Molson Coors Beverage Co (TAP) 2013 Q3 法說會逐字稿

Welcome to the Molson Coors Brewing Company third-quarter 2013 earnings follow-up session conference call. Before we begin, I will 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. Please refer to its most recent 10-K and 10-Q 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. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made, regarding any non US GAAP measures that may be discussed during the call and from time to time by the Company's executives in discussing the Company's performances. Please visit the Company's website www.molsoncoors.com and click on the financial reporting tab at the Investor Relations page for reconciliation of these measures to the nearest US GAAP results. Also, unless otherwise indicated, all financial results the Company discusses are versus the comparable prior-year period and in US dollars. The Company also encourages investors to read SABMiller, plc news releases and trading statements that include financial and other information relating to its MillerCoors joint venture.

I will now turn the call over to Dave Dunnewald, Corporate Vice President of Investor Relations for Molson Coors.

Thanks, Tracy. Hello, everybody, and welcome. On behalf of Molson Coors Brewing Company thank you for joining us today for our third-quarter 2013 follow-up earnings conference call. Our goal in this call is to address as many additional earnings related questions as possible following our regular earnings conference call with Peter Swinburn, Gavin Hattersley and our business unit CEOs earlier today. We will use a standard question and answer format and we anticipate that the call will last less than an hour.

Let's get started with an introduction of the team with me on this call. We have Kevin Kim, Investor Relations Manager; Spencer Schurr, Finance Forecasting Manager; Katie Walters, Senior Forecasting Analyst; Erik Mickelson, Manager of Technical Accounting; Ashley Walker, Manager of SEC Reporting; Brian Table, Senior Director of Technical and SEC Accounting; and Mark Saks, VP of Tax.

As Peter Swinburn mentioned on our regular earnings call earlier today, in the third quarter Molson Coors increased underlying after-tax earnings nearly 8%, expanded gross margins and underlying pretax margins and grew underlying EBITDA and free cash flow. As we anticipated on our earnings call last quarter, consumer demand was weak across our markets. Despite this, we have continued to invest in our core brands. Our innovation pipeline is delivering a mid single-digit percent of sales and our owned above premium brand portfolio is growing at a double-digit rate globally. We also made progress on our global cost savings and cash generation targets, paid down nearly $282 million worth of net debt in the quarter, and continued to standardize processes to reduce complexity and improve efficiency. Across our markets we continue to see weak consumer demand and shifts in consumer preferences that will impact our business for some time. In that environment, however, we will accelerate our commitment to transformational efforts to grow our brands and make Molson Coors more competitive and to drive total shareholder return going forward.

So with that, we'd now like to open it up for your questions. Back over to you, Tracy.

(Operator Instructions)

Mark Swartzberg, Stifel Nicolaus.

Couple questions related to Canada, trying to better understand the Modelo change there. Just looking through the Q, it sounds like you add those numbers that Stewart was referencing. In other words, the Q talks about a year-to-date number of $9 million in equity income, and then a year-to-date number of I believe, if I'm reading this right here, $9 million in reimbursement for some costs. Is that the right way to think about what's going away? Obviously, we don't know what the future number would be. In terms of what the run rate numbers have been, is that the right way to think about that?

I think that's a good start, especially from a year-to-date basis. I think from your perspective it's also useful to know that on an annualized basis, say in recent years, the equity income from those brands in Canada has been in the range of $12 million to $15 million pretax per year, which flows to the cost of goods line. Then, we had $5 million to $7 million worth of what we call administrative fee reimbursements. Those hit the MG&A line. Then in addition, we have some variable costs of $3 million to $5 million that have been reimbursed. Those variable costs go away, so when the brands go away, those costs go away with the brand. The other elements, the first two that I mentioned, that's equity income that we won't get. In the sense we're getting paid for that through the $70 million payment from ABI for --

Got it. So, it's really those first two items that Stewart mentioned that are more the go-forward loss?

Yes, if you're looking for call it impact in the absence of any changes in the Business, in other words, any additional brands we might drive through the Business through innovation or what have you, then, yes, in other words, static, steady state, that's what the impact has been in recent years of those brands.

