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MarketScreener Homepage  >  Equities  >  Nyse  >  Molson Coors Brewing    TAP

MOLSON COORS BREWING

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MOLSON COORS BREWING : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

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02/12/2019 | 07:25am EDT
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is provided to assist in understanding our
company, operations and current business environment and should be considered a
supplement to, and read in conjunction with, the accompanying consolidated
financial statements and notes included within Part II-Item 8 Financial
Statements and Supplementary Data, as well as the discussion of our business and
related risk factors in Part I-Item 1 Business and Part I-Item 1A Risk Factors,
respectively. See also "Cautionary Statement Pursuant to Safe Harbor Provisions
of the Private Securities Litigation Reform Act of 1995". We have restated our
financial statements for 2017 and 2016 due to the correction of errors in the
accounting for income taxes related to the deferred tax liabilities for our
partnership in MillerCoors. Accordingly, the Management's Discussion and
Analysis of Financial Condition and Results of Operations set forth below
reflect the effects of the restatements. See details at Part II-Item 8 Financial
Statements and Supplementary Data,   Note 1, "Basis of Presentation and Summary
of Significant Accounting Policies."
Our Fiscal Year
Unless otherwise indicated, (a) all $ amounts are in USD and (b) comparisons are
to comparable prior periods. For 2016, the consolidated statement of operations
includes MillerCoors' results of operations for the period from January 1, 2016,
to October 10, 2016, on an equity method basis of accounting and from October
11, 2016, to December 31, 2016, on a consolidated basis of accounting. Where
indicated, we have reflected unaudited pro forma financial information for 2016
which gives effect to the Acquisition and the related financing as if they were
completed on January 1, 2016, the first day of the Company's 2016 fiscal year.
Operational Measures
We have certain operational measures, such as STWs and STRs, which we believe
are important metrics. STW is a metric that we use in our business to reflect
the sales from our operations to our direct customers, generally wholesalers. We
believe the STW metric is important because it gives an indication of the amount
of beer and adjacent products that we have produced and shipped to customers.
STR is a metric that we use in our business to refer to sales closer to the end
consumer than STWs, which generally means sales from our wholesalers or our
company to retailers, who in turn sell to consumers. 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.
Acquisition
On October 11, 2016, we completed the acquisition of SABMiller plc's
("SABMiller") 58% economic interest and 50% voting interest in MillerCoors and
all trademarks, contracts and other assets primarily related to the "Miller
International Business," as defined in the purchase agreement, outside of the
U.S. and Puerto Rico (the "Acquisition") from Anheuser-Busch InBev SA/NV
("ABI"). The Acquisition was completed for $12.0 billion in cash, subject to a
downward purchase price adjustment as described in the purchase agreement. This
purchase price "Adjustment Amount," as defined in the purchase agreement,
required payment to MCBC if the unaudited EBITDA for the Miller International
Business for the twelve months prior to closing was below $70 million.
On January 21, 2018, MCBC and ABI entered into a settlement agreement related to
the purchase price adjustment under the purchase agreement, and on January 26,
2018, pursuant to the settlement agreement, ABI paid to MCBC $330.0 million, of
which $328.0 million constitutes the Adjustment Amount. As this settlement
occurred following the finalization of purchase accounting, we recorded the
settlement proceeds related to the Adjustment Amount as a gain within special
items, net in our consolidated statement of operations in our Corporate segment
and within cash provided by operating activities within our consolidated
statement of cash flows for the year ended December 31, 2018. MCBC and ABI also
agreed to certain mutual releases as further described in the settlement
agreement.
Executive Summary
We are one of the world's largest brewers and have a diverse portfolio of owned
and partner brands, including global priority brands Blue Moon, Coors Banquet,
Coors Light, Miller Genuine Draft, Miller Lite, and Staropramen, regional
champion brands Carling, Molson Canadian and other leading country-specific
brands, as well as craft and specialty beers such as Creemore Springs, Cobra,
Doom Bar, Henry's Hard and Leinenkugel's. With centuries of brewing heritage, we
have been crafting high-quality, innovative products with the purpose of
delighting the world's beer drinkers and with the ambition to be the first
choice for our consumers and customers. Our success depends on our ability to
make our products available to meet a wide range of consumer segments and
occasions.

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In 2018, we continued to focus on building our brand strength and transforming
our portfolio toward the above premium, flavored malt beverage, craft and cider
segments. Further, we continued to focus on generating higher returns on our
invested capital, managing our working capital and delivering a greater return
on investment for our shareholders.
Adoption of Revenue Recognition Guidance
On January 1, 2018, we adopted the FASB's new accounting pronouncement related
to revenue recognition. This guidance was adopted using the modified
retrospective approach, and therefore, prior period results have not been
restated. The following table highlights the impact of this new guidance on
summarized components of our consolidated statement of operations for the year
ended December 31, 2018, when comparing our current period results of operations
under the new guidance, versus our results of operations if historical guidance
had continued to be applied.
                                                         Year Ended December 31, 2018
                                    U.S.         Canada        Europe        International      Consolidated
                                                                (In millions)
Impact to Consolidated Statement of Operations - Favorable/(Unfavorable):
Net sales                        $    (6.6 )$   (47.3 )$    (1.7 )   $           0.1     $      (55.5 )
Cost of goods sold               $       -     $       -     $       -     $             -     $          -
Gross profit                     $    (6.6 )$   (47.3 )$    (1.7 )   $           0.1     $      (55.5 )
Marketing, general and
administrative expenses          $     7.7$    47.3$     4.7     $             -     $       59.7
Operating income (loss)          $     1.1     $       -     $     3.0     $           0.1     $        4.2

Interest income (expense), net $ - $ - $ (3.4 ) $

             -     $       (3.4 )
Income (loss) before income
taxes                            $     1.1     $       -     $    (0.4 )   $           0.1     $        0.8


These impacts are primarily driven by the reclassification of certain cash
payments to customers from marketing, general and administrative expenses to a
reduction of revenue, as well as a change in the timing of recognition of
certain promotional discounts and cash payments to customers. See Part I-Item 1.
Financial Statements,   Note 1, "Basis of Presentation and Summary of
Significant Accounting Policies"   and   Note 2, "New Accounting
Pronouncements"   for further discussion on the adoption of this guidance.
Adoption of Pension and Other Postretirement Benefit Guidance
On January 1, 2018, we adopted the FASB's new accounting pronouncement related
to the classification of pension and other postretirement benefit costs.
Specifically, the new guidance requires us to report only the service cost
component in the same line item as other compensation costs arising from
services rendered by the pertinent employees during the period; while the other
components of net benefit cost are now presented in the consolidated statements
of operations separately from the service cost component and outside of
operating income. The amendments in this update also allow only the service cost
component to be eligible for capitalization when applicable. We have also
determined that only service cost will be reported within each operating segment
and all other components will be reported within the Corporate segment. The
guidance related to the income statement presentation of service costs and other
pension and postretirement benefit costs is applied retrospectively, while the
capitalization of service costs component is applied prospectively. This
adjustment is classification only and had no impact to our consolidated net
income. See   Note 2, "New Accounting Pronouncements  " for further details
including updated historical financial information.
Summary of Consolidated Results of Operations
The following table highlights summarized components of our consolidated
statements of operations for the years ended December 31, 2018, December 31,
2017, and December 31, 2016, and unaudited pro forma financial information for
the year ended December 31, 2016. See Part II-Item 8 Financial Statements and
Supplementary Data, "Consolidated Statements of Operations" for additional
details of our U.S. GAAP results.
We have presented unaudited pro forma financial information to enhance
comparability of financial information between periods. The unaudited 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 and the completed financing as if they were
completed on January 1, 2016. Pro forma adjustments are based on items that are
factually supportable, are directly attributable to the Acquisition or the
related financing, and are expected to have a continuing impact on MCBC's
results of operations. Any non-recurring items directly attributable to the
Acquisition or the related financing are excluded in the unaudited pro forma
statements of operations. The unaudited pro forma financial information does not
include adjustments for costs related to integration activities following the
completion of the Acquisition, cost savings or synergies that have been or

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may be achieved by the combined businesses. The unaudited pro forma financial
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 related financing occurred at the date indicated, or project
the results of operations of MCBC for any future dates or periods. See
"Unaudited Pro Forma Financial Information" below for details of pro forma
adjustments.
Net income attributable to MCBC and the related diluted per share amounts for
2017 and 2016 have been restated due to the correction of errors related to
income tax accounting. See details at Part II-Item 8 Financial Statements and
Supplementary Data,   Note 1, "Basis of Presentation and Accounting Policies."
                                                                      For the years ended
                           December 31, 2018                  December 31, 2017           December 31, 2016
                              As Reported         Change         As Restated          As Restated      Pro Forma      Pro Forma Change
                                                      (In millions, except percentages and per share data)
Financial volume in
hectoliters(1)                        96.627      (2.9 )%                99.563            46.912        101.934            (2.3 )%
Net sales                $          10,769.6      (2.1 )%   $          11,002.8     $     4,885.0$ 10,983.2             0.2  %
Net income (loss)
attributable to MCBC     $           1,116.5     (28.7 )%   $           1,565.6     $     1,593.9$    291.8             N/M
Net income (loss)
attributable to MCBC per
diluted share            $              5.15     (28.8 )%   $              7.23     $        7.47$     1.35             N/M

N/M = Not meaningful (1) Financial volumes for the year ended December 31, 2016, were recast to

reflect the impacts of aligning policies on reporting financial volumes as

a result of the Acquisition.

2018 Financial Highlights • In 2018, net income attributable to MCBC decreased 28.7% compared to the

prior year primarily driven by the one-time income tax benefit recognized

       in the prior year due to the reduction to the U.S. federal corporate
       income tax rate as a result of the 2017 Tax Act. This decline was also
       driven by unrealized mark-to-market changes on commodity positions and

lower volume and cost inflation in the U.S. and Canada, partially offset

       by the gain of $328.0 million related to the Adjustment Amount as
       previously discussed, positive global net pricing, global marketing
       optimization, general and administrative spend reductions and cost
       savings, as well as lower interest expense.

• During 2018, we repaid our CAD 400 million 2.25% notes with cash on hand

       as part of our deleveraging commitment. We also repaid $379 million of
       commercial paper which was outstanding at December, 31, 2017.


•      We generated cash flow from operating activities of approximately $2.3

billion, representing a 24.9% increase from approximately $1.9 billion in

       2017. The increase in operating cash flow in 2018 compared to 2017 is
       primarily related to the proceeds received during the first quarter of

2018 of $328.0 million related to the Adjustment Amount as previously

       discussed, as well as lower pension contributions and lower interest paid,
       partially offset by unfavorable changes in working capital and lower cash
       tax receipts.

• Regional financial highlights:


•            In the U.S. segment, we reported income before income taxes of
             $1,320.7 million in 2018, versus income of $1,394.2 million in 2017,
             primarily driven by lower volume, cost of goods sold inflation,
             higher special charges and negative sales mix, partially offset by
             lower marketing, general and administrative expenses and higher net
             pricing. During the year we grew our share of the premium light
             segment with Miller Lite, which completed its seventeenth
             consecutive quarter of increased segment share, according to
             Nielsen. Coors Light remained the number two beer in industry share.
             In above premium, we established a foundation for growth by
             successfully introducing Arnold Palmer Spiked, establishing Peroni
             as the fastest growing European import, and relaunching the Sol
             brand. Additionally, Peroni grew volume for the seventeenth
             consecutive quarter. Blue Moon remained the number one national
             craft brand in the U.S.


•            In our Canada segment, we drove positive pricing primarily in
             Ontario and West. However, volume declined in the West and Ontario,
             partially offset by growth in Quebec. We reported income before
             income taxes of $157.0 million in 2018, versus income of $210.2
             million in 2017, primarily due to higher other expense related to
             unrealized mark-to-market losses on warrants issued in connection
             with the formation of the Truss LP ("Truss") joint venture, negative
             sales mix and lower volumes, partially offset by higher net pricing.



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•            In our Europe segment, our continued portfolio 

premiumization while

             defending share of national champion brands positively

impacted our

             performance as we grew volumes in our above premium and core brands.
             In 2018, we reported income before income taxes of $186.4 million,
             versus income of $234.9 million in 2017, primarily due to cycling
             the impact of the indirect tax provision release of

approximately

             $50 million during the first quarter of 2017, adopting recently
             revised excise-tax guidelines in one of our European markets,
             investments in our First Choice Agenda, as well as unfavorable
             foreign currency movements. This was partially offset by favorable
             sales mix shift from our premiumization efforts, more efficient
             marketing investments, the addition of Aspall Cider business, as
             well as a positive impact from cycling a bad debt provision
             recognized in 2017.


•            Our International segment reported a loss before income taxes of
             $2.7 million in 2018, compared to a loss of $19.7 million in the
             prior year, primarily driven by lower marketing and integration
             expenses, shifting to a more profitable business model in Mexico,
             higher net pricing, along with volume growth in our focus markets,
             partially offset by negative foreign currency movements and
             increased special charges as a result of formally exiting our China
             business.


• Brand highlights:


•            Global priority brand volume decreased 3.1% in 2018 versus 2017, due
             to declines across Canada, the U.S. and International, partially
             offset by growth in Europe.


•            Blue Moon Belgian White global brand volume decreased 0.2% in 2018
             versus 2017, due to decline in the U.S., offset by growth in Canada,
             Europe and International.


•            Carling brand volume in Europe decreased by 2.5% versus

2017, due to

             lower volumes in the U.K., the brand's primary market.


•            Coors global brand volume - Coors Light global brand volume 

declined

             5.0% in 2018 versus 2017. The overall volume decrease was due 

to

             lower brand volume in the U.S., Canada and International, 

partially

             offset by growth in Europe. Volumes in the U.S. were lower than
             prior year reflective of the U.S. industry premium and premium light
             segment performance. The declines in Canada are the result of
             ongoing competitive pressures in Quebec and Ontario and a

continued

             shift in consumer preference to value brands in the West. Coors
             Banquet global brand volume decreased 4.9% in 2018 versus 2017,
             driven by the U.S. and Canada.


•            Miller global brand volume - Miller Lite global brand

volumes

             decreased 1.3% in 2018 versus 2017, primarily driven by

declines in

             the U.S., partially offset by growth in International.

However,

             Miller Lite gained share of the U.S. premium light segment for the
             seventeenth consecutive quarter. Miller Genuine Draft global brand
             volume decreased 3.9% in 2018 versus 2017, due to decreases in the
             U.S., International and Canada, partially offset by growth in
             Europe.


•            Molson Canadian brand volume in Canada decreased 8.1% during 2018
             versus the prior year, primarily driven by competitive

pressures in

             the West.


•            Staropramen global brand volume increased 3.7% during 2018 versus
             2017, driven by growth outside of the brand's primary market.


