Dave Dunnewald - IR Mark Hunter - President and CEO Gavin Hattersley - CFO Molson Coors & CEO of Miller Coors Stewart Glendinning - CEO Canada Simon Cox - CEO Europe Kandy Anand - International CEO.

Vivien Azer - Cowen and Company Ian Shackleton - Nomura Judy Hong - Goldman Sachs John Faucher - JP Morgan Bryan Spillane - Bank of America Mark Swartzberg - Stifel Nicolas Rob Ottenstein - Evercore Brett Cooper - Consumer Edge Research Pablo Zuanic - SIG Andrew Holland - Societe Generale.

Good morning and welcome to the Molson Coors Brewing Company's Third Quarter 2015 Earnings Conference Call. Now, I will turn the call over to Dave Dunnewald, Global Vice President of Investor Relations for Molson Coors..

Thank you, Liam and good morning to everyone on our earnings conference call today. Before we begin, I want to paraphrase the company's Safe Harbor language. Some of our discussions today may include forward-looking statements.

Actual results could differ materially from what we project today, so please refer to our most recent 10-K and 10-Q filings for a more complete description of factors that could affect these projections. Our company does not undertake to publicly update forward-looking statements whether as a result of new information, future events or otherwise.

You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Regarding any non-U.S.

GAAP measures that may be discussed during the call today and from time-to-time by the company's executives in discussing our company's performance, please visit the company's Web site, www.molsoncoors.com, and click on the Financial Reporting tab of the Investor Relations page for a reconciliation of these measures to the nearest U.S. GAAP results.

Also, unless otherwise indicated, all financial results the company discusses are versus the comparable prior year period and in U.S. dollars.

As you know Anheuser-Busch InBev announced yesterday, a further extension of it possible offer for all of the outstanding share capital of SABMiller and there has been some related press speculation that mentions Molson Coors.

As a matter of policy Molson Coors does not comment on market rumors and we will not be discussing AB InBev SABMiller situation on our call this morning, including during the Q&A session at the end. We will devote our time this morning to our third quarter financial results, then outlook for the balance of 2015.

Now I would like to turn the call over to Mark Hunter, President and CEO of Molson Coors..

Thanks, Dave. Hello and welcome, everybody, to the Molson Coors earnings call. And we really appreciate you joining us today.

With me on the call this morning, I have Gavin Hattersley, the CFO of Molson Coors and the CEO of Miller Coors, Stewart Glendinning, our Canada CEO, Simon Cox, our CEO of European; Kandy Anand, our International CEO; Sam Walker, our Chief Legal and People Officer; Brian Tabolt, our Controller; and obviously Dave Dunnewald, you just heard from our VP of Investor Relations.

In the third quarter our worldwide volume increased 0.7% driven by strong growth in Europe and International. Underlying earnings were lower due to unfavorable foreign currency, increased brand investments and the termination of our Miller brands agreement in Canada and the Modelo brands in Heineken brewing contracts in UK earlier this year.

We increased gross margins and consolidated business bases driven by the U.S. and Europe. We invested more in our brands in all over businesses except international, where lower marketing was primarily due to the substantial restructuring of our China business this year.

In the quarter we continue to transform our portfolio toward above-premium, craft and cider. We expanded the depth and reach of our international brands in fast-growing markets and we increased our commercial capability. We also continued to drive meaningful cash generation and disciplined cash and capital allocation. More specifically, in the U.S.

Miller Coors achieved its best quarterly performance in premium lights in three years as well Coors Light and Miller Light built momentum and grew share of the segment. We continue to roll out Coors Light's new visual identity and Miller Light launched this tiny bottle and grew quarterly volume for the second time in the past year. Outside of the U.S.

and Canada Coors Light grew strongly, and we'll soon launch our largest global brand into the highly profitable Columbian market.

Miller Coors is the ninth acquisition of the majority interest in the Saint Archer Brewing Company, a San Diego based brewer of award winning craft sales and this acquisition will further strengthen our global craft portfolio which grew nearly 10% in the third quarter.

The integration of the Rekorderlig cider business into our UK and Ireland portfolio has gone well and our global cider portfolio grew a low single digit rate in the quarter.

We continue to restructure our business to ensure we're fit for the future, including the restructuring of our China business the planned closure of the Miller Coors Eden brewery next year following the closure of our Alton UK brewery in May of this year.

And importantly we've reached an agreement to sell our Vancouver brewery which will allow us to build a more efficient and flexible brewery in British Columbia.

Other third quarter performance headlines are as follows, worldwide volume increased 0.7% driven by Europe and International and despite the impact of the termination of the Miller brands agreement in Canada and the Modelo brands contract in the UK. Coors Light volume grew 1% globally driven by nearly 20% volume growth outside of the U.S. and Canada.

Our net sales per hectoliter decreased 2.3% in constant currency, driven by mix changes within our Europe and International businesses, including the impact of terminating the Modelo brands and Heineken contract-brewing agreements in the UK. And we grew net pricing in the U.S., Canada and Europe in local currency.

Constant currency net sales increased 0.7% due to higher volume in Europe and International along with the positive net pricing in Canada and Europe. By adding an effect of foreign currency, reported net sales declined 12.9%.

Underlying pre-tax income of $295.4 million was down 10.9% but decreased 1.7% on a constant currency basis, with the key drivers being increased brand investment and the well documented contract terminations. Underlying after-tax income decreased 4.3% driven by unfavorable foreign currency, higher brand investments and terminated contracts.

And these factors were partially offset by higher volume positive net pricing a lower tax rate and the results of the cost savings initiatives. U.S. GAAP net income from continuing operations increased $49.4 million from year ago due to lower brand impairment charges this year in Europe.

