Business Context and Reporting Period
Company: Molson Coors Brewing Company
Filing Type: Form 8-K (Current Report)
Date of Report: February 8, 2019
Subject: Non-reliance on previously issued financial statements for the years ended December 31, 2017, and December 31, 2016, due to accounting errors related to income taxes.
Key Financial Metrics and Adjustments
The filing details specific restatement adjustments rather than current period performance metrics. The following adjustments were identified:
- 2016 Restatement: Increase in deferred tax liabilities and deferred tax expense by $399.1 million, resulting in a decrease to net income and earnings per share.
- 2017 Restatement: Decrease in deferred tax liabilities and deferred tax expense by $151.4 million (due to U.S. Tax Cuts and Jobs Act revaluation and correction of insignificant errors), resulting in an increase to net income and earnings per share.
- Aggregate Impact (as of Dec 31, 2017): Net increase in deferred tax liabilities of $247.7 million, with a corresponding decrease in retained earnings and total equity.
Note: The filing does not provide current revenue, profit, cash flow, or debt figures for the 2018 period or the current date.
Material Changes and Causes
The material change involves the restatement of historical financial statements caused by errors in accounting for income taxes related to deferred tax liabilities for the partnership in MillerCoors, LLC. Specifically:
- Following the 2016 acquisition of the remaining interest in MillerCoors, the Company failed to reconcile the outside basis deferred income tax liability to the book-tax differences in underlying assets and liabilities.
- This reconciliation was completed during the preparation of 2018 financial statements, revealing the misstatements in the 2016 and 2017 periods.
Guidance, Risks, and Internal Controls
Internal Control Weakness: Management determined a material weakness existed in internal control over financial reporting as of December 31, 2018. This weakness relates to the design and maintenance of controls over the completeness and accuracy of accounting for income tax effects of acquired partnership interests.
Effectiveness of Controls: The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were not effective as of December 31, 2018. Consequently, internal control over financial reporting was deemed not effective.
Future Filings:
- Restated consolidated financial statements for 2016 and 2017 will be included in the 2018 Annual Report on Form 10-K, expected to be filed on February 12, 2019.
- Corrected unaudited interim financial information for 2018 and 2017 will be included in the 2018 Annual Report.
- Unaudited 2018 interim financial statements will be revised in connection with the filing of Quarterly Reports on Form 10-Q for the quarters ending March 31, June 30, and September 30, 2019.
Investor Verification Checklist
- Verify the specific impact of the $247.7 million aggregate adjustment on historical earnings per share (EPS) and retained earnings.
- Review the upcoming Form 10-K (expected Feb 12, 2019) for the full restated financial statements for 2016 and 2017.
- Monitor the Company's remediation plan for the identified material weakness in internal controls over income tax accounting for partnership interests.
- Check future Form 10-Q filings for revised 2018 interim financial data.