Molson Coors Beverage Co (TAP) 2014 Q4 法說會逐字稿

Good afternoon, and welcome to the Molson Coors Brewing Company fourth quarter 2014 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, so 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 performance, please visit the Company's website, www.MolsonCoors.com, and click on the financial reporting tab of the Investor Relations page, for a 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, Global Vice President of Investor Relations for Molson Coors.

Thanks, Stephanie. Hello, and welcome everybody. On behalf of Molson Coors Brewing Company, thank you for joining us today for our fourth quarter 2014 follow-up earnings conference call. Our goal on this call is to address as many additional earnings-related questions as possible, following our regular earnings conference call with Mark Hunter, 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.

So let's get started with an introduction of the team with me on this call. We have Kevin Kim, Investor Relations Senior Manager; Spencer Schurr, Finance Forecasting Senior Manager; Katie Walter, Finance Forecasting Senior Analyst; Brian Tabolt, Controller; Mike Rumley, Treasurer; Mark Saks, VP of Tax; and Steve Mack, Director of Tax. And today, we have a special guest, Gavin Hattersley, CFO. Regarding quarterly results, as Mark Hunter mentioned on our regular earnings call this morning, overall, 2014 was a good year for Molson Coors.

We grew net sales in constant currency, as well as underlying EBITDA, free cash flow, after-tax earnings and earnings per share. Weak consumer demand continued across our largest markets, but we made good progress in building a stronger brand portfolio, delivering value added innovation, strengthening our core brand positions, and increasing our share in above premium. We also continued to improve our sales execution and revenue management capabilities, increase the efficiency of our operations, implement common systems, and focus on profit after capital charge, or PAC, as a key driver for our cash and capital allocation strategy.

Based on this performance, and our commitment to returning cash to our shareholders, we also announced Board approval today for a new four-year, $1 billion stock repurchase program, and an 11% increase in our quarterly dividend. With this change in the dividend, we have increased our quarterly dividend 156% since 2007. Now before we start the Q&A, I'd like to offer a little bit of additional perspective regarding our 2015 underlying free cash flow target. As Gavin mentioned on the earlier call, we plan to exclude, from our 2015 free cash flow calculation, the $230 million voluntary contribution to our UK pension plan last month.

This treatment is consistent with the way we have handled these types of additional pension contributions in the past. Said another way, if we were to not exclude the additional pension contribution, our free cash flow guidance for 2015 would be $230 million lower than the $550 million goal that we provided. So with that, for a little clarity, we'd now like to open it up for questions. Stephanie, over to you.

(Operator Instructions)

Your first question comes from Judy Hong with Goldman Sachs. Please go ahead.

Hey, guys. How are you?

Hey, Judy. Great, thanks.

So my first question is related to the $40 million headwind related to the Miller loss, the Modelo loss, in 2015. Can you just break out how much of that is Miller versus Modelo?

Short answer is no. We haven't provided that level of granularity on those contractual arrangements. You can get a little bit of detail out of our annual filings, but not enough to get an actual number. And based on the relative confidentiality of those types of agreements, we're not going to be able to provide more detail than what's in the filings.

The volume impact, I think, if I think about the January numbers, we can probably extrapolate that's the volume impact. Is there a big difference, at least, in terms of some of the margin or profitability differences across those relationships?

What we've, I guess, said consistently, that our contract brew arrangements, that's a -- how do you say? That's not a branded activity, and so those tend to be relatively modest margins. And we also have said, relating specifically to the partner brands, that the -- generally speaking, the brand owner gets the lion's share of the profit stream on those. So they do tend to be thinner margin than our own brands, in any given market, depending on the margin structure in that particular market. But beyond that, no, we have not provided granularity about the profit -- or sorry, margin structure, of either of those arrangements.

Okay. And then -- sorry.

