Sara Lee 2011 Annual Report Download - page 68

FINANCIAL REVIEW
Sara Lee’s current North American retail and foodservice businesses. The separation plan is subject to final approval by the board of direc- tors, other customary approvals and the receipt of an IRS tax ruling.
In conjunction with this planned separation, the board of directors
intends to declare a $3.00 per share dividend on the corporation’s common stock, a significant portion of which will be funded from proceeds from the sale of the North American fresh bakery business. This special dividend is expected to be declared and paid in fiscal 2012 before the completion of the spin-off.
During 2010, Sara Lee announced a revised capital plan that
focused on share repurchases, dividend pay-out and the funded status of the company’s pension plans, while maintaining a solid investment grade credit profile.
As part of this capital plan, the company planned to buy back
$2.5 to $3 billion of shares of its common stock over a three-year period. Sara Lee bought back approximately 36.4 million shares of common stock through an accelerated share repurchase (ASR) program begun in March 2010 and completed in the first quarter of 2011 at a total cost of $513 million, of which $500 million was paid in 2010 and an additional $13 million was paid in the first quar- ter of 2011 as a final settlement. The company also repurchased 80.2 million shares of common stock at a cost of $1.3 billion in the first nine months of 2011, which satisfies its commitment to repur- chase a total of $1.0 to $1.5 billion of shares during fiscal 2011. As of July 2, 2011, approximately $1.2 billion remains authorized for share repurchase by the board of directors, in addition to the 13.5 million share authorization remaining under the prior share repurchase program. However, the corporation does not expect to continue with any further share repurchases.
As part of the capital plan, Sara Lee indicated its intention
to maintain and gradually increase the corporation’s dividend. In October 2010, Sara Lee’s board of directors announced that it had increased the corporation’s dividend from $0.44 per share to $0.46 per share on an annualized basis. As previously noted, the corpora- tion announced its intention to declare a $3.00 per share special dividend. After the payment of the special dividend in fiscal 2012, the corporation will have returned a total of $3.5 billion of capital to its shareholders since the revised capital plan was announced.
The company also made a $200 million voluntary cash contribution
to the company’s pension plans in the fourth quarter of fiscal 2010 as part of its announced capital plan.
The company previously announced the divestitures of the
non-Indian insecticides business for €154 million to SC Johnson
and received a deposit of $203 million (€152 million) on the sale
of these businesses. The deposit was recognized as unrestricted cash, with an offsetting liability to the buyer until the deal closes. Due to competition concerns raised by the European Commission, the parties have abandoned the original sale transaction. Sara Lee will proceed to complete the sale of the insecticides businesses outside the European Union to SC Johnson and will embark on a process to divest the insecticides businesses inside the European Union to another buyer. Sara Lee will receive the original purchase price and transfer the net proceeds received from the divestiture of the European businesses to SC Johnson. The divestitures of the non-Indian insecticides business is expected to close in the second half of calendar 2011, subject to customary closing conditions and regulatory clearances.
On November 9, 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 adjustments, 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 regula- tory review process is ongoing but may result in a purchase price reduction in excess of $140 million. 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 busi- ness for $545 million. In August 2011, the company also made the decision to divest of its Spanish bakery and French dough businesses 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 businesses are currently reported as part of continuing operations.
In January 2011, the corporation announced that its board
of directors has 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, Sara Lee’s international beverage businesses will be spun off, tax-free, into a new public company. The other company will include