MOLSON COORS BREWING CO, 10-K filed on 2/19/2010
Annual Report
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Per Share data
Year Ended
Dec. 26, 2009
Dec. 28, 2008
Dec. 30, 2007
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
Sales
$ 4,426.5 
$ 6,651.8 
$ 8,319.7 
Excise taxes
(1,394.1)
(1,877.5)
(2,129.1)
Net sales
3,032.4 
4,774.3 
6,190.6 
Cost of goods sold
(1,726.9)
(2,840.8)
(3,702.9)
Gross profit
1,305.5 
1,933.5 
2,487.7 
Marketing, general and administrative expenses
(900.8)
(1,333.2)
(1,734.4)
Special items, net
(32.7)
(133.9)
(112.2)
Equity income in MillerCoors
382.0 
155.6 
 
Operating income
754.0 
622.0 
641.1 
Other (expense) income, net
 
 
 
Interest expense
(96.6)
(119.1)
(134.9)
Interest income
10.7 
17.3 
26.6 
Debt extinguishment costs
 
(12.4)
(24.5)
Other income (expense), net, includes $46.0 gain in 2009 on related party transaction, see Note 4.
49.4 
(8.4)
17.7 
Total other expense, net
(36.5)
(122.6)
(115.1)
Income from continuing operations before income taxes
717.5 
499.4 
526.0 
Income tax (benefit) expense
14.7 
(96.4)
(1.0)
Income from continuing operations
732.2 
403.0 
525.0 
Loss from discontinued operations, net of tax
(9.0)
(12.1)
(17.7)
Net income
723.2 
390.9 
507.3 
Less: Net income attributable to noncontrolling interests
(2.8)
(12.2)
(15.3)
Net income attributable to Molson Coors Brewing Company
720.4 
378.7 
492.0 
Basic income (loss) per share:
 
 
 
From continuing operations (in dollars per share)
3.96 
2.14 
2.85 
From discontinued operations (in dollars per share)
(0.05)
(0.07)
(0.10)
Basic net income per share (in dollars per share)
3.91 
2.07 
2.75 
Diluted income (loss) per share:
 
 
 
From continuing operations (in dollars per share)
3.92 
2.11 
2.81 
From discontinued operations (in dollars per share)
(0.05)
(0.07)
(0.10)
Diluted net income per share (in dollars per share)
3.87 
2.04 
2.71 
Weighted average shares - basic (in shares)
184.4 
182.6 
178.7 
Weighted average shares - diluted (in shares)
185.9 
185.5 
181.4 
Amounts attributable to MCBC
 
 
 
Income from continuing operations, net of tax
729.4 
390.8 
509.7 
Loss from discontinued operations, net of tax
(9.0)
(12.1)
(17.7)
Net income attributable to Molson Coors Brewing Company
$ 720.4 
$ 378.7 
$ 492.0 
CONSOLIDATED STATEMENTS OF OPERATIONS (PARENTHETICAL) (USD $)
In Millions
Year Ended
Dec. 26, 2009
CONSOLIDATED STATEMENTS OF OPERATIONS
 
Other income (expense), gain on related party transaction
$ 46.0 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions
Dec. 26, 2009
Dec. 28, 2008
Assets
 
 
Current assets:
 
 
Cash and cash equivalents
$ 734.2 
$ 216.2 
Accounts and notes receivable:
 
 
Trade, less allowance for doubtful accounts of $10.1 and $7.9, respectively
513.8 
432.9 
Affiliates
52.9 
39.6 
Current notes receivable and other receivables, less allowance for doubtful accounts of $2.8 and $3.3, respectively
150.5 
162.9 
Inventories:
 
 
Finished
111.1 
89.1 
In process
18.3 
13.4 
Raw materials
43.6 
43.3 
Packaging materials
63.2 
46.3 
Total inventories
236.2 
192.1 
Maintenance and operating supplies, less allowance for obsolete supplies of $4.1 and $4.6, respectively
17.7 
14.8 
Other current assets, less allowance for advertising supplies
47.6 
47.1 
Discontinued operations
9.9 
1.5 
Total current assets
1,762.8 
1,107.1 
Properties, less accumulated depreciation of $843.4 and $673.5, respectively
1,292.5 
1,301.9 
Goodwill
1,475.0 
1,298.0 
Other intangibles, less accumulated amortization of $356.8 and $274.9, respectively
4,534.7 
3,923.4 
Investment in MillerCoors
2,613.6 
2,418.7 
Deferred tax assets
177.9 
75.3 
Notes receivable, less allowance for doubtful accounts of $7.3 and $8.1, respectively
48.7 
51.8 
Other assets
115.9 
203.4 
Discontinued operations
 
7.0 
Total assets
12,021.1 
10,386.6 
Liabilities and equity
 
 
Current liabilities:
 
 
Accounts payable:
 
 
Trade
193.4 
152.8 
Affiliates
16.9 
17.7 
Accrued expenses and other liabilities
745.0 
690.8 
Deferred tax liabilities
167.1 
107.8 
Current portion of long-term debt
300.3 
0.1 
Discontinued operations
158.2 
16.9 
Total current liabilities
1,580.9 
986.1 
Long-term debt
1,412.7 
1,752.0 
Pension and post-retirement benefits
823.8 
581.0 
Derivative hedging instruments
374.2 
225.9 
Deferred tax liabilities
468.0 
399.4 
Unrecognized tax benefits
65.0 
230.4 
Other liabilities
185.0 
47.6 
Discontinued operations
18.7 
124.8 
Total liabilities
4,928.3 
4,347.2 
Commitments and contingencies (Note 21)
 
 
Molson Coors Brewing Company stockholders' equity
 
 
Capital stock:
 
 
Preferred stock, non-voting, no par value (authorized: 25.0 shares; none issued)
0.0 
0.0 
Paid-in capital
3,441.5 
3,334.6 
Retained earnings
2,734.9 
2,184.9 
Accumulated other comprehensive (loss) income
20.7 
(371.4)
Total Molson Coors Brewing Company stockholders' equity
7,079.6 
6,055.4 
Noncontrolling interests
13.2 
(16.0)
Total equity
7,092.8 
6,039.4 
Total liabilities and equity
12,021.1 
10,386.6 
Class A Common Stock
 
 
Capital stock:
 
 
Common stock
0.0 
Class B Common Stock
 
 
Capital stock:
 
 
Common stock
1.6 
1.6 
Class A Exchangeable Stock
 
 
Capital stock:
 
 
Exchangeable shares
119.1 
119.4 
Class B Exchangeable Stock
 
 
Capital stock:
 
 
Exchangeable shares
$ 761.8 
$ 786.3 
CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) (USD $)
In Millions, except Per Share data
Dec. 26, 2009
Dec. 28, 2008
Trade receivables, allowance for doubtful accounts
$ 10.1 
$ 7.9 
Current notes receivable and other receivables, allowance for doubtful accounts
2.8 
3.3 
Maintenance and operating supplies, allowance for obsolete supplies
4.1 
4.6 
Properties, accumulated depreciation
843.4 
673.5 
Other intangibles, accumulated amortization
356.8 
274.9 
Notes receivable, allowance for doubtful accounts
7.3 
8.1 
Preferred stock, non-voting, no par value (in dollars per share)
Preferred stock, non-voting, authorized (in shares)
25.0 
25.0 
Preferred stock, non-voting, issued (in shares)
0.0 
0.0 
Class A Common Stock
 
 
Common stock, par value (in dollars per share)
0.01 
0.01 
Common stock, authorized (in shares)
500.0 
500.0 
Common stock, issued (in shares)
2.6 
2.7 
Common stock, outstanding (in shares)
2.6 
2.7 
Class B Common Stock
 
 
Common stock, par value (in dollars per share)
0.01 
0.01 
Common stock, authorized (in shares)
500.0 
500.0 
Common stock, issued (in shares)
159.4 
157.1 
Common stock, outstanding (in shares)
159.4 
157.1 
Class A Exchangeable Stock
 
 
Exchangeable shares, issued (in shares)
3.2 
3.2 
Exchangeable shares, outstanding (in shares)
3.2 
3.2 
Class B Exchangeable Stock
 
 
Exchangeable shares, issued (in shares)
20.2 
20.9 
Exchangeable shares, outstanding (in shares)
20.2 
20.9 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions
Year Ended
Dec. 26, 2009
Dec. 28, 2008
Dec. 30, 2007
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
 
Cash flows from operating activities:
 
 
 
Net income
$ 723.2 
$ 390.9 
$ 507.3 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
187.4 
273.4 
345.8 
Amortization of debt issuance costs and discounts
19.4 
17.1 
13.2 
Share-based compensation
22.8 
55.9 
37.4 
(Gain) loss on sale or impairment of properties and intangibles
(38.1)
39.2 
49.6 
Excess tax benefits from share-based compensation
(21.7)
(8.3)
(28.1)
Deferred income taxes
127.8 
78.6 
(101.1)
(Gain) loss on foreign currency fluctuations and derivative instruments
(0.1)
(1.5)
7.1 
Equity income in MillerCoors
(382.0)
(155.6)
 
Distributions from MillerCoors
401.1 
136.5 
 
Equity in net income of other unconsolidated affiliates
(6.9)
(24.1)
(6.6)
Distributions from other unconsolidated affiliates
16.6 
7.5 
9.3 
Change in current assets and liabilities (net of assets acquired and liabilities assumed in business combinations) and other:
 
 
 
Receivables
(63.3)
(128.2)
(47.7)
Inventories
(11.7)
39.3 
(23.1)
Payables
21.0 
(10.5)
(27.5)
Other assets and other liabilities
(180.3)
(310.8)
(137.2)
Operating cash flows of discontinued operations
9.0 
12.1 
17.6 
Net cash provided by operating activities
824.2 
411.5 
616.0 
Cash flows from investing activities:
 
 
 
Additions to properties and intangible assets
(124.7)
(230.5)
(428.3)
Proceeds from sales of businesses and other assets
58.0 
38.8 
38.1 
Proceeds from sales (purchases) of investment securities, net
 
22.8 
(22.8)
Acquisition of businesses, net of cash acquired
(41.7)
 
(26.7)
Investment in MillerCoors
(514.5)
(84.3)
 
Return of capital from Miller Coors
448.2 
 
 
Deconsolidation of Brewers' Retail, Inc.
(26.1)
 
 
Investment in and advances to an unconsolidated affiliate
 
(6.9)
 
Trade loan repayments from customers
32.1 
25.8 
32.3 
Trade loans advanced to customers
(25.5)
(31.5)
(32.9)
Other
0.1 
(3.7)
1.2 
Net cash used in investing activities
(194.1)
(269.5)
(439.1)
Cash flows from financing activities:
 
 
 
Exercise of stock options under equity compensation plans
43.1 
59.0 
209.5 
Excess tax benefits from share-based compensation
21.7 
8.3 
28.1 
Dividends paid
(170.4)
(139.1)
(114.8)
Dividends paid to noncontrolling interest holders
(2.9)
(20.3)
(17.0)
Proceeds from issuances of long-term debt
 
16.0 
 
Proceeds from issuance of convertible debt
 
 
575.0 
Debt issuance costs
 
 
(10.2)
Sale of warrants
 
 
57.0 
Purchase of call options
 
 
(106.7)
Payments on long-term debt and capital lease obligations
(0.4)
(181.3)
(631.0)
Proceeds from short-term borrowings
14.7 
54.5 
179.2 
Payments on short-term borrowings
(17.0)
(47.3)
(180.5)
Net proceeds from (payments on) revolving credit facilities
 
1.1 
(6.1)
Change in overdraft balances and other
(6.0)
(29.8)
20.7 
Proceeds from settlements of debt-related derivatives
 
12.0 
5.2 
Net cash (used in) provided by financing activities
(117.2)
(266.9)
8.4 
Cash and cash equivalents:
 
 
 
Net increase (decrease) in cash and cash equivalents
512.9 
(124.9)
185.3 
Effect of foreign exchange rate changes on cash and cash equivalents
5.1 
(35.9)
9.5 
Balance at beginning of year
216.2 
 
182.2 
Balance at end of year
$ 734.2 
$ 216.2 
$ 377.0 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND NONCONTROLLING INTEREST (USD $)
In Millions
Class A Common Stock | Common stock issued
Class B Common Stock | Common stock issued
Comprehensive Income
Retained earnings
Accumulated other comprehensive income (loss)
Paid-in-capital
Non controlling Interest
Class A Exchangeable Stock | Exchangeable shares issued
Class B Exchangeable Stock | Exchangeable shares issued
Total
1/1/2007 - 12/30/2007
 
 
 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
Balance
$ 1.3 
$ 1.3 
 
$ 1,673.5 
$ 333.9 
$ 2,389.9 
$ 28.6 
$ 124.7 
$ 1,311.0 
$ 5,862.9 
Exchange of shares
0.1 
0.1 
 
 
 
365.5 
 
0.1 
(365.7)
 
Sale of warrants
 
 
 
 
 
57.0 
 
 
 
57.0 
Purchase of call options
 
 
 
 
 
(66.0)
 
 
 
(66.0)
Shares issued under equity compensation plan
0.1 
0.1 
 
 
 
238.7 
 
 
 
238.8 
Amortization of stock based compensation
 
 
 
 
 
37.4 
 
 
 
37.4 
Acquisition of a business
 
 
 
 
 
 
 
 
 
 
Deconsolidation of BRI
 
 
 
 
 
 
 
 
 
 
Adjustment to adopt convertible debt guidance, see Note 2
 
 
 
 
 
64.2 
 
 
 
64.2 
Adjustment to adopt guidance to account for uncertainty in income taxes, see Note 2
 
 
 
(105.4)
 
 
 
 
 
(105.4)
Contribution to MillerCoors
 
 
 
 
 
 
 
 
 
 
Comprehensive income:
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
 
507.3 
492.0 
 
 
15.3 
 
 
507.3 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
 
783.2 
 
783.2 
 
 
 
 
783.2 
Unrealized gain (loss) on derivative instruments, net
 
 
(3.4)
 
(3.4)
 
 
 
 
(3.4)
Realized gain (loss) on derivative instruments reclassified to net income, net
 
 
2.9 
 
2.9 
 
 
 
 
2.9 
Ownership share of equity method investees other comprehensive income
 
 
 
 
 
 
 
 
 
 
Pension and other postretirement benefit adjustments
 
 
5.2 
 
6.3 
 
(1.1)
 
 
5.2 
Other comprehensive income (loss)
 
 
1,295.2 
 
 
 
 
 
 
1,295.2 
Dividends declared and paid
 
 
 
(114.8)
 
 
(17.0)
 
 
(131.8)
Balance
1.5 
1.5 
 
1,945.3 
1,122.9 
3,086.7 
25.8 
124.8 
945.3 
7,252.3 
12/31/2007 - 12/28/2008
 
 
 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
Balance
1.5 
1.5 
 
1,945.3 
1,122.9 
3,086.7 
25.8 
124.8 
945.3 
7,252.3 
Exchange of shares
0.1 
0.1 
 
