Sara Lee 2008 Annual Report Download - page 20

Financial review
the corporation recognized pretax impairment charges of $394 million
related to the discontinued operations. Further details regarding
these charges can be found in Note 4 to the Consolidated Financial
Statements, “Discontinued Operations.”
Gain on Sale of Discontinued Operations The corporation
completed the disposition of its Mexican meats business in March
2008 and recognized a pretax and after tax loss of $23 million and
$24 million, respectively. In 2007, the corporation completed the
disposition of the European Meats and Branded Apparel Americas/
Asia businesses and completed certain postclosing adjustments
related to the completed transactions and recognized a pretax and
after tax gain of $5 million and $16 million, respectively. The corpo-
ration completed the sales of the remaining businesses reported as
discontinued operations during 2006 and recognized a pretax and
after tax gain of $466 million and $401 million, respectively. Further
details regarding these transactions are included in Note 4 to the
Consolidated Financial Statements, “Discontinued Operations.”
Consolidated Net Income and Diluted Earnings per Share (EPS)
The net loss was $79 million in 2008 as compared to net income
of $504 million reported in 2007. The decrease in net income was
due to the $827 million of after tax impairment charges, which were
$682 million higher than the prior year. Diluted EPS decreased from
$0.68 in 2007 to a loss of $0.11 in 2008.
Net income of $504 million in 2007 was $51 million, or 9.4%,
lower than reported in 2006. The decline in net income was primarily
due to the $460 million decline in results related to the discontinued
operations partially offset by the $409 million increase in income
from continuing operations. Diluted EPS decreased from $0.72 in
2006 to $0.68 in 2007, a decline of 5.6%.
Operating Results by Business Segment
The corporation’s structure is currently organized around six business
segments, which are described below.
North American Retail Meats sells a variety of packaged meat
products to retail customers in North America. Products include
hot dogs and corn dogs, breakfast sausages and sandwiches,
smoked and dinner sausages, premium deli and luncheon meats,
bacon and cooked hams. The major brands include Hillshire Farm,
Ball Park, Jimmy Dean, Sara Lee, Bryan, State Fair
and Kahn’s.
18 Sara Lee Corporation and Subsidiaries
Income (Loss) from Continuing Operations and Diluted Earnings per
Share (EPS) from Continuing Operations The loss from continuing
operations in 2008 was $41 million, which was $481 million lower
than the prior year. Income from continuing operations in 2007 was
$440 million, which was $409 million higher than 2006.
Diluted EPS from continuing operations was a loss of $0.06
in 2008 versus income of $0.59 in 2007 and $0.04 in 2006. The
diluted EPS from continuing operations in each succeeding year
was favorably impacted by lower average shares outstanding as
the corporation has been repurchasing shares of its common stock
as part of an ongoing share repurchase program. The corporation
repurchased 20 million shares, 42 million shares and 30 million
shares of common stock during 2008, 2007 and 2006, respectively.
Discontinued Operations The results of the corporation’s Direct
Selling, U.S. Retail Coffee, European Branded Apparel, European
Nuts and Snacks, U.K. Apparel, U.S. Meat Snacks, European Meats,
Branded Apparel Americas/Asia and Mexican meats businesses
have been classified as discontinued operations. The following
summarizes the results of the discontinued operations for 2008,
2007 and 2006:
In millions 2008 2007 2006
Income (loss) from discontinued
operations before income taxes $(14) $«82 $144
Income tax benefit (expense) on
income from discontinued operations – (34) (21)
Gain (loss) on disposition
of discontinued operations (23) 5 466
Income tax (expense) benefit on
disposition of discontinued operations (1) 11 (65)
Net income (loss) from
discontinued operations $(38) $«64 $524
Income from Discontinued Operations before Income Taxes
The decline in income from operations before income taxes in each
succeeding year is primarily the result of the timing of the dispositions.
The Mexican meats business was sold in March of 2008, while the
European Meats business and Branded Apparel Americas/Asia
businesses were disposed of in the early part of 2007. The remaining
businesses being reported as discontinued operations were disposed
of in 2006. The operating results in 2008 also include a $15 million
charge related to the settlement of a pension plan in the U.K. asso-
ciated with the European Branded Apparel business. During 2006,