UPDATES EARNINGS GUIDANCE TO REFLECT THIS ACTION
Initiated first $500 million of $2.5 to $3.0 billion share repurchase plan
Repurchase expected to add $0.02 to fiscal 2010 earnings per share
Tax provision for repatriation expected to result in an $(0.80) per share charge
Currency hedges put in place to protect anticipated value of Household & Body Care proceeds
DOWNERS GROVE, Ill. (Mar. 2, 2010) – Sara Lee Corp. (NYSE: SLE) today announced it has initiated an accelerated share repurchase program under which it will repurchase $500 million of common stock. The repurchase is part of its recently announced capital plan under which the company intends to buy back $2.5 to $3.0 billion of stock over a three year period, with $1.0 to $1.3 billion to be repurchased in calendar year 2010. As a result of the repurchase, the company’s shares outstanding will be reduced from 697 million to approximately 661 million.
Sara Lee also announced today that it has hedged €1.6 billion of the proceeds anticipated to be generated by the divestiture of its Household & Body Care (H&BC) business at a euro-dollar rate of $1.35 per euro. To date, the company has announced binding agreements to sell its Body Care business to Unilever for €1.275 billion and its Air Care business to Proctor & Gamble for €320 million. The company continues to work toward the sale of the remaining parts of the business, Insecticides and Shoe Care.
“We recently announced our intention to use the H&BC proceeds and cash on hand to aggressively repurchase shares,” said Sara Lee Corp. chairman and chief executive officer Brenda C. Barnes. “Today’s announcement reflects our commitment to act swiftly and create value for our shareholders. At the same time, our actions to hedge the euro-dollar rate will protect the value of the proceeds from the sale of H&BC.”
Sara Lee announces $500 million accelerated share repurchase and updates earnings guidance – Page 2
Additional information about the accelerated share repurchase
The company’s share repurchases will be made through an accelerated share repurchase contract with Goldman, Sachs & Co., which is expected to be in effect for the next three to five months. During this time, Sara Lee cannot repurchase shares in the open market. The accelerated share repurchase contract is subject to a final adjustment upon completion, which may impact the total dollar amount expended or the number of shares acquired. Sara Lee has filed a Form 8-K with the Securities and Exchange Commission describing the accelerated share repurchase contract in more detail. The Form 8-K can be accessed in the Investor Relations section (Financial/SEC Information page) on www.saralee.com.
Updated Earnings Per Share (EPS) guidance
Solely as a result of the accelerated share repurchase and a one-time charge, Sara Lee is updating EPS guidance. The accelerated repurchase reduces the company’s shares outstanding on a weighted average basis over the course of fiscal 2010 and is expected to add $0.02 per share to EPS. The company also anticipates taking a one-time $550 million book charge, or $(0.80) per share, to provide for taxes on the deemed repatriation of both existing overseas cash and the book value of the H&BC business.
After the H&BC deals have closed, additional tax charges on the repatriation of the gains on the transactions are likely, though at this time the size and timing of these charges have not been determined and are therefore not reflected in the updated guidance below. Sara Lee confirms the other elements of the company’s guidance (excluding the elements set forth below) previously provided on February 4, 2010.
| All amounts in U.S. dollars per share | Fiscal 2010 Guidance (1) | Fiscal 2009 |
| Total diluted EPS | 0.58 – 0.63 | 0.52 |
| Diluted EPS from continuing operations | 0.79 – 0.82 | 0.31 |
| Diluted EPS from discontinued operations | (0.21) – (0.19) | 0.21 |
| Contingent sale proceeds | 0.19 | 0.21 |
| Total significant items (2) | (0.63) | (0.51) |
| Significant items related to continuing operations | (0.15) | (0.51) |
| Significant items related to discontinued operations | (0.48) | (0.01) |
| Adjusted EPS (2)(3) | 1.02 – 1.07 | 0.82 |
| Adjusted EPS from continuing operations | 0.75 – 0.78 | 0.61 |
| Adjusted EPS from discontinued operations | 0.27 – 0.29 | 0.22 |
(1) Fiscal 2010 has an extra, 53rd week.
(2) Amounts are rounded and may not add to the total.
(3) “Adjusted EPS” and other “adjusted” financial measures are explained at the end of this release.
Additional information
Sara Lee announces $500 million accelerated share repurchase and updates earnings guidance –
“Adjusted EPS” and other “adjusted” financial measures are explained at the end of this release.
Additional information about currency hedges
The company has hedged the euro-dollar exchange rate at $1.35 per euro. These hedges have been structured as third party forward currency contracts that should have an immaterial impact on the company’s income statement. These contracts will be settled in cash as they expire beginning in July 2010. The proceeds from the H&BC transaction will be recorded on the company’s Statement of Cash Flows as Cash from Investing Activities while any hedging gains or losses will be reported as Cash from Operations.
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