Good day, ladies and gentlemen, and welcome to the Molson Coors Brewing Company 2008 second quarter earnings conference call. (Operator Instructions) I would now like to introduce your host for today’s conference, Mr. Peter Swinburn, President and Chief Executive Officer of Molson Coors Brewing Company. Sir, you may begin.

Thanks, Matt. Hello and welcome to everybody. Thanks for joining us today. With me on the call are: Kevin Boyce, CEO of Molson Canada; Mark Hunter, CEO of Coors Brewers Limited; Sam Walker, our global Chief Legal Officer; and Dave Dunnewald, Vice President of Investor Relations. I also want to introduce two new leaders on our global finance team who are on the call with us today. First, Stewart Glendinning is our new Molson Coors' CFO. Stewart comes to the global team from his role as CFO of our U.K. business. Prior to that, Stewart held leadership roles in global audit and finance consulting firms. Secondly, Bill Watters joined the global team as Controller in June, moving over from his role as CFO of our U.S. business. Bill has more than 15 years of finance and accounting experience with our company in the U.S. and overseas. On the call today, Stewart and I will take you through some highlights of our second quarter 2008 results for Molson Coors Brewing Company, along with some perspective on the balance of the year. Then we will open it up for questions. So let’s get started -- with the creation of Molson Coors, we accomplished the most significant business combination in the history of U.S. beer. This new venture fundamentally changes the game in the U.S. beer industry by creating a stronger and more competitive company with the talent, brands, and scale to win in this critical market. Molson Coors is bringing new energy to the beer industry and will drive additional profitable growth for Molson Coors Brewing Company. This in turn provides important new financial resources for us to continue building our brands in our core markets and around the world. Turning to financial performance in the second quarter, we benefited from another…

Thanks, Peter and hello, everyone. I’ll start with the second quarter financial highlights. We grew total company volume 0.9% and net sales 4.8%. Meanwhile, our underlying pretax income grew 2.5% in a challenging cost environment. On the bottom line, underlying after-tax earnings of $172.6 million, or $0.93 per diluted share in the second quarter were 2% lower than a year ago. We will discuss our earnings performance today primarily in terms of underlying earnings, a common performance measure that excludes special and other one-time items from our U.S. GAAP results. Also, unless otherwise indicated, all financial results we share with you today will be in U.S. dollars. It is important to note that our second quarter underlying earnings exclude $103.9 million of special items. Nearly half of this total was a $50.6 million non-cash charge to reduce the carrying value of the Molson brands sold in the U.S. The remaining items are virtually all cash charges that offer attractive returns on investment, including expenses associated with the formation of Molson Coors, restructuring costs in the U.K., and transition costs related to an outsourcing contract. These adjustments to our U.S. GAAP results are described in more detail in the earnings news release we distributed this morning. Foreign exchange movements increased our total company pretax profit by approximately $6 million in the second quarter on an underlying basis, driven by an 8% year-over-year appreciation of the Canadian dollar versus the U.S. dollar. In segment performance highlights, starting with Canada, underlying pretax income of $154.4 million in the second quarter was 5.6% higher than a year ago, driven by an $11 million benefit from favorable foreign currency. Positive net pricing was offset by fuel and commodity price inflation and lower comparable Canada market volume. As we discussed last quarter, the new Modelo Molson…

Thanks, Stewart. In 2008, we remain focused on building strong brands and reducing costs in each of our businesses. To keep our brand momentum going this year, in Canada, we continue to focus on building our strategic brands. In the second half of the year, we anticipate continued aggressive competitive pricing activity, primarily in Quebec and Ontario. In the face of this activity, we are committed to remaining competitive while growing our strategic brands over the long term, including the introduction of new innovative packaging, promotions and advertising creative. Building on our Coors Light Cold Activated Can launch last year, we recently introduced Coors Light Cold Certified bottles across Canada, strengthening our Rocky Mountain Cold Refreshment with our consumers. We will continue to focus on capturing growth from our super-premium owned and partner-import brands, including the addition of Corona in Western Canada, which has strengthened our national portfolio. In the U.K., we anticipate a challenging trading environment in the second half of the year, due to the weakening U.K. economy. Nonetheless, we expect our U.K. business to benefit in the second half from cycling the U.K. smoking bans, and we will begin to accrue the benefits of the Heineken contract brewing arrangement, the Magners cider agreement, and recent supplier renegotiations. We will also cycle a one-time $9.5 million increase in pension expense in the third quarter last year. In addition, we continue to roll out our new cold dispense technology for Carling, with 20,000 new installations year to date, as well as the "Cold You Can See" thermo-chromatic packaging and our compact draught system. Coors Light volume is also showing encouraging growth, driven by solid retail partnerships and increasing consumer demand for lighter, more-refreshing beers. Based on the strength of our brands, and considering the challenging cost environment in each…

(Operator Instructions) Our first question comes from Mark Swartzberg from Stifel Nicolaus.

