MOLSON COORS BREWING CO, 10-K filed on 2/27/2012
Annual Report
Document and Entity Information Document (USD $)
12 Months Ended
Dec. 31, 2011
Jun. 25, 2011
Feb. 17, 2012
Class A common stock, voting
Feb. 17, 2012
Class B common stock, non-voting
Feb. 17, 2012
Class A exchangeable shares
Feb. 17, 2012
Class B exchangeable shares
Document Information [Line Items]
 
 
 
 
 
 
Entity Registrant Name
MOLSON COORS BREWING CO 
 
 
 
 
 
Trading Symbol
tap 
 
 
 
 
 
Entity Central Index Key
0000024545 
 
 
 
 
 
Document Type
10-K 
 
 
 
 
 
Document Period End Date
Dec. 31, 2011 
 
 
 
 
 
Document Fiscal Year Focus
2011 
 
 
 
 
 
Document Fiscal Period Focus
FY 
 
 
 
 
 
Current Fiscal Year End Date
--12-31 
 
 
 
 
 
Amendment Flag
false 
 
 
 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
 
 
 
Entity Common Stock, Shares Outstanding
 
 
2,583,694 
155,740,376 
 
 
Entity Exchangeable, shares outstanding
 
 
 
 
2,939,704 
19,260,978 
Entity Well-known Seasoned Issuer
Yes 
 
 
 
 
 
Entity Voluntary Filers
No 
 
 
 
 
 
Entity Current Reporting Status
Yes 
 
 
 
 
 
Entity Public Float
 
$ 6,643,623,931 
 
 
 
 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 25, 2010
Dec. 26, 2009
Sales
$ 5,169.9 
$ 4,703.1 
$ 4,426.5 
Excise taxes
(1,654.2)
(1,448.7)
(1,394.1)
Net sales
3,515.7 1
3,254.4 
3,032.4 1
Cost of goods sold
(2,049.1)
(1,812.2)
(1,726.9)
Gross profit
1,466.6 
1,442.2 
1,305.5 
Marketing, general and administrative expenses
(1,019.0)
(1,012.5)
(900.8)
Special items, net
(12.3)
(21.3)
(32.7)
Equity income in MillerCoors
457.9 
456.1 
382.0 
Operating income (loss)
893.2 
864.5 
754.0 
Other income (expense), net
 
 
 
Interest expense
(118.7)
(110.2)
(96.6)
Interest income
10.7 
10.8 
10.7 
Other income (expense), net, includes $46.0 gain in 2009 on related party transaction, see Note 4
(11.0)
43.9 
49.4 
Total other income (expense), net
(119.0)
(55.5)
(36.5)
Income from continuing operations before income taxes
774.2 
809.0 
717.5 
Income tax benefit (expense)
(99.4)
(138.7)
14.7 
Net income (loss) from continuing operations
674.8 
670.3 
732.2 
Income (loss) from discontinued operations, net of tax
2.3 
39.6 
(9.0)
Net income (loss) including noncontrolling interest
677.1 
709.9 
723.2 
Less: Net income attributable to noncontrolling interests
(0.8)
(2.2)
(2.8)
Net income (loss) attributable to Molson Coors Brewing Company
676.3 
707.7 
720.4 
Basic net income (loss) attributable to Molson Coors Brewing Company per share:
 
 
 
From continuing operations (in dollars per share)
$ 3.65 
$ 3.59 
$ 3.96 
From discontinued operations (in dollars per share)
$ 0.01 
$ 0.21 
$ (0.05)
Basic net income (loss) attributable to Molson Coors Brewing Company per share (in dollars per share)
$ 3.66 
$ 3.80 
$ 3.91 
Diluted net income (loss) attributable to Molson Coors Brewing Company per share:
 
 
 
From continuing operations (in dollars per share)
$ 3.62 
$ 3.57 
$ 3.92 
From discontinued operations (in dollars per share)
$ 0.01 
$ 0.21 
$ (0.05)
Diluted net income (loss) attributable to Molson Coors Brewing Company per share (in dollars per share)
$ 3.63 
$ 3.78 
$ 3.87 
Weighted average shares - basic (in shares)
184.9 
185.9 
184.4 
Weighted average shares - diluted (in shares)
186.4 
187.3 
185.9 
Amounts attributable to Molson Coors Brewing Company
 
 
 
Net income (loss) from continuing operations
674.0 
668.1 
729.4 
Income (loss) from discontinued operations, net of tax
2.3 
39.6 
(9.0)
Net income (loss) attributable to Molson Coors Brewing Company
$ 676.3 
$ 707.7 
$ 720.4 
CONSOLIDATED STATEMENTS OF OPERATIONS (Parentheticals) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 26, 2009
Other income (expense), gain on related party transaction
$ 46.0 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Dec. 31, 2011
Dec. 25, 2010
Current assets:
 
 
Cash and cash equivalents
$ 1,078.9 
$ 1,217.6 
Trade, less allowance for doubtful accounts of $10.3 and $7.4, respectively
529.9 
503.8 
Affiliates
58.9 
67.0 
Current notes receivable and other receivables, less allowance for doubtful accounts of $1.8 and $2.5, respectively
137.2 
158.7 
Inventories:
 
 
Finished
140.7 
134.3 
In process
15.3 
16.6 
Raw materials
41.8 
32.1 
Packaging materials
9.4 
12.0 
Total inventories
207.2 
195.0 
Maintenance and operating supplies, less allowance for obsolete supplies of $5.9 and $4.1, respectively
22.0 
20.2 
Other current assets
72.0 
58.0 
Deferred tax assets
11.6 
Discontinued operations
0.3 
0.6 
Total current assets
2,118.0 
2,220.9 
Properties, less accumulated depreciation of $1,021.1 and $926.5, respectively
1,430.1 1
1,388.7 1
Goodwill
1,453.3 
1,489.1 
Other intangibles, less accumulated amortization of $442.7 and $406.8, respectively
4,586.0 
4,655.1 
Investment in MillerCoors
2,487.9 
2,574.1 
Deferred tax assets
149.9 
188.2 
Notes receivable, less allowance for doubtful accounts of $4.4 and $6.6, respectively
32.7 
43.0 
Other assets
165.9 
138.5 
Total assets
12,423.8 
12,697.6 
Accounts payable:
 
 
Trade
268.5 
227.8 
Affiliates
32.7 
40.4 
Accrued expenses and other liabilities
646.8 
804.6 
Derivative hedging instruments
107.6 
26.4 
Deferred tax liabilities
161.3 
219.6 
Current portion of long-term debt and short-term borrowings
46.9 
1.1 
Discontinued operations
13.4 
14.0 
Total current liabilities
1,277.2 
1,333.9 
Long-term debt
1,914.9 
1,959.6 
Pension and post-retirement benefits
697.5 
458.6 
Derivative hedging instruments
212.5 
404.8 
Deferred tax liabilities
455.6 
466.7 
Unrecognized tax benefits
76.4 
80.8 
Other liabilities
77.5 
126.4 
Discontinued operations
22.0 
24.2 
Total liabilities
4,733.6 
4,855.0 
Commitments and contingencies (Note 20)
   
   
Capital stock:
 
 
Preferred stock, non-voting, no par value (authorized: 25.0 shares; none issued)
Paid-in capital
3,572.1 
3,548.4 
Retained earnings
3,689.7 
3,241.5 
Accumulated other comprehensive income (loss)
(129.7)
171.1 
Class B common stock held in treasury at cost (7.5 shares and zero shares at December 31, 2011 and December 25, 2010, respectively)
(321.1)
Total Molson Coors Brewing Company stockholders' equity
7,647.9 
7,798.8 
Noncontrolling interests
42.3 
43.8 
Total equity
7,690.2 
7,842.6 
Total liabilities and equity
12,423.8 
12,697.6 
Class A common stock, voting
 
 
Capital stock:
 
 
Common stock
Class B common stock, non-voting
 
 
Capital stock:
 
 
Common stock
1.6 
1.6 
Class A exchangeable shares
 
 
Capital stock:
 
 
Exchangeable shares
110.5 
111.2 
Class B exchangeable shares
 
 
Capital stock:
 
 
Exchangeable shares
$ 724.8 
$ 725.0 
CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) (USD $)
In Millions, except Share data, unless otherwise specified
Dec. 31, 2011
Dec. 25, 2010
Assets
 
 
Trade receivables, allowance for doubtful accounts
$ 10.3 
$ 7.4 
Current notes receivable and other receivables, allowance for doubtful accounts
1.8 
2.5 
Maintenance and operating supplies, allowance for obsolete supplies
5.9 
4.1 
Properties, accumulated depreciation
1,020.1 
926.5 
Other intangibles, accumulated amortization
442.7 
406.8 
Notes receivable, allowance for doubtful accounts
$ 4.4 
$ 6.6 
Equity [Abstract]
 
 
Preferred stock, non-voting, par value
$ 0 
$ 0 
Preferred stock, non-voting, authorized shares
25,000,000 
25,000,000 
Preferred stock, non-voting, issued shares
Class A common stock, voting
 
 
Equity [Abstract]
 
 
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, authorized shares
500,000,000 
500,000,000 
Common Stock, Issued (in shares)
2,600,000.0 
2,600,000.0 
Common stock, outstanding shares
2,600,000 
2,600,000 
Class B common stock, non-voting
 
 
Equity [Abstract]
 
 
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, authorized shares
500,000,000 
500,000,000 
Common Stock, Issued (in shares)
162,700,000.0 
162,000,000.0 
Common stock, outstanding shares
Treasury Stock, Shares
7,500,000 
Class A exchangeable shares
 
 
Equity [Abstract]
 
 
Exchangeable shares, par value
$ 0 
$ 0 
Exchangeable shares, issued shares
2,900,000 
3,000,000 
Exchangeable shares, outstanding shares
2,900,000 
3,000,000 
Class B exchangeable shares
 
 
Equity [Abstract]
 
 
Exchangeable shares, par value
$ 0 
$ 0 
Exchangeable shares, issued shares
19,300,000 
19,200,000 
Exchangeable shares, outstanding shares
19,300,000 
19,200,000 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2011
Dec. 25, 2010
Dec. 26, 2009
Cash flows from operating activities:
 
 
 
Net income (loss) including noncontrolling interest
$ 677.1 
$ 709.9 
$ 723.2 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
217.1 1
202.3 1
208.0 1
Amortization of debt issuance costs and discounts
22.5 
20.6 
19.4 
Share-based compensation
24.7 
27.4 
22.8 
Loss (gain) on sale or impairment of properties and intangibles
8.6 
19.1 
(38.1)
Excess tax benefits from share-based compensation
(2.0)
(4.8)
(21.7)
Deferred income taxes
38.9 
68.0 
127.8 
Loss (gain) on foreign currency fluctuations and derivative instruments
9.1 
(9.9)
(0.1)
Equity income in MillerCoors
(457.9)
(456.1)
(382.0)
Distributions from MillerCoors
457.9 
456.1 
401.1 
Equity in net income of other unconsolidated affiliates
(23.2)
(18.2)
(6.9)
Distributions from other unconsolidated affiliates
28.4 
14.0 
16.6 
Change in current assets and liabilities (net of assets acquired and liabilities assumed in business combinations) and other:
 
 
 
Receivables
(29.0)
(7.8)
(63.3)
Inventories
(17.1)
(10.1)
1.8 
Payables
(16.4)
45.3 
21.0 
Other assets and other liabilities
(68.3)
(266.5)
(180.3)
(Gain) loss from discontinued operations
(2.3)
(39.6)
9.0 
Net cash provided by operating activities
868.1 
749.7 
858.3 
Cash flows from investing activities:
 
 
 
Additions to properties and intangible assets
(235.4)2
(177.9)2
(158.8)2
Proceeds from sales of businesses and other assets, includes $53.3 in 2009 on related party transaction, see Note 4
4.6 
5.2 
58.0 
Acquisition of businesses, net of cash acquired
(41.3)
(19.8)
(41.7)
Change in restricted cash balances
6.7 
(10.8)
Payment on discontinued operations
(96.0)
Investment in MillerCoors
(800.1)
(1,071.2)
(514.5)
Return of capital from MillerCoors
782.7 
1,060.3 
448.2 
Deconsolidation of Brewers' Retail, Inc.
(26.1)
Investment in and advances to an unconsolidated affiliate
(83.2)
Trade loan repayments from customers
22.4 
16.6 
32.1 
Trade loans advanced to customers
(9.9)
(9.1)
(25.5)
Proceeds from settlements of derivative instruments
15.4 
35.1 
Other
0.2 
0.1 
Net cash used in investing activities
(338.1)
(267.4)
(228.2)
Cash flows from financing activities:
 
 
 
Exercise of stock options under equity compensation plans
11.6 
38.5 
43.1 
Excess tax benefits from share-based compensation
2.0 
4.8 
21.7 
Payments for purchase of treasury stock
(321.1)
Dividends paid
(228.1)
(201.1)
(170.4)
Dividends paid to noncontrolling interests holders
(2.3)
(3.7)
(2.9)
Proceeds from issuances of long-term debt
488.4 
Debt issuance costs
(2.2)
(3.3)
Payments on long-term debt and capital lease obligations
(0.3)
(300.0)
(0.4)
Proceeds from short-term borrowings
6.8 
12.1 
14.7 
Payments on short-term borrowings
(18.3)
(8.1)
(17.0)
Net proceeds from (payments on) revolving credit facilities
2.1 
Payments on settlements of debt-related derivatives
(104.5)
(42.0)
Change in overdraft balances and other
(10.8)
6.8 
(6.0)
Net cash used in financing activities
(665.1)
(7.6)
(117.2)
Cash and cash equivalents:
 
 
 
Net increase (decrease) in cash and cash equivalents
(135.1)
474.7 
512.9 
Effect of foreign exchange rate changes on cash and cash equivalents
(3.6)
8.7 
5.1 
Balance at beginning of year
1,217.6 
734.2 
216.2 
Balance at end of period
$ 1,078.9 
$ 1,217.6 
$ 734.2 
CONSOLIDATED STATEMENT OF CASH FLOWS (Parentheticals) (Club)
In Millions, unless otherwise specified
12 Months Ended
Dec. 26, 2009
USD ($)
Dec. 26, 2009
CAD ($)
Net proceeds from sale of ownership interest in Montreal Candadiens to CH Group
$ 53.3 
$ 56.3 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND NONCONTROLLING INTERESTS (USD $)
In Millions, unless otherwise specified
Total
Retained earnings
Accumulated other comprehensive income (loss)
Class A common stock, voting
Class B common stock, non-voting
Common stock held in Treasury Class B
Class A exchangeable shares
Class B exchangeable shares
Paid-in capital
Noncontrolling interest
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest at Dec. 28, 2008
$ 6,039.4 
$ 2,184.9 
$ (371.4)
$ 0 
$ 1.6 
 
$ 119.4 
$ 786.3 
$ 3,334.6 
$ (16.0)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
Exchange of shares
 
 
 
 
 
(0.3)
(24.5)
24.8 
 
Shares issued under equity compensation plan
61.0 
 
 
 
 
 
 
 
61.0 
 
Amortization of stock based compensation
21.1 
 
 
 
 
 
 
 
21.1 
 
Acquisition of business
9.6 
 
 
 
 
 
 
 
 
9.6 
Deconsolidation of Brewer's Retail, Inc.
(5.7)
 
 
 
 
 
 
 
 
(5.7)
Comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
Net income (loss) including noncontrolling interest
723.2 
720.4 
 
 
 
 
 
 
 
2.8 
Other Comprehensive Income (Loss), Net of Tax [Abstract]
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
614.7 
 
614.7 
 
 
 
 
 
 
 
Unrealized gain (loss) on derivative instruments, net
(28.7)
 
(28.7)
 
 
 
 
 
 
 
Realized gain (loss) on derivative instruments reclassified to net income, net
(10.6)
 
(10.6)
 
 
 
 
 
 
 
Ownership share of equity method investees other comprehensive loss
56.7 
 
56.7 
 
 
 
 
 
 
 
Pension and other postretirement benefit plans, adjustment
(214.6)
 
(240.0)
 
 
 
 
 
 
25.4 
Other comprehensive income (loss), net of Tax
417.5 
 
392.1 
 
 
 
 
 
 
 
Comprehensive income (loss), net of tax
1,140.7 
 
 
 
 
 
 
 
 
 
Dividends declared and paid
(173.3)
(170.4)
 
 
 
 
 
 
 
(2.9)
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest at Dec. 26, 2009
7,092.8 
2,734.9 
20.7 
1.6 
 
119.1 
761.8 
3,441.5 
13.2 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
Exchange of shares
 
(7.9)
(36.8)
44.7 
Shares issued under equity compensation plan
39.6 
 
 
 
 
 
 
 
39.6 
 
Amortization of stock based compensation
22.6 
 
 
 
 
 
 
 
22.6 
 
Acquisition of business
32.1 
 
 
 
 
 
 
 
32.1 
Comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
Net income (loss) including noncontrolling interest
709.9 
707.7 
 
 
 
 
 
 
 
2.2 
Other Comprehensive Income (Loss), Net of Tax [Abstract]
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
121.5 
 
121.5 
 
 
 
 
 
 
 
Unrealized gain (loss) on derivative instruments, net
(16.0)
 
(16.0)
 
 
 
 
 
 
 
Realized gain (loss) on derivative instruments reclassified to net income, net
8.4 
 
8.4 
 
 
 
 
 
 
 
Ownership share of equity method investees other comprehensive loss
(71.7)
 
(71.7)
 
 
 
 
 
 
 
Pension and other postretirement benefit plans, adjustment
108.2 
 
108.2 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of Tax
150.4 
 
150.4 
 
 
 
 
 
 
 
Comprehensive income (loss), net of tax
860.3 
 
 
 
 
 
 
 
 
 
Dividends declared and paid
(204.8)
(201.1)
 
 
 
 
 
 
 
(3.7)
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest at Dec. 25, 2010
7,842.6 
3,241.5 
171.1 
1.6 
 
111.2 
725.0 
3,548.4 
43.8 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
 
 
Exchange of shares
 
(0.7)
(0.2)
0.9 
Shares issued under equity compensation plan
6.9 
 
 
 
 
 
 
 
6.9 
 
Amortization of stock based compensation
15.9 
 
 
 
 
 
 
 
15.9 
 
Comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
Net income (loss) including noncontrolling interest
677.1 
676.3 
 
 
 
 
 
 
 
0.8 
Other Comprehensive Income (Loss), Net of Tax [Abstract]
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
(67.7)
 
(67.7)
 
 
 
 
 
 
 
Unrealized gain (loss) on derivative instruments, net
(6.1)
 
(6.1)
 
 
 
 
 
 
 
Realized gain (loss) on derivative instruments reclassified to net income, net
19.4 
 
19.4 
 
 
 
 
 
 
 
Ownership share of equity method investees other comprehensive loss
(67.0)
 
(67.0)
 
 
 
 
 
 
 
Pension and other postretirement benefit plans, adjustment
(179.4)
 
(179.4)
 
 
 
 
 
 
 
Other comprehensive income (loss), net of Tax
(300.8)
 
(300.8)
 
 
 
 
 
 
 
Comprehensive income (loss), net of tax
376.3 
 
 
 
 
 
 
 
 
 
Repurchase of common stock
(321.1)
 
 
 
 
(321.1)
 
 
 
 
Dividends declared and paid
(230.4)
(228.1)
 
 
 
 
 
 
 
(2.3)
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest at Dec. 31, 2011
$ 7,690.2 
$ 3,689.7 
$ (129.7)
$ 0 
$ 1.6 
$ (321.1)
$ 110.5 
$ 724.8 
$ 3,572.1 
$ 42.3 
Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Summary of Significant Accounting Policies
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 subsidiaries: Molson Coors Canada ("MCC"), formerly referred to as Molson Canada ("Molson"), operating in Canada; 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, "Investments"; Molson Coors Brewing Company (UK) Limited ("MCBC-UK"), formerly referred to as Coors Brewers Limited ("CBL"), operating in the United Kingdom ("U.K.") and the Republic of Ireland; Molson Coors International ("MCI") operating in various other countries; and our other non-operating subsidiaries. Any reference to "Coors" means the Adolph Coors Company prior to the 2005 merger with Molson Inc. (the "Merger"). Any reference to Molson Inc. or Molson 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
We follow a 52/53 week fiscal reporting calendar. Unless otherwise indicated, fiscal year 2011 refers to the 53 weeks ended December 31, 2011, and fiscal years 2010 and 2009 refer to the 52 weeks ended December 25, 2010, and December 26, 2009, respectively.
MillerCoors follows a monthly reporting calendar. Fiscal years 2011, 2010 and 2009 refer to the 12 months ended December 31, 2011, December 31, 2010, and December 31, 2009, respectively. Additionally, the results from Brewers' Retail, Inc. ("BRI"), a consolidated subsidiary through February 28, 2009, and an equity method investment thereafter, are reported one month in arrears. Our policy is to accelerate recording the effect of events occurring in the lag period that significantly affect our consolidated financial statements.
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 ("VIEs") for which we are the primary beneficiary. All significant intercompany accounts and transactions have been eliminated in consolidation. 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, "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 differences between these estimates and actual results, our consolidated financial statements may be materially affected.
Revenue Recognition
Revenue is recognized when the significant risks and rewards of ownership are transferred to the customer or distributor depending upon the method of distribution and shipping terms, which is either at the time of shipment to distributors or upon delivery of product to retail customers. 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. Sales are 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 them 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.
In addition to supplying our own brands, the U.K. segment sells other beverage companies' products to on-premise customers to provide them with a full range of products for their retail outlets. We refer to this as the "factored brand business." Sales from this business are included in our Net sales and Cost of goods sold when ultimately sold, but the related volume is not included in our reported sales volumes. In the factored brand business, we normally purchase inventory, which includes excise taxes charged by the vendor, take orders from customers for such brands, and invoice 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 reported on a gross income basis.
Excise Taxes
Excise taxes collected from customers and remitted to tax authorities are government-imposed excise taxes on beer shipments. Excise taxes on beer shipments are shown in a separate line item in the consolidated statements of operations as a reduction of sales. Sales taxes collected from customers are recognized as a liability, with the liability subsequently reduced when the taxes are remitted to the tax authority.
Cost of Goods Sold
Our Cost of goods sold includes 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.
Marketing, General and Administrative Expenses
Our Marketing, general and administrative expenses consist of advertising, sales costs, intangible amortization, share-based compensation, 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 expensed when the advertising is first run. Advertising expense was $398.8 million, $361.6 million, and $349.3 million for fiscal years 2011, 2010, and 2009, respectively. Prepaid advertising costs of $21.6 million and $13.4 million, were included in Other current assets in the consolidated balance sheets at December 31, 2011, and December 25, 2010, respectively.
Share-based compensation is recognized straight line over the vesting period of the awards. Certain share-based compensation plans contain provisions that accelerate vesting of awards upon retirement, disability, or death of eligible employees and directors. Our share-based awards are considered vested when the employee's retention of the award is no longer contingent on providing service. Accordingly, we recognize share-based compensation cost for awards granted to retirement-eligible individuals immediately. Also, if less than the stated vesting period, we recognize these costs over the period from the grant date to the date retirement eligibility is achieved. We report the benefits of tax deductions in excess of recognized compensation cost as a financing cash flow, thereby reducing net operating cash flows and increasing net financing cash flows.
Special Items    
Our special items represent charges incurred or benefits realized that we do not believe to be indicative of our core operations; specifically, such items are considered to be one of the following:
infrequent or unusual items,
impairment or asset abandonment-related losses, or
restructuring charges and other atypical employee-related costs.
Although we believe these items are not indicative of our core operations, the items classified as Special Items are not necessarily non-recurring.
Income Taxes
Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of our assets, liabilities, and certain unrecognized gains and losses recorded in accumulated other comprehensive earnings. We provide for taxes that may be payable if undistributed earnings of overseas subsidiaries were to be remitted to the U.S., except for those earnings that we consider to be permanently reinvested.
Cash and Cash Equivalents
Cash consists of cash on hand and bank deposits. Cash equivalents represent highly liquid investments with original maturities of 90 days or less. Our cash deposits may be redeemed upon demand and are maintained with multiple, reputable financial institutions. The following presents our supplemental cash flow information:
 
 
For the fiscal years ended
 
 
December 31, 2011
 
December 25, 2010
 
December 26, 2009
 
 
(In millions)
Cash paid for interest
 
$
102.3

 
$
87.0

 
$
76.0

Cash paid for taxes
 
$
62.7

 
$
38.4

 
$
50.9

Receipt of note upon sale of property
 
$

 
$
5.3

 
$

Issuance of restricted stock, net of forfeitures
 
$
9.3

 
$
9.8

 
$
8.9

Issuance of performance shares, net of forfeitures
 
$
7.0

 
$
7.4

 
$
14.1

Accounts Receivable and Notes Receivable
We record accounts and notes receivable at net realizable value. This carrying value includes an appropriate allowance for estimated uncollectible amounts to reflect any loss anticipated on the accounts and notes receivable balances.
Canada's distribution channels are highly regulated by provincial regulation and experience few collectability problems. However, we do have direct sales to retail customers in Canada for which an allowance is recorded based upon expected collectability and historical experience.
The U.K. segment 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 the U.K. segment 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 fiscal years 2011, 2010 and 2009, these amounts were $6.3 million, $6.7 million, and $8.3 million, respectively and this interest income is included in the U.K. segment.
Trade loan receivables are classified as either current notes receivable and other receivables or non-current notes receivable in our consolidated balance sheets. At December 31, 2011, and December 25, 2010, total loans outstanding, net of allowances, were $42.6 million and $48.4 million, respectively.
An allowance for credit losses is maintained to provide for loan losses deemed to be probable related to specifically identified loans and for losses in the loan portfolio that have been incurred at the balance sheet date. We establish our allowance through a provision for loan losses charged against earnings and recorded in Marketing, general & administrative expenses. Loan balances that are written off are recorded against the allowance as a write-off.
Total loans that may not be recoverable at December 31, 2011, and December 25, 2010, were $12.1 million and $12.5 million, respectively. In fiscal years 2011 and 2010, total loans written off were $7.2 million and $6.2 million, respectively. Any subsequent loan recovery is recorded as a gain upon collection within Marketing, general and administrative expenses. A rollforward of the allowance for the year ended December 31, 2011, is as follows (in millions):
Balance at December 26, 2009
$
10.1

Additions charged to expense, net of recoveries
5.4

Write-offs
(6.2
)
Foreign currency and other adjustments
(0.2
)
Balance at December 25, 2010
$
9.1

