Molson Coors Beverage Company (TAP) Q1 2010 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Molson Coors Brewing Company 2010 First Quarter Earnings Conference Call. [Operator Instructions] I would now like to introduce your host for today's conference call, Mr. Dave Dunnewald, Vice President of Investor Relations. You may begin, sir.

Thanks, Kevin. Before we get started, I want to paraphrase the company's Safe Harbor language. Some of the discussions today may include forward-looking statements. Actual results could differ materially from what the company projects today, so please refer to its most recent 10-K and 10-Q filings for a more complete description of factors that could affect these projections. The company does not undertake to publicly update forward-looking statements whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Regarding any non-U.S. GAAP measures that may be discussed during the call and from time to time by our executives in discussing the company's performance, please visit the company's website at www.molsoncoors.com, and click on the financial reporting tab of the Investor Relations Page for a reconciliation of these measures to the nearest U.S. GAAP results. And with that, I'd like to now turn it over to Peter Swinburn, President and CEO of Molson Coors. Peter?

Thanks, Dave. Hello, and welcome, everybody. And thanks for joining us today. With me on the call is Stewart Glendinning, Molson Coors, CFO; Leo Kiely, CEO of MillerCoors; Gavin Hattersley, CFO of MillerCoors; Dave Perkins, CEO of Molson Coors Canada; Mark Hunter, CEO of Molson Coors U.K.; Kandy Anand, President of Molson Coors International; Sam Walker, Molson Coors Chief Legal Officer; Bill Waters, Molson Coors Controller; and Dave Dunnewald, Molson Coors Vice President of Investor Relations. On the earnings call today, Stewart and I will share highlights of our first quarter 2010 results for Molson Coors Brewing Company, along with some perspectives on the balance of 2010. And then as usual, we will open it for questions. So let's get started. In the early part of 2010, we continue to face challenging economic and beer industry conditions primarily as the result of high unemployment and the slow recovery in consumer confidence. These conditions negatively affected our company's volume and financial performance with Molson Coors worldwide volume declining 3.8% and underlying pretax income down 19% versus a year ago. Adding the impact of a much higher tax rate this year, underlying after-tax income decreased 29.5% in the first quarter. More importantly from our perspective, we are seeing signs of progress in key areas of our business as a result of our continued investment and focus on brands and innovation. In Canada, as we indicated on our last earnings call, challenging pricing and cost comparisons resulted in lower earnings in the first quarter versus a year ago. But our strong volume and market share performances demonstrated the benefit of the brand innovations we rolled out late last year and early this year. Based on the current environment, the strength of our Canada portfolio will drive improving results over the balance of the year. And despite a 3.6% drop in MillerCoors domestic volume, our U.S. underlying income grew slightly in the first quarter due to positive pricing and aggressive cost reductions. We are pleased with these results in a difficult volume quarter and look forward to improved sales as the economy recovers. In the U.K., the strength of our brands continue to boost margins as they have over the past two years. Having achieved this, we now expect to drive more stable U.K. market share as the year progresses. Overall, our core business remains strong and well positioned to take advantage of growth opportunities as the economy recovers. During our most recent briefing between investors and analysts in early March in New York, we provided a detailed look at how we are executing our strategies around brands, innovation and cost reductions. Let me take a moment to update you on our progress against those priorities in the first quarter. On brands, despite tough economic conditions, we remain committed to a strategy of continued brand investment because we believe that a strong portfolio of brands is the key to growing profitably as markets improve. In Canada, in the first quarter, we saw growth in Molson Canadian for the first time in four years. And Coors Light continued to achieve strong growth. In fact, Coors Light is now the largest selling beer in Canada. In the U.K., we continue to see the benefits of our brand-building and pricing strategies. And In the U.S. industry volume remains weak, but five out of our six strategic brands again grew market share in the first quarter. And we are confident that our branded innovations efforts will be rewarded as conditions improve. When we met with many of you two months ago in New York, we discussed our commitment to innovation as a driver of growth and the ability of Molson Coors to own innovation and lead the industry in this area. I'm especially pleased with the progress we've made over the past few months to bring innovations to market that offer compelling value propositions for beer drinkers. Key examples include introducing or expanding Molson M, Canadian 67, Rickard's Dark, Keystone and Miller Chill in Canada, along with home draft, aluminum pint bottles, Blue Moon cans, wartex bottles for Miller Light and code-activated packaging for Coors Light in the U.S. and Blue Moon draft, cold-activated cans for Coors Light and taste-lock cans for Carling in the U.K. These innovations help to drive positive market share in the U.S. and Canada in the first quarter and positive pricing in the U.K. On costs, we committed to deliver $150 million of resources for growth to savings by 2012, along with our share of $700 million of savings of MillerCoors. In the first quarter, we exceeded our cost reduction targets with $15 million of RFG2 savings and $60 million of MillerCoors cost reductions, underscoring again our ability to meet or exceed our cost commitments through our disciplined approach to these critical initiatives. We have also achieved a favorable resolution of Brazilian tax indemnities and announced a dividend increase and the purchase of a controlling share in the Si'hai Brewery in China. Stewart will discuss these in the context of our $760 million free cash flow target and our cash use priorities. So with that as an overview, I'll turn it over to Stewart to review first quarter financial results and highlights of our brands, innovation and cost reductions across our company. And then, we'll cover the outlook for 2010. Stewart?

