What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-21 compared with 2022-02-23 · 231 added, 383 removed, 322 unchanged (66% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 many beloved and iconic beer brands.

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

From Coors Light , Miller Lite, Molson Canadian, Carling and Staropramen to Coors Banquet, Blue Moon Belgian White, Vizzy Hard Seltzer, Leinenkugel’s Summer Shandy, Miller High Life and more, we produce many beloved and iconic beer brands.

While our Company’s history is rooted in beer, we offer a modern portfolio that expands beyond the beer aisle as well.

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Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 2021 Form 10-K, filed with the SEC on February 23, 2022, which is available free of charge on the SEC's website at www.sec.gov and our corporate website at www.molsoncoors.com.

Changes to our Consolidated Results of Operations

As of December 31, 2022, we modified our presentation of the consolidated statements of operations to replace the former "Special items, net" line item with "Other operating income (expense), net." In addition, goodwill impairment, which had previously been included in "Special items, net" has been reclassified to a separate line titled "Goodwill impairment." The consolidated statements of operations for the years ended December 31, 2021 and December 31, 2020 were reclassified to reflect this change in presentation only.

Our Fiscal Year

Unless otherwise indicated, (a) all $ amounts are in USD, (b) comparisons are to comparable prior periods and (c) 2022, 2021 and 2020 refers to the 12 months ended December 31, 2022, December 31, 2021 and December 31, 2020, respectively.

Operational Measures

We have certain operational measures, such as STWs and STRs, which we believe are important metrics.

STW is a metric that we use in our business to reflect the sales from our operations to our direct customers, generally wholesalers.

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

STR is a metric that we use in our business to refer to sales closer to the end consumer than STWs, which generally means sales from 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.

Items Affecting Reported Results

Items Affecting Consolidated Results of Operations

Cost Inflation

We continued to experience significant cost inflation, including higher material, transportation and energy costs, which negatively impacted our results of operations during the year ended December 31, 2022.

While cost inflation was high in all of our markets during the year ended December 31, 2022, the impact to COGS on a percentage basis was higher for our EMEA&APAC segment than our Americas segment.

In addition, consumers in certain markets in our EMEA&APAC segment were impacted by local inflation leading to a reduction in their discretionary purchases.

We expect cost inflation to continue to have a negative impact on our results of operations in 2023.

In addition to the cost increases that commenced in the second half of 2021, the Russian invasion of Ukraine in February 2022 caused and continues to cause a negative impact on the global economy, driving further increases to, among other things, the cost of transportation, energy and materials.

Higher transportation costs are a result of increased fuel prices, a short supply of truck drivers worldwide and increased freight costs.

In the Americas, we are taking steps to reduce the impact by shipping more beverages via rail to decrease the impacts of higher freight costs.

In EMEA&APAC, we are taking steps to find alternative fuel and energy sources to reduce the potential impact of the loss or disruption of the energy sources or suppliers in Europe due to supply shortages as a result of the Russia-Ukraine conflict.

We have established a governance regime to continually monitor this situation.

Alternative sources of fuel have been implemented or are in the process of being implemented throughout our operations in the U.K.

We have increased fuel stock levels where feasible and we have been drawing on new gas pipelines and fuel sources in the Baltics, Bulgaria-Greece, North Sea and Norway.

We are also experiencing increased materials costs due to overall cost inflation.

Specifically, the volatility of aluminum prices, inclusive of Midwest Premium and tariffs, continued to significantly impact our results for the year ended December 31, 2022.

To the extent materials, transportation and energy prices continue to fluctuate, and if we are unable to mitigate the impact of supply chain constraints and inflationary pressures through price increases or other measures, our results of operations and financial condition could be materially adversely impacted.

Even if we are able to raise the prices of our products, consumers might react negatively to such price increases, which could have a material adverse effect on, among other things, our brand, reputation and sales.

If our competitors maintain or substantially lower their prices, we may lose customers or mark down prices to match them.

Our profitability may be impacted by prices that do not offset the inflationary pressures, which may impact gross margins.

In addition, even if we increase the prices of our products in response to increases in the cost of commodities or other cost increases, we may not be able to sustain our price increases or customers may trade down to cheaper alternatives.

We continue to monitor these risks and rely on our risk management hedging program, increased pricing to our customers, our premiumization strategy and cost savings programs to help mitigate some of the inflationary pressures.

Coronavirus Global Pandemic

We have been actively monitoring the impact of the coronavirus pandemic since it started at the end of the first quarter of 2020.

We observed improvements in the marketplace related to the coronavirus global pandemic as on-premise locations began to re-open, with varying degrees of restrictions, across the world beginning in the second quarter of 2021.

A new variant of coronavirus, Omicron, created additional uncertainty and negatively impacted our on-premise business at the end of 2021 and into the first quarter of 2022 when we started to see progressive improvements in our on-premise channel.

Thus, while an improvement from 2021, the coronavirus global pandemic continued to have a negative impact to our financial results for the year ended December 31, 2022.

However, the margin impact of the coronavirus pandemic improved during the year ended December 31, 2022 when compared to the year ended December 31, 2021 primarily as a result of the progressive improvements in the on-premise channel.

The extent to which our operations will continue to be impacted by the coronavirus pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including, but not limited to, the level of governmental or societal orders or restrictions on public gatherings and on-premise venues including any vaccine mandates or testing requirements, the severity and duration of the coronavirus pandemic by market including continued or prolonged future outbreaks of variants, changes in consumer behavior, the rate of vaccination and the efficacy of vaccines against coronavirus and related variants.

We continue to actively monitor the ongoing evolution of the coronavirus pandemic and resulting impacts to our business.

Cybersecurity Incident

During March 2021, we experienced a systems outage that was caused by a cybersecurity incident.

We engaged leading forensic information technology firms and legal counsel to assist our investigation into the incident and we restored our systems after working to get the systems back up as quickly as possible.

We engaged leading

forensic information technology firms and legal counsel to assist our investigation into the incident and we restored our systems as quickly as possible.

Despite these actions, we experienced delays and disruptions to our business, including brewery operations, production and shipments.

This incident caused us to not produce or ship as much as we otherwise would have in the first quarter of 2021.

Subsequently, in the balance of 2021, we made progress recovering from the incident with increased shipments and have operationally recovered as of December 31, 2021.

In addition, we incurred certain incremental one-time costs of $2.4 million for the year ended December 31, 2021 related to consultants, experts and data recovery efforts, net of insurance recoveries.

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Coronavirus Global Pandemic

We have been actively monitoring the impact of the coronavirus pandemic which has had a material adverse effect on our operations, liquidity, financial condition and results of operations in 2020 and 2021.

In 2021, while we saw improvements in the marketplace related to the coronavirus global pandemic as on-premise locations began to re-open across the world, including in the U.S.

and Europe, which led to a shift in revenue from off-premise to on-premise starting in the second quarter and continuing through the third quarter of 2021, during the fourth quarter of 2021, a new variant of coronavirus, Omicron, created additional uncertainty and negatively impacted our on-premise business.

While on-premise volumes in our EMEA&APAC segment progressively improved throughout 2021 as bars and restaurants reopened with restrictions, due to implications of the new coronavirus variant, consumer behavior in the U.K.

and across Central Europe became more uncertain as individuals were encouraged to work from home and reduce other personal interactions during the fourth quarter of 2021.

With a shift in consumer behavior and surge in coronavirus cases not only in Europe but also in the U.S.

and Canada at the end of the year, sales to the on-premise during the fourth quarter of 2021 were negatively impacted.

The extent to which our operations will continue to be impacted by the coronavirus pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including the level of governmental or societal orders or restrictions on public gatherings and on-premise venues, including any vaccine mandates or testing requirements, the severity and duration of the coronavirus pandemic by market, including continued or prolonged outbreaks of variants, changes in consumer behavior, the rate of vaccination and the efficacy of vaccines against the coronavirus and related variants.

We continue to actively monitor the ongoing evolution of the coronavirus pandemic and resulting impacts to our business.

Despite the improvements in re-openings of on-premise locations from 2020, closures and openings with restrictions continued to impact our financial results during 2021.

Specifically, beginning in the first quarter of 2020 and continuing into the first half of 2021, we experienced a significant decline in on-premise demand in the Americas and EMEA&APAC segments resulting from lockdowns and other government-imposed restrictions to the on-premise.

See further discussion in Part I.

Business regarding the historical percentage of on-premise channel versus off-premise within our Americas and EMEA&APAC 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 certain countries in Europe lifted lockdown restrictions, particularly in the U.K.

which resulted in the reopening of certain on-premise locations early in the second quarter of 2021 with measures removed early in the third quarter of 2021, the on-premise did not return to pre-pandemic levels in the EMEA&APAC segment.

In addition, during the first half of 2021, certain provinces of Canada, including the most populous provinces, endured lockdowns pursuant to which bars and restaurants were required to close.