That's great. Okay. Then kind of in that same vein, could you remind us where you stand in Canada with this lawsuit relating to the Miller brand?

Yes, right now there is no significant update, I guess. At this point, we have a temporary injunction so that we continue to manage the brands. We think we're doing -- well, we're working hard to manage those brands in a way that's right for them in Canada. At the same time, we have a court date in December.

December. Got it. Do you have rough market share figures for the Modelo portfolio and the brands that are subject to this suit in the case of SABMiller?

Yes. The Modelo brands are low single-digit percent of our portfolio in Canada, as a percent of our STRs. Then the Miller brands, same thing, low single-digit percent.

On a market share basis also, low single digit?

Oh, yes. So, lower single digit.

Lower. Okay.

39% market share in Canada.

Great. That's my more business question. What do you think -- so next year you're going to be competing, call it 3 points lower than 39% because of the Modelo impact and Lebatt will be competing 3 points higher. I think their share's around 40%, 41%. What do you think that in-market marketplace affect will be? Obviously, you have of Coors Banquet being introduced. In terms of getting the shelf space and being able to compete for attention at the shelf, how do you think that will affect you?

In essence, in Canada if you stack up all the brands we have from top of the category to the bottom of the category, we believe we still have a very strong portfolio in Canada. We are working on an ongoing basis to enhance that portfolio. We've evidenced that with recent moves in that marketplace. We now have the largest selling cider in the market. We obviously have the largest beer of any -- largest beer in the marketplace in Coors Light, Molson Canadian's doing well. We have strengthened our sub premium or value offerings in that market. We feel good about the portfolio we have, and we're just going to continue to drive it forward. You're right, though, that this does have a share impact, but it's relatively modest, at least in absolute numbers.

That's great. That's very helpful. Finally, Coors Banquet, I think your MillerCoors release said 7 consecutive years of growth in the US. Just trying to get some sense of dimension, potential of that brand in Canada, how you guys are thinking about it? Obviously, it's new there. Can you give us anything to think about how your thinking about its potential there?

Not a lot of specifics, but I would say right. Banquet has 7 years of growth in a declining segment in the US, and really has done nicely in the face of not only that but some very tough macroeconomic times. In Canada, there's a lot of spillover in brands, messaging, a lot of spillover across border between when you have brands between the US and Canada. It works both ways. We're really excited about the opportunity for Banquet in Canada because obviously it's doing well in the US and has a long heritage. We think that will ring true with a lot of Canadian beer drinkers.

Do you know offhand portion of mix or market share in the US?

The easy answer is low-single digits, but -- I mean, really low. It's a relatively small brand. You figure Coors Light's essentially high-single digits, then Banquet would be low-single digits.

Fair enough. Okay. Great. Thank you, Dave.

Ian Shackleton, Nomura.

I have a couple of areas I wanted to follow up on. First, there was quite a bit of talk around further cost cutting moves in Canada. If I written it down properly there was some talk about completing the efficiency structure by mid 2015. I wonder if I just got that right? Really, what I'm trying to get as well here, is this all part of the programs that were announced Investor Day in the summer? Or are we actually thinking about further programs on top of what was envisioned at that stage?

Yes, this program is envisioned in the $40 million to $60 million of cost savings that we committed to in June or talked about in June. As you may recall, actually, Gavin Hattersley said at the high end of that range for the next 2 to 3 years and the $40 million to $60 million overall for at least 5 years. Really the main point is we're looking at ways to make sure that our cost structure is competitive on an ongoing basis. This isn't necessarily the end of the line on cost savings even within that $40 million to $60 million that we talked about.

And so the importance of the mid-2015 date, did I get that down correctly or --?

Sorry, yes, you heard it exactly right. That's what Stewart said. The reason is, any time you have what I would call a broad-based benchmarking type of exercise in a business, then some changes can be done relatively quickly and some take quite a bit longer.

Right. But was that particularly talking about the production infrastructure or is that across the whole business?