Thanks, Peter, and hello, everyone. I'll start with the first quarter financial highlights. Worldwide beer volume for Molson Coors declined 3.8% from a year ago, driven by industry weakness in the U.S. and U.K., as well as our pricing strategy in the U.K. On the bottom line underlying after tax income of $69.7 million or $0.37 per diluted share, decreased 29.5% from a year ago due to lower volume, higher marketing, general and administrative expense and a higher effective tax rate this year. It is important to note that our first quarter underlying earnings excludes some non-core gains, losses and expenses primarily related to a sale of real estate, changes in the value of our fastest cash-settled total-return swap in MillerCoors integration costs, as well as net special charges of $2.6 million. The adjustments to our U.S. GAAP results are described in detail in the earnings release we distributed this morning. Also, unless otherwise indicated, all financial results we share with you today will be in U.S. dollars. And results comparisons will be versus the comparable prior-year period. In segment performance highlights starting with Canada. Underlying pretax income and local currency decreased 14% in the first quarter. Strong volume in operations, cost reductions in the quarter were more than offset by cycling lower levels of price discounting a year ago, along with higher commercial and overhead costs this year. Our prior-year results included overhead cost reductions, favorable impacts from consolidating the beer stores in Ontario and equity income from our interest in the Montréal Canadiens hockey club. These prior-year impacts which did not reoccur this year accounted for more than 70% of the decline in first quarter Canada local currency income. In U.S. dollars, Canada underlying earnings decreased 3.3% to $56.2 million in the first quarter, which reflects the $9 million benefit of a 21% year-over-year increase in the Canadian dollar versus the U.S. dollar. So let's review some highlights. Our Canada sales to retail or STRs for the calendar quarter ended March 31, increased 5%. We estimate that about half of this increase was driven by our successful sponsorship of the Winter Olympic games in February along with an earlier timing of the Easter holiday this year. Strong brand performance also drove our Canada STRs with mid-single-digit growth from Coors Light and Molson Canadian brands along with positive growth for Molson Dry and Rickard's, partially offset by a decline in Molson Export in our nonstrategic brands. We are off to a solid start in the revitalization of Molson Canadian by leveraging our sponsorship during the Olympics, launching new ad creative and packaging, continuing to drive distribution of Molson Canadian, of Canadian 67, and ensuring competitive pricing in our regional markets. During the first quarter, we also launched Molson M into the Atlantic region, Keystone into the West and Ontario regions, and Rickard’s Dark across the rest of Canada. These brand initiatives along with the addition of Granville Island volume and incremental sales from the Vancouver Winter Olympics held in February, helped us to increase our market share a 0.5 a point versus a year ago. Total Canadian beer industry sales to retail increased an estimated 3.8% in the calendar first quarter, driven in part by the Winter Olympics and Easter holiday timing. Our Canada sales volume at 1.8 million hectoliters in the first quarter, up 3.3%. Net sales per hectoliter declined 2.7% in local currency. About 2/3 of this decline was driven by cycling our less-competitive price position in the first half of 2009, which we expect to fully cycle by this summer. During the second quarter last year, we began implementing strategies to make our brands more competitive in Canada, including more competitive pricing for some brands and markets. Balance of the decrease in sales per hectoliter was due to lower export sales to the U.S. Cost of goods sold per hectoliter decreased 4.6% in local currency in the first quarter driven by the net effect of two factors. First, savings from our RFG2 program reduced cost of goods sold per hectoliter by more than three percentage points. And second, lower export volume to the U.S. reduced the cost of goods sold rate by about 1.4 percentage points. Marketing, general and administrative expense in the quarter increased 12.7% in local currency, with a little over 1/3 of the change driven by higher commercial and innovation spending to build brands. The balance of the increase was due to prior-year benefits that included the last two months of consolidating the Ontario beer stores, along with adding Granville Island overhead costs this year. Other income decreased $5.5 million in the first quarter due to foreign currency movements and the lack of the Montréal Canadiens equity income this year. Moving to our U.K. business. In the first quarter, underlying pretax profit of $2.1 million represents a decrease of $1.4 million due to a $7.1 million non-cash increase in defined benefit pension expense. If we excluded the first quarter increase in pension expense, our U.K. underlying pretax income would have more than doubled driven by positive benefits of continuing to leverage our contract brewing arrangements, brand-building efforts and strong pricing. Our first quarter U.K. results include only minimal impact from foreign exchange movements. By looking at first quarter highlights, our U.K.