Sara Lee 2011 Annual Report Download - page 63

60/61 Sara Lee Corporation and Subsidiaries 2011 versus 2010
Net sales increased by $19 million, or 1.2%,
while adjusted net sales, which excludes the impact of the additional 53rd week in the prior year, increased by $43 million, or 2.8%. The increase in net sales was due to the impact of price increases in response to an increase in commodity costs and an improved sales mix partially offset by unit volume declines. The pricing actions increased sales by 9.5%. Overall, net unit volumes declined 13.4% due to demand softness resulting from the continued weak economic conditions and the loss of certain contracts. The bakery volumes declined due primarily to the loss of a high volume, low margin pizza dough contract and volume softness in bakery products. Beverage volumes are down due to declines in roast and ground and coffee concentrates. The decline in coffee concentrates is due to the loss of a high margin liquid coffee concentrate contract, which had a neg- ative impact on sales and operating segment income. Meat volumes increased, driven in part by growth in breakfast sausage.
Operating segment income increased by $19 million, or 32.8%.
Adjusted operating segment income increased by $16 million, or 19.1%, as the negative impact of higher commodity costs and lower unit volumes, which includes the loss of the liquid coffee business noted above, were effectively offset by pricing actions, a favorable shift in sales mix and continuous improvement savings. North American Foodservice
Dollar Percent Dollar Percent
In millions 2011 2010 Change Change 2010 2009 Change Change Net sales $1,566 $1,547 $«19 1.2 % $1,547 $1,776 $(229) (12.9) % Less: Increase/(decrease) in net sales from
Changes in foreign currency exchange rates $÷÷÷«– $÷÷««(2) $÷«2 $÷÷÷«– $÷÷÷(3) $÷÷«3 Dispositions – – – – 142 (142) Impact of 53rd week – 26 (26) 26 – 26 Adjusted net sales $1,566 $1,523 $«43 2.8 % $1,521 $1,637 $(116) (7.1) %
Operating segment income (loss) $÷«÷79 $÷«÷60 $«19 32.8 % $÷«÷60 $÷÷(20) $÷«80 NM %
Less: Increase/(decrease) in
operating segment income (loss) from Project Accelerate charges $÷÷÷(2) $÷÷(10) $÷«8 $÷÷(10) $÷÷÷«1 $««(11) Accelerated depreciation (2) (7) 5 (7) – (7) Spin-off related costs (4) – (4) – – – Impairment charge (15) (15) – (15) (107) 92
Pension plan curtailment gain –5(5) 5–5
Disposition – – – – 11 (11)
Impact of 53rd week –1(1) 1–1 Adjusted operating segment income $÷«102 $÷÷«86 $«16 19.1 % $÷«÷86 $÷«÷75 $÷«11 14.3 % Gross margin % 23.7 % 24.1 % (0.4) % 24.1 % 24.5 % (0.4) %
2010 versus 2009
Net sales decreased by $229 million, or
12.9%. Business dispositions after the start of 2009, which include the DSD beverage business and a sauces and dressings business, reduced net sales by $142 million, while the change in foreign currency exchange rates and the impact of the 53rd week increased net sales by $29 million. Adjusted net sales decreased by $116 million, or 7.1%, due to unit volume declines partially offset by a favorable sales mix shift. Pricing actions had virtually no impact on the change in net sales. Overall net unit volumes declined 13.1% due to the loss of a large non-core bakery contract and demand softness resulting from the continued weak economic conditions. Bakery volumes declined due primarily to the loss of a low-margin, high-volume pizza ingredient business. Meat volumes declined, driven in part by the planned exit of certain lower margin meat business. Beverage volumes are down due to declines in roast and ground coffee.
Operating segment income increased by $80 million. The net
impact of the change in impairment charges, pension curtailment gain, Project Accelerate charges, and the impact of the 53rd week increased operating segment income by $80 million. Dispositions after the start of 2009 reduced operating segment income by $11 million. Adjusted operating segment income increased by $11 million, or 14.3%, due to the favorable impact of lower commod- ity costs net of pricing actions, continuous improvement savings, an improved shift in sales mix and lower distribution and fuel costs, partially offset by lower unit volumes.