Molson Coors Beverage 10Q 2006 Q2 Quarterly report

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MOLSON COORS BREWING COMPANY AND SUBSIDIARIES INDEX

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended June 25, 2006
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .

Commission File Number: 1-14829

MOLSON COORS BREWING COMPANY
(Exact name of registrant as specified in its charter)

DELAWARE (State or other jurisdiction of incorporation or organization)		84-0178360 (I.R.S. Employer Identification No.)
1225 17^th Street, Denver, Colorado 1555 Notre Dame Street East, Montréal, Québec, Canada (Address of principal executive offices)		80202 H2L 2R5 (Zip Code)

303-279-6565 (Colorado)
514-521-1786 (Québec)
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý

Accelerated filer o

Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of July 28, 2006:

Class A Common Stock—1,346,586 shares
Class B Common Stock—63,977,135 shares

Exchangeable shares:

As of July 28, 2006, the following number of exchangeable shares was outstanding for Molson Coors Canada, Inc.:

Class A Exchangeable shares—1,735,120
Class B Exchangeable shares—19,075,001

In addition, the registrant has outstanding one share of special Class A voting stock, through which the holders of Class A exchangeable shares and Class B exchangeable shares of Molson Coors Canada Inc. (a subsidiary of the registrant), respectively, may exercise their voting rights with respect to the registrant. The special Class A and Class B voting stock are entitled to one vote for each of the exchangeable share classes, respectively, excluding shares held by the registrant or its subsidiaries, and generally vote together with the Class A common stock and Class B common stock, respectively, on all matters on which the Class A common stock and Class B common stock are entitled to vote. The trustee holder of the special Class A voting stock and the special Class B voting stock has the right to cast a number of votes equal to the number of then outstanding Class A exchangeable shares and Class B exchangeable shares, respectively.

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES

INDEX


		PART I. FINANCIAL INFORMATION
Item 1.		Financial Statements (Unaudited)
		Condensed Consolidated Statements of Operations for the thirteen and twenty-six weeks ended June 25, 2006 and June 26, 2005
		Condensed Consolidated Balance Sheets at June 25, 2006 and December 25, 2005
		Condensed Consolidated Statements of Cash Flows for the twenty-six weeks ended June 25, 2006 and June 26, 2005
		Notes to Unaudited Condensed Consolidated Financial Statements
Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.		Quantitative and Qualitative Disclosures About Market Risk
Item 4.		Controls and Procedures
		PART II. OTHER INFORMATION
Item 1.		Legal Proceedings
Item 1A.		Risk Factors
Item 6.		Exhibits

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

		Thirteen Weeks Ended						Twenty-Six Weeks Ended
		June 25, 2006			June 26, 2005			June 25, 2006			June 26, 2005
Sales		$	2,130,047		$	2,065,346		$	3,673,993		$	3,461,382
Excise taxes			(547,022	)		(518,483	)		(937,122	)		(866,084	)

	Net sales		1,583,025			1,546,863			2,736,871			2,595,298
Cost of goods sold			(919,976	)		(895,601	)		(1,646,644	)		(1,585,245	)

	Gross profit		663,049			651,262			1,090,227			1,010,053
Marketing, general and administrative expenses			(448,281	)		(446,399	)		(837,139	)		(783,769	)
Special charges, net			(25,840	)		(40,963	)		(52,671	)		(81,663	)

	Operating income		188,928			163,900			200,417			144,621
Interest expense, net			(36,894	)		(27,701	)		(68,849	)		(47,285	)
Other income (expense), net			5,045			2,750			2,804			(2,256	)

	Income from continuing operations before income taxes		157,079			138,949			134,372			95,080
Income tax benefit (expense)			4,965			(37,418	)		12,403			(21,725	)

	Income from continuing operations before minority interests		162,044			101,531			146,775			73,355
Minority interests in net income of consolidated entities			(4,402	)		(6,060	)		(7,703	)		(8,283	)

	Income from continuing operations		157,642			95,471			139,072			65,072
Loss from discontinued operations, net of tax			(1,415	)		(56,925	)		(13,082	)		(60,710	)

	Net income	$	156,227		$	38,546		$	125,990		$	4,362

Basic income (loss) per share:
	From continuing operations	$	1.83		$	1.12		$	1.62		$	0.88
	From discontinued operations		(0.01	)		(0.67	)		(0.15	)		(0.82	)

Basic net income per share		$	1.82		$	0.45		$	1.47		$	0.06

Diluted income (loss) per share:
	From continuing operations	$	1.82		$	1.11		$	1.61		$	0.87
	From discontinued operations		(0.01	)		(0.66	)		(0.15	)		(0.81	)

Diluted net income per share		$	1.81		$	0.45		$	1.46		$	0.06

Weighted average shares—basic			85,953			85,321			85,819			74,214

Weighted average shares—diluted			86,526			85,928			86,351			75,124

See notes to unaudited condensed consolidated financial statements.

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)

			As of
			June 25, 2006		December 25, 2005
Assets
Current assets:
	Cash and cash equivalents		$	79,591	$	39,413
	Accounts receivable, net			784,986		699,577
	Other receivables, net			116,148		130,123
	Inventories:
		Finished, net		167,868		132,611
		In process		43,291		35,270
		Raw materials		69,700		86,674
		Packaging materials, net		70,632		60,170

	Total inventories, net			351,491		314,725
	Other assets, net			118,003		113,147
	Deferred tax assets			20,126		20,127
	Discontinued operations			6,427		151,130

		Total current assets		1,476,772		1,468,242
Properties, net				2,365,708		2,305,561
Goodwill				2,965,866		2,871,320
Other intangibles, net				4,562,823		4,423,324
Deferred tax assets				69,751		61,611
Notes receivable, net				71,945		70,964
Other assets				171,045		169,980
Discontinued operations				3,832		428,263

Total assets			$	11,687,742	$	11,799,265

				(Continued)

See notes to unaudited condensed consolidated financial statements.

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(UNAUDITED)

			As of
			June 25, 2006		December 25, 2005
Liabilities and stockholders' equity
Current liabilities:
	Accounts payable		$	365,443	$	372,324
	Accrued compensation			123,330		123,780
	Accrued excise taxes			293,086		284,740
	Accrued expenses and other liabilities			828,138		742,579
	Deferred tax liabilities			125,391		106,484
	Short-term borrowings and current portion of long-term debt			310,307		348,102
	Discontinued operations			45,832		258,607

		Total current liabilities		2,091,527		2,236,616
Long-term debt				2,162,999		2,136,668
Pension and post-retirement benefits				743,214		841,824
Long-term portion of derivatives liability				247,209		174,755
Deferred tax liabilities				588,333		606,126
Other liabilities				77,348		87,564
Discontinued operations				66,306		307,183

		Total liabilities		5,976,936		6,390,736
Minority interests				46,934		83,812
Stockholders' equity:
	Capital stock:
		Preferred stock, non-voting, no par value (authorized: 25,000,000 shares; none issued and outstanding)		—		—
		Class A common stock, voting, $0.01 par value (authorized: 500,000,000 shares; issued and outstanding: 1,346,586 shares and 1,344,507 shares at June 25, 2006 and December 25, 2005, respectively)		14		14
		Class B common stock, non-voting, $0.01 par value, (authorized: 500,000,000 shares; issued and outstanding: 63,453,570 shares and 61,751,615 shares at June 25, 2006 and December 25, 2005, respectively)		635		618
		Class A exchangeable shares (issued and outstanding 1,735,122 shares and 1,926,592 shares at June 25, 2006 and December 25, 2005, respectively)		130,558		145,006
		Class B exchangeable shares (issued and outstanding: 19,516,528 shares and 20,630,761 at June 25, 2006 and December 25, 2005, respectively)		1,468,575		1,552,483

		Total capital stock		1,599,782		1,698,121
	Paid-in capital			2,151,405		2,023,838
	Unvested restricted stock			—		(7,218	)
	Retained earnings			1,493,791		1,422,987
	Accumulated other comprehensive income			418,894		186,989

		Total stockholders' equity		5,663,872		5,324,717

Total liabilities and stockholders' equity			$	11,687,742	$	11,799,265

				(Concluded)

See notes to unaudited condensed consolidated financial statements.

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

			Twenty-Six Weeks Ended
			June 25, 2006			June 26, 2005
Cash flows from operating activities:
Net income			$	125,990		$	4,362
	Adjustments to reconcile net income to net cash provided by (used in) operating activities:
		Depreciation and amortization		228,214			181,345
		Share-based compensation		12,454			24,125
		(Gain) loss on sale or impairment of properties and intangibles		(1,062	)		6,548
		Deferred income taxes		(52,917	)		48,397
		Equity in net income of unconsolidated affiliates		(1,145	)		(764	)
		Distributions from unconsolidated affiliates		1,286			6,411
		Minority interest in net income of consolidated entities		7,703			8,283
		Change in current assets and liabilities (net of assets acquired and liabilities assumed in a business combination) and other		(97,323	)		(447,717	)
		Discontinued operations		13,965			42,193

Net cash provided by (used in) operating activities				237,165			(126,817	)

Cash flows from investing activities:
	Additions to properties and intangible assets			(201,683	)		(141,084	)
	Proceeds from sales of properties and intangible assets			10,338			2,704
	Acquisition of subsidiaries, net of cash acquired			—			(16,561	)
	Cash recognized on Merger with Molson			—			73,540
	Cash expended for Merger-related costs			—			(20,382	)
	Trade loan repayments from customers			14,140			23,591
	Trade loans advanced to customers			(13,131	)		(14,225	)
	Other			—			15
	Discontinued operations—proceeds from sale of majority stake in Kaiser, net of costs to sell			63,813			—
	Discontinued operations—other			—			(1,978	)

Net cash used in investing activities				(126,523	)		(94,380	)

Cash flows from financing activities:
	Issuances of stock under equity compensation plans			27,724			51,961
	Excess income tax benefits from share-based compensation			253			—
	Dividends paid			(54,934	)		(54,923	)
	Dividends paid to minority interest holders			(9,234	)		(4,782	)
	Payments on long-term debt and capital lease obligations			(2,258	)		(452,541	)
	Proceeds from short-term borrowings			62,913			1,000,137
	Payments on short-term borrowings			(65,928	)		(831,327	)
	Net proceeds from commercial paper			74,457			290,000
	Net (payments on) proceeds from revolving credit facilities			(113,019	)		318,154
	Change in overdraft balances and other			7,673			(8,274	)
	Premium paid to bondholders for debt redemption			—			(106,415	)
	Discontinued operations			(884	)		(54,844	)

Net cash (used in) provided by financing activities				(73,237	)		147,146

Cash and cash equivalents:
	Net increase (decrease) in cash and cash equivalents			37,405			(74,051	)
	Effect of foreign exchange rate changes on cash and cash equivalents			2,773			(5,042	)
	Balance at beginning of year			39,413			123,013

Balance at end of period			$	79,591		$	43,920

See notes to unaudited condensed consolidated financial statements.

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTEEN AND TWENTY-SIX WEEKS ENDED JUNE 25, 2006

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

On February 9, 2005, Adolph Coors Company merged with Molson Inc. In connection with the merger (the "Merger"), Adolph Coors Company became the parent of the merged company and changed its name to Molson Coors Brewing Company. Unless otherwise noted in this report, any description of us includes Molson Coors Brewing Company (MCBC or the "Company"), principally a holding company, and its operating subsidiaries: Coors Brewing Company (CBC), operating in the United States (U.S.); Molson Canada (Molson), operating in Canada; Coors Brewers Limited (CBL), operating in the United Kingdom (U.K.); Cervejarias Kaiser Brasil S.A. (Kaiser), presented as a discontinued operation; and our other Corporate entities. Any reference to "Coors" means the Adolph Coors Company prior to the Merger. Any reference to "Molson" means Molson Inc. prior to the Merger. Any reference to "Molson Coors" means MCBC, after the Merger.

Unless otherwise indicated, information in this report is presented in U.S. dollars (U.S. $).

Unaudited Condensed Consolidated Financial Statements

The accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented. The accompanying condensed consolidated financial statements include our accounts, the accounts of our majority-owned domestic and foreign subsidiaries and certain variable interest entities of which we are the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements, including the notes thereto, contained in our Annual Report on Form 10-K for the year ended December 25, 2005. The results of operations for the thirteen and twenty-six week period ended June 25, 2006, are not necessarily indicative of the results that may be achieved for the full fiscal year and cannot be used to indicate financial performance for the entire year.

The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (U.S. GAAP).

Reporting Periods Presented

The accompanying unaudited condensed consolidated financial statements do not include the results of Molson and Kaiser (presented as discontinued operations) prior to the Merger on February 9, 2005. Further, the results of Kaiser and our joint venture, Brewers Retail Inc. (BRI), consolidated under FIN 46R, are reported one month in arrears since the date of the Merger, which means for the twenty-six weeks ended June 25, 2006, Kaiser's results include the results for December 2005 through January 13, 2006 (the date of the sale) and BRI's results include the results for the months of December 2005 through May 2006. For the twenty-six weeks ended June 26, 2005, Kaiser's and BRI's results include the results for the month of February 2005, after the date of the Merger, through May 2005.

Use of estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and

assumptions are reasonable, based on information available at the time they are made. To the extent there are material differences between these estimates and actual results, our consolidated financial statements may be affected.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

Adoption of New Accounting Pronouncements

SFAS No. 123R "Share-Based Payment"

Statement of Financial Accounting Standard No. 123R (SFAS 123R) was issued in December 2004 and became effective for us in the first quarter of 2006. SFAS 123R requires all share-based payments to qualified individuals, including grants of employee stock options, to be recognized as compensation in the financial statements based on their grant date fair values. Prior to the adoption, under the guidance for qualifying stock option grants with no intrinsic value on the date of grant, we presented pro forma share-based compensation expense for our stock option program in the notes to our financial statements. We have elected to use the modified prospective application method of implementing SFAS 123R, which does not require restatement of prior periods. Under the modified prospective application method, awards that are granted, modified, or settled after adoption of SFAS 123R are prospectively measured and accounted for in accordance with SFAS 123R. Unvested equity-classified awards that were granted prior to the adoption of SFAS 123R will continue to be accounted for in accordance with SFAS 123, except that the fair value amounts are recognized in the statement of operations and are subject to the forfeiture provisions of SFAS 123R. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (SAB 107) to assist preparers by simplifying some of the implementation challenges of SFAS 123R. In particular, SAB 107 provides supplemental implementation guidance on SFAS 123R, including guidance on valuation methods, classification of compensation expense, inventory capitalization of share-based compensation cost, income tax effects, disclosures in Management's Discussion and Analysis and several other issues. We applied the principles of SAB 107 in conjunction with our adoption of SFAS 123R in the first quarter of 2006.

The effect of adoption of SFAS 123R on the second quarter of 2006 was an additional expense of $1.7 million pretax, $1.0 million after tax, or $0.01 per diluted share. For the twenty-six weeks ended June 25, 2006, the impact of adoption was $4.6 million pretax, $3.2 million after tax, or $0.04 per diluted share. (See Note 14.)

SFAS No. 151 "Inventory Costs"

SFAS 151 is an amendment to ARB No. 43, Chapter 4 that became effective for us in the first quarter of 2006. The standard clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and spoilage requiring immediate recognition in the period they are incurred. The adoption of this standard had no impact in the first half of 2006 and is not expected to have any material impact on our full year financial results.

SFAS No. 154 "Accounting Changes and Corrections"

SFAS 154 replaces APB Opinion No. 20 and SFAS 3 and became effective for us in the first quarter of 2006. The standard introduces a new requirement to retrospectively apply accounting principle changes to prior years' comparative financial statements as if the Company had always applied the newly adopted accounting principle. Changes in depreciation, amortization and depletion methods previously considered a change in accounting principle are now considered a change in estimate under SFAS 154, requiring prospective adoption. The adoption of SFAS 154 did not have an impact on the financial statements included herein, as the single change in accounting principle affecting the

Company pertained to the adoption of SFAS 123R, which does not require the restatement of prior periods.

FASB Staff Position ("FSP") No. FIN 45-3 "Application of FASB Interpretation No. 45 to Minimum Revenue Guarantees Granted to a Business or its Owners"

FSP FIN 45-3 is an amendment to FIN 45 requiring the recognition and disclosure of the fair value of an obligation undertaken for minimum revenue guarantees granted to a business or its owners that the revenue of the business for a specified period of time will be at least a specified minimum amount. The FSP is effective for new minimum revenue guarantees issued or modified beginning in the first quarter of 2006. We currently do not maintain arrangements with minimum revenue guarantees that have a significant impact on our financial statements.

New Accounting Pronouncements

SFAS No. 155 "Accounting for Certain Hybrid Financial Instruments"

SFAS 155 was issued in February 2006 and will be effective for us in the first quarter of our 2007 fiscal year. Among other factors, SFAS 155 simplifies the accounting for certain hybrid financial instruments by permitting fair value accounting for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. We are still reviewing the impact, if any, that SFAS 155 will have on our financial statements.

SFAS No. 156 "Accounting for Servicing of Financial Assets—an amendment of FASB Statement No. 140"

SFAS 156 was issued in February 2006 and will be effective for us in the first quarter of 2007. The new standard, which is an amendment to SFAS 140, will simplify the accounting for servicing assets and liabilities by addressing the recognition and measurement of separately recognized servicing assets and liabilities and providing an approach to simplify efforts to obtain hedge-like accounting. We are still in the process of reviewing the impact, if any, that SFAS 156 will have on our financial statements.

SFAS Interpretation No. 48 "Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109"

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. FIN 48 prescribes a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon examination. If the tax position is deemed "more-likely-than-not" to be sustained, the tax position is then valued to determine the amount of benefit to be recognized in the financial statements. FIN 48 is effective as of the beginning of our 2007 fiscal year. We are currently evaluating the impact of adopting FIN 48 on our financial statements.

FASB's Emerging Issue Task Force Issue No. 06-03 "How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross Versus Net Presentation)"

In June 2006, the FASB ratified a consensus on the EITF Issue No. 06-03 (EITF 06-03) related to the classification of certain sales, value added and excise taxes within the income statement. This EITF would become effective for us in the first quarter of our fiscal year 2007. We are in the process of evaluating the impact of this EITF on our presentation of such taxes on the statement of operations.

2. MOLSON MERGER

Merger Transaction

The Merger, which closed February 9, 2005, was effected through an exchange of stock, in which Molson Inc. shareholders received stock in MCBC according to an exchange ratio, depending upon the type of stock held. Also, Molson Inc. shareholders were permitted to receive a combination of common stock of MCBC and exchangeable shares in a subsidiary of MCBC, Molson Coors Canada, Inc. Canadian resident holders who received exchangeable shares in the Merger defer paying income taxes on the transaction until such time as they exchange the shares for common stock or otherwise dispose of them.

Molson Class A non-voting and Class B common shareholders, excluding Pentland Securities (a company controlled by Eric Molson, a related party), also received a special dividend (the "Special Dividend") of Cdn $5.44 per share, or a total of approximately Cdn $652 million (U.S. $523 million) paid by Molson in connection with the Merger to Molson Inc. shareholders of record at the close of business on February 8, 2005. Included in the number of outstanding shares of Molson Inc.'s common stock were approximately 1.4 million shares issued upon the exercise of options to purchase Molson Class A common stock by Molson Inc.'s directors and senior management between January 28, 2005, and February 8, 2005. This resulted in an increase in the Special Dividend of Cdn $12 million (U.S. $10 million) and an increase in Molson Inc.'s outstanding Class A common stock.

Reasons for the Merger

The Merger placed our combined Company as one of the largest brewers in the world, by volume, with combined annual volume of approximately 40 million barrels. The combined Company offers a diverse offering of owned and licensed brands in key markets throughout the world.

Pro Forma Results

The results of Molson, Inc. have been included in the consolidated financial statements since February 9, 2005.

The following unaudited, pro forma information shows the results of our operations for the twenty-six weeks ended June 26, 2005, as if the Merger had occurred at the beginning of the period. The 2005 pro forma income from continuing operations before income taxes and minority interests include special charges of $105.5 million, including $17.4 million of Merger-related special charges in the U.S. segment for restructuring and accelerated depreciation of the company's Memphis brewery, which is scheduled to be closed in September of 2006; a $3.6 million write-off of obsolete brewing assets in the Europe segment, offset by a $3.2 million gain on an asset sale; and Corporate segment special charges totaling $87.7 million, including $49.3 million due to change in control payments and benefits for certain officers who were employed by Adolph Coors Company prior to the Merger and elected to leave the Company following the Merger, $14.6 million due to severance and related benefits paid to former Molson officers who left the Company following the Merger. The remaining

$23.8 million of pro forma Corporate segment special charges were associated primarily with non-capitalized merger costs incurred at both Molson and Coors, prior to the merger.

	Twenty-Six Weeks Ended
	June 25, 2006 (Actual)		June 26, 2005 (Pro forma)
	(In millions, except per share amounts)
Net sales	$	2,736.9	$	2,701.5
Income from continuing operations before income taxes and minority interests	$	134.4	$	90.2
Net income (loss)	$	126.0	$	(37.2	)
Basic net income (loss) per share	$	1.47	$	(0.43	)
Diluted net income (loss) per share	$	1.46	$	(0.43	)

Allocation of Purchase Price

The Merger's equity consideration was valued at $3.6 billion, including the exchange of 46.7 million equivalent shares of stock at a market price of $75.25 per share, the exchange of stock options valued at $4.0 million, and Merger-related costs incurred by Coors, of which $16.0 million was incurred prior to the Merger. Coors was considered the accounting acquirer in the Merger, requiring the purchase consideration to be allocated to Molson's and Kaiser's (now presented as discontinued operations) assets and liabilities based upon their fair values, with the residual to goodwill. The following table summarizes the fair values of the assets acquired and liabilities assumed at the Merger date:

			As of February 9, 2005
			(In millions)
Current assets			$	486.6
Property, plant and equipment				1,012.3
Goodwill				1,816.8
Intangible assets				3,740.4
Other assets				489.6

	Total assets acquired			7,545.7

Current liabilities				(686.8	)
Non-current liabilities and minority interests				(3,302.4	)

	Total liabilities assumed			(3,989.2	)

		Net assets acquired	$	3,556.5

Overall enterprise values and values of individual intangible assets were determined primarily through the use of discounted cash flow techniques. We have allocated the purchase price to goodwill and intangibles as follows:

			As of February 9, 2005
			Amount		Estimated Useful Lives in Years
			(In millions)
Goodwill
U.S. Segment			$	1,117.0
Canada Segment				604.4
Brazil Segment				95.4

Total Goodwill			$	1,816.8

Intangible Assets—Finite Lived
Canada Segment
	Distribution Agreements		$	276.0	4 to 11
	Brands			144.5	12

		Total Canada Segment		420.5

Brazil Segment
	Distribution Agreements		$	8.3	15
	Brands			23.5	12 to 36

		Total Brazil Segment		31.8

Total Intangible Assets—Finite Lived			$	452.3

Intangible Assets—Indefinite Lived
Canada Segment
	Distribution Agreements		$	811.5
	Brands			2,476.6

Total Intangible Assets—Indefinite Lived			$	3,288.1

Total Intangible Assets			$	3,740.4

Intangible assets associated with the Brazil segment on the opening balance sheet date are no longer carried on our balance sheets as a result of the sale of 68% of Kaiser on January 13, 2006.

Synergies deriving from the Merger are expected to benefit both the Canada and U.S. segments. Goodwill has been allocated to the U.S. segment based upon projections that a large portion of synergy cost savings will benefit that segment. Fair value estimates of the U.S. segment done both with and without total synergies expected to benefit the U.S. segment indicate a difference in that fair value of $1.1 billion. Management believes that this amount provides a reasonable basis for allocation of goodwill to the U.S. segment.

Merger-related Other

Molson owns a 19.9% common ownership interest in the Montréal Canadiens professional hockey club (the Club), as well as a preferred interest, redeemable in 2009. However, as discussed in Note 15, on June 30, 2006, entities which control and own a majority of the Club purchased the preferred equity held by Molson. Subsequent to the transaction, Molson still retains a 19.9% common equity interest in the Club, as well as Board representation on the Club and related entities. We account for our interest in the Club using the equity method. We have assigned values to intangible assets that are imbedded in our investment in the Montréal Canadiens, which is recorded in non-current other assets. We recorded

amortization in the thirteen and twenty-six week periods ended June 25, 2006, of $0.2 and $0.4 million, respectively, associated with the estimated finite-lived intangibles (no amortization was recorded in the first or second quarter of 2005). This amortization cost is classified as a component of other expenses.

The shareholders of the Club (the majority owner and Molson) and the National Hockey League (NHL) are parties to a consent agreement, which requires the purchaser and Molson to abide by funding requirements included in the terms of the shareholders' agreement. In addition, Molson was party to certain guarantees to the lenders of the majority owner of the Canadiens and the Bell Centre (formerly the Molson Centre). Molson was released from the guarantee to lenders of the majority owner of the Canadiens coincident with the sale of the preferred equity on June 30, 2006. Molson continues to be party to certain guarantees associated with the Bell Centre. We have made estimates of the fair values of ownership interests and guarantees, and recorded them as other assets and other liabilities as appropriate in our balance sheets. See Note 12.