-owned brand volume increased 10.9% due to declining industry volume, partly as a result of poor weather. Volume was also impacted in the first quarter as we worked on concluding contract negotiations with some of our major customers, especially in the off premise channel. Total U.K. beer industry volume declined approximately 5% in the first quarter. Net sales per hectoliter of our owned products increased 21% in local currency with about 13 percentage points driven by higher pricing in all channels as we continued to benefit from our strategy and forego low-margin volume and eight percentage points as a result of positive sales mix, predominately due to growth in Magners Cider and Cobra. Cost of goods sold per hectoliter of our own products increased 22% in local currency driven by five factors: Incremental pension expense represented four percentage points of this increase, 1% was due to input cost inflation; seven percentage points were due to mix, driven by growth in Draught Magners Cider and Cobra and higher employee related costs; seven percentage points of the increase was due to fixed cost deleverage related to lower owned brand volumes; and three percentage points predominantly relating to 2009 performance that we do not expect impact the balance of this year. Marketing, general and administrative expenses in the U.K. increased 10% in local currency with six percentage points due to higher pension expense this year. Balance was due to information systems investments and the cost of adding the Cobra sales force and higher employee-related costs. In our U.S. segment. Underlying pretax income increased 0.4% to $94.6 million in the first quarter driven by MillerCoors results. Looking at total MillerCoors P&L. First quarter underlying net income increased 0.4% to $217.2 million due to favorable U.S. pricing and delivery of cost-savings, which were offset by soft volumes, cost deleverage and commodity price pressures. MillerCoors domestic STRs declined 4% driven by continued weak economic conditions affecting the entire industry. Domestic sales-to-wholesalers declined 3.6% driven primarily by lower retail sales. Total net revenue decreased 0.9% to $1.7 billion. Nonetheless, pricing remained strong in the quarter as domestic net revenue per hectoliter, which excludes contract brewing and company-owned distributor sales increased 2.1%. Cost of goods sold or COGS per hectoliter increased 5.9% driven by increases in commodity costs with significant increases in brewing materials, malt and corn, packaging materials, glass and aluminum and higher fuel costs. COGS per hectoliter continued to be negatively impacted by the absorption of fixed and semi variable costs across lower production volumes. Marketing, general and administrative expense decreased by 9.2% primarily due to synergies. In our International and Corporate segment, the underlying pretax loss for International and Corporate combined was $65.8 million in the first quarter, an increase of $17.4 million driven by three factors. First, higher interest expense due to a year-over-year appreciation of the Canadian dollar versus the U.S. Dollar; second, cost to implement our RSG2 cost reduction initiatives; and third, the timing difference in the company's incentive compensation expense, which is more heavily weighted towards the first quarter this year versus the second quarter in previous years. As a result, first quarter of Corporate net interest expense increased $4.3 million. And Corporate general and administrative expense increased $12.3 million to $33.4 million. It is important to note that a significant portion of the first quarter of Corporate G&A expense increase was due to timing, or infrequent factors. As a result, we expect Corporate G&A to be roughly flat for the balance of this year. Our international team grew sales volume nearly 20% in the first quarter up a small base, driven by sales in China and Europe. Speaking of China, we announced this morning that we have signed an agreement to form a joint venture with Hebei Si'hai Beer Company in China