Well, when said wrap up mid 2015, he was really talking about the overall effort that he was referring to. In other words, across supply chain and G&A and so on. I would tell you, though, that generally speaking, the supply chain takes more time because you're dealing with processes and breweries and just figuring out how do we make this more efficient.

Understood. Thanks for that. The second thing I want to talk about was, I think Gavin mentioned early on about debt repayments. I just wondered what we should be thinking about for the average coupon for next year, really, for FY14.

Okay. Let's see. There are two ways you could attack that. One would be just to look at the debt that we have outstanding in the 10-Q and you could tote up a coupon from that, which would get you -- sounds pretty close to me. The other way to think about it is, now that the -- I guess piece of perspective I'd add is, now that our convertible debt is substantially all paid off, then the cash coupon looks an awful lot like the book coupon, so that will make the math a little easier.

Okay, but if we pick up the Q, that should give us really all the pieces that we need there?

Yes, it's all right in there. Brian, may even have a page number for you. Give him a second.

Page 26, footnote 12.

There you go. He's not familiar with that document, is he?

I'm very impressed. Thanks a lot. Thanks, Dave. Thank you.

(Operator Instructions)

Judy Hong, Goldman Sachs.

First, just on Canada, so the gap between sales volume and STR of about 2 points, I think you called out some inventory destocking. Can you just give us a little bit of color on what happened in the quarter? Is this something that will be ongoing or does this reverse next quarter?

Good question. No, actually what happened was when we rolled in to second quarter this year, we wanted to make sure that we had a little bit more robust inventories in some particular channels on certain particular brands this year versus what we had last year. So, we ended the second quarter this year with a bit higher inventories in trade, so to speak. That's wholesalers, in some cases retailers, in some cases in transit and in other cases actually governmental entities when you're talking about Canada. We wanted a bit more inventory in the second quarter leading into peak season. We accomplished that. We ended the second quarter with a bit higher inventories in those channels, so to speak. Then, essentially, they brought them back down by the end of the third quarter, so at the end of the third quarter this year on a year-to-date basis we're essentially in line with prior year.

Okay. Got it. Then, just on the volume performance in Canada, I think you have given some of the brand numbers, but I don't know if you've actually quantified how much Molson Canadian was up and Coors Light was down and others. Could you help us just go through your key brands and the volume performance in the quarter in Canada?

Yes, sure. I can give you a few headlines on that, at least somewhat general. Let's see. We said that Molson Canadian performed relatively well, actually picked up some share in the quarter. The market was down about 1% and Canadian was down less than the market. Coors Light was down call it a high single-digit rate. Let's see, what other ones do you care about? Obviously, Coors Banquet was up strongly on a 0 base from the year before, which isn't particularly meaningful. Keystone Light is a relatively important brand. That one grew at a double-digit rate, as you may know, the value segment in Canada is a growth segment unlike in the US. Then other important brands, we've got the Carling brand up in Canada and that one declined slightly. Our craft brands, importantly at the top end of the category, such as Rickard's and Creemore and Granville Island, all grew at healthy rates and gained share.

Okay.

Does that give you a head start?

Yes, that's helpful. Just on Coors Light's high-single digit decline, how much of that was the Iced T portion versus the underlying Coors Light?

Yes, Iced T was a factor. That brand still would have been down at least mid-single digits without Coors Light Iced T.

Okay. So, the point there is you had the benefit of the Iced T last year. On top of that, you probably had more activation on the underlying Coors Light given the Iced T launch and other activities that you had implemented last year. So, lapping that made the Coors Light more challenging?

I would say that's exactly right. We had some challenging comps around Coors Light not only related to Iced T, but also related to weather. I would say this year we had fewer impact promotions than some of our competitors. When you have the biggest brand in the market, that can have a greater impact than if you're a smaller brand. These are things that, along with new ad copy and so forth that Stewart talked about this morning, that we're working on around our largest brand in Canada.

When you looked at the October trends, Canada up low-single digits and STR, are you seeing some moderation in terms of the decline in Coors Light in that context?

