What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-02-11 compared with 2020-02-12 · 532 added, 452 removed, 363 unchanged (73% of the section changed)

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See also "Cautionary Statement Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995."

A discussion related to the results of operations and changes in financial condition for 2018 compared to 2017 has been omitted from this report, unless significant, but may be found in Part II, Item 7.

A discussion related to the results of operations and changes in financial condition for 2019 compared to 2018 has been omitted from this report, but may be found in Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 2019 Form 10-K, filed with the SEC on February 12, 2020, which is available free of charge on the SEC's website at www.sec.gov and our corporate website at www.molsoncoors.com.

Such discussion does not reflect the recast of the historical presentation of segment information as a result of the reporting segment changes that became effective on January 1, 2020.

Our Fiscal Year

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We believe the STW metric is important because it gives an indication of the amount of beer and adjacent products that we have produced and shipped to customers.

STR is a metric that we use in our business to refer to sales closer to the end consumer than STWs, which generally means sales from our wholesalers or our Company to retailers, who in turn sell to consumers.

STR is a metric that we use in our business to refer to sales closer to the end consumer than STWs, which generally means sales from wholesalers or our company to retailers, who in turn sell to consumers.

We believe the STR metric is important because, unlike STWs, it provides the closest indication of the performance of our brands in relation to market and competitor sales trends.

Executive Summary

We are one of the world's largest brewers and have a diverse portfolio of owned and partner brands, including global priority brands Blue Moon, Coors Banquet, Coors Light, Miller Genuine Draft, Miller Lite, and Staropramen , regional champion brands Carling , Molson Canadian and other leading country-specific brands , as well as craft and specialty beers such as Creemore Springs , Cobra , Sharp's Doom Bar, Henry's Hard and Leinenkugel's .

With centuries of brewing heritage, we craft high-quality, innovative beverages with the purpose of uniting people to celebrate all life’s moments.

For more than two centuries, we have been brewing beverages that unite people for all life’s moments.

From Coors Light , Miller Lite, Molson Canadian, Carling, and Staropramen to Coors Banquet, Blue Moon Belgian White, Blue Moon LightSky, Vizzy, Coors Seltzer, Leinenkugel’s Summer Shandy, Creemore Springs, Hop Valley and more, we produce some of the most beloved and iconic beer brands ever made.

While the Company’s history is rooted in beer, we offer a modern portfolio that expands beyond the beer aisle with sparkling cocktails, hard coffee, canned wine, kombucha, cider and more.

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.

Coronavirus Global Pandemic

The coronavirus pandemic had a material adverse effect on our operations, liquidity, financial condition and results of operations during our full year 2020 due mainly to the on-premise closures worldwide.

The effects of the pandemic remain highly uncertain especially around the severity and duration of the outbreak and actions by government authorities to contain the pandemic or address its impact, among other things.

Many governmental entities across North America and Europe required that bars and restaurants close or cease sit-down service during the second quarter of 2020 and again at the end of 2020, which negatively impacted the on-premise sales of our beverages and led to the incurrence of costs to repurchase products that on-premise accounts or distributors were unable or prohibited from selling as a result of the governmental regulations.

This can be seen in our financial results during the full year 2020.

During this same time, other restaurants and bars implemented closures and modified their hours, either voluntarily or as a result of governmental orders or quarantines.

At the end of the second quarter and into the third quarter of 2020, there was a phased reopening of a significant number of on-premise accounts in certain of our markets, but with restrictions and in the fourth quarter some of these re-openings were reversed and businesses were shut down again.

Sales to restaurants and bars have not returned to pre-pandemic levels and in many instances, the reopened on-premise accounts have been impacted by further restrictions or further shut downs imposed as a result of the increased spread of the coronavirus.

In addition, sporting events, festivals and other large public gatherings where our products are served have been canceled throughout North America and Europe.

Sales to on-premise customers tend to be higher margin than sales to off-premise (retail outlets) customers.

Additionally, these and other governmental or societal impositions of restrictions on public gatherings, especially if prolonged in nature, whether government or self-imposed, will have adverse effects on on-premise traffic and, in turn, our business.

We experienced a significant adverse volume impact in 2020 resulting from the initial closure of, and subsequent continued impacts to, the on-premise channel.

As perspective, we estimate that approximately 23% of our 2019 consolidated net sales resulted from on-premise consumption, with approximately 17% of our North America net sales and approximately 50-55% of our Europe net sales each coming from this important part of the industry, and in many of our markets the on-premise business had been reduced to zero for much of the second quarter of 2020.

See further discussion in Part I.

Business regarding the historical percentage of volume and net sales represented in the on-premise within our North America and Europe segments and resulting implications to expected profitability as a result of the effective closures of the on-premise in the markets in which we operate.

While we began to see some of the on-premise return mid-year in many of our markets, with the exception of the U.K., which did not reopen until early July, business and consumer behavior in the channel has been slow and remains uncertain.

Subsequently, in the fourth quarter of 2020, the second pandemic wave triggered new lockdowns with different levels of restrictions in Europe and Canada depending on the market.

Therefore, as a result of this uncertainty, we currently continue to expect a significant adverse impact to both net sales and profit performance for fiscal 2021 and, possibly beyond.

In addition, where we have seen shifts in demand to the off-premise, and shifts into certain package types, which has strained our supply chain and package availability, particularly with aluminum can demand and other packaging materials, requiring that we strategically prioritize certain brands and package types.

Our supply chain continues to work diligently to ensure sufficient supply of these high demand brand and packages as we adjust to these changing consumer dynamics.

Further, during 2020, we recorded charges of $15.5 million within cost of goods sold related to temporary "thank you" pay for certain essential North America brewery employees.

Additionally, in order to support the challenges facing our on-premise customers and retailers, and our overall commitment to quality, during the first quarter of 2020, we initiated voluntary temporary keg relief programs in many of our markets providing customers with reimbursements for untapped kegs that met certain established return requirements.

As a result, our results for 2020 further include aggregate charges of $42.4 million, inclusive of a reduction to net sales of $30.3 million for reimbursements through these keg relief programs, as well as charges of $12.1 million within cost of goods sold related to obsolete finished goods keg inventories that were unable to be sold within our freshness specifications as a result of the ongoing on-premise impacts, as well as the costs to facilitate the above mentioned keg returns.

These keg return and inventory obsolescence charges were primarily recognized during the first quarter of 2020.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" for additional details.

As a result of the ongoing impacts of the pandemic, we have continued to take various mitigating actions to offset some of the implications to our employees and communities, as well as the challenges to performance, while also ensuring liquidity and deleverage remain key priorities as further discussed within "Liquidity and Capital Resources" below.

In addition to actions already taken, additional actions may be necessary.

Such potential actions include, but are not limited to, drawing on our revolving line of credit facility, issuing additional commercial paper under our U.S.

commercial paper program, issuing commercial paper under the COVID Corporate Financing Facility in the U.K.

(see Part II—Item 8 Financial Statements and Supplementary Data, Note 11, "Debt" for further discussion of the facilities and our remaining capacity), further accessing the capital markets, reducing discretionary spending including marketing, general and administrative as well as capital expenditures, asset monetization and taking advantage of certain governmental programs such as furloughs in the U.K.

and government relief and payment deferral programs, for example by the U.S.

Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), and other such government-sponsored legislation and programs.

Further, in response to the global economic uncertainty created by the coronavirus pandemic our board of directors suspended our regular quarterly dividends on our Class A and Class B common and exchangeable shares in May 2020.

See "Liquidity and Capital Resources" and Item 1A.

"Risk Factors" in this report for additional information regarding the impact of the global coronavirus pandemic.

We also continue to monitor the impacts of the pandemic on the recoverability of our assets, including goodwill and indefinite-lived intangible assets.

In particular, given the length and severity of the impacts of the coronavirus pandemic on our Europe business, as well as the protracted recovery currently expected in certain on-premise markets, we recorded a goodwill impairment loss of $1,484.3 million in the fourth quarter of 2020.

If the duration of the pandemic is prolonged and the severity of its impact continues or worsens, it could result in additional significant impairment losses.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 10, "Goodwill and Intangible Assets" for further details.

Revitalization Plan

On October 28, 2019, we initiated a revitalization plan designed to allow us to invest across our portfolio to drive long-term, sustainable success.

As part of this plan, we expect to accelerate investments behind our largest brands, by focusing on recruitment of consumers and by driving relevance with breakthrough marketing and innovating on core brands to attract new legal age drinkers.

We additionally plan to invest significantly in the above premium segment, the fastest growing area of the beer industry, with added investment in existing brands, new innovations and potentially through new acquisitions.

We expect to invest more in whitespace and beyond beer opportunities.

We have had success in the above premium segment, including portfolio transformation in Europe, Peroni growth accelerating and Blue Moon Belgian White improving in the U.S.

and Belgian Moon growing in Canada.

However, our revitalization plan is designed to give us the resources we need to invest in our core brands and build in the above premium segment through innovation and potential acquisition and investments, including more investment behind brands like Saint Archer Gold , Blue Moon Light Sky , and Coors Pure in the U.S.

and Coors Slice and Molson Ultra in Canada.

We also intend to expand a “test and learn” approach that allows us to determine market potential for products and then quickly scale up as we are with Movo wine spritzers, and Saint Archer Gold , both expected to be available nationally in the U.S.

We also expect this plan will allow us to invest behind an even stronger second year of Cape Line sparkling cocktails and a stronger third year of Arnold Palmer Spiked in the U.S.

Finally, our pipeline includes the recent introductions of La Colombe hard coffee in the U.S., Pip & Wild premium ciders in the U.K., and Vizzy hard seltzer in the U.S., which we plan to launch early in 2020, and Truss’s expected new line of cannabis-infused non-alcoholic beverages in Canada, subject to and after all of its licenses and regulatory clearances have been obtained, including the recently announced Flow Glow , a CBD-infused spring water.

We also expect to put a greater focus on bringing new beverages to the market faster and with more precision.

This includes expanding the model that has reduced the time it takes to bring innovations to market from 18 months to as little as four months in the U.S., and expanding our previously mentioned “test and learn” approach that evaluates market potential for products and then quickly scales up.

As part of the revitalization plan, we also intend to invest in improving our digital competencies, expanding data resources and building out innovation systems.

To make these new investments possible, we plan to unlock approximately $150 million in annual savings, increasing our 2020-2022 cost savings program from $450 million to $600 million, by simplifying our structure.

We also made the determination to establish Chicago, Illinois as our North American operational headquarters, close our existing office in Denver, Colorado and consolidate certain administrative functions into our other existing office locations.

Effective January 2020, we moved from a corporate center and four business units to two business units - North America and Europe.

The North America business unit consolidates the United States, Canada and corporate center, enabling us to move more quickly with an integrated portfolio strategy.

The Europe business unit allows for standalone operations, developed and supported by a European-based team, including a local leadership, commercial, supply chain and support functions.

The existing International team was reconstituted to more effectively grow our global brands - with the Africa and Asia Pacific businesses reporting into the European business unit and the remaining International business reporting into the North America business unit.

The change in structure to two business units and the resulting financial reporting segment changes will not be reflected until our first quarter 2020 results.

In connection with these consolidation activities, certain impacted employees have been extended an opportunity to continue their employment with the Company in the new organization and locations and, for those not continuing with the Company, certain of such employees have been asked to provide transition assistance and offered severance and retention packages in connection with their termination of service.

After taking into account all changes in each of the business units, including Europe, the plan is expected to reduce employment levels, in aggregate, by approximately 500 to 600 employees globally.

The company expects the costs associated with the restructuring to be substantially recognized by the end of fiscal year 2021.

Further, we currently expect to incur certain cash and non-cash restructuring charges related to employee relocation, severance, retention and transition costs, non-cash asset related costs, lease exit costs in connection with our office lease in Denver, Colorado, and other transition activities estimated in the range of approximately $120 million to $180 million in the aggregate, the majority of which will be cash charges that we began recognizing in the fourth quarter of 2019, and will be further spread through the balance of fiscal years 2020 and 2021.

In 2019, we recognized aggregate impairment losses of $2.1 million related to the closure of the Denver, Colorado office facility.

Additionally, in 2019 we recognized severance and retention charges of $41.2 million , of which, approximately $40 million remained accrued as of December 31, 2019.

We recognized these charges as special items within our consolidated statements of operations.

See Part II—Item 8 Financial Statements and Supplementary Data, “Note 7, Special Items” for additional details.

Actual severance and retention costs related to this restructuring, which are primarily being recognized ratably over the employees’ required future service period, may differ from original estimates based on actual employee turnover levels prior to achieving severance and retention eligibility requirements.

Employee relocation charges are recognized in the period incurred and were immaterial in 2019.

We also changed our name to Molson Coors Beverage Company in January 2020 in order to better reflect our strategic intent to expand beyond beer and into other growth adjacencies.

In addition to the revitalization plan, we intend to continue our ongoing efforts to modernize our brewery footprint and invest several hundred million dollars to modernize our brewery in Golden, Colorado over the next several years.

These previously planned brewery investments are intended to allow for more flexible capacity to better meet demand and fulfill future growth opportunities, while increasing supply chain efficiency.

On October 28, 2019, we initiated a revitalization plan designed to allow us to invest across our business to drive long-term, sustainable success.

Under this plan, we intend to accelerate investments behind our largest brands, invest significantly in the above premium segment and invest more in whitespace and beyond beer opportunities.

Progress has been made against these ambitions despite the complexities and adversity brought by the coronavirus pandemic.

The savings from the

revitalization plan have been routed not only to the goals of the revitalization plan, but also to protecting our cash and liquidity position during the uncertainties brought on by the pandemic.

The combined segment share for Coors Light and Miller Lite continued to grow in the United States in 2020 despite the constraints of the pandemic restrictions.

We increased the proportion of our above premium products in our North America portfolio and introduced new hard seltzer products to markets in the United States and parts of Europe.

Additionally, Truss, our joint venture with HEXO, introduced ready-to-drink cannabis beverages in Canada.

See "Outlook" below for additional discussion regarding progress on our revitalization plan.

During 2020, we also established Chicago, Illinois as our North America segment operational headquarters, closed our office in Denver, Colorado and consolidated certain administrative functions into our other existing office locations.

Effective January 1, 2020, we changed our management structure from a corporate center and four segments to two segments - North America and Europe.

We also have certain activity that is not allocated to our segments, which has been reflected as “Unallocated.” Specifically, "Unallocated" activity primarily includes financing related costs such as interest expense and income, foreign exchange gains and losses on intercompany balances 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.

We recasted the historical presentation of segment information as a result of these reporting segment changes accordingly.

See Part II - Item 8.

Financial Statements, Note 3,"Segment Reporting" for additional details.

In connection with these consolidation activities, we currently expect to continue to incur certain cash and non-cash restructuring charges related to severance, retention and transition costs, employee relocation, non-cash asset related costs, lease impairment and exit costs in connection with our office lease in Denver, Colorado and other transition activities currently estimated in the range of approximately $100 million to $120 million in the aggregate, the majority of which are cash charges that we began recognizing as special items in the fourth quarter of 2019, and have been, and will continue to, further recognize through 2021.

During 2020 and 2019 we recognized severance and retention charges of $35.6 million and $41.2 million, respectively.

These charges, along with the other revitalization costs, bring the aggregate of such charges to approximately $100 million since the plan was initiated in 2019.

See Part II—Item 8 Financial Statements and Supplementary Data, “Note 7, Special Items” for additional details related to these restructuring and other charges.

After taking into account all changes in each of the business units, including Europe, the execution of the plan has reduced employment levels, in aggregate, by approximately 600 employees globally.