Yes, I was going to say, one thing we did mention is that we will be paid by both Heineken for -- Heineken and Miller. Heineken, for the expiration of -- or accelerated expiration of the contract brew arrangement. And we also are receiving a payment for -- are receiving payments from Miller, for the termination of the Miller brand's contract in Canada.

And both of that payment hits in 2015, in terms of cash impact?

Actually, there are various times for those payments, and you can read about those in the 10-K, which we will we file in the days ahead.

Okay.

In other words, there were some payments in 2014, some in 2015. But rather than going into those kind of details, you can find it all in there.

Got it. Okay. And then my second question is just relating to the COGS guidance in Canada. I may have missed some of the comments. I think they came out on the call. So mid single digit COGS increase is -- what are the key drivers, in terms of the increase in year over year?

Yes, I think, as I recall, did Stewart go into a little bit of detail on that one? Essentially, what we're looking at is, there's innovation in Canada that we're seeing. There -- we have some import brands that are growing quite nicely in that market. And as I mentioned the -- I'll just tell you, the import brands tend to be purchased at a relatively high cost per hectoliter. And so I'd say that, plus there are things like conversion costs, and so forth. But I would hasten to mention, or add, that the Canada team is working very hard with cost -- for cost reductions across the business. We also have a little bit of MMI -- sorry, Modelo Molson volume in the first part of 2014, that we're comparing against.

Okay. So if I think about the impact of imports growing faster, does that also help your price mix line in 2015, as well?

Yes, that's a good point, Judy. Yes, the revenue per hectoliter tends to be always higher on -- or is virtually always higher on those brands as well, not just the cost of goods.

Okay. And then lastly, just the closure of the brewery, one of the breweries in Canada. Can you give us some sense of what type of cost savings you're looking at from that particular closure? Was that part of, also, the $40 million to $60 million of cost savings guidance? Or is this incremental?

Yes, so the brewery closure that we mentioned is the Alton brewery. That's in the UK. And that's specifically related to the contract brew arrangement that we have with Heineken in the UK, which ends at the end of April. And so we have proposed closing the Alton brewery. It is not a -- how do you say? It is only a proposal at this point. And so we'll see how that, and the consultation process, goes in the UK. And at that -- anyway, and so we'll have to see how that goes. As far as part of the $40 million to $60 million, we have a variety of programs that are part of the $40 million to $60 million. I'll just set that one aside, unless Gavin wants to add some additional color around whether that's in or out of the $40 million to $60 million.

No, I think that's fine, what you said, David.

Okay. So no additional color about what's in or out. But the point is, we intend to hit $40 million to $60 million of cost savings, regardless of how the Alton brewery closure proposal turns out.

Okay. And nothing was announced, in terms of the Canada brewery closure?

No, we haven't talked about any adjustments to the Canada supply chain.

Okay. Got it. All right. Thank you.

Yes, sorry. One more point from Gavin.

Judy, as I think about it, when we put the $40 million to $60 million out there, we didn't have plans to close the Alton brewery. So I think the short answer is no, it's not.

Your next question comes from Ian Shackleton with Nomura. Please go ahead.

Yes, hi, Dave. Hi, Gavin. Particularly wanted to just chat a bit around free cash flow, and thinking about FY16. And the message I took away from the call, early on, is that it should presumably become more normalized, back more to the sort of 750 type level. I just wanted to confirm whether there was something I was missing? Or whether that is the right assumption?

I think it's a little early for us to be giving guidance on 2016, Ian. So let's let 2015 play out, and we'll give you the guidance for that this time next year.

Yes, so broadly speaking, Ian, right, we have some headwinds in 2015 that, as Gavin mentioned earlier, we did not face in 2014. We have some, call it, working capital timing differences between 2014 and 2015. But as Gavin mentioned, we'll -- and higher CapEx, and higher cash tax payments, than we saw in 2014. But there are a lot of unknowns between now and 2016, and FX is not the least of those. So we'll see how this year goes through, and then we'll help you out in roughly a year.