 
 
164.3 
 
(5.4)
(159.0)
 
Sale of warrants
 
 
 
 
 
 
 
 
 
 
Purchase of call options
 
 
 
 
 
 
 
 
 
 
Shares issued under equity compensation plan
 
 
 
 
 
24.6 
 
 
 
24.6 
Amortization of stock based compensation
 
 
 
 
 
59.0 
 
 
 
59.0 
Acquisition of a business
 
 
 
 
 
 
 
 
 
 
Deconsolidation of BRI
 
 
 
 
 
 
 
 
 
 
Adjustment to adopt convertible debt guidance, see Note 2
 
 
 
 
 
 
 
 
 
 
Adjustment to adopt guidance to account for uncertainty in income taxes, see Note 2
 
 
 
 
 
 
 
 
 
 
Contribution to MillerCoors
 
 
 
 
134.5 
 
(26.3)
 
 
108.2 
Comprehensive income:
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
 
390.9 
378.7 
 
 
12.2 
 
 
390.9 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
 
(1,234.7)
 
(1,234.7)
 
 
 
 
(1,234.7)
Unrealized gain (loss) on derivative instruments, net
 
 
49.0 
 
49.0 
 
 
 
 
49.0 
Realized gain (loss) on derivative instruments reclassified to net income, net
 
 
3.9 
 
3.9 
 
 
 
 
3.9 
Ownership share of equity method investees other comprehensive income
 
 
(211.2)
 
(211.2)
 
 
 
 
(211.2)
Pension and other postretirement benefit adjustments
 
 
(243.2)
 
(235.8)
 
(7.4)
 
 
(243.2)
Other comprehensive income (loss)
 
 
(1,245.3)
 
 
 
 
 
 
(1,245.3)
Dividends declared and paid
 
 
 
(139.1)
 
 
(20.3)
 
 
(159.4)
Balance
1.6 
1.6 
 
2,184.9 
(371.4)
3,334.6 
(16.0)
119.4 
786.3 
6,039.4 
12/29/2008 - 12/26/2009
 
 
 
 
 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
Balance
 
 
 
2,184.9 
(371.4)
3,334.6 
(16.0)
119.4 
786.3 
6,039.4 
Exchange of shares
 
 
 
 
 
24.8 
 
(0.3)
(24.5)
 
Sale of warrants
 
 
 
 
 
 
 
 
 
 
Purchase of call options
 
 
 
 
 
 
 
 
 
 
Shares issued under equity compensation plan
 
 
 
 
 
61.0 
 
 
 
61.0 
Amortization of stock based compensation
 
 
 
 
 
21.1 
 
 
 
21.1 
Acquisition of a business
 
 
 
 
 
 
9.6 
 
 
9.6 
Deconsolidation of BRI
 
 
 
 
 
 
(5.7)
 
 
(5.7)
Adjustment to adopt convertible debt guidance, see Note 2
 
 
 
 
 
 
 
 
 
 
Adjustment to adopt guidance to account for uncertainty in income taxes, see Note 2
 
 
 
 
 
 
 
 
 
 
Contribution to MillerCoors
 
 
 
 
 
 
 
 
 
 
Comprehensive income:
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
 
723.2 
720.4 
 
 
2.8 
 
 
723.2 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
 
614.7 
 
614.7 
 
 
 
 
614.7 
Unrealized gain (loss) on derivative instruments, net
 
 
(28.7)
 
(28.7)
 
 
 
 
(28.7)
Realized gain (loss) on derivative instruments reclassified to net income, net
 
 
(10.6)
 
(10.6)
 
 
 
 
(10.6)
Ownership share of equity method investees other comprehensive income
 
 
56.7 
 
56.7 
 
 
 
 
56.7 
Pension and other postretirement benefit adjustments
 
 
(214.6)
 
(240.0)
 
25.4 
 
 
(214.6)
Other comprehensive income (loss)
 
 
1,140.7 
 
 
 
 
 
 
1,140.7 
Dividends declared and paid
 
 
 
(170.4)
 
 
(2.9)
 
 
(173.3)
Balance
$ 0.0 
$ 1.6 
 
$ 2,734.9 
$ 20.7 
$ 3,441.5 
$ 13.2 
$ 119.1 
$ 761.8 
$ 7,092.8 
Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Summary of Significant Accounting Policies

1. Basis of Presentation and Summary of Significant Accounting Policies

        Unless otherwise noted in this report, any description of "we", "us" or "our" 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.") until June 30, 2008 when MCBC and SABMiller plc ("SABMiller") combined the U.S. and Puerto Rico operations of their respective subsidiaries, CBC and Miller Brewing Company ("Miller") and the results and financial position of U.S. operations, which had historically comprised substantially all of our U.S. reporting segment were, in all material respects, deconsolidated from MCBC prospectively upon formation of MillerCoors LLC ("MillerCoors"), see Note 4, "Equity Investments"; Molson Coors Brewing Company (UK) Limited ("MCBC-UK"), formerly referred to as Coors Brewers Limited ("CBL"), operating in the United Kingdom ("U.K."); Molson Coors Canada ("MCC"), formerly referred to as Molson Canada ("Molson"), operating in Canada; and our other corporate entities. Any reference to "Coors" means the Adolph Coors Company prior to the 2005 merger with Molson Inc. (the "Merger"). Any reference to Molson Inc. means MCC 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 ("USD" or "$").

Our Fiscal Year

        In 2009, our fiscal year is a 52 week period ending on the last Saturday in December. Previously, our fiscal year was a 52 or 53 week period ending on the last Sunday in December. The fiscal years ended December 26, 2009, December 28, 2008, and December 30, 2007, were 52 week periods.

Principles of Consolidation

        Our consolidated financial statements include our accounts and our majority-owned and controlled domestic and foreign subsidiaries, as well as certain variable interest entities. All significant intercompany accounts and transactions have been eliminated in consolidation.

Reporting Periods Presented

        The results from Brewers' Retail, Inc. ("BRI"), a consolidated subsidiary through February 28, 2009, are reported one month in arrears. Due to a change in our ownership level of BRI, we deconsolidated this entity from our financial statements as of March 1, 2009, and began to prospectively account for it under the equity method of accounting. See Note 4, "Equity Method Investments" for further information.

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 used to determine certain amounts that affect the financial statements 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 and Retrospective Applications

        During the first quarter of 2009, we adopted new pronouncements related to noncontrolling interests in consolidated financial statements and accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement), both of which required retrospective applications. See discussions in Note 2, "New Accounting Pronouncements." In addition, certain prior period amounts have been reclassified to conform to the current period presentation.

Revenue Recognition

        Depending upon the method of distribution, revenue is recognized when the significant risks and rewards of ownership are transferred to the customer or distributor, which is either at the time of shipment to distributors or upon delivery of product to retail customers.

        In the United Kingdom, excise taxes are included in the purchase price we pay the vendor on beverages for the factored brands business purchased from third parties for resale, and are included in our net sales and cost of goods sold when ultimately sold.

        The cost of various programs, such as price promotions, rebates and coupon programs are treated as a reduction of sales. Sales of products are for cash or otherwise agreed upon credit terms. Revenue is stated net of incentives, discounts and returns.

        Outside of unusual circumstances, if product is returned, it is generally for failure to meet our quality standards, not caused by customer actions. Products that do not meet our high quality standards are returned and destroyed. We do not have standard terms that permit return of product. We estimate the costs for product returns and record those costs in cost of goods sold each period. We reduce revenue at the value of the original sales price in the period that the product is returned.

Cost of Goods Sold

        Our cost of goods sold includes beer raw materials, packaging materials (including promotional packaging), manufacturing costs, plant administrative support and overheads, inbound and outbound freight charges, purchasing and receiving costs, inspection costs, warehousing, and internal transfer costs.

Equity Method Accounting

        We generally apply the equity method of accounting to 20% to 50% owned investments where we exercise significant influence, except for certain investments that must be consolidated as variable interest entities. Equity method investments include our equity ownership in MillerCoors in the U.S., Tradeteam (a transportation and logistics services company in the U.K.), and Modelo Molson Imports, L.P., BRI, Brewers' Distributor Ltd. ("BDL") and our former interests in the Montréal Canadiens and House of Blues, all in Canada. See Note 4, "Equity Investments."

        There are no related parties that own interests in our equity method investments as of December 26, 2009.

Marketing, General and Administrative Expenses

        Our marketing, general and administrative expenses consist of advertising, sales costs, non-manufacturing administrative, and overhead costs. The creative portion of our advertising activities is expensed as incurred. Production costs of advertising and promotional materials are generally expensed when the advertising is first run. Advertising expense was $349.3 million, $610.0 million, and $858.1 million for years 2009, 2008, and 2007, respectively. Prepaid advertising costs of $13.9 million and $8.1 million, were included in other current assets in the Consolidated Balance Sheets at December 26, 2009, and December 28, 2008, respectively.

Trade Loans

        MCBC-UK extends loans to a portion of the retail outlets that sell our brands. Some of these loans provide for no interest to be payable, and others provide for payment of a below market interest rate. In return, the retail outlets receive smaller discounts on beer and other beverage products purchased from us, with the net result being MCBC-UK attaining a market return on the outstanding loan balance. We therefore reclassify a portion of beer revenue into interest income to reflect a market rate of interest on these loans. In 2009, 2008 and 2007, these amounts were $8.3 million, $10.7 million and $11.5 million, respectively. This interest income is included in the U.K. segment since it is related solely to MCBC-UK.

        Trade loan receivables are classified as either other receivables or non-current notes receivable in our Consolidated Balance Sheets. At December 26, 2009, and December 28, 2008, total loans outstanding, net of allowances, were $62.5 million and $68.8 million, respectively.

Allowance for Doubtful Accounts

        Canada's distribution channels are highly regulated by provincial regulation and experience few collectability problems. However, MCC does have direct sales to retail customers for which an allowance is recorded based upon expected collectability and historical experience.

        Because the majority of MCBC-UK sales are directly to retail customers, and because of the industry practice of making trade loans to customers, our ability to manage credit risk in this business is critical. At MCBC-UK, we provide allowances for uncollectible trade receivables and trade loans from our customers. Generally, provisions are recorded to cover the full exposure to a specific customer at the point the account is considered uncollectible. Accounts are typically deemed uncollectible based on the sales channel, after becoming either one hundred twenty days or one hundred eighty days overdue. We record the provision in marketing, general and administrative expenses. Provisions are reversed upon recoverability of the account.

        We are not able to predict changes in financial condition of our customers, and if circumstances related to our customers deteriorate, our estimates of the recoverability of our trade receivables and trade loans could be materially affected.

Inventories

        Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out ("FIFO") method. Prior to the formation of MillerCoors, substantially all of the inventories in the United States were determined on the last-in, first-out ("LIFO") method.

        We regularly assess the shelf-life of our inventories and reserve for those inventories when it becomes apparent the product will not be sold within our freshness specifications. There were no allowances for obsolete finished goods or packaging materials at December 26, 2009 or at December 28, 2008.

Fair Value of Financial Instruments

        The carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value as recorded due to the short-term maturity of these instruments. In addition, the carrying amounts of our trade loan receivables approximate fair value. The fair value of long-term obligations for derivatives was estimated by discounting the future cash flows using market interest rates, adjusted for non-performance credit risk associated with our counterparties (assets) or with MCBC (liabilities). See Note 19, "Derivative Instruments and Hedging Activities." Based on current market rates for similar instruments, the fair value of long-term debt is presented in Note 14, "Debt."

        The Financial Accounting Standards Board ("FASB") issued guidance for fair value establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach). We utilize a combination of market and income approaches to value derivative instruments, and use an income approach for valuing our indemnity obligations. Our financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels of the hierarchy are as follows:

        The three levels of the hierarchy are as follows:

        Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.

        Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are less active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

        Level 3—Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability. We develop these inputs based on the best information available, including our own data.

Foreign Currency Translation

        Assets and liabilities recorded in foreign currencies that are the functional currencies for the respective operations are translated at the prevailing exchange rate at the balance sheet date. Revenue and expenses are translated at the average exchange rates during the period. Translation adjustments resulting from this process are reported as a separate component of other comprehensive income.

Factored Brands

        In addition to supplying our own brands, MCBC-UK sells other beverage companies' products to on-premise customers to provide them with a full range of products for their retail outlets. These factored brand sales are included in our financial results, but the related volume is not included in our reported sales volumes. We refer to this as the "factored brand business." In the factored brand business, MCBC-UK normally purchases factored brand inventory, taking orders from customers for such brands, and invoicing customers for the product and related costs of delivery. In accordance with guidance pertaining to reporting revenue gross as a principal versus net as an agent, sales under the factored brands are generally reported on a gross income basis.

Goodwill and Other Asset Valuation

        We evaluate the carrying value of our goodwill and indefinite-lived intangible assets for impairment at least annually, and we evaluate our other tangible and intangible assets for impairment when there is evidence that certain events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Significant judgments and assumptions are required in such impairment evaluations. See Note 13, "Goodwill and Intangible Assets."

Statement of Cash Flows Data

        Cash equivalents represent highly liquid investments with original maturities of 90 days or less. The carrying value of these investments approximates their fair value. The following presents our supplemental cash flow information:

 
  For the fiscal years ended  
 
  December 26,
2009
  December 28,
2008
  December 30,
2007
 
 
  (In millions)
 

Cash paid for interest(1)

  $ 76.0   $ 84.2   $ 104.4  

Cash paid for taxes

  $ 50.9   $ 71.5   $ 77.6  

Receipt of note upon sale of property

  $   $ 2.8   $  

Issuance of restricted stock, net of forfeitures

  $ 8.9   $ 28.2   $ 11.1  

Issuance of performance shares, net of forfeitures

  $ 14.1   $ 0.9   $ 1.6  

(1)
2008 and 2007 includes cash paid for interest of $3.0 and $6.2 million, respectively associated with debt extinguishment costs.

        See Note 4, "Equity Investments," for a summary of assets and liabilities contributed to MillerCoors, the formation of which was a significant non-cash activity in 2008.

New Accounting Pronouncements
New Accounting Pronouncements

2. New Accounting Pronouncements

Adoption of New Accounting Pronouncements

Accounting for Uncertainty in Income Taxes

        On January 1, 2007, we adopted the FASB's guidance related to accounting for uncertainty in income taxes. This guidance clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements by prescribing a two-step process to determine the amount of tax benefit to be recognized. However, 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. The cumulative effect of applying the new requirement has been recorded as a reduction to the beginning balance of retained earnings as of January 1, 2007 in the amount of $105.4 million. See Note 8, "Income Tax," for further discussion related to income taxes

Business Combinations

        In December 2007, the FASB issued authoritative guidance for business combinations, which establishes principles and requirements for the manner in which the acquirer in a business combination (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree, (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. In addition to new financial statement disclosures, this guidance also changes the accounting treatment for certain specific items, including the expensing of acquisition costs and restructuring costs associated with a business combination, and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date which generally affects income tax expense. This guidance applies prospectively to business combinations for which the acquisition date is on or after December 29, 2008, with the exception of the accounting for valuation allowances on deferred tax assets and acquired tax contingencies, for which the adoption is retrospective. The adoption of this guidance did not have a significant impact on the determination or reporting of our financial results.