Additions charged to expense, net of recoveries
4.1

Write-offs
(7.2
)
Foreign currency and other adjustments
0.2

Balance at December 31, 2011
$
6.2


Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out ("FIFO") 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. We did not have a material allowance for obsolete finished goods or packaging materials at December 31, 2011, or at December 25, 2010, respectively. In the fourth quarter of 2010, we reclassified our returnable bottles and pallets from Inventories, Packaging materials, to Properties as discussed below.
Properties
Properties are stated at original cost less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets. Costs of enhancements or modifications that substantially extend the capacity or useful life of an asset are capitalized and depreciated accordingly. Start-up costs associated with manufacturing facilities, but not related to construction, are expensed as incurred. Ordinary repairs and maintenance are expensed as incurred. When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from our consolidated balance sheets and the resulting gain or loss, if any, is reflected in our consolidated statements of operations. Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an asset (or asset group) may not be recoverable.
Returnable containers are recorded at acquisition cost and are classified within Properties. Returnable containers consist of returnable bottles, kegs and pallets that are both in our direct control within our breweries, warehouses and distributions facilities and those that we indirectly control in the market through our agreements with our customers and other brewers and for which a deposit is received. The deposits received on our returnable containers in the market are recorded as deposit liabilities, included as current liabilities within Accrued Expenses and other liabilities in the Consolidated Balance Sheets.
The costs of acquiring or developing internal-use computer software, including directly-related payroll costs, are capitalized and classified within Properties. Software maintenance and training costs are expensed in the period incurred.
Properties held under capital lease are depreciated using the straight-line method over the estimated useful life or the lease term, whichever is shorter, and the related depreciation is included in depreciation expense.
Goodwill and Other Intangible Assets
Goodwill is allocated to the reporting unit in which the business that created the goodwill resides. A reporting unit is an operating segment, or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management. The Canada and the U.K. reporting units are consistent with our operating segments. However, for our China and India businesses, the reporting unit is one level below the MCI operating segment. We evaluate the carrying value of our goodwill and indefinite-lived intangible assets for impairment at the reporting unit level at least annually or when an interim triggering event occurs that would indicate that impairment may have taken place. We evaluate our other definite-lived intangible assets for impairment when evidence exists 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. We completed the required annual impairment testing as of June 26, 2011, the first day of our fiscal third quarter, and concluded there were no impairments. Finite-lived intangible assets are stated at cost less accumulated amortization. Amortization is recorded using the straight-line method over the estimated lives of the assets.
Equity Method Investments
We generally apply the equity method of accounting to 20% to 50% owned investments where we exercise significant influence or VIEs for which we are not the primary beneficiary. Equity method investments include our equity ownership in MillerCoors in the U.S. and Tradeteam, Ltd ("Tradeteam") (a transportation and logistics services company) in the U.K., along with Modelo Molson Imports, L.P. ("MMI"), BRI, Brewers' Distributor Ltd. ("BDL") and our former interest in the Montréal Canadiens in Canada. See Note 4, "Investments."
There are no related parties that own interests in our equity method investments as of December 31, 2011.
Derivative Hedging Instruments
We use derivatives as part of our normal business operations to manage our exposure to fluctuations in interest, foreign currency exchange, commodity, production and packaging material costs and for other strategic purposes related to our core business. We enter into derivatives for risk management purposes only, including derivatives designated in hedge accounting relationships as well as those derivatives utilized as economic hedges. We do not enter into derivatives for trading or speculative purposes. We recognize our derivatives on the consolidated balance sheet as assets or liabilities at fair value and are classified in either current or non-current assets or liabilities based on each contract's respective unrealized gain or loss position and each contract's respective maturity. Our policy is to present all derivative balances on a gross basis, without regard to counterparty master netting agreements or similar arrangements.
Changes in fair values (to the extent of hedge effectiveness) of outstanding cash flow and net investment hedges are recorded in other comprehensive income, until earnings are affected by the variability of cash flows of the underlying hedged item or the sale of the underlying net investment, respectively. Effective hedges offset the gains or losses recognized on the underlying exposure in the consolidated statement of operations. Any ineffectiveness is recorded directly into earnings.
We record realized gains and losses from derivative instruments in the same financial statement line item as the hedged item/forecasted transaction. Changes in unrealized gains and losses for derivatives not designated in a hedge accounting relationship are recorded directly in earnings each period and are recorded in the same financial statement line item as the associated realized (cash settled) gains and losses. Cash flows from the settlement of derivatives appear in the consolidated statement of cash flows in the same categories as the cash flows of the hedged item.
In accordance with authoritative accounting guidance, we do not record the fair value of derivatives for which we have elected the Normal Purchase Normal Sale ("NPNS") exemption. We account for these contracts on an accrual basis, recording realized settlements related to these contracts in the same financial statement line items as the corresponding transaction.
Pension and Postretirement Benefits
We have defined benefit plans that cover certain current and former employees in Canada and the U.K. We also have unfunded post-retirement plans in Canada and the U.S. that provide medical benefits for retirees and eligible dependents and life insurance for certain retirees. All retirement plans for MCBC employees in the United States are defined contribution pension plans. MillerCoors, BRI and BDL maintain pension and postretirement plans as well. Each plan is managed locally and in accordance with respective local laws and regulations.
We recognize the underfunded or overfunded status of a defined benefit postretirement plan as an asset or liability in the consolidated balance sheets and recognize changes in the funded status in the year in which the changes occur within other comprehensive income. The funded status of a plan, measured as the difference between the fair value of plan assets and the projected or accumulated benefit obligation, and the related net periodic pension cost are calculated using a number of significant actuarial assumptions. Changes in net periodic pension cost and funding status may occur in the future due to changes in these assumptions.
Projected benefit obligation is the actuarial present value as of the measurement date of all benefits attributed by the plan benefit formula to employee service rendered before the measurement date using assumptions as to future compensation levels if the plan benefit formula is based on those future compensation levels. Accumulated benefit obligation is the actuarial present value of benefits (whether vested or unvested) attributed by the plan benefit formula to employee service rendered before the measurement date and based on employee service and compensation, if applicable, prior to that date. Accumulated benefit obligation differs from projected benefit obligation in that it includes no assumption about future compensation levels and years of service.
Fair Value Measurements
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, net of allowances, approximate fair value. The fair value of derivatives was estimated by discounting the future cash flows utilizing observable market interest, foreign exchange and commodity rates adjusted for non-performance credit risk associated with our counterparties (assets) or with MCBC (liabilities). See Note 18, "Derivative Instruments and Hedging Activities." Based on current market rates for similar instruments, the fair value of long-term debt is presented in Note 13, "Debt."
U.S. GAAP guidance for fair value includes 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). 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:
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 the assumptions that we believe 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
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. Gains and losses from foreign currency transactions are included in earnings for the period.
New Accounting Pronouncements
New Accounting Pronouncements
New Accounting Pronouncements
Adoption of New Accounting Pronouncements
Goodwill Impairment Analysis
In December 2010, the Financial Accounting Standards Board ("FASB") issued authoritative guidance related to the evaluation of goodwill impairment testing for reporting units with zero or negative carrying amounts. Upon adoption of the guidance and annually thereafter, an entity with reporting units that have carrying amounts that are zero or negative is required to assess whether it is more likely than not that the reporting units' goodwill is impaired. If the entity determines that it is more likely than not that the goodwill of one or more of its reporting units is impaired, the entity should perform Step 2 of the goodwill impairment test for those reporting units. The guidance was effective for our first quarter 2011. The adoption of this guidance did not impact our financial position or results from operations.
New Accounting Pronouncements Not Yet Adopted
Fair Value Measurement
In May 2011, the FASB issued authoritative guidance related to fair value measurement and disclosure requirements. The new guidance results in a consistent definition of fair value and convergence between U.S. GAAP and International Financial Reporting Standards ("IFRS") on both how to measure fair value and on what disclosures to provide about fair value measurements. The guidance is effective for our quarter ending March 31, 2012. We do not anticipate that this guidance will have an impact on our financial position or results from operations.
Presentation of Other Comprehensive Income
In June 2011, the FASB issued authoritative guidance related to the presentation of other comprehensive income, which was later amended in December 2011. Upon adoption of the guidance, as amended, an entity has the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance is effective for our quarter ending March 31, 2012. The impact of this guidance is limited to a change in the presentation of our results.
Testing Goodwill for Impairment
In September 2011, the FASB issued authoritative guidance related to goodwill impairment testing. The new guidance permits an entity to first assess qualitative factors to whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is concluded that this is the case, it is necessary to perform the two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. The guidance is effective for annual and interim goodwill impairment tests performed for our fiscal years beginning January 1, 2012. We do not anticipate that this guidance will have an impact on our financial position or results from operations.
Disclosure about Offsetting Assets and Liabilities
In December 2011, the FASB issued authoritative guidance enhancing the disclosure requirements related to offsetting asset and liability positions. The update creates new disclosure requirements about the nature of an entity's rights of offset and related arrangements associated with its financial instruments and derivative instruments. The new disclosures are designed to better facilitate comparison between financial statements prepared under U.S. GAAP and IFRS by requiring entities to provide financial statement users information about both gross and net exposures. The guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods thereafter. We do not anticipate that this guidance will have an impact on our financial position or results from operations. However, we are currently evaluating the impact of this guidance on our existing disclosures.
Segment Reporting
Segment Reporting
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.
Reporting 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 MMI, our joint venture with Grupo Modelo S.A.B. de C.V. ("Modelo").
We have an agreement with Heineken N.V. ("Heineken") that grants us the right to import, market, and sell Heineken products throughout Canada and with SABMiller to brew, market, and sell several SABMiller brands, and to distribute and sell imported SABMiller brands. We also contract brew and package Labatt Blue and 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 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 represents our U.S. segment beginning July 1, 2008.
United Kingdom (U.K.)
The U.K. segment consists of our production, marketing and sales of our brands (the largest of which is Carling), principally in the U.K.; our consolidated joint venture relating to the production and distribution of the Grolsch brands in the U.K. and the Republic of Ireland; our consolidated joint venture to produce and distribute the Cobra beer brands in the U.K. and the Republic of Ireland; factored brand sales (beverage brands owned by other companies, but sold and delivered to retail by us), in the U.K.; and our equity method joint venture arrangement ("Tradeteam") for the physical distribution of products throughout the U.K.
Molson Coors International (MCI)
MCI includes results of operations in our non-core and emerging markets, including Asia, Mexico, Latin America, the Caribbean (not including Puerto Rico as it is a part of the U.S. segment) and continental Europe. This includes our joint venture agreement in China with Hebei Si'hai Beer Company, Molson Coors Si'hai Brewing (China) Co., Ltd. ("MC Si'hai") and our joint venture agreement in India with Cobra India, Molson Coors Cobra India ("MC Cobra India").
Beginning in 2011, we are separately presenting the MCI operating segment that was previously combined with our Corporate results. We have also revised our historical segment presentation to be consistent with this presentation.
Corporate
Corporate is not a segment and 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, finance and accounting, treasury, insurance and risk management. Additionally, the results of our water resources and energy operations in Colorado are included in Corporate. 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 31, 2011
 
Canada
 
U.S.
 
U.K.
 
MCI
 
Corporate
 
Eliminations(1)
 
Consolidated
 
(In millions)
Net sales
$
2,067.3

 
$

 
$
1,333.5

 
$
122.6

 
$
1.3

 
$
(9.0
)
 
$
3,515.7

Interest expense

 

 

 

 
(118.7
)
 

 
(118.7
)
Interest income

 

 
6.3

 

 
4.4

 

 
10.7

Income (loss) from continuing operations before income taxes
$
474.9

 
$
457.9

 
$
99.3

 
$
(33.3
)
 
$
(224.6
)
 
$

 
$
774.2

Income tax benefit (expense)
 

 
 

 
 

 
 

 
 
 
 
 
(99.4
)
Net income (loss) from continuing operations
 

 
 

 
 

 
 

 
 
 
 
 
674.8

Less: Net (income) loss attributable to noncontrolling interests
 

 
 

 
 

 
 

 
 
 
 
 
(0.8
)
Net income (loss) from continuing operations attributable to MCBC
 

 
 

 
 

 
 

 
 
 
 
 
$
674.0


(1)    Represents intersegment sales from the U.K. segment to the MCI segment, which began in 2011.

 
Year ended December 25, 2010
 
Canada
 
U.S.
 
U.K.
 
MCI
 
Corporate
 
Consolidated
 
(In millions)
Net sales
$
1,938.2

 
$

 
$
1,234.9

 
$
80.0

 
$
1.3

 
$
3,254.4

Interest expense

 

 

 

 
(110.2
)
 
(110.2
)
Interest income

 

 
6.7

 

 
4.1

 
10.8

Income (loss) from continuing operations before income taxes
$
454.0

 
$
456.1

 
$
95.3

 
$
(25.7
)
 
$
(170.7
)
 
$
809.0

Income tax benefit (expense)
 

 
 

 
 

 
 

 
 
 
(138.7
)
Net income (loss) from continuing operations
 

 
 

 
 

 
 

 
 
 
670.3

Less: Net (income) loss attributable to noncontrolling interests
 

 
 

 
 

 
 

 
 
 
(2.2
)
Net income (loss) from continuing operations attributable to MCBC
 

 
 

 
 

 
 

 
 
 
$
668.1

 
 
Year ended December 26, 2009
 
Canada
 
U.S.
 
U.K.
 
MCI
 
Corporate
 
Consolidated
 
(In millions)
Net sales
$
1,732.3

 
$

 
$
1,226.2

 
$
72.9

 
$
1.0

 
$
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

 
$
(21.6
)
 
$
(196.3
)
 
$
717.5

Income tax benefit (expense)
 

 
 

 
 

 
 

 
 
 
14.7

Net income (loss) from continuing operations
 

 
 

 
 

 
 

 
 
 
732.2

Less: Net (income) loss attributable to noncontrolling interests
 

 
 

 
 

 
 

 
 
 
(2.8
)
Net income (loss) from continuing operations attributable to MCBC
 

 
 

 
 

 
 

 
 
 
$
729.4


The following table presents total assets by segment:
 
 
As of
 
 
December 31, 2011
 
December 25, 2010
 
 
(In millions)
Canada
 
$
6,541.6

 
$
6,548.9

U.S.(1)
 
2,487.9

 
2,574.1

U.K.
 
2,293.4

 
2,276.2

MCI(1)
 
151.7

 
86.7

Corporate(1)
 
948.9

 
1,211.1

Discontinued operations
 
0.3

 
0.6

Consolidated total assets
 
$
12,423.8

 
$
12,697.6

(1)
The decrease in Corporate is primarily due to the reduction in cash balances. The decrease in the U.S. is driven primarily by our share of the change in MillerCoors accumulated other comprehensive income ("AOCI") thereby decreasing our Investment in MillerCoors . These decreases are partially offset by the increase in MCI, which is primarily due to our increased investment in our International markets, such as our acquisition of a controlling stake in MC Cobra India.
The following table presents select cash flow information by segment:
 
For the years ended
 
December 31, 2011
 
December 25, 2010
 
December 26, 2009
 
 
 
(In millions)
 
 
Depreciation and amortization(1):
 
 
 
 
 
Canada
$
125.0

 
$
122.3

 
$
120.6

United Kingdom
75.6

 
67.5

 
77.6

MCI
3.2

 
0.8

 
0.2

Corporate
13.3

 
11.7

 
9.6

Consolidated depreciation and amortization
$
217.1

 
$
202.3

 
$
208.0

Capital expenditures(2):
 
 
 
 
 
Canada
$
138.8

 
$
97.8

 
$
77.6

United Kingdom
80.3

 
70.0

 
64.6

MCI
12.4

 
4.2

 
0.1

Corporate
3.9

 
5.9

 
16.5

Consolidated capital expenditures
$
235.4

 
$
177.9

 
$
158.8

(1)
Depreciation and amortization amounts do not reflect amortization of bond discounts, fees, or other debt-related items.
(2)
Capital expenditures increased in 2011 driven by the addition of a high-speed can line in our Montréal brewery.
The following table presents sales by geography, based on the location of the customer:
 
 
For the years ended
 
 
December 31, 2011
 
December 25, 2010
 
December 26, 2009
 
 
(In millions)
Net sales to unaffiliated customers:
 
 
 
 
 
 
Canada
 
$
1,987.4

 
$
1,894.9

 
$
1,687.0

United States and its territories
 
81.3

 
44.6

 
46.3

United Kingdom
 
1,313.9

 
1,217.7

 
1,180.3

Other foreign countries
 
133.1

 
97.2

 
118.8

Consolidated net sales
 
$
3,515.7

 
$
3,254.4

 
$
3,032.4



The following table presents properties by geography:
 
 
As of
 
 
December 31, 2011
 
December 25, 2010
 
 
(In millions)
Properties(1):
 
 
 
 
Canada
 
$
877.5

 
$
864.7

United States and its territories
 
35.7

 
41.8

United Kingdom
 
456.3

 
441.9

Other foreign countries
 
60.6

 
40.3

Consolidated net properties
 
$
1,430.1

 
$
1,388.7

(1)
Includes net properties based on geographic location. The increase to Other foreign countries is primarily attributable to our acquisition of a controlling stake in MC Cobra India.
Investments
Investments
Investments
Our investments include both equity method and consolidated investments. Those entities identified as VIEs have been evaluated to determine whether we are the primary beneficiary. The VIEs included under Consolidated Investments below are those for which we have concluded that we are the primary beneficiary and accordingly, consolidate these entities. We have not provided any financial support to any of our VIEs during the year that we were not previously contractually obligated to provide except for the capital contribution to BRI discussed below.
Authoritative guidance related to the consolidation of VIEs requires that we continually reassess whether we are the primary beneficiary of VIEs in which we have an interest. As such, the conclusion regarding the primary beneficiary status is subject to change and we continually evaluate circumstances that could require consolidation or deconsolidation.
Equity Investments
Investment in MillerCoors
MillerCoors has a Board of Directors consisting of five MCBC-appointed 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 MillerCoors joint venture agreed not to transfer its economic or voting interests in the joint venture for a period of five years from July 1, 2008, and certain rights of first refusal will apply to any subsequent assignment of such interests. Our interest in MillerCoors is accounted for under the equity method of accounting.
Summarized financial information for MillerCoors is as follows (in millions):
Condensed Balance Sheet
 
 
As of
 
 
December 31, 2011
 
December 31, 2010
Current assets
 
$
810.9

 
$
815.9

Non-current assets
 
8,861.7

 
8,972.1

Total assets
 
$
9,672.6

 
$
9,788.0

Current liabilities
 
$
922.7

 
$
932.9

Non-current liabilities
 
1,471.3

 
1,273.4

Total liabilities
 
2,394.0

 
2,206.3

Noncontrolling interests
 
36.7

 
30.5

Owners' equity
 
7,241.9

 
7,551.2

Total liabilities and equity
 
$
9,672.6

 
$
9,788.0

Results of Operations
 
For the years ended
 
December 31, 2011
 
December 31, 2010
 
December 31, 2009
Net sales
$
7,550.2

 
$
7,570.6

 
$
7,574.3

Cost of goods sold
(4,647.9
)
 
(4,686.3
)
 
(4,720.9
)
Gross profit
$
2,902.3

 
$
2,884.3

 
$
2,853.4

Operating income(1)
$
1,020.3

 
$
1,078.9

 
$
866.1

Net income attributable to MillerCoors(1)
$
1,003.8

 
$
1,057.0

 
$
842.8

(1)
Fiscal year 2011 includes special charges of $60.0 million for a write-down in the value of the Sparks brand and a $50.9 million charge resulting from the planned assumption of the Milwaukee Brewery Worker's Pension Plan, an underfunded multi-employer pension plan. Fiscal year 2010 and fiscal year 2009 include special charges of $30.3 million and $49.4 million, respectively, primarily driven by pension curtailment losses and integration costs.
The following represents MCBC's proportional share in MillerCoors' net income, reported under the equity method (in millions):
 
 
For the years ended
 
 
December 31, 2011
 
December 31, 2010
 
December 31, 2009
Net income attributable to MillerCoors
 
$
1,003.8

 
$
1,057.0

 
$
842.8

MCBC economic interest
 
42
%
 
42
%
 
42
%
MCBC proportionate share of MillerCoors net income
 
421.6

 
443.9

 
354.0

MillerCoors accounting policy elections(1)
 

 

 
7.3

Amortization of the difference between MCBC contributed cost basis and proportional share of the underlying equity in net assets of MillerCoors(2)
 
35.4

 
6.9

 
11.7

Share-based compensation adjustment(3)
 
0.9

 
5.3

 
9.0

Equity income in MillerCoors
 
$
457.9

 
$
456.1

 
$
382.0

(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 impact on 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 our contributed inventories using the first in, first out (FIFO) method, rather than the last in, first out (LIFO) method, which had been applied by us prior to the formation of MillerCoors, the impact of which was fully amortized in early 2009.
(2)
Our net investment in MillerCoors is based on the carrying values of the net assets contributed to the joint venture which is less than our proportional share of underlying equity (42%) of MillerCoors (contributed by both CBC and Miller) by approximately $589 million as of December 31, 2011. This difference, with the exception of goodwill and land, is being amortized as additional equity income over the remaining useful lives of the contributed long-lived amortizing assets. During the third quarter of 2011, MillerCoors recognized an impairment charge of $60.0 million associated with its Sparks brand intangible asset. Our portion, $25.2 million, or 42% of the charge, is offset by an adjustment to our basis amortization above. This adjustment represents accelerated amortization attributable to our proportionate share of the underlying basis of the asset class in which Sparks was contributed. The current basis difference combined with the $35.0 million recorded in 2008 and 2009 related to differences resulting from accounting policy elections must be considered to reconcile MillerCoors equity to our investment in MillerCoors.
(3)
The net adjustment is to record all share-based compensation associated with pre-existing equity awards to be settled in Class B common stock held by former CBC employees now employed by MillerCoors and to eliminate all share-based compensation impacts related to pre-existing SABMiller plc equity awards held by former Miller employees now employed by MillerCoors. As of the end of the second quarter of 2011, the share-based awards granted to former CBC employees now employed by MillerCoors became fully vested. As such, no further adjustments will be recorded related to these awards.
During fiscal year 2011, we recorded $28.2 million of beer sales to MillerCoors and $11.5 million of beer purchases from MillerCoors. In addition, we recorded $6.0 million of service agreement and other charges to MillerCoors and $1.3 million of service agreement costs from MillerCoors. As of December 31, 2011, we had $2.0 million net receivables due from MillerCoors. During fiscal year 2010, we recorded $35.1 million of beer sales to MillerCoors and $9.3 million of beer purchases from MillerCoors. In addition, we recorded $4.1 million of service agreement and other charges to MillerCoors and $1.2 million of service agreement costs from MillerCoors. As of December 25, 2010, we had $1.3 million net receivables due from MillerCoors. During fiscal year 2009, we recorded $38.1 million of beer sales to MillerCoors and $10.6 million of beer purchases from MillerCoors. 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.
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 retained numerous water rights in Colorado. We lease these water rights to MillerCoors at no cost for use at its Golden, Colorado brewery.
There were no undistributed earnings in MillerCoors as of December 31, 2011, or December 31, 2010.
Other Equity Investments
Tradeteam Ltd.
Tradeteam, a joint venture between us and DHL in which we have a 49.9% interest, has a contract with us which gives them exclusive rights to provide our transportation and logistics services in the U.K. until 2018. Our approximate financial commitments under the distribution contract with Tradeteam based on foreign exchange rates as of December 31, 2011, are as follows:
 
 
 
Amount
 
(In millions)
2012
$
135.1

2013
139.1

2014
143.3

2015
147.6

2016
152.0

Thereafter
277.6

Total
$
994.7

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 us, paying Tradeteam's net book value for assets acquired which approximates $35.5 million as of December 31, 2011.
Services provided under the Tradeteam contract were approximately $130.7 million, $117.6 million, and $118.4 million for the fiscal years ended 2011, 2010 and 2009, respectively, and are included in Cost of goods sold. As of December 31, 2011, and December 25, 2010, we had $15.6 million and $14.2 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 ("CH Group") purchased the controlling 80.1% common ownership interest in the Club, as well as the interest in the ground lease of the Bell Centre arena in Montréal (the "Bell Centre") from the majority owner of the Club, an independent third-party. The general partner of CH Group and one of its limited partners are entities affiliated with Andrew Molson 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. We received net proceeds of CAD 56.3 million ($53.3 million), which is equal to the sale price for our interest reduced by a portion of the debt obligations of the Club assumed by the CH Group, and recognized a gain of CAD 48.7 million ($46.0 million) in Other income (expense) related to this transaction. 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.
Brewers' Retail Inc.
BRI, a VIE, is a beer distribution and retail network for the Ontario region of Canada, owned by MCBC, Anheuser-Busch InBev ("ABI") and Sleeman. BRI charges its owners 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 its owners based on volume of products. Contractual provisions cause our interests to fluctuate based on this calculated market share requiring frequent primary beneficiary evaluations. Acquisition activity by ABI caused our variable interest to decrease to a level indicating that we were no longer the primary beneficiary and, as such, we deconsolidated BRI from our financial statements during the first quarter of 2009. Subsequent to deconsolidation we continue to regularly evaluate the primary beneficiary; however, based on the existing structure, control is shared and therefore we do not anticipate becoming the primary beneficiary in the foreseeable future.
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 maintained with regard to BRI's debt obligations (see Note 20, Commitments and Contingencies for discussion of guarantee release in 2011). 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 balance of $16 million. 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 balance. As of December 31, 2011, and December 25, 2010, we had a negative equity method balance of $28.5 million and $85.1 million, respectively. The decrease in our negative balance was primarily driven by historical corrections of immaterial errors identified during 2011 related to changes since our 2009 deconsolidation, including decreases in ownership, and a 2005 historical purchase accounting correction of $55.7 million related to the minority interest held by Molson at merger resulting in an equivalent offsetting decrease to goodwill at acquisition. This decrease was partially offset by our proportionate share in the increase of the BRI underfunded defined benefit and postretirement plans in fiscal year 2011. As a result of these immaterial errors we also recognized a non-cash benefit of approximately $4 million in Cost of goods sold and a credit to Other comprehensive income ("OCI") of $15.0 million related to tax impacts of historical pension and postretirement adjustments during 2011. Administrative fees under the agreement with BRI were approximately $99.5 million, $93.9 million and $89.2 million for fiscal years 2011, 2010 and 2009, respectively. As of December 31, 2011, and December 25, 2010, we had $40.9 million and $37.9 million due from BRI related to services under the administrative fees agreement, respectively.
Brewers' Distributor Ltd.
BDL, a VIE, is a distribution operation owned by MCBC and ABI and pursuant to an operating agreement, acts as an agent for the distribution of their products in the western provinces of Canada. The two owners share 50%/50% voting control of this business.
BDL charges the owners 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 owners 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 the owners. As of December 31, 2011, and December 25, 2010, our investment in BDL was $12.6 million and negative $0.4 million, respectively. The increase in our investment was primarily related to a reclassification of $11.9 million from trade accounts receivable based on our assessment of the receivable as a long-term investment. Administrative fees under the contract were approximately $41.6 million, $38.5 million, and $43.9 million for the fiscal years 2011, 2010 and 2009, respectively. As of December 31, 2011, and December 25, 2010, we had $13.5 million and $19.9 million due from BDL, respectively, related to services under the administrative fees agreement.
Modelo Molson Imports, L.P.
MMI, a 50%/50% joint venture with Modelo, imports, distributes, and markets the Modelo beer brand portfolio across all Canadian provinces and territories. Our sales team is responsible for selling the brands across Canada on behalf of the joint venture. We account for MMI, a VIE, under the equity method of accounting. During fiscal years 2011, 2010 and 2009, we incurred $15.4 million, $12.3 million and $7.6 million, respectively, of fees due to MMI. As of December 31, 2011, and December 25, 2010, we had $11.0 million and $15.5 million due to MMI, respectively, related to activities under the operating agreement.
Summarized financial information for our other equity method investments combined is as follows (in millions):
Results of Operations
 