And just going back to the pension fund payment, the $230 million in the UK, that does sound like a genuine one-off. You did talk about the 90% funding ratio in the UK. Was that before you made that payment? Or is that after that payment?

Yes, the 90% funding is before the payment, because 90% would be, as of year-end, the last time we did all the valuation calculations. So this -- so anyway, the contribution is after the 90% was calculated.

So does that take us to 100% funding? Or is it not quite as simple as that?

You can look in the 10-K that we're filing in the days ahead, but I think you'll see that the funded status -- or sorry, the GAAP to fully funded status is greater than $230 million. Plus, we have other plans, besides the UK plan, that we're focused on.

Great. Okay. And the other thing I just want to ask about, you've obviously indicated the $1 billion buyback will be a bit back-end loaded. And I suppose that raises the question of how back-end loaded, over the 4 years? Can you give us some idea of how we should think about the phasing?

Short answer is no. But we did provide some free cash flow guidance for this year, and some of the challenges that we face from a cash standpoint. And that, plus the pension contribution, shows -- gives you a sense of our -- how do you say -- target and outlook for cash generation this year, which I think speaks to at least part of that time frame. But I think beyond that, we can't really add any additional color.

Okay. Great. Thanks, Dave. Thank you.

Yes. Thanks, Ian.

Your next question comes from Vivien Azer with Cowen and Company. Please go ahead.

Hi, guys. How are you?

Great, Vivian.

Thanks for taking the question. I just have one on currency mechanics in Canada. As I look back over the last few years, 2012 and 2013 specifically, it looks like, on a reported basis, currency was kind of a low single-digit drag to revenues, and then a low single-digit benefit to pretax income. And then over the course of 2014, we've seen a bit of a normalization in that trend, though the pretax drag hasn't been quite as meaningful as it has been on revenue. So can you remind us, one, why the change, in terms of the matching between currency hits to the top line and pretax income for Canada? And then how we should think about that for 2015, please?

Yes. So let me speak more broadly to how FX impacts the Canada business. We -- essentially, you have translational effect, which is, if you averaged it through the year, you could -- you'd get a sense of what the impact would be on something like net sales, where there's essentially no hedging going on. But then, if you migrate down to the bottom line, then broadly speaking, roughly half of our profit and cash streams in Canada are indirectly hedged through different types of derivatives, royalty streams, natural hedges through debt structure.

In other words, we have Canadian denominated debt. Those types of things. So generally speaking, on a percentage basis -- or percentage impact basis, you'd see about half the impact on the bottom line that you'd see on the top line, just because about half the translation is effectively hedged -- or is hedged away indirectly. But those are very broad brush numbers. And that's generally what you should see in the business, whether you're talking about 2012, 2013 or 2014. Because our strategy around that has not changed significantly, and neither has our debt structure.

Fair enough. That makes perfect sense. And is there an opportunity, at all, to create some natural hedges in Europe, where currency is going to be a bit problem? Or is that, it is what it is?

I'm sure our Treasury team would love to take that up, but the Europe exposures are spread over more currencies, and the overall profit exposure is somewhat less. And so given those -- and we have a certain amount of debt outstanding. So -- and there are a lot of factors that go into it. I guess the point is, at this point, we have not seen a business need to handle it quite that way. But we'll always look at that, and let you know if we decide to do something along those lines.

Super helpful. Thanks very much, guys.

Yes. Thanks, Vivian.

Your next question comes from Bryan Spillane with Bank of America. Please go ahead.

I've got a couple of questions. I guess the first one, just in terms of the pension contributions, was there something in terms of -- I don't know, like asset performance, change in interest rates? Just what was the trigger to increase the pension contributions?

Yes. So the short answer is, there are always lots of factors that go into figuring out pension contributions, and it actually varies a great deal by geography, by plan. In 2014, as you know, a lot of asset classes performed relatively well. Unfortunately, interest rates declined during the year, which tends to be a bit of a headwind. And then if you throw in pensioners living longer, which means more payments over -- or sorry, same payments over a longer period of time. Or let's just say payments over a longer period of time, that was a bit of a headwind, overall, for the pension plans.