Noncontrolling Interests

        In December 2007, the FASB issued authoritative guidance related to noncontrolling interests in consolidated financial statements. This guidance requires the recognition of a noncontrolling interest (previously referred to as minority interest) as a component of equity in the consolidated financial statements and separate from the parent's equity. The amount of net income attributable to the noncontrolling interest is included in consolidated net income in the consolidated statement of operations. It also amends existing guidance to be consistent with the revised guidance for business combinations discussed above, including procedures associated with the deconsolidation of a subsidiary. As such, our adoption of this guidance on December 28, 2008 impacted the accounting for the deconsolidation of BRI in the first quarter of 2009. Changes to noncontrolling interests reflected in total equity during 2009 resulted from $2.8 million of net earnings, establishment of the non-controlling interest in Cobra Beer Partnership Ltd of $9.6 million, and the effects of deconsolidating BRI ($19.7 million). Changes to the individual components of accumulated other comprehensive income attributable to noncontrolling interests were insignificant. See Note 6 "Variable Interest Entities" for further discussion. This guidance also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest.

Accounting for Convertible Debt Instruments

        In May 2008, the FASB issued authoritative guidance related to accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) that applies to all convertible debt instruments that have a "net settlement feature", which means that such convertible debt instruments, by their terms, may be settled either wholly or partially in cash upon conversion. This guidance requires issuers of convertible debt instruments that may be settled wholly or partially in cash upon conversion to separately account for the liability and equity components in a manner reflective of the issuers' nonconvertible debt borrowing rate. The Company retrospectively adopted this guidance on December 29, 2008, impacting historical accounting for our 2007 2.5% Convertible Senior Notes due July 30, 2013 ("Convertible Senior Notes"). See further discussion in Note 14, "Debt."

Subsequent Events Treatment

        In May 2009, the FASB issued authoritative guidance related to subsequent events, which formalizes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this guidance sets forth: (i) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. For the year ended December 26, 2009, subsequent events were evaluated through February 19, 2010, the date the financial statements were issued.

New Accounting Pronouncements Not Yet Adopted

Consolidation of Variable Interest Entities

        In June 2009, the FASB issued authoritative guidance related to the consolidation of variable interest entities, which requires an enterprise to determine whether its variable interest or interests give it a controlling financial interest. The primary beneficiary of a variable interest entity is the enterprise that has both (1) the power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance, and (2) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. This amendment also requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity requiring consolidation. The guidance is effective for our first quarter ending March 27, 2010. We are currently evaluating the impact that this guidance may have on the determination or reporting of our financial results.

Segment Reporting
Segment Reporting

3. Segment Reporting

        Our reporting segments are based on the key geographic regions in which we operate, which are the basis on which our chief operating decision maker evaluates the performance of the business. The Company operates in the reporting segments listed below.

Reportable segments

Canada

        The Canada segment consists of our production, marketing and sales of the Molson family of brands, Coors Light and other brands, principally in Canada; BRI, our joint venture arrangement related to the distribution and retail sale of beer in Ontario and BDL, our joint venture arrangement related to the distribution of beer in the western provinces, both accounted for as equity method investments. The Canada segment also includes our equity interest in Modelo Molson Imports, L.P ("MMI").

        We have an agreement with Heineken N.V. that grants us the right to import, market, and sell Heineken products throughout Canada and with Miller Brewing Co., a subsidiary of SABMiller, to brew, market, and sell several Miller brands, and distribute and sell imported Miller brands. We also have the right to contract brew and package Asahi for the U.S. market.

United States (U.S.)

        As discussed in Note 1, "Basis of Presentation and Summary of Significant Accounting Policies," effective July 1, 2008, MillerCoors LLC ("MillerCoors") began operations. The results and financial position of our U.S. segment operations were deconsolidated upon contribution to the joint venture, and our interest in MillerCoors is being accounted for and reported by us under the equity method of accounting. MCBC's equity investment in MillerCoors will represent our U.S. segment going forward.

United Kingdom (U.K.)

        The U.K. segment consists of our production, marketing and sales of the MCBC-UK brands (the largest of which is Carling), principally in the U.K. and the Republic of Ireland; our consolidated joint venture arrangement relating to the production and distribution of the Grolsch brands in the U.K. and the Republic of Ireland; and our equity method joint venture arrangement ("Tradeteam") for the physical distribution of products throughout Great Britain.

Non-reportable segment and other business activities

Molson Coors International ("MCI") and Corporate

        MCI includes results of operations in developing markets around the world, including Asia, Mexico, the Caribbean (not including Puerto Rico) and continental Europe. 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 relate to worldwide administrative functions, such as corporate affairs, legal, human resources, accounting, treasury, insurance and risk management. Corporate also includes certain royalty income and administrative costs related to the management of intellectual property.

Summarized financial information

        No single customer accounted for more than 10% of our sales. Net sales represent sales to third party external customers. Inter-segment sales revenues other than sales to MillerCoors are insignificant and eliminated in consolidation.

        The following tables represent consolidated net sales, consolidated interest expense, consolidated interest income, and reconciliations of amount shown as income (loss) from continuing operations before income taxes to income from continuing operations attributable to MCBC.

 
  Year ended December 26, 2009  
 
  Canada   U.S.   U.K.   MCI and
Corporate
  Consolidated  
 
  (In millions)
 

Net sales

  $ 1,732.3   $   $ 1,226.2   $ 73.9   $ 3,032.4  

Interest expense

                (96.6 )   (96.6 )

Interest income

            8.3     2.4     10.7  

Income (loss) from continuing operations before income taxes

  $ 462.6   $ 382.0   $ 90.8   $ (217.9 ) $ 717.5  

Income tax benefit

                            14.7  
                               

Income from continuing operations

                            732.2  

Net income attributable to noncontrolling interests

                            (2.8 )
                               

Income from continuing operations attributable to MCBC

                          $ 729.4  
                               

 

 
  Year ended December 28, 2008  
 
  Canada   U.S.   U.K.   MCI and
Corporate
  Eliminations   Consolidated  
 
  (In millions)
 

Net sales(1)

  $ 1,920.0   $ 1,504.8   $ 1,342.2   $ 62.9   $ (55.6 ) $ 4,774.3  

Interest expense

                (119.1 )       (119.1 )

Interest income

            10.7     6.6         17.3  

Debt extinguishment costs

                (12.4 )       (12.4 )

Income (loss) from continuing operations before income taxes

  $ 458.4   $ 265.0   $ 85.4   $ (309.4 ) $   $ 499.4  

Income tax expense

                                  (96.4 )
                                     

Income from continuing operations

                                  403.0  

Net income attributable to noncontrolling interests

                                  (12.2 )
                                     

Income from continuing operations attributable to MCBC

                                $ 390.8  
                                     

 

 
  Year ended December 30, 2007  
 
  Canada   U.S.   U.K.   MCI and
Corporate
  Eliminations   Consolidated  
 
  (In millions)
 

Net sales(1)

  $ 2,005.1   $ 2,754.8   $ 1,455.6   $ 67.0   $ (91.9 ) $ 6,190.6  

Interest expense

                (134.9 )       (134.9 )

Interest income

            11.5     15.1         26.6  

Debt extinguishment costs

                (24.5 )       (24.5 )

Income (loss) from continuing operations before income taxes

  $ 426.9   $ 286.6   $ 89.5   $ (277.0 ) $   $ 526.0  

Income tax expense

                                  (1.0 )
                                     

Income from continuing operations

                                  525.0  

Net income attributable to noncontrolling interests

                                  (15.3 )
                                     

Income from continuing operations attributable to MCBC

                                $ 509.7  
                                     

(1)
Beginning in the third quarter of 2009, management adjusted internal financial reporting to conform sales reporting for the pre-MillerCoors periods to the post-MillerCoors periods. As a result, Canada segment sales for years ended December 28, 2008 and December 30, 2007, are higher than reported in prior periods due to the inclusion of $55.6 million and $91.9 million of intersegment/intercompany sales, respectively, which were eliminated upon consolidation.

        The following table represents total assets by reporting segment:

 
  As of  
 
  December 26,
2009
  December 28,
2008
 
 
  (In millions)
 

Canada(1)

  $ 6,402.0   $ 5,688.1  

U.S. 

    2,613.6     2,418.7  

U.K.(1)

    2,359.8     2,024.2  

MCI and Corporate

    635.8     247.1  

Discontinued operations

    9.9     8.5  
           
 

Consolidated total assets

  $ 12,021.1   $ 10,386.6  
           

(1)
A significant part of the increase in asset values in Canada and the UK in 2009 reflects the strengthening of the Canadian dollar ("CAD") and the British pound ("GBP") against the USD.

        The following table represents cash flow information by segment:

 
  For the years ended  
 
  December 26,
2009
  December 28,
2008
  December 30,
2007
 
 
  (In millions)
 

Depreciation and amortization(1):

                   
 

Canada

  $ 100.0   $ 118.3   $ 139.9  
 

United States(2)

        51.3     97.4  
 

United Kingdom

    77.6     99.3     105.6  
 

MCI and Corporate

    9.8     4.5     2.9  
               
   

Consolidated depreciation and amortization

  $ 187.4   $ 273.4   $ 345.8  
               

Capital expenditures:

                   
 

Canada

  $ 43.5   $ 72.7   $ 95.7  
 

United States(2)

        55.9     142.5  
 

United Kingdom

    64.6     88.2     181.8  
 

MCI and Corporate

    16.6     13.7     8.3  
               
   

Consolidated capital expenditures

  $ 124.7   $ 230.5   $ 428.3  
               

(1)
Depreciation and amortization amounts do not reflect amortization of bond discounts, fees, or other debt-related items.

(2)
Reflects the formation of MillerCoors on July 1, 2008. Prior periods reflect amounts of the Company's pre-existing U.S. operations.

        The following table represents sales by geographic segment:

 
  For the years ended  
 
  December 26,
2009
  December 28,
2008
  December 30,
2007
 
 
  (In millions)
 

Net sales to unaffiliated customers(1):

                   
 

Canada

  $ 1,687.0   $ 1,804.6   $ 1,877.6  
 

United States and its territories(2)

    46.3     1,565.7     2,757.8  
 

United Kingdom

    1,180.3     1,311.3     1,418.0  
 

Other foreign countries

    118.8     92.7     137.2  
               
   

Consolidated net sales

  $ 3,032.4   $ 4,774.3   $ 6,190.6  
               

(1)
Net sales attributed to geographic areas is based on the location of the customer.

(2)
Reflects the formation of MillerCoors on July 1, 2008. Prior periods reflect amounts of the Company's pre-existing U.S. operations.

        The following table represents long-lived assets by geographic segment:

 
  As of  
 
  December 26,
2009
  December 28,
2008
 
 
  (In millions)
 

Long-lived assets(1):

             
 

Canada(2)

  $ 788.7   $ 835.4  
 

United States and its territories

    44.3     34.2  
 

United Kingdom(3)

    459.1     431.8  
 

Other foreign countries

    0.4     0.5  
           
   

Consolidated long-lived assets

  $ 1,292.5   $ 1,301.9  
           

(1)
Long-lived assets include net properties and are based on geographic location of the long-lived assets.

(2)
A significant part of the decrease in long-lived asset value in Canada in 2009 is related to the deconsolidation of BRI which was offset partially by the strengthening of the CAD against the USD.

(3)
The increase in asset value in the UK in 2009 reflects the strengthening of the GBP against the USD.
Equity Investments
Equity Investments

4. Equity Investments

Investment in MillerCoors

        Effective July 1, 2008, MCBC and SABMiller combined the U.S. and Puerto Rico operations of their respective subsidiaries, CBC and Miller.

        MillerCoors has a Board of Directors consisting of five MCBC-appointed directors and five SABMiller-appointed directors. The percentage interests in the profits of MillerCoors are 58% for SABMiller and 42% for MCBC, and voting interests are shared 50%-50%. Each party to the joint venture has agreed not to transfer its economic or voting interests in the joint venture for a period of five years, and certain rights of first refusal will apply to any subsequent assignment of such interests.

        The results and financial position of U.S. operations, which had historically comprised substantially all of our U.S. reporting segment were, in all material respects, deconsolidated from MCBC prospectively upon formation of MillerCoors. Our interest in the new combined operations is accounted for under the equity method of accounting.

        The following table summarizes the carrying values of net assets contributed to MillerCoors on July 1, 2008 (in millions):

 
  As of
July 1, 2008
 

Current assets

  $ 684.9  

Property, plant and equipment

    1,004.3  

Goodwill

    1,608.8  
       
 

Total assets contributed

    3,298.0  

Current liabilities

   
573.2
 

Noncurrent liabilities

    204.3  
       
 

Total liabilities

    777.5  

Accumulated other comprehensive loss(1)

    (211.9 )
       

Net assets contributed

  $ 2,732.4  
       

(1)
Represents the accumulated other comprehensive loss associated with employee retirement and post-employment benefit plan obligations and derivative assets contributed to MillerCoors.

        Summarized financial information for MillerCoors is as follows (in millions):

Condensed balance sheet

 
  As of  
 
  December 31,
2009
  December 31,
2008
 

Current assets

  $ 808.5   $ 849.0  

Noncurrent assets

    9,025.0     8,853.2  
           
 

Total assets

  $ 9,833.5   $ 9,702.2  
           

Current liabilities

 
$

885.4
 
$

1,033.6
 

Noncurrent liabilities

    1,278.4     1,412.3  
           
 

Total liabilities

    2,163.8     2,445.9  

Noncontrolling interests

    28.1     29.4  

Interest attributable to shareholders'

    7,641.6     7,226.9  
           

Total liabilities and shareholders' investment

  $ 9,833.5   $ 9,702.2  
           

Results of operations

 
  For the year
ended
December 31,
2009
  For the six
months ended
December 31,
2008
 
 
  Actual
 

Net sales

  $ 7,574.3   $ 3,689.4  

Cost of goods sold

    (4,720.9 )   (2,326.0 )
           

Gross profit

  $ 2,853.4   $ 1,363.4  

Operating income

  $ 866.1   $ 227.2  

Net income attributable to MillerCoors

  $ 842.8   $ 222.4  

        The following represents MCBC's proportional share in MillerCoors of net income reported under the equity method (in millions):

 
  For the year
ended
December 31,
2009
  For the six
months ended
December 31,
2008
 

MillerCoors net income

  $ 842.8   $ 222.4  
 

MCBC economic interest

    42 %   42 %
           
 

MCBC proportionate share of MillerCoors net income

    354.0     93.4  
 

MillerCoors accounting policy elections(1)

    7.3     27.7  
 

Amortization of the difference between MCBC contributed cost basis and proportional share of the underlying equity in net assets of MillerCoors(2)

    11.7     36.7  
 

Share-based compensation adjustment(3)

    9.0     (2.2 )
           

Equity income in MillerCoors

  $ 382.0   $ 155.6  
           

(1)
MillerCoors made its initial accounting policy elections upon formation, impacting certain asset and liability balances contributed by MCBC. Our investment basis in MillerCoors is based on the book value of the net assets we contributed to it. These adjustments reflect the favorable impact to our investment in MillerCoors as a result of the differences resulting from accounting policy elections, the most significant of which was MillerCoors' election to value contributed CBC inventories using the first in, first out (FIFO) method, rather than the last in, first out (LIFO) method, which had been applied by CBC prior to the formation of MillerCoors, the impact of which was fully amortized in early 2009.

(2)
MCBC's net investment in MillerCoors is based on the carrying values of the net assets it contributed to the joint venture which is less than our proportional share of underlying equity (42%) of MillerCoors (contributed by both Coors and Miller) by approximately $631 million. This difference is being amortized as additional equity income over the remaining useful lives of long-lived assets giving rise to the difference. For non-depreciable assets, such as goodwill, no adjustment is being recorded unless there is an impairment in our overall investment. During the fourth quarter of 2008, MillerCoors recognized an impairment charge of $65.0 million associated with its Sparks brand intangible asset. Included in our basis amortization income shown above is a credit of $27.3 million, or 42% of that amount, as our proportional share of the underlying basis in the Sparks intangible asset was less than that of MillerCoors, no impairment existed at a MCBC level.

(3)
The net adjustment is to record all stock-based compensation associated with pre-existing equity awards to be settled in MCBC Class B common stock held by former CBC employees now employed by MillerCoors and to eliminate all stock-based compensation impacts related to preexisting SABMiller equity awards held by Miller employees now employed by MillerCoors.

        During the year ended December 26, 2009, we recorded $38.1 million and $10.6 million of sales of beer to MillerCoors and purchase of beer from MillerCoors, respectively. In addition, we recorded $12.7 million of service agreement and other charges to MillerCoors and $1.6 million of service agreement costs from MillerCoors. As of December 26, 2009, we had $5.4 million due from MillerCoors related to activities mentioned above. During the twenty-six weeks ended December 28, 2008, we recorded $51.3 million and $2.9 million of sales of beer to MillerCoors and purchase of beer from MillerCoors, respectively. In addition, we recorded $5.8 million of service agreement charges to MillerCoors and $0.6 million of service agreement costs from MillerCoors. As of December 28, 2008, we had $20.2 million due from MillerCoors related to activities mentioned above.

        MCBC assigned the United States and Puerto Rican rights to the legacy Coors brands, including Coors Light, Coors Banquet, Keystone Light and the Blue Moon brands, to MillerCoors. We retained all ownership rights of these brands outside of the United States and Puerto Rico. In addition, we maintain numerous water rights in Colorado. We lease these water rights to MillerCoors at no cost for use at their Golden, Colorado brewery.

        There were no significant undistributed earnings in MillerCoors as of December 26, 2009 or December 28, 2008.

All Other Equity Investments

Tradeteam Ltd.

        Tradeteam Ltd., is a joint venture between MCBC-UK and DHL in which MCBC-UK has a 49.9% interest that has an exclusive contract with MCBC-UK to provide transportation and logistics services in England and Wales until 2018. Our approximate financial commitments under the distribution contract with Tradeteam are as follows:

 
  Amount  
 
  (In millions)
 

2010

  $ 130.8  

2011

    134.7  

2012

    138.8  

2013

    142.9  

2014

    147.2  

Thereafter

    536.0  
       
 

Total

  $ 1,230.4  
       

        The financial commitments on termination of the distribution agreement are to essentially take over property, assets and people used by Tradeteam to deliver the service to MCBC-UK, paying Tradeteam's net book value for assets acquired which approximates $50.8 million as of December 26, 2009.

        Services provided under the Tradeteam, Ltd. contract were approximately $118.4 million, $146.6 million, and $157.5 million for the years ended December 26, 2009, December 28, 2008, and December 30, 2007, respectively. As of December 26, 2009 and December 28, 2008, we had $10.2 million and $2.3 million due to Tradeteam for services provided.

Montréal Canadiens

        Molson Hockey Holdings, Inc. ("MHHI"), a wholly-owned subsidiary of the Company, owned a 19.9% indirect common ownership in the Montréal Canadiens professional hockey team, the Gillett Entertainment Group and certain related assets (collectively, the "Club"). An independent party owned the controlling 80.1% common ownership interest in the Club. During the fourth quarter of 2009, CH Group Limited Partnership / Société en commandite Group CH (formerly Racine Limited Partnership / Société en commandite Racine) ("CH Group") purchased the controlling 80.1% common ownership interest in the Club, as well as the interest in the ground lease of Bell Centre arena in Montréal (the "Bell Centre") from the majority owner of the Club. The general partner of CH Group and one of its limited partners are entities affiliated with Andrew and Geoff Molson, who are both members of the Board of Directors of the Company.

        In connection with CH Group's purchase of the controlling common ownership interest in the Club and the Bell Centre, effective December 1, 2009, MHHI sold its 19.9% common ownership interest in the Club to CH Group. The Company received net proceeds of CAD $56.3 million (USD $53.3 million), which is equal to the sale price for the Company's interest reduced by a portion of the debt obligations of the Club assumed by the buyer, and recognized a gain of CAD $48.7 million (USD $46.0 million) related to this transaction. Included in this gain is CAD $4.7 million (USD $4.4 million) of escrow balances expected to be received during 2010 (after giving effect to a purchase price adjustment). The selling price of our interest in the Club was based on the price at which CH Group purchased the 80.1% controlling interest in the Club from the majority owner, an independent third party.

        As part of its ownership of the Club, the Company was historically obligated under two principal financial guarantees: a consent agreement with the NHL (the "Consent Agreement"), which required the direct and indirect owners of the Club to abide by certain funding requirements related to the ownership of the Club, including those provided in a shareholders' agreement; and a guarantee of the Club's majority owner's obligations under a ground lease for the Bell Centre (the "Ground Lease Guarantee"). In connection with the sale of our common ownership interest in the Club, we were released from our obligations under the Consent Agreement, but remain obligated under the Ground Lease Guarantee. However, CH Group agreed to indemnify the Company in connection with the liabilities we may incur under the Ground Lease Guarantee and provided the Company with a CAD $10 million (USD $9.5 million) letter of credit to guarantee such indemnity. This transaction did not materially affect our risk exposure related to the Ground Lease Guarantee, which continues to be recognized as a liability on our balance sheet. The gain that we recognized on the sale of our common ownership interest in the Club reflects the release of a CAD $4.5 million (USD $4.3 million) liability associated with the Consent Agreement.

Brewers' Retail Inc.

        Brewers' Retail, Inc. ("BRI") is a beer distribution and retail network for the Ontario region of Canada, owned by MCC, Labatt and Sleeman brewers and operates on a break-even basis. MCBC has historically consolidated BRI as its primary beneficiary. Contractual provisions cause our variable interests to fluctuate requiring frequent evaluations as to primary beneficiary status. Acquisition activity by another BRI owner (which is not a related party to MCC) caused our variable interest to decrease to a level indicating that we are no longer the primary beneficiary and, as such, we deconsolidated BRI from our financial statements during the first quarter of 2009. The deconsolidation does not impact our continuing involvement with BRI, which will remain the same. Further, following the deconsolidation, BRI remains a related party.

        BRI's liabilities exceeded its assets at the date of deconsolidation (negative book value), by $90.3 million. We recorded a liability of $74.3 million associated with the recognition of the fair value of our proportionate share of the guarantee we maintain with regard to BRI's debt obligations. We determined the fair value of the guarantee based upon our share of BRI's total debt obligation adjusted for nonperformance risk—considered a level 3 input. Because we have an obligation to proportionately fund BRI's obligations, the difference between net carrying value and the fair value of our retained equity interest in BRI was recorded as an adjustment to our BRI investment, effectively resulting in a negative equity method basis of $16 million. Therefore, no gain was recognized upon deconsolidation. Additionally, because of our continued obligation, we continue to record our proportional share of BRI's net income or loss, despite our negative equity method basis. Administrative fees under the agreement with BRI were approximately $89.2 million for the year ended December 26, 2009. As of December 26, 2009, we had $44.3 million due from BRI related to services under the administrative fees agreement.

Brewers' Distributor Ltd.

        Brewers' Distributor Ltd. ("BDL") is a distribution operation owned by Molson and Labatt Breweries of Canada (collectively, the "Members") and pursuant to an operating agreement, acts as an agent for the distribution of their products in the western provinces of Canada. The two Members share 50%/50% voting control of this business.

        BDL charges Molson and Labatt administrative fees that are designed so the entity operates at break-even profit levels. This administrative fee is based on costs incurred, net of other revenues earned, and is allocated in accordance with the operating agreement to the Members based on volume of products. No other parties are allowed to sell beer through BDL, which does not take legal title to the beer distributed for its owners. Administrative fees under the contract were approximately $43.9 million, $52.8 million, and $51.4 million for the years ended December 26, 2009, December 28, 2008, and December 30, 2007, respectively. As of December 26, 2009 and December 28, 2008, we had $22.0 million and $15.6 million due from BDL, respectively, related to services under the administrative fees agreement.

Modelo Molson Imports, L.P.

        Effective, January 1, 2008, Molson and Grupo Modelo, S.A.B. de C.V. established a joint venture, Modelo Molson Imports, L.P. ("MMI"), to import, distribute, and market the Modelo beer brand portfolio across all Canadian provinces and territories. Under this new arrangement, Molson's sales team is responsible for selling the brands across Canada on behalf of the joint venture. Molson holds a 50% ownership interest in MMI and accounts for it under the equity method of accounting. During 2009 and 2008, we incurred $7.6 million and $13.8 million, respectively, of costs payable to MMI. As of December 26, 2009 and December 28, 2008, we had $0.2 million due from MMI and $3.8 million due to MMI, respectively, related to activities provided by the existing operating agreement.

House of Blues Concerts Canada

        House of Blues Concerts Canada ("HOB") partnership was formed to promote, produce and commercially utilize concerts in Canada. Molson historically had a 50% interest in HOB. During 2007, we sold our investment in HOB, which resulted in $30.0 million of proceeds and recognized a gain of $16.7 million.

        Summarized financial information for Tradeteam, Ltd., the Montréal Canadiens, BRI, BDL, MMI and HOB combined is as follows (in millions):

Results of operations

 
  For the years ended  
 
  December 26,
2009
  December 28,
2008
  December 30,
2007
 

Net sales

  $ 996.9   $ 926.8   $ 768.5  

Cost of goods sold

    (487.4 )   (565.2 )   (509.0 )
               

Gross profit

  $ 509.5   $ 361.6   $ 259.5  

Operating income

  $ 47.0   $ 90.1   $ 38.6  

Net Income

  $ 22.0   $ 63.2   $ 16.2  

Condensed Combined Balance sheet

 
  As of  
 
  December 26,
2009
  December 28,
2008
 

Current assets

  $ 377.4   $ 261.4  

Noncurrent assets

    348.5     179.8  
           
 

Total assets

  $ 725.9   $ 441.2  
           

Current liabilities

  $ 443.2   $ 300.8  

Noncurrent liabilities

    283.3     177.6  
           
 

Total liabilities

    726.5     478.4  

Noncontrolling interests

           

Owners' deficit

    (0.6 )   (37.2 )
           

Total liabilities and owner's deficit

  $ 725.9   $ 441.2  
           

        There were no significant undistributed earnings as of December 26, 2009 or December 28, 2008 for any of the companies included in other equity investments above.

Discontinued Operations
Discontinued Operations

5. Discontinued Operations

        In 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").

        The terms of the sale 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 21, "Commitments and Contingencies").

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

 
  For the years ended  
 
  December 26,
2009
  December 28,
2008
  December 30,
2007
 
 
   
  (In millions)
   
 

Gain on sale of Kaiser(1)

  $   $   $ (2.7 )

Adjustments to indemnity liabilities due to changes in estimates, foreign exchange gains and losses, and accretion expense (See "Footnote 21")

    9.0     12.1     20.4  
               

Loss from discontinued operations, net of tax

  $ 9.0   $ 12.1   $ 17.7  
               

(1)
The $2.7 million gain recognized in 2007 resulted from a deferred tax liability adjustment related to the Kaiser transaction.

        As of December 26, 2009, included in current assets of discontinued operations on the balance sheet is $9.9 million of deferred tax assets associated with these indemnity liabilities. As of December 28, 2008, included in current and non-current assets of discontinued operations on the balance sheet are $1.5 million and $7.0 million, respectively, of deferred tax assets associated with these indemnity liabilities.

Variable Interest Entities
Variable Interest Entities

6. Variable Interest Entities

Brewers' Retail Inc.

        We deconsolidated BRI from our financial statements during the first quarter of 2009. See Note 4, "Equity Investments" for further discussion.

Rocky Mountain Metal Container

        RMMC, a Colorado limited liability company, is a joint venture with Ball Corporation in which MillerCoors holds and consolidates a 50% interest. Prior to the formation of MillerCoors on July 1, 2008, CBC held the 50% interest in RMMC and consolidated the results and financial position of RMMC in 2007 and first half of 2008. MillerCoors has a can and end supply agreement with RMMC. RMMC is a non-taxable entity, accordingly, for the periods RMMC was consolidated, income tax expense on the accompanying statements of operations only includes taxes related to our share of the joint venture income or loss. MCBC remains the guarantor of approximately $37.4 million and $43.3 million of RMMC debt at December 26, 2009 and December 28, 2008, respectively.

Rocky Mountain Bottle Company

        RMBC, a Colorado limited liability company, is a joint venture with Owens-Brockway Glass Container, Inc. ("Owens") in which MillerCoors holds a 50% interest. RMBC produces glass bottles at MillerCoors' glass manufacturing facility for use at its Golden and other breweries. The results and financial position of RMBC were consolidated in our financial statements in 2007 and the first half of 2008. MillerCoors consolidates RMBC and the results and financial position of RMBC are reflected through our equity method accounting for MillerCoors beginning July 1, 2008. RMBC is a non-taxable entity; accordingly, for the periods RMBC was consolidated by us, income tax expense in our consolidated statements of operations only includes taxes related to our share of the joint venture income or loss.

