Folgers Merger

12 Months Ended

Apr. 30, 2011

NOTE C: FOLGERS MERGER

On November 6, 2008, the Company merged The Folgers Coffee Company (“Folgers”), previously a subsidiary of The Procter & Gamble Company (“P&G”), with a wholly-owned subsidiary of the Company. Under the terms of the agreement, P&G distributed the Folgers common shares to electing P&G shareholders in a tax-free transaction, which was immediately followed by the conversion of Folgers common stock into Company common shares. As a result of the merger, Folgers became a wholly-owned subsidiary of the Company. In the merger, P&G shareholders received approximately 63.2 million common shares of the Company valued at approximately $3,366.4 million. The aggregate purchase price was approximately $3,735.8 million. The transaction with Folgers, a leading producer of retail packaged coffee products in the U.S., is consistent with the Company’s strategy to own and market number one brands in North America.

The Folgers purchase price was allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of the merger. The Company determined the estimated fair values based on independent appraisals, discounted cash flow analyses, quoted market prices, and estimates made by management. The purchase price exceeded the estimated fair value of the net identifiable tangible and intangible assets acquired and the excess was allocated to goodwill. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the transaction date.


Assets acquired:
Current assets	$	300,781
Property, plant, and equipment		316,851
Intangible assets		2,515,000
Goodwill		1,643,636
Other noncurrent assets		4,278

Total assets acquired	$	4,780,546

Liabilities assumed:
Current liabilities	$	85,795
Deferred tax liabilities		955,235
Other noncurrent liabilities		3,750

Total liabilities assumed	$	1,044,780

Net assets acquired	$	3,735,766

Folgers goodwill of $1,643.6 million was assigned to the U.S. Retail Coffee Market and Special Markets segments. Of the total goodwill, $1,634.3 million is not deductible for tax purposes.

The purchase price allocated to the identifiable intangible assets acquired is as follows:


Intangible assets with finite lives:
Customer and contractual relationships (20-year weighted-average useful life)	$	1,089,000
Technology (14-year weighted-average useful life)		133,000
Intangible assets with indefinite lives		1,293,000

Total intangible assets	$	2,515,000

The results of operations of the Folgers business are included in the Company’s consolidated financial statements from the date of the transaction. Had the transaction occurred on May 1, 2008, unaudited, pro forma consolidated results for the year ended April 30, 2009, would have been as follows:


	Year Ended April 30, 2009

Net sales	$	4,684,746
Net income		359,979
Net income per common share — assuming dilution		3.04

The unaudited, pro forma consolidated results are based on the Company’s historical financial statements and those of the Folgers business and do not necessarily indicate the results of operations that would have resulted had the merger been completed at the beginning of the applicable period presented. The unaudited, pro forma consolidated results do not give effect to the synergies of the merger and are not indicative of the results of operations in future periods.