I would say that we are seeing -- I'm not going to drill into October STRs for Coors Light, but let's say more broadly in October you do have the return of hockey which is a good thing. You also -- but then as Stewart mentioned earlier this morning, that we're still going against a really relatively tough macroeconomic environment and call it weak consumer confidence and some promotional challenges in the Canadian market. Those things continue and it is nice to pick up hockey, but you can't lose sight of those other pieces as well.

Yes. Okay. Then on the COGS line for Canada, just the sequential moderation. I guess we'd always expected the back half to be a little bit more favorable, but just seems like the drop in the third quarter versus the first half was a bit more dramatic, and especially given that volume was also negative, so you're still kind of suffering from the fixed cost deleveraging. Anything to call out there? Was there any timing benefit or anything that helped your third quarter COGS per unit in Canada more?

Sorry, in the third quarter?

In the third quarter, yes.

No, nothing comes to mind. You know -- let's see. No, I would say that there's very little hockey benefit that we would pick up in Canada. The increase in MG&A expense actually is more of a challenge in the fourth quarter than in the third quarter.

It was more of a COGS comment. Your COGS were, in Canada, up in 1.5% or so in the third quarter and it's been running 6%, 6.5% in the first half.

We did have a bit more cost reductions in the third quarter, but they can have a little bit of ebb and flow there. I wouldn't call that a major factor. No, I don't think there was anything in particular that comes to mind. I mean, you have normal -- think about the cost of goods line in a business that size, it's made up of thousands of different lines and entries that build up to the final COGS line. We've seen some favorability on some pieces of the input inflation line, if you will. I wouldn't call that a major driver. As I say, there's just a bit of an ebb and flow to that type of line, within that kind of range is not uncommon.

Right. Okay. Got it.

Our guidance is maintained for the year.

Right. But you have a wide range in terms of mid single digits, particularly?

Yes, right.

(laughter) Okay. Then just in terms of the free cash flow, the first with the CapEx coming down by $30 million or so, can you talk about what's driving the decline? Is it more timing or are you deciding that some of the projects are not worth spending in this year?

Well, every year we like to be very tight on capital and so that's not new. I would say, if anything, we're raising the bar on that with the pack model that Gavin's talked about, that we're pushing through the organization. It's all about returns on capital.

Okay. And the free cash flow guidance coming up towards the upper end of that $700 million, plus/minus 10%, is it mostly just CapEx?

Mostly CapEx? Well, that would be one factor, but really our free cash flow is built on a lot of different things, including working capital, obviously, financial performance and so it's not just CapEx.

Okay. Can you remind me how much you have left in the cross-currency swap settlement?

Yes, we'll see if Brian or Spencer can come up with the specific number, but my recollection is we have -- I don't have to recall. Brian's finding it.

As noted in the 10-Q, we have $134 million outstanding as of the end of September. However, we settled an additional amount early in the fourth quarter of an additional $51.4 million.

That leave us with a net out of the money of about $80 million then?

Approximately, it does move with --

It'll move with FX and other, call them, adjustments, but that's -- well, primarily FX, but around $80 million left, Judy at current FX rates. I should say end of quarter FX rates, shouldn't I?

Okay. Is the plan just to settle all of that this year or is some of that get spilled over into 2014?

We'll see. It's due in 2014, but as you can tell because actually the stuff that we just settled was due in 2014. We make decisions in that area, an ongoing basis, depending how much cash generation we have and what the pros and cons are from an organizational -- I shouldn't say organizational, from a shareholder value standpoint. In other words, what makes the most sense.

Okay. Got it. Thank you.

Bryan Spillane, Bank of America.

Couple questions. The first one, if you look at the MillerCoors JV, I think the savings, cost savings identified in the quarter was $33 million. I know we were modeling something more like $25 million. Was there any benefit at all from the headcount reduction that was just recently announced? Or, was there any other unusual thing that occurred in the quarter, just to cause that to be as high as it was?

Short answer is, no, not related to the announcement. That announcement was certainly not implemented before the end of the quarter. As with some of the other things we've discussed about cost of goods, for example, there can be a bit of an ebb and flow to cost savings as well when they come in, so to speak. We had a lot of supply chain savings in MillerCoors in the third quarter, but also some logistics, some productivity, brewing process. I mean it's the usual types of savings, but just the mixture and magnitude was a bit different in the third quarter.

