NOTE 4. 2014 PERFORMANCE IMPROVEMENT PLAN AND OTHER RESTRUCTURING

The 2014 Performance Improvement Plan, approved by the Board of Directors on June 23, 2014, includes the exiting of certain unprofitable retail doors and fragrance license agreements, changes in customer, distribution and supply chain relationships, the discontinuation of certain products, the elimination of approximately 175 employee positions globally, and the closing of the Company's Puerto Rico affiliate. At June 30, 2014, the Company estimated that the 2014 Performance Improvement Plan would result in pre-tax charges beginning in the fourth fiscal quarter of 2014 and through fiscal 2015 of $65 million to $72 million. As a result of the Companys continuing reexamination of how it commercially executes its business, during the three months ended December 31, 2014, the Company made changes to its distribution strategy in China. Primarily as a result of this decision, in December 2014 the Company increased the range of estimated pre-tax charges to be incurred under the 2014 Performance Improvement Plan through fiscal 2015 and now expects the amounts to be between $92 million and $99 million.

The current estimated pre-tax charges for the 2014 Performance Improvement Plan consist of:

(i) approximately $35 million to $41 million for changes to the Companys distribution strategy in China, and for exit and contract termination costs related to the closing of the Company's Puerto Rico affiliate, the exiting of unprofitable doors and changes in customer, distribution and supply chain relationships; (ii) approximately $12 million for employee severance and other related one-time costs (including those related to the closing of the Company's Puerto Rico affiliate); and

(iii) approximately $45 million to $46 million related to asset impairments, including approximately $18 million to $19 million associated with intangible asset and inventory impairments and exit costs caused by the expiration, non-renewal or wind-down of fragrance license agreements, and $26 million associated with discontinuations of certain products, including $7.1 million related to certain Elizabeth Arden branded skincare and color products developed prior to the Elizabeth Arden brand repositioning.

During the three and six months ended December 31 2014, we incurred approximately $22.6 million and $28.7 million, respectively, of pre-tax charges in connection with the 2014 Performance Improvement Plan. Since inception we have incurred approximately $84.6 million of pre-tax charges in connection with the 2014 Performance Improvement Plan. The pre-tax charges for the three and six months ended December 31, 2014 and since inception consisted of the following:

Three Months Ended December 31, 2014:


				Cost of		Selling,
				Goods		General and
(Amounts in thousands)		Net Sales		Sold		Administrative		Total
Returns and markdowns	$	12,582	$		$		$	12,582
Inventory write-downs				4,542				4,542
Asset impairments and related charges						77		77
Severance and other employee-related costs						769		769
Other						4,672		4,672
Total	$	12,582	$	4,542	$	5,518	$	22,642

Six Months Ended December 31, 2014:


				Cost of		Selling,
				Goods		General and
*(Amounts in thousands)*		Net Sales		Sold		Administrative		Total
Returns and markdowns	$	15,261	$		$		$	15,261
Inventory write-downs				4,580				4,580
Asset impairments and related charges						138		138
Severance and other employee-related costs						1,920		1,920
Other						6,835		6,835
Total	$	15,261	$	4,580	$	8,893	$	28,734

Since Inception:


				Cost of		Selling,
				Goods		General and
(Amounts in thousands)		Net Sales		Sold		Administrative		Total
Returns and markdowns ⁽¹⁾	$	24,725	$		$		$	24,725
Inventory write-downs ⁽²⁾				34,765				34,765
Asset impairments and related charges⁽³⁾						9,812		9,812
Severance and other employee-related costs⁽⁴⁾						7,958		7,958
Other⁽⁵⁾						7,366		7,366
Total	$	24,725	$	34,765	$	25,136	$	84,626

(1) Related to changes in the Companys distribution strategy in China, the closing of the Companys Puerto Rico affiliate, exiting of unprofitable doors, changes in customer relationships and non-renewal and expiration of certain fragrance license agreements.

(2) Related to the expiration, non-renewal and wind-down of fragrance license agreements and discontinuation of certain products.

(3) Related primarily to the non-renewal and expiration of fragrance license agreements.

(4) Severance and other employee-related costs associated with reduction in global headcount positions.

(5) Consists primarily of transition expenses and customer and vendor contract termination costs.

As of December 31, 2014, the related liability balance and activity for costs associated with the 2014 Performance Improvement Plan are as follows:

		Severance and
		Other Employee-
(Amounts in thousands)		Related Costs			Other			Total
Liability balance at June 30, 2014	$	5,427		$	531		$	5,958
Accruals⁽¹⁾		1,151			2,163			3,314
Cash payments-First Quarter Fiscal 2015		(4,643	)		(2,694	)		(7,337	)
Liability balance at September 30, 2014	$	1,935		$			$	1,935
Accruals⁽¹⁾		769			4,672			5,441
Cash payments-Second Quarter Fiscal 2015		(1,102	)		(2,026	)		(3,128	)
Liability balance at December 31, 2014 ⁽²⁾	$	1,602		$	2,646		$	4,248

(1) Included in selling, general and administrative expenses in the Company's consolidated statements of operations.

(2) The Company expects to pay the balance of these liabilities during fiscal 2015.

During the three and six months ended December 31, 2014, and in addition to the items discussed above under the 2014 Performance Improvement Plan, the Company recorded approximately $43.8 million in asset impairment charges primarily related to the write off of the Justin Bieber and Nicki Minaj licenses and other costs. See Note 7 for further discussion.

All of the expenses discussed above, as described in Note 17, have not been attributed to any of the Companys reportable segments and are included in unallocated corporate expenses.