Sara Lee 2013 Annual Report Download - page 20

DIVIDENDS
The quarterly dividend amounts paid in 2013 were $0.125 per share,
or $0.50 on an annualized basis. On August 8, 2013, the company
announced it had increased its next quarterly dividend to $0.175 per
share, or $0.70 on an annualized basis. The amount of any future
dividends will be determined by the company’s Board of Directors
and is not guaranteed.
BUSINESS DISPOSITIONS IN 2013
In February 2013, the company closed on the sale of its Australian
bakery business to McCain Foods for 82 million AUD (approximately
$85 million U.S. dollars). Also included in the transaction were the
license rights to certain intellectual property used by the Australian
bakery business in the Asia-Pacific region.
BUSINESS DISPOSITIONS IN 2012
In September 2011, the company closed on the sale of its North
American refrigerated dough business to Ralcorp for $545 million.
In November 2011, the company closed on the sale of its North
American fresh bakery business to Grupo Bimbo for $709 million,
which included the assumption of $34 million of debt. In December
2011, the company closed on the sale of its North American food
service beverage operations to J. M. Smucker for $350 million. In
August 2011, the company also made the decision to divest its Spanish
bakery business to Grupo Bimbo for €115 million and closed on this
sale in the second quarter of 2012. The company also divested its
French refrigerated dough business for €115 million and closed on
this deal in the third quarter of 2012. The company closed on the
divestiture of certain of the international household and body care
businesses during 2012 and received proceeds of approximately
$117 million.
SPIN-OFF/SPECIAL DIVIDEND
In 2012, immediately after the spin-off, DEMB paid a $3.00 per
share special dividend, which totaled $1.8 billion, to the company’s
shareholders who received shares of the spun-off business.
SHARE REPURCHASES
As of June 29, 2013, approximately $1.2 billion were authorized
for share repurchase by the board of directors, in addition to a
2.7 million share authorization remaining under a prior share
repurchase program, after adjusting for the 1-for-5 reverse stock
split in June 2012. In August 2013, the company announced that
it is targeting repurchases of approximately $200 million of shares
of its common stock over the next two fiscal years under its pre-
existing stock repurchase authorizations. The timing of the share
buybacks will depend, in part, on our share price, the state of the
financial markets and other factors.
DEBT
The total debt outstanding at June 29, 2013 is $951 million, an
increase of $7 million over the prior year due to the increase in the
value of current zero coupon note debt. The company’s long-term
debt was virtually 100% fixed-rate debt as of June 29, 2013 and
June 30, 2012.
The debt is due to be repaid as follows: $19 million in 2014,
$93 million in 2015, $400 million in 2016, nil in 2017, nil in 2018
and $439 million thereafter. The debt obligations are expected to
be satisfied with cash on hand, cash from operating activities or
with additional borrowings.
From time to time, the company opportunistically may
repurchase or retire its outstanding debt through cash purchases
and/or exchanges for equity securities, in open market purchases,
privately negotiated transactions or otherwise. Such repurchases
or exchanges, if any, will depend on prevailing market conditions,
the company’s liquidity requirements, contractual restrictions and
other factors. The amounts involved could be material.
PENSION PLANS
As shown in Note 16 – Defined Benefit Pension Plans, the funded
status of the company’s defined benefit pension plans is defined as
the amount the projected benefit obligation exceeds the plan assets.
The funded status of the plans for total continuing operations is an
underfunded position of $123 million at the end of fiscal 2013 as
compared to an underfunded position of $165 million at the end
of fiscal 2012.
The company expects to contribute approximately $5 million
of cash to its pension plans in 2014 as compared to approximately
$8 million in 2013 and $9 million in 2012. The contribution amounts
are for pension plans of continuing operations and pension plans
where the company has agreed to retain the pension liability after
certain business dispositions were completed. The exact amount of
cash contributions made to pension plans in any year is dependent
upon a number of factors, including minimum funding requirements.
As a result, the actual funding in 2014 may be materially different
from the estimate.
The company participates in one multi-employer pension plan
(MEPP) that provided retirement benefits to certain employees
covered by collective bargaining agreements. Participating employers
in a MEPP are jointly responsible for any plan underfunding. MEPP
contributions are established by the applicable collective bargaining
agreements; however, the MEPPs may impose increased contribution
rates and surcharges based on the funded status of the plan and the
provisions of the Pension Protection Act of 2006 (PPA). The PPA
imposes minimum funding requirements on the plans. Plans that
fail to meet certain funding standards as defined by the PPA are
categorized as being either in a critical or endangered status. We
18 The Hillshire Brands Company
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