Molson Coors Beverage 10-Q 2023-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2023

Commission File Number: 1-14829

Molson Coors Beverage Company

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

P.O. Box 4030, BC555, Golden, Colorado, USA

111 Boulevard Robert-Bourassa, 9th Floor, Montréal, Québec, Canada

(Address of principal executive offices)

84-0178360

(I.R.S. Employer Identification No.)

80401

H3C 2M1

(Zip Code)

303-279-6565 (Colorado)

514-521-1786 (Québec)

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý Accelerated filer o Non-accelerated filer o Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of October 26, 2023:

Class A Common Stock — 2,600,910 shares

Class B Common Stock — 200,955,118 shares

Exchangeable shares:

As of October 26, 2023, the following number of exchangeable shares were outstanding for Molson Coors Canada, Inc.:

Class A Exchangeable shares — 2,678,963 shares

Class B Exchangeable shares — 9,462,866 shares

The Class A exchangeable shares and Class B exchangeable shares are shares of the share capital in Molson Coors Canada Inc., a wholly-owned subsidiary of the registrant. They are publicly traded on the Toronto Stock Exchange under the symbols TPX.A and TPX.B, respectively. These shares are intended to provide substantially the same economic and voting rights as the corresponding class of Molson Coors common stock in which they may be exchanged. In addition to the registered Class A common stock and the Class B common stock, the registrant has also issued and outstanding one share each of a Special Class A voting stock and Special Class B voting stock. The Special Class A voting stock and the Special Class B voting stock provide the mechanism for holders of Class A exchangeable shares and Class B exchangeable shares to be provided instructions to vote with the holders of the Class A common stock and the Class B common stock, respectively. The holders of the Special Class A voting stock and Special Class B voting stock are entitled to one vote for each outstanding Class A exchangeable share and Class B exchangeable share, respectively, excluding shares held by the registrant or its subsidiaries, and generally vote together with the Class A common stock and Class B common stock, respectively, on all matters on which the Class A common stock and Class B common stock are entitled to vote. The Special Class A voting stock and Special Class B voting stock are subject to a voting trust arrangement. The trustee which holds the Special Class A voting stock and the Special Class B voting stock is required to cast a number of votes equal to the number of then-outstanding Class A exchangeable shares and Class B exchangeable shares, respectively, but will only cast a number of votes equal to the number of Class A exchangeable shares and Class B exchangeable shares as to which it has received voting instructions from the owners of record of those Class A exchangeable shares and Class B exchangeable shares, other than the registrant or its subsidiaries, respectively, on the record date, and will cast the votes in accordance with such instructions so received.

MOLSON COORS BEVERAGE COMPANY AND SUBSIDIARIES

INDEX

Glossary of Terms and Abbreviations

Cautionary Statement Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995

This Quarterly Report on Form 10-Q ("this report") contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). From time to time, we may also provide oral or written forward-looking statements in other materials we release to the public. Such forward-looking statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995.

Statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements, and include, but are not limited to, statements in Part I.—Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations in this report under the heading "Items Affecting Reported Results", with respect to expectations of cost inflation, limited consumer disposable income, consumer preferences, overall volume and market share trends, pricing trends, industry forces, cost reduction strategies, shipment levels and profitability, the sufficiency of capital resources, anticipated results, expectations for funding future capital expenditures and operations, debt service capabilities, timing and amounts of debt and leverage levels, market share and expectations regarding future dividends. In addition, statements that we make in this report that are not statements of historical fact may also be forward-looking statements. Words such as "expects," "intend," "goals," "plans," "believes," "continues," "may," "anticipate," "seek," "estimate," "outlook," "trends," "future benefits," "potential," "projects," "strategies" and variations of such words and similar expressions are intended to identify forward-looking statements.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those indicated (both favorably and unfavorably). These risks and uncertainties include, but are not limited to, those described in Part II.— Item IA. "Risk Factors" in this report and those described from time to time in our past and future reports filed with the SEC, including in our Annual Report on Form 10-K for the year ended December 31, 2022 ("Annual Report"). Caution should be taken not to place undue reliance on any such forward-looking statements. Forward-looking statements speak only as of the date when made and we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

Market and Industry Data

The market and industry data used in this report are based on independent industry publications, customers, trade or business organizations, reports by market research firms and other published statistical information from third parties (collectively, the “Third Party Information”), as well as information based on management’s good faith estimates, which we derive from our review of internal information and independent sources. Such Third Party Information generally states that the information contained therein or provided by such sources has been obtained from sources believed to be reliable.

PART I. FINANCIAL INFORMATION

MOLSON COORS BEVERAGE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN MILLIONS, EXCEPT PER SHARE DATA)

(UNAUDITED)

See notes to unaudited condensed consolidated financial statements.

MOLSON COORS BEVERAGE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(IN MILLIONS)

(UNAUDITED)

See notes to unaudited condensed consolidated financial statements.

