Estee Lauder 2012 Annual Report Download - page 137

THE EST{E LAUDER COMPANIES INC. 135
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 car-
rying value 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 $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
carrying value of the customer list is 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.
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. Indefinite-lived intangible assets (e.g., trademarks)
are not subject to amortization and are assessed at least annually for impairment during the fiscal fourth quarter, or more
frequently if certain events or circumstances exist. Other intangible assets (e.g., non-compete agreements, customer lists)
are amortized on a straight-line basis over their expected period of benefit, approximately 2 years to 13 years. Intangible
assets related to license agreements were amortized on a straight-line basis over their useful lives based on the terms of
the respective agreements. The Company did not incur costs to extend or renew the term of acquired intangible assets
during fiscal 2012.
Other intangible assets consist of the following:
JUNE 30, 2012 JUNE 30, 2011
Gross Accumulated Total Net Gross Accumulated Total Net
Carrying Value Amortization Book Value Carrying Value Amortization Book Value
(In millions)
Amortizable intangible assets:
Customer lists and other $268.4 $191.9 $ 76.5 $270.9 $168.5 $102.4
License agreements 43.0 43.0 — 43.0 43.0 —
$311.4 $234.9 76.5 $313.9 $211.5 102.4
Non-amortizable
intangible assets:
Trademarks and other 113.6 125.1
Total intangible assets $190.1 $227.5
G
The aggregate amortization expense related to amortizable intangible assets for fiscal 2012, 2011 and 2010 was $13.9
million, $14.6 million and $9.1 million, respectively. The estimated aggregate amortization expense for each of the next
five fiscal years is as follows:
FISCAL 2013 2014 2015 2016 2017
(In millions)
Estimated aggregate amortization expense $12.4 $12.3 $12.1 $12.0 $9.9