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8-K - 8-K - Hillshire Brands Co | form8-kfy2013.htm |
Exhibit 99
HILLSHIRE BRANDS REPORTS FULL YEAR EARNINGS ABOVE GUIDANCE RANGE;
RAISES DIVIDEND AND ANNOUNCES PLANS TO REPURCHASE SHARES
CHICAGO, IL (August 8, 2013) - 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. |
Hillshire Brands Reports Fourth Quarter and Full Year Results - Page 2
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 by a 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.
Hillshire Brands Reports Fourth Quarter and Full Year Results - Page 3
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 Gallo Salame. For more information on the company, please visit www.hillshirebrands.com.
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Hillshire Brands Reports Fourth Quarter and Full Year Results - Page 4
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. |
Hillshire Brands Reports Fourth Quarter and Full Year Results - Page 5
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 sales | 698 | 713 | 2,758 | 2,857 | ||||||||||||
Selling, general and administrative expenses | 213 | 284 | 855 | 930 | ||||||||||||
Net charges for exit activities, asset and business dispositions | 2 | 11 | 9 | 81 | ||||||||||||
Impairment charges | — | — | 1 | 14 | ||||||||||||
Operating income | 49 | (25 | ) | 297 | 76 | |||||||||||
Interest expense | 13 | 10 | 48 | 77 | ||||||||||||
Interest income | (2 | ) | (1 | ) | (7 | ) | (5 | ) | ||||||||
Debt extinguishment costs | — | 39 | — | 39 | ||||||||||||
Income (loss) from continuing operations before income taxes | 38 | (73 | ) | 256 | (35 | ) | ||||||||||
Income tax expense (benefit) | 3 | (11 | ) | 72 | (15 | ) | ||||||||||
Income (loss) from continuing operations | 35 | (62 | ) | 184 | (20 | ) | ||||||||||
Discontinued Operations | ||||||||||||||||
Income from discontinued operations net of tax expense (benefit) of $(1), $(631), $(8), and $(603) | 2 | 658 | 15 | 463 | ||||||||||||
Gain on sale of discontinued operations, net of tax expense of $1, nil, $15, and $367 | 4 | 3 | 53 | 405 | ||||||||||||
Net income from discontinued operations | 6 | 661 | 68 | 868 | ||||||||||||
Net income | 41 | 599 | 252 | 848 | ||||||||||||
Less: Income from noncontrolling interests, net of tax | ||||||||||||||||
Discontinued operations | — | — | — | 3 | ||||||||||||
Net income attributable to Hillshire Brands | $ | 41 | $ | 599 | $ | 252 | $ | 845 | ||||||||
Amounts attributable to Hillshire Brands | ||||||||||||||||
Net income (loss) from continuing operations | $ | 35 | $ | (62 | ) | $ | 184 | $ | (20 | ) | ||||||
Net income from discontinued operations | 6 | 661 | 68 | 865 | ||||||||||||
Earnings per share of common stock | ||||||||||||||||
Basic | ||||||||||||||||
Income (loss) from continuing operations | $ | 0.29 | $ | (0.52 | ) | $ | 1.50 | $ | (0.16 | ) | ||||||
Net income | $ | 0.33 | $ | 5.02 | $ | 2.05 | $ | 7.13 | ||||||||
Average shares outstanding | 123 | 119 | 123 | 119 | ||||||||||||
Diluted | ||||||||||||||||
Income (loss) from continuing operations | $ | 0.28 | $ | (0.52 | ) | $ | 1.49 | $ | (0.16 | ) | ||||||
Net income | $ | 0.33 | $ | 5.02 | $ | 2.04 | $ | 7.13 | ||||||||
Average shares outstanding | 125 | 119 | 123 | 119 | ||||||||||||