We currently expect the costs associated with the restructuring to be substantially recognized by the end of fiscal year 2021.

Summary of Consolidated Results of Operations

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For the years ended

December 31, 2019

December 31, 2018

December 31, 2017

December 31, 2020 Change December 31, 2019 Change December 31, 2018

(In millions, except percentages and per share data)

Financial volume in hectoliters 84.479 (8.9) % 92.722 (4.0) % 96.627

Net sales $ 9,654.0 (8.7) % $ 10,579.4 (1.8) % $ 10,769.6

Net income (loss) attributable to MCBC

$ (949.0) N/M $ 241.7 (78.4) % $ 1,116.5

Net income (loss) attributable to MCBC per diluted share

$ (4.38) N/M $ 1.11 (78.4) % $ 5.15

N/M = Not meaningful

2020 Financial Highlights

In 2019 , net income attributable to MCBC decreased 78.4% compared to the prior year primarily driven by the impact of aggregate goodwill and intangible asset impairment losses of $691.9 million , primarily related to our Canada reporting unit.

The decrease was also due to lower volume, inflation, restructuring charges and pension and postretirement benefit charges, partially offset by positive global pricing, cost savings, lower incentive compensation, as well as lower interest expense.

During 2019, we repaid our EUR 500 million variable rate notes, $500 million 1.90% notes, and $500 million 1.45% notes upon their respective maturities throughout the year as part of our deleveraging commitment.

We generated cash flow from operating activities of approximately $1.9 billion , representing an 18.6% decrease from approximately $2.3 billion in 2018 .

The decrease in operating cash flow in 2019 compared to 2018 is primarily driven by cycling the proceeds received during the first quarter of 2018 of $328.0 million related to the Adjustment Amount (as defined and further discussed in Part II—Item 8 Financial Statements and Supplementary Data, Note 7, "Special Items" ) related to the settlement agreement between MCBC and ABI, as well as lower net income adjusted for non-cash add backs and higher cash paid for taxes, partially offset by favorable changes in working capital and lower interest paid.

• In 2020, we incurred a net loss attributable to MCBC of $949.0 million compared to net income attributable to MCBC of $241.7 million in the prior year, primarily attributable to a goodwill impairment loss in our Europe segment of $1,484.3 million recorded in the fourth quarter of 2020, lower financial volume, higher tax expense driven by $135 million related to the enactment of the U.S.

final hybrid regulation in the second quarter of 2020, keg sales returns and other coronavirus-related costs, partially offset by lower marketing, general and administrative expenses, an approximate $108 million year-over-year favorable variance resulting from unrealized mark-to-market changes on our commodity positions, a goodwill impairment loss in our North America segment of $668.3 million recorded in 2019 and positive pricing in North America and Europe.

• During 2020, we repaid our $500 million 2.25% notes and CAD $500 million 2.75% notes upon their respective maturities throughout the year as part of our deleveraging commitment.

• We generated cash flow from operating activities of approximately $1.7 billion, representing a 10.6% decrease from approximately $1.9 billion in 2019.

The decrease in operating cash flow in 2020 compared to 2019 was primarily driven by lower net income after adjusting for non-cash add-backs and higher cash paid for taxes, partially offset by favorable timing of working capital.

Notably, working capital benefited from the deferral of approximately $130 million in tax payments from various government-sponsored payment deferral programs initiated in response to the coronavirus pandemic, of which we currently anticipate the majority to be paid in 2021 as these amounts become due.

• Regional financial highlights:

segment, income before income taxes decreased 1.4% to $1,301.8 million in 2019 , versus $1,320.7 million in 2018 , primarily driven by lower volume and cost inflation, partially offset by higher net pricing, cycling special charges in the prior year related to restructuring, and cost savings.

During the year we grew our share of the premium light segment with Miller Lite , which completed its twenty-first consecutive quarter of increased segment share, and Coors Light , which completed its third consecutive quarter of increased segment share, according to Nielsen.

In above premium, we successfully launched Cape Line which was among the industry’s top new franchises in the flavored malt beverage category, according to Nielsen, and we also introduced Sol Chelada which drove double-digit volume growth in the Sol Franchise.

Blue Moon remained the number one national craft brand in the U.S.

and held industry share.

Additionally, Peroni grew volume for the twenty-first consecutive quarter with growth accelerating significantly in 2019 with support of the brand's first national marking campaign.

In our Canada segment, we reported a loss before income taxes of $508.7 million in 2019 , versus income of $157.0 million in 2018 , primarily driven by the $668.3 million goodwill impairment loss recognized in the third quarter of 2019 as well as the gross profit impacts of volume declines, higher cost of goods sold per hectoliter, Truss joint venture start-up costs, partially offset by positive pricing and lower incentive compensation.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 10, “Goodwill and Intangible Assets” for additional details.

In our Europe segment, income before income taxes decreased 14.1% to $160.1 million in 2019 , versus $186.4 million in 2018 , primarily related to increased brand investments, unfavorable foreign currency movements, special charges mainly due to restructuring activities, as well as soft industry demand and inflation, partially offset by positive net pricing and mix and lower incentive compensation.

Our International segment reported a loss before income taxes of $7.7 million in 2019 , compared to a loss of $2.7 million in the prior year, primarily driven by higher special charges due to an aggregate impairment loss of $12.2 million related to our India business along with lower volume and negative geographic mix, partially offset by lower marketing, general and administrative expense and shifting to local production in Mexico.

Brand highlights:

Global priority brand volume decreased 2.2% in 2019 versus 2018 , due to declines across the U.S., Canada, and International partially offset by growth in Europe.

Blue Moon Belgian White global brand volume increased 1.1% in 2019 versus 2018 , driven by growth in Canada, International and Europe, partially offset by declines in the U.S.

Carling brand volume in Europe decreased by 4.8% versus 2018 , due to lower volumes in the U.K., the brand's primary market.

Coors global brand volume - Coors Light global brand volume decreased 4.6% in 2019 versus 2018 .

The overall volume decrease was primarily driven by lower brand volume in the U.S., International, and Canada, partially offset by growth in Europe.

Volumes in the U.S.

were lower than prior year, although Coors Light gained share of the U.S.

premium light segment for the third consecutive quarter.

The declines in International were driven by competitive pressures in Mexico along with economic decline in Puerto Rico.

The declines in Canada are primarily the result of industry declines due to ongoing competitive pressures in Quebec and Ontario.

Coors Banquet global brand volume decreased 2.6% in 2019 versus 2018 , driven by the U.S.

and Canada, partially offset by the introduction of Coors Original in International markets.

Miller global brand volume - Miller Lite global brand volumes were flat in 2019 versus 2018 , primarily driven by declines in the U.S., partially offset by growth in Canada and International.

However, Miller Lite gained share of the U.S.

premium light segment for the twenty-first consecutive quarter.

Miller Genuine Draft global brand volume decreased 6.9% in 2019 versus 2018 , due to decreases in all segments.

Molson Canadian brand volume in Canada decreased 8.9% during 2019 versus the prior year, primarily driven by industry declines as well as share declines due to competitive pressures in the West and Ontario.

Staropramen global brand volume, including royalty volume, increased 7.2% during 2019 versus 2018 , driven by higher volumes in all major markets for the brand.

• In our North America segment, income before income taxes increased 67.5% to $1,080.5 million in 2020, versus $645.0 million in 2019, driven by lower special charges, lower marketing, general and administrative expenses, and positive pricing, partially offset by impacts from lower financial volume, inflation and higher transportation costs within cost of goods sold.

Lower special charges are primarily due to the goodwill impairment charge of $668.3 million in the third quarter of the prior year.

• In our Europe segment, we incurred a loss before income taxes of $1,603.7 million in 2020 compared to income before income taxes of $102.4 million in 2019, primarily due to higher special charges including the above mentioned goodwill impairment loss and lower gross profit as a result of the on-premise impacts of the coronavirus pandemic.

See "Results of Operations" below for further analysis of our segment results.

Worldwide Brand Volume

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For the years ended

December 31, 2019

December 31, 2018

December 31, 2017

December 31, 2020 Change December 31, 2019 Change December 31, 2018

(In millions, except percentages)

1 unchanged sentence

Financial volume 84.479 (8.9) % 92.722 (4.0) % 96.627

Contract brewing and wholesaler volume

Contract brewing, wholesaler and non-beer volume (6.355) (17.6) % (7.715) (5.7) % (8.182)

Royalty volume 3.783 (10.5) % 4.226 4.2 % 4.054

STW to STR adjustment

STW to STR adjustment 0.126 N/M (0.287) (19.8) % (0.358)

Total worldwide brand volume 82.033 (7.8) % 88.946 (3.5) % 92.141

Our worldwide brand volume decreased in 2019 compared to 2018 , primarily due to lower volume in all segments primarily driven by challenging industry dynamics.

Worldwide Brand Volume by Segment

North America 61.313 (5.1) % 64.640 (3.5) % 67.017

Europe 20.720 (14.8) % 24.306 (3.3) % 25.124

Total 82.033 (7.8) % 88.946 (3.5) % 92.141

N/M = Not meaningful

Our worldwide brand volume decreased 7.8% in 2020 compared to 2019, while financial volume decreased 8.9% in 2020 compared to 2019.

The decrease in 2020 reflects the impacts of the coronavirus pandemic and the related closure of on-premise outlets in both North America and Europe, as well as market share declines in part due to prioritization of certain key brands and package types to meet off-premise demand while dealing with packaging supply constraints, and lower contract brewing volumes in North America.

Despite this and the gradual re-opening of on-premise locations during the third quarter of 2020, the increase in off-premise brand volumes was not sufficient to offset the volume losses experienced related to the on-premise restrictions, resulting in overall brand volume declines.

Subsequently, in the fourth quarter of 2020, the second pandemic wave triggered new lockdowns with different levels of restrictions in Europe from one market to another.

As a result, the off-premise volumes did not offset the loss of the on-premise volume due to closures related to the pandemic.

The decrease in 2019 was due to lower volume in all segments primarily driven by challenging industry dynamics.

Net Sales Drivers

The following table highlights the drivers of change in net sales for the year ended December 31, 2019 versus December 31, 2018 , by segment (in percentages) and excludes Corporate net sales revenue for our water resources and energy operations in the state of Colorado.

Price, Product and Geography Mix

International

The following table highlights the drivers of change in net sales on a reported basis for the year ended December 31, 2018 versus December 31, 2017 , by segment (in percentages) and excludes Corporate net sales revenue for our water resources and energy operations in the state of Colorado.

Price, Product and Geography Mix

International

Europe "Other" column includes the release of an indirect tax provision in 2017.

Adoption of Revenue Recognition Guidance

On January 1, 2018, we adopted the FASB's new accounting pronouncement related to revenue recognition using the modified retrospective approach, therefore, prior period results were not restated.

Results for the years ended December 31, 2019 and 2018 are presented under the new guidance, while the year ended December 31, 2017 is reported in accordance with historical accounting guidance.

The adoption of this guidance in 2018 did not have a significant impact to our core revenue generating activities, however, resulted in the reclassification of certain cash payments to customers from marketing, general and administrative expenses to a reduction of revenue.

This classification change resulted in a reduction of revenue and marketing, general and administrative expenses by approximately $60 million during 2018 versus 2017, primarily within our Canada segment.

The adoption of this guidance also resulted in a change in the timing of recognition of certain promotional discounts and cash payments to customers, which shifted financial statement recognition primarily amongst quarters, however, the full-year impact was not significant to our financial results.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" for additional details.

The following table highlights the drivers of change in net sales for the year ended December 31, 2020 versus December 31, 2019, by segment (in percentages).

Volume Price, Product and Geography Mix Currency Other Total

Consolidated (8.9) % 0.1 % 0.1 % — % (8.7) %

North America (6.0) % 1.7 % (0.1) % — % (4.4) %

Europe (17.3) % (11.1) % 0.5 % — % (27.9) %

The following table highlights the drivers of change in net sales on a reported basis for the year ended December 31, 2019 versus December 31, 2018, by segment (in percentages).

Volume Price, Product and Geography Mix Currency Other Total

Consolidated (4.0) % 3.6 % (1.2) % (0.2) % (1.8) %

North America (4.3) % 3.4 % (0.3) % — % (1.2) %

Europe (3.3) % 3.9 % (4.7) % — % (4.1) %

Cost Savings Initiatives

Total cost savings in 2019 exceeded our targets and totaled approximately $230 million, resulting in a total of approximately $725 million of cost savings delivered over the course of the 2017 to 2019 program.

Our next generation cost savings program, which began in 2020, is expected to deliver approximately $600 million of cost savings over the three year program term through 2022 and is focused around many of the same functions of the business as the 2017 to 2019 program.

These cost savings include approximately $150 million related to the revitalization plan.

Total cost savings delivered in 2020 totaled approximately $270 million.

Depreciation and Amortization

Depreciation and amortization expense was $859.0 million in 2019 , an increase of $1.5 million compared to 2018 , primarily driven by incremental accelerated depreciation related to brewery closures largely offset by impacts of foreign exchange movements.

Depreciation and amortization expense was $922.0 million in 2020, an increase of $63.0 million compared to 2019, primarily driven by incremental accelerated depreciation related to brewery closures.

For the years ended

December 31, 2019

December 31, 2018

December 31, 2017

December 31, 2020 December 31, 2019 December 31, 2018

Effective tax rate (47) % 49 % 17 %

The increase in the effective income tax rate for 2019 versus 2018 is primarily driven by the $668.3 million impairment loss attributable to nondeductible goodwill of our Canada reporting unit, increased valuation allowances, the recognition of other one-time tax expenses in 2019, as well as cycling one-time tax benefits in 2018.

The increase in the effective income tax rate for 2018 versus 2017 was primarily driven by the one-time impacts of the 2017 Tax Act recognized when enacted in 2017, most notably the remeasurement of our deferred taxes from the reduction in the U.S.

statutory federal corporate income tax rate.

Our tax rate is volatile and may increase or decrease with changes in, among other things, the amount and source of 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 in which we do business that, if enacted, may have an impact on our effective tax rate.

The decrease to the effective tax rate, when compared to the statutory rate, for fiscal year 2020 is primarily driven by two items.

The impact of the $1,484.3 million goodwill impairment, recorded within our Europe segment in the fourth quarter of 2020, of which a majority related to nondeductible goodwill and the recognition of approximately $135 million of tax expense following the enactment of the U.S.

final hybrid regulations, recorded in the second quarter of 2020 as further discussed below.

Since 2018, the U.S.

Department of Treasury has continued to issue proposed, temporary and final regulations to implement provisions of the 2017 Tax Act.

We have continued to monitor these and while temporary and final regulations have not yet resulted in material adverse impacts to us, there are certain proposed regulations, which are not yet considered law, that if finalized as proposed, could result in a material adverse impact on our consolidated financial statements.

Specifically, if certain of the proposed regulations are finalized as proposed with full retroactive application to January 1, 2018, then we would be required to recognize estimated income tax expense of approximately $100 million to $200 million upon enactment related to the proposed retroactive period through December 31, 2019, for fiscal years 2018 and 2019.

This estimated range contains significant uncertainty and could be impacted by various factors, including any differences between the proposed and ultimately finalized regulations.

We have continued to monitor these regulations, and on April 7, 2020, the U.S.

Department of Treasury enacted final hybrid regulations with full retroactive application to January 1, 2018, with a few exceptions.

The final hybrid regulations, associated with the taxability of certain interest, impact tax positions we took in 2018 and 2019 and have resulted in additional income tax expense of approximately $135 million, which was recognized upon issuance in the second quarter of 2020.