3. DISCONTINUED OPERATIONS

On January 13, 2006, we sold a 68% equity interest in our Brazilian unit, Cervejarias Kaiser Brasil S.A. ("Kaiser"), to FEMSA Cerveza S.A. de C.V. ("FEMSA") for $68 million cash, less $4.2 million of transaction costs, including the assumption by FEMSA of Kaiser-related debt and contingencies. Kaiser represented our previously-reported Brazil operating segment that we acquired on February 9, 2005 as part of the Merger. We retain a 15% interest in Kaiser, which we account for under the cost method, and have one seat out of seven on its board. Heineken N.V. remains a 17% equity partner in the Kaiser business. We undertook the sale of Kaiser to allow us to focus on our United States, Canada and Europe markets, and to continue to deliver the cost synergies and other benefits related to the Merger. Prior to the acquisition of 68% of Kaiser, FEMSA was, and remains, the largest distributor of Kaiser products in Brazil. We have reflected the results of operations, financial position, and cash flows for the Brazil segment in our financial statements as discontinued operations.

The terms of the agreement require us to indemnify FEMSA for exposures related to certain tax, civil and labor contingencies arising prior to FEMSA's purchase of Kaiser. (See Note 12.) We provided a full indemnity for any losses Kaiser may incur with respect to tax claims associated with certain previously utilized tax credits. The total base amount of potential claims in this regard, plus estimated accumulated penalties and interest, is $265 million. As of June 25, 2006, we have recorded the fair value of this indemnity liability on the balance sheet at $57 million. We also provided indemnity related to all other tax, civil and labor contingencies. In this regard, however, FEMSA assumed their full share of all contingent liabilities that had been previously recorded and disclosed by us. We may have to provide indemnity to FEMSA if those contingencies settle at amounts greater than those amounts previously recorded or disclosed by us. We will be able to offset any indemnity exposures in these circumstances with amounts that settle favorably to amounts previously recorded. As of June 25, 2006, we have recorded the fair value of this indemnity liability on the balance sheet at $43 million. The recognition of liabilities associated with the indemnifications impacted the loss on the sale of 68% of the business reported in the first half of 2006 and future changes thereto will impact reported results for discontinued operations.

As part of the sale, we also received a put option to sell to FEMSA our remaining 15% interest in Kaiser for the greater of $15.0 million or fair market value through January 2009 and at fair market value thereafter. The value of the put option favorably impacted the calculation of the loss on the sale of Kaiser. In addition, FEMSA received a call option to purchase from us our remaining 15% interest at fair market value beginning in January 2013.

Kaiser had $57.8 million and $80.2 million of net sales and $2.3 million and $60.7 million of pre-tax losses during the twenty-six weeks ended June 25, 2006 and June 26, 2005, respectively. The 2006 period included the month of December 2005 and the first thirteen days of January 2006, since we

reported Kaiser's results one month in arrears. The 2005 period included the period between February 9 (the date of the Merger) and May 29, 2005, again due to our reporting Kaiser one month in arrears in 2005. The accounting for our ownership interest in Kaiser changed after the reduction in our stake in January 2006, resulting in current and future accounting for our interest under the cost method. As such, Kaiser's results of operations were not included in our consolidated statement of operations for the thirteen weeks ended June 25, 2006, whereas sales of $64.5 million and pre-tax losses of $56.9 million were recorded in our consolidated results of operations for the corresponding thirteen weeks ended June 26, 2005. The loss from discontinued operations of $1.4 million for the thirteen weeks ended June 25, 2006 relate to adjustments to indemnity liabilities, including the impacts of foreign exchange and accretion of interest expense on the indemnity guarantee obligations recorded at their present value on the date of the sale of our majority interest in Kaiser discussed above. The loss from discontinued operations of $13.1 million for the twenty-six weeks ended June 25, 2006 also resulted from such liability adjustments as well as from losses generated by Kaiser in the month of December 2005 (as Kaiser's results of operations were reported one month in arrears) and thirteen days of January 2006 prior to the sale of Kaiser, in addition to the loss on the sale of our ownership interest in Kaiser.

The table below summarizes the loss from discontinued operations, net of tax, presented on our consolidated statements of operations:

	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	June 25, 2006		June 26, 2005		June 25, 2006		June 26, 2005
	(In thousands)
Loss from operations of Kaiser prior to sale(1)	$	—	$	56,925	$	2,293	$	60,710
Loss on sale of 68% of Kaiser		—		—		2,797		—
Adjustments to indemnity liabilities due to changes in estimates, foreign exchange gains and losses, and accretion expense		1,415		—		7,992		—

Loss from discontinued operations, tax effected	$	1,415	$	56,925	$	13,082	$	60,710

(1): Due to the operating losses incurred by Kaiser, there was no income tax impact on Kaiser's losses from operations.

Included in current and non-current assets of discontinued operations on the balance sheet are $6.4 million and $3.8 million, respectively, of deferred tax assets associated with these indemnity liabilities. In addition to the indemnity liabilities discussed above, current liabilities of discontinued operations include current tax liabilities of $11.2 million.

4. BUSINESS SEGMENTS

Subsequent to the sale of Kaiser, the Company operates in the reporting segments listed below. Our Brazil segment, which was composed of Kaiser, was sold on January 13, 2006, and has now been reflected as a discontinued operation.

Canada

The Canada segment consists of our production, marketing and sales of the Molson® and Coors Light® brands, principally in Canada; our joint venture arrangement related to the distribution and retail sale of beer in Ontario, Brewers Retail, Inc. (BRI) (consolidated under FIN 46R); and our joint venture arrangement related to the distribution of beer in the western provinces, Brewers Distribution Limited (BDL). The Canada segment also includes our equity interest in the Montréal Canadiens Hockey Club.

We also distribute, market and sell Corona Extra® in Ontario, Québec, and the Atlantic provinces under agreement with Cerveceria Modelo S.A. de C.V. We have an agreement with Heineken N.V. (Netherlands) which grants us the right to import, market and sell Heineken® products throughout Canada, and with Miller to brew, market and sell several Miller® brands, and distribute and sell imported Miller® brands. The Canada segment also has an agreement with Carlton and United Breweries Limited, a subsidiary of Foster's Brewing Group Limited, to brew Foster's Lager® in Canada for sale in Canada and the United States. Lastly, Molson has the right to produce Asahi® for the United States market.

United States (U.S.)

The U.S. segment consists of the production, marketing, and sales of the Coors® and Molson® portfolios of brands in the United States and its territories, its military bases world-wide, Mexico and the Caribbean, Coors Distributing Company, which consists of several Company-owned beer distributorships in Colorado and Idaho, and Rocky Mountain Metal Container (RMMC) and Rocky Mountain Bottle Company (RMBC), joint ventures consolidated under FIN 46R.

Europe

The Europe segment consists of our production, marketing and sale of the CBL brands, principally in the United Kingdom, our joint venture arrangement relating to the production and distribution of Grolsch® (consolidated under FIN 46R) in the United Kingdom and Republic of Ireland, and our joint venture arrangement for the physical distribution of products throughout Great Britain (Tradeteam), and sales of Molson Coors brands in Asia and other export markets.

Corporate

Corporate includes interest and certain other general and administrative costs that are not allocated to any of the operating segments. The majority of these Corporate costs relates to worldwide administrative functions, such as Corporate affairs, legal, human resources, accounting, treasury, and insurance and risk management.

No single customer accounted for more than 10% of our sales. Net sales represent sales to third party external customers. Intersegment revenues are insignificant. Following is a reconciliation of amounts shown as income (loss) from continuing operations before income taxes and after minority interests for each segment, to income (loss) from continuing operations before income taxes and

income (loss) from continuing operations shown on the condensed consolidated statements of operations:

	Thirteen Weeks Ended June 25, 2006
	U.S.		Canada		Europe		Corporate(1)			Total
	(In thousands)
Net sales	$	721,779	$	496,284	$	363,225	$	1,737		$	1,583,025
Income (loss) from continuing operations before income taxes and after minority interests		38,585		141,712		37,519		(65,541	)		152,275
Minority interests, before taxes		5,513		1,770		1,426		(3,905	)		4,804

Income (loss) before income taxes	$	44,098	$	143,482	$	38,945	$	(69,446	)	$	157,079
Income tax benefit											4,965

Income before minority interests											162,044
Minority interests											(4,402	)

Income from continuing operations										$	157,642

(1): Net sales are reflective of revenues associated with the marketing of the Company's intellectual property, including trademarks and brands. Prior period amounts have not been reclassified due to immateriality.

	Thirteen Weeks Ended June 26, 2005
	U.S.		Canada		Europe		Corporate			Total
	(In thousands)
Net sales	$	701,982	$	438,593	$	406,288	$	—		$	1,546,863
Income (loss) from continuing operations before income taxes and after minority interests		74,458		106,036		28,962		(76,960	)		132,496
Minority interests, before taxes		4,354		1,302		1,417		(620	)		6,453

Income (loss) before income taxes	$	78,812	$	107,338	$	30,379	$	(77,580	)	$	138,949
Income tax expense											(37,418	)

Income before minority interests											101,531
Minority interests											(6,060	)

Income from continuing operations										$	95,471

	Twenty-Six Weeks Ended June 25, 2006
	U.S.		Canada		Europe		Corporate(1)			Total
	(In thousands)
Net sales	$	1,273,053	$	825,603	$	635,804	$	2,411		$	2,736,871
Income (loss) from continuing operations before income taxes and after minority interests		50,141		185,544		15,412		(125,087	)		126,010
Minority interests, before taxes		8,981		3,255		2,361		(6,235	)		8,362

Income (loss) before income taxes	$	59,122	$	188,799	$	17,773	$	(131,322	)	$	134,372
Income tax benefit											12,403

Income before minority interests											146,775
Minority interests											(7,703	)

Income from continuing operations										$	139,072

(1): Net sales are reflective of revenues associated with the marketing of the Company's intellectual property, including trademarks and brands. Prior period amounts have not been reclassified due to immateriality.

	Twenty-Six Weeks Ended June 26, 2005
	U.S.		Canada		Europe		Corporate			Total
	(In thousands)
Net sales	$	1,226,956	$	634,924	$	733,418	$	—		$	2,595,298
Income (loss) from continuing operations before income taxes and after minority interests		87,051		121,711		17,931		(140,414	)		86,279
Minority interests, before taxes		6,457		1,302		1,982		(940	)		8,801

Income (loss) before income taxes	$	93,508	$	123,013	$	19,913	$	(141,354	)	$	95,080
Income tax expense											(21,725	)

Income before minority interests											73,355
Minority interests											(8,283	)

Income from continuing operations										$	65,072

The following table represents total assets by segment:

		At June 25, 2006		At December 25, 2005
		(In thousands)
United States		$	2,712,268	$	2,631,312
Canada			6,250,569		5,875,120
Europe			2,714,646		2,713,441
Discontinued operations			10,259		579,392

	Total assets	$	11,687,742	$	11,799,265

5. EARNINGS PER SHARE (EPS)

Basic income per common share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted income per share includes the additional dilutive effect of our potentially dilutive securities, which include certain stock options, restricted stock awards and performance stock awards, calculated using the treasury stock method. The following summarizes the effect of dilutive securities on earnings per share:

		Thirteen Weeks Ended						Twenty-Six Weeks Ended
		June 25, 2006			June 26, 2005			June 25, 2006			June 26, 2005
		(In thousands, except per share amounts)
Net income		$	156,227		$	38,546		$	125,990		$	4,362

Weighted average shares for basic EPS			85,953			85,321			85,819			74,214
Effect of dilutive securities:
	Stock options granted to employees		514			592			490			895
	Restricted stock excluded from basic EPS		59			15			42			15

Weighted average shares for diluted EPS			86,526			85,928			86,351			75,124

Basic income (loss) per share:
	From continuing operations	$	1.83		$	1.12		$	1.62		$	0.88
	From discontinued operations		(0.01	)		(0.67	)		(0.15	)		(0.82	)

Basic income per share		$	1.82		$	0.45		$	1.47		$	0.06

Diluted income (loss) per share:
	From continuing operations	$	1.82		$	1.11		$	1.61		$	0.87
	From discontinued operations		(0.01	)		(0.66	)		(0.15	)		(0.81	)

Diluted income per share		$	1.81		$	0.45		$	1.46		$	0.06

Dividends per share		$	0.32		$	0.32		$	0.64		$	0.64

Anti-dilutive securities totaling 4.3 million and 4.6 million in the thirteen weeks and 4.3 million and 2.7 million in the twenty-six weeks ended June 25, 2006 and June 26, 2005, respectively, were not included in our calculation because the stock options' exercise prices were greater than the average market price of the common shares or were anti-dilutive because of the impact of unrecognized compensation cost on the calculation of assumed proceeds in the application of the treasury stock method with our implementation of SFAS 123R,"Share Based Payment." The assumed proceeds calculation in the treasury stock method required us to determine windfall tax benefits. We accomplish this by multiplying in-the-money options outstanding by a dollar amount derived by calculating the current average market price less the grant price less the Black-Scholes fair value amount. This product was multiplied by the appropriate tax rate. We have thus far not elected the short-cut method as

allowed by FAS 123R and its interpretations. However, we may elect the short-cut method prior to the end of 2006.

Outstanding performance stock awards, totaling 963,165 on June 25, 2006, were also excluded from dilutive shares in accordance with SFAS 128,"Earnings per Share.", as all necessary conditions required to be satisfied (outlined in Note 14) have not been met as of quarter-end. There were no such performance awards issued or outstanding prior to 2006.

6. SPECIAL CHARGES, NET

Largely in connection with the Merger and our related synergy goals, we have incurred net expenses during 2006 and 2005 that are not indicative of our normal, recurring operations. As such, we have separately classified these costs as special operating charges. By segment, the following items have been recorded as special charges (credits):

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	June 25, 2006			June 26, 2005			June 25, 2006			June 26, 2005
	(In thousands)
U.S.—Memphis brewery accelerated depreciation	$	23,693		$	9,566		$	43,303		$	14,411
U.S.—Restructuring and other costs associated with the Memphis brewery		2,729			434			7,251			3,036
U.S.—Insurance recovery—environmental		—			—			(2,408	)		—
Europe—Gains (losses and impairments) on long-lived assets		—			(3,231	)		—			398
Europe—Restructuring charge		3,165			—			9,832			—
Europe—Pension curtailment gain		(5,261	)		—			(5,261	)		—
Europe—Other exit costs		179			—			1,315			—
Corporate—Change in control to Coors executives		1,335			17,111			(1,361	)		44,311
Corporate—Other severance for Molson executives		—			14,555			—			14,555
Corporate—Other		—			2,528			—			4,952

Total	$	25,840		$	40,963		$	52,671		$	81,663

U.S. Segment

The U.S. segment recognized $26.4 million and $10.0 million of net special charges in the second quarters of 2006 and 2005, respectively, in accordance with a restructuring plan approved by the Company's board of directors in connection with the closure of our Memphis facility and plans to obtain synergy cost savings at our Golden facility. In the second quarter of 2006, $23.7 million of these charges related to accelerated depreciation and the remaining $2.7 million included employee termination costs and other incremental costs that were the direct result of the Memphis plant closure, planned for the third quarter of 2006. In the second quarter of 2005, $9.6 million of these charges related to accelerated depreciation and the remaining $0.4 million included employee termination costs. Charges for accelerated depreciation are larger in 2006 than in 2005 because of 1) reductions in salvage value estimates of the Memphis brewery, and 2) acceleration of the plant's closing date. Retention and severance costs for the Memphis employees are being accrued over the service period during which such benefits are earned by the employees.

U.S. segment special charges for the twenty-six weeks ended June 25, 2006 were partially offset by a receipt of $2.4 million cash distribution from bankruptcy proceedings of a former insurance carrier

for a claim related to our environmental obligations at the Lowry Superfund site in Denver, Colorado. We recorded the cash receipt as a special benefit, and did not impact our estimated environmental liability associated with this site.

The following summarizes the activity in the U.S. segment restructuring accruals:

		Severance and Other Employee-Related Costs		Closing and Other Costs			Total
		(In thousands)
Balance at December 25, 2005		$	27,600	$	—		$	27,600
	Charges incurred		3,204		3,064			6,268
	Payments made		—		(181	)		(181	)
	Other adjustments		—		—			—

Balance at June 25, 2006		$	30,804	$	2,883		$	33,687

The liability for severance and other employee-related costs include a $25.0 million estimated payment required upon withdrawal from the hourly workers multi-employer pension plan associated with our Memphis location that we recorded in the third quarter of 2005.

The Memphis brewery currently employs approximately 300 people and brews products for export. All production remaining at the Memphis location will be relocated to a different Company-owned facility or outsourced when the brewery is closed. The Memphis brewery is scheduled to close in September of 2006.

Canada Segment

The Canada segment restructured its sales and marketing organizations in the fourth quarter of 2005, and recorded $0.8 million of asset write-offs and lease exit costs, and $4.4 million of severance and other exit costs.

The following summarizes the activity in the Canada segment restructuring accruals:

		Severance and Other Employee-Related Costs
		(In thousands)
Balance at December 25, 2005		$	3,850
	Charges incurred		—
	Payments made		(811	)
	Other adjustments for currency translation		(251	)

Balance at June 25, 2006		$	2,788

Europe Segment

The Europe segment recorded a special item gain in the second quarter due to a $5.3 million curtailment gain associated with the U.K. pension plan, which resulted from changes in the plan and reductions in headcount from restructuring efforts. This item is discussed at more length in Note 10,"Employee Retirement Plans." Charges of $3.2 million pertaining to restructuring costs partially offset this gain. In the 2005 second quarter, we realized $3.2 million of one-time development profits on real estate formerly held by the Company.

Net special charges of $5.9 million were recorded during the twenty-six weeks ended June 25, 2006 as compared to $0.4 in charges for the same period of 2005. The 2006 charges of $11.1 million are a combination of employee termination costs associated with the U.K. supply chain and back office

restructuring efforts ($9.8 million) and costs associated with exiting the Russia market ($1.3 million), offset by a $5.3 million recovery of pension costs. The impact of the pension curtailment is not included in the summary below; rather its impact is discussed in Note 10,Employee Retirement Plans. The 2005 costs represented impairments of brewing assets in the United Kingdom, largely offset by the one-time development profit recognized in the second quarter.

Approximately 240 employees are impacted by the supply chain and back office restructuring efforts. Pursuant to the restructuring plan, during the first half of the year, 180 employees terminated employment, and the remaining employee terminations are expected in the second half of 2006. Charges for employee termination costs have, in some cases, been recognized over the course of the employees' remaining service period if there was a significant period of time between initial notification and termination of employment.

The following summarizes the activity in the Europe segment restructuring accruals:

		Severance and Other Employee-Related Costs			Closing and Other Costs		Total
		(In thousands)
Balance at December 25, 2005		$	11,035		$	—	$	11,035
	Charges incurred		9,815			456		10,271
	Payments made		(14,286	)		—		(14,286	)
	Other adjustments for currency translation		628			17		645

Balance at June 25, 2006		$	7,192		$	473	$	7,665

Corporate Segment

The Corporate segment recognized $1.3 million and $34.2 million of special charges in the second quarters of 2006 and 2005, respectively. The entire 2006 amount and $13.3 million in 2005 were costs associated with providing an exercise price floor on stock options held by former Coors officers who left the Company under change in control agreements following the Merger. The remaining 2005 charges were associated with 1) $3.8 million of severance and other benefits paid to a former Coors officer who exercised change in control rights in the second quarter of 2005, 2) $14.6 million of severance and share-based compensation and benefits paid to two former Molson officers who left the Company during the second quarter of 2005 following the Merger, and 3) $2.5 million of merger-related costs that did not qualify for capitalization under purchase accounting.

The Corporate segment recognized a special benefit of $1.4 million and special charges of $63.8 million in the twenty-six week periods ending June 25, 2006 and June 26, 2005, respectively. The entire 2006 amount and $13.3 million in 2005 were costs associated with the exercise price floor on stock options mentioned above. The remaining 2005 charges were associated with 1) $31.0 million of severance and other benefits paid to twelve former Coors officers who exercised change in control rights in the first half of 2005, 2) $14.6 million of severance and share-based compensation and benefits paid to two former Molson officers who left the Company during the second quarter of 2005 following the Merger, and 3) $4.9 million of merger-related costs that did not qualify for capitalization under purchase accounting.

Coors had agreements with executive officers, and certain other members of management, relating to a change of control of Coors (referred to above). The Merger, which occurred on February 9, 2005, constituted a change in control of Coors under these agreements. These employees were entitled to severance benefits if triggering events specified in the agreement occurred. Upon a triggering event, the officer would receive a multiple of annual salary and bonus and continued health, pension and life insurance benefits. For terminated officers, stock option exercises are subject to a floor market price

equal to the price of Coors' stock on the date of the change of control ($73.50). This potential cash award is recorded as a liability and is marked to market each period with the change in MCBC's stock price, up to the price at the date of the Merger. We recorded expense of $1.3 million and a benefit of $1.4 million during the thirteen and twenty-six week periods ended June 25, 2006, respectively, associated with these potential awards, as a result of an increase in our stock price during the first quarter of 2006 and a decrease in our stock price during the second quarter of 2006. Such expense amounted to $13.3 million in the second quarter of 2005 due to a decrease in our stock price during that time period. The liability for these potential awards was $4.5 million as of June 25, 2006. If the price of the Company's stock rises to the option floor, it will result in a reduction to this liability. To the extent the Company's stock price falls below the price on June 25, 2006, additional charges will be necessary. The cost or benefit associated with the stock option exercise price floor is included in the statement of cash flows as share based compensation as a non-cash add-back to net income in determining cash flows from operating activities.

7. VARIABLE INTEREST ENTITIES

FASB Interpretation No. 46R "Consolidation of Variable Interest Entities—An Interpretation of ARB 51" (FIN 46R) expands the scope of ARB 51 and can require consolidation of "variable interest entities (VIEs)." Once an entity is determined to be a VIE, the party with the controlling financial interest, the primary beneficiary, is required to consolidate it. We have investments in VIEs, of which we are the primary beneficiary. Accordingly, we have consolidated the following four joint ventures for all periods presented: Rocky Mountain Metal Container (RMMC), Rocky Mountain Bottle Company (RMBC), Brewers' Retail Inc. (BRI) (effective with the Merger on February 9, 2005) and Grolsch (U.K.) Limited (Grolsch).

Rocky Mountain Metal Container

RMMC, a Colorado limited liability company, is a joint venture with Ball Corporation in which we hold a 50% interest. We have a can and end supply agreement with RMMC. Under this agreement, RMMC supplies us with substantially all the can and end requirements for our Golden brewery. RMMC manufactures these cans and ends at our manufacturing facilities, which RMMC is operating under a use and license agreement. As of June 25, 2006, the Company is the guarantor of approximately $36.4 million of RMMC debt.

Rocky Mountain Bottle Company

RMBC is a joint venture with Owens-Brockway Glass Container, Inc. (Owens) in which we hold a 50% interest. RMBC produces glass bottles at our glass manufacturing facility for use at our Golden brewery. Under this agreement, RMBC supplies our bottle requirements, and Owens has a contract to supply the majority of our bottle requirements not met by RMBC.

Brewers' Retail Inc.

BRI is a joint venture beer distribution and retail network for the Ontario region of Canada, owned by MCBC, Labatt and Sleeman brewers. Ownership percentages fluctuate with sales volumes. At June 25, 2006, our ownership percentage was approximately 52%. BRI operates on a breakeven basis. The three owners guarantee BRI's debt and pension liabilities, which were approximately $189.8 million and $81.5 million, respectively, at June 25, 2006.

Grolsch

Grolsch is a joint venture between CBL and Royal Grolsch N.V. in which we hold a 49% interest. The Grolsch joint venture markets Grolsch® branded beer in the United Kingdom and the Republic of

Ireland. The majority of the Grolsch® branded beer is produced by CBL under a contract brewing arrangement with the joint venture. CBL and Royal Grolsch N.V. sell beer to the joint venture, which sells the beer back to CBL (for onward sale to customers) for a price equal to what it paid, plus a marketing and overhead charge and a profit margin.

	Thirteen Weeks Ended June 25, 2006						Thirteen Weeks Ended June 26, 2005
	Total Assets		Revenues		Pre-tax Income		Total Assets		Revenues		Pre-tax Income
	(In thousands)						(In thousands)
RMBC(1)	$	45,243	$	25,113	$	5,253	$	54,716	$	24,298	$	4,699
RMMC(1)	$	86,248	$	68,949	$	5,537	$	83,150	$	64,971	$	3,821
BRI(2)	$	372,314	$	67,743	$	56	$	315,543	$	37,497	$	—
Grolsch(1)	$	27,407	$	19,990	$	2,882	$	25,866	$	20,015	$	2,882

(1): Substantially all such sales are made to the Company, and as such, are eliminated in consolidation.
(2): Revenues reflect service charge revenues earned by BRI from the sale of products to the consumer; amount does not include beer sales of the Company.

