Proctor and Gamble 2003 Annual Report Download - page 46

44Notes to Consolidated Financial Statements The Procter & Gamble Company and Subsidiaries
The Company finalized the purchase price allocation of Clairol in the
second quarter of 2003. There were no significant changes to the initial
allocation.
The Clairol acquisition resulted in $3,330 in goodwill, all of which was
allocated to the Beauty Care segment, and $1,533 in total intangible
assets acquired with $1,220 allocated to trademarks with indefinite
lives. The remaining $313 of acquired intangibles have determinable
useful lives and were assigned to trademarks ($128), patents and tech-
nology ($146) and other intangible assets ($39). Total intangible assets
acquired with determinable lives have a weighted average useful life of
9 years (11 years for trademarks, 9 years for patents and technology
and 5 years for other intangible assets).
The Company completed a buyout of the purchase price contingency
associated with the prior acquisition of Dr. John’s Spinbrush during
2002. The total adjusted purchase price approximates $475, with the
incremental payment resulting in additional goodwill in the Health
Care segment.
2001 Acquisitions
In 2001, purchase acquisitions totaled $246 resulting in additions to
goodwill and other intangibles of $208.
2002 Spin-off
On May 31, 2002, the Jif peanut butter and Crisco shortening brands
were spun off to the Company’s shareholders, and subsequently
merged into The J.M. Smucker Company (Smucker). The Company’s
shareholders received one new common Smucker share for every 50
shares held in the Company, totaling 26 million shares, or approximate-
ly $900 in market value. This transaction was not included in the results
of operations, since a spin-off to the Company’s shareholders is record-
ed at net book value, or $150, in a manner similar to dividends.
Note 4 Goodwill and Intangible Assets
The change in the net carrying amount of goodwill for the years ended
June 30, 2003 and 2002 was allocated by reportable business segment
as follows:
2002 Acquisitions
In 2002, purchase acquisitions, primarily the Clairol business, totaled
$5.47 billion and resulted in additions to goodwill of $3.61 billion and
other intangible assets of $1.73 billion.
On November 16, 2001, the Company completed the acquisition of the
Clairol business from The Bristol-Myers Squibb Company for approxi-
mately $5.03 billion in cash, financed primarily with debt. The operating
results of the Clairol business are reported in the Company’s Beauty
Care segment beginning November 16, 2001.
The following table provides pro forma results of operations for the
years ended June 30, 2002 and 2001 as if Clairol had been acquired as
of the beginning of each fiscal year presented. Pro forma information
for 2003 is not presented as the results of Clairol are included with
those of the Company for the entire year. The pro forma results include
adjustments for estimated interest expense on acquisition debt and
amortization of intangible assets, excluding goodwill and indefinite-
lived intangibles. However, pro forma results do not include any antici-
pated cost savings or other effects of the integration of Clairol. Accord-
ingly, such amounts are not necessarily indicative of the results that
would have occurred if the acquisition had closed on the dates indicat-
ed, or that may result in the future.
The following table presents the allocation of purchase price related to
the Clairol business as of the date of acquisition.
Millions of dollars except per share amounts
2001
$40,801
2,927
$2.07
Net Sales
Net Earnings
Diluted Net Earnings per Common Share
2002
$40,780
4,406
$3.13
Years ended June 30
Pro forma results
$487
184
1,533
3,300
18
5,522
450
47
497
5,025
Current assets
Property, plant and equipment
Intangible assets
Goodwill (1)
Other non-current assets
Total assets acquired
Current liabilities
Non-current liabilities
Total liabilities assumed
Net assets acquired
Opening Balance
(1) Approximately $2,600 in goodwill is deductible for tax purposes.