Worldwide Brand Volume
Worldwide brand volume (or "brand volume" when discussed by segment) reflects
owned brands sold to unrelated external customers within our geographic markets,
net of returns and allowances, royalty volume, an adjustment from STWs to STRs
and our proportionate share of equity investment brand volume calculated
consistently with MCBC owned volume. Contract brewing and wholesaler volume is
removed from worldwide brand volume as this is non-owned volume for which we do
not directly control performance. 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. Financial volume represents
owned brands sold to unrelated external customers within our geographical
markets, net of returns and allowances as well as contract brewing, wholesale
non-owned brand volume and company-owned distribution volume. Royalty volume
consists of our brands produced and sold by third parties under various license
and contract-brewing agreements and because this is owned volume, it is included
in worldwide brand volume. The adjustment from STWs to STRs provides the closest
indication of the performance of our owned brands in relation to market and
competitor sales trends, as it reflects sales volume one step closer to the end
consumer and generally means sales from our wholesalers or our company to
retailers. Equity investment worldwide brand volume represents our ownership
percentage share of volume in our subsidiaries accounted for under the equity
method, consisting of MillerCoors prior to the completion of the Acquisition on
October 11, 2016. See Part II-Item 8 Financial Statements and Supplementary
Data,   Note 4, "Acquisition and Investments"   of the Notes for further
discussion.

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Effective in the first quarter of 2018, we have revised our net sales per
hectoliter performance discussions to include a brand volume basis as defined
above (with the exception of the STW to STR adjustment) with the net sales
revenue component reflecting owned and actively managed brands as well as
royalty revenue consistent with how management views the business. We continue
to also discuss net sales per hectoliter performance on a reported basis.
                                                               For the years ended
                              December 31, 2018     Change      December 31, 2017     Change      December 31, 2016
                                                        (In millions, except percentages)
Volume in hectoliters:
Financial volume                      96.627         (2.9 )%            99.563        112.2  %            46.912
Less: Contract brewing and
wholesaler volume                     (8.182 )       (4.9 )%            (8.602 )      108.6  %            (4.124 )
Add: Royalty volume                    4.054         10.0  %             3.685         75.3  %             2.102
Add: STW to STR adjustment            (0.358 )      (47.9 )%            (0.687 )        N/M                0.707
Owned volume                          92.141         (1.9 )%            93.959        106.1  %            45.597
Add: Proportionate share of
equity investment worldwide
brand volume                               -            -  %                 -       (100.0 )%            19.940
Total worldwide brand volume          92.141         (1.9 )%            93.959         43.4  %            65.537


N/M = Not meaningful
Our worldwide brand volume decreased in 2018 compared to 2017, due to declines
in the U.S. and Canada, partially offset by growth in Europe and International.
Worldwide brand volume increased in 2017 compared to 2016, due to the
Acquisition as well as strong growth in Europe and International partially as a
result of adding the Miller global brands business as well as growth within our
existing brand portfolio.
Net Sales Drivers
The following table highlights the drivers of change in net sales for the year
ended December 31, 2018, versus December 31, 2017, by segment (in percentages)
and excludes Corporate net sales revenue for our water resources and energy
operations in the state of Colorado.
                                   Price, Product
                                    and Geography
                      Volume           Mix(1)           Currency        Other(2)          Total
Consolidated            (2.9 )%             0.7  %           0.5  %         (0.4 )%         (2.1 )%
U.S.                    (5.1 )%             1.9  %             -  %         (0.1 )%         (3.3 )%
Canada                  (2.9 )%            (1.6 )%             -  %            -  %         (4.5 )%
Europe                   2.1  %             0.4  %           3.3  %         (2.6 )%          3.2  %
International           (7.5 )%             3.5  %          (1.3 )%         

- % (5.3 )%

(1) Includes the impacts of the adoption of the new accounting pronouncement

       related to revenue recognition as discussed above. See Part II-Item 8
       Financial Statements and Supplementary Data,   Note 1, "Basis of
       Presentation and Summary of Significant Accounting Policies"   and   Note
       2, "New Accounting Pronouncements  " for further discussion on the
       adoption of this revenue recognition guidance.

(2) Europe "Other" column includes the impacts of the release of an indirect

tax provision in 2017 as further described in the Results of Operations.




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The following table highlights the drivers of change in net sales on a reported
basis for the year ended December 31, 2017, versus December 31, 2016, by segment
(in percentages) and excludes Corporate net sales revenue for our water
resources and energy operations in the state of Colorado. Consolidated includes
the U.S. segment for 2017 as well as the post-Acquisition period of October 11,
2016, through December 31, 2016. Prior to the Acquisition, MillerCoors was
accounted for as an equity method investment:
                                  Price, Product
                                   and Geography
                      Volume            Mix           Currency         Other(1)          Total
Consolidated           112.2  %            13.3 %         (0.3 )%            -  %          125.2 %
Canada                  (1.6 )%             2.2 %          1.7  %            -  %            2.3 %
Europe                   3.1  %             2.9 %         (2.1 )%          6.4  %           10.3 %
International           60.1  %             1.3 %            -  %            -  %           61.4 %


(1) Europe "Other" column includes the release of an indirect tax provision

further described in the Results of Operations.



Cost Savings Initiatives
Total cost savings in 2018 exceeded our targets and totaled more than $240
million, driven by our U.S., Canada and Europe segments. We have delivered more
than $495 million of cost savings collectively for the 2017 - 2019 program.
Depreciation and Amortization
Depreciation and amortization expense was $857.5 million in 2018, an increase of
$44.7 million compared to 2017, primarily due to brewery system implementations
in the U.S. On a reported basis, depreciation and amortization expense was
$812.8 million in 2017, an increase of $424.4 million compared to 2016,
primarily due to the incremental depreciation and amortization recorded for the
U.S. segment as a result of the Acquisition. On a pro forma basis, depreciation
and amortization expense decreased $38.6 million in 2017 compared to 2016,
primarily due to lower accelerated depreciation due to brewery closures in 2017
and the impact of foreign exchange rates.
Income Taxes
Effective tax rates have been restated for 2017 and 2016 due to the correction
of errors related to income tax accounting. See details at Part II-Item 8
Financial Statements and Supplementary Data,   Note 1, "Basis of Presentation
and Summary of Significant Accounting Policies."
                                         For the years ended
                                           December 31, 2017     December 31, 2016
                    December 31, 2018         As Restated           As Restated
Effective tax rate          17 %                  (15 )%                  48 %


The increase in the effective income tax rate for 2018 versus 2017 was primarily
driven by the one-time impacts of the enactment of the 2017 Tax Act recognized
in 2017, most notably the remeasurement of our deferred taxes for the reduction
in the U.S. statutory federal corporate income tax rate. This one-time benefit
to our deferred tax positions recognized in 2017 was partially offset by the
reduction of the statutory U.S. federal corporate income tax rate from 35% to
21% beginning in 2018.
The decrease in the effective income tax rate for 2017 versus 2016 was primarily
driven by the above mentioned impacts of the 2017 Tax Act, as well as the income
tax impacts recognized in 2016 associated with our previously held equity
interest in MillerCoors which increased our effective tax rate in 2016.
Additionally, our 2016 effective tax rate was negatively impacted by the
remeasurement of the deferred tax liability on our Molson core brand intangible
asset to the Canadian ordinary income tax rate upon reclassification from
indefinite-lived to definite-lived subject to amortization.
Our tax rate is volatile and may increase or decrease with changes in, among
other things, the amount and source of income or loss, our ability to utilize
foreign tax credits, excess tax benefits or deficiencies from share-based
compensation, changes in tax laws, and the movement of liabilities established
pursuant to accounting guidance for uncertain tax positions as statutes of
limitations expire, positions are effectively settled, or when additional
information becomes available. There are proposed or pending tax law changes in
various jurisdictions in which we do business that, if enacted, may have an
impact on our effective tax rate. Additionally, we continue to monitor the 2017
Tax Act, including proposed regulations which may change upon finalization, as
well as yet to be issued regulations and interpretations. If the forthcoming
regulations and interpretations change relative to our current understanding and
initial assessment of the impacts of the 2017 Tax Act, the resulting impacts
could have a material adverse impact on our effective tax rate.

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See Part II-Item 8 Financial Statements and Supplementary Data, Note 6, "Income Tax", for additional details regarding our effective tax rate.


Results of Operations
United States Segment
                                                                  For the years ended
                                                December 31, 2018       Change        December 31, 2017
                                                           (In millions, except percentages)
Financial volume in hectoliters(1)                        64.272           (5.1 )%              67.731
Sales(1)                                       $         8,234.4           (3.6 )%   $         8,541.7
Excise taxes                                              (974.5 )         (5.9 )%            (1,036.0 )
Net sales(1)                                             7,259.9           (3.3 )%             7,505.7
Cost of goods sold(1)                                   (4,277.5 )         (1.1 )%            (4,324.2 )
Gross profit                                             2,982.4           (6.3 )%             3,181.5

Marketing, general and administrative expenses (1,631.3 ) (8.5 )%

            (1,782.7 )
Special items, net(2)                                      (37.8 )        147.1  %               (15.3 )
Operating income                                         1,313.3           (5.1 )%             1,383.5
Interest income (expense), net                               8.8          (32.8 )%                13.1
Other income (expense), net                                 (1.4 )        (41.7 )%                (2.4 )
Income (loss) before income taxes              $         1,320.7           

(5.3 )% $ 1,394.2


(1)    Includes gross inter-segment sales, purchases, and volumes, which are
       eliminated in the consolidated totals.

(2) See Part II-Item 8 Financial Statements and Supplementary Data, Note 7,

       "Special Items"   of the Notes for detail of special items.



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We have presented unaudited pro forma financial information of the U.S. segment
for 2016 to enhance comparability of financial information between periods.
Results for the period from January 1, 2016, through October 10, 2016, are
actual results of MillerCoors utilized in preparing MCBC's share of MillerCoors
earnings when we historically accounted for MillerCoors under the equity method
of accounting, and, therefore, its results of operations were reported as equity
income within MCBC's consolidated statements of operations. Results for the
period from October 11, 2016, through December 31, 2016, are actual results
recorded when MillerCoors was fully consolidated within our results of
operations. We have aggregated these reported 2016 results and applied pro forma
adjustments to arrive at combined U.S. segment pro forma financial information
for the full year 2016.
                                                                 For the
                                             For the period       period
                           For the year        January 1        October 11
                               ended            through          through
                           December 31,       October 10,      December 31,          For the year ended
                               2017               2016             2016              December 31, 2016
                            As Reported       As Reported      As Reported
                                by                 by               by            Pro Forma            Pro       Pro Forma
                               MCBC           MillerCoors          MCBC         Adjustments(1)      Forma(1)       Change
                                                          (In millions, except percentages)
Financial volume in
hectoliters(2)(3)                67.731             55.750         14.436                    -        70.186        (3.5 )%
Sales(3)                  $     8,541.7$      6,987.2$  1,780.0     $          (23.2 )   $ 8,744.0        (2.3 )%
Excise taxes                   (1,036.0 )           (861.8 )       (213.4 )               12.3      (1,062.9 )      (2.5 )%
Net sales(3)                    7,505.7            6,125.4        1,566.6                (10.9 )     7,681.1        (2.3 )%

Cost of goods sold(3) (4,324.2 ) (3,426.6 ) (1,027.0 )

               37.8      (4,415.8 )      (2.1 )%
Gross profit                    3,181.5            2,698.8          539.6                 26.9       3,265.3        (2.6 )%
Marketing, general and
administrative expenses        (1,782.7 )         (1,403.9 )       (432.2 )              (27.3 )    (1,863.4 )      (4.3 )%
Special items, net(4)             (15.3 )           (111.3 )      2,959.1             (2,965.0 )      (117.2 )     (86.9 )%
Operating income                1,383.5            1,183.6        3,066.5             (2,965.4 )     1,284.7         7.7  %
Interest income
(expense), net                     13.1               (1.4 )            -                    -          (1.4 )       N/M
Other pension and
postretirement benefits
(costs), net                          -              (14.4 )            -                 14.4             -           -  %
Other income (expense),
net                                (2.4 )              3.7            0.7                    -           4.4         N/M
Income (loss) before
income taxes              $     1,394.2$      1,171.5$  3,067.2$       (2,951.0 )$ 1,287.7         8.3  %

N/M = Not meaningful (1) Pro forma amounts give effect to the Acquisition as if it had occurred at

       the beginning of fiscal year 2016 and have been updated to reflect that
       effective January 1, 2017, the results of the MillerCoors Puerto Rico

business, which were previously included as part of the U.S. segment, are

       now reported within the International segment. See Part II - Item 7
       Management's Discussion and Analysis, "Unaudited Pro Forma Financial
       Information," for details of pro forma adjustments.


(2)    Financial volumes for the year ended December 31, 2016, were recast to

reflect the impacts of aligning policies on reporting financial volumes as

       a result of the Acquisition.


(3)    On a reported basis, includes gross inter-segment sales, purchases, and
       volumes, which are eliminated in the consolidated totals.

(4) See Part II-Item 8 Financial Statements and Supplementary Data, Note 7,

       "Special Items"   of the Notes for detail of special items.



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The following represents our proportionate share of MillerCoors' net income reported under the equity method prior to the Acquisition:

                                                                       For the period
                                                                          January 1
                                                                           through
                                                                         October 10,
                                                                            2016
                                                                    (In millions, except
                                                                        percentages)
Income (loss) before income taxes                                   $       

1,171.5

  Income tax expense                                                             (3.3 )
Net (income) loss attributable to noncontrolling interest                       (11.0 )
Net income attributable to MillerCoors                              $       

1,157.2

MCBC's economic interest                                                           42 %
MCBC's proportionate share of MillerCoors' net income                       

486.0

Amortization of the difference between MCBC's contributed cost basis and proportionate share of the underlying equity in net assets of MillerCoors(1)

3.3

Share-based compensation adjustment(1)                                           (0.7 )
U.S. import tax benefit(1)                                                       12.3
Equity income in MillerCoors                                        $           500.9

(1) See Part II-Item 8 Financial Statements and Supplementary Data, Note 4,

"Acquisition and Investments" of the Notes, for a detailed discussion of

these equity method adjustments prior to the Acquisition.



