COORS ADOLPH CO - 10-Q Quarterly Report

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ADOLPH COORS COMPANY AND SUBSIDIARIES INDEX

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended June 27, 2004
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number: 1-14829

ADOLPH COORS COMPANY
(Exact name of registrant as specified in its charter)

DELAWARE (State or other jurisdiction of incorporation or organization)		84-0178360 (I.R.S. Employer Identification No.)
311 Tenth Street, Golden, Colorado (Address of principal executive offices)		80401 (Zip Code)
303-279-6565 (Registrant's telephone number, including area code)

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 ý NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES ý NO o

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of July 30, 2004:

Class A Common Stock—1,260,000 shares
Class B Common Stock—36,121,728 shares

ADOLPH COORS COMPANY AND SUBSIDIARIES

INDEX


PART I. FINANCIAL INFORMATION
Item 1.		Financial Statements (Unaudited)
		Condensed Consolidated Statements of Income for the thirteen and twenty-six weeks ended June 27, 2004 and June 29, 2003
		Condensed Consolidated Balance Sheets at June 27, 2004 and December 28, 2003
		Condensed Consolidated Statements of Cash Flows for the twenty-six weeks ended June 27, 2004 and June 29, 2003
		Notes to Unaudited Condensed Consolidated Financial Statements
Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.		Quantitative and Qualitative Disclosures About Market Risk
Item 4.		Controls and Procedures
PART II. OTHER INFORMATION
Item 1.		Legal Proceedings
Item 6.		Exhibits and Reports on Form 8-K
		(a) Exhibits
		(b) Reports on Form 8-K

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ADOLPH COORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

		Thirteen Weeks Ended
		June 27, 2004			June 29, 2003
Sales (Note 3)		$	1,550,325		$	1,469,371
Excise taxes			(399,631	)		(368,995	)

	Net sales		1,150,694			1,100,376
Cost of goods sold (Note 3)			(703,024	)		(683,087	)

	Gross profit		447,670			417,289
Marketing, general and administrative expenses			(322,062	)		(299,812	)

	Operating income		125,608			117,477
Interest income			4,505			5,203
Interest expense			(17,530	)		(22,694	)
Other income, net (Note 3)			1,353			2,908

	Income before income taxes		113,936			102,894
Income tax expense			(36,495	)		(26,552	)

Income before minority interests			77,441			76,342
Minority interests in net income of consolidated joint ventures			(5,405	)		—

	Net income	$	72,036		$	76,342

Net income per common share—basic		$	1.94		$	2.10

Net income per common share—diluted		$	1.90		$	2.09

Weighted average shares—basic			37,160			36,319

Weighted average shares—diluted			37,862			36,524

See notes to unaudited condensed consolidated financial statements.

ADOLPH COORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

		Twenty-six Weeks Ended
		June 27, 2004			June 29, 2003
Sales (Note 3)		$	2,785,013		$	2,570,226
Excise taxes			(710,808	)		(641,709	)

	Net sales		2,074,205			1,928,517
Cost of goods sold (Note 3)			(1,314,768	)		(1,242,561	)

	Gross profit		759,437			685,956
Marketing, general and administrative expenses			(605,839	)		(554,122	)

	Operating income		153,598			131,834
Interest income			9,190			9,862
Interest expense			(37,753	)		(43,834	)
Other (expense) income, net (Note 3)			(20	)		6,292

	Income before income taxes		125,015			104,154
Income tax expense			(40,228	)		(27,006	)

Income before minority interests			84,787			77,148
Minority interests in net income of consolidated joint ventures			(7,911	)		—

	Net income	$	76,876		$	77,148

Net income per common share—basic		$	2.08		$	2.12

Net income per common share—diluted		$	2.05		$	2.11

Weighted average shares—basic			36,911			36,318

Weighted average shares—diluted			37,568			36,541

See notes to unaudited condensed consolidated financial statements.

ADOLPH COORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

			As of
			June 27, 2004		December 28, 2003
			(Unaudited)
Assets
Current assets:
	Cash and cash equivalents		$	36,243	$	19,440
	Accounts receivable, net			650,434		618,053
	Other receivables, net			103,188		133,019
	Inventories, net:
		Finished		114,722		91,214
		In process		31,168		29,480
		Raw materials		68,348		81,068
		Packaging materials		10,464		7,723

	Total inventories, net			224,702		209,485
	Current deferred tax asset			11,819		12,819
	Other current assets			102,159		86,032

		Total current assets		1,128,545		1,078,848
Properties, net				1,411,009		1,450,785
Goodwill				820,984		796,420
Other intangibles, net				576,547		552,112
Investments in joint ventures (Note 3)				144,991		193,582
Non-current deferred tax asset				212,013		204,804
Other non-current assets				237,868		209,675

Total assets			$	4,531,957	$	4,486,226

(Continued)

See notes to unaudited condensed consolidated financial statements.

ADOLPH COORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)

			As of
			June 27, 2004			December 28, 2003
			(Unaudited)
Liabilities and shareholders' equity
Current liabilities:
	Accounts payable		$	304,831		$	396,204
	Accrued salaries and vacations			48,152			57,593
	Taxes, other than income			220,881			212,481
	Accrued expenses and other liabilities			391,550			376,279
	Short-term borrowings			—			21,309
	Current portion of long-term debt			210,515			69,856

		Total current liabilities		1,175,929			1,133,722
Long-term debt				931,622			1,159,838
Deferred tax liability				201,332			195,523
Deferred pension and post-retirement benefits				530,522			530,126
Other long-term liabilities				237,379			199,641

		Total liabilities		3,076,784			3,218,850

Minority interests				29,759			—
Shareholders' equity:
	Capital stock:
		Preferred stock, non-voting, no par value (25,000,000 shares authorized, none issued)		—			—
		Class A common stock, voting, $0.01 par value (1,260,000 shares authorized, issued and outstanding)		13			13
		Class B common stock, non-voting, $0.01 par value, (200,000,000 shares authorized, 36,005,905 and 35,153,707 issued and outstanding, respectively)		360			352

		Total capital stock		373			365
	Paid-in capital			80,498			32,049
	Unvested restricted stock			(462	)		(681	)
	Retained earnings			1,293,500			1,231,802
	Accumulated other comprehensive income			51,505			3,841

		Total shareholders' equity		1,425,414			1,267,376

Total liabilities and shareholders' equity			$	4,531,957		$	4,486,226

(Concluded)

See notes to unaudited condensed consolidated financial statements.

ADOLPH COORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

			Twenty-six Weeks Ended
			June 27, 2004			June 29, 2003
Cash flows from operating activities:
	Net income		$	76,876		$	77,148
	Adjustments to reconcile net income to net cash provided by operating activities:
		Minority interest		7,911			—
		Equity in net earnings from joint ventures		(27,604	)		(29,502	)
		Distributions from joint ventures		27,962			36,260
		Depreciation, depletion and amortization		133,304			116,326
		Amortization of debt issuance costs and discounts		1,219			4,276
		Losses (gains) on sale of properties and intangibles		300			(2,951	)
		Deferred income taxes		9,260			40,970
	Change in current assets and liabilities and other, net of effects of consolidation of joint ventures			(74,677	)		(81,023	)

		Net cash provided by operating activities		154,551			161,504

Cash flows from investing activities:
	Capital expenditures			(75,235	)		(107,838	)
	Proceeds from sales of assets			46,318			12,528
	Investment in Molson USA, LLC			(998	)		(2,745	)
	Cash recognized on initial consolidation of joint ventures (Note 2)			20,840			—
	Other			(86	)		(630	)

		Net cash used in investing activities		(9,161	)		(98,685	)

Cash flows from financing activities:
	Issuances of stock under stock plans			44,047			113
	Dividends paid			(15,178	)		(14,901	)
	Net payments on short-term borrowings			(21,314	)		(65,387	)
	Net (payments on) proceeds from commercial paper			(43,458	)		299,556
	Payments on debt and capital lease obligations			(88,223	)		(312,482	)
	Dividends paid to minority interest holders			(5,748	)		—
	Change in overdraft balances and other			(464	)		(16,280	)

		Net cash used in financing activities		(130,338	)		(109,381	)

Cash and cash equivalents:
	Net increase (decrease) in cash and cash equivalents			15,052			(46,562	)
	Effect of exchange rate changes on cash and cash equivalents			1,751			160
	Balance at beginning of year			19,440			59,167

	Balance at end of quarter		$	36,243		$	12,765

See notes to unaudited condensed consolidated financial statements.

ADOLPH COORS COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWENTY-SIX WEEKS ENDED JUNE 27, 2004

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Unless otherwise noted in this report, any description of us includes Adolph Coors Company (ACC), principally a holding company; its principal operating subsidiaries, Coors Brewing Company (CBC) and Coors Brewers Limited (CBL); and our other corporate entities.

Unaudited condensed consolidated financial statements

The accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. The accompanying condensed consolidated financial statements include our accounts, the accounts of our majority-owned domestic and foreign subsidiaries, and, effective December 29, 2003, certain variable interest entities of which we are the primary beneficiary (See Note 2). All significant intercompany transactions and balances have been eliminated in consolidation. These condensed consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 28, 2003. The results of operations for the twenty-six weeks ended June 27, 2004, are not necessarily indicative of the results that may be achieved for the full fiscal year and cannot be used to indicate financial performance for the entire year.

The year-end condensed balance sheet data was derived from audited financial statements.

Use of estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions are reasonable, based on information available at the time they are made. To the extent there are material differences between these estimates and actual results, our consolidated financial statements are affected.

Reclassifications

Certain reclassifications have been made to the 2003 financial statements to conform to 2004 presentation.

Stock-based compensation

We use the intrinsic value method when accounting for options issued to employees in accordance with Accounting Principles Board No. 25, "Accounting for Stock Issued to Employees" (APB No. 25), and related interpretations. Accordingly, we do not recognize compensation expense related to employee stock options, since options are always granted at a price equal to the market price on the day of grant. Compensation expense recorded in the financial statements relates to grants of restricted stock, and beginning in the second quarter of 2004, contingently issuable shares of stock granted to key executives, whose issuance is considered probable on December 31, 2004. The following table illustrates the effect on net income and earnings per share if we had applied the fair value provisions of

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-based Compensation" (SFAS No. 123) to stock-based compensation using the Black-Scholes valuation model:

	Thirteen Weeks Ended						Twenty-six Weeks Ended
	June 27, 2004			June 29, 2003			June 27, 2004			June 29, 2003
	(In thousands, except per share data)
Net income, as reported	$	72,036		$	76,342		$	76,876		$	77,148
Total stock-based compensation expense, net of related tax benefits, included in the determination of net income, as reported		1,046			91			1,133			178
Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects		(3,978	)		(4,061	)		(8,616	)		(7,400	)

Proforma net income	$	69,104		$	72,372		$	69,393		$	69,926

Earnings per share:
Basic—as reported	$	1.94		$	2.10		$	2.08		$	2.12
Basic—proforma	$	1.86		$	1.99		$	1.88		$	1.93
Diluted—as reported	$	1.90		$	2.09		$	2.05		$	2.11
Diluted—proforma	$	1.83		$	1.98		$	1.85		$	1.91

We adjusted the expected term for stock options issued in 2004 to 7.0 years for options granted to Section 16B officers and to 3.5 years for other option grantees, from 5.4 years in 2003. We amortize proforma expense over the option-vesting period of three years.

2. VARIABLE INTEREST ENTITIES

The FASB finalized FASB Interpretation No. 46R, Consolidation of Variable Interest Entities—An Interpretation of ARB51 (FIN 46R) in December 2003, making the new guidance applicable to us in the first quarter of 2004. FIN 46R expands the scope of ARB51 and can require consolidation of legal structures, called "variable interest entities (VIEs)." Once an entity is determined to be a VIE, the party with the controlling financial interest, the primary beneficiary, is required to consolidate it. We have investments in VIEs, of which we are the primary beneficiary. Accordingly, we have consolidated three joint ventures in our 2004 results, effective December 29, 2003, and financial position as of June 27, 2004. These include Rocky Mountain Metal Container (RMMC), Rocky Mountain Bottle Company (RMBC) and Grolsch UK Limited (Grolsch). The impacts to our balance sheet included the addition of net fixed assets of RMMC and RMBC totaling approximately $69 million, and RMMC debt of approximately $45 million. The most significant impact to our cash flow statement for the twenty-six weeks ended June 27, 2004, was to increase depreciation expense by approximately $5.8 million. The impact to our income statement was to reduce Americas segment cost of goods sold, reclassify Europe segment costs out of cost of goods sold into marketing, general and administrative expense and to increase corporate interest expense in the quarter. Our partners' share of the operating results of the ventures is eliminated in the minority interest in net income of consolidated joint ventures line of the accompanying statement of income. Results of operations and financial position from prior periods are not being restated as a result of the adoption of FIN 46R.

