MOLSON COORS BEVERAGE CO, 10-Q filed on 10/29/2020
Quarterly Report
v3.20.2
Cover Page - shares
9 Months Ended
Sep. 30, 2020
Oct. 22, 2020
Entity Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2020  
Document Transition Report false  
Entity File Number 1-14829  
Entity Registrant Name Molson Coors Beverage Company  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 84-0178360  
Entity Address, Address Line One P.O. BOX 4030, NH353  
Entity Address, City or Town Golden  
Entity Address, State or Province CO  
Entity Address, Country US  
Entity Address, Postal Zip Code 80401  
City Area Code 303  
Local Phone Number 279-6565  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Central Index Key 0000024545  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q3  
Current Fiscal Year End Date --12-31  
Amendment Flag false  
Common Class A    
Entity Information [Line Items]    
Entity Common Stock, Shares Outstanding   2,561,670
Common Class B    
Entity Information [Line Items]    
Entity Common Stock, Shares Outstanding   200,296,645
Exchangeable Class A    
Entity Information [Line Items]    
Entity Common Stock, Shares Outstanding   2,718,267
Exchangeable Class B    
Entity Information [Line Items]    
Entity Common Stock, Shares Outstanding   11,104,592
NEW YORK STOCK EXCHANGE | Common Class A    
Entity Information [Line Items]    
Title of 12(b) Security Class A Common Stock, $0.01 par value  
Trading Symbol TAP.A  
Security Exchange Name NYSE  
NEW YORK STOCK EXCHANGE | Common Class B    
Entity Information [Line Items]    
Title of 12(b) Security Class B Common Stock, $0.01 par value  
Trading Symbol TAP  
Security Exchange Name NYSE  
1.25% Senior Notes due 2024 | NEW YORK STOCK EXCHANGE    
Entity Information [Line Items]    
Title of 12(b) Security 1.25% Senior Notes due 2024  
Trading Symbol TAP  
Security Exchange Name NYSE  
CANADA    
Entity Information [Line Items]    
Entity Address, Address Line Two 1555 Notre Dame Street East  
Entity Address, City or Town Montréal  
Entity Address, State or Province QC  
Entity Address, Country CA  
Entity Address, Postal Zip Code H2L 2R5  
City Area Code 514  
Local Phone Number 521-1786  
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Millions, $ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Sales $ 3,378.4 $ 3,498.0 $ 8,946.0 $ 9,918.1
Excise taxes (624.9) (656.4) (1,586.3) (1,824.9)
Net sales 2,753.5 2,841.6 7,359.7 8,093.2
Cost of goods sold (1,551.0) (1,685.4) (4,486.6) (4,858.2)
Gross profit 1,202.5 1,156.2 2,873.1 3,235.0
Marketing, general and administrative expenses (634.5) (690.2) (1,788.7) (2,115.1)
Special items, net (59.7) (703.3) (210.6) (666.4)
Operating income (loss) 508.3 (237.3) 873.8 453.5
Interest income (expense), net (67.9) (65.6) (206.5) (204.5)
Other pension and postretirement benefits (costs), net 7.6 8.0 22.7 25.0
Other income (expense), net 2.4 (13.7) 3.4 (0.7)
Income (loss) before income taxes 450.4 (308.6) 693.4 273.3
Income tax benefit (expense) (104.0) (90.7) (265.2) (193.3)
Net income (loss) 346.4 (399.3) 428.2 80.0
Net (income) loss attributable to noncontrolling interests (3.6) (3.5) (7.4) (2.0)
Net income (loss) attributable to MCBC $ 342.8 $ (402.8) $ 420.8 $ 78.0
Net income (loss) attributable to Molson Coors Beverage Company per share:        
Net income (loss) per share, basic (in dollars per share) $ 1.58 $ (1.86) $ 1.94 $ 0.36
Diluted net income (loss) attributable to Molson Coors Beverage Company per share:        
Net income (loss) per share, diluted (in dollars per share) $ 1.58 $ (1.86) $ 1.94 $ 0.36
Weighted average shares outstanding, basic        
Weighted average shares - basic (in shares) 216.9 216.6 216.8 216.6
Weighted average shares outstanding, diluted        
Dilutive effect of share-based awards (in shares) 0.1 0.0 0.2 0.3
Weighted average shares - diluted (in shares) 217.0 216.6 217.0 216.9
Share-based payment arrangement        
Weighted average shares outstanding, diluted        
Antidilutive securities excluded from the computation of diluted EPS (in shares) 2.3 1.6 2.3 1.3
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract]        
Net income (loss) including noncontrolling interests $ 346.4 $ (399.3) $ 428.2 $ 80.0
Other comprehensive income (loss), net of tax:        
Foreign currency translation adjustments 149.8 (144.8) (104.0) (31.2)
Unrealized gain (loss) on derivative instruments 14.5 (55.8) (114.1) (123.8)
Reclassification of derivative (gain) loss to income 0.2 0.2 (0.9) 0.0
Amortization of net prior service (benefit) cost and net actuarial (gain) loss to income (1.5) (0.8) (4.7) (1.9)
Ownership share of unconsolidated subsidiaries' other comprehensive income (loss) 0.7 0.5 2.2 2.3
Total other comprehensive income (loss), net of tax 163.7 (200.7) (221.5) (154.6)
Comprehensive income (loss) 510.1 (600.0) 206.7 (74.6)
Comprehensive (income) loss attributable to noncontrolling interests (5.1) (2.5) (7.1) (0.9)
Comprehensive income (loss) attributable to Molson Coors Beverage Company 505.0 (602.5) 199.6 (75.5)
Net income (loss) including noncontrolling interests $ 346.4 $ (399.3) $ 428.2 $ 80.0
v3.20.2
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Millions
Sep. 30, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 731.3 $ 523.4
Accounts receivable, net 694.2 714.8
Other receivables, net 123.1 105.5
Inventories, net 657.7 615.9
Other current assets, net 434.2 224.8
Total current assets 2,640.5 2,184.4
Properties, net 4,180.1 4,546.5
Goodwill 7,624.1 7,631.4
Other intangibles, net 13,410.4 13,656.0
Other assets 820.2 841.5
Total Assets 28,675.3 28,859.8
Current liabilities:    
Accounts payable and other current liabilities 3,068.4 2,767.3
Current portion of long-term debt and short-term borrowings 1,242.1 928.2
Total current liabilities 4,310.5 3,695.5
Long-term debt 7,129.5 8,109.5
Pension and postretirement benefits 691.5 716.6
Deferred tax liabilities 2,276.0 2,258.6
Other liabilities 492.2 406.5
Total Liabilities 14,899.7 15,186.7
Commitments and contingencies (Note 12)
Capital stock:    
Preferred stock, $0.01 par value (authorized: 25.0 shares; none issued) 0.0 0.0
Paid-in capital 6,931.3 6,773.6
Retained earnings 7,914.0 7,617.0
Accumulated other comprehensive income (loss) (1,383.4) (1,162.2)
Class B common stock held in treasury at cost (9.5 shares and 9.5 shares, respectively) (471.4) (471.4)
Total Molson Coors Beverage Company stockholders' equity 13,512.7 13,419.4
Noncontrolling interests 262.9 253.7
Total equity 13,775.6 13,673.1
Total liabilities and equity 28,675.3 28,859.8
Common Class A    
Capital stock:    
Common stock issued 0.0 0.0
Common Class B    
Capital stock:    
Common stock issued 2.1 2.1
Exchangeable Class A    
Capital stock:    
Exchangeable shares issued 102.3 102.5
Exchangeable Class B    
Capital stock:    
Exchangeable shares issued $ 417.8 $ 557.8
v3.20.2
CONDENSED CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - $ / shares
Sep. 30, 2020
Dec. 31, 2019
Preferred stock, par value (in dollars per share) $ 0.01 $ 0.01
Preferred stock, shares authorized (in shares) 25,000,000.0 25,000,000.0
Preferred stock, shares issued (in shares) 0 0
Treasury stock, shares (in shares) 9,500,000 9,500,000
Common Class A    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 500,000,000.0 500,000,000.0
Common stock, shares issued (in shares) 2,600,000 2,600,000
Common stock, shares outstanding (in shares) 2,600,000 2,600,000
Common Class B    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 500,000,000.0 500,000,000.0
Common stock, shares issued (in shares) 209,800,000 205,700,000
Common stock, shares outstanding (in shares) 209,800,000 205,700,000
Exchangeable Class A    
Exchangeable shares, no par value (in dollars per share) $ 0 $ 0
Exchangeable shares, issued (in shares) 2,700,000 2,700,000
Exchangeable shares, outstanding (in shares) 2,700,000 2,700,000
Exchangeable Class B    
Exchangeable shares, no par value (in dollars per share) $ 0 $ 0
Exchangeable shares, issued (in shares) 11,100,000 14,800,000
Exchangeable shares, outstanding (in shares) 11,100,000 14,800,000
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Millions
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Cash flows from operating activities:    
Net income (loss) including noncontrolling interests $ 428.2 $ 80.0
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:    
Depreciation and amortization 714.9 641.4
Amortization of debt issuance costs and discounts 6.3 11.2
Share-based compensation 18.0 7.5
(Gain) loss on sale or impairment of properties and other assets, net 39.8 630.6
Unrealized (gain) loss on foreign currency fluctuations and derivative instruments, net (25.9) 16.2
Income tax (benefit) expense 265.2 193.3
Income tax (paid) received (75.7) (50.3)
Interest expense, excluding interest amortization 202.5 207.0
