Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is provided to assist in understanding our company, operations and current business environment and should be considered a supplement to, and read in conjunction with, the accompanying consolidated financial statements and notes included within Part II—Item 8 Financial Statements and Supplementary Data, as well as the discussion of our business and related risk factors in Part I—Item 1 Business and Part I—Item 1A Risk Factors, respectively.

Our Fiscal Year

Unless otherwise indicated, (a) all $ amounts are in U.S. Dollars ("USD"), (b) comparisons are to comparable prior periods, and (c) 2016, 2015 and 2014 refers to the 12 months ended December 31, 2016, December 31, 2015, and December 31, 2014, respectively. For 2016, the consolidated statement of operations includes MillerCoors' results of operations for the period from January 1, 2016, to October 10, 2016, on an equity method basis of accounting and from October 11, 2016, to December 31, 2016, on a consolidated basis of accounting. Additionally, our consolidated balance sheet as of December 31, 2016, includes our acquired assets and liabilities, which were recorded at their respective acquisition-date fair values upon completion of the Acquisition. Where indicated, we have reflected unaudited pro forma information for 2016 and 2015 which gives effect to the Acquisition and the related financing as if they were completed on January 1, 2015, the first day of the Company’s 2015 fiscal year.

Operational Measures

We use certain operational measures, such as sales-to-wholesalers (“STWs”) and sales-to-retailers (“STRs”), which we believe are important metrics. STW is a metric that we use in our U.S. business to reflect the sales from our operations to our direct customers, generally wholesalers. We believe the STW metric is important because it gives an indication of the amount of beer and adjacent products that we have produced and shipped to customers. STR is a metric that we use in our Canada and U.S. businesses to refer to sales closer to the end consumer than STWs, which generally means sales from our wholesalers or our company to retailers, who in turn sell to consumers. We believe the STR metric is important because, unlike STWs, it provides the closest indication of the performance of our brands in relation to market and competitor sales trends.

Acquisition

On November 11, 2015, Anheuser-Busch InBev SA/NV (“ABI”) announced it had entered into a definitive agreement to acquire SABMiller plc ("SABMiller") (“ABI/SABMiller transaction”) and concurrently, on November 11, 2015, we entered into a purchase agreement (as amended, the “Purchase Agreement”) with ABI to acquire, contingent upon the closing of the ABI/SABMiller transaction, all of SABMiller’s 58% economic interest and 50% voting interest in MillerCoors and all trademarks, contracts and other assets primarily related to the Miller brand portfolio outside of the U.S. and Puerto Rico for $12.0 billion in cash, subject to downward adjustment as described in the Purchase Agreement (the "Acquisition"). On October 11, 2016, the Acquisition was completed and MillerCoors, previously a joint venture between MCBC and SABMiller, became a wholly-owned subsidiary of MCBC and as a result, MCBC now owns 100% of the outstanding equity and voting interests of MillerCoors. The Acquisition was funded through cash on hand, including proceeds received from our February 3, 2016, equity issuance, the issuance of our 2016 Notes, as defined below, as well as borrowings on our term loan agreement. Further, as we elected to treat the Acquisition as an asset acquisition for U.S. tax purposes, we expect to receive substantial cash tax benefits for the first 15 years following the close of the Acquisition.

Under the Purchase Agreement, we retained the rights to all of the brands currently in the MillerCoors portfolio for the U.S. and Puerto Rican markets, including import brands such as Peroni and Pilsner Urquell, as well as obtained full ownership of the Miller brand portfolio outside of the U.S. and Puerto Rico. Additionally, in consolidating control of MillerCoors, we expect we will further improve our scale and agility, benefit from significantly enhanced cash flows from operations, and capture substantial operational synergies. We believe the purchase of the Miller brand trademarks outside of the U.S. and Puerto Rico provides a strategic opportunity to leverage the iconic Miller trademark globally alongside MCBC’s trademarks for Coors and Staropramen, and presents volume and profit growth opportunities for MCBC in both core markets, as well as emerging markets.

On July 7, 2016, MCBC issued approximately $5.3 billion senior notes with portions maturing from July 15, 2019, through July 15, 2046 (“USD Notes”), and EUR 800.0 million senior notes maturing July 15, 2024 (“EUR Notes”), and Molson Coors International LP, a Delaware limited partnership and wholly-owned subsidiary of MCBC, completed a private placement of CAD 1.0 billion senior notes maturing July 15, 2023, and July 15, 2026 (“CAD Notes”) (USD Notes, EUR Notes and CAD notes, collectively, the "2016 Notes"). On October 11, 2016, under our term loan agreement, we borrowed $1.0 billion under the 3-year tranche and $1.5 billion under the 5-year tranche, for an aggregate principal amount of $2.5 billion. The

net proceeds received from the term loan borrowings as well as the 2016 Notes, and the February 3, 2016, equity offering were sufficient to fund the purchase price of the Acquisition, and on October 11, 2016, the $12.0 billion of cash consideration was transferred upon completion of the Acquisition.

Executive Summary

We are one of the world's largest brewers and have a diverse portfolio of owned and partner brands, including core brands Carling, Coors Light, Miller Lite, Molson Canadian and Staropramen, as well as craft and specialty beers such as Blue Moon, Creemore Springs, Cobra and Doom Bar. With centuries of brewing heritage, we have been crafting high-quality, innovative products with the purpose of delighting the world's beer drinkers and with the ambition to be the first choice for our consumers and customers. Our success depends on our ability to make our products available to meet a wide range of consumer segments and occasions.

In addition to our most notable 2016 event, completing the Acquisition as discussed above, in 2016, we continued to focus on our first choice ambition and on building a stronger, broader and more premium brand portfolio. In 2016, our net income from continuing operations attributable to MCBC on a pro forma basis declined versus 2015 due to a number of challenges; however, we exceeded our targets for cost savings and cash generation and achieved positive net pricing in most of our major markets, excluding the impacts of changes in foreign currency exchange rates, and we continued to premiumize our portfolio across all of our businesses. Additionally, in 2016, we gained share of the key premium light segment in the U.S. and accelerated growth of our MCI business in Latin America and through the addition of the Miller global brands. We continued to improve our sales execution and revenue management capabilities, increase the efficiency of our operations, implement common systems and invested heavily in sales capability and execution improvement to drive incremental revenue, margin and profit growth. Our U.S. premium light brands have gained segment share for several consecutive quarters and outside of North America, Coors Light continued see significant volume growth. Despite the challenging market conditions in the U.S. and Canada, Coors Light, our largest brand, was nearly flat globally. In a challenging macroeconomic environment, our Europe business increased market share. Additionally, in accordance with our commitment to deleverage, during the fourth quarter of 2016, we made principal payments of $200 million on our $1.0 billion 3-year tranche term loan.

Summary of Consolidated Results of Operations:

The table below highlights summarized components of our consolidated statements of operations for the years ended December 31, 2016, December 31, 2015, and December 31, 2014, and pro forma information for the years ended December 31, 2016, and December 31, 2015. See Part II-Item 8 Financial Statements and Supplementary Data, “Consolidated Statements of Operations” for additional details of our U.S. GAAP results.

We have presented pro forma information to enhance comparability of financial information between periods. The pro forma financial information is based on the historical consolidated financial statements of MCBC and MillerCoors, both prepared in accordance with U.S. GAAP, and gives effect to the Acquisition and the completed financing as if they were completed on January 1, 2015. Pro forma adjustments are based on items that are factually supportable, are directly attributable to the Acquisition or the related completed financing, and are expected to have a continuing impact on MCBC's results of operations and/or financial position. Any nonrecurring items directly attributable to the Acquisition or the related completed financing are excluded in the pro forma statements of operations. Pro forma information does not include adjustments for costs related to integration activities following the completion of the Acquisition, cost savings or synergies that have been or may be achieved by the combined businesses. The pro forma information is presented for illustrative purposes only and does not necessarily reflect the results of operations of MCBC that actually would have resulted had the Acquisition occurred at the date indicated, or project the results of operations of MCBC for any future dates or periods.

	For the years ended
	December 31, 2016										December 31, 2015										December 31, 2014
	As Reported			Pro Forma(1)				Pro Forma Change			As Reported			Pro Forma(1)				As Reported Change			As Reported
	(In millions, except percentages and per share data)
Volume in hectoliters(2)	46.912			101.934				(2.0	)%		33.746			104.012				(6.3	)%		36.034
Net sales	$	4,885.0		$	10,983.2			(2.3	)%		$	3,567.5		$	11,238.1			(14.0	)%		$	4,146.3
Net income (loss) attributable to MCBC from continuing operations	$	1,978.7		$	277.5			(48.9	)%		$	355.6		$	542.6			(30.7	)%		$	513.5
Net income (loss) attributable to MCBC per diluted share from continuing operations	$	9.27		$	1.28			(49.0	)%		$	1.91		$	2.51			(30.8	)%		$	2.76

(1)	Pro forma amounts give effect to the Acquisition and completed financing as if they had occurred at the beginning of fiscal year 2015. See Part II - Item 7 Management's Discussion and Analysis, "Pro Forma Information," for details of pro forma adjustments.

(2)	Historical volumes have been recast to reflect the impacts of aligning policies on reporting financial volumes as a result of the Acquisition. See "Worldwide Beer Volume" below for further details.

2016 Financial Highlights:

•

On an as reported basis - In 2016, net income from continuing operations attributable to MCBC increased significantly as a result of the Acquisition, including a net benefit of approximately $3.0 billion recorded within special items, net related to the revaluation of our previously held equity interest in MillerCoors and the reclassification of our accumulated other comprehensive loss related to our historical 42% interest in MillerCoors as described in Note 4, "Acquisition and Investments", partially offset by increased income tax expense primarily related to this net benefit and higher Acquisition related expenses recorded in 2016, including $82.0 million within cost of goods sold, $108.4 million within marketing, general and administrative expenses, $58.9 million within other income (expense) and $76.8 million within interest expense. In 2015, we recorded Acquisition related expenses of $13.9 million, including $6.9 million within other income (expense), $6.9 million within marketing, general and administrative expenses and $0.1 million within interest expense. Unrelated to the Acquisition, within special items, net we recorded impairment charges of $526.0 million in 2016 versus $275.0 million in 2015. Additionally, during 2016, we recorded a gain of $110.4 million for the sale of our Vancouver brewery within specials items, net and recorded gains of $20.5 million for the sale of non-operating assets within other income (expense). Further, an indirect tax provision charge of approximately $50 million was recorded in the fourth quarter of 2016 in our Europe business which unfavorably impacted net sales.

•

On a pro forma basis - In 2016, pro forma net income from continuing operations attributable to MCBC decreased 48.9% due to higher charges on our indefinite-lived intangible asset brand impairment, the above-mentioned indirect tax provision recorded in Europe and higher tax expense. The decrease was partially offset by lower cost of goods sold. The pro forma net sales decrease of 2.3% in 2016 is driven by unfavorable foreign currency exchange rates, which had a negative impact of $182.4 million, the indirect tax provision charge of approximately $50 million recorded in the fourth quarter of 2016 in our Europe business, and lower volume. In 2016, we had impairment charges of $526.0 million versus $275.0 million in 2015 as further discussed in "Results of Operations" below. Cost of goods sold decreased primarily as result of supply chain cost savings and lower commodity costs.

•	Additionally, in accordance with our commitment to deleverage, during the fourth quarter of 2016, we made principal payments of $200 million on our $1.0 billion 3-year tranche term loan.

•

We generated cash flow from operating activities of approximately $1.1 billion, representing a 57.4% increase from $715.9 million in 2015. The increase in operating cash flow in 2016 compared to 2015 is primarily related to additional operating cash generated by the U.S. business from October 11, 2016, through December 31, 2016, as a result of the Acquisition, as well as the $227.1 million discretionary contribution made to our U.K. pension plan in 2015, slightly offset by higher cash paid for income taxes and interest in 2016.

•	Regional financial highlights:

•	In the U.S., MillerCoors realized lower cost of goods sold and grew net sales per hectoliter with positive pricing and mix which increased our income from continuing operations before income taxes on both a

reported basis and a pro forma basis compared to 2015. This increase was partially offset by lower volume. On a reported basis, income from continuing operations was also significantly impacted by the net benefit of approximately $3.0 billion recorded within special items, net related to the revaluation of our previously held equity interest and the reclassification of our accumulated other comprehensive loss related to our historical 42% interest as described in Note 4, "Acquisition and Investments". Additionally, we grew our share of the premium light segment with both Coors Light and Miller Lite. In above premium, we purchased three regional craft breweries during the year and began integrating these high potential businesses. Although Blue Moon seasonals and Redd's had a challenging year, Peroni continued to grow volume and Henry's Hard Soda, which was launched just over a year ago, became the number one hard soda franchise in 2016. Coors Banquet, which completed its tenth consecutive year of volume growth, gained segment share and ended 2016 with accelerating volume trends. During the year we continued strategizing the improvement of our performance in the economy segment and are beginning to see progress. Additionally, the closure of the Eden brewery was completed in September.

•

In our Canada segment, we drove positive pricing and mix, and achieved growth in our above premium brands. Coors Banquet, Mad Jack, Belgian Moon, Creemore and our Heineken import portfolio all continued to grow volume and market share. However, as a result of market pressure, specifically in Quebec and the West, volume declined. We reported a loss from continuing operations before income taxes of $135.5 million in 2016 compared to income of $277.3 million in 2015 primarily due to indefinite-lived intangible asset brand impairment charges incurred in 2016 of $495.2 million as well as lower volume, higher brand amortization and commercial investments and unfavorable foreign currency impacts, partially offset by cost savings and lower compensation expense. Additionally, in 2016, we completed the sale of our Vancouver brewery and accordingly recorded a gain of $110.4 million within specials items, net.

•

In our Europe segment, our continued portfolio premiumization and mix management positively impacted our performance and we grew volumes in our above premium brands and market share in the region. In 2016, we reported income from continuing operations before income taxes of $138.0 million, versus a loss of $109.7 million in 2015, primarily driven by lower special charges due to indefinite-lived intangible asset brand impairment charges incurred in 2015 of $275.0 million, slightly offset by the indirect tax provision charge recorded in 2016 of approximately $50 million as further discussed in detail within Note 18, "Commitments and Contingencies", higher brand amortization, lower net pension benefit and unfavorable foreign currency movements.

•

Our MCI segment reported a loss from continuing operations before income taxes of $39.7 million in 2016, compared to $24.8 million in the prior year, primarily driven higher special charges as a result of total alcohol prohibition in Bihar, which resulted in an aggregate impairment charge of $30.8 million recorded in 2016 and negatively impacted our ongoing operations in Bihar, the repatriation of our U.K. Staropramen rights to our European business and higher brand investments in Latin America. This loss was partially offset by the addition of the Miller global brands, higher volume, favorable sales mix, positive pricing, cost saving initiatives, and cycling the substantial restructure of our China business in the prior year.

•	Core brand highlights:

•	Volume for Carling, the number one beer brand in the U.K. and the largest brand in our Europe segment, decreased by 4.4% compared to 2015, which was in-line with the mainstream lager market in U.K. which has declined approximately 5% compared to 2015. Despite this, Carling gained share within its segment compared to the prior year.

•

Coors Light global volume on a pro forma basis was relatively consistent in 2016 versus 2015, as lower volumes in the U.S. and Canada were nearly offset by strong performance in Europe and MCI. Volumes in the U.S. were lower than prior year; however, the brand gained share of the premium light segment for the seventh consecutive quarter. The declines in Canada were the result of ongoing competitive pressures in Quebec as well as a shift in preference to value brands in the West resulting from a weaker economy; however, our new packaging, advertising and in-pack sales promotions are driving improved consumer purchase intent and other brand health scores.

•	Miller Lite U.S. volume on a pro forma basis decreased 1.7%; however, in the U.S., the brand gained share of the premium light segment for the ninth consecutive quarter.

•	Molson Canadian volume in Canada decreased 5.4% during 2016 versus the prior year, primarily driven by challenging economic conditions and competitive pressures in Quebec the West.

•	Staropramen volume, including royalty volume, decreased by 3.7% during 2016 versus 2015, primarily driven by lower volumes in Czech Republic and the Ukraine, partially offset by growth outside of the brand's primary market.

Worldwide Beer Volume

As a result of the Acquisition, we aligned our volume reporting policies resulting in adjustments to our historically reported volumes. Specifically, financial volume for all consolidated segments has been recast to include contract brewing and wholesaler non-owned brand volumes (including factored brands in Europe and non-owned brands distributed in the U.S.), as the corresponding sales are reported within our gross sales amounts. Additionally, financial volumes continue to include our owned beer brands sold to unrelated external customers within our geographic markets, net of returns and allowances. Worldwide beer volume reflects only owned beer brands sold to unrelated external customers within our geographic markets, net of returns and allowances, royalty volume and our proportionate share of equity investment worldwide beer volume calculated consistently with MCBC owned volume.

