Molson Coors Beverage Co (TAP) 2005 Q4 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Molson Coors fourth quarter and year end earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session, and instructions will follow at that time. [OPERATOR INSTRUCTIONS] As a reminder, this conference call is being recorded.

I would like to introduce your host for today's conference Mr. Leo Kiely, President and Chief Executive Officer, of Molson Coors Brewing Company. Thanks Matt. Hello and welcome everybody, thanks for joining us today. With me on the call are Tim Wolf, our Global CFO, Kevin Boyce, CEO, Molson Canada, Frits van Paasschen, CEO, Coors Brewing Company , Peter Swinburn, CEO of Coors Brewers Ltd., Sam Walker, our Global Chief Legal Office, Mike Gannon, Global Treasurer, Marty Miller, our Global Controller, and of course, Dave Dunnewald, our Investor Relations Director.

During the call, Tim and I will cover the three topics with you today. First, an overview of our Molson Coors Brewing Company fourth quarter and full year 2005 performance. With the sale of our controlling interest in our Brazil business last month, the resulting change in accounting methods for that business, we have considerable complexity in our numbers this quarter. So we plan to take a few extra minutes to give you some strategic content around our results. Unless we specify otherwise, these results are without the Kaiser business in Brazil, which is now reported as discontinued operations in our historical financial statements.

Second, we'll have a discussion of the result drivers for our operating businesses in Canada, United States and Europe, and third, we'll share some perspective on 2006 for our Company, and of course then we'll open it up for questions.

Let's start with full year 2005 highlights. For continuing operations and that is excluding Brazil, we reported consolidated sales volume of 41.2 million barrels, that's down 1.4% on a comparable pro forma basis from 2004. Sales from retail were down 1.1% versus prior year on a comparable basis, although trends in the U.S. and Canada improved as the year progressed.

Net sales from continuing operations were $5.61 billion for 2005, down 4.4% on a pro forma basis from 2004. Pro forma cost of goods sold declined 6.5%, while marketing and general administrative expense increased 4.7% globally. After tax income from continuing operations excluding special items was $335.5 million, or $3.95 per diluted share in 2005, which is 22.6% lower than pro forma 2004 earnings.

If we include Brazil results for 2005 and 2004, total company 2005 after tax income excluding special items was $264.5 million, or $3.11 per diluted share, 24.2% lower than pro forma 2004 earnings. So all-in, the Brazil business represented an $0.84 per share after tax earnings drain in 2005 excluding special items. We will provide more texture around the Kaiser sale, and it's benefits going forward for Molson Coors in a few minutes.

Overall our 2005 financial results reflect changing operating environments in all of our major businesses. But we also made progress this year as a Company in the first year after the merger of Molson and Coors. We created a new company one year ago today, promising our shareholders that over time we would achieve four goals.

First, capture $175 million of annual merger-related cost synergies within three years. Second, address the top line challenges and restore growth in Canada, and reestablish consistent growth trends in Coors Light in the U.S. Third, accelerate the pace of reducing the cost structure across our Company, and fourth, reassess our strategic future in the Brazil beer market. Despite the tough industry back drop in all of our major markets, we made solid progress in all four of these other areas, as we will review today with you.

Best of all, we have a North American brand on the march, that is Coors Light, and we're witnessing encouraging trends for two other franchise brands, Molson Canadian and Carling in the U.K. Driving big brands in big markets is how we win. These are good pieces of news. Now I will review the financial highlights for fourth quarter.

For the total Company excluding Brazil, we reported fourth quarter consolidated sales volume of 10.3 million barrels, down 1% on a comparable basis from a year ago. Sales to retail declined 0.4% versus prior year on a comparable basis, due to declines in Europe. Net sales were $1.38 billion, down 8.9% from pro forma quarter 2004. Cost of goods sold declined 11.1% per barrel, partially reflecting our merger synergies work, and underlying cost reduction programs, in all three of our businesses.

Marketing, general and administrative expenses grew 3.3%, as we increased investments behind our brands and sales programs globally. After tax income from continuing operations excluding special items was $53.9 million, or $0.63 per share, that's down 34.1% on a pro forma basis from last year.

At this point I will turn it over to Tim to review fourth quarter segment and corporate highlights and trends, and then we'll provide some perspective on 2006 for our Company.

Timothy.

Leo, thank you, and hello everybody.

Performance highlights starting with Canada, operating income was $92.5 million in the fourth quarter excluding special charges this year and last year, operating income increased 3.9% from the pro forma fourth quarter of 2004, as favorable currency movements, positive brand mix, and lower operations costs, were largely offset by higher marketing, selling, and general and administrative expense.

The Canadian dollar appreciated 4% year-over-year versus the U.S. dollar, which increased Canadian pre-tax results by about $4 million U.S. in the quarter. In Canada our sales to retail for the calendar fourth quarter 2005 increased 0.3 of 1% from a year ago. Double digit growth by Coors Light and our partner import brands drove the increase. Notably Molson Canadian brand sales were unchanged from a year ago, which is a significant trend improvement from earlier in 2005, and the key brands best quarterly volume trend performance in more than two years. Stabilizing the Molson Canadian brand was one of our most important goals following the merger, so this change along the accelerated growth of Coors Light is particularly encouraging.

The Canadian beer industry sales increased about 0.6 of 1% year-over-year in the fourth quarter. This industry growth results in a slight share decline for our overall portfolio of less than 0.2 of a point, which is the smallest share decline for our Canadian business in more than nine quarters, and a continuation of a trend for improving our top line trends in Canada. Fourth quarter sales volume in Canada totaled 2.0 million barrels, up 0.3 of 1% on a comparable basis from a year ago. Net sales per barrel increased about 1% on a pro forma basis in local currency, driven by positive product mix partially offset by increased price discount.

Pro forma cost of goods sold per barrel decreased about 3% in local currency, due to favorable results from our merger synergy work, and other cost reduction programs, which were offset partially by a sales mix shift to higher cost products. Marketing, general administrative expense grew about 11% of local currency, driven by higher marketing investments as planned, and trade spending in our larger markets. The entire expenses were partially offset by merger-related cost synergies. Other income net totaled $4.8 million in fourth quarter, driven by the Montreal Canadian Hockey Club income, along with the finalization of merger purchase accounting related to the club.

Turning now to our U.S. segment, pre-tax income in the fourth quarter was $18.5 million, down 55% due to 13.5 million of special charges this year, and a one-time $11.7 million gain on the sale of real estate a year ago. Excluding these factors, U.S. pre-tax income would have increased 10.4% in the quarter on a pro forma basis from a year ago, driven by merger cost synergies and underlying cost initiatives. This earnings performance represents a significant accomplishment in the context of an industry that was impacted by substantial cost inflation, and extensive price discounting during the quarter.

Looking at U.S. performance highlights, sales to retail in the U.S. increased 1.1% in the fourth quarter on a pro forma basis. This was driven by low single digit growth for Coors Light in the quarter, and strong double digit growth of Blue Moon. U.S. volume to wholesalers decreased 0.1 of 1% on a comparable basis due to a reduction in distributor inventory in fourth quarter, and declines in Aspen Edge and the Coors brand.

U.S. net sales per barrel decreased 0.7 of 1% in the fourth quarter on a comparable basis, as increased price discounting and coupon activity, more than offset sales mix and front line price increases earlier in the year. U.S. costs of goods per barrel increased 0.9 of 1% on an apples-to-apples basis in the quarter, due primarily to a higher transportation, energy, can and bottle costs, which were mostly offset by positive results from our operations cost reduction initiatives, and merger synergies.

In a very challenging cost environment, these programs offset more than 80% of the cost inflation impact with the U.S. business in the fourth quarter, and they offset about 70% of the inflation for the full year. U.S. marketing general and administrative expense decreased 5.1% on pro forma basis in the fourth quarter, because of lower overhead costs.

Other income net decreased $10.8 million, due to cycling the 11.7 million of nonrecurring gain on the sale of real estate a year ago. Our Europe segment reported operating income of $20.5 million, excluding special items this year and last year, operating income declined $18.9 million, or 36.2% from the fourth quarter of 2004. Industry conditions were very challenging, widespread price discounting through the key Christmas and New Year's holidays, especially in the off-premise channel. We applied a balanced approach in responding to these industry challenges, that partially mitigated the unfavorable volume and margin impact on our results. Our Europe margins also continue to be squeezed by retailer consolidation and increased price leverage that the retail chains now have, particularly in the on-premise channel.

In addition, our Europe margins have been reduced by two ongoing non-core factors. First, sale of non the own factor beverage brands are declining as large-chain customers move toward their own distribution systems. Second, sales of high margin flavored alcohol beverages, or FABs, continue to decline rapidly as a category. These non-core brand factors accounted for nearly half of our decline in Europe operating income excluding special items in the quarter.

In response to these operating challenges we have accelerated a wide range of cost production programs especially in our U.K. supply chain. Our Europe financial results in the fourth quarter were also affected by 6% year-over-year decline of the British pound against the U.S. dollar.

Now look at other Europe results for the fourth quarter. Overall volume of our own and licensed Europe brands decreased 3.5%, with low-single digit growth for the Carling brand, and double digit growth for our Coors Fine Light Beer, more than offset by declines in most other brands. The overall U.K. beer market declined slightly more than our business, so we actually gained share in the U.K. versus a year earlier, primarily in the on-premise channel, as we continued to increase distribution for our Carling brand.

The 21% decline in fourth quarter Europe net revenue per barrel in local currency, was driven by two factors. First, 17 percentage points were the result of a change early this year in our invoicing arrangements with one of our largest factor brand customers. We mentioned this element before. This invoicing change resulted in a one-time decline of $88.6 million in both net sales and cost of goods for the fourth quarter. But with no net impact on gross profit.

Second, about 4 percentage points of the decline in revenue per barrel were due to unfavorable own brand net pricing and sales mix, which did impact the bottom line. Cost of goods sold per barrel decreased 24% in the quarter in local currency, mainly due to the change in factored brand invoicing and declining factored brand volume. Excluding the impact of factored brands cost of goods per barrel for our own brands, was down nearly 2% from prior year local currency, driven by lower distribution costs and favorable package mix. Marketing general and administrative costs in Europe, decreased 4% in local currency in the fourth quarter, primarily because of lower overhead and labor-related costs, and reduced spending on non-core brands.

Finally for our Brazil segment, as you know we sold a controlling interest in the Kaiser business just a few weeks ago. We expect to record our 15% interest in this business, using cost method accounting going forward. This means that all of the usual balance sheet and P&L entries will come off our financial statements for the period following the close of the transaction on January 13, 2006. For the periods prior to the sale, including the fourth quarter and full year 2005, Brazil results are reported as discontinued operations in one line, near the bottom of our consolidated income statement. The Brazil segment is therefore no longer shown.

To help model our Company going forward, I would like to share the impact of the Brazil operation on our 2005 pro forma results. All of the following 2005 impacts of the Brazil business will no longer affect our Company results in 2006 after the sale. First, the P&L impact totaled a negative $125.7 million after tax, or $1.48 per diluted share in 2005. This P&L impact came from three areas, first, pre-tax losses in the Brazil segment totaled $112.8 million in 2005, excluding $22.8 million of the minority owner's share of losses, but including $54.7 million of special charges.

Second, corporate interest expense on Brazil debt totaled $11.5 million in 2005, again excluding the minority owner's share. Third, corporate overhead and other costs related to the Brazil business totaled $1.4 billion for the year. Also since our effective tax rate did not benefit from these Brazil losses, these represent after tax impacts on our financial results.

Second, our balance sheet improves in two principle principal ways. One, our total debt position improves by approximately $128 million in 2006, following the Brazil sale versus 2005, with the inflow of $68 million of sale proceeds on the one hand, and the removal of $60 million of debt on the other. Two, contingent liabilities of $260 million come off our balance sheet. In addition, approximately $365 million of disclosed but unaccrued transactional tax claims, are no longer the responsibility of Molson Coors.

As we disclosed at the time of the Brazil sale we we believe all specifics and contingencies have been disclosed as part of the sale process, and adequately reserved for on the Kaiser statements. Nonetheless, resolution contingencies and claims above reserve or otherwise disclosed amounts, could under some circumstances result in additional liability for Molson Coors, because of transaction-related indemnity provisions.

Third, Brazil business reduced free cash flow by $22 million during 2005, due to capital contributions, interest expense, and other costs. Fourth, removing Brazil results from our financial statements, will also reduce the volatility of our tax rate.

Finally, we retained a 15% minority equity position, that allows us to participate in some of the potential upside of this business, including by exploring the potential of Coors Light in this large and growing beer market. Bottom line, this transaction improved our profit and cash trends, strengthened our balance sheet and reduced our future risk profile. On all fronts we see this as being a positive transaction, for our Company and our shareholders.

Now, continuing with the fourth quarter P&L, special charges totaled $30.2 million pre-tax, or $0.23 per share after tax. In our business segment special charges were as follows: in Canada, special charges of $5.2 million were attributed primarily to restructuring the sales and marketing organizations in Canada. The efforts will further integrate the market and selling organizations into one team, improving our brand communications and customer focus. We anticipate a pay back period of approximately two years on this investment. In the U.S. results included a $13.5 million pre-tax special charge, related primarily to the planning closing of the Memphis brewery.

These charges include accelerated depreciation of the Memphis assets and some limited restructuring expenses. The Memphis plant closure announced in February of last year, is a key part of our initial wave of merger cost synergies, as expected to provide 32 to $35 million of annualized pre-tax savings.

In Europe, a $12.9 million special charge, is due primarily to accelerated cost reduction initiatives, and supply chain and overhead areas, as well as modest expenses to close our small Russian sales operation. The overhead in Russia of the restructuring are largely complete with the supply chain work crossing over in 2006. We expect a very attractive pay back period of about a year on these restructuring initiatives.

Corporate general and administrative expenses in the quarter was $35.1 million, up $20.2 million in the pro forma fourth quarter of 2004, due primarily to increased legal and financial expense related to the merger. We expect less than half of this increase to be ongoing. Our effective tax rate for earnings from continuing operations was 36.9% in the fourth quarter, excluding special items the tax rate was 36.4%, more than 14% percentage points higher than our annual rate, primarily because of a one-time non-cash increase in the provencial income tax rate in Canada.

The cumulative effect of the change in accounting principle on our P&L is the result of our adopting FIN 47 in the fourth quarter. Under this new rule, companies must recognize potential long-term liabilities related to the eventual retirement of assets. The non-cash after tax expense of $3.7 million in the fourth quarter represents more than 30 years of accumulated remediation and restoration expense, related to future anticipated asset retirements. Following this catch up expense of 2005, we don't expect FIN 47 to have a significant impact on our annual operating results.

Total company capital spending for 2005 was approximately $355 million, and this number excludes about $9 million from Brazil, as well as our beer store CapEx in Canada. Net debt at the end of 2005 was $2.45 billion net of cash on hand excluding Brazil. During 2005, we generated free cash to repay $295 million of post merger debt, well ahead of our $200 million goal following the merger. This cash generation was a significant achievement in a year marked by a very challenging operating environment. Brazil business cash used, merger synergy programs, and our Virginia brewery expansion.

Now, I will preface the outlook section as usual, by paraphrasing our Safe Harbor language, some of what we discuss now and in the Q&A may constitute forward-looking statements. Actual results could differ materially from what we project today. So please refer to our most recent 10-K, 10-Q, and proxy filings for a more complete description of factors that could affect our projections. We do not undertake to publicly update forward-looking statements whether as a result of new information, future events, or otherwise. Regarding any non-U.S. GAAP measures that we may discuss during the call, please visit our website, www.molsoncoors.com for a reconciliation of these measures to the nearest U.S. GAAP results.

Looking forward, we estimate that corporate interest expense in 2006, will be approximately 33 to $34 million per quarter, with the Brazil debt now removed from our balance sheet. Note that this excludes U.K. trade loan interest income. As with many large companies, long-term incentive compensation is going to be an incremental expense starting in 2006, due to the new accounting guidelines around stock options this year.

In reviewing our own long-term incentive plans we have chosen a mix of tools that include performance share units, restricted shares, and stock option grants. We chose this mix of tools to better align management incentives with the Company's financial performance, and interest of our shareholders. We anticipate this new long-term incentive plan will result in about $25 million of incremental expense in 2006 versus 2005. Importantly, the 2006 stock option grant will involve approximately 350,000 shares, or about 1/6th the size, of the 2005 option grant.

Additionally, the new restricted performance share programs will involve only about 500,000 shares per year, and more than 300,000 of these new incentive shares will be awarded, only if the Company achieves strong profit performance during the next few years. We anticipate that our full year 2006 effective tax rate will be in the range of 25% to 30%.

It is important to note that the adoption of ATP's 23 tax treatment for our U.K. business last year lowered our 2005 tax rate, and we do not anticipate a similar benefit to repeat in 2006. Our outlook for 2006 total Company capital spending is in the range of $400 million, plus or minus 5%. This is higher than 2005 due to completing our Virginia brewery build out, and our merger-related capital projects.

After this year we expect capital spending to drop to the low 300 million range for the total Company. One of our key goals of 2006 is to generate rate more than $300 million of free cash flow available, for debt pay down and this includes $68 million in cash proceeds as mentioned earlier from the Brazil sale. It is important to note some of the drivers of our 2005 free cash flow may not recur in 2006, and those include working capital timing, option exercises, and asset monetization all of which totals more than $100 million in 2005. Our merger-related special dividend debt balance stood at US$163 million at the beginning of 2006, and recall that this started at US$526 million one year ago.

Currently as of today, this amount is now below $100 million, with the Kaiser business proceeds applied to debt. We plan to use our free cash flow to pay off the special dividend debt entirely, by sometime this summer, which is well ahead of our original time line. After the special dividend debt our highest priority use of free cash flow will be to reduce total debt to the range of about 2 times annual EBITDA. We anticipate increasing our free cash generation goal again in 2007, as we complete the construction of our Virginia brewery, and realize more merger cost synergies.

At this point, I will turn it back over to Leo for the synergies update and a look ahead for 2006.

Thanks, Tim. Let me start by giving you an update on our merger-related cost synergies, and then I will review some of our key business drivers that we're focused on for 2006. As you know, as part of the merger process, we have committed $175 million worth of annual pre-tax cost synergies, in stages over the first three years as a combined company. Our goal for the first year was $50 million. In the first ten months since we closed the merger, our synergy teams have achieved 59 million, or 18% above our year one target.

In 2006, our established goal is another $40 million on top of the 2005 achievements. At this time we conservatively anticipate capturing more than 50 million of additional cost synergies in 2006. Looking out to 2007, we fully expect to exceed our $175 million target, but we want to get some additional work under our belts, before we consider revising our outlook upward. Equally important we believe there are significant additional leverage opportunities afforded by the merger, and we will share more information around these ideas, as they're more fully embedded.

Now, let's look at some of the main drivers of our business in 2006. First in Canada, we'll continue to leverage our progress against our five key priorities. #1, we'll continue to drive accelerated growth for Coors Light through marketing and sales programs. Coors Light commands approximately two-thirds of the light beer category in Canada, and now our largest brand in Canada, just ahead of Molson Canadian. This brand grew at double-digit rates in 2005, and along with our top end portfolio is our main growth engine.

Second, we're making progress in stabilizing our overall volume and share trends for our main stream brands, in particular Molson Canadian. Our strategies in this area began to show results by the fourth quarter of 2005. In addition to continued Coors Light growth, Molson Canadian stabilized and the above premium Rickard's brand grew at a double digit rate. After increasing marketing investment behind the Molson Canadian brand substantially in 2005, we intend to maintain a competitive investment level for this critical brand going forward.

#3, to drive volume growth we are leveraging the strength of our world class partner import portfolio, which includes Heineken, Corona, and Miller Genuine Draft. These brands grew at significant rates in 2005, and will again benefit from new innovative programming this year.

#4, We've adjusted our value segment strategies, to regain launched volume and reduce the rate of grading down by consumers. We began to see positive results from the strategies in the second half of 2005, as the share gain of the value brands in Ontario slowed significantly, but we have more work to do. Looking ahead to the first quarter of 2006, we will cycle the steepest part of the substantial ramp-up of the valued-brand share in Ontario, so early this year we expect the value segment headwind to lessen further.

#5, we continue to focus on reducing costs to leverage the remaining savings identified in our previous initiatives, and aggressively pursue gather related merger cost synergies. Through our initiatives, we'll work to offset cost of goods inflation, specifically the cost of distribution, energy, and input materials, which remain near historical high levels. Meanwhile, we expect to limit general administrative increases to significantly less than inflation. In the first four weeks of January, our Canadian sales to retail increased at a mid-single digit rate.

This is good news. But keep in mind the four weeks is only a small portion of the quarter, and these trends could change.

In the U.S. business, our team is focused in 2006 on what we call the Coors winning formula, which has three overall goals. First, the U.S. team intends to grow its business by building the most compelling and relevant beer brands. Coors Light is the key to success in this business. Our top line programs revolve around this brand. In 2005 we built momentum throughout the year, with improved ads created, packaging invasions, and sales initiatives focused on chain accounts, Hispanic consumers and the on-premise channel. In fact, Coors Light has achieved a significant turnaround by posting three consecutive growth quarters to finish 2005, following several quarters of declining sales to retail. In 2006 the U.S. team has more ideas of improvement designed to build on this top line momentum.

Second goal for the U.S. team this year, is to capture all of the identified cost savings for merger synergies in our preexisting cost initiatives. The lion's share of the cost improvement potential as a merged company, resides in the U.S. business. Frits' team is going after these cost savings with a high energy level, to offset as much inflation as possible, and in fact turn the cost of goods down if we can.

Third goal is to transform the Company's culture to be quick, consumer driven, and internally aligned. Since Frits joined the Company last year, he and the top team have applied new energy and focus to the U.S. business, and begun transforming it's culture, particularly as we interface with our U.S. distributors.

Other factors in 2006 to consider when assessing the outlook of the U.S. business include the beer price environment and import cost inflation. Beer pricing last year became more promotional than at any time in the past several years. In this environment our brand building efforts allowed us to gain volume momentum as the year progressed. The first few weeks of 2006, we have instituted modest front line price increases in more markets than a year ago. We'll obviously be tracking very closely, and make pricing decisions that are right for our business.

Transportation, energy and packaging material costs remain at historical high levels. As our 2005 results reflected, we're aggressively pursuing cost initiatives throughout our business, to offset as much of these inflationary increases as possible. As one measure of these initiatives, in 2005 we will reduce the total U.S. business [capping] levels by nearly 10% by year end. We continue to report additional accelerated depreciation and other special charges related to the Memphis brewery, until it is closed. In the first six weeks of the fiscal first quarter overall U.S. sales to retail increased at a low single digit rate, while Coors Light grew at a similar rate for the fourth quarter.

Turning to Europe, the competitive environment in the U.K. beer industry continues to be extremely challenging. In response we're focused on two main strategies. First, we are working faster and harder at our cost induction initiatives, especially related to overhead and supply chain costs.

While many of these changes were completed during the fourth quarter, more will follow in the months ahead. We're already beginning to see the cost savings from these initiatives. While these cost improvements are not enough to offset the margin loss that our Europe business sustained in the past year, we believe that these aggressive improvements will help this business return to an attractive earnings growth trend.

Second, we continue to invest substantially behind our core lager brands, Carling, Grolsch, Coors Fine Light. We remain encouraged by the consistent strength of the Carling brand, which has grown market share every year for more than a decade, and now represents three-fourths of our Europe volume. Carling continues to receive improved consumer research scores, maintains large leads in on-premise and off-premise throughput versus competition, and remains the largest brand in the U.K. by a margin of more than 30% over the #2 brand.

Additionally Coors Fine Light has achieved strong growth in the American lager segment, as we've expanded distribution of this premium brand. In the first six weeks of the first quarter, our Europe sales to retail have increased slightly from a year ago but primary due to the timing of Christmas relative to our fiscal year end.

Switching to Brazil, we earlier reviewed all the benefits to Molson Coors from this sale. You can see why we're pleased with this revolution to our strategic situation in Brazil, but I also want to emphasize that we believe this is truly a winning transaction for FEMSA as well, since they bought into an improving high potential business, in one of the largest beer markets in the world, at a very attractive price.

To summarize our discussion today, when I look back on 2005 for Molson Coors Brewing Company I see three main themes. First, the merger itself, which I believe has gone very well. The cost synergies, are being achieved faster than we planned. A new leadership team up and running with our teams around the world staffed, integrated and energized, and a new company governance structure effectively implemented.

Second, the very challenging business environment. With each of our major markets, buffeted by substantial cost inflation, and competitive price discounts. With these challenges, I am pleased with the way each of our businesses stayed focused on the right strategies to win in their markets, and made solid step by step progress throughout the year.

Which leads me to the third theme, which is improvement, by staying focused on our priorities coming out of the merger, we achieved encouraging momentum in our top line trends in Canada and the U.S., we resolved our strategic situation in Brazil, and we accelerated our cost reduction programs across the [Company]. As we begin our second year as a merged company, we have a solid portfolio of companies focused on the right strategies, to build on the progress we made last year, and realize the full potential of our transformed Company.

One final note, a housekeeping note, that is our prepared remarks will be available on our website for your reference within a couple of hours this afternoon. Also at 3:00 p.m. eastern time today, our Investor Relations team led by David Dunnewald, will host a follow up conference call, essentially a working session for analysts and investors, who have additional questions regarding our fourth quarter and full year results. This call will also be available for you to hear via webcast, and a recorded replay on our website.

At this time, Matt, back to you to do some questions.

Thank you. [OPERATOR INSTRUCTIONS] Our first question is from Judy Hong from Goldman Sachs

Hello, Judy.

A few questions on Canada. First of all, I am wondering why the industry wasn't up as much in the fourth quarter given relatively easy year ago comparisons, when there was a hockey strike.

Secondly, if you could talk a little bit more broadly about what you're seeing in the marketplace, as far as the competitive dynamics and the pricing situation is concerned there, and just if you can really assess the outlook for 2006 as you talk about the competitive situations?

Okay. If you take the first question, the market was pretty good, a little bit soft in Quebec in the fourth quarter. Definitely the return of hockey which has helped us, I think disproportionately to the rest of the industry did help the volume, but we had, I believe the industry grew 1.7% for the full year. Perhaps some of the earlier high volumes there was a little bit of a [flight], taking a breath if you like, in one of the markets in the fourth quarter, interestingly if you look at the side of this year the initiative has been very solid. We're encouraged by all of that.

In terms of the pricing, what's happening out there right now is Ontario is fairly stable. 26.40 has been the lowest price for quite some time now. And that's encouraging versus where it was a year or year and a half ago. There is increased discounting in Quebec, and that's driven primarily by big retailers trying to get an advantage over each other, and right now we believe that will continue to be the case for the next, probably few months. We'll see how it ends in the summer, and see what happens there. But there's no doubt, retailers are using beer as a loss leader in Quebec.

As far as your pricing outlook is concerned for 2006, are you expecting pricing to be down without the mix benefit?

We've already taken pricing on selected SKUs in Ontario and British Columbia, and so has Labatt's in both of those markets. There will be some discounting from time to time, but we're expecting that the pricing environment will be probably as a little bit less than historical growth levels, in terms of price, but there will be some pricing taken throughout the country.

Okay. In the second question for Tim, and just looking at the free cash flow outlook for 2006, you're getting the 68 million from sale of the Brazilian operation, you're getting a positive 22 million swing on a cash flow basis without Brazil, and I am just wondering why you don't think the cash flow would be up much more than the north of 300 million you talked about?

Thanks. Certainly could be, but I think if you take out the proceeds from Brazil, which obviously you already received, the 220 to $230 million range, it's not really dissimilar from what you're talking about, is what we're targeting, obviously we want to do better, but we have very significant working capital improvements in the U.K. that is not easily repeated.

We did have earlier in the year, as you saw earlier in the year, some cash proceeds from stock option exercises. We're not resuming that. It is standing here today, assuming our business comes in with their planned EBIT, is there a greater chance of exceeding that 220 to 230 range, sure but very early in the year, it would be inappropriate and premature to say sure, north of 300 is easy. Net of the Brazilian proceeds, the 220 to 230 sort of range is the quarter range we should be looking at, and looking at today.

Okay. Thanks.

Thanks.

Thank you. Our next question comes from Caroline Levy from UBS.

Hi, everybody. I was wondering if you could elaborate a little bit on pricing in the U.S. and maybe walk us around some of the major markets, like California and the Northeast for you guys, and talk about how much actual rate increase you've seen from in the marketplace by you and your competitors, and whether you think, whether you feel confident at this point that pricing is going to be better than it was in the back half of '05 in the U.S.

Yes. I will take that one. This is Frits. I think you're right in asking the question as geographic one, because I think the story does vary as you go around the country. The story I think also relates more to a reduction in discount behavior, than price increases that we're seeing people take.

In other words, I think the biggest swing that we can see year-on-year is whether the discounting behavior that we observed so thoroughly, particularly during the course of the summer would go away. Now, early indications are that in Florida, we're seeing some competitive discounting activity, and that's probably the one market for us, where we're seeing the lowest revenue, excuse me, volume growth there and momentum.

As we go to the West Coast, particularly California, but also the northwest, we're also seeing some aggressive pricing activity, as we've said publicly, and as we are following in our strategy, we believe that the real benefit in our business is by building brands, not by competing on price. We view the heavy discounting behavior over the course of last year, as being unhealthy for the brands, and therefore for the industry. So we continue to invest behind our brands, and try not to follow where we don't have to. In the Northeast, likewise we continue to have momentum and therefore -- [audio break]

Can you hear us.

That got cut off. In the Northeast you had momentum and therefore.

Therefore we will try to hold where we are.

Can I just go back. I am not sure I understand. Are you saying that California and the northwest look a little bit like Florida, where the discounting is quite aggressive still?

We're not seeing quite as much aggressive behavior in the West as we are in Florida. We are seeing some. We also feel that we have considerable presence, history, and brand strength that is allowing us to continue to grow our business without following that behavior.

And did you take a rate increase, and did the competition in January or February?

Not yet.

Did you see the competition do that?

I have not.

That's interesting. They've told us they have, that they've implemented price increases. You don't see it in the market.

Not yet.

Okay. Also if I could staying with the U.S. if I think about the mix effect in '06, what would be the gives and takes that you think would make mix positive or negative in '06 for you guys?

Pretty balanced picture. Our job in '05 initially was to make sure that we got volume growth back in Coors Light. Obviously want to continue that going into '06, and current trends would indicate we seem to be doing that. Then the two offsetting effects would be, we see continued strength and momentum in Keystone on the lower end, at the same time very strong growth in Blue Moon on the top end, so a bit of a balanced picture there really.

That could come out at a zero, the mix?

The balanced picture might be zero. These things depend obviously on fluctuation.

If I might just clarify, you guys gave us a ton of information. It was fast, so I missed some of it. If I think about '06 in, this is more across the business, do you think the synergies are enough to offset the cost pressures, and particularly if you think about the first half where year-over-year the cost pressure is going to be more extreme?

Well, I think if you want me to comment from a U.S. perspective, what we mentioned already is that we offset 80% in the fourth quarter, and 90% over the course of the year from getting those numbers right.

70 over the year.

70 over the year. I don't think that ratio is altogether inappropriate, as we look over the course of this year going forward. The real variable in this thing isn't where we see our synergy benefit, because we've been pretty clear on that. Leo talked about getting a 59 for the year.

It is really what happens to fuel prices. If things stabilize or go down, I think we'll be in pretty good shape to offset most of those increases. If we see further increases in fuel prices, it will be very difficult for us to capture all of those at a 100% level for the year.

Right. And then could I just go to the U.K. for a second, and try to understand how much longer this drag effected brands is going to be in the numbers?

Hi, Caroline. When you talk about brands, you mean affected brands.

The big hit to revenues.

Well, they're going to be in the numbers really continuously, because we still actually sell factored brands, so there is still the effect of major retailers moving out into their own distribution. We were hit quite hard by one major company with a renegotiation back in September, so that that's going to run through for at least three quarters of the year this year.

Is that the part that doesn't have an impact on the bottom line, it simply comes out of both?

No, that's the bit that affects the actual revenue line, top line. That's going to actually come out pretty early this year, but the stuff I am talking about will actually hit the margin line.

What was the hit on, in the fourth quarter from that?

Specifically on that, I don't have because this is one single customer. The hit on our factored brand year-over-year was, just wait one second. Was in the region of about 2 million.

Thank you very much.

Caroline, just so, you know, there are two separate effects there. There is the one large customer that Peter refers to, and that was a September, Peter, that we changed our billing arrangements. That's a large piece of the on the net income line. That doesn't hit the bottom line.

We still are seeing declining trends overall in the factored business, because all the large customers are trending towards doing more of that business on their own. That's the effect Peter cited there. Accurate, Peter?

But Leo, if I look at the U.K. and I take out those two one-time effects, is there any sign of pricing stabilizing there in the first quarter? Or is it just as severe as the fourth?

Peter, you can comment on that.

I am sorry, could you say it again Caroline?

Has the negative pricing you saw in the fourth quarter continued into the first?

Well, it's pretty early days in the first quarter, because what you get is the negative pricing largely that we see on the volatility basis is in the off-premise. On the off-premise pricing actually carries through in the first couple of weeks of the first quarter from Christmas, so it is very difficult to make any judgement on that. The pricing pressures that we're under with the consolidation of a large entree retailers, that's in the books and that will continue.

Okay. Thanks a lot.

Thank you. Our next question comes from Robert van Brugge from Sanford Bernstein.

Good afternoon. I was wondering if you can elaborate a little bit more on the big increase in corporate expenses in the quarter? You mentioned one-time merger-related legal costs.

Yes, thanks, Robert. This is Tim. As I mentioned in my remarks, we expect that fully half of the increase is not recurring. That's .1, .2. The rebucketing of spending as we put the two companies together, we have continued to achieve some really significant synergies. We still are are on the results that we're showing you, we're adding back some spending to staff this new larger company. The objective net/net will be, and has been, and looks like we're making good progress on, net/net reducing overhead.

Okay. But what you're saying is that the rebucketing, did it increase from Q3 to Q4, or is it still at the same run rate as Q3?

No. The rebucketing did not increase. The increase you saw were some of these one-time nonrecurring factors.

Okay. And then just to follow up on the free cash flow guidance, I am also just a little bit puzzled by, it is certainly lower than expected. Is there just a big shift in the working capital that went into the fourth quarter and the full year 2005, and is it just going to reverse out like you're paying payables after the end of the fiscal year in '06?

Two points. One is we did get some, as I mentioned, some working capital savings, contributions from the U.K. We don't expect that to repeat, and then point two, some of the CapEx spending specifically in the U.S. occurred slower in '05 than we had anticipated. That spending will occur in '06. That is really just timing. That's really the reason why I think at this point in the year, it is not appropriate to say sure as I mentioned in my earlier remarks, north of 300 is no problem.

I still think net of Brazil proceeds that 2.20 to 2.30 range is about right, and as we do every quarter we will dutifully update you on the pace and progress that we achieve.

Will working capital just not be a source of funds, or will it actually be a net use of funds in your growth for '06?

Good question. I think at the margin net/net, it will be a slight user of funds.

Okay. Thanks.

Thanks.

Our next question is from Corey Horsch from Credit Suisse.

Good afternoon, everyone. To follow up, sorry to harp on this, on the corporate unallocated, a fair run rate to use for that line going forward on an annual basis, would you put that around kind of $80 million, and then that's about right.

That's about right because think about the half of the increase in the quarter of 15 million is about 27. That's a little bit on the high side, so we did have some nonrecurring factors, so the 80 to $83 million range for the full year 2006, is just about right.

And secondly, Frits, would you mind giving us an update on where you are with the initiatives you've taken with your sales force, as far as streamlining that a little bit, getting better representation at your wholesalers moving to a P&L system, et cetera?

Yes. A couple themes to what we're doing on the sales force side, the first is a much more intimate alignment between marketing and sales, and doing that right from the top meaning getting together as a marketing and sales team on a weekly basis, to review not just the most recent results but also in a forward-looking way trying to determine what we can do to adjust course where we need to.

More specifically though around the restructuring on the sales force, a couple of things. First, we have substantially reallocated the actual head count in the market, that we see as being better growth opportunities for us. Without increasing headcounts, in other words on a head count neutral basis, moving around a fair number of people in the markets where we feel like we have a better opportunity to grow, and around initiatives, such as things that Leo mentioned, around Hispanic marketing on-premise, as well as he referred to it, our chain or key accounts.

And then the other piece is working towards what we call a GM structure in some of our key markets, so we have moved towards implementing that in seven markets around the U.S., which I may have mentioned to you before is a little bit more than 20% of our total volume. We're still in the process of laying all of the infrastructure and organization around that, but have gone forward in rolling that out in those seven markets.

Thank you.

Thank you. Our next question comes from Anthony Bucalo from Bear, Stearns.

Good afternoon gentlemen. In the U.K. looks like you have got a relatively easy comp on volumes in the second quarter. Any sense historically what kind of impact the World Cup has on consumption patterns in that country, just curious to see what we should look forward to in the second quarter.

Things depends on how England progresses in the championship, to be honest with you, but historically what we have found is that we do get an upturn, in terms of our trade volume and on trade volume, that usually comes back to bite us at the first couple of weeks or the first four weeks of the third quarter, so when you banish it all out, it's a bit of a wash.

That's the cycle, so the impact is one of volatility. The overall benefits, there is an overall benefit but its not as significant as you would imagine overall.

Okay. So we should be rooting for the U.K. is what you're telling me?

Well, England, yes, if you can do that. If we have 3 goalkeepers, we should be okay.

Got you. Thank you.

Thank you. Our next question comes from Bryan Spillane from Banc of America.

Good afternoon. Couple of questions. First, with Coors, was North American marketing, or U.S. marketing up in the fourth quarter or down?

I think it was down slightly, which is more a question of timing on media than anything else.

Did you run similar media weights this year in the fourth quarter as last year, or did you just, would you just have less on-air presence?

It was pretty comparable to last year.

Okay. Okay. Would your expectation for '06 be that that marketing advertising levels would be above this year, below prior year? Are you going to spend more or less in marketing?

The way we put our target together for this year 2006 is overall sales and marketing G&A down, but with an increased investment in on the marketing side. Now, how much of that goes to media versus more grassroots and end market programs, is something we're still trying to balance out. Net effect is more marketing resources, lower overall SG&A, but unclear whether the absolute media number will be up.

Okay. And Tim, if you could just break out you went into 2005 with basically two buckets of cost savings. One was going to be the synergy, merger synergy-related cost saves, the other were the preexisting programs that you had, both at Coors and what was happening at Molson, and I guess what I am trying to understand is, where you mitigated the cost of goods inflation, you gave the number in the U.S. of 90% of the cost of goods inflation.

How much of that was from synergies, how much of it was from merger synergies, and how much of it was preexisting cost programs, and when I look at modeling 2006, will you get on top of the merger-related synergies you're expecting, are there still benefits from the preexisting programs?

Short answer about a third, a little bit more than a third was synergies, more than two-thirds was the product of the initiatives that Chad and Dennis Puffer, and a variety of folks have been working on the balance of the last four years. As we move forward, it will start evening out more 50/50, and obviously when Memphis comes on, and Shenandoah comes on, you'll actually have a continuation of that mix because you'll recall the 30 plus million dollars savings from building out our Shenandoah facility, we are not counting as synergy per se, because that's something that Coors could have done on its own. I think you will see that balance of about 50/50 marching forward, this year and 2007.

Okay. So fair to say that there are still other savings above and beyond, what you have identified within the 175 that you're expecting in '06 and '07?

I think as Leo mentioned in his remarks, we feel very good about where we're going on 175. Yes, we had been saying throughout 2005, the longer we work together the more ideas we find, and we're finding them, and we hope to be able to as Leo mentioned vet a couple of them, challenge ourselves on a few items, and try to share some of those with you next month when we're in New York and Toronto, because we think there is good leveraging, further leveraging of having brought these companies together.

One last. Could you just review the timing, where you stand now in terms of Shenandoah, and what the timeline is, when do you expect to start testing, and when do you actually begin to brew product there?

We're on target to getting some late fall, in terms of first production there, and then over the course of spring a year from now into '07, really being fully on-stream, so that has been the project timeline for a while, and as I said we're either on, or slightly ahead of that right now. We're feeling very good about that.

Great. Thank you very much.

Thank you. Our next question is from Michael [van Elst] from TD Newcrest.

Question on the Canadian pricing and discounting. It was quite heavy in Q4 as you mentioned. Seems like at least in Quebec and Ontario the mainstream brands are on sale every few weeks. Is this the strategy to get, to stabilize Molson Canadian market share, or is that a big part of it?

It is part of it, but it is not the only form of it. If you look at the actual depth of the pricing, it is not as deep as it would have been six or nine months ago. There has been on Canadian and some of our other brands a pull-back in concerns of the depth. In Quebec obviously Canadian isn't participating there. It is other brands that are participating.

Are you seeing a little bit more frequency, yes, you're seeing it throughout the market, but importantly we're not seeing it as deep as it used to be, and we'll see as we enter into the summertime how those are taking place.

It is only one part of the component that's driving Canadian. We've got new ads out there. As I spoke before, I think the integrated program that we're doing from our promotional side, not just pricing has also taken effect, so we're quite pleased with our program in Canadian.

And in Ontario, do you feel you have enough brands and strong enough brands down to the 26.48 level, to maintain your share of that category going forward?

We're focusing on Carling in that area, and Carling is quite a strong brand. It is in the top five or six brands in Ontario, so we're quite comfortable with that.

Can you also comment on the Miller situation in Canada, and their lawsuit and what do you think happens there?

Right now we're just focusing on that business. We're proud to represent them, and we're doing a very good job with them. We look forward to continuing to grow in their business.

Do you see any chance that you guys lose that business over the next few years?

Any chance we got to talk to the lawyers on that. Right now we're confident of our position.

Okay. Finally in the U.K., with the volume shifting to off-premise, and that being where the major pricing pressure is greatest, at what point do you actually think you will show an improvement in profitability there?

Are you talking, sorry, Michael, it is Peter. Are you talking specifically about the off-trade channel, or talking about the business overall?

I am talking about the business overall.

I think as indicated by comments Leo made, we're look to improve profitability this year. We have got a very difficult market over here. It is declining quite significantly, the total trade last year was down 2%, and that trend actually accelerated in the last quarter. We believe we've taken the necessary measures, in terms of cost savings, and getting the organization sort of fit for purpose, but we'll make sure that we bring profitability growth back into the business this year.

Thanks very much.

Our next question comes from Cheryl Gedvila, Prudential.

Going back to Europe, could you just detail how much of the volume went through premise for the year versus a year ago, and also just a little more detail on what you're seeing in pricing in those two different channels?

Can I check that I got what you asked there Cheryl. You want to know what our volume did for the full year against the market?

What proportion of your volume sales went through on-premise versus a year ago in Europe.

What proportion of on-premise versus a year ago.

Yes.

Okay. Fine. Our on/off mix is roughly 64%/36% in favor of on trade. That would have moved by a couple of percentage points, no more, less than 2 percentage points in the year.

And then could you comment on the pricing environment in those distinct channels?

In those distinct channels, yes, certainly. What is happening is, you have got two dynamics happening in both channels. One is that you have got movement from the independent single customer, to the major players be they multiple supermarkets or the consolidated on-trade players, so you have a customer mix effect that's happening. Within that, because I think largely because the market has been so difficult.

People are finding volume difficult to get. You're getting some reaction from weaker brands, in terms of their pricing, and so you have people trying to get volume through price, so there are the two things that are happening, and I think we saw almost brand by brand that happening across the Christmas period.

Our position on that is much the same as fixed outline with Coors ,as Leo explained, Carling is the biggest brand in the country by quite a ways. It has got a very strong franchise, got very strong health factors behind the brand. We do what we need, we feel we need to do to make sure we equalize the margin and profit, sorry, the margin and volume mix together, our profit.

We were comfortable with what we did in a difficult market over Christmas, and we're going to pursue that policy going forward. We're not going to ruin the brand, and we've been through difficult periods before in this market. The market will come right, when it comes right. The good brands will actually be the ones that will be successful, and take the profit forward.

In terms of how rate played out in on-premise versus off-premise in the fourth quarter, was there any shift from the third quarter or ?

How what played out?

How rate in local currency.

How price played out?

Yes.

The retail level, the on trade didn't change much. It is pretty static. The pricing environment in the on-trade at a retail level doesn't change. It is our margin levels that have changed, because of the customer mix.

In terms of the off-trade, the Nielson figures coming out of January for December, showed that there was a slight decrease overall in value, but that was driven exclusively by what we would call the strong brands, the mainstream brands that Carling placed on value actually improved, and Carling value improved by about 1.3% over that period.

Okay. Thank you.

Christine Farkas from Merrill Lynch.

Thank you very much. First, a couple questions on cost. Could you talk about cost per barrel generally being down across the board, except in the U.S. Is that largely due to the transportation cost there, at the single brewery?

Well, both transportation and packaging costs.

And packaging. So the mix of packaging in the U.S. is far different than what you see in our countries? In that respect?

I can't comment on the other countries. I can tell you that energy plays a significant role in the packaging costs as well, so you would have seen costs coming through there also.

We have a much higher mix in cans and aluminum as you know, is sitting at a very, very high level, so we mitigate some of that by the way, we buy aluminum, which is pretty smart, but the fact is, canned packaging was a very high input ingredient last year. That is certainly a factor there.

Just to clarify your cost per barrel was actually down in, if I heard you correctly, in the U.K. and in Canada, where you also have high energy costs in aluminum packaging, but it was up in the U.S. I am trying to understand what the difference was in that magnitude, if that was largely due to transportation or fuel costs?

That's right. Much smaller mix of cans, and much less vulnerable to fuel costs, and shorter shipping distances.

Right. And with respect to the cost reduction in the U.K., forgive me if you quantified this. What kind of savings are you looking for there?

I think we've already given an indication on that in the preamble, we'll be looking for 1 to 1 return. We're looking to get the money back in the year.

Two points. One is Peter's point, the special charge and the restructuring charge associated with the U.K. roughly $12 million. To Peter's point, we expect to get a one-year pay back on those restructuring charges. He is not limiting his team's effort to reduce costs just to those though, and are looking to try to save even more.

We're on a good track to do that. I think we'll be inclined, Peter will be inclined to share more of that in March, and March is through the amount, and more importantly the pacing quarter by quarter. Clearly there is cost to take out of some of those costs will require restructuring charges, and severance and the like, and that's what you saw in the fourth quarter.

Great. That's helpful. A question on Canada. You talked about the easing comps in the value segment, also main stream brands being discounted. We've seen some of the low end brand prices coming up. I don't know if that's isolated or not. What's your view of the price gap? Has anything changed structurally that would limit the growth, or slow the growth of the value segment here?

Looking at Ontario, you can count movement on 12-packs in the month of January, so all the discount brands came up on 12-packs. Not been a move on 24 packs, which is the bulk of the volume. We're encouraged by what we see in the 12 pack. It remains to be seen what's going to takes place on the 24's. Certainly the 26.40 right now, is the lowest by law that it can be. If anything it can only go up from there.

How would you characterize the price gap over the last few months? In the fourth quarter, how did that gap look relative to all of '05?

All of '05, '05 was pretty static actually. The price tended to be at 26.40. If I did use 24s, it was really the fourth quarter of '04 where we were seeing 23.70. 26.40 has been around now for about twelve months. It worked its way through in the first month or two of '05. We are pretty static at that point, and some slight upward movement on 12-packs.

Okay. I think that's it for me. Thank you.

Thank you. Our next question comes from Mark Swartzberg from Stifel Nicolaus.

Thanks, operator. Good afternoon, guys. Kevin, on Quebec, my estimate is that that represents about a third of your volume in Canada. Am I correct in believing it is a bit more, in terms of your Canada profits, because it is in fact higher margin, and then I had a question about the pricing dynamic.

Yes. That's a fair assumption.

Okay. And then as we look at the pricing comments you offered earlier in the Q&A about discounting increasing in Quebec, what is your assumption about how that's going to play out, in terms of what's in your plan for '06? What is your comfort it is not going to affect it worse, and then how would you characterize Labatt's role in all of this?

Well right now, the pricing is putting pressure on the trade spending line obviously. We haven't assumed major changes for '06, and who is driving it, I think probably, I think it is retailer led. There is no doubt that Labatt's and ourselves are participating in it right now, and we're if you look at our fourth quarter performance in Quebec, we had a strong fourth quarter, so at this point in time, the price points that are on some of the our leading brands are certainly driving some consumption and increase in profit.

So just help me with the question pertaining to it not getting worse, as the weather improves and so forth, and people start drinking more beer, what's your comfort level that it is not going to get worse?

It can't get too much worse than the majority of the summertime last year, many of the retailers were at what was the lowest price by law, so that goes up each year in Quebec by inflation, so we expect through the summertime, that the retailers if they go to their historical habits we could see that, but that's not necessarily getting worse. It is already pretty deep in the Quebec market, and pretty expensive during the summertime.

That's great. Thanks, Kevin.

Thank you. I am showing no further questions at this time.

That's great. Thanks for being with us, everybody. We really appreciate your interest in Molson Coors.

As we sit here looking at 2006, I think we feel really good about our operating teams. I personally feel really good about the leadership we have around the world, and here in our headquarters in Denver and Montreal, and I think and I hope the characterization today, would give you a sense that we're focused on the things that we can control, and having strong strategies against those to build our brands, and build our markets in the right way.

Obviously we continue to operate in very dynamic markets. We'll influence those markets as best we can, but we'll do the things that are the right things to do to build our business in the long-term. As we look forward as a newly formed Company, having come through year one of the merger, I feel really good about that.

Thank you. We look forward to seeing many of you with us in about a month in New York City. Thanks for being with us today. That's all, Matt.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Have a great day!