Interest paid (236.1) (249.5)
Change in current assets and liabilities and other 156.0 (199.2)
Net cash provided by (used in) operating activities 1,493.2 1,288.2
Cash flows from investing activities:    
Additions to properties (456.4) (457.3)
Proceeds from sales of properties and other assets 4.6 101.0
Other 0.5 37.3
Net cash provided by (used in) investing activities (451.3) (319.0)
Cash flows from financing activities:    
Exercise of stock options under equity compensation plans 4.0 1.5
Dividends paid (125.3) (300.9)
Payments on debt and borrowings (913.5) (1,575.9)
Proceeds on debt and borrowings 1.5 0.0
Net proceeds from (payments on) revolving credit facilities and commercial paper 224.6 262.9
Change in overdraft balances and other (32.6) (1.2)
Net cash provided by (used in) financing activities (841.3) (1,613.6)
Cash and cash equivalents:    
Net increase (decrease) in cash and cash equivalents 200.6 (644.4)
Effect of foreign exchange rate changes on cash and cash equivalents 7.3 (3.3)
Balance at beginning of year 523.4 1,057.9
Balance at end of period $ 731.3 $ 410.2
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND NONCONTROLLING INTERESTS - USD ($)
$ in Millions
Total
Common Stock
Common Class A
Common Stock
Common Class B
Common Stock
Exchangeable Class A
Common Stock
Exchangeable Class B
Paid-in capital
Retained earnings
Accumulated other comprehensive income (loss)
Common stock held in treasury, Class B
Noncontrolling interest
Beginning balance at Dec. 31, 2018 $ 13,735.8 $ 0.0 $ 2.0 $ 103.2 $ 557.6 $ 6,773.1 $ 7,692.9 $ (1,150.0) $ (471.4) $ 228.4
Increase (Decrease) in Stockholders' Equity [Roll Forward]                    
Exchange of shares       (0.7) 0.2 0.5        
Shares issued under equity compensation plan (7.9)   0.1     (8.0)        
Amortization of share-based compensation 7.3         7.3        
Purchase of noncontrolling interest 0.6                 0.6
Deconsolidation of VIE (1.5)                 (1.5)
Net income (loss) including noncontrolling interests 80.0           78.0     2.0
Other comprehensive income (loss), net of tax (154.6)             (153.5)   (1.1)
Adoption of lease accounting standard 32.0           32.0      
Reclassification of stranded tax effects             74.8 (74.8)    
Contributions from noncontrolling interests 25.4                 25.4
Distributions and dividends to noncontrolling interests (9.7)                 (9.7)
Dividends declared and paid (300.9)           (300.9)      
Ending balance at Sep. 30, 2019 13,406.5 0.0 2.1 102.5 557.8 6,772.9 7,576.8 (1,378.3) (471.4) 244.1
Beginning balance at Jun. 30, 2019 14,145.0 0.0 2.1 103.0 557.9 6,783.3 8,103.1 (1,178.6) (471.4) 245.6
Increase (Decrease) in Stockholders' Equity [Roll Forward]                    
Exchange of shares       (0.5) (0.1) 0.6        
Amortization of share-based compensation (11.0)         (11.0)        
Purchase of noncontrolling interest (0.1)                 (0.1)
Deconsolidation of VIE (1.5)                 (1.5)
Net income (loss) including noncontrolling interests (399.3)           (402.8)     3.5
Other comprehensive income (loss), net of tax (200.7)             (199.7)   (1.0)
Contributions from noncontrolling interests 3.9                 3.9
Distributions and dividends to noncontrolling interests (6.3)                 (6.3)
Dividends declared and paid (123.5)           (123.5)      
Ending balance at Sep. 30, 2019 13,406.5 0.0 2.1 102.5 557.8 6,772.9 7,576.8 (1,378.3) (471.4) 244.1
Beginning balance at Dec. 31, 2019 13,673.1 0.0 2.1 102.5 557.8 6,773.6 7,617.0 (1,162.2) (471.4) 253.7
Increase (Decrease) in Stockholders' Equity [Roll Forward]                    
Exchange of shares       (0.2) (140.0) 140.2        
Shares issued under equity compensation plan (0.5)   0.0     (0.5)        
Amortization of share-based compensation 18.0         18.0        
Purchase of noncontrolling interest (0.1)                 (0.1)
Net income (loss) including noncontrolling interests 428.2           420.8     7.4
Other comprehensive income (loss), net of tax (221.5)             (221.2)   (0.3)
Contributions from noncontrolling interests 14.0                 14.0
Distributions and dividends to noncontrolling interests (11.8)                 (11.8)
Dividends declared and paid (123.8)           (123.8)      
Ending balance at Sep. 30, 2020 13,775.6 0.0 2.1 102.3 417.8 6,931.3 7,914.0 (1,383.4) (471.4) 262.9
Beginning balance at Jun. 30, 2020 13,268.0 0.0 2.1 102.5 557.8 6,786.3 7,571.2 (1,545.6) (471.4) 265.1
Increase (Decrease) in Stockholders' Equity [Roll Forward]                    
Exchange of shares       (0.2) (140.0) 140.2        
Shares issued under equity compensation plan (1.4)         (1.4)        
Amortization of share-based compensation 6.2         6.2        
Net income (loss) including noncontrolling interests 346.4           342.8     3.6
Other comprehensive income (loss), net of tax 163.7             162.2   1.5
Distributions and dividends to noncontrolling interests (7.3)                 (7.3)
Ending balance at Sep. 30, 2020 $ 13,775.6 $ 0.0 $ 2.1 $ 102.3 $ 417.8 $ 6,931.3 $ 7,914.0 $ (1,383.4) $ (471.4) $ 262.9
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND NONCONTROLLING INTERESTS (PARENTHETICAL) - $ / shares
3 Months Ended 9 Months Ended
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Statement of Stockholders' Equity [Abstract]      
Dividends declared (in dollars per share) $ 0.57 $ 0.57 $ 1.39
Dividends paid (in dollars per share) $ 0.57 $ 0.57 $ 1.39
v3.20.2
Basis of Presentation and Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation and Summary of Significant Accounting Policies
Unless otherwise noted in this report, any description of "we," "us" or "our" includes Molson Coors Beverage Company ("MCBC" or the "Company") (formerly known as Molson Coors Brewing Company), principally a holding company, and its operating and non-operating subsidiaries included within our reporting segments. As further discussed below, on January 1, 2020, we changed our management structure from a corporate center and four segments to two segments - North America and Europe. Our International segment was reconstituted with the Africa and Asia Pacific businesses reporting into the Europe segment and the remaining International business reporting into the North America segment. Accordingly, effective January 1, 2020, our reporting segments include: North America (North America segment), operating in the U.S., Canada and various countries in Latin and South America; and Europe (Europe segment), operating in Bulgaria, Croatia, Czech Republic, Hungary, Montenegro, the Republic of Ireland, Romania, Serbia, the U.K., various other European countries, and certain countries within Africa and Asia Pacific. We have recast the historical presentation of segment information as a result of these reporting segment changes accordingly.
Unless otherwise indicated, information in this report is presented in USD and comparisons are to comparable prior periods. Our primary operating currencies, other than the USD, include the CAD, the GBP, and our Central European operating currencies such as the EUR, CZK, HRK and RSD.
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 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 SEC. 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, 2019 ("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 included in our Annual Report, except as noted in Note 2, "New Accounting Pronouncements" as well as the changes to our reportable segments and reporting units as discussed above and in Note 3, "Segment Reporting" and Note 7, "Goodwill and Intangible Assets," respectively.
The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be achieved for the full year.
Coronavirus Global Pandemic
On March 11, 2020, the World Health Organization characterized the outbreak of the novel coronavirus disease, known as COVID-19, as a global pandemic and recommended containment and mitigation measures. We are actively monitoring the impact of the coronavirus pandemic, which had a material adverse effect on our operations, liquidity, financial condition, and results of operations during the second quarter of 2020 due to the on-premise closures worldwide. While the adverse effects of the coronavirus pandemic continued into the third quarter of 2020 due to on-premise locations only being open at partial capacity and at reduced hours and is expected to have an impact for the rest of 2020 and beyond, we do not currently anticipate the adverse effects to be as material as were observed in the second quarter of 2020. The effects of the pandemic remain highly uncertain especially around the severity and duration of the outbreak and actions by government authorities to contain the pandemic or address its impact, among other things.
