First Quarter 2017 Highlights
(versus First Quarter 2016 Pro Forma Results)(1)(2)
- Worldwide brand volume: 19.706
million hectoliters, increased 2.1%
- Global priority brand(3)
volume increased 6.6%
- Net sales: $2.4 billion,
decreased 0.5%, and increased 1.0% in constant currency
- Net sales per HL: $111.93,
increased 2.4%, and increased 3.9% in constant currency
- U.S. GAAP net income from
continuing operations attributable to MCBC: $201.9 million ($0.93
per diluted share), compared to pro forma net income of $257.4
million a year ago
- Underlying after-tax income:
$165.6 million ($0.76 per diluted share), decreased 12.1%
- Underlying EBITDA (earnings
before interest, taxes, depreciation and amortization): $514.9
million, decreased 3.6%, and was unchanged in constant
currency
- Cash tax benefits resulting from
the MillerCoors acquisition were $97.0 million for the first
quarter, and transaction-related amortization was $11.2
million, net of tax. For the full year 2017, we now expect
transaction-related cash tax benefits of nearly $390 million and
transaction-related amortization of approximately $45 million, net
of tax.
Molson Coors Brewing Company (NYSE: TAP; TSX: TPX) today
reported U.S. GAAP net income from continuing operations
attributable to MCBC of $201.9 million for the first quarter, down
from pro forma net income of $257.4 million a year ago. This
decrease was driven by lower net special and other non-core items
this year, along with lower U.S. volume, mix shift to higher-cost
products, higher brand amortization expense and higher corporate
costs. The Company also reported a 12.1 percent decrease in
underlying after-tax income for the first quarter of 2017, driven
by lower income in the U.S. and Canada, as well as higher brand
amortization expense and corporate costs.
Molson Coors president and chief executive officer Mark Hunter
said, "With the completion of the MillerCoors transaction late last
year and the changes we are making to align and enhance our
organization, 2017 will be a transition year as we build a larger,
stronger First Choice-focused company. Consistent with this, our
results today reflect increased investments in the building blocks
that will drive top-line growth, cost savings, profit growth, cash
generation, debt pay-down, and total shareholder returns in the
years ahead."
Mark added, "First quarter underlying earnings were lower than
last year, primarily due to higher brand amortization expense and
weaker January and February volumes in the U.S. this year-- and
because we were cycling strong earnings comparatives from last
year. First quarter underlying after-tax income in 2016 increased
more than 35 percent compared to 2015 on a pro forma basis,
partially due to the benefit of inventory dynamics and the timing
of the Easter holiday. We have also made incremental investments
this year to strengthen our global business and capabilities.
Despite the softer start to this year, volume trends have improved
since January and February, we are making great progress with our
First Choice agenda in each of our businesses, and we are confident
of delivering our full-year business plans."
Operating and Underlying Free Cash
Flow
U.S. GAAP net cash used in operating activities for
the first quarter was $118.3 million, which represents an
increase in cash used of $30.0 million from prior year, driven by
higher cash paid for interest and higher pension contributions,
partially offset by lower cash tax payments.
Underlying free cash flow for the first quarter was a
cash use of $221.3 million. This represents an increase in cash
used of $19.9 million from the prior year, driven by higher
interest payments, partially offset by lower cash tax payments and
the addition of the other 58 percent of MillerCoors cash flows.
Underlying EBITDA (versus First
Quarter 2016 Pro Forma Results)(1)
Underlying EBITDA was $514.9 million for the first
quarter, a 3.6 percent decrease from a year ago. The decline was
driven by higher corporate costs, declines from Canada and
MillerCoors and negative foreign currency movements during the
quarter, partially offset by growth in Europe. Underlying EBITDA on
a constant-currency basis was unchanged from a year ago.
Foreign Exchange
The Company’s consolidated pro forma underlying EBITDA for the
first quarter includes the negative effect of foreign currency
movements totaling $19.1 million. Negative currency impacts of
$12.6 million in Europe, $7.8 million in Corporate and $0.4 million
in MillerCoors were partially offset by positive currency impacts
of $1.4 million in Canada and $0.3 million in International.
Worldwide Brand and Financial
Volume (versus First Quarter 2016 Pro Forma
Results)(1)
Worldwide brand volume of 19.7 million hectoliters in the
first quarter increased 2.1 percent versus the prior year.
Financial volume of 21.9 million hectoliters in the first
quarter decreased 2.8 percent versus the prior year.
As previously disclosed in our fourth quarter 2016 earnings
release, financial volume now includes contract brewing and
wholesaler non-owned brand volumes. The financial impact of these
volumes has always been included in our results, and now we are
also including the volume impact of these sales.
Worldwide brand volume excludes contract brewing and wholesaler
non-owned brand volumes, and it includes royalty volumes. We also
modified our worldwide brand volume definition to include an
adjustment from Sales-to-Wholesaler (STW) volume to
Sales-to-Retailer (STR) volume. We believe the STR metric is
important because, unlike STWs, it provides the closest indication
of the performance of our brands in relation to market and
competitor sales trends. Prior periods presented have been revised
to reflect these changes. We believe this definition of worldwide
brand volume more closely aligns with how we measure the
performance of our owned brands within the markets in which they
are sold.
Effective January 1, 2017, European markets, including Sweden,
Spain, Germany, Ukraine and Russia, which were previously reported
under our MCI segment, are now presented within our Europe segment.
Additionally, effective January 1, 2017, the results of the
MillerCoors Puerto Rico business, which were previously reported as
part of the U.S. segment, are now reported within the MCI
segment.
Effective Income Tax Rates (versus
First Quarter 2016 Pro Forma Results)
The Company’s first quarter effective income tax rate was
23.7 percent on a reported basis and 23.4 percent on an underlying
basis. The Company’s prior year pro forma first quarter effective
income tax rate was 22.5 percent on a reported basis and 27.0
percent on an underlying basis. The effective tax rate on a
reported basis was slightly higher this year due to the
favorable tax treatment associated with the sale of our Vancouver
brewery in 2016. The underlying effective tax rate was lower
than the prior year due to geographic mix of income and higher
discrete benefits in 2017.
Debt
Total debt at the end of the first quarter was $12.286
billion, and cash and cash equivalents totaled $395 million,
resulting in net debt of $11.891 billion.
Business Segment Results
The following are the Company’s first quarter 2017 results by
business segment:
United States Business
(MillerCoors) (versus First Quarter 2016 Pro Forma
Results) (1)
U.S. domestic sales-to-retailers volume (STRs) declined 2.0
percent for the quarter, driven by lower volume in the Premium
Light and Below Premium segments. Domestic sales-to-wholesalers
volume (STWs) decreased 4.0 percent for the quarter. Domestic net
revenue per hectoliter, which excludes contract brewing and
company-owned-distributor sales, grew 0.2 percent for the quarter
as a result of favorable net pricing, partially offset by negative
sales mix.
Cost of goods sold (COGS) per hectoliter increased 1.7 percent
for the quarter, driven by higher input costs and volume
deleverage, partially offset by supply chain cost savings.
Marketing, general and administrative (MG&A) expense decreased
3.7 percent due to lower brand investments and lower
employee-related expenses.
On a U.S. GAAP basis, MillerCoors income from continuing
operations before income tax was $315.6 million for the first
quarter. The 3.4 percent increase versus the same period in the
prior year was primarily due to lower special charges related to
the Eden, North Carolina, brewery closure; lower MG&A expenses;
and net pricing growth, partially offset by lower volume and higher
COGS per hectoliter.
