ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
For more than two centuries, we have brewed beverages that unite people to celebrate all life’s moments. From our core power brands Coors Light, Miller Lite, Coors Banquet, Molson Canadian, Carling and Ožujsko to our above premium brands including Madrí Excepcional, Staropramen, Blue Moon Belgian White and Leinenkugel’s Summer Shandy, to our economy and value brands like Miller High Life and Keystone Light, we produce many beloved and iconic beers. While our Company's history is rooted in beer, we offer a modern portfolio that expands beyond the beer aisle as well, including flavored beverages like Vizzy Hard Seltzer, spirits like Five Trail whiskey and non-alcoholic beverages. We also have partner brands, such as Simply Spiked, ZOA Energy, among others, through license, distribution, partnership and joint venture agreements. As a business, our ambition is to be the first choice for our people, our consumers and our customers, and our success depends on our ability to make our products available to meet a wide range of consumer segments and occasions.
Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") in this Annual Report on Form 10-K is provided to assist in understanding our Company, operations and current business environment and should be considered a supplement to, and read in conjunction with, the accompanying audited consolidated financial statements and notes included within Part II—Item 8 Financial Statements and Supplementary Data, as well as the discussion of our business and related risk factors in Part I—Item 1 Business and Part I—Item 1A Risk Factors, respectively. See also "Cautionary Statement Pursuant to Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995."
A discussion related to the results of operations and changes in financial condition for 2023 compared to 2022 has been omitted from this report, but may be found in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our fiscal 2023 Form 10-K, filed with the SEC on February 20, 2024, which is available free of charge on the SEC's website at www.sec.gov and our corporate website at www.molsoncoors.com.
Our Fiscal Year
Unless otherwise indicated, (a) all $ amounts are in USD, (b) comparisons are to comparable prior periods and (c) 2024, 2023 and 2022 refers to the 12 months ended December 31, 2024, December 31, 2023 and December 31, 2022, respectively.
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Items Affecting Reported Results
Items Affecting the Consolidated Results of Operations
Purchases of Annuity Contracts
On September 26, 2024, we purchased annuity contracts for two of our Canadian pension plans. As a result, on September 30, 2024, we remeasured both pension plans and recorded a total settlement loss of $34.0 million to other pension and postretirement benefit (cost), net in the consolidated statements of operations. SeePart II—Item 8 Financial Statements and Supplementary Data, Note 11, "Employee Retirement Plans and Postretirement Benefits" and Part II—Item 8 Financial Statements and Supplementary Data, Note 15, "Accumulated Other Comprehensive Income (Loss)" for further information.
Cobra Beer Partnership, Ltd. Buyout
In March 2024, our partner of CBPL exercised a put option under our partnership agreement which required us to acquire the remaining 49.9% ownership interest. We adjusted our NCI by $34.5 million to our best estimate of the redemption value that existed at the time of the put option exercise by increasing our net income attributable to noncontrolling interests and decreasing our net income attributable to MCBC. In addition, we received the final determination of the redemption value in the third quarter of 2024 and as the transaction was considered mandatorily redeemable, we recorded an adjustment of $45.8 million to interest expense in the EMEA&APAC segment. The transaction was finalized on October 21, 2024, resulting in a cash payment of $89 million which was recorded as a cash outflow from financing activities. See further discussion of this transaction in Part II—Item 8 Financial Statements and Supplementary Data, Note 1, "Basis of Presentation and Summary of Significant Accounting Policies".
Items Affecting the Americas Segment Results of Operations
ZOA Energy
On October 31, 2024, we further increased our investment in ZOA bringing our ownership interest to 51%. Upon conversion from equity method accounting to consolidation accounting, we recognized a gain of $77.9 million in other operating income (expense), net in the consolidated statements of operations. See Part II—Item 8 Financial Statements and Supplementary Data, Note 3, "Investments" for further information.
Wind Down or Sale of Certain U.S. Craft Businesses
During the third quarter of 2024, we decided to wind down or sell certain of our U.S. craft businesses and related facilities and recorded employee-related and asset abandonment charges, including accelerated depreciation in excess of normal depreciation of $93.6 million. In addition, we recognized a loss of $41.2 million on the sold businesses. We expect to continue to incur incremental restructuring charges during the first quarter of 2025 through completion of wind down and closure of certain remaining U.S. craft facilities. SeePart II—Item 8 Financial Statements and Supplementary Data, Note 17, "Other Operating Income (Expense), net" for further information.
Truss Impairment and Sale
During the first quarter of 2022, we recognized an impairment loss of $28.6 million related to the Truss LP ("Truss") joint venture asset group of which $12.1 million was attributable to the noncontrolling interest. Additionally, during the third quarter of 2023, we sold our controlling interest in Truss and recognized a loss of $11.1 million. These losses were recorded within other operating income (expense), net. See Part II—Item 8 Financial Statements and Supplementary Data, Note 17, "Other Operating Income (Expense), net" and Part II—Item 8 Financial Statements and Supplementary Data, Note 3, "Investments" for further information.
Keystone Litigation
During the first quarter of 2022, we accrued a liability of $56.0 million within MG&A related to probable losses as a result of the ongoing Keystone litigation case. During the years ended December 31, 2024 and December 31, 2023 we accrued $2.1 million and $1.9 million, respectively, in associated interest related to this accrued liability. See Part II—Item 8 Financial Statements and Supplementary Data, Note 13, "Commitments and Contingencies" for further information.
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Items Affecting the EMEA&APAC Segment Results of Operations
Staropramen Brands Impairment
During the fourth quarter of 2023, we recorded a partial impairment charge of $160.7 million to our indefinite-lived intangible asset related to the Staropramen family of brands within the EMEA&APAC segment as a result of our annual impairment analysis. See Part II—Item 8 Financial Statements and Supplementary Data, Note 6, "Goodwill and Intangible Assets" for further information.
Russia-Ukraine Conflict
In February 2022, Russia invaded Ukraine and the conflict remains ongoing. As a result, we suspended exports of all our brands to Russia and subsequently terminated the license to produce any of our brands in Russia. While not material to our consolidated net sales, the Russia-Ukraine conflict negatively impacted our EMEA&APAC segment net sales for the years ended December 31, 2023 and December 31, 2022. In addition, the Russia-Ukraine conflict has caused a negative impact to the global economy which has impacted our Company, driving further increases to materials and manufacturing expenses. See risk factors related to this conflict at Part I.—Item 1A. "Risk Factors".
Consolidated Results of Operations
The following table highlights summarized components of our consolidated statements of operations for the years ended December 31, 2024, December 31, 2023 and December 31, 2022. See Part II—Item 8 Financial Statements and Supplementary Data, “Consolidated Statements of Operations” for additional details of our U.S. GAAP results comparing December 31, 2024 and December 31, 2023.
For the years ended
(In millions, except percentages and per share data)
Goodwill impairment — — % — N/M (845.0)
N/M = Not meaningful
Foreign currency impacts on results
For the year ended December 31, 2024, foreign currency movements had the following impacts on our USD consolidated results:
•Net sales - Unfavorable impact of $1.6 million (unfavorable impact for Americas of $21.9 million, partially offset by the favorable impact for EMEA&APAC of $20.3 million).
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•Cost of goods sold - Favorable impact of $0.6 million (favorable impact for Americas and Unallocated of $14.3 million and $0.4 million, respectively, partially offset by the unfavorable impact for EMEA&APAC of $14.1 million).
•MG&A - Favorable impact of $2.8 million (favorable impact for Americas of $6.5 million, partially offset by the unfavorable impact for EMEA&APAC of $3.7 million).
•Income (loss) before income taxes - Unfavorable impact of $7.0 million (unfavorable impact for Americas and EMEA&APAC of $7.0 million and $2.3 million, respectively, partially offset by the favorable impact for Unallocated of $2.3 million).
The impacts of foreign currency movements on our consolidated USD results described above for the year ended December 31, 2024, were primarily due to the strengthening of the USD compared to the CAD and CZK, partially offset by the weakening of the USD compared to the GBP.
Included in these amounts are both translational and transactional impacts of changes in foreign exchange rates. We calculate the impact of foreign exchange by translating our current period local currency results at the average exchange rates used to translate the financial statements in the comparable prior year period during the respective period throughout the year and comparing that amount with the reported amount for the period. The impact of transactional foreign currency gains and losses, including the impact of undesignated foreign currency forwards, is recorded within other non-operating income (expense), net in our consolidated statements of operations.
Volume
Financial volume represents owned or actively managed brands sold to unrelated external customers within our geographic markets (net of returns and allowances), as well as contract brewing, factored non-owned volume and company-owned distribution volume. This metric is presented on a sales-to-wholesalers ("STW") basis to reflect the sales from our operations to our direct customers, generally distributors. We believe this metric is important and useful for investors and management because it gives an indication of the amount of beer and adjacent products that we have produced and shipped to customers. This metric excludes royalty volume, which consists of our brands produced and sold under various license and contract brewing agreements. Factored volume in our EMEA&APAC segment is the distribution of beer, wine, spirits and other products owned and produced by other companies to the on-premise channel such as bars and restaurants, which is a common arrangement in the U.K.
Net sales
The following table highlights the drivers of the change in net sales for the year ended December 31, 2024, compared to December 31, 2023, (in percentages):
Financial Volume Price and Sales Mix Currency Total
Consolidated net sales (5.0) % 4.4 % — % (0.6) %
Net sales decreased 0.6% for the year ended December 31, 2024, compared to prior year driven by lower financial volumes, partially offset by favorable price and sales mix.
Financial volumes decreased 5.0% for the year ended December 31, 2024, compared to prior year, due to lower shipments in the Americas, including lower contract brewing volumes representing almost half of the decline as well as the impact of the macroeconomic environment resulting in industry softness. EMEA&APAC financial volumes also decreased 2.6%.
Price and sales mix favorably impacted net sales for the year ended December 31, 2024, by 4.4%, primarily due to increased net pricing as well as favorable sales mix for both segments, including as a result of lower contract brewing volumes in the Americas as well as premiumization and favorable channel mix in EMEA&APAC.
A discussion of currency impacts on net sales is included in the "Foreign currency impacts on results" section above.
Cost of goods sold
We utilize cost of goods sold per hectoliter, as well as the year over year changes in this metric, as a key metric for analyzing our results. This metric is calculated as cost of goods sold per our consolidated statements of operations divided by financial volume for the respective period. We believe this metric is important and useful for investors and management because it provides an indication of the trends of sales mix and other cost impacts on our cost of goods sold.
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Cost of goods sold decreased 3.3% for the year ended December 31, 2024, compared to prior year, primarily due to lower financial volumes, partially offset by higher cost of goods sold per hectoliter. Cost of goods sold per hectoliter increased 1.8% for the year ended December 31, 2024, compared to prior year, primarily due to cost inflation related to materials and manufacturing expenses, unfavorable mix driven by lower contract brewing volumes and volume deleverage in the Americas segment, partially offset by favorable changes in our unrealized mark-to-market commodity derivative positions of $133.0 million and cost savings initiatives.
A discussion of currency impacts on cost of goods sold is included in the "Foreign currency impacts on results" section above.
Marketing, general and administrative expenses
MG&A expenses decreased 2.2% for the year ended December 31, 2024, compared to prior year, primarily due to lower incentive compensation expense and lower marketing resulting from cycling higher investment levels in the prior year.
A discussion of currency impacts on marketing, general and administrative expenses is included in the "Foreign currency impacts on results" section above.