MOLSON COORS BEVERAGE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN MILLIONS, EXCEPT PAR VALUE)

(UNAUDITED)

Showing the first 8K of 116K characters. Open the full section

Overview

For more than two centuries, we have been brewing beverages that unite people to celebrate all life’s moments. From Coors Light, Miller Lite, Molson Canadian, Carling, Ozujsko and Staropramen to Coors Banquet, Blue Moon Belgian White, Vizzy Hard Seltzer, Leinenkugel’s Summer Shandy, Miller High Life and more, we produce many beloved and iconic beer brands. While our Company's history is rooted in beer, we offer a modern portfolio that expands beyond the beer aisle as well. As a business, our ambition is to be the first choice for our people, our consumers and our customers, and our success depends on our ability to make our products available to meet a wide range of consumer segments and occasions.

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") in this Quarterly Report on Form 10-Q is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements, the accompanying notes and the MD&A included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 ("Annual Report"), as well as our unaudited condensed consolidated financial statements and the accompanying notes included in this report. Due to the seasonality of our operating results, quarterly financial results are not necessarily indicative of the results that may be achieved for the full year or any other future period.

Unless otherwise noted in this report, any description of "we," "us" or "our" includes Molson Coors Beverage Company ("MCBC" or the "Company"), principally a holding company, and its operating and non-operating subsidiaries included within our reporting segments. Our reporting segments include Americas and EMEA&APAC. Our Americas segment operates in the U.S., Canada and various countries in the Caribbean, Latin and South America and our EMEA&APAC segment operates in Bulgaria, Croatia, Czech Republic, Hungary, Montenegro, the Republic of Ireland, Romania, Serbia, the U.K., various other European countries, and certain countries within the Middle East, Africa and Asia Pacific.

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

Items Affecting Reported Results

Items Affecting Consolidated Results of Operations

Cost Inflation

We have continued to incur significant cost inflation, including materials and manufacturing expenses, which negatively impacted our results of operations for the three and nine months ended September 30, 2023, although we have experienced some moderation in the recent period. While cost inflation has been high in all of our markets, the impact to COGS on a percentage basis was higher for our EMEA&APAC segment than our Americas segment. In addition, consumers in certain markets in our EMEA&APAC segment continued to be impacted by local inflation leading to a reduction in their discretionary purchases. We continue to see the expected moderation of cost inflation in the second half of 2023 and we will continue to monitor the inflationary environment going forward.

To the extent materials and manufacturing prices continue to fluctuate, our business and financial results could continue to be materially adversely impacted. We continue to monitor these risks and rely on our risk management hedging program, increased pricing to our customers, our premiumization strategy and cost savings programs to help mitigate some of the inflationary pressures. Even if we are able to raise the prices of our products, consumers might react negatively to such price increases, which could have a material adverse effect on, among other things, our brands, reputation and sales. If our competitors maintain or substantially lower their prices, we may lose customers or be forced to lower prices to remain competitive. Our profitability may be impacted by prices that do not offset the inflationary pressures, which would negatively impact gross margins. In addition, even if we increase the prices of our products in response to increases in the cost of commodities or other cost increases, we may not be able to sustain our price increases or customers may trade down to cheaper alternatives.

Items Affecting Americas Segment Results of Operations

Truss Impairment and Sale

During the three months ended September 30, 2023, we sold our controlling interest in Truss and recognized a loss of $11.1 million. During the first quarter of 2022, we recognized an impairment loss of $28.6 million related to the Truss joint venture asset group within other operating income (expense), net, of which $12.1 million was attributable to the noncontrolling interest. See Part I.—Item 1. Financial Statements, Note 12, "Other Operating Income (Expense), net" and Note 3, "Investments" for further information.

Montreal/Longueuil, Québec Brewery and Distribution Centers Labor Strike

From late March 2022 until June 2022, approximately 400 unionized employees in our Montreal/Longueuil, Québec brewery and distribution centers went on strike which adversely affected our business and operations. Over the course of the third quarter of 2022, we recovered from the strike by rebuilding inventory and replenishing our retailers' shelves. As the brewery had not yet fully recovered until the end of the third quarter, results for the third quarter of 2022 were further impacted by the strike.

Keystone Litigation

During the first quarter of 2022, we accrued a liability of $56.0 million within MG&A expenses related to probable losses as a result of the ongoing Keystone litigation case. During the three and nine months ended September 30, 2023, we accrued $0.5 million and $1.5 million in associated interest related to this accrued liability, respectively. See Part I. - Item 1. Financial Statements, Note 10, "Commitments and Contingencies" for further information.

Items Affecting EMEA&APAC Segment Results of Operations

Russia-Ukraine Conflict

In February 2022, Russia invaded Ukraine and the conflict remains ongoing. As a result of the invasion, we suspended exports of all our brands to Russia and subsequently terminated the license to produce any of our brands in Russia. While not material to our consolidated net sales, the Russia-Ukraine conflict negatively impacted our EMEA&APAC segment net sales for the nine months ended September 30, 2023. In addition, the Russia-Ukraine conflict has caused a negative impact to the global economy which has impacted our Company, driving further increases to materials and manufacturing expenses as discussed in more detail above.

India Entity Sale

During the first quarter of 2022, we completed the sale of our non-operating India entity in our EMEA&APAC segment resulting in an insignificant loss on disposal recorded within other operating income (expense), net in the unaudited condensed consolidated statements of operations. The disposal group had previously been classified as held for sale during the fourth quarter of 2021.

