10-Q
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________
FORM 10-Q
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended September 30, 2015
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______ .
Commission File Number: 1-14829
Molson Coors Brewing Company
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
 
84-0178360
(I.R.S. Employer Identification No.)
1801 California Street, Denver, Colorado, USA
1555 Notre Dame Street East, Montréal, Québec, Canada
(Address of principal executive offices)
 
80202
H2L 2R5
(Zip Code)
303-927-2337 (Colorado)
514-521-1786 (Québec)
(Registrant's telephone number, including area code)

1225 17th Street, Denver, Colorado, USA
(Registrant's former address)

_______________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý
 
Accelerated filer o
 
Non-accelerated filer o
 
Smaller reporting company o
 
 
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of October 30, 2015:
Class A Common Stock— 2,562,594 shares
Class B Common Stock—162,902,990 shares
Exchangeable shares:
As of October 30, 2015, the following number of exchangeable shares were outstanding for Molson Coors Canada, Inc.:
Class A Exchangeable shares—2,891,237 shares
Class B Exchangeable shares—16,157,303 shares
The Class A exchangeable shares and Class B exchangeable shares are shares of the share capital in Molson Coors Canada Inc., a wholly-owned subsidiary of the registrant. They are publicly traded on the Toronto Stock Exchange under the symbols TPX.A and TPX.B, respectively. These shares are intended to provide substantially the same economic and voting rights as the corresponding class of Molson Coors common stock in which they may be exchanged. In addition to the registered Class A common stock and the Class B common stock, the registrant has also issued and outstanding one share each of a Special Class A voting stock and Special Class B voting stock. The Special Class A voting stock and the Special Class B voting stock provide the mechanism for holders of Class A exchangeable shares and Class B exchangeable shares to be provided instructions to vote with the holders of the Class A common stock and the Class B common stock, respectively. The holders of the Special Class A voting stock and Special Class B voting stock are entitled to one vote for each outstanding Class A exchangeable share and Class B exchangeable share, respectively, excluding shares held by the registrant or its subsidiaries, and generally vote together with the Class A common stock and Class B common stock, respectively, on all matters on which the Class A common stock and Class B common stock are entitled to vote. The Special Class A voting stock and Special Class B voting stock are subject to a voting trust arrangement. The trustee which holds the Special Class A voting stock and the Special Class B voting stock is required to cast a number of votes equal to the number of then-outstanding Class A exchangeable shares and Class B exchangeable shares, respectively, but will only cast a number of votes equal to the number of Class A exchangeable shares and Class B exchangeable shares as to which it has received voting instructions from the owners of record of those Class A exchangeable shares and Class B exchangeable shares, other than the registrant or its subsidiaries, respectively, on the record date, and will cast the votes in accordance with such instructions so received.
 

Table of Contents

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
INDEX
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2

Cautionary Statement Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). From time to time, we may also provide oral or written forward-looking statements in other materials we release to the public. Such forward-looking statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995.
Statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements, and include, but are not limited to, statements under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations," and under the heading "Outlook for 2015" therein, relating to overall volume trends, consumer preferences, pricing trends, industry forces, cost reduction strategies, anticipated results, anticipated synergies, expectations for funding future capital expenditures and operations, debt service capabilities, shipment levels and profitability, market share and the sufficiency of capital resources. In addition, statements that we make in this report that are not statements of historical fact may also be forward-looking statements. Words such as "expects," "goals," "plans," "believes," "continues," "may," "anticipate," "seek," "estimate," "outlook," "trends," "future benefits," "potential," "projects," "strategies," and variations of such words and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those indicated (both favorably and unfavorably). These risks and uncertainties include, but are not limited to those described under the heading "Risk Factors," elsewhere throughout this report, and those described from time to time in our past and future reports filed with the Securities and Exchange Commission ("SEC"), including in our Annual Report on Form 10-K for the year ended December 31, 2014. Caution should be taken not to place undue reliance on any such forward-looking statements. Forward-looking statements speak only as of the date when made and we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
Market and Industry Data
The market and industry data used in this Quarterly Report on Form 10-Q are based on independent industry publications, customers, trade or business organizations, reports by market research firms and other published statistical information from third parties, as well as information based on management’s good faith estimates, which we derive from our review of internal information and independent sources. Although we believe these sources to be reliable, we have not independently verified the accuracy or completeness of the information.


3
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PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
Sales
$
1,454.3

 
$
1,650.0

 
$
3,890.5

 
$
4,514.2

Excise taxes
(436.9
)
 
(482.0
)
 
(1,167.4
)
 
(1,341.7
)
Net sales
1,017.4

 
1,168.0

 
2,723.1

 
3,172.5

Cost of goods sold
(585.9
)
 
(666.6
)
 
(1,620.6
)
 
(1,873.1
)
Gross profit
431.5

 
501.4

 
1,102.5

 
1,299.4

Marketing, general and administrative expenses
(265.2
)
 
(289.6
)
 
(789.1
)
 
(881.3
)
Special items, net
(293.5
)
 
(367.6
)
 
(335.8
)
 
(317.8
)
Equity income in MillerCoors
135.3

 
158.9

 
470.1

 
471.8

Operating income (loss)
8.1

 
3.1

 
447.7

 
572.1

Interest income (expense), net
(26.8
)
 
(31.3
)
 
(86.6
)
 
(102.9
)
Other income (expense), net
3.7

 
(5.0
)
 
7.4

 
(3.5
)
Income (loss) from continuing operations before income taxes
(15.0
)
 
(33.2
)
 
368.5

 
465.7

Income tax benefit (expense)
27.3

 
(0.7
)
 
(43.9
)
 
(41.9
)
Net income (loss) from continuing operations
12.3

 
(33.9
)
 
324.6

 
423.8

Income (loss) from discontinued operations, net of tax
2.9

 
1.3

 
4.5

 
(0.4
)
Net income (loss) including noncontrolling interests
15.2

 
(32.6
)
 
329.1

 
423.4

Net (income) loss attributable to noncontrolling interests
1.4

 
(1.8
)
 
(2.4
)
 
(3.5
)
Net income (loss) attributable to Molson Coors Brewing Company
$
16.6

 
$
(34.4
)
 
$
326.7

 
$
419.9

Basic net income (loss) attributable to Molson Coors Brewing Company per share:
 
 
 
 
 
 
 
From continuing operations
$
0.07

 
$
(0.20
)
 
$
1.74

 
$
2.27

From discontinued operations
0.02

 
0.01

 
0.02

 
—

Basic net income (loss) attributable to Molson Coors Brewing Company per share
$
0.09

 
$
(0.19
)
 
$
1.76

 
$
2.27

Diluted net income (loss) attributable to Molson Coors Brewing Company per share:
 
 
 
 
 
 
 
From continuing operations
$
0.07

 
$
(0.20
)
 
$
1.73

 
$
2.26

From discontinued operations
0.02

 
0.01

 
0.02

 
—

Diluted net income (loss) attributable to Molson Coors Brewing Company per share
$
0.09

 
$
(0.19
)
 
$
1.75

 
$
2.26

Weighted-average shares—basic
185.0

 
185.1

 
185.5

 
184.7

Weighted-average shares—diluted
186.0

 
185.1

 
186.6

 
185.9

Amounts attributable to Molson Coors Brewing Company
 
 
 
 
 
 
 
Net income (loss) from continuing operations
$
13.7

 
$
(35.7
)
 
$
322.2

 
$
420.3

Income (loss) from discontinued operations, net of tax
2.9

 
1.3

 
4.5

 
(0.4
)
Net income (loss) attributable to Molson Coors Brewing Company
$
16.6

 
$
(34.4
)
 
$
326.7

 
$
419.9

See notes to unaudited condensed consolidated financial statements.

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MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN MILLIONS)
(UNAUDITED)
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
Net income (loss) including noncontrolling interests
$
15.2

 
$
(32.6
)
 
$
329.1

 
$
423.4

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
(263.3
)
 
(499.0
)
 
(687.9
)
 
(520.9
)
Unrealized gain (loss) on derivative instruments
2.0

 
(0.8
)
 
10.6

 
3.1

Reclassification of derivative (gain) loss to income
(1.7
)
 
9.9

 
(4.7
)
 
4.3

Pension and other postretirement benefit adjustments
—

 
—

 
(1.8
)
 
—

Amortization of net prior service (benefit) cost and net actuarial (gain) loss to income
9.1

 
4.3

 
27.4

 
19.7

Ownership share of unconsolidated subsidiaries' other comprehensive income (loss)
(2.1
)
 
4.1

 
(2.4
)
 
13.3

Total other comprehensive income (loss), net of tax
(256.0
)
 
(481.5
)
 
(658.8
)
 
(480.5
)
Comprehensive income (loss)
(240.8
)
 
(514.1
)
 
(329.7
)
 
(57.1
)
Comprehensive (income) loss attributable to noncontrolling interests
1.4

 
(1.8
)
 
(2.4
)
 
(3.5
)
Comprehensive income (loss) attributable to Molson Coors Brewing Company
$
(239.4
)
 
$
(515.9
)
 
$
(332.1
)
 
$
(60.6
)
See notes to unaudited condensed consolidated financial statements.


