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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Hillshire Brd | LSE:HSH | London | Ordinary Share | COM STK USD0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.00 | - |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
TIDMHSH
The Hillshire Brands Company (NYSE: HSH) today reported earnings for its first quarter of fiscal year 2013.
First Quarter Highlights (continuing operations)
Hot Features
Premium
-- Adjusted1 diluted EPS increased by $0.19 to $0.51; reported
diluted EPS increased $0.31 to $0.41
-- Adjusted net sales increased by 2% to $1.01 billion; reported net
sales declined 1.4%
-- Adjusted operating income increased 76.3% to $105 million; reported
operating income increased $60 million to $87 million
-- Strong performance in the Retail segment, with sales growth of 3% and
adjusted operating segment income growth of 45.5%
CEO Perspective
"I am very pleased with our first quarter performance," said Sean Connolly, chief executive officer, The Hillshire Brands Company. "Our volumes are moving in the right direction, our key brands are gaining strength, our costs are coming down and our team is markedly stronger. Overall, we are off to an encouraging start against our three-year plan to build a consistently growing and more profitable branded food company."
He added, "While we are pleased with this progress, we recognize that we are only one quarter into our year. We want to wait for greater visibility into the cost picture and see our momentum continue to develop further before making any changes to our outlook. Accordingly, our full year guidance, given on August 9, remains unchanged at this time."
Key Financial Data, Continuing Operations
$ in millions, except per share
First Quarter
2013 2012 % Change
Adjusted Net Sales $ 1,011 $ 991 2.0 %
Reported Net Sales 1,011 1,025 (1.4 )%
Adj. Operating Income 105 60 76.3 %
Rep. Operating Income 87 27 NM
Adj. Diluted EPS 0.51 0.32 59.4 %
Rep. Diluted EPS 0.41 0.10 NM
Discussion of Continuing Operations Results
The company posted increases in adjusted net sales and adjusted operating income versus the first quarter of fiscal 2012. Higher adjusted net sales, coupled with lower expenses, including deflationary commodities, actions taken to lower SG&A costs, and lower variable costs, drove higher adjusted operating income.
Retail
Net sales in the Retail segment increased 3.0% in the quarter, driven by 2.3% volume growth. Adjusted operating segment income increased by 45.5%, primarily due to lower input costs and lower SG&A costs, reflecting the benefit of the company's cost reduction programs.
Jimmy Dean turned in a strong performance during the quarter, with double-digit sales growth. Ball Park also posted solid top line growth during the key summer hot dog season and the brand's new Flame Grilled Patties continued to perform well. Aidells continued to deliver strong double-digit growth and launched several new products, including hot dogs and all-natural salame. Each of these brands received strong MAP support, reflecting the company's commitment to brand building for the long-term.
Foodservice/Other
In the first quarter, Foodservice/Other adjusted net sales declined 1.6%. While volumes increased, revenues declined on a less profitable sales mix and lower pricing tied to declining input costs. Adjusted operating segment income increased $3 million, as a result of positive price recovery and lower SG&A expenses.
Foodservice Bakery struggled as industry trends for dessert consumption continued to decline and as the business was impacted by the lingering negative effects following the plant upgrades in the Tarboro, N.C. facility.
Australian Bakery
The Australian Bakery segment reported a 2.3% decline in sales in the quarter. The sales decline was expected, driven by the closing of a number of outlet stores and the exiting of unprofitable private label businesses. Excluding negative currency impacts, sales were down 1.1%. Adjusted operating segment income increased by $2 million on lower costs.
Corporate
The company's corporate expenses, excluding significant items, declined $14 million versus the first quarter of fiscal 2012, to $8 million. This reduction was driven primarily by an $8 million year-over-year increase in commodity mark-to-market gains, as well as cost savings initiatives, including headcount reductions.
Dividend
On October 25, 2012, Hillshire Brands' board of directors declared a quarterly dividend of $0.125 per share to be paid on December 31, 2012 to shareholders of record as of December 3, 2012.
Webcast and Form 10-Q
The Hillshire Brands Company's review of its results for the first quarter of 2013 will be broadcast live via the Internet today at 7:30 a.m. CDT. The live webcast can be accessed in the Investor Relations section on www.hillshirebrands.com and is anticipated to conclude by 8:30 a.m. CDT. For people who are unable to listen to the webcast live, a recording will be available on the website at 2:00 p.m. CDT on the day of the webcast until May 1, 2013.