Okay. Just on MillerCoors again, the price mix was helped a lot by mix. That's a function of some of the new products. Just trying to get a sense, because the cost per COGS per hectoliter is also up. As we try to model out just how to think about how a higher mix of those products, like Redd's for instance, affect the P&L? Is it somewhat neutral in terms of what happens on the gross profit line, meaning they're a higher revenue per unit but not necessarily a higher gross margin per unit?

You're thinking about it in the right way. NSR per hectoliter, net sales revenue per hectoliter, is higher on brands like Redd's. The cost of goods are higher as well, generally speaking, on the above-premium brands. But these are good margin brands. I'm not going to be too specific, but if we have above-premium brands, unless it's a situation where we're giving the lion's share of the profit stream to the brand owner. We've seen that in, for example, in the Modelo brands in some markets and that sort of thing, then above-premium generally means healthy margins.

Okay. So, theoretically, they would be a higher-gross margin? Then in the comments that Tom made on the call about there being the payback period or the breakeven period maybe being on some of these new ones 3 years is more just a function of what's being spent on marketing and SG&A as opposed to there being a real gross margin differential?

Yes, Tom's comments I think, right, they go largely toward the -- talk about essentially toward the flow of the MG&A investment in the brands. The gross margins don't change significantly as you move through the introduction. Again, you're thinking about it in the right way. Above-premium brands tend to have more robust gross margins than value brands, for example. Sometimes you have scale differences that you need to take into account, but for the same-size brand, that generally holds true.

Okay.

There's one other thing I'd add. We talk about innovations and how we're spending more behind them. I'd also throw into the mix packaging innovations can add cost and generally also revenue. That's another mix component, but I would say not as important as the new brands like Redd's and Third Shift that we talked about previously.

Okay. Just following back on Ian Shackleton's question earlier, if I was just trying to think about the shape of net interest expense next year, I guess I've got two components that are going to affect it, right? It looks like, I inferred from what you said earlier, although, I admit I haven't looked at page 26 in the Q yet. Is the interest rate, the coupon rate's going to be lower next year? Then the other thing I'm factoring in is if you're targeting what your leverage ratios are going to be by the end of next year, I'm going to have some debt reduction as well. I should have some leverage, positive leverage on the net interest line next year, just based on those two components. Is that right?

Debt pay down, yes, that is our priority cash use. I'll let you decide how you want to actually model that out, but that makes a lot of sense. When you say the coupon's lower, actually I'm not sure I'd -- it depends on how you define coupon. If you really mean the average percent paid on the debt?

It's the average rate, yes, you'd pay on your debt.

Yes. Actually, the debt that we paid off -- well, this year it was a mixture. On a book basis the 5.75% convertible was actually on the high side for coupon.

Okay.

Obviously, it was paid off end of July. However, the zero coupon Euro convertible, on a book basis, that was extremely low coupon. I think you might actually be more successful modeling it out, just take the debt outstanding, go to the page 29 or 26 that Brian mentioned. Then, you can get an average coupon for an amount of debt and then at the same time think about what you think we might be able to accomplish as far as debt pay down goes. I think that will get you closer. Having said all that stuff about the coupon, I mean, yes, we have less debt outstanding so lower total interest expense. We'll see what rates do on some of the debt that is outstanding, revolvers or what have you. I'd say you ought to be able to get an estimate off of that.

Okay. Then just on the tax rate, we've got this hypothetical factor in the future where the tax rate would go back up, migrate back up to a more normal tax rate, but we're not really sure where that is in the future. You maybe, but we don't. (laughter) I'm just trying to understand, I mean, from this year's tax rate coming in lower than what was originally thought, if I understood everything that was said, it's largely a function of some changes in statutory rates in Canada and some other, those types of things and not necessarily settlements that happen to come up and take your tax rate down. A, is that true? Then, B, just as we think about the ramp to a more normal tax rate, how much is left still of tax matters that are unsettled that have to be settled? As we start to think about modeling the tax rate next year and over the next couple of years, how steep do you think that curve is or is has the slope of that curve changed at all?