	Twenty-Six Weeks Ended June 25, 2006						Twenty-Six Weeks Ended June 26, 2005
	Total Assets		Revenues		Pre-tax Income		Total Assets		Revenues		Pre-tax Income
	(In thousands)						(In thousands)
RMBC(1)	$	45,243	$	48,432	$	9,748	$	54,716	$	45,506	$	7,744
RMMC(1)	$	86,248	$	117,528	$	7,796	$	83,150	$	108,350	$	4,777
BRI(2)	$	372,314	$	131,873	$	117	$	315,543	$	56,285	$	—
Grolsch(1)	$	27,407	$	32,240	$	4,792	$	25,866	$	28,603	$	4,119

(1): Substantially all such sales are made to the Company, and as such, are eliminated in consolidation.
(2): BRI results in 2005 are included from February 9, 2005, the date of the Merger through May 21, 2005 (due to BRI's results being reported one month in arrears). Revenues reflect service charge revenues earned by BRI from the sale of products to the consumer; amount does not include beer sales of the Company.

Trigen

In 1995, we sold a power plant located at the Golden brewery to Trigen-Nations Colorado LLP, including nearly all the fixed assets necessary to produce energy for the brewery operations. All output from the power plant is sold to CBC at rates consisting of fixed and variable components. We have no investment in Trigen but, due to the nature of our relationship with Trigen, we believe we may have a variable interest as defined by FIN 46R. We have no legal right or ability to receive or review financial information for the activity that occurs at the power plant. As a result, after exhaustive efforts, we were unable to conclude as to whether the activity which occurs at the power plant is a variable interest entity, and if so, whether we are the primary beneficiary as defined by FIN 46R. We incurred net expenses of $9.7 million and $8.6 million for the thirteen weeks ended June 25, 2006 and June 25, 2005, respectively, and $22.0 million and $17.3 million for the twenty-six weeks ended June 25, 2006 and June 26, 2005, respectively, under our agreement with Trigen.

8. GOODWILL AND OTHER INTANGIBLES

The following table presents details of our intangible assets, other than goodwill, as of June 25, 2006:

		Useful Life	Gross		Accumulated Amortization			Net
		(Years)	(In millions)
Intangible assets subject to amortization:
	Brands	3-35	$	287.4	$	(78.9	)	$	208.5
	Distribution rights	2-14		348.2		(81.5	)		266.7
	Patents and technology and distribution channels	3-10		30.0		(15.1	)		14.9
	Other	5-34		14.2		(9.5	)		4.7
Intangible assets not subject to amortization:
	Brands	Indefinite		3,122.5		—			3,122.5
	Pension	N/A		16.6		—			16.6
	Distribution networks	Indefinite		900.8		—			900.8
	Other	Indefinite		28.1		—			28.1

Total			$	4,747.8	$	(185.0	)	$	4,562.8

The following table presents details of our intangible assets, other than goodwill, as of December 25, 2005:

		Useful Life	Gross		Accumulated Amortization			Net
		(Years)	(In millions)
Intangible assets subject to amortization:
	Brands	3-35	$	275.5	$	(64.5	)	$	211.0
	Distribution rights	2-14		329.4		(54.2	)		275.2
	Patents and technology and distribution channels	3-10		28.6		(13.3	)		15.3
	Other	5-34		14.2		(9.3	)		4.9
Intangible assets not subject to amortization:
	Brands	Indefinite		3,004.6		—			3,004.6
	Pension	N/A		16.0		—			16.0
	Distribution networks	Indefinite		867.8		—			867.8
	Other	Indefinite		28.5		—			28.5

Total			$	4,564.6	$	(141.3	)	$	4,423.3

The incremental change in the value of intangibles from December 25, 2005 to June 25, 2006 is primarily due to the impact of foreign exchange, as a significant amount of intangibles are denominated in foreign currency.

Based on foreign exchange rates as of June 25, 2006, the estimated future amortization expense of finite-lived intangible assets is as follows:

Fiscal Year	Amount
	(In millions)
2006—Remaining	$	38.2
2007	$	76.3
2008	$	76.3
2009	$	69.6
2010 and thereafter	$	52.9

Amortization expense of intangible assets was $18.7 million and $37.1 million for the thirteen and twenty-six weeks ended June 25, 2006 and $14.8 million and $26.4 million for the thirteen and twenty-six weeks ended June 26, 2005, respectively.

The following summarizes the change in goodwill for the twenty-six weeks ended June 25, 2006 (in millions):

Balance at December 25, 2005		$	2,871.3
	Final purchase accounting adjustments related to Merger with Molson, Inc.		(20.9	)
	Impact of currency exchange		115.5

Balance at June 25, 2006		$	2,965.9

We completed the allocation of the purchase price related to the Merger with Molson, Inc. during the first quarter of 2006. The final adjustments were related to an increase in intangible assets and a reduction in the fair values of certain liabilities assumed in the Merger, and related deferred tax adjustments.

As of June 25, 2006, goodwill was allocated between our reportable segments as follows:

Segment	Amount
	(In millions)
United States	$	1,339.1
Canada		794.8
Europe		832.0

Total	$	2,965.9

9. DEBT AND OTHER CREDIT ARRANGEMENTS

Our total borrowings as of June 25, 2006 and December 25, 2005 were composed of the following:

		As of
		June 25, 2006			December 25, 2005
		(In thousands)
Short-term borrowings(1)		$	11,057		$	14,001

Senior notes
	U.S. $850 million(2)	$	841,076		$	849,898
	U.S. $300 million(3)		300,000			300,000
	Cdn $900 million(3)		799,686			770,326
Commercial paper(4)			241,835			167,378
Credit facility(5)			53,412			162,713
Other notes payable(6)			226,240			220,454

	Total long-term debt (including current portion)		2,462,249			2,470,769
	Less: current portion of long-term debt		(299,250	)		(334,101	)

	Total long-term debt	$	2,162,999		$	2,136,668

(1): Our short-term borrowings consist of various uncommitted lines of credit, short-term bank loans and overdraft facilities as summarized below:

		As of
		June 25, 2006		December 25, 2005
		(In millions)
U.S. $ Lines of Credit
	Two lines totaling $50 million	$	—	$	—
	Interest rates at 5.65%
Canadian Bank Overdraft Facilities
	Two lines totaling Cdn $30 million ($27 million)		11.1		—
	Interest rates at U.S. Prime and Cdn Prime
British Pound Lines of Credit and Bank Overdraft Facility
	Three lines totaling £30 million ($55 million)		—		14.0
	Interest rates at 5.50%
Japanese Yen Lines of Credit
	Two lines totaling 1.1 billion Yen ($9 million)		—		—
	Interest rates at <1%

Total short-term borrowings		$	11.1	$	14.0

(2): On May 7, 2002, CBC completed a private placement of $850 million principal amount of 6³/8% senior notes, due 2012, with interest payable semi-annually. The notes are unsecured, are not subject to any sinking fund provision and include a redemption provision (make-whole provision) if the notes are retired before their scheduled maturity. The redemption price is equal to the greater of (1) 100% of the principal amount of the notes plus accrued and unpaid interest and (2) the make-whole amount of the notes being redeemed, which is equal to the present value of the principal amount of the notes and interest to be redeemed. Net proceeds from the sale of the notes, after deducting estimated expenses and underwriting fees, were approximately $841 million. The notes were subsequently exchanged for publicly registered notes with the same terms.

The notes are guaranteed by Molson Coors Brewing Company, all of its significant U.S. subsidiaries and Molson Coors Capital Finance ULC. The securities have certain restrictions on secured borrowing, sale-leaseback transactions and the sale of assets, all of which the Company was in compliance with at June 25, 2006.

(3): On September 22, 2005, the Molson Coors Capital Finance ULC (MCCF), a Nova Scotia entity and wholly owned subsidiary of the Company issued 10-year and 5-year private placement debt securities totaling Cdn $900 million in Canada and U.S. $300M in the United States. The Canadian bonds bear interest at 5.0% and the U.S. bonds bear interest at 4.85%. Both offerings are guaranteed by Molson Coors Brewing Company and all of its significant U.S. subsidiaries. The securities have certain restrictions on secured borrowing, sale-leaseback transactions and the sale of assets, all of which the Company was in compliance with at June 25, 2006. The securities pay interest semi-annually on March 22 and September 22. The private placement securities will mature on September 22, 2010 for the U.S. issue and September 22, 2015 for the Canadian issue. All the proceeds from these transactions were used to repay outstanding amounts on the Company's $1.3 billion bridge facility, a facility which was terminated at the time of repayment. Debt issuance costs capitalized in connection with the debt issuances will be amortized over the life of the bonds and total approximately $9.2 million. The notes were subsequently exchanged for publicly registered notes with the same terms.
(4): We maintain a $500 million commercial paper program. All of our commercial paper issued is classified as current portion of long-term debt as of June 25, 2006. As of June 25, 2006, the interest rates on our outstanding commercial paper borrowings ranged from 4.92% to 5.335%, with a weighted average of 5.17%. As of June 25, 2006, $241.8 million of our total $1.4 billion unsecured committed credit arrangement was being used as a backstop for our commercial paper program [See (5) below]. This line of credit has a five-year term expiring 2010.
(5): In March 2005, we entered into a $1.4 billion revolving multicurrency bank credit facility. Amounts drawn against the credit facility accrue interest at variable rates, which are based upon LIBOR or CDOR, plus a spread based upon Molson Coors' long-term bond rating and facility utilization. At June 25, 2006, the average effective interest rate for all borrowings outstanding was 5.576% and we had $53.4 million outstanding. The credit facility expires in March 2010.
(6): Other notes payable consist of the following:

		As of
		June 25, 2006		December 25, 2005
		(In millions)
Note payable issued by
	RMMC joint venture	$	36.4	$	36.4
	Interest rate at 7.2%
	Maturity in December 2013
Notes payable issued by
	BRI joint venture, denominated in Canadian dollars		189.8		184.1
	Interest rate at 7.5%
	Maturity in June 2011

Total other notes payable		$	226.2	$	220.5

10. EMPLOYEE RETIREMENT PLANS

The Company offers retirement plans in the United States, Canada and the United Kingdom that cover substantially all of its employees. Additionally, the Company offers other postretirement benefits

for CBC and Molson employees. The Company's net periodic pension costs under retirement plans and other postretirement benefits are as follows:

		Thirteen Weeks Ended June 25, 2006
		U.S. Plans			Canada Plans			U.K. Plan			Total
		(In thousands)
Defined Benefit Plans
	Service cost	$	4,915		$	8,256		$	8,996		$	22,167
	Interest cost		13,654			20,825			25,075			59,554
	Expected return on plan assets		(16,063	)		(25,892	)		(34,537	)		(76,492	)
	Amortization of prior service cost (benefit)		11			313			(1,514	)		(1,190	)
	Amortization of net loss		4,732			—			2,596			7,328
	Less expected participant contributions		—			(899	)		(2,432	)		(3,331	)

	Net periodic pension cost (benefit)	$	7,249		$	2,603		$	(1,816	)	$	8,036

Other Postretirement Benefits
	Service cost—benefits earned during the period	$	784		$	1,760		$	—		$	2,544
	Interest cost on projected benefit obligation		1,846			3,186			—			5,032
	Amortization of prior service cost		52			27			—			79
	Recognized net actuarial loss		711			206			—			917

	Net periodic postretirement benefit cost	$	3,393		$	5,179		$	—		$	8,572

		Thirteen Weeks Ended June 26, 2005
		U.S. Plans			Canada Plans			U.K. Plan			Total
		(In thousands)
Defined Benefit Plans
	Service cost	$	5,223		$	6,312		$	9,372		$	20,907
	Interest cost		13,344			18,977			27,270			59,591
	Expected return on plan assets		(15,016	)		(20,278	)		(33,685	)		(68,979	)
	Amortization of prior service cost		1,366			—			—			1,366
	Amortization of net loss		4,277			—			1,255			5,532
	Less expected participant contributions		—			(962	)		(2,775	)		(3,737	)

	Net periodic pension cost	$	9,194		$	4,049		$	1,437		$	14,680

Other Postretirement Benefits
	Service cost—benefits earned during the period	$	507		$	1,318		$	—		$	1,825
	Interest cost on projected benefit obligation		1,524			2,458			—			3,982
	Amortization of prior service benefit		(188	)		—			—			(188	)
	Recognized net actuarial loss		448			—			—			448

	Net periodic postretirement benefit cost	$	2,291		$	3,776		$	—		$	6,067

		Twenty-Six Weeks Ended June 25, 2006
		U.S. Plans			Canada Plans			U.K. Plan			Total
		(In thousands)
Defined Benefit Plans
	Service cost	$	9,830		$	16,292		$	18,781		$	44,903
	Interest cost		27,308			41,011			48,761			117,080
	Expected return on plan assets		(32,126	)		(50,867	)		(67,376	)		(150,369	)
	Amortization of prior service cost (benefit)		22			846			(3,079	)		(2,211	)
	Amortization of net loss		9,464			—			7,326			16,790
	Less expected participant contributions		—			(1,766	)		(4,931	)		(6,697	)

	Net periodic pension cost (benefit)	$	14,498		$	5,516		$	(518	)	$	19,496

Other Postretirement Benefits
	Service cost—benefits earned during the period	$	1,568		$	3,454		$	—		$	5,022
	Interest cost on projected benefit obligation		3,692			6,251			—			9,943
	Amortization of prior service cost		104			27			—			131
	Recognized net actuarial loss		1,422			405			—			1,827

	Net periodic postretirement benefit cost	$	6,786		$	10,137		$	—		$	16,923

		Twenty-Six Weeks Ended June 26, 2005
		U.S. Plans			Canada Plans			U.K. Plan			Total
		(In thousands)
Defined Benefit Plans
	Service cost	$	10,446		$	9,840		$	18,744		$	39,030
	Interest cost		26,688			29,596			54,540			110,824
	Expected return on plan assets		(30,032	)		(31,624	)		(67,370	)		(129,026	)
	Amortization of prior service cost		2,732			—			—			2,732
	Amortization of net loss		8,554			—			2,510			11,064
	Less expected participant contributions		—			(1,498	)		(5,550	)		(7,048	)

	Net periodic pension cost	$	18,388		$	6,314		$	2,874		$	27,576

Other Postretirement Benefits
	Service cost—benefits earned during the period	$	1,014		$	2,055		$	—		$	3,069
	Interest cost on projected benefit obligation		3,048			3,835			—			6,883
	Amortization of prior service benefit		(376	)		—			—			(376	)
	Recognized net actuarial loss		896			—			—			896

	Net periodic postretirement benefit cost	$	4,582		$	5,890		$	—		$	10,472

During the second quarter of 2006, contributions paid to the defined benefit plans were $5.0 million, $32.2 million and $6.9 million for the U.S., Canada and U.K. plans, respectively. Contributions paid to the defined benefit plans for the first half of 2006 were $9.9 million, $57.4 million and $12.9 million for the U.S., Canada and U.K. plans, respectively. Expected total fiscal year 2006 contributions to U.S., Canada and U.K. defined benefits plans for 2006 are approximately $160 million.

U.K. Plan Curtailment

As a result of employee restructuring activities associated with the Europe segment supply chain operations, a pension curtailment was recognized in the second quarter of 2006. The curtailment

triggered a significant event that resulted in the re-measurement of the pension assets and liabilities as of April 30, 2006. The table below represents the projected benefit obligation and the funded status as of the curtailment measurement date of April 30, 2006 and the changes in their status from December 25, 2005, for the U.K. plan.

As a result of the curtailment, a gain of $5.3 million was recognized and presented as a special item in the statement of operations in the second quarter of 2006. This gain arose from the reduction in estimated future working lifetimes of plan participants resulting in the acceleration of the recognition of the prior service benefit. This prior service benefit was generated by plan changes in previous years and was deferred on the balance sheet and amortized into earnings over the then expected working lifetime of plan participants of approximately 10 years. In addition, this curtailment event required a remeasurement of the projected benefit obligation and plan assets, which resulted in an $11.8 million reduction in the projected benefit obligation at April 30, 2006, as shown below, and was recognized in other comprehensive income in the second quarter of 2006.

The changes in the projected benefit obligation, plan assets and the funded status of the U.K. pension plan are as follows:

	U.K. Plan April 30, 2006
	(In thousands)
Actuarial present value of accumulated benefit obligation	$	1,847,391
Change in projected benefit obligation:
Projected benefit obligation at beginning of year	$	2,018,353
Service cost, net of expected employee contributions		9,733
Interest cost		31,640
Actual employee contributions		2,407
Curtailment gain		(11,771	)
Actuarial gain		(80,830	)
Benefits paid		(25,439	)
Foreign currency exchange rate change		104,749

Projected benefit obligation as of measurement date	$	2,048,842

Change in plan assets:
Fair value of assets at beginning of year	$	1,756,108
Actual return on plan assets		96,044
Employer contributions		10,524
Actual employee contributions		2,407
Benefits and plan expenses paid		(27,986	)
Foreign currency exchange rate change		96,896

Fair value of plan assets as of measurement date	$	1,933,993

Reconciliation of funded status:
Funded status—shortfall	$	(114,849	)
Unrecognized net actuarial loss		173,734
Unrecognized prior service benefit		(55,818	)

Net amount recognized	$	3,067

Pension expense for the U.K. plan was actuarially calculated for the remainder of 2006, following the curtailment using data available as of the measurement date of April 30, 2006. Assumptions as of December 25, 2005 were applied to related balance sheet amounts as of that date and for the pension expense through April 30, 2006. The table below details assumptions applied to our accounting for the U.K. pension plan as of the last two measurement dates.

		U.K. Plan
		April 30, 2006		December 25, 2005
Weighed average assumptions:
	Settlement discount rate	5.15	%	4.75	%
	Rate of compensation increase	4.25	%	4.00	%
	Expected return on plan assets	7.80	%	7.80	%
	Price inflation rate	2.75	%	2.50	%

11. INCOME TAXES

Our effective tax rate for the second quarter of 2006 was negative 3%, which is different from the range of our forecasted full year effective tax rate due primarily to revaluing our deferred tax assets and liabilities to give effect to a two percentage point reduction in the Canada corporate income tax rate as well as minor changes to two provincial income tax rates. These enacted tax rate changes, which will be implemented during the next four years, result in a $52.3 million tax benefit being recognized as a discrete item in the second quarter of 2006 income tax provision. Absent that item, our effective tax rate would have been approximately 30%. We anticipate that our full year 2006 effective tax rate will be in the range of 16% to 20%.

Our tax rate is volatile and may move up or down with changes in, among other things, the amount and source of income or loss, our ability to utilize foreign tax credits, and changes in tax laws.

During the second quarter of 2006, the U.K. enacted tax law changes that impact the deductibility of pension contributions. The changes did not have a material impact on our U.K. income tax provision.

12. CONTINGENCIES

Indemnity Obligations—Sale of Kaiser

have to provide indemnity to FEMSA if those contingencies settle at amounts greater than those amounts previously recorded or disclosed by us. We will be able to offset any indemnity exposures in these circumstances with amounts that settle favorably to amounts previously recorded. Our exposure related to these indemnity claims is capped at the amount of the sales price of the 68% equity interest of Kaiser, which was $68 million. As a result of these contract provisions, our fair value estimates include not only probability-weighted potential cash outflows associated with indemnity provisions, but also probability-weighted cash inflows that could result from favorable settlements, which could occur through negotiation or settlement programs that could arise from the federal or any of the various state governments in Brazil. The fair value of the total tax, civil and labor indemnity liability on our balance sheet is $43 million as of June 25, 2006, $29 million of which is classified as a current liability and $14 million of which is classified as non-current. Future settlement procedures and related negotiation activities associated with these contingencies are largely outside of our control, and will be handled by FEMSA. The sale agreement requires annual cash settlements relating to the tax, civil and labor indemnities, the first of which will occur during the first half of 2007. Indemnity obligations related to purchased tax credits must be settled upon notification. Due to the uncertainty involved with the ultimate outcome and timing of these contingencies, significant adjustments to the carrying values of the indemnity obligations could result in the future. These liabilities are denominated in Brazilian reals and have been stated at present value, and will therefore be subject in the future to foreign exchange gains or losses and to accretion cost, both of which will be recognized in the discontinued operations section of the statement of operations.

As a result of the sale of 68% of Kaiser on January 13, 2006, the indemnity liabilities were first reported as of March 26, 2006. The table below provides a summary of contingency reserve balances from March 26, 2006 through June 25, 2006:

		Purchased Tax Credits Indemnity Reserve			Tax, Civil and Labor Indemnity Reserve			Total Indemnity Reserves
		(In thousands)
Balance at March 26, 2006		$	52,397		$	42,910		$	95,307
	Foreign exchange		(1,317	)		(1,142	)		(2,459	)
	Changes to liability estimates		6,945			1,644			8,589
	Tax and other adjustments		(303	)		(248	)		(551	)

Balance at June 25, 2006		$	57,722		$	43,164		$	100,886

Current liabilities of discontinued operations include current tax liabilities of $11.2 million.

Montréal Canadiens

The shareholders of the Club (the majority owner and Molson) and the National Hockey League (NHL) are parties to a consent agreement, which requires the purchaser and Molson to abide by funding requirements included in the terms of the shareholders' agreement. In addition, Molson was a party to certain guarantees to the lenders of the majority owner of the Canadiens and the Bell Centre (formerly the Molson Centre). Molson was released from the guarantee to lenders of the majority owner of the Canadiens coincident with the sale of the preferred equity on June 30, 2006. Molson continues to be party to certain guarantees associated with the Bell Centre. We have recorded fair

value liabilities related to the guarantees associated with the NHL Consent Agreement as well as the guarantee related to the land lease.

Litigation and Other Disputes

Beginning in May 2005, several purported class action lawsuits were filed in the United States and Canada, including Federal courts in Delaware and Colorado and provincial courts in Ontario and Québec, alleging, among other things, that the Company, including Molson Inc., and certain officers and directors misled stockholders by failing to disclose first quarter (January-March) 2005 U.S. business trends prior to the Merger vote in January 2005. The Colorado Federal case has been transferred to the Delaware Federal court. The Delaware Federal lawsuits also allege that the Company failed to comply with U.S. GAAP. The Company will vigorously defend the lawsuits.

The Company was contacted in 2005 by the Central Regional Office of the U.S. Securities and Exchange Commission in Denver (the SEC) requesting the voluntary provision of documents and other information from the Company and Molson Inc. relating primarily to Corporate and financial information and communications related to the Merger, the Company's financial results for the first quarter of 2005 and other information. The SEC has advised the Company that this inquiry should not be construed as an indication by the SEC or its staff that any violations of law have occurred, nor should it be considered a reflection upon any person, entity, or security. The Company is cooperating with the inquiry.

The Company was also contacted in 2005 by the New York Stock Exchange. The Exchange has requested information in connection with events leading up to the Company's earnings announcement on April 28, 2005, which was the date we announced our first quarter 2005 losses attributed to lower sales and the Merger. The Exchange regularly conducts reviews of market activity surrounding Corporate announcements or events and has indicated that no inference of impropriety should be drawn from its inquiry. The Company is cooperating with the inquiry.

On July 20, 2005, the Ontario Securities Commission requested information related to the trading of MCBC stock prior to April 28, 2005, which was the date we announced our first quarter 2005 losses attributed to lower sales and the Merger. The Company is cooperating with the inquiry.

The Audit Committee of the Company's Board of Directors is investigating whether a complaint that it received in the third quarter of 2005 has any merit. The Committee has hired independent counsel to assist it in conducting the investigation. The complaint relates primarily to disclosure in connection with the Merger, exercises of stock options by Molson Inc. option holders before the record date for the special dividend paid to Molson Inc. shareholders before the Merger (which were disclosed in the Company's Report on Form 8-K dated February 15, 2005), statements made concerning the special dividend to Molson Inc. shareholders, and sales of the Company's common stock in connection with exercise of stock options by the Company's chief executive officer and chief financial officer following the Merger, after the release of the year-end results for Coors and Molson Inc. and after the Company lifted the trading restrictions imposed before the Merger. This investigation is ongoing and the Board of Directors continues to have full confidence in senior management, including the chief executive officer and chief financial officer.

In December 2005, Miller Brewing Company (Miller) sued the Company and several subsidiaries in a Wisconsin federal court. Miller seeks to invalidate a licensing agreement (the Agreement) allowing Molson Canada to be the sole distributor of Miller® products in Canada. Miller also seeks damages for U.S. and Canadian antitrust violations, and violations of the Agreement's confidentiality provisions. Miller also claims that the Agreement's purposes have been frustrated as a result of the Merger. The Company intends to vigorously defend this lawsuit, and has filed a claim against Miller and certain related entities in Ontario, Canada, seeking a declaration that the licensing agreement remains in full force and effect.

