Downers Grove, Ill., Jul. 22 - Sara Lee Corp. today announced it will incur a non-cash impairment charge of between $865 million and $975 million, or $(1.17) to $(1.32) per share, in the fiscal fourth quarter ended June 28, 2008, primarily associated with its North American Foodservice bakery and Spanish bakery business units.
Sara Lee performs its annual goodwill impairment testing during the second quarter of each fiscal year. While there were no impairments at that time, the company disclosed that the goodwill of these two business units might be impaired in the future.
During the second half of fiscal 2008, these operations did not show the level of improvement management expected. Based on this, plus adverse economic conditions and escalating wheat costs for the Spanish bakery and North American Foodservice bakery operations, the company determined that it was required to take an estimated aggregate goodwill impairment charge for the businesses of between $800 million and $900 million in the fourth quarter. All of the goodwill balances relate to the company’s 2001 acquisition of The Earthgrains Company. Sara Lee will not recognize any tax benefit.
“Today’s announcement is consistent with our second and third quarter disclosures, in which we identified our North American Foodservice bakery and Spanish bakery businesses as at risk for future goodwill impairment,” said Brenda C. Barnes, chairman and chief executive officer, Sara Lee Corp. “While this goodwill impairment charge is required, we retain our longer-term positive view of these businesses. The bakery units represent an important part of our strategy and we remain committed to continuing to grow these businesses.”
Sara Lee also announced a non-cash pre tax write-down of $65 million to $75 million related to certain other assets in North America.
The company anticipates providing updated results in conjunction with its fourth quarter and full-year financial results announcement on August 7, 2008.