Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]


	North America		Europe		Consolidated
Changes in Goodwill:	(In millions)
Balance as of December 31, 2019	$	6,146.6	$	1,484.8	$	7,631.4

Foreign currency translation	(5.4)		(1.9)		(7.3)
Balance as of September 30, 2020	$	6,141.2	$	1,482.9	$	7,624.1

The gross amount of goodwill totaled approximately $8.3 billion as of both September 30, 2020 and December 31, 2019. Accumulated impairment losses as of September 30, 2020 and December 31, 2019 totaled $664.5 million and $681.3 million, respectively, all of which was related to our North America segment.

The following table presents details of our intangible assets, other than goodwill, as of September 30, 2020:


	Useful life	Gross		Accumulated amortization		Net
	(Years)	(In millions)
Intangible assets subject to amortization:
Brands	10 - 50	$	5,011.2	$	(1,009.3)	$	4,001.9
License agreements and distribution rights	15 - 20	201.8		(94.1)		107.7
Other	3 - 40	124.4		(49.6)		74.8
Intangible assets not subject to amortization:
Brands	Indefinite	8,158.9		—		8,158.9
Distribution networks	Indefinite	759.5		—		759.5
Other	Indefinite	307.6		—		307.6
Total		$	14,563.4	$	(1,153.0)	$	13,410.4

The following table presents details of our intangible assets, other than goodwill, as of December 31, 2019:


	Useful life	Gross		Accumulated amortization		Net
	(Years)	(In millions)
Intangible assets subject to amortization:
Brands	10 - 50	$	5,036.3	$	(865.1)	$	4,171.2
License agreements and distribution rights	15 - 20	202.0		(90.6)		111.4
Other	3 - 40	124.0		(39.4)		84.6
Intangible assets not subject to amortization:
Brands	Indefinite	8,172.4		—		8,172.4
Distribution networks	Indefinite	778.8		—		778.8
Other	Indefinite	337.6		—		337.6
Total		$	14,651.1	$	(995.1)	$	13,656.0

The changes in the gross carrying amounts of intangible assets from December 31, 2019 to September 30, 2020 are primarily driven by the impact of foreign exchange rates, as a significant amount of intangible assets are denominated in foreign currencies, and, $30.0 million of other intangibles held for sale reclassified to other current assets, net as discussed in Note 5, "Special Items."

Based on foreign exchange rates as of September 30, 2020, the estimated future amortization expense of intangible assets is as follows:


Fiscal year	Amount
	(In millions)
2020 - remaining	$	54.0
2021	$	215.3
2022	$	209.9
2023	$	208.8
2024	$	208.8

Amortization expense of intangible assets was $55.4 million for both the three months ended September 30, 2020 and September 30, 2019, and $164.9 million and $166.0 million for the nine months ended September 30, 2020 and September 30, 2019, respectively. This expense is primarily presented within marketing, general and administrative expenses on the unaudited condensed consolidated statements of operations.

Reporting Unit Changes and Interim Impairment Testing

As of the date of completion of our 2019 impairment testing, the operations in each of the specific regions within our historical U.S., Canada, Europe and International segments were considered components based on the availability of discrete financial information and the regular review by segment management. We had further concluded that the components within the U.S., Canada and Europe segments each met the criteria of having similar economic characteristics and therefore we

previously aggregated these components into the U.S., Canada and Europe reporting units, respectively. Additionally, we previously determined that the components within our International segment did not meet the criteria for aggregation, and therefore, the operations of our India business constituted a separate reporting unit at the component level, however, the associated goodwill balance was fully impaired in the third quarter of 2019.

As discussed in Note 3, "Segment Reporting," effective January 1, 2020, we changed our management structure from a corporate center and four segments to two segments - North America and Europe. These structural changes included leadership re-alignment with a centralized North America leadership team, an integrated North American supply chain network, and centralized marketing and innovations functions including movement to a single brand manager and North America marketing strategy for our major brands. Additionally, as part of our leadership re-alignment, we moved from two separate U.S. and Canada segment managers, to a single North America segment manager, our President and Chief Executive Officer, who reviews discrete financial information only at the consolidated North America segment level. As a result of these changes, we re-evaluated our historical reporting unit conclusions and have consolidated our previously separate U.S. and Canada reporting units into a single North America reporting unit effective January 1, 2020. There were no changes to our existing Europe reporting unit, which was considered to be at risk of future impairment following the completion of our October 1, 2019 annual impairment testing.

We completed an interim impairment assessment for our U.S. and Canada reporting units as of January 1, 2020 immediately prior to the reporting unit change, as well as an impairment assessment of the combined North America reporting unit immediately after the change, and determined that no impairments existed. Additionally, as the changes resulted in the combination of our U.S. and Canada reporting units into a single North America reporting unit, no further reallocation of goodwill was required.

Additionally, as a result of the structural changes discussed above, including the centralization of the brand management and strategy for our Coors brands across North America, we have aggregated our Coors brand indefinite-lived intangible asset in the U.S. and Coors Light distribution agreement indefinite-lived intangible asset in Canada into a single unit of accounting for the purpose of testing for impairment, effective January 1, 2020. We completed an interim impairment assessment for each individual indefinite-lived intangible asset immediately prior to aggregation, and determined that no impairments existed.

We have further evaluated whether the effects of the coronavirus pandemic, and related impacts to the interest rate environment as well as market multiples, required an additional interim impairment assessment as of September 30, 2020. While factors are present that indicate that triggering events may exist, such as the decline in our market capitalization since the pandemic began in March 2020 combined with recent weakened financial performance, current circumstances do not indicate that it is more likely than not that the fair values of our reporting units or indefinite-lived intangible assets have fallen below their carrying values. Therefore, an interim impairment assessment was not performed as of September 30, 2020. However, we believe that the effects of the coronavirus pandemic may, depending on severity and duration, place our North America and Europe reporting units and certain of our indefinite-lived intangible assets at risk of future impairment. We will continue to monitor the length and severity of the impacts of the pandemic to our business, and if the duration is prolonged and the severity of its impacts continues or worsens, this may indicate the need to perform future interim impairment analyses that could result in material impairments.

2019 Interim Impairment Assessment

We identified a triggering event requiring an interim impairment assessment of the goodwill within our former Canada reporting unit, now part of our North America reporting unit, at the end of the third quarter of 2019, which resulted in a goodwill impairment loss of $668.3 million. The goodwill impairment trigger was the result of continued challenges and steepening declines within the Canadian beer industry reflected in the prolonged weakened performance of the Canada reporting unit through the third quarter of 2019.

Separately, during the third quarter of 2019 we also identified an interim triggering event related to goodwill within our former India reporting unit resulting from significant declines in performance in 2019, coupled with the continuation of challenging business conditions, which required us to perform an interim quantitative impairment analysis at the end of the third quarter of 2019. As a result of this interim analysis, we determined that the carrying value of the former India reporting unit exceeded its fair value, resulting in an aggregate impairment loss of $12.2 million related to the goodwill of our India reporting unit and a definite-lived brand intangible asset.

Key Assumptions

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. The key assumptions used to derive the estimated fair values of our reporting units and indefinite-lived intangible assets are discussed in Part II—Item 8 Financial Statements, Note 10, "Goodwill and Intangible Assets" in our Annual Report, and represent Level 3 measurements.

Based on known facts and circumstances, we evaluate and consider recent events and uncertain items, as well as related potential implications, as part of our annual and interim assessments and incorporate into the analyses as appropriate. These facts and circumstances are subject to change and may impact future analyses. For example, we continue to monitor the challenges within the beer industry for further weakening or additional systemic structural declines, as well as for adverse changes in macroeconomic conditions such as the coronavirus pandemic that could significantly impact our immediate and long-range results. Specifically, subsequent to the January 1, 2020 interim impairment assessments, the World Health Organization characterized the outbreak of the coronavirus disease as a global pandemic as further discussed in Note 1, “Basis of Presentation and Summary of Significant Accounting Policies.” Our business has been, and could continue to be, materially and adversely impacted by the coronavirus pandemic. The related weakening of economic conditions during a prolonged pandemic could lead to a material impairment as the duration and severity of the pandemic and resulting impacts to our financial projections are further understood. Additionally, we are monitoring the impacts the coronavirus pandemic has on the market inputs used in calculating our discount rates, including risk-free rates, equity premiums and our cost of debt, which could result in a meaningful change to our weighted-average cost of capital calculation, as well as the market multiples used in our impairment assessment. Furthermore, increased volatility in the equity and debt markets or other country specific factors, including, but not limited to, extended or future government intervention in response to the pandemic, could also result in a meaningful change to our weighted-average cost of capital calculation and other inputs used in our impairment assessment.

Separately, the Ontario government in Canada adopted a bill that, if enacted, could adversely impact the existing terms of the beer distribution and retail systems in the province, as further described in Note 12, "Commitments and Contingencies."

While historical performance and current expectations have resulted in fair values of our reporting units and indefinite-lived intangible assets equal to or in excess of carrying values, if our assumptions are not realized, it is possible that an impairment loss may need to be recorded in the future.

Definite-Lived Intangible Assets

Regarding definite-lived intangible assets, we continuously monitor the performance of the underlying assets for potential triggering events suggesting an impairment review should be performed. No such triggering events were identified in the first three quarters of 2020 that resulted in an impairment loss.