During the third quarter of 2021, these venues began to reopen with varying degrees of restrictions;

however, during the fourth quarter of 2021 as a result of implications from the new coronavirus variant, restrictions in certain provinces were implemented and consumer behavior in the on-premise became more uncertain and as a result sales to the on-premise channel in the fourth quarter of 2021 were negatively impacted.

Throughout 2021, the U.S.

progressively reopened, and sales to restaurants and bars returned to near pre-coronavirus pandemic levels within the Americas segment but pulled back towards the end of the year as a result of the spread of the Omicron coronavirus variant.

Certain sporting events, festivals and other large public gatherings where our products are served have started to return with restrictions including proof of vaccination or negative coronavirus testing requirements.

While the U.S., Canada, and Western European countries have seen an increase in vaccination levels throughout 2021, certain Eastern European countries have lagged, and therefore, the risk of further coronavirus pandemic restrictions and governmental imposed lockdowns remains throughout Europe.

Throughout the world, any governmental or societal impositions of restrictions on public gatherings, especially if prolonged in nature, will continue to impact on-premise traffic and, in turn, our business.

In addition, where we have seen shifts in demand to the off-premise, and shifts back to the on-premise and the related shifts between certain package types, this has strained our supply chain and package availability, requiring that we strategically prioritize certain brands and package types and expand the number of suppliers we work with to ensure we can meet production requirements.

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 Americas segment brewery employees.

Additionally, in order to support and demonstrate our commitment to the continued viability of the many bars and restaurants which were negatively impacted by the coronavirus pandemic, during the first quarter of 2020, we initiated temporary keg relief programs in many of our markets.

We committed to provide customers with reimbursements for untapped kegs that met certain established return requirements in conjunction with the voluntary programs.

As a result, during 2020, we recognized a reduction to net sales of $30.3 million ($13.2 million for the Americas segment and $17.1 million for the EMEA&APAC segment) for reimbursements through these keg relief programs, substantially all of which was recognized in the first quarter of 2020 other than immaterial adjustments for changes in estimates during the remainder of 2020, reflecting estimated sales returns and reimbursements through these keg relief programs.

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Further, during 2020, we recognized charges of $12.1 million ($9.2 million for the Americas segment and $2.9 million for the EMEA&APAC segment), substantially all of which were recognized in the first quarter of 2020 other than immaterial adjustments for changes in estimates during the remainder of 2020, within cost of goods sold related to obsolete finished goods keg inventories that were not expected to be sold within our freshness specifications, as well as the estimated costs to facilitate the above mentioned keg returns.

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 coronavirus pandemic, we continue 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 deleveraging remain key priorities.

We continue to monitor the coronavirus pandemic and will take additional actions as necessary if the global coronavirus pandemic takes a further negative turn.

Such potential actions may 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 (see Part II—Item 8 Financial Statements and Supplementary Data, Note 11, "De b t " for further discussion of the facilities and our remaining capacity), further accessing the capital markets, reducing discretionary spending including capital expenditures and asset monetization.

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.

In the third quarter of 2021, a quarterly dividend was reinstated.

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

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

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

Given the length and severity of the impacts of the global coronavirus pandemic on our EMEA&APAC segment, as well as the protracted recovery 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 coronavirus pandemic is further prolonged and the severity of its impact continues or worsens, it could result in additional significant impairment losses.

See P art II—Item 8 Financial Statements and Supplementary Data, Note 10, "Goodwill a n d I n t a n g i b l e A s s e t s " for further details.

This incident caused a shift in production and shipments from the first quarter of 2021 to the balance of fiscal year 2021.

Revitalization Plan

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As of January 1, 2020, we changed our name to Molson Coors Beverage Company and changed our management structure to two segments - Americas and EMEA&APAC.

We began to incur charges related to these restructuring activities during the fourth quarter of 2019 and we recognized severance and retention charges of $4.0 million, $35.6 million and $41.2 million during the years ended December 31, 2021, December 31, 2020 and December 31, 2019, respectively.

We began to incur charges during the fourth quarter of 2019 and we recognized severance and retention charges related to these restructuring activities of $4.0 million and $35.6 million during the years ended December 31, 2021 and December 31, 2020, respectively.

As of the year ended December 31, 2021, the revitalization plan restructuring charges were substantially complete.

See Part II—Item 8 Financial Statements and Supplementary Data Note 7, "Special Items" and Note 10, "Goodwill and Intangibles" for further discussion of the impacts of this plan.

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Cost Inflation

We are experiencing cost inflation, including higher transportation and input costs which negatively impacted our results of operations during the year ended December 31, 2021.

We expect cost inflation to continue to have a negative impact in 2022.

Higher transportation costs are a result of increased fuel prices, a short supply of truck drivers worldwide and increased freight costs.

Driver shortages are forcing us to use the spot market and to pay spot market prices which are higher than they have been in many years.

We are taking steps to reduce the impact of driver shortages by shipping more beverages via rail.

Besides impacting our outbound shipments, our suppliers are facing difficulty in timely delivering the materials we need, and we are also experiencing increased supply costs due to overall cost inflation.

The volatility of aluminum prices, inclusive of Midwest Premium and tariffs, continued to significantly impact our results during the year ended December 31, 2021.

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, pricing, our premiumization strategy and cost savings programs to help mitigate some of the inflationary pressure.

There were no material changes to our restructuring activities since December 31, 2021.

See Part II—Item 8 Financial Statements and Supplementary Data Note 17, "Other Operating Income (Expense), net" and Note 6, "Goodwill and Intangibles" for further discussion of the impacts of this plan.

Premiumization of our Portfolio

In 2021, in order to support the overall premiumization of our portfolio, we strategically de-prioritized and rationalized certain non-core SKUs predominantly in the economy segment.

While we rationalized certain non-core economy SKUs, we retained key economy brands allowing us to maintain a portfolio for all socio-economic demographics.

We believe the premiumization of our portfolio will drive sustainable net sales and earnings growth but result in potential volume declines due to the rationalization of certain SKUs and as the portfolio mix shifts towards a higher composition of above premium products.

Items Affecting Americas Segment Results of Operations

Goodwill Impairment

During the fourth quarter of 2022, we recorded a partial goodwill impairment charge of $845.0 million related to the Americas reporting unit as a result of the annual goodwill impairment analysis.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 6, "Goodwill and Intangible Assets" for further information.

Montreal/Longueuil, Québec Brewery and Distribution Centers Labor Strike

From late March 2022 until June 2022, approximately 400 unionized employees in our Montreal/Longueuil, Québec brewery and distribution centers went on strike which adversely affected our business and operations.

Over the course of the third quarter of 2022, we recovered from the strike by rebuilding inventory and replenishing our retailers' shelves.

As the brewery had not yet fully recovered until the end of the third quarter, results for the second and third quarters of 2022 were adversely impacted by this strike.

Keystone Litigation

During the year ended December 31, 2022, we recorded an accrued liability of $56.6 million within MG&A related to probable losses as a result of the ongoing Keystone litigation case including associated interest.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 13, "Commitments and Contingencies" for further information.

Impairment of an Asset Group

During the first quarter of 2022, we recognized an impairment loss of $28.6 million related to the Truss joint venture asset group within other operating income (expense), net, of which $12.1 million was attributable to the noncontrolling interest.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 17, "Other Operating Income (Expense), net" for further information.

In February 2021, a winter ice storm severely impacted the southern U.S.

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

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

Montreal Brewery Sale

In further efforts to optimize the Canada and U.S.

brewery network, in the third quarter of 2017, we announced a plan to build a more efficient and flexible brewery in Longueuil, Québec.

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 special items, net in the consolidated statement of operations.

In conjunction with the sale, we agreed to lease back the existing property to continue operations on an uninterrupted basis until the new brewery became operational.

Completion of the Longueuil, Québec brewery occurred during the fourth quarter of 2021.

We recorded charges related to the Irwindale brewery closure as further discussed in Part II—Item 8 Financial Statements and Supplementary Data Note 17, "Other Operating Income (Expense), net"

Items Affecting EMEA&APAC Segment Results of Operations

Russia-Ukraine Conflict

In February 2022, Russia invaded Ukraine and the conflict remains ongoing.

As a result, we suspended exports of all our brands to Russia and subsequently terminated the license to produce any of our brands in Russia.

Out of an abundance of caution, at the commencement of the conflict, production and sales of our brands in Ukraine under license arrangements were halted as a result of the dangerous environment in the country due to the conflict.

We anticipate entering into a new license contract within Ukraine in early 2023.

Until then, we plan to export to Ukraine from the Czech Republic.

We had less than 0.2% of our 2021 consolidated net sales, less than 1% of our 2021 EMEA&APAC net sales and no physical assets in Russia and Ukraine before the conflict began.

While not material to our Company, the Russia-Ukraine conflict negatively impacted our net sales for the year ended December 31, 2022.

In addition, the Russia-Ukraine conflict has caused a negative impact to the global economy which has impacted our Company, driving further increases to the cost of materials, transportation and energy.

See the risk factor related to this conflict at Part I.—Item 1A.

"Risk Factors ".