The discussion below highlights the U.S. segment results of operations for the
year ended December 31, 2018, versus the year ended December 31, 2017, and for
the year ended December 31, 2017, versus the year ended December 31, 2016, on a
reported and pro forma basis, where applicable.
Significant events
Throughout 2018, U.S. financial volume, including shipment timing and
distributor inventory levels, as well as financial results were impacted by
brewery system implementations at our Golden, Colorado, Trenton, Ohio and Fort
Worth, Texas breweries. We continue to prepare for future implementations at our
remaining breweries expected to occur in 2019, including the implementation at
our Milwaukee, Wisconsin brewery, which is currently underway.
In order to align our cost base with our scale of business, during the third
quarter of 2018, we initiated restructuring activities in the U.S. and reduced
U.S. employment levels by approximately 300 employees in the fourth quarter of
2018. As a result, severance costs related to these restructuring activities
were recorded as special charges.
The volatility of aluminum, inclusive of Midwest Premium, and freight and fuel
costs continued to significantly impact our results during 2018. To the extent
these prices continue to fluctuate, our business and financial results could be
materially adversely impacted. We continue to monitor these risks and rely on
our risk management hedging program to help mitigate price risk exposure for
commodities including aluminum and fuel.
In order to increase overall operating efficiency, during the first quarter of
2018, the U.S. segment announced plans to close the Colfax, California cidery.
The cidery closed in January 2019 and cider production has moved to the 10th
Street Brewery in Milwaukee, Wisconsin. We recognized special charges in 2018
associated with the cidery closure consisting primarily of accelerated
depreciation in excess of normal depreciation.
On October 11, 2016, we completed the Acquisition and as a result, MCBC owns
100% of the outstanding equity and voting interests of MillerCoors. Therefore,
beginning October 11, 2016, MillerCoors' results of operations have been
prospectively consolidated into MCBC's consolidated financial statements and
included in the U.S. segment. See Part II-Item 8 Financial Statements and
Supplementary Data,   Note 4, "Acquisition and Investments"   for further
details. Additionally, effective January 1, 2017, the results of the MillerCoors
Puerto Rico business, which were previously included as part of the U.S.
segment, are now reported within the International segment. Note, we only
present unaudited pro forma financial information for the consolidated entity
and the U.S. segment.
During the third quarter of 2015, the U.S. business announced plans to close its
brewery in Eden, North Carolina in an effort to optimize the brewery footprint
and streamline operations for greater efficiencies. Products produced in Eden
were transitioned to other breweries in the U.S. supply chain network and the
Eden brewery is now closed. Total special charges

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associated with the Eden closure of approximately $182 million have been
incurred from the decision to close through December 31, 2018, consisting
primarily of accelerated depreciation. During the fourth quarter of 2018, the
real property associated with the closed Eden brewery was sold.
Additionally, in 2016 MillerCoors acquired craft breweries Revolver Brewing,
Terrapin Beer Company and Hop Valley Brewing Company.
Volume and net sales
Brand volume declined 3.9% in 2018 compared to 2017, driven by lower volume in
the premium light segment. STWs, excluding contract brewing volume, decreased
4.4% in 2018 compared to 2017, reflective of brand volume performance.
Net sales per hectoliter on a brand volume basis increased 1.5% in 2018 compared
to 2017, due to favorable net pricing, partially offset by negative sales mix.
Net sales per hectoliter on a reported basis for 2018, increased 1.9% in 2018
compared to 2017.
Brand volume declined 2.9% in 2017 compared to 2016, driven by lower volume in
the premium light and below premium segments. STWs, excluding contract brewing
volume, decreased 3.3% in 2017 compared to 2016.
Net sales per hectoliter on a brand volume basis for 2017 increased 1.2%
compared to 2016 reported net sales and 1.0% compared to 2016 pro forma net
sales, due to favorable net pricing. Net sales per hectoliter on a reported
basis, increased 1.1% compared to 2016 reported figures and increased 1.3%
compared to 2016 pro forma figures.
Cost of goods sold
Cost of goods sold per hectoliter increased 4.2% in 2018 compared to prior year
driven by higher transportation costs, aluminum inflation and volume deleverage,
partially offset by cost savings. Additionally, in 2018 we recorded $2.8 million
of integration costs related to the Acquisition within cost of goods sold.
Cost of goods sold per hectoliter decreased 0.1% in 2017 compared to 2016
reported figures due to the cycling of $82.0 million related to the inventory
step up as a result of the Acquisition. Cost of goods sold per hectoliter
increased 1.5% in 2017 compared to 2016 pro forma figures driven by higher input
costs and volume deleverage, partially offset by cost savings. Additionally, in
2017 we recorded $2.4 million of integration costs related to the Acquisition
within cost of goods sold.
Marketing, general and administrative expenses
Marketing, general and administrative expenses decreased 8.5% in 2018 compared
to 2017 driven by the amicable resolution of a dispute with a vendor in the
third quarter of 2018, spending optimization and efficiencies during the year as
well as lower employee-related expenses including incremental cost reductions
initiated in the third quarter of 2018 and lower employee incentive expense.
Marketing, general and administrative expenses decreased in 2017 compared to
2016 on a reported basis and decreased in 2017 compared to 2016 on a pro forma
basis, due to spending optimization and efficiencies. Marketing, general and
administrative expenses also includes integration costs of $5.1 million in 2017.
Interest income (expense), net
Net interest income decreased for 2018 compared to 2017 as a result of lower
reductions in mandatorily redeemable noncontrolling interest liabilities in 2018
compared to 2017. Adjustments in the carrying value of the mandatorily
redeemable noncontrolling interests are recorded to interest income (expense),
net until settled.
Net interest income increased for 2017 compared to 2016, primarily due to a
reduction in mandatorily redeemable noncontrolling interest liabilities.


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Canada Segment
                                                             For the years ended
                           December 31, 2018      Change      December 31, 2017      Change      December 31, 2016
                                                      (In millions, except percentages)
Financial volume in
hectoliters(1)(2)                     8.554        (2.9 )%               8.805        (1.6 )%               8.950
Sales(2)                  $         1,850.6        (2.9 )%   $         1,906.2         1.4  %   $         1,879.4
Excise taxes                         (458.5 )       2.3  %              (448.2 )      (1.2 )%              (453.7 )
Net sales(2)                        1,392.1        (4.5 )%             1,458.0         2.3  %             1,425.7
Cost of goods sold(2)                (847.0 )         -  %              (847.0 )       6.4  %              (796.4 )
Gross profit                          545.1       (10.8 )%               611.0        (2.9 )%               629.3
Marketing, general and
administrative expenses              (341.9 )     (14.0 )%              (397.5 )       9.5  %              (363.0 )
Special items, net(3)                 (23.8 )      65.3  %               (14.4 )     (96.3 )%              (393.8 )
Operating income (loss)               179.4        (9.9 )%               199.1         N/M                 (127.5 )
Other income (expense),
net(4)                                (22.4 )       N/M                   11.1        42.3  %                 7.8
Income (loss) before
income taxes              $           157.0       (25.3 )%   $           210.2         N/M      $          (119.7 )

N/M = Not meaningful (1) Financial volumes for the year ended December 31, 2016, were recast to

reflect the impacts of aligning policies on reporting financial volumes as

       a result of the Acquisition.


(2)    Includes gross inter-segment sales, purchases, and volumes, which are
       eliminated in the consolidated totals.

(3) See Part II-Item 8 Financial Statements and Supplementary Data, Note 7,

"Special Items" of the Notes for detail of special items.

(4) See Part II-Item 8 Financial Statements and Supplementary Data, Note 5,

"Other Income and Expense" of the Notes for detail of other income

(expense).



Significant events
As a result of the Acquisition, the Miller brands were added to our Canada
segment's portfolio beginning October 11, 2016. Additionally, as part of our
ongoing assessment of our Canadian supply chain network, we completed the sale
of our Vancouver brewery on March 31, 2016. In conjunction with the sale of the
brewery, we agreed to leaseback the existing property to continue operations on
an uninterrupted basis while the new brewery is being constructed. We have and
continue to incur significant capital expenditures associated with the
construction of the new brewery in Chilliwack, British Columbia, most of which
we expect to be funded with the proceeds from the sale of the Vancouver brewery.
We will also incur additional charges, including estimated accelerated
depreciation charges of approximately CAD 7 million, through final closure of
the brewery which is currently expected to occur in the third quarter of 2019.
The remaining costs of leasing the existing facility through the estimated
closure date will be approximately CAD 4 million which are not included within
special items.
In further efforts to help optimize the Canada brewery network, in the third
quarter of 2017 we announced a plan to build a more efficient and flexible
brewery in the greater Montreal area. As a result of this decision, we have
begun to develop plans to transition out of our existing Montreal brewery,
including the acquisition of land in Longueuil, Quebec. We are also actively
negotiating the sale of the existing brewery location and are targeting
completion of the sale in the second quarter of 2019. The brewery continues to
be operational, and as part of the sale, we anticipate leasing back the property
for continued use until the new brewery is operational, which is currently
expected to occur in 2021. Accordingly, we incurred accelerated depreciation
charges associated with the existing brewery closure starting in the second half
of 2017, of which the amount in excess of normal depreciation is recorded within
special items. We expect to incur additional charges, including estimated
accelerated depreciation charges in excess of normal depreciation of
approximately CAD 65 million, through final closure of the brewery. However, due
to the uncertainty inherent in our estimates, these estimated future accelerated
depreciation charges, as well as the timing of the brewery closure, are subject
to change.
During 2016, we recorded an aggregate impairment charge to the Molson core brand
intangible asset within special items and subsequently reclassified the brands
from indefinite to definite-lived, resulting in increased amortization expense
of intangible assets for 2017 compared to 2016.

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Foreign currency impact on results
During 2018, the CAD depreciated versus the USD on an average basis, resulting
in a decrease of $4.3 million to our 2018 USD earnings before income taxes.
During 2017, the CAD appreciated versus the USD on an average basis, resulting
in an increase of $5.1 million to our 2017 USD earnings before income taxes.
Included in these amounts are both translational and transactional impacts of
changes in foreign exchange rates. The impact of transactional foreign currency
gains and losses is recorded within other income (expense) in our consolidated
statements of operations.
Volume and net sales
Our Canada brand volume decreased 2.2% in 2018 compared to 2017, as a result of
volume decline in the West and Ontario, partially offset by growth in Quebec.
Net sales per hectoliter on a brand volume basis decreased 2.6% in local
currency in 2018 compared to 2017, driven by the impacts resulting from the
adoption of the new accounting pronouncement related to revenue recognition,
which requires certain cash payments to customers to now be recognized as a
reduction of revenue versus marketing, general and administrative expense, and
unfavorable brand mix. Net sales per hectoliter on a reported basis in local
currency decreased 1.6% in 2018 compared to 2017.
Brand volume decreased 0.5% in 2017 compared to 2016, primarily as a result of
lower domestic volumes, partially offset by the addition of the Miller brands as
a result of the Acquisition. Net sales per hectoliter on a brand volume basis
increased 1.6% in local currency in 2017 compared to 2016, driven by positive
pricing and sales mix. Net sales per hectoliter on a reported basis in local
currency increased 2.2% in 2017 compared to 2016.
Cost of goods sold
Cost of goods sold per hectoliter in local currency increased 2.9% in 2018
compared to 2017, driven by input cost inflation, volume deleverage, and supply
chain transformation investments, partially offset by distribution gains and
cost savings. Additionally, for 2018 we recorded $0.5 million of integration
costs related to the Acquisition within cost of goods sold.
Cost of goods sold per hectoliter in local currency increased 6.2% in 2017
compared to 2016, due to sales mix shift to higher cost products, impacts of
volume deleverage, higher inflation and unfavorable transactional foreign
currency impacts, partially offset by ongoing cost saving initiatives.
Additionally, for 2017 we recorded $4.1 million of integration costs related to
the Acquisition within cost of goods sold.
Marketing, general and administrative expenses
Marketing, general and administrative expenses decreased 14.1% in local currency
in 2018 compared to 2017, primarily driven by impacts resulting from the
adoption of the new accounting pronouncement related to revenue recognition as
further discussed above and lower brand investments.
Marketing, general and administrative expenses increased 7.6% in local currency
in 2017 compared to 2016, primarily driven by higher brand amortization in 2017,
partially offset by lower bad debt expense, and spending reductions.
Other income (expense), net
Other expense of $22.4 million in 2018 was primarily driven by charges related
to unrealized mark-to-market losses on warrants issued in connection with the
formation of the Truss joint venture, as further detailed in   Note 16,
"Derivative Instruments and Hedging Activities."


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Europe Segment
                                                             For the years ended
                           December 31, 2018      Change      December 31, 2017      Change      December 31, 2016
                                                      (In millions, except percentages)
Financial volume in
hectoliters(1)(2)(3)                 23.772         2.1  %              23.290         3.1  %              22.590
Sales(3)                  $         3,088.6         6.9  %   $         2,888.3         4.0  %   $         2,778.1
Excise taxes                       (1,086.0 )      14.6  %              (947.6 )      (6.9 )%            (1,017.9 )
Net sales(3)                        2,002.6         3.2  %             1,940.7        10.3  %             1,760.2
Cost of goods sold                 (1,269.4 )       8.1  %            (1,174.4 )       4.5  %            (1,123.5 )
Gross profit                          733.2        (4.3 )%               766.3        20.4  %               636.7
Marketing, general and
administrative expenses              (534.6 )       0.8  %              (530.3 )       3.7  %              (511.4 )
Special items, net(4)                  (6.0 )      20.0  %                (5.0 )       N/M                   (0.6 )
Operating income (loss)               192.6       (16.6 )%               231.0        85.2  %               124.7
Interest income
(expense), net                         (5.1 )       N/M                    3.6           -  %                 3.6
Other income (expense),
net                                    (1.1 )       N/M                    0.3       (96.8 )%                 9.3
Income (loss) before
income taxes              $           186.4       (20.6 )%   $           234.9        70.7  %   $           137.6

N/M = Not meaningful (1) Financial volumes for the year ended December 31, 2016, were recast to

reflect the impacts of aligning policies on reporting financial volumes as

       a result of the Acquisition.


(2)    Excludes royalty volume of 1.787 million hectoliters, 1.694 million
       hectoliters and 0.194 million hectoliters for 2018, 2017 and 2016,
       respectively.


(3)    Includes gross inter-segment sales and volumes, which are eliminated in
       the consolidated totals.

(4) See Part II-Item 8 Financial Statements and Supplementary Data, Note 7,

"Special Items" of the Notes for detail of special items.



Significant events
The U.K. is expected to leave the European Union on March 29, 2019. However, the
proposed withdrawal agreement was rejected by the U.K. Parliament on November
14, 2018, and January 15, 2019. As a result, the terms of the withdrawal remain
unknown, which subjects our Europe segment to regulatory and market uncertainty
in the U.K. and in the rest of Europe. See Part I-Item 1A Risk Factors under
"Risks Specific to the Europe Segment" for further discussion of the risks
specific to the U.K.'s proposed exit from the EU.
In January 2018, the Europe segment completed the acquisition of Aspall Cyder
Limited, an established premium cider business in the U.K.
As a result of the Acquisition, the Miller brands were added to our Europe
segment's portfolio beginning October 11, 2016, and effective January 1, 2017,
European markets including Sweden, Spain, Germany, Ukraine and Russia, which
were previously reported under our International segment, are reported within
our Europe segment.
As part of our continued strategic review of our European supply chain network,
during the fourth quarter of 2015, we announced the planned closure of the
Burton South brewery in the U.K. Since 2015, we incurred charges consisting
primarily of accelerated depreciation in excess of normal depreciation related
to the Burton South brewery which closed during the first quarter of 2018.
Production has been consolidated within our recently modernized Burton North
brewery. We may recognize other charges or benefits related to brewery closures,
which cannot currently be estimated and will be recorded within special items.
In the first quarter of 2017, the largest food and retail company in Croatia,
Agrokor, announced that it was facing significant financial difficulties that
raised doubt about the collectibility of certain of our outstanding receivables
with its direct subsidiaries. These subsidiaries are customers of ours within
the Europe segment and, therefore, we have closely monitored the situation. As a
result, we recorded a provision for an estimate of uncollectible receivables
during 2017. We have subsequently reduced this exposure and as of December 31,
2018, our estimated provision of uncollectible receivables from Agrokor totals

