Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

The following summarizes the change in goodwill for the second quarter of 2012 (in millions):



Balance at December 31, 2011	$	1,453.3
Business acquisition(1)	831.5
Impairment related to China reporting unit(2)	(9.5		)
Foreign currency translation	12.3
Purchase price adjustment	0.4
Balance at June 30, 2012	$	2,288.0


(1)	On June 15, 2012, we completed the Acquisition. See Note 3, "Acquisition of StarBev" for further discussion.


(2)	See further discussion below.

Goodwill was attributed to our segments as follows:



	As of
	June 30, 2012		December 31, 2011
	(In millions)
Canada	$	692.7	$	689.5
Central Europe(1)	833.4		—
United Kingdom	753.9		746.1
MCI	8.0		17.7
Consolidated	$	2,288.0	$	1,453.3


(1)	We have initially attributed the preliminary goodwill arising from the Acquisition to our Central Europe segment. This allocation is subject to change as we finalize purchase accounting, which we expect to occur during 2012.

The following table presents details of our intangible assets, other than goodwill, as of June 30, 2012:



	Useful life	Gross		Accumulated amortization			Net
	(Years)	(In millions)
Intangible assets subject to amortization:
Brands(1)	3 - 40	$	456.3	$	(189.6	)	$	266.7
Distribution rights	2 - 23	343.7		(242.5		)	101.2
Patents and technology and distribution channels	3 - 10	34.3		(30.4		)	3.9
Favorable contracts, land use rights and other(1)	2 - 42	18.3		(1.2		)	17.1
Intangible assets not subject to amortization:
Brands(1)	Indefinite	5,725.8		—			5,725.8
Distribution networks	Indefinite	995.1		—			995.1
Other	Indefinite	15.5		—			15.5
Total		$	7,589.0	$	(463.7	)	$	7,125.3

(1)

Includes the preliminary fair values of $135.6 million for brand intangibles with a 30 year useful life, $2,377.5 million for brand intangibles with an indefinite-life and a preliminary fair value of a favorable supply contract and other intangibles of $12.0 million with a 2 year useful life as a result of the Acquisition. See Note 3, "Acquisition of StarBev" for total allocation of consideration. The following table presents details of our intangible assets, other than goodwill, as of December 31, 2011:



	Useful life	Gross		Accumulated amortization			Net
	(Years)	(In millions)
Intangible assets subject to amortization:
Brands	3 - 40	$	316.9	$	(179.0	)	$	137.9
Distribution rights	2 - 23	342.0		(234.0		)	108.0
Patents and technology and distribution channels	3 - 10	34.9		(28.9		)	6.0
Land use rights and other	2 - 42	6.5		(0.8		)	5.7
Intangible assets not subject to amortization:
Brands	Indefinite	3,322.4		—			3,322.4
Distribution networks	Indefinite	990.5		—			990.5
Other	Indefinite	15.5		—			15.5
Total		$	5,028.7	$	(442.7	)	$	4,586.0

The changes in the gross carrying amounts of intangibles from December 31, 2011, to June 30, 2012, are primarily due to the Acquisition. See Note 3, "Acquisition of StarBev" for further discussion. Changes are also driven by the impact of foreign exchange rates, as a significant amount of intangibles are denominated in foreign currencies.

Based on foreign exchange rates as of June 30, 2012, the following is our estimated amortization expense related to intangible assets for the next five years:



	Amount
	(In millions)
2012 - remaining	$	23.2
2013	$	46.4
2014	$	38.5
2015	$	36.0
2016	$	36.0

Amortization expense of intangible assets was $9.3 million and $10.5 million for the second quarter of 2012 and 2011, respectively, and $18.6 million and $20.3 million for the first half of 2012 and 2011, respectively.

We are required to perform goodwill and indefinite-lived intangible asset impairment tests on at least an annual basis and more frequently in certain circumstances. We performed the required annual impairment testing as of June 26, 2011, and determined that there were no impairments of goodwill or other indefinite-lived intangible assets. We are in process of performing our annual impairment testing as of July 1, 2012.

As of June 30, 2012, we had $753.9 million of goodwill and $315.9 million of indefinite-lived intangibles associated with our U.K. reporting unit and Carling brand, respectively, which originated from our acquisition of Coors Brewers Limited in 2002. Our annual impairment testing in 2011 revealed that the fair value of the U.K. reporting unit and the Carling brand was more than 25% and 175%, respectively, in excess of their carrying values. In recent quarters our U.K. business, along with other U.K. corporations across all industries, has been adversely impacted by the soft economy both in the U.K. and Europe. If this continues, a future impairment charge may be required.

Through our annual impairment testing in 2011, we determined that the fair value of our China reporting unit, included in MCI, was not significantly in excess of its carrying value. Since its inception, the performance of the Molson Coors Si'hai joint venture (which is included in our China reporting unit with our other operations in China) has not met our expectations due to delays in executing its business plans. As a result, the fair value of our China reporting unit only exceeded its carrying value by 4%. We have held ongoing negotiations with our joint venture partner intended to overcome these business difficulties and other issues affecting the joint venture. As part of the negotiations to resolve these issues with our partner, during the second quarter of 2012, we signed an agreement to acquire our partner's 49% noncontrolling interest in the joint venture. Since the execution of the agreement, there has been a lack of progress by our partner in timely satisfying the closing conditions, as well as delays and new obstacles in gaining government approval for the acquisition of the noncontrolling interest, including a court order in China which prevents our joint venture partner from transferring its equity interest to us. These developments, coupled with the impact of increased competitive pressures in China were the combined trigger to review the future cash flows for the reporting unit. The subsequent testing identified that the full amount of the goodwill was impaired resulting in a charge of $9.5 million in the second quarter of 2012. Additionally, in the second quarter of 2012, we recognized an impairment charge on the definite-lived brand and distribution rights intangible assets of $0.9 million. Both of these charges are classified as Special items in our Condensed Consolidated Statements of Operations. In addition, as a result of the recent developments, we believe there is a substantial likelihood the closing conditions in the agreement with our joint venture partner will not be satisfied, which will result in the closing of the purchase of our joint venture partner's equity interest not occurring on the terms contemplated by the agreement previously signed, or at all. In that scenario, we will consider other alternatives, which may require us to record further costs and potential incremental asset impairment charges in the future related to our China reporting unit.

Regarding definite-lived intangibles, we continuously monitor the performance of the underlying asset for potential triggering events suggesting an impairment review should be performed. No such triggering events were identified in the second quarter of 2012, except as noted above related to our China reporting unit.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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