Management's Discussion and Analysis

Acquisitions

On November 1, 2004, we purchased C.M. van Sillevoldt B.V. (Silvo), the market leader in the Dutch spices and herbs consumer market, for €58 million in cash (equivalent to $74.5 million) funded with cash from operations and current credit facilities. Silvo sells spices, herbs and seasonings under the Silvo brand in the Netherlands and the India brand as well as private label store brands in Belgium. The brand has a strong heritage, high recognition among consumers and is the leading brand of herbs and spices in the Netherlands. The acquisition was accounted for under the purchase method, and the results of operations have been included in our consolidated results from the date of acquisition . The excess of the purchase price over the estimated fair value of the tangible net assets purchased of $59.4 million was initially classified as goodwill in the consumer segment in 2004. In the fourth quarter of 2005, we completed the purchase price allocation for the Silvo acquisition. A detailed analysis of the intangible assets resulted in our conclusion that the excess purchase price should be accounted for as the value of the acquired brand and goodwill. No other intangible assets were identified as a result of this analysis. We concluded that a large portion of the value of the excess purchase price resides in the Dutch consumers' cultural connections with the Silvo brand name. Based on an analysis of the premium value that is derived from consumer loyalty and trust in the Silvo brand's quality, we assigned $35.0 million of the excess purchase price to this unamortizable brand. Given Silvo's strong brand name recognition in the marketplace, we intend to use and support the brand name indefinitely. The remaining $24.4 million of excess purchase price remained as goodwill in the consumer segment.

In the second quarter of 2004, we completed the purchase price allocation for the Zatarain's acquisition. The excess of the purchase price over the estimated fair value of the net assets purchased was $176.2 million, which includes $3.4 million of fees directly related to the acquisition. An analysis of the various types of intangible assets resulted in a determination that the excess purchase price should be classified as the value of the acquired brand name and goodwill. No other intangible assets were identified as a result of this analysis. We have concluded that a substantial portion of the value of the excess purchase price resides in consumer trust and recognition of the Zatarain's brand name as authentic New Orleans-style cuisine. As a result, we have assigned $106.4 million of the excess purchase price to this unamortizable brand based on an analysis of the premium value that is derived from consumer loyalty and trust in the brands' quality. Zatarain's brand name has been used since 1889, and we intend to use and support the brand name indefinitely. The remaining $69.8 million of excess purchase price remained as goodwill in the consumer segment.

B2K

Late in 1999, we initiated the B2K program as a global program of business process improvement. B2K is designed to re-engineer transactional processes, strengthen the product development process, extend collaborative processes with trading partners, optimize the supply chain and generally enhance our capabilities to increase sales and profit. An integral part of B2K is the design and implementation of an enterprise-wide state-of-the-art technology and information system platform.

The implementation of B2K in our U.S. operations was completed in 2004. We began to rollout B2K to our international operations in 2005 with implementation in Europe to be completed early in 2006. Remaining implementation efforts for other international locations are targeted for completion by the end of 2007.

To date, $135 million of costs associated with B2K have been capitalized and $39 million has been expensed. Additional capital spending of approximately $11 million and an additional expense of approximately $8 million is anticipated under this program. Capital costs under the B2K program are for computer hardware, software and software development and are reflected in property, plant and equipment in the consolidated balance sheet. Costs expensed under the B2K program include costs of business re-engineering, data conversion and training, and are reflected in both cost of sales and selling, general and administrative expense in the consolidated statement of income.