____________________________________
Net Sales Revenue (NSR) Decreased 0.6%, and
Increased 1.3% in Constant Currency
NSR/HL Decreased 0.2%, and Increased 1.7% in
Constant Currency
Worldwide Brand Volume Increased 2.3% to
26.4 million HL
EPS of $1.49 increased 4.2%, and Underlying
EPS (Non-GAAP) of $1.66 Increased 3.1%
On Track to Deliver Full-Year Business Plans
and Cost Savings
____________________________________
Molson Coors Brewing Company (NYSE: TAP; TSX: TPX) today
reported results for the 2017 second quarter. Molson Coors
president and chief executive officer Mark Hunter said, "In the
second quarter, we continued to drive our First Choice for
Consumers and Customers agenda, with laser focus on strengthening
our core brands, premiumizing our portfolio, accelerating our
international footprint, enhancing our customer partnerships, and
driving the integration of MillerCoors and the Miller brands
globally to unlock synergies and other cost savings. As a sign of
progress against this agenda, our team delivered solid growth in
constant currency net sales, global brand volume, underlying
EBITDA, net income, earnings per share and free cash flow.
Additionally, we exceeded our goals for cash generation and debt
reduction in the first half of this year and have maintained our
investment-grade debt ratings. Our second quarter performance was
in-line with our expectations, and we remain on track to deliver
our 2017 business and financial plans, cost savings targets and
cash flow goals."
Consolidated Performance - Second
Quarter 2017
Three Months Ended ($ in
millions, except per share data) (Unaudited)
June 30, 2017
June 30, 2016
Reported%
Increase(Decrease)
ForeignExchangeImpact($)
ConstantCurrency%
Increase(Decrease)
Actual Pro forma Net Sales $ 3,091.3 $ 3,109.2
(0.6)
%
$ (57.3 ) 1.3 % U.S. GAAP Net income (loss)(1) $ 321.7 $ 309.3 4.0
% Per diluted share $ 1.49 $ 1.43 4.2 % Underlying (Non-GAAP) Net
income (loss)(1) $ 358.9 $ 348.7 2.9 % Per diluted share $ 1.66 $
1.61 3.1 % Underlying EBITDA (Non-GAAP) $ 793.8 $ 761.8 4.2 % $
(11.5 ) 5.7 %
(1) Net income (loss) attributable to MCBC
from continuing operations. See Appendix for definitions and
reconciliations of non-GAAP financial measures.
Quarterly Highlights (versus Second
Quarter 2016 Pro Forma Results, unless otherwise noted)
- Net sales per HL: $109.08,
decreased 0.2 percent, and increased 1.7 percent in constant
currency, driven by higher pricing and sales mix in U.S., Canada
and Europe.
- Volume: Worldwide brand volume
of 26.4 million hectoliters increased 2.3 percent due to strong
growth in Europe and International, partially as a result of adding
the Miller global brands business and also from growth in some of
our core brands. Global priority brand volume increased 4.6
percent. Financial volume of 28.3 million hectoliters decreased 0.4
percent, driven by lower contract brewing volume.
- U.S. GAAP net income from
continuing operations attributable to MCBC increased 4.0 percent,
and underlying net income (non-GAAP) increased 2.9 percent,
both driven by increased brand volume, higher net pricing, positive
sales mix, cost savings and lower marketing spending, partially
offset by a higher effective tax rate.
- The company looks at value creation
from the MillerCoors transaction through the lens of the sum of
three numbers. In the 2nd quarter, these three numbers were:
- Underlying net earnings of
$358.9 million, plus…
- $103 million of transaction-related
cash tax benefits and…
- $11 million of transaction-related
after-tax book amortization.
- To calculate this measure on a
per-share basis, the company had 216.4 million weighted average
diluted shares outstanding in the 2nd quarter.
- Underlying EBITDA: Increased 4.2
percent and on a constant-currency basis increased 5.7 percent,
driven by higher pricing, positive sales mix, cost savings and
lower marketing spending versus a year ago.
- U.S. GAAP cash from operations:
Net cash from operating activities for the first half of 2017 was
$818.5 million, which represents an increase of $536.1 million from
actual prior year results, driven by the addition of the other 58
percent of MillerCoors cash flows, as well as lower cash paid for
taxes, which were partially offset by higher cash paid for
interest.
- Underlying free cash flow:
$586.7 million for the first half of 2017, a 232 percent increase
from actual prior year results of $176.9 million, driven by the
same factors as cash from operations.
- Debt: Total debt at the end of
the second quarter was $11.872 billion, and cash and cash
equivalents totaled $502.9 million, resulting in net debt of
$11.369 billion, which is more than $522 million lower than at the
beginning of the second quarter.
Business Review- Second Quarter
2017
Net
Sales
($ in millions) (Unaudited)
Three Months
Ended June 30, 2017 June 30, 2016
Reported%Increase(Decrease)
ForeignExchangeImpact($)
ConstantCurrency
%Increase(Decrease)
United States (1) $ 2,138.9 $ 2,132.2 0.3 % $ — 0.3 % Canada $
407.6 $ 425.9
(4.3)
%
$ (16.9 )
(0.3)
%
Europe $ 524.7 $ 522.1 0.5 % $ (40.5 ) 8.3 % International $ 65.1 $
39.2 66.1 % $ 0.1 65.8 % Corporate $ 0.3 $ 0.2 50.0 % $ — 50.0 %
Pretax Income
(U.S. GAAP)
($ in millions) (Unaudited)
Three
Months Ended June 30, 2017 June 30, 2016
Reported%Increase(Decrease)
ForeignExchangeImpact($)
ConstantCurrency
%Increase(Decrease)
United States (1) $ 484.7 $ 418.2 15.9 % $ (0.8 ) 16.1 % Canada $
68.7 $ 88.5
(22.4)
%
$ (1.6 )
(20.6)
%
Europe $ 73.3 $ 59.0 24.2 % $ (4.8 ) 32.4 % International $ (7.7 )
$ (33.4 ) 76.9 % $ (0.3 ) 77.8 % Corporate $ (169.2 ) $ (109.1 )
(55.1)
%
$ 1.1
(56.1)
%
Underlying
EBITDA (Non-GAAP)(2)
($ in millions) (Unaudited)
Three
Months Ended June 30, 2017 June 30, 2016
Reported%Increase(Decrease)
ForeignExchangeImpact($)
ConstantCurrency
%Increase(Decrease)
United States (1) $ 619.4 $ 574.0 7.9 % $ (0.8 ) 8.0 % Canada $
100.4 $ 111.2
(9.7)
%
$ (2.8 )
(7.2)
%
Europe $ 118.3 $ 104.0 13.8 % $ (7.9 ) 21.3 % International $ (0.9
) $ (1.7 ) 47.1 % $ (0.3 ) 64.7 % Corporate $ (43.4 ) $ (28.2 )
(53.9)
%
$ 0.3
(55.0)
%
(1) United States second quarter 2016 results
are presented on a pro forma basis. (2) See Appendix for
definitions and reconciliations of non-GAAP financial measures.
United States Business
(MillerCoors) (versus Second Quarter 2016 Pro Forma
Results)
- Volume: U.S. domestic
sales-to-retailers volume (STRs) declined 1.9 percent for the
quarter, driven by lower volume in the Premium Light and Below
Premium segments, partially offset by growth in the Above Premium
segment. Domestic sales-to-wholesalers volume (STWs) decreased 0.4
percent.
- Revenue: Domestic net sales per
hectoliter, which excludes contract brewing and
company-owned-distributor sales, grew 1.0 percent as a result of
higher net pricing and positive sales mix, partially offset by
cycling a multi-year adjustment in federal excise tax expense last
year.
- Cost of goods sold (COGS) per
hectoliter increased 0.3 percent, driven by higher input costs,
portfolio premiumization, and volume deleverage, partially offset
by cost savings.
- Marketing, general and
administrative (MG&A) expense decreased 5.7 percent due to
lower marketing and employee-related expenses.
- On a U.S. GAAP basis, United States
income from continuing operations before income taxes increased
15.9 percent to $484.7 million, primarily due to lower special
charges related to the Eden, North Carolina, brewery closure; lower
MG&A expenses; higher net pricing; positive sales mix; and cost
savings.
- United States underlying EBITDA
increased 7.9 percent to $619.4 million, driven by lower MG&A
expenses, higher net pricing, positive sales mix and cost
savings.
Canada Business
- Volume: Canada brand volume
decreased 1.3 percent in the second quarter, as a result of lower
domestic volumes, partially offset by the return of the Miller
brands to our portfolio. Canada financial volume, which includes
contract brewing volume, decreased 2.6 percent primarily due to
lower contract brewing volume.
- Revenue: Net sales per
hectoliter increased 2.3 percent in local currency, primarily due
to positive pricing and brand mix, driven by higher import brand
volume.
- COGS per hectoliter increased
4.6 percent in local currency due to mix shift to higher-cost
import brands, volume deleverage, and input cost inflation
(including unfavorable transactional foreign currency impacts),
partially offset by ongoing cost savings initiatives.
- MG&A expense increased 10.4
percent in local currency, driven primarily by higher brand
amortization expense of approximately $10 million related to
changing the Molson brands to definite-lived intangible assets last
year.
- On a U.S. GAAP basis, Canada
reported a decrease in income from continuing operations before
income taxes of 22.4 percent to $68.7 million, compared to the
prior year, which was primarily driven by lower domestic volume and
higher brand amortization expense.
- Canada underlying EBITDA
decreased 9.7 percent to $100.4 million in the quarter, driven
primarily by the impact of lower domestic volume and unfavorable
COGS rate, partially offset by positive pricing.
Europe Business
- Volume: Europe brand volume
increased 11.5 percent in the second 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 the later timing of the Easter
holiday this year and strong growth from our core and above-premium
brands. Europe financial volume, which includes contract brewing
and factored brands but excludes royalty volume, increased 4.4
percent.
- Revenue: Europe net sales per
hectoliter increased 3.7 percent in local currency, due to positive
mix and net pricing.
- COGS per hectoliter increased
4.7 percent in local currency, primarily driven by mix shift to
higher-cost brands and geographies, partially offset by higher net
pension benefit this year.
- MG&A expense decreased 3.8
percent in local currency, due to the quarterly timing of marketing
investments.
- On a U.S. GAAP basis, Europe
reported an increase in income from continuing operations before
income taxes of 24.2 percent to $73.3 million compared to the
prior year due to higher volume, positive sales mix, lower brand
investments, increased net pension benefit, and favorable timing of
Easter this year, partially offset by unfavorable foreign
currency.
- Europe underlying EBITDA
increased 13.8 percent to $118.3 million, driven by the same
factors that impacted U.S. GAAP income.
International Business
- Volume: International brand
volume increased by 43.2 percent in the second quarter, driven by
the transfer of the Puerto Rico business from MillerCoors, Coors
Light growth primarily in Latin America, and the addition of the
Miller global brands business. These factors were partially offset
by the transfer of royalty and export brand volume to Europe.
- Revenue: Net sales per
hectoliter decreased 5.5 percent, driven by sales mix changes,
partially offset by positive pricing.
- COGS per hectoliter increased
5.9 percent, due to sales mix changes.
- MG&A expense increased 53.4
percent, driven by increased brand investments, along with higher
organization and integration costs related to the acquisition of
the Miller global brands business.
- On a U.S. GAAP basis, International
segment reported a loss from continuing operations before
income taxes of $7.7 million improved from a loss of $33.4
million a year ago, driven by cycling impairment charges related to
our India business in the second quarter of 2016.
- International underlying EBITDA
was a loss of $0.9 million in the second quarter, versus a loss of
$1.7 million a year ago, driven by higher volume and positive
pricing, partially offset by higher MG&A expense.
Corporate
- On a U.S. GAAP basis, corporate loss
from continuing operations on a reported basis was $169.2
million in the second quarter compared to a loss of $109.1 million
in the prior year, primarily due to increased interest and MG&A
expense, as well as unrealized mark-to-market losses from commodity
hedges this quarter.
- Corporate underlying EBITDA was
a loss of $43.4 million for the second quarter versus a $28.2
million loss in the prior year, driven primarily by higher global
investments in commercial, supply chain and information
technology.
Worldwide Brand and Financial
Volume(1)
(In millions of hectoliters) (Unaudited)
Three Months Ended June 30, 2017
June 30, 2016 % Change June 30,
2016 Actual Pro forma Actual Financial
Volume(1) 28.340 28.455
(0.4)
%
9.377 Contract brewing and wholesaler volume (2.390 ) (2.836 )
(15.7)
%
(0.800 ) Royalty Volume 1.033 0.521 98.3 % 0.521
Sales-To-Wholesaler to Sales-To-Retail adjustment (0.617 ) (0.361 )
70.9 % (0.036 ) Owned Volume 26.366 25.779 2.3 % 9.062
Proportionate share of Equity Investment Worldwide Brand Volume —
— — % 7.021
Total Worldwide Brand
Volume(1) 26.366 25.779 2.3 % 16.083
(1) See Appendix for
definitions and additional discussion regarding Financial and
Worldwide Brand Volume.
Other Results
Effective Income
Tax Rates (versus second quarter 2016 pro forma
results)
Three Months Ended June 30, 2017
June 30, 2016 U.S. GAAP effective tax rate 27.4 %
26.1 % Underlying effective tax rate 28.4 % 27.2 %
- The effective tax rate on a reported
and underlying basis was slightly higher this year due to
geographic mix and lower discrete benefits in 2017.
Special and Other Non-Core
Items
The following special and other non-core items have been
excluded from underlying results. See the Appendix for
reconciliations of non-GAAP financial measures.
- During the second quarter, MCBC
recognized a net special charge of $16.5 million, primarily
driven by charges related to the Eden brewery closure in the U.S.
and the planned closure of our Burton South brewery in Europe and
Vancouver brewery in Canada.
- Additionally during the second quarter,
we recorded other non-core net charges of $42.3 million,
primarily driven by unrealized mark-to-market losses on commodity
hedges and integration costs related to the Acquisition.
2017 Outlook
The following targets for full year 2017 are unchanged from
previous disclosures, unless otherwise indicated:
- Underlying free cash
flow: $1.2 billion, plus or minus 10 percent.
- Cash pension contributions in
the range of $300 to $320 million as a result of an additional,
discretionary contribution to the U.S. pension plan. - Updated
(formerly $100 to $120 million)
- Included in 2017 underlying free cash
flow target.
- Transaction-related cash tax
benefits: approximately $400 million.
- Capital spending: approximately
$750 million, plus or minus 10 percent.
- Cost savings: more than $175
million.
- Cost of goods sold per
hectoliter:
- MillerCoors: low-single-digit
increase.
- Canada: mid-single-digit
increase (local currency).
- Europe: low-single-digit
increase (local currency).
- International business: decrease
at a mid-single-digit rate. - Updated (formerly double-digit
decrease)
- Underlying Corporate MG&A
expense: approximately $170 million, plus or minus 10
percent.
- Underlying depreciation and
amortization: approximately $790 million.
- Pension income: approximately
$24 million.
- Underlying consolidated net interest
expense: approximately $370 million, plus or minus 5
percent.
- Underlying effective tax rate in
the top half of the range of 24 to 28 percent. - Updated
Notes
Unless otherwise indicated in this release, all $ amounts are in
U.S. Dollars, and all quarterly comparative results are for the
Company’s second quarter ended June 30, 2017, compared to the
second quarter ended June 30, 2016. 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.
As used in this release, the term “Acquisition” refers to the
Company’s acquisition from Anheuser-Busch InBev SA/NV on October
11, 2016, of SABMiller plc’s 58 percent economic interest and 50
percent voting interest in MillerCoors LLC and all trademarks,
contracts and other assets primarily related to the Miller
International business outside of the U.S. and Puerto Rico.
2017 Second 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 second quarter results.
The live webcast will be accessible via the Company’s website,
www.molsoncoors.com. Online replays of the webcast will be
available until 11:59 p.m. Eastern Time on October 31, 2017. The
Company will post this release and related financial statements on
its website today.
The company will not host an Investor Relations Follow-Up
Session call.
Upcoming Investor
Webcast
The company will host an online, real-time webcast at the
Barclays Global Consumer Staples Conference in Boston on Wednesday,
September 6, 2017, at 9:00 a.m. Eastern Time. A live webcast of
this investor event will be accessible via the Molson Coors Brewing
Company website, www.molsoncoors.com, on the Investors page. An
online replay of the presentation webcast will be available on the
website within two hours after the presentation.
Overview of Molson Coors
With a story that starts in 1774, Molson Coors has spent
centuries defining brewing greatness. As one of the largest global
brewers, 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 and Creemore Springs Premium Lager,
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 “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 and our
Quarterly Reports on Form 10-Q. 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.
APPENDIX
Consolidated Financial
Performance(1)
Molson Coors Brewing
Company Three Months Ended June 30, 2017
% Change
(In millions, except per share
data)(Unaudited)
U.S. GAAP
Non-GAAPAdjustments(2)
Non-GAAPUnderlying(2)
U.S. GAAP
Non-GAAPUnderlying
Net sales $ 3,091.3 $ — $
3,091.3 (0.6 )% (0.6 )% Net
Sales per HL change (0.2 )% (0.2 )%
Cost of goods sold $
(1,756.1 ) $ 28.4 $ (1,727.7 )
1.1 % (1.2
)% Cost of goods sold per HL change 1.6 % (0.8 )%
Gross
profit $ 1,335.2 $ 28.4 $
1,363.6 (2.7 )% 0.3 %
Marketing, general and administrative expenses $
(781.2 ) $ 13.9 $ (767.3
) (0.3 )% (2.1 )% Special items,
net $ (16.5 ) $ 16.5 $ — (77.7 )% N/M
Operating income
(loss) $ 537.5 $ 58.8 $
596.3 4.2 % 3.4 % Interest
income (expense), net $ (89.2 ) $ — $ (89.2 ) (2.7 )% (2.7 )% Other
income (expense), net $ 1.5 $ — $ 1.5 (37.5 )% (37.5 )% Income
(loss) from continuing operations before income taxes $ 449.8 $
58.8 $ 508.6 5.5 % 4.4 % Income tax benefit (expense) $ (123.0 ) $
(21.6 ) $ (144.6 ) 10.7 % 9.0 %
Net income (loss)(3)
$ 321.7 $ 37.2 $ 358.9
4.0
% 2.9 % Per diluted share 1.49
0.17 1.66 4.2 % 3.1 %
EBITDA(4) $ 793.8 4.2 %
Molson Coors Brewing Company Six Months Ended June
30, 2017 % Change (In millions, except per share
data)(Unaudited)
U.S. GAAP
Non-GAAPAdjustments(2)
Non-GAAPUnderlying(2)
U.S. GAAP
Non-GAAPUnderlying
Net sales $ 5,540.0 $ — $
5,540.0 (0.5 )% (0.5 )% Net
Sales per HL change 0.9 % 0.9 %
Cost of goods sold $
(3,129.0 ) $ (34.0 ) $ (3,163.0 )
(1.8 )% (1.2
)% Cost of goods sold per HL change (0.3 )% (0.3 )%
Gross
profit $ 2,411.0 $ (34.0 )
$ 2,377.0 1.2 % 0.4 %
Marketing, general and administrative expenses $
(1,484.0 ) $ 32.2 $
(1,451.8 ) 2.9 % 0.6 %
Special items, net $ (20.3 ) $ 20.3 $ — 822.7 % N/M
Operating
income (loss) $ 906.7 $ 18.5
$ 925.2 (3.4 )% — %
Interest income (expense), net $ (185.8 ) $ — $ (185.8 ) 1.8 % 1.8
% Other income (expense), net $ 1.9 $ (8.1 ) $ (6.2 ) (73.2 )%
(187.3 )% Income (loss) from continuing operations before income
taxes $ 722.8 $ 10.4 $ 733.2 (5.3 )% (2.2 )% Income tax benefit
(expense) $ (187.6 ) $ (9.5 ) $ (197.1 ) 0.4 % (3.1 )%
Net
income (loss)(3) $ 523.6 $
0.9 $ 524.5
(7.6 )% (2.3 )%
Per diluted share 2.42 — 2.42
(7.6 )% (2.8 )% EBITDA(4)
$ 1,308.7 1.0 %
- Versus comparable 2016 period Pro Forma
Results.
- Refer to the table "Actual and Pro
Forma Condensed Consolidated Statements of Operations" for detailed
descriptions and reconciliation of non-GAAP adjustments and 2016
results.
- Net income (loss) attributable to MCBC
from continuing operations.
- EBITDA is earnings before interest,
taxes, depreciation and amortization, a non-GAAP financial
measure.
Pro Forma Information
We have presented consolidated and U.S. segment pro forma
information in this release 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. 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
International segment. 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 and the related
financing occurred at the date indicated, nor does this information
project the results of operations of MCBC for any future dates or
periods.
Actual and Pro Forma Worldwide Brand
and Financial Volumes
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. 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.
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 International 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 International segment.
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 "underlying pretax and net
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 historical 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.
Our guidance for corporate underlying MG&A, underlying
depreciation and amortization, underlying EBITDA margin, underlying
free cash flow, underlying effective tax rate, and underlying
consolidated net interest expense are also non-GAAP financial
measures that exclude or otherwise have been adjusted for 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. We are unable to reconcile the
above described guidance measures to their nearest U.S. GAAP
measures without unreasonable efforts because we are unable to
predict with a reasonable degree of certainty the actual impact of
the special and other non-core items. By their very nature, special
and other non-core items are difficult to anticipate with precision
because they are generally associated with unexpected and unplanned
events that impact our company and its financial results.
Therefore, we are unable to provide a reconciliation of these
measures.
Reconciliations to Nearest U.S. GAAP
Measures
Underlying Actual
and Pro Forma EBITDA
(In millions) (Unaudited)
Three Months
Ended June 30, 2017 June 30, 2016
% change June 30, 2016 Actual Pro
Forma Actual U.S. GAAP:
Net income (loss)
attributable to MCBC from continuing operations $
321.7 $ 309.3 4.0 %
$ 174.1 Add:
Net income (loss) attributable to noncontrolling interests 5.1
5.9
(13.6)
%
1.6 U.S. GAAP:
Net income (loss) from continuing
operations 326.8 315.2 3.7 % 175.7 Add: Interest expense
(income), net 89.2 91.7
(2.7)
%
40.5 Add: Income tax expense (benefit) 123.0 111.1 10.7 % 21.2 Add:
Depreciation and amortization 198.9 219.2
(9.3)
%
70.2 Adjustments included in underlying income(1) 58.8 60.9
(3.4)
%
86.2 Adjustments to arrive at underlying EBITDA(2) (2.9 ) (36.3 )
(92.0)
%
(16.6 ) Adjustments to arrive at underlying EBITDA related to our
investment in MillerCoors(3) — — — % 51.5
Non-GAAP:
Underlying EBITDA $ 793.8
$ 761.8 4.2 %
$ 428.7
(In millions) (Unaudited)
Six Months Ended
June 30, 2017 June 30, 2016 %
change June 30, 2016 Actual Pro
Forma Actual U.S. GAAP:
Net income (loss)
attributable to MCBC from continuing operations $
523.6 $ 566.7
(7.6)
%
$ 337.3 Add: Net income (loss) attributable to
noncontrolling interests 11.6 9.5 22.1 % 2.4
U.S. GAAP:
Net income (loss) from continuing operations
535.2 576.2
(7.1)
%
339.7 Add: Interest expense (income), net 185.8 182.6 1.8 % 87.8
Add: Income tax expense (benefit) 187.6 186.8 0.4 % 37.9 Add:
Depreciation and amortization 396.0 438.6
(9.7)
%
137.7 Adjustments included in underlying income(1) 10.4 (13.1 )
(179.4)
%
29.0 Adjustments to arrive at underlying EBITDA(2) (6.3 ) (75.2 )
(91.6)
%
(40.0 ) Adjustments to arrive at underlying EBITDA related to our
investment in MillerCoors(3) — — — % 100.0
Non-GAAP:
Underlying EBITDA $ 1,308.7
$ 1,295.9 1.0 %
$ 692.1
(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.
Underlying Free
Cash Flow
(In millions) (Unaudited)
Actual
Six Months Ended June 30, 2017 June
30, 2016 U.S. GAAP:
Net Cash Provided by (Used In) Operating
Activities $ 818.5 $ 282.4 Less:
Additions to properties(1) (354.0 ) (121.6 ) Less: Investment in
MillerCoors(1) — (810.6 ) Add: Return of capital from
MillerCoors(1) — 731.1 Add: Cash impact of special items(2) 59.0
4.0 Add: Non-core costs related to acquisition of businesses(3)
63.2 90.6 Add: MillerCoors cash impact of special items(4) —
1.0 Non-GAAP:
Underlying Free Cash Flow $
586.7 $ 176.9
(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 $140.8 million received
from the sale of the Vancouver brewery are being used to fund the
construction of the new brewery in British Columbia. (3)
Included in net cash provided by operating activities and reflects
costs paid associated with the Acquisition of 58% of MillerCoors,
LLC, and the Miller global brand portfolio. (4) Amounts
represent our proportionate 42% share of the cash flow impacts for
the pre-Acquisition period January 1, 2016, through June 30, 2016.
Statements of Operations -- Molson
Coors Brewing Company and Subsidiaries
Actual and Pro
Forma Condensed Consolidated Statements of
Operations
($ In millions, except per share data)
(Unaudited)
Three Months Ended June 30, 2017
June 30, 2016 Actual Pro forma
Actual
Financial volume in hectoliters(1)
28.340 28.455 9.377 Sales $ 3,793.1 $ 3,818.5
$ 1,407.0 Excise taxes (701.8 ) (709.3 ) (420.8 ) Net sales 3,091.3
3,109.2 986.2 Cost of goods sold (1,756.1 ) (1,736.3 ) (562.2 )
Gross profit 1,335.2 1,372.9 424.0 Marketing, general and
administrative expenses (781.2 ) (783.4 ) (313.6 ) Special items,
net (16.5 ) (73.9 ) (34.5 ) Equity income in MillerCoors — —
191.9 Operating income (loss) 537.5 515.6 267.8
Interest income (expense), net (89.2 ) (91.7 ) (40.5 ) Other income
(expense), net 1.5 2.4 (30.4 ) Income (loss) from
continuing operations before income taxes 449.8 426.3 196.9 Income
tax benefit (expense) (123.0 ) (111.1 ) (21.2 ) Net income (loss)
from continuing operations 326.8 315.2 175.7 Income (loss) from
discontinued operations, net of tax 1.6 (1.8 ) (1.8 ) Net
income (loss) including noncontrolling interests 328.4 313.4 173.9
Net (income) loss attributable to noncontrolling interests (5.1 )
(5.9 ) (1.6 ) Net income (loss) attributable to MCBC $ 323.3
$ 307.5 $ 172.3 Basic net income (loss)
attributable to MCBC per share: From continuing operations $ 1.49 $
1.44 $ 0.81 From discontinued operations 0.01 — (0.01
) Basic net income (loss) attributable to MCBC per share $ 1.50
$ 1.44 $ 0.80 Diluted net income (loss)
attributable to MCBC per share: From continuing operations $ 1.49 $
1.43 $ 0.81 From discontinued operations — — (0.01 )
Diluted net income (loss) attributable to MCBC per share $ 1.49
$ 1.43 $ 0.80 Weighted average shares -
basic 215.4 214.7 214.7 Weighted average shares - diluted 216.4
216.0 216.0 Dividends per share $ 0.41 $ 0.41
Amounts attributable to MCBC Net income (loss) from
continuing operations $ 321.7 $ 309.3 $ 174.1 Income (loss) from
discontinued operations, net of tax 1.6 (1.8 ) (1.8 ) Net
income (loss) attributable to MCBC $ 323.3 $ 307.5 $
172.3
(1)
Historical financial volumes have been
recast to reflect the impacts of aligning policies on reporting
financial volumes as a result of the Acquisition. See "Actual and
Pro Forma Worldwide Brand Volume" above for further details.
($ In millions, except per share data)
(Unaudited)
Six Months Ended June 30, 2017
June 30, 2016 Actual Pro forma
Actual
Financial volume in hectoliters(1)
50.218 50.971 15.707 Sales $ 6,706.9 $ 6,826.7
$ 2,357.8 Excise taxes (1,166.9 ) (1,256.1 ) (714.4 ) Net sales
5,540.0 5,570.6 1,643.4 Cost of goods sold (3,129.0 ) (3,187.1 )
(976.2 ) Gross profit 2,411.0 2,383.5 667.2 Marketing, general and
administrative expenses (1,484.0 ) (1,442.8 ) (564.5 ) Special
items, net (20.3 ) (2.2 ) 74.1 Equity income in MillerCoors —
— 334.3 Operating income (loss) 906.7 938.5
511.1 Interest income (expense), net (185.8 ) (182.6 ) (87.8 )
Other income (expense), net 1.9 7.1 (45.7 ) Income
(loss) from continuing operations before income taxes 722.8 763.0
377.6 Income tax benefit (expense) (187.6 ) (186.8 ) (37.9 ) Net
income (loss) from continuing operations 535.2 576.2 339.7 Income
(loss) from discontinued operations, net of tax 1.0 (2.3 )
(2.3 ) Net income (loss) including noncontrolling interests 536.2
573.9 337.4 Net (income) loss attributable to noncontrolling
interests (11.6 ) (9.5 ) (2.4 ) Net income (loss) attributable to
MCBC $ 524.6 $ 564.4 $ 335.0 Basic net
income (loss) attributable to MCBC per share: From continuing
operations $ 2.43 $ 2.64 $ 1.61 From discontinued operations 0.01
— (0.01 ) Basic net income (loss) attributable to
MCBC per share $ 2.44 $ 2.64 $ 1.60
Diluted net income (loss) attributable to MCBC per share: From
continuing operations $ 2.42 $ 2.62 $ 1.60 From discontinued
operations — — (0.01 ) Diluted net income (loss)
attributable to MCBC per share $ 2.42 $ 2.62 $ 1.59
Weighted average shares - basic 215.3 214.6 209.2
Weighted average shares - diluted 216.4 215.9 210.5
Dividends per share $ 0.82 $ 0.82 Amounts
attributable to MCBC Net income (loss) from continuing operations $
523.6 $ 566.7 $ 337.3 Income (loss) from discontinued operations,
net of tax 1.0 (2.3 ) (2.3 ) Net income (loss) attributable
to MCBC $ 524.6 $ 564.4 $ 335.0
(1)
Historical financial volumes have been
recast to reflect the impacts of aligning policies on reporting
financial volumes as a result of the Acquisition. See "Actual and
Pro Forma Worldwide Brand Volume" above for further details.
Molson Coors Brewing Company and
SubsidiariesU.S. Actual and Pro Forma
Results of Operations
($ In millions) (Unaudited)
Three
Months Ended June 30, 2017 June 30, 2016
Actual Pro Forma Actual
Financial volume in hectoliters(1)(2)
19.190 19.363 19.363 Sales(2) $ 2,433.0 $
2,420.7 $ 2,426.3 Excise taxes (294.1 ) (288.5 ) (299.6 ) Net
sales(2) 2,138.9 2,132.2 2,126.7 Cost of goods sold(2) (1,182.1 )
(1,188.9 ) (1,174.5 ) Gross profit 956.8 943.3 952.2 Marketing,
general and administrative expenses (458.8 ) (486.3 ) (477.1 )
Special items, net(3) (12.6 ) (39.4 ) (39.4 ) Operating income
485.4 417.6 435.7 Interest income (expense), net — (0.4 ) (0.4 )
Other income (expense), net (0.7 ) 1.0 1.0 Income
(loss) from continuing operations before income taxes $ 484.7 $
418.2 $ 436.3 Add/(less): Special items, net(3) 12.6 39.4 39.4
Acquisition and integration related costs(4) 0.8 — —
Non-GAAP: Underlying pretax income (loss) $ 498.1 $ 457.6 $
475.7 Add: Interest expense (income), net — 0.4 0.4 Add:
Depreciation and amortization 121.3 149.0 116.0 Adjustments to
arrive at underlying EBITDA(5) — (33.0 ) (33.0 ) Non-GAAP:
Underlying EBITDA $ 619.4 $ 574.0 $ 559.1
(1)
Historical financial volumes have been
recast to reflect the impacts of aligning policies on reporting
financial volumes as a result of the Acquisition. See "Actual and
Pro Forma Worldwide Brand Volume" above for further details.
(2) On a reported basis, includes gross inter-segment sales
and volumes that 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 June 30, 2016, includes $33.0 million of
accelerated depreciation in excess of normal depreciation
associated with the brewery and $6.4 million of other charges.
These accelerated depreciation charges are included in our
adjustments to arrive at underlying EBITDA. (4) For the
three months ended June 30, 2017, $0.7 million of integration costs
were incurred in cost of goods sold and $0.1 million of integration
costs were incurred in marketing, general & administrative
expenses. (5) Represents adjustments to remove amounts
related to interest, depreciation and amortization included in the
adjustments to non-GAAP underlying income above, as these items are
added back as adjustments to net income attributable to MCBC from
continuing operations. ($ In millions)
(Unaudited)
Six Months Ended June 30, 2017
June 30, 2016 Actual Pro Forma
Actual
Financial volume in hectoliters(1)(2)
34.962 35.751 35.751 Sales(2) $ 4,424.4 $
4,484.1 $ 4,495.6 Excise taxes (535.6 ) (541.7 ) (552.8 ) Net
sales(2) 3,888.8 3,942.4 3,942.8 Cost of goods sold(2) (2,209.0 )
(2,237.6 ) (2,207.5 ) Gross profit 1,679.8 1,704.8 1,735.3
Marketing, general and administrative expenses (863.7 ) (906.7 )
(886.8 ) Special items, net(3) (15.1 ) (76.3 ) (76.3 ) Operating
income 801.0 721.8 772.2 Interest income (expense), net — (0.9 )
(0.9 ) Other income (expense), net (0.7 ) 2.6 2.6
Income (loss) from continuing operations before income taxes $
800.3 $ 723.5 $ 773.9 Add/(less): Special items, net(3) 15.1 76.3
76.3 Acquisition and integration related costs(4) 5.3 —
— Non-GAAP: Underlying pretax income (loss) $ 820.7 $
799.8 $ 850.2 Add: Interest expense (income), net — 0.9 0.9 Add:
Depreciation and amortization 240.6 300.9 233.1 Adjustments to
arrive at underlying EBITDA(5) — (68.9 ) (68.9 ) Non-GAAP:
Underlying EBITDA $ 1,061.3 $ 1,032.7 $ 1,015.3
(1)
Historical financial volumes have been
recast to reflect the impacts of aligning policies on reporting
financial volumes as a result of the Acquisition. See "Actual and
Pro Forma Worldwide Brand Volume" above for further details.
(2) On a reported basis, includes gross inter-segment sales
and volumes that 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 six months ended June 30, 2016, includes $68.9 million of
accelerated depreciation in excess of normal depreciation
associated with the brewery and $7.4 million of other charges.
These accelerated depreciation charges are included in our
adjustments to arrive at underlying EBITDA. (4) For the six
months ended June 30, 2017, $1.2 million of integration costs were
incurred in cost of goods sold and $4.1 million of integration
costs were incurred in marketing, general & administrative
expenses. (5) Represents adjustments to remove amounts
related to interest, depreciation and amortization included in the
adjustments to non-GAAP underlying income above, as these items are
added back as adjustments to net income attributable to MCBC from
continuing operations.
Molson Coors Brewing Company and
SubsidiariesUnderlying Equity Income
in MillerCoors
($ In millions)
(Unaudited)
Three Months Ended Six Months Ended
June 30, 2016 June 30, 2016 Income (loss) from
continuing operations before income taxes $ 436.3 $ 773.9 Income
tax expense (2.5 ) (2.0 ) Net (income) loss attributable to
noncontrolling interest (4.3 ) (7.1 ) Net income attributable to
MillerCoors $ 429.5 $ 764.8 MCBC economic interest 42 % 42 % MCBC
proportionate share of MillerCoors net income 180.4 321.2
Amortization of the difference between
MCBC contributed cost basis andproportionate share of the
underlying equity in net assets of MillerCoors
1.1 2.2 Share-based compensation adjustment(1) (0.7 ) (0.2 ) U.S.
import tax benefit(2) 11.1 11.1 Equity income in
MillerCoors $ 191.9 $ 334.3 Add/(less): MCBC proportionate share of
MillerCoors special items, net of tax(3) 16.5 32.0
Non-GAAP Equity Income in MillerCoors $ 208.4 $ 366.3
(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) Represents a benefit associated with an anticipated
refund to Coors Brewing Company ("CBC"), a wholly-owned subsidiary
of MCBC, of U.S. federal excise tax paid on products imported by
CBC based on qualifying volumes exported by CBC from the U.S.
(3) Results include net special charges of $39.4 million and
$76.3 million for the three and six months ended June 30, 2016,
respectively, primarily related to the closure of the Eden, North
Carolina, brewery for which we recorded our proportionate 42%
share.
Molson Coors Brewing Company and
SubsidiariesCanada Results of
Operations
($ In millions) (Unaudited)
Three Months Ended Six Months Ended
June 30, 2017 June 30, 2016 June 30,
2017 June 30, 2016
Financial volume in hectoliters(1)(2)
2.530 2.597 4.323 4.371 Sales(2) $
527.6 $ 560.0 $ 905.0 $ 913.8 Excise taxes (120.0 ) (134.1 ) (206.3
) (219.9 ) Net sales(2) 407.6 425.9 698.7 693.9 Cost of goods
sold(2) (234.1 ) (239.2 ) (416.0 ) (396.4 ) Gross profit 173.5
186.7 282.7 297.5 Marketing, general and administrative expenses
(105.0 ) (99.3 ) (201.0 ) (176.0 ) Special items, net(3) (1.0 )
(1.4 ) 0.7 107.9 Operating income (loss) 67.5 86.0
82.4 229.4 Other income (expense), net 1.2 2.5 9.4
5.7 Income (loss) from continuing operations before
income taxes $ 68.7 $ 88.5 $ 91.8 $ 235.1 Add/(less): Special
items, net(3) 1.0 1.4 (0.7 ) (107.9 ) Acquisition and integration
related costs(4) 2.8 — 2.8 — Other non-core items(5) — —
(8.1 ) — Non-GAAP: Underlying pretax
income (loss) $ 72.5 $ 89.9 $ 85.8 $ 127.2 Add: Depreciation and
amortization 29.0 22.6 59.8 43.6 Adjustments to arrive at
underlying EBITDA(5) (1.1 ) (1.3 ) (2.3 ) (2.4 ) Non-GAAP:
Underlying EBITDA $ 100.4 $ 111.2 $ 143.3 $
168.4
(1)
Historical financial volumes have been
recast to reflect the impacts of aligning policies on reporting
financial volumes as a result of the Acquisition. See "Actual and
Pro Forma Worldwide Brand Volume" above for further details.
(2) Reflects gross inter-segment sales, purchases and
volumes that 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 June 30, 2017, and June 30, 2016,
includes accelerated depreciation expense of $1.1 million and $1.3
million, respectively, related to the planned closure of the
Vancouver brewery. Special items for the six months ended June 30,
2017, and June 30, 2016, includes accelerated depreciation expense
of $2.3 million and $2.4 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 and six months ended
June 30, 2017, $2.8 million of acquisition and integration related
costs were incurred in cost of goods sold. (5) For the six
months ended June 30, 2017, a gain of $8.1 million was recorded in
other income (expense), net resulting from a purchase price
adjustment related to the historical sale of Molson Inc.’s
ownership interest in the Montreal Canadiens. (6) Represents
adjustments to remove amounts related to interest, depreciation and
amortization included in the adjustments to non-GAAP underlying
income above, as these items are added back as adjustments to net
income attributable to MCBC from continuing operations.
Molson Coors Brewing Company and
SubsidiariesEurope Results of
Operations
($ In millions) (Unaudited)
Three Months Ended Six Months Ended
June 30, 2017 June 30, 2016 June 30,
2017 June 30, 2016
Financial volume in hectoliters(1)(2)
6.715 6.430 11.074 10.691 Sales(2) $
796.2 $ 800.5 $ 1,310.6 $ 1,361.4 Excise taxes (271.5 ) (278.4 )
(404.3 ) (480.6 ) Net sales(2) 524.7 522.1 906.3 880.8 Cost of
goods sold (313.9 ) (310.9 ) (538.0 ) (550.8 ) Gross profit 210.8
211.2 368.3 330.0 Marketing, general and administrative expenses
(136.5 ) (151.1 ) (261.7 ) (270.4 ) Special items, net(3) (2.6 )
(2.3 ) (5.2 ) (3.0 ) Operating income (loss) 71.7 57.8 101.4 56.6
Interest income, net 1.0 0.9 2.0 1.7 Other income (expense), net
0.6 0.3 0.5 (0.5 ) Income (loss) from
continuing operations before income taxes $ 73.3 $ 59.0 $ 103.9 $
57.8 Add/(less): Special items, net(3) 2.6 2.3 5.2 3.0 Acquisition
and integration related costs(4) 0.1 — 0.3 —
Non-GAAP: Underlying pretax income (loss) $ 76.0 $ 61.3 $
109.4 $ 60.8 Add: Interest expense (income), net (1.0 ) (0.9 ) (2.0
) (1.7 ) Add: Depreciation and amortization 45.1 45.6 88.9 90.2
Adjustments to arrive at underlying EBITDA(5) (1.8 ) (2.0 ) (4.0 )
(3.9 ) Non-GAAP: Underlying EBITDA $ 118.3 $ 104.0 $
192.3 $ 145.4
(1)
Historical financial volumes have been
recast to reflect the impacts of aligning policies on reporting
financial volumes as a result of the Acquisition. See "Actual and
Pro Forma Worldwide Brand Volume" above for further details.
(2) Reflects gross inter-segment sales that are eliminated
in the consolidated totals. Excludes royalty volume of 0.479
million hectoliters and 0.804 million hectoliters for the three and
six months ended June 30, 2017, and excludes royalty volume of
0.051 million hectoliters and 0.087 million hectoliters for the
three and six months ended June 30, 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 and six months ended June 30, 2017, includes
accelerated depreciation expense of $1.8 million and $4.0 million,
respectively, related to the planned closure of our Burton South
brewery in the U.K. Special items for the three and six months
ended June 30, 2016, includes accelerated depreciation expense of
$2.0 million and $3.9 million, respectively, associated with this
planned closure. These accelerated depreciation charges are
included in our adjustments to arrive at underlying EBITDA.
(4) For the three and six months ended June 30, 2017, $0.1 million
and $0.3 million, respectively, of acquisition and integration
related costs were incurred in cost of goods sold. (5)
Represents adjustments to remove amounts related to interest,
depreciation and amortization included in the adjustments to
non-GAAP underlying income above, as these items are added back as
adjustments to net income attributable to MCBC from continuing
operations.
Molson Coors Brewing Company and
SubsidiariesInternational Results of
Operations
($ In millions) (Unaudited)
Three Months Ended Six Months Ended
June 30, 2017 June 30, 2016 June 30,
2017 June 30, 2016
Financial volume in hectoliters(1)(2)
0.643 0.366 1.171 0.671 Sales $ 81.3 $
47.5 $ 147.6 $ 84.1 Excise taxes (16.2 ) (8.3 ) (20.7 ) (13.9 ) Net
sales 65.1 39.2 126.9 70.2 Cost of goods sold(3) (47.8 ) (25.7 )
(86.8 ) (46.3 ) Gross profit 17.3 13.5 40.1 23.9 Marketing, general
and administrative expenses (24.7 ) (16.1 ) (45.7 ) (28.8 ) Special
items, net(4) (0.3 ) (30.8 ) (0.6 ) (30.8 ) Operating income (loss)
(7.7 ) (33.4 ) (6.2 ) (35.7 ) Other income (expense), net —
— — — Income (loss) from continuing operations
before income taxes $ (7.7 ) $ (33.4 ) $ (6.2 ) $ (35.7 )
Add/(less): Special items, net(4) 0.3 30.8 0.6 30.8 Acquisition and
integration related costs(5) 4.0 — 4.9 —
Non-GAAP: Underlying pretax income (loss) $ (3.4 ) $ (2.6 )
$ (0.7 ) $ (4.9 ) Add: Depreciation and amortization 2.5 0.9 4.8
1.8 Adjustments to arrive at underlying EBITDA — — —
— Non-GAAP: Underlying EBITDA $ (0.9 ) $ (1.7 ) $ 4.1
$ (3.1 )
(1)
Historical financial volumes have been
recast to reflect the impacts of aligning policies on reporting
financial volumes as a result of the Acquisition. See "Actual and
Pro Forma Worldwide Brand Volume" above for further details.
(2)
Excludes royalty volume of 0.554 million
hectoliters and 1.027 million hectoliters for the three and six
months ended June 30, 2017, respectively, and excludes royalty
volume of 0.470 million and 0.771 million hectoliters for the three
and six months ended June 30, 2016, respectively.
(3) Reflects gross inter-segment purchases that 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
and six months ended June 30, 2017, $1.4 million of integration
costs were incurred in cost of goods sold, and for the three and
six months ended June 30, 2017, $2.6 million and $3.5 million,
respectively, of integration costs were incurred in marketing,
general & administrative expenses.
Molson Coors Brewing Company and
SubsidiariesCorporate Results of
Operations
($ In millions) (Unaudited)
Three Months Ended Six Months Ended
June 30, 2017 June 30, 2016 June 30,
2017 June 30, 2016
Financial volume in hectoliters
— — — — Sales $ 0.3 $ 0.2 $ 0.6 $ 0.6
Excise taxes — — — — Net sales 0.3 0.2
0.6 0.6 Cost of goods sold (23.5 ) 12.4 39.5 15.2
Gross profit (23.2 ) 12.6 40.1 15.8 Marketing, general and
administrative expenses (56.2 ) (47.1 ) (111.9 ) (89.3 ) Special
items, net(1) — — (0.1 ) — Operating income
(loss) (79.4 ) (34.5 ) (71.9 ) (73.5 ) Interest expense, net (90.2
) (41.4 ) (187.8 ) (89.5 ) Other income (expense), net 0.4
(33.2 ) (7.3 ) (50.9 ) Income (loss) from continuing operations
before income taxes $ (169.2 ) $ (109.1 ) $ (267.0 ) $ (213.9 )
Add/(less): Special items, net(1) — — 0.1 — Acquisition and
integration related costs(2) 11.2 64.7 24.6 118.4 Unrealized
mark-to-market (gains) and losses(3) 23.4 (13.0 ) (39.7 )
(15.3 ) Non-GAAP: Underlying pretax income (loss) $ (134.6 ) $
(57.4 ) $ (282.0 ) $ (110.8 ) Add: Interest expense (income), net
90.2 41.4 187.8 89.5 Add: Depreciation and amortization 1.0 1.1 1.9
2.1 Adjustments to arrive at underlying EBITDA(4) — (13.3 )
— (33.7 ) Non-GAAP: Underlying EBITDA $ (43.4 ) $ (28.2 ) $
(92.3 ) $ (52.9 )
(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 and six months ended June 30, 2017, we have recorded
$11.2 million and $24.6 million, respectively, of
transaction-related costs within marketing, general &
administrative expenses. For the three and six months ended June
30, 2016, we recorded $19.6 million and $34.5 million,
respectively, of transaction-related costs within marketing,
general & administrative expenses, $31.8 million and $50.2
million, respectively, of financing costs in other income
(expense), and $13.3 million and $33.7 million, respectively, of
net interest expense in interest income (expense). The interest
income (expense) is included in our adjustments to arrive at
underlying EBITDA. (3) The unrealized changes in fair value
on our commodity swaps, which are economic hedges, are recorded as
cost of goods sold within our Corporate business activities. As the
exposure we are managing is realized, we reclassify the gain or
loss to the segment in which the underlying exposure resides,
allowing our segments to realize the economic effects of the
derivative without the resulting unrealized mark-to-market
volatility. (4) Represents adjustments to remove amounts
related to interest, depreciation and amortization included in the
adjustments to non-GAAP underlying income above, as these items are
added back as adjustments to net income attributable to MCBC from
continuing operations.
Balance Sheet
Condensed
Consolidated Balance Sheets
($ In millions, except par value) (Unaudited)
As of June 30, 2017 December 31, 2016
Assets Current assets: Cash and cash equivalents $ 502.9 $
560.9 Accounts receivable, net 962.9 669.5 Other receivables, net
113.8 135.8 Inventories, net 633.7 592.7 Other current assets, net
275.7 210.7 Total current assets 2,489.0 2,169.6
Properties, net 4,585.2 4,507.4 Goodwill 8,391.2 8,250.1 Other
intangibles, net 14,199.6 14,031.9 Other assets 453.6 382.5
Total assets $ 30,118.6 $ 29,341.5
Liabilities and equity Current liabilities: Accounts payable
and other current liabilities $ 2,616.6 $ 2,467.7 Current portion
of long-term debt and short-term borrowings 686.6 684.8
Discontinued operations 4.9 5.0 Total current
liabilities 3,308.1 3,157.5 Long-term debt 11,185.1 11,387.7
Pension and postretirement benefits 1,124.8 1,196.0 Deferred tax
liabilities 1,865.2 1,699.0 Other liabilities 317.2 267.0
Discontinued operations 12.4 12.6 Total liabilities
17,812.8 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: 204.6 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) 107.7 108.1 Class B exchangeable shares, no par value
(issued and outstanding: 14.7 shares and 15.2 shares, respectively)
554.4 571.2 Paid-in capital 6,658.5 6,635.3 Retained earnings
6,467.0 6,119.0 Accumulated other comprehensive income (loss)
(1,222.3 ) (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 12,095.9 11,418.7
Noncontrolling interests 209.9 203.0 Total equity
12,305.8 11,621.7 Total liabilities and equity $
30,118.6 $ 29,341.5
Cash Flow Statement
Condensed
Consolidated Statements of Cash Flows
($ In millions) (Unaudited)
Six Months
Ended June 30, 2017 June 30, 2016 Cash
flows from operating activities: Net income (loss) including
noncontrolling interests $ 536.2 $ 337.4 Adjustments to reconcile
net income (loss) to net cash provided by operating activities:
Depreciation and amortization 396.0 137.7 Amortization of debt
issuance costs and discounts 11.2 35.5 Share-based compensation
31.6 11.5 (Gain) loss on sale or impairment of properties and other
assets, net (4.3 ) (79.8 ) Equity income in MillerCoors — (323.2 )
Distributions from MillerCoors — 323.2 Equity in net (income) loss
of other unconsolidated affiliates 4.7 2.4 Unrealized (gain) loss
on foreign currency fluctuations and derivative instruments, net
(40.5 ) (5.2 ) Income tax (benefit) expense 187.6 37.9 Income tax
(paid) received 23.5 (109.1 ) Interest expense, excluding interest
amortization 177.6 95.5 Interest paid (175.4 ) (95.1 ) Pension
expense (benefit) (14.1 ) 4.0 Pension contributions paid (72.1 )
(10.4 ) Change in current assets and liabilities (net of impact of
business combinations) and other (242.5 ) (82.2 ) (Gain) loss from
discontinued operations (1.0 ) 2.3 Net cash provided by
(used in) operating activities 818.5 282.4 Cash flows
from investing activities: Additions to properties (354.0 ) (121.6
) Proceeds from sales of properties and other assets 46.1 144.6
Investment in MillerCoors — (810.6 ) Return of capital from
MillerCoors — 731.1 Other 6.0 (4.1 ) Net cash provided by
(used in) investing activities (301.9 ) (60.6 ) Cash flows from
financing activities: Proceeds from issuance of common stock, net —
2,525.9 Exercise of stock options under equity compensation plans
1.1 5.4 Dividends paid (176.6 ) (176.5 ) Debt issuance costs (4.6 )
(15.0 ) Payments on debt and borrowings (2,201.5 ) (17.9 ) Proceeds
on debt and borrowings 1,536.0 31.7 Net proceeds from (payments on)
revolving credit facilities and commercial paper 282.0 2.5 Change
in overdraft balances and other (29.6 ) (17.5 ) Net cash provided
by (used in) financing activities (593.2 ) 2,338.6 Cash and
cash equivalents: Net increase (decrease) in cash and cash
equivalents (76.6 ) 2,560.4 Effect of foreign exchange rate changes
on cash and cash equivalents 18.6 (1.0 ) Balance at beginning of
year 560.9 430.9 Balance at end of period $ 502.9
$ 2,990.3
Reconciliations to Nearest U.S. GAAP
Measures by Line Item
Second Quarter 2017 Three
Months Ended June 30, 2017
($ In millions, except per share
data)(Unaudited)
Net sales
Cost of
goodssold(1)
Gross profit
Marketing,general
andadministrativeexpenses(2)
Special
items,net(3)
Operatingincome (loss)
Reported (U.S. GAAP) $ 3,091.3 $ (1,756.1 ) $ 1,335.2 $
(781.2 ) $ (16.5 ) $ 537.5 Adjustments to arrive at underlying:
Special items, net Employee-related charges — — — — 0.4 0.4
Impairments or asset abandonment charges — — — — 16.1 16.1 Non-Core
items Acquisition and integration related costs — 5.0 5.0 13.9 —
18.9 Unrealized mark-to-market (gains) losses — 23.4
23.4 — —
23.4
Underlying (Non-GAAP) $ 3,091.3 $
(1,727.7 ) $ 1,363.6 $ (767.3 ) $ —
$ 596.3
Second Quarter 2017 Three
Months Ended June 30, 2017
($ In millions, except per share
data)(Unaudited)
Interestincome(expense),net
Otherincome(expense),net
Income
(loss)fromcontinuingoperationsbefore
incometaxes
Income
taxbenefit(expense)
Net income (loss)attributable
toMCBC fromcontinuingoperations
Net income (loss)attributable
toMCBC fromcontinuingoperations
perdiluted share
Reported (U.S. GAAP) $ (89.2 ) $ 1.5 $ 449.8 $ (123.0 ) $
321.7 $ 1.49 Adjustments to arrive at underlying: Special items,
net Employee-related charges — — 0.4 — 0.4 — Impairments or asset
abandonment charges — — 16.1 — 16.1 0.07 Non-Core items Acquisition
and integration related costs — — 18.9 — 18.9 0.09 Unrealized
mark-to-market (gains) losses — — 23.4 — 23.4 0.11 Tax effects on
special and non-GAAP items — — —
(21.6 ) (21.6 ) (0.10 )
Underlying
(Non-GAAP) $ (89.2 ) $ 1.5 $ 508.6
$ (144.6 ) $ 358.9 $ 1.66
(1)
Adjustments relate to the following segments: U.S. segment $0.7
million, Canada segment $2.8 million, Europe segment $0.1 million,
International segment $1.4 million, Corporate segment $23.4
million. (2) Adjustments relate to the following segments:
U.S. segment $0.1 million, International segment $2.6 million,
Corporate segment $11.2 million. (3) Adjustments relate to
the following segments: U.S. segment $12.6 million, Canada segment
$1.0 million, Europe segment $2.6 million, International segment
$0.3 million.
YTD Second Quarter
2017 Six Months Ended June 30, 2017
($ In millions, except per share
data)(Unaudited)
Net sales
Cost of
goodssold(1)
Gross profit
Marketing,general
andadministrativeexpenses(2)
Special
items,net(3)
Operatingincome (loss)
Reported (U.S. GAAP) $ 5,540.0 $ (3,129.0 ) $ 2,411.0 $
(1,484.0 ) $ (20.3 ) $ 906.7 Adjustments to arrive at underlying:
Special items, net Employee-related charges — — — — (1.6 ) (1.6 )
Impairments or asset abandonment charges — — — — 21.9 21.9 Non-Core
items Acquisition and integration related costs — 5.7 5.7 32.2 —
37.9 Unrealized mark-to-market (gains) losses — (39.7
) (39.7 ) — — (39.7 )
Underlying (Non-GAAP) $ 5,540.0 $ (3,163.0 )
$ 2,377.0 $ (1,451.8 ) $ —
$ 925.2
YTD Second Quarter 2017
Six Months Ended June 30, 2017
($ In millions, except per share
data)(Unaudited)
Interestincome(expense),net
Otherincome(expense),net
Income
(loss)fromcontinuingoperationsbefore
incometaxes
Income
taxbenefit(expense)
Net income (loss)attributable
toMCBC fromcontinuingoperations
Net income (loss)attributable
toMCBC fromcontinuingoperations
perdiluted share
Reported (U.S. GAAP) $ (185.8 ) $ 1.9 $ 722.8 $ (187.6 ) $
523.6 $ 2.42 Adjustments to arrive at underlying: Special items,
net Employee-related charges — — (1.6 ) — (1.6 ) (0.02 )
Impairments or asset abandonment charges — — 21.9 — 21.9 0.10
Non-Core items
Acquisition and integration related
costs
— — 37.9 — 37.9 0.18 Unrealized mark-to-market (gains) losses — —
(39.7 ) — (39.7 ) (0.18 ) Other non-core items — (8.1 ) (8.1 ) —
(8.1 ) (0.04 ) Tax effects on special and non-GAAP items —
— — (9.5 ) (9.5 )
(0.04 )
Underlying (Non-GAAP) $ (185.8 ) $ (6.2 )
$ 733.2 $ (197.1 ) $ 524.5
$ 2.42
(1) Adjustments relate to the following
segments: U.S. segment $1.2 million, Canada segment $2.8 million,
Europe segment $0.3 million, International segment $1.4 million,
Corporate segment ($39.7) million. (2) Adjustments relate to
the following segments: U.S. segment $4.1 million, International
segment $3.5 million, Corporate segment $24.6 million. (3)
Adjustments relate to the following segments: U.S. segment $15.1
million, Canada segment $(0.7) million, Europe segment $5.2
million, International segment $0.6 million, Corporate $0.1
million.
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Molson Coors Brewing CompanyNews
MediaColin Wheeler, 303-927-2443orInvestor RelationsDave Dunnewald,
303-927-2334orKevin Kim, 303-927-2515
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