TIDMHSH
The Hillshire Brands Company (NYSE: HSH) today reported earnings
for the fourth quarter and full fiscal year 2013.
-- Fiscal Year 2013 adjusted1 diluted EPS of $1.72; reported
diluted EPS of $1.49
-- Full-year net sales increased slightly, in line with guidance, with
both operating segments showing growth
-- Adjusted operating income increased $40 million in the fiscal year;
reported operating income increased $221 million
-- Fiscal 2014 adjusted diluted EPS expected to be flat to down
mid-single digits
-- Dividend will increase 40% to $0.70 per share on an annualized basis
-- Company targeting repurchases of approximately $200 million of stock
over the next two fiscal years
CEO Perspective
"In this pivotal transition year, we are pleased with the
progress we made on our plans to deliver strong and sustainable
shareholder returns. This affirms our confidence in the underlying
business and enables us to return more cash to shareholders," said
Sean Connolly, president and chief executive officer of The
Hillshire Brands Company.
"Our strategy of strengthening our core brands through increased
MAP and innovation worked well as our strong businesses became
stronger and we made progress on our challenged businesses. We also
achieved our fiscal 2013 savings targets and identified additional
efficiency initiatives. We recognize our work is not done, and we
will continue our efforts to strengthen our portfolio," added
Connolly.
"As we look to fiscal 2014, we expect performance to gain
momentum through the year. First half results will reflect lapping
of fiscal 2013 favorability, near-term inflation, and competitive
dynamics. Second half performance will be fueled by a robust
innovation slate and the benefit of our cost savings programs. As
we exit fiscal 2014, our company will be significantly stronger
versus where we started, delivering solid growth and
well-positioned for fiscal 2015."
Discussion of Continuing Operations Results
In the fourth quarter, net sales of $962 million were down 2.1%
versus the prior year's fourth quarter. Consistent with the
company's expectations, adjusted operating income decreased 23.2%
to $63 million. The lower operating income was driven by the sales
decline and planned investments in brand building and innovation.
Reported operating income increased to $49 million from a loss in
the prior year. Adjusted earnings per share decreased 16.1% to
$0.26, and reported earnings per share increased to $0.28 from a
loss of $0.52 in the prior year.
For fiscal year 2013, adjusted and reported net sales of $3,920
million were up 0.4% and down 1.0%, respectively, versus the prior
year. Adjusted operating income increased 12.5% to $363 million, as
the benefits of lower input costs and efficiencies were partially
reinvested in MAP. Reported operating income increased 290.7% to
$297 million. Adjusted earnings per share increased 18.6% to $1.72,
and reported earnings per share increased to $1.49 from a loss in
the prior year.
1 The term "adjusted diluted EPS" and other financial
measures identified as "adjusted"
are explained and reconciled to comparable
GAAP measures at the end of this release.
Retail
Retail net sales declined 3.8% in the fourth quarter versus the
prior year. Operating segment income declined 32.3% from the prior
year's comparable quarter. This lower operating income was driven
by the sales decline and planned investments in brand building and
innovation.
Jimmy Dean, which has performed well all year, had another
strong quarter, growing both volume and sales behind increased MAP
and innovation. Breakfast sandwiches continued their strong growth
driven, in particular, by Jimmy Dean Delights. The Ball Park brand
also had a good quarter, growing share in hot dogs and delivering
continued growth in flame grilled patties. Additionally, Aidells
continued to grow behind successful new product launches, including
multiple varieties of chicken meatballs.
However, sales gains were more than offset bya material change
in inventory levels at a large retail customer during the quarter,
the anticipated softness in Hillshire Farm lunchmeat, and pricing
investments in certain categories.
During the quarter, the company successfully addressed the
Hillshire Farm manufacturing issue related to the new lunchmeat
package. Customer service is now back to normal levels and
promotional activities have resumed.
For the full year, Retail segment sales were up 0.3% versus the
prior year with Jimmy Dean,Ball Park, Aidells, and Gallo all
showing positive growth behind increased MAP spend.Operating
segment income for the year increased 5.5% over the prior year
driven by input cost favorability.
Foodservice/Other
Net sales increased 2.7% from the prior year's fourth quarter.
Although the macro environment remains challenging, core
foodservice sales grew in the quarter behind double-digit increases
in convenience stores and high-end desserts. Commodity turkey sales
also contributed to the increase in the quarter. Operating segment
income decreased 13.5% behind higher SG&A and MAP.
For the full year, the Foodservice/Other segment net sales were
up 0.1% and operating segment income was down 5.0% versus the prior
fiscal year.
Corporate
For the full fiscal year, general corporate expense was $41
million, excluding significant items, reflecting non-repeating
favorability in compensation-related and other expenses throughout
the year.
Fiscal 2014 Outlook
The company expects sales to increase slightly in fiscal year
2014, building momentum in the back half of the year. This reflects
a robust second-half innovation slate offset by near-term
competitive dynamics. Additionally, reduced commodity meat sales
are expected to impact the company's net sales growth rate by
approximately one percentage point.
Adjusted diluted EPS is expected to be flat to down mid-single
digits. This outlook takes into account that fiscal year 2013 EPS
was favorably impacted by one-time, non-repeating benefits, as well
as expected inflationary input costs in fiscal year 2014.
