
hereof), other than any Permitted Holder, of Equity
Interests representing more than 30% of the aggregate
ordinary voting power represented by the issued and
outstanding Equity Interests of the Company; (b) occupation
of a majority of the seats (other than vacant seats) on the
board of directors of the Company by Persons who were
neither (i) nominated by the board of directors of the
Company nor (ii) appointed by directors so nominated; or (c)
the acquisition of direct or indirect Control of the Company
by any Person or group, other than any Permitted Holder.
"Change in Law" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change
in any law, rule or regulation or in the interpretation or
application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by any Lender or
the Issuing Bank (or, for purposes of Section 2.15(b), by
any lending office of such Lender or by such Lender's or
Issuing Bank's holding company, if any) with any request,
guideline or directive (whether or not having the force of
law, but if not having the force of law, being of a type
with which such Person would ordinarily comply) of any
Governmental Authority made or issued after the date of this
Agreement.
"Class", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such
Borrowing, are US Tranche Revolving Loans, UK Tranche
Revolving Loans or Term Loans and, when used in reference to
any Commitment, refers to whether such Commitment is a US
Tranche Revolving Commitment, a UK Tranche Revolving
Commitment or a Term Loan Commitment.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Commitment" means a US Tranche Revolving Commitment, a
UK Tranche Revolving Commitment or Term Loan Commitment or
any combination thereof (as the context requires).
"Company" means Adolph Coors Company, a Colorado
corporation.
"Consolidated EBITDA" means, for any period, consolidated
net income of the Company and the Subsidiaries for such
period plus, without duplication and to the extent deducted
in determining such consolidated net income, the sum of
(i) Consolidated Interest Expense for such period,
(ii) consolidated income tax expense for such period,
(iii) all amounts attributable to depreciation and
amortization (or other impairment of intangible assets) for
such period, (iv) any non-cash charges for such period
(provided, that any cash payment made with respect to any
such non-cash charge shall be subtracted in computing
Consolidated EBITDA during the period in which such cash
payment is made), (v) cash charges for such period related
to the sale, transfer or other disposition of Specified
Assets in an aggregate amount for all periods for all such
cash charges not to exceed $50,000,000, and (vi)
extraordinary non-cash losses for such period (provided,
that any cash payments made in respect of items that are the
subject of any such extraordinary non-cash loss shall be
subtracted in computing Consolidated EBITDA during the
periods in which such cash payments are made), determined
without giving effect to any extraordinary gains for such
period (other than up to $10,000,000 of extraordinary cash
gains realized in such period) to the extent included in
determining consolidated net income of the Company and the
Subsidiaries, all determined on a consolidated basis in
accordance with GAAP; provided that for the purposes of
computing the ratios set forth in Sections 6.06 and 6.07 and
identifying the Significant Subsidiaries, Consolidated
EBITDA in respect of the fiscal quarter ending March 31,
2002, and the fiscal quarters ended December 30, 2001 and
September 30, 2001, shall include the consolidated EBITDA of
the Acquired Business, which shall be deemed to equal for
any such quarter (i) if pro forma quarterly consolidated
financial statements of the Acquired Business meeting the
requirements of Regulation S-X under the Securities Act of
1933 are available, the actual consolidated quarterly EBITDA
of the Acquired Business for such quarter, calculated in the
manner set forth above, or (ii) if such pro forma quarterly
consolidated financial statements of the Acquired Business
meeting the requirements of Regulation S-X under the
Securities Act of 1933 are not available, the annual
consolidated EBITDA of the Acquired Business, calculated in
the manner set forth above on the basis of audited annual
consolidated financial statements of the Acquired Business
for the four fiscal quarters ended December 30, 2001,
divided by four.
"Consolidated Interest Expense" means, for any period, the
interest expense of the Company and the Subsidiaries for
such period determined on a consolidated basis in accordance
with GAAP (and giving effect on a net basis to payments made
or received under interest rate protection agreements or
other interest rate hedging arrangements), including (a) the
amortization of debt discounts to the extent included in
interest expense in accordance with GAAP, (b) the
amortization of all fees (including fees with respect to
interest rate protection agreements or other interest rate
hedging arrangements) payable in connection with the
incurrence of Indebtedness to the extent included in
interest expense in accordance with GAAP, (c) commissions,
discounts and other fees and charges owed in respect of
letters of credit to the extent included in interest expense
in accordance with GAAP and (d) the portion of any rents
payable under capital leases allocable to interest expense
in accordance with GAAP. For purposes of determining the
ratio set forth in Section 6.07 for the four fiscal quarter
periods ended at June 30, 2002, September 29, 2002, and
December 29, 2002, Consolidated Interest Expense shall be
determined by multiplying Consolidated Interest Expense for
the period commencing April 1, 2002 by (i) 4, in the case of
the period ended June 30, 2002, (ii) 2, in the case of the
period ended September 29, 2002, and (iii) 4/3, in the case
of the period ended December 29, 2002.
"Consolidated Net Tangible Assets" means, at any time, the
aggregate amount of assets (less applicable accumulated
depreciation, depletion and amortization and other reserves
and other properly deductible items) of the Company and the
Subsidiaries, minus (a) all current liabilities of the
Company and the Subsidiaries (excluding (i) liabilities that
by their terms are extendable or renewable at the option of
the obligor to a date more than 12 months after the date of
determination and (ii) current maturities of long-term debt)
and (b) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other intangible
assets of the Company and the Subsidiaries, all as set forth
in the most recent consolidated balance sheet of the Company
and the Subsidiaries delivered pursuant to Section 5.01,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Debt" means, on any date, all
Indebtedness of the Company and the Subsidiaries on such
date (other than obligations referred to in clause (i) of
the definition of "Indebtedness" to the extent they support
liabilities that do not themselves constitute Indebtedness),
determined, without duplication, on a consolidated basis in
accordance with GAAP.
"Control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management
or policies of a Person, whether through the ability to
exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative
thereto.
"Default" means any event or condition which constitutes an
Event of Default or which upon notice, lapse of time or both
would become an Event of Default.
"Designated Obligations" means, in respect of this
Agreement, all Obligations of the Loan Parties in respect of
(a) principal of and interest on the Loans, (b) payments
required to be made hereunder in respect of Letters of
Credit, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide
cash collateral and (c) commitment fees and Letter of Credit
participation fees in respect of this Agreement, in each
case regardless of whether then due and payable.
"Disclosed Matters" means the actions, suits and proceedings
and the environmental matters disclosed in Schedule 3.06.
"dollars" or "$" refers to lawful money of the United States
of America.
"Domestic Subsidiary" means a Subsidiary that is not a
Foreign Subsidiary.
"Effective Date" means the date on which the conditions
specified in Section 4.01 are satisfied (or waived in
accordance with Section 10.02).
"EMU Legislation" means the legislative measures of the
European Union for the introduction of, changeover to or
operation of the Euro in one or more member states.
"Environmental Laws" means all applicable and legally
binding laws, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any
Governmental Authority, relating in any way to the
environment, preservation or reclamation of natural
resources, the management, release or threatened release of
any Hazardous Material or to environmental or workplace
health and safety matters.
"Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, costs of
environmental remediation, fines, penalties or indemnities),
of the Company or any Subsidiary directly or indirectly
resulting from or based upon (a) violation of any
Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any
Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any
Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant
to which liability is assumed or imposed with respect to any
of the foregoing.
"Equity Interests" means shares of capital stock,
partnership interests, membership interests in a limited
liability company, beneficial interests in a trust or other
equity ownership interests in a Person, and any warrants,
options or other rights entitling the holder thereof to
purchase or acquire any such equity interest.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or
not incorporated) that, together with the Company, is
treated as a single employer under Section 414(b) or (c) of
the Code or, solely for purposes of Section 302 of ERISA and
Section 412 of the Code, is treated as a single employer
under Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined
in Section 4043 of ERISA or the regulations issued
thereunder with respect to a Plan (other than an event for
which the 30-day notice period is waived); (b) the existence
with respect to any Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived; (c) the filing
pursuant to Section 412(d) of the Code or Section 303(d) of
ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (d) the incurrence by the
Company or any of its ERISA Affiliates of any liability
under Title IV of ERISA with respect to the termination of
any Plan; (e) the receipt by the Company or any ERISA
Affiliate from the PBGC or a plan administrator of any
notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f)
the incurrence by the Company or any of its ERISA Affiliates
of any liability with respect to the withdrawal or partial
withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by the Company or any ERISA Affiliate of any notice,
or the receipt by any Multiemployer Plan from the Company or
any ERISA Affiliate of any notice, concerning the imposition
of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA.
"Euro" or "_" means the single currency of the European
Union as constituted by the Treaty on European Union and as
referred to in the EMU Legislation.
"Eurocurrency", when used in reference to any Loan or
Borrowing, refers to whether such Loan, or the Loans
comprising such Borrowing, are bearing interest at a rate
determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in
Section 7.01.
"Exchange Rate" means on any day, for purposes of
determining the US Dollar Equivalent of any other currency,
the rate at which such other currency may be exchanged into
US Dollars, as set forth at approximately 11:00 a.m., London
time, on such day on the Bloomberg Index WCR page for such
currency, or if such rate does not appear on the Bloomberg
Index WCR, on the Reuters World Currency Page for such
currency. In the event that such rate does not appear on
any Reuters World Currency Page, the Exchange Rate shall be
determined by reference to such other publicly available
service for displaying exchange rates as may be agreed upon
by the Administrative Agent and the Company, or, in the
absence of such an agreement, such Exchange Rate shall
instead be the arithmetic average of the spot rates of
exchange of the Administrative Agent in the market where its
foreign currency exchange operations in respect of such
currency are then being conducted, at or about 10:00 a.m.,
Local Time, on such date for the purchase of US Dollars for
delivery two Business Days later; provided that if at the
time of any such determination, for any reason, no such spot
rate is being quoted, the Administrative Agent may, after
consultation with the Company, use any reasonable method it
deems appropriate to determine such rate, and such
determination shall be conclusive absent manifest error.
"Excluded Taxes" means, with respect to any Lender, Agent or
the Issuing Bank, (a) income or franchise taxes imposed on
(or measured by) its net income or net profits by the United
States of America (or any political subdivision thereof), or
by the jurisdiction under which such recipient is organized
or in which its principal office or any lending office from
which it makes Loans hereunder is located, (b) any branch
profits taxes imposed by the United States of America or any
similar tax imposed by any other jurisdiction described in
clause (a) above, (c) any withholding tax that is imposed
(other than by operation of the CAM) (i) by the United
States of America on payments by any Borrower organized or
resident for tax purposes in the United States or (ii) by
the United Kingdom on payments by any Borrower organized or
resident for tax purposes in the United Kingdom, in either
case to the extent such tax is in effect and would apply as
of the date such Lender, Agent or the Issuing Bank becomes a
party to this Agreement or relates to payments received by a
Lender Affiliate or a new lending office designated by such
Lender and is in effect and would apply at the time such
Lender Affiliate receives such payment or such lending
office is designated, (d) any withholding tax that is
attributable to such Lender's, Agent's or the Issuing Bank's
failure to comply with Section 2.16(e), (e) Taxes imposed by
any jurisdiction (i) in which the Borrower is not organized
or resident for tax purposes, (ii) through which no payment
is made by or on behalf of the Borrower under this
Agreement, and (iii) with respect to which there is no other
connection between the making of a payment by or on behalf
of a Borrower under this Agreement and such jurisdiction
that would directly result in the imposition of Taxes by
such jurisdiction on that payment, and (f) Taxes imposed by
the United Kingdom on a payment under this Agreement to a
Lender that was a Qualifying Lender on the date it became a
party to this Agreement if such Taxes are imposed solely as
a result of the relevant Lender ceasing to be a Qualifying
Lender, other than as a result of any change in any law,
treaty, published practice or concession by any relevant
Governmental Authority after the date such Lender becomes a
party to this Agreement.
"Existing Credit Agreement" means the $200,000,000 Revolving
Credit Agreement dated as of October 23, 1997, among the
Company, Nationsbank of Texas, N.A., as agent and the banks
party thereto.
"Federal Funds Effective Rate" means, for any day, the
weighted average (rounded upwards, if necessary, to the next
1/100 of 1%) of the rates on overnight Federal funds
transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of
New York, or, if such rate is not so published for any day
that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the
Administrative Agent from three Federal funds brokers of
recognized standing selected by it.
"Financial Officer" means the chief financial officer,
principal accounting officer, treasurer or controller of the
Company.
"Foreign Subsidiary" means any Subsidiary that is organized
under the laws of a jurisdiction other than the United
States or any state thereof.
"GAAP" means generally accepted accounting principles in the
United States of America, as construed in accordance with
Section 1.04.
"Governmental Authority" means the government of the United
States of America, any other nation or any political
subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, court, central
bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor
guaranteeing or having the economic effect of guaranteeing
any Indebtedness or other obligation of any other Person
(the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor,
direct or indirect, (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to
advance or supply funds for the purchase of) any security
for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner
of such Indebtedness or other obligation of the payment
thereof, (c) to maintain working capital, equity capital or
any other financial statement condition or liquidity of the
primary obligor so as to enable the primary obligor to pay
such Indebtedness or other obligation or (d) as an account
party in respect of any letter of credit or letter of
guaranty issued to support such Indebtedness or obligation;
provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary
course of business.
"Guarantee Requirement" means, at any time, that the
Subsidiary Guarantee Agreement (or a supplement referred to
therein) shall have been executed by each Significant
Subsidiary (other than a Foreign Subsidiary) existing at
such time, shall have been delivered to the Administrative
Agent and shall be in full force and effect; provided,
however, that, with respect to any Person that becomes a
Significant Subsidiary (other than a Foreign Subsidiary)
after the date hereof, the Guarantee Requirement shall be
satisfied if such Person executes a supplement to the
Subsidiary Guarantee Agreement within 15 days of becoming a
Significant Subsidiary.
"Hazardous Materials" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances,
wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical
wastes and all other substances or wastes of any nature
regulated pursuant to any Environmental Law.
"Hedging Agreement" means any interest rate protection
agreement, foreign currency exchange agreement, commodity
price protection agreement or other interest or currency
exchange rate or commodity price hedging arrangement. The
"principal amount" of the obligations of the Company or any
Subsidiary in respect of any Hedging Agreement at any time
shall be the maximum aggregate amount (giving effect to any
netting agreements) that the Company or such Subsidiary
would be required to pay to the counterparty thereunder in
accordance with the terms of such Hedging Agreement if such
Hedging Agreement were terminated at such time.
"Indebtedness" of any Person means, without duplication,
(a) all obligations of such Person for borrowed money or
with respect to deposits or advances of any kind, (b) all
obligations of such Person evidenced by bonds (other than
performance bonds), debentures, notes or similar
instruments, (c) all obligations of such Person upon which
interest charges are customarily paid, (d) all obligations
of such Person under conditional sale or other title
retention agreements relating to property acquired by such
Person (other than customary title retention provisions in
supply contacts entered into in the ordinary course of
business with payment terms not exceeding 90 days), (e) all
obligations of such Person in respect of the deferred
purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of
business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not
the Indebtedness secured thereby has been assumed, provided,
that the amount of Indebtedness of such Person existing at
any time under this clause shall be deemed to be an amount
equal to the maximum amount secured by (or with a right to
be secured by) such Liens pursuant to the terms of the
instruments embodying such Indebtedness of others, (g) all
Guarantees by such Person of Indebtedness of others,
provided, that the amount of any such Guarantee at any time
shall be deemed to be an amount equal to maximum amount for
which such Person may be liable pursuant to the terms of the
instrument embodying such Guarantee, (h) all Capital Lease
Obligations of such Person, (i) all obligations, contingent
or otherwise, of such Person as an account party in respect
of letters of credit and letters of guaranty, (j) all
obligations of such Person in respect of Hedging Agreements,
(k) all obligations, contingent or otherwise, of such Person
in respect of bankers' acceptances and (l) all
Securitization Transactions of such Person. The
Indebtedness of any Person shall include the Indebtedness of
any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is
liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except
to the extent the terms of such Indebtedness provide that
such Person is not liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Index Debt" means senior, unsecured, long-term indebtedness
for borrowed money of the Company that is not guaranteed by
any other Person or subject to any other credit enhancement.
