Sara Lee CEO Discusses F1Q2011 Results - Earnings Call Transcript
Sara Lee Corporation (
)
F1Q2011 Earnings Call Transcript
November 9, 2010 10:00 am ET
Executives
Aaron Hoffman – VP, IR
Marcel Smits – EVP and Interim CEO
Chris Fraleigh – EVP and CEO, North America
Mark Garvey – Interim CFO
Analysts
Jason English – Goldman Sachs
Tim Ramey – D.A. Davidson
Jaclyn Inglesby – Morgan Stanley
Andrew Lazar – Barclays Capital
Alexia Howard – Sanford Bernstein
Robert Moskow – Credit Suisse
Tim Ramey – D.A. Davidson
Eric Serotta – Wells Fargo Securities
Ken Zaslow – BMO Capital Markets
Robert Dickerson – Consumer Edge Research
John Baumgartner – Telsey Advisory Group
Georg von Wyss – Classic Fund Management
Presentation
Operator
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Good morning, and welcome to Sara Lee's first quarter earnings conference call for fiscal 2011. Your lines have been placed on a listen-only mode. This call is being recorded. If you have any objections, please disconnect at this time.
I would now like to turn the call over to Aaron Hoffman, Vice President of Investor Relations for Sara Lee Corporation. Thank you. Aaron. You may begin.
Aaron Hoffman
Thank you. Good morning and welcome to Sara Lee's first quarter earnings conference call. Joining me for today's call are Marcel Smits, our Interim CEO; CJ Fraleigh, our CEO of our North American businesses; and Mark Garvey, our Interim CFO.
Our first quarter 2011 results were released at 6.30 Central Time this morning via press release that you can find on our website at saralee.com. You've any problems accessing the release, please call Jeannie Williams at 630-598-8100. Our 10-Q will be filed no later than Friday, November 12.
To begin, I'll caution you that our remarks this morning contain forward-looking statements about Sara Lee's future operations, financial performance, and business conditions. These forward-looking statements are based on currently available competitive, financial, and economic data as well as management's views and assumptions regarding future events. Such forward-looking statements are inherently uncertain and investors must recognize that actual results may differ from those expressed or implied in these statements. Consequently, I need to caution you not to place undue reliance on forward-looking statements.
We've provided additional information in our current press release and fiscal 2009 Form 10-K that I encourage you to review concerning factors that could cause actual results to differ materially from these forward-looking statements.
This morning we're providing slides to go along with our remarks. You can find the slides on the webcast portion of our website in the Investor Relations' section. As a reminder, all adjusted numbers we discuss on today's call exclude the impact of significant items, contingent sale proceeds, acquisitions, divestitures, and the effects of currency changes.
The release also contains a reconciliation of reported to adjusted numbers. I'd also like to point out that in the spirit of simplification and continuous improvement, we've changed the presentation of some of the financial schedules provided with the release. I think you will find them easy to follow and more instructive. We're certainly glad to have any feedback in the future about these tables.
Now let me turn the time over to Marcel.
Marcel Smits
Thank you, Aaron, and let me just add my welcome to everybody on today's call. Ladies and gentlemen, we have a load of news to share with you today, so let me just give you a quick perspective on where we are.
Firstly, our business is doing fine. We knew that we were in for a couple of tough quarters but that overall for the year, we'd make another meaningful step in adjusted operating income. With the first quarter now behind us, we're confident that we will deliver the full year earnings and EPS that we have guided for and actually on account of our interest burden coming down and the exchange rates moving favorably, our EPS guidance was has come up by $0.04.
Underneath that overall statement of us delivering the guidance, we have some puts and takes of course. In some segments, we're a bit more cautious and on the corporate expense side, we have become more bullish. We have some challenges ahead of us in terms of pricing through some of the commodity increases that we've been confronted with, but we feel good about our ability to increasingly do so. Then, of course, we have today announced that we have reached an agreement to sell our North America Fresh Bakery operations to Grupo Bimbo.
So, what we'll do on the call and if you allow us is the following. I will first talk you through the key elements of the bakery transaction. CJ will then talk to you about the first quarter results and then lastly Mark will take you through the financials and show how it will hangs together in terms of the updated guidance. I am going to try to keep this real short, so that we leave enough time for questions that you all might have.
Now let's first dive into our agreement to sell our North American Fresh Bakery operations to Grupo Bimbo. We view this as a very good deal for both Sara Lee and Grupo Bimbo. From our perspective to start there, we're able to look in very good value for our shareholders, and at the same time, we're freeing up resources to increase our investment behind our two core growth categories; protein and coffee.
You will, of course, wonder if investment also means acquisitions and as far as we're concerned, yes it does. Rest assured, we're going to be really disciplined about it as we've been around all matters of our shareholder's money. But we do see substantial opportunity for both organic investment and growth through acquisition in our core categories.
We've been very clear in recent years that these are categories where we hold real competitive sustainable advantage and therefore, we can truly win these categories and create value for our shareholders. At the same time, for the great employees in our North American Fresh Bakery operations we're excited that they are also going to be part of a winning feat.
Now let me take you through the specifics of the transaction. Sara Lee will receive $925 million of cash and Grupo Bimbo will assume $34 million of debt, that adds up to the $959 million as a top line figure.
Bimbo will also resume all employee-related commitments including pension liabilities. The purchase price is greater than book value, meaning that there is no write-down. However, the tax basis remains high enough to say that we're comfortable that there are not going to be any taxes paid on this transaction. This transaction also includes a small piece of our food service bakery business, which is in the North American Foodservice segment.
Now let me go through the details about how we will manage the powerful Sara Lee brand in this transaction.
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