The company anticipates an effective tax rate of 35%, net
interest expense of approximately $40 million, and corporate
expenses of approximately $60 million, excluding significant
items.
Capital Allocation
The company is increasing its dividend to an annualized rate of
$0.70 per share, a 40% increase. The company's board of directors
has declared a regular quarterly dividend of $0.175 per share on
the company's common stock, payable on October 7, 2013. The
dividend is payable to stockholders of record as of the close of
business on September 3, 2013.
The company is targeting repurchases of approximately $200
million of stock over the next two fiscal years.
Webcast
The Hillshire Brands Company's review of its results for the
fourth quarter and full fiscal year 2013 will be broadcast live via
the Internet today at 8:30 a.m. CDT. The live webcast, together
with the slides reviewed during the webcast, can be accessed in the
Investor Relations section on www.hillshirebrands.com. For people
who are unable to listen to the webcast live, a recording will be
available on the website at 2:00 p.m. CDT on the day of the webcast
until February 6, 2014.
About The Hillshire Brands Company
The Hillshire Brands Company (NYSE: HSH) is a leader in
meat-centric food solutions for the retail and foodservice markets.
The company generates approximately $4 billion in annual sales and
has approximately 9,500 employees. Hillshire Brands' portfolio
includes iconic brands such as Jimmy Dean, Ball Park, Hillshire
Farm, State Fair,Sara Lee frozen bakery and Chef Pierre pies, as
well as artisanal brands Aidells and GalloSalame. For more
information on the company, please visit
www.hillshirebrands.com.
Forward-Looking Statements
This release contains forward-looking statements regarding
Hillshire Brands' business prospects and future financial results
and metrics, including statements contained under the heading "CEO
Perspective," "Fiscal 2014 Outlook," and "Capital Allocation."
Forward-looking statements are typically preceded by terms such as
"will," "anticipates," "intends," "expects," "likely" or "believes"
and other similar terms. These forward-looking statements are based
on currently available competitive, financial and economic data and
management's views and assumptions regarding future events and are
inherently uncertain.
Investors must recognize that actual results may differ from
those expressed or implied in the forward-looking statements, and
the company wishes to caution readers not to place undue reliance
on any forward-looking statements. Among the factors that could
cause Hillshire Brands' actual results to differ from such
forward-looking statements are those described under Item 1A, Risk
Factors, in Hillshire Brands' most recent Annual Report on Form
10-K, as well as factors relating to:
-- Hillshire Brands' spin-off of its international coffee and tea
business in June 2012, including (i) Hillshire Brands' ability
to
generate the anticipated benefits from the spin-off; (ii)
the
transition of leadership to a new senior management team and
the
departure of key personnel with historical knowledge; and
(iii) potential tax liabilities and other indemnification
obligations;
-- The consumer marketplace, such as (i) intense competition, including
advertising, promotional and price competition; (ii) changes
in
consumer behavior due to economic conditions, such as a shift
in
consumer demand toward private label; (iii) fluctuations in
raw
material costs, Hillshire Brands' ability to increase or
maintain
product prices in response to cost fluctuations and the impact
on
profitability; (iv) the impact of various food safety issues
and
regulations on sales and profitability of Hillshire Brands'
products;
and (v) inherent risks in the marketplace associated with
product
innovations, including uncertainties related to execution and
trade
and consumer acceptance;
-- Hillshire Brands' relationship with its customers, such as (i) a
significant change in Hillshire Brands' business with any of its
major
customers, such as Wal-Mart, its largest customer; and (ii)
credit and
other business risks associated with customers operating in a
highly
competitive retail environment; and
-- Other factors, such as (i) Hillshire Brands' ability to generate
margin improvement through cost reduction and productivity
improvement
initiatives; (ii) Hillshire Brands' credit ratings, the impact
of
Hillshire Brands' capital plans on such credit ratings and the
impact
these ratings and changes in these ratings may have on
Hillshire
Brands' cost to borrow funds and access to capital/debt markets;
and
(iii) the settlement of a number of ongoing reviews of
Hillshire
Brands' income tax filing positions and inherent uncertainties
related
to the interpretation of tax regulations in the jurisdictions in
which
Hillshire Brands transacts or has transacted business.