MillerCoors underlying EBITDA for the first quarter
decreased 3.7 percent to $441.9 million, versus the same period in
the prior year, driven by lower volume and higher COGS per
hectoliter, partially offset by lower MG&A expenses and net
pricing growth.
Canada Business
Canada brand volume increased 0.7 percent in the first quarter,
driven primarily by the addition of the Miller brands, as well as
growth in Coors Banquet. Canada financial volume, which includes
contract brewing volume, increased 1.1 percent and benefited from
the timing of customer inventories. Net sales per hectoliter
increased 3.9 percent in local currency, due primarily to positive
pricing and brand mix, including growth in our import brands.
COGS per hectoliter increased 10.7 percent in local currency due
to mix shift to higher-cost import brands, input cost inflation,
unfavorable foreign currency movements, and cycling a temporary
reduction in distribution costs last year, partially offset by
ongoing cost savings initiatives. MG&A expense increased 21.2
percent in local currency, driven by higher brand amortization
expense and commercial investments.
Canada reported income from continuing operations before
income taxes of $23.1 million, compared to $146.6 million in the
prior year, which was primarily driven by the gain on the sale of
our Vancouver brewery last year.
Canada underlying EBITDA decreased 25.0 percent to $42.9
million in the quarter, primarily due to higher cost of goods sold
and commercial investments this year, partially offset by positive
pricing and mix. Foreign currency movements positively affected
underlying EBITDA by $1.4 million.
Europe Business
Europe brand volume increased 9.6 percent in the first quarter
versus a year ago, primarily driven by the transfer of royalty and
export brand volume across Europe from our International business
and the addition of the Miller brands, along with strong growth
from Coors Light and Staropramen. These positive factors more than
offset the impact of the later timing of the Easter holiday this
year. Europe financial volume, which includes contract brewing and
factored brands but excludes royalty volume, increased 2.3 percent.
Europe net sales per hectoliter increased 16.3% percent in local
currency, due to the release of a previously recorded indirect tax
provision of approximately $50 million after a favorable ruling by
a local jurisdictional court. The increase was also driven by
positive mix, which more than offset negative net pricing.
COGS per hectoliter increased 1.7 percent in local currency,
driven by mix shift to higher-cost brands and geographies,
partially offset by higher net pension benefit this year. MG&A
expense increased 14.1 percent in local currency, due to an
approximate $11 million estimated bad debt provision established
related to a customer in Croatia, higher brand investments and the
addition of the Miller brand portfolio.
Europe reported income from continuing operations before
income taxes of $30.6 million, compared to a loss of $1.2 million
in the prior year due to the release of the indirect tax
provision.
Europe underlying EBITDA increased 78.7 percent to $74.0
million, due to the release of the indirect tax provision, higher
volumes and increased net pension benefit. These positive factors
were partially offset by an estimated bad debt provision
established related to a customer in Croatia, along with higher
brand investments, the timing of the Easter holiday, and
unfavorable foreign currency movements. Underlying EBITDA was
negatively impacted by $12.6 million in foreign currency
movements.
International Business
Total International brand volume increased by 65.2 percent in
the first quarter, driven by the transfer of the Puerto Rico
business from MillerCoors, the addition of the Miller global
brands, and Coors Light growth, primarily in Latin America. These
factors were partially offset by the transfer of royalty and export
brand volume to Europe. Net sales per hectoliter increased 15.2
percent, driven by sales mix changes and higher pricing.
COGS per hectoliter increased 9.4 percent, due to sales mix
changes. International MG&A expense increased 65.4 percent,
driven by increased brand investments, along with overhead and
integration costs related to the acquisition of the Miller global
brands.
The International segment reported income from continuing
operations before income taxes of $1.5 million versus a loss
from continuing operations before income taxes of $2.3 million a
year ago, driven by the transfer of the Puerto Rico business and
the addition of the Miller global brands.
International underlying EBITDA was $5.0 million in the
first quarter, versus a loss of $1.4 million a year ago, driven by
higher volume associated the transfer of the Puerto Rico business
and the addition of Miller global brands, along with positive
pricing in Latin America. Foreign currency movements positively
impacted underlying EBITDA by $0.3 million in the first
quarter.
Corporate
Corporate pretax loss on a reported basis was $97.8
million in the first quarter, 6.7 percent lower than the prior
year, primarily due to unrealized mark-to-market gains from
commodity hedges this year, which more than offset increased
interest expense and marketing general and administrative
expense.
Underlying Corporate EBITDA was a loss of $48.9 million
for the first quarter versus a $24.7 million loss in the prior
year, driven primarily by higher interest expense and a foreign
currency hedge loss of $8.3 million related to our first quarter
debt issuance, as well as global investments in commercial, supply
chain and information technology, as we build a larger, stronger
company.
Special and Other Non-Core
Items(4)
The following special and other non-core items have been
excluded from underlying results.
During the first quarter, Molson Coors recognized a net
special charge of $3.8 million, primarily driven by asset
abandonment costs of $2.6 million in Europe related to the planned
closure of our Burton South brewery, $2.0 million in the U.S.
related to the Eden brewery closure and $1.2 million in Canada
related to the planned closure of our Vancouver brewery. These
factors were partially offset by a $2.9 million Other
Postretirement Benefits curtailment gain recorded within the Canada
segment.
Additionally, during the first quarter we recorded other
non-core net gains of $52.2 million, primarily driven by
unrealized mark-to-market gains on commodity hedges during the
quarter, as well as a purchase-price-adjustment gain related to the
historical sale of Molson Inc.’s ownership interest in the Montreal
Canadiens.
2017 First Quarter Conference
Call
Molson Coors Brewing Company will conduct an earnings conference
call with financial analysts and investors at 11:00 a.m. Eastern
Time today to discuss the Company’s 2017 first quarter results. The
Company will provide a live webcast of the earnings call.
The Company will also host an online, real-time webcast of an
Investor Relations Follow-up Session with financial analysts and
institutional investors at 1:00 p.m. Eastern Time. Both webcasts
will be accessible via the Company’s website, www.molsoncoors.com.
Online replays of the webcasts will be available until 11:59 p.m.
Eastern Time on August 1, 2017. The Company will post this release
and related financial statements on its website today.
Upcoming Investor
Webcasts
The Company will host online, real-time webcasts in May and June
at the following events:
The Company will host its Annual Meeting of Stockholders on
Wednesday, May 17, 2017, at 11:00 a.m. Eastern Time. The meeting
will take place at the Molson Coors Montreal Brewery.
The Company will host a presentation to institutional investors
and financial analysts in New York on Wednesday, June 7, 2017. The
presentation is scheduled for 1:30 p.m. to 3:15 p.m. Eastern
Time.
Live webcasts of both investor events will be accessible via the
Molson Coors Brewing Company website, www.molsoncoors.com, on the
Investors page. Online replays of the presentation webcasts will be
available within two hours after the presentations.
Footnotes:
(1) Comparable 2016 figures have been prepared on a pro formas
basis. Our U.S. segment pro forma information has been updated from
the version previously provided on February 14, 2017, to reflect
the removal of the Puerto Rico business effective as of January 1,
2017, from the results of the MillerCoors business, which were
previously reported as part of the U.S. segment, and are now
reported within the MCI segment. There have been no changes to our
consolidated pro forma financial information from what was provided
on February 14, 2017. Additionally, we have adjusted our reported
brand volumes to reflect this change in Puerto Rico business
reporting and to align our global volume reporting.