We incurred impairment charges of 275 million this quarter related to some of our Europe brands including the Allen brand because of continued economic and competitive challenges and increased discount rates across the region we have also changed the accounting treatment of these brands from investment lives to definite lives which we expect to increase amortization expense by approximately $50 million per year based on current foreign exchange rates.

Underlying EBITDA in the quarter was $420.2 million, a 10.4% decrease from a year ago, driven almost entirely by unfavorable foreign currency investments. Year-to-date underlying EBITDA was $1.104 billion than 7.7% from a year ago.

We also continued to implement our four year 1 billion stock buyback program with $50 million of cash used in the third quarter to repurchase more than 689,000 flat e-common shares from July through early October.

Please note that in August we committed another $50 million of cash to be used for stock repurchases during the fourth quarter under accelerated share repurchase program. In terms of regional highlights U.S.

underlying pretax income decreased 7.5% due to lower volume including a reduction in distributor inventories versus the year ago and continued softness in our economy portfolio along with higher investments and brands and technology as discussed on our last earnings call.

These factors were partially offset by positive net pricing and mix supply chain cost savings and lower brewing, packaging, material and fuel costs. One significant news item from Molson Coors was the appointment of Gavin our CEO in September. Gavin has quickly taken actions across a number of areas to energized and focus the entire organization.

Coors Light and Molson Light both grew shares of segment and improved volume trends in the third quarter versus the first half of this year. And meanwhile Miller Light and Coors Banquet grew volume and overall market share. The U.S.

portfolio of transformation towards the above premium segment continues with lead brands Blue Moon, Belgian White, Leinenkugel and The Redd’s Family each growing the volume. Through Tenth and Blake, the leading craft grow in the U.S.

Miller Coors expanded its growing craft portfolio with the acquisition of Saint Archer Brewing which was completed in October. We are excited about the growth opportunity offered by this Saint Archer brands which represent a variety of sales that complimentary to the current Tenth and Blake portfolio. Including some outstanding Shandy [ph] ales.

The U.S. team also announced the plan closure of its Eden, North Carolina, brewery. In Canada underlying pretax income decreased 5.4% in constant currency primarily due to the negative impact of terminating a Miller brands agreement at the end of March of this year.

The fact of lowered volume in the quarter was partially offset by positive pricing and substantial cost savings including the impact of unfavorable foreign currency underlying earnings declined by 18.9%. Canada sales to retail our STRs decline 4.9% primarily due to the termination of the Miller contract.

Excluding the Miller brand our STRs decline by 0.5% of 1%. In Coors brands Coors Light and Molson Canadian volumes declined in the quarter. But trends improved versus the second quarter as we rolled out the advertising and commercial executions for Coors Light.

And about premium Coors Banquet delivered strong volume and share growth in the third quarter as did Mad Jack Apple Lager, Molson Canadian Cider and Strongbow Cider along with our Granville Island and Creemore craft brands.

In Europe, underling pretax income increased 7.1% in constant currency driven by higher sales volume positive pricing and lower costs. Despite the loss of the Modelo and Heineken contracts in the UK this year and the release of our regulatory reserve last year.

Europe underlying pretax income decreased 6.7% in the quarter due to the impact of unfavorable foreign currency. Sales volume increased in 9 of 11 countries and for 8 of our 11 lead brands in the region. Excluding the loss of the Modelo brands the UK market would also have increased volume in the quarter.

Equally encouraging areas of Croatia, Bosnia and Serbia that were affected by severe flooding a year ago continued to recover. In Coors brands Carling trends improved, primarily on the year and on Staropramen Bergenbier grew volume and segment share in their core markets.

Our craft and above premiums portfolio continued to perform well with Coors Light, Doom Bar and Cobra [ph] all achieving strong growth in the quarter as did above premium Staropramen outside of Czech Republic.

Our international business again delivered double digit volume growth in the third quarter driven by triple digit volume growth in India and double digit growth for Coors Light in Latin America. India’s growth was due to strong performance of our existing India business and our acquisition of Mount Shivalik Breweries earlier this year.

Due to higher volume in India and Latin America along with lower MG&A we ended the quarter with a $600,000 improvement and international's underlying pre-tax loss versus a year ago, or a $1.8 million improvement excluding the impact of foreign currency movements.

Now, I'll turn over to Gavin to give additional third quarter financial highlights and perspective on the rest of 2015, Gavin..

Thanks, Mark and hello, everybody. Underlying free cash flow for the first three quarters of 2015 totaled $476.8 million which represent a $289.3 million decrease versus the same period last year.

This decrease was primarily driven by lower underlying after-tax income, negative foreign currency and less benefit from working capital changes, including higher cash paid for taxes.

Our year-to-date free cash flow included the following factors, $461.5 million of operating cash flow and $279.9 million of net add-backs for our discretionary UK pension contribution in January. Settlements of interest swaps the cash impact of special items and Miller Coors investments in businesses.

Investing cash outflows included $208.3 million of capital spending. Our underlying free cash flow included $1.088 billion of cash distributions from Miller Coors and $1.145 billion of cash invested in Miller Coors. A detailed reconciliation of our underlying free cash flow is available in our earnings release distributed this morning.

Total debt at the end of the third quarter was $3.002 billion and cash and cash equivalents totaled $393.6 million, resulting in net debt of $2.609 billion, which is lower than a year ago, primarily driven by foreign currency movements and debt pay down.

Please see the earnings release we distributed earlier this morning for a detailed review of our business unit financial results in the quarter. Looking forward to the balance of 2015, the following full year forward guidance is unchanged from the last quarter.

Although we’re not changing our 2015 underlying free cash flow target of $550 million plus or minus 10%. We currently expect our results for the year to be in the upper half of this range and that is between $550 million and $605 million. And we expect our 2015 MG&A expense in Corporate to be approximately $110 million.