So how did we decide to do the extra contribution for the UK plan? Essentially, it was negotiated with the trustees, and we decided it was the right thing to do for the plan and for the pensioners. Let me see if there's any additional color that Gavin or Mike Rumley would like to add to that.

All I would add to what Dave has said is that we have a valuation discussion with our trustees every 3 years, and we completed that late last year. And we obviously see pension as part of debt, and part of our liabilities. And so when you look at our cash uses, and how we look at debt, strengthening our balance sheet is part of that, as well. So we believe it's an effective use of our available cash.

And I would --

Go ahead, Dave. I was going to say, I appreciate that. I guess what I'm trying to get at is -- because we've had some pretty meaningful pension contributions over the years. And just what's the -- what are the things that we can -- we should, or can, watch from the outside, that determine whether or not there might be another meaningful contribution down the road?

And I guess when I saw it this morning, especially the size of the magnitude in the UK, given that we're looking at potential negative interest rates in Europe, is that -- is this proactively trying to account for where interest rates are headed? Or is -- or should we be watching that as maybe a potential factor for more potential contributions, going forward?

I wouldn't tag it on interest rate outlooks. I don't think anybody knows with certainty where those types of things are going. What I would say is, for the UK pension plan in particular, which is what -- when Gavin mentioned we negotiate with the trustees, and sort out what's in the best interest of the UK, that is just the UK plan. The other ones, the other plans are -- how do you say -- contributions are driven by other factors.

For example, things like regulations and laws and things, depending on the geography you're in. But anyway, that's something that we work out with the trustees every 3 years. I guess all I would say is that we had no more than minimal, in fact, de minimis contributions to the UK plan in 2011 and 2012, and relatively modest contributions in 2013. So you can tell that this one is quite lumpy, so to speak.

I think the other thing I'd add is --

Go ahead.

This is the same payment, as I referenced last year, the GBP150 million. I think it was either the second or third earnings call, Dave. I can't remember specifically. It's not in additional to that. That is it; it's just translated into US dollars now. And you're right, interest rates, the discount rate has fallen. And obviously, that drives the liability up, and Dave also mentioned the mortality tables. Our pensioners are living longer.

All right. That's helpful, Dave.

If you want to look back at our -- sure. Yes, thanks, Bryan. If you want to see the original mention of the UK pension contribution, I don't remember, but Brian Tabolt may remember, which document it was in. But we mentioned GBP150 million contribution to the UK plan expected sometime in 2015. And so obviously, we've already made that contribution in January. And -- but it was somewhere, I thought, around early to middle of last year that when we first mentioned that, just to give you guys a heads up.

Okay. And then Dave, just one -- I guess two other things. One, just in terms of -- and we've talked around, or talked about the COGS per hectoliter guidance in Canada this year, and, so, those moving parts. But even the fourth quarter seemed like higher than expected. Can you just talk about just what some of the moving parts were there in Canada, in the fourth quarter?

Yes, absolutely. So we had some input cost inflation. The -- as you know, volume was down, and so we had fixed cost deleverage. And definitely, the termination of the Modelo brands joint venture had an effect. And so those are the main drivers.

Okay. And then one last one. I just wanted to make sure I've got all of these different moving parts. The pretax profits this year, in 2014, ended up at about $904 million or so. And if I caught everything on the call, there was a $40 million hit from the MillerCoors, Heineken, Modelo brands going away. There's a -- I think I heard it as a $70 million hit, related to foreign exchange translation, just simply, or foreign exchange, just simply, at today's rates.

Seems like there's a $15 million favorable swing in interest expense. I think a $5 million benefit, favorable swing, in terms of what you're expecting for pension expenses. If I use the midpoint of what you're forecasting for cost savings, it would be a $50 million offset. And then it's whatever we want to forecast for MillerCoors. Are there any other big pieces that I'm missing there?

