Sara Lee 2009 Annual Report Download - page 19

Sara Lee Corporation and Subsidiaries 17
Significant Items Affecting Comparability The reported results for
2009, 2008 and 2007 reflect amounts recognized for restructuring
actions and other significant amounts that impact comparability.
The nature of these items includes the following:
Exit Activities, Asset and Business Dispositions These costs are
reported on a separate line of the Consolidated Statements of
Income. Exit activities primarily relate to charges taken to recognize
severance actions approved by the corporation’s management and
the exit of leased facilities or other contractual arrangements.
Asset and business disposition activities include costs associated
with separating businesses targeted for sale and preparing financial
statements for these businesses, as well as gains and losses
associated with the disposition of asset groups that do not qualify
for discontinued operations reporting. More information on these
costs can be found in Note 5 to the Consolidated Financial
Statements, “Exit, Disposal and Transformation Activities.”
Project Accelerate Costs Project Accelerate is a series of global cost
reduction and efficiency projects initiated in fiscal 2009. The costs
include charges associated with the transition of business support
services to an outside third party vendor as part of a business
process outsourcing initiative announced in 2009 as well as costs
associated with the outsourcing of a portion of the North American
and European finance processing functions, information systems
application development and maintenance as well as indirect pro-
curement activities. These costs are recognized in the Consolidated
Statements of Income in Selling, general and administrative expenses
or Cost of sales. Employee termination costs, lease exit costs
and gains or losses on the disposition of assets or asset groupings
that do not qualify as discontinued operations associated with
these initiatives are reported as part of exit activities, asset and
business dispositions.
The corporation currently expects to recognize more than
$300 million of one-time charges related to Project Accelerate,
approximately half of which was incurred in 2009 and the remain-
der is expected to be incurred predominately in 2010. It also
anticipates annualized savings in the range of $350 million to
$400 million by 2012.
Business Transformation Costs In February 2005, the corporation
announced a transformation plan designed to improve performance
and better position the corporation for long-term growth. The plan
involved significant changes in the organization structure, portfolio
changes including the disposition of a significant portion of the cor-
poration’s businesses and initiatives to improve operational efficiency.
The costs related to the transformation include costs to retain
and relocate existing employees, recruit new employees, third-party
consulting costs associated with transformation efforts, and
amortization costs for new enterprise-wide software. In addition,
these costs include accelerated depreciation, which is incremental
depreciation associated with decisions to close facilities at dates
sooner than originally anticipated, pursuant to an exit plan. These
costs are recognized in Cost of sales or Selling, general and
administrative expenses in the Consolidated Statements of Income
as they do not qualify for treatment as an exit activity or asset and
business disposition under the accounting rules for exit or disposal
activities. However, management believes that the disclosure of
these transformation related charges provides the reader greater
transparency to the total cost of the transformation plan. More
information on these costs can be found in Note 5 to the Consolidated
Financial Statements, “Exit, Disposal and Transformation Activities.”
Impairment Charges These costs are included on a separate line
of the Consolidated Statements of Income and represent charges
for the impairment of fixed assets, intangible assets, goodwill and
investments held by the corporation. More information regarding
impairment charges can be found in Note 3 to the Consolidated
Financial Statements, “Impairment Charges.”
The reported results were also impacted by certain discrete
tax matters that affect comparability. They include contingent tax
obligation adjustments, tax on repatriation of prior years’ earnings,
valuation allowance adjustments and various other tax matters. The
tax impact of the various items is determined using the statutory rates
in the individual tax jurisdictions in which the charge was incurred.
The impact of the above items on net income and diluted earnings
per share is summarized on the following page.