Goodwill and Other Intangible Assets

3 Months Ended

Sep. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

4. Goodwill and Other Intangible Assets

Goodwill is allocated by reportable segment as follows:



	Beauty, Hair and Personal Care			Grooming			Health Care			Fabric Care and Home Care			Baby, Feminine and Family Care			Corporate		Total Company
GOODWILL at June 30, 2014	$	17,040		$	20,939		$	6,280		$	4,535		$	4,910		$	—	$	53,704
Acquisitions and divestitures	—			—			—			(2		)	—			—		(2		)
Goodwill impairment charges	—			—			—			(863		)	—			—		(863		)
Translation and other	(586		)	(512		)	(155		)	(85		)	(140		)	—		(1,478		)
GOODWILL at September 30, 2014	$	16,454		$	20,427		$	6,125		$	3,585		$	4,770		$	—	$	51,361

During the quarter ended September 30, 2014, we determined that the estimated fair value of our Batteries reporting unit was less than its carrying amount. The underlying fair value assessment was triggered by an agreement that was reached in the quarter to sell a portion of the Batteries business and a related decision to pursue options to exit the remainder of the Batteries business. As previously disclosed in our Annual Report on Form 10-K for the year ended June 30, 2014, the results of our annual goodwill impairment testing during fiscal 2014 indicated a decline in the fair value of the Batteries reporting unit due to lower long-term market growth assumptions in certain key geographies. At that time, the estimated fair value of Batteries continued to exceed its underlying carrying value, but the fair value cushion had been reduced to about 5%. The agreement during the most recent quarter to sell a portion of the Batteries business is at a transaction value that is below the earnings multiple implied from the prior valuation of our Batteries business, which effectively eliminated our fair value cushion. As a result, the remaining business unit cash flows no longer support the remaining carrying amount of the Batteries business. In addition, management made the decision in October to pursue alternatives to exit the remainder of the Batteries business, which could include a sale or split-off transaction. The timing of any such transaction is uncertain.

Due largely to the above factors, we recorded a non-cash before and after-tax impairment charge of $863 to reduce the carrying amount of goodwill for the Batteries business unit to its estimated fair value. Following the impairment charge, the carrying value of the Batteries goodwill was $1,344. These same factors resulted in a decline in the fair value of our Duracell brand intangible asset below its carrying value. This resulted in a non-cash, before-tax impairment charge of $110 ($69 after tax) to reduce the carrying amount of this asset to its estimated fair value. The carrying value of our Duracell brand intangible asset was $2,135 as of September 30, 2014.

The test to evaluate goodwill for impairment is a two-step process. In the first step, we compare the fair value of the reporting unit to its carrying value. If the fair value of the reporting unit is less than its carrying value, we perform a second step to determine the implied fair value of the reporting unit's goodwill. The second step of the impairment analysis requires a valuation of a reporting unit's tangible and intangible assets and liabilities in a manner similar to the allocation of purchase price in a business combination. If the resulting implied fair value of the reporting unit's goodwill is less than its carrying value, that difference represents an impairment. The impairment charges are included in Corporate for segment reporting.

The business unit valuations used to test goodwill and intangible assets for impairment are dependent on a number of significant estimates and assumptions, including macroeconomic conditions, overall category growth rates, competitive activities, cost containment and margin expansion and Company business plans. We believe these estimates and assumptions are reasonable. However, actual events and results of the Batteries reporting unit could differ substantially from those used in our valuations. To the extent such factors result in a reduction of the level of projected cash flows used to estimate the Batteries reporting unit fair value, we may need to record additional non-cash impairment charges in the future.

In addition, as previously disclosed in our Annual Report on Form 10-K for the year ended June 30, 2014, a key competitor announced its intent to split its consolidated business into two separate companies during 2015. One of those companies would operate primarily in the batteries category. While this proposed transaction has not been consummated, initial independent third party estimates of the competitor’s stand-alone batteries business valuation are below the earnings multiple implied from the most recent valuation of our Batteries business. We attribute the implied valuation difference primarily to our more favorable business trends, primarily organic net sales and share growth, and brand equity. If our evaluation of exit alternatives results in the execution of a divestiture transaction, such a divestiture could result in an additional loss that could be material depending on the form of the transaction and/or valuations utilized by potential acquirers.

In addition to the impairment charge, goodwill decreased from June 30, 2014 due to currency translation across all reportable segments.

Identifiable intangible assets at September 30, 2014 are comprised of:



	Gross Carrying Amount		Accumulated Amortization
Intangible assets with determinable lives	$	9,120	$	(5,221	)
Intangible assets with indefinite lives	26,311		—
Total identifiable intangible assets	$	35,431	$	(5,221	)

Intangible assets with determinable lives consist of brands, patents, technology and customer relationships. The intangible assets with indefinite lives consist primarily of brands. The amortization of intangible assets for the three months ended September 30, 2014 and 2013 was $119 and $134, respectively.

- 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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