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 USD, (b) comparisons are to comparable prior periods, and (c) 2017, 2016 and 2015 refers to the 12 months ended December 31, 2017, December 31, 2016, and December 31, 2015, 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. Where indicated, we have reflected unaudited pro forma financial 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 have certain operational measures, such as STWs and STRs, which we believe are important metrics. STW is a metric that we use in our 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 business 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 October 11, 2016, we completed the acquisition of SABMiller plc's ("SABMiller") 58% economic interest and 50% voting interest in MillerCoors and all trademarks, contracts and other assets primarily related to the "Miller International Business," as defined in the purchase agreement, outside of the U.S. and Puerto Rico (the "Acquisition") from Anheuser-Busch InBev SA/NV ("ABI"). The Acquisition was completed for $12.0 billion in cash, subject to a downward purchase price adjustment as described in the purchase agreement. This purchase price "Adjustment Amount," as defined in the purchase agreement, required payment to MCBC if the unaudited EBITDA for the Miller International Business for the twelve months prior to closing was below $70 million.

On January 21, 2018, MCBC and ABI entered into a settlement agreement related to the purchase price adjustment under the purchase agreement. Subsequently, on January 26, 2018, pursuant to the settlement agreement, ABI paid to MCBC $330.0 million, of which $328.0 million constitutes the Adjustment Amount. This settlement occurred following the finalization of purchase accounting and, as a result, we expect the settlement proceeds related to the Adjustment Amount to be recorded as a gain within special items, net in our consolidated statement of operations for the three months ended March 31, 2018. Therefore, the amount will not impact the fair value of consideration transferred for the purpose of the previously disclosed purchase accounting. MCBC and ABI also agreed to certain mutual releases as further described in the settlement agreement which was filed as an exhibit to a Current Report on Form 8-K filed January 22, 2018.

Executive Summary

We are one of the world's largest brewers and have a diverse portfolio of owned and partner brands, including global priority brands Blue Moon, Coors Banquet, Coors Light, Miller Genuine Draft, Miller Lite, and Staropramen, regional champion brands Carling, Molson Canadian and other leading country-specific brands, as well as craft and specialty beers such as Creemore Springs, Cobra, Doom Bar, Henry's Hard and Leinenkugel's. 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 2017, we continued to focus on building our brand strength and transforming our portfolio toward the above premium, flavored malt beverages, craft and cider segments. Further, we continued to focus on generating higher returns on our invested capital, managing our working capital and delivering a greater return on investment for our shareholders. During the first quarter of 2017, we issued the 2017 Notes (as defined in Part II—Item 8 Financial Statements and Supplementary Data, Note

12, "Debt" of the Notes), and within the first nine months of 2017, we fully repaid our term loans, all of which will generate future interest savings and will contribute to meeting our deleveraging commitments. As part of our deleveraging commitments we also made a discretionary cash contribution of $200 million to the U.S. pension plan during 2017.

Summary of Consolidated Results of Operations

The following table highlights summarized components of our consolidated statements of operations for the years ended December 31, 2017, December 31, 2016, and December 31, 2015, and unaudited pro forma financial 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.

Our consolidated historical financial statements and unaudited pro forma financial information have been revised to reflect the retrospective application of our change in accounting policy as discussed in Part II—Item 8 Financial Statements and Supplementary Data, Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" of the Notes. This change impacts our Canada and Europe segments.

We have presented unaudited pro forma financial information to enhance comparability of financial information between periods. The unaudited 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 financing, and are expected to have a continuing impact on MCBC's results of operations. Any non-recurring items directly attributable to the Acquisition or the related financing are excluded in the unaudited pro forma statements of operations. The unaudited pro forma financial 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 financial 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 and related financing occurred at the date indicated, or project the results of operations of MCBC for any future dates or periods. See "Unaudited Pro Forma Financial Information" below for details of pro forma adjustments.

	For the years ended
	December 31, 2017				December 31, 2016											December 31, 2015
	As Reported				As Reported				Pro Forma				Pro Forma Change			As Reported				Pro Forma				Pro Forma Change
	(In millions, except percentages and per share data)
Financial volume in hectoliters(1)	99.563				46.912				101.934				(2.3	)%		33.746				104.012				(2.0	)%
Net sales	$	11,002.8			$	4,885.0			$	10,983.2			0.2	%		$	3,567.5			$	11,238.1			(2.3	)%
Net income (loss) attributable to MCBC from continuing operations	$	1,412.7			$	1,995.8			$	294.6			N/M			$	391.3			$	578.3			(49.1	)%
Net income (loss) attributable to MCBC per diluted share from continuing operations	$	6.52			$	9.35			$	1.36			N/M			$	2.10			$	2.67			(49.1	)%

N/M = Not meaningful

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

2017 Financial Highlights

•

On an as reported basis - In 2017, net income attributable to MCBC from continuing operations decreased 29.2% compared to the prior year largely due to a benefit recorded to special items, net in 2016 for the revaluation gain on the excess of the estimated fair value remeasurement for our pre-existing 42% interest in MillerCoors over its carrying value, as well as the reclassification of the loss related to MCBC's historical AOCI on our 42% interest in MillerCoors. This was partially offset by the incremental net income recorded in 2017 associated with the Acquisition. Further, we released an indirect tax loss contingency, which was initially recorded in the fourth quarter of 2016, for a benefit of approximately $50 million during the first quarter of 2017 in our Europe business which favorably impacted net sales and net income attributable to MCBC from continuing operations.

•	On a pro forma basis - In 2017, net income attributable to MCBC from continuing operations increased from $294.6 million to $1,412.7 million, primarily as a result of lower special charges specifically related to the 2016 impairment

charge of $495.2 million and an income tax benefit in the current year resulting from U.S. tax reform. Additionally, as noted above, we released an indirect tax loss contingency, which was initially recorded in the fourth quarter of 2016, for a benefit of approximately $50 million during the first quarter of 2017 in our Europe business which favorably impacted net sales and net income attributable to MCBC from continuing operations. Further, consolidated results were favorably impacted by positive global pricing, net pension benefits, cost savings, and marketing, general and administrative efficiencies, partially offset by the impacts of lower volume, cost inflation and investments behind our global business capabilities.

•

During 2017, we issued the 2017 Notes and fully repaid our term loans and also refinanced our senior notes maturing during the year with commercial paper, resulting in net debt payments of approximately $1.1 billion, which will generate future interest savings and will contribute to meeting our deleveraging commitments. In addition, we also made contributions of approximately $310 million to our defined benefit pension plans as part of our overall pension de-risking strategy and deleveraging goals.

•

We generated cash flow from operating activities of approximately $1.9 billion, representing a 65.6% increase from approximately $1.1 billion in 2016. The increase in operating cash flow in 2017 compared to 2016 is primarily related to the addition of the consolidated U.S. business and lower cash paid for taxes (refund in 2017 as compared to cash tax paid in 2016), partially offset by higher cash paid for interest and higher pension contributions.

•	Regional financial highlights:

•

In the U.S. segment, our income from continuing operations before income taxes decreased on a reported basis due to a net gain in 2016 of approximately $3.0 billion recorded within special items related to the Acquisition. On a pro forma basis compared to 2016, our income from continuing operations before income taxes increased driven by higher net pricing, cost savings and lower marketing, general and administrative expenses, partially offset by cost of goods sold inflation, and lower shipment volumes. During the year we focused on gaining segment share in premium, accelerating performance in above premium and stabilizing our below premium brand volume. In the premium segment, Coors Banquet completed its eleventh consecutive year of volume growth. We also grew our share of the premium light segment with both Miller Lite and Coors Light. Miller Lite completed its thirteenth consecutive quarter of increased segment share which elevated the brand to the number three beer in America, according to Nielsen. Coors Light remained the number two beer and completed its eleventh consecutive quarter of increased segment share. In above premium, Blue Moon Belgian White grew during each quarter and continued to acquire incremental tap handles while Leinenkugel's was up low-single digits for the year, carried by Summer Shandy's best volume year in the brand's history. Our below premium brand volumes showed a trend improvement relative to recent years led by the Keystone family.

•

In our Canada segment, we drove positive pricing and mix resulting from lower year-over-year contract brewing volume. However, volume declined as a result of market pressure in Quebec and weak industry performance in Ontario. We reported income from continuing operations before income taxes of $212.8 million in 2017 compared to a loss of $125.6 million in 2016 primarily driven by lower special charges due to indefinite-lived intangible asset brand impairment charges incurred in 2016 of $495.2 million, positive pricing, cost savings and favorable foreign currency impacts, partially offset by lower volume, cycling lower distribution costs from the prior year, cost inflation, higher brand amortization, and higher compensation expense.

•

In our Europe segment, our continued portfolio premiumization and mix management positively impacted our performance as we grew volumes in our above premium brands. In 2017, we reported income from continuing operations before income taxes of $281.0 million, versus income of $149.7 million in 2016, primarily driven by the first quarter 2017 reversal of the indirect tax provision which was recognized in the fourth quarter of 2016 and higher net pension benefits. We also grew our market share as brand volumes increased 10.3% in Europe.

