6.	GOODWILL AND INTANGIBLE ASSETS

Our goodwill and intangible assets have resulted from acquisitions. Upon acquisition, the purchase price is first allocated to identifiable assets and liabilities, including trademarks and customer-related intangible assets, with any remaining purchase price recorded as goodwill. Goodwill and trademarks with indefinite lives are not amortized.

A trademark is determined to have an indefinite life if it has a history of strong sales and cash flow performance that we expect to continue for the foreseeable future. If these perpetual trademark criteria are not met, the trademarks are amortized over their expected useful lives. Determining the expected life of a trademark is based on a number of factors including the competitive environment, trademark history and anticipated future trademark support.

Amortizable intangible assets are only evaluated for impairment upon a significant change in the operating environment. If an evaluation of the undiscounted cash flows indicates impairment, the asset is written down to its estimated fair value, which is generally based on discounted future cash flows.

We conduct impairment tests of goodwill and intangible assets with indefinite lives annually in the fourth quarter and on an interim basis when circumstances arise that indicate a possible impairment. We evaluate goodwill at the reporting unit level; our reporting units include Fresh Dairy Direct, WhiteWave, Morningstar and Alpro. We did not recognize any impairment charges related to goodwill during 2010 or 2009.

Interim Impairment Test at Fresh Dairy Direct — During the third quarter of 2011, we performed a step one interim goodwill analysis of our Fresh Dairy Direct reporting unit. A prolonged economic decline has resulted in significantly lower consumer spending, declining volumes in the fluid milk industry and increased competitive pricing pressures that are unlikely to improve materially. These conditions have continued to affect both consumption and pricing in our Fresh Dairy Direct product categories, which culminated in a change to our outlook for that business. We believed that these indicators of impairment were isolated to the Fresh Dairy Direct reporting unit and did not warrant interim testing for our WhiteWave, Morningstar and Alpro reporting units. We assessed each of these reporting units for impairment during the fourth quarter of 2011 in connection with our annual impairment test, as described more fully below.

Based on the results of the step one analysis, we determined that the carrying value of our Fresh Dairy Direct reporting unit exceeded its fair value. For purposes of the step one analysis, we estimated the fair value of the Fresh Dairy Direct reporting unit using both an income approach that analyzed projected discounted cash flows and a market approach that considered other comparable companies. Both approaches resulted in substantially similar values for our Fresh Dairy Direct reporting unit. We also compared the aggregate fair value estimates of all of our reporting units, using the fair values derived in our 2010 annual impairment test, conducted in the fourth quarter of 2010, for our other three reporting units, to our enterprise value (market capitalization plus outstanding indebtedness) as of the valuation date. In our view, the comparison indicated that the step one determination of fair value of Fresh Dairy Direct was reasonable.

In calculating the fair value of our Fresh Dairy Direct reporting unit we used unobservable inputs (Level 3, as defined in Note 10) and significant management judgment. We used the following estimates and assumptions in the discounted cash flow analysis:

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A terminal EBITDA margin percentage reflecting our historical and forecasted EBITDA margins;

•

A terminal growth rate based on long term real growth rate potential and a long-term inflation forecast;

•

Assumptions regarding future capital expenditures reflective of maintaining facilities under normalized operations; and

•

An overall discount rate based on our weighted average cost of capital for the Fresh Dairy Direct reporting unit.

Additionally, under the market approach analysis, we used significant other observable inputs (Level 2, as defined in Note 10) including various peer company comparisons. Changes in these estimates or assumptions could materially affect the determination of fair value and the conclusions of the step one analysis for the reporting unit.

Because our Fresh Dairy Direct reporting unit carrying value was determined to be in excess of its fair value in our step one analysis, we were required to perform step two of the impairment analysis to determine the amount of goodwill impairment to be recorded. The amount of the impairment is calculated by comparing the implied fair value of the goodwill to its carrying amount, which requires us to allocate the fair value determined in the step one analysis to the individual assets and liabilities of the reporting unit. Any remaining fair value would represent the implied fair value of goodwill on the testing date.

The interim impairment analysis was not complete as of the filing date of our Quarterly Report on Form 10-Q for the period ended September 30, 2011; however, based on the work performed through the date of that filing, we concluded that an impairment charge between $1.9 billion and $2.1 billion could be reasonably estimated. Accordingly, we recorded a $1.9 billion, non-cash charge ($1.6 billion, net of tax), during the third quarter of 2011, which represented our best estimate of the impairment present at September 30, 2011. This impairment charge did not impact our operations, compliance with our debt covenants or our cash flows.

During the fourth quarter of 2011, we finalized the interim impairment analysis of Fresh Dairy Direct goodwill and other indefinite-lived intangible assets and recorded an additional non-cash impairment charge of $149.8 million ($57.9 million, net of tax). The adjustment to the initial impairment estimate booked during the third quarter of 2011 was the result of refining our valuation models to verify the overall accuracy and reasonableness of all significant inputs and assumptions. This impairment charge did not impact our operations, compliance with our debt covenants or our cash flows.