5
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MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT PAR VALUE)
(UNAUDITED)
 
As of
 
September 30, 2015
 
December 31, 2014
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
393.6

 
$
624.6

Accounts receivable, net
524.6

 
527.7

Other receivables, net
91.8

 
94.0

Inventories:
 
 
 
Finished
173.1

 
135.3

In process
15.7

 
20.7

Raw materials
24.6

 
34.5

Packaging materials
11.1

 
11.7

Total inventories
224.5

 
202.2

Other current assets, net
89.8

 
101.4

Deferred tax assets
27.3

 
27.2

Total current assets
1,351.6

 
1,577.1

Properties, net
1,614.8

 
1,798.0

Goodwill
2,046.8

 
2,191.6

Other intangibles, net
4,923.6

 
5,755.8

Investment in MillerCoors
2,440.7

 
2,388.6

Deferred tax assets
38.5

 
58.2

Notes receivable, net
21.3

 
21.6

Other assets
208.0

 
189.2

Total assets
$
12,645.3

 
$
13,980.1

Liabilities and equity
 
 
 
Current liabilities:
 
 
 
Accounts payable and other current liabilities
$
1,196.2

 
$
1,305.0

Deferred tax liabilities
164.8

 
164.8

Current portion of long-term debt and short-term borrowings
48.2

 
849.0

Discontinued operations
4.1

 
6.1

Total current liabilities
1,413.3

 
2,324.9

Long-term debt
2,953.9

 
2,321.3

Pension and postretirement benefits
243.0

 
542.9

Deferred tax liabilities
668.8

 
784.3

Unrecognized tax benefits
12.9

 
25.4

Other liabilities
70.3

 
79.7

Discontinued operations
10.4

 
15.5

Total liabilities
5,372.6

 
6,094.0

Commitments and contingencies (Note 15)


 


Molson Coors Brewing Company stockholders' equity
 
 
 
Capital stock:
 
 
 
Preferred stock, no par value (authorized: 25.0 shares; none issued)
—

 
—

Class A common stock, $0.01 par value per share (authorized: 500.0 shares; issued and outstanding: 2.6 shares and 2.6 shares, respectively)
—

 
—

Class B common stock, $0.01 par value per share (authorized: 500.0 shares; issued: 171.7 shares and 169.9 shares, respectively)
1.7

 
1.7

Class A exchangeable shares, no par value (issued and outstanding: 2.9 shares and 2.9 shares, respectively)
108.3

 
108.5

Class B exchangeable shares, no par value (issued and outstanding: 16.7 shares and 17.6 shares, respectively)
628.2

 
661.5

Paid-in capital
3,951.7

 
3,871.2

Retained earnings
4,538.5

 
4,439.9

Accumulated other comprehensive income (loss)
(1,556.7
)
 
(898.4
)
Class B common stock held in treasury at cost (8.8 shares and 7.5 shares, respectively)
(421.4
)
 
(321.1
)
Total Molson Coors Brewing Company stockholders' equity
7,250.3

 
7,863.3

Noncontrolling interests
22.4

 
22.8

Total equity
7,272.7

 
7,886.1

Total liabilities and equity
$
12,645.3

 
$
13,980.1

See notes to unaudited condensed consolidated financial statements.

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MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
Cash flows from operating activities:
 
 
 
Net income (loss) including noncontrolling interests
$
329.1


$
423.4

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 

Depreciation and amortization
241.9

 
233.0

Amortization of debt issuance costs and discounts
3.6

 
5.6

Share-based compensation
12.9

 
18.0

(Gain) loss on sale or impairment of properties and other assets, net
272.1

 
372.0

Deferred income tax (benefit) expense
(93.1
)
 
(19.0
)
Equity income in MillerCoors
(470.1
)
 
(471.8
)
Distributions from MillerCoors
470.1

 
471.8

Equity in net (income) loss of other unconsolidated affiliates
(2.6
)
 
(3.0
)
Distributions from other unconsolidated affiliates
—

 
15.4

Excess tax benefits from share-based compensation
(8.5
)
 
(6.6
)
Unrealized (gain) loss on foreign currency fluctuations and derivative instruments, net
10.0

 
(10.2
)
Change in current assets and liabilities (net of impact of business combinations) and other
(299.4
)
 
29.4

(Gain) loss from discontinued operations
(4.5
)
 
0.4

Net cash provided by (used in) operating activities
461.5

 
1,058.4

Cash flows from investing activities:
 

 
 

Additions to properties
(208.3
)
 
(195.8
)
Proceeds from sales of properties and other assets
8.8

 
6.0

Acquisition of businesses, net of cash acquired
(91.2
)
 
—

Proceeds from sale of business
8.7

 
—

Investment in MillerCoors
(1,144.5
)
 
(1,100.4
)
Return of capital from MillerCoors
1,088.2

 
1,053.9

Return of capital from an unconsolidated affiliate
—

 
5.9

Loan repayments
26.1

 
7.1

Loan advances
(29.9
)
 
(14.6
)
Other
(3.3
)
 
—

Net cash used in investing activities
(345.4
)
 
(237.9
)
Cash flows from financing activities:
 

 
 

Exercise of stock options under equity compensation plans
31.2

 
38.5

Excess tax benefits from share-based compensation
8.5

 
6.6

Dividends paid
(228.1
)
 
(205.1
)
Payments for purchase of treasury stock
(100.1
)
 
—

Proceeds from long-term debt
679.9

 
—

Payments on long-term debt
(676.4
)
 
(61.6
)
Proceeds from short-term borrowings
33.1

 
35.5

Payments on short-term borrowings
(19.7
)
 
(23.3
)
Payments on settlement of derivative instruments
—

 
(65.2
)
Net proceeds from (payments on) revolving credit facilities and commercial paper
17.1

 
(350.5
)
Change in overdraft balances and other
(55.6
)
 
111.9

Net cash provided by (used in) financing activities
(310.1
)
 
(513.2
)
Cash and cash equivalents:
 

 
 

Net increase (decrease) in cash and cash equivalents
(194.0
)
 
307.3

Effect of foreign exchange rate changes on cash and cash equivalents
(37.0
)
 
(27.5
)
Balance at beginning of year
624.6

 
442.3

Balance at end of period
$
393.6

 
$
722.1

See notes to unaudited condensed consolidated financial statements.

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MOLSON COORS BREWING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 and non-operating subsidiaries included within our reporting segments and Corporate. Our reporting segments include: Molson Coors Canada ("MCC" or Canada segment), operating in Canada; MillerCoors LLC ("MillerCoors" or U.S. segment), which is accounted for by us under the equity method of accounting, operating in the United States ("U.S."); Molson Coors Europe (Europe segment), operating in Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Hungary, Montenegro, Republic of Ireland, Romania, Serbia, Slovakia and the United Kingdom ("U.K."); and Molson Coors International ("MCI"), operating in various other countries. Unless otherwise indicated, information in this report is presented in U.S. dollars ("USD" or "$") and comparisons are to comparable prior periods.
The accompanying unaudited condensed consolidated interim financial statements reflect all adjustments which are necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented in accordance with accounting principles generally accepted in the U.S. ("U.S. GAAP"). Such unaudited interim condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.
These unaudited condensed consolidated interim financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2014 ("Annual Report"), and have been prepared on a consistent basis with the accounting policies described in Note 1 of the Notes to the Audited Consolidated Financial Statements ("Notes") included in our Annual Report. Our accounting policies did not change in the first three quarters of 2015.
The results of operations for the three and nine months ended September 30, 2015, are not necessarily indicative of the results that may be achieved for the full fiscal year.
2. New Accounting Pronouncements
Adoption of New Accounting Pronouncements
In April 2015, the Financial Accounting Standards Board ("FASB") issued authoritative guidance intended to simplify the presentation of debt issuance costs. These amendments require that debt issuance costs be presented as a direct deduction from the carrying amount of the related debt liabilities, consistent with the presentation of debt discounts. This results in the elimination of debt issuance costs as an asset and reduces the carrying value of our debt liabilities. As this guidance did not specifically address the presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements, the FASB issued an announcement in August 2015, stating that they would not object to an entity deferring and presenting debt issuance costs related to line-of-credit arrangements as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. We have early adopted this guidance effective for our quarter ended September 30, 2015, and have elected to continue to present our debt issuance costs associated with our line-of-credit arrangements as assets. The adoption of this guidance had an immaterial impact on our financial position and has resulted in the following retrospective adjustments to our condensed consolidated balance sheet:
 
December 31, 2014
 
As Reported
 
As Adjusted
 
(In millions)
Other current assets, net
$
103.2

 
$
101.4

Other assets
$
203.6

 
$
189.2

Current portion of long-term debt and short-term borrowings
$
849.4

 
$
849.0

Long-term debt
$
2,337.1

 
$
2,321.3

New Accounting Pronouncements Not Yet Adopted
In July 2015, the FASB issued authoritative guidance intended to simplify the measurement of inventory. The amendment requires entities to measure in-scope inventory at the lower of cost and net realizable value, and replaces the current

8
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requirement to measure in-scope inventory at the lower of cost or market, which considers replacement cost, net realizable value, and net realizable value less an approximate normal profit margin. This amendment will more closely align the measurement of inventory under U.S. GAAP with the measurement of inventory under International Financial Reporting Standards. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2016. The amendment should be applied prospectively with early adoption permitted. We are currently evaluating the potential impact on our financial position and results of operations upon adoption of this guidance.
In May 2014, the FASB issued authoritative guidance related to new accounting requirements for the recognition of revenue from contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for the goods or services. In August 2015, the FASB deferred the effective date of the new revenue recognition standard for all entities by one year. As a result, the requirements of the new standard are effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods. In conjunction with the deferral, the FASB will permit all entities to apply the new revenue recognition standard early, but not before the original effective date. The use of either a full retrospective or cumulative effect transition method is permitted. We have not yet selected a transition method and are currently evaluating the potential impact on our financial position and results of operations upon adoption of this guidance.
In May 2015, the FASB issued an amendment to the fair value measurement guidance that applies to reporting entities that elect to measure the fair value of an investment using the net asset value (“NAV”) per share (or its equivalent) practical expedient. Under the new guidance, investments for which fair value is measured, or are eligible to be measured, using the NAV per share practical expedient are excluded from the fair value hierarchy. The amendment also removes certain disclosure requirements for these investments, and is effective for reporting periods beginning after December 15, 2015, with early adoption permitted. This amendment will result in revisions to the presentation of the fair value hierarchy within Part II - Item 8. Financial Statements and Supplementary Data, Note 16, “Employee Retirement Plans and Postretirement Benefits" of our Annual Report. There will be no impact on our financial position and results of operations upon adoption of this guidance.
Other than the items noted above, there have been no new accounting pronouncements not yet effective or adopted in the current year that we believe have a significant impact, or potential significant impact, to our condensed consolidated financial statements.
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. Our reporting segments consist of Canada, the U.S., Europe and MCI. Corporate is not a segment and primarily includes interest and certain other general and administrative costs that are not allocated to any of the operating segments. No single customer accounted for more than 10% of our consolidated sales for the three and nine months ended September 30, 2015, and September 30, 2014, respectively. Net sales represent sales to third-party external customers. Inter-segment transactions impacting sales revenues and income (loss) from continuing operations before income taxes are insignificant (other than those with MillerCoors, see Note 4, "Investments" for additional detail) and eliminated in consolidation.
The following table presents net sales by segment:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
 
(In millions)
Canada
$
411.2

 
$
507.2

 
$
1,169.6

 
$
1,370.8

Europe
566.0

 
618.7

 
1,448.7

 
1,685.7

MCI
41.3

 
43.4

 
107.6

 
119.3

Corporate
0.3

 
0.2

 
0.8

 
0.9

Eliminations(1)
(1.4
)
 
(1.5
)
 
(3.6
)
 
(4.2
)
         Consolidated
$
1,017.4

 
$
1,168.0

 
$
2,723.1

 
$
3,172.5

(1)
Represents inter-segment sales from the Europe segment to the MCI segment.

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The following table presents income (loss) from continuing operations before income taxes by segment:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
 
(In millions)
Canada
$
91.8

 
$
121.5

 
$
228.8

 
$
330.6

U.S. 
135.3

 
158.9

 
470.1

 
471.8

Europe
(183.2
)
 
(255.1
)
 
(138.3
)
 
(143.6
)
MCI
(2.1
)
 
(2.7
)
 
(19.7
)
 
(9.4
)
Corporate
(56.8
)
 
(55.8
)
 
(172.4
)
 
(183.7
)
         Consolidated
$
(15.0
)
 
$
(33.2
)
 
$
368.5

 
$
465.7

The variances in the above table include the impact of special items. Refer to Note 6, "Special Items" for further discussion.
The following table presents total assets by segment:
 
As of
 
September 30, 2015
 
December 31, 2014(1)
 
(In millions)
Canada
$
4,766.9


$
5,537.2

U.S. 
2,440.7


2,388.6

Europe
5,060.5


5,773.3

MCI
133.4


75.2

Corporate
243.8


205.8

         Consolidated
$
12,645.3


$
13,980.1

(1)
Amounts have been adjusted to reflect the adoption of the authoritative guidance requiring debt issuance costs to be presented as a direct reduction from the carrying value of the related debt. See Note 2, "New Accounting Pronouncements" for further discussion.
4. Investments
Our investments include both equity method and consolidated investments. Those entities identified as variable interest entities ("VIEs") have been evaluated to determine whether we are the primary beneficiary. The VIEs included under "Consolidated VIEs" below are those for which we have concluded that we are the primary beneficiary and accordingly, consolidate these entities. None of our consolidated VIEs held debt as of September 30, 2015, or December 31, 2014. With the exception of the debt guarantee further discussed below, we have not provided any financial support to any of our VIEs during the year that we were not previously contractually obligated to provide. Amounts due to and due from our equity method investments are recorded as affiliate accounts payable and affiliate accounts receivable.
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. As of September 30, 2015, and December 31, 2014, our consolidated VIEs are Cobra Beer Partnership, Ltd. ("Cobra U.K.") and Grolsch U.K. Ltd. ("Grolsch"). Our unconsolidated VIEs are Brewers' Retail Inc. ("BRI") and Brewers' Distributor Ltd. ("BDL").
During the second quarter of 2015, our equity method investment, BRI, entered into a Canadian Dollar ("CAD") 150 million revolving credit facility with Canadian Imperial Bank of Commerce (“CIBC”), maturing one year after issuance, with one year renewal options subject to approval by CIBC. In conjunction with the issuance of the revolving credit facility, we, along with an additional shareholder of BRI, were each required to guarantee 50% of BRI’s obligations under the facility. As a result of this guarantee, we have recorded a current liability of $12.4 million as of September 30, 2015. The carrying value of the guarantee equals its fair value, which considers an adjustment for our own non-performance risk and is considered a level 2 measurement. The offset to the guarantee liability was recorded as an adjustment to our equity method investment balance, which carried a negative balance as of September 30, 2015. The guarantee liability was calculated based on our proportionate, 50% share of BRI’s total revolving credit facility outstanding balance at September 30, 2015. The resulting change in equity investment balance during the year due to movements in the guarantee represents a non-cash investing activity.

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In October 2015, an additional shareholder of BRI was added as a guarantor to the revolving credit facility, which reduced our proportionate guarantee obligation to 45.9%. Our guarantee liability will be recorded based on this new proportionate share starting in the fourth quarter of 2015.
In conjunction with finalization of the new beer framework agreement (see Note 10, "Goodwill and Intangible Assets"), we, along with the other owners of BRI and the Province of Ontario, agreed to revise the ownership structure of BRI. The new BRI shareholder agreement (“New Shareholder Agreement”) incorporating these changes has not yet been executed and is anticipated to be executed and effective during the fourth quarter of 2015. The New Shareholder Agreement will adjust the existing BRI ownership structure to allow all other small and large Ontario based brewers the ability to participate in the ownership of BRI. As part of this proposed change, the board of directors of BRI will be expanded to include representation for these new ownership groups, as well as independent director representation. The new owners will be subject to the same fee structure as the current owners, with the exception of smaller brewers, who will have discounted fees, as they will not be required to fund certain costs associated with pension obligations. BRI will continue to operate on a break-even basis under the new ownership structure. BRI will also convert all existing capital stock into a new share class, as well as create a separate new share class to facilitate new and existing brewer participation and governance. While governance and board of director participation will continue to have the ability to fluctuate based on market share relative to the other owners, our equity interest will become fixed under the New Shareholder Agreement. We will continue to evaluate the accounting implications associated with the implementation of the New Shareholder Agreement and will make any necessary changes upon execution of the agreement.
Equity Investments
Investment in MillerCoors Summarized Financial Information
Condensed Balance Sheets
 
As of
 
September 30, 2015
 
December 31, 2014
 
(In millions)
Current assets
$
923.5

 
$
795.3

Non-current assets
8,983.4

 
9,047.4

Total assets
$
9,906.9

 
$
9,842.7

Current liabilities
$
1,131.0

 
$
1,061.3

Non-current liabilities
1,463.5

 
1,578.8

Total liabilities
2,594.5

 
2,640.1

Noncontrolling interests
17.4

 
23.5

Owners' equity
7,295.0

 
7,179.1

Total liabilities and equity
$
9,906.9

 
$
9,842.7

The following represents our proportionate share in MillerCoors' equity and reconciliation to our investment in MillerCoors:
 
As of
 
September 30, 2015
 
December 31, 2014
 
(In millions, except percentages)
MillerCoors owners' equity
$
7,295.0

 
$
7,179.1

MCBC economic interest
42
%
 
42
%
MCBC proportionate share in MillerCoors' equity
3,063.9

 
3,015.2

Difference between MCBC contributed cost basis and proportionate share of the underlying equity in net assets of MillerCoors(1)
(658.2
)
 
(661.6
)
Accounting policy elections
35.0

 
35.0

Investment in MillerCoors
$
2,440.7


$
2,388.6


11
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(1)
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 proportionate share of underlying equity (42%) of MillerCoors (contributed by both Coors Brewing Company ("CBC") and Miller Brewing Company ("Miller")). This basis difference, with the exception of certain non-amortizing items (goodwill, land, etc.), is being amortized as additional equity income over the remaining useful lives of the contributed long-lived amortizing assets.
Results of Operations
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
 
(In millions)
Net sales
$
2,000.0

 
$
2,069.5

 
$
5,977.3

 
$
6,066.6

Cost of goods sold
(1,173.9
)
 
(1,237.7
)
 
(3,490.6
)
 
(3,614.2
)
Gross profit
$
826.1

 
$
831.8

 
$
2,486.7

 
$
2,452.4

Operating income(1)
$
323.0

 
$
381.9

 
$
1,125.7

 
$
1,129.2

Net income attributable to MillerCoors(1)
$
316.5

 
$
376.5

 
$
1,108.3

 
$
1,112.9

(1)
Results include special charges of $28.0 million for the three and nine months ended September 30, 2015, related to the planned closure of the Eden, North Carolina, brewery, including $21.8 million of accelerated depreciation in excess of normal depreciation associated with this brewery. Results also include special charges related to restructuring activities of $0.2 million and $1.4 million for the three and nine months ended September 30, 2014, respectively.
The following represents our proportionate share in net income attributable to MillerCoors reported under the equity method of accounting:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
 
(In millions, except percentages)
Net income attributable to MillerCoors
$
316.5

 
$
376.5

 
$
1,108.3

 
$
1,112.9

MCBC economic interest
42
%
 
42
%
 
42
%
 
42
%
MCBC proportionate share of MillerCoors net income(1)
132.9

 
158.1

 
465.5

 
467.4

Amortization of the difference between MCBC contributed cost basis and proportionate share of the underlying equity in net assets of MillerCoors
1.0

 
1.2

 
3.4

 
3.5

Share-based compensation adjustment(1)(2)
1.4

 
(0.4
)
 
1.2

 
0.9

Equity income in MillerCoors
$
135.3

 
$
158.9

 
$
470.1

 
$
471.8

(1)
The sum of the quarterly proportionate share of MillerCoors net income and share-based compensation adjustment amounts may not agree to the year-to-date amounts due to rounding.
(2)
The net adjustment is to eliminate all share-based compensation impacts related to pre-existing SABMiller plc equity awards held by former Miller employees employed by MillerCoors as well as to add back all share-based compensation impacts related to pre-existing MCBC equity awards held by former MCBC employees that transferred to MillerCoors.

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The following table summarizes our transactions with MillerCoors:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
 
(In millions)
Beer sales to MillerCoors
$
2.8

 
$
3.8

 
$
8.8

 
$
10.1

Beer purchases from MillerCoors
$
11.6

 
$
10.8

 
$
30.9

 
$
27.0

Service agreement costs and other charges to MillerCoors
$
0.7

 
$
0.6

 
$
2.0

 
$
1.7

Service agreement costs and other charges from MillerCoors
$
0.2

 
$
0.3

 
$
0.8

 
$
0.8

As of September 30, 2015, and December 31, 2014, we had $5.6 million and $8.3 million of net payables due to MillerCoors, respectively.
Consolidated VIEs
The following summarizes the assets and liabilities of our consolidated VIEs (including noncontrolling interests):
 
As of
 
September 30, 2015
 
December 31, 2014
 
Total Assets
 
Total Liabilities
 
Total Assets
 
Total Liabilities
 
(In millions)
Grolsch
$
8.1

 
$
2.7

 
$
6.8

 
$
2.9

Cobra U.K.
$
36.5

 
$
0.8

 
$
31.0

 
$
0.8

Termination of MMI Operations
On February 28, 2014, Anheuser-Busch Inbev ("ABI") and MCBC finalized the accelerated termination of Modelo Molson Imports, L.P. ("MMI"), a 50% - 50% joint venture with Grupo Modelo S.A.B. de C.V. ("Modelo"), which provided for the import, distribution, and marketing of the Modelo beer brand portfolio across all Canadian provinces and territories. The joint venture was accounted for under the equity method of accounting.
Following the successful completion of the transition in the first quarter of 2014, we recognized income of $63.2 million (CAD 70.0 million) within special items, reflective of the agreed upon payment received from Modelo for the early termination of the joint venture. Additionally in the first quarter of 2014, we recorded a charge of $4.9 million representing the accelerated amortization of the remaining carrying value of our definite-lived intangible asset associated with the agreement. Under the MMI arrangement, during the nine months ended September 30, 2014, we recognized equity earnings within cost of goods sold of $0.7 million, and recognized marketing and administrative cost recoveries related to the promotion, sale and distribution of Modelo products under our agency and services agreement with MMI of $1.1 million. These cost recoveries are recorded within marketing, general and administrative expenses.
In accordance with the early termination agreement, the book value of the joint venture's net assets was required to be distributed to the respective joint venture partners for the owners' proportionate ownership interest at the end of the transition period. This distribution was finalized in the third quarter of 2014. Concurrently, we derecognized our equity investment within other non-current assets upon full recovery of our investment carrying value.
5. Share-Based Payments
The MCBC Incentive Compensation Plan ("Incentive Compensation Plan") was amended and restated effective February 19, 2015, to reaffirm the ability to grant awards that are intended to qualify as performance-based compensation, to extend the term of the Incentive Compensation Plan for ten years and to incorporate certain corporate governance practices. We continue to have only one incentive compensation plan as of September 30, 2015, and all outstanding awards fall under this plan.
During the nine months ended September 30, 2015, and September 30, 2014, we recognized share-based compensation expense related to the following Class B common stock awards to certain directors, officers and other eligible employees, pursuant to the Incentive Compensation Plan: restricted stock units ("RSUs"), deferred stock units ("DSUs"), performance units ("PUs"), performance share units ("PSUs") and stock options. The settlement amount of the PSUs is determined based on market and performance metrics, which include our total shareholder return performance relative to the S&P 500 and specified

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internal performance metrics designed to drive greater shareholder return. PSU compensation expense is based on a fair value assigned to the market metric using a Monte Carlo model, which will remain constant throughout the vesting period of three years, and a performance multiplier, which will vary due to changing estimates of the performance metric condition.
The following table summarizes share-based compensation expense:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
 
(In millions)
Pretax compensation expense
$
4.8

 
$
5.9

 
$
12.9

 
$
18.0

Tax benefit
(1.2
)
 
(1.6
)
 
(3.3
)
 
(5.5
)
After-tax compensation expense
$
3.6

 
$
4.3

 
$
9.6

 
$
12.5

The decrease in expense in the first three quarters of 2015 was primarily driven by accelerated expense related to certain RSUs and PSUs granted in the first quarter of 2014, which were not granted in the first quarter of 2015.
As of September 30, 2015, there was $33.6 million of total unrecognized compensation expense from all share-based compensation arrangements granted under the Incentive Compensation Plan, related to unvested awards. This compensation expense is expected to be recognized over a weighted-average period of 2.0 years.
The following table represents non-vested RSUs, DSUs, PUs and PSUs as of September 30, 2015, and the activity during the nine months ended September 30, 2015:
 
RSUs and DSUs
 
PUs
 
PSUs
 
Units
 
Weighted-average
grant date fair value
per unit
 
Units
 
Weighted-average fair value
per unit
 
Units
 
Weighted-average
grant date fair value
per unit
 
(In millions, except per unit amounts)
Non-vested as of December 31, 2014
0.7

 
$47.75
 
0.5

 
$3.22
 
0.4

 
$50.49
Granted
0.2

 
$70.79
 
—

 
$—
 
0.1

 
$74.42
Vested
(0.2
)
 
$43.31
 
(0.5
)
 
$2.89
 
—

 
$—
Forfeited
(0.1
)
 
$51.95
 
—

 
$—
 
—

 
$—
Non-vested as of September 30, 2015
0.6

 
$56.17
 
—

 
$—
 
0.5

 
$57.05
The weighted-average fair value per unit for the non-vested PSUs is $64.90 as of September 30, 2015.
The following table represents the summary of stock options and stock-only stock appreciation rights ("SOSARs") outstanding as of September 30, 2015, and the activity during the nine months ended September 30, 2015:
 
Shares outstanding
 
Weighted-average
exercise price per
share
 
Weighted-average
remaining contractual life
(years)
 
Aggregate
intrinsic value
 
(In millions, except per share amounts and years)
Outstanding as of December 31, 2014
2.2
 
$45.33
 
5.0
 
$
64.6

Granted
0.1
 
$74.81
 
 
 
 
Exercised
(0.9)
 
$44.23
 
 
 
 
Forfeited
—
 
$—
 
 
 
 
Outstanding as of September 30, 2015
1.4
 
$48.87
 
5.0
 
$
48.4

Exercisable at September 30, 2015
1.2
 
$45.61
 
4.2
 
$
44.3

The total intrinsic values of stock options exercised during the nine months ended September 30, 2015, and September 30, 2014, were $28.6 million and $24.9 million, respectively. During the nine months ended September 30, 2015, and September 30, 2014, cash received from stock option exercises was $31.2 million and $38.5 million, respectively, and the total excess tax benefit from these stock option exercises and other awards was $8.5 million and $6.6 million, respectively.

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The fair value of each option granted in the first three quarters of 2015 and 2014 was determined on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
Risk-free interest rate
1.70%
 
2.29%
Dividend yield
2.20%
 
2.57%
Volatility range
21.65%-29.90%
 
22.66%-26.57%
Weighted-average volatility
23.71%
 
25.59%
Expected term (years)
5.7
 
7.5
Weighted-average fair market value
$13.98
 
$12.78
The risk-free interest rates utilized for periods throughout the contractual life of the stock options are based on a zero-coupon U.S. Treasury security yield at the time of grant. Expected volatility is based on a combination of historical and implied volatility of our stock. The expected term of stock options is estimated based upon observations of historical employee option exercise patterns and trends of those employees granted options in the respective year.
The fair value of the market metric for each PSU granted in the first three quarters of 2015 and 2014 was determined on the date of grant using a Monte Carlo model to simulate total shareholder return for MCBC and peer companies with the following weighted-average assumptions:
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
Risk-free interest rate
1.06%
 
0.72%
Dividend yield
2.20%
 
2.57%
Volatility range
12.73%-62.28%
 
12.45%-72.41%
Weighted-average volatility
21.53%
 
21.72%
Expected term (years)
2.8
 
2.8
Weighted-average fair market value
$74.42
 
$58.69
The risk-free interest rates utilized for periods throughout the expected term of the PSUs 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 as well as the stock of our peer firms, as shown within the volatility range above, for a period from the grant date consistent with the expected term. The expected term of PSUs is calculated based on the grant date to the end of the performance period.
As of September 30, 2015, there were 6.8 million shares of the Company's Class B common stock available for issuance as awards under the Incentive Compensation Plan.

15
Table of Contents

6. Special Items
We have incurred charges or realized benefits that either we do not believe to be indicative of our core operations, or we believe are significant to our current operating results warranting separate classification. As such, we have separately classified these charges (benefits) as special items. The table below summarizes special items recorded by segment:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
 
(In millions)
Employee-related restructuring charges
 
 
 
 
 
 
 
Canada
$
—

 
$
2.2

 
$
—

 
$
7.6

Europe
0.5

 
—

 
(0.5
)
 
1.0

MCI(1)
—

 
—

 
3.2

 
—

Corporate
—

 
—

 
—

 
0.3

Impairments or asset abandonment charges
 
 
 
 
 
 
 
Canada - Intangible asset write-off(2)
—

 
8.9

 
—

 
13.8

Canada - Asset abandonment(3)
15.7

 
—

 
23.9

 
—

Europe - Asset abandonment(4)
2.3

 
—

 
23.4

 
—

Europe - Intangible asset impairment(5)
275.0

 
360.0

 
275.0

 
360.0

MCI - Asset write-off(1)
—

 
—

 
3.2

 
—

Unusual or infrequent items
 
 
 
 
 
 
 
Europe - Flood loss (insurance reimbursement), net(6)
—

 
(3.5
)
 
(2.4
)
 
(1.7
)
Termination fees and other (gains) losses
 
 
 
 
 
 
 
Canada - Termination fee income(2)
—

 
—

 
—

 
(63.2
)
Europe - Termination fee expense, net(7)
—

 
—

 
10.0

 
—

Total Special items, net
$
293.5

 
$
367.6

 
$
335.8

 
$
317.8

(1)
During the second quarter of 2015, we announced our decision to substantially restructure our business in China and consequently, recognized employee-related and asset write-off charges, including $0.7 million of accelerated depreciation.
(2)
During the third quarter of 2014, we recognized an impairment charge related to our definite-lived intangible asset associated with our license agreement with Miller in Canada. Additionally, upon termination of our MMI operations in the first quarter of 2014, we recognized termination fee income and charges associated with the write-off of the definite-lived intangible asset associated with the joint venture. See Note 4, "Investments" for further discussion.
(3)
During the third quarter of 2015, we incurred $15.7 million of charges related to the closure of a bottling line within our Vancouver brewery, including $15.4 million of accelerated depreciation associated with this bottling line. Additionally, during the second quarter of 2015, we incurred $8.2 million of charges related to the closure of a bottling line within our Toronto brewery, including $7.9 million of accelerated depreciation associated with this bottling line. The decisions to close these bottling lines were made as part of an ongoing strategic review of our Canadian supply chain network and the overall shift in consumer preference toward can consumption in Canada. Additionally, in the fourth quarter of 2015, as a result of the continuation of this strategic review, we entered into an agreement to sell the Vancouver brewery with the intent to use the proceeds from the sale to help fund the construction of an efficient and flexible brewery in British Columbia. The sale is anticipated to be completed in the first quarter of 2016. In conjunction with the sale, we also agreed to leaseback the existing property to continue operations on an uninterrupted basis while the new brewery is being constructed. This transaction will result in accelerated depreciation and other charges associated with the brewery sale starting during the fourth quarter of 2015. These charges will continue to be incurred on an ongoing basis until completion of the project and will be recorded as special items, along with the anticipated gain on the sale of the property.  
(4)
In the second quarter of 2015, we completed the closure of the Alton brewery in the U.K. as part of our strategic review of our European supply chain network. As a result, we incurred charges associated with the closure of $2.3 million and $23.4 million, for the three and nine months ended September 30, 2015, respectively, including accelerated depreciation in excess of our normal depreciation associated with this brewery, of $2.0 million and $21.8 million, respectively.

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Table of Contents

As part of this continued strategic review of our European supply chain network, in the fourth quarter of 2015, management has made a proposal and entered into a consultation process to close our Burton South Brewery in the U.K. and consolidate production within our recently modernized Burton North brewery. As a result of management's proposal, we will incur additional charges beginning in the fourth quarter of 2015 and through completion of the closure, which we anticipate will be recorded within special items. We will continue to evaluate our supply chain network and seek opportunities for further efficiencies and cost savings, and we therefore may incur additional restructuring related charges in the future.
(5)
During the third quarters of 2015 and 2014, we recognized impairment charges related to indefinite-lived intangible assets in Europe. See Note 10, "Goodwill and Intangible Assets" for further discussion.
(6)
During the nine months ended September 30, 2015, we recorded $2.4 million of income for insurance proceeds received related to significant flooding in Czech Republic that occurred during the second quarter of 2013. During the three and nine months ended September 30, 2014, we recorded losses and related costs of $0.4 million and $2.2 million, respectively, associated with significant flooding in Serbia, Bosnia, and Croatia that occurred in the second quarter of 2014. These losses were offset by insurance proceeds of $3.9 million recorded in the third quarter of 2014 related to flooding in the second quarter of 2014.
(7)
In December 2013, we entered into an agreement with Heineken to early terminate our contract brewing and kegging agreement under which we produced and packaged the Foster's and Kronenbourg brands in the U.K. As a result of the termination, Heineken agreed to pay us an aggregate early termination payment of British Pound ("GBP") 13.0 million, of which we received GBP 5.0 million in 2014 and the remaining GBP 8.0 million on April 30, 2015. The full amount of the termination payment ($19.4 million upon recognition) is included in income within special items for the nine months ended September 30, 2015, following the completion of the transition period in the second quarter of 2015.
Separately, in June 2015, we terminated our agreement with Carlsberg whereby it held the exclusive distribution rights for the Staropramen brand in the U.K. As a result of this termination, we agreed to pay Carlsberg an early termination payment of GBP 19.0 million ($29.4 million at payment date), which was recognized as a special charge during the second quarter of 2015. The transition period concludes on December 27, 2015, at which time we will have the exclusive distribution rights of the Staropramen brand in the U.K.
Restructuring Activities
In 2012, we introduced several initiatives focused on increasing our efficiencies and reducing costs across all functions of the business in order to develop a more competitive supply chain and global cost structure. Included in these initiatives is a long-term focus on reducing labor and general overhead costs through restructuring activities. We view these restructuring activities as actions to allow us to meet our long-term growth targets by generating future cost savings within cost of goods sold and general and administrative expenses and include organizational changes that strengthen our business and accelerate efficiencies within our operational structure. As a result of these restructuring activities, we have reduced headcount and consequently recognized severance and other employee-related charges, which we have recorded as special items. During 2014, we finalized our restructuring initiatives that began in 2012. Additionally, in the second quarter of 2015, we completed the closure of the Alton brewing facility within our Europe segment resulting in restructuring charges as noted above. In the second quarter of 2015, we recognized employee-related charges within our MCI segment following the decision to substantially restructure our business in China as stated above. As a result of this action, employment levels were reduced by approximately 125 full-time employees. During 2015, we continued our ongoing assessment of our supply chain strategies across our segments in order to align with our cost saving objectives. We will continue to evaluate our supply chain network and seek opportunities for further efficiencies and cost savings, and we therefore may incur additional restructuring related charges in the future.

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The accrued restructuring balances represent expected future cash payments required to satisfy the remaining severance obligations to terminated employees, the majority of which we expect to be paid in the next 12 to 15 months. The table below summarizes the activity in the restructuring accruals by segment:
 
Canada
 
Europe
 
MCI
 
Corporate
 
Total
 
(In millions)
Total at December 31, 2014
$
3.8

 
$
11.5

 
$
—

 
$
0.2

 
$
15.5

Charges incurred
—

 
0.7

 
3.2

 
—

 
3.9

Payments made
(2.8
)
 
(6.4
)
 
(1.1
)
 
(0.2
)
 
(10.5
)
Changes in estimates
—

 
(1.2
)
 
—

 
—

 
(1.2
)
Foreign currency and other adjustments
(0.4
)
 
(0.3
)
 
—

 
—

 
(0.7
)
Total at September 30, 2015
$
0.6

 
$
4.3

 
$
2.1

 
$
—

 
$
7.0

 
Canada
 
Europe
 
MCI
 
Corporate
 
Total
 
(In millions)
Total at December 31, 2013
$
9.7

 
$
13.6

 
$
0.5

 
$
0.9

 
$
24.7

Charges incurred
7.6

 
1.0

 
—

 
0.3

 
8.9

Payments made
(10.7
)
 
(4.0
)
 
(0.4
)
 
(0.8
)
 
(15.9
)
Foreign currency and other adjustments
(0.3
)
 
(0.2
)
 
—

 
—

 
(0.5
)
Total at September 30, 2014
$
6.3

 
$
10.4

 
$
0.1

 
$
0.4

 
$
17.2


7. Other Income and Expense
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
 
(In millions)
Gain on sale of non-operating asset
$
—

 
$
—

 
$
3.3

 
$
—

Gain (loss) from foreign exchange and derivative activity
3.7

 
(4.0
)
 
3.8

 
(2.7
)
Other, net
—

 
(1.0
)
 
0.3

 
(0.8
)
Other income (expense), net
$
3.7

 
$
(5.0
)
 
$
7.4

 
$
(3.5
)


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8. Income Tax
Our effective tax rates for the third quarter of 2015 and 2014 were approximately positive 182% and negative 2%, respectively. For the first nine months of 2015 and 2014, our effective tax rates were approximately positive 12% and 9%, respectively. Our effective tax rates deviate from the federal statutory rate of 35% primarily due to lower effective income tax rates applicable to our foreign businesses, driven by lower statutory income tax rates and tax planning impacts on statutory taxable income, as well as the impact of discrete items further discussed below. The change in the effective tax rate for the third quarter of 2015 versus 2014, was primarily due to a lower pretax loss in 2015 driven by the brand impairment charges in Europe, and higher net discrete and other tax benefits recognized in 2015. Our total net discrete tax benefit was $14.3 million in the third quarter of 2015, versus an $8.2 million net discrete tax benefit recognized in the third quarter of 2014. The net discrete tax benefit recognized in the third quarter of 2015 was driven by the release of unrecognized tax benefits, primarily resulting from the expiration of certain statutes of limitations. This activity includes the release of the remaining $8.1 million unrecognized tax benefit that was established during the second quarter of 2014, as well as the release of other unrecognized tax benefits in domestic and foreign jurisdictions. The net discrete tax benefit recognized in the third quarter of 2014 was also primarily driven by the release of unrecognized tax benefits. The increase in the effective tax rate during the first nine months of 2015 versus 2014 was primarily due to a lower net discrete tax benefit recognized in 2015, as well as lower pretax income.
Our tax rate is volatile and may move up or down with changes in, among other things, the amount and source of income or loss, our ability to utilize foreign tax credits, changes in tax laws and the movement of liabilities established for uncertain tax positions as statutes of limitations expire or positions are otherwise effectively settled. There are proposed or pending tax law changes in various jurisdictions that, if enacted, may have an impact on our effective tax rate.
In March 2015, we formally submitted a renewal application of our bilateral advanced pricing agreement ("BAPA") between the U.S. and Canada tax authorities. The BAPA submission covers both historical and future tax years and is subject to approval by both taxing authorities. The prior year impacts of the submission were recognized as a discrete item in the first quarter of 2015, and the related tax implications for the current year have been incorporated into our projected full year effective tax rate.

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9. Earnings Per Share ("EPS")
Basic EPS was computed using the weighted-average number of shares of common stock outstanding during the period. Diluted EPS includes the additional dilutive effect of our potentially dilutive securities, which include RSUs, DSUs, PUs, PSUs, stock options and SOSARs. The dilutive effects of our potentially dilutive securities are calculated using the treasury stock method. The following summarizes the effect of dilutive securities on diluted EPS:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
 
(In millions, except per share amounts)
Amounts attributable to Molson Coors Brewing Company:
 
 
 
 
 
 
 
Net income (loss) from continuing operations
$
13.7

 
$
(35.7
)
 
$
322.2

 
$
420.3

Income (loss) from discontinued operations, net of tax
2.9

 
1.3

 
4.5

 
(0.4
)
Net income (loss) attributable to Molson Coors Brewing Company
$
16.6

 
$
(34.4
)
 
$
326.7

 
$
419.9

Weighted-average shares for basic EPS
185.0

 
185.1

 
185.5

 
184.7

Effect of dilutive securities:
 
 
 
 
 
 
 
RSUs, DSUs, PUs and PSUs
0.6

 
—

 
0.7

 
0.5

Stock options and SOSARs
0.4

 
—

 
0.4

 
0.7

Weighted-average shares for diluted EPS
186.0

 
185.1

 
186.6

 
185.9

Basic net income (loss) attributable to Molson Coors Brewing Company per share(1):
 
 
 
 

 

From continuing operations
$
0.07

 
$
(0.20
)
 
$
1.74

 
$
2.27

From discontinued operations
0.02

 
0.01

 
0.02

 
—

Basic net income (loss) attributable to Molson Coors Brewing Company per share
$
0.09

 
$
(0.19
)
 
$
1.76

 
$
2.27

Diluted net income (loss) attributable to Molson Coors Brewing Company per share(1):
 
 
 
 


 
 
From continuing operations
$
0.07

 
$
(0.20
)
 
$
1.73

 
$
2.26

From discontinued operations
0.02

 
0.01

 
0.02

 
—

Diluted net income (loss) attributable to Molson Coors Brewing Company per share
$
0.09

 
$
(0.19
)
 
$
1.75

 
$
2.26

Dividends declared and paid per share
$
0.41

 
$
0.37

 
$
1.23

 
$
1.11

(1)
Due to the anti-dilutive effect resulting from the reported net loss from continuing operations for the three months ended September 30, 2014, the impact of potentially dilutive securities has been omitted from the quarterly calculation of weighted-average shares for diluted EPS for the third quarter of 2014. The impact of these potentially dilutive securities has been included in the calculation of weighted-average shares for diluted EPS for the nine months ended September 30, 2014.
Additionally, the sum of the quarterly net income per share amounts may not agree to the full year net income per share amounts. We calculate net income per share based on the weighted-average number of outstanding shares during the period for each reporting period presented. The average number of shares fluctuates throughout the year and can therefore produce a full year result that does not agree to the sum of the individual quarters.
The following anti-dilutive securities were excluded from the computation of the effect of dilutive securities on diluted EPS:
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
 
(In millions)
RSUs, stock options and SOSARs
0.1

 
1.2

 
0.1

 
0.1


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Table of Contents

Share Repurchase Program
In February 2015, our Board of Directors approved and authorized a new program to repurchase up to $1.0 billion of our Class A and Class B common stock with a program term of four years. Under the program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act. The number, price and timing of the repurchases will be at the Company’s sole discretion and will be evaluated depending on market conditions, liquidity needs or other factors. The Company’s Board of Directors may suspend, modify or terminate the program at any time without prior notice. This repurchase program replaces and supersedes any repurchase programs previously approved by the Board of Directors. Under Delaware state law, these shares are not retired, and the issuer has the right to resell any of the shares repurchased. Beginning in April 2015, under this program, we entered into accelerated share repurchase agreements (“ASRs”) with a financial institution. In exchange for up-front payments, the financial institution delivers shares of our common stock during the purchase periods of each ASR. The total number of shares ultimately delivered, and therefore the average repurchase price paid per share, will be determined at the end of the applicable purchase period of each ASR based on the volume weighted-average price of our common stock during that period. The up-front payments for the treasury stock are accounted for as a reduction to shareholders’ equity in the unaudited condensed consolidated balance sheet in the periods the payments are made. We reflect each ASR as a repurchase of common stock in the period delivered for purposes of calculating earnings per share and as forward contracts indexed to its own common stock. Each ASR meets all of the applicable criteria for equity classification, and therefore, is not accounted for as a derivative instrument.
During the second and third quarters of 2015, we purchased a total of 1.3 million shares of our Class B common stock under two separate ASRs for an aggregate of approximately $100 million. In early October 2015, under a separate ASR, we received Class B common stock for an up-front payment of approximately $50 million. The total number of shares ultimately delivered under this ASR, and therefore the average repurchase price paid per share, will be determined at the end of the purchase period in December 2015.
10. Goodwill and Intangible Assets
The following summarizes the change in goodwill for the nine months ended September 30, 2015:
 
Canada
 
Europe
 
MCI
 
Consolidated
 
(In millions)
Balance at December 31, 2014
$
656.5

 
$
1,528.0

 
$
7.1

 
$
2,191.6

Business acquisition and disposition (1)
—

 
(6.7
)
 
16.4

 
9.7

Foreign currency translation
(83.4
)
 
(70.5
)
 
(0.6
)
 
(154.5
)
Balance at September 30, 2015
$
573.1

 
$
1,450.8

 
$
22.9

 
$
2,046.8

(1)
In July 2015, we sold our U.K. malting facility resulting in an adjustment to the goodwill in our Europe reporting unit based on the proportionate fair value of the disposed business relative to the reporting unit. In addition, on April 1, 2015, we completed the acquisition of Mount Shivalik Breweries Ltd., a regional brewer in India. As part of the purchase price accounting, goodwill generated in conjunction with this acquisition has been recorded within our MCI segment beginning in the second quarter of 2015 and included within the India reporting unit of our MCI segment for purposes of our annual goodwill impairment testing.
The following table presents details of our intangible assets, other than goodwill, as of September 30, 2015:
 
Useful life
 
Gross
 
Accumulated
amortization
 
Net
 
(Years)
 
(In millions)
Intangible assets subject to amortization:
 
 
 
 
 
 
 
Brands
 3 - 50
 
$
1,158.6

 
$
(225.0
)
 
$
933.6

License agreements and distribution rights
 3 - 28
 
139.5

 
(89.5
)
 
50.0

Other
 2 - 8
 
30.7

 
(29.2
)
 
1.5

Intangible assets not subject to amortization:
 
 
 
 
 
 
 
Brands
 Indefinite
 
3,161.1

 
—

 
3,161.1

Distribution networks
 Indefinite
 
759.9

 
—

 
759.9

Other
 Indefinite
 
17.5

 
—

 
17.5

Total
 
 
$
5,267.3

 
$
(343.7
)
 
$
4,923.6


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The following table presents details of our intangible assets, other than goodwill, as of December 31, 2014:
 
Useful life
 
Gross
 
Accumulated
amortization
 
Net
 
(Years)
 
(In millions)
Intangible assets subject to amortization:
 
 
 
 
 
 
 
Brands
3 - 40
 
$
483.5

 
$
(229.1
)
 
$
254.4

License agreements and distribution rights
3 - 28
 
122.0

 
(101.1
)
 
20.9

Other
2 - 8
 
31.7

 
(29.4
)
 
2.3

Intangible assets not subject to amortization:
 
 
 
 
 
 
 
Brands
Indefinite
 
4,590.2

 
—

 
4,590.2

Distribution networks
Indefinite
 
870.5

 
—

 
870.5

Other
Indefinite
 
17.5

 
—

 
17.5

Total
 
 
$
6,115.4

 
$
(359.6
)
 
$
5,755.8

The changes in the gross carrying amounts of intangibles from December 31, 2014, to September 30, 2015, are primarily driven by the impact of foreign exchange rates, as a significant amount of intangibles are denominated in foreign currencies, the indefinite-lived brand intangible impairments recorded in the third quarter of 2015 and the change in classification of certain European brands from indefinite life to definite life subject to amortization as noted below. Additionally, we wrote-off the gross value and accumulated amortization associated with our licensing agreement with Miller in Canada upon finalizing the termination in the first quarter of 2015, and we acquired a definite-lived brand as part of our acquisition of the Rekorderlig distribution rights in the third quarter of 2015, as well as a definite-lived brand as part of our acquisition in India in the second quarter of 2015.
Based on foreign exchange rates as of September 30, 2015, the estimated future amortization expense of intangible assets, inclusive of the impact driven by the change in classification of certain European brands from an indefinite life to definite life subject to amortization, is as follows:
Fiscal year
Amount
 
(In millions)
2015 - remaining
$
10.0

2016
$
39.9

2017
$
29.2

2018
$
27.7

2019
$
27.7

Amortization expense of intangible assets was $6.4 million and $10.1 million for the three months ended September 30, 2015, and September 30, 2014, respectively, and $20.1 million and $31.1 million for the nine months ended September 30, 2015, and September 30, 2014, respectively. This expense is presented within marketing, general and administrative expenses on the unaudited condensed consolidated statements of operations and includes the $4.9 million accelerated amortization recognized for the write-off of the intangible asset associated with the termination of MMI operations in the first quarter of 2014. See Note 4, "Investments" for further discussion.
During the fourth quarter of 2014, we changed the date of our annual impairment test for goodwill and indefinite lived intangible assets from July 1, the first day of our fiscal third quarter, to October 1, the first day of our fiscal fourth quarter. The change was made to more closely align the impairment testing date with our strategic and annual operating planning and forecasting process. The change in accounting principle is preferable, as it will align the impairment testing data with the most current information available from the annual operating plan, and allow for the completion of the annual impairment testing closer to the end of our annual reporting period. Based on the results of our testing performed as of October 1, 2014, we concluded there were no impairments of goodwill within our Europe, Canada or India reporting units or impairments of our indefinite-lived intangible assets. The fair values determined during our October 1, 2014, testing were largely consistent with the results of our July 1, 2014, testing. See further discussion below.
In April 2014, the Ontario Premier's Advisory Council on Government Assets (the "Council") began a review that included evaluating the beer retailing and distribution system in Ontario, for which BRI is the primary beer retail and distribution channel. In April 2015, as a result of this review and our negotiations with the Council, we, along with the other owners of BRI, agreed, in principle and subject to entry into definitive binding documents, to enter into a new beer framework

22
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agreement (the "New Framework") with the Province of Ontario. The associated Master Framework Agreement was subsequently executed by all parties on September 22, 2015, and is anticipated to become effective during the fourth quarter of 2015. The New Framework is designed to further enhance the overall beer retail and distribution system within Ontario, as well as provide easier access to market for small brewers. The New Framework includes the implementation of an additional CAD 100.0 million annual tax on all beer volume sold in Ontario, which will be phased in over four years beginning November 1, 2015. Additionally, with the exception of adjustments for increases in annual inflation, the two largest brewers in Ontario will have restrictions on price increases for certain packaging types of the largest Ontario brands until the second quarter of 2017. The New Framework is also intended to increase convenience and choice available for consumers by increasing the number and types of outlets where beer is sold (including introducing beer sales to a specified number of grocery stores and standalone outlets), increasing the required level of shelf space allocated to small brewers in retail outlets, as well as allowing for incremental packaging options at the Liquor Control Board of Ontario ("LCBO") and agents of the LCBO. The New Framework also provides qualifying licensees (restaurants and bars) the ability to purchase beer at BRI retail outlets at the same price as retail consumers. Further, BRI has committed to invest CAD 100.0 million of capital spending through 2018, 80.0% of which will be directed toward enhancements to the purchasing experience for consumers. The New Framework also incorporates many of the proposed changes to the BRI ownership structure that were announced in January 2015, allowing all other Ontario brewers, regardless of size, to participate in the ownership and governance of BRI (see Note 4, "Investments"). We are still evaluating and beginning to implement actions to mitigate any adverse impacts to our Canada results due to the adoption of the New Framework. The ultimate outcome and potential impact to our Canada business remains to be fully determined.
Reporting Units and Goodwill
The operations in each of the specific regions within our Canada, Europe and MCI segments are considered components based on the availability of discrete financial information and the regular review by segment management. We have concluded that the components within the Canada and Europe segments each meet the criteria as having similar economic characteristics and therefore have aggregated these components into the Canada and Europe reporting units, respectively. Additionally, we determined that the components within our MCI segment do not meet the criteria for aggregation, and therefore, the operations of our India business constitute a separate reporting unit at the component level.
Our 2014 annual goodwill impairment testing determined that our Europe and Canada reporting units were at risk of failing step one of the goodwill impairment test. Specifically, the fair value of the Europe and Canada reporting units were estimated at approximately 14% and 11% in excess of carrying value, respectively, as of the October 1, 2014, testing date. Prior to recognizing the 2014 brand impairments discussed below, the excess of the fair value over the carrying value of the Europe reporting unit declined from the prior year. The decrease was driven by challenging macroeconomic conditions in Europe negatively impacting our business, as well as declines in the forecasts of certain European brands, which have been adversely impacted by the expected prolonged recovery from recent flooding and an accelerated consumer trend to value brands. These impacts were partially offset by improvements to market multiples. The impairment of certain European indefinite-lived brands during the third quarter of 2015, as discussed below, was a potential impairment indicator for the Europe reporting unit; however, we evaluated and based on other offsetting factors at the Europe reporting unit level, an interim impairment test at the reporting unit level was not required. We will complete our 2015 annual goodwill impairment test during the fourth quarter of 2015. The Canada reporting unit had a marginal decrease from the prior year primarily due to continued competitive pressures and economic weakness in the Canadian market, partially offset by improved market multiples.
Indefinite-Lived Intangibles
During the third quarter of 2015, we identified impairment indicators as it pertains to indefinite-lived intangible assets related to certain European brands driven by key changes to our underlying assumptions supporting the value of the brands. Specific changes include underperformance through the 2015 peak season driving a downward shift in management's forecasts, along with challenging macroeconomic and competitive conditions that we no longer expect to subside in the near term. As a result, we recorded an aggregate impairment charge across various European brands, including Jelen, of $275.0 million within special items in the third quarter of 2015. These lower projected cash flows along with higher weighted-average costs of capital attributed to these brands compared to previously made assumptions continue to result in lower brand valuations as this charge follows impairments of $360.0 million in 2014 and $150.9 million in 2013 related to European indefinite-lived brands as a result of our 2014 and 2013 annual impairment testing, respectively. The remaining Europe indefinite-lived intangibles' fair values, including Staropramen and Carling brands, while facing similar macroeconomic challenges, were sufficiently in excess of their respective carrying values.

In conjunction with the interim brand impairment review, we also reassessed each brand's indefinite-life classification and determined that these impaired brands have characteristics that have evolved and which now indicate a definite-life is more appropriate. Specifically, such characteristics include continued pressure on these brands given the geographical markets and price segments in which they participate, as well as significant competition from the value segment, which has challenged the segment in which these brands operate with continued stress on these brands driven by on-going macroeconomic conditions.

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Table of Contents

These brands have therefore been reclassified as definite-lived intangible assets with the remaining aggregate fair value of $700.2 million, which equals the carrying value, to be amortized over useful lives ranging from 30 to 50 years.
Separately, our Molson core brand intangible asset continues to be at risk of future impairment with a fair value estimated at approximately 9% in excess of its carrying value as of the October 1, 2014, impairment testing date. The fair value of the Molson core brand intangible assets in excess of carrying value decreased slightly from the prior year, as they continue to face significant competitive pressures and challenging macroeconomic conditions in the Canada market. These challenges continue to be partially offset by anticipated cost savings initiatives. As part of our annual impairment testing during the fourth quarter of 2015, we will evaluate the impact to the fair value of the intangible asset as a result of management's completed strategic and annual operating planning and forecasting process along with potential changes in other key inputs, such as the weighted-average cost of capital, which could be adversely impacted by a number of factors. As of September 30, 2015, the Molson core brand intangible asset had a carrying value of $2,280.4 million. The value of the Coors Light brand distribution rights and our other indefinite-lived intangible assets in Canada continue to be sufficiently in excess of their carrying values.

We utilized Level 3 fair value measurements in our impairment analysis of our indefinite-lived intangible assets, which utilizes an excess earnings approach to determine the fair values of the assets as of the testing date, inclusive of the intangible assets mentioned above valued during the third quarter of 2015. The future cash flows used in the analysis are based on internal cash flow projections based on our long range plans and include significant assumptions by management as noted below.

Key Assumptions
The Europe and Canada reporting units' goodwill and the Molson core brand intangible asset are at risk of future impairment in the event of significant unfavorable changes in the forecasted cash flows (including significant delays in projected macroeconomic recovery or prolonged adverse economic conditions), terminal growth rates, market multiples and/or weighted-average cost of capital utilized in the discounted cash flow analyses. For testing purposes, management's best estimates of the expected future results are the primary driver in determining the fair value. Current projections used for our Europe reporting unit testing reflect continued challenging environments in the future followed by growth resulting from a longer term recovery of the macroeconomic environment, as well as the benefit of anticipated cost savings and specific brand-building and innovation activities. Our Canada reporting unit and Molson core brand projections also reflect a continued challenging environment that has been adversely impacted by a weak economy across all industries, as well as weakened consumer demand driven by increased competitive pressures, partially offset by anticipated cost savings and specific brand-building and innovation activities. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill and indefinite-lived intangible impairment tests will prove to be an accurate prediction of the future. Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of our Canada and Europe reporting units and Molson core brand may include such items as: (i) a decrease in expected future cash flows, specifically, a decrease in sales volume and increase in costs due to another natural disaster or other unknown event that could significantly impact our immediate and long-range results, a decrease in sales volume driven by a prolonged weakness in consumer demand or other competitive pressures adversely affecting our long term volume trends, a continuation of the trend away from core brands in certain of our markets, especially in markets where our core brands represent a significant portion of the market, unfavorable working capital changes and an inability to successfully achieve our cost savings targets, (ii) an economic recovery that significantly differs from our assumptions in timing and/or degree (such as a recession or continued worsening of the overall European economy), an inability of the market to successfully recover from the recent severe flooding in several of our Central European markets, (iii) volatility in the equity and debt markets or other country specific factors which could result in a higher weighted-average cost of capital; and (iv) sensitivity to market multiples.
While historical performance and current expectations have resulted in fair values of our reporting units in excess of carrying values, if our assumptions are not realized, it is possible that an impairment charge may need to be recorded in the future.
Definite-Lived Intangibles
Regarding definite-lived intangibles, we continuously monitor the performance of the underlying asset for potential triggering events suggesting an impairment review should be performed. No such triggering events were identified in the third quarter of 2015.
In the third quarter of 2014, as a result of the settlement with Miller in Canada, we updated our assessment of the definite-lived intangible asset related to the Miller license agreement for impairment resulting in an $8.9 million impairment charge. The valuation of the asset at that time was primarily indicative of the settlement amount, as well as the remaining future cash flows expected to be generated under the license agreement through March 31, 2015. We received half of the mutually agreed upon settlement payment following the execution of the settlement and received the remainder upon finalization of

24
Table of Contents

transition at the end of the first quarter of 2015. The intangible asset was fully amortized as of the end of the first quarter of 2015 and the associated gross value and accumulated amortization balances were written off. We utilized Level 3 fair value measurements in our impairment analysis of this definite-lived intangible asset in the third quarter of 2014, which included cash flow assumptions by management related to the transition period.

