Foodservice/Other

In the fourth quarter, Foodservice/Other adjusted net sales declined 1.2% with the meats business outperforming the bakery business. The meats business benefited from increased convenience store sales while the bakery business was unfavorably impacted by disruptions from plant upgrades at the Tarboro, North Carolina facility and continued industry weakness in desserts. Adjusted operating segment income decreased $9 million, primarily due to lower pricing, unfavorable mix, higher distribution costs, and the Tarboro plant upgrades.

For the full fiscal year, Foodservice/Other adjusted net sales increased 2.4% primarily driven by higher prices and higher commodity sales in the second half. Adjusted operating segment income contracted 22% in the fiscal year, driven by lower non-commodity volumes, higher trade spend, discounts for aged inventory (discussed last quarter), and the disruptions associated with the Tarboro plant upgrades .

Australian Bakery

Sales in the quarter were down as a result of negative currency impacts. The business increased sales by 1% for the full year, helped by positive currency impacts, and also swung to a full year operating profit of $4 million after showing a $2 million loss in fiscal 2011. The business introduced new dessert products and closed some less profitable outlet stores in the quarter. Additionally, the Australian business has completed the separation from the international coffee & tea company and is operating on a stand-alone basis.

Outlook for Fiscal 2013

In fiscal year 2013, sales are expected to be roughly in line with fiscal 2012 on a dollar basis. Adjusted EPS is expected to be between $1.40 and $1.55.

Management’s outlook for fiscal 2013 assumes modest commodity deflation. Adjusted operating segment income is expected to be flat to modestly down as a result of investments behind higher brand support and innovation. The benefits of significant cost reductions do not fully offset inflation and certain increases in SG&A. As previously communicated, the company also anticipates an effective tax rate of 35%, net interest expense of between $35-$40 million, and corporate expenses of approximately $70 million, excluding significant items and mark-to-market impacts related to commodity hedges.

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