During the nine months ended September 30, 2020, we recorded charges of $15.5 million within cost of goods sold related to temporary "thank you" pay for certain essential North America brewery employees. Additionally, in order to support and demonstrate our commitment to the continued viability of the many bars and restaurants which have been negatively impacted by the coronavirus pandemic, during the first quarter of 2020, we initiated temporary keg relief programs in many of our markets. As part of these voluntary programs, we committed to provide customers with reimbursements for untapped kegs that meet certain established return requirements. As a result, during the nine months ended September 30, 2020, we recognized a reduction to net sales of $31.1 million reflecting actual, and estimated remaining, sales returns and reimbursements through these keg relief programs, substantially all of which was recognized in the first quarter other than immaterial adjustments for changes in estimates recognized during the second and third quarters of 2020. Further, during the nine months ended September 30, 2020, we recognized charges of $12.6 million, substantially all of which was recognized in the first quarter other than immaterial adjustments for changes in estimates recognized during the second and third quarters of 2020, within cost of goods sold related to obsolete finished goods keg inventories that are not expected to be sold within our freshness specifications, as well as the costs to facilitate the above mentioned keg returns. As of September 30, 2020 and December 31,
2019, our aggregate allowance for obsolete inventories was approximately $14 million and $11 million, respectively. The actual duration of the coronavirus pandemic, including the length of government-mandated closures or ceased sit-down service limitations at bars and restaurants coupled with the subsequent economic recovery period relative to the assumptions utilized to derive these estimates, could result in further charges due to incremental finished goods keg inventory becoming obsolete in future periods.
Additionally, we continue to monitor the impacts of the coronavirus pandemic on our customers’ liquidity and capital resources and therefore our ability to collect, or the timeliness of collection of our accounts receivable. While these receivables are not concentrated in any specific customer and our allowance on these receivables factors in expected credit loss, continued disruption and declines in the global economy could result in difficulties in our ability to collect and require increases to our allowance for doubtful accounts. As of September 30, 2020 and December 31, 2019, our allowance for trade receivables was approximately $9 million and $12 million, respectively, and allowance activity was immaterial during the three and nine months ended September 30, 2020.
Further, in response to the coronavirus pandemic, various governmental authorities globally have announced relief programs which among other items, provide temporary deferrals of non-income based tax payments, which have positively impacted our operating cash flows in the first nine months of 2020. These temporary deferrals of over $200 million as of September 30, 2020, are included within accounts payable and other current liabilities on our unaudited condensed consolidated balance sheet.
Finally, we continue to protect and support our liquidity position in response to the global economic uncertainty created by the coronavirus pandemic. During the second quarter, our board of directors suspended our regular quarterly dividends on our Class A and Class B common and exchangeable shares otherwise payable in fiscal year 2020.
For considerations of the effects of the coronavirus pandemic and related potential impairment risks to our goodwill and indefinite-lived intangible assets, see Note 7, "Goodwill and Intangible Assets."
Revitalization Plan
On October 28, 2019, we initiated a revitalization plan designed to allow us to invest across our portfolio to drive long-term, sustainable success. As part of our revitalization plan, we made the determination to establish Chicago, Illinois as our North American operational headquarters, close our office in Denver, Colorado and consolidate certain administrative functions into our other existing office locations. As discussed above, in connection with these consolidation activities, effective January 1, 2020, we changed our management structure to two segments - North America and Europe. We began to incur charges related to these restructuring activities during the fourth quarter of 2019 and have continued to incur charges in the first three quarters of 2020.
We also changed our name from Molson Coors Brewing Company to Molson Coors Beverage Company in January 2020 in order to better reflect our strategic intent to expand beyond beer and into other growth adjacencies in the beverage industry. See Note 3, "Segment Reporting," Note 5, "Special Items" and Note 7, "Goodwill and Intangible Assets" for further discussion of the impacts of this plan.
Non-Cash Activity
Non-cash activity includes non-cash issuances of share-based awards, as well as non-cash investing activities related to movements in our guarantee of indebtedness of certain equity method investments. See Note 4, "Investments" for further discussion. We also had non-cash activities related to capital expenditures incurred but not yet paid of $128.6 million and $126.3 million during the nine months ended September 30, 2020 and September 30, 2019, respectively.
Other than the activity mentioned above and the supplemental non-cash activity related to the recognition of leases further discussed in Note 13, "Leases," there was no other significant non-cash activity during the nine months ended September 30, 2020 and September 30, 2019.
Share-Based Compensation
We grant stock options, RSUs and PSUs to certain officers and other eligible employees and recognized share-based compensation expense of $6.2 million and $18.0 million during the three and nine months ended September 30, 2020, respectively, and a benefit of $11.1 million and expense of $7.5 million during the three and nine months ended September 30, 2019, respectively. The benefit in share-based compensation expense recognized in the third quarter of 2019 was driven by the reversal of cumulative compensation expense previously recognized for our 2018 and 2017 PSU awards as the achievement of the performance conditions was no longer deemed probable for the respective performance periods.
v3.20.2
New Accounting Pronouncements
9 Months Ended
Sep. 30, 2020
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]  
New Accounting Pronouncements New Accounting Pronouncements
New Accounting Pronouncements Recently Adopted
In June 2016, the FASB issued authoritative guidance that changes the impairment model used to measure credit losses for most financial instruments. The new guidance replaces the existing incurred credit loss model, and requires the application of a forward-looking expected credit loss model, which will generally result in earlier recognition of allowances for credit losses for financial instruments that are in scope of the new guidance, including trade receivables. We adopted this guidance in the first quarter of 2020, which did not have a material impact on our financial statements.
In August 2018, the FASB issued authoritative guidance intended to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance also requires presentation of the capitalized implementation costs in the statement of financial position and in the statement of cash flows in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented, and the expense related to the capitalized implementation costs to be presented in the same line item in the statement of operations as the fees associated with the hosting element (service) of the arrangement. We adopted this guidance prospectively in the first quarter of 2020, which did not have a material impact on our financial statements. However, the adoption of this guidance resulted in the change in presentation of capitalized implementation costs related to hosting arrangements from properties to other assets on the consolidated balance sheet, as well as the expense related to such costs no longer being classified as depreciation expense and cash flows related to those costs no longer being presented as investing activities beginning in the first quarter of 2020.
New Accounting Pronouncements Not Yet Adopted
In March 2020, the FASB issued authoritative guidance which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform and are effective for all entities upon issuance, March 12, 2020, through December 31, 2022, which is a full year after the current expected discontinuation date of LIBOR. We are currently evaluating the potential impact of this guidance on our financial statements.
In December 2019, the FASB issued authoritative guidance intended to simplify the accounting for income taxes. This guidance eliminates certain exceptions to the general approach to the income tax accounting model, and adds new guidance to reduce the complexity in accounting for income taxes. This guidance is effective for annual periods beginning after December 15, 2020, including interim periods within those annual periods. We are currently evaluating the potential impact of this guidance and do not expect it will have a material impact on our financial statements.
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 unaudited condensed consolidated interim financial statements.
v3.20.2
Segment Reporting
9 Months Ended
Sep. 30, 2020
Segment Reporting [Abstract]  
Segment Reporting Segment Reporting
Our reporting segments are based on the key geographic regions in which we operate, and previously included the U.S. segment, Canada segment, Europe segment and International segment. As part of our revitalization plan announced in the fourth quarter of 2019, we made the determination to establish Chicago, Illinois as our North American operational headquarters, close our office in Denver, Colorado and consolidate certain administrative functions into our other existing office locations. In connection with these consolidation activities, effective January 1, 2020, we changed our management structure from a corporate center and four segments to two segments - North America and Europe. The North America segment consolidates the United States, Canada and corporate center, with a centralized North American leadership team, integrated North American supply chain network and centralized marketing and support functions, enabling us to move more quickly with an integrated portfolio strategy. The Europe segment allows for standalone operations, developed and supported by a European-based team, including local leadership, commercial, supply chain and support functions. The previous International segment was reconstituted to more effectively grow our global brands with the Africa and Asia Pacific businesses reporting into the Europe segment and the remaining International business reporting into the North America segment. As a result of these structural changes, the review of discrete financial information by our chief operating decision maker, our President and Chief Executive Officer, is now performed only at the consolidated North America and Europe geographic segment level, which is the basis on which our chief operating decision maker evaluates the performance of the business and allocates resources accordingly.
We also have certain activity that is not allocated to our segments, which has been reflected as “Unallocated” below. Specifically, "Unallocated" activity primarily includes financing related costs such as interest expense and income, foreign
exchange gains and losses on intercompany balances related to financing and other treasury-related activities, and the unrealized changes in fair value on our commodity swaps not designated in hedging relationships recorded within cost of goods sold, which are later reclassified when realized to the segment in which the underlying exposure resides. Additionally, only the service cost component of net periodic pension and OPEB cost is reported within each operating segment, and all other components remain unallocated.
Historical results have been recast to retrospectively reflect these changes in segment reporting.
Summarized Financial Information
No single customer accounted for more than 10% of our consolidated sales for the three and nine months ended September 30, 2020 and September 30, 2019. Consolidated net sales represent sales to third-party external customers less excise taxes. Inter-segment transactions impacting net sales revenues and income (loss) before income taxes eliminate upon consolidation and are primarily related to North America segment sales to the Europe segment.