•

Our International segment reported a loss from continuing operations before income taxes of $19.7 million in 2017, compared to a loss of $39.7 million in the prior year, primarily driven by special charges as a result of total alcohol prohibition in the state of Bihar, India which resulted in an aggregate impairment charge of $30.8 million recorded in 2016. This improvement was also driven by the addition of the results of the MillerCoors Puerto Rico business, which were previously included as part of the U.S. segment, volume growth in several Latin American markets, and the addition of the Miller global brands. Overall improvements in the International segment were partially offset by the transfer of royalty and export volume to the Europe segment and the loss of the Modelo contract in Japan.

•	Brand highlights:

•	Global priority brand volume increased 2.8% in 2017 versus 2016, driven by growth in Europe, Canada and International, partially offset by declines in the U.S. The overall increase is driven by growth from all global priority brands with the exception of Coors Light as discussed below.

•	Blue Moon Belgian White global brand volume increased 4.1% in 2017 versus 2016, due to strong growth globally.

•	Carling brand volume in Europe decreased by 0.6% versus 2016, driven by a decrease of 2.3% in the mainstream lager market in U.K. However, Carling maintained its share within its segment compared to the prior year.

•

Coors global brand volume - Coors Light global brand volume declined 2.9% in 2017 versus 2016, as lower volumes in the U.S. and Canada were partially offset by strong performance in Europe and International. Although volumes in the U.S. were lower than prior year, Coors Light gained share of the premium light segment for the eleventh consecutive quarter. The declines in Canada were the result of ongoing competitive pressures in Quebec and Ontario. Coors Banquet global brand volume increased 4.2% in 2017 versus 2016, due to continued strong performance in the U.S. and Canada.

•	Miller global brand volume - Miller Lite and Miller Genuine Draft global brand volumes increased 1.3% and 116.1% in 2017 versus 2016, respectively, due to the addition of the Miller global brands business. Additionally, Miller Lite gained share of the premium light segment in the U.S. for the thirteenth consecutive quarter.

•	Molson Canadian brand volume in Canada decreased 4.7% during 2017 versus the prior year, primarily driven by challenging economic conditions in Ontario and competitive pressures in the West.

•	Staropramen global brand volume increased 2.7% during 2017 versus 2016, driven by growth outside of the brand's primary market.

Worldwide Brand 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. We have also modified our worldwide brand volume definition to include an adjustment from STWs to STRs for timing impacts.

Worldwide brand volume (or "brand volume" when discussed by segment) reflects owned brands sold to unrelated external customers within our geographic markets, net of returns and allowances, royalty volume, an adjustment from STWs to STRs and our proportionate share of equity investment brand volume calculated consistently with MCBC owned volume. Contract brewing and wholesaler volume is removed from worldwide brand volume as this is non-owned volume for which we do not directly control performance. We believe this definition of worldwide brand volume more closely aligns with how we measure the performance of our owned brands within the markets in which they are sold. Financial volume represents owned 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 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 brand volume. The adjustment from STWs to STRs provides the closest indication of the performance of our owned brands in relation to market and competitor sales trends, as it reflects sales volume one step closer to the end consumer and generally means sales from our wholesalers or our company to retailers. Equity investment worldwide brand volume represents our ownership percentage share of volume in our subsidiaries accounted for under the equity method, consisting of MillerCoors prior to the completion of the Acquisition on October 11, 2016. See Part II—Item 8 Financial Statements and Supplementary Data, Note 4, "Acquisition and Investments" of the Notes for further discussion.

	For the years ended
	December 31, 2017			Change			December 31, 2016			Change			December 31, 2015
	(In millions, except percentages)
Volume in hectoliters:
Financial volume	99.563			112.2	%		46.912			39.0	%		33.746
Less: Contract brewing and wholesaler volume	(8.602	)		108.6	%		(4.124	)		18.4	%		(3.482	)
Add: Royalty volume	3.685			75.3	%		2.102			28.9	%		1.631
Add: STW to STR adjustment	(0.687	)		(197.2	)%		0.707			N/M			(0.041	)
Owned volume	93.959			106.1	%		45.597			43.1	%		31.854
Add: Proportionate share of equity investment worldwide brand volume	—			(100.0	)%		19.940			(23.9	)%		26.211
Total worldwide brand volume	93.959			43.4	%		65.537			12.9	%		58.065

N/M = Not meaningful

Our worldwide brand volume increased in 2017 compared to 2016, due to the Acquisition as well as strong growth in Europe and International partially as a result of adding the Miller global brands business as well as growth within our existing brand portfolio. Worldwide brand volume increased in 2016 compared to 2015, primarily due to the Acquisition.

Net Sales Drivers

The following table highlights the drivers of change in net sales on a reported basis for the year ended December 31, 2017, versus December 31, 2016, 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 2017 as well as 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(1)			Total
Consolidated	112.2	%		13.3	%		(0.3	)%		—	%		125.2	%
Canada	(1.6	)%		2.2	%		1.7	%		—	%		2.3	%
Europe	3.1	%		2.9	%		(2.1	)%		6.4	%		10.3	%
International	60.1	%		1.3	%		—	%		—	%		61.4	%

(1)	Europe "other" column includes the release of an indirect tax provision as further discussed below.

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(1)			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	)%
International	(7.3	)%		19.1	%		1.4	%		—	%		13.2	%

(1)	Europe "other" column includes an indirect tax provision recorded in the fourth quarter of 2016 as further discussed below.

Cost Savings Initiatives

Total cost savings in 2017 exceeded our targets and totaled more than $255 million, driven by our U.S., Canada and Europe segments.

Depreciation and Amortization

On a reported basis, depreciation and amortization expense was $812.8 million in 2017, an increase of $424.4 million compared to 2016, primarily due to the incremental depreciation and amortization recorded for the U.S. segment as a result of the Acquisition. On a pro forma basis, depreciation and amortization expense decreased $38.6 million in 2017 compared to 2016, primarily due to lower accelerated depreciation due to brewery closures in the current year and the impact of foreign exchange rates. 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.

Income Taxes

	For the years ended
	December 31, 2017			December 31, 2016			December 31, 2015
Effective tax rate	(4	)%		35	%		14	%

The decrease in the effective income tax rate for 2017 versus 2016 is primarily driven by the impacts of the enactment of the Tax Cuts and Jobs Act (the "2017 Tax Act"), most notably the remeasurement of our deferred tax positions resulting from the reduction in the U.S. statutory federal corporate income tax rate, as well as higher pretax income in 2016 resulting from the Acquisition related revaluation gain on our previously held equity interest in MillerCoors. Additionally, our 2016 effective tax rate was also negatively impacted by the remeasurement of the deferred tax liability on our Molson core brand intangible asset to the Canadian ordinary income tax rate upon reclassification from indefinite-lived to definite-lived subject to amortization. The decrease was partially offset by the full-year inclusion of 100% of MillerCoors' pretax income in 2017, which is subject to the U.S. federal and state income tax rates, and the impact of certain Acquisition related permanent items during the comparable periods. The increase in our effective income tax rate in 2016 versus 2015 was primarily driven by higher pretax income in 2016 resulting from the Acquisition related revaluation gain, the inclusion of 100% of MillerCoors' pretax income following the completion of the Acquisition, and the remeasurement of the Molson core brand intangible deferred tax liability. Additionally, our effective income tax rates also deviate from the U.S. 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.

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, we continue to evaluate the impacts of the 2017 Tax Act. As we further understand its implications, as well as the related, and yet to be issued, regulator rules, regulations and interpretations, our effective tax rate could be impacted. Additional impacts from the 2017 Tax Act will be recorded as they are identified during the measurement period pursuant to Staff Accounting Bulletin No. 118 ("SAB 118"). Our determination of the tax effects of the 2017 Tax Act will be completed no later than one year from the enactment date as permitted under SAB 118. Any adjustments to provisional amounts that are identified during the measurement period will be recorded and disclosed in the reporting period in which the adjustment is determined. The complexity of the 2017 Tax Act could necessitate the need to use the full one year measurement period to adequately interpret, analyze and conclude upon the tax effects of the 2017 Tax Act as of the enactment date. 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 19, "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 unaudited pro forma financial information of the U.S. segment 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 of MillerCoors utilized in preparing MCBC's share of MillerCoors earnings when we historically 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 the year ended December 31, 2017				For the period January 1 through October 10, 2016				For the period October 11 through December 31, 2016				For the year ended December 31, 2016
	As Reported by MCBC				As Reported by MillerCoors				As Reported by MCBC				Pro Forma Adjustments(1)				Pro Forma(1)				Pro Forma Change
	(In millions, except percentages)
Financial volume in hectoliters(2)(3)	67.731				55.750				14.436				—				70.186				(3.5	)%
Sales(3)	$	8,541.7			$	6,987.2			$	1,780.0			$	(23.2	)		$	8,744.0			(2.3	)%
Excise taxes	(1,036.0		)		(861.8		)		(213.4		)		12.3				(1,062.9		)		(2.5	)%
Net sales(3)	7,505.7				6,125.4				1,566.6				(10.9		)		7,681.1				(2.3	)%
Cost of goods sold(3)	(4,331.5		)		(3,457.4		)		(1,026.0		)		37.8				(4,445.6		)		(2.6	)%
Gross profit	3,174.2				2,668.0				540.6				26.9				3,235.5				(1.9	)%
Marketing, general and administrative expenses	(1,782.1		)		(1,413.2		)		(430.9		)		(27.3		)		(1,871.4		)		(4.8	)%
Special items, net(4)	(9.9		)		(85.6		)		2,959.1				(2,965.0		)		(91.5		)		(89.2	)%
Operating income	1,382.2				1,169.2				3,068.8				(2,965.4		)		1,272.6				8.6	%
Interest income (expense), net	13.1				(1.4		)		—				—				(1.4		)		N/M
Other income (expense), net	(2.4		)		3.7				0.7				—				4.4				(154.5	)%
Income (loss) from continuing operations before income taxes	$	1,392.9			$	1,171.5			$	3,069.5			$	(2,965.4	)		$	1,275.6			9.2	%

N/M = Not meaningful

(1)

Pro forma amounts give effect to the Acquisition as if it had occurred at the beginning of fiscal year 2015 and have been updated to reflect that effective January 1, 2017, the results of the MillerCoors Puerto Rico business, which were previously included as part of the U.S. segment, are now reported within the International segment. See Part II - Item 7 Management's Discussion and Analysis, "Unaudited Pro Forma Financial Information," for details of pro forma adjustments.

