Net Sales Increased 1.8%, Financial Volumes
and Net Sales/HL Improved, Worldwide Brand Volumes Down 1.0%, U.S.
GAAP Net Income and Underlying EBITDA Delivered Growth
EPS (U.S. GAAP) of $1.56 Increased 17.3%,
and Underlying EPS (Non-GAAP) of $1.84 Increased 34.3%, versus
prior year
Management Increases Cost Savings Guidance,
Reaffirms Dividend ExpectationsRemains Committed to
Full-Year Free Cash Flow and Deleverage Targets
Molson Coors Brewing Company (NYSE: TAP; TSX: TPX) today
reported results for the 2018 third quarter. Molson Coors president
and chief executive officer Mark Hunter said:
"This quarter reflects progress on a number of fronts as we
drive our consistent First Choice strategy of earning more, using
less and investing wisely as brand volume grew in developed and
developing markets outside of North America, NSR/HL grew globally,
and we grew underlying EBITDA in constant currency in each of our
four business units."
Mark continued, "The volume growth we are seeing outside North
America is driven by consistency of our First Choice strategy, the
breadth and depth of our global brand portfolio and a positive
industry. Europe, our second largest business unit by volume, is
growing consistently and accelerating the pace of portfolio
premiumization while our International business unit, led by the
Latin American markets, posted mid-teens growth due to the strong
performance of our global brands, led by Coors Light and the Miller
Trademark brands of MGD, Miller Lite and Miller High Life.
"In the U.S., brand volumes or STRs were below industry volumes.
As we have indicated, improving our volume performance in the U.S.
is a priority and the first step is to improve our share
performance through Coors Light and accelerated premiumization of
the portfolio.
"Additionally, across Molson Coors we are over delivering on our
synergy and cost savings program to counter higher than anticipated
commodity inflation and maintain our deleverage commitment and
dividend plan."
Consolidated Performance - Third
Quarter 2018
Three Months Ended ($ in millions,
except per share data) (Unaudited)
September 30,2018
September 30,2017
Reported%
Increase(Decrease)
ForeignExchangeImpact
($)
ConstantCurrency%
Increase(Decrease)(2)
Net Sales $ 2,934.2 $ 2,883.2 1.8 % $ (22.4 ) 2.5 % U.S. GAAP Net
income (loss)(1) $ 338.3 $ 287.0 17.9 % Per diluted share $ 1.56 $
1.33 17.3 % Underlying (Non-GAAP) Net income (loss)(2) $ 398.5 $
296.5 34.4 % Per diluted share $ 1.84 $ 1.37 34.3 % Underlying
EBITDA (Non-GAAP)(2) $ 756.7 $ 688.6 9.9 % $ (8.1 ) 11.1 %
Nine Months Ended ($ in millions, except per share
data) (Unaudited)
September 30,2018
September 30,2017
Reported%
Increase(Decrease)
ForeignExchangeImpact
($)
ConstantCurrency%
Increase(Decrease)(2)
Net Sales $ 8,350.9 $ 8,423.2 (0.9 )% $ 89.2 (1.9 )% U.S. GAAP Net
income (loss)(1) $ 1,040.5 $ 825.4 26.1 % Per diluted share $ 4.80
$ 3.81 26.0 % Underlying (Non-GAAP) Net income (loss)(2) $ 908.9 $
835.8 8.7 % Per diluted share $ 4.20 $ 3.86 8.8 % Underlying EBITDA
(Non-GAAP)(2) $ 1,966.0 $
2,015.6 (2.5 )% $ 7.7
(2.8 )% (1) Net income (loss) attributable to
MCBC. (2) See Appendix for definitions and reconciliations of
non-GAAP financial measures.
Quarterly Highlights (versus Third Quarter 2017
Results)
- Net sales: $2.9 billion,
increased by 1.8 percent, driven by positive global net pricing in
all segments, higher financial volume in Europe, U.S. and Canada
and favorable mix in Europe, partially offset by unfavorable
foreign currency movements and the adoption of the new revenue
recognition accounting standard (discussed in the Appendix below).
Net sales in constant currency increased 2.5 percent.
- Net sales per HL: $110.67 on a
reported financial-volume basis, increased 0.9 percent. Net
sales per HL on a brand volume basis(1) in constant currency
increased by 0.4 percent, driven by positive global net pricing as
well as favorable mix in Europe, partially offset by the adoption
of the new revenue recognition accounting standard.
- Volume: Worldwide brand volume
of 25.3 million hectoliters decreased 1.0 percent driven by
declines in the U.S. and Canada, partially offset by growth in
Europe and International. Financial volume of 26.5 million
hectoliters increased 0.8 percent, driven by Europe, U.S. and
Canada. Global priority brand volume decreased 1.4 percent.
- U.S. GAAP net income
attributable to MCBC increased 17.9 percent, driven by higher net
sales, a net benefit to U.S. MG&A resulting from the amicable
resolution of a dispute with a vendor, global marketing
optimization, cost savings to manage inflationary pressure,
partially offset by higher special charges and unrealized
mark-to-market changes on commodity positions. This performance
further benefited from lower income tax expense driven by the
reduction to the U.S. federal income tax rate and discrete tax
benefits.
- Underlying net income increased
34.4 percent, driven by the same factors as U.S. GAAP results with
the exception of special charges and unrealized mark-to-market
changes.
- Underlying EBITDA: Increased 9.9
percent on a reported basis and increased 11.1 percent on a
constant-currency basis, driven by higher net sales, a net benefit
to U.S. MG&A resulting from the amicable resolution of a
dispute with a vendor, global marketing optimization, and cost
savings to manage inflationary pressures.
- U.S. GAAP cash from operations:
Net cash provided by operating activities for the first three
quarters of 2018 was approximately $1.8 billion, which represents
an improvement of $646.0 million from the prior year, 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 lower cash paid for
pension contributions and lower interest paid.
- Underlying free cash flow: cash
received of $1.0 billion for the first three quarters, which
represents an increase of $189.0 million from the prior year,
driven by lower cash paid for pension contributions and lower
interest paid, partially offset by lower underlying EBITDA and
higher cash paid for capital expenditures.