for a total cash investment of approximately $40 million. We will gain a 51% controlling interest in the joint venture, which will be called Molson Coors Si'hai Brewing company. This JV will give us access to a quality regional brewery for the production of Molson Coors brands along with sales of the regionally strong Si'hai brands. We expect this new venture to be accretive in the short term and to grow long-term shareholder value by reducing costs and increasing the growth potential for Coors Light in the world's largest beer market by volume. We plan to close the transaction this summer. Back to first quarter results. MG&A expense for international was $11.6 million in the quarter, an increase of $0.6 million due to brand investments in our priority international markets. Corporate other expense was $7.4 million driven by a $6.9 million non-cash mark-to-market loss related to the total return swap we arranged with respect to Foster's common stock. As a result, as usual, mark-to-market to gains and losses on the Foster swap are excluded from our underlying earnings. Now, highlights of our cost reduction initiatives. We kicked off our RFG2 program in the first quarter with $15 million of cost-savings towards the program's three-year goal of $150 million. In addition to our RFG2 savings, MillerCoors delivered $53 million of incremental cost synergies in the first quarter toward the original $500 million three-year synergy commitment. MillerCoors also delivered $7 million of cost reductions against its new $200 million cost-savings program to be delivered by the end of 2012. We benefit from 42% of the MillerCoors cost savings. Moving beyond, operating business performance. Our first quarter effective tax rate was 16% on a reported basis and 19% on an underlying basis. With a regard to our balance sheet during the first quarter, we reached an agreement with FEMSA to settled some indemnity liabilities related to purchase tax credits in Brazil. Resolution of these liabilities stem from a Brazilian tax amnesty program announced last year for a cash payment of $96 million. This favorable settlement eliminated $284.5 million of maximum potential tax claims, of which $131.2 million of indemnity liabilities were accrued on our balance sheet. The result is a $42.6 million gain related to discontinued operations in the first quarter. With this settlement a reserve of less than $25 million for Brazil indemnities remains on our balance sheet. Total debt at the end of the first quarter was $1.74 billion. And cash, and cash equivalents totaled $657 million, resulting in a net debt of $1.08 billion. The first quarter each year is generally a cash-use quarter because of the seasonality of the beer business. The cash flow for the first quarter of this year reflected a net cash use of $34 million, which was made up of $86 million of operating cash flow, plus $2 million of proceeds from asset sales, minus capital spending of $23 million and $99 million of net cash contributed to MillerCoors. This free cash flow result was an improvement of $46 million primarily due to improved working capital this year, partially offset by an increase in net cash provided to MillerCoors. If we exclude cash uses by MillerCoors to capture synergies and to buy the distribution rights for Miller and other brands in Denver, along with the return of collateral cash related to MillerCoors commodity hedges, our underlying free cash flow for the first quarter total a negative $5 million cash use, a substantial improvement from underlying free cash flow of negative $61 million in cash use a year ago. Note that the Brazil settlement was not paid until the first day of our fiscal second quarter, so this cash use will be included in second quarter results. With regard to our use of free cash flow, in addition to the favorable Brazil settlement, we announced yesterday our third consecutive annual dividend increase, this time a 16.7% increase to an annual dividend rate of $1.12 per share. Looking forward, we continue to expect full-year 2010 MG&A expense in the International Corporate segment of approximately $180 million plus or minus 5%. We now forecast full-year 2010 Corporate interest expense to be approximately $110 million at today's foreign exchange rates. Turning to our effective tax rate. We expect our full-year underlying tax rate for 2010 to be in the range of 18% to 22%, assuming no further changes in tax laws. We continue to expect our normalized long-term tax rate to be in the range of 22% to 26% after this year. Our 2010 capital spending outlook remains approximately $150 million for the full year. As always, this guidance excludes MillerCoors. At this point, I'll turn it back over to Peter for a look ahead to the balance of 2010. Peter?

Thank you, Stewart. In 2010 we continue to focus on brand-building, innovation, reducing costs across our company and generating cash. In Canada, we've introduced new brands and innovation to strengthen our portfolio. The early results are encouraging. As indicated by our positive Canada share trends in the last two quarters. This brand-led focus will continue with the upcoming expansion of Miller Chill across Canada early this summer. By summer, we also expect to have cycled nearly all of the step-up in price discounting activity last year. At the same time, the Canadian dollar is strong. The economy has started to show encouraging signs of improvement and based on the strength of our brands, we are achieving moderate, selective price increases in most regions of Canada. In the U.K., the business has continued to make substantial progress in improving profitability. We are succeeding with our strategy of value ahead of volume, which continues to strengthen our overall position within the U.K. market. Although the U.K. business lost market share in the first quarter, we are confident that our share trends will improve in the balance of the year. We are taking a number of actions in key areas of the business to drive momentum. In the off premise, trading deals have been signed with all major retail chains. In the on premise, nearly all major customer contracts have also been renegotiated with annual price increases on an average three-year contract life. We are growing portfolio strength in a number of areas, including Cobra performing ahead of acquisition objectives and Coors Light growing at strong double-digit rate in the off-premise, and increasing share in Ireland. In the U.S., we successfully grew profit despite a challenging selling environment in the first quarter. As we enter the key summer selling season, we're investing in brand innovation, chain account focus, execution, quality and people to win in U.S. beer. As we continue to deal with economic and competitive pressures, we remain focused on building our brands and managing costs. Following, are the most recent volume trends for each of our businesses early in the second quarter. In Canada, our sales to retail in April declined at a low single digit rate due in part to the Easter holiday shift. In the first five weeks of the second quarter, our U.K. STRs have decreased at a low double-digit rate. In the U.S., for the four weeks ending April 24, MillerCoors STRs declined at a low-single-digit rate due to continued industry softness with some trend improvement aided by favorable weather in April. As always, please keep in mind that these numbers represent only a very small portion of the second quarter and trends could change in the weeks ahead. In the area of cost outlook by business. In Canada, we continue to expect our 2010 cost of goods sold per hectoliter to decrease at a low-single-digit rate in local currency driven primarily by the delivery of RFG2 cost-savings. In the U.K., we now expect 2010 cost of goods per hectoliter of our own product to increase at a high single-digit rate in local currency. Drivers include the step up in pension expense this year, a low-single-digit increase in input cost inflation, which is a substantial improvement over last year, and a shift in our sales mix towards the high cost off-premise channel, as well as product mix reflecting more Cobra and Draught Magners volume. We expect cost of goods comparisons to be more challenging in the first half of the year than in the second half, due to less fixed cost deleverage and cycling of the Cobra acquisition in the second half. In the first quarter, we also agreed a multi-year agreement to contract brew ales for Carlsberg beginning in 2011 which will help us to continue to maximize U.K. asset utilization. In the U.S., MillerCoors remains on track to deliver $750 million in total synergies and other cost-savings by the end of 2012. Supply-chain integration continues to proceed on schedule. The brewery optimization project is nearing completion as beer production moves are more than 90% complete. The next phase of supply-chain integration will include the realignment of teams in quality, engineering and packaging and manufacturing and supply-chain development. We expect U.S. COGS per hectoliter will be up at a low-single-digit rate for the full year of 2010, though we anticipate some degree of fluctuation within the year. We expect to see a low-single-digit increase in the second quarter and approximately flat for the second half of the year. So to summarize our discussion today, despite challenging economic and industry conditions, we have continued to execute our strategies for brands, innovation and cost reduction, which we outlined in New York earlier this year. We are encouraged by the trends we are seeing as a result of the right investment in brands and innovation and aggressive cost reductions in each of our businesses. As a result, we believe our company is stronger and better positioned to take advantage of growth opportunities as the economy recovers. Now before we start the Q&A portion of the call, a quick comment. Our prepared remarks will be on our website for your reference within a couple of hours this afternoon. Also, at 2:00 p.m. Eastern time today, our Investor Relations team, led by David Dunnewald will host a follow-up conference call, essentially a working session for analysts and investors who have additional questions regarding our quarterly results. That call will also be available for you to hear via webcast on our website. So at this point, let's open it up for questions.

