Avon 2010 Annual Report Download - page 106

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of the estimated fair value of the liability after probability-weighting and discounting various potential payments. Avon acquired control of
this business on July 28, 2010, and the financial results of the acquired operations are included in these financial statements beginning on
that date. Net sales and net income before taxes of the acquired operations, including acquisition and integration expenses, since the
acquisition were approximately $109 and $26, respectively. The acquisition was funded with cash and commercial paper borrowings. The
purchase price allocation resulted in goodwill of $314.4, indefinite lived trademarks of $150.0 and customer relationships of $172.8. The
customer relationships have an average 10-year useful life.
At December 31, 2010, we estimated that the potential additional payment associated with the contingent consideration could range from
$0 to approximately $35 and that the estimated fair value of the contingent consideration liability was $11. The change in the fair value of
the contingent consideration was recorded within selling, general and administrative expenses and was primarily due to a decrease in
estimates of the ultimate earnout.
In March 2010, we acquired Liz Earle Beauty Co. Limited (“Liz Earle”). The acquired business is included in our Western Europe, Middle
East & Africa operating segment. The purchase price allocation resulted in goodwill of $123.6, indefinite lived trademarks of $22.8, licensing
agreements of $8.7 and customer relationships of $4.7. The licensing agreements and customer relationships have a weighted average
8-year useful life.
The following unaudited pro forma summary presents the Company’s consolidated information as if Silpada and Liz Earle had been acquired
on January 1, 2009, and on January 1, 2010.
2010 2009
Pro forma Revenue Results including Acquisitions $10,975.8 $10,473.3
Pro forma Operating Profit Results including Acquisitions 1,084.9 1,051.6
Pro forma Income from continuing operations, net of tax Results including Acquisitions 601.9 648.2
We completed our annual goodwill impairment test as of November 30, 2010, which indicated no impairment of goodwill, as the estimated
fair value substantially exceeded the carrying values of each of our reporting units, with the exception of Silpada where the estimated fair
value was similar to the carrying value, since this reporting unit was only recently acquired.
Goodwill
North
America
Latin
America
Western
Europe,
Middle East
& Africa
Central
& Eastern
Europe
Asia
Pacific China Total
Balance at December 31, 2009 $ 0.0 $ 94.9 $ 33.9 $8.9 $2.6 $75.2 $215.5
Acquisitions 314.4 – 123.6 – – – 438.0
Foreign exchange .3 18.6 1.0 (.5) (.1) 2.3 21.6
Balance at December 31, 2010 $314.7 $113.5 $158.5 $8.4 $2.5 $77.5 $675.1