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H. J. Heinz Company and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
performance. The amendment also requires additional disclosures about a reporting entity’s
involvement with variable interest entities and any significant changes in risk exposure due to
that involvement. A reporting entity is required to disclose how its involvement with a variable
interest entity affects the reporting entity’s financial statements. The Company adopted this
amendment on April 29, 2010, the first day of Fiscal 2011. This adoption did not have a material
impact on the Company’s financial statements.
3. Discontinued Operations and Other Disposals
During the third quarter of Fiscal 2010, the Company completed the sale of its Appetizers And,
Inc. frozen hors d’oeuvres business which was previously reported within the U.S. Foodservice
segment, resulting in a $14.5 million pre-tax ($10.4 million after-tax) loss. Also during the third
quarter of Fiscal 2010, the Company completed the sale of its private label frozen desserts business in
the U.K., resulting in a $31.4 million pre-tax ($23.6 million after-tax) loss. During the second quarter
of Fiscal 2010, the Company completed the sale of its Kabobs frozen hors d’oeuvres business which
was previously reported within the U.S. Foodservice segment, resulting in a $15.0 million pre-tax
($10.9 million after-tax) loss. The losses on each of these transactions have been recorded in
discontinued operations.
In accordance with accounting principles generally accepted in the United States of America, the
operating results related to these businesses have been included in discontinued operations in the
Company’s consolidated statements of income for Fiscal 2010 and 2009. The following table presents
summarized operating results for these discontinued operations:
Fiscal Year Ended
April 28, 2010 April 29, 2009
FY 2010 FY 2009
(Millions of Dollars)
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $63.0 $136.8
Net after-tax losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (4.7) $ (6.4)
Tax benefit on losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.0 $ 2.4
During the fourth quarter of Fiscal 2010, the Company received cash proceeds of $94.6 million
from the government of the Netherlands for property the government acquired through eminent
domain proceedings. The transaction includes the purchase by the government of the Company’s
factory located in Nijmegen, which produces soups, pasta and cereals. The cash proceeds are intended
to compensate the Company for costs, both capital and expense, the Company will incur three years
from the date of the transaction, which is the length of time the Company has to exit the current
factory location and construct certain new facilities. Note, the Company will likely incur costs to
rebuild an R&D facility in the Netherlands, costs to transfer a cereal line to another factory location,
employee costs for severance and other costs directly related to the closure and relocation of the
existing facilities. The Company also entered into a three-year leaseback on the Nijmegen factory.
The Company will continue to operate in the leased factory while commencing to execute its plans for
closure and relocation of the operations. The Company has accounted for the proceeds on a cost
recovery basis. In doing so, the Company has made its estimates of cost, both of a capital and expense
nature, to be incurred and recovered and to which proceeds from the transaction will be applied. Of
the proceeds received, $81.2 million was deferred based on management’s total estimated future
costs to be recovered and incurred and recorded in other non-current liabilities, other accrued
liabilities and accumulated depreciation in the Company’s consolidated balance sheet as of April 28,
2010. These deferred amounts are recognized as the related costs are incurred. If estimated costs
differ from what is actually incurred, these adjustments are reflected in earnings. As of April 27,
2011, the remaining deferred amount on the consolidated balance sheet was $63.2 million and was
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