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approximately $3 million. The settlement plan related to this matter was
approved in October 2018, and did not have a significant impact on our financial
statements.
During the first quarter of 2017, we released an indirect tax loss contingency
which was initially recorded in the fourth quarter of 2016, for a benefit of
approximately $50 million within the excise taxes line item on the consolidated
statement of operations. See Part II-Item 8 Financial Statements and
Supplementary Data,   Note 18, "Commitments and Contingencies"   of the Notes
for further discussion.
Foreign currency impact on results
Our Europe segment operates in numerous countries within Europe, and each
country's operations utilize distinct currencies. During 2018, foreign currency
movements unfavorably impacted our Europe USD income before income taxes by $2.8
million. During 2017, foreign currency movements unfavorably impacted our Europe
USD income before income taxes by $7.5 million. Included in these amounts are
both translational and transactional impacts of changes in foreign exchange
rates. The impact of transactional foreign currency gains and losses is recorded
within other income (expense) in our consolidated statements of operations.
Volume and net sales
Our Europe brand volume increased 2.2% in 2018 compared to 2017, primarily
driven by growth from our above premium and core brand performance.
Net sales per hectoliter on a brand volume basis decreased 3.4% in local
currency in 2018 compared to 2017, primarily driven by the negative impact of
cycling the release of the approximate $50 million indirect tax provision in the
first quarter of 2017, negative pricing due to the impact of adopting recently
revised excise-tax guidelines in one of our European markets, and increasing our
investment behind our First Choice Agenda this year. Net sales per hectoliter on
a reported basis in local currency decreased 2.1% in 2018 compared to 2017.
Brand volume increased 10.3% in 2017 compared to 2016, 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 growth from our above
premium brands.
Net sales per hectoliter on a brand volume basis increased 4.9% in local
currency in 2017 compared to 2016, primarily driven by the indirect tax
provision of approximately $50 million recorded in the fourth quarter of 2016
and subsequently released in the first quarter of 2017 and the addition of
royalty and export brand volumes, including the impact of Miller brands. Net
sales per hectoliter on a reported basis in local currency increased 9.0% in
2017 compared to 2016.
Cost of goods sold
Cost of goods sold per hectoliter increased 2.3% in local currency in 2018
compared to 2017, primarily due to input inflation and mix shift to higher-cost
brands and geographies. Additionally, we recorded $0.6 million of integration
costs related to the Acquisition within cost of goods sold in 2018.
Cost of goods sold per hectoliter increased 3.4% in local currency in 2017
compared to 2016, primarily driven by mix shift to higher cost brands and
geographies. Additionally, we have recorded $0.6 million of integration costs
related to the Acquisition within cost of goods sold in 2017.
Marketing, general and administrative expenses
Marketing, general and administrative expenses decreased 3.3% in local currency
in 2018 compared to 2017, driven by more efficient marketing investments and the
impacts resulting from the adoption of the new accounting pronouncement related
to revenue recognition and a positive impact from cycling a bad debt provision
booked in 2017, partially offset by the addition of Aspall brand investments.
Marketing, general and administrative expenses increased 4.9% in local currency
in 2017 compared to 2016, driven by higher brand investments and general and
administrative costs, including increased amortization related to the Miller
brand portfolio, and recognition of the previously mentioned provision for
uncollectible receivables.

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International Segment
                                                               For the years ended
                             December 31, 2018      Change      December 31, 2017      Change      December 31, 2016
                                                        (In millions, except percentages)
Financial volume in
hectoliters(1)(2)                       2.214        (7.5 )%               2.394        60.1  %               1.495
Sales                       $           299.5        (0.5 )%   $           300.9        57.5  %   $           191.0
Excise taxes                            (49.4 )      33.9  %               (36.9 )      34.7  %               (27.4 )
Net sales                               250.1        (5.3 )%               264.0        61.4  %               163.6
Cost of goods sold(3)                  (160.4 )     (11.1 )%              (180.5 )      68.5  %              (107.1 )
Gross profit                             89.7         7.4  %                83.5        47.8  %                56.5
Marketing, general and
administrative expenses                 (81.6 )     (19.8 )%              (101.7 )      56.0  %               (65.2 )
Special items, net(4)                    (9.3 )       N/M                   (1.6 )     (94.9 )%               (31.1 )
Operating income (loss)                  (1.2 )     (93.9 )%               (19.8 )     (50.3 )%               (39.8 )
Other income (expense), net              (1.5 )       N/M                    0.1       (50.0 )%                 0.2
Income (loss) before income
taxes                       $            (2.7 )     (86.3 )%   $           (19.7 )     (50.3 )%   $           (39.6 )

N/M = Not meaningful (1) Financial volumes for the year ended December 31, 2016, were recast to

reflect the impacts of aligning policies on reporting financial volumes as

       a result of the Acquisition.


(2)    Excludes royalty volume of 2.267 million hectoliters, 1.991 million
       hectoliters and 1.908 million hectoliters in 2018, 2017 and 2016,
       respectively.


(3)    Includes gross inter-segment purchases, which are eliminated in the
       consolidated totals.

(4) See Part II-Item 8 Financial Statements and Supplementary Data, Note 7,

"Special Items" of the Notes for detail of special items.



Significant events
During the first half of 2018, we decided to formally exit our business in China
and, as such, have incurred special charges. See Part II-Item 8 Financial
Statements and Supplementary Data,   Note 7, "Special Items"   of the Notes for
further detail.
As a result of the Acquisition, the Miller brands were added to our
International segment's portfolio beginning October 11, 2016. Additionally, as a
result of the Acquisition, effective January 1, 2017, European markets including
Sweden, Spain, Germany, Ukraine and Russia, which were previously reported as
part of our International segment, are reported within our Europe segment while
the results of the MillerCoors Puerto Rico business, which were previously
included as part of the U.S. segment, are reported within the International
segment.
On April 5, 2016, the government of the state of Bihar implemented a complete
prohibition of the sale and consumption of all forms of alcohol. As a result of
this ban, our Molson Coors Cobra India business is currently not operating. This
ban does not impact the rest of our business in India outside of the state of
Bihar. As a result, we recorded an aggregate impairment charge of $30.8 million
within special items during the second quarter of 2016. We continue to monitor
legal proceedings impacting the regulatory environment as it relates to our
ability to resume operations in the state.
Foreign currency impact on results
Our International segment operates in numerous countries around the world and
each country's operations utilize distinct currencies. Foreign currency
movements unfavorably impacted our International USD loss before income taxes by
$3.2 million for 2018 and favorably impacted our International USD loss before
income taxes by $0.2 million for 2017. Included in these amounts are both
translational and transactional impacts of changes in foreign exchange rates.
The impact of transactional foreign currency gains and losses is recorded within
other income (expense) in our consolidated statements of operations.
Volume and net sales
Our International brand volume increased 2.2% in 2018 compared to 2017, driven
by organic volume growth in many of our focus markets, partially offset by lower
volumes in Mexico due to higher net pricing and the loss of the Modelo contract
in

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Japan at the end of the second quarter of 2017. Our International financial
volume decreased 7.5% in 2018 compared to 2017, driven by shifting to local
third party production in Mexico, which increased our royalty volume.
Net sales per hectoliter on a brand volume basis decreased 7.3% in 2018 compared
to 2017, primarily driven by sales mix changes and shifting to local production
in Mexico, partially offset by positive net pricing. Net sales per hectoliter on
a reported basis increased 2.4% in 2018 compared to 2017 due to changes in sales
mix.
Brand volume increased 28.9% in 2017 compared to 2016, driven by the change in
segment reporting of the Puerto Rico business from the U.S. segment, Coors Light
growth primarily in Latin America and the addition of the Miller brands
partially offset by the transfer of royalty and export brand volume to Europe.
Net sales per hectoliter on a brand volume basis increased 25.2% in 2017
compared to 2016, primarily due to sales mix changes and positive pricing. Net
sales per hectoliter on a reported basis increased 0.8% in 2017 compared to
2016, driven by positive net pricing and favorable sales mix.
Cost of goods sold
Cost of goods sold per hectoliter decreased 3.9% in 2018 compared to 2017,
primarily driven by sales mix changes. Additionally, during 2018 we recorded
$1.0 million of integration costs related to the Acquisition within cost of
goods sold.

Cost of goods sold per hectoliter increased 5.2% in 2017 compared to 2016,
primarily driven by sales mix changes. Additionally, during 2017 we recorded
$3.6 million of integration costs related to the Acquisition within cost of
goods sold.
Marketing, general and administrative expenses
Marketing, general and administrative expenses decreased 19.8% in 2018 compared
to 2017, primarily due to lower marketing investments, overhead, and integration
costs as well as $2.0 million of settlement proceeds related to our Colombia
business in the first quarter of 2018. During 2018, we recorded $1.8 million of
integration costs related to the Acquisition within marketing, general and
administrative expenses.
Marketing, general and administrative expenses increased 56.0% in 2017 compared
to 2016, primarily due to higher organization and integration costs related to
the acquisition of the Miller global brands, along with increased brand
investments, including higher brand amortization costs. During 2017, we recorded
$8.4 million of integration costs related to the Acquisition within marketing,
general and administrative expenses.

Corporate Segment
                                                               For the years ended
                             December 31, 2018      Change      December 31, 2017      Change      December 31, 2016
                                                        (In millions, except percentages)
Financial volume in
hectoliters                                 -           -  %                   -           -  %                   -
Sales                       $             0.8       (11.1 )%   $             0.9       (10.0 )%   $             1.0
Excise taxes                                -           -  %                   -           -  %                   -
Net sales                                 0.8       (11.1 )%                 0.9       (10.0 )%                 1.0
Cost of goods sold                     (166.4 )       N/M                  122.9         N/M                   22.9
Gross profit                           (165.6 )       N/M                  123.8         N/M                   23.9
Marketing, general and
administrative expenses                (213.3 )     (11.1 )%              (239.8 )       6.4  %              (225.3 )
Special items, net(1)                   326.6         N/M                   (0.1 )     (85.7 )%                (0.7 )
Operating income (loss)                 (52.3 )     (55.0 )%              (116.1 )     (42.6 )%              (202.1 )
Interest expense, net                  (301.9 )     (16.1 )%              (360.0 )      45.2  %              (248.0 )
Other pension and
postretirement benefits
(costs), net                             38.2       (19.4 )%                47.4         N/M                    8.4
Other income (expense), net              14.4         N/M                   (7.7 )     (84.8 )%               (50.5 )
Income (loss) before income
taxes                       $          (301.6 )     (30.9 )%   $          (436.4 )     (11.3 )%   $          (492.2 )


N/M = Not meaningful

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(1) See Part II-Item 8 Financial Statements and Supplementary Data, Note 7,

"Special Items" of the Notes for detail of special items.



Significant events
In connection with the Acquisition, we have incurred, and will continue to
incur, various transaction and integration costs as further discussed below. See
Part II-Item 8 Financial Statements and Supplementary Data,   Note 4,
"Acquisition and Investments"   of the Notes for further details.
Cost of goods sold
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. Cost of goods sold for the year ended
December 31, 2018, include unrealized mark-to-market losses of $166.2 million,
and cost of goods sold for the years ended December 31, 2017, and December 31,
2016, include unrealized mark-to-market gains of $123.3 million and $23.1
million, respectively, on these commodity swaps. Lower commodity market prices
relative to our hedged positions on our commodity swaps drove the total
unrealized mark-to-market loss in 2018. The total gain recognized in 2017 was
primarily driven by higher commodity prices during the year versus 2016.
Marketing, general and administrative expenses
Marketing, general and administrative expenses decreased in 2018 compared to
2017, primarily due to the timing of corporate general and administrative costs,
lower employee-related expenses, and higher integration costs related to the
Acquisition recognized in the prior year, partially offset by incremental
investment behind global business capabilities including information technology
investments. During 2018 we recorded $36.9 million of integration costs related
to the Acquisition within marketing, general and administrative expenses.
Marketing, general and administrative expenses increased in 2017 compared to
2016, primarily due to incremental investment behind global business
capabilities including higher compensation expense, partially offset by higher
acquisition-related costs recognized in 2016. Specifically, during 2017 we
recorded $57.1 million within marketing, general and administrative expenses
related the Acquisition, compared to $108.4 million in 2016.
Interest expense, net
Net interest expense decreased in 2018 compared to 2017, primarily driven by
debt repayments. Net interest expense increased in 2017 compared to 2016,
primarily driven by incremental interest incurred on debt issued to partially
fund the Acquisition. See Part II-Item 8 Financial Statements and Supplementary
Data,   Note 16, "Derivative Instruments and Hedging Activities"   and   Note
11, "Debt"   for further details.
Other income (expense), net
Net other income in 2018 compared to net other expense in 2017 was primarily
driven by an $11.7 million gain recorded on the sale of a non-operating asset in
2018. Net other expense decreased from 2017 compared to 2016, primarily driven
by financing costs incurred in 2016 on our bridge loan of approximately $63
million partially offset by the $20.5 million gain on the sale of non-operating
assets as well as unrealized gains on foreign currency forwards which are
economic hedges entered into during the second quarter of 2016 in connection
with the issuance of debt on July 7, 2016.
See Part II-Item 8 Financial Statements and Supplementary Data,   Note 5, "Other
Income and Expense"   of the Notes for further discussion of other income
(expense) amounts and   Note 15, "Employee Retirement Plans and Postretirement
Benefits"   for discussion of changes in pension and postretirement benefits
(costs) as all non-service cost components of pension and postretirement
benefits (costs) are now reported within Corporate.
Liquidity and Capital Resources
Our primary sources of liquidity include cash provided by operating activities
and access to external capital. We believe that cash flows from operations and
cash provided by short-term and long-term borrowings, when necessary, will be
more than adequate to meet our ongoing operating requirements, scheduled
principal and interest payments on debt, anticipated dividend payments and
capital expenditures for the next twelve months, and our long-term liquidity
requirements.
A significant portion of our trade receivables are concentrated in Europe. While
these receivables are not concentrated in any specific customer and our
allowance on these receivables factors in collectibility, we may encounter
difficulties in our ability to collect due to the impact to our customers of any
further economic downturn within Europe.

