Deconsolidation, Divestitures And Discontinued Operations

6 Months Ended

Jun. 30, 2011

Deconsolidation, Divestitures And Discontinued Operations

Deconsolidation, Divestitures And Discontinued Operations

Note 14 – Deconsolidation, Divestitures and Discontinued Operations

DANONE CHIQUITA FRUITS JOINT VENTURE

In May 2010, the company sold 51% of its European smoothie business to Danone S.A., for €15 million ($18 million) and deconsolidated it. The deconsolidation and sale resulted in the creation of the Danone Chiquita Fruits SAS ("Danone JV"), which is a joint venture intended to develop, manufacture, and sell packaged fruit juices and fruit smoothies in Europe and is financed by Chiquita and Danone in amounts proportional to their ownership interests. The gain on the deconsolidation and sale of European smoothie business was $32 million, which includes a gain of $15 million related to the remeasurement of the retained investment in European smoothie business to its fair value of $16 million on the closing date. No income tax expense resulted from the gain on the sale because sufficient foreign NOLs were in place and, when those foreign NOLs were used, the related valuation allowance was released. The fair value of the investment was a Level 3 measurement (see Note 6) based upon the consideration paid by Danone for 51% of the Danone JV, including a control discount. The company's 49% investment in the joint venture is accounted for as an equity method investment and is included in the Salads and Healthy Snacks segment. Future company contributions to the Danone JV are limited to an aggregate €17 million ($25 million) through 2013 without unanimous consent of the owners. The company contributed a total of €4 million ($5 million) during 2010 and less than $1 million during the second quarter of 2011. The company's carrying value of the Danone JV was $16 million as of June 30, 2011.

The Danone JV is a variable interest entity; however, the company was not the primary beneficiary, and does not consolidate it. The Danone JV will obtain sales, local marketing, and product supply chain management services from the company's subsidiaries; however, the power to direct the JV's most significant activities is controlled by Danone S.A.

SALE OF EQUITY INVESTMENT

In April 2010, the company sold its 49% investment in Coast Citrus Distributors, Inc. for $18 million in cash, which approximated its carrying value. Prior to the sale, the company accounted for this investment using the equity method.

DISCONTINUED OPERATIONS

In August 2008, the company sold its subsidiary, Atlanta AG, and the 2010 loss from discontinued operations was related to new information about potential indemnification obligations for tax liabilities. In addition, approximately €6 million ($7 million) was received in February 2010 related to consideration from the sale which had been held in escrow to secure any potential obligations of the company under the sale agreement.