Cash dividends declared per share of common stock | $ | 0.125 | $ | — | $ | 0.50 | $ | 1.15 |
Hillshire Brands Reports Fourth Quarter and Full Year Results - Page 6
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, 2013 | June 30, 2012 | % Change | June 29, 2013 | June 30, 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 adjusted net sales | $ | 962 | $ | 983 | (2.1 | )% | $ | 3,920 | $ | 3,903 | 0.4 | % | ||||||||||
Adjusted operating income (loss) | ||||||||||||||||||||||
Retail | $ | 57 | $ | 85 | (32.3 | )% | $ | 329 | $ | 313 | 5.5 | % | ||||||||||
Foodservice/Other | 13 | 14 | (13.5 | ) | 75 | 79 | (5.0 | ) | ||||||||||||||
Operating segment income | 70 | 99 | (29.6 | )% | 404 | 392 | 3.4 | % | ||||||||||||||
General corporate expenses | (4 | ) | (15 | ) | (36 | ) | (64 | ) | ||||||||||||||
Mark-to-market derivatives gains (losses) | (2 | ) | (1 | ) | (1 | ) | (1 | ) | ||||||||||||||
Amortization of trademarks & intangibles | (1 | ) | (1 | ) | (4 | ) | (4 | ) | ||||||||||||||
Total adjusted operating income | $ | 63 | $ | 82 | (23.2 | )% | $ | 363 | $ | 323 | 12.5 | % | ||||||||||
Adjusted income from continuing operations | $ | 33 | $ | 38 | (12.8 | )% | $ | 212 | $ | 173 | 22.3 | % | ||||||||||
Adjusted net income | $ | 35 | $ | 151 | (77.2 | )% | $ | 223 | $ | 574 | (61.1 | )% | ||||||||||
Continuing operations | $ | 33 | $ | 38 | (12.8 | )% | $ | 212 | $ | 173 | 22.3 | % | ||||||||||
Discontinued operations | $ | 2 | $ | 113 | (98.5 | )% | $ | 11 | $ | 398 | (97.2 | )% | ||||||||||
Adjusted net income attributable to Hillshire Brands | $ | 35 | $ | 151 | (77.2 | )% | $ | 223 | $ | 571 | (60.9 | )% | ||||||||||
Adjusted diluted earnings per share: | ||||||||||||||||||||||
Income from continuing operations | $ | 0.26 | $ | 0.31 | (16.1 | )% | $ | 1.72 | $ | 1.45 | 18.6 | % | ||||||||||
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 Hillshire Brands | 6.6 | % | 8.4 | % | (1.8) ppt | 9.3 | % | 8.3 | % | 1.0 ppt |
(1) Represents a non-GAAP financial measure. See detailed explanation of these and other non-GAAP measures at end of this release.
Hillshire Brands Reports Fourth Quarter and Full Year Results - Page 7
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, 2013 | June 30, 2012 | % Change | June 29, 2013 | June 30, 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 dispositions and exits | — | — | — | 55 | ||||||||||||||||||
Intersegment | — | — | — | (6 | ) | |||||||||||||||||
Total net sales | $ | 962 | $ | 983 | (2.1 | )% | $ | 3,920 | $ | 3,958 | (1.0 | )% | ||||||||||
Operating income (loss) | ||||||||||||||||||||||
Retail | $ | 57 | $ | 85 | (32.3 | )% | $ | 329 | $ | 313 | 5.5 | % | ||||||||||
Foodservice/Other | 13 | 14 | (13.5 | ) | 75 | 79 | (5.0 | ) | ||||||||||||||
Operating segment income | 70 | 99 | (29.6 | )% | 404 | 392 | 3.4 | % | ||||||||||||||
General corporate expenses | (10 | ) | (104 | ) | (93 | ) | (272 | ) | ||||||||||||||
Mark-to-market derivatives gains (losses) | (2 | ) | (1 | ) | (1 | ) | (1 | ) | ||||||||||||||
Amortization of trademarks & intangibles | (1 | ) | (1 | ) | (4 | ) | (4 | ) | ||||||||||||||
Business dispositions and exits | — | — | 6 | 8 | ||||||||||||||||||
Significant items - business segments | (8 | ) | (18 | ) | (15 | ) | (47 | ) | ||||||||||||||