Fiscal Year 2020 Goodwill Impairment

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Consequently, the EMEA&APAC reporting unit was fully impaired as of December 31, 2020.

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

Impairment of a Disposal Group

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

The sale of the India business disposal group was completed during the first quarter of 2021.

During the fourth quarter of 2021, we recognized an impairment loss of $13.5 million within special items, net related to the held for sale classification of the remaining portion of our India business.

India Impairment & Sale

During the third quarter of 2020, we recognized an impairment loss of $30.0 million within other operating income (expense), net related to the held for sale classification of a disposal group within our India business, representing an insignificant part of our EMEA&APAC segment.

The sale of the India business disposal group was subsequently completed during the first quarter of 2021.

During the fourth quarter of 2021, we recognized an impairment loss of $13.5 million within other operating income (expense), net related to the held for sale classification of the remaining portion of our India business.

The sale of the remaining portion of our India business was subsequently completed during the first quarter of 2022 and resulted in an insignificant loss on disposal recorded in other operating income (expense), net.

Consolidated Results of Operations

The following table highlights summarized components of our consolidated statements of operations for the years ended December 31, 2022, December 31, 2021 and December 31, 2020.

See Part II—Item 8 Financial Statements and Supplementary Data, “ Consolidated Statements of Operatio ns ” for additional details of our U.S.

See Part II—Item 8 Financial Statements and Supplementary Data, “Consolidated Statements of Operations” for additional details of our U.S.

GAAP results comparing December 31, 2022 and December 31, 2021.

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For the years ended

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Marketing, general and administrative expenses (2,618.8) 2.5 % (2,554.5) 4.8 % (2,437.0)

Special items, net (44.5) (97.4) % (1,740.2) 145.5 % (708.8)

Operating income (loss) 1,454.4 N/M (408.9) N/M 764.4

Total other income (expense), net (215.4) (8.3) % (235.0) (17.4) % (284.5)

Goodwill impairment (845.0) N/M — N/M (1,484.3)

Other operating income (expense), net (38.6) (13.3) % (44.5) (82.6) % (255.9)

Equity income (loss) 4.7 N/M — N/M —

Operating income (loss) 157.5 (89.2) % 1,454.4 N/M (408.9)

Total non-operating income (expense), net (220.0) 2.1 % (215.4) (8.3) % (235.0)

Income (loss) before income taxes (62.5) N/M 1,239.0 N/M (643.9)

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Net income (loss) (186.5) N/M 1,008.5 N/M (945.7)

Net (income) loss attributable to noncontrolling interests (2.8) (15.2) % (3.3) (26.7) % (4.5)

Net (income) loss attributable to noncontrolling interests 11.2 N/M (2.8) (15.2) % (3.3)

Net income (loss) attributable to MCBC $ (175.3) N/M $ 1,005.7 N/M $ (949.0)

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Financial volume in hectoliters 82.272 (2.1) % 84.028 (0.5) % 84.479

Brand volume in hectoliters 80.673 (1.7) % 82.033 (7.8) % 88.946

N/M = Not meaningful

Foreign currency impacts on results

During 2021, foreign currency movements favorably impacted our consolidated USD income before income taxes by $4.5 million (favorably impacting income before income taxes of our Americas segment by $2.1 million, our EMEA&APAC segment by $0.3 million and unallocated by $2.1 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.

Worldwide brand volume (or "brand volume" when discussed by segment) reflects owned or actively managed brands sold to unrelated external customers within our geographic markets (net of returns and allowances), royalty volume and our proportionate share of equity investment worldwide brand volume calculated consistently with MCBC owned volume.

Financial volume represents owned brands sold to unrelated external customers within our geographical markets, net of returns and allowances as well as contract brewing, wholesale non-owned brand volume and company-owned distribution volume.

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

Royalty volume consists of our brands produced and sold by third parties under various license and contract-brewing agreements and because this is owned volume, it is included in worldwide brand volume.

Our worldwide brand volume definition also includes an adjustment from Sales-to-Wholesaler (STW) volume to Sales-to-Retailer (STR) volume.

We believe the brand volume metric is useful to investors and management because, unlike financial volume and STWs, it provides the closest indication of the performance of our brands in relation to market and competitor sales trends.

As part of the revitalization plan strategy to grow our above premium portfolio and expand beyond the beer aisle, we have de-prioritized certain non-core economy SKUs.

This strategy is intended to drive sustainable net sales growth and earnings growth, despite potential volume declines as the portfolio mix shifts towards a higher composition of above premium products.

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For the years ended

December 31, 2021 Change December 31, 2020 Change December 31, 2019

(In millions, except percentages)

Volume in hectoliters

Financial volume 84.028 (0.5) % 84.479 (8.9) % 92.722

Contract brewing and wholesaler volume (6.730) 5.9 % (6.355) (17.6) % (7.715)

Royalty volume 4.475 18.3 % 3.783 (10.5) % 4.226

STW to STR adjustment (1.100) N/M 0.126 N/M (0.287)

Total worldwide brand volume 80.673 (1.7) % 82.033 (7.8) % 88.946

N/M = Not meaningful

For the year ended December 31, 2022, foreign currency movements had the following impacts on our USD consolidated results:

• Net sales - Unfavorable impact of $298.0 million (unfavorable impact for EMEA&APAC and Americas of $249.0 million and $49.0 million, respectively).

• Cost of goods sold - Favorable impact of $211.7 million (favorable impact for EMEA&APAC, Americas and Unallocated of $169.4 million, $36.3 million and $6.0 million, respectively).

• MG&A - Favorable impact of $83.4 million (favorable impact for EMEA&APAC and Americas of $66.8 million and $16.6 million, respectively).

• Income (loss) before income taxes - Unfavorable impact of $15.1 million (unfavorable impact for EMEA&APAC and Americas of $14.0 million and $2.6 million, respectively, partially offset by the favorable impact for Unallocated of $1.5 million).

The impacts of foreign currency movements on our consolidated USD results described above for the year ended December 31, 2022 were primarily due to the strength of the USD as compared to the GBP and CAD.

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 non-operating income (expense), net in our consolidated statements of operations.

Financial volume represents owned or actively managed brands sold to unrelated external customers within our geographic markets (net of returns and allowances), as well as contract brewing, wholesale/factored non-owned volume and company-owned distribution volume.

This metric is presented on a STW basis to reflect the sales from our operations to our direct customers, generally distributors.

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

This metric excludes royalty volume, which consists of our brands produced and sold under various license and contract brewing agreements.

Factored volume in our EMEA&APAC segment is the distribution of beer, wine, spirits and other products owned and produced by other companies to the on-premise channel, which is a common arrangement in the U.K.

As part of the revitalization plan strategy to grow our above premium portfolio and expand beyond the beer aisle, in late 2021 we de-prioritized and rationalized certain non-core SKUs, predominantly in the economy segment.

This strategy was intended to drive sustainable net sales growth and earnings growth, despite potential volume declines due to the rationalization or certain SKUs and as the portfolio mix shifted toward a higher composition of above premium products.

The following table highlights the drivers of change in net sales for the year ended December 31, 2022 versus December 31, 2021, by segment (in percentages).

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EMEA&APAC 8.1 % 17.0 % (13.8) % 11.3 %

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

The following table highlights the drivers of change in net sales for the year ended December 31, 2021 versus December 31, 2020, by segment (in percentages).

Financial Volume Price and Sales Mix Currency Total

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EMEA&APAC 3.9 % 15.7 % 6.3 % 25.9 %

Net sales per hectoliter on a brand volume basis in local currency increased 3.8% for the year ended December 31, 2021 compared to prior year.

The increase for the year ended December 31, 2021 was primarily due to positive net pricing in both the Americas and EMEA&APAC segments, as well as favorable sales mix resulting from portfolio premiumization and fewer on-premise channel restrictions.

Net sales per hectoliter on a financial volume basis in local currency increased 5.2% for the year ended December 31, 2021, compared to prior year.

Worldwide brand volume decreased 1.7% for the year ended December 31, 2021, compared to prior year, while financial volume decreased 0.5% compared to prior year.

The decline in brand volumes for the year ended December 31, 2021 was primarily due to lower economy portfolio volumes, including the de-prioritization of certain non-core SKUs in the U.S., partially offset by growth in the above premium portfolio volumes due to the increased premiumization efforts and favorable U.S.

domestic shipments as we worked to rebuild distributor inventory levels.

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Net sales per hectoliter on a financial volume basis in local currency increased 9.3% for the year ended December 31, 2022, compared to prior year, primarily due to positive net pricing and favorable sales mix driven by portfolio premiumization and favorable channel mix.

Financial volumes declined 2.1% for the year ended December 31, 2022, compared to prior year, primarily due to industry softness in the Americas, cycling the rebuild of U.S.

distributor inventory levels in the prior year, and the impacts of the Québec labor strike, partially offset by growth in Western Europe due to less onerous coronavirus pandemic restrictions.

