TIDMSRL
Sara Lee Corp. (NYSE: SLE) today reported earnings for the third
quarter of fiscal 2011 and announced portfolio changes.
Strategic Initiatives:
-- On track for the creation of two pure-play companies.
-- Signed agreement to acquire Aidells Sausage Company, apremium
meats business in North America, for a purchase price of $87
million.
-- Evaluating strategic options for International Bakery and North
American refrigerated dough businesses.
Third Quarter Highlights:
-- 6% increase in adjusted net sales1 from continuing
operations to $2.2 billion. Reported net sales increased 7%.
-- 11% decline in adjusted operating income from continuing operations.
Reported operating income from continuing operations declined
6%.
-- $0.24 adjusted EPS from continuing operationscompared to $0.22
in year-ago period. Reported diluted EPS from continuing
operations
was $0.22 compared to $0.03 in prior year's third quarter.
-- 12% increase in MAP spending.
Year-to-Date Highlights:
-- 4% increase in adjusted net sales from continuing operations;2%
increase in reported net sales.
-- 11% decline in adjusted operating income from continuing operations;27% decline in reported operating income from continuing
operations.
-- 11% increase in MAPspending.
Guidance Update:
-- Full-year adjusted EPS from continuing operations guidance reduced by
$.06 to $0.79 - $0.83. Full year diluted EPS from continuing
operations guidance range of $0.67 - $0.71.
Perspectives from Executive Chairman & Chief Executive
Officer
"We are making great progress toward the creation of two solid,
stand-alone companies," said Sara Lee Executive Chairman, Jan
Bennink. "We are focused on preparing both the Coffee company and
the Meat company for strong and vibrant futures. Looking ahead, in
North America we are pleased to announce that we signed an
agreement to acquire Aidells Sausage Company. Aidells premium,
high-potential products will enhance our North American meat
portfolio. Also within North America, we will be evaluating our
strategic options regarding the North American refrigerated dough
business. Within the Coffee business, we are working on the
strategic role and options relating to our International Bakery
segment. These initial steps are part of the preparatory phase
which will give each company the best platform for a strong and
independent future."
In reviewing third quarter results, Chief Executive Officer
Marcel Smits commented, "On the operational side, our strategy is
to cover commodity inflation through price increases and cost
savings, and meanwhile continue to build our brands with superior
marketing and innovation. We remain committed to this approach
despite some short-term volume risk. Mainly due to this volume risk
in our core businesses, as well as intense competition in our
International Bakery segment, we are reducing our guidance by six
cents. That said, we are optimistic about the long term prospects
of our businesses. In North America, for the first time in four
quarters, we were able to offset commodity costs increases through
pricing actions and productivity gains. In International Beverage,
we are still lagging the rapid increases in commodity cost, but we
saw price increases accelerate as the third quarter progressed. In
total, on a year-to-date basis, MAP spending is significantly
higher, SG&A costs are significantly lower and we are confident
in our ability to manage commodity cost inflation over time. In
addition, as work on our spin-off progresses, we expect to gain
further visibility on additional cost reduction opportunities."
¹ The term "adjusted net sales" and other "adjusted" financial
measures are explained and reconciled to each item's most
comparable U.S. generally accepted accounting principles measure at
the end of this release.
Acquisitions, Divestitures & Strategic Initiatives
-- Sara Lee has entered into a definitive agreement to acquire Aidells
Sausage Company, a leading premium brand in the dinner sausage
categoryin North America, for $87 million in cash. The deal is
expected to
close within the next few months, and is subject to
customary
conditions, including regulatory approval. This acquisition
expands
the company's presence into the organic and natural meat
segments,
while also increasing coverage of fast growing retail channels,
such
as club stores and organic grocers.
-- The company is in the process of evaluating strategic options for
International Bakery and North American refrigerated dough
businesses.
-- The divestiture of the North American Fresh Bakery business is
expected to close by the end of fiscal 2011.
-- Divestiture of the insecticides business is now expected to close in
the second half of calendar year 2011.
Business Segment Review
North American Retail
The North American Retail business remains focused on gross
margin recovery through pricing initiatives and productivity gains.
Pricing actions and favorable sales mix drove a net sales increase
of 1% (on an adjusted and reported basis). Despite higher prices,
the Jimmy Dean and Hillshire Farm brands grew volumes in the key
strategic categories of breakfast sandwiches and lunch meats. In
other categories, volumes were negatively impacted by pricing
actions, the rationalization of low-margin promotional programs and
the timing of Easter.
The segment continued to show sequential improvement in adjusted
operating margin, increasing to 12.8%, up from 11.6% in the second
quarter and 9.0% in the first quarter. Reported operating margin
for the quarter was 12.6%. Higher commodity costs were, for the
first time in four quarters, recovered through pricing actions and
cost savings. These positives were more than offset by volume
declines and investments in IT systems and the new Kansas City meat
slicing facility. These factors drove an adjusted operating segment
income decline of 8% versus a very strong year-ago period. Reported
operating segment income declined 16%.
The segment will overlap a weak prior year fourth quarter and
anticipates adjusted operating income to be marginally down for the
full year.
North American Foodservice
For the first time in several quarters, reported and adjusted
net sales increased in the North American Foodservice segment, up
5% due to pricing actions and strength in meats, frozen bakery and
liquid coffee. This growth was achieved despite the losses of a
high-volume, low-margin bakery contract in the second quarter of
fiscal 2010 and a low-volume, high-margin liquid coffee contract in
the fourth quarter of fiscal 2010.
Adjusted operating segment income increased 27% driven by
strength in meats and frozen bakery. Reported operating segment
income increased 32%. Adjusted operating margin expanded 130 basis
points over the prior year to 7.8% driven by manufacturing
efficiencies and favorable sales mix. The reported operating margin
increased 150 basis points to 7.4%.
The company expects volume improvement, continued cost savings
and the full realization of pricing actions to drive full year
sales and profit growth.
International Beverage
The International Beverage business posted strong top-line
results with adjusted net sales up 13%, including volume growth of
1% and sales mix improvement of 1.5%. Reported net sales increased
16%. Adjusted operating segment income, however, was down $45
million, or 25%, to an adjusted operating margin of 14.7%. The
decline was primarily due to price increases lagging strong
commodity cost inflation, a significant increase in MAP spending,
up $13 million or 39%, and a negative currency mark-to-market
impact of $28 million. Reported operating segment income declined
$39 million, or 23%.
Across the business significant price increases were
implemented, of which 6% was reflected in net sales for the
quarter. Market shares are holding up well in spite of pricing
actions, illustrating the strength of Sara Lee's coffee and tea
brands.
France and Australia achieved three-year highs in market share
behind innovation and strong market activation. France has
benefited from the launch of L'OR EspressO and continues to post
strong results behind the roll-out of new varieties. The
Netherlands and Spain are promising new markets for this exciting
innovative product. In Brazil, the launch of Senseo in Sao Paolo is
showing promising results and the integration of Damasco is ahead
of plan, with better than expected synergies and growth.
The business plans additional price increases in the fourth
quarter to cover further commodity increases and protect margins,
allowing for continued investment in marketing and innovation.
International Bakery
Reported and adjusted net sales declined 7% mainly due to weak
performance in the Spanish fresh bakery business, which continues
to be impacted by difficult macro-economic and competitive
conditions.
Adjusted operating segment income was $6 million lower than the
prior year while reported operating segment income increased $4
million, resulting from $11 million of business disposition costs
in the prior year. As the quarter progressed, the Spanish business
adjusted prices downward and saw volumes rebound. Negotiations with
the Spanish unions on transforming the company's sales force to
independent operators are progressing.
For the full year, the segment expects sales and operating
segment income to be meaningfully below last year.
Corporate
In the third quarter, corporate expenses, excluding significant
items, were $12 million lower than the prior year period.
Year-to-date, corporate expenses, excluding significant items,
declined $60 million attributable to the impact of headcount
reductions, and lower employee benefit and IT costs.
Fiscal Year
Guidance
Continuing Prior GuidanceFebruary 8, 2011 Updated GuidanceMay 5, 2011
operations
Reported $0.75 - $0.79 $0.67 - $0.71
diluted
EPS
Adjusted EPS $0.85 - $0.89 $0.79 - $0.83
Reported $852 - $888 million $770 - $800 million
operating
income
Adjusted $904 - $940 million $840 - $870 million
operating
income
Reported net $9.0 - $9.1 billion $8.9 - $9.0 billion
sales
Cash $400 - $500 million $400 - $450 million
flow
from
operations(includes
discontinued
ops.)
Other Guidance items:
Fiscal 2011 year-end cash balances are estimated to be
approximately $2.7 billion and gross debt is estimated to be
approximately $2.4 billion.
Sara Lee expects to benefit from a number of tailwinds in fiscal
2012 with an anticipated total EPS impact of approximately $0.17,
of which two cents relates to the North American refrigerated dough
and International Bakery businesses. These tailwinds include a
reduced share count as a result of fiscal 2011 repurchases,
declines in pension expense of approximately $25 million and in
amortization expense of approximately $30 million (of which $20
million relates to the North American refrigerated dough and
International Bakery businesses), the elimination of more than half
of fiscal 2011 stranded overhead from the Household & Body Care
and North American Fresh Bakery divestitures and a currency benefit
of approximately $40 million.
Additional Information
Share Repurchase:
The company has completed its fiscal 2011 share repurchase
commitment of $1.3 billion of stock. After payment of the $3.00
special dividend in fiscal 2012, the company will have returned a
total of approximately $3.5 billion of capital to its
shareholders.
Currency Mark-to-Market and Commodity Costs:
The International Beverage segment results include a
year-over-year negative currency mark-to-market impact of $28
million in the third quarter and $61 million in the first nine
months. In the third quarter, commodity costs increased by $188
million (including the $28 million of currency mark-to-market
adjustments highlighted above), partially offset by $127 million in
higher prices. In the first nine months, commodity costs increased
by $403 million (including the $61 million of currency
mark-to-market adjustments highlighted above), partially offset by
$249 million in price increases.
Diluted Earnings Per Share:
Reported and adjusted EPS can be summarized as follows:
Third Quarter YTD
2011 2010 2011 2010
Diluted EPS as reported $0.25 $(0.49 ) $1.85 $0.46
Less:
Gain on sale of discontinued 0.05 0.01 0.96 0.01
operations
Tax related items - (0.76 ) 0.36 (0.49 )
Other significant items (0.10 ) (0.04 ) (0.25 ) (0.13 )
Contingent sale proceeds - 0.01 - 0.18
Adjusted EPS* $0.30 $0.29 $0.81 $0.89
Of which:
Adjusted EPS from continuing 0.24 0.22 0.61 0.64
operations
Adjusted EPS from discontinued 0.06 0.08 0.20 0.25
operations
* Amounts are rounded and may
not add to the total.
In the third quarter, Sara Lee reported a $0.05 book gain
related to the sale of a Household & Body Care asset. Other
significant items include a $0.04 charge related to the termination
of a licensing agreement, Project Accelerate charges of $0.01 and
spin-off related costs of $0.01. See Significant Items Analysis for
additional detail.
Webcast and Form 10-Q
Sara Lee Corporation's review of its results for the third
quarter will be broadcast live via the Internet today at 9:00 a.m.
CDT. The live webcast can be accessed in the Investor Relations
section on www.saralee.com and is anticipated to conclude by 10:00
a.m. CDT. For people who are unable to listen to the webcast live,
a recording will be available on the website two hours following
the completion of the webcast until Nov. 4, 2011. Sara Lee has also
provided slides containing additional information that will be
reviewed during its third quarter webcast. The slides can be
accessed in the Investor Relations section on www.saralee.com under
Investor News and Events.
Sara Lee Corporation will file a Form 10-Q for the third quarter
of fiscal 2011 with the Securities and Exchange Commission on or
before May 12, 2011. The Form 10-Q will be available in the
Investor Relations section (Financial/SEC Information page) on
www.saralee.com.
About Sara Lee Corporation
Each and every day, Sara Lee (NYSE: SLE) delights millions of
consumers and customers around the world. The company has one of
the world's best-loved and leading portfolios with its innovative
and trusted food and beverage brands, including Ball Park, Douwe
Egberts, Hillshire Farm, Jimmy Dean, Sara Lee and Senseo.
Collectively, our brands generate nearly $9 billion in annual net
sales from continuing operations. Sara Lee has approximately 20,000
employees in its continuing operations worldwide. Please visit
www.saralee.com for the latest news and in-depth information about
Sara Lee and its brands.
Forward-Looking Statements
This release contains forward-looking statements regarding Sara
Lee's business prospects and future financial results, including
statements contained under the heading "Fiscal Year Guidance." In
addition, from time to time, in oral statements and written
reports, the corporation discusses its expectations regarding the
corporation's future performance by making forward-looking
statements preceded by terms such as "anticipates," "we are
confident," "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.
Forward-looking statements are inherently uncertain, and
investors must recognize that actual results may differ from those
expressed or implied in the forward-looking statements.
Consequently, the corporation wishes to caution readers not to
place undue reliance on any forward-looking statements. Among the
factors that could cause Sara Lee's actual results to differ from
such forward-looking statements are those described under Item 1A,
Risk Factors, in Sara Lee's most recent Annual Report on Form 10-K
and other SEC Filings, as well as factors relating to:
-- Sara Lee's spin-off and separation plans and the special dividend
announced on Jan. 28, 2011, its regular quarterly dividend and
its
share repurchase plans, such as (i) unanticipated developments
that
delay or negatively impact the proposed spin-off and capital
plans;
(ii) Sara Lee's ability to obtain an IRS tax ruling and any
other
customary approvals; (iii) Sara Lee's ability to generate
the
anticipated efficiencies and savings from the proposed spin-off;
(iv)
the impact of the proposed spin-off on Sara Lee's relationships
with
its employees, its major customers and vendors and on Sara
Lee's
credit ratings and cost of funds; (v) changes in market
conditions;
(vi) future opportunities that the Board may determine present
greater
potential value to shareholders than the spin-off, special
dividend
and share purchase plans; (vii) the inability to complete the
sale of
Sara Lee's North American Fresh Bakery business, a condition to
the
payment of the special dividend; (viii) disruption to Sara
Lee's
business operations as a result of the proposed spin-off; (ix)
future
operating or capital needs that require a more significant
outlay of
cash than currently anticipated; and (x) the ability of the
businesses
to operate independently following the completion of the
proposed
spin-off;
-- Sara Lee's relationship with its customers, such as (i) a significant
change in Sara Lee's business with any of its major customers,
such as
Walmart, its largest customer, including changes in how such
customers
manage their suppliers and the level of inventory these
customers
maintain; and (ii) credit and other business risks associated
with
customers operating in a highly competitive retail
environment;
-- The consumer marketplace, such as (i) significant 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 the
cost
of raw materials, Sara Lee's ability to increase or maintain
product
prices in response to fluctuations in cost and the impact on
Sara
Lee's profitability; (iv) the impact of various food safety
issues and
regulations on sales and profitability of Sara Lee products; and
(v)
inherent risks in the marketplace associated with new
product
introductions, including uncertainties about trade and
consumer
acceptance;
-- Sara Lee's international operations, such as (i) impacts on reported
earnings from fluctuations in foreign currency exchange
rates,
particularly the euro; (ii) Sara Lee's generation of a high
percentage
of its revenues from businesses outside the United States and
costs to
remit these foreign earnings into the U.S. to fund Sara Lee's
domestic
operations, share repurchase plans, dividends, debt service
and
corporate costs; (iii) difficulties and costs associated
with
complying with U.S. laws and regulations, such as Foreign
Corrupt
Practices Act, applicable to entities with overseas operations,
and
different regulatory structures and unexpected changes in
regulatory
environments overseas, including without limitation
potentially
negative consequences from changes in anti-competition and tax
laws;
and (iv) Sara Lee's ability to continue to source production
and
conduct manufacturing and selling operations in various
countries due
to changing business conditions, political environments, import
quotas
and the financial condition of suppliers;
-- Previous business decisions, such as (i) Sara Lee's ability to
generate margin improvement through cost reduction and
efficiency
initiatives; (ii) Sara Lee's ability to achieve planned cash
flows
from capital expenditures and acquisitions and the impact of
changing
interest rates and the cost of capital on the discounted value
of
those planned cash flows, which could impact future
impairment
analyses; (iii) credit ratings issued by the three major credit
rating
agencies, the impact of Sara Lee's capital plans and targets on
such
credit ratings and the impact these ratings and changes in
these
ratings may have on Sara Lee's cost to borrow funds, access
to
capital/debt markets, and ability to complete the planned
share
repurchase; (iv) the settlement of a number of ongoing reviews
of Sara
Lee's income tax filing positions in various jurisdictions
and
inherent uncertainties related to the interpretation of tax
regulations in the jurisdictions in which Sara Lee transacts
business;
and (v) changes in the expense for and contingent liabilities
relating
to multi-employer pension plans in which Sara Lee
participates.
In addition, Sara Lee's 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 corporation competes. Sara Lee
undertakes no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events
or otherwise.
Consolidated Statements of Income
For the Quarter and Nine Months ended April 2, 2011 and March 27, 2010
(In millions, except per share data - Unaudited)
Quarter ended Nine Months ended
April 2, March 27, April 2, March 27,
2011 2010 2011 2010
Continuing operations
Net sales $ 2,220 $ 2,077 $ 6,628 $ 6,483
Cost of sales 1,484 1,296 4,427 4,121
Selling, general and administrative expenses 518 531 1,564 1,620
Net charges for exit activities, asset and business dispositions 5 25 48 52
Impairment charges - - - 17
Contingent sale proceeds - - - (133 )
Operating income 213 225 589 806
Interest expense 25 35 87 103
Interest income (9 ) (7 ) (22 ) (19 )
Debt extinguishment costs - - 55 -
Income from continuing operations before income taxes 197 197 469 722
Income tax expense 60 174 155 217
Income from continuing operations 137 23 314 505
Discontinued operations:
Income (loss) from discontinued operations,
net of tax expense (benefit) of $2,$440, $(189) and $411 (10 ) (357 ) 261 (176 )
Gain on sale of discontinued operations, net of
tax expense of $14, $2, $576 and $2 29 6 608 6
Net income (loss) from discontinued operations 19 (351 ) 869 (170 )
Net income (loss) 156 (328 ) 1,183 335
Less: Income from noncontrolling interests, net of tax
Discontinued operations 3 8 7 16
Net income (loss) attributable to Sara Lee $ 153 $ (336 ) $ 1,176 $ 319
Amounts attributable to Sara Lee:
Net income from continuing operations $ 137 $ 23 $ 314 $ 505
Net income (loss) from discontinued operations 16 (359 ) 862 (186 )
Earnings per share of common stock:
Basic
Income from continuing operations $ 0.23 $ 0.03 $ 0.50 $ 0.73
Net income (loss) $ 0.25 $ (0.49 ) $ 1.86 $ 0.46
Average shares outstanding 605 691 632 695
Diluted
Income from continuing operations $ 0.22 $ 0.03 $ 0.49 $ 0.72
Net income (loss) $ 0.25 $ (0.49 ) $ 1.85 $ 0.46
Average shares outstanding 609 693 635 697
Cash dividends declared per share of common stock $ 0.115 $ 0.11 $ 0.23 $ 0.22
Note: The corporation identified errors related to the gain on the sale of discontinued operations recognized in the second quarter of fiscal 2011 that overstated the gain by $49 million. The year-to-date and quarterly amounts reported above reflect the correction of the errors as of the end of the second quarter of 2011.
Condensed Consolidated
Balance Sheet Data
at April 2, 2011
and July 3, 2010
(In millions
- Unaudited)
April 2, July 3,
2011 2010
Assets
Cash $ 2,132 $ 955
and equivalents
Trade accounts receivable, 925 1,047
less allowances
Inventories 1,041 712
Other current 389 605
assets
Assets held 308 461
for sale
Total current 4,795 3,780
assets
Property, net of accumulated depreciation 1,730 1,672
of $2,519 and $2,330, respectively
Trademarks, other identifiable 1,291 1,228
intangibles and goodwill
Other noncurrent 585 375
assets
Noncurrent assets 1,211 1,781
held for sale
$ 9,612 $ 8,836
Liabilities
and Equity
Notes $ 605 $ 47
payable
Accounts payable and 3,068 2,099
accrued liabilities
Current maturities 462 2
of long-term debt
Liabilities held 318 436
for sale
Total current 4,453 2,584
liabilities
Long-term 1,932 2,627
debt
Other 1,320 1,702
liabilities
Noncurrent liabilities 333 408
held for sale
Total 1,574 1,515
Equity
$ 9,612 $ 8,836
Consolidated Statements
of Cash Flows
For the Nine Months Ended April
2, 2011 and March 27, 2010
(In millions
- Unaudited)
Nine Months ended
April 2, March 27,
2011 2010
Operating activities
-
Net income $ 1,183 $ 335
Less: Cash received from - (133 )
contingent sale proceeds
Adjustments to reconcile
net income to net cash
from operating
activities:
Depreciation 225 265
Amortization 62 67
Impairment - 17
charges
Net (gain) loss on business (1,184 ) 13
dispositions
Pension contributions, (76 ) (2 )
net of expense
Increase in deferred income taxes 234 518
for unremitted earnings
Tax benefit on Fresh (227 ) -
Bakery disposition
Debt extinguishment 55 -
costs
Other 35 (55 )
Changes in current assets
and liabilities, net of
businesses acquired
and sold:
Trade accounts 136 14
receivable
Inventories (268 ) (9 )
Other current (105 ) 37
assets
Accounts payable (10 ) (27 )
Accrued (83 ) (103 )
liabilities
Accrued taxes 315 (130 )
Net cash from operating 292 807
activities
Investing activities
-
Purchases of property (238 ) (215 )
and equipment
Purchases of software and (14 ) (11 )
other intangibles
Acquisition of businesses (32 ) -
and investments
Dispositions of businesses 2,182 6
and investments
Cash received from contingent - 133
sale proceeds
Cash received from derivative 72 61
transactions
Sales of assets 10 13
Net cash received from 1,980 (13 )
investing activities
Financing activities
-
Issuances of 20 2
common stock
Purchases of (1,313 ) (500 )
common stock
Borrowings of 1,032 45
other debt
Repayments of (1,352 ) (73 )
other debt
Net change in financing with 483 (3 )
less than 90-day maturities
Payments of (217 ) (232 )
dividends
Net cash used in financing (1,347 ) (761 )
activities
Effect of changes in foreign 252 (20 )
exchange rates on cash
Increase (decrease) in 1,177 13
cash and equivalents
Add: Cash balances of discontinued - 8
operations at beginning of year
Less: Cash balances of discontinued - (37 )
operations at end of period
Cash and equivalents 955 951
at beginning of year
Cash and equivalents $ 2,132 $ 935
at end of quarter
Supplemental cash
flow data:
Cash paid for restructuring $ 82 $ 107
actions
Cash contributions 115 100
to pension plans
Cash paid for 219 241
income taxes
Segment Analysis
- as reported
For the Quarter and Nine Months ended
April 2, 2011 and March 27, 2010
(In millions
- Unaudited)
Quarter ended Nine Months ended
Apr. 2, Mar. 27, Change Apr. 2, Mar. 27, Change
2011 2010 Dollars % 2011 2010 Dollars %
Continuing
Operations:
Net sales:
North American Retail $ 681 $ 672 $ 9 1.2 % $ 2,142 $ 2,076 $ 66 3.1 %
North American Foodservice 448 427 21 5.0 1,410 1,413 (3 ) (0.2 )
International Beverage 925 799 126 15.7 2,552 2,417 135 5.6
International Bakery 173 186 (13 ) (6.6 ) 544 601 (57 ) (9.4 )
Intersegment (7 ) (7 ) - (20 ) (24 ) 4
Total net sales $ 2,220 $ 2,077 $ 143 6.9 % $ 6,628 $ 6,483 $ 145 2.2 %
Operating income (loss):
North American Retail $ 85 $ 101 $ (16 ) (16.1 )% $ 236 $ 303 $ (67 ) (22.1 )%
North American Foodservice 33 26 7 31.6 121 109 12 11.4
International Beverage 134 173 (39 ) (22.6 ) 333 468 (135 ) (28.9 )
International Bakery 3 (1 ) 4 NM 16 4 12 NM
Operating segment income 255 299 (44 ) (15.0 ) 706 884 (178 ) (20.2 )
General corporate expenses (42 ) (61 ) 19 (112 ) (183 ) 71
Mark-to-market derivative gain/(loss) 8 (5 ) 13 19 (4 ) 23
Amortization (8 ) (8 ) - (24 ) (24 ) -
Contingent sale proceeds - - - - 133 (133 )
Total operating income $ 213 $ 225 $ (12 ) (6.0 )% $ 589 $ 806 $ (217 ) (27.0 )%
Operating Margin:
North American Retail 12.6 % 15.1 % (2.5 )% 11.0 % 14.6 % (3.6 )%
North American Foodservice 7.4 5.9 1.5 8.6 7.7 0.9
International Beverage 14.5 21.7 (7.2 ) 13.0 19.4 (6.4 )
International Bakery 1.3 (0.2 ) 1.5 2.9 0.7 2.2
Total Sara Lee 9.6 % 10.9 % (1.3 )% 8.9 % 12.4 % (3.5 )%
Discontinued
Operations:
Net sales $ 688 $ 1,026 $ (338 ) (32.9 )% $ 2,464 $ 3,152 $ (688 ) (21.8 )%
Operating segment income (12 ) 88 (100 ) NM 72 256 (184 ) (71.8 )
Operating income (5 ) 84 (89 ) NM 78 240 (162 ) (67.7 )
Operating Margin (1.7 )% 8.5 % (10.2 )% 2.9 % 8.1 % (5.2 )%
NM: Not meaningful
Segment Analysis - as adjusted
For the Quarter and Nine Months ended April 2, 2011 and March 27, 2010
(In millions - Unaudited)
Quarter ended Nine Months ended
Apr. 2, Mar. 27, Change Apr. 2, Mar. 27, Change
2011 2010 Dollars % 2011 2010 Dollars %
Continuing Operations:
Adjusted net sales:
North American Retail $ 681 $ 672 $ 9 1.2 % $ 2,142 $ 2,076 $ 66 3.1 %
North American Foodservice 448 427 21 4.9 1,410 1,414 (4 ) (0.3 )
International Beverage 912 806 106 13.2 2,536 2,342 194 8.3
International Bakery 173 187 (14 ) (7.1 ) 544 577 (33 ) (5.7 )
Intersegment (7 ) (7 ) - (20 ) (24 ) 4
Adjusted net sales $ 2,207 $ 2,085 $ 122 5.8 % $ 6,612 $ 6,385 $ 227 3.5 %
Adjusted operating income (loss):
North American Retail $ 86 $ 94 $ (8 ) (7.8 )% $ 238 $ 299 $ (61 ) (20.3 )%
North American Foodservice 35 28 7 27.3 125 126 (1 ) (1.1 )
International Beverage 134 179 (45 ) (25.1 ) 368 455 (87 ) (18.9 )
International Bakery 3 9 (6 ) (75.7 ) 16 32 (16 ) (51.6 )
Adjusted operating segment income 258 310 (52 ) (16.8 ) 747 912 (165 ) (18.1 )
General corporate expenses (28 ) (40 ) 12 (84 ) (144 ) 60
Mark-to-market derivative gain/(loss) 8 (5 ) 13 19 (4 ) 23
Amortization (8 ) (8 ) - (24 ) (24 ) -
Adjusted operating income $ 230 $ 257 $ (27 ) (10.5 )% $ 658 $ 740 $ (82 ) (11.1 )%
Adjusted Operating Margin:
North American Retail 12.8 % 14.1 % (1.3 )% 11.1 % 14.4 % (3.3 )%
North American Foodservice 7.8 6.5 1.3 8.9 8.9 0.0
International Beverage 14.7 22.2 (7.5 ) 14.5 19.4 (4.9 )
International Bakery 1.4 5.2 (3.8 ) 2.9 5.7 (2.8 )
Total Sara Lee 10.4 % 12.3 % (1.9 )% 9.9 % 11.6 % (1.7 )%
Discontinued Operations:
Adjusted net sales $ 688 $ 690 $ (2 ) (0.2 )% $ 2,464 $ 2,490 $ (26 ) (1.0 )%
Adjusted operating segment income 55 39 16 40.6 192 191 1 1.4
Adjusted operating income 62 35 27 73.3 198 175 23 13.4
Adjusted operating margin 7.9 % 5.6 % 2.3 % 7.8 % 7.6 % 0.2 %
* Adjusted amounts are non-GAAP measures.
See "Explanation of Non-GAAP Financial Measures" for a detailed explanation of these and other non-GAAP measures used in this release.
Net Sales Bridge
For the Third Quarter and First Nine Months ended April 2, 2011
(Unaudited)
The following table illustrates the components of the change in net sales versus the prior year for each of the four reported business segments.
Third Quarter ended April 2, 2011
Adjusted Total
Unit Net Sales* Acq./ Foreign Net Sales
Volume + Mix + Price + Other = Change + Disp. + Exchange = Change
North American Retail (1) (7.0 )% 2.4 % 6.1 % (0.3 )% 1.2 % 0.0 % 0.0 % 1.2 %
North American Foodservice (6.9 ) 1.2 10.8 (0.2 ) 4.9 0.0 0.1 5.0
International Beverage 1.0 1.5 5.9 4.8 13.2 1.5 1.0 15.7
International Bakery (3.1 ) (0.3 ) (4.1 ) 0.4 (7.1 ) 0.0 0.5 (6.6 )
Total Continuing Business (1) (3.3 )% 1.3 % 6.1 % 1.7 % 5.8 % 0.6 % 0.5 % 6.9 %
First Nine Months ended April 2, 2011
Adjusted Total
Unit Net Sales* Acq./ Foreign Net Sales
Volume + Mix + Price + Other = Change + Disp. + Exchange = Change
North American Retail (1) (2.7 )% 2.4 % 4.5 % (1.1 )% 3.1 % 0.0 % 0.0 % 3.1 %
North American Foodservice (14.1 ) 6.5 6.7 0.6 (0.3 ) 0.0 0.1 (0.2 )
International Beverage 0.4 1.5 3.3 3.1 8.3 0.7 (3.4 ) 5.6
International Bakery (2.9 ) (0.3 ) (3.4 ) 0.9 (5.7 ) 0.0 (3.7 ) (9.4 )
Total Continuing Business (1) (3.9 )% 2.6 % 3.8 % 1.0 % 3.5 % 0.2 % (1.5 )% 2.2 %
*Adjusted net sales is a non-GAAP measure that excludes the impact of foreign currency exchange rates and acquisitions/dispositions. See "Explanation of Non-GAAP Financial Measures" for a detailed explanation of this and other non-GAAP measures in this release.
(1) Volume data excludes the impact of commodity hog volumes as the corporation has exited nearly all of its commodity hog contracts.
Significant
Items
Analysis
Quarter ended
April
2, 2011
and March
27, 2010
(Unaudited)
Quarter ended Apr. 2, 2011 Quarter ended Mar. 27, 2010
Diluted Diluted
Pretax Net EPS Pretax Net EPS
(In millions Impact Income Impact (1) Impact Income Impact (1)
except
per share
data)
Continuing
Operations:
Business $ (6 ) $ (4 ) $ (0.01 ) $ (11 ) $ (7 ) $ (0.01 )
outsourcing
costs
Severance (2 ) (2 ) - (10 ) (7 ) (0.01 )
Lease exit - - - (4 ) (2 ) -
costs
Business 2 1 - (11 ) (8 ) (0.01 )
disposition
costs
Total Project (6 ) (5 ) (0.01 ) (36 ) (24 ) (0.04 )
Accelerate
International (2 ) - - - - -
stranded
overhead -
severance
Pension - - - 21 14 0.02
curtailment
gain
Mexican - - - (15 ) (10 ) (0.01 )
tax
indemnification
Spin off (10 ) (6 ) (0.01 ) - - -
related
costs
Impact (18 ) (11 ) (0.02 ) (30 ) (20 ) (0.03 )
of
significant
items
on
income
fromcontinuing
operations
before
income taxes
Tax - - - - (102 ) (0.15 )
on unremitted
earnings
Belgian tax - - - - (43 ) (0.06 )
proceeding
UK - - - - 4 0.01
net operating
loss
utilization
Tax credit - - - - 18 0.03
adjustment
Tax - 2 - - 9 0.01
audit
settlement/reserve
adjustments
Impact (18 ) (9 ) (0.02 ) (30 ) (134 ) (0.20 )
of
significant
items
on incomefrom
continuing
operations
Discontinued
operations:
Professional (11 ) (9 ) (0.01 ) (7 ) (7 ) (0.01 )
fees/other
Exit (14 ) (10 ) (0.02 ) - - -
activities
Accelerated (1 ) (1 ) - (2 ) (2 ) -
depreciation
Pension - - - 4 3 -
curtailment
gain (loss)
Pension (2 ) (1 ) - - - -
partial
withdrawal
liability
charge
Gain on the 43 29 0.05 8 6 0.01
sale
of
discontinued
operations
Licensing (39 ) (27 ) (0.04 ) - - -
agreement
termination
charge
Tax - - - - (416 ) (0.60 )
on unremitted
earnings
Tax - (1 ) - - 3 -
audit
settlement/reserve
adjustment
Impact (24 ) (20 ) (0.03 ) 3 (413 ) (0.60 )
of
significant
items on
income
fromdiscontinued
operations
Impact $ (42 ) $ (29 ) $ (0.05 ) $ (27 ) $ (547 ) $ (0.79 )
of
significant
items on net
income
Impact
of
significant
items on
income
from
continuing
operations
before income
taxes
Cost of sales $ - $ 6
Selling, (13 ) (11 )
general
and
administrative
expenses
Exit and (5 ) (25 )
business
dispositions
Impairment - -
charges
Debt - -
extinguishment
costs
Total $ (18 ) $ (30 )
Notes:
(1)
EPS amounts
are rounded
to
the nearest
$0.01 and may
not add
to the
total.
Significant
Items
Analysis
Nine Months
ended
April 2,
2011 and
March
27, 2010
(Unaudited)
Nine Months ended Apr. 2, 2011 Nine Months ended Mar. 27, 2010
Diluted Diluted
Pretax Net EPS Pretax Net EPS
(In millions Impact Income Impact (1) Impact Income Impact (1)
except
per share
data)
Continuing
Operations:
Business $ (11 ) $ (8 ) (0.01 ) $ (21 ) $ (14 ) (0.02 )
outsourcing
costs
Severance (6 ) (4 ) (0.01 ) (23 ) (16 ) (0.02 )
Lease exit - - - (9 ) (5 ) (0.01 )
costs
Business - - - (20 ) (14 ) (0.02 )
disposition
costs
Accelerated (2 ) (1 ) - - - -
depreciation
Total Project (19 ) (13 ) (0.02 ) (73 ) (49 ) (0.07 )
Accelerate
International (41 ) (29 ) (0.05 ) - - -
stranded
overhead -
severance
Pension - - - 21 14 0.02
curtailment
gain
Impairment - - - (17 ) (11 ) (0.02 )
charges
Mexican - - - (15 ) (10 ) (0.01 )
tax
indemnification
Debt (55 ) (35 ) (0.06 ) - - -
extinguishment
costs
Spin off (10 ) (6 ) (0.01 ) - - -
related
costs
Impact (125 ) (83 ) (0.13 ) (84 ) (56 ) (0.08 )
of
significant
items
on
income
fromcontinuing
operations
before
income taxes
Tax - - - - (102 ) (0.15 )
on unremitted
earnings
Belgian tax - - - - (43 ) (0.06 )
proceeding
UK - - - - 16 0.02
net operating
loss
utilization
Tax credit - - - - 18 0.03
adjustment
Tax - 8 0.01 - 103 0.15
audit
settlement/reserve
adjustments
Tax valuation - - - - (5 ) (0.01 )
allowance
adjustment
Impact (125 ) (75 ) (0.12 ) (84 ) (69 ) (0.10 )
of
significant
items on
income
fromcontinuing
operations
Discontinued
operations:
Professional (20 ) (16 ) (0.02 ) (22 ) (20 ) (0.03 )
fees/other
Exit (56 ) (40 ) (0.06 ) (1 ) - -
activities
Accelerated (2 ) (2 ) - (2 ) (2 ) -
depreciation
Pension (1 ) - - (7 ) (6 ) (0.01 )
curtailment
gain (loss)
Pension (2 ) (1 ) - (7 ) (5 ) (0.01 )
partial
withdrawal
liability
charge
Gain on the 1,184 608 0.96 8 6 0.01
sale
of
discontinued
operations
Licensing (39 ) (27 ) (0.04 ) - - -
agreement
termination
charge
Tax - 227 0.36 - - -
basis
difference
- Fresh
Bakery
Tax - (2 ) - - 11 0.02
basis
difference
- H&BC
Tax - (1 ) - - (3 ) -
audit
settlement
Capital loss - - - - 27 0.04
carryforward
utilization
Valuation - (2 ) - - 53 0.08
allowance
adjustment
Tax - (6 ) (0.01 ) - (421 ) (0.61 )
on unremitted
earnings
Impact 1,064 738 1.16 (31 ) (360 ) (0.52 )
of
significant
items on
income
fromdiscontinued
operations
Impact $ 939 $ 663 $ 1.04 $ (115 ) $ (429 ) $ (0.61 )
of
significant
items on net
income
Impact
of
significant
items on
income
from
continuing
operations
before income
taxes
Cost of sales $ (2 ) $ 6
Selling, (20 ) (21 )
general
and
administrative
expenses
Exit and (48 ) (52 )
business
dispositions
Impairment - (17 )
charges
Debt (55 ) -
extinguishment
costs
Total $ (125 ) $ (84 )
Notes:
(1)
EPS amounts
are rounded
to
the nearest
$0.01 and may
not add
to the
total.
EPS
Reconciliation
of as
Reported
to
Adjusted
Quarter
ended
April
2, 2011
and March
27, 2010
(In
millions,
except
per
share data
-
Unaudited)
Quarter ended April 2, 2011 Quarter ended March 27, 2010
Impact of Significant Items Impact of Significant Items
Contingent
As Continuing Discontinued As Continuing Discontinued Sale
Reported Operations Operations Adjusted (1) Reported Operations Operations Proceeds Adjusted (1)
Continuing
operations:
Income $ 197 $ (18 ) $ - $ 215 $ 197 $ (30 ) $ - $ - $ 227
from
continuing
operations
before
income
taxes
Income 60 (9 ) - 69 174 104 - (10 ) 80
tax
(benefit)
expense
Income 137 (9 ) - 146 23 (134 ) - 10 147
from
continuing
operations
Discontinued
operations:
Income (10 ) - (49 ) 39 (357 ) - (419 ) - 62
(loss)
from
discontinued
operations,
net of
tax
Gain on 29 - 29 - 6 - 6 - -
sale
of
discontinued
operations,
net of
tax
Net 19 - (20 ) 39 (351 ) - (413 ) - 62
income
(loss)
from
discont.
ops.
Net 156 (9 ) (20 ) 185 (328 ) (134 ) (413 ) 10 209
income
(loss)
Less:
Income
from
noncontrolling
interests,
net of
tax
Discontinued 3 - - 3 8 - - - 8
operations
Net $ 153 $ (9 ) $ (20 ) $ 182 $ (336 ) $ (134 ) $ (413 ) $ 10 $ 201
income
(loss)
attributable
to Sara
Lee
Amounts
attributable
to Sara
Lee:
Net $ 137 $ (9 ) $ - $ 146 $ 23 $ (134 ) $ - $ 10 $ 147
income
(loss)
from
continuing
operations
Net 16 - (20 ) 36 (359 ) - (413 ) - 54
income
(loss)
from
discontinued
operations
Earnings
per
share
of common
stock*:
Diluted
Income $ 0.22 $ (0.02 ) $ - $ 0.24 $ 0.03 $ (0.20 ) $ - $ 0.01 $ 0.22
(loss)
from
continuing
operations
Net $ 0.25 $ (0.02 ) $ (0.03 ) $ 0.30 $ (0.49 ) $ (0.20 ) $ (0.60 ) $ 0.01 $ 0.29
income
(loss)
Effective 30.5 % 32.2 % 88.1 % 35.3 %
tax rate
-
continuing
operations
(1)
Represents
a
non-GAAP
financial
measure.
See
"Explanation
of
Non-GAAP
Financial
Measures"
for
a
detailed
explanation
of
these
and
other
non-GAAP
measures.
*
EPS amounts
are
rounded
to
the
nearest
$0.01 and
may
not add
to the
total
EPS Reconciliation of as
Reported to Adjusted
Nine Months ended April 2,
2011 and March 27, 2010
(In millions, except per
share data - Unaudited)
Nine Months ended April 2, 2011 Nine Months ended March 27, 2010
Impact of Significant Items Impact of Significant Items
Contingent
As Continuing Discontinued As Continuing Discontinued Sale
Reported Operations Operations Adjusted (1) Reported Operations Operations Proceeds Adjusted (1)
Continuing
operations:
Income from continuing operations $ 469 $ (125 ) $ - $ 594 $ 722 $ (84 ) $ - $ 133 $ 673
before income taxes
Income tax (benefit) 155 (50 ) - 205 217 (15 ) - 6 226
expense
Income from continuing 314 (75 ) - 389 505 (69 ) - 127 447
operations
Discontinued
operations:
Income from discontinued 261 - 130 131 (176 ) - (366 ) - 190
operations, net of tax
Gain on sale of discontinued 608 - 608 - 6 - 6 - -
operations, net of tax
Net income (loss) from 869 - 738 131 (170 ) - (360 ) - 190
discont. ops.
Net 1,183 (75 ) 738 520 335 (69 ) (360 ) 127 637
income
Less: Income from noncontrolling
interests, net of tax
Discontinued 7 - - 7 16 - - - 16
operations
Net income attributable $ 1,176 $ (75 ) $ 738 $ 513 $ 319 $ (69 ) $ (360 ) $ 127 $ 621
to Sara Lee
Amounts attributable
to Sara Lee:
Net income from continuing $ 314 $ (75 ) $ - $ 389 $ 505 $ (69 ) $ - $ 127 $ 447
operations
Net income from discontinued 862 - 738 124 (186 ) - (360 ) - 174
operations
Earnings per share
of common stock*:
Diluted
Income from continuing $ 0.49 $ (0.12 ) $ - $ 0.61 $ 0.72 $ (0.10 ) $ - $ 0.18 $ 0.64
operations
Net $ 1.85 $ (0.12 ) $ 1.16 $ 0.81 $ 0.46 $ (0.10 ) $ (0.52 ) $ 0.18 $ 0.89
income
Effective tax rate - continuing 33.0 % 34.4 % 30.0 % 33.5 %
operations
(1) Represents a non-GAAP financial measure. See "Explanation of Non-GAAP Financial
Measures" for a detailed explanation of these and other non-GAAP measures.
* EPS amounts are rounded to the nearest
$0.01 and may not add to the total.
Explanation of Non-GAAP Financial Measures
Management measures and reports Sara Lee's financial results in
accordance with U.S. generally accepted accounting principles
("GAAP"). In this release, Sara Lee highlights certain items that
have significantly impacted the corporation's financial results and
uses several non-GAAP financial measures to help investors
understand the financial impact of these 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 corporation 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; transformation
program and Project Accelerate costs; impairment charges; pension
partial withdrawal liability charges; benefit plan curtailment
gains (losses); debt extinguishment costs; spin-off related costs;
tax charge 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 Sara Lee
or the applicable business segment or discontinued operations and
to enable more meaningful comparability between financial results
from period to period. Additionally, Sara Lee 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 corporation.
"Contingent sale proceeds" are contingent proceeds from the sale
of the company's tobacco business in fiscal 1999. Under the sales
agreement, Sara Lee received cash payments annually so long as
tobacco continued to be a legal product in the specified countries.
Our last cash payment was received on July 15, 2009. Contingent
sale proceeds are not "significant items," but are identified
separately because the income is not generated by the company's
underlying business and has a finite term.
"Impact of 53rd week" is the financial impact to Sara Lee, in
terms of additional sales, expense or income, resulting from fiscal
2010 having 53 weeks as compared to 52 weeks in the comparable
fiscal years.
