Goodwill and Intangible Assets

9 Months Ended

Nov. 30, 2014

Note 9 - Goodwill and Intangible Assets

Annual Impairment Testing in the First Quarter of Fiscal Year 2015 - We performed our 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 - We performed our 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.

A summary of the carrying amounts and associated accumulated amortization for all intangible assets by operating segment follows:

GOODWILL AND INTANGIBLE ASSETS

(in thousands)

	November 30, 2014										February 28, 2014
	Gross		Cumulative								Gross		Cumulative
	Carrying		Goodwill			Accumulated			Net Book		Carrying		Goodwill			Accumulated			Net Book
Description	Amount		Impairments			Amortization			Value		Amount		Impairments			Amortization			Value

Housewares:
Goodwill	$	166,132	$	-		$	-		$	166,132	$	166,132	$	-		$	-		$	166,132
Trademarks - indefinite	75,200		-			-			75,200		75,200		-			-			75,200
Other intangibles - finite	15,923		-			(12,090		)	3,833		15,693		-			(11,149		)	4,544
Total Housewares	257,255		-			(12,090		)	245,165		257,025		-			(11,149		)	245,876

Healthcare / Home Environment:
Goodwill	251,758		-			-			251,758		251,758		-			-			251,758
Trademarks - indefinite	54,000		-			-			54,000		54,000		-			-			54,000
Licenses - finite	15,300		-			(8,637		)	6,663		15,300		-			(6,416		)	8,884
Other intangibles - finite	114,918		-			(42,789		)	72,129		114,490		-			(34,606		)	79,884
Total Healthcare / Home Environment	435,976		-			(51,426		)	384,550		435,548		-			(41,022		)	394,526

Nutritional Supplements:
Goodwill (1)	96,587		-			-			96,587		-		-			-			-
Brand assets - indefinite	65,500		-			-			65,500		-		-			-			-
Other intangibles - finite	43,800		-			(2,607		)	41,193		-		-			-			-
Total Nutritional Supplements	205,887		-			(2,607		)	203,280		-		-			-			-

Personal Care:
Goodwill	81,841		(46,490		)	-			35,351		81,841		(46,490		)	-			35,351
Trademarks - indefinite	54,754		-			-			54,754		63,754		-			-			63,754
Trademarks - finite	150		-			(81		)	69		150		-			(77		)	73
Licenses - indefinite	10,300		-			-			10,300		10,300		-			-			10,300
Licenses - finite	18,683		-			(16,123		)	2,560		18,683		-			(15,887		)	2,796
Other intangibles - finite	49,437		-			(30,766		)	18,671		49,437		-			(26,563		)	22,874
Total Personal Care	215,165		(46,490		)	(46,970		)	121,705		224,165		(46,490		)	(42,527		)	135,148

Total	$	1,114,283	$	(46,490	)	$	(113,093	)	$	954,700	$	916,738	$	(46,490	)	$	(94,698	)	$	775,550

(1)

Includes $1.28 million of acquisition adjustments recorded in the fiscal quarter ending August 31, 2014.

On October 24, 2014, 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 the fiscal quarter and year-to-date ended November 30, 2014, sales into the relinquished countries accounted for approximately 1.1 and 1.0 percent, respectively, of the Healthcare / Home Environment segment’s total net sales. For the fiscal quarter and year-to-date ended November 30, 2013, sales into the relinquished countries accounted for approximately 0.4 and 0.5 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 periods covered in this quarterly report, as well as our estimated amortization expense for the fiscal years 2015 through 2020.

AMORTIZATION OF INTANGIBLE ASSETS
(in thousands)
Aggregate Amortization Expense
For the three months ended

November 30, 2014	$	6,853
November 30, 2013	$	5,407

Aggregate Amortization Expense
For the nine months ended

November 30, 2014	$	18,427
November 30, 2013	$	16,246

Estimated Amortization Expense
For the fiscal years ended

February 2015	$	25,257
February 2016	$	27,150
February 2017	$	26,835
February 2018	$	23,030
February 2019	$	18,306
February 2020	$	16,720

- 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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