MOLSON COORS BEVERAGE CO - Quarter Report: 2024 March (Form 10-Q)

Change in current assets and liabilities and other()()Net cash provided by (used in) operating activities Cash flows from investing activities Additions to property, plant and equipment()()Proceeds from sales of property, plant, equipment and other assets Other ()Net cash provided by (used in) investing activities()()Cash flows from financing activities Dividends paid()()Payments for purchases of treasury stock()()Payments on debt and borrowings()()Proceeds on debt and borrowings Other() Net cash provided by (used in) financing activities()()Effect of foreign exchange rate changes on cash and cash equivalents() Net increase (decrease) in cash and cash equivalents()()Balance at beginning of year Balance at end of period$ $

See notes to unaudited condensed consolidated financial statements.

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MOLSON COORS BEVERAGE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

AND NONCONTROLLING INTERESTS

(IN MILLIONS)

(UNAUDITED)

Molson Coors Beverage Company Stockholders' Equity

Accumulated

Common stock

Exchangeable

other

held in

Non

issued

shares issued

Paid-in-

Retained

comprehensive

treasury

controlling

Total

Class A

Class B

Class A

Class B

capital

earnings

income (loss)

Class B

interests(1)

As of December 31, 2022

()

Exchange of shares

—

()

—

Shares issued under equity compensation plan

()

—

()

—

Amortization of share-based compensation

—

Net income (loss) including noncontrolling interests

—

Other comprehensive income (loss), net of tax

—

Share repurchase program

()

—

()

—

Distributions and dividends to noncontrolling interests

()

—

()

Dividends declared

()

—

()

—

As of March 31, 2023

()

Molson Coors Beverage Company Stockholders' Equity

Accumulated

Common stock

Exchangeable

other

held in

Non

issued

shares issued

Paid-in-

Retained

comprehensive

treasury

controlling

Total

Class A

Class B

Class A

Class B

capital

earnings

income (loss)

Class B

interests(1)

As of December 31, 2023

()

Shares issued under equity compensation plan

()

—

()

—

Amortization of share-based compensation

—

Net income (loss) including noncontrolling interests

—

Other comprehensive income (loss), net of tax

()

—

()

—

()

Share repurchase program

()

—

()

—

Distributions and dividends to noncontrolling interests

()

—

()

Dividends declared

()

—

()

—

As of March 31, 2024

()

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(1)

See notes to unaudited condensed consolidated financial statements.

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MOLSON COORS BEVERAGE COMPANY AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

These unaudited condensed consolidated financial statements should be read in conjunction with our Annual Report, and have been prepared on a consistent basis with the accounting policies described in Note 1 of the Notes to the Audited Consolidated Financial Statements included in our Annual Report, except as noted in Note 2, "New Accounting Pronouncements".

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results that may be achieved for the full year or any other future period.

Anti-Dilutive Securities

Anti-dilutive securities excluded from the computation of diluted EPS were million and million as of March 31, 2024 and March 31, 2023, respectively.

Dividends

On February 13, 2024, our Company's Board of Directors ("Board") declared a dividend of $ per share, paid on March 15, 2024, to shareholders of Class A and Class B common stock of record on March 1, 2024. Shareholders of exchangeable shares received the CAD equivalent of dividends declared on Class A and Class B common stock, equal to CAD per share.

Share Repurchase Program

During the third quarter of 2023, our Board approved a share repurchase program authorizing the repurchase of up to an aggregate of $ billion of our Company's Class B common stock excluding brokerage commissions and excise taxes, with an expected program term of . This repurchase program replaces and supersedes any repurchase program previously approved by our Board, including the program approved during the first quarter of 2022.

Aggregate cost (in millions)

$ $

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million and $ million during the three months ended March 31, 2024 and March 31, 2023, respectively. In addition, we had non-cash activities related to certain issuances of share-based awards.

Other than the activity mentioned above and the supplemental non-cash activity related to the recognition of leases further discussed in Note 6, "Leases," there was no other significant non-cash activity during the three months ended March 31, 2024 and March 31, 2023, respectively.

Share-Based Compensation

During the three months ended March 31, 2024 and March 31, 2023, we granted stock options, RSUs and PSUs to certain officers and other eligible employees. We recognized share-based compensation expense of $ million and $ million during the three months ended March 31, 2024 and March 31, 2023, respectively.

Supplier Financing

We are the buyer under a supplier finance program with Citibank N.A. with $ million and $ million confirmed as valid and outstanding as of March 31, 2024 and December 31, 2023, respectively. We recognize these unpaid balances in accounts payable and other current liabilities on our unaudited condensed consolidated balance sheets.

Allowance for Doubtful Accounts

The allowance for doubtful accounts for trade receivables was $ million and $ million as of March 31, 2024 and December 31, 2023, respectively.

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% ownership interest, with the transaction anticipated to close during the second quarter of 2024 pending finalization of terms.