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A significant portion of our cash flows from operating activities is generated
outside the U.S., in currencies other than USD. As of December 31, 2018,
approximately 47% of our cash and cash equivalents were located outside the
U.S., largely denominated in foreign currencies. We accrue for tax consequences
on the earnings of our foreign subsidiaries upon repatriation. When the earnings
are considered indefinitely reinvested outside of the U.S., we do not accrue
taxes. However, we continue to assess the impact of the 2017 Tax Act on the tax
consequences of future repatriations. We utilize a variety of tax planning and
financing strategies in an effort to ensure that our worldwide cash is available
in the locations in which it is needed. We periodically review and evaluate
these strategies, including external committed and non-committed credit
agreements accessible by MCBC and each of our operating subsidiaries. We believe
these financing arrangements, along with the cash generated from the operations
of our U.S. segment, are sufficient to fund our current cash needs in the U.S.
Cash Flows and Use of Cash
Our business generates positive operating cash flow each year, and our debt
maturities are of a longer-term nature. However, our liquidity could be impacted
significantly by the risk factors described in Part I, Item 1A. Risk Factors.
Cash Flows from Operating activities
Net cash provided by operating activities of approximately $2.3 billion in 2018,
increased by $465.0 million compared to 2017. This increase was driven by the
proceeds received during the first quarter of $328.0 million related to the
Adjustment Amount as defined and further discussed in Part II-Item 8 Financial
Statements and Supplementary Data,   Note 4, "Acquisition and Investments"  

of

the Notes, lower pension contributions and interest paid, partially offset by
unfavorable changes in working capital and lower cash tax receipts.
Net cash provided by operating activities of approximately $1.9 billion in 2017
increased by $739.4 million compared to 2016. This increase is primarily related
to the addition of the consolidated U.S. business, lower cash paid for taxes
(refund in 2017 as compared to cash tax paid in 2016) and working capital
improvements, partially offset by higher pension contributions including the
discretionary cash contribution of $200 million to the U.S. pension plan and
higher cash paid for interest.
Cash Flows from Investing activities
Net cash used in investing activities of $669.1 million in 2018, increased by
$130.9 million compared to 2017 primarily due to higher capital expenditures,
increased outflows from other investing activities, including acquisitions, as
well as lower proceeds related to asset disposals.
Net cash used in investing activities of $538.2 million in 2017 decreased by
approximately $11.7 billion compared to 2016 driven primarily by the completion
of the Acquisition in 2016 for $12.0 billion, offset by higher capital
expenditures in 2017 resulting from the Acquisition.
Cash Flows from Financing activities
Net cash used in financing activities of approximately $1.0 billion in 2018,
decreased by $487.5 million from net cash used in financing activities of
approximately $1.5 billion in 2017. This decrease was primarily driven by lower
net repayments on debt and borrowings in 2018 compared to 2017, partially offset
by the repayment of borrowings under our commercial paper program in 2018
compared to an increase in borrowings under our commercial paper program in the
prior year.
Net cash used in financing activities of approximately $1.5 billion in 2017,
decreased by approximately $12.8 billion from net cash provided by financing
activities of approximately $11.3 billion in 2016. This change was primarily
driven by the approximate $2.5 billion of net proceeds received from our
February 3, 2016, equity offering of 29.9 million shares of our Class B common
stock, the approximate $6.9 billion of net proceeds from the issuance of debt on
July 7, 2016, to partially fund the Acquisition in 2016, as well as increased
net repayments of debt as we began to deleverage in 2017. See "Borrowings" below
for more details on financing activity.
See Part II-Item 8 Financial Statements and Supplementary Data,   Note 11,
"Debt"   of the Notes for a summary of our financing activities and debt
position as of December 31, 2018, and December 31, 2017.
Capital Resources
Cash and Cash Equivalents
As of December 31, 2018, we had total cash and cash equivalents of approximately
$1.1 billion, compared to $418.6 million as of December 31, 2017. The increase
in cash and cash equivalents as of December 31, 2018, from December 31, 2017,
was primarily driven by the net proceeds from operating activities including the
proceeds received during the first quarter of $328.0 million related to the
Adjustment Amount as defined and further discussed in Part II-Item 8 Financial
Statements and Supplementary Data,   Note 4, "Acquisition and Investments"  

of

the Notes, partially offset by repayments of borrowings,

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capital expenditures and dividend payments. The majority of our cash and cash
equivalents are invested in a variety of highly liquid investments with original
maturities of 90 days or less. These investments are viewed by management as
low-risk investments on which there are little to no restrictions regarding our
ability to access the underlying cash to fund our operations as necessary. While
we have some investments in prime money market funds, these are classified as
cash and cash equivalents; however, we continually monitor the need for
reclassification under the updated SEC requirements for money market funds, and
the potential that the shares of such funds could have a net asset value of less
than one dollar. We also utilize cash pooling arrangements to facilitate the
access to cash across our geographies.
Working Capital
The Company actively manages working capital through inventory management as
well as management of accounts payable and accounts receivable to ensure we are
able to meet short-term obligations and we are effectively using assets to
increase profitability.
Borrowings
During the third quarter of 2018, we repaid our CAD 400 million 2.25% notes
which matured in September 2018. Notional amounts are presented in USD based on
the applicable exchange rate as of December 31, 2018. Refer to Part II-Item 8
Financial Statements and Supplementary Data,   Note 11, "Debt"   for details
regarding the cross currency swaps on our $500 million 2.25% senior notes due
2020 which economically converted these notes to EUR denominated.

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                [[Image Removed: chart-35bc352e379c5ba9a78.jpg]]
Based on the credit profile of our lenders that are party to our credit
facilities, we are confident in our ability to draw on our revolving credit
facility if the need arises. We had no borrowings on our $1.5 billion revolving
credit facility as of December 31, 2018. During the third quarter of 2018, we
extended the maturity date of our revolving credit facility by one year to July
7, 2023. In addition, we intend to further utilize our cross-border,
cross-currency cash pool as well as our commercial paper program for liquidity
as needed. We also have JPY overdraft facilities, CAD, GBP and USD lines of
credit with several banks should we need additional short-term liquidity.
Under the terms of each of our debt facilities, we must comply with certain
restrictions. These include restrictions on priority indebtedness (certain
threshold percentages of secured consolidated net tangible assets), leverage
thresholds, liens, and restrictions on certain types of sale lease-back
transactions and transfers of assets. Additionally, under the $1.5 billion
revolving credit facility, the maximum leverage ratio is 4.75x debt to EBITDA,
with a decline to 4.00x debt to EBITDA as of the last day of the fiscal quarter
ending December 31, 2020. As of December 31, 2018, and December 31, 2017, we
were in compliance with all of these restrictions, have met such financial
ratios and have met all debt payment obligations. All of our outstanding senior
notes as of December 31, 2018, rank pari-passu.
See Part II-Item 8 Financial Statements and Supplementary Data,   Note 11,
"Debt"   of the Notes for a complete discussion and presentation of all
borrowings and available sources of borrowing, including lines of credit.
Credit Rating
Our current long-term credit ratings are BBB-/Stable Outlook, Baa3/Stable
Outlook and BBB(Low)/Stable Outlook with Standard and Poor's, Moody's and DBRS,
respectively. Our short-term credit ratings are A-3, Prime-3 and R-2(low),
respectively. A securities rating is not a recommendation to buy, sell or hold
securities, and it may be revised or withdrawn at any time by the rating agency.
Foreign Exchange
Foreign exchange risk is inherent in our operations primarily due to the
significant operating results that are denominated in currencies other than USD.
Our approach is to reduce the volatility of cash flows and reported earnings
which result from

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currency fluctuations rather than business related factors. Therefore, we
closely monitor our operations in each country and seek to adopt appropriate
strategies that are responsive to foreign currency fluctuations. Our financial
risk management policy is intended to offset a portion of the potentially
unfavorable impact of exchange rate changes on net income and earnings per
share. See Part II-Item 8 Financial Statements and Supplementary Data,   Note
16, "Derivative Instruments and Hedging Activities"   of the Notes for
additional information on our financial risk management strategies.
Our consolidated financial statements are presented in USD, which is our
reporting currency. Assets and liabilities recorded in foreign currencies that
are the functional currencies for the respective operations are translated at
the prevailing exchange rate at the balance sheet date. Translation adjustments
resulting from this process are reported as a separate component of other
comprehensive income. Revenue and expenses are translated at the average
exchange rates during the period. Gains and losses from foreign currency
transactions are included in earnings for the period. The significant exchange
rates to the USD used in the preparation of our consolidated financial results
for the primary foreign currencies used in our foreign operations (functional
currency) are as follows:
                                                          For the years ended
                                     December 31, 2018     December 31, 2017     December 31, 2016
Weighted-Average Exchange Rate (1
USD equals)
Canadian dollar (CAD)                            1.30                  1.27                  1.32
Euro (EUR)                                       0.84                  0.88                  0.90
British pound (GBP)                              0.77                  0.77                  0.75
Czech Koruna (CZK)                              21.93                 23.43                 24.61
Croatian Kuna (HRK)                              6.32                  6.59                  6.78
Serbian Dinar (RSD)                             99.74                112.49                110.81
Romanian Leu (RON)                               4.00                  4.01                  4.05
Bulgarian Lev (BGN)                              1.67                  1.72                  1.77
Hungarian Forint (HUF)                         267.65                276.49                258.13


                                                      As of
                                     December 31, 2018    December 31, 2017
Closing Exchange Rate (1 USD equals)
Canadian dollar (CAD)                             1.36                 1.26
Euro (EUR)                                        0.87                 0.83
British pound (GBP)                               0.78                 0.74
Czech Koruna (CZK)                               22.43                21.29
Croatian Kuna (HRK)                               6.46                 6.19
Serbian Dinar (RSD)                             103.20                98.52
Romanian Leu (RON)                                4.06                 3.89
Bulgarian Lev (BGN)                               1.71                 1.63
Hungarian Forint (HUF)                          279.94               258.91


The weighted-average exchange rates in the above table have been calculated
based on the average of the foreign exchange rates during the relevant period
and have been weighted according to the foreign denominated earnings from
operations of the USD equivalent. If foreign currencies in the countries in
which we operate devalue significantly in future periods, most significantly the
CAD and European operating currencies included in the above table, then the
impact on USD reported earnings may be material.
Capital Expenditures
In 2018, we incurred $643.2 million, and have paid $651.7 million, for capital
improvement projects worldwide, excluding capital spending by equity method
joint ventures, representing an approximate 2% increase versus 2017 capital
expenditures incurred of $628.4 million. This increase is primarily due to
capital expenditures associated with the construction of our new Chilliwack,
British Columbia brewery, expected to be finalized in the third quarter of 2019,
and Longueuil, Quebec brewery.

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We continue to focus on where and how we employ our planned capital
expenditures, specifically strengthening our focus on required returns on
invested capital as we determine how to best allocate cash within the business.
Contractual Obligations and Commercial Commitments
Contractual Obligations
A summary of our consolidated contractual obligations as of December 31, 2018,
based on foreign exchange rates as of December 31, 2018, is as follows:
                                                      Payments due by period
                                         Less than 1                                         More than 5
                            Total           year          1 - 3 years       3 - 5 years         years
                                                           (In millions)
Debt obligations         $ 10,540.0$   1,595.2$     1,866.6$       866.6$    6,211.6
Interest payments on
debt obligations            4,284.5           297.1             542.9             458.9          2,985.6
Retirement plan
expenditures(1)               447.8            51.4              90.6              89.5            216.3
Operating leases              184.8            49.4              72.8              41.6             21.0
Capital leases                124.1             6.1              42.1              11.7             64.2
Other long-term
obligations(2)              2,592.6           694.4           1,081.8             657.0            159.4
Total obligations        $ 18,173.8$   2,693.6$     3,696.8     $

2,125.3 $ 9,658.1

See Part II - Item 8 Financial Statements and Supplementary Data, Note 11, "Debt" , Note 15, "Employee Retirement Plans and Postretirement Benefits,"

Note 16, "Derivative Instruments and Hedging Activities" and Note 18, "Commitments and Contingencies" of the Notes for additional information. (1) Represents expected contributions under our defined benefit pension plans

in the next twelve months and our benefit payments under postretirement

benefit plans for all periods presented. The net underfunded liability as

of December 31, 2018, of our defined benefit pension plans (excluding our

overfunded plans) and postretirement benefit plans is $104.1 million and

$672.1 million, respectively. Defined benefit pension plan contributions

in future years will vary based on a number of factors, including actual

plan asset returns and interest rates, and as such, have been excluded

from the above table. We fund pension plans to meet the requirements set

forth in applicable employee benefits laws. We may also voluntarily

increase funding levels to meet financial goals. Excluding BRI and BDL, in

2019, we expect to make contributions to our defined benefit pension plans

of approximately $6 million and benefit payments under our OPEB plans of

approximately $45 million, based on foreign exchange rates as of

December 31, 2018.



Our U.K. pension plan is subject to a statutory valuation for funding purposes
every three years. The most recent valuation as of June 30, 2016, resulted in a
long-term funding commitment plan consisting of MCBC contributions to the plan
of a GBP 60 million lump-sum contribution in early 2020 and incremental GBP 25.7
million annual contributions from 2020 through 2026, which are excluded from the
above table.
We have taken numerous steps to reduce our exposure to these long-term pension
obligations, including the closure of the U.K. pension plan in early 2009 to
future earning of service credit, benefit modifications in several of our Canada
plans and entering into partial buy-out contracts for some of our plans.
However, given the net liability of our underfunded plans and their dependence
upon the global financial markets for their financial health, the plans may
continue to periodically require potentially significant amounts of cash
funding.
(2)    Primarily includes non-cancelable purchase commitments as of December 31,

2018, that are enforceable and legally binding. Approximately $1.7 billion

of the total other long-term obligations relate to long-term supply

contracts with third parties to purchase raw material, packaging material

and energy used in production. Our aggregate commitments for advertising

       and promotions, including sports sponsorship, total approximately $486
       million. The remaining amounts relate to derivative payments, sales and

marketing, distribution, information technology services, open purchase

orders and other commitments. Included in other long-term obligations are

$6.1 million of unrecognized tax benefits, excluding positions we would

expect to settle using deferred tax assets, and $10.5 million of

indemnities provided to FEMSA for which we cannot reasonably estimate the

timing of future cash flows, and we have therefore included these amounts

       in the more than 5 years column.



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Guarantees

We guarantee indebtedness and other obligations to banks and other third parties
for some of our equity method investments and consolidated subsidiaries. See
Part II-Item 8 Financial Statements and Supplementary Data,   Note 18,
"Commitments and Contingencies"   of the Notes for further discussion.
Other Commercial Commitments
Based on foreign exchange rates as of December 31, 2018, future commercial
commitments are as follows:
                                                   Amount of commitment expiration per period
                          Total amounts                                                                  More than 5
                            committed       Less than 1 year       1 - 3 years        3 - 5 years           years
                                                                 (In millions)
Standby letters of credit $      64.5     $             48.8     $        15.7     $             -     $           -



Contingencies

We are party to various legal proceedings arising in the ordinary course of business, environmental litigation and indemnities associated with our sale of Kaiser to FEMSA. See Part II-Item 8 Financial Statements and Supplementary Data,

  Note 18, "Commitments and Contingencies"   of the Notes for further
discussion.
Off-Balance Sheet Arrangements
In accordance with U.S. GAAP, our operating leases are not reflected in our
consolidated balance sheets. See Part II-Item 8 Financial Statements,   Note 18,
"Commitments and Contingencies"   of the Notes for further discussion of these
off-balance sheet arrangements. As of December 31, 2018, we did not have any
other material off-balance sheet arrangements (as defined in Item 303(a)(4)(ii)
of Regulation S-K).
Outlook for 2019
In the U.S., Miller Lite continues its strong segment trend while Coors Light's
relative performance improved with the brand holding share of segment in the
fourth quarter of 2018. In 2019, we have plans to accelerate our above premium
portfolio through higher investment. We plan to double our media spend on Blue
Moon, the number one national craft brand, air national advertising for Peroni
for the first time, build on a very successful year-one for both Arnold Palmer
Spiked Half and Half and Sol, increase the presence of Henry's Hard in the fast
growing hard seltzer category, focusing on the brand's clear product
differentiators of zero sugar and only 88 calories and introduce a number of
innovations, including Cape Line, Saint Archer Gold, Crispin extensions and Sol
Chelada - all before this summer. Our U.S. business enters 2019 having further
strengthened its position as the trusted category captain across chain accounts
in both the off- and on-premise channels and more broadly our customer
excellence performance is market leading and improving further, as evidenced by
the Advantage Survey results. Additionally, allied to this we have ramped up our
e-commerce approach within joint business plans and continue to build
competitive advantage through our technology enabled field sales teams with
tools such as BeerMate, which we are rolling out globally. Our new Coors Light
advertising is now on air, and we believe we are moving in the right direction
with the brand, allowing us to take even more share in premium lights. We
anticipate Coors Light will continue to emphasize its cold, Rocky Mountain
positioning as the World's Most Refreshing Beer. We expect it will also invest
more than ever on digital and social channels to engage and recruit 21-34 year
olds. Miller Lite, the original light beer with less carbs and calories, plans
to further enhance its competitive messaging to drive greater consumer affinity
and brand switching from its major competitor.

