Estee Lauder 2010 Annual Report Download - page 121

120 THE EST{E LAUDER COMPANIES INC.
The cost of assets related to projects in progress of $160.4
million and $144.9 million as of June 30, 2010 and 2009,
respectively, is included in their respective asset catego-
ries above. Depreciation and amortization of property,
plant and equipment was $251.8 million, $240.2 million
and $233.9 million in fiscal 2010, 2009 and 2008, respec-
tively. Depreciation and amortization related to the
Company’s manufacturing process is included in Cost of
sales and all other depreciation and amortization is
included in Selling, general and administrative expenses in
the accompanying consolidated statements of earnings.
During the fourth quarter of fiscal 2010 and 2009, the
Company recorded non-cash impairment charges of $2.7
million and $8.5 million, respectively, to reduce the net
carrying value of certain retail store and counter assets to
their estimated fair value, which was determined based on
discounted projected future cash flows. Lower than
expected operating cash flow performance relative to the
affected assets, restructuring activities, revisions in internal
forecasts and the impact of the economic environment
on their projected future results of operations indicated
that the carrying value of the related long-lived assets
were not recoverable. These asset impairment charges
primarily related to the Company’s skin care and makeup
businesses in the Americas and the Europe, Middle East
and Africa regions and are included in Impairment of
other intangible and long-lived assets in the accompany-
ing consolidated statements of earnings.
NOTE 5 — GOODWILL AND OTHER
INTANGIBLE ASSETS
During fiscal 2009, the Company acquired Applied
Genetics Incorporated Dermatics (“AGI”), a manufacturer
of cosmetics ingredients. In addition, the Company
acquired businesses engaged in the wholesale distribu-
tion and retail sale of Aveda products. These activities
were predominantly related to the Company’s skin care
and hair care businesses and resulted in increases to
goodwill of $42.5 million and other intangible assets of
$19.9 million as of June 30, 2009.
Recently Issued Accounting Standards
In June 2009, the FASB issued authoritative guidance to
eliminate the exception to consolidate a qualifying spe-
cial-purpose entity, change the approach to determining
the primary beneficiary of a variable interest entity and
require companies to more frequently re-assess whether
they must consolidate variable interest entities. Under the
new guidance, the primary beneficiary of a variable inter-
est entity is identified qualitatively as the enterprise that
has both (a) the power to direct the activities of a variable
interest entity that most significantly impact the entity’s
economic performance, and (b) the obligation to absorb
losses of the entity that could potentially be significant to
the variable interest entity or the right to receive benefits
from the entity that could potentially be significant to the
variable interest entity. This guidance becomes effective
for the Company’s fiscal 2011 year end and interim report-
ing periods thereafter. The Company does not maintain
any variable interests with unconsolidated entities that
would be expected to have a material impact on its finan-
cial condition or results of operations. Accordingly, the
Company does not expect this guidance to have a mate-
rial impact on its consolidated financial statements.
NOTE 3 — INVENTORY AND
PROMOTIONAL MERCHANDISE
JUNE 30 2010 2009
(In millions)
Inventory and promotional
merchandise, net consists of:
Raw materials $206.0 $188.5
Work in process 78.6 43.8
Finished goods 377.8 375.6
Promotional merchandise 164.2 187.1
$826.6 $795.0
2010
$206.0
78.6
377.8
164.2
$826.6
NOTE 4 — PROPERTY, PLANT AND EQUIPMENT
JUNE 30 2010 2009
(In millions)
Asset (Useful Life)
Land $ 14.3 $ 14.5
Buildings and improvements
(10 to 40 years) 172.5 183.2
Machinery and equipment
(3 to 10 years) 1,174.9 1,080.2
Furniture and fixtures
(5 to 10 years) 82.1 86.1
Leasehold improvements 1,081.2 1,112.8
2,525.0 2,476.8
Less accumulated depreciation
and amortization 1,501.4 1,450.1
$1,023.6 $1,026.7
2010
$ 14.3
172.5
1,174.9
82.1
1,081.2
2,525.0
1,501.4
$1,023.6