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Gross profit decreased $44 million, or 11.1%, to $353 million, and the gross profit margin
decreased to 24.3% from 26.7%, due to lower volume, higher commodity and manufacturing costs and
Fiscal 2008 gains on commodity derivative contracts, partially offset by higher pricing. Operating
income decreased $34 million, or 20.7%, to $129 million, which was primarily due to the decline in
gross profit, partially offset by reduced G&A reflecting a gain in Fiscal 2009 on the sale of a small,
non-core portion control business.
Rest of World
Sales for Rest of World increased $100 million, or 27.3%, to $468 million. Volume increased 4.6%
driven by increases in Latin America and the Middle East. Higher pricing increased sales by 27.6%,
largely due to inflation in Latin America and commodity-related price increases in South Africa and
the Middle East. Acquisitions increased sales 0.2% due to the fourth quarter Fiscal 2009 acquisition
of Papillon, a small chilled products business in South Africa. Foreign exchange translation rates
decreased sales 5.2%.
Gross profit increased $28 million, or 21.4%, to $161 million, due mainly to increased pricing and
higher volume, partially offset by increased commodity costs and unfavorable foreign currency
movements. Operating income increased $7 million, or 15.2% to $52 million due to the increase in
gross profit partially offset by wage inflation in Latin America.
Liquidity and Financial Position
For Fiscal 2010, cash provided by operating activities was a record $1.26 billion compared to
$1.17 billion in the prior year. The improvement in Fiscal 2010 versus Fiscal 2009 was generated
despite significant contributions to our pension plans, and was primarily due to favorable movements
in working capital and reduced tax payments. Additionally, $84 million of cash was received in the
current year in connection with an accounts receivable securitization program (see additional
explanations below), and the Company also received $48 million of cash from the termination of
a total rate of return swap. In the prior year, the Company received $106 million of cash from the
settlement and maturity of foreign currency contracts that were put in place to help mitigate the
impact of translation associated with key foreign currencies (see Note 12, “Derivative Financial
Instruments and Hedging Activities” in Item 8-“Financial Statements and Supplementary Data” for
additional information). The Company’s cash conversion cycle improved 8 days, to 47 days in Fiscal
2010. There was a 6 day improvement in inventories as a result of the Company’s efforts to reduce
inventory levels. Receivables accounted for 5 days of the improvement, 4 days of which is a result of
the accounts receivable securitization program. Accounts payable partially offset these improvements,
with a 3 day decrease, a portion of which reflects inventory reductions and the resulting
decrease in the amounts due to suppliers.
During Fiscal 2010, the Company made $540 million of contributions to the pension plans
compared to $134 million in the prior year. Of this $540 million of payments, $475 million were
discretionary contributions that were made to help offset the impact of adverse conditions in the
global equity and bond markets in Fiscal 2009. Contributions for Fiscal 2011 are expected to be less
than $50 million; however, actual contributions may be affected by pension asset and liability
valuations during the year.
During the first quarter of Fiscal 2010, the Company entered into a three-year $175 million
accounts receivable securitization program. Under the terms of the agreement, the Company sells, on
a revolving basis, its U.S. receivables to a wholly-owned, bankruptcy-remote-subsidiary. This subsidiary
then sells all of the rights, title and interest in these receivables to an unaffiliated entity. After
the sale, the Company, as servicer of the assets, collects the receivables on behalf of the unaffiliated
entity. The amount of receivables sold through this program as of April 28, 2010 was $84 million.
Cash provided by investing activities totaled $13 million compared to using $761 million of cash
last year. In the current year, proceeds from divestitures provided cash of $19 million which primarily
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