Sara Lee 2009 Annual Report Download - page 33

International Bakery
Dollar Percent Dollar Percent
In millions 2009 2008 Change Change 2008 2007 Change Change
Net sales $«790 $«929 $(139) (14.9) % $«929 $«799 $«130 16.1 %
Increase/(decrease) in net sales from
Changes in foreign currency exchange rates $÷÷«– $«««70 $««(70) $÷÷«– $(102) $«102
Disposition – 14 (14) «– – –
Total $÷÷«– $«««84 $««(84) $÷÷«– $(102) $«102
Operating segment income (loss) $(193) $(346) $«153 44.1 % $(346) $÷«38 $(384) NM
Increase/(decrease) in operating segment income (loss) from
Changes in foreign currency exchange rates $÷÷«– $«««««4 $««««(4) $÷÷«– $÷÷(7) $÷÷«7
Exit activities, asset and business dispositions (37) (7) (30) (7) (14) 7
Transformation/Accelerate charges (1) (2) 1 (2) (4) 2
Impairment charge (207) (400) 193 (400) – (400)
Disposition «– (1) 1 – – –
Total $(245) $(406) $«161 $(409) $÷(25) $(384)
Gross margin % 37.7 % 37.6 % 0.1 % 37.6 % 40.0 % (2.4) %
2008 versus 2007 Net sales in 2008 increased $130 million, or
16.1% over 2007. The impact of changes in foreign currency exchange
rates, particularly in the European euro, increased reported net
sales by $102 million, or 13.1%. The remaining net sales increase
of $28 million, or 3.0%, was primarily a result of price increases
to cover higher commodity costs and higher unit volumes in Europe,
partially offset by an unfavorable sales mix due to an increase in
private label sales. Net unit volumes increased 0.3% due to an
increase in private label fresh bread volumes in Spain, and refrigerated
dough volumes in Europe, which were partially offset by a volume
decline in private label frozen products and the planned exit of
certain products in Australia.
Operating segment income in 2008 decreased by $384 million
versus 2007. Changes in foreign currency exchange rates increased
operating segment income by $7 million, or 12.6%. The net impact
of the change in exit activities, asset and business dispositions,
transformation charges and impairment charges decreased operating
segment income by $391 million due primarily to a $400 million
goodwill impairment charge related to the Spanish bakery operations.
The remaining operating segment income was unchanged versus the
prior year as favorable pricing actions and savings from continuous
improvement programs were offset by higher commodity and labor
costs and an unfavorable sales mix shift to private label in Spain.
Sara Lee Corporation and Subsidiaries 31
2009 versus 2008 Net sales decreased by $139 million, or 14.9%.
The impact of foreign currency changes, particularly in the European
euro and the Australian dollar, decreased reported net sales by
$70 million, or 7.1%. A disposition subsequent to the start of 2008
reduced net sales by $14 million, or 1.3%. The remaining net sales
decrease of $55 million, or 6.5%, was the result of unit volume
declines. The impact of unit volume declines were only partially
offset by price increases in response to higher commodity costs,
which increased net sales by approximately 6%. Net unit volumes
decreased 11.6% due to a decline in fresh bread volumes in Spain
as a result of lower branded sales, due in part to economic and
competitive pressures, as well as the loss of some private label
contracts; a decrease in refrigerated dough volumes in Europe
due to lower export sales; and a small volume decline in Australia
due in part to the planned exit of certain lower margin business.
Operating segment income increased by $153 million, or 44.1%
due to a $193 million reduction in impairment charges. An impairment
charge of $207 million was recorded in 2009 as compared to an
impairment charge of $400 million in 2008. The net change in exit
activities, asset and business dispositions and transformation/
Accelerate charges decreased operating segment income by
$29 million, while a disposition subsequent to the start of 2008
increased operating segment income by $1 million. Changes in
foreign currency rates decreased operating segment income by
$4 million, or 5.5%. The remaining decrease in operating segment
income was $8 million, or 13.9%, as the impact of lower unit
volumes, higher costs associated with key raw materials, and
an unfavorable sales mix shift were only partially offset by price
increases, continuous improvement savings and lower SG&A costs
due to cost control efforts.