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HBI » Topics » UNAUDITED PRO FORMA COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

This excerpt taken from the HBI 8-K filed Sep 5, 2006.

UNAUDITED PRO FORMA COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

The Unaudited Pro Forma Combined and Consolidated Financial Statements consist of Unaudited Pro Forma Combined and Consolidated Statements of Income for the thirty-nine weeks ended April 1, 2006 and for the fiscal year ended July 2, 2005 and an Unaudited Pro Forma Combined and Consolidated Balance Sheet as of April 1, 2006. The Unaudited Pro Forma Combined and Consolidated Financial Statements should be read in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our Combined and Consolidated Financial Statements and the corresponding notes, and our Unaudited Interim Condensed Combined and Consolidated Financial Statements and the corresponding notes included elsewhere in this information statement.

The Unaudited Pro Forma Combined and Consolidated Financial Statements included in this information statement have been derived from our historical financial statements included elsewhere in this information statement and do not necessarily reflect what our financial position and results of operations would have been if we had operated as a separate stand-alone entity during the periods shown.

The Unaudited Pro Forma Combined and Consolidated Statements of Income reflect our combined and consolidated results as if the spin off and related transactions described below had occurred as of July 4, 2004, the beginning of the most recent fiscal year for which audited financial statements are available. The Unaudited Pro Forma Combined and Consolidated Balance Sheet reflects our combined and consolidated results as if the spin off and related transactions described below had occurred as of April 1, 2006.

The pro forma adjustments give effect to the following transactions:

 

  •   The contribution by Sara Lee to us of the assets and liabilities that comprise our business.

 

  •   The execution of our senior secured credit facility and the borrowing of approximately $1.65 billion under that credit facility.

 

  •   The execution of our senior secured second lien credit facility and the borrowing of approximately $450.0 million under that facility.

 

  •   The execution of our bridge loan facility and the borrowing of approximately $500.0 million under that facility.

 

  •   The payment by us to Sara Lee of $2.4 billion from the proceeds of such borrowings.

 

  •   The distribution of approximately 95.1 million shares of our common stock to holders of Sara Lee common stock, based upon the number of shares of Sara Lee common stock outstanding on July 28, 2006.

 

  •   The estimated cost of $46.8 million associated with the debt incurrence described above.

 

  •   Settlement of intercompany accounts.

The Unaudited Pro Forma Combined and Consolidated Financial Statements do not include certain non-recurring separation costs we expect to incur in connection with the spin off. Excluded are cash costs to be incurred in the first year estimated at $10 million related to legal, consulting and rebranding activities. In addition, we expect non-recurring revenues of approximately $4 million for transition services to be provided to Sara Lee in accordance with the separation agreements, offset by non-recurring costs of approximately $7 million for us to provide such transition services. See “Agreements with Sara Lee.” The historical service fees paid to Sara Lee for support services in fiscal 2005 and the thirty-nine weeks ended April 1, 2006 were $8.9 million and $4.7 million, respectively.

For the fiscal year ended July 2, 2005 and the thirty-nine weeks ended April 1, 2006, Sara Lee allocated to us general and administrative (including corporate) expenses in the amount of $34 million and $27 million, respectively. General and administrative expenses include costs related to human resources, legal, treasury, insurance, finance, internal audit, strategy, public affairs and other services. Effective with the spin off, we will assume responsibility for all of these functions and related costs. We expect our general and administrative expenses, in aggregate, to be approximately $40 million in fiscal 2006. No pro forma adjustments have been made to our financial statements to reflect the costs and expenses described in this paragraph.

 

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