As outlined above, worldwide beer volume (including adjacencies, such as cider and hard soda) is comprised of our owned beer brands sold to unrelated external customers within our geographic markets, net of returns and allowances (financial volume, less contract brewing and wholesaler non-owned brand volume), royalty volume and our proportionate share of equity investment worldwide beer volume. Financial volume represents owned beer brands sold to unrelated external customers within our geographical markets, net of returns and allowances as well as contract brewing, wholesale non-owned brand volume and company-owned distribution volume. Royalty beer volume consists of our brands produced and sold by third parties under various license and contract-brewing agreements and because this is owned volume, it is included in worldwide beer volume. Equity investment worldwide beer volume represents our ownership percentage share of volume in our subsidiaries accounted for under the equity method, consisting of MillerCoors prior to the Acquisition date of October 11, 2016. See Part II—Item 8 Financial Statements and Supplementary Data, Note 4, "Acquisition and Investments" of the Notes for further discussion.

The following table highlights summarized components of our worldwide beer volume for the years ended December 31, 2016, December 31, 2015, and December 31, 2014:

	For the years ended
	December 31, 2016			Change			December 31, 2015			Change			December 31, 2014
	(In millions, except percentages)
Volume in hectoliters:
Financial volume	46.912			39.0	%		33.746			(6.3	)%		36.034
Less: Contract brewing and wholesaler volume(1)	(3.965	)		22.0	%		(3.250	)		(41.9	)%		(5.589	)
Add: Royalty volume(2)	2.102			28.9	%		1.631			3.2	%		1.580
Owned volume	45.049			40.2	%		32.127			0.3	%		32.025
Add: Proportionate share of equity investment worldwide beer volume	17.908			(34.2	)%		27.210			(2.5	)%		27.915
Total worldwide beer volume	62.957			6.1	%		59.337			(1.0	)%		59.940

(1)	Contract brewing and wholesaler volume is included within financial volume as noted above, but is removed from worldwide beer volume as this is non-owned volume for which we do not directly control performance.

(2)	Includes MCI segment royalty volume that is primarily in Russia, Ukraine and Mexico, and Europe segment royalty volume in Republic of Ireland.

On a reported basis, our worldwide beer volume increased in 2016 compared to 2015, primarily due to the Acquisition, which as a result of, we consolidated 100% of our U.S. segment's worldwide beer volume for the period October 11, 2016, through December 31, 2016. On a pro forma basis, our worldwide beer volume slightly decreased due to lower volume in the U.S. and Canada segments, partially offset by higher volume in the MCI and Europe segments. Worldwide beer volume decreased in 2015 compared to 2014, primarily due to lower volumes in Canada and the U.S., partially offset by increased volumes from MCI.

Net Sales

The following table highlights the drivers of change in net sales on a reported basis for the year ended December 31, 2016, versus December 31, 2015, by segment (in percentages) and excludes Corporate net sales revenue for our water resources and energy operations in the state of Colorado. Consolidated includes the U.S. segment for the post-Acquisition period of October 11, 2016, through December 31, 2016. Prior to the Acquisition, MillerCoors was accounted for as an equity method investment:

	Volume			Price, Product and Geography Mix			Currency			Other			Total
Consolidated	39.0	%		3.0	%		(5.1	)%		—	%		36.9	%
Canada	(2.8	)%		0.2	%		(3.1	)%		—	%		(5.7	)%
Europe	(1.7	)%		4.2	%		(7.2	)%		(3.4	)%		(8.1	)%
MCI	(7.3	)%		19.1	%		1.4	%		—	%		13.2	%

The following table highlights the drivers of change in net sales for the year ended December 31, 2015, versus December 31, 2014, by segment (in percentages) and excludes Corporate net sales revenue for our water resources and energy operations in the state of Colorado:

	Volume			Price, Product and Geography Mix			Currency			Other			Total
Consolidated	(6.3	)%		4.1	%		(11.8	)%		—	%		(14.0	)%
Canada	(4.5	)%		2.2	%		(13.4	)%		—	%		(15.7	)%
Europe	(8.1	)%		6.3	%		(10.7	)%		(0.5	)%		(13.0	)%
MCI	13.0	%		(11.0	)%		(9.5	)%		—	%		(7.5	)%

Cost Savings Initiatives

Total cost reductions, including 100% of MillerCoors' cost savings, in 2016 exceeded our targets and totaled more than $165 million, driven by our U.S., Canada and Europe segments. MillerCoors delivered incremental cost savings in 2016 exceeding $85 million on a pro forma basis, which we benefited from through our 42% equity income through October 10, 2016, and based on our 100% ownership post-Acquisition from October 11, 2016, through December 31, 2016.

Depreciation and Amortization

On a reported basis, depreciation and amortization expense was $388.4 million in 2016, an increase of $74.0 million compared to 2015, primarily due to the incremental depreciation and amortization recorded for the U.S. segment from October 11, 2016, through December 31, 2016, as a result of the Acquisition. On a pro forma basis, 2016 depreciation and amortization of approximately $850 million was consistent with prior year, excluding the higher accelerated depreciation expense recorded within special items, net in 2016 compared to 2015 related to the closure of the Eden, North Carolina, brewery. On a reported basis, depreciation and amortization expense was $314.4 million in 2015, a slight increase of $1.4 million compared to 2014, primarily due to increased amortization of our intangible assets as a result of reclassifying certain brands in our Europe segment to definite-lived in the third quarter of 2015 as well as accelerated depreciation related to bottling line and announced brewery closures, partially offset by the impact of changes in foreign currency rates.

Income Taxes

Our effective tax rate was approximately 35% in 2016, 13% in 2015 and 12% in 2014. The increase in the effective income tax rate for 2016 versus 2015 was primarily driven by higher pretax income in 2016 resulting from the Acquisition related remeasurement gain on our previously held equity interest in MillerCoors, along with the inclusion of 100% of MillerCoors' pretax income following the completion of the Acquisition, each of which were taxed at the U.S. federal and state income tax rates. The increase in our effective income tax rate in 2016 was also impacted by the remeasurement of the deferred tax liability on our Molson core brands intangible asset to the Canadian ordinary income tax rate upon reclassification from indefinite-lived to definite-lived assets subject to amortization. Our effective income tax rates in 2015 and 2014 were significantly lower than the federal statutory rate of 35% primarily due to lower effective income tax rates applicable to our foreign businesses, driven by lower statutory income tax rates and tax planning impacts on statutory taxable income. In addition, during 2015 and 2014, our effective tax rate was also positively impacted by the favorable resolution of unrecognized tax benefits in various taxing jurisdictions.

Our tax rate is volatile and may move up or down with changes in, among other things, the amount and source of income or loss, our ability to utilize foreign tax credits, excess tax benefits from share-based compensation, changes in tax laws, and the movement of liabilities established pursuant to accounting guidance for uncertain tax positions as statutes of limitations expire, positions are effectively settled, or when additional information becomes available. There are proposed or pending tax law changes in various jurisdictions in which we do business that, if enacted, may have an impact on our effective tax rate. Additionally, our effective tax rates prior to October 11, 2016, do not incorporate the effects of the Acquisition, which were a driver of the increase to our effective tax rate in the fourth quarter of 2016, and which we expect will result in an increase to our effective tax rate on a go-forward basis as a result of the incremental 58% interest in the results of MillerCoors subject to U.S. federal and state income tax. See Part II—Item 8 Financial Statements and Supplementary Data, Note 6, "Income Tax" of the Notes for further discussion.

Discontinued Operations

Discontinued operations are associated with the formerly-owned Cervejarias Kaiser Brasil S.A. ("Kaiser") business in Brazil. See Part II—Item 8 Financial Statements and Supplementary Data, Note 18, "Commitments and Contingencies" of the Notes for discussions of the nature of amounts recognized in discontinued operations, which consist of amounts associated with indemnity obligations to FEMSA Cerveza S.A. de C.V. ("FEMSA") related to purchased tax credits and other tax, civil and labor issues.

Results of Operations

United States Segment

We have presented pro forma financial information for 2016 and 2015 to enhance comparability of financial information between periods. Results for the period from January 1, 2016, through October 10, 2016, are actual results recorded when we accounted for MillerCoors under the equity method of accounting, and, therefore, its results of operations were reported as equity income within MCBC's consolidated statements of operations. Results for the period from October 11, 2016, through December 31, 2016, are actual results recorded when MillerCoors was fully consolidated within our results of operations. We have aggregated these reported 2016 results and applied pro forma adjustments to arrive at combined U.S. segment pro forma financial information for the full year 2016. We have also included actuals and pro forma financial information for 2015. For comparability between 2015 and 2014, actuals have been presented below.

	For the period January 1 through October 10, 2016				For the period October 11 through December 31, 2016				For the years ended
			December 31, 2016											December 31, 2015
	As Reported by MillerCoors				As Reported by MCBC				Pro Forma Adjustments(1)				Pro Forma(1)				Pro Forma Change			As Reported by MillerCoors				Pro Forma Adjustments(1)				Pro Forma(1)
	(In millions, except percentages)
Volume in hectoliters(2)(3)	55.750				14.436				—				70.186				(1.5	)%		71.220				—				71.220
Sales(3)	$	6,987.2			$	1,780.0			$	—			$	8,767.2			(0.6	)%		$	8,822.2			$	—			$	8,822.2
Excise taxes	(861.8		)		(213.4		)		12.3				(1,062.9		)		(3.1	)%		(1,096.7		)		—				(1,096.7		)
Net sales(3)	6,125.4				1,566.6				12.3				7,704.3				(0.3	)%		7,725.5				—				7,725.5
Cost of goods sold(3)	(3,457.4		)		(1,026.0		)		37.8				(4,445.6		)		(3.9	)%		(4,547.5		)		(78.2		)		(4,625.7		)
Gross profit	2,668.0				540.6				50.1				3,258.7				5.1	%		3,178.0				(78.2		)		3,099.8
Marketing, general and administrative expenses	(1,413.2		)		(430.9		)		(39.5		)		(1,883.6		)		(0.5	)%		(1,828.7		)		(64.4		)		(1,893.1		)
Special items, net(4)	(85.6		)		2,959.1				(2,965.0		)		(91.5		)		(16.9	)%		(110.1		)		—				(110.1		)
Operating income	1,169.2				3,068.8				(2,954.4		)		1,283.6				17.1	%		1,239.2				(142.6		)		1,096.6
Interest income (expense), net	(1.4		)		—				—				(1.4		)		(12.5	)%		(1.6		)		—				(1.6		)
Other income (expense), net	3.7				0.7				—				4.4				(22.8	)%		5.7				—				5.7
Income (loss) from continuing operations before income taxes	$	1,171.5			$	3,069.5			$	(2,954.4	)		$	1,286.6			16.9	%		$	1,243.3			$	(142.6	)		$	1,100.7

	For the years ended
	December 31, 2015							December 31, 2014
	As Reported by MillerCoors				Change			As Reported by MillerCoors
	(In millions, except percentages)
Volumes in hectoliters(2)(3)	71.220				(2.9	)%		73.323
Sales	$	8,822.2			(1.9	)%		$	8,990.4
Excise taxes	(1,096.7		)		(4.0	)%		(1,142.0		)
Net sales	7,725.5				(1.6	)%		7,848.4
Cost of goods sold	(4,547.5		)		(4.1	)%		(4,743.8		)
Gross profit	3,178.0				2.4	%		3,104.6
Marketing, general and administrative expenses	(1,828.7		)		4.1	%		(1,755.9		)
Special items, net(4)	(110.1		)		N/M			(1.4		)
Operating income	1,239.2				(8.0	)%		1,347.3
Interest income (expense), net	(1.6		)		45.5	%		(1.1		)
Other income (expense), net	5.7				3.6	%		5.5
Income (loss) from continuing operations before income taxes	$	1,243.3			(8.0	)%		$	1,351.7

N/M = Not meaningful

(1)	Pro forma amounts give effect to the Acquisition and completed financing as if they had occurred at the beginning of fiscal year 2015. See Part II - Item 7 Management's Discussion and Analysis, "Pro Forma Information," for details of pro forma adjustments.

(2)	Historical volumes have been recast to reflect the impacts of aligning policies on reporting financial volumes as a result of the Acquisition. See "Worldwide Beer Volume" above for further details.

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

(4)	See Part II—Item 8 Financial Statements and Supplementary Data, Note 7, "Special Items" of the Notes for detail of special items.

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

	For the period January 1 through October 10, 2016							For the years ended
		Change			December 31, 2015				Change			December 31, 2014
	(In millions, except percentages)
Income (loss) from continuing operations before income taxes	$	1,171.5			(5.8	)%		$	1,243.3			(8.0	)%		$	1,351.7
Income tax expense	(3.3		)		(29.8	)%		(4.7		)		(23.0	)%		(6.1		)
Net (income) loss attributable to noncontrolling interest	(11.0		)		(47.1	)%		(20.8		)		7.2	%		(19.4		)
Net income attributable to MillerCoors	$	1,157.2			(5.0	)%		$	1,217.8			(8.2	)%		$	1,326.2
MCBC's economic interest	42		%					42		%					42		%
MCBC's proportionate share of MillerCoors' net income	486.0				(5.0	)%		511.5				(8.2	)%		557.0
Amortization of the difference between MCBC's contributed cost basis and proportionate share of the underlying equity in net assets of MillerCoors(1)	3.3				(28.3	)%		4.6				—	%		4.6
Share-based compensation adjustment(1)	(0.7		)		N/M			0.2				—	%		0.2
U.S. import tax benefit(1)	12.3				N/M			—				—	%		—
Equity income in MillerCoors	$	500.9			(3.0	)%		$	516.3			(8.1	)%		$	561.8

N/M = Not meaningful

(1)	See Part II—Item 8 Financial Statements and Supplementary Data, Note 4, "Acquisition and Investments" of the Notes, for a detailed discussion of these equity method adjustments prior to the Acquisition.

The discussion below highlights the MillerCoors results of operations for the year ended December 31, 2016, versus the year ended December 31, 2015, on a reported and pro forma basis, where applicable, and for the year ended December 31, 2015, versus the year ended December 31, 2014, on a reported basis.

Significant events

On October 11, 2016, we completed the Acquisition and as a result, MCBC now owns 100% of the outstanding equity and voting interests of MillerCoors. Therefore, beginning October 11, 2016, MillerCoors' results of operations have been prospectively consolidated into MCBC’s consolidated financial statements and included in the U.S. segment. See Part II—Item 8 Financial Statements and Supplementary Data, Note 4, "Acquisition and Investments" for further details. Additionally, effective January 1, 2017, the results of the MillerCoors Puerto Rico business, which were previously included as part of the U.S. segment, will be reported within the MCI segment.

During the third quarter of 2015, MillerCoors announced plans to close its brewery in Eden, North Carolina, in an effort to optimize the brewery footprint and streamline operations for greater efficiencies. Products produced in Eden were transitioned to other breweries in the MillerCoors network and the Eden brewery is now closed. See "Special items, net" below for further discussion.

Additionally, in 2016 MillerCoors acquired Revolver Brewing, Terrapin Beer Company and Hop Valley Brewing Company, all craft breweries, and in 2015 MillerCoors acquired Saint Archer Brewing Company, also a craft brewery.

Volume and net sales

Domestic STRs declined 2.5% in 2016 compared to 2015, driven by declines in both the below premium and premium light segments.

Total STWs volume declined 1.5% in 2016 compared to 2015. Domestic STWs decreased 1.3% versus 2015, driven by the decline in STRs, and contract brewing volume of 2.6%.

Domestic net sales per hectoliter increased 1.2% on a reported basis and 1.3% on a pro forma basis in 2016 compared to 2015, driven by favorable net pricing and positive sales mix. Total net sales per hectoliter, including non-owned brands, contract brewing and company-owned distributor sales, increased 1.0% on a reported basis and 1.2% on a pro forma basis in 2016 compared to 2015.

Domestic STRs declined 2.6% in 2015 compared to 2014, driven by declines in both the economy and premium light portfolios, partially offset by growth in Redd's, Blue Moon, Leinenkugel's and Coors Banquet.

Total STWs volume declined 2.9% in 2015 compared to 2014. Domestic STWs decreased 2.9% versus 2014, driven by the decline in STRs, and contract brewing volume decreased 2.5%.

Domestic net sales per hectoliter increased 1.5% in 2015 compared to 2014, driven by favorable net pricing and positive sales mix. Total net sales per hectoliter, including non-owned brands, contract brewing and company-owned distributor sales, increased 1.4% in 2015 compared to 2014.

Cost of goods sold

Cost of goods sold per hectoliter remained relatively consistent on a reported basis and decreased 2.5% on a pro forma basis in 2016 compared to 2015. The decrease in pro forma results is driven by supply chain cost savings and lower commodity costs, partially offset by lower fixed-cost absorption due to lower volume.

Cost of goods sold per hectoliter decreased 1.3% in 2015 compared to 2014, driven by lower aluminum, malt, corn and fuel pricing, along with supply chain cost savings. These factors were partially offset by brewery and freight inflation and fixed-cost absorption due to lower volumes.

Marketing, general and administrative expenses

Marketing, general and administrative expenses remained relatively consistent on a reported and pro forma basis in 2016 compared to 2015.

Marketing, general and administrative expenses increased 4.1% in 2015 compared to 2014, driven by higher brand and information technology investments.

Special items, net

On a reported basis, our U.S. segment recorded net special benefits of approximately $2.9 billion in 2016 primarily related to the Acquisition, including the revaluation of our previously held equity interest in MillerCoors and the reclassification of our accumulated other comprehensive loss related to our historical 42% interest in MillerCoors as described in Note 4, "Acquisition and Investments" as well as charges related to the Eden brewery closure, including $103.2 million of accelerated depreciation in excess of normal depreciation. On a reported basis, MillerCoors recorded special charges of $110.1 million in 2015, primarily related to costs associated with the Eden brewery closure, of which $61.3 million was accelerated depreciation in excess of normal depreciation. Special charges in 2015 also included $42.4 million related to an early settlement of a portion of its defined benefit pension plan liability.

On a pro forma basis, special items, net decreased in 2016 compared to 2015 as a result of the pension settlement loss of $42.4 million recorded in 2015, partially offset by higher charges related to the closure of the Eden brewery in 2016.

We expect to continue to incur special charges during 2017 related to the closure of the Eden brewery. Total special charges associated with the Eden closure are expected to be up to approximately $180 million, of which $164.6 million have been incurred through December 31, 2016, consisting primarily of accelerated depreciation. However, this estimate is uncertain, and actual results could differ from these estimates due to uncertainty regarding the ultimate net cost associated with the disposition of assets, contract termination costs, and other costs associated with the closure.

Canada Segment

	For the years ended
	December 31, 2016				Change			December 31, 2015				Change			December 31, 2014
	(In millions, except percentages)
Volume in hectoliters(1)(2)	8.950				(2.8	)%		9.207				(4.5	)%		9.645
Sales(2)	$	1,879.4			(5.8	)%		$	1,994.2			(15.6	)%		$	2,363.4
Excise taxes	(453.7		)		(6.0	)%		(482.7		)		(15.2	)%		(569.5		)
Net sales(2)	1,425.7				(5.7	)%		1,511.5				(15.7	)%		1,793.9
Cost of goods sold(2)	(801.8		)		(6.9	)%		(861.6		)		(15.7	)%		(1,021.6		)
Gross profit	623.9				(4.0	)%		649.9				(15.8	)%		772.3
Marketing, general and administrative expenses	(364.4		)		2.5	%		(355.6		)		(13.8	)%		(412.5		)
Special items, net(3)	(402.8		)		N/M			(27.2		)		(165.1	)%		41.8
Operating income (loss)	(143.3		)		(153.7	)%		267.1				(33.5	)%		401.6
Other income (expense), net	7.8				(23.5	)%		10.2				96.2	%		5.2
Income (loss) from continuing operations before income taxes	$	(135.5	)		(148.9	)%		$	277.3			(31.8	)%		$	406.8

N/M = Not meaningful

(1)	Historical volumes have been recast to reflect the impacts of aligning policies on reporting financial volumes as a result of the Acquisition. See "Worldwide Beer Volume" above for further details.

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

(3)	See Part II—Item 8 Financial Statements and Supplementary Data, Note 7, "Special Items" of the Notes for detail of special items.

Significant events

Our ongoing assessment of our supply chain strategies continued in 2016 in order to align with our cost saving objectives. As part of this process, in October 2015, we entered into an agreement to sell our Vancouver brewery for CAD 185.0 million, with the intent to use the proceeds from the sale to help fund the construction of an efficient and flexible brewery in British Columbia. The sale was completed on March 31, 2016. Subsequently, during the third quarter of 2016, we completed the purchase of land in British Columbia for the site of the new brewery. We believe the decision to sell the brewery will help optimize the western Canada brewery network and allow for greater flexibility and future cost savings. Further, in conjunction with the sale of the Vancouver brewery, we agreed to leaseback the existing property to continue operations on an uninterrupted basis while the new brewery is being constructed. We also expect to incur significant capital expenditures associated with the construction of the new brewery, most of which we expect to be funded with the proceeds from the sale of the Vancouver brewery. See "Special items, net" below for more details.

In the fourth quarter of 2014, we entered into an agreement with Miller Brewing Company ("Miller") for the accelerated termination of our license agreement, effective March 2015, under which we had exclusive rights to distribute certain Miller products in Canada. As a result, beginning in the second quarter of 2015, we discontinued distributing these Miller brands in Canada, which adversely impacted our volume and sales. We recognized net sales under this agreement of $11.5 million and, $79.5 million for 2015 and 2014, respectively. The Acquisition resulted in the return of the Miller brands to our Canada business.

Further, we finalized the termination of our MMI joint venture relationship in the first quarter of 2014. As such, our results for the year ended December 31, 2014, include our percentage share of the MMI results through the transition period ended February 28, 2014. See Part II—Item 8 Financial Statements and Supplementary Data, Note 4, "Acquisition and Investments" and Note 11, "Goodwill and Intangible Assets" of the Notes for further discussion of these matters impacting our Canada business.

Foreign currency impact on results

During 2016, the CAD depreciated versus the USD on an average basis, resulting in a decrease of $12.9 million to our 2016 USD earnings before income taxes. During 2015, the CAD depreciated against the USD on an average basis, resulting in

a decrease of $34.3 million to our 2015 USD earnings before income taxes. Included in these amounts are both translational and transactional impacts of changes in foreign exchange rates. The impact of transaction gains and losses is recorded within other income (expense).

Volume and net sales

Our Canada STRs decreased 2.8% in 2016 compared to 2015, primarily due to competitor trade spending and pricing activities, as well as weak economic conditions in the West. As a result, our market share also declined on a full-year basis. Sales volume decreased in 2016 compared to 2015 due to the termination of the Miller brand agreement in 2015 and increased competitive pressure on our core brands, partially offset by the added volumes from acquired Miller brands from October 11, 2016, through December 31, 2016. Net sales per hectoliter increased 0.2% in local currency in 2016 compared to 2015, driven by positive pricing and brand mix, partially offset by mix shift toward lower-revenue packages and contract brewing volume.

STRs decreased 6.0% in 2015 compared to 2014, driven by the impact of the loss of the Miller brand agreement, a weak economy and increased competitor promotional activity. Canadian beer industry STRs increased slightly in 2015 compared to 2014; however, our market share declined on a full-year basis. Sales volume decreased in 2015 compared to 2014, due to the termination of the Miller brand agreement and increased competitive pressure on our core brands. Net sales per hectoliter increased 2.2% in local currency in 2015 compared to 2014, driven by favorable pricing.

Cost of goods sold

Cost of goods sold per hectoliter in local currency decreased 1.1% in 2016 compared to 2015, due to our ongoing cost savings initiatives and lower depreciation expense, partially offset by the impacts of volume deleverage, unfavorable foreign currency impacts and inflation.

Cost of goods sold per hectoliter increased 2.2% in local currency in 2015 compared to 2014, driven by input inflation, negative foreign currency impacts, fixed-cost deleverage and sales mix shift toward higher-cost brands and packages. These factors were partially offset by cost savings.

Marketing, general and administrative expenses

Marketing, general and administrative expenses increased 6.0% in local currency in 2016 compared to 2015, driven by higher brand amortization expense related to the reclassification of the Molson core brands asset to definite-lived intangible assets, partially offset by lower incentive compensation costs.

Marketing, general and administrative expenses decreased slightly in local currency in 2015 compared to 2014, driven by cost savings, partially offset by higher marketing spending.

Special items, net

During our annual impairment testing as of October 1, 2016, we identified a decline in the fair value of the Molson core brand indefinite-lived intangible asset below its carrying value, driven by key factors impacting our underlying assumptions supporting the value of the brands within the Molson core brands portfolio. Specific changes included a continued decline in performance throughout 2016 which drove a downward shift in management's forecasts, a challenging market dynamic and competitive conditions not expected to subside in the near-term, as well as an increased discount rate. As a result, we recorded an aggregate impairment charge to the Molson core brands asset of $495.2 million within special items in the fourth quarter of 2016 and reclassified the brands to definite-lived intangible assets. See Part II-Item 8 Financial Statements and Supplementary Data, Note 11, "Goodwill and Intangible Assets" of the Notes for further discussion.

The sale of our Vancouver brewery on March 31, 2016, resulted in a $110.4 million gain on sale, which was recorded as a special item in 2016. The net cash proceeds of CAD 183.1 million ($140.8 million) were received on April 1, 2016, and are reflected as a cash inflow from investing activities on the consolidated statement of cash flows for the year ended December 31, 2016. During 2016 and 2015, we also incurred other abandonment charges, including accelerated depreciation charges in excess of normal depreciation of $4.9 million and $1.2 million, respectively, related to equipment that continues to be owned by the Company and utilized during the leaseback period to support ongoing operations. We currently plan to dispose of this equipment following the brewery closure, which we currently anticipate to occur near the end of 2018. We expect to incur additional special charges, including estimated accelerated depreciation charges of approximately CAD 13 million, through final closure of the brewery. We also expect the ongoing costs of leasing the existing facility through the estimated closure date to be approximately CAD 5 million per annum, which are not included within special items.

During 2015, we incurred $15.7 million of charges related to the closure of a bottling line within our Vancouver brewery, including $15.4 million of accelerated depreciation associated with this bottling line. Additionally, we incurred $8.2 million of charges related to the closure of a bottling line within our Toronto brewery, including $7.9 million of accelerated depreciation

associated with this bottling line. The decisions to close these bottling lines were made as part of an ongoing strategic review of our Canadian supply chain network and the overall shift in consumer preference toward can package consumption in Canada. Results also include special charges related to restructuring activities of $2.1 million incurred during 2015.

During the third quarter of 2014, we recognized impairment charges related to our definite-lived intangible asset associated with our license agreement with Miller in Canada. See Part II—Item 8 Financial Statements and Supplementary Data, Note 11, "Goodwill and Intangible Assets" of the Notes for further discussion.

During the first quarter of 2014, we finalized the termination of our MMI joint venture and concurrently recognized a charge of $4.9 million for the accelerated amortization of the remaining carrying value of our definite-lived intangible asset associated with the agreement, as well as recorded income of $63.2 million for the payment received upon termination. See Part II—Item 8 Financial Statements and Supplementary Data, Note 4, "Acquisition and Investments" of the Notes for further discussion.

Europe Segment

	For the years ended
	December 31, 2016				Change			December 31, 2015				Change			December 31, 2014
	(In millions, except percentages)
Volume in hectoliters(1)(2)	22.590				(1.7	)%		22.981				(8.1	)%		25.019
Sales(2)	$	2,778.1			(6.1	)%		$	2,959.6			(12.5	)%		$	3,384.1
Excise taxes	(1,017.9		)		(2.6	)%		(1,044.7		)		(11.8	)%		(1,183.8		)
Net sales(2)	1,760.2				(8.1	)%		1,914.9				(13.0	)%		2,200.3
Cost of goods sold	(1,123.2		)		(5.9	)%		(1,193.0		)		(13.3	)%		(1,375.8		)
Gross profit	637.0				(11.8	)%		721.9				(12.4	)%		824.5
Marketing, general and administrative expenses	(511.3		)		(1.5	)%		(519.3		)		(9.4	)%		(573.1		)
Special items, net(3)	(0.6		)		(99.8	)%		(313.1		)		(14.4	)%		(365.9		)
Operating income (loss)	125.1				N/M			(110.5		)		(3.5	)%		(114.5		)
Interest income(4)	3.6				(7.7	)%		3.9				(11.4	)%		4.4
Other income (expense), net	9.3				N/M			(3.1		)		72.2	%		(1.8		)
Income (loss) from continuing operations before income taxes	$	138.0			N/M			$	(109.7	)		(2.0	)%		$	(111.9	)

N/M = Not meaningful

(1)	Historical volumes have been recast to reflect the impacts of aligning policies on reporting financial volumes as a result of the Acquisition. See "Worldwide Beer Volume" above for further details.

(2)	Reflects gross segment sales and volumes which are eliminated in the consolidated totals.

(3)	See Part II—Item 8 Financial Statements and Supplementary Data, Note 7, "Special Items" of the Notes for detail of special items.

(4)	Interest income is earned on trade loans to on-premise customers exclusively in the U.K. and is typically driven by note receivable balances outstanding from period to period.

Significant events

As a result of the Acquisition, the Miller brands were added to our Europe segment's portfolio beginning October 11, 2016, and effective January 1, 2017, various European markets including Sweden, Spain, Germany, Ukraine and Russia, which are currently under our MCI segment, will move to our Europe segment.

As part of our continued strategic review of our European supply chain network, during the fourth quarter of 2015, we announced the planned closure of the Burton South brewery in the U.K., in which we will consolidate production within our recently modernized Burton North brewery. The closure is expected to be completed by the end of 2017. Additionally, as part of this review, we closed our Plovdiv brewery in Bulgaria during the fourth quarter of 2015 and our Alton brewery in the U.K. during the second quarter of 2015. As a result of these closures, we incurred charges which were recorded within special items and are discussed further below.

During the fourth quarter of 2014 and first quarters of 2015 and 2016, we received assessments from a local country regulatory authority in Europe related to indirect tax calculations. Related to these assessments, we have concluded that a portion of the estimated range of loss is deemed probable, and, as a result, have recorded a charge of approximately $50 million, based on foreign exchange rates at December 31, 2016. The aggregate amount of the assessments received is approximately $98 million, based on foreign exchange rates at December 31, 2016. While we continue to challenge the validity of these assessments and defend our position regarding the method of calculation, if the assessments, as issued, are ultimately upheld, they could materially affect our results of operations, including excise taxes, net sales revenue and resulting impacts to other consolidated financial statement line items. Based on the assessments received and related impacts, we estimate a current range of loss of up to approximately $132 million, based on foreign exchange rates at December 31, 2016, excluding consideration of interest and penalties. See Part II—Item 8 Financial Statements and Supplementary Data, Note 18, "Commitments and Contingencies" of the Notes for further discussion.

In the second quarter of 2015, we terminated our agreement with Carlsberg whereby it held the exclusive distribution rights for the Staropramen brand in the U.K. This gave us the exclusive distribution rights for the Staropramen brand in the U.K. by the end of 2015. Additionally, the termination of our contract brewing arrangement with Heineken in the U.K. became effective at the end of April 2015. Related to these contract terminations, we recorded net termination fees of $10.0 million for 2015 within special items, net. To lessen the impact of the lost revenue associated with the Heineken contract, we closed certain breweries as noted above. Additionally, during the third quarter of 2015, we sold our U.K. malting facility and purchased the Rekorderlig cider brand distribution rights in the U.K. and Ireland.

Further, in 2015 and 2014, we recorded impairment charges for certain indefinite-lived intangible brands primarily driven by continued macroeconomic challenges, and have reclassified these brands to definite-lived. See "Special items, net" below for more details.

Foreign currency impact on results

Our Europe segment operates in numerous countries within Europe, and each country's operations utilize distinct currencies. During 2016, foreign currency movements unfavorably impacted our Europe USD income from continuing operations before income taxes by $7.3 million. During 2015, foreign currency movements decreased our Europe USD loss from continuing operations before income taxes by $24.0 million. Included in these amounts are both translational and transactional impacts of changes in foreign exchange rates. The impact of transactional gains and losses is recorded within other income (expense). See "Foreign Exchange" section below for details related to the volatility of the GBP following the U.K.'s vote to leave the EU.

Volume and net sales

Sales volume decreased in 2016 compared to 2015, due to lower contract brewing volumes partially offset by volume growth, as well as the addition of the Staropramen, Rekorderlig and Bavaria brands in the U.K.

Net sales per hectoliter increased 1.0% in local currency in 2016 compared to 2015, primarily driven by lower contract brewing volume. Excluding the impact from the termination of the brewing agreements and the indirect tax provision discussed above, positive brand and geographic mix was partially offset by negative net pricing.

Sales volume decreased in 2015 compared to 2014, due to lower contract brewing volumes and the loss of the Modelo brands in the U.K. in 2015, partially offset by strong growth in Romania and Croatia.

Net sales per hectoliter increased 6.3% in local currency in 2015 compared to 2014, primarily driven by a higher percentage of owned brand sales, partially offset by the loss of contract brewing revenue and the Modelo brands in the U.K.

Cost of goods sold

Cost of goods sold per hectoliter increased 4.4% in local currency in 2016 compared to 2015, driven by mix shift to higher-cost brands and geographies as well as a lower net pension benefit.

Cost of goods sold per hectoliter increased 5.4% in local currency in 2015 compared to 2014, primarily due to lower contract brewing volume in the U.K., partially offset by positive supply chain performance.

Marketing, general and administrative expenses

Marketing, general and administrative expenses increased 3.1% in local currency in 2016 compared to 2015, driven by higher marketing investments and brand amortization expenses, partially offset by lower overhead costs.

Marketing, general and administrative expenses increased 2.8% in local currency in 2015 compared to 2014, driven by the release of a regulatory reserve in the third quarter of 2014 and an $11.3 million non-core gain recognized in the first quarter

of 2014 related to the favorable resolution of an indirect-tax audit, along with severance costs and higher brand amortization expense in 2015.

Special items, net

During 2016, we received the final settlement of insurance proceeds of $9.3 million related to losses incurred by our Europe business from flooding in Serbia, Bosnia and Croatia which occurred during 2014. This benefit was recorded within special items, net. See Part II—Item 8 Financial Statements and Supplementary Data, Note 7, "Special Items" of the Notes for further discussion.

During 2016, we incurred special charges associated with the planned closure of our Burton South brewery of $8.5 million which includes accelerated depreciation charges in excess of our normal depreciation of $7.5 million. During 2015 we incurred $1.4 million of accelerated depreciation charges in excess of our normal depreciation associated with this brewery.

During 2016, we incurred asset abandonment related special charges associated with the Alton brewery of $0.5 million, and during 2015, we incurred asset abandonment related special charges of $24.0 million, including accelerated depreciation in excess of our normal depreciation associated with this brewery of $21.8 million. In 2014, we incurred accelerated depreciation in excess of our normal depreciation associated with the Alton brewery of $4.0 million.

During 2016, we incurred asset abandonment related special charges related to the closure of our Plovdiv brewery of $1.8 million, and during 2015 we incurred asset abandonment related special charges of $2.1 million including accelerated depreciation in excess of our normal depreciation of $1.0 million.

We expect to incur additional future accelerated depreciation in excess of our normal depreciation of approximately GBP 5 million related to the Burton South brewery through the third quarter of 2017. We do not expect to incur future accelerated depreciation on the Alton and Plovdiv breweries. We may recognize other charges or benefits related to these brewery closures, which cannot currently be estimated and will be recorded within special items.

During the third quarter of 2015, we identified impairment indicators pertaining to indefinite-lived intangible assets related to certain European brands driven by key changes to our underlying assumptions supporting the value of the brands. Specific changes include underperformance through the 2015 peak season driving a downward shift in management's forecasts, along with challenging macroeconomic and competitive conditions that we no longer expect to subside in the near term. As a result, we recorded an aggregate impairment charge of $275.0 million within special items in the third quarter of 2015 and reclassified the brands to definite-lived intangible assets. This followed impairment charges of indefinite-lived brand assets of $360.0 million in 2014. See Part II—Item 8 Financial Statements and Supplementary Data, Note 11, "Goodwill and Intangible Assets" of the Notes for further discussion.

Molson Coors International Segment

	For the years ended
	December 31, 2016				Change			December 31, 2015				Change			December 31, 2014
	(In millions, except percentages)
Volume in hectoliters(1)(2)	1.495				(7.3	)%		1.613				13.0	%		1.428
Sales	$	191.0			7.9	%		$	177.0			(3.9	)%		$	184.2
Excise taxes	(27.4		)		(15.7	)%		(32.5		)		16.5	%		(27.9		)
Net sales	163.6				13.2	%		144.5				(7.5	)%		156.3
Cost of goods sold(3)	(107.1		)		8.6	%		(98.6		)		2.2	%		(96.5		)
Gross profit	56.5				23.1	%		45.9				(23.2	)%		59.8
Marketing, general and administrative expenses	(65.3		)		2.2	%		(63.9		)		(12.6	)%		(73.1		)
Special items, net(4)	(31.1		)		N/M			(6.4		)		N/M			—
Operating income (loss)	(39.9		)		63.5	%		(24.4		)		83.5	%		(13.3		)
Other income (expense), net	0.2				(150.0	)%		(0.4		)		N/M			—
Income (loss) from continuing operations before income taxes	$	(39.7	)		60.1	%		$	(24.8	)		86.5	%		$	(13.3	)

N/M = Not meaningful

(1)	Historical volumes have been recast to reflect the impacts of aligning policies on reporting financial volumes as a result of the Acquisition. See "Worldwide Beer Volume" above for further details.

(2)	Excludes royalty volume of 1.908 million hectoliters, 1.458 million hectoliters and 1.351 million hectoliters in 2016, 2015 and 2014, respectively.

(3)	Reflects gross segment purchases which are eliminated in the consolidated totals.

(4)	See Part II—Item 8 Financial Statements and Supplementary Data, Note 7, "Special Items" of the Notes for detail of special items.

Significant events

As a result of the Acquisition, the Miller brands were added to MCI's portfolio beginning October 11, 2016. Additionally, as a result of the Acquisition, effective January 1, 2017, various European markets including Sweden, Spain, Germany, Ukraine and Russia, which were previously part of our MCI segment will move to our Europe segment while the results of the MillerCoors Puerto Rico business, which were previously included as part of the U.S. segment, will be reported within the MCI segment.

In the fourth quarter of 2015, a newly elected government in the state of Bihar, India, announced plans to ban the sale of "country" liquor and to limit the sale of other forms of alcohol, such as beer, to certain government owned outlets, effective April 1, 2016. On April 5, 2016, four days after the start of the ban on "country" liquor, the government of the state of Bihar announced immediate changes to the ban, implementing a complete prohibition of the sale and consumption of all forms of alcohol. As a result of this ban, our Molson Coors Cobra India business is currently not operating and is idled pending any future change in law or regulation. This ban does not impact our Mount Shivalik business operating outside of Bihar, India. Due to this triggering event, and as the expected length of the prohibition is unclear, we performed an interim impairment assessment for the impacted tangible assets, intangible assets and the India reporting unit goodwill. Specifically, upon identification of the triggering event, we completed step one of the goodwill impairment test comparing the fair value of the India reporting unit to its carrying value using a combination of discounted cash flow analyses and market approaches, which resulted in the need to complete step two. Upon completion of step two, we recorded an impairment of tangible assets of $11.0 million and impairment of goodwill and definite-lived intangibles of $19.8 million within special items during the second quarter of 2016. The remaining goodwill attributable to the India reporting unit of $6.4 million, based on foreign exchange rates at December 31, 2016, is associated with cash flows in other states in India, where alcohol sales are not prohibited. We continue to monitor legal proceedings impacting the regulatory environment as it relates to our ability to resume operations in the state. In addition, if the facts or circumstances associated with the expected collectibility of certain Bihar receivables due from the government of approximately $6 million, based on foreign exchange rates at December 31, 2016, adversely change or if future cash flows are adversely impacted relative to the projected cash flows used in the impairment analysis we may incur additional impairment or other losses in future periods.

In accordance with our strategy to increase our international portfolio and deepen our reach into the rapidly growing India beer market, MCI acquired Mount Shivalik, a regional brewer, during the second quarter of 2015. As part of the transaction, MCI acquired Mount Shivalik's entire brand portfolio, including the leading strong-beer brand Thunderbolt, and assumed direct control over brewing operations. The acquisition of Mount Shivalik added two breweries and more than doubled our brewing capacity in India. We believe this acquisition has resulted in a powerful combination of industry leading brewing expertise, brand reach and operational efficiency that has allowed us to accelerate the growth of our brands within the India market.

Additionally, during the second quarter of 2015, we announced our decision to substantially restructure our business in China and consequently recognized employee-related and asset write-off charges.

Foreign currency impact on results

Our MCI segment operates in numerous countries around the world and each country's operations utilize distinct currencies. Foreign currency movements favorably impacted MCI's USD loss before income taxes by $1.0 million for 2016 and unfavorably impacted our USD loss before income taxes by $4.3 million for 2015. Included in these amounts are both translational and transactional impacts of changes in foreign exchange rates. The impact of transactional foreign currency gains and losses is recorded within other income (expense).

Volume and net sales

Sales volume excluding royalty volume decreased by 7.3% in 2016 compared to 2015, primarily driven by the enactment of total alcohol prohibition implemented in the state of Bihar, India, the repatriation of our U.K. Staropramen rights to our European segment along with the substantial restructure of our business in China. Sales volume including royalty volume

increased by 10.8% driven by the addition of the Miller global brands, volume growth in Latin America, including our launch in Colombia, as well as volume growth in Japan.

Net sales per hectoliter increased 22.2% in 2016 compared to 2015, primarily due to higher pricing and favorable sales mix changes. The increase in 2016 is also driven by the recognition of price promotion expenses related to the substantial restructure of our business in China in 2015.

Total sales volume including royalty volumes increased 14.0%, and sales volume excluding royalty volume increased by 13.0% in 2015 compared to 2014, due to volume growth in India from strong performance of our existing business and our acquisition of Mount Shivalik during the second quarter of 2015, along with Coors Light growth in Latin America including our latest launch in Colombia.

Net sales per hectoliter decreased 23.0% in 2015 compared to 2014, primarily due to sales mix changes and foreign currency movements.

Cost of goods sold

Cost of goods sold per hectoliter increased 17.2% in 2016 compared to 2015, driven primarily by sales mix changes.

Cost of goods sold per hectoliter decreased 14.9% in 2015 compared to 2014, due to sales mix changes and foreign currency movements.

Marketing, general and administrative expenses

Marketing, general and administrative expenses increased 2.2% in 2016 compared to 2015, primarily due to the addition of the Miller global brands along with higher brand investments in Latin America, partially offset by cost savings from the substantial restructure of our business in China.

Marketing, general and administrative expenses decreased 12.6% in 2015 compared to 2014, driven by the substantial restructure of our business in China, as well as foreign currency movements.

Corporate

	For the years ended
	December 31, 2016				Change			December 31, 2015				Change			December 31, 2014
	(In millions, except percentages)
Volume in hectoliters	—				—	%		—				—	%		—
Sales	$	1.0			—	%		$	1.0			(9.1	)%		$	1.1
Excise taxes	—				—	%		—				—	%		—
Net sales	1.0				—	%		1.0				(9.1	)%		1.1
Cost of goods sold	22.9				N/M			(14.7		)		N/M			(4.7		)
Gross profit	23.9				N/M			(13.7		)		N/M			(3.6		)
Marketing, general and administrative expenses	(225.4		)		99.5	%		(113.0		)		7.4	%		(105.2		)
Special items, net(1)	(0.7		)		N/M			—				(100.0	)%		(0.3		)
Operating income (loss)	(202.2		)		59.6	%		(126.7		)		16.1	%		(109.1		)
Interest expense, net	(248.0		)		114.0	%		(115.9		)		(16.1	)%		(138.1		)
Other income (expense), net	(47.7		)		N/M			(5.8		)		(41.4	)%		(9.9		)
Income (loss) from continuing operations before income taxes	$	(497.9	)		100.4	%		$	(248.4	)		(3.4	)%		$	(257.1	)

N/M = Not meaningful

(1)	See Part II—Item 8 Financial Statements and Supplementary Data, Note 7, "Special Items" of the Notes for detail of special items.

Significant events

In connection with the Acquisition, we have incurred, and will continue to incur, various transaction and integration costs as further discussed below. See Part II—Item 8 Financial Statements and Supplementary Data, Note 4, "Acquisition and Investments" of the Notes.

Cost of goods sold

The unrealized changes in fair value on our commodity swaps, which are economic hedges, are recorded as cost of goods sold within our Corporate business activities. As the exposure we are managing is realized, we reclassify the gain or loss to the segment in which the underlying exposure resides, allowing our segments to realize the economic effects of the derivative without the resulting unrealized mark-to-market volatility. Cost of goods sold for the years ended December 31, 2016, and December 31, 2015, include unrealized mark-to-market gains of $23.1 million and losses of $14.1 million, respectively, on these commodity swaps.

Marketing, general and administrative expenses

Marketing, general and administrative expenses increased in 2016 compared to 2015, primarily due to transaction costs associated with the Acquisition of $108.4 million.

Interest expense, net

Net interest expense increased in 2016 compared to 2015, primarily due to the incremental interest expense on our 2016 Notes issued July 7, 2016, compared to the prior year, as well as other net interest costs associated with the Acquisition. We incurred approximately $77 million of Acquisition related net interest expense for the period prior to the completion of the Acquisition from January 1, 2016 through October 10, 2016. See Part II—Item 8 Financial Statements and Supplementary Data, Note 16, "Derivative Instruments and Hedging Activities" and Note 12, "Debt" for further details.

Net interest expense decreased in 2015 compared to 2014, driven primarily by lower interest expense recorded on our $300 million 2.0% notes due 2017 ("$300 million notes") and our $500 million 3.5% notes due 2022 ("$500 million notes") as a result of our interest rate swap hedges on these notes.

Other income (expense), net

The increase in other income (expense) from 2016 compared to 2015, is primarily driven by financing costs incurred on our bridge loan of approximately $63 million which were incurred prior to the Acquisition. Other income (expense) during 2016 is partially offset by the $20.5 million gain on the sale of non-operating assets as well as unrealized gains on foreign currency forwards which are economic hedges entered into during the second quarter of 2016 in connection with the issuance of our 2016 Notes on July 7, 2016.

Other income (expense) includes $6.9 million of amortization expense related to commitment fees on the bridge loan for the year ended December 31, 2015. Additionally, other income (expense) includes a gain of $3.3 million 2015, resulting from the sale of a non-operating asset.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 5, "Other Income and Expense" of the Notes for further discussion of other income (expense) amounts.

Liquidity and Capital Resources

Our primary sources of liquidity include cash provided by operating activities and access to external capital. We believe that cash flows from operations and cash provided by short-term and long-term borrowings, when necessary, will be more than adequate to meet our ongoing operating requirements, scheduled principal and interest payments on debt, anticipated dividend payments and capital expenditures for the next twelve months, and our long-term liquidity requirements.

A significant portion of our trade receivables are concentrated in Europe. While these receivables are not concentrated in any specific customer and our allowance on these receivables factors in collectibility, we may encounter difficulties in our ability to collect due to the impact to our customers of any further economic downturn within Europe.

A significant portion of our cash flows from operating activities is generated outside the U.S., in currencies other than USD. As of December 31, 2016, approximately 64% of our cash and cash equivalents were located outside the U.S., largely denominated in foreign currencies. Most of the amounts held outside of the U.S. could be repatriated to the U.S. but under current law would be subject to U.S. federal and state income taxes, less applicable foreign tax credits. We accrue for U.S. federal and state tax consequences on the earnings of our foreign subsidiaries upon repatriation. When the earnings are

considered indefinitely reinvested outside of the U.S., we do not accrue U.S. federal and state tax consequences. We utilize a variety of tax planning and financing strategies in an effort to ensure that our worldwide cash is available in the locations in which it is needed. We periodically review and evaluate these strategies, including external committed and non-committed credit agreements accessible by MCBC and each of our operating subsidiaries. These financing arrangements, along with cash flows from our U.S. segment are sufficient to fund our current cash needs in the U.S.

Net Working Capital

As of December 31, 2016, we had negative working capital and debt-free net working capital of $303.1 million compared to positive working capital and debt-free net working capital of $70.3 million as of December 31, 2015. Short-term borrowings and the current portion of long-term debt are excluded from net working capital, as they are not reflective of the ongoing operational requirements of the business. The levels of working capital required to run our business fluctuate with the seasonality in our business. Our working capital is also sensitive to foreign exchange rates, as a significant portion of current assets and current liabilities are denominated in either CAD or our European operating currencies such as, but not limited to, GBP, Euro, Czech Koruna, Croatian Kuna, Serbian Dinar, New Romanian Leu, Bulgarian Lev and Hungarian Forint, while financial results are reported in USD. While we continue to work towards improving our working capital, we may be unable to maintain these working capital benefits in the long term. Below is a table outlining our current and historical net working capital levels:

	As of
	December 31, 2016				December 31, 2015
	(In millions)
Current assets	$	2,169.6			$	1,258.8
Less: Current liabilities	(3,157.5		)		(1,217.2		)
Add back: Current portion of long-term debt and short-term borrowings	684.8				28.7
Net working capital	$	(303.1	)		$	70.3

As a result of the Acquisition, MillerCoors' net assets became consolidated on October 11, 2016. The decrease in net working capital from $70.3 million at December 31, 2015, to negative $303.1 million at December 31, 2016, is primarily related to an overall increase in accounts payable and other current liabilities due to the consolidation of MillerCoors' current liabilities, partially offset by an increase in cash balances and accounts receivable resulting from the consolidation of MillerCoors. The increase in current portion of long-term debt and short-term borrowings is due to our $300 million 2.0% notes and CAD 500 million 3.95% notes maturing during 2017.

Cash Flows and Use of Cash

Our business generates positive operating cash flow each year, and our debt maturities are of a longer-term nature. However, our liquidity could be impacted significantly by the risk factors described in Part I, Item 1A. Risk Factors.

Cash Flows from Operating activities

Net cash provided by operating activities of approximately $1.1 billion in 2016, increased by $411.0 million compared to 2015. This increase is primarily related to additional operating cash generated by the U.S. business from October 11, 2016, through December 31, 2016, as a result of the Acquisition as well as higher cash paid for pension contributions in 2015 including the $227.1 million discretionary payment to our U.K. pension plan. This increase is partially offset by higher cash paid for interest and higher cash paid for taxes primarily due to the Acquisition.

Net cash provided by operating activities of $715.9 million in 2015 decreased by $572.0 million compared to 2014. This decrease was primarily due to lower net income, adjusted for lower non-cash add-backs, along with unfavorable foreign currency movements, higher cash paid for pension contributions, including our $227.1 million discretionary payment to our U.K. pension plan, and taxes.

Cash Flows from Investing activities

Net cash used in investing activities of approximately $12.3 billion in 2016, increased by approximately $12.0 billion compared to 2015 driven primarily by the completion of the Acquisition for $12.0 billion. This increase is partially offset by the receipt of CAD 183.1 million ($140.8 million) of proceeds from the sale of our Vancouver brewery.

Net cash used in investing activities of $334.7 million in 2015, increased by $95.3 million compared to 2014 driven primarily by the cash paid in 2015 for the acquisition of Mount Shivalik in India and the Rekorderlig distribution rights in the U.K.

Cash Flows from Financing activities

Net cash provided by financing activities of approximately $11.3 billion in 2016, increased by approximately $11.8 billion compared to 2015. This increase is primarily driven by the approximate $6.9 billion of net proceeds from the issuance of the 2016 Notes on July 7, 2016, the $2.5 billion of proceeds received from borrowings on our term loan agreement as well as the approximate $2.5 billion of net proceeds received from our February 3, 2016, equity offering of 29.9 million shares of our Class B common stock, to fund the Acquisition.

Net cash used in financing activities of $531.5 million in 2015, decreased by $285.8 million compared to 2014. This decrease is primarily driven by proceeds on our commercial paper program and other revolving credit facilities in 2015 compared to repayments in 2014. Specifically, we had proceeds of $3.9 million in 2015 versus repayments of $513.9 million in 2014. This decrease is partially offset by our Class B common stock share repurchase of approximately $150 million in 2015 as well as increased repayments on our overdraft facilities, payments for debt issuance costs and dividend payments during 2015.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 12, "Debt" of the Notes for a summary of our financing activities and debt position at December 31, 2016, and December 31, 2015.

Capital Resources

Cash and Cash Equivalents

As of December 31, 2016, we had total cash and cash equivalents of $560.9 million, compared to $430.9 million at December 31, 2015. The increase in cash and cash equivalents at December 31, 2016, from December 31, 2015, was driven by lower 2015 cash balances due to the additional cash used to pay our discretionary cash contributions of $227.1 million made to our U.K. pension plan in the first quarter of 2015 and share repurchases of approximately $150 million, as well as the consolidation of MillerCoors' cash as a result of the Acquisition. This increase was partially offset by the $200 million partial paydown on our term loan as well as higher cash paid for Acquisition related expenses.

The majority of our cash and cash equivalents are invested in a variety of highly liquid investments with original maturities of 30 days or less. These investments are viewed by management as low-risk investments on which there are little to no restrictions regarding our ability to access the underlying cash to fund our operations as necessary. While we have some investments in prime money market funds, these are classified as cash and cash equivalents; however, we continually monitor the need for reclassification under the updated SEC requirements for money market funds, effective October 14, 2016, and the potential that the shares of such funds could have a net asset value of less than one dollar. We also utilize cash pooling arrangements to facilitate the access to cash across our geographies.

Borrowings

The majority of our outstanding borrowings as of December 31, 2016, consisted of fixed-rate senior notes, with maturities ranging from 2017 to 2046. On July 7, 2016, MCBC issued the 2016 Notes in order to partially fund the financing of the Acquisition. This issuance resulted in total proceeds of approximately $6.9 billion, net of underwriting fees and discounts of $36.5 million and $17.7 million, respectively. Total estimated amounts capitalized in connection with the 2016 Notes, including underwriting fees, discounts as well as other financing related costs, were approximately $65 million and will be amortized over the terms of the 2016 Notes. The 2016 Notes began accruing interest upon issuance, with semi-annual payments due on the USD Notes and CAD Notes in January and July beginning in 2017, and annual payments on our EUR Notes beginning July 2017.

As a result of the issuance of our 2016 Notes, we terminated our outstanding 364-day bridge loan agreement concurrent with the receipt of these proceeds. There were no outstanding borrowings on the bridge loan upon termination. We also had a term loan agreement to partially fund the Acquisition that provided access to a total term loan commitment of up to $1.5 billion in a 3-year tranche and up to $1.5 billion in a 5-year tranche, for an aggregate principal amount of up to $3.0 billion. On October 11, 2016, in connection with the closing of the Acquisition, we borrowed $1.0 billion under the 3-year tranche and $1.5 billion under the 5-year tranche, for an aggregate principal amount of $2.5 billion. The net proceeds received from the term loan as well as the issuance of the 2016 Notes and February 3, 2016, equity offering were sufficient to fund the purchase price of the Acquisition, and on October 11, 2016, the $12.0 billion of cash consideration was transferred upon close of the Acquisition. Subsequent to the Acquisition, we repaid $200 million on our term loan in accordance with our deleveraging goals.

The CAD 900 million 5.0% notes due 2015 were repaid during the third quarter of 2015 using the proceeds from the issuance of the CAD 500 million 2.75% notes due 2020 and CAD 400 million 2.25% notes due 2018, which were both issued in September 2015 (collectively the "2015 Notes"). Beginning in the second quarter of 2014, we entered into forward starting interest rate swap agreements to manage our exposure to the volatility of the interest rates associated with future interest

payments on the forecasted debt issuance. Under the agreements, we were required to early terminate these swaps at the approximate time we issued the previously forecasted debt. At the time of issuance of the 2015 Notes, the government of Canada bond rates were trading at a yield lower than that locked in by the interest rate swaps, resulting in an aggregate loss of CAD 39.2 million ($29.5 million at settlement), which was recorded in other comprehensive income and is being amortized to interest expense over the life of the associated note. During 2014, we also entered into interest rate swaps to economically convert our fixed rate $500 million 3.5% notes due 2022 to floating rate debt. Additionally, in the first quarter of 2015, we entered into interest rate swaps with an aggregate notional amount of $300 million and a cross currency swap with a notional amount of EUR 265 million ($300 million upon execution) to economically convert our fixed rate $300 million 2.0% notes due in 2017 to floating rate, Euro denominated debt. During the fourth quarter of 2015, we voluntarily cash settled all of our interest rate swaps which resulted in cash receipts of $18.8 million as well as our cross currency swap which resulted in cash receipts of $16.0 million. We also hold short-term borrowings primarily related to overdrafts on our cross-border cross-currency cash pool arrangement and overdraft facilities. See Part II—Item 8 Financial Statements, Note 12, "Debt" of the Notes for further details.

Based on the credit profile of our lenders that are party to our credit facilities, we are confident in our ability to draw on our $750 million revolving credit facility if the need arises. There were no outstanding borrowings under our $750 million revolving credit facility as of December 31, 2016. As we had no outstanding borrowings as of December 31, 2016, under our commercial paper program, $750 million was available to draw on under this revolving credit facility. We also have Japanese Yen ("JPY") overdraft facilities, CAD and GBP lines of credit with several banks should we need additional short-term liquidity. We also currently utilize and will further utilize our cross-border, cross-currency cash pool as well as our commercial paper program for liquidity needs after this revolving credit facility expires in 2019.

Under the terms of each of our debt facilities, we must comply with certain restrictions. These include restrictions on priority indebtedness (certain threshold percentages of secured consolidated net tangible assets), leverage thresholds, liens, and restrictions on certain types of sale lease-back transactions. The covenants specify that our leverage ratio cannot exceed 3.5x debt to earnings before interest expense, tax expense, depreciation and amortization ("EBITDA"), as defined in our credit agreement. As of December 31, 2016, and December 31, 2015, we were in compliance with all of these restrictions and have met all debt payment obligations. The restrictions related to our 2016 Notes and term loan are substantially similar as those of our outstanding senior notes as of December 31, 2016, which all rank pari-passu. As part of our financing for the Acquisition, we amended our $750 million revolving multi-currency credit facility during the fourth quarter of 2015, effective following the completion of the Acquisition, to increase the maximum leverage ratio to 5.75x debt to EBITDA, with a decline to 3.75x debt to EBITDA in the fourth year following the completion of Acquisition.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 12, "Debt" of the Notes for a complete discussion and presentation of all borrowings and available sources of borrowing, including lines of credit.

Credit Rating

Our current long-term credit ratings are BBB-/Stable Outlook, Baa3/Stable Outlook and BBB(Low)/Stable Outlook with Standard and Poor's, Moody's Investor Services and DBRS, respectively. Our short-term credit ratings are A-3, Prime-3 and R-2(low), respectively. A securities rating is not a recommendation to buy, sell or hold securities, and it may be revised or withdrawn at any time by the rating agency.

Foreign Exchange

Foreign exchange risk is inherent in our operations primarily due to the significant operating results that are denominated in currencies other than USD. Our approach is to reduce the volatility of cash flows and reported earnings which result from currency fluctuations rather than business related factors. Therefore, we closely monitor our operations in each country and seek to adopt appropriate strategies that are responsive to foreign currency fluctuations. Our financial risk management policy is intended to offset a portion of the potentially unfavorable impact of exchange rate changes on net income and earnings per share. See Part II—Item 8 Financial Statements and Supplementary Data, Note 16, "Derivative Instruments and Hedging Activities" of the Notes for additional information on our financial risk management strategies.

Our consolidated financial statements are presented in USD, which is our reporting currency. Assets and liabilities recorded in foreign currencies that are the functional currencies for the respective operations are translated at the prevailing exchange rate at the balance sheet date. Translation adjustments resulting from this process are reported as a separate component of other comprehensive income. Revenue and expenses are translated at the average exchange rates during the period. Gains and losses from foreign currency transactions are included in earnings for the period. The significant exchange rates to the USD used in the preparation of our consolidated financial results for the primary foreign currencies used in our foreign operations (functional currency) are as follows:

	For the years ended
	December 31, 2016			December 31, 2015			December 31, 2014
Weighted-Average Exchange Rate (1 USD equals)
Canadian dollar (CAD)	1.32			1.27			1.11
Euro (EUR)	0.90			0.89			0.75
British pound (GBP)	0.75			0.65			0.60
Czech Koruna (CZK)	24.61			24.48			20.67
Croatian Kuna (HRK)	6.78			6.85			5.58
Serbian Dinar (RSD)	110.81			107.46			84.82
New Romanian Leu (RON)	4.05			3.99			3.33
Bulgarian Lev (BGN)	1.77			1.75			1.46
Hungarian Forint (HUF)	285.13			278.85			228.63

	As of
	December 31, 2016			December 31, 2015
Closing Exchange Rate (1 USD equals)
Canadian dollar (CAD)	1.34			1.38
Euro (EUR)	0.95			0.92
British pound (GBP)	0.81			0.68
Czech Koruna (CZK)	25.69			24.88
Croatian Kuna (HRK)	7.18			7.04
Serbian Dinar (RSD)	117.23			111.86
New Romanian Leu (RON)	4.31			4.16
Bulgarian Lev (BGN)	1.86			1.80
Hungarian Forint (HUF)	294.36			290.44

The weighted-average exchange rates for the years ended December 31, 2016, December 31, 2015, and December 31, 2014, have been calculated based on the average of the foreign exchange rates during the relevant period and have been weighted according to the foreign denominated earnings from continuing operations of the USD equivalent.

If foreign currencies in the countries in which we operate devalue significantly in future periods, most significantly the CAD and European operating currencies included in the above table, then the impact on USD reported earnings may be material. For example, as a result of the referendum held on June 23, 2016, in which a majority of voters in the U.K. voted in favor of the U.K. leaving the European Union, the GBP has since weakened and continues to be volatile. Any significant weakening of the GBP to the USD will have an adverse impact on our European revenues as reported in USD due to the importance of U.K. sales.

Capital Expenditures

In 2016, we incurred $339.9 million, and have paid $341.8 million, for capital improvement projects worldwide, excluding capital spending by MillerCoors for the pre-Acquisition period of January 1, 2016, through October 10, 2016, and other equity method joint ventures, representing an approximate 26% increase versus 2015 capital expenditures incurred of $269.1 million, primarily driven by the incremental capital expenditure spend of MillerCoors for the post-Acquisition period. We currently expect to incur total capital expenditures of approximately $750 million in 2017, based on foreign exchange rates as of December 31, 2016, including capital expenditures associated with the new construction intended to replace the

Vancouver brewery and excluding capital spending by equity method joint ventures. The increase in planned expenditures for 2017 from 2016 is driven by the addition of MillerCoors' capital expenditures as a consolidated entity for the full year 2017 compared to October 11, 2016, through December 31, 2016 for 2016, construction of an efficient and flexible brewery in British Columbia, and spending to capture transaction-related synergies and other cost savings.

We have increased our focus on where and how we employ our planned capital expenditures, specifically strengthening our focus on required returns on invested capital as we determine how to best allocate cash within the business.

Contractual Obligations and Commercial Commitments

Contractual Obligations

A summary of our consolidated contractual obligations as of December 31, 2016, based on foreign exchange rates at December 31, 2016, is as follows:

	Payments due by period
	Total				Less than 1 year				1 - 3 years				3 - 5 years				More than 5 years
	(In millions)
Debt obligations	$	12,142.3			$	685.3			$	1,597.6			$	2,872.0			$	6,987.4
Interest payments on debt obligations	4,948.2				351.6				660.9				583.2				3,352.5
Retirement plan expenditures(1)	638.4				163.4				104.7				106.4				263.9
Operating leases	223.4				57.0				79.0				48.2				39.2
Other long-term obligations(2)	3,223.1				978.4				1,022.9				633.7				588.1
Total obligations	$	21,175.4			$	2,235.7			$	3,465.1			$	4,243.5			$	11,231.1

See Part II - Item 8 Financial Statements and Supplementary Data, Note 12, "Debt", Note 15, "Employee Retirement Plans and Postretirement Benefits", Note 16, "Derivative Instruments and Hedging Activities" and Note 18, "Commitments and Contingencies" of the Notes for additional information.

(1)

Represents expected contributions under our defined benefit pension plans in the next twelve months and our benefit payments under postretirement benefit plans for all periods presented. The net underfunded liability at December 31, 2016, of our defined benefit pension plans (excluding our overfunded plans) and postretirement benefit plans is $416.6 million and $835.0 million, respectively. Defined benefit pension plan contributions in future years will vary based on a number of factors, including actual plan asset returns and interest rates, and as such, have been excluded from the above table. We fund pension plans to meet the requirements set forth in applicable employee benefits laws. We may also voluntarily increase funding levels to meet financial goals. Excluding BRI and BDL, in 2017, we expect to make contributions to our defined benefit pension plans of approximately $100 million to $120 million and benefit payments under our OPEB plans of approximately $50 million, based on foreign exchange rates as of December 31, 2016.

Our U.K. pension plan is subject to a statutory valuation for funding purposes every three years. The most recent valuation as of June 30, 2016, resulted in a long-term funding commitment plan consisting of MCBC contributions to the plan of a GBP 60 million lump-sum contribution in early 2020 and incremental GBP 25.7 million annual contributions from 2020 through 2026, which are excluded from the above table. We expect to complete this statutory valuation in 2017.

We have taken numerous steps in recent years to reduce our exposure to these long-term pension obligations, including the closure of the U.K. pension plan in early 2009 to future earning of service credit and benefit modifications in several of our Canada plans. However, given the net liability of these plans and their dependence upon the global financial markets for their financial health, the plans may continue to periodically require potentially significant amounts of cash funding.

(2)

The "other long-term obligations" line primarily includes non-cancelable purchase commitments as of December 31, 2016, that are enforceable and legally binding. Approximately $2.0 billion of the total other long-term obligations relate to long-term supply contracts with third parties to purchase raw material, packaging material and energy used in production. Our aggregate commitments for advertising and promotions, including sports sponsorship, total approximately $788 million. The remaining amounts relate to derivative payments, sales and marketing, distribution, information technology services, open purchase orders and other commitments. Included in other long-term obligations are $9.7 million of unrecognized tax benefits, excluding positions we would expect to settle using deferred

tax assets, and $12.6 million of indemnities provided to FEMSA for which we cannot reasonably estimate the timing of future cash flows, and we have therefore included these amounts in the more than 5 years column.

Guarantees

We guarantee indebtedness and other obligations to banks and other third parties for some of our equity investments and consolidated subsidiaries. See Part II—Item 8 Financial Statements and Supplementary Data, Note 18, "Commitments and Contingencies" of the Notes for further discussion.

Other Commercial Commitments

Based on foreign exchange rates as of December 31, 2016, future commercial commitments are as follows:

	Amount of commitment expiration per period
	Total amounts committed				Less than 1 year				1 - 3 years				3 - 5 years				More than 5 years
	(In millions)
Standby letters of credit	$	60.9			$	60.7			$	0.2			$	—			$	—

Contingencies

We are party to various legal proceedings arising in the ordinary course of business, environmental litigation and indemnities associated with our sale of Kaiser to FEMSA. Additionally, during the fourth quarter of 2014, and first quarters of 2015 and 2016, we received assessments from a local country regulatory authority related to indirect tax calculations in our Europe operations. While we continue to challenge the validity of these assessments and defend our position regarding the method of calculation, if the assessments, as issued, are ultimately upheld, they could materially affect our results of operations, including excise taxes, net sales revenue and resulting impacts to other consolidated financial statement line items. See Part II—Item 8 Financial Statements and Supplementary Data, Note 18, "Commitments and Contingencies" of the Notes for further discussion.

Off-Balance Sheet Arrangements

In accordance with generally accepted accounting principles in the U.S., our operating leases are not reflected in our consolidated balance sheets. See Part II—Item 8 Financial Statements, Note 18, "Commitments and Contingencies" of the Notes for further discussion of these off-balance sheet arrangements. As of December 31, 2016, we did not have any other material off-balance sheet arrangements (as defined in Item 303(a)(4)(ii) of Regulation S-K).

Outlook for 2017

In 2017, we will continue our relentless focus on delighting our consumers and our customers to ensure we are the first choice brewer in the geographies and segments in which we operate.

In the U.S., as we move forward in 2017, we will continue to drive toward our goal of flat volume in 2018 and volume growth in 2019. We expect to again invest heavily in our flagship brands, Coors Light and Miller Lite along with Coors Banquet. Coors Light recently launched a new extension of the "Climb On" campaign built on our continued commitment to sustainability, which we believe will appeal to a growing number of consumers who support brands that make the world a better place. In above premium, Henry's Hard Sparkling, a new product to play in the growing alcoholic sparkling water category, plans to be launched nationally in March with Lemon Lime and Passion Fruit flavors, while Redd's and Blue Moon Belgian White expect to introduce new aluminum pint packaging in the second quarter. Tenth and Blake, the craft and import division of MillerCoors, will continue to focus on integrating and rapidly expanding the geographic reach of our craft acquisitions. As an example, the Terrapin Beer Company, expects to open its brand-new tap room and microbrewery at The Battery Atlanta, adjacent to SunTrust Park, which will soon be the new home of the Atlanta Braves baseball team. In addition, Tenth and Blake expects to accelerate efforts on Peroni to drive incremental growth. Finally, we are implementing a range of new initiatives to boost our economy portfolio. For example, Miller High Life has new marketing and redesigned packaging, the Keystone family plans to unveil new packaging early this year, and Mickey's plans to bring back its popular large-format glass bottle packaging. In first choice customer engagement, besides the Tammarron survey win, more than 15 retailers named MillerCoors their supplier of the year, and we have increased production flexibility across our brewery network and ramped up two new aluminum pint filling lines in Fort Worth and Shenendoah to meet strong demand for this package. We also remain committed to developing and maintaining strong relationships with our U.S. distributors.

In Canada, our first choice agenda will be focused on bringing back momentum to the top line through a relentless focus on our two largest brands, Coors Light and Molson Canadian, in the premium segment. We look forward to the launch of a new Molson Canadian campaign celebrating Canada's 150th Anniversary this year, and to aligning the Coors Light creative platform with the U.S. "Climb On" campaign. We expect to also drive for further growth in above premium with Coors Banquet, Mad Jack, Belgian Moon and the Heineken brand family. While we expect Miller Genuine Draft to be the main focus Miller brand in the short term, we are fine tuning the potential roles of Miller Lite and Miller High Life to further strengthen our portfolio. Our customer relationships remain one of our key assets, and we anticipate increased call efficiency in 2017 and more focus on the in-store execution of our brand campaigns across all channels. In 2017, we expect to also continue to transform our cost base to ensure we maximize our future competitiveness, including in our brewery network.

In Europe, our first choice consumer agenda now includes the Miller brands, as well as the MCI license and export business in the region starting on January 1, 2017, resulting in our plan to drive Staropramen, Coors, Carling, and Miller with fully aligned strategies across Europe. We expect to also continue building out our craft portfolio, including Sharp's, Franciscan Well and further expansion of Blue Moon across the region. In January 2017, we purchased a controlling interest in the Spanish craft brewery La Sagra. Located near Madrid, La Sagra expands our craft portfolio in the world’s 11th largest beer market and offers a new distribution partner in Spain for Blue Moon Belgian White. In customer excellence, our overall Europe Net Promoter Score increased again in 2016 for the third year in a row, with 9 out of 11 countries improving their customer rating. In the U.K., our key accounts and convenience retail customers scored us number-one out of 21 beverage suppliers.

MCI has greater scale and reach with the addition of the Miller global brands, including in attractive developing and emerging markets. Beginning on January 1, 2017, we also changed our Puerto Rico business reporting to MCI so that one team is managing the entire Caribbean, while also transferring the European MCI markets to our Europe business. We plan to build on our existing Coors Light momentum in Latin America and leverage opportunities to grow the Coors and Miller brands in high-opportunity markets using an asset-light model of strong partnering and local license agreements. The addition of the Miller global brands complements our growth strategy, and we have already hit the ground running in key priority markets. In existing priority markets, such as Australia and Honduras, where our partners have already embraced Coors Light, we are ready to accelerate growth with the addition of the Miller brands. In attractive new markets, we have begun expanding distribution with local partners, on-boarding our country managers, and activating local transition service agreements.

Pension Plans

We currently anticipate approximately $100 million to $120 million of cash contributions to our defined benefit pension plans in 2017 and pension income of approximately $24 million, based on foreign exchange rates as of December 31, 2016. BRI and BDL pension expense and contributions to their respective defined benefit pension plans are excluded here, as they are not consolidated in our financial statements.

Interest

We anticipate 2017 consolidated net interest expense of approximately $370 million, based on foreign exchange and interest rates at December 31, 2016.

Dividends and Stock Repurchases

As a result of the Acquisition, we plan to maintain our current quarterly dividend of $0.41 per share, and have suspended our share repurchase program as we pay down debt, and we will revisit our dividend policy and share repurchase program once deleveraging is well underway.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP. In connection with the preparation of our consolidated financial statements, we are required to make judgments and estimates that significantly affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. Our estimates are based on historical experience, current trends and various other assumptions we believe to be relevant under the circumstances. We review the underlying factors used in our estimates regularly, including reviewing the significant accounting policies impacting the estimates, to ensure compliance with U.S. GAAP. However, due to the uncertainty inherent in our estimates, actual results may be materially different. We have identified the accounting estimates below as critical to understanding and evaluating the financial results reported in our consolidated financial statements.

For a complete description of our significant accounting policies, see Part II—Item 8 Financial Statements and Supplementary Data, Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" of the Notes.

Pension and Other Postretirement Benefits

Our defined benefit pension plans cover certain current and former employees in the U.S., Canada, the U.K. (within our Europe segment) and Japan (within our MCI segment). Benefit accruals for the majority of employees in our U.S. plan have been frozen and the plans are closed to new entrants. In the U.S., we also participate in, and make contributions to, multi-employer pension plans. Our other postretirement benefit ("OPEB") plans provide medical benefits for retirees and their eligible dependents as well as life insurance and, in some cases, dental and vision coverage, for certain retirees in Canada, the U.S. (MillerCoors and Corporate), and Europe. The U.S., Canada and U.K. defined benefit pension plans are primarily funded, but the Japan plan and all OPEB plans are unfunded. We also offer defined contribution plans in each of our segments.

Accounting for pension and OPEB plans requires that we make assumptions that involve considerable judgment which are significant inputs in the actuarial models that measure our net pension and OPEB obligations and ultimately impact our earnings. These include the discount rate, long-term expected rate of return on assets, compensation trends, inflation considerations, health care cost trends and other assumptions, as well as determining the fair value of assets in our funded plans.

Specifically, the discount rates, as well as the expected rates of return on assets and plan asset fair value determination, are important assumptions used in determining the plans' funded status and annual net periodic pension and OPEB benefit costs. We evaluate these critical assumptions at least annually on a plan and country-specific basis. We also, with the help of actuaries, periodically evaluate other assumptions involving demographic factors, such as retirement age, mortality and turnover, and update them to reflect our experience and expectations for the future. While we believe that our assumptions are appropriate, significant differences in our actual experience or significant changes in our assumptions may materially affect our net pension and postretirement benefit obligations and related expense.

Discount Rates

The assumed discount rates are used to present-value future benefit obligations based on each plan's respective duration. Our pension and postretirement discount rates are based on our annual evaluation of high quality corporate bonds in the various markets based on appropriate indices and actuarial guidance. We believe that our discount rate assumptions are appropriate; however, significant changes in our assumptions may materially affect our pension and OPEB obligations and related expense.

At December 31, 2016, on a weighted-average basis, the discount rates used were 3.36% for our defined benefit pension plans and 3.76% for our OPEB plans. The change from the weighted-average discount rates of 3.82% for our defined benefit pension plans and 4.05% for our postretirement plans at December 31, 2015, is primarily the result of changes in the global economic environment.

A 50 basis point change in our discount rate assumptions would have had the following effects on the projected benefit obligation balances as of December 31, 2016, for our pension and OPEB plans:

	Impact to projected benefit obligation as of December 31, 2016 - 50 basis points
	Decrease				Increase
	(In millions)
Projected benefit obligation - unfavorable (favorable)
Pension obligation	$	437.5			$	(391.5	)
OPEB obligation	47.2				(44.3		)
Total impact to the projected benefit obligation	$	484.7			$	(435.8	)

Our U.K. pension plan includes benefits linked to inflation. The above sensitivity analysis does not consider the implications to inflation resulting from the above contemplated discount rate changes. This sensitivity holds all other assumptions constant.

Long-Term Expected Rates of Return on Assets

The assumed long-term expected return on assets (“EROA”) is used to estimate the actual return that will occur on each individual funded plan's respective plan assets in the upcoming year. We determine each plan's EROA with substantial input from independent investment specialists, including our actuaries and other consultants. In developing each plan's EROA, we consider current and expected asset allocations, historical market rates as well as historical and expected returns on each plan's individual asset classes. In developing future return expectations for each of our plan's assets, we evaluate general market trends as well as key elements of asset class returns such as expected earnings growth, yields and spreads. The calculation

includes inputs for interest, inflation, credit, and risk premium (active investment management) rates and fees paid to service providers. Based on the above factors and expected asset allocations, we have assumed, on a weighted-average basis, an EROA of 4.83% for our defined benefit pension plan assets for cost recognition in 2017. This is a decrease from the weighted-average rate of 5.09% we had assumed in 2016. We believe that our EROA assumptions are appropriate; however, significant changes in our assumptions or actual returns that differ significantly from estimated returns may materially affect our net periodic pension costs.

To compute the expected return on plan assets, we apply the EROA to the market-related value of the pension plans assets adjusted for projected benefit payments to be made from the plan assets and projected contributions to the plan assets. We have elected to recognize actual returns on these assets ratably over a five year period when computing our market-related value of plan assets. The unrecognized portion of actual returns on these assets is included in accumulated other comprehensive income. This method has the effect of reducing the impact of market volatility that may be experienced from year to year. Specifically, while employer contributions and realized gains and losses (such as dividends received or gains and losses on sales of assets) are reflected immediately in the market-related value of assets, each year's unrealized gains and losses are recognized into the market-related value over five years. Therefore, significant divergences of actual returns from expected returns may not have an immediate impact on each of our plan's future net periodic pension costs; rather, such differences will be recognized into the market-related value over the five years, following the event. Therefore, future years' pension expense will continue to be impacted by the gains and losses experienced in prior years.

A 50 basis point change in our discount rate and expected return on assets assumptions made at the beginning of 2016 (and at October 11, 2016, for MillerCoors' plans) would have had the following effects on 2016 net periodic pension and postretirement benefit costs:

	Impact to 2016 pension and postretirement benefit costs - 50 basis points (unfavorable) favorable
	Decrease				Increase
	(In millions)
Description of pension and postretirement plan sensitivity item
Expected return on pension plan assets	$	(12.2	)		$	33.6
Discount rate on pension plans	$	(20.1	)		$	21.7
Discount rate on postretirement plans	$	(11.1	)		$	9.9

Fair Value of Plan Assets

We recognize our defined benefit pension plans as assets or liabilities in the consolidated balance sheets based on their underfunded or overfunded status as of our year end and recognize changes in the funded status in the year in which the changes occur within other comprehensive income. Our funded status of our defined benefit pension plans is measured as the difference between each plan's projected benefit obligation (“PBO”) and its assets' fair values. The fair value of plan assets is determined by us using available market information and appropriate valuation methodologies. However, considerable judgment is required in selecting an appropriate methodology and interpreting market data to develop the estimates of fair value, especially in the absence of quoted market values in an active market. Changes in these assumptions or the use of different market inputs may have a material impact on the estimated fair values or the ultimate amount at which the plan assets are available to satisfy our plan obligations.

Equity assets are diversified between domestic and other international investments. Relative allocations reflect the demographics of the respective plan participants. See Part II—Item 8 Financial Statements and Supplementary Data, Note 15, "Employee Retirement Plans and Postretirement Benefits" of the Notes for a comparison of target asset allocation percentages to actual asset allocations at December 31, 2016.

Other Considerations

Our net periodic pension and postretirement benefit costs are also influenced by the potential amortization (or non-amortization) from accumulated other comprehensive income (loss) of deferred gains and losses, which occur when actual experience differs from estimates. We employ the corridor approach for determining each plan's amortization. This approach defines the “corridor” as the greater of 10% of the PBO or 10% of the market-related value of plan assets (as discussed above) and requires amortization of the excess net gain or loss that exceeds the corridor over the average remaining service periods of active plan participants. For our closed plans, the average remaining life expectancy of all plan participants (including retirees) is used. If our actuarial losses significantly exceed this corridor in the future, significant incremental pension and postretirement costs could result. As of year end 2016, the deferred losses of several of our Canadian plans, as well as those in our U.K. plan, exceeded the 10% corridor.

The assumed health care cost trend rates represent the rates at which health care costs are assumed to increase and are based on actuarial input and consideration of historical and expected experience. We use these trends as a significant assumption in determining our postretirement benefit obligation and related costs. Changes in our projections of future health care costs due to general economic conditions and those specific to health care will impact this trend rate. An increase in the trend rate would increase our obligation and expense of our postretirement health care plan. We believe that our health care cost trend rate assumptions are appropriate; however, significant changes in our assumptions may materially affect our postretirement benefit obligations and related costs. At December 31, 2016, the health care trend rates used were ranging ratably from 7.0% in 2017 to 4.5% in 2037, consistent with our health care trend rates ranging ratably from 7.7% in 2016 to 4.5% in 2028 used at December 31, 2015. See Part II—Item 8 Financial Statements and Supplementary Data, Note 15, "Employee Retirement Plans and Postretirement Benefits" of the Notes for the impact of a one-percentage point change in assumed health care cost trend rates on total service and interest cost components and postretirement benefit obligation at December 31, 2016.

Contingencies, Environmental and Litigation Reserves

Contingencies, environmental and litigation reserves are recorded, when probable, using our best estimate of loss. This estimate, involving significant judgment, is based on an evaluation of the range of loss related to such matters and where the amount and range can be reasonably estimated. These matters are generally resolved over a number of years and only when one or more future events occur or fail to occur. Following our initial determination, we regularly reassess and revise the potential liability related to any pending matters as new information becomes available. Unless capitalization is allowed or required by U.S. GAAP, environmental and legal costs are expensed when incurred. We disclose pending loss contingencies when the loss is deemed reasonably possible, which requires significant judgment. As a result of the inherent uncertainty of these matters, the ultimate conclusion and actual cost of settlement may materially differ from our estimates. We recognize contingent gains upon the determination that realization is assured beyond a reasonable doubt, regardless of the perceived probability of a favorable outcome prior to achieving that assurance. In the instance of gain contingencies resulting from favorable litigation, due to the numerous uncertainties inherent in a legal proceeding, gain contingencies resulting from legal settlements are not recognized in income until cash or other forms of payment are received. If significant and probable, we disclose as appropriate.

See Part I—Item 3 Legal Proceedings and Part II—Item 8 Financial Statements and Supplementary Data, Note 18, "Commitments and Contingencies" of the Notes for a discussion of our contingencies, environmental and litigation reserves as of December 31, 2016.

Goodwill and Intangible Asset Valuation

Goodwill is allocated to the reporting unit in which the business that created the goodwill resides. A reporting unit is an operating segment, or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management. As of the date of our annual impairment test, performed as of October 1, the operations in each of the specific regions within our Canada, Europe and MCI segments are components based on the availability of discrete financial information and the regular review by segment management. Therefore, the components within each respective segment must be evaluated for aggregation to determine if the components have similar economic characteristics. As a result, in certain cases, we have aggregated business units, within an operating segment, into one reporting unit if the specific aggregation criteria under U.S. GAAP is met. Specifically, we have concluded that the components within the Canada and Europe segment each meet the criteria as having similar economic characteristics and therefore have aggregated these components into the Canada and Europe reporting units, respectively. Therefore, the Canada and Europe reporting units are consistent with our operating segments. However, for our India business, the reporting unit is one level below the MCI operating segment. Any change to the conclusion of our reporting units or the aggregation of components within our reporting units could result in a different outcome to our annual impairment test. As of the date of our annual impairment test, our significant indefinite-lived intangible assets included the Molson core brands and the Coors Light distribution rights in Canada, and the Carling and Staropramen brands in Europe. As further discussed below, we reclassified the Molson core brands from indefinite-lived to definite-lived intangible assets following the completion of our annual impairment test. Additionally, following the completion of the Acquisition on October 11, 2016, the Coors and Miller brand families in the U.S. are also included within our significant indefinite-lived intangible asset portfolio.

We evaluate the carrying value of our goodwill and indefinite-lived intangible assets for impairment at least annually or when an interim triggering event occurs that would indicate that impairment may have taken place. Our annual impairment test was performed as of October 1, the first day of the last fiscal quarter. We evaluate our other definite-lived intangible assets for impairment when evidence exists that certain events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Significant judgments and assumptions are required in such impairment evaluations.

Our annual evaluation involves comparing each reporting unit's fair value to its respective carrying value, including goodwill. If the fair value exceeds carrying value, then we conclude that no goodwill impairment has occurred. If a reporting

unit's carrying value exceeds its fair value, a second step is required to measure possible goodwill impairment loss. This step, if required, would include valuing all tangible and intangible assets and liabilities of the reporting unit, excluding goodwill. Then, the implied fair value of the reporting unit's goodwill derived from this step would be compared to the carrying value of that goodwill. If the carrying value of the reporting unit's goodwill were to exceed the implied fair value of the goodwill, we would recognize an impairment loss in an amount equal to the excess.

We use a combination of discounted cash flow analyses and market approaches to determine the fair value of each of our reporting units, and an excess earnings approach to determine the fair values of our indefinite-lived intangible assets. Our discounted cash flow projections include assumptions for growth rates for sales, costs and profits, which are based on various long-range financial and operational plans of each reporting unit or each indefinite-lived intangible asset. Additionally, discount rates used in our goodwill analysis are based on weighted-average cost of capital, driven by the prevailing interest rates in geographies where these businesses operate, as well as the credit ratings, financing abilities and opportunities of each reporting unit, among other factors. Discount rates for the indefinite-lived intangible analysis by brand largely reflect the rates supporting the overall reporting unit valuation but may differ slightly to adjust for country or market specific risk associated with a particular brand. Our market-based valuations utilize earnings multiples of comparable public companies, which are reflective of the market in which each respective reporting unit operates, and recent comparable market transactions.

Changes in the factors used in our fair value estimates, including declines in industry or company-specific beer volume sales, margin erosion, termination of brewing and/or distribution agreements with other brewers, and discount rates used, could have a significant impact on the fair values of the reporting units and indefinite-lived intangible assets.

Reporting Units and Goodwill

Our 2016 annual goodwill impairment testing determined that the fair value of our Canada reporting unit declined from the prior year, largely due to continued economic and competitive challenges negatively impacting our business, including sustained challenges facing the Molson core brands as further discussed below. Our Europe reporting unit fair value remained comparable with the prior year, and continues to be considered at risk of failing step one of the goodwill impairment test. Specifically, the fair value of the Europe and Canada reporting units were estimated at approximately 14% and 29% in excess of carrying value, respectively, as of the October 1, 2016, testing date. The excess of the fair value over the carrying value of the Europe reporting unit slightly improved from the prior year. The improvement in the current year was driven by a decrease to the carrying value of the reporting unit versus the prior year, in addition to the fair value of the reporting unit benefiting from improved cost savings estimates and favorable tax rate changes, which positively impacted the forecasted future cash flows for the Europe reporting unit. While the fair value of our Canada reporting unit declined from the prior year, the Canada reporting unit had an increase in the fair value in excess of the carrying value from the prior year primarily due to the impacts of the Molson core brands impairment charge resulting in a reduction to the overall carrying value of the reporting unit. The Canada reporting unit, continued to face challenging market dynamics during the year, including continued performance declines within the Molson core brands, resulting in a reduction of forecasted results in comparison to the prior year, which were slightly off-set by incremental cost savings initiatives included in the current year forecast. Although the fair value in excess of the carrying value has increased for the Canada reporting unit from the October 1, 2015, testing date, the fair value is sensitive to further unfavorable changes in forecasted cash flows, macroeconomic conditions, market multiples or discount rates that could have an adverse impact. The fair value of the India reporting unit approximated its carrying value, as there were no significant changes indicating a reduction in the fair value of the reporting unit since our completion of an interim impairment assessment during the second quarter of 2016.

Intangible Assets

During the annual impairment testing as of October 1, 2016, we identified a decline in the fair value of the Molson core brands indefinite-lived intangible asset below its carrying value, driven by key factors impacting our underlying assumptions supporting the value of the brands within the Molson portfolio. Specific changes included a continued decline in performance throughout 2016 which drove a downward shift in management's forecasts, a challenging market dynamic and competitive conditions not expected to subside in the near-term, as well as an increased discount rate. As a result, we recorded an aggregate impairment charge to the Molson core brands asset of $495.2 million within special items in the fourth quarter of 2016. The fair value of the Coors Light brand distribution rights continues to be sufficiently in excess of its carrying value as of the testing date.

In conjunction with the Molson core brands impairment during our annual testing, we also reassessed the brands' indefinite-life classification and determined that the Molson core brands asset had characteristics that indicated a definite-life assignment was more appropriate, including prolonged weakness in consumer demand driven by increased economic and competitive pressures. These factors have resulted in sustained declines in performance, and it is unclear when these ongoing pressures on the brands will subside. These brands were therefore reclassified as definite-lived intangible assets as of October 1, 2016, and are now being amortized over their remaining useful lives ranging from 30 to 50 years.

Our Europe indefinite-lived intangible asset fair values, including the Staropramen and Carling brands, continue to be sufficiently in excess of their respective carrying values as of the annual testing date. During 2015 and 2014, we also recognized impairment charges on certain European indefinite-lived brands of $275.0 million and $360.0 million, respectively. These brands were reclassified as definite-lived intangible assets as of September 30, 2015, and are being amortized over their remaining useful lives of 30 to 50 years. Separately, the Coors and Miller indefinite-lived brands in the U.S. were recognized at their fair values upon completion of the Acquisition on October 11, 2016.

We utilized Level 3 fair value measurements in our impairment analysis of our indefinite-lived intangible assets, which utilizes an excess earnings approach to determine the fair values of the assets as of the testing date. The future cash flows used in the analysis are based on internal cash flow projections based on our long range plans and include significant assumptions by management as noted below.

Key Assumptions

As of the date of our annual impairment test, performed as of October 1, the Europe reporting unit goodwill is at risk of future impairment in the event of significant unfavorable changes in the forecasted cash flows (including prolonged, or further weakening of, adverse economic conditions or significant unfavorable changes in tax, environmental or other regulations, including interpretations thereof), terminal growth rates, market transaction multiples and/or weighted-average cost of capital utilized in the discounted cash flow analyses. For testing purposes, management's best estimates of the expected future results are the primary driver in determining the fair value. Current projections used for our Europe reporting unit testing reflect continued challenging environments in the future followed by growth resulting from a longer term recovery of the macroeconomic environment, as well as the benefit of anticipated cost savings and specific brand-building and innovation activities. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill and indefinite-lived intangible impairment tests will prove to be an accurate prediction of the future. Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of our reporting units and indefinite-lived intangibles may include such items as: (i) a decrease in expected future cash flows, specifically, a decrease in sales volume and increase in costs that could significantly impact our immediate and long-range results, a decrease in sales volume driven by a prolonged weakness in consumer demand or other competitive pressures adversely affecting our long-term volume trends, a continuation of the trend away from core brands in certain of our markets, especially in markets where our core brands represent a significant portion of the market, unfavorable working capital changes and an inability to successfully achieve our cost savings targets, (ii) adverse changes in macroeconomic conditions or an economic recovery that significantly differs from our assumptions in timing and/or degree (such as a recession or worsening of the overall European economy), (iii) volatility in the equity and debt markets or other country specific factors which could result in a higher weighted-average cost of capital, (iv) sensitivity to market multiples; and (v) regulation limiting or banning the manufacturing, distribution or sale of alcoholic beverages.

Based on known facts and circumstances, we evaluate and consider recent events and uncertain items, as well as related potential implications, as part of our annual assessment and incorporate into the analyses as appropriate. These facts and circumstances are subject to change and may impact future analyses.

In 2016, the discount rates used in developing our fair value estimates for each of our reporting units were 8.0% and 9.0% for our Canada and Europe reporting units, respectively. These rates are consistent with the discount rates used in our 2015 testing. In 2016, discount rates used for testing of indefinite-lived intangibles ranged from 7.5% to 9.0% considering the market or country specific risk premium for each geography in which our brands are based. The discount rates for the Carling and Staropramen brands in Europe, and the Coors Light brand distribution rights in Canada, decreased in 2016, primarily due to a reduction in risk free rates between testing dates. The discount rate applied to the Molson core brands in Canada increased in 2016 due to an increase in the unsystematic risk premium as a result of recent performance trends that have shown continued declines in net sales and volume pressures that are indicative of increased risk surrounding future brand performance. Consistent with the prior year testing, we assessed qualitative factors to determine whether it was more likely than not that the fair value of our water rights, an indefinite-lived intangible asset, was greater than its carrying amount and determined that a full quantitative analysis was not necessary.

While historical performance and current expectations have resulted in fair values of our reporting units in excess of carrying values, if our assumptions are not realized, it is possible that an impairment charge may need to be recorded in the future. For example, a 50 basis point increase in our discount rate assumptions, which is within a reasonable range of historical discount rate fluctuations between test dates, would have had the following effects on the fair value cushion in excess of

carrying value for the Europe and Canada reporting units as of the October 1, 2016, test date:

	Impact to the fair value cushion as of October 1, 2016 - 50 basis points increase
	Cushion (as reported)		Cushion (post-sensitivity)
	% of fair value in excess of carrying value
Reporting units:
Europe	14%		11%
Canada	29%		25%

Post sensitivity, the fair values of the Europe and Canada reporting units remain in excess of the their carrying values. The discount rate sensitivity holds all other assumptions and inputs constant.

Regarding definite-lived intangibles, we continuously monitor the performance of the underlying asset for potential triggering events suggesting an impairment review should be performed. Excluding the definite-lived intangible asset impairment charge associated with the triggering event that occurred in Bihar, India, which resulted in an impairment of tangible assets of $11.0 million and impairment of goodwill and definite-lived intangibles of $19.8 million in 2016, no such triggering events were identified in 2016. In addition, no such triggering events were identified in 2015 or 2014, with the exception of the license agreement settlement and preceding litigation with Miller in Canada, which resulted in $8.9 million of impairment charges of our definite-lived intangible asset in 2014. See Part II—Item 8 Financial Statements and Supplementary Data, Note 11, "Goodwill and Intangible Assets" of the Notes for further discussion.

As of December 31, 2016, the carrying values of goodwill and indefinite-lived intangible assets were approximately $8.3 billion and $14.0 billion, respectively. If actual performance results differ significantly from our projections or we experience significant fluctuations in our other assumptions, a material impairment charge may occur in the future. See Part II—Item 8 Financial Statements and Supplementary Data, Note 11, "Goodwill and Intangible Assets" of the Notes for further discussion and presentation of these amounts.

Income Taxes

Income taxes are accounted for in accordance with U.S. GAAP. Judgment is required in determining our consolidated provision for income taxes. In the ordinary course of our global business, there are many transactions for which the ultimate tax outcome is uncertain. Additionally, our income tax provision is based on calculations and assumptions that are subject to examination by many different tax authorities. We adjust our income tax provision in the period it is probable that actual results will differ from our estimates. Tax law and rate changes are reflected in the income tax provision in the period in which such changes are enacted.

We are periodically subject to tax return audits by both foreign and domestic tax authorities, which can involve questions regarding our tax positions. Settlement of any challenge resulting from these audits can result in no change, a complete disallowance, or some partial adjustment reached through negotiations or litigation. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained based on its technical merits. We measure and record the tax benefits from such a position based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Our estimated liabilities related to these matters are adjusted in the period in which the uncertain tax position is effectively settled, the statute of limitations for examination expires or when additional information becomes available. Our liability for unrecognized tax benefits requires the use of assumptions and significant judgment to estimate the exposures associated with our various filing positions. Although we believe that the judgments and estimates made are reasonable, actual results could differ and resulting adjustments could materially affect our effective income tax rate and income tax provision.

We annually receive cash from our foreign subsidiaries’ current year earnings. Separately, we treat all accumulated foreign subsidiary earnings through December 31, 2016, as indefinitely reinvested under the accounting guidance, and accordingly, have not provided for any U.S. or foreign tax thereon. In order to arrive at this conclusion, we considered factors including, but not limited to, past experience, domestic cash requirements and cash generated by MillerCoors, as well as cash requirements to satisfy the ongoing operations, capital expenditures and other financial obligations of our foreign subsidiaries. As of December 31, 2016, approximately $17 million of undistributed earnings and profits attributable to foreign subsidiaries were considered to be indefinitely invested. Our intention is to permanently reinvest the earnings outside of the U.S. It is not practicable to determine the amount of incremental taxes that might arise were these earnings to be remitted. The amount of tax payable could be impacted by the jurisdiction in which a distribution was made, the amount of the distribution, foreign withholding taxes under applicable tax laws when distributed, relevant tax treaties and foreign tax credits. While it is not

practical to determine the amount of tax, we believe that U.S. foreign tax credits and tax planning strategies would allow us to make remittances in a tax efficient manner.

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We evaluate our ability to realize the tax benefits associated with deferred tax assets by assessing the adequacy of future expected taxable income, including the reversal of existing temporary differences, historical and projected operating results, and the availability of prudent and feasible tax planning strategies. The realization of tax benefits is evaluated by jurisdiction and the realizability of these assets can vary based on the character of the tax attribute and the carryforward periods specific to each jurisdiction. In the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax asset would decrease income tax expense in the period a determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would be recorded to income tax expense in the period such determination was made.

New Accounting Pronouncements

New Accounting Pronouncements Not Yet Adopted

Leases

In February 2016, the Financial Accounting Standards Board ("FASB") issued authoritative guidance intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. Under the new guidance, lessees will be required to recognize a right-of-use asset and a lease liability, measured on a discounted basis, at the commencement date for all leases with terms greater than twelve months. Additionally, this guidance will require disclosures to help investors and other financial statement users to better understand the amount, timing, and uncertainty of cash flows arising from leases, including qualitative and quantitative requirements. The guidance should be applied under a modified retrospective transition approach for leases existing at the beginning of the earliest comparative period presented in the adoption-period financial statements. Any leases that expire before the initial application date will not require any accounting adjustment. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. We are currently evaluating the potential impact on our financial position and results of operations upon adoption of this guidance.

Revenue Recognition

In May 2014, the FASB issued authoritative guidance related to new accounting requirements for the recognition of revenue from contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for the goods or services. The guidance also includes enhanced disclosure requirements which are intended to help financial statement users better understand the nature, amount, timing and uncertainty of revenue being recognized. Subsequent to the release of this guidance, the FASB has issued additional updates intended to provide interpretive clarifications and to reduce the cost and complexity of applying the new revenue recognition standard both at transition and on an ongoing basis. The new standard and related amendments are effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted for annual reporting periods beginning after December 15, 2016, including interim periods within that annual reporting period. Upon adoption of the new standard, the use of either a full retrospective or cumulative effect transition method is permitted. We are currently in the process of evaluating the potential impact this new guidance will have on our financial statements and do not anticipate early adoption. We have not completed this evaluation and therefore, cannot conclude whether the guidance will have a significant impact on our financial statements at this time. However, based on preliminary work completed, we are considering the implications that the new standard may have on our contract brewing arrangements, presentation of certain customer related trade spend, as well as the timing of recognition of certain promotional discounts, which are areas that could potentially be impacted by the adoption of the new guidance. We currently anticipate that we will utilize the cumulative effect transition method, however, this expectation may change following the completion of our evaluation of the impact of this guidance on our financial statements.

Other than the items noted above, there have been no new accounting pronouncements not yet effective that we believe have a significant impact, or potential significant impact, to our consolidated financial statements.

See Part II-Item 8 Financial Statements and Supplementary Data, Note 2, "New Accounting Pronouncements" of the Notes for a description of new accounting pronouncements.

Pro Forma Information

The following unaudited pro forma financial information gives effect to the Acquisition and the related financing as if they were completed on January 1, 2015, the first day of our 2015 fiscal year. The pro forma adjustments are based on items that are factually supportable, are directly attributable to the Acquisition, and are expected to have a continuing impact on our results of operations. Any nonrecurring items directly attributable to the Acquisition or the related completed financing are excluded in the pro forma statements of operations. Pro forma information does not include adjustments for costs related to integration activities following the completion of the Acquisition, cost savings or synergies that have been or may be achieved by the combined businesses. The unaudited pro forma information has been calculated after applying MCBC’s accounting policies and adjusting the results of MillerCoors to reflect the additional depreciation and amortization that would have been charged assuming the preliminary fair value adjustments to property, plant and equipment, and intangible assets had been applied from January 1, 2015, together with the consequential tax effects. Additionally, the following unaudited pro forma information does not reflect the impact of the acquisition of the Miller global brand portfolio as we are not able to estimate the historical results of operations from this business and have concluded, based on the limited information available to MCBC, it is insignificant to the overall Acquisition. The pro forma information should not be considered indicative of the results that would have occurred if the Acquisition and related financing had been completed on January 1, 2015, nor are they indicative of future results. If the pro forma financial information for the year ended December 31, 2016, was presented assuming the Acquisition took place on January 1, 2016, the pro forma information would not be materially different.

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2016

(IN MILLIONS, EXCEPT PER SHARE DATA)

	MCBC Historical				MillerCoors Historical (1)				Pro Forma Adjustments				Note		Pro Forma Combined
Volume in hectoliters	46.912				55.750				(0.728		)		(1)		101.934
Sales	$	6,597.4			$	6,987.2			$	(39.5	)		(1)		$	13,545.1
Excise taxes	(1,712.4		)		(861.8		)		12.3				(1)		(2,561.9		)
Net sales	4,885.0				6,125.4				(27.2		)				10,983.2
Cost of goods sold	(3,003.1		)		(3,457.4		)		77.3				(2)		(6,383.2		)
Gross profit	1,881.9				2,668.0				50.1						4,600.0
Marketing, general and administrative expenses	(1,597.3		)		(1,413.2		)		40.2				(3)		(2,970.3		)
Special items, net	2,523.9				(85.6		)		(2,965.0		)		(4)		(526.7		)
Equity income in MillerCoors	500.9				—				(500.9		)				—
Operating income (loss)	3,309.4				1,169.2				(3,375.6		)				1,103.0
Interest income (expense), net	(244.4		)		(1.4		)		(123.0		)		(5)		(368.8		)
Other income (expense), net	(29.7		)		3.7				58.9				(6)		32.9
Income (loss) from continuing operations before income taxes	3,035.3				1,171.5				(3,439.7		)				767.1
Income tax benefit (expense)	(1,050.7		)		(3.3		)		581.3				(7)		(472.7		)
Net income (loss) from continuing operations	1,984.6				1,168.2				(2,858.4		)				294.4
Income (loss) from discontinued operations, net of tax	(2.8		)		—				—						(2.8		)
Net income (loss) including noncontrolling interests	1,981.8				1,168.2				(2,858.4		)				291.6
Net income (loss) attributable to noncontrolling interests	(5.9		)		(11.0		)		—						(16.9		)
Net income (loss) attributable to MCBC	$	1,975.9			$	1,157.2			$	(2,858.4	)				$	274.7
Net income (loss) per share attributable to MCBC from continuing operations:
Net income (loss) attributable to MCBC from continuing operations	$	1,978.7			$	1,157.2			$	(2,858.4	)				$	277.5
Basic	$	9.33													$	1.29
Diluted	$	9.27													$	1.28
Weighted-average shares—basic	212.0								2.7				(8)		214.7
Weighted-average shares—diluted	213.4								2.7				(8)		216.1

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

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2015

(IN MILLIONS, EXCEPT PER SHARE DATA)

	MCBC Historical				MillerCoors Historical				Pro Forma Adjustments				Note		Pro Forma Combined
Volume in hectoliters	33.746				71.220				(0.954		)		(1)		104.012
Sales	$	5,127.4			$	8,822.2			$	(54.9	)		(1)		$	13,894.7
Excise taxes	(1,559.9		)		(1,096.7		)		—						(2,656.6		)
Net sales	3,567.5				7,725.5				(54.9		)				11,238.1
Cost of goods sold	(2,163.5		)		(4,547.5		)		(23.3		)		(2)		(6,734.3		)
Gross profit	1,404.0				3,178.0				(78.2		)				4,503.8
Marketing, general and administrative expenses	(1,051.8		)		(1,828.7		)		(57.5		)		(3)		(2,938.0		)
Special items, net	(346.7		)		(110.1		)		—						(456.8		)
Equity income in MillerCoors	516.3				—				(516.3		)				—
Operating income (loss)	521.8				1,239.2				(652.0		)				1,109.0
Interest income (expense), net	(112.0		)		(1.6		)		(250.8		)		(5)		(364.4		)
Other income (expense), net	0.9				5.7				6.9				(6)		13.5
Income (loss) from continuing operations before income taxes	410.7				1,243.3				(895.9		)				758.1
Income tax benefit (expense)	(51.8		)		(4.7		)		(134.9		)		(7)		(191.4		)
Net income (loss) from continuing operations	358.9				1,238.6				(1,030.8		)				566.7
Income (loss) from discontinued operations, net of tax	3.9				—				—						3.9
Net income (loss) including noncontrolling interests	362.8				1,238.6				(1,030.8		)				570.6
Net income (loss) attributable to noncontrolling interests	(3.3		)		(20.8		)		—						(24.1		)
Net income (loss) attributable to MCBC	$	359.5			$	1,217.8			$	(1,030.8	)				$	546.5
Net income (loss) per share attributable to MCBC from continuing operations:
Net income (loss) attributable to MCBC from continuing operations	$	355.6			$	1,217.8			$	(1,030.8	)				$	542.6
Basic	$	1.92													$	2.52
Diluted	$	1.91													$	2.51
Weighted-average shares—basic	185.3								29.9				(8)		215.2
Weighted-average shares—diluted	186.4								29.9				(8)		216.3

(1)	Sales

The following pro forma adjustments eliminate beer sales between MCBC and MillerCoors for the years ended December 31, 2016, and 2015, that were previously recorded as affiliate sales and became intercompany transactions after the Acquisition was completed and thus eliminate in consolidation.

	For the years ended
	December 31, 2016				December 31, 2015
	(In millions)
Hectoliters of beer and other beverages sold	(0.728		)		(0.954		)
MCBC's beer sales to MillerCoors	$	7.5			$	11.7
MillerCoors' beer sales to MCBC	32.0				43.2
Total pro forma adjustment to sales	$	39.5			$	54.9
Excise tax adjustment(1)	$	12.3			$	—

(1)

Reflects the benefit associated with an anticipated refund to Coors Brewing Company ("CBC"), a wholly-owned subsidiary of MCBC, of U.S. federal excise tax paid on products imported by CBC based on qualifying volumes exported from the U.S. by CBC. Historically, the benefit was recorded within the Equity income in MillerCoors line item, which has been removed for pro forma purposes. Had the Acquisition occurred at the beginning of the fiscal year, the excise tax benefit would have been recorded as a benefit to the excise tax line item within the U.S. segment and as such, has been adjusted in the pro forma information to reflect this.

(2)	Cost of Goods Sold

The following pro forma adjustments (increase)/decrease cost of goods sold for the years ended December 31, 2016, and 2015:

	For the years ended
	December 31, 2016				December 31, 2015
	(In millions)
MillerCoors' beer purchases from MCBC (1)	$	7.5			$	11.7
MCBC's beer purchases from MillerCoors (1)	32.0				43.2
Depreciation (2)	(46.1		)		(79.2		)
MillerCoors' royalties paid to SABMiller (3)	13.2				16.0
Policy reclassification (4)	(18.6		)		(24.9		)
Historical charges recorded for pallets (5)	7.3				9.9
Historical charges recorded for inventory step-up (6)	82.0				—
Total pro forma adjustment to cost of goods sold	$	77.3			$	(23.3	)

(1)	Reflects beer purchases between MCBC and MillerCoors that were previously recorded as affiliate purchases and became intercompany transactions after the Acquisition was completed and thus eliminate in consolidation.

(2)	Reflects the pro forma adjustment to depreciation expense associated with the preliminary estimated fair value of MillerCoors' property, plant and equipment over the preliminary estimated remaining useful life.

(3)	Reflects royalties paid by MillerCoors to SABMiller plc for sales of certain of its licensed brands in the U.S. Upon completion of the Acquisition, royalties are no longer paid related to these licensed brands. See Purchase Agreement for additional details.

(4)	Reflects the reclassification of certain MillerCoors overhead costs from marketing, general and administrative expenses to cost of goods sold to align to MCBC policy related to profit and loss classification of such costs.

(5)	Reflects the amortization of MillerCoors' pallet costs which were historically recorded as a non-current asset and amortized into cost of goods sold, separate from depreciation expense. As part of our policy alignment, the pallets are now classified

as depreciable fixed assets within Properties, net and the related depreciation is included as part of depreciation expense that is recognized in cost of goods sold. This adjustment reflects the removal of historical pallet amortization expense recorded within cost of goods sold and the depreciation pro forma adjustment above reflects the updated amount to be recorded as cost of goods sold depreciation going forward.

(6)	Reflects the step-up in fair value of inventory related to the Acquisition which was sold in the fourth quarter of 2016 and therefore increased our historical cost of goods sold. Given this cost does not have a continuing impact, we have accordingly adjusted the pro forma financial information.

(3)	Marketing, General and Administrative

Based on the estimated preliminary fair values of identifiable amortizable intangible assets and depreciable property, plant and equipment, and the preliminary estimated useful lives assigned, the following pro forma adjustments to amortization and depreciation expenses have been made to marketing, general and administrative expenses for the years ended December 31, 2016, and 2015. Additionally, a pro forma adjustment has been made to eliminate MillerCoors' service agreement income related to charges to SABMiller for the years ended December 31, 2016, and 2015, that were previously recorded as a reduction to MillerCoors' marketing, general and administrative expenses as this activity with SABMiller ceased upon completion of the Acquisition. We have also removed transaction related costs included in the historical MCBC statements of operations as they will not have a continuing impact. The pro forma adjustments to increase/(decrease) marketing, general and administrative expense are as follows:

	For the years ended
	December 31, 2016				December 31, 2015
	(In millions)
Marketing, general and administrative pro forma adjustment for depreciation and amortization	$	56.5			$	87.3
MillerCoors' service agreement charges to SABMiller	1.6				2.0
Policy reclassification - See cost of goods sold note 4 above	(18.6		)		(24.9		)
Historical transaction costs	(79.7		)		(6.9		)
Total pro forma adjustment to marketing, general and administrative expenses	$	(40.2	)		$	57.5

(4)	Special Items, Net

	For the years ended
	December 31, 2016				December 31, 2015
	(In millions)
Pro forma adjustment to special items, net(1)	$	(2,965.0	)		$	—

(1)

Reflects the net gain of approximately $3.0 billion recorded within special items, net, during the fourth quarter of 2016, representing the excess of the approximate $6.1 billion estimated fair value of our pre-existing 42% equity interest in MillerCoors over its estimated transaction date carrying value of approximately $2.7 billion, as well as the reclassification of the loss related to MCBC's historical AOCI on our 42% interest in MillerCoors of $458.3 million. Refer to Note 4, "Acquisition and Investments" for further details regarding the inputs used to determine revaluation.

(5)	Interest Income (Expense)

Represents the pro forma adjustments for the incremental interest expense, including the amortization of debt issuance costs, as if the Acquisition and related financing had occurred on January 1, 2015. The Acquisition was funded by the approximate $2.5 billion of net proceeds from our February 3, 2016, equity offering, the approximate $6.9 billion of net proceeds from the issuance of the 2016 Notes on July 7, 2016, and the $2.5 billion of net proceeds received from the borrowings on our term loan on October 11, 2016. We incurred costs related to the committed financing we had in place prior to the completion of the Acquisition and earned interest income on the cash proceeds from the equity issuance and 2016 Notes prior to the completion of the Acquisition. We have therefore removed these amounts for pro forma purposes as they would not have been incurred or earned had the Acquisition and related financing been completed on January 1, 2015. Additionally, we incurred losses on the swaption derivative instruments that we entered into to economically hedge a portion of our long-term debt issuance with which we partially funded the Acquisition. These swaptions were not designated in hedge accounting relationships as the hedges were entered into in association with the Acquisition and, accordingly, all mark-to-market fair value adjustments were reflected within interest expense. As the losses on the swaptions are nonrecurring and do not have a continuing impact on the business, we have removed them from our pro forma financial information. The 2016 Notes are fixed rate notes and the term loan bears monthly interest at the rate of 1.50% + 1-month LIBOR.

	For the years ended
	December 31, 2016				December 31, 2015
	(In millions)
Term Loan
Debt issuance cost amortization expense	$	2.0			$	2.2
Interest expense on principal	50.7				44.3
Total term loan interest expense adjustments	$	52.7			$	46.5
2016 Notes
Debt issuance cost and discount amortization expense	$	5.2			$	5.2
Interest expense on principal	198.9				199.2
Total 2016 Notes interest expense adjustments	$	204.1			$	204.4
Historical fees
Historical financing costs and interest expense on term loan	$	(17.5	)		$	(0.1	)
Historical financing costs and interest expense on 2016 Notes	(98.9		)		—
Historical mark-to-market on swaptions	(36.4		)		—
Historical interest income on money market accounts	19.0				—
Total historical interest expense adjustments	$	(133.8	)		$	(0.1	)
Total pro forma adjustment to interest expense	$	123.0			$	250.8

(6)	Other Income (Expense)

Represents the elimination of historical financing costs that do not have a continuing impact related to the bridge loan and other derivative and foreign exchange net gains recorded on cash received from the 2016 Notes, which have been included in the historical financial statements within other income (expense).

	For the years ended
	December 31, 2016				December 31, 2015
	(In millions)
Historical financing costs on the bridge loan	$	63.4			$	6.9
Historical derivative and foreign exchange net gains related to the 2016 Notes	(4.5		)		—
Total pro forma adjustment to other income (expense)	$	58.9			$	6.9

(7)	Income Tax Benefit (Expense)

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

	For the years ended
	December 31, 2016				December 31, 2015
	(In millions)
Total pro forma adjustment to income tax benefit (expense)	$	581.3			$	(134.9	)

(8)	Weighted-Average Shares Outstanding

Weighted-average shares outstanding have been calculated to include the impact of the shares that were issued in the first quarter of 2016 in conjunction with the February 3, 2016, equity offering, which was completed to fund a portion of the Acquisition. As such, the below adjustment assumes such shares were outstanding on January 1, 2015.

	For the years ended
	December 31, 2016			December 31, 2015
	(In millions)
Historical weighted-average shares
Weighted-average shares—basic	212.0			185.3
Weighted-average shares—diluted	213.4			186.4
Impact of shares issued in February 3, 2016, equity offering
Weighted-average shares—basic	2.7			29.9
Weighted-average shares—diluted	2.7			29.9
Pro forma weighted-average shares
Weighted-average shares—basic	214.7			215.2
Weighted-average shares—diluted	216.1			216.3