Hillshire Brands Posts Strong Results to Start Fiscal Year 2013

Hillshire Brands Posts Strong Results to Start Fiscal Year 2013

DOWNERS GROVE, Ill.--(BUSINESS WIRE)-- The Hillshire Brands Company (NYS: HSH) today reported earnings for its first quarter of fiscal year 2013.

First Quarter Highlights (continuing operations)

  • Adjusted1 diluted EPS increased by $0.19 to $0.51; reported diluted EPS increased $0.31 to $0.41
  • Adjusted net sales increased by 2% to $1.01 billion; reported net sales declined 1.4%
  • Adjusted operating income increased 76.3% to $105 million; reported operating income increased $60 million to $87 million
  • Strong performance in the Retail segment, with sales growth of 3% and adjusted operating segment income growth of 45.5%

CEO Perspective

"I am very pleased with our first quarter performance," said Sean Connolly, chief executive officer, The Hillshire Brands Company. "Our volumes are moving in the right direction, our key brands are gaining strength, our costs are coming down and our team is markedly stronger. Overall, we are off to an encouraging start against our three-year plan to build a consistently growing and more profitable branded food company."

He added, "While we are pleased with this progress, we recognize that we are only one quarter into our year. We want to wait for greater visibility into the cost picture and see our momentum continue to develop further before making any changes to our outlook. Accordingly, our full year guidance, given on August 9, remains unchanged at this time."

Key Financial Data, Continuing Operations
$ in millions, except per share
First Quarter
2013 2012 % Change
Adjusted Net Sales$1,011$9912.0%
Reported Net Sales1,0111,025(1.4)%
Adj. Operating Income1056076.3%
Rep. Operating Income8727NM
Adj. Diluted EPS0.510.3259.4%
Rep. Diluted EPS0.410.10NM

Discussion of Continuing Operations Results

The company posted increases in adjusted net sales and adjusted operating income versus the first quarter of fiscal 2012. Higher adjusted net sales, coupled with lower expenses, including deflationary commodities, actions taken to lower SG&A costs, and lower variable costs, drove higher adjusted operating income.


Net sales in the Retail segment increased 3.0% in the quarter, driven by 2.3% volume growth. Adjusted operating segment income increased by 45.5%, primarily due to lower input costs and lower SG&A costs, reflecting the benefit of the company's cost reduction programs.

Jimmy Dean turned in a strong performance during the quarter, with double-digit sales growth. Ball Park also posted solid top line growth during the key summer hot dog season and the brand's new Flame Grilled Patties continued to perform well. Aidells continued to deliver strong double-digit growth and launched several new products, including hot dogs and all-natural salame. Each of these brands received strong MAP support, reflecting the company's commitment to brand building for the long-term.


In the first quarter, Foodservice/Other adjusted net sales declined 1.6%. While volumes increased, revenues declined on a less profitable sales mix and lower pricing tied to declining input costs. Adjusted operating segment income increased $3 million, as a result of positive price recovery and lower SG&A expenses.

Foodservice Bakery struggled as industry trends for dessert consumption continued to decline and as the business was impacted by the lingering negative effects following the plant upgrades in the Tarboro, N.C. facility.

Australian Bakery

The Australian Bakery segment reported a 2.3% decline in sales in the quarter. The sales decline was expected, driven by the closing of a number of outlet stores and the exiting of unprofitable private label businesses. Excluding negative currency impacts, sales were down 1.1%. Adjusted operating segment income increased by $2 million on lower costs.


The company's corporate expenses, excluding significant items, declined $14 million versus the first quarter of fiscal 2012, to $8 million. This reduction was driven primarily by an $8 million year-over-year increase in commodity mark-to-market gains, as well as cost savings initiatives, including headcount reductions.


On October 25, 2012, Hillshire Brands' board of directors declared a quarterly dividend of $0.125 per share to be paid on December 31, 2012 to shareholders of record as of December 3, 2012.

Webcast and Form 10-Q

The Hillshire Brands Company's review of its results for the first quarter of 2013 will be broadcast live via the Internet today at 7:30 a.m. CDT. The live webcast can be accessed in the Investor Relations section on www.hillshirebrands.com and is anticipated to conclude by 8:30 a.m. CDT. 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 May 1, 2013.

The company's first quarter 2013 earnings release can be found in the News & Media section on www.hillshirebrands.com. Hillshire Brands has also provided slides containing additional information that will be reviewed during its first quarter webcast. The slides can be accessed in the Investor Relations section on www.hillshirebrands.com under Investor Upcoming Events.

Amounts included in the release are preliminary, pending The Hillshire Brands Company's filing of its Form 10-Q with the Securities and Exchange Commission, expected on or before November 2, 2012. The Form 10-Q will be available in the Investor Relations section (Financial/SEC Information page) on www.hillshirebrands.com.

About The Hillshire Brands Company

The Hillshire Brands Company (NYS: 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. The company, formerly known as Sara Lee Corporation, began trading under the "HSH" ticker symbol on June 29, 2012, following the successful spin-off of its international coffee and tea business. 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." In addition, from time to time, in oral statements and written reports, the company discusses its expectations regarding the company's future performance by making forward-looking statements preceded by terms such as "anticipates," "intends," "expects," "likely" or "believes." 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 and other SEC Filings, 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 about 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;
  • Other business decisions, 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 business.

In addition, Hillshire Brands' results may also be affected by general factors, such as economic conditions, political developments, interest and inflation rates, accounting standards, taxes and laws and regulations in markets where the company competes. Hillshire Brands undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

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.



Financial Summary - As Adjusted *

For the Quarter ended Sept. 29, 2012 and Oct. 1, 2011 (in millions, except per share data - unaudited)
Quarter ended
Sept. 29,Oct. 1,


Continuing operations:
Adjusted net sales:
Australian Bakery3738(2.3)
Intersegment -  (4) 
Total adjusted net sales$1,011 $991 2.0%
Adjusted operating income
Australian Bakery 4  2 70.8 
Adjusted operating segment income1138236.7%
General corporate expenses(11)(17)
Mark-to-market derivatives gains/(losses)4(4)
Amortization of trademarks & intangibles (1) (1) 
Total adjusted operating income$105 $60 76.3%
Adjusted income from continuing operations$62 $38 65.9%
Adjusted net income - As Restated$62 $124 (50.0)%
Adjusted net Income attributable to Hillshire Brands:
Continuing operations$62$3865.9%
Discontinued operations - As Restated$-$86NM
Adjusted diluted earnings per share:
Income from continuing operations$0.51 $0.32 59.4%
Net income - As Restated$0.51 $1.05 (51.4)%
Adjusted operating margin:




Australian Bakery10.86.24.6
Total Hillshire Brands10.4







NM = Not meaningful
* 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 ended Sept. 29, 2012 and Oct. 1, 2011 (in millions, except per share data - unaudited)


Quarter ended
Sept. 29,Oct. 1,


Continuing operations:
Net sales:
Australian Bakery3738(2.3)
Intersegment -  (4) 
Total net sales$1,011 $1,025 (1.4)%
Operating income
Australian Bakery 3  2 9.5 
Operating segment income1147159.5%
General corporate expenses(30)(39)
Mark-to-market derivatives gains/(losses)4(4)
Amortization of trademarks & intangibles (1) (1) 
Total operating income$87 $27 NM 
Income from continuing operations$51 $12 NM 
Net income (loss) - As Restated$53 $(218)NM 
Net income (loss) attributable to Hillshire Brands:
Continuing operations$51$12NM
Discontinued operations - As Restated$2$(232)NM
Diluted earnings per share:
Income from continuing operations$0.41 $0.10 NM 
Net income (loss) - As Restated$0.43 
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