Consolidated Results of Operations

The following table highlights summarized components of our unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2023 and September 30, 2022. See Part I.—Item 1. Financial Statements for additional details of our U.S. GAAP results.

N/M = Not meaningful

Foreign currency impacts on results

During the three months ended September 30, 2023, foreign currency movements had the following impacts on our USD consolidated results:

• Net sales - Favorable impact of $39.5 million (favorable impact for EMEA&APAC of $49.5 million, partially offset by unfavorable impact for Americas of $10.0 million).

• Cost of goods sold - Unfavorable impact of $25.2 million (unfavorable impact for EMEA&APAC of $32.4 million, partially offset by favorable impact for Americas and Unallocated of $6.6 million and $0.6 million, respectively).

• MG&A - Unfavorable impact of $9.8 million (unfavorable impact for EMEA&APAC of $12.0 million, partially offset by favorable impact for Americas of $2.2 million).

• Income (loss) before income taxes - Favorable impact of $1.3 million (favorable impact for EMEA&APAC and Unallocated of $3.4 million and $3.1 million, respectively, partially offset by unfavorable impact for Americas of $5.2 million).

The impacts of foreign currency movements on our consolidated USD results described above for the three months ended September 30, 2023 were primarily due to the weakening of the USD as compared to certain currencies throughout Europe, partially offset by the strength of the USD as compared to the CAD.

During the nine months ended September 30, 2023, foreign currency movements had the following impacts on our USD consolidated results:

• Net sales - Unfavorable impact of $19.9 million (unfavorable impact for Americas of $45.8 million, partially offset by favorable impact for EMEA&APAC of $25.9 million).

• Cost of goods sold - Favorable impact of $21.9 million (favorable impact for Americas and Unallocated of $34.4 million and $2.2 million, respectively, partially offset by unfavorable impact for EMEA&APAC of $14.7 million).

• MG&A - Favorable impact of $9.3 million (favorable impact for Americas of $13.9 million, partially offset by unfavorable impact for EMEA&APAC of $4.6 million).

• Income (loss) before income taxes - Favorable impact of $11.9 million (favorable impact for Unallocated and EMEA&APAC of $7.1 million and $5.4 million, respectively, partially offset by unfavorable impact for Americas of $0.6 million).

The impacts of foreign currency movements on our consolidated USD results described above for the nine months ended September 30, 2023 were primarily due to the strength of the USD as compared to the CAD, partially offset by the weakening of the USD as compared to certain currencies throughout Europe.

Included in these amounts are both translational and transactional impacts of changes in foreign exchange rates. We calculate the impact of foreign exchange by translating our current period local currency results at the average exchange rates used to translate the financial statements in the comparable prior year period during the respective period throughout the year and comparing that amount with the reported amount for the period. The impact of transactional foreign currency gains and losses, including the impact of undesignated foreign currency forwards, is recorded within other non-operating income (expense), net in our unaudited condensed consolidated statements of operations.

Volume

Financial volume represents owned or actively managed brands sold to unrelated external customers within our geographic markets (net of returns and allowances), as well as contract brewing, wholesale/factored non-owned volume and company-owned distribution volume. This metric is presented on an STW basis to reflect the sales from our operations to our direct customers, generally distributors. We believe this metric is important and useful for investors and management because it gives an indication of the amount of beer and adjacent products that we have produced and shipped to customers. This metric excludes royalty volume, which consists of our brands produced and sold under various license and contract brewing agreements. Factored volume in our EMEA&APAC segment is the distribution of beer, wine, spirits and other products owned and produced by other companies to the on-premise channel, which is a common arrangement in the U.K.

We also utilize net sales per hectoliter and cost of goods sold per hectoliter, as well as the year over year changes in such metrics, as key metrics for analyzing our results. These metrics are calculated as net sales and cost of goods sold, respectively, per our consolidated statements of operations divided by financial volume for the respective period. We believe these metrics are important and useful for investors and management because they provide an indication of the trends in pricing and sales mix on our net sales and the trends of sales mix and other cost impacts such as inflation on our cost of goods sold.

Net Sales

The following table highlights the drivers of the change in net sales and net sales per hectoliter for the three months ended September 30, 2023 compared to September 30, 2022 (in percentages):

Net sales increased 12.4% for the three months ended September 30, 2023, compared to prior year, driven by favorable price and sales mix, higher financial volumes and favorable foreign currency impacts.

Financial volumes increased 3.2% for the three months ended September 30, 2023, compared to prior year, primarily due to higher financial volumes in the Americas segment, partially offset by a decrease in EMEA&APAC financial volumes.

Price and sales mix favorably impacted net sales and net sales per hectoliter for the three months ended September 30, 2023 by 7.8% and 7.6%, respectively, primarily due to increased net pricing including the rollover benefit of taking several price increases in the prior year, as well as favorable sales mix driven by geographic mix.

The following table highlights the drivers of the change in net sales and net sales per hectoliter for the nine months ended September 30, 2023 compared to September 30, 2022 (in percentages):

Net sales increased 10.4% for the nine months ended September 30, 2023, compared to prior year, driven by favorable price and sales mix as well as higher financial volumes, partially offset by unfavorable foreign currency impacts.

Financial volumes increased 2.1% for the nine months ended September 30, 2023, compared to prior year, primarily due to higher financial volumes in the Americas segment, partially offset by a decrease in EMEA&APAC financial volumes.