Cost of goods sold

Cost of goods sold per hectoliter in local currency increased 4.4% for the year ended December 31, 2021, compared to prior year.

The increase for the year ended December 31, 2021 was primarily due to cost inflation mainly on input materials and transportation costs and the mix impacts of the portfolio premiumization and unfavorable foreign exchange movements, partially offset by changes to our unrealized mark-to-market commodity positions, lower depreciation and cost savings.

Cost of goods sold per hectoliter in local currency increased 19.0% for the year ended December 31, 2022, compared to prior year, primarily due to changes in our unrealized mark-to-market commodity positions which accounted for approximately 40% of the increase and is recorded as Unallocated.

In addition, the increase was also impacted by cost inflation, mainly on materials, transportation and energy costs, mix impacts from portfolio premiumization, higher factored volumes and volume deleverage, partially offset by lower depreciation expense and cost savings programs.

Marketing, general and administrative expenses

Marketing, general and administrative expenses increased 4.8% for the year ended December 31, 2021, compared to prior year.

The increase for the year ended December 31, 2021 was primarily due to higher marketing spend in both the Americas and EMEA&APAC segments to support new innovations and core brands, as well as the cycling of lower spend in areas impacted by the coronavirus pandemic, partially offset by lower depreciation expense, cost savings and lower incentive compensation.

Special items, net

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

Total other income (expense), net

Total other income (expense), net improved 8.3% for the year ended December 31, 2021, compared to prior year primarily due to lower pension and OPEB non-service costs and lower interest expense driven by the repayment of debt as a result of our continued deleveraging actions.

MG&A increased 2.5% for the year ended December 31, 2022, compared to prior year, primarily due to the cycling of lower people-related costs in the prior year and the recording of a $56.6 million accrued liability related to potential losses as a result of the ongoing Keystone litigation case including associated interest, partially offset by favorable impacts from foreign currency movements and reductions in marketing spend on non-core and discontinued brands.

Goodwill Impairment

See Part II—Item 8 Financial Statements and Supplementary Data, Note 6, "Goodwill and Intangible Assets" for detail of

our goodwill impairments.

Other operating income (expense), net

See Part II—Item 8 Financial Statements and Supplementary Data, Note 17, "Other Operating Income (Expense), net" for detail of our other operating income (expense), net.

Total non-operating income (expense), net

Total non-operating expense, net increased 2.1% for the year ended December 31, 2022, compared to prior year primarily due to higher pension and OPEB non-service costs and unfavorable transactional impacts of changes in foreign exchange rates, partially offset by lower interest expense driven by the repayment of debt as a result of our continued deleveraging actions.

Income taxes benefit (expense)

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Effective tax rate (198) % 19 % (47) %

The increase in our effective tax rate for the year ended December 31, 2021 as compared to the year ended December 31, 2020 was primarily due to (i) the approximate $1.5 billion goodwill impairment charge in our EMEA&APAC segment recognized in the fourth quarter of 2020, and (ii) $18 million of tax expense recognized in the second quarter of 2021, which related to the remeasurement of our deferred tax liabilities following an announced corporate income tax rate increase in the U.K.

The decrease in our effective tax rate for the year ended December 31, 2022 compared to the prior year was primarily due to the impact of (i) the $845 million partial goodwill impairment, recorded within our Americas segment in the fourth quarter of 2022, which related to goodwill not deductible for tax purposes, and (ii) $18 million of tax expense recognized in 2021, which related to the remeasurement of our deferred tax liabilities following an announced corporate income tax rate increase in the U.K.

from 19% to 25%.

These increases to the effective tax rate were partially offset by $135 million of tax expense recognized in the second quarter of 2020 related to the hybrid regulations enacted in the U.S., and the release of $73 million of reserves for unrecognized tax positions as a result of an effective settlement reached on a tax audit during the third quarter of 2021.

As a result of the effective settlement reached, which included resolution of the impact of the final U.S.

tax hybrid regulations, we paid cash tax and associated interest of approximately $125 million in the fourth quarter of 2021.

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 S tatements and Supplementary Data, Note 6, "Income Tax" for additional details regarding our effective tax rate.

These decreases to the effective tax rate were partially offset by the release of $73 million of reserves for unrecognized tax positions as a result of an effective settlement reached on a tax audit during 2021.

Our tax rate can be 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, could have an impact on our effective tax rate.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into U.S.

The IRA includes a new corporate alternative minimum tax of 15% on the adjusted financial statement income (“AFSI”) of corporations with average AFSI exceeding $1.0 billion over a three-year period.

The alternative minimum tax is effective for the Company beginning in fiscal year 2023, and any impact to our consolidated financial statements, including cash flow, tax expense and effective tax rate, will depend on several factors, most specifically our AFSI and any future administrative guidance.

Additionally, the IRA imposes an excise tax of 1% on stock repurchases, effective January 1, 2023.

The impact of this excise tax will be dependent on the extent of our share repurchases in future periods.

While we continue to evaluate the new tax law, we do not believe it will have a material impact to the Company in the near future.

Refer to Part II—Item 8 Financial Statements and Supplementary Data, Note 12, "Income Tax" for additional details regarding our effective tax rate.

Cost Savings Initiatives

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 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 2021 and 2020 totaled approximately $220 million and $270 million, respectively.

Our next generation cost savings program, which began in 2020, delivered $605 million of cost savings over the three year program, which ended December 31 2022.

The program was focused on building our capabilities and reorganizing to support our commercial revitalization strategy.

Total cost savings delivered in 2022, 2021 and 2020 totaled approximately $115 million, $220 million and $270 million, respectively.

Depreciation and Amortization

Depreciation and amortization expense of $786.1 million for the year ended December 31, 2021 decreased by $135.9 million compared to $922.0 million for the year ended December 31, 2020, primarily due to the decrease in accelerated depreciation expense recorded as a result of certain facility closures as well as assets becoming fully depreciated during the year.

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

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Depreciation and amortization expense decreased 12.9% for the year ended December 31, 2022, primarily due to assets becoming fully depreciated during the year, favorable impacts from foreign currency movements and a decrease in accelerated depreciation expense recorded as a result of certain facility closures.

Segment Results of Operations

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60.323 (5.4) % 63.737 (2.0) % 65.010

Brand volume in hectoliters 59.334 (3.2) % 61.313 (5.1) % 64.640

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

(2) Excludes royalty volume of 2.719 million hectoliters, 2.507 million hectoliters and 2.052 million hectoliters for 2022, 2021 and 2020, respectively.

The results for 2019 were recasted to reflect the segment changes as part of the revitalization plan.

Net sales and volume

Net sales per hectoliter on a brand volume basis in local currency increased 3.2% for the year ended December 31, 2021, compared to prior year.

The increase for the year ended December 31, 2021 was primarily due to positive net pricing and favorable brand mix, partially offset by unfavorable geographic mix attributed to growing license volume in Latin America.

Net sales per hectoliter on a financial volume basis in local currency increased 4.0% for the year ended December 31, 2021, compared to the prior year.

Brand volume decreased 3.2% for the year ended December 31, 2021, compared to prior year.

The decrease for the year ended December 31, 2021 was primarily due to a decline in the U.S.

economy portfolio, including the de-prioritization and rationalization of non-core SKUs, partially offset by growth in Latin America and the U.S.

above premium portfolio.

Financial volumes decreased 2.0% for the year ended December 31, 2021, compared to prior year, due to lower brand volume, partially offset by favorable U.S.

domestic shipment trends as we worked to rebuild distributor inventory levels.

Net sales per hectoliter on a financial volume basis in local currency increased 9.1% for the year ended December 31, 2022, compared to the prior year, primarily due to positive net pricing and favorable sales mix driven by portfolio premiumization.

Financial volumes decreased 5.4% for the year ended December 31, 2022, compared to prior year, primarily due to industry softness, cycling the rebuild of U.S.

distributor inventory levels in the prior year and the impacts of the Québec labor strike.

Income (loss) before income taxes

Income (loss) before income taxes increased 8.9% for the year ended December 31, 2021, compared to prior year.

The increase for the year ended December 31, 2021 was primarily due to positive net pricing and favorable brand mix, lower net special items charges, lower depreciation expense, and cost savings partially offset by cost inflation mainly on input materials and transportation costs, lower financial volumes and higher MG&A spend.

The higher MG&A spend was driven by higher marketing spend to support new innovations and core brands and the cycling of lower spend in areas impacted by the coronavirus pandemic, partially offset by lower incentive compensation expense, cost savings and equity income from the TYC joint venture which started distribution in Texas in the third quarter of 2021.

Income (loss) before income taxes decreased 73.4% for the year ended December 31, 2022, compared to prior year, primarily due to a partial goodwill impairment charge of $845 million, cost inflation, mainly on materials, transportation and energy costs, lower financial volumes and higher MG&A spend, partially offset by positive net pricing, favorable sales mix and lower depreciation expense.