[Operator Instructions] Our first question comes from Christine Farkas with Bank of America Merrill Lynch.

I had a question on Canada, a couple of questions on Canada, if I could. First thing on pricing, down 2.7%. It seems to me and please correct me if I'm wrong that sales mix might have been favorable. And I think there was a step up in Quebec minimum pricing in core [Audio Gap] Take us through the net of the pricing and the mix and perhaps regionally, where you might have seen some more discounting?

Yes, Christine, it's Dave Perkins. So on the 2.7, about 2/3 of that is due to the cycling, our less competitive position last year. What we've seen this year is reasonable stability in the pricing environment. I think Quebec has been quite stable. We haven't seen much change in recent quarters. What we have seen obviously as we've moved through successive quarters is a drop off of the benefit that we get from general price increases that went into effect over a year ago. So that actually is the reason that we've seen this drop off in NSR per hectoliter. There really hasn't been the kind of mix issues -- the one thing I would point out is in the last few weeks and months, and in particular, during February and March, we were able to put in place moderate price increases on selective brands and packages in nine of our 10 provinces. So there has been price increases going into effect.

And if I can follow up on cost of goods, in Canada, it's sharply different than in the U.S. where you're enjoying lower cost of goods, where in the U.S. it's higher. So I'm trying to understand the picture on the commodities front, perhaps offset by the fixed cost leverage. Maybe you compare why we're seeing such a difference in that management?

Stewart here. Maybe I could pick that up. I think the first thing is to bear in mind that each of these geographies got a fairly different mix just in terms of costs. So your U.S., for example, has about 50% of its -- roughly half of its costs are in packaging materials. Whereas in Canada, it's less than 1/3. So right there is a big difference in terms of why you're not seeing that packaging cost coming through in Canada quite as strongly. The other thing to bear in mind in Canada is that over the last year you've seen a strengthening of the U.S. dollar by approximately 20%. And that will have influence some areas they otherwise would have seen cost increases in, particularly metals and fuel.

Our next question comes from Mark Swartzberg with Stifel, Nicolaus. Mark Swartzberg - Stifel, Nicolaus & Co., Inc.: A couple questions on Canada, starting either with you, Stewart or you, Dave. On the MG&A, if we assume kind of a flat volume picture in Canada for the rest of the year, is a 4% kind of increase in MG&A the right way to be thinking about it or a reasonable way to be thinking about it, local currency?

