TIDMSRL
Sara Lee Corp. (NYSE: SLE) today reported earnings for the third
quarter and first nine months of fiscal 2012 and provided an update
on the progress of the spin-off of D.E MASTER BLENDERS 1753.
Third Quarter Highlights (continuing operations):
-- 3% increase in adjusted1 net sales; 2% increase in reported
net sales
Coffee & Tea Co2: adjusted net sales up 5%;
reported net sales up 1%
Meat Co2: adjusted net sales up 1%; reported net sales
up 2%
-- Adjusted and reported operating income decreased 5% and 66%
Coffee & Tea Co: adjusted operating segment income down
9%;
reported operating segment income down 21%
Meat Co: adjusted operating segment income down 7%; reported
operating segment income down 13%
-- Adjusted EPS decreased two cents to $0.20; reported EPS decreased
fourteen cents to $0.06
Guidance Update
-- Expect adjusted EPS to fall in the middle of the $0.89-$0.95 range
-- Net sales and operating income will meet objectives at the low end of
their respective guidance ranges
Key Financial Data, Continuing Operations
Third Quarter ($ millions, except per share) First Nine Months
2012 2011 % Change Continuing Operations 2012 2011 % Change
1,861 1,806 3.0 Adjusted Net Sales 5,805 5,536 4.9
1,899 1,860 2.0 Reported Net Sales 5,923 5,545 6.8
195 205 (4.7 ) Adjusted Operating Income 633 596 6.3
66 194 (65.9 ) Reported Operating Income 278 526 (47.2 )
$0.20 $0.22 (9.1 ) Adjusted EPS $0.65 $0.55 18.2
$0.06 $0.20 (70.0 ) Reported EPS $0.06 $0.43 (86.0 )
1 The term "adjusted net sales" and other "adjusted" financial
measures are explained and reconciled to comparable GAAP measures
at the end of this release.
2 Coffee & Tea Co is Sara Lee's business segment, which is
planned to be spun-off into an independent company. Meat Co is the
summation of the N.A. Retail and N.A. Foodservice & Specialty
Meats segments
Perspectives from Executive Chairman & Chief Executive
Officer
"I am pleased to announce that we are on track to spin-off the
Coffee & Tea business by June 30. Significant progress has been
made in the last quarter with the IRS private letter ruling, an F-1
prospectus filing for Coffee, the successful bond redemption and
tender offers and the investor day for Coffee Co (D.E MASTER
BLENDERS 1753)," said Executive Chairman Jan Bennink. "Both
companies are in full preparation to become highly successful pure
play companies. Sean Connolly, the new CEO for Meats, is finalizing
his strategy and his new management structure, which will be
presented to investors shortly. Michiel Herkemij, appointed as CEO
for Master Blenders in December, has presented his strategy to
investors and has added a supply chain executive and a regional
head for Western Europe to his executive team. The Boards for the
new companies will be announced in May."
Chief Executive Officer Marcel Smits added, "I am pleased to
report that Meat Co showed continued improvement in volume trends,
achieved SG&A reductions and launched new innovation in the
third quarter. The Coffee & Tea business performed well in its
main markets with underlying margin improvement, and is gearing up
for significant innovation. Activity levels in both companies
increased during this period as the corporate headquarters
operation continued to be scaled down. In addition, both businesses
worked through manufacturing inefficiencies that impacted results.
Positively, after two years of steep commodity cost increases, we
finally see a stabilization and, in the case of coffee, a reversal
of raw material trends. For the first time in two years, both
businesses recovered their commodity cost increases and will see
further benefits in Q4, particularly in coffee. We are confident
that we will achieve our guidance, at the low end of the range for
sales and operating income, as we continue to build two stand-alone
businesses."
Fiscal 2012 Guidance
February
Guidance Current Expectations
Adjusted EPS $0.89 - $0.95 Middle of the range
Net Sales $7.9-$8.15B Low end of the range
Adjusted Operating Income $875 - $930M Low end of the range
(including acquisitions)
Net interest expenses $80M $65M
Tax Rate 33.4% 33%
Year-end-cash $300M $300M
Year-end-debt $2.4B $1.7B*
Average dollar euro exchange rate $1.35 $1.35
*Updated on March 2, 2012
Coffee & Tea Co.
Third Quarter ($ millions) First Nine Months
2012 2011 % Change Continuing Operations 2012 2011 % Change
929 888 4.6 Adjusted Net Sales 2,823 2,567 10.0
938 925 1.4 Reported Net Sales 2,858 2,552 12.0
36 47 (23.1) MAP 141 131 7.1
120 131 (8.7) Adjusted Op. Seg. Inc. 385 374 2.9
106 134 (20.7) Reported Op. Seg. Inc. 360 333 8.2
Overall, Coffee & Tea experienced strong performance in its
branded business during the quarter. Excluding green coffee
exports, adjusted net sales increased by 8.2%. Including export
sales, the business grew by 4.6%. NOTE: Going forward net sales
will be reported excluding green coffee export sales.
All business sectors showed strength, with Western Europe the
most robust, at 10.5% sales growth, Rest of World at 8.4% and
Out-of-Home at 2.9%. Shares in the key Western European countries
(Netherlands, France and Spain) held steady or grew.
Mix improved to +6.5%, from +5.4% last quarter, while volume
continued to be negative at -7.3% compared to the prior year in Q3.
Volume has been affected by three factors: the elimination of
private label business in France in summer 2011; the effects of the
Thai flooding; and negative volume trends in several smaller
countries due to aggressive pricing to protect margins. Excluding
French private label and Thai volume declines, the ongoing business
shows a -3.9% compared to the prior year in Q3. Actions are
underway to rebalance volume and margins in these markets.
Operating segment income for the third quarter was below last
year, adversely affected by SG&A increases due to stranded
costs, costs for the stand-alone company and one-off innovation
costs. Positive raw material developments are not reflected in this
quarter due to the forward buying strategy of the business.
Income was impacted by a $17 million currency mark-to-market
loss in this quarter. Adjusted operating margins excluding this
impact are healthy at 14.7%, a significant increase over the
comparable number last quarter of 13.6%. As of the spin-off, these
currency mark-to-market impacts will be reported below the
operating profit line to better track operating results.
MAP spend was below last year, as funds were partly reallocated
to support volume actions in selected smaller markets and to foster
upcoming innovations.
Innovations are starting to show the first green shoots, with
the encouraging launch of the premium R&G line in the
Netherlands, the upcoming re-launch of capsules and the re-launch
of the Spanish Tea range with new flavors and packaging in Q4.
Raw material benefits will begin to be realized in Q4, with
coverage of lower prices until October.
Meat Co.
North American Retail and North American Foodservice & Specialty Meats
Third Quarter ($ millions) First Nine Months
2012 2011 % Change Continuing Operations 2012 2011 % Change
906 895 1.3 Adjusted Net Sales 2,898 2,882 0.6
935 913 2.4 Reported Net Sales 2,981 2,913 2.3
32 25 28.8 MAP 109 98 12.0
96 103 (7.1 ) Adjusted Op. Seg. Inc. 297 310 (4.4 )
89 103 (13.5 ) Reported Op. Seg. Inc. 272 308 (11.8 )
The total Meat Co. business continues to show positive progress.
For the first time in the fiscal year, pricing net of commodities
was positive in both the Retail and Foodservice & Specialty
Meats segments. Total volumes have begun to stabilize and were
slightly down (less than 1%) for the quarter, showing sequential
improvement from a 5.7% decline over the prior year in Q1 and a
3.5% decline over the prior year in Q2, assisted by the timing of
the Easter holiday as well as higher commodity turkey sales. Bakery
categories in both segments continue to perform below expectations,
diluting the stronger performance of the meat categories.
North American Retail
Third Quarter ($ millions) First Nine Months
2012 2011 % Change Continuing Operations 2012 2011 % Change
675 670 0.8 Adjusted Net Sales 2,100 2,106 (0.3 )
675 670 0.8 Reported Net Sales 2,100 2,106 (0.3 )
26 24 8.8 MAP 93 93 0.5
78 83 (7.0 ) Adjusted Op. Seg. Inc. 222 228 (3.1 )
72 82 (12.6 ) Reported Op. Seg. Inc. 195 226 (14.0 )
Third quarter reported and adjusted net sales showed a slight
increase of almost 1% over the prior year third quarter as positive
pricing offset a weaker sales mix. Unit volumes were flat for the
quarter, continuing a sequential improvement from volume declines
of 7.3% over the prior year in Q1 and a 4.9% decline over the prior
year in Q2. Volume declines from the transition to third party
brokers have shown improvement. Adjusted and reported operating
segment income declined, as a result of discounts to move aged
inventory and higher MAP spend.
Jimmy Dean continues its strong performance with positive volume
growth for the quarter. New innovations, including quesadillas and
bowl variants, launched in Q3 and were supported by increased media
and advertising spend.
The Ball Park frozen hamburger patty launch in Q3 extends the
brand beyond hot dogs. Rollout of this new product will continue
through Q4. Media and Advertising campaigns supporting Ball Park
are also planned for Q4.
Efforts to refresh and reposition the HillshireFarm brand
continue. The Hillshire Farm sausage business showed improvement in
the quarter behind new products launched earlier in the year,
increased MAP spend and selected pricing actions implemented in
Q2.
In the first nine months, adjusted and reported net sales were
flat as pricing and sales mix virtually offset volume declines and
higher slotting expenses. Adjusted operating segment income
declined 3% and reported operating segment income declined 14% as
lower volumes and higher commodity costs and slotting expenses were
not entirely offset by lower SG&A costs and favorable
pricing.
North American Foodservice & Specialty Meats
Third Quarter ($ millions) First Nine Months
2012 2011 % Change Continuing Operations 2012 2011 % Change
231 225 2.9 Adjusted Net Sales 798 776 2.9
260 243 6.9 Reported Net Sales 881 807 9.1
6 1 NM MAP 16 5 NM
18 20 (7.4 ) Adjusted Op. Seg. Inc. 75 82 (8.3 )
17 21 (16.9 ) Reported Op. Seg. Inc. 77 82 (5.9 )
In the third quarter, adjusted and reported net sales increased
by almost 3% and 7%, respectively, over the prior year's third
quarter as pricing more than offset volume declines in the segment.
Adjusted and reported operating segment income declined as a result
of the lower segment volumes and related manufacturing
inefficiencies. Low single digit volume growth in the meat business
was offset by high single-digit volume declines in bakery as that
business continues to suffer from negative economic and industry
trends.
In the first nine months, adjusted and reported net sales
increased by approximately 3% and 9%, respectively, driven
primarily by higher pricing and the impact of the Aidells
acquisition. Adjusted and reported operating segment declines can
be attributed to higher commodity costs and declining volumes
offsetting additional higher pricing and lower SG&A costs.
Additional Information
Corporate Expenses
Third Quarter ($ millions, excluding significant items) First Nine Months
2012 2011 2012 2011
(5) (33) General corporate expenses (36) (97)
(4) (4) Amortization of trademarks and intangibles (10) (10)
(10) 8 Commodity MTM gains/(losses) (6) 18
(19) (29) Total corporate expenses (52) (89)
Total corporate expenses were $19 million for the quarter, a
decline of $10 million from the prior year. The reduction was
primarily in general corporate expenses due to corporate headcount
reductions, lower pension and casualty insurance costs and lower
overhead expenses related to sold companies. These reductions were
somewhat offset by commodity mark-to-market losses of $10 million
for the quarter (mainly due to declining coffee costs) compared to
an $8 million gain last year. We expect full year total corporate
expenses (including amortization and commodity MTM adjustments) to
be in a range of $70-$80 million.
Commodity Costs (including Currency Mark-to-Market)
In the third quarter, price increases of $123 million helped to
offset total commodity cost increases of $92 million. In the first
nine months of the year, price increases of $445 million helped to
offset total commodity cost increases of $411 million. The $411
million increase in FY12 commodity costs includes a $35 million
favorable variance in currency mark-to-market adjustments,
comprised of a $4 million dollar gain in the first nine months of
FY12 versus a $31 million dollar year-to-date loss in the first
nine months of FY11. This year-over-year benefit is included in the
Coffee and Tea results.
Cash from Operations
Net cash used in operating activities for the third quarter was
$173 million versus a source of $59 million in the prior year. The
decrease was primarily due to a $73 million (EUR55 million)
termination payment paid to Royal Philips Electronics as well as
refundable tax payments of $43 million primarily related to the
Senseo trademark acquisitions and higher cash payments for
significant items. For the first nine months, net cash from
operating activities was a use of $140 million compared to a source
of $292 million in the prior year. The decrease was primarily due
to a significant decline in the cash generated by discontinued
operations as divestitures were completed, a one-time $86 million
(EUR60 million) payment to the Netherlands pension plan in the
first quarter of fiscal 2012, higher cash payments for significant
items and refundable tax payments.
Significant Items
For the quarter, total significant items, excluding impairment
charges and gains or losses on the sale of businesses, were $131
million, primarily resulting from the termination of a previous
agreement with Royal Philips Electronics and spin-related advisory
costs. For the full year, we expect total significant items for
continuing and discontinued operations, excluding impairment
charges and gains or losses on the sale of businesses, to be
approximately $550 million.
As a consequence of the spin-off, Sara Lee expects to release
approximately $700 million of deferred tax liabilities currently on
its balance sheet related to the repatriation of foreign earnings.
This reversal, which will be reflected as a reduction to income tax
expense, is expected to occur in the same quarter as the
spin-off.
Dividends
Sara Lee previously announced that as part of the spin-off
process, Sara Lee will spin-off all of the shares of its U.S.
subsidiary that holds its Coffee & Tea business. Immediately
after that spin-off occurs, the U.S. subsidiary will pay a $3.00
special dividend to Sara Lee shareholders who receive shares of the
spun-off business.
Sara Lee Corporation does not expect to declare or pay any
additional dividends before spin-off.
Diluted Earnings
Per Share
Third Quarter
Continuing Operations Total Company
2012 2011 2012 2011
Diluted EPS as reported $0.06 $0.20 $0.00 $0.25
Less:
Gain (Loss) on sale - - (0.10 ) 0.05
of discontinued
operations
Tax related items 0.01 - 0.04 -
Other significant items (0.15 ) (0.02 ) (0.15 ) (0.09 )
Adjusted EPS* $0.20 $0.22 $0.21 $0.30
* Amounts are rounded
and may
not add to the total.
First Nine Months
Continuing Operations Total Company
2012 2011 2012 2011
Diluted EPS as reported $0.06 $0.43 $0.42 $1.85
Less:
Gain on sale of - - 0.68 0.96
discontinued
operations
Tax related items (0.17 ) 0.01 0.07 0.35
Other significant items (0.42 ) (0.13 ) (1.04 ) (0.26 )
Adjusted EPS* $0.65 $0.55 $0.72 $0.81
* Amounts are rounded
and may
not add to the total.
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 at 7:00 p.m. on the
day of the webcast until November 3, 2012. 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.
Amounts included in the release are preliminary, pending Sara
Lee Corporation's filing of its Form 10-Q with the Securities and
Exchange Commission on or before May 10, 2012. The Form 10-Q will
be available in the Investor Relations section (Financial/SEC
Information page) on www.saralee.com.
About Sara Lee Corporation
Sara Lee Corp. (NYSE: SLE) and it's leading portfolio of food
and beverage brands, including Ball Park, Douwe Egberts, Hillshire
Farm, Jimmy Dean, Pickwick Teas, Sara Lee and Senseo, generate
nearly $8 billion in annual net sales from continuing operations
and employ approximately 20,000 people worldwide. In January 2011,
Sara Lee Corp. announced that it will divide the company into two
pure-play publicly-traded companies, one focused on the
international coffee and tea market and the other on North American
meats. For more information on the company, please visit
www.saralee.com.
Forward-Looking Statements
This release contains forward-looking statements regarding Sara
Lee's business prospects and future financial results and metrics,
including statements contained under the heading "Fiscal 2012
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 and are inherently
uncertain.
Investors must recognize that actual results may differ from
those expressed or implied in the forward-looking statements, and
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 proposed spin-off plans and the special dividend announced
on Jan. 28, 2011, 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 spin-off including a lower
effective
tax rate for the spin-off company; (iv) the impact of the
spin-off on
Sara Lee's relationships with its employees, 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 and special dividend; (vii) disruption to Sara Lee's
business
operations as a result of the spin-off; (viii) future operating
or
capital needs that require a more significant outlay of cash
than
currently anticipated; and (ix) the ability of the businesses
to
operate independently following the completion of the
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; and (ii) credit and other
business
risks associated with customers operating in a highly
competitive
retail environment;
-- 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, Sara Lee's ability to increase or maintain
product
prices in response to cost fluctuations 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 product
innovations,
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, 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
global corporations, and different regulatory structures and
unexpected changes in regulatory environments overseas; and (iv)
Sara
Lee's ability to continue to source production and conduct
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 credit ratings, the impact of Sara
Lee's
capital plans on such credit ratings and the impact these
ratings and
changes in these ratings may have on Sara Lee's cost to borrow
funds
and access to capital/debt markets; (iii) 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 (iv) 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.
Financial
Summary
-
As Adjusted
For
the
Quarters
and Nine
Months
ended
Mar.
31,
2012 and
Apr.
2, 2011
(in
millions,
except
per share
data
-
unaudited)
Quarter ended Nine Months ended
Mar. 31, Apr. 2, % Mar. 31, Apr. 2, %
2012 2011 Change 2012 2011 Change
Continuing
operations:
Adjusted
net
sales:
N.A. $ 675 $ 670 0.8 % $ 2,100 $ 2,106 (0.3 )%
Retail
N.A. 231 225 2.9 798 776 2.9
FS
&
Specialty
Meats
Coffee 929 888 4.6 2,823 2,567 10.0
& Tea
Australian 30 30 (3.2 ) 103 107 (4.4 )
Bakery
Intersegment (4 ) (7 ) (19 ) (20 )
Total $ 1,861 $ 1,806 3.0 % $ 5,805 $ 5,536 4.9 %
adjusted
net sales
Adjusted
operating
income
N.A. $ 78 $ 83 (7.0 )% $ 222 $ 228 (3.1 )%
Retail
N.A. 18 20 (7.4 ) 75 82 (8.3 )
FS
&
Specialty
Meats
Coffee 120 131 (8.7 ) 385 374 2.9
& Tea
Australian (2 ) - NM 3 1 NM
Bakery
Adjusted 214 234 (8.6 )% 685 685 (0.1 )%
operating
segment
income
General (5 ) (33 ) (36 ) (97 )
corporate
expenses
Mark-to-market (10 ) 8 (6 ) 18
derivatives
gains/(losses)
Amortization (4 ) (4 ) (10 ) (10 )
of
trademarks
&
intangibles
Total $ 195 $ 205 (4.7 )% $ 633 $ 596 6.3 %
adjusted
operating
income
Adjusted $ 121 $ 132 (9.3 )% $ 387 $ 347 11.6 %
income
from
continuing
operations
Adjusted $ 123 $ 185 (33.4 )% $ 429 $ 520 (17.6 )%
net
income
Adjusted
net
income
attributable
to Sara
Lee:
Continuing $ 121 $ 132 (9.3 )% $ 387 $ 347 11.6 %
operations
Discontinued $ 2 $ 50 (95.5 )% $ 39 $ 166 (77.1 )%
operations
Adjusted
diluted
earnings
per
share:
Income $ 0.20 $ 0.22 (9.1 )% $ 0.65 $ 0.55 18.2 %
from
continuing
operations
Net $ 0.21 $ 0.30 (30.0 )% $ 0.72 $ 0.81 (11.1 )%
income
Adjusted
operating
margin:
N.A. 11.5 % 12.5 % (1.0 )% 10.5 % 10.9 % (0.4 ) %
Retail
N.A. 7.7 8.6 (0.9 ) 9.3 10.5 (1.2 )
FS
&
Specialty
Meats
Coffee 12.9 14.7 (1.8 ) 13.6 14.6 (1.0 )
& Tea
Australian (6.7 ) (2.1 ) (4.6 ) 3.5 1.0 2.5
Bakery
Total 10.5 % 11.3 % (0.8 )% 10.9 % 10.8 % 0.1 %
Sara
Lee
NM
=
Not
meaningful
Financial
Summary
-
As Reported
For
the
Quarters
and Nine
Months
ended
Mar.
31,
2012 and
Apr.
2, 2011
(in
millions,
except
per share
data
-
unaudited)
Quarter ended Nine Months ended
Mar. 31, Apr. 2, % Mar. 31, Apr. 2, %
2012 2011 Change 2012 2011 Change
Continuing
operations:
Net
sales:
N.A. $ 675 $ 670 0.8 % $ 2,100 $ 2,106 (0.3 )%
Retail
N.A. 260 243 6.9 881 807 9.1
FS
&
Specialty
Meats
Coffee 938 925 1.4 2,858 2,552 12.0
& Tea
Australian 30 29 1.0 103 100 2.8
Bakery
Intersegment (4 ) (7 ) (19 ) (20 )
Total net $ 1,899 $ 1,860 2.0 % $ 5,923 $ 5,545 6.8 %
sales
Operating
income
N.A. $ 72 $ 82 (12.6 )% $ 195 $ 226 (14.0 )%
Retail
N.A. 17 21 (16.9 ) 77 82 (5.9 )
FS
&
Specialty
Meats
Coffee 106 134 (20.7 ) 360 333 8.2
& Tea
Australian (2 ) - NM 3 1 NM
Bakery
Operating 193 237 (18.4 )% 635 642 (1.1 )%
segment
income
General (113 ) (47 ) (341 ) (124 )
corporate
expenses
Mark-to-market (10 ) 8 (6 ) 18
derivatives
gains/(losses)
Amortization (4 ) (4 ) (10 ) (10 )
of
trademarks
&
intangibles
Total $ 66 $ 194 (65.9 )% $ 278 $ 526 (47.2 )%
operating
income
Income $ 38 $ 124 (70.1 )% $ 37 $ 273 (86.7 )%
from
continuing
operations
Net $ (2 ) $ 156 NM $ 252 $ 1,183 (78.7 )%
income
(loss)
Net
income
(loss)
attributable
to Sara
Lee:
Continuing $ 38 $ 124 (70.1 )% $ 37 $ 273 (86.7 )%
operations
Discontinued $ (40 ) $ 29 NM $ 212 $ 903 (76.5 )%
operations
Diluted
earnings
per
share:
Income $ 0.06 $ 0.20 (70.0 )% $ 0.06 $ 0.43 (86.0 )%
(loss)
from
continuing
operations
Net $ - $ 0.25 NM $ 0.42 $ 1.85 (77.3 )%
income
Operating
margin:
N.A. 10.6 % 12.2 % (1.6 )% 9.3 % 10.7 % (1.4 )%
Retail
N.A. 6.6 8.5 (1.9 ) 8.7 10.1 (1.4 )
FS
&
Specialty
Meats
Coffee 11.3 14.5 (3.2 ) 12.6 13.0 (0.4 )
& Tea
Australian (8.2 ) (2.0 ) (6.2 ) 3.0 1.0 2.0
Bakery
Total 3.5 % 10.4 % (6.9 )% 4.7 % 9.5 % (4.8 )%
Sara
Lee
NM
=
Not
meaningful
Consolidated
Statements
of Income
For the Quarters
and Nine Months
ended Mar. 31,
2012 and Apr.
2, 2011 (in
millions,
except
per share data
- unaudited)
Quarter ended Nine Months ended
March 31, April 2, March 31, April 2,
2012 2011 2012 2011
Continuing
operations
Net sales $ 1,899 $ 1,860 $ 5,923 $ 5,545
Cost of sales 1,312 1,226 4,024 3,664
Selling, general 458 436 1,410 1,308
and
administrative
expenses
Net charges 63 4 179 47
for exit
activities,
asset and business
dispositions
Impairment charges - - 32 -
Operating income 66 194 278 526
Interest expense 29 25 88 87
Interest income (11 ) (9 ) (31 ) (21 )
Debt - - - 55
extinguishment
costs
Income from 48 178 221 405
continuing
operations
before income
taxes
Income tax expense 10 54 184 132
Income from 38 124 37 273
continuing
operations
Discontinued
operations:
Income (loss) from
discontinued
operations,
net of tax 20 3 (188 ) 302
(benefit)
of $(23),
$8, $(155)
and $(166)
Gain (loss)
on sale
of discontinued
operations, net of
tax expense (60 ) 29 403 608
of $29,
$14, $368 and $576
Net income (loss) (40 ) 32 215 910
from
discontinued
operations
Net income (loss) (2 ) 156 252 1,183
Less: Income from
noncontrolling
interests,
net of tax
Discontinued - 3 3 7
operations
Net income (loss) $ (2 ) $ 153 $ 249 $ 1,176
attributable
to Sara Lee
Amounts
attributable
to Sara Lee:
Net income from $ 38 $ 124 $ 37 $ 273
continuing
operations
Net income (loss) (40 ) 29 212 903
from
discontinued
operations
Earnings per share
of common stock:
Basic
Income from $ 0.06 $ 0.21 $ 0.06 $ 0.43
continuing
operations
Net income (loss) $ - $ 0.25 $ 0.42 $ 1.86
Average shares 593 605 592 632
outstanding
Diluted
Income from $ 0.06 $ 0.20 $ 0.06 $ 0.43
continuing
operations
Net income (loss) $ - $ 0.25 $ 0.42 $ 1.85
Average shares 597 609 595 635
outstanding
Cash dividends $ 0.115 $ 0.115 $ 0.23 $ 0.23
declared per
share of common
stock
Net Sales Bridge
For the Quarters and Nine Months ended Mar. 31, 2012 and Apr. 2, 2011 (in millions, except per share data - 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 March 31, 2012
Adjusted Total
Unit Net Sales* Acq./ Foreign Net Sales
Volume Mix + Price + Other = Change + Disp. + Exchange = Change
N.A. Retail 0.3 % (0.9 )% 4.0 % (2.6 )% 0.8 % 0.0 % 0.0 % 0.8 %
N.A. FS and Specialty Meats (2.5 ) 0.2 4.9 0.3 2.9 4.0 0.0 6.9
Coffee & Tea (7.3 ) 6.5 9.1 (3.7 ) 4.6 0.8 (4.0 ) 1.4
Australian Bakery (4.3 ) 2.1 (1.6 ) 0.6 (3.2 ) 0.0 4.2 1.0
Total Continuing Business (3.9 )% 3.0 % 6.6 % (2.7 )% 3.0 % 0.9 % (1.9 )% 2.0 %
First Nine Months ended March 31, 2012
Adjusted Total
Unit Net Sales* Acq./ Foreign Net Sales
Volume + Mix + Price + Other = Change + Disp. + Exchange = Change
N.A. Retail (4.1 )% 0.4 % 5.1 % (1.7 )% (0.3 )% 0.0 % 0.0 % (0.3 )%
N.A. FS and Specialty Meats (1.7 ) 0.0 4.7 (0.1 ) 2.9 6.2 0.0 9.1
Coffee & Tea (6.0 ) 5.3 11.6 (0.9 ) 10.0 1.2 0.8 12.0
Australian Bakery (7.7 ) 5.3 3.1 (5.1 ) (4.4 ) 0.0 7.2 2.8
Total Continuing Business (4.7 )% 2.6 % 8.0 % (1.0 )% 4.9 % 1.4 % 0.5 % 6.8 %
*Adjusted net sales is a non-GAAP measure that excludes the impact of foreign currency exchange rates and acquisitions/dispositions. See detailed explanation of this and other non-GAAP measures in this release.
Condensed Consolidated Balance Sheet Data
As of Mar. 31, 2012 and July 2, 2011 (in millions,
except per share data - unaudited)
March 31, July 2,
2012 2011
Assets
Cash and equivalents $ 2,655 $ 2,066
Trade accounts receivable, less allowances 734 828
Inventories 907 884
Current deferred income taxes 35 42
Other current assets 324 261
Assets held for sale 5 503
Total current assets 4,660 4,584
Property, net of accumulated depreciation 1,300 1,380
of $2,120 and $2,057, respectively
Trademarks and other identifiable intangibles 400 282
Goodwill 599 624
Deferred income taxes 139 260
Pension asset 427 265
Other noncurrent assets 244 236
Noncurrent assets held for sale 5 1,902
$ 7,774 $ 9,533
Liabilities and Equity
Notes payable $ 187 $ 238
Accounts payable 693 875
Income taxes payable and current deferred taxes 615 468
Other accrued liabilities 1,061 1,576
Current maturities of long-term debt 985 473
Liabilities held for sale - 492
Total current liabilities 3,541 4,122
Long-term debt 954 1,935
Pension obligation 225 216
Deferred income taxes 211 179
Other liabilities 698 823
Noncurrent liabilities held for sale - 284
Equity
Sara Lee common stockholders' equity 2,145 1,945
Noncontrolling interest - 29
Total Equity 2,145 1,974
$ 7,774 $ 9,533
Consolidated Statements of Cash Flows
For the Nine Months ended Mar.
