Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

410K characters. Original on sec.gov · Markdown

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




Index to Financial Statements	Page
Consolidated Financial Statements:
Management's Report	78
Report of Independent Registered Public Accounting Firm	80
Consolidated Statements of Operations for the years ended December 31, 2018, December 31, 2017, and December 31, 2016	82
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2018, December 31, 2017, and December 31, 2016	83
Consolidated Balance Sheets as of December 31, 2018, and December 31, 2017	84
Consolidated Statements of Cash Flows for the years ended December 31, 2018, December 31, 2017, and December 31, 2016	85
Consolidated Statements of Stockholders' Equity and Noncontrolling Interests for the years ended December 31, 2018, December 31, 2017, and December 31, 2016	87
Notes to Consolidated Financial Statements	89
Note 1, "Basis of Presentation and Summary of Significant Accounting Policies"	89
Note 2, "New Accounting Pronouncements"	98
Note 3, "Segment Reporting"	102
Note 4, "Acquisition and Investments"	106
Note 5, "Other Income and Expense"	114
Note 6, "Income Tax"	114
Note 7, "Special Items"	120
Note 8, "Stockholders' Equity"	122
Note 9, "Properties"	123
Note 10, "Goodwill and Intangible Assets"	124
Note 11, "Debt"	128
Note 12, "Inventories"	131
Note 13, "Share-Based Payments"	131
Note 14, "Accumulated Other Comprehensive Income (Loss)"	135
Note 15, "Employee Retirement Plans and Postretirement Benefits"	136
Note 16, "Derivative Instruments and Hedging Activities"	146
Note 17, "Accounts Payable and Other Current Liabilities"	155
Note 18, "Commitments and Contingencies"	155
Note 19, "Supplemental Guarantor Information"	159
Note 20, "Quarterly Financial Information (Unaudited)"	171

MANAGEMENT'S REPORT

The preparation, integrity and objectivity of the financial statements and all other financial information included in this annual report are the responsibility of the management of Molson Coors Brewing Company. The financial statements have been prepared in accordance with generally accepted accounting principles in the United States, applying estimates based on management's best judgment where necessary. Management believes that all material uncertainties have been appropriately accounted for and disclosed.

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2018, based on the framework and criteria established in Internal Control—Integrated Framework (2013 Framework), issued by the Committee of Sponsoring Organizations of the Treadway Commission.

A material weakness, as defined in Exchange Act Rule 12b-2, is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

As part of preparing our 2018 consolidated financial statements, we identified errors in the accounting for income taxes related to the deferred tax liabilities for our partnership in MillerCoors. Following the Acquisition in 2016, MillerCoors continued as a partnership for tax purposes until 2018, at which point the partnership was dissolved. Upon the dissolution of the MillerCoors partnership, we changed our outside basis deferred tax liability for our investment in the partnership to separate deferred tax positions for each of the individual book-tax basis differences in the underlying assets and liabilities of MillerCoors. In doing so, we identified a difference between the deferred tax liabilities recorded and the deferred tax liabilities required. As a result, we concluded that the deferred tax liabilities and deferred tax expense associated with our remeasurement of our previously held equity interest in MillerCoors was incorrectly calculated upon close of the Acquisition in the fourth quarter of 2016. Specifically, upon closing of the Acquisition and completion of the related deferred income tax calculations, we did not reconcile the outside basis deferred income tax liability for the investment in the partnership to the book-tax difference in the underlying assets and liabilities within the partnership.

As part of our annual assessment of internal control over financial reporting, we have determined that a material weakness existed in the Company’s internal control over financial reporting as of December 31, 2018. A material weakness existed in that we did not design and maintain effective controls over the completeness and accuracy of the accounting for, and disclosure of, the income tax effects of acquired partnership interests. Specifically, we did not design appropriate controls to identify and reconcile deferred income taxes associated with the accounting for acquired partnership interests. This material weakness resulted in material errors in connection with our step acquisition of MillerCoors that were corrected through the restatement of the consolidated financial statements as of and for the years ended December 31, 2017, and December 31, 2016, as described in Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" to the consolidated financial statements and the correction of the unaudited quarterly financial information for fiscal years 2018 and 2017. Additionally, this material weakness could result in misstatements to the aforementioned account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

As a result of the material weakness in internal control over financial reporting described above, management has concluded that we did not maintain effective internal control over financial reporting as of December 31, 2018.

Management's Plan for Remediation of the Material Weakness

In response to the material weakness described above, with the oversight of the Audit Committee of our Board of Directors, management is currently evaluating our policies and procedures related to the accounting for income taxes and plans to design and implement adequate internal controls to ensure that (i) the income tax effects of acquired partnership interests are properly accounted for and disclosed in the period of acquisition, and (ii) the resulting investment in partnership deferred income tax assets and liabilities are assessed and reconciled periodically to the book-tax differences in the underlying assets and liabilities within the partnership to determine whether any adjustment is necessary.

The remediation efforts are intended both to address the identified material weakness and to enhance our overall financial control environment. Management is committed to continuous improvement of the Company’s internal control over financial reporting and will continue to diligently review the Company’s internal control over financial reporting.

PricewaterhouseCoopers LLP, the Company's independent registered public accounting firm, provides an objective, independent audit of the consolidated financial statements and internal control over financial reporting. Their accompanying

report is based upon an examination conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), including tests of accounting procedures, records and internal control.

The Board of Directors, operating through its Audit Committee composed of independent, outside directors, monitors the Company's accounting control systems and reviews the results of the Company's auditing activities. The Audit Committee meets at least quarterly, either separately or jointly, with representatives of management, PricewaterhouseCoopers LLP, and internal auditors. To ensure complete independence, PricewaterhouseCoopers LLP and the Company's internal auditors have full and free access to the Audit Committee and may meet with or without the presence of management.



/s/ MARK R. HUNTER		/s/ TRACEY I. JOUBERT
Mark R. Hunter		Tracey I. Joubert
President & Chief Executive Officer		Chief Financial Officer
Molson Coors Brewing Company		Molson Coors Brewing Company
February 12, 2019		February 12, 2019

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of Molson Coors Brewing Company

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Molson Coors Brewing Company and its subsidiaries (the "Company") as of December 31, 2018 and 2017, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and noncontrolling interests and of cash flows for each of the three years in the period ended December 31, 2018, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2018 appearing under Item 15(c) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because a material weakness in internal control over financial reporting existed as of that date related to the completeness and accuracy of the accounting for and disclosure of the income tax effects of acquired partnership interests.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness referred to above is described in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. We considered this material weakness in determining the nature, timing, and extent of audit tests applied in our audit of the 2018 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.

Restatement of Previously Issued Financial Statements

As discussed in Note 1 to the consolidated financial statements, the Company has restated its 2017 and 2016 financial statements to correct errors.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in management's report referred to above. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal

control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Denver, Colorado

February 12, 2019

We have served as the Company's auditor since 1974.

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN MILLIONS, EXCEPT PER SHARE DATA)



	For the Years Ended
	December 31, 2018			December 31, 2017			December 31, 2016
		As Restated			As Restated
Sales	$	13,338.0		$	13,471.5		$	6,597.4
Excise taxes	(2,568.4		)	(2,468.7		)	(1,712.4		)
Net sales	10,769.6			11,002.8			4,885.0
Cost of goods sold	(6,584.8		)	(6,236.7		)	(2,999.0		)
Gross profit	4,184.8			4,766.1			1,886.0
Marketing, general and administrative expenses	(2,802.7		)	(3,052.0		)	(1,597.2		)
Special items, net	249.7			(36.4		)	2,532.9
Equity income in MillerCoors	—			—			500.9
Operating income (loss)	1,631.8			1,677.7			3,322.6
Other income (expense), net
Interest expense	(306.2		)	(349.3		)	(271.6		)
Interest income	8.0			6.0			27.2
Other pension and postretirement benefits (costs), net	38.2			47.4			8.4
Other income (expense), net	(12.0		)	1.4			(32.5		)
Total other income (expense), net	(272.0		)	(294.5		)	(268.5		)
Income (loss) before income taxes	1,359.8			1,383.2			3,054.1
Income tax benefit (expense)	(225.2		)	204.6			(1,454.3		)
Net income (loss)	1,134.6			1,587.8			1,599.8
Net (income) loss attributable to noncontrolling interests	(18.1		)	(22.2		)	(5.9		)
Net income (loss) attributable to Molson Coors Brewing Company	$	1,116.5		$	1,565.6		$	1,593.9

Net income (loss) attributable to Molson Coors Brewing Company per share:
Basic	$	5.17		$	7.27		$	7.52
Diluted	$	5.15		$	7.23		$	7.47

Weighted-average shares outstanding:
Basic	216.0			215.4			212.0
Dilutive effect of share-based awards	0.6			1.1			1.4
Diluted	216.6			216.5			213.4

Anti-dilutive securities excluded from computation of diluted EPS	0.8			0.3			0.1

See notes to consolidated financial statements.

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(IN MILLIONS)



	For the Years Ended
	December 31, 2018			December 31, 2017			December 31, 2016
		As Restated			As Restated
Net income (loss) including noncontrolling interests	$	1,134.6		$	1,587.8		$	1,599.8
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(359.0		)	686.7			(234.4		)
Reclassification of cumulative translation adjustment to income	6.0			—			—
Unrealized gain (loss) on derivative and non-derivative financial instruments	10.9			(133.4		)	9.7
Reclassification of derivative (gain) loss to income	2.5			1.3			(3.0		)
Pension and other postretirement benefit adjustments	43.5			145.7			53.8
Amortization of net prior service (benefit) cost and net actuarial (gain) loss to income and settlement	4.9			3.6			22.8
Reclassification of historical share of MillerCoors' AOCI loss	—			—			258.2
Ownership share of unconsolidated subsidiaries' other comprehensive income (loss)	(0.8		)	10.4			22.3
Total other comprehensive income (loss), net of tax	(292.0		)	714.3			129.4
Comprehensive income (loss)	842.6			2,302.1			1,729.2
Comprehensive (income) loss attributable to noncontrolling interests	(16.1		)	(24.7		)	(3.0		)
Comprehensive income (loss) attributable to Molson Coors Brewing Company	$	826.5		$	2,277.4		$	1,726.2

See notes to consolidated financial statements.

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN MILLIONS)

	As of
	December 31, 2018			December 31, 2017
		As Restated
Assets
Current assets:
Cash and cash equivalents	$	1,057.9		$	418.6
Accounts and other receivables:
Trade, less allowance for doubtful accounts of $14.5 and $17.2, respectively	736.0			728.3
Affiliate receivables	8.4			5.5
Other receivables, less allowance for doubtful accounts of $0.2 and $0.5, respectively	126.6			168.2
Inventories, less allowance for obsolete inventories of $16.2 and $8.1, respectively	591.8			591.5
Other current assets, net	245.6			277.6
Total current assets	2,766.3			2,189.7
Properties, less accumulated depreciation of $2,558.8 and $2,096.6, respectively	4,608.3			4,673.7
Goodwill	8,260.8			8,405.5
Other intangibles, less accumulated amortization of $810.3 and $662.3, respectively	13,776.4			14,296.5
Other assets	698.0			681.5
Total assets	$	30,109.8		$	30,246.9
Liabilities and equity
Current liabilities:
Accounts payable and other current liabilities (includes affiliate payables of $0.1 and $0.4, respectively)	$	2,706.4		$	2,684.5
Current portion of long-term debt and short-term borrowings	1,594.5			714.8
Total current liabilities	4,300.9			3,399.3
Long-term debt	8,893.8			10,598.7
Pension and postretirement benefits	726.6			848.5
Deferred tax liabilities	2,128.9			1,896.3
Other liabilities	323.8			316.8
Total liabilities	16,374.0			17,059.6
Commitments and contingencies (Note 18)
Molson Coors Brewing Company stockholders' equity
Capital stock:
Preferred stock, $0.01 par value (authorized: 25.0 shares; none issued)	—			—
Class A common stock, $0.01 par value per share (authorized: 500.0 shares; issued and outstanding: 2.6 shares and 2.6 shares, respectively)	—			—
Class B common stock, $0.01 par value per share (authorized: 500.0 shares; issued: 205.4 shares and 204.7 shares, respectively)	2.0			2.0
Class A exchangeable shares, no par value (issued and outstanding: 2.8 shares and 2.9 shares, respectively)	103.2			107.7
Class B exchangeable shares, no par value (issued and outstanding: 14.8 shares and 14.7 shares, respectively)	557.6			553.2
Paid-in capital	6,773.1			6,688.5
Retained earnings	7,692.9			6,958.4
Accumulated other comprehensive income (loss)	(1,150.0		)	(860.0		)
Class B common stock held in treasury at cost (9.5 shares and 9.5 shares, respectively)	(471.4		)	(471.4		)
Total Molson Coors Brewing Company stockholders' equity	13,507.4			12,978.4
Noncontrolling interests	228.4			208.9
Total equity	13,735.8			13,187.3
Total liabilities and equity	$	30,109.8		$	30,246.9

See notes to consolidated financial statements.

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS)

	For the Years Ended
	December 31, 2018			December 31, 2017			December 31, 2016
		As Restated			As Restated
Cash flows from operating activities:
Net income (loss) including noncontrolling interests	$	1,134.6		$	1,587.8		$	1,599.8
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Revaluation gain on previously held 42% equity interest in MillerCoors and AOCI reclassification	—			—			(2,965.0		)
Inventory step-up in cost of goods sold	—			—			82.0
Depreciation and amortization	857.5			812.8			388.4
Amortization of debt issuance costs and discounts	12.7			23.2			66.5
Share-based compensation	42.6			58.3			29.9
(Gain) loss on sale or impairment of properties and other assets, net	(8.1		)	(0.4		)	396.0
Equity income in MillerCoors	—			—			(488.6		)
Distributions from MillerCoors	—			—			488.6
Unrealized (gain) loss on foreign currency fluctuations and derivative instruments, net	193.1			(124.3		)	(20.7		)
Income tax (benefit) expense	225.2			(204.6		)	1,454.3
Income tax (paid) received	32.3			86.0			(165.0		)
Interest expense, excluding interest amortization	304.2			338.8			262.3
Interest paid	(308.7		)	(350.3		)	(162.5		)
Pension expense (benefit)	(57.2		)	(67.8		)	(11.6		)
Pension contributions paid	(8.9		)	(310.0		)	(12.1		)
Change in current assets and liabilities (net of impact of business combinations) and other:
Receivables	(38.4		)	(7.2		)	65.6
Inventories	(10.6		)	21.3			(23.2		)
Payables and other current liabilities	27.6			31.0			144.9
Other assets and other liabilities	(66.6		)	(28.3		)	(2.7		)
Net cash provided by operating activities	2,331.3			1,866.3			1,126.9
Cash flows from investing activities:
Additions to properties	(651.7		)	(599.6		)	(341.8		)
Proceeds from sales of properties and other assets	32.5			60.5			174.5
Payment for completion of Acquisition, net of cash acquired	—			—			(11,961.0		)
Investment in MillerCoors	—			—			(1,253.7		)
Return of capital from MillerCoors	—			—			1,086.9
Other	(49.9		)	0.9			8.5
Net cash used in investing activities	(669.1		)	(538.2		)	(12,286.6		)

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (IN MILLIONS)

	For the Years Ended
	December 31, 2018			December 31, 2017			December 31, 2016
		As Restated			As Restated
Cash flows from financing activities:
Proceeds from issuance of common stock, net	—			—			2,525.6
Exercise of stock options under equity compensation plans	16.0			4.0			11.2
Dividends paid	(354.2		)	(353.4		)	(352.9		)
Payments on debt and borrowings	(319.8		)	(3,000.1		)	(223.9		)
Proceeds on debt and borrowings	—			1,536.0			9,460.6
Debt issuance costs	(0.5		)	(7.0		)	(60.7		)
Net proceeds from (payments on) revolving credit facilities and commercial paper	(374.3		)	374.3			(1.1		)
Other	23.9			(50.2		)	(40.9		)
Net cash provided by (used in) financing activities	(1,008.9		)	(1,496.4		)	11,317.9
Cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents	653.3			(168.3		)	158.2
Effect of foreign exchange rate changes on cash and cash equivalents	(14.0		)	26.0			(28.2		)
Balance at beginning of year	418.6			560.9			430.9
Balance at end of year	$	1,057.9		$	418.6		$	560.9

See notes to consolidated financial statements. See Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" for supplementary cash flow data.

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND NONCONTROLLING INTERESTS (IN MILLIONS)

				MCBC Stockholders' Equity
					Common stock				Exchangeable												Accumulated other			Common Stock held in			Non
					issued				shares issued						Paid-in-			Retained			comprehensive			treasury			controlling
	Total				Class A		Class B		Class A			Class B			capital			earnings			income (loss)			Class B			interests
Balance as of December 31, 2015	$	7,063.1			$	—	$	1.7	$	108.2		$	603.0		$	4,000.4		$	4,505.2		$	(1,704.1	)	$	(471.4	)	$	20.1
Exchange of shares	—				—		—		(0.1		)	(31.8		)	31.9			—			—			—			—
Shares issued under equity compensation plan	(1.1		)		—		—		—			—			(1.1		)	—			—			—			—
Amortization of share-based compensation	32.3				—		—		—			—			32.3			—			—			—			—
Replacement share-based awards issued in conjunction with Acquisition	46.4				—		—		—			—			46.4			—			—			—			—
Acquisition of businesses	186.3				—		—		—			—			—			—			—			—			186.3
Purchase of noncontrolling interest	(0.1		)		—		—		—			—			0.1			—			—			—			(0.2		)
Net income (loss) including noncontrolling interests - As Restated	1,599.8				—		—		—			—			—			1,593.9			—			—			5.9
Other comprehensive income (loss), net of tax	129.4				—		—		—			—			—			—			132.3			—			(2.9		)
Issuance of common stock	2,525.6				—		0.3		—			—			2,525.3			—			—			—			—
Distributions and dividends to noncontrolling interests	(6.2		)		—		—		—			—			—			—			—			—			(6.2		)
Dividends declared and paid - $1.64 per share	(352.9		)		—		—		—			—			—			(352.9		)	—			—			—
Balance as of December 31, 2016 - As Restated	$	11,222.6			$	—	$	2.0	$	108.1		$	571.2		$	6,635.3		$	5,746.2		$	(1,571.8	)	$	(471.4	)	$	203.0
Exchange of shares	—				—		—		(0.4		)	(18.0		)	18.4			—			—			—			—
Shares issued under equity compensation plan	(22.9		)		—		—		—			—			(22.9		)	—			—			—			—
Amortization of share-based compensation	57.3				—		—		—			—			57.3			—			—			—			—
Acquisition of business and purchase of noncontrolling interest	1.8				—		—		—			—			0.4			—			—			—			1.4
Net income (loss) including noncontrolling interests - As Restated	1,587.8				—		—		—			—			—			1,565.6			—			—			22.2

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND NONCONTROLLING INTERESTS (Continued) (IN MILLIONS)

				MCBC Stockholders' Equity
					Common stock				Exchangeable										Accumulated other			Common Stock held in			Non
					issued				shares issued					Paid-in-		Retained			comprehensive			treasury			controlling
	Total				Class A		Class B		Class A			Class B		capital		earnings			income (loss)			Class B			interests
Other comprehensive income (loss), net of tax	714.3				—		—		—			—		—		—			711.8			—			2.5
Distributions and dividends to noncontrolling interests	(20.2		)		—		—		—			—		—		—			—			—			(20.2		)
Dividends declared and paid - $1.64 per share	(353.4		)		—		—		—			—		—		(353.4		)	—			—			—
Balance as of December 31, 2017 - As Restated	$	13,187.3			$	—	$	2.0	$	107.7		$	553.2	$	6,688.5	$	6,958.4		$	(860.0	)	$	(471.4	)	$	208.9
Exchange of shares	—				—		—		(4.5		)	4.4		0.1		—			—			—			—
Shares issued under equity compensation plan	2.8				—		—		—			—		2.8		—			—			—			—
Amortization of share-based compensation	42.2				—		—		—			—		42.2		—			—			—			—
Formation of consolidated joint venture (Note 4)	44.3				—		—		—			—		39.4		—			—			—			4.9
Purchase of noncontrolling interest	(0.2		)		—		—		—			—		0.1		—			—			—			(0.3		)
Net income (loss) including noncontrolling interests	1,134.6				—		—		—			—		—		1,116.5			—			—			18.1
Other comprehensive income (loss), net of tax	(292.0		)		—		—		—			—		—		—			(290.0		)	—			(2.0		)
Adoption of new accounting pronouncement (Note 2)	(27.8		)		—		—		—			—		—		(27.8		)	—			—			—
Contributions from noncontrolling interests	21.6				—		—		—			—		—		—			—			—			21.6
Distributions and dividends to noncontrolling interests	(22.8		)		—		—		—			—		—		—			—			—			(22.8		)
Dividends declared and paid - $1.64 per share	(354.2		)		—		—		—			—		—		(354.2		)	—			—			—
Balance as of December 31, 2018	$	13,735.8			$	—	$	2.0	$	103.2		$	557.6	$	6,773.1	$	7,692.9		$	(1,150.0	)	$	(471.4	)	$	228.4

See notes to consolidated financial statements.

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation and Summary of Significant Accounting Policies

Unless otherwise noted in this report, any description of "we", "us" or "our" includes Molson Coors Brewing Company ("MCBC" or the "Company"), principally a holding company, and its operating and non-operating subsidiaries included within our reporting segments and Corporate. Our reporting segments include: MillerCoors LLC ("MillerCoors" or U.S. segment), operating in the U.S.; Molson Coors Canada ("MCC" or Canada segment), operating in Canada; Molson Coors Europe (Europe segment), operating in Bulgaria, Croatia, Czech Republic, Hungary, Montenegro, the Republic of Ireland, Romania, Serbia, the U.K. and various other European countries; and Molson Coors International ("MCI" or International segment), operating in various other countries.

Unless otherwise indicated, comparisons are to comparable prior periods, and 2018, 2017 and 2016 refers to the 12 months ended December 31, 2018, December 31, 2017, and December 31, 2016, respectively. 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"), and MillerCoors, previously a joint venture between MCBC and SABMiller, became a wholly-owned subsidiary of MCBC. Accordingly, for periods prior to October 11, 2016, our 42% economic ownership interest in MillerCoors was accounted for under the equity method of accounting, and, therefore, its results of operations were reported as equity income in MillerCoors in the consolidated statements of operations, and our 42% share of MillerCoors' net assets was reported as investment in MillerCoors in the consolidated balance sheets. Beginning October 11, 2016, MillerCoors was fully consolidated and continues to be reported as our U.S. segment. See Note 4, "Acquisition and Investments" for further discussion.

Our consolidated financial statements and related disclosures reflect new accounting pronouncements adopted during the year as discussed in Note 2, "New Accounting Pronouncements."

Unless otherwise indicated, information in this report is presented in USD and comparisons are to comparable prior periods. Our primary operating currencies, other than USD, include the CAD, the GBP, and our Central European operating currencies such as the EUR, CZK, HRK and RSD.

Principles of Consolidation

Our consolidated financial statements include our accounts and our majority-owned and controlled domestic and foreign subsidiaries, as well as certain VIEs for which we are the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions used to determine certain amounts that affect the financial statements are reasonable, based on information available at the time they are made. To the extent there are differences between these estimates and actual results, our consolidated financial statements may be materially affected.

Restatement of Previously Issued Consolidated Financial Statements for Income Tax Accounting Errors

As part of preparing our 2018 consolidated financial statements, MCBC identified errors in the accounting for income taxes related to the deferred tax liabilities for our partnership in MillerCoors. Following the Acquisition in 2016, MillerCoors continued as a partnership for tax purposes until 2018, at which point the partnership was dissolved. Upon the dissolution of the MillerCoors partnership, we changed our outside basis deferred tax liability for our investment in the partnership to separate deferred tax positions for each of the individual book-tax basis differences in the underlying assets and liabilities of MillerCoors. In doing so, we identified a difference between the deferred tax liabilities recorded and the deferred tax liabilities required related to our acquired partnership interest in MillerCoors. Specifically, upon closing of the Acquisition and completion of the related deferred income tax calculations associated with the remeasurement of the previously held equity interest in MillerCoors, we did not reconcile the outside basis deferred income tax liability for the investment in the partnership to the book-tax differences in the underlying assets and liabilities within the partnership, which would have identified the difference resulting from the Acquisition. As a result of completing this reconciliation as part of preparing our 2018 consolidated financial statements, we concluded that the previously issued 2017 and 2016 consolidated financial statements were misstated. Accordingly, we have restated our 2016 consolidated financial statements to increase deferred tax liabilities (and related subtotals) and corresponding deferred tax expense by $399.1 million, with a corresponding decrease to net income

and earnings per share. For 2017, the change to the deferred tax liabilities caused by the aforementioned error required revaluation due to the effects of the 2017 Tax Act. This impact, along with further insignificant income tax errors in the recorded tax effects related to the remeasurement of the previously held equity interest in MillerCoors, resulted in a required correction to decrease deferred tax liabilities and deferred tax expense by $151.4 million, resulting in increases to our net income and earnings per share for the year ended December 31, 2017. These adjustments resulted in an aggregate increase to our deferred tax liabilities and total liabilities and a corresponding decrease in retained earnings and total equity of $247.7 million as of December 31, 2017. These errors had no impact on any period prior to the Acquisition (which was completed during the fourth quarter of 2016), and, further, there is no impact on the previously disclosed cash tax benefits resulting from the election to treat the Acquisition as an asset acquisition for U.S. tax purposes and accordingly the related tax benefit. Impacts to the condensed consolidated statements of cash flow are limited to changes within operating activities as noted below, and, therefore, there are no impacts on the operating, investing or financing subtotals. Refer to Note 20, "Quarterly Financial Information (Unaudited)," for the impact of correcting these previously reported errors on our unaudited quarterly results.

The impacts of these corrections to fiscal years 2016 and 2017 are as follows:



	Year Ended				Year Ended
	December 31, 2017				December 31, 2016
	As Reported		As Restated		As Reported			As Restated
	(In millions)
Consolidated Statements of Operations:
Income tax benefit (expense)	$	53.2	$	204.6	$	(1,055.2	)	$	(1,454.3	)
Net income (loss)	$	1,436.4	$	1,587.8	$	1,998.9		$	1,599.8
Net income (loss) attributable to Molson Coors Brewing Company	$	1,414.2	$	1,565.6	$	1,993.0		$	1,593.9
Basic net income (loss) attributable to Molson Coors Brewing Company per share	$	6.57	$	7.27	$	9.40		$	7.52
Diluted net income (loss) attributable to Molson Coors Brewing Company per share	$	6.53	$	7.23	$	9.34		$	7.47



	Year Ended				Year Ended
	December 31, 2017				December 31, 2016
	As Reported		As Restated		As Reported		As Restated
	(In millions)
Consolidated Statements of Comprehensive Income:
Net income (loss) including noncontrolling interests	$	1,436.4	$	1,587.8	$	1,998.9	$	1,599.8
Comprehensive income (loss)	$	2,150.7	$	2,302.1	$	2,128.3	$	1,729.2
Comprehensive income (loss) attributable to Molson Coors Brewing Company	$	2,126.0	$	2,277.4	$	2,125.3	$	1,726.2



	As of				As of
	December 31, 2017				December 31, 2016
	As Reported		As Restated		As Reported		As Restated
	(In millions)
Consolidated Balance Sheets:
Deferred tax liabilities	$	1,648.6	$	1,896.3	$	1,699.0	$	2,098.1
Total liabilities	$	16,811.9	$	17,059.6	$	17,719.8	$	18,118.9
Retained earnings	$	7,206.1	$	6,958.4	$	6,145.3	$	5,746.2
Total Molson Coors Brewing Company stockholders' equity	$	13,226.1	$	12,978.4	$	11,418.7	$	11,019.6
Total equity	$	13,435.0	$	13,187.3	$	11,621.7	$	11,222.6



	Year Ended						Year Ended
	December 31, 2017						December 31, 2016
	As Reported			As Restated			As Reported		As Restated
	(In millions)
Consolidated Statements of Cash Flows:
Net income (loss) including noncontrolling interests	$	1,436.4		$	1,587.8		$	1,998.9	$	1,599.8
Income tax (benefit) expense	$	(53.2	)	$	(204.6	)	$	1,055.2	$	1,454.3

The impacts of the restatement have been reflected throughout the financial statements, including the applicable footnotes, as appropriate.

Revenue Recognition

We account for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, which we adopted on January 1, 2018, using the modified retrospective transition approach (see Note 2, "New Accounting Pronouncements" for impacts of adoption).

Our net sales represent the sale of beer and other malt beverages (including adjacencies, such as cider and hard soda), net of excise tax. Sales are stated net of incentives, discounts and returns. Sales of products are for cash or otherwise agreed upon credit terms. Our payment terms vary by location and customer, however, the time period between when revenue is recognized and when payment is due is not significant. Our revenue generating activities have a single performance obligation and are recognized at the point in time when control transfers and our obligation has been fulfilled, which is when the related goods are shipped or delivered to the customer, depending upon the method of distribution and shipping terms. Where our products are sold under consignment arrangements, revenue is not recognized until control has transferred, which is when the product is sold to the end customer. Revenue is measured as the amount of consideration we expect to receive in exchange for the sale of our product. The cost of various programs, such as price promotions, rebates and coupons are treated as a reduction of sales. In certain of our markets, we make cash payments to customers such as slotting or listing fees, or payments for other marketing or promotional activities. These cash payments are recorded as a reduction of revenue unless we receive a distinct good or service as defined under ASC 606. Specifically, a good or service is considered distinct when it is separately identifiable from other promises in the contract, we receive a benefit from the good or service, and the benefit is separable from the sale of our product to the customer.

Certain payments made to customers are conditional on the achievement of volume targets, marketing commitments, or both. If paid in advance, we record such payments as prepayments and amortize them over the relevant period to which the customer commitment is made (generally up to five years). When the payment is not for a distinct good or service, or fair value cannot be reasonably estimated, the amortization of the prepayment or the cost as incurred is recorded as a reduction of revenue. Where a distinct good or service is received and fair value can be reasonably estimated, the cost is included as marketing, general and administrative expenses. The amounts deferred are reassessed regularly for recoverability over the contract period and are impaired where there is objective evidence that the benefits will not be realized or the asset is otherwise not recoverable. Separately, as discussed below, we analyze whether these advance payments contain a significant financing component for potential adjustment to the transaction price.

Our primary revenue generating activity represents the sale of beer and other malt beverages to customers, including both domestic and exported product sales. Our customer could be a distributor, retail or on-premise outlet, depending on the market. The majority of our revenues are generated from brands that we own and brew ourselves, however, we also import or brew and sell certain non-owned partner brands under licensing and related arrangements. In addition, primarily in the U.K., as well as certain other countries in our Europe segment, we sell other beverage companies' products to on-premise customers to provide them with a full range of products for their retail outlets. We refer to this as the "factored brand business." Sales from this business are included in our net sales and cost of goods sold when ultimately sold. In the factored brand business, we normally purchase inventory, which includes excise taxes charged by the vendor, take orders from customers for such brands, negotiate with the customers on pricing and invoice customers for the product and related costs of delivery. In addition, we incur the risk of loss at times we are in possession of the inventory and for the receivables due from the customers. Revenues for owned brands, partner and imported brands, as well as factored brands are recognized at the point in time when control is transferred to the customer as discussed above.

Other Revenue Generating Activities

We contract manufacture for other brewers in some of our markets. These contractual agreements require us to brew, package and ship certain brands to these brewers, who then sell the products to their own customers in their respective markets.

Revenues under contract brewing arrangements are recognized when our obligation related to the finished product is fulfilled and control of the product transfers to these other brewers.

We also have licensing agreements with third party partners who brew and distribute our products in various markets across our segments. Under these agreements, we are compensated based on the amount of products sold by our partners in these markets at an agreed upon royalty rate or profit percentage. We apply the sales-based royalty practical expedient to these licensing arrangements and recognize revenue as product is sold by our partners at the agreed upon rate.

We have evaluated these other revenue generating activities under the disaggregation disclosure criteria outlined within the guidance and concluded that these other revenue generating activities are immaterial for separate disclosure. See Note 3, "Segment Reporting," for disclosure of revenues by geographic segment.

Variable Consideration

Our revenue generating activities include variable consideration which is recorded as a reduction of the transaction price based upon expected amounts at the time revenue for the corresponding product sale is recognized. For example, customer promotional discount programs are entered into with certain distributors for certain periods of time. The amount ultimately reimbursed to distributors is determined based upon agreed-upon promotional discounts which are applied to distributors' sales to retailers. Other common forms of variable consideration include volume rebates for meeting established sales targets, and coupons and mail-in rebates offered to the end consumer. The determination of the reduction of the transaction price for variable consideration requires that we make certain estimates and assumptions that affect the timing and amounts of revenue and liabilities recorded. We estimate this variable consideration, including analyzing for a potential constraint on variable consideration, by taking into account factors such as the nature of the promotional activity, historical information and current trends, availability of actual results, and expectations of customer and consumer behavior.

