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Sara Lee's CEO Discusses Q3 2012 Results - Earnings Call Transcript

Stocks in this article: SLE

Mark A. Garvey

Thank you, Jan. Good morning to everyone on the call. I'd like to start by reviewing some key financial highlights for the quarter. Overall, results were mixed. Adjusted net sales for continuing operations grew by 3%. In the North American Meat businesses, we're seeing a stabilization of volume trends. Overall, volumes were almost flat for the quarter compared to declines in the previous 2 quarters.

In Coffee and Tea, we continue to see strong pricing and positive mix as sales of single-serve capsules do well. However, this positive trend was partially offset by lower volumes. Adjusted operating income from continuing operations decreased 5% for the quarter and was up 6% year-to-date.

A number of factors impacted our results. Volume softness in both businesses has led to some manufacturing inefficiencies, which we are working to mitigate. In addition, both businesses are managing through stranded costs and will continue to do so in fiscal '13.

Finally, we had negative commodity mark-to-market results in the quarter, which led to a variance of $18 million compared to the same quarter last year. Adjusted earnings per share for continuing operations was down $0.02 to $0.20 for the quarter. Year-to-date, earnings per share was up $0.10 to $0.65.

Looking ahead to the full year, we are beginning to see commodity costs decline in the Coffee and Tea business and stabilize in our Meat business. This should have some beneficial impact on our fourth quarter results, particularly for Coffee and Tea, and gives us confidence that we will end up within our existing guidance ranges. To be more precise, we expect adjusted earnings per share to fall in the middle of our guidance range of $0.89 to $0.95, which we provided at the beginning of this fiscal year. And as you'll see later, our earnings-per-share expectations has benefited from a favorable expectations on interest expense and tax costs for the year. Our net sales and adjusted operating income, we expect actual results to be at the low end of the current guidance ranges.

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