31, 2012 and Apr. 2, 2011
(in millions, except per share data - unaudited)
Nine Months ended
Mar. 31, Apr. 2,
2012 2011
Operating activities -
Net income $ 252 $ 1,183
Adjustments to reconcile net
income/(loss) to net cash
from operating activities:
Depreciation 197 225
Amortization 35 62
Impairment charges 418 -
Net (gain) loss on business dispositions (771) (1,184)
Pension contributions, net of expense (197) (76)
Refundable tax on Senseo payments (43) -
Increase in deferred income taxes 25 234
for unremitted earnings
Increase (decrease) in deferred income 122 (227)
taxes for tax basis differences
Debt extinguishment costs - 55
Other (41) 35
Changes in current assets and liabilities, net of
businesses acquired and sold:
Trade accounts receivable 42 136
Inventories (77) (268)
Other current assets 31 (105)
Accounts payable (70) (10)
Accrued liabilities (133) (83)
Accrued taxes 70 315
Net cash from operating activities (140) 292
Investing activities -
Purchases of property and equipment (193) (238)
Purchases of software and other intangibles (178) (14)
Acquisitions of businesses (29) (32)
Dispositions of businesses and investments 2,035 2,182
Cash received from derivative transactions 49 72
Sales of assets 2 10
Net cash received from investing activities 1,686 1,980
Financing activities -
Issuances of common stock 62 20
Purchases of common stock - (1,313)
Borrowings of other debt 173 1,032
Repayments of other debt and derivatives (715) (1,352)
Net change in financing with (109) 483
less than 90-day maturities
Purchase of noncontrolling interest (10) -
Payments of dividends (203) (217)
Net cash used in financing activities (802) (1,347)
Effect of changes in foreign exchange rates on cash (155) 252
Increase in cash and equivalents 589 1,177
Add: Cash balances of discontinued - -
operations at beginning of year
Less: Cash balances of discontinued - -
operations at end of period
Cash and equivalents at beginning of year 2,066 955
Cash and equivalents at end of quarter $ 2,655 $ 2,132
Supplemental cash flow data:
Cash paid for restructuring actions $ 354 $ 82
Cash contributions to pension plans 187 115
Cash paid for income taxes 180 219
Operating Results by
Business Segment
For the Quarters ended Mar. 31, 2012 and Apr. 2, 2011
(in millions, except per share data - unaudited)
Changes in
Foreign
Currency
As Exchange Acquisitions/ As
Reported Rates Dispositions Adjusted
Third Quarter 2012
Net sales:
N.A. Retail $ 675 $ - $ - $ 675
N.A. FS & Specialty Meats 260 - 29 231
Coffee & Tea 938 - 9 929
Australian Bakery 30 - - 30
Intersegment (4 ) - - (4 )
Total net sales $ 1,899 $ - $ 38 $ 1,861
Third Quarter 2011
Net sales:
N.A. Retail $ 670 $ - $ - $ 670
N.A. FS & Specialty Meats 243 - 18 225
Coffee & Tea 925 35 2 888
Australian Bakery 29 (1 ) - 30
Intersegment (7 ) - - (7 )
Total net sales $ 1,860 $ 34 $ 20 $ 1,806
Changes in
Foreign
Currency Other
Third Quarter 2012 As Exchange Acquisitions/ Restructuring Impairment Significant As
Reported Rates Dispositions Actions Charges Items Adjusted
Operating income:
N.A. Retail $ 72 $ - $ - $ (6 ) $ - $ - $ 78
N.A. FS & Specialty Meats 17 - - (1 ) - - 18
Coffee & Tea 106 - - (14 ) - - 120
Australian Bakery (2 ) - - - - - (2 )
Total operating segment income 193 - - (21 ) - - 214
General corporate expenses (113 ) - - (108 ) - - (5 )
Mark-to-market derivative (10 ) - - - - - (10 )
gains/(losses)
Amortization (4 ) - - - - - (4 )
of trademarks/intangibles
Operating income $ 66 $ - $ - $ (129 ) $ - $ - $ 195
Operating margin 3.5 % 10.5 %
Third Quarter 2011
Operating income:
N.A. Retail $ 82 $ - $ - $ (1 ) $ - $ - $ 83
N.A. FS & Specialty Meats 21 - 2 (1 ) - - 20
Coffee & Tea 134 4 - (1 ) - - 131
Australian Bakery - - - - - - -
Total operating segment income 237 4 2 (3 ) - - 234
General corporate expenses (47 ) - - (14 ) - - (33 )
Mark-to-market derivative 8 - - - - - 8
gains/(losses)
Amortization (4 ) - - - - - (4 )
of trademarks/intangibles
Operating income $ 194 $ 4 $ 2 $ (17 ) $ - $ - $ 205
Operating margin 10.4 % 11.3 %
Operating Results by
Business Segment
For the Nine Months ended Mar. 31, 2012 and Apr. 2, 2011
(in millions, except per share data - unaudited)
Changes in
Foreign
Currency
As Exchange Acquisitions/ As
Reported Rates Dispositions Adjusted
First Nine Months 2012
Net sales:
N.A. Retail $ 2,100 $ - $ - $ 2,100
N.A. FS & Specialty Meats 881 - 83 798
Coffee & Tea 2,858 - 35 2,823
Australian Bakery 103 - - 103
Intersegment (19 ) - - (19 )
Total net sales $ 5,923 $ - $ 118 $ 5,805
First Nine Months 2011
Net sales:
N.A. Retail $ 2,106 $ - $ - $ 2,106
N.A. FS & Specialty Meats 807 - 31 776
Coffee & Tea 2,552 (19 ) 4 2,567
Australian Bakery 100 (7 ) - 107
Intersegment (20 ) - - (20 )
Total net sales $ 5,545 $ (26 ) $ 35 $ 5,536
Changes in
Foreign
Currency Other
First Nine Months 2012 As Exchange Acquisitions/ Restructuring Impairment Significant As
Reported Rates Dispositions Actions Charges Items Adjusted
Operating income:
N.A. Retail $ 195 $ - $ - $ (27 ) $ - $ - $ 222
N.A. FS & Specialty Meats 77 - 4 (2 ) - - 75
Coffee & Tea 360 - 2 (27 ) - - 385
Australian Bakery 3 - - - - - 3
Total operating segment income 635 - 6 (56 ) - - 685
General corporate expenses (341 ) - - (278 ) (32 ) 5 (36 )
Mark-to-market derivative (6 ) - - - - - (6 )
gains/(losses)
Amortization (10 ) - - - - - (10 )
of trademarks/intangibles
Operating income $ 278 $ - $ 6 $ (334 ) $ (32 ) $ 5 $ 633
Operating margin 4.7 % 10.9 %
First Nine Months 2011
Operating income:
N.A. Retail $ 226 $ - $ - $ (2 ) $ - $ - $ 228
N.A. FS & Specialty Meats 82 - 3 (3 ) - - 82
Coffee & Tea 333 (6 ) 1 (36 ) - - 374
Australian Bakery 1 - - - - - 1
Total operating segment income 642 (6 ) 4 (41 ) - - 685
General corporate expenses (124 ) - - (27 ) - - (97 )
Mark-to-market derivative 18 - - - - - 18
gains/(losses)
Amortization (10 ) - - - - - (10 )
of trademarks/intangibles
Operating income $ 526 $ (6 ) $ 4 $ (68 ) $ - $ - $ 596
Operating margin 9.5 % 10.8 %
Significant Items
For the Quarters
ended Mar.
31, 2012 and
Apr. 2, 2011
(in millions,
except per
share data -
unaudited)
Quarter ended Mar. 31, 2012 Quarter ended Apr. 2, 2011
Diluted Diluted
Pretax Net EPS Pretax Net EPS
(In millions except Impact Income/(loss) Impact (1) Impact Income/(loss) Impact (1)
per share data)
Continuing Operations:
Restructuring actions:
Severance/ retention $ (12 ) $ (9 ) $ (0.02 ) $ (4 ) $ (2 ) $ -
costs
Lease and contractual (70 ) (53 ) (0.09 ) - - -
obligation
exit costs
Consulting/advisory (30 ) (17 ) (0.03 ) (13 ) (8 ) (0.01 )
costs
Accelerated (17 ) (11 ) (0.02 ) - - -
depreciation
Total restructuring (129 ) (90 ) (0.15 ) (17 ) (10 ) (0.02 )
actions
Gain on HBI tax - - - - - -
settlement
Impairment charges - - - - - -
Litigation accrual - - - - - -
Thailand flood loss - - - - - -
Tax indemnification - - - - - -
accrual adjustment
Debt extinguishment - - - - - -
costs
Impact of significant (129 ) (90 ) (0.15 ) (17 ) (10 ) (0.02 )
items
on income/(loss) from
continuing operations
before income taxes
Tax on unremitted - (6 ) (0.01 ) - - -
earnings
Tax - 12 0.02 - 2 -
audit
settlement/reserve
adjustments
Tax valuation - 1 - - - -
allowance
adjustment
Impact of significant (129 ) (83 ) (0.14 ) (17 ) (8 ) (0.02 )
items
on income/(loss)
from continuing
operations
Discontinued
operations:
Restructuring actions:
Severance/ retention - - - (17 ) (12 ) (0.02 )
costs
Consulting/advisory (2 ) (2 ) - (9 ) (7 ) (0.01 )
costs
Accelerated - - - (1 ) (1 ) -
depreciation
Impairment charges - - - - - -
Gain (loss) on (31 ) (60 ) (0.10 ) 43 29 0.05
the sale of
discontinued
operations
Licensing agreement - - - (39 ) (27 ) (0.04 )
termination charge
Pension - - - (2 ) (2 ) -
curtailment/withdrawal
Tax basis differences - (3 ) (0.01 ) - - -
Tax - 22 0.04 - (1 ) -
audit
settlement/reserve
adjustments
Tax valuation - - - - - -
allowance
adjustment
Tax on unremitted - 1 - - - -
earnings
Impact of significant (33 ) (42 ) (0.07 ) (25 ) (21 ) (0.03 )
items
on income/(loss)
from discontinued
operations
Impact of significant $ (162 ) $ (125 ) $ (0.21 ) $ (42 ) $ (29 ) $ (0.05 )
items on net income
Impact of significant items on income from continuing operations before income taxes
Cost of sales $ (6 ) $ -
Selling, general and (60 ) (13 )
administrative
expenses
Exit and business (63 ) (4 )
dispositions
Total $ (129 ) $ (17 )
Notes:
(1) EPS amounts
are rounded
to the nearest
$0.01 and may not add
to the total.
Significant Items
For the Nine
Months
ended Mar.
31, 2012 and
Apr. 2, 2011
(in millions,
except per
share data -
unaudited)
Nine Months ended Mar. 31, 2012 Nine Months ended Apr. 2, 2011
Diluted Diluted
Pretax Net EPS Pretax Net EPS
(In millions Impact Income/(loss) Impact (1) Impact Income/(loss) Impact (1)
except
per share data)
Continuing
Operations:
Restructuring
actions:
Severance/ $ (47 ) $ (33 ) $ (0.05 ) $ (47 ) $ (33 ) $ (0.05 )
retention
costs
Lease (157 ) (112 ) (0.19 ) - - -
and contractual
obligation
exit costs
Consulting/advisory (101 ) (74 ) (0.12 ) (19 ) (13 ) (0.02 )
costs
Accelerated (29 ) (18 ) (0.03 ) (2 ) (1 ) -
depreciation
Total (334 ) (237 ) (0.40 ) (68 ) (47 ) (0.07 )
restructuring
actions
Gain on HBI tax 15 15 0.02 - - -
settlement
Impairment (32 ) (22 ) (0.04 ) - - -
charges
Litigation (11 ) (7 ) (0.01 ) - - -
accrual
Thailand flood (2 ) (1 ) - - - -
loss
Tax 3 4 0.01 - - -
indemnification
accrual
adjustment
Debt - - - (55 ) (35 ) (0.06 )
extinguishment
costs
Impact (361 ) (248 ) (0.42 ) (123 ) (82 ) (0.13 )
of significant
items
on income/(loss)
from
continuing
operations
before income
taxes
Tax on unremitted - (111 ) (0.19 ) - - -
earnings
Tax - 81 0.14 - 8 0.01
audit
settlement/reserve
adjustments
Tax valuation - (72 ) (0.12 ) - - -
allowance
adjustment
Impact (361 ) (350 ) (0.59 ) (123 ) (74 ) (0.12 )
of significant
items
on income/(loss)
from continuing
operations
Discontinued
operations:
Restructuring
actions:
Severance/ (17 ) (12 ) (0.02 ) (66 ) (47 ) (0.07 )
retention
costs
Consulting/advisory (16 ) (13 ) (0.02 ) (12 ) (9 ) (0.02 )
costs
Accelerated - - - (2 ) (2 ) -
depreciation
Impairment (385 ) (345 ) (0.58 ) - - -
charges
Gain on the sale 771 403 0.68 1,184 608 0.96
of discontinued
operations
Licensing - - - (39 ) (27 ) (0.04 )
agreement
termination
charge
Pension (3 ) (2 ) - (3 ) (2 ) -
curtailment/withdrawal
Tax - 186 0.31 - 225 0.35
basis differences
Tax - 22 0.04 - - -
audit
settlement/reserve
adjustments
Tax valuation - - - - (3 ) -
allowance
adjustment
Tax on unremitted - (66 ) (0.11 ) - (6 ) (0.01 )
earnings
Impact 350 173 0.29 1,062 737 1.16
of significant
items
on income/(loss)
from discontinued
operations
Impact $ (11 ) $ (177 ) $ (0.30 ) $ 939 $ 663 $ 1.04
of significant
items on net
income
Impact of significant items on income from continuing operations before income taxes
Cost of sales $ (18 ) $ (2 )
Selling, general (132 ) (19 )
and
administrative
expenses
Exit and business (179 ) (47 )
dispositions
Impairment (32 ) -
charges
Debt - (55 )
extinguishment
costs
Total $ (361 ) $ (123 )
Notes:
(1) EPS amounts
are rounded
to the nearest
$0.01 and may
not add
to the total.
EPS Reconciliation - Reported to Adjusted
For the Quarters ended Mar. 31, 2012 and Apr. 2, 2011
(in millions, except per share data - unaudited)
Quarter ended March 31, 2012 Quarter ended April 2, 2011
Impact of Impact of
As Significant As Significant
Reported Items Adjusted (1) Reported Items Adjusted (1)
Continuing operations:
Income from continuing operations
before income taxes $ 48 $ (129 ) $ 177 $ 178 $ (17 ) $ 195
Income tax expense (benefit) 10 (46 ) 56 54 (9 ) 63
Income from continuing operations 38 (83 ) 121 124 (8 ) 132
Discontinued operations:
Income from discontinued operations, net of tax 20 18 2 3 (50 ) 53
Gain (loss) on sale of discontinued (60 ) (60 ) - 29 29 -
operations, net of tax
Net income (loss) from discontinued operations (40 ) (42 ) 2 32 (21 ) 53
Net income (loss) (2 ) (125 ) 123 156 (29 ) 185
Less: Income from noncontrolling
interests, net of tax
Discontinued operations - - - 3 - 3
Net income (loss) attributable to Sara Lee $ (2 ) $ (125 ) $ 123 $ 153 $ (29 ) $ 182
Amounts attributable to Sara Lee:
Net income from continuing operations $ 38 $ (83 ) $ 121 $ 124 $ (8 ) $ 132
Net income (loss) from discontinued operations (40 ) (42 ) 2 29 (21 ) 50
Earnings per share of common stock:
Diluted
Income from continuing operations $ 0.06 $ (0.14 ) $ 0.20 $ 0.20 $ (0.02 ) $ 0.22
Net income $ - $ (0.21 ) $ 0.21 $ 0.25 $ (0.05 ) $ 0.30
Effective tax rate - continuing operations 21.9 % 32.0 % 30.0 % 31.9 %
(1) Represents a non-GAAP financial measure. See detailed explanation
of these and other non-GAAP measures at end of this release.
EPS Reconciliation - Reported to Adjusted
For the Nine Months ended Mar. 31, 2012 and Apr. 2, 2011
(in millions, except per share data - unaudited)
Nine Months ended March 31, 2012 Nine Months ended April 2, 2011
Impact of Impact of
As Significant As Significant
Reported Items Adjusted (1) Reported Items Adjusted (1)
Continuing operations:
Income/(loss) from continuing operations
before income taxes $ 221 $ (361 ) $ 582 $ 405 $ (123 ) $ 528
Income tax expense (benefit) 184 (11 ) 195 132 (49 ) 181
Income/(loss) from continuing operations 37 (350 ) 387 273 (74 ) 347
Discontinued operations:
Income/(loss) from discontinued (188 ) (230 ) 42 302 129 173
operations, net of tax
Gain on sale of discontinued 403 403 - 608 608 -
operations, net of tax
Net income from discontinued operations 215 173 42 910 737 173
Net income 252 (177 ) 429 1,183 663 520
Less: Income from noncontrolling
interests, net of tax
Discontinued operations 3 - 3 7 - 7
Net income attributable to Sara Lee $ 249 $ (177 ) $ 426 $ 1,176 $ 663 $ 513
Amounts attributable to Sara Lee:
Net income/(loss) from continuing operations $ 37 $ (350 ) $ 387 $ 273 $ (74 ) $ 347
Net income/(loss) from discontinued operations 212 173 39 903 737 166
Earnings per share of common stock:
Diluted
Income/(loss) from continuing operations $ 0.06 $ (0.59 ) $ 0.65 $ 0.43 $ (0.12 ) $ 0.55
Net income $ 0.42 $ (0.30 ) $ 0.72 $ 1.85 $ 1.04 $ 0.81
Effective tax rate - continuing operations 83.5 % 33.5 % 32.5 % 34.2 %
(1) Represents a non-GAAP financial measure. See detailed explanation
of these and other non-GAAP measures at end of this release.
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; consulting and
advisory costs, transformation program and Project Accelerate
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 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.
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 and the impact of acquisitions
and dispositions, 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 the impact of significant items.
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 significant items 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 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 also presents fiscal 2011 results at fiscal 2012
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 businesses
acquired or divested after the start of the fiscal period, and also
presents fiscal 2011 results at fiscal 2012 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 applicable operating segment income
measure the impact of significant items recognized by that portion
of the business during the fiscal period presented and the results
of businesses acquired or divested after the start of the fiscal
period presented, and also presents fiscal 2011 results at fiscal
2012 currency exchange rates.
"Adjusted operating income (including acquisitions)" for
continuing operations excludes from operating income from
continuing operations the impact of significant items recognized
during the fiscal period presented; this measure does not exclude
the results of businesses acquired or divested after the start of
the fiscal period presented and does not present fiscal 2011
results at fiscal 2012 currency exchange rates.
Sara Lee Corp.
Investor Relations:
Melissa Napier, +1.630.598.8739
Robin Jansen, +31.30.292.7455
or
Media:
Jon Harris, +1.630.598.8661
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