NOTE 5 – GOODWILL AND INTANGIBLE ASSETS

We do not record amortization expense for goodwill or other intangible assets that have indefinite useful lives. Amortization expense is recorded for intangible assets with definite useful lives. We perform an annual impairment review of goodwill and other intangible assets during the first quarter of each fiscal year. We also perform interim testing, if necessary, as required by GAAP. We write down any asset deemed to be impaired to its fair value.

The Company's traditional impairment test methodology uses primarily estimated future discounted cash flow models (“DCF Models”). The DCF Models use a number of assumptions including expected future cash flows from the assets, volatility, risk free rate, and the expected life of the assets, the determination of which require significant judgments from management. In determining the assumptions to be used, the Company considers the existing rates on Treasury Bills, yield spreads on assets with comparable expected lives, historical volatility of the Company's common stock and that of comparable companies and general economic and industry trends, among other considerations. When stock market or other conditions warrant, the Company expands its traditional impairment test methodology to give weight to other methods that provide additional observable market information in order to better reflect the current risk level being incorporated into market prices and in order to corroborate the fair values of each of the Company’s reporting units. Management will place increased reliance on these additional methods in conjunction with its DCF Models in the event that the total market capitalization of its stock drops below its consolidated stockholders’ equity balance for a sustained period.

Considerable management judgment is necessary in reaching a conclusion regarding the reasonableness of fair value estimates, evaluating the most likely impact of a range of possible external conditions, considering the resulting operating changes and their impact on estimated future cash flows, determining the appropriate discount factors to use, and selecting and weighting appropriate comparable market level inputs.

Annual Impairment Testing in the First Quarter of Fiscal Year 2015 – The Company performed its annual evaluation of goodwill and indefinite-lived intangible assets for impairment during the first quarter of fiscal year 2015. As a result of our testing of indefinite-lived trademarks and licenses, we recorded a non-cash asset impairment charge of $9.00 million ($8.16 million after tax). The charge was related to certain trademarks in our Personal Care segment, which were written down to their estimated fair value, determined on the basis of future discounted cash flows using the relief from royalty valuation method.

Annual Impairment Testing in the First Quarter of Fiscal Year 2014 – The Company performed its annual evaluation of goodwill and indefinite-lived intangible assets for impairment during the first quarter of fiscal year 2014. As a result of our testing of indefinite-lived trademarks and licenses, we recorded a non-cash asset impairment charge of $12.05 million ($12.03 million after tax). The charge was related to certain trademarks in our Personal Care segment, which were written down to their estimated fair value, determined on the basis of future discounted cash flows using the relief from royalty valuation method.

Annual Impairment Testing in the First Quarter of Fiscal Year 2013 – The Company performed its annual evaluation of goodwill and indefinite-lived intangible assets for impairment during the first quarter of fiscal year 2013. As a result of its testing, the Company concluded no impairment charges were required as the estimated fair value of the indefinite-lived trademarks and licenses, reporting unit net assets and the Company’s estimated enterprise value exceeded their respective carrying values as of the date of evaluation.

The following tables summarize by operating segment the changes in our goodwill and intangible assets for fiscal years 2015 and 2014:

GOODWILL AND INTANGIBLE ASSETS

(in thousands)


		Balances at										Balances at
	Weighted	February 28, 2014				Year Ended February 28, 2015						February 28, 2015
	Average	Gross		Cumulative						Acquisition		Gross		Cumulative
	Life	Carrying		Goodwill						and Retirement		Carrying		Goodwill		Accumulated		Net Book
Description / Life	(Years)	Amount		Impairments		Additions		Impairments		Adjustments		Amount		Impairments		Amortization		Value

Housewares:
Goodwill		$	166,132	$	-	$	-	$	-	$	-	$	166,132	$	-	$	-	$	166,132
Trademarks - indefinite			75,200		-		-		-		-		75,200		-		-		75,200
Other intangibles - finite	1.7		15,693		-		244		-		(183)		15,754		-		(12,331)		3,423
Subtotal			257,025		-		244		-		(183)		257,086		-		(12,331)		244,755

Healthcare / Home Environment:
Goodwill			251,758		-		-		-		-		251,758		-		-		251,758
Trademarks - indefinite			54,000		-		-		-		-		54,000		-		-		54,000
Licenses - finite	2.0		15,300		-		-		-		-		15,300		-		(9,377)		5,923
Other Intangibles - finite	6.7		114,490		-		827		-		(1,675)		113,642		-		(43,848)		69,794
Subtotal			435,548		-		827		-		(1,675)		434,700		-		(53,225)		381,475

Nutritional Supplements:
Goodwill			-		-		95,308		-		1,178		96,486		-		-		96,486
Brand assets - indefinite			-		-		65,500		-		-		65,500		-		-		65,500
Other intangibles - finite	6.3		-		-		43,800		-		-		43,800		-		(4,171)		39,629
Subtotal			-		-		204,608		-		1,178		205,786		-		(4,171)		201,615

Personal Care:
Goodwill			81,841		(46,490)		-		-		-		81,841		(46,490)		-		35,351
Trademarks - indefinite			63,754		-		-		(9,000)		-		54,754		-		-		54,754
Trademarks - finite	13.6		150		-		-		-		-		150		-		(82)		68
Licenses - indefinite			10,300		-		-		-		-		10,300		-		-		10,300
Licenses - finite	7.8		18,683		-		-		-		(4,987)		13,696		-		(11,216)		2,480
Other intangibles - finite	3.2		49,437		-		85		-		(1,561)		47,961		-		(30,602)		17,359
Subtotal			224,165		(46,490)		85		(9,000)		(6,548)		208,702		(46,490)		(41,900)		120,312

Total		$	916,738	$	(46,490)	$	205,764	$	(9,000)	$	(7,228)	$	1,106,274	$	(46,490)	$	(111,627)	$	948,157

GOODWILL AND INTANGIBLE ASSETS

(in thousands)


		Balances at										Balances at
	Weighted	February 28, 2013				Year Ended February 28, 2014						February 28, 2014
	Average	Gross		Cumulative						Acquisition		Gross		Cumulative
	Life	Carrying		Goodwill						and Retirement		Carrying		Goodwill		Accumulated		Net Book
Description / Life	(Years)	Amount		Impairments		Additions		Impairments		Adjustments		Amount		Impairments		Amortization		Value

Housewares:
Goodwill		$	166,132	$	-	$	-	$	-	$	-	$	166,132	$	-	$	-	$	166,132
Trademarks - indefinite			75,200		-		-		-		-		75,200		-		-		75,200
Other intangibles - finite	2.7		15,609		-		339		-		(255)		15,693		-		(11,149)		4,544
Subtotal			256,941		-		339		-		(255)		257,025		-		(11,149)		245,876

Healthcare / Home Environment:
Goodwill			251,758		-		-		-		-		251,758		-		-		251,758
Trademarks - indefinite			54,000		-		-		-		-		54,000		-		-		54,000
Licenses - finite	3.0		15,300		-		-		-		-		15,300		-		(6,416)		8,884
Other Intangibles - finite	7.6		114,490		-		-		-		-		114,490		-		(34,606)		79,884
Subtotal			435,548		-		-		-		-		435,548		-		(41,022)		394,526

Personal Care:
Goodwill			81,841		(46,490)		-		-		-		81,841		(46,490)		-		35,351
Trademarks - indefinite			75,803		-		-		(12,049)		-		63,754		-		-		63,754
Trademarks - finite	14.6		150		-		-		-		-		150		-		(77)		73
Licenses - indefinite			10,300		-		-		-		-		10,300		-		-		10,300
Licenses - finite	6.5		18,683		-		-		-		-		18,683		-		(15,887)		2,796
Other intangibles - finite	4.0		49,437		-		-		-		-		49,437		-		(26,563)		22,874
Subtotal			236,214		(46,490)		-		(12,049)		-		224,165		(46,490)		(42,527)		135,148

Total		$	928,703	$	(46,490)	$	339	$	(12,049)	$	(255)	$	916,738	$	(46,490)	$	(94,698)	$	775,550

In the third quarter of fiscal year 2015, we amended the terms of our trademark licensing agreement with Honeywell International Inc. to relinquish the rights to market Honeywell branded portable air purifiers after December 31, 2015 in twelve selected developing countries, including China. In exchange for the amendment, we received a one‐time cash payment of $7 million ($6.98 million after tax), which was recorded as a gain in SG&A. For fiscal years 2015, 2014 and 2013, sales into the relinquished countries accounted for approximately 0.3, 0.2 and 0.1 percent, respectively, of the Healthcare / Home Environment segment’s total net sales. We plan to market portable air purifiers in the relinquished markets under non‐Honeywell branded trademarks and retained the rights to market Honeywell portable air purifiers in other countries, including the United States, Canada and all European countries. For categories such as portable fans, portable heaters and portable humidifiers, we remain the Honeywell global licensee under the same material terms as our previous agreement.

The following table summarizes the amortization expense attributable to intangible assets for the fiscal years 2015, 2014 and 2013, as well as estimated amortization expense for the fiscal years 2016 through 2020:

AMORTIZATION OF INTANGIBLE ASSETS

(in thousands)


Aggregate Amortization Expense
For the fiscal years ended
February 2015	$	25,328
February 2014	$	21,612
February 2013	$	22,400


Estimated Amortization Expense
For the fiscal years ended
February 2016	$	27,138
February 2017	$	26,826
February 2018	$	22,885
February 2019	$	18,492
February 2020	$	16,733

Many of the license agreements under which we sell or intend to sell products with trademarks owned by other entities require that we pay minimum royalties. Some license agreements also require that we make minimum levels of advertising expenditures. For fiscal year 2016, estimated minimum royalties due and minimum advertising expenditures under these license agreements total $12.57 and $5.74 million, respectively.