Sara Lee 2009 Annual Report Download - page 60

Notes to financial statements
Dollars in millions except per share data
North American Foodservice Property and Goodwill In 2008, steps
were taken to market and identify potential buyers for the U.S. direct
store delivery foodservice beverage business (DSD) that is part of the
North American Foodservice segment. In June 2008, the corporation’s
board of directors authorized management to negotiate and sell DSD
under certain criteria. As part of this process, the corporation received
a non-binding offer for the business which was less than the carrying
value. Utilizing the net purchase price, the corporation conducted an
impairment review of DSD and recognized a pretax impairment charge
of $49 in the fourth quarter of 2008, of which $38 and $11 were
related to property and goodwill, respectively. The after tax impact
of the impairment charge was $33. The remaining assets of this
reporting unit were classified as held for sale at the end of 2008.
During 2009, the corporation completed the disposition of the
DSD business and received $42.
2007
North American Retail Property In 2007, the corporation decided to
exit a commodity meats hog slaughtering operation being conducted
at a facility that is part of the North American Retail segment. Certain
of the activities performed at the location were transferred to more
efficient third-party suppliers and others were eliminated as part of
the shutdown of this plant. Based upon our consideration of the
results of a third-party appraisal and internal estimates of cash
flows to be generated through the date of disposition, the corpora-
tion concluded that it was necessary to recognize an impairment
charge of $34 for this asset group in 2007. The after tax impact
of this impairment charge was $22.
North American Fresh Bakery Trademarks In 2007, as part of the
corporation’s transformation plan to improve operating efficiency and
profitability, the North American Fresh Bakery business began to focus
its marketing, advertising and promotion spending on a select number
of brands. As a result of these plans, the corporation assessed the
recoverability of certain trademarks impacted by this strategy. The
corporation determined that the undiscounted cash flows over the
remaining lives of the trademarks did not recover the carrying value
of the assets. Therefore, the corporation calculated the estimated fair
value of the trademarks using the royalty savings method and recorded
an impairment charge of $16 for the difference between fair value and
carrying value. The after tax impact of the impairment charge is $10.
International Beverage Goodwill and Trademarks In 2007, the
corporation recognized a $118 pretax impairment charge in its
International Beverage operations to record the impairment of $92
of goodwill and $26 of trademarks. No tax benefit was recognized
on the goodwill impairment charge. The after tax impact of the
trademark impairment charge is $17.
International Household and Body Care In 2007, changes in local
governmental regulations in Zimbabwe included severe foreign
exchange restrictions which inhibit the corporation from declaring divi-
dends and repatriating earnings from the local operation. Due to these
restrictions, the corporation recognized a pretax charge of $4 in 2007.
Note 4 – Discontinued Operations
There were no financial results attributable to discontinued operations
in 2009. In 2008, the corporation disposed of its Mexican Meats
operations. In 2007, the corporation disposed of its European Meats
and Branded Apparel Americas/Asia businesses. The results of
these businesses have been reported as discontinued operations.
The amounts in the tables below reflect the operating results of the
businesses reported as discontinued operations. Gains and losses
related to the disposal of these discontinued operations are excluded
from the following tables; however, they are discussed further below.
Pretax
Income Income
Net Sales (Loss) (Loss)
2008
European Branded Apparel $«««««««– $(15) $(15)
Mexican Meats 23811
Total $÷«238 $(14) $(14)
2007
European Meats $«««114 $«««7 $«««3
Branded Apparel Americas/Asia 787 85 59
Mexican Meats 296 (10) (14)
Total $1,197 $«82 $«48
Results of Discontinued Operations Net sales of discontinued
operations were $238 in 2008 and $1,197 in 2007; a full year
of results for the Mexican meats business was not included in
2008 as the business was sold in the third quarter of 2008; and
a full year of results for the European Meats and Branded Apparel
Americas/Asia businesses was not included in 2007 as each of
the businesses was sold in the first quarter of that fiscal year.
The corporation reported income (loss) from discontinued
operations of $(14) in 2008 and $48 in 2007. In 2008, the corpo -
ration recognized a $15 charge related to the settlement of a
pension plan in the U.K. associated with the European Branded
Apparel business, which was sold in 2006.
Gain (Loss) on the Sale of Discontinued Operations
The gains (losses) recognized in 2008 and 2007 are summarized in
the following tables. A further discussion of each disposition follows.
Pretax Tax
Gain (Loss) (Charge)/ After Tax
on Sale Benefit Gain (Loss)
2008
Mexican Meats $(23) $«(1) $(24)
2007
European Meats $«18 $«(1) $«17
Branded Apparel Americas/Asia (23) 6 (17)
Philippines portion of European
Branded Apparel 8(2) 6
Other 2810
Total $«««5 $11 $«16
58 Sara Lee Corporation and Subsidiaries