The following tables present net sales and income (loss) before income taxes by segment:
Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
(In millions)
North America$2,252.3 $2,274.3 $6,242.2 $6,607.5 
Europe504.1 574.0 1,128.8 1,503.8 
Inter-segment net sales eliminations(2.9)(6.7)(11.3)(18.1)
Consolidated net sales$2,753.5 $2,841.6 $7,359.7 $8,093.2 
Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
(In millions)
North America(1)
$400.8 $(287.4)$888.5 $407.0 
Europe(2)
40.9 52.9 (46.9)57.9 
Unallocated(3)
8.7 (74.1)(148.2)(191.6)
Consolidated income (loss) before income taxes$450.4 $(308.6)$693.4 $273.3 
(1)     During the three months ended September 30, 2019, we recorded a goodwill impairment loss in our North America segment of $668.3 million, which was recorded as a special item. See Note 7, "Goodwill and Intangible Assets" for further discussion. During the second quarter of 2019, we completed the sale of our Montreal brewery for $96.2 million, resulting in a $61.3 million gain. Also, during the first quarter of 2019, we received payment and recorded a gain of $1.5 million resulting from a purchase price adjustment related to the historical sale of Molson Inc.’s ownership interest in the Montreal Canadiens, which is considered an affiliate of MCBC.
(2)    The decrease during the nine months ended September 30, 2020 was primarily driven by the impacts of the coronavirus pandemic including lower volume and unfavorable channel and geographic mix due to the closure of the on-premise channel in second quarter followed by a reduced consumption after reopening, particularly in the higher margin U.K. business, which has a more significant exposure to the on-premise channel, as well as the estimated keg sales returns and finished goods obsolescence reserves recognized primarily in the first quarter of 2020.
(3)    Includes unrealized mark-to-market changes on our commodity hedge positions. We recorded unrealized gains of $64.4 million and $24.7 million during the three and nine months ended September 30, 2020, respectively, compared to unrealized losses of $14.9 million and $12.0 million during the three and nine months ended September 30, 2019, respectively.
Income (loss) before income taxes includes the impact of special items. Refer to Note 5, "Special Items" for further discussion.
The following table presents total assets by segment:
As of
September 30, 2020December 31, 2019
(In millions)
North America$23,118.6 $23,360.2 
Europe5,556.7 5,499.6 
Consolidated total assets$28,675.3 $28,859.8 
v3.20.2
Investments
9 Months Ended
Sep. 30, 2020
Equity Method Investments and Joint Ventures [Abstract]  
Investments Investments
Our investments include both equity method and consolidated investments. Those entities identified as VIEs have been evaluated to determine whether we are the primary beneficiary. The VIEs included under "Consolidated VIEs" below are those for which we have concluded that we are the primary beneficiary and accordingly, we have consolidated these entities. None of our consolidated VIEs held debt as of September 30, 2020 or December 31, 2019. 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.
In the third quarter of 2020, we, in collaboration with D.G. Yuengling & Son, Inc. ("Yuengling"), formed The Yuengling Company LLC ("TYC"), a 50% - 50% joint venture by MCBC and DGY West Holdings, LP that, pursuant to an operating agreement, formed to expand commercialization of Yuengling's brands with operation currently expected to commence in the second half of 2021. TYC will oversee any new market expansion in the U.S. outside Yuengling's current 22-state footprint and New England. We have concluded that TYC is a VIE for which we are not the primary beneficiary and will therefore apply the equity method of accounting. We have an obligation to proportionately fund TYC's operations. Initial funding of TYC is expected to begin in the fourth quarter of 2020 and is expected to be immaterial. Transactions between MCBC and TYC are expected to include billings for product under a supply agreement and fees under a services agreement and will be considered affiliate transactions.
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. Our consolidated VIEs are Cobra Beer Partnership, Ltd. ("Cobra U.K."), Rocky Mountain Metal Container ("RMMC"), Rocky Mountain Bottle Company ("RMBC") and Truss LP ("Truss"), as well as other immaterial entities. Our unconsolidated VIEs are Brewers Retail Inc. ("BRI") and Brewers' Distributor Ltd. ("BDL"), as well as other immaterial investments.
Both BRI and BDL have outstanding third party debt which is guaranteed by their respective shareholders. As a result, we have a guarantee liability of $49.4 million and $37.7 million recorded as of September 30, 2020 and December 31, 2019, respectively, which is presented within accounts payable and other current liabilities on the unaudited condensed consolidated balance sheets and represents our proportionate share of the outstanding balance of these debt instruments. The carrying value of the guarantee liability equals 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 respective equity method investment within the unaudited condensed consolidated balance sheets. The resulting change in our equity method investments during the year due to movements in the guarantee represents a non-cash investing activity.
Consolidated VIEs
The following summarizes the assets and liabilities of our consolidated VIEs (including noncontrolling interests):
 As of
 September 30, 2020December 31, 2019
 Total AssetsTotal LiabilitiesTotal AssetsTotal Liabilities
 (In millions)
RMMC/RMBC$220.6 $17.5 $207.4 $17.9 
Other$86.2 $16.0 $65.3 $20.8 
v3.20.2
Special Items
9 Months Ended
Sep. 30, 2020
Unusual or Infrequent Items, or Both [Abstract]  
Special Items Special Items
We 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 separately classified these charges (benefits) as special items.
Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
(In millions)
Employee-related charges
Restructuring$8.9 $4.4 $61.8 $10.7 
Impairments or asset abandonment charges
North America - Asset abandonment(1)
20.6 3.8 110.5 20.7 
North America - Impairment losses(2)
— 669.6 7.6 669.6 
Europe - Asset abandonment
0.1 0.3 0.6 0.9 
Europe - Impairment losses(3)
30.0 12.2 30.0 12.2 
Termination fees and other (gains) losses
North America(4)
0.1 — 0.1 (60.8)
Europe(5)
— 13.0 — 13.1 
Total Special items, net$59.7 $703.3 $210.6 $666.4 
(1)    Following management approval in December 2019, in January 2020, we announced plans to cease production at our Irwindale, California brewery and entered into an option agreement with Pabst Brewing Company, LLC ("Pabst"), granting Pabst an option to purchase our Irwindale, California brewery, including plant equipment and machinery and the underlying land for $150 million, subject to adjustment as further specified in the option agreement. Pursuant to the option agreement, on May 4, 2020, Pabst exercised its option to purchase the Irwindale brewery, and such purchase is currently expected to be completed in the fourth quarter of 2020, subject to the satisfaction of certain customary closing conditions. Production at the Irwindale brewery ceased during the third quarter of 2020.
Charges associated with the planned brewery closure for the three and nine months ended September 30, 2020 totaled $17.6 million and $115.9 million, respectively, and primarily consisted of accelerated depreciation in excess of normal depreciation of $13.0 million and $96.0 million, respectively. Charges also included employee related costs of retention and severance of $1.5 million and $16.3 million, recognized during the three and nine months ended September 30, 2020, respectively, which are included within the restructuring line above. We will continue to recognize related activity in special items through the expected sale of the brewery in the fourth quarter of 2020, however, this activity is not expected to be significant. The Irwindale brewery disposal group, which includes land, buildings, machinery and equipment and other intangible assets, with an aggregate carrying value of approximately $150 million, is considered held for sale and included within other current assets, net on our unaudited condensed consolidated balance sheet as of September 30, 2020. We could incur additional asset abandonment charges if the expected sale is not completed.
In addition, during the three and nine months ended September 30, 2020 and September 30, 2019 we incurred asset abandonment charges, primarily related to the accelerated depreciation in excess of normal depreciation as a result of the Vancouver brewery closure, which occurred in the third quarter of 2019, and the planned Montreal brewery closure, which is currently expected to occur in 2021. We currently expect to incur additional charges, including estimated accelerated depreciation charges in excess of normal depreciation of approximately CAD 14 million, through the completion of the Montreal brewery closure. However, due to the uncertainty inherent in our estimates, these estimated future accelerated depreciation charges as well as the timing of the brewery closure are subject to change.
(2)    During the third quarter of 2019, we recognized goodwill impairment losses of $668.3 million. See Note 7, "Goodwill and Intangible Assets" for further discussion.

(3)     During the third quarter of 2020, we recognized as a special charge an impairment loss of $30.0 million related to the held for sale classification of a disposal group within our India business, representing an insignificant part of our Europe segment. The held for sale disposal group was measured at fair value on a nonrecurring basis using Level 3 inputs. The estimated fair value less cost to sell was determined using a market approach, based upon the expected net sales proceeds of the disposal group. The remaining carrying value of the disposal group held for sale is presented within other current assets, net on our unaudited condensed consolidated balance sheet as of September 30, 2020.
In addition, during the third quarter of 2019, we recorded aggregate impairment losses of $12.2 million related to goodwill and definite-lived intangible assets. See Note 7, "Goodwill and Intangible Assets" for further discussion.
(4)    During the second quarter of 2019, we completed the sale of the Montreal brewery property for $96.2 million and recognized a gain of $61.3 million.
(5)    During the third quarter of 2019, we recorded special charges of $12.4 million resulting from the deconsolidation of the Grolsch joint venture, which were primarily comprised of impairment losses of the associated definite-lived intangible assets.
Restructuring Activities
On October 28, 2019, as part of our revitalization plan, we made the determination to establish Chicago, Illinois as our North American operational headquarters, close our office in Denver, Colorado and consolidate certain administrative functions into our other existing office locations. In connection with these consolidation activities, certain impacted employees have been extended an opportunity to continue their employment with MCBC in the new organization and locations and, for those not continuing with MCBC, certain of such employees have been asked to provide transition assistance and offered severance and retention packages in connection with their termination of service. We expect the costs associated with the restructuring to be substantially recognized by the end of fiscal year 2021. After taking into account all changes in each of the business units, including Europe, the revitalization plan is expected to reduce employment levels, in aggregate, by approximately 600 employees globally.
