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TheStreet Open House

Sara Lee Reports Third Quarter Earnings

Stocks in this article: SLE

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 (€55 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 (€60 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.

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