Estee Lauder 2002 Annual Report Download - page 60

THEEST{E LAUDER COMPANIES INC.
To determine fair value, the Company relied on three
valuation models: guideline public companies, acquisition
analysis and discounted cash flow. For goodwill valuation
purposes only, the revised fair value of this unit was allo-
cated to the assets and liabilities of the business unit to
arrive at an implied fair value of goodwill, based upon
known facts and circumstances, as if the acquisition
occurred currently. This allocation resulted in a write-
down of recorded goodwill in the amount of $20.6
million, which has been reported as the cumulative effect
of a change in accounting principle, as of July 1, 2001, in
the accompanying consolidated statements of earnings.
On a product category basis, this write-down would have
primarily impacted the Company’s makeup category.
During fiscal 2002, the Company recorded a goodwill
impairment charge related to its Gloss.com business as a
component of its restructuring expense. See Note 5
“Restructuring and Other Non-Recurring Expenses”.
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The following table presents adjusted net earnings and earnings per share data restated to include the retroactive impact
of the adoption of SFAS No. 142.
YEAR ENDED JUNE 30 2002 2001 2000
(In millions, except per share data)
Reported Net Earnings before Accounting Change $212.5 $307.4 $314.1
Cumulative effect of a change in accounting principle, net of tax (20.6) (2.2) —
Net Earnings 191.9 305.2 314.1
Preferred stock dividends 23.4 23.4 23.4
Reported Net Earnings Attributable to Common Stock 168.5 281.8 290.7
Add back: Goodwill amortization, net of tax —13.4 11.1
Adjusted Net Earnings $168.5 $295.2 $301.8
Basic net earnings per common share:
Reported net earnings attributable to common stock before accounting change $.79 $ 1.19 $ 1.22
Cumulative effect of a change in accounting principle, net of tax (.08) (.01) —
Net earnings attributable to common stock .71 1.18 1.22
Goodwill amortization, net of tax —.06 .05
Adjusted net earnings attributable to common stock $.71 $ 1.24 $ 1.27
Diluted net earnings per common share:
Reported net earnings attributable to common stock before accounting change $.78 $ 1.17 $ 1.20
Cumulative effect of a change in accounting principle, net of tax (.08) (.01) —
Net earnings attributable to common stock .70 1.16 1.20
Goodwill amortization, net of tax —.06 .04
Adjusted net earnings attributable to common stock $.70 $ 1.22 $ 1.24
Weighted average common shares outstanding:
Basic 238.2 238.4 237.7
Diluted 241.1 242.2 242.5
Goodwill
The change in the carrying amount of goodwill is
as follows:
YEAR ENDED JUNE 30, 2002
(In millions)
Net balance as of June 30, 2001 $699.7
Goodwill impairment loss upon adoption
of newaccounting principle (20.6)
Restructuring write-off of Gloss.com
acquisition goodwill (20.1)
Goodwill acquired during the period 16.6
Net balance as of June 30, 2002 $675.6
Other Intangible Assets
Other intangible assets consist of the following:
Gross Total
Carrying Accumulated Net Book
JUNE 30, 2002 Value Amortization Value
(In millions)
Licensing agreements $15.0 $ 6.2 $ 8.8
Trademarks and other 15.2 6.7 8.5
Patents 1.6 0.5 1.1
Total $31.8 $13.4 $18.4
Pursuant to the adoption of SFAS No. 142 and effective
July 1, 2001, trademarks have been classified as indefinite
lived assets and are no longer amortized. The cost of
other intangible assets is amortized on a straight-line
basis over their estimated useful lives. The aggregate