Market Overview

Molson Coors Reports 2017 Second Quarter Results

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____________________________________

Net Sales Revenue (NSR) Decreased 0.6%, and Increased 1.3% in
Constant Currency

NSR/HL Decreased 0.2%, and Increased 1.7% in Constant Currency

Worldwide Brand Volume Increased 2.3% to 26.4 million HL

EPS of $1.49 increased 4.2%, and Underlying EPS (Non-GAAP) of
$1.66 Increased 3.1%

On Track to Deliver Full-Year Business Plans and Cost Savings

____________________________________

Molson Coors Brewing Company (NYSE:TAP, TSX:TPX) today reported
results for the 2017 second quarter. Molson Coors president and chief
executive officer Mark Hunter said, "In the second quarter, we continued
to drive our First Choice for Consumers and Customers agenda, with laser
focus on strengthening our core brands, premiumizing our portfolio,
accelerating our international footprint, enhancing our customer
partnerships, and driving the integration of MillerCoors and the Miller
brands globally to unlock synergies and other cost savings. As a sign of
progress against this agenda, our team delivered solid growth in
constant currency net sales, global brand volume, underlying EBITDA, net
income, earnings per share and free cash flow. Additionally, we exceeded
our goals for cash generation and debt reduction in the first half of
this year and have maintained our investment-grade debt ratings. Our
second quarter performance was in-line with our expectations, and we
remain on track to deliver our 2017 business and financial plans, cost
savings targets and cash flow goals."

     

Consolidated Performance - Second Quarter 2017

     
  Three Months Ended
($ in millions, except per share data) (Unaudited) June 30, 2017   June 30, 2016  

Reported
% Increase
(Decrease)

 

Foreign
Exchange
Impact
($)

 

Constant
Currency
% Increase
(Decrease)

Actual Pro forma
Net Sales $ 3,091.3 $ 3,109.2

(0.6)

%

$ (57.3 ) 1.3 %
U.S. GAAP Net income (loss)(1) $ 321.7 $ 309.3 4.0 %
Per diluted share $ 1.49 $ 1.43 4.2 %
Underlying (Non-GAAP) Net income (loss)(1) $ 358.9 $ 348.7 2.9 %
Per diluted share $ 1.66 $ 1.61 3.1 %
Underlying EBITDA (Non-GAAP) $ 793.8 $ 761.8 4.2 % $ (11.5 ) 5.7 %
                                 
  (1)   Net income (loss) attributable to MCBC from continuing operations.
See Appendix for definitions and reconciliations of non-GAAP
financial measures.
 

Quarterly Highlights (versus Second
Quarter 2016 Pro Forma Results, unless otherwise noted)

  • Net sales per HL: $109.08, decreased 0.2 percent, and increased
    1.7 percent in constant currency, driven by higher pricing and sales
    mix in U.S., Canada and Europe.
  • Volume: Worldwide brand volume of 26.4 million hectoliters
    increased 2.3 percent due to strong growth in Europe and
    International, partially as a result of adding the Miller global
    brands business and also from growth in some of our core brands.
    Global priority brand volume increased 4.6 percent. Financial volume
    of 28.3 million hectoliters decreased 0.4 percent, driven by lower
    contract brewing volume.
  • U.S. GAAP net income from continuing operations attributable to
    MCBC increased 4.0 percent, and underlying net income (non-GAAP)
    increased 2.9 percent, both driven by increased brand volume, higher
    net pricing, positive sales mix, cost savings and lower marketing
    spending, partially offset by a higher effective tax rate.
  • The company looks at value creation from the MillerCoors transaction
    through the lens of the sum of three numbers. In the 2nd
    quarter, these three numbers were:
    • Underlying net earnings of $358.9 million, plus…
    • $103 million of transaction-related cash tax benefits and…
    • $11 million of transaction-related after-tax book amortization.
    • To calculate this measure on a per-share basis, the company had
      216.4 million weighted average diluted shares outstanding in the 2nd
      quarter.
  • Underlying EBITDA: Increased 4.2 percent and on a
    constant-currency basis increased 5.7 percent, driven by higher
    pricing, positive sales mix, cost savings and lower marketing spending
    versus a year ago.
  • U.S. GAAP cash from operations: Net cash from operating
    activities for the first half of 2017 was $818.5 million, which
    represents an increase of $536.1 million from actual prior year
    results, driven by the addition of the other 58 percent of MillerCoors
    cash flows, as well as lower cash paid for taxes, which were partially
    offset by higher cash paid for interest.
  • Underlying free cash flow: $586.7 million for the first half of
    2017, a 232 percent increase from actual prior year results of $176.9
    million, driven by the same factors as cash from operations.
  • Debt: Total debt at the end of the second quarter was $11.872
    billion, and cash and cash equivalents totaled $502.9 million,
    resulting in net debt of $11.369 billion, which is more than $522
    million lower than at the beginning of the second quarter.

 

   

Business Review- Second Quarter 2017

 

Net Sales

     
($ in millions) (Unaudited) Three Months Ended
June 30, 2017   June 30, 2016  

Reported
%
Increase
(Decrease)

 

Foreign
Exchange
Impact
($)

 

Constant
Currency %
Increase
(Decrease)

United States (1) $ 2,138.9 $ 2,132.2 0.3 % $ 0.3 %
Canada $ 407.6 $ 425.9

(4.3)

%

$ (16.9 )

(0.3)

%

Europe $ 524.7 $ 522.1 0.5 % $ (40.5 ) 8.3 %
International $ 65.1 $ 39.2 66.1 % $ 0.1 65.8 %
Corporate $ 0.3 $ 0.2 50.0 % $ 50.0 %
                                 

Pretax Income (U.S. GAAP)

 
     
($ in millions) (Unaudited) Three Months Ended
June 30, 2017   June 30, 2016  

Reported
%
Increase
(Decrease)

 

Foreign
Exchange
Impact
($)

 

Constant
Currency %
Increase
(Decrease)

United States (1) $ 484.7 $ 418.2 15.9 % $ (0.8 ) 16.1 %
Canada $ 68.7 $ 88.5

(22.4)

%

$ (1.6 )

(20.6)

%

Europe $ 73.3 $ 59.0 24.2 % $ (4.8 ) 32.4 %
International $ (7.7 ) $ (33.4 ) 76.9 % $ (0.3 ) 77.8 %
Corporate $ (169.2 ) $ (109.1 )

(55.1)

%

$ 1.1

(56.1)

%

                                 

Underlying EBITDA (Non-GAAP)(2)

 
     
($ in millions) (Unaudited) Three Months Ended
June 30, 2017   June 30, 2016  

Reported
%
Increase
(Decrease)

 

Foreign
Exchange
Impact
($)

 

Constant
Currency %
Increase
(Decrease)

United States (1) $ 619.4 $ 574.0 7.9 % $ (0.8 ) 8.0 %
Canada $ 100.4 $ 111.2

(9.7)

%

$ (2.8 )

(7.2)

%

Europe $ 118.3 $ 104.0 13.8 % $ (7.9 ) 21.3 %
International $ (0.9 ) $ (1.7 ) 47.1 % $ (0.3 ) 64.7 %
Corporate $ (43.4 ) $ (28.2 )

(53.9)

%

$ 0.3

(55.0)

%

                                     
  (1)   United States second quarter 2016 results are presented on a pro
forma basis.
(2) See Appendix for definitions and reconciliations of non-GAAP
financial measures.
 

United States Business (MillerCoors) (versus
Second Quarter 2016 Pro Forma Results)

  • Volume: U.S. domestic sales-to-retailers volume (STRs) declined
    1.9 percent for the quarter, driven by lower volume in the Premium
    Light and Below Premium segments, partially offset by growth in the
    Above Premium segment. Domestic sales-to-wholesalers volume (STWs)
    decreased 0.4 percent.
  • Revenue: Domestic net sales per hectoliter, which excludes
    contract brewing and company-owned-distributor sales, grew 1.0 percent
    as a result of higher net pricing and positive sales mix, partially
    offset by cycling a multi-year adjustment in federal excise tax
    expense last year.
  • Cost of goods sold (COGS) per hectoliter increased 0.3 percent,
    driven by higher input costs, portfolio premiumization, and volume
    deleverage, partially offset by cost savings.
  • Marketing, general and administrative (MG&A) expense
    decreased 5.7 percent due to lower marketing and employee-related
    expenses.
  • On a U.S. GAAP basis, United States income from continuing
    operations before income taxes
    increased 15.9 percent to
    $484.7 million, primarily due to lower special charges related to the
    Eden, North Carolina, brewery closure; lower MG&A expenses; higher net
    pricing; positive sales mix; and cost savings.
  • United States underlying EBITDA increased 7.9 percent to $619.4
    million, driven by lower MG&A expenses, higher net pricing, positive
    sales mix and cost savings.

