Sara Lee 2009 Annual Report Download - page 61

Business Sold in 2008
Mexican Meats In March 2008, the corporation completed the
disposition of its investment in its Mexican meats operation as it
wanted to more closely focus on its core brands in the U.S. The
corporation recognized a pretax loss of $23 and an after tax loss
of $24. A total of $55 of cash proceeds was received from the
disposition of the business. The Mexican meats operation had
been reported in the North American Retail segment.
Businesses Sold in 2007
European Meats In June 2006, the corporation entered into a
definitive agreement to sell its European Meats business. The
transaction closed in August 2006 after receiving European regula-
tory approval and the corporation recognized a pretax and after tax
gain of $18 and $17, respectively. The capital gain related to this
transaction was offset by capital losses on other disposition trans-
actions. A total of $337 of cash proceeds was received from the
disposition of the business and an additional $238 was received
from the repayment of an obligation to the corporation, which was
included in the net assets sold.
The corporation has not had any significant continuing involve-
ment in the business after the disposal date and does not expect
any material direct cash inflows or outflows with the sold entity.
Branded Apparel Americas/Asia In February 2005, as part of its
transformation plan, the corporation announced its intent to spin
off the corporation’s apparel business in the Americas/Asia. This
business is referred to as Branded Apparel Americas/Asia. In prepa-
ration for the spin off, the corporation incorporated Hanesbrands
Inc., a Maryland corporation to which it transferred the assets and
liabilities that relate to the Branded Apparel Americas/Asia busi-
ness. On September 5, 2006, Hanesbrands borrowed $2,600 from
a group of banks. Net of loan origination fees, Hanesbrands received
$2,558 of cash proceeds. Using a portion of the proceeds received
from the borrowing, Hanesbrands paid a dividend of $1,950 to the
corporation. Immediately following this dividend payment, Sara Lee
distributed to each stockholder of record one share of Hanesbrands
common stock for every eight shares of Sara Lee common stock
held. The spin off was tax free on a U.S. tax basis to the corpora-
tion and its shareholders.
After the spin off was completed, Hanesbrands paid $450
to the corporation to settle the note payable it had with Sara Lee
Corporation. In addition, the corporation recognized as expense
$23 of investment banker and other fees as a direct result of this
transaction. The after tax loss recognized on these fees was $17.
These amounts are recognized as part of the net gain on disposal
of discontinued operations in 2007. The corporation has no signifi-
cant continuing involvement in this business after the disposal date
and does not expect any material direct cash inflows or outflows
with this business.
Subsequent to the spin off date, the corporation has completed
certain postclosing adjustments, tax reporting and other postclosing
reconciliations in various areas, including completing the split of
the corporation’s pension plans and the determination under ERISA
rules of the relevant asset split to each plan. The net assets of the
Hanesbrands business distributed were $29 and this amount is
reflected as a dividend in the corporation’s Consolidated Statements
of Common Stockholders’ Equity.
Philippines Portion of European Branded Apparel Substantially all of
the European Branded Apparel business was sold in February 2006.
When this business was sold, certain operations in the Philippines
were awaiting local governmental approval to legally transfer the
assets. Under the terms of the sale agreement, the buyer of this
business assumed financial responsibility for all of the operations,
including the Philippines business, even though legal transfer of the
Philippines assets had not been completed. In September 2006,
upon receiving local government approval, the corporation completed
the legal transfer of the assets and recognized in 2007 a pretax
and after tax gain of $8 and $6, respectively. Under the terms of
the sale agreement of the business, the buyer assumed financial
responsibility for the Philippines business in February 2006 upon
the initial closing of the sale transaction. As such, no financial
results for the Philippines business are included in the results
of the corporation after that date.
The corporation has no significant continuing involvement in this
business after the disposal date and does not expect any material
direct cash inflows or outflows with the sold entity.
Other During 2007, the corporation completed certain postclosing
adjustments which included certain working capital adjustments
related to the assets transferred, finalized certain related tax report-
ing and completed certain financial and tax reporting adjustments
related to the U.K. Apparel and Direct Selling businesses that were
sold in 2006. As a result of these adjustments, the corporation
recognized a pretax and after tax gain in discontinued operations
of $2 and $10, respectively.
Discontinued Operations Cash Flows The corporation’s discontinued
operations impacted the cash flows of the corporation as summarized
in the table below.
2008 2007
Discontinued operations impact on
Cash from operating activities $10 $«88
Cash from investing activities (8) (47)
Cash from financing activities (5) (56)
Net cash impact of discontinued operations $«(3) $(15)
Cash balance of discontinued operations
At start of period $««3 $«18
At end of period –3
Decrease in cash of discontinued operations $«(3) $(15)
Sara Lee Corporation and Subsidiaries 59