Sara Lee 2013 Annual Report Download - page 43

The Hillshire Brands Company 41
The company 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. Other long-lived assets are tested for
recoverability whenever events or changes in circumstances indicate
that its carrying value may not be recoverable. The following is a
discussion of each impairment charge:
2013
Retail Property The company recognized a $1 million impairment
charge related to machinery and equipment within the Retail
segment which was determined to no longer have any future use
by the company.
2012
Capitalized Computer Software The company recognized a $14 million
impairment charge related to the write-down of capitalized computer
software which was determined to no longer have any future use by
the company. These charges were recognized as part of general
corporate expenses.
2011
Foodservice/Other Property The company recognized a $15 million
impairment charge related to the write-down of manufacturing
equipment associated with the foodservice bakery operations of
the Foodservice/Other segment.
NOTE 5 – DISCONTINUED OPERATIONS
The results of the fresh bakery, refrigerated dough and foodservice
beverage operations in North America and the international coffee
and tea, household and body care, European bakery and Australian
bakery businesses are classified as discontinued operations and are
presented as discontinued operations in the condensed consolidated
statements of income for all periods presented. The assets and liabili-
ties for these businesses met the accounting criteria to be classified
as held for sale and have been aggregated and reported on a separate
line of the Condensed Consolidated Balance Sheet prior to disposition.
NORTH AMERICAN OPERATIONS
North American Fresh Bakery On October 21, 2011, the company
announced an agreement with Grupo Bimbo that allowed the parties
to complete the previously announced sale of its North American
Fresh Bakery business for a purchase price of $709 million. The sale
also included a small portion of business that was part of the North
American Foodservice/Other segment which is not reflected as
discontinued operations as it did not meet the definition of a com-
ponent pursuant to the accounting rules. The transaction closed
on November 4, 2011 and Hillshire Brands received $717 million,
which included working capital and other purchase price adjustments.
The company entered into a customary transition services agreement
with the purchaser of this business to provide for the orderly separation
of the business and transition of various administrative functions
and processes which ended in the fourth quarter of 2013.
The buyer of the North American Fresh Bakery business assumed
all the pension and postretirement medical liabilities associated with
these businesses, including any multi-employer pension liabilities.
An actuarial analysis under ERISA guidelines was performed to deter-
mine the final plan assets that should be transferred to support the
pension liabilities assumed by the buyer. The transfer of the benefit
plan liabilities to the buyer resulted in the recognition of a $36 million
settlement loss related to the defined benefit pension plans and
a $71 million settlement gain and a $44 million curtailment gain
related to the postretirement benefit plans. These amounts have
been included in the gain on disposition of this business.
North American Foodservice Beverage On October 24, 2011, the
company announced that it had entered into an agreement to sell
the majority of its North American Foodservice Beverage operations
to the J.M. Smucker Company (Smuckers) for $350 million. The
transaction closed on December 31, 2011, resulting in the recogni-
tion of a pretax gain of $222 million in the second quarter of 2012.
The company received $376 million of proceeds, which included a
working capital adjustment. The company entered into a customary
transition services agreement with Smuckers to provide for the orderly
separation of the business and the transition of various administrative
functions and processes which ended in the fourth quarter of 2012.
The company also entered into a 10 year partnership to collaborate
on liquid coffee innovation that will pay the company approximately
$50 million plus growth-related royalties over the 10 year period.
While this arrangement provided a continuation of cash flows subse-
quent to the divestiture, it did not represent significant continuing
cash flows or significant continuing involvement that would have
precluded classification of the North American Foodservice Beverage
component as a discontinued operation. This partnership agreement
was subsequently transferred to the international coffee and tea
business as part of the spin-off. The company performed an updated
impairment analysis for the remaining assets for sale in North
American foodservice beverage and recognized a pretax impairment
charge of $6 million in 2012 which has been recognized in the oper-
ating results for discontinued operations. The company has also
recognized exit related costs for this business which is included in
the operating results for discontinued operations.
North American Foodservice Refrigerated Dough On August 9,
2011, the company announced it had entered into an agreement
to sell its North American Foodservice Refrigerated Dough business
to Ralcorp for $545 million. The company received $552 million of
proceeds, which included working capital adjustments. The company
entered into a customary transitional services agreement with the
purchaser of this business to provide for the orderly separation of
the business and the orderly transition of various functions and
processes which ended in the fourth quarter of 2012.