MillerCoors Reports 2015 Underlying Net Income of $1.328 Billion

From MillerCoors:

February 11, 2016 (London and Denver)

SABMiller plc (LN:SAB; OTC:SABMRY) and Molson Coors Brewing Company (NYSE: TAP; TSX: TPX) reported that MillerCoors underlying net income for the full year was $1.328 billion, which was in-line with 2014. Fourth quarter underlying net income decreased 10.2 percent to $191.5 million versus the same period in the prior year, driven by lower volume and increased marketing and information technology investment, partially offset by lower cost of goods sold, net pricing growth and positive sales mix. For the third consecutive quarter, Coors Light and Miller Lite each gained share of the Premium Light segment. Domestic net revenue per barrel increased 1.5% for both the quarter and year. 

“We began to drive substantial improvements to our business in the latter half of 2015 that were necessary to create the foundation for growth we aim to achieve in the years ahead,” said Gavin Hattersley, MillerCoors Chief Executive Officer. “Additionally, there were a number of positives in the fourth quarter as our net revenue per barrel again increased, and we invested significantly more in our brands, which resulted in our flagship brands taking further share in the Premium Light segment, while a number of our Above Premium brands also continued their growth.” 

Full Year and Fourth Quarter Highlights

Unless otherwise indicated, all amounts are in U.S. dollars and calculated in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). All market share references are per A.C. Nielsen. Percentages are versus the prior year comparable period and include MillerCoors operations in the U.S. and Puerto Rico.

• Underlying net income, a non-GAAP measure, was $1.328 billion for the full year, in-line versus prior year, and decreased 10.2 percent to $191.5 million for the fourth quarter. 
• Total net sales decreased 1.6 percent to $7.726 billion for the year and declined 1.9 percent to $1.748 billion for the quarter.
• Domestic net revenue per barrel, excluding contract brewing and company-owned distributor sales, increased 1.5 percent for both the year and the quarter.
• Total cost of goods sold (COGS) per barrel decreased 1.3 percent for the year and 3.4 percent for the quarter.
• Domestic sales-to-retail volume (STRs) decreased 2.6 percent for the year and 2.2 percent for the quarter, primarily driven by lower volume in the Below Premium segment.  
• Domestic sales-to-wholesalers volume (STWs) decreased 2.9 percent for the year and 3.1 percent for the fourth quarter.  

Brand Highlights for the Full Year and Fourth Quarter

Miller Lite gained share of the Premium Light segment in the fourth quarter and the year, but STRs decreased low-single digits during the fourth quarter and year. The brand’s strong performance in the segment can be partially attributed to the recent limited-edition release of the Steinie bottle, which was the latest step in celebrating Miller Lite’s unique heritage and history. Miller Lite will continue to emphasize its authenticity and originality through brand messaging.

Coors Light gained share of the Premium Light segment in the year and the fourth quarter, having its best quarterly volume performance since the second quarter of 2014, but STRs declined low-single digits for the quarter and year. Coors Light began to reassert its pride in the quality of the beer and its heritage through a new marketing campaign which launched in January. Known as “Climb On”, the campaign makes a stronger emotional connection with beer drinkers who know that climbing our personal mountains is what makes life enjoyable. 

Overall, MillerCoors Premium Light portfolio STRs declined low-single digits for the full year and the fourth quarter.

The MillerCoors Above Premium STRs finished up low-single digits for the year, excluding Miller Fortune, which was strategically deprioritized. The Redd’s franchise achieved mid-single-digit growth in the quarter and double-digit growth for the year, driven by Redd’s Green Apple and Redd’s Wicked brands, including the 2015 introduction of Redd’s Wicked Mango. Including Miller Fortune, the portfolio was down low-single digits in the fourth quarter and year. 

The MillerCoors Tenth & Blake portfolio finished the year with low-single digit growth, but declined low-single digits for the quarter. The Blue Moon Brewing Company grew low-single digits for both the quarter and year, driven by Blue Moon Belgian White’s 81st consecutive quarter of growth and the release of Blue Moon White IPA, which finished 2015 as the No. 3 new craft offering of the year, according to Nielsen. The Jacob Leinenkugel Brewing Company declined double digits in the quarter, primarily caused by a temporary production issue with the winter variety pack that has been resolved. Despite that, Leinenkugel’s was up low-single digits for the year due to the continued growth of its Shandy portfolio and its new varietals, Harvest Patch Shandy and Grapefruit Shandy. According to Nielsen, Grapefruit Shandy was the No. 1 new craft offering in 2015. Since acquiring the Saint Archer Brewing Company in October, MillerCoors has moved quickly to align our distribution footprint in California and is now executing a capacity expansion plan to supply demand in California before moving the brand beyond its home state. 

In the Premium Regular segment, Coors Banquet gained market share and grew mid-single digits in the fourth quarter and low-single digits for the year as it achieved its ninth consecutive year of growth. According to Nielsen, Coors Banquet remains the only national Premium Regular brand that is growing, in part due to the continued success of its “stubby” heritage bottle. The growth from Banquet offset a high-single-digit decline for Miller Genuine Draft in the fourth quarter and a double-digit decline on the year, resulting in the Premium Regular segment finishing down low-single digits in 2015.   

The MillerCoors Below Premium portfolio decreased mid-single digits for the quarter and the year, driven by a quarterly and yearly high-single digit decline of Milwaukee’s Best and Keystone Light. Miller High Life declined mid-single digits in the quarter and the year, while Steel Reserve grew low-single digits during the quarter and mid-single digits for the year due to the continuing success of the Steel Reserve Alloy Series, the brand’s line of flavored malt beverages. 

Financial Highlights for the Full Year and Fourth Quarter

Domestic net revenue per barrel grew 1.5 percent for both the year and the quarter as a result of favorable net pricing and positive sales mix.

Total company net revenue per barrel, including contract brewing and company-owned distributor sales, increased 1.4 percent for the full year and 1.3 percent for the quarter. Third-party contract brewing volumes were down 2.5 percent for the year and 4.1 percent for the quarter.

Total COGS per barrel decreased 1.3 percent for the full year and 3.4 percent for the quarter, driven by lower aluminum, fuel, corn and malt pricing, along with supply chain cost savings. These factors were partially offset by brewery and freight inflation, and fixed-cost absorption due to lower volumes. 

Marketing, general and administrative costs increased by 4.1 percent for the full year and 14.2 percent for the quarter driven by higher brand investments, largely impacting the fourth quarter, and information technology investments. 

MillerCoors achieved $88 million of cost savings for the year and $25 million in the fourth quarter, primarily related to procurement savings and brewery efficiencies.  

Depreciation and amortization expenses for MillerCoors were $358.4 million for the year and $104.4 million in the quarter. These results include accelerated depreciation related to the planned closure of the Eden, North Carolina, brewery of $61.3 million in the year and $39.5 million in the quarter that are included in special items. Additions to tangible and intangible assets totaled $377.7 million in the year and $145.7 million in the quarter.

Special items of $67.7 million for the year and $39.7 million for the quarter were recognized related to the previously announced closure of the Eden Brewery, with additional special items expected to be recognized through the third quarter of 2016, when the closure is expected to be completed. Additionally, a special charge of $42.4 million for both the fourth quarter and the year resulted from an early settlement of a portion of MillerCoors defined benefit pension plan liability.