This release contains certain non-GAAP financial measures that
exclude from a financial measure computed in accordance with GAAP
the impact of the significant items, the receipt of contingent sale
proceeds, and the impact of acquisitions and dispositions, the 53rd
week and changes in foreign currency exchange rates. Management
believes that these non-GAAP financial measures reflect an
additional way of viewing aspects of Sara Lee's business that, when
viewed together with Sara Lee's financial results computed in
accordance with GAAP, provide a more complete understanding of
factors and trends affecting Sara Lee's historical financial
performance and projected future operating results, greater
transparency of underlying profit trends and greater comparability
of results across periods. These non-GAAP financial measures are
not intended to be a substitute for the comparable GAAP measures
and should be read only in conjunction with our consolidated
financial statements prepared in accordance with GAAP.
In addition, investors frequently have requested information
from management regarding significant items and the impact of the
contingent sale proceeds. Management believes, based on feedback it
has received during earnings calls and discussions with investors,
that these non-GAAP measures enhance investors' ability to assess
Sara Lee's historical and project future financial performance.
Management also uses certain of these non-GAAP financial measures,
in conjunction with the GAAP financial measures, to understand,
manage and evaluate our businesses, in planning for and forecasting
financial results for future periods, and as one factor in
determining achievement of incentive compensation. Two of the three
performance measures under Sara Lee's annual incentive plan are net
sales and operating income, which are the reported amounts as
adjusted for significant items and possibly other items. Operating
income, as adjusted for significant items, also may be used as a
component of Sara Lee's long-term incentive plans. Many of the
significant items will recur in future periods; however, the amount
and frequency of each significant item varies from period to
period. Management also has received inquiries from investors
seeking to better understand and project the corporation's tax
rate, which can be complex given the multiple foreign jurisdictions
in which Sara Lee operates and the numerous tax rules with which it
must comply. The information contained in the tables
"Reconciliation of as Reported to Adjusted" for each fiscal period
includes certain non-GAAP financial measures, and is intended to
help investors better understand Sara Lee's effective tax rate.
The following is an explanation of the non-GAAP financial
measures presented in this release.
In the "EPS Reconciliation of as Reported to Adjusted" tables,
each item in the "Adjusted" column of that table equals the
indicated financial measure computed in accordance with GAAP less
the impact of both significant items and contingent sale proceeds
recognized in the fiscal period presented.
"Adjusted EPS" excludes from diluted EPS, as reported, for total
Sara Lee, for continuing operations or for discontinued operations,
as indicated, the per share impact of significant items and
contingent sale proceeds, and the per share impact of the 53rd week
recognized in the fiscal period presented.
"Adjusted net sales" for continuing operations or discontinued
operations, as indicated, excludes from applicable net sales the
impact of businesses acquired or divested after the start of the
fiscal period and the impact of the 53rd week, and also presents
fiscal 2010 results at fiscal 2011 currency exchange rates.
"Adjusted operating income" for continuing operations or
discontinued operations, as indicated, excludes from applicable
operating income the impact of significant items and contingent
sale proceeds, if any, the impact of the 53rd week and businesses
acquired or divested after the start of the fiscal period, and also
presents fiscal 2010 results at fiscal 2011 currency exchange
rates.
"Adjusted operating margin" for continuing operations, a
specified business segment or discontinued operations, as
indicated, is a non-GAAP financial measure that equals adjusted
operating income for the applicable portion of the business divided
by adjusted net sales of the corporation (in the case of computing
adjusted operating margin for continuing operations) or adjusted
operating segment income for a business segment or discontinued
operations divided by adjusted net sales for that business segment
or discontinued operation (in the case of computing adjusted
operating margin for a specific business segment or discontinued
operations).
"Adjusted operating segment income" for continuing operations, a
specified business segment or discontinued operations, as
indicated, excludes from the operating segment income from
continuing operations, of a specified business segment or from
discontinued operations the impact of significant items and the
impact of the 53rd week recognized by that portion of the business
during the fiscal period and businesses acquired or divested after
the start of the fiscal period, and also presents fiscal 2010
results at fiscal 2011 currency exchange rates.
Guidance Reconciliation
Updated
Fiscal 2011
Guidance Fiscal
(USD) as of 5/5/11 2010 (1)
Total diluted EPS (2) $2.03 - $2.09 $0.73
Continuing operations $0.67 - $0.71 $0.89
Discontinued operations $1.36 - $1.38 $(0.16)
Contingent sale proceeds - $0.19
Total significant items, net (2) $1.04 $(0.57)
Continuing operations $(0.12) $(0.04)
Discontinued operations $1.16 $(0.54)
Impact of 53rd week - $0.03
Continuing operations - $0.02
Discontinued operations - $0.01
Adjusted EPS (2)(3) $0.99 - $1.05 $1.08
Continuing operations $0.79 - $0.83 $0.72
Discontinued operations $0.20 - $0.22 $0.37
Net sales $11.9 - 12.1 B $12.9 B
Continuing operations $8.9 - 9.0 B $8.7 B
Discontinued operations $3.0 - 3.1 B $4.2 B
Total operating income (4) $855 - $900 MM $1.169 B
Continuing operations $770 - $800 MM $877 MM
Discontinued operations $85 - $100 MM $292 MM
Contingent sale proceeds - $133 MM
Total significant items, net (2) $(190) MM $(262) MM
Continuing operations $(70) MM $(150) MM
Discontinued operations $(120) MM $(112) MM
Impact of 53rd week - $33 MM
Continuing operations - $19 MM
Discontinued operations - $14 MM
Adjusted operating income (3) $1,045 - $1,090 MM $1.265 B
Continuing operations $840 - $870 MM $875 MM
Discontinued operations $205 - $220 MM $390 MM
Cash flow from operations $400 - $450 MM $952 MM
(incl. discontinued ops.)
Capital expenditures $375 - $400 MM $385 MM
Interest expense, net $89 MM $115 MM
(continuing operations)
Tax rate, cont. operations, 34% - 35% 29.6%
excl. significant items
Dollar/Euro exchange rate $1.36 $1.39
(1) Fiscal 2010 had 53 weeks.
(2) Amounts are rounded and may not add to the total.
(3) "Adjusted" financial measures are explained on "Explanation
of Non-GAAP Financial Measures" of this report.
(4) Fiscal 2011 operating income guidance includes net significant
items reported year to date, but does not include
any additional significant items that may occur
during the remainder of the fiscal year.
Operating
Results
by
Business
Segment
For
the Quarter
and
Nine Months
ended
April 2,
2011 and
March 27,
2010
(In millions
- Unaudited)
Third Quarter First Nine Months
Dollar Percent Dollar Percent
2011 2010 Change Change 2011 2010 Change Change
North American
Retail
Net sales $ 681 $ 672 $ 9 1.2 % $ 2,142 $ 2,076 $ 66 3.1 %
Adjusted net $ 681 $ 672 $ 9 1.2 % $ 2,142 $ 2,076 $ 66 3.1 %
sales*
Operating $ 85 $ 101 $ (16 ) (16.1 )% $ 236 $ 303 $ (67 ) (22.1 )%
segment
income
Operating 12.6 % 15.1 % (2.5 )% 11.0 % 14.6 % (3.6 )%
margin %
Increase/(decrease)
in operating
segment income
from:
Project $ (1 ) $ - $ (1 ) $ (2 ) $ (3 ) $ 1
Accelerate
charges
Curtailment - 7 (7 ) - 7 (7 )
gain
Adjusted $ 86 $ 94 $ (8 ) (7.8 )% $ 238 $ 299 $ (61 ) (20.3 )%
operating
segment
income*
Adjusted 12.8 % 14.1 % (1.3 )% 11.1 % 14.4 % (3.3 )%
operating
margin %*
North American
Foodservice
Net sales $ 448 $ 427 $ 21 5.0 % $ 1,410 $ 1,413 $ (3 ) (0.2 )%
Increase/(decrease)
in net sales
from:
Changes in $ - $ - $ - $ - $ (1 ) $ 1
foreign
currency
exchange rates
Adjusted net $ 448 $ 427 $ 21 4.9 % $ 1,410 $ 1,414 $ (4 ) (0.3 )%
sales*
Operating $ 33 $ 26 $ 7 31.6 % $ 121 $ 109 $ 12 11.4 %
segment
income
Operating 7.4 % 5.9 % 1.5 % 8.6 % 7.7 % 0.9 %
margin %
Increase/(decrease)
in operating
segment income
from:
Project $ (2 ) $ (8 ) $ 6 $ (4 ) $ (10 ) $ 6
Accelerate
charges
Impairment - - - - (13 ) 13
charges
Curtailment - 6 (6 ) - 6 (6 )
gain
Adjusted $ 35 28 7 27.3 % $ 125 126 (1 ) (1.1 )%
operating
segment
income*
Adjusted 7.8 % 6.5 % 1.3 % 8.9 % 8.9 % 0.0 %
operating
margin %*
International
Beverage
Net sales $ 925 $ 799 $ 126 15.7 % $ 2,552 $ 2,417 $ 135 5.6 %
Increase/(decrease)
in net sales
from:
Changes in $ - $ (7 ) $ 7 $ - $ 75 $ (75 )
foreign
currency
exchange rates
Acquisition 13 - 13 16 - 16
Adjusted net $ 912 $ 806 $ 106 13.2 % $ 2,536 $ 2,342 $ 194 8.3 %
sales*
Operating $ 134 $ 173 $ (39 ) (22.6 )% $ 333 $ 468 $ (135 ) (28.9 )%
segment
income
Operating 14.5 % 21.7 % (7.2 )% 13.0 % 19.4 % (6.4 )%
margin %
Increase/(decrease)
in operating
segment income
from:
Changes in $ - $ (2 ) $ 2 $ - $ 17 $ (17 )
foreign
currency
exchange rates
Project - (4 ) 4 (2 ) (4 ) 2
Accelerate
charges
International (1 ) - (1 ) (34 ) - (34 )
stranded
overhead -
severance
Acquisition 1 - 1 1 - 1
Adjusted $ 134 $ 179 $ (45 ) (25.1 )% $ 368 $ 455 $ (87 ) (18.9 )%
operating
segment
income*
Adjusted 14.7 % 22.2 % (7.5 )% 14.5 % 19.4 % (4.9 )%
operating
margin %*
International
Bakery
Net sales $ 173 $ 186 $ (13 ) (6.6 )% $ 544 $ 601 $ (57 ) (9.4 )%
Increase/(decrease)
in net sales
from:
Changes in $ - $ (1 ) $ 1 $ - $ 24 $ (24 )
foreign
currency
exchange rates
Adjusted net $ 173 $ 187 $ (14 ) (7.1 )% $ 544 $ 577 $ (33 ) (5.7 )%
sales*
Operating $ 3 $ (1 ) $ 4 NM $ 16 $ 4 $ 12 NM
segment
income
Operating 1.3 % (0.2 )% 1.5 % 2.9 % 0.7 % 2.2 %
margin %
Increase/(decrease)
in operating
segment income
from:
Changes in $ - $ - $ - $ - $ 2 $ (2 )
foreign
currency
exchange rates
Project - (10 ) 10 - (26 ) 26
Accelerate
charges
Impairment - - - - (4 ) 4
charge
Adjusted $ 3 9 (6 ) (75.7 )% $ 16 32 (16 ) (51.6 )%
operating
segment
income*
Adjusted 1.4 % 5.2 % (3.8 )% 2.9 % 5.7 % (2.8 )%
operating
margin %*
* Adjusted
amounts
are
non-GAAP
measures.
See
the
explanation
non-GAAP
financial
measures
in this
release.
Operating
Results
by
Business
Segment
For
the Quarter
and
Nine Months
ended
April 2,
2011 and
March 27,
2010
(in millions
- Unaudited)
Third Quarter First Nine Months
Dollar Percent Dollar Percent
2011 2010 Change Change 2011 2010 Change Change
Total Sara Lee
- Continuing
Operations
Net sales $ 2,227 $ 2,084 $ 143 $ 6,648 $ 6,507 $ 141
- total
operating
segments
Intersegment (7 ) (7 ) - (20 ) (24 ) 4
Net sales $ 2,220 $ 2,077 $ 143 6.9 % $ 6,628 $ 6,483 $ 145 2.2 %
Increase/(decrease)
in net sales
from:
Changes in $ - $ (8 ) $ 8 $ - $ 98 $ (98 )
foreign
currency
exchange rates
Acquisition 13 - 13 16 - 16
Adjusted net $ 2,207 $ 2,085 $ 122 5.8 % $ 6,612 $ 6,385 $ 227 3.5 %
sales*
Total $ 255 $ 299 $ (44 ) (15.0 )% $ 706 $ 884 $ (178 ) (20.2 )%
operating
segment income
Increase/(decrease)
in operating
segment income
from:
Changes in $ - $ (2 ) $ 2 $ - $ 19 $ (19 )
foreign
currency
exchange rates
Project (3 ) (22 ) 19 (8 ) (43 ) 35
Accelerate
charges
International (1 ) - (1 ) (34 ) - (34 )
stranded
overhead -
severance
Impairment - - - - (17 ) 17
charges
Pension - 13 (13 ) - 13 (13 )
curtailment
gain
Acquisition 1 - 1 1 - 1
Total adjusted $ 258 $ 310 $ (52 ) (16.8 )% $ 747 $ 912 $ (165 ) (18.1 )%
operating
segment
income*
Total $ 255 $ 299 $ (44 ) (15.0 )% $ 706 $ 884 $ (178 ) (20.2 )%
operating
segment income
General (42 ) (61 ) 19 (112 ) (183 ) 71
corporate
expenses
Mark-to-market 8 (5 ) 13 19 (4 ) 23
derivative
gains (losses)
Amortization (8 ) (8 ) - (24 ) (24 ) -
of
trademarks
and
other
intangibles
Contingent - - - - 133 (133 )
sales
proceeds
Operating $ 213 $ 225 $ (12 ) (6.0 )% $ 589 $ 806 $ (217 ) (27.0 )%
income
Operating 9.6 % 10.9 % (1.3 )% 8.9 % 12.4 % (3.5 )%
margin %
Increase/(decrease)
in
operating
income
from:
Contingent $ - $ - $ - $ - $ 133 $ (133 )
sale
proceeds
Changes in - (2 ) 2 - 17 (17 )
foreign
currency
exchange rates
Project (6 ) (36 ) 30 (19 ) (73 ) 54
Accelerate
charges
Spin off (10 ) - (10 ) (10 ) - (10 )
related
costs
International (2 ) - (2 ) (41 ) - (41 )
stranded
overhead -
severance
Impairment - - - - (17 ) 17
charges
Pension - 21 (21 ) - 21 (21 )
curtailment
gain
Mexican - (15 ) 15 - (15 ) 15
tax
indemnification
Acquisition 1 - 1 1 - 1
Adjusted $ 230 $ 257 $ (27 ) (10.5 )% $ 658 $ 740 $ (82 ) (11.1 )%
operating
income*
Adjusted 10.4 % 12.3 % (1.9 )% 9.9 % 11.6 % (1.7 )%
operating
margin %*
* Adjusted
amounts
are
non-GAAP
measures.
See
the
explanation
non-GAAP
financial
measures
in this
release.
Operating
Results
by
Business
Segment
For
the Quarter
and
Nine Months
ended
April 2,
2011 and
March 27,
2010
(in millions
- Unaudited)
North American
Fresh
Bakery
Operations
Third Quarter First Nine Months
Dollar Percent Dollar Percent
2011 2010 Change Change 2011 2010 Change Change
Net sales $ 491 $ 501 $ (10 ) (2.0 )% $ 1,494 $ 1,541 $ (47 ) (3.0 )%
Adjusted net $ 491 $ 501 $ (10 ) (2.0 )% $ 1,494 $ 1,541 $ (47 ) (3.0 )%
sales*
Operating $ 16 $ 9 $ 7 81.7 % $ 20 $ 45 $ (25 ) (55.4 )%
segment
income
Operating 3.3 % 1.8 % 1.5 % 1.3 % 2.9 % (1.6 )%
margin %
Increase/(decrease)
in operating
segment income
from:
Changes in $ - $ - $ - $ - $ - $ -
foreign
currency
exchange rates
Exit - - - (1 ) (1 ) -
activities
and business
dispositions
Professional (4 ) - (4 ) (5 ) - (5 )
fees/Other
Pension - 3 (3 ) (5 ) 3 (8 )
curtailment
gain (loss)
Pension (2 ) - (2 ) (2 ) (7 ) 5
partial
withdrawal
liability
charge
Accelerated - (2 ) 2 - (2 ) 2
depreciation
Adjusted $ 22 $ 8 $ 14 NM $ 33 $ 52 $ (19 ) (35.2 )%
operating
segment
income*
Adjusted 4.4 % 1.5 % 2.9 % 2.2 % 3.3 % (1.1 )%
operating
margin %*
Operating $ 16 $ 9 $ 7 81.7 % $ 20 $ 45 $ (25 ) (55.4 )%
segment
income
Amortization - (4 ) 4 (4 ) (11 ) 7
expense
Mark-to-market 5 (2 ) 7 4 (5 ) 9
derivative
gains
and
losses/Other
Adjustment for 2 2 - 6 4 2
noncontrolling
interests
Operating $ 23 $ 5 $ 18 NM $ 26 $ 33 $ (7 ) (24.7 )%
income
Changes in $ - $ - $ - $ - $ - $ -
foreign
currency
exchange rates
Exit - - - (1 ) (1 ) -
activities
and business
dispositions
Professional (4 ) - (4 ) (5 ) - (5 )
fees/Other
Pension - 3 (3 ) (5 ) 3 (8 )
curtailment
loss
Pension (2 ) - (2 ) (2 ) (7 ) 5
partial
withdrawal
liability
charge
Accelerated - (2 ) 2 - (2 ) 2
depreciation
Adjusted $ 29 $ 4 $ 25 NM $ 39 $ 40 $ (1 ) (3.7 )%
operating
income
Operating $ 23 $ 5 $ 18 NM $ 26 $ 33 $ (7 ) (24.7 )%
income
Interest (2 ) (2 ) - (6 ) (7 ) 1
income
(expense)
Income before 21 3 18 20 26 (6 )
income taxes
Income taxes 7 (2 ) 9 (222 ) 7 (229 )
expense
(benefit)
Income 14 5 9 NM 242 19 223 NM
from
discontinued
operations
Adjustment for (2 ) (2 ) - (6 ) (4 ) (2 )
noncontrolling
interests
Income 12 3 9 NM 236 15 221 NM
from
discontinued
operations
attributable
to Sara Lee
Gain on sale - - - - - -
of
discontinued
operations,
net of tax
Net income $ 12 $ 3 $ 9 NM $ 236 $ 15 $ 221 NM
from
discontinued
operations
attributable
to Sara Lee
* Adjusted
amounts
are
non-GAAP
measures.
See
the
explanation
non-GAAP
financial
measures
in this
release.
Operating
Results
- Discontinued
Operations
For
the Quarter
and
Nine Months
ended
April 2,
2011 and
March 27,
2010
(in millions
- Unaudited)
International
Household
and
Body
Care
Businesses
Third Quarter First Nine Months
Dollar Percent Dollar Percent
2011 2010 Change Change 2011 2010 Change Change
Net sales $ 197 $ 525 $ (328) (62.4)% $ 970 $ 1,611 $ (641) (39.8)%
Increase/(decrease)
in net sales
from:
Changes in $ - $ (12) $ 12 $ - $ 19 $ (19)
foreign
currency
exchange rates
Disposition - 348 (348) - 643 (643)
Adjusted net $ 197 $ 189 $ 8 4.7% $ 970 $ 949 $ 21 2.3%
sales*
Operating $ (28) $ 79 $ (107) NM $ 52 $ 211 $ (159) (75.3)%
segment
income
Operating (14.0)% 14.9% (28.9)% 5.4% 13.1% (7.7)%
margin %
Increase/(decrease)
in operating
segment income
from:
Changes in $ - $ (2) $ 2 $ - $ 2 $ (2)
foreign
currency
exchange rates
Exit (14) - (14) (55) - (55)
activities
and business
dispositions
Professional (7) (7) - (15) (22) 7
fees/Other
Curtailment - 1 (1) 4 (10) 14
gain/(loss)
Accelerated (1) - (1) (2) - (2)
Depreciation
License (39) - (39) (39) - (39)
termination
cost
Dispositions - 56 (56) - 102 (102)
Adjusted $ 33 $ 31 $ 2 4.4% $ 159 $ 139 $ 20 14.8%
operating
segment
income*
Adjusted 16.5% 16.5% 0.0% 16.5% 14.7% 1.8%
operating
margin %*
Operating $ (28) $ 79 $ (107) NM $ 52 $ 211 $ (159) (75.3)%
segment
income
Amortization - - - - (4) 4
expense
Foreign - - - - - -
currency
transaction
gains/Other
Operating $ (28) $ 79 $ (107) NM $ 52 $ 207 $ (155) (74.6)%
income
Changes in $ - $ (2) $ 2 $ - $ 2 $ (2)
foreign
currency
exchange rates
Exit (14) - (14) (55) - (55)
activities
and business
dispositions
Professional (7) (7) - (15) (22) 7
fees/Other
Curtailment - 1 (1) 4 (10) 14
gain/(loss)
Accelerated (1) - (1) (2) - (2)
Depreciation
License (39) - (39) (39) - (39)
termination
cost
Dispositions - 56 (56) - 102 (102)
Adjusted $ 33 $ 31 $ 2 2.9% $ 159 $ 135 $ 24 18.3%
operating
income
Operating $ (28) $ 79 $ (107) NM $ 52 $ 207 $ (155) (74.6)%
income
Interest (1) 1 (2) - 2 (2)
income
(expense)
Income before (29) 80 (109) 52 209 (157)
income taxes
Income taxes (5) 442 (447) 33 404 (371)
expense
(benefit)
Income (24) (362) 338 93.7% 19 (195) 214 NM
from
discontinued
operations
Adjustment for (1) (6) 5 (1) (12) 11
noncontrolling
interests
Income (25) (368) 343 93.7% 18 (207) 225 NM
from
discontinued
operations
attributable
to Sara Lee
Gain on sale 29 6 23 608 6 602
of
discontinued
operations,
net of tax
Net income $ 4 $ (362) $ 366 NM $ 626 $ (201) $ 827 NM
from
discontinued
operations
attributable
to Sara Lee
* Adjusted
amounts
are
non-GAAP
measures.
See
the
explanation
non-GAAP
financial
measures
in this
release.
Operating
Results
- Discontinued
Operations
For
the Quarter
and
Nine Months
ended
April 2,
2011 and
March 27,
2010
(in millions
- Unaudited)
Total
Discontinued
Operations
Third Quarter First Nine Months
Dollar Percent Dollar Percent
2011 2010 Change Change 2011 2010 Change Change
Net sales $ 688 $ 1,026 $ (338) (32.9)% $ 2,464 $ 3,152 $ (688) (21.8)%
Increase/(decrease)
in net sales
from:
Changes in $ - $ (12) $ 12 $ - $ 19 $ (19)
foreign
currency
exchange rates
Disposition - 348 (348) - 643 (643)
Adjusted net $ 688 $ 690 $ (2) (0.2)% $ 2,464 $ 2,490 $ (26) (1.0)%
sales*
Operating $ (12) $ 88 $ (100) NM $ 72 $ 256 $ (184) (71.8)%
segment
income
Operating (1.7)% 8.5% (10.2)% 2.9% 8.1% (5.2)%
margin %
Increase/(decrease)
in operating
segment income
from:
Changes in $ - $ (2) $ 2 $ - $ 2 $ (2)
foreign
currency
exchange rates
Exit (14) - (14) (56) (1) (55)
activities
and business
dispositions
Professional (11) (7) (4) (20) (22) 2
fees/Other
Curtailment - 4 (4) (1) (7) 6
gain/(loss)
Accelerated (1) (2) 1 (2) (2) -
Depreciation
Pension (2) - (2) (2) (7) 5
partial
withdrawal
liability
charge
License (39) - (39) (39) - (39)
termination
cost
Dispositions - 56 (56) - 102 (102)
Adjusted $ 55 $ 39 $ 16 40.6% $ 192 $ 191 $ 1 1.4%
operating
segment
income*
Adjusted 7.9% 5.6% 2.3% 7.8% 7.6% 0.2%
operating
margin %*
Operating $ (12) $ 88 $ (100) NM $ 72 $ 256 $ (184) (71.8)%
segment
income
Amortization - (4) 4 (4) (15) 11
expense
Foreign 5 (2) 7 4 (5) 9
currency
transaction
gains/Other
Adjustment for 2 2 - 6 4 2
noncontrolling
interests
Operating $ (5) $ 84 $ (89) NM $ 78 $ 240 $ (162) (67.7)%
income
Changes in $ - $ (2) $ 2 $ - $ 2 $ (2)
foreign
currency
exchange rates
Exit (14) - (14) (56) (1) (55)
activities
and business
dispositions
Professional (11) (7) (4) (20) (22) 2
fees/Other
Curtailment - 4 (4) (1) (7) 6
gain/(loss)
Accelerated (1) (2) 1 (2) (2) -
Depreciation
Pension (2) - (2) (2) (7) 5
partial
withdrawal
liability
charge
License (39) - (39) (39) - (39)
termination
cost
Dispositions - 56 (56) - 102 (102)
Adjusted $ 62 $ 35 $ 27 73.3% $ 198 $ 175 $ 23 13.4%
operating
income
Operating $ (5) $ 84 $ (89) NM $ 78 $ 240 $ (162) (67.7)%
income
Interest (3) (1) (2) (6) (5) (1)
income
(expense)
Income before (8) 83 (91) 72 235 (163)
income taxes
Income taxes 2 440 (438) (189) 411 (600)
expense
(benefit)
Income (10) (357) 347 97.3% 261 (176) 437 NM
from
discontinued
operations
Adjustment for (3) (8) 5 (7) (16) 9
noncontrolling
interests
Income (13) (365) 352 96.8% 254 (192) 446 NM
from
discontinued
operations
attributable
to Sara Lee
Gain on sale 29 6 23 608 6 602
of
discontinued
operations,
net of tax
Net income $ 16 $ (359) $ 375 NM $ 862 $ (186) $ 1,048 NM
from
discontinued
operations
attributable
to Sara Lee
* Adjusted
amounts
are
non-GAAP
measures.
See
the
explanation
non-GAAP
financial
measures
in this
release.
Media: Jon Harris, +1.630.598.8661Analysts: Melissa Napier,
+1.630.598.8739
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