Well, Mark, I can't give guidance on that. Let me just review a couple of facts that will be helpful. Of the 12.7% increase in MG&A in our first quarter, 1/3 of that was increased commercial spend. The balance is related to Granville and some prior-year benefits, such as BRI deconsolidation and some other overhead savings. So I just point that out and then the other thing I just remind you is last year in 2009, you'll remember in the first half of the year, our MG&A was flat over the prior year. Q3, we increased 4% and Q4, we increased 14%. So there's obviously implications to cycling that. So hopefully, that's somewhat helpful to you. Mark Swartzberg - Stifel, Nicolaus & Co., Inc.: Dave, also on Keystone, trying to get my arms around how significant this could be in Canada. Can you -- first -- I guess a couple of questions, number one, how is it priced versus Coors Light and Molson Canadian? And then secondly, how is it going? And thirdly, I think it's only, you said only in Western Ontario, what's your intention or what's the potential for it to be in other provinces as we move through the year?

Well, Keystone is actually in Ontario and Western Canada, so it's in a total of five provinces. They'd account for around 2/3 of the country. So it's in significant geography. The value -- it's priced in the value segment, so it is up against other value brands in the marketplace. And the value category in those markets that I've talked about would be in and around 20% of the market. Now the significance of the brand over time, we'll see. I mean, we're in very early days. We're driving distribution and awareness and trial right now. I'm pleased with what I'm seeing in the early days. But as I say, we've only been in a few weeks really. We're at the distribution levels that we want now, we have TV advertising supporting the brand. And so we're starting to build the awareness in trial that we need. But, it's very difficult to give you a clear sense of the upside potential on this at this point. Mark Swartzberg - Stifel, Nicolaus & Co., Inc.: And than lastly Dave, why not keep talking about Canada here. Limelight obviously had a great summer last year. Can you just give us a sense how they're performing here in the early spring? And in your mind, what are the parts of your portfolio that are most directly going against them?

So the lime products last summer did very well during their first two months. They actually tailed off quite significantly post-Labor Day, post the September long weekend. And we've seen some discounting. I think because of inventory builds on some of the competitive products. So far, what we've seen this spring is not a major pop-up. But I mean the limes are still significant. We've come in with Miller Chill, which is our product in that segment. Again, we're in early days with that as we are with Keystone, we're building trial and awareness. It is going in across the country so it'll be a full national launch. And it will be supported in a meaningful way. So we feel good about our level of competitiveness. So far, we haven't seen the big bump up in the segment yet. But I think we're watching for the May long weekend which is when the warmer weather kicks in and usually you'll see products like this start to take hold.

Our next question comes from Marc Greenberg with Deutsche Bank.

Peter, during the call, some of the press reporting that MillerCoors has bowed out of the NFL sponsorship, for Coors Light. Particularly curious here, as over the years you all have talked about how important that's been to Coors Light and its growth. So two parts really. First, with regards to the brand, how are you going to make up for losing such a big sponsor? And secondly, what kind of a cost impact might that have with regards to the U.S. business?

I'm going to pass that on to Leo and Tom because I know that they've got all the answers to those. So Leo, do you want to pick that up?

Yes, Marc. It is no secret that the trademark negotiations for the NFL marks was up for renegotiation starting with the 2011, 2012 season. So that's -- that's a year away. Until midnight last night, we had a -- what we felt was a full value offer on the table that expired at midnight. That story broke on us this morning. This was a long-term decision based on our sense that the NFL marks were fully valued. And we look at each of those situations one up and one at a time. The two important points to remember. First -- first of all, we have a full season ahead of us, where we're fully committed to in 2010 and 2011, activating behind those marks on Coors Light before there's any change. Secondly, as you probably know, we have several -- in fact, Tom may even have the number, of very successful programs and activations with teams in our key markets, and those -- those have in some cases multiple years left on those activations. So we're comfortable with this. I don't think it's going to cost us anything. I think the question is how do we get smarter about how we spend those dollars and activate them behind the portfolio. So that's our point of view.