Other operating income (expense), net
Other operating expense, net improved 59.8% for the year ended December 31, 2024, compared to prior year, primarily due to the cycling of a $160.7 million partial impairment charge to our indefinite-lived intangible asset related to the Staropramen family of brands recorded in the prior year as well as a $77.9 million gain recognized upon the consolidation of ZOA in the fourth quarter of 2024, partially offset by the costs incurred related to the wind down and sale of certain U.S. craft businesses and related restructuring costs including accelerated depreciation charges in excess of normal depreciation of $93.6 million as well as a $41.2 million loss on the disposal of the sold businesses. See Part II—Item 8 Financial Statements and Supplementary Data, Note 17, "Other Operating Income (Expense), net" for further detail of our other operating income (expense), net.
Total non-operating income (expense), net
Total non-operating expense, net increased 34.7% for the year ended December 31, 2024, compared to prior year primarily due to higher interest expense driven by a $45.8 million adjustment to increase our mandatorily redeemable NCI liability to the final redemption value related to the CBPL buyout recorded in the third quarter of 2024, a settlement loss of $34.0 million recorded as a result of Canadian pension plan annuity purchases and unfavorable transactional foreign currency impacts, partially offset by higher pension and OPEB non-service benefit.
Income tax benefit (expense)
For the years ended
Effective tax rate 23 % 24 % (198) %
Our effective tax rate decreased for the year ended December 31, 2024, compared to the prior year, in part due to the impact of the $77.9 million gain recognized upon the consolidation of ZOA in the fourth quarter of 2024, which is non-taxable. The decrease was partially offset by (i) the $20.0 million increase in valuation allowance that was recorded on deferred tax assets related to the sale of certain U.S. craft businesses in the third quarter of 2024, and (ii) the impact of the $45.8 million increase in the mandatorily redeemable NCI liability of CBPL in the third quarter of 2024, which is non-deductible for tax purposes. The effective tax rate for the year ended December 31, 2024, was further decreased by the recognition of additional net tax benefit items totaling $12.8 million, as compared to the recognition of additional net tax expense items totaling $10.0 million in the year ended December 31, 2023.
Our effective tax rate can be volatile and may change with, among other things, the amount and source of pretax 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, could have an impact on our effective tax rate.
Refer to Part II—Item 8 Financial Statements and Supplementary Data, Note 12, "Income Tax" for further discussion regarding our effective tax rate.
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Net income (loss) attributable to noncontrolling interests
Net income attributable to noncontrolling interests increased $27.8 million for the year ended December 31, 2024, compared to the prior year, primarily due to the recording of an out of period adjustment in the third quarter 2024 to increase the noncontrolling interest to the best estimate of the redemption value that existed at the time of the put option exercise in March 2024. See further discussion in Part II—Item 8 Financial Statements and Supplementary Data, Note 1, "Basis of Presentation and Summary of Significant Accounting Policies".
Segment Results of Operations
Americas Segment
For the years ended
(In millions, except percentages)
(1)Includes gross inter-segment sales and volumes which are eliminated in the consolidated totals.
(2)Excludes royalty volume of 2.550 million hectoliters, 2.683 million hectoliters and 2.719 million hectoliters for the years ended December 31, 2024, 2023 and 2022, respectively.
Net sales
The following table highlights the drivers of the change in net sales for the year ended December 31, 2024, compared to December 31, 2023, (in percentages):
Financial Volume Price and Sales Mix Currency Total
Americas net sales (5.7) % 4.0 % (0.3) % (2.0) %
Net sales decreased 2.0% for the year ended December 31, 2024, compared to prior year, driven by lower financial volumes and unfavorable foreign currency impacts, partially offset by favorable price and sales mix.
Financial volumes decreased 5.7% for the year ended December 31, 2024, compared to prior year, primarily due to lower contract brewing volumes related to the wind down of a U.S. contract brewing arrangement (1.9 million hectoliters) and lower U.S. volumes due to the macroeconomic environment resulting in industry softness partly offset by an increase in volumes in Canada.
Price and sales mix favorably impacted net sales for the year ended December 31, 2024, by 4.0% primarily due to increased net pricing and favorable sales mix as a result of lower contract brewing volumes.
A discussion of currency impacts on net sales is included in the "Foreign currency impacts on results" section above.
Income (loss) before income taxes
Income before income taxes declined 2.8% for the year ended December 31, 2024, compared to prior year, primarily due to lower financial volumes, cost inflation related to materials and manufacturing expenses and higher other operating expense, net, partially offset by increased net pricing, favorable sales mix, lower MG&A expense and favorable cost saving initiatives. Higher other operating expense, net was primarily due to the wind down and sale of certain of our U.S. craft businesses and related restructuring costs, including accelerated depreciation charges in excess of normal depreciation of $93.6 million as well as a $41.2 million loss on the disposal of the sold businesses, partially offset by a $77.9 million gain recognized upon the consolidation of ZOA in the fourth quarter of 2024. Lower MG&A spend was primarily due to lower incentive compensation expense and lower marketing resulting from cycling higher investment levels in the prior year.
A discussion of currency impacts on income (loss) before income taxes is included in the "Foreign currency impacts on results" section above.
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EMEA&APAC Segment
For the years ended
(In millions, except percentages)
Income (loss) before income taxes $ 145.3 N/M $ (41.1) N/M $ 61.0
N/M = Not meaningful
(1)Includes gross inter-segment sales and volumes which are eliminated in the consolidated totals.
(2)Excludes royalty volume of 1.185 million hectoliters, 0.935 million hectoliters and 1.012 million hectoliters for the years ended December 31, 2024, 2023 and 2022, respectively.
Net sales
The following table highlights the drivers of the change in net sales for the year ended December 31, 2024, compared to December 31, 2023 (in percentages):
Financial Volume Price and Sales Mix Currency Total
EMEA&APAC net sales (2.6) % 6.7 % 0.9 % 5.0 %
Net sales increased 5.0% for the year ended December 31, 2024, compared to prior year, driven by favorable price and sales mix as well as favorable foreign currency impacts, partially offset by lower financial volumes.
Financial volumes decreased 2.6% for the year ended December 31, 2024, compared to prior year, primarily due to lower volumes in Western Europe due to soft market demand and high promotional activity from the competition, partially offset by Central and Eastern Europe volume growth driven by the favorable performance of our above premium and premium brands.
Price and sales mix favorably impacted net sales for the year ended December 31, 2024, by 6.7% primarily due to increased net pricing and favorable sales mix driven by premiumization and favorable channel mix.
A discussion of currency impacts on net sales is included in the "Foreign currency impacts on results" section above.
Income (loss) before income taxes
Income before income taxes was $145.3 million for the year ended December 31, 2024, compared to a loss before income taxes of $41.1 million in the prior year. The improvement was primarily due to the cycling of a $160.7 million partial impairment charge to our indefinite-lived intangible asset related to the Staropramen family of brands recorded in the prior year, increased net pricing, favorable sales mix and cost savings initiatives, partially offset by higher net interest expense, lower financial volumes and higher MG&A spend. Higher net interest expense was driven by an adjustment of $45.8 million to increase our mandatorily redeemable NCI liability to the final redemption value related to the CBPL buyout in the third quarter of 2024. Higher MG&A spend was due to increased strategic and transformation project costs as well as increased marketing to support our brands and innovations.
A discussion of currency impacts on income (loss) before income taxes is included in the "Foreign currency impacts on results" section above.
Unallocated Segment
We have certain activity that is not allocated to our segments, which has been reflected as Unallocated below. Specifically, Unallocated primarily includes certain financing-related activities such as interest expense and interest income, foreign exchange gains and losses on intercompany balances as well as realized and unrealized changes in fair value on derivative instruments not designated in hedging relationships related to financing and other treasury-related activities. Unallocated activity also includes 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.
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For the years ended
(In millions, except percentages)
N/M = Not meaningful
Cost of goods sold
The unrealized changes in fair value on our commodity derivatives, which are economic hedges, make up substantially all of the activity presented within cost of goods sold in the table above for the years ended December 31, 2024, 2023 and 2022. As the exposure we are managing is realized, we reclassify the gain or loss on our commodity derivatives to the segment in which the underlying exposure resides, allowing our segments to realize the economic effects of the derivative without the resulting unrealized mark-to-market volatility. See Part II—Item 8 Financial Statements and Supplementary Data, Note 10, "Derivative Instruments and Hedging Activities" for further information.
Total non-operating income (expense), net
Total non-operating expense, net increased 10.5% for the year ended December 31, 2024, compared to prior year primarily due to a settlement loss of $34.0 million recorded as a result of Canadian pension plan annuity purchases and lower favorable transactional foreign currency impacts, partially offset by higher pension and OPEB non-service benefits and higher interest income from higher cash balances.
See Part II - Item 8 Financial Statements and Supplementary Data, Note 11, "Employee Retirement Plans and Postretirement Benefits" for further discussion of pension and OPEB.
Fever-Tree Partnership
Effective February 1, 2025, we obtained exclusive rights via a license agreement to produce, market and sell Fever-Tree products in the U.S. In connection with this agreement, we acquired the shares of the Fever-Tree USA, Inc. entity, with the immaterial acquisition to be accounted for as a business combination and consideration to be allocated primarily to working capital balances. Further, we made an investment of approximately $90 million in Fever-Tree Drinks Plc, a listed entity on the London Stock Exchange (LSE:FEVR). The investment will be accounted for at fair value under ASC 321. We expect to incur certain one-time transition and integration fees related to the transactions over the next several months. The amounts of such fees will be dependent upon the progression of our integration plans.
Liquidity and Capital Resources
Liquidity
Overview
Our primary sources of liquidity include cash provided by operating activities and access to external capital. We continue to monitor world events which may create credit or economic challenges that could adversely impact our profit or operating cash flows and our ability to obtain additional liquidity. We currently believe that our cash and cash equivalents, cash flows from operations and cash provided by short-term and long-term borrowings, when necessary, will be adequate to meet our ongoing operating requirements, scheduled principal and interest payments on debt, anticipated dividend payments, capital expenditures and other obligations for the twelve months subsequent to the date of the issuance of this report and our long-term liquidity requirements. We do not have any restrictions that prevent or limit our ability to declare or pay dividends.
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While a significant portion of our cash flows from operating activities are generated within the U.S., our cash balances include cash held outside the U.S. and in currencies other than the USD. As of December 31, 2024, approximately 55% of our cash and cash equivalents were located outside the U.S., largely denominated in foreign currencies. Fluctuations in foreign currency exchange rates have had and may continue to have a material impact on these foreign cash balances. Cash balances in foreign countries are often subject to additional restrictions. We may, therefore, have difficulties timely repatriating cash held outside the U.S., and such repatriation may be subject to tax. These limitations may affect our ability to fully utilize our cash resources for needs in the U.S. and other countries and may adversely affect our liquidity. To the extent necessary, we accrue for tax consequences on the earnings of our foreign subsidiaries as they are earned. We may utilize tax planning and financing strategies in an effort to ensure that our worldwide cash is available in the locations in which it is needed. We periodically review and evaluate these plans and strategies, including externally committed and non-committed credit agreements accessible by our Company and each of our operating subsidiaries. We believe these financing arrangements, along with cash flows from operating activities within the U.S., are sufficient to fund our current cash needs in the U.S.
Guarantor Information
SEC Registered Securities
For purposes of this disclosure, including the tables, "Parent Issuer" shall mean MCBC in its capacity as the issuer of the senior notes under the May 2012 Indenture, the July 2016 Indenture and the May 2024 Indenture. "Subsidiary Guarantors" shall mean certain Canadian and U.S. subsidiaries reflecting the substantial operations of our Americas segment.