EMEA&APAC Segment

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$ 2,005.2 11.3 % $ 1,802.3 25.9 % $ 1,431.9

Income (loss) before income taxes $ 32.9 N/M $ (1,603.7) N/M $ 102.4

Income (loss) before income taxes $ 61.0 85.4 % $ 32.9 N/M $ (1,603.7)

Financial volume in hectoliters (2)

21.955 8.1 % 20.315 3.9 % 19.560

Brand volume in hectoliters 21.339 3.0 % 20.720 (14.8) % 24.306

N/M = Not meaningful

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

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(2) Excludes royalty volume of 1.012 million hectoliters, 1.968 million hectoliters and 1.731 million hectoliters for 2022, 2021 and 2020, respectively.

The results for 2019 were recasted to reflect the segment changes as part of the revitalization plan.

Net sales and volume

Net sales per hectoliter on a brand volume basis in local currency increased 10.1% for the year ended December 31, 2021, compared to prior year.

The increase for the year ended December 31, 2021 was primarily due to favorable geographic, channel and brand mix and positive net pricing.

Net sales per hectoliter on a financial volume basis in local currency increased 15.1% for the year ended December 31, 2021, compared to prior year.

Brand volume increased 3.0% for the year ended December 31, 2021, compared to prior year.

The increase for the year ended December 31, 2021 was primarily due to the benefit of fewer on-premise restrictions and growth in the above premium portfolio.

Financial volumes increased 3.9% for the year ended December 31, 2021, compared to prior year, primarily due to higher brand volumes and factored sales.

Net sales per hectoliter on a financial volume basis in local currency increased 15.7% for the year ended December 31, 2022, compared to prior year, primarily due to favorable sales mix, in part due to the cycling of significant on-premise restrictions that occurred during the first and last quarters of 2021, particularly in the U.K, and positive net pricing.

Financial volumes increased 8.1% for the year ended December 31, 2022, compared to prior year, primarily due to growth in our above premium portfolio and our core brands, including the cycling of significant on-premise restrictions that occurred during the first and last quarters of 2021, particularly in the U.K.

and higher factored volumes.

Income (loss) before income taxes

Income (loss) before income taxes was income of $32.9 million for the year ended December 31, 2021 compared to a loss of $1,603.7 million in the prior year.

The improvement of income (loss) before income taxes of $1,636.6 million for the year ended December 31, 2021 was primarily due to the cycling of special items in the prior year related to the $1.5 billion goodwill impairment of the EMEA&APAC segment, favorable sales mix, positive net pricing and higher financial volumes, partially offset by cost inflation and higher MG&A spend mainly due to the cycling of lower prior year spend in areas impacted by the coronavirus pandemic.

Income (loss) before income taxes increased 85.4% for the year ended December 31, 2022, compared to prior year, primarily due to higher financial volumes, favorable sales mix and positive net pricing, partially offset by cost inflation, mainly on materials, transportation and energy costs, as well as higher MG&A spend.

Higher MG&A spend was primarily due to cost inflation, higher incentive compensation, higher marketing spend to support our brands and the cycling of lower spend in the prior year due to cost mitigation efforts as a result of the pandemic.

Unallocated Segment

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Operating income (loss) (229.9) N/M 236.6 119.9 % 107.6

Total other income (expense), net (207.0) (9.3) % (228.3) (14.4) % (266.7)

Income (loss) before income taxes $ 29.6 N/M $ (120.7) (54.9) % $ (267.5)

Total non-operating income (expense), net (206.5) (0.2) % (207.0) (9.3) % (228.3)

Income (loss) before income taxes $ (436.4) N/M $ 29.6 N/M $ (120.7)

N/M = Not meaningful

Cost of goods sold

The unrealized changes in fair value on our commodity derivatives, 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 2021, 2020 and 2019.

The unrealized changes in fair value on our commodity derivatives, which are economic hedges, make up substantially all of the activity presented within cost of goods sold in the table above for 2022, 2021 and 2020.

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

See Part II—Item 8 Financial Statements and Supplementary Data, Note 10, "Derivative Instruments and Hedging Activities" for further information.

Total other income (expense), net

Total other expense, net decreased 9.3% for the year ended December 31, 2021 compared to the prior year primarily due to lower pension and OPEB non-service costs and lower interest expense driven by the repayment of debt as a result of our continued deleveraging actions.

Total non-operating income (expense), net

Total non-operating expense, net decreased 0.2% for the year ended December 31, 2022 compared to the prior year primarily due to lower net interest expense partially offset by higher pension and OPEB non-service costs.

See Part II - Item 8.

Financial Statements and Supplementary Data, Note 9, "Debt" for further details on our debt instruments.

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 OPEB.

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See Part II - Item 8 Financial Statements and Supplementary Data, Note 11, "Employee Retirement Plans and Postretirement Benefits" for further discussion of pension and OPEB.

Liquidity and Capital Resources

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

However, the ongoing worldwide 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 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 twelve months subsequent to the date of the issuance of this annual report, and our long-term liquidity requirements.

We continue to focus on navigating the ongoing challenges presented by the coronavirus pandemic by preserving our liquidity and managing our cash flow through taking preemptive actions 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 our $1.5 billion revolving credit facility, including issuing commercial paper under our U.S.

commercial paper program (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 government-sponsored legislation and programs.

We intend to maintain our investment grade debt rating as demonstrated by our continued deleveraging actions which included the repayment of our $1.0 billion 2.1% notes that were due July 2021.

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

We continue to monitor world events which may create credit or economic challenges that could adversely impact our profit or operating cash flows and our ability to obtain additional liquidity.

We currently believe that our cash and cash equivalents, cash flows from operations and cash provided by short-term and long-term borrowings, when necessary, will be adequate to meet our ongoing operating requirements, scheduled principal and interest payments on debt, anticipated dividend payments, capital expenditures and other obligations for the twelve months subsequent to the date of the issuance of this annual report and our long-term liquidity requirements.

We do not have any restrictions that prevent or limit our ability to declare or pay dividends.

On July 15, 2021, our Company's Board of Directors reinstated a quarterly dividend after it was suspended during the second quarter of 2020 to preserve our liquidity position as a result of the coronavirus pandemic.

While we currently expect to have the necessary cash on hand to repay obligations when due, 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 spread of variants, the rate of vaccinations and the efficacy of vaccines, the duration of the coronavirus pandemic, the duration of on-premise restrictions and closures and related prolonged weakening of economic or other negative conditions, including the impacts on the global supply chain 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 weaken;

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, 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 implemented relief programs which we continue to monitor and evaluate, such as the CARES Act in the U.S.

Certain of these relief programs

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provide temporary deferrals of non-income based tax payments, which positively impacted our operating cash flows in 2020.

Of the $130 million of temporary net tax payment deferrals as of December 31, 2020, approximately $105 million was repaid during the year ended December 31, 2021, with approximately $25 million outstanding as of December 31, 2021.

The majority of the remaining balance is expected to be paid during the year ended December 31, 2022.

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, 2021, approximately 76% 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.

While a significant portion of our cash flows from operating activities are generated within the U.S., our cash balances include cash held outside the U.S.

and in currencies other than the USD.

As of December 31, 2022, approximate ly 76% of our cash and cash equivalents were located outside the U.S., largely denominated in foreign currencies.

T he recent fluctuations in

foreign currency exchange rates have had and may continue to have a material impact on these foreign cash balances.

Cash balances in foreign countries are often subject to additional restrictions and covenants.

We may, therefore, have difficulties timely repatriating cash held outside the U.S., and such repatriation may be subject to tax.

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

and other countries and may adversely affect our liquidity.

To the extent necessary, we accrue for tax consequences on the earnings of our foreign subsidiaries as they are earned.

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

We periodically review and evaluate these plans and strategies, including externally committed and non-committed credit agreements accessible by the Company and each of its operating subsidiaries.

We periodically review and evaluate these plans and strategies, including externally committed and non-committed credit agreements accessible by our Company and each of our operating subsidiaries.

We believe these financing arrangements, along with the cash generated from the operations of our U.S.

business and other liquidity measures resulting from considerations of the ongoing 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., and such repatriation may be subject to tax.

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 Sta tements and Supplementary Data, Note 6, "Income Tax" , during third quarter 2021, an income tax audit settlement, which included resolution of the impact of the final U.S.

tax hybrid regulations recorded in the second quarter of 2020, was reached with taxing authorities.

The settlement resulted in the cash payment of approximately $125 million in the fourth quarter of 2021, including incremental tax liability and related interest.

business, are sufficient to fund our current cash needs in the U.S.

Guarantor Information

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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 2.1% senior notes and its associated cross currency swap were subsequently repaid in July 2021 upon maturity using a combination of commercial paper borrowings and cash on hand.

The senior notes issued under the May 2012 Indenture and the July 2016 Indenture were registered under the Securities Act of 1933, as amended.

The 3.5% senior notes were subsequently repaid in May 2022 upon maturity using a combination of commercial paper borrowings and cash on hand.

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

The issuances of the senior notes issued under the May 2012 Indenture and the July 2016 Indenture were registered under the Securities Act of 1933, as amended.