In Canada, our First Choice Commercial excellence approach and capability is
building. In terms of commercial performance, there are multiple highlights. Our
total share trend has improved three quarters in a row and Coors Light's segment
share also improved three quarters in a row, improving to flat in the fourth
quarter. Craft volume grew driven by Belgian Moon and Creemore and our
non-alcoholic portfolio of Coors Edge and Heineken 0.0 is delivering strong
volume and segment share growth. In the value segment, we delivered strong share
growth in 2018 driven by our simplified portfolio strategy and the launch of
Miller High Life. As we look at 2019 and beyond, we believe there is growth
potential from our innovation pipeline. Coors Slice, for example, is an
innovation that strengthens the Coors trademark, and we are encouraged by the
tests behind our pending introduction of Aqua-Relle, our hard sparkling water.
Our commitment to customer excellence includes the adoption of BeerMate to
strengthen field sales management and promising joint business plan pilots with
key customers. For example, a pilot with Ontario's LCBO is producing beer
category growth well in excess of the total industry performance. Our two
largest brands will benefit from new advertising, brand redesign, and innovation
in 2019. For Coors Light, we launch our new "The Mountains Are Calling" campaign
and introduce new packages, including a new chill pack in

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time for summer and the Molson trademark enters 2019 with a new brand redesign
and communication platform which we expect will unlock latent passion for the
brand. The Miller brand trademark returned to our portfolio in 2016, and we plan
to build on a very successful 2018: building awareness and distribution of
Miller High Life since its launch early last year, rolling out Miller Lite
nationally after a successful trial in Newfoundland, and adding to the success
of Miller Genuine Draft in other non-U.S. markets by expanding the brand's
availability and above premium positioning.

In Europe, our brand volumes are growing and premiumizing. Our national champion
portfolio inflected to positive volume growth last year, our global brands
continued to grow well in excess of the industry, and our above premium and
craft portfolio also contributed to growth and mix. Our First Choice for
Customer focus is also strengthening our customer relationships. For example,
according to the Advantage survey of U.K. retailers, we rate number one in the
Multiple On-Trade across all beverage suppliers. Our national champion brands in
Europe had a solid year, and we still aim for more. Our largest brand, Carling,
has just begun a major new 360 campaign, "Made Local," which started this month,
and we anticipate it will continue throughout 2019 and we believe it will
strengthen the brand's market leading position. Finally, in Europe, we are
exporting and licensing our brands to multiple new markets. We are generating
increasing profit from this business and are excited about its future because it
is low capital intensity and we believe it offers considerable room for growth.

In International, last year was year-one of our new International strategy,
targeting focus markets and implementing the many actions that have improved
profitability. These include our shift to local production in Mexico, favorable
changes in the pricing of Coors Light, Miller Genuine Draft, and Miller Lite,
accelerated growth of Blue Moon and Miller High Life, and improved performance
at retail. International's recent wins include Miller Genuine Draft capturing
leadership of Paraguay's premium segment, our new Blue Moon Tap House in Panama
which we expect to be the first of many, and strong growth across our portfolio
in Latin America and India. Looking forward, our International business will
remain committed to top- and bottom-line growth driven by continued focus on
portfolio mix improvements, building capabilities to expand within our priority
markets and potential strategic entry into new markets.
Cost Savings
We intend to deliver cost savings on our three-year cost savings program for
2017 to 2019 of approximately $700 million, including approximately $205 million
in 2019. Delivering on these savings commitments will be particularly important
given recent increases in input costs such as aluminum and fuel as well as
impacts of inflation. Our next generation cost savings program, for 2020 through
2022, is currently expected to deliver approximately $450 million over the
three-year program term and is focused around many of the same functions of the
business as the current program.
Capital Expenditures
We currently expect to incur total capital expenditures of approximately $700
million in 2019, based on foreign exchange rates as of December 31, 2018,
including capital expenditures associated with the construction of our new
British Columbia and Montreal breweries and excluding capital spending by equity
method joint ventures.
Interest
We anticipate 2019 consolidated net interest expense of approximately $300
million, based on foreign exchange and interest rates as of December 31, 2018.
Tax
We expect our effective tax rate to be in the range of 18 to 22 percent for
2019, which remains subject to additional definitive guidance from the U.S.
government regarding the implementation of the 2017 Tax Act. Our preliminary
view of our long-term effective tax rate (after 2019) is in the range of 20 to
24 percent.
Dividends and Stock Repurchases
We currently plan to maintain our current quarterly dividend of $0.41 per share
until we achieve a leverage ratio of approximately 3.75x debt to EBITDA on a
rating agency basis, which we expect to achieve around the middle of 2019. Upon
achieving approximately 3.75x leverage, our board's intention is to reinstitute
a dividend payout-ratio target in the range of 20-25% of annual trailing EBITDA
for the second half of 2019 and ongoing thereafter. We have suspended our share
repurchase program as we continue to pay down debt which we plan to revisit as
we deleverage.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP.
In connection with the preparation of our consolidated financial statements, we
are required to make judgments and estimates that significantly affect the
reported amounts of assets, liabilities, revenues and expenses and related
disclosures. Our estimates are based on historical experience,

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current trends and various other assumptions we believe to be relevant under the
circumstances. We review the underlying factors used in our estimates regularly,
including reviewing the significant accounting policies impacting the estimates,
to ensure compliance with U.S. GAAP. However, due to the uncertainty inherent in
our estimates, actual results may be materially different. We have identified
the accounting estimates below as critical to understanding and evaluating the
financial results reported in our consolidated financial statements.
For a complete description of our significant accounting policies, see
Part II-Item 8 Financial Statements and Supplementary Data,   Note 1, "Basis of
Presentation and Summary of Significant Accounting Policies"   of the Notes.
Pension and Other Postretirement Benefits
Our defined benefit pension plans cover certain current and former employees in
the U.S., Canada, the U.K. (within our Europe segment) and Japan (within our
International segment). Benefit accruals for the majority of employees in our
U.S. plan have been frozen and the plans are closed to new entrants. In the
U.S., we also participate in, and make contributions to, multi-employer pension
plans. Our OPEB plans provide medical benefits for retirees and their eligible
dependents as well as life insurance and, in some cases, dental and vision
coverage, for certain retirees in Canada, the U.S., Corporate, and Europe. The
U.S., Canada and U.K. defined benefit pension plans are primarily funded, but
the Japan plan and all OPEB plans are unfunded. We also offer defined
contribution plans in each of our segments.
Accounting for pension and OPEB plans requires that we make assumptions that
involve considerable judgment which are significant inputs in the actuarial
models that measure our net pension and OPEB obligations and ultimately impact
our earnings. These include the discount rate, long-term expected rate of return
on assets, compensation trends, inflation considerations, health care cost
trends and other assumptions, as well as determining the fair value of assets in
our funded plans. Specifically, the discount rates, as well as the expected
rates of return on assets and plan asset fair value determination, are important
assumptions used in determining the plans' funded status and annual net periodic
pension and OPEB benefit costs. We evaluate these critical assumptions at least
annually on a plan and country-specific basis. We also, with the help of
actuaries, periodically evaluate other assumptions involving demographic
factors, such as retirement age, mortality and turnover, and update them to
reflect our experience and expectations for the future. While we believe that
our assumptions are appropriate, significant differences in our actual
experience or significant changes in our assumptions may materially affect our
net pension and postretirement benefit obligations and related expense.
Discount Rates
The assumed discount rates are used to present-value future benefit obligations
based on each plan's respective estimated duration. Our pension and
postretirement discount rates are based on our annual evaluation of high quality
corporate bonds in the various markets based on appropriate indices and
actuarial guidance. We believe that our discount rate assumptions are
appropriate; however, significant changes in our assumptions may materially
affect our pension and OPEB obligations and related expense.
As of December 31, 2018, on a weighted-average basis, the discount rates used
were 3.44% for our defined benefit pension plans and 3.92% for our OPEB plans.
The change from the weighted-average discount rates of 3.01% for our defined
benefit pension plans and 3.34% for our postretirement plans as of December 31,
2017, is primarily the result of overall market changes during 2018.
A 50 basis point change in our discount rate assumptions would have had the
following effects on the projected benefit obligation balances as of
December 31, 2018, for our pension and OPEB plans:
                                                 Impact to projected benefit obligation as
                                                                    of
                                                             December 31, 2018
                                                             - 50 basis points
                                                       Decrease              Increase
                                                               (In millions)
Projected benefit obligation - unfavorable
(favorable)
Pension obligation                               $             350.0     $        (313.1 )
OPEB obligation                                                 35.4               (33.2 )
Total impact to the projected benefit obligation $             385.4     $        (346.3 )



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Our U.K. pension plan includes benefits linked to inflation. The above
sensitivity analysis does not consider the implications to inflation resulting
from the above contemplated discount rate changes. This sensitivity holds all
other assumptions constant.
Long-Term Expected Rates of Return on Assets
The assumed long-term expected return on assets is used to estimate the actual
return that will occur on each individual funded plan's respective plan assets
in the upcoming year. We determine each plan's EROA with substantial input from
independent investment specialists, including our actuaries and other
consultants. In developing each plan's EROA, we consider current and expected
asset allocations, historical market rates as well as historical and expected
returns on each plan's individual asset classes. In developing future return
expectations for each of our plan's assets, we evaluate general market trends as
well as key elements of asset class returns such as expected earnings growth,
yields and spreads. The calculation includes inputs for interest, inflation,
credit, and risk premium (active investment management) rates and fees paid to
service providers. Based on the above factors and expected asset allocations, we
have assumed, on a weighted-average basis, an EROA of 4.38% for our defined
benefit pension plan assets for cost recognition in 2019. This is an increase
from the weighted-average rate of 4.10% we had assumed in 2018. We believe that
our EROA assumptions are appropriate; however, significant changes in our
assumptions or actual returns that differ significantly from estimated returns
may materially affect our net periodic pension costs.
To compute the expected return on plan assets, we apply the EROA to the
market-related value of the pension plan assets adjusted for projected benefit
payments to be made from the plan assets and projected contributions to the plan
assets. We use the fair value approach to calculate the market-related value of
pension plan assets used to determine net periodic pension cost, which includes
measuring the market-related value of plan assets at fair value for purposes of
determining the expected return on plan assets and amount of gain or loss
subject to amortization.
A 50 basis point change in our discount rate and expected return on assets
assumptions made at the beginning of 2018 would have had the following effects
on 2018 net periodic pension and postretirement benefit costs:
                                              Impact to 2018 pension and 

postretirement benefit costs - 50

                                                          basis points (unfavorable) favorable
                                                       Decrease                          Increase
                                                                     (In millions)
Description of pension and postretirement
plan sensitivity item
Expected return on pension plan assets        $               (28.4 )           $                   28.4
Discount rate on pension plans                $                 2.7             $                   (7.5 )
Discount rate on postretirement plans         $                 1.8             $                   (1.6 )


Fair Value of Plan Assets
We recognize our defined benefit pension plans as assets or liabilities in the
consolidated balance sheets based on their underfunded or overfunded status as
of our year end and recognize changes in the funded status due to changes in
actuarial assumptions in the year in which the changes occur within other
comprehensive income. Our funded status of our defined benefit pension plans is
measured as the difference between each plan's projected benefit obligation and
its assets' fair values. The fair value of plan assets is determined by us using
available market information and appropriate valuation methodologies. However,
considerable judgment is required in selecting an appropriate methodology and
interpreting market data to develop the estimates of fair value, especially in
the absence of quoted market values in an active market. Changes in these
assumptions or the use of different market inputs may have a material impact on
the estimated fair values or the ultimate amount at which the plan assets are
available to satisfy our plan obligations.
Equity assets are diversified between domestic and other international
investments. Relative allocations reflect the demographics of the respective
plan participants. See Part II-Item 8 Financial Statements and Supplementary
Data,   Note 15, "Employee Retirement Plans and Postretirement Benefits"   of
the Notes for a comparison of target asset allocation percentages to actual
asset allocations as of December 31, 2018.
Other Considerations
Our net periodic pension and postretirement benefit costs are also influenced by
the potential amortization (or non-amortization) from accumulated other
comprehensive income (loss) of deferred gains and losses, which occur when
actual experience differs from estimates. We employ the corridor approach for
determining each plan's amortization. This approach defines the "corridor" as
the greater of 10% of the PBO or 10% of the market-related value of plan assets
(as discussed above)

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and requires amortization of the excess net gain or loss that exceeds the
corridor over the average remaining service periods of active plan participants.
For our closed plans or plans that are primarily inactive, the average remaining
life expectancy of all plan participants (including retirees) is used. If our
actuarial losses significantly exceed this corridor in the future, significant
incremental pension and postretirement costs could result. As of year-end 2018,
the deferred losses of several of our Canadian plans, as well as those in our
U.K. plan, and the deferred gains of our U.S. plan, exceeded the 10% corridor.
The assumed health care cost trend rates represent the rates at which health
care costs are assumed to increase and are based on actuarial input and
consideration of historical and expected experience. We use these trends as a
significant assumption in determining our postretirement benefit obligation and
related costs. Changes in our projections of future health care costs due to
general economic conditions and those specific to health care will impact this
trend rate. An increase in the trend rate would increase our obligation and
expense of our postretirement health care plan. We believe that our health care
cost trend rate assumptions are appropriate; however, significant changes in our
assumptions may materially affect our postretirement benefit obligations and
related costs. As of December 31, 2018, the health care trend rates used were
ranging ratably from 6.5% in 2019 to 4.5% in 2037, consistent with our health
care trend rates ranging ratably from 6.8% in 2018 to 4.5% in 2037 used as of
December 31, 2017. See Part II-Item 8 Financial Statements and Supplementary
Data,   Note 15, "Employee Retirement Plans and Postretirement Benefits"   of
the Notes for further information.
Contingencies, Environmental and Litigation Reserves
Contingencies, environmental and litigation reserves are recorded, when
probable, using our best estimate of loss. This estimate, involving significant
judgment, is based on an evaluation of the range of loss related to such matters
and where the amount and range can be reasonably estimated. These matters are
generally resolved over a number of years and only when one or more future
events occur or fail to occur. Following our initial determination, we regularly
reassess and revise the potential liability related to any pending matters as
new information becomes available. Unless capitalization is allowed or required
by U.S. GAAP, environmental and legal costs are expensed when incurred. We
disclose pending loss contingencies when the loss is deemed reasonably possible,
which requires significant judgment. As a result of the inherent uncertainty of
these matters, the ultimate conclusion and actual cost of settlement may
materially differ from our estimates. We recognize contingent gains upon the
determination that realization is assured beyond a reasonable doubt, regardless
of the perceived probability of a favorable outcome prior to achieving that
assurance. In the instance of gain contingencies resulting from favorable
litigation, due to the numerous uncertainties inherent in a legal proceeding,
gain contingencies resulting from legal settlements are not recognized in income
until cash or other forms of payment are received. If significant and probable,
we disclose as appropriate.
See Part I-Item 3 Legal Proceedings and Part II-Item 8 Financial Statements and
Supplementary Data,   Note 18, "Commitments and Contingencies"   of the Notes
for a discussion of our contingencies, environmental and litigation reserves as
of December 31, 2018.
Goodwill and Intangible Asset Valuation
Goodwill is allocated to the reporting unit in which the business that created
the goodwill resides. A reporting unit is an operating segment, or a business
unit one level below that operating segment, for which discrete financial
information is prepared and regularly reviewed by segment management. As of the
date of our annual impairment test, performed as of October 1, the operations in
each of the specific regions within our U.S., Canada, Europe and International
segments are components based on the availability of discrete financial
information and the regular review by segment management. Therefore, the
components within each respective segment must be evaluated for aggregation to
determine if the components have similar economic characteristics. As a result,
in certain cases, we have aggregated business units, within an operating
segment, into one reporting unit if the specific aggregation criteria under U.S.
GAAP is met. Specifically, we have concluded that the components within the
U.S., Canada and Europe segment each meet the criteria as having similar
economic characteristics and therefore have aggregated these components into the
U.S., Canada and Europe reporting units, respectively. Therefore, the U.S.,
Canada and Europe reporting units are consistent with our operating segments.
However, for our India business, the reporting unit is one level below the
International operating segment. Any change to the conclusion of our reporting
units or the aggregation of components within our reporting units could result
in a different outcome to our annual impairment test. As of the date of our
annual impairment test, our significant indefinite-lived intangible assets
included the Coors and Miller brand families in the U.S., the Coors Light
distribution rights in Canada, and the Carling and Staropramen brands in Europe.
We evaluate the carrying value of our goodwill and indefinite-lived intangible
assets for impairment at least annually or when an interim triggering event
occurs that would indicate that impairment may have taken place. Our annual
impairment test was performed as of October 1, the first day of the last fiscal
quarter. We evaluate our other definite-lived intangible assets for impairment
when evidence exists that certain events or changes in circumstances indicate
that the carrying amount of these assets may not be recoverable. Significant
judgments and assumptions are required in such impairment evaluations.