In connection with these consolidation activities and related organizational and personnel changes, we currently expect to incur certain cash and non-cash restructuring charges related to severance, retention and transition costs, employee relocation, non-cash asset related costs, lease impairment and exit costs in connection with our office lease in Denver, Colorado, and other transition activities currently estimated in the range of approximately $90 million to $120 million in the aggregate, the majority of which will be cash charges that we began recognizing in the fourth quarter of 2019, and will be further recognized through the balance of fiscal years 2020 and 2021. During the three and nine months ended September 30, 2020, we recognized severance and retention charges of $2.8 million and $33.9 million, respectively, and our remaining accrued restructuring balance related to the revitalization plan as of September 30, 2020 was approximately $23 million. Actual severance and retention costs related to this restructuring, which are primarily being recognized ratably over the employees' required future service period, may differ from original estimates based on actual employee turnover levels prior to achieving severance and retention eligibility requirements. Employee relocation charges are recognized in the period incurred and totaled $2.6 million and $9.0 million for the three and nine months ended September 30, 2020, respectively. Additionally, during the second quarter of 2020, we recognized an aggregate impairment loss of $7.6 million related to the closure of the office facility in Denver, Colorado, including our lease right-of use asset, in light of the sublease market outlook as a result of the coronavirus pandemic. Should our ability to obtain future subtenant occupancy for the office location significantly differ from the estimates and assumptions used to determine its fair value, which represent Level 3 measurements, additional impairment losses may be recognized in the future.
Other than those noted above, there were no material changes to our restructuring activities since December 31, 2019, as reported in Part II - Item 8. Financial Statements and Supplementary Data, Note 7, "Special Items" in our Annual Report. We continually evaluate our cost structure and seek opportunities for further efficiencies and cost savings as part of ongoing and new initiatives. As such, we may incur additional restructuring related charges or adjustments to previously recorded charges in the future, however, we are unable to estimate the amount of charges at this time.
The accrued restructuring balances as of September 30, 2020 represent expected future cash payments required to satisfy our remaining obligations to terminated employees, the majority of which we expect to be paid in the next 12 months.
 North AmericaEuropeTotal
 (In millions)
As of December 31, 2019$42.6 $4.5 $47.1 
Charges incurred58.3 8.3 66.6 
Payments made(60.6)(10.2)(70.8)
Changes in estimates(4.0)(0.8)(4.8)
Foreign currency and other adjustments(0.3)— (0.3)
As of September 30, 2020$36.0 $1.8 $37.8 
 North AmericaEuropeTotal
 (In millions)
As of December 31, 2018$24.5 $1.1 $25.6 
Charges incurred and changes in estimates5.8 4.9 10.7 
Payments made(22.9)(3.4)(26.3)
Foreign currency and other adjustments0.1 (0.1)— 
As of September 30, 2019$7.5 $2.5 $10.0 
v3.20.2
Income Tax
9 Months Ended
Sep. 30, 2020
Income Tax Disclosure [Abstract]  
Income Tax Income Tax
Three Months EndedNine Months Ended
September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Effective tax rate23 %(29)%38 %71 %

The change in the effective tax rate for the three and nine months ended September 30, 2020 was primarily driven by the impact of the $668.3 million goodwill impairment loss within our North America segment recognized in the third quarter of 2019. Specifically, this impairment loss, which resulted in a pretax loss during the three months ended September 30, 2019 and a significant reduction to our pretax income during the nine months ended September 30, 2019, was nondeductible for income tax purposes, resulting in a negative effective tax rate during the three months ended September 30, 2019, and a significant increase to our effective tax rate during the nine months ended September 30, 2019. Separately, our effective tax rate during the nine months ended September 30, 2020 was impacted by the recognition of approximately $135 million of discrete tax expense in the second quarter of 2020 related to the hybrid regulations enacted in the second quarter of 2020 as further discussed below.
Since 2018, the U.S. Department of Treasury has continued to issue proposed, temporary and final regulations to implement provisions of the 2017 Tax Act. We have continued to monitor these regulations, and on April 7, 2020, the U.S. Department of Treasury enacted final hybrid regulations with full retroactive application to January 1, 2018, with a few exceptions. We have reviewed the final regulations and their impact on our tax positions and financial statements. The final regulations, associated with the taxability of certain interest, impact tax positions we took in 2018 and 2019 and have resulted in additional income tax expense of approximately $135 million, which was recognized upon enactment in the second quarter of 2020. The impact of the finalized regulations could result in cash tax outflows up to this amount in 2021. We continue to analyze the potential cash impacts of the final regulations to minimize any cash outflows.
During the third quarter of 2020, the U.K. government enacted, and royal assent was received, legislation to repeal the previously enacted reduction to the corporate income tax rate that was due to take effect April 1, 2020, that changed the previously anticipated corporate income tax rate from 17% to 19%. As a result, we remeasured our deferred tax liabilities resulting in the recognition of discrete tax expense of approximately $6 million during the three months ended September 30, 2020.
Our tax rate is volatile and may increase or decrease with changes in, among other things, the amount and source of income or loss, our ability to utilize foreign tax credits, excess tax benefits or deficiencies from share-based compensation, changes in tax laws, and the movement of liabilities established pursuant to accounting guidance for uncertain tax positions as statutes of limitations expire, positions are effectively settled, or when additional information becomes available. There are proposed or pending tax law changes in various jurisdictions and other changes to regulatory environments in countries in which we do business that, if enacted, may have an impact on our effective tax rate.
v3.20.2
Goodwill and Intangible Assets
9 Months Ended
Sep. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets Goodwill and Intangible Assets
North AmericaEuropeConsolidated
Changes in Goodwill:(In millions)
Balance as of December 31, 2019$6,146.6 $1,484.8 $7,631.4 
Foreign currency translation(5.4)(1.9)(7.3)
Balance as of September 30, 2020$6,141.2 $1,482.9 $7,624.1 
The gross amount of goodwill totaled approximately $8.3 billion as of both September 30, 2020 and December 31, 2019. Accumulated impairment losses as of September 30, 2020 and December 31, 2019 totaled $664.5 million and $681.3 million, respectively, all of which was related to our North America segment.
The following table presents details of our intangible assets, other than goodwill, as of September 30, 2020:
Useful lifeGrossAccumulated
amortization
Net
 (Years)(In millions)
Intangible assets subject to amortization:    
Brands
 10 - 50
$5,011.2 $(1,009.3)$4,001.9 
License agreements and distribution rights
 15 - 20
201.8 (94.1)107.7 
Other
 3 - 40
124.4 (49.6)74.8 
Intangible assets not subject to amortization:    
Brands Indefinite8,158.9 — 8,158.9 
Distribution networks Indefinite759.5 — 759.5 
Other Indefinite307.6 — 307.6 
Total $14,563.4 $(1,153.0)$13,410.4 
The following table presents details of our intangible assets, other than goodwill, as of December 31, 2019:
Useful lifeGrossAccumulated
amortization
Net
 (Years)(In millions)
Intangible assets subject to amortization:    
Brands
10 - 50
$5,036.3 $(865.1)$4,171.2 
License agreements and distribution rights
15 - 20
202.0 (90.6)111.4 
Other
3 - 40
124.0 (39.4)84.6 
Intangible assets not subject to amortization:    
BrandsIndefinite8,172.4 — 8,172.4 
Distribution networksIndefinite778.8 — 778.8 
OtherIndefinite337.6 — 337.6 
Total $14,651.1 $(995.1)$13,656.0 
The changes in the gross carrying amounts of intangible assets from December 31, 2019 to September 30, 2020 are primarily driven by the impact of foreign exchange rates, as a significant amount of intangible assets are denominated in foreign currencies, and, $30.0 million of other intangibles held for sale reclassified to other current assets, net as discussed in Note 5, "Special Items."
Based on foreign exchange rates as of September 30, 2020, the estimated future amortization expense of intangible assets is as follows:
Fiscal yearAmount
(In millions)
2020 - remaining$54.0 
2021$215.3 
2022$209.9 
2023$208.8 
2024$208.8 
Amortization expense of intangible assets was $55.4 million for both the three months ended September 30, 2020 and September 30, 2019, and $164.9 million and $166.0 million for the nine months ended September 30, 2020 and September 30, 2019, respectively. This expense is primarily presented within marketing, general and administrative expenses on the unaudited condensed consolidated statements of operations.
Reporting Unit Changes and Interim Impairment Testing
As of the date of completion of our 2019 impairment testing, the operations in each of the specific regions within our historical U.S., Canada, Europe and International segments were considered components based on the availability of discrete financial information and the regular review by segment management. We had further concluded that the components within the U.S., Canada and Europe segments each met the criteria of having similar economic characteristics and therefore we
previously aggregated these components into the U.S., Canada and Europe reporting units, respectively. Additionally, we previously determined that the components within our International segment did not meet the criteria for aggregation, and therefore, the operations of our India business constituted a separate reporting unit at the component level, however, the associated goodwill balance was fully impaired in the third quarter of 2019.