Canada Business

  • Volume: Canada brand volume decreased 1.3 percent in the second
    quarter, as a result of lower domestic volumes, partially offset by
    the return of the Miller brands to our portfolio. Canada financial
    volume, which includes contract brewing volume, decreased 2.6 percent
    primarily due to lower contract brewing volume.
  • Revenue: Net sales per hectoliter increased 2.3 percent in
    local currency, primarily due to positive pricing and brand mix,
    driven by higher import brand volume.
  • COGS per hectoliter increased 4.6 percent in local currency due
    to mix shift to higher-cost import brands, volume deleverage, and
    input cost inflation (including unfavorable transactional foreign
    currency impacts), partially offset by ongoing cost savings
    initiatives.
  • MG&A expense increased 10.4 percent in local currency,
    driven primarily by higher brand amortization expense of approximately
    $10 million related to changing the Molson brands to definite-lived
    intangible assets last year.
  • On a U.S. GAAP basis, Canada reported a decrease in income from
    continuing operations before income taxes
    of 22.4 percent to $68.7
    million, compared to the prior year, which was primarily driven by
    lower domestic volume and higher brand amortization expense.
  • Canada underlying EBITDA decreased 9.7 percent to $100.4
    million in the quarter, driven primarily by the impact of lower
    domestic volume and unfavorable COGS rate, partially offset by
    positive pricing.

Europe Business

  • Volume: Europe brand volume increased 11.5 percent in the
    second quarter versus a year ago, primarily driven by the transfer of
    royalty and export brand volume across Europe from our International
    business and the addition of the Miller brands, along with the later
    timing of the Easter holiday this year and strong growth from our core
    and above-premium brands. Europe financial volume, which includes
    contract brewing and factored brands but excludes royalty volume,
    increased 4.4 percent.
  • Revenue: Europe net sales per hectoliter increased 3.7 percent
    in local currency, due to positive mix and net pricing.
  • COGS per hectoliter increased 4.7 percent in local currency,
    primarily driven by mix shift to higher-cost brands and geographies,
    partially offset by higher net pension benefit this year.
  • MG&A expense decreased 3.8 percent in local currency, due
    to the quarterly timing of marketing investments.
  • On a U.S. GAAP basis, Europe reported an increase in income from
    continuing operations before income taxes
    of 24.2 percent to $73.3
    million compared to the prior year due to higher volume, positive
    sales mix, lower brand investments, increased net pension benefit, and
    favorable timing of Easter this year, partially offset by unfavorable
    foreign currency.
  • Europe underlying EBITDA increased 13.8 percent to $118.3
    million, driven by the same factors that impacted U.S. GAAP income.

International Business

  • Volume: International brand volume increased by 43.2 percent in
    the second quarter, driven by the transfer of the Puerto Rico business
    from MillerCoors, Coors Light growth primarily in Latin America, and
    the addition of the Miller global brands business. These factors were
    partially offset by the transfer of royalty and export brand volume to
    Europe.
  • Revenue: Net sales per hectoliter decreased 5.5 percent, driven
    by sales mix changes, partially offset by positive pricing.
  • COGS per hectoliter increased 5.9 percent, due to sales mix
    changes.
  • MG&A expense increased 53.4 percent, driven by increased
    brand investments, along with higher organization and integration
    costs related to the acquisition of the Miller global brands business.
  • On a U.S. GAAP basis, International segment reported a loss from
    continuing operations
    before income taxes of $7.7 million
    improved from a loss of $33.4 million a year ago, driven by cycling
    impairment charges related to our India business in the second quarter
    of 2016.
  • International underlying EBITDA was a loss of $0.9
    million in the second quarter, versus a loss of $1.7 million a year
    ago, driven by higher volume and positive pricing, partially offset by
    higher MG&A expense.

Corporate

  • On a U.S. GAAP basis, corporate loss from continuing operations
    on a reported basis was $169.2 million in the second quarter compared
    to a loss of $109.1 million in the prior year, primarily due to
    increased interest and MG&A expense, as well as unrealized
    mark-to-market losses from commodity hedges this quarter.
  • Corporate underlying EBITDA was a loss of $43.4 million for the
    second quarter versus a $28.2 million loss in the prior year, driven
    primarily by higher global investments in commercial, supply chain and
    information technology.
 

Worldwide Brand and Financial Volume(1)

     
(In millions of hectoliters) (Unaudited)   Three Months Ended
June 30, 2017   June 30, 2016   % Change   June 30, 2016
Actual Pro forma Actual
Financial Volume(1) 28.340 28.455

(0.4)

%

9.377
Contract brewing and wholesaler volume (2.390 ) (2.836 )

(15.7)

%

(0.800 )
Royalty Volume 1.033 0.521 98.3 % 0.521
Sales-To-Wholesaler to Sales-To-Retail adjustment (0.617 ) (0.361 ) 70.9 % (0.036 )
Owned Volume 26.366 25.779 2.3 % 9.062
Proportionate share of Equity Investment Worldwide Brand Volume     % 7.021  
Total Worldwide Brand Volume(1) 26.366   25.779   2.3 % 16.083  
                         
(1)   See Appendix for definitions and additional discussion regarding
Financial and Worldwide Brand Volume.
 
     

Other Results

   
 

Effective Income Tax Rates (versus
second quarter 2016 pro forma results)

     
Three Months Ended
June 30, 2017   June 30, 2016
U.S. GAAP effective tax rate 27.4 % 26.1 %
Underlying effective tax rate 28.4 % 27.2 %
             
  • The effective tax rate on a reported and underlying basis was
    slightly higher this year due to geographic mix and lower discrete
    benefits in 2017.

Special and Other Non-Core Items

The following special and other non-core items have been excluded
from underlying results. See the Appendix for reconciliations of
non-GAAP financial measures.

  • During the second quarter, MCBC recognized a net special charge of
    $16.5 million, primarily driven by charges related to the Eden brewery
    closure in the U.S. and the planned closure of our Burton South
    brewery in Europe and Vancouver brewery in Canada.
  • Additionally during the second quarter, we recorded other non-core
    net charges
    of $42.3 million, primarily driven by unrealized
    mark-to-market losses on commodity hedges and integration costs
    related to the Acquisition.

2017 Outlook

The following targets for full year 2017 are unchanged from previous
disclosures, unless otherwise indicated:

  • Underlying free cash flow: $1.2 billion, plus or minus
    10 percent.
  • Cash pension contributions in the range of $300 to $320 million
    as a result of an additional, discretionary contribution to the U.S.
    pension plan. - Updated (formerly $100 to $120 million)
    • Included in 2017 underlying free cash flow target.
  • Transaction-related cash tax benefits: approximately $400
    million.
  • Capital spending: approximately $750 million, plus or minus 10
    percent.
  • Cost savings: more than $175 million.
  • Cost of goods sold per hectoliter:
    • MillerCoors: low-single-digit increase.
    • Canada: mid-single-digit increase (local currency).
    • Europe: low-single-digit increase (local currency).
    • International business: decrease at a mid-single-digit
      rate. - Updated (formerly double-digit decrease)
  • Underlying Corporate MG&A expense: approximately $170
    million, plus or minus 10 percent.
  • Underlying depreciation and amortization: approximately
    $790 million.
  • Pension income: approximately $24 million.
  • Underlying consolidated net interest expense: approximately
    $370 million, plus or minus 5 percent.
  • Underlying effective tax rate in the top half of the range of
    24 to 28 percent. - Updated

Notes

Unless otherwise indicated in this release, all $ amounts are in U.S.
Dollars, and all quarterly comparative results are for the Company's
second quarter ended June 30, 2017, compared to the second quarter ended
June 30, 2016. All per-hectoliter calculations include contract brewing
and non-owned factored beverage volume in the denominator, as well as
the financial impact of these sales in the numerator, unless otherwise
indicated. Some numbers may not sum due to rounding.

As used in this release, the term "Acquisition" refers to the Company's
acquisition from Anheuser-Busch InBev SA/NV on October 11, 2016, of
SABMiller plc's 58 percent economic interest and 50 percent voting
interest in MillerCoors LLC and all trademarks, contracts and other
assets primarily related to the Miller International business outside of
the U.S. and Puerto Rico.

2017 Second Quarter Conference Call

Molson Coors Brewing Company will conduct an earnings conference call
with financial analysts and investors at 11:00 a.m. Eastern Time today
to discuss the Company's 2017 second quarter results. The live webcast
will be accessible via the Company's website, www.molsoncoors.com.
Online replays of the webcast will be available until 11:59 p.m. Eastern
Time on October 31, 2017. The Company will post this release and related
financial statements on its website today.

The company will not host an Investor Relations Follow-Up Session call.

Upcoming Investor Webcast

The company will host an online, real-time webcast at the Barclays
Global Consumer Staples Conference in Boston on Wednesday, September 6,
2017, at 9:00 a.m. Eastern Time. A live webcast of this investor event
will be accessible via the Molson Coors Brewing Company website, www.molsoncoors.com,
on the Investors page. An online replay of the presentation webcast will
be available on the website within two hours after the presentation.

Overview of Molson Coors

With a story that starts in 1774, Molson Coors has spent centuries
defining brewing greatness. As one of the largest global brewers, Molson
Coors works to deliver extraordinary brands that delight the world's
beer drinkers. From Coors Light, Miller Lite, Carling, Staropramen and
Sharp's Doom Bar to Leinenkugel's Summer Shandy, Blue Moon Belgian White
and Creemore Springs Premium Lager, Molson Coors offers a beer for every
beer lover.