We have presented consolidated and U.S. segment pro forma
information to enhance comparability of financial information
between periods. Canada, Europe, International and Corporate
results are not presented on a pro forma basis. The pro forma
financial information is based on the historical consolidated
financial statements of MCBC and MillerCoors, both prepared in
accordance with U.S. GAAP, and gives effect to the acquisition of
the remaining 58 percent interest of MillerCoors and the completed
financing as if they were completed on January 1, 2016. Pro forma
adjustments are based on items that are factually supportable, are
directly attributable to the acquisition or the related completed
financing, and are expected to have a continuing impact on MCBC's
results of operations and/or financial position. Any nonrecurring
items directly attributable to the acquisition or the related
completed financing are excluded in the pro forma statements of
operations. Pro forma information does not include adjustments for
costs related to integration activities following the completion of
the acquisition, synergies or other cost savings that have been or
may be achieved by the combined businesses. The pro forma
information is unaudited, based on significant estimates and
continues to be subject to significant change throughout the
one-year post-acquisition measurement period, as we have referenced
in our previous disclosures. The pro forma information is presented
for illustrative purposes only and does not necessarily reflect the
results of operations of MCBC that actually would have resulted,
had the acquisition occurred at the date indicated, nor does this
information project the results of operations of MCBC for any
future dates or periods.
(2) The Company calculates non-GAAP underlying pretax and
after-tax income, underlying effective tax rate, underlying EBITDA
and underlying free cash flow results by excluding special and
other non-core items from the nearest U.S. GAAP performance
measure, which is net income from continuing operations
attributable to MCBC for both underlying after-tax income and
underlying EBITDA and net cash provided by operating activities for
underlying free cash flow. In addition, constant-currency results
exclude the impact of foreign currency movements. For further
details regarding these adjustments, please see the section
“Special and Other Non-Core Items,” along with tables for
reconciliations to the nearest U.S. GAAP measures. Unless otherwise
indicated, all $ amounts are in U.S. Dollars, and all quarterly
comparative results are for the Company’s first quarter ended March
31, 2017, compared to the first quarter ended March 31, 2016.
Additionally, all per-hectoliter calculations include contract
brewing and non-owned factored beverage volume in the denominator,
as well as the financial impact of these sales in the numerator,
unless otherwise indicated. Some numbers may not sum due to
rounding.
(3) Our global priority brands include Coors Light, Coors
Banquet, Miller Lite, MGD, Staropramen and Blue Moon Belgian
White.
(4) See tables 1 and 2 for the impact of special and other
non-core items.
Overview of Molson Coors
With a story that starts in 1774, Molson Coors has spent
centuries defining brewing greatness. As the third largest global
brewer, Molson Coors works to deliver extraordinary brands that
delight the world’s beer drinkers. From Coors Light, Miller Lite,
Carling, Staropramen and Sharp’s Doom Bar to Leinenkugel’s Summer
Shandy, Blue Moon Belgian White, Creemore Springs Premium Lager and
Smith & Forge Hard Cider, Molson Coors offers a beer for every
beer lover.
Molson Coors operates through Molson Coors Canada, MillerCoors,
Molson Coors Europe and Molson Coors International. The company is
not only committed to brewing extraordinary beers, but also running
a business focused on respect for its employees, communities and
drinkers, which means corporate responsibility and accountability
right from the start. It has been listed on the Dow Jones
Sustainability World Index for the past five years. To learn more
about Molson Coors Brewing Company, visit molsoncoors.com,
ourbeerprint.com or on Twitter through @MolsonCoors.
About Molson Coors Canada
Inc.
Molson Coors Canada Inc. (MCCI) is a subsidiary of Molson Coors
Brewing Company. MCCI Class A and Class B exchangeable
shares offer substantially the same economic and voting rights as
the respective classes of common shares of MCBC, as described in
MCBC’s annual proxy statement and Form 10-K filings with the U.S.
Securities and Exchange Commission. The trustee holder of the
special Class A voting stock and the special Class B
voting stock has the right to cast a number of votes equal to the
number of then outstanding Class A exchangeable shares and
Class B exchangeable shares, respectively.
Forward-Looking
Statements
This press release includes estimates or projections that
constitute “forward-looking statements” within the meaning of the
U.S. federal securities laws. Generally, the words “believe,”
“expect,” “intend,” “anticipate,” “project,” “will,” and similar
expressions identify forward-looking statements, which generally
are not historic in nature. Although the Company believes that the
assumptions upon which its forward-looking statements are based are
reasonable, it can give no assurance that these assumptions will
prove to be correct. Important factors that could cause actual
results to differ materially from the Company’s historical
experience, and present projections and expectations are disclosed
in the Company’s filings with the Securities and Exchange
Commission (“SEC”). These factors include, among others, our
ability to successfully integrate the acquisition of MillerCoors;
our ability to achieve expected tax benefits, accretion and cost
savings and synergies; impact of increased competition resulting
from further consolidation of brewers, competitive pricing and
product pressures; health of the beer industry and our brands in
our markets; economic conditions in our markets; additional
impairment charges; our ability to maintain
manufacturer/distribution agreements; changes in our supply chain
system; availability or increase in the cost of packaging
materials; success of our joint ventures; risks relating to
operations in developing and emerging markets; changes in legal and
regulatory requirements, including the regulation of distribution
systems; fluctuations in foreign currency exchange rates; increase
in the cost of commodities used in the business; the impact of
climate change and the availability and quality of water; loss or
closure of a major brewery or other key facility; our ability to
implement our strategic initiatives, including executing and
realizing cost savings; our ability to successfully integrate newly
acquired businesses; pension plan and other post retirement benefit
costs; failure to comply with debt covenants or deterioration in
our credit rating; our ability to maintain good labor relations;
our ability to maintain brand image, reputation and product
quality; and other risks discussed in our filings with the SEC,
including our most recent Annual Report on Form 10-K. All
forward-looking statements in this press release are expressly
qualified by such cautionary statements and by reference to the
underlying assumptions. You should not place undue reliance on
forward-looking statements, which speak only as of the date they
are made. We do not undertake to update forward-looking statements,
whether as a result of new information, future events or
otherwise.
Use of Non-GAAP Measures
In addition to financial measures presented on the basis of
accounting principles generally accepted in the U.S.
("U.S. GAAP"), we also present pretax and after-tax
"underlying income," "underlying income per diluted share,"
"underlying effective tax rate," and "underlying free cash flow,"
which are non-GAAP measures and should be viewed as supplements to
(not substitutes for) our results of operations presented under
U.S. GAAP. We also present underlying earnings before
interest, taxes, depreciation, and amortization ("underlying
EBITDA") as a non-GAAP measure. Our management uses underlying
income, underlying income per diluted share, underlying EBITDA, and
underlying effective tax rate as measures of operating performance,
as well as underlying free cash flow in the measure of cash
generated from core operations, to assist in comparing performance
from period to period on a consistent basis; as a measure for
planning and forecasting overall expectations and for evaluating
actual results against such expectations; in communications with
the board of directors, stockholders, analysts and investors
concerning our financial performance; as useful comparisons to the
performance of our competitors; and as metrics of certain
management incentive compensation calculations. We believe that
underlying income, underlying income per diluted share, underlying
EBITDA, and underlying effective tax rate performance are used by,
and are useful to, investors and other users of our financial
statements in evaluating our operating performance, as well as
underlying free cash flow in evaluating our generation of cash from
core operations, because they provide an additional tool to
evaluate our performance without regard to special and non-core
items, which can vary substantially from company to company
depending upon accounting methods and book value of assets and
capital structure. In addition to the reasons discussed above, we
consider underlying free cash flow an important measure of our
ability to generate cash, grow our business and enhance shareholder
value, driven by core operations and after adjusting for non-core
items. For discussion and analysis of our liquidity, see the
consolidated statements of cash flows and the Liquidity and Capital
Resources section of our Management’s Discussion and Analysis of
Financial Condition and Results of Operations in our latest Form
10-K and 10-Q filings with the SEC. We have provided
reconciliations of all non-GAAP measures to their nearest U.S. GAAP
measure and have consistently applied the adjustments within our
reconciliations in arriving at each non-GAAP measure. These
adjustments consist of special items from our U.S. GAAP financial
statements as well as other non-core items, such as acquisition and
integration related costs, unrealized mark-to-market gains and
losses, and gains and losses on sales of non-operating assets,
included in our U.S. GAAP results that warrant adjustment to arrive
at non-GAAP results. We consider these items to be necessary
adjustments for purposes of evaluating our ongoing business
performance and are often considered non-recurring. Such
adjustments are subjective and involve significant management
judgment.