Pursuant to the indenture dated May 3, 2012 (as amended, the "May 2012 Indenture"), MCBC issued its outstanding 5.0% senior notes due 2042. Additionally, pursuant to the indenture dated July 7, 2016 ("July 2016 Indenture"), MCBC issued its outstanding 3.0% senior notes due 2026, 4.2% senior notes due 2046 and 1.25% senior notes due 2024 (subsequently repaid upon maturity on July 15, 2024). Further, pursuant to the indenture dated May 29, 2024 ("May 2024 Indenture"), MCBC issued its outstanding 3.8% senior notes due 2032. The issuances of the senior notes issued under the May 2012 Indenture, the July 2016 Indenture and the May 2024 Indenture were registered under the Securities Act of 1933, as amended. These senior notes are guaranteed on a senior unsecured basis by certain subsidiaries of MCBC, which are listed in Exhibit 22 of this Annual Report on Form 10-K (the Subsidiary Guarantors, and together with the Parent Issuer, the "Obligor Group"). Each of the Subsidiary Guarantors is 100% owned by the Parent Issuer. The guarantees are full and unconditional and joint and several.
None of our other outstanding debt was issued in a transaction that was registered with the SEC, and such other outstanding debt is issued or otherwise generally guaranteed on a senior unsecured basis by the Obligor Group or other consolidated subsidiaries of MCBC. These other guarantees are also full and unconditional and joint and several.
As of December 31, 2024, the senior notes and related guarantees rank pari-passu with all other unsubordinated debt of the Obligor Group and senior to all future subordinated debt of the Obligor Group. The guarantees can be released upon the sale or transfer of a Subsidiary Guarantors' capital stock or substantially all of its assets, or if such Subsidiary Guarantor ceases to be a guarantor under our other outstanding debt.
See Part II—Item 8 Financial Statements and Supplementary Data, Note 9, "Debt" for details of all debt issued and outstanding as of December 31, 2024.
The following summarized financial information relates to the Obligor Group as of December 31, 2024, on a combined basis, after elimination of intercompany transactions and balances between the Obligor Group, and excluding the investments in and equity in the earnings of any non-guarantor subsidiaries. The balances and transactions with non-guarantor subsidiaries have been separately presented.
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Summarized Financial Information of Obligor Group
(In millions)
Net sales, out of which: $ 9,077.4
Intercompany sales to non-guarantor subsidiaries $ 104.5
Gross profit, out of which: $ 3,590.2
Intercompany net costs from non-guarantor subsidiaries $ (368.3)
Net interest expense, out of which: $ (170.4)
Intercompany net interest income from non-guarantor subsidiaries $ 31.5
Income before income taxes $ 1,338.9
(In millions)
Total current assets, out of which: $ 1,859.8
Intercompany receivables from non-guarantor subsidiaries $ 191.6
Total noncurrent assets, out of which: $ 23,958.2
Total current liabilities, out of which: $ 2,673.9
Current portion of long-term debt and short-term borrowings $ 7.6
Intercompany payables due to non-guarantor subsidiaries $ 715.6
Total noncurrent liabilities, out of which: $ 8,950.8
Noncurrent intercompany notes payable due to non-guarantor subsidiaries $ 13.2
Cash Flows and Use of Cash
Our business historically generates positive operating cash flows each year and our debt maturities are generally of a longer-term nature. See the debt maturity profile graph below or refer to Part II—Item 8 Financial Statements and Supplementary Data, Note 9, "Debt" for further details of our debt maturity profile. However, our liquidity could be impacted significantly by the risk factors described in Part I—Item 1A. Risk Factors.
Cash Flows from Operating Activities
Net cash provided by operating activities of $1,910.3 million for the year ended December 31, 2024, decreased $168.7 million from $2,079.0 million for the year ended December 31, 2023, primarily due to the unfavorable timing of working capital, partially offset by higher net income adjusted for non-cash items. The unfavorable timing of working capital was primarily driven by the timing of cash paid for our payables as well as higher payments in the current year for 2023 annual incentive compensation, partially offset by the timing of cash receipts.
Cash Flows from Investing Activities
Net cash used in investing activities of $648.0 million for the year ended December 31, 2024, decreased $193.7 million from $841.7 million for the year ended December 31, 2023, primarily due to cash paid in the prior year for an acquisition and other investing activities, as well as higher proceeds in the current year from the sale of the U.S. craft businesses.
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Cash Flows from Financing Activities
Net cash used in financing activities of $1,138.4 million for the year ended December 31, 2024, increased $157.0 million from $981.4 million for the year ended December 31, 2023, primarily due to higher Class B common stock share repurchases and a payment to acquire the noncontrolling interest in CBPL, partially offset by lower net debt repayments.
Capital Resources, including Material Cash Requirements
Cash and Cash Equivalents
As of December 31, 2024, we had total cash and cash equivalents of $969.3 million, compared to $868.9 million as of December 31, 2023. The increase in cash and cash equivalents from December 31, 2023, was primarily due to net cash provided by operating activities, as well as the issuance of new EUR 800 million 3.80% senior notes due 2032. This was partially offset by debt repayments, including the repayment of our EUR 800 million 1.25% senior notes which matured in July 2024, capital expenditures, Class B common stock share repurchases, dividend payments and payment to acquire the noncontrolling interest in CBPL. See Part II—Item 8 Financial Statements and Supplementary Data, Consolidated Statements of Cash Flows for additional detail.
The majority of our cash and cash equivalents are invested in a variety of highly liquid investments with original maturities of 90 days or less. These investments are viewed by management as low-risk investments on which there are little to no restrictions regarding our ability to access the underlying cash to fund our operations as necessary. While we have some investments in prime money market funds at times, these are classified as cash and cash equivalents; however, we continually monitor the need for reclassification under the SEC requirements for money market funds, and the potential that the shares of such funds could have a net asset value of less than one dollar. We also utilize cash pooling arrangements to facilitate the access to cash across our geographies.
Working Capital
We actively manage our working capital to ensure we are able to meet our short-term obligations and to provide more favorable timing of cash inflows. These efforts include optimizing our inventory levels and managing our payment terms on accounts payable and accounts receivable.
Borrowings
We repaid our EUR 800 million 1.25% senior notes upon their maturity on July 15, 2024, using the cash proceeds from our EUR 800 million 3.80% senior notes issued on May 29, 2024, and cash on hand. Refer to Part II—Item 8 Financial Statements and Supplementary Data, Note 9, "Debt" for details.
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Based on the credit profile of our lenders that are party to our credit facilities, we are confident in our ability to draw on our revolving credit facility if the need arises. On June 3, 2024, we amended our existing $2.0 billion multi-currency revolving credit facility to, among other things, extend the maturity date from June 26, 2028 to June 26, 2029. As of December 31, 2024, we had $2.0 billion available to draw on our amended and restated $2.0 billion multi-currency revolving credit facility. As of December 31, 2024, we had no borrowings drawn on this amended and restated multi-currency revolving credit facility and no commercial paper borrowings.
We intend to further utilize our cross-border, cross currency cash pool as well as our commercial paper programs for liquidity as needed. We also have CAD, GBP and USD overdraft facilities across several banks should we need additional short-term liquidity.
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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.
The maximum net debt to EBITDA leverage ratio, as defined by the amended and restated multi-currency revolving credit facility agreement, was 4.00x as of December 31, 2024, and December 31, 2023. As of December 31, 2024, and December 31, 2023, we were in compliance with all of these restrictions and covenants, have met such financial ratios and have met all debt payment obligations. All of our outstanding senior notes as of December 31, 2024, rank pari-passu.
See Part II—Item 8 Financial Statements and Supplementary Data, Note 9, "Debt" for further discussion of our borrowings and available sources of borrowings, including lines of credit.
Guarantees
We guarantee indebtedness and other obligations to banks and other third parties for some of our equity method investments and consolidated subsidiaries. Guarantees of the outstanding third-party debt of our equity method investments, which are classified as current on the consolidated balance sheets, have been excluded from the material cash requirements table below. See Part II - Item 8 Financial Statements and Supplementary Data, Note 3, "Investments" and Part II - Item 8 Financial Statements and Supplementary Data, Note 13, "Commitments and Contingencies" for further discussion.
Material Cash Requirements from Contractual and Other Obligations
A summary of our material cash requirements from our contractual and other obligations as of December 31, 2024, based on foreign exchange rates as of December 31, 2024, is as follows.
Payments due by period
(In millions)
See Part II—Item 8 Financial Statements and Supplementary Data, Note 9, "Debt,"Note 8, "Leases,"Note 11, "Employee Retirement Plans and Postretirement Benefits,"Note 10, "Derivative Instruments and Hedging Activities," and Note 13, "Commitments and Contingencies" for additional information.
(1)Primarily represents expected benefit payments under our OPEB plans through 2033. The net underfunded liability as of December 31, 2024, of our defined benefit pension plans (excluding our overfunded plans) and OPEB plans is $34.9 million and $423.0 million, respectively. Defined benefit pension plan contributions in future years will vary based on a number of factors, including actual plan asset returns and interest rates, and thus, have been excluded from the above table.
(2)See Part II—Item 8 Financial Statements and Supplementary Data, Note 13, "Commitments and Contingencies" for further discussion of the majority of the other long-term obligations which includes supply and distribution and advertising and promotions commitments. The remaining balance relates to derivative payments, information technology services, pre-commencement leases, open purchase orders and other commitments.
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Other Commercial Commitments
Based on foreign exchange rates as of December 31, 2024, future commercial commitments are as follows:
Amount of commitment expiration per period
(In millions)
Standby letters of credit $ 45.2 $ 43.7 $ 1.4 $ 0.1 $ —
(1)Includes $12 million of letters of credit each of which contain a feature that automatically renews for an additional year if no cancellation notice is submitted. See Part II—Item 8 Financial Statements and Supplementary Data, Note 13, "Commitments and Contingencies" for further discussion.
Credit Rating
Our current long-term credit ratings are BBB/Stable Outlook, Baa1/Stable Outlook and BBB/Stable Outlook with Standard & Poor's, Moody's and DBRS, respectively. Our short-term credit ratings are A-2, Prime-2 and R-2, respectively. A securities rating is not a recommendation to buy, sell or hold securities, and it may be revised or withdrawn at any time by the applicable rating agency.
Capital Expenditures
We incurred $720.8 million, and paid $674.1 million, for capital improvement projects worldwide for the year ended December 31, 2024, excluding capital spending by equity method joint ventures, representing an increase of $32.2 million from the $688.6 million of capital expenditures incurred for the year ended December 31, 2023. We continue to focus on where and how we employ our planned capital expenditures, with an emphasis on obtaining required returns on invested capital as we determine how to best allocate cash within the business.
Contingencies
We are party to various legal proceedings arising in the ordinary course of business, environmental litigation and indemnities associated with our sale of Kaiser to FEMSA. See Part II—Item 8 Financial Statements and Supplementary Data, Note 13, "Commitments and Contingencies" for further discussion.
Off-Balance Sheet Arrangements
Refer to Part II—Item 8 Financial Statements and Supplementary Data, Note 13, "Commitments and Contingencies" for discussion of off-balance sheet arrangements. As of December 31, 2024, we did not have any other material off-balance sheet arrangements.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. In connection with the preparation of our consolidated financial statements, we are required to make judgments and estimates that significantly affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. Our estimates are based on historical experience, current trends and various other assumptions we believe to be relevant under the circumstances. We review the underlying factors used in our estimates regularly, including reviewing the significant accounting policies impacting the estimates, to ensure compliance with U.S. GAAP. However, due to the uncertainty inherent in our estimates, actual results may be materially different. We have identified the accounting estimates below as critical to understanding and evaluating the financial results reported in our consolidated financial statements.