Leo, I guess when I was talking about cost, I was really alluding to what kind of dollars may come back into the marketing portfolio as a consequence of not spending behind the NFL.

Yes. I don't think we've been public about what our baseline was on that. And we don't know, by the way, where the NFL's finally going to come out on this. So, I mean, I have to be very careful and respectful about that, but it gives us a significant amount of money to reallocate. And our judgment is we can reallocated it long-term more effectively, activating our innovation and a full mix of properties. In fact, I think it's an opportunity that's different for us as a new company than it was as Coors. So, hey, look. NFL's a great property. We're not running away from the NFL. We have tremendous advertising commitments there and we'll continue to. This is really how you activate trademarks and brands and these are decisions you have to make. I feel really confident about it.

Our next question comes from Carlos LaBoy with Credit Suisse. Carlos LaBoy - Crédit Suisse First Boston, Inc.: Can you, Peter, can you give us some more insight on this announcement you made on this China investment; why start in this province with this brewer, maybe how much you paid for it per hectoliter? But more importantly, how do you look at capital requirements for China going forward? Is there going to be a major deployment of cash behind China and is this -- this is just the start of it?

I'll let Kandy talk about the detail, Carlos, but to the general point, the answer's absolutely, no. If you remember in New York, we -- I think we tried to make it quite clear that our approach to our investment into developing markets in particular is that we don't want to send capital ahead of our brand development. So we go in, we develop the brand. We've been doing that in China in a pretty disciplined way for seven to eight years now. The brand has built up to -- it's in 42 different cities. It's national. It's got a critical mass. And so the actual equation for us is that we've got brand health scores, we've got brand momentum. And therefore, it makes it sensible for us to actually put fairly limited investment into a brewing capacity, which will give us both security of supply -- a quality of supply. But also we can justify it because we already have that critical of volume to date. So that really is the approach we take. We don't see ourselves putting more capital into China on top of this, we've got no plans for that at the moment. But obviously, as hopefully as the brand develops, we might review that, but that's a long, long way off. Kandy, any additions on that?

Just to build on what Peter said, as you know since 2003, our business in China has been growing at about 30% per annum. So we thought this is the right time for us to take the next step in China. This joint venture, what specifically it does is allows us to further expand our distribution channels, gives us greater control on our brewing, increases our cost efficiency in China as well as more flexibility on packaging and brand innovation, that allows us to grow our share in the market. The Si'hai group is an attractive partner for us because of its strength in the Hebei province, which is north of Beijing. And its proven ability to build a cost effective and portfolio -- and profitable business in a fairly intensely competitive environment. So that's the strategic rationale and Peter explained to you our overall strategy around investments over there.

[Operator Instructions] Our next question comes from a follow up from Christine Farkas from Bank of America.

I just wanted to follow up, Peter, on the Brazilian liability, now just to understand that is completely put to bed, that there'll be no more cash payments or negotiations on this topic?

Well, certainly on this specific topic, Christine. No, that is put to bed. There are some other, as Stewart outlined, we do have some other issues on our balance sheet that are pretty minimal and we're much more confident of a successful outcome on them. But Stewart can give you the details.

Yes. To Peter's point, this was a more volatile enough part of the liability. I did highlight during the call that we've got less than $25 million on the balance sheet for remaining issues in Brazil. And that we feel that, that's a fair representation of the liability there.

Finally on your Fosters stake, I realize there's mark-to-market impacts every quarter. But could you tell us if your strategic thinking has changed there? Or if that value or if that investment is actually now smaller than it was before?

No, Christine. It's not moved. The investment hasn't moved and our position really hasn't moved either. I don't think I can add much more to that which we've already said.

And there are no further questions at this time. I'd like to turn it back over to you, Peter, for closing comments.

Thanks, very much Kevin. And thank you everybody for your questions and for the interest in the business. And we look forward to speaking to you again in the end of the next quarter's results. Thanks a lot. Bye now.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect.