House & Home
House and Home
House and Home
Fri, January 28, 2011
Thu, January 27, 2011
Sara Lee Board Agrees in Principle to Divide the Company into Two Public Entities
DOWNERS GROVE, Ill.--([ BUSINESS WIRE ])--Sara Lee Corp. (NYSE:SLE) announced today that its board of directors has agreed in principle to divide the company into two separate, publicly traded companies. The separation is expected to be completed in early calendar year 2012. Each company will have leading consumer brands, compelling growth prospects and strong potential to deliver long-term value to shareholders.
"Todaya™s announcement is a logical step following the divestment of our International Household and Body Care business and the announced sale of our North American Fresh Bakery business"
Under the plan approved by its board, Sara Leea™s North American Retail and North American Foodservice businesses (excluding the North American beverage business) will be spun off, tax-free, into a new public company that will retain the aSara Leea name. Its leading brands will include Sara Lee, Jimmy Dean, BallPark, Hillshire Farm, Chef Pierre and State Fair. The new company would have reported approximately $4.1 billion in revenue in fiscal 2010.
The yet to be named other company will consist of Sara Leea™s current International Beverage and Bakery businesses, as well as the North American beverage business. Its leading brands will include Douwe Egberts, Senseo, Pickwick, Maison du Caf©, La™OR, Caf© Pilo, Marcilla and Bimbo. This entity would have reported approximately $4.6 billion in revenue in fiscal 2010 using fiscal 2010 actual exchange rates.
Each company is projected to have an investment grade credit profile, a competitive dividend yield, a corporate tax rate of approximately 35% and future financial flexibility with a targeted gross leverage of 2.0x EBITDA.
In conjunction with the planned separation, the board of directors intends to declare a $3.00 per share special dividend on the companya™s common stock, the majority of which will be funded with proceeds from the sale of the companya™s North American Fresh Bakery business. The special dividend is expected to be declared and paid in fiscal 2012 and before completion of the spin-off of Sara Leea™s North American Retail and North American Foodservice businesses.
aTodaya™s announcement is a logical step following the divestment of our International Household and Body Care business and the announced sale of our North American Fresh Bakery business,a said James Crown, Sara Lee Corp.a™s chairman of the board. aWe have carefully considered various strategic alternatives, including unsolicited indications of interest in the company. We believe that the spin-off, plus the one-time special dividend, offers the greatest potential for delivering long-term shareholder value. These two pure-play companies will have their own distinct growth strategies within their respective core markets that will attract a more focused shareholder base.a
Crown added, aOn behalf of the board of directors, I would like to thank the management team and our employees worldwide for their tremendous support of our business and helping shape the long-term strategic plans for Sara Lee.a
In February 2010, Sara Lee Corp. announced a revised capital plan with intent to repurchase between $2.5 and $3.0 billion of stock. The company repurchased $500 million of shares in fiscal year 2010, $765 million of shares to date in fiscal 2011 and intends to repurchase an additional $535 million of stock in the remainder of thisfiscal year, for a cumulative total of $1.8 billion through the end of fiscal 2011. After payment of the $3.00 special dividend in fiscal 2012, the company will have returned a total of $3.5 billion of capital to its shareholders since the revised capital plan was announced, and, at this time, does not expect to continue with further share repurchases through the completion of the spin-off. The company expects to maintain its quarterly dividend through the completion of the separation process.
The company is developing detailed implementation plans for the spin-off and will continue to evaluate a variety of methods to enhance the efficiency of the operating structure of the two companies. Sara Lee will consult with relevant works councils during the process. The separation plan will also be subject to final approval by the board of directors, other customary approvals and the receipt of an IRS tax ruling. Further details will be disclosed at a later date.
Executive Leadership
The board of directors also announced that, effective immediately, it has appointed Jan Bennink, 54, as director and executive chairman. Benninka™s primary responsibility is the leadership and implementation of the spin-off, in addition to chairing the board of directors and building and maintaining a senior management team. Bennink replaces Jim Crown, who has served as chairman of the board since May 2010. Crown will continue on the board and will serve as lead independent director.