Annual Impairment Test of Goodwill and Indefinite-Lived Intangible Assets — Following the interim testing of our Fresh Dairy Direct reporting unit as described above, we conducted our annual impairment test during the fourth quarter of 2011. Considerable management judgment is necessary to evaluate goodwill and indefinite-lived intangible assets for impairment. We determine fair value using widely acceptable valuation techniques including discounted cash flows, market multiples analyses and relief from royalty analyses. Assumptions used in our valuations, such as forecasted growth rates and our cost of capital, are consistent with our internal projections and operating plans. The terminal growth rates utilized in calculating the fair value of our reporting units (ranging from 1% to 3.5%) is also dependent upon meeting our internal projections and operating plans, as well as other factors and assumptions.

Based on our analysis performed in the fourth quarter of 2011, each of our reporting units tested had fair values in excess of book values by approximately $512 million or 28.6%, $510 million or 94.5%, $1.2 billion or 106.7% and $193 million or 46.4% for Fresh Dairy Direct, Morningstar, WhiteWave and Alpro, respectively. The sum of the fair values of our reporting units was in excess of our market capitalization. We believe that the difference between the fair value and market capitalization is reasonable (in the context of assessing whether any asset impairment exists) when market-based control premiums are taken into consideration. Additionally, based on the analysis of our indefinite-lived trademarks performed in the fourth quarter of 2011, each of our trademarks had fair values in excess of their book values.

In 2009, we recognized an impairment charge of $0.5 million in Fresh Dairy Direct related to a perpetual trademark for a regional brand due to projected declining annualized sales volumes and profitability. These trademarks were no longer deemed to have a perpetual life and are being amortized over their respective estimated remaining lives.

We can provide no assurance that we will not have additional impairment charges in future periods as a result of changes in our operating results or our assumptions.

The changes in the carrying amount of goodwill for the years ended December 31, 2011 and 2010 are as follows:

		December 31		December 31		December 31		December 31
	Fresh Dairy Direct		WhiteWave- Alpro		Morningstar		Total
	(In thousands)
Balance at December 31, 2009	$	2,223,565	$	712,912	$	336,337	$	3,272,814
Acquisitions and purchase accounting adjustments		(4,696)		—		—		(4,696)
Foreign currency translation		—		(6,487)		—		(6,487)
Goodwill transferred to assets held for sale (1)		(55,084)		—		(27,355)		(82,439)

Balance at December 31, 2010	$	2,163,785	$	706,425	$	308,982	$	3,179,192
Goodwill impairment		(2,075,836)		—		—		(2,075,836)
Acquisitions and purchase accounting adjustments		—		—		—		—
Foreign currency translation		—		(3,655)		—		(3,655)
Divestitures (Note 2)		(1,108)		—		(2,888)		(3,996)
Other (2)		—		59,566		—		59,566

Balance at December 31, 2011	$	86,841	$	762,336	$	306,094	$	1,155,271

(1)	In the fourth quarter of 2010, we entered into agreements to sell our Mountain High and private label yogurt operations. In connection with these divestitures, goodwill of $82.4 million was allocated to these operations and recorded as assets held for sale as of December 31, 2010.

(2)

In 2011, we identified that we had not set up a deferred tax liability for a trademark acquired as part of our acquisition of WhiteWave in 2002. We corrected this error as of December 31, 2011 and recorded an increase in the goodwill attributable to our WhiteWave reporting unit of $59.6 million, with a corresponding increase in deferred tax liabilities. See Note 8.

The gross carrying amount and accumulated amortization of our intangible assets other than goodwill as of December 31, 2011 and 2010 are as follows:

		December 31		December 31		December 31		December 31		December 31		December 31
	December 31
	2011						2010
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(In thousands)
Intangible assets with indefinite lives:
Trademarks(1)	$	586,663	$	—	$	586,663	$	593,387	$	—	$	593,387
Intangible assets with finite lives:
Customer-related and other (1)		131,751		(53,652)		78,099		133,829		(44,622)		89,207
Trademarks(1)(2)		10,564		(4,938)		5,626		18,614		(4,474)		14,140

Total	$	728,978	$	(58,590)	$	670,388	$	745,830	$	(49,096)	$	696,734

(1)

We wrote off $4.6 million of indefinite-lived intangibles and $1.5 million of net finite-lived intangibles during 2011 related to the divestitures disclosed in Note 2. The remaining decrease in the carrying amount of intangible assets with indefinite lives is primarily the result of foreign currency translation adjustments.

(2)	During 2011, we sold a trademark with a gross carrying amount of $7.5 million.

Amortization expense on intangible assets for the years ended December 31, 2011, 2010 and 2009 was $10.5 million, $11.3 million and $9.6 million, respectively. Estimated aggregate intangible asset amortization expense for the next five years is as follows:



2012	$	9.3 million
2013		9.2 million
2014		8.5 million
2015		8.5 million
2016		8.5 million