Price and sales mix favorably impacted net sales and net sales per hectoliter for the nine months ended September 30, 2023 by 8.6% and 8.3%, respectively, primarily due to increased net pricing including the rollover benefit of taking several price increases in the prior year, as well as favorable sales mix driven by geographic mix and premiumization.

A discussion of currency impacts on net sales is included in the "Foreign currency impact on results" section above.

Cost of goods sold

Cost of goods sold remained relatively flat for the three months ended September 30, 2023, compared to prior year, with higher financial volumes and unfavorable foreign currency impacts offset by lower cost of goods sold per hectoliter. Cost of goods sold per hectoliter decreased 3.0% for the three months ended September 30, 2023 compared to prior year, including the unfavorable impact of currency of 1.3%, primarily due to changes to our unrealized mark-to-market derivative positions of $133.4 million, cost savings initiatives and the benefits of volume leverage, partially offset by cost inflation related to materials and manufacturing expenses and unfavorable mix.

Cost of goods sold increased 4.4% for the nine months ended September 30, 2023, compared to prior year, primarily due to higher cost of goods sold per hectoliter and higher financial volumes, partially offset by favorable foreign currency impacts. Cost of goods sold per hectoliter increased 2.2% for the nine months ended September 30, 2023 compared to prior year, including the favorable impact of currency of 0.4%, primarily due to cost inflation related to materials and manufacturing expenses and unfavorable mix, partially offset by changes in our unrealized mark-to-market derivative positions of $120.9 million, our cost savings initiatives and volume leverage.

Marketing, general and administrative expenses

MG&A expenses increased 13.2% for the three months ended September 30, 2023 compared to prior year, primarily due to increased marketing investment on core brands and higher incentive compensation expense.

MG&A expenses increased 2.6% for the nine months ended September 30, 2023 compared to prior year, primarily due to higher incentive compensation expense and increased marketing investment on core and innovation brands, partially offset by cycling the recording of a $56.0 million accrued liability in the prior year related to potential losses as a result of the ongoing Keystone litigation case.

Other operating income (expense), net

See Part I.—Item 1. Financial Statements, Note 12, "Other Operating Income (Expense), net" for detail of our other operating income (expense), net.

Total non-operating income (expense), net

Total non-operating expense, net decreased 15.6% and 9.3% for the three and nine months ended September 30, 2023, compared to prior year, respectively, primarily due to lower net interest expense driven by higher interest income as well as the repayment of debt as a result of our continued deleveraging actions and the favorable impact of transactional foreign currency impacts, partially offset by lower pension and OPEB non-service net benefit, including the cycling of a prior year settlement gain recorded as a result of an annuity purchase for a portion of our U.S. pension plan.

Income taxes benefit (expense)

The higher effective tax rate for the three and nine months ended September 30, 2023 compared to the same periods in the prior year was primarily due to the impact of geographic mix with higher pretax income in higher tax rate jurisdictions, partially offset by the net effect of discrete tax items in the period. We recognized $15.5 million discrete tax benefit in the three months ended September 30, 2023 compared to $5.9 million discrete tax expense in the three months ended September 30, 2022. We recognized $7.6 million discrete tax benefit in the nine months ended September 30, 2023 compared to $2.7 million discrete tax expense in the nine months ended September 30, 2022.

Our tax rate can be volatile and may change with, among other things, the amount and source of pretax income or loss, our ability to utilize foreign tax credits, excess tax benefits or deficiencies from share-based compensation, changes in tax laws and the movement of liabilities established pursuant to accounting guidance for uncertain tax positions as statutes of limitations expire, positions are effectively settled, or when additional information becomes available. There are proposed or pending tax law changes in various jurisdictions and other changes to regulatory environments in countries in which we do business that, if enacted, could have an impact on our effective tax rate.

Refer to Part I.—Item 1. Financial Statements, Note 9, "Income Tax" for discussion regarding our effective tax rate.

Segment Results of Operations

Americas Segment

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

(2)Excludes royalty volume of 0.692 million hectoliters and 1.955 million hectoliters for the three and nine months ended September 30, 2023, respectively, and excludes royalty volume of 0.711 million hectoliters and 1.957 million hectoliters for the three and nine months ended September 30, 2022, respectively.

Net sales

The following table highlights the drivers of the change in net sales and net sales per hectoliter for the three months ended September 30, 2023 compared to September 30, 2022 (in percentages):

Net sales increased 10.8% for the three months ended September 30, 2023, compared to prior year, driven by increased net pricing as well as higher financial volumes, partially offset by unfavorable sales mix and unfavorable foreign currency impacts.

Financial volumes increased 6.6% for the three months ended September 30, 2023, compared to prior year, primarily due to an increase in U.S. domestic shipments driven by volume growth in our core brands. The increase in U.S. volume was impacted by the continued shifts in consumer purchasing behavior largely within the premium beer segment.

Price and sales mix favorably impacted net sales and net sales per hectoliter for the three months ended September 30, 2023 by 4.6% and 4.3%, respectively, primarily due to increased net pricing including the rollover benefit of several price increases taken in the previous year, partially offset by unfavorable sales mix.

The following table highlights the drivers of the change in net sales and net sales per hectoliter for the nine months ended September 30, 2023 compared to September 30, 2022 (in percentages):

Net sales increased 9.3% for the nine months ended September 30, 2023, compared to prior year, driven by favorable price and sales mix as well as higher financial volumes, partially offset by unfavorable foreign currency impacts.

Financial volumes increased 4.0% for the nine months ended September 30, 2023, compared to prior year, primarily due to an increase in U.S. domestic shipments driven by volume growth in our core brands and higher shipments in Canada mainly attributed to cycling the prior year impacts of the Québec labor strike, partially offset by lower Latin America volumes. The increase in U.S. volume was impacted by the continued shifts in consumer purchasing behavior largely within the premium beer segment.

Price and sales mix favorably impacted net sales and net sales per hectoliter for the nine months ended September 30, 2023 by 6.0% and 5.8%, respectively, primarily due to increased net pricing including the rollover benefit of several price increases taken in the previous year.

A discussion of currency impacts on net sales is included in the "Foreign currency impact on results" section above.

Income (loss) before income taxes

Income before income taxes improved 28.2% for the three months ended September 30, 2023 compared to prior year, primarily due to increased net pricing, higher financial volumes and lower logistics expenses, partially offset by cost inflation related to materials and manufacturing expenses, as well as higher MG&A expense and the loss on the sale of our controlling interest in the Truss joint venture in Canada. Higher MG&A spend was primarily due to increased marketing investment behind our core brands and higher incentive compensation expense.

Income before income taxes improved 48.3% for the nine months ended September 30, 2023 compared to prior year, primarily due to increased net pricing, higher financial volumes and lower logistics expenses, partially offset by cost inflation related to materials and manufacturing expenses, higher MG&A expense and the loss on the sale of our controlling interest in the Truss joint venture in Canada. Higher MG&A spend was primarily due to higher incentive compensation expense and increased marketing investment behind our core and innovation brands, partially offset by cycling the recording of a $56.0 million accrued liability related to potential losses as a result of the ongoing Keystone litigation case.

EMEA&APAC Segment

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

(2)Excludes royalty volume of 0.291 million hectoliters and 0.697 million hectoliters for the three and nine months ended September 30, 2023, respectively, and excludes royalty volume of 0.274 million hectoliters and 0.811 million hectoliters for the three and nine months ended September 30, 2022, respectively.

Net sales

The following table highlights the drivers of the change in net sales and net sales per hectoliter for the three months ended September 30, 2023 compared to September 30, 2022 (in percentages):

Net sales increased 19.2% for the three months ended September 30, 2023, compared to prior year driven by favorable price and sales mix as well as favorable foreign currency impacts, partially offset by a decline in financial volumes.

Financial volumes decreased 5.5% for the three months ended September 30, 2023, compared to prior year, in all regions throughout the segment driven by continued industry softness and inflationary pressures on the consumer in Central and Eastern Europe.

Price and sales mix favorably impacted net sales and net sales per hectoliter for the three months ended September 30, 2023 by 15.9% and 16.8%, respectively, primarily due to increased net pricing including the rollover benefits from price increases taken in the prior year and favorable sales mix.

The following table highlights the drivers of the change in net sales and net sales per hectoliter for the nine months ended September 30, 2023 compared to September 30, 2022 (in percentages):

Net sales increased 15.1% for the nine months ended September 30, 2023, compared to prior year driven by favorable price and sales mix as well as favorable foreign currency impacts, partially offset by a decline in financial volumes.

Financial volumes decreased 3.1% for the nine months ended September 30, 2023, compared to prior year, primarily due to declines in Central and Eastern Europe due to industry softness given the inflationary pressures on the consumer, partially offset by resilient demand and growth in above premium volumes in the U.K during the first half of the current year.

Price and sales mix favorably impacted net sales and net sales per hectoliter for the nine months ended September 30, 2023 by 16.5% and 17.0%, respectively, primarily due to increased net pricing including the rollover benefits from price increases taken in the previous year and favorable sales mix driven by geographic mix and premiumization.

A discussion of currency impacts on net sales is included in the "Foreign currency impact on results" section above.

Income (loss) before income taxes

Income before income taxes improved $21.1 million or 45.5% for the three months ended September 30, 2023, compared to the prior year, primarily due to increased net pricing to customers and favorable sales mix, partially offset by lower financial volumes and cost inflation on materials, logistics and manufacturing expenses.

Income before income taxes improved $57.7 million or 118.7% for the nine months ended September 30, 2023, compared to the prior year, primarily due to increased net pricing to customers and favorable sales mix, partially offset by lower financial volumes and cost inflation on materials, logistics and manufacturing expenses, as well as higher MG&A spend. Higher MG&A spend was primarily due to cost inflation as well as higher incentive compensation expense.

Unallocated

We have certain activity that is not allocated to our segments, which has been reflected as "Unallocated" below. Specifically, "Unallocated" activity primarily includes financing-related costs such as interest expense and income, foreign exchange gains and losses on intercompany balances and realized and unrealized changes in fair value on instruments not designated in hedging relationships related to financing and other treasury-related activities and 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. Additionally, only the service cost component of net periodic pension and OPEB cost is reported within each operating segment, and all other components remain unallocated.

