Graco 2005 Annual Report Download - page 68

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2004
As a result of the impairment testing performed in 2004, the Company recorded non-cash impairment
charges of $295.1 million ($273.5 million, net of tax), as follows:
Other IndeÑnite-
Lived Intangible Other Long-
Segment Goodwill Assets Lived Assets Total
Cleaning & Organization ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ Ì $ Ì $11.3 $ 11.3
OÇce Products ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 138.8 93.8 11.4 244.0
Tools & Hardware ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1.5 3.3 2.0 6.8
Home Fashions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.4 18.9 3.9 31.2
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 1.8 1.8
TotalÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $148.7 $116.0 $30.4 $295.1
Cleaning & Organization
In 2004, the Company made the decision to exit certain product lines, which resulted in the
impairment of Ñxed assets. The Company determined the fair value of the Ñxed assets by estimating the
future cash Öows attributable to these Ñxed assets, including an estimate of the ultimate sale proceeds.
Accordingly, the Company recorded a charge to write-down the assets to their estimated fair value.
OÇce Products
The impairment charge recorded in the OÇce Products segment was primarily a result of three
factors:
‚ Prior year restructuring activity related to a European business had not resulted in the expected
returns, and management began exploring alternatives for this product line. Accordingly, an
impairment charge was recorded to write-down the long-lived assets to fair value (disposal value).
The impairment charge recognized on this product line was $80.8 million, of which $8.5 million
related to the write-down of property, plant & equipment.
‚ In the European business, the Company historically promoted and supported several diÅerent
businesses in the everyday writing category. In 2004, management developed a plan to consolidate
certain businesses in Europe in this category. This new plan resulted from several factors:
‚ The Company believes that rationalizing its brands will enable the Company to more eÅectively
allocate capital and other resources. In this regard, the Company is focused on promoting its
brands globally and reducing the reliance on local or regional brands.
‚ The brand targeted for rationalization had experienced sales declines, especially in 2004, and
management believed it has more eÅective investment opportunities outside of this brand.
As a result of this plan, the Company recognized an impairment charge of $123.1 million related to
this product line.
‚ Management decided to rationalize several trademarks and tradenames (brands), primarily in the
Latin America businesses. The current plan is to reduce the number of brands from 76 to 12 by
2007. As a result of this decision, the Company determined that certain brands that were previously
considered to have indeÑnite lives were impaired. Accordingly, the Company wrote-down these
trademarks and tradenames to their fair value and began amortizing these brands over their
remaining useful lives (generally three years). The total impairment charge recognized as a result
of the decision to rationalize brands was $37.2 million.
The remaining impairment charge recognized in 2004 represents a write-down to fair value of certain
other long-lived assets.
67