Molson Coors Beverage Co (TAP) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Molson Coors Brewing Company 2009 first quarter earnings conference call. (Operator Instructions) Before we get started I want to paraphrase the Company's Safe Harbor language. Some of the discussion today may include forward-looking statements. Actual results could differ materially from what the Company projects today so please refer to its most recent 10-K, 10-Q, and proxy filings for a more complete description of factors that could affect these projections. The Company does not undertake to publicly update forward-looking statements whether as a result of new information, future events or otherwise. Regarding any non-US GAAP measures that may be discussed during the call, please visit the Company's website www.molsoncoors.com for a reconciliation of these measures to the nearest US GAAP results.

I would now like to turn the conference over to your host, Mr. Peter Swinburn, President and Chief Executive Officer of Molson Coors Brewing. Sir, you may begin.

Thank you, Matthew. Hello, and welcome everybody. Thanks for joining us today. With me on the call are Stewart Glendinning, our Molson Coors CFO; Leo Kiely, CEO of MillerCoors; Gavin Hattersley, CFO of MillerCoors; Kevin Boyce, CEO of Molson Canada; Mark Hunter, CEO of Molson Coors UK; Jay Perkins, President of Global Brand and Market Development; Sam Walker, Molson Coors Chief Legal Officer; Bill Waters, Molson Coors Controller; and Dave Dunnewold, Molson Coors Vice President of Investor Relations. On the call today Stewart and will take you through our quarter one 2009 results for Molson Coors Brewing Company along with some perspective on the balance for 2009. As usual we will include a review of financial results for Miller Coors, then we will open it up for questions. So let's get started.

In the first quarter, our strong brands strategic initiatives cost reductions and lower incentive compensation drove 75% profit growth for our Company. We also achieved positive pricing and local currency profit growth in each of our major markets. These positive factors more than offset continuing commodity inflation, unfavorable currency movements, a higher tax rate and lower volume especially in the UK. Our highlights for the quarter show the importance of building brands and reducing costs.

In the first quarter, we increased worldwide Coors Light volume more than 4% from a year ago. In Canada, net pricing grew as price increases across all major markets more than offset higher price discounting from primarily in the Quebec market. In the UK, based on our value-driven strategy which is underpinned by our brand building focus we delivered strong pricing growth and benefited significantly from our contract brewing arrangement and the expansion of Magners draft cider. MillerCoors made great progress in the US on both the top line and bottom line with the improving growth profile achieved for the total portfolio and for key brands. At the same time, MillerCoors achieved underlying profit growth of nearly 50% versus pro forma results a year ago. We reduced corporate overhead and interest cost in the first quarter. So we are pleased with the bottom line momentum we have achieved leading into the peak summer selling season but we nonetheless remain cautious about the rest of the year due to uncertainty around currency exchange rates rates and beer market volume trends plus continuing commodity inflation. So with that as an overview I'll turn it over to stewart to review first quarter financial results and trends and then we'll cover the outlook for 2009. Stewart, over to you.

Thanks, Peter. Hello, everyone. I'll start with the first quarter financial highlights. Worldwide pro forma beer volume for Molson Coors declined 2.7% from a year ago, driven by industry weakness primarily in the UK. Meanwhile, our underlying pretax income increased 74% to $107.5 million. This increase was driven by earnings growth from MillerCoors and our UK business along with lower long-term incentive compensation and interest expenses.

Foreign currency movements decreased this pretax profit by approximately $9 million in the first quarter, driven by a 20% year over year depreciation of the Canadian dollar and a 28% depreciation of the British pound versus the US dollar. On the bottom line, underlying after tax income of $98.8 million, $0.53 per dilute shared was 75% higher than the first quarter a year ago. It is important to note that our first quarter underlying earnings exclude some one-time expenses particularly related to MillerCoors and our Foster's cash settle total return swap as well as net special charges of $10.2 million. These adjustments to our US GAAP results are described in detail in the earnings release we distributed this morning. Also, our first quarter 2009 results reflect our adoption of new accounting standards for convertible debt ABB14 and noncontrolling interest in financial statements FAS-160 as well as the adoption of hectoliters as our standard global volume measure. Prior period results presented have been adjusted to reflect these changes. Also unless otherwise indicated all financial results we share with you today will be in U.S. dollars.

In segment performance highlights starting with Canada, our results benefited from positive net pricing along with cost inflation impacts that were more than two-thirds lower than in the fourth quarter of 2008. As a result underlying pretax earnings and local currency grew more than 13% versus a year ago. However, a 20% year-over-year decline in the Canadian dollar versus the US dollar resulted in lower reported Canada earnings in the quarter. In March this year we discontinued our consolidation of Brewers Retail Inc. or BRI which operates some carrier beer stores. We began accounting for BRI results using the equity method of accounting because we are no longer the majority holder of financial interest in BRI primarily due to our ownership interest being reduced following Labatts acquisition of Lakeport Brewing in Ontario. This change will decrease underlying Canada pretax income and corporate interest expense a similar amount. yielding no significant impact on underlying consolidated income. To provide more comparable results we'll provide year-over-year changes that exclude the reporting effects in Canada of deconsolidating BRI and upsetting of MillerCoors in 2008.

So let's review the highlights. Canada underlying pretax income was $58.1 million in the first quarter, 9.4% lower than a year ago as gains in the base business were more than offset by unfavorable foreign exchange. The weakening Canadian dollar reduced Canada segment underlying income by approximately $12 million in the quarter. Canada underlying pretax income in local currency was approximately 13% higher than a year ago including the benefit of currency hedges. Our Canada sales to retail or STRs for the calendar quarter ended March 31, decreased 3.2% versus a year ago driven by soft industry volumes in the first quarter along with our decision to limit our participation in off premise price discounting.

STRs of our strategic brands which represent more than 85% of our Canada volume was stable while sales of our nonsupportive brands declined. Strategic brand changes were led by double-digit growth of Coors Light and mid single digit growth by Carling. Partner import brands and Molson Canadian declined versus prior year. Total Canadian beer industry sales to retail declined an estimated 1.2% in the calendar first quarter. Our estimated Canada market share decreased about three-quarters of a share point in the first quarter versus a year ago.

Our Canada sales volume was 1.8 million hectoliters in the first quarter virtually unchanged from a year ago. Comparable net sales to hectoliter increased 2% in local currency driven by favorable net pricing led by price increases across all major markets partially offset by continued discounting activity. Cost of goods sold per hectoliter in the first quarter increased 2.4% on a comparable basis in local currency. This increase was due to the net effect of three factors. One, higher commodity packaging, material distribution and other input costs increased 2.5%. Two, more than a third of these inflationary increases were offset by savings from our resources for growth initiatives. And three, an increase of about 1% was driven by increased overhead cost and ongoing product mix shifts. Comparable marketing in general and administrative expense in the quarter decreased almost 6% in local currency driven by lower overhead costs and cycling higher long-term incentive compensation in the prior year. Other income increased due to $2.7 million of pretax gains from foreign currency hedges.

In the US, underlying US segment pretax income increased 52% to $94.2 million in the first quarter driven by strong underlying earnings growth by MillerCoors versus a year ago. Note that US segment results conclude our share of first quarter 2009 MillerCoors net income and various equity income adjustments which are then compared to the year earlier results reported by our legacy Coors business. Looking specifically at the total MillerCoors P&L, in US GAAP which is compared to the prior year pro forma MillerCoors results, underlying net income for the quarter excluding special items increased 46% to $216.4 million from the prior year pro forma result. This earnings growth was driven by accelerated synergy delivery, strong revenue growth, disciplined cost management and the timing of marketing spending despite continuing commodity cost pressures.

MillerCoors domestic STRs increased 0.4% versus the prior year pro forma quarter due to strong results from five of the six focus brands offset primarily by declines in Milwaukee's Best and above premium domestic brands. Domestic sales to wholesalers STWs declined 1% versus prior year. While total STWs declined 2% driven by a double digit reduction in contract brewing volumes. MillerCoors total net sales increased by 3.8% to 1.72 billion versus the prior pro forma quarter. Pricing remains strong in the first quarter as domestic net sales per hectoliter excluding contract brewing and Company owned distributor sales increased 5.6% based on 2008 price increases in the first and fourth quarters. and reductions in discounting. Pricing growth was lower than the previous quarter due to cycling of early 2008 general price increases.

MillerCoors continues to realize supply chain related synergies and deliver savings from its cost leadership programs. resources for growth and project uniform, cost of goods sold, COGs per hectoliter increased by 5.3% due to significant increases in brewing and packaging materials related to high commodity costs last year. For the first quarter marketing, general and administrative costs decreased by 9.1% driven by timing and management of marketing and sales spending and the accelerated timing of synergy delivery.

Moving to our UK business in the first quarter, we achieved underlying pretax profit for the quarter of $3.5 million an improvement of $5.5 million versus 2008. Driven by strong pricing growth, the ramp up of our contract brewing arrangement and reduced marketing and pension costs, this represents our best first quarter profit in the UK in five years. The UK team achieved this improvement despite a 28% devaluation of the British pound versus the US dollar which had a $2 million negative impact on UK pretax income.

Looking at first quarter highlights, our UK owned brand volume decreased 13.8% year on year compared to a total industry decline of more than 8%, reflecting the impact of a weak economy in the UK and our firm pricing stance with customers, especially in the off premise, which is key to our strategy to grow margins. As a consequence of this stance, we lost market share in the quarter. Comparable net sells for hectoliter of our own products increased 11.6% in local currency with approximately three-fourths of this driven by higher pricing in all channels as we benefited from price increases implemented in 2008 combined with an additional price increase towards the end of the first quarter of this year. The balance of the revenue per hectoliter increase was the result of positive sales mix partly the result of growth in draught Magners cider.

This represents the ninth consecutive quarter of year-over-year pricing growth for our UK business. For the second consecutive quarter we achieved pricing growth ahead of input inflation resulting in improved gross margins. Comparable cost of goods sold per hectoliter of our own products increased 5.2% in local currency in the first quarter primarily due to higher input cost inflation partly offset by results of cost reduction initiatives and lower pension costs.

Marketing, general and administrative expenses in the UK decreased 2.7% in local currency due to lower marketing and pension expense in the quarter. In the global markets in the corporate segment our global markets team grew volume nearly 26% in the first quarter on a small base driven by China and Europe. MG&A expense for global markets was $11 million in the quarter. An increase of $2.8 million versus a year ago. On the other hand, corporate G&A expense declined $7.8 million to $21.1 million due to lower long-term incentive compensation this year. First quarter corporate interest expense declined $8.7 million from a year ago with about $5 million of this reduction attributable to foreign currency movements and the balance due to the deconsolidation of BRI.

Net debt interest expense for the first quarter of 2008 has been increased $3.9 million retroactively in accordance with the new accounting rules for convertible debt. Corporate other expense of $21.9 million was driven by a noncash mark to market expense related to the cash settle total return swap we arranged with respect to Foster's common stock. The underlying loss for our global markets in corporate was $48.4 million pretax in the first quarter, a 22% decrease driven by lower corporate G&A and interest expense this year.

Now, highlights of our cost reduction initiatives. In the first quarter, we captured an incremental $18 million of cost savings as part of our three-year, $250 million resources for growth or RFG cost reduction initiative. These cost reductions include our 42% share of RFG cost savings initiatives that were assumed by MillerCoors which equaled $3 million in the first quarter. In addition to RFG savings MillerCoors delivered $50 million of incremental cost synergies in the quarter.

Moving beyond operating business performance. Our first quarter effective tax rate was negative 2% on a reported basis and positive 8% on an underlying basis. These rates are lower than our expected annual rate for 2009 because of the favorable resolution of unrecognized tax additions in the quarter. The first quarter is generally a cash use quarter because of the seasonality of the beer business. Free cash flow for the first quarter affected a net cash use of [$18] million which is made up of $5 million of operating cash flow plus $2 million of proceeds from asset sales minus capital spending of $20 million and $67 million of cash contributed to MillerCoors. This free cash flow result was $88 million improved versus the first quarter of 2008 due to improved operating cash flow from the US this year.

Total earned debt at the end of the first quarter was $1.57 billion, cash and cash equivalents totaled $94 million at the end of the first quarter, resulting in earned net debt of $1.47 billion. Looking forward, we continue to expect full year 2009 marketing, general and administrative expense in the corporate and global market segment of approximately $150 million plus or minus 5%. We anticipate full year corporate interest of approximately 85 million to $90 million at today's foreign exchange rates including a net effect of new accounting rules for convertible debt and the deconsolidation of BRI.

Turning to our effective tax rate, we continue to anticipate that our underlying tax rates for full year 2009 will be in the range of 16% to 20%, assuming no further changes in tax laws. Within the quarters, however, our tax rate will be volatile. We currently anticipate underlying tax rates in the range of 24% to 28% in the second and third quarters and 4 to 8% for the fourth quarter this year. Our capital spending outlook for 2009 continues to be approximately $140 million. As usual, this guidance excludes MillerCoors. At this point, I'll turn it back over to Peter for a look ahead to 2009. Peter?

Thanks, Stewart. In 2009 we continue to focus on building strong brands, reducing cost in each of our businesses and generating cash. In Canada we made a conscious decision not to fully participate in some of the price discounting in Quebec during the first quarter and this adversely affected our volume and share trends in that province. For the remainder of the year we are confident that we can manage the business in a way that keeps us competitive in all markets while generating sufficient profit to enable us to continue ongoing investments in our brands.

In the US, the MillerCoors integration is proceeding well, specifically the integration of business processes and systems is enabling faster local decision making and streamlining of costs. The MillerCoors network optimization project is ahead of schedule as are the planned brewing production relocations with more than 60% completed by the beginning of April. In addition, construction of the new MillerCoors headquarters in Chicago is nearing completion with an expected occupancy date in the third quarter of 2009. Finally, the US team is aggressively working to deliver against its stated goal of achieving $500 million of cost savings in the first two years combined operations. Our top priority in the U.S. is getting Miller Lite growing again. We believe that by focusing on taste MillerCoors new marketing program can get this great brand back on the path towards growth.

As we enter the key summer selling season, MillerCoors plan is to ramp up marketing spending on our brand portfolio to align package and product innovation with marketing messages that drive consumer trial, repeat, and loyalty. The team will continue to accelerate Coors Light growth by driving its Rocky Mountain cold refreshment message with new marketing and cold activated cans. And at retail MillerCoors will have a number of major marketing programs lined up with chain partners to drive sales this summer.

In the UK, we anticipate a challenging trading environment to continue through 2009 due to a weak local economy with commodity inflation also being a challenge. However, we believe that our UK business is now on much firmer footing as it benefits from our contract brewing arrangement, the Magners cider agreement, supplier negotiations, and price negotiations with customers. Moreover our brand strength has consistently supported positive pricing and we implemented a 2009 price increase in March. As a brand led Company we continue to grow our investments behind our brands n a per hectoliter basis.

Looking forward we anticipate that performance comparisons with prior year will become more challenging in the second half of 2009 in the UK as we cycle a ramp up of our strategic initiatives in the second half of 2008. Following are the most recent volume results for each of our businesses early in the second quarter.

In Canada, our comparable sales to retail in April decreased slightly versus a year ago. In the first four weeks of the second quarter our UK sales to retail have increased at a low single digit rate due to the year-over-year change in the timing of the Easter holiday along with improving weather. In the first four weeks of the second quarter, in the US, MillerCoors has grown sales to retail at a low single-digit rate compared to last year.

In the area of cost outlook by business, in Canada, we continue to expect our comparable 2009 cost of goods per hectoliter in local currency to increase at a low single-digit rate versus 2008 due to inflationary pressures partially offset by anticipated reductions in certain commodity and fewer inflation rates as well as savings from our resources for growth initiatives. Our UK team is targeting substantial reductions as part of our resources for growth program driven by supplier negotiations and operation efficiencies. In a challenging industry volume environment, our view for the full year 2009 is that UK-owned bank cost of goods would increase at a high single-digit rate per hectoliter in local currency. This is driven by mid single digit inflation and production exchanges related to growth in contract brewing and Magners cider. These mix changes also increase net sales per hectoliter and are a benefit to gross profit.

In the US, the MillerCoors team further accelerated synergy delivery timing, realizing $15 million in the first quarter, including some savings originally planned for the second quarter. MillerCoors has now realized $78 million in synergy savings since being formed on July the 1st, 2008. The US team expects to realize $128 million of synergies by June 30, more than 2.5 times its original goal for the first 12 months of operations. As a result, MillerCoors is more confident than ever that it can nail the synergies commitment on time and the team is already developing the next generation of cost savings with more details to follow later this year.

Finally, with regard to foreign currency impacts, if the Canadian dollar and British pound stay where they are today relative to the US dollar we would face substantial currency translation challenges in the second and third quarters of 2009. At current rates, Canadian dollar devaluation would present Canada pretax earnings head wind of approximately 15% to 20% of prior year earnings in each of the second and third quarters of 2009 with minimal impact in the fourth quarter. It is important to note that we expect our debt structure and currency hedging programs to offset about 50% to 60% of this impact on pretax earnings in 2009. Also at current rates, British pound devaluation would negatively impact our UK pre tax earnings by about 20% to 25% in the second and third quarters of the year with a 5% to 10% impact in the fourth quarter. We have no significant currency hedges focused on the British pound exposure.

To summarize our results in discussion today, the first quarter -- in the first quarter our strong brands strategic initiatives, cost reduction and lower incentive compensation drove 75% profit growth from our Company. We've also achieved positive pricing and local currency profit growth in each of our major market. These positive factors more than offset continuing commodity inflation, unfavorable currency movements, a higher tax rate and lower volume, particularly in the UK. We are pleased with our bottom line momentum that we have achieved leading into peaks in the selling season but we remain cautious about the rest of the year due to uncertainty around currency exchange rates and beer market volume trends plus continuing commodity price inflation.

For the balance of 2009 we will remain keenly focused on the fundamental that drive result in this business. Our priorities are to build great beer brands and grow revenue per hectoliter, deliver cost savings on or ahead of our commitments, generate substantial free cash and grow long term returns to MolsonCoors shareholders.

Before we start the Q&A portion of the call, a quick comment. Our prepared remarks will be on our website for your reference within a couple of hours this afternoon. Also, at 2:00 p.m. Eastern time today our investor relations team led by Dave Dunnewold will host a follow-up conference call, essentially a working session for analysts and investors who have additional questions regarding our quarterly results. That call will also be available for you to hear by webcast and recorded replay on our website. So at this point, Matthew, can we open it for questions, please?

(Operator Instructions) Our first question comes from Christine Farkas from Merrill Lynch. Your line is open.

Thank you very much. I'm hoping I can get a little bit more color on Canada. We are hearing, Kevin, a little bit more widespread discounting occurring in Quebec and it's hard to read across all the retailers what the depth of that is. Can you comment on the environment there and how it looks in other provinces and just on the back of that, is there an Alberta tax that could impact industry volumes coming up? Thank you.

Let's start with -- thanks, Christine. Let's start with Quebec where it's fair to say in the last three to four months it's extended a little bit more into the independent trade. Having said that, as you're familiar with, there is a minimum price change every year in Quebec so the minimum price has actually been adjusted up and we took a fairly conservative approach early in the quarter, certainly as we went into March and April, we've adjusted our plans and we have seen a nice bounce back in volume. So as we look forward we've got, we believe, the right programs in place, we've adjusted our costs where appropriate. We continue to have good support, marketing and sales support on our brands so we are confident that the plans we have in place are the right mix of both driving equity but also being priced competitive in that marketplace. If you look across the rest of the provinces -- I say the general comment, pricing has been taken, maybe discounting is a little bit more aggressive, a little bit in the west but I would have to say nothing in the context of what I think people are looking at with respect to Quebec. And, yes, there is a tax change in Alberta that was just enacted in the latest budget.

Now, can you help me with the currency? I'm under the impression there is some natural hedges but we are seeing a 20% hit on your profit line. And also about a 20% hit on total tax pretax so I'm trying to understand where there might have been a benefit. Can you give us the top line hit on Canadian FX and how the rest of the P&L might have offset some of that increase?

Christine, if it's all right with you, could I switch that over to Stewart to answer that?

Certainly. Certainly.

Yes, Christine, just to highlight here there was about 11.7 million FX impact on Canadian earnings for the quarter. Some of our hedges, which we have in place, actually flow through the Canadian P&L so that you can more easily see the net impact in Canada. There's a 2.7 million benefit coming through that P&L in the -- in the first quarter. It's also important to realize since a bunch of our debt is Canadian dollar denominated we actually save on interest costs when the Canadian dollar depreciates. So as Peter mentioned, we have got about 50% to 60% of the Canadian earnings covered. But there is still a fair bit of exposure.

Okay. Great. And last question, if I could, Peter, on your holdings in Foster's. I know there was a mark to market hit. Can you talk about the losses or the mark to market losses to date and if your view on this financial instrument or strategic interest has changed at all?

Yes, certainly, Christine. Our view on Foster's has been pretty consistent and it's not going to change. And that is that we like the flexibility of the cash settle swap. We reserve our right to either increase that or decrease it or stay the same so really nothing has changed s far as we're concerned on Foster's.

Thank you very much.

Thank you. Our next question comes from Carlos Laboy from Credit Suisse. Your line is open.

Good morning. Good morning, everyone.

Good morning, Carlos.

Peter, I was hoping you could expand a little bit on that previous question with the Loblaws arrangement -- Labatt looks like it's renewed it for at least another year. Can you expand on your market response in terms of pricing, in terms of price caps for Coors Light in particular in Quebec? And I guess the big concern is, is there enough cost to cut out that you don't have to cut into market spending for Coors Light?

I'll let Kevin give the details Carlos, but I think just as a sort of context, if you like, we have always taken the view in Quebec that we have a strong brand portfolio that will always be successful on a relative price platform. And I think we probe that every time we step in the market. We are very comfortable about the spend of our brands in that market. And as I said, I think in the preamble, we always have had and will continue to have a bias to invest behind our brands both in good and bad times. We are not going to come off that. So I don't think we will talk about the detail of what we are doing but I will pass it over to Kevin just to give slightly more detail, perspective on Quebec.

Carlos, I think your first question was with respect to did Labatt's renew their deal or was a new deal put in place at Loblaws and yes, our understanding is it probably is another year. I would say that we are back in in a more meaningful way in Loblaws so we will see a different trend this year and that we look at as positive. When you look at -- I think your second question about -- are we confident we can take out the cost so that we are not going to have to alter our brand support -- the programs that we've identified focused in Quebec and elsewhere, we are confident that we have got the appropriate balance and that we will be able to put the amount of money that we think is necessary behind all of our brands in Quebec and indeed, nationally.

Have you had to cut back market spend though?

Market spend in the first quarter is pretty flattish with a year ago.

Thank you.

You're welcome.

Thank you. (Operator Instructions) Our next question in queue is from Judy Hong from Goldman Sachs. Your line is open.

Thank you. Kevin, just following up on Canada again, I think you said the FTRs actually were down slightly in April which suggests sequential improvements in the first quarter. Is this driven by just more discounting or has the industry gotten a little bit better as we enter into the second quarter here?

If you look kind of, there has been two different aspects over the last four months. The first two months, January and February were fairly soft. If you just took March and April together -- March and April the industry has grown as have our shipments. So clearly a bit of a soft start. There's a whole bunch of reasons, leap year, that we can all get into. I would say of late that the industry is better. I think there is still concern about the economy and we are seeing some trading down and a little bit -- a touch of southness here and there. When I talk about a touch I'm really talking about some very modest changes and certainly we are encouraged by what we've seen in March and April.

Okay. And then just on pricing, it sounds like as the quarter progressed you've become a little bit more aggressive on discounting. You've talked about getting back in Loblaws with more discounting there. Is the 2% pricing in the first quarter, is that number going to moderate as the year progresses in terms of your initiatives with some of these discounting activities?

I think it's important to remember when you compare to a year ago on the first quarter by and large the pricing activity in Quebec was much more benign so as we go into the rest of the year we will be cycling some of the spending that we did in the last nine months and specifically in the summertime. I don't feel comfortable giving you an estimate going forward but I think that was important background to get into and a lot will depend on a combination of how everybody is doing in the marketplace, what the industry's performing like and to be honest I don't think the weather last summer was very good, particularly on the weekends so as we look forward we would love some nice, warm, long weekend weather.

Okay. And then Peter or Stewart, if we look at your tax rate, obviously the long-term tax rate is pretty low compared to other companies. To what extend would the current proposal by the administration in terms of changing the foreign taxes could have an impact on your long-term tax rate?

Two pieces there. Given the current laws we feel pretty confident that the guidance we've given you with respect to our tax rate is good. With respect to some of the recent announcements we really haven't seen enough detail yet to be able to opine on the impact specifically on our numbers and once we do see that detail we will be able to share that with you.

Okay. Then my last question -- Stewart, just given the strong performance that you have seen in the first quarter, is there any changes to your cash flow outlook for the full year?

No. We are going to continue to hold to the numbers that we have given you already. I think that's a place we feel comfortable with.

Okay. Thanks.

Thank you. Currently I have no other questions in queue. (Operator Instructions) Our next question is from Mark Swartzberg of Stifel Nicolaus.

Good morning, everyone. Canada is the topic du jour, I guess. A couple more questions there -- the shipment number flat FTRs down on the order of 3. What were the causes for that spread and what do you think that implies for the relationship in the second quarter and looking out?

Yes, Mark, thanks for the question. Most of the shift was actually in the stub period between Christmas and New Year's. So there was a big shift versus the year before. And that's the majority of the change, if you look at the biggest single drivers. That's the majority of the change. So that shouldn't affect the future periods, if you like.

Got it. Great.

Mark, what Kevin is saying by stub period, that's the, essentially the difference in calendars for STWs versus the calendar for STRs. Particularly when you have a holiday like New Year's or Canada Day at the crossover of a quarter, you will get some shifting there. What he is saying is it's not primarily an inventory issue.

Got it. That's helpful. And then also, more on the financial side -- I don't know if this is for Stewart, but you gave us the 4X hedge benefit in the other income line, the $2.7 million. Was there also a benefit in Canadian COGs and if so can you give us that amount?

We haven't provided any guidance on COGs.

Is it fair to say there was a benefit?

We really haven't gotten into any of the details around that. What we shared with you the $2.7 million specifically in our specific hedge agreements that's, you're seeing that flow through there. I can't give you any specifics on COGs.

Okay. And then back on the tax rate -- could you just repeat what you said in your prepared remarks about how you see that laying out in the second and third quarter?

Yes. If you look at the biggest impact on volatility of our tax rates it's related to the FIN48 provisions which require us to put some of those liabilities on our books. If they unwind that creates a lot of volatility in the numbers. If you then look at our number this quarter it's obviously negative. It's very low because of the unwinding in some of that. We expect the range for the year will follow the guidance that we have given you but specifically to your question, we are seeing quarters two and three that -- two and three the rate will go up. We think somewhere between 24% and 28%. And then we expect Q4 will see that come back down again to somewhere between 4% and 8%. Is that helpful?

Yes. Thanks, Stewart. Thanks, Ken.

Welcome.

Thank you. Our next question comes from [John Bowger] of JPMorgan. Your line is open.

Yes, good morning, everyone. I was wondering if I could ask a question about the US business. You talked a little bit about the potential for improvement in Miller Lite. So can you talk a little bit about the order of magnitude of expectation there? And then also as I look at successful campaigns in light beer over the last decade or so, it seems to be more sort of specific attribute focus, whether it's low carb or cold, what have you, and I guess what's going to be different about taste this time which doesn't really seem like it's been a big motivating factor in this segment over the past decade or so? Thanks.

This is Leo. Tom, are you on the line?

Yes.

Yes, you want to take that?