We currently believe the impact of the finalized regulations could be cash tax outflows

up to approximately $100 million in 2021.

We continue to analyze the potential cash impacts of the final regulations to minimize cash outflows over time.

During the third quarter of 2020, the U.K.

government enacted, and royal assent was received for, legislation to repeal the previously enacted reduction to the U.K.

corporate income tax rate.

This legislation changed the previously anticipated corporate income tax rate of 17% back to 19%.

Remeasurement of our deferred tax liabilities under the higher income tax rate resulted in the recognition of additional tax expense of approximately $6 million in 2020.

Our tax rate can be more or less volatile and may change with, among other things, the amount and source of pre-tax 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, may have an impact on our effective tax rate.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 6, "Income Tax" for additional details regarding our effective tax rate.

Results of Operations

United States Segment

Segment Results of Operations

North America Segment

For the years ended

December 31, 2019

December 31, 2018

December 31, 2017

December 31, 2020 Change December 31, 2019 Change December 31, 2018

(In millions, except percentages)

Financial volume in hectoliters (1)

65.010 (6.0) % 69.180 (4.3) % 72.283

$ 9,505.8 (4.8) % $ 9,985.3 (1.7) % $ 10,157.4

Excise taxes (1,268.8) (7.2) % (1,367.1) (4.6) % (1,433.0)

Net sales (1)

8,237.0 (4.4) % 8,618.2 (1.2) % 8,724.4

Cost of goods sold (1)

(4,983.1) (2.5) % (5,112.5) — % (5,112.3)

Gross profit 3,253.9 (7.2) % 3,505.7 (2.9) % 3,612.1

Marketing, general and administrative expenses (1,960.2) (9.5) % (2,166.5) (2.0) % (2,211.2)

Special items, net (2)

(212.5) (69.0) % (685.6) N/M 261.9

Operating income 1,081.2 65.4 % 653.6 (60.7) % 1,662.8

Interest income (expense), net

Other income (expense), net

Interest income (expense), net (2.4) N/M 2.8 (68.2) % 8.8

Other income (expense), net 1.7 N/M (11.4) 17.5 % (9.7)

Income (loss) before income taxes $ 1,080.5 67.5 % $ 645.0 (61.2) % $ 1,661.9

N/M = Not meaningful

(1) Excludes royalty volume of 2.052 million hectoliters, 2.258 million hectoliters and 2.014 million hectoliters for 2020, 2019 and 2018, respectively.

The results for 2019 and 2018 have been recast to reflect the segment changes as part of the revitalization plan.

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

1 unchanged sentence

Significant events

Following management approval in December 2019, in January 2020, we announced plans to cease production at our Irwindale, California brewery and entered into an option agreement with Pabst Brewing Company, LLC ("Pabst"), granting Pabst an option to purchase our Irwindale, California brewery, including plant equipment and machinery and the underlying land.

Pursuant to the agreement, Pabst will have 120 days from receipt of the notice of the Irwindale brewery closure from MillerCoors to exercise the option to purchase the Irwindale brewery.

If Pabst exercises its option to purchase the Irwindale brewery, the agreement provides (i) the purchase price will be $150 million, subject to adjustment as further specified in the agreement, (ii) the closing will be within six months from Pabst’s exercise of the option, but no earlier than September 1, 2020 and no later than December 31, 2020, subject to the satisfaction of certain customary closing conditions, (iii) for the treatment and allocation of certain liabilities related to the operation of the Irwindale brewery prior to closing, and (iv) for customary representations and warranties and certain post-closing restrictions on Pabst regarding the operations and disposal of the Irwindale brewery.

In conjunction with the agreement, MillerCoors and Pabst also executed mutual releases of claims related to their ongoing litigation and agreed to dismiss the litigation with prejudice.

We recorded special charges related to the planned Irwindale brewery closure totaling approximately $16 million in the fourth quarter of 2019, and will continue to incur special charges during each reporting period through the planned closure of the brewery in September 2020.

While analysis of the implications of the announced brewery closure remain underway, total special charges associated with the planned closure are currently expected to be approximately $150 million to $175 million , consisting primarily of accelerated depreciation charges.

However, this estimated range contains significant uncertainty, and actual results could differ materially from these estimates due to uncertainty regarding the ultimate net cost associated with the disposition of assets, restructuring charges, as well as the overall outcome of the Pabst purchase option, which if exercised, could significantly impact these estimates.

As part of our revitalization plan announced during the fourth quarter of 2019, we initiated restructuring activities and will continue to incur severance and other employee-related costs as special items.

In order to align our cost base with our scale of business, during the third quarter of 2018, we initiated restructuring activities in the U.S.

and reduced U.S.

employment levels by approximately 300 employees in the fourth quarter of 2018.

As a result, severance costs related to these restructuring activities were recorded as special charges.

The volatility of aluminum, inclusive of Midwest Premium and tariffs, and freight and fuel costs continued to significantly impact our results during 2019.

We continue to monitor the coronavirus pandemic, which had a material adverse effect on our North America results of operations for fiscal year 2020 and we expect it will continue to have a material adverse effect on our results of operations in 2021.

We experienced a significant adverse impact in the first half of 2020 resulting from the initial closure of, and subsequent continued impacts to, the on-premise channel.

While we began to see some of the on-premise return in June, due to limitations and restrictions as well as consumer uncertainty, volume has not returned to pre-pandemic levels.

Additionally, continuing governmental or societal impositions on bars and restaurants and restrictions on public gatherings including the growing risk of a return of shutdowns, especially if prolonged in nature, we expect will continue to have adverse effects on on-premise traffic and, in turn, our business performance, cash flows and liquidity.

Further, the CAD has become volatile as a result of the

ongoing uncertainties and impacts of the coronavirus pandemic.

Any significant weakening of the CAD to the USD could have an adverse impact on our results due to the relative magnitude of our Canadian business.

Our results for 2020 include a reduction to net sales of $13.2 million and charges to cost of goods sold of $9.2 million related to the recognition of sales returns and finished good obsolescence charges and related costs resulting from the on-premise impacts of the coronavirus pandemic.

These charges were primarily recognized during the first quarter of 2020, with adjustments recognized in subsequent quarters in 2020.

We also recognized charges to cost of goods sold of $15.5 million related to temporary "thank you" pay for certain essential North America brewery employees.

In the third quarter of 2020, we formed a joint venture equally owned by MCBC and DGY West Holdings, LP that was formed to expand commercialization of Yuengling's brands with operation currently expected to commence in the second half of 2021.

TYC will oversee any new market expansion in the U.S.

outside Yuengling's current 22-state footprint and New England.

We expect that TYC will expand in a methodical pace following disciplined and steady growth.

As part of our revitalization plan announced during the fourth quarter of 2019, we initiated restructuring activities and continue to incur severance and other employee-related costs as special items.

Pursuant to the option agreement, on May 4, 2020, Pabst exercised its option to purchase the Irwindale Brewery and the purchase was completed in the fourth quarter of 2020.

Production at the Irwindale brewery ceased during the third quarter of 2020.

We recorded special charges related to the planned Irwindale brewery closure as further discussed in Part II—Item 8 Financial Statements and Supplementary Data, Note 7, "Special Items."

The volatility of aluminum, inclusive of Midwest Premium and tariffs, continued to significantly impact our results during 2020.

To the extent these prices continue to fluctuate, our business and financial results could be materially adversely impacted.

We continue to monitor these risks and rely on our risk management hedging program to help mitigate price risk exposure for commodities including aluminum and fuel.

In order to increase overall operating efficiency, during the first quarter of 2018, we announced plans to close the Colfax, California cidery.

The cidery closed in January 2019 and cider production has moved to the 10th Street Brewery in Milwaukee, Wisconsin.

We recognized special charges in 2019 and 2018 associated with the cidery closure consisting primarily of accelerated depreciation in excess of normal depreciation.

Volume and net sales

Brand volume decreased 3.6% in 2019 compared to 2018 , primarily driven by challenging industry dynamics.

STWs, excluding contract brewing volume, decreased 3.7% in 2019 compared to 2018 , reflective of brand volume performance.

Net sales per hectoliter on a brand volume basis increased 3.3% in 2019 compared to 2018 , driven by higher net pricing.

Net sales per hectoliter on a reported basis for 2019 , increased 4.1% in 2019 compared to 2018 .

Cost of goods sold

Cost of goods sold per hectoliter increased 4.8% in 2019 compared to prior year driven by inflation, volume deleverage and other factors, including a substantial unanticipated increase in property tax at our Golden, Colorado brewery and increased packaging costs associated with our bottle furnace rebuild, partially offset by cost savings.

Marketing, general and administrative expenses

Marketing, general and administrative expenses decreased 0.6% in 2019 compared to 2018 primarily driven by spending optimization and efficiencies including incremental cost reductions related to the restructuring initiated in the third quarter of 2018, partially offset by cycling lower employee incentive compensation.

Canada Segment

For the years ended

December 31, 2019

December 31, 2018

December 31, 2017

(In millions, except percentages)

Financial volume in hectoliters (1)

Net sales (1)

Cost of goods sold (1)

Marketing, general and administrative expenses

Special items, net (2)

Operating income (loss)

Interest income (expense), net

Other income (expense), net (3)

Income (loss) before income taxes

N/M = Not meaningful

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

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

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

Significant events

We identified a triggering event requiring an interim impairment assessment of the goodwill within our Canada reporting unit at the end of the third quarter of 2019, as a result, in part, of prolonged weakening of the Canadian beer industry negatively impacting the performance of the Canada business in the current year and the expected future cash flows of the Canada reporting unit.

The interim goodwill impairment analysis resulted in a goodwill impairment loss recognized within our Canada reporting unit of $668.3 million , which was recorded as a special item.

We identified a triggering event requiring an interim impairment assessment of the goodwill within our historical Canada reporting unit at the end of the third quarter of 2019, as a result, in part, of prolonged weakening of the Canadian beer industry negatively impacting the performance of the Canada business through the third quarter of 2019 and the expected future cash flows of the Canada reporting unit.

The interim goodwill impairment analysis resulted in a goodwill impairment loss recognized within our historical Canada reporting unit of $668.3 million, which was recorded as a special item.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 10, "Goodwill and Intangible Assets" for additional information.

As part of our ongoing assessment of our Canadian supply chain network, we have incurred significant capital expenditures associated with the completion of the new brewery in Chilliwack, British Columbia, most of which was funded with the previously received proceeds from the sale of the Vancouver brewery in 2016.

The transition of production to the new brewery in Chilliwack and final closure of the leased Vancouver brewery was completed in third quarter of 2019, and the new Chilliwack brewery is now operational.

In further efforts to help optimize the Canada brewery network, in the third quarter of 2017, we announced a plan to build a more efficient and flexible brewery in Longueuil, Quebec.

Additionally, during the second quarter of 2019, we completed the sale of our Montreal brewery for $96.2 million (CAD 126 million ), resulting in a $61.3 million gain, which was recorded as a special item.

In further efforts to help optimize the North America brewery network, in the third quarter of 2017, we announced a plan to build a more efficient and flexible brewery in Longueuil, Quebec.

During the second quarter of 2019, we completed the sale of our Montreal brewery for $96.2 million, resulting in a $61.3 million gain, which was recorded as a special item.

In conjunction with the sale, we agreed to lease back the existing property to continue operations on an uninterrupted basis until the new brewery is operational, which we currently expect to occur in 2021.

However, due to the uncertainty inherent in our estimates, the timing of the brewery closure is subject to change.

We will continue to incur significant capital expenditures associated with the construction of the new brewery in Longueuil, Quebec.

In June 2019, the Ontario government adopted a bill that, if enacted, would terminate a 10-year Master Framework Agreement that was originally signed between the previous government administration and MCBC, Labatt Brewing Company Limited, Sleeman Breweries Ltd., and BRI in 2015 and governs the terms of the beer distribution and retail systems in Ontario through 2025.

However, due to the uncertainty inherent in our estimates, and the impacts of the coronavirus pandemic potentially delaying construction of the new brewery, the timing of the brewery closure is subject to change.

We will continue to incur significant capital expenditures associated with the construction of the new brewery in Longueuil, Quebec, through its estimated completion in late 2021.

In June 2019, the Ontario government in Canada adopted a bill that, if enacted, would terminate a 10-year Master Framework Agreement that was originally signed between the previous government administration and Molson Canada 2005, a wholly owned indirect subsidiary of the Company, Labatt Brewing Company Limited, Sleeman Breweries Ltd., and Brewers Retail Inc.

in 2015 and governs the terms of the beer distribution and retail systems in Ontario through 2025.

The government has not yet proclaimed the bill as law.

The impacts of these potential legislative changes are unknown at this time, but could have a negative impact on the results of operations, cash flows and financial position of the

Canada segment.

While discussions remain ongoing with the government to reach a mutually agreeable alternative to the enactment of the law, the Company and the other Master Framework Agreement signatories are prepared to vigorously defend their rights and pursue legal recourse, should the Master Framework Agreement be unilaterally terminated by the enactment of the legislation.

The impacts of these potential legislative changes are unknown at this time, but could have a negative impact on the results of operations, cash flows and financial position of the North America segment.

While discussions remain ongoing with the government to reach a mutually agreeable alternative to the enactment of the law, it is unclear how the coronavirus pandemic will impact these discussions.

Molson Canada 2005 and the other Master Framework Agreement signatories are prepared to vigorously defend their rights and pursue legal recourse, should the Master Framework Agreement be unilaterally terminated by the enactment of the legislation.

For additional information, See Part II—Item 8 Financial Statements and Supplementary Data, Note 18, "Commitments and Contingencies."

In June 2019, Health Canada released final regulations resulting in the legalization of new classes of cannabis products including edibles and cannabis infused beverages on October 17, 2019, with product sales being permitted sixty days after submission of the beverage formulations to Health Canada and satisfaction of all other licensing and regulatory preconditions.

Our Truss joint venture with HEXO has been preparing for the launch of cannabis-infused products in the Canadian market, including the on-going construction of a production facility in Belleville, Ontario.

We currently expect that Truss will launch products in 2020, subject to and after all of its licenses and regulatory clearances have been obtained.

Truss, our joint venture with HEXO in Canada, began rolling out its range of THC and CBD infused beverages across the Canadian market during the third quarter of 2020.

Separately, in April 2020, we completed the formation of a new joint venture with HEXO to explore opportunities for non-alcohol hemp-derived CBD beverages in Colorado.

Foreign currency impact on results

During 2019 , the CAD appreciated versus the USD on an average basis, resulting in an increase of $9.2 million to our 2019 USD earnings before income taxes.

Included in these amounts are both translational and transactional impacts of changes in foreign exchange rates.

During 2020, foreign currency movements unfavorably impacted our North America USD income before income taxes by $0.3 million.

Included in this amount are both translational and transactional impacts of changes in foreign exchange rates.

The impact of transactional foreign currency gains and losses is recorded within other income (expense) in our consolidated statements of operations.

Volume and net sales

Our Canada brand volume decreased 5.7% in 2019 compared to 2018 , primarily due to weakened brand performance and industry declines.

Our net sales per hectoliter on a brand volume basis increased 1.7% in local currency in 2019 compared to 2018 , driven by positive net pricing.

Brand volume decreased 5.1% in 2020 compared to 2019, due to on-premise outlet restrictions as well as packaging constraints contributing to the declines in the economy and premium segments.

Financial volume declined 6.0% in 2020 compared to 2019, reflecting lower brand volume, unfavorable shipment timing in the U.S.

largely due to aluminum can supply and other packaging material constraints as well as lower contract brewing volume.

