General Information And Summary Of Significant Accounting Policies | NOTE 1. General Information and Summary of Significant Accounting Policies Organization and Business Activity . Elizabeth Arden, Inc. (the "Company" or "our") is a global prestige beauty products company that sells fragrances, skin care and cosmetic products to retailers in the United States and approximately 120 Basis of Consolidation. The consolidated financial statements include the accounts of the Company's wholly-owned domestic and international subsidiaries as well as variable interest entities ("VIEs") of which the Company is the primary beneficiary in accordance with consolidation accounting guidance. See Note 12 for information on the consolidated VIEs. All significant intercompany accounts and transactions have been eliminated in consolidation. Liquidity. Since fiscal 2014, the Company has identified and undertaken several initiatives to reduce the size and complexity of its overhead structure and to exit low-return businesses, customers and brands, in order to improve gross margins and profitability in the long term. There are risks and uncertainties associated with the execution of the Company's business plans, including the general economic and retail environment. The Company's ability to fund operations and capital expenditures in the future is dependent upon the ability to generate cash from operations, maintain or improve margins and to borrow funds available under its credit facilities. As further described in Note 9 (Short Term Debt), the Company maintains a revolving bank credit facility (the "Credit Facility") that was amended and restated in July 2016 (the "Amended Credit Facility") and a second lien credit agreement (the "Second Lien Credit Agreement") with its lenders. The Amended Credit Facility has only one 1.1 Based upon its business strategies and initiatives for fiscal 2017, the Company does not anticipate that its borrowing base capacity and/or borrowing availability will fall below the applicable thresholds in its Amended Credit Facility. If the Company requires additional liquidity to fund operations, the Company believes it has the ability to postpone or reduce certain expenditures, such as capital expenditures, in a manner that the Company believes is sufficient to create the liquidity necessary to fund operations. Deterioration in the economic and retail environment or continued challenges in the Company's operating performance, however, could cause the Company to default under its Amended Credit Facility if it does not have the requisite average borrowing base capacity or borrowing availability and also fails to meet the financial maintenance covenant set forth in the Credit Facility. In such an event, the Company would not be allowed to borrow under these facilities and may not have access to the capital necessary to meet its operating and investing needs. In addition, a default under its Amended Credit Facility or Second Lien Credit Agreement that causes acceleration of the debt under either facility could trigger a default under the Company's outstanding 7 March 2021 Investments and Variable Interest Entities. During fiscal 2013, 2014 and 2015, the Company, through a subsidiary, invested an aggregate of $ 13.7 2 During fiscal 2014 and 2015, the Company, through a subsidiary (the "EA USC Subsidiary"), invested an aggregate of $ 9.0 30 3.6 1.5 85.45 14.55 During fiscal 2015, the Company, through a subsidiary, entered into a joint venture in the United Arab Emirates (the "UAE Joint Venture") with an unrelated third party for the sale, promotion and distribution of the Company's products primarily in the Middle East. Based on its equity interests and controlling rights in the Middle East joint venture, the Company has determined that the UAE Joint Venture is a VIE, requiring consolidation of such joint venture's financial statements in accordance with Topic 810, Consolidation. The unrelated third party's interest in the UAE Joint Venture is classified as a "noncontrolling interest" in the shareholders' equity section of the Company's consolidated balance sheet. See Note 12 for additional information on this investment and the consolidated VIE. During fiscal 2016, the Company, through a subsidiary, entered into a joint venture with an unrelated third party for the sale, promotion and distribution of the Company's products in Southeast Asia and, effective January 1, 2016, in Hong Kong ("the Southeast Asia Joint Venture"). Based on its equity interests and controlling rights in the Southeast Asia joint venture, the Company has determined that the Southeast Asia Joint Venture is a VIE, requiring consolidation of such joint venture's financial statements in accordance with Topic 810, Consolidation. The unrelated third party's interest in the joint venture is classified as a "noncontrolling interest" in the shareholders' equity section of the Company's consolidated balance sheet. See Note 12 for additional information on this investment and the consolidated VIE. Use of Estimates. The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include expected useful lives of brand licenses, trademarks, other intangible assets and property, plant and equipment, allowances for sales returns and markdowns, share-based compensation, fair value of long-lived assets, allowances for doubtful accounts receivable, provisions for inventory obsolescence, and income taxes and valuation reserves. Changes in facts and circumstances may result in revised estimates, which are recorded in the period in which they become known. Revenue Recognition. Sales are recognized when title and the risk of loss transfers to the customer, the sale price is fixed or determinable and collectability of the resulting receivable is probable. Sales are recorded net of estimated returns, markdowns and other allowances, which are granted to certain of the Company's customers and are subject to the Company's authorization and approval. The provision for sales returns and markdowns represents management's estimate of future returns and markdowns based on historical and projected experience and considering current external factors and market conditions. During each of the years ended June 30, 2016, 2015 and 2014, one 12 Foreign Currency Translation . All assets and liabilities of foreign subsidiaries and affiliates that do not utilize the U.S. dollar as their functional currency are translated at year-end rates of exchange, while sales and expenses are translated at weighted average rates of exchange. Unrealized translation gains or losses are reported as foreign currency translation adjustments through other accumulated comprehensive loss or income included in shareholders' equity. Such adjustments resulted in net unrealized losses of $3.5 million and $13.9 million for the years ended June 30, 2016 and 2015, respectively, and net unrealized gains of $2.4 million for the year ended June 30, 2014. Gains or losses resulting from foreign currency transactions are recorded in the foreign subsidiaries' statements of operations. Such amounts resulted in net losses of $ 3.9 6.7 0.8 Cash and Cash Equivalents. Cash and cash equivalents include cash and interest-bearing deposits at banks with an original maturity date of three months or less. Allowances for Doubtful Accounts Receivable. The Company maintains allowances for doubtful accounts to cover uncollectible accounts receivable and evaluates its accounts receivable to determine if they will ultimately be collected. This evaluation includes significant judgments and estimates, including an analysis of receivables aging and a customer-by-customer review for large accounts. If, for example, the financial condition of the Company's customers deteriorates resulting in an impairment of their ability to pay, additional allowances may be required, resulting in a charge to income in the period in which the determination was made. Inventories. Inventories are stated at the lower of cost or market. Cost is determined using the weighted average method. See Note 6. Property and Equipment, and Depreciation. Property and equipment are stated at cost. Expenditures for major improvements and additions are recorded to the asset accounts, while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are charged to expense. Depreciation is provided over the estimated useful lives of the assets using the straight-line method. When fixed assets are sold or otherwise disposed of, the accounts are relieved of the original cost of the assets and the related accumulated depreciation and any resulting profit or loss is credited or charged to income. See Note 7 . Exclusive Brand Licenses, Trademarks, and Intangibles. The Company's definite lived intangible assets are being amortized using the straight-line method over their estimated useful lives. Intangible assets that have indefinite useful lives are not being amortized. See Note 8. Indefinite-Lived and Long-Lived Assets. Goodwill and intangible assets with indefinite lives are not amortized, but rather assessed for impairment at least annually. An annual impairment assessment is performed during the Company's fourth fiscal quarter or more frequently if events or changes in circumstances indicate the carrying value of goodwill and indefinite-lived intangible assets may not fully be recoverable. The Company follows the guidance in Topic 350, Intangibles-Goodwill and Other, which simplifies how an entity assesses goodwill for impairment and allows an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment assessment. An entity is not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. Should a goodwill impairment assessment be necessary, there is a two step process for assessing impairment of goodwill. The first step used to identify potential impairment compares the fair value of a reporting unit with its carrying amount, including goodwill. The second step, if necessary, measures the amount of the impairment by comparing the estimated fair value of the goodwill and intangible assets to their respective carrying values. If an impairment is identified, the carrying value of the asset is adjusted to estimated fair value. Long-lived assets are reviewed for impairment upon the occurrence of specific triggering events. The impairment assessment is based on a comparison of the carrying value of such assets against the undiscounted future cash flows expected to be generated by such assets. If an impairment is identified, the carrying value of the asset is adjusted to estimated fair value. During the second quarter of fiscal 2015, net sales of Justin Bieber and Nicki Minaj fragrances fell significantly below expectations. The Company reviewed these license agreements for potential impairment. Given the significant decline in net sales during the second quarter of fiscal 2015, and the expectation for a continued decline of sales in future periods, the Company determined that these intangible assets were fully impaired. As a result, the Company recorded a total impairment charge of approximately $ 39.6 During the fourth quarter of fiscal 2014, the Company decided (i) not to renew the True Religion license agreement which expired on June 30, 2014, and (ii) not to renew the BCBGMAXAZRIA license agreement once it expires in January 2017. At the time of the acquisition of the licenses from New Wave Fragrances LLC in May 2012, the Company assumed it would exercise its renewal options for both licenses and estimated the useful lives to be approximately six 9.5 5.8 The Company will continue to monitor and evaluate the expected future cash flows of its reporting units and the long-term trends of its market capitalization for the purposes of assessing the carrying value of its goodwill and indefinite-lived Elizabeth Arden trademarks, other trademarks and intangible assets. There were no triggering events identified, and therefore no such adjustments were recorded for the year ended June 30, 2016. See Note 8. Leases. The Company leases distribution equipment, office and computer equipment, and vehicles. The Company also has operating leases for office and retail space, as well as capital leases for computer equipment and software. The Company reviews all of its leases to determine whether they qualify as operating or capital leases. Leasehold improvements are capitalized and amortized over the lesser of the useful life of the asset or current lease term. The Company accounts for free rent periods and scheduled rent increases on a straight-line basis over the lease term. Landlord allowances and incentives are recorded as deferred rent and are amortized as a reduction to rent expense over the lease term. Debt Issuance Costs and Debt Premium . Debt issuance costs, transaction fees and debt premium, which are associated with the issuance of the senior notes, the Amended Credit Facility and the Second Lien Credit Agreement (see Note 9), are being amortized and charged to interest expense, or in the case of debt premium recorded as interest income, over the term of the related notes or the term of the applicable credit facility. In any period in which the senior notes are redeemed, the unamortized debt issuance costs and transaction fees relating to the notes being redeemed are expensed and the unamortized debt premium relating to the notes being redeemed is recorded as a reduction in interest expense. See Note 10. Cost of Sales. Included in cost of sales are the cost of products sold, the cost of gift with purchase items provided to customers, royalty costs related to patented technology or formulations, warehousing, distribution and supply chain costs. The major components of warehousing, distribution and supply chain costs include salary and related benefit costs for employees in the warehousing, distribution and supply chain functions and facility- related costs in these areas. Selling, General and Administrative Costs. Included in selling, general and administrative expenses are advertising, creative development and promotion costs not paid directly to the Company's customers, royalty costs related to trademarks, salary and related benefit costs of the Company's employees in the finance, human resources, information technology, legal, sales and marketing functions, facility- related costs of the Company's administrative functions, and costs paid to consultants and third party providers for related services. Advertising and Promotional Costs. Advertising and promotional costs that are paid directly to customers for goods and services provided (primarily co-op advertising and certain direct selling costs) are expensed as incurred and are recorded as a reduction of sales. Advertising and promotional costs that are not paid directly to the Company's customers are expensed as incurred and recorded as a component of cost of goods sold (in the case of free goods given to customers) or selling, general and administrative expenses. Advertising and promotional costs include promotions, direct selling, co-op advertising and media placement. Advertising and promotional costs for the years ended June 30, 2016, 2015 and 2014 were as follows: Year Ended June 30, (Amounts in millions) 2016 2015 2014 Advertising and promotional costs $ 289.4 $ 297.5 $ 367.8 Income Taxes. The provision for income taxes is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities and certain other adjustments. The Company provides for deferred taxes under the liability method. Under such method, deferred taxes are adjusted for tax rate changes as they occur. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize their benefit, or, that future deductibility is uncertain. Commencing with the fourth quarter of fiscal 2014, the Company began recording valuation allowances against its U.S. deferred tax assets as a non-cash charge to income tax expense. Also, commencing in fiscal 2015, for certain foreign operations, the Company began recording valuation allowances against our deferred tax assets in such foreign operations as non-cash charges to income tax expense. The valuation allowances for net deferred tax assets will prevent the Company from recording tax benefits on future losses in the affected operations unless sufficient future taxable income is generated in such operations to support the realization of the deferred tax assets. See Note 14. During the fourth quarter of fiscal 2015, the Company finalized an intercompany loan agreement between a foreign subsidiary, incorporated in Switzerland, and a U.S. subsidiary. Under the terms of the intercompany loan agreement, the foreign subsidiary loaned $ 42 2.1 The Company recognizes in its consolidated financial statements the impact of a tax position if it is more likely than not that such position will be sustained on audit based on its technical merits. While the Company believes that its assessments of whether its tax positions are more likely than not to be sustained are reasonable, each assessment is subjective and requires the use of significant judgments. As a result, one or more of such assessments may be challenged by the relevant tax authorities, which could result in a change to net income if such position is not sustained. Hedge Contracts. The Company has designated each foreign currency contract entered into as of June 30, 2016, as a cash flow hedge. Unrealized gains or losses, net of taxes, associated with these contracts are included in accumulated other comprehensive (loss) income on the consolidated balance sheet. Gains and losses will be recognized in earnings in the period in which the forecasted transaction affects earnings or the transactions are no longer probable of occurring. Changes to fair value of any contracts deemed to be ineffective would be recognized in earnings immediately. Other Payables and Accrued Expenses. A summary of the Company's other payables and accrued expenses as of June 30, 2016 and 2015, is as follows: June 30, June 30, (Amounts in thousands) 2016 2015 Accrued advertising, promotion and royalties $ 23,284 $ 30,279 Accrued employee-related benefits 29,874 28,116 Accrued value added taxes 4,511 4,083 Accrued interest 7,871 7,855 Freight 2,760 2,815 Other accruals 36,220 41,830 Total other payables and accrued expenses $ 104,520 $ 114,978 Accumulated Other Comprehensive (Loss) Income. Accumulated other comprehensive (loss) income includes, in addition to net income or net loss, unrealized gains and losses excluded from the consolidated statements of operations and recorded directly into a separate section of shareholders' equity on the consolidated balance sheet. These unrealized gains and losses are referred to as other comprehensive (loss) income items. The Company's accumulated other comprehensive (loss) income shown on the consolidated balance sheets at June 30, 2016 and June 30, 2015, consists of foreign currency translation adjustments, which are not adjusted for income taxes as such amounts relate to indefinite investments in non-U.S. subsidiaries, and the unrealized gains (losses), net of taxes, related to the Company's foreign currency contracts, respectively. The components of accumulated other comprehensive loss as of June 30, 2016, 2015 and 2014, were as follows: Year Ended June 30, (Amounts in thousands) 2016 2015 2014 Cumulative foreign currency translation adjustments $ (20,038 ) $ (16,540 ) $ (2,622 ) Unrealized hedging loss, net of taxes (750 ) (46 ) (2,163 ) Accumulated other comprehensive loss $ (20,788 ) $ (16,586 ) $ (4,785 ) Fair Value of Financial Instruments. The Company's financial instruments include accounts receivable, accounts payable, currency forward contracts, short-term debt and long-term debt. The Company follows the guidance under Topic 820, Fair Value Measurements and Disclosures. See Note 17. Share-Based Compensation . All share-based payments to employees, including the grants of employee stock options, are recognized in the consolidated financial statements based on their fair values, but only to the extent that vesting is considered probable. Compensation cost for awards that vest will not be reversed if the awards expire without being exercised. The fair value of stock options is determined using the Black-Scholes option-pricing model and the fair value of restricted stock and restricted stock unit awards is based on the closing price of the Company's common stock, $ .01 The Company relies on its historical experience and post-vested termination activity to provide data for estimating expected term for use in determining the fair value of its stock options. The Company currently estimates its stock volatility by considering historical stock volatility experience and other key factors. The risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the input to the Black-Scholes model. The Company estimates forfeitures using its historical experience, which will be adjusted over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Because of the significant amount of judgment used in these calculations, it is reasonably likely that circumstances may cause the estimate to change. If, for example, actual forfeitures are lower than the Company's estimate, additional charges to net income may be required. Out-Of-Period Adjustments . During the year ended June 30, 2014, the Company recorded two 0.5 0.8 0.3 . |