Both BRI and BDL have outstanding third party debt which is guaranteed by their respective shareholders. As a result, we had a guarantee liability of $ million and $ million recorded as of March 31, 2024 and December 31, 2023, respectively, which is presented within accounts payable and other current liabilities on the unaudited condensed consolidated balance sheets and represents our proportionate share of the outstanding balance of these debt instruments. The offset to the guarantee liability was recorded as an adjustment to our respective equity method investment within the unaudited condensed consolidated balance sheets. The resulting change in our equity method investments during the year due to movements in the guarantee represents a non-cash investing activity.

Consolidated VIEs

$ $ $ Other$ $ $ $

As of March 31, 2024, for RMMC/RMBC, $ million and $ million were recorded in inventories, net and property, plant and equipment, net, respectively on the unaudited condensed consolidated balance sheets. As of December 31, 2023, for RMMC/RMBC, $ million and $ million were recorded in inventories, net and property, plant and equipment, net, respectively on the consolidated balance sheets.

4. $ Work in process Raw materials Packaging materials Inventories, net$ $

$ $ Foreign currency translation, net() ()Balance as of March 31, 2024$ $ $

(1)Accumulated impairment losses for the Americas segment was $ million as of March 31, 2024 and December 31, 2023. The EMEA&APAC goodwill balance was fully impaired during the year ended December 31, 2020 with an accumulated impairment loss of $ million.

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%, and as such, the reporting unit continues to be at heightened risk of future impairment in the event of significant unfavorable changes in assumptions. We continue to focus on growing our core power brand net sales, aggressively premiumizing our portfolio and scaling and expanding beyond beer. While progress has been made on these strategies over recent years, including the strengthening of our core brands, the growth targets included in management’s forecasted future cash flows are inherently at risk given that the strategies are still in progress. These growth targets have factored in current expectations of the beer industry environment and broader macroeconomic conditions. However, the fair value determinations are sensitive to changes in forecasted cash flows, macroeconomic conditions, market multiples or discount rates that could negatively impact future analyses, including the impacts of cost inflation, further increases to interest rates and other external industry factors impacting our business.

We determined that there was no triggering event that occurred during the three months ended March 31, 2024 that would indicate the carrying value of our goodwill was greater than its fair value.

Intangible Assets, Other than Goodwill

- $ $()$ License agreements and distribution rights

()

Other

() Intangible assets not subject to amortization Brands Indefinite — Distribution networks Indefinite — Other Indefinite — Total $ $()$

The following table presents details of our intangible assets, other than goodwill, as of December 31, 2023:

Useful life

Gross

Accumulated
amortization

Net

(Years)

(In millions)

Intangible assets subject to amortization

Brands

()

License agreements and distribution rights

()

Other

()

Intangible assets not subject to amortization

Brands

Indefinite

—

Distribution networks

Indefinite

—

Other

Indefinite

—

Total

()

The changes in the gross carrying amounts of intangible assets from December 31, 2023 to March 31, 2024 were primarily driven by the impact of foreign exchange rates, as a significant amount of intangible assets, other than goodwill, are denominated in foreign currencies.

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2025$ 2026$ 2027$ 2028$

Amortization expense of intangible assets was $ million and $ million for the three months ended March 31, 2024 and March 31, 2023, respectively. This expense was presented within MG&A expenses in our unaudited condensed consolidated statements of operations.

As of the date of our annual impairment test of indefinite-lived intangible assets, performed as of October 1, 2023, the carrying value of the Staropramen family of brands in EMEA&APAC was determined to be in excess of its fair value such that an impairment loss was recorded during the three months ended December 31, 2023. As this was a partial impairment, the intangible asset is considered to be at a heightened risk of future impairment in the event of significant unfavorable changes in assumptions, including forecasted future cash flows based on execution of strategic initiatives for expansion and distribution of the brand, as well as discount rates and other macroeconomic factors.

The fair value of the Coors brands in the Americas, the Miller brands in the U.S. and the Carling brands in EMEA&APAC all exceeded their respective carrying values by over % as of the annual testing date.

No triggering events were identified during the three months ended March 31, 2024 that would indicate the carrying values of our indefinite-lived or definite-lived intangible assets were greater than their fair values.

Fair Value Assumptions

$ Current operating lease liabilitiesAccounts payable and other current liabilities$ $ Non-current operating lease liabilitiesOther liabilities Total operating lease liabilities$ $ Finance LeasesFinance lease right-of-use assetsProperty, plant and equipment, net$ $ Current finance lease liabilitiesCurrent portion of long-term debt and short-term borrowings$ $ Non-current finance lease liabilitiesLong-term debt Total finance lease liabilities$ $

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$ Operating cash flows from finance leases$ $ Financing cash flows from finance leases$ $ Supplemental non-cash information on right-of-use assets obtained in exchange for new lease liabilitiesOperating leases$ $ Finance leases$ $

As of March 31, 2024, we entered into leases that have not yet commenced with estimated aggregated future lease payments of approximately $ million. The leases are expected to commence in 2024.

million % notes due July 2024$ $

CAD million % notes due July 2026

$ billion % notes due July 2026

$ billion % notes due May 2042

$ billion % notes due July 2046

Finance leases Other Less: unamortized debt discounts and debt issuance costs()()Total long-term debt (including current portion) Less: current portion of long-term debt()()Total long-term debt$ $

Short-term borrowings(1)

$ $ Current portion of long-term debt Current portion of long-term debt and short-term borrowings$ $

(1)Our short-term borrowings include bank overdrafts, borrowings on our overdraft facilities and other items.

As of March 31, 2024, we had $ million in bank overdrafts and $ million in bank cash related to our cross-border, cross-currency cash pool for a net positive position of $ million. As of December 31, 2023, we had $ million in bank overdrafts and $ million in bank cash related to our cross-border, cross-currency cash pool for a net positive position of $ million.

outstanding borrowings as of March 31, 2024 and December 31, 2023. See further detail within Part II.—Item 8. Financial Statements, Note 13, "Commitments and Contingencies" in our Annual Report for further discussion related to letters of credit.

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billion and $ billion, respectively. All senior notes are valued based on significant observable inputs and classified as Level 2 in the fair value hierarchy. The carrying values of all other outstanding long-term borrowings and our short-term borrowings approximate their fair values and are also classified as Level 2 in the fair value hierarchy.

Revolving Credit Facility and Commercial Paper

We maintain a $ billion amended and restated revolving credit facility with a maturity date of June 26, 2028 that allows us to issue a maximum aggregate amount of $ billion in commercial paper or make other borrowings at any time at variable interest rates. We use this facility from time to time to fund the repayment of debt upon maturity and for working capital or general purposes.

We had borrowings drawn on the amended and restated revolving credit facility and commercial paper borrowings as of March 31, 2024 and December 31, 2023.

Debt Covenants

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.

billion revolving credit facility, we are required to maintain a maximum leverage ratio, calculated as net debt to EBITDA (as defined in the amended and restated revolving credit facility agreement) of x, measured as of the last day of each fiscal quarter through maturity of the credit facilit

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$ Foreign currency forwards ()Commodity swaps and options()()Total$ $

As of March 31, 2024 and December 31, 2023, we had no significant transfers between Level 1 and Level 2. New derivative contracts transacted during the three months ended March 31, 2024 were all included in Level 2.

Results of Period Derivative Activity

The tables below include the results of our derivative activity in our unaudited condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023, and our unaudited condensed consolidated statements of operations for the three months ended March 31, 2024 and March 31, 2023.

Other non-current assets$ Other liabilities $ Foreign currency forwards$ Other current assets Accounts payable and other current liabilities() Other non-current assets Other liabilities ()Total derivatives designated as hedging instruments$ $()Derivatives not designated as hedging instruments

Commodity swaps(1)

$ Other current assets$ Accounts payable and other current liabilities$()

Other non-current assets Other liabilities ()

Commodity options(1)

$ Other current assets Accounts payable and other current liabilities()Total derivatives not designated as hedging instruments$ $()

As of December 31, 2023

Derivative Assets

Derivative Liabilities

Notional amount

Balance sheet location

Fair value

Balance sheet location

Fair value

Derivatives designated as hedging instruments

Forward starting interest rate swaps

Other non-current assets

Other liabilities

Foreign currency forwards

Other current assets

Accounts payable and other current liabilities

()

Other non-current assets

Other liabilities

()

Total derivatives designated as hedging instruments

()

Derivatives not designated as hedging instruments

Commodity swaps(1)

Other current assets

Accounts payable and other current liabilities

()

Other non-current assets

Other liabilities

()

Commodity options(1)

Other current assets

Accounts payable and other current liabilities

()

Total derivatives not designated as hedging instruments

()

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Interest income (expense), net$()Foreign currency forwards Cost of goods sold Other non-operating income (expense), net()Total$ $()Three Months Ended March 31, 2023Forward starting interest rate swaps$()Interest income (expense), net$()Foreign currency forwards()Cost of goods sold Other non-operating income (expense), net()Total$()$()

The Pretax Effect of Net Investment Hedge Accounting on Other Comprehensive Income (Loss), Accumulated Other Comprehensive Income (Loss) and Income (Loss) (in millions):

Net investment hedge relationships

Amount of gain
(loss) recognized
in OCI

Location of gain (loss) recognized in income (amount excluded from effectiveness testing)

Amount of gain (loss) recognized in income (amount excluded from effectiveness testing) (1)

Three Months Ended March 31, 2024

EUR million notes due 2024

Other non-operating income (expense), net

Three Months Ended March 31, 2023

EUR million notes due 2024

()

Other non-operating income (expense), net

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

The cumulative translation adjustments related to our net investment hedges remain in AOCI until the respective underlying net investment is sold or liquidated. During the three months ended March 31, 2024 and March 31, 2023, respectively, we did not reclassify any amounts related to net investment hedges from AOCI into earnings.

As of March 31, 2024, we expect net losses of approximately $ million (pretax) recorded in AOCI will be reclassified into earnings within the next months. For derivatives designated in cash flow hedge relationships, the maximum length of time over which forecasted transactions are hedged as of March 31, 2024 is approximately years, as well as those related to our forecasted debt issuances in 2026.

)Three Months Ended March 31, 2023Commodity swapsCost of goods sold$()

% %

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million discrete tax benefit in the three months ended March 31, 2024 as compared to recognition of $ million discrete tax expense in the three months ended March 31, 2023.

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

Recently, intergovernmental entities such as the Organization for Economic Development ("OECD") and European Union ("EU") have proposed changes to the existing tax laws of member countries, including model rules introduced by the OECD for a new 15% global minimum tax. In December 2022, the EU member states agreed to incorporate the 15% global minimum tax into their respective domestic laws effective for fiscal years beginning on or after December 31, 2023. In addition, several non-EU countries, including the U.K., have proposed and/or adopted legislation consistent with the OECD global minimum tax framework. The global minimum tax, which is now effective in countries with enacted legislation, did not materially impact our financial or cash tax position in the three months ended March 31, 2024. We continue to evaluate the impact on future periods as previously-enacting countries issue related guidance and additional countries consider adoption of the global minimum tax rules.

10.

million and $ million as of March 31, 2024 and December 31, 2023, respectively. While we cannot predict the eventual aggregate cost for litigation, other disputes and environmental matters in which we are currently involved, we believe adequate reserves have been provided for losses that are probable and estimable. For all matters unless otherwise noted below, we believe that any reasonably possible losses in excess of the amounts accrued are immaterial to our unaudited condensed consolidated financial statements. Our litigation, other disputes and environmental issues are discussed in further detail within Part II.—Item 8. Financial Statements, Note 13, "Commitments and Contingencies" in our Annual Report and did not significantly change during the three months ended March 31, 2024.

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

On February 12, 2018, Stone Brewing Company filed a trademark infringement lawsuit in federal court in the Southern District of California against Molson Coors Beverage Company USA LLC ("MCBC USA"), a wholly owned subsidiary of our Company, alleging that the Keystone brand had “rebranded” itself as “Stone” and was marketing itself in a manner confusingly similar to Stone Brewing Company's registered Stone trademark. In the first quarter of 2022, a jury returned a verdict in which it concluded that trademark infringement had occurred and awarded Stone Brewing Company $ million in damages. After denial of post-trial motions, in the fourth quarter of 2023, MCBC USA filed a notice of appeal in the 9th Circuit Court of Appeals. As of March 31, 2024 and December 31, 2023, the Company had a recorded accrued liability of $ million and $ million, respectively, within other liabilities on our unaudited condensed consolidated balance sheets reflecting the best estimate of probable loss in this case based on the judgment plus associated post-judgment interest. However, it is reasonably possible that the estimate of the loss could change in the near term based on the progression of the case, including the appeals process. We will continue to monitor the status of the case and will adjust the accrual in the period in which any significant change occurs which could impact the estimate of the loss for this matter.

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million and $ million, respectively.

Separately, related to our Cervejarias Kaiser Brasil S.A. ("Kaiser") indemnities, we accrued $ million and $ million, in aggregate, as of March 31, 2024 and December 31, 2023 respectively. Our Kaiser liabilities are discussed in further detail within Part II.—Item 8. Financial Statements, Note 13, "Commitments and Contingencies" in our Annual Report and did not significantly change during the three months ended March 31, 2024.

11. )$ $()$()$()Foreign currency translation adjustments()— — — ()Gain (loss) recognized on net investment hedges — — — Unrealized gain (loss) recognized on derivative instruments— — — Derivative instrument activity reclassified from other comprehensive income (loss)— — — Pension and other postretirement activity reclassified from other comprehensive income (loss)— — ()— ()Ownership share of unconsolidated subsidiaries' other comprehensive income (loss)— — — Tax benefit (expense)()() ()()As of March 31, 2024$()$ $()$()$()

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12.

$()

Gains (losses) on disposals and other

Other operating income (expense), net$ $()

13.

billion and $ billion of our consolidated net sales for the three months ended March 31, 2024 and March 31, 2023 respectively.

Consolidated net sales represent sales to third-party external customers less excise taxes. Inter-segment transactions impacting net sales and income (loss) before income taxes eliminate upon consolidation and are primarily related to the Americas segment royalties received from, and sales to the EMEA&APAC segment.

$ EMEA&APAC Inter-segment net sales eliminations()()Consolidated net sales$ $ $ EMEA&APAC()()Unallocated()()Consolidated income (loss) before income taxes$ $

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$ EMEA&APAC Consolidated total assets$ $

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

For over two centuries, we have been brewing beverages that unite people to celebrate all life’s moments. From our core power brands Coors Light, Miller Lite, Coors Banquet, Molson Canadian, Carling and Ožujsko to our above premium brands including Madri, Staropramen, Blue Moon Belgian White and Leinenkugel’s Summer Shandy, to our economy and value brands like Miller High Life and Keystone, 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, including flavored beverages like Vizzy Hard Seltzer, spirits like Five Trail whiskey as well as non-alcoholic beverages. As a business, our ambition is to be the first choice for our people, our consumers and our customers, and our success depends on our ability to make our products available to meet a wide range of consumer segments and occasions.

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") in this Quarterly Report on Form 10-Q is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements, the accompanying notes and the MD&A included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 ("Annual Report"), as well as our unaudited condensed consolidated financial statements and the accompanying notes included in this report. Due to the seasonality of our operating results, quarterly financial results are not necessarily indicative of the results that may be achieved for the full year or any other future period.

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

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

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Consolidated Results of Operations

The following table highlights summarized components of our unaudited condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023. See Part I.—Item 1. Financial Statements for additional details of our U.S. GAAP results.


	March 31, 2024		March 31, 2023		% change
	(In millions, except percentages and per share data)
Net sales	$	2,596.4	$	2,346.3	10.7	%
Cost of goods sold	(1,632.9)		(1,575.6)		3.6	%
Gross profit	963.5		770.7		25.0	%
Marketing, general and administrative expenses	(654.6)		(615.0)		6.4	%

Other operating income (expense), net	6.3		(0.5)		N/M
Equity income (loss)	(0.9)		3.0		N/M
Operating income (loss)	314.3		158.2		98.7	%
Total non-operating income (expense), net	(48.9)		(56.3)		(13.1)	%
Income (loss) before income taxes	265.4		101.9		160.5	%
Income tax benefit (expense)	(55.5)		(28.7)		93.4	%
Net income (loss)	209.9		73.2		186.7	%
Net (income) loss attributable to noncontrolling interests	(2.1)		(0.7)		200.0	%
Net income (loss) attributable to MCBC	$	207.8	$	72.5	186.6	%
Net income (loss) attributable to MCBC per diluted share	$	0.97	$	0.33	193.9	%

Financial volume in hectoliters	17.974		17.006		5.7	%

Cost of goods sold

We utilize cost of goods sold per hectoliter, as well as the year over year changes in this metric, as a key metric for analyzing our results. This metric is calculated as cost of goods sold per our unaudited condensed consolidated statements of operations divided by financial volume for the respective period. We believe this metric is important and useful for investors and management because it provides an indication of the trends of sales mix and other cost impacts on our cost of goods sold.

Cost of goods sold increased 3.6% for the three months ended March 31, 2024, compared to prior year, primarily due to higher financial volumes and unfavorable foreign currency impacts, partially offset by lower cost of goods sold per hectoliter. Cost of goods sold per hectoliter improved 1.9% for the three months ended March 31, 2024 compared to prior year, including unfavorable foreign currency impacts of 0.6%, primarily due to the favorable changes in our unrealized mark-to-market derivative positions of $52.6 million, the benefits of cost savings and volume leverage, partially offset by cost inflation related to materials and manufacturing expenses and unfavorable mix driven by lower contract brewing volumes in the Americas segment.

Marketing, general and administrative expenses

MG&A expenses increased 6.4% for the three months ended March 31, 2024 compared to prior year, primarily due to increased marketing investment to support our brands and innovations and unfavorable foreign currency impacts.

Other operating income (expense), net

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

Total non-operating income (expense), net

Total non-operating expense, net improved 13.1% for the three months ended March 31, 2024, compared to prior year, primarily due to lower net interest expense of 18.1% as a result of higher interest income from higher cash balances and higher interest rates as well as our continued deleveraging actions and higher pension and OPEB non-service net benefit, partially offset by unfavorable transactional foreign currency impacts.

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Income taxes benefit (expense)


	March 31, 2024		March 31, 2023
Effective tax rate	21	%	28	%

The lower effective tax rate for the three months ended March 31, 2024 compared to the same period in the prior year was primarily due to a decrease in net discrete tax expense. We recognized a $5.7 million discrete tax benefit in the three months ended March 31, 2024 compared to $7.5 million discrete tax expense in the three months ended March 31, 2023.