Molson Coors operates through Molson Coors Canada, MillerCoors, Molson
Coors Europe and Molson Coors International. The company is not only
committed to brewing extraordinary beers, but also running a business
focused on respect for its employees, communities and drinkers, which
means corporate responsibility and accountability right from the start.
It has been listed on the Dow Jones Sustainability World Index for the
past five years. To learn more about Molson Coors Brewing Company, visit
molsoncoors.com, ourbeerprint.com or on Twitter through @MolsonCoors.

About Molson Coors Canada Inc.

Molson Coors Canada Inc. (MCCI) is a subsidiary of Molson Coors Brewing
Company. MCCI Class A and Class B exchangeable shares offer
substantially the same economic and voting rights as the respective
classes of common shares of MCBC, as described in MCBC's annual proxy
statement and Form 10-K filings with the U.S. Securities and Exchange
Commission. The trustee holder of the special Class A voting stock and
the special Class B voting stock has the right to cast a number of votes
equal to the number of then outstanding Class A exchangeable shares and
Class B exchangeable shares, respectively.

Forward-Looking Statements

This press release includes "forward-looking statements" within the
meaning of the U.S. federal securities laws.
Generally, the words
"believe," "expect," "intend," "anticipate," "project," "will," and
similar expressions identify forward-looking statements, which generally
are not historic in nature.
Although the Company believes that
the assumptions upon which its forward-looking statements are based are
reasonable, it can give no assurance that these assumptions will prove
to be correct. Important factors that could cause actual results to
differ materially from the Company's historical experience, and present
projections and expectations are disclosed in the Company's filings with
the Securities and Exchange Commission ("SEC").
These factors
include, among others, our ability to successfully integrate the
acquisition of MillerCoors; our ability to achieve expected tax
benefits, accretion and cost savings and synergies; impact of increased
competition resulting from further consolidation of brewers, competitive
pricing and product pressures; health of the beer industry and our
brands in our markets; economic conditions in our markets; additional
impairment charges; our ability to maintain manufacturer/distribution
agreements; changes in our supply chain system; availability or increase
in the cost of packaging materials; success of our joint ventures; risks
relating to operations in developing and emerging markets; changes in
legal and regulatory requirements, including the regulation of
distribution systems; fluctuations in foreign currency exchange rates;
increase in the cost of commodities used in the business; the impact of
climate change and the availability and quality of water; loss or
closure of a major brewery or other key facility; our ability to
implement our strategic initiatives, including executing and realizing
cost savings; our ability to successfully integrate newly acquired
businesses; pension plan and other post-retirement benefit costs;
failure to comply with debt covenants or deterioration in our credit
rating; our ability to maintain good labor relations; our ability to
maintain brand image, reputation and product quality; and other risks
discussed in our filings with the SEC, including our most recent Annual
Report on Form 10-K and our Quarterly Reports on Form 10-Q.
All
forward-looking statements in this press release are expressly qualified
by such cautionary statements and by reference to the underlying
assumptions. You should not place undue reliance on forward-looking
statements, which speak only as of the date they are made.
We do
not undertake to update forward-looking statements, whether as a result
of new information, future events or otherwise.

 

APPENDIX

 

       

Consolidated Financial Performance(1)

         
Molson Coors Brewing Company   Three Months Ended June 30, 2017   % Change

(In millions, except per share data)(Unaudited)

U.S. GAAP  

Non-GAAP
Adjustments(2)

 

Non-GAAP
Underlying(2)

U.S. GAAP  

Non-GAAP
Underlying

Net sales $ 3,091.3 $ $ 3,091.3 (0.6 )% (0.6 )%
Net Sales per HL change (0.2 )% (0.2 )%
Cost of goods sold $ (1,756.1 ) $ 28.4 $ (1,727.7 ) 1.1 % (1.2 )%
Cost of goods sold per HL change 1.6 % (0.8 )%
Gross profit $ 1,335.2 $ 28.4 $ 1,363.6 (2.7 )% 0.3 %
Marketing, general and administrative expenses $ (781.2 ) $ 13.9 $ (767.3 ) (0.3 )% (2.1 )%
Special items, net $ (16.5 ) $ 16.5 $ (77.7 )% N/M
Operating income (loss) $ 537.5 $ 58.8 $ 596.3 4.2 % 3.4 %
Interest income (expense), net $ (89.2 ) $ $ (89.2 ) (2.7 )% (2.7 )%
Other income (expense), net $ 1.5 $ $ 1.5 (37.5 )% (37.5 )%
Income (loss) from continuing operations before income taxes $ 449.8 $ 58.8 $ 508.6 5.5 % 4.4 %
Income tax benefit (expense) $ (123.0 ) $ (21.6 ) $ (144.6 ) 10.7 % 9.0 %
Net income (loss)(3) $ 321.7 $ 37.2 $ 358.9 4.0 % 2.9 %
Per diluted share 1.49 0.17 1.66 4.2 % 3.1 %
EBITDA(4) $ 793.8 4.2 %
                         
         
Molson Coors Brewing Company   Six Months Ended June 30, 2017   % Change
(In millions, except per share data)(Unaudited) U.S. GAAP  

Non-GAAP
Adjustments(2)

 

Non-GAAP
Underlying(2)

U.S. GAAP  

Non-GAAP
Underlying

Net sales $ 5,540.0 $ $ 5,540.0 (0.5 )% (0.5 )%
Net Sales per HL change 0.9 % 0.9 %
Cost of goods sold $ (3,129.0 ) $ (34.0 ) $ (3,163.0 ) (1.8 )% (1.2 )%
Cost of goods sold per HL change (0.3 )% (0.3 )%
Gross profit $ 2,411.0 $ (34.0 ) $ 2,377.0 1.2 % 0.4 %
Marketing, general and administrative expenses $ (1,484.0 ) $ 32.2 $ (1,451.8 ) 2.9 % 0.6 %
Special items, net $ (20.3 ) $ 20.3 $ 822.7 % N/M
Operating income (loss) $ 906.7 $ 18.5 $ 925.2 (3.4 )% %
Interest income (expense), net $ (185.8 ) $ $ (185.8 ) 1.8 % 1.8 %
Other income (expense), net $ 1.9 $ (8.1 ) $ (6.2 ) (73.2 )% (187.3 )%
Income (loss) from continuing operations before income taxes $ 722.8 $ 10.4 $ 733.2 (5.3 )% (2.2 )%
Income tax benefit (expense) $ (187.6 ) $ (9.5 ) $ (197.1 ) 0.4 % (3.1 )%
Net income (loss)(3) $ 523.6 $ 0.9 $ 524.5 (7.6 )% (2.3 )%
Per diluted share 2.42 2.42 (7.6 )% (2.8 )%
EBITDA(4) $ 1,308.7 1.0 %
                         
  • Versus comparable 2016 period Pro Forma Results.
  • Refer to the table "Actual and Pro Forma Condensed
    Consolidated Statements of Operations" for detailed descriptions and
    reconciliation of non-GAAP adjustments and 2016 results.
  • Net income (loss) attributable to MCBC from continuing operations.
  • EBITDA is earnings before interest, taxes, depreciation and
    amortization, a non-GAAP financial measure.

Pro Forma Information

We have presented consolidated and U.S. segment pro forma information in
this release to enhance comparability of financial information between
periods. Canada, Europe, International and Corporate results are not
presented on a pro forma basis. The pro forma financial information is
based on the historical consolidated financial statements of MCBC and
MillerCoors, both prepared in accordance with U.S. GAAP, and gives
effect to the acquisition of the remaining 58 percent interest of
MillerCoors and the completed financing as if they were completed on
January 1, 2016. Our U.S. segment pro forma information has been updated
from the version previously provided on February 14, 2017, to reflect
the removal of the Puerto Rico business effective as of January 1, 2017,
from the results of the MillerCoors business, which were previously
reported as part of the U.S. segment, and are now reported within the
International segment. Pro forma adjustments are based on items that are
factually supportable, are directly attributable to the acquisition or
the related completed financing, and are expected to have a continuing
impact on MCBC's results of operations and/or financial position. Any
nonrecurring items directly attributable to the acquisition or the
related completed financing are excluded in the pro forma statements of
operations. Pro forma information does not include adjustments for costs
related to integration activities following the completion of the
acquisition, synergies or other cost savings that have been or may be
achieved by the combined businesses. The pro forma information is
unaudited, based on significant estimates and continues to be subject to
significant change throughout the one-year post-acquisition measurement
period, as we have referenced in our previous disclosures. The pro forma
information is presented for illustrative purposes only and does not
necessarily reflect the results of operations of MCBC that actually
would have resulted, had the acquisition and the related financing
occurred at the date indicated, nor does this information project the
results of operations of MCBC for any future dates or periods.

Actual and Pro Forma Worldwide Brand and
Financial Volumes

As a result of the Acquisition, we aligned our volume reporting policies
resulting in adjustments to our historically reported volumes.
Specifically, financial volume for all consolidated segments has been
recast to include contract brewing and wholesaler non-owned brand
volumes (including factored brands in Europe and non-owned brands
distributed in the U.S.), as the corresponding sales are reported within
our gross sales amounts. Additionally, financial volumes continue to
include our owned brands sold to unrelated external customers within our
geographic markets, net of returns and allowances.