We are revising the following full year guidance. First we now expect capital spending to be approximately $275 million down from $300 million previously largely driven by foreign currency movements.

Second we expect our consolidated net interest expense to be approximately $110 million versus $120 million previously driven by favorable foreign currency and interest rates.

Third, we now expect cash contributions to our defined benefit pension plans to be approximately $300 million in 2015, including our 42% of Miller Coors contributions at today's exchange rates. This was revised from the previous guidance of $300 million to $320 million primarily due to foreign currency movements.

Fourth, we now anticipate 2015 pension expense of approximately $23 million, including our portion of Miller Coors. And fifth, we now anticipate that our full year 2015 underlying effective tax rate will be in the range of 14% to 16% down from 18% to 22% previously due to the favorable resolution of uncertain tax positions and other tax benefits.

After this year, we still expect our underlying tax rate to be near the low end of our long-term range of 20% to 24% for the next few years, assuming no further changes in tax laws, settlement of tax audits or adjustments to our uncertain tax positions.

In 2015 cost outlook, we now expect our full year cost savings to be near the upper end of the $40 million to $60 million range that we've been targeting.

By region we continue to expect Europe cost of goods sold per hectoliter to decrease to the low single digit rate this year in local currency and International business cost of goods sold to decrease at a low double digit rate per hectoliter.

We now expect Canada cost of goods sold per hectoliter in local currency to increase at a low single digit rate down from the annual guidance of mid-single digit last quarter, driven by lower brewery and distribution costs.

And Miller Coors now expects 2015 cost of goods sold per hectoliter to be approximately in line with or slightly below the year before. This is previous guidance of in line. This change is driven by lower packaging commodity and fuel costs.

And finally regarding the profit and cash headwind from foreign currency that we expect this year, if we apply foreign exchange rates at the end of October to our results for the fourth quarter of 2014, it would reduce underlying pretax earnings for that period by approximately $10 million and the impact on cash would have been even larger.

By adding the foreign exchange impact on pretax results for the first three quarters of this year, we arrive at a full-year foreign currency impact of nearly $70 million versus our 2014 consolidated pretax results. At this point, I'll turn it back over to Mark for outlook, wrap up and the Q&A.

Mark?.

Thanks, Gavin. In addition to the foreign currency headwind that Gavin just mentioned our results in the fourth quarter of this year will continue to be affected by determination of major business contract which we anticipate will have a full year 2015 profit impact of $40 million pretax.

Additionally, we plan to significantly step up our portfolio investments in the balance of this year particularly in the U.S. and Canada.

These investments will have a negative impact in the fourth quarter bottom line results, but we expect them to provide benefits long term as we focused on delighting our consumer and our customers to ensure we are the first choice brewer in the geographies and segments where we choose to play. Regionally in the U.S.

we are driving three key priorities. Job number one is to transform our portfolio and reignite volume growth we are targeting getting our volume trends to flat in 2018 and growth in 2019 for the first time since Miller Coors was formed, and to that we have three focus areas.

Firstly, taking share and growing our American Light Lagers Coors Light and Miller Light. As part of the Coors Light overhaul [Audio Gap].

Secondly, continue to the premimize portfolio and further developed [Audio Gap], examples include the successful launches of Blue Moon White IPA and Leinenkugel Grapefruit Shandy this year as well as the acquisition of some [Indiscernible] excellent craft brand and suddenly we've began the process of simplifying un-clarifying our below premium portfolio offering.

Job number two is to improve our commercial capability including winning in non-premise and increasing the relevance of our brands in this critical channel, where brands are built, and job number three is to ensure that our cost base is competitive and fits for the future including closing our Eden brewery next year.

Consistent with our priorities we intend to invest significantly in our brands and information technology in the fourth quarter including beginning of fuse of enterprise system ramp up starting of this Shanondor brewery. We continuously expect our U.S. underline operating margins for full year 2015 to be relatively flat versus prior year.

We would be disciplined, decisive and accountable and remain laser focused on growing our business in the United States from transforming then Miller Coors portfolio. In Canada we continue to invest in our core brands and above premiums including craft, imports and flavored malt beverages.

In core brands in the advertising campaign and increased focus on commercial execution on Coors Light are showing early positive signs particularly in our highest share regions. Initial consumer response to our latest advertising created for Molson Canadian has been also been positive.

In the fourth quarter we are again investing aggressively in these programs. And above premium our portfolio is benefiting from the strong performance of Coors Banquet Mad Jack Apple lager, Rickard’s Radler and Molson Canadian Cider brands along with Dos Equis, Tecate, Sol and Strongbow.

Belgian Moon is also performing well after three months in the Canada market. In Europe determinate Modelo and Heineken contracts Miller Coors continues to present a headwind in the fourth quarter as well in the amortization expense for the brands we impaired this quarter and moved to definite life.

In some Europe markets we continue to see consumer migrations to all new brands and increased competitive pricing. We’ll continue to invest in a core brand portfolio across Europe to ensure that these brands remain relevant and contemporary for our consumers.

In the third quarter the majority of our lead brands grew volume including Ozujsko, Staropramen, Bergenbier and Borsodi. In the balance of this year our Europe theme will be ramping up for the full repay attrition of the Staropramen brand into the UK starting on January the 1st.

Additionally, we are implementing significant new initiatives to further improve the efficiency and efficiency of our European operations and provide more resources to invest in driving top line and bottom line growth.

As the most recent example we announce earlier this week that we have made a proposal and entered into consultation process in the UK to close our Burton South brewery and consolidate production with another recently modernize Burton North brewery by the end of September 2017.