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

(3)	On a reported basis, includes gross inter-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.

	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)
Financial 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			$	(23.2	)		$	8,744.0			(0.6	)%		$	8,822.2			$	(24.6	)		$	8,797.6
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				(10.9		)		7,681.1				(0.3	)%		7,725.5				(24.6		)		7,700.9
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				26.9				3,235.5				5.2	%		3,178.0				(102.8		)		3,075.2
Marketing, general and administrative expenses	(1,413.2		)		(430.9		)		(27.3		)		(1,871.4		)		(0.5	)%		(1,828.7		)		(52.3		)		(1,881.0		)
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				(2,965.4		)		1,272.6				17.4	%		1,239.2				(155.1		)		1,084.1
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			$	(2,965.4	)		$	1,275.6			17.2	%		$	1,243.3			$	(155.1	)		$	1,088.2

(1)

Pro forma amounts give effect to the Acquisition as if it had occurred at the beginning of fiscal year 2015 and have been updated to reflect that effective January 1, 2017, the results of the MillerCoors Puerto Rico business, which were previously included as part of the U.S. segment, are now reported within the International segment. See Part II - Item 7 Management's Discussion and Analysis, "Unaudited Pro Forma Financial Information," for details of pro forma adjustments.

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

(3)	On a reported basis, includes gross inter-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 year ended December 31, 2015
		Change
	(In millions, except percentages)
Income (loss) from continuing operations before income taxes	$	1,171.5			(5.8	)%		$	1,243.3
Income tax expense	(3.3		)		(29.8	)%		(4.7		)
Net (income) loss attributable to noncontrolling interest	(11.0		)		(47.1	)%		(20.8		)
Net income attributable to MillerCoors	$	1,157.2			(5.0	)%		$	1,217.8
MCBC's economic interest	42		%					42		%
MCBC's proportionate share of MillerCoors' net income	486.0				(5.0	)%		511.5
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
Share-based compensation adjustment(1)	(0.7		)		N/M			0.2
U.S. import tax benefit(1)	12.3				N/M			—
Equity income in MillerCoors	$	500.9			(3.0	)%		$	516.3

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 U.S. segment results of operations for the year ended December 31, 2017, versus the year ended December 31, 2016, and for the year ended December 31, 2016, versus the year ended December 31, 2015, on a reported and pro forma basis, where applicable.

Significant events

On October 11, 2016, we completed the Acquisition and as a result, MCBC 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, are now reported within the International segment. Note, we only present unaudited pro forma financial information for the consolidated entity and the U.S. 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. Total special charges associated with the Eden closure of approximately $179 million have been incurred from the decision to close through December 31, 2017, consisting primarily of accelerated depreciation. We have incurred the majority of the costs associated with the closure, however, future costs may be incurred associated with the disposition of assets and other costs associated with the closure.

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 2.9% in 2017 compared to 2016, driven by lower volume in the premium light and below premium segments. Domestic STWs decreased 3.3% in 2017 compared to 2016.

Domestic net sales per hectoliter increased 1.2% compared to prior year reported net sales and 1.0% compared to prior year pro forma net sales for 2017, due to favorable net pricing. Total net sales per hectoliter, including non-owned brands, contract brewing and company-owned distributor sales for 2017, increased 1.1% compared to prior year reported figures and increased 1.3% compared to prior year pro forma figures.

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 decline 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.

Cost of goods sold

Cost of goods sold per hectoliter decreased 0.1% compared to prior year reported figures due to the cycling of $82.0 million related to the inventory step up as a result of the Acquisition. Cost of goods sold per hectoliter increased 1.0% compared to prior year pro forma figures driven by higher input costs and volume deleverage, partially offset by cost savings. Additionally, in 2017 we recorded $2.4 million of integration costs related to the Acquisition within 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.

Marketing, general and administrative expenses

Marketing, general and administrative expenses decreased 3.4% compared to prior year on a reported basis and decreased 4.8% compared to prior year on a pro forma basis, due to spending optimization and efficiencies. Marketing, general and administrative expenses also includes integration costs of $5.1 million in 2017.

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

Interest income (expense), net

Net interest income increased for 2017 compared to the prior year, primarily due to a reduction in mandatorily redeemable noncontrolling interest liabilities. Adjustments in the carrying value of the mandatorily redeemable noncontrolling interests are recorded to interest income (expense), net until settled.

Canada Segment

	For the years ended
	December 31, 2017				Change			December 31, 2016(1)				Change			December 31, 2015(1)
	(In millions, except percentages)
Financial volume in hectoliters(2)(3)	8.805				(1.6	)%		8.950				(2.8	)%		9.207
Sales(3)	$	1,906.2			1.4	%		$	1,879.4			(5.8	)%		$	1,994.2
Excise taxes	(448.2		)		(1.2	)%		(453.7		)		(6.0	)%		(482.7		)
Net sales(3)	1,458.0				2.3	%		1,425.7				(5.7	)%		1,511.5
Cost of goods sold(3)	(847.7		)		6.9	%		(793.2		)		(6.2	)%		(845.3		)
Gross profit	610.3				(3.5	)%		632.5				(5.1	)%		666.2
Marketing, general and administrative expenses	(397.1		)		9.8	%		(361.6		)		2.6	%		(352.5		)
Special items, net(4)	(11.5		)		(97.2	)%		(404.3		)		N/M			(27.2		)
Operating income (loss)	201.7				N/M			(133.4		)		(146.6	)%		286.5
Other income (expense), net(5)	11.1				42.3	%		7.8				(23.5	)%		10.2
Income (loss) from continuing operations before income taxes	$	212.8			N/M			$	(125.6	)		(142.3	)%		$	296.7

N/M = Not meaningful

(1)	Cost of goods sold, gross profit, marketing, general and administrative expenses, operating income (loss) and income (loss) from continuing operations before income taxes for 2016 and 2015, and special items, net, for 2016, have been

revised to reflect the retrospective application of our change in accounting policy as discussed in Part II—Item 8 Financial Statements and Supplementary Data, Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" of the Notes.

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

(3)	Includes gross inter-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.

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

Significant events

As a result of the Acquisition, the Miller brands were added to our Canada segment's portfolio beginning October 11, 2016. Additionally, as part of our ongoing assessment of our Canadian supply chain network, we completed the sale of our Vancouver brewery on March 31, 2016. In conjunction with the sale of the brewery, we agreed to leaseback the existing property to continue operations on an uninterrupted basis while the new brewery is being constructed. We 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. We also expect to incur additional charges, including estimated accelerated depreciation charges of approximately CAD 8 million, through final closure of the brewery which is currently expected to occur in the third quarter of 2019. 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.

In further efforts to help optimize the Canada brewery network, in the third quarter of 2017 we announced a plan to build a more efficient and flexible brewery in the greater Montreal area. As a result of this decision, we have begun to develop plans to transition out of our existing Montreal brewery. Accordingly, we incurred accelerated depreciation charges associated with the existing brewery closure in the second half of 2017, of which the amount in excess of normal depreciation is recorded within special items. We expect to incur additional charges, including estimated accelerated depreciation charges in excess of normal depreciation of approximately CAD 89 million, through final closure of the brewery which is currently expected to occur in 2021. However, due to the uncertainty inherent in our estimates, these estimated future accelerated depreciation charges, as well as the timing of the brewery closure, are subject to change.

During 2016, we recorded an aggregate impairment charge to the Molson core brand intangible asset within special items and subsequently reclassified the brands from indefinite to definite-lived, resulting in increased amortization expense of intangible assets for 2017 compared to 2016.

We entered into an agreement with Miller Brewing Company 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 for 2015. The Acquisition resulted in the return of the Miller brands to our Canada business.

Foreign currency impact on results

During 2017, the CAD appreciated versus the USD on an average basis, resulting in an increase of $5.1 million to our 2017 USD earnings before income taxes. 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. 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) in our consolidated statements of operations.

Volume and net sales

Our Canada brand volume decreased 0.5% in 2017 compared to 2016, primarily as a result of lower domestic volumes, partially offset by the addition of the Miller brands as a result of the Acquisition. Our net sales per hectoliter increased 2.2% in local currency in 2017 compared to 2016, driven by positive pricing and sales mix.