The company's first quarter 2013 earnings release can be found in the News & Media section on www.hillshirebrands.com. Hillshire Brands has also provided slides containing additional information that will be reviewed during its first quarter webcast. The slides can be accessed in the Investor Relations section on www.hillshirebrands.com under Investor Upcoming Events.
Amounts included in the release are preliminary, pending The Hillshire Brands Company's filing of its Form 10-Q with the Securities and Exchange Commission, expected on or before November 2, 2012. The Form 10-Q will be available in the Investor Relations section (Financial/SEC Information page) on www.hillshirebrands.com.
About The Hillshire Brands Company
The Hillshire Brands Company (NYSE: HSH) is a leader in meat-centric food solutions for the retail and foodservice markets. The company generates approximately $4 billion in annual sales and has approximately 9,500 employees. Hillshire Brands' portfolio includes iconic brands such as Jimmy Dean, Ball Park, Hillshire Farm, State Fair,Sara Lee frozen bakery and Chef Pierre pies, as well as artisanal brands Aidells and GalloSalame. The company, formerly known as Sara Lee Corporation, began trading under the "HSH" ticker symbol on June 29, 2012, following the successful spin-off of its international coffee and tea business. For more information on the company, please visit www.hillshirebrands.com.
Forward-Looking Statements
This release contains forward-looking statements regarding Hillshire Brands' business prospects and future financial results and metrics, including statements contained under the heading "CEO Perspective." In addition, from time to time, in oral statements and written reports, the company discusses its expectations regarding the company's future performance by making forward-looking statements preceded by terms such as "anticipates," "intends," "expects," "likely" or "believes." These forward-looking statements are based on currently available competitive, financial and economic data and management's views and assumptions regarding future events and are inherently uncertain.
Investors must recognize that actual results may differ from those expressed or implied in the forward-looking statements, and the company wishes to caution readers not to place undue reliance on any forward-looking statements. Among the factors that could cause Hillshire Brands' actual results to differ from such forward-looking statements are those described under Item 1A, Risk Factors, in Hillshire Brands' most recent Annual Report on Form 10-K and other SEC Filings, as well as factors relating to:
-- Hillshire Brands' spin-off of its international coffee and tea
business in June 2012, including (i) Hillshire Brands' ability to
generate the anticipated benefits from the spin-off; (ii) the
transition of leadership to a new senior management team and the
departure of key personnel with historical knowledge; and (iii)
potential tax liabilities and other indemnification obligations;
-- The consumer marketplace, such as (i) intense competition, including
advertising, promotional and price competition; (ii) changes in
consumer behavior due to economic conditions, such as a shift in
consumer demand toward private label; (iii) fluctuations in raw
material costs, Hillshire Brands' ability to increase or maintain
product prices in response to cost fluctuations and the impact on
profitability; (iv) the impact of various food safety issues and
regulations on sales and profitability of Hillshire Brands products;
and (v) inherent risks in the marketplace associated with product
innovations, including uncertainties about trade and consumer
acceptance;
-- Hillshire Brands' relationship with its customers, such as (i) a
significant change in Hillshire Brands' business with any of its major
customers, such as Wal-Mart, its largest customer; and (ii) credit and
other business risks associated with customers operating in a highly
competitive retail environment;
-- Other business decisions, such as (i) Hillshire Brands' ability to
generate margin improvement through cost reduction and productivity
improvement initiatives; (ii) Hillshire Brands' credit ratings, the
impact of Hillshire Brands' capital plans on such credit ratings and
the impact these ratings and changes in these ratings may have on
Hillshire Brands' cost to borrow funds and access to capital/debt
markets; and (iii) the settlement of a number of ongoing reviews of
Hillshire Brands' income tax filing positions and inherent
uncertainties related to the interpretation of tax regulations in the
jurisdictions in which Hillshire Brands transacts business.
In addition, Hillshire Brands' results may also be affected by general factors, such as economic conditions, political developments, interest and inflation rates, accounting standards, taxes and laws and regulations in markets where the company competes. Hillshire Brands undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
1 The term "adjusted diluted EPS" and other financial measures identified as "adjusted" are explained and reconciled to comparable GAAP measures at the end of this release.