Consolidated
Statements
of Income
For
the Quarter
and
Twelve
Months
ended June
29,
2013 and
June
30, 2012
(in
millions,
except
per
share
data--unaudited)
Quarter ended Twelve Months ended
June 29, 2013 June 30, 2012 June 29, 2013 June 30, 2012
Continuing
Operations
Net sales $ 962 $ 983 $ 3,920 $ 3,958
Cost of 698 713 2,758 2,857
sales
Selling, 213 284 855 930
general
and
administrative
expenses
Net 2 11 9 81
charges
for exit
activities,
asset and
business
dispositions
Impairment -- -- 1 14
charges
Operating 49 (25 ) 297 76
income
Interest 13 10 48 77
expense
Interest (2 ) (1 ) (7 ) (5 )
income
Debt -- 39 -- 39
extinguishment
costs
Income 38 (73 ) 256 (35 )
(loss)
from
continuing
operations
before
income
taxes
Income tax 3 (11 ) 72 (15 )
expense
(benefit)
Income 35 (62 ) 184 (20 )
(loss)
from
continuing
operations
Discontinued
Operations
Income 2 658 15 463
from
discontinued
operations
net of tax
expense
(benefit)
of
$(1),
$(631),
$(8), and
$(603)
Gain on 4 3 53 405
sale
of
discontinued
operations,
net
of
tax expense
of $1,
nil, $15,
and $367
Net income 6 661 68 868
from
discontinued
operations
Net income 41 599 252 848
Less:
Income
from
noncontrolling
interests,
net of tax
Discontinued -- -- -- 3
operations
Net $ 41 $ 599 $ 252 $ 845
income
attributable
to
Hillshire
Brands
Amounts
attributable
to
Hillshire
Brands
Net income $ 35 $ (62 ) $ 184 $ (20 )
(loss)
from
continuing
operations
Net income 6 661 68 865
from
discontinued
operations
Earnings
per
share
of common
stock
Basic
Income $ 0.29 $ (0.52 ) $ 1.50 $ (0.16 )
(loss)
from
continuing
operations
Net income $ 0.33 $ 5.02 $ 2.05 $ 7.13
Average 123 119 123 119
shares
outstanding
Diluted
Income $ 0.28 $ (0.52 ) $ 1.49 $ (0.16 )
(loss)
from
continuing
operations
Net income $ 0.33 $ 5.02 $ 2.04 $ 7.13
Average 125 119 123 119
shares
outstanding
Cash $ 0.125 $ -- $ 0.50 $ 1.15
dividends
declared
per
share of
common
stock
Financial
Summary--As
Adjusted (1)
For
the Quarter
and
Twelve
Months
ended
June 29,
2013
and June 30,
2012
(in
millions,
except per
share
data--unaudited)
Quarter ended Twelve Months ended
June 29, June 30, % June 29, June 30, %
2013 2012 Change 2013 2012 Change
Continuing
operations:
Adjusted net
sales:
Retail $ 706 $ 734 (3.8 )% $ 2,894 $ 2,884 0.3 %
Foodservice/Other 256 249 2.7 1,026 1,025 0.1
Intersegment -- -- -- (6 )
Total $ 962 $ 983 (2.1 )% $ 3,920 $ 3,903 0.4 %
adjusted
net sales
Adjusted
operating
income
(loss)
Retail $ 57 $ 85 (32.3 )% $ 329 $ 313 5.5 %
Foodservice/Other 13 14 (13.5 ) 75 79 (5.0 )
Operating 70 99 (29.6 )% 404 392 3.4 %
segment
income
General (4 ) (15 ) (36 ) (64 )
corporate
expenses
Mark-to-market (2 ) (1 ) (1 ) (1 )
derivatives
gains
(losses)
Amortization (1 ) (1 ) (4 ) (4 )
of
trademarks
&
intangibles
Total $ 63 $ 82 (23.2 )% $ 363 $ 323 12.5 %
adjusted
operating
income
Adjusted $ 33 $ 38 (12.8 )% $ 212 $ 173 22.3 %
income
from
continuing
operations
Adjusted net $ 35 $ 151 (77.2 )% $ 223 $ 574 (61.1 )%
income
Continuing $ 33 $ 38 (12.8 )% $ 212 $ 173 22.3 %
operations
Discontinued $ 2 $ 113 (98.5 )% $ 11 $ 398 (97.2 )%
operations
Adjusted net $ 35 $ 151 (77.2 )% $ 223 $ 571 (60.9 )%
income
attributable
to Hillshire
Brands
Adjusted
diluted
earnings
per share:
Income from $ 0.26 $ 0.31 (16.1 )% $ 1.72 $ 1.45 18.6 %
continuing
operations
Net income $ 0.28 $ 1.26 (77.8 )% $ 1.81 $ 4.77 (62.1 )%
Adjusted
operating
margin:
Retail 8.2 % 11.6 % (3.4) ppt 11.4 % 10.8 % 0.6 ppt
Foodservice/Other 4.8 5.7 (0.9) ppt 7.3 7.7 (0.4) ppt
Total 6.6 % 8.4 % (1.8) ppt 9.3 % 8.3 % 1.0 ppt
Hillshire
Brands
(1) Represents a non-GAAP financial measure. See detailed
explanation of these and other non-GAAP measures at end of this
release.
