Molson Coors Beverage Company (TAP) Q1 2016 Earnings Report, Transcript and Summary

Welcome to the Molson Coors Brewing Company First Quarter 2016 Earnings Conference Call. Before we begin, I will paraphrase the company's Safe Harbor language. Some of the discussion 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 the company's executives in discussing the company's performance, please visit the company's website 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. Also, unless otherwise indicated, all financial results the company discusses are versus the comparable prior-year period and in U.S. dollars. Now, I would like to turn the call over to Mark Hunter, President and CEO of Molson Coors. Mark R. Hunter - President, Chief Executive Officer & Director: Thank you, Connor. Hello and welcome everybody to the Molson Coors earnings call. And thanks for joining us today. With me on the call this morning from Molson Coors, we have: Gavin Hattersley, the CEO of MillerCoors; Stewart Glendinning, our CEO in Canada; Simon Cox, our European CEO; Kandy Anand, the CEO of our International Business; Sam Walker, our Global Chief People and Legal Officer; Brian Tabolt, our Global Controller; Dave Dunnewald, VP of Investor Relations; and David Heede, who has very ably filled the role of Interim Global CFO for the past six months, as we've completed our search for a permanent CFO. David is now transitioning back to his role as our Europe CFO as we welcome our new Global CFO, Mauricio Restrepo, who joined Molson Coors yesterday and he is here with us this morning. And for our earnings call today, David and I will take you through highlights of our first quarter 2016 results for the Molson Coors Brewing Company along with some perspectives on the balance of 2016. In the first quarter, we continued to focus on our First Choice ambition and on building a stronger brand portfolio, delivering value-added innovation, strengthening our core brand positionings through incremental marketing investments, and continuing to premiumize our portfolio. We began to see the benefits flow to our top-line performance as we grew worldwide volume, improved core brand momentum in key markets, introduced fast-growing innovations in all of our businesses, and achieved Above Premium growth globally including in craft, flavored malt beverages and cider. We also significantly expanded gross, operating, and pre-tax margins globally and increased total company underlying after-tax earnings more than 28%, while growing underlying EBITDA more than 15% versus a year ago. At the same time, we completed a common stock offering in January to fund about 20% of the pending MillerCoors transaction. And we made solid progress in our planning for the integration of MillerCoors and the Miller global brand portfolio. Completion of this game-changing transaction is still expected in the second half of this year and we intend to be ready to go on day one following the close. In brands, Coors Light grew volume 3.5% globally including strong double-digit growth in the U.K. and Ireland and high-single-digit growth in Latin America. In Above Premium, our craft portfolio drove growth from Doom Bar and the broader Sharp's portfolio in the U.K., Creemore and Granville Island in Canada, Blue Moon Belgian White in the U.S., and in the U.K., and its sister brand Belgian Moon in Canada, and also the newly acquired Saint Archer in the U.S. In ciders, we grew volume of Rekorderlig in Europe and Strongbow in Canada. And in flavored malt beverages, introduction of Henry's Hard Soda is proceeding well ahead of expectations and driving incremental Above Premium volume for us in the U.S. We continued to strengthen our business through improvements to our sales execution and revenue management capabilities, we increased efficiency of our operations, and we implemented common global systems. To ensure that our supply chain is fit for future, we completed the sale of our Vancouver Brewery in Canada for C$185 million and we'll lease the brewery back from the buyer as we build a new, more efficient, and flexible brewery. We also gained agreement to the closure of Burton South Brewery in the U.K., allowing us to further consolidate U.K. brewing operations. Regional highlights for the first quarter are as follows: In the U.S., underlying equity income increased 22.1% from a year ago, driven by higher net pricing, positive sales mix, timing of shipments and lower cost of goods sold. Coors Light and Miller Lite each gained share of the U.S. Premium Light segment for the fourth consecutive quarter, with both brands achieving flat sales to retail volume for the first time in MillerCoors' history. Improved momentum for these two brands was driven by ongoing improvements to their consumer communications, which appeals to a broad cross-section of men and women, Millennials, and multi-cultural consumers. Coors Banquet remains only national premium beer in the category that continues to grow. In the higher margin Above Premium segment, our lead craft brand, Blue Moon Belgian White, delivered another quarter of growth, as did Leinenkugel's Grapefruit Shandy and our newly acquired Saint Archer brands. In FMBs, we achieved strong initial results from the introduction of Henry's Hard Sodas in the first quarter. And according to Nielsen, Henry's Hard Orange Soda has the best velocity of any hard soda since the fourth week of its launch, and Henry's Hard Ginger Ale Soda is the number one Ginger Ale in this fast growing segment. In Canada, we delivered strong earnings growth, but our top-line performance was lower in both volume and revenue per hectoliter. In brands, Coors Light and Molson Canadian both had a challenging quarter, and we're taking additional concrete steps to improve performance in the balance of the year, which I'll discuss in a few minutes. In Above Premium and craft, Coors Banquet, Belgian Moon, Mad Jack Apple Lager, Heineken and Strongbow Cider all grew volume and share in the quarter along with our Creemore and Granville craft brands. In headline financial results for the quarter, Canada underlying pre-tax income increased 25.2% in constant currency, primarily due to a timing-led reduction in distribution costs, some lower pension expenses, and results of our ongoing cost savings initiatives. These factors were partially offset by the impact of lower volume and higher brand investments. Excluding the impact of the loss of the Miller brands, Canada STRs declined 1.6%, but including the Miller brands, STRs declined 5.2%. Increased competitor trade spend and pricing activities, especially in Québec and the West region, led to overall softer volume. In Europe, earnings were lower in the quarter primarily due to higher brand investments and amortization expenses, lower net pension benefit and the termination of the Heineken contract brewing arrangement in the U.K. Notwithstanding, our business and our brands performed well across the region. We increased market share and we continue to premiumize our portfolio and reduce costs. We grew volume in seven of the 11 countries and for seven of our lead core and premium brands in the region. In core brands, Carling, Bergenbier, and Ožujsko grew share of segment in their primary markets. Our Above Premium portfolio increased momentum with strong double-digit growth by Coors Light and the craft portfolio, including Doom Bar and the other Sharp's brands. Additionally, our cider portfolio achieved strong growth with the inclusion of Rekorderlig since the middle of 2015. And the full repatriation of the Staropramen brand in the U.K. also added to the solid progress we made in premiumizing our Europe portfolio. Our International business improved pre-tax performance in the first quarter, driven by continued volume growth in Latin America, India, and Japan, as well as lower marketing and overhead expenses due to the substantial restructure of our China business last year. Coors Light grew at a high-single-digit rate in international markets due to our launch in Colombia, as well as growth in our existing Latin America markets. Now I'll turn over to David to give first quarter financial highlights and perspective on the balance of 2016. David?

Thank you, Mark, and hello everybody. Our first quarter financial headlines are as follows. Headline net sales increased 0.1% on a constant currency basis, driven by 1.2% growth in worldwide volume. Including foreign currency movements, net sales were down approximately 6% in U.S. dollars. Our net sales per hectoliter decreased 1.9% in constant currency, due to negative mix in Canada and lower Heineken contract brewing volume in Europe. Underlying after-tax income increased 28.1% to a $110.3 million or $0.54 per share driven by worldwide volume growth and lower cost of goods sold. On a U.S. GAAP basis, we reported income from continuing operations attributable to Molson Coors of $159.3 million, which is nearly double the prior year result. In addition to the factors that drove higher underlying income, this increase was primarily due to $110.4 million gain on the sale of our Vancouver brewery at the end of the first quarter, partially offset by special charges related to brewery closures. Please note that we received the cash from the Vancouver brewery sale on the first day of the second quarter. Underlying EBITDA in the quarter was $263.4 million, a 15.2% increase from a year ago. We issued 29.9 million shares Class B common stock from our equity offering in January for approximately $2.5 billion of net proceeds, which will fund about 20% of the $12 billion pending MillerCoors transaction. Please see the earnings release we distributed earlier this morning for a detailed review of business unit financial results in the quarter. Total debt at the end of the first quarter was $3 billion, and cash and cash equivalents totaled $2.6 billion, resulting in a net debt of just over $400 million, which is significantly lower than prior year due to the proceeds received from our equity offering earlier this year. Looking forward to the remainder of 2016, our strong first quarter results were aided by the timing of Easter holiday and the additional days sales as a result of 2016 being the leap year, along with relatively favorable cost comparisons in the U.S. and lower Canada distribution costs. We anticipate that our results will not benefit from most of these factors in the balance of this year. Other trends to consider over the last three quarters of this year include: higher investments in our brands this year, including a double-digit increase globally in the second quarter, leading into peak season in the U.S., Canada, and Europe; incremental Europe brand amortization expense with an annualized impact of approximately $15 million, which began in the fourth quarter of 2015 along with lower net pension benefit in Europe this year; a total prohibition on the sale of alcohol, unexpectedly implemented by the state government in Bihar, India, in early April. We don't know how long this ban will be in place and we expect this development to present a headwind for our International business until it is resolved, as this is our largest state of operation in India. Note, however, that this prohibition in Bihar has no impact on the Mount Shivalik business in India that we purchased last year; the impact of terminated contracts which are now nearly all behind this; and finally, foreign currency translation, which, at current exchange rates, would not be a significant factor in our underlying pre-tax results this year. This view has improved significantly since our February earnings call, because of the recent strengthening of the Canadian dollar versus the U.S. dollar. Given the recent volatility of key foreign currencies, however, it is important to watch these rates closely. Regarding 2016 guidance, all of the following metrics exclude any effects of the MillerCoors and Miller global brands transaction, the timing of which will have a big impact on virtually all guidance measures. For the full year, we expect cash contributions to our defined pension funds to be in the range of $45 million to $65 million in 2016 and pension expense of approximately $17 million, including a 42% of MillerCoors contributions and expense; capital spending of approximately $300 million; MG&A expense in corporate of approximately $120 million as we invest more behind innovation and commercial excellence this year; consolidated net interest expense of approximately $110 million; and underlying effective tax rate in the range of 18% to 22%, assuming no further changes in tax laws, settlement of tax audits, or adjustments to uncertain tax provisions. Regarding free cash flow guidance, we still have a large number of dynamic factors in play in relation to cash use and capital deployment, principally due to the pending MillerCoors transaction and, therefore, we plan to issue 2016 underlying free cash flow guidance later in the year with the goal of removing some of the recent volatility to guidance that has occurred. As far as cost outlook is concerned, we continue to expect the cost of goods sold per hectoliter in Canada and Europe in local currency to increase at low-single-digit rate for the full year 2016; we now expect 2016 MillerCoors COGS per hectoliter to be approximately in line with prior year; lower than expected pricing for diesel, aluminum, and corn, as well as acceleration in some of our cost savings initiatives drove the change from previous guidance of up low-single-digits; we now expect our International COGS per hectoliter in local currency to increase at the high-single-digit rate for 2016. This is up from low-single-digits previously due to geographic mix changes; we continue to expect cost savings for the next two years to be in the range of $50 million to $70 million. This view excludes cost savings from MillerCoors, as well as synergies resulting from the pending MillerCoors acquisition, which we expect to be $200 million by the year four following the transaction close. Finally, here are the most recent volume trends for each of businesses early in the second quarter, which are impacted by the early timing of Easter this year. In the U.S. and Canada, for the three weeks through April 23, sales to retail decreased at mid-single-digit rates. In Europe, volume through to April 25 decreased low-single-digits. And our International sales volume, including royalty volume, through to April 23 decreased at a double-digit rate, partially due to the alcohol prohibition in Bihar, India. As ever, please keep in mind, these numbers represent only a portion of the current quarter and trends could change in the weeks ahead. Also note that, following the close of the pending MillerCoors transaction, we plan to discontinue providing early next quarter volumes. At this point, I'll turn it back over to Mark for outlook, wrap up and the Q&A. Mark? Mark R. Hunter - President, Chief Executive Officer & Director: Thanks, David. In 2016, we will continue to drive our First Choice for consumer and customer agenda in the geographies and segments where we choose to play. As we move into peak season this year, we're seeing additional competitive pricing pressure and we intend to step-up our brand investments significantly, particularly in the second quarter. In the U.S., there has been a great deal of change in MillerCoors over the past 10 months. Those changes were necessary to create the foundation for the volume growth we aim to achieve by 2019. As we work to close the transaction, MillerCoors remains disciplined, decisive, and accountable for growing the business, transforming its portfolio, and driving value for our shareholders. In American Light Lagers, we continued to gain momentum behind the revitalization of our two largest U.S. brands, Coors Light and Miller Lite. In Above Premium, we continue to develop higher-margin offerings that can scale and stick, including strong early results from the launch of Henry's Hard Orange and Ginger Ale Sodas and we'll introduce a cherry cola flavor later this year. We've also made the decision to offer our fastest-growing Leinenkugel's extension, Grapefruit Shandy, on a year-round basis to strengthen the Leinenkugel's brand family, which alongside Blue Moon Belgian White forms the base of a formidable craft portfolio. In cider, we're broadening the appeal of Smith & Forge Hard Cider by adding a bottle package to our lineup. We'll continue to build First Choice customer partnerships with our Building with Beer retail strategy, which leverages the higher velocity and broad appeal of American Light Lagers. We plan to expand this valuable tool beyond the on-premise to additional channels in the balance of this year. In Canada, the restructuring of our brand portfolio was largely complete and gaining traction. In the first quarter, we achieved strong volume growth behind both Coors Banquet and Pilsner. We also continue to see strong momentum for our craft brands, Creemore and Granville Island, as well as in our Mexican portfolio with Sol and Dos Equis and in flavored malt beverages with Mad Jack. At the end of the quarter, we launched Mad Jack Root Beer and Ginger Ale, the first major hard soda entries in Canada. We continue to focus on accelerating growth for our core brands Coors Light and Molson Canadian as our biggest opportunity and challenge. Coors Light brand health has improved behind our North American packaging update, which continued to roll out in the first quarter, along with high impact retail executions that drove positive momentum in social engagement. For Molson Canadian, following another successful #anythingforhockey campaign in the first quarter, we'll continue in peak season with strong programming and new communications that celebrates all of the rich qualities of our beer and our Canadian identity. Operationally, we continue on our mission to be First Choice for consumers and customers focusing on our Field Sales Management program to deliver brilliant store-level execution across space, assortment, and pricing. In 2016, we will also continue to restructure our supply chain to ensure we are fit for the future. The sale of our Vancouver brewery for C$185 million at the end of the first quarter was a significant first step towards allowing us to build a more efficient and flexible brewery over the next few years. In Europe, we achieved solid top-line performance in the first quarter on the strength of our core brands and the addition of the Rekorderlig cider and Staropramen brands in the U.K. Although, the increased brand amortization expense will present a headwind for the next couple of quarters, we will continue to invest in our core brand portfolio across Europe to grow share of segment. In fact, earlier today, we announced the signing of a global Carling sponsorship as the official beer partner of the English Premier League. This sponsorship reaches well beyond Carling in the U.K., as it allows us to leverage any brand in any market with one of the most popular sports properties globally. We'll also continue to premiumize our portfolio with Coors Light, the Sharp's portfolio led by Doom Bar, Ireland's leading craft brand, Franciscan Well, Cobra, Rekorderlig, and Staropramen. And to ensure that our supply chain is fit for future, the planned closure of our Burton South Brewery in the U.K. is progressing well, along with the transition of production to our recently modernized Burton North Brewery by the end of 2017. Our International business is focused on attaining profitability in 2016 on a constant currency basis versus 2013 foreign exchange rates when we originally made this commitment, and continue to accelerate our overall growth in existing and select new markets. Upon closing of the MillerCoors and Miller global brands transaction, we will integrate the Miller international brands into our portfolio and leverage a footprint that complements our growth strategy, and allows us to gain entrance into high priority markets, while increasing our business scale in current markets. We also intend to continue to drive rapid growth for Coors Light in Latin America, including the high potential Colombia market, where we launched at the end of last year. Going forward, we expect the Coors, Miller, and Staropramen brands to form the backbone of our international portfolio. In India, we will continue to add scale through our Mount Shivalik business, which we acquired last year as we developed contingency plans related to the Bihar alcohol prohibition. To wrap up, in the balance of 2016, we'll continue to focus on our First Choice for consumers and customer – customer's ambition all driven through our PACC lens and with the intent to drive total shareholder returns. Now before we start the Q&A portion of the call, just a quick comment. As usual, our prepared remarks will be on our website for your reference with a couple of hours this afternoon. Also 1:00 P.M. Eastern Time today, Dave Dunnewald will host a follow-up conference call, which is an opportunity for you to ask additional questions regarding our quarterly results. This call will also be available for you to hear via webcast on our website. Additionally, in the next two months, we hope to see many of you at two events. Firstly, we will hold our Annual Meeting of Stockholders on Wednesday May 25, 2016 here in Denver. And second, we'll host our Annual New York Investor and Analyst Day at New York Exchange on the afternoon of Wednesday, June 8, 2016. Finally, I want to offer a thank you to David Heede, who has capably led the finance function over the past almost six months. So, at this point, Connor, we'd like to open up for questions, please. Thank you.