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Our annual evaluation involves comparing each reporting unit's fair value to its
respective carrying value, including goodwill. If the fair value exceeds
carrying value, then we conclude that no goodwill impairment has occurred. If a
reporting unit's carrying value exceeds its fair value, we would recognize an
impairment loss in an amount equal to the excess up to the total amount of
goodwill allocated to that reporting unit.
We use a combination of discounted cash flow analyses and market approaches to
determine the fair value of each of our reporting units, and an excess earnings
approach to determine the fair values of our Coors and Miller brand families in
the U.S. and Staropramen brand in Europe. We utilized a qualitative assessment
of the Coors Light distribution rights in Canada and the Carling brand in
Europe, in order to determine whether the fair value of these indefinite-lived
intangible assets is in excess of its carrying value. The decision to utilize a
qualitative assessment in the current year for these brands was the result of
taking several factors into consideration, including the excess of the
respective brands' fair value over its carrying value in the prior year
quantitative impairment analysis. Our discounted cash flow projections include
assumptions for growth rates for sales, costs and profits, which are based on
various long-range financial and operational plans of each reporting unit or
each indefinite-lived intangible asset. Additionally, discount rates used in our
goodwill analysis are based on weighted-average cost of capital, driven by the
prevailing interest rates in geographies where these businesses operate, as well
as the credit ratings, financing abilities and opportunities of each reporting
unit, among other factors. Discount rates for the indefinite-lived intangible
analysis by brand largely reflect the rates supporting the overall reporting
unit valuation but may differ slightly to adjust for country or market specific
risk associated with a particular brand. Our market-based valuations utilize
earnings multiples of comparable public companies, which are reflective of the
market in which each respective reporting unit operates, and recent comparable
market transactions.
Changes in the factors used in our fair value estimates, including declines in
industry or company-specific beer volume sales, margin erosion, termination of
brewing and/or distribution agreements with other brewers, and discount rates
used, could have a significant impact on the fair values of the reporting units
and indefinite-lived intangible assets.
Reporting Units and Goodwill
The fair value of the U.S., Europe and Canada reporting units were estimated at
approximately 19%, 11% and 6% in excess of carrying value, respectively, as of
the October 1, 2018, testing date. In the current year testing, it was
determined that the fair value of each of the reporting units declined from the
prior year, resulting in our Europe and Canada reporting units now being
considered at risk of impairment. The decline in fair value across all reporting
units in the current year is largely due to the recent interest rate environment
which has resulted in an increase to the risk-free rate included in our current
year discount rate calculations. This fact, coupled with the recent changes in
market conditions resulting in lower earnings multiples of comparable public
companies within our market-based valuations, adversely impacted the results of
our impairment testing. In the U.S. reporting unit, market driven declines from
the prior year were partially offset by a decrease in the tax rate driven by the
enactment of the 2017 Tax Act within the U.S., as well as inclusion of
incremental cost saving initiatives included in the current year forecast. In
the Europe reporting unit, declines from the prior year were partially offset by
continued volume and revenue growth throughout 2018 benefiting management's
forecasts and positively impacting the forecasted future cash flows of the
reporting unit. The market-driven decline in the excess of the fair value over
the carrying value of the Canada reporting unit was coupled with continued
challenging industry dynamics during the year, including continued performance
declines within the Molson and Coors Light core brands, resulting in a reduction
of forecasted results in comparison to the prior year. These declines were
slightly offset by incremental cost saving initiatives included in the current
year forecast. The fair value of the India reporting unit declined slightly from
the prior year, as a result of shifts in business strategy; however, fair value
of the India reporting unit continues to remain in excess of its carrying value
as of our annual testing date.
Intangible Assets
The Coors and Miller indefinite-lived brands in the U.S. continue to be
sufficiently in excess of their respective carrying values as of the annual
testing date.
The fair value of the Coors Light brand distribution rights in Canada continues
to be sufficiently in excess of its carrying value as of the testing date.
During 2016, we recorded an aggregate impairment charge to the Molson core
indefinite-lived brand asset of $495.2 million. The impairment charge was the
result of a continued decline in performance of the Molson core brand asset
throughout 2016, which drove a downward shift in management's forecast, along
with a challenging market dynamic and competitive conditions that were not
expected to subside in the near-term. At that time, we also reassessed the
brand's indefinite-life classification and determined that the Molson core
brands had characteristics that indicated a definite-life assignment was more
appropriate, including prolonged weakness in consumer demand driven by increased
economic and competitive pressures. Given these factors resulted in sustained
declines in brand performance, and it was unclear when these ongoing pressures
on the brands would subside, these brands were reclassified as definite-lived
intangible assets as of October 1, 2016, and are being amortized over their
remaining useful lives ranging from 30 to 50 years.

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Our Europe indefinite-lived intangibles' fair values, including the Staropramen
and Carling brands, continue to be sufficiently in excess of their respective
carrying values as of the annual testing date.
We utilized Level 3 fair value measurements in our impairment analysis of
certain indefinite-lived intangible brand assets, including the Coors and Miller
brands in the U.S., and the Staropramen brand in Europe, which utilizes an
excess earnings approach to determine the fair values of these assets as of the
testing date. The future cash flows used in the analysis are based on internal
cash flow projections based on our long range plans and include significant
assumptions by management as noted below. Separately, we performed qualitative
assessments of certain indefinite-lived intangible assets, including the Coors
Light brand distribution rights in Canada, Carling brand in Europe and water
rights in the U.S., to determine whether it was more likely than not that the
fair values of these assets were greater than their respective carrying amounts.
Based on the qualitative assessments, we determined that a full quantitative
analysis was not necessary.
Key Assumptions
As of the date of our annual impairment test, performed as of October 1, the
Europe and Canada reporting unit goodwill balances are at risk of future
impairment in the event of significant unfavorable changes in the forecasted
cash flows (including prolonged weakening of economic conditions, or significant
unfavorable changes in tax, environmental or other regulations, including
interpretations thereof), terminal growth rates, market multiples and/or
weighted-average cost of capital utilized in the discounted cash flow analyses.
For testing purposes of our reporting units, management's best estimates of the
expected future results are the primary driver in determining the fair value.
Current projections used for our Canada reporting unit testing reflect continued
challenges within the beer industry in Canada adversely impacting the projected
cash flows of the business, offset by growth resulting from the benefit of
anticipated cost savings and specific brand-building and innovation activities.
Current projections used for our Europe reporting unit incorporate ongoing
anticipated cost savings, coupled with continued volume and revenue growth.
Positive assumptions included in management's forecast for both the Europe and
Canada reporting units are being offset by adverse market conditions negatively
impacting discount rate and market multiple assumptions applied to our fair
valuation models in the current year.
Fair value determinations require considerable judgment and are sensitive to
changes in underlying assumptions and factors. As a result, there can be no
assurance that the estimates and assumptions made for purposes of the annual
goodwill and indefinite-lived intangible impairment tests will prove to be an
accurate prediction of the future. Examples of events or circumstances that
could reasonably be expected to negatively affect the underlying key assumptions
and ultimately impact the estimated fair value of our reporting units and
indefinite-lived intangibles may include such items as: (i) a decrease in
expected future cash flows, specifically, a decrease in sales volume and
increase in costs that could significantly impact our immediate and long-range
results, a decrease in sales volume driven by a prolonged weakness in consumer
demand or other competitive pressures adversely affecting our long-term volume
trends, a continuation of the trend away from core brands in certain of our
markets, especially in markets where our core brands represent a significant
portion of the market, unfavorable working capital changes and an inability to
successfully achieve our cost savings targets, (ii) adverse changes in
macroeconomic conditions or an economic recovery that significantly differs from
our assumptions in timing and/or degree (such as a recession), (iii) volatility
in the equity and debt markets or other country specific factors which could
result in a higher weighted-average cost of capital, (iv) sensitivity to market
multiples; and (v) regulation limiting or banning the manufacturing,
distribution or sale of alcoholic beverages.
Based on known facts and circumstances, we evaluate and consider recent events
and uncertain items, as well as related potential implications, as part of our
annual assessment and incorporate into the analyses as appropriate. These facts
and circumstances are subject to change and may impact future analyses.
In 2018, the discount rates used in developing our fair value estimates for each
of our reporting units were 9.00%, 9.25% and 9.50% for our U.S, Canada and
Europe reporting units, respectively. The rates used for our reporting unit
testing increased for each of the reporting units in the current year. In 2018,
discount rates used for testing of indefinite-lived intangibles ranged from
9.25% to 10.50% considering the market or country specific risk premium for each
geography in which our brands are based. The discount rates for the Coors and
Miller brands in the U.S., and the Staropramen brand in Europe, increased
compared to the discount rates used in the prior year analysis, primarily due to
an increase in the risk-free rates included in our current year discount rate
calculations.

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While historical performance and current expectations have resulted in fair
values of our reporting units in excess of carrying values, if our assumptions
are not realized, it is possible that an impairment charge may need to be
recorded in the future. For example, a 50 basis point increase in our discount
rate assumptions, which is within a reasonable range of historical discount rate
fluctuations between test dates, would have had the following effects on the
fair value cushion in excess of carrying value for the U.S., Europe and Canada
reporting units as of the October 1, 2018, test date:
                   Impact to the fair value cushion as of October 1, 2018
                                 - 50 basis points increase
                  Cushion (as reported)        Cushion (post-sensitivity)
                        % of fair value in excess of carrying value
Reporting units:
United States              19%                            16%
Europe                     11%                             8%
Canada                      6%                             3%


Post sensitivity, the fair values of the U.S., Europe and Canada reporting units
remain in excess of the their carrying values. The discount rate sensitivity
holds all other assumptions and inputs constant.
Regarding definite-lived intangibles, we continuously monitor the performance of
the underlying asset for potential triggering events suggesting an impairment
review should be performed. Excluding the definite-lived intangible asset
impairment charge associated with the triggering event that occurred in Bihar,
India, which resulted in an impairment of tangible assets of $11.0 million and
impairment of goodwill and definite-lived intangibles of $19.8 million in 2016,
no such triggering events resulting in an impairment charge were identified in
2018, 2017 or 2016. See Part II-Item 8 Financial Statements and Supplementary
Data,   Note 10, "Goodwill and Intangible Assets"   of the Notes for further
discussion.
As of December 31, 2018, the carrying values of goodwill and intangible assets
were approximately $8.3 billion and $13.8 billion, respectively. If actual
performance results differ significantly from our projections or we experience
significant fluctuations in our other assumptions, a material impairment charge
may occur in the future. See Part II-Item 8 Financial Statements and
Supplementary Data,   Note 10, "Goodwill and Intangible Assets"   of the Notes
for further discussion and presentation of these amounts.
Income Taxes
Income taxes are accounted for in accordance with U.S. GAAP. Judgment is
required in determining our consolidated provision for income taxes. In the
ordinary course of our global business, there are many transactions for which
the ultimate tax outcome is uncertain. Additionally, our income tax provision is
based on calculations and assumptions that are subject to examination by many
different tax authorities. See Part II-Item 8 Financial Statements and
Supplementary Data,   Note 6, "Income Tax"   of the Notes for further discussion
on the implications of the 2017 Tax Act in the U.S. on our financial statements.
We are periodically subject to tax return audits by both foreign and domestic
tax authorities, which can involve questions regarding our tax positions.
Settlement of any challenge resulting from these audits can result in no change,
a complete disallowance, or some partial adjustment reached through negotiations
or litigation. We recognize the tax benefit from an uncertain tax position only
if it is more likely than not that the tax position will be sustained based on
its technical merits. We measure and record the tax benefits from such a
position based on the largest benefit that has a greater than 50% likelihood of
being realized upon ultimate settlement. Our estimated liabilities related to
these matters are adjusted in the period in which the uncertain tax position is
effectively settled, the statute of limitations for examination expires or when
additional information becomes available. Our liability for unrecognized tax
benefits requires the use of assumptions and significant judgment to estimate
the exposures associated with our various filing positions. Although we believe
that the judgments and estimates made are reasonable, actual results could
differ and resulting adjustments could materially affect our effective income
tax rate and income tax provision.
We provide for taxes that may be payable if undistributed earnings of overseas
subsidiaries were to be remitted to the U.S., except for those earnings that we
consider to be permanently reinvested. However, we continue to monitor the
impacts of the 2017 Tax Act, as defined in Part II-Item 8 Financial Statements
and Supplementary Data,   Note 6, "Income Tax,"   including yet to be issued
regulations and interpretations, on the tax consequences of future
repatriations. Future sales of foreign subsidiaries are not exempt from capital
gains tax in the U.S. under the 2017 Tax Act. We have no plans to dispose of any
of our foreign subsidiaries and are not recording deferred taxes on outside
basis differences in foreign subsidiaries for the sale of a foreign subsidiary.

