Sara Lee 2011 Annual Report Download - page 50

FINANCIAL REVIEW This Financial Review discusses the corporation’s results of operations, financial condition and liquidity, risk management activities, and significant accounting policies and critical estimates. This discussion should be read in conjunction with the Consolidated Financial Statements and related notes thereto contained elsewhere in this annual report. The corporation’s fiscal year ends on the Saturday closest to June 30. Fiscal years 2011 and 2009 were 52-week years, while fiscal 2010 was a 53-week year. Unless other- wise stated, references to years relate to fiscal years. The following is an outline of the analysis included herein: • Business Overview • Summary of Results • Review of Consolidated Results • Operating Results by Business Segment • Financial Condition • Liquidity • Risk Management • Non-GAAP Financial Measures • Critical Accounting Estimates • Issued But Not Yet Effective Accounting Standards • Forward-Looking Information Business Overview Our Business Sara Lee is a global manufacturer and marketer of high-quality, brand name products for consumers throughout the world focused primarily in the meats, bakery and beverage categories. Our major brands include
Ball Park, Douwe Egberts, Hillshire Farm,
Jimmy Dean, Senseo
and our namesake,
Sara Lee.
In North America, the company sells a variety of packaged meat
products that include hot dogs, corn dogs, breakfast sausages, dinner sausages and deli meats as well as a variety of frozen baked prod- ucts and specialty items including cakes and cheesecakes. These products are sold through the retail channel to supermarkets, ware- house clubs and national chains. The company also sells a variety of meat, bakery and beverage products to foodservice customers in North America. Internationally, the company sells coffee and tea products in Europe, Brazil, Australia and Asia through the retail and foodservice channels as well as a variety of bakery and dough prod- ucts to retail and foodservice customers in Europe and Australia.
The company is focused on building sustainable, profitable growth
over the long term by achieving share leadership in its core cate- gories; innovating around its core products and product categories;
expanding into high opportunity geographic markets and strategic joint ventures/partnerships; delivering superior quality and value to our customers; and driving operating efficiencies.
In January 2011, the corporation announced that its board
of directors had agreed in principle to divide the company into two separate, publicly traded companies, which is expected to be completed in the first half of calendar 2012. Under the current plan, the international beverage business will be spun off, tax-free, into a new public company. The remaining company will include Sara Lee’s North American Retail and North American Foodservice businesses. The separation plan is subject to final approval by the board of directors, other customary approvals and the receipt of an IRS tax ruling.
In November 2010, the corporation signed an agreement to
sell its North American fresh bakery business to Grupo Bimbo for $959 million, which includes the assumption of $34 million of debt. Per the agreement, the purchase price is subject to various adjust- ments, including reduction by up to $140 million if and to the extent that Grupo Bimbo is required to divest certain amounts of assets in connection with obtaining regulatory approval. The regulatory review process is ongoing but may result in a purchase price reduction in excess of $140 million. The agreement will enable Grupo Bimbo to use the Sara Lee brand in the fresh bakery category throughout the world, except Western Europe, Australia and New Zealand, while the corporation retains the brand for all other categories and geogra- phies. The sale also includes a small portion of business that is currently part of the North American Foodservice segment which is not reflected as discontinued operations as it does not meet the definition of a component pursuant to the accounting rules. The transaction is anticipated to close in the first quarter of 2012.
In the fourth quarter of 2011, steps were taken to market and
dispose of the North American refrigerated dough business, which is being reported as a discontinued operation. On August 9, 2011, the company announced it had signed an agreement to sell this business for $545 million. In August 2011, the company also made the decision to divest of its Spanish bakery and French dough busi- nesses which are part of the International Bakery segment. The Australian frozen desserts business, which is also part of the International Bakery segment, is under strategic review. These busi- nesses are currently reported as part of continuing operations.
As of the end of 2011, the corporation has closed or received
binding offers for virtually all of its household and body care busi- nesses – body care, air care, shoe care and insecticides.