"Information Memorandum" means the Confidential Information
Memorandum dated January 2002 relating to the Company and
the Transactions.
"Interest Coverage Ratio" means, for any period, the ratio
of (a) Consolidated EBITDA for such period to
(b) Consolidated Interest Expense for such period.
"Interest Election Request" means a request by a Borrower to
convert or continue a Revolving Borrowing or a Term
Borrowing in accordance with Section 2.06.
"Interest Payment Date" means (a) with respect to any ABR
Loan, the last day of each March, June, September and
December and (b) with respect to any Eurocurrency Loan, the
last day of the Interest Period applicable to the Borrowing
of which such Loan is a part and, in the case of a
Eurocurrency Borrowing with an Interest Period of more than
three months' duration, each day prior to the last day of
such Interest Period that occurs at intervals of three
months' duration after the first day of such Interest
Period.
"Interest Period" means, with respect to any Eurocurrency
Borrowing, the period commencing on the date of such
Borrowing and ending on the numerically corresponding day in
the calendar month that is one, two, three or six months,
or, if agreed by the applicable Lenders, nine or twelve
months, thereafter, as the applicable Borrower may elect;
provided, that (i) if any Interest Period would end on a day
other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such
next succeeding Business Day would fall in the next calendar
month, in which case such Interest Period shall end on the
next preceding Business Day, (ii) any Interest Period that
commences on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day
in the last calendar month of such Interest Period) shall
end on the last Business Day of the last calendar month of
such Interest Period and (iii) the initial Interest Period
for the Borrowings made on the Effective Date will be a
period of 21 days. For purposes hereof, the date of a
Borrowing initially shall be the date on which such
Borrowing is made and thereafter shall be the effective date
of the most recent conversion or continuation of such
Borrowing.
"Issuing Bank" means JPMorgan Chase Bank, in its capacity as
the issuer of Letters of Credit hereunder, and its
successors in such capacity as provided in Section 2.04(i).
The Issuing Bank may, in its discretion, arrange for one or
more Letters of Credit to be issued by Affiliates of the
Issuing Bank, in which case the term "Issuing Bank" shall
include any such Affiliate with respect to Letters of Credit
issued by such Affiliate.
"JPMC" means JPMorgan Chase Bank.
"Judgment Currency" has the meaning assigned to such term in
Section 10.14(b).
"LC Disbursement" means a payment made by the Issuing Bank
in respect of a Letter of Credit.
"LC Exposure" means at any time the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit
denominated in US Dollars at such time, (b) the aggregate of
the US Dollar Equivalents of the undrawn amounts of all
outstanding Letters of Credit denominated in Sterling at
such time, (c) the aggregate amount of all LC Disbursements
denominated in US Dollars that have not yet been reimbursed
by or on behalf of the relevant Borrower at such time and
(d) the aggregate of the US Dollar Equivalents of the
amounts of all LC Disbursements denominated in Sterling that
have not yet been reimbursed by or on behalf of the relevant
Borrower at such time. The LC Exposure of any US Tranche
Lender at any time shall be such Lender's US Tranche
Percentage of the aggregate LC Exposure.
"Lender Affiliate" means, (a) with respect to any Lender,
(i) an Affiliate of such Lender or (ii) any entity (whether
a corporation, partnership, trust or otherwise) that is
engaged in making, purchasing, holding or otherwise
investing in bank loans and similar extensions of credit in
the ordinary course of its business and is administered or
managed by a Lender or an Affiliate of such Lender and (b)
with respect to any Lender that is a fund which invests in
bank loans and similar extensions of credit, any other fund
that invests in bank loans and similar extensions of credit
and is managed by the same investment advisor as such Lender
or by an Affiliate of such investment advisor.
"Lenders" means the Persons listed on Schedule 2.01, their
successors and any other Person that shall have become a
party hereto pursuant to Section 10.04, other than any such
Person that ceases to be a party hereto pursuant to Section
10.04.
"Letter of Credit" means any letter of credit issued
pursuant to this Agreement on behalf of Lenders holding US
Tranche Revolving Commitments.
"Leverage Ratio" means, at any time, the ratio of
(a) Consolidated Total Debt at such time to (b) Consolidated
EBITDA for the most recent period of four consecutive fiscal
quarters of the Company ended at or prior to such time.
"LIBO Rate" means, for any Interest Period, (a) with respect
to (i) any Eurocurrency Borrowing denominated in a currency
other than Sterling and (ii) any UK Tranche Revolving
Borrowing made by the UK Borrower (or by another Borrowing
Subsidiary organized under the laws of England and Wales)
and denominated in Sterling, the rate per annum determined
by the Applicable Agent at approximately 11:00 a.m., London
time, on the Quotation Day for such Interest Period by
reference to the British Bankers' Association Interest
Settlement Rates for deposits in the currency of such
Borrowing (as reflected on the applicable Telerate screen),
for a period equal to such Interest Period, or, if an
interest rate is not ascertainable pursuant to the foregoing
provisions of this definition, the interest rate per annum
determined by the Applicable Agent to be the average of the
rates per annum at which deposits in the currency of such
Borrowing are offered for such Interest Period to major
banks in the London interbank market by JPMC at
approximately 11:00 a.m., London time, on the Quotation Day
for such Interest Period, and (b) with respect to any
Eurocurrency Borrowing (other than any UK Tranche Revolving
Borrowing made by the UK Borrower or by another Borrowing
Subsidiary organized under the laws of England and Wales)
denominated in Sterling, the interest rate per annum
determined by the Applicable Agent to be the average of the
rates per annum at which deposits in the currency of such
Borrowing are offered for such Interest Period to major
banks in the London interbank market by JPMC at
approximately 11:00 a.m., London time, two Business Days
prior to the commencement of such Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance,
charge or security interest in, on or of such asset, (b) the
interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or
any financing lease having substantially the same economic
effect as any of the foregoing) relating to such asset and
(c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such
securities.
"Loan Documents" this Agreement, each Borrowing Subsidiary
Agreement, each Borrowing Subsidiary Termination, the
Subsidiary Guarantee Agreement and each Letter of Credit and
promissory note delivered pursuant to this Agreement.
"Loan Parties" means the Borrowers and the Subsidiary
Guarantors.
"Loans" means the loans made by the Lenders to the Borrowers
pursuant to this Agreement.
"Local Time" means (a) with respect to a Loan, Borrowing or
Letter of Credit denominated in US Dollars, New York City
time and (b) with respect to a Loan, Borrowing or Letter of
Credit denominated in Sterling or Euro, as applicable,
London time.
"London Agent" means J.P. Morgan Europe Limited, in its
capacity as London agent for the Lenders hereunder, or any
successor thereto appointed in accordance with Article IX.
"Margin Stock" means "margin stock" as defined in Regulation
U of the Board of Governors of the Federal Reserve System.
"Material Adverse Effect" means a material adverse effect on
(a) the business, assets, liabilities or condition,
financial or otherwise, of the Company and the Subsidiaries
taken as a whole, (b) the ability of the Loan Parties, taken
as a whole, to perform any of their obligations under the
Loan Documents or (c) the rights of or benefits available to
the Lenders under the Loan Documents.
"Material Indebtedness" means Indebtedness (other than the
Loans) of any one or more of the Company and its
Subsidiaries in an aggregate principal amount exceeding
$25,000,000.
"Maturity Date" means the fifth anniversary of the Effective
Date.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Net Proceeds" means, with respect to any Asset Disposition
or issuance of Indebtedness under Section 6.01(i)(iii),
(a) the cash proceeds received in respect thereof, including
(i) any cash received in respect of any non-cash proceeds,
but only as and when received, (ii) in the case of a
casualty, insurance proceeds, and (iii) in the case of a
condemnation or similar event, condemnation awards and
similar payments, net of (b) the sum of (i) all fees,
discounts, commissions and out-of-pocket expenses paid by
the Company and its Subsidiaries to third parties (other
than Affiliates) in connection therewith, (ii) the amount of
all payments required to be made by the Company and its
Subsidiaries as a result thereof to repay Indebtedness
(other than Loans) secured by the assets disposed of or
otherwise subject to mandatory prepayment as a result of
such event, (iii) the amount of all taxes paid (or
reasonably estimated to be payable) by the Company and the
Subsidiaries with respect to the year that such Asset
Disposition occurred and that are directly attributable to
such Asset Disposition (as determined reasonably and in good
faith by the chief financial officer of the Company), and
(iv) the amount of any reserves established by the Company
and its Subsidiaries to fund contingent liabilities
reasonably estimated to be payable in connection with, and
directly attributable to, such Asset Disposition (as
determined reasonably and in good faith by the chief
financial officer of the Company).
"Obligations" means (a) the due and punctual payment of (i)
the principal of and interest (including interest accruing
during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) on the
Loans made to any Borrower, when and as due, whether at
maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, (ii) each payment required to be
made by any Borrower under this Agreement in respect of any
Letter of Credit, when and as due, including payments in
respect of reimbursement of disbursements, interest thereon
and obligations to provide cash collateral and (iii) all
other monetary obligations, including fees, costs, expenses
and indemnities, whether primary, secondary, direct,
contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such
proceeding), of the Loan Parties under this Agreement and
the other Loan Documents, and (b) the due and punctual
payment and performance of all obligations of the Company or
any Subsidiary, monetary or otherwise, under each interest
rate Hedging Agreement relating to Obligations referred to
in the preceding clause (a) entered into with any
counterparty that was a Lender (or an Affiliate thereof) at
the time such hedging agreement was entered into.
"Other Taxes" means any and all present or future recording,
stamp, documentary, excise, transfer, or similar taxes,
charges or levies arising from any payment made hereunder or
from the execution, delivery or enforcement of this
Agreement or any other Loan Document other than an
Assignment and Acceptance that does not require the consent
of the Company and a sale of a participation pursuant to
Section 10.04.
"Participant" has the meaning set forth in Section 10.04(e).
"PBGC" means the Pension Benefit Guaranty Corporation
referred to and defined in ERISA and any successor entity
performing similar functions.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or
are being contested in compliance with Section 5.04;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in
the ordinary course of business and securing obligations
that are not overdue by more than 60 days or are being
contested in compliance with Section 5.04;
(c) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation,
unemployment insurance and other social security laws or
regulations;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like
nature, in each case in the ordinary course of business;
(e) judgment liens in respect of judgments that do not
constitute an Event of Default under Section 7.01(j);
(f) easements, zoning restrictions, rights-of-way and
similar encumbrances on real property imposed by law or
arising in the ordinary course of business that do not
secure any monetary obligations and do not materially
detract from the value of the affected property or interfere
with the ordinary conduct of business of the Company or any
Subsidiary;
(g) any interest or title of a lessor in the property
subject to any lease other than (A) a capital lease or (B) a
lease entered into as part of a sale and leaseback
transaction subject to Section 6.03;
(h) Liens in favor of customs or revenue authorities imposed
by law and arising in the ordinary course of business in
connection with the importation of goods;
(i) interests of suppliers in respect of customary title
retention provisions in supply contacts entered into in the
ordinary course of business and with payment terms not
exceeding 90 days; and
(j) rights of set-off in favor of financial institutions
(other than in respect of amounts deposited to secure
Indebtedness);
provided that the term "Permitted Encumbrances" shall not
include any Lien securing Indebtedness.
"Permitted Holders" means (a) the Adolph Coors, Jr. Trust,
(b) any trustee of such Trust acting in its capacity as
such, (c) any Person that is a beneficiary of such trust on
the date hereof, (d) any other trust or similar arrangement
for the benefit of such beneficiaries and (e) the successors
of any such Persons.
"Person" means any natural person, corporation, limited
liability company, trust, joint venture, association,
company, partnership, Governmental Authority or other
entity.
"Plan" means any employee pension benefit plan (other than
a Multiemployer Plan) subject to the provisions of Title IV
of ERISA or Section 412 of the Code or Section 302 of ERISA,
and in respect of which the Company or any ERISA Affiliate
is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by JPMorgan Chase Bank as its
prime rate in effect at its principal office in New York
City; each change in the Prime Rate shall be effective from
and including the date such change is publicly announced as
being effective.
"Qualifying Lender" means a Lender which is, on the date a
payment falls due under this Agreement, (a) beneficially
entitled to, and within the charge to United Kingdom
corporation tax in respect of, that payment and that is a
Lender in respect of an advance made by a person that was a
bank for purposes of Section 349 of the Income and
Corporation Taxes Act 1988 (as currently defined in section
840A of the Income and Corporation Taxes Act 1988) at the
time the advance was made, (b) a person to whom that payment
may be made without deduction or withholding for or on
account of United Kingdom taxes by reason of an applicable
double taxation treaty between the United Kingdom and the
country in which that Lender is, or is treated as, resident
or carrying on a business pursuant to which there is a valid
and extant claim of such person or (c) beneficially entitled
to interest payable to that Lender in respect of an advance
under this Agreement and is (i) a company resident in the
United Kingdom for United Kingdom tax purposes; (ii) a
partnership each member of which is a company resident in
the United Kingdom for United Kingdom tax purposes; or (iii)
a company not so resident in the United Kingdom which
carries on a trade in the United Kingdom through a branch or
agency and which brings into account interest payable in
respect of that advance in computing its chargeable profits
(within the meaning given by Section 11(2) of the Income and
Corporation Taxes Act 1988).
"Quotation Day" means, with respect to any Eurocurrency
Borrowing and any Interest Period, the day on which it is
market practice in the relevant interbank market for prime
banks to give quotations for deposits in the currency of
such Borrowing for delivery on the first day of such
Interest Period. If such quotations would normally be given
by prime banks on more than one day, the Quotation Day will
be the last of such days.
"Receivables" means accounts receivable (including, without
limitation, all rights to payment created by or arising from
the sales of goods, leases of goods or the rendition of
services, no matter how evidenced and whether or not earned
by performance) and payments owing to the Company or any
Subsidiary from public house businesses in the United
Kingdom in respect of loans made by BHL or any Subsidiary of
BHL to such businesses.
"Register" has the meaning set forth in Section 10.04.
"Related Parties" means, with respect to any specified
Person, such Person's Affiliates and the respective
directors, officers, employees, agents and advisors of such
Person and such Person's Affiliates.
"Required Lenders" means, at any time, Lenders having
Revolving Credit Exposures, outstanding Term Loans and
unused Commitments representing more than 50% of the
aggregate Revolving Credit Exposures, outstanding Term Loans
and unused Commitments at such time.
"Reset Date" has the meaning assigned to such term in
Section 1.05.
"Revolving Availability Period" means the period from and
including (i) with respect to Loans the proceeds of which
are to be used to fund the Acquisition or to pay related
fees and expenses, the Effective Date or (ii) with respect
to other extensions of credit hereunder, the date on or
after the Effective Date on which the conditions set forth
in Section 4.02 have been satisfied (or waived in accordance
with Section 10.02), to but excluding the earlier of the
Maturity Date and the date of termination of the Revolving
Commitments.
"Revolving Commitment" means a US Tranche Revolving
Commitment or a UK Tranche Revolving Commitment, or any
combination thereof (as the context requires).
"Revolving Credit Exposure" means a US Tranche Revolving
Credit Exposure or a UK Tranche Revolving Credit Exposure.
"Revolving Loan" means a US Tranche Revolving Loan or a UK
Tranche Revolving Loan.
"Sale-Leaseback Transactions" means any arrangement whereby
the Company or a Subsidiary shall sell or transfer any
property, real or personal, used or useful in its business,
whether now owned or hereinafter acquired, and thereafter
rent or lease property that it intends to use for
substantially the same purpose or purposes as the property
sold or transferred; provided that any such arrangement
entered into within 180 days after the acquisition,
construction or substantial improvement of the subject
property shall not be deemed to be a "Sale-Leaseback
Transaction".
"S&P" means Standard & Poor's.
"Securitization Transaction" means (a) any transfer by the
Company or any Subsidiary of Receivables or interests
therein and all collateral securing such Receiveables, all
contracts and contract rights and all guarantees or other
obligations in respect of such Receivables, all other assets
that are customarily transferred or in respect of which
security interests are customarily granted in connection
with asset securitization transactions involving such
Receivables and all proceeds of any of the foregoing (i) to
a trust, partnership, corporation or other entity (other
than the Company or a Subsidiary other than a SPE
Subsidiary), which transfer is funded in whole or in part,
directly or indirectly, by the incurrence or issuance by the
transferee or any successor transferee of indebtedness or
other securities that are to receive payments from, or that
represent interests in, the cash flow derived from such
Receivables or interests in Receivables, or (ii) directly to
one or more investors or other purchasers (other than the
Company or any Subsidiary), or (b) any transaction in which
the Company or a Subsidiary incurs Indebtedness or other
obligations secured by Liens on Receivables. The "amount"
or "principal amount" of any Securitization Transaction
shall be deemed at any time to be (A) in the case of a
transaction described in clause (a) of the preceding
sentence, the aggregate principal or stated amount of the
Indebtedness or other securities referred to in such clause
or, if there shall be no such principal or stated amount,
the uncollected amount of the Receivables transferred
pursuant to such Securitization Transaction net of any such
Receivables that have been written off as uncollectible, and
(B) in the case of a transaction described in clause (b) of
the preceding sentence, the aggregate outstanding principal
amount of the Indebtedness secured by Liens on the subject
Receivables.
"Share Purchase Agreement" means the Share Purchase
Agreement dated December 24, 2001 among Interbrew S.A.,
Interbrew UK Holdings Limited, Brandbrew S.A., Bass Holdings
Limited, Golden Acquisition Limited, Coors Worldwide, Inc.
and the Company.
"Significant Subsidiary" means (a) each Borrowing
Subsidiary, (b) any Subsidiary that directly or indirectly
owns or Controls any other Significant Subsidiary, (c) each
Subsidiary identified as a Significant Subsidiary on
Schedule 3.13, (d) any Subsidiary designated from time to
time by the Company as a Significant Subsidiary by written
notice to the Administrative Agent and (e) any other
Subsidiary (other than a SPE) (i) the consolidated EBITDA
of which for the most recently ended period of four fiscal
quarters for which financial statements have been delivered
pursuant to Section 5.01(a) or (b) was more than the lesser
of (A) 5% of the Company's Consolidated EBITDA for such
period and (B) $25,000,000 or (ii) the consolidated assets
of which as of the last day of the most recent period for
which financial statements have been delivered pursuant to
Section 5.01(a) or (b) (or, prior to the delivery of any
such statements, December 30, 2001) were greater than 5% of
the Company's consolidated total assets as of such date as
shown on such financial statements (or, prior to the
delivery of such financial statements, on the pro forma
consolidated balance sheet referred to in Section 3.04(d)).
The Company covenants that it will designate Subsidiaries
as Significant Subsidiaries as contemplated by clause (d) of
the preceding sentence as necessary in order that the total
consolidated assets and the consolidated EBITDA of the
Significant Subsidiaries (together with the directly owned
assets and EBITDA of the Company) will represent not less
than 90% of consolidated total assets or Consolidated EBITDA
of the Company at any relevant date or for any relevant
period referred to above. For purposes of making the
determinations required by this definition, the EBITDA and
assets of Foreign Subsidiaries shall be converted into US
Dollars at the rates used in preparing the consolidated
balance sheets of the Company.
"SPE Subsidiary" means any Subsidiary formed solely for the
purpose of, and that engages only in, one or more
Securitization Transactions.
"Specified Assets" means the Capehill Brewery, the Alton
Brewery and any of the malting facilities of BHL or any of
its Subsidiaries located in the United Kingdom.
"Specified Event" shall mean an Event of Default specified
in paragraph (h) or (i) of Section 7.01.
"Statutory Reserves" means, with respect to any currency,
any reserve, liquid asset or similar requirements
established by any Governmental Authority of the United
States or of the jurisdiction of such currency or any
jurisdiction in which Loans in such currency are made or
funded to which banks in such jurisdiction are subject for
any category of deposits or liabilities customarily used to
fund loans in such currency or by reference to which
interest rates applicable to Loans in such currency are
determined, in each case expressed as a decimal.
"Sterling" means the lawful money of the United Kingdom.
"subsidiary" means, with respect to any Person (the
"parent") at any date, any corporation, limited liability
company, partnership, association or other entity the
accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if
such financial statements were prepared in accordance with
GAAP as of such date, as well as any other corporation,
limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of
the ordinary voting power or, in the case of a partnership,
more than 50% of the general partnership interests are, as
of such date, owned, controlled or held, or (b) that is, as
of such date, otherwise Controlled, by the parent or one or
more subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent.
"Subsidiary" means any subsidiary of the Company. At all
times after the Acquisition, BHL and the subsidiaries of BHL
acquired in the Acquisition will constitute Subsidiaries.
"Subsidiary Guarantee Agreement" means a Subsidiary
Guarantee Agreement substantially in the form of Exhibit D,
made by the Subsidiary Guarantors in favor of the
Administrative Agent for the benefit of the Lenders, the
Agents and the Issuing Bank.
"Subsidiary Guarantors" means each Person listed on
Schedule 3.13 and each other Person that becomes party to a
Subsidiary Guarantee Agreement as a Subsidiary Guarantor,
and the permitted successors and assigns of each such
Person, but excluding any Person that ceases to be a
Subsidiary Guarantor in accordance with the provisions of
the Loan Documents.
"Syndication Agent" means Deutsche Banc Alex. Brown Inc.
"Taxes" means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed
by any Governmental Authority.
"Term Lender" means a Lender with a Term Loan Commitment or
an outstanding Term Loan.
"Term Loan" means a Loan made pursuant to Section 2.01(c).
"Term Loan Commitment" means, with respect to each Lender,
the commitment, if any, of such Lender to make Term Loans
hereunder on the Effective Date, expressed as an amount
representing the maximum principal amount of the Term Loans
to be made by such Lender hereunder, as such commitment may
be (a) reduced from time to time pursuant to Section 2.07
and (b) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 10.04.
The initial amount of each Lender's Term Loan Commitment is
set forth on Schedule 2.01, or in the Assignment and
Acceptance pursuant to which such Lender shall have assumed
its Term Loan Commitment, as applicable. The initial
aggregate amount of the Lenders' Term Loan Commitments is
$800,004,400.
"Tranche" means a category of Commitments and extensions of
credits thereunder. For purposes hereof, each of the
following comprises a separate Tranche: (a) the US Tranche
Revolving Commitments and the US Tranche Revolving Loans,
(b) the UK Tranche Revolving Commitments and the UK Tranche
Revolving Loans and (c) the Term Commitments and the Term
Loans.
"Transactions" means the execution, delivery and performance
by the Loan Parties of this Agreement and the other Loan
Documents, the borrowing of Loans and the use of the
proceeds thereof, the Acquisition and the other transactions
contemplated to be effected on the Effective Date in
connection therewith.
"Type", when used in reference to any Loan or Borrowing,
refers to whether the rate of interest on such Loan, or on
the Loans comprising such Borrowing, is determined by
reference to the Adjusted LIBO Rate or the Alternate Base
Rate.
"UK Borrower" means Golden Acquisition Limited.
"UK Tranche Lender" means a Lender with a UK Tranche
Revolving Commitment or with outstanding UK Tranche
Revolving Loans.
"UK Tranche Percentage" means, with respect to any UK
Tranche Lender, the percentage of the total UK Tranche
Revolving Commitments represented by such Lender's UK
Tranche Revolving Commitment. If the UK Tranche Revolving
Commitments have terminated or expired, the UK Tranche
Percentages shall be determined based upon the UK Tranche
Revolving Commitments most recently in effect, giving effect
to any assignments.
"UK Tranche Revolving Borrowing" means a Borrowing comprised
of UK Tranche Revolving Loans.
"UK Tranche Revolving Commitment" means, with respect to
each UK Tranche Lender, the commitment of such UK Tranche
Lender to make UK Tranche Revolving Loans pursuant to
Section 2.01(b), expressed as an amount representing the
maximum aggregate permitted amount of such UK Tranche
Lender's UK Tranche Revolving Credit Exposure hereunder, as
such commitment may be (a) reduced from time to time
pursuant to Section 2.07 and (b) reduced or increased from
time to time pursuant to assignments by or to such Lender
under Section 10.04. The initial amount of each UK Tranche
Lender's UK Tranche Revolving Commitment is set forth on
Schedule 2.01, or in the Assignment and Acceptance pursuant
to which such UK Tranche Lender shall have assumed its UK
Tranche Revolving Commitment, as applicable. The aggregate
amount of the UK Tranche Revolving Commitments on the date
hereof is US$50,000,000.
"UK Tranche Revolving Credit Exposure" means, at any time,
the sum of (a) the aggregate principal amount of the UK
Tranche Revolving Loans denominated in US Dollars
outstanding at such time and (b) the US Dollar Equivalent of
the aggregate principal amount of the UK Tranche Revolving
Loans denominated in Sterling or Euro outstanding at such
time. The UK Tranche Revolving Credit Exposure of any
Lender at any time shall be such Lender's UK Tranche
Percentage of the total UK Tranche Revolving Credit Exposure
at such time.
"UK Tranche Revolving Loan" means a Loan made by a UK
Tranche Lender pursuant to Section 2.01(b). Each UK Tranche
Revolving Loan denominated in US Dollars shall be a
Eurocurrency Loan or an ABR Loan, and each UK Tranche
Revolving Loan denominated in Sterling shall be a
Eurocurrency Loan.
"US Dollars" or "US$" refers to lawful money of the United
States of America.
"US Dollar Equivalent" means, on any date of determination,
(a) with respect to any amount in US Dollars, such amount,
and (b) with respect to any amount in Sterling or Euro, the
equivalent in US Dollars of such amount, determined by the
Administrative Agent pursuant to Section 1.05 using the
Exchange Rate with respect to Sterling or Euro, as the case
may be, at the time in effect under the provisions of such
Section.
"US Tranche Lender" means a Lender with a US Tranche
Revolving Commitment or with outstanding US Tranche
Revolving Credit Exposure.
"US Tranche Percentage" means, with respect to any US
Tranche Lender, the percentage of the total US Tranche
Revolving Commitments represented by such Lender's US
Tranche Revolving Commitment. If the US Tranche Revolving
Commitments have terminated or expired, the US Tranche
Percentages shall be determined based upon the US Tranche
Revolving Commitments most recently in effect, giving effect
to any assignments.
"US Tranche Revolving Borrowing" means a Borrowing comprised
of US Tranche Revolving Loans.
"US Tranche Revolving Commitment" means, with respect to
each US Tranche Lender, the commitment of such US Tranche
Lender to make US Tranche Revolving Loans pursuant to
Section 2.01(a) and to acquire participations in Letters of
credit pursuant to Section 2.04, expressed as an amount
representing the maximum aggregate permitted amount of such
Lender's US Tranche Revolving Credit Exposure hereunder, as
such commitment may be (a) reduced from time to time
pursuant to Section 2.07 and (b) reduced or increased from
time to time pursuant to assignments by or to such Lender
pursuant to Section 10.04. The initial amount of each US
Tranche Lender's US Tranche Revolving Commitment is set
forth on Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such US Tranche Lender shall have assumed
its US Tranche Revolving Commitment, as applicable. The
aggregate amount of the US Tranche Revolving Commitments on
the date hereof is US$250,000,000.
"US Tranche Revolving Credit Exposure" means, at any time,
the sum of (a) the aggregate principal amount of the US
Tranche Revolving Loans denominated in US Dollars
outstanding at such time, (b) the US Dollar Equivalent of
the aggregate principal amount of the US Tranche Revolving
Loans denominated in Sterling outstanding at such time and
(c) the aggregate LC Exposure at such time. The US Tranche
Revolving Credit Exposure of any Lender at any time shall be
such Lender's US Tranche Percentage of the total US Tranche
Revolving Credit Exposure at such time.
"US Tranche Revolving Loan" means a Loan made by a US
Tranche Lender pursuant to Section 2.01(a). Each US Tranche
Revolving Loan shall be a Eurocurrency Loan or an ABR Loan.
"Wholly Owned Subsidiary" means any Subsidiary all the
Equity Interests in which, other than directors' qualifying
shares and/or other nominal amounts of Equity Interests that
are required to be held by Persons (other than the Company
or its Wholly Owned Subsidiaries, as applicable) under
applicable law, are owned, directly or indirectly, by the
Company.
"Withdrawal Liability" means liability to a Multiemployer
Plan as a result of a complete or partial withdrawal from
such Multiemployer Plan, as such terms are defined in Part I
of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For
purposes of this Agreement, Loans may be classified and
referred to by Class (e.g., a "US Tranche Revolving Loan")
or by Type (e.g., a "Eurocurrency Loan") or by Class and
Type (e.g., a "US Tranche Eurocurrency Revolving Loan").
Borrowings also may be classified and referred to by Class
(e.g., a "US Tranche Revolving Borrowing") or by Type (e.g.,
a "Eurocurrency Borrowing") or by Class and Type (e.g., a
"US Tranche Eurocurrency Revolving Borrowing").
SECTION 1.03. Terms Generally. The definitions of terms
herein shall apply equally to the singular and plural forms
of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine
and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase
"without limitation". The word "will" shall be construed to
have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of
or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or
modifications set forth herein), (b) any reference herein to
any Person shall be construed to include such Person's
successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed
to refer to this Agreement in its entirety and not to any
particular provision hereof, (d) all references herein to
Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement and (e) the words "asset"
and "property" shall be construed to have the same meaning
and effect and to refer to any and all tangible and
intangible assets and properties. References herein to the
taking of any action hereunder of an administrative nature
by any Borrower shall be deemed to include references to the
Company taking such action on such Borrower's behalf and the
Agents are expressly authorized to accept any such action
taken by the Company as having the same effect as if taken
by such Borrower.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise
expressly provided herein, all terms of an accounting or
financial nature shall be construed in accordance with GAAP,
as in effect from time to time; provided that if the Company
notifies the Administrative Agent that the Company requests
an amendment to any provision hereof to eliminate the effect
of any change occurring after the date hereof in GAAP or in
the application thereof on the operation of such provision
(or if the Administrative Agent notifies the Company that
the Required Lenders request an amendment to any provision
hereof for such purpose), regardless of whether any such
notice is given before or after such change in GAAP or in
the application thereof, then such provision shall be
interpreted on the basis of GAAP as in effect and applied
immediately before such change shall have become effective
until such notice shall have been withdrawn or such
provision amended in accordance herewith (it being
understood that the financial statements delivered under
Section 5.01(a) or (b) shall in all cases be prepared in
accordance with GAAP as in effect at the applicable time).
SECTION 1.05. Exchange Rates. (a) Not later than
1:00 p.m., New York City time, on each Calculation Date, the
Administrative Agent shall (i) determine the Exchange Rate
as of such Calculation Date with respect to Sterling and
Euro and (ii) give notice thereof to the Lenders and the
Company. The Exchange Rates so determined shall become
effective on the first Business Day immediately following
the relevant Calculation Date (a "Reset Date") or other date
of determination, shall remain effective until the next
succeeding Reset Date, and shall for all purposes of this
Agreement (other than Section 10.14 or any other provision
expressly requiring the use of a current Exchange Rate) be
the Exchange Rates employed in converting any amounts
between US Dollars and Sterling or Euro.
(b) Not later than 5:00 p.m., New York City time, on each
Reset Date and each date on which Revolving Loans
denominated in Sterling or Euro are made, or Letters of
Credit denominated in Sterling are issued, the
Administrative Agent shall (i) determine the aggregate
amount of each of the US Tranche Revolving Credit Exposure
and the UK Tranche Revolving Credit Exposure (after giving
effect to any Loans made or repaid or Letters of Credit
issued, drawn or expired on such date) and (ii) notify the
Lenders and the Company of the results of such
determination.
ARTICLE II
The Credits
SECTION 2.01. Commitments. (a) Subject to the terms and
conditions set forth herein, each US Tranche Lender agrees
to make US Tranche Revolving Loans to the Borrowers from
time to time during the Revolving Availability Period in US
Dollars or Sterling in an aggregate principal amount at any
time outstanding that will not result in (i) such Lender's
US Tranche Revolving Credit Exposure exceeding its US
Tranche Revolving Commitment or (ii) the aggregate amount of
the Lenders' US Tranche Revolving Credit Exposures exceeding
the aggregate amount of the US Tranche Revolving
Commitments.
(b) Subject to the terms and conditions set forth
herein, each UK Tranche Lender agrees to make UK Tranche
Revolving Loans to the UK Borrower in Sterling and UK
Tranche Revolving Loans to the Company, CBC and/or the UK
Borrower in US Dollars, Sterling or Euro from time to time
during the Revolving Availability Period in an aggregate
principal amount at any time outstanding that will not
result in (i) such Lender's UK Tranche Revolving Credit
Exposure exceeding its UK Tranche Revolving Commitment or
(ii) the aggregate amount of the Lenders' UK Tranche
Revolving Credit Exposures exceeding the aggregate amount of
the UK Tranche Revolving Commitments.
(c) Subject to the terms and conditions set forth herein,
each Lender agrees to make a Term Loan or Term Loans to the
Company, CBC and/or the UK Borrower in US Dollars or
Sterling on the Effective Date in an aggregate principal
amount not greater than its Term Loan Commitment. Amounts
prepaid or repaid in respect of Term Loans may not be
reborrowed.
SECTION 2.02. Loans and Borrowings. (a) Each Loan shall
be made as part of a Borrowing consisting of Loans of the
same Class and Type made by the Lenders ratably in
accordance with their respective Commitments of the
applicable Class. The failure of any Lender to make any
Loan required to be made by it shall not relieve any other
Lender of its obligations hereunder; provided that the
Commitments of the Lenders are several and no Lender shall
be responsible for any other Lender's failure to make Loans
as required.
(b) Subject to Section 2.13, (i) each US Tranche Revolving
Borrowing shall be comprised entirely of (A) in the case of
a Borrowing denominated in US Dollars, Eurocurrency Loans or
ABR Loans and (B) in the case of a Borrowing denominated in
Sterling, Eurocurrency Loans, in each case as the applicable
Borrower may request in accordance herewith; (ii) each UK
Tranche Revolving Borrowing shall be comprised entirely of
(A) in the case of a Borrowing denominated in Sterling or
Euros, Eurocurrency Loans and (B) in the case of a Borrowing
denominated in US Dollars, Eurocurrency Loans or ABR Loans,
in each case as the applicable Borrower may request in
accordance herewith; and (iii) each Term Loan Borrowing
shall be comprised entirely of (A) in the case of a
Borrowing denominated in US Dollars, Eurocurrency Loans or
ABR Loans and (B) in the case of a Borrowing denominated in
Sterling, Eurocurrency Loans, in each case as the applicable
Borrower may request in accordance herewith. Each Lender at
its option may make any Eurocurrency Loan by causing any
domestic or foreign branch or Affiliate of such Lender to
make such Loan; provided that any exercise of such option
shall not affect the obligation of the applicable Borrower
to repay such Loan in accordance with the terms of this
Agreement and that such Borrower's obligation to make
payments pursuant to Section 2.16 shall not increase.
(c) At the commencement of each Interest Period for any
Borrowing, such Borrowing shall be in an aggregate amount
that is at least equal to the Borrowing Minimum and an
integral multiple of the Borrowing Multiple; provided that
an ABR Revolving Borrowing may be made in an aggregate
amount that is equal to the aggregate available US Tranche
Revolving Commitments or UK Tranche Revolving Commitments,
or that is required to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.04(e), as the case
may be. Borrowings of more than one Type and Class may be
outstanding at the same time; provided that there shall not
at any time be more than a total of (i) ten US Tranche
Eurocurrency Revolving Borrowings outstanding, (ii) five UK
Tranche Eurocurrency Revolving Borrowings outstanding or
(iii) ten Eurocurrency Term Loan Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement,
no Borrower shall be entitled to request, or to elect to
convert or continue, any Borrowing if the Interest Period
requested with respect thereto would end after the Maturity
Date.
SECTION 2.03. Requests for Borrowings. To request a
Revolving Borrowing or a Term Borrowing, the applicable
Borrower, or the Company on behalf of the applicable
Borrower, shall notify the Applicable Agent of such request
by telephone (a) in the case of a Eurocurrency Borrowing
(other than a UK Tranche Revolving Borrowing denominated in
Sterling by the UK Borrower or by another Borrowing
Subsidiary organized under the laws of England and Wales),
not later than 2:00 p.m., Local Time, three Business Days
before the date of the proposed Borrowing, (b) in the case
of a UK Tranche Revolving Borrowing denominated in Sterling
by the UK Borrower or by another Borrowing Subsidiary
organized under the laws of England and Wales, not later
than 10:00 a.m., Local Time, on the Business Day of the
proposed Borrowing and (c) in the case of an ABR Borrowing,
not later than 2:00 p.m., Local Time, one Business Day
before the date of the proposed Borrowing; provided that any
such notice of an ABR Revolving Borrowing to finance the
reimbursement of an LC Disbursement as contemplated by
Section 2.04(e), or to replace a Eurocurrency Borrowing
Request deemed ineffective pursuant to clause (i) of Section
2.13, may be given not later than 12:00 noon, Local Time, on
the date of the proposed Borrowing; and provided further
that any such notice in respect of any Borrowing to be made
on the Effective Date may be given at such later time or on
such shorter notice as the Applicable Agent may agree. Each
such telephonic Borrowing Request shall be irrevocable and
shall be confirmed promptly by hand delivery or telecopy to
the Applicable Agent of a written Borrowing Request in a
form approved by the Applicable Agent and signed by the
applicable Borrower, or by the Company on behalf of the
applicable Borrower. Each such telephonic and written
Borrowing Request shall specify the following information in
compliance with Section 2.02:
(i) the Borrower requesting such Borrowing (or on whose
behalf the Company is requesting such Borrowing);
(ii) whether the requested Borrowing is to be a US Tranche
Revolving Borrowing, a UK Tranche Revolving Borrowing or a
Term Borrowing;
(iii) the currency and aggregate principal amount of the
requested Revolving Borrowing or Term Borrowing;
(iv) the date of the requested Borrowing, which shall be a
Business Day;
(v) the Type of the requested Borrowing;
(vi) in the case of a Eurocurrency Borrowing, the initial
Interest Period to be applicable thereto, which shall be a
period contemplated by the definition of the term "Interest
Period"; and
(vii) the location and number of the applicable Borrower's
account to which funds are to be disbursed, which shall
comply with the requirements of Section 2.05 or other
disbursement instructions that shall have been given by the
applicable Borrower to the Applicable Agent.
If no currency is specified with respect to any requested
Eurocurrency Borrowing, then the applicable Borrower shall
be deemed to have selected US Dollars. If no election as to
the Type of Borrowing is specified, then the requested
Borrowing shall be (i) in the case of a Borrowing
denominated in US Dollars, an ABR Borrowing and (ii) in the
case of any other Borrowing, a Eurocurrency Borrowing. If
no Interest Period is specified with respect to any
requested Eurocurrency Borrowing, then the applicable
Borrower shall be deemed to have selected an Interest Period
of one month's duration. Promptly following receipt of a
Borrowing Request in accordance with this Section, the
Applicable Agent shall advise each Lender that will make a
Loan as part of the requested Borrowing of the details
thereof and of the amount of the Loan to be made by such
Lender as part of the requested Borrowing.
SECTION 2.04. Letters of Credit. (a) General. Subject to
the terms and conditions set forth herein, any Borrower may
request the issuance (or the amendment, renewal or
extension) of Letters of Credit denominated in US Dollars or
Sterling, in any case in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, at any time and
from time to time during the Revolving Availability Period.
In the event of any inconsistency between the terms and
conditions of this Agreement and the terms and conditions of
any form of letter of credit application or other agreement
submitted by any Borrower to, or entered into by such
Borrower with, the Issuing Bank relating to any Letter of
Credit, the terms and conditions of this Agreement shall
control. On the first Business Day after the Effective
Date, without further action by any party hereto, the
Issuing Bank shall be deemed to have granted to each US
Tranche Lender and each US Tranche Lender shall be deemed to
have purchased from the Issuing Bank a participation in each
letter of credit issued by the Issuing Bank on or prior to
the Effective Date for the account of the Company or any
Subsidiary in accordance with paragraph (d) below, and each
such letter of credit shall constitute a Letter of Credit
for all purposes hereof.
(b) Notice of Issuance, Amendment, Renewal, Extension;
Certain Conditions. To request the issuance of a Letter of
Credit (or the amendment, renewal or extension of an
outstanding Letter of Credit), the applicable Borrower shall
hand deliver or telecopy (or transmit by electronic
communication, if arrangements for doing so have been
approved by the Issuing Bank) to the Issuing Bank and the
Applicable Agent (in any case reasonably in advance of the
requested date of issuance, amendment, renewal or extension)
a notice requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended, renewed or
extended, and specifying the date of issuance, amendment,
renewal or extension (which shall be a Business Day), the
date on which such Letter of Credit is to expire (which
shall comply with paragraph (c) of this Section), the amount
and currency of such Letter of Credit, the name and address
of the beneficiary thereof and such other information as
shall be necessary to enable the Issuing Bank to prepare,
amend, renew or extend such Letter of Credit. If requested
by the Issuing Bank, the applicable Borrower also shall
submit a letter of credit application on the Issuing Bank's
standard form in connection with any request for a Letter of
Credit. A Letter of Credit shall be issued, amended,
renewed or extended only if (and upon issuance, amendment,
renewal or extension of each Letter of Credit the applicable
Borrower shall be deemed to represent and warrant that),
after giving effect to such issuance, amendment, renewal or
extension (i) the LC Exposure shall not exceed $25,000,000
and (ii) the aggregate US Tranche Revolving Credit Exposures
will not exceed the aggregate US Tranche Revolving
Commitments.
(c) Expiration Date. Each Letter of Credit shall expire at
or prior to the close of business on the earlier of (i) the
date one year after the date of the issuance of such Letter
of Credit (or, in the case of any renewal or extension
thereof, one year after such renewal or extension) and
(ii) the date that is five Business Days prior to the
Maturity Date.
(d) Participations. By the issuance of a Letter of Credit
(or an amendment to a Letter of Credit increasing the amount
thereof) and without any further action on the part of the
Issuing Bank or the US Tranche Lenders, the Issuing Bank
hereby grants to each US Tranche Lender, and each US Tranche
Lender hereby acquires from the Issuing Bank, a
participation in such Letter of Credit equal to such US
Tranche Lender's US Tranche Percentage of the aggregate
amount available to be drawn under such Letter of Credit.
In consideration and in furtherance of the foregoing, each
US Tranche Lender hereby absolutely and unconditionally
agrees to pay to the Administrative Agent, for the account
of the Issuing Bank, such Lender's US Tranche Percentage of
each LC Disbursement made by the Issuing Bank and not
reimbursed by the applicable Borrower on the date due as
provided in paragraph (e) of this Section, or of any
reimbursement payment required to be refunded to the
applicable Borrower for any reason. Each US Tranche Lender
acknowledges and agrees that its obligation to acquire
participations pursuant to this paragraph in respect of
Letters of Credit is absolute and unconditional and shall
not be affected by any circumstance whatsoever, including
any amendment, renewal or extension of any Letter of Credit
or the occurrence and continuance of a Default or reduction
or termination of the US Tranche Revolving Commitments, and
that each such payment shall be made without any offset,
abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, the
applicable Borrower shall reimburse such LC Disbursement by
paying to the Applicable Agent an amount equal to such LC
Disbursement, in the currency in which such LC Disbursement
shall have been made, not later than 12:00 noon, Local Time,
on the date that such LC Disbursement is made, if the
applicable Borrower shall have received notice of such LC
Disbursement prior to 11:00 a.m., Local Time, on such date,
or, if such notice has not been received by the applicable
Borrower prior to such time on such date, then not later
than 1:00 p.m., Local Time, on (A) the Business Day that the
applicable Borrower receives such notice, if such notice is
received prior to 11:00 a.m., Local Time, on the day of
receipt, or (B) the Business Day immediately following the
day that the applicable Borrower receives such notice, if
such notice is not received prior to such time on the day of
receipt; provided, however, that if the applicable Borrower
shall fail to deliver a timely Borrowing Request to finance
the reimbursement of such LC Disbursement (and shall not
otherwise reimburse such LC Disbursement pursuant to the
provisions of this paragraph), then such Borrower shall be
deemed to have delivered a Borrowing Request for an ABR
Revolving Borrowing in an amount equal to the US Dollar
Equivalent of the LC Disbursement, and the Applicable Agent
shall apply the proceeds of any ABR Revolving Borrowing made
in response to such Borrowing Request to the reimbursement
of such LC Disbursement (after converting such proceeds, if
necessary, into the currency of such LC Disbursement).
Promptly following receipt by the Applicable Agent of any
payment from the applicable Borrower (or by the application
of proceeds of an ABR Revolving Borrowing) pursuant to this
paragraph, the Applicable Agent shall distribute such
payment to the Issuing Bank or, to the extent that US
Tranche Lenders have made payments pursuant to this
paragraph to reimburse the Issuing Bank, then to such US
Tranche Lenders and the Issuing Bank as their interests may
appear. If the applicable Borrower fails to make such
payment when due, directly or through the application of an
ABR Borrowing, then, upon notice from the applicable Issuing
Bank to the applicable Borrower and the Applicable Agent,
the Applicable Agent shall notify each US Tranche Lender of
the applicable LC Disbursement, the payment then due from
the applicable Borrower in respect thereof and such Lender's
US Tranche Percentage thereof. Promptly following receipt
of such notice, each US Tranche Lender shall pay to the
Applicable Agent its US Tranche Percentage of the payment
then due from the applicable Borrower in the same manner as
provided in Section 2.05 with respect to Loans made by such
US Tranche Lender (and Section 2.05 shall apply, mutatis
mutandis, to the payment obligations of the US Tranche
Lenders), and the Applicable Agent shall promptly pay to the
Issuing Bank the amounts so received by it from the US
Tranche Lenders. Any payment made by a US Tranche Lender
pursuant to this paragraph to reimburse the Issuing Bank for
any LC Disbursement shall not constitute a Loan and shall
not relieve the applicable Borrower of its obligation to
reimburse such LC Disbursement.
(f) Obligations Absolute. The Borrowers' obligations to
reimburse LC Disbursements as provided in paragraph (e) of
this Section shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all
circumstances whatsoever and irrespective of (i) any lack of
validity or enforceability of any Letter of Credit or this
Agreement or any other Loan Document, or any term or
provision herein or therein, (ii) any draft or other
document presented under a Letter of Credit proving to be
forged, fraudulent or invalid in any respect or any
statement therein being untrue or inaccurate in any respect,
(iii) payment by the Issuing Bank under a Letter of Credit
against presentation of a draft or other document that does
not comply with the terms of such Letter of Credit, or
(iv) any other event or circumstance whatsoever, whether or
not similar to any of the foregoing, that might, but for the
provisions of this Section, constitute a legal or equitable
discharge of, or provide a right of set-off against, the
Borrowers' obligations hereunder. None of the Agents, the
US Tranche Lenders or the Issuing Bank, or any of their
Related Parties, shall have any liability or responsibility
by reason of or in connection with the issuance or transfer
of any Letter of Credit or any payment or failure to make
any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any
error, omission, interruption, loss or delay in transmission
or delivery of any draft, notice or other communication
under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error
in interpretation of technical terms or any consequence
arising from causes beyond the control of the Issuing Bank;
provided that the foregoing shall not be construed to excuse
the Issuing Bank from liability to the applicable Borrower
to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby
waived by the Borrowers to the extent permitted by
applicable law) suffered by the applicable Borrower that are
caused by the Issuing Bank's failure to exercise care when
determining whether drafts and other documents presented
under a Letter of Credit comply with the terms thereof. The
parties hereto expressly agree that, in the absence of gross
negligence or wilful misconduct on the part of the Issuing
Bank (as determined by a court of competent jurisdiction),
the Issuing Bank shall be deemed to have exercised care in
each such determination. In furtherance of the foregoing
and without limiting the generality thereof, the parties
agree that, with respect to documents presented which appear
on their face to be in substantial compliance with the terms
of a Letter of Credit, the Issuing Bank may, in its sole
discretion, either accept and make payment upon such
documents without responsibility for further investigation,
regardless of any notice or information to the contrary, or
refuse to accept and make payment upon such documents if
such documents are not in strict compliance with the terms
of such Letter of Credit.
(g) Disbursement Procedures. The Issuing Bank shall,
promptly following its receipt thereof, examine all
documents purporting to represent a demand for payment under
a Letter of Credit. The Issuing Bank shall promptly notify
the Applicable Agent and the applicable Borrower by
telephone (confirmed by telecopy) of such demand for payment
and whether the Issuing Bank has made or will make an LC
Disbursement thereunder; provided that any failure to give
or delay in giving such notice shall not relieve the
applicable Borrower of its obligation to reimburse the
Issuing Bank and the US Tranche Lenders with respect to any
such LC Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any
LC Disbursement, then, unless the applicable Borrower shall
reimburse such LC Disbursement in full on the date such LC
Disbursement is made, the unpaid amount thereof shall bear
interest, for each day from and including the date such LC
Disbursement is made to but excluding the date that the
applicable Borrower reimburses such LC Disbursement, at (i)
in the case of any LC Disbursement denominated in US
Dollars, the rate per annum then applicable to ABR Revolving
Loans and (ii) in the case of any LC Disbursement
denominated in Sterling, a rate per annum determined by the
Issuing Bank (which determination will be conclusive absent
manifest error) to represent its cost of funds plus the
Applicable Rate used to determine interest applicable to
Eurocurrency Revolving Loans; provided that, at all times
after the applicable Borrower fails to reimburse such LC
Disbursement when due pursuant to paragraph (e) of this
Section, Section 2.12(c) shall apply. Interest accrued
pursuant to this paragraph shall be for the account of the
Issuing Bank, except that interest accrued on and after the
date of payment by any US Tranche Lender pursuant to
paragraph (e) of this Section to reimburse the Issuing Bank
shall be for the account of such US Tranche Lender to the
extent of such payment.
(i) Replacement of the Issuing Bank. The Issuing Bank may
be replaced at any time by written agreement among the
Company, the Administrative Agent, the replaced Issuing Bank
and the successor Issuing Bank. The Administrative Agent
shall notify the Lenders of any such replacement of the
Issuing Bank. At the time any such replacement shall become
effective, the Company shall pay all unpaid fees accrued for
the account of the replaced Issuing Bank pursuant to Section
2.11(b). From and after the effective date of any such
replacement, (i) the successor Issuing Bank shall have all
the rights and obligations of the Issuing Bank under this
Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term "Issuing
Bank" shall be deemed to refer to such successor or to any
previous Issuing Bank, or to such successor and all previous
Issuing Banks, as the context shall require. After the
replacement of an Issuing Bank hereunder, the replaced
Issuing Bank shall remain a party hereto and shall continue
to have all the rights and obligations of an Issuing Bank
under this Agreement with respect to Letters of Credit
issued by it prior to such replacement, but shall not be
required to issue additional Letters of Credit.
(j) Cash Collateralization. If the US Tranche Revolving
Commitments shall have been terminated or an Event of
Default shall have occurred and be continuing and the
Company shall receive notice from the Administrative Agent
or the Required Lenders (or, if the maturity of the Loans
has been accelerated, US Tranche Lenders with LC Exposure
representing greater than 50% of the total LC Exposure)
demanding the deposit of cash collateral pursuant to this
paragraph, the Company shall deposit in an account with the
Administrative Agent, in the name of the Administrative
Agent and for the benefit of the US Tranche Lenders, an
amount in cash equal to the LC Exposure as of such date plus
any accrued and unpaid interest thereon; provided that the
obligation to deposit such cash collateral shall become
effective immediately, and such deposit shall become
immediately due and payable, without demand or other notice
of any kind, upon the occurrence of any Specified Event with
respect to the Company. Such deposit shall be held by the
Administrative Agent as collateral for the payment and
performance of the obligations of the Loan Parties under the
Loan Documents. The Administrative Agent shall have
exclusive dominion and control, including the exclusive
right of withdrawal, over such account. At the request of
the Company, amounts so deposited shall be invested by the
Administrative Agent, at the Company's risk and expense, in
high quality overnight or short-term cash equivalent
investments of prime financial institutions (which may
include the Administrative Agent) maturing prior to the date
or dates on which the Administrative Agent anticipates that
such amounts will be applied as required by this paragraph.
Interest or profits, if any, on such investments shall
accumulate in such account. Moneys in such account shall be
applied by the Administrative Agent to reimburse the Issuing
Bank for LC Disbursements for which it has not been
reimbursed and, to the extent not so applied, shall be held
for the satisfaction of the reimbursement obligations of the
Company for the LC Exposure at such time or, if the maturity
of the Loans has been accelerated (but subject to the
consent of US Tranche Lenders with LC Exposures representing
greater than 50% of the total LC Exposure) be applied to
satisfy other obligations of the Company under this
Agreement. If the Company is required to provide an amount
of cash collateral hereunder as a result of the occurrence
of an Event of Default, such amount (to the extent not
applied as aforesaid) shall be returned to the Company
within three Business Days after all Events of Default have
been cured or waived.
SECTION 2.05. Funding of Borrowings. (a) Each Lender
shall make each Loan to be made by it hereunder on the
proposed date thereof by wire transfer of immediately
available funds in the applicable currency by 11:00 a.m.,
Local Time, to the account of the Applicable Agent most
recently designated by it for such purpose for Loans of such
Class and currency by notice to the applicable Lenders. The
Applicable Agent will make such Loans available to the
relevant Borrower by promptly crediting the amounts so
received, in like funds, to an account of such Borrower
notified by the Borrower to the Applicable Agent (i) in the
United States, in the case of Loans denominated in US
Dollars and (ii) in the United Kingdom, in the case of
Eurocurrency Loans denominated in Sterling or Euro, or
otherwise in accordance with disbursement instructions given
by such Borrower to the Applicable Agent; provided that US
Tranche Revolving Loans made to finance the reimbursement of
an LC Disbursement shall be remitted by the Administrative
Agent to the Issuing Bank.
(b) Unless the Applicable Agent shall have received notice
from a Lender prior to the proposed date of any Borrowing
that such Lender will not make available to the Applicable
Agent such Lender's share of such Borrowing, the Applicable
Agent may assume that such Lender has made such share
available on such date in accordance with paragraph (a) of
this Section and may, in reliance upon such assumption, make
available to the relevant Borrower a corresponding amount.
In such event, if a Lender has not in fact made its share of
the applicable Borrowing available to the Applicable Agent,
then the applicable Lender and such Borrower severally agree
to pay to the Applicable Agent forthwith on demand such
corresponding amount with interest thereon, for each day
from and including the date such amount is made available to
such Borrower to but excluding the date of payment to the
Applicable Agent, at (i) in the case of such Lender, the
rate reasonably determined by the Applicable Agent to be the
cost to it of funding such amount or (ii) in the case of
such Borrower, the interest rate applicable to the subject
Loan. If such Lender pays such amount to the Applicable
Agent, then such amount shall constitute such Lender's Loan
included in such Borrowing and the Applicable Agent shall
return to such Borrower any amount (including interest) paid
by such Borrower to the Applicable Agent pursuant to this
paragraph.
SECTION 2.06. Interest Elections. (a) Each Revolving
Borrowing and Term Borrowing initially shall be of the Type
specified in the applicable Borrowing Request and, in the
case of a Eurocurrency Borrowing, shall have an initial
Interest Period as specified in such Borrowing Request.
Thereafter, the relevant Borrower may elect to convert such
Borrowing to a Borrowing of a different Type or to continue
such Borrowing and, in the case of a Eurocurrency Borrowing,
may elect Interest Periods therefor, all as provided in this
Section and on terms consistent with the other provisions of
this Agreement. A Borrower may elect different options with
respect to different portions of an affected Borrowing, in
which case each such portion shall be allocated ratably
among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising each such portion shall
be considered a separate Borrowing.
(b) To make an election pursuant to this Section, a
Borrower, or the Company on its behalf, shall notify the
Applicable Agent of such election by telephone by the time
that a Borrowing Request would be required under
Section 2.03 if such Borrower were requesting a Revolving
Borrowing of the Type resulting from such election to be
made on the effective date of such election. Each such
telephonic Interest Election Request shall be irrevocable
and shall be confirmed promptly by hand delivery or telecopy
to the Applicable Agent of a written Interest Election
Request in a form approved by the Administrative Agent and
signed by the relevant Borrower, or by the Company on its
behalf. Notwithstanding any contrary provision herein, this
Section shall not be construed to permit any Borrower to
(i) change the currency of any Borrowing, (ii) elect an
Interest Period for Eurocurrency Loans that does not comply
with Section 2.02(d) or (iii) convert any Borrowing to a
Borrowing of a Type not available under the Class of
Commitments pursuant to which such Borrowing was made.
(c) Each telephonic and written Interest Election Request
shall specify the following information in compliance with
Section 2.02:
(i) the Borrowing to which such Interest Election Request
applies and, if different options are being elected with
respect to different portions thereof, the portions thereof
to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to clauses (iii)
and (iv) below shall be specified for each resulting
Borrowing);
(ii) the effective date of the election made pursuant to
such Interest Election Request, which shall be a Business
Day;
(iii) the Type of the resulting Borrowing; and
(iv) if the resulting Borrowing is to be a Eurocurrency
Borrowing, the Interest Period to be applicable thereto
after giving effect to such election, which shall be a
period contemplated by the definition of the term "Interest
Period".
If any such Interest Election Request requests a
Eurocurrency Borrowing but does not specify an Interest
Period, then the Borrower shall be deemed to have selected
an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election
Request, the Applicable Agent shall advise each Lender
holding a Loan to which such request relates of the details
thereof and of such Lender's portion of each resulting
Borrowing.
(e) If a Borrower fails to deliver a timely Interest
Election Request with respect to a Eurocurrency Revolving
Borrowing, then (i) in the case of a Revolving Borrowing
denominated in US Dollars, unless such Borrowing is repaid
as provided herein, such Borrowing shall be converted to an
ABR Borrowing at the end of the Interest Period applicable
thereto, (ii) in the case of any Revolving Borrowing
denominated in a currency other than US Dollars (other than
a UK Tranche Revolving Borrowing denominated in Sterling by
the UK Borrower or another Borrowing Subsidiary organized
under the laws of England and Wales), unless the applicable
Borrower has advised the Applicable Agent that such
Borrowing will be repaid at the end of the Interest Period
applicable thereto by 2:00 p.m., Local Time, three Business
Days before the end of such Interest Period, such Borrowing
shall be continued as a Eurocurrency Borrowing with an
Interest Period of one month's duration and (iii) in the
case of a UK Tranche Revolving Borrowing denominated in
Sterling by the UK Borrower or another Borrowing Subsidiary
organized under the laws of England and Wales, unless such
Borrowing is repaid as provided herein, such Borrowing shall
be continued at the end of the Interest Period applicable
thereto as a Eurocurrency Borrowing with an Interest Period
of one month's duration. If the Company, CBC or the UK
Borrower fails to deliver a timely Interest Election Request
with respect to a Eurocurrency Term Borrowing, and does not
advise the Applicable Agent that such Borrowing will be
repaid at the end of the Interest Period applicable thereto
by 2:00 p.m., Local Time, three Business Days before the end
of such Interest Period, then at the end of such Interest
Period, such Borrowing shall be continued as a Eurocurrency
Borrowing with an Interest Period of one month's duration.
SECTION 2.07. Termination and Reduction of Commitments.
(a) Unless previously terminated, (i) the Term Loan
Commitments shall terminate at 5:00 p.m., New York City
time, on the Effective Date, (ii) the Revolving Commitments
shall terminate on the Maturity Date and (iii) all the
Commitments shall terminate if the initial borrowing
hereunder shall not have occurred by February 28, 2002.
(b) The Company may at any time terminate, or from time to
time reduce, the Commitments of any Class; provided that (i)
each reduction of the Commitments of any Class shall be in
an amount that is an integral multiple of the Borrowing
Multiple and not less than the Borrowing Minimum, or the
entire amount of the Commitments of such Class, (ii) the
Company shall not terminate or reduce the US Tranche
Revolving Commitments if, after giving effect to any
concurrent prepayment of the US Tranche Revolving Loans in
accordance with Section 2.10, the aggregate US Tranche
Revolving Credit Exposures would exceed the aggregate US
Tranche Revolving Commitments and (iii) the Company shall
not terminate or reduce the UK Tranche Revolving Commitments
if, after giving effect to any concurrent prepayment of the
UK Tranche Revolving Loans in accordance with Section 2.10,
the aggregate UK Tranche Revolving Credit Exposures would
exceed the aggregate UK Tranche Revolving Commitments.
(c) The Company shall notify the Administrative Agent of
any election to terminate or reduce the Commitments of any
Class under paragraph (b) of this Section at least three
Business Days prior to the effective date of such
termination or reduction, specifying the effective date of
such election. Promptly following receipt of any such
notice, the Administrative Agent shall advise the London
Agent and the applicable Lenders of the contents thereof.
Each notice delivered by the Company pursuant to this
Section shall be irrevocable; provided that a notice of
termination of the Commitments delivered by the Company may
state that such notice is conditioned upon the effectiveness
of other credit facilities, in which case such notice may be
revoked by the Company (by notice to the Administrative
Agent on or prior to the specified effective date) if such
condition is not satisfied. Any termination or reduction of
the Commitments of any Class shall be permanent. Each
reduction of the Commitments of any Class shall be made
ratably among the applicable Lenders in accordance with
their respective Commitments of such Class.
SECTION 2.08. Repayment of Loans; Evidence of Debt.
(a) Each Borrower hereby unconditionally promises to pay to
the Applicable Agent for the accounts of the applicable
Lenders (i) the then unpaid principal amount of each
Revolving Borrowing of such Borrower on the Maturity Date
and (ii) the then unpaid principal amount of each Term Loan
of such Borrower as provided in Section 2.09. Each Borrower
agrees to repay the principal amount of each Loan made to
such Borrower and the accrued interest thereon in the
currency of such Loan.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness
of each Borrower to such Lender resulting from each Loan
made by such Lender, including the amounts of principal and
interest payable and paid to such Lender from time to time
hereunder.