As discussed in Note 3, "Segment Reporting," effective January 1, 2020, we changed our management structure from a corporate center and four segments to two segments - North America and Europe. These structural changes included leadership re-alignment with a centralized North America leadership team, an integrated North American supply chain network, and centralized marketing and innovations functions including movement to a single brand manager and North America marketing strategy for our major brands. Additionally, as part of our leadership re-alignment, we moved from two separate U.S. and Canada segment managers, to a single North America segment manager, our President and Chief Executive Officer, who reviews discrete financial information only at the consolidated North America segment level. As a result of these changes, we re-evaluated our historical reporting unit conclusions and have consolidated our previously separate U.S. and Canada reporting units into a single North America reporting unit effective January 1, 2020. There were no changes to our existing Europe reporting unit, which was considered to be at risk of future impairment following the completion of our October 1, 2019 annual impairment testing.
We completed an interim impairment assessment for our U.S. and Canada reporting units as of January 1, 2020 immediately prior to the reporting unit change, as well as an impairment assessment of the combined North America reporting unit immediately after the change, and determined that no impairments existed. Additionally, as the changes resulted in the combination of our U.S. and Canada reporting units into a single North America reporting unit, no further reallocation of goodwill was required.
Additionally, as a result of the structural changes discussed above, including the centralization of the brand management and strategy for our Coors brands across North America, we have aggregated our Coors brand indefinite-lived intangible asset in the U.S. and Coors Light distribution agreement indefinite-lived intangible asset in Canada into a single unit of accounting for the purpose of testing for impairment, effective January 1, 2020. We completed an interim impairment assessment for each individual indefinite-lived intangible asset immediately prior to aggregation, and determined that no impairments existed.
We have further evaluated whether the effects of the coronavirus pandemic, and related impacts to the interest rate environment as well as market multiples, required an additional interim impairment assessment as of September 30, 2020. While factors are present that indicate that triggering events may exist, such as the decline in our market capitalization since the pandemic began in March 2020 combined with recent weakened financial performance, current circumstances do not indicate that it is more likely than not that the fair values of our reporting units or indefinite-lived intangible assets have fallen below their carrying values. Therefore, an interim impairment assessment was not performed as of September 30, 2020. However, we believe that the effects of the coronavirus pandemic may, depending on severity and duration, place our North America and Europe reporting units and certain of our indefinite-lived intangible assets at risk of future impairment. We will continue to monitor the length and severity of the impacts of the pandemic to our business, and if the duration is prolonged and the severity of its impacts continues or worsens, this may indicate the need to perform future interim impairment analyses that could result in material impairments.
2019 Interim Impairment Assessment
We identified a triggering event requiring an interim impairment assessment of the goodwill within our former Canada reporting unit, now part of our North America reporting unit, at the end of the third quarter of 2019, which resulted in a goodwill impairment loss of $668.3 million. The goodwill impairment trigger was the result of continued challenges and steepening declines within the Canadian beer industry reflected in the prolonged weakened performance of the Canada reporting unit through the third quarter of 2019.
Separately, during the third quarter of 2019 we also identified an interim triggering event related to goodwill within our former India reporting unit resulting from significant declines in performance in 2019, coupled with the continuation of challenging business conditions, which required us to perform an interim quantitative impairment analysis at the end of the third quarter of 2019. As a result of this interim analysis, we determined that the carrying value of the former India reporting unit exceeded its fair value, resulting in an aggregate impairment loss of $12.2 million related to the goodwill of our India reporting unit and a definite-lived brand intangible asset.
Key Assumptions
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. The key assumptions used to derive the estimated fair values of our reporting units and indefinite-lived intangible assets are discussed in Part II—Item 8 Financial Statements, Note 10, "Goodwill and Intangible Assets" in our Annual Report, and represent Level 3 measurements.
Based on known facts and circumstances, we evaluate and consider recent events and uncertain items, as well as related potential implications, as part of our annual and interim assessments and incorporate into the analyses as appropriate. These facts and circumstances are subject to change and may impact future analyses. For example, we continue to monitor the challenges within the beer industry for further weakening or additional systemic structural declines, as well as for adverse changes in macroeconomic conditions such as the coronavirus pandemic that could significantly impact our immediate and long-range results. Specifically, subsequent to the January 1, 2020 interim impairment assessments, the World Health Organization characterized the outbreak of the coronavirus disease as a global pandemic as further discussed in Note 1, “Basis of Presentation and Summary of Significant Accounting Policies.” Our business has been, and could continue to be, materially and adversely impacted by the coronavirus pandemic. The related weakening of economic conditions during a prolonged pandemic could lead to a material impairment as the duration and severity of the pandemic and resulting impacts to our financial projections are further understood. Additionally, we are monitoring the impacts the coronavirus pandemic has on the market inputs used in calculating our discount rates, including risk-free rates, equity premiums and our cost of debt, which could result in a meaningful change to our weighted-average cost of capital calculation, as well as the market multiples used in our impairment assessment. Furthermore, increased volatility in the equity and debt markets or other country specific factors, including, but not limited to, extended or future government intervention in response to the pandemic, could also result in a meaningful change to our weighted-average cost of capital calculation and other inputs used in our impairment assessment.
Separately, the Ontario government in Canada adopted a bill that, if enacted, could adversely impact the existing terms of the beer distribution and retail systems in the province, as further described in Note 12, "Commitments and Contingencies."
While historical performance and current expectations have resulted in fair values of our reporting units and indefinite-lived intangible assets equal to or in excess of carrying values, if our assumptions are not realized, it is possible that an impairment loss may need to be recorded in the future.
Definite-Lived Intangible Assets
Regarding definite-lived intangible assets, we continuously monitor the performance of the underlying assets for potential triggering events suggesting an impairment review should be performed. No such triggering events were identified in the first three quarters of 2020 that resulted in an impairment loss.
v3.20.2
Debt
9 Months Ended
Sep. 30, 2020
Debt Disclosure [Abstract]  
Debt Debt
Debt obligations
As of
 September 30, 2020December 31, 2019
 (In millions)
Long-term debt:
CAD 500 million 2.75% notes due September 2020(1)
$— $384.9 
CAD 500 million 2.84% notes due July 2023
375.4 384.9 
CAD 500 million 3.44% notes due July 2026
375.4 384.9 
$500 million 2.25% notes due March 2020(2)(3)
— 499.8 
$1.0 billion 2.1% notes due July 2021(3)
1,000.0 1,000.0 
$500 million 3.5% notes due May 2022(2)
504.4 506.5 
$2.0 billion 3.0% notes due July 2026
2,000.0 2,000.0 
$1.1 billion 5.0% notes due May 2042
1,100.0 1,100.0 
$1.8 billion 4.2% notes due July 2046
1,800.0 1,800.0 
EUR 800 million 1.25% notes due July 2024
937.7 897.0 
Finance leases and other97.6 129.5 
Less: unamortized debt discounts and debt issuance costs(51.6)(56.7)
Total long-term debt (including current portion)8,138.9 9,030.8 
Less: current portion of long-term debt(1,009.4)(921.3)
Total long-term debt$7,129.5 $8,109.5 
Short-term borrowings:
Commercial paper programs(4)(5)
$224.9 $— 
Other short-term borrowings(6)
7.8 6.9 
Current portion of long-term debt1,009.4 921.3 
Current portion of long-term debt and short-term borrowings$1,242.1 $928.2 
(1)In September 2020, we repaid our CAD 500 million 2.75% notes upon maturity through a combination of commercial paper issuances and cash on hand.
(2)The fair value hedges related to these notes have been settled and are being amortized over the life of the respective note.
(3)We repaid our $500 million 2.25% notes upon maturity in March 2020, at which time we also settled the associated cross currency swaps resulting in cash receipts of $3.2 million, which were classified as financing and investing activities in our unaudited condensed consolidated statement of cash flows. As of September 30, 2020, we have cross currency swaps associated with our $1.0 billion 2.1% senior notes due 2021 in order to hedge a portion of the foreign currency translational impacts of our European investment. As a result of the swaps, we have economically converted a portion of these notes and associated interest to EUR denominated, which results in a EUR interest rate to be received of 0.71%.
(4)We maintain a $1.5 billion revolving credit facility with a maturity date of July 7, 2024, that allows us to issue a maximum aggregate amount of $1.5 billion in commercial paper or other borrowings at any time at variable interest rates. We use this financing from time to time to leverage cash needs including debt repayments. During the first nine months of 2020, we utilized borrowings from this facility in order to fund the repayment of our $500 million 2.25% notes and CAD 500 million 2.75% notes upon maturity in March 2020 and September 2020, respectively, for working capital and general purposes, as well as a precautionary measure in order to provide enhanced financial flexibility due to uncertain market conditions arising from the impact of the coronavirus pandemic, as further discussed in Note 1, "Basis of Presentation and Summary of Significant Accounting Policies."
As of September 30, 2020, we had $1.3 billion available to draw on the $1.5 billion revolving credit facility, as the borrowing capacity is also reduced by borrowings under our commercial paper program. The outstanding borrowings under our commercial paper program had a weighted-average effective interest rate and tenor of 0.72% and 90 days, respectively, as of September 30, 2020. We had no borrowings drawn on this revolving credit facility and no commercial paper borrowings as of December 31, 2019.
Subsequent to September 30, 2020, we had commercial paper payments of approximately $125 million, for a total amount outstanding of approximately $100 million as of October 29, 2020. As such, as of October 29, 2020, we have approximately $1.4 billion available to draw on our total $1.5 billion revolving credit facility.