Total operating income (loss) | $ | 49 | $ | (25 | ) | NM | $ | 297 | $ | 76 | NM | |||||||||||
Income (loss) from continuing operations | $ | 35 | $ | (62 | ) | NM | $ | 184 | $ | (20 | ) | NM | ||||||||||
Net income | $ | 41 | $ | 599 | (93.2 | )% | $ | 252 | $ | 848 | (70.3 | )% | ||||||||||
Continuing operations | $ | 35 | $ | (62 | ) | NM | $ | 184 | $ | (20 | ) | NM | ||||||||||
Discontinued operations | $ | 6 | $ | 661 | (99.1 | )% | $ | 68 | $ | 865 | (92.1 | )% | ||||||||||
Net income (loss) attributable to Hillshire Brands | $ | 41 | $ | 599 | (93.2 | )% | $ | 252 | $ | 845 | (70.2 | )% | ||||||||||
Diluted earnings per share: | ||||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.28 | $ | (0.52 | ) | NM | $ | 1.49 | $ | (0.16 | ) | NM | ||||||||||
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 Hillshire Brands | 5.1 | % | (2.5 | )% | 7.6 ppt | 7.6 | % | 1.9 | % | 5.7 ppt |
NM = Not meaningful
Hillshire Brands Reports Fourth Quarter and Full Year Results - Page 8
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
Fourth quarter ended June 29, 2013 | Retail | Foodservice/ Other | Total 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 | )% | |||
Year ended June 29, 2013 | Retail | Foodservice/ Other | Total 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. |
Hillshire Brands Reports Fourth Quarter and Full Year Results - Page 9
Operating Results by Business Segment
For the Quarters ended June 29, 2013 and June 30, 2012 (in millions—unaudited)
Fourth Quarter 2013 | Fourth Quarter 2012 | |||||||
Net sales: | ||||||||
Retail | $ | 706 | $ | 734 | ||||
Foodservice/Other | 256 | 249 | ||||||
Business dispositions and exits | — | — | ||||||
Intersegment | — | — | ||||||
Total net sales | $ | 962 | $ | 983 |
Fourth Quarter 2013 | As Reported | Dispositions | Restructuring Actions | Accelerated Depreciation | Impairment Charges | Other Significant Items | As Adjusted (1) | |||||||||||||||||||||
Operating income: | ||||||||||||||||||||||||||||
Retail | $ | 57 | $ | 57 | ||||||||||||||||||||||||
Foodservice/Other | 13 | 13 | ||||||||||||||||||||||||||
Total operating segment income | 70 | 70 | ||||||||||||||||||||||||||
General corporate expenses | (10 | ) | $ | — | $ | (15 | ) | $ | — | $ | — | $ | 9 | (4 | ) | |||||||||||||
Mark-to-market derivative gains (losses) | (2 | ) | — | — | — | — | — | (2 | ) | |||||||||||||||||||
Amortization of trademarks/intangibles | (1 | ) | — | — | — | — | — | (1 | ) | |||||||||||||||||||
Business dispositions and exits | — | — | — | — | — | — | — | |||||||||||||||||||||
Significant items - business segments | (8 | ) | — | (3 | ) | (5 | ) | — | — | — | ||||||||||||||||||
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 segment income | 99 | 99 | ||||||||||||||||||||||||||
General corporate expenses | (104 | ) | $ | — | $ | (76 | ) | $ | (12 | ) | $ | — | $ | (1 | ) | (15 | ) | |||||||||||
Mark-to-market derivative gains (losses) | (1 | ) | — | — | — | — | — | (1 | ) | |||||||||||||||||||
Amortization of trademarks/intangibles | (1 | ) | — | — | — | — | — | (1 | ) | |||||||||||||||||||
Business dispositions and exits | — | — | — | — | — | — | — | |||||||||||||||||||||
Significant items - business segments | (18 | ) | — | (8 | ) | (5 | ) | — | (5 | ) | — | |||||||||||||||||
