RETURNS AND CHARGES ASSOCIATED WITH RESTRUCTURING ACTIVITIES

3 Months Ended

Sep. 30, 2012

RETURNS AND CHARGES ASSOCIATED WITH RESTRUCTURING ACTIVITIES

RETURNS AND CHARGES ASSOCIATED WITH RESTRUCTURING ACTIVITIES

NOTE 3 — RETURNS AND CHARGES ASSOCIATED WITH RESTRUCTURING ACTIVITIES

In an effort to drive down costs and achieve synergies within the organization, in February 2009, the Company announced the implementation of a multi-faceted cost savings program (the “Program”) to position itself to achieve long-term profitable growth.  The Company anticipates the Program will result in related restructuring and other charges, inclusive of cumulative charges recorded to date and through the remainder of the Program, totaling between $350 million and $450 million before taxes.  While the Company will continue to seek cost savings opportunities, the Company’s current plans are to identify and approve specific initiatives under the Program through calendar 2012 and execute those initiatives through fiscal 2013.  The total amount of charges (pre-tax) associated with the Program, recorded, plus other initiatives approved through September 30, 2012, is approximately $361 million to $366 million, of which approximately $251 million to $253 million relates to restructuring charges, approximately $50 million of other costs to implement the initiatives, approximately $42 million to $45 million in sales returns and approximately $18 million in inventory write-offs.  The restructuring charges are comprised of approximately $188 million to $190 million of employee-related costs, approximately $40 million of other exit costs and contract terminations (substantially all of which have resulted in or will result in cash expenditures), and approximately $23 million in non-cash asset write-offs.  The total amount of cumulative charges (pre-tax) associated with the Program recorded from inception through September 30, 2012 was $303.0 million.

The Program focuses on a redesign of the Company’s organizational structure in order to integrate it in a more cohesive way and operate more globally across brands and functions.  The principal aspect of the Program was the reduction of the workforce by approximately 2,000 employees.  Specific actions taken since Program inception included:

·Resize and Reorganize the Organization – The Company continued the realignment and optimization of its organization to better leverage scale, improve productivity, reduce complexity and achieve cost savings in each region and across various functions.  This included reduction of the workforce which occurred through the consolidation of certain functions, which the Company achieved through a combination of normal attrition and job eliminations, and the closure and consolidation of certain distribution and office facilities.

·Turnaround or Exit Unprofitable Operations – To improve the profitability in certain of the Company’s brands and regions, the Company has selectively exited certain channels of distribution, categories and markets, and has made changes to turnaround others.  This included the exit from the global wholesale distribution of the Company’s Prescriptives brand, the reformulation of Ojon brand products and the exit from the global distribution of Sean John products.  In connection with these activities, the Company incurred charges for product returns, inventory write-offs, reduction of workforce and termination of contracts.

·Outsourcing – In order to balance the growing need for information technology support with the Company’s efforts to provide the most efficient and cost effective solutions, the Company continued the outsourcing of certain information technology processes.  The Company incurred costs to transition services to outsource providers and employee-related termination costs.

Restructuring Charges

The following table presents restructuring charges related to the Program as follows:

	Three Months Ended September 30
(In millions)	2012		2011
Employee-related costs	$	0.1	$	2.2
Asset write-offs	—		0.1
Contract terminations	—		0.1
Other exit costs	0.2		0.6
Total restructuring charges	$	0.3	$	3.0

The following table presents aggregate restructuring charges related to the Program to date:

(In millions)	Employee- RelatedCosts		AssetWrite-offs		Contract Terminations		Other Exit Costs		Total
Fiscal 2009	$	60.9	$	4.2	$	3.4	$	1.8	$	70.3
Fiscal 2010	29.3		11.0		2.3		6.2		48.8
Fiscal 2011	34.6		2.4		3.0		1.1		41.1
Fiscal 2012	37.1		1.7		12.6		2.2		53.6
Three months ended September 30, 2012	0.1		—		—		0.2		0.3
Charges recorded through September 30, 2012	$	162.0	$	19.3	$	21.3	$	11.5	$	214.1

The following table presents accrued restructuring charges and the related activities under the Program to date:

(In millions)	Employee- Related Costs			Asset Write-offs			Contract Terminations			Other Exit Costs			Total
Charges	$	60.9		$	4.2		$	3.4		$	1.8		$	70.3
Cash payments	(7.5		)	—			(0.5		)	(1.6		)	(9.6		)
Non-cash write-offs	—			(4.2		)	—			—			(4.2		)
Translation adjustments	0.6			—			—			—			0.6
Other adjustments	(2.4		)	—			—			—			(2.4		)
Balance at June 30, 2009	51.6			—			2.9			0.2			54.7
Charges	29.3			11.0			2.3			6.2			48.8
Cash payments	(49.5		)	—			(5.1		)	(6.0		)	(60.6		)
Non-cash write-offs	—			(11.0		)	—			—			(11.0		)
Translation adjustments	(0.8		)	—			—			—			(0.8		)
Balance at June 30, 2010	30.6			—			0.1			0.4			31.1
Charges	34.6			2.4			3.0			1.1			41.1
Cash payments	(30.6		)	—			(2.4		)	(1.4		)	(34.4		)
Non-cash write-offs	—			(2.4		)	—			—			(2.4		)
Translation adjustments	1.2			—			(0.1		)	0.1			1.2
Balance at June 30, 2011	35.8			—			0.6			0.2			36.6
Charges	37.1			1.7			12.6			2.2			53.6
Cash payments	(23.6		)	—			(12.4		)	(2.0		)	(38.0		)
Non-cash write-offs	—			(1.7		)	—			—			(1.7		)
Translation adjustments	(1.4		)	—			—			0.1			(1.3		)
Balance at June 30, 2012	47.9			—			0.8			0.5			49.2
Charges	0.1			—			—			0.2			0.3
Cash payments	(8.8		)	—			(0.3		)	(0.3		)	(9.4		)
Translation adjustments	0.3			—			—			0.1			0.4
Balance at September 30, 2012	$	39.5		$	—		$	0.5		$	0.5		$	40.5

Accrued restructuring charges at September 30, 2012 are expected to result in cash expenditures funded from cash provided by operations of approximately $26 million, $12 million and $3 million in fiscal 2013, 2014 and 2015, respectively.

Total Returns and Other Charges Associated with Restructuring Activities

The following table presents total returns and charges associated with restructuring and other activities related to the Program:

	Three Months Ended September 30
(In millions)	2012		2011
Sales returns (included in Net Sales)	$	—	$	(0.7	)
Cost of sales	—		0.1
Restructuring charges	0.3		3.0
Other charges	0.1		1.7
Total charges associated with restructuring activities	$	0.4	$	4.1

During the three months ended September 30, 2011, the Company recorded adjustments to reflect revised estimates of then-anticipated sales returns associated with prior initiatives.  Other charges in connection with the implementation of the Program primarily relate to consulting and other professional services.