Net sales per hectoliter on a brand volume basis increased 1.6% in local currency in 2020 compared to 2019, driven by positive brand and package mix in the U.S.

as well as net pricing increases in the U.S.

and Canada, partially offset by negative channel and brand mix in Canada attributed to the shift of volume from on-premise to off-premise and the estimated keg sales returns and reimbursements recognized in the first quarter of 2020 related to the on-premise impacts of the coronavirus pandemic.

Net sales per hectoliter on a reported basis in local currency increased 1.9% in 2020 compared to 2019.

Cost of goods sold

Cost of goods sold per hectoliter in local currency increased 5.7% in 2019 compared to 2018 , driven primarily driven by volume deleverage and mix, increased distribution costs, brewery startup costs and inflation, partially offset by cost savings.

Cost of goods sold per hectoliter in local currency increased 3.9% in 2020 compared to prior year, impacted by finished goods obsolescence charges and related costs primarily recognized in the first quarter of 2020 resulting from the on-premise impacts of the coronavirus pandemic as well as temporary "thank you" pay for certain essential North America brewery employees, partially offset by cost savings and the favorable resolution of our property tax appeal for our Golden, Colorado brewery.

Marketing, general and administrative expenses

Our marketing, general and administrative expenses increased 0.6% in local currency in 2019 compared to 2018 , primarily driven by Truss joint venture start-up costs, partially offset by lower employee-related expenses, including lower incentive compensation and benefits.

Marketing, general and administrative expenses in local currency decreased 9.4% in 2020 compared to 2019 primarily driven by lower marketing spend in areas impacted by the coronavirus pandemic, such as sports and live entertainment events, and other cost mitigation actions, as well as cost savings related to the revitalization plan, partially offset by cycling lower incentive compensation and a non-recurring vendor benefit in the prior year.

Other income (expense), net

Other expense of $14.9 million in 2019 was primarily driven by unrealized mark-to-market losses of $17.8 million on the HEXO warrants received in connection with the formation of the Truss joint venture, as further discussed in Note 16, "Derivative Instruments and Hedging Activities" , partially offset by a gain of $1.5 million related to the historical sale of Molson Inc.'s ownership interest in the Montreal Canadiens.

Other expense in 2018 was also primarily driven by unrealized mark-to-market losses of $23.8 million on the HEXO warrants.

Other income was $1.7 million in 2020 compared to other expense of $11.4 million in 2019 primarily driven by unrealized mark-to-market changes on our HEXO warrants, partially offset by a $1.5 million gain recognized in 2019 on the sale of the Company's ownership interest in the Montreal Canadiens.

Europe Segment

For the years ended

December 31, 2019

December 31, 2018

December 31, 2017

December 31, 2020 Change December 31, 2019 Change December 31, 2018

(In millions, except percentages)

Financial volume in hectoliters (1)(2)

19.560 (17.3) % 23.660 (3.3) % 24.469

$ 2,232.9 (26.8) % $ 3,049.0 (4.9) % $ 3,205.8

Excise taxes (801.0) (24.6) % (1,062.6) (6.4) % (1,135.4)

Net sales (2)

1,431.9 (27.9) % 1,986.4 (4.1) % 2,070.4

Cost of goods sold (1,025.1) (20.5) % (1,290.1) (3.1) % (1,331.5)

Gross profit 406.8 (41.6) % 696.3 (5.8) % 738.9

Marketing, general and administrative expenses (476.8) (15.1) % (561.5) (5.1) % (591.5)

Special items, net (3)

Operating income (loss)

(1,527.7) N/M (23.2) 90.2 % (12.2)

Operating income (loss) (1,597.7) N/M 111.6 (17.5) % 135.2

Interest income (expense), net (5.4) (5.3) % (5.7) 11.8 % (5.1)

Other income (expense), net (0.6) (82.9) % (3.5) 133.3 % (1.5)

Income (loss) before income taxes

Income (loss) before income taxes $ (1,603.7) N/M $ 102.4 (20.4) % $ 128.6

N/M = Not meaningful

(1) Excludes royalty volume of 1.731 million hectoliters, 1.968 million hectoliters and 2.040 million hectoliters for 2020, 2019 and 2018, respectively.

The results for 2019 and 2018 have been recast to reflect the segment changes as part of the revitalization plan.

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

1 unchanged sentence

Significant events

We continue to monitor the coronavirus pandemic, which had a material adverse effect on our Europe results of operations in 2020 and we expect it will continue to have a material adverse effect on our Europe results of operations in 2021.

We experienced a significant adverse impact particularly in the second and fourth quarters of 2020 resulting from the closure of, and subsequent continued impacts to, the on-premise channel.

While we began to see some of the on-premise return during June, and the on-premise reopening in July 2020 in the U.K., consumer behavior throughout Europe in the channel has been uncertain and has not returned to pre-pandemic levels.

Subsequently, in the fourth quarter of 2020, the second pandemic wave triggered new lockdowns with different levels of restrictions in Europe from one market to another.

Our results for fiscal year 2020 include a reduction to net sales of $17.1 million and charges to cost of goods sold of $2.9 million related to the recognition of sales returns and finished goods obsolescence charges and related costs resulting from the on-premise impacts of the coronavirus pandemic.

These charges were preliminarily recognized during the first quarter of 2020, with further adjustments for changes in estimates recognized during the year.

exited the EU on January 31, 2020, which subjects our Europe segment to regulatory and market uncertainty as the U.K.

remains in the EU customs union and single market until December 31, 2020, while the full terms of future trade agreements continue to be negotiated.

The GBP has recently become volatile as a result of the government discussions related to the uncertainty and terms of the exit, including the weakening of the GBP to the USD during the third quarter of 2019 leading up to the initial extended exit date of October 31, 2019, which had an adverse impact on our European revenues as reported in USD due to the significance of U.K.

Any further weakening of the GBP to the USD could have a further adverse impact on our results.

exited the EU on January 31, 2020 and entered a twelve month transition period.

The treaty regarding the U.K.

and EU trade relationship became effective on January 1, 2021.

left the single market and customs union on December 31, 2020, the treaty guarantees "zero tariff and zero quota" trade on goods.

See Part I—Item 1A Risk Factors under "Risks Specific to the Europe Segment" for further discussion of the risks specific to the U.K.'s exit from the EU.

The GBP has been volatile as a result of the government discussions related to the uncertainty and terms of the exit as well as from the ongoing uncertainties and impacts of the coronavirus pandemic.

Any significant weakening of the GBP to the USD could have an adverse impact on our results due to the importance and relative magnitude of U.K.

We completed our required annual goodwill and indefinite-lived intangible asset impairment testing as of October 1, 2020, the first day of our fourth quarter, and recorded a goodwill impairment charge related to our Europe reporting unit of $1,484.3 million, which was recorded as a special item.

This impairment charge was a result of the expected prolonged impacts of the coronavirus on the European beer industry.

During the third quarter of 2019, we recognized an aggregate impairment loss of $12.2 million related to the goodwill of our India reporting unit and a definite-lived brand intangible asset, which were

recorded as special items.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 10, "Goodwill and Intangible Assets" for additional information.

During the third quarter of 2020, we recognized an impairment loss of $30.0 million recorded within special items related to the held for sale classification of a disposal group within our India business, representing an insignificant part of our Europe segment.

In 2019, our Grolsch joint venture arrangement as well as the related brewing and distribution agreements for the Grolsch brands in the U.K.

1 unchanged sentence

See Part II—Item 8 Financial Statements and Supplementary Data, Note 4 , " Investments " for further information.

In January 2018, the Europe segment completed the acquisition of Aspall Cyder Limited, an established premium cider business in the U.K.

Foreign currency impact on results

Our Europe segment operates in numerous countries within Europe, and each country's operations utilize distinct currencies.

During 2019 , foreign currency movements unfavorably impacted our Europe USD income before income taxes by $8.2 million .

Included in these amounts are both translational and transactional impacts of changes in foreign exchange rates.

The impact of transactional foreign currency gains and losses is recorded within other income (expense) in our consolidated statements of operations.

Volume and net sales

Our Europe brand volume decreased 2.6% in 2019 compared to 2018 due to soft industry demand.

Net sales per hectoliter on a brand volume basis increased 4.5% in local currency in 2019 compared to 2018 , primarily driven by positive net pricing and favorable sales mix.

Net sales per hectoliter on a reported basis in local currency increased 4.0% in 2019 compared to 2018 .

Cost of goods sold

Cost of goods sold per hectoliter increased 4.9% in local currency in 2019 compared to 2018 , primarily due to inflation and volume deleverage.

Marketing, general and administrative expenses

Marketing, general and administrative expenses increased 1.7% in local currency in 2019 compared to 2018 , primarily due to higher marketing investments focused on our national champion brands and premiumization initiatives, as well as cycling a benefit from the partial reversal of bad debt provisions in 2018, partially offset by lower incentive compensation.

International Segment

For the years ended

December 31, 2019

December 31, 2018

December 31, 2017

(In millions, except percentages)

Financial volume in hectoliters (1)

Cost of goods sold (2)

Marketing, general and administrative expenses

Special items, net (3)

Operating income (loss)

Other income (expense), net

Income (loss) before income taxes

N/M = Not meaningful

Excludes royalty volume of 2.461 million hectoliters, 2.267 million hectoliters and 1.991 million hectoliters in 2019 , 2018 and 2017 , respectively.

Includes gross inter-segment purchases, which are eliminated in the consolidated totals.

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

Significant events

See Part II—Item 8 Financial Statements and Supplementary Data, Note 10, "Goodwill and Intangible Assets" for additional information.

During the first half of 2018, we decided to formally exit our business in China and, as such, have incurred special charges.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 7, "Special Items" for further detail.

Foreign currency impact on results

Our International segment operates in numerous countries around the world and each country's operations utilize distinct currencies.

Foreign currency movements unfavorably impacted our International USD loss before income taxes by $1.5 million for 2019 .

Included in these amounts are both translational and transactional impacts of changes in foreign exchange rates.

Our Europe segment operates in numerous countries, and each country's operations utilize distinct currencies.

During 2020, foreign currency movements unfavorably impacted our Europe USD loss before income taxes by $74.3 million, primarily driven by the approximate $78 million translational impacts of the goodwill impairment recorded.

Included in this amount are both translational and transactional impacts of changes in foreign exchange rates.

The impact of transactional foreign currency gains and losses is recorded within other income (expense) in our consolidated statements of operations.

Volume and net sales

Our International brand volume decreased 3.5% in 2019 compared to 2018 , primarily driven by India supply chain and demand constraints along with economic decline in Paraguay and Puerto Rico, partially offset by growth in several of our focus markets.

Our International financial volume decreased 15.7% in 2019 compared to 2018 , driven by India supply chain and demand constraints and shifting to local third party production in Mexico, which increased our royalty volume.

Net sales per hectoliter on a brand volume basis decreased 5.8% in local currency in 2019 compared to 2018 , primarily driven by geographic mix and shifting to local production in Mexico.

Net sales per hectoliter on a reported basis increased 7.9% in local currency in 2019 compared to 2018 due to geographic mix.

Our Europe brand volume decreased 14.8% in 2020 compared to 2019 as a result of the coronavirus pandemic.

Financial volume declined 17.3% in 2020 compared to 2019, also as a result of the coronavirus pandemic.

Net sales per hectoliter on a brand volume basis decreased 8.1% in local currency in 2020 compared to 2019, primarily driven by unfavorable channel, brand and geographic mix, particularly from our higher margin U.K.

business, which has a more significant exposure to the on-premise channel which was restricted for much of the year due to the coronavirus pandemic.

Net sales per hectoliter on a brand volume basis was also impacted by the keg sales returns primarily recognized in the first quarter of 2020 related to the on-premise impacts resulting from the coronavirus pandemic.

Net sales per hectoliter on a reported basis decreased 13.4% in local currency in 2020 compared to 2019.

Cost of goods sold

Cost of goods sold per hectoliter increased 5.9% in local currency in 2019 compared to 2018 , primarily driven by inflation and geographic mix.

Cost of goods sold per hectoliter decreased 4.3% in local currency in 2020 compared to 2019, driven by changes in geographic and product mix, partially offset by volume deleverage and cost inflation as well as the finished good obsolescence charges and costs resulting from the on-premise impacts of the coronavirus pandemic.

Marketing, general and administrative expenses

Marketing, general and administrative expenses decreased 8.0% in local currency in 2019 compared to 2018 , primarily due to lower marketing investments, overhead and integration costs, partially offset by cycling the $2.0 million of settlement proceeds received related to our Colombia business in the first quarter of 2018.

Corporate Segment

Marketing, general and administrative expenses decreased 15.4% in local currency in 2020 compared to 2019, primarily as a result of actions taken to mitigate the impacts associated with the coronavirus pandemic, and lower incentive compensation.

Unallocated Segment

For the years ended

December 31, 2019

December 31, 2018

December 31, 2017

December 31, 2020 Change December 31, 2019 Change December 31, 2018

(In millions, except percentages)

Financial volume in hectoliters — — % — — % —

Cost of goods sold

Sales $ — — % $ — — % $ —

Excise taxes — — % — — % —

Net sales — — % — — % —

Cost of goods sold 107.6 N/M (0.8) (99.5) % (166.2)

Gross profit 107.6 N/M (0.8) (99.5) % (166.2)

Marketing, general and administrative expenses — — % — — % —

Special items, net — — % — — % —

Operating income (loss)

Operating income (loss) 107.6 N/M (0.8) (99.5) % (166.2)

Interest expense, net (263.5) (2.3) % (269.8) (10.6) % (301.9)

Other pension and postretirement benefits (costs), net

Other income (expense), net

Other pension and postretirement benefits (costs), net 30.3 N/M 2.9 (92.4) % 38.2

Other income (expense), net 4.9 N/M 0.2 N/M (0.8)

Income (loss) before income taxes $ (120.7) (54.9) % $ (267.5) (37.9) % $ (430.7)

N/M = Not meaningful

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

Significant events

As a result of our revitalization plan, during the fourth quarter of 2019, we initiated restructuring activities and have and will continue to incur severance and other employee-related costs as special items.

We also recorded impairment losses in connection with the closure of our office in Denver, Colorado, which were also recorded as special items.

Cost of goods sold

The unrealized changes in fair value on our commodity swaps, which are economic hedges, are recorded as cost of goods sold within our Corporate activities.

The unrealized changes in fair value on our commodity swaps, which are economic hedges, are recorded as cost of goods sold within unallocated and make up the entirety of the activity presented with cost of goods sold in the table above for 2020, 2019 and 2018.

As the exposure we are managing is realized, we reclassify the gain or loss to the segment in which the underlying exposure resides, allowing our segments to realize the economic effects of the derivative without the resulting unrealized mark-to-market volatility.

Lower commodity market prices relative to our hedged positions on our commodity swaps drove a total unrealized mark-to-market loss of $0.8 million recognized in cost of goods sold for the year ended December 31, 2019 , as compared to an unrealized mark-to-market loss of $166.2 million recognized in cost of goods sold for the year ended December 31, 2018 .

Cost of goods sold for the year ended December 31, 2017 include an unrealized mark-to-market gain of $123.3 million on these commodity swaps.

Marketing, general and administrative expenses

Marketing, general and administrative expenses decreased in 2019 compared to 2018 , primarily due to lower incentive compensation in the current year as well as higher integration costs recognized in the prior year.

Specifically, we recorded integration costs of $23.1 million for the year ended December 31, 2019 and $36.9 million for the year ended December 31, 2018 related to the Acquisition within marketing, general and administrative expenses.

Interest expense, net

Net interest expense decreased in 2019 compared to 2018 , primarily driven by the repayment of debt as part of our deleveraging commitments as well as risk management strategies to reduce interest expense.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 16, "Derivative Instruments and Hedging Activities" and Note 11, "Debt" for further details.

Other income (expense), net and Other pension and postretirement benefits (costs), net

Net other income decreased in 2019 compared to 2018 , primarily driven by an $11.7 million gain recorded on the sale of a non-operating asset in 2018.

The decrease in other pension and postretirement benefits in 2019 was primarily driven by a pension settlement charge of $29.8 million recognized in 2019.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 5, "Other Income and Expense" for further discussion of other income (expense) amounts and Note 15, "Employee Retirement Plans and Postretirement Benefits" for discussion of changes in pension and postretirement benefits (costs) as all non-service cost components of pension and postretirement benefits (costs) are reported within Corporate.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 1 6 , "De rivative Instruments and Hedging Activities " for further information.

Interest income (expense), net

Net interest expense decreased in 2020 compared to 2019, primarily driven by the repayment of debt as part of our deleveraging commitments.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 11, "Debt" for further details.

Other pension and postretirement benefits (costs), net

Other pension and postretirement benefits were $30.3 million for the year ended 2020 compared to $2.9 million in 2019, primarily driven by a pension settlement charge of $29.8 million recognized in 2019.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 15, "Employee Retirement Plans and Postretirement Benefits" for further discussion of other pension and postretirement benefits.

Liquidity and Capital Resources

Our primary sources of liquidity include cash provided by operating activities and access to external capital.

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

Our primary sources of liquidity have included cash provided by operating activities and access to external capital.

However, the worldwide economic disruption caused by the coronavirus pandemic could materially affect our future access to our sources of liquidity.

In the event of a sustained market deterioration and continued declines in net sales, profit and operating cash flow, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions.

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, capital expenditures and other obligations for the next twelve months, and our long-term liquidity requirements.

Additionally, in the second quarter of 2020, as part of our planned actions to mitigate liquidity considerations related to the coronavirus pandemic, we amended our $1.5 billion revolving credit facility to revise the leverage ratios under the financial maintenance covenant upwards for the six fiscal quarters beginning with the second quarter 2020 in response to the effects of the pandemic on our business.

Separately, we entered into a COVID Corporate Financing Facility

commercial paper program in the U.K.

allowing for an incremental borrowing capacity of up to GBP 300 million as further discussed below.

We are currently focused on navigating the recent challenges presented by the coronavirus pandemic by preserving our liquidity and managing our cash flow through taking preemptive action to enhance our ability to meet our short-term liquidity needs.

Specifically, we have taken several actions and considered various potential actions that may be needed to meet short-term and mid-term liquidity needs and have resources in place should we need to act on any of these quickly.

Such potential actions include, but are not limited to, drawing on the available $1.5 billion revolving credit facility, including issuing commercial paper under our U.S.

commercial paper program, issuing, as necessary, up to GBP 300 million in commercial paper under the COVID Corporate Financing Facility in the U.K.

(see Part II—Item 8 Financial Statements and Supplementary Data, Note 11, "Debt" regarding details of our current borrowings and remaining capacities under these programs), further accessing the capital markets, reducing discretionary spending including marketing, general and administrative as well as capital expenditures, asset monetization, and taking advantage of certain governmental programs such as furloughs in the U.K.

and government relief and payment deferral programs, for example by the U.S.

Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), discussed below, and other such government-sponsored legislation and programs.

In addition, we and our board of directors continue to actively evaluate various capital allocation considerations.

Specifically, we currently intend to maintain our investment grade debt rating and we are committed to further deleverage in 2021 in accordance with our plans.

Further, our current expectation is that the Company's board of directors will be in a position to reinstate a dividend in the second half of 2021.

While we currently expect to have the necessary cash on hand to repay obligations when due, continued declines in net sales and profit could have a material adverse effect on our financial operations, cash flow and our ability to raise capital.

The coronavirus pandemic is ongoing, and because of its dynamic nature, including uncertainties relating to the ultimate spread of the virus, the severity of the disease, the duration of the pandemic, the duration of on-premise closures and related prolonged weakening of economic or other negative conditions, and governmental reactions, we cannot fully anticipate future conditions given the substantial uncertainties in the economy in general.

We may have unexpected costs and liabilities;

revenue and cash provided by operations may decline;

macroeconomic conditions may continue to weaken;

prolonged and severe levels of unemployment may negatively impact our consumers;

and competitive pressures may increase.

These factors may result in difficulty maintaining liquidity, meeting our deleverage commitments and complying with our revolving credit facility covenants.

As a result, our credit ratings could be downgraded, which would increase our costs of future borrowing and harm our ability to refinance our debt in the future on acceptable terms or at all.

However, in anticipation of these uncertainties, we entered into Amendment No.

2 to our revolving credit facility on June 19, 2020.

While the amendment did not increase our borrowing capacity or extend the term of the facility, it, among other things, (i) temporarily increased certain levels of the applicable rate by 25 basis points for the period beginning June 19, 2020 and ending on the last day of the fiscal quarter ending September 30, 2021, and (ii) revised the leverage ratios under the financial maintenance covenant for each fiscal quarter ending on or after June 30, 2020 through the maturity of the Credit Agreement.

There can be no assurance that we will be able to secure additional liquidity if our revolving credit facility is fully drawn, the capital markets become inaccessible or if our credit rating is adversely impacted, which may result in difficulties in accessing debt markets or increase our debt costs.

Even if we have access to the capital markets, we may not be able to raise capital on acceptable terms or at all.

If we are unable to maintain or access adequate liquidity, our ability to timely pay our obligations when due could be adversely affected.

Continued disruption and declines in the global economy could also impact our customers' liquidity and capital resources and therefore our ability to collect, or the timeliness of collection of our accounts receivable from them, which may have a material adverse impact on our performance, cash flows and capital resources.

We continue to monitor our accounts receivable aging and have recorded reserves as appropriate.

In addition, measures taken by governmental agencies to provide relief to businesses could further impact our ability to collect from customers.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” for additional discussion related to our accounts receivable and associated reserves.

Additionally, in response to the coronavirus pandemic, various governmental authorities globally have announced relief programs which we continue to monitor and evaluate, such as the CARES Act in the U.S.

Certain of these relief programs provide temporary deferrals of income and non-income based tax payments, which have positively impacted our operating cash flows in 2020.

Of the approximate $130 million of cash flow benefits recognized in 2020 from these temporary deferrals, the majority is expected to be paid in 2021.

While a significant portion of our cash flows from operating activities is generated within the U.S., our cash balances may be comprised of cash held outside the U.S.

and in currencies other than USD.

As of December 31, 2019 , approximately 90% of our cash and cash equivalents was located outside the U.S., largely denominated in foreign currencies.

We accrue for tax consequences on the earnings of our foreign subsidiaries upon repatriation.

When the earnings are considered indefinitely reinvested outside of the U.S., we do not accrue taxes.

As of December 31, 2020, approximately 60% of our cash and cash equivalents were located outside the U.S., largely denominated in foreign currencies.

The recent fluctuations in foreign currency exchange rates may have a material impact on these foreign cash balances.

When the earnings

are considered indefinitely reinvested outside of the U.S., we do not accrue taxes.

To the extent necessary, we accrue for tax consequences on the earnings of our foreign subsidiaries upon repatriation.

However, we continue to assess the impact of the 2017 Tax Act and related U.S.

Department of Treasury proposed, temporary and final regulations, on the tax consequences of future repatriations.

Department of Treasury proposed, temporary and final regulations, on the tax consequences of future cash repatriations.

We utilize a variety of tax planning and financing strategies in an effort to ensure that our worldwide cash is available in the locations in which it is needed.

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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.

business and other liquidity measures resulting from considerations of the on-going coronavirus global pandemic, as discussed above, are sufficient to fund our current cash needs in the U.S.

Additionally, our cash balances in foreign countries are often subject to additional restrictions and covenants.

We may, therefore, have difficulties repatriating cash held outside of the U.S.

which would also be subject to various repatriation taxes.

In some countries repatriation of certain foreign balances is restricted by local laws and could have adverse tax consequences if we were to move the cash to another country.

These limitations may affect our ability to fully utilize our cash resources for needs in the U.S.

or other countries and may adversely affect our liquidity.

Separately, as discussed in See Part II—Item 8 Financial Statements and Supplementary Data, Note 6, "Income Tax" , the U.S.

Department of Treasury recently enacted final hybrid regulations which impact tax positions we took in 2018 and 2019 and have resulted in additional income tax expense of approximately $135 million recognized during the second quarter of 2020.

We currently believe the impact of the finalized regulations could be cash tax outflows up to approximately $100 million in 2021.

We continue to analyze the potential cash impacts of the final regulations to minimize cash outflows over time.

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 North America segment.

Pursuant to the indenture dated May 3, 2012 (as amended, the "May 2012 Indenture"), MCBC issued its outstanding 3.5% senior notes due 2022 and 5.0% senior notes due 2042.

Additionally, pursuant to the indenture dated July 7, 2016, MCBC issued its outstanding 2.1% senior notes due 2021, 3.0% senior notes due 2026, 4.2% senior notes due 2046 and 1.25% senior notes due 2024.

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 on Exhibit 22 of this Annual Report on Form 10-K (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 II—Item 8 Financial Statements and Supplementary Data, Note 11, "Debt" for details of all debt issued and outstanding as of December 31, 2020.

The following summarized financial information relates to the Obligor Group as of December 31, 2020 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

Year ended December 31, 2020

(In millions)

Net sales, out of which:

Intercompany sales to non-guarantor subsidiaries $ 31.3

Gross profit, out of which:

Intercompany net costs from non-guarantor subsidiaries $ (460.5)

Net interest expense third parties $ (265.5)

Intercompany net interest income from non-guarantor subsidiaries $ 90.8

Income before income taxes $ 1,107.5

Net income $ 918.6

As of December 31, 2020

(In millions)

Total current assets, out of which:

Intercompany receivables from non-guarantor subsidiaries $ 184.4

Total noncurrent assets, out of which:

Noncurrent intercompany notes receivable from non-guarantor subsidiaries $ 3,962.2

Total current liabilities, out of which:

Current portion of long-term debt and short-term borrowings $ 1,001.4

Intercompany payables due to non-guarantor subsidiaries $ 72.3

Total noncurrent liabilities, out of which:

Long-term debt $ 7,129.8

Noncurrent intercompany notes payable due to non-guarantor subsidiaries $ 4,117.6

Cash Flows and Use of Cash

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Net cash provided by operating activities of approximately $1.7 billion in 2020 decreased by $201.6 million compared to 2019.

This decrease was primarily driven by cycling the proceeds received during the first quarter of 2018 of $328.0 million related to the Adjustment Amount (as defined and further discussed in Part II—Item 8 Financial Statements and Supplementary Data, Note 7, "Special Items" ), lower net income adjusted for non-cash add backs and higher cash paid for taxes, partially offset by favorable changes in working capital and lower interest paid during 2019.

This decrease was primarily driven by lower net income adjusted for non-cash add-backs and higher cash paid for taxes partially offset by favorable timing of working capital.

Cash Flows from Investing activities

Net cash used in investing activities of $413.6 million in 2020 decreased by $19.7 million compared to 2019.

This decrease was primarily driven by the receipt of $94.2 million of net proceeds from the sale of our Montreal brewery during the second quarter of 2019, lower capital expenditures in the current year, proceeds received from the voluntary settlement of our cross currency swaps during the second quarter of 2019 and lower cash paid for acquisitions in the current year.

This decrease was primarily driven by higher proceeds from the sale of breweries (approximately $150 million from the sale of the Irwindale brewery completed in the fourth quarter of 2020 compared with the receipt of $94.2 million of net proceeds from the sale of our Montreal brewery during the second quarter of 2019) and lower capital expenditures, partially offset by the lower cash inflows from other investing activities including proceeds received from the voluntary settlement of our cross currency swaps during the second quarter of 2019.

Cash Flows from Financing activities

Net cash used in financing activities of approximately $2.0 billion in 2019 increased by $998.1 million compared to 2018 .

This increase was primarily driven by higher net repayments on debt and borrowings in 2019 compared to 2018 , as well as increased dividend payments in 2019 , partially offset by higher net repayments of borrowings under our commercial paper program in 2018 .

Net cash used in financing activities of approximately $1.1 billion in 2020 decreased by $936.6 million compared to 2019.

This decrease was primarily driven by lower net repayments on debt and borrowings and lower dividends paid resulting from the suspension of dividend payments in the second quarter of 2020, partially offset by higher net cash outflows from other financing activities.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 11, "Debt" for a summary of our financing activities and debt position as of December 31, 2020 and December 31, 2019.

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Cash and Cash Equivalents

As of December 31, 2019 , we had total cash and cash equivalents of $523.4 million compared to approximately $1.1 billion as of December 31, 2018 .

The decrease in cash and cash equivalents as of December 31, 2019 from December 31, 2018 was primarily driven by cash use related to increased debt and dividend payments in 2019, as well as capital spend, partially offset by cash generated from operating activities.

As of December 31, 2020, we had total cash and cash equivalents of $770.1 million compared to $523.4 million as of December 31, 2019.

The increase in cash and cash equivalents as of December 31, 2020 from December 31, 2019 was primarily driven by cash generated from operating activities, including the above-mentioned deferral of tax payments from various government-sponsored payment deferral programs and the proceeds from the sale of the Irwindale brewery, partially offset by the repayment of debt, capital expenditures and dividend payments.

See Part II—Item 8 Financial Statements and Supplementary Data, Consolidated Statements of Cash Flows for additional detail.

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These investments are viewed by management as low-risk investments on which there are little to no restrictions regarding our ability to access the underlying cash to fund our operations as necessary.

While we have some investments in prime money market funds, these are classified as cash and cash equivalents;

however, we continually monitor the need for reclassification under the updated SEC requirements for money market funds, and the potential that the shares of such funds could have a net asset value of less than one dollar.

While we have some investments in prime money market funds at times, these are classified as cash and cash equivalents;

however, we continually monitor the need for reclassification under the SEC requirements for money market funds, and the potential that the shares of such funds could have a net asset value of less than one dollar.

We also utilize cash pooling arrangements to facilitate the access to cash across our geographies.

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

During 2019, we repaid our EUR 500 million variable rate notes, $500 million 1.90% notes, and $500 million 1.45% notes upon their respective maturities throughout the year.

During 2020, we repaid our $500 million 2.25% notes and CAD 500 million 2.75% notes upon their respective maturities throughout the year.

Notional amounts are presented in USD based on the applicable exchange rate as of December 31, 2020.

Refer to Part II—Item 8 Financial Statements and Supplementary Data, Note 11, "Debt" for details regarding the $500 million and $400 million cross currency swaps on our $500 million 2.25% senior notes due 2020 and on a portion of our $1.0 billion 2.1% senior notes due 2021, respectively, which economically converted these notes to EUR denominated.

The impact of the reclassification of long-term finance leases to long-term debt is included in the "other" column in the table above.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 2, "New Accounting Pronouncements " for further details.

Based on the credit profile of our lenders that are party to our credit facilities, we are confident in our ability to draw on our revolving credit facility if the need arises.

As of December 31, 2019 and December 31, 2018 , we had $1.5 billion available to draw under our $1.5 billion revolving credit facility, which we extended the maturity date in the current year to July 7, 2024, as there were no outstanding revolving credit facility or commercial paper borrowings.

In addition, we intend to further utilize our cross-border, cross-currency cash pool for liquidity as needed.