Operating income (loss) | $ | (25 | ) | $ | — | $ | (84 | ) | $ | (17 | ) | $ | — | $ | (6 | ) | $ | 82 | ||||||||||
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. |
Hillshire Brands Reports Fourth Quarter and Full Year Results - Page 10
Operating Results by Business Segment
For the Twelve Months ended June 29, 2013 and June 30, 2012 (in millions—unaudited)
Twelve Months 2013 | Twelve Months 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 |
Twelve Months 2013 | As Reported | Dispositions | Restructuring Actions | Accelerated Depreciation | Impairment Charges | Other Significant Items | As Adjusted (1) | |||||||||||||||||||||
Operating income: | ||||||||||||||||||||||||||||
Retail | $ | 329 | $ | 329 | ||||||||||||||||||||||||
Foodservice/Other | 75 | 75 | ||||||||||||||||||||||||||
Total operating segment income | 404 | 404 | ||||||||||||||||||||||||||
General corporate expenses | (93 | ) | $ | — | $ | (51 | ) | $ | (18 | ) | $ | — | $ | 12 | (36 | ) | ||||||||||||
Mark-to-market derivative gains (losses) | (1 | ) | — | — | — | — | — | (1 | ) | |||||||||||||||||||
Amortization of trademarks/intangibles | (4 | ) | — | — | — | — | — | (4 | ) | |||||||||||||||||||
Business dispositions and exits | 6 | 6 | — | — | — | — | — | |||||||||||||||||||||
Significant items - business segments | (15 | ) | — | (3 | ) | (11 | ) | (1 | ) | — | — | |||||||||||||||||
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 segment income | 392 | 392 | ||||||||||||||||||||||||||
General corporate expenses | (272 | ) | $ | — | $ | (178 | ) | $ | (22 | ) | $ | (14 | ) | $ | 6 | (64 | ) | |||||||||||
Mark-to-market derivative gains (losses) | (1 | ) | — | — | — | — | — | (1 | ) | |||||||||||||||||||
Amortization of trademarks/intangibles | (4 | ) | — | — | — | — | — | (4 | ) | |||||||||||||||||||
Business dispositions and exits | 8 | 8 | — | — | — | — | — | |||||||||||||||||||||
Significant items - business segments | (47 | ) | — | (18 | ) | (24 | ) | — | (5 | ) | — | |||||||||||||||||
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. |
Hillshire Brands Reports Fourth Quarter and Full Year Results - Page 11
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 | |||||||||||||||||||||||
(In millions except per share data) | Pretax Impact | Net Income/(loss) | Diluted EPS Impact (1) | Pretax Impact | Net Income/(loss) | Diluted EPS Impact (1) | ||||||||||||||||||
Continuing Operations: | ||||||||||||||||||||||||
Restructuring actions: | ||||||||||||||||||||||||
Severance/ retention costs | $ | (3 | ) | $ | (1 | ) | $ | (0.02 | ) | $ | (11 | ) | $ | (7 | ) | $ | (0.06 | ) | ||||||
Lease and contractual obligation exit costs | 1 | — | 0.01 | (2 | ) | (1 | ) | (0.01 | ) | |||||||||||||||
Consulting/advisory and other costs | (16 | ) | (11 | ) | (0.08 | ) | (71 | ) | (49 | ) | (0.41 | ) | ||||||||||||
Accelerated depreciation | (5 | ) | (3 | ) | (0.03 | ) | (17 | ) | (11 | ) | (0.09 | ) | ||||||||||||
Total restructuring actions | (23 | ) | (15 | ) | (0.12 | ) | (101 | ) | (68 | ) | (0.56 | ) | ||||||||||||
Pension settlement/withdrawal/other | (1 | ) | — | (0.01 | ) | (6 | ) | (4 | ) | (0.03 | ) | |||||||||||||
Tax indemnification accrual adjustment | 10 | 10 | 0.08 | — | — | — | ||||||||||||||||||
Debt extinguishment costs | — | — | — | (39 | ) | (25 | ) | (0.21 | ) | |||||||||||||||
Impact of significant items on income (loss) from continuing operations before significant tax matters | (14 | ) | (5 | ) | (0.04 | ) | (146 | ) | (97 | ) | (0.80 | ) | ||||||||||||
Tax audit settlement/reserve adjustments | — | 7 | 0.06 | — | (3 | ) | (0.03 | ) | ||||||||||||||||
Impact of significant items on income (loss) from continuing operations | (14 | ) | 2 | 0.02 | (146 | ) | (100 | ) | (0.83 | ) | ||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||
Severance/ retention costs | — | — | — | (29 | ) | (23 | ) | (0.19 | ) | |||||||||||||||
Lease and contractual obligation exit costs | — | — | — | (2 | ) | 1 | 0.01 | |||||||||||||||||
Consulting, advisory & other costs | — | — | — | (67 | ) | (53 | ) | (0.44 | ) | |||||||||||||||
Impairment charges | — | — | — | (10 | ) | (7 | ) | (0.06 | ) | |||||||||||||||
Gain on the sale of discontinued operations | 5 | 4 | 0.03 | 3 | 3 | 0.02 | ||||||||||||||||||
Pension curtailment/withdrawal/other | — | — | — | (3 | ) | (1 | ) | (0.01 | ) | |||||||||||||||
Indirect tax reserve - Brazil | — | — | — | (1 | ) | (1 | ) | (0.01 | ) | |||||||||||||||
Tax basis difference adjustment | — | — | — | — | — | 0.01 | ||||||||||||||||||
Tax audit settlement/reserve adjustment | — | — | — | — | (25 | ) | (0.21 | ) | ||||||||||||||||
Tax valuation allowance adjustment | — | — | — | — | 6 | 0.05 | ||||||||||||||||||
Tax on unremitted earnings | — | — | — | — | 648 | 5.37 | ||||||||||||||||||
Impact of significant items on income (loss) from discontinued operations | 5 | 4 | 0.03 | (109 | ) | 548 | 4.54 | |||||||||||||||||
Impact of using diluted versus basic shares | — | — | — | — | — | 0.05 | ||||||||||||||||||
Impact of significant items on net income (loss) attributable to Hillshire Brands | $ | (9 | ) | $ | 6 | $ | 0.05 | $ | (255 | ) | $ | 448 | $ | 3.76 | ||||||||||
Impact of significant items on income from continuing operations before income taxes | ||||||||||||||||||||||||
Cost of sales | $ | (5 | ) | $ | (10 | ) | ||||||||||||||||||
Selling, general and administrative expenses | (7 | ) | (86 | ) | ||||||||||||||||||||
Exit and business dispositions | (2 | ) | (11 | ) | ||||||||||||||||||||
Debt extinguishment costs | — | (39 | ) | |||||||||||||||||||||
Total | $ | (14 | ) | $ | (146 | ) |
Notes:
(1) | EPS amounts are rounded to the nearest $0.01 and may not add to the total. |
Hillshire Brands Reports Fourth Quarter and Full Year Results - Page 12
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 | |||||||||||||||||||||||
(In millions except per share data) | Pretax Impact | Net Income/ (loss) | Diluted EPS Impact (1) | Pretax Impact | Net Income/ (loss) | Diluted EPS Impact (1) | ||||||||||||||||||
Continuing Operations: | ||||||||||||||||||||||||
Restructuring actions: | ||||||||||||||||||||||||
Severance/ retention costs | $ | (4 | ) | $ | (2 | ) | $ | (0.02 | ) | $ | (31 | ) | $ | (20 | ) | $ | (0.17 | ) | ||||||
Lease and contractual obligation exit costs | (12 | ) | (8 | ) | (0.06 | ) | (55 | ) | (35 | ) | (0.29 | ) | ||||||||||||
Consulting/advisory and other costs | (38 | ) | (25 | ) | (0.20 | ) | (110 | ) | (84 | ) | (0.70 | ) | ||||||||||||
Income from asset dispositions | 6 | 4 | 0.03 | — | — | — | ||||||||||||||||||