Bennink has extensive executive leadership experience in the food and beverage and consumer packaged goods industries. Most recently, he served as chief executive officer of Royal Numico and has also held key management positions with Groupe Danone, Benckiser Gmbh and Procter & Gamble. He previously served on the advisory board of ABN AMRO, as well as on the boards of various global companies, including Kraft Foods. He is currently a director of Coca-Cola Enterprises.
aSara Lee has a powerful mix of iconic brands, people and potential,a said Bennink. aI am excited to serve as executive chairman of the board of directors and oversee the companya™s transition into two publicly traded companies, each with exciting prospects for growth and value creation.a
Also effective immediately, Sara Lee has appointed Marcel Smits, 49, as chief executive officer. Smits has been serving as the companya™s interim CEO since May 2010. In his role as chief executive officer, Smits will be responsible for Sara Leea™s day-to-day operations and execution of the companya™s annual operating plan and strategy.
In addition to Bennink and Smits, the board of directors has named Mark Garvey, 46, as chief financial officer. Garvey has been serving as interim chief financial officer since May 2010. The Board has also determined that CJ Fraleigh, 47, who currently serves as Sara Leea™s chief executive officer, North America, will be named chief executive officer of the new North American Retail and Foodservice business upon completion of the spin-off.
aWe are pleased to have Jan Bennink join a senior management team that has performed so well, particularly since we formed the Office of the Chairman in 2010,a added Crown.
aHe brings strong food and beverage experience, a global perspective and a solid track record of creating shareholder value. The board of directors is confident that with this leadership team in place, this company will build on its past successes as it completes its strategic plan.a
Fiscal 2011 Guidance
On February 8, 2011, Sara Lee will report results for the second quarter of fiscal 2011. The attached table provides revisions to the previously communicated fiscal 2011 guidance. First, the guidance previously provided on November 9, 2010, was restated in order to present the results of the North American Fresh Bakery operations as discontinued operations for all periods. Second, this restated guidance was updated to reflect all information available through January 28, 2011. As customary, the guidance includes the net impact of significant items reported in the first quarter, but does not reflect any additional significant items that may occur during the remainder of the fiscal year.
After restating for North American Fresh Bakery, guidance for adjusted operating income from continuing operations was $904 to $969 million. Sara Lee is updating this range to $904 to $940 million, with the top end of the range coming down due to higher green coffee costs that cannot be fully recovered through pricing within the year. At an EPS level the guidance (after restating for North American Fresh Bakery) stood at $0.87 to $0.94 which is being updated to $0.85 to $0.89. This change reflects both the aforementioned update of the range of adjusted operating income from continuing operations as well as approximately $0.02 of adverse impact from changes in the assumption for the tax rate, as well as minor changes to the share count and interest expense assumptions.
Updated cash flow from operations in fiscal 2011 is anticipated to be between $400 and $500 million. The updated fiscal 2011 cash flow guidance includes approximately $290 million of tax payments related to the disposition of the Household and Body Care operations and the subsequent repatriation of funds. Most of this $290 million represents transaction taxes. In addition, the 2011 cash flow includes a planned $60 million, net of tax, additional contribution to the Dutch pension plan following an agreement with the Dutch Unions to restructure the Dutch pension plan. Lastly, updated fiscal 2011 cash flow guidance includes approximately $200 million for restructuring costs related to Project Accelerate and the Household and Body Care and North American Fresh Bakery divestitures.
Fiscal 2011 cash flow guidance has been reduced since November 9, 2010, as a result of the aforementioned contribution to the Dutch pension plan, higher inventory levels driven by commodity cost increases and earlier than expected payments of transaction and repatriation taxes.
Fiscal 2011 year-end cash balances are estimated to be approximately $2.8 billion and gross debt is estimated to be approximately $2.7 billion. This assumes that all announced transactions have closed and most transaction taxes have been paid, but repatriation taxes have mostly not yet been paid. As of the end of fiscal 2011, Sara Lee anticipates having a provision of approximately $880 million for taxes, mainly repatriation taxes. This relates to the disposition of the Household and Body Care business and the subsequent repatriation of funds.
As a result of the North American Fresh Bakery operations moving to discontinued operations, operating income from discontinued operations will benefit in the remainder of fiscal 2011 from the cessation of depreciation related to that business. This benefit has been reflected in the updated guidance for discontinued operations.
Looking forward to fiscal 2012, other than operational improvements, Sara Lee will benefit from a number of tailwinds, adding a total of approximately $0.15 to the fiscal 2012 EPS for continuing operations. First, there will be a benefit from the share repurchases completed throughout fiscal 2011. Second, pension expenses, based on current assumptions, are expected to decline by approximately $40 million. Third, amortization will be reduced by approximately $30 million related to IT software and trademarks. Last, more than half of the stranded overhead related to the Household and Body Care and North American Fresh Bakery divestitures is expected to be eliminated by fiscal 2012.
Actual results may differ from this guidance due to future significant events that may occur, the nature, timing and financial impact of which are not yet known. The timing of the close of various International Household and Body Care transactions and the North American Fresh Bakery divestiture can impact on guidance.
($ amounts are per share) | As Reported Fiscal 2011 Guidance as of 11/9/10 | Impact of the Reclassification of N.A. Fresh Bakery to Discontinued Operations | Restated Fiscal 2011 Guidance as of 11/ 9/10 (5) | Updated Fiscal 2011 Guidance as of 1/28/11 (6) | Fiscal 2010 (1) (5) | ||||||
| Total diluted EPS | $1.09 a" 1.18 | a' | $1.09 a" 1.18 | $1.11 a" 1.17 | $0.73 | ||||||
Continuing operations | $0.89 a' 0.96 | $(0.05) | $0.84 a' 0.91 | $0.82 a" 0.86 | $0.89 | ||||||
Discontinued operations | $0.21 a' 0.23 | $ 0.05 | $0.26 a' 0.28 | $0.30 a" 0.32 | $(0.16) | ||||||
| Contingent sale proceeds | a' | a' | a' | a' | $0.19 | ||||||
| Total significant items, net (2) | $0.08 | a' | $0.08 | $0.08 | $(0.57) | ||||||
Continuing operations | $(0.03) | a' | $(0.03) | $(0.03) | $(0.04) | ||||||
Discontinued operations | $0.12 | a' | $0.12 | $0.12 | $(0.54) | ||||||
Impact of 53rd week | a' | a' | a' | a' | $0.03 | ||||||
Continuing operations | a' | a' | a' | a' | $0.02 | ||||||
Discontinued operations | a' | a' | a' | a' | $0.01 | ||||||
| Adjusted EPS (2)(3) | $1.01 a" 1.10 | a' | $1.01 a" 1.10 | $1.03 a" 1.09 | $1.08 | ||||||
Continuing operations | $0.92 a" 0.99 | $(0.05) | $0.87 a" 0.94 | $0.85 a" 0.89 | $0.72 | ||||||
Discontinued operations | $0.09 a" 0.11 | $ 0.05 | $0.14 a" 0.16 | $0.18 a" 0.20 | $0.37 | ||||||
| Net sales | $11.8 a" 12.1 B | a' | $11.8 a" 12.1 B | $11.9 a" 12.1 B | $12.9 B | ||||||
Continuing operations | $11.0 a" 11.2 B | $(2.15) B | $8.85 a" 9.05 B | $9.0 a" 9.1 B | $8.7 B | ||||||
Discontinued operations | $0.8 a" 0.9 B | $ 2.15 B | $2.95 a" 3.05 B | $2.9 a" 3.0 B | $4.2 B | ||||||
| Total operating income (4) | $1.035 a" 1.120B | a' | $1.035 a" 1.120B | $1.063 a" 1.119 B | $1.169 B | ||||||
Continuing operations | $965 a" 1,030 MM | $(70) MM | $895 a" 960 MM | $895 a" 931 MM | $877 MM | ||||||
Discontinued operations | $70 a" 90 MM | $ 70 MM | $140 a" 160 MM | $168 a" 188 MM | $292 MM | ||||||
| Contingent sale proceeds | a' | a' | a' | a' | $133 MM | ||||||
| Total significant items, net (2) | $(21) MM | a' | $(21) MM | $(21) MM | $(262) MM | ||||||
Continuing operations | $(10) MM | $1 MM | $(9) MM | $(9) MM | $(150) MM | ||||||
Discontinued operations | $(11) MM | $(1) MM | $(12) MM | $(12) MM | $(112) MM | ||||||
Impact of 53rd week | a' | a' | a' | a' | $33 MM | ||||||
Continuing operations | a' | a' | a' | a' | $19 MM | ||||||
Discontinued operations | a' | a' | a' | a' | $14 MM | ||||||
| Adjusted operating income(2)(3) | $1.056 a" 1.141 B | a' | $1.056 a" 1.141 B | $1.084 a" 1.140B | $1.265 B | ||||||
Continuing operations | $975 a" 1,040 MM | $(71) MM | $904 a" 969 MM | $904 a" 940 MM | $875 MM | ||||||
Discontinued operations | $81 a" 101 MM | $71 MM | $152 a" 172 MM | $180 a" 200 MM | $390 MM | ||||||
Cash flow from operations (incl. discontinued ops.) | $600 a" 700 MM | a' | $600 a" 700 MM | $400 - 500 MM | $952 MM | ||||||
| Capital expenditures | $400 a" 450 MM | a' | $400 a" 450 MM | $400 a" 425 MM | $385 MM | ||||||
| Interest expense, net (continuing operations) | $96 MM | $(7) MM | $89 MM | $91 MM | $115 MM | ||||||
Tax rate, cont. operations, excl. significant items | 33% a"35% | a' | 33% a"35% | 34% - 35% | 29.6% | ||||||
| Dollar/Euro exchange rate | $1.35 | a' | $1.35 | $1.34 | $1.39 | ||||||
(1) Fiscal 2010 had 53 weeks. | |||||||||||
(2) Amounts are rounded and may not add to the total. | |||||||||||
(3) aAdjusteda financial measures are explained in aExplanation of Non-GAAP Financial Measures.a | |||||||||||
(4) Fiscal 2011 operating income guidance includes a negative impact of $21 million in net significant items reported in the first quarter, but does not include any additional significant items that may occur during the remainder of the fiscal year. | |||||||||||
(5) This section of the guidance table is intended to restate actual results for fiscal 2010 and the guidance for fiscal 2011 previously provided by the corporation in its first quarter 2011 earnings release dated November 9, 2010, in order to present the results of the businesses comprising the corporationa™s former North American Fresh Bakery segment as discontinued operations for all periods presented.The results of the North American Fresh Bakery operations are being classified as discontinued operations due to the corporation entering into an agreement to sell these operations to Grupo Bimbo.See the Form 8-K filed with the SEC on January 27, 2011, for additional details. | |||||||||||
(6) This column updates the fiscal 2011 guidance based upon information available through January 28, 2011. | |||||||||||
Webcast
Sara Lee Corp.a™s management will review the details of its announcement live via the Internet today at 9:00 a.m. CST. The live webcast can be accessed at [ www.saralee.com ] and is anticipated to conclude by 10:00 a.m. CST. For people who are unable to listen to the webcast live, the presentation will be available two hours following the completion of the webcast in the Investors section of the Sara Lee corporate Web site until July 28, 2011.
Forward-Looking Statements
This release contains forward-looking statements regarding Sara Leea™s spin-off and separation plans, the special dividend, its regular quarterly dividend, its ongoing and future stock repurchase plans, and updated fiscal 2011 guidance and future financial results. In addition, from time to time, in oral statements and written reports, the corporation discusses its expectations regarding the corporationa™s future performance by making forward-looking statements preceded by terms such as aprojects,a aplans,a aintends,a aestimates,a amay,a acan,a awill,a ashould,a apotential,a aanticipates,a awe are confident,a aexpects,a alikelya or abelieves.a These forward-looking statements are based on currently available competitive, financial and economic data and managementa™s views and assumptions regarding future events.
