Avon 2007 Annual Report Download - page 86

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2007, 2006 and 2005, the
components of other expense, net were as follows:
2007 2006 2005
Foreign exchange (gains) losses, net $ (2.9) $ 6.2 $ 5.8
Net gains on available-for-sale
securities (Note 5) – – (2.5)
Amortization of debt issue costs
and other financing 12.3 9.6 8.9
Gain on de-designated treasury lock
agreement (Note 7) – – (2.5)
Other (2.8) (2.2) (1.7)
Other expense, net $ 6.6 $13.6 $ 8.0
NOTE 16. Goodwill and Intangible
Assets
On April 2, 2007, we acquired our licensee in Egypt for approx-
imately $17 in cash. The acquired business is being operated by
a new wholly-owned subsidiary and is included in our Western
Europe, Middle East & Africa operating segment. The purchase
price allocation resulted in goodwill of $9.3 and customer rela-
tionships of $1.0 with a seven-year useful life.
In August 2006, we purchased all of the remaining 6.155%
outstanding shares in our two joint-venture subsidiaries in China
from the minority interest shareholders for approximately $39.1.
We previously owned 93.845% of these subsidiaries and con-
solidated their results, while recording minority interest for the
portion not owned. Upon completion of the transaction, we
eliminated the minority interest in the net assets of these sub-
sidiaries. The purchase of these shares did not have a material
impact on our consolidated net income. Avon China is a stand-
alone operating segment. The purchase price allocation resulted
in goodwill of $33.3 and customer relationships of $1.9 with a
ten-year weighted-average useful life.
On October 18, 2005, we purchased the Avon direct-selling busi-
ness of our licensee in Colombia for approximately $154.0 in
cash, pursuant to a share purchase agreement that Avon Interna-
tional Holdings Company, a wholly owned subsidiary of the
Company, entered into with Sarastro Ltd. Ldc. on October 7,
2005. The acquired business is being operated by a new wholly-
owned subsidiary under the name “Avon Colombia” and is
included in our Latin America operating segment. We had a
pre-existing license arrangement with the acquired business. The
negotiated terms of the license agreement were considered to be
at market rates; therefore, no settlement gain or loss was recog-
nized upon acquisition. During the fourth quarter of 2005, we
recorded a preliminary purchase price allocation, which resulted
in goodwill of $94.8, licensing agreement of $32.0 (four-year
useful life), customer relationships of $35.1 (seven-year weighted-
average useful life), and a noncompete agreement of $3.9 (three-
year useful life). During 2006, we gathered additional data to
refine certain assumptions of the valuation. The revised purchase
price allocation resulted in goodwill of $94.6, licensing agreement
of $36.0 (four-year useful life), customer relationships of $28.6
(five-year weighted-average useful life), and a noncompete
agreement of $3.9 (three-year useful life).
Goodwill
Latin
America
Western
Europe,
Middle
East &
Africa
Central
& Eastern
Europe
Asia
Pacific China Total
Balance at December 31, 2006 $95.1 $24.2 $8.8 $10.2 $65.4 $203.7
Goodwill acquired – 9.3 – – – 9.3
Adjustments – – – – .2 .2
Foreign exchange (.2) 4.3 – .2 4.7 9.0
Balance at December 31, 2007 $94.9 $37.8 $8.8 $10.4 $70.3 $222.2