We have economically converted a portion of our $1.0 billion 2.1% senior notes due 2021 to EUR denominated using cross currency swaps of $400 million.

Refer to Part II—Item 8 Financial Statements and Supplementary Data, Note 11, "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.

As of December 31, 2020 and December 31, 2019, we had $1.5 billion available to draw under our $1.5 billion revolving credit facility, as there were no outstanding revolving credit facility or commercial paper borrowings.

Separately, on May 26, 2020, Molson Coors Brewing Company (UK) Limited (“MCBC U.K.”), a subsidiary of MCBC that operates and manages the Company’s business in the U.

K., established a commercial paper facility for the purpose of issuing short-term, unsecured Sterling-denominated notes that are eligible for purchase under the Joint HM Treasury and Bank of England’s COVID Corporate Financing Facility commercial paper program (the “CCFF Program”) in an aggregate principal amount up to GBP 300 million, subject to certain conditions, which may be increased from time to time as provided in the Dealer Agreement (as defined in Part II—Item 8 Financial Statements and Supplementary Data, Note 11, "Debt" ).

Commercial paper issuances under the CCFF Program do not impact the borrowing capacity under our revolving credit facility.

We had no borrowings outstanding under the CCFF Program as of December 31, 2020.

To the extent MCBC U.K.

has borrowings outstanding under the CCFF Program with maturities extending beyond May 19, 2021, there are certain additional conditions placed on the operations of MCBC U.K., including capital distributions and senior executive compensation, and as a consequence we currently do not anticipate having any borrowings under the CCFF Program with maturities extending beyond May 19, 2021, unless such previously described conditions under the CCFF Program are modified.

In addition, 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 JPY, CAD, GBP and USD overdraft facilities as well as an additional JPY line of credit across several banks should we need additional short-term liquidity.

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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.

Additionally, under the $1.5 billion revolving credit facility, the maximum leverage ratio as of December 31, 2019 is 4.25x net debt to EBITDA, with a decline to 4.00x net debt to EBITDA as of the last day of the fiscal quarter ending December 31, 2020 .

On June 19, 2020, we entered into to an amendment to our existing revolving credit facility agreement, which among other things, revised the leverage ratios under the financial maintenance covenant for each fiscal quarter ending on or after June 30, 2020 through the maturity of the credit facility.

The maximum leverage ratio, as defined by the amended revolving credit facility agreement as of December 31, 2020 is 5.25x net debt to EBITDA with a 0.50x reduction to 4.75x net debt to EBITDA for the fiscal quarter ending June 30, 2021.

The leverage ratio requirement as of the last day of the fiscal quarter ending September 30, 2021 is reduced by 0.25x to 4.50x net debt to EBITDA, with a further 0.50x reduction to 4.00x net debt to EBITDA as of the last day of the fiscal quarter ending December 31, 2021 through maturity of the credit facility.

As of December 31, 2020 and December 31, 2019, we were in compliance with all of these restrictions, have met such financial ratios and have met all debt payment obligations.

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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-3, Prime-3 and R-2(low),

respectively.

A securities rating is not a recommendation to buy, sell or hold securities, and it may be revised or withdrawn at any time by the rating agency.

Our current long-term credit ratings are BBB-/Negative Outlook, Baa3/Stable Outlook and BBB(Low)/Negative Outlook with Standard & Poor's, Moody's and DBRS, respectively.

Our short-term credit ratings are A-3, Prime-3 and R-2(low), respectively.

A securities rating is not a recommendation to buy, sell or hold securities, and it may be revised or withdrawn at any time by the applicable rating agency.

Foreign Exchange

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For the years ended

December 31, 2019

December 31, 2018

December 31, 2017

December 31, 2020 December 31, 2019 December 31, 2018

Weighted-Average Exchange Rate (1 USD equals)

Canadian dollar (CAD) 1.32 1.32 1.30

Euro (EUR) 0.85 0.89 0.84

British pound (GBP) 0.78 0.79 0.77

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Hungarian Forint (HUF) 303.65 292.42 267.65

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Closing Exchange Rate (1 USD equals)

Canadian dollar (CAD) 1.27 1.30

Euro (EUR) 0.82 0.89

British pound (GBP) 0.73 0.75

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The weighted-average exchange rates in the above table have been calculated based on the average of the foreign exchange rates during the relevant period and have been weighted according to the foreign denominated earnings from operations of the USD equivalent.

If foreign currencies in the countries in which we operate devalue significantly in future periods, most significantly the CAD, GBP and other European operating currencies included in the above table, then the impact on USD reported earnings may be material.

If foreign currencies in the countries in which we operate devalue significantly in future periods, most significantly the CAD, GBP, EUR and other European operating currencies included in the above table, then the impact on USD reported earnings may be material.

Capital Expenditures

In 2020, we incurred $530.0 million, and have paid $574.8 million, for capital improvement projects worldwide, excluding capital spending by equity method joint ventures, representing an approximate 11% decrease versus 2019 capital expenditures incurred of $593.0 million.

This decrease is primarily due to cycling higher investments in 2018 versus 2019 associated with the U.S.

bottle furnace rebuild as well as lower spend to drive cost savings related to our 2017 to 2019 cost savings program as the timing of spend associated with this program was more heavily weighted towards the first two years of the three year program.

Additionally, we are cycling higher investments incurred in 2018 around the construction of our new Chilliwack, British Columbia brewery, which was completed in 2019.

This favorability was partially offset by higher expenditures associated with the new Longueuil, Quebec brewery, for which construction is currently underway and not expected to be completed until 2021, as well as the consolidated capital expenditures related to a new manufacturing facility in Belleville, Ontario as part of our Truss joint venture with HEXO in Canada.

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

This decrease was primarily due to a targeted reduction of capital expenditures resulting from mitigating actions in response to the coronavirus pandemic in 2020.

Specifically, as one of the mitigating actions we took to offset some of the financial implications of the coronavirus pandemic, in the first quarter we reduced our capital expenditure plans by approximately $170 million for full year 2020.

Despite the revised expectations, with improved liquidity and strong cash management, we were able to accelerate certain investments in expanding our production capacity and capabilities to support new innovations and growth initiatives resulting in slightly higher capital spend than previously communicated.

These capital expenditures include adding capacity for our innovations, specifically additional seltzer capacity.

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.

Contractual Obligations and Commercial Commitments

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Payments due by period

Less than 1 year

More than 5 years

Total Less than 1 year 1 - 3 years 3 - 5 years More than 5 years

(In millions)

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Retirement plan expenditures (1)

415.5 47.1 85.0 83.2 200.2

Operating leases 166.4 52.0 71.3 25.9 17.2

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Other long-term obligations (2)

2,948.6 691.2 1,020.9 511.4 725.1

Total obligations $ 15,559.2 $ 2,083.1 $ 2,557.8 $ 2,056.7 $ 8,861.6

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(2) Primarily includes non-cancelable purchase commitments as of December 31, 2020 that are enforceable and legally binding.

Approximately $2.0 billion of the total other long-term obligations relate to long-term supply contracts with third parties to purchase raw material, packaging material and energy used in production.

Approximately $1.6 billion of the total other long-term obligations relate to long-term supply contracts with

third parties to purchase raw material, packaging material and energy used in production.

Our aggregate commitments for advertising and promotions, including sports sponsorship, total approximately $779 million.

The remaining amounts relate to derivative payments, sales and marketing, distribution, information technology services, open purchase orders and other commitments.

Included in other long-term obligations are $6.9 million of unrecognized tax benefits, excluding positions we would expect to settle using deferred tax assets, and $10.2 million of indemnities provided to FEMSA for which we cannot reasonably estimate the timing of future cash flows, and we have therefore included these amounts in the more than 5 years column.

Included in other long-term obligations are unrecognized tax benefits of $98.0 million that are included in the less than one year column.

Additionally, unrecognized tax benefits of $7.0 million and $11.0 million of indemnities provided to FEMSA are included in the more than 5 years column because we cannot reasonably estimate the timing of future cash flows related to these items.

The unrecognized tax benefit amounts exclude positions we would expect to settle using deferred tax assets.

We guarantee indebtedness and other obligations to banks and other third parties for some of our equity method investments and consolidated subsidiaries.

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Total amounts

Less than 1 year

More than 5 years

committed Less than 1 year 1 - 3 years 3 - 5 years More than 5 years

(In millions)

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Outlook for 2021

On October 28, 2019, we initiated a revitalization plan designed to get Molson Coors back to consistent topline growth.

The plan is designed to streamline the Company, allow us to move faster, and free up resources to invest in our brands and capabilities.

The components of the revitalization plan include investing in our iconic brands, aggressively growing our above premium business - in beer and flavored beverages, growing beyond beer, strengthening our capabilities and streamlining our company.

We believe our core brands have the power to recruit new legal-age drinkers, which is why investing in our core brands is a key part of the revitalization plan.

In the fourth quarter of 2019, we released new creative pieces in the Coors Light “Made to Chill” campaign and the Miller Lite “It’s Miller Time” campaign in the U.S., and we have already unveiled additional spots in 2020.

In above premium, volume and net sales revenue improved for the full year 2019 and accelerated in the fourth quarter.

We intend to support this acceleration by providing more fuel to our fastest growing brands and new innovations in the above premium space.

We recently launched a new creative for Peroni in the U.S.

that we believe presents an opportunity for continued success in 2020.

We have also recently launched two new innovations in the U.S.

with Blue Moon LightSky and Saint Archer Gold .

LightSky is a low calorie, low carb beer brewed with tangerine peel that pushes the Blue Moon brand into incremental occasions and consumers.

Saint Archer Gold is a premium light lager that we introduced to consumers with a broad media campaign that kicked off in early February 2020 and showcases how the brand is a better tasting light beer than other competitors.

Additionally, in January 2020, we agreed to acquire Atwater Brewery, a regional craft brewer in Michigan.

It fills a geographic void, gives us distilled spirits capability and we anticipate it will help position our craft portfolio to continue

outperforming the broader craft market.

We plan to invest more in flavored malt beverages and white spaces that differentiate us and allow us to reach more consumers.

Building on our 2019 successes, we expect to continue to invest behind Cape Line sparkling cocktails in the U.S.

and plan to expand La Colombe hard coffee to additional markets.

In Canada, we intend to continue to invest in Mad Jack - a popular flavored malt beverage.

In March 2020, we plan to also launch Vizzy , a hard seltzer that offers differentiated ingredients, in the U.S.

which we expect will help it carve out a meaningful space in the hard seltzer category.

Lastly, we intend to expand beyond the beer aisle altogether.

In November 2019, we announced an investment in and partnership with L.A.

Libations, an incubator of "better-for-you" non-alcoholic beverages.

We intend to be selective about where we compete, always looking to leverage our unique strengths.

Additionally, we are taking a definitive step into the wine category with the expected national launch of Movo wine spritzers in March 2020.

The organizational restructuring is well under way and we are making progress toward our goal of improving efficiency and unlocking an additional $150 million in annual savings, bringing our total expected costs savings to $600 million over the three year cost savings program discussed below.

Effective January 2020, we have simplified our structure from four business units and a corporate center to two streamlined business units - North America and Europe.

In North America our new organizational design is now in place.

All teams have been selected and people are transitioning to new office locations.

In Europe, we have announced all senior leadership changes and anticipate the organization will be complete by the end of March 2020.

As part of our updated structure, we have a new data and analytics team and are expanding and developing new commercial and operational capabilities, which we believe will make us smarter and more efficient.

The resulting financial reporting changes of this new operating structure will be reflected in our first quarter 2020 results.

We continue to estimate the cost of all of these changes will result in total one-time cash and non-cash charges in the range of approximately $120 million to $180 million .

We expect the majority of these charges will be cash charges which we began recognizing in the fourth quarter of 2019, and will be further spread through the balance of fiscal years 2020 and 2021.

We recognized approximately $43 million as special items within our consolidated statements of operations during the fourth quarter of 2019 related to our revitalization plan.

We currently expect to record the remainder of these costs as special items within our consolidated statements of operations.

Our next generation cost savings program, which began in 2020 and includes the anticipated benefits of the revitalization plan, is currently expected to deliver approximately $600 million over the three year program term through 2022 and is focused around many of the same functions of the business as the 2017 to 2019 program.

We plan to reinvest these additional cost savings behind our brands and other capability building.

Capital Expenditures

We currently expect to incur total capital expenditures of approximately $700 million in 2020 , based on foreign exchange rates as of December 31, 2019 , including capital expenditures associated with the construction of our new Longueuil, Quebec brewery and increased investment to modernize our Golden, Colorado brewery, excluding capital spending by equity method joint ventures.

We anticipate 2020 consolidated net interest expense of approximately $280 million , based on foreign exchange and interest rates as of December 31, 2019 .

We expect our effective tax rate to be in the range of 20 to 24 percent for 2020 and beyond, which remains subject to additional definitive guidance and finalized regulations from the U.S.

government regarding the implementation of the 2017 Tax Act.

We set bold plans for our business for 2020 with the introduction of the revitalization plan at the end of 2019 which positioned our company well despite the headwinds experienced as a result of the coronavirus in 2020.

We continue to strive to build on the strength of our iconic core brands, grow our above premium portfolio, expand beyond the beer aisle, invest in our capabilities and support our people and communities.

Our accomplishments in 2020 have given us momentum for 2021, which is intended to be a year of investment as we continue to deliver our revitalization plan and drive towards long-term growth.

We have seen success in our response to the short-term impacts of the coronavirus pandemic, positioning ourselves to succeed in the medium- and long-term.

The coronavirus pandemic continues to impact our business due to significantly reduced on-premise sales across all our geographies, disproportionately so in Europe as well as Canada, with on-premise location capacity restrictions and limits that have and we believe will continue to prevent sales from returning to pre-pandemic levels.

We currently expect to continue to see on-premise sales lag behind pre-pandemic levels due to continued capacity restrictions, potential additional closures in the near term, uncertainty in the distribution and effectiveness of the vaccines, the evolving of additional variants of coronavirus and other limitations at on-premise locations.

As a result, we currently expect to see a continued strength of our off-premise sales compared to pre-pandemic levels.

However, as we have seen throughout the pandemic, the strong off-premise sale performance is not expected to completely offset the declines in on-premise sale performance.

Further, one of the biggest challenges for beverage companies in 2020 was the packaging supply shortage as a result of the significant increase in off-premise sales, particularly aluminum cans in North America.

Our supply chain has worked diligently to ensure sufficient supply of high demand brands and packages notwithstanding these packaging challenges.

inventory levels steadily improve in 2020.

While work remains and industry standard can supply constraints continue due to high demand, supplies for glass bottles, paperboard and tall aluminum cans have improved and we believe all have returned

to normal availability and we currently expect industry standard can supply to return to normal material availability by the end of the first quarter of 2021.

With the plan to build on the strength of our core brands, we made progress as we continued to grow the combined segment share for Coors Light and Miller Lite in the United States even while on-premise sales remain constrained due to pandemic restrictions.

These brands finished 2020 with stronger brand health and, in 2021, we expect to put even more marketing behind these two iconic brands.

Our plan to grow our above premium portfolio progressed meaningfully as we announced our plans to significantly expand our production capacity for both hard seltzers and our newly released Blue Moon LightSky.

We expect these expansions will allow us to meet increasing demand in the near future and we further plan to expand our hard seltzer and innovation production capacity in 2021 and 2022.

Blue Moon LightSky was launched in the U.S.

in February 2020 and was the top selling new beer in the United States in 2020 per Nielsen.

Additionally, we launched Vizzy hard seltzer in the U.S.

in April 2020 and launched Coors Seltzer , also in the U.S., during the third quarter of 2020.