There's a couple of things in there, Bryan, that we mentioned on the call, that you've left out. We do have the new brands from Heineken in Canada, which we took on from the beginning of this year. And obviously, those aren't as big as Corona. But they are new brands, and we intend to work hard with them. And then there's the new brands in central Europe, which we've picked up from Anheuser Busch.

Again, which -- it's not going to entirely offset the profit loss from Heineken and Corona in the UK, but certainly, we're going to drive those brands hard, as well. So those are the two that -- and then there's the $40 million to $60 million, obviously, cost savings project, the Alton brewery, which we're still in discussions on, and hope to bring that to closure relatively soon. I can't think of anything else. Dave?

Yes, those are the things we've talked about.

Okay. And it just -- I think what people are looking at today is, again, you're just thinking about where we ended for pretax profits in 2014. And when you go through that list, depending on -- and I know there's some things that are open to interpretation, I guess. But it seems like that number could actually be down, unless there's some other meaningful factor that goes in there.

Yes, if you stack up just the numbers we've talked about, we'll let you do the math. I would say that 2014 was definitely a good year for our Company overall, not just cash and profit, but a number of other things that Mark mentioned earlier. We see some challenges in 2015. I would say this is not the first year we faced challenges, and that's what we got to work on. FX is a big challenge, to be clear, and FX gives and takes. And who knows how it will flow from here? But I think the point is, these are challenges we'll just have to deal with.

Yes, the $70 million ForEx liability -- not liability -- ForEx impact is something that's come out pretty quickly, Bryan, as you would know. The percentage impact on our profit results is not terribly dissimilar to that which I've seen in all the other earnings releases that have come out over the last three or four weeks.

Yes, no, that's totally fair. There's many other multi-nationals that are facing this same thing, so I appreciate that. Dave, thank you for your patience, and handling all these questions.

My pleasure, Bryan.

All right. Take care.

Your next question comes from Brett Cooper with Consumer Edge Research. Please go ahead.

Hey, Dave, a couple, if I might. On the lost brands, or the contract brands, can you just run through what line items in the P&L they hit in each region? So the Modelo brands in the UK, the Miller brands in Canada, and the Heineken production in the UK?

Absolutely. So the Miller brands in Canada are fully consolidated. So you'd see that through the P&L. Same thing for the Modelo brands in the UK. And then the contract brew arrangement would primarily affect net -- in the UK, would primarily affect the revenue line and the cost line since there are relatively few overheads, and certainly no marketing associated with them, because those Heineken brands are not ours.

You said revenue and COGS, right? So there's no SG&A or MG&A associated with this?

Exactly.

Okay. And then, is it possible for you either -- I'm just trying to understand the impact that the lost Modelo brands had in Canada, on a line item basis, in terms of -- you referenced them hitting, obviously, COGS and MG&A. And I'm just trying to make sure that we get the right starting point -- or I get the right starting point, for what the underlying increases were that we saw in -- 2014 would be ideal. But fourth quarter would be helpful, as well.

Yes. We talked about the impacts of those numbers. I don't have them off the top of my head. I'll see if Spencer or Brian has a sense. I know that, in the filings, we've given a sense of the -- yes, the -- so in 2014, we talked about the impact being in the range of $17 million, and roughly two -- or nearly two-thirds of that is in the cost of goods line, where we get the equity income from the joint venture in Canada. And then the other portion would be in the MG&A line, where we had, call it, reimbursed expenses and overhead costs, I guess, is the best way to put it. Does that help?

That does help. And then the other one, you guys said that your -- in Canada, your SDRs were down [4.2]. Is it right to assume that -- the loss of Modelo brands, is that 3 points on SDRs?

It's between 2 and 3 points, yes. In other words, it was primarily -- that reduction in SDRs in Canada was primarily driven by the elimination of those -- of that arrangement.

Okay. Perfect. Thanks, Dave.

Thanks, Brett.

