TIDMHSH
The Hillshire Brands Company (NYSE: HSH) today presented at the
Barclays Back-to-School Consumer Conference in Boston, MA and
provided an overview of the company's three-year strategic plan for
generating profitable growth.
"We are confident that our portfolio of leading retail brands
presents significant untapped potential for profitable growth in
the large and growing meat-centric meals and snacks markets," said
Sean Connolly, chief executive officer, Hillshire Brands. "With an
experienced senior leadership team now in place, we are focused on
executing our strategic plan to drive long-term growth and
profitability though brand-building and margin-accretive
innovation. Ultimately, we believe these efforts will create
significant value for our shareholders."
Strategic Priorities and Plan
Hillshire Brands' key strategic priorities center on
strengthening the company's core brands, expanding into adjacencies
and augmenting the strength of its portfolio through selective
acquisitions. The company's core brands - Hillshire Farm, Ball
Park, Jimmy Dean, State Fair, Aidells and Gallo - form a leading
platform for delivering differentiated, value-added products to
consumers. The company anticipates introducing innovative new line
extensions and product upgrades to further enhance its portfolio.
The company is also firmly committed to supporting its products
through greater marketing, advertising and promotion (MAP) spend as
it seeks to expand revenue from new innovations¹ to between 13% and
15% of total revenue by fiscal 2015; up from historic levels of 9%
of revenue.
Connolly described the company's three-year plan with the words
fix, drive and expand, which characterize Hillshire's focus in
fiscal 2013, 2014 and 2015, respectively. "This year, we are
already seeing progress against our plans, and continue to work
aggressively to strengthen the challenged portions of our portfolio
like lunchmeat and foodservice bakery," continued Connolly. "As a
transition year, the initiatives we pursue in 2013 will strengthen
our brands, reduce costs and fill our innovation pipeline. We are
fully committed to making these investments as we position
Hillshire Brands to achieve our targets for 2015 and beyond."
Financial Outlook
Maria Henry, chief financial officer of Hillshire Brands,
provided additional financial perspective on the company. She
announced that the company had adjusted diluted EPS for continuing
operations of $1.47² for fiscal 2012 versus $1.20 for fiscal 2011,
and on a reported basis, ($0.18) for fiscal 2012 versus $0.45 for
fiscal 2011. Henry reiterated fiscal 2013 guidance of net sales in
line with fiscal 2012, and adjusted EPS in the range of $1.40 and
$1.55.
She also reiterated Hillshire Brands' long-term 2015 operating
targets:
-- 2% - 3% volume growth
-- 4% - 5% net sales growth
-- 5% MAP spend as percent of total revenue
-- 10% operating margin
"We continue to look at 2013 as a transition year with increased
potential for variability that may impact our performance," said
Henry. "Our top priority is investing in our business in order to
create sustainable, long-term shareholder value, and we believe we
are well-positioned to do so with our strong balance sheet and
attractive underlying cash flow."
1 Products introduced within the previous three years2 "Adjusted
diluted EPS" is a non-GAAP measure and is reconciled to the
comparable GAAP measure at the end of this release.
Henry also reiterated that the company is targeting a September
13, 2012 filing date for its fiscal 2012 Form 10-K; however, based
on information recently received from D.E MASTER BLENDERS 1753 N.V.
regarding the status of its investigation into accounting
irregularities and other adjustments within its Brazilian
operations, there is a possibility the filing may be delayed beyond
September 13. She also reiterated that the company continues to
expect that any adjustment from the Brazilian investigation will
primarily impact Hillshire Brands' discontinued operations and is
not expected to impact Hillshire Brands' fiscal 2013 results.
To view and download the slides and an audio record of Hillshire
Brands' Barclays Back-to-School Consumer Conference presentation,
visit the Investor Relations section of the Hillshire Brands
corporate website www.hillshirebrands.com.
About The Hillshire Brands Company
The Hillshire Brands Company (NYSE: HSH) is a leader in
meat-centric food solutions for the retail and foodservice markets.
The company generates nearly $4 billion in annual sales and has
approximately 9,500 employees. Hillshire Brands' portfolio includes
iconic brands such as Jimmy Dean, Ball Park, Hillshire Farm, State
Fair,Sara Lee frozen bakery and Chef Pierre pies, as well as
artisanal brands Aidells and GalloSalame. The company, formerly
known as Sara Lee Corporation, began trading under the "HSH" ticker
symbol on June 29, 2012, following the successful spin-off of its
international coffee and tea business. For more information on the
company, please visit www.hillshirebrands.com.
Forward-Looking Statements
This release contains forward-looking statements regarding
Hillshire Brands' business prospects and future financial results
and metrics, including statements contained under the heading
"Financial Outlook." In addition, from time to time, in oral
statements and written reports, the company discusses its
expectations regarding the company's future performance by making
forward-looking statements preceded by terms such as "anticipates,"
"intends," "expects," "likely" or "believes." These forward-looking
statements are based on currently available competitive, financial
and economic data and management's views and assumptions regarding
future events and are inherently uncertain.
Investors must recognize that actual results may differ from
those expressed or implied in the forward-looking statements, and
the company wishes to caution readers not to place undue reliance
on any forward-looking statements. Among the factors that could
cause Hillshire Brands' actual results to differ from such
forward-looking statements are those described under Item 1A, Risk
Factors, in Hillshire Brands' most recent Annual Report on Form
10-K and other SEC Filings, as well as factors relating to:
-- Hillshire Brands' spin-off of its international coffee and tea
business in June 2012, including (i) Hillshire Brands' ability
to
generate the anticipated benefits from the spin-off; (ii)
the
transition of leadership to a new senior management team and
the
departure of key personnel with historical knowledge; (iii)
impact of
the spin-off on Hillshire Brands' relationships with its
employees,
major customers and vendors and on Hillshire Brands' credit
ratings
and cost of funds; and (iv) potential tax liabilities and
other
indemnification obligations.
-- The completion of the investigation of the accounting matters in the
spun-off Brazilian business and the final nature and scope of
the
restatement of the company's historical financial results;
-- The consumer marketplace, such as (i) intense competition, including
advertising, promotional and price competition; (ii) changes
in
consumer behavior due to economic conditions, such as a shift
in
consumer demand toward private label; (iii) fluctuations in
raw
material costs, Hillshire Brands' ability to increase or
maintain
product prices in response to cost fluctuations and the impact
on
profitability; (iv) the impact of various food safety issues
and
regulations on sales and profitability of Hillshire Brands
products;
and (v) inherent risks in the marketplace associated with
product
innovations, including uncertainties about trade and
consumer
acceptance;
-- Hillshire Brands' relationship with its customers, such as (i) a
significant change in Hillshire Brands' business with any of its
major
customers, such as Wal-Mart, its largest customer; and (ii)
credit and
other business risks associated with customers operating in a
highly
competitive retail environment;
-- Other business decisions, such as (i) Hillshire Brands' ability to
generate margin improvement through cost reduction and
productivity
improvement initiatives; (ii) Hillshire Brands' credit ratings,
the
impact of Hillshire Brands' capital plans on such credit ratings
and
the impact these ratings and changes in these ratings may have
on
Hillshire Brands' cost to borrow funds and access to
capital/debt
markets; and (iii) the settlement of a number of ongoing reviews
of
Hillshire Brands' income tax filing positions and inherent
uncertainties related to the interpretation of tax regulations
in the
jurisdictions in which Hillshire Brands transacts business.
In addition, Hillshire Brands' results may also be affected by
general factors, such as economic conditions, political
developments, interest and inflation rates, accounting standards,
taxes and laws and regulations in markets where the company
competes. Hillshire Brands undertakes no obligation to publicly
update any forward-looking statements, whether as a result of new
information, future events or otherwise.
Reconciliation of Diluted EPS, Continuing Operations, to Adjusted EPS
($ in Millions, except EPS) Fiscal Year ended June 30, 2012
Reported Less:Impact ofSignificantItems Adjusted:Earnings pershare (1)
Op Seg Income 351 (53) 404
Corporate Expenses 277 208 69
Operating Income 74 (261) 335
Interest Expense - net 72 - 72
Debt Extinguishment costs 39 (39) -
Income before Tax (37) (300) 263
Income tax expense/(benefit) (15) (103) 87
Net Income (22) (197) 176
Diluted Shares 120 120 120
Diluted EPS ($0.18) ($1.65) $1.47
(1) Adjusted EPS is a non-GAAP financial measure excluding the impact of Significant Items
Preliminary results pending the filing of the Company's Form 10-K
Reconciliation of Diluted EPS, Continuing Operations, to Adjusted EPS
($ in Millions, except EPS) Fiscal Year ended July 2, 2011
Reported Less:Impact ofSignificantItems Adjusted:Earnings pershare (1)
Op Seg Income 386 (31) 417
Corporate Expenses 162 60 102
Operating Income 225 (91) 316
Interest Expense - net 87 - 87
Debt Extinguishment costs 55 (55) -
Income before Tax 83 (146) 229
Income tax expense/(benefit) 27 (52) 79
Net Income 56 (94) 150
Diluted Shares 125 125 125
Diluted EPS $0.45 ($0.75) $1.20
(1) Adjusted EPS is a non-GAAP financial measure excluding the impact of Significant Items
Preliminary results pending the filing of the Company's Form 10-K
Explanation of Non-GAAP Financial Measure
Management measures and reports Hillshire Brands' financial
results in accordance with U.S. generally accepted accounting
principles ("GAAP"). In this release, Hillshire Brands highlights
certain items that have significantly impacted the company's
financial results and uses a non-GAAP financial measure of earnings
per share to help investors understand the financial impact of
these significant items.
"Adjusted diluted EPS from continuing operations" excludes from
diluted EPS for continuing operations computed in accordance with
GAAP the per share impact of significant items.
"Significant items" are income or charges (and related tax
impact) that management believes have had or are likely to have a
significant impact on the earnings of the applicable business
segment or on the total company for the period in which the item is
recognized, are not indicative of the company's core operating
results and affect the comparability of underlying results from
period to period. Significant items may include, but are not
limited to: charges for exit activities; consulting and advisory
costs; lease and contractual obligation exit costs; impairment
charges; pension partial withdrawal liability charges; debt
extinguishment costs; spin-off related costs; tax charges on deemed
repatriated earnings; tax costs and benefits resulting from the
disposition of a business; impact of tax law changes; gains on the
sale of discontinued operations; changes in tax valuation
allowances and favorable or unfavorable resolution of open tax
matters based on the finalization of tax authority examinations or
the expiration of statutes of limitations. Management highlights
significant items to provide greater transparency into the
underlying sales or profit trends of Hillshire Brands or the
applicable business segment or discontinued operations and to
enable more meaningful comparability between financial results from
period to period. Additionally, Hillshire Brands believes that
investors desire to understand the impact of these factors to
better project and assess the longer term trends and future
financial performance of the company.
The Hillshire Brands Company
Investor Relations: Melissa Napier, +1.630.598.8739
Media: Mike Cummins, +1.630.598.8412
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