These two hard seltzers have diversified our portfolio and we believe position us well in the growing hard seltzer market and, in 2021, we have strong plans to accelerate marketing support behind Coors Seltzer, as well as expand both Vizzy and Coors Seltzer into Canada.

Also, this year, through an exclusive agreement with The Coca-Cola Company in the U.S., we expect to launch Topo Chico Hard Seltzer, which is an extension of an iconic brand with an already large following in various markets across the U.S., and, separately, we also intend to launch Proof Point , a new differentiated hard seltzer with premium ingredients like real spirits, early this year in the U.S.

We plan to continue to grow our share of the hard seltzer market with these newly launched, or to be launched, products working towards the most diversified hard seltzer portfolio in the industry and we believe expanding production capacity will make the expected growth possible.

We also expect to have further growth opportunities in 2021 as we bring Yuengling brands west in the U.S.

under our new joint venture, which will oversee any new market expansion outside Yuengling's current 22-state footprint and New England, beginning with plans to bring Yuengling to Texas in the fall of 2021.

We also have a distribution deal for Bodega Bay hard seltzer in the U.K.

and Ireland, which allows us to be an early entrant in the hard seltzer segment in these markets and have plans to extend seltzers into Central Europe as well.

We plan to build on the strategy to grow our above premium portfolio into the future.

In addition to our growth in the hard seltzer market, we made further steps this year to expand our portfolio beyond the beer aisle for future growth opportunities.

Specifically, we launched MOVO , our first canned wine.

Truss, our Canadian joint venture with HEXO, launched Veryvell CBD and THC drops earlier in 2020 and its first ready-to-drink cannabis beverages during the third quarter of 2020 as well as launched our first CBD-based products in Colorado.

In addition, we launched a new line of non-alcohol products through our minority stake in the beverage incubator LA Libations LLC.

We expect this expansion beyond beer to continue into 2021 and beyond.

Future expansions beyond beer in 2021 include the commencement of the distribution of ready-to-drink La Colombe coffees in the U.S.

in early 2021, our new energy drink partnership with ZOA and our first entry into the fast-growing RTD cocktail space through an exclusive equity and distribution agreement with Superbird , an above premium blue agave tequila-based cocktail.

Our performance and agility in navigating the coronavirus pandemic and executing against our revitalization plan has proven meaningful, but we recognize there are still challenges ahead.

We are mindful of the continued challenges and the uncertainty that remains and are focused on doing what is best not only in the near-term, but also positioning the business for medium- and long-term success.

In addition, in response to the coronavirus pandemic, we took steps in 2020 to improve our financial flexibility including continuing to pay down debt, amending the covenants on our $1.5 billion revolving credit facility, adding a commercial paper facility in our U.K.

business, suspending the dividend in May 2020, reducing our capital expenditures in 2020 and generally reducing our discretionary spend.

We took these steps as we remain committed to maintaining our investment grade rating.

Our next generation cost savings program, which began in 2020 and is a three-year program and includes the anticipated benefits of the revitalization plan, is currently expected to deliver approximately $600 million through 2022.

We plan to reinvest these additional cost savings behind our brands and growing other capabilities.

Total cost savings delivered in 2020 totaled approximately $270 million.

We anticipate 2021 consolidated net interest expense of approximately $270 million, plus or minus 5% and based on foreign exchange and interest rates as of December 31, 2020.

We expect our effective tax rate to be in the range of 20 to 23 percent for 2021, which remains subject to additional guidance, final regulations, and tax law changes issued from the U.S.

Deleverage & Dividends

We currently intend to maintain our investment grade debt rating and we are committed to further deleverage in 2020 in accordance with our plans.

We have suspended our share repurchase program as we continue to pay down debt which we plan to revisit as we further deleverage.

Our most recent quarterly dividend was declared and paid at $0.57 per share, which when annualized, is consistent with our ongoing target dividend payout ratio of 20% to 25% of trailing annual EBITDA, which we currently intend to maintain in the future.

We currently intend to maintain our investment grade debt rating and we are committed to further deleveraging in 2021 in accordance with our plans.

Further, our current expectation is that the Company's board of directors will be in a position to reinstate a dividend in the second half of 2021.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with U.S.

In connection with the preparation of our consolidated financial statements, we are required to make judgments and estimates that significantly affect the reported

amounts of assets, liabilities, revenues and expenses and related disclosures.

In connection with the preparation of our consolidated financial statements, we are required to make judgments and estimates that significantly affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures.

Our estimates are based on historical experience, current trends and various other assumptions we believe to be relevant under the circumstances.

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In the U.S., we also participate in, and make contributions to, multi-employer pension plans.

Our OPEB plans provide medical benefits for retirees and their eligible dependents as well as life insurance and, in some cases, dental and vision coverage, for certain retirees in Canada, the U.S., Corporate, and Europe.

The U.S., Canada and U.K.

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- 50 basis points

Decrease Increase

(In millions)

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basis points (unfavorable) favorable

Decrease Increase

(In millions)

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However, considerable judgment is required in selecting an appropriate methodology and interpreting market data to develop the estimates of fair value, especially in the absence of quoted market values in an active market.

Changes in these assumptions or the use of different market inputs may have a material impact on the estimated fair values or the ultimate amount at which the plan assets are available to satisfy our plan obligations.

Changes in these assumptions

or the use of different market inputs may have a material impact on the estimated fair values or the ultimate amount at which the plan assets are available to satisfy our plan obligations.

Equity assets are diversified between domestic and other international investments.

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We employ the corridor approach for determining each plan's amortization.

This approach defines the “corridor” as the greater of 10% of the PBO or 10% of the market-related value of plan assets (as discussed above)

and requires amortization of the excess net gain or loss that exceeds the corridor over the average remaining service periods of active plan participants.

This approach defines the “corridor” as the greater of 10% of the PBO or 10% of the market-related value of plan assets (as discussed above) and requires amortization of the excess net gain or loss that exceeds the corridor over the average remaining service periods of active plan participants.

For our closed plans or plans that are primarily inactive, the average remaining life expectancy of all plan participants (including retirees) is used.

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If significant and probable, we disclose as appropriate.

See Part I—Item 3 Legal Proceedings and Part II—Item 8 Financial Statements and Supplementary Data, Note 18, "Commitments and Contingencies" for a discussion of our contingencies, environmental and litigation reserves as of December 31, 2019 .

See Part II—Item 8 Financial Statements and Supplementary Data, Note 18, "Commitments and Contingencies" for a discussion of our contingencies, environmental and litigation reserves as of December 31, 2020.

Goodwill and Intangible Asset Valuation

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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 completion of our 2019 impairment testing, the operations in each of the specific regions within our U.S., Canada, Europe and International segments are components based on the availability of discrete financial information and the regular review by segment management.

Therefore, the components within each respective segment must be evaluated for aggregation to determine if the components have similar economic characteristics.

As a result, in certain cases, we have aggregated components, within an operating segment, into one reporting unit if the specific aggregation criteria under U.S.

Specifically, we have concluded that the components within the U.S., Canada and Europe segment each meet the criteria as having similar economic characteristics and therefore have aggregated these components into the U.S., Canada and Europe reporting units, respectively.

Therefore, the U.S., Canada and Europe reporting units are consistent with our operating segments.

However, for our India business, the reporting unit is one level below the International operating segment.

Any change to the conclusion of our reporting units or the aggregation of components within our reporting units, including potential changes resulting from our revitalization plan, could result in a different outcome to our annual impairment test.

As of the date of our annual impairment test, our significant indefinite-lived intangible assets included the Coors and Miller brand families in the U.S., the Coors Light distribution rights in Canada, and the Carling and Staropramen brands in Europe.

As discussed in Part II—Item 8 Financial Statements and Supplementary Data, Note 3, "Segment Reporting," effective January 1, 2020, we changed our management structure from a corporate center and four segments to two segments - North America and Europe.

These structural changes included leadership re-alignment with a centralized North America leadership team, an integrated North American supply chain network, and centralized marketing and innovations functions including movement to a single brand manager and North America marketing strategy for our major brands.

Additionally, as part of our leadership re-alignment, we moved from two separate U.S.

and Canada segment managers to a single North America segment manager, our President and Chief Executive Officer, who reviews discrete financial information only at the consolidated North

America segment level.

As a result of these changes, we re-evaluated our historical reporting unit conclusions and have consolidated our previously separate U.S.

and Canada reporting units into a single North America reporting unit effective January 1, 2020.

There were no changes to our existing Europe reporting unit, which was considered to be at risk of future impairment following the completion of our October 1, 2019 annual impairment testing.

We completed an interim impairment assessment for our former U.S.

and Canada reporting units as of January 1, 2020 immediately prior to the reporting unit change, as well as an impairment assessment of the combined North America reporting unit immediately after the change, and determined that no impairments existed.

Additionally, as the changes resulted in the combination of our former U.S.

and Canada reporting units into a single North America reporting unit, no further reallocation of goodwill was required.

Additionally, as a result of the structural changes discussed above, including the centralization of the brand management and strategy for our Coors brands across North America, we aggregated our Coors brand indefinite-lived intangible asset in the U.S.

and Coors Light distribution agreement indefinite-lived intangible asset in Canada into a single unit of accounting for the purpose of testing for impairment, effective January 1, 2020.

We completed an interim impairment assessment for each individual indefinite-lived intangible asset immediately prior to aggregation and determined that no impairments existed.

We evaluate the carrying value of our goodwill and indefinite-lived intangible assets for impairment at least annually or when an interim triggering event occurs that would indicate that impairment may have taken place.

We identified a triggering event requiring an interim impairment assessment of the goodwill within our Canada and India reporting units at the end of the third quarter of 2019.

Our annual impairment test of indefinite-lived intangible assets was performed as of October 1, the first day of the last fiscal quarter.

We evaluate our other definite-lived intangible assets for impairment when evidence exists that

certain events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.

We evaluate our other definite-lived intangible assets for impairment when evidence exists that certain events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.

Significant judgments and assumptions are required in such impairment evaluations.

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If a reporting unit's carrying value exceeds its fair value, we would recognize an impairment loss in an amount equal to the excess up to the total amount of goodwill allocated to that reporting unit.

We use a combination of discounted cash flow analyses and market approaches to determine the fair value of each of our reporting units, and an excess earnings approach to determine the fair values of our Coors and Miller brand families in the U.S., the Staropramen brand in Europe, and the Coors Light distribution rights in Canada.

We utilized a qualitative assessment of the Carling brand in Europe and water rights in the U.S., in order to determine whether the fair value of those indefinite-lived intangible assets was in excess of its carrying value.

The decision to utilize a qualitative assessment in the current year for the Carling brand was the result of taking several factors into consideration, including the excess of the brand's fair value over its carrying value in the most recent quantitative impairment analysis.

We utilized a qualitative assessment for our water rights in the U.S., in order to determine whether the fair value of those indefinite-lived intangible assets was in excess of their carrying value.

Our discounted cash flow projections include assumptions for growth rates for sales, costs and profits, which are based on various long-range financial and operational plans of each reporting unit or each indefinite-lived intangible asset.

Additionally, discount rates used in our goodwill analysis are based on weighted-average cost of capital, driven by the prevailing interest rates in geographies where these businesses operate, as well as the credit ratings, financing abilities and opportunities of each reporting unit, among other factors.

Discount rates for the indefinite-lived intangible analysis by brand largely reflect the rates supporting the overall reporting unit valuation but may differ slightly to adjust for country or market specific risk associated with a particular brand.

Our market-based valuations utilize earnings multiples of comparable public companies, which are reflective of the market in which each respective reporting unit operates, and recent comparable market transactions.

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

Interim Impairment Assessment

We identified a triggering event requiring an interim impairment assessment of the goodwill within our Canada reporting unit at the end of the third quarter of 2019, which resulted in a goodwill impairment loss of $668.3 million .

The goodwill impairment trigger was the result of continued challenges and steepening declines within the Canadian beer industry reflected in the prolonged weakened performance of the Canada reporting unit through the third quarter of 2019.

These performance headwinds have been countered, in part, by the benefit of the recent interest rate environment, which resulted in a decrease in the risk-free rate included in our current year discount rate calculations.

Specifically, the discount rate used in developing our interim fair value estimate for the Canada reporting unit was 8.50% , as compared to 9.25% used as of the October 1, 2018 annual testing date.

However, the performance declines and increased challenges within the beer industry in Canada, coupled with significant increases in cost inflation, volume deleverage, and resulting margin erosion, has had a material adverse impact on the expected future cash flows utilized in the valuation approaches for the Canada reporting unit, such that it was determined that the fair value of the reporting unit was more likely than not reduced below its carrying amount during the third quarter.

As a result of this triggering event, we performed an interim quantitative analysis, using a combination of discounted cash flow analyses and market-based approaches, consistent with our annual impairment testing, in which it was determined that the carrying value of the Canada reporting unit exceeded its fair value by $668.3 million .

We also evaluated the indefinite-lived and definite-lived intangible assets within our Canada reporting unit, prior to recording the goodwill impairment, and concluded that no impairments were required;

however, the Coors Light distribution agreement indefinite-lived intangible asset is considered to be at risk of future impairment as further discussed below.

Separately, during the third quarter of 2019 we also identified an interim triggering event related to goodwill within our India reporting unit resulting from significant declines in performance in the current year, coupled with the continuation of challenging business conditions, which required us to perform an interim quantitative impairment analysis at the end of the third quarter of 2019.

As a result of this interim analysis, we determined that the carrying value of the India reporting unit exceeded its fair value, resulting in an aggregate impairment loss of $12.2 million related to the goodwill of our India reporting unit and a definite-lived brand intangible asset.

Annual Impairment Assessment

We completed our required annual goodwill and indefinite-lived intangible asset impairment testing as of October 1, 2019, the first day of our fourth quarter, and concluded there were no additional impairments of goodwill within any of our reporting units.

Further, there were no impairments of our other indefinite-lived intangible assets as a result of the annual review process.

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

Reporting Units and Goodwill

The fair value of the U.S., Europe and Canada reporting units were estimated at approximately 17% , 12% and 0% in excess of carrying value, respectively, as of the October 1, 2019 testing date.

In the current year testing, it was determined that the fair value of the U.S.

and Canada reporting units declined during the year, while there was a slight increase in the fair value of the Europe reporting unit versus the prior year.

As a result of our testing, the Europe and Canada reporting units continue to be considered at risk of impairment.

The decline in fair value of the U.S.

and Canada reporting units in the current year is largely due to weakening of the overall North American beer market in the current year, which adversely impacted the results of our impairment testing.

These challenges were partially offset by the benefits to our discount rate as a result of the recent interest rate environment.

reporting unit, industry driven declines negatively impacted brand volumes as compared to the prior year;

however these headwinds were partially offset by continued investment behind above premium brands and innovation benefiting management's forward-looking plans.

In the Europe reporting unit, while weather and tourism-related headwinds had an adverse impact on current year brand volumes, forward-looking plans continue to focus on management's premiumization agenda, which is positively impacting the forecasted future cash flows of the reporting unit.

Following the interim goodwill impairment charge recorded during the third quarter within the Canada reporting unit, the fair value of the Canada reporting unit was reduced to its carrying value.

No further deterioration in value was identified in the fourth quarter testing, and therefore, the fair value of the Canada reporting unit goodwill equals its carrying value as of the October 1, 2019 testing date.

As a result of the interim goodwill impairment charge within the India reporting unit, the goodwill balance was reduced to zero and is no longer subject to evaluation for impairment on a go-forward basis.