(Operator Instructions)

Your next question comes from John Faucher with JPMorgan. Please go ahead.

Thanks. Thank you. Hi, guys. Thanks for doing this. I wanted to follow up on the Europe cost of goods sold per hectoliter guidance, because I think maybe I was misunderstanding. When I asked about transactional on the call, you had said that the transactional was in the guidance.

And I guess I'm trying to figure out -- I thought you guys gave us Europe, currency-neutral COGS per hectoliter. So did you give us both the currency-neutral and the one including currency? And can you talk about the key drivers, in terms of getting that currency-neutral COGS per hectoliter down? I think your guidance says mid single digits? Is that right, for next year?

Yes, you're talking about Europe, specifically. And, yes, we said that the -- we anticipate mid single digit decrease in cost of goods per hectoliter, in local currency, for 2015. Now, the point we were making on the earlier call is that embedded in that guidance is not only -- okay, so translation, essentially no, that's not in there. But there are some cost of goods items that we buy in US dollars. There's some transactional FX, if you will, that are included, or embodied, in that guidance. So even though it's in local currency, there are some FX impacts. And there's also FX hedging that we do in some -- on some things, as well.

Just put another way, John, if you're sitting in Serbia, and you're buying something in Euros or dollars, or a different country to the local country, that ForEx impact is in these guidance numbers.

And that's a transactional effect.

Okay. Totally get that. I guess it's just fascinating that you're looking at Canada, which has transactional, and Europe, which has transactional, and they're so dramatically different. So in terms of -- what are the key drivers, in terms of that favorability, from the COGS per barrel standpoint? Because that's obviously a very favorable number.

Two big drivers in Europe, John, would be Corona and Heineken. Contract losses, those obviously carry cost of goods sold. That will come out. From a Heineken point of view, we don't show volume. So from a cost of goods sold per hectoliter point of view, that has a meaningful impact. And then Corona is obviously a higher-priced import brand. So taking that out would actually take that decrease mid single digits to, I think, decrease low single digits.

Yes, it would be a meaningful change. And just so you know, the Heineken contract brew arrangement was up to 3 million hectoliters of production. So based on an average cost of production, with no volume associated with it, that's going to be a significant factor. And Corona brands purchased from the brand owner, at a relatively high rate, that's a significant factor, as well. Does that help, John?

Okay. Yes. Okay, that makes a ton of -- so they were -- because you were buying them as finished goods? Is that what you're saying? Because you were buying them as finished goods?

Yes, exactly.

They were lower gross margin. So -- okay.

Yes, in other words, the cost of goods that we booked in the UK last year, for the Corona and other Modelo brands, included not only the cost of brewing and packaging the beer in Mexico, but shipping it all the way over to Europe.

Okay. Got it. So the favorability that actually comes from that is actually factored into the -- is that actually factored into the $40 million?

The $40 million is a margin number, not a COGS number.

Yes, yes, so it's the inverse of that. But maybe if we look at the COGS going down -- okay. The COGS going down is associated with that $40 million in lost operating profit?

Yes, it is, yes.

Okay. Excellent. Thank you, guys. I appreciate it.

(Operator Instructions)

Your next question comes from Robert Ottenstein with Evercore. Please go ahead.

Thank you very much. I know you've gone over this a number of times, just want to hit it at a different angle. Given a challenging outlook for 2015 on the EPS side, and particularly in terms of free cash flow, talk about why you decided to increase the dividend 11%, which is a pretty hefty increase? And then, what gives you the confidence that, as you mentioned in the press release, in terms of your -- in terms of the long-term cash flow growth characteristics of the Company?

Yes, I think that's a good question, Robert, for our special guest, Gavin.

Hey, Robert. Maybe I can just take you back to the comment I made earlier, about how pleased we were with our 2014 cash flow generation. If you take 2014 and 2015 together, that's $1.5 billion. It's right at the upper end of our guidance, which we came into 2014 with, on average, $750 million.

