Sara Lee 2010 Annual Report Download - page 23

Significant Items Affecting Comparability The reported results for
2010, 2009 and 2008 reflect amounts recognized for restructuring
actions and other significant amounts that impact comparability.
“Significant items” are income or charges (and related tax
impact) that management believes have had or are likely to have
a significant impact on the earnings of the applicable business
segment or on the total corporation for the period in which the item
is recognized, are not indicative of the company’s core operating
results and affect the comparability of underlying results from period
to period. Significant items may include, but are not limited to: charges
for exit activities; transformation program and Project Accelerate
costs; impairment charges; pension partial withdrawal liability charges;
benefit plan curtailment gains and losses; tax charges on deemed
repatriated earnings; tax costs and benefits resulting from the
disposition of a business; impact of tax law changes; changes in
tax valuation allowances and favorable or unfavorable resolution
of open tax matters based on the finalization of tax authority
examinations or the expiration of statutes of limitations.
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 6 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 busi-
ness 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 procurement activities.
The corporation currently expects to recognize more than
$300 million of charges related to Project Accelerate, approximately
$225 million of which has been recognized through the end of 2010.
The remainder is expected to be incurred pre dominately in 2011. For
2010, the savings resulting from Project Accelerate and other restruc-
turing actions were approximately $180 million, of which $130 million
is incremental to the prior year. The corporation anticipates incremental
savings related to continuing operations of approximately $90 mil-
lion to $110 million in 2011. It 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 corpo-
ration’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 amorti-
zation costs for new enterprise-wide software. In addition, these
costs include accelerated depreciation, which is incremental depre-
ciation associated with decisions to close facilities at dates sooner
than originally anticipated, pursuant to an exit plan. More informa-
tion on these costs can be found in Note 6 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 4 to the Consolidated
Financial Statements, “Impairment Charges.”
The reported results were also impacted by certain discrete tax
matters that affect comparability. They include audit settlements,
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.
Sara Lee Corporation and Subsidiaries 21