Although the fair value of each of our reporting units was determined to be either equal to or in excess of its respective carrying value as of the October 1, 2019, 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.

As of the October 1, 2020 testing date, the carrying value of the Europe reporting unit was determined to be in excess of its fair value such that an impairment loss of $1,484.3 million was recorded.

The fair value of the North America reporting unit was estimated at approximately 7% in excess of carrying value, as of the October 1, 2020 testing date, which is a decline during the year, and therefore the reporting unit is considered to be at risk of future impairment.

Goodwill allocated to the North America reporting unit as of December 31, 2020 is $6.2 billion.

The decline in fair value of the North America reporting unit in the current year is largely due to the perceived risk in the execution of our revitalization efforts amidst a global pandemic.

These challenges were partially offset by the reduction to the discount rate as a result of the recent interest rate environment.

We continue to invest behind above premium brands and innovation.

While the preliminary results are promising, including successful launches of brands like Blue Moon LightSky , Vizzy and Coors Seltzer in 2020, the growth targets included in management’s forecasted future cash flows are inherently at risk given the recent introduction of these brands.

In the Europe reporting unit, impacts from the coronavirus pandemic drove significant headwinds that had an adverse impact on current year brand volumes and overall company performance as the Europe business relies heavily on the on-premise business.

uncertainty around the ongoing impacts of the pandemic including governmental or societal impositions on bars and restaurants and restrictions on public gatherings that limit many on-premise locations to operate at full capacity, if at all, have negatively impacted the forecasted future cash flows of the reporting unit.

As of the October 1, 2020 testing date, the fair value of our North America reporting unit was determined to be in excess of its carrying value although noted to be at risk of future impairment while the Europe reporting unit's fair value resulted in an impairment.

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, including the further extent, duration and impact of the ongoing pandemic on our reporting units.

The key assumptions used to derive the estimated fair values of our reporting units represent Level 3 measurements.

Indefinite-Lived Intangible Assets

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 indefinite-lived Coors Light brand distribution rights in Canada is considered to be at risk of future impairment with a fair value estimated at approximately 11% in excess of its carrying value as of the annual testing date.

The fair value decline of the Coors Light brand distribution rights versus the prior year was a result of continued volume declines through 2019.

The performance deterioration in the current year follows the goodwill impairment charge that was taken in the third quarter of 2019 that resulted from prolonged Canada beer industry declines.

The fair values of our indefinite-lived intangible assets 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., the Coors Light distribution rights in Canada, 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 Coors indefinite-lived brands in North America, the Miller indefinite-lived brands in the U.S.

and the Carling brands in Europe continue to be sufficiently in excess of their respective carrying values as of the annual testing date.

The fair value of the indefinite-lived Staropramen brand in Europe is considered to be at risk of future impairment with a fair value estimated at approximately 9% in excess of its carrying value as of the annual testing date.

The fair value decline of the Staropramen brand versus the prior year was a result of the coronavirus’ impact on the on-premise business throughout Europe during 2020 and potentially beyond.

We utilize Level 3 fair value measurements in our impairment analysis of certain indefinite-lived intangible assets, including the Coors brands in North America, Miller brands in the U.S.

and the Staropramen and Carling brands in Europe.

An excess earnings approach is used 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 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.

Separately, we performed a qualitative assessment of our water rights indefinite-lived intangible assets 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 this qualitative assessment, 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.

As of the date of our annual impairment test, performed as of October 1, the North America reporting unit goodwill balance is at risk of future impairment in the event of significant unfavorable changes in the forecasted cash flows (including company-specific risks like the performance of our above-premium transformation efforts and overall market performance of new innovations like hard seltzers, along with macro-economic risks like the continued prolonged weakening of economic conditions, or significant unfavorable changes in tax rates, 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.

Current projections used for our Europe reporting unit incorporate volume and revenue growth driven by management's premiumization agenda, slightly off-set by adverse impacts to cash flows in the current year generated by underperformance of brand volumes driven by external factors such as weather and tourism-related activity.

Challenges in both Canada and Europe were partially offset by the benefits to our discount rate as a result of the recent interest rate environment.

Current projections used for our North America reporting unit testing reflect growth assumptions associated with our revitalization plan to build on the strength of our iconic core brands, aggressively grow our above premium portfolio, expand beyond the beer aisle, invest in our capabilities and support our people and our communities all of which are intended to benefit the projected cash flows of the business.

These cash flow assumptions are tempered somewhat by the impacts the coronavirus has had on our overall business and specifically our more profitable on-premise segment.

The coronavirus pandemic had a disproportional impact on our Europe business as a greater portion of its business takes place on-premise.

Additionally, European countries have had and continue to impose stricter measures, i.e.

lockdowns and social distancing requirements, to control the spread of the pandemic relative to our North American markets.

Such stricter measures have limited many on-premise locations from operating at full capacity.

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.

As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill and indefinite-lived intangible asset 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 intangible assets 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.

(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 global pandemic or recession), (iii) significant unfavorable changes in tax rates such as increased corporate income

tax rates, (iv) volatility in the equity and debt markets or other country specific factors which could result in a higher weighted-average cost of capital, (v) sensitivity to market multiples;

and (vi) regulation limiting or banning the manufacturing, distribution or sale of alcoholic beverages.

Based on known facts and circumstances, we evaluate and consider recent events and uncertain items, as well as related potential implications, as part of our annual assessment and incorporate into the analyses as appropriate.

These facts and circumstances are subject to change and may impact future analyses.

For example, we continue to monitor the challenges within the beer industry for further weakening or additional systemic structural declines.

Separately, the Ontario provincial government adopted a bill that, if enacted, could adversely impact the existing terms of the beer distribution and retail systems in the province, as further described in Part II—Item 8 Financial Statements and Supplementary Data, Note 18, "Commitments and Contingencies" .

In 2019 , the discount rate used in developing our annual fair value estimates for the U.S., Europe and Canada reporting units was 8.50% for all reporting units, based on market-specific factors, as compared to 9.00% , 9.50% and 9.25% , respectively used as of the October 1, 2018 annual testing date.

The recent interest rate environment has resulted in a decrease to the risk-free rate used in the current year discount rate calculations, which has resulted in a discount rate decrease for each of the reporting units when also taking into consideration the market or country specific risk premium for each geography in which our brands are based.

The discount rates for the Coors and Miller brands in the U.S., the Staropramen brand in Europe and the Coors Light distribution rights in Canada decreased compared to the discount rates used in the prior year analysis, primarily due to the decrease in the risk-free rates included in our current year discount rate calculations, as noted above.

We identified a triggering event requiring an interim impairment assessment of the goodwill within our Canada and India reporting units at the end of the third quarter of 2019, which resulted in goodwill impairment charges during the year as noted above and within Part II—Item 8 Financial Statements and Supplementary Data, Note 10, "Goodwill and Intangible Assets" .

Current expectations driving our annual impairment testing as of October 1, 2019 have resulted in fair values of our reporting units either equal to or in excess of carrying values.

For example, we continue to monitor the challenges within the beer industry for further weakening or additional systemic structural declines, as well as for adverse changes in macroeconomic conditions such as the coronavirus pandemic that could significantly impact our immediate and long-range results.

Specifically, subsequent to the January 1, 2020 interim impairment assessments, the World Health Organization, characterized the outbreak of the coronavirus disease as a global pandemic as further discussed in Part II—Item 8 Financial Statements and Supplementary Data, Note 1 , "Basis of Presentation and Summary of Significant Accounting Policies." Our business has been, and could continue to be, materially and adversely impacted by the coronavirus pandemic.

The related weakening of economic conditions during a prolonged pandemic could lead to a material impairment as the duration and severity of the pandemic and resulting impacts to our financial projections are further understood.

Additionally, we are monitoring the impacts the coronavirus pandemic has on the market inputs used in calculating our discount rates, including risk-free rates, equity premiums and our cost of debt, which could result in a meaningful change to our weighted-average cost of capital calculation, as well as the market multiples used in our impairment assessment.

Furthermore, increased volatility in the equity and debt markets or other country specific factors, including, but not limited to, extended or future government intervention in response to the pandemic, could also result in a meaningful change to our weighted-average cost of capital calculation and other inputs used in our impairment assessment.

Separately, the Ontario provincial government in Canada adopted a bill that, if enacted, could adversely impact the existing terms of the beer distribution and retail systems in the province, as further described in Part II—Item 8 Financial Statements and Supplementary Data, Note 18, "Commitments and Contingencies" .

In 2020, the discount rate used in developing our annual fair value estimates for the North America and Europe reporting units was 8.00% and 10.00%, respectively, based on market-specific factors, as compared to 8.50% used across all reporting units as of the October 1, 2019 annual testing date.

The recent interest rate environment has resulted in a decrease to the risk-free rate used in the current year discount rate calculations, which is reflected in the North America lower discount rate.

However, the benefit driven by the recent interest rate environment was more than offset by the unsystematic risk premium included in the market or country specific risk premium for each European geography in which our business is based.

With the exception of the Miller brands in the U.S., the discount rates for the Coors brands in North America and the Staropramen and Carling brands in Europe increased compared to the discount rates used in the prior year analysis, primarily due to increased perceived risk in meeting management’s cash flow projections that was also included in our current year discount rate calculations for the reporting units, including innovations, as noted above.

The discount rate for the Miller brands in the U.S.

decreased compared to prior year driven by a decrease to the risk-free rate used in the current year discount rate calculation.

While there was a risk adjustment made to the discount rate for the Miller brands, it was not as substantial as the other brands because the cash flow projections for this brand included potential ongoing coronavirus impacts assumptions and excluded innovation assumptions.

Current expectations driving our annual impairment testing as of October 1, 2020 have resulted in fair values of our North America reporting unit and indefinite-lived intangible assets in excess of carrying values.

However, if our assumptions are not realized, it is possible that further impairment charges may need to be recorded in the future.

For example, a 50 basis point increase in our discount rate assumptions, which is within a reasonable range of historical discount rate fluctuations between test dates, would have had the following effects on the fair value cushion in excess of carrying value for the U.S., Europe and Canada reporting units, as well as the at risk Coors Light brand distribution right indefinite-lived intangible asset in Canada, as of the October 1, 2019 test date:

For example, a 50 basis point increase in our discount rate assumptions, which is within a reasonable range of historical discount rate fluctuations between test dates, would have had the following effects on the fair value cushion in excess of carrying value for the North America reporting unit, as well as the at risk Staropramen brand indefinite-lived intangible asset in Europe, as of the October 1, 2020 test date:

Impact to the fair value cushion as of October 1, 2020

- 50 basis points increase

Cushion (as reported)

Cushion (post-sensitivity)

Cushion (as reported) Cushion (post-sensitivity)

% of fair value in excess of carrying value

Reporting Units:

United States

Indefinite-Lived Intangible Assets:

Coors Light brand distribution rights, Canada

Post sensitivity, the fair values of the U.S.

and Europe reporting units as well as the Coors Light brand distribution right indefinite-lived intangible asset remain in excess of their carrying values, while the fair value of the Canada reporting unit falls below its carrying value.

North America Reporting Unit 7% 3%

Staropramen brand families Indefinite-Lived Intangible Asset, Europe

Post sensitivity, the fair values of the North America reporting unit as well as the Staropramen brand indefinite-lived intangible asset remain in excess of their carrying values.

The discount rate sensitivity holds all other assumptions and inputs constant.

Regarding definite-lived intangible assets, we continuously monitor the performance of the underlying asset for potential triggering events suggesting an impairment review should be performed.

With the exception of the impairment losses related to the Grolsch brand and distribution agreement definite-lived intangible assets discussed in Part II—Item 8 Financial Statements and Supplementary Data, Note 4, "Investments" and the brand intangible asset related to our India business discussed above, no such triggering events resulting in an impairment loss were identified in 2019 , 2018 or 2017 .

See Part II—Item 8 Financial Statements and Supplementary Data, Note 10, "Goodwill and Intangible Assets" for further discussion.

As of December 31, 2019 , the carrying values of goodwill and intangible assets were approximately $7.6 billion and $13.7 billion , respectively.

In the current year, we recognized impairment losses on some of our definite-lived intangible assets related to a few of our regional craft breweries in North America and Europe.

The impairments losses on the Grolsch brand and distribution agreement definite-lived intangible assets and the brand intangible asset related to our India business were recognized in 2019.

See Part II—Item 8 Financial Statements and Supplementary Data Note 7, "Special Items" for further details on these impairment losses.

No such triggering events resulting in an impairment loss were identified in 2018.

As of December 31, 2020, the carrying values of goodwill and intangible assets were approximately $6.2 billion and $13.6 billion, respectively, inclusive of Staropramen's indefinite-lived intangible asset carrying value of $621.7 million.

If actual performance results differ significantly from our projections or we experience significant fluctuations in our other assumptions, a material impairment loss may occur in the future.

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Additionally, our income tax provision is based on calculations and assumptions that are subject to examination by many different tax authorities.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 6, "Income Tax" for further discussion on the implications of the 2017 Tax Act on our financial statements.

We are periodically subject to tax return audits by both foreign and domestic tax authorities, which can involve questions regarding our tax positions.

Settlement of any challenge resulting from these audits can result in no change, a complete disallowance, or some partial adjustment reached through negotiations or litigation.

We are periodically subject to tax controversies in various foreign and domestic jurisdictions, which can involve questions regarding our tax positions and result in additional income tax liabilities assessed against us.

Settlement of any challenge resulting from these tax controversies can result in no change, a complete disallowance, or some partial adjustment reached through negotiations or litigation.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained based on its technical merits.

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Our liability for unrecognized tax benefits requires the use of assumptions and significant judgment to estimate the exposures associated with our various filing positions.

Although we believe that the judgments and estimates made are reasonable, actual results could differ and resulting adjustments could materially affect our effective income tax rate and income tax provision.

We annually distribute cash from our foreign subsidiaries’ current year earnings and record the tax impacts associated with these transactions.

Any current earnings not otherwise distributed or planned to be distributed in the current year are considered permanently reinvested in our foreign operations.

The aggregate of these earnings is currently a deficit for U.S.

tax purposes and would not result in any material taxes, if distributed.

We have no plans to dispose of foreign subsidiaries and would not expect outside basis differences in foreign subsidiaries to reverse with material tax consequences.

Although we believe that the judgments and estimates made are reasonable, actual results could differ and resulting adjustments could materially affect our effective tax rate and tax provision.

When working capital funds are available after satisfying all other business obligations, we may distribute cash from a foreign subsidiary to its U.S.

parent and record the tax impacts associated with these transactions.

However, to the extent current earnings exist and are not otherwise distributed or planned to be distributed, they would become accumulated.

As such and due to limitations in annual excess working capital, these accumulated earnings are considered permanently reinvested in our foreign operations.

We currently would not expect the aggregate of these permanently reinvested earnings, which are largely in deficit positions for U.S.

tax purposes, to result in any material U.S.

taxes, if distributed.

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized.

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For example, as discussed in Part II—Item 8 Financial Statements and Supplementary Data, Note 6, "Income Tax" , since 2018, the U.S.

Department of Treasury has continued to issue proposed, temporary and final regulations to implement provisions of the 2017 Tax Act.

We recognize the impacts of changes in tax law upon enactment, and therefore, proposed changes in tax law, regulations and rules are not reflected within our income tax provision.

Treasury Department has continued to issue proposed, temporary and final regulations to implement provisions of the 2017 Tax Act.

We recognize the impacts of changes in tax law upon enactment, and therefore, proposed changes in tax law, regulations and rules are not reflected within our tax provision.

As a result, such changes may, upon ultimate enactment, result in material impacts to our financial statements.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis