Molson Coors Reports 2018 Third Quarter Results

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
Expectations
Remains Committed to Full-Year Free Cash
Flow and Deleverage Targets

DENVER & MONTREAL–(BUSINESS WIRE)–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)			Foreign Exchange Impact ($)			Constant Currency % 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)			Foreign Exchange Impact ($)			Constant Currency % 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)		Foreign Exchange Impact ($)			Constant Currency % 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)		Foreign Exchange Impact ($)			Constant Currency % 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)		Foreign Exchange Impact ($)			Constant Currency % 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.

Contacts

Molson Coors Brewing Company
News
Media
Colin Wheeler, 303-927-2443
or
Investor
Relations
Mark Swartzberg, 303-927-2334
or
Kevin
Kim, 303-927-2515

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