In Canada, it was actually tax law changes. The rates didn't actually change. We've got some FIN 48 roll offs and that also had an effect. That's just detail. What I would want to know, if I were you, okay 13% to 15% tax rate for the year, about 4 percentage points of benefit from one-time tax stuff including the things I just mentioned. That gets you to more of a call it a normalized rate, if you will. Then we said that we expect to move toward that 20% to 24% long-term tax rate over the next few years, which I define that as 3 to 5 years. Stuff could change. Obviously, all that is caveated by assuming no changes in tax laws and those types of things.

It just feels like it's been 3 to 5 years for the last 10, so I'm just trying to understand if we're closer to the --?

That's a fair question. Of course, the reason is, we've actually seen corporate income tax rates coming down around the world except of course in the US. That's been really significant in Canada, the UK. We've added the central Europe business that has relatively low tax rates, average of 10% to 20%, depending on which country you're in. If you put all that together, you're right, that progression has been delayed for those reasons.

Okay. Then just one last question. Related to the asset write-downs in StarBev, if you've changed the cash flow expectations for those brands has it changed the cash flow expectations in total for what you thought StarBev in aggregate was going to generate?

Yes, the value of the brands are lower. The way that they are valued is discounted cash flows. The best answer is we reiterated our guidance that we expect to be driving what we call shareholder value or ROIC over WAC in the 3 to 5 year time frame. I would also emphasize that while those two brands warranted a write-down based on impairment testing and DCF valuations and those types of things, we had other really substantial brands that actually grew in value. Gavin mentioned earlier today, Staropramen and Ozujsko and some others in that market and the overall Europe segment valuation is certainly above carrying value.

Okay. Does the write-down at all affect what your ongoing depreciation and amortization would be? Also does it have any affect on your tax rate? Like is there a loss or some other benefit that you'd get at some point down the road because of that? A credit, I should say.

The brand in Czech Republic, that one actually is moving to a definite lived, Ostravar, a definite lived depreciation schedule, but that does not have a significant impact on our overall depreciation, call it flow, if you will.

Okay.

I'd say in that case, not particularly. I don't think I want to front run the tax folks on what the implications are for tax around brand write-downs, but if we have anything significant there we'll update you at the right time.

All right. Very helpful. Thank you, Dave.

Pat Posey, Beutel Goodman.

Question for you, just with respect to Canada again. Just want to get a better handle on the volume and the mix. If you look at it over the last few years, has the volume decline been larger in bottles versus cans? Has that been one of the negative factors when you call out mix?

Broadly speaking, absolutely, the volume challenges do lean much more toward bottles, especially in the east. That does create a cost challenge because you have to continually adjust your cost structure around returnable bottles. Saying that that's a driver, a specific driver of mix in any given period, I'd say it doesn't top out that way, but over a longer period of time it is a mix challenge for us. If you mean on -- I'm talking specifically about the cost of goods line there.

Yes, that's exactly what I wanted to get at. That's right.

If you're talking about revenue, then that's a different he question and I'd say kind of a minimal impact.

Then that's been one of the challenges with you not being able to lower your COGS factor, or control your costs better?

Well, it's one of many challenges, along with input inflation and pension costs and all kinds of other things, fixed cost deleverage. So, it's one challenge.

Okay. Thanks, Dave.

Jesse Rienhart, Stifel Nicolaus.

Quick one for you on marketing spend. Just trying to get a sense of the size of the uptick. First, in Canada, I know you guys, after the second quarter, had talked to a $12 million benefit from the timing of marketing. I'm trying to figure out, it looks like this obviously hasn't been recorded in the third quarter. Is there anything you can give us on what size of an uptick we should be looking for in the fourth quarter?

Yes, very good, very observant of you. We did say that in the second quarter and that is correct, we did not see a significant uptick in the third quarter. It's largely to be resolved in the fourth quarter.

Got you. So, all of that $12 million is going to be in the fourth? And then can we assume -- obviously it was down again in third. Do you think it will be in addition to $12 million or should we view that as the run rate, I guess?