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We record a valuation allowance to reduce our deferred tax assets to the amount
that is more likely than not to be realized. We evaluate our ability to realize
the tax benefits associated with deferred tax assets by assessing the adequacy
of future expected taxable income, including the reversal of existing temporary
differences, historical and projected operating results, and the availability of
prudent and feasible tax planning strategies. The realization of tax benefits is
evaluated by jurisdiction and the realizability of these assets can vary based
on the character of the tax attribute and the carryforward periods specific to
each jurisdiction. In the event we were to determine that we would be able to
realize our deferred tax assets in the future in excess of its net recorded
amount, an adjustment to the deferred tax asset would decrease income tax
expense in the period a determination was made. Likewise, should we determine
that we would not be able to realize all or part of our net deferred tax asset
in the future, an adjustment to the deferred tax asset would be recorded to
income tax expense in the period such determination was made.
New Accounting Pronouncements
New Accounting Pronouncements Not Yet Adopted
Leases
In February 2016, the FASB issued authoritative guidance intended to increase
transparency and comparability among organizations by requiring the recognition
of lease assets and liabilities on the balance sheet and disclosure of key
information about leasing arrangements. We will adopt this guidance and all
related amendments applying the modified retrospective transition approach to
all lease arrangements as of the effective date of adoption, January 1, 2019.
Additionally, for existing leases as of the effective date, we will elect the
package of practical expedients available at transition to not reassess the
historical lease determination, lease classification and initial direct costs.
For operating leases, the adoption of this new guidance is currently expected to
result in the recognition of right-of-use ("ROU") assets of between
approximately $150 million and $160 million, and aggregate current and
non-current lease liabilities of between approximately $160 million and $170
million, as of the effective date of adoption, including immaterial
reclassifications of prepaid and deferred rent balances into ROU assets.
Additionally, as a result of the cumulative impact of adopting the new guidance,
we expect to record a net increase to opening retained earnings of between $30
million and $35 million as of January 1, 2019, with the offsetting impact within
other assets, related to our share of the accelerated recognition of deferred
gains on non-qualifying and other sale-leaseback transactions by an equity
method investment within our Canada segment. We are in the process of finalizing
this transition adjustment calculation, which will be completed during the first
quarter of 2019. Additionally, while our accounting for finance leases will
remain unchanged at adoption, we will prospectively change the presentation of
finance lease liabilities within the consolidated balance sheets to be presented
within current portion of long-term debt and short-term borrowings and long-term
debt, as appropriate. The adoption of this guidance is not expected to impact
our cash flows from operating, investing, or financing activities.
Other than the items noted above, there have been no new accounting
pronouncements not yet effective that we believe have a significant impact, or
potential significant impact, to our consolidated financial statements.
See Part II-Item 8 Financial Statements and Supplementary Data,   Note 2, "New
Accounting Pronouncements"   of the Notes for a description of new accounting
pronouncements.

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Unaudited Pro Forma Financial Information


The following unaudited pro forma financial information gives effect to the
Acquisition and the related financing as if they were completed on January 1,
2016, the first day of our 2016 fiscal year, and the pro forma adjustments are
based on items that are factually supportable, are directly attributable to the
Acquisition, and are expected to have a continuing impact on our results of
operations. The unaudited pro forma financial information has been calculated
after applying MCBC's accounting policies and adjusting the results of
MillerCoors to reflect the additional depreciation and amortization that would
have been charged assuming the fair value adjustments to property, plant and
equipment, and intangible assets had been applied from January 1, 2016, together
with the consequential tax effects. Pro forma adjustments have been made to
remove non-recurring transaction-related costs included in historical results as
well as to reflect the incremental interest expense to be prospectively incurred
on the debt and term loans issued to finance the Acquisition, in addition to
other pro forma adjustments. See below table for significant non-recurring
costs.

Additionally, the following unaudited pro forma financial information does not
reflect the impact of the acquisition of the Miller global brand portfolio and
other assets primarily related to the Miller International Business as we are
not able to estimate the historical results of operations from this business and
have concluded, based on the limited information available to MCBC, that it is
insignificant to the overall Acquisition. The purchase price allocation reflects
the estimated value allocated to the Miller global brand portfolio reported
within identifiable intangible assets subject to amortization.

The unaudited pro forma financial information below does not reflect the
realization of any expected ongoing synergies related to integration. Further,
the unaudited pro forma financial information should not be considered
indicative of the results that would have occurred if the Acquisition and
related financing had been completed on January 1, 2016, nor are they indicative
of future results.

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                 MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
         UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 2016
                      (IN MILLIONS, EXCEPT PER SHARE DATA)
                                                                                     Pro Forma
                                     MCBC Historical(1)        MillerCoors         Adjustments(1)              Pro Forma
                                        As Restated           Historical(2)         As Restated       Note     Combined
Financial volume in hectoliters                46.912               55.750                 (0.728 )   (1)        101.934

Sales                               $         6,597.4      $       6,987.2       $          (39.5 )   (1)    $  13,545.1
Excise taxes                                 (1,712.4 )             (861.8 )                 12.3     (1)       (2,561.9 )
Net sales                                     4,885.0              6,125.4                  (27.2 )             10,983.2
Cost of goods sold                           (2,999.0 )           (3,426.6 )                 77.3     (2)       (6,348.3 )
Gross profit                                  1,886.0              2,698.8                   50.1                4,634.9
Marketing, general and
administrative expenses                      (1,597.2 )           (1,403.9 )                 40.2     (3)       (2,960.9 )
Special items, net                            2,532.9               (111.3 )             (2,965.0 )   (4)         (543.4 )
Equity income in MillerCoors                    500.9                    -                 (500.9 )                    -
Operating income (loss)                       3,322.6              1,183.6               (3,375.6 )              1,130.6
Interest income (expense), net                 (244.4 )               (1.4 )               (123.0 )   (5)         (368.8 )
Other pension and postretirement
benefits (costs), net                             8.4                (14.4 )                    -                   (6.0 )
Other income (expense), net                     (32.5 )                3.7                   58.9     (6)           30.1
Income (loss) before income taxes             3,054.1              1,171.5               (3,439.7 )                785.9
Income tax benefit (expense)(2)              (1,454.3 )               (3.3 )                980.4     (7)         (477.2 )
Net income (loss) including
noncontrolling interests(2)                   1,599.8              1,168.2               (2,459.3 )                308.7
Net income (loss) attributable to
noncontrolling interests                         (5.9 )              (11.0 )                    -                  (16.9 )
Net income (loss) attributable to
MCBC(2)                             $         1,593.9      $       1,157.2

$ (2,459.3 )$ 291.8


Basic net income (loss)
attributable to Molson Coors
Brewing Company per share(2)        $            7.52                                                        $      1.36
Diluted net income (loss)
attributable to Molson Coors
Brewing Company per share(2)        $            7.47                                                        $      1.35
Weighted-average shares-basic                   212.0                                         2.7     (8)          214.7
Weighted-average shares-diluted                 213.4                                         2.7     (8)          216.1


(1) The MCBC historical results and pro forma adjustments columns reflect the

impact of the correction of errors in the accounting for income taxes

related to the deferred tax liabilities for our partnership in MillerCoors

as discussed in Part II-Item 8 Financial Statements and Supplementary

       Data,   Note 1, "Basis of Presentation and Summary of Significant
       Accounting Policies."   The correction of these errors had no impact on
       our pro forma combined results.


(2)    Represents MillerCoors' activity for the pre-Acquisition periods of
       January 1, 2016, through October 10, 2016.



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(1) Sales



The following pro forma adjustments eliminate beer sales between MCBC and
MillerCoors for the year ended December 31, 2016, that were previously recorded
as affiliate sales and became intercompany transactions after the Acquisition
was completed and thus eliminate in consolidation.
                                              For the year ended
                                              December 31, 2016
                                                (In millions)
Hectoliters of beer and other beverages sold           (0.728 )

MCBC's beer sales to MillerCoors             $            7.5
MillerCoors' beer sales to MCBC                          32.0
Total pro forma adjustment to sales          $           39.5
Excise tax adjustment(1)                     $           12.3



(1) 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.



(2) Cost of Goods Sold



The following pro forma adjustments (increase)/decrease cost of goods sold for the year ended December 31, 2016:

                                                       For the year ended
                                                       December 31, 2016
                                                         (In millions)
MillerCoors' beer purchases from MCBC (1)             $            7.5
MCBC's beer purchases from MillerCoors (1)                        32.0
Depreciation (2)                                                 (46.1 )
MillerCoors' royalties paid to SABMiller (3)                      13.2
Policy reclassification (4)                                      (18.6 )
Historical charges recorded for pallets (5)                        7.3
Historical charges recorded for inventory step-up (6)             82.0
Total pro forma adjustment to cost of goods sold      $           77.3


(1) Reflects beer purchases between MCBC and MillerCoors that were previously

recorded as affiliate purchases and became intercompany transactions after

the Acquisition was completed and thus eliminate in consolidation.

(2) Reflects the pro forma adjustment to depreciation expense associated with

the estimated fair value of MillerCoors' property, plant and equipment over

the estimated remaining useful life.

(3) Reflects royalties paid by MillerCoors to SABMiller plc for sales of certain

     of its licensed brands in the U.S. Upon completion of the Acquisition,
     royalties are no longer paid related to these licensed brands. See the
     purchase agreement for additional details.

(4) Reflects the reclassification of certain MillerCoors overhead costs from

marketing, general and administrative expenses to cost of goods sold to

align to MCBC policy related to profit and loss classification of such

costs.

(5) Reflects the amortization of MillerCoors' pallet costs which were

historically recorded as a non-current asset and amortized into cost of

goods sold, separate from depreciation expense. As part of our policy

alignment, the pallets are now classified as depreciable fixed assets within

Properties, net and the related depreciation is included as part of

depreciation expense that is recognized in cost of goods sold. This

adjustment reflects the removal of historical pallet amortization expense

recorded within cost of goods sold and the depreciation pro forma adjustment

     above reflects the updated amount to be recorded as cost of goods sold
     depreciation going forward.

(6) Reflects the step-up in fair value of inventory related to the Acquisition

     which was sold in the fourth quarter of 2016 and



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therefore increased our historical cost of goods sold. Given this cost does not
have a continuing impact, we have accordingly adjusted the pro forma financial
information.

(3) Marketing, General and Administrative




Based on the estimated fair values of identifiable amortizable intangible assets
and depreciable property, plant and equipment, and the estimated useful lives
assigned, the following pro forma adjustments to amortization and depreciation
expenses have been made to marketing, general and administrative expenses for
the year ended December 31, 2016. Additionally, a pro forma adjustment has been
made to eliminate MillerCoors' service agreement income related to charges to
SABMiller for the year ended December 31, 2016, that were previously recorded as
a reduction to MillerCoors' marketing, general and administrative expenses as
this activity with SABMiller ceased upon completion of the Acquisition. We have
also removed transaction related costs included in the historical MCBC
statements of operations as they will not have a continuing impact. The pro
forma adjustments to increase/(decrease) marketing, general and administrative
expense are as follows:
                                                                     For the year ended
                                                                      December 31, 2016
                                                                        (In millions)

Marketing, general and administrative pro forma adjustment for depreciation and amortization

                                       $       

56.5

MillerCoors' service agreement charges to SABMiller                         

1.6

Policy reclassification - See cost of goods sold note 4 above                   (18.6 )
Historical transaction costs                                                    (79.7 )
Total pro forma adjustment to marketing, general and administrative
expenses                                                            $           (40.2 )



(4) Special Items, Net


                                                For the year ended
                                                December 31, 2016
                                                  (In millions)

Pro forma adjustment to special items, net(1) $ (2,965.0 )

(1) Reflects the net gain of approximately $3.0 billion recorded within special

     items, net, during the fourth quarter of 2016, representing the excess of
     the approximate $6.1 billion estimated fair value of our pre-existing 42%

equity interest in MillerCoors over its estimated transaction date carrying

value of approximately $2.7 billion, as well as the reclassification of the

loss related to MCBC's historical AOCI on our 42% interest in MillerCoors of

$458.3 million. Refer to Part II-Item 8 Financial Statements and

Supplementary Data, Note 4, "Acquisition and Investments" of the Notes

for further details regarding the inputs used to determine revaluation.




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(5) Interest Income (Expense)



Represents the pro forma adjustments for the incremental interest expense,
including the amortization of debt issuance costs, as if the Acquisition and
related financing had occurred on January 1, 2016. The Acquisition was funded
through cash on hand, including proceeds received from our February 3, 2016,
equity issuance, the issuance of debt on July 7, 2016, as well as borrowings on
our term loan, which occurred concurrent with the close of the Acquisition. We
incurred costs related to the issuance of debt, committed financing we had in
place prior to the completion of the Acquisition and earned interest income on
the cash proceeds from the equity issuance and debt issuance prior to the
completion of the Acquisition. We have therefore removed these amounts for pro
forma purposes as they would not have been incurred or earned had the
Acquisition and related financing been completed on January 1, 2016.
Additionally, we incurred losses on the swaption derivative instruments that we
entered into to economically hedge a portion of our long-term debt issuance with
which we partially funded the Acquisition. These swaptions were not designated
in hedge accounting relationships as the hedges were entered into in association
with the Acquisition and, accordingly, all mark-to-market fair value adjustments
were reflected within interest expense. As the losses on the swaptions are
non-recurring and do not have a continuing impact on the business, we have
removed them from our pro forma financial information. The debt issued on July
7, 2016, consists of fixed rate notes. The term loans, which had monthly
interest at the rate of 1.50% plus one-month LIBOR, were fully repaid as of July
19, 2017.
                                                                     For the year ended
                                                                      December 31, 2016
                                                                        (In millions)
Term loan interest expense adjustments                              $       

52.7

Interest expense adjustments from debt issued on July 7, 2016

204.1

Historical net interest on other items discussed above                         (133.8 )
Total pro forma adjustment to interest expense                      $           123.0



(6) Other Income (Expense)



Represents the elimination of historical financing costs that do not have a
continuing impact related to the bridge loan and other derivative and foreign
exchange net gains recorded on cash received from the debt issued on July 7,
2016, which have been included in the historical financial statements within
other income (expense).
                                                                     For the year ended
                                                                     December 31, 2016
                                                                       (In millions)
Historical financing costs on the bridge loan                       $       

63.4

Historical derivative and foreign exchange net gains related to debt issued on July 7, 2016

                                                     (4.5 )
Total pro forma adjustment to other income (expense)                $           58.9



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(7) Income Tax Benefit (Expense)




MillerCoors elected to be taxed as a partnership for U.S. federal and state
income tax purposes. As a result, the related tax attributes of MillerCoors are
passed through to its shareholders and income taxes are payable by its
shareholders. Therefore, income tax expense within MCBC's historical results
includes the tax effect of our 42% equity income from MillerCoors. The pro forma
adjustment to income tax expense is inclusive of both the tax effect of the
assumption of the incremental 58% of MillerCoors' pretax income, as well as the
tax effect of the other pro forma adjustments impacting pretax income discussed
above, based on the estimated blended U.S. federal and state statutory income
tax rate and other pro forma tax considerations.
                                                               For the year ended
                                                               December 31, 2016
                                                                 (In millions)
Total pro forma adjustment to income tax benefit (expense)(1) $             

980.4

(1) Includes the impact of the restatement to correct errors related to income

     tax accounting. See details at Part II-Item 8 Financial Statements and
     Supplementary Data,   Note 1, "Basis of Presentation and Accounting
     Policies"   as previously discussed.


(8) Weighted-Average Shares Outstanding




Weighted-average shares outstanding have been calculated to include the impact
of the shares that were issued in the first quarter of 2016 in conjunction with
the February 3, 2016, equity offering, which was completed to fund a portion of
the Acquisition. As such, the below adjustment assumes such shares were
outstanding on January 1, 2016.
                                                             For the year ended
                                                              December 31, 2016
                                                                (In millions)

Impact of shares issued in February 3, 2016, equity offering Weighted-average shares-basic

2.7

Weighted-average shares-diluted                                             

2.7

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