Rocky Mountain Bottle Company

RMBC is a joint venture with Owens-Brockway Glass Container, Inc. (Owens) in which we hold a 50% interest. RMBC produces glass bottles at our glass manufacturing facility for use at our Golden brewery. Under this agreement, RMBC supplies our bottle requirements, and Owens has a contract to supply the majority of our bottle requirements not met by RMBC. In 2003, our share of pre-tax joint venture profits for this venture, totaling $3.6 million and $6.3 million in the thirteen and twenty-six weeks ended June 29, 2003, respectively, was included in cost of goods sold in our Condensed

Consolidated Statements of Income. RMBC is a non-taxable entity. Accordingly, income tax expense on the accompanying statements of income only includes taxes related to our share of the joint venture income.

Rocky Mountain Metal Container

RMMC, a Colorado limited liability company, is a joint venture with Ball Corporation (Ball) in which we hold a 50% interest. We have a can and end supply agreement with RMMC. Under this agreement, RMMC supplies us with substantially all of the can and end requirements for our Golden brewery. RMMC manufactures these cans and ends at our manufacturing facilities, which RMMC is operating under a use and license agreement. In 2003, our share of pre-tax joint venture profits, totaling $0.40 million and $0.04 million in the thirteen and twenty-six weeks ended June 29, 2003, respectively, was included in cost of goods sold in our Condensed Consolidated Statements of Income. RMMC is a non-taxable entity. Accordingly, income tax expense on the accompanying statements of income only includes taxes related to our share of the joint venture income. Upon consolidation of RMMC, debt of approximately $45 million was added to our balance sheet. As of June 27, 2004, this debt was non-recourse to Coors.

Grolsch

Grolsch is a joint venture between CBL and Royal Grolsch NV in which we hold a 49% interest. The Grolsch joint venture markets Grolsch® branded beer in the United Kingdom and the Republic of Ireland. The majority of the Grolsch branded beer is produced by CBL under a contract brewing arrangement with the joint venture. CBL and Grolsch NV sell beer to the joint venture, which sells the beer back to CBL (for onward sale to customers) for a price equal to what it paid, plus a marketing and overhead charge and a profit margin. In 2003, our share of after-tax profits for this venture, totaling $1.0 million and $ 1.6 million in the thirteen and twenty-six weeks ended June 29, 2003, respectively, was included in cost of goods sold in our Condensed Consolidated Statements of Income. Grolsch is a taxable entity in the United Kingdom. Accordingly, income tax expense on the accompanying statements of income includes taxes related to the entire income of the venture. Upon consolidation, net fixed assets of approximately $4 million and net intangibles of approximately $21 million were added to our balance sheet.

The following summarizes the relative size of our consolidated joint ventures (including minority interests):

	Thirteen Weeks Ended June 27, 2004						Twenty-six Weeks Ended June 27, 2004
	Total Assets		Sales(1)		Pre-tax Income		Total Assets		Sales(1)		Pre-tax Income
	(In thousands)
Grolsch	$	33,236	$	28,799	$	3,783	$	33,236	$	41,108	$	5,679
RMBC	$	43,305	$	23,112	$	5,806	$	43,305	$	44,590	$	10,738
RMMC	$	83,326	$	59,365	$	2,499	$	83,326	$	102,485	$	1,979

(1): Substantially all such sales are made to the Company.

3. EQUITY INVESTMENTS

The following summarizes information regarding our other equity investments that we have determined are not required to be consolidated under FIN 46R:

Non-Majority-Owned Equity Investments:

	Thirteen Weeks Ended June 27, 2004					Twenty-six Weeks Ended June 27, 2004
	Total Assets		Company share of joint venture income (loss)			Total Assets		Company share of joint venture income (loss)
	(In thousands)
Molson USA, LLC	$	14,938	$	(633	)	$	14,938	$	(884	)
Tradeteam	$	116,353	$	1,741		$	116,353	$	1,031

Molson USA, LLC

In January 2001, we entered into a joint venture partnership agreement with Molson Inc. (Molson), and paid $65.0 million for a 49.9% interest in the joint venture. The joint venture, Molson USA, LLC, was formed to import, market, sell and distribute Molson's brands of beer in the United States. We account for this joint venture by using the equity method of accounting. We recognize our share of the joint venture results in the other income (expense), net, line in our Condensed Consolidated Statements of Income, given the immateriality of its results. We believe our maximum exposure to loss over the required ownership period to be $41 million. We have determined that, while Molson USA is a variable interest entity as defined by FIN 46R, we are not the primary beneficiary of the entity.

Tradeteam

Tradeteam was formed in 1995 by CBL (then Bass Brewers Limited) and Exel Logistics. CBL has a 49.9% interest in this joint venture. The joint venture operates a system of satellite warehouses and a transportation fleet for deliveries between CBL breweries and customers. Tradeteam also delivers products for other UK brewers. Our share of pre-tax joint venture results has been included in the other income (expense), net, line of our Condensed Consolidated Statements of Income given the immateriality of its results. We do not believe there is a significant exposure to loss in our current relationship over our expected ownership period. We have determined that Tradeteam is not a variable interest entity as defined in FIN 46R.

Majority-Owned, Non-Consolidated Equity Investment:

	Thirteen Weeks Ended June 27, 2004				Twenty-six Weeks Ended June 27, 2004
	Total Assets		Company share of partnership pre-tax income		Total Assets		Company share of partnership pre-tax income
	(In thousands)
Coors Canada	$	21,430	$	14,995	$	21,430	$	27,458

Coors Canada, Inc. (CCI), a wholly-owned subsidiary, formed a partnership, Coors Canada, with Molson to market and sell our products in Canada beginning in 1998. CCI and Molson have a 50.1% and 49.9% interest, respectively, in Coors Canada. Under the partnership agreement, Coors Canada is responsible for marketing our products in Canada, while the partnership contracts with Molson for brewing, distribution and sales of these brands. In December 2000, the partnership and licensing agreements between Molson and Coors were extended for an indefinite period and included the addition of Molson performance standards for the Coors brand. Coors Canada receives an amount

from Molson generally equal to net sales revenue generated from our brands less production, distribution, sales and overhead costs related to these sales. Our share of pre-tax income from this partnership is included in net sales in our Condensed Consolidated Statements of Income. We do not believe that there is a significant exposure to loss in our current relationship over the expected ownership period. Although we believe Coors Canada is a variable interest entity, we have determined that we are not the primary beneficiary of the entity.

4. OTHER COMPREHENSIVE INCOME

	Thirteen Weeks Ended					Twenty-six Weeks Ended
	June 27, 2004			June 29, 2003		June 27, 2004			June 29, 2003
	(In thousands)
Net income	$	72,036		$	76,342	$	76,876		$	77,148

Other comprehensive income:
Foreign currency translation adjustments, net of tax		6,974			22,665		49,387			53,397
Currency effect on minimum pension liability		(805	)		—		(4,251	)		—
Unrealized (loss) gain on derivative instruments, net of tax		(14,635	)		9,137		5,159			519
Reclassification adjustment -derivative instruments, net of tax		(980	)		455		(2,631	)		1,949

Comprehensive income	$	62,590		$	108,599	$	124,540		$	133,013

5. EARNINGS PER SHARE (EPS)

Basic and diluted net income per common share were determined using the calculations outlined below:

		Thirteen Weeks Ended				Twenty-six Weeks Ended
		June 27, 2004		June 29, 2003		June 27, 2004		June 29, 2003
		(In thousands, except per share amounts)
Net income available to common shareholders		$	72,036	$	76,342	$	76,876	$	77,148

Weighted average shares for basic EPS			37,160		36,319		36,911		36,318
Effect of dilutive securities:
	Stock options granted to employees		671		184		626		202
	Restricted shares subject to repurchase excluded from basic EPS		31		21		31		21

Weighted average shares for diluted EPS			37,862		36,524		37,568		36,541

Basic EPS		$	1.94	$	2.10	$	2.08	$	2.12

Diluted EPS		$	1.90	$	2.09	$	2.05	$	2.11

The dilutive effects of stock options and restrictive shares were determined by applying the treasury stock method, assuming we were to purchase common shares with the proceeds from stock option exercises. Anti-dilutive stock options totaling 1.3 million and 3.8 million in the thirteen weeks and 2.6 million and 1.8 million in the twenty-six weeks ended June 27, 2004 and June 29, 2003, respectively, were not included in our calculation because the stock options' exercise prices were greater than the average market price of the common shares.

6. BUSINESS SEGMENTS

The Americas segment is focused on the production, marketing, and sales of the Coors portfolio of brands in the United States and its territories, including the results of the RMMC and RMBC joint ventures consolidated in 2004 under FIN 46R. This segment also includes the Coors Light® business in Canada that is conducted through a joint venture with Molson, Coors Canada, and the sale of Molson products in the United States that is conducted through a joint venture, Molson USA. The Americas also include the small amount of volume that is sold outside of the United States and its territories and Europe.

The Europe segment consists of our production and sale of the CBL brands, principally in the United Kingdom but also in other parts of the world; our joint venture arrangement relating to the production and distribution of Grolsch in the United Kingdom and Republic of Ireland; (consolidated under FIN 46R in 2004) and our joint venture arrangement for the physical distribution of products throughout Great Britain (Tradeteam). It also includes the sale of Coors Fine Light Beer® in the United Kingdom and Coors Light in the Republic of Ireland.

No single customer accounted for more than 10% of our sales. Inter-segment revenues are insignificant.

Summarized financial information concerning our reportable segments is shown in the following table:

		Thirteen Weeks Ended						Twenty-six Weeks Ended
		June 27, 2004			June 29, 2003			June 27, 2004			June 29, 2003
		(In thousands)
Income Statement Information
*Americas*
	Net sales	$	679,385		$	692,033		$	1,219,178		$	1,218,789
	Income before income taxes, after minority interests		86,474			90,210			115,596			116,899
	*Europe*
	Net sales		471,309			408,343			855,027			709,728
	Income before income taxes, after minority interests		49,729			41,887			55,338			42,613
	*Total Operating Segments*
	Net sales from operating segments		1,150,694			1,100,376			2,074,205			1,928,517
	Income before income taxes, after minority interests		136,203			132,097			170,934			159,512
	Corporate unallocated expenses, after minority interests		(27,672	)		(29,203	)		(53,830	)		(55,358	)

	Total consolidated income before income taxes, after minority interests	$	108,531		$	102,894		$	117,104		$	104,154

Following is a reconciliation of amounts shown as income before income taxes, after minority interests, to income before income taxes and net income shown on the condensed consolidated

statements of income. Minority interests exist in 2004 due to the consolidation of certain variable interest entities as a result of the adoption of FIN 46R (Note 2).

	Thirteen Weeks Ended June 27, 2004										Thirteen Weeks Ended June 29, 2003
	Americas		Europe		Corporate			Total			Americas		Europe		Corporate			Total
	(In thousands)
Income before income taxes, after minority interests	$	86,474	$	49,729	$	(27,672	)	$	108,531		$	90,210	$	41,887	$	(29,203	)	$	102,894
Minority interests		4,276		1,477		(348	)		5,405			—		—		—			—

Income before income taxes		90,750		51,206		(28,020	)		113,936			90,210		41,887		(29,203	)		102,894
Income tax expense									(36,495	)									(26,552	)

Income before minority interests									77,441										76,342
Minority interests									(5,405	)									—

Net income								$	72,036									$	76,342

	Twenty-six Weeks Ended June 27, 2004										Twenty-six Weeks Ended June 29, 2003
	Americas		Europe		Corporate			Total			Americas		Europe		Corporate			Total
	(In thousands)
Income before income taxes, after minority interests	$	115,596	$	55,338	$	(53,830	)	$	117,104		$	116,899	$	42,613	$	(55,358	)	$	104,154
Minority interests		6,677		2,022		(788	)		7,911			—		—		—			—

Income before income taxes		122,273		57,360		(54,618	)		125,015			116,899	$	42,613	$	(55,358	)	$	104,154
Income tax expense									(40,228	)									(27,006	)

Income before minority interests									84,787										77,148
Minority interests									(7,911	)									—

Net income								$	76,876									$	77,148

7. CAPE HILL BREWERY SALE

We sold our Cape Hill brewery property in May 2004 for £26 million (approximately $46 million at current exchange rates), with £6 million payable to us in 2004 and £20 million due in 2005. We received an initial payment of £500 thousand at closing and expect the sale to result in a one-time pretax gain of £4 million (approximately $7 million). We recorded an insignificant portion of the ultimate gain in the second quarter of 2004 under the installment method. We anticipate recording the remaining gain on sale in the fourth quarter of 2004 after the remaining 2004 payment has been received.