Brand volume decreased 3.1% 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. 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.

Cost of goods sold

Cost of goods sold per hectoliter in local currency increased 6.7% in 2017 compared to 2016, due to sales mix shift to higher cost products, impacts of volume deleverage, higher inflation and unfavorable transactional foreign currency impacts, partially offset by ongoing cost saving initiatives. Additionally, for 2017 we recorded $4.1 million of integration costs related to the Acquisition within cost of goods sold.

Cost of goods sold per hectoliter in local currency decreased 0.3% in 2016 compared to 2015, due to ongoing cost savings initiatives, higher net pension benefits and lower depreciation expense, partially offset by the impacts of volume deleverage, unfavorable foreign currency impacts and inflation.

Marketing, general and administrative expenses

Marketing, general and administrative expenses increased 7.9% in local currency in 2017 compared to 2016, primarily driven by higher brand amortization in 2017, partially offset by lower bad debt expense, and spending reductions.

Marketing, general and administrative expenses increased 6.1% 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 and higher net pension benefits.

Europe Segment

	For the years ended
	December 31, 2017				Change			December 31, 2016(1)				Change			December 31, 2015(1)
	(In millions, except percentages)
Financial volume in hectoliters(2)(3)(4)	23.290				3.1	%		22.590				(1.7	)%		22.981
Sales(4)	$	2,888.3			4.0	%		$	2,778.1			(6.1	)%		$	2,959.6
Excise taxes	(947.6		)		(6.9	)%		(1,017.9		)		(2.6	)%		(1,044.7		)
Net sales(4)	1,940.7				10.3	%		1,760.2				(8.1	)%		1,914.9
Cost of goods sold	(1,146.9		)		2.8	%		(1,116.2		)		(5.2	)%		(1,177.4		)
Gross profit	793.8				23.3	%		644.0				(12.7	)%		737.5
Marketing, general and administrative expenses	(511.7		)		1.0	%		(506.6		)		(0.5	)%		(508.9		)
Special items, net(5)	(5.0		)		N/M			(0.6		)		(99.8	)%		(313.1		)
Operating income (loss)	277.1				102.6	%		136.8				N/M			(84.5		)
Interest income	3.6				—	%		3.6				(7.7	)%		3.9
Other income (expense), net	0.3				(96.8	)%		9.3				N/M			(3.1		)
Income (loss) from continuing operations before income taxes	$	281.0			87.7	%		$	149.7			N/M			$	(83.7	)

N/M = Not meaningful

(1)

Cost of goods sold, gross profit, marketing, general and administrative expenses, operating income (loss) and income (loss) from continuing operations before income taxes for 2016 and 2015, and special items, net, for 2016, have been revised to reflect the retrospective application of our change in accounting policy as discussed in Part II—Item 8 Financial Statements and Supplementary Data, Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" of the Notes.

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

(3)	Excludes royalty volume of 1.694 million hectoliters, 0.194 million hectoliters and 0.173 million hectoliters for 2017, 2016 and 2015, respectively.

(4)	Includes gross inter-segment sales and volumes, which are eliminated in the consolidated totals.

(5)	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 our Europe segment's portfolio beginning October 11, 2016, and effective January 1, 2017, European markets including Sweden, Spain, Germany, Ukraine and Russia, which were previously reported under our International segment, are reported within 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. We have incurred special charges related to this closure which is expected to be completed by the first quarter of 2018. We may recognize other charges or benefits related to brewery closures, which cannot currently be estimated and will be recorded within special items.

In the first quarter of 2017, the largest food and retail company in Croatia, Agrokor, announced that it was facing significant financial difficulties that raised doubt about the collectibility of certain of our outstanding receivables with its direct subsidiaries. These subsidiaries are customers of ours within the Europe segment and, therefore, we are closely monitoring the situation. Specifically, Agrokor has entered into active discussions with local regulators, financial institutions and other creditors to stabilize and restructure its business and sustain ongoing operations. As a result, we recorded a provision for an estimate of uncollectible receivables during 2017. As of December 31, 2017, our gross accounts receivable related to Agrokor was approximately $8 million, with an associated provision for estimated uncollectable receivables of $6 million, based on foreign exchange rates as of December 31, 2017.

Each year since 2014, we received assessments from a local country regulatory authority related to indirect tax calculations in our Europe operations. The aggregate amount of the assessments received at the time of resolution of this matter was approximately $139 million. We challenged the validity of these assessments and defended our position regarding the method of calculation, including by following the required regulatory procedures in order to proceed with an appeal of the assessments. During the fourth quarter of 2016, following discussions with the regulatory authority and consideration of existing facts and circumstances at that time, we concluded that a portion of this estimated range of loss was deemed probable. As a result, we recorded a charge of approximately $50 million within the excise taxes line item on the consolidated statement of operations for the year ended December 31, 2016. During the first quarter of 2017, a local jurisdictional court heard evidence in this matter and subsequently ruled in our favor in April 2017. Based on this favorable ruling, we released this provision in the first quarter of 2017 as we no longer deemed this loss probable. This resulted in a benefit of approximately $50 million, recorded within the excise taxes line item on the consolidated statement of operations during the quarter ended March, 31, 2017. During the second quarter of 2017, we received formal confirmation from the regulatory authority that they would not appeal the local jurisdictional court ruling, and the regulatory authority has since withdrawn its assessments. As a result, we believe this dispute is fully resolved. See Part II—Item 8 Financial Statements and Supplementary Data, Note 19, "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. 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, we recorded an aggregate impairment charge of $275.0 million within special items for certain indefinite-lived intangible brands primarily driven by continued macroeconomic challenges, and have reclassified these brands to definite-lived. See Part II—Item 8 Financial Statements and Supplementary Data, Note 11, "Goodwill and Intangible Assets" of the Notes for further discussion.

Foreign currency impact on results

Our Europe segment operates in numerous countries within Europe, and each country's operations utilize distinct currencies. During 2017, foreign currency movements unfavorably impacted our Europe USD income from continuing operations before income taxes by $9.8 million. During 2016, foreign currency movements unfavorably impacted our Europe USD income from continuing operations before income taxes by $7.3 million. 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) in our consolidated statements of operations.

Volume and net sales

Our Europe brand volume increased 10.3% in 2017 compared to 2016, primarily driven by the transfer of royalty and export brand volume across Europe from our International business and the addition of the Miller brands, along with growth from our above premium brands.

Net sales per hectoliter increased 9.0% in local currency in 2017 compared to 2016, primarily driven by the indirect tax provision of approximately $50 million recorded in the fourth quarter of 2016 and subsequently released in the first quarter of 2017 and the addition of royalty and export brand volumes, including the impact of Miller brands.

Brand volume increased 1.4% in 2016 compared to 2015 driven 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, positive brand and geographic mix partially offset by negative net pricing and the impact of the termination of the brewing agreements and the indirect tax provision discussed above.

Cost of goods sold

Cost of goods sold per hectoliter increased 1.6% in local currency in 2017 compared to 2016, primarily driven by mix shift to higher cost brands and geographies, partially offset by higher net pension benefit this year. Additionally, we have recorded $0.6 million of integration costs related to the Acquisition within cost of goods sold in 2017.

Cost of goods sold per hectoliter increased 5.1% 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.

Marketing, general and administrative expenses

Marketing, general and administrative expenses increased 2.0% in local currency in 2017 compared to 2016, driven by higher brand investments and general and administrative costs, including increased amortization related to the Miller brand portfolio, recognition of the above mentioned provision for uncollectible receivables, partially offset by higher net pension benefits.

Marketing, general and administrative expenses increased 4.1% in local currency in 2016 compared to 2015, driven by higher marketing investments and brand amortization expenses, partially offset by lower overhead costs.

International Segment

	For the years ended
	December 31, 2017				Change			December 31, 2016				Change			December 31, 2015
	(In millions, except percentages)
Financial volume in hectoliters(1)(2)	2.394				60.1	%		1.495				(7.3	)%		1.613
Sales	$	300.9			57.5	%		$	191.0			7.9	%		$	177.0
Excise taxes	(36.9		)		34.7	%		(27.4		)		(15.7	)%		(32.5		)
Net sales	264.0				61.4	%		163.6				13.2	%		144.5
Cost of goods sold(3)	(180.5		)		68.5	%		(107.1		)		8.6	%		(98.6		)
Gross profit	83.5				47.8	%		56.5				23.1	%		45.9
Marketing, general and administrative expenses	(101.7		)		55.7	%		(65.3		)		2.2	%		(63.9		)
Special items, net(4)	(1.6		)		(94.9	)%		(31.1		)		N/M			(6.4		)
Operating income (loss)	(19.8		)		(50.4	)%		(39.9		)		63.5	%		(24.4		)
Other income (expense), net	0.1				(50.0	)%		0.2				(150.0	)%		(0.4		)
Income (loss) from continuing operations before income taxes	$	(19.7	)		(50.4	)%		$	(39.7	)		60.1	%		$	(24.8	)

N/M = Not meaningful

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

(2)	Excludes royalty volume of 1.991 million hectoliters, 1.908 million hectoliters and 1.458 million hectoliters in 2017, 2016 and 2015, respectively.

(3)	Includes gross inter-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 our International segment's portfolio beginning October 11, 2016. Additionally, as a result of the Acquisition, effective January 1, 2017, European markets including Sweden, Spain, Germany, Ukraine and Russia, which were previously reported as part of our International segment, are reported within our Europe segment while the results of the MillerCoors Puerto Rico business, which were previously included as part of the U.S. segment, are reported within the International 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 $6.9 million, based on foreign exchange rates at December 31, 2017, 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 $3 million, based on foreign exchange rates at December 31, 2017, 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, our International segment acquired Mount Shivalik, a regional brewer, during the second quarter of 2015. As part of the transaction, we 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 International segment operates in numerous countries around the world and each country's operations utilize distinct currencies. Foreign currency movements favorably impacted our International USD loss before income taxes by $0.2 million for 2017 and favorably impacted our International USD loss before income taxes by $1.0 million for 2016. 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) in our consolidated statements of operations.

Volume and net sales

Our International brand volume increased by 28.9% in 2017 compared to 2016, driven by the change in segment reporting of the Puerto Rico business from the U.S. segment, Coors Light growth primarily in Latin America and the addition of the Miller brands partially offset by the transfer of royalty and export brand volume to Europe.

Net sales per hectoliter increased 0.8% in 2017 compared to 2016, primarily due to sales mix changes and positive pricing.

Brand 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.

Cost of goods sold

Cost of goods sold per hectoliter increased 5.2% in 2017 compared to 2016, primarily driven by sales mix changes. Additionally, during 2017 we recorded $3.6 million of integration costs related to the Acquisition within cost of goods sold.

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

Marketing, general and administrative expenses

Marketing, general and administrative expenses increased 55.7% in 2017 compared to 2016, primarily due to higher organization and integration costs related to the acquisition of the Miller global brands, along with increased brand investments, including higher brand amortization costs. During 2017 we recorded $8.4 million of integration costs related to the Acquisition within 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.

Corporate

	For the years ended
	December 31, 2017				Change			December 31, 2016				Change			December 31, 2015
	(In millions, except percentages)
Financial volume in hectoliters	—				—	%		—				—	%		—
Sales	$	0.9			(10.0	)%		$	1.0			—	%		$	1.0
Excise taxes	—				—	%		—				—	%		—
Net sales	0.9				(10.0	)%		1.0				—	%		1.0
Cost of goods sold	122.9				N/M			22.9				N/M			(14.7		)
Gross profit	123.8				N/M			23.9				N/M			(13.7		)
Marketing, general and administrative expenses	(239.8		)		6.4	%		(225.4		)		99.5	%		(113.0		)
Special items, net(1)	(0.1		)		(85.7	)%		(0.7		)		N/M			—
Operating income (loss)	(116.1		)		(42.6	)%		(202.2		)		59.6	%		(126.7		)
Interest expense, net	(360.0		)		45.2	%		(248.0		)		114.0	%		(115.9		)
Other income (expense), net	(9.2		)		(80.7	)%		(47.7		)		N/M			(5.8		)
Income (loss) from continuing operations before income taxes	$	(485.3	)		(2.5	)%		$	(497.9	)		100.4	%		$	(248.4	)

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 for further details.

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, 2017, and December 31, 2016, include unrealized mark-to-market gains of $123.3 million and $23.1 million, respectively, on these commodity swaps. Cost of goods sold for the year ended December 31, 2015, included unrealized mark-to-market losses of $14.1 million on commodity swaps. The total gain recognized in 2017 was primarily driven by higher commodity prices during the year.

Marketing, general and administrative expenses

Marketing, general and administrative expenses increased in 2017 compared to 2016, primarily due to incremental investment behind global business capabilities including higher compensation expense, partially offset by higher acquisition-related costs recognized in the prior year. Specifically, during 2017 we recorded $57.1 million within marketing, general and administrative expenses related to the Acquisition.

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 2017 compared to 2016, and increased in 2016 compared to 2015 primarily driven by incremental interest incurred on debt issued to partially fund the Acquisition. See Part II—Item 8 Financial Statements and Supplementary Data, Note 17, "Derivative Instruments and Hedging Activities" and Note 12, "Debt" for further details.

Other income (expense), net

Other income (expense) decreased from 2017 compared to 2016, and increased 2016 compared to 2015, primarily driven by financing costs incurred in 2016 on our bridge loan of approximately $63 million 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 debt 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 in 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. For example, in the first quarter of 2017, the largest food and retail company in Croatia, Agrokor, announced that it was facing significant financial difficulties that raised doubt about the collectibility of certain of our outstanding receivables with its direct subsidiaries. These subsidiaries are customers of ours within the Europe segment and, therefore, we are closely monitoring the situation. Specifically, Agrokor has entered into active discussions with local regulators, financial institutions and other creditors to stabilize and restructure its business and sustain ongoing operations. As a result, we recorded a provision for an estimate of uncollectible receivables during 2017. As of December 31, 2017, our gross accounts receivable related to Agrokor was

approximately $8 million, with an associated provision for estimated uncollectable receivables of $6 million, based on foreign exchange rates as of December 31, 2017.

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, 2017, approximately 82% of our cash and cash equivalents were located outside the U.S., largely denominated in foreign currencies. We accrue for 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 taxes. However, we will continue to assess the impact of the 2017 Tax Act on the tax consequences of future repatriations. 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 the cash generated from the operations of our U.S. segment, are sufficient to fund our current cash needs in the U.S.

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 $1.9 billion in 2017, increased by approximately $0.7 billion compared to 2016. This increase is primarily related to the addition of the consolidated U.S. business, lower cash paid for taxes (refund in 2017 as compared to cash tax paid in 2016) and working capital improvements, partially offset by higher pension contributions including the discretionary cash contribution of $200 million to the U.S. pension plan and higher cash paid for interest.

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.

Cash Flows from Investing activities

Net cash used in investing activities of approximately $538 million in 2017, decreased by approximately $11.7 billion compared to 2016 driven primarily by the completion of the Acquisition in 2016 for $12.0 billion, offset by higher capital expenditures in 2017 resulting from the Acquisition.

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.

Cash Flows from Financing activities

Net cash used in financing activities of approximately $1.5 billion in 2017, decreased by approximately $12.8 billion from net cash provided by financing activities of approximately $11.3 billion in 2016. This change was primarily driven by 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, the approximate $6.9 billion of net proceeds from the issuance of debt on July 7, 2016, to partially fund the Acquisition in 2016, as well as increased net repayments of debt as we have begun to deleverage in 2017. See "Borrowings" below for more details of financing activity.

Net cash provided by financing activities of approximately $11.3 billion in 2016, increased by approximately $11.8 billion from net cash used by financing activities of $531.5 million in 2015. This increase is primarily driven by the approximate $6.9 billion of net proceeds from the issuance of debt 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.

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, 2017, and December 31, 2016.

Capital Resources

Cash and Cash Equivalents

As of December 31, 2017, we had total cash and cash equivalents of $418.6 million, compared to $560.9 million at December 31, 2016. The decrease in cash and cash equivalents at December 31, 2017, from December 31, 2016, was primarily driven by the repayment of our term loans, CAD 500 million 3.95% note and $300 million 2.0% note, the discretionary cash contribution of $200 million to the U.S. pension plan and higher interest payments on long-term debt, partially offset by proceeds received from the issuance of our 2017 Notes (as defined in Part II—Item 8 Financial Statements and Supplementary Data, Note 12, "Debt" of the Notes), proceeds from commercial paper issuances, and lower cash paid for taxes. 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.

On January 21, 2018, MCBC and ABI entered into a settlement agreement related to the Acquisition purchase price adjustment. Subsequently, on January 26, 2018, pursuant to the settlement agreement, ABI paid to MCBC $330.0 million, of which $328.0 million constitutes the Adjustment Amount. MCBC and ABI also agreed to certain mutual releases as further described in the settlement agreement which was filed as an exhibit to a Current Report on Form 8-K filed on January 22, 2018. We currently expect these proceeds resulting from the settlement related to the Adjustment Amount to be recorded as income within special items, net in our consolidated statement of operations for the three months ended March 31, 2018.

Working Capital

The Company actively manages working capital through inventory management as well as management of accounts payable and accounts receivable to ensure we are able to meet short-term obligations and we are effectively using assets to increase profitability.

Borrowings

The following table summarizes the maturities of our long-term debt, excluding short-term borrowings. Notional amounts are presented in USD based on the applicable exchange rate as of December 31, 2017.

The following presents long-term debt activity during 2017:

On July 7, 2017, we entered into a 5-year, $1.5 billion revolving multi-currency credit facility, which provides a $150 million sub-facility available for the issuance of letters of credit. This $1.5 billion revolving credit facility replaced our pre-existing $750 million revolving credit facility, which would have matured in the second quarter of 2019. In connection with the new revolving credit facility, we increased the size of our existing commercial paper program to a maximum aggregate amount outstanding at any time of $1.5 billion.

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 revolving credit facility if the need arises. As of December 31, 2017, we had approximately $1.1 billion available to draw under our $1.5 billion revolving multi-currency credit facility, as the borrowing capacity is reduced by borrowings under our commercial paper program, and we have no other borrowings drawn on this revolving credit facility. We also have JPY overdraft facilities, CAD and GBP lines of credit with several banks should we need additional short-term liquidity. We also currently utilize and intend to further utilize our cross-border, cross-currency cash pool as well as our commercial paper program for liquidity needs.

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. Additionally, under the new $1.5 billion revolving credit facility, the maximum leverage ratio is 5.75x debt to EBITDA, with a decline to 4.00x debt to EBITDA as of the last day of the fiscal quarter ending December 31, 2020. As of December 31, 2017, and December 31, 2016, we were in compliance with all of these restrictions and have met all debt payment obligations. All of our outstanding senior notes as of December 31, 2017, rank pari-passu.

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 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 17, "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, 2017			December 31, 2016			December 31, 2015
Weighted-Average Exchange Rate (1 USD equals)
Canadian dollar (CAD)	1.27			1.32			1.27
Euro (EUR)	0.88			0.90			0.89
British pound (GBP)	0.77			0.75			0.65
Czech Koruna (CZK)	23.43			24.61			24.48
Croatian Kuna (HRK)	6.59			6.78			6.85
Serbian Dinar (RSD)	112.49			110.81			107.46
Romanian Leu (RON)	4.01			4.05			3.99
Bulgarian Lev (BGN)	1.72			1.77			1.75
Hungarian Forint (HUF)	276.49			285.13			278.85

	As of
	December 31, 2017			December 31, 2016
Closing Exchange Rate (1 USD equals)
Canadian dollar (CAD)	1.26			1.34
Euro (EUR)	0.83			0.95
British pound (GBP)	0.74			0.81
Czech Koruna (CZK)	21.29			25.69
Croatian Kuna (HRK)	6.19			7.18
Serbian Dinar (RSD)	98.52			117.23
Romanian Leu (RON)	3.89			4.31
Bulgarian Lev (BGN)	1.63			1.86
Hungarian Forint (HUF)	258.91			294.36

The weighted-average exchange rates in the above table 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.

Capital Expenditures

In 2017, we incurred $628.4 million, and have paid $599.6 million, for capital improvement projects worldwide, excluding capital spending by equity method joint ventures, representing an approximate 85% increase versus 2016 capital expenditures incurred of $339.9 million. This increase is primarily due to the Acquisition.

We continue to 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, 2017, based on foreign exchange rates at December 31, 2017, 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	$	11,380.5			$	715.2			$	2,507.5			$	1,500.0			$	6,657.8
Interest payments on debt obligations	4,498.9				310.5				570.4				489.8				3,128.2
Retirement plan expenditures(1)	505.9				60.0				99.4				99.3				247.2
Operating leases	176.5				54.2				77.2				26.0				19.1
Capital leases	112.2				4.1				38.5				8.0				61.6
Other long-term obligations(2)	3,291.6				818.1				1,277.0				767.6				428.9
Total obligations	$	19,965.6			$	1,962.1			$	4,570.0			$	2,890.7			$	10,542.8

See Part II - Item 8 Financial Statements and Supplementary Data, Note 12, "Debt", Note 16, "Employee Retirement Plans and Postretirement Benefits", Note 17, "Derivative Instruments and Hedging Activities" and Note 19, "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, 2017, of our defined benefit pension plans (excluding our overfunded plans) and postretirement benefit plans is $98.7 million and $803.6 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 2018, we expect to make contributions to our defined benefit pension plans of approximately $10 million and benefit payments under our OPEB plans of approximately $50 million, based on foreign exchange rates as of December 31, 2017.

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 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)

Primarily includes non-cancelable purchase commitments as of December 31, 2017, that are enforceable and legally binding. Approximately $2.2 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 $906 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 $6.1 million of unrecognized tax benefits, excluding positions we would expect to settle using deferred tax assets, and $12.4 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 method investments and consolidated subsidiaries. See Part II—Item 8 Financial Statements and Supplementary Data, Note 19, "Commitments and Contingencies" of the Notes for further discussion.

Other Commercial Commitments

Based on foreign exchange rates as of December 31, 2017, 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	$	63.5			$	53.8			$	9.7			$	—			$	—

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. See Part II—Item 8 Financial Statements and Supplementary Data, Note 19, "Commitments and Contingencies" of the Notes for further discussion.

Off-Balance Sheet Arrangements

In accordance with U.S. GAAP, our operating leases are not reflected in our consolidated balance sheets. See Part II—Item 8 Financial Statements, Note 19, "Commitments and Contingencies" of the Notes for further discussion of these off-balance sheet arrangements. As of December 31, 2017, 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 2018

In the U.S., while 2017 industry dynamics were challenging, we continue to be disciplined, decisive and accountable as we continue our focus to deliver long-term profitable growth. We are confident that we have the brands, strategic plans and team to achieve our goals, which include our growth agenda. Our objective of flat volumes by 2018 and growth by 2019 remains our strategic imperative, but we are not driving for growth at any cost. We expect to continue to strengthen and expand our portfolio, drive investment efficiency through return on marketing investment, global procurement and the use of our Profit After Capital Charge model and plan to continue to earn category captainships underpinned by tools such as our Building with Beer program, as these are all steps to help us and our partners sell more beer profitably. Within our brand portfolio, we intend to remain focused on gaining segment share in premium, growing in above premium and stabilizing our below premium brand volume. We plan to refresh Coors Light packaging and release new creative over the next couple of months, while continuing to build momentum behind Miller Lite. In above premium, we plan to accelerate our performance by building on the solid growth last year from our two national craft brands, Blue Moon Belgian White and Leinenkugel's Summer Shandy, as well as the strong growth of our regional brands including Terrapin, Hop Valley, Revolver, Saint Archer and Colorado Native. Additionally, excitement from our distributors and chain partners for our 2018 innovation line up is also apparent as they have already committed to incremental placements. We expect to relaunch the Sol brand in April with redesigned packaging supported by an integrated marketing campaign. These plans, alongside Peroni which is also accelerating, will allow us to drive toward achieving strong momentum in the import segment. In just the past few weeks, we have brought to retail Arnold Palmer Spiked Half and Half designed to take share in the valuable hard tea segment, and Two Hats positioned to bring new legal-age consumers into beer.

In Canada, our teams are building on improved 2017 momentum. Our consumer excellence teams remain focused on gaining segment share in premium, accelerating our growth in above premium and craft and stabilizing our below premium brand share. Improving the performance of our two largest brands, Coors Light and Molson Canadian, remains the number one priority by refocused marketing, improved consumer promotions and stronger commercial execution. We plan to drive above premium performance led by Coors Banquet, Miller Genuine Draft, Belgian Moon and the Heineken portfolio. Along with the

addition of Miller High Life to Canada in late 2017, we have plans to introduce two further brands from our U.S. portfolio to broaden and deepen our Canadian portfolio later this year. We are also pursuing incremental drinking occasions by launching some great tasting innovations in the non-alcohol segment in 2018. On customer excellence, we plan to continue to roll out proven best practice sales tools such as our Building with Beer program. In 2018, commercial excellence expects to continue to focus on sales productivity, customer 360 initiatives, and joint business planning, which we expect to result in strong in-market impact. Our supply chain teams continue with brewery optimization efforts and productivity improvements, as we are just over a year from opening our new British Columbia brewery and the new Montreal brewery is expected to begin production in 2021.

In Europe, while the environment remains competitive, we plan to continue to use a balanced portfolio approach, drive disciplined retail execution and optimize our brewery network. In 2018, there are a few headwinds that are important to remember when modeling results for Europe. In the first quarter, we will be cycling the $50 million indirect tax provision benefit from 2017. Throughout 2018, we expect to increase investment behind our brands and commercial priorities to further strengthen our first choice agenda. Our commercial teams plan to build on our positive momentum this year by strengthening our national mainstream brands, including Carling, our largest brand in Europe, which further strengthened its overall number-one position in the U.K. beer market in 2017. For our above premium portfolio, 2017's doubt-digit sales growth reflects the fact that "ice cold, Rocky Mountain refreshment" is resonating powerfully with Coors Light consumers in the U.K. and Republic of Ireland. Above premium Staropramen outside of its domestic market, has grown at a double-digit rate, and we plan to continue to further push the brand into new markets where the Czech provenance and quality can deliver growth in the above premium segment. To accelerate our growth in craft, led by Sharp's and Franciscan Well, we have added the La Sagra and Birradamare brands to our portfolio. In cider, we are building on strong growth by Carling Cider and Rekorderlig with the 2018 acquisition of Aspall, a growing cider brand founded in 1728 with a distinct face, place and story that supports our premiumization strategy. Our balanced portfolio approach also relies on a continuing commitment to deliver against our focus to become first choice for customers. We maintained our number-one ranking in the U.K.'s Advantage retail survey for the multiple grocer off-premise channel and also recently achieved the number-one ranking in the multiple on-premise channel for the first time.

In International, we have increased substantially over the past year with the integration of the Miller International Business largely complete and with nearly 4.4 million hectoliters of total brand volume in 2017, this segment is now more than half as big as our Canada business from a volume perspective. We plan to continue to utilize an asset-light investment model in select markets and our efforts will focus on our global priority brands Coors Light, Miller brands and Blue Moon. Coors Light maintained strong growth in Latin America last year, and in Mexico, passed one million hectoliters of brand volume making it the fourth largest Coors Light market globally. We are currently launching the Miller Lite original white can packaging to more than 20 markets globally with positive results so far for this authentic packaging.

Cost Savings

We intend to deliver cost savings on our three-year cost savings program for 2017 to 2019 of approximately $600 million, including approximately $210 million in 2018. Delivering on these savings commitments will be particularly important given recent increases in input costs such as aluminum and fuel as well as impacts of inflation.

Pension Plans

We currently anticipate approximately $10 million of cash contributions to our defined benefit pension plans in 2018 and pension income of approximately $60 million, based on foreign exchange rates as of December 31, 2017. 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. Effective in the first quarter of 2018, all non-service cost components of net periodic pension and other postretirement benefit costs will be recorded to other income (expense), net as a result of the adoption of a new accounting pronouncement. In conjunction with the adoption of this guidance, we will also retrospectively and prospectively allocate the non-service component of pension and other postretirement benefit plan cost to our Corporate segment. Accordingly, only service cost will be recorded in our segments' results of operations going forward. See Part II—Item 8 Financial Statements and Supplementary Data, Note 2, "New Accounting Pronouncements" of the Notes for further details.

Capital Expenditures

We currently expect to incur total capital expenditures of approximately $670 million in 2018, based on foreign exchange rates as of December 31, 2017, including capital expenditures associated with the construction of our new British Columbia and Montreal breweries and excluding capital spending by equity method joint ventures.

Interest

We anticipate 2018 corporate net interest expense of approximately $330 million, based on foreign exchange and interest rates at December 31, 2017.

Tax

We expect to realize net benefits from U.S. tax reform, primarily driven by the lower federal corporate income tax rate of 21% and accelerated depreciation of qualified assets for tax purposes. As an additional result of the 2017 Tax Act, we expect a long-term consolidated effective tax rate in the range of 20% to 24%. However, we will continue to evaluate the impacts of the 2017 Tax Act as we further understand its implications, as well as the related, and yet to be issued, regulator rules, regulations and interpretations which could impact this outlook.

Dividends and Stock Repurchases

As a result of the Acquisition, we currently plan to maintain our current quarterly dividend of $0.41 per share, and have suspended our share repurchase program as we pay down debt. 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 International 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 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., 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 estimated 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, 2017, on a weighted-average basis, the discount rates used were 3.01% for our defined benefit pension plans and 3.34% for our OPEB plans. The change from the weighted-average discount rates of 3.36% for our defined benefit pension plans and 3.76% for our postretirement plans at December 31, 2016, 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, 2017, for our pension and OPEB plans:

	Impact to projected benefit obligation as of December 31, 2017 - 50 basis points
	Decrease				Increase
	(In millions)
Projected benefit obligation - unfavorable (favorable)
Pension obligation	$	411.8			$	(363.2	)
OPEB obligation	45.8				(42.9		)
Total impact to the projected benefit obligation	$	457.6			$	(406.1	)

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 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 4.10% for our defined benefit pension plan assets for cost recognition in 2018. This is a decrease from the weighted-average rate of 4.83% we had assumed in 2017. 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 plan assets adjusted for projected benefit payments to be made from the plan assets and projected contributions to the plan assets. During the fourth quarter of 2017, we changed our method of calculating the market-related value of pension plan assets used to determine net periodic pension cost. Specifically, our historical accounting treatment, the calculated value approach, smoothed asset returns and deferred gains and losses into the calculation of expected return on plan assets and gains and losses subject to amortization over five years. Effective December 31, 2017, we changed our accounting treatment to the fair value approach, which includes measuring the market-related value of plan assets at fair value for purposes of determining the expected return on plan assets and amount of gain or loss subject to amortization instead of using a five-year smoothing approach. We consider the fair value approach to be preferable as it results in a current reflection of changes in the value of plan assets in the measurement of net periodic pension cost. Additionally, given the plan assets of our major pension plans employ a liability-driven investment strategy, this approach more closely aligns our expected return on plan assets with how we value our funded status (plan assets and projected benefit obligation) and how much of our accumulated gain or loss is subject to amortization. We have retrospectively applied this change to all periods presented. See Part II—Item 8 Financial Statements and Supplementary Data, Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" of the Notes for further details surrounding this accounting policy change.

A 50 basis point change in our discount rate and expected return on assets assumptions made at the beginning of 2017 would have had the following effects on 2017 net periodic pension and postretirement benefit costs:

	Impact to 2017 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	$	(29.8	)		$	29.8
Discount rate on pension plans	$	2.3			$	(2.4	)
Discount rate on postretirement plans	$	1.1			$	(1.0	)

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 due to changes in actuarial assumptions 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 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 16, "Employee Retirement Plans and Postretirement Benefits" of the Notes for a comparison of target asset allocation percentages to actual asset allocations at December 31, 2017.

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 described above, our change in accounting policy for calculating the market-related value of plan assets to the fair value approach also impacted the amount of gain or loss subject to amortization. As of year-end 2017, 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, 2017, the health care trend rates used were ranging ratably from 6.8% in 2018 to 4.5% in 2037, consistent with our health care trend rates ranging ratably from 7.0% in 2017 to 4.5% in 2037 used at December 31, 2016. See Part II—Item 8 Financial Statements and Supplementary Data, Note 16, "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, 2017.

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 19, "Commitments and Contingencies" of the Notes for a discussion of our contingencies, environmental and litigation reserves as of December 31, 2017.

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 U.S., Canada, Europe and International 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 U.S., Canada and Europe segment each meet the criteria as having similar economic characteristics and therefore have aggregated these components into the U.S., Canada and Europe reporting units, respectively. Therefore, the U.S., Canada and Europe reporting units are consistent with our operating segments. However, for our India business, the reporting unit is one level below the International 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 Coors and Miller brand families in the U.S., the Coors Light distribution rights in Canada, and the Carling and Staropramen brands in Europe.

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, we would recognize an impairment loss in an amount equal to the excess up to the total amount of goodwill allocated to that reporting unit.

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

The fair value of the U.S., Europe and Canada reporting units were estimated at approximately 28%, 18% and 26% in excess of carrying value, respectively, as of the October 1, 2017, testing date. The U.S. reporting unit was not tested for impairment in the prior year, as the Acquisition was completed after our annual October 1st test date. In the current year testing, it was determined that the fair value of the U.S. reporting unit sufficiently exceeded its carrying value one year following the Acquisition. 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 positive volume and revenue growth throughout 2017, as well as the benefit of incremental cost savings and synergies, which positively impacted the forecasted future cash flows of the Europe reporting unit. The fair value of our Canada reporting unit declined slightly from the prior year, as the reporting unit continued to face challenging market dynamics during the year, including continued performance declines within the Molson and Coors Light core brands, resulting in a reduction of forecasted results in comparison to the prior year. These declines were slightly offset by incremental cost savings initiatives included in the current year forecast. The fair value of the India reporting unit slightly improved from the prior year, as the economic outlook for the reporting unit continues to improve.

Intangible Assets

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. Following the completion of our annual impairment testing as of October 1, 2017, the fair value of the Coors and Miller brand families were determined to be sufficiently in excess of their carrying values.

The fair value of the Coors Light brand distribution rights in Canada continues to be sufficiently in excess of its carrying value as of the testing date. During 2016, we recorded an aggregate impairment charge to the Molson core indefinite-lived brand asset of $495.2 million. The impairment charge was the result of a continued decline in performance of the Molson core brand asset throughout 2016, which drove a downward shift in management's forecast, along with a challenging market dynamic and competitive conditions that were not expected to subside in the near-term. At that time, we also reassessed the brand's indefinite-life classification and determined that the Molson core brands had characteristics that indicated a definite-life assignment was more appropriate, including prolonged weakness in consumer demand driven by increased economic and competitive pressures. Given these factors resulted in sustained declines in brand performance, and it was unclear when these ongoing pressures on the brands would subside, these brands were reclassified as definite-lived intangible assets as of October 1, 2016, and are being amortized over their remaining useful lives ranging from 30 to 50 years.

Our Europe indefinite-lived intangibles' 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, we also recognized impairment charges on certain European indefinite-lived brands of $275.0 million. These brands were reclassified as definite-lived intangible assets as of September 30, 2015, and are being amortized over their remaining useful lives ranging from 30 to 50 years.

We utilized Level 3 fair value measurements in our impairment analysis of our indefinite-lived intangible brand 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. Separately, 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.

Key Assumptions

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. For example, we considered the implications of the enactment of the 2017 Tax Act on our U.S. reporting unit and indefinite-lived brand valuations. The results of our preliminary analysis indicated that the implications are expected to be favorable, keeping all other assumptions constant.

In 2017, the discount rates used in developing our fair value estimates for each of our reporting units were 7.75%, 8.25% and 8.75% for our U.S, Canada and Europe reporting units, respectively. The rates used for our Canada and Europe reporting units did not significantly deviate from the discount rates used in our 2016 testing. The discount rate used for our U.S. reporting unit was based on the country-specific weighted average cost of capital ("WACC"), adjusted based on the current perceived risks impacting the business. In 2017, discount rates used for testing of indefinite-lived intangibles ranged from 7.50% to 9.50% considering the market or country specific risk premium for each geography in which our brands are based. The discount rates for the Coors and Miller brands in the U.S. were based on the country-specific WACC, adjusted, as appropriate, based on the relative perceived risk of each brand. The discount rates for the Carling and Staropramen brands in Europe remained largely consistent with those used in the prior year analysis. The discount rate for the Coors Light brand distribution rights in Canada, increased in 2017, primarily due to a slight increase to the unsystematic risk premium applied to the brand between testing dates.

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 U.S., Europe and Canada reporting units as of the October 1, 2017, test date:

	Impact to the fair value cushion as of October 1, 2017 - 50 basis points increase
	Cushion (as reported)		Cushion (post-sensitivity)
	% of fair value in excess of carrying value
Reporting units:
United States	28%		25%
Europe	18%		15%
Canada	26%		22%

Post sensitivity, the fair values of the U.S., 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 resulting in an impairment charge were identified in 2017, 2016 or 2015. 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, 2017, the carrying values of goodwill and intangible assets were approximately $8.4 billion and $14.3 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. See Part II—Item 8 Financial Statements and Supplementary Data, Note 6, "Income Tax" of the Notes for further discussion on the implications of the 2017 Tax Act in the U.S. on our financial statements.

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 provide for taxes that may be payable if undistributed earnings of overseas subsidiaries were to be remitted to the U.S., except for those earnings that we consider to be permanently reinvested. However, we will continue to assess the impact of the 2017 Tax Act on the tax consequences of future repatriations. For example, as discussed in Part II—Item 8 Financial Statements and Supplementary Data, Note 6, "Income Tax" of the Notes, we continue to evaluate our assertion with respect to any remaining outside basis differences as of December 31, 2017, as we have not finalized our analysis of the effects of all of the new provisions in the 2017 Tax Act, including the new tax on global intangible low-taxed income. Future sales of foreign subsidiaries are not exempt from capital gains tax in the U.S. under the 2017 Tax Act. We have no plans to dispose of any of our foreign subsidiaries and are not recording deferred taxes on outside basis differences in foreign subsidiaries for the sale of a foreign subsidiary.

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 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. 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. This guidance will result in our existing operating leases, for certain real estate and equipment, to be recognized on our balance sheet. We will further analyze our lease arrangements as we complete our assessment and implementation of this new 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.

We will adopt this guidance and related amendments as of January 1, 2018, applying the modified retrospective transition approach to all contracts. Based on our comprehensive assessment of the new guidance, including our evaluation of the five-step approach outlined within the guidance, we concluded that the adoption will not have a significant impact to our core revenue generating activities. However, the adoption will result in a change in presentation of certain cash payments made to customers as well as the timing of recognition of certain promotional discounts. Specifically, certain cash payments to customers were previously recorded within marketing, general and administrative expenses in the consolidated statements of

operations. Upon the adoption of the new guidance, many of these cash payments will not meet the specific criteria within the new guidance of providing a “distinct” good or service, and therefore, will be required to be presented as a reduction of revenue. Based on foreign exchange rates as of December 31, 2017, we currently anticipate that the impact of this change will result in a reduction of revenue and marketing, general and administrative expenses by approximately $70 million to $90 million during the first year of adoption, primarily within our Canada segment, with no impact to net income. However, actual results may differ from these estimates. Furthermore, upon adoption of the new guidance, certain of our promotional discounts which are deemed variable consideration under the new guidance, will now be recognized at the time of the related shipment of product, which is earlier than recognized under historical guidance. We anticipate that this change in recognition timing will shift financial statement recognition primarily amongst quarters, however, do not anticipate that the full-year impact will be significant to our financial results. We also evaluated the requirements of the new guidance on our other revenue generating activities such as contract brewing and license arrangements, and concluded that no changes to our historical accounting treatment is required.

As a result of the cumulative impact of adopting the new guidance in the first quarter of 2018, we currently expect to record a net reduction to opening retained earnings of approximately $26 million to $30 million as of January 1, 2018, with an offsetting increase primarily within accounts payable and other current liabilities, and the related tax effects, related primarily to the accelerated recognition of certain promotional discounts. We are in the process of finalizing this transition adjustment calculation, which will be completed during the first quarter of 2018.

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.

Unaudited Pro Forma Financial 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, and 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. The unaudited pro forma financial 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 fair value adjustments to property, plant and equipment, and intangible assets had been applied from January 1, 2015, together with the consequential tax effects. Pro forma adjustments have been made to remove non-recurring transaction-related costs included in historical results as well as to reflect the incremental interest expense to be prospectively incurred on the debt and term loans issued to finance the Acquisition, in addition to other pro forma adjustments. See below table for significant non-recurring costs.

Additionally, the following unaudited pro forma financial information does not reflect the impact of the acquisition of the Miller global brand portfolio and other assets primarily related to the Miller International Business 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, that it is insignificant to the overall Acquisition. The purchase price allocation reflects the estimated value allocated to the Miller global brand portfolio reported within identifiable intangible assets subject to amortization.

The unaudited pro forma financial information below does not reflect the realization of any expected ongoing synergies related to integration. Further, the unaudited pro forma financial 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. The MCBC historical amounts for fiscal years 2016 and 2015 have been revised to reflect the retrospective application of our change in accounting policy as discussed in Part II-Item 8 Financial Statements and Supplementary Data, Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" of the Notes.

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
Financial 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	(2,987.5		)		(3,457.4		)		77.3				(2)		(6,367.6		)
Gross profit	1,897.5				2,668.0				50.1						4,615.6
Marketing, general and administrative expenses	(1,589.8		)		(1,413.2		)		40.2				(3)		(2,962.8		)
Special items, net	2,522.4				(85.6		)		(2,965.0		)		(4)		(528.2		)
Equity income in MillerCoors	500.9				—				(500.9		)				—
Operating income (loss)	3,331.0				1,169.2				(3,375.6		)				1,124.6
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	3,056.9				1,171.5				(3,439.7		)				788.7
Income tax benefit (expense)	(1,055.2		)		(3.3		)		581.3				(7)		(477.2		)
Net income (loss) from continuing operations	2,001.7				1,168.2				(2,858.4		)				311.5
Income (loss) from discontinued operations, net of tax	(2.8		)		—				—						(2.8		)
Net income (loss) including noncontrolling interests	1,998.9				1,168.2				(2,858.4		)				308.7
Net income (loss) attributable to noncontrolling interests	(5.9		)		(11.0		)		—						(16.9		)
Net income (loss) attributable to MCBC	$	1,993.0			$	1,157.2			$	(2,858.4	)				$	291.8
Net income (loss) per share attributable to MCBC from continuing operations:
Net income (loss) attributable to MCBC from continuing operations	$	1,995.8			$	1,157.2			$	(2,858.4	)				$	294.6
Basic	$	9.41													$	1.37
Diluted	$	9.35													$	1.36
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
Financial 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	(2,131.6		)		(4,547.5		)		(23.3		)		(2)		(6,702.4		)
Gross profit	1,435.9				3,178.0				(78.2		)				4,535.7
Marketing, general and administrative expenses	(1,038.3		)		(1,828.7		)		(57.5		)		(3)		(2,924.5		)
Special items, net	(346.7		)		(110.1		)		—						(456.8		)
Equity income in MillerCoors	516.3				—				(516.3		)				—
Operating income (loss)	567.2				1,239.2				(652.0		)				1,154.4
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	456.1				1,243.3				(895.9		)				803.5
Income tax benefit (expense)	(61.5		)		(4.7		)		(134.9		)		(7)		(201.1		)
Net income (loss) from continuing operations	394.6				1,238.6				(1,030.8		)				602.4
Income (loss) from discontinued operations, net of tax	3.9				—				—						3.9
Net income (loss) including noncontrolling interests	398.5				1,238.6				(1,030.8		)				606.3
Net income (loss) attributable to noncontrolling interests	(3.3		)		(20.8		)		—						(24.1		)
Net income (loss) attributable to MCBC	$	395.2			$	1,217.8			$	(1,030.8	)				$	582.2
Net income (loss) per share attributable to MCBC from continuing operations:
Net income (loss) attributable to MCBC from continuing operations	$	391.3			$	1,217.8			$	(1,030.8	)				$	578.3
Basic	$	2.11													$	2.69
Diluted	$	2.10													$	2.67
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)	Represents a 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 by CBC from the U.S.

(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 estimated fair value of MillerCoors' property, plant and equipment over the 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 the 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 fair values of identifiable amortizable intangible assets and depreciable property, plant and equipment, and the 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 Part II—Item 8 Financial Statements and Supplementary Data, Note 4, "Acquisition and Investments" of the Notes 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 through cash on hand, including proceeds received from our February 3, 2016, equity issuance, the issuance of debt on July 7, 2016, as well as borrowings on our term loan, which occurred concurrent with the close of the Acquisition. We incurred costs related to the issuance of debt, 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 debt issuance 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 non-recurring and do not have a continuing impact on the business, we have removed them from our pro forma financial information. The debt issued on July 7, 2016, consists of fixed rate notes. The term loans, which had monthly interest at the rate of 1.50% plus one-month LIBOR, were fully repaid as of July 19, 2017.

	For the years ended
	December 31, 2016				December 31, 2015
	(In millions)
Term loan interest expense adjustments	$	52.7			$	46.5
Interest expense adjustments from debt issued on July 7, 2016	204.1				204.4
Historical net interest on other items discussed above	(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 debt issued on July 7, 2016, 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 debt issued on July 7, 2016	(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)
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