Grolsch

        Grolsch is a joint venture between MCBC-UK 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 MCBC-UK under a contract brewing arrangement with the joint venture. MCBC-UK and Royal Grolsch N.V. sell beer to the joint venture, which sells the beer back to MCBC-UK (for onward sale to customers) for a price equal to what it paid, plus a marketing and overhead charge and a profit margin. Grolsch is a taxable entity in the United Kingdom. Accordingly, income tax expense in our Consolidated Statements of Operations includes taxes related to the entire income of the joint venture.

Cobra Beer Partnership, Ltd

        During the second quarter of 2009, MCBC-UK purchased 50.1% of Cobra Beer Partnership, Ltd ("CBPL"), which owns the United Kingdom and world-wide rights to the Cobra beer brand (with the exception of the Indian sub-continent area). The addition of the Cobra beer brands broaden our specialty beer portfolio and provides access to additional on-premise outlets (primarily ethnic restaurants) in the U.K. The non-controlling interest is held by the founder of the Cobra beer brand. We consolidate the results and financial position of CBPL and it is reported within our U.K. operating segment. We have not presented pro forma information, as the acquisition of CBPL is not material to our results of operations or financial position.

Granville Island

        During the fourth quarter of 2009, Creemore Springs Brewery Ltd. ("Creemore"), a wholly-owned subsidiary of the Company, entered into an agreement to acquire 100% of Granville Island Brewing Company Ltd. and Mainland Beverage Distribution Ltd. (collectively, "Granville Island" or the "Granville Island Entities"). Granville Island is an established craft brewer located in Vancouver, Canada, with distribution throughout the Canadian province of British Columbia. This acquisition expands on our super premium portfolio in Canada.

        Under the terms of this agreement, we made a non-refundable deposit in exchange for one share of common stock in each of the Granville Island entities and expect to close on this transaction in the second quarter of 2010. The Granville Island entities are variable interest entities, and we are the primary beneficiary of these entities as of December 26, 2009, due to certain economic and voting rights. On December 1, 2009, we began consolidating the results and financial position of Granville Island, and it is reported within our Canada reportable segment. We have not presented pro forma information, as the acquisition of Granville Island is not material to our results of operations or financial position.

        The following summarizes the assets and results of operations of our consolidated joint ventures (including noncontrolling interests):

 
  For the years ended/As of  
 
  December 26, 2009   December 28, 2008   December 30, 2007  
 
  Total
Assets(1)
  Revenues(2)   Pre-tax
income
  Total
Assets(1)
  Revenues(2)   Pre-tax
income
  Total
Assets(1)
  Revenues(2)   Pre-tax
income
 
 
  (In millions)
 

BRI

  $   $ 40.4   $   $ 373.5   $ 271.1   $   $ 442.7   $ 274.4   $ 2.2  

RMMC(3)

  $   $   $   $   $ 157.6   $ 3.7   $ 66.5   $ 295.1   $ 5.8  

RMBC(3)

  $   $   $   $   $ 56.5   $ 14.7   $ 41.0   $ 95.5   $ 20.2  

Grolsch

  $ 22.7   $ 37.8   $ 5.7   $ 16.7   $ 61.2   $ 8.5   $ 30.1   $ 77.6   $ 10.1  

Cobra

  $ 32.3   $ 21.2   $ 1.9   $   $   $   $   $   $  

Granville Island

  $ 28.7   $ 4.6   $ 0.2   $   $   $   $   $   $  

(1)
Excludes receivables from the Company.

(2)
Substantially all such sales for RMMC, RMBC and Grolsch are made to the Company, and as such, are eliminated in consolidation. The BRI revenues for 2009 represent the first two months prior to deconsolidation.

(3)
Deconsolidated upon formation of MillerCoors on July 1, 2008.
Other Income and Expense
Other Income and Expense

7. Other Income and Expense

 
  For the years ended  
 
  December 26,
2009
  December 28,
2008
  December 30,
2007
 
 
  (In millions)
 

Gain (loss) on disposals of non-operating long-lived assets

  $   $ 1.7   $ (0.3 )

Gain on sale of Montréal Canadiens

    46.0          

Gain on sale of House of Blues Canada equity investment

            16.7  

Equity (loss) income of unconsolidated affiliates, other than MillerCoors, net

    (1.2 )   3.1     4.3  

Gain (loss) from foreign exchange and derivatives(1)

    6.1     (7.4 )   (1.5 )

Environmental reserve

    (1.5 )   (4.4 )    

Asset impairments of non-operating assets

        (0.2 )   (1.7 )

Loss on non-operating leases

    (3.6 )   (2.4 )   (1.8 )

Other, net

    3.6     1.2     2.0  
               

Other income (expense), net

  $ 49.4   $ (8.4 ) $ 17.7  
               

(1)
During the third quarter of 2008, we entered into a cash settled total return swap with Deutsche Bank in order to gain an economic interest exposure to Foster's Group ("Foster's") stock (ASX:FGL), a major global brewer (see Note 19, "Derivative Instruments and Hedging Activities"). We recognized a net gain on the fair value of the swap of $0.7 million during 2009 and a net loss of $4.4 million during 2008.
Income Tax
Income Tax

8. Income Tax

        The pre-tax income on which the provision for income taxes was computed is as follows:

 
  For the years ended  
 
  December 26,
2009
  December 28,
2008
  December 30,
2007
 
 
  (In millions)
 

Domestic

  $ 477.1   $ 372.7   $ 370.0  

Foreign

    240.4     126.7     156.0  
               
 

Total

  $ 717.5   $ 499.4   $ 526.0  
               

        Income tax expense (benefit) includes the following current and deferred provisions:

 
  For the years ended  
 
  December 26,
2009
  December 28,
2008
  December 30,
2007
 
 
  (In millions)
 

Current:

                   
 

Federal

  $ (51.3 ) $ (8.1 ) $ 69.8  
 

State

    9.6     0.4     6.5  
 

Foreign

    (100.8 )   25.5     25.8  
               

Total current tax (benefit) expense

  $ (142.5 ) $ 17.8   $ 102.1  
               

Deferred:

                   
 

Federal

  $ 87.0   $ 60.2   $ (18.6 )
 

State

    14.7     15.4     (1.0 )
 

Foreign

    26.1     3.0     (81.5 )
               

Total deferred tax expense (benefit)

  $ 127.8   $ 78.6   $ (101.1 )
               

Total income tax (benefit) expense from continuing operations

  $ (14.7 ) $ 96.4   $ 1.0  
               

        Our income tax expense varies from the amount expected by applying the statutory federal corporate tax rate to income as follows:

 
  For the years ended  
 
  December 26,
2009
  December 28,
2008
  December 30,
2007
 

Statutory Federal income tax rate

    35.0 %   35.0 %   35.0 %

State income taxes, net of federal benefits

    2.0 %   1.3 %   0.8 %

Effect of foreign tax rates

    (21.7 )%   (21.1 )%   (18.9 )%

Effect of foreign tax law and rate changes

    (2.7 )%       (15.4 )%

Effect of changes to unrecognized tax benefits

    (18.8 )%   (1.8 )%   (2.9 )%

Effect of MillerCoors one-time costs

        3.3 %    

Other, net

    4.2 %   2.6 %   1.6 %
               
 

Effective tax rate

    (2.0 )%   19.3 %   0.2 %
               

        Our deferred taxes are composed of the following:

 
  As of  
 
  December 26,
2009
  December 28,
2008
 
 
  (In millions)
 

Current deferred tax assets:

             
 

Compensation related obligations

  $ 0.8   $ 0.8  
 

Accrued liabilities and other

    42.4     49.0  
 

Tax credit carryforward

    21.1      
 

Valuation allowance

        (0.1 )
           

Total current deferred tax assets

    64.3     49.7  
           

Current deferred tax liabilities:

             
 

Partnership investments

    217.7     146.2  
 

Inventory

    13.1     11.2  
 

Other

    0.6      
           

Total current deferred tax liabilities

    231.4     157.4  
           

Net current deferred tax assets(1)

         
           

Net current deferred tax liabilities(1)

  $ 167.1   $ 107.7  
           

Non-current deferred tax assets:

             
 

Compensation related obligations

  $ 12.2   $ 20.9  
 

Postretirement benefits

    220.0     166.7  
 

Foreign exchange losses

    182.4     65.6  
 

Convertible debt

    1.4     1.4  
 

Hedging

        12.1  
 

Tax loss carryforwards

    24.3     25.8  
 

Intercompany financing

    15.2      
 

Partnership investments

    14.5      
 

Accrued liabilities and other

    27.9     30.0  
 

Fixed assets

        1.0  
 

Valuation allowance

    (19.6 )   (12.8 )
           

Total non-current deferred tax assets

    478.3     310.7  
           

Non-current deferred tax liabilities:

             
 

Fixed assets

    120.8     84.2  
 

Partnership investments

    68.8     30.1  
 

Intangibles

    575.5     512.1  
 

Hedging

        3.0  
 

Other

    3.3     5.4  
           

Total non-current deferred tax liabilities

    768.4     634.8  
           

Net non-current deferred tax asset(1)

  $   $  
           

Net non-current deferred tax liability(1)

  $ 290.1   $ 324.1  
           

(1)
Our net deferred tax assets and liabilities are presented and composed of the following:

 
  As of  
 
  December 26,
2009
  December 28,
2008
 
 
  (In millions)
 

Domestic net current deferred tax liabilities

  $ 88.9   $ 39.0  

Foreign net current deferred tax liabilities

    78.2     68.8  
           
 

Net current deferred tax liabilities

  $ 167.1   $ 107.8  
           

Domestic net non-current deferred tax assets

  $ 133.0   $ 75.3  

Foreign net non-current deferred tax assets

    44.9      

Foreign net non-current deferred tax liabilities

    468.0     399.4  
           
 

Net non-current deferred tax liabilities

  $ 290.1   $ 324.1  
           

        Our full year effective tax rate was approximately -2% in 2009, 19% in 2008, and 0% in 2007. Our effective tax rates were significantly lower than the federal statutory rate of 35% primarily due to the following: lower effective income tax rates applicable to our Canadian and U.K. businesses, one time benefits from favorable resolution of unrecognized tax benefits, and revaluing our deferred tax assets and liabilities to give effect to reductions in foreign income tax rates and tax law changes.

        The Company has U.S. federal and state net operating losses, and foreign tax credit carryforwards. The tax effect of these attributes is $24.9 million at December 26, 2009, and $2.6 million at December 28, 2008, which will expire between 2010 and 2030. The Company believes that a portion of the deferred tax asset attributable to these losses and credit carryforwards is not, more likely than not, to be realized and has established a valuation allowance in the amount of $1.0 million and $2.1 million at December 26, 2009, and December 28, 2008, respectively. The change in valuation allowance from December 28, 2008 to December 26, 2009, is primarily attributable to the increase of certain state tax liabilities. In addition, the Company has Canadian federal and provincial net operating loss and capital loss carryforwards. The tax effect of these attributes is $11.1 million at December 26, 2009 and $14.4 million at December 28, 2008. The Canadian loss carryforwards will expire between 2013 through 2029. The Company believes that a portion of the deferred tax asset attributable to the Canadian loss carryforwards is not, more likely than not, to be realized and has established a valuation allowance in the amount of $1.9 million and $2.1 million and December 26, 2009 and December 28, 2008, respectively. The change from December 28, 2008 to December 26, 2009, is attributable to revaluing the deferred tax asset due to tax rate changes. The remaining valuation allowance of $16.7 million primarily relates to the deconsolidation of BRI. In addition, the Company has U.K. capital loss carryforwards. The tax effect of these attributes was $9.4 at December 26, 2009, and $8.6 million at December 28, 2008. The U.K. capital loss carryforwards do not have a limit in time to be used. As of December 28, 2008, the Company believed that the deferred tax asset associated with these U.K. loss carryforwards would not, more likely than not, be realized and established a valuation allowance for the full amount, $8.6 million. Due to the intercompany transfer of indefinite lived deferred tax liabilities, the Company now believes that the full amount of the capital loss carryforward is more likely than not to be realized and has released the valuation allowance.

        Annual tax provisions include amounts considered sufficient to pay assessments that may result from examination of prior year tax returns; however, the amount ultimately paid upon resolution of issues may differ materially from the amount accrued. As of December 28, 2008, we had $229.4 million of unrecognized tax benefits. Since December 28, 2008, unrecognized tax benefits decreased by $157.9 million. This reduction represents the net of increases due to fluctuation in foreign exchange rates, additional unrecognized tax benefits, accrued penalties, and interest accrued for the current year and decreases primarily due to, tax years closing or being effectively settled and payments made to tax authorities with regard to unrecognized tax benefits during 2009, resulting in total unrecognized tax benefits of $71.5 million as of December 26, 2009. If recognized, the full amount of the unrecognized tax benefits would affect the effective tax rate as of December 26, 2009 compared with $225 million as of December 28, 2008. During 2010, the Company does not expect any significant increases or decreases to unrecognized tax benefits. We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. Anticipated interest and penalty payments of $5.8 million and $35.0 million were accrued in unrecognized tax benefits as of December 26, 2009 and December 28, 2008 respectively. We recognized an income tax benefit of $29.3 million and $18.1 million for the net reduction of interest and penalties on unrecognized tax benefits as of December 26, 2009 and December 28, 2008, respectively.

        A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

 
  For the years ended  
 
  December 26,
2009
  December 28,
2008
  December 30,
2007
 
 
  (In millions)
 

Balance at beginning of year

  $ 206.1   $ 269.4   $ 269.9  
 

Additions for tax positions related to the current year

    26.0     20.8     33.0  
 

Additions for tax positions of prior years

    1.8     8.9     18.3  
 

Reductions for tax positions of prior years

    (74.1 )   (38.8 )   (61.2 )
 

Settlements

    (11.4 )   (4.8 )   (18.2 )
 

Release due to statute expiration

    (92.1 )   (4.2 )   (2.2 )
 

Foreign currency adjustment

    16.0     (45.2 )   29.8  
               

Balance at end of year

  $ 72.3   $ 206.1   $ 269.4  
               

        We file income tax returns in most of the federal, state, and provincial jurisdictions in the U.S., U.K., Canada and the Netherlands. Tax years through 2007 are closed or have been effectively settled through examination in the U.S. The 2008 tax year is currently under examination and expected to conclude in late 2010. Tax years through 2004 are closed or have been effectively settled through examination in Canada. Tax years through 2007 are closed or have been effectively settled through examination in the U.K. Tax years through 2006 are closed or have been effectively settled through examination in the Netherlands.

        We have elected to treat our portion of all foreign subsidiary earnings through December 26, 2009 as permanently reinvested under accounting guidance and accordingly have not provided any U.S. federal or state tax thereon. As of December 26, 2009, approximately $1,140 million of retained earnings attributable to foreign subsidiaries was considered to be indefinitely invested. The Company's intention is to reinvest the earnings permanently or to repatriate the earnings when it is tax effective to do so. It is not practicable to determine the amount of incremental taxes that might arise were these earnings to be remitted. However, the Company believes that U.S. foreign tax credits would largely eliminate any U.S. taxes and offset any foreign withholding taxes due on remittance.

Unusual or Infrequent Items
Unusual or Infrequent Items

9. Unusual or Infrequent Items

        We have incurred charges or gains that are not indicative of our core operations. As such, we have separately classified these costs as special items.

Summary of Special Items

 
  For the years ended  
 
  December 26,
2009
  December 28,
2008
  December 30,
2007
 
 
  (In millions)
 

Canada—Restructuring, exit and other related costs associated with the Edmonton and Montréal breweries

  $ 7.6   $ 10.9   $ 51.1  

Canada—Impairment of Foster's distribution right intangible asset

            24.1  

Canada—Pension curtailment loss

    5.3          

U.S.—MillerCoors joint venture associated costs

        37.9     6.7  

U.S.—Impairment of Molson brands intangible asset

        50.6      

U.S.—Impairments of fixed assets

        2.6      

U.S.—Gain on sale of distribution businesses

        (21.8 )    

U.S.—Other restructuring charges

            2.8  

U.K.—Non-income-related tax reserve

    10.4          

U.K.—Restructuring charges and related exit costs

    2.8     8.6     14.1  

U.K.- Pension curtailment gain

        (10.4 )    

U.K.—Costs associated with Cobra Beer partnership

    5.7          

U.K.—Gain on sale of non-core business

        (2.7 )    

MCI and Corporate—Gain on change in control agreements for Coors executives

            (0.5 )

MCI and Corporate—Costs associated with the MillerCoors joint venture

        28.8     13.9  

MCI and Corporate—Costs associated with outsourcing and other strategic initiatives

    0.9     29.4      
               
 

Total special items

  $ 32.7   $ 133.9   $ 112.2  
               

Canada Segment

        In 2009, we recognized a $5.3 million pension curtailment loss (see Note 17 "Employee Retirement Plans" and Note 18 "Postretirement Benefits") and $3.0 million of restructuring costs associated with employee terminations at the Montréal brewery driven by MillerCoors' decision to shift Blue Moon production to its facilities in the U.S. Additionally, the segment incurred $4.6 million of Edmonton brewery site preparation and impairment closure costs during 2009. The facility was closed in 2007 and we transferred the facility's production to our other breweries in Canada. Current plans are to demolish the building and sell the land. Approximately 130 employees were impacted by the brewery's closure.

        In 2008, we incurred $6.2 million of clean-up, remediation and general up-keep costs associated with the closed Edmonton brewery, an asset held for sale. We also incurred $3.6 million of asset impairment and employee termination charges at the Montréal brewery as a result of MillerCoors' decision to shift Blue Moon production to its facilities in the U.S and $1.1 million of employee termination costs associated with the outsourcing of administrative functions.

        In 2007, we recorded a pretax non-cash impairment charge of approximately $31.9 million associated with the carrying amount of fixed assets at the Edmonton brewery in excess of estimated market value, $6.1 million for severance and other employee related costs and $8.5 million of other costs associated with the brewery's closure in 2007. We also recognized an intangible asset impairment charge of $24.1 million as a result of the Foster's contract termination and $4.6 million for severance and other costs relating to the restructuring program focused on labor and overhead cost savings across production, sales and general and administrative functions. The restructuring program resulted in a reduction of 126 full-time employees.

U.S. Segment

        During the first six months of 2008, prior to the formation of MillerCoors, our U.S. segment incurred a number of special charges and income items including $30.3 million for employee retention and incremental bonus costs and $7.6 million of integration planning costs in the period leading up to the MillerCoors formation. It should be noted that MillerCoors continues with significant restructuring efforts as part of the overall program to deliver synergy savings. We realize our portion of those costs through our equity method income pickup from MillerCoors. The MillerCoors deal costs and integration planning costs were also incurred in the Corporate group (see below). The U.S. segment also realized a net $21.8 million gain on the sale of two beer distribution businesses in Colorado, $2.6 million related to certain brewing asset impairment charges and an intangible asset impairment charge of $50.6 million related to the decline in value of Molson brands sold in the U.S. (see Note 13, "Goodwill and Intangible Assets").

        In 2007, the U.S. segment began a restructuring program focused on labor savings across supply chain functions and we recognized $2.8 million of expense for severance and other employee related costs relating to a reduction of 34 full-time employees. In 2007, we also incurred $6.7 million of employee retention costs in anticipation of the MillerCoors joint venture.

        The liability for severance and other employee-related costs in 2006 included a $27.6 million estimated payment required for our withdrawal from the hourly workers multi-employer pension plan associated with our Memphis brewery and was paid in September 2007. All production from the Memphis location was relocated to a different Company-owned facility or outsourced. The Memphis brewery was sold in September 2006 to an investment group led by a former employee. The Memphis brewery assets were depreciated to a value that approximated the sale price; therefore, the loss from the final disposition of the assets and liabilities associated with Memphis was insignificant. We entered into a distribution agreement with the new Memphis brewery owners. Management believes that the terms of the sale of the Memphis plant and three-year distribution agreement are market reflective arms-length. See table below for summary of restructuring accruals.

U.K. Segment

        During 2009, the U.K. segment recognized $2.5 million of costs associated with the Cobra Beer Partnership, Ltd. acquisition and recognized employee severance costs of $3.2 million related to individuals not retained subsequent to the acquisition. Additionally, the U.K. segment recognized $2.8 million of employee termination costs related to supply chain restructuring activity and company-wide efforts to increase efficiency in certain finance, information technology and human resource activities by outsourcing portions of those functions. During 2009, the U.K. segment established a $10.4 million non-income-related tax reserve. Our current estimates indicate a range of possible loss relative to this reserve of $0 to $22.8 million, inclusive of potential penalties and interest. This liability is one-time in nature and does not affect the on-going margin or profitability of the segment.

        During 2008, the U.K. segment recognized a $10.4 million pension gain associated with the cessation of employee service credit to its defined benefit pension plan (see Note 17, "Employee Retirement Plans"). The U.K. segment also realized a gain on the sale of a business of $2.7 million. Offsetting these items were $8.6 million of employee termination costs associated with restructuring efforts related to supply chain and administrative functions.

        The U.K. segment recognized special items of $14.1 million in 2007, related primarily to employee termination costs associated with supply chain and back-office restructuring efforts in the U.K., resulting in a reduction of 85 employees in 2007, as well as the recognition of an existing pension benefit obligation in accordance with U.K. law.

MCI and Corporate

        During 2009, MCI and Corporate incurred $0.9 million of costs associated with other strategic initiatives.

        During 2008, the Corporate group recognized $28.8 million of deal costs and integration planning costs associated with the formation of MillerCoors. We also recognized $22.8 million of transition costs paid to our third-party vendor associated with the start-up of our outsourced administrative functions. In January 2008, we signed a contract with a third-party service provider to outsource a significant portion of our general and administrative back-office functions in all of our operating segments and corporate office. This outsourcing initiative is a key component of our Resources for Growth cost reduction program. Last, we incurred $6.6 million associated with other strategic initiatives.

        The net costs reported as special items recorded in 2007 of $13.4 million are associated with the proposal of the MillerCoors joint venture, and consist primarily of outside professional services. These charges were partially offset by a reversal of an excise tax accrual for a former employee that exercised options under the control agreement.

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

 
  Canada   U.S.   U.K.  
 
  Severance and
other employee-
related costs
  Severance and
other employee-
related costs
  Closing and
other costs
  Severance and
other employee-
related costs
 
 
  (In millions)
 

Balance at December 31, 2006

  $ 0.6   $ 27.7   $ 0.4   $ 4.0  

Charges incurred

    10.0     2.7         10.2  

Payments made

    (7.2 )   (27.8 )   (0.4 )   (11.8 )

Foreign currency and other adjustments

    0.8             0.1  
                   

Balance at December 30, 2007

  $ 4.2   $ 2.6   $   $ 2.5  

Charges incurred

    1.8     (0.1 )       8.6  

Payments made

    (4.1 )   (2.5 )       (7.9 )

Foreign currency and other adjustments

    (0.5 )           (1.1 )
                   

Balance at December 28, 2008

  $ 1.4   $   $   $ 2.1  

Charges incurred

    3.0             6.0  

Payments made

    (4.0 )           (6.1 )

Foreign currency and other adjustments

    0.2             0.3  
                   

Balance at December 26, 2009

  $ 0.6   $   $   $ 2.3  
                   
Stockholders' Equity
Stockholders' Equity

10. Stockholders' Equity

        Changes to the number of shares of capital stock issued were as follows:

 
  Common stock
issued
  Exchangeable
shares issued
 
 
  Class A   Class B   Class A   Class B  
 
  (Share amounts in millions)
 

Balances at December 31, 2006

    2.7     133.2     3.3     34.8  
 

Shares issued under equity compensation plans

        6.7          
 

Shares exchanged for common stock

        9.7         (9.7 )
                   

Balances at December 30, 2007

    2.7     149.6     3.3     25.1  
 

Shares issued under equity compensation plans

        3.1          
 

Shares exchanged for common stock

        4.4     (0.1 )   (4.2 )
                   

Balances at December 28, 2008

    2.7     157.1     3.2     20.9  
 

Shares issued under equity compensation plans

        1.5          
 

Shares exchanged for common stock

    (0.1 )   0.8         (0.7 )
                   

Balances at December 26, 2009

    2.6     159.4     3.2     20.2  
                   

Preferred Stock

        At December 26, 2009 and December 28, 2008, 25.0 million shares of no par value preferred stock were authorized but not issued.

Class A and Class B Common Stock

Dividend Rights

        Subject to the rights of the holders of any series of preferred stock, stockholders of Molson Coors Class A common stock (Class A common stock) are entitled to receive, from legally available funds, dividends when and as declared by the Board of Directors of Molson Coors, except that so long as any shares of Molson Coors Class B common stock (Class B common stock) are outstanding, no dividend will be declared or paid on the Class A common stock unless at the same time a dividend in an amount per share (or number per share, in the case of a dividend paid in the form of shares) equal to the dividend declared or paid on the Class A common stock is declared or paid on the Class B common stock.

Voting Rights

        Except in limited circumstances, including the right of the holders of the Class B common stock and special Class B voting stock voting together as a single class to elect three directors to the Molson Coors Board of Directors, the right to vote for all purposes is vested exclusively in the holders of the Class A common stock and special Class A voting stock, voting together as a single class. The holders of Class A common stock are entitled to one vote for each share held, without the right to cumulate votes for the election of directors.

        An affirmative vote is required of a majority of the votes entitled to be cast by the holders of the Class A common stock and special Class A voting stock (through which holders of Class A exchangeable shares vote), voting together as a single class, prior to the taking of certain actions, including:

  • the issuance of any shares of Class A common stock or securities convertible into Class A common stock (other than upon the conversion of Class B common stock under circumstances provided in the certificate of incorporation or the exchange or redemption of Class A exchangeable shares in accordance with the terms of those exchangeable shares) or securities (other than Class B common stock) convertible into or exercisable for Class A common stock;

    the issuance of shares of Class B common stock (other than upon the conversion of Class A common stock under circumstances provided in the certificate of incorporation or the exchange or redemption of Class B exchangeable shares in accordance with the terms of those exchangeable shares) or securities (other than Class A common stock) that are convertible into or exercisable for Class B common stock, if the number of shares to be issued is equal to or greater than 20% of the number of outstanding shares of Class B common stock;

    the issuance of any preferred stock having voting rights other than those expressly required by Delaware law;

    the sale, transfer or other disposition of any capital stock (or securities convertible into or exchangeable for capital stock) of subsidiaries;

    the sale, transfer or other disposition of all or substantially all of the assets of the Company; and

    any decrease in the number of members of the Molson Coors Board of Directors to a number below 15.

        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.

        The Molson Coors certificate of incorporation provides the holders of Class B common stock and special Class B voting stock (through which holders of Class B exchangeable shares vote), voting together as a single class, the right to elect three directors to the Molson Coors Board of Directors. In addition, the holders of Class B common stock and special Class B voting stock, voting together as a single class, have the right to vote on specified transactional actions. Except in the limited circumstances provided in the certificate of incorporation, the right to vote for all other purposes is vested exclusively in the holders of the Class A common stock and special Class A voting stock, voting together as a single class. The holders of Class B common stock are entitled to one vote for each share held with respect to each matter on which holders of the Class B common stock are entitled to vote, without the right to cumulate votes for the election of directors.

Rights Upon Dissolution or Wind Up

        If Molson Coors liquidates, dissolves or winds up its affairs, the holders of Class A common stock, together with the holders of the Class B common stock, would be entitled to receive, after Molson Coors' creditors have been paid and the holders of any then outstanding series of preferred stock have received their liquidation preferences, all of the remaining assets of Molson Coors in proportion to their share holdings. Holders of Class A and Class B common stock would not have pre-emptive rights to acquire any securities of Molson Coors. The outstanding shares of Class A and Class B common stock would be fully paid and non-assessable.

Conversion Rights

        The Molson Coors certificate of incorporation provides for the right of holders of Class A common stock to convert their stock into Class B common stock on a one-for-one basis at any time.

Exchangeable Shares

        The Class A exchangeable shares and Class B exchangeable shares were issued by Molson Coors Canada Inc. ("MCCI") a wholly-owned subsidiary. The exchangeable shares are substantially the economic equivalent of the corresponding shares of Class A and Class B common stock that a Molson shareholder would have received if the holder had elected to receive shares of Molson Coors common stock. Holders of exchangeable shares also receive, through a voting trust, the benefit of Molson Coors voting rights, entitling the holder to one vote on the same basis and in the same circumstances as one corresponding share of Molson Coors common stock.

        The exchangeable shares are exchangeable at any time, at the option of the holder on a one-for-one basis for corresponding shares of Molson Coors common stock.

        Holders of exchangeable shares are entitled to receive, subject to applicable law, dividends as follows:

  • in the case of a cash dividend declared on a corresponding share of Molson Coors common stock, an amount in cash for each exchangeable share corresponding to the cash dividend declared on each corresponding share of Molson Coors common stock in USD or in an equivalent amount in CAD;

    in the case of a stock dividend declared on a corresponding share of Molson Coors common stock to be paid in shares of Molson Coors common stock, in the number of exchangeable shares of the relevant class for each exchangeable share that is equal to the number of shares of corresponding Molson Coors common stock to be paid on each corresponding share of Molson Coors common stock; or

    in the case of a dividend declared on a corresponding share of Molson Coors common stock in any other type of property, in the type and amount of property as is economically equivalent as determined by MCCI's Board of Directors to the type and amount of property to be paid on each corresponding share of Molson Coors common stock.

        The declaration dates, record dates and payment dates for dividends on the exchangeable shares are the same as the relevant dates for the dividends on the shares of corresponding Molson Coors common stock.

Earnings Per Share
Earnings Per Share

11. Earnings Per Share

        Basic income per common share was 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 ("options"), stock-only stock appreciation rights ("SOSAR"), restricted stock units ("RSU"), deferred stock units ("DSU"), performance shares ("PSU") and performance units ("PU"). The dilutive effects of our potentially dilutive securities are calculated using the treasury stock method. Diluted income per share could also be impacted by our convertible debt and related warrants outstanding if they were in the money.

        The following summarizes the effect of dilutive securities on diluted EPS:

 
  For the years ended  
 
  December 26,
2009
  December 28,
2008
  December 30,
2007
 
 
  (In millions, except per share amounts)
 

Net income attributable to MCBC

  $ 720.4   $ 378.7   $ 492.0  
               

Weighted average shares for basic EPS

    184.4     182.6     178.7  

Effect of dilutive securities:

                   
 

Options, LOSARs and SOSARs

    1.0     1.8     2.5  
 

RSUs, PUs and DSUs

    0.5     1.1     0.2  
               

Weighted average shares for diluted EPS

    185.9     185.5     181.4  
               

Basic income (loss) per share:

                   
 

From continuing operations

  $ 3.96   $ 2.14   $ 2.85  
 

From discontinued operations

    (0.05 )   (0.07 )   (0.10 )
               

Basic income per share

  $ 3.91   $ 2.07   $ 2.75  
               

Diluted income (loss) per share:

                   
 

From continuing operations

  $ 3.92   $ 2.11   $ 2.81  
 

From discontinued operations

    (0.05 )   (0.07 )   (0.10 )
               

Diluted income per share

  $ 3.87   $ 2.04   $ 2.71  
               

Dividends declared and paid per share

  $ 0.92   $ 0.76   $ 0.64  
               

        Our calculation of weighted average shares includes all four classes of our outstanding stock: Class A and Class B Common, and Class A and Class B Exchangeable. Exchangeable shares are the equivalent of common shares, by class, in all respects. All classes of stock have in effect the same dividend rights and share equitably in undistributed earnings. Class A shareholders receive dividends only to the extent dividends are declared and paid to Class B shareholders. See Note 10, "Stockholders' Equity," for further discussion of the features of Class A and B Common shares and Class A and B Exchangeable shares.

        The following anti-dilutive securities were excluded from the computation of the effect of dilutive securities on earnings per share for the following periods:

 
  For the years ended  
 
  December 26,
2009
  December 28,
2008
  December 30,
2007
 
 
   
  (In millions)
   
 

Options, SOSARs and RSUs(1)

    0.6     0.3     0.2  

PUs and PSUs

            2.1  

Shares issuable upon assumed conversion of the 2.5% Convertible Senior Notes to issue Class B common shares(2)

    10.5     10.5     5.7  

Warrants to issue Class B common shares(2)

    10.5     10.5     5.7  
               

 

    21.6     21.3     13.7  
               

(1)
Exercise prices exceed the average market price of the common shares or are anti-dilutive due to the impact of the unrecognized compensation cost on the calculation of assumed proceeds in the application of the treasury stock method. See Note 15, "Share-Based Payments," for further discussion of these items.

(2)
As discussed in Note 14, "Debt," we issued $575 million of senior convertible notes in June 2007. The impact of a net share settlement of the conversion amount at maturity will begin to dilute earnings per share when our stock price reaches $54.76. The impact of stock that could be issued to settle share obligations we could have under the warrants we issued simultaneously with the convertible notes issuance will begin to dilute earnings per share when our stock price reaches $70.09. The potential receipt of MCBC stock from counterparties under our purchased call options when and if our stock price is between $54.76 and $70.09 would be anti-dilutive and excluded from any calculations of earnings per share.
Properties
Properties

12. Properties

        The cost of properties and related accumulated depreciation and amortization consists of the following:

 
  As of  
 
  December 26,
2009
  December 28,
2008
 
 
  (In millions)
 

Land and improvements

  $ 105.7   $ 117.7  

Buildings and improvements

    324.9     391.3  

Machinery and equipment

    1,323.4     1,145.0  

Furniture and fixtures

    292.3     246.6  

Software

    42.2     22.9  

Natural resource properties

    3.0     3.0  

Construction in progress

    44.4     48.9  
           

Total properties cost

    2,135.9     1,975.4  
 

Less accumulated depreciation and amortization

   
(843.4

)
 
(673.5

)
           

Net properties

  $ 1,292.5   $ 1,301.9  
           

        Depreciation expense was $146.9 million, $230.1 million and $283.4 million for fiscal years 2009, 2008, and 2007, respectively. Certain equipment held under capital lease is classified as equipment and amortized using the straight-line method or estimated useful life, whichever is shorter over the lease term. Lease amortization is included in depreciation expense. Expenditures for new facilities and improvements that substantially extend the capacity or useful life of an asset are capitalized. Start-up costs associated with manufacturing facilities, but not related to construction, are expensed as incurred. Ordinary repairs and maintenance are expensed as incurred.

        MCBC-UK owns and maintains the dispensing equipment in on-premise retail outlets. Dispensing equipment that transfers the beer from the keg in the cellar to the glass is capitalized at cost upon installation and depreciated on a straight-line basis over lives of up to 7 years, depending on the nature and usage of the equipment. Labor and materials used to install dispensing equipment are capitalized and depreciated over 2 years. Dispensing equipment awaiting installation is held in inventory and valued at the lower of cost or market. Ordinary repairs and maintenance are expensed as incurred.

        The following table details the ranges of the useful economic lives assigned to depreciable property, plant and equipment for the periods presented:

 
  Useful Economic Lives
as of December 26, 2009
Buildings and improvements   20 - 40 years
Machinery and equipment   3 - 25 years
Furniture and fixtures   3 - 10 years
Goodwill and Intangible Assets
Goodwill and Intangible Assets

13. Goodwill and Intangible Assets

        The following summarizes the changes in goodwill:

 
  As of  
 
  December 26,
2009
  December 28,
2008
 
 
  (In millions)
 

Balance at beginning of year

  $ 1,298.0   $ 3,346.5  
 

Contribution to MillerCoors

        (1,608.8 )
 

Foreign currency translation

    164.0     (438.2 )
 

Business acquisitions

    13.0      
 

Unrecognized tax benefits adjustments subsequent to adoption of new guidance

        (0.1 )
 

Transfer from goodwill to intangible assets

        (1.4 )
           

Balance at end of year

  $ 1,475.0   $ 1,298.0  
           

        Goodwill was allocated between our reportable segments as follows:

 
  As of  
 
  December 26,
2009
  December 28,
2008
 
 
  (In millions)
 

Canada

  $ 720.7   $ 614.8  

United Kingdom

    754.3     683.2  
           
 

Consolidated

  $ 1,475.0   $ 1,298.0  
           

        The following table presents details of our intangible assets, other than goodwill, as of December 26, 2009:

 
  Useful life   Gross   Accumulated
amortization
  Net  
 
  (Years)
  (In millions)
 

Intangible assets subject to amortization:

                       
 

Brands

  3 - 40   $ 293.5   $ (140.1 ) $ 153.4  
 

Distribution rights

  2 - 23     334.4     (194.3 )   140.1  
 

Patents and technology and distribution channels

  3 - 10     35.8     (22.4 )   13.4  

Intangible assets not subject to amortization:

                       
 

Brands

  Indefinite     3,248.8         3,248.8  
 

Distribution networks

  Indefinite     963.5         963.5  
 

Other

  Indefinite     15.5         15.5  
                   

Total

      $ 4,891.5   $ (356.8 ) $ 4,534.7  
                   

        The following table presents details of our intangible assets, other than goodwill, as of December 28, 2008:

 
  Useful life   Gross   Accumulated
amortization
  Net  
 
  (Years)
  (In millions)
 

Intangible assets subject to amortization:

                       
 

Brands

  3 - 35   $ 247.1   $ (107.9 ) $ 139.2  
 

Distribution rights

  2 - 23     289.0     (149.4 )   139.6  
 

Patents and technology and distribution channels

  3 - 10     25.8     (17.6 )   8.2  

Intangible assets not subject to amortization:

                       
 

Brands

  Indefinite     2,790.8         2,790.8  
 

Distribution networks

  Indefinite     827.9         827.9  
 

Other

  Indefinite     17.7         17.7  
                   

Total

      $ 4,198.3   $ (274.9 ) $ 3,923.4  
                   

        The change in the gross carrying amounts of intangibles from December 28, 2008 to December 26, 2009, is primarily due to the impact of foreign exchange rate fluctuations, as a significant amount of intangibles are denominated in foreign currencies. The gross carrying value was also impacted by the 50.1% purchase of CBPL and the acquisition of Granville Island.

        During the second quarter of 2008, we recognized an impairment charge of $50.6 million associated with a Molson brands intangible asset, an asset which represented the value of the Molson brands sold in the U.S. only. This intangible asset was not subject to amortization. While our accounting policy calls for annual testing of indefinite-lived intangible assets in the third quarter of each year, we noted unfavorable operating results and a change in management's strategic initiatives associated with these brands, and as a result tested the intangible for impairment in the second quarter of 2008.

        Based on foreign exchange rates as of December 26, 2009, the estimated future amortization expense of intangible assets is as follows:

Fiscal Year
  Amount  
 
  (In millions)
 

2010

  $ 43.9  

2011

  $ 42.5  

2012

  $ 30.4  

2013

  $ 29.9  

2014

  $ 29.9  

        Amortization expense of intangible assets was $40.5 million, $43.3 million, and $62.4 million for the years ended December 26, 2009, December 28, 2008, and December 30, 2007, 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 completed the required impairment testing during the third quarter of 2009 and determined that there were no impairments of goodwill or other indefinite-lived intangible assets. No accumulated impairment losses were included in the goodwill balances as of December 26, 2009 or December 28, 2008.

Debt
Debt

14. Debt

        Our total long-term borrowings as of December 26, 2009 and December 28, 2008, were composed of the following:

 
  As of  
 
  December 26,
2009
  December 28,
2008
 
 
  (In millions)
 

Senior notes:

             
 

U.S. $850 million 6.375% due 2012(1)

  $ 44.6   $ 44.6  
 

U.S. $300 million 4.85% due 2010(2)

    300.0     300.0  
 

CAN $900 million 5.0% due 2015(2)

    857.2     736.5  

U.S. $575 million Convertible debt 2.5% due 2013(3)

    575.0     575.0  

Credit facility(4)

         

Other notes payable issued by:

             
 

BRI joint venture 7.5% due 2011(5)

        176.0  

Less: unamortized debt discounts and other

    (63.8 )   (80.0 )
           

Total long-term debt (including current portion)

    1,713.0     1,752.1  

Less: current portion of long-term debt

    (300.3 )   (0.1 )
           

Total long-term debt

  $ 1,412.7   $ 1,752.0  
           

Total fair value

  $ 1,913.6   $ 1,817.5  
           

(1)
On May 7, 2002, CBC completed a private placement of $850 million of 6.375% 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 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 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. On July 11, 2007, we repurchased $625 million aggregate principal amount of those notes. On February 7, 2008, we announced a tender for repurchase of any and all of the remaining principal amount of $225 million, with the tender period running through February 14, 2008. The net costs of $12.4 million related to this extinguishment of debt and termination of related interest rate swaps was recorded in the first quarter of 2008. The amount actually repurchased was $180.4 million with $45.3 million outstanding as of December 26, 2009, which, in addition to the remaining principal amount of $44.6 million, also includes a liability of $0.7 million related to interest rate swaps transacted around this debt issuance in 2002, but were cash settled in 2008 in conjunction with the tender offer. This remaining balance relates to the outstanding principal amount and is being amortized over the remaining term of this debt.

(2)
On September 22, 2005, Molson Coors Capital Finance ULC (MCCF), a Nova Scotia entity, and Molson Coors International, LP, a Delaware partnership, both wholly owned subsidiaries of MCBC, issued 10-year and 5-year private placement debt securities totaling CAD $900 million in Canada and U.S. $300 million in the United States, bearing interest at 5.0% and at 4.85%, respectively paid semi-annually. Both offerings are guaranteed by MCBC, and all of its significant subsidiaries. The securities have certain restrictions on secured borrowing, sale-leaseback transactions and the sale of assets, all of which we were in compliance at December 26, 2009. These securities will mature on September 22, 2010 for the U.S. issue and September 22, 2015 for the Canadian issue. 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 CAD $900 million notes were subsequently exchanged for publicly registered notes with the same terms.

(3)
On June 15, 2007, MCBC issued $575 million of 2.5% Convertible Senior Notes (the "Notes") in a public offering payable semi-annually in arrears. The Notes are governed by indenture dated June 15, 2007, and supplemental indenture documents (together, the "Indenture"), among MCBC and its subsidiary guarantors and our trustee. The Notes are the Company's senior unsecured obligations and rank equal in rights of payment with all of the Company's other senior unsecured debt and senior to all of the Company's future subordinated debt. The Notes are guaranteed on a senior unsecured basis by the same subsidiary guarantors that have guaranteed the Company's other debt securities. The Notes mature on July 30, 2013, unless earlier converted or terminated, subject to certain conditions, as noted below. The Notes contain certain customary anti-dilution and make-whole provisions to protect holders of the Notes as defined in the Indenture.

Holders may surrender their Notes for conversion prior to the close of business on January 30, 2013, if any of the following conditions are satisfied:

during any calendar quarter, if the closing sales price of our Class B common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter preceding the quarter in which the conversion occurs is more than 130% of the conversion price of the Notes in effect on that last trading day;

during the ten consecutive trading day period following any five consecutive trading day period in which the trading price for the Notes for each such trading day was less than 95% of the closing sale price of our Class B common stock on such date multiplied by the then current conversion rate; or

if we make certain significant distributions to holders of our Class B common stock, we enter into specified corporate transactions or our Class B common stock ceases to be approved for listing on the New York Stock Exchange and is not listed for trading purposes on a U.S. national securities exchange.


After January 30, 2013, holders may surrender their Notes for conversion any time prior to the close of business on the business day immediately preceding the maturity date regardless of whether any of the conditions listed above have been satisfied. Upon conversion of the Notes, holders of the Notes will receive the par value amount of each bond in cash and the shares of our Class B common stock (subject to our right to deliver cash in lieu of all or a portion of those shares) in satisfaction of the conversion feature if, on the day of conversion, the MCBC stock price exceeds the conversion price. The conversion price for each $1,000 aggregate principal amount of notes is $54.76 per share of our Class B common stock, which represents a 25% premium above the stock price on the day of the issuance of the Notes and corresponds to the initial conversion ratio of 18.263 shares per each $1,000 aggregate principal amount of notes. The conversion ratio and conversion price are subject to customary adjustments for certain events and provisions, as defined in the Indenture. If, upon conversion, the MCBC stock price is below the conversion price, adjusted as necessary, a cash payment for the par value amount of the Notes will be made.

We initially accounted for the Notes pursuant to guidance pertaining to convertible bonds with issuer option to settle for cash upon conversion, that is, we did not separate and assign values to the conversion feature of the Notes but rather accounted for the entire agreement as one debt instrument as the conversion feature met the requirements of guidance pertaining to accounting for derivative financial instruments indexed to, and potentially settled in, a company's own stock. Due to new guidance effective in 2009, the amounts in the table above have been reduced by the unamortized discount in the amounts of $63.3 million and $79.7 million for the years ended December 26, 2009 and December 28, 2008, respectively. As noted in Note 2, "New Accounting Pronouncements," the Company retrospectively adopted authoritative guidance related to accounting for convertible debt instruments, impacting historical accounting for the Notes. Considering interest rates applicable at the time of the Convertible Senior Notes issuance on June 15, 2007, we determined that the historical liability and equity components would have been valued using an effective 6.08% interest rate. As such, the amount allocated to the long-term debt at that date was $471.1 million, and the pretax amount allocated to equity was $103.9 million ($64.2 million net of tax). The retrospective adoption increased non-cash interest expense by $15.8 million and $8.4 million for the fifty-two weeks ended December 28, 2008 and December 30, 2007, respectively as the Company accreted the discounted debt to its face value. During the year ended December 26, 2009, we incurred additional non-cash interest expense of $16.4 million. The additional non-cash interest expense impact (net of tax) to net income per share was a decrease of $0.06, $0.05 and $0.03 for the years ended December 26, 2009, December 28, 2008, and December 30, 2007, respectively. We also incurred interest expense related to the 2.5% coupon rate of $14.4 million, $14.4 million, and $7.8 million for the years ended December 26, 2009, December 28, 2008, and December 30, 2007, respectively. The combination of non-cash and cash interest resulted in an effective interest rate of 6.01%. 6.10% and 6.23% for the years ended December 26, 2009, December 28, 2008 and December 30, 2007, respectively. We expect to also record additional non-cash interest expense representing the amortization of the debt discount on the Convertible Senior Notes in 2010 through 2013 of approximately $16 million to $18 million annually, thereby increasing the carrying value of the long-term debt to its $575 million face value at maturity in July 2013.

In connection with the issuance of the Notes, we incurred approximately $10.2 million of deferred debt issuance costs which will be amortized as interest expense over the life of the Notes.

Convertible Note Hedge and Warrants:

In connection with the issuance of the Notes, we entered into a privately negotiated convertible note hedge transaction. The convertible note hedge (the "purchased call options") will cover up to approximately 10.5 million shares of our Class B common stock. The purchased call options, if exercised by us, require the counterparty to deliver to us shares of MCBC Class B common stock adequate to meet our net share settlement obligations under the convertible notes and are expected to reduce the potential dilution to our Class B common stock to be issued upon conversion of the Notes, if any. Separately and concurrently, we also entered into warrant transactions with respect to our Class B common stock pursuant to which we may be required to issue to the counterparty up to approximately 10.5 million shares of our Class B common stock. The warrant price is $70.09 which represents a 60% premium above the stock price on the date of the warrant transaction. The warrants expire on February 20, 2014.

We used approximately $50 million of the net proceeds from the issuance of the 2.5% Convertible Senior Notes, to pay for the cost of the purchased call options, partially offset by the proceeds to us from the warrant transaction. The net cost of these transactions, net of tax, was recorded in the Stockholder's Equity section of the balance sheet.

The purchased call options and warrants are separate transactions entered into by the Company, and they are not part of the terms of the Notes and do not affect the holders' rights under the Notes.

(4)
We maintain a $750 million revolving multicurrency bank credit facility, which expires in August 2011. 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. There were no outstanding borrowings on this credit facility as of December 26, 2009.

(5)
We deconsolidated BRI from our financial statements in February 2009. As a result BRI notes payable are not presented as part of MCBC debt obligations for 2009.

        Our total short-term borrowings facilities consist of a USD $20.0 million line of credit with a borrowing rate of USD LIBOR +1.5%, an overdraft facility of CAD $30.0 million at either USD Prime or CAD Prime depending on the borrowing currency, a line of credit for GBP £10.0 million and an overdraft facility for GBP £10.0 million, both at GBP LIBOR +1.5%, and a line of credit for Japanese Yen 600.0 million, of which 275.0 million is committed under an outstanding letter of credit, at a base rate of less than 1.0%. As of December 26, 2009 and December 28, 2008, we have no borrowings under any of these facilities. See Note 21, "Commitments and Contingencies" for discussion related to letters of credit.

        As of December 26, 2009, the aggregate principal debt maturities of long-term debt and short-term borrowings for the next five fiscal years are as follows:

 
  Amount  
 
  (In millions)
 

2010

  $ 300.0  

2011

     

2012

    44.6  

2013

    575.0  

2014

     

Thereafter

    857.2  
       
 

Total

  $ 1,776.8  
       

        Under the terms of some of our debt facilities, we must comply with certain restrictions. These restrictions include restrictions on debt secured by certain types of mortgages, certain threshold percentages of secured consolidated net tangible assets, and restrictions on certain types of sale lease-back transactions. As of December 26, 2009, we were in compliance with all of these restrictions.

Interest

        Interest incurred, capitalized and expensed were as follows:

 
  For the years ended  
 
  December 26,
2009
  December 28,
2008
  December 30,
2007
 
 
  (In millions)
 

Interest incurred(1)

  $ 99.3   $ 120.2   $ 144.4  

Interest capitalized

    (2.7 )   (1.1 )   (9.5 )
               

Interest expensed

  $ 96.6   $ 119.1   $ 134.9  
               

(1)
Interest incurred includes non-cash interest of $16.4 million, $15.8 million and $8.4 million for the years ended December 26, 2009, December 28, 2008 and December 30, 2007, respectively.
Share-Based Payments
Share-Based Payments

15. Share-Based Payments

        At December 26, 2009, we had three stock-based compensation plans.

The 1990 Equity Incentive Plan

        The 1990 Equity Incentive Plan ("EI Plan") generally provides for two types of grants for our employees: stock options and restricted stock awards. The stock options have a term of 10 years and one-third of the stock option award vests in each of the three successive years after the date of grant. There were no awards granted under the EI Plan in 2009, 2008, or 2007 and we are not expecting to grant any new awards under this plan.

Equity Compensation Plan for Non-Employee Directors

        The Equity Compensation Plan for Non-Employee Directors ("EC Plan") provides for awards of the Company's Class B shares of restricted stock or options for Class B shares. Awards vest after completion of the director's annual term. The compensation cost associated with the EC plan is amortized over the directors' term. There were no awards granted under the EC Plan in 2009, 2008, or 2007 and we are not expecting to grant any new awards under this plan.

Molson Coors Brewing Company Incentive Compensation Plan

        During 2009, 2008, and 2007, we issued the following awards related to Class B common shares to certain directors, officers, and other eligible employees, pursuant to the Molson Coors Brewing Company Incentive Compensation Plan ("MCBC IC Plan"): restricted stock units ("RSU"), deferred stock units ("DSU"), performance units ("PU"), performance share units ("PSU"), stock options, and stock-only stock appreciation rights ("SOSAR").

        RSU awards are issued at the market value equal to the price of our stock at the date of the grant and vest over the period of three years. In 2009, 2008 and 2007, we granted 0.2 million, 0.6 million and 0.3 million RSUs with a weighted-average market value of $42.07, $56.43 and $46.24 each, respectively.

        DSU awards, under the Directors' Stock Plan pursuant to the MCBC IC Plan, are elected by the non-employee directors of MCBC by enabling them to receive all or one-half of their annual cash retainer payments in our stock. The deferred stock unit awards are issued at the market value equal to the average day's price on the date of the grant and generally vest over the annual service period. In 2009, 2008 and 2007, we granted a small number of DSUs with a weighted-average market value of $42.82, $50.38 and $48.66 per share, respectively.

        PUs are granted based on a target value established at the date of grant and vest upon completion of a service requirement. The payout value can range from zero to two times the target value based on achievement of specified adjusted earnings per share targets. Adjusted earnings per share is an internal measure calculated from our actual diluted earnings per share adjusted for special items and other significant benefits or charges as approved by the Company's compensation committee. The PU award value is calculated by multiplying the number of PUs granted by actual cumulative adjusted earnings per share over the specific performance period. The PU award value can be settled in cash or shares, or partly in cash and partly in shares, at the discretion of the Company. If settled in shares, it will be based on the closing MCBC Class B common stock price on the date of vesting. Prior to vesting, no shares are issued and PUs have no voting rights. We are unable to predict the vesting date share price and as a result, account for the PUs as liabilities, resulting in variable compensation expense until settled. The variability of compensation expense will arise primarily from changing estimates of adjusted earnings per share. Changes in MCBC Class B common stock prices during the vesting period will not impact compensation expense but will impact the number of shares ultimately issued if the awards are settled in stock. Compensation expense is determined based upon the estimated award value and recognized over the requisite service period of the grant once we have determined that achievement of the performance condition is probable. If in the future it becomes improbable that the performance condition will be met, previously recognized compensation cost will be reversed, and no compensation cost will be recognized. The service condition vesting periods range from one to three years. During the second quarter of 2009, we granted 2.4 million PUs, all of which were outstanding as of December 26, 2009. The aggregate intrinsic value of PUs outstanding at December 26, 2009 was $14.9 million. Total compensation expense recognized for PUs for the year ended December 26, 2009, totaled $4.8 million. No PUs were granted in 2008 or 2007.

        PSU awards are earned over the estimated expected term to achieve certain financial targets, which were established on March 16, 2006 at the time of the initial grant. As of March 30, 2008, these financial targets were achieved for all PSU awards outstanding. As a result of achieving these financial targets, we recognized the remaining $34.4 million expense before taxes in the first quarter of 2008 associated with the outstanding PSU awards. PSUs are granted at the market value of our stock on the date of the grant. In 2009, we did not grant any of these shares under this plan. In 2008, a small number of these shares were granted under this plan at the weighted-average market value of $50.37 per share. In 2007, 0.2 million shares were granted under this plan at the weighted-average market value of $44.31 per share. As of December 26, 2009, there were 0.7 million shares of the Company's stock available for the issuance of the options, SOSAR, RSU, DSU, PSU, and PU awards under the MCBC IC Plan.

        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. During 2009, we granted 0.7 million options with a weighted-average fair market value of $10.33 each. No options were granted in 2008.

        SOSARs were granted with an exercise price equal to the market value of a share of common stock on the date of grant. The SOSARs entitle the award recipient to receive shares of the Company's stock with a fair market value equal to the excess of the trading price over the exercise price of such shares on the date of the exercise. SOSARs have a term of ten years and generally vest over three years. No SOSARs were granted in 2009. During 2008 and 2007, we granted 0.6 million and 1.0 million SOSARs with a weighted-average fair market value of $14.40 and $13.23 each, respectively.

        We record the fair value impact related to stock-based compensation for former CBC employees, now employed by MillerCoors who hold previously granted MCBC stock-awards, on a quarterly basis. The additional mark-to-market cost is related to stock awards to be settled in MCBC Class B common stock. The mark-to-market stock-based compensation expense before tax, related to MCBC equity awards, during the year ended December 26, 2009 and six months ended December 28, 2008 was $3.0 million and $3.1 million, respectively.

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

 
  For the years ended  
 
  December 26,
2009
  December 28,
2008
  December 30,
2007
 
 
  (In millions)
 

Options and SOSARs

                   
 

Pre-tax compensation expense

  $ 5.9   $ 9.9   $ 10.3  
 

Tax benefit

    (1.8 )   (2.9 )   (3.1 )
               
 

After-tax compensation expense

    4.1     7.0     7.2  
               

RSUs and DSUs

                   
 

Pre-tax compensation expense

    15.1     14.9     7.6  
 

Tax benefit

    (4.1 )   (4.4 )   (2.2 )
               
 

After-tax compensation expense

    11.0     10.5     5.4  
               

PUs and PSUs

                   
 

Pre-tax compensation expense

    4.8     34.2     19.5  
 

Tax benefit

    (1.2 )   (9.9 )   (5.7 )
               
 

After-tax compensation expense

    3.6     24.3     13.8  
               
 

Total after-tax compensation expense

  $ 18.7   $ 41.8   $ 26.4  
               

        The mark-to-market stock option floor adjustment, which expires in the first quarter of 2010, relates to adjusting to the floor provided on the exercise price of stock options held by former Coors officers who left the Company under change in control agreements. As a result of the stock price exceeding the floor, no mark-to-market stock option floor adjustment was recognized in 2009, 2008 or 2007.

        Included in the restricted stock compensation expense was the DSU amortization of $0.6 million, $0.5 million and $0.5 million for the years ended December 26, 2009, December 28, 2008 and December 30, 2007, respectively.

        The summary of activity of unvested RSUs, DSUs, PUs and PSUs during 2009 is presented below:

 
  Shares   Weighted-average
grant date fair value
 
 
  (In millions, except per share amounts)
 

Non-vested as of December 28, 2008

    1.1   $ 48.06  
 

Granted

    2.7   $ 9.90  
 

Vested

    (0.3 ) $ 36.53  
 

Forfeited

    (0.3 ) $ 52.67  
             

Non-vested as of December 26, 2009

    3.2   $ 16.60  
             

        The total fair values of RSUs, DSUs PUs and PSUs vested during 2009, 2008 and 2007 were $11.4 million, $116.2 million and $3.4 million, respectively. As of December 26, 2009, there was approximately $37.6 million of total unrecognized compensation cost from all 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 1.4 years.

        The fair value of each option and SOSAR granted in 2009, 2008 and 2007 was determined on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

 
  For the years ended  
 
  December 26,
2009
  December 28,
2008
  December 30,
2007
 

Risk-free interest rate

    2.46 %   3.05 %   4.64 %

Dividend yield

    2.28 %   1.41 %   1.40 %

Volatility range

    28.7% - 28.9 %   25.3% - 26.8 %   21.8% - 26.8 %

Weighted-average volatility

    28.88 %   25.43 %   25.30 %

Expected term (years)

    5.0 - 7.0     3.5 - 7.0     3.5 - 7.0  

Weighted-average fair market value(1)

    $10.33     $14.40     $13.23  

(1)
Value relates to options granted for the year ended December 26, 2009 and SOSARs granted for the years ended December 28, 2008 and December 30, 2007.

        The risk-free interest 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. The expected term of options is estimated based upon observations of historical employee option exercise patterns and trends. The range on the expected term results from separate groups of employees who exhibit different historical exercise behavior.

        Options and SOSARs outstanding at December 26, 2009, changes during 2009, and shares available for grant under all of our plans are presented below:

 
  Shares outstanding   Shares exercisable at year-end  
 
  Shares