Your first question comes from the line of Vivien Azer with Cowen & Co. Your line is open. Vivien Azer - Cowen & Co. LLC: Hi. Good morning. Mark R. Hunter - President, Chief Executive Officer & Director: Good morning, Vivien. Vivien Azer - Cowen & Co. LLC: So, I was hoping we could dig in on Canada a little bit. Two questions please. The first on the negative mix shift, and how we should think about that evolving, because clearly you are having a fair amount of success at the Above Premium price points where you're putting some notable investment, so kind of the offset there and how we think about that evolving. On the earlier call, we discussed a little bit with Gavin, the outlook for U.S. beer and perhaps that U.S beer would not lose share in the U.S. relative to other competitive alcoholic beverage categories. So, if you could put in that context, that would be helpful. That's my first question on Canada. Thank you. Mark R. Hunter - President, Chief Executive Officer & Director: So, I'll pass across to Stewart. Stewart, do you want to set that question just in the context of the kind of transformational agenda that you're leading for in Canada. Stewart F. Glendinning - President & Chief Executive Officer, Molson Coors Canada, Molson Coors Brewing Co.: Yeah, cheers. Thanks for that, Vivien. Well, look, I think if you look at where we've been going with our portfolio, our focus has been on developing the top end and we're really pleased with the way that the Above Premium brands are gaining share in the marketplace. If you look at our NSR in total, the underlying increase in NSR is close to about 1%, and the mix that we're talking about is really being driven by two items; one is the loss of Miller and the other is the impact of our contract brewing revenues which impact the top line, but don't impact the volume. So, I would focus on the 1% is what fits underneath the real performance. Vivien Azer - Cowen & Co. LLC: Thank you. And any comment on the outlook for the beer category relative to some of the other alcoholic beverage categories in Canada? Mark R. Hunter - President, Chief Executive Officer & Director: Stewart, do you want to follow-up on that? Stewart F. Glendinning - President & Chief Executive Officer, Molson Coors Canada, Molson Coors Brewing Co.: No. I mean I don't have the most recent data for the first quarter; it will be out next week. I think that the broad trends that we have seen in the last couple of years have seen wine gaining share. Spirits hasn't been a major factor for us in Canada. I would step back and look at the health of the beer industry. I think the first quarter had the benefit, obviously, of an extra trading day and Easter, but broadly this quarter has felt healthier than previous years, number one. Number – with number two, I would point out, that there are the challenges in Canada that we saw in the fourth quarter, we're limited really to Québec and to Alberta. In this past quarter, I think the most challenging market remained Alberta, but the rest of the industry looks healthy. Vivien Azer - Cowen & Co. LLC: Terrific. Thank you very much. Mark R. Hunter - President, Chief Executive Officer & Director: Vivien, the only thing I would add to that is I think if you look at what's has happening on macro level within the beer industry in Canada than consumers generally are choosing to invest their hard earned dollars in some of the higher-priced segments, whether that's craft or Above Premium and imports, the exception to that really has been in Alberta where, obviously, that economy is under a lot of pressure with what we've seen from the oil industry, but not dissimilar to what we've in the U.S. where in a relatively benign volume market that the areas of real consumer momentum tend to be in imports, higher-priced segments like FMBs and craft. Vivien Azer - Cowen & Co. LLC: Terrific. That's very helpful. Thank you so much.

Your next question comes from the line of Judy Hong with Goldman Sachs. Your line is open. Judy E. Hong - Goldman Sachs & Co.: Thank you. Good morning. Mark R. Hunter - President, Chief Executive Officer & Director: Hey, Judy, how are you? Judy E. Hong - Goldman Sachs & Co.: So I wanted to ask about Europe. I think the quarter had a pretty decent volume growth, but there was some timing benefit, so just wanted to get a sense of what's happening from a category growth standpoint in some of your key markets, your market share performance? And maybe just, broadly speaking, as you think about certainly MillerCoors becoming a bigger portion of your business going forward, how does sort of Europe fit into your broader strategy and your attempt to kind of grow and accelerate the profit growth in that region? Mark R. Hunter - President, Chief Executive Officer & Director: Thanks, Judy. I think there was a couple of questions in there. So, Simon, why don't you take the first part of the question and just talk a little bit about the momentum we're seeing in our Europe business and then I'll touch on the impact of MillerCoors more broadly? Simon Cox - President & CEO-Molson Coors Europe, Molson Coors Brewing Co.: Yeah. Thanks, Mark. Thank you, Judy. So, if you look to that top-line results, Judy, then our volumes grew by just over 5% in Europe in the quarter and that translated into just over 4% top-line on net sales revenue growth if you extract currency changes. So, we were very pleased with that. We think that's a very, very solid performance. And to answer your question and give that some context, the markets in which we operate were pretty much flat from a volume perspective. So, in other words, we gained share and we would calculate that to be about an 0.6% or 0.7% share gain across the quarter, which again I think is very solid. And I think, pleasingly, it's share gain driven by the majority of our countries, by the majority of our main brands, and we also saw some pretty good trends on our premium brands. So, overall, if you're looking for our performance in the context to the market, good performance on volume, strong performance on revenue, good share gain and a good shape to the portfolio growth as well. Mark R. Hunter - President, Chief Executive Officer & Director: Okay. Thanks, Simon. Judy, any follow-up for Simon specifically before I talk about MillerCoors? Judy E. Hong - Goldman Sachs & Co.: No. I'm good with Simon. Thank you. Mark R. Hunter - President, Chief Executive Officer & Director: Okay. Thanks, Simon. And then, Judy, just to your broader question about Europe and the impact of MillerCoors, as business as usual we've got a big business and it'll be a bigger business in the U.S. We have a big business in Canada. We've got a fast-growing International business and we have a big business in Europe. And we want all of our businesses to be focused on top-line growth. The European business will have the additional benefit of, in particular, the MGD volumes in the U.K. and Ireland, but it'll be very much business as usual, and I think the opportunity is on that enhanced platform, how we can lift and shift some of our faster growing brands, so brands like the Sharp's portfolio or Franciscan Well, and really leverage them and more broadly internationally. So, very much business as usual. I think you've seen solid improvements and a competitive position in Europe, and we'll continue down that path going forward. Europe is a big part of our overall business and is an important part of our business. Judy E. Hong - Goldman Sachs & Co.: Got it. Okay. Thank you. Mark R. Hunter - President, Chief Executive Officer & Director: Thanks, Judy.

Your next question comes from the line of Mark Swartzberg with Stifel. Your line is open. Mark Swartzberg - Stifel, Nicolaus & Co., Inc.: Yeah. Thanks. Good morning, everyone. I guess Mauricio and Mark, one question for – or kind of two-part question for you and then also on the subject of Canada, but Mauricio or really Mark I guess, what are Mauricio's priorities, now that he is the new CFO? And then, Mauricio, you come with the experience from Beam and is there anything special about that experience that you think pertains to the job at hand for Molson Coors? Mark R. Hunter - President, Chief Executive Officer & Director: Okay, so let me pickup Mauricio's job description and his goal setting conversation, which will take place probably later this week. I anticipate this being a very seamless transition. We are delighted that Mauricio has joined our business. He's got great experience in both developed and developing markets and across the alcohol sector broadly. And I think he'll come in and be provocative and added value on a number of fronts. So, I mean, the short-term priorities are pretty clear and I think we've been consistent on that, Mark, which is we've got to deliver our 2016 plan, make sure that we are delivering both top-line, bottom-line and the strong cash performance and be prepared to go when the deal is approved and then subsequently close this (31:57) in relation to MillerCoors and Miller International and Mauricio is going to play a very explicit part on that agenda. It's really no more complicated than that. I don't know, Mauricio, if you want to say, hi and offer any further perspectives.

Yes. Thank you, Mark and Mark. With one full day under by belt, I guess – what I can say is that, I'm very excited to be here at Molson Coors. It is a company with outstanding people and great brand portfolio, and it's really a very exciting time for the company. And I'll be essentially focusing on furthering the strategy of the company which is to delight the world's beer consumers with our products. As Mark said, offering hopefully some interesting points of view in terms of my experience in the spirits industry and formerly at SABMiller. That being said, I look forward to seeing and meeting most if not all of you in person at our event in New York in early June. Mark Swartzberg - Stifel, Nicolaus & Co., Inc.: That's great. Okay. Thank you for that. And if I could also on Canada and Mark or Stewart, I guess I want to focus particularly on Coors Light and Molson Canadian and what I'm – what I'd like to better understand is why we really are coming around the corner, because we've been coming around the corner for quite some time with these two brands. And it sounds like you feel a little better, but – and I guess you're going to be spending more, and so that in itself is real. But what are you seeing that makes you think that maybe it's not second quarter, maybe it's 2017. These brands really are in a better position than they've been because I appreciate you've been working hard on correcting the issue, but it's still an issue and the U.S. is improving, Molson Canadian is not a U.S. brand of any size, but it's hard from where we sit, at least from where I sit, to believe that anything meaningful is going to change for those two brands anytime soon. So can you give us a little bit more on what's going on there? Mark R. Hunter - President, Chief Executive Officer & Director: Yeah. So let me offer – let me offer a little bit of context. And then Stewart, do you want to just talk about some of the specifics I think are building confidence? But, if you look across our business, Mark, whether that's Coors Light and Miller Lite in the U.S., whether it's the way that Carling's got back into share of segment growth over the last couple of years in the U.K., I think we've got a track record of where we've seen new challenges in our business, continuing to work that challenge, and put in place the right response. And I think the most recent trends in the U.S. on our two biggest brands demonstrate our ability to get focused with the right inputs in place. And I mean these are big, big brands. It's like driving a -captaining an oil tanker, it doesn't turnaround overnight, but you've got to remain resolute and focused on the right inputs. We've demonstrated that in the U.S. We've demonstrated that in other markets. In all honesty, we had a couple of misfires on some of our consumer communication in Canada. But, I think Stewart and the team have really got to grips with what's required now, and are feeling very good about the quality of our communications that we've got in the marketplace. But, Stewart do you want to just talk about a few more of the specifics that are building confidence as we go into Q2 and in Q3, in particular? Stewart F. Glendinning - President & Chief Executive Officer, Molson Coors Canada, Molson Coors Brewing Co.: Yeah, sure, Mark. I'd actually just, Mark, just step back one second and just say, that as we looked at our strategic plan three years ago. We really built out three big blocks; one was redoing our supply chain footprint, the other was lowering our G&A cost base, and the third was improving our commercial capability and portfolio. And those are relevant. Why? Because on the cost base and the supply chain, the savings that we're getting from that has allowed us to start to feed the investments required to get the brands going. On the brand side, we're really focused on making sure that we had a portfolio that was right for consumers. And on the Above Premium, which is where we built up all the brands, we're performing well and we're really happy with those brands. On Molson Canadian and on Coors Light, those brands sit in the mainstream. That is the part of the market that is under the most pressure. And if you looked at this past quarter, Canadian held share of the segment and Coors Light did not. So, Coors Light is where our real challenge is. I've been pretty clear about calling out where the challenges are for Coors Light, those being our need to improve our brand scores. Our need to reach out to millennials and to engage those consumers more actively in our brands. I think when you look at the first quarter from a costs standpoint, our G&A costs went down, and we spent some of that money back in the brand. So, that's moving our strategy. I think it gives the brand itself, we saw finally the introduction of some marketing that is working. Our advertising is scoring better than any of the campaigns we've seen over the last three years or four years, that's a positive, and we're seeing an uptick in our brand equity. So, those are positives. I think if you look at the activity that we have for the second quarter and the call out that we made in the earning release and the script this morning, we pointed to the fact that we expect to put more money behind the brands and that is because we have a pretty full activation agenda, we've got a full advertising agenda and we know that we need to spend some money to get the energy going on these brands. So, that's where we are. And I think you'll be in a position in June to hear more from us and to see some of that work when we meet in New York. Mark Swartzberg - Stifel, Nicolaus & Co., Inc.: That's actually very helpful. One quick follow-up. Is there any history or what does the history say about the relationship between the U.S. and Canada for the brand Coors Light? The U.S. is seeing this improvement. Is there a historical analogue to make you believe that you can get some tailwind, so to speak, off of that with this added spending you're going to be doing for the brand in Canada? Stewart F. Glendinning - President & Chief Executive Officer, Molson Coors Canada, Molson Coors Brewing Co.: I'm not sure whether there is a strong correlation between the markets is because the development of the brands has been a little bit different. But what I will say is that, we've been working well together as a North American group to understand what drives our consumers. You will see us leveraging more ideas back and forth between the two business units. And in fact, here in the next few weeks, you will see us starting to use some of that U.S. messaging. Mark Swartzberg - Stifel, Nicolaus & Co., Inc.: Great. Great. Thank you, Stewart. Thanks, Mark. Mark R. Hunter - President, Chief Executive Officer & Director: Thanks, Mark.

Your next question comes from the line of Pablo Zuanic with SIG. Your line is open.

Good morning, everyone. Look, I mean, just two quick questions. The first one Mark, in very general terms, 10 months after – almost six months, seven months after that we know the MillerCoors transaction, do you have more, the same or less conviction about the guidance with $100 million synergies? So, if you can answer that and maybe give some color in terms of why? And then the second question related to these questions you had, in global terms, after the transaction has closed, MillerCoors, the U.S. market is going to be about 80% of your earnings. What about trying to diversify the regional profile of the company later on. Is that a priority, or it doesn't matter at all? And the reason I ask that obviously is when you hear news about Anheuser-Busch InBev trying to sell their assets in Poland and Czech Republic, are those potential assets that could be of interest to your company? Thanks. Mark R. Hunter - President, Chief Executive Officer & Director: Yeah. Hi, Pablo. Thanks for the questions. To your specific question on the synergy target, I would say having done the planning, I'm more convicted or convinced, that's the right word with regard to the number, but clearly I don't want to talk in any more specifics. I have been pretty clear that once our planning team have finished all of the planning work and we get deal approval and we're moving towards close, then we can update more specifically at that point. But, I think the gains that we offered last November as we work through the planning stands good and we'll update more broadly in due course. From your question with regard to the center of gravity that would be our business being the U.S. Our overall strategy doesn't change, we will have a bigger position in the U.S. and you know that has many benefits associated with it. But, we've been on the journey to build a footprint over the course of the last five years, in particular, led by Coors Light and more recently by Staropramen and that will continue. I'm not going to comment specifically on any M&A opportunities. We never do, as you're aware. But we need to play to win in both the U.S., Canada, and in our European business. And we need to continue to build our global footprint, led through our global brands, that's principally been on an asset-light license and export model. It's likely that model will continue as we look to take Coors trademark, Staropramen trademark in the future of the Miller trademark into more markets, that's probably all I can say at this stage.

Yeah. That's fine. Thanks. Mark R. Hunter - President, Chief Executive Officer & Director: Thanks, Pablo.

Your next question comes from the line of Bryan Spillane with Bank of America. Your line is open.

Hey, good morning, everyone. Mark R. Hunter - President, Chief Executive Officer & Director: Good morning, Bryan. Stewart F. Glendinning - President & Chief Executive Officer, Molson Coors Canada, Molson Coors Brewing Co.: Good morning, Bryan.

Just a couple of short questions. First, in terms of the two breweries that the sale in Vancouver and then the plans to close in Eden. On Vancouver, are there any timing provisions? I guess, you know, if it takes you a while to find a property or find a location or build a brewery, are there any sort of timing provisions we should think about, in terms of when that lease term ends, or are there any timing provisions we should think about there? Mark R. Hunter - President, Chief Executive Officer & Director: Okay. Just on Vancouver?

Just on Vancouver, yeah. Mark R. Hunter - President, Chief Executive Officer & Director: Yeah. Stewart, do you want to just give a little bit of color on Vancouver? Stewart F. Glendinning - President & Chief Executive Officer, Molson Coors Canada, Molson Coors Brewing Co.: Yeah. Sure. Bryan, as you point out, we closed the deal this quarter. In terms of the timeline, we have up to five years. So, we've got plenty of time to find and build a new brewery. And, of course, that process is actively underway already.

Okay. And then in Eden, have you disclosed yet what the plans are for that property, once you close it? Have you – will it continue, will you sell it? Will it continue to operate as a brewery under someone else's ownership? Just any thoughts on yet, in terms of what happens to that brewery, kind of post closing it? Mark R. Hunter - President, Chief Executive Officer & Director: The very specific response, Bryan, is that, no, we haven't disclosed anything in relation to Eden other than our plan to close the brewery. And Gavin and the team are working through the process at this point in time, and it's going as anticipated. I don't know whether, Gavin, you'd want to add anything to that?

No, Mark, other than to say, we just haven't made a decision as to what to do with the facility and land, at this point in time, as you correctly stated.

Okay. And just the reason why I asked the question is just, you've got a lot of capacity that's being added to the industry from the craft beer industry, and the capacity that Constellation is adding in Mexico is essentially U.S. brewing capacity. So, I'm just trying to get a sense for whether or not just the capacity in the industry at all overall sort of affects your decision-making in terms of what you might decide to do? Mark R. Hunter - President, Chief Executive Officer & Director: No, I think, Gavin, do you want to pick up on that?

Yeah, I was going to say, Bryan, we're focused on the moment of closing the brewery down and transitioning the volume to where it's supposed to be. That's our focus, here. And we just haven't made any decisions on what to do with a facility or the land at this point.

Okay. And then, just the last one, and I might have missed this earlier. But just in Canada this quarter, the distribution, the lower distribution costs, what was that related to, specifically? Mark R. Hunter - President, Chief Executive Officer & Director: Well, look, I can give you a headline on that, Bryan. COGS performance in the first quarter was very, very encouraging, probably about half of the COGS improvement related to some timing benefit and that relates specifically just to some distribution charge and the timing of those distribution costs. I think if you work on the basis, about half of the COGS improvement as underlying and continuing and about half of the COGS improvement in the first quarter or something that will fall away because it was a timing benefit – I don't think we whether want to get into any more of the specifics at this stage.

Okay. That's all I have. Thank you. Mark R. Hunter - President, Chief Executive Officer & Director: Okay. Thanks, Bryan.

Your next question comes from the line of Rob Ottenstein with Evercore. Your line is open.

Great. Thank you very much. Could you talk a little bit about how Coors Light is doing globally? I'm guessing there was some impact in terms of what was happening in India, so perhaps maybe kind of a number, a volume number for Coors Light globally, taking India into account? Mark R. Hunter - President, Chief Executive Officer & Director: Hi, Rob. It's Mark here. Just a couple of comments for you. Firstly, Coors Light isn't available in India, so no issues there. I don't think, Kandy has got any plans to launch in India, hasn't spoken to me, I've heard it. So, Coors Light globally was up about 3.5% and across Europe and our international business, we were close to 19% growth. So, we're seeing very, very strong performance as we take the brand outside of North America, a tremendous traction and velocity and growth in Central and South America. And a brand which has become our second largest brand in our UK and Ireland portfolio and has grown to well over a million hectoliters now across the UK and Ireland. So, in a number of international markets, but I wouldn't describe it is having a global footprint, center of gravity outside of North America, certainly, Central and South America and our UK and Ireland business. And strong and growing momentum behind the Coors Light brand. Alongside that, we've introduced Coors 1873 into a couple of markets, as a sister brand of Coors Banquet. And again, we've seen that performed strongly, so we're looking to build out the Coors trademark and that proof-of-concept in Coors 1873, I think, gives us some signals as to how we can build that trademark more broadly going forward.

I just want to make sure I got those numbers right. So globally, including U.S. up 3.5%, and outside of the U.S., up 19%? Mark R. Hunter - President, Chief Executive Officer & Director: In Europe and MCI combined, it's just under 19% growth.

Okay, so outside of North America. That's terrific. Mark R. Hunter - President, Chief Executive Officer & Director: Yeah.

And as you're going to look to take control of the Miller brands globally, how would you compare, do you think, the potential for those brands with Coors? And how are you thinking about positioning outside of the U.S.? Mark R. Hunter - President, Chief Executive Officer & Director: Yeah. We'll – I mean, I think we're in a great position because the positioning of the brands is very complementary, the Coors positioning is very clear in terms of begin born in the Rockies and owning the whole sense of cold refreshment. Miller is much more of an urban positioning and MGD, in particular, I think it's very complementary to Coors Light. And then, Staropramen clearly operates with a very, very strong check in our European provenance. In really simplistic terms, Robert, we've got a great clear bottle offering, brown bottle offering and green bottle offering, but that's me probably getting out my depth on my marketing skills. But, I think overall positionings of the brand are very complementary, it gives us more scale in a number of existing MCI markets, and it gives us an entry point into a number of new markets as well. So, our international business will scale up very significantly on the back of this addition to our portfolio. With what I think will be a great backbone of international brands and around that we can then start to really test our ability to build some of the international footprint for some of our craft brands as well. So, I think, we're poised for the next phase in international brand development.

Okay. And any comments on, I know it's very small, but just in terms of understanding how the portfolio is doing, and the business in Australia. And whether, is that a template for other countries? Mark R. Hunter - President, Chief Executive Officer & Director: Okay. I'll pass that across to Kandy. Kandy, do you want to just comment on our Australia business?

Sure. Thanks, Mark. Rob, as you mentioned, it's a relatively small part of our business; however, we launched there now. It's little over 18 months. We launched Coors Light, but we have to call it Coors, because of the laws there, which where lights are low alcohol beers only, so it's basically the same born in Rockies, cold refreshment that Mark referred to, but we call it Coors. It's doing well and we've had a really good summer season, we just finished in Australia in March. And we're looking forward to also add the Miller portfolio to that. With the two we'll actually increase our scale in Australia more than twofold with the addition of Miller. So, I would say, it's something that we believe in the long run, well, we bought a reasonable size business as well as reasonably profitable business. And it's going to take a while to grow these two brands. Mark R. Hunter - President, Chief Executive Officer & Director: Does it make sense?

And U.S. craft beers, are taking off in many countries. Any just final quick thoughts on early potential, early insight into Blue Moon and the ability of that brand to gain traction overseas? Mark R. Hunter - President, Chief Executive Officer & Director: Yeah, I think it's a good observation, Robert. And I think we've led that wave with the development of Blue Moon in a number of markets. Obviously, we've now got Belgian Moon up in Canada. Blue Moon has been in our UK and Ireland business for a number of years and is growing strongly. And Kandy and his team now have gone into a multiple markets. Australia is one of those markets, Japan is another market. And interest from around the world continues to grow, so we're already on that path and have been developing that over the course of the last three years to five years, in particular and we're seeing demand growing. I think we're in a strong position when you look at the number one Irish brand, the leading brand in UK with Sharp's and our Canadian brands as well. There is opportunities for us to really build out that craft portfolio at international level and that's central to some of our international expansion thinking at this point in time.

Terrific. Very exciting. Thank you. Mark R. Hunter - President, Chief Executive Officer & Director: Thanks, Robert.

Your next question comes from the line of Filippe Goossens with MUFG. Your line is open. Filippe Goossens - Mitsubishi UFJ Securities (USA), Inc.: Yes, good morning, gentlemen. And thanks for the call this morning again. I had two questions, although I think the first one has been indirectly answered, it was more from an M&A perspective, trying to find out if there was any remote interest perhaps in the Pilsner Urquell brand that AB InBev is putting up for sale. But I'll take your comments for that on the earlier question. My second question, if I may, is given the Carling business in the UK, how are you seeing the potential for the Brexit potential vote next month in England? Would that cause meaningful issues for you, or that's something that is relatively managed within the scope of the operations in Europe? Thank you very much. Mark R. Hunter - President, Chief Executive Officer & Director: Okay. Thanks, Filippe. So, thanks for your acknowledgement on the M&A question. I would just mention, obviously our definitive agreement with ABI is the Pilsner Urquell brand remains in our portfolio in the U.S. on a perpetual royalty-free basis. So that's in our portfolio currently and will remain in our portfolio, irrespective of what's been announced last week by ABI and SAB divestiture. With regard to the Carling business in the UK and Brexit, that's a great question. I think if you ask 10 commentators, you'd probably get 10 different points of view. I mean it's outside of our control, the consumer demand in the UK for Carling and our other brands, I think will remain unaffected by whatever decision is made. The impact on currency and any translational impact, I think is probably the thing that we're keeping our eye on it at the moment, but I don't think it will affect any real demand patterns in the UK, which is clearly what we're really interested in. I don't know Simon, whether you'd offer any more color on that, it's just such a difficult one to call, but any perspective, Simon? Simon Cox - President & CEO-Molson Coors Europe, Molson Coors Brewing Co.: No. I think it's similar to you, Mark. I mean of all the things that we should keep our eye on, it wouldn't be one of the things that necessarily keeps me awake at night. I just don't see it actually having any material impact on the overall demand in the beer market in the UK. And I certainly think based on our recent trends of Carling performance on that portfolio in the UK, we'd be able to withstand whatever effect did come. So no, I wouldn't put that in any future model of any real importance, no. Filippe Goossens - Mitsubishi UFJ Securities (USA), Inc.: So, it seems then basically if there's any issue at all, it's most likely going to come from a translation perspective, as it relates to the impact on the currency, but nothing in terms of demand. Is that a fair summary? Simon Cox - President & CEO-Molson Coors Europe, Molson Coors Brewing Co.: I think, that's reasonable. Yeah. Mark R. Hunter - President, Chief Executive Officer & Director: Yeah. Filippe Goossens - Mitsubishi UFJ Securities (USA), Inc.: Thank you, gentlemen. Mark R. Hunter - President, Chief Executive Officer & Director: Thank you.

Your next question comes from the line of Mark Swartzberg with Stifel. Your line is open. Mark Swartzberg - Stifel, Nicolaus & Co., Inc.: Hello. Thanks. Hi, again guys. Thank you for taking this follow-up. Simon, I wanted to understand a little better what is happening in Europe, in the sense that it's clear the UK is benefiting from this introduction, and I presume you're taking some share there, and then these other markets that drove the volume increase, I presume your taking share there. Can you give us a little more sense of either the theme that's underlying share gains versus those markets where you're seeing share losses, if there is a theme? But 11 countries is a lot. Don't know that we need to go into every single one, but I'm just trying to better understand the other side of the coin, if you will. The markets where you're not having the success you'd like. That's what I'm trying to understand. Simon Cox - President & CEO-Molson Coors Europe, Molson Coors Brewing Co.: Yeah. Mark R. Hunter - President, Chief Executive Officer & Director: Simon, do you want to answer that. Simon Cox - President & CEO-Molson Coors Europe, Molson Coors Brewing Co.: Yeah. Sure. I mean, to your point, Mark, I think, we could spend a lot of the time doing individual diagnosis on 11 different countries. I think, the theme that I will point you to is that, in general, we are increasing our investments in marketing and those investments are playing out well for us with stronger volumes, stronger revenues and premiumizing that portfolio. And actually, that's a factor virtually across all the markets. So if for example, I took Staropramen, we are investing in Staropramen across all of our European markets, and we've also repatriated that into the UK, and we're investing behind it, and that's giving us double-digit growth almost universally, actually across those markets. So, there are always you know some puts and takes from a timing perspective in individual markets, but our general strategy of investing behind our core brands and investing in premiumization is working at the aggregate level in Europe and any countries that isn't true in this quarter, I'd been confident that we could continue to drive those countries back towards the norm. So, I don't think, there's actually as much variation as perhaps you might be pointing to. And I think overall, our strategy is just working in aggregate. Mark Swartzberg - Stifel, Nicolaus & Co., Inc.: That's very helpful. And one quick follow-up. Of those markets that did not participate in the 5% volume increase, what's the largest of those markets? Countries? Simon Cox - President & CEO-Molson Coors Europe, Molson Coors Brewing Co.: Yeah. We don't intend to break those down. So, I wouldn't want to get into market-by-market commentary, if that's okay, Mark? Mark Swartzberg - Stifel, Nicolaus & Co., Inc.: Sure, enough. Okay. Thank you, Simon. Mark R. Hunter - President, Chief Executive Officer & Director: Okay. Thanks, Mark.

Your next question comes from the line of Brett Cooper with Consumer Edge Research. Your line is open.

Good morning, guys. Just a quick one. Mark R. Hunter - President, Chief Executive Officer & Director: Hi, Brett.

The pushing of near beer or FMBs continues to be an avenue of growth for you in the industry. Do you see any risk of heightened regulatory scrutiny from FMBs getting closer and closer to non-alcoholic beverages? Mark R. Hunter - President, Chief Executive Officer & Director: Okay. Brett, let me give you just a couple of comments on that. Obviously, selling alcohol is something that you know comes with a significant obligations and we are – and all of our markets very, very careful about the way that we both introduce and market brands. FMBs have been a big part of our business for the last couple of decades back in the UK. We, in the mid-1990s, launched a brand called Hooch, which was you know one of the forerunners of the FMB category and it's been you know part of our business as a safer you know a couple of decades now. So, we are very careful, very responsible, very clear about the fact that these are adult drinks, they're clearly marked as adult drinks and will continue to comply with all regulations in all of our markets to build our portfolio responsibly. I think beyond that, it's probably not worth getting into any specifics. So, that's just our general philosophy in our business.

All right. Thank you. Mark R. Hunter - President, Chief Executive Officer & Director: Okay. Thanks, Brett.

Your next question comes from the line of Pablo Zuanic with SIG. Your line is open.

Thank you for taking the follow-up. Look, Gavin, I realize I asked questions relating to MillerCoors call earlier today, but three very quick ones for you. So, is the industry traditionally, will increase prices in the fall and most of the companies would follow. Has the industry changed in that regard? And what happened really with that price increase in the fall? Did it stick or not? That's the first question. The second one, in the earlier call you said that pricing ex-mix was up 0.8% for the MillerCoors portfolio. Can you just give us some new ones there, in terms of what was increase in the value brands, compared to say mainstream? It seems to me that on value-price, pricing might have come down, if you can explain that. And then the third and last question I think that Miller High Life, it's in my opinion in a very unique position within your value portfolio. And one would think that it may be stacking between mainstream and value, and that there's an opportunity for you to have a very strong value brand, if Miller High Life were to trend down price wise into fully the value segment, as opposed to what seems to be happening, that it's moving up to mainstream. If you can just comment on that Gavin, and thanks for taking the follow-up again. Mark R. Hunter - President, Chief Executive Officer & Director: Hey Gavin. Do you want to pick up on let's call it some general comments without getting lost in any of the specifics?

Right. I mean, Pablo it's little difficult for me to give you a detailed specifics as Mark says. And from an industry pricing point of view, you know price increases take place in the fall, they take place in the spring, there is no general one-size-fits all. And as I've said quite often on these calls is, we follow very clear pricing strategy and market-by-markets and brand-by-brand basis. And your second question is around breaking out the 80 basis points between the various sub-segments is, we just simply don't do that publicly. And from a Miller High Life point of view, we do think we've got a unique proposition here as the Champagne of Beers and we intend to continue to invest quiet strongly behind that brand, it's an important part of our sub-premium portfolio and we'll play an important role in reducing the lost market share that we've experienced in the primary portfolio. Beyond that, I can't really get into any more detail.

All right. Thanks. Mark R. Hunter - President, Chief Executive Officer & Director: Pablo, the only thing I would add is, I mean, if you look at the choice in the U.S. market now as probably be, there's more proliferation, more choice for consumers than we've seen in living memory. So, our job is to make sure our brands deliver great value for consumers and we'll make sure we do that through a combination of our price points, SKUs that we offer, the quality of our brand communications. We got to be competitive. And as I say, consumers have got more variety and more choice than they've ever had before. So, we've got to be really sharp, we've got to stay very local, and we've got to ensure that we are competing very effectively in the marketplace.

Got it. Thank you.

There are no further questions at this time. I'll turn the call back to Mr. Hunter for closing remarks. Mark R. Hunter - President, Chief Executive Officer & Director: Okay. Thanks, Connor. Can I just thank everybody for your time, attention, and interest in Molson Coors Brewing Company. We look forward to seeing hopefully most of you at our Analyst and Investor Day in New York in June. And Dave and team will be available for follow-up questions at – a little bit later on today. So, thanks again for your interest and we look forward to seeing you soon. Thanks, everybody.

This concludes today's conference call. You may now disconnect.