EPS (U.S. GAAP) of $1.96 Increased 28.9%,
and Underlying EPS (Non-GAAP) of $1.88 Increased 10.6%, versus
prior year
Sequential Improvement to Top and Bottom
Line Reflects Benefits from Positive Global Net Pricing, Cost
Savings Delivery, Lower Marketing Spend and U.S. Tax Reform,
Despite Worldwide Brand Volumes down 2.4%
Management Remains Committed to Full-Year
Free Cash Flow and Cost Savings Targets
Molson Coors Brewing Company (NYSE: TAP; TSX: TPX) today
reported results for the 2018 second quarter. Molson Coors
president and chief executive officer Mark Hunter said:
"We were pleased with the sequential improvements in the second
quarter for top and bottom line results. Our full year underlying
cost savings and free cash flow guidance has not changed, despite
ongoing industry demand challenges in the U.S. and Canada and
inflationary pressures. While we are aggressively addressing our
volume performance in North America, performance in our Europe and
International businesses was strong in the quarter.
Mark continued, "More specifically for the quarter, our
underlying EPS growth of 10.6 percent reflected positive global net
pricing, cost savings delivery, lower marketing spend, and a lower
tax rate, while we continued to strengthen our balance sheet with
lower net debt. Our results also include the unfavorable timing
effect of the revenue recognition accounting standard, which
reduced underlying EPS by 5 cents for the quarter. This timing
difference is largely expected to flip back as a benefit in the
fourth quarter. Across the organization, our teams exercised
flexibility in the P&L with lower MG&A spend across all
business units.
"Our teams are leaning in to deliver on our commitments for the
full year by finding opportunities to earn more, use less and
invest wisely. Guidance for free cash flow of $1.5 billion plus or
minus 10 percent this year is based on continuing to drive our
First Choice commercial excellence initiatives, as well as our
disciplined approach to cost savings, flexibility with
discretionary spending and our continued focus on driving working
capital efficiencies."
Consolidated Performance - Second Quarter 2018
Three Months Ended ($ in
millions, except per share data) (Unaudited)
June 30, 2018
June 30, 2017
Reported
%Increase(Decrease)
ForeignExchangeImpact
($)
ConstantCurrency%
Increase(Decrease)
Net Sales $ 3,085.2 $ 3,091.3 (0.2 )% $ 53.5 (1.9 )% U.S. GAAP Net
income (loss)(1) $ 424.1 $ 329.9 28.6
%
Per diluted share $ 1.96 $ 1.52 28.9
%
Underlying (Non-GAAP) Net income (loss)(2) $ 406.1 $ 367.1 10.6
%
Per diluted share $ 1.88 $ 1.70 10.6
%
Underlying EBITDA (Non-GAAP)(2) $ 783.3
$ 804.2 (2.6 )% $ 9.7
(3.8 )%
Six Months Ended ($ in millions, except per share
data) (Unaudited)
June 30, 2018 June 30,
2017
Reported%
Increase(Decrease)
ForeignExchangeImpact
($)
ConstantCurrency
%Increase(Decrease)
Net Sales $ 5,416.7 $ 5,540.0 (2.2 )% $ 111.6 (4.2 )% U.S. GAAP Net
income (loss)(1) $ 702.2 $ 538.4 30.4
%
Per diluted share $ 3.24 $ 2.49 30.1
%
Underlying (Non-GAAP) Net income (loss)(2) $ 510.4 $ 539.3 (5.4 )%
Per diluted share $ 2.36 $ 2.49 (5.2 )% Underlying EBITDA
(Non-GAAP)(2) $ 1,209.3 $
1,327.0 (8.9 )% $ 15.8
(10.1 )% (1) Net income (loss) attributable to
MCBC. (2) See Appendix for definitions and reconciliations of
non-GAAP financial measures.
Quarterly Highlights
(versus Second Quarter 2017 Results)
- Net sales: $3.1 billion,
decreased by 0.2 percent, due to lower financial volume and the
adoption of the new revenue recognition accounting standard
(discussed in the Appendix below). These factors were largely
offset by positive global pricing and favorable foreign currency
movements. Net sales in constant currency declined 1.9
percent.
- Net sales per HL: $111.20 on a
reported financial-volume basis, increased 1.9 percent. Net
sales per HL on a brand volume basis(1) in constant currency
decreased by 0.3 percent, driven by the adoption of the new revenue
recognition accounting standard, partially offset by positive
global net pricing as well as favorable mix in Europe and
International.
- Volume: Worldwide brand volume
of 25.7 million hectoliters decreased 2.4 percent driven by
declines in the U.S. and Canada partially offset by growth in
Europe and International. Financial volume of 27.7 million
hectoliters decreased 2.1 percent, and was adversely impacted by
reductions in brand volumes and contract brewing. Global priority
brand volume decreased 4.0 percent.
- U.S. GAAP net income
attributable to MCBC increased 28.6 percent, driven by unrealized
mark-to-market gains on our commodity positions (versus losses a
year ago), cost savings, lower income tax expense, lower interest
expense and positive net pricing, partially offset by lower
financial volume, higher input cost inflation and the adoption of
the new revenue recognition accounting standard.
- Underlying net income increased
10.6 percent, driven by cost savings, lower income tax expense,
lower interest expense and positive net pricing, partially offset
by lower financial volume, higher cost inflation and the adoption
of the new revenue recognition accounting standard.
- Underlying EBITDA: Decreased 2.6
percent on a reported basis and decreased 3.8 percent on a
constant-currency basis, driven by lower financial volume, higher
input cost inflation and the impacts of the adoption of the new
revenue recognition accounting standard, partially offset by
positive global net pricing, cost savings and lower marketing
spend.
- U.S. GAAP cash from operations:
Net cash provided by operating activities for the first half of
2018 was approximately $1.3 billion, which represents an
improvement of $479.3 million, driven by the $328 million cash
payment received in January 2018 related to the receipt of a
purchase price adjustment for our acquisition of the Miller
International business, as well as working capital improvements and
lower cash paid for pension contributions and interest.
- Underlying free cash flow: cash
received of $659.8 million, which represents an increase of $73.1
million from the prior year, driven by working capital improvements
and lower cash paid for pension contributions and interest.
- Debt: Total debt at the end of
the second quarter of 2018 was $10.9 billion, and cash and cash
equivalents totaled $792.9 million, resulting in net debt of $10.1
billion.
(1) Brand Volume Basis NSR/HL:
Effective in the first quarter of 2018, we have revised our net
sales revenue (NSR) per HL performance discussions to be on a brand
volume basis, with all per-hectoliter calculations including owned
and actively managed brands, along with royalty volume, in the
denominator, as well as the financial impact of these sales in the
numerator, unless otherwise indicated. See Appendix for
definitions.
Business Review - Second Quarter 2018
Net Sales
($ in millions) (Unaudited)
Three Months Ended June 30, 2018
June 30, 2017
Reported%
Increase(Decrease)
ForeignExchangeImpact
($)
ConstantCurrency
%Increase(Decrease)
United States $ 2,072.5 $ 2,138.9 (3.1 )% $ — (3.1 )% Canada 397.4
407.6 (2.5
)%
15.3 (6.3
)%
Europe 586.1 524.7 11.7
%
38.8 4.3
%
International 67.9 65.1 4.3
%
(0.5 ) 5.1
%
Corporate 0.3 0.3 —
%
— — % Eliminations(1) (39.0 ) (45.3 ) 13.9
%
(0.1 ) 14.1
%
Consolidated $ 3,085.2 $ 3,091.3 (0.2 )% $ 53.5
(1.9 )%
(1)
Reflects intercompany sales that are eliminated in consolidated
totals.
Pretax Income (U.S.
GAAP)
($ in millions) (Unaudited)
Three Months Ended June 30, 2018
June 30, 2017
Reported%
Increase(Decrease)
ForeignExchangeImpact
($)
ConstantCurrency
%Increase(Decrease)
United States $ 445.5 $ 486.5 (8.4 )% $ (0.5 ) (8.3 )% Canada 61.3
69.7 (12.1 )% 1.3 (13.9 )% Europe 86.8 69.9 24.2
%
3.7 18.9
%
International 1.3 (7.7 ) N/M (0.1 ) N/M Corporate (71.9 ) (158.2 )
54.6
%
1.3 53.7
%
Consolidated $ 523.0 $ 460.2 13.6
%
$ 5.7 12.4
%
N/M = Not meaningful
Underlying EBITDA
(Non-GAAP)(1)
($ in millions) (Unaudited)
Three Months Ended June 30, 2018
June 30, 2017
Reported%
Increase(Decrease)
ForeignExchangeImpact
($)
ConstantCurrency
%Increase(Decrease)
United States $ 576.3 $ 621.2 (7.2 )% $ (0.5 ) (7.1 )% Canada 96.2
101.4 (5.1 )% 2.7 (7.8 )% Europe 135.8 114.9 18.2
%
7.4 11.7
%
International 6.5 (0.9 ) N/M (0.3 ) N/M Corporate (31.5 ) (32.4 )
2.8
%
0.4 1.5
%
Consolidated $ 783.3 $ 804.2 (2.6 )% $ 9.7
(3.8 )%
N/M = Not meaningful
(1) See Appendix for definitions and reconciliations of
non-GAAP financial measures.
United States Business
- Volume: U.S. brand volume
decreased 4.8 percent for the quarter, primarily driven by lower
volume in the Premium Light segment. Sales-to-wholesalers (STWs),
excluding contract brewing, volume decreased 3.6 percent.
- Revenue: Net sales per
hectoliter (brand volume basis), which excludes contract brewing
and company-owned-distributor sales, grew 0.9 percent. Excluding
the $12.1 million impact of the new revenue recognition accounting
standard, net sales per hectoliter (brand volume basis) grew 1.6
percent primarily as a result of higher net pricing, partially
offset by negative sales mix.
- Cost of goods sold (COGS) per
hectoliter increased 5.5 percent, driven by higher freight and
fuel costs, aluminum inflation and volume deleverage, partially
offset by cost savings.
- Marketing, general and
administrative (MG&A) expense decreased 5.2 percent due to
spending optimization and efficiencies as well as lower
employee-related expenses.
- On a U.S. GAAP basis, U.S. pretax
income decreased 8.4 percent to $445.5 million, primarily
driven by higher COGS, particularly aluminum and freight, lower
volumes, negative sales mix, the unfavorable impact of the new
revenue recognition accounting standard and higher depreciation
expense, partially offset by higher net pricing and lower MG&A
expenses.
- U.S. underlying EBITDA decreased
7.2 percent to $576.3 million, driven by higher COGS, particularly
aluminum and freight, lower volumes, negative sales mix and the
unfavorable impact of the new revenue recognition accounting
standard, partially offset by higher net pricing and lower MG&A
expenses.
Canada Business
- Volume: Canada brand volume
decreased 2.4 percent in the second quarter, as a result of volume
challenges in Ontario and the West and lower volumes in the Premium
Light segment, partially offset by growth in the Value segment.
Financial volume decreased 2.3 percent primarily due to brand
volume declines.
- Revenue: Net sales per
hectoliter (brand volume basis) decreased 4.5 percent in local
currency, driven by our adoption of the new revenue recognition
accounting standard, which reduced net sales by approximately $12
million in the quarter. Excluding the effect of the new accounting
standard, NSR per HL (brand volume basis) would have decreased 1.4
percent in local currency due to negative brand mix, partially
offset by higher net pricing.
- COGS per hectoliter decreased
0.7 percent in local currency due to cost savings and certain
one-time distribution savings, partially offset by volume
deleverage, negative mix and input cost inflation.
- MG&A expense decreased 13.8
percent in local currency, driven by the approximate $10 million
favorable impact of the new revenue recognition accounting
standard, as well as timing benefits and an overall reduction in
brand investments.
- On a U.S. GAAP basis, Canada
reported pretax income of $61.3 million, a 12.1 percent
decrease from the prior year, driven by negative sales mix and
lower volumes as well as unfavorable impacts related to the
adoption of the new revenue recognition accounting standard,
partially offset by lower marketing investment.
- Canada underlying EBITDA
decreased 7.8 percent in constant currency to $96.2 million in the
quarter, due to the same factors as U.S. GAAP results.
Europe Business
- Volume: Europe brand volume
increased 2.9 percent in the second quarter versus a year ago, as a
result of above premium brands and national champion brand
performance, as well as World Cup consumption. Europe financial
volume increased 3.0 percent.
- Revenue: Europe net sales per
hectoliter (brand volume basis) increased 1.5 percent in local
currency, primarily driven by positive sales mix and pricing. This
was partially offset by the impact of adopting recently revised
excise-tax guidelines in one of our European markets as well as
increasing our investment behind our First Choice Agenda this
year.
- COGS per hectoliter increased
1.5 percent in local currency, primarily due to mix shift to
higher-cost brands and geographies, input inflation and logistics
costs.
- MG&A expense decreased 3.5
percent in local currency, driven by spend efficiency and timing of
brand investments, the impact of adopting the new revenue
recognition accounting standard and a benefit from the partial
reversal of bad debt provisions, slightly offset by the addition of
Aspall brand investments.
- On a U.S. GAAP basis, Europe
reported pretax income of $86.8 million, an increase of 24.2
percent driven by favorable gross profit impacts, lower marketing
investments, the partial reversal of bad debt provisions and the
addition of the Aspall Cider business and favorable foreign
currency movements. These factors were partially offset by adopting
recently revised excise tax guidelines in one of our European
markets and investments in our First Choice Agenda.
- Europe underlying EBITDA
increased 11.7 percent in constant currency to $135.8 million, due
to the same factors as U.S. GAAP results.
International Business
- Volume: International brand
volume increased by 0.6 percent in the second quarter, driven by
organic growth in many of our focus markets, partially offset by
the loss of the Modelo contract in Japan.
- Revenue: Net sales per
hectoliter (brand volume basis) increased by 3.8 percent, driven by
positive net pricing and favorable sales mix.
- COGS per hectoliter decreased
6.9 percent, due to sales mix changes.
- MG&A expense decreased 16.6
percent, driven by lower marketing investments and integration
costs.
- On a U.S. GAAP basis,
International reported pretax income of $1.3
million versus a loss of $7.7 million a year ago, driven by
positive net pricing, favorable sales mix, and lower marketing and
integration expenses, partially offset by the loss of the Modelo
brands in Japan.
- International underlying EBITDA
was $6.5 million in the second quarter, compared to $0.9 million
loss a year ago, driven by by positive net pricing,
favorable sales mix, and lower marketing expenses, partially offset
by the loss of the Modelo brands in Japan.
Corporate
- On a U.S. GAAP basis, Corporate
reported a pretax loss of $71.9 million in the second
quarter compared to a loss of $158.2 million in the prior year, due
to unrealized mark-to-market gains on commodity swaps, primarily
our aluminum positions, compared to losses a year ago as well as
lower interest expense in the current year.
- Corporate underlying EBITDA was
a loss of $31.5 million for the second quarter versus a $32.4
million loss in the prior year, driven primarily by the timing of
general and administrative costs, slightly offset by pension
benefit and favorable foreign currency.
Worldwide Brand and Financial Volume(1)
(In millions of hectoliters) (Unaudited)
Three Months Ended June 30, 2018 %
Change June 30, 2017 Financial
Volume(1) 27.745 (2.1 )% 28.340 Contract brewing,
wholesaler and non-beer volume (2.277 ) (4.7 )% (2.390 ) Royalty
volume 1.057 2.3
%
1.033 Sales-To-Wholesaler to Sales-To-Retail adjustment (0.780 )
26.4
%
(0.617 )
Total Worldwide Brand Volume(1) 25.745
(2.4 )% 26.366
(1)
See Appendix for definitions and additional discussion regarding
Financial and Worldwide Brand Volume.
Other Results
Effective Income Tax
Rates
Three Months Ended
June 30, 2018 June 30, 2017 U.S. GAAP
effective tax rate 18 % 27 % Underlying effective tax rate 17 % 28
%
- The U.S. GAAP effective tax rate
and the underlying effective tax rate decreased 9 percentage
points and 11 percentage points, respectively, from a year ago,
primarily due to the reduction of the U.S. federal statutory
corporate income tax rate to 21 percent as a result of U.S. tax
reform.
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 of 2018, MCBC
recognized a net special charge of $10.5 million, primarily
driven by asset abandonment charges, including accelerated
depreciation, related to brewery closures.
- Additionally, other non-core net
benefits of $35.4 million include unrealized mark-to-market
gains on commodity hedges as well as integration-related
expenses.
2018 Outlook
The following guidance for full year 2018 is unchanged from
previous disclosures, unless otherwise indicated:
- Underlying free cash
flow: $1.5 billion, plus or minus 10 percent, which excludes
the $328 million cash payment received in January 2018 related to
resolving a purchase price adjustment to our October 2016
acquisition of the Miller International business.
- Transaction-related metrics:
approximately $200 million (included in free cash flow guidance) of
cash tax benefits and approximately $55 million of after-tax book
amortization.
- Cash pension contributions:
approximately $10 million.
- Capital spending: approximately
$670 million, plus or minus 10 percent.
- Cost savings: approximately $210
million in 2018, and $600 million for 2017 to 2019.
- Cost of goods sold per
hectoliter:
- U.S.: mid-single-digit increase.
- Updated (formerly low-single-digit increase)
- Canada: low-single-digit
increase (local currency).
- Europe: low-single-digit
increase (local currency).
- International business:
low-single-digit decrease.
- Underlying Corporate MG&A
expense: approximately $180 million, plus or minus 10
percent.
- Underlying depreciation and
amortization: approximately $850 million, versus $792 million
in 2017, primarily due to planned information systems
implementations in the U.S.
- Pension benefit: approximately
$60 million.
- Corporate net interest expense:
approximately $330 million, plus or minus 10 percent.
- Underlying effective tax rate in
the range of 18 to 22 percent for 2018, following the enactment of
U.S. tax reform. Subject to additional definitive guidance from the
U.S. government regarding the implementation of the recently passed
tax reform legislation, the company's preliminary view of its
long-term effective tax rate (after 2018) is in the range of 20 to
24 percent.
- Deleverage & Dividend: We
are committed to maintaining our investment grade rating and
currently plan to achieve approximately 4x leverage on a rating
agency basis by the end of 2018. We plan to achieve about 3.75x
rating agency leverage around the middle of 2019. Upon achieving
about 3.75x leverage, our board currently intends to reinstitute a
dividend payout-ratio target in the range of 20-25% of annual
trailing underlying EBITDA for the second half of 2019 and ongoing
thereafter. - New
- In addition, our 2018 results are also
being impacted by the adoption of the new revenue recognition
accounting standard, as well as guidance changing the presentation
of pension and other postretirement benefit (OPEB) costs.
- The new revenue recognition
accounting standard became effective for us at the beginning of
2018, and we have elected the modified retrospective adoption
method. Therefore, prior period results have not been restated, but
results under the old standard will continue to be disclosed
throughout 2018 for comparability, as required by the standard.
Along with some timing changes between quarters, this adoption
changes the presentation of our results. We currently anticipate
that the impact of this change will result in a reduction of both
revenue and marketing, general and administrative expenses by
approximately $60 million to $70 million during
2018, primarily within our Canada segment, with no impact to full
year net income. See Appendix for detailed impacts on 2018 results
from our adoption of the new revenue recognition accounting
standard.
- Under the new pension guidance,
we are continuing to report the service cost component of net
periodic pension and OPEB costs or income in our business segment
operating results. Beginning in 2018, however, all other components
of net periodic pension and OPEB cost or income are being reported
in Corporate outside of operating income. Prior period results for
each of our segments and Consolidated have been restated
retrospectively for this change, as required by the guidance, with
no impact to consolidated net income. This accounting change
primarily impacts the reported results of our Europe segment. See
Appendix section below.
- The impacts of these accounting changes
are discussed in further detail within footnote 2 of our 2017 Form
10-K and our 2018 quarterly reports on Form 10-Q.
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, 2018, compared to the
second quarter ended June 30, 2017. Prior year results have been
adjusted to reflect the retrospective adoption of new pension
accounting, as described above. Effective in the first quarter of
2018, we have revised our net sales revenue (NSR) per HL
performance discussions to be on a brand volume basis, such that
all per-hectoliter calculations now include owned and actively
managed brand volume, along with royalty 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.
2018 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 2018 second quarter results.
The live webcast will be accessible via the Company’s website,
www.molsoncoors.com. An online replay of the webcast will be
available until 11:59 p.m. Eastern Time on October 31, 2019. The
Company will post this release and related financial statements on
its website today.
Upcoming Investor Webcast
The company will host an online, real-time webcast at the
Barclays Global Consumer Staples Conference in Boston on Wednesday,
September 5, 2018 at 9:45 a.m. Eastern Time. A live webcast of this
investor event will be accessible via the Molson Coors Brewing
Company Investor Relations website, ir.molsoncoors.com. An online
replay of the presentation webcast will be available on the website
within two hours after the presentation.
Overview of Molson Coors
Molson Coors has defined brewing greatness for more than two
centuries. As one of the largest global brewers, Molson Coors works
to deliver extraordinary brands that delight the world’s beer
drinkers. From Coors Light, Coors Banquet, Miller Lite, Molson
Canadian, Carling, Staropramen and Sharp’s Doom Bar to
Leinenkugel’s Summer Shandy, Blue Moon Belgian White, Hop Valley,
Creemore Springs and Crispin Cider, Molson Coors offers a beer for
every beer lover.
Molson Coors operates through Molson Coors Canada, MillerCoors
in the U.S., 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 Index for the past seven 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,” “outlook,” 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 and
achieve expected tax benefits, accretion and cost savings and
synergies relating to the Acquisition; 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
Molson Coors Brewing Company
Three Months Ended June 30, 2018 % Change (In
millions, except per share data)(Unaudited)
U.S. GAAP
Non-GAAPAdjustments(1)
Non-GAAPUnderlying(1)
U.S. GAAP
Non-GAAPUnderlying
Net sales $ 3,085.2 $ — $
3,085.2 (0.2 )% (0.2 )% Net
Sales per HL change 1.9
%
1.9 %
Cost of goods sold $ (1,739.1 ) $ (43.9 ) $ (1,783.0 )
(0.9 )% 3.2 % Cost of goods sold per HL
change 1.2
%
5.4 %
Gross profit $ 1,346.1 $
(43.9 ) $ 1,302.2 0.8
%
(4.5 )% Marketing, general and administrative
expenses $ (744.7 ) $ 8.5
$ (736.2 ) (4.8 )% (4.2
)% Special items, net $ (10.5 ) $ 10.5 $ — (36.4 )% — %
Operating income (loss) $ 590.9 $
(24.9 ) $ 566.0 10.1
%
(5.0 )% Interest income (expense), net $ (76.7 ) $ —
$ (76.7 ) (14.0 )% (14.0 )% Other pension and postretirement
benefits (costs), net $ 9.9 $ — $ 9.9 5.3
%
5.3 % Other income (expense), net $ (1.1 ) $ — $ (1.1 ) N/M N/M
Income (loss) before income taxes $ 523.0 $ (24.9 ) $ 498.1 13.6 %
(4.0 )% Income tax benefit (expense) $ (92.2 ) $ 6.9 $ (85.3 )
(26.4 )% (41.9 )%
Net income (loss)(2) $
424.1 $ (18.0 ) $ 406.1
28.6
% 10.6 % Per diluted share $
1.96 $ (0.08 ) $ 1.88
28.9 % 10.6 % Underlying
EBITDA(3) $ 783.3 (2.6 )%
Molson
Coors Brewing Company Six Months Ended June
30, 2018 % Change (In millions,
except per share data)(Unaudited)
U.S. GAAP
Non-GAAPAdjustments(1)
Non-GAAPUnderlying(1)
U.S. GAAP
Non-GAAPUnderlying
Net sales $ 5,416.7 $ — $
5,416.7 (2.2 )% (2.2 )% Net
Sales per HL change 1.1
%
1.1
%
Cost of goods sold $ (3,274.8 ) $ 42.2 $ (3,232.6 )
4.7
%
2.2
%
Cost of goods sold per HL change 8.3
%
5.7
%
Gross profit $ 2,141.9 $ 42.2
$ 2,184.1 (11.2 )% (8.2
)% Marketing, general and administrative expenses
$ (1,425.8 ) $ 17.3 $
(1,408.5 ) (4.2 )% (3.2
)% Special items, net $ 304.3 $ (304.3 ) $ — N/M —
%
Operating income (loss) $ 1,020.4 $
(244.8 ) $ 775.6 13.2
%
(15.9 )% Interest income (expense), net $ (159.9 ) $
— $ (159.9 ) (13.9 )% (13.9 )% Other pension and postretirement
benefits (costs), net $ 19.9 $ 0.1 $ 20.0 (12.3 )% 1.0
%
Other income (expense), net $ — $ — $ — (100.0 )% (100.0 )% Income
(loss) before income taxes $ 880.4 $ (244.7 ) $ 635.7 18.8
%
(15.4 )% Income tax benefit (expense) $ (167.1 ) $ 52.9 $ (114.2 )
(12.6 )% (43.1 )%
Net income (loss)(2) $
702.2 $ (191.8 ) $ 510.4
30.4
%
(5.4 )% Per diluted share $ 3.24
$ (0.88 ) $ 2.36 30.1
%
(5.2 )% Underlying EBITDA(3) $
1,209.3 (8.9 )%
N/M = Not meaningful
(1) Refer to the table "Reconciliation to Nearest U.S. GAAP
Measures" for detailed descriptions and reconciliation of non-GAAP
adjustments and results. (2) Net income (loss) attributable to
MCBC. (3) EBITDA is earnings before interest, taxes, depreciation
and amortization, a non-GAAP financial measure.
Adoption
of Revenue Recognition Guidance
The new revenue recognition accounting standard became effective
for us at the beginning of 2018. We have adopted the new standard
using the modified retrospective approach, and, therefore, prior
period results have not been restated. However, results under the
old standard will continue to be disclosed throughout 2018 for
comparability, as required by the standard. The following table
highlights the impact of this new guidance on summarized components
of our unaudited condensed consolidated statement of operations for
the three months ended June 30, 2018, when comparing our
current period results of operations under the new guidance, versus
our results of operations if historical guidance had continued to
be applied.
Three Months Ended June 30, 2018 U.S.
Canada Europe
International Consolidated (In
millions) Impact to Unaudited Condensed Consolidated
Statements of Operations - Favorable/(Unfavorable): Net sales $
(12.1 ) $ (12.1 ) $ (0.5 ) $ — $ (24.7 ) Cost of goods sold $ — $ —
$ — $ — $ — Gross profit $ (12.1 ) $ (12.1 ) $ (0.5 ) $ — $ (24.7 )
Marketing, general and administrative expenses $ 2.2 $ 9.9 $ 0.9 $
— $ 13.0 Operating income (loss) $ (9.9 ) $ (2.2 ) $ 0.4 $ — $
(11.7 ) Interest income (expense), net $ — $ — $ (0.9 ) $ — $ (0.9
) Income (loss) before income taxes $ (9.9 ) $
(2.2 ) $ (0.5 ) $ —
$ (12.6 )
These impacts are driven primarily by the reclassification of
certain cash payments to customers from marketing, general and
administrative expenses to a reduction of revenue, as well as a
change in the timing of recognition of certain promotional
discounts and cash payments to customers. For further discussion
regarding the impacts of the adoption of this new guidance, refer
to footnote 2 within our second quarter 2018 Form 10-Q.
Adoption of Pension and Other Postretirement Benefit Accounting
Pronouncement
During the first quarter of 2018, we adopted the FASB's new
guidance related to classification of pension and other
postretirement benefit costs. Specifically, the new guidance
requires us only to report the service cost component in the same
line item as other compensation costs arising from services
rendered by the pertinent employees during the period; while the
other components of net benefit cost are now presented in the
statements of operations separately from the service cost component
and outside of operating income. We have also determined that only
service cost will be reported within each operating segment, and
all other components will be reported within the Corporate segment.
These changes to the results of each quarter and full year 2017
were included in the first quarter Earnings Release. See the
Company's second quarter 2018 10-Q filing for additional
detail.
Worldwide Brand and Financial Volumes
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. Contract brewing and wholesaler volume is
included within financial volume, but is removed from worldwide
brand volume, as this is non-owned volume for which we do not
directly control performance. Our worldwide brand volume definition
also includes an adjustment from Sales-to-Wholesaler (STW) volume
to Sales-to-Retailer (STR) volume. We believe the brand volume
metric is important because, unlike financial volume and STWs, it
provides the closest indication of the performance of our brands in
relation to market and competitor sales trends.
Effective in the first quarter of 2018, we revised our net sales
revenue (NSR) per HL performance discussions to be on a brand
volume basis, such that all per-hectoliter calculations now include
owned and actively managed brand volume, along with royalty volume,
in the denominator, as well as the financial impact of these sales
in the numerator, unless otherwise indicated.
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, as well as underlying EBITDA
margin, which is calculated by dividing underlying EBITDA by U.S.
GAAP net sales. Our management uses underlying income, underlying
income per diluted share, underlying EBITDA (and margin), 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 margin), 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 underlying Corporate MG&A, underlying
depreciation and amortization, underlying free cash flow and
underlying effective tax rate 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 EBITDA
($ in millions) (Unaudited)
Three Months Ended June 30, 2018
% change June 30, 2017 U.S. GAAP:
Net income (loss) attributable to MCBC $ 424.1
28.6
%
$ 329.9 Add: Net income (loss) attributable to
noncontrolling interests 6.7 31.4
%
5.1 U.S. GAAP:
Net income (loss) 430.8 28.6
%
335.0 Add: Interest expense (income), net 76.7 (14.0 )% 89.2 Add:
Income tax expense (benefit) 92.2 (26.4 )% 125.2 Add: Depreciation
and amortization 215.9 8.5
%
198.9 Adjustments included in underlying income(1) (24.9 ) N/M 58.8
Adjustments to arrive at underlying EBITDA(2) (7.4 ) 155.2
%
(2.9 ) Non-GAAP:
Underlying EBITDA $ 783.3
(2.6 )%
$ 804.2
($ in millions)
(Unaudited)
Six Months Ended June 30,
2018 % change June 30,
2017 U.S. GAAP:
Net income (loss) attributable to MCBC
$ 702.2 30.4
%
$ 538.4 Add: Net income (loss) attributable to
noncontrolling interests 11.1 (4.3 )% 11.6 U.S. GAAP:
Net income (loss) 713.3 29.7
%
550.0 Add: Interest expense (income), net 159.9 (13.9 )% 185.8 Add:
Income tax expense (benefit) 167.1 (12.6 )% 191.1 Add: Depreciation
and amortization 429.6 8.5
%
396.0 Adjustments included in underlying income(1) (244.7 ) N/M
10.4 Adjustments to arrive at underlying EBITDA(2) (15.9 ) 152.4
%
(6.3 ) Non-GAAP:
Underlying EBITDA $ 1,209.3
(8.9 )%
$ 1,327.0
N/M = Not meaningful
(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.
Underlying Free Cash
Flow
(In millions) (Unaudited)
Six Months Ended June 30, 2018 June
30, 2017 U.S. GAAP:
Net Cash Provided by (Used In) Operating
Activities $ 1,297.8 $ 818.5 Less:
Additions to properties(1) (351.1 ) (354.0 ) Add/Less: Cash impact
of special items(2) (321.6 ) 59.0 Add: Non-core costs related to
acquisition of businesses(3) 34.7 63.2 Non-GAAP:
Underlying Free Cash Flow $ 659.8
$ 586.7
(1)
Included in net cash used in investing activities. (2) Included in
net cash provided by (used in) operating activities. For the six
months ended June 30, 2018, primarily reflects the settlement
payment received relating to a purchase price adjustment and for
the six months ended June 30, 2017, primarily reflects costs paid
for brewery closures and restructuring activities. (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.
Statements of Operations
-- Molson Coors Brewing Company and Subsidiaries
Condensed Consolidated Statements of
Operations
(In millions,
except per share data) (Unaudited)
Three Months
Ended Six Months Ended June 30,
2018 June 30, 2017 June 30, 2018
June 30, 2017 Financial volume in hectoliters
27.745 28.340 48.558 50.218 Sales $
3,820.5 $ 3,793.1 $ 6,688.5 $ 6,706.9 Excise taxes (735.3 ) (701.8
) (1,271.8 ) (1,166.9 ) Net sales 3,085.2 3,091.3 5,416.7 5,540.0
Cost of goods sold (1,739.1 ) (1,755.5 ) (3,274.8 ) (3,127.8 )
Gross profit 1,346.1 1,335.8 2,141.9 2,412.2 Marketing, general and
administrative expenses (744.7 ) (782.4 ) (1,425.8 ) (1,487.7 )
Special items, net (10.5 ) (16.5 ) 304.3 (23.2 ) Operating
income (loss) 590.9 536.9 1,020.4 901.3 Interest income (expense),
net (76.7 ) (89.2 ) (159.9 ) (185.8 ) Other pension and
postretirement benefits (costs), net 9.9 9.4 19.9 22.7 Other income
(expense), net (1.1 ) 3.1 — 2.9 Income (loss)
before income taxes 523.0 460.2 880.4 741.1 Income tax benefit
(expense) (92.2 ) (125.2 ) (167.1 ) (191.1 ) Net income (loss)
430.8 335.0 713.3 550.0 Net (income) loss attributable to
noncontrolling interests (6.7 ) (5.1 ) (11.1 ) (11.6 ) Net income
(loss) attributable to MCBC $ 424.1 $ 329.9 $ 702.2
$ 538.4 Basic net income (loss) attributable
to MCBC per share: $ 1.96 $ 1.53 $ 3.25 $ 2.50 Diluted net income
(loss) attributable to MCBC per share: $ 1.96 $ 1.52 $ 3.24 $ 2.49
Weighted average shares - basic 216.0 215.4 215.9 215.3
Weighted average shares - diluted 216.5 216.4 216.6 216.4
Dividends per share $ 0.41 $ 0.41 $ 0.82 $
0.82
Molson Coors Brewing Company and
SubsidiariesU.S. Results of
Operations
(In millions)
(Unaudited)
Three Months Ended Six Months Ended
June 30, 2018 June 30, 2017 June 30,
2018 June 30, 2017 Financial volume in
hectoliters(1) 18.338 19.190 33.056 34.962
Sales(1) $ 2,354.6 $ 2,433.0 $ 4,216.3 $ 4,424.4 Excise
taxes (282.1 ) (294.1 ) (496.0 ) (535.6 ) Net sales(1) 2,072.5
2,138.9 3,720.3 3,888.8 Cost of goods sold(1) (1,189.7 ) (1,180.3 )
(2,179.8 ) (2,205.4 ) Gross profit 882.8 958.6 1,540.5 1,683.4
Marketing, general and administrative expenses (435.1 ) (458.8 )
(828.2 ) (864.5 ) Special items, net(2) (3.3 ) (12.6 ) (4.8 ) (15.1
) Operating income 444.4 487.2 707.5 803.8 Interest income
(expense), net 1.6 — 0.4 — Other income (expense), net (0.5 ) (0.7
) (0.7 ) (0.7 ) Income (loss) before income taxes $ 445.5 $ 486.5 $
707.2 $ 803.1 Add/(less): Special items, net(2) 3.3 12.6 4.8 15.1
Acquisition and integration related costs(3) 0.9 0.8
2.0 5.3 Non-GAAP: Underlying pretax income (loss) $
449.7 $ 499.9 $ 714.0 $ 823.5 Add: Interest expense (income), net
(1.6 ) — (0.4 ) — Add: Depreciation and amortization 129.6 121.3
254.4 240.6 Adjustments to arrive at underlying EBITDA(4) (1.4 ) —
(2.8 ) — Non-GAAP: Underlying EBITDA $ 576.3 $
621.2 $ 965.2 $ 1,064.1
(1)
Includes gross inter-segment sales, purchases, and volumes,
which are eliminated in the consolidated totals. (2) 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, 2018, includes accelerated
depreciation in excess of normal depreciation of $1.4 million and
$2.8 million, respectively. These accelerated depreciation charges
are included in our adjustments to arrive at underlying EBITDA. (3)
For the three and six months ended June 30, 2018, $0.9 million and
$2.0 million, respectively, of integration costs were incurred in
cost of goods sold, and for the three and six months ended June 30,
2017, $0.7 million and $1.2 million, respectively, of integration
costs were incurred in cost of goods sold. For the three and six
months ended June 30, 2017, integration costs of $0.1 million and
$4.1 million, respectively, were incurred in marketing, general
& administrative expenses. (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.
Molson Coors Brewing Company and
Subsidiaries
Canada Results of
Operations
(In millions)
(Unaudited)
Three Months Ended Six Months
Ended June 30, 2018 June 30, 2017
June 30, 2018 June 30, 2017 Financial
volume in hectoliters(1) 2.473 2.530 4.180
4.323 Sales(1) $ 524.6 $ 527.6 $ 899.5 $ 905.0 Excise taxes
(127.2 ) (120.0 ) (218.3 ) (206.3 ) Net sales(1) 397.4 407.6 681.2
698.7 Cost of goods sold(1) (235.7 ) (233.4 ) (423.1 ) (414.5 )
Gross profit 161.7 174.2 258.1 284.2 Marketing, general and
administrative expenses (94.3 ) (104.7 ) (175.3 ) (200.8 ) Special
items, net(2) (5.7 ) (1.0 ) (11.3 ) (2.2 ) Operating income (loss)
61.7 68.5 71.5 81.2 Other income (expense), net (0.4 ) 1.2
(1.1 ) 9.4 Income (loss) before income taxes $ 61.3 $ 69.7 $
70.4 $ 90.6 Add/(less): Special items, net(2) 5.7 1.0 11.3 2.2
Acquisition and integration related costs(3) 0.2 2.8 0.3 2.8 Other
non-core items(4) — — — (8.1 )
Non-GAAP: Underlying pretax income (loss) $ 67.2 $ 73.5 $ 82.0 $
87.5 Add: Depreciation and amortization 35.0 29.0 71.0 59.8
Adjustments to arrive at underlying EBITDA(5) (6.0 ) (1.1 ) (12.1 )
(2.3 ) Non-GAAP: Underlying EBITDA $ 96.2 $ 101.4 $
140.9 $ 145.0
(1)
Includes gross inter-segment sales, purchases, and volumes, which
are eliminated in the consolidated totals. (2) 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, 2018, includes accelerated
depreciation in excess of normal depreciation of $1.0 million and
$2.0 million, respectively, and for the three and six months ended
June 30, 2017, includes accelerated depreciation in excess of
normal depreciation of $1.1 million and $2.3 million, respectively,
related to the planned closure of the Vancouver brewery. Also
incurred in the three and six months ended June 30, 2018, are
accelerated depreciation charges in excess of normal depreciation
of $5.0 million and $10.1 million, respectively, related to the
planned closure of our existing Montreal brewery. These accelerated
depreciation charges in excess of normal depreciation are included
in our adjustments to arrive at underlying EBITDA. (3) For the
three and six months ended June 30, 2018, $0.2 million and $0.3
million, respectively, of integration related costs were incurred
in cost of goods sold. For the three and six months ended June 30,
2017, $2.8 million of integration related costs were incurred in
cost of goods sold. (4) 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. (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.
Molson Coors Brewing Company and
Subsidiaries
Europe Results of
Operations
(In millions)
(Unaudited)
Three Months Ended
Six Months Ended June 30, 2018 June
30, 2017 June 30, 2018 June 30,
2017 Financial volume in hectoliters(1)(2) 6.916 6.715
11.320 11.074 Sales(2) $ 893.9 $ 796.2 $
1,492.4 $ 1,310.6 Excise taxes (307.8 ) (271.5 ) (532.0 ) (404.3 )
Net sales(2) 586.1 524.7 960.4 906.3 Cost of goods sold (353.6 )
(315.8 ) (621.3 ) (541.9 ) Gross profit 232.5 208.9 339.1 364.4
Marketing, general and administrative expenses (143.7 ) (138.0 )
(274.1 ) (264.8 ) Special items, net(3) 0.3 (2.6 ) (4.8 )
(5.2 ) Operating income (loss) 89.1 68.3 60.2 94.4 Interest income
(expense), net (1.4 ) 1.0 (2.1 ) 2.0 Other income (expense), net
(0.9 ) 0.6 (1.2 ) 0.5 Income (loss) before income
taxes $ 86.8 $ 69.9 $ 56.9 $ 96.9 Add/(less): Special items, net(3)
(0.3 ) 2.6 4.8 5.2 Acquisition and integration related costs(4) 0.1
0.1 0.3 0.3 Non-GAAP: Underlying pretax
income (loss) $ 86.6 $ 72.6 $ 62.0 $ 102.4 Add: Interest expense
(income), net 1.4 (1.0 ) 2.1 (2.0 ) Add: Depreciation and
amortization 47.8 45.1 97.2 88.9 Adjustments to arrive at
underlying EBITDA(5) — (1.8 ) (1.0 ) (4.0 ) Non-GAAP:
Underlying EBITDA $ 135.8 $ 114.9 $ 160.3 $
185.3
(1) Excludes royalty
volume of 0.490 million hectoliters and 0.796 million hectoliters
for the three and six months ended June 30, 2018, respectively, and
excludes royalty volume of 0.479 million hectoliters and 0.804
million hectoliters for the three and six months ended June 30,
2017, respectively. (2) 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. Special items
for the six months ended June 30, 2018, includes accelerated
depreciation in excess of normal depreciation of $1.0 million, and
for the three and six months ended June 30, 2017, includes
accelerated depreciation in excess of normal depreciation of $1.8
million and $4.0 million, respectively, related to the closure of
our Burton South brewery in the U.K., which was completed in the
first quarter of 2018. These accelerated depreciation charges in
excess of normal depreciation are included in our adjustments to
arrive at underlying EBITDA. (4) For the three and six months ended
June 30, 2018, $0.1 million and $0.3 million, respectively, of
integration related costs were incurred in cost of goods sold, and
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.
Molson Coors Brewing Company and
Subsidiaries
International
Results of Operations
(In millions)
(Unaudited)
Three Months Ended Six Months Ended
June 30, 2018 June 30, 2017 June 30,
2018 June 30, 2017 Financial volume in
hectoliters(1) 0.637 0.643 1.157 1.171
Sales $ 86.1 $ 81.3 $ 150.9 $ 147.6 Excise taxes (18.2 ) (16.2 )
(25.5 ) (20.7 ) Net sales 67.9 65.1 125.4 126.9 Cost of goods
sold(2) (44.1 ) (47.8 ) (81.9 ) (86.8 ) Gross profit 23.8 17.3 43.5
40.1 Marketing, general and administrative expenses (20.6 ) (24.7 )
(35.7 ) (45.7 ) Special items, net(3) (1.8 ) (0.3 ) (2.8 ) (0.6 )
Operating income (loss) 1.4 (7.7 ) 5.0 (6.2 ) Other income
(expense), net (0.1 ) — — — Income (loss)
before income taxes $ 1.3 $ (7.7 ) $ 5.0 $ (6.2 ) Add/(less):
Special items, net(3) 1.8 0.3 2.8 0.6 Acquisition and integration
related costs(4) 0.8 4.0 0.8 4.9
Non-GAAP: Underlying pretax income (loss) $ 3.9 $ (3.4 ) $ 8.6 $
(0.7 ) Add: Depreciation and amortization 2.6 2.5 5.0
4.8 Non-GAAP: Underlying EBITDA $ 6.5 $ (0.9 )
$ 13.6 $ 4.1
(1)
Excludes royalty volume of 0.567 million hectoliters and 0.977
million hectoliters for the three and six months ended June 30,
2018, respectively, and excludes royalty volume of 0.554 million
hectoliters and 1.027 million hectoliters for the three and six
months ended June 30, 2017, respectively. (2) Includes gross
inter-segment purchases, 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. (4) For the three and six months ended June 30, 2017, $1.4
million of integration costs were incurred in cost of goods sold.
For the three and six months ended June 30, 2018, integration costs
of $0.8 million were incurred in marketing, general &
administrative expenses, and for the three and six months ended
June 30, 2017, integration costs of $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, 2018 June 30, 2017 June 30,
2018 June 30, 2017 Financial volume in
hectoliters — — — — Sales $ 0.3 $ 0.3 $
0.5 $ 0.6 Excise taxes — — — — Net
sales 0.3 0.3 0.5 0.6 Cost of goods sold 45.0 (23.5 ) (39.8
) 39.5 Gross profit 45.3 (23.2 ) (39.3 ) 40.1 Marketing,
general and administrative expenses (51.0 ) (56.2 ) (112.5 ) (111.9
) Special items, net(1) — — 328.0 (0.1 )
Operating income (loss) (5.7 ) (79.4 ) 176.2 (71.9 ) Interest
expense, net (76.9 ) (90.2 ) (158.2 ) (187.8 ) Other pension and
postretirement benefits (costs), net 9.9 9.4 19.9 22.7 Other income
(expense), net 0.8 2.0 3.0 (6.3 ) Income
(loss) before income taxes $ (71.9 ) $ (158.2 ) $ 40.9 $ (243.3 )
Add/(less): Special items, net(1) — — (328.0 ) 0.1 Acquisition and
integration related costs(2) 7.7 11.2 16.5 24.6 Unrealized
mark-to-market (gains) and losses(3) (45.1 ) 23.4 39.6 (39.7 )
Non-core other pension and postretirement benefits (costs), net(4)
— — 0.1 (2.9 ) Non-GAAP: Underlying pretax
income (loss) $ (109.3 ) $ (123.6 ) $ (230.9 ) $ (261.2 ) Add:
Interest expense (income), net 76.9 90.2 158.2 187.8 Add:
Depreciation and amortization 0.9 1.0 2.0 1.9
Non-GAAP: Underlying EBITDA $ (31.5 ) $ (32.4 ) $ (70.7 ) $
(71.5 )
(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, 2018, we
have recorded $7.7 million and $16.5 million, respectively, of
integration costs within marketing, general & administrative
expenses, and for the three and six months ended June 30, 2017, we
have recorded $11.2 million and $24.6 million, respectively, of
integration costs within marketing, general & administrative
expenses. (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) For the six
months ended June 30, 2017, includes the retrospective impact of
the FASB's new pension and OPEB accounting standard and moving the
non-service cost component of net periodic pension and other
postretirement benefits to the Corporate segment. See Part I—Item
1. Financial Statements, Note 2, "New Accounting Pronouncements" of
the Form 10-Q for detailed discussion.
Balance Sheet
Condensed Consolidated Balance
Sheets
(In millions, except par value)
(Unaudited)
As of June 30, 2018
December 31, 2017 Assets Current assets: Cash
and cash equivalents $ 792.9 $ 418.6 Accounts receivable, net 984.9
733.8 Other receivables, net 131.1 168.2 Inventories, net 637.5
591.5 Other current assets, net 341.1 277.6 Total
current assets 2,887.5 2,189.7 Properties, net 4,599.4 4,673.7
Goodwill 8,332.6 8,405.5 Other intangibles, net 14,018.4 14,296.5
Other assets 723.0 681.5 Total assets $ 30,560.9
$ 30,246.9
Liabilities and equity Current
liabilities: Accounts payable and other current liabilities $
2,971.0 $ 2,684.5 Current portion of long-term debt and short-term
borrowings 1,411.0 714.8 Total current liabilities
4,382.0 3,399.3 Long-term debt 9,455.1 10,598.7 Pension and
postretirement benefits 828.1 848.5 Deferred tax liabilities
1,771.0 1,648.6 Other liabilities 328.1 316.8 Total
liabilities 16,764.3 16,811.9 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: 205.1 shares and 204.7 shares, respectively) 2.0
2.0 Class A exchangeable shares, no par value (issued and
outstanding: 2.9 shares and 2.9 shares, respectively) 107.7 107.7
Class B exchangeable shares, no par value (issued and outstanding:
14.7 shares and 14.7 shares, respectively) 553.2 553.2 Paid-in
capital 6,707.0 6,688.5 Retained earnings 7,703.5 7,206.1
Accumulated other comprehensive income (loss) (1,025.4 ) (860.0 )
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 13,576.6 13,226.1 Noncontrolling
interests 220.0 208.9 Total equity 13,796.6
13,435.0 Total liabilities and equity $ 30,560.9 $
30,246.9
Cash Flow Statement
Condensed Consolidated Statements of
Cash Flows
($ in millions) (Unaudited)
Six Months Ended June 30, 2018
June 30, 2017 Cash flows from operating activities: Net
income (loss) including noncontrolling interests $ 713.3 $ 550.0
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: Depreciation and amortization 429.6 396.0
Amortization of debt issuance costs and discounts 7.2 11.2
Share-based compensation 25.1 31.6 (Gain) loss on sale or
impairment of properties and other assets, net — (4.3 ) Unrealized
(gain) loss on foreign currency fluctuations and derivative
instruments, net 38.4 (41.5 ) Income tax (benefit) expense 167.1
191.1 Income tax (paid) received 20.0 23.5 Interest expense,
excluding interest amortization 155.8 177.6 Interest paid (152.5 )
(175.4 ) Pension expense (benefit) (29.5 ) (31.4 ) Pension
contributions paid (5.0 ) (72.1 ) Change in current assets and
liabilities and other (71.7 ) (237.8 ) Net cash provided by (used
in) operating activities 1,297.8 818.5 Cash flows
from investing activities: Additions to properties (351.1 ) (354.0
) Proceeds from sales of properties and other assets 4.4 46.1 Other
(50.5 ) 6.0 Net cash provided by (used in) investing
activities (397.2 ) (301.9 ) Cash flows from financing activities:
Exercise of stock options under equity compensation plans 6.3 1.1
Dividends paid (177.0 ) (176.6 ) Payments on debt and borrowings
(2.4 ) (2,201.5 ) Proceeds on debt and borrowings — 1,536.0 Net
proceeds from (payments on) revolving credit facilities and
commercial paper (376.1 ) 282.0 Change in overdraft balances and
other 24.5 (34.2 ) Net cash provided by (used in) financing
activities (524.7 ) (593.2 ) Cash and cash equivalents: Net
increase (decrease) in cash and cash equivalents 375.9 (76.6 )
Effect of foreign exchange rate changes on cash and cash
equivalents (1.6 ) 18.6 Balance at beginning of year 418.6
560.9 Balance at end of period $ 792.9 $ 502.9
Reconciliations to Nearest U.S. GAAP Measures by
Line Item Second Quarter
2018 Three Months Ended June 30, 2018 (In
millions) (Unaudited)
Net sales
Cost of
goodssold(1)
Gross profit
Marketing,general
andadministrativeexpenses(2)
Special
items,net(3)
Operatingincome (loss)
Reported (U.S. GAAP) $ 3,085.2 $ (1,739.1 ) $ 1,346.1 $
(744.7 ) $ (10.5 ) $ 590.9 Adjustments to arrive at underlying:
Special items, net Employee-related charges — — — — 1.0 1.0
Impairments or asset abandonment charges — — — — 8.3 8.3
Termination fees and other (gains) losses — — — — 1.2 1.2 Non-Core
items Integration related costs — 1.2 1.2 8.5 — 9.7 Unrealized
mark-to-market (gains) losses — (45.1 ) (45.1 ) — — (45.1 ) Tax
effects on special and non-GAAP items — — — —
— —
Underlying (Non-GAAP) $ 3,085.2
$ (1,783.0 ) $ 1,302.2 $ (736.2 ) $ — $ 566.0
Second Quarter 2018 Three Months Ended June
30, 2018 (In millions, except per share data) (Unaudited)
Interestincome(expense),net
Other
pensionandpostretirementbenefits(costs),
net
Otherincome(expense),net
Income(loss)beforeincometaxes
Incometaxbenefit(expense)
Net
income(loss)attributableto MCBC
Net
income(loss)attributable toMCBC
perdiluted share
Reported (U.S. GAAP) $ (76.7 ) $ 9.9 $ (1.1 ) $ 523.0 $
(92.2 ) $ 424.1 $ 1.96 Adjustments to arrive at underlying: Special
items, net Employee-related charges — — — 1.0 — 1.0 0.01
Impairments or asset abandonment charges — — — 8.3 — 8.3 0.04
Termination fees and other (gains) losses — — — 1.2 — 1.2 0.01
Non-Core items Integration related costs — — — 9.7 — 9.7 0.04
Unrealized mark-to-market (gains) losses — — — (45.1 ) — (45.1 )
(0.21 ) Tax effects on special and non-GAAP items — —
— — 6.9 6.9 0.03
Underlying
(Non-GAAP) $ (76.7 ) $ 9.9 $ (1.1 ) $ 498.1 $
(85.3 ) $ 406.1 $ 1.88
(1) Adjustments relate to
the following segments: U.S. segment $0.9 million, Canada segment
$0.2 million, Europe segment $0.1 million, Corporate segment
$(45.1) million. (2) Adjustments relate to the following segment:
International segment $0.8 million, Corporate segment $7.7 million.
(3) Adjustments relate to the following segments: U.S. segment $3.3
million, Canada segment $5.7 million, Europe segment $(0.3)
million, International segment $1.8 million.
YTD Second Quarter 2018 Six
Months Ended June 30, 2018 (In millions) (Unaudited)
Net
sales
Cost of
goodssold(1)
Gross profit
Marketing,general
andadministrativeexpenses(2)
Special
items,net(3)
Operatingincome (loss)
Reported (U.S. GAAP) $ 5,416.7 $ (3,274.8 ) $ 2,141.9 $
(1,425.8 ) $ 304.3 $ 1,020.4 Adjustments to arrive at underlying:
Special items, net Employee-related charges — — — — 4.9 4.9
Impairments or asset abandonment charges — — — — 17.6 17.6
Termination fees and other (gains) losses — — — — (326.8 ) (326.8 )
Non-Core items Integration related costs — 2.6 2.6 17.3 — 19.9
Unrealized mark-to-market (gains) losses — 39.6 39.6 — — 39.6 Other
non-core items — — — — — — Tax effects on special and non-GAAP
items — — — — — —
Underlying (Non-GAAP) $ 5,416.7 $ (3,232.6 ) $
2,184.1 $ (1,408.5 ) $ — $ 775.6
YTD
Second Quarter 2018 Six Months Ended June 30, 2018 (In
millions, except per share data) (Unaudited)
Interestincome(expense),net
Other
pensionandpostretirementbenefits(costs),
net(4)
Otherincome(expense),net
Income(loss)beforeincometaxes
Incometaxbenefit(expense)
Net
income(loss)attributableto MCBC
Net
income(loss)attributable toMCBC
perdiluted share
Reported (U.S. GAAP) $ (159.9 ) $ 19.9 $ — $ 880.4 $ (167.1
) $ 702.2 $ 3.24 Adjustments to arrive at underlying: Special
items, net Employee-related charges — — — 4.9 — 4.9 0.03
Impairments or asset abandonment charges — — — 17.6 — 17.6 0.08
Termination fees and other (gains) losses — — — (326.8 ) — (326.8 )
(1.51 ) Non-Core items Integration related costs — — — 19.9 — 19.9
0.09 Unrealized mark-to-market (gains) losses — — — 39.6 — 39.6
0.18 Non-core other pension and postretirement benefits (costs),
net — 0.1 — 0.1 — 0.1 — Tax effects on special and non-GAAP items —
— — — 52.9 52.9 0.25
Underlying (Non-GAAP) $ (159.9 ) $ 20.0 $ —
$ 635.7 $ (114.2 ) $ 510.4 $ 2.36
(1)
Adjustments relate to the following segments: U.S. segment
$2.0 million, Canada segment $0.3 million, Europe segment $0.3
million, Corporate segment $39.6 million. (2) Adjustments relate to
the following segment: International segment $0.8 million,
Corporate segment $16.5 million. (3) Adjustments relate to the
following segments: U.S. segment $4.8 million, Canada segment $11.3
million, Europe segment $4.8 million, International segment $2.8
million, Corporate segment $(328.0) million. (4) Adjustments relate
to the following segment: Corporate segment $0.1 million.
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Molson CoorsNews MediaColin
Wheeler, 303-927-2443orInvestor
RelationsKevin Kim, 303-927-2515
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