For a complete description of our significant accounting policies, see Part II—Item 8 Financial Statements and Supplementary Data, Note 1, "Basis of Presentation and Summary of Significant Accounting Policies".
Pension and Other Postretirement Benefits
Our defined benefit pension plans cover certain current and former employees in the U.S., Canada and the U.K. Benefit accruals for the majority of employees in our U.S. and U.K. plans have been frozen and the plans are closed to new entrants. In the U.S., we also participate in, and make contributions to, multi-employer pension plans. Further, our OPEB plans provide medical benefits for retirees and their eligible dependents as well as life insurance and, in some cases, dental and vision coverage, for certain retirees in the U.S., Canada and Europe. The defined benefit pension plans are primarily funded, but all OPEB plans are unfunded. We also offer defined contribution plans in each of our segments.
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Accounting for pension and OPEB plans requires that we make assumptions that involve considerable judgment which are significant inputs in the actuarial models that measure our net pension and OPEB obligations and ultimately impact our earnings. These include the discount rate, long-term expected rate of return on assets, and plan asset fair value determination, which are important assumptions used in determining the plans' funded status and annual net periodic pension and OPEB costs. Further assumptions include inflation considerations and health care cost trends. We evaluate these critical assumptions at least annually on a plan and country-specific basis. We also, with the help of actuaries, periodically evaluate other assumptions involving demographic factors, such as retirement age, mortality and turnover, and update them to reflect our experience and expectations for the future. While we believe that our assumptions are appropriate, significant differences in our actual experience or significant changes in our assumptions may materially affect our net pension and postretirement benefit obligations and related expense. The following discussion focuses on assumptions that are deemed to have the most material impact on our pension and OPEB liabilities and net periodic benefit cost.
Discount Rates
The assumed discount rates are used to present value future benefit obligations based on each plan's respective estimated duration. Our pension and OPEB discount rates are based on our annual evaluation of high quality corporate bonds in various markets based on appropriate indices and actuarial guidance. We believe that our discount rate assumptions are appropriate; however, significant changes in our assumptions may materially affect our pension and OPEB obligations and related expense.
As of December 31, 2024, on a weighted-average basis, the discount rates used were 5.41% for our defined benefit pension plans and 5.15% for our OPEB plans. The change from the weighted-average discount rates of 4.74% for our defined benefit pension plans and 4.64% for our OPEB plans as of December 31, 2023, was primarily due to an increase in interest rates in 2024, particularly for our U.S. and U.K. plans.
A 50 basis point change in our discount rate assumptions would have had the following effects on the projected benefit obligation balances as of December 31, 2024, for our pension and OPEB plans:
Decrease in discount rate Increase in discount rate
(In millions)
Total impact to the projected benefit obligation $ 135.8 $ (125.4)
Our U.K. pension plan includes benefits linked to inflation. The above sensitivity analysis does not consider the implications to inflation resulting from the above contemplated discount rate changes. This sensitivity holds all other assumptions constant.
Long-Term Expected Rate of Return on Assets
The assumed long-term expected return on assets is used to estimate the actual return that will occur on each individual funded plan's respective plan assets in the upcoming year. We determine each plan's EROA with substantial input from independent investment specialists, including our actuaries and our outsourced investment consultants. In developing each plan's EROA, we consider current and expected asset allocations, historical market rates as well as historical and expected returns on each plan's individual asset classes. In developing future return expectations for each of our plan's assets, we evaluate general market trends as well as key elements of asset class returns such as expected earnings growth, yields and spreads. The calculation includes inputs for interest, inflation, credit and risk premium (active investment management) rates and fees paid to service providers. Based on the above factors and expected asset allocations, we have assumed, on a weighted-average basis, an EROA of 5.70% for our defined benefit pension plan assets for cost recognition in 2025. This is an increase from the weighted-average rate of 5.47% we assumed for 2024, primarily due to the increase in interest rates in 2024 causing higher expected future fixed income returns. We believe that our EROA assumptions are appropriate; however, significant changes in our assumptions or actual returns that differ significantly from estimated returns may materially affect our net periodic pension costs.
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A 50 basis point change in our EROA assumptions made at the beginning of 2024 would have had the following effects on 2024 net periodic pension and postretirement benefit costs.
Decrease in EROA Increase in EROA
(In millions)
Fair Value of Plan Assets
The fair value of plan assets is determined by us using available market information and appropriate valuation methodologies. However, considerable judgment is required in selecting an appropriate methodology and interpreting market data to develop the estimates of fair value, especially in the absence of quoted market values in an active market. Changes in these assumptions or the use of different market inputs may have a material impact on the estimated fair values or the ultimate amount at which the plan assets are available to satisfy our plan obligations.
Health Care Cost Trend Rates
The assumed health care cost trend rates represent the rates at which health care costs are assumed to increase and are based on actuarial input and consideration of historical and expected experience. We use these trends as a significant assumption in determining our postretirement benefit obligation and related costs. Changes in our projections of future health care costs due to general economic conditions and those specific to health care will impact this trend rate. An increase in the trend rate would increase our obligation and expense of our postretirement health care plan. We believe that our health care cost trend rate assumptions are appropriate; however, significant changes in our assumptions may materially affect our postretirement benefit obligations and related costs. As of December 31, 2024, the health care trend rates used were ranging ratably from 7.00% in 2025 to 3.57% in 2040, which is a slight increase from our assumed health care trend rates ranging ratably from 6.75% in 2024 to 3.57% in 2040 as of December 31, 2023. See Part II—Item 8 Financial Statements and Supplementary Data, Note 11, "Employee Retirement Plans and Postretirement Benefits" for further information.
Contingencies, Environmental and Litigation Reserves
Contingencies, environmental and litigation reserves are recorded when probable, using our best estimate of loss. These estimates involve significant judgment and are based on an evaluation of the range of loss related to such matters and where the amount and range can be reasonably estimated. These matters are generally resolved over a number of years and only when one or more future events occur or fail to occur. Following our initial determination, we regularly reassess and revise the potential liability related to any pending matters as new information becomes available. Unless capitalization is allowed or required by U.S. GAAP, environmental and legal costs are expensed when incurred. We disclose pending loss contingencies when the loss is deemed reasonably possible, which requires significant judgment. As a result of the inherent uncertainty of these matters, the ultimate conclusion and actual cost of settlement may materially differ from our estimates. We recognize contingent gains upon the determination that realization is assured beyond a reasonable doubt, regardless of the perceived probability of a favorable outcome prior to achieving that assurance. In the instance of gain contingencies resulting from favorable litigation, due to the numerous uncertainties inherent in a legal proceeding, gain contingencies resulting from legal settlements are not recognized in income until cash or other forms of payment are received. If significant and probable, we disclose as appropriate.
See Part II—Item 8 Financial Statements and Supplementary Data, Note 13, "Commitments and Contingencies" for a discussion of our contingencies, environmental and litigation reserves as of December 31, 2024.
Goodwill and Intangible Asset Valuation
We evaluate the carrying value of our goodwill and indefinite-lived intangible assets for impairment at least annually or when an interim triggering event occurs that may indicate potential impairment. Our annual impairment test of goodwill and indefinite-lived intangible assets is performed as of October 1, the first day of the last fiscal quarter. We evaluate our other definite-lived intangible assets for impairment when evidence exists that certain events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Significant judgments and assumptions are required in such impairment evaluations. As of December 31, 2024, the carrying values of goodwill and intangible assets were approximately $5.6 billion and $12.2 billion, respectively, with the goodwill balance entirely attributed to the Americas reporting unit.
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We use a combination of discounted cash flow analyses and market approaches to determine the fair value of each of our reporting units and an excess earnings approach to determine the fair values of our indefinite-lived brand intangible assets. Our discounted cash flow projections include assumptions for growth rates for sales, costs and profits, which are based on various long-range financial and operational plans of each reporting unit or each indefinite-lived intangible asset. Additionally, discount rates used in our goodwill analysis are based on weighted-average cost of capital, driven by the prevailing interest rates in geographies where these businesses operate, as well as the credit ratings, financing abilities and opportunities of each reporting unit, among other factors. Discount rates for the indefinite-lived intangible analysis by brand largely reflect the rates supporting the overall reporting unit valuation but may differ to adjust for country or market specific risk associated with a particular brand, among other factors. Our market-based valuations utilize earnings multiples of comparable public companies, which are reflective of the market in which each respective reporting unit operates. The key assumptions used to derive the estimated fair values of our reporting units and indefinite-lived intangible assets represent Level 3 measurements.
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 asset 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 reporting units and indefinite-lived intangible assets may include such items as: (i) a decrease in expected future cash flows, specifically, an inability to execute on our strategic initiatives including our premiumization efforts or an increase in costs driven by inflation or other factors that could significantly impact our immediate and long range results, prolonged weakness in consumer demand or other competitive pressures adversely affecting our long-term volume trends, changes in trends and consumer preferences within the industry towards other brands or product categories, unfavorable working capital changes or an inability to successfully implement our cost savings initiatives, (ii) adverse changes in macroeconomic conditions that significantly differ from our assumptions in timing and/or degree (such as a global pandemic, recession or evolving beer industry), (iii) significant unfavorable changes in tax rates, (iv) volatility in the equity and debt markets or other country-specific factors which could result in a higher weighted-average cost of capital, (v) sensitivity to market multiples; and (vi) regulation limiting or banning the manufacturing, distribution or sale of alcoholic beverages.
If actual performance results differ significantly from our projections or we experience significant fluctuations in our other assumptions, a material impairment loss may occur in the future. See Part II—Item 8 Financial Statements and Supplementary Data, Note 6, "Goodwill and Intangible Assets" for further discussion and presentation of these amounts.
Annual Goodwill Impairment Test
As of the October 1, 2024, testing date, the fair value of the Americas reporting unit was determined to be in excess of its carrying amount and therefore no goodwill impairment charge was recorded. The Americas reporting unit continues to be at a heightened risk of future impairment as the fair value exceeded its respective carrying value by less than 15%. The fair value of the Americas reporting unit decreased during the current year, primarily due to lower market multiples and lower forecasted cash flow projections, with the decreases largely driven by more challenging U.S. industry expectations. This is partially offset by a decrease to the discount rate as a result of reductions in the interest rate environment. Specifically, the discount rate used in developing our annual fair value estimates for the Americas reporting unit in the current year was 8.25% based on market-specific factors, as compared to 9.00% used as of the October 1, 2023, annual testing date. A 50 basis point increase in our discount rate assumption, holding all other assumptions and inputs constant, would not have resulted in an impairment of the Americas reporting unit.
Current projections used for the Americas reporting unit testing reflected growth assumptions associated with our continued plan to consistently grow our core power brand revenue, aggressively premiumize our portfolio, scale and expand beyond beer, invest in our capabilities and invest in our people, communities and planet, all of which are intended to benefit the projected cash flows of the business. While progress has been made on this strategy, including the strengthening of our core brands, there is not enough historical data yet to adequately predict future impacts and forecasted future cash flows are inherently at risk given that the strategies are still in progress. In addition, while we have included in our forecasted future cash flows estimates for expected cost inflation and adjusted our volumes to be reflective of the current beer industry trends, there is still inherent risk in achieving our goals. If our assumptions are not realized, it is possible that further impairment charges may be recorded in the future.
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Indefinite-Lived Intangible Assets
The fair values of the Coors brands in the Americas (inclusive of our Coors brand in the U.S. and Coors distribution agreement in Canada), the Miller brands in the U.S., the Carling brands in the U.K. and the Staropramen brands in EMEA&APAC are sufficiently in excess of their respective carrying values as of the October 1, 2024 annual testing date, with each having over 15% cushion of fair value over book value. We utilize Level 3 fair value measurements in our impairment analysis of our indefinite-lived intangible assets. The future cash flows used in the analyses are based on internal cash flow projections utilizing our long range plans and include significant assumptions by management. A 50 basis point increase in our discount rate assumptions would not have resulted in an impairment of any of our indefinite-lived intangible assets.
As of the October 1, 2023, testing date, the carrying value of the Staropramen family ofbrands in EMEA&APAC was determined to be in excess of its fair value such that a partial impairment loss of $160.7 million was recorded in our consolidated statements of operations during the fourth quarter of 2023.
Definite-Lived Intangible Assets and Other Long-Lived Assets
We continuously monitor the performance of our definite-lived intangible assets and other long-lived assets for potential triggering events suggesting an impairment review should be performed or useful lives should be re-assessed. Due to a reduction in forecasted cash flows associated with one of our asset groups, we identified this as a triggering event during the fourth quarter of 2024 and performed a recoverability test for the long-lived assets at the asset group level but concluded that the recoverability test passed and no impairment was recorded. No other material triggering events were identified in either 2024 or 2023 related to our definite-lived intangible assets or other definite-lived assets.
Income Taxes
Income taxes are accounted for in accordance with U.S. GAAP. Judgment is required in determining our consolidated provision for income taxes. In the ordinary course of our global business, there are many transactions for which the ultimate tax outcome is uncertain. Additionally, our income tax provision is based on calculations and assumptions that are subject to examination by many different tax authorities.
We are periodically subject to income tax audits in various foreign and domestic jurisdictions, which can involve questions regarding our tax positions and result in additional income tax liabilities assessed against us. Settlement of any challenge resulting from these tax controversies can result in a variety of resolutions including no change, a complete disallowance, or some partial adjustment reached through negotiations or litigation. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained based on its technical merits. We measure and record the tax benefits from such a position based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Our estimated liabilities related to these matters are adjusted in the period in which the uncertain tax position is effectively settled, the statute of limitations for examination expires or when additional information becomes available. Our liability for unrecognized tax benefits requires the use of assumptions and significant judgment to estimate the exposures associated with our various filing positions. Although we believe that the judgments and estimates made are reasonable, actual results could differ and resulting adjustments could materially affect our effective tax rate and tax provision.
When cash is available after satisfying working capital needs and all other business obligations, we may distribute current earnings and the associated cash from a foreign subsidiary to its U.S. parent, and record the tax impact associated with the distribution. However, to the extent current earnings of our foreign operations exist and are not otherwise distributed or planned to be distributed, such earnings accumulate. These accumulated earnings are not considered permanently reinvested in our foreign operations. The taxes associated with any future repatriation of undistributed earnings are anticipated to be insignificant.
We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We evaluate our ability to realize the tax benefits associated with deferred tax assets by assessing the adequacy of future expected taxable income, including the reversal of existing temporary differences, historical and projected operating results, and the availability of prudent and feasible tax planning strategies. The realization of tax benefits is evaluated by jurisdiction and the realizability of these assets can vary based on the character of the tax attribute and the carryforward periods specific to each jurisdiction.
There are proposed or pending tax law changes in various jurisdictions in which we do business. As discussed in Part II—Item 8 Financial Statements and Supplementary Data, Note 12, "Income Tax", we recognize the impacts of changes in tax law upon enactment, and therefore, proposed changes in tax law, regulations and rules are not reflected within our tax provision. As a result, such changes may, upon ultimate enactment, result in material impacts to our financial statements.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of our global operations, we are exposed to market risks associated with volatile interest rates, foreign currency exchange fluctuations and commodity price risks. To manage our exposure to these market risks, we enter into certain supplier-based and market-based hedging transactions. Such transactions are allowed under our risk management policy and are monitored closely with clear controls around the activities. Our market-based transactions include a variety of derivative financial instruments, none of which are used for trading or speculative purposes. The counterparties to these market-based transactions are generally highly rated institutions. Our objective is to manage our exposures and to decrease the volatility of our earnings and cash flows as a result of changes in underlying rates and costs.
Interest Rate Risk
We are exposed to volatility in interest rates with regard to our current and future debt offerings. Specifically, we are exposed to U.S. Department of Treasury rates, Canadian government rates and SOFR, or any such alternatives like SONIA or EURIBOR, for example. We may from time to time enter into interest rate swaps on our current debt obligations as our hedging strategy is to achieve our desired fixed-to-floating rate debt profile such that we manage the volatility in earnings as well as the cost of funding our operations. Further, we may enter into forward starting interest rate swaps to manage our exposure to the volatility of interest rates associated with future interest payments on a forecasted debt issuance.
In May 2023, we amended our 2026 forward starting interest rate swaps to replace LIBOR with SOFR. Subsequent to this transition, we are no longer exposed to LIBOR. As of December 31, 2024, the following table presents our fixed rate debt and forward starting interest rate swaps as well as the impact of an absolute 1% adverse change in interest rates on their respective fair values. Notional amounts and fair values are presented in USD based on the applicable exchange rates as of December 31, 2024. See Part II - Item 8. Financial Statements and Supplementary Data, Note 9. "Debt" for the maturity dates of our outstanding debt instruments.
Notional amounts Fair Value Asset/(Liability) Effect of Adverse Change
Foreign Exchange Risk
Foreign currency exchange risk is inherent in our operations primarily due to operating results that are denominated in currencies other than the USD. We closely monitor our operations in each country and seek to adopt appropriate strategies that are responsive to foreign currency fluctuations. Our financial risk management policy is intended to mitigate a portion of the potentially unfavorable impact of exchange rates on our earnings and cash flows.
Changes in foreign currency exchange rates affect the translation of local currency balances of foreign subsidiaries, transaction gains and losses associated with intercompany loans with foreign subsidiaries, royalty agreements and transactions denominated in currencies other than the USD, and their related cash flows, specifically related to the purchase of production inputs and imports, as well as our foreign currency-denominated debt. See Part II - Item, 8. Financial Statements and Supplementary Data, Note 1. "Basis of Presentation and Summary of Significant Accounting Policies" for our accounting policy over the accounting for translation adjustments and foreign currency transactions.
Approximately $3.7 billion, or 32%, of our net sales were denominated in functional currencies other than the USD for the year ended December 31, 2024. As a result, fluctuations in foreign currency exchange rates, particularly the CAD and the GBP, may have a material impact on our reported results. For the year ended December 31, 2024, net sales denominated in GBP and CAD approximated $1.4 billion and $1.3 billion, for each respective currency.
We manage our foreign currency exposures through foreign currency forward contracts and net investment hedges. Our EUR foreign-denominated debt is designated as a net investment hedge of our investment in a EUR functional currency subsidiary in order to hedge a portion of the foreign currency translational impacts. Accordingly, the changes in fair value of the net investment hedge due to the fluctuations in the spot rate are recorded to AOCI until a liquidation or deconsolidation event at which point the accumulated gains and losses will be reclassified into earnings. Our foreign currency forward contracts manage our exposure related to certain royalty agreements, the purchase of production inputs and imports that are denominated in currencies other than the entity's functional local currency and other foreign currency exchange exposure.
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The following table includes details of our foreign currency forwards used to hedge our foreign exchange rate risk as well as the impact of a hypothetical 10% adverse change in the related foreign currency exchange rates on the fair value of the foreign currency forwards. Notional amounts and fair values are presented in USD based on the applicable exchange rate as of December 31, 2024 and December 31, 2023. As of December 31, 2024, approximately 65% of our outstanding foreign currency forwards mature in 2025, 32% mature in 2026 and 3% mature thereafter.
Notional amounts Fair ValueAsset/(Liability) Effect of Adverse Change
Commodity Price Risk
We are exposed to volatility in commodity prices as we use commodities in the production and distribution of our products. We specifically hedge our exposure to fluctuations in the price of natural gas, barley, diesel and aluminum, including surcharges relating to our aluminum exposures. We utilize market-based derivatives and supplier-based mechanisms, specifically a combination of purchase orders, long-term supply contracts and over-the-counter financial instruments to mitigate our commodity price risk by reducing price volatility for select commodities that are used in our supply chain.
The following table includes details of our commodity swaps used to hedge commodity price risk as well as the impact of a hypothetical 10% adverse change in the related commodity prices on the fair value of the derivatives. The following table excludes our commodity options because we have offsetting buy and sell positions. Notional amounts and fair values are presented in USD based on the applicable exchange rate as of December 31, 2024 and December 31, 2023. As of December 31, 2024, approximately 79% of commodity swaps mature in 2025 and 21% mature in 2026.
Notional amounts Fair Value Asset/(Liability) Effect of Adverse Change
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements Page
Management's Report 58
Report of Independent Registered Public Accounting Firm (PCAOB ID 238) 59
Consolidated Statements of Operations 61
Consolidated Statements of Comprehensive Income (Loss) 62
Consolidated Balance Sheets 63
Consolidated Statements of Cash Flows 64
Consolidated Statements of Stockholders' Equity and Noncontrolling Interests 66
Notes to Consolidated Financial Statements 68
Note 2, "New Accounting Pronouncements" 79
Note 3, "Investments" 79
Note 4, "Inventories" 83
Note 5, "Property, Plant and Equipment" 83
Note 6, "Goodwill and Intangible Assets" 83
Note 7, "Accounts Payable and Other Current Liabilities" 87
Note 8, "Leases" 87
Note 9, "Debt" 89
Note 10, "Derivative Instruments and Hedging Activities" 91
Note 11, "Employee Retirement Plans and Postretirement Benefits" 96
Note 13, "Commitments and Contingencies" 108
Note 14, "Stockholders' Equity" 112
Note 15, "Accumulated Other Comprehensive Income (Loss)" 114
Note 16, "Share-Based Payments" 116
Note 17, "Other Operating Income (Expense), net" 118
Note 18, "Segment Reporting" 119
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MANAGEMENT'S REPORT
The preparation, integrity and objectivity of the financial statements and all other financial information included in this annual report are the responsibility of the management of Molson Coors Beverage Company. The financial statements have been prepared in accordance with generally accepted accounting principles in the United States, applying estimates based on management's best judgment where necessary. Management believes that all material uncertainties have been appropriately accounted for and disclosed.
Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2024, based on the framework and criteria established in Internal Control—Integrated Framework (2013 Framework), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon its assessment, management concluded that, as of December 31, 2024, the Company's internal control over financial reporting was effective.
PricewaterhouseCoopers LLP, the Company's independent registered public accounting firm, provides an objective, independent audit of the consolidated financial statements and internal control over financial reporting. Their accompanying report is based upon an examination conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), including tests of accounting procedures, records and internal control.
The Board of Directors, operating through its Audit Committee composed of independent, outside directors, monitors the Company's accounting control systems and reviews the results of the Company's auditing activities. The Audit Committee meets at least quarterly, either separately or jointly, with representatives of management, PricewaterhouseCoopers LLP and internal auditors. To ensure complete independence, PricewaterhouseCoopers LLP and the Company's internal auditors have full and free access to the Audit Committee and may meet with or without the presence of management.
/s/ GAVIN D.K. HATTERSLEY /s/ TRACEY I. JOUBERT
Gavin D.K. Hattersley Tracey I. Joubert
President & Chief Executive Officer Chief Financial Officer
Molson Coors Beverage Company Molson Coors Beverage Company
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Molson Coors Beverage Company
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Molson Coors Beverage Company and its subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and noncontrolling interests, and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2024 appearing under Item 15(c) (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill Impairment Assessment - Americas Reporting Unit
As described in Notes 1 and 6 to the consolidated financial statements, the Company’s goodwill balance related to the Americas reporting unit was $5,582 million as of December 31, 2024. The carrying value of goodwill is evaluated for impairment at the reporting unit level at least annually or when an interim triggering event occurs that may indicate potential impairment. The Company’s annual impairment test is performed as of the first day of the fiscal fourth quarter. The evaluation involves comparing the reporting unit’s fair value to its carrying value. If the fair value exceeds its respective carrying value, then management would conclude that no impairment has occurred. If the carrying value exceeds its fair value, the Company would recognize an impairment loss in an amount equal to the excess up to the total amount of goodwill allocated to the reporting unit. A combination of a discounted cash flow analysis and market approach is used by management to determine the fair value of the reporting unit. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. 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 reporting unit may include the following, as disclosed by management, (i) growth rates for sales, costs of goods sold and profits, which are based on various long-range financial and operational plans; (ii) prolonged weakening of economic conditions; or (iii) significant unfavorable changes in income tax rates, environmental or other regulations, including interpretations thereof, terminal growth rate, market multiples and/or weighted-average cost of capital. Management concluded that the fair value of the Americas reporting unit was in excess of its carrying value and therefore no goodwill impairment charge was recorded.
The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment for the Americas reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the Americas reporting unit; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the weighted average cost of capital, growth rates for sales and growth rates for costs of goods sold; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Americas reporting unit. These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the Americas reporting unit; (ii) evaluating the appropriateness of the discounted cash flow analysis and market approach used by management; (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow analysis and market approach; and (iv) evaluating the reasonableness of significant assumptions used by management related to the weighted average cost of capital, growth rates for sales and growth rates for costs of goods sold. Evaluating management’s assumptions related to growth rates for sales and growth rates for costs of goods sold involved evaluating whether the significant assumptions used were reasonable considering (i) the current and past performance of the Americas reporting unit; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the Company’s discounted cash flow analysis and market approach and (ii) the reasonableness of the weighted average cost of capital assumption.
/s/ PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
February 18, 2025
We have served as the Company’s auditor since 1974.
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MOLSON COORS BEVERAGE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
For the Years Ended
Marketing, general and administrative expenses (2,717.5) (2,779.9) (2,618.8)
Goodwill impairment — — (845.0)
Other operating income (expense), net (65.4) (162.7) (38.6)
Other pension and postretirement benefit (cost), net (5.0) 10.2 36.6
Other non-operating income (expense), net 2.1 12.7 (10.3)
Total non-operating income (expense), net (250.2) (185.7) (220.0)
Net (income) loss attributable to noncontrolling interests (35.3) (7.5) 11.2
Net income (loss) attributable to Molson Coors Beverage Company per share
Weighted-average shares outstanding
Dilutive effect of share-based awards 1.1 1.3 —
See notes to consolidated financial statements.
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MOLSON COORS BEVERAGE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN MILLIONS)
For the Years Ended
Net income (loss) including noncontrolling interests $ 1,157.7 $ 956.4 $ (186.5)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments (306.1) 98.7 (329.8)
Unrealized gain (loss) recognized on derivative instruments 53.2 (2.5) 153.8
Total other comprehensive income (loss), net of tax (243.2) 90.1 (201.9)
See notes to consolidated financial statements.
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MOLSON COORS BEVERAGE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT PAR VALUE)
As of
Assets
Current assets
Cash and cash equivalents $ 969.3 $ 868.9
Liabilities and equity
Current liabilities
Accounts payable and other current liabilities $ 3,013.0 $ 3,180.8
Current portion of long-term debt and short-term borrowings 32.2 911.8
Pension and postretirement benefits 416.7 465.8
Commitments and contingencies (Note 13)
Redeemable noncontrolling interest 168.5 27.9
Molson Coors Beverage Company stockholders' equity
Capital stock
Preferred stock, $0.01 par value (authorized: 25.0 shares; none issued) — —
Accumulated other comprehensive income (loss) (1,362.4) (1,116.3)
Total Molson Coors Beverage Company stockholders' equity 13,092.4 13,196.0
See notes to consolidated financial statements.
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MOLSON COORS BEVERAGE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
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For the Years Ended
Cash flows from operating activities
Net income (loss) including noncontrolling interests $ 1,157.7 $ 956.4 $ (186.5)
Amortization of debt issuance costs and discounts 5.3 5.7 7.7
Goodwill impairment — — 845.0
Equity (income) loss (2.7) (12.0) (4.7)
Other non-cash items, net (77.1) — —
Payables and other current liabilities (234.4) 50.2 (16.1)
Other assets and other liabilities (38.4) 9.2 6.0
Cash flows from investing activities
Additions to property, plant and equipment (674.1) (671.5) (661.4)
Acquisition of business, net of cash acquired (8.6) (63.7) —
Net cash provided by (used in) investing activities (648.0) (841.7) (625.1)
Cash flows from financing activities
Payments for purchases of treasury stock (643.4) (205.8) (51.5)
Proceeds on debt and borrowings 863.7 7.0 7.0
Net cash provided by (used in) financing activities (1,138.4) (981.4) (889.5)
Net increase (decrease) in cash and cash equivalents 100.4 268.9 (37.4)
See notes to consolidated financial statements. See Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" for supplementary cash flow data.
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MOLSON COORS BEVERAGE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND NONCONTROLLING INTERESTS
(IN MILLIONS)
Molson Coors Beverage Company Stockholders' Equity
Common stock Exchangeable Accumulatedother Common Stockheld in Non
issued shares issued Paid-in- Retained comprehensive treasury controlling
Exchange of shares — — — — (4.5) 4.5 — — — —
Shares issued under equity compensation plan (2.9) — — — — (2.9) — — — —
Amortization of share-based compensation 33.6 — — — — 33.6 — — — —
Purchase of noncontrolling interest (1.4) — — — — 0.3 — — — (1.7)
Share repurchase program (51.5) — — — — — — — (51.5) —
Contributions from noncontrolling interests 8.1 — — — — — — — — 8.1
Dividends declared (332.1) — — — — — (332.1) — — —
Exchange of shares — — — (1.4) (61.0) 62.4 — — — —
Shares issued under equity compensation plan 0.2 — — — — 0.2 — — — —
Amortization of share-based compensation 44.9 — — — — 44.9 — — — —
Purchase of noncontrolling interest (8.5) — — — — (5.5) — — — (3.0)
Deconsolidation of VIE (8.8) — — — — — — — — (8.8)
Other comprehensive income (loss), net of tax 90.1 — — — — — — 89.2 — 0.9
Share repurchase program (212.7) — — — — — — — (212.7) —
Contributions from noncontrolling interests 2.4 — — — — — — — — 2.4
Dividends declared (358.7) — — — — — (358.7) — — —
Exchange of shares — — — — (81.2) 81.2 — — —
Shares issued under equity compensation plan (9.8) — — — — (9.8) — — — —
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Molson Coors Beverage Company Stockholders' Equity
Common stock Exchangeable Accumulatedother Common Stockheld in Non
issued shares issued Paid-in- Retained comprehensive treasury controlling
Amortization of share-based compensation 43.1 — — — — 43.1 — — — —
Purchase of noncontrolling interest 0.5 — — — — 0.7 — — — (0.2)
Share repurchase program (645.2) — — — — — — — (645.2) —
Contributions from noncontrolling interests 5.2 — — — — — — — — 5.2
Dividends declared (368.7) — — — — — (368.7) — — —
(1)All activity included in the noncontrolling interests column of the consolidated statements of stockholders' equity and noncontrolling interests excludes activity from our redeemable noncontrolling interests.
See notes to consolidated financial statements.
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MOLSON COORS BEVERAGE COMPANY AND SUBSIDIARIES
NOTES TO 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 Beverage Company ("MCBC" or the "Company"), principally a holding company, and its operating and non-operating subsidiaries included within its reporting segments. Our reporting segments include the Americas and EMEA&APAC. Our Americas segment operates in the U.S., Canada and various countries in Latin America, and our EMEA&APAC segment operates in Bulgaria, Croatia, Czech Republic, Hungary, Montenegro, the Republic of Ireland, Romania, Serbia, the U.K., various other European countries and certain countries within the Middle East, Africa and Asia Pacific.
Unless otherwise indicated, information in this report is presented in USD and comparisons are to comparable prior periods. 2024, 2023 and 2022 refers to the twelve months ended December 31, 2024, December 31, 2023 and December 31, 2022, respectively. Our primary operating currencies, other than the USD, include the CAD, the GBP and our Central European operating currencies such as the EUR, CZK, RON and RSD.
Our consolidated financial statements and related disclosures reflect new accounting pronouncements adopted during the year as discussed in Note 2, "New Accounting Pronouncements."
Principles of Consolidation
Our consolidated financial statements include our accounts and our majority-owned and controlled domestic and foreign subsidiaries, as well as certain VIEs for which we are the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions used to determine certain amounts that affect the financial statements are reasonable, based on information available at the time they are made. To the extent there are differences between these estimates and actual results, our consolidated financial statements may be materially affected.
Acquisitions and Buyouts
On October 31, 2024, we further increased our investment in ZOA for cash consideration of $53 million, bringing our ownership interest to 51% subsequent to the closing of the transaction. As a result, we have recorded the transaction as a business combination, with ZOA included in our consolidated financial statements from the date of acquisition within the Americas reporting segment. See Note 3, "Investments" for further discussion.
In March 2024, our CBPL partner exercised a put option under our partnership agreement in which we acquired the remaining 49.9% ownership interest resulting in a cash payment of $89 million on October 21, 2024, which was recorded as a cash outflow from financing activities. See the redeemable noncontrolling interest section of this footnote for further discussion of this transaction.
On August 7, 2023, we acquired a 75% equity interest in Blue Run, a U.S. based high end whiskey business, for a purchase price of $77 million, which included cash paid of $64 million. The acquisition is aligned with our strategy to expand beyond the beer aisle and enhance our presence in the spirits category.
The Blue Run acquisition was accounted for as a business combination, with $88 million allocated to a definite-lived brand intangible asset to be amortized over a 15-year period and the remainder primarily allocated to other working capital balances and goodwill for the amount in excess of the net identifiable assets acquired. A noncontrolling interest was recognized at fair value based on a Monte Carlo simulation model and is recorded as redeemable noncontrolling interest in the consolidated balance sheets based on the contractual terms of the agreement. Pro forma results of operations have not been presented as the impact is not material to our consolidated statements of operations or consolidated balance sheets.
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Supplier Financing
We are the buyer under a supplier finance program with Citibank N.A. ("Citi" or "the bank"), with $145.1 million and $147.5 million confirmed as valid and outstanding as of December 31, 2024 and December 31, 2023, respectively. We recognize these unpaid balances in accounts payable and other current liabilities on our consolidated balance sheets. Under the program, we agree to pay the bank the stated amount of confirmed invoices from our designated suppliers on the original maturity dates of the invoices. We have no involvement in establishing the terms or conditions of the arrangement between the suppliers and the bank and do not participate in such transactions. Either Citi or us may terminate the agreement upon at least 30 days written notice. We do not provide secured legal assets or other forms of guarantees under the arrangement. Our current payment terms with the majority of the suppliers participating in the supplier finance program generally range from 60 to 120 days, which we deem to be commercially reasonable.
The rollforward of our outstanding obligations confirmed as valid under our supplier finance program for the year ended December 31, 2024 was as follows:
(In millions)
Confirmed obligations outstanding as of December 31, 2023 $ 147.5
Invoices confirmed during the year 590.8
Confirmed invoices paid during the year (590.7)
Effect of foreign exchange rate changes (2.5)
Confirmed obligations outstanding as of December 31, 2024 $ 145.1
Government Assistance
We receive government assistance in the form of tax credits and grants, including tax credits from government agencies in certain jurisdictions around job creation and retention, as well as capital investment initiatives. This includes, but is not limited to, refundable and non-refundable property and income tax credits in various state and other local jurisdictions. We recognize amounts received from government assistance programs, including non income tax credits and grants, as a reduction to MG&A expenses in our consolidated statements of operations, when it is probable we will receive the funds and have met the conditions, if any, required by the government assistance program. If we receive the government assistance at a point in time for services to be completed over a future time period, the cash received is initially recorded in our consolidated balance sheets as other liabilities, and amortized as a reduction to MG&A expenses over the service period of the agreement. No programs are material individually or in the aggregate.
Revenue Recognition
Our net sales represent the sale of beer, malt beverages and other adjacencies, net of excise tax. Sales are stated net of incentives, discounts and returns. Sales of products are for cash or otherwise agreed upon credit terms. Our payment terms vary by location and customer, however, the time period between when revenue is recognized and when payment is due is not significant. Our revenue generating activities have a single performance obligation and are recognized at the point in time when control transfers and our obligation has been fulfilled, which is when the related goods are shipped or delivered to the customer, depending upon the method of distribution and shipping terms. Where our products are sold under consignment arrangements, revenue is not recognized until control has transferred, which is when the product is sold to the end customer. Revenue is measured as the amount of consideration we expect to receive in exchange for the sale of our product. The cost of various programs, such as price promotions, rebates and coupons, are treated as a reduction of sales. In certain of our markets where legally permitted, we make cash payments to customers such as slotting or listing fees, or payments for other marketing or promotional activities. These cash payments are recorded as a reduction of revenue unless we receive a distinct good or service. Specifically, a good or service is considered distinct when it is separately identifiable from other promises in the contract, we receive a benefit from the good or service and the benefit is separable from the sale of our product to the customer.
Certain payments made to customers are conditional on the achievement of volume targets, marketing commitments or both. If paid in advance, we record such payments as prepayments and amortize them over the relevant period to which the customer commitment is made (generally up to five years). When the payment is not for a distinct good or service, or fair value cannot be reasonably estimated, the amortization of the prepayment or the cost as incurred is recorded as a reduction of revenue. Where a distinct good or service is received and fair value can be reasonably estimated, the cost is included as MG&A expenses. The amounts deferred are reassessed regularly for recoverability over the contract period and are impaired where there is objective evidence that the benefits will not be realized or the asset is otherwise not recoverable. Separately, as discussed below, we analyze whether these advance payments contain a significant financing component for potential adjustment to the transaction price.
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Our primary revenue generating activity represents the sale of beer and other beverages to customers, including both domestic and exported product sales. Our customer could be a distributor, retail or on-premise outlet, depending on the market. The majority of our revenues are generated from brands that we own and brew ourselves; however, we also import or brew and sell certain non-owned partner brands under licensing and related arrangements. In addition, primarily in the U.K., we sell other beverage companies' products to on-premise customers to provide them with a full range of products for their retail outlets. We refer to this as the "factored brand business." Sales from this business are included in our net sales and cost of goods sold when ultimately sold. In the factored brand business, we normally purchase inventory, which includes excise taxes charged by the vendor, take orders from customers for such brands, negotiate with the customers on pricing and invoice customers for the product and related costs of delivery. In addition, we incur the risk of loss when we are in possession of the inventory and for the receivables due from the customers. Revenues for owned brands, partner and imported brands, as well as factored brands are recognized at the point in time when control is transferred to the customer as discussed above.
Other Revenue Generating Activities
We contract manufacture for other brewers in some of our markets. These contractual agreements require us to brew, package and ship certain brands for these brewers, who then sell the products to their own customers in their respective markets. Revenues under contract brewing arrangements are recognized when our obligation related to the finished product is fulfilled and control of the product transfers to these other brewers.
We also have licensing agreements with third party partners who brew and distribute our products in various markets across our segments. Under these agreements, we are compensated based on the amount of products sold by our partners in these markets at an agreed upon royalty rate or profit percentage. We apply the sales-based royalty practical expedient to these licensing arrangements and recognize revenue as product is sold by our partners at the agreed upon rate.
Disaggregation of Revenue
We have evaluated our primary revenue generating activities under the disaggregation disclosure criteria outlined within the guidance and concluded that disclosure at the geographical segment level depicts how the nature, amount, timing and uncertainty of revenues and cash flows are affected by economic factors. We have also evaluated our other revenue generating activities and concluded that these activities are not material for separate disclosure. See Note 18, "Segment Reporting," for disclosure of revenues by geographic segment.
Variable Consideration
Our revenue generating activities include variable consideration which is recorded as a reduction of the transaction price based upon expected amounts at the time revenue for the corresponding product sale is recognized. For example, customer promotional discount programs are entered into with certain distributors for certain periods of time. The amount ultimately reimbursed to distributors is determined based upon agreed-upon promotional discounts which are applied to distributors' sales to retailers. Other common forms of variable consideration include volume rebates for meeting established sales targets, and coupons and mail-in rebates offered to the end consumer. The determination of the reduction of the transaction price for variable consideration requires that we make certain estimates and assumptions that affect the timing and amounts of revenue and liabilities recorded. We estimate this variable consideration, including analyzing for a potential constraint on variable consideration, by taking into account factors such as the nature of the promotional activity, historical information and current trends, availability of actual results and expectations of customer and consumer behavior.
We do not have standard terms that permit return of product; however, in certain markets where returns occur we estimate the amount of returns as variable consideration based on factors including historical return experience and adjust our revenue accordingly. Products that do not meet our high quality standards are returned by the customer or recalled and destroyed and are recorded as a reduction of revenue. The reversal of revenue is recorded upon determination that the product will be recalled and destroyed. We estimate the costs required to facilitate product returns and record them in cost of goods sold as required.
For the years ended December 31, 2024, 2023 and 2022, adjustments to revenue from performance obligations satisfied in the prior period due to changes in estimates in variable consideration were immaterial.
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Significant Financing Component and Costs to Obtain Contracts
In certain of our businesses where such practices are legally permitted, we make loans or advanced payments to retail outlets that sell our brands. For arrangements that do not span greater than one year, we apply the practical expedient available under ASC 606 and do not adjust the transaction price for the effects of a potential significant financing component. We further analyze arrangements that span greater than one year on an ongoing basis to determine whether a significant financing component exists. During the years ended December 31, 2024, 2023 and 2022, no arrangements were material individually or in the aggregate.
Advance payments to customers, where legally permitted, are deferred and amortized as a reduction to revenue over the expected period of benefit and tested for recoverability as appropriate. All other costs to obtain and fulfill contracts are expensed as incurred based on the nature, significance and expected benefit of these costs relative to the contract.
Contract Assets and Liabilities
We continually evaluate whether our revenue generating activities and advanced payment arrangements with customers result in the recognition of contract assets or liabilities. These assets and liabilities were immaterial as of December 31, 2024 and December 31, 2023. Separately, trade receivables, net including affiliate receivables, approximates receivables from contracts with customers.
Shipping and Handling
Freight costs billed to customers for shipping and handling are recorded as revenue. Shipping and handling expense related to costs incurred to deliver product are recognized within cost of goods sold. We account for shipping and handling activities that occur after control has transferred as a fulfillment cost as opposed to a separate performance obligation, and the costs of shipping and handling are recognized concurrently with the related revenue.
Excise Taxes
Excise taxes on alcohol products are government-imposed taxes based on measurable attributes like alcohol content, volume, or beverage type, aimed at generating revenue and regulating consumption. Excise taxes are shown in a separate line item in the consolidated statements of operations as a reduction of sales. In the consolidated balance sheets, excise taxes are generally recognized as a current liability within accounts payable and other current liabilities, with the liability subsequently reduced when the taxes are remitted to the tax authority. In cases where excise taxes are prepaid, they are recorded within other current assets, net.
Cost of Goods Sold
Our cost of goods sold includes costs we incur to make and ship beer and other beverages. These costs include brewing materials, such as barley, hops and various grains. Packaging materials, including aluminum, glass bottles, aluminum cans, cardboard and paperboard are also included in our cost of goods sold. Additionally, our cost of goods sold contains manufacturing expenses including both direct and indirect labor, shipping and handling including freight costs, utilities, maintenance costs, warehousing costs, purchasing and receiving costs, depreciation, promotional packaging, other manufacturing overheads and costs to purchase factored and other non-owned brands from suppliers, as well as the cost to facilitate product returns.
Marketing, General and Administrative Expenses
MG&A expenses include marketing expenses, including the direct costs related to the selling of a product or brand, media advertising (television, radio, digital, print), tactical advertising (signs, banners, point-of-sale materials) and promotion costs on both local and national levels. The creative portion of our advertising activities is expensed as incurred. Production costs of advertising and promotional materials are recorded as a prepaid asset and expensed when the advertising is first run. Additionally, marketing expenses include amortization costs associated with definite-lived brand intangible assets and certain depreciation costs related to marketing related assets. Total marketing and advertising expenses, excluding depreciation and amortization costs, were approximately $1.1 billion, $1.1 billion and $1.0 billion for the years ended December 31, 2024, 2023 and 2022, respectively.
MG&A expenses also include general and administrative costs for functions such as finance, legal, human resources and information technology. These costs primarily consist of compensation, benefits and outside services, as well as bad debt expense related to our allowance for doubtful accounts. Unless capitalization is allowed or required by U.S. GAAP, legal costs are expensed when incurred. These costs also include our marketing and sales organizations, including compensation, benefits and other overhead costs, including travel and entertainment expenses. This line item additionally includes share-based compensation and certain depreciation costs related to non-production equipment.
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Share-based compensation is recognized using a straight-line method over the vesting period of the awards. We include estimated forfeitures expected to occur when calculating share-based compensation expense. Our share-based compensation plan and the awards within it contain provisions that accelerate vesting of awards upon change in control, retirement, disability or death of eligible employees and directors. Our share-based awards are considered vested when the employee's retention of the award is no longer contingent on providing service, which for certain awards can result in immediate recognition for awards granted to retirement-eligible individuals or accelerated recognition for awards granted to individuals that will become retirement eligible within the stated vesting period. Also, if less than the stated vesting period, we recognize these costs over the period from the grant date to the date retirement eligibility is achieved.
Other Operating Income (Expense), net
Our other operating income (expense), net items represent charges incurred or benefits realized that we believe are significant to our current operating results warranting separate classification; specifically, such items are considered to be one of the following:
•restructuring charges, including certain employee-related charges, asset abandonment-related losses, fees on termination of significant operating agreements and other related exit or disposal charges;
•intangible and tangible asset impairments, excluding goodwill;
•gains and (losses) on disposal of investments; and
•other significant items deemed to warrant separate classification within operating income
These items classified as other operating income (expense), net are not necessarily non-recurring, however, they are generally deemed to be incremental to income earned or costs incurred through normal operations.
Interest Expense, net
Our interest costs are primarily associated with borrowings to finance our operations and strategic acquisitions. Interest earned on our cash and cash equivalents across our business is recorded as interest income.
We capitalize interest cost as a part of the original cost of acquiring certain fixed assets if the cost of the capital expenditure and the expected time to complete the project are considered significant. Generally, we use the weighted average cost of borrowing of outstanding long-term debt to calculate capitalized interest.
Other Non-Operating Income (Expense), net
Our other non-operating income (expense), net classification primarily includes gains and losses associated with activities not directly related to our operations. For instance, aggregate unrealized and realized foreign exchange gains and losses resulting from the remeasurement and settlement of foreign-denominated monetary assets and liabilities, as well as certain gains or losses on sales of non-operating assets and the mark-to-market activity associated with certain equity securities and other investments are classified in this line item. These gains and losses are included in the respective reporting unit; however, foreign exchange gains and losses on intercompany balances and realized and unrealized changes in fair value on instruments not designated in hedging relationships related to financing and other treasury-related activities remain unallocated. The initial recording of foreign-denominated transactions are classified based on the nature of the transaction, with the unrealized or realized foreign exchange gains or losses resulting from the subsequent remeasurement of the monetary asset or liability, and its ultimate settlement, classified in other non-operating income (expense), net.
Income Taxes
Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of our assets, liabilities and certain unrecognized gains and losses recorded in AOCI. We apply the intraperiod tax allocation rules to allocate our provision for income taxes between continuing operations and other categories of earnings, such as OCI, when we meet the criteria prescribed by U.S. GAAP.
The tax benefit from an uncertain tax position is recognized only if it is determined that the tax position will more likely than not be sustained based on its technical merits. We measure and record the tax benefits from such a position based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Interest, penalties and offsetting positions related to unrecognized tax benefits are recognized as a component of income tax expense with interest and penalties being recorded to income tax benefit (expense) in our consolidated statement of operations. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized.
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Other Comprehensive Income (Loss)
OCI represents income and losses for the reporting period, including the related tax impacts, which are excluded from net income (loss) and recognized directly within AOCI as a component of equity. OCI also includes amounts reclassified to the consolidated statements of operations during the reporting period that were previously recognized within AOCI. Amounts remaining within AOCI are expected to be reclassified out of AOCI in the future, at which point they will be recognized within the consolidated statement of operations as a component of net income (loss). We recognize OCI related to the translation of assets and liabilities of our foreign subsidiaries which are denominated in currencies other than the USD, unrealized gains and losses on the effective portion of our derivatives designated in cash flow hedging relationships and derivative and non-derivative instruments designated in net investment hedging relationships, actuarial gains and losses and prior service costs related to our pension and other post-retirement benefit plans, as well as our proportionate share of our equity method investments' OCI. Additionally, when we do not have the expectation or intent to cash settle certain of our intercompany note receivable and note payable positions in the foreseeable future, the remeasurement of these instruments is recorded as a component of foreign currency translation adjustments within OCI. We release stranded tax effects from AOCI using either a specific identification approach or portfolio approach based on the nature of the underlying item.
Earnings Per Share
Basic EPS is 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, PSUs and stock options. The dilutive effects of our potentially dilutive securities are calculated using the treasury stock method. Our calculation of weighted-average shares includes Class A common stock and Class B common stock and Class A exchangeable shares and Class B exchangeable shares. All classes of stock have in effect the same dividend rights and share equitably in undistributed earnings. Holders of Class A common stock receive dividends only to the extent dividends are declared and paid to holders of Class B common stock. See Note 14, "Stockholders' Equity" for further discussion of the Class A common stock and Class B common stock and Class A exchangeable shares and Class B exchangeable shares. We have no unvested outstanding equity share awards that contain non-forfeitable rights to dividends.
Anti-dilutive securities excluded from the computation of diluted EPS for the years ended December 31, 2024, 2023 and 2022, were 1.2 million, 0.6 million and 3.1 million shares, respectively.
Cash and Cash Equivalents
Cash consists of cash on hand and bank deposits. Cash equivalents represent highly liquid investments with original maturities of three months or less. Our cash deposits are maintained with multiple, reputable financial institutions.
Dividends
On November 21, 2024, our Company's Board declared a dividend of $0.44 per share, paid on December 20, 2024 to shareholders of Class A and Class B common stock of record on December 6, 2024. Shareholders of exchangeable shares received the CAD equivalent of dividends declared on Class A and Class B common stock, equal to CAD 0.61 per share. During the year ended December 31, 2024, dividends declared to eligible shareholders totaled $1.76 per share, with the CAD equivalent equal to CAD 2.39 per share. During the year ended December 31, 2023, dividends declared to eligible shareholders totaled $1.64 per share with the CAD equivalent equal to CAD 2.19 per share. During the year ended December 31, 2022, dividends declared to eligible shareholders totaled $1.52 per share with the CAD equivalent equal to CAD 1.95 per share.
Non-Cash Activity
Non-cash investing activities includes movements in our guarantee of indebtedness of certain equity method investments. See Note 3, "Investments" for further discussion. We also had other non-cash activities related to capital expenditures incurred but not yet paid of $297.8 million, $254.9 million and $234.3 million during the years ended December 31, 2024, 2023 and 2022, respectively. In addition, we had non-cash activities related to certain issuances of share-based awards. See Note 16, "Share-Based Payments" for further details.
Other than the activity mentioned above and the supplemental non-cash activity related to the recognition of leases discussed in Note 8, "Leases," there was no other significant non-cash activity for the years ended December 31, 2024, 2023 and 2022.
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Trade Receivables
We record trade receivables at net realizable value. This carrying value includes an appropriate allowance for estimated uncollectible amounts to reflect any loss anticipated on the trade receivable balances. We calculate this allowance based on our country-specific history of write-offs, level of past-due accounts based on the contractual terms of the receivables and our relationships with and the economic status of our customers, which may be impacted by current macroeconomic and regulatory factors specific to the country of origin. This methodology takes into consideration historical loss experience and current and forecasted changes in cash flows based on internal and external information. The allowance for doubtful accounts was $8.9 million and $12.7 million as of December 31, 2024, and December 31, 2023, respectively.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out ("FIFO") method. We regularly assess the shelf-life of our inventories and reserve for those inventories when it becomes probable the product will not be sold within our freshness specifications. In addition, we reserve for those inventories associated with discontinued SKUs or seasonal or other packaging material changes.
Other Current Assets
Other current assets include prepaid assets, maintenance and operating supplies, promotion materials and derivative assets that are expected to be recognized or realized within the next 12 months. Maintenance and operating supplies include our inventories of spare parts, which are kept on hand for repairs and maintenance of machinery and equipment. The majority of spare parts within our business include motors, fillers and other components that are required to maintain a normal level of production in the event that expected maintenance and/or repairs are required. These parts are classified within current assets as they are reasonably expected to be used during the normal operating cycle of the business and are reserved for excess and obsolescence, as appropriate.
Property, Plant and Equipment
Property, plant and equipment is stated at original cost less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets, which are reviewed periodically and have the following ranges: buildings and improvements: 20-40 years; production and office equipment 3-25 years; and software: 3-7 years. Land is not depreciated and construction in progress is not depreciated until ready for service. Costs of enhancements or modifications that substantially extend the capacity or useful life of an asset are capitalized and depreciated accordingly. Ordinary repairs and maintenance are expensed as incurred. When property, plant and equipment is sold or otherwise disposed of, the cost and accumulated depreciation are removed from our consolidated balance sheets and the resulting gain or loss, if any, is reflected in our consolidated statements of operations. Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an asset (or asset group) may not be recoverable. Our asset groups are generally identified at the segment level with the exception of certain businesses or locations which may operate on a more stand-alone basis.
Returnable containers are recorded at acquisition cost and consist of returnable bottles, kegs, pallets and crates that are both in our direct control within our breweries, warehouses and distribution facilities and those that we indirectly control in the market through our agreements with our customers and other brewers and for which a deposit is received. The deposits received on our returnable containers in the market are recorded as deposit liabilities, included within accounts payable and other current liabilities on the consolidated balance sheets. We estimate that the loss, breakage and deterioration of our returnable containers is comparable to the depreciation calculated on an estimated useful life of up to 4 years for bottles, 5 years for pallets, 7 years for crates and 15 years for returnable kegs. We also own and maintain other equipment in the market related to delivery of our products to end consumers, for example on-premise dispense equipment and refrigeration units. This equipment is recorded at acquisition cost and depreciated over lives of up to 7 years, depending on the market, reflecting the use of the equipment, as well as the loss and deterioration of the asset.
The costs of acquiring or developing internal-use computer software, including directly-related payroll costs for internal resources, are capitalized and classified within property, plant and equipment. Software maintenance and training costs are expensed in the period incurred.
Property, plant and equipment held under finance lease are depreciated using the straight-line method over the estimated useful life or the lease term, whichever is shorter. Finance lease assets for which ownership is transferred at the end of the lease, or there is a purchase option that we are reasonably certain to exercise, are depreciated over the useful life that would be assigned if the asset were owned.
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Cloud Computing Arrangements
Cloud computing arrangement implementation costs incurred in hosting arrangements that are service contracts are recorded within other assets in the consolidated balance sheets. Capitalized cloud computing arrangement implementation costs are amortized using the straight-line method over the remaining term of the contract. Amortization expense was $11.3 million, $7.9 million and $6.2 million for the years ended December 31, 2024, December 31, 2023 and December 31, 2022, respectively.
The following table presents the gross and net value of capitalized cloud computing implementation costs associated with active hosting arrangements.
As of
(In millions)
Cloud computing implementation costs $ 71.9 $ 56.5
Less: accumulated amortization (32.0) (20.8)
Cloud computing implementation costs, net $ 39.9 $ 35.7
Goodwill and Other Intangible Assets
Goodwill is allocated to the reporting unit in which the business that created the goodwill resides. A reporting unit is an operating segment, or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management. As of the date of the completion of our 2024 impairment testing, we have concluded that we have two reporting units, Americas and EMEA&APAC. See further discussion in Note 6, "Goodwill and Intangibles."
As required, we evaluate the carrying value of our goodwill at the reporting unit level and indefinite-lived intangible assets for impairment at least annually or when an interim triggering event occurs that may indicate potential impairment. Our annual test is performed as of the first day of our fiscal fourth quarter, October 1. The testing of goodwill and indefinite-lived intangible assets uses estimates and assumptions affected by factors such as economic and industry conditions along with changes in operating performance. The evaluation involves comparing the reporting unit or indefinite-lived intangible asset's fair value to its carrying value. If the fair value exceeds its respective carrying value, then we conclude that no impairment has occurred. If the carrying value exceeds its fair value, we would recognize an impairment loss in an amount equal to the excess up to the total amount of goodwill allocated to that reporting unit or balance of the respective indefinite-lived intangible asset.
We continuously monitor the performance of our other definite-lived intangible assets and evaluate for impairment when evidence exists that certain triggering events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Significant judgments and assumptions are required in such impairment evaluations. Definite-lived intangible assets are stated at cost less accumulated amortization. Amortization is recorded using the straight-line method over the estimated lives of the assets as this approximates the pattern in which the assets economic benefits are consumed.
Goodwill impairments are recorded to goodwill impairment on the consolidated statements of operations whereas impairments of intangible assets are recorded to other operating income (expense), net in the consolidated statements of operations.
Equity Method Investments
We apply the equity method of accounting to investments that we do not control but where we exercise significant influence or VIEs for which we are not the primary beneficiary. We use the cumulative earnings approach for determining cash flow presentation of cash distributions received from equity method investments. Distributions received are included in our consolidated statements of cash flows as operating activities, unless the cumulative distributions exceed our portion of the cumulative equity in the net earnings of the equity method investment, in which case the excess distributions are deemed to be returns of the investment and are classified as investing activities in our consolidated statements of cash flows. See Note 3, "Investments" for further information regarding our equity method investments. There are no related parties that own interests in our equity method investments as of December 31, 2024.
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