(c) Subject to the Register described in Section 10.04, the
Administrative Agent shall maintain accounts (including the
Register described in Section 10.04) in which it shall
record (i) the amount of each Loan made hereunder, the
Class, Type and currency thereof and the Interest Period
applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from
each Borrower to each Lender hereunder and (iii) the amount
of any sum received by any Agent hereunder for the accounts
of the Lenders and each Lender's share thereof. The London
Agent shall furnish to the Administrative Agent, promptly
after the making of any Loan or Borrowing with respect to
which it is the Applicable Agent or the receipt of any
payment of principal or interest with respect to any such
Loan or Borrowing, information with respect thereto that
will enable the Administrative Agent to maintain the
accounts referred to in the preceding sentence. The
Administrative Agent shall notify in writing the London
Agent promptly after the making of any Loan or Borrowing
with respect to which it is the Applicable Agent or the
receipt of payment of any principal with respect to any such
Loan or Borrowing.
(d) Subject to the Register described in Section 10.04, the
entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be prima facie
evidence of the existence and amounts of the obligations
recorded therein; provided that the failure of any Lender or
the Administrative Agent to maintain such accounts or any
error therein shall not in any manner affect the obligation
of any Borrower to repay the Loans in accordance with the
terms of this Agreement.
(e) Any Lender may request that Loans of any Class made by
it to any Borrower be evidenced by a promissory note. In
such event, each applicable Borrower shall prepare, execute
and deliver to such Lender a promissory note payable to such
Lender and its registered assigns and in a form approved by
the Administrative Agent, acting reasonably. Thereafter,
the Loans evidenced by each such promissory note and
interest thereon shall at all times (including after
assignment pursuant to Section 10.04) be represented by one
or more promissory notes in such form payable to the payee
named therein and its registered assigns.
SECTION 2.09. Amortization of Term Loans. (a) Subject to
adjustment pursuant to paragraph (c) of this Section, the
applicable Borrowers shall repay the principal of the Term
Borrowings in 16 consecutive quarterly installments (each of
which may consist of payments of one or more Term Borrowings
selected by such Borrowers), the aggregate US Dollar
Equivalent of each of which on the applicable quarterly
installment date shall be the amount (expressed as a
percentage of the sum of the US Dollar Equivalents on the
fifth Business Day prior to the applicable quarterly
installment date of the amounts of the Term Loans made on
the Effective Date) set forth opposite the applicable
quarterly installment date below:
Date Amount
March 28, 2003 3.75%
June 27, 2003 3.75%
September 26, 2003 3.75%
December 26, 2003 3.75%
March 26, 2004 5.00%
June 25, 2004 5.00%
September 24, 2004 5.00%
December 22, 2004 5.00%
March 25, 2005 6.25%
June 24, 2005 6.25%
September 23, 2005 6.25%
December 21, 2005 6.25%
March 24, 2006 10.00%
June 23, 2006 10.00%
September 22, 2006 10.00%
Maturity Date 10.00%
The Administrative Agent shall not less than five Business
Days prior to each quarterly installment date deliver to the
Company a calculation of the aggregate amount of the payment
required to be made hereunder on such quarterly installment
date.
(b) To the extent not previously repaid, all Term Loans
shall be due and payable on the Maturity Date.
(c) Any mandatory prepayment of a Term Borrowing shall be
applied to reduce the subsequent scheduled repayments of the
Term Borrowings to be made pursuant to this Section ratably
in accordance with the amounts thereof. Any voluntary
prepayment of a Term Borrowing shall be applied to reduce
the next scheduled quarterly repayment of the Term
Borrowings to be made pursuant to this Section and
thereafter to reduce subsequent scheduled repayments of the
Term Borrowings to be made pursuant to this Section ratably
in accordance with the amounts thereof. For purposes of
determining the amount by which any quarterly installment of
principal is to be reduced as a result of any prepayment,
the amount of such prepayment (denominated in the currency
in which such prepayment shall have been made) shall be
allocated as provided above in this paragraph on the next
quarterly installment date among the remaining scheduled
installments of principal, and the US Dollar Equivalent of
the amount so allocated to each scheduled installment shall
be determined as of the date of determination under
paragraph (a) above of the amount of the payment due on the
applicable quarterly installment date.
(d) Prior to any repayment of Term Borrowings, the Company
shall select the Borrowing or Borrowings to be repaid and
shall notify the Administrative Agent by telephone
(confirmed by telecopy) of such selection not later than
11:00 a.m., New York time, three Business Days before the
scheduled date of such repayment. Each repayment of a
Borrowing shall be applied ratably to the Loans included in
the repaid Borrowing. Repayments of Term Borrowings shall
be accompanied by accrued interest on the amounts repaid.
SECTION 2.10. Prepayment of Loans. (a) Any Borrower shall
have the right at any time and from time to time to prepay
any Borrowing of such Borrower in whole or in part, subject
to prior notice in accordance with paragraph (e) of this
Section.
(b) If the aggregate Revolving Credit Exposures of any
Class shall exceed the aggregate Revolving Commitments of
such Class, then (i) on the last day of any Interest Period
for any Eurocurrency Revolving Borrowing of such Class and
(ii) on any other date in the event ABR Revolving Borrowings
of such Class shall be outstanding, the applicable Borrowers
shall prepay Revolving Loans of such Class in an amount
equal to the lesser of (A) the amount necessary to eliminate
such excess (after giving effect to any other prepayment of
Loans on such day) and (B) the amount of the Borrowings
referred to in clauses (i) and (ii), as applicable. If, on
any Reset Date, the aggregate amount of the Revolving Credit
Exposures of any Class shall exceed 105% of the aggregate
Commitments of such Class, then the applicable Borrowers
shall, not later than the next Business Day, prepay one or
more Borrowings of such Class in an aggregate principal
amount sufficient to eliminate such excess.
(c)(i) In the event and on each occasion that any Net
Proceeds are received by or on behalf of the Company or any
Subsidiary in respect of any Asset Disposition, the Company
shall, within three Business Days after such Net Proceeds
are received, prepay or cause the applicable Borrower to
prepay Term Borrowings in an aggregate amount equal to 50%
of such Net Proceeds; provided that the Company shall not be
subject to such prepayment obligation to the extent that
within such period of three Business Days the Company
notifies the Administrative Agent that it intends to
reinvest such Net Proceeds in capital assets within 12
months after the receipt thereof, and within such 12-month
period the Company delivers to the Administrative Agent a
notice certifying that such Net Proceeds have in fact been
so invested; provided, further, however, that if the Company
gives such a notice of its intention to reinvest such Net
Proceeds and such Net Proceeds are not reinvested within the
12-month period referred to above, the Company shall
forthwith apply or cause the applicable Borrower to apply
such Net Proceeds to prepay Term Borrowings.
(ii) In the event and on each occasion that any Net
Proceeds are received by or on behalf of the Company in
respect of any Indebtedness issued under Section
6.01(i)(iii), the Company shall, within three Business Days
after such Net Proceeds are received, prepay or cause the
applicable Borrower to prepay Term Borrowings in an
aggregate amount equal to 100% of such Net Proceeds.
(d) Prior to any optional or mandatory prepayment of
Borrowings hereunder, the applicable Borrower shall select
the Borrowing or Borrowings to be prepaid and shall specify
such selection in the notice of such prepayment pursuant to
paragraph (e) of this Section.
(e) The applicable Borrower, or the Company on behalf of
the applicable Borrower, shall notify the Applicable Agent
by telephone (confirmed by telecopy) of any prepayment of a
Borrowing hereunder (i) in the case of a Eurocurrency
Borrowing, not later than 11:00 a.m., Local Time,
three Business Days before the date of such prepayment and
(ii) in the case of an ABR Borrowing, not later than 11:00
a.m., Local Time, one Business Day before the date of such
prepayment. Each such notice shall be irrevocable and shall
specify the prepayment date and the principal amount of each
Borrowing or portion thereof to be prepaid; provided that,
if a notice of optional prepayment is given in connection
with a conditional notice of termination of the Commitments
as contemplated by Section 2.07(c), then such notice of
prepayment may be revoked if such notice of termination is
revoked in accordance with Section 2.07(c). Promptly
following receipt of any such notice, the Applicable Agent
shall advise the applicable Lenders of the contents thereof.
Except to the otherwise required in connection with any
mandatory prepayment, each partial prepayment of any
Borrowing shall be in an amount that would be permitted in
the case of an advance of a Borrowing of the same Type as
provided in Section 2.02. Each prepayment of a Borrowing
shall be applied ratably to the Loans included in the
prepaid Borrowing. Prepayments shall be accompanied
by accrued interest to the extent required by Section 2.12.
(f) In the event the amount of any prepayment required to
be made pursuant to this Section shall exceed the aggregate
principal amount of the ABR Term Loans or ABR Revolving
Loans, as the case may be, outstanding (the amount of any
such excess being called the "Excess Amount"), the
applicable Borrower shall have the right, in lieu of making
such prepayment in full, to prepay all the outstanding ABR
Loans of the applicable Class and to deposit an amount equal
to the Excess Amount with the Applicable Agent in a cash
collateral account maintained (pursuant to documentation
reasonably satisfactory to the Applicable Agent) by and in
the sole dominion and control of the Applicable Agent, which
shall have the exclusive right of withdrawal for application
in accordance with this paragraph (f). Any amounts so
deposited shall be held by the Applicable Agent as
collateral for the Obligations and applied to the prepayment
of the applicable Eurocurrency Loans at the ends of the
current Interest Periods applicable thereto. At the request
of the applicable Borrower, amounts so deposited shall be
invested by the Applicable Agent, at the applicable
Borrower's risk and expense, in high quality overnight or
short-term cash equivalent investments of prime financial
institutions (which may include the Administrative Agent)
maturing prior to the date or dates on which the Applicable
Agent anticipates that such amounts will be applied to
prepay Eurocurrency Loans; any interest earned on such
Permitted Investments will be for the account of the
applicable Borrower, and the applicable Borrower will
deposit with the Administrative Agent the amount of any loss
on any such investment to the extent necessary in order that
the amount of the prepayment to be made with the deposited
amounts is not reduced.
SECTION 2.11. Fees. (a) The Company agrees to pay to the
Administrative Agent for the account of each Lender a
commitment fee, which shall accrue at the Applicable Rate on
the average daily unused amount of each Commitment of such
Lender during the period from and including the date hereof
to but excluding the date on which such Commitment
terminates. Accrued commitment fees shall be payable in
arrears (i) in the case of commitment fees in respect of the
Revolving Commitments, on the last day of March, June,
September and December of each year, commencing on the first
such date to occur after the date hereof, and on the date on
which such Commitments terminate and (ii) in the case of
commitment fees in respect of the Term Loan Commitments, on
the Effective Date or any earlier date on which such
Commitments terminate. All commitment fees shall be
computed on the basis of a year of 360 days and shall be
payable for the actual number of days elapsed (including the
first day but excluding the last day). For purposes of
determining the unused portion of the Revolving Commitments,
the Revolving Commitment of a Lender shall be deemed to be
used to the extent of the outstanding Revolving Loans and LC
Exposure of such Lender.
(b) The Company agrees to pay (i) to the Administrative
Agent for the account of each US Tranche Lender a
participation fee with respect to its participations in
Letters of Credit, which shall accrue at the Applicable Rate
used to determine the interest rate applicable to
Eurocurrency Revolving Loans on the daily amount of such US
Tranche Lender's LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the
period from and including the date hereof to but excluding
the later of the date on which such US Tranche Lender's US
Tranche Revolving Commitment terminates and the date on
which such Lender ceases to have any LC Exposure, and (ii)
to the Issuing Bank a fronting fee, which shall accrue at
the rate of 0.125% per annum on the average daily amount of
the LC Exposure (excluding any portion thereof attributable
to unreimbursed LC Disbursements) during the period from and
including the date hereof to but excluding the later of the
date of termination of the US Tranche Revolving Commitments
and the date on which there ceases to be any LC Exposure, as
well as the Issuing Bank's standard fees with respect to the
issuance, amendment, renewal or extension of any Letter of
Credit or processing of drawings thereunder. Participation
fees and fronting fees accrued under this paragraph through
and including the last day of March, June, September and
December of each year shall be payable on such last day,
commencing on the first such date to occur after the date
hereof; provided that all such fees shall be payable on the
date on which the US Tranche Revolving Commitments terminate
and any such fees accruing after the date on which the US
Tranche Revolving Commitments terminate shall be payable on
demand. Any other fees payable to the Issuing Bank pursuant
to this paragraph shall be payable within 10 days after
demand. All participation fees and fronting fees payable
under this paragraph shall be computed on the basis of a
year of 360 days and shall be payable for the actual number
of days elapsed (including the first day but excluding the
last day).
(c) The Company agrees to pay to the Administrative Agent,
for its own account, fees payable in the amounts and at the
times separately agreed upon between the Company and the
Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates
due, in immediately available funds, to the Administrative
Agent (or to the Issuing Bank, in the case of fees payable
to it) for distribution, in the case of the commitment fees,
to the Lenders. Fees paid shall not be refundable under any
circumstances.
SECTION 2.12. Interest. (a) The Loans comprising each
ABR Borrowing shall bear interest at the Alternate Base Rate
plus the Applicable Rate.
(b) The Loans comprising each Eurocurrency Borrowing shall
bear interest at the Adjusted LIBO Rate for the Interest
Period in effect for such Borrowing plus the Applicable
Rate.
(c) Notwithstanding the foregoing, if any principal of or
interest on any Loan or any fee or other amount payable by
any Borrower hereunder is not paid when due, whether at
stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to (i) in the case of
overdue principal of any Loan, 2% plus the rate otherwise
applicable to such Loan as provided in the preceding
paragraphs of this Section or (ii) in the case of any other
amount, 2% plus the rate applicable to ABR Loans as provided
in paragraph (a) of this Section.
(d) Accrued interest on each Loan shall be payable in
arrears on each Interest Payment Date for such Loan and, in
the case of Revolving Loans, upon termination of the
Commitments; provided that (i) interest accrued pursuant to
paragraph (c) of this Section shall be payable on demand,
(ii) in the event of any repayment or prepayment of any Loan
(other than a prepayment of an ABR Revolving Loan prior to
the end of the Revolving Availability Period), accrued
interest on the principal amount repaid or prepaid shall be
payable on the date of such repayment or prepayment and
(iii) in the event of any conversion of any Eurocurrency
Loan prior to the end of the current Interest Period
therefor, accrued interest on such Loan shall be payable on
the effective date of such conversion.
(e) All interest hereunder shall be computed on the basis
of a year of 360 days, except that (i) interest on
Borrowings denominated in Sterling and (ii) interest
computed by reference to the Alternate Base Rate at times
when the Alternate Base Rate is based on the Prime Rate
shall be computed on the basis of a year of 365 days (or
366 days in a leap year), and in each case shall be payable
for the actual number of days elapsed (including the first
day but excluding the last day). The applicable Alternate
Base Rate, Adjusted LIBO Rate or LIBO Rate shall be
determined by the Applicable Agent, and such determination
shall be conclusive absent manifest error.