Sure. The light trend improved from around minus 7 to minus 4.5 in the first quarter versus fourth quarter last year and as you know, we shed some rented volume, particularly out in the west and did a pretty good job of net revenue management with Miller Lite. In fact, for the last two quarters, the net revenue per barrel of Miller Lite has been the strongest in our portfolio. And that's been the result of letting this portfolio work. And finding the right balance in each of our markets.

Now, of course, minus 4.5% is below our original aspirations but the trend line is getting better and our April numbers are even better and sales of that Miller Lite pint, an aluminum pint have been accelerating so we are ambitious for the brand and we expect the trend to continue to improve throughout the year. In terms of your point about the evolution of light beers, functionality combined with an emotional reason to buy tends to work. And you're right. A functional point of difference has worked. Miller Lite's had great taste since its inception. And we brought that back to life with a reason to believe called triple hops brewing which we're seeding and we will move that campaign on through with some innovation around the taste protector lid and some other innovations in the package this summer. And we'll follow it up and balance it out with some more emotionally driven advertising which we showed our distributors in March called taste greatness. So we think we will have a good combination of functional benefits and emotional reasons to drink. But most of this decline in Miller Lite is really not about the change in positioning. It's really about a change in strategy and how we have Miller Lite work with the portfolio, how it and Coors Light and MGD 64 work together to create a portfolio of really strong light beers with clear positions. So that's the context I hope you take Miller Lite's position in.

Great. Thanks.

Thank you. Our next question is from Christine Farkas of Merrill Lynch. Your line is open.

Thank you for taking the follow-up. Stewart, I'm wondering if you can help me with the joint venture accounting if you will? It looks like on your cash flow there was about an 86% pay out of those distributions into cash. Can you maybe help us with how much CapEx there was in the JV and depreciation? I believe that flows through that line. Just help me reconcile that. And then on the back of that, the depreciation that Molson Coors adds below the line in terms of their share of the MillerCoors earnings is very volatile. We've seen $3 million added back in the first quarter. Very different than the $36 million added back in the second half of `08. How does that look for the rest of the year and once we anniversary the depreciation does that line go to 0? Thank you.

Let's take the first part of your question. I think we will need to revisit the second part. If you first look at our cap distribution arrangements with the joint venture, we basically are receiving payments from the joint venture which closely correspond to their EBITDA plus or minus changes that come through in working capital. You will see that. That's the $80 million or so -- $84 million that we took in this period, right?

Right.

That does closely correspond and obviously there's some working capital impact there. The cash that went out to MillerCoors, $67 million, is reflected on the various CapEx needs that Miller -- that Coors had and that will encompass both of their synergy spending as well as their regular CapEx requirements. Hopefully that answers the first part. I'm sorry, can you give me the second part of your question again?

Sure, but on the first part the cash flow that went out, the $67 million, that's not included in the distribution line or in your CapEx line on your cash flow statement, correct?

It will show up in two places. The cash flow that we get back from them will show up in our cash flow from operating activities so that's $84 million coming in.

Okay.

But the CapEx, the cash flows going back to them will go out as cash flows from investing activities.

So that $67 million includes CapEx that you would have put into the quarter?

That's correct.

Great. And the second part was really just about the depreciation below the line of what you add back in. Pulling into Molson Coors the depreciation number was near $30 million in the fourth quarter but $3 million in the first. I'm just wondering how to model that going forward?

Yes, you're talking about with respect to MillerCoors?

That's right. For MillerCoors and then pulling it into -- right from MillerCoors and then the Molson Coors share.

We actually don't have that in any separate lines so the only two lines that will be affected relative to MillerCoors cash flow were the two that I just highlighted.

Okay. Thanks for that.

Thank you. (Operator Instructions) I'm showing no further questions from the phone lines.

Okay. Thank you very much, Matthew. Thank you, everyone, for joining us and thanks for your interest in Molson Coors. We'll no doubt speak to some of you in the interim but probably most of you we'll speak to at the next quarter results. Thanks very much. Thank you, Matthew.

Thank you. Ladies and gentlemen, thank you for your participation in today's call. This does conclude the program and you may now disconnect.