Sara Lee 2008 Annual Report Download - page 29

Financial Condition
The corporation’s cash flow statements include amounts related
to discontinued operations through the date of disposal. The
discontinued operations had a significant impact on the cash
flows from operating, investing and financing activities in 2007
and 2006.
Cash from Operating Activities The total cash generated from
operating activities was $606 million in 2008, $492 million in
2007 and $1,265 million in 2006.
The cash from operating activities generated by continuing
and discontinued operations is summarized in the following table:
2008 2007 2006
Cash from operating activities
Continuing operations $596 $404 $÷«405
Discontinued operations 10 88 860
Total $606 $492 $1,265
The increase in cash from operating activities of $114 million
in 2008 was due to an increase in earnings, after adjusting for the
non-cash impairment and other charges, partially offset by an increase
in cash used to fund working capital requirements.
Changes in current assets and liabilities resulted in the usage
of $507 million of cash in 2008, $527 million in 2007 and $44 mil-
lion in 2006. In 2008, the primary changes in working capital which
impacted cash flow from operations were:
•Accrued liabilities, other than income taxes, declined by
$318 million due to $194 million of cash contributions to pension
and postretirement plans and a reduction in accrued liabilities
resulting from cash expenditures exceeding expenses for various
operating expenses.
•Accrued taxes increased by $18 million primarily as a result of a
current tax provision of $468 million partially offset by $459 million
of cash tax payments.
•Cash was used to fund a $117 million increase in inventories
and a $92 million increase in accounts receivable during the year
due in part to the general growth in the business, as well as higher
commodity costs with respect to inventories.
The most significant reason for the decline in cash from operating
activities from 2006 to 2007 was the disposition of a number of
businesses which are reported as discontinued operations. The
Branded Apparel Americas/Asia and the European Meats businesses,
which were disposed of in the first quarter of 2007, generated the
majority of the cash from operating activities related to discontin-
ued operations in 2007 and a significant portion of the 2006
amount as well.
In 2007, the primary changes in working capital which impacted
cash from operations were a $270 million decline in accrued liabilities
related to cash contributions to pension and postretirement plans and
various operating expenses. In addition, the corporation made cash
payments for income taxes of $378 million and used $106 million
to fund an increase in inventories, which was partially offset by a
$93 million increase in accounts payable. In 2006, the corporation
reduced inventories, generating $108 million of cash, which was
offset by $132 million of additional cash that was used to fund
various accrued liabilities and other current assets.
Cash from Investment Activities In 2008, $196 million of cash was
used in investment activities, while the corporation received $568 mil-
lion from investment activities in 2007 and $365 million in 2006.
Net cash (used in) generated from investment activities is split
between continuing and discontinued operations as follows:
2008 2007 2006
Cash from (used in) investment activities
Continuing operations $(188) $615 $«704
Discontinued operations (8) (47) (339)
Total $(196) $568 $«365
A significant amount of cash was received in 2007 and 2006 from
the disposition of businesses and assets as well as the cash received
from the collection of loans receivable related to prior business dis-
positions. In total, $223 million, $1,224 million and $1,101 million
were received in 2008, 2007 and 2006, respectively.
During 2008, the corporation completed the disposition of its
meat operations in Mexico and received $55 million. It also received
95 million euros or $130 million in contingent proceeds from the
previous sale of the corporation’s tobacco product line. The increase
versus the prior year was due to a change in foreign currency
exchange rates.
During 2007, the corporation completed the disposition of
Hanesbrands and the European Meats businesses. The net assets
of businesses disposed of included certain intercompany loans
payable which were paid shortly after the businesses were disposed
of. The corporation received $688 million of cash in total from the
settlement of these notes receivable – $450 million of cash received
was related to the Hanesbrands disposition and $238 million was
related to the European Meats disposition. The corporation also
received $346 million in proceeds primarily related to the disposition
of the European Meats business and received 95 million euros
or $120 million in contingent proceeds from the sale of the
corporation’s tobacco product line.
Sara Lee Corporation and Subsidiaries 27