Estee Lauder 2008 Annual Report Download - page 88

86 THE EST{E LAUDER COMPANIES INC.
bumble business, recorded additional goodwill related to
payments made in prior years in connection with the
acquisition of the Bobbi Brown brand (see Note 3), and
acquired businesses engaged in the wholesale distribu-
tion and retail sale of the Company’s products in the
United States and other countries. The combined results
of these activities increased goodwill by $20.4 million and
other intangible assets by $47.0 million. Also during fi scal
2007, as a result of the Company’s annual impairment
testing, the Company determined that the carrying values
of its goodwill and intangible assets related to the Darphin
and Rodan + Fields brands exceeded their respective fair
values. As such, the Company reduced its goodwill by
$7.3 million and other intangible assets by $4.3 million,
which are reported in Selling, general and administrative
expenses in the accompanying consolidated statements
of earnings.
NOTE 6 — GOODWILL AND OTHER
INTANGIBLE ASSETS
During fi scal 2008, the Company acquired Ojon Corpo-
ration, which markets and sells Ojon hair care and skin
care products primarily through direct response television
and specialty stores. In conjunction with this acquisition,
the Company purchased, from an unrelated party, the
exclusive rights to sell and distribute Ojon products
worldwide. In addition, the Company acquired a business
engaged in the wholesale distribution and retail sale of
Aveda products and recorded goodwill for earn-out
payments related to the acquisition of the Bobbi
Brown brand. These activities resulted in an increase to
goodwill of $51.9 million and other intangible assets of
$85.5 million.
During fiscal 2007, the Company purchased the
remaining minority equity interest in the Bumble and
Goodwill
The Company assigns goodwill of a reporting unit to the product category in which that reporting unit predominantly
operates at the time of its acquisition. The change in the carrying amount of goodwill, including the effect of foreign
exchange rates is as follows:
YEAR ENDED OR AT JUNE 30 2006 Additions Reductions 2007 Additions Reductions 2008
(In millions)
Skin Care $ 20.3 $ 1.3 $7.3 $ 14.3 $ 8.1 $ — $ 22.4
Makeup 227.3 18.5 — 245.8 6.6 — 252.4
Fragrance 53.9 0.6 — 54.5 0.4 — 54.9
Hair Care 334.3 2.4 — 336.7 42.5 — 379.2
Total $635.8 $22.8 $7.3 $651.3 $57.6 $ — $708.9
Other Intangible Assets
Other intangible assets include trademarks and patents, as well as license agreements and other intangible assets resulting
from or related to businesses and assets purchased by the Company. Indefi nite lived assets (e.g., trademarks) are not
subject to amortization and are evaluated annually for impairment or more frequently if certain events or circumstances
indicate a potential impairment. Patents are amortized on a straight-line basis over the shorter of the legal term or the
useful life of the patent, approximately 20 years. Other intangible assets (e.g., non-compete agreements, customer lists)
are amortized on a straight-line basis over their expected period of benefi t, approximately 5 years to 14 years. Intangible
assets related to license agreements are amortized on a straight-line basis over their useful lives based on the term of the
respective agreement, currently approximately 10 years to 16 years, and are subject to impairment testing if certain events
or circumstances indicate a potential impairment.
Other intangible assets consist of the following:
JUNE 30, 2008 JUNE 30, 2007
Gross Accumulated Total Net Gross Accumulated Total Net
Carrying Value Amortization Book Value Carrying Value Amortization Book Value
(In millions)
Amortizable intangible assets:
License agreements $ 43.2 $ 28.1 $ 15.1 $ 42.9 $ 23.8 $ 19.1
Trademarks and other 184.3 102.7 81.6 125.8 93.0 32.8
Patents 0.2 0.1 0.1 0.6 0.2 0.4
227.7 130.9 96.8 169.3 117.0 52.3
Non-amortizable intangible assets:
Trademarks and other 99.7 4.6 95.1 65.4 4.3 61.1
Total intangible assets $327.4 $135.5 $191.9 $234.7 $121.3 $113.4