Goodwill and Intangible Assets

The Company's goodwill and intangible assets relate primarily to the December 2005 acquisition of the direct selling businesses of Sara Lee Corporation and the October 2000 acquisition of BeautiControl.

The Company does not amortize its tradename intangible assets or goodwill. Instead, the Company tests these assets for impairment annually, or more frequently if events or changes in circumstances indicate they may be impaired. Certain tradenames are allocated between multiple reporting units. The impairment test for the Company's tradenames involves comparing the estimated combined fair value of the assets to the combined carrying amounts, to determine if a write-down to fair value is required. If the carrying amount of a tradename exceeds its estimated fair value, an impairment charge is recognized in an amount equal to the excess. The impairment test for goodwill involves comparing the fair value of a reporting unit to its carrying amount, including goodwill, after any intangible asset impairment charges. If the carrying amount of the reporting unit exceeds its fair value, a second step is required to measure for any goodwill impairment loss. This step revalues all assets and liabilities of the reporting unit to their current fair value and then compares the implied fair value of the reporting unit's goodwill to the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to the excess.

In 2009, the Company recorded impairment charges related to its NaturCare, Nutrimetics and South African businesses, in part, due to the fact that current and forecasted future results of operations were below its prior projections. Also contributing to these impairments was an overall increase to the assumed discount rates used in the valuations. As a result, the Company recorded impairments to the Nutrimetics, NaturCare and Avroy Shlain tradenames of $10.1 million, $4.2 million and $2.0 million, respectively. In addition, the Company recognized impairments of goodwill of $8.6 million and $3.2 million relating to the Nutrimetics and South African beauty reporting units, respectively.

In the third quarter of 2010, the Company completed the annual impairment tests for all of the reporting units and tradenames, other than BeautiControl which was completed in the second quarter, and determined there was no further impairment. The Company subsequently decided it would cease operating its Swissgarde unit in Southern Africa as a separate business. As a result of this decision, the Company concluded that its intangible assets and goodwill were impaired and recorded in 2010 a $2.1 million impairment to the Swissgarde tradename, a $0.1 million impairment related to the sales force intangible and a $2.1 million impairment to goodwill relating to the South African beauty reporting unit. During 2011, the Company sold its interest in Swissgarde for $0.7 million that resulted in a gain of $0.1 million.

In the third quarter of 2011, the Company completed the annual impairment tests for all of the reporting units and tradenames, other than BeautiControl, which was completed in the second quarter. During the third quarter of 2011, the financial results of Nutrimetics were below expectations. As well, the Company made the decision to cease operating its Nutrimetics business in Malaysia. As a result, the Company lowered its forecast of future sales and profit. The result of the impairment tests was to record a $31.1 million impairment to the Nutrimetics goodwill in the Asia Pacific reporting unit and a $5.0 million impairment to its tradename.

Fair value of the reporting units is determined by the Company using either the income approach or a combination of the income and market approaches with generally a greater weighting on the income approach (75 percent). When the characteristics of the reporting unit are more similar to the guideline public companies in terms of size, markets and economy, then a more equal weighting is used between the income and market approaches. The income approach, or discounted cash flow approach, requires significant assumptions to determine the fair value of each reporting unit. These include estimates regarding future operations and the ability to generate cash flows, including projections of revenue, costs, utilization of assets and capital requirements, along with an estimate as to the appropriate discount rate to be used. The most sensitive estimate in this valuation is the projection of operating cash flows, as these provide the basis for the fair market valuation. The Company’s cash flow model uses forecasts for periods of about 10 years and a terminal value. The significant 2011 assumptions for these forecasts included annual revenue growth rates ranging from zero to 12.0 percent with an average growth rate of 6 percent. The growth rates were determined by reviewing historical results of these units and the historical results of the Company’s other business units that are similar to those of the reporting units, along with the expected contribution from growth strategies implemented in the units. Terminal values for all reporting units were calculated using a long-term growth rate of 3 percent. In estimating the fair value of the reporting units in 2011, the Company applied discount rates to its reporting units’ projected cash flows ranging from 11.6 to 22.3 percent. The discount rate at the high end of this range was for the Avroy Shlain and Latin American reporting units due to higher country-specific risks. The market approach relies on an analysis of publicly-traded companies similar to Tupperware and deriving a range of revenue and profit multiples. The publicly-traded companies used in the market approach were selected based on their having similar product lines of consumer goods, beauty products and/or companies using a direct-selling distribution method. The resulting multiples were then applied to the reporting unit to determine fair value.

The fair value of the Company’s tradenames was determined using the relief from royalty method, which is a form of the income approach. In this method, the value of the asset is calculated by selecting royalty rates, which estimate the amount a company would be willing to pay for the use of the asset. These rates were applied to the Company’s projected revenue, tax affected and discounted to present value using an appropriate rate. Royalty rates used were selected by reviewing comparable trademark licensing agreements in the market, and a range from 3.0 to 4.75 percent was used in 2011. In estimating the fair value of the tradenames, the Company also applied a discount rate ranging from 12.6 to 22.3 percent, and revenue growth ranging from zero to 12 percent, with an average growth rate of 6 percent, and a long-term terminal growth rate of 3 percent. Similar to the rates used in valuing goodwill, the discount rates toward the high end of the range related to tradenames located in areas with higher country risks, including revenue generated using the Avroy Shlain tradenames in South Africa and the Nuvo tradename in Uruguay.

With the goodwill impairment recorded in the current year for Nutrimetics Asia Pacific, this unit is at a higher risk of additional impairments in future periods if changes in certain assumptions occur. This is also the case for the Nutrimetics tradename value, as the fair value was set equal to carrying value in the current year. The fair value of the Avroy Shlain, Fuller Mexico, Fuller Philippines, NaturCare and Nutrimetics Europe reporting units as well as the Nuvo and Avroy Shlain trade names exceeded the carrying value by over 65 percent at the valuation date. The fair value of the Fuller Latin America and BeautiControl reporting units exceeded the carrying value by almost 45 percent. The fair value of the Company’s Fuller and NaturCare tradenames had an excess of 29 and 37 percent over carrying value, respectively. Given the sensitivity of the valuations to changes in cash flow or market multiples, the Company may be required to recognize an impairment of goodwill or intangible assets in the future due to changes in market conditions or other factors related to the Company’s performance. Actual results below forecasted results or a decrease in the forecasted future results of the Company’s business plans or changes in interest rates could also result in an impairment charge, as could changes in market characteristics including declines in valuation multiples of comparable publicly-traded companies. Further impairment charges would have an adverse impact on the Company’s net income.

The following table reflects gross goodwill and accumulated impairments allocated to each reporting segment at December 31, 2011, December 25, 2010 and December 26, 2009:



(In millions)	Europe			Asia Pacific		TW North America		Beauty North America			South America			Total
Gross goodwill balance at December 26, 2009	$	35.0		$	79.2	$	16.3	$	155.6		$	7.1		$	293.2
Effect of changes in exchange rates	(1.0		)	6.9		—		4.9			(0.1		)	10.7
Gross goodwill balance at December 25, 2010	34.0			86.1		16.3		160.5			7.0			303.9
Effect of changes in exchange rates	(0.9		)	2.6		—		(12.9		)	(0.4		)	(11.6		)
Gross goodwill balance at December 31, 2011	$	33.1		$	88.7	$	16.3	$	147.6		$	6.6		$	292.3



(In millions)	Europe		Asia Pacific		TW North America		Beauty North America		South America		Total
Accumulated impairment balance at December 26, 2009	$	14.7	$	3.0	$	—	$	—	$	—	$	17.7
Goodwill impairment	2.1		—		—		—		—		2.1
Accumulated impairment balance at December 25, 2010	16.8		3.0		—		—		—		19.8
Goodwill impairment	—		31.1		—		—		—		31.1
Accumulated impairment balance at December 31, 2011	$	16.8	$	34.1	$	—	$	—	$	—	$	50.9

The gross carrying amount and accumulated amortization of the Company's intangible assets, other than goodwill, were as follows:



	December 31, 2011
(In millions)	Gross Carrying Value		Accumulated Amortization		Net
Trademarks and tradenames	$	157.1	$	—	$	157.1
Sales force relationships - single level	26.9		23.9		3.0
Sales force relationships - multi tier	35.9		31.7		4.2
Acquired proprietary product formulations	3.6		3.6		—
Total intangible assets	$	223.5	$	59.2	$	164.3



	December 25, 2010
(In millions)	Gross Carrying Value		Accumulated Amortization		Net
Trademarks and tradenames	$	170.2	$	—	$	170.2
Sales force relationships - single level	29.7		25.1		4.6
Sales force relationships - multi tier	35.3		29.7		5.6
Acquired proprietary product formulations	4.0		4.0		—
Total intangible assets	$	239.2	$	58.8	$	180.4

A summary of the identifiable intangible asset account activity is as follows:



	Year Ending
(In millions)	December 31, 2011			December 25, 2010
Beginning balance	$	239.2		$	229.9
Impairment of intangible assets	(5.0		)	(2.2		)
Effect of changes in exchange rates	(10.7		)	11.5
Ending balance	$	223.5		$	239.2

Amortization expense was $2.9 million, $3.9 million and $5.1 million in 2011, 2010 and 2009, respectively. The estimated annual amortization expense associated with the above intangibles for each of the five succeeding years is $2.0 million, $1.4 million, $1.0 million, $0.7 million and $0.6 million, respectively.