Forward-looking statements are inherently uncertain, and investors must recognize that actual results may differ from those expressed or implied in the forward-looking statements. Consequently, the corporation wishes to caution readers not to place undue reliance on any forward-looking statements. Among the factors that could cause Sara Leea™s actual results to differ from such forward-looking statements are those described under Item 1A, Risk Factors, in Sara Leea™s most recent Annual Report on Form 10-K and other SEC Filings, as well as factors relating to:
- Sara Leea™s spin-off and separation plans, the special dividend, its regular quarterly dividend and its share repurchase plans, such as (i) unanticipated developments that delay or negatively impact the proposed spin-off and capital plans; (ii) Sara Leea™s ability to obtain an IRS tax ruling and any other customary approvals; (iii) Sara Leea™s ability to generate the anticipated efficiencies and savings from the proposed spin off; (iv) the impact of the proposed spin off on Sara Leea™s relationships with its employees, its major customers and vendors and on Sara Leea™s credit ratings and cost of funds; (v) changes in market conditions; (vi) future opportunities that the Board may determine present greater potential value to shareholders than the spin off, special dividend and share purchase plans; (vii) the inability to complete the sale of Sara Leea™s North American Fresh Bakery business, a condition to the payment of the special dividend; (viii) disruption to Sara Leea™s business operations as a result of the proposed spin off; (ix) future operating or capital needs that require a more significant outlay of cash than currently anticipated; and (x) the ability of the businesses to operate independently following the completion of the proposed spin off;
- Sara Leea™s relationship with its customers, such as (i) a significant change in Sara Leea™s business with any of its major customers, such as Walmart, its largest customer, including changes in how such customers manage their suppliers and the level of inventory these customers maintain; and (ii) credit and other business risks associated with customers operating in a highly competitive retail environment;
- The consumer marketplace, such as (i) significant 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 the cost of raw materials, Sara Leea™s ability to increase or maintain product prices in response to fluctuations in cost and the impact on Sara Leea™s profitability; (iv) the impact of various food safety issues and regulations on sales and profitability of Sara Lee products; and (v) inherent risks in the marketplace associated with new product introductions, including uncertainties about trade and consumer acceptance;
- Sara Leea™s international operations, such as (i) impacts on reported earnings from fluctuations in foreign currency exchange rates, particularly the euro; (ii) Sara Leea™s generation of a high percentage of its revenues from businesses outside the United States and costs to remit these foreign earnings into the U.S. to fund Sara Leea™s domestic operations, share repurchase plans, dividends, debt service and corporate costs; (iii)difficulties and costs associated with complying with U.S. laws and regulations, such as Foreign Corrupt Practices Act, applicable to entities with overseas operations, and different regulatory structures and unexpected changes in regulatory environments overseas, including without limitation potentially negative consequences from changes in anti-competition and tax laws; and (iv) Sara Leea™s ability to continue to source production and conduct manufacturing and selling operations in various countries due to changing business conditions, political environments, import quotas and the financial condition of suppliers;
- Previous business decisions, such as (i) Sara Leea™s ability to generate margin improvement through cost reduction and efficiency initiatives, including Project Accelerate and the outsourcing of significant portions of our financial transaction processing, global IT, and global indirect procurement activities; (ii) Sara Leea™s ability to achieve planned cash flows from capital expenditures and acquisitions and the impact of changing interest rates and the cost of capital on the discounted value of those planned cash flows, which could impact future impairment analyses; (iii) credit ratings issued by the three major credit rating agencies, the impact of Sara Leea™s capital plans and targets on such credit ratings and the impact these ratings and changes in these ratings may have on Sara Leea™s cost to borrow funds, access to capital/debt markets, and ability to complete the planned share repurchase; (iv) Sara Leea™s plan to repurchase a significant amount of its common stock and the impact of such repurchases on its earnings, cash flow and credit ratings; (v) the settlement of a number of ongoing reviews of Sara Leea™s income tax filing positions in various jurisdictions and inherent uncertainties related to the interpretation of tax regulations in the jurisdictions in which Sara Lee transacts business; and (vi) changes in the expense for and contingent liabilities relating to multi-employer pension plans in which Sara Lee participates.