Financial Summary - As Adjusted *
For the Quarter ended Sept. 29, 2012 and Oct. 1, 2011 (in millions, except per share data - unaudited)
Quarter ended
Sept. 29, Oct. 1, %
2012 2011 Change
Continuing operations:
Adjusted net sales:
Retail $ 719 $ 698 3.0 %
Foodservice/Other 255 259 (1.6 )
Australian Bakery 37 38 (2.3 )
Intersegment - (4 )
Total adjusted net sales $ 1,011 $ 991 2.0 %
Adjusted operating income
Retail $ 84 $ 58 45.5 %
Foodservice/Other 25 22 10.9
Australian Bakery 4 2 70.8
Adjusted operating segment income 113 82 36.7 %
General corporate expenses (11 ) (17 )
Mark-to-market derivatives gains/(losses) 4 (4 )
Amortization of trademarks & intangibles (1 ) (1 )
Total adjusted operating income $ 105 $ 60 76.3 %
Adjusted income from continuing operations $ 62 $ 38 65.9 %
Adjusted net income - As Restated $ 62 $ 124 (50.0 )%
Adjusted net Income attributable to Hillshire Brands:
Continuing operations $ 62 $ 38 65.9 %
Discontinued operations - As Restated $ - $ 86 NM
Adjusted diluted earnings per share:
Income from continuing operations $ 0.51 $ 0.32 59.4 %
Net income - As Restated $ 0.51 $ 1.05 (51.4 )%
Adjusted operating margin:
Retail 11.6 % 8.2 % 3.4 %
Foodservice/Other 9.9 8.7 1.2
Australian Bakery 10.8 6.2 4.6
Total Hillshire Brands 10.4 % 6.0 % 4.4 %
NM = Not meaningful
* Represents a non-GAAP financial measure.
See detailed explanation of these and other non-GAAP measures at end of this release.
Financial Summary - As Reported
For the Quarter ended Sept. 29, 2012 and Oct. 1, 2011 (in millions, except per share data - unaudited)
Quarter ended
Sept. 29, Oct. 1, %
2012 2011 Change
Continuing operations:
Net sales:
Retail $ 719 $ 698 3.0 %
Foodservice/Other 255 293 (12.9 )
Australian Bakery 37 38 (2.3 )
Intersegment - (4 )
Total net sales $ 1,011 $ 1,025 (1.4 )%
Operating income
Retail $ 86 $ 44 96.5 %
Foodservice/Other 25 25 0.2
Australian Bakery 3 2 9.5
Operating segment income 114 71 59.5 %
General corporate expenses (30 ) (39 )
Mark-to-market derivatives gains/(losses) 4 (4 )
Amortization of trademarks & intangibles (1 ) (1 )
Total operating income $ 87 $ 27 NM
Income from continuing operations $ 51 $ 12 NM
Net income (loss) - As Restated $ 53 $ (218 ) NM
Net income (loss) attributable to Hillshire Brands:
Continuing operations $ 51 $ 12 NM
Discontinued operations - As Restated $ 2 $ (232 ) NM
Diluted earnings per share:
Income from continuing operations $ 0.41 $ 0.10 NM
Net income (loss) - As Restated $ 0.43 $ (1.85 ) NM
Operating margin:
Retail 12.0 % 6.3 % 5.7 %
Foodservice/Other 9.9 ' 8.6 1.3
Australian Bakery 7.2 6.4 0.8
Total Hillshire Brands 8.6 % 2.6 % 6.0 %
NM = Not meaningful
Consolidated Statements of Income
For the Quarters ended Sept. 29, 2012 and Oct. 1, 2011 (in millions, except per share data - unaudited)
Quarter ended
Oct. 1,
Sept. 29, 2011
2012 As Restated (1)
Continuing operations
Net sales $ 1,011 $ 1,025
Cost of sales 705 740
Selling, general and administrative expenses 222 227
Net charges for (income from) exit activities, asset and business dispositions (3 ) 21
Impairment charges - 10
Operating income 87 27
Interest expense 11 23
Interest income (2 ) (1 )
Income from continuing operations before income taxes 78 5
Income tax expense (benefit) 27 (7 )
Income from continuing operations 51 12
Discontinued operations:
Income (loss) from discontinued operations,
net of tax expense of nil and $70 - (322 )
Gain on sale of discontinued operations, net of
tax expense of $1 and $170 2 92
Net income (loss) from discontinued operations 2 (230 )
Net income (loss) 53 (218 )
Less: Income from noncontrolling interests, net of tax
Discontinued operations - 2
Net income (loss) attributable to Hillshire Brands $ 53 $ (220 )
Amounts attributable to Hillshire Brands:
Net income from continuing operations $ 51 $ 12
Net income (loss) from discontinued operations 2 (232 )
Earnings per share of common stock:
Basic
Income from continuing operations $ 0.42 $ 0.10
Net income (loss) $ 0.43 $ (1.86 )
Average shares outstanding 122 118
Diluted
Income from continuing operations $ 0.41 $ 0.10
Net income (loss) $ 0.43 $ (1.85 )
Average shares outstanding 123 119
Cash dividends declared per share of common stock $ 0.125 $ -
(1) As disclosed in the company's Annual Report on Form 10-K for the year ended June 30, 2012,
the company restated its previously issued unaudited financial results for the first three quarters of Fiscal 2012 to
recognize the correction of accounting errors. See Note 1 to the Annual Report for additional information.