Cost of goods sold

The unrealized changes in fair value on our commodity derivatives, which are economic hedges, make up substantially all of the activity presented within cost of goods sold in the table above for the three and nine months ended September 30, 2023 and September 30, 2022, respectively. As the exposure we are managing is realized, we reclassify the gain or loss on our commodity derivatives to the segment in which the underlying exposure resides, allowing our segments to realize the economic effects of the derivative without the resulting unrealized mark-to-market volatility. See Part I.—Item 1. Financial Statements, Note 8, "Derivative Instruments and Hedging Activities" for further information.

Total non-operating income (expense), net

Total non-operating income (expense), net decreased 5.6% and 3.4% for the three and nine months ended September 30, 2023, respectively, compared to prior year, primarily due to lower net interest expense and the favorable impact of transactional foreign currency, partially offset by lower pension and OPEB non-service net benefit including the cycling of a prior year settlement gain recorded as a result of an annuity purchase for a portion of our U.S. pension plan.

See Part I.—Item 1. Financial Statements, Note 7, "Debt" for further details on our debt instruments.

Liquidity and Capital Resources

Liquidity

Overview

Our primary sources of liquidity include cash provided by operating activities and access to external capital. We continue to monitor world events which may create credit or economic challenges that could adversely impact our profit or operating cash flows and our ability to obtain additional liquidity. We currently believe that our cash and cash equivalents, cash flows from operations and cash provided by short-term and long-term borrowings, when necessary, will be adequate to meet our ongoing operating requirements, scheduled principal and interest payments on debt, anticipated dividend payments, capital expenditures and other obligations for the twelve months subsequent to the date of the issuance of this quarterly report and our long-term liquidity requirements. We do not have any restrictions that prevent or limit our ability to declare or pay dividends.

While a significant portion of our cash flows from operating activities are generated within the U.S., our cash balances include cash held outside the U.S. and in currencies other than the USD. As of September 30, 2023, approximately 66% of our cash and cash equivalents were located outside the U.S., largely denominated in foreign currencies. Fluctuations in foreign currency exchange rates have had and may continue to have a material impact on these foreign cash balances. Cash balances in foreign countries are often subject to additional restrictions and covenants. We may, therefore, have difficulties timely repatriating cash held outside the U.S., and such repatriation may be subject to tax. These limitations may affect our ability to fully utilize our cash resources for needs in the U.S. and other countries and may adversely affect our liquidity. To the extent necessary, we accrue for tax consequences on the earnings of our foreign subsidiaries as they are earned. We may utilize tax

planning and financing strategies in an effort to ensure that our worldwide cash is available in the locations in which it is needed. We periodically review and evaluate these plans and strategies, including externally committed and non-committed credit agreements accessible by our Company and each of our operating subsidiaries. We believe these financing arrangements, along with the cash generated from the operations of our U.S. business, are sufficient to fund our current cash needs in the U.S.

Cash Flows and Use of Cash

Our business historically generates positive operating cash flows each year and our debt maturities are generally of a longer-term nature. However, our liquidity could be impacted significantly by the risk factors we described in Part I—Item 1A. "Risk Factors" in our Annual Report, Part II.—Item 1A. "Risk Factors" in this report and the items listed above.

Cash Flows from Operating Activities

Net cash provided by operating activities of $1,604.5 million for the nine months ended September 30, 2023 increased $487.0 million compared to $1,117.5 million for the nine months ended September 30, 2022. The increase in net cash provided by operating activities was primarily due to higher net income and the favorable timing of working capital in the Americas, partially offset by higher income taxes paid.

Cash Flows from Investing Activities

Net cash used in investing activities of $668.5 million for the nine months ended September 30, 2023 increased $163.6 million compared to $504.9 million for the nine months ended September 30, 2022. The increase in net cash used in investing activities was primarily due to cash paid in the current year for acquisitions, partially offset by lower capital expenditures as a result of the timing of capital projects.

Cash Flows from Financing Activities

Net cash used in financing activities of $728.6 million for the nine months ended September 30, 2023 increased $55.8 million compared to $672.8 million for the nine months ended September 30, 2022. The increase in net cash used in financing activities was primarily due to higher prior year borrowings under our commercial paper program, higher Class B common stock share repurchases and higher dividend payments, partially offset by lower net debt repayments.

Capital Resources, including Material Cash Requirements

Cash and Cash Equivalents

As of September 30, 2023, we had total cash and cash equivalents of $801.7 million, compared to $600.0 million as of December 31, 2022 and $525.2 million as of September 30, 2022. The increase in cash and cash equivalents from December 31, 2022 and September 30, 2022 was primarily due to the net cash provided by operating activities, partially offset by capital expenditures, net debt repayments, including the repayment of our CAD 500 million 2.84% notes which matured in July 2023, dividend payments, cash paid for acquisitions, as well as Class B common stock repurchases. The increase in cash and cash equivalents from September 30, 2022 was also offset by the repayment of our commercial paper program in the prior year.

Borrowings

We repaid our CAD 500 million 2.84% notes upon their maturity on July 15, 2023 using cash on hand. Refer to Part I.—Item 1. Financial Statements, Note 7, "Debt" for details.

Based on the credit profile of our lenders that are party to our credit facilities, we are confident in our ability to continue to draw on our revolving credit facility if the need arises. On June 26, 2023, we amended and restated our multi-currency revolving credit facility. Among other things, the term was extended through June 26, 2028, and the borrowing capacity was increased to $2.0 billion. This $2.0 billion revolving credit facility amended our pre-existing $1.5 billion revolving credit facility, which would have matured on July 7, 2024. On September 28, 2023, we amended our commercial paper program, which reduces borrowing capacity under the revolving credit facility, to a maximum borrowing capacity of $2.0 billion to borrow at any time at variable interest rates. The $150.0 million sub-facility available for the issuance of letters of credit remains unchanged. As of September 30, 2023, we had $2.0 billion available to draw on our $2.0 billion revolving credit facility. As of September 30, 2023, we had no borrowings drawn on this revolving credit facility and no commercial paper borrowings.

We intend to further utilize our cross-border, cross currency cash pool as well as our commercial paper programs for liquidity as needed. We also have CAD, GBP and USD overdraft facilities across several banks should we need additional short-term liquidity.

Under the terms of each of our debt facilities, we must comply with certain restrictions. These include customary events of default and specified representations, warranties and covenants, as well as covenants that restrict our ability to incur certain additional priority indebtedness (certain thresholds of secured consolidated net tangible assets), certain leverage threshold percentages, create or permit liens on assets and restrictions on mergers, acquisitions and certain types of sale lease-back transactions.

The maximum net debt to EBITDA leverage ratio, as defined by the amended and restated revolving credit facility agreement, was 4.00x as of September 30, 2023 which remained unchanged from the requirement as of December 31, 2022. As of September 30, 2023 and December 31, 2022, we were in compliance with all of these restrictions and covenants, have met such financial ratios and have met all debt payment obligations. All of our outstanding senior notes as of September 30, 2023 rank pari-passu.

See Part I.—Item 1. Financial Statements, Note 7, "Debt" for further discussion of our borrowings and available sources of borrowing, including lines of credit.

Guarantees

We guarantee indebtedness and other obligations to banks and other third parties for some of our equity method investments and consolidated subsidiaries. See Part I.—Item 1. Financial Statements, Note 10, "Commitments and Contingencies" for further discussion.

Material Cash Requirements from Contractual and Other Obligations

There were no material changes to our material cash requirements from contractual and other obligations outside the ordinary course of business or due to factors similar in nature to inflation, changing prices on operations or changes in the remaining terms of the contracts since December 31, 2022, as reported in Part II.— Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, "Material Cash Requirements from Contractual and Other Obligations" in our Annual Report.

Credit Rating

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

Guarantor Information

SEC Registered Securities

For purposes of this disclosure, including the tables, "Parent Issuer" shall mean MCBC. "Subsidiary Guarantors" shall mean certain Canadian and U.S. subsidiaries reflecting the substantial operations of our Americas segment.

Pursuant to the indenture dated May 3, 2012 (as amended, the "May 2012 Indenture"), MCBC issued its outstanding 5.0% senior notes due 2042. Additionally, pursuant to the indenture dated July 7, 2016 ("July 2016 Indenture"), MCBC issued its outstanding 3.0% senior notes due 2026, 4.2% senior notes due 2046 and 1.25% senior notes due 2024. The issuances of the senior notes issued under the May 2012 Indenture and the July 2016 Indenture were registered under the Securities Act of 1933, as amended. These senior notes are guaranteed on a senior unsecured basis by certain subsidiaries of MCBC, which are listed in Exhibit 22 (the "Subsidiary Guarantors", and together with the Parent Issuer, the "Obligor Group"). "Parent Issuer" in this section is specifically referring to MCBC in its capacity as the issuer of the senior notes under the May 2012 Indenture and the July 2016 Indenture. 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 was issued in a transaction that was registered with the SEC, and such other outstanding debt is issued or otherwise generally guaranteed on a senior unsecured basis by the Obligor Group or other consolidated subsidiaries of MCBC. These other guarantees are also full and unconditional and joint and several.

The senior notes and related guarantees rank pari-passu with all other unsubordinated debt of the Obligor Group and senior to all future subordinated debt of the Obligor Group. The guarantees can be released upon the sale or transfer of a Subsidiary Guarantors' capital stock or substantially all of its assets, or if such Subsidiary Guarantor ceases to be a guarantor under our other outstanding debt.

See Part I.—Item 1. Financial Statements, Note 7, "Debt" for details of all debt issued and outstanding as of September 30, 2023.

The following summarized financial information relates to the Obligor Group as of September 30, 2023 on a combined basis, after elimination of intercompany transactions and balances between the Obligor Group, and excluding the investments in and equity in the earnings of any non-guarantor subsidiaries. The balances and transactions with non-guarantor subsidiaries have been separately presented.

Summarized Financial Information of Obligor Group

Capital Expenditures

We incurred $428.4 million, and paid $494.1 million, for capital improvement projects worldwide in the nine months ended September 30, 2023, excluding capital spending by equity method joint ventures, representing a decrease of $57.8 million from the $486.2 million of capital expenditures incurred in the nine months ended September 30, 2022. This decrease was primarily due to the timing of capital projects. We continue to focus on where and how we employ our planned capital expenditures, with an emphasis on strengthening our focus on required returns on invested capital as we determine how to best allocate cash within the business.

