Sara Lee 2011 Annual Report Download - page 96

Download and view the complete annual report

Please find page 96 of the 2011 Sara Lee annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 124

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124

NOTES TO FINANCIAL STATEMENTS
Lease obligations associated with the VIE’s are secured by the
vehicles subject to lease and do not represent additional claims
on the corporation’s general assets. The corporation’s maximum
exposure for loss associated with the Independent Operator enti-
ties is limited to $50 million of long-term debt of the Independent
Operators as of July 2, 2011.
Note 6 – Exit, Disposal and Restructuring Activities
As part of its ongoing efforts to improve its operational performance
and reduce cost, the corporation initiated Project Accelerate in 2009,
which was a series of global initiatives designed to drive significant
savings over a three year period. The overall cost of the initiatives
includes severance costs as well as transition costs associated
with transferring services to an outside third party. An important
component of Project Accelerate involves outsourcing pieces of the
North American and European Finance (transaction processing) and
Global Information Services (applications development and mainte-
nance) groups as well as the company’s indirect procurement
activities. In addition to cost savings, this business process out-
sourcing will help the corporation drive standardization, increase
efficiency and provide flexibility. The implementation of the initiative
in North America and Europe began in the second quarter of 2009
and has been substantially completed as of the end of 2011.
The company had also announced a transformation plan in
February 2005 designed to improve performance and better posi-
tion the company for long-term growth. The plan involved significant
changes in the company’s organizational structure, portfolio changes
involving the disposition of a significant portion of the corporation’s
business, and a number of actions to improve operational efficiency.
The corporation has recognized certain trailing costs related to these
transformation actions, including the impact of certain activities that
were completed for amounts more favorable than previously estimated.
In January 2011, the corporation announced that its board of
directors had agreed in principle to divide the company into two sep-
arate, publicly traded companies which is expected to be completed
in the first half of calendar 2012. Under this plan, the corporation’s
International Beverage operations will be spun-off, tax-free, into a
new public company. As the corporation prepares for the spin-off,
it will incur certain spin-off related costs. Spin-off related costs will
include restructuring actions such as employee termination costs
and costs related to renegotiating contractual agreements; third
party professional fees for consulting and other services that are
directly related to the spin-off; and the costs of employees solely
dedicated to activities directly related to the spin-off.
The corporation also incurs exit, disposition and restructuring
charges for initiatives outside of the scope of the projects noted above.
The following is a summary of the net assets held for sale
as of July 2, 2011 and July 3, 2010, which primarily consists of
the net assets of the North American fresh bakery and refrigerated
dough businesses and the international household and body
care businesses.
July 2, July 3,
In millions 2011 2010
Trade accounts receivable $÷«173 $÷«200
Inventories 84 240
Other current assets 28 51
Total current assets held for sale 285 491
Property 558 616
Trademarks and other intangibles 263 452
Goodwill 612 1,038
Deferred assets (91) –
Other noncurrent assets 49 17
Assets held for sale $1,676 $2,614
Accounts payable $134 $137
Accrued expenses and other current liabilities 157 303
Current maturities of long-term debt 16 20
Total current liabilities held for sale 307 460
Long-term debt 79 92
Other liabilities 194 320
Liabilities held for sale $÷«580 $÷«872
Noncontrolling interest $÷÷«29 $÷÷«28
The corporation enters into franchise agreements with
independent third party contractors (“Independent Operators”)
representing distribution rights to sell and distribute fresh bakery
products via direct-store-delivery to retail outlets in defined sales
territories. The corporation does not hold equity interests in any
of the Independent Operator entities. The corporation determined
that all Independent Operators are variable interest entities (VIE) of
which it is the primary beneficiary, primarily as a result of Sara Lee’s
debt guarantee and other route maintenance obligations. The bal-
ance sheet amounts resulting from the consolidation of these VIE’s,
which are included in the assets and liabilities held for sale in the
table above, are as follows:
In millions 2011 2010
Inventories – Finished goods $÷2 $÷2
Property – Machinery and equipment 18 22
Total assets $20 $24
Current portion of long-term debt $13 $12
Long-term debt excluding current portion 49 58
Total liabilities $62 $70
Noncontrolling interests $28 $23