Reconciliations
to Nearest U.S. GAAP MeasureMolson Coors Brewing
Company and Subsidiaries
Table 1: First Quarter Actual
and Pro Forma Underlying After-Tax Income
($ In millions, except per share
data)
(Unaudited)
Three Months Ended March 31,
2017 March 31, 2016
March 31, 2016 Actual Pro
Forma(1) Actual
U.S.
GAAP: Net income (loss) attributable to MCBC from
continuing operations
$ 201.9 $ 257.4 $ 163.2
Per diluted share $ 0.93 $ 1.19 $ 0.80 Add/(less): Special items,
net(2) 3.8 (71.7 ) (108.6 ) 42% of MillerCoors special items, net
of tax(3) — — 15.5 Acquisition and integration related costs(4)
19.0 — 53.7 Unrealized mark-to-market (gains) and losses(5) (63.1 )
(2.3 ) (2.3 ) Other non-core items(6) (8.1 ) — — Tax effects on
special and non-GAAP items(7) 12.1 4.9 (7.4 )
Non-GAAP: Underlying after-tax
income
$ 165.6 $ 188.3
$ 114.1 Per diluted share $ 0.76
$ 0.87 $
0.56 (1) We have presented pro forma information to
enhance comparability of financial information between periods. The
pro forma financial information is based on the historical
consolidated financial statements of MCBC and MillerCoors, both
prepared in accordance with U.S. GAAP, and gives effect to the
acquisition and the completed financing as if they were completed
on January 1, 2016. Pro forma adjustments are based on items that
are factually supportable, are directly attributable to the
acquisition or the related completed financing, and are expected to
have a continuing impact on MCBC's results of operations and/or
financial position. Any nonrecurring items directly attributable to
the Acquisition or the related completed financing are excluded in
the pro forma statement of operations. Pro forma information does
not include adjustments for costs related to integration activities
following the completion of the Acquisition, cost savings or
synergies that have been or may be achieved by the combined
businesses. The pro forma information is unaudited, based on
significant estimates and continues to be subject to significant
change throughout the one-year post-acquisition measurement period,
as we have referenced in our previous disclosures. The following
unaudited pro forma information does not reflect the impact of the
acquisition of the Miller global brand portfolio and other assets
primarily related to the "Miller International Business" as defined
in the purchase agreement, as we are not able to estimate the
historical results of operations from this business and have
concluded, based on the limited information available to MCBC, that
it is insignificant to the overall Acquisition. The pro forma
information is presented for illustrative purposes only and does
not necessarily reflect the results of operations of MCBC that
actually would have resulted had the Acquisition occurred at the
date indicated, or project the results of operations of MCBC for
any future dates or periods. (2) Special items, net for the
three months ended March 31, 2017, includes accelerated
depreciation expense of $3.4 million related to the planned
closures of our Vancouver brewery in Canada and Burton South
brewery in the U.K. Special items for the three months ended March
31, 2016, includes accelerated depreciation expense of $3.0 million
related to the planned closures of our Vancouver brewery in Canada
and Burton South brewery in the U.K. These accelerated depreciation
charges are included in our adjustments to arrive at underlying
EBITDA in table 2 below. See Part I—Item 1. Financial Statements,
Note 6, "Special Items" of the Form 10-Q for detailed discussion of
special items, on an actual basis. (3) We recorded our 42%
share of MillerCoors special charges on a reported basis for the
three months ended March 31, 2016, and MillerCoors recorded special
charges related to the closure of the Eden brewery, including $35.9
million of accelerated depreciation in excess of normal
depreciation associated with the brewery. The tax effect related to
our share of MillerCoors special items in 2016 was immaterial.
(4) For the three months ended March 31, 2017, we have
recorded charges of $0.7 million of transaction-related costs
within cost of goods sold and $18.3 million of transaction-related
costs recorded within marketing, general & administrative
expenses. (5) The unrealized changes in fair value on our
commodity swaps, which are economic hedges, are recorded as cost of
goods sold within our Corporate business activities. As the
exposure we are managing is realized, we reclassify the gain or
loss to the segment in which the underlying exposure resides,
allowing our segments to realize the economic effects of the
derivative without the resulting unrealized mark-to-market
volatility. The amounts included for the three months ended March
31, 2017, and March 31, 2016, include the unrealized mark-to-market
on these commodity swaps. (6) A gain of $8.1 million was
recorded in other income (expense), net resulting from a purchase
price adjustment related to the historical sale of Molson Inc.’s
ownership interest in the Montreal Canadiens. (7) The effect
of taxes on the adjustments used to arrive at underlying income, a
non-GAAP measure, is calculated based on applying the estimated
underlying full-year effective tax rate to actual underlying
earnings, excluding special and non-core items. The effect of taxes
on special and non-core items is calculated based on the statutory
tax rate applicable to the item being adjusted for in the
jurisdiction from which each adjustment arises. Additionally,
included in this line item is any applicable flow through MCBC tax
impacts of MillerCoors special items for the pre-Acquisition
period.
Molson Coors Brewing Company and
Subsidiaries
Table 2: Underlying Actual and
Pro Forma EBITDA
($ In millions)
(Unaudited)
Three Months Ended March 31,
2017 March 31, 2016 %
change March 31, 2016 Actual Pro
Forma Actual
U.S.
GAAP: Net income (loss) attributable to MCBC from
continuing operations
$ 201.9 $ 257.4 (21.6 )%
$
163.2 Add: Net income (loss) attributable to noncontrolling
interests 6.5 3.6 80.6
%
0.8
U.S.
GAAP: Net income (loss) from continuing
operations
208.4 261.0 (20.2 )% 164.0 Add: Interest expense (income), net 96.6
90.9 6.3
%
47.3 Add: Income tax expense (benefit) 64.6 75.7 (14.7 )% 16.7 Add:
Depreciation and amortization 197.1 219.4 (10.2 )% 67.5 Adjustments
included in underlying income(1) (48.4 ) (74.0 ) (34.6 )% (57.2 )
Adjustments to arrive at underlying EBITDA(2) (3.4 ) (38.9 ) (91.3
)% (23.4 ) Adjustments to arrive at underlying EBITDA related to
our investment in MillerCoors(3) — — — % 48.5
Non-GAAP: Underlying EBITDA
$ 514.9 $ 534.1 (3.6 )%
$ 263.4
(1) Includes
adjustments to non-GAAP underlying income within the table above
related to special and non-core items. (2) Represents
adjustments to remove amounts related to interest, depreciation and
amortization included in the adjustments to non-GAAP underlying
income above, as these items are added back as adjustments to net
income attributable to MCBC from continuing operations. (3)
Adjustments to our equity income from MillerCoors, which include
our proportionate share of MillerCoors' interest, income tax,
depreciation and amortization, special items, and amortization of
the difference between the MCBC contributed cost basis and
proportionate share of the underlying equity in net assets of
MillerCoors.