These senior notes are guaranteed on a senior unsecured basis by certain subsidiaries of MCBC, which are listed on Exhibit 22 of this Annual Report on Form 10-K (the "Subsidiary Guarantors", and together with the Parent Issuer, the "Obligor Group").

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See Part II—Item 8 Financial Statements and Supplementary Data, Note 9, "Debt" for details of all debt issued and outstanding as of December 31, 2022.

The following summarized financial information relates to the Obligor Group as of December 31, 2021 on a combined basis, after elimination of intercompany transactions and balances between the Obligor Group, and excluding the investments in

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and equity in the earnings of any non-guarantor subsidiaries.

The following summarized financial information relates to the Obligor Group as of December 31, 2022 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.

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Intercompany receivables from non-guarantor subsidiaries $ 202.6

Total noncurrent assets, out of which:

Noncurrent intercompany notes receivable from non-guarantor subsidiaries $ 3,977.1

Total noncurrent assets $ 20,153.6

Total current liabilities, out of which:

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Cash Flows and Use of Cash

Our business generates positive operating cash flow each year, and our debt maturities are of a longer-term nature.

Our business historically generates positive operating cash flows each year and our debt maturities are generally of a longer-term nature.

However, our liquidity could be impacted significantly by the risk factors described in Part I, Item 1A.

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Cash Flows from Operating Activities

Net cash provided by operating activities of $1,573.5 million for the year ended December 31, 2021 decreased by $122.2 million compared to $1,695.7 million for the year ended December 31, 2020, primarily due to the unfavorable timing of working capital and higher cash paid for income taxes, partially offset by higher net income adjusted for non-cash add-backs and lower interest paid.

The unfavorable timing of working capital included $230 million of an unfavorable impact related to prior year net tax payment deferrals, partially offset by the timing of receipts and payments related to higher financial volumes in the fourth quarter of 2021 compared to the fourth quarter of 2020.

Prior year working capital benefited from approximately $130 million of net tax payment deferrals related to various government-sponsored payment deferral programs associated with the coronavirus pandemic, while in 2021 we made over $100 million of net repayments against the net tax payment deferrals.

Net cash provided by operating activities of $1,502.0 million for the year ended December 31, 2022 decreased $71.5 million compared to $1,573.5 million for the year ended December 31, 2021.

The decrease in net cash provided by operating activities was primarily due to the unfavorable timing of working capital and lower net income adjusted for non-cash add-backs, partially offset by lower income taxes paid and lower payments for incentive compensation.

The unfavorable timing of working capital includes the prior year net repayment against various tax payment deferrals programs associated with the coronavirus pandemic.

Cash Flows from Investing Activities

Net cash used in investing activities of $509.9 million for the year ended December 31, 2021 increased by $96.3 million compared to $413.6 million for the year ended December 31, 2020, primarily due to lower proceeds from the sale of properties and other assets, including $150 million from the sale of the Irwindale Brewery completed in the fourth quarter of fiscal 2020, and higher net cash outflows from other investing activities, partially offset by lower capital expenditures.

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Net cash used in investing activities of $625.1 million for the year ended December 31, 2022 increased $115.2 million compared to $509.9 million for the year ended December 31, 2021.

The increase in net cash used in investing activities was primarily due to higher capital expenditures as a result of significant investment in our Americas breweries, partially offset by higher cash inflows from other investing activities.

Cash Flows from Financing Activities

Net cash used in financing activities of approximately $1,172.2 million for the year ended December 31, 2021 increased by $101.8 million compared to $1,070.4 million for the year ended December 31, 2020, primarily due to higher net debt repayments and higher dividend payments, partially offset by lower 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, 2021 and December 31, 2020.

Net cash used in financing activities of $889.5 million for the year ended December 31, 2022 decreased $282.7 million compared to $1,172.2 million for the year ended December 31, 2021.

The decrease in net cash used in financing activities was primarily due to lower net debt repayments, partially offset by higher dividend payments and Class B common stock share

Capital Resources, including Material Cash Requirements

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We had total cash and cash equivalents of $600.0 million as of December 31, 2022, compared to $637.4 million as of December 31, 2021.

The decrease in cash and cash equivalents from December 31, 2020 to December 31, 2021 was primarily due to net debt repayments, including the repayment of our $1.0 billion 2.1% senior notes which matured in July 2021, capital expenditures and dividend payments, partially offset by net cash provided by operating activities and proceeds from the sale of properties and other assets.

The decrease in cash and cash equivalents from December 31, 2021 to December 31, 2022 was primarily due to capital expenditures, net debt repayments, including the repayment of our $500 million 3.5% USD notes which matured in May 2022, dividend payments, Class B common stock share repurchases and unfavorable foreign currency impact, partially offset by net cash provided by operating activities and from the sales of properties and other assets.

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

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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 cash inflows.

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In July 2021, we repaid our $1.0 billion 2.1% notes upon maturity.

Notional amounts are presented in USD based on the applicable exchange rate as of December 31, 2021.

We repaid our $500 million 3.5% USD notes upon maturity on May 1, 2022 using a combination of commercial paper borrowings and cash on hand.

Refer to Part II—Item 8 Financial Statements and Supplementary Data, Note 9, "Debt" for details.

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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, 2021 and December 31, 2020, 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.

As of December 31, 2022, and December 31, 2021, we had $1.5 billion a vailable to draw under our $1.5 billion revolving credit facility, as there were no outstanding revolving credit facility or commercial paper borrowings.

We intend to further utilize our cross-border, cross currency cash pool as well as our commercial paper programs for liquidity as needed.

We also have a JPY line of credit as well as JPY, CAD, GBP and USD overdraft facilities across several banks should we need additional short-term liquidity.

We also have CAD, GBP and USD overdraft facilities across several banks should we need additional short-term liquidity.

Under the terms of each of our debt facilities, we must comply with certain restrictions.

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

The maximum leverage ratio, as defined by the amended revolving credit facility agreement as of the last day of the fiscal year ended December 31, 2021 is 4.00x net debt to EBITDA, through maturity of the credit facility.

As of December 31, 2021 and December 31, 2020, we were in compliance with all of these restrictions, have met such financial ratios and have met all debt payment obligations.

These include customary events

of default and specified representations, warranties and covenants, as well as covenants that restrict our ability to incur certain additional priority indebtedness (certain thresholds of secured consolidated net tangible assets), certain leverage threshold percentages, create or permit liens on assets and restrictions on mergers, acquisitions and certain types of sale lease-back transactions.

The maximum net debt to EBITDA leverage ratio, as defined by the amended revolving credit facility agreement, was 4.00x as of December 31, 2022 and December 31, 2021.

As of December 31, 2022 and December 31, 2021, we were in compliance with all of these restrictions and covenants, have met such financial ratios and have met all debt payment obligations.

All of our outstanding senior notes as of December 31, 2022 rank pari-passu.

In October 2021, we further amended our existing revolving credit facility agreement to replace LIBOR with designated replacement rates for any future borrowings denominated in EUR or GBP to ensure continued, uninterrupted access to these markets should we need it.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 11, "Debt" for a complete discussion and presentation of all borrowings and available sources of borrowing, including lines of credit.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 9, "Debt" for further discussion of our borrowings and available sources of borrowings, including lines of credit.

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

Guarantees of the outstanding third-party debt of our equity method investments, which are classified as current on the consolidated balance sheets, have been excluded from the contractual obligations table above.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 3, "Investments" and Note 13, "Commitments and Contingencies" for further discussion.

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Material Cash Requirements from Contractual and Other Obligations

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(2) See Part II—Item 8 Financial Statements and Supplementary Data, Note 13, "Commitments and Contingencies" for further discussion of the majority of the other long-term obligations which includes supply and distribution and advertising and promotions commitments.

The remaining balance relates to derivative payments, sales and marketing, supply and distribution, information technology services, open purchase orders and other commitments.

The remaining balance relates to derivative payments, information technology services, open purchase orders and other commitments.

Other Commercial Commitments

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Credit Rating

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

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.

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Capital Expenditures

We incurred $558.6 million, and paid $522.6 million, for capital improvement projects worldwide for the year ended December 31, 2021, excluding capital spending by equity method joint ventures, representing an increase of $28.6 million from the $530.0 million of capital expenditures incurred in the year ended December 31, 2020.

This increase was primarily due to the timing of expenditures for capital projects.

We incurred $694.7 million, and paid $661.4 million, for capital improvement projects worldwide for the year ended December 31, 2022, excluding capital spending by equity method joint ventures, representing an increase of $136.1 million from the $558.6 million of capital expenditures incurred for the year ended December 31, 2021.

This increase was primarily due to significant investment in our Americas breweries including the completion of a new brewery in Québec, Canada and the sustainability investment in our Golden, Colorado brewery.

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.

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Contingencies

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Accounting for pension and OPEB plans requires that we make assumptions that involve considerable judgment which are significant inputs in the actuarial models that measure our net pension and OPEB obligations and ultimately impact our earnings.

These include the discount rate, long-term expected rate of return on assets, compensation trends, inflation considerations, health care cost trends and other assumptions, as well as determining the fair value of assets in our funded plans.

Specifically, the discount rates, as well as the expected rates of return on assets and plan asset fair value determination, are important assumptions used in determining the plans' funded status and annual net periodic pension and OPEB costs.

These include the discount rate, long-term expected rate of return on assets, and plan asset fair value determination,

which are important assumptions used in determining the plans' funded status and annual net periodic pension and OPEB costs.

Further assumptions include inflation considerations and health care cost trends.

We evaluate these critical assumptions at least annually on a plan and country-specific basis.

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While we believe that our assumptions are appropriate, significant differences in our actual experience or significant changes in our assumptions may materially affect our net pension and postretirement benefit obligations and related expense.

The following discussion focuses on assumptions that are deemed to have the most material impact on our pension and OPEB liabilities and net periodic benefit cost.

Discount Rates

The assumed discount rates are used to present-value future benefit obligations based on each plan's respective estimated duration.

Our pension and postretirement discount rates are based on our annual evaluation of high quality corporate bonds in various markets based on appropriate indices and actuarial guidance.

Our pension and OPEB discount rates are based on our annual evaluation of high quality corporate bonds in various markets based on appropriate indices and actuarial guidance.

We believe that our discount rate assumptions are appropriate;

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As of December 31, 2022, on a weighted-average basis, the discount rates used were 5.01% for our defined benefit pension plans and 4.90% for our OPEB plans.

The change from the weighted-average discount rates of 1.84% for our defined benefit pension plans and 2.10% for our postretirement plans as of December 31, 2020 is primarily due to increasing interest rates in 2021.

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The change from the weighted-average discount rates of 2.27% for our defined benefit pension plans and 2.59% for our OPEB plans as of December 31, 2021 is primarily due to increasing interest rates in 2022.

A 50 basis point change in our discount rate assumptions would have had the following effects on the projected benefit obligation balances as of December 31, 2022 for our pension and OPEB plans:

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This sensitivity holds all other assumptions constant.

Long-Term Expected Rates of Return on Assets

Long-Term Expected Rate of Return on Assets

The assumed long-term expected return on assets is used to estimate the actual return that will occur on each individual funded plan's respective plan assets in the upcoming year.

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Based on the above factors and expected asset allocations, we have assumed, on a weighted-average basis, an EROA of 4.91% for our defined benefit pension plan assets for cost recognition in 2023.

This is an increase from the weighted-average rate of 3.03% we assumed for 2021.

This is an increase from the weighted-average rate of 3.11% we assumed for 2022, primarily due to the significant increase in interest rates throughout 2022 as 65.2% of our portfolio was invested in fixed income securities as of year end.

We believe that our EROA assumptions are appropriate;

however, significant changes in our assumptions or actual returns that differ significantly from estimated returns may materially affect our net periodic pension costs.

To compute the expected return on plan assets, we apply the EROA to the market-related value of the pension plan assets adjusted for projected benefit payments to be made from the plan assets and projected contributions to the plan assets.

We use the fair value approach to calculate the market-related value of pension plan assets used to determine net periodic pension cost, which includes measuring the market-related value of plan assets at fair value for purposes of determining the expected return on plan assets and amount of gain or loss subject to amortization.

A 50 basis point change in our discount rate and expected return on assets assumptions made at the beginning of 2021 would have had the following effects on 2021 net periodic pension and postretirement benefit costs:

A 50 basis point change in our expected return on assets assumptions made at the beginning of 2022 would have had the following effects on 2022 net periodic pension and postretirement benefit costs.

Impact to 2022 pension and postretirement benefit costs - 50

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Expected return on pension plan assets $ (22.7) $ 23.9

Discount rate on pension plans $ 5.6 $ (9.0)

Discount rate on postretirement plans $ 2.3 $ (2.0)

Fair Value of Plan Assets

We recognize our defined benefit pension plans as assets or liabilities in the consolidated balance sheets based on their underfunded or overfunded status as of our year end and recognize changes in the funded status due to changes in actuarial assumptions in the year in which the changes occur within other comprehensive income.

Our funded status of our defined benefit pension plans is measured as the difference between each plan's projected benefit obligation and its assets' fair values.

The fair value of plan assets is determined by us using available market information and appropriate valuation methodologies.

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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.

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Equity assets are diversified between domestic and other international investments.

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See Part II—Item 8 Financial Statements and Supplementary Data, Note 11, "Employee Retirement Plans and Postretirement Benefits" for a comparison of target asset allocation percentages to actual asset allocations as of December 31, 2022.

Other Considerations

Our net periodic pension and postretirement benefit costs are also influenced by the potential amortization (or non-amortization) from accumulated other comprehensive income (loss) of deferred gains and losses, which occur when actual experience differs from estimates.

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

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

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

If our actuarial losses significantly exceed this corridor in the future, significant incremental pension and postretirement costs could result.

As of year-end 2021, the deferred losses of several of our Canadian plans, as well as those in our U.K.

plans, and the deferred gains of our U.S.

plan, exceeded the 10% corridor.

Health Care Cost Trend Rates

The assumed health care cost trend rates represent the rates at which health care costs are assumed to increase and are based on actuarial input and consideration of historical and expected experience.

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however, significant changes in our assumptions may materially affect our postretirement benefit obligations and related costs.

As of December 31, 2021, the health care trend rates used were ranging ratably from 6.0% in 2022 to 3.57% in 2040, consistent with our health care trend rates ranging ratably from 6.0% in 2021 to 3.57% in 2040 as of December 31, 2020.

As of December 31, 2022, the health care trend rates used were ranging ratably from 6.50% in 2023 to 3.57% in 2040, as compared to health care trend rates ranging ratably from 6.00% in 2022 to 3.57% in 2040 as of December 31, 2021.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 11, "Employee Retirement Plans and Postretirement Benefits" for further information.

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Goodwill and Intangible Asset Valuation

Goodwill is allocated to the reporting unit in which the business that created the goodwill resides.

A reporting unit is an operating segment, or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management.

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

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

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 may indicate potential impairment.

Our annual impairment test of goodwill and 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.

Significant judgments and assumptions are required in such impairment evaluations.

Our annual evaluation involves comparing each reporting unit's fair value to its respective carrying value, including goodwill.

If the fair value exceeds carrying value, then we conclude that no goodwill impairment has occurred.

If a reporting

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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.

Significant judgments and assumptions are required in such

impairment evaluations.

As of December 31, 2022, the carrying values of goodwill and intangible assets were approximately $5.3 billion and $12.8 billion, respectively, with the goodwill balance entirely attributed to the Americas reporting unit.

We use a combination of discounted cash flow analyses and market approaches to determine the fair value of each of our reporting units and an excess earnings approach to determine the fair values of our indefinite-lived brand intangible assets.

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.

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

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, cost inflation or other 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

As of the October 1, 2021 testing date, the fair value of our Americas reporting unit was estimated at approximately 6% in excess of its carrying amount and therefore no goodwill impairment charge was required for the Americas reporting unit.

However, the Americas reporting unit is considered to be at risk for future impairments consistent with the 2020 testing results.

The fair value in the current year is still largely impacted by the continued perceived risk of realizing management’s revitalization efforts and the ongoing impacts from the coronavirus pandemic.

In addition, the fair value as of the 2021 test was impacted by assumptions related to increased cost inflation pressures in the medium term.

The fair value of the Americas reporting unit is heavily dependent upon transforming our company including strengthening our iconic core brands, growing our above premium portfolio and expanding beyond beer.

Despite successful launches of Blue Moon LightSky and Vizzy , and early success around products like Topo Chico Hard Seltzer and our joint venture expansion of Yuengling , there is not enough historical data yet to comfortably predict future impacts.

Additionally, the fact that these products were launched in the midst of a global pandemic makes understanding and predicting their market positions and potential in a normal economy even more challenging.

While the Americas reporting unit appears to be weathering the ongoing impacts of the pandemic and cost inflation, there is still inherent risk in achieving our goals.

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 coronavirus pandemic on our reporting units.

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

Goodwill allocated to the Americas reporting unit as of December 31, 2021 was $6.2 billion.

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

Indefinite-Lived Intangible Assets

The fair values of the Coors indefinite-lived brands in the Americas, the Miller indefinite-lived brands in the U.S.

and the Carling brands in the U.K.

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

The fair value of the Staropramen brand increased versus the prior year and is sufficiently in excess of its carrying value as of the annual testing date.

The increase in the fair value of the Staropramen brand was a result of the progressive reopening of the on-premise business throughout Europe, but more impactfully Western Europe, during the year and the related improvement to expected future cash flows based on our long-range plan for this brand.

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

and the Staropramen and Carling brands in EMEA&APAC.

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 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

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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 Americas 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 and cost inflation, 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 the Americas 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 pandemic has had on our overall business and specifically our more profitable on-premise segment.

The key assumptions used to derive the estimated fair values of our reporting units and indefinite-lived intangible assets represent Level 3 measurements.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors.

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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, an inability to execute on our strategic initiatives or an increase in costs that could significantly impact our immediate and long-range results, 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;

(i) a decrease in expected future cash flows, specifically, an inability to execute on our strategic initiatives or an increase in costs driven by inflation or other factors that could significantly impact our immediate and long-range results 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, (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, as well as for adverse changes in macroeconomic conditions such as the coronavirus pandemic and cost inflation that could significantly impact our immediate and long-range results.

The related weakening of economic conditions either as a result of resurgences in the coronavirus pandemic or cost inflation could lead to a material impairment.

Additionally, we are monitoring the impacts that the coronavirus pandemic and cost inflation have 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 coronavirus 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 2021, the discount rate used in developing our annual fair value estimates for the Americas reporting unit was 8.25%, based on market-specific factors, as compared to 8.00% as of the October 1, 2020 annual testing date.

The recent interest rate environment has resulted in an increase to the risk-free rate used in the current year discount rate calculations, which is reflected in the Americas higher discount rate.

This discount rate also continues to be reflective of an unsystematic risk premium related to projected results of various new and unproven brands and innovations.

The adverse effect of a higher discount rate driven by the recent interest rate environment is offset by improved cash flow projections for the Americas reporting unit.

As we continue to recover from the coronavirus pandemic's impacts to the on-premise channel, the current year along with future projections have improved.

The discount rates for the Miller brands in the U.S., and Coors brands in the Americas decreased compared to

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the discount rates used in the prior year analysis.

For the Coors brands, this is primarily due to a reduction in the discount rate due to a lower risk premium, which was elevated in the prior year related to assumptions surrounding the launch of Coors Seltzer .

Both brands also benefited from decreased perceived risk in meeting management’s cash flow projections as they did not rely on new and unproven brands and innovations included in our current year discount rate calculations for the Americas reporting unit.

The discount rate for the Staropramen brands in EMEA&APAC increased compared to the discount rate used in the prior year analysis, primarily due to increases in the unsystematic risk premium related to risks associated with achieving the forecasted results while still in a global pandemic, particularly in Eastern Europe.

Conversely, the discount rate for the Carling brands in the U.K.

decreased compared to the discount rate used in the prior year analysis, primarily due to a decrease in the unsystematic risk premium as a result of the progressive reopening of the on-premise business throughout Western Europe, and specifically the U.K.

Current expectations driving our annual impairment testing as of October 1, 2021 have resulted in fair values of our Americas 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 Americas reporting unit as of the October 1, 2021 test date:

Impact to the fair value cushion as of October 1, 2021

- 50 basis points increase

Cushion (as reported) Cushion (post-sensitivity)

% of fair value in excess of carrying value

Americas Reporting Unit 6% 1%

Post sensitivity, the fair value of the Americas reporting unit remains in excess of its 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 assets for potential triggering events suggesting an impairment review should be performed.

In the current year, consistent with our revitalization plan, management made the decision to discontinue select economy SKUs and brands.

It was determined that although these specific brand family line extensions had been discontinued, the brand family itself was still being used and produced.

Additional evaluation was performed on these specific definite-lived brand intangible assets with no triggering events noted at the asset group level and no changes in useful life of the brand intangible assets deemed necessary.

In 2020, we recognized impairment losses on some of our definite-lived intangible assets related to a few of our regional craft breweries in the Americas and EMEA&APAC segments, which were recorded in special items, net in the consolidated statement of operations.

The impairment 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, and recorded in special items, net.

See Part II—Item 8 Financial Statements and Supplementary Data Note 7, "Special Items" for further details on these impairment losses.

As of December 31, 2021, the carrying values of goodwill and intangible assets were approximately $6.2 billion and $13.3 billion, respectively.

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.

See Part II—Item 8 Financial Statements and Supplementary Data, Note 6, "Goodwill and Intangible Assets" for further discussion and presentation of these amounts.

Annual Goodwill Impairment Test

As of the October 1, 2022 testing date, the carrying value of the Americas reporting unit was determined to be in excess of its fair value such that an impairment loss of $845.0 million was recorded.

As this is a partial impairment of the reporting unit, the reporting unit is still considered to be at risk of future impairment.

Assets are considered to be at heightened risk of future impairment if the fair value does not exceed its respective carrying value by 15.0% or more.

The decline in the fair value of the Americas reporting unit in the current year was largely impacted by macroeconomic factors including an increase to the discount rate as a result of the recent rising interest rate environment as well as reductions in management forecasts and expectations due primarily to cost inflation pressures in the near to medium term and a softening beer industry in certain markets in which we operate.

Specifically, the discount rate used in developing our annual fair value estimates for the Americas reporting unit in the current year was 8.75% based on market-specific factors, primarily the recent interest rate environment, as compared to 8.25% used as of the October 1, 2021 annual testing date.

Current projections used for the Americas reporting unit testing reflect growth assumptions associated with our continued 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.

While progress has been made on this strategy, including the increasing proportion of our above premium portfolio in the current year and the strengthening of our core brands, there is not enough historical data yet to comfortably predict future impacts and forecasted future cash flows are inherently at risk given that the strategies are still in progress.

In addition, while we have included in our forecasted future cash flows estimates for expected cost inflation and adjusted our volumes to be reflective of the current beer industry trends, there is still inherent risk in achieving our goals.

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

For example, a 50 basis point increase in our discount rate assumptions, which is within a reasonable range of our historical discount rate fluctuations, could have a significant or material impact on the fair value of the Americas reporting unit holding all other assumptions and inputs constant.

Indefinite-Lived Intangible Assets

The fair values of the Coors brands in the Americas, the Miller brands in the U.S, the Carling brands in the U.K., and the Staropramen brands in EMEA&APAC continue to be sufficiently in excess of their respective carrying values as of the annual testing date, with each having over 15% cushion of fair value over book value.

We utilize Level 3 fair value measurements in our impairment analysis of our indefinite-lived intangible assets.

The future cash flows used in the analyses are based on internal cash flow projections based on our long range plans and include significant assumptions by management.

The same macroeconomic factors impacting the discount rates of the Americas reporting unit are relevant to the indefinite-lived intangible assets with the Carling and Staropramen brands in EMEA&APAC being further impacted by the effects of cost inflation driven by the Russia-Ukraine conflict and the associated impacts on consumer demand and discretionary spending primarily in Central and Eastern Europe.

A 50 basis point increase in our discount rate assumptions would not have resulted in an impairment of any of our indefinite-lived intangible assets.

Definite-Lived Intangible Assets and Other Long-Lived Assets

Regarding definite-lived intangible assets, we continuously monitor the performance of the underlying assets for potential triggering events suggesting an impairment review should be performed or useful lives should be re-assessed.

During the first quarter of 2022, we identified a triggering event related to the Truss joint venture asset group within our Americas segment and recognized an impairment loss of $28.6 million, of which $12.1 million was attributable to the noncontrolling interest.

The asset group was measured at fair value primarily using a market approach with Level 3 inputs.

See Pa rt II—Item 8 Financial Statements and Supplementary Data, Note 6, "Goodwill and Intangible Assets" and Note 17, "Other Operating Income (Expense), net" for further details on these impairment losses.

No other material triggering events were identified in either 2022 or 2021 related to the definite-lived intangible assets or other definite-lived assets.

Income taxes are accounted for in accordance with U.S.

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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.

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 are periodically subject to income tax audits 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 a variety of resolutions including 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 estimated liabilities related to these matters are adjusted in the period in which the uncertain tax position is effectively settled, the statute of limitations for examination expires or when additional information becomes available.

Our liability for unrecognized tax benefits requires the use of assumptions and significant judgment to estimate the exposures associated with

Ta b l e of C o n t e n t s

our various filing positions.

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 tax rate and tax provision.

When cash is available after satisfying working capital needs and all other business obligations, we may distribute cash from a foreign subsidiary to its U.S.

When cash is available after satisfying working capital needs and all other business obligations, we may distribute current earnings and the associated cash from a foreign subsidiary to its U.S.

parent, and record the tax impact associated with the distribution.

However, to the extent current earnings of our foreign operations exist and are not otherwise distributed or planned to be distributed, such earnings accumulate.

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.

These accumulated earnings are not considered permanently reinvested in our foreign operations.

The taxes associated with any future repatriation of undistributed earnings are anticipated to be insignificant.

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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In the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax asset would decrease income tax expense in the period a determination was made.

Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would increase income tax expense in the period such determination was made.

Likewise, should we determine that we would not be able to realize all or part of our net

deferred tax asset in the future, an adjustment to the deferred tax asset would increase income tax expense in the period such determination was made.

There are proposed or pending tax law changes in various jurisdictions in which we do business.

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As a result, such changes may, upon ultimate enactment, result in material impacts to our financial statements.

New Accounting Pronouncements

New Accounting Pronouncements Not Yet Adopted

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

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What changed 10-K

Item 7. Management’s Discussion and Analysis