Accelerated depreciation | (29 | ) | (18 | ) | (0.15 | ) | (46 | ) | (29 | ) | (0.25 | ) | ||||||||||||
Total restructuring actions | (77 | ) | (49 | ) | (0.40 | ) | (242 | ) | (168 | ) | (1.40 | ) | ||||||||||||
Gain on HBI tax settlement | — | — | — | 15 | 15 | 0.12 | ||||||||||||||||||
Impairment charges | (1 | ) | (1 | ) | (0.01 | ) | (14 | ) | (9 | ) | (0.07 | ) | ||||||||||||
Litigation accrual | — | — | — | (11 | ) | (7 | ) | (0.06 | ) | |||||||||||||||
Pension settlement/withdrawal/other | (5 | ) | (3 | ) | (0.03 | ) | (6 | ) | (4 | ) | (0.03 | ) | ||||||||||||
Tax indemnification accrual adjustment | 10 | 10 | 0.08 | 3 | 4 | 0.03 | ||||||||||||||||||
Workers' compensation deposit adjustment | 7 | 5 | 0.04 | — | — | — | ||||||||||||||||||
Debt extinguishment costs | — | — | — | (39 | ) | (25 | ) | (0.21 | ) | |||||||||||||||
Impact of significant items on income (loss) from continuing operations before significant tax matters | (66 | ) | (38 | ) | (0.31 | ) | (294 | ) | (194 | ) | (1.62 | ) | ||||||||||||
Tax audit settlement/reserve adjustments | — | 10 | 0.09 | — | 1 | 0.01 | ||||||||||||||||||
Impact of significant items on income (loss) from continuing operations | (66 | ) | (28 | ) | (0.23 | ) | (294 | ) | (193 | ) | (1.61 | ) | ||||||||||||
Discontinued operations: | ||||||||||||||||||||||||
Severance/ retention costs | — | — | — | (73 | ) | (55 | ) | (0.46 | ) | |||||||||||||||
Lease and contractual obligation exit costs | — | — | — | (108 | ) | (79 | ) | (0.66 | ) | |||||||||||||||
Consulting, advisory & other costs | (3 | ) | (2 | ) | (0.02 | ) | (145 | ) | (105 | ) | (0.87 | ) | ||||||||||||
Impairment charges | — | — | — | (414 | ) | (365 | ) | (3.05 | ) | |||||||||||||||
Gain on the sale of discontinued operations | 68 | 53 | 0.43 | 772 | 405 | 3.38 | ||||||||||||||||||
Thailand flood loss | — | — | — | (2 | ) | (1 | ) | (0.01 | ) | |||||||||||||||
Pension curtailment/withdrawal/other | 1 | 1 | — | (6 | ) | (3 | ) | (0.02 | ) | |||||||||||||||
Indirect tax reserve - Brazil | — | — | — | (1 | ) | (1 | ) | (0.01 | ) | |||||||||||||||
Tax basis difference adjustment | — | 4 | 0.03 | — | 186 | 1.56 | ||||||||||||||||||
Tax audit settlement/reserve adjustments | — | 1 | 0.01 | — | 80 | 0.67 | ||||||||||||||||||
Tax valuation allowance adjustment | — | — | — | — | (66 | ) | (0.55 | ) | ||||||||||||||||
Tax on unremitted earnings | — | — | — | — | 471 | 3.94 | ||||||||||||||||||
Impact of significant items on income from discontinued operations | 66 | 57 | 0.46 | 23 | 467 | 3.90 | ||||||||||||||||||
Impact of using diluted versus basic shares | — | — | — | — | — | 0.07 | ||||||||||||||||||
Impact of significant items on net income (loss) attributable to Hillshire Brands | $ | — | $ | 29 | $ | 0.23 | $ | (271 | ) | $ | 274 | $ | 2.36 | |||||||||||
Impact of significant items on income from continuing operations before income taxes | ||||||||||||||||||||||||
Cost of sales | $ | (11 | ) | $ | (28 | ) | ||||||||||||||||||
Selling, general and administrative expenses | (45 | ) | (132 | ) | ||||||||||||||||||||
Impairment charges | (1 | ) | (14 | ) | ||||||||||||||||||||
Exit and business dispositions | (9 | ) | (81 | ) | ||||||||||||||||||||
Debt extinguishment costs | — | (39 | ) | |||||||||||||||||||||
Total | $ | (66 | ) | $ | (294 | ) |
(1) | EPS amounts are rounded to the nearest $0.01 and may not add to the total. |
Hillshire Brands Reports Fourth Quarter and Full Year Results - Page 13
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 | |||||||||||||||||||||||
As Reported | Impact of Significant Items | Adjusted (1) | As Reported | Impact of Significant Items | Adjusted (1) | |||||||||||||||||||
Continuing operations: | ||||||||||||||||||||||||
Income (loss) from continuing operations before income taxes | $ | 38 | $ | (14 | ) | $ | 52 | $ | (73 | ) | $ | (146 | ) | $ | 73 | |||||||||
Income tax expense (benefit) | 3 | (16 | ) | 19 | (11 | ) | (46 | ) | 35 | |||||||||||||||
Income (loss) from continuing operations | 35 | 2 | 33 | (62 | ) | (100 | ) | 38 | ||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||
Income from discontinued operations, net of tax | 2 | — | 2 | 658 | 545 | 113 | ||||||||||||||||||
Gain on sale of discontinued operations, net of tax | 4 | 4 | — | 3 | 3 | — | ||||||||||||||||||
Net income from discontinued operations | 6 | 4 | 2 | 661 | 548 | 113 | ||||||||||||||||||
Net income | 41 | 6 | 35 | 599 | 448 | 151 | ||||||||||||||||||
Less: Income from noncontrolling interests, net of tax | ||||||||||||||||||||||||
Discontinued operations | — | — | — | — | — | — | ||||||||||||||||||
Net income attributable to Hillshire Brands | $ | 41 | $ | 6 | $ | 35 | $ | 599 | $ | 448 | $ | 151 | ||||||||||||
Amounts attributable to Hillshire Brands: | ||||||||||||||||||||||||
Net income (loss) from continuing operations | $ | 35 | $ | 2 | $ | 33 | $ | (62 | ) | $ | (100 | ) | $ | 38 | ||||||||||
Net income from discontinued operations | 6 | 4 | 2 | 661 | 548 | 113 | ||||||||||||||||||
Earnings per share of common stock: | ||||||||||||||||||||||||
Diluted | ||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.28 | $ | 0.02 | $ | 0.26 | $ | (0.52 | ) | $ | (0.83 | ) | $ | 0.31 | ||||||||||
Net income | $ | 0.33 | $ | 0.05 | $ | 0.28 | $ | 5.02 | $ | 3.76 | $ | 1.26 | ||||||||||||
Effective tax rate—continuing operations | 7.7 | % | 37.4 | % | 15.0 | % | 48.4 | % |
(1) | Represents a non-GAAP financial measure. See detailed explanation of these and other non-GAAP measures at end of this release |
Hillshire Brands Reports Fourth Quarter and Full Year Results - Page 14
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 | |||||||||||||||||||||||
As Reported | Impact of Significant Items | Adjusted (1) | As Reported | Impact of Significant Items | Adjusted (1) | |||||||||||||||||||
Continuing operations: | ||||||||||||||||||||||||
Income (loss) from continuing operations before income taxes | $ | 256 | $ | (66 | ) | $ | 322 | $ | (35 | ) | $ | (294 | ) | $ | 259 | |||||||||
Income tax expense (benefit) | 72 | (38 | ) | 110 | (15 | ) | (101 | ) | 86 | |||||||||||||||
Income (loss) from continuing operations | 184 | (28 | ) | 212 | (20 | ) | (193 | ) | 173 | |||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||
Income from discontinued operations, net of tax | 15 | 4 | 11 | 463 | 62 | 401 | ||||||||||||||||||
Gain on sale of discontinued operations, net of tax | 53 | 53 | — | 405 | 405 | — | ||||||||||||||||||
Net income from discontinued operations | 68 | 57 | 11 | 868 | 467 | 401 | ||||||||||||||||||
Net income | 252 | 29 | 223 | 848 | 274 | 574 | ||||||||||||||||||
Less: Income from noncontrolling interests, net of tax | ||||||||||||||||||||||||
Discontinued operations | — | — | — | 3 | — | 3 | ||||||||||||||||||
Net income attributable to Hillshire Brands | $ | 252 | $ | 29 | $ | 223 | $ | 845 | $ | 274 | $ | 571 | ||||||||||||
Amounts attributable to Hillshire Brands: | ||||||||||||||||||||||||
Net (loss) income from continuing operations | $ | 184 | $ | (28 | ) | $ | 212 | $ | (20 | ) | $ | (193 | ) | $ | 173 | |||||||||
Net income from discontinued operations | 68 | 57 | 11 | 865 | 467 | 398 | ||||||||||||||||||
Earnings per share of common stock: | ||||||||||||||||||||||||
Diluted | ||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 1.49 | $ | (0.23 | ) | $ | 1.72 | $ | (0.16 | ) | $ | (1.61 | ) | $ | 1.45 | |||||||||
Net income | $ | 2.04 | $ | 0.23 | $ | 1.81 | $ | 7.13 | $ | 2.36 | $ | 4.77 | ||||||||||||
Effective tax rate—continuing operations | 28.1 | % | 34.2 | % | 44.2 | % | 33.1 | % |
(1) | Represents a non-GAAP financial measure. See detailed explanation of these and other non-GAAP measures at end of this release. |
Hillshire Brands Reports Fourth Quarter and Full Year Results - Page 15
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 | ||||||||||||||||
As Reported | Impact of Significant 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 MAP) | 166 | 7 | — | 159 | ||||||||||||
Net charges for exit activities, asset and business dispositions | 2 | 2 | — | — | ||||||||||||
Impairment charges | — | — | — | — | ||||||||||||
Operating income | $ | 49 | $ | (14 | ) | $ | — | $ | 63 | |||||||
Quarter ended June 30, 2012 | ||||||||||||||||
As Reported | Impact of Significant 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 MAP) | 258 | 86 | 1 | 171 | ||||||||||||
Net charges for exit activities, asset and business dispositions | 11 | 11 | — | — | ||||||||||||
Impairment charges | — | — | — | — | ||||||||||||
Operating income (loss) | $ | (25 | ) | $ | (107 | ) | $ | — | $ | 82 |
(1) | Represents a non-GAAP financial measure. See detailed explanation of these and other non-GAAP measures at end of this release. |
Hillshire Brands Reports Fourth Quarter and Full Year Results - Page 16
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 | ||||||||||||||||
As Reported | Impact of Significant 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 MAP) | 681 | 45 | — | 636 | ||||||||||||
Net charges for exit activities, asset and business dispositions | 9 | 9 | — | — | ||||||||||||
Impairment charges | 1 | 1 | — | — | ||||||||||||
Operating income | $ | 297 | $ | (66 | ) | $ | — | $ | 363 | |||||||
Twelve Months Ended June 30, 2012 | ||||||||||||||||
As Reported | Impact of Significant 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 MAP) | 795 | 132 | 7 | 656 | ||||||||||||
Net charges for exit activities, asset and business dispositions | 81 | 81 | — | — | ||||||||||||
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. |
Hillshire Brands Reports Fourth Quarter and Full Year Results - Page 17
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.
Hillshire Brands Reports Fourth Quarter and Full Year Results - Page 18
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.