- Debt: During the third quarter,
we repaid our CAD 400 million 2.25% notes with cash on hand as part
of our deleverage commitment resulting in total debt and cash and
cash equivalents of $10.6 billion and $750.1 million, respectively,
or net debt of $9.8 billion, at the end of the third quarter of
2018.
(1)
Brand Volume Basis
NSR/HL: Effective in the first quarter of 2018, we have
revised our net sales revenue (NSR) per HL performance discussions
to be on a brand volume basis, with all per-hectoliter calculations
including owned and actively managed brands, along with royalty
volume, in the denominator, as well as the financial impact of
these sales in the numerator, unless otherwise indicated. See
Appendix for definitions.
Business Review - Third Quarter 2018
Net
Sales
($ in millions) (Unaudited)
Three Months
Ended
September 30,2018
September 30,2017
Reported%
Increase(Decrease)
ForeignExchangeImpact
($)
ConstantCurrency%
Increase(Decrease)(1)
United States $ 1,935.8 $ 1,892.2 2.3 % $ — 2.3 % Canada 388.9
406.4 (4.3 )% (16.2 ) (0.3 )% Europe 577.9 561.2 3.0 % (4.6 ) 3.8 %
International 67.0 65.7 2.0 % (1.6 ) 4.4 % Corporate 0.2 0.3 (33.3
)% — (33.3 )% Eliminations(2) (35.6 ) (42.6 ) 16.4 % — 16.4
% Consolidated $ 2,934.2 $ 2,883.2 1.8 % $ (22.4 )
2.5 %
(1)
See Appendix for definitions and reconciliations of non-GAAP
financial measures. (2) Reflects intercompany sales that are
eliminated in consolidated totals.
Pretax Income
(U.S. GAAP)
($ in millions) (Unaudited)
Three Months
Ended
September 30,2018
September 30,2017
Reported%
Increase(Decrease)
ForeignExchangeImpact
($)
ConstantCurrency%
Increase(Decrease)(1)
United States $ 374.2 $ 367.1 1.9 % $ (0.7 ) 2.1 % Canada 77.5 77.2
0.4 % (2.8 ) 4.0 % Europe 96.0 94.9 1.2 % (0.5 ) 1.7 %
International (1.0 ) (6.0 ) 83.3 % (2.5 ) 125.0 % Corporate (136.6
) (92.7 ) (47.4 )% 0.6 (48.0 )% Consolidated $ 410.1
$ 440.5 (6.9 )% $ (5.9 ) (5.6 )%
(1) See Appendix for definitions and
reconciliations of non-GAAP financial measures.
Underlying EBITDA
(Non-GAAP)(1)
($ in millions) (Unaudited)
Three Months
Ended
September 30,2018
September 30,2017
Reported%
Increase(Decrease)
ForeignExchangeImpact
($)
ConstantCurrency%
Increase(Decrease)(1)
United States $ 526.1 $ 477.6 10.2 % $ (0.7 ) 10.3 % Canada 112.6
113.0 (0.4 )% (4.3 ) 3.5 % Europe 144.1 136.9 5.3 % (0.7 ) 5.8 %
International 2.9 (1.0 ) N/M (2.2 ) N/M Corporate (29.0 ) (37.9 )
23.5 % (0.2 ) 24.0 % Consolidated $ 756.7 $ 688.6 9.9
% $ (8.1 ) 11.1 % 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 3.3 percent for the quarter, primarily driven by lower
volume in the premium light segment. Sales-to-wholesalers (STWs),
excluding contract brewing, volume increased 1.1 percent driven by
an increase in distributor inventories to support further ordering
system implementations at our breweries. These increased
distributor inventory levels at the end of the third quarter are
expected to remain through the end of the year as we prepare for
future implementations at our remaining breweries, which are
currently expected to occur in 2019.
- Revenue: Net sales per
hectoliter (brand volume basis), which excludes contract brewing
and company-owned-distributor sales, grew 1.3 percent. Excluding
the impact of the new revenue recognition accounting standard, net
sales per hectoliter (brand volume basis) grew 1.2 percent
primarily as a result of higher net pricing, partially offset by
negative sales mix.
- Cost of goods sold (COGS) per
hectoliter increased 3.3 percent, driven by higher
transportation costs and aluminum inflation, partially offset by
cost savings.
- Marketing, general and
administrative (MG&A) expense decreased 8.2 percent due to
a net benefit from the amicable resolution of a vendor dispute,
which drove nearly half of the decline, as well as spending
optimization and efficiencies and lower employee-related
expenses.
- On a U.S. GAAP basis, U.S. pretax
income increased 1.9 percent to $374.2 million, driven by
higher STWs from an increase in distributor inventories, higher net
pricing and lower MG&A expenses, partially offset by higher
COGS, higher special charges related to restructuring, as well as
negative sales mix.
- U.S. underlying EBITDA increased
10.2 percent to $526.1 million, driven by the same factors as U.S.
GAAP results with the exception of special charges.
Canada Business
- Volume: Canada brand volume
decreased 1.4 percent in the third quarter, as a result of lower
volumes in the West, partially offset by growth in Ontario and
Quebec. Financial volume increased 0.4 percent.
- Revenue: Net sales per
hectoliter (brand volume basis) decreased 2.0 percent in local
currency, driven by our adoption of the new revenue recognition
accounting standard, which reduced net sales by approximately $14
million in the quarter with a corresponding benefit to MG&A.
Excluding the effect of the new accounting standard, NSR per HL
(brand volume basis) increased 1.6 percent in local currency due to
higher net pricing, partially offset by negative brand mix.
- COGS per hectoliter increased
2.1 percent in local currency due to supply chain transformation
investments and input cost inflation, partially offset by
distribution gains and cost savings.
- MG&A expense decreased 11.8
percent in local currency, primarily driven by the approximate $14
million favorable impact of the new revenue recognition accounting
standard. Excluding the impact of the new revenue recognition
accounting standard, marketing and brand investments increased
slightly during the quarter.
- On a U.S. GAAP basis, Canada
reported pretax income of $77.5 million, a 0.4 percent
increase from the prior year, driven by positive pricing, partially
offset by negative sales mix and input cost inflation.
- Canada underlying EBITDA
increased 3.5 percent in constant currency to $112.6 million in the
quarter, due to the same factors as U.S. GAAP results.
Europe Business
- Volume: Europe brand volume
increased 2.1 percent in the third quarter versus a year ago, as a
result of improved above premium and core brand performance. Europe
financial volume increased 1.1 percent.
- Revenue: Europe net sales per
hectoliter (brand volume basis) increased 2.1 percent in local
currency, driven by positive sales mix. This was partially offset
by negative pricing due to 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
4.5 percent in local currency, due to input inflation and mix shift
to higher-cost brands and geographies.
- MG&A expense decreased 3.2
percent in local currency, primarily driven by spend efficiency of
brand investments and the impact of adopting the new revenue
recognition accounting standard.
- On a U.S. GAAP basis, Europe
reported pretax income of $96.0 million, an increase of 1.2
percent driven by a favorable mix shift from our premiumization
efforts and more efficient marketing investments. These factors
were partially offset by adopting recently revised excise tax
guidelines in one of our European markets, investments in our First
Choice Agenda and unfavorable foreign currency movements.
- Europe underlying EBITDA
increased 5.8 percent in constant currency to $144.1 million, due
to the same factors as U.S. GAAP results.
International Business
- Volume: International brand
volume increased by 13.8 percent in the third quarter, driven by
organic growth in our focus markets.
- Revenue: Net sales per
hectoliter (brand volume basis) decreased by 10.3 percent, driven
by sales mix changes and shifting to local production in Mexico,
partially offset by positive net pricing.
- COGS per hectoliter was flat,
driven by sales mix changes.
- MG&A expense decreased 10.7
percent, driven by lower marketing investments and integration
costs.
- On a U.S. GAAP basis,
International reported a pretax loss of $1.0
million versus a loss of $6.0 million a year ago, driven by volume
growth in our focus markets, higher net pricing, shifting to a more
profitable business model in Mexico, along with lower marketing and
integration expenses, partially offset by negative foreign currency
movements.
- International underlying EBITDA
was $2.9 million in the third quarter, compared to $1.0 million
loss a year ago, driven by the same factors as U.S. GAAP
with the exception of integration charges.
Corporate
- On a U.S. GAAP basis, Corporate
reported a pretax loss of $136.6 million in the third
quarter compared to a loss of $92.7 million in the prior year, due
to unrealized mark-to-market losses on commodity swaps, primarily
our aluminum positions, compared to gains a year ago, partially
offset by lower interest expense and lower general and
administrative costs in the current year.
- Corporate underlying EBITDA was
a loss of $29.0 million for the third quarter versus a $37.9
million loss in the prior year, driven primarily by lower general
and administrative costs.
Worldwide Brand and Financial
Volume(1)
(In millions of hectoliters) (Unaudited)
Three Months Ended
September 30,2018
% Change
September 30,2017
Financial Volume(1) 26.513 0.8 % 26.290 Contract
brewing, wholesaler and non-beer volume (2.222 ) (0.8 )% (2.239 )
Royalty volume 1.171 23.7 % 0.947 Sales-To-Wholesaler to
Sales-To-Retail adjustment (0.178 ) N/M 0.532
Total
Worldwide Brand Volume(1) 25.284 (1.0 )% 25.530
N/M = Not meaningful (1) See Appendix for
definitions and additional discussion regarding Financial and
Worldwide Brand Volume.
Other Results
Effective Income
Tax Rates
Three Months Ended
September 30, 2018 September 30, 2017
U.S. GAAP effective tax rate 16 % 33 % Underlying effective tax
rate 16 % 27 %
- The U.S. GAAP effective tax rate
and the underlying effective tax rate decreased 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 and the net impact of discrete items. The net discrete tax
benefit recognized in 2018 was driven primarily by the release of
uncertain tax positions during the third quarter related to
finalizing our bilateral advanced pricing agreement with the
Canadian Revenue Agency and U.S. Internal Revenue Service.
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 third quarter of 2018, MCBC
recognized a net special charge of $36.6 million, driven by
U.S. restructuring charges and asset abandonment charges, primarily
accelerated depreciation related to brewery closures.
- Additionally, other non-core net
charges of $35.3 million primarily include unrealized
mark-to-market losses 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 $700
million for 2017 to 2019. - Updated (formerly $600 million for 2017
to 2019)
- Cost of goods sold per
hectoliter:
- U.S.: mid-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:
expected near the low end of our $330 million, plus or minus 10
percent guidance range. - Updated
- Underlying effective tax rate in
the range of 17 to 19 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. - Updated (formerly 18 to 22 percent for 2018)
- Deleverage & Dividend: As
communicated in June, we remain 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. Additionally, as a reminder, we also previously communicated
in June of this year that upon achieving about 3.75x leverage, our
board's intention is 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.
- 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 $65 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 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 third quarter ended September 30, 2018, compared to
the third quarter ended September 30, 2017. Prior year results
have been adjusted to reflect the retrospective adoption of new
pension accounting guidance, 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 Third 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 third 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 February 11, 2019. The
Company will post this release and related financial statements on
its website today.
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 September 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 $ 2,934.2 $ — $
2,934.2 1.8 % 1.8 % Net Sales
per HL change 0.9 % 0.9 %
Cost of goods sold $ (1,714.0 ) $
24.5 $ (1,689.5 )
7.9 % 3.4 % Cost of
goods sold per HL change 6.9 % 2.6 %
Gross profit $
1,220.2 $ 24.5 $ 1,244.7
(5.7 )% (0.4 )% Marketing, general
and administrative expenses $ (713.9 )
$ 8.8 $ (705.1 ) (8.9
)% (8.4 )% Special items, net $ (36.6 ) $ 36.6
$ — N/M — %
Operating income (loss) $ 469.7
$ 69.9 $ 539.6 (7.2 )%
12.3 % Interest income (expense), net $ (67.4 ) $ — $
(67.4 ) (7.2 )% (7.2 )% Other pension and postretirement benefits
(costs), net $ 7.6 $ 2.0 $ 9.6 (20.8 )% — % Other income (expense),
net $ 0.2 $ — $ 0.2 N/M N/M Income (loss) before income taxes $
410.1 $ 71.9 $ 482.0 (6.9 )% 16.2 % Income tax benefit (expense) $
(64.5 ) $ (11.7 ) $ (76.2 ) (56.2 )% (32.1 )%
Net income
(loss)(2) $ 338.3 $ 60.2 $
398.5
17.9 % 34.4 % Per diluted
share $ 1.56 $ 0.28 $
1.84 17.3 % 34.3 % Underlying
EBITDA(3)
$ 756.7 9.9
% Molson Coors Brewing Company
Nine Months Ended September 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 $ 8,350.9 $ — $
8,350.9 (0.9 )% (0.9 )% Net
Sales per HL change 1.0 % 1.0 %
Cost of goods sold $
(4,988.8 ) $ 66.7 $ (4,922.1 )
5.8 % 2.7
% Cost of goods sold per HL change 7.8 % 4.6 %
Gross
profit $ 3,362.1 $ 66.7 $
3,428.8 (9.3 )% (5.5 )%
Marketing, general and administrative expenses $
(2,139.7 ) $ 26.1 $
(2,113.6 ) (5.8 )% (5.0
)% Special items, net $ 267.7 $ (267.7 ) $ — N/M — %
Operating income (loss) $ 1,490.1 $
(174.9 ) $ 1,315.2 5.9 %
(6.3 )% Interest income (expense), net $ (227.3 ) $ —
$ (227.3 ) (12.0 )% (12.0 )% Other pension and postretirement
benefits (costs), net $ 27.5 $ 2.1 $ 29.6 (14.9 )% 0.7 % Other
income (expense), net $ 0.2 $ — $ 0.2 — % N/M Income (loss) before
income taxes $ 1,290.5 $ (172.8 ) $ 1,117.7 9.2 % (4.2 )% Income
tax benefit (expense) $ (231.6 ) $ 41.2 $ (190.4 ) (31.6 )% (39.1
)%
Net income (loss)(2) $ 1,040.5
$ (131.6 ) $ 908.9
26.1 %
8.7 % Per diluted share $ 4.80
$ (0.60 ) $ 4.20 26.0
% 8.8 % Underlying EBITDA(3)
$ 1,966.0
(2.5 )% 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 September 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 September 30, 2018
U.S. Canada Europe
International Consolidated (In
millions) Impact to Unaudited Condensed Consolidated
Statements of Operations - Favorable/(Unfavorable): Net sales $
1.5 $ (13.5 ) $ (0.6 ) $ (0.1 ) $ (12.7 ) Cost of goods sold $ — $
— $ — $ — $ — Gross profit $ 1.5 $ (13.5 ) $ (0.6 ) $ (0.1 ) $
(12.7 ) Marketing, general and administrative expenses $ 3.3 $ 14.3
$ 1.8 $ — $ 19.4 Operating income (loss) $ 4.8 $ 0.8 $ 1.2 $ (0.1 )
$ 6.7 Interest income (expense), net $ — $ — $ (0.8 ) $ — $ (0.8 )
Income (loss) before income taxes $ 4.8
$ 0.8 $ 0.4 $ (0.1 ) $ 5.9
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 third 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 third 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 constant currency, "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. In addition, constant-currency results exclude the impact of
foreign currency movements. 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.
Constant currency is a non-GAAP measure utilized by Molson Coors
management to measure performance, excluding the impact of foreign
currency movements. As we operate in various foreign countries
where the local currency may strengthen or weaken significantly
versus the U.S. dollar or other currencies used in operations, we
utilize a constant currency measure as an additional metric to
evaluate the underlying performance of each business without
consideration of foreign currency movements. This information is
non-GAAP and should be viewed as a supplement to (not a substitute
for) our reported results of operations under U.S. GAAP. We
calculate the impact of foreign exchange on net sales, pretax
income, non-GAAP underlying EBITDA and non-GAAP underlying pretax
income using the following steps:
- Multiply our current period local
currency operating results (that also include the impact of the
comparable prior-period currency hedging activities) by the
weighted average foreign exchange rates used to translate the
financial statements in the comparable prior year period. The
result is the current-period operating results in U.S. dollars, as
if foreign exchange rates had not changed from the prior-year
period.
- Subtract the result in step 1 from the
unadjusted current-period reported operating result in U.S. dollars
(U.S. GAAP measure). This difference reflects the impact of foreign
currency translational gains/losses included in the current-period
results.
- Determine the amount of actual
non-operating foreign currency gains/losses realized as a result of
hedging activities and activities transacted in a currency other
than the functional currency of each legal entity.
- Add the results of steps 2 and 3 above.
This sum equals the total impact of foreign currency translational
gains/losses and realized gains/losses from foreign currency
transactions. This is the value shown in the “Foreign Exchange $
Impact” column within the table above.
Reconciliations to Nearest U.S. GAAP Measures
Underlying
EBITDA
($ in millions) (Unaudited)
Three Months
Ended
September 30,2018
% change
September 30,2017
U.S. GAAP:
Net income (loss) attributable to MCBC $
338.3 17.9 %
$ 287.0 Add: Net income (loss)
attributable to noncontrolling interests 7.3 19.7 % 6.1
U.S. GAAP:
Net income (loss) 345.6 17.9 % 293.1 Add:
Interest expense (income), net 67.4 (7.2 )% 72.6 Add: Income tax
expense (benefit) 64.5 (56.2 )% 147.4 Add: Depreciation and
amortization 214.6 3.0 % 208.3 Adjustments included in underlying
income(1) 71.9 N/M (25.7 ) Adjustments to arrive at underlying
EBITDA(2) (7.3 ) 2.8 % (7.1 ) Non-GAAP:
Underlying EBITDA
$ 756.7 9.9 %
$ 688.6
($ in millions)
(Unaudited)
Nine Months Ended
September 30,2018
% change
September 30,2017
U.S. GAAP:
Net income (loss) attributable to MCBC $
1,040.5 26.1 %
$ 825.4 Add: Net income (loss)
attributable to noncontrolling interests 18.4 4.0 % 17.7
U.S. GAAP:
Net income (loss) 1,058.9 25.6 % 843.1
Add: Interest expense (income), net 227.3 (12.0 )% 258.4 Add:
Income tax expense (benefit) 231.6 (31.6 )% 338.5 Add: Depreciation
and amortization 644.2 6.6 % 604.3 Adjustments included in
underlying income(1) (172.8 ) N/M (15.3 ) Adjustments to arrive at
underlying EBITDA(2) (23.2 ) 73.1 % (13.4 ) Non-GAAP:
Underlying
EBITDA $ 1,966.0 (2.5 )%
$
2,015.6 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)
Nine Months
Ended
September 30,2018
September 30,2017
U.S. GAAP:
Net Cash Provided by (Used In) Operating
Activities $ 1,791.4 $ 1,145.4
Less: Additions to properties(1) (491.0 ) (466.0 ) Add/Less: Cash
impact of special items(2) (319.4 ) 82.0 Add: Non-core costs
related to acquisition of businesses(3) 44.4 75.0
Non-GAAP:
Underlying Free Cash Flow $ 1,025.4
$ 836.4
(1) Included in net cash used in investing
activities. (2) Included in net cash provided by (used in)
operating activities. For the nine months ended September 30, 2018,
primarily reflects the settlement payment received relating to a
purchase price adjustment and for the nine months ended September
30, 2017, primarily reflects costs paid for brewery closures and
restructuring activities. (3) Included in net cash provided by
operating activities and reflects integration 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 Nine Months
Ended
September 30,2018
September 30,2017
September 30,2018
September 30,2017
Financial volume in hectoliters 26.513 26.290 75.071
76.508 Sales $ 3,625.1 $ 3,552.9 $ 10,313.6 $
10,259.8 Excise taxes (690.9 ) (669.7 ) (1,962.7 ) (1,836.6 ) Net
sales 2,934.2 2,883.2 8,350.9 8,423.2 Cost of goods sold (1,714.0 )
(1,589.1 ) (4,988.8 ) (4,716.9 ) Gross profit 1,220.2 1,294.1
3,362.1 3,706.3 Marketing, general and administrative expenses
(713.9 ) (783.8 ) (2,139.7 ) (2,271.5 ) Special items, net (36.6 )
(4.1 ) 267.7 (27.3 ) Operating income (loss) 469.7 506.2
1,490.1 1,407.5 Interest income (expense), net (67.4 ) (72.6 )
(227.3 ) (258.4 ) Other pension and postretirement benefits
(costs), net 7.6 9.6 27.5 32.3 Other income (expense), net 0.2
(2.7 ) 0.2 0.2 Income (loss) before income
taxes 410.1 440.5 1,290.5 1,181.6 Income tax benefit (expense)
(64.5 ) (147.4 ) (231.6 ) (338.5 ) Net income (loss) 345.6 293.1
1,058.9 843.1 Net (income) loss attributable to noncontrolling
interests (7.3 ) (6.1 ) (18.4 ) (17.7 ) Net income (loss)
attributable to MCBC $ 338.3 $ 287.0 $ 1,040.5
$ 825.4 Basic net income (loss) attributable to MCBC
per share: $ 1.57 $ 1.33 $ 4.82 $ 3.83 Diluted net income (loss)
attributable to MCBC per share: $ 1.56 $ 1.33 $ 4.80 $ 3.81
Weighted average shares - basic 216.0 215.5 215.9 215.4 Weighted
average shares - diluted 216.6 216.5 216.6 216.5 Dividends
per share $ 0.41 $ 0.41 $ 1.23 $ 1.23
Molson Coors Brewing Company and
Subsidiaries
U.S. Results of
Operations
(In millions) (Unaudited)
Three Months
Ended Nine Months Ended
September 30,2018
September 30,2017
September 30,2018
September 30,2017
Financial volume in hectoliters(1) 17.206 17.163
50.262 52.125 Sales(1) $ 2,199.8 $ 2,154.3 $ 6,416.1
$ 6,578.7 Excise taxes (264.0 ) (262.1 ) (760.0 ) (797.7 ) Net
sales(1) 1,935.8 1,892.2 5,656.1 5,781.0 Cost of goods sold(1)
(1,118.7 ) (1,080.1 ) (3,298.5 ) (3,285.5 ) Gross profit 817.1
812.1 2,357.6 2,495.5 Marketing, general and administrative
expenses (420.4 ) (458.2 ) (1,248.6 ) (1,322.7 ) Special items,
net(2) (29.7 ) (0.1 ) (34.5 ) (15.2 ) Operating income 367.0 353.8
1,074.5 1,157.6 Interest income (expense), net 7.6 14.0 8.0 14.0
Other income (expense), net (0.4 ) (0.7 ) (1.1 ) (1.4 ) Income
(loss) before income taxes $ 374.2 $ 367.1 $ 1,081.4 $ 1,170.2
Add/(less): Special items, net(2) 29.7 0.1 34.5 15.2 Acquisition
and integration related costs(3) 0.6 1.5 2.6
6.8 Non-GAAP: Underlying pretax income (loss) $ 404.5 $
368.7 $ 1,118.5 $ 1,192.2 Add: Interest expense (income), net (7.6
) (14.0 ) (8.0 ) (14.0 ) Add: Depreciation and amortization 130.6
122.9 385.0 363.5 Adjustments to arrive at underlying EBITDA(4)
(1.4 ) — (4.2 ) — Non-GAAP: Underlying EBITDA $ 526.1
$ 477.6 $ 1,491.3 $ 1,541.7
(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 nine months ended September 30, 2018, includes accelerated
depreciation in excess of normal depreciation of $1.4 million and
$4.2 million, respectively. These accelerated depreciation charges
are included in our adjustments to arrive at underlying EBITDA. (3)
For the three and nine months ended September 30, 2018, $0.5
million and $2.5 million, respectively, of integration costs were
incurred in cost of goods sold, and $0.1 million of integration
costs in each period were incurred in marketing, general &
administrative expenses. For the three and nine months ended
September 30, 2017, $0.6 million and $1.8 million, respectively, of
integration costs were incurred in cost of goods sold, and
integration costs of $0.9 million and $5.0 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
Nine Months Ended
September 30,2018
September 30,2017
September 30,2018
September 30,2017
Financial volume in hectoliters(1) 2.405 2.395 6.585
6.718 Sales(1) $ 519.4 $ 535.2 $ 1,418.9 $ 1,440.2
Excise taxes (130.5 ) (128.8 ) (348.8 ) (335.1 ) Net sales(1) 388.9
406.4 1,070.1 1,105.1 Cost of goods sold(1) (218.8 ) (222.1 )
(641.9 ) (636.6 ) Gross profit 170.1 184.3 428.2 468.5 Marketing,
general and administrative expenses (87.2 ) (103.0 ) (262.5 )
(303.8 ) Special items, net(2) (5.9 ) (5.9 ) (17.2 ) (8.1 )
Operating income (loss) 77.0 75.4 148.5 156.6 Other income
(expense), net 0.5 1.8 (0.6 ) 11.2 Income
(loss) before income taxes $ 77.5 $ 77.2 $ 147.9 $ 167.8
Add/(less): Special items, net(2) 5.9 5.9 17.2 8.1 Acquisition and
integration related costs(3) 0.1 0.5 0.4 3.3 Other non-core
items(4) — — — (8.1 ) Non-GAAP: Underlying
pretax income (loss) $ 83.5 $ 83.6 $ 165.5 $ 171.1 Add:
Depreciation and amortization 35.0 35.5 106.0 95.3 Adjustments to
arrive at underlying EBITDA(5) (5.9 ) (6.1 ) (18.0 ) (8.4 )
Non-GAAP: Underlying EBITDA $ 112.6 $ 113.0 $ 253.5
$ 258.0
(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 nine months ended September
30, 2018, includes accelerated depreciation in excess of normal
depreciation of $5.9 million and $18.0 million, respectively, and
for the three and nine months ended September 30, 2017, includes
accelerated depreciation in excess of normal depreciation of $6.1
million and $8.4 million, respectively, related to the planned
closure of the Vancouver brewery in 2019 and the Montreal brewery
in 2021. These accelerated depreciation charges in excess of normal
depreciation are included in our adjustments to arrive at
underlying EBITDA. (3) For the three and nine months ended
September 30, 2018, $0.1 million and $0.4 million, respectively, of
integration related costs were incurred in cost of goods sold. For
the three and nine months ended September 30, 2017, $0.5 million
and $3.3 million, respectively, of integration related costs were
incurred in cost of goods sold. (4) For the nine months ended
September 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 Nine Months Ended
September 30,2018
September 30,2017
September 30,2018
September 30,2017
Financial volume in hectoliters(1)(2) 6.891 6.815
18.211 17.889 Sales(2) $ 860.6 $ 831.2 $ 2,353.0 $
2,141.8 Excise taxes (282.7 ) (270.0 ) (814.7 ) (674.3 ) Net
sales(2) 577.9 561.2 1,538.3 1,467.5 Cost of goods sold (346.9 )
(330.8 ) (968.2 ) (872.7 ) Gross profit 231.0 230.4 570.1 594.8
Marketing, general and administrative expenses (133.3 ) (138.9 )
(407.4 ) (403.7 ) Special items, net(3) (0.6 ) 2.8 (5.4 )
(2.4 ) Operating income (loss) 97.1 94.3 157.3 188.7 Interest
income (expense), net (1.5 ) 0.8 (3.6 ) 2.8 Other income (expense),
net 0.4 (0.2 ) (0.8 ) 0.3 Income (loss) before income
taxes $ 96.0 $ 94.9 $ 152.9 $ 191.8 Add/(less): Special items,
net(3) 0.6 (2.8 ) 5.4 2.4 Acquisition and integration related
costs(4) 0.2 0.1 0.5 0.4 Non-GAAP:
Underlying pretax income (loss) $ 96.8 $ 92.2 $ 158.8 $ 194.6 Add:
Interest expense (income), net 1.5 (0.8 ) 3.6 (2.8 ) Add:
Depreciation and amortization 45.8 46.5 143.0 135.4 Adjustments to
arrive at underlying EBITDA(5) — (1.0 ) (1.0 ) (5.0 )
Non-GAAP: Underlying EBITDA $ 144.1 $ 136.9 $ 304.4
$ 322.2
(1) Excludes royalty volume of 0.522
million hectoliters and 1.318 million hectoliters for the three and
nine months ended September 30, 2018, respectively, and excludes
royalty volume of 0.473 million hectoliters and 1.277 million
hectoliters for the three and nine months ended September 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 nine months ended September 30, 2018, includes accelerated
depreciation in excess of normal depreciation of $1.0 million, and
for the three and nine months ended September 30, 2017, includes
accelerated depreciation in excess of normal depreciation of $1.0
million and $5.0 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 nine months
ended September 30, 2018, $0.2 million and $0.5 million,
respectively, of integration related costs were incurred in cost of
goods sold, and for the three and nine months ended September 30,
2017, $0.1 million and $0.4 million, respectively, of 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 Nine Months Ended
September 30,2018
September 30,2017
September 30,2018
September 30,2017
Financial volume in hectoliters(1) 0.577 0.603 1.734
1.774 Sales $ 80.7 $ 74.5 $ 231.6 $ 222.1 Excise
taxes (13.7 ) (8.8 ) (39.2 ) (29.5 ) Net sales 67.0 65.7 192.4
192.6 Cost of goods sold(2) (42.0 ) (43.9 ) (123.9 ) (130.7 ) Gross
profit 25.0 21.8 68.5 61.9 Marketing, general and administrative
expenses (24.1 ) (27.0 ) (59.8 ) (72.7 ) Special items, net(3) (0.4
) (0.9 ) (3.2 ) (1.5 ) Operating income (loss) 0.5 (6.1 ) 5.5 (12.3
) Other income (expense), net (1.5 ) 0.1 (1.5 ) 0.1
Income (loss) before income taxes $ (1.0 ) $ (6.0 ) $ 4.0 $ (12.2 )
Add/(less): Special items, net(3) 0.4 0.9 3.2 1.5 Acquisition and
integration related costs(4) 1.1 1.7 1.9 6.6
Non-GAAP: Underlying pretax income (loss) $ 0.5 $ (3.4 ) $
9.1 $ (4.1 ) Add: Depreciation and amortization 2.4 2.4
7.4 7.2 Non-GAAP: Underlying EBITDA $ 2.9
$ (1.0 ) $ 16.5 $ 3.1
(1) Excludes
royalty volume of 0.649 million hectoliters and 1.626 million
hectoliters for the three and nine months ended September 30, 2018,
respectively, and excludes royalty volume of 0.474 million
hectoliters and 1.501 million hectoliters for the three and nine
months ended September 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 nine months ended September 30, 2018,
$0.5 million of integration costs were incurred in cost of goods
sold, and for the nine months ended September 30, 2017, $1.4
million of integration costs were incurred in cost of goods sold.
For the three and nine months ended September 30, 2018, integration
costs of $0.6 million and $1.4 million, respectively, were incurred
in marketing, general & administrative expenses, and for the
three and nine months ended September 30, 2017, integration costs
of $1.7 million and $5.2 million, respectively, were incurred in
marketing, general & administrative expenses.
Molson Coors Brewing Company and Subsidiaries
Corporate Results
of Operations
(In millions) (Unaudited)
Three Months
Ended Nine Months Ended
September 30,2018
September 30,2017
September 30,2018
September 30,2017
Financial volume in hectoliters — — — —
Sales $ 0.2 $ 0.3 $ 0.7 $ 0.9 Excise taxes — — —
— Net sales 0.2 0.3 0.7 0.9 Cost of goods sold (23.2
) 45.2 (63.0 ) 84.7 Gross profit (23.0 ) 45.5 (62.3 )
85.6 Marketing, general and administrative expenses (48.9 ) (56.7 )
(161.4 ) (168.6 ) Special items, net(1) — — 328.0
(0.1 ) Operating income (loss) (71.9 ) (11.2 ) 104.3 (83.1 )
Interest expense, net (73.5 ) (87.4 ) (231.7 ) (275.2 ) Other
pension and postretirement benefits (costs), net 7.6 9.6 27.5 32.3
Other income (expense), net 1.2 (3.7 ) 4.2 (10.0 )
Income (loss) before income taxes $ (136.6 ) $ (92.7 ) $ (95.7 ) $
(336.0 ) Add/(less): Special items, net(1) — — (328.0 ) 0.1
Acquisition and integration related costs(2) 8.1 11.7 24.6 36.3
Unrealized mark-to-market (gains) and losses(3) 23.2 (45.3 ) 62.8
(85.0 ) Non-core other pension and postretirement benefits (costs),
net(4) 2.0 — 2.1 (2.9 ) Non-GAAP: Underlying
pretax income (loss) $ (103.3 ) $ (126.3 ) $ (334.2 ) $ (387.5 )
Add: Interest expense (income), net 73.5 87.4 231.7 275.2 Add:
Depreciation and amortization 0.8 1.0 2.8 2.9
Non-GAAP: Underlying EBITDA $ (29.0 ) $ (37.9 ) $ (99.7 ) $
(109.4 )
(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
nine months ended September 30, 2018, we have recorded $8.1 million
and $24.6 million, respectively, of integration costs within
marketing, general & administrative expenses, and for the three
and nine months ended September 30, 2017, we have recorded $11.7
million and $36.3 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 three and nine
months ended September 30, 2018, we recognized special termination
benefit charges related to the restructuring program in the U.S.
segment. See Part I—Item 1. Financial Statements, Note 13, "Pension
and Other Postretirement Benefits" of the Form 10-Q for discussion.
For the nine months ended September 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 September 30, 2018
December 31, 2017 Assets Current assets: Cash and
cash equivalents $ 750.1 $ 418.6 Accounts receivable, net 933.4
733.8 Other receivables, net 184.2 168.2 Inventories, net 631.9
591.5 Other current assets, net 312.7 277.6 Total
current assets 2,812.3 2,189.7 Properties, net 4,593.5 4,673.7
Goodwill 8,333.0 8,405.5 Other intangibles, net 13,996.4 14,296.5
Other assets 735.1 681.5 Total assets $ 30,470.3
$ 30,246.9
Liabilities and equity Current
liabilities: Accounts payable and other current liabilities $
2,820.6 $ 2,684.5 Current portion of long-term debt and short-term
borrowings 1,602.0 714.8 Total current liabilities
4,422.6 3,399.3 Long-term debt 8,970.3 10,598.7 Pension and
postretirement benefits 827.6 848.5 Deferred tax liabilities
1,853.6 1,648.6 Other liabilities 306.2 316.8 Total
liabilities 16,380.3 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: 2.8 shares and 2.9 shares, respectively) 103.4 107.7
Class B exchangeable shares, no par value (issued and outstanding:
14.8 shares and 14.7 shares, respectively) 557.4 553.2 Paid-in
capital 6,715.9 6,688.5 Retained earnings 7,953.2 7,206.1
Accumulated other comprehensive income (loss) (996.4 ) (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 13,864.1 13,226.1 Noncontrolling
interests 225.9 208.9 Total equity 14,090.0
13,435.0 Total liabilities and equity $ 30,470.3 $
30,246.9
Cash Flow Statement
Condensed
Consolidated Statements of Cash Flows
($ in millions) (Unaudited)
Nine Months Ended September 30, 2018
September 30, 2017 Cash flows from operating activities: Net
income (loss) including noncontrolling interests $ 1,058.9 $ 843.1
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: Depreciation and amortization 644.2 604.3
Amortization of debt issuance costs and discounts 10.0 17.6
Share-based compensation 33.8 46.2 (Gain) loss on sale or
impairment of properties and other assets, net 0.2 (9.6 )
Unrealized (gain) loss on foreign currency fluctuations and
derivative instruments, net 61.2 (84.5 ) Income tax (benefit)
expense 231.6 338.5 Income tax (paid) received 11.2 15.9 Interest
expense, excluding interest amortization 231.8 259.3 Interest paid
(273.1 ) (299.0 ) Pension expense (benefit) (42.9 ) (46.9 ) Pension
contributions paid (7.1 ) (307.7 ) Change in current assets and
liabilities and other (168.4 ) (231.8 ) Net cash provided by (used
in) operating activities 1,791.4 1,145.4 Cash flows
from investing activities: Additions to properties (491.0 ) (466.0
) Proceeds from sales of properties and other assets 7.5 56.9 Other
(50.0 ) 11.1 Net cash provided by (used in) investing
activities (533.5 ) (398.0 ) Cash flows from financing activities:
Exercise of stock options under equity compensation plans 6.7 3.6
Dividends paid (265.6 ) (264.9 ) Payments on debt and borrowings
(310.2 ) (2,601.5 ) Proceeds on debt and borrowings — 1,536.0 Net
proceeds from (payments on) revolving credit facilities and
commercial paper (374.8 ) 999.7 Change in overdraft balances and
other 20.5 (40.7 ) Net cash provided by (used in) financing
activities (923.4 ) (367.8 ) Cash and cash equivalents: Net
increase (decrease) in cash and cash equivalents 334.5 379.6 Effect
of foreign exchange rate changes on cash and cash equivalents (3.0
) 30.8 Balance at beginning of year 418.6 560.9
Balance at end of period $ 750.1 $ 971.3
Reconciliations to Nearest U.S. GAAP
Measures by Line Item
Third Quarter 2018
Three Months Ended September 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) $ 2,934.2 $ (1,714.0 ) $ 1,220.2 $
(713.9 ) $ (36.6 ) $ 469.7 Adjustments to arrive at underlying:
Special items, net Employee-related charges — — — — 28.7 28.7
Impairments or asset abandonment charges — — — — 7.8 7.8
Termination fees and other (gains) losses — — — — 0.1 0.1 Non-Core
items Integration related costs — 1.3 1.3 8.8 — 10.1 Unrealized
mark-to-market (gains) losses — 23.2 23.2 — — 23.2 Tax effects on
special and non-GAAP items — — — — —
—
Underlying (Non-GAAP) $ 2,934.2 $ (1,689.5 )
$ 1,244.7 $ (705.1 ) $ — $ 539.6
Third Quarter 2018
Three Months Ended September 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) $ (67.4 ) $ 7.6 $ 0.2 $ 410.1 $ (64.5 )
$ 338.3 $ 1.56 Adjustments to arrive at underlying: Special items,
net Employee-related charges — — — 28.7 — 28.7 0.13 Impairments or
asset abandonment charges — — — 7.8 — 7.8 0.03 Termination fees and
other (gains) losses — — — 0.1 — 0.1 — Non-Core items Integration
related costs — — — 10.1 — 10.1 0.05 Unrealized mark-to-market
(gains) losses — — — 23.2 — 23.2 0.11 Non-core other pension and
postretirement benefits (costs), net — 2.0 — 2.0 — 2.0 0.01 Tax
effects on special and non-GAAP items — — — —
(11.7 ) (11.7 ) (0.05 )
Underlying (Non-GAAP) $ (67.4
) $ 9.6 $ 0.2 $ 482.0 $ (76.2 ) $ 398.5
$ 1.84
(1) Adjustments relate to
the following segments: U.S. segment $0.5 million, Canada segment
$0.1 million, Europe segment $0.2 million, International segment
$0.5 million, Corporate segment $23.2 million. (2) Adjustments
relate to the following segment: U.S. segment $0.1 million,
International segment $0.6 million, Corporate segment $8.1 million.
(3) Adjustments relate to the following segments: U.S. segment
$29.7 million, Canada segment $5.9 million, Europe segment $0.6
million, International segment $0.4 million. (4) Adjustments relate
to the following segment: Corporate segment $2.0 million.
YTD Third Quarter 2018 Nine
Months Ended September 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) $ 8,350.9 $ (4,988.8 ) $ 3,362.1 $
(2,139.7 ) $ 267.7 $ 1,490.1 Adjustments to arrive at underlying:
Special items, net Employee-related charges — — — — 33.6 33.6
Impairments or asset abandonment charges — — — — 25.4 25.4
Termination fees and other (gains) losses — — — — (326.7 ) (326.7 )
Non-Core items Integration related costs — 3.9 3.9 26.1 — 30.0
Unrealized mark-to-market (gains) losses — 62.8 62.8 — — 62.8 Tax
effects on special and non-GAAP items — — — —
— —
Underlying (Non-GAAP) $ 8,350.9
$ (4,922.1 ) $ 3,428.8 $ (2,113.6 ) $ — $
1,315.2
YTD Third Quarter 2018 Nine
Months Ended September 30, 2018
(In millions, except per share
data)(Unaudited)
Interestincome(expense),net
Other
pensionandpostretirement
benefits(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) $ (227.3 ) $ 27.5 $ 0.2 $ 1,290.5 $
(231.6 ) $ 1,040.5 $ 4.80 Adjustments to arrive at underlying:
Special items, net Employee-related charges — — — 33.6 — 33.6 0.16
Impairments or asset abandonment charges — — — 25.4 — 25.4 0.12
Termination fees and other (gains) losses — — — (326.7 ) — (326.7 )
(1.51 ) Non-Core items Integration related costs — — — 30.0 — 30.0
0.14 Unrealized mark-to-market (gains) losses — — — 62.8 — 62.8
0.29 Non-core other pension and postretirement benefits (costs),
net — 2.1 — 2.1 — 2.1 0.01 Tax effects on special and non-GAAP
items — — — — 41.2 41.2
0.19
Underlying (Non-GAAP) $ (227.3 ) $ 29.6 $
0.2 $ 1,117.7 $ (190.4 ) $ 908.9 $ 4.20
(1) Adjustments relate to the following
segments: U.S. segment $2.5 million, Canada segment $0.4 million,
Europe segment $0.5 million, International segment $0.5 million,
Corporate segment $62.8 million. (2) Adjustments relate to the
following segment: U.S. segment $0.1 million, International segment
$1.4 million, Corporate segment $24.6 million. (3) Adjustments
relate to the following segments: U.S. segment $34.5 million,
Canada segment $17.2 million, Europe segment $5.4 million,
International segment $3.2 million, Corporate segment $(328.0)
million. (4) Adjustments relate to the following segment: Corporate
segment $2.1 million.
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Molson Coors Brewing CompanyNews
MediaColin Wheeler, 303-927-2443orInvestor RelationsMark Swartzberg,
303-927-2334orKevin Kim, 303-927-2515
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