Thanks. Good morning, everyone. Peter, a couple of questions on Canada -- just a clarification, did you say it was up, volumes were up mid-single -- or I guess STR is up mid-single-digit in the month of July? And if so, can you tell us what’s happening local currency on net revenue per barrel? And then, also on Canada, Molson Canadian, down mid-single-digits in the quarter. Can you give us an idea of how that played out by region, or at least by Quebec and Ontario on that brand?

I’ll let Kevin jump in in a minute, as he can give you probably more detail on some of the questions but what I actually said on Canada for July is that the STRs were up low double-digit, and that basically represents a bounce-back in July from really what was unprecedented bad weather in the Canadian market in the quarter that we just experienced. We won’t give guidance on where we are in terms of margins but Kevin, do you want to pick up on the Canadian question, the Molson Canadian question?

Mark, the Molson Canadian is not sold actually in Quebec. It’s sold in the rest of Canada and if you look at it, it had a good period in the Atlantic and broadly speaking, the rest of the country was pretty consistent, about mid-single-digit decline in the quarter.

And Kevin, on that low double-digit increase in July for all of your brands, do you put all of that on weather on or are there also -- is it getting more promotional?

Well, to be honest, the weather wasn’t super in July either. I think that we had a couple of good weekends early in the month. We’ve got a couple of extra shipping days in Quebec but basically I think the country has decided, this is a little bit anecdotal, but the country has decided that it’s time to have summer, that there was enough rain in June, and we can see shipments from an industry perspective are quite strong in July and broadly speaking, it had to happen -- there’s no indications that the industry is in decline or anything like that. It was just some pretty bad weather for a prolonged period of time in May and June, which as I said has extended into July but a little bit of it would be promotional but most of it I think is simply returning to normal levels where the industry has historically grown year over year at about 1%.

And when you say up low double-digits, are we talking the same number of selling days in each period or are you getting the benefit of the selling days in that number?

Well, in Quebec, for example, you would get -- there’s a couple of extra shipping days and that’s -- in Quebec, our STRs are measured by shipping days, so there’s a little extra days in there but most of it would seem to be, or at least half plus would seem to be the industry strength and us participating or more than participating in that.

Okay, great. Thank you.

Thank you. Our next question comes from Kaumil Gajrawala from UBS.

This is actually Zack standing in for Kaumil. I have a quick question for you guys -- could you just comment on whether there were any cost-savings opportunities in the U.S. that you guys ended up delaying in the quarter, you know, waiting for the closing of the Miller Coors JV?

I’ll take that -- the short answer is no. We ran the business as we would. We got the cost savings that we wanted out and the Miller Coors people are working very hard at the moment putting together their plans to make sure that they get their cost savings and synergies out as well, so what you would expect, really.

Thanks.

Thank you. Our next question comes from Bryan Spillane from Banc of America.

Good morning. Peter, I guess one of the things that we’re sort of struggling with on this side today is visibility, and seeing that the cost inflation expectations have changed sequentially from the first quarter to the second quarter and now looking out into next year, and I think there’s about a 35%, 40% difference in the range of consensus estimates for next year between the high and the low end, can you talk a little bit about, as much as you can on some broader themes? First, where you stand today relative to past statements that management has made on share buy-backs. Also, is the language on your expectations for the phasing of the cost savings from the Miller Coors JV the same? Meaning is it still $50 million in year one, the first fiscal year after the JV closed? And then also, if you could talk a little bit about your expectations for the continuing of cost savings programs in -- resources for growth, I guess, savings in the U.K. and in Canada beyond this year.

Okay, Bryan, I’ll try my best to answer all of those for you and I’ll let Stewart jump in as well to help out as well. First of all, can I just -- before I address the specifics, can I just say we appreciate that this particular quarter is slightly unique. Miller Coors as a business is less than five weeks old and so we simply are not in a position to provide you with the sort of information that we would like to provide you with and which we will provide you with on an ongoing basis. So our apologies for that but it’s just -- and I’m sure you’ll understand why that is the case. In terms of your specifics, on share buy-backs, we really want the same visibility that you want on Miller Coors and what is likely to be our expenditure and their cash needs going forward. We’ll have that by the end of the next quarter and that will give us -- that will put us in a position where we can discuss that particular issue with our board clearly, so that’s where we are on that one. In terms of the synergy savings then, yes, everything is still in line with the numbers that we’ve given you previously, $50 million in the first year and so on. And again, Leo and his team will be able to update you on that at our next quarter announcements. And in terms of the cost savings, our resources for growth program is bang in line Canada, bang in line in the U.K. I think we said in the announcement that we are bang in line with hitting the numbers that we’ve already given you for this year and again, the Miller Coors people are working on their numbers and we’ll have greater visibility on that at the end of the third quarter. But at the moment, certainly we are very confident that we are in line with our cost saving-program.

The only thing I would add to that, Bryan, is that if you looked out for ROT this year, I mean, we’ve delivered 60% of the numbers already. We feel confident about this year. We are taking a look at next year in concert with Miller Coors and on that subject, we feel quite confident that to the extent that there are any detrimental effects from the Miller Coors joint venture, that that will be offset by additional savings they had realized on their side.

Okay, great. Thank you, guys.

Thank you. Our next question comes from Carlos Laboy from Credit Suisse.

Good morning. Could you expand on the importance of the Corona brand in Canada? You mentioned it briefly, and for your growth, with Modello on the block, if Modello goes to InBev, how do you hang on to the brand? And if you lose it, how does it affect your Canada earnings?

I’ll let Kevin again jump in on the detail of it but you are well aware we’re not going to speculate on anything that might happen in the future. We’ve got no more insight into that than you have, to be honest with you, but Kevin, do you want to talk about the Modello brand specifically in Canada?

The Modello brand, it’s hard to give comparisons because we’ve added Modello to Western Canada this year, so it obviously distorts the numbers. But it is a sizable brand that continues to enjoy good growth, both in the east and western part of Canada, and we’ve had a long relationship with Corona and the creation of the joint venture for us and for them we think is a great opportunity to continue to grow in the country.

How important is it to your portfolio and to your growth? It’s a pretty important brand in the portfolio, no?

Yeah, it’s within our -- it’s one of our top 10 brands. It’s not our biggest but it’s certainly not our smallest. As I said, it’s -- I’m trying to give you a size without giving the actual share here but it is -- I think it’s fair to say it’s one of our more meaningful brands. It’s after obviously Coors Light and Molson Canadian but it’s a very substantial brand and it plays a very important role in our super premium portfolio.

Thank you.

Carlos, just to clarify because maybe we didn’t make it clear -- our agreement with Modello for the Corona brand in Canada is a long-term agreement, so there’s not question of us losing it, if that’s really what you are trying to get at.

That’s the concern.

No, if that answers your concern, hopefully we’ve done so.

Thank you.

Thank you. Our next question comes from Judy Hong from Goldman Sachs.

Good morning. Kevin, a couple more questions on Canada, particularly focusing on the pricing environment there -- if I look at revenue per barrel in the second quarter, it looks like it was more moderate growth than the first quarter, while the fuel and commodity outlook has worsened. So I’m hoping to get a little bit more color in terms of the competitive promotional activity, as well as your promotional activity. And with commodity outlook getting worse, your confidence level in taking more pricing to offset the commodity inflation there.

In the second quarter, we still got pretty good pricing in the marketplace. Our pricing grew, our MSR grew about 3% per barrel, which is pretty good growth. The first quarter was a little bit better because we had taken pricing a little bit earlier in the year than in previous years, so our comparables versus previous year were a little bit better. But if you look at it on an ongoing basis, obviously we are facing a challenging cost environment. There’s still a province or two where we have yet to take pricing this year and obviously we’ll be looking very seriously at those quite soon. But I think given all the cost pressures, we will be going back even to markets where we’ve already taken some price this year and look at those markets and say should we be re-looking at our price for this year and ongoing to try to offset some of these cost increases.

And what are you seeing from your competitors and their pricing?

Well, I think they are right in there with us in terms of -- it’s a pretty aggressive marketplace right now. One of the things with the kind of weak industry in May and June, it’s caused people to chase volume a little bit and worry about what the summer was going to be like. So I think what you are seeing out there now in a couple of markets is some pretty aggressive discounting, probably more aggressive than a year ago right now, as people are chasing a little bit of volume. This market has historically gone in some of those cycles and we would expect that things will work their way through. Everybody is facing the same challenge and cost environment but right now, it is pretty aggressive out there.

Okay, and then I think your MG&A in Canada was down 6% if you exclude some of the factors that affected the comparability. Is that more of a timing issue or cost savings help the MG&A line, or is your brand spending actually declined in the second quarter?

Well, our marketing and sales, if you like, rather than MG&A on a comparable basis year over year is about flat.

Okay, and then a couple of questions in the U.K. market -- you talked about the second half potentially getting better as you cycle the smoking bans a year ago. Are you seeing any evidence that that is indeed happening? Sales to retailers were down mid-single-digits in July, so it doesn’t really look like it got a whole lot better. And then secondly on pricing, it seems like you got a little bit more promotional in off-premise outlets and I’m wondering if this is something that we should look forward to going forward, and are you pleased with the returns that you are getting as you ramped up promotional spending in that part of the channel?

With regard to the industry, I mean, what we’ve seen is basically the industry volumes have accelerated from a decline perspective through the second quarter, so second quarter was down about 4.6%, the first quarter was down a couple of percent, so the total market at the half year is down just over 3, and we would expect the market for the full year to be down around about 3.5% in total volume terms. That still has a little bit of uncertainty associated with it because although we’ll be cycling the smoking ban from last year, clearly the U.K. economy is not in great shape so consumer spending and disposable income is clearly under a lot of pressure. But we’re currently forecasting total market volume to be down pretty much in line with where the market is at the half year, around about 3.5%. With regard to pricing, we I think intimated at the start of this year that we wanted to be more selective in some of our promotional activity in the take-home market. We lost share as a business last year and as we’ve come through the first two quarters of this year, we’ve managed to achieve both pricing growth and market share growth, which is really the formula that we’re looking to repeat on an ongoing basis. Our pricing growth was a little bit lower in the second quarter, principally because the take-home market, the off-premise market took up a larger proportion of the overall volume in margins and the take-home market are generally lower than they are in the on-premise market. But we will continue to push for selective promotional activity through the balance of this year.

Okay, and then my last question, a clarification on the cash flow outlook from this year. That didn’t change even though the tax rate guidance went up -- is that correct?

That’s correct, Judy. That tax change won’t affect us from a cash flow perspective.

Okay. Thank you.

(Operator Instructions) Thank you. Our next question comes from Christine Farkas from Merrill Lynch.

Thank you very much. A couple of questions, if I could -- with respect to your Canadian market where your costs of goods or the raw material inflation was up eight points, and this was offset by 2.5 points of your cost savings, this ratio seems a little bit lower, of course, than what you reported in the past with your cost savings program offsetting a lot of the inflation. Can you talk a little bit about firstly, is that ratio correct going forward, given the inflation pressures that we are seeing? And then with respect to North American raw material, specifically on your packaging inflation and your AG inputs, we can all see what fuel is doing, what is your hedging position and outlook on those two particular components? Thank you.

I’ll take those. Let’s start with the inflation has been higher than in previous quarters, obviously. Peter mentioned or Stewart may have mentioned that for the rest of the year, we see more mid-single-digit increases. A lot of what you saw in this quarter has been driven by a combination of agriculture but obviously fuel is an important part of our business, as we have DSD delivery system in some provinces and we share a system through either BBL or TBS with some other brewers, so we’ve seen some pretty dramatic increases through there, and some of that going forward will depend on what’s happening. You know that right now, oil is moderating somewhat, which is good news for us, but we are forecasting that it’s not going to get a whole lot better. It’s certainly for the balance of the year, the agricultural products we’ve kind of built in today’s pricing, as well as oil. So if there’s any upside in that, it would be in the sense of if there’s some substantive movements downward in oil.

Do you hedge where you can on these inputs?

Just to cover that point, we don’t as a rule sort of get into all of our specifics of hedges, but all of our hedging is taken into account in looking at our going forward COGS for the rest of the year, which we’ve outlined at a sort of mid-single-digit rate.

Okay, great. And then just a follow-up question on the U.K., with respect to the higher pricing, you’ve talked about a buy-ahead ahead of the higher excise taxes. In the U.K., your pricing was up on core brands 0.6%. Can you talk about whether or not you can pass on more pricing there to offset potentially some of the volume decline?

We’re currently reviewing pricing options for the balance of this year. It’s going to be a combination of our SKU mix and driving more profitable packs and we are currently reviewing whether there is any room for a more blanket price increase, but that’s still work in progress.

Okay, great. That’s all for me. Thanks.

Thank you. Our next question comes from Patricia O’Donnell from [Kingdom]. Ms. O’Donnell, your line is open. Our next question comes from Bryan Spillane from Banc of America.

Thanks for taking the follow-up. I just wanted to get a little perspective on the U.K. There’s been a pretty -- I guess an accelerated level of pub closures in the last year or so. I think I read one story where there’s maybe 1400 pubs closed last year and they are closing at a rate of two or three per day right now. So two questions related to that -- one, are your volumes and sales being influenced or affected by sort of a reduction of inventory in the trade? If you’ve got fewer customers, there’s not only just less throughput but maybe less stock in the trade, so maybe like a de-stocking effect. And then the second thing is does it still make sense to spend the capital on cold dispense equipment right now if the on trade is declining at the rate it is? And I think Carlsberg said this morning that 2Q on trade was down something in the neighborhood of 9% in the second quarter. So could you just talk a little bit about that and how that’s affecting your numbers and maybe affect your thinking going forward?

With regard to the pub closures, I mean, clearly that’s a concern for the long-term viability of the pub industry in the U.K. I think what we are seeing at this stage is that the pubs that are closing tend to be the smaller volume pubs, so pubs you would describe as kind of the tail end of the market, so their impact on our overall performance relative to the industry is pretty small at this stage. So I would rule that out as kind of a material issue in the short-term but clearly as we look longer term at pub closures generally and on-premise performance is a concern for us. With regard to CapEx, we will continue to invest in those outlets that we think can generate a material return for us, so we are very selective with regard to where we are installing cold dispense. It’s all being driven on the back of our core brands and brands that we see having a long-term future, so it’s important that those brands represent themselves effectively. But this isn’t a ubiquitous approach across all customers. It’s a selective approach and we look to invest where we can maximize the returns. It tends to be with those customers who are investing in the retail proposition and where our brand positioning is reflected at the point of purchase.

Okay, great. And if I could just follow-up on the -- again in the U.K. on the pricing, were the excise tax increases passed through by retailers or did they not pass that, the excise tax increases through to consumers?

It would certainly appear that within the off-trade market, the excise increases were not passed through so we’ve seen very little movement in off-trade pricing. And the on-premise, most of the excise tax increases seemed to have been passed through.

And does that potentially raise the question or a flag that there could be some more aggressive regulatory action taken? I mean, part of the -- my impression has been part of the reason why excise taxes were increased were to raise revenue but part of it is a public policy action to try to curb consumption, and it seems both in beer and wine that the off-trade has sort of ignored the suggestion that shelf price ought to move up. First of all, am I on target with that and if so, is there a chance that maybe there’s going to be potentially more aggressive regulation to try to ensure that you don’t get the same level of discounting in the off-trade?

It’s a good observation, Bryan. You have to connect that to two things; the first thing you need to connect is the commentary from the current U.K. government and other interested bodies about their concern relating to aggressive promotional pricing in take-home and the need for something to change. And then you have to connect that to the fact that there’s going to be an election in the U.K. probably in the next 18 months, so the likelihood of the current government putting through a material change that affects retail pricing, I would suggest -- and this is a pure personal perspective -- would be pretty limited. There is a lot of discussion around this topic and we will wait to see whether there will be any movement from the government, but I would just set it in the context of a forthcoming general election.

Okay, great. Thank you very much.

(Operator Instructions) I am showing no further questions.

Okay. Thanks very much, Matt. We’ll call that a wrap. Thank you, everybody, for joining us and thanks very much for your interest in Molson Coors. We look forward to speaking to you again next quarter.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. You may now disconnect. Everyone have a great day.