Molson Coors Brewing Company and
Subsidiaries
Table 3: Underlying Free Cash
Flow
($ In millions)
(Unaudited)
Actual
Three Months Ended March 31, 2017
March 31, 2016
U.S.
GAAP:
Net Cash Provided by (Used In) Operating Activities $
(118.3 ) $ (88.3 ) Less:
Additions to properties(1) (180.0 ) (71.1 ) Less: Investment in
MillerCoors(1) — (413.7 ) Add: Return of capital from
MillerCoors(1) — 283.4 Add/(Less): Cash impact of special items(2)
33.0 1.9 Add: Non-core costs related to acquisition of
businesses(3) 44.0 47.2 Add: Cash paid for taxes related to the
Acquisition(4) — 38.8 Add: MillerCoors cash impact of special
items(5) — 0.4
Non-GAAP:
Underlying Free Cash Flow $ (221.3 )
$ (201.4 )
(1)
Included in net cash used in investing activities.
(2) Included in net cash provided by (used in) operating activities
and primarily reflects costs paid for brewery closures and
restructuring activities. Also, includes additions to properties
within net cash used in investing activities related to the cash
paid to build a new efficient and flexible brewery in British
Columbia, following the sale of our Vancouver brewery in the first
quarter of 2016. The proceeds of $140.8 million received from the
sale of the Vancouver brewery are being used to fund the
construction of the new brewery in British Columbia. (3)
Included in net cash provided by operating activities and reflects
costs paid associated with the Acquisition of 58% of MillerCoors,
LLC, and the Miller global brand portfolio. (4) Included in
net cash provided by (used in) operating activities and reflects
cash paid for income taxes related to the Acquisition. (5)
Amounts represent our proportionate 42% share of the cash flow
impacts for the pre-Acquisition period January 1, 2016, through
March 31, 2016.
Molson Coors Brewing Company and
Subsidiaries
Table 4: Constant Currency
Results
(Unaudited)
U.S. GAAP: Net Sales (In
millions)
Three Months Ended March 31,
2017 March 31, 2016
Reported
%Increase(Decrease)
ForeignExchangeImpact
($)
Constant Currency %Increase
(Decrease)
Canada $ 291.1 $ 268.0 8.6
%
$ 9.5 5.1
%
Europe $ 381.6 $ 358.7 6.4
%
$ (45.6 ) 19.1
%
MCI $ 61.8 $ 31.0 99.4
%
$ (0.1 ) 99.7
%
Corporate $ 0.3 $ 0.4
(25.0 )% $ — (25.0
)%
U.S. GAAP: Pretax Income (In
millions)
Three Months Ended
March 31, 2017 March 31, 2016
Reported
%Increase(Decrease)
ForeignExchangeImpact
($)
Constant Currency %Increase
(Decrease)
Canada $ 23.1 $ 146.6 (84.2)% $ 0.7 (84.7)% Europe $ 30.6 $ (1.2 )
N/M $ (8.8 ) N/M MCI $ 1.5 $ (2.3 ) N/M $ 0.3 N/M Corporate
$ (97.8 ) $ (104.8 ) 6.7%
$ (7.9 ) 14.2%
Non-GAAP: Underlying Pretax
Income (In millions)
Three Months Ended March 31, 2017
March 31, 2016
Reported
%Increase(Decrease)
ForeignExchangeImpact
($)
Constant Currency %Increase
(Decrease)
Canada $ 13.3 $ 37.3 (64.3)% $ 0.3 (65.1)% Europe $ 33.4 $ (0.5 )
N/M $ (9.2 ) N/M MCI $ 2.7 $ (2.3 ) N/M $ 0.3 N/M Corporate $
(147.4 ) $ (53.4 ) (176.0)%
$ (7.9 ) (161.2)%
Non-GAAP: Underlying EBITDA (In
millions)
Three
Months Ended March 31, 2017
March 31, 2016
Reported
%Increase(Decrease)
ForeignExchangeImpact
($)
Constant Currency %Increase
(Decrease)
Canada $ 42.9 $ 57.2 (25.0 )% $ 1.4 (27.4 )% Europe $ 74.0 $ 41.4
78.7
%
$ (12.6 ) 109.2
%
MCI $ 5.0 $ (1.4 ) N/M $ 0.3 N/M Corporate $ (48.9 )
$ (24.7 ) (98.0 )% $ (7.8
) (66.4 )%
MCBC Consolidated (In millions)
Three Months Ended March 31,
2017 March 31, 2016
Reported
%Increase(Decrease)
ForeignExchangeImpact
($)
Constant Currency %Increase
(Decrease)
Actual Pro forma U.S. GAAP Net Sales $ 2,448.7 $
2,461.4 (0.5 )% $ (36.2 ) 1.0 % U.S. GAAP Pretax Income $ 273.0 $
336.7 (18.9 )% $ (16.1 ) (14.1 )% Non-GAAP Underlying Pretax Income
$ 224.6 $ 262.7 (14.5 )% $ (16.9 ) (8.1 )% Non-GAAP Underlying
EBITDA $ 514.9 $ 534.1
(3.6 )% $ (19.1 ) — %
Constant currency is a non-GAAP measure utilized by Molson Coors
management to measure performance, excluding the impact of foreign
currency movements. As we operate in various foreign countries
where the local currency may strengthen or weaken significantly
versus the U.S. dollar or other currencies used in operations, we
utilize a constant currency measure as an additional metric to
evaluate the underlying performance of each business without
consideration of foreign currency movements. This information is
non-GAAP and should be viewed as a supplement to (not a substitute
for) our reported results of operations under U.S. GAAP. We
calculate the impact of foreign exchange on net sales, pretax
income and non-GAAP underlying pretax income using the following
steps:
1. Multiply our current period local currency operating
results (that also include the impact of the comparable
prior-period currency hedging activities) by the weighted average
foreign exchange rates used to translate the financial statements
in the comparable prior year period. The result is the
current-period operating results in U.S. dollars, as if foreign
exchange rates had not changed from the prior-year period.
2. Subtract the result in step 1 from the unadjusted current-period
reported operating result in U.S. dollars (U.S. GAAP measure). This
difference reflects the impact of foreign currency translational
gains/losses included in the current-period results. 3.
Determine the amount of actual non-operating foreign currency
gains/losses realized as a result of hedging activities and
activities transacted in a currency other than the functional
currency of each legal entity. 4. Add the results of steps 2
and 3 above. This sum equals the total impact of foreign currency
translational gains/losses and realized gains/losses from foreign
currency transactions. This is the value shown in the “Foreign
Exchange $ Impact” column within the table above.