Our international business is focused on attaining profitability in 2016 on a constant currency basis and accelerating our overall growth and expansion in new and existing markets.

We’ll continue to drive rapid growth for Coors Light develop Coors 1873 in Latin America, including introducing new brands to consumers in the high potential Columbia market.

We will also continue to build in Staropramen's momentum in greater Europe and rapid growth on our existing India business with the growth from our newly acquired Mount Shivalik Breweries operation. Finally, here are the most recent volume trends reached of our businesses early in fourth quarter. In U.S.

through October 31st STRs decreased at low single digit rate. In Canada through October 31st SPRs were down low double digits excluding the Miller brands last year our Canada SPRs decreased a high single digit rates. In Europe, October sales volume was down mid-single digits partially due to loss of the Modelo brands in the UK.

Our international sales volume including royalty volume increased at double digit rate in October. Now as always please keep in mind that these numbers represent only a portion of the current quarter and frames could change in the weeks ahead.

So to summarize our discussion today, in the third quarter, we grew our worldwide volume and constant currency net sales, increased our gross margins and invested significantly more in our brands. Underlying earnings, however, were lower due to unfavorable foreign currency and the termination of contracts this year.

There has been a great deal of news flow around the global beer category in recent weeks. Notwithstanding this, our organization remains focused on our strategy of driving brand-led profit growth, meaningful cash generation and disciplined cash and capital allocation.

We remain resolute on utilizing PACC as our key business-decision framework, using our cash to reward investors and ensure a healthy balance sheet, reducing costs to provide front-end firepower, and making smart investments to deliver value enhancing growth opportunities.

Our strategy is underpinned by highly engaged, passionate and inspired people with the ambition to be First Choice in the eyes of our consumers and customers. Now, before we start the Q&A portion of the call, just first the few personal comments about Gavin, as he transitions really to the CEO role within MillerCoors.

This is Gavin's 15th quarterly earnings call. And I think everybody has come to recognize this transparent and productive relationships with both our analysts and investor communities.

He's been an integral part of the Molson Coors strategy and progress over the last three years, and the good news is that Gavin will remain a member of our executive team here at Molson Coors. So, Gavin, from me, just a big personal thank you and best wishes as you become 100% focused on MillerCoors as CEO. You go with our best wishes, Gavin..

Thank you..

In order to help Gavin focus his full energy and attention on the MillerCoors business, I'm pleased to announce that our Europe CFO David Heede will be stepping into the global CFO role on an interim basis as we work to finalize the selection process for Gavin's successor here at Molson Coors.

David has more than 30 years of leadership experience in many areas of our company and he's played a central role in a very successful integration of our Central Europe and UK businesses. David will have a strong global finance team supporting him.

And I have every confidence that we'll not miss a beat in this critical area where we complete the global CFO search process. And then finally, as usual, our prepared remarks will be on our website for your reference within a couple of hours this afternoon.

Also, 1 pm Eastern Time today, Dave Dunnewald will host a follow-up conference call, which is an opportunity for you to ask additional questions regarding our quarterly results. This call will also be available for you to hear via the recorded webcast on our website. So, at this point, Leanne, we'd like to open it up for questions please. Thank you..

[Operator Instructions] Our first question comes from the line of Vivien Azer from Cowen and Company. Your line is now open..

My first question has to do with the price mix in Europe, I totally appreciate that the loss of Modelo is a drag there and you called out lower contract brewing volume and negative mix.

But I'm trying to kind of get a sense of what's happening kind of underneath that given your commentary on some intensified promotional activity and then a tougher competitive landscape. So, if you could just elaborate on price mix in Europe, that'd be helpful. Thank you..

I'll ask Simon to pick up on that.

So, Simon, do you want to just talk to a little bit more of the detail with regard to our Europe performance?.

Yes, sure. Thanks for the question Vivien. When you look at our price mix, pricing across Europe is at actually 0.3% positive across the region. And so all the drag on net sales to -- net sales revenue perhaps was to do with mix. And actually you more or less correctly called out the two main drivers of that during your commentary.

It is very much to do with the loss of Modelo brands in the UK and the fact that the contract manufacturing revenue is also put into our net sales revenue line but doesn’t actually attract any of the hectoliters because obviously it's not our own sales. And that has quite a significant impact on the overall NSR per hectoliter.

So, there isn't too much of the color to add. But we're actually very pleased with the way the brands are performing across, both the UK and the Central European region. And so it is really pricing marginally up and mix driven by Modelo and contract manufacturing is the drag..

And just a follow-up on -- is it fair to say that more muted price increases are reasonable to anticipate just given the broader macro environment in the EU?.

As you know, we don't give forward guidance on pricing. But historically if you look into our performance over the last three quarters, we've issued a sensible balance I think between volume and pricing.

We're orientating our portfolio much more towards maintaining strong positions in our core brands and ensuring that in pockets of value growth like cider, craft beer in the UK, premium brands, Staropramen growth in Czech Republic. These are all things that can support overall pricing growth and that's where we're orientating our portfolio.

So, that's been working well for us I think over the past three quarters. And that's where we're going to focus on..

Your next question comes from the line of Ian Shackleton from Nomura. Your line is open..

Obviously, Gavin set out some targets of volume growth for MillerCoors going forward.

I just wonder what assumptions around that were on pricing mix and whether we assume the lower number that you’ve been reporting today, I just have a 1% as sort of guideline, we should be expecting the future on the higher number that we've had into last couple of years?.

I let Gavin get into the detail, but obviously, the principal response is we don't give any guidance with regard to future pricing.

But Gavin, do you want to talk a little bit more about ambitions in terms of getting back to flat volume?.

We do want to be flat in 2018 and grow in 2019. We’ve got a very strategy and very clear plans to achieve that. It requires significant focus on our Premium Lights brands with Coors Light and Miller Lite and we are very pleased that we in the third quarter had the best performance in those two combined brands in over three years.

And it does require us to transform our portfolio more into the above-premium and get really specific about what we’re doing with our economy brands..

More broadly, I mean our medium-term guidance in terms of pricing hasn't been updated for our U.S. business. So, no color over that..

Just a quick follow-up, I mean you've gone through last couple of years surprises and quite a few this quarter on the tax rate on the positive side, i.e., so it was coming beneath what we’d expect and we’ve got another example of that today for the full year.

Could you just give us a little bit more granularity what is helping particularly in this quarter to bring down that rate?.

Look, I mean the one thing we can't predict is when we’re going to resolve uncertain tax positions. They are uncertain for a reason and obviously we can't predict when we resolve them. And we again resolved some uncertain tax positions in the third quarter. And having said, so the large change of the reduction to 14% to 16% is related to that.

And we haven't changed our longer term guidance of 20% to 24%. And in the shorter term, for example next year, we expect towards the lower end of that, that remains unchanged. If you want to get a feel for the level of uncertain tax positions that are still out there, formal SEC filings of the Qs would give you some guidance on that..

Your next question comes from the line of Judy Hong from Goldman Sachs. Your line is open..

So, just on Canada, Mark, I think I may have missed the October STR number excluding the Miller brand?.

Yes, it's a high single digit decline. .

Just any reason, why it was so low sequentially?.

Stewart, do you want to give a little bit of a flavor as to what you're seeing in Canada coming through the third quarter and any commentary around the start of the fourth quarter?.

Judy, overall the market was much healthier in the third quarter, benefiting from some warmer weather. Our portfolio was in a much better place. Going into the fourth quarter, nothing has changed in that portfolios, it's still robust, activity levels strong.

Really the only big item in the -- in October to point out is that there is one less trading day in October but other than that there is nothing materially that’s going on in the marketplace. .

So, maybe just a calendar issue, as opposed to….

The other think I would additional is, as per my prepared remarks, if you look at our STRs for the quarter, when you exclude the loss of the Miller brands, the volume is down about 0.5%. So on underlying basis, I would describe our volume performance as reasonably solid..

And then Stewart, just maybe if we can get an update on your brewery optimization plan in Canada. And we've heard a little bit during the quarter in terms of the Vancouver and I think potentially maybe an update on the Montreal side.

So, what are some of the updates that you can provide us with respect to the recent announcements and how you would plan to optimize and the margin impact that would have in 2016 and beyond?.

Okay, Judy but not a lot we can say obviously on margin since we don't give any forward guidance. But good news coming out of Vancouver for sure, that was an old brewery that was going to consume a bunch of capital and we have been able to lock-in contract for sale of the property.

Broadly the sale of that property will fund the construction of a new brewery. And when we move into that brewery, we should expect to see lower going forward CapEx and the lower operating costs on that brewery. In Montreal, we have a similar study underway to understand whether we should invest in the current brewery or to invest in new build.

And I won’t have the answer to that question until likely early next year. Overall, I think we've got a very strong plan for reshaping the supply chain in Canada. And of course that's one of the things that's driving the estimates of savings that the Gavin's provided to the Street..

Stewart, if I can just follow up, if I think about from a capacity standpoint in Canada, it seems like because you are building a new brewery in Vancouver, the capacity numbers really don’t change much in Canada despite some of the volume declines that we've seen in the last few years.

Can you just comment on why you wouldn’t necessarily take out more capacity and looking at the breweries in Canada?.

Look, I never actually spoke to the capacity to conclude whether we would take it up or take it down. What I will say is we are going to build the brewery to provide the best operating efficiencies for our company. And more importantly, what you get with a new brewery is the ability to drive a more flexible brewing.

If you look at what's going on in the market today, it's important to be able to provide a wide range of brew sizes to accommodate the smaller brew stuff. I think we’ll gain a lot of from that. But you can rest assured that rightsizing our capacity is a key part of our plan..

Your next question comes from the line of John Faucher from JP Morgan. Your line is open..

Question for Gavin. Gavin, you talked about -- when you talked about sort of the changes in the U.S. business, particularly on Coors Light with the focus I think on a new agency but sort of the same Rocky Mountain heritage.

So, is that a sign that the message isn’t the issue, it's been the delivery of the advertising or the amount of the advertising; is there some lesson learned there that we should glean from the fact that the campaign idea generally stays exactly where it is?.

I would say couple of things there. Obviously changing an agency not going to change the direction of the Coors Light brand. It’s the total package as it relates to Coors Light.

So, our new brand identity which we launched in the second quarter and which really got completely rolled out in the third quarter is part of that being extraordinarily well-received by both distributors, customers and retailers a lot.

And so we’re pleased with the performance in Coors Light which has been driven largely by that over the last couple of quarters. And as David said on this morning's call, Coors Light’s performance in the third quarter was the base that we've had for quite some time.

And our new above the line marketing campaign will be focused on Rocky Mountain Cold Refreshment. There will be a different way of expressing that than you have seen in the past. And thirdly, we are putting significantly more money behind Coors Light.

And we’ve put large -- meaningfully more behind Coors Light in the third quarter and we’re seeing the impact of that. So, I wouldn’t point to just any one thing but a total package of what we're doing on Coors Light, John..

John, its Mark here. The only thing I would add to that is if you look across the global footprint of Coors Light, Rocky Mountain Cold Refreshment isn’t up for debate. That's what the brand stands for that's its absolute bedrock. And we consistently dramatize that across all of the market that we execute the brand.

And clearly to Gavin's point, how we dramatize it in the U.S. is going to be evolved but that will still be very much of a bringing to Light Rocky Mountain Cold Refreshment in a way that's contemporary relevant and distinct. And David Kroll this morning spoke to the need for us actually to develop campaign ideas in the U.S.

that have got longevity so that we can get behind something and drive it over the medium to long-term as opposed to changing creative ideas on a annual or biannual basis. The Rocky Mountain Cold Refreshment is absolutely in the heart of what Coors Light stands for..

Your next question comes from the line of Philipp Gusinde from MUFG. [Ph] Your line is now open..

Good morning and thanks for taking my questions. Actually I had a two-part question, if I may. The first one is with regard to the accelerated share repurchase program.

Do you have any commitments beyond the $50 million that you talked about for the current quarter? And then the second question, trying to be very respectful of Dave's question, or request not to talk about any potential activity in the space, but if I may perhaps ask a more holistic question, just talking a bit about capital allocation as you have talked about in the past.

If you were to state a once in a lifetime opportunity, have been Molson and Coors family ever talked about then potentially contributing new equity if that's were to be required in order to maintain an investment grade rating?.

Let me try and do with both of those questions. On the first question on the share repurchase program, we’ve set out $1 billion repurchase program over four years but the majority of that towards the latter half of that program. We've confirmed what we've done in the third quarter and what's likely to happen in the fourth quarter.

On our next earnings call, we will update you with regard to progress on that program. So, there is no new news with regard to our share repurchase program. With regard to capital allocations, I don’t think this call is a time or place to get into discussions about what the preferences are of the Molson or the Coors family would be.

Under certain circumstances, the families have been long term investors in the beer industry, we are talking centuries here, not just quarters. And they've said that they’re very committed to the long-term vitality of our organization.

So, as opportunities come and go, we'll consider them appropriately with our board but those will be confidential board discussions..

Your next question comes from the line of Bryan Spillane from Bank of America. Your line is open..

Just two questions, one is, in Europe, I think in the press release, there is a mention of, there was a reserve that was released during the quarter.

Could you give us a sense of just how much of an impact that had on profit?.

Do you remember the specifics? They’re released last year. Simon or David do you have that….

We didn't give the specific number last year but we said that it was a factor in our results in third quarter of 2014, but no specific number’s been provided..

And then, I guess more broadly, just as we're thinking about free cash flow, this year we had a few items that negatively affected free cash flow.

I guess as we start thinking forward from here, is the Vancouver brewery -- I guess I understand that it's going to be net cash neutral once you sell the property and build but is there a period of time where that will potentially be a drag on free cash flow? And then also in terms of pensions, with interest rates still having not moved yet, or just a way the markets have behaved, is there anything that we should be thinking about in terms of pensions that might cause you to have to contribute more, again I guess next year?.

Gavin, do you want to take that?.

Sure. Look Bryan, we haven't given any guidance for 2016 and beyond on cash flow at this stage. I guess the only point that I would make is that if we did build a brewery, it would be out of multi years; you don't necessarily just build it in the one year. And I guess that's what our concern that particular point.

As far as pension contributions are concerned, I think our requirements under the UK Pension Plan which for Molson Coors remains a biggest pension cash contribution area, quite clearly laid out in our financial filings. So, you can have a look at those, there Bryan.

And as know, we made a one-off contribution this year, which impacts the contributions that we have to make in the IPOs. It's very clearly set on..

Gavin, just one other additional perspective. Bryan, if you look back at the changes we made our UK supply chain over the course of the last five years, I mean we've fundamentally transformed and modernized our manufacturing facilities in the UK.

And we've managed to that all within what you describe as a pretty normal capital envelope within our business. We expect to be able to do something similar in Canada looking at the cash that we secure from for example Vancouver brewery [indiscernible] under requirement to continue to modernize our brewery network in Canada.

So, I think our track record speaks to our ability to modernize our manufacturing facilities and do that in a way which is within a recognized capital envelope in the business..

One other think I'd like to just clarify there, Bryan. You said that the proceeds and the investments would offset each other but in terms of how that's disclosed in cash flow, for the proceeds from the sale of the Vancouver property would not be included in underlying free cash flow but capital investments would..

Your next question comes from the line of Mark Swartzberg from Stifel Nicolas. Your line is open..

A few questions on Canada, one just a technical one, the down high single digit comment at the Miller impact for October, what would that number be if we have it on an equal selling days basis?.

Yes, I agree with the question. Stewart, I'll be impressed if you know the answer to that, but Dave, do you want to…..

I do, it's somewhere around 5% Bryan. But yes -- so it's right around 5% is the technical answer..

Okay, down 5 for the month of October excluding the Miller impact on an apples-to-apples days basis..

Apples-to-apples, one less trading day equates to about 4.9 something but rounded to 5, if you want..

And then, total brewing capacity in Canada, have you disclosed what that figure is? Can you disclose what the total brewing capacity across the country is?.

To my knowledge, we haven't disclosed that. I think the more important thing is to recognize that as we reshape up the supply chain footprint for the country, of course you're going to be looking at what our needs are, what kind of brewing we're going to be undertaking and where best to brew it and capacity will be wrapped into that..

And then, I guess the last on Canada, all of you have this goal of improving above premium craft and cider performance. I think you've been very clear about how that looks here in the U.S. and there's some real progress there. I think there's progress there in Canada as well.

But could you talk a little bit about more about how well positioned you are presently for that and what the trends in that component of Canada look like?.

Mark, was that an MCBC question or Canada specific question? Sorry, you broke up a little bit just….

Yes, specific to Canada. I think we've good visibility on how you’re positioned here in the U.S.

but with Canada, I was wondering how you’re positioned and how the outlook against that objective is?.

I mean just in headline terms, Stewart and his team are really driving three big change initiatives across our Canadian business, partially transforming our supply chain and making sure that we really are fit for future, secondly ensuring our cost structure, again as competitive, and thirdly, we're working very hard on transforming the portfolio which includes driving further into above- premium and cider, craft et cetera.

So, Steward, do you want to just give a color on the progress that made over the last couple of years and the momentum is building in that particular part of the portfolio?.

Yes, certainly Mark. I mean all of the changes primarily that have taken place have been at the top end of the portfolio. We've been -- as you know, we have The Six Pints team here, which is our equivalent in Canada of Tenth and Blake.

That group with craft brands [ph] Granville, and Creemore have been driving those brands across the country, so craft portfolio growing rapidly. We also recently introduce Belgian Moon into a Canada, that reception’s been very warm with strongly encouraged by the rate of sale that we've seen in those where we’ve brought that brand into customers.

And then of course, the biggest launch of all, so far has been Coors Banquet which we brought in at a premium price position and that's better than one share of the market now. So, I would say those are the big ones.

On the apple side of course, we’ve got two very quick growing ciders which is the Strongbow and own Molson Canadian Cider and then this year, we launched Mad Jack, which is an apple flavored lager. So, all of those apple variants are performing strongly, all of them playing at the upper end of the market..

And when you think about your view of where the consumer’s going against those opportunities, is it right to think, tuck-ins and innovation and just good spending in plant against the brands that already exist there, that's how you think about executing further against that goal?.

I think that makes a lot of sense. So I will say, it's an important just to understand the dynamics across the broad market. There are consumer needs, at every segment of the market and to exclude one at the expense of the other doesn't make sense. Premiums are huge out of our business and so that remains an important focus in innovation as well..

Okay, great, thank you Stewart, thanks everyone. .

No, I'm sorry, Bryan, I meant to mention one part of the market also. As you know, this year we've also broaden the types [ph] of brands and Dos Equis and Sol had the nice portfolio and they're also growing well..

Your next question comes from the line of Rob Ottenstein from Evercore. Your line is open. .

I was wondering if you can talk a little bit about your plans and strategy for Coors Light outside of the U.S. and Canada and maybe perhaps start by giving a some sense of what percentage of Coors Light volumes are outside of U.S.

and Canada; how much they grew in the quarter and on average roughly how they’re positioned pricewise outside of North America, what percentage of mainstream price in place?.

So let me just give you a little bit contexts and I’ll ask Simon to talk about the Coors Light progress in the UK and Ireland and then Kandy to talk more broadly about our other international markets. We don't offer percentage of our volume, relating the proportion of Coors Light outside of North America but it's into millions of hectoliters.

So, I'll give you a sense of scale. And through the quarter, we grew at 20%, outside of the U.S. and Canada. So, it's a meaningful presence as growing very rapidly. So clearly within the UK and Ireland that brand has been there now for approximately a decade.

Simon, do you want to just give a flavor for the momentum you're seeing and Kandy can talk more broadly, outside of the UK and Ireland..

Yes, thank you for the question. And Coors Light has been performing as one of the strongest performing brands in the market for over three years and this quarter is no exception, we've seen double-digit growth of course like in the UK and Ireland this quarter.

And basically, it’s just a brand that continues to work extremely well for our consumers and on for our customers and for us. In terms of answering your question around pricing index, it tends to be priced above the mainstream.

So on the on-trade, if you walk into a typical English pub, you will see calling on the bars, mainstream price, and you will Coors Light generally at a 5% to 10% premium to that. That's a similar trend into UK off-trade although of course that's a little bit more volatile, based on what tends to be quite a discount driven off-trade market.

But generally, it comes under premium to mainstream pricing and in the UK and Ireland is continuing in really strong growth for us. So, very important brand in that portfolio and doing extremely well..

And in terms of India, can you give us a sense of what the organic volume growth was there?.

Rob, why doesn’t Kandy give you a flavor for what’s happening with Coors Light and talk specifically about the India performance.

Kandy?.

As you know Coors Light has been engine of growth for us for several quarters in the last couple of years. It continues to grow very strong double digits with a big focus on Latin America. It grows on the back of an earlier answer that Mark gave, on Rocky Mountain Cold Refreshment. We are very much focused on that positioning.

We think it relies for marketing programs, placements of coolers and working with our partners and sales execution. And we see that that growth continuing in the future.

We also spoke about our excitement about our launch in Colombia which actually happens next week and they are doing that in partnership with CCC which is a joint venture of CCU in Postobón and Colombia. So that’s on Coors Light overall. In the international business, we've also -- you asked about India.

On India, we’re very pleased with our progress this year. Our overall volumes have grown triple digit along with the acquisition. But just on that organic basis on the royalty [ph] acquisition our volumes are also growing double digit there.

So, at this point of time, we are still under three steps that we spoke about during the June conference and continue to drive our business through that..

Kandy, in terms of the Coors Light pricing in Latin America, is it also a 5% to 10% premium to mainstream or is it a higher premium there?.

Typically it's been a higher premium in those markets. We tend to have a pricing of on the average 20% above the mainstream. It of course varies by market, maybe a little bit less than one and more on the other but on the average we target 20ish pricing premium. .

[Operator Instructions] Our next question comes from the line of Brett Cooper with Consumer Edge Research. Your line is now open..

Hi, guys, a few questions. In the past, you've confirmed impairments in Europe were a function of specific brands. And then if you look at the portfolio in total, the appreciation in value of non-impacted brands offset the brands where impairments have been taken.

Can we get a similar confirmation today, given the impairments in the quarter?.

Sorry Brett, could you just -- there was a lot in that question. Could you just repeat that again, please, apologies..

Specifically, when you guys take impairments on the European brand, its brands specific and what you've done in the past it's that if you look at the value of Staropramen, it offsets the impairments you've taken. And since we have a new impairment today, I just wanted to make sure that that’s still the case.

That the sort of the total portfolio, if you will is better off in terms of intangibles than when you bought the business?.

That is correct. So, we've seen very strong performance as you pointed out, for example on Staropramen. So, that's correct yes..

Should have asked this morning but in the U.S. the business transformation expenses that you looked on 2016, those continued -- sorry, in the end of 2015 here.

Those continue as you go through the transformations through 2017; is that correct or should they abate for any reason?.

Yes. That's correct, Brett. We will continue to incur meaningful BT expenses in 2016 and also in 2017 although it’s slightly lesser..

And then finally, in Canada, is actually according to your cost savings that you guys are delivering at Molson Coors excluding your share of the MillerCoors piece are coming from Canada and you are beginning to see some traction on what you are doing at Coors Light.

Is there a need or desire to reinvest more of those savings to get the business back to share stability? Thanks..

Well. Brett, I think we laid that in the last quarter that our intention was to invest incrementally through the second half of this year. And I mentioned already on the call the economic engine of our businesses is the strength of our brands. So, we remain committed to invest to build our brand equity and our brand health.

We outweighed our investment in Canada through the third quarter and continue to plan to do the same in the fourth quarter, so very much in line with the guidance that we gave around the second half of this year. Building the strength of our brands in Canada is an absolute priority for us..

And our next question comes from the line of Pablo Zuanic from SIG. Your line is open..

Good morning everyone. In your prepared remarks, you said that you are planning on working on simplifying and clarifying your value brands. So three questions on that. One, can you elaborate on what do you mean by that? I think simplifying means SKU cuts but clarifying the message? So that's one.

Two as you define them, value brands would be percentage roughly of your volumes or revenues? And three, again roughly on Coors Light EBIT margin versus some of these value brands, roughly what the difference here at the gross margin level or EBIT margin that would be very helpful? Thank you..

Hi, Pablo. A lot of detail in that, Gavin, did you manage to get that....

I'll give a shot and if I miss anything, then somebody will correct me. From a simplification point of view, it does go to SKU simplification. We have a lot of brands in that segment and we have a lot of different packages. So simplifying that is a key focus area for us.

In terms of what brands are in there, brands such as Miller High Life which has been around for over a 100 years and it's very clearly differentiated. We have brands like Keystone in that area and then we have regional brands such as Hamm.

And so, making sure that we have a very clear positioning and message behind those brands is the work we're doing. The differentiation from a price point of view is it can be varied but if Coors Light and Miller Lite are in a 100, economy can be anywhere from anywhere from -- in our portfolio from 72% to 90% of that.

And then from an overall portfolio point of view which I think was your other question, it is around a quarter of our portfolio would be in the below premium segment. I think I’ve covered a little..

Yes, the only other thing that Pablo asked was about our margin comparisons that we incurred like in the rest of portfolio and that’s not information we go in the public domain other than the that….

Understood, but just a follow-up, thank you for that.

So in terms of target of reaching flat volumes, I think it was 2018 or 2019; how is this particular strategy supposed to play out? Is this a headwind or a tailwind in terms of volume growth? Because of you are guiding SKU simplifying that would mean potentially a reduction if you can clarify that please? Thanks..

So, I mean the [indiscernible] portfolio would definitely be a headwind for us in terms of achieving that that means we need to perform better on premiums and above-premiums, no question about that..

And our last question comes from the line of Andrew Holland from Societe Generale. Your line is open..

Just we haven't really talked so much about Europe. And I just wanted to try and distinguish between your performance in the UK and your performance in Central Europe. So, just first looking at price mix which you say was down in Europe.

Is that entirely attributable to the UK and the loss of Heineken and Modelo? And can you tell me if price mix was actually up across your Central European countries, is number one. And something similar for volume, you said was up in 9 out of 11.

I guess that one of two volumes were down would have been in the UK again because of the loss of Heineken and Modelo brands, can you confirm that that is the case and give us an idea of volume ex the UK?.

I’ll ask Simon to talk in a little bit more detail in a second. I did cover in my prepared remarks the fact that if you strip out the loss of the Modelo volume in UK that UK business would have been in volume growth. So that was one of your specifics. We don't tend to breakout price or volume information on a market-by-market basis.

So Simon, is there any additional color that you would offer you Andrew’s question?.

I think you've probably broadly covered it there, Mark. I mean it's a similar answer to the first question I gave that the reduction in NSR per hectoliter is all driven by the two factors of the Modelo brands in the UK and the loss of contract manufacturing.

And just to explain that again, obviously the revenue from contract manufacturing goes into our net sales revenue line but the volume denominator perhaps [ph] because only pertains to our owned brand sales, so it's actually quite a significant headwind in terms of the overall what we call out as mix.

If you strip that out and if you strip Modelo out, then you'd get a more positive picture. So, that's really the main explanation there. Pricing across Europe and UK was pretty similar and pretty solid. And then as Mark just alluded to, if you remove the impact of the Modelo brands, then the UK business would have also slightly grown it's volumes.

So, if you triangulate that against a 5% overall increase in volume and that gives you an idea of the relative performance of Central Europe which was very positive through the quarter..

So, I think that concludes the questions. So, just on behalf of the team here at Molson Coors, I'd like to thank you all for joining us on our third quarter earnings call. And just as a reminder Dave Dunnewald will as usual be hosting a more detailed call at 1'o clock this afternoon, Dave? Yes, 1'o clock Eastern Time.

So, many thanks for your interest in Molson Coors Brewing Company. And we look forward to catching up with all of you through the fourth quarter and beyond. Thank you..

And this concludes today's conference. You may now disconnect..