And as I said on the call, some of those benefits that we got in 2014, we were expecting to get in 2015. So as we looked at our cash use priorities, which have really been consistent for several years now, in terms of strengthening our balance sheet or returning cash to our shareholders, and brand-led growth opportunities, the Board and management believe this is in the best interest of our shareholders. So I can't really give you much more than that. We had a really good 2014 cash year.

Yes, no. So what you're saying is, you should look at 2014 and 2015 together?

Yes, I am saying that. We should look at that as $1.5 billion worth of cash, between the two years.

That could be instructive. Robert, there's one other thing. Prior to announcing the increase in the dividend, as you recall, we were a bit at the low end of our target payout range for dividends, as a percent of trailing annual EBITDA. And so the -- this announced increase in the dividend puts us relatively close to the middle of that range, based on 2014 numbers.

Great. And then I'll give you the chance again, Gavin. Does the 750 look like a good baseline, going forward, on an average basis for free cash flow?

Robert, I'm not going to bite on that any more than I did with Ian. So I'm sorry to disappoint you on that one. The only other thing I would say, to add to what David and I have already said around this, is we were very clear, 2 years ago -- 2 1/2 years ago, when we bought StarBev, that once we got our leverage ratios back to where they were pre-acquisition, that that would bring share buybacks back on the table. And the cash performance, over the last 2 1/2 years, has been really good, and we've got back to pretty much those levels at the beginning of this year. And we're just following through with our clear cash use priority commitments that we've been making.

And Robert, from the standpoint of modeling, as Gavin said, we can't tie it all up for you. But we did give you some numbers, if you're trying to figure out how much -- what would the underlying free cash flow look like, without some of the headwinds? And we did dimensionalize the foreign currency headwind, the increased CapEx, and -- but the other pieces, unfortunately, we can't provide more specifics on those.

And then just so I got it, the CapEx for 2015 -- for 2014 was [$291 million]?

Yes, it was $291 million for 2014, and our guidance for 2015 is $330 million.

What's the $259 million in the cash flow statement?

The $259 million, that's the amount that we exceeded our target -- original target in underlying free cash flow generation.

I think, Robert, what you're referring to is the fact that the cash flow statement is lower than the $291 million.

Exactly.

The $291 million is the commitment or incurred, and the $259 million is paid. And because we have -- obviously, as you go into the fourth quarter, it's a low -- it's a relatively lower volume period. We do a lot of our capital work around the fourth quarter. And so we would have incurred it in probably November, December. But we would only pay it in January, February. So that's a fairly --

And Gavin, what would your best guesstimate of an ongoing maintenance CapEx number, going forward?

We don't provide a specific number, but we have talked about how the CapEx that we're anticipating in 2015, and in fact, the CapEx that we had in 2014, which was south of $300 million, those numbers include significant projects, designed to improve the efficiency of the business, projects around innovation. In other words, things beyond maintenance. So clearly, our maintenance CapEx level -- this would be excluding MillerCoors -- would be south of the $291 million that we reported for last year.

I think if you back and look at our historical numbers, Robert, you'll find that this is towards the upper end of that. Historically, we've spent less than this.

And that would be a good guidance on the (technical difficulty)?

No, not really. We do look at our cash use priorities on an ongoing basis, and this falls fairly and squarely into the third bucket, which Dave and I have talked about. Which is branded growth opportunities, from an innovation point of view, and also the cost savings projects in Canada. So as we get into our strategic planning and annual operating planning exercise later in the year, we'll make assessments, as far as that's concerned.

And then just as a reminder, where are we -- how many more years do we have to go, in the cost take-out program, which was averaging $40 million to $60 million a year?

Yes, we said that our goal of $40 million to $60 million per year, again, that excludes MillerCoors, because they're going after additional cost saving. The $40 million to $60 million, we anticipate delivering in that range for at least the next few years, which I define as 3 to 5 years. One thing I would add, around all these CapEx decisions, is that we're going to run those through our PAC model, and that will be what will determine what's in the best interest of our shareholders, and growing value.