Worldwide Brand
Volume
Molson Coors Brewing Company and
Subsidiaries
Table 5: Actual and Pro Forma
Worldwide Brand Volume
(In millions of hectoliters)
(Unaudited)
Three Months Ended March 31,
2017 March 31, 2016 %
Change March 31, 2016 Actual Pro
forma Actual Financial Volume(1) 21.878 22.516 (2.8 )%
6.330 Contract brewing and wholesaler volume(2) (1.988 ) (2.256 )
(11.9 )% (0.581 ) Royalty Volume(3) 0.798 0.337 136.8
%
0.337 Sales-To-Wholesaler to Sales-To-Retail adjustment (0.982 )
(1.299 ) (24.4 )% (0.002 )
Owned Volume 19.706 19.298 2.1
%
6.084 Proportionate share of Equity Investment Worldwide Brand
Volume(1) — — —
%
5.550
Total Worldwide Brand Volume 19.706
19.298 2.1
%
11.634
(1) As a result of the Acquisition, we aligned our
volume reporting policies resulting in adjustments to our
historically reported volumes. Specifically, financial volume for
all consolidated segments has been recast to include contract
brewing and wholesaler non-owned brand volumes (including factored
brands in Europe and non-owned brands distributed in the U.S.), as
the corresponding sales are reported within our gross sales
amounts. Additionally, financial volumes continue to include our
owned brands sold to unrelated external customers within our
geographic markets, net of returns and allowances. Worldwide brand
volume reflects only owned brands sold to unrelated external
customers within our geographic markets, net of returns and
allowances, royalty volume and our proportionate share of equity
investment worldwide brand volume calculated consistently with MCBC
owned volume. 2017 and pro forma worldwide brand volume includes
100 percent of MillerCoors brand volume. (2) Contract
brewing and wholesaler volume is included within financial volume
as noted above, but is removed from worldwide brand volume as this
is non-owned volume for which we do not directly control
performance. (3) 2016 includes MCI and Europe segment
royalty volume that is primarily in Russia, Ukraine, Mexico and the
Republic of Ireland. Effective January 1, 2017, royalty volumes in
Russia and Ukraine are reported within our Europe segment.
Molson Coors Brewing Company and
Subsidiaries
Table 6: Actual and Pro
Forma Condensed Consolidated Statements of
Operations
($ In millions, except per share
data)
(Unaudited)
Three Months Ended March 31,
2017 March 31, 2016 Actual Pro
forma Actual Volume in hectoliters(1)
21.878 22.516 6.330 Sales $ 2,913.8 $ 3,008.2
$ 950.8 Excise taxes (465.1 ) (546.8 ) (293.6 ) Net sales 2,448.7
2,461.4 657.2 Cost of goods sold (1,372.9 ) (1,450.8 ) (414.0 )
Gross profit 1,075.8 1,010.6 243.2 Marketing, general and
administrative expenses (702.8 ) (659.4 ) (250.9 ) Special items,
net (3.8 ) 71.7 108.6 Equity income in MillerCoors — —
142.4 Operating income (loss) 369.2 422.9 243.3
Interest income (expense), net (96.6 ) (90.9 ) (47.3 ) Other income
(expense), net 0.4 4.7 (15.3 ) Income (loss) from
continuing operations before income taxes 273.0 336.7 180.7 Income
tax benefit (expense) (64.6 ) (75.7 ) (16.7 ) Net income (loss)
from continuing operations 208.4 261.0 164.0 Income (loss) from
discontinued operations, net of tax (0.6 ) (0.5 ) (0.5 ) Net income
(loss) including noncontrolling interests 207.8 260.5 163.5 Net
(income) loss attributable to noncontrolling interests (6.5 ) (3.6
) (0.8 ) Net income (loss) attributable to MCBC $ 201.3 $
256.9 $ 162.7 Basic net income (loss)
attributable to MCBC per share: From continuing operations $ 0.94 $
1.20 $ 0.80 From discontinued operations — — —
Basic net income (loss) attributable to MCBC per share $ 0.94
$ 1.20 $ 0.80 Diluted net income (loss)
attributable to MCBC per share: From continuing operations $ 0.93 $
1.19 $ 0.80 From discontinued operations — — —
Diluted net income (loss) attributable to MCBC per share $ 0.93
$ 1.19 $ 0.80 Weighted average shares -
basic 215.0 214.4 203.6 Weighted average shares - diluted 216.5
215.9 205.1 Dividends per share $ 0.41 $ 0.41
Amounts attributable to MCBC Net income (loss) from
continuing operations $ 201.9 $ 257.4 $ 163.2 Income (loss) from
discontinued operations, net of tax (0.6 ) (0.5 ) (0.5 ) Net income
(loss) attributable to MCBC $ 201.3 $ 256.9 $ 162.7
(1)
Historical volumes have been recast to reflect the impacts of
aligning policies on reporting financial volumes as a result of the
Acquisition. See table 5, "Actual and Pro Forma Worldwide Brand
Volume" above for further details.
Molson Coors Brewing Company and
Subsidiaries
Table 7: U.S. Actual and Pro
Forma Results of Operations
($ In millions)
(Unaudited)
Three months ended March 31,
2017 March 31, 2016 Actual Pro
Forma Actual Volumes in hectoliters(1)(2)
15.772 16.388 16.388 Sales(2) $ 1,991.4 $
2,063.4 $ 2,069.3 Excise taxes (241.5 ) (253.2 ) (253.2 ) Net
sales(2) 1,749.9 1,810.2 1,816.1 Cost of goods sold(2) (1,026.9 )
(1,048.7 ) (1,033.0 ) Gross profit 723.0 761.5 783.1 Marketing,
general and administrative expenses (404.9 ) (420.4 ) (409.7 )
Special items, net(3) (2.5 ) (36.9 ) (36.9 ) Operating income 315.6
304.2 336.5 Interest income (expense), net — (0.5 ) (0.5 ) Other
income (expense), net — 1.6 1.6 Income (loss)
from continuing operations before income taxes $ 315.6 $ 305.3 $
337.6 Add/(less): Special items, net(3) 2.5 36.9 36.9 Acquisition
and integration related costs(4) 4.5 — —
Non-GAAP: Underlying pretax income (loss) $ 322.6 $ 342.2 $ 374.5
Add: Interest expense (income), net — 0.5 0.5 Add: Depreciation and
amortization 119.3 151.9 117.1 Adjustments to arrive at underlying
EBITDA(5) — (35.9 ) (35.9 ) Non-GAAP: Underlying EBITDA $
441.9 $ 458.7 $ 456.2
(1) Historical volumes have been
recast to reflect the impacts of aligning policies on reporting
financial volumes as a result of the Acquisition. See table 5,
"Actual and Pro Forma Worldwide Brand Volume" above for further
details. (2) On a reported basis, includes gross
inter-segment sales and volumes which are eliminated in the
consolidated totals. (3) See Part I—Item 1. Financial
Statements, Note 6, "Special Items" of the Form 10-Q for detailed
discussion of special items, on an actual basis. Results include
net special charges primarily related to the closure of the Eden,
North Carolina, brewery, which for the three months ended March 31,
2016, includes $35.9 million of accelerated depreciation in excess
of normal depreciation associated with the brewery and $1.0 million
of other charges. These accelerated depreciation charges are
included in our adjustments to arrive at underlying EBITDA.
(4) For the three months ended March 31, 2017, $0.5 million of
integration costs were incurred in cost of goods sold and $4.0
million of integration costs were incurred in marketing, general
& administrative expenses. (5) Represents adjustments to
remove amounts related to interest, depreciation and amortization
included in the adjustments to non-GAAP underlying income above, as
these items are added back as adjustments to net income
attributable to MCBC from continuing operations.
Molson Coors Brewing Company and
Subsidiaries
Table 8: Underlying Equity
Income in MillerCoors
($ In millions)
(Unaudited)
Three months ended March 31,
2016 Income (loss) from continuing operations before income
taxes $ 337.6 Income tax expense 0.5 Net (income) loss attributable
to noncontrolling interest (2.8 ) Net income attributable to
MillerCoors $ 335.3 MCBC economic interest 42 % MCBC proportionate
share of MillerCoors net income 140.8 Amortization of the
difference between MCBC contributed cost basis and proportionate
share of the underlying equity in net assets of MillerCoors 1.1
Share-based compensation adjustment(1) 0.5 Equity income in
MillerCoors $ 142.4 Add/(less): MCBC proportionate share of
MillerCoors special items, net of tax(2) 15.5 Non-GAAP
Equity Income in MillerCoors $ 157.9
(1) The net adjustment is to eliminate
all share-based compensation impacts related to pre-existing
SABMiller equity awards held by former Miller Brewing Company
employees employed by MillerCoors, as well as to add back all
share-based compensation impacts related to pre-existing MCBC
equity awards held by former MCBC employees who transferred to
MillerCoors. (2) Results include net special charges of
$36.9 million primarily related to the closure of the Eden, North
Carolina, brewery for the three months ended March 31, 2016, for
which we recorded our proportionate 42% share.
Molson Coors Brewing Company and
Subsidiaries
Table 9: Canada Results of
Operations
($ In millions)
(Unaudited)
Three Months Ended March 31,
2017 March 31, 2016 Volume in
hectoliters(1)(2) 1.793 1.774 Sales(2) $ 377.4 $
353.8 Excise taxes (86.3 ) (85.8 ) Net sales(2) 291.1 268.0 Cost of
goods sold(2) (181.9 ) (157.2 ) Gross profit 109.2 110.8 Marketing,
general and administrative expenses (96.0 ) (76.7 ) Special items,
net(3) 1.7 109.3 Operating income (loss) 14.9 143.4
Other income (expense), net 8.2 3.2 Income (loss)
from continuing operations before income taxes $ 23.1 $ 146.6
Add/(less): Special items, net(3) (1.7 ) (109.3 ) Other non-core
items(4) (8.1 ) — Non-GAAP: Underlying pretax income (loss)
$ 13.3 $ 37.3 Add: Depreciation and amortization 30.8 21.0
Adjustments to arrive at underlying EBITDA(5) (1.2 ) (1.1 )
Non-GAAP: Underlying EBITDA $ 42.9 $ 57.2
(1) Historical volumes have been recast to reflect
the impacts of aligning policies on reporting financial volumes as
a result of the Acquisition. See table 5, "Actual and Pro Forma
Worldwide Brand Volume" above for further details. (2)
Reflects gross inter-segment sales, purchases and volumes which are
eliminated in the consolidated totals. (3) See Part I—Item
1. Financial Statements, Note 6, "Special Items" of the Form 10-Q
for detailed discussion of special items. Special items for the
three months ended March 31, 2017, and March 31, 2016, includes
accelerated depreciation expense of $1.2 million and $1.1 million,
respectively, related to the planned closure of the Vancouver
brewery. These accelerated depreciation charges are included in our
adjustments to arrive at underlying EBITDA. (4) For the
three months ended March 31, 2017, a gain of $8.1 million was
recorded in other income (expense), net resulting from a purchase
price adjustment related to the historical sale of Molson Inc.’s
ownership interest in the Montreal Canadiens. (5) Represents
adjustments to remove amounts related to interest, depreciation and
amortization included in the adjustments to non-GAAP underlying
income above, as these items are added back as adjustments to net
income attributable to MCBC from continuing operations.
Molson Coors Brewing Company and
Subsidiaries
Table 10: Europe Results of
Operations
($ In millions)
(Unaudited)
Three Months Ended March 31,
2017 March 31, 2016 Volume in
hectoliters(1)(2) 4.359 4.261 Sales(2) $ 514.4 $
560.9 Excise taxes (132.8 ) (202.2 ) Net sales(2) 381.6 358.7 Cost
of goods sold (224.1 ) (239.9 ) Gross profit 157.5 118.8 Marketing,
general and administrative expenses (125.2 ) (119.3 ) Special
items, net(3) (2.6 ) (0.7 ) Operating income (loss) 29.7 (1.2 )
Interest income, net 1.0 0.8 Other income (expense), net (0.1 )
(0.8 ) Income (loss) from continuing operations before income taxes
$ 30.6 $ (1.2 ) Add/(less): Special items, net(3) 2.6 0.7
Acquisition and integration related costs(4) 0.2 —
Non-GAAP: Underlying pretax income (loss) $ 33.4 $ (0.5 ) Add:
Interest expense (income), net (1.0 ) (0.8 ) Add: Depreciation and
amortization 43.8 44.6 Adjustments to arrive at underlying
EBITDA(5) (2.2 ) (1.9 ) Non-GAAP: Underlying EBITDA $ 74.0 $
41.4
(1) Historical volumes have been recast
to reflect the impacts of aligning policies on reporting financial
volumes as a result of the Acquisition. See table 5, "Actual and
Pro Forma Worldwide Brand Volume" above for further details.
(2) Reflects gross inter-segment sales which are eliminated in the
consolidated totals. Excludes royalty volume of 0.325 million
hectoliters and 0.036 million hectoliters for the three months
ended March 31, 2017, and March 31, 2016, respectively. (3)
See Part I—Item 1. Financial Statements,
Note 6, "Special Items" of the Form 10-Q for detailed discussion of
special items. Special items for the three months ended March 31,
2017, includes accelerated depreciation expense of $2.2 million
related to the planned closure of our Burton South brewery in the
U.K., and for the three months ended March 31, 2016, includes
accelerated depreciation expense of $1.9 million associated with
the planned closure of the Burton South brewery in the U.K. These
accelerated depreciation charges are included in our adjustments to
arrive at underlying EBITDA.
(4) For the three months ended March 31, 2017, $0.2 million
of integration costs were incurred in cost of goods sold.
(5) Represents adjustments to remove amounts related to interest,
depreciation and amortization included in the adjustments to
non-GAAP underlying income above, as these items are added back as
adjustments to net income attributable to MCBC from continuing
operations.
Molson Coors Brewing Company and
Subsidiaries
Table 11: Molson Coors
International Results of Operations
($ In millions)
(Unaudited)
Three Months Ended March 31,
2017 March 31, 2016 Volume in
hectoliters(1)(2) 0.528 0.305 Sales $ 66.3 $ 36.6
Excise taxes (4.5 ) (5.6 ) Net sales 61.8 31.0 Cost of goods
sold(3) (39.0 ) (20.6 ) Gross profit 22.8 10.4 Marketing, general
and administrative expenses (21.0 ) (12.7 ) Special items, net(4)
(0.3 ) — Operating income (loss) 1.5 (2.3 ) Other income
(expense), net — — Income (loss) from continuing
operations before income taxes $ 1.5 $ (2.3 ) Add/(less): Special
items, net(4) 0.3 — Acquisition and integration related costs(5)
0.9 Non-GAAP: Underlying pretax income (loss) $ 2.7 $
(2.3 ) Add: Depreciation and amortization 2.3 0.9 Adjustments to
arrive at underlying EBITDA — — Non-GAAP: Underlying
EBITDA $ 5.0 $ (1.4 )
(1) Historical
volumes have been recast to reflect the impacts of aligning
policies on reporting financial volumes as a result of the
Acquisition. See table 5, "Actual and Pro Forma Worldwide Brand
Volume" above for further details. (2) Excludes royalty
volume of 0.473 million hectoliters and 0.301 million hectoliters
for the three months ended March 31, 2017, and March 31, 2016,
respectively. (3) Reflects gross inter-segment purchases
which are eliminated in the consolidated totals. (4) See
Part I—Item 1. Financial Statements, Note 6, "Special Items" of the
Form 10-Q for detailed discussion of special items. (5) For
the three months ended March 31, 2017, $0.9 million of integration
costs were incurred in marketing, general & administrative
expenses.
Molson Coors Brewing Company and
Subsidiaries
Table 12: Corporate Results of
Operations
($ In millions)
(Unaudited)
Three Months Ended March 31,
2017 March 31, 2016 Volume in hectoliters
— — Sales $ 0.3 $ 0.4 Excise taxes — —
Net sales 0.3 0.4 Cost of goods sold 63.0 2.8 Gross
profit 63.3 3.2 Marketing, general and administrative expenses
(55.7 ) (42.2 ) Special items, net(1) (0.1 ) — Operating
income (loss) 7.5 (39.0 ) Interest expense, net (97.6 ) (48.1 )
Other income (expense), net (7.7 ) (17.7 ) Income (loss) from
continuing operations before income taxes $ (97.8 ) $ (104.8 )
Add/(less): Special items, net(1) 0.1 — Acquisition and integration
related costs(2) 13.4 53.7 Unrealized mark-to-market (gains) and
losses(3) (63.1 ) (2.3 ) Non-GAAP: Underlying pretax income (loss)
$ (147.4 ) $ (53.4 ) Add: Interest expense (income), net 97.6 48.1
Add: Depreciation and amortization 0.9 1.0 Adjustments to arrive at
underlying EBITDA(4) — (20.4 ) Non-GAAP: Underlying EBITDA $
(48.9 ) $ (24.7 )
(1) See Part I—Item 1. Financial
Statements, Note 6, "Special Items" of the Form 10-Q for detailed
discussion of special items. (2) In connection with the
acquisition, for the three months ended March 31, 2017, and March
31, 2016, we have recorded $13.4 million and $14.9 million of
transaction related costs recorded within marketing, general &
administrative expenses, respectively. For the three months ended
March 31, 2016, we recorded financing costs of $18.4 million in
other income (expense), net and interest expense of $20.4 million
in interest income (expense). The interest income (expense) is
included in our adjustments to arrive at underlying EBITDA.
(3) The unrealized changes in fair value on our commodity swaps,
which are economic hedges, are recorded as cost of goods sold
within our Corporate business activities. As the exposure we are
managing is realized, we reclassify the gain or loss to the segment
in which the underlying exposure resides, allowing our segments to
realize the economic effects of the derivative without the
resulting unrealized mark-to-market volatility. (4)
Represents adjustments to remove amounts related to interest,
depreciation and amortization included in the adjustments to
non-GAAP underlying income above, as these items are added back as
adjustments to net income attributable to MCBC from continuing
operations.
Molson Coors Brewing Company and
Subsidiaries
Table 13: Condensed Consolidated
Balance Sheets
($ In millions, except par value)
(Unaudited)
As of March 31, 2017
December 31, 2016 Assets Current
assets: Cash and cash equivalents $ 395.0 $ 560.9 Accounts
receivable, net 756.5 669.5 Other receivables, net 166.5 135.8
Inventories, net 663.5 592.7 Other current assets, net 297.7
210.7 Total current assets 2,279.2 2,169.6 Properties, net
4,528.8 4,507.4 Goodwill 8,276.2 8,250.1 Other intangibles, net
14,032.6 14,031.9 Other assets 426.1 382.5 Total
assets $ 29,542.9 $ 29,341.5
Liabilities and
equity Current liabilities: Accounts payable and other current
liabilities $ 2,200.5 $ 2,467.7 Current portion of long-term debt
and short-term borrowings 843.0 684.8 Discontinued operations 5.2
5.0 Total current liabilities 3,048.7 3,157.5
Long-term debt 11,443.1 11,387.7 Pension and postretirement
benefits 1,157.9 1,196.0 Deferred tax liabilities 1,762.6 1,699.0
Other liabilities 307.2 267.0 Discontinued operations 13.1
12.6 Total liabilities 17,732.6 17,719.8 Molson Coors
Brewing Company stockholders' equity Capital stock: Preferred
stock, $0.01 par value (authorized: 25.0 shares; none issued) — —
Class A common stock, $0.01 par value per share (authorized: 500.0
shares; issued and outstanding: 2.6 shares and 2.6 shares,
respectively) — — Class B common stock, $0.01 par value per share
(authorized: 500.0 shares; issued: 204.2 shares and 203.7 shares,
respectively) 2.0 2.0 Class A exchangeable shares, no par value
(issued and outstanding: 2.9 shares and 2.9 shares, respectively)
108.4 108.1 Class B exchangeable shares, no par value (issued and
outstanding: 15.1 shares and 15.2 shares, respectively) 567.6 571.2
Paid-in capital 6,629.9 6,635.3 Retained earnings 6,232.0 6,119.0
Accumulated other comprehensive income (loss) (1,470.2 ) (1,545.5 )
Class B common stock held in treasury at cost (9.5 shares and 9.5
shares, respectively) (471.4 ) (471.4 ) Total Molson Coors Brewing
Company stockholders' equity 11,598.3 11,418.7 Noncontrolling
interests 212.0 203.0 Total equity 11,810.3
11,621.7 Total liabilities and equity $ 29,542.9 $
29,341.5
Molson Coors Brewing Company and
Subsidiaries
Table 14: Condensed Consolidated
Statements of Cash Flows
($ In millions)
(Unaudited)
Three Months Ended March 31,
2017 March 31, 2016 Cash flows from
operating activities: Net income (loss) including noncontrolling
interests $ 207.8 $ 163.5 Adjustments to reconcile net income to
net cash provided by operating activities: Depreciation and
amortization 197.1 67.5 Amortization of debt issuance costs and
discounts 6.5 16.7 Share-based compensation 15.5 6.1 (Gain) loss on
sale or impairment of properties and other assets, net (4.4 )
(110.1 ) Equity income in MillerCoors — (142.4 ) Distributions from
MillerCoors — 142.4 Equity in net (income) loss of other
unconsolidated affiliates 7.3 6.5 Unrealized (gain) loss on foreign
currency fluctuations and derivative instruments, net (63.0 ) (4.0
) Income tax (benefit) expense 64.6 16.7 Income tax (paid) received
(10.9 ) (88.8 ) Interest expense, excluding interest amortization
91.7 50.4 Interest paid (120.7 ) (46.9 ) Pension expense (benefit)
(7.8 ) 2.0 Pension contributions (paid) (36.0 ) (6.7 ) Change in
current assets and liabilities (net of impact of business
combinations) and other (466.6 ) (161.7 ) (Gain) loss from
discontinued operations 0.6 0.5 Net cash used in
operating activities (118.3 ) (88.3 ) Cash flows from investing
activities: Additions to properties (180.0 ) (71.1 ) Proceeds from
sales of properties and other assets 42.0 2.4 Investment in
MillerCoors — (413.7 ) Return of capital from MillerCoors — 283.4
Other 5.9 (6.5 ) Net cash used in investing activities
(132.1 ) (205.5 ) Cash flows from financing activities: Proceeds
from issuance of common stock, net — 2,526.4 Exercise of stock
options under equity compensation plans 0.3 4.2 Dividends paid
(88.3 ) (88.3 ) Debt issuance costs (3.7 ) (14.2 ) Payments on debt
and borrowings (1,501.1 ) (10.3 ) Proceeds on debt and borrowings
1,536.0 20.9 Net proceeds from (payments on) revolving credit
facilities and commercial paper 131.0 2.5 Change in overdraft
balances and other 6.1 17.3 Net cash provided by
financing activities 80.3 2,458.5 Cash and cash
equivalents: Net increase (decrease) in cash and cash equivalents
(170.1 ) 2,164.7 Effect of foreign exchange rate changes on cash
and cash equivalents 4.2 7.3 Balance at beginning of year 560.9
430.9 Balance at end of period $ 395.0 $
2,602.9
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Molson CoorsNews
MediaColin Wheeler, 303-927-2443orInvestor RelationsDave Dunnewald,
303-927-2334orKevin Kim, 303-927-2515
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