Molson Coors and many other brewers and distilled spirits manufacturers have been sued in several courts regarding advertising practices and underage consumption. The suits have all been brought by the same law firm and allege that each defendant intentionally marketed its products to "children and other underage consumers." In essence, each suit seeks, on behalf of an undefined class of parents and guardians, an injunction and unspecified money damages. In each suit, the manufacturers have advanced motions for dismissal to the court. Several of the lawsuits have been dismissed and are on appeal. There have been no appellate decisions. We will vigorously defend these cases and it is not possible at this time to estimate the possible loss or range of loss, if any, in these lawsuits.

CBL replaced a bonus plan in the United Kingdom with a different plan under which a bonus was not paid in 2003. A group of employees pursued a claim against CBL in respect of this issue with an employment tribunal. During the second quarter of 2005, the tribunal ruled against CBL. CBL appealed against this ruling and the appeal was heard in the first quarter of 2006, where most aspects of the initial tribunal judgments were overturned. However, the employment appeal tribunal remitted two specific issues back to a new employment tribunal. CBL has filed an appeal against the employment appeal tribunal's judgment on two grounds. We have estimated the cost of this contingency, if upheld, to be $1.2 million, which was recorded as a reserve in 2005. If the award were applied to other groups of employees, the potential loss could be higher.

We are involved in other disputes and legal actions arising in the ordinary course of our business. While it is not feasible to predict or determine the outcome of these proceedings, in our opinion, based on a review with legal counsel, none of these disputes and legal actions is expected to have a material impact on our consolidated financial position, results of operations or cash flows. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters, including the above-described advertising practices case, may arise from time to time that may harm our business.

Environmental

When we determine that it is probable that a liability for environmental matters or other legal actions exists and the amount of the loss is reasonably estimable, an estimate of the future costs are recorded as a liability in the financial statements. Costs that extend the life, increase the capacity or improve the safety or efficiency of Company-owned assets or are incurred to mitigate or prevent future environmental contamination may be capitalized. Other environmental costs are expensed when incurred.

From time to time, we have been notified that we are or may be a potentially responsible party (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act or similar state laws for the cleanup of other sites where hazardous substances have allegedly been released into the environment. We cannot predict with certainty the total costs of cleanup, our share of the total cost, the extent to which contributions will be available from other parties, the amount of time necessary to complete the cleanups or insurance coverage.

We are one of a number of entities named by the Environmental Protection Agency (EPA) as a PRP at the Lowry Superfund site. This landfill is owned by the City and County of Denver (Denver), and is managed by Waste Management of Colorado, Inc. (Waste Management). In 1990, we recorded a pretax charge of $30 million, a portion of which was put into a trust in 1993 as part of a settlement with Denver and Waste Management regarding the then outstanding litigation. Our settlement was based on an assumed remediation cost of $120 million (in 1992 adjusted dollars). We are obligated to pay a portion of future costs, if any, in excess of that amount.

Waste Management provides us with updated annual cost estimates through 2032. We reviewed these cost estimates, in the assessment of our accrual related to this issue. We use certain assumptions

that differ from Waste Management's estimates to assess our expected liability. Our expected liability (based on the $120 million threshold being met) is based on our best estimates available.

The assumptions used are as follows:

•: trust management costs are included in projections with regard to the $120 million threshold, but are expensed only as incurred,
•: income taxes, which we believe not to be an included cost, are not included in projections with regard to the $120 million threshold,
•: a 2.5% inflation rate for future costs, and
•: certain operations and maintenance costs were discounted using a 4.60% risk-free rate of return.

Based on these assumptions, the present value and gross amount of the costs at June 25, 2006 are approximately $3.7 million and $5.9 million, respectively. Accordingly, we believe that the existing liability is adequate as of June 25, 2006. We did not assume any future recoveries from insurance companies in the estimate of our liability, and none are expected.

Considering the estimates extend through the year 2032 and the related uncertainties at the site, including what additional remedial actions may be required by the EPA, new technologies, and what costs are included in the determination of when the $120 million threshold is reached, the estimate of our liability may change as facts further develop. We cannot predict the amount of any such change, but additional accruals in the future are possible.

We are aware of groundwater contamination at some of our properties in Colorado resulting from historical, ongoing or nearby activities. There may also be other contamination of which we are currently unaware.

While we cannot predict the eventual aggregate cost for environmental and related matters in which we are currently involved, we believe that any payments, if required, for these matters would be made over a period of time in amounts that would not be material in any one year to our operating results, cash flows or our financial or competitive position. We believe adequate reserves have been provided for losses that are probable and estimable.

13. CHANGES IN OTHER COMPREHENSIVE INCOME

The following summarizes the components in other comprehensive income:

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	June 25, 2006			June 26, 2005			June 25, 2006			June 26, 2005
	(In thousands)
Net income	$	156,227		$	38,546		$	125,990		$	4,362

Other comprehensive income:
Foreign currency translation adjustments, net of tax		194,250			(67,387	)		194,505			(23,550	)
Minimum pension liability		45,977			2,644			49,266			5,642
Unrealized loss on derivative instruments, net of tax		(6,575	)		(1,374	)		(6,774	)		(4,395	)
Reclassification adjustment—derivative instruments, net of tax		460			(1,671	)		(5,092	)		(6,144	)

Comprehensive income (loss)	$	390,339		$	(29,242	)	$	357,895		$	(24,085	)

The Canadian dollar strengthened against the U.S. dollar, thereby increasing our Canada segment's assets as stated in U.S. dollars in Note 4 and resulting in an increase in comprehensive income through foreign currency translation adjustments. Although the British pound weakened compared to the U.S. dollar, the variance was 2% and 5% for the comparative thirteen and twenty-six week periods, respectively, compared to the more favorable Canadian dollar by 10% and 8% for the same comparative periods. As the European segment's asset balance is less than half of that of Canada, the translation adjustment is more reflective of the weaker U.S. dollar versus the Canadian dollar. The curtailment of the U.K. pension plan discussed in Note 10 also resulted in a benefit to comprehensive income through the minimum pension liability.

14. SHARE BASED PAYMENTS—STOCK OPTIONS, RESTRICTED STOCK AND OTHER STOCK AWARDS

In the first quarter of 2006, we adopted the Financial Accounting Standards Board Statement No. 123 (Revised 2004), "Share-Based Payment" (SFAS 123R). The Company adopted SFAS 123R using the modified prospective method of adoption, which does not require restatement of prior periods.

The revised standard supersedes SFAS 123, "Accounting for Stock-Based Compensation", which we previously applied (see related discussion in Note 1). The new standard generally requires the recognition of the cost of employee services for share-based compensation based on the grant date fair value of the equity or liability instruments issued. The effect of adoption of SFAS 123R on the second quarter of 2006 was an additional expense of $1.7 million pretax, $1.0 million after tax, or $0.01 per diluted share. For the twenty-six weeks ended June 25, 2006, such impact was $4.6 million pretax, $3.2 after tax, or $0.04 per diluted share. The total share-based compensation expense recognized in the financial statements for the second quarter and first half of 2006 amounted to $10.8 million and $12.5 million, pre-tax, and $7.3 million and $8.8 million, after-tax, respectively. The second quarter after-tax expense consisted of $1.9 million, $3.7 million and $1.8 million for stock-options, performance shares and restricted stock units, respectively. The first half of 2006 after-tax expense consisted of $2.4 million, $4.1 million and $2.2 million for stock-options, performance shares and restricted stock units, respectively. Included in the stock option expense was a mark to market adjustment of the stock option floor. Such mark to market adjustment amounted to a $1.3 million expense and a $1.4 million benefit in the thirteen and twenty-six weeks ended June 25, 2006, respectively, and was included in special charges in the statements of operations. Under the new standard, excess income tax benefits from share-based compensation are presented as financing activities rather than operating activities in the statements of cash flows.

During the first twenty-six weeks of 2006, we issued the following awards to certain directors, officers, and other eligible employees, pursuant to the 2005 Molson Coors Brewing Company Incentive Compensation Plan: stock options, restricted stock units, performance shares, and limited stock appreciation rights. There were no awards granted under the Company's Equity Compensation Plan for Non-Employee Directors and the 1990 Equity Incentive Plan in the first half of 2006, and we are not expecting to grant any new awards under these plans.

Stock options are granted with an exercise price equal to the market value of a share of common stock on the date of grant. Stock options have a term of 10 years and generally vest over three years.

Restricted stock unit awards are issued at the market value equal to the price of our stock at the date of the grant and generally vest over the period of three years. In the first half of 2006, we granted 181,510 of restricted stock units with the weighted-average market value of $68.68 each.

Performance share awards are earned over the estimated term to achieve projected financial targets established at the time of the grant. Currently, these financial targets are expected to be achieved by the end of our fiscal year 2008 at which point these shares will fully vest. This estimate is

subject to future revisions based on the performance levels of the Company. Performance shares are granted at the market value equal to the price of our stock at the date of the grant and have a term of five years. In the first half of 2006, 982,965 shares were granted under this plan at the weighted-average market value of $68.98 per share.

On March 21, 2006, the Company issued 150,000 limited stock appreciation rights to one of its key executives. These limited stock appreciation rights entitle the executive to receive shares of the Company's stock with a fair market value equal to the excess of the trading price of such shares on the date of the exercise, but not to exceed $77.20, and the trading price on the date of the grant, or $70.01 per share. The award cannot be exercised before May 2, 2007 and will fully vest on May 2, 2008. The fair value of this award of $2.15 per limited stock appreciation right as of the date of grant was determined using the Black-Scholes option-pricing model. The total fair value of $0.3 million will be recognized in the statement of operations on a straight-line basis over the remaining vesting period of approximately 2.1 years. The option pricing model includes certain assumptions and estimates. For the assumption and estimates management used for this award, see the table in the stock option section below.

As of June 25, 2006, there were 1,804,358 shares of the Company's stock available for the issuance of the stock options, restricted stock units, performance shares, and limited stock appreciation rights awards.

The following table illustrates the pro forma effects for the thirteen week and twenty-six week periods ended June 26, 2005, if the Company followed the fair value provisions of SFAS 123 during such periods:

		Thirteen Weeks Ended			Twenty-Six Weeks Ended
		June 26, 2005
		(In thousands, except per share data)
Net income, as reported		$	38,546		$	4,362
Add: Total stock-based compensation expense, net of related tax			9,169			13,262
Deduct: Total stock-based compensation expense determined under the fair value based method for all awards, net of related tax			(10,324	)		(32,397	)

Pro forma net income (loss)		$	37,391		$	(14,773	)
Earnings (Loss) per share:
	Basis—as reported	$	0.45		$	0.06
	Basic—pro forma	$	0.44		$	(0.20	)
	Diluted—as reported	$	0.45		$	0.06
	Diluted—pro forma	$	0.44		$	(0.20	)

The following table summarizes components of the equity-based compensation recorded as expense:

		Thirteen Weeks Ended						Twenty-Six Weeks Ended
		June 25, 2006			June 26, 2005			June 25, 2006			June 26, 2005
		(In thousands)
Stock Options:
	Pre-tax compensation expense	$	3,038		$	13,281		$	3,278		$	19,109
	Tax benefit		(1,178	)		(7,039	)		(870	)		(8,927	)

After-tax compensation expense		$	1,860		$	6,242		$	2,408		$	10,182

Restricted Stock Units:
	Pre-tax compensation expense	$	2,679		$	6,228		$	3,421		$	6,454
	Tax benefit		(846	)		(3,301	)		(1,123	)		(3,374	)

After-tax compensation expense		$	1,833		$	2,927		$	2,298		$	3,080

Performance shares:
	Pre-tax compensation expense	$	5,093		$	—		$	5,754		$	—
	Tax benefit		(1,441	)		—			(1,623	)		—

After-tax compensation expense		$	3,652		$	—		$	4,131		$	—

Total after-tax compensation expense		$	7,345		$	9,169		$	8,837		$	13,262

Stock options outstanding at June 25, 2006, changes during the first half of 2006, and shares available for grant under all of the Company's plans are presented below:

		Shares available for grant		Outstanding options		Weighted- average exercise price, per common share		Remaining contractual life in years	Aggregate intrinsic value
Outstanding as of December 25, 2005:		3,382,263		9,205,388		$	63.14
	Authorized	—		—			—
	Granted	(463,694	)	463,694		$	68.59
	Exercised	—		(397,205	)	$	51.39
	Forfeited	50,264		(431,306	)	$	70.01
	Non-option grants	(1,164,475	)	—

Outstanding as of June 25, 2006		1,804,358		8,840,571		$	63.61	6.78	$	54,192,819

Exercisable at June 25, 2006				8,176,543		$	63.36	6.56	$	53,052,170

The weighted-average grant date fair values of options granted during the first twenty-six weeks of 2006 and 2005 were $18.87 and $16.10, respectively. The total intrinsic values of options exercised during the first half of 2006 and 2005 were $7.2 million and $13.1 million, respectively. The fair values of options that vested during the same periods were $16.45 per option in 2006 and $13.90 per option in 2005.

The fair value of each option granted in the first half of 2006 and 2005 was determined on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	Twenty-Six Weeks Ended
	June 25, 2006	June 26, 2005
Risk-free interest rate	4.48%	4.03%
Dividend yield	1.86%	1.74%
Volatility ranges	24.9%–30.1%	24.7%–33.8%
Weighted-average volatility	27.87%	25.67%
Expected term (years)	3.5–7.0	3.5–7.0

The risk-free rates utilized for periods throughout the contractual life of the options are based on a zero-coupon U.S. Treasury security yield at the time of grant. Expected volatility is based on historical volatility of our stock. We use historical data to estimate option expected term. The range of 3.5 years to 7.0 years results from separate groups of employees who exhibit different historical exercise behavior.

The summary of activity of unvested restricted stock units and performance shares during the first half of 2006 is presented below:

		Shares		Weighted- average grant date fair value
Unvested as of December 25, 2005		138,252		$	61.69
	Granted	1,164,475			68.93
	Vested	—			—
	Forfeited	(20,200	)		69.14

Unvested at June 25, 2006		1,282,527		$	68.15

As of June 25, 2006, there was $75.7 million of total unrecognized compensation cost from share-based compensation arrangements granted under the plans, related to unvested shares. This compensation is expected to be recognized over a weighted-average period of approximately 2.5 years. During the first twenty-six weeks of 2006, cash received from stock options exercises was $27.7 million and the total tax benefit to be realized for the tax deductions from these option exercises was $2.6 million.

15. SUBSEQUENT EVENT

On June 30, 2006, entities which control and own a majority of the Montréal Canadiens hockey club (the Club) purchased the preferred equity holdings in the Club held by Molson. Total proceeds for the transaction were Cdn $40.3 million (U.S. $36.1 million). Molson was released from a direct guarantee associated with the Canadiens' debt financing coincident with the sale of the preferred equity. Subsequent to the transaction, Molson still retains a 19.9% common equity interest in the Club, as well as Board representation. The transaction did not impact other guarantees to which Molson is a party, including consent agreements with the NHL and a guarantee related to a lease on the land upon which the Bell Centre is constructed. (See Note 12.) We will continue to apply the equity method of accounting to our investment in the Club.

16. OTHER INCOME (EXPENSE), NET

The following summarizes the components in other income (expense):

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	June 25, 2006			June 26, 2005			June 25, 2006			June 26, 2005
	(In thousands)
Gains (losses and impairments) on disposals of long-lived assets	$	6,835		$	(378	)	$	6,813		$	(510	)
Equity in losses, net of unconsolidated affiliates		(155	)		(1,006	)		(2,157	)		(4,748	)
Gains (losses) from foreign exchange and derivatives		(845	)		4,126			(1,533	)		3,996
Other, net		(790	)		8			(319	)		(994	)

Other income (expense), net	$	5,045		$	2,750		$	2,804		$	(2,256	)

The thirteen and twenty-six week periods ended June 25, 2006 include a gain on the sale of non-productive, non-operating real estate in our Europe segment which resulted in a gain of $5.5 million.

17. SUPPLEMENTAL GUARANTOR INFORMATION

In 2002, our wholly-owned subsidiary, CBC (2002 Issuer), completed a placement of $850 million principal amount of 6³/8% Senior notes due 2012. The notes are guaranteed on a senior and unsecured basis by MCBC (Parent Guarantor), Molson Coors Capital Finance ULC and certain domestic subsidiaries (Subsidiary Guarantors). The guarantees are full and unconditional and joint and several. A significant amount of the 2002 Issuer's income and cash flow is generated by its subsidiaries. As a result, funds necessary to meet the 2002 Issuer's debt service obligations are provided in large part by distributions or advances from its subsidiaries. Under certain circumstances, contractual and legal restrictions, as well as our financial condition and operating requirements and those of certain domestic subsidiaries, could limit the 2002 Issuer's ability to obtain cash for the purpose of meeting its debt service obligation including the payment of principal and interest on the notes.

On September 22, 2005, our wholly-owned subsidiary, Molson Coors Capital Finance ULC (2005 Issuer), completed a private placement of approximately $1.1 billion principal amount of Senior notes due as follows:

U.S. $300 million 4.85% notes due 2010
Cdn $900 million 5.00% notes due 2015

The notes were issued with registration rights and are guaranteed on a senior and unsecured basis by Parent Guarantor and certain domestic subsidiaries, including 2002 Issuer and Subsidiary Guarantors. The guarantees are full and unconditional and joint and several. Funds necessary to meet the 2005 Issuer's debt service obligations are provided in large part by distributions or advances from MCBC's other subsidiaries, including Molson, a non-guarantor. Under certain circumstances, contractual and legal restrictions, as well as our financial condition and operating requirements, could limit the 2005 Issuer's ability to obtain cash for the purpose of meeting its debt service obligation including the payment of principal and interest on the notes.

The following information sets forth our Condensed Consolidating Statements of Operations for the thirteen and twenty-six weeks ended June 25, 2006, and June 26, 2005, our Condensed Consolidating Balance Sheets as of June 25, 2006, and December 25, 2005, and our Condensed Consolidating Statements of Cash Flows for the twenty-six weeks ended June 25, 2006, and June 26, 2005. Investments in our subsidiaries are accounted for on the equity method; accordingly, entries necessary to consolidate the Parent Guarantor, the Issuers, and all of our subsidiaries are reflected in

the eliminations column. In the opinion of management, separate complete financial statements of the Issuers and the Subsidiary Guarantors would not provide additional material information that would be useful in assessing their financial composition.

Consolidated stockholders' equity derives from Molson Coors Brewing Company, which is the Parent Guarantor, and from Molson Coors Canada, Inc., which is a Subsidiary Non-Guarantor. Molson Coors Canada, Inc. is the issuer of exchangeable shares, which Canadian resident holders received in the Merger.

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED JUNE 25, 2006
(IN THOUSANDS)
(UNAUDITED)

		Parent Guarantor			2002 Issuer			2005 Issuer			Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
Sales		$	—		$	741,446		$	—		$	42,903		$	1,345,698		$	—		$	2,130,047
Excise taxes			—			(109,681	)		—			(622	)		(436,719	)		—			(547,022	)

	Net sales		—			631,765			—			42,281			908,979			—			1,583,025
Cost of goods sold			(9	)		(398,606	)		—			(34,364	)		(486,997	)		—			(919,976	)
Equity in subsidiary earnings			178,746			233,913			—			—			—			(412,659	)		—

	Gross profit		178,737			467,072			—			7,917			421,982			(412,659	)		663,049
Marketing, general and administrative expenses			(16,240	)		(202,236	)		—			(5,793	)		(224,012	)		—			(448,281	)
Special (charges) credits			(1,334	)		(26,421	)		—			(1	)		1,916			—			(25,840	)

	Operating income		161,163			238,415			—			2,123			199,886			(412,659	)		188,928
Interest income (expense), net			1,240			(33,676	)		(13,753	)		(1,723	)		11,018			—			(36,894	)
Other (expense) income, net			(80	)		1,892			—			(992	)		4,225			—			5,045

	Income (loss) from continuing operations before income taxes		162,323			206,631			(13,753	)		(592	)		215,129			(412,659	)		157,079
Income tax (expense) benefit			(5,958	)		(27,885	)		—			(1,123	)		39,931			—			4,965

	Income (loss) from continuing operations before minority interests		156,365			178,746			(13,753	)		(1,715	)		255,060			(412,659	)		162,044
Minority interests in net income of consolidated entities			—			—			—			—			(4,402	)		—			(4,402	)

	Income (loss) from continuing operations		156,365			178,746			(13,753	)		(1,715	)		250,658			(412,659	)		157,642
Loss from discontinued operations, net of tax			(138	)		—			—			—			(1,277	)		—			(1,415	)

	Net income (loss)	$	156,227		$	178,746		$	(13,753	)	$	(1,715	)	$	249,381		$	(412,659	)	$	156,227

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED JUNE 26, 2005
(IN THOUSANDS)
(UNAUDITED)

		Parent Guarantor			2002 Issuer			2005 Issuer		Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
Sales		$	—		$	715,448		$	—	$	38,861		$	1,311,037		$	—		$	2,065,346
Excise taxes			—			(108,629	)		—		(279	)		(409,575	)		—			(518,483	)

	Net sales		—			606,819			—		38,582			901,462			—			1,546,863
Cost of goods sold			—			(357,987	)		—		(31,137	)		(506,477	)		—			(895,601	)
Equity in subsidiary earnings			46,919			16,054			—		—			—			(62,973	)		—

	Gross profit		46,919			264,886			—		7,445			394,985			(62,973	)		651,262
Marketing, general and administrative expenses			81			(202,266	)		—		(5,872	)		(238,342	)		—			(446,399	)
Special charges			(18,071	)		(15,683	)		—		—			(7,209	)		—			(40,963	)

	Operating income		28,929			46,937			—		1,573			149,434			(62,973	)		163,900
Interest income (expense), net			1,871			(4,315	)		—		(6,868	)		(18,389	)		—			(27,701	)
Other income (expense), net			4,507			(28,566	)		—		43,988			(17,179	)		—			2,750

	Income from continuing operations before income taxes		35,307			14,056			—		38,693			113,866			(62,973	)		138,949
Income tax benefit (expense)			3,239			32,863			—		(30,318	)		(43,202	)		—			(37,418	)

	Income from continuing operations before minority interests		38,546			46,919			—		8,375			70,664			(62,973	)		101,531
Minority interests in net income of consolidated entities			—			—			—		—			(6,060	)		—			(6,060	)

	Income from continuing operations		38,546			46,919			—		8,375			64,604			(62,973	)		95,471
Loss from discontinued operations, net of tax			—			—			—		—			(56,925	)		—			(56,925	)

	Net income	$	38,546		$	46,919		$	—	$	8,375		$	7,679		$	(62,973	)	$	38,546

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE TWENTY-SIX WEEKS ENDED JUNE 25, 2006
(IN THOUSANDS)
(UNAUDITED)

		Parent Guarantor			2002 Issuer			2005 Issuer			Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
Sales		$	—		$	1,304,080		$	—		$	76,330		$	2,293,583		$	—		$	3,673,993
Excise taxes			—			(194,565	)		—			(1,077	)		(741,480	)		—			(937,122	)

	Net sales		—			1,109,515			—			75,253			1,552,103			—			2,736,871
Cost of goods sold			—			(702,270	)		—			(62,319	)		(882,055	)		—			(1,646,644	)
Equity in subsidiary earnings			198,496			289,033			—			—			—			(487,529	)		—

	Gross profit		198,496			696,278			—			12,934			670,048			(487,529	)		1,090,227
Marketing, general and administrative expenses			(22,129	)		(382,047	)		—			(11,265	)		(421,698	)		—			(837,139	)
Special credits (charges)			1,361			(48,146	)		—			—			(5,886	)		—			(52,671	)

	Operating income		177,728			266,085			—			1,669			242,464			(487,529	)		200,417
Interest (expense) income, net			(59	)		(33,543	)		(27,284	)		60			(8,023	)		—			(68,849	)
Other (expense) income, net			(181	)		2,226			—			(1,026	)		1,785			—			2,804

	Income (loss) from continuing operations before income taxes		177,488			234,768			(27,284	)		703			236,226			(487,529	)		134,372
Income tax (expense) benefit			(51,360	)		(36,272	)		—			(1,892	)		101,927			—			12,403

	Income (loss) from continuing operations before minority interests		126,128			198,496			(27,284	)		(1,189	)		338,153			(487,529	)		146,775
Minority interests in net income of consolidated entities			—			—			—			—			(7,703	)		—			(7,703	)

	Income (loss) from continuing operations		126,128			198,496			(27,284	)		(1,189	)		330,450			(487,529	)		139,072
Loss from discontinued operations, net of tax			(138	)		—			—			—			(12,944	)		—			(13,082	)

	Net income (loss)	$	125,990		$	198,496		$	(27,284	)	$	(1,189	)	$	317,506		$	(487,529	)	$	125,990

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE TWENTY-SIX WEEKS ENDED JUNE 26, 2005
(IN THOUSANDS)
(UNAUDITED)

		Parent Guarantor			2002 Issuer			2005 Issuer		Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
Sales		$	—		$	1,259,344		$	—	$	69,627		$	2,132,411		$	—		$	3,461,382
Excise taxes			—			(192,148	)		—		(682	)		(673,254	)		—			(866,084	)

	Net sales		—			1,067,196			—		68,945			1,459,157			—			2,595,298
Cost of goods sold			—			(651,375	)		—		(55,673	)		(878,197	)		—			(1,585,245	)
Equity in subsidiary earnings			13,063			58,214			—		—			—			(71,277	)		—

	Gross profit		13,063			474,035			—		13,272			580,960			(71,277	)		1,010,053
Marketing, general and administrative expenses			(110	)		(369,234	)		—		(11,246	)		(403,179	)		—			(783,769	)
Special charges			(23,899	)		(46,857	)		—		—			(10,907	)		—			(81,663	)

	Operating income (loss)		(10,946	)		57,944			—		2,026			166,874			(71,277	)		144,621
Interest income (expense), net			8,774			(11,452	)		—		(7,889	)		(36,718	)		—			(47,285	)
Other income (expense), net			3,366			(49,872	)		—		81,404			(37,154	)		—			(2,256	)

	Income (loss) from continuing operations before income taxes		1,194			(3,380	)		—		75,541			93,002			(71,277	)		95,080
Income tax benefit (expense)			3,168			16,443			—		(20,166	)		(21,170	)		—			(21,725	)

	Income from continuing operations before minority interests		4,362			13,063			—		55,375			71,832			(71,277	)		73,355
Minority interests in net income of consolidated entities			—			—			—		—			(8,283	)		—			(8,283	)

	Income from continuing operations		4,362			13,063			—		55,375			63,549			(71,277	)		65,072
Loss from discontinued operations, net of tax			—			—			—		—			(60,710	)		—			(60,710	)

	Net income	$	4,362		$	13,063		$	—	$	55,375		$	2,839		$	(71,277	)	$	4,362

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF JUNE 25, 2006
(IN THOUSANDS)
(UNAUDITED)

		Parent Guarantor			2002 Issuer		2005 Issuer			Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
Assets
Current assets:
	Cash and cash equivalents	$	701		$	1,574	$	32		$	5,717		$	71,567		$	—		$	79,591
	Accounts receivable, net		—			124,743		—			11,693			648,550			—			784,986
	Other receivables, net		2,128			32,454		3,815			885			76,866			—			116,148
	Total inventories, net		—			104,213		—			7,690			239,588			—			351,491
	Other assets, net		159			50,601		—			1,671			65,572			—			118,003
	Deferred tax asset		(3,787	)		19,142		—			456			4,315			—			20,126
	Discontinued operations		(2,239	)		—		—			—			8,666			—			6,427

Total current assets			(3,038	)		332,727		3,847			28,112			1,115,124			—			1,476,772
Properties, net			10,931			822,161		—			19,276			1,513,340			—			2,365,708
Goodwill			—			11,386		—			21,357			2,933,123			—			2,965,866
Other intangibles, net			—			23,647		—			10,477			4,528,699			—			4,562,823
Net investment in and advances to subsidiaries			5,235,544			7,667,012		—			—			—			(12,902,556	)		—
Deferred tax asset			84,064			107,246		—			67,703			(189,262	)		—			69,751
Other assets			11,322			25,438		6,434			987			198,809			—			242,990
Discontinued operations			2,101			—		—			—			1,731			—			3,832

Total assets		$	5,340,924		$	8,989,617	$	10,281		$	147,912		$	10,101,564		$	(12,902,556	)	$	11,687,742

Liabilities and stockholders' equity
Current liabilities:
	Accounts payable	$	124		$	169,754	$	—		$	2,544		$	193,021		$	—		$	365,443
	Accrued expenses and other liabilities		57,982			276,013		17,820			6,827			885,912			—			1,244,554
	Deferred tax liability		(3,628	)		—		—			(2	)		129,021			—			125,391
	Short-term borrowings and current portion of long-term debt		—			241,492		(200	)		—			69,015			—			310,307
	Discontinued operations		—			—		—			—			45,832			—			45,832

	Total current liabilities		54,478			687,259		17,620			9,369			1,322,801			—			2,091,527
Long-term debt			—			841,421		1,099,885			—			221,693			—			2,162,999
Deferred tax liability			88,537			119,783		—			(157	)		380,170			—			588,333
Other liabilities			6,894			506,403		19,054			—			535,420			—			1,067,771
Discontinued operations			—			—		—			—			66,306			—			66,306

	Total liabilities		149,909			2,154,866		1,136,559			9,212			2,526,390			—			5,976,936
Minority interests			—			—		—			—			46,934			—			46,934
	Total stockholders' equity		5,191,015			6,834,751		(1,126,278	)		138,700			7,528,240			(12,902,556	)		5,663,872

Total liabilities and stockholders' equity		$	5,340,924		$	8,989,617	$	10,281		$	147,912		$	10,101,564		$	(12,902,556	)	$	11,687,742

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 25, 2005
(IN THOUSANDS)
(UNAUDITED)

		Parent Guarantor			2002 Issuer		2005 Issuer			Subsidiary Guarantors			Subsidiary Non Guarantors			Eliminations			Consolidated
Assets
Current assets:
	Cash and cash equivalents	$	998		$	1,269	$	31		$	5,575		$	31,540		$	—		$	39,413
	Accounts receivable, net		—			88,456		—			8,744			602,377			—			699,577
	Other receivables, net		9,085			39,772		3,759			(1,024	)		78,531			—			130,123
	Total inventories, net		—			102,765		—			7,890			204,070			—			314,725
	Other assets, net		—			37,540		—			369			75,238			—			113,147
	Deferred tax asset		(159	)		19,142		—			455			689			—			20,127
	Discontinued operations		—			—		—		��	—			151,130			—			151,130

Total current assets			9,924			288,944		3,790			22,009			1,143,575			—			1,468,242
Properties, net			2,287			801,833		—			19,439			1,482,002			—			2,305,561
Goodwill			—			11,386		—			20,513			2,839,421			—			2,871,320
Other intangibles, net			—			23,799		—			10,426			4,389,099			—			4,423,324
Net investment in and advances to subsidiaries			4,712,614			7,176,432		—			—			—			(11,889,046	)		—
Deferred tax asset			2,480			107,246		—			67,703			(115,818	)		—			61,611
Other assets			10,385			34,768		6,632			987			188,172			—			240,944
Discontinued operations			—			—		—			—			428,263			—			428,263

Total assets		$	4,737,690		$	8,444,408	$	10,422		$	141,077		$	10,354,714		$	(11,889,046	)	$	11,799,265

Liabilities and stockholders' equity
Current liabilities:
	Accounts payable	$	1,106		$	156,123	$	—		$	2,202		$	212,893		$	—		$	372,324
	Accrued expenses and other liabilities		18,461			272,088		17,107			4,959			838,484			—			1,151,099
	Deferred tax liability		—			—		—			(2	)		106,486			—			106,484
	Short-term borrowings and current portion of long-term debt		—			167,036		(192	)		—			181,258			—			348,102
	Discontinued operations		—			—		—			—			258,607			—			258,607

	Total current liabilities		19,567			595,247		16,915			7,159			1,597,728			—			2,236,616
Long-term debt			—			850,243		1,070,518			—			215,907			—			2,136,668
Deferred tax liability			1,507			116,617		—			—			488,002			—			606,126
Other liabilities			7,141			472,613		5,770			—			618,619			—			1,104,143
Discontinued operations			—			—		—			—			307,183			—			307,183

	Total liabilities		28,215			2,034,720		1,093,203			7,159			3,227,439			—			6,390,736
Minority interests			—			—		—			—			83,812			—			83,812
	Total stockholders' equity		4,709,475			6,409,688		(1,082,781	)		133,918			7,043,463			(11,889,046	)		5,324,717

Total liabilities and stockholders' equity		$	4,737,690		$	8,444,408	$	10,422		$	141,077		$	10,354,714		$	(11,889,046	)	$	11,799,265

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED JUNE 25, 2006
(IN THOUSANDS)
(UNAUDITED)

		Parent Guarantor			2002 Issuer			2005 Issuer			Subsidiary Guarantors			Subsidiary Non Guarantors			Consolidated
Net cash (used in) provided by operating activities		$	(16,603	)	$	(29,506	)	$	(26,200	)	$	(3,561	)	$	313,035		$	237,165

CASH FLOWS FROM INVESTING ACTIVITIES:
	Additions to properties and intangible assets		(2,410	)		(129,653	)		—			(861	)		(68,759	)		(201,683	)
	Proceeds from sales of properties and intangible assets		—			82			—			79			10,177			10,338
	Trade loan repayments from customers		—			—			—			—			14,140			14,140
	Trade loans advanced to customers		—			—			—			—			(13,131	)		(13,131	)
	Discontinued operations—proceeds from sale of majority stake in Kaiser, net of costs to sell		—			(4,453	)		—			—			68,266			63,813
	Discontinued operations

Net cash (used in) provided by investing activities			(2,410	)		(134,024	)		—			(782	)		10,693			(126,523	)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Issuances of stock under equity compensation plans		27,724			—			—			—			—			27,724
	Excess income tax benefits from share-based compensation		253			—			—			—			—			253
	Dividends paid		(41,123	)		—			—			—			(13,811	)		(54,934	)
	Dividends paid to minority interest holders		—			—			—			—			(9,234	)		(9,234	)
	Payments on long-term debt and capital lease obligations		—			—			—			—			(2,258	)		(2,258	)
	Proceeds from short-term borrowings		—			—			—			—			62,913			62,913
	Payments on short-term borrowings		—			—			—			—			(65,928	)		(65,928	)
	Net proceeds from commercial paper		—			74,457			—			—			—			74,457
	Net payments on revolving credit facilities		—			—			—			—			(113,019	)		(113,019	)
	Change in overdraft balances and other		(9,309	)		(9,461	)		—			—			26,443			7,673
	Other—discontinued operations		—			—			—			—			(884	)		(884	)
	Net activity in investments and advances (to) from subsidiaries		41,171			98,839			26,201			4,320			(170,531	)		—

	Net cash provided by (used in) financing activities		18,716			163,835			26,201			4,320			(286,309	)		(73,237	)

CASH AND CASH EQUIVALENTS:
	Net increase in cash and cash equivalents		(297	)		305			1			(23	)		37,419			37,405
	Effect of foreign exchange rate changes on cash and cash equivalents		—			—			—			165			2,608			2,773
Balance at beginning of year			998			1,269			31			5,575			31,540			39,413

Balance at end of period		$	701		$	1,574		$	32		$	5,717		$	71,567		$	79,591

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED JUNE 26, 2005
(IN THOUSANDS)
(UNAUDITED)

		Parent Guarantor			2002 Issuer			2005 Issuer		Subsidiary Guarantors			Subsidiary Non Guarantors			Consolidated
Net cash (used in) provided by operating activities		$	(4,817	)	$	(95,135	)	$	—	$	122,564		$	(149,429	)	$	(126,817	)

CASH FLOWS FROM INVESTING ACTIVITIES:
	Additions to properties and intangible assets		—			(45,840	)		—		(1,163	)		(94,081	)		(141,084	)
	Proceeds from sales of properties and intangible assets		—			197			—		365			2,142			2,704
	Acquisition of subsidiaries, net of cash acquired		—			—			—		—			(16,561	)		(16,561	)
	Cash recognized on Merger with Molson		—			—			—		—			73,540			73,540
	Cash expended for Merger-related costs		—			(20,382	)		—		—			—			(20,382	)
	Trade loan repayments from customers		—			—			—		—			23,591			23,591
	Trade loans advanced to customers		—			—			—		—			(14,225	)		(14,225	)
	Other		—			—			—		—			15			15
	Discontinued operations—proceeds from sale of majority stake in Kaiser, net of costs to sell		—			—			—		—			—			—
	Discontinued operations—other		—			—			—		—			(1,978	)		(1,978	)

Net cash used in investing activities			—			(66,025	)		—		(798	)		(27,557	)		(94,380	)

CASH FLOWS FROM FINANCING ACTIVITIES:
	Issuances of stock under equity compensation plans		51,961			—			—		—			—			51,961
	Excess income tax benefits from share-based compensation		—			—			—		—			—			—
	Dividends paid		(35,756	)		—			—		—			(19,167	)		(54,923	)
	Dividends paid to minority interest holders		—			—			—		—			(4,782	)		(4,782	)
	Payments on long-term debt and capital lease obligations		—			—			—		—			(452,541	)		(452,541	)
	Proceeds from short-term borrowings		—			—			—		977,785			22,352			1,000,137
	Payments on short-term borrowings		—			—			—		—			(831,327	)		(831,327	)
	Net proceeds from commercial paper		—			290,000			—		—			—			290,000
	Net proceeds from revolving credit facilities		—			—			—		—			318,154			318,154
	Change in overdraft balances and other		(2,539	)		(5,736	)		—		—			1			(8,274	)
	Premium paid to bondholders in debt redemption		—			—			—		—			(106,415	)		(106,415	)
	Discontinued operations		—			—			—		—			(54,844	)		(54,844	)
	Net activity in investment and advances (to) from subsidiaries		(7,629	)		(139,188	)		—		(1,096,490	)		1,243,307			—

Net cash provided by (used in) financing activities			6,037			145,076			—		(118,705	)		114,738			147,146

CASH AND CASH EQUIVALENTS:
	Net increase (decrease) in cash and cash equivalents		1,220			(16,084	)		—		3,061			(62,248	)		(74,051	)
	Effect of foreign exchange rate changes on cash and cash equivalents		—			—			—		(1,474	)		(3,568	)		(5,042	)
Balance at beginning of year			3,200			16,988			—		2,552			100,273			123,013

Balance at end of period		$	4,420		$	904		$	—	$	4,139		$	34,457		$	43,920

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Summary

Our net income for the thirteen and twenty-six weeks ended June 25, 2006 was $156.2 and $126.0 million, or $1.81 and $1.46 per diluted share, respectively, compared to net income in the thirteen and twenty-six weeks ended June 26, 2005 of $38.5 and $4.4 million, or $0.45 and $0.06 per diluted share, respectively. Net sales for the thirteen and twenty-six weeks ended June 25, 2006 were $1,583.0 and $2,736.9 million on 11.4 and 20.0 million barrels of beer sold, versus $1,546.9 and $2,595.3 million on 11.2 and 18.9 million barrels sold in the same periods of 2005. The merger with Molson was completed on February 9, 2005; consequently, a portion of the year to date growth in volume, revenue and profit is due to the inclusion of the Canada segment for the full twenty-six weeks ended June 25, 2006, versus nineteen and one-half weeks for the period ended June 26, 2005. However, our results for the thirteen week periods are fully comparable year-over-year without pro forma considerations.

Our second quarter results demonstrate that we are continuing to make progress in strengthening the fundamentals of our company.

•: Our top-line sales trends were favorable, as we grew sales volume in all three of our operating segments, led by the strength of our strategic brands.
•: Our cost savings programs—both merger synergies and other efforts—combined with our top-line strength resulting in higher operating income and margins. We achieved approximately $27 million of pretax savings from these programs in the second quarter, which allowed us to offset a substantial portion of the cost pressures we are facing globally, and especially in our U.S. business.
•: Certain other factors, such as changes in corporate income tax rates in Canada, continue to cause volatility in our bottom-line results.

On the whole, these reflect efforts to strengthen our business and are favorable developments for future earnings, cash flow and shareholder value.

Reviewing this progress by segment:

•: In Canada, we grew operating profit on the strength of strategic brands in this key market, in particular Coors Light®, Rickards®, and our partner import brands. This business faced heavy competitive and cost pressures and still achieved favorable results, including growing Coors Light and other strategic brands at double-digit rates in the quarter. Synergies and other cost reduction initiatives offset approximately two-thirds of the Canada business cost of goods inflation, which additional reductions were achieved in marketing, general and administrative expenses.
•: Our U.S. business performed well on the top line, with solid volume growth and pricing, especially for Coors Light relative to its competitors. The best overall indicator of this strength is the 3.0 percent increase our U.S. team achieved in 50-state sales-to-retail. Additionally, cost-reduction initiatives in this business offset a significant portion of the very high inflation pressures that drove the U.S. profit decline in the 2nd quarter. We are dealing with a substantial, unprecedented year-over-year run-up in energy and packaging materials costs in the second and third quarters this year without most of the synergy benefit of closing the Memphis brewery, which will begin to favorably impact our results in the fourth quarter of 2006. We anticipate that the cost pressures in this business will ease significantly after we close the Memphis brewery in early September—six months ahead of our original schedule. By year-end,

we expect our cost savings initiatives to offset more than half of the cost of goods inflation that we face this year.

•: In Europe (specifically in the U.K.), despite an extremely difficult business and inflation environment, we achieved double-digit earnings growth by 1) growing our market-leading Carling brand, which accounts for more than three-fourths of our annual Europe volume, and 2) cutting costs significantly. Total year-over-year cost savings in the second quarter actually offset more than all of the cost of goods inflation and the substantial margin challenges in Europe.

Our former Brazil segment, which consisted of the Kaiser beer business, was sold on January 13, 2006, and is presented as a discontinued operation.

Synergies

During 2005, we captured $59 million in Merger-related cost synergies, surpassing our 2005 goal of $50 million. Our 2006 goal calls for an incremental $50 million in synergies, with total annual synergies eventually reaching $175 million, which are expected to be achieved by the third year following completion of the Merger. We realized approximately $13 million and $28 million in incremental synergies during the second quarter and first half of 2006, respectively. We are actively developing the next generation of cost initiatives. Some of these efforts are well underway and others are in a formative stage.

Income Taxes

Our effective tax rate for the second quarter of 2006 was negative 3%, which is different from the range of our forecasted full year effective tax rate due primarily to revaluing our deferred tax assets and liabilities to give effect to a two percentage point reduction in the Canada corporate income tax rate, as well as minor changes to two provincial income tax rates. These tax rate changes, which will be implemented during the next four years, resulted in a $52.3 million tax benefit being recognized as a discrete item in the second quarter of 2006 income tax provision. Absent that item, our effective tax rate would have been approximately 30%. We anticipate that our full year 2006 effective tax rate will be in the range of 16% to 20%.

Our tax rate is volatile and may move up or down with changes in, among other things, the amount and source of income or loss, our ability to utilize foreign tax credits, and changes in tax laws.

Discontinued Operations

The Company's former Brazil business, which was acquired as part of the Merger, is reported as a discontinued operation due to the sale of a controlling interest in the business on January 13, 2006. Proceeds from the sale were $68 million, less $4.2 million of transaction costs. The loss from discontinued operations of $13.1 million in the first half of 2006 is comprised of the following components:

•: Losses generated by the Brazil business prior to the sale of $2.3 million.
•: A loss on the sale of the business of $2.8 million.
•: Adjustments to indemnity liabilities due to foreign exchange fluctuations and changes in estimates of $8.0 million.

During the first half of 2005, the Brazil business generated pre-tax losses of $60.7 million, due primarily to expenses associated with increasing reserves for contingent liabilities.

In addition to the $63.8 million of net proceeds on the sale, the purchaser (FEMSA) assumed $63 million of financial debt. The purchaser also assumed contingent liabilities of approximately $260 million, related primarily to tax claims. We do have a level of continuing potential exposure to these contingent liabilities of Kaiser, as well as previously disclosed but less than probable unaccrued claims, due to certain indemnities provided to FEMSA pursuant to the sales and purchase agreement. While we believe that all significant contingencies were disclosed as part of the sale process and adequately reserved for on Kaiser's financial statements, resolution of contingencies and claims above reserved or otherwise disclosed amounts could, under some circumstances, result in additional cash outflows for Molson Coors because of transaction-related indemnity provisions. We have recorded these indemnity liabilities at fair value and have a carrying value at June 25, 2006, of $101 million. (See "CONTINGENCIES—Indemnity Obligations—Sale of Kaiser" for additional discussion.) Due to the uncertainty involved with the ultimate outcome and timing of these contingencies, significant adjustments could result in the future.

RESULTS OF OPERATIONS

This discussion summarizes the significant factors affecting our consolidated results of operations for the thirteen and twenty-six week periods ended June 25, 2006, and June 26, 2005, respectively, and should be read in conjunction with the financial statements and notes thereto included elsewhere in this report, as well as our Annual Report on Form 10-K for the year ended December 25, 2005.

CANADA SEGMENT RESULTS OF OPERATIONS

Before the Merger, the Canada segment consisted of Coors' 50.1% interest in the Coors Canada Partnership (CCP), through which the Coors Light® business in Canada was conducted. CCP contracted with Molson for the brewing, distribution and sale of Coors Light® products, while CCP managed all marketing activities in Canada. In connection with the Merger, CCP was dissolved into the Canadian business. Coors accounted for its interest in CCP using the equity method of accounting.

Following the Merger, our Canada segment consists primarily of Molson's beer business, including the production and sale of the Molson® brands, Coors Light® and other licensed brands, principally in Canada. The Canada segment also includes our joint venture arrangements related to the distribution

of beer in Ontario and the Western provinces, Brewers Retail, Inc. (BRI) (consolidated under FIN 46R), and Brewers Distribution Limited (BDL).

	Thirteen Weeks Ended								Twenty-Six Weeks Ended
	June 25, 2006			June 26, 2005			% Change		June 25, 2006			June 26, 2005			% Change
	(In thousands, except percentages)
Volume in barrels		2,253			2,218		1.6	%		3,844			3,093		24.3	%

Net sales	$	496,284		$	438,593		13.2	%	$	825,603		$	634,924		30.0	%
Cost of goods sold		(235,665	)		(218,651	)	7.8	%		(424,193	)		(352,814	)	20.2	%

Gross profit		260,619			219,942		18.5	%		401,410			282,110		42.3	%
Marketing, general and administrative expenses		(118,418	)		(113,310	)	4.5	%		(214,414	)		(159,097	)	34.8	%

Operating income		142,201			106,632		33.4	%		186,996			123,013		52.0	%
Other income, net		1,281			706		81.4	%		1,803			—		100.0	%

Segment earnings before income taxes(1)	$	143,482		$	107,338		33.7	%	$	188,799		$	123,013		53.5	%

(1): Earnings before income taxes include $1,770 thousand and $1,302 thousand for the thirteen weeks ended June 25, 2006 and June 26, 2005, respectively, and $3,255 thousand and $1,302 thousand for the twenty-six weeks ended June 25, 2006 and June 26, 2005 of the minority owners' share of income attributable to the BRI joint venture.

The Canadian dollar strengthened versus the U.S. dollar by approximately 10% during the second quarter of 2006 compared to the second quarter of 2005, further improving the Canada segment's results when translated to U.S. dollars. The Canadian dollar strengthened versus the U.S. dollar by approximately 8% during the first half of 2006 compared to the first half of 2005.

The following represents the Canada segment's pro forma results, as if the Merger had occurred on December 27, 2004, the first day of Coors' 2005 fiscal year:

	Twenty-Six Weeks Ended
	June 25, 2006 (Actual)			June 26, 2005 (Pro forma)			% Change
	(In thousands, except percentages)
Volume in barrels		3,844			3,783		1.6	%

Net sales	$	825,603		$	735,339		12.3	%
Cost of goods sold		(424,193	)		(380,252	)	11.6	%

Gross profit		401,410			355,087		13.0	%
Marketing, general and administrative expenses		(214,414	)		(207,020	)	3.6	%

Operating income		186,996			148,067		26.3	%
Other income, net		1,803			693		160.2	%

Segment earnings before income taxes	$	188,799		$	148,760		26.9	%

Net sales and volume

Sales volume for the second quarter increased by 1.6% from a year ago. Continuing solid performance by Coors Light®, Rickard's® and partner import brands was offset by softness in other premium brands and our value brands. Total Canadian beer industry sales grew more than 2% in the second quarter of 2006 compared to the same period in 2005, driven by increased promotional and pricing activity across most provinces. Price discounting directly affected our volume and share

performance in the quarter. During the quarter, we emphasized profitability over the pursuit of lower-margin volume. As a result of this decision and the discontinuation of Molson Kick® and A Marca Bavaria®, we realized an approximate one percentage point decline in our market share in the second quarter compared to a year ago, realizing that nearly half of this decline was due the discontinued brands. Despite the competitive pricing activity, Coors Light® and Rickard's® continued to grow at double-digit rates. We will continue to balance the priorities of volume and profitability while remaining competitive in the market place.

Net sales per barrel increased approximately 1.0% in local currency, due to improved sales mix resulting from higher super premium import and lower value brand volume. Net pricing was essentially unchanged in the quarter, as the flow-through of selective price increases during the past year was offset by more widespread price discounting in the second quarter.

Sales volume for the twenty-six period increased by 1.6% on a year-over-year, pro forma basis (accounting for the Merger, which occurred on February 9, 2005). Growth in Coors Light® and partner import brands in both quarters drove the increase for the year to date period. The 10.5% increase in revenue per barrel for the twenty-six week period shown in the table above is largely explained by the improvement of the Canadian dollar versus the U.S. dollar, with modest general price increases and decreased trade discounts in the first quarter, coupled with improved sales mix due to increased premium and import sales during the entire first half, driving the remainder of the increase.

Cost of goods sold

Cost of goods sold per barrel decreased 4% in local currency versus the second quarter of 2005, driven by three primary factors. First, inflationary cost increases across nearly all inputs—primarily related to commodities and energy—drove approximately three percentage points of increase. Second, approximately two-thirds of this inflation was offset by the results of our synergy, procurement and other cost savings initiatives. Third, the remaining five percentage point decline in cost of goods per barrel can be attributed to lower employee-related expense this year, and lower overhead costs.

The 9.8% increase in cost of goods sold per barrel for the twenty-six week period shown in the pro forma table above is primarily explained by the improvement of the Canadian dollar versus the U.S. dollar and also reflects a higher cost of goods per barrel on a year-over-year basis in the first quarter, and lower amounts per barrel in the second quarter. The higher costs in the first quarter of 2006 were driven by a prior year benefit from the change in the recognition of distribution expenses in 2005, and higher overhead costs in 2006.

Marketing, general and administrative expenses

Marketing, general and administrative expense decreased approximately 5% in local currency due to a reduction in brand investment, mainly as a result of higher marketing spend in 2005 associated with both Molson Kick® (which was launched last year) and A Marca Bavaria®, both of which have been discontinued in 2006.

The 3.6% increase in marketing, general and administrative expenses for the twenty-six week period shown in the pro forma table above are actually the result of lower costs in local currency in both quarters thus far in 2006. Lower promotional spending and brand investments in 2006 contributed to the decrease, as did lower general and administrative costs as a result of the synergies generated from the consolidation of the operations of the pre-merger Coors Canada partnership with Molson Canada operations.

Other income, net

Quarterly other income increased $0.6 million over the prior year quarter. On a pro forma basis, other income increased $1.1 million versus $0.7 million for the twenty-six weeks ended June 26, 2005. Other income primarily represents the equity earnings in the Montréal Canadiens Hockey Club and in the House of Blues Concerts joint venture.

UNITED STATES SEGMENT RESULTS OF OPERATIONS

	Thirteen Weeks Ended								Twenty-Six Weeks Ended
	June 25, 2006			June 26, 2005			% Change		June 25, 2006			June 26, 2005			% Change
	(In thousands, except percentages)
Volume in barrels		6,428			6,334		1.5	%		11,386			11,128		2.3	%

Net sales	$	721,779		$	701,982		2.8	%	$	1,273,053		$	1,226,956		3.8	%
Cost of goods sold		(449,960	)		(409,994	)	9.7	%		(795,169	)		(741,421	)	7.2	%

Gross profit		271,819			291,988		(6.9	)%		477,884			485,535		(1.6	)%
Marketing, general and administrative expenses		(203,074	)		(203,158	)	0.0	%		(372,520	)		(374,637	)	(0.6	)%
Special charges, net		(26,422	)		(10,000	)	N/M			(48,146	)		(17,447	)	N/M

Operating income		42,323			78,830		(46.3	)%		57,218			93,451		(38.8	)%
Other income (expense), net		1,775			(18	)	N/M			1,904			57		N/M

Segment earnings before income taxes(1)	$	44,098		$	78,812		(44.0	)%	$	59,122		$	93,508		(36.8	)%

N/M = not meaningful

(1): Earnings before income taxes includes $5,513 thousand and $4,354 thousand for the thirteen weeks ended June 25, 2006 and June 26, 2005, respectively, and $8,981 thousand and $6,457 thousand for the twenty-six weeks ended June 25, 2006 and June 26, 2005, respectively, of the minority owners' share of income attributable to the RMBC and RMMC joint ventures.

Net sales and volume

Sales volume to wholesalers grew 1.5% during the quarter on a year-over-year basis, driven by our distributors' sales-to-retail growth, along with a modest reduction in our distributors' inventories toward the end of the second quarter this year as distributors' sales-to-retail accelerated in the last six weeks of the quarter. Our distributors' sales-to-retail increased 2.3% in the second quarter. This increase was driven by low-single-digit growth for the Coors Light® brand in the quarter, double-digit growth of the Blue Moon® brand and high-single-digit growth of Keystone Light®. Our 50-states volume (excluding our Caribbean business) grew 3.0% from a year ago, and 28 of our 30 largest states showed sales-to-retail growth for our total portfolio in the second quarter. Strong execution leading up to the key Memorial Day and July 4^th holidays allowed for our volume growth and resulting market share gains during this period.

Net sales per barrel increased 1.3% in the second quarter due to higher net pricing and more sales of import brands through company-owned distributorships. Our U.S. net pricing has held up well leading into the key summer sales period, especially for Coors Light relative to its largest competitors.

Sales volume to wholesalers increased by 2.3% for the six—month period on a year-over-year basis, with Coors Light®, Keystone Light® and Blue Moon® driving the increased volume. Net revenue per barrel increased by 1.4% for the twenty-six week period year-over-year, with net pricing accounting for most of the increase.

Cost of goods sold

Cost of goods per barrel increased 8.1% in the quarter as a result of four primary factors: cost inflation, innovative promotional packaging, initiatives designed to yield cost reductions in the future, and expenses related to making our brewing network more efficient, which were partially offset by results from our cost reduction initiatives. Approximately six percentage points of the increase in cost of goods per barrel was due to inflationary increases across nearly all of the inputs to our operations, including cans, bottles, paper, plastic, utilities, freight rates, fuel and various components of labor and labor-related costs. Transportation and fuel costs, which are particularly volatile inputs for us, accounted for approximately 40% of the quarterly U.S. cost inflation. Another two percentage points of the increase in cost of goods per barrel were related to the cost of innovative packaging initiatives that are helping to drive sales of Coors Light®. These include our plastic bottle cooler box, cold wrap bottle, and frost-brew can liner—all designed to drive Coors Light® brand equities around cold refreshment this year. Approximately two percentage points of the increase were for initiatives that will yield lower costs in future quarters, including costs for temporary process changes and new contract packaging and freight arrangements related to shutting down our Memphis brewery, all of which will be more than offset by Memphis-related savings starting in the fourth quarter. Savings from our operations cost initiatives and merger synergies reduced costs of goods per barrel in the quarter, on a year-over-year basis, by two percentage points, which offset approximately 30% of the total inflation costs increases in the quarter. Our cost savings programs offset more than all of the non-commodity inflation in the U.S. business in the second quarter. This is an important consideration because our cost programs offer long-term benefits that we expect to outlast large swings in the commodity markets.

Costs of goods sold per barrel increased by 4.8% for the twenty-six period ending June 25, 2006. The year to date change is the result of a nearly flat cost of goods per barrel variance in the first quarter versus an 8.1% unfavorable variance in the second quarter. The impact of inflation was more pronounced in the second quarter of 2006 than in the first quarter. We also realized gains on certain commodity hedges in the first quarter which helped make comparisons to prior year more favorable earlier in the year.

Marketing, general and administrative expenses

Marketing, general & administrative expenses were essentially unchanged from a year ago as marketing expense declined because of the timing of sales and marketing expense between quarters last year, offset by an increase in labor-related costs, including our new stock-based long-term incentive program. We anticipate that sales and marketing spending will increase at a low-single-digit rate for the full year.

Marketing, general and administrative costs were down very slightly on a twenty-six week comparison basis. While marketing expense was lower in the first half of 2006 than in the same period of 2005, these costs were partially offset by higher share-based compensation costs.

Special charges, net

Second quarter U.S. results included $26.4 million of special charges related primarily to the planned closure of the Memphis brewery in September of this year. Specifically, the total includes $23.7 million of incremental accelerated depreciation expense which results from the shortening of the useful lives of Memphis assets to the fall of 2006 and a reduction of the estimated salvage value of that facility. The remainder of the costs is associated primarily with severance and related costs associated with the Memphis closure. Special charges in the second quarter of 2005 of $10.0 million included $9.6 million of incremental accelerated depreciation associated with the anticipated Memphis closure (the planned closure was announced in February 2005), with the remainder consisting of severance and other related exit costs associated with the closure. We expect to incur costs for accelerated

depreciation for one more quarter leading up to the planned Memphis closure in the fall of this year. It is possible that we could also incur costs in the future to adjust the estimate of our obligation to a multi-employer pension plan which covers most of the Memphis plant employees. The obligation is currently estimated at $25 million and was recorded in the third quarter of 2005. The obligation could change based on the plan's actuarial valuations. However, since we do not manage the plan, we cannot predict with certainty our ultimate liability.

Special charges were $30.7 million higher in the first twenty-six weeks of 2006 versus the same period in 2005. Accelerated depreciation associated with the Memphis plant closure was higher in 2006 because 1) 2005 accelerated depreciation reflected only nineteen and one-half weeks of this activity (based upon the announcement date of the closure in February 2005), while 2006 reflected twenty-six weeks of depreciation, 2) the timeline for closing the facility was accelerated during the second half of 2005, and 3) the rate of depreciation has increased from 2005 with the reduction in expected salvage value for the Memphis plant.

Other income (expense), net

Other income was $1.8 million higher in the second quarter of 2006 than in the same period of 2005. The change resulted from the recognition of a portion of a previously deferred gain on a prior year's real estate sale. This amount was recognized in the second quarter of 2006 with the satisfaction of certain conditions pertaining to the sale contract.

Other income was $1.9 million higher in the twenty-six week period of 2006 than in the same period of 2005. The variance was due to the recognition of the portion of the previously deferred gain on a prior year's real estate sale, as mentioned in the previous paragraph.

EUROPE SEGMENT RESULTS OF OPERATIONS

	Thirteen Weeks Ended								Twenty-Six Weeks Ended
	June 25, 2006			June 26, 2005			% Change		June 25, 2006			June 26, 2005			% Change
	(In thousands, except percentages)
Volume in barrels		2,743			2,610		5.1	%		4,813			4,651		3.5	%

Net sales	$	363,225		$	406,288		(10.6	)%	$	635,804		$	733,418		(13.3	)%
Cost of goods sold		(233,599	)		(266,956	)	(12.5	)%		(426,102	)		(491,010	)	(13.2	)%

Gross profit		129,626			139,332		(7.0	)%		209,702			242,408		(13.5	)%
Marketing, general and administrative expenses		(98,510	)		(113,326	)	(13.1	)%		(192,192	)		(222,462	)	(13.6	)%
Special credits (charges), net		1,917			3,231		N/M			(5,886	)		(398	)	N/M

Operating income		33,033			29,237		13.0	%		11,624			19,548		(40.5	)%
Interest income(1)		2,885			3,382		(14.7	)%		5,689			6,958		(18.2	)%
Other income (expense), net		3,027			(2,240	)	N/M			460			(6,593	)	N/M

Segment earnings before income taxes(2)	$	38,945		$	30,379		28.2	%	$	17,773		$	19,913		(10.7	)%

N/M = not meaningful

(1): Interest income is earned on trade loans to U.K. on-premise customers, and is typically driven by debt balances outstanding from period-to-period.
(2): Earnings before income taxes includes $1,426 thousand ($1,024 thousand, net of tax) and $1,417 thousand ($1,024 thousand, net of tax) for the thirteen weeks ended June 25, 2006 and June 26, 2005, respectively, and $2,361 thousand ($1,702 thousand, net of tax) and $1,982 thousand

($1,463, thousand net of tax) for the twenty-six weeks ended June 25, 2006 and June 26, 2005, respectively, of the minority owners' share of income attributable to the Grolsch joint venture.

The British pound weakened versus the U.S. dollar by approximately 2% on a year-over-year basis during the thirteen week second quarter period, unfavorably impacting revenues and the Europe segment's operating results when viewed in U.S. dollars. The British pound weakened versus the U.S. dollar by approximately 5% on a year-over-year basis during the comparable twenty-six week periods in 2006 and 2005.

Net sales and volume

Our owned-brand volumes were up 5.1% in the second quarter versus the same period last year, driven by our industry-leading Carling brand. Carling sales in the quarter benefited from the 2006 World Cup soccer tournament, the year-over-year shift in the timing of the Easter holiday and distribution gains with retail pub chains.

Europe net sales per barrel in local currency declined approximately 14% in the second quarter, driven by two primary factors. Approximately half of the decline was the result of a change last year in the reporting of our factored brand sales to a large on-premise customer from gross to net, which stemmed from changes in our contractual and invoicing arrangements with that customer (factored brands are non-owned beverage brands that we deliver to retail in the U.K.). This invoicing change resulted in a one-time decline of approximately $21.2 million in both net sales and cost of goods in the second quarter, but with no net impact on gross profit. The other half of the decline in sales per barrel was largely due to unfavorable owned-brand net pricing and sales mix. Both customer mix and pricing were unfavorably impacted by ongoing industry trends, which include 1) the continued industry shift from independent to chain on-premise accounts and from on-premise to off-premise customers or markets, 2) ongoing volume declines in the highly profitable flavored alcohol beverages, and 3) pricing pressure from large retail accounts in both major channels and from aggressive competition in the more profitable independent on-premise market.

Sales volume for the twenty-six week period increased by 3.5% on a year-over-year basis, a combination of a more modest first quarter growth rate of 1.4% and a more robust second quarter growth rate of 5.1%. The impact of the World Cup soccer tournament in 2006 is the largest driver of the second quarter, and therefore year to date volume growth. The 16.2% decrease in net sales per barrel for the twenty-six week period shown in the table above was the result of the following major factors: 1) the change in reporting revenue from gross to net for factored brand sales to a large on-premise customer, as discussed above, 2) foreign exchange, and 3) unfavorable owned-brand net pricing and sales mix, which are impacted by the industry trends discussed in the paragraph above.

Cost of goods sold

Cost of goods sold per barrel decreased approximately 15% in the quarter versus the prior year in local currency due mainly to the change in factored-brand invoicing and declining factored brand volume. Excluding the impact of factored brands, cost of goods per barrel for our owned brands was down approximately 10% from prior year in local currency, driven by lower distribution costs, cost savings from our supply chain restructuring program, and increased fixed-cost leverage as a result of higher beer volume. These cost initiatives improved Europe results by approximately $4.7 million in the second quarter of 2006.

The 16.1% decrease in cost of goods sold per barrel for the twenty-six week period shown in the table above is explained by the change in factored-brand invoicing and declining factored brand volume. A weaker British pound versus the U.S. dollar, as discussed above, also contributed to the unfavorable variance in 2006.

Marketing, general and administrative expenses

Marketing, general and administrative costs in Europe decreased approximately 12% in local currency in the second quarter driven by lower overhead and labor-related costs resulting from our restructuring and other cost-reduction efforts that began in the second half of 2005 and continued into 2006. When combined with the supply-chain savings discussed in the cost of goods sold section above, our Europe segment more than offset the margin compression sustained in the quarter.

The 13.6% decrease in marketing, general and administrative expenses for the twenty-six week period shown in the table above is explained by a weaker British pound versus the U.S. dollar, as discussed above, contributing to the favorable variance in 2006. We have also achieved lower overhead and labor-related costs resulting from our restructuring and other cost-reduction efforts that began in the second half of 2005 and continued into 2006.

Special credits (charges), net

The $1.9 million net special benefit in the second quarter of 2006 is due primarily to a $5.3 million curtailment gain representing the acceleration of benefits associated with changes made to our U.K. pension plan in 2005. The recognition of this pension item in the second quarter was triggered by the cost-reduction initiatives that have reduced our staffing levels nearly 10% from a year ago. This benefit was partially offset by additional restructuring costs in our supply chain and other areas. This restructuring work is now substantially complete, with a payback period of approximately one year. The 2005 special benefit of $3.2 million was due to one-time development profits on real estate formerly held by the Company.

The $5.9 million special charge for the twenty-six weeks ended June 25, 2006, is the result of new and additional restructuring charges recorded by the Europe segment associated with the restructuring of the supply chain operation and organization, offset by the pension curtailment gain in the second quarter. The small prior year number reflects the net impact of an asset impairment for obsolete equipment largely offset by the development profit recorded in the second quarter of 2005.

Interest income

Interest income is earned on trade loans to U.K. on-premise customers. Interest income decreased in 2006 for both the quarter and year to date periods primarily as a result of lower customer loan balances compared to the same periods in 2005.

Other income (expense), net

Other income improved more than $5 million in the second quarter of 2006 as a result of a $5.5 million gain on the sale of non-operating property near our Alton brewery. This sale is part of our ongoing effort to convert non-core assets into cash to improve returns to shareholders. The Alton sale in the second quarter of 2006 also contributes to the improvement in other income (expense) for the twenty-six weeks ended June 25, 2006 as well.

CORPORATE RESULTS OF OPERATIONS

	Thirteen Weeks Ended								Twenty-Six Weeks Ended
	June 25, 2006			June 26, 2005			% Change		June 25, 2006			June 26, 2005			% Change
	(In thousands, except percentages)
Net sales(1)	$	1,737		$	—		N/M		$	2,411		$	—		N/M
Cost of goods sold(1)		(752	)		—		N/M			(1,180	)		—		N/M

Gross profit		985			—		N/M			1,231			—		N/M
Marketing, general and administrative expenses		(28,279	)		(16,605	)	70.3	%		(58,013	)		(27,573	)	110.4	%
Special (charges) credits, net		(1,335	)		(34,194	)	N/M			1,361			(63,818	)	N/M

Operating loss		(28,629	)		(50,799	)	(43.6	)%		(55,421	)		(91,391	)	(39.4	)%
Interest expense, net		(39,779	)		(31,083	)	28.0	%		(74,538	)		(54,243	)	37.4	%
Other (expense) income, net		(1,038	)		4,302		(124.1	)%		(1,363	)		4,280		(131.9	)%

Segment loss before income taxes(2)	$	(69,446	)	$	(77,580	)	(10.5	)%	$	(131,322	)	$	(141,354	)	(7.1	)%

N/M = not meaningful

(1): The amounts shown are reflective of revenues and costs associated with the marketing of the Company's intellectual property, including trademarks and brands. Prior period amounts have not been reclassified due to immateriality.
(2): Loss before income taxes in 2006 and 2005 includes $3,905 thousand and $620 thousand for the thirteen weeks in the second quarter, respectively, and $6,235 thousand and $940 thousand for the twenty-six weeks, respectively, of the minority owners' share of interest expense attributable to debt obligations of the RMMC and BRI joint ventures.

Marketing, general and administrative expenses

Corporate marketing, general and administrative expense in the second quarter of 2006 was $28.3 million, up $11.7 million from the second quarter of 2005. This increase is primarily the result of five factors: 1) $4.7 million related to our stock-based long-term incentive plan, including the effect of adopting FAS123R accounting treatment this year for expensing equity-based compensation; 2) approximately $3.0 million of the increase is related to severance costs and unusually high legal fees driven by litigation and other disputes discussed in Note 12,"Contingencies;" 3) approximately $1.0 million of the increase is related to investments in carefully developed projects designed to help deliver our next phase of enterprise-wide cost-reductions; 4) approximately $2.0 million of the increase is due to the transfer of global costs from operating segments to the Corporate center, some of which are in direct support of the business units; and 5) approximately $1.0 million of the increase in is related to the new and ongoing cost of strong corporate center capabilities, which include Sarbanes-Oxley compliance, corporate governance, finance, legal, commercial development and human resources.

The year-to-date increase in general and administrative expenses is largely reflective of the items noted in the above paragraph dealing with the second quarter increase, since similar trends were noted in the first quarter.

Special (charges) credits, net

A special charge of $1.3 million in the second quarter of 2006 resulted from the non-cash cost of providing an exercise price floor for stock options held by certain Coors officers who left the Company under a change in control provision following the Merger. In the second quarter of 2005, the charges

included not only a much larger expense for the same stock option exercise price floor ($13.3 million) due to a decrease in our stock price, but also severance and separation costs related to certain Molson executives who left the company in the second quarter of 2005.

The stock option exercise price floor discussed above resulted in a net special benefit for the Corporate segment's 2006 year-to-date operations due to an increase in the our stock price since the beginning of the year. However, year to date Corporate special charges in 2005 included all of the change in control costs for Coors officers, as well as costs for departing Molson officers, and third, the stock option exercise price floor matter previously discussed. See Note 6,"Special Charges."

Interest expense

Interest expense was $39.8 million during the second quarter of 2006, compared to $31.1 million in the same period of 2005. The increase of $8.7 million is primarily due to three primary factors. First, the higher cost of the long-term debt structure that we now have (put in place in September of 2005) versus the low-rate short-term bridge loan that we had a year ago. Second, we recognized a $4.6 million loss in the second quarter of 2006 on the mark to market of an interest rate swap held by BRI. We have restructured the Ontario Beer Store swaps, so that they now qualify for hedge accounting, meaning that, beginning in the current quarter, any mark-to-market adjustments to their value will be made on the balance sheet—without the significant P&L impacts that we have seen during the past year. Third, market interest rates were higher in the second quarter of 2006 than in the same period of 2005, impacting our variable rate debt. These increased costs were offset partially by the benefit of lower overall debt levels in 2006 due to the general pay down of borrowings over the past year.

Interest expense was $74.5 million during the first twenty-six weeks of 2006, versus $54.2 million during the first half of 2005. Interest expense was unfavorably impacted due to similar factors, primarily, higher interest rates on permanent financing and a stronger Canadian dollar. However, the 2005 amount on a year to date basis includes the incremental $1.6 billion of debt assumed from Molson in the Merger only from the date of the Merger, which was February 9, 2005. These increased costs were partially offset by the benefit of lower special dividend and commercial paper debt levels this year.

Other (expense) income, net

Other expense in the second quarter of 2006 includes primarily foreign exchange losses, while the Other income in the same period of 2005 includes a mark to market impact on a financing-related derivative assumed from Molson in the merger and held by a majority-owned (but less than 100%-owned) subsidiary. The year to date trends are largely comparable to the 2005 trends.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash provided by operating activities, external borrowings and asset monetizations. As of June 25, 2006 and June 26, 2005, we had working capital deficits of $614.8 million and $984.3 million, respectively. Contributing to our working capital deficits were $310.3 million and $1,019.3 million, respectively, of short-term borrowings and current portion of long-term debt at June 25, 2006 and June 26, 2005. We had total cash of $79.6 million at June 25, 2006, compared to $43.9 million at June 26, 2005. Long-term debt was $2,163.0 million and $1,669.8 million at June 25, 2006 and June 26, 2005, respectively. We believe that cash flows from operations and cash provided by short-term borrowings, when necessary, will be sufficient to meet our ongoing operating requirements, scheduled principal and interest payments on debt, dividend payments and anticipated capital expenditures. However, our liquidity could be impacted significantly by a decrease in demand for our products, which could arise from competitive circumstances, a decline in

the acceptability of alcohol beverages, or any of the other factors we describe in the section entitled "Risk Factors."

Operating activities

Net cash provided by operating activities of $237.2 million for the twenty-six weeks ended June 25, 2006 improved by $364.0 million from the comparable period last year. Our 2005 operating cash flows were impacted by a number of unfavorable items. During the second quarter of 2005, we made a $138 million Canadian tax payment that was driven by the Merger, a one-time liquidity event that was not repeated in 2006. Our pension funding in 2006 is lower primarily due to a special $50 million funding to the U.S. plan in 2005. Merger-related costs of $21 million were paid out subsequent to the Merger in the first quarter of 2005 by our Molson business in Canada (costs which had been accrued on the opening balance sheet as of the merger date), representing a unique cash outflow not experienced in 2006. We also made payments to officers under change in control and severance agreements of $24 million in 2005. The remaining improvement is due primarily to Molson's Canadian business being included in 2006 for the full twenty-six weeks versus nineteen and a half weeks in 2005, given the merger date of February 9, 2005.

Investing activities

Net cash used in investing activities of $126.5 million for the twenty-six weeks ended June 25, 2006, was higher by $32.1 million compared to the same period in 2005. Additions to properties were higher in 2006 by $60.6 million as compared to 2005, due primarily to spending in the U.S. related to the build-out of the Shenandoah, Virginia brewery. In 2006, we recognized proceeds of $68 million on the sale of 68% of the Kaiser business in Brazil, offset by $4.2 million of transaction costs. Offsetting the impact of this unique event in 2006 on the year-over-year change was the acquisition of $73.5 million of cash upon the Merger in 2005.

On June 30, 2006 (early in the third quarter), as part of a general refinancing of the team, Molson sold its preferred equity interest in the Montréal Canadiens Hockey Club to entities which control and own a majority interest in the Club. Total proceeds from the transaction were Cdn $40.3 million (U.S. $36.1 million), which will primarily be reported, net of costs to sell, as a cash inflow from investing activities in the third quarter. We retain a 19.9% common equity interest in the Club as well as board representation. The transaction structure is consistent with our long term commitment to the Team and its success, and helps to ensure the Team's long term presence in Montréal.

Financing activities

Net cash used for financing activities was $73.2 million for the twenty-six weeks ended June 25, 2006 compared to $147.1 million of cash provided by financing activities during the same period in 2005. Net repayments of debt were approximately $44.7 million for the first half of 2006, encompassing all activity in our various debt and credit facilities (including those associated with discontinued operations). Net borrowing of debt during the same period of 2005 was approximately $163.2 million (including those associated with discontinued operations). The $207.9 million variance in cash flows associated with debt explains the majority of the change in the cash flows from financing activities. Proceeds from stock option exercises were lower in 2006 by $24.2 million.

OFF BALANCE SHEET ARRANGEMENTS

Variable Interest Entities

FASB Interpretation No. 46R, Consolidation of Variable Interest Entities—An Interpretation of ARB 51 (FIN 46R) expands the scope of ARB 51 and can require consolidation of "variable interest entities (VIEs)." Once an entity is determined to be a VIE, the party with the controlling financial interest, the primary beneficiary, is required to consolidate it. We have investments in VIEs, of which we are the

primary beneficiary. Accordingly, we have consolidated the following four joint ventures for all periods presented. These include Rocky Mountain Metal Container (RMMC), Rocky Mountain Bottle Company (RMBC), BRI (effective with the Merger), and Grolsch (U.K.) Limited (Grolsch).

The following summarizes the relative size of our consolidated joint ventures (including minority interests):

	Thirteen Weeks Ended June 25, 2006						Thirteen Weeks Ended June 26, 2005
	Total Assets		Revenues		Pre-tax Income		Total Assets		Revenues		Pre-tax Income
	(In thousands)						(In thousands)
RMBC(1)	$	45,243	$	25,113	$	5,253	$	54,716	$	24,298	$	4,699
RMMC(1)	$	86,248	$	68,949	$	5,537	$	83,150	$	64,971	$	3,821
BRI(2)	$	372,314	$	67,743	$	56	$	315,543	$	37,497	$	—
Grolsch(1)	$	27,407	$	19,990	$	2,882	$	25,866	$	20,015	$	2,882

(1): Substantially all such sales are made to the Company, and as such, are eliminated in consolidation.
(2): Revenues reflect service charge revenues earned by BRI from the sale of products to the consumer; amount does not include beer sales of the Company.

	Twenty-Six Weeks Ended June 25, 2006						Twenty-Six Weeks Ended June 26, 2005
	Total Assets		Revenues		Pre-tax Income		Total Assets		Revenues		Pre-tax Income
	(In thousands)						(In thousands)
RMBC(1)	$	45,243	$	48,432	$	9,748	$	54,716	$	45,506	$	7,744
RMMC(1)	$	86,248	$	117,528	$	7,796	$	83,150	$	108,350	$	4,777
BRI(2)	$	372,314	$	131,873	$	117	$	315,543	$	56,285	$	—
Grolsch(1)	$	27,407	$	32,240	$	4,792	$	25,866	$	28,603	$	4,119

(1): Substantially all such sales are made to the Company, and as such, are eliminated in consolidation.
(2): BRI results are included in 2005 from February 9, 2005, the date of the Merger through May 21, 2005 (due to BRI's results being reported one month in arrears). Revenues reflect service charge revenues earned by BRI from the sale of products o the consumer; amount does not include beer sales of the Company.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

We have contractual cash obligations as of June 25, 2006 pertaining to debt, interest payments, derivative payments, retirement plan expenditures, operating and capital leases, and other long-term obligations totaling $10,950 million. There have been only normal and recurring changes in the Company's cash commitments since December 25, 2005.

Other commercial commitments as of June 25, 2006 were:

	Amount of Commitment Expiration Per Period
	Total Amounts Committed		Less than 1 year		1-3 years		4-5 years		After 5 years
	(In thousands)
Standby letters of credit	$	71,782	$	37,037	$	34,745	$	—	$	—

CONTINGENCIES

Indemnity Obligations—Sale of Kaiser

On January 13, 2006, we sold a 68% equity interest in Kaiser to FEMSA for $68 million in cash, net of $4.2 million of transaction costs, including the assumption by FEMSA of Kaiser-related debt and contingencies. We retained a 15% interest in Kaiser and have one seat out of seven on its board. The terms of the agreement require us to indemnify FEMSA for certain exposures related to tax, civil and labor contingencies. First, we provided a full indemnity for any losses Kaiser may incur with respect to tax claims associated with certain previously utilized purchased tax credits. Any potential liabilities associated with these exposures were considered less than probable during 2005, and therefore no associated reserves were recorded in 2005. The total base amount of potential claims in this regard, plus estimated accumulated penalties and interest, is $265 million. As of June 25, 2006, the fair value of this indemnity liability on the balance sheet is $57 million, $6 million of which is classified as a current liability and $51 million of which is classified as non-current. Our fair value estimates account for the possibility that we could have to pay the full amount of the exposure in a future year, but that a majority of the amounts paid would be recovered in subsequent years through Brazil's legal system. Our fair value estimates also consider, through probability-weighted scenarios, the possibility that we will never have to pay any amounts associated with this exposure. We also provided indemnity related to all other tax, civil and labor contingencies. In this regard, however, FEMSA assumed their full share of all contingent liabilities that had been previously recorded and disclosed by us. However, we may have to provide indemnity to FEMSA if those contingencies settle at amounts greater than those amounts previously recorded or disclosed by us. We will be able to offset any indemnity exposures in these circumstances with amounts that settle favorably to amounts previously recorded. Our exposure related to these indemnity claims is capped at the amount of the sales price of the 68% equity interest of Kaiser, which was $68 million. As a result of these contract provisions, our fair value estimates include not only probability-weighted potential cash outflows associated with indemnity provisions, but also probability-weighted cash inflows that could result from favorable settlements, which could occur through negotiation or settlement programs that could arise from the federal or any of the various state governments in Brazil. The fair value of the total tax, civil and labor indemnity liability on our balance sheet is $43 million as of June 25, 2006, $29 million of which is classified as a current liability and $14 million of which is classified as non-current. Future settlement procedures and related negotiation activities associated with these contingencies are largely outside of our control, and will be handled by FEMSA. The sale agreement requires annual cash settlements relating to the tax, civil and labor indemnities, the first of which will occur during the first half of 2007. Indemnity obligations related to purchased tax credits must be settled upon notification. Due to the uncertainty involved with the ultimate outcome and timing of these contingencies, significant adjustments to the carrying values of the indemnity obligations could result in the future. These liabilities are denominated in Brazilian reals and have been stated at present value, and will therefore be subject in the future to foreign exchange gains or losses and to accretion cost, both of which will be recognized in the discontinued operations section of the statement of operations.

ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS

SFAS No. 123R "Share-Based Payment"

prospective application method, awards that are granted, modified, or settled after adoption of SFAS 123R are prospectively measured and accounted for in accordance with SFAS 123R. Unvested equity-classified awards that were granted prior to the adoption of SFAS 123R will continue to be accounted for in accordance with SFAS 123, except that the fair value amounts are recognized in the statement of operations and are subject to the forfeiture provisions of SFAS 123R. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (SAB 107) to assist preparers by simplifying some of the implementation challenges of SFAS 123R. In particular, SAB 107 provides supplemental implementation guidance on SFAS 123R, including guidance on valuation methods, classification of compensation expense, inventory capitalization of share-based compensation cost, income tax effects, disclosures in Management's Discussion and Analysis and several other issues. We applied the principles of SAB 107 in conjunction with our adoption of SFAS 123R in the first quarter of 2006.

SFAS No. 151 "Inventory Costs"

SFAS 151 is an amendment to ARB No. 43, Chapter 4 that became effective for us in the first quarter of 2006. The standard clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and spoilage requiring immediate recognition in the period they are incurred. The adoption of this standard had no impact in the second quarter and first half of 2006 periods and is not expected to have any material impact on our full year financial results.

SFAS No. 154 "Accounting Changes and Corrections"

FASB Staff Position ("FSP") No. FIN 45-3 "Application of FASB Interpretation No. 45 to Minimum Revenue Guarantees Granted to a Business or its Owners"

New Accounting Pronouncements

SFAS No. 155 "Accounting for Certain Hybrid Financial Instruments"

embedded derivative that otherwise would require bifurcation. We are still reviewing the impact, if any, that SFAS 155 will have on our financial statements.

SFAS No. 156 "Accounting for Servicing of Financial Assets—an amendment of FASB Statement No. 140"

SFAS Interpretation No. 48 "Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109"

In June 2006, the FASB ratified a consensus on the EITF Issue No. 06-03 (EITF 06-03) related to the classification of certain sales, value added and excise taxes within the income statement. EITF 06-03 would become effective for us in the first quarter of our fiscal year 2007. We are in the process of evaluating the impact of this EITF on our presentation of such taxes in the statement of operations.

CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. From time to time, we may also provide oral or written forward-looking statements in other materials we release to the public. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by forward-looking words such as "expect," "anticipate," "plan," "believe," "seek," "estimate," "outlook," "trends," "future benefits," "strategies," "goals" and similar words. In addition, statements that we make in this report that are not statements of historical fact may also be forward-looking statements.

In particular, statements that we make under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Outlook for 2006" including, but not limited to, statements relating to our overall volume trends, consumer preferences, pricing trends and industry forces, cost reduction strategies and anticipated results, anticipated synergies, our expectations for funding our 2006 capital expenditures and operations, debt service capabilities, shipment levels and profitability, market share and the sufficiency of our capital resources are forward-looking statements.

Forward-looking statements are not guarantees of our future performance and involve risks, uncertainties and assumptions that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. You should not place undue reliance on

forward-looking statements. We do not undertake to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You should be aware that the factors we discuss in "Risk Factors" in Part II., Item 1A, and elsewhere in this report could cause our actual results to differ from future results expressed or implied by any forward-looking statements.

OUTLOOK FOR 2006

Canada

With regard to volume, the start of the summer season is evidence that our focused portfolio is healthier than it was a year ago, as we continue to strengthen and build a consumer-preferred portfolio. Our investment focus remains on key brands, strategically investing for growth behind Coors Light®, positioning our premium brands for recovery and modest growth, and continuing to fuel growth of our above-premium domestic and world-class partner import brand portfolio, including Corona®, Heineken® & Miller Genuine Draft®. Coors Light® and our above-premium brands are benefiting from unyielding focus and investment and have achieved consistently very favorable sales growth.

In the second quarter, the marketplace in Canada saw increased price and promotional activity, which had a disproportional impact on our premium and value brand groups. During this time, we continued to improve our brand strength, which will be the foundation for long-term growth. We remain focused on building our strategic, premium brand equities for the long term, but we will also ensure that our portfolio remains competitive on a market-by-market basis.

With regard to costs, we continue to aggressively pursue merger synergies and other cost savings in the areas of packaging materials, waste reduction, plant productivity and distribution expense. These initiatives successfully offset approximately two-thirds of this quarter's cost inflation. Constant attention to our cost savings efforts is required to offset continued inflation in material costs, freight and utilities. Nonetheless, we anticipate low-single-digit increases in cost of goods per barrel (in local currency) for the balance of the year.

At the midway point of the year, our Canada business has built a significantly healthier financial position than a year ago, while faced with increasing competitive price and promotional pressure. Balance of year challenges will be centered on remaining focused on brand equity measures and long term bottom-line growth, while addressing immediate, short-term competitive promotional activity.

On June 30, 2006, as part of a general refinancing of the team, Molson sold its preferred equity interest in the Montréal Canadiens Hockey Club to entities which control and own a majority interest in the Club. Total proceeds from the transaction were Cdn $40.3 million (U.S. $36.1 million), which will primarily be reported, net of costs to sell, as a cash inflow from investing activities in the third quarter. We retain a 19.9% common equity interest in the Club as well as board representation. The transaction structure is consistent with our long term commitment to the team and its success, and helps to ensure the team's long-term presence in Montréal.

U.S.

The U.S. will focus on continuing its top-line momentum by building the most compelling and relevant beer brands. We have achieved favorable volume trends and brand equities in the past few quarters, particularly in the Coors Light®, Keystone® and Blue Moon® brands. Drivers of these results include favorable on-premise and key account performance, innovation and brand equities around cold Rocky Mountain refreshment, ethnic consumer outreach, and category management.

A variety of leading indicators and important metrics point toward a strengthening of our top line in the U.S. In the second quarter, our draft sales outpaced cans and bottles for the first time in several years, with recent on-premise growth approximately doubling the growth of our overall U.S. business. Can packaging is also experiencing enhanced growth trends with the summer's latest packaging innovations. Coors Light®'s Hispanic volume growth is more than four times its overall growth trend.

With regard to costs, we cannot look at the second quarter in isolation because of the substantial volatility in the drivers of U.S. cost of goods this year. Cost of goods per barrel increased 8% in the second quarter, as 2006 has had an unprecedented year-over-year run-up in energy and packaging materials costs compared to the prior year without most of the synergy benefit of closing the Memphis brewery. The third quarter factors are expected to be similar to those experienced in the second quarter, except that comparisons with 2005 may be favorable, since the significant fuel and packaging increases last year did not occur until the third quarter. The fourth quarter of this year will benefit from several favorable factors, including lower spending for packaging innovations and $6 million-$7 million dollars of all-in cost savings from closing the Memphis brewery in the third quarter. The inflationary commodity environment has strengthened our focus to capture all of the identified cost savings from both merger synergies and our pre-existing cost initiatives. Cost savings this year center primarily on procurement, brewery network optimization and transportation improvements. We have accelerated the closing of our Memphis brewery by six months to early September 2006 versus our original timeline. We are well into that closure, currently migrating product supply from that facility to other breweries. The annualized cost savings from closing Memphis will be approximately $32 million, which will begin to impact our U.S. business results beginning late in the third quarter of this year.

With the current view of commodity prices and despite higher costs in the short-term related to closing Memphis and opening the Shenandoah, Virginia, brewing capacity early in 2007, we believe that we can limit the full-year U.S. cost of goods increase to a range of 3% to 5% per barrel. We intend to achieve this through a combination of the Memphis closure and other cost initiatives that we expect to offset more than half of the cost inflation that we anticipate this year. Equally important, these cost initiatives are designed to provide benefits long after the recent large increases in the commodity markets have reversed. More broadly, if aluminum and diesel fuel costs remain at today's historically high levels, our U.S. business would require net price realization closer to the average of the past several years to maintain favorable profit momentum in 2007.

The U.S. beer price environment so far this summer has been more favorable than last summer, but not as favorable as two years ago, primarily due to the fact that we were able to take very few price increases last fall. Given the widespread promotional discounting and coupon activity in the third and fourth quarters of last year, we anticipate relatively favorable net pricing comparisons to prior year in the second half of this year. We continue our focus on strategically managing pricing and discounting on an individual market basis.

Europe

Our Europe segment continues to execute against the growth and cost strategies we launched in late 2005.

We continue to invest strongly behind our strategic brands in the U.K., both in marketing programs and in retail innovations. In the on-premise retail channel, we continue to roll out our new cold-dispense technologies and distinctive above-bar fonts. This rollout extends beyond Carling and establishes a cold platform for a broad group of suitable brands within our existing portfolio. Five years after our industry-leading introduction of extra cold beer, the industry is rapidly moving to this standard—and our aim is to maintain our leadership in this space to drive sales with current customers, along with increased distribution. A significant benefit of our equipment design is the flexibility to deliver different brands with clearly differentiated branding but using a common font base that is unique to our brands. Results of recent consumer research have been very favorable, with consumers indicating a preference for our new above-bar equipment over selected competitors.

With regard to Europe segment costs, our cost reduction program has been very successful to date. While we have substantially completed the program we began last year, we will benefit during the balance of the year from the flow-through of initiatives already completed.

The area of pricing is the source of extreme margin pressure in the U.K. beer industry, especially given the price discounting we have seen in the off-premise and because of the continued growth and consolidation of the large multiple-outlet retailers in both the off-premise and on-premise channels. Our focus is on balancing volume growth against margin. As the market continues to shift to areas of our strength, cold mainstream lager, we expect an increased ability to resist market-destructive pricing.

Corporate

We expect Corporate general and administrative expense for all of 2006 to be in the range of $110-$120 million, a significant increase from 2005. Contributing to these higher costs will be amounts related to long-term incentive programs, severance and other employee costs, audit fees and investments in substantial cost saving initiatives that we plan to initiate in the second half of 2006. Compared to 2005 pro forma (presuming the merger had occurred on the first day of 2005) corporate general and administrative expenses of $87 million, this 2006 range represents and increase of $23 to $33 million, comprised of $10 million due to our new stock-based long-term incentive plan, approximately $9 million attributable to new costs for strong corporate center capabilities, approximately $5 million as a result of investments in projects and initiatives designed to deliver the next generation of cost reductions, $3 million of cost transfers from operating segments to the Corporate center this year, and approximately $2 million due to severance and other restructuring-related expenses. We do believe, however, that there are opportunities to reduce this annual amount by 10-20% for next year. This is a key cost-reduction objective for us in 2007.

Corporate interest expense in the second half of 2006 will be approximately $31 to $33 million per quarter. This estimate assumes constant foreign exchange rates throughout the year.

Stock Compensation Expense

Due to the redesign of our long-term incentive compensation plan and the new accounting rules for stock option expense, we anticipate that share-based compensation expense for our Company for the full year will be approximately $25-$30 million, with approximately $12 million in the Corporate segment. Our new incentive plan relies primarily on performance shares that will not be awarded unless the Company achieves established profit growth during the next few years.

Income Taxes

We currently anticipate that our full-year 2006 effective tax rate will be in the range of 16% to 20%. In the absence of additional tax law changes, we anticipate an effective tax rate for the last half of 2006 close to the top of our long-term range of 25% to 30%. In future years, we expect our tax rate to be near the bottom of this range or somewhat lower, depending on the timing of changes in tax laws and our company tax structure. One important factor in our outlook is the relatively favorable economic and tax environment in Canada. Our tax rate is volatile and may move up or down with changes in, among other things, the amount and source of income or loss, our ability to utilize foreign tax credits, and changes in tax laws. The Canada federal tax rate change enacted in the second quarter is particularly important beginning in 2008, when we expect it to begin to reduce our cash taxes by approximately $5-7 million annually, with the yearly benefit increasing to $7-10 million as the change is fully phased in by 2010. This change also reduces our long-term expected tax rate approximately 2 percentage points.

Goodwill and Intangible Assets

Because there is goodwill included in the carrying value of our three segments, its fair value was compared to its carrying value in 2005 to determine whether there was a risk of goodwill impairment. Most of the goodwill associated with the U.S. and Canada segments originated in the Merger. Similarly, we tested indefinite-lived intangible assets for impairment during 2005, most of which relate to our Canada and Europe segments.

Canada's goodwill was determined through purchase accounting, requiring the purchase consideration to be allocated to Molson's assets and liabilities based upon their fair values with the residual to goodwill. A portion of the Merger goodwill was allocated to the U.S. segment, based on the level of Merger synergy savings expected to accrue to the U.S. segment over time. A reduction in the fair value of the U.S. or Canada segment in the future could lead to goodwill impairment. We also have significant indefinite-lived and definite-lived intangible assets in Canada, associated primarily with core, non-core and partner beer brands, as well as distribution rights. A reduction in the fair values of these intangibles could lead to impairment charges. Reductions in fair value could occur for a number of reasons, including cost increases due to inflation, an unfavorable beer pricing environment, declines in industry or company-specific beer volume sales, or the inability to achieve synergies from the Merger.

The goodwill associated with the Europe segment originated in the 2002 purchase of the CBL business by Coors. A reduction in the fair value of the Europe segment in the future could lead to goodwill impairment. We noted a reduction in the value of the Europe segment from 2004 to 2005, but not enough of a decrease to warrant goodwill impairment. We also have significant indefinite-lived and definite-lived intangible assets in Europe, associated mainly with the Carling® brand (indefinite-lived) and our other beer brands, as well as distribution rights and channels. Future reductions in fair value of the Europe business or of specific intangibles could occur for a number of reasons, including cost increases due to inflation, an unfavorable beer pricing environment, and declines in industry or company-specific beer volume sales, which could result in possible impairment of these assets.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, we are exposed to fluctuations in interest rates, foreign currencies and the prices of production and packaging materials. We have established policies and procedures to govern the strategic management of these exposures through a variety of financial instruments. By policy, we do not enter into any contracts for the purpose of trading or speculation.

Our objective in managing our exposure to fluctuations in interest rates, foreign currency exchange rates and production and packaging materials prices is to decrease the volatility of our earnings and cash flows affected by potential changes in underlying rates and prices. To achieve this objective, we enter into foreign currency forward contracts, commodity swaps, interest rate swaps and cross currency swaps, the values of which change in the opposite direction of the anticipated cash flows. Our primary foreign currency exposures are Canadian dollar and British pound sterling.

Derivatives are either exchange-traded instruments, or over-the-counter agreements entered into with highly rated financial institutions. No losses on over-the-counter agreements due to counterparty credit issues are anticipated. All over-the-counter agreements are entered into with counterparties rated no lower than A (S&P) or A2 (Moody's). In some instances, our counterparties and we have reciprocal collateralization agreements regarding fair value positions in excess of certain thresholds. These agreements call for the posting of collateral in the form of cash, treasury securities or letters of credit if a fair value loss position to our counterparties or us exceeds a certain amount. At June 25, 2006, no collateral was posted by our counterparties or us.

Prior to issuing the Cdn $900 million bonds on September 22, 2005, we entered into a bond forward transaction for a portion of the Canadian offering. The bond forward transaction effectively established, in advance, the yield of the government of Canada bond rates over which the Company's private placement was priced. At the time of the private placement offering and pricing, the government of Canada bond rates was trading at a yield lower than that locked in with the Company's interest rate lock. This resulted in a loss of $4.0 million on the bond forward transaction. Per SFAS 133 accounting, the loss will be amortized over the life of the Canadian issued private placement and will serve to increase the Company's effective cost of borrowing by 4.9 basis points compared to the stated coupon on the issue.

Simultaneously with our U.S. private placement by a Canadian-functional subsidiary, we entered into a cross currency swap transaction for the entire $300 million issue amount and for the same maturity. In this transaction we exchanged our $300 million for a Cdn $355.5 million obligation with a third party. The terms of the transaction are such that the Company will pay interest at a rate of 4.28% to the third party on the amount of Cdn $355.5 million and will receive interest at the rate of 4.85% on the $300 million amount. There was an exchange of principle at the inception of this transaction and there will be a subsequent exchange of principle at the termination of the transaction. We have designated this transaction as a hedge of the variability of the cash flows associated with the payment of interest and principle on the U.S. dollar securities. Consistent with SFAS 133 accounting, all changes in the value of the transaction due to foreign exchange will be booked through the Statement of Operations and will be offset by a revaluation of the associated debt instrument. Changes in the value of the transaction due to interest rates will be recorded to other comprehensive income.

We monitor foreign exchange risk, interest rate risk and related derivatives using two techniques: sensitivity analysis and value-at-risk. Our market-sensitive derivative and other financial instruments, as defined by the Securities and Exchange Commission, are foreign currency forward contracts, commodity swaps, interest rate swaps, and cross currency swaps.

We use value-at-risk to monitor the foreign exchange and interest rate risk of our cross currency swaps. The value-at-risk provides an estimate of the level of a one-day loss that may be equaled or exceeded due to changes in the fair value of these foreign exchange rate and interest rate-sensitive financial instruments. The type of value-at-risk model used to estimate the maximum potential one-day loss in the fair value is a variance/covariance method. The value-at-risk model assumes normal market conditions and a 95% confidence level. There are various modeling techniques that can be used to compute value-at-risk. The computations used to derive our values take into account various correlations between currency rates and interest rates. The correlations have been determined by observing foreign exchange currency market changes and interest rate changes over the most recent one-year period. We have excluded anticipated transactions, firm commitments, cash balances, and accounts receivable and payable denominated in foreign currencies from the value-at-risk calculation, some of which these instruments are intended to hedge.

The value-at-risk calculation is a statistical measure of risk exposure based on probabilities and is not intended to represent actual losses in fair value that we may incur. The calculated value-at-risk result does not represent the full extent of the possible loss that may occur. It attempts to represent the most likely measure of potential loss that may be experienced 95 times out of 100 due to adverse market events that may occur. Actual future gains and losses will differ from those estimated by value-at-risk because of changes or differences in market rates and interrelationships, hedging instruments, hedge percentages, timing and other factors.

The estimated maximum one-day loss in fair value on our cross currency swaps, derived using the value-at-risk model, was $12.8 million and $12.2 million at June 25, 2006, and December 25, 2005, respectively. Such a hypothetical loss in fair value is a combination of the foreign exchange and interest rate components of the cross currency swap. Value changes due to the foreign exchange component

would be offset completely by increases in the value of our inter-company loan, the underlying transaction being hedged. The hypothetical loss in fair value attributable to the interest rate component would be deferred until termination or maturity.

Details of all other market-sensitive derivative and other financial instruments, including their fair values, are included in the table below. These instruments include foreign currencies, commodity swaps, interest rate swap and cross currency swaps.

		Notional principal amounts (U.S. $)		Fair Value Positive (Negative)			Maturity
		(In thousands)
June 25, 2006
Foreign currency management
	Forwards	$	219,660	$	(4,196	)	07/06–04/08
	Cross currency swaps		1,300,789		(240,290	)	07/06–05/12
Commodity pricing management
	Swaps		26,955		4,483		07/06–09/08
Interest rate pricing management
	Interest rate swaps		379,318		(3,823	)	06/11–05/12

Total				$	(243,826	)

		Notional principal amounts (U.S. $)		Fair Value Positive (Negative)			Maturity
		(In thousands)
December 25, 2005
Foreign currency management
	Forwards	$	162,005	$	(2,548	)	01/06–11/07
	Cross currency swaps		1,291,600		(174,755	)	04/06–05/12
Commodity pricing management
	Swaps		45,439		9,422		01/06–09/08
Interest rate pricing management
	Interest rate swap		372,800		11,195		06/11–05/12

Total				$	(156,686	)

On a rolling twelve-month basis, maturities of derivative financial instruments held on June 25, 2006, are as follows (in thousands):

2007			2008			2009 and thereafter			Total
$	(3,103	)	$	2,589		$	(243,312	)	$	(243,826	)

A sensitivity analysis has been prepared to estimate our exposure to market risk of interest rates, foreign exchange rates and commodity prices. The sensitivity analysis reflects the impact of a hypothetical 10% adverse change in the applicable market interest rates, foreign exchange rates and commodity prices. The volatility of the applicable rates and prices are dependent on many factors that cannot be forecast with reliable accuracy. Therefore, actual changes in fair values could differ significantly from the results presented in the table below.

The following table presents the results of the sensitivity analysis of our derivative and debt portfolio:

		As of
Estimated Fair Value Volatility		June 25, 2006			December 25, 2005
		(In millions)
Foreign currency risk:
	Forwards, swaps	$	(16.9	)	$	(13.4	)
Interest rate risk:
	Debt, swaps	$	(75.1	)	$	(75.6	)
Commodity price risk:
	Swaps	$	(2.8	)	$	(17.6	)

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to the Company's management, including our Global Chief Executive Officer and Global Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applies its judgment in assessing the costs and benefits of such controls and procedures that, by their nature, can only provide reasonable assurance regarding management's control objectives. Also, we have investments in certain unconsolidated entities that we do not control or manage. Consequently, our disclosure controls and procedures with respect to such entities are necessarily substantially more limited than those we maintain with respect to our consolidated subsidiaries.

The Global Chief Executive Officer and the Global Chief Financial Officer, with assistance from other members of management, have evaluated the effectiveness of our disclosure controls and procedures as of June 25, 2006 and, based on their evaluation, have concluded that a material weakness in internal control over financial reporting as reported in our Form 10-K for our year ended December 25, 2005 continues to exist as of June 25, 2006 with respect to accounting for income taxes. Due to the material weakness, our Global Chief Executive Officer and Global Chief Financial Officer concluded that our disclosure controls and procedures were not effective to provide reasonable assurance regarding management's control objectives as of June 25, 2006. Notwithstanding the material weakness, we have performed additional procedures to ensure that our financial statements as of and for the quarter ended June 25, 2006, were fairly presented in all material respects in accordance with generally accepted accounting principles.

The certifications attached as Exhibits 31.1 and 31.2 hereto should be read in conjunction with the disclosures set forth herein.

Remediation of Material Weakness in Internal Control over Financial Reporting

As previously reported in our first quarter 2005 Quarterly Report on Form 10-Q/A, we had identified the above material weakness in internal control over financial reporting, which continues to exist as of June 25, 2006. Since original identification of the material weakness, we have been working to implement the following steps to remediate this material weakness:

•: We have hired additional experienced tax staff including a vice president of tax and two additional senior level tax managers;

•: We have implemented additional procedures to ensure adequate levels of review in this area; and
•: We are in the final stages of implementing new software that will automate and improve controls in this area. We have reached the test stage whereby we have populated the software with historical data and are running the software parallel with existing systems. Assuming favorable parallel run test results are achieved, we plan to place reliance on this new software as our primary income tax provision preparation tool in the third quarter of 2006.

In addition to completing the implementation of new software that will automate and improve transparency and controls with respect to the preparation of the tax provision (our third remediation initiative noted above), we intend to continue to evaluate the need to implement additional internal controls as necessary and appropriate with respect to accounting for income taxes.

Changes in Internal Control over Financial Reporting

There were no changes in internal control over financial reporting during the quarter ended June 25, 2006 that have materially affected, or are reasonably likely to materially affect the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Beginning in May 2005, several purported class action lawsuits were filed in the United States and Canada, including Federal courts in Delaware and Colorado and provincial courts in Ontario and Québec, alleging, among other things, that the Company and its affiliated entities, including Molson Inc., and certain officers and directors misled stockholders by failing to disclose first quarter (January-March) 2005 U.S. business trends prior to the Merger vote in January 2005. The Colorado Federal case has been transferred to the Delaware Federal court. The Delaware Federal lawsuits also allege that the Company failed to comply with U.S. GAAP. The Company will vigorously defend the lawsuits.

The Audit Committee of the Company's Board of Directors is investigating whether a complaint that it received in the third quarter of 2005 has any merit. The Committee has hired independent counsel to assist it in conducting the investigation. The complaint relates primarily to disclosure in connection with the Merger, exercises of stock options by Molson Inc. option holders before the record date for the special dividend paid to Molson Inc. shareholders before the Merger (which were disclosed in the Company's Report on Form 8-K dated February 15, 2005), statements made concerning the special dividend to Molson Inc. shareholders, and sales of the Company's common stock in connection with exercise of stock options by the Company's chief executive officer and chief financial officer following the Merger, after the release of the year-end results for Coors and Molson Inc. and after the Company lifted the trading restrictions imposed before the Merger. This investigation is ongoing and the Board of Directors has full confidence in senior management, including the chief executive officer and chief financial officer.

In December 2005, Miller Brewing Company sued the Company and several subsidiaries in a Wisconsin federal court. Miller seeks to invalidate a licensing agreement (the Agreement) allowing Molson Canada the sole distribution of Miller® products in Canada. Miller also seeks damages for U.S. and Canadian antitrust violations, and violations of the Agreement's confidentiality provisions. Miller also claims that the Agreement's purposes have been frustrated as a result of the Merger. The Company intends to vigorously defend this lawsuit, and has filed a claim against Miller and certain related entities in Ontario, Canada, seeking a declaration that the licensing agreement remains in full force and effect.

ITEM 1A. RISK FACTORS

The reader should carefully consider the following factors and the other information contained within this document. The most important factors that could influence the achievement of our goals, and cause actual results to differ materially from those expressed in the forward-looking statements, include, but are not limited to, the following:

Risks specific to the Molson Merger

We may not realize the cost savings and other benefits we currently anticipate due to challenges associated with integrating the operations, technologies, sales and other aspects of the businesses of Molson®and Coors®. Our success will depend in large part on management's success in integrating the operations, technologies and personnel of Molson and Coors. If we fail to integrate the operations of Molson and Coors or otherwise fail to realize any of the anticipated benefits of the Merger transaction, including the estimated cost savings of approximately $175 million annually by the third year following the Merger, our results of operations could be impaired. In addition, the overall integration of the two companies may result in unanticipated operations problems, expenses and liabilities, and diversion of management's attention.

If Pentland and the Coors Trust do not agree on a matter submitted to stockholders, generally the matter will not be approved, even if beneficial to the Company or favored by other stockholders. Pentland and the Coors Trust, which together control more than two-thirds of the Company's Class A Common and Exchangeable stock, have voting trust agreements through which they have combined their voting power over the shares of our Class A common stock and the Class A exchangeable shares that they own. However, in the event that these two stockholders do not agree to vote in favor of a matter submitted to a stockholder vote (other than the election of directors), the voting trustees will be

required to vote all of the Class A common stock and Class A exchangeable shares deposited in the voting trusts against the matter. There is no other mechanism in the voting trust agreements to resolve a potential deadlock between these stockholders. Therefore, if either Pentland or the Coors Trust is unwilling to vote in favor of a transaction that is subject to a stockholder vote, we may be unable to complete the transaction even if our board, management or other stockholders believe the transaction is beneficial for Molson Coors.

Risks specific to our Discontinued Operations

Indemnities provided to the purchaser of 68% of the Kaiser business in Brazil could result in future cash outflows and income statement charges. On January 13, 2006, we sold a 68% equity interest in Kaiser to FEMSA for $68 million cash, including the assumption by FEMSA of Kaiser-related debt and contingencies. The terms of the agreement require us to indemnify FEMSA for exposures related to certain tax, civil and labor contingencies. The ultimate resolution of these claims is not under our control, and we cannot predict the outcomes of administrative and judicial proceedings that will occur with regard to these claims. It is possible that we will have to make cash outlays to FEMSA with regard to these indemnities. While the fair values of these indemnity obligations are recorded as liabilities on our balance sheet in conjunction with the sale, we could incur future income statement charges as facts further develop resulting in changes to our fair value estimates or change in assessment of probability of loss on these items. Due to the uncertainty involved in the ultimate outcome and timing of these contingencies, significant adjustments could result in the future.

Risks specific to our Company

Our success as an enterprise depends largely on the success of three primary products in three mature markets; the failure or weakening of one or more could materially adversely affect our financial results. Although we currently have 14 products in our U.S. portfolio, Coors Light® represented more than 72% of our U.S. sales volume for 2005. Carling® lager is the best-selling brand in the United Kingdom and represented approximately 75% of CBL sales volume in 2005. The combination of the Molson Canadian® and Coors Light® brands represented approximately 45% of our Canada segment's sales volume for the year ended December 25, 2005. Consequently, any material shift in consumer preferences away from these brands, or from the categories in which they play, would have a disproportionately large adverse impact on our business. Moreover, each of our three major markets is mature, and we face large competitors who are larger and more diverse in terms of their geographies and brand portfolios.

We have indebtedness that is substantial in relation to our stockholders' equity, which could hinder our ability to adjust to rapid changes in market conditions or to respond to competitive pressures. As of December 25, 2005, we had $850 million in debt primarily related to our acquisition of CBL, and $1.4 billion of debt primarily related to our Merger with Molson. As a result, we must use a substantial portion of our cash flow from operations to pay principal and interest on our debt. If our financial and operating performance is insufficient to generate sufficient cash flow for all of our activities, our operations could be adversely impacted.

We rely on a small number of suppliers to obtain the packaging we need to operate our business, of which the loss or inability to obtain materials could negatively affect our ability to produce our products. For our U.S. business, we purchase most of our paperboard and container supplies from a single supplier or a small number of suppliers. This packaging is unique and is not produced by any other supplier. Additionally, we are contractually obligated to purchase substantially all our can and bottle needs in the United States from our container joint ventures or from our partners in those ventures, Ball Corporation (RMMC) and Owens-Brockway Glass Container, Inc. (RMBC). Consolidation of the glass bottle industry in North America has reduced local supply alternatives and increased risks of glass bottle supply disruptions. CBL has only a single source for its can supply (Ball). The inability of any of

these suppliers to meet our production requirements without sufficient time to develop an alternative source could have a material adverse effect on our business.

Our primary production facilities in Europe and the United States are located at single sites, so we could be more vulnerable than our competitors to transportation disruptions, fuel increases and natural disasters. Our primary production facility in the United States is in Golden, Colorado and in Europe, our primary production facility is located in Burton-on-Trent, England. In both countries, our competitors have multiple geographically dispersed breweries and packaging facilities. As a result, we must ship our products greater distances than some of our competitors, making us more vulnerable to fluctuations in costs such as fuel, as well as the impact of any localized natural disasters should they occur.

The termination of one or more manufacturer/distribution agreements could have a material adverse effect on our business. We manufacture and/or distribute products of other beverage companies, including those of one or more competitors, through various licensing, distribution or other arrangements in Canada and the United Kingdom. The loss of one or more of these arrangements could have a material adverse effect on the results of one or more reporting segments.

Because we will continue to face intense global competition, operating results may be unfavorably impacted. The brewing industry is highly competitive and requires substantial human and capital resources. Competition in our various markets could cause us to reduce prices, increase capital and other expenditures or lose sales volume, any of which could have a material adverse effect on our business and financial results. In addition, in some of our markets, our primary competitors have substantially greater financial, marketing, production and distribution resources than Molson Coors has. In all of the markets where Molson Coors operates, aggressive marketing strategies by our main competitors could adversely affect our financial results.

Changes in tax, environmental or other regulations or failure to comply with existing licensing, trade and other regulations could have a material adverse effect on our financial condition. Our business is highly regulated by federal, state, provincial and local laws and regulations in various countries regarding such matters as licensing requirements, trade and pricing practices, labeling, advertising, promotion and marketing practices, relationships with distributors, environmental matters and other matters. Failure to comply with these laws and regulations could result in the loss, revocation or suspension of our licenses, permits or approvals. In addition, changes in tax, environmental or any other laws or regulations could have a material adverse effect on our business, financial condition and results of operations.

We are subject to fluctuations in foreign exchange rates, most significantly the British pound and the Canadian dollar. We hold assets and incur liabilities, earn revenues and pay expenses in different currencies, most significantly sales of Coors Light® in Canada, and sales of the Carling® brand in the United Kingdom. Since our financial statements are presented in U.S. dollars, we must translate our assets, liabilities, income and expenses into U.S. dollars at current exchange rates. Increases and decreases in the value of the U.S. dollar will affect, perhaps adversely, the value of these items in our financial statements, even if their local currency value has not changed.

Our operations face significant commodity price change and foreign exchange rate exposure which could materially and adversely affect our operating results. We will use a large volume of agricultural and other raw materials to produce our products, including malt, hops, water and packaging materials, including aluminum and paper products. We also use a significant amount of diesel fuel in our operations. The supply and price of these raw materials and commodities can be affected by a number of factors beyond our control, including market demand, global geo-political events (especially as to their impact on crude oil prices and the resulting impact on diesel fuel prices), frosts, droughts and other weather conditions, economic factors affecting growth decisions, plant diseases and theft. To the extent any of the foregoing factors affect the prices of ingredients or packaging, our results of operations could be

materially and adversely impacted. We have active hedging programs to address commodity price and foreign exchange rate changes. However, to the extent we fail to adequately manage the foregoing risks, including if our hedging arrangements do not effectively or completely hedge changes in foreign currency rates or commodity price risks, including price risk associated with diesel fuel and aluminum, both of which are at historically high price levels, our results of operations may be adversely impacted.

We could be adversely affected by overall declines in the beer market. Industry trends in many global markets indicate increases in consumer preference for wine and spirits, as well as for lower priced, value segment beer brands in some Canada markets, which could result in loss of volume or operating margins.

Because of our reliance on a single service supplier, we could experience significant disruption to our business. We rely exclusively on one information technology services provider worldwide for our network, help desk, hardware, and software configuration. If that service provider fails and we are unable to find a suitable replacement in a timely manner, we could be unable to properly administer our information technology systems.

Due to a high concentration of unionized workers in the United Kingdom and Canada, we could be significantly affected by labor strikes, work stoppages or other employee-related issues. Approximately 29% of CBL's total workforce and approximately 67% of Molson's total workforce is represented by trade unions. Although we believe relations with our employees are good, more stringent labor laws in the United Kingdom expose us to a greater risk of loss should we experience labor disruptions in that market.

Changes to the regulation of the distribution systems for our products could adversely impact our business. The U.S. Supreme Court recently ruled that certain state regulations of interstate wine shipments are unlawful. As a result of this decision, states may alter the three-tier distribution system that has historically applied to the distribution of our products. Although it is too early to tell what, if any, changes states may make as a result of this decision, changes to the three-tier distribution system could have a materially adverse impact on our business. Further, in certain Canadian provinces, our products are distributed through joint venture arrangements that are mandated and regulated by provincial government regulators. If provincial regulation should change, effectively eliminating the distribution channels, the costs to adjust our distribution methods could have a material adverse impact on our business.

Risks specific to the Canada Segment

We may be required to provide funding to the entity that owns the entertainment business and the Montréal Canadiens pursuant to the guarantees given to the NHL. Pursuant to certain guarantees given to the NHL as a minority owner of the entertainment business and the Montréal Canadiens professional hockey club (purchased from Molson in 2001), Molson shall provide funding to the Club (joint and severally based on our 19.9% ownership) to meet its obligations and it's operating expenses if it cannot meet its obligations under various agreements.

An adverse result in a lawsuit brought by Miller could have an adverse impact on our business. In December 2005, Miller Brewing Company sued the Company and several subsidiaries in a Wisconsin federal court. Miller seeks to invalidate a licensing agreement allowing Molson Canada the sole distribution of Miller® products in Canada. Miller claims U.S. and Canadian antitrust violations, and violations of the Agreement's confidentiality provisions. Miller also claims that the Agreement's purposes have been frustrated as a result of the Molson Coors merger. If Miller were to prevail in this action, it could have an adverse impact on our business.

If we are unsuccessful in renegotiating licensing, distribution and related agreements, our business could suffer adverse effects. We manufacture and/or distribute products of other beverage companies in

Canada, including those of one or more competitors, through various licensing, distribution or other arrangements. The loss of one or more of these arrangements could adversely impact our business.

If regulatory authorities determine that industry understandings regarding the bottle standards are invalid, our business could be adversely impacted. The Canadian Competition Bureau is currently reviewing the validity of industry arrangements regarding industry bottle standards. If the Bureau were to determine that the agreement is anticompetitive, we may be required to use multiple bottle types which could significantly increase our production and other related costs.

Risks specific to the U.S. Segment

Litigation directed at the alcohol beverage industry may adversely affect our sales volumes, our business and our financial results. Molson Coors and many other brewers and distilled spirits manufacturers have been sued in several courts regarding advertising practices and underage consumption. The suits allege that each defendant intentionally marketed its products to "children and other underage consumers." In essence, each suit seeks, on behalf of an undefined class of parents and guardians, an injunction and unspecified money damages. We will vigorously defend these lawsuits and it is not possible at this time to estimate the possible loss or range of loss, if any, that may result from these lawsuits.

We are highly dependent on independent distributors in the United States to sell our products, with no assurance that these distributors will effectively sell our products. We sell all of our products in the United States to distributors for resale to retail outlets. Some of our distributors are at a competitive disadvantage because they are smaller than the largest distributors in their markets. Our distributors also sell products that compete with our products. These distributors may give our competitors' products higher priority, thereby reducing sales of our products. In addition, the regulatory environment of many states makes it very difficult to change distributors. Consequently, if we are not allowed or are unable to replace unproductive or inefficient distributors, our business, financial position, and results of operation may be adversely affected.

Risks specific to the Europe Segment

Consolidation of pubs and growth in the size of pub chains in the United Kingdom could result in less ability to achieve favorable pricing. The trend toward consolidation of pubs, away from independent pub and club operations, is continuing in the United Kingdom. These larger entities have stronger price negotiating power, which could impact CBL's ability to obtain favorable pricing in the on-premise channel (due to spillover effect of reduced negotiating leverage) and could reduce our revenues and profit margins. In addition, these larger customers are beginning to purchase directly more of the products that, in the past, we have provided as part of our factored business. This consolidation could impact us adversely.

We depend exclusively on one logistics provider in England, Wales and Scotland for distribution of our CBL products. We are involved in a joint venture with Exel Logistics called Tradeteam. Tradeteam handles all of the physical distribution for CBL in England, Wales and Scotland, except where a different distribution system is requested by a customer. If Tradeteam were unable to continue distribution of our product and we were unable to find a suitable replacement in a timely manner, we could experience significant disruptions in our business that could have an adverse impact on our operations.

We are reliant on a single third party as a supplier for kegs in the United Kingdom. We do not own our kegs in the United Kingdom; rather we source our kegs from a logistics provider who is responsible for their ownership, upkeep, and to maintain an adequate stock. If this third party provider were to

have a business failure, we may be required to purchase a stock of kegs, the estimated cost of which would be approximately $60 million.

Sales volume trends in the United Kingdom brewing industry reflect movement from on-premise locations to off-premise locations, a trend which unfavorably impacts our profitability. We have noted in recent years that beer volume sales in the U.K. have been shifting from pubs and restaurants (on-premise) to retail stores (off-premise), for the industry in general. The progression to a ban on smoking in pubs and restaurants across the whole in the U.K. may accelerate this trend. Margins on sales to off-premise customers tend to be lower than margins on sales to on-premise customers. A continuation of this trend could adversely impact our profitability.

ITEM 6. EXHIBITS

The following are filed as a part of this Report on Form 10-Q:

(a) Exhibits

Exhibit Number		Document Description
4.1		Indenture dated as of September 22, 2005, among Molson Coors Capital Finance ULC, Molson Coors Brewing Company, Coors Brewing Company, Coors Distributing Company, Coors International Market Development, L.L.L.P., Coors Worldwide, Inc., Coors Global Properties, Inc., Coors Intercontinental, Inc., and Coors Brewing Company International, Inc. and TD Banknorth, National Association and the Canada Trust Company as co-trustees (Incorporated by reference to Exhibit 4.1 to Form S-4, filed October 19, 2005).
4.2		First Supplemental Indenture dated as of September 22, 2005, among Molson Coors Capital Finance ULC, Molson Coors Brewing Company, Coors Brewing Company, Coors Distributing Company, Coors International Market Development, L.L.L.P., Coors Worldwide, Inc., Coors Global Properties, Inc., Coors Intercontinental, Inc., and Coors Brewing Company International, Inc. and TD Banknorth, National Association as trustee (Incorporated by reference to Exhibit 4.2 to Form S-4, filed October 19, 2005).
4.3		Second Supplemental Indenture dated as of September 22, 2005, among Molson Coors Capital Finance ULC, Molson Coors Brewing Company, Coors Brewing Company, Coors Distributing Company, Coors International Market Development, L.L.L.P., Coors Worldwide, Inc., Coors Global Properties, Inc., Coors Intercontinental, Inc., and Coors Brewing Company International, Inc. and The Canada Trust Company as trustee (Incorporated by reference to Exhibit 4.3 to Form S-4, filed October 19, 2005).
4.4		U.S. $300,000,000 in aggregate principal amount of 4.85% Notes due 2010 (Incorporated by reference to Exhibit 4.4 to Form S-4, filed October 19, 2005).
4.5		Cdn. $900,000,000 in aggregate principal amount of 5.00% Notes due 2015. (Incorporated by reference to Exhibit 4.5 to Form 10-Q, filed November 4, 2005).
4.7		Exchange Offer Agreement dated as of September 22, 2005, among Molson Coors Capital Finance ULC, Molson Coors Brewing Company, Coors Brewing Company, Coors Distributing Company, Coors International Market Development, L.L.L.P., Coors Worldwide, Inc., Coors Global Properties, Inc., Coors Intercontinental, Inc., and Coors Brewing Company International, Inc. and BMO Nesbitt Burns Inc., TD Securities Inc., J.P. Morgan Securities Inc., Morgan Stanley & Co. Incorporated, Deutsche Bank Securities Inc., Deutsche Bank Securities Limited, J.P. Morgan Securities Canada Inc., and Morgan Stanley Canada Limited, as the initial purchasers named in the related Canadian Purchase Agreement. (Incorporated by reference to Exhibit 4.7 to Form 10-Q, filed November 4, 2005).
10.1		Employment Agreements by and among Coors Brewing Ltd. and Peter Swinburn, dated March 20, 2002 and April 12, 2005.
10.2		Employment Agreement by and among Molson Inc. and Kevin Boyce dated February 6, 2004.
10.3		Employment Agreements by and among Molson Coors Brewing Company and Frits D. van Paasschen dated February 28, 2005 and March 21, 2006.
10.4		Form of Performance Share Grant Agreement granted pursuant to the Molson Coors Incentive Compensation Plan.

10.5		Form of Restricted Stock Unit Agreement granted pursuant to the Molson Coors Incentive Compensation Plan.
10.6		Directors Stock Plan under the Molson Coors Brewing Company Incentive Compensation Plan.
31.1		Section 302 Certification of Chief Executive Officer.
31.2		Section 302 Certification of Chief Financial Officer.
32		Written Statement of Chief Executive Officer and Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 USC. Section 1350).

*: Indicates a management contract.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		MOLSON COORS BREWING COMPANY
		By:	/s/ MARTIN L. MILLER Martin L. Miller Vice President and Global Controller (Chief Accounting Officer) August 3, 2006

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