Molson Coors Beverage Co (TAP) 2002 Q1 法說會逐字稿

Welcome to the Adolph Coors Company first quarter earning conference call.

At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. Leo Kiely, President and CEO of Coors Brewing Company.

Mr. Kiely, you may begin.

Thank you. Hello and welcome everybody, and thanks for joining us today. With me on the call are Pete Coors, Jim Wolf, Peter Kendall, the CEO of our UK and other European businesses, David Barnes our Treasurer, Ron our Controller, and Anne Stats our Group Manager of Technical Accounting, and our Investor Relations Director. Just for your information Peter Kendall's in England, on the line with us, the rest of us are here in Golden.

Let me start by saying that we plan to spend more time on our calls we get this quarter because, in addition to releasing first quarter earnings, the two substantial business segments - we files an amended 8-K last week with historical and pro forma results for our new UK business.

Here's how Tim will structure our time with you today. First, an overview of Coors Brewing Company's performance in the first quarter. Second, a detailed review of first quarter results for our two operating segments now designated as the America's and Europe. The America's is virtually the same as our old consolidated results, except we moved our small preacquisition European operation over to report in with our new Coors Brewers Limited business, as our Europe . Third, some prospective on the balance of 2002 for our total company, and then fourth, we'll be happy to take questions related to our first quarter results.

When we're done with questions finally, for those of you who are interested, Tim and Ron, that's Tim Wolf and Ron will conduct a brief review session on the historical and pro forma results in the 8-K, during which you'll have an opportunity to ask questions specifically related to that doc.

So let's get started.

The first quarter was time of transformation, great energy, and renewed focus on the basics, for the Coors Brewing Company. In the first quarter we completed the acquisition of a great company and team in the United Kingdom. We continue to make substantial progress and increasing our flexibility and reducing our cost per barrel throughout our US business. And even though our US volume growth in the first quarter was not as strong as we had hoped, we completed some exciting new brand building work that we believe will boost our top line momentum in the months ahead. The first quarter was the first reporting period for our new company that included the results of our new business in the UK, Coors Brewers Limited, or as we say CBL, which makes up nearly all of our New York segment.

It's important to note that the results for all periods prior to February 2, 2002, exclude CBL results. So index comparison with reported 2001 results really are not relevant. Since CBL represents only a portion of the former brewers, we can not offer specific financial results beyond the results in the 8-K we filed last week.

Still we'll offer some general guidance on business trends for CBL versus 2001.

Now, let's look at some key financial results for the first quarter for our total consolidated company. Early today we reported first quarter unit volume of 6.4 million barrels, with 5.1 million barrels of the America's, and 1.3 from Europe.

Meanwhile gross sales totaled $937.8 million in the quarter, with net sales of 739.3 million.

In terms of profitability, excluding special items, operating income more than doubled for 48.1 million, after tax income grew almost 58 percent and diluted EPS increased more than 63 percent versus a year ago.

Looking at our new business segments, in the America's sales to retail for the segment were up 1.4 percent from a year ago, yet less than we would like, and below our expectations.

We had our annual distributor convention and late in the quarter and rolled out new advertising, creative retail promotions, and sponsorships, including a completely new approach for our advertising, in our move to making Coors Light the official beer of the NFL. These efforts were received enthusiastically by our distributors and sales force in fact, the distributors at our convention were as pumped up as I've seen them in several years. We believe this enthusiasm and focus, combined with the new energy in our sales and marketing efforts, will help us to build momentum in the US businesses as this year progresses.

We had another good quarter on cost management in our US operations. Obviously a quarter or two doesn't make a trend and the proof will be in peak season, when we need to sustain our momentum in this key area. We are however, encouraged by the progress our operating team .

Canada continued to deliver double-digit growth on Coors Light volume and pretax income, driven by a specially strong growth in Quebec and Ontario. Molson USA volume was up slightly in the first quarter, and that is the first quarterly increase for this business as a whole in the past several years.

Operating income for our America segment grew more than 60 percent because of subtle pricing, lower costs, and the sales company owned distributorships last year. But keep in mind the percentage changes tend to be exaggerated in our smallest quarter of the year.

Turning the Europe. This business continues to achieve significant volume growth in the UK, led brands. Aside from the strength of our brands and distribution network, this growth is being aided by improved industry sales trends, particularly in the our trade, that's pubs and restaurants. But importantly dispersely driven by the timing of Easter this year which fell earlier in the calendar.

Margins were solid, even though the first quarter usually has significantly lower sales and capacity utilization than the rest of the year.

We set the stage for continued strong performance and improved efficiency, by announcing our plan to close brewery in the UK, to bring out production footprint in line with the brands we bought from Interbrew.

Overall the acquisitions going extremely well, as expected, integration is minimal, best practice opportunities are real, and we continue to be very optimistic about the potential of this great business.

We've said in the past that the first quarter is a relatively small quarter for us, and not necessarily indicative of how the year will unfold. This is particular true with our UK business, which normally recognizes only about 20 percent of its annual sales and five percent of its operating income in the first quarter.

As we move into the key summer selling season, our entire organization is focused on growing our key brands and key markets, driving productivity, reducing costs, and building talent and a great team.

At this point, I'll turn it over to Tim to review first quarter financial highlights and take a look ahead to 2002.

Timothy.

Leo, thank you and hello everybody.

With two substantial business units to discuss, I'll start by to performance highlights, each of them, and then give some consolidated highlights. Let's review the results of the America segment first.

Unit volume in the first quarter of 2002, was up five tenths of one percent, from a year earlier, while sales to retail were up 1.4 percentage points for the total segment, or 1.6 percent of the domestic U.S. business.

Increased volume was driven by Coors Light, which grew at a low single digit rate at retail in the quarter, Keystone Light which grew at a mid single digit rate in the quarter.

Soft sales trends for Zima and Killian continued in the quarter, while Coors original declined slightly during the first quarter.

Net for sales per barrel decreased one tenth of one percent in the first quarter from a year ago. To get a clearer view of this segment's performance, it's helpful to eliminate the impact of the sale of company owned distributorships. Recall that we sold three of these distributorship branches last year. Without the impact of these divestitures, net sales per barrel would have been up about 2.5 percent, driven by a little over two percent of domestic pricing and by lower price promotion expense versus a year ago.

Domestic and international sales mix were a small offset to positive pricing in the quarter.

Cost of goods sold per barrel decreased 2.5 percent in the quarter, again if you back out the sales distributorships, cost of goods per barrel would have been up only about five tenths of one percent, primarily due to higher labor and capacity costs.

The encouraging improvement in our costs trends was driven primarily by reduced cost from our operations efficiency initiatives along with modestly lower packaging and raw materials costs in the quarter. Our gross margin was 37.0 percent in the first quarter, up 150 basis points from prior year.

Marketing, G&A expense in the first quarter decreased 3.8 percent which is driven by first, again the sales company owned distributorships, which represented about two thirds of the decline, second most of the rest of the decline was related to some one time reductions in overhead expense versus prior year.

Our advertising and sales promotions spending per barrel for the quarter, was actually up modestly.

Operating income was $38.6 million, including special items, including special items up 61.9 percent from prior year.

Our America's business segment contributed $38.5 million of pretax income, to first quarter consolidated results.

Turning our Europe business segment, keep in mind that we own the Coors Brewers Limited CBL business for only the last months of the quarter, because we did no own Coors Brewer's business a year ago, the results we released for the first - for our Europe segment for the first quarter of 2001, include only our preacquisition European business. We can't offer specific historical quarterly results for the CBL business, because it didn't exist in its current form prior to February 2, 2002. Still, we'll offer current results and perspective on key business trends versus a year ago and as Leo mentioned, Peter Kendall will be able to offer additional perspective during our Q&A session a little later on.