SECTION 2.13. Alternate Rate of Interest. If prior to the
commencement of any Interest Period for a Eurocurrency
Borrowing denominated in any currency:
(a) the Applicable Agent determines (which determination
shall be conclusive absent manifest error) that adequate and
reasonable means do not exist for ascertaining the Adjusted
LIBO Rate or the LIBO Rate, as applicable, for such Interest
Period; or
(b) the Applicable Agent is advised by the Required Lenders
that the Adjusted LIBO Rate or the LIBO Rate, as applicable,
for such Interest Period will not adequately and fairly
reflect the cost to such Lenders (or Lender) of making or
maintaining their Loans (or its Loan) included in such
Borrowing for such Interest Period;
then the Applicable Agent shall give notice thereof to the
Company and the Lenders by telephone or telecopy as promptly
as practicable thereafter and, until the Applicable Agent
notifies the Company and the Lenders that the circumstances
giving rise to such notice no longer exist, (i) any
Borrowing Request that requests a Eurocurrency Borrowing in
such currency shall be ineffective and the applicable
Borrower may instead request an ABR Borrowing not later than
12:00 noon, Local Time, on the date of the proposed
Borrowing and (ii) any Interest Election Request that
requests the conversion or continuation of any Revolving
Borrowing or Term Borrowing as a Eurocurrency Borrowing in
such currency shall be ineffective, and such Borrowing shall
be converted to or continued on the last day of the Interest
Period applicable thereto (A) if such Borrowing is
denominated in US Dollars, as an ABR Borrowing, or (B) if
such Borrowing is denominated in any other currency, as a
Borrowing bearing interest at such rate as the Lenders and
the Company may agree adequately reflects the costs to the
Lenders of making or maintaining their Loans (or, in the
absence of such agreement, shall be repaid as of the last
day of the current Interest Period applicable thereto).
SECTION 2.14. Increased Costs. (a) If any Change in Law
shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any
Lender or the Issuing Bank (except any such reserve
requirement reflected in the Adjusted LIBO Rate); or
(ii) impose on any Lender or the Issuing Bank or the London
interbank market any other condition affecting this
Agreement or Eurocurrency Loans made by such Lender or any
Letter of Credit or participations therein, other than a
condition related to Taxes, which is governed by Section
2.16;
and the result of any of the foregoing shall be to increase
the cost to such Lender of making or maintaining any
Eurocurrency Loan (or of maintaining its obligation to make
any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any
Letter of Credit or to reduce the amount of any sum received
or receivable by such Lender or the Issuing Bank hereunder
(whether of principal, interest or otherwise), then the
Company will pay or cause the other Borrowers to pay to such
Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender
or the Issuing Bank for such additional costs incurred or
reduction suffered.
(b) If any Lender or the Issuing Bank determines that any
Change in Law regarding capital requirements has or would
have the effect of reducing the rate of return on such
Lender's or Issuing Bank's capital or on the capital of such
Lender's or Issuing Bank's holding company, if any, as a
consequence of this Agreement or the Loans made by, or
participations in Letters of Credit held by, such Lender, or
the Letters of Credit issued by the Issuing Bank, to a level
below that which such Lender or the Issuing Bank or such
Lender's or Issuing Bank's holding company could have
achieved but for such Change in Law (taking into
consideration such Lender's or the Issuing Bank's policies
and the policies of such Lender's or the Issuing Bank's
holding company with respect to capital adequacy), then from
time to time the Company will pay or cause the other
Borrowers to pay to such Lender or the Issuing Bank, as the
case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Bank or such Lender's
or the Issuing Bank's holding company for any such reduction
suffered.
(c) A certificate of a Lender or the Issuing Bank setting
forth the amount or amounts necessary to compensate such
Lender or the Issuing Bank or such Lender's or the Issuing
Bank's holding company, as the case may be, as specified in
paragraph (a) or (b) of this Section, and setting forth in
reasonable detail the calculations used by such Lender or
the Issuing Bank to determine such amount, shall be
delivered to the Company and shall be conclusive absent
manifest error. The Company shall pay or cause the other
Borrowers to pay to such Lender or the Issuing Bank, as the
case may be, the amount shown as due on any such certificate
within 10 days after receipt thereof.
(d) Failure or delay on the part of any Lender or the
Issuing Bank to demand compensation pursuant to this Section
shall not constitute a waiver of such Lender's or the
Issuing Bank's right to demand such compensation; provided
that the Company shall not be required to compensate a
Lender or the Issuing Bank pursuant to this Section for any
increased costs or reductions incurred more than 360 days
prior to the date that such Lender or the Issuing Bank, as
the case may be, notifies the Company of the Change in Law
giving rise to such increased costs or reductions and
delivers a certificate with respect thereto as provided in
paragraph (c) above; provided further that, if the Change in
Law giving rise to such increased costs or reductions is
retroactive, then the 360-day period referred to above shall
be extended to include the period of retroactive effect
thereof.
SECTION 2.15. Break Funding Payments. In the event of (a)
the payment of any principal of any Eurocurrency Loan other
than on the last day of an Interest Period applicable
thereto (including as a result of an Event of Default), (b)
the conversion of any Eurocurrency Loan to a Loan of a
different Type or Interest Period other than on the last day
of the Interest Period applicable thereto, (c) the failure
to borrow (including as a result of a return of funds to the
Lenders under the last sentence of Section 4.01), convert,
continue or prepay any Loan on the date specified in any
notice delivered pursuant hereto (regardless of whether such
notice may be revoked under Section 2.07(c) and is revoked
in accordance therewith), or (d) the assignment or deemed
assignment of any Eurocurrency Loan other than on the last
day of the Interest Period applicable thereto as a result of
a request by the Company pursuant to Section 2.18 or the CAM
Exchange, then, in any such event, the applicable Borrower
shall compensate each Lender for the loss, cost and expense
attributable to such event. Such loss, cost or expense to
any Lender shall be deemed to include an amount determined
by such Lender to be the excess, if any, of (i) the amount
of interest that would have accrued on the principal amount
of such Loan had such event not occurred, at the Adjusted
LIBO Rate that would have been applicable to such Loan, for
the period from the date of such event to the last day of
the then current Interest Period therefor (or, in the case
of a failure to borrow, convert or continue, for the period
that would have been the Interest Period for such Loan),
over (ii) the amount of interest that would accrue on such
principal amount for such period at the interest rate such
Lender would bid were it to bid, at the commencement of such
period, for deposits in the applicable currency of a
comparable amount and period from other banks in the London
interbank market. A certificate of any Lender setting forth
any amount or amounts that such Lender is entitled to
receive pursuant to this Section, and setting forth in
reasonable detail the calculations used by such Lender to
determine such amount or amounts, shall be delivered to the
applicable Borrower and shall be conclusive absent manifest
error. The applicable Borrower shall pay such Lender the
amount shown as due on any such certificate within 10 days
after receipt thereof.
SECTION 2.16. Taxes. (a) Subject to all the provisions of
this Section 2.16 and except as required by law, any and all
payments by or on account of any Borrower hereunder or under
any other Loan Document shall be made free and clear of and
without deduction for any Taxes; provided that if any
Borrower shall be required to deduct any Indemnified Taxes
or Other Taxes from such payments, then (i) the sum payable
shall be increased as necessary so that after making all
required deductions (including deductions applicable to
additional sums payable under this Section) the
Administrative Agent, the London Agent or the applicable
Lender or Issuing Bank, as the case may be, receives an
amount equal to the sum it would have received had no such
deductions been made, (ii) such Borrower shall make such
deductions and (iii) such Borrower shall pay the full amount
deducted to the relevant Governmental Authority in
accordance with applicable law.
(b) In addition, the Loan Parties shall pay any Other Taxes
to the relevant Governmental Authority in accordance with
applicable law.
(c) The relevant Borrower shall indemnify the
Administrative Agent, the London Agent, each Lender and the
Issuing Bank, within 10 days after written demand therefor,
for the full amount of any Indemnified Taxes or Other Taxes
paid by such Agent or such Lender or the Issuing Bank, as
the case may be, on or with respect to any payment by or on
account of any obligation of any Borrower hereunder or under
any other Loan Document (including Indemnified Taxes or
Other Taxes imposed or asserted on or attributable to
amounts payable under this Section) and any penalties,
interest and reasonable expenses arising therefrom or with
respect thereto (except to the extent such penalties,
interest or costs are attributable to the gross negligence
or willful misconduct by a Lender, Issuing Bank or Agent),
whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of
such payment or liability delivered to the Company by a
Lender or the Issuing Bank, or by an Agent, on its own
behalf or on behalf of a Lender or the Issuing Bank, shall
be conclusive absent manifest error. Such Lender, Issuing
Bank or Agent shall give the Company written notice of any
payment of Indemnified Taxes or Other Taxes to be made
hereunder with respect to which the Company has an indemnity
obligation, but the failure of such Lender, Issuing Bank or
Agent to give such notice shall not limit its right to
receive indemnification hereunder, except that a failure to
give such notice will constitute gross negligence or wilful
misconduct for purposes of the first sentence of this clause
(c) to the extent penalties, interest or costs are incurred
solely as a result of the failure to give such notice. Such
Lender, Issuing Bank or Agent shall use reasonable efforts
to cooperate with the Company in seeking a refund of such
payment of Indemnified Taxes or Other Taxes.
(d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by any Borrower to a Governmental
Authority, such Borrower shall deliver to the Administrative
Agent the original or a certified copy of a receipt issued
by such Governmental Authority evidencing such payment, a
copy of the return reporting such payment or other evidence
of such payment reasonably satisfactory to the
Administrative Agent.
(e) Any Lender, Issuing Bank or Agent that is entitled to
an exemption from or reduction of withholding tax under the
law of the jurisdiction in which a Borrower is located, or
any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to
the Company (with a copy to the Administrative Agent), at
the time or times prescribed by applicable law, such
properly completed and executed documentation prescribed by
applicable law or reasonably requested by the Company as
will permit such payments to be made without withholding or
at a reduced rate. Such Lender, Issuing Bank or Agent shall
indemnify and hold harmless the Company and such Borrower
from any penalties, interest or other costs incurred by such
Borrower solely as a result of the failure of such Lender,
Issuing Bank or Agent to comply properly with such
documentation requirements. This Section shall not be
construed to require any Agent or any Lender to make
available its tax returns (or any other information relating
to its taxes which it reasonably deems confidential) to any
Borrower or any other Person.
(f) Each Lender, on the date it becomes a Lender hereunder,
and the Issuing Bank, on the date it becomes an Issuing
Bank, will designate lending offices for the Loans to be
made by it and provide documentation to the Company (with a
copy to the Administrative Agent) pursuant to Section
2.16(e) such that, on such date, it will not be liable for
any withholding tax that is imposed (i) by the United States
of America on payments by any Borrower that is organized or
resident for tax purposes within such jurisdiction or (ii)
by the United Kingdom on payments by any Borrower that is
organized or resident for tax purposes within such
jurisdiction.
(g) If a Lender, the Issuing Bank, or an Agent (each a
"Finance Party") receives a refund or credit in respect of
Indemnified Taxes or Other Taxes pursuant to this Section
2.16 and, in the case of a credit, such credit reduces the
Tax liability of the Finance Party and is in the good faith
opinion of the relevant Finance Party both identifiable and
quantifiable without requiring such Finance Party or its
professional advisers to expend a material amount of time or
incur a material cost in so identifying or quantifying, the
Finance Party will pay over the amount of such refund or
credit to the relevant Borrower to the extent the Finance
Party has received indemnity payments or additional amounts
pursuant to this Section 2.16, net of all out-of-pocket
expenses incurred in obtaining such refund or credit and
without interest (other than interest paid by the relevant
Governmental Authority with respect to such refund or
credit); provided, however, that the relevant Borrower, upon
the request of the Finance Party, agrees to repay the amount
it received to the Finance Party within 30 days of such
request, plus penalties, interest or other charges imposed
by the relevant Governmental Authority (except to the extent
such penalties or other charges are incurred solely as a
result of the gross negligence or wilful misconduct of the
relevant Finance Party), if the refund or credit is
subsequently disallowed or cancelled. Amounts payable to a
Borrower under this clause (g) with respect to a refund
received by a Finance Party will be paid to the relevant
Borrower within 30 days of receipt of such refund by the
Finance Party. Amounts payable under this clause (g) with
respect to a credit realized by a Finance Party will be paid
within 30 days of the determination by the Finance Party
that the credit reduced the Tax liability of such Finance
Party.
SECTION 2.17. Payments Generally; Pro Rata Treatment;
Sharing of Set-offs. (a) Each Borrower shall make each
payment required to be made by it hereunder or under any
other Loan Document (whether of principal, interest, fees or
reimbursement of LC Disbursements, or of amounts payable
under Section 2.14, 2.15 or 2.16, or otherwise) prior to
12:00 noon, Local Time (unless a different time is specified
under a particular provision hereof or thereof), on the date
when due, in immediately available funds, without set-off or
counterclaim. Any amounts received after such time on any
date may, in the discretion of the Applicable Agent, be
deemed to have been received on the next succeeding Business
Day for purposes of calculating interest thereon. All such
payments shall be made to the Applicable Agent to the
applicable account specified in Schedule 2.17 or, in any
such case, to such other account as the Applicable Agent
shall from time to time specify in a notice delivered to the
Company; provided that payments to be made directly to the
Issuing Bank as expressly provided herein and payments
pursuant to Sections 2.14, 2.15, 2.16 and 10.03 shall be
made directly to the Persons entitled thereto. The
Applicable Agent shall distribute any such payments received
by it for the account of any Lender or other Person promptly
following receipt thereof to the appropriate lending office
or other address specified by such Lender or other Person.
If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any
payment accruing interest, interest thereon shall be payable
for the period of such extension. All payments hereunder of
principal or interest in respect of any Loan or LC
Disbursement shall be made in the currency of such Loan or
LC Disbursement; all other payments hereunder and under each
other Loan Document shall be made in US Dollars. Any
payment required to be made by an Agent hereunder shall be
deemed to have been made by the time required if such Agent
shall, at or before such time, have taken the necessary
steps to make such payment in accordance with the
regulations or operating procedures of the clearing or
settlement system used by such Agent to make such payment.
Any amount payable by any Agent to one or more Lenders in
the national currency of a member state of the European
Union that has adopted the Euro as its lawful currency shall
be paid in Euro.
(b) If at any time insufficient funds are received by and
available to any Agent from any Borrower to pay fully all
amounts of principal, interest and fees then due from such
Borrower hereunder, such funds shall be applied (i) first,
towards payment of interest and fees then due from such
Borrower hereunder, ratably among the parties entitled
thereto in accordance with the amounts of interest and fees
then due to such parties, and (ii) second, towards payment
of principal then due from such Borrower hereunder, ratably
among the parties entitled thereto in accordance with the
amounts of principal then due to such parties.
(c) If any Lender shall, by exercising any right of set-off
or counterclaim or otherwise, obtain payment in respect of
any principal of or interest on its Loans or participations
in LC Disbursements resulting in such Lender receiving
payment of a greater proportion of the aggregate amount of
its Loans and participations in LC Disbursements and accrued
interest thereon than the proportion received by any other
Lender, then the Lender receiving such greater proportion
shall purchase (for cash at face value) participations in
the Loans and participations in LC Disbursements of other
Lenders to the extent necessary so that the benefit of all
such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of their respective
Loans and participations in LC Disbursements and accrued
interest thereon; provided that (i) if any such
participations are purchased and all or any portion of the
payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest,
and (ii) the provisions of this paragraph shall not be
construed to apply to any payment made by any Borrower
pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as
consideration for the assignment of or sale of a
participation in any of its Loans or participations in LC
Disbursements to any assignee or participant, other than to
the Company or any Subsidiary or Affiliate thereof (as to
which the provisions of this paragraph shall apply). Each
Borrower consents to the foregoing and agrees, to the extent
it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against such Borrower rights of
set-off and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of the
Borrower in the amount of such participation.