I would say we had a benefit in the second quarter and we anticipate that that benefit will largely reverse in the fourth quarter. So, I don't think I'll isolate on the third quarter for you.

Okay.

And I'd reiterate that that's partially driven by NHL activation and related stuff, related expense.

Great. Quickly on Europe, you guys said on the call that you're expecting higher MG&A in the fourth quarter. Is that relative to the third quarter? Is that relative to the year? I mean, obviously, you guys were up mid-teens in the third quarter. So, are we supposed to expect an uptick beyond that?

Right. Didn't say specifically how much, so I'm not going to narrow it down much. But, the statement was that we expect higher Europe MG&A expense in the fourth quarter. That sounds like a percentage increase year over year in local currency.

Okay. So, year over year. Great. That's helpful. Thank you.

(Operator Instructions)

Rob Ottenstein, ISI.

Dave, couple of follow-up questions to some of the prior questions. In terms of the brands where you had the write-downs, roughly what percentage of your volumes did they represent in Serbia and Czech Republic?

I'm not going to break it out by country, but the Ostravar brand in Czech, it's our third largest brand in the Czech Republic. As you may know, we have somewhere in the teens share between 10% and 20% share in that marketplace. You can tell the third largest brand is not all that big. Staropramen is a decent size brand in Czech Republic, but not Ostravar. Jelen is our largest brand in Serbia, so it is a significant brand in that market. I would say of the total Europe segment, we'd be in the mid single-digit range for those two brands as a percent of Europe. Obviously, globally it would be much lower than that.

Okay. Would it be fair to say that the brand in Serbia was more of an issue with Serbia, whereas the one in the Czech Republic was more competitive?

Actually, I'd flip that around. The Czech brand, the issue was really local economics. The region where Ostravar is strong in the Czech Republic, they've had a number of factory shutdowns. The economy there, if you think the Eurozone's got challenges, the region where Ostravar sells has really had a tough stretch economically. The consumer base is particularly suffering there. We're not suffering disproportionately in that market. It's just that particular region of the Czech Republic. The Jelen brand is a combination of Eurozone challenges, Serbian economy, consumer confidence, some extra competitive activity, including at the value end of the category, so it's really a range of things in Serbia. Also the -- which by the way are reflected in the discount rates that we mentioned on the earlier call as well as having a higher income tax rate, the 50% increase in Serbia this year, that's been a little tough on consumers, too. I'd say Jelen is a combination of macroeconomics, market challenges, and some competitive activity as well.

Okay. I guess it was just news to me that you'd write-down the value of brands based on local economics rather than brand health considerations. That's interesting.

When we look at brand impairments, we have to look at a variety of factors. One thing that goes into the discounted cash flows that are the primary driver of brand valuations is what's going on in the economy? What do we think sales will look like over a longer period of time? Or I should say over a very long period of time, and the economy is part of that calculation.

Okay. That's, obviously, a lot of forecasting there.

It's fun stuff. One note, Brian mentioned, if you want details on those asset impairments, you can look at page 23, footnote 11 in the 10-Q.

All right. In terms of the $70 million your getting for Corona in Canada, is that a pretax or after-tax amount? Any sense of how that gets taxed? Will that be used to pay down debt or to be reinvested in the market?

The $70 million is a pretax number, a payment for the acceleration of the contract. We accelerated it 3 years and 10 months, is the agreement. How that will be used, I guess the short answer is we're going to use it along with all of our other cash uses, we're just going to look for the highest return for our shareholders.

Okay. Great. Thank you very much.

Since there are no further questions at this time, I turn the call back over to Mr. Dunnewald.

Great. Thanks, Tracy. Wanted to thank everybody for joining us on the call today. If you have additional questions that we did not cover during our time this afternoon, please call Kevin Kim or me on our direct lines or at the main number here at Molson Coors, which is 303-927-BEER or 927-2337. Thank you and have a great day.

Thank you, ladies and gentlemen, for joining the Molson Coors Brewing Company third quarter 2013 earnings follow-up session conference call. You may now disconnect.