We do not have standard terms that permit return of product; however, in certain markets where returns occur we estimate the amount of returns as variable consideration based on historical return experience and adjust our revenue accordingly. Products that do not meet our high quality standards are returned by the customer or recalled and destroyed and are recorded as a reduction of revenue. The reversal of revenue is recorded upon determination that the product will be recalled and destroyed. We estimate the costs required to facilitate product returns and record them in cost of goods sold as required.

During the twelve months ended December 31, 2018, adjustments to revenue from performance obligations satisfied in the prior period due to changes in estimates in variable consideration were immaterial.

Significant Financing Component and Costs to Obtain Contracts

In certain of our businesses where such practices are legally permitted, we make loans or advanced payments to retail outlets that sell our brands. For arrangements that do not span greater than one year, we apply the practical expedient available under ASC 606 and do not adjust the transaction price for the effects of a potential significant financing component. We further analyze arrangements that span greater than one year on an ongoing basis to determine whether a significant financing component exists. No such arrangements existed during the twelve months ended December 31, 2018.

Advance payments to customers, where legally permitted, are deferred and amortized as a reduction to revenue over the expected period of benefit and tested for recoverability as appropriate. All other costs to obtain contracts and fulfill are expensed as incurred based on the nature, significance and expected benefit of these costs relative to the contract.

Contract Assets and Liabilities

We continually evaluate whether our revenue generating activities and advanced payment arrangements with customers result in the recognition of contract assets or liabilities. No such assets or liabilities existed as of December 31, 2018, or December 31, 2017. Separately, trade accounts receivable, including affiliate receivables, approximates receivables from contracts with customers.

Shipping and Handling

Freight costs billed to customers for shipping and handling are recorded as revenue. Shipping and handling expense related to costs incurred to deliver product are recognized within cost of goods sold. We account for shipping and handling activities that occur after control has transferred as a fulfillment cost as opposed to a separate performance obligation, and the costs of shipping and handling are recognized concurrently with the related revenue.

Excise Taxes

Excise taxes remitted to tax authorities are government-imposed excise taxes on beer. Excise taxes are shown in a separate line item in the consolidated statements of operations as a reduction of sales. Excise taxes are recognized as a current liability within accounts payable and other current liabilities on the consolidated balance sheets, with the liability subsequently reduced when the taxes are remitted to the tax authority.

Cost of Goods Sold

Our cost of goods sold includes costs we incur to make and ship beer and other malt beverages. These costs include brewing materials, such as barley, hops and various grains. Packaging materials, such as glass bottles, aluminum cans, cardboard and paperboard are also included in our cost of goods sold. Additionally, our cost of goods sold include both direct and indirect labor, shipping and handling including freight costs, utilities, maintenance costs, warehousing costs, purchasing and receiving costs, depreciation, promotional packaging, other manufacturing overheads and costs to purchase factored and other non-owned brands from suppliers, as well as the estimated cost to facilitate product returns.

Marketing, General and Administrative Expenses

Our marketing, general and administrative expenses include media advertising (television, radio, digital, print), tactical advertising (signs, banners, point-of-sale materials) and promotion costs on both local and national levels within our operating segments. The creative portion of our advertising activities is expensed as incurred. Production costs of advertising and promotional materials are expensed when the advertising is first run. Marketing, general and administrative expenses also include integration costs of $38.8 million and $70.6 million for 2018 and 2017, respectively, and acquisition and integration costs of $108.4 million for 2016 associated with the Acquisition.

This classification includes general and administrative costs for functions such as finance, legal, human resources and information technology, along with acquisition and integration costs as noted above, which consist primarily of labor and outside services, as well as bad debt expense related to our allowance for doubtful accounts. Unless capitalization is allowed or required by U.S. GAAP, legal costs are expensed when incurred. These costs also include our marketing and sales organizations, including labor and other overheads. This line item additionally includes amortization costs associated with intangible assets, as well as certain depreciation costs related to non-production equipment and share-based compensation.

Share-based compensation is recognized using a straight-line method over the vesting period of the awards. We include estimated forfeitures expected to occur when calculating share-based compensation expense. Our share-based compensation plan and the awards within it contain provisions that accelerate vesting of awards upon change in control, retirement, disability or death of eligible employees and directors. Our share-based awards are considered vested when the employee's retention of the award is no longer contingent on providing service, which for certain awards can result in immediate recognition for awards granted to retirement-eligible individuals or accelerated recognition for awards granted to individuals that will become retirement eligible within the stated vesting period. Also, if less than the stated vesting period, we recognize these costs over the period from the grant date to the date retirement eligibility is achieved.

Special Items

Our special items represent charges incurred or benefits realized that either we do not believe to be indicative of our core operations, or we believe are significant to our current operating results warranting separate classification; specifically, such items are considered to be one of the following:

infrequent or unusual items,
impairment or asset abandonment-related losses,
restructuring charges and other atypical employee-related costs, or
fees on termination of significant operating agreements and gains (losses) on disposal of investments.

The items classified as special items are not necessarily non-recurring, however, they are deemed to be incremental to income earned or costs incurred by the company in conducting normal operations, and therefore are presented separately from other components of operating income.

Equity Income in MillerCoors

On October 11, 2016, following the close of the Acquisition, MillerCoors became a wholly-owned subsidiary of MCBC and as a result, MCBC owns 100% of the outstanding equity and voting interests of MillerCoors. Prior to October 11, 2016, MCBC's equity income in MillerCoors represented our proportionate share for the period of the net income of our investment in MillerCoors accounted for under the equity method. This amount reflected adjustments to eliminate intercompany gains and

losses, and to amortize, if appropriate, any difference between cost and underlying equity in net assets upon the formation of MillerCoors.

Interest Expense, net

Our interest costs are associated with borrowings to finance our operations and acquisitions. Interest earned on our cash and cash equivalents across our business is recorded as interest income. Changes in estimates (if any) to mandatorily redeemable noncontrolling interest liabilities, which are presented within other current and non-current liabilities on the consolidated balance sheet, are also recognized within interest expense.

We capitalize interest cost as a part of the original cost of acquiring certain fixed assets if the cost of the capital expenditure and the expected time to complete the project are considered significant.

Other Income (Expense)

Our other income (expense) classification primarily includes gains and losses associated with activities not directly related to brewing and selling beer and other malt beverages. For instance, aggregate unrealized and realized foreign exchange gains and losses resulting from remeasurement and settlement of foreign-denominated monetary assets and liabilities, as well as certain gains or losses on sales of non-operating assets and the mark-to-market activity associated with warrants are classified in this line item. These gains and losses are reported in the operating segment in which they occur; however, foreign exchange gains and losses on intercompany balances related to financing and other treasury-related activities are reported within the Corporate segment. The initial recording of foreign-denominated transactions are classified based on the nature of the transaction, with the unrealized or realized foreign exchange gains or losses resulting from the subsequent remeasurement of the monetary asset or liability, and its ultimate settlement, classified in other income (expense).

Discontinued Operations

We no longer present the activity related to foreign exchange movements nor the liabilities associated with our indemnities resulting from the historical sale of the Kaiser business, as discussed in Note 18, "Commitments and Contingencies," within discontinued operations and have accordingly reclassified the activity into other income within continuing operations of the consolidated statements of operations, and the liabilities into other current and long-term liabilities within the consolidated balance sheets. This change has been applied retrospectively and prospectively. As a result, we reclassified a foreign exchange gain of $1.5 million and a loss of $2.8 million from discontinued operations to other income (expense), net for the fiscal years 2017 and 2016, respectively.

Income Taxes

Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of our assets, liabilities, and certain unrecognized gains and losses recorded in accumulated other comprehensive income (loss). We apply the intraperiod tax allocation rules to allocate our provision for income taxes between continuing operations and other categories of earnings, such as other comprehensive income (loss), when we meet the criteria prescribed by U.S. GAAP.

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 continue to monitor the impacts of the 2017 Tax Act, as defined in Note 6, "Income Tax," including yet to be issued regulations and interpretations, on the tax consequences of future repatriations. Future sales of foreign subsidiaries are not exempt from capital gains tax in the U.S. under the 2017 Tax Act. However, 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.

The tax benefit from an uncertain tax position is recognized 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. Interest, penalties and offsetting positions related to unrecognized tax benefits are recognized as a component of income tax expense. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized.

We account for the tax effects of global intangible low-taxed income (“GILTI”) as a component of income tax expense in the period the tax arises, to the extent applicable.

Other Comprehensive Income (Loss)

OCI represents income and losses for the reporting period, including the related tax impacts, which are excluded from net income (loss) and recognized directly within AOCI as a component of equity. OCI also includes amounts reclassified to income during the reporting period that were previously recognized within AOCI. Amounts remaining within AOCI are expected to be

reclassified out of AOCI in the future, at which point they will be recognized within the consolidated statement of operations as a component of net income (loss). We recognize OCI related to the translation of assets and liabilities of our foreign subsidiaries which are denominated in currencies other than USD, unrealized gains and losses on the effective portion of our derivatives designated in cash flow and net investment hedging relationships, actuarial gains and losses and prior service costs related to our pension and other post-retirement benefit plans, as well as our proportionate share of our equity method investments' OCI. Additionally, we do not have the expectation or intent to cash settle certain of our intercompany note receivable and note payable positions in the foreseeable future; therefore, the remeasurement of these instruments is recorded as a component of foreign currency translation adjustments within OCI.

Earnings Per Share

Basic EPS was computed using the weighted-average number of shares of common stock outstanding during the period. Diluted EPS includes the additional dilutive effect of our potentially dilutive securities, which include RSUs, DSUs, PSUs, and stock options. The dilutive effects of our potentially dilutive securities are calculated using the treasury stock method. Our calculation of weighted-average shares includes Class A common stock and Class B common stock, and Class A exchangeable shares and Class B exchangeable shares. All classes of stock have in effect the same dividend rights and share equitably in undistributed earnings. Holders of Class A common stock receive dividends only to the extent dividends are declared and paid to holders of Class B common stock. See Note 8, "Stockholders' Equity" for further discussion of the Class A common stock and Class B common stock and Class A exchangeable shares and Class B exchangeable shares. We have no unvested outstanding equity share awards that contain non-forfeitable rights to dividends.

Cash and Cash Equivalents

Cash consists of cash on hand and bank deposits. Cash equivalents represent highly liquid investments with original maturities of three months or less. Our cash deposits are maintained with multiple, reputable financial institutions.

Supplementary cash flow includes non-cash issuances of share-based awards, as well as non-cash investing activities related to movements in our guarantee of indebtedness of certain equity method investments. Additionally, the initial recognition of the warrants discussed in Note 16, “Derivative Instruments and Hedging Activities” represents a non-cash financing activity in 2018. In 2016, total Acquisition consideration includes non-cash investing activity related to the issuance of replacement share-based compensation awards, as well as the elimination of a net payable owed by MCBC to MillerCoors.

During 2018 and 2017, we had non-cash activities related to the recognition of capital leases, and during 2017, we also had non-cash activities related to the acquisition of a business. We also had non-cash activities related to capital expenditures incurred but not yet paid during each period presented. This aggregate non-cash activity totaled $236.5 million, $265.5 million and $177.4 million, for 2018, 2017 and 2016, respectively.

There was no other significant non-cash activity in 2018, 2017 and 2016 other than mentioned above. See Note 4, "Acquisition and Investments," Note 10, "Goodwill and Intangible Assets," Note 13, "Share-Based Payments," and Note 16, “Derivative Instruments and Hedging Activities” for further discussion.

Accounts Receivable and Notes Receivable

We record accounts and notes receivable at net realizable value. This carrying value includes an appropriate allowance for estimated uncollectible amounts to reflect any loss anticipated on the accounts and notes receivable balances. We calculate this allowance based on our country-specific history of write-offs, level of past-due accounts based on the contractual terms of the receivables and our relationships with and the economic status of our customers, which may be impacted by current macroeconomic and regulatory factors specific to the country of origin.

In the U.K., loans are extended to a portion of the retail outlets that sell our brands. An allowance for credit losses is maintained to provide for loan losses deemed to be probable related to specifically identified loans and for losses in the loan portfolio that have been incurred at the balance sheet date. We establish our allowance through a provision for loan losses charged against earnings and recorded in marketing, general and administrative expenses. Loan balances that are written off are recorded against the allowance as a write-off. Activity within the allowance for credit losses was immaterial for fiscal years 2018, 2017 and 2016.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out ("FIFO") method. We regularly assess the shelf-life of our inventories and reserve for those inventories when it becomes apparent the product will not be sold within our freshness specifications.

Other current assets

Other current assets include prepaid assets, maintenance and operating supplies, promotion materials and derivative assets that are expected to be recognized or realized within the next 12 months. Maintenance and operating supplies include our inventories of spare parts, which are kept on hand for repairs and maintenance of machinery and equipment. The majority of spare parts within our business include motors, fillers and other components that are required to maintain a normal level of production in the event that expected maintenance and/or repairs are required. These parts are inventoried within current assets as they are reasonably expected to be used during the normal operating cycle of the business and are reserved for excess and obsolescence, as appropriate. The allowance for obsolete supplies was $9.2 million and $7.4 million as of December 31, 2018, and December 31, 2017, respectively.

Properties

Properties are stated at original cost less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets, which are reviewed periodically and have the following ranges: buildings and improvements: 20-40 years; machinery and equipment: 3-25 years; furniture and fixtures: 3-10 years; returnable containers: 2-15 years; and software: 3-5 years. Land is not depreciated, and construction in progress is not depreciated until ready for service. Costs of enhancements or modifications that substantially extend the capacity or useful life of an asset are capitalized and depreciated accordingly. Ordinary repairs and maintenance are expensed as incurred. When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from our consolidated balance sheets and the resulting gain or loss, if any, is reflected in our consolidated statements of operations. Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an asset (or asset group) may not be recoverable.

Returnable containers are recorded at acquisition cost and consist of returnable bottles, kegs, pallets and crates that are both in our direct control within our breweries, warehouses and distribution facilities and those that we indirectly control in the market through our agreements with our customers and other brewers and for which a deposit is received. The deposits received on our returnable containers in the market are recorded as deposit liabilities, included as current liabilities within accounts payable and other current liabilities in the consolidated balance sheets. We estimate that the loss, breakage and deterioration of our returnable containers is comparable to the depreciation calculated on an estimated useful life of up to 4 years for bottles, 5 years for pallets, 7 years for crates, and 15 years for returnable kegs. We also own and maintain other equipment in the market related to delivery of our products to end consumers, for example on-premise dispense equipment and refrigeration units. This equipment is recorded at acquisition cost and depreciated over lives of up to 7 years, depending on the market, reflecting the use of the equipment, as well as the loss and deterioration of the asset.

The costs of acquiring or developing internal-use computer software, including directly-related payroll costs for internal resources, are capitalized and classified within properties. Implementation costs incurred in hosting arrangements that are service contracts are also capitalized within properties. Software maintenance and training costs are expensed in the period incurred.

Properties held under capital lease are depreciated using the straight-line method over the estimated useful life or the lease term, whichever is shorter, and the related depreciation is included in depreciation expense. Capital lease assets for which ownership is transferred at the end of the lease, or there is a bargain purchase option, are amortized over the useful life that would be assigned if the asset were owned.

Goodwill and Other Intangible Assets

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 considered components based on the availability of discrete financial information and the regular review by segment management. We have concluded that the components within the U.S., Canada and Europe segments 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. Additionally, we determined that the components within our International segment do not meet the criteria for aggregation with the exception of the operations of our India businesses, which constitute a separate reporting unit. As required, we evaluate the carrying value of our goodwill and indefinite-lived intangible assets for impairment at the reporting unit level at least annually or when an interim triggering event occurs that would indicate that impairment may have taken place. Our annual test is performed as of the first day of our fiscal fourth quarter. We continuously monitor the performance of our other definite-lived intangible assets and evaluate 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. Definite-lived intangible assets are stated at cost less accumulated

amortization. Amortization is recorded using the straight-line method over the estimated lives of the assets as this approximates the pattern in which the assets economic benefits are consumed.

Equity Method Investments

We apply the equity method of accounting to 20% to 50% owned investments where we exercise significant influence or VIEs for which we are not the primary beneficiary. We use the cumulative earnings approach for determining cash flow presentation of cash distributions received from equity method investees. Distributions received are included in our consolidated statements of cash flows as operating activities, unless the cumulative distributions exceed our portion of the cumulative equity in the net earnings of the equity method investment, in which case the excess distributions are deemed to be returns of the investment and are classified as investing activities in our consolidated statements of cash flows. Equity method investments as of December 31, 2018, include Brewers' Retail, Inc. ("BRI") and Brewers' Distributor Ltd. ("BDL") in Canada.

There are no related parties that own interests in our equity method investments as of December 31, 2018.

Derivative Hedging Instruments

We use derivatives as part of our normal business operations to manage our exposure to fluctuations in interest rates, foreign currency exchange, commodity prices, production and packaging material costs and for other strategic purposes related to our core business. We enter into derivatives for risk management purposes only, including derivatives designated in hedge accounting relationships as well as those derivatives utilized as economic hedges. We do not enter into derivatives for trading or speculative purposes. We recognize our derivatives on the consolidated balance sheets as assets or liabilities at fair value and are classified in either current or non-current assets or liabilities based on each contract's respective unrealized gain or loss position and each contract's respective maturity. Our policy is to present all derivative balances on a gross basis, without regard to counterparty master netting agreements or similar arrangements. Further, our current derivative agreements do not allow us to net positions with the same counterparty and therefore, we present our derivative positions gross in our consolidated balance sheets.

Changes in fair values of outstanding cash flow and net investment hedges are recorded in OCI, until earnings are affected by the variability of cash flows of the underlying hedged item or the sale of the underlying net investment, respectively. Effective cash flow hedges offset the gains or losses recognized on the underlying exposure in the consolidated statements of operations, or for net investment hedges, the foreign exchange translation gain or loss recognized in AOCI. Changes in fair value of outstanding fair value hedges and the offsetting changes in fair value of the hedged item are recognized in earnings. Changes in fair value of the derivative attributable to components allowed to be excluded from the assessment of hedge effectiveness are deferred in AOCI and recognized in earnings over the life of the hedge.

We record realized gains and losses from derivative instruments in the same financial statement line item as the hedged item/forecasted transaction. Changes in unrealized gains and losses for derivatives not designated in a hedge accounting relationship are recorded directly in earnings each period and are also recorded in the same financial statement line item as the hedged item/forecasted transaction. Cash flows from the settlement of derivatives, including both economic hedges and those designated in hedge accounting relationships, appear in the consolidated statements of cash flows in the same categories as the cash flows of the hedged item.

In accordance with authoritative accounting guidance, we do not record the fair value of derivatives for which we have elected the Normal Purchase Normal Sale ("NPNS") exemption. We account for these contracts on an accrual basis, recording realized settlements related to these contracts in the same financial statement line items as the corresponding transaction.

Pension and Postretirement Benefits

We maintain retirement plans for the majority of our employees. We offer different types of plans within each segment, including defined benefit plans, defined contribution plans and OPEB plans. Each plan is managed locally and in accordance with respective local laws and regulations. Our equity investments, BRI and BDL, maintain defined benefit, defined contribution and postretirement benefit plans as well.

We recognize the underfunded or overfunded status of a defined benefit postretirement plan as an asset or liability in the consolidated balance sheets and recognize changes in the funded status in the year in which the changes occur within OCI. The funded status of a plan, measured as the difference between the fair value of plan assets and the projected benefit obligation, and the related net periodic pension cost are calculated using a number of significant actuarial assumptions. Changes in net periodic pension cost and funding status may occur in the future due to changes in these assumptions.

We use the fair value approach to calculate the market-related value of pension plan assets used to determine net periodic pension cost, 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.

Projected benefit obligation is the actuarial present value as of the measurement date of all benefits attributed by the plan benefit formula to employee service rendered before the measurement date using assumptions as to future compensation levels and years of service if the plan benefit formula is based on those future compensation levels and years of service. Accumulated benefit obligation is the actuarial present value of benefits (whether vested or unvested) attributed by the plan benefit formula to employee service rendered before the measurement date and based on employee service and compensation, if applicable, prior to that date. Accumulated benefit obligation differs from projected benefit obligation in that it includes no assumption about future compensation levels and years of service.

We employ the corridor approach for determining each plan's potential amortization from AOCI of deferred gains and losses, which occur when actual experience differs from estimates, into our net periodic pension and postretirement benefit cost. This approach defines the "corridor" as the greater of 10% of the projected benefit obligation or 10% of the market-related value of plan assets 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 plans closed to new entrants and the future accrual of benefits, the average remaining life expectancy of all plan participants (including retirees) is used.

Fair Value Measurements

The carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable and other current liabilities approximate fair value as recorded due to the short-term nature of these instruments. In addition, the carrying amounts of our trade loan receivables, net of allowances, approximate fair value. The fair value of derivatives is estimated by discounting the estimated future cash flows utilizing observable market interest, foreign exchange and commodity rates adjusted for non-performance credit risk associated with our counterparties (assets) or with MCBC (liabilities). Additionally, the fair value of warrants is estimated using the Black-Scholes valuation model. See Note 16, "Derivative Instruments and Hedging Activities" for additional information. Based on current market rates for similar instruments, the fair value of long-term debt is presented in Note 11, "Debt."

U.S. GAAP guidance for fair value includes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach). Our financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy.

The three levels of the hierarchy are as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.

Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are less active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (market corroborated inputs).

Level 3—Unobservable inputs that reflect the assumptions that we believe market participants would use in pricing the asset or liability. We develop these inputs based on the best information available, including our own data.

Foreign 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 OCI. Gains and losses from foreign currency transactions are included in earnings for the period. Revenue and expenses are translated at the average exchange rates during the period.

New Accounting Pronouncements

Adoption of New Accounting Pronouncements

Pension and Other Postretirement Benefit Plans

In August 2018, the FASB issued authoritative guidance intended to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. This guidance is effective for annual periods after

December 15, 2020, with early adoption permitted. We early adopted this guidance in the fourth quarter of 2018 on a retrospective basis. The adoption of this guidance did not have an impact on our financial position or results of operations.

In March 2017, the FASB issued authoritative guidance intended to improve the consistency, transparency and usefulness of financial information related to defined benefit pension or other postretirement plans. Under the new guidance, an employer must disaggregate the service cost component from the other components of net benefit cost within the statements of operations. Specifically, the new guidance requires us to report only the service cost component in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period; while the other components of net benefit cost are now presented in the consolidated statements of operations separately from the service cost component and outside of operating income. The amendments in this update also allow only the service cost component to be eligible for capitalization when applicable. We have also determined that only service cost will be reported within each operating segment and all other components will be reported within the Corporate segment. The guidance related to the income statement presentation of service costs and other pension and postretirement benefit costs is applied retrospectively, while the capitalization of service costs component is applied prospectively. We adopted this guidance as of January 1, 2018, which was a classification adjustment only and had no impact to our consolidated net income.

The following table shows the (increase) decrease for the respective line item within the consolidated statement of operations for consolidated and segment reporting amounts for the year ended December 31, 2017. There was no impact to the International segment in 2017.



	Corporate		Europe			U.S.			Canada			Consolidated
Cost of goods sold	$	—	$	(27.5	)	$	7.3		$	0.7		$	(19.5	)
Marketing, general and administrative expenses	—		(18.6		)	(0.6		)	(0.4		)	(19.6		)
Special items, net	—		—			(5.4		)	(2.9		)	(8.3		)
Other pension and postretirement benefits (costs), net	47.4		—			—			—			47.4
Total	$	47.4	$	(46.1	)	$	1.3		$	(2.6	)	$	—



	Corporate		International		Europe			U.S.			Canada			Consolidated
Cost of goods sold	$	—	$	—	$	(7.3	)	$	(1.0	)	$	(3.2	)	$	(11.5	)
Marketing, general and administrative expenses	0.1		0.1		(4.8		)	(1.4		)	(1.4		)	(7.4		)
Special items, net	—		—		—			—			10.5			10.5
Other pension and postretirement benefits (costs), net	8.4		—		—			—			—			8.4
Total	$	8.5	$	0.1	$	(12.1	)	$	(2.4	)	$	5.9		$	—

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 adopted 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 did not have a significant impact to our core revenue generating activities. However, the adoption resulted 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 did not meet the specific criteria within the new guidance of providing a “distinct” good or service, and therefore, were required to be presented as a reduction of revenue. The impact of this change resulted in a reduction of revenue and marketing, general and administrative expenses by approximately $60 million during 2018, primarily within our Canada segment, with no impact to net income. Furthermore,

upon adoption of the new guidance, certain of our promotional discounts which are deemed variable consideration under the new guidance, are now recognized at the time of the related shipment of product, which is earlier than recognized under historical guidance. This change in recognition timing has shifted financial statement recognition primarily amongst quarters, however, the full-year impact was not 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 was required.

As a result of the cumulative impact of adopting the new guidance, we recorded a reduction to opening retained earnings of $27.8 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. Results for reporting periods beginning after January 1, 2018, are presented under the new guidance, while prior period amounts have not been adjusted and continue to be reported in accordance with historical accounting guidance. The following tables provide a comparison of our current period results of operations and financial position under the new guidance, versus our financial statements if the historical guidance had continued to be applied:



	Year ended December 31, 2018
	Under Historical Guidance			As Reported Under New Guidance			Effect of Change
	(In millions, except per share data)
Consolidated Statement of Operations:
Sales	$	13,393.5		$	13,338.0		$	(55.5	)
Excise taxes	(2,568.4		)	(2,568.4		)	—
Net sales	10,825.1			10,769.6			(55.5		)
Cost of goods sold	(6,584.8		)	(6,584.8		)	—
Gross profit	4,240.3			4,184.8			(55.5		)
Marketing, general and administrative expenses	(2,862.4		)	(2,802.7		)	59.7
Special items, net	249.7			249.7			—
Operating income (loss)	1,627.6			1,631.8			4.2
Interest expense	(306.2		)	(306.2		)	—
Interest income	11.4			8.0			(3.4		)
Other pension and postretirement benefits (costs), net	38.2			38.2			—
Other income (expense), net	(12.0		)	(12.0		)	—
Income (loss) before income taxes	1,359.0			1,359.8			0.8
Income tax benefit (expense)	(225.1		)	(225.2		)	(0.1		)
Net income (loss)	1,133.9			1,134.6			0.7
Net (income) loss attributable to noncontrolling interests	(18.1		)	(18.1		)	—
Net income (loss) attributable to MCBC	$	1,115.8		$	1,116.5		$	0.7
Basic net income (loss) attributable to MCBC per share	$	5.17		$	5.17		$	—
Diluted net income (loss) attributable to MCBC per share	$	5.15		$	5.15		$	—



	As of December 31, 2018
	Under Historical Guidance			As Reported Under New Guidance			Effect of Change
	(In millions)
Consolidated Balance Sheet:
Assets
Trade accounts receivable, net	$	735.9		$	736.0		$	0.1
Other current assets, net	$	242.4		$	245.6		$	3.2
Liabilities and equity
Accounts payable and other current liabilities	$	2,667.4		$	2,706.4		$	39.0
Deferred tax liabilities	$	2,137.7		$	2,128.9		$	(8.8	)
Retained earnings	$	7,720.0		$	7,692.9		$	(27.1	)
Accumulated other comprehensive income (loss)	$	(1,150.2	)	$	(1,150.0	)	$	0.2

These changes are primarily driven by the reclassification of certain cash payments to customers from marketing, general and administrative expenses to a reduction of revenue, as well as the change in the timing of recognition of certain promotional discounts and cash payments to customers. This adoption had no impact to our cash flows from operating, investing or financing activities. See Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" for further details on our significant accounting policies for revenue recognition pursuant to the new guidance.

Financial and Commodity Risks

In August 2017, the FASB issued authoritative guidance intended to refine and expand hedge accounting for both financial and commodity risks. The revised guidance will create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. In addition, this guidance makes certain targeted improvements to simplify the application of hedge accounting guidance. This guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. We early adopted this guidance during the second quarter of 2018. All transition requirements have been applied to hedging relationships existing on the date of adoption and the effect of the adoption is reflected as of January 1, 2018. The adoption of this guidance did not result in a cumulative adjustment to the opening balance of retained earnings as of January 1, 2018, and did not have any other material effect on our results of operations, financial position or cash flows. All required disclosures under the new guidance have been made in Note 16, "Derivative Instruments and Hedging Activities."

New Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued authoritative guidance intended to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance also requires presentation of the capitalized implementation costs in the statement of financial position and in the statement of cash flows in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented, and the expense related to the capitalized implementation costs to be presented in the same line item in the statement of operations as the fees associated with the hosting element (service) of the arrangement. This guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods, with early adoption permitted. We are currently evaluating the potential impact on our financial position, results of operations, and statement of cash flows upon adoption of this guidance, which will result in the change in presentation of capitalized implementation costs related to hosting arrangements from properties to other assets on the consolidated balance sheet, as well as the expense related to such costs no longer being classified as depreciation expense and cash flows related to those costs no longer being presented as investing activities.

In February 2018, the FASB issued authoritative guidance intended to improve the usefulness of financial information related to the enactment of the 2017 Tax Act, as defined in Note 6, "Income Tax." This guidance provides an option to reclassify from AOCI to retained earnings the stranded tax effects resulting from the change in the U.S. federal corporate income tax rate as a result of the 2017 Tax Act. This guidance is effective for annual 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 statements in order to determine whether to elect to make this reclassification upon adoption of this guidance.

In February 2016, the FASB issued authoritative guidance intended to increase transparency and comparability among organizations by requiring the recognition of lease assets and liabilities on the balance sheet and disclosure of key information about leasing arrangements. We will adopt this guidance and all related amendments applying the modified retrospective transition approach to all lease arrangements as of the effective date of adoption, January 1, 2019. Additionally, for existing leases as of the effective date, we will elect the package of practical expedients available at transition to not reassess the historical lease determination, lease classification and initial direct costs.

For operating leases, the adoption of this new guidance is currently expected to result in the recognition of right-of-use ("ROU") assets of between approximately $150 million and $160 million, and aggregate current and non-current lease liabilities of between approximately $160 million and $170 million, as of the effective date of adoption, including immaterial reclassifications of prepaid and deferred rent balances into ROU assets. Additionally, as a result of the cumulative impact of adopting the new guidance, we expect to record a net increase to opening retained earnings of between $30 million and $35 million as of January 1, 2019, with the offsetting impact within other assets, related to our share of the accelerated recognition of deferred gains on non-qualifying and other sale-leaseback transactions by an equity method investment within our Canada segment. We are in the process of finalizing this transition adjustment calculation, which will be completed during the first quarter of 2019. Additionally, while our accounting for finance leases will remain unchanged at adoption, we will prospectively change the presentation of finance lease liabilities within the consolidated balance sheets to be presented within current portion of long-term debt and short-term borrowings and long-term debt, as appropriate. The adoption of this guidance is not expected to impact our cash flows from operating, investing, or financing activities.

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

Segment Reporting

Our reporting segments are based on the key geographic regions in which we operate, which are the basis on which our chief operating decision maker evaluates the performance of the business.

Reporting Segments

United States

The U.S. segment consists of our production, marketing and sales of our brands and other owned and licensed brands in the U.S. Prior to the completion of the Acquisition on October 11, 2016, MillerCoors was a limited liability company that we jointly owned with SABMiller and which operated in the U.S. and Puerto Rico. See Note 4, "Acquisition and Investments" for further discussion. Effective January 1, 2017, the results of the MillerCoors Puerto Rico business, which were previously reported as part of the U.S. segment, are reported within the International segment. We have not recast historical results for these changes on the basis of materiality.

Canada

The Canada segment consists of our production, marketing and sales of our brands and other owned and licensed brands in Canada. The Canada segment also includes BRI, our joint venture arrangement related to the distribution and retail sale of beer in Ontario, and BDL, our joint venture arrangement related to the distribution of beer in the western provinces. Both BRI and BDL are accounted for as equity method investments.

We have an agreement with Heineken N.V. ("Heineken") that grants us the right to import, market, distribute and sell Heineken products. Additionally, as a result of the Acquisition, beginning October 11, 2016, we have the right to brew or import, market, distribute and sell certain Miller brands in Canada. We also contract brew and package certain Labatt and Asahi brands for the U.S. market.

Europe

The Europe segment consists of our production, marketing and sales of our brands as well as a number of smaller regional brands in the U.K., the Republic of Ireland and Central Europe. As a result of the Acquisition, a portion of the operating results of the international Miller brand portfolio are reported in the Europe segment. Additionally, 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. Our European business also has licensing agreements and distribution agreements with various other brewers.

International

The objective of the International segment is to grow and expand our business and brand portfolio in new and existing markets, including emerging markets, outside the U.S., Canada, and Europe segments. The International segment includes operations in Latin America (the Caribbean, Central America, Mexico and South America), Asia Pacific (Australia, India, Japan and South Korea) and South Africa and surrounding markets. International operates through a combination of export and license arrangements, in addition to our India business that produces, markets and sells our products and our Japan business that imports, markets and sells our and certain other third-party products. As a result of the Acquisition, 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 while the results of the MillerCoors Puerto Rico business, which were previously reported as part of the U.S. segment, are reported within the International segment.

Corporate

Corporate is not a reportable segment and primarily includes interest and certain other general and administrative costs that are not allocated to any of the operating segments. The majority of these corporate costs relate to worldwide administrative functions, such as corporate affairs, legal, human resources, information technology, finance, internal audit, insurance, ethics and compliance, risk management, global growth, supply chain and commercial initiatives, as well as acquisition, integration and financing costs associated with the Acquisition. Additionally, Corporate includes the results of our water resources and energy operations in Colorado as well as the unrealized changes in fair value on our commodity swaps not designated in hedging relationships recorded within cost of goods sold, which are later reclassified when realized to the segment in which the underlying exposure resides.

Summarized Financial Information

No single customer accounted for more than 10% of our consolidated sales in 2018, 2017 or 2016. Consolidated net sales represent sales to third-party external customers less excise taxes. Inter-segment transactions impacting net sales revenues and income (loss) before income taxes eliminate in consolidation and, for fiscal year 2018 are U.S. segment sales of $104.5 million to our International segment and $19.0 million to our Canada segment, as well as approximately $12 million of Canada inter-segment sales to the U.S.

The following tables represent consolidated net sales, interest expense, interest income and reconciliations of amounts shown as income (loss) before income taxes to income (loss) attributable to MCBC. Income (loss) before income taxes includes the impact of special items; refer to Note 7, "Special Items" for further discussion. Income (loss) before income taxes for 2017 and 2016 has been adjusted to reflect the adoption of the new accounting pronouncement resulting in the reclassification of all non-service components of pension and other postretirement costs to Corporate as discussed in Note 2, "New Accounting Pronouncements." Additionally, various costs associated with the Acquisition, including its related financing, were recorded in 2018, 2017 and 2016; refer to Note 4, "Acquisition and Investments" for details.



	Year ended December 31, 2018
	U.S.		Canada		Europe			International			Corporate(1)			Inter-segment net sales eliminations			Consolidated
	(In millions)
Net sales	$	7,259.9	$	1,392.1	$	2,002.6		$	250.1		$	0.8		$	(135.9	)	$	10,769.6
Interest expense	8.8		—		(5.6		)	—			(309.4		)	—			(306.2		)
Interest income	—		—		0.5			—			7.5			—			8.0
Income (loss) before income taxes	$	1,320.7	$	157.0	$	186.4		$	(2.7	)	$	(301.6	)	$	—		$	1,359.8
Income tax benefit (expense)																	(225.2		)
Net income (loss)																	1,134.6
Net (income) loss attributable to noncontrolling interests																	(18.1		)
Net income (loss) attributable to MCBC																	$	1,116.5


(1)	During the first quarter of 2018, we recorded a gain of $328.0 million related to the Adjustment Amount as defined and further discussed in Note 4, "Acquisition and Investments." Additionally, related to the unrealized mark-to-market

valuation on our commodity hedge positions, we recorded unrealized losses of $166.2 million for the year ended December 31, 2018, compared to unrealized gains of $123.3 million for the year ended December 31, 2017.



	Year ended December 31, 2017
	U.S.		Canada			Europe(1)		International			Corporate(2)			Inter-segment net sales eliminations			Consolidated
					As Restated
	(In millions)
Net sales	$	7,505.7	$	1,458.0		$	1,940.7	$	264.0		$	0.9		$	(166.5	)	$	11,002.8
Interest expense	13.1		—			—		—			(362.4		)	—			(349.3		)
Interest income	—		—			3.6		—			2.4			—			6.0
Income (loss) before income taxes	$	1,394.2	$	210.2		$	234.9	$	(19.7	)	$	(436.4	)	$	—		$	1,383.2
Income tax benefit (expense)																	204.6
Net income (loss)																	1,587.8
Net (income) loss attributable to noncontrolling interests																	(22.2		)
Net income (loss) attributable to MCBC																	$	1,565.6


(1)	In the first quarter of 2017, we recorded a provision for an estimate of uncollectible receivables of approximately $11 million related to Agrokor, a large customer in Croatia. We have subsequently reduced this exposure and as of December 31, 2018, our estimated provision of uncollectible receivables from Agrokor totals approximately $3 million. The settlement plan related to this matter was approved in October 2018, and did not have a significant impact on our financial statements. Separately, during the first quarter of 2017, we released an indirect tax loss contingency, which was initially recorded in the fourth quarter of 2016, for a benefit of approximately $50 million. See Note 18, "Commitments and Contingencies" for details.

(1)

In the first quarter of 2017, we recorded a provision for an estimate of uncollectible receivables of approximately $11 million related to Agrokor, a large customer in Croatia. We have subsequently reduced this exposure and as of December 31, 2018, our estimated provision of uncollectible receivables from Agrokor totals approximately $3 million. The settlement plan related to this matter was approved in October 2018, and did not have a significant impact on our financial statements. Separately, during the first quarter of 2017, we released an indirect tax loss contingency, which was initially recorded in the fourth quarter of 2016, for a benefit of approximately $50 million. See Note 18, "Commitments and Contingencies" for details.


(2)	Related to the unrealized mark-to-market valuation on our commodity hedge positions, we recorded unrealized gains of $123.3 million for the twelve months ended December 31, 2017, compared to unrealized gains of $23.1 million for the twelve months ended December 31, 2016.



	Year ended December 31, 2016
	U.S.(1)		Canada			Europe(2)		International			Corporate			Inter-segment net sales eliminations			Consolidated
					As Restated
	(In millions)
Net sales	$	1,566.6	$	1,425.7		$	1,760.2	$	163.6		$	1.0		$	(32.1	)	$	4,885.0
Interest expense	—		—			—		—			(271.6		)	—			(271.6		)
Interest income	—		—			3.6		—			23.6			—			27.2
Income (loss) before income taxes	$	3,568.0	$	(119.7	)	$	137.6	$	(39.6	)	$	(492.2	)	$	—		$	3,054.1
Income tax benefit (expense)																	(1,454.3		)
Net income (loss)																	1,599.8
Net (income) loss attributable to noncontrolling interests																	(5.9		)
Net income (loss) attributable to MCBC																	$	1,593.9


(1)	Prior to October 11, 2016, MCBC’s 42% share of MillerCoors' results of operations was reported as equity income in MillerCoors in the consolidated statements of operations. As a result of the Acquisition, beginning October 11, 2016, MillerCoors' results were fully consolidated into MCBC’s consolidated financial statements. The above table reflects this treatment accordingly. Also included in net income attributable to MCBC is a net special items gain of approximately $3.0 billion related to the fair value remeasurement of 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. Refer to Note 4, "Acquisition and Investments" for further discussion.

(1)

Prior to October 11, 2016, MCBC’s 42% share of MillerCoors' results of operations was reported as equity income in MillerCoors in the consolidated statements of operations. As a result of the Acquisition, beginning October 11, 2016, MillerCoors' results were fully consolidated into MCBC’s consolidated financial statements. The above table reflects this treatment accordingly. Also included in net income attributable to MCBC is a net special items gain of approximately $3.0 billion related to the fair value remeasurement of 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. Refer to Note 4, "Acquisition and Investments" for further discussion.


(2)	During the fourth quarter of 2016, we recorded a charge of approximately $50 million within excise taxes due to assessments received from a local country regulatory authority in Europe related to indirect tax calculations. See Note 18, "Commitments and Contingencies" for further discussion.

The following table presents total assets and select cash flow information by segment:



	Assets				Depreciation and amortization						Capital expenditures
	As of December 31,				For the years ended December 31,						For the years ended December 31,
	2018		2017		2018		2017		2016		2018		2017		2016
	(In millions)
U.S.(1)	$	19,057.1	$	19,353.6	$	514.0	$	485.7	$	105.7	$	322.0	$	351.5	$	105.4
Canada	4,640.5		4,835.7		141.9		131.2		98.4		165.3		99.9		72.2
Europe	5,430.0		5,522.0		188.0		182.3		175.7		150.0		131.6		144.4
International	274.1		294.8		9.9		9.6		5.1		3.1		2.3		4.9
Corporate	708.1		240.8		3.7		4.0		3.5		11.3		14.3		14.9
Consolidated	$	30,109.8	$	30,246.9	$	857.5	$	812.8	$	388.4	$	651.7	$	599.6	$	341.8


(1)	For the year ended December 31, 2016, represents MillerCoors' activity for the post-Acquisition period of October 11, 2016, through December 31, 2016.

The following table presents net sales by geography, based on the location of the customer:



	For the years ended
	December 31, 2018		December 31, 2017		December 31, 2016
	(In millions)
Net sales to unaffiliated customers:
United States and its territories(1)	$	7,272.1	$	7,493.6	$	1,622.4
Canada	1,298.2		1,358.4		1,344.4
United Kingdom	1,184.6		1,172.8		1,071.4
Other foreign countries(2)	1,014.7		978.0		846.8
Consolidated net sales	$	10,769.6	$	11,002.8	$	4,885.0


(1)	Prior to October 11, 2016, MCBC’s 42% share of MillerCoors' results of operations was reported as equity income in MillerCoors in the consolidated statements of operations. As a result of the completion of the Acquisition, beginning October 11, 2016, MillerCoors' results of operations were fully consolidated into MCBC’s consolidated financial statements and included in the U.S. segment. Net sales from the period October 11, 2016, through December 31, 2016, reflect the consolidation of MillerCoors in the U.S. segment.

(1)


(2)	Reflects net sales from the individual countries within our Central European operations (included in our Europe segment), as well as our International segment, for which no individual country has total net sales exceeding 10% of the total consolidated net sales.

The following table presents net properties by geographic location:



	As of
	December 31, 2018		December 31, 2017
	(In millions)
Net properties:
United States and its territories	$	2,943.0	$	3,025.0
Canada	719.7		673.0
United Kingdom	396.5		392.6
Other foreign countries(1)	549.1		583.1
Consolidated net properties	$	4,608.3	$	4,673.7


(1)	Reflects net properties within the individual countries included in our Central European operations (included in our Europe segment), as well as our International segment, for which no individual country has total net properties exceeding 10% of the total consolidated net properties.

Acquisition and Investments

Acquisition

On October 11, 2016, we completed the Acquisition 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. Throughout the process outlined in the purchase agreement, significant uncertainty remained on the ultimate outcome of the Adjustment Amount. As a result, no adjustment to purchase accounting was made through the completion of the measurement period in October 2017. On January 21, 2018, MCBC and ABI entered into a settlement agreement related to the purchase price adjustment under the purchase agreement, and 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. As this settlement occurred following the finalization of purchase accounting, we recorded the settlement proceeds related to the Adjustment Amount as a gain within special items, net in our consolidated statement of operations in our Corporate segment and within cash provided by operating activities within our consolidated statement of cash flows for the year ended December 31, 2018. MCBC and ABI also agreed to certain mutual releases as further described in the settlement agreement.

Prior to the Acquisition, MCBC owned a 50% voting and 42% economic interest in MillerCoors and MillerCoors was accounted for under the equity method of accounting. Following the completion of the Acquisition, MillerCoors, which was previously a joint venture between MCBC and SABMiller, became a wholly-owned subsidiary of MCBC and its results were fully consolidated by MCBC prospectively beginning on October 11, 2016.

The operating results of MillerCoors are reported in our U.S. segment and the operating results of the international Miller brand portfolio are reported in our Canada segment, Europe segment and International segment. Additionally, effective January 1, 2017, the results of the MillerCoors Puerto Rico business, which were previously reported as part of the U.S. segment, are reported within the International segment. See Note 3, "Segment Reporting" for more information on our reporting segments.

Under the acquisition method of accounting, MCBC recorded all assets acquired and liabilities assumed at their respective acquisition-date fair values. The excess of total consideration, including the estimated fair value of our previously held equity interest in MillerCoors, over the net identifiable assets acquired and liabilities assumed was recorded as goodwill. During 2017, we recorded adjustments to our preliminary purchase price allocation, primarily related to the recognition of certain deferred tax assets, partially offset by the recognition of certain accrued liabilities. The net impact of these changes was a decrease to goodwill of $92.1 million. There were no other changes to our allocated amounts during 2017, and our purchase price allocation is now finalized.

Separately, early in the fourth quarter of 2017, and prior to the completion of our one year measurement period, we completed the allocation of goodwill to our reporting units, with the goodwill predominantly assigned to the U.S. reporting unit, and a portion allocated to the Canada and Europe reporting units. See Note 10, "Goodwill and Intangible Assets" for further information.

We have elected to treat the Acquisition as an asset acquisition for U.S. tax purposes and accordingly currently expect to receive substantial tax benefits for the first 15 years following the close of the Acquisition. The assets and liabilities acquired in

connection with the Acquisition related to the remaining 58% ownership were stepped up to fair value for tax purposes and thus the carrying value of these assets and liabilities related to the purchase price for the 58% interest primarily equals the tax basis as of the acquisition date.

The total cash paid to ABI in October 2016 to complete the Acquisition, net of cash acquired of $39.0 million, is presented as a cash outflow within investing activities during 2016. Additionally, cash flows provided by operating activities during 2016 include outflows of $90.3 million primarily related to transaction and other acquisition costs.

See Note 8, "Stockholders' Equity" for details related to our February 3, 2016, equity offering completed in relation to the Acquisition and Note 11, "Debt" and Note 16, "Derivative Instruments and Hedging Activities" for details related to the financing and hedging strategies completed in relation to the Acquisition.

Our fiscal year 2016 consolidated statement of operations includes net sales and income before taxes of approximately $1.6 billion and $3.1 billion, respectively, attributable to MillerCoors since the Acquisition date. The income includes the net gain of approximately $3.0 billion related to the Acquisition as discussed below.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information gives effect to the Acquisition and the completed financing as if they were completed on January 1, 2016, the first day of our 2016 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 MCBC's results of operations. The unaudited pro forma financial information has been calculated after applying MCBC’s accounting policies and adjusting the historical 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, 2016, 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 the below table for significant non-recurring costs. Also, see Note 5, "Other Income and Expense" and Note 11, "Debt" for details related to financing-related expenses incurred.

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 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 relating to the integration of MillerCoors. 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 consummated on January 1, 2016, nor are they indicative of future results.



	For the year ended
	December 31, 2016
	(in millions)
Net sales	$	10,983.2
Net income attributable to MCBC	$	291.8
Net income attributable to MCBC per share:
Basic	$	1.36
Diluted	$	1.35

For the year ended December 31, 2016, the following non-recurring charges (benefits) directly attributable to the Acquisition were made as adjustments to our pro forma results to remove the impact from our historical operating results within the below noted line items.



	For the year ended
	December 31, 2016
	(In millions)
Non-recurring charges (benefits)				Location
Recognition of inventory fair value step-up	$	82.0		Cost of goods sold
Revaluation gain on previously held 42% equity interest in MillerCoors and AOCI loss reclassification	$	(2,965.0	)	Special items, net
Other transaction-related costs	$	79.7		Marketing, general and administrative expenses
Bridge loan - amortization of financing costs	$	63.4		Other income (expense)
Foreign currency forwards and transactional foreign currency - net gain	$	(4.5	)	Other income (expense)
Term loan - commitment fee	$	4.0		Interest expense, net
Swaption - unrealized loss	$	36.4		Interest expense, net
Interest income earned on money market and fixed rate deposit accounts	$	(19.0	)	Interest income, net

Fair Value of Consideration Transferred

The purchase consideration was comprised of the following (in millions):



Total cash consideration	$	12,000.0
Replacement share-based awards issued in conjunction with Acquisition(1)	46.4
Elimination of MCBC's net payable to MillerCoors(2)	(8.0		)
Total consideration	$	12,038.4
Previously held equity interest in MillerCoors(3)	6,090.0
Total consideration and value to be allocated to net assets	$	18,128.4


(1)	In connection with the Acquisition, MCBC issued replacement share-based compensation awards to various MillerCoors' employees who had awards outstanding under the historical MillerCoors share-based compensation plan. The fair value of the replacement awards associated with services rendered through the date of the Acquisition was recognized as a non-cash component of the total purchase consideration. See Note 13, "Share-Based Payments" for further information.

(1)

In connection with the Acquisition, MCBC issued replacement share-based compensation awards to various MillerCoors' employees who had awards outstanding under the historical MillerCoors share-based compensation plan. The fair value of the replacement awards associated with services rendered through the date of the Acquisition was recognized as a non-cash component of the total purchase consideration. See Note 13, "Share-Based Payments" for further information.


(2)	Represents the net payable owed by MCBC to MillerCoors as of the closing date which became an intercompany payable upon completion of the Acquisition.


(3)	The acquisition of MillerCoors is considered a step acquisition, and accordingly, we remeasured our pre-existing 42% equity interest in MillerCoors immediately prior to completion of the Acquisition to its estimated fair value of approximately $6.1 billion. As a result of the remeasurement, we recorded a net gain of approximately $3.0 billion 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 over its transaction date carrying value of approximately $2.7 billion. This net gain also includes the reclassification of our accumulated other comprehensive loss related to our previously held equity interest of $458.3 million in the fourth quarter of 2016 as further discussed below. Additionally, related to our pre-existing 42% equity interest, we recorded incremental deferred income tax expense and a corresponding deferred tax liability of approximately $1.5 billion upon completion of the Acquisition. This deferred tax adjustment has been restated to reflect the correction of the error discussed in Note 1, "Basis of Presentation and Summary of Significant Accounting Policies."

(3)

The acquisition of MillerCoors is considered a step acquisition, and accordingly, we remeasured our pre-existing 42% equity interest in MillerCoors immediately prior to completion of the Acquisition to its estimated fair value of approximately $6.1 billion. As a result of the remeasurement, we recorded a net gain of approximately $3.0 billion 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 over its transaction date carrying value of approximately $2.7 billion. This net gain also includes the reclassification of our accumulated other comprehensive loss related to our previously held equity interest of $458.3 million in the fourth quarter of 2016 as further discussed below. Additionally, related to our pre-existing 42% equity interest, we recorded incremental deferred income tax expense and a corresponding deferred tax liability of approximately $1.5 billion upon completion of the Acquisition. This deferred tax adjustment has been restated to reflect the correction of the error discussed in Note 1, "Basis of Presentation and Summary of Significant Accounting Policies."

As discussed above, our revaluation gain is net of a loss of $458.3 million related to the reclassification of our historical AOCI related to our 42% interest in MillerCoors, thereby removing the historical balance from our balance sheet. The reclassified AOCI loss is related to historical net unrealized losses on derivative positions previously designated by MillerCoors as cash flow hedges and historical pension and other postretirement benefit actuarial losses.

The associated income tax benefit of $200.1 million related to this reclassified AOCI loss was recorded as a component of the income tax benefit (expense) line item on the consolidated statement of operations for the year ended December 31, 2016.

Allocation of Consideration Transferred

The acquisition of MillerCoors was reflected in our consolidated financial statements as a step acquisition using the acquisition method of accounting. As such, we remeasured our pre-existing 42% equity interest in MillerCoors to fair value as discussed above. The fair value measurement of our previously held equity interest immediately prior to the completion of the Acquisition is based on significant inputs not observable in the market, and thus represents a Level 3 measurement. Specifically, the approach used in determining the fair value of our pre-existing 42% equity interest in MillerCoors, while considering an allocation of the total $12.0 billion purchase price attributable to the Acquisition and the nature of the Acquisition, also incorporated an income valuation approach using inputs including discount rate and terminal growth rate.

Under the acquisition method, MCBC recorded all assets acquired and liabilities assumed at their respective acquisition-date fair values. The excess of total consideration, including the estimated fair value of our previously held equity interest in MillerCoors, over the net identifiable assets acquired and liabilities assumed was recorded as goodwill.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the Acquisition date (in millions):



Total current assets(1)	$	1,061.8
Property, plant and equipment(2)	2,998.9
Other intangible assets(3)	9,875.0
Other assets(4)	462.3
Total current liabilities	(1,190.1		)
Pension and postretirement benefits	(1,009.7		)
Other non-current liabilities	(208.3		)
Total identifiable net assets acquired	$	11,989.9
Goodwill(5)	6,323.5
Fair value of noncontrolling interests(6)	(185.0		)
Total consideration and value to be allocated to net assets	$	18,128.4


(1)	Includes inventories of $505.4 million, trade receivables of $344.3 million, other receivables of $40.2 million as well as cash acquired of $39.0 million. The fair value of inventories was determined based on the estimated selling price of the inventory less the remaining manufacturing and selling costs and a normal profit margin on those manufacturing and selling efforts. The estimated step-up in fair value of inventory of $82.0 million increased cost of goods sold over approximately one month as the acquired inventory was sold. For all other current assets acquired, the fair values approximate the carrying values.

(1)

Includes inventories of $505.4 million, trade receivables of $344.3 million, other receivables of $40.2 million as well as cash acquired of $39.0 million. The fair value of inventories was determined based on the estimated selling price of the inventory less the remaining manufacturing and selling costs and a normal profit margin on those manufacturing and selling efforts. The estimated step-up in fair value of inventory of $82.0 million increased cost of goods sold over approximately one month as the acquired inventory was sold. For all other current assets acquired, the fair values approximate the carrying values.

(2)The fair value of property, plant and equipment was determined by using certain estimates and assumptions that are not observable in the market and thus represent a Level 3 measurement. The fair value and remaining useful life of property, plant and equipment are estimated as follows:



	Fair value		Remaining useful life
	(In millions)		(Years)
Land	$	156.8	N/A
Buildings and improvements	413.0		3-40
Machinery and equipment	1,927.7		3-25
Software	152.4		1-5
Returnable containers	89.8		1-15
Construction in progress	259.2		N/A
Acquired property, plant and equipment	$	2,998.9


(3)	The fair value of identifiable intangible assets was estimated using significant assumptions that are not observable in the market and thus represent a Level 3 measurement. The excess earnings approach was primarily used and significant assumptions included the amount and timing of projected cash flows, a discount rate selected to measure the risk inherent in the future cash flows, and the assessment of the asset’s life cycle, including competitive trends and other factors. The fair value and remaining useful life of identifiable intangible assets was estimated as follows:

(3)

The fair value of identifiable intangible assets was estimated using significant assumptions that are not observable in the market and thus represent a Level 3 measurement. The excess earnings approach was primarily used and significant assumptions included the amount and timing of projected cash flows, a discount rate selected to measure the risk inherent in the future cash flows, and the assessment of the asset’s life cycle, including competitive trends and other factors. The fair value and remaining useful life of identifiable intangible assets was estimated as follows:



	Fair value		Remaining useful life
	(In millions)		(Years)
Brands not subject to amortization	$	7,320.0	Indefinite
Brands subject to amortization	2,030.0		10-30
Other intangible assets not subject to amortization	320.0		Indefinite
Other intangible assets subject to amortization	205.0		2-40
Total acquired identifiable intangible assets	$	9,875.0

Brands not subject to amortization include the Coors and Miller families of brands in the U.S. Brands subject to amortization include certain brands in the U.S. and the Miller global brand portfolio. Other intangible assets not subject to amortization include water rights. Other intangible assets subject to amortization include certain distribution rights, naming rights and favorable contracts.


(4)	Includes estimated deferred tax assets of approximately $430 million which were presented as non-current deferred tax liabilities upon consolidation by MCBC due to jurisdictional netting.


(5)	The goodwill arising from the Acquisition is primarily attributable to expected improvements to our global scale and agility, operational synergies and acceleration of the MCBC growth strategy, as well as the assembled workforce. We have predominantly allocated the goodwill generated in the Acquisition to our U.S. reporting unit, with a portion allocated to the Canada and Europe reporting units. All of the tax basis goodwill generated in the Acquisition is expected to be deductible for U.S. federal and state tax purposes.

(5)

The goodwill arising from the Acquisition is primarily attributable to expected improvements to our global scale and agility, operational synergies and acceleration of the MCBC growth strategy, as well as the assembled workforce. We have predominantly allocated the goodwill generated in the Acquisition to our U.S. reporting unit, with a portion allocated to the Canada and Europe reporting units. All of the tax basis goodwill generated in the Acquisition is expected to be deductible for U.S. federal and state tax purposes.


(6)	MillerCoors has jointly held interests in multiple entities that are fully consolidated. The related fair value of the noncontrolling interest in each entity was estimated by applying the market and income valuation approaches. The fair value of MillerCoors' noncontrolling interest was estimated using significant assumptions that are not observable in the market and thus represent a Level 3 measurement.

(6)

MillerCoors has jointly held interests in multiple entities that are fully consolidated. The related fair value of the noncontrolling interest in each entity was estimated by applying the market and income valuation approaches. The fair value of MillerCoors' noncontrolling interest was estimated using significant assumptions that are not observable in the market and thus represent a Level 3 measurement.

Summarized financial information for MillerCoors for the periods prior to the Acquisition, under the equity method of accounting, is as follows:

Results of Operations



	For the period January 1 through October 10
	2016
	(In millions)
Net sales	$	6,125.4
Cost of goods sold	(3,426.6		)
Gross profit	$	2,698.8
Operating income(1)	$	1,183.6
Net income attributable to MillerCoors(1)	$	1,157.2


(1)	Results include net special charges primarily related to the closure of the Eden, North Carolina, brewery. For the pre-Acquisition periods of January 1, 2016, through October 10, 2016, MillerCoors recorded net special charges of $85.6 million, including $103.2 million of accelerated depreciation in excess of normal depreciation associated with the closure of the Eden brewery, and a postretirement benefit curtailment gain related to the closure of Eden of $25.7 million.

(1)

Results include net special charges primarily related to the closure of the Eden, North Carolina, brewery. For the pre-Acquisition periods of January 1, 2016, through October 10, 2016, MillerCoors recorded net special charges of $85.6 million, including $103.2 million of accelerated depreciation in excess of normal depreciation associated with the closure of the Eden brewery, and a postretirement benefit curtailment gain related to the closure of Eden of $25.7 million.

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



	For the period January 1 through October 10
	2016
	(In millions, except percentages)
Net income attributable to MillerCoors	$	1,157.2
MCBC's economic interest	42		%
MCBC's proportionate share of MillerCoors' net income	486.0
Amortization of the difference between MCBC's contributed cost basis and proportionate share of the underlying equity in net assets of MillerCoors	3.3
Share-based compensation adjustment(1)	(0.7		)
U.S. import tax benefit(2)	12.3
Equity income in MillerCoors	$	500.9


(1)	The net adjustment is to eliminate all share-based compensation impacts related to pre-existing SABMiller equity awards held by former Miller Brewing Company employees employed by MillerCoors, as well as to add back all share-based compensation impacts related to pre-existing MCBC equity awards held by former MCBC employees who transferred to MillerCoors.


(2)	Represents a benefit associated with an anticipated refund to CBC of U.S. federal excise tax paid on products imported by CBC based on qualifying volumes exported by CBC from the U.S. The anticipated refund is recorded within other non-current assets on the consolidated balance sheet as of December 31, 2018.

Investments

Our investments include both equity method and consolidated investments. Those entities identified as VIEs have been evaluated to determine whether we are the primary beneficiary. The VIEs included under "Consolidated VIEs" below are those for which we have concluded that we are the primary beneficiary and accordingly, consolidate these entities. None of our consolidated VIEs held debt as of December 31, 2018, or December 31, 2017. We have not provided any financial support to any of our VIEs during 2018 that we were not previously contractually obligated to provide. Amounts due to and due from our equity method investments are recorded as affiliate accounts payable and affiliate accounts receivable. See below under "Affiliate Transactions" for further details.

Authoritative guidance related to the consolidation of VIEs requires that we continually reassess whether we are the primary beneficiary of VIEs in which we have an interest. As such, the conclusion regarding the primary beneficiary status is subject to change and we continually evaluate circumstances that could require consolidation or deconsolidation. As of December 31, 2018, and December 31, 2017, our consolidated VIEs are Cobra Beer Partnership, Ltd. ("Cobra U.K."), Grolsch U.K. Ltd ("Grolsch"), Rocky Mountain Metal Container (“RMMC”), Rocky Mountain Bottle Company (“RMBC”) and Truss LP ("Truss"). Our unconsolidated VIEs are BRI and BDL.

Both BRI and BDL have outstanding third-party debt which is guaranteed by their respective shareholders. As a result, we have a guarantee liability of $35.9 million and $38.1 million recorded as of December 31, 2018, and December 31, 2017, respectively, which is presented within accounts payable and other current liabilities on the consolidated balance sheets and represents our proportionate share of the outstanding balance of these debt instruments. The carrying value of the guarantee liability equals fair value, which considers an adjustment for our own non-performance risk and is considered a Level 2 measurement. The offset to the guarantee liability was recorded as an adjustment to our respective equity method investment within the consolidated balance sheets. The resulting change in our equity method investments during the year due to movements in the guarantee represents a non-cash investing activity.

Equity Method Investments

Brewers' Retail Inc.

BRI is a beer distribution and retail network for the Ontario region of Canada, with majority of the ownership residing with MCC, Labatt Breweries of Canada LP (a subsidiary of ABI) and Sleeman Breweries Ltd. (a subsidiary of Sapporo International). BRI charges its owners administrative fees that are designed so the entity operates on a cash neutral basis. This

administrative fee is based on costs incurred, net of other revenues earned, and is allocated in accordance with the operating agreement to its owners based on volume of products. Contractual provisions cause participation in governance and other interests to fluctuate based on this calculated market share requiring frequent primary beneficiary evaluations. However, based on the existing structure, control is shared, and remains shared through such changes, and therefore we do not anticipate becoming the primary beneficiary in the foreseeable future. We consider BRI an affiliate. See "Affiliate Transactions" section below summarizing our transactions and balances with affiliates, including BRI.

We have an obligation to proportionately fund BRI's operations. As a result of this obligation, we continue to record our proportional share of BRI's net income or loss and OCI activity, including when we have a negative equity method balance. As of December 31, 2018, and December 31, 2017, we had a positive equity method investment balance of $13.8 million and $2.8 million, respectively. The increase to our net investment balance from prior year was primarily driven by equity earnings. See "Affiliate Transactions" below for BRI affiliate transactions including administrative fees charged to MCBC under the agreement with BRI which are recorded in cost of goods sold, as well as for BRI affiliate due to and due from balances as of December 31, 2018, and December 31, 2017, respectively, related to trade receivables and payables for sales to external customers and costs incurred by BRI offset by administrative fees charged and paid by MCBC (which may be in a payable or receivable position depending on the amount under or over charged).

Brewers' Distributor Ltd.

BDL is a distribution operation owned by MCC and Labatt Breweries of Canada LP (a subsidiary of ABI) that, pursuant to an operating agreement, acts as an agent for the distribution of their products in the western provinces of Canada. The two owners share 50% - 50% voting control of this business. We consider BDL an affiliate. See "Affiliate Transactions" section below summarizing our transactions and balances with affiliates, including BDL.

BDL charges the owners administrative fees that are designed so the entity operates at break-even profit levels. This administrative fee is based on costs incurred, net of other revenues earned, and is allocated in accordance with the operating agreement to the owners based on volume of products. No other parties are allowed to sell beer through BDL, which does not take legal title to the beer distributed for the owners. As of December 31, 2018, and December 31, 2017, our investment in BDL was $30.0 million and $33.2 million, respectively. The decrease in our investment balance from prior year is primarily attributable to a decrease in our guarantee of BDL's third-party debt obligations. See "Affiliate Transactions" section below for BDL affiliate transactions including administrative fees charged to MCBC under the agreement with BDL which are recorded in cost of goods sold, as well as for BDL affiliate due to and due from balances as of December 31, 2018, and December 31, 2017, respectively, related to trade receivables and payables for sales to external customers and costs incurred by BDL offset by administrative fees charged and paid by MCBC (which may be in a payable or receivable position depending on the amount under or over charged).

Our equity method investments are not considered significant for disclosure of financial information on either an individual or aggregated basis and there were no significant undistributed earnings as of December 31, 2018, or December 31, 2017, for any of these companies.

Affiliate Transactions

All transactions with our equity method investments are considered related party transactions and recorded within our affiliate accounts. The following table summarizes transactions with affiliates:



	For the years ended
	December 31, 2018		December 31, 2017		December 31, 2016
	(In millions)
Beer sales to MillerCoors(1)	$	—	$	—	$	7.5
Beer purchases from MillerCoors(1)	$	—	$	—	$	32.0
Service agreement costs and other charges to MillerCoors(1)	$	—	$	—	$	1.9
Service agreement costs and other charges from MillerCoors(1)	$	—	$	—	$	0.9
Administrative fees, net charged from BRI	$	94.0	$	93.5	$	85.8
Administrative fees, net charged from BDL	$	40.2	$	37.3	$	34.3


(1)	For 2016, represents MillerCoors' activity for the pre-Acquisition period of January 1, 2016, through October 10, 2016, when MillerCoors was an equity method investment.

Amounts due to and due from affiliates as of December 31, 2018, and December 31, 2017, respectively, are as follows:



	Amounts due from affiliates				Amounts due to affiliates
	December 31, 2018		December 31, 2017		December 31, 2018		December 31, 2017
	(In millions)
BRI	$	7.7	$	4.4	$	—	$	—
BDL	0.7		1.1		—		—
Other	—		—		0.1		0.4
Total	$	8.4	$	5.5	$	0.1	$	0.4

Consolidated VIEs

Rocky Mountain Metal Container

RMMC, a Colorado limited liability company, is a joint venture with Ball Corporation in which we hold a 50% interest. Our U.S. business has a can and end supply agreement with RMMC. Under this agreement, we purchase substantially all of the output of RMMC. RMMC manufactures cans and ends at our facilities, which RMMC is operating under a use and license agreement. As RMMC is a limited liability company (“LLC”), the tax consequences flow to the joint venture partners.

Rocky Mountain Bottle Company

RMBC, a Colorado limited liability company, is a joint venture with Owens-Brockway Glass Container, Inc. in which we hold a 50% interest. Our U.S. business has a supply agreement with RMBC under which we agree to purchase output approximating the agreed upon annual plant capacity of RMBC. RMBC manufactures bottles at our facilities, which RMBC is operating under a lease agreement. As RMBC is an LLC, the tax consequences flow to the joint venture partners.

Cobra U.K.

We hold a 50.1% interest in Cobra U.K., which owns the worldwide rights to the Cobra beer brand (with the exception of the Indian sub-continent, owned by Cobra India). The noncontrolling interest is held by the founder of the Cobra beer brand. We consolidate the results and financial position of Cobra U.K., and it is reported within our Europe operating segment.

Grolsch

Grolsch is a joint venture between us and Royal Grolsch N.V. (a member of Asahi Group Holdings, Ltd.) in which we hold a 49% interest. The Grolsch joint venture markets Grolsch brands in the U.K. and the Republic of Ireland. The majority of the Grolsch brands are produced by us under a contract brewing arrangement with the joint venture. MCBC and Royal Grolsch N.V. sell beer to the joint venture, which sells the beer back to MCBC (for onward sale to customers) for a price equal to what it paid, plus a marketing and overhead charge and a profit margin. Grolsch is a taxable entity in Europe. Accordingly, income tax expense in our consolidated statements of operations includes taxes related to the entire income of the joint venture. We consolidate the results and financial position of Grolsch and it is reported within our Europe operating segment.

Truss

On October 4, 2018, a wholly-owned subsidiary within our Canadian business completed the formation of Truss LP, an independent Canadian joint venture with HEXO Corp. ("HEXO") to pursue opportunities to develop, produce and market non-alcoholic, cannabis-infused beverages once legal in Canada. Truss is structured as a standalone start-up company with its own board of directors and an independent management team. We maintain a 57.5% controlling interest in Truss, which is a VIE that is consolidated. In connection with the formation of Truss, HEXO also issued warrants to our Canadian subsidiary, which are further discussed in Note 16, "Derivative Instruments and Hedging Activities."

The following summarizes the assets and liabilities of our consolidated VIEs (including noncontrolling interests):



	As of
	December 31, 2018				December 31, 2017
	Total Assets		Total Liabilities		Total Assets		Total Liabilities
	(In millions)
RMMC/RMBC	$	189.8	$	35.0	$	130.6	$	9.0
Other	$	31.0	$	5.1	$	25.0	$	2.3

Other Income and Expense



	For the years ended
	December 31, 2018			December 31, 2017			December 31, 2016
	(In millions)
Bridge loan commitment fees	$	—		$	—		$	(63.4	)
Gain on sale of non-operating asset	11.7			—			20.5
Gain (loss) from other foreign exchange and derivative activity, net	(31.9		)	(8.0		)	7.2
Other, net(1)	8.2			9.4			3.2
Other income (expense), net	$	(12.0	)	$	1.4		$	(32.5	)

(1)

During 2018, we recorded a non-cash gain of CAD 5.8 million, or $4.3 million, resulting from the release of our guarantee of the Montreal Canadiens' obligations under a ground lease for the Bell Centre Arena as a result of an independent transaction by the Montreal Canadiens with the lessor. Separately, during 2017, we recorded a gain of CAD 10.9 million, or $8.3 million, resulting from a purchase price adjustment related to the historical sale of Molson Inc.’s ownership interest in the Montreal Canadiens. The CAD 10.9 million was paid by the Montreal Canadiens in 2017. Both transactions involve the Montreal Canadiens, which is considered an affiliate of MCBC.

Income Tax

Restatement of Previously Issued Consolidated Financial Statements for Income Tax Accounting Errors

Prior year amounts have been restated to reflect the correction of the errors discussed in Note 1, "Basis of Presentation and Summary of Significant Accounting Policies."

U.S. Federal Income Tax Reform

On December 22, 2017, H.R. 1, also known as the Tax Cuts and Jobs Act (the “2017 Tax Act”), was enacted in the U.S. This enactment resulted in a number of significant changes to U.S. federal income tax law for U.S. corporations. Most notably, the statutory U.S. federal corporate income tax rate was changed from 35% to 21% for corporations.

Additionally, on December 22, 2017, the SEC staff also issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. SAB 118 provides a measurement period for companies to evaluate the impacts of the 2017 Tax Act on their financial statements. The measurement period ended during the fourth quarter of 2018 and we completed our accounting for the effects of the 2017 Tax Act and did not make material adjustments to the amounts recorded as of December 31, 2017. However, we did adjust for the restatement for the income tax accounting errors as described in Note 1, "Basis of Presentation and Summary of Significant Accounting Policies."

We recorded a net tax benefit of approximately $567 million as a result of the effects of the 2017 Tax Act on our deferred taxes as of December 31, 2017. The tax effects recorded primarily include the impact of the reduction in the U.S. tax rate on our deferred tax assets and liabilities as well as the impact of additional limitations on share-based compensation deductions as of December 31, 2017.

Further, the 2017 Tax Act includes a one-time transition tax on post-1986 undistributed foreign earnings and profits. We do not expect to have any liability for this tax as we have no accumulated earnings and profits, as defined by U.S. tax law, as of

November 2, 2017, and December 31, 2017. As a result of the 2017 Tax Act and new territorial tax regime, we do not anticipate any material future U.S. or foreign tax costs associated with future dividends and have no accumulated earnings and profits as of December 31, 2018. Our remaining outside basis differences in foreign subsidiaries are not expected to reverse with material tax consequences in the future as we have no plans to sell any foreign subsidiaries.

We continue to monitor the 2017 Tax Act, including proposed regulations which may change upon finalization, as well as yet to be issued regulations and interpretations. If the forthcoming regulations and interpretations change relative to our current understanding and initial assessment of the impacts of the 2017 Tax Act, the resulting impacts could have a material adverse impact on our effective tax rate.

Income Taxes

Our income (loss) before income taxes on which the provision for income taxes was computed is as follows:



	For the years ended
	December 31, 2018		December 31, 2017			December 31, 2016
	(In millions)
Domestic	$	1,320.4	$	1,488.3		$	3,396.9
Foreign	39.4		(105.1		)	(342.8		)
Total	$	1,359.8	$	1,383.2		$	3,054.1

Income tax expense (benefit) includes the following current and deferred provisions:



	For the years ended
	December 31, 2018			December 31, 2017			December 31, 2016
		As Restated			As Restated
	(In millions)
Current:
Federal	$	(22.9	)	$	(177.1	)	$	83.4
State	(4.7		)	4.7			12.0
Foreign	38.7			36.5			31.9
Total current tax expense (benefit)	$	11.1		$	(135.9	)	$	127.3
Deferred:
Federal	$	232.2		$	(79.5	)	$	1,033.8
State	31.2			33.5			150.0
Foreign	(49.3		)	(22.7		)	143.2
Total deferred tax expense (benefit)	$	214.1		$	(68.7	)	$	1,327.0
Total income tax expense (benefit)	$	225.2		$	(204.6	)	$	1,454.3

The increase in income tax expense for 2018 versus 2017 was primarily driven by the above mentioned net deferred tax benefit of approximately $567 million recognized in 2017 resulting from the impacts of the 2017 Tax Act, partially offset by the impact of the reduction of the U.S. federal corporate income tax rate from 35% to 21% in 2018. The decrease in income tax expense for 2017 versus 2016 was also largely driven by the above mentioned net deferred tax benefit resulting from the impacts of the 2017 Tax Act, as well as the 2016 deferred tax effects associated with our previously held equity interest in MillerCoors, including the pretax gain recognized on its fair value remeasurement and the reclassification of the accumulated other comprehensive loss related to our historical 42% interest in MillerCoors upon completion of the Acquisition (see Note 4, "Acquisition and Investments"). Specifically, this resulted in the recognition of net deferred income tax expense of approximately $1.3 billion in 2016. In addition, we recognized incremental deferred income tax expense in 2016 as a result of the remeasurement of our deferred tax liability associated with our Molson core brand intangible asset to the Canadian ordinary income tax rate upon reclassification from indefinite-lived to definite-lived subject to amortization (see Note 10, "Goodwill and Intangible Assets"). This incremental deferred tax expense more than offset the deferred tax benefit associated with the pretax impairment charge recognized in 2016.

Our effective tax rate varies from the U.S. federal statutory income tax rate as follows:



	For the years ended
	December 31, 2018		December 31, 2017		December 31, 2016
		As Restated		As Restated
Statutory Federal income tax rate	21.0	%	35.0	%	35.0	%
State income taxes, net of federal benefits	1.4	%	2.2	%	3.5	%
Effect of foreign tax rates and tax planning	(8.1	)%	(16.5	)%	(1.9	)%
Effect of Molson brand useful life change	—	%	—	%	6.4	%
Effect of U.S. tax reform	0.2	%	(41.0	)%	—	%
Effect of unrecognized tax benefits	0.8	%	(0.3	)%	—	%
Change in valuation allowance	0.7	%	3.6	%	(0.5	)%
Acquisition-related permanent items	—	%	—	%	4.4	%
Other, net	0.6	%	2.2	%	0.7	%
Effective tax rate	16.6	%	(14.8	)%	47.6	%

The increase in the effective income tax rate for 2018 versus 2017 is primarily driven by the one-time impacts of the 2017 Tax Act recognized in 2017, most notably the remeasurement of our deferred taxes from the reduction in the U.S. statutory federal corporate income tax rate. This one-time benefit to our deferred tax positions recognized in 2017 was partially offset by the reduction of the statutory U.S. federal corporate income tax rate from 35% to 21% beginning in 2018.

The decrease in the effective income tax rate for 2017 versus 2016 was primarily driven by the above mentioned impacts of the 2017 Tax Act, as well as the above mentioned income tax impacts recognized in 2016 associated with our previously held equity interest in MillerCoors. Additionally, our 2016 effective tax rate was negatively impacted by the remeasurement of the deferred tax liability on our Molson core brand intangible asset to the Canadian ordinary income tax rate as discussed above.

Additionally, our foreign businesses operate in jurisdictions with statutory income tax rates that differ from the U.S. Federal statutory rate. Specifically, the statutory income tax rates in the countries in Europe in which we operate range from 9% to 25%, and Canada has a statutory income tax rate of approximately 26%.



	As of
	December 31, 2018			December 31, 2017
		As Restated
	(In millions)
Non-current deferred tax assets:
Compensation-related obligations	$	55.8		$	10.3
Pension and postretirement benefits	121.4			—
Foreign exchange gain/loss	—			21.0
Derivative instruments	8.9			45.8
Tax credit carryforwards	54.5			23.6
Tax loss carryforwards	1,201.8			1,214.2
Accrued liabilities and other	52.2			28.3
Other	24.0			8.3
Valuation allowance	(1,040.0		)	(1,077.7		)
Total non-current deferred tax assets	$	478.6		$	273.8
Non-current deferred tax liabilities:
Fixed assets	345.8			69.4
Partnership investments	17.0			1,146.4
Foreign exchange gain/loss	3.0			—
Pension and postretirement benefits	—			2.7
Intangible assets	2,167.1			881.2
Total non-current deferred tax liabilities	$	2,532.9		$	2,099.7
Net non-current deferred tax assets	—			—
Net non-current deferred tax liabilities	$	2,054.3		$	1,825.9

The balances in the table above reflect the change in tax status of our investment in MillerCoors, which effective in 2018, is no longer a partnership for U.S. tax purposes. As a result of this change, the associated net deferred tax liability balance for the partnership investment in MillerCoors, previously in the partnership investments line item, has been reallocated in 2018 into its respective individual deferred tax asset and liability classifications above.

The overall increase in net deferred tax liabilities of $228.4 million in 2018 is primarily attributable to the amortization of goodwill and indefinite-lived intangible assets resulting from the Acquisition for U.S. tax purposes, as well as incremental tax depreciation of fixed assets. Additionally, our deferred tax balances are also impacted by foreign exchange rates, as a significant amount of our deferred tax assets and liabilities are in foreign jurisdictions.

Our deferred tax valuation allowances are primarily the result of uncertainties regarding the future realization of recorded tax benefits on tax loss carryforwards from operations in various jurisdictions. The measurement of deferred tax assets is reduced by a valuation allowance if, based upon available evidence, it is more likely than not that the deferred tax assets will not be realized. We have evaluated the realizability of our deferred tax assets in each jurisdiction by assessing the adequacy of 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. Based on this analysis, we have determined that the valuation allowances recorded in each period presented are appropriate.

We have deferred tax assets for U.S. tax carryforwards that expire between 2019 and 2038 of $76.7 million and $35.8 million as of December 31, 2018, and December 31, 2017, respectively. We have foreign tax loss carryforwards that expire between 2019 and 2038 of $195.0 million and $238.6 million as of December 31, 2018, and December 31, 2017, respectively. We have foreign tax loss carryforwards that do not expire of $984.6 million and $963.4 million as of December 31, 2018, and December 31, 2017, respectively.



	As of
	December 31, 2018		December 31, 2017
		As Restated
	(In millions)
Domestic net non-current deferred tax liabilities	$	1,353.2	$	1,045.6
Foreign net non-current deferred tax assets	26.8		32.5
Foreign net non-current deferred tax liabilities	727.9		812.8
Net non-current deferred tax liabilities	$	2,054.3	$	1,825.9

The 2018 and 2017 amounts above exclude $47.8 million and $37.9 million respectively, of unrecognized tax benefits that have been recorded as a reduction of non-current deferred tax assets, which is presented within non-current deferred tax liabilities due to jurisdictional netting on the consolidated balance sheets.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties, is as follows:



	For the years ended
	December 31, 2018			December 31, 2017			December 31, 2016
	(In millions)
Balance at beginning of year	$	41.9		$	39.7		$	39.5
Additions for tax positions related to the current year	22.3			13.5			1.7
Additions for tax positions of prior years	0.7			13.6			—
Reductions for tax positions of prior years	(8.4		)	—			—
Settlements	—			(12.8		)	—
Release due to statute expirations	(1.6		)	(14.6		)	(2.3		)
Foreign currency adjustment	(3.3		)	2.5			0.8
Balance at end of year	$	51.6		$	41.9		$	39.7

In 2018, we finalized our bilateral advanced pricing agreement with the Canadian Revenue Agency and U.S. Internal Revenue Service covering tax years 2014 through December 31, 2021, and accordingly, released associated uncertain tax positions.

Our remaining unrecognized tax benefits as of December 31, 2018, relate to tax years that are currently open to examination. Annual tax provisions include amounts considered sufficient to pay assessments that may result from examination of prior year tax returns; however, the amount ultimately paid upon resolution of issues may differ materially from the amount accrued.

During 2019, we anticipate that approximately $1 million to $5 million of unrecognized tax benefits will be released due to closings of statutes of limitations.



	For the years ended
	December 31, 2018		December 31, 2017		December 31, 2016
	(In millions)
Reconciliation of unrecognized tax benefits balance
Estimated interest and penalties	$	2.3	$	2.1	$	5.7
Unrecognized tax positions	51.6		41.9		39.7
Total unrecognized tax benefits	$	53.9	$	44.0	$	45.4

Presented net against non-current deferred tax assets	$	47.8	$	37.9	$	32.7
Current (included in accounts payable and other current liabilities)	—		—		3.0
Non-current (included within other liabilities)	6.1		6.1		9.7
Total unrecognized tax benefits	$	53.9	$	44.0	$	45.4

Amount of unrecognized tax benefits that would impact the effective tax rate, if recognized(1)	$	51.6	$	41.9	$	39.7


(1)	Amounts exclude the potential effects of valuation allowances, which may fully or partially offset the impact to the effective tax rate.

We file income tax returns in most of the federal, state and provincial jurisdictions in the U.S., Canada and various countries in Europe. Tax years through 2013 are closed in the U.S. In Canada, tax years through the year ended 2012 are closed or have been effectively settled through examination except for issues relating to intercompany cross-border transactions. The statute of limitations for intercompany cross-border transactions is closed through tax year 2010. Tax years through 2011 are closed for most countries in European jurisdictions with statutes of limitations varying from 3 to 8 years.

Special Items

We have incurred charges or realized benefits that either we do not believe to be indicative of our core operations, or we believe are significant to our current operating results warranting separate classification. As such, we have separately classified these charges (benefits) as special items.



	For the years ended
	December 31, 2018			December 31, 2017			December 31, 2016
	(In millions)
Employee-related charges
Restructuring	$	34.7		$	2.6		$	7.3
Impairments or asset abandonment charges
U.S. - Asset abandonment(1)	8.2			14.5			2.7
Canada - Intangible asset impairment(2)	—			—			495.2
Canada - Asset abandonment(3)	24.5			14.4			5.0
Europe - Asset abandonment(4)	3.8			9.5			10.8
International - Asset impairment and write-off(5)	—			—			30.8
Unusual or infrequent items
Europe - Flood loss (insurance reimbursement), net(6)	—			—			(9.3		)
Termination fees and other (gains) losses
U.S. - Acquisition revaluation gain and reclassification of historical share of MillerCoors' AOCI(7)	—			—			(2,965.0		)
Canada - Gain on sale of asset(3)	—			—			(110.4		)
Europe - Gain on sale of asset(4)	—			(4.6		)	—
International(8)	7.1			—			—
Acquisition purchase price adjustment settlement gain(9)	(328.0		)	—			—
Total Special items, net	$	(249.7	)	$	36.4		$	(2,532.9	)


(1)	Charges for 2018 relate to the closure of the Colfax, California cidery, and consist primarily of accelerated depreciation in excess of normal depreciation, as well as other costs associated with the previously closed Eden, North Carolina brewery, including net charges associated with the sale of the Eden real property. Charges for 2017 also relate to the Eden brewery closure.


(2)	During the fourth quarter of 2016, we recognized impairment charges related to indefinite-lived intangible assets in Canada. See Note 10, "Goodwill and Intangible Assets" for further discussion.

(3)

As part of our ongoing strategic review of our Canadian supply chain network, during 2016 we completed the sale of our Vancouver brewery, resulting in net cash proceeds received of CAD 183.1 million ($140.8 million), and recognized a gain of $110.4 million within special items. In conjunction with the sale of the brewery, we agreed to leaseback the existing property to continue operations on an uninterrupted basis while our new brewery is being constructed. We have evaluated this transaction pursuant to the accounting guidance for sale-leaseback transactions, and concluded that the relevant criteria had been met for full gain recognition. Additionally, during 2018, 2017 and 2016, we incurred other abandonment charges, consisting primarily of accelerated depreciation charges in excess of normal depreciation, related to the planned closure of the Vancouver brewery, which is currently expected to occur in the third quarter of 2019.

Additionally, in the third quarter of 2017, as a result of the continuation of this strategic review, we announced the 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 and in 2018, 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 65 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.

(4)

As a result of our continued strategic review of our European supply chain network, during 2018, 2017 and 2016, we incurred charges consisting primarily of accelerated depreciation in excess of normal depreciation related to the closure of our Burton South brewery and other associated closure costs. The Burton South Brewery closed during the first quarter of 2018. Additionally, as part of this review, related to the closures of our Plovdiv brewery in Bulgaria and Alton brewery in the U.K., during 2018, 2017 and 2016, we recorded asset abandonment related special charges.

Separately, during 2017 we completed the sale of land related to our previously closed Plovdiv brewery and received net cash proceeds of $8.2 million and recognized a gain of $4.6 million within special items.


(5)	Based on an interim impairment assessment performed during the second quarter of 2016, which was triggered by the enactment of total alcohol prohibition in the state of Bihar, India on April 5, 2016, we recorded an impairment loss in the second quarter of 2016. See Note 10, "Goodwill and Intangible Assets" for additional details.


(6)	During the third quarter of 2016, we received the final settlement of insurance proceeds related to losses incurred by our Europe business from flooding in Serbia, Bosnia and Croatia that occurred during 2014.

(7)

On October 11, 2016, we completed the Acquisition and recorded a 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 within special items, net in the fourth quarter of 2016. See Note 4, "Acquisition and Investments" for further details.


(8)	Represents charges related to the exit of our China business in 2018, consisting primarily of the reclassification of the associated cumulative foreign currency translation adjustment from AOCI upon substantial liquidation. See Note 14, "Accumulated Other Comprehensive Income (Loss)" for further details.


(9)	During the first quarter of 2018, we recorded the settlement proceeds related to the Adjustment Amount as a gain within special items, net in our consolidated statement of operations in our Corporate segment and within cash provided by operating activities within our consolidated statement of cash flows. See Note 4, "Acquisition and Investments" for further details.

Restructuring Activities

Beginning in 2016, restructuring initiatives related to the integration of MillerCoors after the completion of the Acquisition were implemented in order to operate a more efficient business and achieve cost saving targets which to date resulted in reduced employment levels by approximately 110 employees. Total restructuring costs related to integration initiatives were $1.6 million in 2017 and $9.3 million in 2016, representing the majority of the charges within the table below by segment. Subsequently, during the third quarter of 2018, we initiated restructuring activities in the U.S. in order to align our cost base with our scale of business. As a result, we reduced U.S. employment levels by approximately 300 employees in the fourth quarter of 2018. Additionally, we also initiated global restructuring activities during the fourth quarter of 2018, and reduced employment levels across the business by approximately 20 employees. Severance costs related to these restructuring activities were recorded as special items in our consolidated statements of operations. As we continually evaluate our cost structure and seek opportunities for further efficiencies and cost savings as part of these initiatives, we may incur additional restructuring related charges in the future, however, we are unable to estimate the amount of charges at this time.

We have continued our ongoing assessment of our supply chain strategies across our segments in order to align with our cost saving objectives. As part of this strategic review, which began in 2014, we have had restructuring activities related to the closure or planned closure of breweries, as well as activities related to business efficiencies. As a result, we have reduced employment levels by a total of 456 employees. Consequently, we recognized severance and other employee-related charges, which we have recorded as special items within our consolidated statements of operations. We will continue to evaluate our supply chain network and seek opportunities for further efficiencies and cost savings, and we therefore may incur additional restructuring related charges or adjustments to previously recorded charges in the future, however, we are unable to estimate the amount of charges at this time.

The accrued restructuring balances represent expected future cash payments required to satisfy the remaining severance obligations to terminated employees, the majority of which we expect to be paid in the next 12 months.



	U.S.			Canada			Europe			International			Corporate			Total
	(In millions)
Balance as of December 31, 2015	$	—		$	2.3		$	5.6		$	1.3		$	—		$	9.2
Balance assumed in Acquisition	6.9			—			—			—			—			6.9
Charges incurred	3.2			4.0			1.2			0.3			0.7			9.4
Payments made	(5.0		)	(0.4		)	(1.2		)	(1.4		)	—			(8.0		)
Changes in estimates	—			—			(2.1		)	—			—			(2.1		)
Foreign currency and other adjustments	—			—			(0.7		)	—			—			(0.7		)
Balance as of December 31, 2016	$	5.1		$	5.9		$	2.8		$	0.2		$	0.7		$	14.7
Charges incurred and changes in estimates	0.8			—			0.1			1.6			0.1			2.6
Payments made	(5.3		)	(1.9		)	(1.3		)	(1.6		)	(0.8		)	(10.9		)
Foreign currency and other adjustments	—			0.3			0.2			—			—			0.5
Balance as of December 31, 2017	$	0.6		$	4.3		$	1.8		$	0.2		$	—		$	6.9
Charges incurred and changes in estimates	29.6			(0.7		)	2.2			2.2			1.4			34.7
Payments made	(8.6		)	(2.0		)	(3.3		)	(1.8		)	(0.1		)	(15.8		)
Foreign currency and other adjustments	—			(0.1		)	(0.1		)	—			—			(0.2		)
Balance as of December 31, 2018	$	21.6		$	1.5		$	0.6		$	0.6		$	1.3		$	25.6

Stockholders' Equity

Changes to the number of shares of capital stock issued were as follows:



	Common stock issued		Exchangeable shares issued
	Class A	Class B(1)	Class A		Class B
	(Share amounts in millions)
Balance as of December 31, 2015	2.6	172.5	2.9		16.0
Shares issued from public offering	—	29.9	—		—
Shares issued under equity compensation plans	—	0.5	—		—
Shares exchanged for common stock	—	0.8	—		(0.8	)
Balance as of December 31, 2016	2.6	203.7	2.9		15.2
Shares issued under equity compensation plans	—	0.5	—		—
Shares exchanged for common stock	—	0.5	—		(0.5	)
Balance as of December 31, 2017	2.6	204.7	2.9		14.7
Shares issued under equity compensation plans	—	0.7	—		—
Shares exchanged for Class B exchangeable shares	—	—	(0.1	)	0.1
Balance as of December 31, 2018	2.6	205.4	2.8		14.8


(1)	During 2016, we received proceeds from our February 3, 2016, equity offering of our Class B common stock. See "Class B Common Stock Equity Issuance" below for further discussion.

Exchangeable Shares

The Class A exchangeable shares and Class B exchangeable shares were issued by Molson Coors Canada Inc. ("MCCI"), a wholly-owned subsidiary of the Company. The exchangeable shares are substantially the economic equivalent of the corresponding shares of Class A and Class B common stock that a Molson shareholder would have received in the Merger if the holder had elected to receive shares of Molson Coors common stock. Holders of exchangeable shares also receive, through a voting trust, the benefit of Molson Coors voting rights, entitling the holder to one vote on the same basis and in the same circumstances as one corresponding share of Molson Coors common stock.

Voting Rights

Each holder of record of Class A common stock, Class B common stock, Class A exchangeable shares and Class B exchangeable shares is entitled to one vote for each share held, without the ability to cumulate votes on the election of directors. Our Class B common stock has fewer voting rights than our Class A common stock and holders of our Class A common stock have the ability to effectively control or have a significant influence over company actions requiring stockholder approval. Specifically, holders of Class B common stock voting together as a single class have the right to elect three directors of the Molson Coors Board of Directors, as well as the right to vote on certain additional matters as outlined in the Restated Certificate of Incorporation (as amended, the “Certificate”), such as merger agreements that require approval under applicable law, sales of all or substantially all of the our assets to unaffiliated third parties, proposals to dissolve MCBC, and certain amendments to the Certificate that require approval under applicable law, each as further described and limited by the Certificate. The Certificate also provides that holders of Class A common stock and Class B common stock shall vote together as a single class, on an advisory basis, on any proposal to approve the compensation of MCBC's named executive officers.

Conversion Rights

The Certificate provides for the right of holders of Class A common stock to convert their stock into Class B common stock on a one-for-one basis at any time. The exchangeable shares are exchangeable at any time, at the option of the holder on a one-for-one basis for corresponding shares of Molson Coors common stock.

Class B Common Stock Equity Issuance

On February 3, 2016, we completed an underwritten public offering of our Class B common stock, which increased the number of Class B common shares issued and outstanding by 29.9 million shares and received proceeds of approximately $2.5 billion, net of issuance costs. The proceeds from the issuance were utilized to partially fund the completion of the Acquisition on October 11, 2016. See Note 4, "Acquisition and Investments" for further details.

Properties



	As of
	December 31, 2018			December 31, 2017
	(In millions)
Land and improvements	$	369.3		$	363.9
Buildings and improvements	953.6			930.6
Machinery and equipment	4,095.0			3,910.6
Returnable containers	403.4			356.2
Furniture and fixtures	361.1			360.5
Software	445.0			310.4
Natural resource properties	3.8			3.8
Construction in progress	535.9			534.3
Total properties cost	7,167.1			6,770.3
Less: accumulated depreciation	(2,558.8		)	(2,096.6		)
Properties, net	$	4,608.3		$	4,673.7

Depreciation expense was $633.4 million, $590.7 million and $306.3 million in 2018, 2017 and 2016, respectively. Loss and breakage expense related to our returnable containers, included in the depreciation expense amounts noted above, was $48.4 million, $46.9 million and $33.0 million in 2018, 2017 and 2016, respectively, and is classified within cost of goods sold in the consolidated statements of operations. Additionally, the previously mentioned depreciation expense for 2018, 2017 and 2016 includes accelerated depreciation of $30.7 million, $20.5 million and $12.4 million respectively, primarily associated with brewery closures, and is classified within special items in the consolidated statements of operations. See Note 7, "Special Items" for further discussion as well as details around facility closures.

Goodwill and Intangible Assets



	U.S.			Canada			Europe			International			Consolidated
	(In millions)
Balance as of December 31, 2016	$	6,415.6		$	567.6		$	1,260.5		$	6.4		$	8,250.1
Adjustments to preliminary purchase price allocation and synergy allocation(1)	(487.1		)	295.0			100.0			—			(92.1		)
Business acquisition(2)	—			13.8			—			—			13.8
Foreign currency translation	—			55.7			177.5			0.5			233.7
Balance as of December 31, 2017	$	5,928.5		$	932.1		$	1,538.0		$	6.9		$	8,405.5
Adjustments to preliminary purchase price allocation(2)	—			(2.8		)	—			—			(2.8		)
Business acquisition(3)	—			—			10.3			—			10.3
Foreign currency translation	—			(72.7		)	(78.9		)	(0.6		)	(152.2		)
Balance as of December 31, 2018	$	5,928.5		$	856.6		$	1,469.4		$	6.3		$	8,260.8

(1)

On October 11, 2016, we completed the Acquisition and estimated preliminary goodwill of approximately $6.4 billion, which was initially allocated to our U.S. segment. During 2017, we recorded adjustments to our preliminary purchase price allocation resulting in a net decrease in goodwill of $92.1 million. Separately, early in the fourth quarter of 2017, and prior to the completion of the one year measurement period, we completed the allocation of goodwill to our reporting units, resulting in $295.0 million and $100.0 million allocated to the Canada and Europe reporting units, respectively, as of October 11, 2016. Refer to Note 4, "Acquisition and Investments" for further details.

(2)

During the fourth quarter of 2017, we completed the acquisition of Le Trou du Diable, a craft brewer located in Quebec. As part of the preliminary purchase price accounting in the fourth quarter of 2017, goodwill generated in conjunction with this acquisition was recorded within our Canada segment. During 2018, we recorded adjustments to the preliminary purchase price allocation related to this acquisition, which is now finalized.


(3)	During the first quarter of 2018, we completed the acquisition of Aspall Cyder Limited, an established premium cider business in the U.K. Goodwill generated in conjunction with this acquisition was recorded within our Europe segment, and our purchase price allocation is now finalized.

The following table presents details of our intangible assets, other than goodwill, as of December 31, 2018:



	Useful life	Gross		Accumulated amortization			Net
	(Years)	(In millions)
Intangible assets subject to amortization:
Brands	10 - 50	$	4,988.0	$	(682.4	)	$	4,305.6
License agreements and distribution rights	15 - 28	220.2		(95.7		)	124.5
Other	2 - 40	129.2		(32.2		)	97.0
Intangible assets not subject to amortization:
Brands	Indefinite	8,169.9		—			8,169.9
Distribution networks	Indefinite	741.8		—			741.8
Other	Indefinite	337.6		—			337.6
Total		$	14,586.7	$	(810.3	)	$	13,776.4

The following table presents details of our intangible assets, other than goodwill, as of December 31, 2017:



	Useful life	Gross		Accumulated amortization			Net
	(Years)	(In millions)
Intangible assets subject to amortization:
Brands	10 - 50	$	5,215.3	$	(516.0	)	$	4,699.3
License agreements and distribution rights	15 - 28	236.3		(103.9		)	132.4
Other	2 - 40	148.3		(42.4		)	105.9
Intangible assets not subject to amortization:
Brands	Indefinite	8,216.6		—			8,216.6
Distribution networks	Indefinite	804.7		—			804.7
Other	Indefinite	337.6		—			337.6
Total		$	14,958.8	$	(662.3	)	$	14,296.5

The changes in the gross carrying amounts of intangibles from December 31, 2017, to December 31, 2018, are primarily driven by the impact of foreign exchange rates, as a significant amount of intangibles are denominated in foreign currencies.