(5)On May 26, 2020, Molson Coors Brewing Company (UK) Limited (“MCBC U.K.”), a subsidiary of MCBC that operates and manages the Company’s business in the U.K., established a commercial paper facility for the purpose of issuing short-term, unsecured Sterling-denominated notes that are eligible for purchase under the Joint HM Treasury and Bank of England’s COVID Corporate Financing Facility commercial paper program (the “CCFF Program”) in an aggregate principal amount up to GBP 300 million, subject to certain conditions, which may be increased from time to time as provided in the Dealer Agreement (as defined below). Commercial paper issuances under the CCFF Program do not impact the borrowing capacity under our revolving credit facility.
In connection with the CCFF Program, MCBC U.K. and MCBC entered into a Dealer Agreement (the “Dealer Agreement”) with Lloyds Bank Corporate Markets PLC (“Lloyds”), as both the arranger and dealer, pursuant to which notes may be issued to Lloyds at such prices and upon such terms as MCBC U.K. and Lloyds may agree. The maturities of the notes vary but will not be less than seven days nor greater than 364 days. The Dealer Agreement contains customary representations, warranties, covenants and indemnification provisions typical for the issuance of commercial paper of this type. In addition, MCBC entered into a Deed of Guarantee to guarantee the payment of all sums payable from time to time by MCBC U.K. in respect of the notes to the holders of any notes.
As of both September 30, 2020 and October 29, 2020, we had no borrowings outstanding under the CCFF Program.
(6)As of September 30, 2020, we had $4.9 million in bank overdrafts and $82.3 million in bank cash related to our cross-border, cross-currency cash pool, for a net positive position of $77.4 million. As of December 31, 2019, we had $1.1 million in bank overdrafts and $55.0 million in bank cash related to our cross-border, cross-currency cash pool for a net positive position of $53.9 million. We had total outstanding borrowings of $2.9 million and $2.8 million under our two JPY overdraft facilities as of September 30, 2020 and December 31, 2019, respectively. In addition, we have USD, CAD and GBP lines of credit under which we had no borrowings as of September 30, 2020 or December 31, 2019.
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, 2020 and December 31, 2019, the fair value of our outstanding long-term debt (including the current portion of long-term debt) was approximately $8.6 billion and $9.2 billion, respectively. All senior notes are valued based on significant observable inputs and 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 in the fair value hierarchy.
Debt Covenants
On June 19, 2020, we entered into an amendment to our existing revolving credit facility agreement, which among other things, revised the leverage ratios under the financial maintenance covenant for each fiscal quarter ending on or after June 30, 2020 through the maturity of the credit facility. The maximum leverage ratio, as defined by the amended revolving credit facility agreement as of September 30, 2020 is 5.25x net debt to EBITDA with a 0.50x reduction to 4.75x net debt to EBITDA for the fiscal quarter ending June 30, 2021. The leverage ratio requirement as of the last day of the fiscal quarter ending September 30, 2021 is reduced by 0.25x to 4.50x net debt to EBITDA, with a further 0.50x reduction to 4.00x net debt to EBITDA as of the last day of the fiscal quarter ending December 31, 2021 through maturity of the credit facility.
Under the terms of each of our debt facilities, we must comply with certain restrictions. These include customary events of default and specified representations, warranties and covenants, as well as covenants that restrict our ability to incur certain additional priority indebtedness (certain thresholds of secured consolidated net tangible assets), certain leverage threshold percentages, create or permit liens on assets, and restrictions on mergers, acquisitions, and certain types of sale lease-back transactions. As of September 30, 2020, we were in compliance with all of these restrictions and have met all debt payment obligations. All of our outstanding senior notes as of September 30, 2020 rank pari-passu.
v3.20.2
Inventories
9 Months Ended
Sep. 30, 2020
Inventory Disclosure [Abstract]  
Inventories Inventories
 As of
 September 30, 2020December 31, 2019
(In millions)
Finished goods$267.0 $236.7 
Work in process72.2 84.0 
Raw materials238.0 227.1 
Packaging materials80.5 68.1 
Inventories, net$657.7 $615.9 
v3.20.2
Accumulated Other Comprehensive Income (Loss)
9 Months Ended
Sep. 30, 2020
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]  
Accumulated Other Comprehensive Income (Loss) Accumulated Other Comprehensive Income (Loss)
MCBC stockholders' equity
Foreign
currency
translation
adjustments
Gain (loss) on
derivative instruments
Pension and
postretirement
benefit
adjustments
Equity method
investments
Accumulated
other
comprehensive
income (loss)
(In millions)
As of December 31, 2019$(652.5)$(87.8)$(351.0)$(70.9)$(1,162.2)
Foreign currency translation adjustments(56.6)— — — (56.6)
Gain (loss) on net investment hedges(54.5)— — — (54.5)
Unrealized gain (loss) on derivative instruments— (151.5)— — (151.5)
Reclassification of derivative (gain) loss to income— (1.2)— — (1.2)
Amortization of net prior service (benefit) cost and net actuarial (gain) loss to income— — (6.2)— (6.2)
Ownership share of unconsolidated subsidiaries' other comprehensive income (loss)— — — 3.0 3.0 
Tax benefit (expense)7.4 37.7 1.5 (0.8)45.8 
As of September 30, 2020$(756.2)$(202.8)$(355.7)$(68.7)$(1,383.4)
Reclassifications from AOCI to net income (loss) were immaterial for the three and nine months ended September 30, 2020 and September 30, 2019.
v3.20.2
Derivative Instruments and Hedging Activities
9 Months Ended
Sep. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Derivative Instruments and Hedging Activities
Our risk management and derivative accounting policies are presented within Part II—Item 8 Financial Statements, Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" and Note 16, "Derivative Instruments and Hedging Activities" in our Annual Report and did not significantly change during the first three quarters of 2020. As noted in Note 16 of the Notes included in our Annual Report, due to the nature of our counterparty agreements, and the fact that we are not subject to master netting arrangements, we are not able to net positions with the same counterparty and, therefore, present our derivative positions on a gross basis in our unaudited condensed consolidated balance sheets. Our significant derivative positions have not changed considerably since December 31, 2019.
Derivative Fair Value Measurements
We utilize market approaches to estimate the fair value of our derivative instruments by discounting anticipated future cash flows derived from the derivative's contractual terms and observable market interest, foreign exchange and commodity rates. The fair values of our derivatives also include credit risk adjustments to account for our counterparties' credit risk, as well as our own non-performance risk, as appropriate. The fair value of our warrants to acquire common shares of HEXO Corp. ("HEXO") at a strike price of CAD 6.00 per share are estimated using the Black-Scholes option-pricing model.
The table below summarizes our derivative assets and liabilities that were measured at fair value as of September 30, 2020 and December 31, 2019.
 Fair value measurements as of September 30, 2020
 As of September 30, 2020Quoted prices in
active markets
(Level 1)
Significant other
observable inputs
(Level 2)
Significant
unobservable
inputs (Level 3)
 (In millions)
Cross currency swaps$(7.0)$— $(7.0)$— 
Interest rate swaps(267.4)— (267.4)— 
Foreign currency forwards3.0 — 3.0 — 
Commodity swaps(17.6)— (17.6)— 
Warrants0.5 — 0.5 — 
Total$(288.5)$— $(288.5)$— 
 Fair value measurements as of December 31, 2019
 As of December 31, 2019Quoted prices in
active markets
(Level 1)
Significant other
observable inputs
(Level 2)
Significant
unobservable
inputs (Level 3)
 (In millions)
Cross currency swaps$10.0 $— $10.0 $— 
Interest rate swaps(111.5)— (111.5)— 
Foreign currency forwards2.1 — 2.1 — 
Commodity swaps and options(41.2)— (41.2)— 
Warrants2.7 — 2.7 — 
Total$(137.9)$— $(137.9)$— 

As of September 30, 2020 and December 31, 2019, we had no significant transfers between Level 1 and Level 2. New derivative contracts transacted during the nine months ended September 30, 2020 were all included in Level 2.
Results of Period Derivative Activity
The tables below include the results of our derivative activity in our unaudited condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019, and our unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and September 30, 2019.
