Hillshire Brands Management Discusses Q4 2012 Results - Earnings Call Transcript

Hillshire Brands (HSH)

Q4 2012 Earnings Call

August 09, 2012 10:00 am ET

Executives

Melissa Napier - Senior Vice President of Investor Relations

Sean M. Connolly - Chief Executive Officer, Director and Chief Executive Officer of North American Retail & Food Service Business

Maria Henry - Chief Financial Officer

Analysts

Kenneth B. Zaslow - BMO Capital Markets U.S.

Andrew Lazar - Barclays Capital, Research Division

Rohan M. Patkar - KeyBanc Capital Markets Inc., Research Division

Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division

Kenneth Goldman - JP Morgan Chase & Co, Research Division

Timothy S. Ramey - D.A. Davidson & Co., Research Division

Jason English - Goldman Sachs Group Inc., Research Division

Robert Moskow - Crédit Suisse AG, Research Division

Bryan D. Spillane - BofA Merrill Lynch, Research Division

Presentation

Operator

Good morning, and welcome to Hillshire Brands' Fourth Quarter Earnings Conference Call for Fiscal 2012. [Operator Instructions] This call is being recorded. If you have any objections, please disconnect at this time. I would now like to introduce your first speaker, Ms. Melissa Napier, Treasurer and Senior Vice President of Investor Relations for Hillshire Brands. Thank you, Melissa, you may begin.

Melissa Napier

Thank you, and good morning to everyone. Welcome to the first earnings call for our Hillshire Brands Company. Today, I'm joined our CEO, Sean Connolly; and our CFO, Maria Henry. Sean will provide his perspectives on the quarter, progress being made on the plans that we've provided at Investor Day and some comments around fiscal '13. Maria will then discuss segment performance for both the fourth quarter and the fiscal year and provide guidance for fiscal '13.

I'd like to remind you that in our financial slides, we will only be talking about results through operating segment income from continuing operations. In connection with the June 28, 2012, spin-off of the company's international coffee and tea business into an independent public company named D.E MASTER BLENDERS 1753, Hillshire Brands has classified that historic results of its spun off international coffee and tea operation as discontinued operation. We issued a press release on August 1, reporting that accounting irregularities involving the previously reported financial results for the Brazilian operation of D.E MASTER BLENDERS were discovered. And as a result, D.E MASTER BLENDERS will restate its previously issued financial statement.

Hillshire Brands also reported that it will restate its previously issued financial statements to reflect the impact on its results from discontinued operation. There is not expected to be a meaningful impact on the results of operating segment income from continuing ops, and the restatement is not expected to impact Hillshire Brands' fiscal 2013 results. An investigation is being conducted by D.E MASTER BLENDERS. And as the investigation is still ongoing, we will not be providing additional commentary on this matter during today's call.

Our results were released at 6:30 a.m. Central Time this morning, and you can find that release along with the slides that we'll be reviewing today posted to our website. We expect our 10-K to be filed by the end of August pending the completion of the investigation in Brazil.

I'd now like to refer you to the forward-looking statement currently displayed and remind you that during today's call, we may make forward-looking statements about future operations, financial performance, business conditions and our outlook for 2013. Actual results may differ from those expressed or implied in these statements, and all explanations of non-GAAP financial measures are included in our release.

You already know that today's discussion will be focused on results for adjusted operating segment income from continuing ops. I'd like to highlight some other changes that we've made in our reporting to provide our investors with information that is most reflective of how we manage our business. As we highlighted at Investor Day, the Aidells and Gallo businesses are now being reported in the Retail segment, while hog and commodity pork and turkey sales are being reported in the Foodservice segment. Our segment names have also been slightly tweaked. Results from acquisition are now included in our results from the time of acquisition. In previous reporting, we had backed out the impact of those sales as a reconciling item between reported and adjusted results. You'll still see the impact of acquisitions, in this case, Aidells, in our earnings release. We are also discussing total adjusted sales and organic sales performance, which is without acquisition results and excludes changes in foreign currency movement. And finally, results for businesses that have been disposed of or exited, such as our Senseo business, are now backed out of all reported period.

To help you understand the year-over-year changes earlier this morning, we filed a current report on Form 8-K that contains our quarterly segment results for fiscal 2012 and fiscal 2011, consistent with the basis of presentation reported in the press release.

We will take your questions after management's prepared remarks conclude. And I'll now turn the call over to our CEO, Sean Connolly. Sean?

Sean M. Connolly

Thanks, Melissa. Good morning, everyone. Maria and I are excited to be speaking with you today and share the results of our fourth quarter and fiscal 2012 performance. But before I jump into the quarterly results, let me just step back a minute and frame up the big picture for you. 2 months ago, we shared with you our plans to unleash the potential of our company and drive strong and sustainable shareholder returns. These plans included our vision to become the most innovative meat-centric food company in the U.S. This growth-oriented vision was born of a clear-eyed recognition that our greatest assets are our brands and that attempting to simply cut our way through to prosperity wouldn't drive a different outcome than we delivered before. We also outlined the steps that we're taking to realize this vision, steps like upgrading our capabilities and team, fixing some underperforming businesses, increasing our commitment to advertising and rebuilding the innovation pipeline. And to fund these investments, we've committed to delivering $100 million in cost savings over the next 3 years.

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