Financial
Summary--As
Reported
For
the Quarter
and
Twelve
Months
ended
June 29,
2013
and June 30,
2012
(in
millions,
except per
share
data--unaudited)
Quarter ended Twelve Months ended
June 29, June 30, % June 29, June 30, %
2013 2012 Change 2013 2012 Change
Continuing
operations:
Net sales:
Retail $ 706 $ 734 (3.8 )% $ 2,894 $ 2,884 0.3 %
Foodservice/Other 256 249 2.7 1,026 1,025 0.1
Business -- -- -- 55
dispositions
and exits
Intersegment -- -- -- (6 )
Total net $ 962 $ 983 (2.1 )% $ 3,920 $ 3,958 (1.0 )%
sales
Operating
income
(loss)
Retail $ 57 $ 85 (32.3 )% $ 329 $ 313 5.5 %
Foodservice/Other 13 14 (13.5 ) 75 79 (5.0 )
Operating 70 99 (29.6 )% 404 392 3.4 %
segment
income
General (10 ) (104 ) (93 ) (272 )
corporate
expenses
Mark-to-market (2 ) (1 ) (1 ) (1 )
derivatives
gains
(losses)
Amortization (1 ) (1 ) (4 ) (4 )
of
trademarks
&
intangibles
Business -- -- 6 8
dispositions
and exits
Significant (8 ) (18 ) (15 ) (47 )
items -
business
segments
Total $ 49 $ (25 ) NM $ 297 $ 76 NM
operating
income
(loss)
Income $ 35 $ (62 ) NM $ 184 $ (20 ) NM
(loss)
from
continuing
operations
Net income $ 41 $ 599 (93.2 )% $ 252 $ 848 (70.3 )%
Continuing $ 35 $ (62 ) NM $ 184 $ (20 ) NM
operations
Discontinued $ 6 $ 661 (99.1 )% $ 68 $ 865 (92.1 )%
operations
Net income $ 41 $ 599 (93.2 )% $ 252 $ 845 (70.2 )%
(loss)
attributable
to Hillshire
Brands
Diluted
earnings
per share:
Income $ 0.28 $ (0.52 ) NM $ 1.49 $ (0.16 ) NM
(loss)
from
continuing
operations
Net income $ 0.33 $ 5.02 (93.4 )% $ 2.04 $ 7.13 (71.4 )%
Operating
margin:
Retail 8.2 % 11.6 % (3.4) ppt 11.4 % 10.8 % 0.6 ppt
Foodservice/Other 4.8 5.7 (0.9) ppt 7.3 7.7 (0.4) ppt
Total 5.1 % (2.5 )% 7.6 ppt 7.6 % 1.9 % 5.7 ppt
Hillshire
Brands
NM = Not meaningful
Net Sales Bridge
For the Quarter and Twelve Months ended June 29, 2013 (unaudited)
The following table illustrates the components of the change in net sales versus the prior year
Foodservice/ Total
Fourth quarter ended June 29, 2013 Retail Other Company
Volume (3.6 )% 4.4 % (1.0 )%
Mix 0.3 (3.4 ) (1.2 )
Price (0.4 ) 2.1 0.3
Other (0.1 ) (0.4 ) (0.2 )
Adjusted net sales* change (3.8 ) 2.7 (2.1 )
Dispositions --
Total Net Sales Change (3.8 )% 2.7 % (2.1 )%
Foodservice/ Total
Year ended June 29, 2013 Retail Other Company
Volume (0.1 )% 4.5 % 1.4 %
Mix 0.6 (3.6 ) (0.7 )
Price (0.2 ) (0.4 ) (0.3 )
Other -- (0.4 ) --
Adjusted net sales* change 0.3 0.1 0.4
Dispositions (1.4 )
Total Net Sales Change 0.3 % 0.1 % (1.0 )%
* Adjusted net sales is a non-GAAP measure that
excludes the impact of dispositions.
See detailed explanation of this and other
non-GAAP measures in this release.
Operating Results by Business Segment
For the Quarters ended June 29, 2013 and June 30, 2012 (in millions--unaudited)
Fourth Quarter Fourth Quarter
2013 2012
Net sales:
Retail $ 706 $ 734
Foodservice/Other 256 249
Business dispositions and exits -- --
Intersegment -- --
Total net sales $ 962 $ 983
Other
As Restructuring Accelerated Impairment Significant As
Fourth Quarter Reported Dispositions Actions Depreciation Charges Items Adjusted (1)
2013
Operating income:
Retail $ 57 $ 57
Foodservice/Other 13 13
Total operating 70 70
segment income
General corporate (10 ) $ -- $ (15 ) $ -- $ -- $ 9 (4 )
expenses
Mark-to-market (2 ) -- -- -- -- -- (2 )
derivative
gains (losses)
Amortization (1 ) -- -- -- -- -- (1 )
of
trademarks/intangibles
Business -- -- -- -- -- -- --
dispositions
and exits
Significant (8 ) -- (3 ) (5 ) -- -- --
items -
business segments
Operating income $ 49 $ -- $ (18 ) $ (5 ) $ -- $ 9 $ 63
Operating margin 5.1 % 6.6 %
Fourth Quarter
2012
Operating income:
Retail $ 85 $ 85
Foodservice/Other 14 14
Total operating 99 99
segment income
General corporate (104 ) $ -- $ (76 ) $ (12 ) $ -- $ (1 ) (15 )
expenses
Mark-to-market (1 ) -- -- -- -- -- (1 )
derivative
gains (losses)
Amortization (1 ) -- -- -- -- -- (1 )
of
trademarks/intangibles
Business -- -- -- -- -- -- --
dispositions
and exits
Significant (18 ) -- (8 ) (5 ) -- (5 ) --
items -
business segments
Operating income $ (25 ) $ -- $ (84 ) $ (17 ) $ -- $ (6 ) $ 82
(loss)
Operating margin (2.5 )% 8.4 %
(1) Represents a non-GAAP financial measure. See detailed
explanation of these and other non-GAAP measures at end of this
release.