Contingencies

We are party to various legal proceedings arising in the ordinary course of business, environmental litigation and indemnities associated with our sale of Kaiser to FEMSA. See Part I.—Item 1. Financial Statements, Note 10, "Commitments and Contingencies" for further discussion.

Off-Balance Sheet Arrangements

Refer to Part II.—Item 8. Financial Statements, Note 13, "Commitments and Contingencies" in our Annual Report for discussion of off-balance sheet arrangements. As of September 30, 2023, we did not have any other material off-balance sheet arrangements.

Critical Accounting Estimates

Our accounting policies and accounting estimates critical to our financial condition and results of operations are set forth in our Annual Report and did not change during the nine months ended September 30, 2023. See Part I.—Item 1. Financial Statements, Note 2, "New Accounting Pronouncements" for discussion of recently adopted accounting pronouncements. See also Part I.—Item 1. Financial Statements, Note 5, "Goodwill and Intangible Assets" for discussion of the results of our 2022 annual impairment testing analysis, the related risks to our indefinite-lived intangible brand assets and the goodwill amounts associated with our reporting units.

New Accounting Pronouncements Not Yet Adopted

See Part I.—Item 1. Financial Statements, Note 2, "New Accounting Pronouncements" for a description of any new accounting pronouncements that have or could have a significant impact on our financial statements.

See Part II.—Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report for further details of our market risks and our market sensitive instruments as of December 31, 2022. During the nine months ended September 30, 2023, our market risk sensitive instruments fluctuated as a result of changes in interest rates, currency exchange rates and commodity prices.

Interest Rate Risk

In May 2023, we amended our 2026 forward starting interest rate swaps to replace LIBOR with SOFR. Subsequent to this transition, we are no longer exposed to LIBOR. For the period ended September 30, 2023, the following table presents our fixed rate debt and forward starting interest rate swaps as well as the impact of an absolute 1% adverse change in interest rates on their respective fair values. For the period ended December 31, 2022, the following table presents our fixed rate debt and forward starting interest rate swaps and the impact of an absolute 1% adverse change in interest rates on our forward starting interest rate swaps and a 10% adverse change in the yield on our fixed rate debt. Notional amounts and fair values are presented in USD based on the applicable exchange rates as of September 30, 2023 and December 31, 2022, respectively. See Part I - Item 1. Financial Statements, Note 7. "Debt" for the maturity dates of our outstanding debt instruments.

Foreign Exchange Risk

The following table includes details of our foreign currency forwards used to hedge our foreign exchange rate risk as well as the impact of a hypothetical 10% adverse change in the related foreign currency exchange rates on the fair value of the foreign currency forwards. Notional amounts and fair values are presented in USD based on the applicable exchange rates as of September 30, 2023 and December 31, 2022.

Commodity Price Risk

The following table includes details of our commodity swaps used to hedge commodity price risk as well as the impact of a hypothetical 10% adverse change in the related commodity prices on the fair value of the derivatives. The following table excludes our commodity options because we have offsetting buy and sell positions. Notional amounts and fair values are presented in USD based on the applicable exchange rates as of September 30, 2023 and December 31, 2022.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) under the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2023 to provide reasonable assurance that information required to be disclosed in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applies its judgment in assessing the costs and benefits of such controls and procedures that, by their nature, can only provide reasonable assurance regarding management's control objectives. Also, we have investments in certain unconsolidated entities that we do not control or manage.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the three months ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Litigation and other disputes

For information regarding litigation, other disputes and environmental and regulatory proceedings see Part I.—Item 1. Financial Statements, Note 10, "Commitments and Contingencies."

In addition to the other information set forth in this report, the factors discussed in Part I.—Item 1A. "Risk Factors" in our Annual Report, which could materially affect our business, financial condition and/or future results, should be carefully considered. There have been no material changes to the risk factors contained in our Annual Report. The risks described in our Annual Report and herein are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, cash flows and/or future results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

The following table presents information with respect to Class B common stock purchases made by our Company during the three months ended September 30, 2023:

(1)On February 17, 2022, our Company's Board of Directors ("the Board") approved a share repurchase program to repurchase up to an aggregate of $200 million of our Company's Class B common stock, excluding brokerage commissions and excise taxes, through March 31, 2026, with the program primarily intended to offset annual employee equity award grants. This program was superseded by the new share repurchase program approved by our Company's Board of Directors on September 29, 2023, authorizing the repurchase of up to an aggregate of $2.0 billion of our Class B common stock, excluding brokerage commissions and excise taxes, with an expected program term of five years.

The number, price, structure and timing of the repurchases under the new program, if any, will be at our sole discretion and future repurchases will be evaluated by us depending on market conditions, liquidity needs, restrictions under our debt arrangements and other factors. Share repurchases may be made in the open market or in privately negotiated transactions. The repurchase authorization does not oblige us to acquire any particular amount of our Company's Class B common stock. The Board may suspend, modify or terminate the new repurchase program at any time without prior notice.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

During the three months ended September 30, 2023, no directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.

The following are filed, furnished or incorporated by reference as a part of this Quarterly Report on Form 10-Q:

(a) Exhibit

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.