Fair Value of Derivative Instruments in the Unaudited Condensed Consolidated Balance Sheets (in millions):
 As of September 30, 2020
  Derivative AssetsDerivative Liabilities
 Notional amountBalance sheet locationFair valueBalance sheet locationFair value
Derivatives designated as hedging instruments:
Cross currency swaps$400.0 Other current assets$— Accounts payable and other current liabilities$(7.0)
Other non-current assets— Other liabilities — 
Interest rate swaps$1,500.0 Other current assets— Accounts payable and other current liabilities(53.1)
Other non-current assets— Other liabilities (214.3)
Foreign currency forwards$169.5 Other current assets3.1 Accounts payable and other current liabilities(0.5)
 Other non-current assets0.9 Other liabilities (0.5)
Total derivatives designated as hedging instruments$4.0  $(275.4)
Derivatives not designated as hedging instruments:
Commodity swaps(1)
$938.3 Other current assets$16.1 Accounts payable and other current liabilities$(47.2)

Other non-current assets25.1 Other liabilities (11.6)
Warrants$51.8 Other non-current assets0.5 Other liabilities — 
Total derivatives not designated as hedging instruments$41.7  $(58.8)
 As of December 31, 2019
  Derivative AssetsDerivative Liabilities
 Notional amountBalance sheet locationFair valueBalance sheet locationFair value
Derivatives designated as hedging instruments:
Cross currency swaps$900.0 Other current assets$1.8 Accounts payable and other current liabilities$— 
Other non-current assets8.2 Other liabilities— 
Interest rate swaps$1,500.0 Other non-current assets— Other liabilities(111.5)
Foreign currency forwards$237.9 Other current assets1.9 Accounts payable and other current liabilities(0.8)
Other non-current assets1.4 Other liabilities(0.4)
Total derivatives designated as hedging instruments$13.3 $(112.7)
Derivatives not designated as hedging instruments:
Commodity swaps(1)
$598.4 Other current assets$5.7 Accounts payable and other current liabilities$(36.4)
Other non-current assets1.0 Other liabilities(11.5)
Commodity options(1)
$18.4 Other current assets— Accounts payable and other current liabilities— 
Warrants$53.1 Other non-current assets2.7 Other liabilities— 
Total derivatives not designated as hedging instruments$9.4 $(47.9)
(1)Notional includes offsetting buy and sell positions, shown in terms of absolute value. Buy and sell positions are shown gross in the asset and/or liability position, as appropriate.
Items Designated and Qualifying as Hedged Items in Fair Value Hedging Relationships in the Unaudited Condensed Consolidated Balance Sheets (in millions):
Line item in the balance sheet in which the hedged item is included
Carrying amount of the hedged assets/liabilities
Cumulative amount of fair value hedging adjustment(s) in the hedged assets/liabilities(1)
Increase/(Decrease)
As of September 30, 2020As of December 31, 2019As of September 30, 2020As of December 31, 2019
(In millions)
Current portion of long-term debt and short-term borrowings$— $— $— $(0.2)
Long-term debt$— $— $4.4 $6.5 
(1)    Entire balances relate to hedging adjustments on discontinued hedging relationships.
The Pretax Effect of Cash Flow Hedge and Net Investment Hedge Accounting on Accumulated Other Comprehensive Income (Loss) (in millions):
Three Months Ended September 30, 2020
Derivatives in cash flow hedge relationshipsAmount of gain (loss) recognized
in OCI on derivative
Location of gain (loss)
reclassified from AOCI into
income
Amount of gain
(loss) recognized
from AOCI on derivative
Forward starting interest rate swaps$23.9 Interest income (expense), net$(0.8)
Foreign currency forwards(4.4)Cost of goods sold0.9 
 Other income (expense), net(0.3)
Total$19.5  $(0.2)
Three Months Ended September 30, 2020
Derivatives in net investment hedge relationshipsAmount of gain (loss) recognized in OCI on derivativeLocation of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) recognized from AOCI on derivativeLocation of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)
Amount of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)(1)
Cross currency swaps$(19.0)Interest income (expense), net$— Interest income (expense), net$2.8 
Total$(19.0)$— $2.8 
Three Months Ended September 30, 2020
Non-derivative financial instruments in net investment hedge relationshipsAmount of gain (loss) recognized in OCI on derivativeLocation of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) recognized from AOCI on derivativeLocation of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)Amount of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)
EUR 800 million notes due 2024
$(39.0)Other income (expense), net$— Other income (expense), net$— 
Total$(39.0) $—  $— 
Three Months Ended September 30, 2019
Derivatives in cash flow hedge relationshipsAmount of gain (loss) recognized in OCI on derivativeLocation of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) recognized from AOCI on derivative
Forward starting interest rate swaps$(77.8)Interest income (expense), net$(0.7)
Foreign currency forwards3.6 Cost of goods sold0.5 
 Other income (expense), net(0.1)
Total$(74.2) $(0.3)
Three Months Ended September 30, 2019
Derivatives in net investment hedge relationshipsAmount of gain (loss) recognized in OCI on derivativeLocation of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) recognized from AOCI on derivativeLocation of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)
Amount of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)(1)
Cross currency swaps$37.6 Interest income (expense), net$— Interest income (expense), net$6.6 
Total$37.6  $—  $6.6 
Three Months Ended September 30, 2019
Non-derivative financial instruments in net investment hedge relationshipsAmount of gain (loss) recognized in OCI on derivativeLocation of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) recognized from AOCI on derivativeLocation of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)Amount of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)
EUR 800 million notes due 2024
$37.9 Other income (expense), net$— Other income (expense), net$— 
Total$37.9  $—  $— 
Nine Months Ended September 30, 2020
Derivatives in cash flow hedge relationshipsAmount of gain (loss) recognized in OCI on derivativeLocation of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) recognized from AOCI on derivative
Forward starting interest rate swaps$(155.9)Interest income (expense), net$(2.2)
Foreign currency forwards4.4 Cost of goods sold4.5 
 Other income (expense), net(1.1)
Total$(151.5) $1.2 
Nine Months Ended September 30, 2020
Derivatives in net investment hedge relationshipsAmount of gain (loss) recognized in OCI on derivativeLocation of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) recognized from AOCI on derivativeLocation of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)
Amount of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)(1)
Cross currency swaps$(13.8)Interest income (expense), net$— Interest income (expense), net$11.3 
Total$(13.8)$— $11.3 
Nine Months Ended September 30, 2020
Non-derivative financial instruments in net investment hedge relationshipsAmount of gain (loss) recognized in OCI on derivativeLocation of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) recognized from AOCI on derivativeLocation of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)Amount of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)
EUR 800 million notes due 2024
$(40.7)Other income (expense), net$— Other income (expense), net$— 
Total$(40.7) $—  $— 
Nine Months Ended September 30, 2019
Derivatives in cash flow hedge relationshipsAmount of gain (loss) recognized in OCI on derivativeLocation of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) recognized from AOCI on derivative
Forward starting interest rate swaps$(156.5)Interest income (expense), net$(2.2)
Foreign currency forwards(7.9)Cost of goods sold2.8 
 Other income (expense), net(0.6)
Total$(164.4) $— 
Nine Months Ended September 30, 2019
Derivatives in net investment hedge relationshipsAmount of gain (loss) recognized in OCI on derivativeLocation of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) recognized from AOCI on derivativeLocation of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)
Amount of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)(1)
Cross currency swaps$44.2 Interest income (expense), net$— Interest income (expense), net$17.0 
Total$44.2  $—  $17.0 
Nine Months Ended September 30, 2019
Non-derivative financial instruments in net investment hedge relationshipsAmount of gain (loss) recognized in OCI on derivativeLocation of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) recognized from AOCI on derivativeLocation of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)Amount of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)
EUR 800 million notes due 2024
$45.5 Other income (expense), net$— Other income (expense), net$— 
EUR 500 million notes due 2019
10.1 Other income (expense), net— Other income (expense), net— 
Total$55.6  $—  $— 
(1)Represents amounts excluded from the assessment of effectiveness for which the difference between changes in fair value and period amortization is recorded in other comprehensive income.
As of September 30, 2020, we expect our reclassification of AOCI into earnings related to cash flow hedges to be immaterial over the next 12 months as our expected net losses primarily offset our expected net gains. For derivatives designated in cash flow hedge relationships, the maximum length of time over which forecasted transactions are hedged as of September 30, 2020 is approximately 4 years, as well as those related to our forecasted debt issuances in 2021, 2022, and 2026.
The Effect of Fair Value and Cash Flow Hedge Accounting on the Unaudited Condensed Consolidated Statements of Operations (in millions):
Three Months Ended September 30, 2020
Location and amount of gain (loss) recognized in income on fair value and cash flow hedging relationships(1)
Cost of goods soldOther income (expense), netInterest income (expense), net
Total amount of income and expense line items presented in the unaudited condensed consolidated statement of operations in which the effects of fair value or cash flow hedges are recorded$(1,551.0)$2.4 $(67.9)
Gain (loss) on cash flow hedging relationships:
Forward starting interest rate swaps
Amount of gain (loss) reclassified from AOCI into income— — (0.8)
Foreign currency forwards
Amount of gain (loss) reclassified from AOCI into income0.9 (0.3)— 
Three Months Ended September 30, 2019
Location and amount of gain (loss) recognized in income on fair value and cash flow hedging relationships(1)
Cost of goods soldOther income (expense), netInterest income (expense), net
Total amount of income and expense line items presented in the unaudited condensed consolidated statement of operations in which the effects of fair value or cash flow hedges are recorded$(1,685.4)$(13.7)$(65.6)
Gain (loss) on cash flow hedging relationships:
Forward starting interest rate swaps
Amount of gain (loss) reclassified from AOCI into income— — (0.7)
Foreign currency forwards
Amount of gain (loss) reclassified from AOCI into income0.5 (0.1)— 
Nine Months Ended September 30, 2020
Location and amount of gain (loss) recognized in income on fair value and cash flow hedging relationships(1)
Cost of goods soldOther income (expense), netInterest income (expense), net
Total amount of income and expense line items presented in the unaudited condensed consolidated statement of operations in which the effects of fair value or cash flow hedges are recorded$(4,486.6)$3.4 $(206.5)
Gain (loss) on cash flow hedging relationships:
Forward starting interest rate swaps
Amount of gain (loss) reclassified from AOCI into income
— — (2.2)