GOODWILL, OTHER INTANGIBLE ASSETS, NET AND OTHER ASSETS

9 Months Ended

Mar. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill, Intangible Assets, Net and Other Assets

GOODWILL, OTHER INTANGIBLE ASSETS, NET AND OTHER ASSETS

The Company tests goodwill and indefinite lived intangible assets for impairment annually as of May 1. Additionally, an impairment test is performed for these assets and other long-lived assets if indicators or changes in circumstances suggest that an impairment exists. During the three months ended March 31, 2014, the Company experienced net cash outflows associated with the TJoy mass channel business in China that were significantly in excess of previous expectations in spite of a reorganization of the Company's management team and distribution network and the launch of new product offerings through which the Company anticipated realizing significant improvements in cash flows beginning in the three months ended March 31, 2014. In the course of evaluating the results for the three months ended March 31, 2014 and the preparation of the financial statements for the three months ended March 31, 2014, management concluded that the results in China represented an indicator of impairment that warranted an interim impairment test for goodwill and certain other intangible assets in the Beauty - Skin & Body Care Reporting Unit, resulting in a total non-cash impairment charge of $316.9, of which $256.4 related to goodwill and $60.5 to other long lived assets, as described below.

In step one of the goodwill impairment test, the Company identified that the carrying value of the reporting unit exceeded its fair value based on a re-evaluation of discounted cash flows and confirmed by using a market approach to value the reporting units. The main drivers of the decline were a decrease in average net sales growth rates for the reporting unit from high-single digits to mid-single digits and an increase in weighted average cost of capital, based on management's recent estimates.

In the preliminary step two of the test the implied fair value of goodwill was determined by comparing the fair value of the other assets in the reporting unit to the fair value of the reporting unit. Predominantly as a result of the fair value of the adidas license agreement, the implied fair value of goodwill was determined to be nil. Consequently, goodwill was determined to be fully impaired, resulting in an impairment charge of $256.4. The preliminary step two test is incomplete, due to the significant amount of work required to calculate the implied fair value of goodwill and due to the timing of the identification of the interim impairment indicators. The items in the step two test that are incomplete include, but are not limited to, determining the valuation of inventory and property, plant and equipment in the reporting unit.

Concurrently with the evaluation of future cash flows of the reporting unit, the Company also re-evaluated future cash flows from other long lived assets in China, consisting of the TJoy trademark, customer relationships and a manufacturing facility, with a total carrying value of $69.1. It was determined that the carrying value of this asset group exceeded its fair value resulting in an impairment charge of $60.5. The TJoy trademark and customer relationships of $21.0 and $33.5, respectively, were fully impaired and the remaining $6.0 impairment charge was attributable to the reduction of the carrying value of a manufacturing facility.

Based on the impairment test performed as of May 1, 2013, the Company determined that the fair values of its other reporting units significantly exceeded their respective carrying values at that date by a range of 40% to greater than 100%. Thus, a significant decrease in fair value would be required before the goodwill balance at other reporting units would have a carrying value in excess of fair value. The Company does not believe that indicators of impairment exist for its other reporting units.

The Company believes the assumptions used in calculating the estimated fair values of the other reporting units are reasonable and attainable. However, the Company can provide no assurances that it will achieve such projected results. Further, the Company can provide no assurances that it will not have to recognize additional impairment of goodwill in the future due to other market conditions or changes in interest rates in these other reporting units. Recognition of additional impairment of a significant portion of the Company’s goodwill would negatively affect the Company’s reported results of operations and total capitalization.

Goodwill

Goodwill as of March 31, 2014 and June 30, 2013 is presented below:



	Fragrances		Color Cosmetics		Skin & Body Care			Total
Gross balance at June 30, 2013	$	711.0	$	529.8	$	686.8		$	1,927.6
Accumulated impairments	—		—		(384.4		)	(384.4		)
Net balance at June 30, 2013	$	711.0	$	529.8	$	302.4		$	1,543.2

Changes during the period ended March 31, 2014:
Acquisition contingent payment ^(a)	$	30.0	$	—	$	—		$	30.0
Acquisitions ^(b)	3.8		2.5		7.0			13.3
Foreign exchange	7.7		5.8		(0.3		)	13.2
Impairment charges	—		—		(256.4		)	(256.4		)
	$	41.5	$	8.3	$	6.7		$	56.5

Gross balance at March 31, 2014	$	752.5	$	538.1	$	693.5		$	1,984.1
Accumulated impairments	—		—		(640.8		)	(640.8		)
Net balance at March 31, 2014	$	752.5	$	538.1	$	52.7		$	1,343.3

^(a) Pursuant to the Company's fiscal 2006 acquisition of Unilever Cosmetics International, the Company is contractually obligated to make future annual contingent purchase price consideration payments for a 10-year period following the acquisition to the seller. Payments are based on contractually agreed upon sales targets and can range up to $30.0 per year. The Company paid $30.0 during the third quarter of both fiscal 2014 and 2013 for such contingent consideration.

^(b) During the nine months ended March 31, 2014, the Company acquired 100% of the shares of StarAsia and Lena White. These transactions were accounted for as business combinations (See Note 4).

Other Intangible Assets

Other intangible assets, net as of March 31, 2014 and June 30, 2013 are presented below:



	March 31, 2014		June 30, 2013
Indefinite-lived other intangible assets ^(a)	$	1,175.2	$	1,171.9
Finite-lived other intangible assets, net	682.2		784.7
Total Other intangible assets, net	$	1,857.4	$	1,956.6

^(a)Net of accumulated impairments of $188.6 as of March 31, 2014 and June 30, 2013.

The effect of foreign currency translation in the carrying amount of indefinite-lived intangible assets is $3.2 as of March 31, 2014.

Intangible assets subject to amortization are presented below:



	Cost		Accumulated Amortization			Accumulated Impairment			Net
June 30, 2013
License agreements	$	827.0	$	(451.6	)	$	—		$	375.4
Customer relationships	543.3		(173.1		)	—			370.2
Trademarks	145.9		(112.5		)	—			33.4
Product formulations	31.8		(26.1		)	—			5.7
Total	$	1,548.0	$	(763.3	)	$	—		$	784.7
March 31, 2014
License agreements	$	836.4	$	(483.0	)	$	—		$	353.4
Customer relationships	559.1		(207.9		)	(33.5		)	317.7
Trademarks	146.3		(116.9		)	(21.0		)	8.4
Product formulations	31.8		(29.1		)	—			2.7
Total	$	1,573.6	$	(836.9	)	$	(54.5	)	$	682.2

Amortization expense totaled $21.1 and $22.2 for the three months ended March 31, 2014 and 2013, respectively, and $66.4 for the nine months ended March 31, 2014 and 2013.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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