Net Sales Bridge
For the Quarter ended September 29, 2012 (unaudited)
The following table illustrates the components of the change in net sales versus the prior year
First Quarter ended Sept. 29, 2012 Total
Foodservice/ Australian Business
Retail Other Bakery Segments
Volume 2.3 % 5.3 % (1.4 )% 3.2 %
Mix 1.3 (5.2 ) 0.3 (0.3 )
Price (0.8 ) (1.1 ) (0.3 ) (0.9 )
Other 0.2 (0.6 ) 0.3 0.0
Organic sales change 3.0 (1.6 ) (1.1 ) 2.0
Foreign exchange impact 0.0 0.0 (1.2 ) 0.0
*Adjusted net sales change 3.0 (1.6 ) (2.3 ) 2.0
Dispositions 0.0 (11.3 ) 0.0 (3.4 )
Total Net Sales Change 3.0 % (12.9 )% (2.3 )% (1.4 )%
* Represents a non-GAAP financial measure.
See detailed explanation of these and other non-GAAP measures at end of this release.
Condensed Consolidated
Balance Sheet Data
At September 29, 2012 and June 30,
2012 (in millions - unaudited)
Sept. 29, June 30,
2012 2012
Assets
Cash $ 253 235
and equivalents
Trade accounts receivable, 236 248
less allowances
Inventories 328 288
Current deferred 105 114
income taxes
Income tax 37 52
receivable
Other current 53 65
assets
Total current 1,012 1,002
assets
Property, net of accumulated depreciation 843 847
of $1,313 and $1,245, respectively
Trademarks and other identifiable 130 132
intangibles
Goodwill 348 348
Deferred income 37 36
taxes
Other noncurrent 82 85
assets
$ 2,452 $ 2,450
Liabilities
and Equity
Accounts $ 322 359
payable
Other accrued 429 469
liabilities
Current maturities 5 5
of long-term debt
Total current 756 833
liabilities
Long-term 942 939
debt
Pension 160 166
obligation
Other 283 277
liabilities
Equity
Hillshire Brands common 311 235
stockholders' equity
$ 2,452 $ 2,450
Consolidated Statements
of Cash Flows
For the Three Months Ended
Sept. 29, 2011 and
Oct. 1, 2012 (in millions - unaudited)
Three Months ended
Oct. 1,
Sept. 29, 2011
2012 As Restated (1)
Operating activities
-
Net income (loss) $ 53 $ (218 )
Adjustments to reconcile net
income/(loss) to net cash
from operating
activities:
Depreciation 39 61
Amortization 4 12
Impairment - 389
charges
Net (gain) loss on business (9 ) (262 )
dispositions
Pension contributions, (3 ) (117 )
net of expense
Increase (decrease) in 8 (110 )
deferred income taxes
Other - (6 )
Changes in current assets
and liabilities, net of
businesses acquired
and sold:
Trade accounts 13 (41 )
receivable
Inventories (40 ) (213 )
Other current 10 (57 )
assets
Accounts payable (55 ) 27
Accrued (31 ) 28
liabilities
Accrued taxes 16 287
Net cash received from (used 5 (220 )
in) operating activities
Investing activities
-
Purchases of property (35 ) (55 )
and equipment
Purchases of software and (1 ) (1 )
other intangibles
Dispositions of businesses 16 (16 )
and investments
Cash received from derivative 5 18
transactions
Sales of assets 1 1
Net cash received from (used (14 ) (53 )
in) investing activities
Financing activities
-
Issuances of 27 29
common stock
Borrowings of - 30
other debt
Repayments of other debt - (162 )
and derivatives
Net change in financing with - 187
less than 90-day maturities
Purchase of noncontrolling - (10 )
interest
Payments of - (68 )
dividends
Net cash received from (used 27 6
in) financing activities
Effect of changes in foreign - (114 )
exchange rates on cash
Increase/decrease in 18 (381 )
cash and equivalents
Add: Cash balances of discontinued - 1,992
operations at beginning of year
Less: Cash balances of discontinued - (1,630 )
operations at end of period
Cash and equivalents 235 74
at beginning of year
Cash and equivalents $ 253 $ 55
at end of quarter
Supplemental cash
flow data:
Cash paid for restructuring $ 27 $ 66
actions
Cash contributions 2 115
to pension plans
Cash paid for 4 56
income taxes
(1) As disclosed in the company's
Annual Report on
Form 10-K for the year
ended June 30, 2012,
the company restated its previously
issued unaudited financial
results for the first three
quarters of Fiscal 2012 to
recognize the correction of accounting
errors. See Note
1 to the Annual Report for
additional information.
Operating Results by Business Segment
For the Quarters ended Sept. 29, 2012 and Oct. 1, 2011 (in millions - unaudited)
As As
Reported Dispositions Adjusted *
First Quarter 2013
Net sales:
Retail $ 719 $ - $ 719
Foodservice/Other 255 - 255
Australian Bakery 37 - 37
Intersegment - - -
Total net sales $ 1,011 $ - $ 1,011
First Quarter 2012
Net sales:
Retail $ 698 $ - $ 698
Foodservice/Other 293 34 259
Australian Bakery 38 - 38
Intersegment (4 ) - (4 )
Total net sales $ 1,025 $ 34 $ 991
Other
First Quarter 2013 As Restructuring Accelerated Impairment Significant As
Reported Dispositions Actions Depreciation Charges Items Adjusted *
Operating income:
Retail $ 86 $ - $ - $ (1 ) $ - $ 3 $ 84
Foodservice/Other 25 - - (2 ) - 2 25
Australian Bakery 3 - (1 ) - - - 4
Total operating segment income 114 - (1 ) (3 ) - 5 113
General corporate expenses (30 ) - (11 ) (8 ) - - (11 )
Mark-to-market derivative gains/(losses) 4 - - - - - 4
Amortization of trademarks/intangibles (1 ) - - - - - (1 )
Operating income $ 87 $ - $ (12 ) $ (11 ) $ - $ 5 $ 105
Operating margin 8.6 % 10.4 %
First Quarter 2012
Operating income:
Retail $ 44 $ - $ (8 ) $ (6 ) $ - $ - $ 58
Foodservice/Other 25 4 (1 ) - - - 22
Australian Bakery 2 - - - - - 2
Total operating segment income 71 4 (9 ) (6 ) - - 82
General corporate expenses (39 ) - (30 ) - (10 ) 18 (17 )
Mark-to-market derivative gains/(losses) (4 ) - - - - - (4 )
Amortization of trademarks/intangibles (1 ) - - - - - (1 )
Operating income $ 27 $ 4 $ (39 ) $ (6 ) $ (10 ) $ 18 $ 60
Operating margin 2.6 % 6.0 %
* Represents a non-GAAP financial measure.
See detailed explanation of these and other non-GAAP measures at end of this release.
Significant Items
Quarters ended Sept. 29, 2012 and Oct. 1, 2011 (in millions, except per share data - unaudited)
Quarter ended Sept. 29, 2012 Quarter ended Oct. 1, 2011
Diluted Diluted
Pretax Net EPS Pretax Net EPS
(In millions except per share data) Impact Income/(loss) Impact (1) Impact Income/(loss) Impact (1)
Continuing Operations:
Restructuring actions:
Severance/ retention costs $ - $ - $ - $ (16 ) $ (10 ) $ (0.09 )
Lease and contractual obligation exit costs (3 ) (2 ) (0.01 ) (6 ) (4 ) (0.03 )
Consulting/advisory costs (9 ) (5 ) (0.05 ) (17 ) (14 ) (0.11 )
Income from asset dispositions 5 3 0.03 - - -
Accelerated depreciation (11 ) (7 ) (0.06 ) (6 ) (4 ) (0.03 )
Total restructuring actions (18 ) (11 ) (0.09 ) (45 ) (32 ) (0.26 )
Gain on HBI tax settlement - - - 15 10 0.08
Impairment charges - - - (10 ) (6 ) (0.05 )
Tax indemnification accrual adjustment - - - 3 2 0.01
Impact of significant items on income/(loss) from continuing operations (18 ) (11 ) (0.10 ) (37 ) (26 ) (0.22 )
Discontinued operations:
Restructuring actions:
Severance/ retention costs - - - (13 ) (10 ) (0.08 )
Consulting/advisory costs - - - (24 ) (18 ) (0.16 )
Impairment charges - - - (379 ) (341 ) (2.87 )
Gain on the sale of discontinued operations 3 2 0.02 262 92 0.77
Tax basis differences - - - - 118 0.99
Tax audit settlement/reserve adjustments - - - - 70 0.59
Tax valuation allowance adjustment - - - - (75 ) (0.63 )
Tax on unremitted earnings - - - - (154 ) (1.30 )
Impact of significant items on income/(loss) from discontinued operations 3 2 0.02 (154 ) (318 ) (2.68 )
Impact of significant items on net income $ (15 ) $ (9 ) $ (0.08 ) $ (191 ) $ (344 ) $ (2.90 )
Impact of significant items on income from continuing operations before income taxes
Cost of sales $ (3 ) $ (6 )
Selling, general and administrative expenses (18 ) -
Impairment charges - (10 )
Exit and business dispositions 3 (21 )
Total $ (18 ) $ (37 )
Notes:
(1) EPS amounts are rounded to the nearest $0.01 and may not add to the total.
EPS Reconciliation - Reported to Adjusted
Quarters ended Sept. 29, 2012 and Oct. 1, 2011 (in millions, except per share data - unaudited)
Quarter ended September 29, 2012 Quarter ended October 1, 2011
Impact of As Reported Impact of
As Significant (As Significant
Reported Items Adjusted * Restated) Items Adjusted *
Continuing operations:
Income from continuing operations
before income taxes $ 78 $ (18 ) $ 96 $ 5 $ (37 ) $ 42
Income tax expense (benefit) 27 (7 ) 34 (7 ) (11 ) 4
Income from continuing operations 51 (11 ) 62 12 (26 ) 38
Discontinued operations:
Income from discontinued operations, net of tax - - - (322 ) (410 ) 88
Gain (loss) on sale of discontinued operations, net of tax 2 2 - 92 92 -
Net income (loss) from discontinued operations 2 2 - (230 ) (318 ) 88
Net income (loss) 53 (9 ) 62 (218 ) (344 ) 126
Less: Income from noncontrolling interests, net of tax
Discontinued operations - - - 2 - 2
Net income (loss) attributable to Hillshire Brands $ 53 $ (9 ) $ 62 $ (220 ) $ (344 ) $ 124
Amounts attributable to Hillshire Brands:
Net income from continuing operations $ 51 $ (11 ) $ 62 $ 12 $ (26 ) $ 38
Net income (loss) from discontinued operations 2 2 - (232 ) (318 ) 86
Earnings per share of common stock:
Diluted
Income from continuing operations $ 0.41 $ (0.10 ) $ 0.51 $ 0.10 $ (0.22 ) $ 0.32
Net income $ 0.43 $ (0.08 ) $ 0.51 $ (1.85 ) $ (2.90 ) $ 1.05
Effective tax rate - continuing operations 35.2 % 35.3 % (162.6 )% 10.1 %
* Represents a non-GAAP financial measure.
See detailed explanation of these and other non-GAAP measures at end of this release.
Operating Income Reconciliation - Reported to Adjusted
Quarters ended Sept. 29, 2012 and Oct. 1, 2011 (in millions, except per share data - unaudited)
Quarter ended September 29, 2012
Impact of
As Significant
Reported Items Dispositions Adjusted *
Net Sales $ 1,011 $ - $ - $ 1,011
Cost of Sales 705 3 - 702
Gross Profit 306 (3 ) - 309
MAP Expense 46 - - 46
SG&A (excluding MAP) 176 18 - 158
Net charges for exit activities, asset and business dispositions (3 ) (3 ) - -
Impairment charges - - - -
Operating income $ 87 $ (18 ) $ - $ 105
Quarter ended October 1, 2011
Impact of
As Significant
Reported Items Dispositions Adjusted *
Net Sales $ 1,025 $ - $ 34 991
Cost of Sales 740 6 26 708
Gross Profit 285 (6 ) 8 283
MAP Expense 48 - - 48
SG&A (excluding MAP) 179 - 4 175
Net charges for exit activities, asset and business dispositions 21 21 - -
Impairment charges 10 10 - -
Operating income $ 27 $ (37 ) $ 4 $ 60
* 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 Hillshire Brands' financial results in accordance with U.S. generally accepted accounting principles ("GAAP"). In this release, Hillshire Brands highlights certain items that have significantly impacted the company's financial results and uses 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 company for the period in which the item is recognized, are not indicative of the company's core operating results and affect the comparability of underlying results from period to period. Significant items may include, but are not limited to: charges for exit activities; consulting and advisory costs; lease and contractual obligation exit costs; impairment charges; tax charges on deemed repatriated earnings; tax costs and benefits resulting from the disposition of a business; impact of tax law changes; gains on the sale of discontinued operations; changes in tax valuation allowances and favorable or unfavorable resolution of open tax matters based on the finalization of tax authority examinations or the expiration of statutes of limitations. Management highlights significant items to provide greater transparency into the underlying sales or profit trends of Hillshire Brands or the applicable business segment or discontinued operations and to enable more meaningful comparability between financial results from period to period. Additionally, Hillshire Brands believes that investors desire to understand the impact of these factors to better project and assess the longer term trends and future financial performance of the company.
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 dispositions. Management believes that these non-GAAP financial measures reflect an additional way of viewing aspects of Hillshire Brands' business that, when viewed together with Hillshire Brands' financial results computed in accordance with GAAP, provide a more complete understanding of factors and trends affecting Hillshire Brands' 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 Hillshire Brands' historical and projected 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 five performance measures under Hillshire Brands' annual incentive plan are net sales and earnings before interest and taxes (EBIT), which are the reported amounts as adjusted for significant items and other items. Many of the significant items will recur in future periods; however, the amount and frequency of each significant item varies from period to period.
The following is an explanation of the non-GAAP financial measures presented in this release.
"Adjusted Diluted EPS" excludes from diluted EPS for continuing operations the per share impact of significant items.
"Adjusted Net Income" excludes from net income the impact of significant items related to both continuing and discontinued operations recognized in the fiscal period presented. It does not exclude the impact of businesses that have been exited or divested and does not exclude the impact of businesses acquired after the start of the fiscal period presented. Results for businesses acquired are included from the date of acquisition onward.
"Adjusted Net Sales" for continuing operations excludes from net sales as reported the impact of businesses that have been exited or divested for all periods presented but does not exclude the impact of businesses acquired after the start of the fiscal period presented. Results for businesses acquired are included from the date of acquisition onward.
"Adjusted Operating Income" for continuing operations excludes from operating income the impact of significant items. It also excludes the results of businesses that have been exited or divested for all periods presented but does not exclude the impact of businesses acquired after the start of the fiscal period presented. Results for businesses acquired are included from the date of acquisition onward.
"Adjusted Operating Segment Margin" for continuing operations or an indicated business segment equals adjusted operating segment income for a business segment divided by adjusted net sales for that business segment.
"Adjusted Operating Segment Income" for all business segments combined or for an indicated business segment 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 excludes the results of businesses that have been exited or divested for all periods presented but does not exclude the impact of businesses acquired after the start of the fiscal period presented. Results for businesses acquired are included from the date of acquisition onward.
"Adjusted Income from Continuing Operations" excludes from income from continuing operations the impact of significant items related to continuing operations recognized in the fiscal period presented. It does not exclude the impact of businesses that have been exited or divested and does not exclude the impact of businesses acquired after the start of the fiscal period presented. Results for businesses acquired are included from the date of acquisition onward.
The Hillshire Brands Company Media: Jon Harris, 1.630.598.8661 Analysts: Melissa Napier, 630.598.8739
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