In 2002, we recorded charges related to the closing of our Cape Hill brewery, which were included in our purchase of CBL. Closure of the Cape Hill brewery commenced in July 2002 with the shut down of the kegging line. All production ceased in December 2002, at which time the assets were reclassified as held-for-sale. No impairment was taken on the assets, as their market value exceeded their carrying value. The payment of severance and other termination benefits started in July 2002 and will be completed in December 2004. We will reduce goodwill for unpaid restructuring liabilities upon completion of sale recognition in 2004.

8. CONTAINER OUTSOURCING ARRANGEMENT

CBL outsourced the ownership, procurement and tracking of its approximately 1.2 million kegs and casks with TrenStar, Inc. in the second quarter of 2004. TrenStar acquired CBL's keg and cask inventory and will provide ongoing container management services for Coors in the United Kingdom, including installation of radio frequency identification tags on each container and the use of container tracking technology under a 15-year service agreement. We received a cash payment of approximately £28 million ($50 million at current exchange rates) for our UK keg and cask inventory. An insignificant loss was recognized on the sale.

9. GOODWILL AND OTHER INTANGIBLES

The following tables present details of our intangible assets as of June 27, 2004:

	Useful Life	Gross		Accumulated Amortization		Net
	(Years)	(In millions)
Intangible assets subject to amortization:
Brands	3-20	$	124.0	$	36.6	$	87.4
Distribution rights	2-10		36.6		12.1		24.5
Patents and technology and distribution channels	3-10		33.9		12.9		21.0
Other	5-34		16.7		7.7		9.0
Intangible assets not subject to amortization:
Brands	Indefinite		366.1		—		366.1
Pension	N/A		40.7		—		40.7
Other	Indefinite		27.8		—		27.8

Total		$	645.8	$	69.3	$	576.5

Based on average foreign exchange rates for the thirteen weeks ended June 27, 2004, the estimated future amortization expense of intangible assets is as follows:

Fiscal Year	Amount
	(In millions)
2004—Remaining	$	11.8
2005	$	18.4
2006	$	17.5
2007	$	13.2
2008	$	12.7

Amortization expense of intangible assets was $11.8 million and $13.0 million for the twenty-six weeks ended June 27, 2004 and June 29, 2003, respectively.

As of June 27, 2004, goodwill was allocated between our reportable segments as follows:

Segment	Amount
	(In millions)
Americas	$	152
Europe		668

Total	$	820

Goodwill balances fluctuated from December 28, 2003, solely due to changes in currency rates.

Goodwill related to our joint venture investment with Molson in the United States was evaluated during the third quarter of 2003 under Accounting Principles Board Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock, (APB No. 18), and found not to be impaired. Since our acquisition of the joint venture interest, the venture has seen significant volume gains, but its operating results have not met our original expectations. Our partners and we continue to evaluate and refine the venture's strategy for 2004 and beyond, along with the implications that future assumptions for volume, costs and profit may have on our investment valuation. This goodwill is included in investments in joint ventures in the accompanying Condensed Consolidated Balance Sheet.

10. DEBT

Our total long-term borrowings as of June 27, 2004, and December 28, 2003, were composed of the following:

		As of
		June 27, 2004		December 28, 2003
		(In thousands)
Short-term borrowings(1)		$	—	$	21,309
Senior private placement notes		$	20,000	$	20,000
6³/8% Senior notes due 2012			850,766		854,043
Senior Credit Facility:(2)			—		86,000
Commercial paper(3)			206,313		249,645
Other notes payable(4)			65,058		20,006

	Total long-term debt	$	1,142,137	$	1,229,694
	Total debt	$	1,142,137	$	1,251,003

Current portion of long-term debt		$	210,515	$	69,856

(1): Our short-term borrowings consist of various uncommitted lines of credit. At June 27, 2004, we had two USD uncommitted lines of credit totaling $50 million. We had $7.0 million outstanding under these lines of credit as of December 28, 2003, and no borrowings outstanding under these lines as of June 27, 2004. Amounts outstanding under the lines of credit bear interest at a rate stated by the lenders. The interest rate at December 28, 2003, was 1.80%. We also had three uncommitted lines of credit totaling £ 30.0 million, or approximately $54.8 million based on foreign exchange rates at June 27, 2004. These lines of credit bear interest at a floating rate determined by the lenders. At June 27, 2004, there was no balance outstanding and at December 28, 2003, the balance outstanding totaled $11.9 million. The interest rate at December 28, 2003 was 4.30%. In addition, we have two uncommitted lines of credit totaling 900 million Japanese yen, or approximately $8.4 million, at June 27, 2004. Interest rates are below 1% and amounts outstanding totaled $2.4 million at December 28, 2003. There was no balance outstanding at June 27, 2004.
(2): At December 28, 2003, we had $86.0 million outstanding in an unsecured senior credit facility consisting of a US dollar-denominated amortizing term loan. We paid the outstanding balance off in full during the first quarter of 2004. In connection with the repayments on our term loan, we accelerated the amortization of fees associated with the loan, resulting in a $0.4 million charge to interest expense during the first quarter of 2004.
(3): In June 2003, we issued approximately $300 million in commercial paper. At June 27, 2004, and December 28, 2003, we had $206 million and $250 million outstanding, respectively. All of our commercial paper balance is classified as short-term as of June 27, 2004, as our intent is to repay the entire balance in the next twelve months. As of June 27, 2004, and December 28, 2003, the interest rates on our commercial paper borrowings ranged from 1.10% to 1.58%, with a weighted average of 1.33%; and from 1.24% to 1.27%, with a weighted average of 1.255%, respectively. As of June 27, 2004, $206 million of our total $500 million unsecured committed credit arrangement was being used as a backstop for our commercial paper program. This line of credit has a five-year term expiring 2007.
(4): Our other notes payable consist of a CBL note payable totaling approximately $20 million and denominated in Euros that existed at the time of the CBL acquisition; and a note payable totaling approximately $45 million issued by our RMMC joint venture (See Note 2). The CBL note bears interest at 5.39% and matures in October 2005. The RMMC note bears interest at 7.20% and matures in December 2013.

11. EMPLOYEE RETIREMENT PLANS

We implemented FASB Statement No. 132 (SFAS 132) Employers' Disclosures about Pensions and Other Postretirement Benefits (Revised 2003) in the fourth quarter of 2003 and incorporated its changes into our 2003 Annual Report on Form 10-K. SFAS 132 does not change the accounting and measurement for pensions and other postretirement benefits. It does add new disclosures for the footnotes to the financial statements, including quarterly reporting on Form 10-Q. We are required to include the following disclosures regarding our retirement plan benefit expenses:

		Thirteen Weeks Ended:
		June 27, 2004									June 29, 2003
		US Plans			UK Plan			Total			US Plans			UK Plan			Total
		(In thousands)
Defined Benefit Plans
	Service cost	$	5,024		$	8,358		$	13,382		$	4,603		$	7,178		$	11,781
	Interest cost		12,962			24,824			37,786			12,210			20,678			32,888
	Expected return on plan assets		(13,104	)		(30,052	)		(43,156	)		(12,121	)		(24,691	)		(36,812	)
	Amortization of prior service cost		1,464			—			1,464			1,470			—			1,470
	Amortization of transition obligation		60			—			60			60			—			60
	Amortization of net loss		3,487			1,185			4,672			2,279			—			2,279
	Less expected participant contributions		—			(2,297	)		(2,297	)		—			(1,998	)		(1,998	)

	Net periodic pension cost	$	9,893		$	2,018		$	11,911		$	8,501		$	1,167		$	9,668

Other Postretirement Benefits
	Service cost—benefits earned during the period	$	499		$	—		$	499		$	401		$	—		$	401
	Interest cost on projected benefit obligation		1,564			—			1,564			1,689			—			1,689
	Amortization of prior service cost		(5	)		—			(5	)		(5	)		—			(5	)
	Recognized net actuarial loss		192			—			192			91			—			91

	Net periodic post-retirement benefit cost	$	2,250		$	—		$	2,250		$	2,176		$	—		$	2,176

		Twenty-six Weeks Ended:
		June 27, 2004									June 29, 2003
		US Plans			UK Plan			Total			US Plans			UK Plan			Total
		(In thousands)
Defined Benefit Plans
	Service cost	$	10,301		$	16,846		$	27,147		$	9,144		$	14,276		$	23,420
	Interest cost		26,317			50,036			76,353			24,259			41,126			65,385
	Expected return on plan assets		(26,617	)		(60,574	)		(87,191	)		(24,068	)		(49,107	)		(73,175	)
	Amortization of prior service cost		2,972			—			2,972			2,921			—			2,921
	Amortization of transition obligation		119			—			119			123			—			123
	Amortization of net loss		7,080			2,388			9,468			4,526			—			4,526
	Less expected participant contributions		—			(4,630	)		(4,630	)		—			(3,974	)		(3,974	)

	Net periodic pension cost	$	20,172		$	4,066		$	24,238		$	16,905		$	2,321		$	19,226

Other Postretirement Benefits
	Service cost—benefits earned during the period	$	998		$	—		$	998		$	802		$	—		$	802
	Interest cost on projected benefit obligation		3,128			—			3,128			3,378			—			3,378
	Amortization of prior service cost		(10	)		—			(10	)		(10	)		—			(10	)
	Recognized net actuarial loss		384			—			384			182			—			182

	Net periodic post-retirement benefit cost	$	4,500		$	—		$	4,500		$	4,352		$	—		$	4,352

12. CHANGES IN CAPITAL STOCK AND PAID-IN CAPITAL

The following summarizes the changes in our capital stock and paid-in capital accounts during the first six months of 2004:

	Shares of common stock issued		Common stock issued
	Shares of common stock issued		Common stock issued				Paid-in Capital
	Class A	Class B	Class A		Class B		Paid-in Capital
	(In thousands)
Balances at December 28, 2003	1,260	35,154	$	13	$	352	$	32,049
Shares issued under stock plans	—	852		—		8		44,047
Tax benefit from shares issued under stock plans	—	—		—		—		4,402

Balances at June 27, 2004	1,260	36,006	$	13	$	360	$	80,498

13. SUBSEQUENT EVENTS

Molson Coors Merger Agreement

On July 22, 2004, we announced that we had entered into a definitive agreement with Molson Inc. to combine in a merger of equals that will result in the world's fifth-largest brewing company by volume, with estimated combined beer sales of 51 million US barrels annually. The proposed merger is subject to approval by shareholders of both companies, the Supreme Court of Quebec, appropriate regulators and other authorities, as well as customary closing conditions.

Interest Rate Swap

On July 1, 2004, we entered into interest rate swap agreements related to $125 million of our 6³/8% senior notes due 2012. The interest rate swaps converted $125 million notional amount from fixed rates to floating rates and mature in 2012. We will receive fixed US dollar interest payments semi-annually at a rate of 6³/8% per annum and pay a rate to our counterparty based on a credit spread of 1.623% plus

the six-month LIBOR rate, thereby exchanging a fixed interest obligation for a floating interest rate obligation. There was no exchange of principal at the inception of the swap. We designated the interest rate swap as a fair value hedge of the changes in the fair value of $125 million of our 6³/8% senior notes due 2012 attributable to changes in the LIBOR swap rates.

CBL Purchase Price Adjustment

In July 2004, we received £14 million (approximately $26 million at current exchange rates) from Interbrew, related to representations made by Interbrew when CBL was purchased in 2002. We are evaluating the accounting required in the third quarter related to our purchase price accounting at the time of the CBL acquisition.

Pub Dispense Equipment Outsourcing Agreement

CBL reached an agreement with Service Dispense Equipment Ltd. (SDE) to outsource the management and servicing of CBL's on-trade dispense equipment on August 2, 2004. Under the technical services agreement, which includes a ten year notice to terminate, SDE will acquire CBL's on-trade beverage dispense equipment for approximately £53 million in cash (approximately $95 million at current exchange rates) and provide ongoing maintenance and procurement services on such equipment in the United Kingdom. We expect to record a pretax loss of approximately £12 million (approximately $22 million at current exchange rates) from the sale of the assets.

CBL, Scottish Courage and Carlsberg UK will each own an equal voting interest in SDE, which will own and service the dispense equipment of all three brewers. SDE will contract with a separate business, Innserve Ltd., to perform day-to-day technical services, including on-trade cellar services, maintenance and installation of fonts, lines, coolers and other equipment used to dispense on-trade beverages.

The agreement is subject to the approval of the Office of Fair Trading (OFT) in the United Kingdom. If the agreement is approved by the OFT, the company expects the majority of its current technical services staff of 320 employees to join the workforce of Innserve Ltd. and the new technical services business to be fully operational by early 2005.

14. CONTINGENCIES

Environmental

When we determine that it is probable that a liability for environmental matters or other legal actions exists and the amount of the loss is reasonably estimable, an estimate of the future costs are recorded as a liability in the financial statements. Costs are capitalized if they 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. Other environmental costs are expensed when incurred.

Lowry Superfund Site

We are 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 is managed by Waste Management of Colorado, Inc. (Waste Management). In 1990, we recorded a pretax charge of $30 million, a portion of which was put into a trust in 1993 as part of a settlement with Denver and Waste Management regarding the then outstanding litigation. Our settlement was based on an assumed cost of $120 million (in 1992 adjusted dollars). We are obligated to pay a portion of future costs in excess of that amount.

In January 2004, Waste Management provided us with updated annual cost estimates through 2032. We reviewed these cost estimates, in conjunction with a third-party expert, in the assessment of our

accrual related to this issue. We used certain assumptions that differ from Waste Management's estimates to assess our expected liability. Our expected liability is based on our and the third-party's best estimates available.

The assumptions used are as follows:

•: trust management costs will be accrued as incurred,
•: income taxes, which we believe not to be an included cost, are not included in the assumptions,
•: a 2% inflation rate for future costs, and
•: certain operations and maintenance costs were discounted using a 4.98% risk-free rate of return.

Based on these assumptions, the present value and gross amount of the discounted costs are approximately $1.4 million and $3.3 million, respectively. We did not assume any future recoveries from insurance companies in the estimate of our liability. We believe that the existing accrual is adequate as of June 27, 2004.

Considering that the estimates extend through the year 2032 and the related uncertainties at the site, including what additional remedial actions may be required by the EPA, new technologies, and what costs are included in the determination of when the $120 million threshold is reached, the estimate of our liability may change as facts further develop. We cannot predict the amount of any such change, but additional accruals in the future are possible.

Other Environmental

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.

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.

While we cannot predict the eventual aggregate cost for 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 and Other Disputes

Coors and many other brewers and distilled spirits manufacturers have been sued in several courts regarding advertising practices and underage consumption. The suits have all been brought by the same law firm and allege that each defendant intentionally marketed its products to "children and other underage consumers." In essence, each suit seeks, on behalf of an undefined class of parents and guardians, an injunction and unspecified money damages. We will vigorously defend this litigation and it is not possible at this time to estimate the possible loss or range of loss, if any, in these lawsuits.

We are involved in other disputes and legal actions arising in the ordinary course of our business. While it is not feasible to predict or determine the outcome of these proceedings, in our opinion, based on a review with legal counsel, none of these disputes and legal actions is expected to have a material impact on our consolidated financial position, results of operations or cash flows. However, litigation is

subject to inherent uncertainties, and an adverse result in these or other matters, including the above-described advertising practices case, may arise from time to time that may harm our business.

Golden Brewery Accident

In February 2004, we experienced an accident at our Golden brewery operation that resulted in injuries to three employees, extensive property damage, and a shutdown of the brewery operation for a short amount of time. We maintain insurance coverage for these types of events; including coverage for costs we incurred to avoid any business interruption. We recorded a loss of $2.0 million during the first quarter of 2004 for cleanup, repairs, and losses from the impairment of long-lived assets. We continued our cleanup and repair efforts in the second quarter of 2004. Our costs and losses are fully insured, but we anticipate that our full-year 2004 financial results will be negatively impacted by approximately $2.0 million, representing our insurance deductibles. These costs will be offset in the Condensed Consolidated Statements of Income by gains associated with insurance recoveries for costs that are being capitalized to property, plant and equipment. FASB Interpretation No. 30, Accounting for Involuntary Conversions of Nonmonetary Assets to Monetary Assets, clarifies that if insurance reimbursements are collected for costs that were capitalized to the balance sheet, those reimbursements are to be treated as gains, as opposed to reducing that book basis of the related assets. We anticipate that we will recognize gains in the current year of $2.0 million to $4.0 million from the insurance proceeds we receive for costs incurred for capital assets purchased as a part of the project to restore the damaged area.

15. SUPPLEMENTAL GUARANTOR INFORMATION

On May 7, 2002, a wholly-owned subsidiary of ours, CBC (Issuer), completed a private placement of $850 million principal amount of 6³/8% Senior notes due 2012. The notes were issued with registration rights and were guaranteed on a senior and unsecured basis by Adolph Coors Company (Parent Guarantor) and certain domestic subsidiaries (Subsidiary Guarantors). The guarantees are full and unconditional and joint and several. A significant amount of the Issuer's income and cash flow is generated by its subsidiaries. As a result, funds necessary to meet the Issuer's debt service obligations are provided in large part by distributions or advances from its subsidiaries. Under certain circumstances, contractual and legal restrictions, as well as our financial condition and operating requirements and those of certain domestic subsidiaries, could limit the Issuer's ability to obtain cash for the purpose of meeting its debt service obligation including the payment of principal and interest on the notes.

Simultaneously with the private placement, we entered into a registration rights agreement pursuant to which we registered the exchange of the notes for substantially identical notes. The exchange of all the notes was completed on September 16, 2002.

The following information sets forth our Condensed Consolidating Balance Sheets as of June 27, 2004, and December 28, 2003, and the Condensed Consolidating Statements of Income for the thirteen and twenty-six weeks ended June 27, 2004, and June 29, 2003, and the Condensed Consolidating Statements of Cash Flows for the twenty-six weeks ended June 27, 2004, and June 29, 2003. Investments in our subsidiaries are accounted for on the equity method; accordingly, entries necessary to consolidate the Parent Guarantor, Issuer, and all of its subsidiaries are reflected in the eliminations column. Separate complete financial statements of the Issuer and the Subsidiary Guarantors would not provide additional material information that would be useful in assessing their financial composition.

ADOLPH COORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS ENDED JUNE 27, 2004 (IN THOUSANDS, UNAUDITED)

		Parent Guarantor			Issuer of Notes			Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
Sales		$	—		$	696,849		$	36,959		$	816,517		$	—		$	1,550,325
Excise taxes			—			(107,995	)		(519	)		(291,117	)		—			(399,631	)

	Net sales		—			588,854			36,440			525,400			—			1,150,694
Cost of goods sold			—			(353,088	)		(28,142	)		(321,794	)		—			(703,024	)
Equity in subsidiary earnings			65,601			59,543			—			—			(125,144	)		—

	Gross profit		65,601			295,309			8,298			203,606			(125,144	)		447,670
Marketing, general and administrative			(1,531	)		(188,696	)		(7,219	)		(124,616	)		—			(322,062	)

	Operating income		64,070			106,613			1,079			78,990			(125,144	)		125,608
Interest income			144			4			94			4,263			—			4,505
Interest income (expense)			11,201			(12,354	)		4,369			(20,746	)		—			(17,530	)
Other income (expense)			(207	)		(25,652	)		51,784			(24,572	)		—			1,353

	Income before income taxes		75,208			68,611			57,326			37,935			(125,144	)		113,936
Income tax expense			(3,172	)		(2,999	)		(18,943	)		(11,381	)		—			(36,495	)

Income before minority interest			72,036			65,612			38,383			26,554			(125,144	)		77,441
Minority interest			—			—			—			(5,405	)		—			(5,405	)

	Net income	$	72,036		$	65,612		$	38,383		$	21,149		$	(125,144	)	$	72,036

ADOLPH COORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS ENDED JUNE 29, 2003 (IN THOUSANDS, UNAUDITED)

		Parent Guarantor			Issuer of Notes			Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
Sales		$	—		$	717,238		$	35,748		$	716,385		$	—		$	1,469,371
Excise taxes			—			(113,528	)		(223	)		(255,244	)		—			(368,995	)

	Net sales		—			603,710			35,525			461,141			—			1,100,376
Cost of goods sold			—			(354,771	)		(28,579	)		(299,737	)		—			(683,087	)
Equity in subsidiary earnings			67,917			36,339			—			—			(104,256	)		—

	Gross profit		67,917			285,278			6,946			161,404			(104,256	)		417,289
Marketing, general and administrative expenses			(123	)		(191,018	)		(7,377	)		(101,294	)		—			(299,812	)

	Operating income (loss)		67,794			94,260			(431	)		60,110			(104,256	)		117,477
Interest income			197			—			61			4,945			—			5,203
Interest income (expense)			11,156			(16,384	)		764			(18,230	)		—			(22,694	)
Other (expense) income			(90	)		31			23,520			(20,553	)		—			2,908

Income before income taxes			79,057			77,907			23,914			26,272			(104,256	)		102,894
Income tax expense			(2,715	)		(10,128	)		(5,827	)		(7,882	)		—			(26,552	)

	Net income	$	76,342		$	67,779		$	18,087		$	18,390		$	(104,256	)	$	76,342

ADOLPH COORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE TWENTY-SIX WEEKS ENDED JUNE 27, 2004 (IN THOUSANDS, UNAUDITED)

		Parent Guarantor			Issuer of Notes			Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
Sales		$	—		$	1,247,499		$	67,592		$	1,469,922		$	—		$	2,785,013
Excise taxes			—			(194,742	)		(875	)		(515,191	)		—			(710,808	)

	Net sales		—			1,052,757			66,717			954,731			—			2,074,205
Cost of goods sold			—			(652,370	)		(52,123	)		(610,275	)		—			(1,314,768	)
Equity in subsidiary earnings			63,044			80,429									(143,473	)

	Gross profit		63,044			480,816			14,594			344,456			(143,473	)		759,437
Marketing, general and administrative expenses			(1,664	)		(353,955	)		(15,117	)		(235,103	)		—			(605,839	)

	Operating income (loss)		61,380			126,861			(523	)		109,353			(143,473	)		153,598
Interest income			238			6			128			8,818			—			9,190
Interest income (expense)			22,212			(26,687	)		8,914			(42,192	)		—			(37,753	)
Other (expense) income			(310	)		(45,224	)		93,510			(47,996	)		—			(20	)

	Income before income taxes		83,520			54,956			102,029			27,983			(143,473	)		125,015
Income tax expense			(6,644	)		8,036			(33,225	)		(8,395	)		—			(40,228	)

	Income before minority interest		76,876			62,992			68,804			19,588			(143,473	)		84,787
Minority interest			—			—			—			(7,911	)		—			(7,911	)

	Net income	$	76,876		$	62,992		$	68,804		$	11,677		$	(143,473	)	$	76,876

ADOLPH COORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE TWENTY-SIX WEEKS ENDED JUNE 29, 2003 (IN THOUSANDS, UNAUDITED)

		Parent Guarantor			Issuer of Notes			Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
Sales		$	—		$	1,275,747		$	49,500		$	1,244,979		$	—		$	2,570,226
Excise taxes			—			(200,352	)		(439	)		(440,918	)		—			(641,709	)

	Net sales		—			1,075,395			49,061			804,061			—			1,928,517
Cost of goods sold			—			(671,715	)		(39,020	)		(531,826	)		—			(1,242,561	)
Equity in subsidiary earnings			60,640			33,822			—			—			(94,462	)		—

	Gross profit		60,640			437,502			10,041			272,235			(94,462	)		685,956
Marketing, general and administrative expenses			(241	)		(345,887	)		(14,091	)		(193,903	)		—			(554,122	)

	Operating income (loss)		60,399			91,615			(4,050	)		78,332			(94,462	)		131,834
Interest income			366			—			61			9,435			—			9,862
Interest income (expense)			22,727			(30,283	)		426			(36,704	)		—			(43,834	)
Other (expense) income			(90	)		7,175			39,705			(40,498	)		—			6,292

Income before income taxes			83,402			68,507			36,142			10,565			(94,462	)		104,154
Income tax expense			(6,254	)		(8,032	)		(9,550	)		(3,170	)		—			(27,006	)

	Net income	$	77,148		$	60,475		$	26,592		$	7,395		$	(94,462	)	$	77,148

ADOLPH COORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF JUNE 27, 2004
(In thousands, unaudited)

			Parent Guarantor		Issuer of Notes		Subsidiary Guarantors			Subsidiary Non Guarantors		Eliminations			Consolidated
Assets
Current assets:
	Cash and cash equivalents		$	110	$	1,751	$	3,153		$	31,229	$	—		$	36,243
	Accounts receivable, net			—		116,065		11,965			522,404		—			650,434
	Other receivables, net			—		39,482		3,738			59,968		—			103,188
	Inventories			—		110,915		7,941			105,846		—			224,702
	Current deferred tax asset			—		8,416		(62	)		3,465		—			11,819
	Other current assets			—		54,373		331			47,455		—			102,159

		Total current assets		110		331,002		27,066			770,367		—			1,128,545
Properties, net				—		786,465		19,839			604,705		—			1,411,009
Goodwill				—		148,519		(154,789	)		827,254		—			820,984
Other intangibles, net				—		66,364		10,426			499,757		—			576,547
Investments in joint ventures				—		64,671		—			80,320		—			144,991
Net investment in and advances to subs				1,457,182		1,875,772		—			—		(3,332,954	)		—
Long-term deferred tax asset				18,406		10,753		131,511			51,343		—			212,013
Other non-current assets				5,649		79,700		2,648			149,871		—			237,868

Total assets			$	1,481,347	$	3,363,246	$	36,701		$	2,983,617	$	(3,332,954	)	$	4,531,957

Liabilities and shareholder's equity
Current liabilities:
	Accounts payable		$	—	$	148,420	$	3,342		$	153,069	$	—		$	304,831
	Accrued salaries and vacations			1,410		37,213		1,148			8,381		—			48,152
	Taxes, other than income			—		29,350		606			190,925		—			220,881
	Accrued expenses and other liabilities			26,556		106,183		2,351			256,460		—			391,550
	Current debt			—		205,970		—			4,545		—			210,515

		Total current liabilities		27,966		527,136		7,447			613,380		—			1,175,929
Long-term debt				20,000		851,109		—			60,513		—			931,622
Deferred tax liability				—		—		—			201,332		—			201,332
Other long-term liabilities				7,967		529,136		977			229,821		—			767,901

	Total liabilities			55,933		1,907,381		8,424			1,105,046		—			3,076,784

Minority interest				—		—		—			29,759		—			29,759
	Total shareholders' equity			1,425,414		1,455,865		28,277			1,848,812		(3,332,954	)		1,425,414

Total liabilities and shareholders' equity			$	1,481,347	$	3,363,246	$	36,701		$	2,983,617	$	(3,332,954	)	$	4,531,957

ADOLPH COORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 28, 2003
(In thousands, unaudited)

			Parent Guarantor		Issuer of Notes			Subsidiary Guarantors			Subsidiary Non Guarantors		Eliminations			Consolidated
Assets
Current assets:
	Cash and cash equivalents		$	454	$	802		$	2,849		$	15,335	$	—		$	19,440
	Accounts receivable, net			35		45,018			8,990			564,010		—			618,053
	Other receivables, net			—		66,483			2,220			64,316		—			133,019
	Current deferred tax asset			—		9,417			(61	)		3,463		—			12,819
	Total inventories			—		109,113			5,619			94,753		—			209,485
	Other current assets			—		30,626			484			54,922		—			86,032

		Total current assets		489		261,459			20,101			796,799		—			1,078,848
Properties, at cost and net				—		813,996			18,919			617,870		—			1,450,785
Goodwill				—		151,868			(149,974	)		794,526		—			796,420
Other intangibles, net				—		66,913			82,782			402,417		—			552,112
Investments in joint ventures				—		95,392			—			98,190		—			193,582
Net investment in and advances to subs				1,285,272		1,851,260			—			—		(3,136,532	)		—
Deferred tax asset				18,392		(125	)		135,047			51,490		—			204,804
Other non-current assets				5,318		78,698			2,648			123,011		—			209,675

Total assets			$	1,309,471	$	3,319,461		$	109,523		$	2,884,303	$	(3,136,532	)	$	4,486,226

Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable		$	—	$	179,300		$	1,091		$	215,813	$	—		$	396,204
	Accrued salaries and vacations			—		47,640			1,203			8,750		—			57,593
	Taxes, other than income taxes			—		27,704			715			184,062		—			212,481
	Accrued expenses and other liabilities			14,739		103,754			3,456			254,330		—			376,279
	Current debt			—		76,855			—			14,310		—			91,165

		Total current liabilities		14,739		435,253			6,465			677,265		—			1,133,722
Long-term debt				20,000		1,119,832			(865	)		20,871		—			1,159,838
Deferred tax liability				—		—			—			195,523		—			195,523
Other long-term liabilities				7,356		480,401			840			241,170		—			729,767

Total liabilities				42,095		2,035,486			6,440			1,134,829		—			3,218,850

Total shareholders' equity				1,267,376		1,283,975			103,083			1,749,474		(3,136,532	)		1,267,376

Total liabilities and shareholders' equity			$	1,309,471	$	3,319,461		$	109,523		$	2,884,303	$	(3,136,532	)	$	4,486,226

ADOLPH COORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED JUNE 27, 2004
(In thousands, unaudited)

		Parent Guarantor			Issuer of Notes			Subsidiary Guarantors			Subsidiary Non Guarantors			Consolidated
Net cash provided by (used in) operating activities		$	13,907		$	(14,275	)	$	62,693		$	92,226		$	154,551

CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital expenditures		—			(35,037	)		(1,775	)		(38,423	)		(75,235	)
	Proceeds from sales of assets		—			649			387			45,282			46,318
	Investment in Molson USA, LLC		—			(998	)		—			—			(998	)
	Cash recognized on initial consolidation of joint ventures		—			—			—			20,840			20,840
	Other		—			—			(86	)		—			(86	)

Net cash (used in) provided by investing activities			—			(35,386	)		(1,474	)		27,699			(9,161	)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Issuance of stock under stock plans		44,047			—			—			—			44,047
	Dividends paid		(15,178	)		—			—			—			(15,178	)
	Net payments on short-term borrowings		—			(7,000	)		—			(14,314	)		(21,314	)
	Net payments on commercial paper		—			(43,458	)		—			—			(43,458	)
	Payments on debt and capital lease obligations		—			(86,572	)		—			(1,651	)		(88,223	)
	Dividends paid to minority interest holders		—			—			—			(5,748	)		(5,748	)
	Change in overdraft balances andother		—			(467	)		—			3			(464	)
	Net activity in investment and advances (to) from subsidiaries		(43,120	)		188,107			(61,175	)		(83,812	)		—

Net cash (used in) provided by financing activities			(14,251	)		50,610			(61,175	)		(105,522	)		(130,338	)

CASH AND CASH EQUIVALENTS:
	Net (decrease) increase in cash and cash equivalents		(344	)		949			44			14,403			15,052
	Effect of exchange rate changes on cash and cash equivalents		—			—			260			1,491			1,751
Balance at beginning of year			454			802			2,849			15,335			19,440

Balance at end of quarter		$	110		$	1,751		$	3,153		$	31,229		$	36,243

ADOLPH COORS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED JUNE 29, 2003
(In thousands, unaudited)

		Parent Guarantor			Issuer of Notes			Subsidiary Guarantors			Subsidiary Non Guarantors			Consolidated
Net cash provided by operating activities		$	10,275		$	69,585		$	24,270		$	57,374		$	161,504

CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital expenditures		—			(42,342	)		(797	)		(64,699	)		(107,838	)
	Proceeds from sales of assets		—			303			8,588			3,637			12,528
	Investment in Molson USA, LLC		—			(2,745	)		—			—			(2,745	)
	Other		—			(630	)		—			—			(630	)

Net cash (used in) provided by investing activities			—			(45,414	)		7,791			(61,062	)		(98,685	)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Issuance of stock under stock plans		113			—			—			—			113
	Dividends paid		(14,901	)		—			—			—			(14,901	)
	Net proceeds from (payments on) short-term borrowings		—			10,200			—			(75,587	)		(65,387	)
	Net proceeds from commercial paper		—			299,556			—			—			299,556
	Payments on debt and capital lease obligations		—			(312,482	)		—			—			(312,482	)
	Change in overdraft balances		—			(16,280	)		—			—			(16,280	)
	Net activity in investment and advances from (to) subsidiaries		4,652			(3,191	)		(30,496	)		29,035			—

Net cash (used in) financing activities			(10,136	)		(22,197	)		(30,496	)		(46,552	)		(109,381	)

CASH AND CASH EQUIVALENTS:
	Net increase (decrease) in cash and cash equivalents		139			1,974			1,565			(50,240	)		(46,562	)
	Effect of exchange rate changes on cash and cash equivalents		—			—			196			(36	)		160
Balance at beginning of year			161			499			634			57,873			59,167

Balance at end of quarter		$	300		$	2,473		$	2,395		$	7,597		$	12,765

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Summary

Overall, our second quarter results showed improving trends in several key areas of the business, but a few, largely temporary, factors negatively impacted our overall results. Improved pricing in our major markets, solid margin and profit growth in the United Kingdom, continued strong performance of our Coors Light business in Canada, and favorable foreign exchange rates drove higher operating income in the quarter. These positive factors were partially offset by the negative impacts of US distributor inventory dynamics and higher logistics-related costs in our Americas business.

In the Americas, while our sales to retail declined slightly in the first half of the year, our sales to wholesalers declined 5.2% in the second quarter and 3.0% in the first half of the year, due to a significant year-over-year shift in distributor inventory patterns. US retail volume declines were focused in select markets—particularly in Pennsylvania and Texas—where we face unique local issues. Sales to retail grew during the quarter in five of our seven largest states, including California and New Jersey, where trends rebounded from declines early in the year.

In our Europe segment, volume growth in the second quarter was challenged by the lapping of heavy off-trade price discounting last year, along with a retailer inventory load-in during the first quarter this year ahead of a U.K excise tax increase. Nevertheless, we grew volume during the quarter, led by high-single-digit growth of Carling®, the number-one selling UK beer brand.

In addition, our consolidated earnings per share were negatively impacted by a higher tax rate this year versus a one-time reduction in our effective tax rate last year, as well as higher diluted shares outstanding this year.

Results of Operations

This discussion summarizes the significant factors affecting our consolidated results of operations, liquidity, and capital resources for the thirteen and twenty-six week periods ended June 27, 2004, and June 29, 2003, respectively, and should be read in conjunction with the financial statements and notes thereto included elsewhere in this report, as well as our Annual Report on Form 10-K for the year ended December 28, 2003. Our results in the first half of 2004 are affected by the adoption of FIN 46R, which required consolidation of some of our joint ventures. (See Note 2 in the accompanying financial statements.)

THE AMERICAS SEGMENT RESULTS OF OPERATIONS

The Americas segment is focused on the production, marketing, and sales of the Coors portfolio of brands in the United States and its territories, including the results of the RMMC and RMBC joint ventures consolidated in 2004 under FIN 46R. This segment also includes the Coors Light business in Canada that is conducted through a partnership with Molson, Coors Canada, and the sale of Molson products in the United States that is conducted through a joint venture, Molson USA. The Americas also include the small amount of Coors brand volume that is sold outside of the United States and its territories and Europe. During the second quarter of 2004, Cerveceria Cuauhtemoc Moctezuma, S.A.

de C.V., a subsidiary of FEMSA Cerveza, was appointed the sole and exclusive importer, marketer, seller and distributor of Coors Light in Mexico.

	Thirteen Weeks Ended								Twenty-six Weeks Ended
	June 27, 2004			June 29, 2003			% Change		June 27, 2004			June 29, 2003			% Change
	(In thousands, except percentages) (Unaudited)
Barrels of beer and other beverages sold		6,085			6,419		(5.2	)%		10,981			11,324		(3.0	)%

Net sales	$	679,385		$	692,033		(1.8	)%	$	1,219,178		$	1,218,789		—
Cost of goods sold		(389,937	)		(401,512	)	(2.9	)%		(724,422	)		(739,102	)	(2.0	)%

Gross profit		289,448			290,521		(0.4	)%		494,756			479,687		3.1	%
Marketing, general and administrative expenses		(199,791	)		(201,106	)	(0.7	)%		(374,820	)		(366,245	)	2.3	%

Operating income		89,657			89,415		0.3	%		119,936			113,442		5.7	%
Other income, net(1)		1,093			795		37.5	%		2,337			3,457		(32.4	)%

Income before income taxes(2)	$	90,750		$	90,210		0.6	%	$	122,273		$	116,899		4.6	%

(1): Other income, net consists primarily of our equity share of Molson USA losses and royalties earned on mineral leases in 2004. In 2003, other income, net, also includes a gain from the sale of a warehouse.
(2): Income before income taxes in 2004 includes $4,276 and $6,677 for the thirteen and twenty-six weeks ended June 27, 2004, respectively, and represents the minority owners' share of income attributable to the RMMC and RMBC joint ventures.

Foreign Currency Impact on 2004 Results

In the first half of 2004, our Americas segment benefited from a 6.8% year-over-year increase in the value of the Canadian dollar (CAD) against the US dollar. In the second quarter of 2004, the increase was 2.6%. As a result of this exchange-rate fluctuation, income before income taxes deriving from the Coors Canada partnership is higher by approximately $1.8 million year-to-date and approximately $0.3 million for the quarter.

Net sales and volume

For the thirteen weeks ended June 27, 2004, net sales in the Americas totaled $679 million, 1.8% lower than the same period in 2003. For the twenty-six weeks ended June 27, 2004, net sales in the Americas were flat against the comparable period in the prior year. Barrel sales were 5.2% and 3.0% lower quarter-over-quarter and year-over-year, respectively. For the first half of 2004, sales to retail have declined less than 1%. The 5.2% decline in sales to wholesalers during the second quarter of 2004, compared to the second quarter of 2003, was due primarily to a 300,000-barrel swing in distributor inventory patterns. Our distributors started the second quarter of 2004 approximately 150,000 barrels higher than a year earlier, and they ended the quarter approximately 150,000 barrels lower than a year ago. This year-over-year inventory shift impacted second quarter Americas results by approximately $15 million through lower sales and fixed-cost inefficiency. Volume has been the primary challenge to sales revenue and profit growth in 2004. We have introduced new products to meet the demand for low-carbohydrate beers. Our net sales per barrel have increased 3.6% in the second quarter of 2004 and 3.1% for the year-to-date due to successful price increases and lower price promotion activity, positive brand mix, and strong results from the Coors Canada business.

Cost of goods sold and gross profit

Cost of goods sold decreased 2.9% to $390 million in the second quarter of 2004 from $401 million in the second quarter of 2003. Year-to-date in 2004, cost of goods sold has decreased 2% compared to the first half of 2003. However, on a per-barrel basis, cost of goods sold increased 2.4% quarter-over-quarter and 1.1% year-over-year. The increase per barrel in 2004 is driven by the de-leveraging of fixed costs from lower volumes, higher outbound freight costs and costs related to the retrieval and disposal of finished goods inventory, which were about $7 million higher in the second quarter of 2004 than a year ago. These costs were, in part, the result of our focus on improving customer service through the first half of the year following our supply chain disruptions late last year. To ensure high order-fill rates, we deployed unusually high levels of inventory—particularly of our new products—throughout our distribution system earlier in the year. We continue to realize cost savings from our operations costs initiatives, offset by higher freight, pension, healthcare and other overhead costs in 2004.

Gross profit decreased less than 1% in the quarter compared to last year, primarily due to factors discussed above, but is 3.0% higher than prior year-to-date, due to lower relative costs on a year-to- year basis.

Marketing, general and administrative expenses

Marketing, general and administrative expenses decreased 0.7% to $200 million in the second quarter of 2004 from $201 million in 2003. We account for advertising spending according to the sales curve method, under which expense is spread throughout the year in relation to expected annual sales volume. The decline in marketing, general and administrative expenses in the quarter is the result of the significant US volume decline which, in turn, was the result of changes in inventory patterns. Year-to-date in 2004, marketing, general and administrative expenses have increased 2.3%, compared to 2003. The overall increase is mainly due to additional marketing investments in Coors Light and Aspen Edge™, in addition to higher pension, healthcare and information systems depreciation.

THE EUROPE SEGMENT RESULTS OF OPERATIONS

The Europe segment consists of our production and sale of the CBL brands (principally in the United Kingdom but also in other parts of the world), our joint venture arrangement relating to the distribution of Grolsch in the United Kingdom and Republic of Ireland (consolidated under FIN 46R in 2004), and our joint venture arrangement for the physical distribution of products throughout Great Britain (Tradeteam). It also includes the sale of Coors Fine Light Beer in the United Kingdom and Coors Light in the Republic of Ireland.

	Thirteen Weeks Ended								Twenty-six Weeks Ended
	June 27, 2004			June 29, 2003			% Change		June 27, 2004			June 29, 2003			% Change
	(In thousands, except percentages) (Unaudited)
Barrels of beer and other beverages sold		2,735			2,713		0.8	%		4,879			4,726		3.2	%

Net sales	$	471,309		$	408,343		15.4	%	$	855,027		$	709,728		20.5	%
Cost of goods sold		(313,087	)		(281,575	)	11.2	%		(590,346	)		(503,459	)	17.3	%

Gross profit		158,222			126,768		24.8	%		264,681			206,269		28.3	%
Marketing, general and administrative expenses		(111,325	)		(91,472	)	21.7	%		(213,344	)		(175,417	)	21.6	%

Operating income		46,897			35,296		32.9	%		51,337			30,852		66.4	%
Interest income(1)		3,843			4,388		(12.4	)%		8,071			8,753		(7.8	)%
Other income (expense), net		466			2,203		(78.8	)%		(2,048	)		3,008		N/M

Income before income taxes and minority interest(2)	$	51,206		$	41,887		22.2	%	$	57,360		$	42,613		34.6	%

(1): Interest income is earned on trade loans to UK on-trade customers, and is typically driven by debt balances from period-to-period.
(2): Income before income taxes in 2004 includes $1,477 and $2,022 for the thirteen and twenty-six weeks ended June 27, 2004, respectively, that represents the minority owners' share of income attributable to the Grolsch joint venture.

Foreign currency impact on 2004 results

In the second quarter of 2004, our Europe segment benefited from an 11.6% year-over-year increase in the value of the British pound sterling (GBP) against the US dollar. In the first half of 2004, our Europe segment benefited from a 13.1% increase in the GBP. Partially as a result of this exchange rate fluctuation, all results from our Europe segment in 2004 are significantly higher than in

the prior year. The following table summarizes the approximate effect this change in exchange rate had on the Europe segment pre-tax results in 2004:

		Increase Due to Currency Effects
		Thirteen Weeks Ended June 27, 2004			Twenty-six Weeks Ended June 27, 2004
		(In thousands)
Net sales		$	48,270		$	97,958
Cost of goods sold			(32,101	)		(67,901	)

	Gross profit		16,169			30,057
Marketing, general & administrative expenses			(11,515	)		(24,603	)

	Operating income		4,654			5,454
Interest income			400			941
Other income (expense), net			53			(244	)

	Income before income taxes and minority interest	$	5,107		$	6,151

Net sales and volume

Net sales from the Europe segment totaled $471 million in the second quarter of 2004, 15.4% higher than the same period last year. Net sales year-to-date are higher by 20.5%, compared to 2003. Per barrel net sales increased 14.5% in the quarter and 16.7% for the year. Volume grew 0.8% quarter-over-quarter and 3.2% year-to-date. Second quarter volume was relatively flat against 2003 as a result of the load-in of retail inventories in advance of an excise tax increase late in the first quarter of 2004 and the comparison to a high-growth quarter in 2003, driven in part by aggressive off-trade discounting in the first half of last year. Revenues per barrel increased as a result of currency appreciation, increases in pricing in both the on- and the off-trade, and an increase in the level of factored brand sales, which are included within our net sales and cost of goods sold figures, but not recorded within our reported volumes. While the factored brand volume increase had a positive impact on net sales, there was a small negative impact on margin as a result of a mix shift to lower margin customers.

Cost of goods sold and gross profit

Cost of goods sold was $313 million in the second quarter of 2004, 11.2% higher than last year's second quarter. Cost of good sold for the first half of 2004 was 17.3% higher than last year. On a per-barrel basis, cost of goods sold increased 10.3% in the quarter and 13.6% year-to-date. Increases in cost of goods sold are due to currency appreciation, the increased factored brand volume, and the implementation of FIN 46R in 2004 (See Note 2 in the accompanying financial statements).

Gross profit increased 24.8% to $158.2 million compared to the second quarter last year and 28.3% year-to-date, as a result of the factors noted above.

Marketing, general and administrative expenses

Second quarter 2004 marketing, general and administrative expenses were $111.3 million, an increase of approximately 21.7% over second quarter 2003. Year-over-year, marketing, general and administrative expenses increased 21.6%. This increase was as a result of the currency appreciation, the implementation of FIN 46R in 2004 and spending related to restructuring our sales organization.

Other income (expense), net

Second quarter other income decreased $1.7 million, largely as a result of non-recurring gains on the sale of assets last year. Year-to-date, we experienced losses from our Tradeteam venture related to the write-off of equipment in the first quarter of 2004, as compared to income reflected in 2003.

CORPORATE

Corporate includes interest and certain other general and administrative costs that are not allocated to either the Americas or Europe operating segments. Corporate contains no sales or cost of goods sold, although certain royalty income and intangible administrative costs are absorbed by Corporate. The majority of these corporate costs relates to worldwide finance and administrative functions, such as corporate affairs, legal, human resources, insurance and risk management.

	Thirteen Weeks Ended								Twenty-six Weeks Ended
	June 27, 2004			June 29, 2003			% Change		June 27, 2004			June 29, 2003			% Change
	(In thousands, except percentages) (Unaudited)
Net sales	$	—		$	—				$	—		$	—
Cost of goods sold		—			—					—			—

Gross profit		—			—					—			—
Marketing, general and administrative expenses		(10,946	)		(7,234	)	51.3	%		(17,675	)		(12,460	)	41.9	%

Operating loss		(10,946	)		(7,234	)	51.3	%		(17,675	)		(12,460	)	41.9	%
Interest income		662			815		(18.8	)%		1,119			1,109		0.9	%
Interest expense		(17,530	)		(22,694	)	(22.8	)%		(37,753	)		(43,834	)	(13.9	)%
Other expense		(206	)		(90	)	128.9	%		(309	)		(173	)	78.6	%

Loss before income taxes(1)	$	(28,020	)	$	(29,203	)	(4.1	)%	$	(54,618	)	$	(55,358	)	(1.3	)%

(1): Loss before income taxes in 2004 includes $348 and $788 for the thirteen and twenty-six weeks ended June 27, 2004 and represents the minority owner's share of interest expense attributable to debt obligations of the RMMC joint venture.

Marketing, general and administrative expenses

Marketing, general and administrative expenses increased 51.3% to $10.9 million in the second quarter of 2004, compared to the second quarter of 2003. Year-to-date, marketing, general and administrative expenses increased 41.9%. Increases are primarily due to higher pension, healthcare, incentive compensation and other labor costs in 2004.

Interest expense

Interest expense decreased $5.1 million in the second quarter of 2004 versus the comparable 2003 period. Year-to-date, interest expense decreased $6.0 million or 13.9%. The decrease is largely due to lower debt balances, partially offset by the negative impact of the British pound exchange rate and the effect of FIN 46R discussed above.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our primary sources of liquidity are cash provided by operating activities and external borrowings. As of June 27, 2004, primarily because of the seasonalilty of our major businesses, we had negative

working capital of $47.4 million compared to negative working capital of $54.9 million at December 28, 2003. We had total cash of $36.2 million at June 27, 2004, compared to $19.4 million at December 28, 2003, mainly due to cash acquired when our joint ventures were consolidated in the first quarter of 2004.

We believe that cash flows from operations and cash provided by short-term borrowings, 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 impacted significantly by a decrease in demand for our products, which could arise from competitive circumstances, a decline in the acceptability of alcohol beverages, or any of the other factors we describe in the section entitled "Risk Factors."

We continue to evaluate opportunities to supplement our operating cash flow through potential monetizations of assets. During the second quarter of 2004, CBL outsourced the ownership, procurement and tracking of its approximately 1.2 million kegs and casks with TrenStar, Inc. in the second quarter of 2004. As a result, we received a cash payment of approximately £28 million ($50 million at current exchange rates). We are evaluating other such efforts, both in the United States and in the United Kingdom, involving either an outsourcing of services which combines a superior long-run business model for a given activity with an asset monetization, or simply sales of idle assets, such as real estate. Success in accomplishing these types of efforts results in faster reduction of outstanding debt. We also have credit facilities that contain financial and operating covenants, and provide for scheduled repayments, that could impact our liquidity on an ongoing basis. During the six months ended June 27, 2004, we made debt repayments of approximately $168 million.

Operating activities

Net cash provided by operating activities of $154.6 million for the twenty-six weeks ended June 27, 2004, decreased $7.0 million from the comparable period last year. The decrease was primarily attributable to higher current taxes paid in 2004 versus the prior year due to the finalization of various tax audits to our favor in 2003.

Investing activities

During the thirteen weeks ended June 27, 2004, net cash used in investing activities was $9.2 million compared to $98.7 million net cash used in the same period last year. This improvement was attributable to reduced capital spending in 2004 and the sale of the kegging assets in the United Kingdom. Also, we presented as an investing activity the inclusion of the opening cash balances of the joint ventures we began consolidating during the first quarter of 2004 as a result of implementing FIN 46R (see Note 2).

Financing activities

Net cash used in financing activities was $130.3 million for the twenty-six weeks ended June 27, 2004, compared to $109.4 million net cash used for the same period last year. The change is mainly the result of increased repayments of debt in 2004, offset by increased stock option exercises in the first half of 2004. We have also included a new item, "Dividends paid to minority interest holders," in the Financing activities section of our Condensed Consolidated Statements of Cash Flows. This item represents distributions from our joint ventures consolidated as a result of FIN 46R to the minority interest holders in those joint ventures. There is no net impact to cash flows as a result of the adoption of FIN 46R. However, from a year-over-year comparison standpoint, cash flows from operating activities have been increased and cash flows from financing activities have been decreased as a result of classifying dividends paid to minority interest holders in financing activities.

EFFECTIVE TAX RATE VOLATILITY

We do not provide deferred taxes on all outside basis differences in our acquired UK subsidiaries stock in accordance with SFAS 109 paragraph 31(a). Outside basis differences arise from differences in the US GAAP accounting ("Book") and US tax accounting ("Tax") for investments in foreign subsidiaries. Some examples of significant Book/Tax differences at our acquired UK subsidiaries include pension expense, goodwill amortization, depreciation and gain or loss on sale of assets. Fluctuations in these Book/Tax differences cause our tax rate to be volatile. For example, a UK asset sale in which the tax gain is $10 million more than the Book gain would cause our full year tax rate for 2004 to increase by 1.3%, assuming EBIT and UK taxes remain unchanged. The impact on the quarterly tax rate from such a sale would be significantly greater in the quarter in which it occurred.

Other factors that can significantly impact our tax rate include permanent reinvestment of earnings, changes in the levels of foreign deferred taxes, unutilized foreign tax credits, and a lack of tax benefits for losses at foreign subsidiaries. In computing our tax rate, we use our best estimate of annual EBIT, but do not include an estimate of future discrete events that may or may not occur during the year.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

Contractual cash obligations as of June 27, 2004:

		Payments Due By Period
		Total		Less than 1 year		1-3 years		4-5 years		After 5 years
		(In thousands)
Long term debt, including current maturities(1)		$	1,142,139	$	210,515	$	52,212	$	8,404	$	871,008
Retirement plan expenditures(2)			191,554		97,800		19,874		21,167		52,713
Operating leases			116,718		25,136		58,141		30,856		2,585
Capital leases(3)			8,426		2,396		6,030		—		—
Other long-term obligations(4)			3,207,694		450,367		1,363,402		716,161		677,764

	Total obligations	$	4,666,531	$	786,214	$	1,499,659	$	776,588	$	1,604,070

(1): We had several significant changes to our debt obligations in the second quarter of 2004: (a) Due to the implementation of FIN46R, we consolidated the RMMC accounts, including approximately $45 million of notes payable. The debt proceeds have been used by RMMC to finance capital improvements. RMMC's debt is secured by its various supply and access agreements with no recourse to CBC or to Ball. (b) At December 28, 2003, we had $86.0 million outstanding in an unsecured senior credit facility consisting of a US dollar-denominated amortizing term loan. We paid the outstanding balance off in full during the first quarter of 2004. (c) In June 2003, we issued approximately $300 million in commercial paper. At June 27, 2004, we had $206 million outstanding. All of our commercial paper is classified as short-term, as our intent is to repay that portion in the next twelve months.
(2): Represents expected contributions under our defined benefit pension plans in the next twelve months and our benefits payments under retiree medical plans for all periods presented.
(3): Includes a UK sale-leaseback included in a global information services agreement signed with Electronic Data Systems (EDS) late in 2003, effective January 2004, and totaling $7.9 million at June 27, 2004. The new EDS contract includes services to our Americas and Europe operations and our corporate offices and, unless extended, will expire in 2010.

(4): Approximately $1.6 billion of the total other long-term obligations relate to long-term supply contracts with third parties to purchase raw material and energy used in production, including our contract with Graphic Packaging Corporation, a related party, dated March 25, 2003. Approximately $1.1 billion relates to commitments associated with Tradeteam in the United Kingdom. The remaining amounts relate to sales and marketing, information technology services, open purchase orders and other commitments.

Other commercial commitments:

	Amount of Commitment Expiration Per Period
	Total Amounts Committed		Less than 1 year		1-3 years		4-5 years		After 5 years
	(In thousands)
Standby letters of credit	$	8,984	$	8,984	$	—	$	—	$	—

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. From time to time, we may also provide oral or written forward-looking statements in other materials we release to the public. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by forward-looking words such as "expect," "anticipate," "plan," "believe," "seek," "estimate," "outlook," "trends," "future benefits," "strategies," "goals" and similar words. In addition, 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 "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Outlook for 2004" including, but not limited to, statements relating to our overall volume trends, consumer preferences, pricing trends and industry forces, cost reduction strategies and anticipated results, our expectations for funding our 2004 capital expenditures and operations, debt service capabilities, shipment levels and profitability, market share and the sufficiency of capital to meet working capital, 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. In particular, our future results could be affected by the substantial amount of indebtedness remaining from financing the acquisition of the CBL business in the United Kingdom, 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 in our business and place us at a competitive disadvantage relative to less leveraged competitors. 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. We do not undertake to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. 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.

RISK FACTORS

These and other risks and uncertainties affecting us are discussed in greater detail in our other filings with the Securities and Exchange Commission, including our December 28, 2003, report on

Form 10-K. You should consider carefully the following factors and the other information contained within this document. The most important factors that could influence the achievement of our goals and could cause actual results to differ materially from those expressed in the forward-looking statements, include, but are not limited to, the following:

•: Government regulatory authorities specific to the alcohol beverage industry in the markets in which we operate may adopt regulations that could increase our costs or our liabilities or could limit our business activities.
•: If the social acceptability of our products declines, if there is additional litigation directed at the alcohol beverage companies, or if such litigation is successful, our sales volumes could decrease and our business could be materially adversely affected.
•: We have indebtedness that is substantial in relation to our stockholders' equity.
•: We are subject to fluctuations in foreign exchange rates, most significantly the British pound and the Canadian dollar.
•: Our primary production facilities in the United States and in England are each located at a single site, so we could be more vulnerable than our competitors to transportation disruptions, fuel price increases and natural disasters.
•: We rely on a small number of suppliers to obtain the packaging and raw materials we need to operate our business.
•: Any significant shift in consumer packaging preferences in the beer industry could disproportionately increase our costs and could limit our ability to meet consumer demand.
•: Our success depends largely on the success of two primary products, one in the United States and Canada, and one in the United Kingdom; the failure or weakening of either could materially adversely affect our financial results.
•: If the contract we have with our current information technology service provider fails, we could experience significant disruption in our business.
•: The recently announced business combination with Molson Inc. may not be consummated on the desired terms, if at all, and the expected benefits, savings and synergies may not be realized.

Risks specific to the Americas Segment

•: We are significantly smaller than our two primary competitors in the United States, and may consequently be more vulnerable to cost and price fluctuations.
•: We are highly dependent on independent distributors in the United States and its territories to sell our products, with no assurance that these distributors will effectively sell our products.
•: We cannot predict with certainty our eventual aggregate cost for our environmental and related matters in which we are currently involved.
•: If our joint venture in Canada is terminated, this could reduce sales and/or increase costs for us in Canada.

Risks specific to the Europe Segment

•: Consolidation of pubs and growth in the size of pub chains in the United Kingdom could result in less ability to achieve desired pricing.
•: Due to a high concentration of unionized workers in the United Kingdom, we could be significantly affected by labor strikes, work stoppages or other employee-related issues.
•: We depend exclusively on Tradeteam in England, Wales and Scotland for distribution of our CBL products.

The foregoing list of important factors is not all-inclusive.

OUTLOOK FOR 2004

Americas

In the Americas, our focus is solidly on reinvigorating US volume growth, both of our portfolio in general, and of Coors Light, specifically. We have new creative advertising for both Coors Light and Aspen Edge to air in the second half of 2004, and we have targeted initiatives designed to drive growth in our core markets. Positive factors for the balance of the year include strong pricing in the United States and an expectation of continued solid performance in our Canadian business.

For the balance of the year, we believe that the effects of inventory dynamics are largely behind us, although inventory patterns are hard to predict, as we are still in the first year of our new supply-chain systems. Our wholesale customers, taking advantage of our new ordering tools and more reliable product supply, appear to be comfortable with modestly lower inventories than they have had in the past. Finished goods losses were a significant factor in the second quarter, accounting for a year-on-year cost increase of approximately $7 million. While we believe this issue is largely behind us, we are still learning to use and optimize our new supply-chain systems and look for continued improvements as the year progresses. Our cost outlook for the balance of the year will continue to be impacted by increases in transportation rates and packaging materials costs, which are often hard to predict.

During second half of 2004, we are expecting MG&A spending to trend higher due to investments in sales efforts and support for Aspen Edge.

•: Looking at specific quarters, we will be lapping the declining US sales to retail and additional supply-chain costs of about $8 million in the fourth quarter of 2003.

Europe

We anticipate volume trends to soften significantly in the third quarter as we lap unusually hot weather in the United Kingdom last year, combined with a drop off in volume after the Euro 2004 football tournament in June. Fourth quarter volume trends in the off-trade, however, should improve due to easier comparisons from the prior year.

Year-over-year margin trends in the on-trade are anticipated to improve for the balance of the year; while year-over-year margins in the off-trade will slow as we start to lap the better balance of volume and pricing achieved in the second half of 2003.

We believe that the impact of movements in factored brand sales will continue to have a negative impact on profits in the second half of the year.

The implementation of FIN46R will continue to reduce cost of goods sold and increase marketing, general and administrative expenses in the second half of the year.

We expect marketing, general and administrative costs to continue to increase as a result of the implementation of FIN 46R, increases in marketing support for our brands, including the continued roll out of Coors Fine Light Beer, increased depreciation and maintenance costs on the dispense equipment supporting our on-trade growth, and increased information systems costs.

In the third quarter we will be lapping a $3.5 million gain on the 2003 sale of the rights to our Hooper's Hooch brand in Russia. In the fourth quarter we expect to book a one-time pretax gain of approximately $7 million from the sale of our Cape Hill brewery site.

The results for the Europe segment will also continue to be highly susceptible to fluctuations in the value of the British pound versus the US dollar.

Corporate Outlook

We estimate that the new FIN46R accounting standard will have no significant impact on our full-year earnings. Above the bottom line, however, operating and pretax income will tend to be higher because the minority owners' share of joint venture income is now included in these totals, while in prior years, only our share was included. The quarterly impact on cost of goods sold, marketing, general and administrative and interest expense will also be significant, with the magnitude dependent on the performance of our container and Grolsch operating ventures.

Molson Coors Merger

We believe we must broaden and strengthen our business on a global basis. With this imperative in mind, we announced in July our definitive agreement to merge with Molson Inc. By combining these two great brewing organizations, we are creating a stronger, more diversified company that will have the organizational scale and financial strength to compete effectively in the consolidating global beer industry and build value for our shareholders. The proposed merger is subject to approval by shareholders of both companies, the Supreme Court of Quebec, appropriate regulators and other authorities, as well as customary closing conditions.

Liquidity

We are on track to achieve debt reduction in excess of $250 million in 2004. This does not include any monetization projects completed in the back half of the year which, if completed, could raise our 2004 debt reduction performance. We also currently estimate capital spending in the range of $220 to $235 million for the year.

We entered into interest rate swap agreements related to $125 million of our 6³/8% senior notes due 2012 in July. The interest rate swaps converted the $125 million notional amount from fixed rates to floating rates and mature in 2012.

CBL Purchase Price Adjustment

Income Taxes

We anticipate that our 2004 effective tax rate will be in the range of 21% to 23%, after taking into account the tax impact of the recently announced sale of UK pub dispense equipment. Our effective tax rate is approximately 10% less than our 2003 rate due to the tax effect of the sale of the pub equipment. Future events—including similar asset monetizations—could alter our tax-rate outlook for 2004 and later years.

Earnings Per Share

Basic and diluted shares outstanding continue to trend higher so far this year due to the combination of new issuances of options, option exercises and a higher stock price.

Pub Dispense Equipment Outsourcing Agreement

on-trade beverage dispense equipment for approximately £53 million (approximately $95 million at current exchange rates) in cash and provide ongoing maintenance and procurement services on such equipment in the United Kingdom. We expect to record a pretax loss of approximately £12 million (approximately $22 at current exchange rates) from the sale of the assets.

The agreement is subject to the approval of the Office of Fair Trading (OFT) in the United Kingdom. If the agreement is approved by the OFT, the company expects the majority of its current technical services staff of 320 employees to join the workforce of Innserve Ltd. And the new technical services business to be fully operational by early 2005.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, we are exposed to fluctuations in interest rates, foreign currencies and the prices of production and packaging materials. We have established policies and procedures to govern the strategic management of these exposures through a variety of financial instruments. By policy, we do not enter into any contracts for the purpose of trading or 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 our earnings and cash flows affected by potential changes in underlying rates and prices. To achieve this objective, we enter into foreign currency forward contracts, commodity swaps, interest rate swaps and cross currency swaps, the values of which change in the opposite direction of the anticipated cash flows. Our primary foreign currency exposures are British pound sterling (GBP), Canadian dollar (CAD) and Japanese yen (YEN).

Derivatives are either exchange-traded instruments, or over-the-counter agreements entered into with highly rated financial institutions. No losses on over-the-counter agreements due to counterparty credit issues are anticipated. All over-the-counter agreements are entered into with counterparties rated no lower than A (S&P) or A2 (Moody's). In some instances, our counterparties and we have reciprocal collateralization agreements regarding fair value positions in excess of certain thresholds. These agreements call for the posting of collateral in the form of cash, treasury securities or letters of credit if a fair value loss position to our counterparties or us exceeds a certain amount. At June 27, 2004, no collateral was posted by our counterparties or us.

At June 27, 2004, we were a party to certain cross currency swaps totaling 530 million GBP (approximately $774 million at original prevailing foreign currency exchange rates). The swaps included an initial exchange of principal on May 7, 2002, and will require final principal exchange 10 years later. The swaps also call for an exchange of fixed GBP interest payments for fixed US dollar interest receipts. At the initial principal exchange, we paid US dollars to a counterparty and received GBP. Upon final exchange, we will provide GBP to the counterparty and receive US dollars. The cross currency swaps have been designated as cash flow hedges of the changes in value of the future GBP interest and principal receipts that results from changes in the US dollar to GBP exchange rates on an intercompany loan between two of our subsidiaries.

At June 27, 2004, we were a party to an interest rate swap agreement related to our 6?% fixed rate debt. The interest rate swap converted $76.2 million notional amount from fixed rates to floating rates and matures in 2012. We will receive fixed US dollar interest payments semi-annually at a rate of 6?% per annum and pay a rate to our counterparty based on a credit spread of 0.789% plus the three-

month LIBOR rate, thereby exchanging a fixed interest obligation for a floating rate obligation. There was no exchange of principal at the inception of the swap. We designated the interest rate swap as a fair value hedge of the changes in the fair value of $76.2 million fixed-rate debt attributable to changes in the LIBOR swap rates. On July 1, 2004, we entered into another interest rate swap agreement related to our 6?% senior notes due 2012. We designated the interest rate swap as a fair value hedge of the changes in the fair value of $125 million of our 6?% senior notes due 2012 attributable to changes in the LIBOR swap rates.

We monitor foreign exchange risk, interest rate risk and related derivatives using two techniques: sensitivity analysis and Value-at-Risk. Our market-sensitive derivative and other financial instruments, as defined by the Securities and Exchange Commission (SEC), are foreign currency forward contracts, commodity swaps, interest rate swaps, and cross currency swaps.

We use Value-at-Risk to monitor the foreign exchange and interest rate risk of our cross-currency swaps. The Value-at-Risk provides an estimate of the level of a one-day loss that may be equaled or exceeded due to changes in the fair value of these foreign exchange rate and interest rate-sensitive financial instruments. The type of Value-at-Risk model used to estimate the maximum potential one-day loss in the fair value is a variance/covariance method. The Value-at-Risk model assumes normal market conditions and a 95% confidence level. There are various modeling techniques that can be used to compute value at risk. The computations used to derive our values take into account various correlations between currency rates and interest rates. The correlations have been determined by observing foreign exchange currency market changes and interest rate changes over the most recent one-year period. We have excluded anticipated transactions, firm commitments, cash balances, and accounts receivable and payable denominated in foreign currencies from the Value-at-Risk calculation, some of which these instruments are intended to hedge.

The Value-at-Risk calculation is a statistical measure of risk exposure based on probabilities and is not intended to represent actual losses in fair value that we may incur. The calculated Value-at-Risk result does not represent the full extent of the possible loss that may occur. It attempts to represent the most likely measure of potential loss that may be experienced 95 times out of 100 due to adverse market events that may occur. Actual future gains and losses will differ from those estimated by Value-at-Risk because of changes or differences in market rates and interrelationships, hedging instruments, hedge percentages, timing and other factors.

The estimated maximum one-day loss in fair value on our cross-currency swaps, derived using the Value-at-Risk model, was $5.4 million and $5.9 million at June 27, 2004, and December 28, 2003, respectively. Such a hypothetical loss in fair value is a combination of the foreign exchange and interest rate components of the cross currency swap. Value changes due to the foreign exchange component would be offset completely by increases in the value of our inter-company loan, the underlying transaction being hedged. The hypothetical loss in fair value attributable to the interest rate component would be deferred until termination or maturity.

Details of all other market-sensitive derivative and other financial instruments, including their fair values, are included in the table below. These instruments include foreign currencies, commodity swaps, interest rate swap and cross-currency swaps.

		Notional principal amounts (USD)		Fair Value Positive (Negative)			Maturity
		(In thousands)
June 27, 2004
Foreign currency management
	Forwards	$	37,164	$	316		4/04-12/05
	Cross currency swap		773,800		(170,887	)	5/12
Commodity pricing management
	Swaps		77,463		13,321		8/04-2/06
Interest rate pricing management
	Interest rate swap		76,200		3,456		5/12

Total				$	(153,794	)

December 28, 2003
Foreign currency management
	Forwards	$	44,048	$	(1,382	)	1/04-12/05
	Cross currency swap		773,800		(138,684	)	5/12
Commodity pricing management
	Swaps		92,468		9,638		2/04-2/06
Interest rate pricing management
	Interest rate swap		76,200		6,904		5/12

Total				$	(123,524	)

Maturities of derivative financial instruments held on June 27, 2004, are as follows (in thousands):

2004			2005			2006 and thereafter			Total
$	5,326		$	7,514		$	(166,634)		$	(153,794	)

A sensitivity analysis has been prepared to estimate our exposure to market risk of interest rates, foreign exchange rates and commodity prices. The sensitivity analysis reflects the impact of a hypothetical 10% adverse change in the applicable market interest rates, foreign 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.

The following table presents the results of the sensitivity analysis of our derivative and debt portfolio:

		As of
		June 27, 2004		December 28, 2003
Estimated Fair Value Volatility		(In millions)
Foreign currency risk:
	Forwards, swaps	(4.1	)	$	(5.0	)
Interest rate risk:
	Debt, swaps	(31.9	)	$	(32.4	)
Commodity price risk:
	Swaps	(9.1	)	$	(10.2	)

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to the Company's management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Chief Executive Officer and the Chief Financial Officer, with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures as of June 27, 2004, and, based on their evaluation, have concluded that the disclosure controls and procedures were effective as of such date.

Changes in internal control over financial reporting

There were no changes in internal controls in the second quarter that have materially affected, or are reasonably likely to materially affect the Company's internal control over financial reporting. We are well into the process of identifying and testing controls that will form the basis for management's evaluation of our internal control over financial reporting for the year ending December 26, 2004. Although this process is not complete, management is continuing to evaluate the company's internal controls for gaps and potential deficiencies.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in certain disputes and legal actions arising in the ordinary course of our business. While it is not feasible to predict or determine the outcome of these proceedings, in our opinion, based on a review with legal counsel, none of these disputes and legal actions is expected to have a material impact on our consolidated financial or other position, results of operations or cash flows. However, litigation is subject to inherent uncertainties, and an adverse result in these matters, including the advertising practices case described below, could arise that may harm our business.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

The following are filed as a part of this Report on Form 10-Q:

Condensed Consolidated Statements of Income for the quarterly and semi-annual periods ended June 27, 2004 and June 29, 2003

Condensed Consolidated Balance Sheets at June 27, 2004 and December 28, 2003

Condensed Consolidated Statements of Cash Flows for the semi-annual periods ended June 27, 2004 and June 29, 2003

Notes to Condensed Consolidated Financial Statements

(a): Exhibits

10.1		Adolph Coors Company 1990 Equity Incentive Plan, effective August 14, 2003, As Corrected and Conformed June 30, 2004.
10.3		Adolph Coors Company Equity Compensation Plan for Non-Employee Directors, Amended and Restated Effective November 13, 2003, As Corrected and Conformed June 30, 2004.
10.16		Adolph Coors Company Deferred Compensation Plan, As Amended and Restated Effective January 1, 2002, As Corrected and Conformed June 30, 2004.
31.1		Section 302 Certification of Chief Executive Officer.
31.2		Section 302 Certification of Chief Financial Officer.
32		Written Statement of Chief Executive Officer and Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).

(b): Reports on Form 8-K

The Company filed a Current Report on Form 8-K dated April 9, 2004, regarding the proposed candidacy of Peter H. Coors for the United States Senate.

The Company filed a Current Report on Form 8-K dated April 22, 2004, regarding expected earnings for the first quarter of fiscal year 2004 ended March 28, 2004.

The Company filed a Current Report on Form 8-K dated May 21, 2004, regarding the outsourcing agreement with TrenStar, Inc.

The Company filed a Current Report on Form 8-K dated June 9, 2004, regarding the sale of the property related to the former Cape Hill brewery.

Pursuant to the requirements 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/ RONALD A. TRYGGESTAD Ronald A. Tryggestad Vice President and Controller (Chief Accounting Officer) August 6, 2004

Exhibit Index

Exhibit Number		Document Description
10.1		Adolph Coors Company 1990 Equity Incentive Plan, effective August 14, 2003, As Corrected and Conformed June 30, 2004.
10.3		Adolph Coors Company Equity Compensation Plan for Non-Employee Directors, Amended and Restated Effective November 13, 2003, As Corrected and Conformed June 30, 2004.
10.16		Adolph Coors Company Deferred Compensation Plan, As Amended and Restated Effective January 1, 2002, As Corrected and Conformed June 30, 2004.
31.1		Section 302 Certification of Chief Executive Officer.
31.2		Section 302 Certification of Chief Financial Officer.
32		Written Statement of Chief Executive Officer and Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).