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

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

Segment Results of Operations

Americas Segment


	March 31, 2024		March 31, 2023		% change
	(In millions, except percentages)
Net sales(1)	$	2,145.4	$	1,939.0	10.6	%
Income (loss) before income taxes	$	320.6	$	233.4	37.4	%

Financial volume in hectoliters(1)(2)	13.910		12.936		7.5	%

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Income (loss) before income taxes

Income before income taxes improved 37.4% for the three months ended March 31, 2024 compared to prior year, primarily due to higher financial volumes, increased net pricing, favorable sales mix and cost savings initiatives, partially offset by cost inflation related to materials and manufacturing expenses, as well as higher MG&A expense. Higher MG&A spend was primarily due to increased marketing investment to support our brands and innovations.

EMEA&APAC Segment


	March 31, 2024		March 31, 2023		% change
	(In millions, except percentages)
Net sales(1)	$	454.7	$	410.1	10.9	%
Income (loss) before income taxes	$	(11.0)	$	(25.4)	(56.7)	%

Financial volume in hectoliters(1)(2)	4.064		4.071		(0.2)	%

%Income (loss) before income taxes

Loss before income taxes improved $14.4 million or 56.7% for the three months ended March 31, 2024, compared to the prior year, primarily due to increased net pricing to customers and favorable sales mix, partially offset by higher MG&A expense. Higher MG&A spend was primarily due to increased marketing to support our brands and innovations as well as cost inflation and unfavorable foreign currency impacts.

Unallocated Segment

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

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	March 31, 2024		March 31, 2023		% change
	(In millions, except percentages)
Cost of goods sold	$	0.5	$	(50.7)	N/M
Gross profit	0.5		(50.7)		N/M
Operating income (loss)	0.5		(50.7)		N/M
Total non-operating income (expense), net	(44.7)		(55.4)		(19.3)	%
Income (loss) before income taxes	$	(44.2)	$	(106.1)	(58.3)	%

N/M = Not meaningful

Cost of goods sold

The unrealized changes in fair value on our commodity derivatives, which are economic hedges, make up substantially all of the activity presented within cost of goods sold in the table above for the three months ended March 31, 2024 and March 31, 2023. As the exposure we are managing is realized, we reclassify the gain or loss on our commodity derivatives to the segment in which the underlying exposure resides, allowing our segments to realize the economic effects of the derivative without the resulting unrealized mark-to-market volatility. See Part I.—Item 1. Financial Statements, Note 8, "Derivative Instruments and Hedging Activities" for further information.

Total non-operating income (expense), net

Total non-operating expense, net improved 19.3% for the three months ended March 31, 2024, compared to prior year, primarily due to lower net interest expense of 17.8% as a result of higher interest income from higher cash balances and higher interest rates as well as our continued deleveraging actions and higher pension and OPEB non-service net benefit, partially offset by the unfavorable impact of transactional foreign currency impacts.

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

Liquidity and Capital Resources

Liquidity

Overview

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

While a significant portion of our cash flows from operating activities are generated within the U.S., our cash balances include cash held outside the U.S. and in currencies other than the USD. As of March 31, 2024, approximately 54% of our cash and cash equivalents were located outside the U.S., largely denominated in foreign currencies. Fluctuations in foreign currency exchange rates have had and may continue to have a material impact on these foreign cash balances. Cash balances in foreign countries are often subject to additional restrictions. We may, therefore, have difficulties timely repatriating cash held outside the U.S., and such repatriation may be subject to tax. These limitations may affect our ability to fully utilize our cash resources for needs in the U.S. and other countries and may adversely affect our liquidity. To the extent necessary, we accrue for tax consequences on the earnings of our foreign subsidiaries as they are earned. We may utilize tax planning and financing strategies in an effort to ensure that our worldwide cash is available in the locations in which it is needed. We periodically review and evaluate these plans and strategies, including externally committed and non-committed credit agreements accessible by our Company and each of our operating subsidiaries. We believe these financing arrangements, along with the cash generated from the operations of our U.S. business, are sufficient to fund our current cash needs in the U.S.

Cash Flows and Use of Cash

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

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Cash Flows from Operating Activities

Net cash provided by operating activities of $25.4 million for the three months ended March 31, 2024 increased $22.0 million compared to $3.4 million for the three months ended March 31, 2023. The increase in net cash provided by operating activities was primarily due to higher net income and lower interest paid, partially offset by the unfavorable timing of working capital. The unfavorable timing of working capital was primarily driven by the timing of cash receipts on trade receivables as well as higher payments for prior year annual incentive compensation.

Cash Flows from Investing Activities

Net cash used in investing activities of $212.5 million for the three months ended March 31, 2024 increased $35.1 million compared to $177.4 million for the three months ended March 31, 2023. The increase in net cash used in investing activities was primarily due to higher capital expenditures driven by the timing of capital projects.

Cash Flows from Financing Activities

Net cash used in financing activities of $216.2 million for the three months ended March 31, 2024 increased $113.7 million compared to $102.5 million for the three months ended March 31, 2023. The increase in net cash used in financing activities was primarily due to higher Class B common stock share repurchases and higher dividend payments.

Capital Resources, including Material Cash Requirements

Cash and Cash Equivalents

As of March 31, 2024, we had total cash and cash equivalents of $458.4 million, compared to $868.9 million as of December 31, 2023 and $328.2 million as of March 31, 2023. The decrease in cash and cash equivalents from December 31, 2023 was primarily due to capital expenditures, Class B common stock share repurchases and dividends paid, partially offset by the net proceeds from operating activities. The increase in cash and cash equivalents from March 31, 2023 was primarily due to the net cash provided by operating activities, partially offset by capital expenditures, net debt repayments, including the repayment of our CAD 500 million 2.84% notes which matured in July 2023, dividend payments, Class B common stock share repurchases as well as cash paid for acquisitions.

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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 draw on our amended and restated revolving credit facility if the need arises. As of March 31, 2024, we had $2.0 billion available to draw on our $2.0 billion amended and restated revolving credit facility. As of March 31, 2024, we had no borrowings drawn on this amended and restated revolving credit facility and no commercial paper borrowings.

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

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

The maximum net debt to EBITDA leverage ratio, as defined by the amended and restated revolving credit facility agreement, was 4.00x as of March 31, 2024 and December 31, 2023. As of March 31, 2024 and December 31, 2023, 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 March 31, 2024 rank pari-passu.

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

Guarantees

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

Material Cash Requirements from Contractual and Other Obligations

There were no material changes to our material cash requirements from contractual and other obligations outside the ordinary course of business or due to factors similar in nature to inflation, changing prices on operations or changes in the remaining terms of the contracts since December 31, 2023, as reported in Part II.— Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, "Material Cash Requirements from Contractual and Other Obligations" in our Annual Report.

Credit Rating

Our current long-term credit ratings are BBB/Stable Outlook, Baa2/Positive Outlook and BBB/Stable Outlook with Standard & Poor's, Moody's and DBRS, respectively. Our short-term credit ratings are A-2, Prime-2 and R-2, respectively. A securities rating is not a recommendation to buy, sell or hold securities, and it may be revised or withdrawn at any time by the applicable rating agency.

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Guarantor Information

SEC Registered Securities

For purposes of this disclosure, including the tables, "Parent Issuer" shall mean MCBC in its capacity as the issuer of the senior notes under the May 2012 Indenture and the July 2016 Indenture. "Subsidiary Guarantors" shall mean certain Canadian and U.S. subsidiaries reflecting the substantial operations of our Americas segment.

Pursuant to the indenture dated May 3, 2012 (as amended, the "May 2012 Indenture"), MCBC issued its outstanding 5.0% senior notes due 2042. Additionally, pursuant to the indenture dated July 7, 2016 ("July 2016 Indenture"), MCBC issued its outstanding 3.0% senior notes due 2026, 4.2% senior notes due 2046 and 1.25% senior notes due 2024. The issuances of the senior notes issued under the May 2012 Indenture and the July 2016 Indenture were registered under the Securities Act of 1933, as amended. These senior notes are guaranteed on a senior unsecured basis by certain subsidiaries of MCBC, which are listed in Exhibit 22 of this Quarterly Report on Form 10-Q (the Subsidiary Guarantors, and together with the Parent Issuer, the "Obligor Group"). Each of the Subsidiary Guarantors is 100% owned by the Parent Issuer. The guarantees are full and unconditional and joint and several.

None of our other outstanding debt was issued in a transaction that was registered with the SEC, and such other outstanding debt is issued or otherwise generally guaranteed on a senior unsecured basis by the Obligor Group or other consolidated subsidiaries of MCBC. These other guarantees are also full and unconditional and joint and several.

As of March 31, 2024, the senior notes and related guarantees rank pari-passu with all other unsubordinated debt of the Obligor Group and senior to all future subordinated debt of the Obligor Group. The guarantees can be released upon the sale or transfer of a Subsidiary Guarantors' capital stock or substantially all of its assets, or if such Subsidiary Guarantor ceases to be a guarantor under our other outstanding debt.

See Part I.—Item 1. Financial Statements, Note 7, "Debt" for details of all debt issued and outstanding as of March 31, 2024.

The following summarized financial information relates to the Obligor Group as of March 31, 2024 on a combined basis, after elimination of intercompany transactions and balances between the Obligor Group, and excluding the investments in and equity in the earnings of any non-guarantor subsidiaries. The balances and transactions with non-guarantor subsidiaries have been separately presented.

Summarized Financial Information of Obligor Group


	Three Months Ended
	March 31, 2024
	(in millions)
Net sales, out of which:	$	2,107.8
Intercompany sales to non-guarantor subsidiaries	$	24.3
Gross profit, out of which:	$	803.3
Intercompany net costs from non-guarantor subsidiaries	$	(103.2)

Net interest expense, out of which:	$	(35.5)
Intercompany net interest income from non-guarantor subsidiaries	$	13.0

Income before income taxes	$	278.2
Net income	$	215.0

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	As of March 31, 2024		As of December 31, 2023
	(in millions)
Total current assets, out of which:	$	1,798.2	$	1,814.3
Intercompany receivables from non-guarantor subsidiaries	$	262.7	$	255.7
Total noncurrent assets, out of which:	$	24,507.3	$	24,641.0
Noncurrent intercompany notes receivable from non-guarantor subsidiaries	$	4,094.3	$	4,178.6

Total current liabilities, out of which:	$	2,968.8	$	3,048.4
Current portion of long-term debt and short-term borrowings	$	867.3	$	885.6
Intercompany payables due to non-guarantor subsidiaries	$	148.2	$	117.7
Total noncurrent liabilities, out of which:	$	8,106.4	$	8,094.7
Long-term debt	$	5,257.7	$	5,257.6

Capital Expenditures

We incurred $143.9 million, and paid $214.7 million, for capital improvement projects worldwide in the three months ended March 31, 2024, excluding capital spending by equity method joint ventures, representing a decrease of $5.1 million from the $149.0 million of capital expenditures incurred in the three months ended March 31, 2023. We continue to focus on where and how we employ our planned capital expenditures, with an emphasis on strengthening our focus on required returns on invested capital as we determine how to best allocate cash within the business.

Contingencies

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

Off-Balance Sheet Arrangements

Refer to Part II.—Item 8. Financial Statements, Note 13, "Commitments and Contingencies" in our Annual Report for discussion of off-balance sheet arrangements. As of March 31, 2024, we did not have any other material off-balance sheet arrangements.

Critical Accounting Estimates

Our accounting policies and accounting estimates critical to our financial condition and results of operations are set forth in our Annual Report and did not change during the three months ended March 31, 2024. See Part I.—Item 1. Financial Statements, Note 2, "New Accounting Pronouncements" for discussion of recently adopted accounting pronouncements. See also Part I.—Item 1. Financial Statements, Note 5, "Goodwill and Intangible Assets" for discussion of the results of our 2023 annual impairment testing analysis, the related risks to our indefinite-lived intangible brand assets and the goodwill amounts associated with our reporting units.

New Accounting Pronouncements Not Yet Adopted

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Part II.—Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report for further details of our market risks and our market sensitive instruments as of December 31, 2023. During the three months ended March 31, 2024, our market risk sensitive instruments fluctuated as a result of changes in interest rates, currency exchange rates and commodity prices.

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Interest Rate Risk

For the periods ended March 31, 2024, and December 31, 2023, the following table presents our fixed rate debt and forward starting interest rate swaps as well as the impact of an absolute 1% adverse change in interest rates on their respective fair values. Notional amounts and fair values are presented in USD based on the applicable exchange rates as of March 31, 2024 and December 31, 2023, respectively. See Part I - Item 1. Financial Statements, Note 7. "Debt" for the maturity dates of our outstanding debt instruments.


	Notional amounts				Fair Value Asset/(Liability)				Effect of 1% Adverse Change
(in millions)	As of March 31, 2024		As of December 31, 2023		As of March 31, 2024		As of December 31, 2023		As of March 31, 2024		As of December 31, 2023
USD denominated fixed rate notes	$	4,900.0	$	4,900.0	$	(4,484.4)	$	(4,608.2)	$	(388.0)	$	(414.4)
Foreign currency denominated fixed rate notes	$	1,232.5	$	1,260.7	$	(1,224.8)	$	(1,248.6)	$	(10.3)	$	(13.5)
Forward starting interest rate swaps	$	1,000.0	$	1,000.0	$	62.6	$	41.6	$	(75.4)	$	(78.9)

Foreign Exchange Risk

The following table includes details of our foreign currency denominated fixed rate debt and our foreign currency forwards used to hedge our foreign exchange rate risk as well as the impact of a hypothetical 10% adverse change in the related foreign currency exchange rates on their respective fair values. Notional amounts and fair values are presented in USD based on the applicable exchange rates as of March 31, 2024 and December 31, 2023.


	Notional amounts				Fair Value Asset/(Liability)				Effect of 10% Adverse Change
(in millions)	As of March 31, 2024		As of December 31, 2023		As of March 31, 2024		As of December 31, 2023		As of March 31, 2024		As of December 31, 2023
Foreign currency denominated fixed rate notes	$	1,232.5	$	1,260.7	$	(1,224.8)	$	(1,248.6)	$	(119.9)	$	(124.8)
Foreign currency forwards	$	233.7	$	219.4	$	2.4	$	(1.4)	$	(24.6)	$	(23.6)

SIGNATURE

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



			MOLSON COORS BEVERAGE COMPANY
			By:						/s/ ROXANNE M. STELTER
									Roxanne M. Stelter Vice President and Controller (Principal Accounting Officer) April 30, 2024

MOLSON COORS BEVERAGE CO - Quarter Report: 2024 March (Form 10-Q)

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