Worldwide brand volume reflects only owned brands sold to unrelated
external customers within our geographic markets, net of returns and
allowances, royalty volume and our proportionate share of equity
investment worldwide brand volume calculated consistently with MCBC
owned volume. 2017 and pro forma worldwide brand volume includes 100
percent of MillerCoors brand volume. Contract brewing and wholesaler
volume is included within financial volume as noted above, but is
removed from worldwide brand volume as this is non-owned volume for
which we do not directly control performance. We also modified our
worldwide brand volume definition to include an adjustment from
Sales-to-Wholesaler (STW) volume to Sales-to-Retailer (STR) volume. We
believe the STR metric is important because, unlike STWs, it provides
the closest indication of the performance of our brands in relation to
market and competitor sales trends. Prior periods presented have been
revised to reflect these changes. We believe this definition of
worldwide brand volume more closely aligns with how we measure the
performance of our owned brands within the markets in which they are
sold. Effective January 1, 2017, European markets, including Sweden,
Spain, Germany, Ukraine and Russia, which were previously reported under
our International segment, are now presented within our Europe segment.
Additionally, effective January 1, 2017, the results of the MillerCoors
Puerto Rico business, which were previously reported as part of the U.S.
segment, are now reported within the International segment.

Use of Non-GAAP Measures

In addition to financial measures presented on the basis of accounting
principles generally accepted in the U.S. ("U.S. GAAP"), we also present
"underlying pretax and net income," "underlying income per diluted
share," "underlying effective tax rate," and "underlying free cash
flow," which are non-GAAP measures and should be viewed as supplements
to (not substitutes for) our results of operations presented under
U.S. GAAP. We also present underlying earnings before interest, taxes,
depreciation, and amortization ("underlying EBITDA") as a non-GAAP
measure. Our management uses underlying income, underlying income per
diluted share, underlying EBITDA, and underlying effective tax rate as
measures of operating performance, as well as underlying free cash flow
in the measure of cash generated from core operations, to assist in
comparing performance from period to period on a consistent basis; as a
measure for planning and forecasting overall expectations and for
evaluating actual results against such expectations; in communications
with the board of directors, stockholders, analysts and investors
concerning our financial performance; as useful comparisons to the
performance of our competitors; and as metrics of certain management
incentive compensation calculations. We believe that underlying income,
underlying income per diluted share, underlying EBITDA, and underlying
effective tax rate performance are used by, and are useful to, investors
and other users of our financial statements in evaluating our operating
performance, as well as underlying free cash flow in evaluating our
generation of cash from core operations, because they provide an
additional tool to evaluate our performance without regard to special
and non-core items, which can vary substantially from company to company
depending upon accounting methods and book value of assets and capital
structure. In addition to the reasons discussed above, we consider
underlying free cash flow an important measure of our ability to
generate cash, grow our business and enhance shareholder value, driven
by core operations and after adjusting for non-core items. For
discussion and analysis of our liquidity, see the consolidated
statements of cash flows and the Liquidity and Capital Resources section
of our Management's Discussion and Analysis of Financial Condition and
Results of Operations in our latest Form 10-K and 10-Q filings with the
SEC.

We have provided reconciliations of all historical non-GAAP measures to
their nearest U.S. GAAP measure and have consistently applied the
adjustments within our reconciliations in arriving at each non-GAAP
measure. These adjustments consist of special items from our U.S. GAAP
financial statements as well as other non-core items, such as
acquisition and integration related costs, unrealized mark-to-market
gains and losses, and gains and losses on sales of non-operating assets,
included in our U.S. GAAP results that warrant adjustment to arrive at
non-GAAP results. We consider these items to be necessary adjustments
for purposes of evaluating our ongoing business performance and are
often considered non-recurring. Such adjustments are subjective and
involve significant management judgment.

Our guidance for corporate underlying MG&A, underlying depreciation and
amortization, underlying EBITDA margin, underlying free cash flow,
underlying effective tax rate, and underlying consolidated net interest
expense are also non-GAAP financial measures that exclude or otherwise
have been adjusted for special items from our U.S. GAAP financial
statements as well as other non-core items, such as acquisition and
integration related costs, unrealized mark-to-market gains and losses,
and gains and losses on sales of non-operating assets, included in our
U.S. GAAP results that warrant adjustment to arrive at non-GAAP results.
We consider these items to be necessary adjustments for purposes of
evaluating our ongoing business performance and are often considered
non-recurring. Such adjustments are subjective and involve significant
management judgment. We are unable to reconcile the above described
guidance measures to their nearest U.S. GAAP measures without
unreasonable efforts because we are unable to predict with a reasonable
degree of certainty the actual impact of the special and other non-core
items. By their very nature, special and other non-core items are
difficult to anticipate with precision because they are generally
associated with unexpected and unplanned events that impact our company
and its financial results. Therefore, we are unable to provide a
reconciliation of these measures.

     

Reconciliations to Nearest U.S. GAAP Measures

 

Underlying Actual and Pro Forma EBITDA

     
(In millions) (Unaudited) Three Months Ended
June 30, 2017   June 30, 2016   % change   June 30, 2016
Actual Pro Forma Actual
U.S. GAAP: Net income (loss) attributable to MCBC from continuing
operations
$ 321.7 $ 309.3 4.0 % $ 174.1
Add: Net income (loss) attributable to noncontrolling
interests
5.1   5.9  

(13.6)

%

1.6  
U.S. GAAP: Net income (loss) from continuing operations 326.8 315.2 3.7 % 175.7
Add: Interest expense (income), net 89.2 91.7

(2.7)

%

40.5
Add: Income tax expense (benefit) 123.0 111.1 10.7 % 21.2
Add: Depreciation and amortization 198.9 219.2

(9.3)

%

70.2
Adjustments included in underlying income(1) 58.8 60.9

(3.4)

%

86.2
Adjustments to arrive at underlying EBITDA(2) (2.9 ) (36.3 )

(92.0)

%

(16.6 )
Adjustments to arrive at underlying EBITDA related to our investment
in MillerCoors(3)
    % 51.5  
Non-GAAP: Underlying EBITDA $ 793.8   $ 761.8   4.2 % $ 428.7  
                               
     
(In millions) (Unaudited)   Six Months Ended
June 30, 2017   June 30, 2016   % change   June 30, 2016
Actual Pro Forma Actual
U.S. GAAP: Net income (loss) attributable to MCBC from continuing
operations
$ 523.6 $ 566.7

(7.6)

%

$ 337.3
Add: Net income (loss) attributable to noncontrolling
interests
11.6   9.5   22.1 % 2.4  
U.S. GAAP: Net income (loss) from continuing operations 535.2 576.2

(7.1)

%

339.7
Add: Interest expense (income), net 185.8 182.6 1.8 % 87.8
Add: Income tax expense (benefit) 187.6 186.8 0.4 % 37.9
Add: Depreciation and amortization 396.0 438.6

(9.7)

%

137.7
Adjustments included in underlying income(1) 10.4 (13.1 )

(179.4)

%

29.0
Adjustments to arrive at underlying EBITDA(2) (6.3 ) (75.2 )

(91.6)

%

(40.0 )
Adjustments to arrive at underlying EBITDA related to our investment
in MillerCoors(3)
    % 100.0  
Non-GAAP: Underlying EBITDA $ 1,308.7   $ 1,295.9   1.0 % $ 692.1  
                               
  (1)   Includes adjustments to non-GAAP underlying income within the table
above related to special and non-core items.
 
(2) Represents adjustments to remove amounts related to interest,
depreciation and amortization included in the adjustments to
non-GAAP underlying income above, as these items are added back as
adjustments to net income attributable to MCBC from continuing
operations.
 
(3) Adjustments to our equity income from MillerCoors, which include our
proportionate share of MillerCoors' interest, income tax,
depreciation and amortization, special items, and amortization of
the difference between the MCBC contributed cost basis and
proportionate share of the underlying equity in net assets of
MillerCoors.
 

Underlying Free Cash Flow

 
     
(In millions) (Unaudited) Actual
  Six Months Ended
June 30, 2017   June 30, 2016
U.S. GAAP: Net Cash Provided by (Used In) Operating Activities $ 818.5 $ 282.4
Less: Additions to properties(1) (354.0 ) (121.6 )
Less: Investment in MillerCoors(1) (810.6 )
Add: Return of capital from MillerCoors(1) 731.1
Add: Cash impact of special items(2) 59.0 4.0
Add: Non-core costs related to acquisition of businesses(3) 63.2 90.6
Add: MillerCoors cash impact of special items(4)   1.0  
Non-GAAP: Underlying Free Cash Flow $ 586.7   $ 176.9  
                     
  (1)   Included in net cash used in investing activities.
 
(2) Included in net cash provided by (used in) operating activities and
primarily reflects costs paid for brewery closures and restructuring
activities. Also, includes additions to properties within net cash
used in investing activities related to the cash paid to build a new
efficient and flexible brewery in British Columbia, following the
sale of our Vancouver brewery in the first quarter of 2016. The
proceeds of $140.8 million received from the sale of the Vancouver
brewery are being used to fund the construction of the new brewery
in British Columbia.
 
(3) Included in net cash provided by operating activities and reflects
costs paid associated with the Acquisition of 58% of MillerCoors,
LLC, and the Miller global brand portfolio.
 
(4) Amounts represent our proportionate 42% share of the cash flow
impacts for the pre-Acquisition period January 1, 2016, through June
30, 2016.

     

Statements of Operations -- Molson Coors Brewing Company and
Subsidiaries

 

Actual and Pro Forma Condensed
Consolidated Statements of Operations

     
($ In millions, except per share data) (Unaudited) Three Months Ended
June 30, 2017   June 30, 2016
Actual Pro forma   Actual

Financial volume in hectoliters(1)

28.340   28.455   9.377  
Sales $ 3,793.1 $ 3,818.5 $ 1,407.0
Excise taxes (701.8 ) (709.3 ) (420.8 )
Net sales 3,091.3 3,109.2 986.2
Cost of goods sold (1,756.1 ) (1,736.3 ) (562.2 )
Gross profit 1,335.2 1,372.9 424.0
Marketing, general and administrative expenses (781.2 ) (783.4 ) (313.6 )
Special items, net (16.5 ) (73.9 ) (34.5 )
Equity income in MillerCoors     191.9  
Operating income (loss) 537.5 515.6 267.8
Interest income (expense), net (89.2 ) (91.7 ) (40.5 )
Other income (expense), net 1.5   2.4   (30.4 )
Income (loss) from continuing operations before income taxes 449.8 426.3 196.9
Income tax benefit (expense) (123.0 ) (111.1 ) (21.2 )
Net income (loss) from continuing operations 326.8 315.2 175.7
Income (loss) from discontinued operations, net of tax 1.6   (1.8 ) (1.8 )
Net income (loss) including noncontrolling interests 328.4 313.4 173.9
Net (income) loss attributable to noncontrolling interests (5.1 ) (5.9 ) (1.6 )
Net income (loss) attributable to MCBC $ 323.3   $ 307.5   $ 172.3  
 
Basic net income (loss) attributable to MCBC per share:
From continuing operations $ 1.49 $ 1.44 $ 0.81
From discontinued operations 0.01     (0.01 )
Basic net income (loss) attributable to MCBC per share $ 1.50   $ 1.44   $ 0.80  
 
Diluted net income (loss) attributable to MCBC per share:
From continuing operations $ 1.49 $ 1.43 $ 0.81
From discontinued operations     (0.01 )
Diluted net income (loss) attributable to MCBC per share $ 1.49   $ 1.43   $ 0.80  
 
Weighted average shares - basic 215.4 214.7 214.7
Weighted average shares - diluted 216.4 216.0 216.0
 
Dividends per share $ 0.41   $ 0.41  
 
Amounts attributable to MCBC
Net income (loss) from continuing operations $ 321.7 $ 309.3 $ 174.1
Income (loss) from discontinued operations, net of tax 1.6   (1.8 ) (1.8 )
Net income (loss) attributable to MCBC $ 323.3   $ 307.5   $ 172.3  
                         
  (1)  

Historical financial volumes have been recast to reflect the
impacts of aligning policies on reporting financial volumes as a
result of the Acquisition. See "Actual and Pro Forma Worldwide
Brand Volume" above for further details.

     
($ In millions, except per share data) (Unaudited)   Six Months Ended
June 30, 2017   June 30, 2016
Actual Pro forma   Actual

Financial volume in hectoliters(1)

50.218   50.971   15.707  
Sales $ 6,706.9 $ 6,826.7 $ 2,357.8
Excise taxes (1,166.9 ) (1,256.1 ) (714.4 )
Net sales 5,540.0 5,570.6 1,643.4
Cost of goods sold (3,129.0 ) (3,187.1 ) (976.2 )
Gross profit 2,411.0 2,383.5 667.2
Marketing, general and administrative expenses (1,484.0 ) (1,442.8 ) (564.5 )
Special items, net (20.3 ) (2.2 ) 74.1
Equity income in MillerCoors     334.3  
Operating income (loss) 906.7 938.5 511.1
Interest income (expense), net (185.8 ) (182.6 ) (87.8 )
Other income (expense), net 1.9   7.1   (45.7 )
Income (loss) from continuing operations before income taxes 722.8 763.0 377.6
Income tax benefit (expense) (187.6 ) (186.8 ) (37.9 )
Net income (loss) from continuing operations 535.2 576.2 339.7
Income (loss) from discontinued operations, net of tax 1.0   (2.3 ) (2.3 )
Net income (loss) including noncontrolling interests 536.2 573.9 337.4
Net (income) loss attributable to noncontrolling interests (11.6 ) (9.5 ) (2.4 )
Net income (loss) attributable to MCBC $ 524.6   $ 564.4   $ 335.0  
 
Basic net income (loss) attributable to MCBC per share:
From continuing operations $ 2.43 $ 2.64 $ 1.61
From discontinued operations 0.01     (0.01 )
Basic net income (loss) attributable to MCBC per share $ 2.44   $ 2.64   $ 1.60  
 
Diluted net income (loss) attributable to MCBC per share:
From continuing operations $ 2.42 $ 2.62 $ 1.60
From discontinued operations     (0.01 )
Diluted net income (loss) attributable to MCBC per share $ 2.42   $ 2.62   $ 1.59  
 
Weighted average shares - basic 215.3 214.6 209.2
Weighted average shares - diluted 216.4 215.9 210.5
 
Dividends per share $ 0.82   $ 0.82  
 
Amounts attributable to MCBC
Net income (loss) from continuing operations $ 523.6 $ 566.7 $ 337.3
Income (loss) from discontinued operations, net of tax 1.0   (2.3 ) (2.3 )
Net income (loss) attributable to MCBC $ 524.6   $ 564.4   $ 335.0  
                         
  (1)  

Historical financial volumes have been recast to reflect the
impacts of aligning policies on reporting financial volumes as a
result of the Acquisition. See "Actual and Pro Forma Worldwide
Brand Volume" above for further details.

 

Molson Coors Brewing Company and Subsidiaries
U.S.
Actual and Pro Forma Results of Operations

 
     
($ In millions) (Unaudited) Three Months Ended
June 30, 2017   June 30, 2016
Actual Pro Forma   Actual

Financial volume in hectoliters(1)(2)

19.190   19.363   19.363  
Sales(2) $ 2,433.0 $ 2,420.7 $ 2,426.3
Excise taxes (294.1 ) (288.5 ) (299.6 )
Net sales(2) 2,138.9 2,132.2 2,126.7
Cost of goods sold(2) (1,182.1 ) (1,188.9 ) (1,174.5 )
Gross profit 956.8 943.3 952.2
Marketing, general and administrative expenses (458.8 ) (486.3 ) (477.1 )
Special items, net(3) (12.6 ) (39.4 ) (39.4 )
Operating income 485.4 417.6 435.7
Interest income (expense), net (0.4 ) (0.4 )
Other income (expense), net (0.7 ) 1.0   1.0  
Income (loss) from continuing operations before income taxes $ 484.7 $ 418.2 $ 436.3
Add/(less):
Special items, net(3) 12.6 39.4 39.4
Acquisition and integration related costs(4) 0.8      
Non-GAAP: Underlying pretax income (loss) $ 498.1 $ 457.6 $ 475.7
Add: Interest expense (income), net 0.4 0.4
Add: Depreciation and amortization 121.3 149.0 116.0
Adjustments to arrive at underlying EBITDA(5)   (33.0 ) (33.0 )
Non-GAAP: Underlying EBITDA $ 619.4   $ 574.0   $ 559.1  
                         
  (1)  

Historical financial volumes have been recast to reflect the
impacts of aligning policies on reporting financial volumes as a
result of the Acquisition. See "Actual and Pro Forma Worldwide
Brand Volume" above for further details.

 
(2) On a reported basis, includes gross inter-segment sales and volumes
that are eliminated in the consolidated totals.
 
(3) See Part I—Item 1. Financial Statements, Note 6, "Special Items" of
the Form 10-Q for detailed discussion of special items, on an actual
basis. Results include net special charges primarily related to the
closure of the Eden, North Carolina, brewery, which for the three
months ended June 30, 2016, includes $33.0 million of accelerated
depreciation in excess of normal depreciation associated with the
brewery and $6.4 million of other charges. These accelerated
depreciation charges are included in our adjustments to arrive at
underlying EBITDA.
 
(4) For the three months ended June 30, 2017, $0.7 million of
integration costs were incurred in cost of goods sold and $0.1
million of integration costs were incurred in marketing, general &
administrative expenses.
 
(5) Represents adjustments to remove amounts related to interest,
depreciation and amortization included in the adjustments to
non-GAAP underlying income above, as these items are added back as
adjustments to net income attributable to MCBC from continuing
operations.
 

     
($ In millions) (Unaudited)   Six Months Ended
June 30, 2017   June 30, 2016
Actual Pro Forma   Actual

Financial volume in hectoliters(1)(2)

34.962   35.751   35.751  
Sales(2) $ 4,424.4 $ 4,484.1 $ 4,495.6
Excise taxes (535.6 ) (541.7 ) (552.8 )
Net sales(2) 3,888.8 3,942.4 3,942.8
Cost of goods sold(2) (2,209.0 ) (2,237.6 ) (2,207.5 )
Gross profit 1,679.8 1,704.8 1,735.3
Marketing, general and administrative expenses (863.7 ) (906.7 ) (886.8 )
Special items, net(3) (15.1 ) (76.3 ) (76.3 )
Operating income 801.0 721.8 772.2
Interest income (expense), net (0.9 ) (0.9 )
Other income (expense), net (0.7 ) 2.6   2.6  
Income (loss) from continuing operations before income taxes $ 800.3 $ 723.5 $ 773.9
Add/(less):
Special items, net(3) 15.1 76.3 76.3
Acquisition and integration related costs(4) 5.3      
Non-GAAP: Underlying pretax income (loss) $ 820.7 $ 799.8 $ 850.2
Add: Interest expense (income), net 0.9 0.9
Add: Depreciation and amortization 240.6 300.9 233.1
Adjustments to arrive at underlying EBITDA(5)   (68.9 ) (68.9 )
Non-GAAP: Underlying EBITDA $ 1,061.3   $ 1,032.7   $ 1,015.3  
                         
  (1)  

Historical financial volumes have been recast to reflect the
impacts of aligning policies on reporting financial volumes as a
result of the Acquisition. See "Actual and Pro Forma Worldwide
Brand Volume" above for further details.

 
(2) On a reported basis, includes gross inter-segment sales and volumes
that are eliminated in the consolidated totals.
 
(3) See Part I—Item 1. Financial Statements, Note 6, "Special Items" of
the Form 10-Q for detailed discussion of special items, on an actual
basis. Results include net special charges primarily related to the
closure of the Eden, North Carolina, brewery, which for the six
months ended June 30, 2016, includes $68.9 million of accelerated
depreciation in excess of normal depreciation associated with the
brewery and $7.4 million of other charges. These accelerated
depreciation charges are included in our adjustments to arrive at
underlying EBITDA.
 
(4) For the six months ended June 30, 2017, $1.2 million of integration
costs were incurred in cost of goods sold and $4.1 million of
integration costs were incurred in marketing, general &
administrative expenses.
 
(5) Represents adjustments to remove amounts related to interest,
depreciation and amortization included in the adjustments to
non-GAAP underlying income above, as these items are added back as
adjustments to net income attributable to MCBC from continuing
operations.
 

Molson Coors Brewing Company and Subsidiaries
Underlying
Equity Income in MillerCoors

   
         
($ In millions) (Unaudited) Three Months Ended Six Months Ended
June 30, 2016 June 30, 2016
Income (loss) from continuing operations before income taxes $ 436.3 $ 773.9
Income tax expense (2.5 ) (2.0 )
Net (income) loss attributable to noncontrolling interest (4.3 ) (7.1 )
Net income attributable to MillerCoors $ 429.5 $ 764.8
MCBC economic interest 42 % 42 %
MCBC proportionate share of MillerCoors net income 180.4 321.2

Amortization of the difference between MCBC contributed cost basis
and
proportionate share of the underlying equity in net
assets of MillerCoors

1.1 2.2
Share-based compensation adjustment(1) (0.7 ) (0.2 )
U.S. import tax benefit(2) 11.1   11.1  
Equity income in MillerCoors $ 191.9 $ 334.3
Add/(less):
MCBC proportionate share of MillerCoors special items, net of tax(3) 16.5   32.0  
Non-GAAP Equity Income in MillerCoors $ 208.4   $ 366.3  
                 
  (1)   The net adjustment is to eliminate all share-based compensation
impacts related to pre-existing SABMiller equity awards held by
former Miller Brewing Company employees employed by MillerCoors, as
well as to add back all share-based compensation impacts related to
pre-existing MCBC equity awards held by former MCBC employees who
transferred to MillerCoors.
 
(2) Represents a benefit associated with an anticipated refund to Coors
Brewing Company ("CBC"), a wholly-owned subsidiary of MCBC, of U.S.
federal excise tax paid on products imported by CBC based on
qualifying volumes exported by CBC from the U.S.
 
(3) Results include net special charges of $39.4 million and $76.3
million for the three and six months ended June 30, 2016,
respectively, primarily related to the closure of the Eden, North
Carolina, brewery for which we recorded our proportionate 42% share.
 

Molson Coors Brewing Company and Subsidiaries
Canada
Results of Operations

         
($ In millions) (Unaudited)   Three Months Ended   Six Months Ended
June 30, 2017   June 30, 2016 June 30, 2017   June 30, 2016

Financial volume in hectoliters(1)(2)

2.530   2.597   4.323   4.371  
Sales(2) $ 527.6 $ 560.0 $ 905.0 $ 913.8
Excise taxes (120.0 ) (134.1 ) (206.3 ) (219.9 )
Net sales(2) 407.6 425.9 698.7 693.9
Cost of goods sold(2) (234.1 ) (239.2 ) (416.0 ) (396.4 )
Gross profit 173.5 186.7 282.7 297.5
Marketing, general and administrative expenses (105.0 ) (99.3 ) (201.0 ) (176.0 )
Special items, net(3) (1.0 ) (1.4 ) 0.7   107.9  
Operating income (loss) 67.5 86.0 82.4 229.4
Other income (expense), net 1.2   2.5   9.4   5.7  
Income (loss) from continuing operations before income taxes $ 68.7 $ 88.5 $ 91.8 $ 235.1
Add/(less):
Special items, net(3) 1.0 1.4 (0.7 ) (107.9 )
Acquisition and integration related costs(4) 2.8 2.8
Other non-core items(5)       (8.1 )    
Non-GAAP: Underlying pretax income (loss) $ 72.5 $ 89.9 $ 85.8 $ 127.2
Add: Depreciation and amortization 29.0 22.6 59.8 43.6
Adjustments to arrive at underlying EBITDA(5) (1.1 ) (1.3 ) (2.3 ) (2.4 )
Non-GAAP: Underlying EBITDA $ 100.4   $ 111.2   $ 143.3   $ 168.4  
                                 
  (1)  

Historical financial volumes have been recast to reflect the
impacts of aligning policies on reporting financial volumes as a
result of the Acquisition. See "Actual and Pro Forma Worldwide
Brand Volume" above for further details.

 
(2) Reflects gross inter-segment sales, purchases and volumes that are
eliminated in the consolidated totals.
 
(3) See Part I—Item 1. Financial Statements, Note 6, "Special Items" of
the Form 10-Q for detailed discussion of special items. Special
items for the three months ended June 30, 2017, and June 30, 2016,
includes accelerated depreciation expense of $1.1 million and $1.3
million, respectively, related to the planned closure of the
Vancouver brewery. Special items for the six months ended June 30,
2017, and June 30, 2016, includes accelerated depreciation expense
of $2.3 million and $2.4 million, respectively, related to the
planned closure of the Vancouver brewery. These accelerated
depreciation charges are included in our adjustments to arrive at
underlying EBITDA.
 
(4) For the three and six months ended June 30, 2017, $2.8 million of
acquisition and integration related costs were incurred in cost of
goods sold.
 
(5) For the six months ended June 30, 2017, a gain of $8.1 million was
recorded in other income (expense), net resulting from a purchase
price adjustment related to the historical sale of Molson Inc.'s
ownership interest in the Montreal Canadiens.
 
(6) Represents adjustments to remove amounts related to interest,
depreciation and amortization included in the adjustments to
non-GAAP underlying income above, as these items are added back as
adjustments to net income attributable to MCBC from continuing
operations.
 

Molson Coors Brewing Company and Subsidiaries
Europe
Results of Operations

         
($ In millions) (Unaudited)   Three Months Ended   Six Months Ended
June 30, 2017   June 30, 2016 June 30, 2017   June 30, 2016

Financial volume in hectoliters(1)(2)

6.715   6.430   11.074   10.691  
Sales(2) $ 796.2 $ 800.5 $ 1,310.6 $ 1,361.4
Excise taxes (271.5 ) (278.4 ) (404.3 ) (480.6 )
Net sales(2) 524.7 522.1 906.3 880.8
Cost of goods sold (313.9 ) (310.9 ) (538.0 ) (550.8 )
Gross profit 210.8 211.2 368.3 330.0
Marketing, general and administrative expenses (136.5 ) (151.1 ) (261.7 ) (270.4 )
Special items, net(3) (2.6 ) (2.3 ) (5.2 ) (3.0 )
Operating income (loss) 71.7 57.8 101.4 56.6
Interest income, net 1.0 0.9 2.0 1.7
Other income (expense), net 0.6   0.3   0.5   (0.5 )
Income (loss) from continuing operations before income taxes $ 73.3 $ 59.0 $ 103.9 $ 57.8
Add/(less):
Special items, net(3) 2.6 2.3 5.2 3.0
Acquisition and integration related costs(4) 0.1     0.3    
Non-GAAP: Underlying pretax income (loss) $ 76.0 $ 61.3 $ 109.4 $ 60.8
Add: Interest expense (income), net (1.0 ) (0.9 ) (2.0 ) (1.7 )
Add: Depreciation and amortization 45.1 45.6 88.9 90.2
Adjustments to arrive at underlying EBITDA(5) (1.8 ) (2.0 ) (4.0 ) (3.9 )
Non-GAAP: Underlying EBITDA $ 118.3   $ 104.0   $ 192.3   $ 145.4  
                                 
  (1)  

Historical financial volumes have been recast to reflect the
impacts of aligning policies on reporting financial volumes as a
result of the Acquisition. See "Actual and Pro Forma Worldwide
Brand Volume" above for further details.

 
(2) Reflects gross inter-segment sales that are eliminated in the
consolidated totals. Excludes royalty volume of 0.479 million
hectoliters and 0.804 million hectoliters for the three and six
months ended June 30, 2017, and excludes royalty volume of 0.051
million hectoliters and 0.087 million hectoliters for the three and
six months ended June 30, 2016, respectively.
 
(3) See Part I—Item 1. Financial Statements, Note 6, "Special Items" of
the Form 10-Q for detailed discussion of special items. Special
items for the three and six months ended June 30, 2017, includes
accelerated depreciation expense of $1.8 million and $4.0 million,
respectively, related to the planned closure of our Burton South
brewery in the U.K. Special items for the three and six months ended
June 30, 2016, includes accelerated depreciation expense of $2.0
million and $3.9 million, respectively, associated with this planned
closure. These accelerated depreciation charges are included in our
adjustments to arrive at underlying EBITDA.
 
(4) For the three and six months ended June 30, 2017, $0.1 million and
$0.3 million, respectively, of acquisition and integration related
costs were incurred in cost of goods sold.
 
(5) Represents adjustments to remove amounts related to interest,
depreciation and amortization included in the adjustments to
non-GAAP underlying income above, as these items are added back as
adjustments to net income attributable to MCBC from continuing
operations.
 

Molson Coors Brewing Company and Subsidiaries
International
Results of Operations

         
($ In millions) (Unaudited)   Three Months Ended   Six Months Ended
June 30, 2017   June 30, 2016 June 30, 2017   June 30, 2016

Financial volume in hectoliters(1)(2)

0.643   0.366   1.171   0.671  
Sales $ 81.3 $ 47.5 $ 147.6 $ 84.1
Excise taxes (16.2 ) (8.3 ) (20.7 ) (13.9 )
Net sales 65.1 39.2 126.9 70.2
Cost of goods sold(3) (47.8 ) (25.7 ) (86.8 ) (46.3 )
Gross profit 17.3 13.5 40.1 23.9
Marketing, general and administrative expenses (24.7 ) (16.1 ) (45.7 ) (28.8 )
Special items, net(4) (0.3 ) (30.8 ) (0.6 ) (30.8 )
Operating income (loss) (7.7 ) (33.4 ) (6.2 ) (35.7 )
Other income (expense), net        
Income (loss) from continuing operations before income taxes $ (7.7 ) $ (33.4 ) $ (6.2 ) $ (35.7 )
Add/(less):
Special items, net(4) 0.3 30.8 0.6 30.8
Acquisition and integration related costs(5) 4.0     4.9    
Non-GAAP: Underlying pretax income (loss) $ (3.4 ) $ (2.6 ) $ (0.7 ) $ (4.9 )
Add: Depreciation and amortization 2.5 0.9 4.8 1.8
Adjustments to arrive at underlying EBITDA        
Non-GAAP: Underlying EBITDA $ (0.9 ) $ (1.7 ) $ 4.1   $ (3.1 )
                                 
  (1)  

Historical financial volumes have been recast to reflect the
impacts of aligning policies on reporting financial volumes as a
result of the Acquisition. See "Actual and Pro Forma Worldwide
Brand Volume" above for further details.

 
(2)

Excludes royalty volume of 0.554 million hectoliters and 1.027
million hectoliters for the three and six months ended June 30,
2017, respectively, and excludes royalty volume of 0.470 million
and 0.771 million hectoliters for the three and six months ended
June 30, 2016, respectively.

 
(3) Reflects gross inter-segment purchases that are eliminated in the
consolidated totals.
 
(4) See Part I—Item 1. Financial Statements, Note 6, "Special Items" of
the Form 10-Q for detailed discussion of special items.
 
(5) For the three and six months ended June 30, 2017, $1.4 million of
integration costs were incurred in cost of goods sold, and for the
three and six months ended June 30, 2017, $2.6 million and $3.5
million, respectively, of integration costs were incurred in
marketing, general & administrative expenses.
 

Molson Coors Brewing Company and Subsidiaries
Corporate
Results of Operations

         
($ In millions) (Unaudited)   Three Months Ended   Six Months Ended
June 30, 2017   June 30, 2016 June 30, 2017   June 30, 2016

Financial volume in hectoliters

       
Sales $ 0.3 $ 0.2 $ 0.6 $ 0.6
Excise taxes        
Net sales 0.3 0.2 0.6 0.6
Cost of goods sold (23.5 ) 12.4   39.5   15.2  
Gross profit (23.2 ) 12.6 40.1 15.8
Marketing, general and administrative expenses (56.2 ) (47.1 ) (111.9 ) (89.3 )
Special items, net(1)     (0.1 )  
Operating income (loss) (79.4 ) (34.5 ) (71.9 ) (73.5 )
Interest expense, net (90.2 ) (41.4 ) (187.8 ) (89.5 )
Other income (expense), net 0.4   (33.2 ) (7.3 ) (50.9 )
Income (loss) from continuing operations before income taxes $ (169.2 ) $ (109.1 ) $ (267.0 ) $ (213.9 )
Add/(less):
Special items, net(1) 0.1
Acquisition and integration related costs(2) 11.2 64.7 24.6 118.4
Unrealized mark-to-market (gains) and losses(3) 23.4   (13.0 ) (39.7 ) (15.3 )
Non-GAAP: Underlying pretax income (loss) $ (134.6 ) $ (57.4 ) $ (282.0 ) $ (110.8 )
Add: Interest expense (income), net 90.2 41.4 187.8 89.5
Add: Depreciation and amortization 1.0 1.1 1.9 2.1
Adjustments to arrive at underlying EBITDA(4)   (13.3 )   (33.7 )
Non-GAAP: Underlying EBITDA $ (43.4 ) $ (28.2 ) $ (92.3 ) $ (52.9 )
                                 
  (1)   See Part I—Item 1. Financial Statements, Note 6, "Special Items" of
the Form 10-Q for detailed discussion of special items.
 
(2) In connection with the acquisition, for the three and six months
ended June 30, 2017, we have recorded $11.2 million and $24.6
million, respectively, of transaction-related costs within
marketing, general & administrative expenses. For the three and six
months ended June 30, 2016, we recorded $19.6 million and $34.5
million, respectively, of transaction-related costs within
marketing, general & administrative expenses, $31.8 million and
$50.2 million, respectively, of financing costs in other income
(expense), and $13.3 million and $33.7 million, respectively, of net
interest expense in interest income (expense). The interest income
(expense) is included in our adjustments to arrive at underlying
EBITDA.
 
(3) The unrealized changes in fair value on our commodity swaps, which
are economic hedges, are recorded as cost of goods sold within our
Corporate business activities. As the exposure we are managing is
realized, we reclassify the gain or loss to the segment in which the
underlying exposure resides, allowing our segments to realize the
economic effects of the derivative without the resulting unrealized
mark-to-market volatility.
 
(4) Represents adjustments to remove amounts related to interest,
depreciation and amortization included in the adjustments to
non-GAAP underlying income above, as these items are added back as
adjustments to net income attributable to MCBC from continuing
operations.
 

 

Balance Sheet

 

Condensed Consolidated Balance Sheets

     
($ In millions, except par value) (Unaudited) As of
June 30, 2017   December 31, 2016
Assets
Current assets:
Cash and cash equivalents $ 502.9 $ 560.9
Accounts receivable, net 962.9 669.5
Other receivables, net 113.8 135.8
Inventories, net 633.7 592.7
Other current assets, net 275.7   210.7  
Total current assets 2,489.0 2,169.6
Properties, net 4,585.2 4,507.4
Goodwill 8,391.2 8,250.1
Other intangibles, net 14,199.6 14,031.9
Other assets 453.6   382.5  
Total assets $ 30,118.6   $ 29,341.5  
Liabilities and equity
Current liabilities:
Accounts payable and other current liabilities $ 2,616.6 $ 2,467.7
Current portion of long-term debt and short-term borrowings 686.6 684.8
Discontinued operations 4.9   5.0  
Total current liabilities 3,308.1 3,157.5
Long-term debt 11,185.1 11,387.7
Pension and postretirement benefits 1,124.8 1,196.0
Deferred tax liabilities 1,865.2 1,699.0
Other liabilities 317.2 267.0
Discontinued operations 12.4   12.6  
Total liabilities 17,812.8 17,719.8
Molson Coors Brewing Company stockholders' equity
Capital stock:
Preferred stock, $0.01 par value (authorized: 25.0 shares; none
issued)
Class A common stock, $0.01 par value per share (authorized: 500.0
shares; issued and outstanding: 2.6 shares and 2.6 shares,
respectively)
Class B common stock, $0.01 par value per share (authorized: 500.0
shares; issued: 204.6 shares and 203.7 shares, respectively)
2.0 2.0
Class A exchangeable shares, no par value (issued and outstanding:
2.9 shares and 2.9 shares, respectively)
107.7 108.1
Class B exchangeable shares, no par value (issued and outstanding:
14.7 shares and 15.2 shares, respectively)
554.4 571.2
Paid-in capital 6,658.5 6,635.3
Retained earnings 6,467.0 6,119.0
Accumulated other comprehensive income (loss) (1,222.3 ) (1,545.5 )
Class B common stock held in treasury at cost (9.5 shares and 9.5
shares, respectively)
(471.4 ) (471.4 )
Total Molson Coors Brewing Company stockholders' equity 12,095.9 11,418.7
Noncontrolling interests 209.9   203.0  
Total equity 12,305.8   11,621.7  
Total liabilities and equity $ 30,118.6   $ 29,341.5  
                 

     

Cash Flow Statement

   
 

Condensed Consolidated Statements of Cash
Flows

     
($ In millions) (Unaudited) Six Months Ended
June 30, 2017   June 30, 2016
Cash flows from operating activities:
Net income (loss) including noncontrolling interests $ 536.2 $ 337.4
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 396.0 137.7
Amortization of debt issuance costs and discounts 11.2 35.5
Share-based compensation 31.6 11.5
(Gain) loss on sale or impairment of properties and other assets, net (4.3 ) (79.8 )
Equity income in MillerCoors (323.2 )
Distributions from MillerCoors 323.2
Equity in net (income) loss of other unconsolidated affiliates 4.7 2.4
Unrealized (gain) loss on foreign currency fluctuations and
derivative instruments, net
(40.5 ) (5.2 )
Income tax (benefit) expense 187.6 37.9
Income tax (paid) received 23.5 (109.1 )
Interest expense, excluding interest amortization 177.6 95.5
Interest paid (175.4 ) (95.1 )
Pension expense (benefit) (14.1 ) 4.0
Pension contributions paid (72.1 ) (10.4 )
Change in current assets and liabilities (net of impact of business
combinations) and other
(242.5 ) (82.2 )
(Gain) loss from discontinued operations (1.0 ) 2.3  
Net cash provided by (used in) operating activities 818.5   282.4  
Cash flows from investing activities:
Additions to properties (354.0 ) (121.6 )
Proceeds from sales of properties and other assets 46.1 144.6
Investment in MillerCoors (810.6 )
Return of capital from MillerCoors 731.1
Other 6.0   (4.1 )
Net cash provided by (used in) investing activities (301.9 ) (60.6 )
Cash flows from financing activities:
Proceeds from issuance of common stock, net 2,525.9
Exercise of stock options under equity compensation plans 1.1 5.4
Dividends paid (176.6 ) (176.5 )
Debt issuance costs (4.6 ) (15.0 )
Payments on debt and borrowings (2,201.5 ) (17.9 )
Proceeds on debt and borrowings 1,536.0 31.7
Net proceeds from (payments on) revolving credit facilities and
commercial paper
282.0 2.5
Change in overdraft balances and other (29.6 ) (17.5 )
Net cash provided by (used in) financing activities (593.2 ) 2,338.6  
Cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents (76.6 ) 2,560.4
Effect of foreign exchange rate changes on cash and cash equivalents 18.6 (1.0 )
Balance at beginning of year 560.9   430.9  
Balance at end of period $ 502.9   $ 2,990.3  
                 

     

Reconciliations to Nearest U.S. GAAP Measures by Line Item

     
Second Quarter 2017   Three Months Ended June 30, 2017
         

($ In millions, except per share data)
(Unaudited)

Net sales  

Cost of goods
sold(1)

 

Gross profit

 

Marketing,
general and
administrative
expenses(2)

 

Special items,
net(3)

 

Operating
income (loss)

Reported (U.S. GAAP) $ 3,091.3 $ (1,756.1 ) $ 1,335.2 $ (781.2 ) $ (16.5 ) $ 537.5
Adjustments to arrive at underlying:
Special items, net
Employee-related charges 0.4 0.4
Impairments or asset abandonment charges 16.1 16.1
Non-Core items
Acquisition and integration related costs 5.0 5.0 13.9 18.9
Unrealized mark-to-market (gains) losses     23.4     23.4             23.4
Underlying (Non-GAAP) $ 3,091.3     $ (1,727.7 )   $ 1,363.6     $ (767.3 )   $     $ 596.3
                                               
     
Second Quarter 2017   Three Months Ended June 30, 2017
         

($ In millions, except per share data)
(Unaudited)

Interest
income
(expense),
net

 

Other
income
(expense),
net

 

Income (loss)
from
continuing
operations
before
income

taxes

 

Income tax
benefit
(expense)

 

Net income (loss)
attributable to
MCBC
from

continuing
operations

 

Net income (loss)
attributable to
MCBC
from

continuing
operations per
diluted
share

Reported (U.S. GAAP) $ (89.2 ) $ 1.5 $ 449.8 $ (123.0 ) $ 321.7 $ 1.49
Adjustments to arrive at underlying:
Special items, net
Employee-related charges 0.4 0.4
Impairments or asset abandonment charges 16.1 16.1 0.07
Non-Core items
Acquisition and integration related costs 18.9 18.9 0.09
Unrealized mark-to-market (gains) losses 23.4 23.4 0.11
Tax effects on special and non-GAAP items             (21.6 )   (21.6 )   (0.10 )
Underlying (Non-GAAP) $ (89.2 )   $ 1.5     $ 508.6     $ (144.6 )   $ 358.9     $ 1.66  
                                                 
  (1)   Adjustments relate to the following segments: U.S. segment $0.7
million, Canada segment $2.8 million, Europe segment $0.1 million,
International segment $1.4 million, Corporate segment $23.4 million.
 
(2) Adjustments relate to the following segments: U.S. segment $0.1
million, International segment $2.6 million, Corporate segment $11.2
million.
 
(3) Adjustments relate to the following segments: U.S. segment $12.6
million, Canada segment $1.0 million, Europe segment $2.6 million,
International segment $0.3 million.
 

     
YTD Second Quarter 2017   Six Months Ended June 30, 2017
         

($ In millions, except per share data)
(Unaudited)

Net sales  

Cost of goods
sold(1)

  Gross profit  

Marketing,
general and
administrative
expenses(2)

 

Special items,
net(3)

 

Operating
income (loss)

Reported (U.S. GAAP) $ 5,540.0 $ (3,129.0 ) $ 2,411.0 $ (1,484.0 ) $ (20.3 ) $ 906.7
Adjustments to arrive at underlying:
Special items, net
Employee-related charges (1.6 ) (1.6 )
Impairments or asset abandonment charges 21.9 21.9
Non-Core items
Acquisition and integration related costs 5.7 5.7 32.2 37.9
Unrealized mark-to-market (gains) losses     (39.7 )   (39.7 )           (39.7 )
Underlying (Non-GAAP) $ 5,540.0     $ (3,163.0 )   $ 2,377.0     $ (1,451.8 )   $     $ 925.2  
                                                 
     
YTD Second Quarter 2017   Six Months Ended June 30, 2017
         

($ In millions, except per share data)
(Unaudited)

Interest
income
(expense),
net

 

Other
income
(expense),
net

 

Income (loss)
from
continuing
operations
before
income

taxes

 

Income tax
benefit
(expense)

 

Net income (loss)
attributable to
MCBC
from

continuing
operations

 

Net income (loss)
attributable to
MCBC
from

continuing
operations per
diluted
share

Reported (U.S. GAAP) $ (185.8 ) $ 1.9 $ 722.8 $ (187.6 ) $ 523.6 $ 2.42
Adjustments to arrive at underlying:
Special items, net
Employee-related charges (1.6 ) (1.6 ) (0.02 )
Impairments or asset abandonment charges 21.9 21.9 0.10
Non-Core items

Acquisition and integration related costs

37.9 37.9 0.18
Unrealized mark-to-market (gains) losses (39.7 ) (39.7 ) (0.18 )
Other non-core items (8.1 ) (8.1 ) (8.1 ) (0.04 )
Tax effects on special and non-GAAP items             (9.5 )   (9.5 )   (0.04 )
Underlying (Non-GAAP) $ (185.8 )   $ (6.2 )   $ 733.2     $ (197.1 )   $ 524.5     $ 2.42  
                                                 
  (1)   Adjustments relate to the following segments: U.S. segment $1.2
million, Canada segment $2.8 million, Europe segment $0.3 million,
International segment $1.4 million, Corporate segment ($39.7)
million.
 
(2) Adjustments relate to the following segments: U.S. segment $4.1
million, International segment $3.5 million, Corporate segment $24.6
million.
 
(3) Adjustments relate to the following segments: U.S. segment $15.1
million, Canada segment $(0.7) million, Europe segment $5.2 million,
International segment $0.6 million, Corporate $0.1 million.
 

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