Operating Results by Business Segment
For the Twelve Months ended June 29, 2013 and June 30, 2012 (in millions--unaudited)
Twelve Months Twelve Months
2013 2012
Net sales:
Retail $ 2,894 $ 2,884
Foodservice/Other 1,026 1,025
Business dispositions and exits -- 55
Intersegment -- (6 )
Total net sales $ 3,920 $ 3,958
Other
As Restructuring Accelerated Impairment Significant As
Twelve Months Reported Dispositions Actions Depreciation Charges Items Adjusted (1)
2013
Operating income:
Retail $ 329 $ 329
Foodservice/Other 75 75
Total operating 404 404
segment income
General corporate (93 ) $ -- $ (51 ) $ (18 ) $ -- $ 12 (36 )
expenses
Mark-to-market (1 ) -- -- -- -- -- (1 )
derivative
gains (losses)
Amortization (4 ) -- -- -- -- -- (4 )
of
trademarks/intangibles
Business 6 6 -- -- -- -- --
dispositions
and exits
Significant (15 ) -- (3 ) (11 ) (1 ) -- --
items -
business segments
Operating income $ 297 $ 6 $ (54 ) $ (29 ) $ (1 ) $ 12 $ 363
Operating margin 7.6 % 9.3 %
Twelve Months
2012
Operating income:
Retail $ 313 $ 313
Foodservice/Other 79 79
Total operating 392 392
segment income
General corporate (272 ) $ -- $ (178 ) $ (22 ) $ (14 ) $ 6 (64 )
expenses
Mark-to-market (1 ) -- -- -- -- -- (1 )
derivative
gains (losses)
Amortization (4 ) -- -- -- -- -- (4 )
of
trademarks/intangibles
Business 8 8 -- -- -- -- --
dispositions
and exits
Significant (47 ) -- (18 ) (24 ) -- (5 ) --
items -
business segments
Operating income $ 76 $ 8 $ (196 ) $ (46 ) $ (14 ) $ 1 $ 323
Operating margin 1.9 % 8.3 %
(1) Represents a non-GAAP financial measure. See detailed
explanation of these and other non-GAAP measures at end of this
release.
Significant Items
Quarters ended
June 29, 2013
and June 30, 2012 (in
millions, except
per share
data--unaudited)
Quarter ended June 29, 2013 Quarter ended June 30, 2012
Diluted Diluted
Pretax Net EPS Pretax Net EPS
(In millions except Impact Income/(loss) Impact (1) Impact Income/(loss) Impact (1)
per share data)
Continuing Operations:
Restructuring actions:
Severance/ retention $ (3 ) $ (1 ) $ (0.02 ) $ (11 ) $ (7 ) $ (0.06 )
costs
Lease and contractual 1 -- 0.01 (2 ) (1 ) (0.01 )
obligation
exit costs
Consulting/advisory (16 ) (11 ) (0.08 ) (71 ) (49 ) (0.41 )
and other costs
Accelerated (5 ) (3 ) (0.03 ) (17 ) (11 ) (0.09 )
depreciation
Total restructuring (23 ) (15 ) (0.12 ) (101 ) (68 ) (0.56 )
actions
Pension (1 ) -- (0.01 ) (6 ) (4 ) (0.03 )
settlement/withdrawal/other
Tax indemnification 10 10 0.08 -- -- --
accrual adjustment
Debt extinguishment -- -- -- (39 ) (25 ) (0.21 )
costs
Impact of significant (14 ) (5 ) (0.04 ) (146 ) (97 ) (0.80 )
items on
income (loss) from
continuing
operations before
significant
tax matters
Tax -- 7 0.06 -- (3 ) (0.03 )
audit
settlement/reserve
adjustments
Impact of significant (14 ) 2 0.02 (146 ) (100 ) (0.83 )
items on income
(loss) from continuing
operations
Discontinued
operations:
Severance/ retention -- -- -- (29 ) (23 ) (0.19 )
costs
Lease and contractual -- -- -- (2 ) 1 0.01
obligation
exit costs
Consulting, advisory -- -- -- (67 ) (53 ) (0.44 )
& other costs
Impairment charges -- -- -- (10 ) (7 ) (0.06 )
Gain on the sale 5 4 0.03 3 3 0.02
of discontinued
operations
Pension -- -- -- (3 ) (1 ) (0.01 )
curtailment/withdrawal/other
Indirect tax reserve -- -- -- (1 ) (1 ) (0.01 )
- Brazil
Tax basis difference -- -- -- -- -- 0.01
adjustment
Tax -- -- -- -- (25 ) (0.21 )
audit
settlement/reserve
adjustment
Tax valuation allowance -- -- -- -- 6 0.05
adjustment
Tax on unremitted -- -- -- -- 648 5.37
earnings
Impact of significant 5 4 0.03 (109 ) 548 4.54
items on income
(loss)
from discontinued
operations
Impact of using diluted -- -- -- -- -- 0.05
versus basic shares
Impact of significant $ (9 ) $ 6 $ 0.05 $ (255 ) $ 448 $ 3.76
items on net income
(loss) attributable to
Hillshire Brands
Impact of significant
items on income from
continuing operations
before income taxes
Cost of sales $ (5 ) $ (10 )
Selling, general and (7 ) (86 )
administrative
expenses
Exit and business (2 ) (11 )
dispositions
Debt extinguishment -- (39 )
costs
Total $ (14 ) $ (146 )
Notes:
(1) EPS amounts are rounded to the nearest
$0.01 and may not add to the total.