 
For the years ended
 
 
December 31, 2011
 
December 25, 2010
 
December 26, 2009
Net sales
 
$
840.5

 
$
810.4

 
$
996.9

Cost of goods sold(1)
 
(747.7
)
 
(700.9
)
 
(704.6
)
Gross profit
 
$
92.8

 
$
109.5

 
$
292.3

Operating income
 
$
51.1

 
$
48.8

 
$
47.0

Net Income
 
$
42.4

 
$
40.7

 
$
22.0

(1)
Historical amounts adjusted to reflect current presentation.
Condensed Combined Balance sheets
 
 
As of
 
 
December 31, 2011
 
December 25, 2010
Current assets
 
$
311.2

 
$
410.9

Non-current assets
 
370.8

 
358.1

Total assets
 
$
682.0

 
$
769.0

Current liabilities
 
$
379.4

 
$
670.2

Non-current liabilities
 
271.6

 
99.3

Total liabilities
 
651.0

 
769.5

Owners' equity
 
31.0

 
(0.5
)
Total liabilities and owners' equity
 
$
682.0

 
$
769.0

There were no significant undistributed earnings as of December 31, 2011, or December 25, 2010, for any of the companies included in other equity investments above.
Consolidated Variable Interest Entities
Grolsch
Grolsch is a joint venture between us 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 us under a contract brewing arrangement with the joint venture. MCBC and Royal Grolsch N.V. sell beer to the joint venture, which sells the beer back to MCBC (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 U.K. Accordingly, income tax expense in our consolidated statements of operations includes taxes related to the entire income of the joint venture. We consolidate the results and financial position of Grolsch and it is reported within our U.K. operating segment.
Cobra Beer Partnership, Ltd
During the second quarter of 2009, we purchased 50.1% of Cobra Beer Partnership, Ltd. ("Cobra U.K."), which owns the worldwide rights to the Cobra beer brand (with the exception of the Indian sub-continent owned by Cobra India). The non-controlling interest is held by the founder of the Cobra beer brand. We consolidate the results and financial position of Cobra U.K. and it is reported within our U.K. operating segment.
The following summarizes the assets and results of operations of our consolidated joint ventures (including noncontrolling interests). None of our consolidated VIEs held debt as of December 31, 2011, or December 25, 2010.
 
 
For the years ended/As of
 
 
December 31, 2011
 
December 25, 2010
 
December 26, 2009
 
 
Total
Assets(1)
 
Revenues(2)
 
Pre-tax
income
 
Total
Assets(1)
 
Revenues(2)
 
Pre-tax
income
 
Revenues(2)
 
Pre-tax
income
 
 
(In millions)
BRI
 
$

 
$

 
$

 
$

 
$

 
$

 
$
40.4

 
$

Grolsch
 
$
20.4

 
$
27.3

 
$
3.9

 
$
14.1

 
$
30.1

 
$
4.3

 
$
37.8

 
$
5.7

Cobra U.K.
 
$
31.6

 
$
40.1

 
$
6.9

 
$
32.7

 
$
39.2

 
$
6.9

 
$
21.2

 
$
1.9

Granville Island(3)
 
$

 
$

 
$

 
$

 
$

 
$

 
$
4.6

 
$
0.2

(1)
Excludes receivables from the Company.
(2)
Substantially all such sales for 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. Revenues for Cobra U.K. for the fiscal year 2009 reflect 6 months of activity.
(3)
During the second quarter of 2010, we acquired 100% of the outstanding stock and, as a result, Granville Island is no longer classified as a VIE.
Discontinued Operations
Discontinued Operations
Discontinued Operations
In 2006, we sold our entire 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 20, "Commitments and Contingencies").The table below summarizes the income (loss) from discontinued operations, net of tax, presented on our consolidated statements of operations:
 
 
For the years ended
 
 
December 31, 2011
 
December 25, 2010
 
December 26, 2009
 
 
(In millions)
Gain related to settlement of a portion of our indemnity liabilities to FEMSA (See "Note 20")
 
$

 
$
42.6

 
$

Loss related to adjustment in legal reserves due to changes in estimates and foreign exchange gains and losses
 
(0.4
)
 
(1.5
)
 

Adjustments to indemnity liabilities due to changes in estimates and foreign exchange gains and losses
 
2.7

 
(1.5
)
 
(9.0
)
Income (loss) from discontinued operations, net of tax
 
$
2.3

 
$
39.6

 
$
(9.0
)

As of December 31, 2011, and December 25, 2010, included in current assets of discontinued operations on the balance sheet are $0.3 million and $0.6 million of deferred tax assets associated with these indemnity liabilities, respectively. Current liabilities of discontinued operations include current legal reserves of $4.8 million and $4.4 million as of December 31, 2011, and December 25, 2010, respectively.
Other Income and Expense
Other Income and Expense
Other Income and Expense
The table below summarizes other income and expense:
 
For the years ended
 
December 31, 2011
 
December 25, 2010
 
December 26, 2009
 
(In millions)
Gain from Foster's swap and related financial instruments(1)
$
0.8

 
$
47.9

 
$
0.7

Gain (loss) from foreign exchange and derivatives
(6.9
)
 
(3.4
)
 
5.4

Gain on sale of Montréal Canadiens(2)

 

 
46.0

Equity income (loss) of Montréal Canadiens

 

 
(1.2
)
Environmental reserve
(0.2
)
 
0.2

 
(1.5
)
Loss on non-operating leases
(0.9
)
 
(1.0
)
 
(3.6
)
Loss related to the change in designation of cross currency swaps(3)
(6.7
)