Notes to Consolidated Financial Statements
5. GOODWILL AND INTANGIBLE ASSETS
The following table displays intangible assets as of November 30, 2006 and 2005:
| 2006 | 2005 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (millions) | Gross carrying amount |
Accumulated amortization |
Gross carrying amount |
Accumulated amortization |
||||||||
| Amortizable intangible assets | $ | 27.8 | $ | 3.5 | $ | 10.0 | $ | 1.2 | ||||
| Non-amortizable intangible assets: |
||||||||||||
| Goodwill | 885.1 | 81.3 | 739.0 | 75.1 | ||||||||
| Brand names | 160.6 | – | 141.4 | – | ||||||||
| Trademarks | 9.5 | .8 | 8.9 | .8 | ||||||||
| 1,083.0 | 82.1 | 889.3 | 75.9 | |||||||||
| Total goodwill and intangible assets |
$ | 1,083.0 | $ | 85.6 | $ | 899.3 | $ | 77.1 | ||||
Intangible asset amortization expense was $1.8 million, $0.5 million and $0.1 million for 2006, 2005 and 2004, respectively. At November 30, 2006, amortizable intangible assets have an average remaining life of approximately 12.9 years.
The changes in the carrying amount of goodwill by segment for the years ended November 30, 2006 and 2005 are as follows:
| 2006 | 2005 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (millions) | Consumer | Industrial | Consumer | Industrial | ||||||||
| Beginning of year | $ | 619.5 | $ | 44.4 | $ | 664.9 | $ | 48.0 | ||||
| Goodwill acquired | 82.4 | – | – | – | ||||||||
| Goodwill disposed | (1.8 | ) | – | – | – | |||||||
| Goodwill transferred and deferred taxes |
– | – | 13.3 | – | ||||||||
| Foreign currency fluctuations | 54.6 | 4.7 | (58.7 | ) | (3.6 | ) | ||||||
| End of year | $ | 754.7 | $ | 49.1 | $ | 619.5 | $ | 44.4 | ||||
6. INVESTMENTS IN AFFILIATES
Summarized year-end information from the financial statements of unconsolidated affiliates representing 100% of the businesses follows:
| (millions) | 2006 | 2005 | 2004 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Net sales | $ | 435.7 | $ | 460.3 | $ | 428.3 | |||
| Gross profit | 167.9 | 183.7 | 157.3 | ||||||
| Net income | 39.8 | 41.3 | 28.8 | ||||||
| Current assets | $ | 154.1 | $ | 181.5 | $ | 189.2 | |||
| Noncurrent assets | 53.0 | 99.0 | 94.1 | ||||||
| Current liabilities | 75.1 | 102.4 | 97.4 | ||||||
| Noncurrent liabilities | 8.8 | 13.9 | 23.4 | ||||||
The results for 2006 include income activity for our investment in Signature only through the date of its redemption in the second quarter of 2006 (see note 4 of the financial statements). Our share of undistributed earnings of unconsolidated affiliates was $46.3 million at November 30, 2006. Royalty income from unconsolidated affiliates was $11.1 million, $10.5 million and $9.7 million for 2006, 2005 and 2004, respectively.
7. FINANCING ARRANGEMENTS
Our outstanding debt is as follows:
| (millions) | 2006 | 2005 | ||||
|---|---|---|---|---|---|---|
| Short-term borrowings Commercial paper (1) |
$ | 78.6 | $ | 104.2 | ||
| Other | 2.2 | 1.2 | ||||
| $ | 80.8 | $ | 105.4 | |||
| Weighted-average interest rate of short-term borrowings at year-end |
5.51% | 4.00% | ||||
| Long-term debt 5.78% - 7.77% medium-term notes due 2006 |
– | $ | 47.0 | |||
| 6.40% - 6.80% medium-term notes | ||||||
| due 2006 to 2008 (2) | $ | 149.8 | 298.6 | |||
| 3.35% medium-term notes due 2009 (3) | 48.6 | 47.8 | ||||
| 5.80% medium-term notes due 2011 | 100.0 | – | ||||
| 5.20% medium-term notes due 2015 (4) | 201.0 | – | ||||
| 7.63% - 8.12% medium-term notes due 2024 | 55.0 | 55.0 | ||||
| Other | 15.8 | 16.2 | ||||
| 570.2 | 464.6 | |||||
| Less current portion | .6 | .7 | ||||
| $ | 569.6 | $ | 463.9 | |||
(1) The variable interest rate on $75 million of commercial paper is hedged by interest rate swaps through 2011. Net interest payments are fixed at 6.35% during this period.
(2) Interest rate swaps, settled upon the issuance of the medium-term notes, effectively fixed the interest rate on $294 million of the notes at a weighted average fixed rate of 7.62%.
(3) The fixed interest rate on the 3.35% medium-term notes due in 2009 is effectively converted to a variable rate by interest rate swaps through 2009. Net interest payments are based on LIBOR minus .21% during this period.
(4) The fixed interest rate on $100 million of the 5.20% medium-term notes due in 2015 is effectively converted to a variable rate by interest rate swaps through 2015. Net interest payments are based on LIBOR minus .05% during this period.
Maturities of long-term debt during the years subsequent to November 30, 2007 are as follows (in millions):
2008 – $150.4
2009 – $50.4
2010 – $14.4
2011 – $100.0
Thereafter – $255.0
In July 2006, we issued $100 million of 5.80% medium-term notes due 2011. Net interest is payable semi-annually in arrears in January and July of each year. The net proceeds from this offering were used to pay down the commercial paper debt placed in June 2006 for the acquisition of Simply Asia Foods.
In December 2005, we issued $200 million of 5.20% medium-term notes due 2015. Net interest is payable semi-annually in arrears in June and December of each year. The net proceeds from this offering were used to pay down long-term debt which matured in 2006.