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Hillshire Brands Reports Fourth Quarter Results And Declares Dividend

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; (iii) impact of the spin-off on Hillshire Brands’ relationships with its employees, major customers and vendors and on Hillshire Brands’ credit ratings and cost of funds; and (iv) potential tax liabilities and other indemnification obligations;
  • The completion of the investigation of the accounting matters in the spun-off Brazilian business and the final nature and scope of the restatement of the company’s historical financial results;
  • 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.

 

             

Financial Summary - As Adjusted *

For the Quarter and Fiscal Year ended June 30, 2012 and July 2, 2011 (in millions, except per share data - unaudited)
 
 
Quarter ended Fiscal Year ended
 
June 30, July 2,

%

June 30, July 2,

%

2012 2011 Change 2012 2011 Change
Continuing operations:
 
Adjusted net sales:
 
Retail $ 734 $ 698 5.0 % $ 2,884 $ 2,760 4.5 %
Foodservice/Other 249 253 (1.2 ) 1,025 1,001 2.4
Australian Bakery 33 35 (5.0 ) 136 135 0.8
Intersegment   -     (2 )     (6 )   (12 )  
Total adjusted net sales $ 1,016   $ 984   3.3 % $ 4,039   $ 3,884   4.0 %
 
 
Adjusted operating segment income
 
Retail $ 85 $ 82 3.7 % $ 313 $ 314 (0.6 )%
Foodservice/Other 14 23 (39.1 ) 79 102 (22.4 )
Australian Bakery   1     (3 ) NM       4     (2 ) NM  
Adjusted operating segment income $ 100     $ 102     (3.1 )%   $ 396     $ 414     (4.7 )%
 
 
Adjusted operating segment margin:
 
Retail 11.6 % 11.8 % (0.2 )% 10.8 % 11.4 % (0.6 ) %
Foodservice/Other 5.7 9.3 (3.6 ) 7.7 10.2 (2.5 )
Australian Bakery 1.0 (7.5 ) 8.5 2.9 (1.2 ) 4.1
 
Total Business Segments 9.8 % 10.5 % (0.7 )% 9.8 % 10.7 % (0.9 )%
 
NM = Not meaningful
 
*Adjusted amounts are non-GAAP measures.
See detailed explanation of non-GAAP measures at the end of this release.

 

           

Financial Summary - As Reported

For the Quarter and Fiscal Year ended June 30, 2012 and July 2, 2011 (in millions, except per share data - unaudited)
 
 
Quarter ended Fiscal Year ended
 
June 30, July 2,

%

June 30, July 2,

%

2012 2011 Change 2012 2011 Change
Continuing operations:
 
Net sales:
 
Retail $ 734 $ 698 5.0 % $ 2,884 $ 2,760 4.5 %
Foodservice/Other 249 285 (12.3 ) 1,080 1,136 (4.9 )
Australian Bakery 33 35 (5.0 ) 136 135 0.8
Intersegment   -     (2 )     (6 )   (12 )  
Total net sales $ 1,016   $ 1,016   0.0 % $ 4,094   $ 4,019   1.9 %
 
 
Operating segment income
 
Retail $ 72 $ 73 (1.3 )% $ 274 $ 303 (9.8 )%
Foodservice/Other 9 7 32.8 79 85 (6.4 )
Australian Bakery   (5 )   (3 ) (51.4 )   (2 )   (2 ) 18.6  
Operating segment income $ 76   $ 77   (0.4 )% $ 351     $ 386     (9.0 )%
 
 
Operating segment margin:
 
Retail 9.8 % 10.5 % (0.7 )% 9.5 % 11.0 % (1.5 )%
Foodservice/Other 3.7 2.5 1.2 7.4 7.5 (0.1 )
Australian Bakery (15.2 ) (9.5 ) (5.7 ) (1.4 ) (1.7 ) 0.3
 
Total Business Segments 7.5 % 7.6 % (0.1 )% 8.6 % 9.6 % (1.0 )%
 
NM = Not meaningful

 

       

Net Sales Bridge

For the Quarter and Fiscal Year ended June 30, 2012 (unaudited)
 
 
The following table illustrates the components of the change in net sales versus the prior year
 
 
Fourth Quarter ended June 30, 2012 Total
Foodservice/ Australian Business
Retail Other Bakery Segments
Volume (1.0)% 2.9% (3.4)% 0.2%
 
Mix 0.9 (2.8) 2.4 (0.1)
 
Price 2.3 (1.0) 1.3 1.4
 
Other (0.5) (0.3) (0.1) (0.3)
Organic sales change 1.7 (1.2) 0.2 1.2
 
Acquisitions 3.3 0.0 0.0 2.3
 
Foreign exchange impact 0.0 0.0 (5.2) (0.2)
Adjusted net sales change 5.0 (1.2) (5.0) 3.3
 
Dispositions 0.0 (11.1) 0.0 (3.3)
Total Net Sales Change 5.0% (12.3)% (5.0)% 0.0%
 
 
 
Fiscal Year ended June 30, 2012
Total
Foodservice/ Australian Business
Retail Other Bakery Segments
Volume (3.8)% (0.1)% (6.7)% (2.7)%
 
Mix 0.5 (0.5) 0.4 0.1
 
Price 4.6 3.2 2.9 4.2
 
Other (0.6) (0.2) (0.1) (0.4)
Organic sales change 0.7 2.4 (3.5) 1.2
 
Acquisitions 3.8 0.0 0.0 2.7
 
Foreign exchange impact 0.0 0.0 4.3 0.1
Adjusted net sales change 4.5 2.4 0.8 4.0
 
Dispositions 0.0 (7.3) 0.0 (2.1)
Total Net Sales Change 4.5% (4.9)% 0.8% 1.9%
 
*Adjusted net sales is a non-GAAP measure that excludes the impact of dispositions.
See detailed explanation of this and other non-GAAP measures in this release.

 

           

Operating Results by Business Segment

For the Quarters ended June 30, 2012 and July 2, 2011 (in millions - unaudited)
 
 
As As
Reported Dispositions Adjusted
Fourth Quarter 2012
Net sales:
Retail $ 734 $ - $ 734
Foodservice/Other 249 - 249
Australian Bakery 33 - 33
Intersegment   -     -   -  
Total net sales $ 1,016   $ - $ 1,016  
 
Fourth Quarter 2011
Net sales:
Retail $ 698 $ - $ 698
Foodservice/Other 285 32 253
Australian Bakery 35 - 35
Intersegment   (2 )   -   (2 )
Total net sales $ 1,016   $ 32 $ 984  
 
 
 
 
Other
Fourth Quarter 2012 As Restructuring Impairment Significant As
Reported Dispositions Actions Charges Items Adjusted
Operating segment income:
Retail $ 72 $ - $ (8 ) $ - $ (5 ) $ 85
Foodservice/Other 9 - (5 ) - - 14
Australian Bakery   (5 )   -   (3 )   -     (3 )   1  
Total operating segment income $ 76   $ - $ (16 ) $ -   $ (8 ) $ 100  
 
Operating segment margin 7.5 % 9.8 %
 
Fourth Quarter 2011
Operating segment income:
Retail $ 73 $ - $ (9 ) $ - $ - $ 82
Foodservice/Other 7 1 (2 ) (15 ) - 23
Australian Bakery   (3 )   -   -     -     -     (3 )
Total operating segment income $ 77   $ 1 $ (11 ) $ (15 ) $ -   $ 102  
 
Operating segment margin 7.6 % 10.5 %

 

           

Operating Results by Business Segment

For the Fiscal Year ended June 30, 2012 and July 2, 2011 (in millions - unaudited)
 
 
As As
Reported Dispositions Adjusted
Fiscal Year 2012
Net sales:
Retail $ 2,884 $ - $ 2,884
Foodservice/Other 1,080 55 1,025
Australian Bakery 136 - 136
Intersegment   (6 )   -   (6 )
Total net sales $ 4,094   $ 55 $ 4,039  
 
Fiscal Year 2011
Net sales:
Retail $ 2,760 $ - $ 2,760
Foodservice/Other 1,136 135 1,001
Australian Bakery 135 - 135
Intersegment   (12 )   -   (12 )
Total net sales $ 4,019   $ 135 $ 3,884  
 
 
 
 
Other
Fiscal Year 2012 As Restructuring Impairment Significant As
Reported Dispositions Actions Charges Items Adjusted
Operating segment income:
Retail $ 274 $ - $ (34 ) $ - $ (5 ) $ 313
Foodservice/Other 79 8 (8 ) - - 79
Australian Bakery   (2 )   -   (3 )   -     (3 )   4  
Total operating segment income $ 351   $ 8 $ (45 ) $ -   $ (8 ) $ 396  
 
Operating segment margin 8.6 % 9.8 %
 
Fiscal Year 2011
Operating segment income:
Retail $ 303 $ - $ (11 ) $ - $ - $ 314
Foodservice/Other 85 3 (5 ) (15 ) - 102
Australian Bakery   (2 )   -   -     -     -     (2 )
Total operating segment income $ 386   $ 3 $ (16 ) $ (15 ) $ -   $ 414  
 
Operating segment margin 9.6 % 10.7 %
 

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.

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