Right. But now -- so the $40 million to $60 million, how many more years of that do we have to go?

Yes, [as I say], at least the next few years. So that's -- a few, to me, means 3 to 5 years.

Okay, so 3 to 5 more years. Terrific, thank you.

You bet. Thanks, Robert.

Your next question comes from Judy Hong with Goldman Sachs. Please go ahead.

Thanks for taking the follow-up. So just following up on Europe, the volume performance by country, any color there?

We said that 8 out of 11 countries grew volume in the fourth quarter, which, given the challenges in those marketplaces, is not actually a small accomplishment. If you adjust the UK volume, adjust it for trading days, to make it comparable, that market, which is the largest one for us in Europe, actually increased. So -- and Ireland is not a really large market for us. I would say the biggest challenge, so to speak, in the fourth quarter, was Serbia, and that's nothing new. We've been challenged by economy and floods, and some value activity in that market, for some time.

Okay. And then the revenue per hectoliter trend in the fourth quarter, how did geographic mix impact that number?

Revenue per hectoliter in which market?

In Europe.

In Europe. Okay. Let's see. So we talked about the revenue per hectoliter being -- let's see, in Europe. Yes, so that (multiple speakers) -- and so that was driven primarily by positive pricing in those markets.

So nothing, really, in terms of the mix issue that either was a tailwind or a headwind in the fourth quarter?

I think, yes, mix was a slight headwind. But I must say that mix, particularly in the Europe market, you have such differences between those different countries, that there are a lot of mix trends, going a lot of different directions in that market, in any given quarter or year. But yes, mix was a slight headwind in the fourth quarter.

Okay. So if we think about 2015 in Europe, and you take out the impact of the headwind that you're facing from Modelo and Heineken, your COGS are down low single digits, your pricing up low single digits. So is this a year where we should be able to see a pretty healthy margin expansion in Europe, if you take out the one-time noise around the loss of businesses?

Yes, so let's see. We gave you numbers around the COGS in local currency. We gave you the -- and we gave you -- I don't know -- I guess the general perspective around the contracts. I guess we won't be able to provide more granularity as to what we think that profitability looks like in Europe this year.

Okay. But nothing --

Judy, while we've got you on, I just wanted to make sure you caught my follow-up answer to the Alton brewery. I think we were transitioning off your question to Ian's question. I just wanted to make sure you heard it.

You said that was not baked in, in terms of the $40 million to $60 million that you set out initially, because you had not been planning on it, at that point.

Correct. I just wanted to make sure you (technical difficulty).

Yes, I heard it, yes. Thank you. And -- okay. Yes, thanks for taking the follow-up.

Okay. Great. Thanks, Judy.

(Operator Instructions)

Your next question comes from Bryan Spillane with Bank of America.

Hey, Dave, just one more. Is there anything that you want to impart upon us, with regard to phasing? There's a lot of moving parts, obviously, in 2015. But just anything at all that we should be thinking about, in terms of phasing the year, would be helpful.

Yes, right. That's a good question, since our guidance at this point is really driven on an annual basis, rather than any real color around the quarters. I don't have anything specific I'd offer. Gavin, would you throw anything in?

I think the things that are known, Bryan, would be these -- we've got one quarter left of cycling the Modelo brands in Canada. The Heineken contract terminates in April?

Yes, late April.

Late April. But obviously, it's winding down, as we get closer to April. The Miller brands, we lose that at the end of February, if I --

March.

End of March, sorry, Bryan. So those are the three that strike me off the top of my head.

Okay. Thank you.

Yes, thanks, Bryan.

There are no further questions at this time.

Okay. Great. Thank you, Stephanie. In closing, I'd like to thank all of you for your interest in Molson Coors, and for joining us 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 again, and have a great day.

Thank you. This concludes today's conference call. You may now disconnect.