In addition, Sara Leea™s 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 corporation competes. Sara Lee undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
About Sara Lee Corporation
Each and every day, Sara Lee (NYSE:SLE) delights millions of consumers and customers around the world. The company has one of the worlda™s best-loved and leading portfolios with its innovative and trusted food and beverage brands, including Ball Park, Douwe Egberts, Hillshire Farm, Jimmy Dean, Sara Lee and Senseo. Collectively, our brands generate nearly $9 billion in annual net sales from continuing operations. Sara Lee has approximately 20,000 employees in its continuing operations worldwide. Please visit [ www.saralee.com ] for the latest news and in-depth information about Sara Lee and its brands.
Explanation of Non-GAAP Financial Measures
Management measures and reports Sara Leea™s financial results in accordance with U.S. generally accepted accounting principles (aGAAPa). In this release, Sara Lee highlights certain items that have significantly impacted the corporationa™s financial results and uses several non-GAAP financial measures to help investors understand the financial impact of these significant items.
aSignificant itemsa 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 corporation for the period in which the item is recognized, are not indicative of the companya™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; transformation program and Project Accelerate costs; impairment charges; pension partial withdrawal liability charges; benefit plan curtailment gains (losses); debt extinguishment costs; tax charge on deemed repatriated earnings; tax costs and benefits resulting from the disposition of a business; impact of tax law changes; 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 Sara Lee or the applicable business segment or discontinued operations and to enable more meaningful comparability between financial results from period to period. Additionally, Sara Lee 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 corporation.
aContingent sale proceedsa are contingent proceeds from the sale of the companya™s tobacco business in fiscal 1999. Under the sales agreement, Sara Lee received cash payments annually so long as tobacco continued to be a legal product in the specified countries. Our last cash payment was received on July 15, 2009. Contingent sale proceeds are not asignificant items,a but are identified separately because the income is not generated by the companya™s underlying business and has a finite term.
aImpact of 53rd weeka is the financial impact to Sara Lee, in terms of additional sales, expense or income, resulting from fiscal 2010 having 53 weeks as compared to 52 weeks in the comparable fiscal years.
aAdjusted EPSa excludes from diluted EPS, as reported, for total Sara Lee, for continuing operations or for discontinued operations, as indicated, the per share impact of significant items and contingent sale proceeds, and the per share impact of the 53rd week recognized in the fiscal period presented. The line item title or the context of its use in this release and in other communications indicates whether aAdjusted EPSa refers to total Adjusted EPS for all of Sara Lee, Adjusted EPS from continuing operations or Adjusted EPS from discontinued operations.
aAdjusted operating incomea for continuing operations or discontinued operations, as indicated in this release, excludes from applicable operating income the impact of significant items and contingent sale proceeds, if any, the impact of the 53rd week and businesses acquired or divested after the start of the fiscal period, and also presents fiscal 2010 results at fiscal 2011 currency exchange rates.
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, the receipt of contingent sale proceeds, the impact of acquisitions and dispositions, the impact of the 53rd week and changes in foreign currency exchange rates. Management believes that these non-GAAP financial measures reflect an additional way of viewing aspects of Sara Leea™s business that, when viewed together with Sara Leea™s financial results computed in accordance with GAAP, provide a more complete understanding of factors and trends affecting Sara Leea™s 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 significant items and the impact of the contingent sale proceeds. Management believes, based on feedback it has received during earnings calls and discussions with investors, that these non-GAAP measures enhance investorsa™ ability to assess Sara Leea™s historical and project 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 three performance measures under Sara Leea™s annual incentive plan are net sales and operating income, which are the reported amounts as adjusted for significant items and possibly other items. Operating income, as adjusted for significant items, also may be used as a component of Sara Leea™s long-term incentive plans. Many of the significant items will recur in future periods; however, the amount and frequency of each significant item varies from period to period.
