Estee Lauder 2013 Annual Report Download - page 153

Impairment Testing During Fiscal 2013
As of the Company’s annual step-one goodwill impair-
ment test on April 1, 2013, the Company determined that
the carrying value of the Darphin reporting unit exceeded
its fair value. As a result, the Company recorded an
impairment charge for the remainder of the goodwill
related to the Darphin reporting unit of $9.6 million. The
fair value of the reporting unit was based upon the
income approach, utilizing estimated cash flows and a
terminal value, discounted at a rate of return that reflects
the relative risk of cash flows. The Company also deter-
mined that the carrying value of the Darphin trademark
exceeded its estimated fair value, which was based on the
use of a royalty rate to determine discounted projected
future cash flows (“relief-from-royalty method”). As a
result, the Company recognized an impairment charge of
$8.1 million for the remaining carrying value of the related
trademark. These impairment charges were reflected in
the skin care product category and in the Europe, the
Middle East & Africa region.
Impairment Testing During Fiscal 2012
During the second quarter of fiscal 2012, the Ojon report-
ing unit identified a potential decline in its projected
results of operations, primarily resulting from a softness in
the direct response television channel, which caused the
Company to review and revise Ojon’s long-term forecast.
The Company concluded that these changes in the busi-
ness of the Ojon reporting unit triggered the need for an
interim impairment test of its trademarks as of December
31, 2011. These changes in circumstances were also an
indicator that the carrying amount of the customer list
may not be recoverable. The Company performed an
interim impairment test for the trademarks and a recover-
ability test for the customer list as of December 31, 2011.
For the trademarks, the Company concluded that the
carrying value exceeded its estimated fair value, which
was based on the relief-from-royalty method. As a result,
the Company recognized an impairment charge of $6.7
million. This charge was reflected in the hair care product
category and in the Americas region. The Company
concluded that the carrying value of the customer list
was recoverable.
As of the Company’s annual indefinite-lived asset
impairment test on April 1, 2012, the Company deter-
mined that the carrying value of the Ojon brand
trademark exceeded its estimated fair value, which was
based on the relief-from-royalty method. As a result, the
Company recognized an impairment charge of $3.3
million for the remaining carrying value of the related
trademark. The Company also determined that the future
cash flows associated with the Ojon brand customer list
were less than its carrying value. As the remaining carry-
ing value of the customer list was not recoverable, the
Company recognized an impairment charge of $11.7
million. These impairment charges were reflected in the
hair care product category and in the Americas region.
NOTE 6 — RETURNS AND CHARGES ASSOCIATED
WITH RESTRUCTURING ACTIVITIES
In an effort to drive down costs and achieve synergies
within the organization, in February 2009, the Company
announced the implementation of a multi-faceted
cost savings program (the “Program”) to position the
Company to achieve long-term profitable growth.
The Company anticipated the Program would result in
total cumulative restructuring charges and other costs to
implement those initiatives of between $350 million and
$450 million before taxes. During the second quarter of
fiscal 2013, the Company closed the Program. The
Company concluded the approval of all initiatives under
the Program and anticipates commencing the execution
of those initiatives through fiscal 2014. As a result of
the closure of the Program and the evaluation of the
initiatives that have been implemented, as of June 30,
2013, the Company anticipates total cumulative restruc-
turing charges and other costs to implement those
initiatives to total between $320 million and $330 million
and that such charges have been substantially recorded
through fiscal 2013. The Company will continue to moni-
tor the progress of these initiatives and revise estimates
as appropriate.
THE EST{E LAUDER COMPANIES INC. 151
The aggregate amortization expense related to amortizable intangible assets for fiscal 2013, 2012 and 2011 was $12.5
million, $13.9 million and $14.6 million, respectively. The estimated aggregate amortization expense for each of the next
five fiscal years is as follows:
FISCAL 2014 2015 2016 2017 2018
(In millions)
Estimated aggregate amortization expense $12.4 $12.1 $12.0 $9.9 $8.4