11. Debt
Debt obligations
Our total borrowings as of September 30, 2015, and December 31, 2014, were comprised of the following:
 
As of
 
September 30, 2015
 
December 31, 2014(1)
 
(In millions)
Senior notes:
 
 
 
CAD 900 million 5.0% notes due 2015(2)
$
—

 
$
774.5

CAD 500 million 3.95% Series A notes due 2017
375.6

 
430.3

CAD 400 million 2.25% notes due 2018(2)
300.5

 
—

CAD 500 million 2.75% notes due 2020(2)
375.6

 
—

$300 million 2.0% notes due 2017(3)
301.3

 
300.0

$500 million 3.5% notes due 2022(3)
523.4

 
510.8

$1.1 billion 5.0% notes due 2042
1,100.0

 
1,100.0

Less: unamortized debt discounts and debt issuance costs
(22.5
)
 
(20.4
)
Total long-term debt (including current portion)
2,953.9

 
3,095.2

Less: current portion of long-term debt
—

 
(773.9
)
Total long-term debt
$
2,953.9

 
$
2,321.3

 
 
 
 
Short-term borrowings:
 
 
 
Commercial paper program(4)
$
10.0

 
$
—

Cash pool overdrafts(5)
9.4

 
64.6

Japanese Yen ("JPY") 1.5 billion line of credit(6)
10.8

 
4.9

Other short-term borrowings
18.0

 
5.6

Current portion of long-term debt
—

 
773.9

Current portion of long-term debt and short-term borrowings
$
48.2

 
$
849.0

(1)
Amounts have been adjusted to reflect the adoption of the authoritative guidance requiring debt issuance costs to be presented as a direct reduction from the carrying value of the related debt. See Note 2, "New Accounting Pronouncements" for further discussion.
(2)
On September 18, 2015, Molson Coors International, LP, a Delaware partnership and a wholly owned subsidiary of MCBC, issued CAD 500 million 2.75% notes due September 18, 2020 ("CAD 500 million notes"), and CAD 400 million 2.25% notes due September 18, 2018 ("CAD 400 million notes", and together with the CAD 500 million notes, the "2015 Notes"). Our previously issued CAD 900 million 5.0% notes matured on September 22, 2015, and were repaid using the proceeds from the new offerings. Prior to issuing the 2015 Notes, we entered into forward starting interest rate swap agreements to hedge the interest rate volatility on CAD 600 million of the 2015 Notes beginning in the second quarter of 2014. At the time of the issuance of the 2015 Notes, the government of Canada bond rates were trading at a yield lower than that locked in by the interest rate swaps, resulting in an aggregate realized loss of CAD 39.2 million ($29.5 million at settlement), which was recorded in other comprehensive income. A portion of this loss is being amortized into interest expense over the 5-year and 3-year lives of the respective 2015 Notes and will increase our effective cost of borrowing compared to the stated coupon rates by 0.65% on the CAD 500 million notes and 0.16% on the CAD 400 million notes. The remaining portion of the loss will be amortized on future debt issuances covering the full 10-year term of the interest rate swap agreements. The cash payment associated with the settlement of the forward starting interest rate swap agreements was recorded as an operating outflow within the other assets and liabilities line item on the unaudited condensed consolidated statement of cash flows. See Note 13, "Derivative Instruments and Hedging Activities" for further details on the forward starting interest rate swaps.

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(3)
In the first quarter of 2015, we entered into interest rate swaps to economically convert our fixed rate $300 million 2.0% notes due 2017 ("$300 million notes") to floating rate debt consistent with the interest rate swaps on our $500 million 3.5% notes due 2022 ("$500 million notes") entered into during 2014. As a result of these hedge programs, the carrying value of the $300 million and $500 million notes include adjustments of $1.3 million and $23.4 million, respectively, for fair value movements attributable to the benchmark interest rate. The carrying value of the $500 million note included an adjustment of $10.8 million for fair value movements attributable to the benchmark interest rate as of December 31, 2014.
In the first quarter of 2015, we also entered into a cross currency swap with a total notional of Euro ("EUR") 265 million ($300 million upon execution) in order to hedge a portion of the foreign currency translational impacts of our European investment. As a result of this cross currency swap and the above mentioned interest rate swaps, we have economically converted the $300 million notes and associated interest to a floating rate EUR denomination. The effective interest rate for the $300 million notes, adjusted for these swaps, was (0.33)% and 0.98%, for the three and nine months ended September 30, 2015, respectively. The interest rate swaps on our $500 million notes resulted in an effective interest rate of 1.41% and 1.38% for the three and nine months ended September 30, 2015, and 1.41% and 2.74% for the three and nine months ended September 30, 2014, respectively. See Note 13, "Derivative Instruments and Hedging Activities" for further details.
(4)
As of September 30, 2015, the weighted-average effective interest rate and tenor for the outstanding commercial paper borrowings was 0.45% and 17.1 days, respectively. As of September 30, 2015, we have $740.0 million available to draw on under our $750 million revolving credit facility, as the borrowing capacity is reduced by borrowings under our commercial paper program, and we have no other borrowings drawn on this revolving credit facility.
(5)
As of September 30, 2015, we had $9.4 million in bank overdrafts and $63.3 million in bank cash related to our cross-border, cross-currency cash pool for a net positive position of $53.9 million. As of December 31, 2014, we had $64.6 million in bank overdrafts and $80.0 million in bank cash related to our cross-border, cross-currency cash pool for a net positive position of $15.4 million.
(6)
In addition to our JPY line of credit, we have a EUR revolving credit facility and GBP and CAD overdraft facilities which we had no borrowings under as of September 30, 2015, or December 31, 2014.
Debt Fair Value Measurements
We utilize market approaches to estimate the fair value of certain outstanding borrowings by discounting anticipated future cash flows derived from the contractual terms of the obligations and observable market interest and foreign exchange rates. As of September 30, 2015, and December 31, 2014, the fair value of our outstanding long-term debt (including current portion) was $2,873.8 million and $3,240.6 million, respectively. All senior notes are valued based on significant observable inputs and would be classified as Level 2 in the fair value hierarchy. The carrying values of all other outstanding long-term borrowings and our short-term borrowings approximate their fair values and are also classified as Level 2.
Other
Under the terms of each of our debt facilities, we must comply with certain restrictions. These include restrictions on priority indebtedness (certain threshold percentages of secured consolidated net tangible assets), leverage thresholds, liens, and restrictions on certain types of sale lease-back transactions and transfers of assets. As of September 30, 2015, and December 31, 2014, we were in compliance with all of these restrictions and have met all debt payment obligations.

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12. Accumulated Other Comprehensive Income (Loss) ("AOCI")
 
MCBC shareholders
 
Foreign
currency
translation
adjustments
 
Gain (loss) on
derivative
instruments
 
Pension and
postretirement
benefit
adjustments
 
Equity method
investments
 
Accumulated
other
comprehensive
income (loss)
 
(In millions)
As of December 31, 2014
$
129.8

 
$
15.0

 
$
(658.5
)
 
$
(384.7
)
 
$
(898.4
)
Foreign currency translation adjustments
(630.2
)
 
—

 
—

 
—

 
(630.2
)
Unrealized gain (loss) on derivative instruments
—

 
6.5

 
—

 
—

 
6.5

Reclassification of derivative (gain) loss to income
—

 
(6.2
)
 
—

 
—

 
(6.2
)
Pension and other postretirement benefit adjustments
—

 
—

 
(2.2
)
 
—

 
(2.2
)
Amortization of net prior service (benefit) cost and net actuarial (gain) loss to income
—

 
—

 
35.2

 
—

 
35.2

Ownership share of unconsolidated subsidiaries' other comprehensive income (loss)
—

 
—

 
—

 
(3.8
)
 
(3.8
)
Tax benefit (expense)
(57.2
)
 
5.6

 
(7.4
)
 
1.4

 
(57.6
)
As of September 30, 2015
$
(557.6
)
 
$
20.9

 
$
(632.9
)
 
$
(387.1
)
 
$
(1,556.7
)

Reclassifications from AOCI to income:
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
 
 
 
 
Reclassifications from AOCI
 
Location of gain (loss)
recognized in income
 
 
(In millions)
 
 
Gain/(loss) on cash flow hedges:
 
 
 
 
 
 
 
 
 
 
Forward starting interest rate swaps
 
$
(0.4
)
 
$
(0.4
)
 
$
(1.0