Molson Coors Brewing Earnings 2020-06-30

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________________

FORM 10-Q


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended June 30, 2020


OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______ .

Commission File Number: 1-14829

Molson Coors Beverage Company

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

P.O. BOX 4030, NH353, Golden, Colorado, USA

1555 Notre Dame Street East, Montréal, Québec, Canada

(Address of principal executive offices)

84-0178360

(I.R.S. Employer Identification No.)

80401

H2L 2R5

(Zip Code)

303-279-6565 (Colorado)

514-521-1786 (Québec)

(Registrant's telephone number, including area code)

_______________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbols

Name of each exchange on which registered

Class A Common Stock, $0.01 par value

TAP.A

New York Stock Exchange

Class B Common Stock, $0.01 par value

TAP

New York Stock Exchange

1.25% Senior Notes due 2024

TAP

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ý Accelerated filer o Non-accelerated filer o Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of July 23, 2020:

Class A Common Stock — 2,560,668 shares

Class B Common Stock — 196,568,046 shares

Exchangeable shares:

As of July 23, 2020, the following number of exchangeable shares were outstanding for Molson Coors Canada, Inc.:

Class A Exchangeable shares — 2,725,047 shares

Class B Exchangeable shares — 14,826,118 shares

The Class A exchangeable shares and Class B exchangeable shares are shares of the share capital in Molson Coors Canada Inc., a wholly-owned subsidiary of the registrant. They are publicly traded on the Toronto Stock Exchange under the symbols TPX.A and TPX.B,

respectively. These shares are intended to provide substantially the same economic and voting rights as the corresponding class of Molson Coors common stock in which they may be exchanged. In addition to the registered Class A common stock and the Class B common stock, the registrant has also issued and outstanding one share each of a Special Class A voting stock and Special Class B voting stock. The Special Class A voting stock and the Special Class B voting stock provide the mechanism for holders of Class A exchangeable shares and Class B exchangeable shares to be provided instructions to vote with the holders of the Class A common stock and the Class B common stock, respectively. The holders of the Special Class A voting stock and Special Class B voting stock are entitled to one vote for each outstanding Class A exchangeable share and Class B exchangeable share, respectively, excluding shares held by the registrant or its subsidiaries, and generally vote together with the Class A common stock and Class B common stock, respectively, on all matters on which the Class A common stock and Class B common stock are entitled to vote. The Special Class A voting stock and Special Class B voting stock are subject to a voting trust arrangement. The trustee which holds the Special Class A voting stock and the Special Class B voting stock is required to cast a number of votes equal to the number of then-outstanding Class A exchangeable shares and Class B exchangeable shares, respectively, but will only cast a number of votes equal to the number of Class A exchangeable shares and Class B exchangeable shares as to which it has received voting instructions from the owners of record of those Class A exchangeable shares and Class B exchangeable shares, other than the registrant or its subsidiaries, respectively, on the record date, and will cast the votes in accordance with such instructions so received.

MOLSON COORS BEVERAGE COMPANY AND SUBSIDIARIES

INDEX


		Page
Glossary of Terms and Abbreviations			3
Cautionary Statement			4

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Income (Loss)	6
	Condensed Consolidated Balance Sheets	7
	Condensed Consolidated Statements of Cash Flows	8
	Condensed Consolidated Statements of Stockholders' Equity and Noncontrolling Interests	9
	Notes to Unaudited Condensed Consolidated Financial Statements	11
	Note 1, "Basis of Presentation and Summary of Significant Accounting Policies"	11
	Note 2, "New Accounting Pronouncements"	13
	Note 3, "Segment Reporting"	13
	Note 4, "Investments"	15
	Note 5, "Special Items"	16
	Note 6, "Income Tax"	17
	Note 7, "Goodwill and Intangible Assets"	18
	Note 8, "Debt"	21
	Note 9, "Inventories"	23
	Note 10, "Accumulated Other Comprehensive Income (Loss)"	23
	Note 11, "Derivative Instruments and Hedging Activities"	23
	Note 12, "Commitments and Contingencies"	29
	Note 13, "Leases"
	Note 14, "Supplemental Guarantor Information"	32
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 4.	Controls and Procedures	60
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	60
Item 1A.	Risk Factors	61
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3.	Defaults Upon Senior Securities	62
Item 4.	Mine Safety Disclosures	62
Item 5.	Other Information	62
Item 6.	Exhibits	63
Signature			64