For current results, the Europe business segment reported unit volume of 1.3 million U.S. barrels. Note that these are sales to retails, with the UK as a tow tiered beer industry.

Net sales for February and March totaled $194.3 million, with cost of goods at $132.4 million, and a gross margin of 31.8 percent.

Marketing G&A expenses equaled $53.2 million or 27.4 percent of net sales. This business segment contributed pretax income of $13.0 million to our consolidated results, since this business usually posts a loss in January after big holiday period. Pretax profit for the eight weeks that we owned this business was higher than it would have been if we had owned the business for the full quarter. Also, these pretax results were aided by the annual - by the timing of the important Easter holiday, which was in the first quarter of this year versus the second quarter last year. The effect of excluding January losses, and shifting the Easter holiday volume in the first quarter, combine to more than double the normal pretax profit for this business in its slowest quarter of the year. Conversely, this Easter holiday shift will negatively impact our second quarter UK results.

Bottom line, given some of these favorable dynamics, you can't simply extrapolate by including the $13 million of pretax income, is five percent of the full year result.

Excuse me.

For the purpose of assessing performance, it may be more helpful to look at trends for Europe including the Carling business results for January this year, and for the first quarter a year ago, even though Interbrew owned the Carling business during these periods. From this view European unit volume for the full first quarter was up at mid single digit rates over the first quarter a year ago, with a Carling branch showing at a strong single digit rate.

Flavored alcohol beverages or FAB's grew a strong double digit rate, led by , which is a fruit juice beverage with a .

Meanwhile factored brands grew at a high single digit rate. Factored brands or other company's beer, wine, spirits, or soft drink brands, that are sold through our UK sales and distributions structure. We report the dollar sales for these factored brands in our P&L, but we do not report unit volume.

Without the Easter holiday shift, we estimate that overall volume would have grown at a low single rate in the - for the full quarter.

Looking at channels, the off trade grew at a double digit rate, and the on trade channel was up at a low single digit rate, both of which benefited again significantly from the timing of the Easter holiday.

Net sales in the first quarter were up at a mid single digit rate from a year ago, driven by volume growth along with modestly improved pricing environment and the sale of more premium products.

Pretax income increased at a strong double-digit rate, driven by volume growth and cost reductions.

Turning now to consolidated business highlights. We recognize the special charge in the quarter of $2. million pretax, primarily these were transition expenses related to our UK business including accounting, appraisal, and legal fees.

Corporate net interest expense, excluding trade loans and the UK, in the first quarter was $7.6 million, which is an $11.4 million change from a year ago, given that we used cash and took on debt to buy the UK business on February 2.

At the end of the first quarter, our cash balances total approximately $286 million, while long term debt, including the current portion of our senior notes totaled $1.66 billion. Just as a note on the $286 million of cash balances, realize as is normal with acquisitions of this magnitude, we have a working capital agreement with Interbrew, so some of this cash is clearly ear marked for settling up with Interbrew over the next few months.

As I hope you're aware, cash generations become a critical focus for us now that we've increased our leverage. The first quarter is usually a for cash flow in our business.

Still, we generated a total of approximately, $90 million of EBITDA in the first quarter. In fact, we are making today debt repayment on our bank loan.

Capital spending in the quarter totaled about $30 million, our expectations for full year cap ex remains in the range of 215 to $235 million for out total business, excluding about $5 million of capitalized interest, and currently while we're - there's still work in progress work trending probably towards the high side of that 215 to $235 million range.

Our tax was 39.5 percent in the first quarter, up from 38.0 percent a year ago, due to lower tax-exempt interest income. As you can guess, we sold our tax-exempt marketable securities when we bought the UK business, so we did not have that tax-exempt interest for most of the quarter, and therefore our tax rate increased.

Although corporate income tax rates are lower in the UK, we've elected to repatriate excess UK cash flows, regressively pay down debt in the near term. This repatriation results in a combined effective tax rate that approximates U.S. rates.

Meanwhile, first quarter averaged diluted - awaited diluted shares outstanding decreased by more than 1.4 million shares from a year ago because of significant repurchases we made last year particularly after September 11.

Excluding special items we achieved after tax income of $28.9 million in the first quarter, up 57.9 percent from $18.3 million a year ago.

Diluted earnings per share equaled 80 cents, up from 49 cents a year ago. This increase of 31 cents per share, breaks down roughly into the following main categories; America segment performance, up about 25 - contributing 25 cents driven primarily by pricing cost reductions, the Europe segment contributing 24 cents per share, reflecting some of the nonrecurring favorable elements I referenced earlier.

The change in corporate interest would subtract about 18 cents. Meaning that the Carling acquisition was about six cents per share, accreted in the first quarter. Keep in mind that our interest expense in the quarter was unusually low, so this is not necessarily indicative of longer-term accretions. On a cash EPS basis, the acquisition was about eight cents accreted to the quarter.

For us, included in the segment numbers I just mentioned is a higher tax rate, which produced, which reduced overall results by about two cents, and then finally share repurchases last year, as I just mentioned a moment ago, increases earnings by three cents per share. Including the special charge, a reported net income $27.2 million or 75 cents per diluted share, was up 48.4 percent from a year ago.

Now a brief look ahead to the balance of 2002, and again to paraphrase our safe harbor language, someone would be covered now and then Q&A may indeed constitute forward-looking statements. Actually results could differ materially from what we project today, so please refer to our most recent 10-K and 10-Q filings, for more complete description of factors that could effect our projections.

To see how 2002 will shape up for Coors Brewing Company, we're focusing on a few primary factors in each of our business segments. Starting with the America's, first volume. Although the first quarter was a soft volume quarter for us in the U.S., we're encouraged by the new brand building programs that Leo mentioned, including new creative that hit the airwaves early in the second quarter. We believe that our U.S. sales and marketing efforts have a strong potential to be more successful this year at cutting through the distractions, in our highly competitive category.

Second, pricing sales of distributorships. U.S. front-line pricing so far this year continues to be about as positive as last year, we saw roughly two percent year-over-year pricing along with reductions in price promotions. Positive pricing has been slightly offset for us by a mid shift away from Zima and Killian. As always, we'll closely monitor the level of promotional discounting and the degree of value pack activity. Also important, the impact that we say on the first quarter relating to the sales of U.S. distributorships, a reduction of about 250 basis points in net revenue per barrel. This likely to continue next quarter, with a slight easing in the third quarter of this year, and significant easing in the fourth.

Third, cost of goods. The outlook for our cost of goods performance continues to be more encouraging than in the past two years. The following factors we believe that would be most important, for the balance of this year. Starting of operating efficiencies, some of the savings from our efficiency efforts in the United States had begun to boost gross margins in the past two quarters. Particularly with distribution costs and related supply chain work.

Second, input costs including packaging materials, agricultural commodities and fuel. At this point, the 2002 outlook for the America's is to modestly hire glass bottled costs, and slightly lower costs per can, paper packaging, and agricultural commodities.

Fuel costs are always difficult to forecast, but the outlook at this point, is about even with a year ago. Changes in oil or natural gas prices obviously changes business outlook, and as you know the environment for oil and natural gas prices highly volatile right now.

Finally, we anticipate for the sales of Coors-owned distributorships in 2001, will be a large factor affecting costs of goods in 2002. As I shared with you earlier, the first quarter of 2002 impact of about 300 basis points, offers the best approximation for the first three quarters of 2002, with this factor essentially , by early in the fourth quarter of 2002.

If you net out all these factors, and exclude the impact of selling distributorships, our focused operations team plans to continue to make progress from reducing costs in key areas of our U.S. business in 2002.

Overall, we see substantial additional potential to reduce our cost of doing business to competitive levels.

Fourth, marketing and G&A. Our meeting of spend strategy for 2002, is the same as in recent years. We start with a fully funded plan for sales and marketing, with clearly a strong bias to invest incremental resources if they're available during the year. Most of you know, that we were successful in signing of the national football league as the official beer sponsor, for at least the next five years. We plan to cover this investment within our existing financial plan by shifting dollars from lower impact efforts. Equally important, the deal offers great leveraged potential for additional investment in marketing promotions to build our sales momentum even more.

The model, the line in 2002, will be helpful, you'll recall that this expense line in 2001, was modestly high in the first half of the year, several million dollars low in the third quarter, because of September 11, and , and about even for the fourth quarter.

You know Europe's segment we're focusing on three areas. First, volume - our UK business is off to a solid start this year and its important to remember that the seasonal flow of our UK business which normally records less than 20 percent of its annual sales, and only about five percent of annual operating earnings in the first quarter of each year.

As I mentioned earlier our pretax margins in the UK for the first quarter this year were double the normal level, because the typically soft January was excluded, along with a shift in the Easter holiday into the first quarter. The last three quarters of the year in the UK are normally about equal in terms of sales and earnings potential.

This year the Easter holiday shift is likely to depress second quarter sales and earnings in Europe.

Second, pricing. We've seen some firming of pricing in the UK, although we expect it continue to be a very competitive beer market. We will closely monitor the level of promotional discounting, the degree of value pack activity, and the volume shifts between channels in the UK.

Third, cost of goods. In Europe, we've seen modest savings from operating and purchasing efficiencies. This business is less attentive on packaged products, which generally reduces the impact of packaging and raw material inputs.

We did announce out plan to close the brewery near the end of this year, in order to more closely match capacity, with anticipated sales growth.

Turning to three other important corporate metrics. Interest expense - as I mentioned, we've been usually low in the first quarter compared to what we'll have spent later this year, but the first quarter included only two months of the new depth structure, and because about half of the debt was in the form of short term low rate bridge loan, which will be converted to longer term higher rate financing later this year. When we convert the bridge , our interest expense on about 45 percent of our debt is likely to increase from less than three percent, to something about six percent. The impact of non- operating expense will be significant.

Our current expectation for our full year 2002 effective tax rate is 39.5 percent, as I mentioned up from 37.9 percent last year.

Also, we adopted FAS-141 and 142, which will result in about four cents per share of tax as discontinued amortization that we booked in 2001 that will not amortize this year. Most if this discontinued amortization relates to goodwill and brand distribution rights. For 2002, as you can understand, out UK acquisition added substantial intangibles to our balance sheet this year, some of which are being amortized.

Now let me turn it back to Leo, to wrap us up.

Thanks, Tim. OK summarize your discussion, the first quarter was a truly transformational quarter for Coors. It was also, an encouraging quarter in many respects, with substantial progress in a number of key areas.

We completed the acquisition of Coors Brewers Limited in the UK. That instantly makes us a player on two continents and greatly diversifies and strengthens our company.

Equally important, we're off to a great start with this business, in terms of both performance and integrating the two companies.

We laid important groundwork for invigorating our top line, in the U.S. business, particularly the young adult consumers and our wholesale system.

And we continue to make progress on reducing costs, in important areas of our operations. Unfortunately however, we didn't achieve our volume growth targets in our U.S. business in the quarter, and we achieved strong - excuse me - we did achieve strong percentage growth in earnings, but remember percent changes in our smallest quarter of the year are not necessarily indicative of the year. Our annual performance is driven in large measure, by the summer selling season.

As we move into this key time of year, we're focused on building sales and profit momentum in our U.S. business, and enhancing the solid trends that the team has in the UK, while accelerating cash generation and debt reduction.

We're excited about the potential for both of our major beer businesses this year, and the years ahead.

The potential our priorities really haven't changed at all. They are to grow our business ahead of the market, reduce cost per barrel across the company, generate a solid return for our shareholders, and build the best team in the beer business.

At this point, I'd like to open it up for questions related to the first quarter performance. After that for those of you who are interested, we'll review some highlight in the 8-K for Coors Brewers Limited. Josh back to you.

Thank you. If you have a question at this time please press the one key on your touch-tone telephone, if you're question has been answered or you wish to remove yourself from the queue, please press the pound key.

Our first question is from of Prudential Securities.

Hey Jeff.

Good afternoon everybody. Leo, you said that you were disappointed in the growth in the quarter, but with marketing up only modestly what were you expecting?

I think in 20/20 hindsight, we probably shouldn't have been surprised with the quarter and I can't say I was surprised . When I say we're disappointed, our goal is to outgrow the category by one to two points, and I don't think we did that in the quarter. I think there's some good reasons for it, we didn't have any new programming in the market this quarter, there's obviously still a lot of activity going on in the or Malternative category right now, and we had our team out of the quarter - but the next to last week out of - in Los Vegas showing them what we were doing for the summer so - and anything - I guess the month of March surprised us a little bit. We came out of the year a little hotter in the month of March is a little soft. I think that's the category in perspective, but you know those things are better 20/20 hindsight, than they are when you're going through them.

Sure, and how is April performing for you given the new marketing campaigns that we're starting to see on television et cetera?

Well it's just too early to comment. We're still bouncing around week to week, we don't give any forecast on the second quarter. I will tell you that I'm real pleased with the focus and the tone of our distributor system, and my expectations are pretty optimistic for heading into summer.

And - with - just for my final question. We heard yesterday that Bud Light volumes were up probably in the high single digits, and Coors again in the low single digits. Again do you think that's just tied to the media spending and the timing of these new campaigns or is there something else that would explain discrepancy?

No, this is the trend line we've been sort of on for the last two quarters Jeff, we know we need to change it, regionally obviously we match up differently than other folks, our business in most of the country is actually quite good and on target, we're still suffering in Southern California, Texas bangs back and forth, but is still a tough market, and the southeast, and I'm not sure I have a great perspective on why it's been sluggish, but our big markets in the East, our key markets in the West and Midwest are all very . Sometimes that's a little different, but I - we've go to change the last few quarters trends most critically on Coors Light, as you know that's what we're most critically focused on, and I really think we've got the stuff loaded to go that ought to reward us in that, but as you know that's momentum that will build, and if we've got it right we will lean into it.

OK. Good thing it's only the March quarter huh? Good luck Leo.

Great, thank you.

Thank you.

Your next question is from of Credit Suites First Boston.

.

.

Hey Leo and Jim, how are you guys doing?

Good.

Couple of questions on shipping growth in the first quarter domestically. Leo of you could talk a little bit about, in your mind what changes as you get into the summer selling season other than your powerful new marketing campaign from an execution, distribution standpoint. If you could talk a little bit about areas where you do share wholesalers with Miller, in a way your view on the angle of - kind of - fighting through the clutter and ensuring that Coors Light has its proper shelf space. How important is your organization focused on specific avenues for that? And also comment if you could, a little bit on wholesaler inventories in your system, leaving the first quarter in - and maybe Tim could talk a little bit about whether - kind of a volume net revenue per case and cost trend for the year. Does he envision the business moving very similar on net revenue and cost, like your successful first quarter?

Let me - let Tim try to wrap the perspective on the rhythm for the year. We've had to press inventories a little bit going into season. As you know, there's a lot of inventor pressure out there and this Malternative thing, in all distributorships right now. We - inventories grew down a little bit in the first quarter, not in any way alarming, but coming out of the shoots in the second quarter, we've been real focused on getting them back up and have had good success with it. I - since we left Los Vegas, the willingness of our wholesalers to move on their forecast inventory has been real good, and that's real important to us at this time of year because otherwise we end of with surprised in the cost areas and it rattles us back and forth as you know.

Yes.

But so far, so good in the last few weeks pretty is pretty encouraging on that. Volume focus - hey look, there's a lot of focus points in the beer category right now. Ours is real clear, it's Coors light first, second, and third, and then I'll tell you what our other ones are - but I - we want to go into the season locked in on Coors Light. We think we've got a game we can win relatively here in our combined houses. Coors Light is consistently doing very well and the pattern that we've had for the long hall of Miller/Coors combinations doing relatively better is holding true clearly on Coors Light, some of this is an exciting brand for them to add to their portfolio, they recognize the excitement we're bringing to the brand. We've got obviously some really sharp, new focus on young adults going into summer. Also, sharp channel focus on premise and convenience in addition to were we've been traditionally strong, which is the larger take home channels.

So those would be the changes in focus - feel good about that. Having said that we still have keen interest in the Malternative category long term - I mean - we are the people who started it - Zima's taken it on the chin, and this new spirits oriented positioning, but still showing super vitality in terms of the consumer probing on it.

We have then announced to our wholesalers a whole new rack of exciting Zima stuff that will head out early this summer, and we'll actually launch a - I think Ron calls it close cousin product into some lead markets in May.

So we're not ignoring this at all. At this point we haven't taken - chosen to taken a spirits direction on it, and we're watching that but, that's - we're still long-term believers in the category.

Original Coors is a challenge. We think the copy will help there, but it's lost a little bit in the world of news, and it faces a little bigger challenge going into the Miller portfolio houses, and we're working on that.

Killians is coming through, having fought off of another battle last year. Right now, we haven't any news to focus there, but I think Killians will pop back - I mean, that's a traditionally strong brand, its been through some threats before. As sort of the heavy buzz on alternatives dies off, I believe those brands will come back pretty strong.

That's the rack as I see it.

And Leo, just before Tim - any views personally on the Malternative category - with another quarter, quarter and a half of you watching closely on that trend. Any change in your perspective on sustainability of that category?

No, everybody's got a funded point of view on this one - you know that - I would - I'd look at it this way. I wouldn't want - be any overlap challenge next year on the lion that's going to be ripping through this year, and that's the way we've looked at it all along, you know that.

Where it settles out is, anybody's guess. I think Ron's gut on this was right, in that is - hey, you know everybody's going to try this, it's going to be a niche in the category, but it isn't going replace - the sort of right of passage role of fear for young adult males. This isn't going to do that, and if you look in the UK, were this boots up over there is in the even younger crowd, but once you get into 21 to 25 year old men, there is the game. So, I - even in a more mature category, this tends to hold some water I think, a lot more to be learned though.

OK.

Hey , this is Tim, thanks for your question. First of all on net revenue per barrel, I think that as I mentioned you - we've got three or four things moving - not all - most of them different directions. We've got this sale of the distributorships, which basically takes us down 200 to 250 basis points. We've got a pricing environment that is around 200 basis points to the good, Killians and Zima softness moving us the wrong way.

So, I think what we say in the first quarter is a pretty good look at the next couple of quarters, and then as I think I mentioned, that impact of the distributorship gets washed out by the fourth quarter. So we'll start seeing some revenue per barrel, in terms of the way you see it, the plus side.

On cross, I think it's kind of similar story - I mean if you look at again, taking out the impact of some of these distributorships, our costs going up a half of one percent per barrel, you look at every quarter for the last couple of years, that's a nice performance. We'd like to think that at worst that would continue. We might be able to beat that again the wild card as I think I mentioned is fuel costs. Fuel costs hit us a number of different ways in obviously running our plants and in natural gas, and obviously in freight costs.

Sure.

And that's really our wild card. We're trying our best to mute the volatility of those costs and get more efficient, and do a little more purchasing, but , I think the in real terms, real operating manufacturing terms, the half of on percent growth - that was on the first floor is about right, as we move through the year.

Thank you.

Our next question is from of Deutsche Bank.

Hi guys, it's , just a couple of follow-up questions. First with the new media Leo, do you guys have any sense at this point on - either by consumer groups - how it's resonating with consumers that are just beyond that first age bucket of 21 to 27?

All I can say is, thank God that all men think they're 22 year olds. I don't know how women think and I'll never figure it out but, I do know - actually the best of that is wholesaler reaction itself.

And the wholesale reaction is incredibly positive, and this is not your youngest set, right. Now, we've taken it - we have many conventions that follow our first convention, we had the first of those in the Midwest last week. Were we get to show it to the - what you call the core wholesaler team, which is your probably average age in a wholesaler, particularly a good one, is about 28 years old right, and they were just absolutely hooting and hollering.

So, I think we passed the test of really well focused young adults advertising that's inspirational to the rest of our core franchise. What is - what's been most interesting here, in the consumer calls, particularly with young adults, is how the music tells them it's their stuff. Everybody likes the video clips, everybody likes the energy and the young adults recognize that the music is theirs, and it's; "Where'd you get the music? That is so cool". That's what Ron was trying to accomplish, so far so good , it's a point of view but that's - were not getting any feedback that's contrary to that.

Well, good luck with it and by the way congratulations on the NFL deal - was wondering if you could give us a little color on - if it's not representing an incremental marketing spend, and your de emphasizing certain properties or channels, can you talk about what those might be?

It's really pretty straightforward, I've noticed two things. Every year we go into the year with some un-ear marked and flexible money, and obviously we have some properties in the past that we've spent money on to try and get football going right, and those are fund that we can use and contribute toward the increments that the NFL deal costs. The numbers which have been quoted, which obviously aren't ours, to get anywhere near to those numbers you'd have to take in all the media we spend by the NFL - which is significantly higher than the cost of this new relationship. All the promotional work we've committed to do with the NFL, the value of publicizing the NFL trademark, in many of our properties - so that fact is that is while this is significant and quite exciting, it's manageable from a spending point of view.

Yeah, and ...

And we're very excited about it. Now remember our point of view going into the year - as we go in with relatively modest increases in our marketing - trying marketing stuff in mind year-to-year, with the attitude as we get stronger we'll invest back against it. So, I wouldn't be surprised is we're successful, that we might take our commitments out further as the year goes on, but right it's manageable within what we've planned to spend.

And Leo, just a point of clarification on the NFL deal. Can you give us a sense of what this brings you in terms of rights that you didn't have before and - from a competitive standpoint, effectively what Miller and Bud don't now have.

Sure, what - we didn't have any rights to do with the NFL, and it made it tough during the fall season and superbowl time to have relevant stuff to get up in store. So, we were at a disadvantage, and particularly the disadvantage had to hit in the Miller/Coors house.

What we get is the exclusive rights to all NFL trademarks - now those are NFL league trademarks - it's the NFL, what do we call it - shield - right? But things like the name "Monday Night Football", things superbowl the work "Superbowl", "Playoffs" - and they've got about a dozen of those things, including "Draft" - and obviously some are much more valuable than others, but that's number one. Number two, we have the exclusive rights to use the collective shield together - no emphasis, no point of emphasis by team, but the collective shields together, which means that in no way can another competitor have more than one local shield on any piece of promotional material. All right, you just can't do it.

Now, what all three of us have a chance to do, is go out and bid with the teams for the exclusive rights to use the individual shield alone in that team's marketing area. OK, and we'll get a few of those, because we've got some friends out there, we're obviously not aggressive about that because we think we've got the market we need to distinguish ourselves, but Bud and Miller will clearly, city by city, try and do that. And many of the teams, by the way, will do that on a non-exclusive basis, and so they won't necessarily be 100 percent exclusive to a brewer.

And then finally just a follow-up for Peter in UK, with regards to Carling, thus far. Are you seeing anything with Heineken's expressed departure from the standard category? How's that playing out from a competitive set?

Well I think , we're expecting Heineken to reposition their brand, they have articulated that. In the meantime they are loosing share of the mainstream lager market, and we are winning accounts against them. So, obviously we've got plans - competitive plans - in the future, but so far, I think we've made a lot of progress against them in the market.

Right, thank you.

Thank you.

Our next question is from of UBS Warburg.

Hi .

Hi, how are you everybody?

Good.

Two quick questions, actually. One is Easter negative for the second quarter in the U.S., as it is in the UK? In other words it helps the first and could hurt the second.

Oh yeah, that was easy, yes. And your second question was?

The second question is for Peter. In the UK, I think already some of the costing coming in favorably. Can you talk about the cost opportunities this year before the brewery is closed, so separate from the closing of the Brewery? What sort of things do you see changing under Coors ownership that you could do differently to improve either volume or cost in the UK?

Peter, I hope you to think about that. Caroline on the Easter issue that is a significant issue in the - particularly in the UK business, it's a bigger swing issue for them. It's not a very big issue in the U.S., timing obviously is the same but, Easters not a very big beer holiday in most U.S. markets.

Actually, I asked that because it seemed to help all the soft drink companies, and yet the beer guys - I mean you and Bud software than expected , so I'm just wondering - has it had any benefit at all in the first quarter?

I would just say plain immaterial. It's not been a holiday we've ever tracked as a big swing item. It is - in the UK business, it tends to be more holiday oriented, but Peter you comment on that.

No, I think , we clearly did benefit in the first quarter. It's not a huge swing factor, but it does obviously add a bit to the momentum of first quarter, and we'll take it in the year a little bit in the second, but in relation to the underlying positive trends of the business, it's not a big factor quite frankly.

And to the other questions though Peter, on how things might be different this year?

Well under costs generally, the local team has done a great job of lowering costs in the last two or three years. I think in terms of what the bigger picture of integrating the two businesses, certainly we get more leverage with some of our suppliers particularly in Canes and some of our other materials, but that's the main benefit. And of course, the most important thing for us is the scale leverage we get from improved volumes, and the more we achieve or exceed our plan the better that reflects also on our costs.

Right. Leo, can I just bounce back once more to this March situation with - because I think volumes were pretty strong in January and February. Was there a weather issue, was there anything that you guys can use to explain why volumes softened in the beer industry?

Yeah, I think everybody has a point of view here, but I will tell you that while there was some - I think - East and Southeast weather issues, ours is more our normal business pattern. The softness in March I would attribute, as much as anything, to focus in the category. An awful lot of the beer category was focused on getting these lead Malternatives out into the marketplace.

A lot of inventory loaded out, various reports about moving out inventory moving through. Seems to me that may be a bigger impact here than we've got our minds around, but I got to tell you, I don't have a very good 20/20 hindsight on it at this point. We just beginning to see the category perspective, and I can't give you a better answer than that .

OK, well that's helpful, thank you.

Again, if you do have a question please the one key. Our next question is from of .

Yes, hello. I just wanted to ask you about the UK, you obviously got a very good arrangement going with Grolsch, in the UK and would that preclude you also from selling Heineken export in its new stronger form?

Peter.

I think , the emphasis of that is we've been - we're very pleased with our relationship with Grolsch. It's been phenomenally successful in the last three or four years and we're really building, it just passed in the UK. So, we're very happy with that relationship and you know we're going forward with it in the future.

I think in terms of whether it would prevent us doing anything with Heineken - the answer is, I think basically we have a good brand to get behind and in terms of our selling system, that's what we want to support. That wouldn't prevent us, for example, from brewing Heineken for them or some lower level of relationship, but I think Grolsch is the brand we want to get behind.

Yes, I was interested in your comment, though you say you just passed lead backs, would that be in overall terms in the on and off trade, because I think the lead backs is doing what's six, 700,000 hexaliters?

It would be passed them in the total market, that's right.

Really, that's very good, and your plans for the Coors brand in the UK, is that - do you have any public plans on that?

Well , not really public plans. We already are in Scotland with a test market, we've been there for about three years. We're in the process of sort of thinking that one through and how we might roll that out in the UK, that's sort of work in progress at this stage.

Thank you very much.

Our next question is from of Texan Corporation.

o'donnel: Good morning gentleman and good afternoon to you too Peter. My question has to do with net interest expense. I know that you are going - you mentioned that you're going to term out $750 million of your debt. Given current short term rates, could you please us your best estimate of what that interest expense would be for 2002?

Yeah , this is Tim. What I'd rather do is give better answers as we go through our next few quarters. Obviously interest rates are - treasuries are moving - obviously we've got a lot of work under our belt and still a bunch of work to do in terms of making sure that from a , an , and interest rate standpoint, we've got the best balance and the best depth structure we can muster.

So broad terms, I think we've shared these numbers with you before, the 70ish million - 70 to $75 million range is probably a good one, but again we've got most of the year in front of us, we've all this work that I mentioned to do to lock in a more permanent financing structure. So, I think at this point that's probably the best clarity I can give you.

o'donnel: Thank you very much.

You're very welcome.

You have a follow-up question from .

Andrew.

Actually, just to focus for Peter if I could, as he focuses on 2002, 2003. If he could just talk about maybe his top three action plans or agenda's that he needs to be successful to drive the business successfully whether it be operations brand, focus on retail. What are three of the top issues he needs to - Peter that you need to focus on in order to drive profit growth up over the next two years?

Well , priority number one is obviously the focus - the whole organization behind building our core brands, and those are Carling, Worthington which is a male brand, Reef which is our flavored alcoholic beverage, and Grolsch. There - roughly a little over 80 percent of our total business, so that's kind of priority number one.

Priority two is as you're probably aware, we are undertaking a kind set of management actions that are going to take costs out of our system. We are 10 to 15 cents smaller than we were a year ago, by virtue of what Interbrew took with them, Scotland and the brand primarily.

So, as you know we've announced the closing of Cape Hill, and we've got to accompany that with taking some overhead out of the business too. And that will - that's obviously a big challenge and priority for next year.

I think beyond that those are the two main priorities and the rest of it is really operating this business which is - a kind of - really an outstanding kind of execution machine and just doing what we've been doing, which is building great momentum in the UK business.

And overall Peter, lead by the Carling brand your expectation would be to grow you total volume in that - your mid single digit range, low to mid single digit range, clearly led by Carling.

That's right, and obviously it assumes that we will be picking and maintaining our share momentum, and hopefully the robustness that we've seen in the UK market, particularly on premise, will continue.

Thank you.

Andrew, Leo, one of the things I'm struck with is a commonality of some challenges that the two operations - an interesting sideline on Carling to me, is that we have two hug pieces of the UK, where we're relatively underdeveloped. London, Peter may want to make a comment about that, because the team is making terrific progress and Scotland, because we lost the major brand in our portfolio there which is Tennants, which obviously leaves us an opportunity to go capitalize on Carling.

But Peter, any top line comments on London particularly?

Well Leo, thank you for that. Yes, the - we're making some - and really in London, it's all about building distribution, and with Carling in particular, because of the expense historically of investing in media in London we have not really invested behind the brand in London because, traditionally we've been pretty weak there.

That's changing. We're making extra drives in the sales area to build distribution and we're going on air on London for the first time this year.

And we're sort of accompanying that, not just from a media perspective but really a bit like we're doing in the U.S. with Coors Light. We're really using music as a hook and as a way of relating to our younger target market. So, we're doing a number of sponsorship deals that sort of come out of London, and we're really looking for some strong and solid growth in that arena.

In Scotland this is all about really a new business. Carling previously is not being sold in Scotland. We're clearly wanting to protect the business we have in Grolsch and Reef up there, but we see there's a tremendous opportunity by taking the UK's number one brand into Scotland, which is a , it is not being , because it's essentially being blocked by Tennants, which is obviously with our competitor now.

So, that will really conclude as an opportunity as well.

Exciting opportunity Peter.

Thanks .

Our next question is from , private investor.

Good morning, good afternoon everyone. Peter also, a question for you, I wonder if you could - you commented in some regards about the competitive landscape in the UK. I wonder if you could broaden that out for us a bit, as we gear up for what Leo likes to call show time, and include in that some comments on the pricing outlook, and any changes you might have on industry pricing outlook relative to your outlook back when we met in February.

, let me take it a couple of ways. Yeah, this is a pretty competitive market and show time is not quite - off seasonality is not quite the same as it is in the U.S., and the fact our on premise business is a much bigger piece of the total business. So, it tends to be more spread out with obviously a big and large push over the - sort of - mid and late December over the Christmas holidays, when people go out and party in the pub so to speak.

But from a competitive point of view we are the number two brewer in the UK, so is - we think of as being our prime competitor, across the range, whether it's in lagers, ales or what have you.

Interbrew is clearly a competitor in a different kind of way, but those are the two primary ones that we focus on, going forward.

I think from a pricing standpoint, we've been reasonably encouraged by what we see out there. It is competitive. The take home side of the business, from a pricing point of view, is aggressive. And we have to manage in our SKU's there very carefully across the range, but because so far this year, the on premise, simply the independent kind of pubs and clubs has been pretty robust relatively to the history. We're looking at obviously a favorable mix in terms of our total margins.

So, overall I think that price outlook looks OK and I think we're happy this is our plan and our target.

Thank you.

Thank you.

Your next question is from ) of Goldman Sachs.

One question I really have is, now that we've had a little bit more time to look at this Malternative flavored alcoholic beverage situation. I wonder if you've got any research now that gives us a better sense of where they're - where these brands are really sourcing their growth from, how they're interacting with some of the other segments of the business, like imports and particularly the light beer area. And is Coors Light keeping pace with the growth of the light beer segment at this point?

, I guess what I'd say is I think it's still a confusing time. A lot of the - this new thrust into Malternatives really hasn't settled in yet. Tremendous amount of , is pretty broad in the category. I don't have any quantitative research, I have qualitative research that would indicate that this is going to profile a lot like Zima, which is young end of the business. Pretty bimodal, male/female, a light beer drinkers - this is not a heavy beer drinker or - what do you call a primary beer drinker kind of product. This is people who are into lighter alcoholic beverages - as the way this tends to profile.

But I got to tell you, during the trial period everybody tries it. This is a very easy trial business. We learned this - in some ways you'd say the hard way in the Zima world back in the early 90's, when we had the huge trial fee, and - let's see we settled at a - we finally caught traction again at a volume that was about a third of the trial fee . I'd be surprised if this isn't the same kind phenomenon by the time you get all the way through it.

I don't think - certainly young adults which are the core of the light beer business are disproportionally inclined to try this. So, it's no doubt in my mind it's impacting the whole light beer growth segment, but I think that'll actually catch traction - we'll get the wind coming into the season. I'm pretty optimistic now, this is beer, so you got weather, you got all kinds of things, but - a pretty confident that by the time we hit beer season things will take this in stride.

Is Coors Light holding share in the light segment?

Let's see, I guess Coors Light tells - I'd have to say - helps share in the total beer category last year, and may have drifted marginally in the light beer segment, but I'm not here to attribute that at this point to strictly to Malternative phenomenon.

Thanks.

We have a follow-up question from Mr. .

Hi guys, can we just talk about the inventory management - Tim you guys have taken a lot of initiatives on the supply chain. Can you give us an update of how that's going and how you're going to better manage capacity utilization during peak demand? And assuming healthier buying trends this summer, do you still expect the same kind of operating leverage you've traditionally exhibited in Golden?

thanks. I think the short answer to your question is yes, I think we're better positioned now than ever before, I mean - since we've shared before, we spent a lot of money last year on brewing capacity, previous years on packaging capacity.

We're spending and working as we speak on warehousing, and we think we've as good a balance as we've had in the last decade, really equilibrating all those different types of capacities. So, we feel really good about going into this peak season. I would say more so than the last two, three years and on top of that as I think you know, with what we're doing in Memphis, and the model we built in Shenandoah, which is ramping up very nicely. We think we're really in good shape, really for the better part of the next four, five years.

So, I think we feel really good about our inventory ability to supply the market. At the same time, with the supply chain we're doing, we want to make our system move faster, we want to be able to cycle inventories faster, and that's something we're easing into. If you can look at the first quarter this year versus last year, still realizing we want to load inventories to fare peak season, we're a little bit less. We're about a half to a day less, this first quarter than we were last year.

That certainly the point Leo was making earlier about first quarter dynamics - hurt us a little bit, but we want to be able to generate that strong mid single digit growth and actually over time do it with tighter inventories, and supply chain work we're doing right now which is focused on building a lot of end-to-end computer systems will - should help us do that. greenberg: Thank you.

You're welcome.

We have a follow-up question from .

Hey Jeff.

Hi. Peter what did the UK beer category grow in the first quarter, and also what did the logger category grow?

Sorry, Jeff I'm - the answer to that is we don't have equivalent figures just yet, we're trailing about a month behind. I think we're looking though - total market roughly about low single digits, about one and a half to two percent, something like that.

For the entire beer category.

Yeah.

OK, and the logger category, any guesstimate there?

No, we don't really have that.

OK, OK, thank you very much.

OK, fine.

I'm showing no further questions at this time.

That's perfect. Thanks for your interest everybody, appreciate it. We're headed into summer, we are focused and look forward to talking to you after the second quarter.

Now, what we're going to do at this point is most of us are going to leave you and I'm going to turn you over to the able hands of Tim and Ron, for those of you that are interested, for a more in depth review of the 8-K, and really focus in on that.

So, for my part, Pete Coors part, thanks very much for your interest, we'll be talking to you soon.

Tim you want to take it over?

Yes sir. Thanks Leo. For the next half hour or so, and we can make it shorter if you want, we plan to go through some of the highlights of the historical and pro forma financials that we filed last week in our 8-K filing. And Ron our VP Controller will be happy to do that, and then we'll take some questions.

The intention of this review is really to help you interpret a document that's quite complicated, because of the , accounting rules history of what is now our UK business.

For comparison purposes with the UK results that we estimated for in our New York meeting at the end of February. That was really before we'd done - completed the carve out work, accounting work for this transaction.

The 2001 EBITDA of $100 million, including trade loan interest for CBL came in $8 million below that estimate, and all of that variance was due to purchase price accounting, which was made up of about $17 of amortization expense from acquired brands, and that was partially offset by positive U.S. GAAP adjustments.

Meanwhile EBITDA of about $19 million including - that included trade loan interest, came in about $8 million higher than we estimated for February. So - just a quick of some of lynch points back to the 8-K, back to our analyst presentation.

Let me turn it over to Ron, to really go through a little more detailed review.

Thank you Tim. I'll start by giving you an overview of the form 8-K we filed with the SEC on April 18th. Then we'll take your questions about the filing.

Anne Stats, our Group Manager of Technical Accounting has worked directly with the Coors Brewers Limited finance team and our auditors in the UK. She is here to help answer your questions.

The form 8-K contains two sets of numerical information. First exhibit 99.1, contains historical financial statements. Second exhibit 99. pro forma financial information for the year 2001.

We'll spend most of our time on the pro forma information, since it provides a clearer picture of our combined business on a going forward basis.

The historical financial includes four different reporting periods. The 53 week period ending October 2nd '99, a 47 week period ending Aug 26 , an 18 week period ending December 30th 2000, 52-week period ending December 31st 2001. The short reporting had ending in August, is attributable to the acquisition of vast business by Interbrew on that date. The short period ending December 30th 2000, is due to the change in the vast historical September year end, to the end of December reporting period that Interbrew had.

A couple of points for you to consider in regard to these historical statements. First, the do not include the Irish business that was obtained by Interbrew, but they do include the Scottish business that was also retained by them. The Irish business was managed and reported within a separate legal entity and results could effectively be excluded from these statements. The Scottish business was managed with and effectively combined with the rest of the Carling business, and could not be separated on a historical basis from the business we acquired. Second the statements are prepared in accordance with UK GAP, with a high level reconciliation in U.S. GAP reflected in footnote 21, on page 23 of the exhibit.

Now, for the pro forma statement. The pro forma financial information is included in exhibit 99.2. Please note, that this information is prepared as if we acquired the business on January 1st 2001, for the income statement, and the end of 2001 for the balance sheet.

I'd to comment on two items dealing with the foreign exchange rate impact on the Coors Brewers Limited financial information. First, the income statement is converted into U.S. dollars as the average annual exchange rate for 2001. Our results in 2002, and later years will be converted at the average annual exchange rates in those years. Any movement in the exchange rate between the U.S. dollar and the British pound will impact our future reported earnings. And a second point, the balance sheet reflects the U.S. dollar equivalent of our 1.2 billion pound purchase price converted at the spot exchange rate on December 28th, 2001.

The balance sheet for Coors Brewers Limited will be converted into U.S. dollars at the end of each reporting period, a the spot on the last day of the .

This will similarly create some volatility in the balance sheet that we did not have prior to the acquisition. As an example, the difference in U.S. dollar purchase price, using the exchange rate on December 28th 2001 and the exchange rate on February 2nd 2002, is about $40 million.

Now let's go over each column of the PNL that is reflected on page number three of exhibit 99.2.

Column one; the first column contains the 2001 number for Coors historic business as reflected in the form 10-K, that was recently filed with the SEC. The impact of ceasing amortization on goodwill and other indefinite live intangibles is not reflected in these numbers. As was mentioned earlier, the impact of FAS-142 on Coors historic business, is about four tenths per share, a reduction in amortization expense of a bit over $2 million.

The second column contains the 2001 numbers for the Carling Brewers business, but note that they also include the Scottish business that was retained by Interbrew.

Five things I'd like to mention in regard to this column.

First the sales dollars in cost include factored brands, which are the beer, soda, spirits, and bottled water that are purchased from third parties and subsequently sold to retail outlets by Coors Brewers Limited.

Second, the numbers in column two include the impact of the Interbrew acquisition, and do not include the impact of FAS-142, that requires the sanction of amortization on goodwill. The FAS-142 adjustment is made in column four, along with the other pro forma adjustments.

Third, interest income includes about $19 million of trade load income, or what is called loan equivalent discount in UK. This arises from loans that are made to independent retail establishments, to which the interest is effectively earned to higher prices for beer purchased from Coors Brewers Limited.

In the UK, this incremental sales revenue is reflected in margin, but for U.S. GAP's an amount of imputed interest is moved from sales into interest income, to reflect the return on the loans.

Fourth, interest expense in this column is related to the debt that existed under Interbrew ownership and will not necessarily be indicative of interest expense, once our financing structuring is completed. We'll talk a little bit more about this issue when we get to column five.

And last, other income and expenses includes the results of operations from both trade teams, the distribution logistics provider for the Carling business, and Grolsch the venture that markets Grolsch beer in the UK. These amounts will be reclassified into cost of goods sold in column four, as they relate to the distribution and sale of products by Coors Brewers Limited.

Column three eliminates the results of the Scottish business. Footnote five on page 13 of exhibit 99.2 describes the adjustment.

Operating income for the Scottish business appears high, compared to the business we acquired. This is attributable to a number of factors.

First the business we acquired includes the factored brands. The factored business activity has relatively low margins, compared to owned brands.

Second, the gross margin on the Scottish beer brands are indeed fairly high.

And third the operating income is impacted by the fact that G&A costs related to the Scottish business were retained by Coors Brewers Limited.

Column four contains the acquisition adjustments and these are laid out in footnote six, on page 15 of exhibit 99.2.

We have now substantially completed the appraisal of the Coors Brewers Limited business, and the combined depreciation and amortization expense, we expect to recognize on a full year basis, is not significantly different than that included in this pro forma information.

Note that extensive work was required under FAS-141 and 142, to identify value and life a large number of both tangible and intangible assets. We currently expect the combined depreciation and amortization expense to be around $104 million per year.

Finally column five. Column five reflects the as-if combined amounts, note that they include special charges of 27.2 and the gain on sale of distributorships of 27.7, both of which predominately relate to the America's business in 2001.

Interest income contains the imputed interest on the UK trade loans, and interest expense is calculated as discussed in footnote seven, on page 20 of exhibit 99.2. As discussed in the footnote, the interest expense reflected in the pro forma statement is bases on a combination of full year fixed and variable rates.

Note that our actual financing for the transaction is not yet completed. Accordingly the number in the pro forma will not necessarily be indicative of former interest expense, for either 2002 or later years. For 2002, the acquisition and related debt did not occur until the February 2nd acquisition date. And the interest rate on the bridge loan, which is still outstanding, is less than the 6.6 percent rate used on the long-term debt in the pro forma.

I think you'll get a better idea of full interest expense for 2002 and subsequent years, after our financing is completed.

That wraps up when I wanted to talk to you about, and now we'll take any questions you might have.

Our first question is from .

Thank you very much. Can you just give us a sense of how the quarterly numbers break out, just basic numbers, barrels, revenue - net revenues, and operating income on a quarterly basis in 2001, for Carling stand alone? Do you know what the annual number is?

Well Jeff in New York we talked a little bit about the net sales and the EBIT numbers on a quarterly breakout. We really haven't done any other work other than that, to look into these pro forma numbers to break that out.

OK, so that guidance from New York hasn't changed.

No, but we really ...

Hey Jeff this is Tim, I think that guidance is still really good just remember a little bit of the numbers non-sequiter of only having two periods in this first quarter, both of which where money making. The first period is typically money loosing the 20 percent of total revenue over the five percent of total profit.

So, that relationship vis-a-vis the full year is going to be little - it's going to be different, and I think in some of my comments I mentioned that the profit for our first quarter of the CBL business - because of excluding that one month that's typically a loss, the total profit for the quarter is roughly doubled. A little more than double, what it would have been last year on a comparable basis.

OK, all right.

Is that helpful?

Yeah, I guess I was just hoping for some more specific numbers but, that is helpful Tim, thank you.

The - you're in the same boat we are - I mean kind of riding through this first year, we're going to have to do that until we really get meaningful year-over-year cost, because as you can tell from Ron's comments on the accounting rules on this, the apples to apples year-over-year comparisons are pretty close to impossible, given the way this dynamic work with Interbrew, in terms of them hiding off businesses that were set legal entities on one hand, inextricably melded into the ongoing operation of the rest of the business. So it's really confusing, and we're - obviously during the course of the year, happy to get in as much detail with this as possible with you. We're learning ourselves as we go through this, so bare with use.

OK, we'll do that, thank you.

Thanks Jeff.

Our next question is from .

Tim and Ron, two questions. One of them, just want to make sure I have the right base of operating income on a pro forma basis for '01, adjusting for the special charge and also reclassification of cost of goods that it's in that 275 to 300 million range. Is that a reasonable range in which to expect baseline growth? And then secondly - I don't know if Ron can provide - if the European business is five percent of operating income on the first quarter, if you could shed some light on the seasonality or calendarization of that traditionally 2-Q through 4-Q.

Andrew, I'll try the second, and I'm gosh I felt like kind of did that already with Jeff, but let me take a wack at it again. The - if we had included January, which obviously we didn't because the month that Interbrew still owned the business, that's generally a loosing month. Those losses were not - aren't reflected in our first quarter results, they're eaten if you will, by Interbrew. But had we owned inter ... - CBL for January the quarterly breakdown - I showed you in New York is pretty darn close to what we expect to see for this year.

I think the overall - sort of - profit number we showed you is again, that's in the ballpark - realizing we can't and generally don't give a full year guidance and profitability, but after the first quarter, and again the sales is roughly 20 percent of the full year, the profits roughly five percent, as you go through the balance of the year, second, third quarter - the revenues are about 26, 27, 28 percent of the full year in each of those quarters and the profitability is about a third, a third, a third, a skosh higher in the third quarter, but basically a third of the remaining 95 percent of the profitability. And I think right now we're - except with this Easter anomaly, which obviously makes the first quarter a bit stronger. That's pretty much the cadence we're expecting.

OK, and what am I missing then as you base your internal projections off of a, off an , U.S. dollar total company operating income. Am I within a reasonable range?

Well, we think the proforma's provide a good starting for looking at what the results might be in 2002, but I think you would have to make independent judgments about a number of things in our business in order to bridge 2002 numbers.

No, I'm talking about pro forma 2001, not '02 forecast. Is the base within a reasonable range for 2001?

Up 275 to 280 million.

Hey , this is . Actually I think if you look at the income statement in the 8-K, I think we've given you all the pieces that you need to get a good - sort of retrospective look on the business. That, by the way, just a reminder what Ron mentioned, that does include special items and it also includes gains on the sales of distributorships, and so if you modeled those out, then feel free to do so. And beyond that - oh and FAS-142 for the bases business and I think that's you know you can do it however you please, but I think you've got all the pieces.

Thank you.

That we can give you.

Thank you.

Next question from Mr. .

Hi guys. Tim first if you could just elaborate a little on that working capital shift from what shored up on pre-cash and on what you're give back is to Interbrew. Is that going to be just a straight second quarter phenomena? And then secondly, with these proforma's and thinking about them, there was - Peter mentioned a 10 to 15 percent smaller. How much of that is now reflective just purely in terms of the brewery closure? Is there any kind of a contribution putting out in these 2001 proforma's that may be skewed as a result of that?

Hey , let me hit the first question. I'm a little bit unclear on the second one, we'll ask Ron to pick up on that. The agreement with Interbrew's quite straight forward and then a couple of nits an nats pretty formulaic, so we're going through a 40/45 day period with them, for them to take a look at our completion account - completion accounting and we don't anticipate any issues, but the - and I don't want to mention any numbers, because I don't want to implicitly commit anything to Interbrew but the 15 plus percent of our ending cash balances are basically ear marked for the commitment that we've already blocked and loaded when we closed on February 2nd.

So that's plus or minus a percent or two, we know what that number look like.

But that's a straight second quarter wash?

Yeah, that was straight second quarter - we send them a wire for the - any excess cash, any excess working capital, and obviously going into the formula was a normalizing of what working capital - other things being equal - should - would look like for that period of time. So, we're real comfortable with that enough to say and as I say, that will be worked out with Interbrew over the next four or five weeks.

This is Ron. On your second point, I think you were talking about savings relating to .

Right.

Footnote number five, on page 12 of exhibit 99.2 discusses that issue. Now a couple of points; our purchase price accounting assumes a value as if the brewery will be closed. So there's some benefit in the pro forma information from smaller depreciation charging. In addition, there's some benefit from the contract brewing relationship from Interbrew that's in effect through this year.

But net of those adjustments, we currently estimate there probably is some incremental up side to the closure, maybe five to seven million.

OK great, thank you, and then just one more qualifying point. You mentioned earlier that the difference in - as a result of changing 4-X on 12/28 which these statements are in -40 million. Does that imply that we should have a slightly different transaction multiple?

I think that you'd probably what to wait until the financing gets in place and we really see all the pieces of the acquisition including the financing before you probably go to that step.

OK.

OK , just put it this way, it wouldn't hurt the multiple.

Thanks, Tim.

Yeah, you're welcome.

Your next question is from Caroline Levy.

Hi, actually it's Dave Palmer for Caroline. The figures that were released today - the unaudited figures for the America's. How is that pretax number adjusted versus, last year's pretax number? In other words can you just help us back into how that number's different aside from the tax rate?

Yeah, I think that the difference you may be referring to is the part of our historic business that was in Europe, in last year, and I think you can probably pick that up off the, off the Europe segment, as prior year numbers.

And that - I mean in the - we cannot separate Carling from the Europe numbers obviously.

Yeah, the year ago numbers David you've got for just the form - I guess we'd call it the pre-acquisition European business Coors Light business in Ireland with test in Scotland primarily. And so you've got a year ago view and the business hasn't changed a great deal since then, but I think the - yeah the main point is to also consider that there's interest income in the prior year period that is now in corporate, that is no longer in the American segment.

I guess what I'm - I'm just amazed there seems to be about a $10 million difference or so - that struck me as a little high, given that the U.S. alone figure, which we're getting now, would be - that, that would be that, that - does that mean that there would be a $10 million loss that is now being reflected in Europe figures which are combined with Coors Brewers Limited?

I think a lot of what you're looking at is just the better results than the first quarter of this year versus last year. Dave made the comment that interest income, interest expense is moved out of last year's numbers and into the corporate ...

OK, I see, I'm act ...

Dave, that's probably it right there.

Yeah.

On an annual basis. Because Dave you go, you go from the positive interest income, given cash balances we had, that wiped out and you move instead to world were we're paying interest - you know we're servicing debt.

So that swing alone, is over $11 million. I think that may be what you're looking at.

Yeah OK, thank you.

You're very welcome, thank you.

I'm showing no further questions at this time.

OK, thank you everybody, we'll be back to you in the - after the second quarter. We really appreciate your interest in Coors Brewing Company.

Thank you very much, have a great rest of the week.

Ladies and gentleman, this concludes today's conference. Thank you for your participation, you may disconnect at this time and have a good day.