Significant Items
Twelve Months ended
June 29,
2013 and June 30, 2012
(in millions,
except per
share data--unaudited)
Twelve Months Ended June 29, 2013 Twelve Months Ended June 30, 2012
Net Diluted Net Diluted
Pretax Income/ EPS Pretax Income/ EPS
(In millions except Impact (loss) Impact (1) Impact (loss) Impact (1)
per share data)
Continuing Operations:
Restructuring actions:
Severance/ retention $ (4 ) $ (2 ) $ (0.02 ) $ (31 ) $ (20 ) $ (0.17 )
costs
Lease and contractual (12 ) (8 ) (0.06 ) (55 ) (35 ) (0.29 )
obligation
exit costs
Consulting/advisory (38 ) (25 ) (0.20 ) (110 ) (84 ) (0.70 )
and other costs
Income from asset 6 4 0.03 -- -- --
dispositions
Accelerated (29 ) (18 ) (0.15 ) (46 ) (29 ) (0.25 )
depreciation
Total restructuring (77 ) (49 ) (0.40 ) (242 ) (168 ) (1.40 )
actions
Gain on HBI tax -- -- -- 15 15 0.12
settlement
Impairment charges (1 ) (1 ) (0.01 ) (14 ) (9 ) (0.07 )
Litigation accrual -- -- -- (11 ) (7 ) (0.06 )
Pension (5 ) (3 ) (0.03 ) (6 ) (4 ) (0.03 )
settlement/withdrawal/other
Tax indemnification 10 10 0.08 3 4 0.03
accrual adjustment
Workers' compensation 7 5 0.04 -- -- --
deposit adjustment
Debt extinguishment -- -- -- (39 ) (25 ) (0.21 )
costs
Impact of significant (66 ) (38 ) (0.31 ) (294 ) (194 ) (1.62 )
items on
income (loss) from
continuing
operations before
significant
tax matters
Tax -- 10 0.09 -- 1 0.01
audit
settlement/reserve
adjustments
Impact of significant (66 ) (28 ) (0.23 ) (294 ) (193 ) (1.61 )
items on income
(loss) from continuing
operations
Discontinued
operations:
Severance/ retention -- -- -- (73 ) (55 ) (0.46 )
costs
Lease and contractual -- -- -- (108 ) (79 ) (0.66 )
obligation
exit costs
Consulting, advisory (3 ) (2 ) (0.02 ) (145 ) (105 ) (0.87 )
& other costs
Impairment charges -- -- -- (414 ) (365 ) (3.05 )
Gain on the sale 68 53 0.43 772 405 3.38
of discontinued
operations
Thailand flood loss -- -- -- (2 ) (1 ) (0.01 )
Pension 1 1 -- (6 ) (3 ) (0.02 )
curtailment/withdrawal/other
Indirect tax reserve -- -- -- (1 ) (1 ) (0.01 )
- Brazil
Tax basis difference -- 4 0.03 -- 186 1.56
adjustment
Tax -- 1 0.01 -- 80 0.67
audit
settlement/reserve
adjustments
Tax valuation allowance -- -- -- -- (66 ) (0.55 )
adjustment
Tax on unremitted -- -- -- -- 471 3.94
earnings
Impact of significant 66 57 0.46 23 467 3.90
items on income
from discontinued
operations
Impact of using diluted -- -- -- -- -- 0.07
versus basic shares
Impact of significant $ -- $ 29 $ 0.23 $ (271 ) $ 274 $ 2.36
items on net income
(loss) attributable to
Hillshire Brands
Impact of significant
items on income from
continuing operations
before income taxes
Cost of sales $ (11 ) $ (28 )
Selling, general and (45 ) (132 )
administrative
expenses
Impairment charges (1 ) (14 )
Exit and business (9 ) (81 )
dispositions
Debt extinguishment -- (39 )
costs
Total $ (66 ) $ (294 )
Notes:
(1) EPS amounts are rounded to the nearest
$0.01 and may not add to the total.
EPS
Reconciliation--Reported
to Adjusted
Quarters ended
June 29, 2013
and June 30,
2012 (in
millions, except
per share
data--unaudited)
Quarter ended June 29, 2013 Quarter ended June 30, 2012
Impact of Impact of
As Significant As Significant
Reported Items Adjusted (1) Reported Items Adjusted (1)
Continuing
operations:
Income (loss) from $ 38 $ (14 ) $ 52 $ (73 ) $ (146 ) $ 73
continuing
operations
before income
taxes
Income tax expense 3 (16 ) 19 (11 ) (46 ) 35
(benefit)
Income (loss) from 35 2 33 (62 ) (100 ) 38
continuing
operations
Discontinued
operations:
Income 2 -- 2 658 545 113
from discontinued
operations,
net of tax
Gain on sale of 4 4 -- 3 3 --
discontinued
operations,
net of tax
Net income from 6 4 2 661 548 113
discontinued
operations
Net income 41 6 35 599 448 151
Less: Income from
noncontrolling
interests,
net of tax
Discontinued -- -- -- -- -- --
operations
Net $ 41 $ 6 $ 35 $ 599 $ 448 $ 151
income
attributable
to Hillshire
Brands
Amounts
attributable
to Hillshire
Brands:
Net income (loss) $ 35 $ 2 $ 33 $ (62 ) $ (100 ) $ 38
from
continuing
operations
Net income from 6 4 2 661 548 113
discontinued
operations
Earnings per share
of common stock:
Diluted
Income (loss) from $ 0.28 $ 0.02 $ 0.26 $ (0.52 ) $ (0.83 ) $ 0.31
continuing
operations
Net income $ 0.33 $ 0.05 $ 0.28 $ 5.02 $ 3.76 $ 1.26
Effective 7.7 % 37.4 % 15.0 % 48.4 %
tax
rate--continuing
operations
(1) Represents a non-GAAP financial measure. See detailed
explanation of these and other non-GAAP measures at end of this
release
EPS
Reconciliation--Reported
to Adjusted
Twelve Months
ended
June 29,
2013 and June 30,
2012
(in millions,
except per
share
data--unaudited)
Twelve Months Ended June 29, 2013 Twelve Months Ended June 30, 2012
Impact of Impact of
As Significant As Significant
Reported Items Adjusted (1) Reported Items Adjusted (1)
Continuing
operations:
Income (loss) from $ 256 $ (66 ) $ 322 $ (35 ) $ (294 ) $ 259
continuing
operations
before income
taxes
Income tax expense 72 (38 ) 110 (15 ) (101 ) 86
(benefit)
Income (loss) from 184 (28 ) 212 (20 ) (193 ) 173
continuing
operations
Discontinued
operations:
Income 15 4 11 463 62 401
from discontinued
operations,
net of tax
Gain on sale of 53 53 -- 405 405 --
discontinued
operations,
net of tax
Net income from 68 57 11 868 467 401
discontinued
operations
Net income 252 29 223 848 274 574
Less: Income from
noncontrolling
interests,
net of tax
Discontinued -- -- -- 3 -- 3
operations
Net $ 252 $ 29 $ 223 $ 845 $ 274 $ 571
income
attributable
to Hillshire
Brands
Amounts
attributable
to Hillshire
Brands:
Net (loss) income $ 184 $ (28 ) $ 212 $ (20 ) $ (193 ) $ 173
from
continuing
operations
Net income from 68 57 11 865 467 398
discontinued
operations
Earnings per share
of common stock:
Diluted
Income (loss) from $ 1.49 $ (0.23 ) $ 1.72 $ (0.16 ) $ (1.61 ) $ 1.45
continuing
operations
Net income $ 2.04 $ 0.23 $ 1.81 $ 7.13 $ 2.36 $ 4.77
Effective 28.1 % 34.2 % 44.2 % 33.1 %
tax
rate--continuing
operations
(1) Represents a non-GAAP financial measure. See detailed
explanation of these and other non-GAAP measures at end of this
release.
Operating
Income
Reconciliation--Reported
to Adjusted
Quarters ended
June 29, 2013
and June 30,
2012 (in
millions, except
per share
data--unaudited)
Quarter ended June 29, 2013
Impact of
As Significant
Reported Items Dispositions Adjusted (1)
Net Sales $ 962 $ -- $ -- $ 962
Cost of Sales 698 5 -- 693
Gross Profit 264 (5 ) -- 269
MAP Expense 47 -- -- 47
SG&A (excluding 166 7 -- 159
MAP)
Net charges 2 2 -- --
for exit
activities,
asset and business
dispositions
Impairment charges -- -- -- --
Operating income $ 49 $ (14 ) $ -- $ 63
Quarter ended June 30, 2012
Impact of
As Significant
Reported Items Dispositions Adjusted (1)
Net Sales $ 983 $ -- $ -- $ 983
Cost of Sales 713 10 1 702
Gross Profit 270 (10 ) (1 ) 281
MAP Expense 26 -- (2 ) 28
SG&A (excluding 258 86 1 171
MAP)
Net charges 11 11 -- --
for exit
activities,
asset and business
dispositions
Impairment charges -- -- -- --
Operating income $ (25 ) $ (107 ) $ -- $ 82
(loss)
(1) Represents a non-GAAP financial measure. See detailed
explanation of these and other non-GAAP measures at end of this
release.
Operating
Income
Reconciliation--Reported
to Adjusted
Twelve Months
ended
June 29,
2013 and June 30,
2012
(in millions,
except per
share
data--unaudited)
Twelve Months ended June 29, 2013
Impact of
As Significant
Reported Items Dispositions Adjusted (1)
Net Sales $ 3,920 $ -- $ -- $ 3,920
Cost of Sales 2,758 11 -- 2,747
Gross Profit 1,162 (11 ) -- 1,173
MAP Expense 174 -- -- 174
SG&A (excluding 681 45 -- 636
MAP)
Net charges 9 9 -- --
for exit
activities,
asset and business
dispositions
Impairment charges 1 1 -- --
Operating income $ 297 $ (66 ) $ -- $ 363
Twelve Months Ended June 30, 2012
Impact of
As Significant
Reported Items Dispositions Adjusted (1)
Net Sales $ 3,958 $ -- $ 55 $ 3,903
Cost of Sales 2,857 28 40 2,789
Gross Profit 1,101 (28 ) 15 1,114
MAP Expense 135 -- -- 135
SG&A (excluding 795 132 7 656
MAP)
Net charges 81 81 -- --
for exit
activities,
asset and business
dispositions
Impairment charges 14 14 -- --
Operating income $ 76 $ (255 ) $ 8 $ 323
(1) Represents a non-GAAP financial measure. See detailed
explanation of these and other non-GAAP measures at end of this
release.
Explanation of Non-GAAP Financial Measures
Management measures and reports Hillshire Brands' financial
results in accordance with U.S. generally accepted accounting
principles ("GAAP"). In this release, Hillshire Brands highlights
certain items that have significantly impacted the company's
financial results and uses several non-GAAP financial measures to
help investors understand the financial impact of these significant
items. Other companies may calculate these non-GAAP financial
measures differently than Hillshire Brands.
"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 company 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; consulting and advisory
costs; lease and contractual obligation exit costs; impairment
charges; tax charges on deemed repatriated earnings; tax costs and
benefits resulting from the disposition of a business; impact of
tax law changes; gains on the sale of discontinued operations;
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. Management highlights significant items to provide
greater transparency into the underlying sales or profit trends of
Hillshire Brands or the applicable business segment or discontinued
operations and to enable more meaningful comparability between
financial results from period to period. Additionally, Hillshire
Brands believes that investors desire to understand the impact of
these factors to better project and assess the longer term trends
and future financial performance of the company.
This release contains certain non-GAAP financial measures that
exclude from a financial measure computed in accordance with GAAP
the impact of the significant items and the impact of dispositions.
Management believes that these non-GAAP financial measures reflect
an additional way of viewing aspects of Hillshire Brands' business
that, when viewed together with Hillshire Brands' financial results
computed in accordance with GAAP, provide a more complete
understanding of factors and trends affecting Hillshire Brands'
historical financial performance and projected future operating
results, greater transparency of underlying profit trends and
greater comparability of results across periods. These non-GAAP
financial measures are not intended to be a substitute for the
comparable GAAP measures and should be read only in conjunction
with our consolidated financial statements prepared in accordance
with GAAP.
In addition, investors frequently have requested information
from management regarding the impact of significant items.
Management believes, based on feedback it has received during
earnings calls and discussions with investors, that these non-GAAP
measures enhance investors' ability to assess Hillshire Brands'
historical and projected future financial performance. Management
also uses certain of these non-GAAP financial measures, in
conjunction with the GAAP financial measures, to understand, manage
and evaluate our businesses, in planning for and forecasting
financial results for future periods, and as one factor in
determining achievement of incentive compensation. Two of the five
performance measures under Hillshire Brands' annual incentive plan
are net sales and earnings before interest and taxes (EBIT), which
are the reported amounts as adjusted for significant items and
other items. Many of the significant items will recur in future
periods; however, the amount and frequency of each significant item
varies from period to period.
The following is an explanation of the non-GAAP financial
measures presented in this release.
"Adjusted Diluted EPS" excludes from diluted EPS for continuing
operations the per share impact of significant items.
"Adjusted Net Income" excludes from net income the impact of
significant items related to both continuing and discontinued
operations recognized in the fiscal period presented. It does not
exclude the impact of businesses that have been exited or divested
and does not exclude the impact of businesses acquired after the
start of the fiscal period presented. Results for businesses
acquired are included from the date of acquisition onward.
"Adjusted Net Sales" for continuing operations for all segments
combined or net sales for an indicated business segment excludes
the impact of businesses that have been exited or divested for all
periods presented but does not exclude the impact of businesses
acquired after the start of the fiscal period presented. Results
for businesses acquired are included from the date of acquisition
onward.
"Adjusted Operating Income" for continuing operations excludes
from operating income the impact of significant items. It also
excludes the results of businesses that have been exited or
divested for all periods presented but does not exclude the impact
of businesses acquired after the start of the fiscal period
presented. Results for businesses acquired are included from the
date of acquisition onward.
"Operating Segment Margin" for continuing operations or an
indicated business segment equals operating segment income for a
business segment divided by adjusted net sales for that business
segment.
"Operating Segment Income" for all business segments combined or
for an indicated business segment excludes the impact of
significant items recognized by that portion of the business during
the fiscal period presented and excludes the results of businesses
that have been exited or divested for all periods presented but
does not exclude the impact of businesses acquired after the start
of the fiscal period presented. Results for businesses acquired are
included from the date of acquisition onward.
"Adjusted Income from Continuing Operations" excludes from
income from continuing operations the impact of significant items
related to continuing operations recognized in the fiscal period
presented. It does not exclude the impact of businesses that have
been exited or divested and does not exclude the impact of
businesses acquired after the start of the fiscal period presented.
Results for businesses acquired are included from the date of
acquisition onward.
The Hillshire Brands CompanyMedia: Jon Harris,
1.312.614.8661Analysts: Melissa Napier, 1.312.614.8739
This information is provided by Business Wire
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