Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]



	U.S.		Canada			Europe			International			Consolidated
Changes in Goodwill:			(In millions)
As of December 31, 2018	$	5,928.5	$	856.6		$	1,469.4		$	6.3		$	8,260.8
Impairments	—		(668.3		)	—			(6.1		)	(674.4		)
Foreign currency translation	—		25.6			(62.6		)	(0.2		)	(37.2		)
As of September 30, 2019	$	5,928.5	$	213.9		$	1,406.8		$	—		$	7,549.2

Accumulated impairment losses related to our reporting units with remaining goodwill balances as of September 30, 2019 totals $668.3 million.

The following table presents details of our intangible assets, other than goodwill, as of September 30, 2019:



	Useful life	Gross		Accumulated amortization			Net
	(Years)	(In millions)
Intangible assets subject to amortization:
Brands	10 - 50	$	4,958.1	$	(801.7	)	$	4,156.4
License agreements and distribution rights	15 - 20	198.2		(86.9		)	111.3
Other	3 - 40	124.3		(36.1		)	88.2
Intangible assets not subject to amortization:
Brands	Indefinite	8,129.7		—			8,129.7
Distribution networks	Indefinite	764.0		—			764.0
Other	Indefinite	337.6		—			337.6
Total		$	14,511.9	$	(924.7	)	$	13,587.2

The following table presents details of our intangible assets, other than goodwill, as of December 31, 2018:



	Useful life	Gross		Accumulated amortization			Net
	(Years)	(In millions)
Intangible assets subject to amortization:
Brands	10 - 50	$	4,988.0	$	(682.4	)	$	4,305.6
License agreements and distribution rights	15 - 28	220.2		(95.7		)	124.5
Other	2 - 40	129.2		(32.2		)	97.0
Intangible assets not subject to amortization:
Brands	Indefinite	8,169.9		—			8,169.9
Distribution networks	Indefinite	741.8		—			741.8
Other	Indefinite	337.6		—			337.6
Total		$	14,586.7	$	(810.3	)	$	13,776.4

The changes in the gross carrying amounts of intangibles from December 31, 2018 to September 30, 2019 are driven, in part, by the impairment losses recognized during the quarter related to the Grolsch brand and distribution agreement definite-lived intangible assets discussed in Note 4, "Investments" and the brand intangible asset related to our India business discussed below, along with the impact of foreign exchange rates, as a significant amount of intangibles are denominated in foreign currencies.

Based on foreign exchange rates as of September 30, 2019, the estimated future amortization expense of intangible assets is as follows:



Fiscal year	Amount
	(In millions)
2019 - remaining	$	55.0
2020	$	218.9
2021	$	212.6
2022	$	207.9
2023	$	206.7

Amortization expense of intangible assets was $55.4 million and $55.8 million for the three months ended September 30, 2019 and September 30, 2018, respectively and $166.0 million and $168.6 million for the nine months ended September 30, 2019 and September 30, 2018, respectively. This expense is primarily presented within marketing, general and administrative expenses on the unaudited condensed consolidated statements of operations.

Interim Impairment Assessment

We identified a triggering event requiring an interim impairment assessment of the goodwill within our Canada 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. These performance headwinds have been countered, in part, by the benefit of the recent interest rate environment, which resulted in a decrease in the risk-free rate included in our current year discount rate calculations. Specifically, the discount rate used in developing our interim fair value estimate for the Canada reporting unit was 8.50%, as compared to 9.25% used as of the October 1, 2018 annual testing date. However, the performance declines and increased challenges within the beer industry in Canada, coupled with significant increases in cost inflation, volume deleverage, and resulting margin erosion, has had a material adverse impact on the expected future cash flows utilized in the valuation approaches for the Canada reporting unit, such that it was determined that the fair value of the reporting unit was more likely than not reduced below its carrying amount during the quarter. As a result of this triggering event, we performed an interim quantitative analysis, using a combination of discounted cash flow analyses and market-based approaches, consistent with our annual impairment testing, in which it was determined that the carrying value of the Canada reporting unit exceeded its fair value by $668.3 million.

We also evaluated the indefinite-lived and definite-lived intangible assets within our Canada reporting unit, prior to recording the goodwill impairment, and concluded that no impairments were required; however, the Coors Light distribution agreement indefinite-lived intangible asset is considered to be at risk of future impairment.

Separately, during the third quarter of 2019 we also identified an interim triggering event related to goodwill within our India reporting unit resulting from significant declines in performance in the current year, 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 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.

Annual Goodwill and Indefinite-Lived Intangible Impairment Testing

We previously completed our required annual goodwill and indefinite-lived intangible impairment testing as of October 1, 2018, the first day of our fourth quarter and concluded there were no impairments of goodwill within our reporting units or our indefinite-lived intangible assets. The fair value of the U.S., Europe and Canada reporting units were estimated at approximately 19%, 11% and 6% in excess of carrying value, respectively, as of the October 1, 2018 testing date. As a result, our Europe and Canada reporting units were considered at risk of impairment following the 2018 assessment. Ultimately, the risk associated with the Canada business culminated in a triggering event related to goodwill within our Canada reporting unit in the third quarter of 2019, as discussed above. Our Europe reporting unit, which remains at risk of impairment, did not have a triggering event identified during the third quarter and, along with our U.S. reporting unit and other indefinite-lived intangible assets, will be tested for impairment as of October 1, 2019, the first day of our fourth quarter.

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 intangibles are discussed above as well as 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. Separately, the Ontario government 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."

This alone or in combination with the potential realization of further weakened performance within the Canada reporting unit, beyond that considered in our assessments, could have a material adverse impact on the underlying cash flow assumptions used in developing our Canada reporting unit fair value estimates for the purpose of goodwill and indefinite-lived intangible asset impairment testing, which could result in a further goodwill impairment, or an impairment of our Coors Light distribution agreement indefinite-lived intangible asset in Canada.

While historical performance and current expectations have resulted in fair values of our U.S. and Europe reporting units and our indefinite-lived intangible assets 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 Intangibles

Regarding definite-lived intangibles, we continuously monitor the performance of the underlying assets for potential triggering events suggesting an impairment review should be performed. With the exception of the impairment losses related to the Grolsch brand and distribution agreement definite-lived intangible assets discussed in Note 4, "Investments" and the brand intangible asset related to our India business discussed above, no such triggering events were identified in the first three quarters of 2019 that resulted in an impairment.