Sara Lee 2011 Annual Report Download - page 93

International Bakery Property, Goodwill and Trademarks
In 2009,
the corporation concluded that the carrying amount of the Spanish bakery reporting unit, which is part of the International Bakery segment, exceeded its fair value. Based upon a comparison of the implied fair value of the goodwill in the reporting unit with the carrying value, management concluded that a $124 million goodwill impairment charge needed to be recognized for which there is no tax benefit. The impairment loss recognized equaled the entire amount of remaining goodwill in the Spanish bakery reporting unit. The corporation also assessed the realization of the Spanish bakery long-lived assets. The corporation considered the results of a third party fair value estimate of these long-lived assets and recorded an impairment charge of $83 million ($58 million after tax) for the difference between fair value and carrying value. Of this total, $79 million related to trademarks, the associated fair value of which was estimated using the royalty savings method. Note 5 – Discontinued Operations The businesses that formerly comprised the North American Fresh Bakery and International Household and Body Care segments as well as the North American refrigerated dough operations previously reported as part of the North American Foodservice segment are classified as discontinued operations and are presented in a sepa- rate line in the Consolidated Statements of Income for all periods presented. The assets and liabilities of these businesses to be sold meet the accounting criteria to be classified as held for sale and have been aggregated and reported on separate lines of the Condensed Consolidated Balance Sheets for all periods presented.
On November 9, 2010, the corporation signed an agreement
to sell its North American fresh bakery business to Grupo Bimbo for $959 million, which includes the assumption of $34 million of debt. Per the agreement, the purchase price is subject to various adjustments, including a reduction by up to $140 million if and to the extent that Grupo Bimbo is required to divest certain assets in connection with obtaining regulatory approval. The regulatory review process is ongoing but may result in a purchase price reduction in excess of $140 million. The agreement will enable Grupo Bimbo to use the Sara Lee brand in the fresh bakery category throughout the world, except Western Europe, Australia and New Zealand, while the corporation retains the brand for all other categories and geog- raphies. The sale also includes a small portion of business that is currently part of the North American Foodservice segment which is not reflected as discontinued operations as it does not meet the definition of a component pursuant to the accounting rules. The transaction, which is subject to customary closing conditions and regu- latory clearances, is anticipated to close in the first quarter of 2012.
The corporation currently tests goodwill and intangible assets
not subject to amortization for impairment in the fourth quarter of its fiscal year and whenever a significant event occurs or circum- stances change that would more likely than not reduce the fair value of these intangible assets. Prior to 2010, the impairment tests were performed in the second quarter. Other long-lived assets are tested for recoverability whenever events or changes in circum- stances indicate that its carrying value may not be recoverable. The following is a discussion of each impairment charge: 2011
North American Foodservice Property
The corporation recognized
a $15 million impairment charge related to the write-down of manufacturing equipment associated with the foodservice bakery operations of the North American Foodservice segment.
International Beverage Property
The corporation recognized a
$6 million impairment charge related to the write-down of beverage equipment associated with the International Beverage segment. 2010
North American Foodservice Property
The corporation recognized
a $15 million impairment charge related to the write-down of manufacturing equipment associated with the foodservice bakery operations of the North American Foodservice segment due to the loss of a customer contract.
International Bakery Property
The corporation recognized a
$13 million impairment charge related to the write-down of bakery equipment associated with the Spanish bakery operations of the International Bakery segment. 2009
North American Foodservice Goodwill
In 2009, the corporation
determined that the carrying amount of its North American food- service beverage reporting unit, which is reported in the North American Foodservice segment, exceeded its fair value. Based upon a comparison of the implied fair value of the goodwill in the reporting unit with the carrying value, management concluded that a $107 million impairment charge needed to be recognized. The impairment loss recognized equaled the entire amount of remaining goodwill in the North American foodservice beverage reporting unit. No tax benefit was recognized on the charge. 90/91 Sara Lee Corporation and Subsidiaries