Glossary of Terms and Abbreviations


AOCI			Accumulated other comprehensive income (loss)
CAD			Canadian dollar
CZK			Czech Koruna
DBRS			A global credit rating agency in Toronto
EBITDA			Earnings before interest, tax, depreciation and amortization
EPS			Earnings per share
EUR			Euro
FASB			Financial Accounting Standards Board
GBP			British Pound
HRK			Croatian Kuna
JPY			Japanese Yen
Moody’s			Moody’s Investors Service Limited, a nationally recognized statistical rating organization designated by the SEC
OCI			Other comprehensive income (loss)
OPEB			Other postretirement benefit plans
PSUs			Performance share units
RSD			Serbian Dinar
RSUs			Restricted stock units
SEC			U.S. Securities and Exchange Commission
Standard & Poor’s			Standard and Poor’s Ratings Services, a nationally recognized statistical rating organization designated by the SEC
STRs			Sales-to-retailers
STWs			Sales-to-wholesalers
2017 Tax Act			U.S. Tax Cuts and Jobs Act
U.K.			United Kingdom
U.S.			United States
U.S. GAAP			Accounting principles generally accepted in the U.S.
USD or $			U.S. dollar
VIEs			Variable interest entities

Cautionary Statement Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). From time to time, we may also provide oral or written forward-looking statements in other materials we release to the public. Such forward-looking statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995.

Statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements, and include, but are not limited to, statements under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations," and under the headings "Executive Summary" and "Outlook" therein, with respect to expectations regarding the impact of the coronavirus pandemic on our operations, liquidity, financial condition and financial results, overall volume trends, consumer preferences, pricing trends, industry forces, cost reduction strategies, including our revitalization plan announced in 2019 and the estimated range of related charges and timing of cash charges, anticipated results, expectations for funding future capital expenditures and operations, debt service capabilities, timing and amounts of debt and leverage levels, shipment levels and profitability, market share, and the sufficiency of capital resources. In addition, statements that we make in this report that are not statements of historical fact may also be forward-looking statements. Words such as "expects," "intend," "goals," "plans," "believes," "continues," "may," "anticipate," "seek," "estimate," "outlook," "trends," "future benefits," "potential," "projects," "strategies," "desire," and variations of such words and similar expressions are intended to identify forward-looking statements.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those indicated (both favorably and unfavorably). These risks and uncertainties include, but are not limited to, those described under the heading "Risk Factors" in this report, and those described from time to time in our past and future reports filed with the SEC, including in our Annual Report on Form 10-K for the year ended December 31, 2019. Caution should be taken not to place undue reliance on any such forward-looking statements. Forward-looking statements speak only as of the date when made and we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

Market and Industry Data

The market and industry data used in this Quarterly Report on Form 10-Q are based on independent industry publications, customers, trade or business organizations, reports by market research firms and other published statistical information from third parties (collectively, the “Third Party Information”), as well as information based on management’s good faith estimates, which we derive from our review of internal information and independent sources. Such Third Party Information generally states that the information contained therein or provided by such sources has been obtained from sources believed to be reliable.

PART I. FINANCIAL INFORMATION

ITEM 1.

MOLSON COORS BEVERAGE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN MILLIONS, EXCEPT PER SHARE DATA)

(UNAUDITED)


	Three Months Ended						Six Months Ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Sales	$	3,029.8	$	3,620.0	$	5,567.6	$	6,420.1
Excise taxes	(526.4)		(671.7)		(961.4)		(1,168.5)
Net sales	2,503.4		2,948.3		4,606.2		5,251.6
Cost of goods sold	(1,456.6)		(1,759.8)		(2,935.6)		(3,172.8)
Gross profit	1,046.8		1,188.5		1,670.6		2,078.8
Marketing, general and administrative expenses	(524.5)		(769.7)		(1,154.2)		(1,424.9)
Special items, net	(64.3)		49.9		(150.9)		36.9
Operating income (loss)	458.0		468.7		365.5		690.8
Interest income (expense), net	(69.7)		(65.6)		(138.6)		(138.9)
Other pension and postretirement benefits (costs), net	7.6		8.4		15.1		17.0
Other income (expense), net	5.8		(10.9)		1.0		13.0
Income (loss) before income taxes	401.7		400.6		243.0		581.9
Income tax benefit (expense)	(204.5)		(70.4)		(161.2)		(102.6)
Net income (loss)	197.2		330.2		81.8		479.3
Net (income) loss attributable to noncontrolling interests	(2.2)		(0.8)		(3.8)		1.5
Net income (loss) attributable to Molson Coors Beverage Company	$	195.0	$	329.4	$	78.0	$	480.8

Net income (loss) attributable to Molson Coors Beverage Company per share:
Basic	$	0.90	$	1.52	$	0.36	$	2.22
Diluted	$	0.90	$	1.52	$	0.36	$	2.22

Weighted-average shares outstanding:
Basic	216.9		216.6		216.8		216.6
Dilutive effect of share-based awards	0.1		0.3		0.2		0.3
Diluted	217.0		216.9		217.0		216.9

Anti-dilutive securities excluded from the computation of diluted EPS	2.3		1.3		2.1		1.3

See notes to unaudited condensed consolidated financial statements.

MOLSON COORS BEVERAGE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(IN MILLIONS)

(UNAUDITED)


	Three Months Ended						Six Months Ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Net income (loss) including noncontrolling interests	$	197.2	$	330.2	$	81.8	$	479.3
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	119.7		42.1		(253.8)		113.6
Unrealized gain (loss) on derivative instruments	(0.7)		(38.3)		(128.6)		(68.0)
Reclassification of derivative (gain) loss to income	(1.1)		(0.3)		(1.1)		(0.2)
Amortization of net prior service (benefit) cost and net actuarial (gain) loss to income	(1.9)		(0.5)		(3.2)		(1.1)
Ownership share of unconsolidated subsidiaries' other comprehensive income (loss)	0.8		0.8		1.5		1.8
Total other comprehensive income (loss), net of tax	116.8		3.8		(385.2)		46.1
Comprehensive income (loss)	314.0		334.0		(303.4)		525.4
Comprehensive (income) loss attributable to noncontrolling interests	(3.3)		(0.5)		(2.0)		1.6
Comprehensive income (loss) attributable to Molson Coors Beverage Company	$	310.7	$	333.5	$	(305.4)	$	527.0

See notes to unaudited condensed consolidated financial statements.

MOLSON COORS BEVERAGE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS, EXCEPT PAR VALUE)

(UNAUDITED)


	As of
	June 30, 2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	780.8	$	523.4
Accounts receivable, net	713.7		714.8
Other receivables, net	129.1		105.5
Inventories, net	639.1		615.9
Other current assets, net	280.0		224.8
Total current assets	2,542.7		2,184.4
Properties, net	4,344.0		4,546.5
Goodwill	7,561.8		7,631.4
Other intangibles, net	13,384.0		13,656.0
Other assets	806.3		841.5
Total assets	$	28,638.8	$	28,859.8
Liabilities and equity
Current liabilities:
Accounts payable and other current liabilities	$	3,192.7	$	2,767.3
Current portion of long-term debt and short-term borrowings	613.0		928.2
Total current liabilities	3,805.7		3,695.5
Long-term debt	8,073.7		8,109.5
Pension and postretirement benefits	694.7		716.6
Deferred tax liabilities	2,218.5		2,258.6
Other liabilities	578.2		406.5
Total liabilities	15,370.8		15,186.7
Commitments and contingencies (Note 12)
Molson Coors Beverage Company stockholders' equity
Capital stock:
Preferred stock, $0.01 par value (authorized: 25.0 shares; none issued)	—		—
Class A common stock, $0.01 par value per share (authorized: 500.0 shares; issued and outstanding: 2.6 shares and 2.6 shares, respectively)	—		—
Class B common stock, $0.01 par value per share (authorized: 500.0 shares; issued: 206.0 shares and 205.7 shares, respectively)	2.1		2.1
Class A exchangeable shares, no par value (issued and outstanding: 2.7 shares and 2.7 shares, respectively)	102.5		102.5
Class B exchangeable shares, no par value (issued and outstanding: 14.8 shares and 14.8 shares, respectively)	557.8		557.8
Paid-in capital	6,786.3		6,773.6
Retained earnings	7,571.2		7,617.0
Accumulated other comprehensive income (loss)	(1,545.6)		(1,162.2)
Class B common stock held in treasury at cost (9.5 shares and 9.5 shares, respectively)	(471.4)		(471.4)
Total Molson Coors Beverage Company stockholders' equity	13,002.9		13,419.4
Noncontrolling interests	265.1		253.7
Total equity	13,268.0		13,673.1
Total liabilities and equity	$	28,638.8	$	28,859.8

See notes to unaudited condensed consolidated financial statements.

MOLSON COORS BEVERAGE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN MILLIONS)

(UNAUDITED)


	Six Months Ended
	June 30, 2020		June 30, 2019
Cash flows from operating activities:
Net income (loss) including noncontrolling interests	$	81.8	$	479.3
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	494.2		429.7
Amortization of debt issuance costs and discounts	4.0		7.5
Share-based compensation	11.8		18.6
(Gain) loss on sale or impairment of properties and other assets, net	7.7		(67.7)
Unrealized (gain) loss on foreign currency fluctuations and derivative instruments, net	40.9		(12.4)
Income tax (benefit) expense	161.2		102.6
Income tax (paid) received	(16.7)		(41.4)
Interest expense, excluding interest amortization	136.0		140.5
Interest paid	(129.8)		(140.9)


Change in current assets and liabilities and other	268.8		(87.8)
Net cash provided by (used in) operating activities	1,059.9		828.0
Cash flows from investing activities:
Additions to properties	(345.1)		(310.5)
Proceeds from sales of properties and other assets	3.0		99.9
Other	0.6		42.8
Net cash provided by (used in) investing activities	(341.5)		(167.8)
Cash flows from financing activities:
Exercise of stock options under equity compensation plans	4.0		1.4
Dividends paid	(125.3)		(177.4)


Payments on debt and borrowings	(507.6)		(1,070.8)
Proceeds on debt and borrowings	1.0		—


Net proceeds from (payments on) revolving credit facilities and commercial paper	199.8		(1.9)
Change in overdraft balances and other	(21.7)		12.8
Net cash provided by (used in) financing activities	(449.8)		(1,235.9)
Cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents	268.6		(575.7)
Effect of foreign exchange rate changes on cash and cash equivalents	(11.2)		8.0
Balance at beginning of year	523.4		1,057.9
Balance at end of period	$	780.8	$	490.2

See notes to unaudited condensed consolidated financial statements.

MOLSON COORS BEVERAGE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

AND NONCONTROLLING INTERESTS

(IN MILLIONS)

(UNAUDITED)

Molson Coors Beverage Company Stockholders' Equity

Accumulated

Common stock

Exchangeable

other

held in

Non

issued

shares issued

Paid-in-

Retained

comprehensive

treasury

controlling

Total

Class A

Class B

Class A

Class B

capital

earnings

income (loss)

Class B

interests

As of March 31, 2019

13,888.1

—

2.0

103.2

557.6

6,776.2

7,862.4

Price	57.47	EPS	1
Shares	217	P/E	79
MCap	12,465	P/FCF	10
Net Debt	8,790	EBIT	352
TEV	21,255	TEV/EBIT	60
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-07-30
10-Q	2020-03-31	Filed 2020-04-30
10-K	2019-12-31	Filed 2020-02-12
10-Q	2019-09-30	Filed 2019-10-30
10-Q	2019-06-30	Filed 2019-07-31
10-Q	2019-03-31	Filed 2019-05-01
10-K	2018-12-31	Filed 2019-02-12
10-Q	2018-09-30	Filed 2018-10-31
10-Q	2018-06-30	Filed 2018-08-01
10-Q	2018-03-31	Filed 2018-05-02
10-K	2017-12-31	Filed 2018-02-14
10-Q	2017-09-30	Filed 2017-11-01
10-Q	2017-06-30	Filed 2017-08-02
10-Q	2017-03-31	Filed 2017-05-03
10-K	2016-12-31	Filed 2017-02-14
10-Q	2016-09-30	Filed 2016-11-01
10-Q	2016-06-30	Filed 2016-08-02
10-Q	2016-03-31	Filed 2016-05-03
10-K	2015-12-31	Filed 2016-02-11
10-Q	2015-09-30	Filed 2015-11-05
10-Q	2015-06-30	Filed 2015-08-06
10-Q	2015-03-31	Filed 2015-05-07
10-K	2014-12-31	Filed 2015-02-12
10-Q	2014-09-30	Filed 2014-11-06
10-Q	2014-06-30	Filed 2014-08-06
10-Q	2014-03-31	Filed 2014-05-07
10-K	2013-12-31	Filed 2014-02-14
10-Q	2013-09-28	Filed 2013-11-06
10-Q	2013-06-29	Filed 2013-08-06
10-Q	2013-03-30	Filed 2013-05-07
10-K	2012-12-29	Filed 2013-02-22
10-Q	2012-09-29	Filed 2012-11-08
10-Q	2012-06-30	Filed 2012-08-08
10-Q	2012-03-31	Filed 2012-05-09
10-K	2011-12-31	Filed 2012-02-27
10-Q	2011-09-24	Filed 2011-11-03
10-Q	2011-06-25	Filed 2011-08-03
10-Q	2011-03-26	Filed 2011-05-04
10-K	2010-12-25	Filed 2011-02-22
10-Q	2010-09-25	Filed 2010-11-04
10-Q	2010-06-26	Filed 2010-08-04
10-Q	2010-03-27	Filed 2010-05-05
10-K	2009-12-26	Filed 2010-02-19

8-K	2020-07-30	Earnings, Exhibits
8-K	2020-06-19
8-K	2020-05-26
8-K	2020-05-20
8-K	2020-05-04
8-K	2020-04-30
8-K	2020-04-29
8-K	2020-03-27
8-K	2020-03-05
8-K	2020-02-12
8-K	2020-01-06
8-K	2020-01-01
8-K	2019-11-13
8-K	2019-10-28
8-K	2019-07-31
8-K	2019-07-30
8-K	2019-07-18
8-K	2019-07-07
8-K	2019-05-22
8-K	2019-05-01
8-K	2019-02-12
8-K	2019-02-08
8-K	2018-10-31
8-K	2018-08-01
8-K	2018-07-19
8-K	2018-06-06
8-K	2018-05-25
8-K	2018-05-02
8-K	2018-02-14
8-K	2018-02-02
8-K	2018-01-22

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TAP 10Q Quarterly Report

Molson Coors Brewing Earnings 2020-06-30