(d) Unless the Applicable Agent shall have received notice
from the relevant Borrower prior to the date on which any
payment is due hereunder that such Borrower will not make
such payment, the Applicable Agent may assume that such
Borrower has made such payment on such date in accordance
herewith and may, in reliance upon such assumption,
distribute to the applicable Lenders or the Issuing Bank, as
the case may be, the amount due. In such event, if such
Borrower has not in fact made such payment, then each of the
applicable Lenders or the Issuing Bank, as the case may be,
severally agrees to repay to the Applicable Agent forthwith
on demand the amount so distributed to such Lender or
Issuing Bank with interest thereon, for each day from and
including the date such amount is distributed to it to but
excluding the date of payment to the Applicable Agent, at a
rate determined by the Applicable Agent in accordance with
banking industry practices on interbank compensation.
(e) If any Lender shall fail to make any payment required
to be made by it to any Agent pursuant to this Agreement,
then the Agents may, in their discretion (notwithstanding
any contrary provision hereof), apply any amounts thereafter
received by them for the account of such Lender to satisfy
such Lender's obligations to the Agents until all such
unsatisfied obligations are fully paid.
SECTION 2.18. Mitigation Obligations; Replacement of
Lenders. (a) If any Lender requests compensation under
Section 2.14, or if any Borrower is required to pay any
additional amount pursuant to Section 2.16, then such Lender
shall use reasonable efforts to designate a different
lending office for funding or booking its Loans hereunder or
to assign (in accordance with and subject to the
restrictions contained in Section 10.04) its rights and
obligations hereunder to another of its offices, branches or
affiliates, if, in the reasonable judgment of such Lender,
such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.14 or 2.16, as the
case may be, in the future and (ii) would not subject such
Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender. The Company
hereby agrees to pay all reasonable costs and expenses
incurred by any Lender in connection with any such
designation or assignment.
(b) If any Lender requests compensation under Section 2.14,
or if any Loan Party is required to pay any additional
amount pursuant to Section 2.16, or if any Lender defaults
in its obligation to fund Loans hereunder, then the Company
may, at its sole expense and effort, upon notice to such
Lender and the Administrative Agent, require such Lender to
assign and delegate, without recourse (in accordance with
and subject to the restrictions contained in Section 10.04),
all its interests, rights and obligations under the Loan
Documents to an assignee that shall assume such obligations
(which assignee may be another Lender, if a Lender accepts
such assignment); provided that (i) the Company shall have
received the prior written consent of the Administrative
Agent (and if a Revolving Commitment is being assigned, the
Issuing Bank), which consent shall not unreasonably be
withheld, (ii) such Lender shall have received payment of an
amount equal to the outstanding principal of its Loans and
participations in LC Disbursements, accrued interest
thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the
Company (in the case of all other amounts) and (iii) in the
case of any such assignment resulting from a claim for
compensation under Section 2.14 or payments required to be
made pursuant to Section 2.16, such assignment will result
in a reduction in such compensation or payments. A Lender
shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the
Company to require such assignment and delegation cease to
apply.
SECTION 2.19. Designation of Additional Subsidiary
Borrowers. The Company may at any time and from time to
time designate any Subsidiary as a Borrowing Subsidiary by
delivery to the Administrative Agent of a Borrowing
Subsidiary Agreement executed by such Subsidiary and the
Company, and upon such delivery such Subsidiary shall for
all purposes of this Agreement be a Borrowing Subsidiary and
a party to this Agreement until the Company shall have
executed and delivered to the Administrative Agent a
Borrowing Subsidiary Termination with respect to such
Subsidiary, whereupon such Subsidiary shall cease to be a
Borrowing Subsidiary and a party to this Agreement.
Notwithstanding the preceding sentence, no Borrowing
Subsidiary Termination will become effective as to any
Borrowing Subsidiary at a time when any principal of or
interest on any Loan to such Borrowing Subsidiary shall be
outstanding hereunder, provided that such Borrowing
Subsidiary Termination shall be effective to terminate the
right of such Borrowing Subsidiary to make further
Borrowings under this Agreement. As soon as practicable
upon receipt of a Borrowing Subsidiary Agreement or
Borrowing Subsidiary Termination, the Administrative Agent
shall send a copy thereof to each Lender.
SECTION 2.20. Additional Reserve Costs. (a) If and so
long as any Lender is required to make special deposits with
the Bank of England, to maintain reserve asset ratios or to
pay fees, in each case in respect of such Lender's Loans (to
the extent not reflected in Statutory Reserves), such Lender
may require the relevant Borrower to pay, contemporaneously
with each payment of interest on each of such Loans,
additional interest on such Loans at a rate per annum equal
to the Mandatory Costs Rate calculated in accordance with
the formula and in the manner set forth in Exhibit C hereto.
(b) If and so long as any Lender is required to comply with
reserve assets, liquidity, cash margin or other requirements
of any monetary or other authority (including any such
requirement imposed by the European Central Bank or the
European System of Central Banks, but excluding requirements
reflected in the Statutory Reserves or the Mandatory Costs
Rate) in respect of any of such Lender's Loans, such Lender
may require the relevant Borrower to pay, contemporaneously
with each payment of interest on each of such Lender's Loans
subject to such requirements, additional interest on such
Loans at a rate per annum specified by such Lender to be the
cost to such Lender of complying with such requirements in
relation to such Loans.
(c) Any additional interest owed pursuant to paragraph (a)
or (b) above shall be determined by the relevant Lender,
which determination shall be conclusive absent manifest
error, and notified to the relevant Borrower (with a copy to
the Administrative Agent) at least five Business Days before
each date on which interest is payable for the relevant
Loans, and such additional interest so notified to the
relevant Borrower by such Lender shall be payable to the
Administrative Agent for the account of such Lender on each
date on which interest is payable for such Loans.
SECTION 2.21. Redenomination of Certain Designated Foreign
Currencies. (a) Each obligation of any party to this
Agreement to make a payment denominated in Sterling shall,
in the event that the United Kingdom adopts the Euro as its
lawful currency after the date hereof, be redenominated into
Euro at the time of such adoption (in accordance with the
EMU Legislation). In such event, if the basis of accrual of
interest expressed in this Agreement in respect of Sterling
shall be inconsistent with any convention or practice in the
London interbank market for the basis of accrual of interest
in respect of the Euro, such expressed basis shall be
replaced by such convention or practice with effect from the
date on which the United Kingdom adopts the Euro as its
lawful currency; provided that if any Borrowing in Sterling
is outstanding immediately prior to such date, such
replacement shall take effect, with respect to such
Borrowing, at the end of the then current Interest Period.
(b) Without prejudice and in addition to any method of
conversion or rounding prescribed by any EMU Legislation and
(i) without limiting the liability of any Borrower for any
amount due under this Agreement or any of the other Loan
Documents and (ii) without increasing any Commitment of any
Lender, all references in this Agreement to minimum amounts
(or integral multiples thereof) denominated in Sterling
shall, immediately upon the adoption by the United Kingdom
of the Euro as its lawful currency, be replaced by
references to such minimum amounts (or integral multiples
thereof) as shall be specified herein with respect to
Borrowings denominated in Euro.
(c) Each provision of this Agreement shall be subject to
such reasonable changes of construction as the
Administrative Agent and the Company may from time to time
agree to be appropriate to reflect the adoption of the Euro
by the United Kingdom and any relevant market conventions or
practices relating to the Euro.
ARTICLE III
Representations and Warranties
Each of the Borrowers represents and warrants to the Lenders
that:
SECTION 3.01. Organization; Powers. Each of the Company
and the Subsidiaries is duly organized, validly existing and
in good standing (to the extent such concept is applicable)
under the laws of the jurisdiction of its organization, has
all requisite power and authority to carry on its business
as now conducted and, except where the failure to do so,
individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is
qualified to do business, and is in good standing (to the
extent such concepts are applicable), in every jurisdiction
where such qualification is required.
SECTION 3.02. Authorization; Enforceability. The
Transactions are within each Loan Party's corporate powers
and have been duly authorized by all necessary corporate or
partnership and, if required, stockholder action. Each of
the Loan Documents has been duly executed and delivered by
each Loan Party party thereto and constitutes a legal, valid
and binding obligation of such Loan Party, enforceable in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a
proceeding in equity or at law.
SECTION 3.03. Governmental Approvals; No Conflicts. The
Transactions (a) do not require any consent or approval of,
registration or filing with, or any other action by, any
Governmental Authority, except such as have been obtained or
made and are in full force and effect, (b) will not violate
any applicable law or regulation or any order of any
Governmental Authority, (c) will not violate or result in a
default under any indenture, material agreement or other
material instrument binding upon the Company or any of the
Subsidiaries or its assets, or give rise to a right
thereunder to require any payment to be made by the Company
or any of the Subsidiaries, (d) will not result in the
creation or imposition of any Lien on any asset of the
Company or any of the Subsidiaries and (e) will not violate
the charter, by-laws or other organizational documents of
the Company or any of the Subsidiaries, except, in the case
of clause (a), (b), (c) and (d), to the extent that failure
to comply could not reasonably be expected to result in a
Material Adverse Effect.
SECTION 3.04. Financial Condition; No Material Adverse
Change. (a) The Company has heretofore furnished to the
Lenders its consolidated balance sheet and statements of
income, stockholders equity and cash flows (i) as of and for
the fiscal year ended December 31, 2000, reported on by
PricewaterhouseCoopers LLP, independent public accountants,
and (ii) as of and for the fiscal quarter and the portion of
the fiscal year ended September 30, 2001, certified by its
chief financial officer. Such financial statements present
fairly, in all material respects, the financial position and
results of operations and cash flows of the Company and the
consolidated Subsidiaries as of such dates and for such
periods in accordance with GAAP, subject to year-end audit
adjustments and the absence of footnotes in the case of the
statements referred to in clause (ii) above.
(b) The pro forma unaudited consolidated balance sheet and
consolidated statements of income, stockholders equity and
cash flows of the Acquired Business (which for these
purposes shall include certain immaterial non-acquired
assets) for the fiscal years ended September 30, 1999,
August 26, 2000, December 31, 2000 and December 31, 2001,
certified by the UK Borrower's chief financial officer, when
furnished to the Administrative Agent, to the best of the
Company's knowledge, will fairly present in all material
respects the consolidated financial condition of the
Acquired Business and its subsidiaries (exclusive of those
assets and operations of BHL not constituting part of the
Acquired Business) as at such dates and their consolidated
results of operations, shareholders' equity and cash flows
for the periods then ended in conformity with GAAP, subject
to the absence of footnotes.
(c) The pro forma consolidated balance sheet of the Company
as of December 30, 2001, prepared giving effect to the
Transactions as if the Transactions had occurred on such
date, when furnished to the Lenders (i) will have been
prepared in good faith based on the same assumptions used to
prepare the pro forma financial statements included in the
Information Memorandum (which assumptions are believed by
the Company to be reasonable), (ii) will be based on the
best information available to the Company after due inquiry,
(iii) will accurately reflect all adjustments necessary to
give effect to the Transactions and (iv) will present
fairly, in all material respects, the pro forma financial
position of the Company and its consolidated Subsidiaries as
of December 30, 2001, as if the Transactions had occurred on
such date. The representations and warranties set forth in
clauses (iii) and (iv) are limited to the best of the
Company's knowledge to the extent they relate to the
Acquired Business and its subsidiaries.
(d) The pro forma consolidated balance sheet of the Company
as of December 30, 2001, and the pro forma consolidated
statements of income and cash flow of the Company for the
fiscal year ended December 30, 2001, prepared giving effect
to the Transactions as if the Transactions had occurred on
such date, included in the model contained in the
Information Memorandum (i) have been prepared in good faith
based on assumptions believed by the Company to be
reasonable, (ii) are based on the best information available
to the Company after due inquiry, (iii) accurately reflect
all adjustments necessary to give effect to the Transactions
and (iv) present fairly, in all material respects, the pro
forma financial position of the Company and its consolidated
Subsidiaries as of December 30, 2001, as if the Transactions
had occurred on such date. The representations and
warranties set forth in clauses (iii) and (iv) are limited
to the best of the Company's knowledge at the Effective Date
to the extent they relate to the Acquired Business and its
subsidiaries.
(e) Since December 31, 2000, there has not occurred or
become known any condition or change that has affected or
would reasonably be expected to affect materially and
adversely the business, assets, liabilities or condition,
financial or otherwise, of the Company and its Subsidiaries,
taken as a whole.
SECTION 3.05. Properties. (a) Each of the Company and the
Subsidiaries has good title to, valid leasehold interests
in, or valid licenses of, all its real and personal property
material to its business, except for defects in title that,
individually or in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect.
(b) Each of the Company and the Subsidiaries owns, or is
licensed to use, all trademarks, tradenames, copyrights,
patents and other intellectual property material to its
business, except for any intellectual property the failure
to own or license which, individually or in the aggregate,
could not reasonably be expected to result in a Material
Adverse Effect, and the use thereof by the Company and the
Subsidiaries does not infringe upon the rights of any other
Person, except for any such infringements that, individually
or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.
SECTION 3.06. Litigation and Environmental Matters.
(a) There are no actions, suits or proceedings by or before
any arbitrator or Governmental Authority pending against or,
to the knowledge of the Company, threatened against or
affecting the Company or any of the Subsidiaries (i) as to
which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could
reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect (other than the
Disclosed Matters) or (ii) that involve this Agreement or
any other Loan Document or the Transactions.
(b) Except for the Disclosed Matters and except with
respect to any other matters that, individually or in the
aggregate, could not reasonably be expected to result in a
Material Adverse Effect, neither the Company nor any of the
Subsidiaries (i) has failed to comply with any Environmental
Law or to obtain, maintain or comply with any permit,
license or other approval required under any Environmental
Law, (ii) has become subject to any Environmental Liability,
(iii) has received written notice of any claim with respect
to any Environmental Liability or (iv) knows of any basis
for any Environmental Liability.
(c) Since the date of this Agreement, there has been no
change in the status of the Disclosed Matters that,
individually or in the aggregate, has resulted in, or
materially increased the likelihood of, a Material Adverse
Effect.
SECTION 3.07. Compliance with Laws and Agreements. Each of
the Company and the Subsidiaries is in compliance with all
laws, regulations and orders of any Governmental Authority
applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its
property, except where the failure to be in compliance,
individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. No Default
has occurred and is continuing.
SECTION 3.08. Investment and Holding Company Status.
Neither the Company nor any of the Subsidiaries is (a) an
"investment company" as defined in, or subject to regulation
under, the Investment Company Act of 1940 or (b) a "holding
company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.
SECTION 3.09. Taxes. Each of the Company and the
Subsidiaries has timely filed or caused to be filed all Tax
returns and reports required to have been filed and has paid
or caused to be paid all Taxes required to have been paid by
it, except (a) Taxes that are being contested in good faith
by appropriate proceedings and for which the Company or such
Subsidiary, as applicable, has set aside on its books
adequate reserves or (b) to the extent that the failure to
do so could not reasonably be expected to result in a
Material Adverse Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is
reasonably expected to occur that, when taken together with
all other such ERISA Events, could reasonably be expected to
result in a Material Adverse Effect. The actuarial present
value of accumulated plan benefits under each Plan (based on
the assumptions used for purposes of FASB Statement 35)
multiplied by 115% did not, as of the date of the most
recent financial statements reflecting such amounts, exceed
the net assets of the Plan available for providing benefits
under such Plan.
SECTION 3.11. Disclosure. Neither the Information
Memorandum nor any of the other reports, financial
statements, certificates or other written or formally
presented information furnished by or on behalf of the
Company to any Agent or any Lender in connection with the
negotiation of this Agreement or delivered hereunder (as
modified or supplemented by other information so furnished)
contains any material misstatement of fact or omits to state
any material fact necessary to make the statements therein,
in the light of the circumstances under which they were
made, not misleading; provided that, with respect to
projected financial information, the Company represents only
that such information was prepared in good faith based upon
assumptions believed to be reasonable at the time; and
provided further that the representations and warranties set
forth in this sentence are