Based on foreign exchange rates as of December 31, 2018, the estimated future amortization expense of intangible assets is as follows:



Year	Amount
	(In millions)
2019	$	220.4
2020	219.4
2021	213.1
2022	208.5
2023	207.6

Amortization expense of intangible assets was $224.1 million, $222.1 million, and $82.1 million for the years ended December 31, 2018, December 31, 2017, and December 31, 2016, respectively. The increase in amortization expense in 2017 versus 2016 is primarily attributable to the addition of U.S. definite-lived intangible asset amortization following the completion of the Acquisition, as well as the reclassification of the Molson core brand intangible assets from indefinite to definite-lived following the completion of our annual impairment test as of October 1, 2016. This expense is primarily presented within marketing, general and administrative expenses in our consolidated statements of operations.

We completed our required annual goodwill and indefinite-lived intangible impairment testing as of October 1, 2018, the first day of our fourth quarter, and concluded there were no impairments of goodwill within our U.S., Europe, Canada or India reporting units. Further, there were no impairments of our other indefinite-lived intangible assets as a result of the annual review process.

Reporting Units and Goodwill

As of the date of our annual impairment test, performed as of October 1, 2018, the operations in each of the specific regions within our U.S., Canada, Europe and International segments are considered components based on the availability of discrete financial information and the regular review by segment management. We have concluded that the components within the U.S., Canada and Europe segments each meet the criteria of having similar economic characteristics and therefore have aggregated these components into the U.S., Canada and Europe reporting units, respectively. Additionally, we determined that the components within our International segment do not meet the criteria for aggregation, and therefore, the operations of our India business constitute a separate reporting unit at the component level. See Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" for further discussion of our determination of reporting units for purposes of goodwill impairment testing.

The fair value of the U.S., Europe and Canada reporting units were estimated at approximately 19%, 11% and 6% in excess of carrying value, respectively, as of the October 1, 2018, testing date. In the current year testing, it was determined that the fair value of each of the reporting units declined from the prior year, resulting in our Europe and Canada reporting units

now being considered at risk of impairment. The decline in fair value across all reporting units in the current year is largely due to the recent interest rate environment which has resulted in an increase to the risk-free rate included in our current year discount rate calculations. This fact, coupled with the recent changes in market conditions resulting in lower earnings multiples of comparable public companies within our market-based valuations, adversely impacted the results of our impairment testing. In the U.S. reporting unit, market driven declines from the prior year were partially offset by a decrease in the tax rate driven by the enactment of the 2017 Tax Act within the U.S., as well as inclusion of incremental cost saving initiatives included in the current year forecast. In the Europe reporting unit, declines from the prior year were partially offset by continued volume and revenue growth throughout 2018 benefiting management's forecasts and positively impacting the forecasted future cash flows of the reporting unit. The market-driven decline in the excess of the fair value over the carrying value of the Canada reporting unit was coupled with continued challenging industry 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 saving initiatives included in the current year forecast. The fair value of the India reporting unit declined slightly from the prior year, as a result of shifts in business strategy; however, the fair value of the India reporting unit continues to remain in excess of its carrying value as of our annual testing date.

Although the fair value of each of our reporting units was determined to be in excess of its respective carrying value as of the October 1, 2018, testing date, the fair value determinations are sensitive to further unfavorable changes in forecasted cash flows, macroeconomic conditions, market multiples or discount rates that could negatively impact future analyses.

Indefinite-Lived Intangibles

The Coors and Miller indefinite-lived brands in the U.S. continue to be sufficiently in excess of their respective carrying values as of the annual testing date.

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. Separately, 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.

The fair values of our indefinite-lived intangibles in Europe, including the Staropramen and Carling brands, continue to be sufficiently in excess of their respective carrying values as of the annual testing date.

We utilized Level 3 fair value measurements in our impairment analysis of certain indefinite-lived intangible brand assets, including the Coors and Miller brands in the U.S., and the Staropramen brand in Europe, which utilizes an excess earnings approach to determine the fair values of these 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 performed qualitative assessments of certain indefinite-lived intangible assets, including the Coors Light brand distribution rights in Canada, Carling brand in Europe and water rights in the U.S., to determine whether it was more likely than not that the fair values of these assets were greater than their respective carrying amounts. Based on the qualitative assessments, we determined that a full quantitative analysis was not necessary.

Key Assumptions

As of the date of our annual impairment test, performed as of October 1, the Europe and Canada reporting unit goodwill balances are at risk of future impairment in the event of significant unfavorable changes in the forecasted cash flows (including prolonged weakening of economic conditions, or significant unfavorable changes in tax, environmental or other regulations, including interpretations thereof), terminal growth rates, market multiples and/or weighted-average cost of capital utilized in the discounted cash flow analyses. For testing purposes of our reporting units, management's best estimates of the expected future results are the primary driver in determining the fair value. Current projections used for our Canada reporting unit testing reflect continued challenges within the beer industry in Canada adversely impacting the projected cash flows of the business, offset by growth resulting from the benefit of anticipated cost savings and specific brand-building and innovation activities. Current projections used for our Europe reporting unit incorporate ongoing anticipated cost savings, coupled with continued volume and revenue growth. Positive assumptions included in management's forecast for both the Europe and Canada reporting units are being offset by adverse market conditions negatively impacting discount rate and market multiple assumptions applied to our fair valuation models in the current year.

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), (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.

While historical performance and current expectations have resulted in fair values of our reporting units and indefinite-lived intangible assets 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.

Definite-Lived Intangibles

Regarding definite-lived intangibles, we continuously monitor the performance of the underlying assets for potential triggering events suggesting an impairment review should be performed. Excluding the definite-lived intangible asset impairment charge associated with the triggering event which occurred in Bihar, India in 2016 further discussed below, no such triggering events that resulted in an impairment charge were identified in 2018, 2017 or 2016.

India Triggering Event and Interim Impairment Assessment

On April 5, 2016, the government of the state of Bihar implemented a complete prohibition of the sale and consumption of all forms of alcohol. Due to this triggering event, and as the expected length of the prohibition was unclear and was expected to remain in effect for the foreseeable future, 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 $6.3 million, based on foreign exchange rates as of December 31, 2018, 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.

Debt

Debt Obligations



	As of
	December 31, 2018			December 31, 2017
	(In millions)
Senior notes:
CAD 400 million 2.25% notes due 2018(1)	$	—		$	318.2
CAD 500 million 2.75% notes due 2020(1)	366.6			397.7
CAD 500 million 2.84% notes due 2023(2)	366.6			397.7
CAD 500 million 3.44% notes due 2026(1)(2)	366.6			397.7
$500 million 1.45% notes due 2019(2)	500.0			500.0
$500 million 1.90% notes due 2019(3)	499.8			498.5
$500 million 2.25% notes due 2020(3)	499.0			498.2
$1.0 billion 2.10% notes due 2021(2)	1,000.0			1,000.0
$500 million 3.5% notes due 2022(4)	509.3			512.2
$2.0 billion 3.0% notes due 2026(2)	2,000.0			2,000.0
$1.1 billion 5.0% notes due 2042(4)	1,100.0			1,100.0
$1.8 billion 4.2% notes due 2046(2)	1,800.0			1,800.0
EUR 500 million notes due 2019(3)	573.4			600.3
EUR 800 million 1.25% notes due 2024(2)	917.4			960.4
Other long-term debt	43.0			22.1
Less: unamortized debt discounts and debt issuance costs	(64.8		)	(75.9		)
Total long-term debt (including current portion)	10,476.9			10,927.1
Less: current portion of long-term debt	(1,583.1		)	(328.4		)
Total long-term debt	$	8,893.8		$	10,598.7

Short-term borrowings:
Commercial paper program(5)	$	—		$	379.0
Other short-term borrowings(6)	11.4			7.4
Current portion of long-term debt	1,583.1			328.4
Current portion of long-term debt and short-term borrowings	$	1,594.5		$	714.8

(1)

Prior to Molson Coors International, L.P., a Delaware limited partnership and wholly-owned subsidiary of MCBC ("Molson Coors International L.P."), issuing our CAD 500 million 2.75% notes due September 18, 2020 ("CAD 500 million notes"), and CAD 400 million 2.25% notes due September 18, 2018 ("CAD 400 million notes", and together with the CAD 500 million notes, the "2015 Notes"), on September 18, 2015, we entered into forward starting interest rate swap agreements to hedge the interest rate volatility for a 10 year period. We settled these swaps at the time of issuance of the 2015 Notes and are amortizing a portion of the resulting loss from AOCI to interest expense over the remaining term of the 2015 Notes as well as over a portion of the 2016 Notes defined below up to the full 10-year term of the interest rate swap agreements. The amortizing loss will increase our effective cost of borrowing compared to the stated coupon rates by 0.65% and 0.60% on each of the CAD 500 million notes due in 2020 and 2026, respectively. See Note 16, "Derivative Instruments and Hedging Activities" for further details on the forward starting interest rate swaps. During the third quarter of 2018, we repaid the CAD 400 million notes with cash on hand.

(2)

On July 7, 2016, MCBC issued approximately $5.3 billion senior notes with portions maturing from July 15, 2019, through July 15, 2046 ("2016 USD Notes"), and EUR 800.0 million senior notes maturing July 15, 2024 ("2016 EUR Notes"), and Molson Coors International L.P., completed a private placement of CAD 1.0 billion senior notes maturing July 15, 2023, and July 15, 2026 ("2016 CAD Notes"), in order to partially fund the financing of the Acquisition (2016 USD Notes, 2016 EUR Notes and 2016 CAD Notes, collectively, the "2016 Notes"). These issuances resulted in total proceeds of approximately $6.9 billion, net of underwriting fees and discounts of $36.5 million and $17.7 million,

respectively. Total debt issuance costs capitalized in connection with these notes including underwriting fees, discounts and other financing related costs, were approximately $65 million and are being amortized over the respective terms of the 2016 Notes. The 2016 Notes began accruing interest upon issuance, with semi-annual payments due on the 2016 USD Notes and 2016 CAD Notes in January and July beginning in 2017, and annual interest payments due on the 2016 EUR Notes in July beginning in 2017.

Prior to issuing the 2016 EUR Notes and the 2016 CAD Notes, we entered into foreign currency forward agreements to economically hedge the foreign currency exposure of a portion of the respective notes, which were subsequently settled on July 7, 2016, concurrent with the issuance of the 2016 Notes. Additionally, upon issuance we designated the EUR Notes as a net investment hedge of our Europe business. See Note 16, "Derivative Instruments and Hedging Activities" for further details.

Prior to using the proceeds from our 2016 Notes and February 3, 2016, equity issuance to partially fund the Acquisition, we invested these proceeds in various fixed rate deposit and money market accounts with terms of three months or less and, accordingly, recognized interest income of $19.0 million for the year ended December 31, 2016, within interest income (expense).

(3)

On March 15, 2017, MCBC issued approximately $1.5 billion of senior notes, consisting of $500 million 1.90% senior notes due March 15, 2019, and $500 million 2.25% senior notes due March 15, 2020 (collectively, the "2017 USD Notes") and EUR 500 million floating rate senior notes due March 15, 2019 ("2017 EUR Notes") (2017 USD Notes and 2017 EUR Notes, collectively, the "2017 Notes"). We bear quarterly interest on the 2017 EUR Notes at the rate of 0.35% plus three-month EURIBOR. These issuances resulted in total proceeds of approximately $1.5 billion, net of underwriting fees and discounts of $3.1 million and $0.7 million, respectively. Total debt issuance costs capitalized in connection with these notes, including underwriting fees, discounts and other financing related costs, were $6.1 million and are being amortized over the respective terms of the 2017 Notes. The 2017 Notes began accruing interest upon issuance, with quarterly payments due on the 2017 EUR Notes beginning June 15, 2017, and semi-annual payments due on the 2017 USD Notes beginning September 15, 2017. The proceeds from our 2017 Notes were used to repay our term loans.

In the first quarter of 2017, we entered into interest rate swaps to economically convert our fixed rate 2017 USD Notes to floating rate debt. As a result of these hedge programs, the carrying value of the $500 million 1.90% notes and $500 million 2.25% notes were adjusted for fair value movements attributable to the benchmark interest rate. During the fourth quarter of 2017, we settled these interest rate swaps, at which time we ceased adjusting the carrying value of the 2017 USD Notes for the fair value of these swaps. At the time of termination, cumulative adjustments to the carrying value of the notes were losses of $1.6 million on the $500 million 1.90% notes and $1.9 million on the $500 million 2.25% notes. Beginning in the fourth quarter of 2017, we began amortizing these cumulative adjustments to interest expense over the remaining term of each respective note and will accordingly increase the annual effective interest rate for the $500 million 1.90% notes and $500 million 2.25% notes for the remaining term of the notes by 0.24% and 0.17%, respectively. The fair value adjustments and subsequent amortization have been excluded from the aggregate principal debt maturities table presented below.

During the second quarter of 2018, we entered into cross currency swaps in order to hedge a portion of the foreign currency translational impacts of our European investment. As a result of the swaps, we economically converted our $500 million 2.25% senior notes due 2020 and associated interest to EUR denominated, which will result in a EUR interest rate to be received at 0.85%. See Note 16, "Derivative Instruments and Hedging Activities" for further details.

Prior to issuing the 2017 EUR Notes, we entered into foreign currency forward agreements to economically hedge the foreign currency exposure of a portion of the respective notes, which were subsequently settled on March 15, 2017, concurrent with the issuance of the 2017 EUR Notes. Additionally, upon issuance we designated the 2017 EUR Notes as a net investment hedge of our Europe business. See Note 16, "Derivative Instruments and Hedging Activities" for further details.

(4)

On May 3, 2012, we issued approximately $1.9 billion of senior notes with portions maturing in 2017, 2022 and 2042. The issuance resulted in total proceeds, before expenses, of approximately $1.9 billion, net of underwriting fees and discounts of $14.7 million and $4.6 million, respectively. Total debt issuance costs capitalized in connection with these senior notes, including the underwriting fees and discounts, were approximately $18.0 million and are being amortized over the term of the notes. During the second quarter of 2017, we repaid the $300 million 2.0% notes due 2017 using commercial paper.

During 2014, we entered into interest rate swaps to economically convert our fixed rate $500 million 3.5% notes due 2022 ("$500 million notes") to floating rate debt. As a result of fair value hedge accounting, the carrying value of the $500 million notes included a cumulative adjustment for the change in fair value of $18.1 million at the time of

termination of the swaps. Beginning in the fourth quarter of 2015, we began amortizing this cumulative adjustment to interest expense over the remaining term of the $500 million notes and will accordingly decrease the annual effective interest rate for the remaining term by 0.56%. The fair value adjustments and subsequent amortization have been excluded from the aggregate principal debt maturities table presented below.


(5)	As of December 31, 2018, we had no outstanding borrowings under our commercial paper program and as of December 31, 2017, we had total outstanding borrowings under our commercial paper program of $379.0 million at a weighted-average effective interest rate and tenor of 1.84% and 45 days, respectively.


(6)	As of December 31, 2018, we had $1.1 million in bank overdrafts and $88.9 million in bank cash related to our cross-border, cross-currency cash pool for a net positive position of $87.8 million. As of December 31, 2017, we had $1.2 million in bank overdrafts and $37.8 million in bank cash related to our cross-border, cross-currency cash pool for a net positive position of $36.6 million.

We had total outstanding borrowings of $7.3 million and $3.2 million under our two JPY overdraft facilities as of December 31, 2018, and December 31, 2017, respectively. In addition, we have GBP and CAD lines of credit under which we had no outstanding borrowings as of December 31, 2018, or December 31, 2017. A summary of our short-term facility availability is presented below. See Note 18, "Commitments and Contingencies" for further discussion related to letters of credit.

JPY 900 million overdraft facility at Japan base rate plus 0.45%
JPY 500 million overdraft facility at Japan base rate plus 0.35%
CAD 30 million overdraft facility at USD Prime or CAD Prime depending on the borrowing currency
GBP 20 million overdraft facility at GBP LIBOR plus 1.5%


•	USD 20 million line of credit overdraft facility at USD Prime plus 5%

Debt Fair Value Measurements

We utilize market approaches to estimate the fair value of certain outstanding borrowings by discounting anticipated future cash flows derived from the contractual terms of the obligations and observable market interest and foreign exchange rates. As of December 31, 2018, and December 31, 2017, the fair value of our outstanding long-term debt (including current portion of long-term debt) was approximately $9.9 billion and $11.2 billion, respectively. All senior notes are valued based on significant observable inputs and classified as Level 2 in the fair value hierarchy. The carrying values of all other outstanding long-term borrowings and our short-term borrowings approximate their fair values and are also classified as Level 2 in the fair value hierarchy.

Revolving Credit Facility

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 which replaced our previous revolving credit facility. 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. Concurrent with these transactions, in the third quarter of 2017, we incurred $3.4 million of issuance costs related to the $1.5 billion revolving credit facility, which are being amortized over the term of the agreement. During the third quarter of 2018, we extended the maturity date of our revolving credit facility by one year to July 7, 2023.

We had no borrowings drawn on our $1.5 billion revolving credit facility as of December 31, 2018. As of December 31, 2017, we had approximately $1.1 billion available to draw under our $1.5 billion revolving credit facility, as the borrowing capacity is reduced by borrowings under our commercial paper program. We had no other borrowings drawn on this revolving credit facility as of December 31, 2017.

The maximum leverage ratio of this facility is 4.75x 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.

Under the terms of each of our debt facilities, we must comply with certain restrictions. These include customary events of default and specified representations and warranties and covenants, including, among other things, covenants that restrict our ability to incur certain additional priority indebtedness, create or permit liens on assets, or engage in mergers or consolidations. As of December 31, 2018, and December 31, 2017, 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, 2018, rank pari-passu.

As of December 31, 2018, the aggregate principal debt maturities of long-term debt and short-term borrowings, based on foreign exchange rates as of December 31, 2018, for the next 5 years are as follows:



Year	Amount
	(In millions)
2019	$	1,595.2
2020	866.6
2021	1,000.0
2022	500.0
2023	366.6
Thereafter	6,211.6
Total	$	10,540.0

Interest



	For the years ended
	December 31, 2018			December 31, 2017			December 31, 2016
	(In millions)
Interest incurred	$	311.7		$	351.8		$	272.2
Interest capitalized	(5.5		)	(2.5		)	(0.6		)
Interest expensed	$	306.2		$	349.3		$	271.6

Inventories



	As of
	December 31, 2018		December 31, 2017
	(In millions)
Finished goods	$	229.8	$	222.3
Work in process	83.4		85.2
Raw materials	224.3		231.7
Packaging materials	54.3		52.3
Inventories, net	$	591.8	$	591.5

Share-Based Payments

We have one share-based compensation plan, the MCBC Incentive Compensation Plan (the "Incentive Compensation Plan"), as of December 31, 2018, and all outstanding awards fall under this plan.

Molson Coors Brewing Company Incentive Compensation Plan

We issue the following types of awards related to shares of Class B common stock to certain directors, officers, and other eligible employees, pursuant to the Incentive Compensation Plan: RSUs, DSUs, PSUs, and stock options.

RSU awards are issued based upon the market value equal to the price of our stock at the date of the grant and vest over a period of three years. In 2018, 2017 and 2016, we granted 0.4 million, 0.3 million and 0.2 million RSUs, respectively, with a weighted-average market value of $72.78, $92.02 and $92.95 each, respectively. Prior to vesting, RSUs have no voting rights.

DSU awards, under the Directors' Stock Plan pursuant to the Incentive Compensation Plan, are elections made by non-employee directors of MCBC that enable them to receive all or one-half of their annual cash retainer payments in our stock. The deferred stock unit awards are issued at the market value equal to the closing price on the date of the grant. The DSUs are paid in shares of stock upon termination of service. Prior to vesting, DSUs have no voting rights. In 2018, 2017 and 2016, we granted a small number of DSUs with a weighted-average market value of $64.48, $86.06 and $100.60 per share, respectively.

As part of our annual grant in the first quarter of 2018, 2017 and 2016 we granted PSUs. PSUs are granted with a target value established at the date of grant and vest upon completion of a service requirement. The settlement amount of the PSUs is

determined based on market and performance metrics, which include our total shareholder return performance relative to the S&P 500 and specified internal performance metrics designed to drive greater shareholder return. PSU compensation expense is based on a fair value assigned to the market metric upon grant using a Monte Carlo model, which remains constant throughout the vesting period of three years and a performance multiplier, which will vary due to changing estimates of the performance metric condition. During 2018, 2017 and 2016, we granted 0.2 million, 0.2 million and 0.1 million PSUs, respectively, each with a weighted-average fair value of $78.30, $97.13 and $90.49, respectively.

Stock options are granted with an exercise price equal to the market value of a share of Class B common stock on the date of grant. Stock options have a term of ten years and generally vest over three years. During 2018, 2017 and 2016, we granted 0.2 million, 0.2 million and 0.1 million options, respectively, each with a weighted-average fair value of $15.44, $18.66 and $16.65, respectively.

In connection with the Acquisition, MCBC issued replacement awards to various MillerCoors employees who had awards outstanding under the historical MillerCoors share-based compensation plan consisting of 0.5 million stock options with a weighted-average fair value of $42.21 per share, 0.4 million RSUs with a weighted-average market value of $107.91 per share, and 0.1 million PSUs with a weighted-average fair value of $106.17 per share. The terms and fair values of these awards were substantially the same as the replaced MillerCoors awards. The fair value of the replacement awards associated with services rendered through the date of the Acquisition was recognized as a non-cash component of the total purchase consideration. The remaining fair value of the replacement awards associated with post-Acquisition service is being recognized as an expense on a straight-line basis over the remaining vesting period of the awards. The fair values of the replacement stock options were estimated using a binomial lattice valuation model due to their various in-the-money levels and remaining terms.



	For the years ended
	December 31, 2018			December 31, 2017			December 31, 2016
	(In millions)
Pretax share-based compensation expense	$	42.6		$	58.3		$	32.3
Tax benefit(1)	(6.9		)	(11.1		)	(10.0		)
After-tax share-based compensation expense	$	35.7		$	47.2		$	22.3


(1)	The tax benefit for 2017 excludes the impact of the remeasurement of related deferred tax assets resulting from the reduction of the U.S. federal corporate income tax rate pursuant to the 2017 Tax Act. See Note 6, "Income Tax" for further discussion.

As of December 31, 2018, there was $39.9 million of total unrecognized compensation cost from all share-based compensation arrangements granted under the Incentive Compensation Plan, related to unvested awards. This total compensation expense is expected to be recognized over a weighted-average period of 1.8 years.



	RSUs and DSUs		PSUs
	Units	Weighted-average grant date fair value per unit	Units	Weighted-average grant date fair value per unit
	(In millions, except per unit amounts)
Non-vested as of December 31, 2017	1.0	$95.80	0.4	$89.57
Granted	0.4	$72.77	0.2	$78.30
Vested	(0.3)	$91.39	(0.1)	$75.46
Forfeited	(0.1)	$89.78	—	$—
Non-vested as of December 31, 2018	1.0	$88.53	0.5	$86.85

The weighted-average fair value per unit for the non-vested PSUs is $84.90 as of December 31, 2018.

The total intrinsic values of RSUs and DSUs vested during 2018, 2017 and 2016 were $24.8 million, $31.5 million and $21.8 million, respectively.



	Stock options
	Awards	Weighted- average exercise price	Weighted- average remaining contractual life (years)	Aggregate intrinsic value
	(In millions, except per share amounts and years)
Outstanding as of December 31, 2017	1.5	$63.60	4.6	$	31.3
Granted	0.2	$78.79
Exercised	(0.4)	$47.16
Forfeited	—	—
Outstanding as of December 31, 2018	1.3	$70.56	5.2	$	4.3
Expected to vest as of December 31, 2018	0.4	$85.32	8.3	$	—
Exercisable as of December 31, 2018	0.9	$64.73	4.0	$	4.3

The total intrinsic values of exercises during 2018, 2017 and 2016 were $9.6 million, $7.0 million and $17.7 million, respectively. During 2018, 2017 and 2016, cash received from stock options exercises was $16.0 million, $4.0 million and $11.2 million, respectively, and total tax benefits realized, including excess tax benefits, from share-based awards vested or exercised was $8.4 million, $20.2 million and $15.1 million, respectively.

The shares of Class B common stock to be issued under the stock option plans are made available from authorized and unissued MCBC Class B common stock. As of December 31, 2018, there were 3.9 million shares of MCBC Class B common stock available for the issuance under the Incentive Compensation Plan.

The fair value of each option granted in 2018, 2017 and 2016 was determined on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:



	For the years ended
	December 31, 2018	December 31, 2017	December 31, 2016
Risk-free interest rate	2.65%	2.04%	1.40%
Dividend yield	2.08%	1.64%	1.81%
Volatility range	22.36% - 24.14%	22.40% - 22.88%	23.16% - 24.64%
Weighted-average volatility	22.81%	22.52%	23.53%
Expected term (years)	5.3	5.1	5.2
Weighted-average fair value	$15.44	$18.66	$16.65

The risk-free interest rates utilized for periods throughout the contractual life of the stock options are based on a zero-coupon U.S. Treasury security yield at the time of grant. Expected volatility is based on a combination of historical and implied volatility of our stock. The expected term of stock options is estimated based upon observations of historical employee option exercise patterns and trends of those employees granted options in the respective year.

The fair value of the market metric for each PSU granted in 2018, 2017 and 2016 was determined on the date of grant using a Monte Carlo model to simulate total stockholder return for MCBC and peer companies with the following weighted-average assumptions:



	For the years ended
	December 31, 2018	December 31, 2017	December 31, 2016
Risk-free interest rate	2.34%	1.59%	1.04%
Dividend yield	2.08%	1.64%	1.81%
Volatility range	13.03% - 81.87%	13.71% - 80.59%	14.10% - 77.11%
Weighted-average volatility	22.76%	24.24%	23.68%
Expected term (years)	2.8	2.8	2.8
Weighted-average fair market value	$78.30	$97.13	$90.49

The risk-free interest rates utilized for periods throughout the expected term of the PSUs are based on a zero-coupon U.S. Treasury security yield at the time of grant. Expected volatility is based on historical volatility of our stock as well as the stock of our peer firms, as shown within the volatility range above, for a period from the grant date consistent with the expected term. The expected term of PSUs is calculated based on the grant date to the end of the performance period.

Accumulated Other Comprehensive Income (Loss)



	MCBC stockholders' equity
	Foreign currency translation adjustments			Gain (loss) on derivative instruments			Pension and Postretirement Benefit adjustments			Equity Method Investments			Accumulated other comprehensive income (loss)
	(In millions)
As of December 31, 2015	$	(769.9	)	$	14.5		$	(598.3	)	$	(350.4	)	$	(1,704.1	)
Foreign currency translation adjustments	(227.4		)	—			(7.3		)	—			(234.7		)
Unrealized gain (loss) on derivative instruments	—			20.0			—			—			20.0
Reclassification of derivative (gain) loss to income	—			(3.4		)	—			—			(3.4		)
Pension and other postretirement benefit adjustments	—			—			64.4			—			64.4
Amortization of net prior service (benefit) cost and net actuarial (gain) loss to income and settlement	—			—			28.9			—			28.9
Reclassification of historical share of MillerCoors' AOCI loss to income(1)	—			—			—			458.3			458.3
Ownership share of unconsolidated subsidiaries' other comprehensive income (loss)(1)	—			—			—			36.8			36.8
Tax benefit (expense)(1)	3.2			(9.9		)	(16.7		)	(214.6		)	(238.0		)
As of December 31, 2016	$	(994.1	)	$	21.2		$	(529.0	)	$	(69.9	)	$	(1,571.8	)
Foreign currency translation adjustments	638.3			—			4.7			—			643.0
Unrealized gain (loss) on derivative and non-derivative instruments	—			(205.3		)	—			—			(205.3		)
Reclassification of derivative (gain) loss to income	—			2.0			—			—			2.0
Pension and other postretirement benefit adjustments	—			—			181.8			—			181.8
Amortization of net prior service (benefit) cost and net actuarial (gain) loss to income and settlement	—			—			4.4			—			4.4
Ownership share of unconsolidated subsidiaries' other comprehensive income (loss)	—			—			—			14.3			14.3
Tax benefit (expense)	41.2			71.2			(36.9		)	(3.9		)	71.6
As of December 31, 2017	$	(314.6	)	$	(110.9	)	$	(375.0	)	$	(59.5	)	$	(860.0	)
Foreign currency translation adjustments	(411.6		)	106.4			(0.6		)	—			(305.8		)
Reclassification of cumulative translation adjustment to income (2)	6.0			—			—			—			6.0
Unrealized gain (loss) on derivative instruments	—			14.5			—			—			14.5
Reclassification of derivative (gain) loss to income	—			3.4			—			—			3.4
Pension and other postretirement benefit adjustments	—			—			55.4			—			55.4
Amortization of net prior service (benefit) cost and net actuarial (gain) loss to income and settlement	—			—			6.5			—			6.5
Ownership share of unconsolidated subsidiaries' other comprehensive income (loss)	—			—			—			(1.0		)	(1.0		)
Tax benefit (expense)	(24.5		)	(31.2		)	(13.5		)	0.2			(69.0		)
As of December 31, 2018	$	(744.7	)	$	(17.8	)	$	(327.2	)	$	(60.3	)	$	(1,150.0	)

(1)

Upon completion of the Acquisition on October 11, 2016, we recorded a loss of $458.3 million within special items, net upon reclassification of our accumulated other comprehensive loss related to our historical 42% interest in MillerCoors. The associated income tax benefit of $200.1 million was also reclassified and recorded as a component of the income tax benefit (expense) line item on the consolidated statement of operations. See Note 4, "Acquisition and Investments" for further details. The remaining AOCI of our equity method investments is related to changes to BRI and BDL pension obligations.


(2)	As a result of exiting our China business, the associated cumulative foreign currency translation adjustment was reclassified from AOCI and recognized within special items, net upon substantial liquidation. See Note 7, "Special Items" for further details.

We have significant levels of net assets denominated in currencies other than the USD due to our operations in foreign countries, and therefore we recognize OCI gains and/or losses when those items are translated to USD. The foreign currency translation losses recognized during 2018 were due to the weakening of the CAD, GBP and other currencies of our Europe operations versus the USD. The foreign currency translation gains recognized during 2017 were due to the strengthening of

CAD, GBP, and other currencies of our Europe operations versus the USD. The foreign currency translation losses recognized during 2016 were due to the weakening of the GBP and other currencies of our Europe operations versus the USD, partially offset by slight strengthening of the CAD versus the USD.

Reclassifications from AOCI to income:



	For the years ended
	December 31, 2018			December 31, 2017			December 31, 2016
	Reclassifications from AOCI									Location of gain (loss) recognized in income
	(In millions)
Gain/(loss) on cash flow hedges:
Forward starting interest rate swaps	$	(3.0	)	$	(3.7	)	$	(3.8	)	Interest expense, net
Foreign currency forwards	(0.2		)	3.7			14.4			Cost of goods sold
Foreign currency forwards	(0.2		)	(2.0		)	(7.2		)	Other income (expense), net
Total income (loss) reclassified, before tax	(3.4		)	(2.0		)	3.4
Income tax benefit (expense)	0.9			0.7			(0.4		)
Net income (loss) reclassified, net of tax	$	(2.5	)	$	(1.3	)	$	3.0

Amortization of defined benefit pension and other postretirement benefit plan items:
Prior service benefit (cost)	$	(0.5	)	$	(0.5	)	$	(0.6	)	Other pension and postretirement benefits (costs), net
Net actuarial gain (loss) and settlement	(6.0		)	(3.9		)	(28.3		)	Other pension and postretirement benefits (costs), net
Total income (loss) reclassified, before tax	(6.5		)	(4.4		)	(28.9		)
Income tax benefit (expense)	1.6			0.8			6.1
Net income (loss) reclassified, net of tax	$	(4.9	)	$	(3.6	)	$	(22.8	)

Other reclassifications from AOCI to Income:
China cumulative translation adjustment resulting from substantial liquidation	$	(6.0	)	$	—		$	—		Special items, net
Historical share of MillerCoors' AOCI loss	—			—			(458.3		)	Special items, net
Total income (loss) reclassified, before tax	(6.0		)	—			(458.3		)
Income tax benefit (expense)	—			—			200.1
Net income (loss) reclassified, net of tax	$	(6.0	)	$	—		$	(258.2	)

Total income (loss) reclassified, net of tax	$	(13.4	)	$	(4.9	)	$	(278.0	)

Employee Retirement Plans and Postretirement Benefits

We maintain retirement plans for the majority of our employees. Depending on the location and benefit program, we provide either defined benefit pension or defined contribution plans to our employees. Each plan is managed locally and in accordance with respective local laws and regulations. We have defined benefit pension plans in the U.S., U.K., Canada and Japan. All active retirement plans for Corporate employees are defined contribution pension plans. Additionally, we offer OPEB plans to a portion of our Canadian, U.S., Corporate and Central European employees; these plans are not funded. BRI and BDL maintain defined benefit, defined contribution and postretirement benefit plans as well; however, those plans are excluded from this disclosure as BRI and BDL are equity method investments and not consolidated.

The U.S. participates in and makes contributions to multi-employer pension plans. Contributions to multi-employer pension plans were $7.9 million in 2018, $7.7 million in 2017 and $1.2 million for the post-Acquisition period of October 11, 2016, through December 31, 2016. Additionally, the U.S. postretirement health plan qualifies for the federal subsidy under the

Medicare Prescription Drug Improvement and Modernization Act of 2003 (“the Act”) because the prescription drug benefits provided under the Company's postretirement health plan for Medicare eligible retirees generally require lower premiums from covered retirees and have lower co-payments and deductibles than the benefits provided in Medicare Part D and, accordingly, are actuarially equivalent to or better than the benefits provided under the Act. The benefits paid, including prescription drugs, were $37.1 million in 2018, $36.6 million in 2017 and $9.0 million for the post-Acquisition period of October 11, 2016, through December 31, 2016. Subsidies of $0.3 million for both 2018 and 2017, and $0.1 million for the post-Acquisition period of October 11, 2016, through December 31, 2016, were received.

As a result of the Acquisition, MillerCoors' results of operations became fully consolidated by MCBC, and, therefore, for the year ended December 31, 2016, the consolidated statement of operations includes MillerCoors' pension and OPEB expenses attributable to the period from October 11, 2016, to December 31, 2016. MillerCoors' pension and OPEB plans were recorded at fair value upon close of the Acquisition.

Defined Benefit and OPEB Plans

Net Periodic Pension and OPEB Cost (Benefit)

We have adopted the FASB's new guidance related to the classification of defined benefit pension and other postretirement plan costs. Specifically, the new guidance requires us to report only the service cost component in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period; while the other components of net benefit cost are now presented in the consolidated statements of operations separately from the service cost component and outside of operating income. We have also determined that only service cost will be reported within each operating segment and all other components will be reported within the Corporate segment. See further discussion in Note 2, "New Accounting Pronouncements."



	For the years ended
	December 31, 2018									December 31, 2017									December 31, 2016
	Pension			OPEB			Consolidated			Pension			OPEB			Consolidated			Pension			OPEB			Consolidated
	(In millions)
Service cost:
Service cost	$	5.5		$	9.3		$	14.8		$	7.7		$	10.9		$	18.6		$	7.6		$	4.1		$	11.7
Other pension and postretirement costs (benefits), net:
Interest cost	161.8			25.8			187.6			205.6			30.6			236.2			146.4			10.9			157.3
Expected return on plan assets, net of expenses	(232.8		)	0.5			(232.3		)	(287.9		)	0.4			(287.5		)	(194.1		)	—			(194.1		)
Amortization of prior service cost (benefit)	0.7			(0.2		)	0.5			0.5			—			0.5			0.7			(0.1		)	0.6
Amortization of net actuarial loss (gain)	7.6			(1.7		)	5.9			12.2			—			12.2			17.8			—			17.8
Curtailment, settlement or special termination benefit loss (gain)	0.8			0.1			0.9			(5.4		)	(2.9		)	(8.3		)	10.5			—			10.5
Less: expected participant contributions	(0.8		)	—			(0.8		)	(0.5		)	—			(0.5		)	(0.5		)	—			(0.5		)
Total other pension and postretirement cost (benefits), net	$	(62.7	)	$	24.5		$	(38.2	)	$	(75.5	)	$	28.1		$	(47.4	)	$	(19.2	)	$	10.8		$	(8.4	)

Net periodic pension and OPEB cost (benefit)	$	(57.2	)	$	33.8		$	(23.4	)	$	(67.8	)	$	39.0		$	(28.8	)	$	(11.6	)	$	14.9		$	3.3

Obligations and Changes in Funded Status



	For the year ended December 31, 2018									For the year ended December 31, 2017
	Pension			OPEB			Consolidated			Pension			OPEB			Consolidated
	(In millions)
Change in benefit obligation:
Prior year benefit obligation	$	5,584.4		$	803.6		$	6,388.0		$	6,177.5		$	835.0		$	7,012.5
Service cost, net of expected employee contributions	4.7			9.3			14.0			7.2			10.9			18.1
Interest cost	161.8			25.8			187.6			205.6			30.6			236.2
Actual employee contributions	0.6			—			0.6			0.7			—			0.7
Actuarial loss (gain)	(342.3		)	(108.8		)	(451.1		)	179.4			(34.9		)	144.5
Amendments and special termination benefits	10.7			(3.2		)	7.5			—			(4.4		)	(4.4		)
Benefits paid	(296.8		)	(44.1		)	(340.9		)	(327.5		)	(43.3		)	(370.8		)
Settlement	(0.6		)	—			(0.6		)	(947.6		)	—			(947.6		)
Foreign currency exchange rate change	(217.8		)	(10.5		)	(228.3		)	289.1			9.7			298.8
Benefit obligation at end of year	$	4,904.7		$	672.1		$	5,576.8		$	5,584.4		$	803.6		$	6,388.0
Change in plan assets:
Prior year fair value of assets	$	5,897.7		$	—		$	5,897.7		$	5,945.5		$	—		$	5,945.5
Actual return on plan assets	(156.1		)	—			(156.1		)	608.9			—			608.9
Employer contributions	8.9			44.1			53.0			310.0			43.3			353.3
Actual employee contributions	0.6			—			0.6			0.7			—			0.7
Settlement	(0.6		)	—			(0.6		)	(947.6		)	—			(947.6		)
Benefits and plan expenses paid	(296.8		)	(44.1		)	(340.9		)	(327.5		)	(43.3		)	(370.8		)
Foreign currency exchange rate change	(236.4		)	—			(236.4		)	307.7			—			307.7
Fair value of plan assets at end of year	$	5,217.3		$	—		$	5,217.3		$	5,897.7		$	—		$	5,897.7
Funded status:	$	312.6		$	(672.1	)	$	(359.5	)	$	313.3		$	(803.6	)	$	(490.3	)
Amounts recognized in the Consolidated Balance Sheets:
Other non-current assets	$	416.7		$	—		$	416.7		$	412.0		$	—		$	412.0
Accounts payable and other current liabilities	(4.5		)	(45.1		)	(49.6		)	(4.9		)	(48.9		)	(53.8		)
Pension and postretirement benefits	(99.6		)	(627.0		)	(726.6		)	(93.8		)	(754.7		)	(848.5		)
Net amounts recognized	$	312.6		$	(672.1	)	$	(359.5	)	$	313.3		$	(803.6	)	$	(490.3	)

The accumulated benefit obligation for our defined benefit pension plans was approximately $4.9 billion and $5.6 billion as of December 31, 2018, and December 31, 2017, respectively. The $130.8 million decrease in the net underfunded status of our aggregate pension and OPEB plans from December 31, 2017, to December 31, 2018, was primarily driven by the increase in discount rates. Our underfunded status also includes the impact of the High Court ruling in the U.K. related to equalizing pension benefits between men and women, which had an immaterial impact to our net underfunded status.

As of December 31, 2018, our defined benefit plan in the U.K. and certain defined benefit plans in the U.S. and Canada were overfunded as a result of our ongoing de-risking strategy. Information for our defined benefit plans that had aggregate accumulated benefit obligations and projected benefit obligations in excess of plan assets as of December 31, 2018, is as follows:



	As of
	December 31, 2018		December 31, 2017
	(In millions)
Accumulated benefit obligation	$	742.1	$	864.0
Projected benefit obligation	$	742.4	$	864.3
Fair value of plan assets	$	638.3	$	765.6

Information for OPEB plans with an accumulated postretirement benefit obligation in excess of plan assets has been disclosed above in "Obligations and Changes in Funded Status" as all of our OPEB plans are unfunded.

Accumulated Other Comprehensive Income (Loss)

Amounts recognized in AOCI not yet recognized as components of net periodic pension and OPEB cost, pretax, were as follows:



	As of December 31, 2018							As of December 31, 2017
	Pension		OPEB			Consolidated		Pension		OPEB			Consolidated
	(In millions)
Net actuarial loss (gain)	$	687.8	$	(191.7	)	$	496.1	$	645.4	$	(83.3	)	$	562.1
Net prior service cost	10.2		(5.6		)	4.6		1.5		(1.6		)	(0.1		)
Total not yet recognized	$	698.0	$	(197.3	)	$	500.7	$	646.9	$	(84.9	)	$	562.0

Changes in plan assets and benefit obligations recognized in OCI, pretax, were as follows:



	Pension			OPEB			Consolidated
	(In millions)
Accumulated other comprehensive loss (income) as of December 31, 2016	$	800.7		$	(47.8	)	$	752.9
Amortization of prior service (costs) benefit	(0.5		)	—			(0.5		)
Amortization of net actuarial (loss) gain	(12.2		)	—			(12.2		)
Net prior service cost	—			(1.6		)	(1.6		)
Settlement	5.4			2.9			8.3
Current year actuarial loss (gain)	(141.5		)	(38.7		)	(180.2		)
Foreign currency exchange rate change	(5.0		)	0.3			(4.7		)
Accumulated other comprehensive loss (income) as of December 31, 2017	$	646.9		$	(84.9	)	$	562.0
Amortization of prior service (costs) benefit	(0.7		)	0.2			(0.5		)
Amortization of net actuarial (loss) gain	(7.6		)	1.7			(5.9		)
Net prior service cost	9.8			(4.1		)	5.7
Settlement	—			(0.1		)	(0.1		)
Current year actuarial loss (gain)	46.8			(107.9		)	(61.1		)
Foreign currency exchange rate change	2.8			(2.2		)	0.6
Accumulated other comprehensive loss (income) as of December 31, 2018	$	698.0		$	(197.3	)	$	500.7

Assumptions

Periodic pension and OPEB cost is actuarially calculated annually for each individual plan based on data available at the beginning of each year. Assumptions used in the calculation include the settlement discount rate selected and disclosed at the end of the previous year as well as other assumptions detailed in the table below. The weighted-average rates used in determining the periodic pension and OPEB cost for the fiscal years 2018, 2017 and 2016 were as follows:



	For the years ended
	December 31, 2018		December 31, 2017		December 31, 2016
	Pension	OPEB	Pension	OPEB	Pension	OPEB
Weighted-average assumptions:
Settlement discount rate	3.01%	3.34%	3.36%	3.76%	3.72%	3.59%
Rate of compensation increase	2.00%	N/A	2.00%	N/A	2.00%	N/A
Expected return on plan assets(1)	4.10%	N/A	4.83%	N/A	5.15%	N/A
Health care cost trend rate	N/A	Ranging ratably from 6.75% in 2018 to 4.5% in 2037	N/A	Ranging ratably from 7.0% in 2017 to 4.5% in 2037	N/A	Ranging ratably from 7.7% in 2016 to 4.5% in 2028

(1)

We develop our EROA assumptions annually with input from independent investment specialists including our actuaries, investment consultants, plan trustee and other specialists. Each EROA assumption is based on historical data, including historical returns, historical market rates and is calculated for each plan's individual asset class. The calculation includes inputs for interest, inflation, credit, and risk premium (active investment management) rates and fees paid to service providers. We consider our EROA to be a significant management estimate. Any material changes in the inputs to our methodology used in calculating our EROA could have a significant impact on our reported defined benefit pension plans' expense.

Benefit obligations are actuarially calculated annually at the end of each year based on the assumptions detailed in the table below. Obligations under the OPEB plans are determined by the application of the terms of medical, dental, vision and life insurance plans, together with relevant actuarial assumptions and heath care cost trend rates. The weighted-average rates used in determining the projected benefit obligation for defined pension plans and the accumulated postretirement benefit obligation for OPEB plans, as of December 31, 2018, and December 31, 2017, were as follows:



	As of December 31, 2018		As of December 31, 2017
	Pension	OPEB	Pension	OPEB
Weighted-average assumptions:
Settlement discount rate	3.44%	3.92%	3.01%	3.34%
Rate of compensation increase	2.00%	N/A	2.00%	N/A
Health care cost trend rate	N/A	Ranging ratably from 6.5% in 2019 to 4.5% in 2037	N/A	Ranging ratably from 6.75% in 2018 to 4.5% in 2037

The change to the weighted-average discount rates used for our defined benefit pension plans and postretirement plans as of December 31, 2018, from December 31, 2017, is primarily the result of overall market changes during 2018.

Investment Strategy

The obligations of our defined benefit pension plans in the U.S., Canada and the U.K. are supported by assets held in trusts for the payment of future benefits. The business segments are obligated to adequately fund these asset trusts. The underlying investments within our defined benefit pension plans include: cash and short-term instruments, debt securities, equity securities, investment funds, and other investments including derivatives, hedge fund of funds and real estate. Investment allocations reflect the customized strategies of the respective plans.

The plans use liability driven investment strategies in managing defined pension benefits. For all defined benefit pension plan assets the plans have the following primary investment objectives:


(1)	optimize the long-term return on plan assets at an acceptable level of risk and manage projected future cash contributions;


(2)	maintain a broad diversification across asset classes and among investment managers; and


(3)	manage the risk level of the plans' assets in relation to the plans' liabilities.

Each plan's respective allocation targets promote optimal expected return and volatility characteristics given a focus on a long-term time horizon for fulfilling the plans' obligations. All assets are managed by external investment managers with a mandate to either match or outperform their benchmark. The plans used different asset managers in the U.S., U.K. and Canada and each plan's respective asset allocation could be impacted by a change in asset managers.

Our investment strategies for our defined benefit pension plans also consider the funding status for each plan. For defined benefit pension plans that are highly funded, assets are invested primarily in fixed income holdings that have a similar duration to the associated liabilities. For plans with lower funding levels, the fixed income component is managed in a similar manner to the highly funded plans. In addition to this liability-matching fixed income allocation, these plans also contain exposure to return generating assets including: equities, real estate, debt, and other investments held with the goal of producing higher returns, which may also have a higher risk profile. These investments are diversified by investing globally with limitations placed on issuer concentration.

Both our U.K. and Canadian plans hedge a portion of the foreign exchange exposure between plan assets that are not denominated in the local plan currency and the local currency as the Canadian and U.K. pension liabilities will be settled in CAD and GBP, respectively.

Target Allocations

The following compares target asset allocation percentages with actual asset allocations on a weighted-average asset basis as of December 31, 2018:



	Target allocations	Actual allocations
Equities	14.4%	13.1%
Fixed income	67.1%	70.9%
Real estate	2.6%	2.5%
Annuities	9.6%	9.7%
Other	6.3%	3.8%

During the first quarter of 2019, we adjusted our target allocation of plan assets to align with our updated investment strategy. These allocation changes are reflected in our weighted-average EROA assumptions for 2019.

Significant Concentration Risks

We periodically evaluate our defined benefit pension plan assets for concentration risks. As of December 31, 2018, we did not have any individual underlying asset position that composed a significant concentration of each plan's overall assets. However, we currently have significant plan assets invested in U.K., U.S. and Canadian government fixed income holdings. A provisional credit rating downgrade for any of these governments could negatively impact the asset values.

Further, as our benefit plans maintain exposure to non-government investments, a significant system-wide increase in credit spreads would also negatively impact the reported plan asset values. In general, equity and fixed income risks have been mitigated by company-specific concentration limits and by utilizing multiple equity managers. We do have significant amounts of assets invested with individual fixed income and hedge fund managers, therefore, the plans use outside investment consultants to aid in the oversight of these managers and fund performance.

Valuation Techniques

We use a variety of industry accepted valuation techniques to value our plan assets. The techniques vary depending upon instrument type. Whenever possible, we prioritize the use of observable market data in our valuation processes. We use market, income and cost approaches to value our plan assets as of period end. See Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" for additional information on our fair value methodologies and accounting policies. We have not changed our fair value techniques used to value plan assets this year.

Major Categories of Plan Assets

As of December 31, 2018, our major categories of plan assets included the following:

•

Cash and short-term instruments—Includes cash, trades awaiting settlement, bank deposits, short-term bills and short-term notes. Our "trades awaiting settlement" category includes payables and receivables associated with asset purchases and sales that are awaiting final cash settlement as of year-end due to the use of trade date accounting for our pension plans assets. These payables normally settle within a few business days of the purchase or sale of the respective asset. The respective assets are included in or removed from our year end plan assets and categorized in their respective asset categories in the fair value hierarchy below. We include these items in Level 1 of this hierarchy, as the values are derived from quoted prices in active markets. Short-term instruments are included in Level 2 of the fair value hierarchy as these are highly liquid instruments that are valued using observable inputs, but their asset values are not publicly quoted.

•

Debt securities—Includes various government and corporate fixed income securities, interest and inflation-linked assets such as bonds and swaps, collateralized securities, and other debt securities. The majority of the plans' fixed income assets trade on "over the counter" exchanges, which provides observable inputs that are the primary data used to determine each individual investment's fair value. We also use independent pricing vendors, as well as matrix pricing techniques. Matrix pricing uses observable data from other similar investments as the primary input to determine the individual security's fair value. Government and corporate fixed income securities are generally classified as Level 2 in the fair value hierarchy as they are valued using observable inputs. Assets included in our collateralized securities include mortgage backed securities and collateralized mortgage obligations, which are considered Level 3 due to the use of the significant unobservable inputs used in deriving these assets' fair values.

•

Equities—Includes publicly traded common and other equity-like holdings, primarily publicly traded common stock and real estate investment trusts. Equity assets are well diversified between international and domestic investments. We consider equities quoted on public exchanges as Level 1 while other assets that are not quoted on public exchanges but valued using significant observable inputs as Level 2 depending on the individual asset's characteristics.


•	NAV per share practical expedient—Includes our debt funds, equity funds, hedge fund of funds, real estate fund holdings and private equity funds. The market values for these funds are based on the net asset values multiplied by the number of shares owned.


•	Annuities—Includes non-participating annuity buy-in insurance policies purchased to cover a portion of the plan members. The fair value of non-participating contracts fluctuates based on changes in the obligation associated with covered plan members. These values are considered Level 3 due to the use of the significant unobservable inputs used in deriving these assets' fair values.

•

Other—Includes derivatives, repurchase agreements, recoverable taxes for taxes paid and awaiting reclaim due to the tax exempt nature of the pension plan, venture capital, and private equity. Derivatives are priced using observable inputs including yields, interest rate curves and spreads. Exchange traded derivatives are typically priced using the last trade price. Repurchase agreements are agreements where our plan has created an asset exposure using borrowed assets, creating a repurchase agreement liability, to facilitate the trade. The assets associated with the repurchase agreement are included in the other category in the fair value hierarchy, and the repurchase agreement liability is classified as Level 1 in the hierarchy, as the liability is valued using quoted prices in active markets. When determining the presentation of our target and asset allocations for repurchase agreements, we are viewing the asset type, as opposed to the investment vehicle, and accordingly include the associated assets within fixed income, specifically interest and inflation linked assets. We include recoverable tax items in Level 1 of this hierarchy, as these are cash receivables and the values are derived from quoted prices in active markets. Private equity is included in Level 3 as the values are based upon the use of unobservable inputs.

Fair Value Hierarchy

The following presents our fair value hierarchy for our defined benefit pension plan assets excluding investments using the NAV per share practical expedient (in millions):



				Fair value measurements as of December 31, 2018
	Total as of December 31, 2018			Quoted prices in active markets (Level 1)			Significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash and cash equivalents
Cash	$	297.3		$	297.3		$	—	$	—
Trades awaiting settlement	(11.2		)	(11.2		)	—		—
Bank deposits, short-term bills and notes	34.6			—			34.6		—
Debt
Government securities	1,695.8			—			1,695.8		—
Corporate debt securities	1,235.5			—			1,235.5		—
Interest and inflation linked assets	1,112.4			—			1,065.8		46.6
Collateralized debt securities	7.2			—			—		7.2
Equities
Common stock	299.0			299.0			—		—
Investment funds
Private equity	23.8			—			—		23.8
Annuities
Buy-in annuities	481.1			—			—		481.1
Other
Repurchase agreements	(1,448.8		)	(1,448.8		)	—		—
Recoverable taxes	0.4			0.4			—		—
Private Equity	137.0			—			—		137.0
Total fair value of investments excluding NAV per share practical expedient	$	3,864.1		$	(863.3	)	$	4,031.7	$	695.7

The following presents our total fair value of plan assets including the NAV per share practical expedient for our defined benefit pension plan assets:



	Total at December 31, 2018
	(In millions)
Fair value of investments excluding NAV per share practical expedient	$	3,864.1
Fair value of investments using NAV per share practical expedient
Debt funds	818.8
Equity funds	420.9
Real estate funds	20.0
Private equity funds	93.5
Total fair value of plan assets	$	5,217.3

The following presents our fair value hierarchy for our defined benefit pension plan assets excluding investments using the NAV per share practical expedient (in millions):



				Fair value measurements as of December 31, 2017
	Total at December 31, 2017			Quoted prices in active markets (Level 1)			Significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash and cash equivalents
Cash	$	299.1		$	299.1		$	—	$	—
Trades awaiting settlement	26.4			26.4			—		—
Bank deposits, short-term bills and notes	41.2			—			41.2		—
Debt
Government securities	1,873.6			—			1,873.6		—
Corporate debt securities	1,515.3			—			1,515.3		—
Interest and inflation linked assets	1,248.3			—			1,193.7		54.6
Collateralized debt securities	10.6			—			—		10.6
Equities
Common stock	697.1			695.9			1.2		—
Investment funds
Private equity	24.2			—			—		24.2
Annuities
Buy-in annuities	178.9			—			—		178.9
Other
Repurchase agreements	(1,835.5		)	(1,835.5		)	—		—
Recoverable taxes	0.5			0.5			—		—
Venture capital	0.3			—			—		0.3
Private equity	200.4			—			—		200.4
Total fair value of investments excluding NAV per share practical expedient	$	4,280.4		$	(813.6	)	$	4,625.0	$	469.0

The following presents our fair value hierarchy including the NAV per share practical expedient for our defined benefit pension plan assets:



	Total at December 31, 2017
	(In millions)
Fair value of investments excluding NAV per share practical expedient	$	4,280.4
Fair value of investments using NAV per share practical expedient
Debt funds	913.3
Equity funds	554.9
Real estate funds	50.0
Private equity funds	99.1
Total fair value of plan assets	$	5,897.7

Fair Value: Level Three Rollforward

The following presents our Level 3 Rollforward for our defined pension plan assets excluding investments using the NAV per share practical expedient:



	Amount
	(In millions)
Balance as of December 31, 2016	$	337.4
Total gain or loss (realized/unrealized):
Realized gain (loss)	0.6
Unrealized gain (loss) included in AOCI	10.2
Purchases, issuances, settlements	94.9
Foreign exchange translation (loss)/gain	25.9
Balance as of December 31, 2017	$	469.0
Total gain or loss (realized/unrealized):
Realized gain (loss)	13.8
Unrealized gain (loss) included in AOCI	(18.8		)
Purchases, issuances, settlements	272.2
Foreign exchange translation (loss)/gain	(40.5		)
Balance as of December 31, 2018	$	695.7

Expected Cash Flows

In 2019, we expect to make contributions to our defined benefit pension plans of approximately $6 million and benefit payments under our OPEB plans of approximately $45 million based on foreign exchange rates as of December 31, 2018. BRI and BDL contributions to their respective defined benefit pension plans are excluded here, as they are not consolidated in our financial statements. Plan funding strategies are influenced by employee benefits, tax laws and plan governance documents.

Expected future benefit payments for defined benefit pension and OPEB plans, based on foreign exchange rates as of December 31, 2018, are as follows:



Expected benefit payments	Pension		OPEB
	(In millions)
2019	$	301.4	$	45.2
2020	$	287.7	$	45.4
2021	$	289.3	$	45.2
2022	$	289.9	$	44.9
2023	$	290.2	$	44.6
2024-2028	$	1,450.9	$	216.3

Defined Contribution Plans

We offer defined contribution pension plans for the majority of our U.S., Corporate, Canadian and U.K. employees. The investment strategy for defined contribution plans are determined by each individual participant from the options we have made available as the plan sponsor. U.S. non-union and Corporate employees are eligible to participate in qualified defined contribution plans which provide for employer contributions ranging from 5% to 11% of eligible compensation (certain employees were also eligible for additional employer contributions). Effective, December 29, 2017, the plans covering the U.S. non-union and Corporate employees were merged while retaining the contribution percentages previously indicated. U.S. union employees are eligible to participate in a qualified defined contribution plan which provides for employer contributions based a factors associated with various collective bargaining agreements. The employer contributions to the U.K. and Canadian plans range from 3% to 8.5% of employee compensation. Both employee and employer contributions were made in cash in accordance with participant investment elections.

We recognized costs associated with defined contribution plans of $78.5 million, $80.5 million and $24.0 million in 2018, 2017 and 2016, respectively.

In addition, we have other deferred compensation and nonqualified defined contribution plans. Effective January 1, 2018, the Company formed the Molson Coors Deferred Compensation Plan through the merger of the Molson Coors Brewing Company Supplemental Savings and Investment Plan with and into the MillerCoors LLC Combined Deferred Compensation Plan and Salaried Non-Union Employees’ Retirement Savings Supplemental Plan. We have voluntarily funded these liabilities through rabbi trusts. These assets are invested in publicly traded mutual funds whose performance is expected to closely match changes in the plan liabilities. As of December 31, 2018, and December 31, 2017, the plan liabilities were equal to the plan assets and were included in other liabilities and other assets on our consolidated balance sheets, respectively.

Derivative Instruments and Hedging Activities

Overview and Risk Management Policies

We use derivatives as part of our normal business operations to manage our exposure to fluctuations in interest rates, foreign currency, commodity price risk and for other strategic purposes related to our core business. We have established policies and procedures that govern the risk management of these exposures. Our primary objective in managing these exposures is to decrease the volatility of cash flows affected by changes in the underlying rates and prices.

To achieve our objectives, we enter into a variety of financial derivatives, including foreign currency exchange, commodity, interest rate, cross currency swaps as well as options. We also enter into physical hedging agreements directly with our suppliers to manage our exposure to certain commodities.

Counterparty Risk

While, by policy, the counterparties to any of the financial derivatives we enter into are major institutions with investment grade credit ratings of at least A- by Standard & Poor's (or the equivalent) or A3 by Moody's, we are exposed to credit-related losses in the event of non-performance by counterparties. This credit risk is generally limited to the unrealized gains in such contracts, should any of these counterparties fail to perform as contracted.

We have established a counterparty credit policy and guidelines that are monitored and reported to management according to prescribed guidelines to assist in managing this risk. As an additional measure, we utilize a portfolio of institutions either headquartered or operating in the same countries that we conduct our business. In calculating the fair value of our

derivative balances, we also record an adjustment to recognize the risk of counterparty credit and our own non-performance risk, as appropriate.

Price and Liquidity Risks

We base the fair value of our derivative instruments upon market rates and prices. The volatility of these rates and prices are dependent on many factors that cannot be forecasted with reliable accuracy. The current fair values of our contracts could differ significantly from the cash settled values with our counterparties. As such, we are exposed to price risk related to unfavorable changes in the fair value of our derivative contracts.

We may be forced to cash settle all or a portion of our derivative contracts before the expected settlement date upon the occurrence of certain contractual triggers including a change of control, termination event or other breach of agreement. This could have a negative impact on our liquidity. For derivative contracts that we have designated as hedging instruments, early cash settlement would result in the timing of our hedge settlement not being matched to the cash settlement of the forecasted transaction or firm commitment. We may also decide to cash settle all or a portion of our derivative contracts before the expected settlement date through negotiations with our counterparties, which could also impact our cash position.

Due to the nature of our counterparty agreements, we are not able to net positions with the same counterparty across business units. Thus, in the event of default, we may be required to early settle all out-of-the-money contracts, without the benefit of netting the fair value of any in-the-money positions against this exposure.

Collateral

We do not receive and are not required to post collateral unless a change of control event occurs. This termination event would give either party the right to early terminate all outstanding swap transactions in the event that the other party consolidates, merges with, or transfers all or substantially all of its assets to, another entity, and the creditworthiness of the surviving entity that has assumed such party's obligations is materially weaker than that of such party. As of December 31, 2018, we did not have any collateral posted with any of our counterparties.

Derivative Accounting Policies

Overview

Our foreign currency forwards and our forward starting interest rate swaps are designated in hedging relationships as cash flow hedges, and our cross currency swaps are designated as net investment hedges. Prior to settlements discussed below, our forward starting interest rate swaps were also designated as cash flow hedges and our interest rate swaps were designated as fair value hedges. In certain situations, we may execute derivatives that do not qualify for, or we do not otherwise seek, hedge accounting but are determined to be important for managing risk. For example, our commodity swaps, commodity options, as well as the swaptions that we entered into in association with the Acquisition were not designated in hedge accounting relationships. These outstanding economic hedges are measured at fair value on our consolidated balance sheets with changes in fair value recorded in earnings. We have historically elected to apply the NPNS exemption to certain contracts, as applicable. These contracts are typically transacted with our suppliers and include risk management features that allow us to fix the price on specific volumes of purchases for specified delivery periods. We also consider whether any provisions in our contracts represent embedded derivative instruments as defined in authoritative accounting guidance and apply the appropriate accounting.

Hedge Accounting Policies

We formally document all relationships receiving hedge accounting treatment between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking hedge transactions pursuant to prescribed guidance. We also formally assess effectiveness both at the hedge's inception and on an ongoing basis, specifically whether the derivatives that are used in hedging transactions have been highly effective in mitigating the risk designated as being hedged and whether those hedges may be expected to remain highly effective in future periods. Specific to net investment hedges, we have elected to use the spot-to-spot methodology to assess effectiveness.

We discontinue hedge accounting prospectively when (1) the derivative is no longer highly effective in offsetting changes in the cash flows of a forecasted future transaction; (2) the derivative expires or is sold, terminated, or exercised; (3) it is no longer probable that the forecasted transaction will occur; (4) management determines that designating the derivative as a hedging instrument is no longer appropriate; or (5) management decides to cease hedge accounting.

When we discontinue hedge accounting prospectively, but it continues to be probable that the forecasted transaction will occur in the originally expected period, the existing gain or loss on the derivative remains in AOCI for cash flow hedges and net investment hedges or in the carrying value of the hedged item for fair value hedges and is reclassified into earnings when the

forecasted transaction affects earnings. However, if it is no longer probable that a forecasted transaction will occur by the end of the originally specified time period or within an additional two-month period of time thereafter, the gains and losses in AOCI are recognized immediately in earnings. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, we carry the derivative at its fair value on the consolidated balance sheets until maturity, recognizing future changes in the fair value in current period earnings.

Significant Derivative/Hedge Positions

Derivative Activity Related to the Acquisition

During the first quarter of 2016, we entered into swaption agreements with a total notional amount of $855.0 million to economically hedge a portion of our long-term debt issuance with which we partially funded the Acquisition. We paid upfront premiums of $37.8 million for the option to enter into and exercise swaps with a forward starting effective date. 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. During the second quarter of 2016, we terminated and cash settled these swaptions in anticipation of the issuance of the 2016 Notes, resulting in cash proceeds of $1.4 million.

Separately, prior to issuing the EUR Notes and the CAD Notes on July 7, 2016, we entered into foreign currency forward agreements in the second quarter of 2016 with a total notional amount of EUR 794.6 million and CAD 965.5 million, representing a majority of the anticipated net proceeds from the issuance of the respective CAD Notes and EUR Notes, to economically hedge the foreign currency exposure of the associated notes against the USD prior to issuance and to convert the proceeds to USD upon issuance through gross settlement. We settled these foreign currency forwards on July 7, 2016, resulting in a loss of $3.6 million, and received the USD necessary, along with the USD Notes, to complete our financing needs for the Acquisition. These foreign currency forwards were not designated in hedge accounting relationships, and, accordingly, the mark-to-market fair value adjustments and resulting unrealized losses were recorded to other income (expense).

On July 7, 2016, concurrent with the issuance of the EUR Notes, we designated the principal EUR 800 million of the EUR Notes as a non-derivative financial net investment hedge of our investment in our Europe business in order to hedge a portion of the related foreign currency translational impacts, and, accordingly, record changes in the carrying value of the EUR Notes due to fluctuations in the spot rate to AOCI. See Note 11, "Debt" for further discussion of the EUR Notes and CAD Notes.

Interest Rate Swaps

In the first quarter of 2017, we entered into interest rate swaps with an aggregate notional amount of $1.0 billion to economically convert our fixed rate $1.0 billion 2017 USD Notes to floating rate debt. We received fixed interest payments semi-annually at a rate of 1.90% and 2.25% per annum on our $500 million senior notes due March 15, 2019, and $500 million senior notes due March 15, 2020, respectively, and paid a rate to our counterparties based on a credit spread plus the one-month LIBOR rate, thereby effectively exchanging a fixed interest obligation for a floating interest obligation.

We entered into these interest rate swap agreements to minimize exposure to changes in the fair value of each of our $500 million notes that results from fluctuations in the benchmark interest rate, specifically LIBOR. We designated these swaps as fair value hedges and determined that there was zero ineffectiveness. The changes in fair value of derivatives designated as fair value hedges and the offsetting changes in fair value of the hedged item were recognized in earnings. The changes in fair value of the two $500 million interest rate swaps were recorded in interest expense in our consolidated statement of operations and were fully offset by changes in fair value of the two $500 million notes attributable to the benchmark interest rate, also recorded to interest expense.

During the fourth quarter of 2017, we voluntarily settled our aggregate notional amount of $1.0 billion which resulted in net cash payments of $3.5 million, representing the cumulative adjustments to the carrying value of the notes from inception to termination. At the time of settlement we ceased adjusting the carrying value of the two $500 million notes for the fair value movements and these cumulative adjustments are now being amortized as a charge to interest expense over the expected remaining term of the respective note. See Note 11, "Debt" for additional details.

Separately, in prior years, we also entered into similar interest rate swap agreements to economically convert our fixed rate $500 million 3.5% notes due 2022 to floating rate debt. These interest rate swap agreements were also previously voluntarily cash settled, at which time we ceased adjusting the carrying value of the notes for the fair value movements. The cumulative adjustments which increased the carrying value of the notes are being amortized as a benefit to interest expense over the expected remaining term of the notes. See Note 11, "Debt" for additional details.

Net Investment Hedges

On March 15, 2017, we issued an aggregate of EUR 500 million (approximately $530 million at issuance), 0.35% plus three-month EURIBOR floating rate senior notes due March 15, 2019. We simultaneously designated the principal of the 2017 EUR Notes as a net investment hedge of our investment in our Europe business in order to hedge a portion of the foreign currency translational impacts and, accordingly, will record changes in the carrying value of the 2017 EUR Notes due to fluctuations in the spot rate to AOCI. See Note 11, "Debt" for further discussion.

Forward Starting Interest Rate Swaps

Forward starting interest rate swaps are instruments we use to manage our exposure to the volatility of the interest rates associated with future interest payments on a forecasted debt issuance. During the third quarter of 2018, we entered into forward starting interest rate swaps with notional amounts totaling $1.5 billion. The forward starting interest rate swaps have an effective date of July 2018 and termination dates of July 2021, May 2022 and July 2026, mirroring the terms of the forecasted debt issuances. Weighted-average interest rates on the swaps are fixed at 3.00%, 3.01% and 3.10% for July 2021, May 2022 and July 2026, respectively. Under the agreements we are required to early terminate these swaps at the time we expect to issue the related forecasted debt. We have designated these contracts as cash flow hedges. As a result, the unrealized mark-to-market gains or losses will be recorded to AOCI until termination at which point the realized gain or loss of these swaps at issuance of the hedged debt will be reclassified from AOCI and amortized to interest expense over the term of the hedged debt.

Prior to the issuance of the 2015 Notes, we entered into forward starting interest rate swaps with a notional of CAD 600 million in order to manage our exposure to the volatility of the interest rates associated with the future interest payments on the forecasted debt issuances. The swaps had an effective date of September 2015 and a termination date of September 2025 mirroring the terms of the initially forecasted debt issuance. Under these agreements we were required to early terminate these swaps at the approximate time we issued the previously forecasted debt. We had designated these contracts as cash flow hedges and accordingly, a portion of the CAD 39.2 million ($29.5 million at settlement) loss on the forward starting interest rate swaps is being reclassified from AOCI and amortized to interest expense over the remaining term of the 2015 Notes and over a portion the CAD 500 million notes due in 2026 up to the full 10-year term of the interest rate swap agreements.

Cross Currency Swaps

Effective April 18, 2018, we entered into cross currency swap agreements having a total notional of approximately EUR 404 million ($500 million upon execution) in order to hedge a portion of the foreign currency translational impacts of our European investment. As a result of the swaps, we economically converted our $500 million 2.25% senior notes due 2020 and associated interest to EUR denominated, which will result in a EUR interest rate to be received at 0.85%. We have designated these cross currency swaps as net investment hedges and accordingly, record changes in fair value due to fluctuations in the spot rate to AOCI. The changes in fair value of the swaps attributable to changes other than those due to fluctuations in the spot rate are excluded from the assessment of hedge effectiveness and recorded to interest expense over the life of the hedge.

Foreign Currency Forwards

Prior to issuing the 2017 EUR Notes on March 15, 2017, we entered into foreign currency forward agreements in the first quarter of 2017 with a total notional amount of EUR 499 million, representing a majority of the anticipated net proceeds from the issuance of the respective 2017 EUR Notes, to economically hedge the foreign currency exposure of the associated notes against the USD prior to issuance and to convert the proceeds to USD upon issuance through gross settlement. We settled these foreign currency forwards on March 15, 2017, resulting in a loss of $8.3 million. These foreign currency forwards were not designated in hedge accounting relationships, and, accordingly, the mark-to-market fair value adjustments and resulting losses were recorded to other income (expense).

We have financial foreign exchange forward contracts in place to manage our exposure to foreign currency fluctuations. We hedge foreign currency exposure related to certain royalty agreements, exposure associated with the purchase of production inputs and imports that are denominated in currencies other than the functional entity's local currency, and other foreign exchanges exposures. These contracts have been designated as cash flow hedges of forecasted foreign currency transactions. We use foreign currency forward contracts to hedge these future forecasted transactions up to a 60 month horizon.

Commodity Swaps and Options

We have financial commodity swap and option contracts in place to hedge changes in the prices of natural gas, aluminum, including surcharges relating to our aluminum exposures, corn, barley and diesel. These contracts allow us to swap our floating exposure to changes in these commodity prices for a fixed rate. These contracts are not designated in hedge accounting relationships. As such, changes in fair value of these derivatives are recorded in cost of goods sold in the consolidated statements of operations. We hedge forecasted purchases of natural gas up to 60 months, aluminum up to 60 months, corn up to

60 months, and diesel up to 60 months out in the future for use in our supply chain, in line with our risk management policy. Further, we hedge forecasted purchases of barley based on crop year and physical inventory management. For purposes of measuring segment operating performance, the unrealized changes in fair value of the swaps not designated in hedge accounting relationships are reported in Corporate outside of the segment specific operating results until such time that the exposure we are managing is realized. At that time we reclassify the gain or loss from Corporate to the operating segment, allowing our operating segments to realize the economic effects of the derivative without the resulting unrealized mark-to-market volatility.

Warrants

On October 4, 2018, in connection with the formation of the Truss joint venture, as discussed further in Note 4, "Acquisition and Investments," our joint venture partner, HEXO, issued to our Canadian subsidiary a total of 11.5 million warrants to purchase common shares of HEXO at a strike price of CAD 6.00 per share at any time during the three year period following the formation of the joint venture. The fair value of the warrants at issuance of approximately $45 million was recorded as a non-current asset and as an adjustment to paid-in capital, net of tax. All changes in the fair value of the warrants subsequent to issuance will be recorded in other income (expense), net on the consolidated statements of operations.

Derivative Fair Value Measurements

We utilize market approaches to estimate the fair value of our derivative instruments by discounting anticipated future cash flows derived from the derivative's contractual terms and observable market interest, foreign exchange and commodity rates. The fair values of our derivatives also include credit risk adjustments to account for our counterparties' credit risk, as well as our own non-performance risk, as appropriate. The fair value of the HEXO warrants is estimated using the Black-Scholes option-pricing model. As of December 31, 2018, the assumptions used to estimate the fair value of the HEXO warrants are as follows:



Expected term (years)	2.75
Estimated volatility	88.71	%
Risk-free interest rate	2.04	%
Expected dividend yield	—	%

The expected term is based on the contractual maturity date of the warrants. Estimated volatility is based on a blend of implied volatility along with historical volatility levels of peer companies. The risk-free rate utilized is based on a zero-coupon Canadian Treasury security yield with a remaining term equal to the expected term of the warrants. The expected dividend yield is determined by historical dividend levels.

The table below summarizes our derivative assets and liabilities that were measured at fair value as of December 31, 2018, and December 31, 2017. See Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" for further discussion related to measuring the fair value of derivative instruments.



				Fair Value Measurements as of December 31, 2018
	Total as of December 31, 2018			Quoted prices in active markets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(In millions)
Cross currency swaps	$	36.5		$	—	$	36.5		$	—
Interest rate swaps	(12.3		)	—		(12.3		)	—
Foreign currency forwards	16.3			—		16.3			—
Commodity swaps and options	(42.0		)	—		(42.0		)	—
Warrants	19.6			—		19.6			—
Total	$	18.1		$	—	$	18.1		$	—



				Fair Value Measurements as of December 31, 2017
	Total as of December 31, 2017			Quoted prices in active markets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(In millions)
Foreign currency forwards	$	(10.9	)	$	—	$	(10.9	)	$	—
Commodity swaps and options	122.8			—		122.8			—
Total	$	111.9		$	—	$	111.9		$	—

As of December 31, 2018 and December 31, 2017, we had no significant transfers between Level 1 and Level 2. New derivative contracts transacted during 2018 were all included in Level 2.

Results of Period Derivative Activity

The following tables include the year-to-date results of our derivative activity in our consolidated balance sheets as of December 31, 2018, and December 31, 2017, and our consolidated statements of operations for the years ended December 31, 2018, December 31, 2017, and December 31, 2016, respectively.

Fair Value of Derivative Instruments in the Consolidated Balance Sheets (in millions):



	December 31, 2018
			Asset derivatives			Liability derivatives
	Notional amount		Balance sheet location	Fair value		Balance sheet location	Fair value
Derivatives designated as hedging instruments:
Cross currency swaps	$	500.0	Other non-current assets	$	36.5	Other liabilities	$	—
Interest rate swaps	$	1,500.0	Other non-current assets	—		Other liabilities	(12.3		)
Foreign currency forwards	$	338.6	Other current assets	7.3		Accounts payable and other current liabilities	(0.1		)
			Other non-current assets	9.2		Other liabilities	(0.1		)
Total derivatives designated as hedging instruments				$	53.0		$	(12.5	)
Derivatives not designated as hedging instruments:
Commodity swaps(1)	$	868.4	Other current assets	$	12.1	Accounts payable and other current liabilities	$	(37.9	)
			Other non-current assets	6.1		Other liabilities	(22.3		)
Commodity options(1)	$	46.6	Other current assets	0.1		Accounts payable and other current liabilities	(0.1		)
Warrants	$	50.6	Other non-current assets	19.6		Other liabilities	—
Total derivatives not designated as hedging instruments				$	37.9		$	(60.3	)



	December 31, 2017
			Asset derivatives			Liability derivatives
	Notional amount		Balance sheet location	Fair value		Balance sheet location	Fair value
Derivatives designated as hedging instruments:
Foreign currency forwards	$	326.4	Other current assets	$	0.4	Accounts payable and other current liabilities	$	(6.1	)
			Other non-current assets	0.2		Other liabilities	(5.4		)
Total derivatives designated as hedging instruments				$	0.6		$	(11.5	)
Derivatives not designated as hedging instruments:
Commodity swaps(1)	$	765.0	Other current assets	$	70.8	Accounts payable and other current liabilities	$	(7.3	)
			Other non-current assets	63.5		Other liabilities	(4.2		)
Commodity options(1)	$	30.6	Other current and non-current assets	0.2		Accounts payable and other current liabilities and other liabilities	(0.2		)
Total derivatives not designated as hedging instruments				$	134.5		$	(11.7	)


(1)	Notional includes offsetting buy and sell positions, shown in terms of absolute value. Buy and sell positions are shown gross in the asset and/or liability position, as appropriate.

Items Designated and Qualifying as Hedged Items in Fair Value Hedging Relationships in the Consolidated Balance Sheets (in millions):



Line item in the balance sheet in which the hedged item is included		Carrying amount of the hedged assets/liabilities			Cumulative amount of fair value hedging adjustment(s) in the hedged assets/liabilities(1) Increase/(Decrease)
	As of December 31, 2018			As of December 31, 2018
		(In millions)
Current portion of long-term debt and short-term borrowings		$	—		$	(0.2	)
Long-term debt		$	—		$	8.3

(1) Entire balances relate to hedging adjustments on discontinued hedging relationships.

The Pretax Effect of Fair Value and Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income (in millions):



For the year ended December 31, 2018
Derivatives in cash flow hedge relationships	Amount of gain (loss) recognized in OCI on derivative			Location of gain (loss) reclassified from AOCI into income	Amount of gain (loss) recognized from AOCI on derivative
Forward starting interest rate swaps	$	(12.3	)	Interest expense	$	(3.0	)
Foreign currency forwards	26.8			Cost of goods sold	(0.2		)
				Other income (expense), net	(0.2		)
Total	$	14.5			$	(3.4	)



For the year ended December 31, 2018
Derivatives in net investment hedge relationships	Amount of gain (loss) recognized in OCI on derivative		Location of gain (loss) reclassified from AOCI into income	Amount of gain (loss) recognized from AOCI on derivative		Location of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)	Amount of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)(1)
Cross currency swaps	$	36.5	Interest expense	$	—	Interest expense	$	10.7
Total	$	36.5		$	—		$	10.7


(1)	Represents amounts excluded from the assessment of effectiveness for which the difference between changes in fair value and period amortization is recorded in other comprehensive income.



For the year ended December 31, 2018
Non-derivative financial instruments in net investment hedge relationships	Amount of gain (loss) recognized in OCI on derivative		Location of gain (loss) reclassified from AOCI into income	Amount of gain (loss) recognized from AOCI on derivative		Location of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)	Amount of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)
EUR 800 million notes due 2024	$	43.0	Other income (expense), net	$	—	Other income (expense), net	$	—
EUR 500 million notes due 2019	26.9		Other income (expense), net	—		Other income (expense), net	—
Total	$	69.9		$	—		$	—



For the year ended December 31, 2017
Derivatives in cash flow hedge relationships	Amount of gain (loss) recognized in OCI on derivative (effective portion)			Location of gain (loss) reclassified from AOCI into income (effective portion)	Amount of gain (loss) recognized from AOCI on derivative (effective portion)			Location of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	Amount of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)
Forward starting interest rate swaps	$	—		Interest expense	$	(3.7	)	Interest expense	$	—
Foreign currency forwards	(22.7		)	Cost of goods sold	3.7			Cost of goods sold	—
				Other income (expense), net	(2.0		)	Other income (expense), net	—
Total	$	(22.7	)		$	(2.0	)		$	—



For the year ended December 31, 2017
Non-derivative financial instruments in net investment hedge relationships	Amount of gain (loss) recognized in OCI on derivative (effective portion)			Location of gain (loss) reclassified from AOCI into income (effective portion)	Amount of gain (loss) recognized from AOCI on derivative (effective portion)		Location of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	Amount of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)
EUR 800 million notes due 2024	$	(119.0	)	Other income (expense), net	$	—	Other income (expense), net	$	—
EUR 500 million notes due 2019	(63.6		)	Other income (expense), net	—		Other income (expense), net	—
Total	$	(182.6	)		$	—		$	—



For the year ended December 31, 2017
Derivatives in fair value hedge relationship	Amount of gain (loss) recognized in income on derivative			Location of gain (loss) recognized in income
Interest rate swaps	$	(3.5	)	Interest expense
Total	$	(3.5	)



For the year ended December 31, 2016
Derivatives in cash flow hedge relationships	Amount of gain (loss) recognized in OCI on derivative (effective portion)			Location of gain (loss) reclassified from AOCI into income (effective portion)	Amount of gain (loss) recognized from AOCI on derivative (effective portion)			Location of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	Amount of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)
Forward starting interest rate swaps	$	—		Interest expense	$	(3.8	)	Interest expense	$	—
Foreign currency forwards	(23.7		)	Cost of goods sold	14.4			Cost of goods sold	—
				Other income (expense), net	(7.2		)	Other income (expense), net	—
Total	$	(23.7	)		$	3.4			$	—



For the year ended December 31, 2016
Non-derivative financial instruments in net investment hedge relationships	Amount of gain (loss) recognized in OCI on derivative (effective portion)		Location of gain (loss) reclassified from AOCI into income (effective portion)	Amount of gain (loss) recognized from AOCI on derivative (effective portion)		Location of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	Amount of gain (loss) recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)
EUR 800 million notes due 2024	$	43.7	Other income (expense), net	$	—	Other income (expense), net	$	—
Total	$	43.7		$	—		$	—

We expect net gains of approximately $4 million (pretax) recorded in AOCI as of December 31, 2018, will be reclassified into earnings within the next 12 months. For derivatives designated in cash flow hedge relationships, the maximum length of time over which forecasted transactions are hedged as of December 31, 2018, is approximately 8 years.

The Effect of Fair Value and Cash Flow Hedge Accounting on the Consolidated Statements of Operations (in millions):



	Location and amount of gain (loss) recognized in income on fair value and cash flow hedging relationships
	For the year ended December 31, 2018
	Cost of goods sold			Other income (expense), net			Interest expense
Total amount of income and expense line items presented in the consolidated statement of operations in which the effects of fair value or cash flow hedges are recorded	$	(6,584.8	)	$	(12.0	)	$	(306.2	)
Gain (loss) on cash flow hedging relationships:
Forward starting interest rate swaps
Amount of gain (loss) reclassified from accumulated other comprehensive income into income	$	—		$	—		$	(3.0	)
Foreign currency forwards
Amount of gain (loss) reclassified from accumulated other comprehensive income into income	$	(0.2	)	$	(0.2	)	$	—

The Effect of Derivatives Not Designated as Hedging Instruments on the Consolidated Statements of Operations (in millions):



For the year ended December 31, 2018
Derivatives not in hedging relationship	Location of gain (loss) recognized in income on derivative	Amount of gain (loss) recognized in income on derivative
Commodity swaps	Cost of goods sold	$	(110.5	)
Warrants	Other income (expense), net	(23.8		)
Total		$	(134.3	)



For the year ended December 31, 2017
Derivatives not in hedging relationship	Location of gain (loss) recognized in income on derivative	Amount of gain (loss) recognized in income on derivative
Commodity swaps	Cost of goods sold	$	150.1
Foreign currency swaps	Other income (expense), net	(8.3		)
Total		$	141.8



For the year ended December 31, 2016
Derivatives not in hedging relationship	Location of gain (loss) recognized in income on derivative	Amount of gain (loss) recognized in income on derivative
Commodity swaps	Cost of goods sold	$	13.0
Commodity options	Cost of goods sold	(0.7		)
Foreign currency swaps	Other income (expense), net	(4.3		)
Swaption	Interest expense	(36.4		)
Total		$	(28.4	)

Lower commodity prices relative to our hedged positions, primarily in aluminum, during 2018 drove the total loss recognized in income related to commodity swaps for the year end December 31, 2018. Contrarily, higher commodity prices, also primarily in aluminum, during 2017 resulted in the total gain recognized in income related to commodity swaps for the year ended December 31, 2017.

Accounts Payable and Other Current Liabilities



	As of
	December 31, 2018		December 31, 2017
	(In millions)
Accounts payable and accrued trade payables	$	1,616.8	$	1,568.6
Accrued compensation	224.6		262.4
Accrued excise and other non-income related taxes	244.1		292.9
Accrued interest	112.6		116.1
Accrued selling and marketing costs	120.0		92.0
Container liability	163.0		146.0
Other(1)	225.3		206.5
Accounts payable and other current liabilities	$	2,706.4	$	2,684.5


(1)	Includes current liabilities related to derivatives, income taxes, pensions and other postretirement benefits and other accrued expenses.

Commitments and Contingencies

Letters of Credit

As of December 31, 2018, we had $64.5 million outstanding in letters of credit with financial institutions. These letters primarily expire throughout 2019 and $19.4 million of the letters contain a feature that automatically renews the letter for an additional year if no cancellation notice is submitted. These letters of credit are being maintained as security for deferred compensation payments, reimbursements to insurance companies, reimbursements to the trustee for pension payments, deductibles or retention payments made on our behalf, various payments due to governmental agencies, operations of underground storage tanks and other general business purposes, and are not included on our consolidated balance sheets.

Guarantees and Indemnities

We guarantee indebtedness and other obligations to banks and other third parties for some of our equity method investments and consolidated subsidiaries. As of December 31, 2018, and December 31, 2017, the consolidated balance sheets include liabilities related to these guarantees of $35.9 million and $42.8 million, respectively, primarily related to the guarantee of the indebtedness of our equity method investments. See Note 4, "Acquisition and Investments" for further detail.

Kaiser

In 2006, we sold our entire equity interest in our Brazilian unit, Cervejarias Kaiser Brasil S.A. ("Kaiser") to FEMSA Cerveza S.A. de C.V. ("FEMSA"). The terms of the sale agreement require us to indemnify FEMSA for certain exposures related to tax, civil and labor contingencies arising prior to FEMSA's purchase of Kaiser. In addition, we provided an indemnity to FEMSA for losses Kaiser may incur with respect to tax claims associated with certain previously utilized purchased tax credits. We settled a portion of our tax credit indemnity obligation during 2010. The maximum potential claims amount for the remainder of the purchased tax credits (which we believe present less risk than those previously settled), was $90.2 million as

of December 31, 2018. Our total estimate of the indemnity liability as of December 31, 2018, was $10.3 million, of which $4.2 million was classified as a current liability, and $6.1 million classified as non-current.

Our estimates consider a number of scenarios for the ultimate resolution of these issues, the probabilities of which are influenced not only by legal developments in Brazil but also by management's intentions with regard to various alternatives that could present themselves leading to the ultimate resolution of these issues. The liabilities are impacted by changes in estimates regarding amounts that could be paid, the timing of such payments, adjustments to the probabilities assigned to various scenarios and foreign currency exchange rates. Our indemnity also covers fees and expenses that Kaiser incurs to manage the cases through the administrative and judicial systems.

Additionally, we also provided FEMSA with indemnity related to all other tax, civil, and labor contingencies existing as of the date of sale. In this regard, however, FEMSA assumed their full share of all of these contingent liabilities that had been previously recorded and disclosed by us prior to the sale on January 13, 2006. However, we may have to provide indemnity to FEMSA if those contingencies settle at amounts greater than those amounts previously recorded or disclosed by us. We will be able to offset any indemnity exposures in these circumstances with amounts that settle favorably to amounts previously recorded. Our exposure related to these indemnity claims is capped at the amount of the sales price of the 68% equity interest of Kaiser, which was $68.0 million. As a result of these contract provisions, our estimates include not only probability-weighted potential cash outflows associated with indemnity provisions, but also probability-weighted cash inflows that could result from favorable settlements, which could occur through negotiation or settlement programs arising from the federal or any of the various state governments in Brazil. The recorded value of the tax, civil, and labor indemnity liability was $4.4 million as of December 31, 2018, which is classified as non-current. For the remaining portion of our indemnity obligations, not deemed probable, we continue to utilize probability-weighted scenarios in determining the value of the indemnity obligations.

Future settlement procedures and related negotiation activities associated with these contingencies are largely outside of our control. The sale agreement requires annual cash settlements relating to the tax, civil, and labor indemnities. Indemnity obligations related to purchased tax credits must be settled upon notification of FEMSA's settlement. Due to the uncertainty involved with the ultimate outcome and timing of these contingencies, significant adjustments to the carrying values of the indemnity obligations have been recorded to date, and additional future adjustments may be required. These liabilities are denominated in Brazilian Reais and are therefore, subject to foreign exchange gains or losses. As a result, these foreign exchange gains and losses are the only impacts recorded within other income (expense), net.

The table below provides a summary of reserves associated with the Kaiser indemnity obligations from December 31, 2015, through December 31, 2018:



	Total indemnity reserves
	(In millions)
Balance as of December 31, 2015	$	14.4
Changes in estimates	—
Foreign exchange impacts	3.2
Balance as of December 31, 2016	$	17.6
Changes in estimates	—
Foreign exchange impacts	(0.3		)
Balance as of December 31, 2017	$	17.3
Changes in estimates	—
Foreign exchange impacts	(2.6		)
Balance as of December 31, 2018	$	14.7

Purchase Obligations

We have various long-term supply contracts and distribution agreements with unaffiliated third parties and our joint venture partners to purchase materials used in production and packaging and to provide distribution services. The supply contracts provide that we purchase certain minimum levels of materials throughout the terms of the contracts. Additionally, we have various long-term non-cancelable commitments for advertising, sponsorships and promotions, including marketing at sports arenas, stadiums and other venues and events. The future aggregate minimum required commitments under these purchase obligations are shown in the table below based on foreign exchange rates as of December 31, 2018. The amounts in the table do not represent all anticipated payments under long-term contracts. Rather, they represent unconditional, non-cancelable purchase commitments under contracts with remaining terms greater than one year.



Year	Supply and Distribution		Advertising and Promotions
	(Amounts in millions)
2019	$	445.4	$	142.3
2020	400.5		104.4
2021	345.5		66.3
2022	316.5		48.9
2023	217.0		35.5
Thereafter	1.3		88.1
Total	$	1,726.2	$	485.5

Total purchases under our supply and distribution contracts in 2018, 2017 and 2016 were approximately $1.1 billion, $1.2 billion and $910.7 million, respectively. Total advertising expense was approximately $1.2 billion, $1.3 billion and $644.1 million in 2018, 2017 and 2016, respectively.

Leases

We lease certain office facilities and operating equipment under cancelable and non-cancelable agreements accounted for as operating leases. Additionally, we lease certain buildings and equipment which are accounted for as capital leases. Gross assets recorded under capital leases as of December 31, 2018, and December 31, 2017, were $82.5 million and $71.4 million, respectively. The associated accumulated amortization on these assets as of December 31, 2018, and December 31, 2017, was $13.2 million and $9.0 million, respectively. These amounts are recorded within properties on the consolidated balance sheets. Based on foreign exchange rates as of December 31, 2018, future minimum lease payments under operating leases that have initial or remaining non-cancelable terms in excess of one year, as well as capital leases, are as follows:



Year	Operating Leases		Capital Leases
	(Amounts in millions)
2019	$	49.4	$	6.1
2020	40.2		36.2
2021	32.6		5.9
2022	24.6		5.9
2023	17.0		5.8
Thereafter	21.0		64.2
Total future minimum lease payments	$	184.8	$	124.1
Less: Interest on capital leases			(38.8		)
Present value of future minimum capital lease payments(1)			$	85.3

(1) Includes current portion of $3.2 million. Current and non-current capital lease obligations are recorded within accounts payable and other current liabilities, and other liabilities on the consolidated balance sheets, respectively.

Total rent expense was $66.1 million, $64.1 million and $36.6 million in 2018, 2017 and 2016, respectively.

Litigation and Other Disputes and Environmental

Related to litigation, other disputes and environmental issues, we have accrued an aggregate of $13.7 million as of December 31, 2018, and $17.8 million as of December 31, 2017. While we cannot predict the eventual aggregate cost for litigation, other disputes and environmental matters in which we are currently involved, we believe adequate reserves have been provided for losses that are probable and estimable. Further, we believe that any payments, if required, for these matters would be made over a period of time in amounts that would not be material in any one year to our results from operations, cash flows or our financial or competitive position. Additionally, we believe that any reasonably possible losses in excess of the amounts accrued are immaterial to our consolidated financial statements, except as otherwise noted.

We are involved in other disputes and legal actions arising in the ordinary course of our business. While it is not feasible to predict or determine the outcome of these proceedings, in our opinion, based on a review with legal counsel, other than as noted, none of these disputes or legal actions are expected to have a material impact on our business, consolidated financial position, results of operations or cash flows. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business.

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 $139.0 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. In April 2017, a local jurisdictional court ruled in our favor. 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 year ended December 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.

On February 12, 2018, Stone Brewing Company filed a trademark infringement lawsuit in federal court in the Southern District of California against MillerCoors LLC alleging that the Keystone brand has “rebranded” itself as “Stone” and is marketing itself in a manner confusingly similar to Stone Brewing Company's registered Stone trademark. Stone Brewing Company seeks treble damages in the amount of MillerCoors’ profit from Keystone sales. MillerCoors subsequently filed an answer and counterclaims against Stone Brewing Company. On May 31, 2018, Stone Brewing Company filed motions to dismiss and for a preliminary injunction seeking to bar MillerCoors from continuing to use “STONE” on Keystone Light cans and related marketing materials. We are currently awaiting the court decision regarding the motions to dismiss and preliminary injunction. We intend to vigorously assert and defend our rights in this lawsuit. A range of potential loss is not estimable at this time.

In December 2018, the U.S. Department of Treasury issued a regulation that impacts our ability to claim a refund of certain federal duties, taxes, and fees paid for beer sold between the U.S. and certain other countries effective in February 2019. As a result, future claims will no longer be accepted, and we may be further unable to collect historically claimed, but not yet received, refunds of approximately $38 million, which are recorded within other non-current assets on our consolidated balance sheet as of December 31, 2018.

Environmental

When we determine it is probable that a liability for environmental matters or other legal actions exists and the amount of the loss is reasonably estimable, an estimate of the future costs is recorded as a liability in the financial statements. Costs that extend the life, increase the capacity or improve the safety or efficiency of our assets or are incurred to mitigate or prevent future environmental contamination may be capitalized. Other environmental costs are expensed when incurred. Total environmental expenditures recognized as other expense for 2018, 2017 and 2016 were immaterial to our consolidated financial statements.

Canada

Our Canada brewing operations are subject to provincial environmental regulations and local permit requirements. Our Montréal and Toronto breweries have water treatment facilities to pre-treat waste water before it goes to the respective local governmental facility for final treatment. We have environmental programs in Canada including organization, monitoring and verification, regulatory compliance, reporting, education and training, and corrective action.

We sold a chemical specialties business in 1996. We are still responsible for certain aspects of environmental remediation, undertaken or planned, at those chemical specialties business locations. We have established provisions for the costs of these remediation programs.

United States

We were previously notified that we are or may be a potentially responsible party ("PRP") under the Comprehensive Environmental Response, Compensation and Liability Act or similar state laws for the cleanup of sites where hazardous substances have allegedly been released into the environment. We cannot predict with certainty the total costs of cleanup, our share of the total cost, the extent to which contributions will be available from other parties, the amount of time necessary to complete the cleanups or insurance coverage.

Lowry

We are one of a number of entities named by the Environmental Protection Agency ("EPA") as a PRP at the Lowry Superfund site. This landfill is owned by the City and County of Denver ("Denver") and is managed by Waste Management of Colorado, Inc. ("Waste Management"). In 1990, we recorded a pretax charge of $30 million, a portion of which was put into a trust in 1993 as part of a settlement with Denver and Waste Management regarding the then-outstanding litigation. Our settlement was based on an assumed remediation cost of $120 million (in 1992 adjusted dollars). We are obligated to pay a portion of future costs, if any, in excess of that amount.

Waste Management provides us with updated annual cost estimates through 2032. We review these cost estimates in the assessment of our accrual related to this issue. Our expected liability (based on the $120 million threshold being met) is based on our best estimates available.

Based on the assumptions utilized, the present value and gross amount of the costs as of December 31, 2018, are approximately $5 million and $7 million, respectively. Cost estimates were discounted using a 2.86% risk-free rate of return. We did not assume any future recoveries from insurance companies in the estimate of our liability, and none are expected.

Considering the estimates extend through the year 2032 and the related uncertainties at the site, including what additional remedial actions may be required by the EPA, new technologies and what costs are included in the determination of when the $120 million is reached, the estimate of our liability may change as further facts develop. We cannot predict the amount of any such change, but additional accruals in the future are possible.

Other

In prior years, we were notified by the EPA and certain state environmental divisions that we are a PRP, along with other parties, at the East Rutherford and Berry's Creek sites in New Jersey and the Chamblee site in Georgia. Certain former non-beer business operations, which we discontinued use of and subsequently sold, were involved at these sites. Potential losses associated with these sites could increase as remediation planning progresses.

We are aware of groundwater contamination at some of our properties in Colorado resulting from historical, ongoing, or nearby activities. There may also be other contamination of which we are currently unaware.

Europe and International

We are subject to the requirements of governmental and local environmental and occupational health and safety laws and regulations within each of the countries in which we operate. Compliance with these laws and regulations did not materially affect our 2018 capital expenditures, results of operations or our financial or competitive position, and we do not anticipate that they will do so in 2019.

Supplemental Guarantor Information

For purposes of this Note 19, including the tables, "Parent Issuer" shall mean MCBC. "Subsidiary Guarantors" shall mean certain Canadian and U.S. subsidiaries reflecting the substantial operations of each of our Canada and U.S. segments.

SEC Registered Securities

On May 3, 2012, MCBC issued $1.9 billion of senior notes, in a registered public offering, consisting of $300 million 2.0% senior notes due 2017 (subsequently repaid in the second quarter of 2017), $500 million 3.5% senior notes due 2022, and $1.1 billion 5.0% senior notes due 2042. Additionally, on July 7, 2016, MCBC issued the 2016 USD Notes and the 2016 EUR Notes, in a registered public offering. In December 2017, MCBC completed an exchange offer in which it issued publicly registered senior notes in exchange for its $500 million 1.90% senior notes due 2019, $500 million 2.25% senior notes due

2020 and our EUR 500 million floating rate senior notes due 2019, which were issued in private placement transactions in March 2017. "Parent Issuer" in the below tables is specifically referring to MCBC in its capacity as the issuer of these 2012, 2016 and 2017 issuances. These senior notes are guaranteed on a senior unsecured basis by the Subsidiary Guarantors. Each of the Subsidiary Guarantors is 100% owned by the Parent Issuer. The guarantees are full and unconditional and joint and several.

None of our other outstanding debt is registered with the SEC, and such other outstanding debt is guaranteed on a senior unsecured basis by the Parent and/or Subsidiary Guarantors. These guarantees are full and unconditional and joint and several. See Note 11, "Debt" for details of all debt issued and outstanding as of December 31, 2018.

Restatement of Previously Issued Consolidated Financial Statements for Income Tax Accounting Errors

As a result of the restatement to correct errors related to income tax accounting discussed in Note 1, "Basis of Presentation and Summary of Significant Accounting Policies," we have restated our supplemental guarantor condensed consolidating statements of operations for the years ended December 31, 2017 and 2016, and condensed consolidating balance sheet as of December 31, 2017. The errors did not impact the total net cash flows from operating, investing or financing activities in the condensed consolidating statement of cash flows.

See Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" for further discussion of these corrections. The impacts to the guarantor condensed consolidating financial statements are included in the tables below.



	Year ended
	December 31, 2017
	Parent Issuer		Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
	(In millions)
Condensed Consolidating Statement of Operations:
As Reported
Equity income (loss) in subsidiaries	$	1,850.4	$	(285.7	)	$	193.4		$	(1,758.1	)	$	—
Operating income (loss)	$	1,584.6	$	1,481.2		$	370.0		$	(1,758.1	)	$	1,677.7
Income (loss) before income taxes	$	1,267.7	$	1,937.0		$	(63.4	)	$	(1,758.1	)	$	1,383.2
Income tax benefit (expense)	$	146.5	$	(86.6	)	$	(6.7	)	$	—		$	53.2
Net income (loss)	$	1,414.2	$	1,850.4		$	(70.1	)	$	(1,758.1	)	$	1,436.4
Net income (loss) attributable to MCBC	$	1,414.2	$	1,850.4		$	(92.3	)	$	(1,758.1	)	$	1,414.2
Comprehensive income (loss) attributable to MCBC	$	2,126.0	$	2,634.4		$	376.8		$	(3,011.2	)	$	2,126.0
As Restated
Equity income (loss) in subsidiaries	$	2,001.8	$	(285.7	)	$	193.4		$	(1,909.5	)	$	—
Operating income (loss)	$	1,736.0	$	1,481.2		$	370.0		$	(1,909.5	)	$	1,677.7
Income (loss) before income taxes	$	1,419.1	$	1,937.0		$	(63.4	)	$	(1,909.5	)	$	1,383.2
Income tax benefit (expense)	$	146.5	$	64.8		$	(6.7	)	$	—		$	204.6
Net income (loss)	$	1,565.6	$	2,001.8		$	(70.1	)	$	(1,909.5	)	$	1,587.8
Net income (loss) attributable to MCBC	$	1,565.6	$	2,001.8		$	(92.3	)	$	(1,909.5	)	$	1,565.6
Comprehensive income (loss) attributable to MCBC	$	2,277.4	$	2,785.8		$	376.8		$	(3,162.6	)	$	2,277.4



	Year ended
	December 31, 2016
	Parent Issuer		Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
	(In millions)
Condensed Consolidating Statement of Operations:
As Reported
Equity income (loss) in subsidiaries	$	2,268.8	$	(340.4	)	$	(119.1	)	$	(1,809.3	)	$	—
Operating income (loss)	$	2,044.8	$	3,170.2		$	(83.1	)	$	(1,809.3	)	$	3,322.6
Income (loss) before income taxes	$	1,780.6	$	3,374.7		$	(291.9	)	$	(1,809.3	)	$	3,054.1
Income tax benefit (expense)	$	212.4	$	(1,108.0	)	$	(159.6	)	$	—		$	(1,055.2	)
Net income (loss)	$	1,993.0	$	2,266.7		$	(451.5	)	$	(1,809.3	)	$	1,998.9
Net income (loss) attributable to MCBC	$	1,993.0	$	2,266.7		$	(457.4	)	$	(1,809.3	)	$	1,993.0
Comprehensive income (loss) attributable to MCBC	$	2,125.3	$	2,362.5		$	(705.9	)	$	(1,656.6	)	$	2,125.3
As Restated
Equity income (loss) in subsidiaries	$	1,869.7	$	(340.4	)	$	(119.1	)	$	(1,410.2	)	$	—
Operating income (loss)	$	1,645.7	$	3,170.2		$	(83.1	)	$	(1,410.2	)	$	3,322.6
Income (loss) before income taxes	$	1,381.5	$	3,374.7		$	(291.9	)	$	(1,410.2	)	$	3,054.1
Income tax benefit (expense)	$	212.4	$	(1,507.1	)	$	(159.6	)	$	—		$	(1,454.3	)
Net income (loss)	$	1,593.9	$	1,867.6		$	(451.5	)	$	(1,410.2	)	$	1,599.8
Net income (loss) attributable to MCBC	$	1,593.9	$	1,867.6		$	(457.4	)	$	(1,410.2	)	$	1,593.9
Comprehensive income (loss) attributable to MCBC	$	1,726.2	$	1,963.4		$	(705.9	)	$	(1,257.5	)	$	1,726.2



	As of
	December 31, 2017
	Parent Issuer		Subsidiary Guarantors		Subsidiary Non Guarantors		Eliminations			Consolidated
	(In millions)
Condensed Consolidating Balance Sheets:
As Reported
Net investment in and advances to subsidiaries	$	26,443.9	$	4,297.4	$	4,683.1	$	(35,424.4	)	$	—
Total assets	$	26,677.0	$	30,289.1	$	11,135.1	$	(37,854.3	)	$	30,246.9
Deferred tax liabilities	$	—	$	864.7	$	845.0	$	(61.1	)	$	1,648.6
Total liabilities	$	13,452.1	$	5,382.9	$	8,351.9	$	(10,375.0	)	$	16,811.9
MCBC stockholders' equity	$	13,226.1	$	31,275.5	$	4,148.9	$	(35,424.4	)	$	13,226.1
Total stockholders' equity	$	13,224.9	$	24,906.2	$	2,574.3	$	(27,479.3	)	$	13,226.1
Total equity	$	13,224.9	$	24,906.2	$	2,783.2	$	(27,479.3	)	$	13,435.0
Total liabilities and equity	$	26,677.0	$	30,289.1	$	11,135.1	$	(37,854.3	)	$	30,246.9
As Restated
Net investment in and advances to subsidiaries	$	26,196.2	$	4,297.4	$	4,683.1	$	(35,176.7	)	$	—
Total assets	$	26,429.3	$	30,289.1	$	11,135.1	$	(37,606.6	)	$	30,246.9
Deferred tax liabilities	$	—	$	1,112.4	$	845.0	$	(61.1	)	$	1,896.3
Total liabilities	$	13,452.1	$	5,630.6	$	8,351.9	$	(10,375.0	)	$	17,059.6
MCBC stockholders' equity	$	12,978.4	$	31,027.8	$	4,148.9	$	(35,176.7	)	$	12,978.4
Total stockholders' equity	$	12,977.2	$	24,658.5	$	2,574.3	$	(27,231.6	)	$	12,978.4
Total equity	$	12,977.2	$	24,658.5	$	2,783.2	$	(27,231.6	)	$	13,187.3
Total liabilities and equity	$	26,429.3	$	30,289.1	$	11,135.1	$	(37,606.6	)	$	30,246.9

Presentation

Certain amounts have been revised to reflect the new accounting pronouncements recently adopted as discussed in Note 2, "New Accounting Pronouncements."

Effective January 1, 2018, MillerCoors USA LLC, a new entity with no historic activity, was added as a subsidiary guarantor. In addition, effective December 26, 2017, our historical subsidiary guarantor, Jacob Leinenkugel Brewing Co., LLC, was merged with and into the existing subsidiary guarantor, MillerCoors LLC, and, on January 1, 2018, our historical subsidiary guarantors MillerCoors Holdings LLC and MC Holding Company LLC were also merged with and into MillerCoors LLC, a subsidiary guarantor.

In the first quarter of 2018, MillerCoors LLC, a subsidiary guarantor, declared a distribution of approximately $1.7 billion to Molson Coors Brewing Company, which was simultaneously non-cash settled via offset to an equal amount of payables that were owed by Molson Coors Brewing Company to MillerCoors LLC.

The following information sets forth the condensed consolidating statements of operations for the years ended December 31, 2018, December 31, 2017, and December 31, 2016, condensed consolidating balance sheets as of December 31, 2018, and December 31, 2017, and condensed consolidating statements of cash flows for the years ended December 31, 2018, December 31, 2017, and December 31, 2016. Investments in subsidiaries are accounted for under the equity method; accordingly, entries necessary to consolidate the Parent Issuer and all of our guarantor and non-guarantor subsidiaries are reflected in the eliminations column. In the opinion of management, separate complete financial statements of MCBC and the Subsidiary Guarantors would not provide additional material information that would be useful in assessing their financial composition.

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(IN MILLIONS)



	Year ended
	December 31, 2018
	Parent Issuer			Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
Sales	$	162.5		$	10,118.0		$	3,739.8		$	(682.3	)	$	13,338.0
Excise taxes	—			(1,420.3		)	(1,148.1		)	—			(2,568.4		)
Net sales	162.5			8,697.7			2,591.7			(682.3		)	10,769.6
Cost of goods sold	(2.0		)	(5,242.6		)	(1,800.3		)	460.1			(6,584.8		)
Gross profit	160.5			3,455.1			791.4			(222.2		)	4,184.8
Marketing, general and administrative expenses	(305.5		)	(2,041.0		)	(678.4		)	222.2			(2,802.7		)
Special items, net	(1.7		)	270.6			(19.2		)	—			249.7
Equity income (loss) in subsidiaries	1,367.8			(126.5		)	131.4			(1,372.7		)	—
Operating income (loss)	1,221.1			1,558.2			225.2			(1,372.7		)	1,631.8
Other income (expense), net
Interest income (expense), net	(323.2		)	342.7			(317.7		)	—			(298.2		)
Other pension and postretirement benefits (costs), net	(0.1		)	5.4			32.9			—			38.2
Other income (expense), net	(0.1		)	(57.3		)	45.4			—			(12.0		)
Total other income (expense), net	(323.4		)	290.8			(239.4		)	—			(272.0		)
Income (loss) before income taxes	897.7			1,849.0			(14.2		)	(1,372.7		)	1,359.8
Income tax benefit (expense)	218.8			(480.8		)	36.8			—			(225.2		)
Net income (loss)	1,116.5			1,368.2			22.6			(1,372.7		)	1,134.6
Net (income) loss attributable to noncontrolling interests	—			—			(18.1		)	—			(18.1		)
Net income (loss) attributable to MCBC	$	1,116.5		$	1,368.2		$	4.5		$	(1,372.7	)	$	1,116.5
Comprehensive income (loss) attributable to MCBC	$	826.5		$	1,061.9		$	(122.8	)	$	(939.1	)	$	826.5

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(IN MILLIONS)



	Year ended
	December 31, 2017
	As Restated
	Parent Issuer			Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
Sales	$	21.8		$	10,457.9		$	3,513.7		$	(521.9	)	$	13,471.5
Excise taxes	—			(1,475.1		)	(993.6		)	—			(2,468.7		)
Net sales	21.8			8,982.8			2,520.1			(521.9		)	11,002.8
Cost of goods sold	(2.0		)	(5,020.3		)	(1,701.4		)	487.0			(6,236.7		)
Gross profit	19.8			3,962.5			818.7			(34.9		)	4,766.1
Marketing, general and administrative expenses	(284.8		)	(2,165.8		)	(636.3		)	34.9			(3,052.0		)
Special items, net	(0.8		)	(29.8		)	(5.8		)	—			(36.4		)
Equity income (loss) in subsidiaries	2,001.8			(285.7		)	193.4			(1,909.5		)	—
Operating income (loss)	1,736.0			1,481.2			370.0			(1,909.5		)	1,677.7
Other income (expense), net
Interest income (expense), net	(308.4		)	275.6			(310.5		)	—			(343.3		)
Other pension and postretirement benefits (costs), net	—			1.3			46.1			—			47.4
Other income (expense), net	(8.5		)	178.9			(169.0		)	—			1.4
Total other income (expense), net	(316.9		)	455.8			(433.4		)	—			(294.5		)
Income (loss) before income taxes	1,419.1			1,937.0			(63.4		)	(1,909.5		)	1,383.2
Income tax benefit (expense)	146.5			64.8			(6.7		)	—			204.6
Net income (loss)	1,565.6			2,001.8			(70.1		)	(1,909.5		)	1,587.8
Net (income) loss attributable to noncontrolling interests	—			—			(22.2		)	—			(22.2		)
Net income (loss) attributable to MCBC	$	1,565.6		$	2,001.8		$	(92.3	)	$	(1,909.5	)	$	1,565.6
Comprehensive income (loss) attributable to MCBC	$	2,277.4		$	2,785.8		$	376.8		$	(3,162.6	)	$	2,277.4

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

(IN MILLIONS)



	Year ended
	December 31, 2016
	As Restated
	Parent Issuer			Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
Sales	$	26.5		$	3,742.8		$	3,044.3		$	(216.2	)	$	6,597.4
Excise taxes	—			(661.4		)	(1,051.0		)	—			(1,712.4		)
Net sales	26.5			3,081.4			1,993.3			(216.2		)	4,885.0
Cost of goods sold	—			(1,831.8		)	(1,352.8		)	185.6			(2,999.0		)
Gross profit	26.5			1,249.6			640.5			(30.6		)	1,886.0
Marketing, general and administrative expenses	(249.5		)	(805.2		)	(573.1		)	30.6			(1,597.2		)
Special items, net	(1.0		)	2,565.3			(31.4		)	—			2,532.9
Equity income (loss) in subsidiaries	1,869.7			(340.4		)	(119.1		)	(1,410.2		)	—
Equity income in MillerCoors	—			500.9			—			—			500.9
Operating income (loss)	1,645.7			3,170.2			(83.1		)	(1,410.2		)	3,322.6
Other income (expense), net
Interest income (expense), net	(202.1		)	268.9			(311.2		)	—			(244.4		)
Other pension and postretirement benefits (costs), net	(0.1		)	(3.5		)	12.0			—			8.4
Other income (expense), net	(62.0		)	(60.9		)	90.4			—			(32.5		)
Total other income (expense), net	(264.2		)	204.5			(208.8		)	—			(268.5		)
Income (loss) before income taxes	1,381.5			3,374.7			(291.9		)	(1,410.2		)	3,054.1
Income tax benefit (expense)	212.4			(1,507.1		)	(159.6		)	—			(1,454.3		)
Net income (loss)	1,593.9			1,867.6			(451.5		)	(1,410.2		)	1,599.8
Net (income) loss attributable to noncontrolling interests	—			—			(5.9		)	—			(5.9		)
Net income (loss) attributable to MCBC	$	1,593.9		$	1,867.6		$	(457.4	)	$	(1,410.2	)	$	1,593.9
Comprehensive income (loss) attributable to MCBC	$	1,726.2		$	1,963.4		$	(705.9	)	$	(1,257.5	)	$	1,726.2

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(IN MILLIONS)



	As of
	December 31, 2018
	Parent Issuer			Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	515.8		$	156.1		$	386.0		$	—		$	1,057.9
Accounts receivable, net	—			427.3			317.1			—			744.4
Other receivables, net	50.0			48.3			28.3			—			126.6
Inventories, net	—			451.6			140.2			—			591.8
Other current assets, net	3.0			157.2			85.4			—			245.6
Intercompany accounts receivable	—			2,366.0			31.0			(2,397.0		)	—
Total current assets	568.8			3,606.5			988.0			(2,397.0		)	2,766.3
Properties, net	19.0			3,427.5			1,161.8			—			4,608.3
Goodwill	—			6,444.0			1,816.8			—			8,260.8
Other intangibles, net	6.0			11,800.0			1,970.4			—			13,776.4
Net investment in and advances to subsidiaries	25,475.0			3,893.2			4,579.7			(33,947.9		)	—
Other assets	159.9			193.2			436.0			(91.1		)	698.0
Total assets	$	26,228.7		$	29,364.4		$	10,952.7		$	(36,436.0	)	$	30,109.8
Liabilities and equity
Current liabilities:
Accounts payable and other current liabilities	$	170.8		$	1,651.0		$	884.6		$	—		$	2,706.4
Current portion of long-term debt and short-term borrowings	1,572.6			—			21.9			—			1,594.5
Intercompany accounts payable	1,836.5			120.9			439.6			(2,397.0		)	—
Total current liabilities	3,579.9			1,771.9			1,346.1			(2,397.0		)	4,300.9
Long-term debt	7,765.6			1,097.4			30.8			—			8,893.8
Pension and postretirement benefits	3.2			711.2			12.2			—			726.6
Deferred tax liabilities	—			1,461.1			758.9			(91.1		)	2,128.9
Other liabilities	26.0			199.3			98.5			—			323.8
Intercompany notes payable	1,347.6			63.6			5,998.6			(7,409.8		)	—
Total liabilities	12,722.3			5,304.5			8,245.1			(9,897.9		)	16,374.0
MCBC stockholders' equity	13,507.4			30,057.5			3,890.4			(33,947.9		)	13,507.4
Intercompany notes receivable	(1.0		)	(5,997.6		)	(1,411.2		)	7,409.8			—
Total stockholders' equity	13,506.4			24,059.9			2,479.2			(26,538.1		)	13,507.4
Noncontrolling interests	—			—			228.4			—			228.4
Total equity	13,506.4			24,059.9			2,707.6			(26,538.1		)	13,735.8
Total liabilities and equity	$	26,228.7		$	29,364.4		$	10,952.7		$	(36,436.0	)	$	30,109.8

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS

(IN MILLIONS)



	As of
	December 31, 2017
	As Restated
	Parent Issuer			Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	6.6		$	140.9		$	271.1		$	—		$	418.6
Accounts receivable, net	—			424.8			309.0			—			733.8
Other receivables, net	90.4			45.2			32.6			—			168.2
Inventories, net	—			457.7			133.8			—			591.5
Other current assets, net	9.6			184.8			83.2			—			277.6
Intercompany accounts receivable	—			2,303.2			65.6			(2,368.8		)	—
Total current assets	106.6			3,556.6			895.3			(2,368.8		)	2,189.7
Properties, net	16.8			3,509.8			1,147.1			—			4,673.7
Goodwill	—			6,487.8			1,917.7			—			8,405.5
Other intangibles, net	8.0			12,183.8			2,104.7			—			14,296.5
Net investment in and advances to subsidiaries	26,196.2			4,297.4			4,683.1			(35,176.7		)	—
Other assets	101.7			253.7			387.2			(61.1		)	681.5
Total assets	$	26,429.3		$	30,289.1		$	11,135.1		$	(37,606.6	)	$	30,246.9
Liabilities and equity
Current liabilities:
Accounts payable and other current liabilities	$	180.4		$	1,648.9		$	855.2		$	—		$	2,684.5
Current portion of long-term debt and short-term borrowings	379.0			317.8			18.0			—			714.8
Intercompany accounts payable	2,131.8			102.8			134.2			(2,368.8		)	—
Total current liabilities	2,691.2			2,069.5			1,007.4			(2,368.8		)	3,399.3
Long-term debt	9,399.7			1,189.5			9.5			—			10,598.7
Pension and postretirement benefits	2.9			832.1			13.5			—			848.5
Deferred tax liabilities	—			1,112.4			845.0			(61.1		)	1,896.3
Other liabilities	10.7			200.1			106.0			—			316.8
Intercompany notes payable	1,347.6			227.0			6,370.5			(7,945.1		)	—
Total liabilities	13,452.1			5,630.6			8,351.9			(10,375.0		)	17,059.6
MCBC stockholders' equity	12,978.4			31,027.8			4,148.9			(35,176.7		)	12,978.4
Intercompany notes receivable	(1.2		)	(6,369.3		)	(1,574.6		)	7,945.1			—
Total stockholders' equity	12,977.2			24,658.5			2,574.3			(27,231.6		)	12,978.4
Noncontrolling interests	—			—			208.9			—			208.9
Total equity	12,977.2			24,658.5			2,783.2			(27,231.6		)	13,187.3
Total liabilities and equity	$	26,429.3		$	30,289.1		$	11,135.1		$	(37,606.6	)	$	30,246.9

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(IN MILLIONS)



	Year ended
	December 31, 2018
	Parent Issuer			Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	1,199.8		$	1,044.6		$	331.7		$	(244.8	)	$	2,331.3
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to properties	(11.1		)	(440.5		)	(200.1		)	—			(651.7		)
Proceeds from sales of properties and other assets	—			23.4			9.1			—			32.5
Other	—			(0.6		)	(49.3		)	—			(49.9		)
Net intercompany investing activity	46.3			(35.4		)	176.4			(187.3		)	—
Net cash provided by (used in) investing activities	35.2			(453.1		)	(63.9		)	(187.3		)	(669.1		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options under equity compensation plans	16.0			—			—			—			16.0
Dividends paid	(325.2		)	(56.4		)	(217.4		)	244.8			(354.2		)
Payments on debt and borrowings	—			(307.3		)	(12.5		)	—			(319.8		)
Debt issuance costs	(0.5		)	—			—			—			(0.5		)
Net proceeds from (payments on) revolving credit facilities and commercial paper	(378.4		)	—			4.1			—			(374.3		)
Other	(5.1		)	(8.5		)	37.5			—			23.9
Net intercompany financing activity	(32.6		)	(199.9		)	45.2			187.3			—
Net cash provided by (used in) financing activities	(725.8		)	(572.1		)	(143.1		)	432.1			(1,008.9		)
CASH AND CASH EQUIVALENTS:
Net increase (decrease) in cash and cash equivalents	509.2			19.4			124.7			—			653.3
Effect of foreign exchange rate changes on cash and cash equivalents	—			(4.2		)	(9.8		)	—			(14.0		)
Balance at beginning of year	6.6			140.9			271.1			—			418.6
Balance at end of period	$	515.8		$	156.1		$	386.0		$	—		$	1,057.9

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(IN MILLIONS)



	Year ended
	December 31, 2017
	Parent Issuer			Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	792.5		$	1,474.7		$	818.5		$	(1,219.4	)	$	1,866.3
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to properties	(12.1		)	(428.6		)	(158.9		)	—			(599.6		)
Proceeds from sales of properties and other assets	—			4.4			56.1			—			60.5
Other	—			0.4			0.5			—			0.9
Net intercompany investing activity	72.1			21.1			(254.4		)	161.2			—
Net cash provided by (used in) investing activities	60.0			(402.7		)	(356.7		)	161.2			(538.2		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options under equity compensation plans	4.0			—			—			—			4.0
Dividends paid	(324.0		)	(809.5		)	(439.3		)	1,219.4			(353.4		)
Payments on debt and borrowings	(2,600.0		)	(398.4		)	(1.7		)	—			(3,000.1		)
Proceeds on debt and borrowings	1,536.0			—			—			—			1,536.0
Debt issuance costs	(7.0		)	—			—			—			(7.0		)
Net proceeds from (payments on) revolving credit facilities and commercial paper	378.5			—			(4.2		)	—			374.3
Other	(12.9		)	(11.1		)	(26.2		)	—			(50.2		)
Net intercompany financing activity	32.2			149.1			(20.1		)	(161.2		)	—
Net cash provided by (used in) financing activities	(993.2		)	(1,069.9		)	(491.5		)	1,058.2			(1,496.4		)
CASH AND CASH EQUIVALENTS:
Net increase (decrease) in cash and cash equivalents	(140.7		)	2.1			(29.7		)	—			(168.3		)
Effect of foreign exchange rate changes on cash and cash equivalents	—			(2.7		)	28.7			—			26.0
Balance at beginning of year	147.3			141.5			272.1			—			560.9
Balance at end of period	$	6.6		$	140.9		$	271.1		$	—		$	418.6

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(IN MILLIONS)



	Year ended
	December 31, 2016
	Parent Issuer			Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	666.6		$	579.4		$	245.3		$	(364.4	)	$	1,126.9
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to properties	(14.3		)	(164.1		)	(163.4		)	—			(341.8		)
Proceeds from sales of properties and other assets	—			159.0			15.5			—			174.5
Payment for completion of Acquisition, net of cash acquired	—			(11,972.6		)	11.6			—			(11,961.0		)
Investment in MillerCoors	—			(1,253.7		)	—			—			(1,253.7		)
Return of capital from MillerCoors	—			1,086.9			—			—			1,086.9
Other	—			1.9			6.6			—			8.5
Net intercompany investing activity	(11,260.0		)	(1,429.1		)	(1,425.7		)	14,114.8			—
Net cash provided by (used in) investing activities	(11,274.3		)	(13,571.7		)	(1,555.4		)	14,114.8			(12,286.6		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net	2,525.6			—			—			—			2,525.6
Exercise of stock options under equity compensation plans	11.2			—			—			—			11.2
Dividends paid	(322.2		)	(355.7		)	(39.4		)	364.4			(352.9		)
Payments on debt and borrowings	(200.0		)	(0.2		)	(23.7		)	—			(223.9		)
Proceeds on debt and borrowings	8,667.6			768.8			24.2			—			9,460.6
Debt issuance costs	(56.2		)	(4.5		)	—			—			(60.7		)
Net proceeds from (payments on) revolving credit facilities and commercial paper	—			—			(1.1		)	—			(1.1		)
Other	(17.4		)	—			(23.5		)	—			(40.9		)
Net intercompany financing activity	—			12,624.9			1,489.9			(14,114.8		)	—
Net cash provided by (used in) financing activities	10,608.6			13,033.3			1,426.4			(13,750.4		)	11,317.9
CASH AND CASH EQUIVALENTS:
Net increase (decrease) in cash and cash equivalents	0.9			41.0			116.3			—			158.2
Effect of foreign exchange rate changes on cash and cash equivalents	—			(5.7		)	(22.5		)	—			(28.2		)
Balance at beginning of year	146.4			106.2			178.3			—			430.9
Balance at end of period	$	147.3		$	141.5		$	272.1		$	—		$	560.9

Quarterly Financial Information (Unaudited)

The 2017 quarterly information reflects retrospective adjustments for the adoption of the new accounting guidance related to defined benefit pension and other postretirement plans as discussed in Note 2, "New Accounting Pronouncements."



	First Quarter						Second Quarter						Third Quarter						Fourth Quarter
	2018			2017			2018			2017 As Revised			2018			2017 As Revised			2018			2017 As Restated
	(In millions, except per share data)
Sales	$	2,868.0		$	2,913.8		$	3,820.5		$	3,793.1		$	3,625.1		$	3,552.9		$	3,024.4		$	3,211.7
Excise taxes	(536.5		)	(465.1		)	(735.3		)	(701.8		)	(690.9		)	(669.7		)	(605.7		)	(632.1		)
Net sales	2,331.5			2,448.7			3,085.2			3,091.3			2,934.2			2,883.2			2,418.7			2,579.6
Cost of goods sold	(1,535.7		)	(1,372.3		)	(1,739.1		)	(1,755.5		)	(1,714.0		)	(1,589.1		)	(1,596.0		)	(1,519.8		)
Gross profit	$	795.8		$	1,076.4		$	1,346.1		$	1,335.8		$	1,220.2		$	1,294.1		$	822.7		$	1,059.8
Amounts attributable to Molson Coors Brewing Company:
Net income (loss) attributable to Molson Coors Brewing Company	$	278.1		$	208.5		$	424.1		$	327.0		$	338.3		$	313.2		$	76.0		$	716.9
Basic net income (loss) attributable to Molson Coors Brewing Company per share	$	1.29		$	0.97		$	1.96		$	1.52		$	1.57		$	1.45		$	0.35		$	3.33
Diluted net income (loss) attributable to Molson Coors Brewing Company per share	$	1.28		$	0.96		$	1.96		$	1.51		$	1.56		$	1.45		$	0.35		$	3.31

The sum of the quarterly net income per share amounts may not agree to the full-year net income per share amounts. We calculate net income per share based on the weighted-average number of outstanding shares during the reporting period. The average number of shares fluctuates throughout the year and can therefore produce a full-year result that does not agree to the sum of the individual quarters.

Correction of Previously Issued Unaudited Condensed Consolidated Financial Statements for Income Tax Accounting Errors

As a result of the corrections of the income tax accounting errors discussed in Note 1, "Basis of Presentation and Summary of Significant Accounting Policies," we have corrected our previously disclosed unaudited condensed consolidated statements of operations for the three month and year-to-date periods ended June 30, 2017, September 30, 2017, and December 31, 2017, and the unaudited condensed consolidated balance sheets as of the end of each of the quarterly periods in 2017 and 2018. Specifically, in addition to the impacts of the errors described in Note 1, "Basis of Presentation and Summary of Significant Accounting Policies," we have further corrected our 2017 unaudited interim financial statements to increase the deferred tax liability and corresponding deferred tax expense by $2.9 million for the three months ended June 30, 2017, and to decrease the deferred tax liability and corresponding deferred tax expense by $26.2 million and $128.1 million for the three months ended September 30, 2017, and December 31, 2017, respectively. There was no impact of the corrections on the unaudited condensed consolidated statements of operations for the three months ended March 31, 2017, or for the three months and year-to-date periods ended March 31, 2018, June 30, 2018, and September 30, 2018. We assessed the applicable guidance issued by the SEC and the FASB and concluded that these errors in the 2017 and 2018 quarterly and year-to-date financial statements were not material, individually or in the aggregate, to MCBC’s previously issued unaudited interim condensed consolidated financial statements for the applicable interim periods included in our Quarterly Reports on Form 10-Q for the aforementioned quarterly periods. The errors in the three months ended December 31, 2017, were material and as such are described as restated.

The revision of our previously issued unaudited condensed consolidated financial statements for the three months ended March 31, 2018, three and six months ended June 30, 2018, and the three and nine months ended September 30, 2018, will be affected in connection with our quarterly filings for the quarters ending March 31, June 30, and September 30, 2019, respectively.



	As of
	March 31, 2018				June 30, 2018				September 30, 2018
	As Reported		As Revised		As Reported		As Revised		As Reported		As Revised
	(In millions)
Consolidated Balance Sheets:
Deferred tax liabilities	$	1,688.7	$	1,936.4	$	1,771.0	$	2,018.7	$	1,853.6	$	2,101.3
Total liabilities	$	16,521.0	$	16,768.7	$	16,764.3	$	17,012.0	$	16,380.3	$	16,628.0
Retained earnings	$	7,367.9	$	7,120.2	$	7,703.5	$	7,455.8	$	7,953.2	$	7,705.5
Total Molson Coors Brewing Company stockholders' equity	$	13,445.9	$	13,198.2	$	13,576.6	$	13,328.9	$	13,864.1	$	13,616.4
Total equity	$	13,663.5	$	13,415.8	$	13,796.6	$	13,548.9	$	14,090.0	$	13,842.3



	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended						Three Months Ended
	June 30, 2017						June 30, 2017						September 30, 2017						September 30, 2017						December 31, 2017
	As Reported			As Revised			As Reported			As Revised			As Reported			As Revised			As Reported			As Revised			As Reported		As Restated
	(In millions)
Consolidated Statements of Operations:
Income tax benefit (expense)	$	(125.2	)	$	(128.1	)	$	(191.1	)	$	(194.0	)	$	(147.4	)	$	(121.2	)	$	(338.5	)	$	(315.2	)	$	391.7	$	519.8
Net income (loss)	$	335.0		$	332.1		$	550.0		$	547.1		$	293.1		$	319.3		$	843.1		$	866.4		$	593.3	$	721.4
Net income (loss) attributable to Molson Coors Brewing Company	$	329.9		$	327.0		$	538.4		$	535.5		$	287.0		$	313.2		$	825.4		$	848.7		$	588.8	$	716.9
Basic net income (loss) attributable to Molson Coors Brewing Company per share	$	1.53		$	1.52		$	2.50		$	2.49		$	1.33		$	1.45		$	3.83		$	3.94		$	2.73	$	3.33
Diluted net income (loss) attributable to Molson Coors Brewing Company per share	$	1.52		$	1.51		$	2.49		$	2.47		$	1.33		$	1.45		$	3.81		$	3.92		$	2.72	$	3.31



	As of
	March 31, 2017				June 30, 2017				September 30, 2017
	As Reported		As Revised		As Reported		As Revised		As Reported		As Revised
	(In millions)
Consolidated Balance Sheets:
Deferred tax liabilities	$	1,762.6	$	2,161.7	$	1,865.2	$	2,267.2	$	1,932.4	$	2,308.2
Total liabilities	$	17,732.3	$	18,131.4	$	17,812.2	$	18,214.2	$	17,980.2	$	18,356.0
Retained earnings	$	6,265.5	$	5,866.4	$	6,507.1	$	6,105.1	$	6,705.8	$	6,330.0
Total Molson Coors Brewing Company stockholders' equity	$	11,602.9	$	11,203.8	$	12,105.5	$	11,703.5	$	12,503.0	$	12,127.2
Total equity	$	11,814.9	$	11,415.8	$	12,315.4	$	11,913.4	$	12,711.4	$	12,335.6

Previous: Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK · Next: Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE