a little different view...
CHICAGO, Jan 24, 2002 (BUSINESS WIRE) --
Sara Lee Corporation today announced that sales for the second
quarter of fiscal 2002, ending December 29, 2001, were $5.0 billion,
up 5%, and diluted earnings per share (EPS), excluding unusual items,
were $.37, a decrease of 14% compared to $.43 one year ago. For the
first six months of fiscal 2002, sales were $9.5 billion, up 3% over
the same period a year ago, and diluted EPS, excluding unusual items,
were $.63 versus $.72 for the first half of fiscal 2001, down 13%.
The company's results for the second quarter and the first half
were affected by several unusual items included in a Reshaping program
initiated by Sara Lee in May 2000; these items are outlined in the
Unusual Items section, beginning on page three of this press release,
and details are provided in the notes of the financial statements.
Including unusual items, diluted EPS were $.20 for the quarter and
$.49 for the first half, compared to $.92 and $1.20, respectively, in
fiscal 2001.
In May 2000, Sara Lee Corporation announced a Reshaping program to
focus the company's operations on three business segments - Food and
Beverage, Intimates and Underwear, and Household Products - and a
number of non-core business units were sold or operations ceased
during fiscal 2001 and fiscal 2002 in conjunction with this program.
Excluding these divested businesses, sales increased 14% in the second
quarter and 12% in the first half of fiscal 2002, reflecting the
acquisition of The Earthgrains Company in August 2001, combined with
base business gains at Sara Lee Meats, Household Products and global
Sock operations.
Operating income, excluding divested businesses, fell 4% in the
second quarter and declined 7% for the first six months, due to
difficult retail markets combined with higher media advertising and
promotion spending and increased funding for organizational and
technology improvements throughout the company. Currency had no
material impact on sales or operating income during the quarter.
Corporate unit volumes, excluding acquisitions and divestitures,
declined 1% during the quarter and increased 1% in the first six
months, with the strongest gains in several of the company's key meat
categories as well as its Household Products and global Sock
operations.
"Sara Lee continued its program of accelerated investment in its
brands, its portfolio and its business infrastructure during the
second quarter as our company becomes a more innovative and effective
organization," said C. Steven McMillan, chairman, president and chief
executive officer of Sara Lee Corporation. "In particular, our
Reshaping efforts have allowed each of our business units to focus
increased resources on developing creative new products that meet the
needs of today's consumers. In the last 12 months, for example, we
have launched a number of new products including Jimmy Dean Fresh
Taste. Fast! pre-cooked sausage, Senseo crema in-home coffee system,
Playtex "Only You" seamless bra and Ambi-Pur Car air freshener. To
support these new products, and our other leading brands, we increased
second quarter media advertising by 9%, and total media advertising
and promotion grew 5%.
"We have also made progress in reducing excess production capacity
and improving the effectiveness of our sales organizations," said
McMillan. "As we begin to benefit from these investments, we enjoyed
increased sales in several of our key product categories during the
second quarter, despite difficult global market conditions, and we
expect to report improved earnings beginning with the third quarter of
fiscal 2002."
Unusual Items
The company's results for the second quarter and first half of
fiscal 2002 and 2001 were affected by actions related to the Reshaping
program initiated in May 2000. This ongoing program includes a number
of business dispositions and the closure or sale of certain high-cost
manufacturing and distribution activities. Income from continuing
operations, net income and diluted earnings per share including and
excluding these unusual items are quantified in notes of the financial
statements, which accompany this press release.
Including the impact of unusual items, income from continuing
operations and diluted earnings per share from continuing operations
in the second quarter of 2002 increased 6% and 18%, respectively,
while net income and diluted earnings per share declined by 80% and
78%, respectively. For the first six months of fiscal 2002, including
the impact of unusual items, income from continuing operations and
diluted earnings per share from continuing operations increased 3% and
11%, respectively, while net income and diluted earnings per share
declined by 62% and 59%, respectively. The second quarter results for
fiscal 2001 included a significant gain from the disposition of the
discontinued PYA/Monarch foodservice operation, while the combined
impact of exit costs and losses on business dispositions related to
continuing operations were higher in fiscal 2001 than in 2002.
Unusual Items Recognized in Fiscal 2002
Reshaping actions recognized in the second quarter of 2002 reduced
pre-tax income and net income by $187 million and $143 million,
respectively, or $.17 per diluted share. On a year-to-date basis,
Reshaping actions reduced pre-tax income and net income by $188
million and $114 million, respectively, or $.14 per diluted share. The
actions taken include:
Exit Activities
The Reshaping program includes the closure or sale of certain
high-cost manufacturing, distribution and administrative activities.
These activities reduced second quarter pre-tax earnings, net income
and earnings per share by $174 million, $130 million and $.16 per
share, respectively. $101 million of the pre-tax charge relates to
severance and other employee benefit costs associated with the
previously announced elimination of 6,200 positions; $64 million
relates to the sale or closure of various owned and leased facilities;
and the remainder primarily relates to the termination of certain
third-party contractual obligations.
Exit activities recorded on a year-to-date basis reduced pre-tax
income and net income by $182 million and $137 million, respectively,
or $.17 per diluted share.
Business Dispositions
During fiscal 2001 and the first quarter of 2002, Sara Lee's
management approved plans to dispose of 18 businesses with limited
growth opportunities and low returns. During the second quarter of
fiscal 2002, the expected losses related to these business
dispositions were higher than estimated in fiscal 2001, and resulted
in a $13 million reduction in pre-tax income - or slightly under $.02
per share. On a year-to-date basis, business dispositions reduced
pre-tax income by $6 million and increased net income by $23 million,
or $.03 per share. To date, the company has disposed of 16 of the 18
businesses.
Unusual Items Recognized in Fiscal 2001
The company's Reshaping actions began in the second quarter of
fiscal 2001. Actions included:
-- Sale of Foodservice Operation - The PYA/Monarch foodservice
business was sold for a gain before income taxes of $1,126
million and an after-tax gain of $638 million, or $.73 of
diluted earnings per share in the second quarter.
-- Gain on Initial Public Offering of Coach Business - The
company's Coach subsidiary completed an initial public
offering of 19.5% of its common stock and recognized a
tax-free gain of $105 million or $.12 of diluted earnings per
share in the second quarter.
-- Other Business Disposition and Exit Activities - The company's
management approved a plan to dispose of certain non-core
businesses and sell or close a number of defined business
activities. As a result of these decisions, the Corporation
recognized a $344 million pre-tax charge. $233 million of this
charge related to anticipated losses on the disposition of
businesses, and $111 million of the charge was the cost of the
defined exit activities. The charge reduced net income by $317
million and diluted earnings per share in the second quarter
of fiscal 2001 by $.37.
Accounting Change
Fiscal 2002 net income and EPS reflect the company's decision to
adopt new accounting rules relating to the amortization of goodwill
and intangibles. The new accounting rules prohibit the restatement of
previously issued financial statements, but require separate
disclosure of the affect the new accounting standard would have had on
prior periods' results. The net income and diluted EPS, excluding
unusual items, for the second quarter of fiscal 2001, adjusted to
exclude amortization recognized in that period related to goodwill and
other intangible assets no longer being amortized under the provisions
of the new rules, were $401 million and $.46 per share, respectively.
For the first half of fiscal 2001 the net income and diluted EPS under
this new accounting standard were $683 million and $.78 per share,
respectively.
Performance Review
A performance review for each line of business follows. Unit
volumes exclude acquisitions and divestitures unless otherwise noted.
All results exclude unusual items unless otherwise noted. All dollar
amounts are in millions.
SARA LEE MEATS
Second Quarter Change
-------------------- ----------
2002 2001
Sales $ 1,096 $ 1,087 1% Operating Income $ 102 $ 110 (7)%
Six Months Change
-------------------- ----------
2002 2001
Sales $ 2,121 $ 2,113 0% Operating Income $ 176 $ 196 (10)%
Sara Lee Meats is a leading manufacturer of branded packaged meat products in the United States, Europe and Mexico. Reported sales for the quarter rose 1%, and were flat for the first half. Operating income declined 7% for the second quarter and fell 10% for the first six months due primarily to increased media advertising spending and costs associated with the U.S. meat group Reshaping program. During the second quarter, media advertising to support key brands, such as Jimmy Dean, Ball Park and Hillshire Farm, increased more than 50%, while total media advertising and promotion expenditures increased 8%.
Global unit sales for Sara Lee Meats declined 1% in the second quarter and were flat for the first six months. In both periods, increased unit sales in the United States for breakfast sausages, corn dogs and Sara Lee Deli meat products were offset by declines in smoked sausages and hot dogs, with the latter two categories particularly affected by higher raw material costs. In October 2001, Sara Lee strengthened its position in the fast-growing meat snacks category by acquiring Trail's Best meat snacks. The acquisition supports Sara Lee's strategy to develop leading positions in growth segments of the company's core categories, and the acquisition has already allowed Sara Lee to introduce meat snack products under the Jimmy Dean brand.
By geographic region, U.S. volumes were flat in the second quarter and down 1% for the first six months. European unit volumes fell 6% for both the second quarter and the first half; and Mexican unit volumes grew 5% in the second quarter and 9% in the first six months.
SARA LEE BAKERY
Second Quarter Change
-------------------- ----------
2002 2001
Sales $ 895 $ 290 NM
Operating Income $ 54 $ 4 NM
SARA LEE BAKERY
Six Months Change
-------------------- ----------
2002 2001
Sales $ 1,468 $ 530 NM
Operating Income $ 89 $ (10) NM
Sara Lee Bakery, through its August 2001 acquisition of The Earthgrains Company, is a leading company in the U.S. fresh bread market, with important positions in U.S. and European refrigerated dough and European fresh bread. The company also enjoys leading positions in frozen baked goods in both the United States and Australia. Earthgrains tripled the size of Sara Lee's Bakery operations and substantially increased its profitability. The renamed Sara Lee Bakery Group already has extended Sara Lee branded fresh baked breads and sweet goods into new geographic markets through its extensive direct-store distribution system. Media advertising and promotion expenditures are expected to increase significantly in the second half of fiscal 2002 to support these new product and market initiatives.
Reported results for fiscal 2002 include Earthgrains and exclude bakery operations in Europe that were divested in fiscal 2001. Excluding acquisitions, divestitures and the effects of currency, second quarter Bakery sales fell 5% while operating income almost tripled as the company benefited from an improved product mix and a number of productivity improvements. Through the first six months, base business sales fell 6% while operating income increased substantially.
Unit volumes, excluding Earthgrains, declined 2% in the second quarter and fell 4% in the first six months as the company continued to discontinue low-growth and unprofitable frozen products.
Earthgrains enjoyed increased sales during the second quarter, with particular strength in European Bakery Products and in Refrigerated Dough operations in both the United States and in Europe.
BEVERAGE
Second Quarter Change
-------------------- ----------
2002 2001
Sales $ 713 $ 779 (9)%
Operating Income $ 125 $ 131 (5)%
Six Months Change
-------------------- ----------
2002 2001
Sales $ 1,353 $ 1,491 (9)%
Operating Income $ 219 $ 242 (10)%
Sara Lee's Beverage line of business includes retail and
foodservice coffee and tea sales in markets around the world, with
significant positions in Europe, the United States and Brazil. Green
coffee prices remain at historically low levels, leading to lower
retail prices and resulting in sales and operating income declines
during both the second quarter and the first half of fiscal 2002. A
significant increase in media advertising to support key brands and
new product introductions also affected margins, but management
expects these investments to produce increased volumes beginning in
the second half.
Global unit sales of coffee products fell 5% during the second
quarter as gains in the Netherlands, France and Hungary were offset by
declines in the United States, Brazil and Belgium. By product line,
global retail coffee volumes fell 6% in the second quarter while
out-of-home unit sales fell 4% in the United States and declined 2% in
Europe. Through the first half, global coffee units fell 3%, with
retail volumes down 3%, U.S. out-of-home unit sales down 5% and
European out-of-home units down 3%.
The company's market positions remained strong, as Sara Lee
maintained its number-one positions in the Netherlands, Belgium and
Spain, and increased its leading shares in Denmark, Hungary and
Brazil.
The company enjoyed continued success with its Senseo crema joint
initiative with Philips Electronics. This unique in-home coffee maker
- which uses pads of coffee produced by Sara Lee's Douwe Egberts
business - is available in the Netherlands, and is currently being
introduced in Belgium and France.
In October 2001, Sara Lee signed an agreement for the acquisition
of the Polish coffee business, Prima S.A., which closed earlier this
month. With this acquisition, Sara Lee reinforces its coffee position
in the Central European region, where it already holds leading
positions in Hungary and the Czech Republic, and gains a strong
distribution network that will help drive growth in Central Europe.
HOUSEHOLD PRODUCTS
Second Quarter Change
-------------------- ----------
2002 2001
Sales $ 537 $ 500 7% Operating Income $ 87 $ 86 1%
Six Months Change
-------------------- ----------
2002 2001
Sales $ 1,046 $ 972 8% Operating Income $ 155 $ 152 2%
Household Products, which includes the company's household and
body care businesses and its Direct Selling operations, is Sara Lee's
most global business, selling products in more than 180 countries.
Sales for the second quarter rose 7% and grew 8% for the first half.
Operating income rose less than sales in both periods as media
advertising and promotion spending to support key brands and new
product launches rose a strong 14% in the quarter and increased 15%
through the first six months.
Unit volumes for this segment's four core categories - body care,
air care, insecticides and shoe care - grew 6% in the second quarter
and rose 8% in the first six months, with increased sales in body
care, insecticides and air care during both periods. Unit volumes were
particularly strong in the air care business, with double-digit growth
led by new product offerings such as Ambi-Pur Home Fragrance, which
was recently introduced in the United States and Europe.
Sales for the company's Direct Selling operations, conducted by
more than 800,000 independent representatives who deliver branded
toiletries, cosmetics and fragrances directly to consumers in 17
countries, rose 6% for the second quarter and increased 5% for the
first half of the year. Operating income grew 11% for the second
quarter and increased 9% for the first six months. Results were
particularly strong in Mexico, South Africa and the Philippines.
INTIMATES AND UNDERWEAR
Second Quarter Change
-------------------- ----------
2002 2001
Sales $ 1,752 $ 2,134 (18)% Operating Income $ 155 $ 278 (44)%
Six Months Change
-------------------- ----------
2002 2001
Sales $ 3,525 $ 4fiscal 2001. Fiscal 2002 results reflect the company's adoption of new accounting standards concerning the amortization of goodwill and other intangibles. If the new accounting standards had been applied to last year's results, diluted EPS would have been $.30 for the third quarter of fiscal 2001 and $1.49 for fiscal 2001.
By line of business in the third quarter, management expects a low-to mid-single digit increase in operating income for Sara Lee Meats, reflecting increased unit volume sales and favorable raw material cost comparisons in the United States. Sara Lee Bakery results should continue to benefit from base business gains and the addition of Earthgrains' operating income. Given their significant exposure to foreign currency, reported operating income for Sara Lee's Beverage and Household Products lines of business, the company's two most global operations, will depend on changes in year-over-year foreign currency relationships; in local currency terms, the Beverage group is likely to report operating income declines in line with second half results, while the Household Products line of business is expected to produce mid-to high-single digit operating income gains. While reported operating income comparisons for the Intimates and Underwear line of business should be down modestly in the third quarter, operating income from ongoing operations, excluding divested businesses, should increase at a mid-single digit rate, a significant improvement from first half results.
For the full year, Sara Lee Meats operating income should be flat to down slightly, and Sara Lee Bakery should continue to benefit from improved base business results and the acquisition of Earthgrains. Beverage and Household Products operating income will depend on foreign currency relationships, with reported results likely to be down for Beverage and up for Household Products. Intimates and Underwear is projected to report lower operating income for the year, although, as mentioned above, profitability is expected to improve in the second half.
Janet Bergman, senior vice president, corporate relations, will discuss the second quarter results live via the Internet today at 9:00 a.m. (CST). The live webcast can be accessed at www.saralee.com, and will last approximately one hour. For people who are unable to listen to the webcast live, it will be archived two hours following the completion of the webcast in the Investor Relations section of the Sara Lee corporate Web site for 10 business days.
This news release contains certain forward-looking statements concerning Sara Lee's operations, economic performance and financial condition. These forward-looking statements are based on currently available competitive, financial and economic data and management's views and assumptions regarding future events. Such 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.
Factors that could cause Sara Lee's actual results to differ materially from such forward-looking statements include the following: (i) impacts on reported earnings from fluctuations in foreign currency exchange rates - particularly the euro - given Sara Lee's significant concentration of business in Western Europe; (ii) significant competitive activity, including advertising, promotional and price competition, and changes in consumer demand for Sara Lee's products; (iii) adverse economic trends, including reduced consumer spending, relating in part to incidents of terrorism and the global repercussions from such incidents; (iv) Sara Lee's ability to continue to source production and conduct manufacturing and selling operations in various countries in the world due to changing political environments and the impacts on the related business environment; (v) Sara Lee's ability to successfully integrate acquisitions, particularly Earthgrains, into its existing operations and the availability of new acquisitions, joint ventures and alliance opportunities that build stockholder value; (vi) Sara Lee's ability to complete transactions anticipated in its business Reshaping initiative, and the ability to realize the estimated savings and productivity improvements associated with these programs; (vii) fluctuations in the cost and availability of various raw materials; (viii) the impact of foot-and-mouth viral disease in parts of Europe on the consumption of meat products in general and the cost of raw materials not affected by the disease used in the production of finished goods; (ix) credit and other business risks associated with customers operating in a highly competitive retail environment; and (x) inherent risks in the marketplace associated with new product introductions, including uncertainties about trade and consumer acceptance.
In addition, the company'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.
Consequently, the company wishes to caution readers not to place undue reliance on any forward-looking statements. We have provided additional information in our Form 10-K for fiscal year 2001 and in our quarterly report on Form 10-Q for the first quarter of fiscal year 2002, which readers are encouraged to review, concerning factors that could cause actual results to differ materially from those in the forward-looking statements. Sara Lee undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
Sara Lee Corporation (www.saralee.com) is a global branded consumer packaged goods company marketing leading brands, including Sara Lee, Douwe Egberts, Hillshire Farm, Hanes and Playtex.
Sara Lee Corporation
Executive Summary of Performance
Second quarter fiscal 2002
(All results exclude unusual items)
Percentage change
----------------------------------------------------------------------
Sara Lee
Sara Lee Bakery
Meats(1) Group(2) Beverage(3)
--------- --------- -----------
Reported sales 1% NM (9)%
Sales from ongoing operations(a) 3% NM (9)%
Base sales(b) 2% (5)% (9)%
Reported operating income (7)% NM (5)%
Operating income from ongoing
operations(a) (7)% NM (5)%
Base operating income(b) (8)% NM (6)%
Base unit volumes(c) (1)% (2)% (5)%
Diluted earnings per share - - -
Total advertising and
promotional expense for
ongoing operations(a) 8% NM 0%
Media advertising expense for
ongoing operations(a) 52% NM 12%
Promotional expense for
ongoing operations(a) 2% NM (4)%
--------------------------------
Intimates
Household and
Products(3) Underwear(4) Total SLE
----------- ------------ ---------
Reported sales 7% (18)% 5%
Sales from ongoing operations(a) 7% (4)% 14%
Base sales(b) 8% (7)% (3)%
Reported operating income 1% (44)% (14)%
Operating income from ongoing
operations(a) 1% (27)% (4)%
Base operating income(b) 2% (27)% (11)%
Base unit volumes(c) 6% (2)% (1)%
Diluted earnings per share - - (14)%
Total advertising and
promotional expense for
ongoing operations(a) 14% (1)% 5%
Media advertising expense for
ongoing operations(a) 10% (6)% 9%
Promotional expense for
ongoing operations(a) 16% 1% 3%
--------------------------------
(a) Ongoing operations results exclude divested businesses from FY02
and FY01.
(b) Base business results exclude acquisitions, divestitures and the
effect of currency.
(c) Base unit volumes exclude acquisitions and divestitures.
(1) There were no divestitures in this segment in 1Q02 or 2Q02. The
following businesses were divested in FY01: Ozark Salad and Argal.
(2) The Earthgrains Company was acquired on August 7, 2001. There were
no divestitures in this segment in 1Q02 or 2Q02. The following
businesses were divested in FY01: Nutrine, Brossard, and U.K.
Bakery.
(3) There were no divestitures in this segment in 1Q02, 2Q02 or FY01.
(4) There were no divestitures in this segment in 2Q02. The following
businesses were sold in 1Q02: International Fabrics operations in
France, Italy, Spain, Portugal and the U.K.; Liabel and Vocal. The
following businesses were sold in FY01: Coach, Champion Europe,
Champion Bookstore, Sara Lee Personal Products Australasia, Well
and International Fabrics operations in Thailand, the Philippines
and Germany.
Sara Lee Corporation
Executive Summary of Performance
First six months fiscal 2002
(All results exclude unusual items)
Percentage change
----------------------------------------------------------------------
Sara Lee
Sara Lee Bakery
Meats(1) Group(2) Beverage(3)
--------- --------- -----------
Reported sales 0% NM (9)%
Sales from ongoing operations(a) 3% NM (9)%
Base sales(b) 2% (6)% (8)%
Reported operating Income (10)% NM (10)%
Operating income from ongoing
operations(a) (11)% NM (10)%
Base operating income(b) (11)% NM (9)%
Base unit volumes(c) 0% (4)% (3)%
Diluted earnings per share - - -
Total advertising and
promotional expense for
ongoing operations(a) 3% NM 3%
Media advertising expense for
ongoing operations(a) 44% NM 0%
Promotional expense for
ongoing operations(a) (4)% NM 4%
--------------------------------
Intimates
Household and
Products(3) Underwear(4) Total SLE
---------- ----------- ---------
Reported sales 8% (16)% 3%
Sales from ongoing operations(a) 8% (3)% 12%
Base sales(b) 10% (5)% (1)%
Reported operating Income 2% (41)% (13)%
Operating income from ongoing
operations(a) 2% (29)% (7)%
Base operating income(b) 4% (29)% (14)%
Base unit volumes(c) 8% 1% 1%
Diluted earnings per share - - (13)%
Total advertising and
promotional expense for
ongoing operations(a) 15% (1)% 3%
Media advertising expense for
ongoing operations(a) 8% (2)% 10%
Promotional expense for
ongoing operations(a) 20% (1)% 2%
--------------------------------
(a) Ongoing operations results exclude divested businesses from FY02
and FY01.
(b) Base business results exclude acquisitions, divestitures and the
effect of currency.
(c) Base unit volumes exclude acquisitions and divestitures.
(1) There were no divestitures in this segment in 1Q02 or 2Q02. The
following businesses were divested in FY01: Ozark Salad and Argal.
(2) The Earthgrains Company was acquired on August 7, 2001. There were
no divestitures in this segment in 1Q02 or 2Q02. The following
businesses were divested in FY01: Nutrine, Brossard, and U.K.
Bakery.
(3) There were no divestitures in this segment in 1Q02, 2Q02 or FY01.
(4) There were no divestitures in this segment in 2Q02. The following
businesses were sold in 1Q02: International Fabrics operations in
France, Italy, Spain, Portugal and the U.K.; Liabel and Vocal. The
following businesses were sold in FY01: Coach, Champion Europe,
Champion Bookstore, Sara Lee Personal Products Australasia, Well
and International Fabrics operations in Thailand, the Philippines
and Germany.
Sara Lee Corporation (NYSE)
Consolidated Statements of Income
(in millions except per share amounts)
----------------------------------------------------------------------
Second Quarter Ended
-------------------------------------
Dec. 29, Dec. 30, Percent
2001 2000 Change
---------- --------- ---------
Net sales $ 4,990 $ 4,757 4.9%
---------- ---------
Cost of sales 2,854 2,718
Cost of sales - product line exit (1) 24
Selling, general and
administrative expenses 1,703 1,525
Interest expense 80 69
Interest income (20) (19)
Unusual Items - Business reshaping:
Gain in connection with
initial public offering -- (105)
Business dispositions
and other charges 188 320
---------- ---------
4,804 4,532
---------- ---------
Income from continuing
operations before income taxes 186 225 (16.9)
Income taxes 26 74
---------- ---------
Income from continuing operations 160 151 6.3
Income from discontinued
operations, net of income taxes -- 9
Gain on disposal of discontinued
operations, net of income taxes -- 638
---------- ---------
Net income $ 160 $ 798 (79.9)
========== =========
Income from continuing operations
per common share
Basic $ 0.20 $ 0.18 11.1
========== =========
Diluted $ 0.20 $ 0.17 17.6
========== =========
Net income per common share
Basic $ 0.20 $ 0.96 (79.2)
========== =========
Diluted $ 0.20 $ 0.92 (78.3)
========== =========
Average shares outstanding
Basic 785 830
========== =========
Diluted 819 869
========== =========
--------------------------------
Six Months Ended
-------------------------------------
Dec. 29, Dec. 30, Percent
2001 2000 Change
---------- --------- ---------
Net sales $ 9,508 $ 9,212 3.2%
---------- ---------
Cost of sales 5,531 5,318
Cost of sales - product line exit (4) 24
Selling, general and
administrative expenses 3,230 3,014
Interest expense 154 151
Interest income (43) (39)
Unusual Items - Business reshaping:
Gain in connection with
initial public offering -- (105)
Business dispositions
and other charges 192 320
---------- ---------
9,060 8,683
Income from continuing
operations before income taxes 448 529 (15.1)
Income taxes 46 140
---------- ---------
Income from continuing operations 402 389 3.4
Income from discontinued
operations, net of income taxes -- 25
Gain on disposal of discontinued
operations, net of income taxes -- 638
---------- ---------
Net income $ 402 $ 1,052 (61.8)
========== =========
Income from continuing operations
per common share
Basic $ 0.51 $ 0.46 10.9
========== =========
Diluted $ 0.49 $ 0.44 11.4
========== =========
Net income per common share
Basic $ 0.51 $ 1.25 (59.2)
========== =========
Diluted $ 0.49 $ 1.20 (59.2)
========== =========
Average shares outstanding
Basic 784 836
========== =========
Diluted 818 873
========== =========
Sara Lee Corporation (NYSE)
Operating Results by Industry Segment
Unusual Items not Allocated to Industry Segments
(in millions)
Second Quarter Ended
----------------------------------------------------------------------
Sales Operating Income
-------------------- --------------------
Dec. 29, Dec. 30, Percent Dec. 29, Dec. 30, Percent
2001 2000 Change 2001 2000 Change
--------- --------- ------- --------- --------- -------
Sara Lee
Meats $ 1,096 $ 1,087 0.8% $ 102 $ 110 (6.8)%
Sara Lee
Bakery 895 290 NM 54 4 NM
Beverage 713 779 (8.5) 125 131 (4.6)
Household
Products 537 500 7.4 87 86 1.5
Intimates
and
Underwear 1,752 2,134 (17.9) 155 278 (44.2)
--------- --------- ------- --------- --------- -------
Total
sales and
operating
companies
income 4,993 4,790 4.2 523 609 (14.0)
Intersegment
sales (3) (33) 91.8 -- -- --
Amortization
of goodwill
and
trademarks -- -- -- (17) (48) 63.3
General
corporate
expenses -- -- -- (73) (47) (52.7)
Gain in
connection
with initial
public
offering -- -- -- -- 105 NM
Business
dispositions
and other
charges -- -- -- (187) (344) 45.5
--------- --------- ------- --------- --------- -------
Total net
sales and
operating
income 4,990 4,757 4.9 246 275 (10.1)
Net interest
expense -- -- -- (60) (50) (20.7)
--------- --------- ------- --------- --------- -------
Net sales
and income
from
continuing
operations
before
income
taxes $ 4,990 $ 4,757 4.9% $ 186 $ 225 (16.9)%
========= ========= ======= ========= ========= =======
Six Months Ended
----------------------------------------------------------------------
Sales Operating Income
-------------------- --------------------
Dec. 29, Dec. 30, Percent Dec. 29, Dec. 30, Percent
2001 2000 Change 2001 2000 Change
--------- --------- ------- --------- --------- -------
Sara Lee
Meats $ 2,121 $ 2,113 0.4% $ 176 $ 196 (10.2)%
Sara Lee
Bakery 1,468 530 NM 89 (10) NM
Beverage 1,353 1,491 (9.2) 219 242 (9.7)
Household
Products 1,046 972 7.6 155 152 2.2
Intimates
and
Underwear 3,525 4,182 (15.7) 282 480 (41.1)
--------- --------- ------- --------- --------- -------
Total sales
and
operating
companies
income 9,513 9,288 2.4 921 1,060 (13.1)
Intersegment
sales (5) (76) 93.6 -- -- --
Amortization
of goodwill
and
trademarks -- -- -- (31) (94) 66.9
General
corporate
expenses -- -- -- (143) (86) (65.8)
Gain in
connection
with initial
public
offering -- -- -- -- 105 NM
Business
dispositions
and other
charges -- -- -- (188) (344) 45.3
--------- --------- ------- --------- --------- -------
Total net
sales and
operating
income 9,508 9,212 3.2 559 641 (12.6)
Net interest
expense -- -- -- (111) (112) 0.6
--------- --------- ------- --------- --------- -------
Net sales
and income
from
continuing
operations
before
income
taxes $ 9,508 $ 9,212 3.2% $ 448 $ 529 (15.1)%
========= ========= ======= ========= ========= =======
See accompanying notes to financial statements for information
regarding the unusual items.
Sara Lee Corporation (NYSE)
Operating Results by Industry Segment
Unusual Items Allocated to Industry Segments
(in millions)
Second Quarter Ended
----------------------------------------------------------------------
Sales Operating Income
-------------------- --------------------
Dec. 29, Dec. 30, Percent Dec. 29, Dec. 30, Percent
2001 2000 Change 2001 2000 Change
--------- --------- ------- --------- --------- -------
Sara Lee
Meats $ 1,096 $ 1,087 0.8% $ 73 $ 38 88.9%
Sara Lee
Bakery 895 290 NM 5 (54) NM
Beverage 713 779 (8.5) 116 129 (10.3)
Household
Products 537 500 7.4 86 84 4.1
Intimates
and
Underwear 1,752 2,134 (17.9) 56 173 (67.6)
--------- --------- ------- --------- --------- -------
Total sales
and
operating
companies
income 4,993 4,790 4.2 336 370 (9.0)
Intersegment
sales (3) (33) 91.8 -- -- --
Amortization
of goodwill
and
trademarks -- -- -- (17) (48) 63.3
General
corporate
expenses -- -- -- (73) (47) (52.7)
--------- --------- ------- --------- --------- -------
Total net
sales and
operating
income 4,990 4,757 4.9 246 275 (10.1)
Net interest
expense -- -- -- (60) (50) (20.7)
--------- --------- ------- --------- --------- -------
Net sales
and income
from
continuing
operations
before
income
taxes $ 4,990 $ 4,757 4.9% $ 186 $ 225 (16.9)%
========= ========= ======= ========= ========= =======
Six Months Ended
----------------------------------------------------------------------
Sales Operating Income
-------------------- --------------------
Dec. 29, Dec. 30, Percent Dec. 29, Dec. 30, Percent
2001 2000 Change 2001 2000 Change
--------- --------- ------- --------- --------- -------
Sara Lee
Meats $ 2,121 $ 2,113 0.4% $ 141 $ 124 13.5%
Sara Lee
Bakery 1,468 530 NM 38 (68) NM
Beverage 1,353 1,491 (9.2) 212 240 (11.9)
Household
Products 1,046 972 7.6 154 150 3.3
Intimates
and
Underwear 3,525 4,182 (15.7) 188 375 (49.8)
--------- --------- ------- --------- --------- -------
Total
sales
and
operating
companies
income 9,513 9,288 2.4 733 821 (10.6)
Intersegment
sales (5) (76) 93.6 -- -- --
Amortization
of goodwill
and
trademarks -- -- -- (31) (94) 66.9
General
corporate
expenses -- -- -- (143) (86) (65.8)
--------- --------- ------- --------- --------- -------
Total net
sales and
operating
income 9,508 9,212 3.2 559 641 (12.6)
Net interest
expense -- -- -- (111) (112) 0.6
--------- --------- ------- --------- --------- -------
Net sales
and income
from
continuing
operations
before
income
taxes $ 9,508 $ 9,212 3.2% $ 448 $ 529 (15.1)%
========= ========= ======= ========= ========= =======
See accompanying notes to financial statements for information
regarding the unusual items.
Sara Lee Corporation (NYSE)
Consolidated Balance Sheets
(in millions)
----------------------------------------------------------------------
December 29, June 30, December 30,
2001 2001 2000
------------ ----------- ------------
ASSETS
Cash and equivalents $ 381 $ 548 $ 735
Trade accounts receivable 1,835 1,538 1,812
Inventories 2,475 2,582 2,752
Other current assets 328 321 367
Net assets of businesses
held for sale 2 94 367
------------ ----------- ------------
Total current assets 5,021 5,083 6,033
Other non-current assets 227 264 471
Property, net 2,999 2,146 2,140
Trademarks and other
identifiable intangibles, net 2,032 1,137 1,113
Goodwill, net 3,207 1,537 1,775
------------ ----------- ------------
$ 13,486 $ 10,167 $ 11,532
============ =========== ============
LIABILITIES AND EQUITY
Notes payable $ 707 $ 101 $ 592
Accounts payable 1,317 1,505 1,406
Accrued liabilities 2,982 2,872 2,898
Current maturities of
long-term debt 254 480 283
------------ ----------- ------------
Total current liabilities 5,260 4,958 5,179
Long-term debt 4,768 2,640 3,145
Deferred income taxes 493 244 437
Other non-current
liabilities 972 563 582
Minority interest in
subsidiaries 634 625 650
Preferred stock 9 15 22
Common stockholders' equity 1,350 1,122 1,517
------------ ----------- ------------
$ 13,486 $ 10,167 $ 11,532
============ =========== ============
Notes to the Financial Statements
1.) The Corporation adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets"
(SFAS No. 142) as of July 1, 2001. Under the provisions of
that statement, goodwill is not amortized; however, other
intangible assets are amortized over their useful lives unless
that life is determined to be indefinite. The guidelines
established for determining the useful life of an intangible
asset under SFAS No. 142 differ from those established under
prior accounting standards. The primary other intangible
assets acquired by the Corporation in business combinations
are trademarks, brands and customer relationships. Outside of
business combinations, the primary other amortizable
intangible assets acquired by the Corporation are software and
licenses.
SFAS No. 142 prohibits the restatement of previously issued
financial statements, but requires separate disclosure of the
impact of the new accounting standard on prior periods
results. The net income and diluted earnings per share for the
second quarter ended December 30, 2000, adjusted to exclude
amortization (including any related tax effects) recognized in
that period related to goodwill and other intangible assets no
longer being amortized under the provisions of SFAS No. 142,
were $827 million and $.95 per share, respectively. The net
income and diluted earnings per share for the six months ended
December 30, 2000, adjusted to exclude amortization (including
any related tax effects) recognized in that period related to
goodwill and other intangible assets no longer being amortized
under the new accounting rules, were $1,109 million, and $1.26
per share, respectively. The net income and diluted earnings
per share for fiscal 2001, adjusted to exclude amortization
(including any related tax effects) recognized in that period
related to goodwill and other intangible assets no longer
being amortized under the new accounting rules, were $2,379
million and $2.78, respectively.
2.) The Corporation's results for the second quarter and first
half of fiscal 2002 and 2001 were impacted by actions related
to the Reshaping program initiated in May 2000. This ongoing
program includes a number of business dispositions and the
exit of certain high cost manufacturing and distribution
activities.
Including the impact of unusual items, income from continuing
operations and diluted earnings per share from continuing
operations in the second quarter of 2002 increased 6% and 18%,
respectively, while net income and diluted earnings per share
declined by 80% and 78%, respectively. Including the impact of
unusual items, income from continuing operations and diluted
earnings per share from continuing operations in the first six
months of 2002 increased 3% and 11%, respectively, while net
income and diluted earnings per share declined by 62% and 59%,
respectively. The second quarter results for fiscal 2001
included a significant gain from the disposition of the
discontinued PYA/Monarch foodservice operation, while the
combined impact of exit costs and losses on business
dispositions related to continuing operations were higher in
fiscal 2001 than in 2002.
Unusual Items Recognized in Fiscal 2002
Reshaping actions recognized in the second quarter of 2002 reduced pre-tax income and net income by $187 million and $143 million, respectively, or $.17 per diluted share. On a year-to-date basis, Reshaping actions reduced pre-tax income and net income by $188 million and $114 million, respectively, or $.14 per diluted share. The actions taken include:
Notes to the Financial Statements (continued)
Exit Activities
The Reshaping program includes the exit of certain high-cost manufacturing, distribution and administrative activities. Exit activities recognized in the second quarter of 2002 reduced pre-tax earnings, net income and earnings per share by $174 million, $130 million and $.16 per share, respectively. $101 million of the pre-tax charge relates to severance and other employee benefit costs associated with the elimination of 6,200 positions; $66 million relates to the exit of various owned and leased facilities; and the remainder primarily relates to the exit of certain product distribution arrangements.
Exit activities recorded on a year-to-date basis reduced pre-tax income and net income by $182 million and $137 million, respectively, or $.17 per diluted share.
During fiscal 2001 and the first quarter of 2002, Sara Lee's management approved plans to dispose of 18 businesses with limited growth opportunities and low returns. During the second quarter of fiscal 2002, expected losses related to these business dispositions were higher than estimated in fiscal 2001 and resulted in a $13 million reduction in pre-tax income - or slightly under $.02 per share. On a year-to-date basis, business dispositions reduced pre-tax income by $6 million and increased net income by $23 million, or $.03 per share. To date, 16 of the 18 planned business dispositions have been completed.
The Corporation's Reshaping actions began in the second quarter of fiscal 2001. Actions included:
Sale of Discontinued Foodservice Operation - The PYA/Monarch foodservice business was sold for a gain before income taxes of $1,126 million and an after-tax gain of $638 million, or $.73 of diluted earnings per share in the second quarter.
Gain on Initial Public Offering of Coach Business - The corporation's Coach subsidiary completed an initial public offering of 19.5% of its common stock and recognized a tax-free gain of $105 million or $.12 of diluted earnings per share in the second quarter.
Other Business Disposition and Exit Activities - The Corporation's management approved a plan to dispose of certain non-core businesses and exit a number of defined business activities. As a result of these decisions, the Corporation recognized a $344 million pre-tax charge. $233 million of this charge related to anticipated losses on the disposition of businesses, and $111 million of the charge was the cost of the defined exit activities. The charge reduced net income by $317 million and diluted earnings per share in the second quarter of fiscal 2001 by $.37.
Notes to the Financial Statements (continued)
Impact of Unusual Items and Adoption of New Intangible
Amortization Rules on Net Income and Diluted Earnings Per Share
(In Millions, Except Per Share Data)
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------- ----------------------
Dec. 29, Dec. 30, % Dec. 29, Dec. 30, %
2001 2000 Change 2001 2000 Change
-------- -------- ------- --------- --------- -------
Net Income $ 160 $ 798 (79.9)% $ 402 $ 1,052 (61.8)%
Exclude
gain on
disposal of
discontinued
operations,
net of tax -- (638) NM -- (638) NM
Exclude
gain in
connection
with initial
public offering,
net of tax -- (105) NM -- (105) NM
Exclude unusual
charges relating
to business
reshaping,
net of tax 143 317 (55.0) 114 317 (64.2)
-------- ------- ------- --------- --------- -------
Net income
excluding
unusual
items 303 372 (18.6)% 516 626 (17.7)%
Adjust
prior year for
change in
accounting for
amortization
of goodwill
and
intangibles -- 29 NM -- 57 NM
-------- ------- ------- --------- --------- -------
Net income
adjusted for
amortization
change and
excluding
unusual
items $ 303 $ 401 (24.3)% $ 516 $ 683 (24.5)%
======== ======= ======= ========= ========= =======
Diluted
EPS(1) $ 0.20 $ 0.92 (78.3)% $ 0.49 $ 1.20 (59.2)%
Exclude gain
on disposal
of discontinued
operations,
net of tax -- (0.73) NM -- (0.73) NM
Exclude gain
in connection
with initial
public
offering -- (0.12) NM -- (0.12) NM
Exclude unusual
charges
relating to
business
reshaping 0.17 0.37 (54.1) 0.14 0.36 (61.1)
-------- ------- ------- --------- --------- -------
Diluted EPS -
excluding
unusual
items 0.37 0.43 (14.0)% 0.63 0.72 (12.5)%
Adjust prior
year for
change in
accounting for
amortization
of goodwill and
intangibles -- 0.03 NM -- 0.06 NM
-------- ------- ------- --------- --------- -------
Diluted EPS -
adjusted for
amortization
change and
excluding
unusual
items $ 0.37 $ 0.46 (19.6)% $ 0.63 $ 0.78 (19.2)%
======== ======= ======= ========= ========= =======
(1) EPS amounts are rounded to nearest cent, and individual amounts
will not necessarily foot.
Notes to the Financial Statements (continued)
Impact of Unusual Items and Adoption of New Intangible Amortization
Rules on Income and Diluted Earnings Per Share from Continuing
Operations
(In Millions, Except Per Share Data)
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------- ----------------------
Dec. 29, Dec. 30, % Dec. 29, Dec. 30, %
2001 2000 Change 2001 2000 Change
-------- ------- ------- --------- --------- -------
Income from
continuing
operations $ 160 $ 151 6.3% $ 402 $ 389 3.4%
Exclude gain
in connection
with initial
public offering,
net of tax -- (105) NM -- (105) NM
Exclude unusual
charges relating
to business
reshaping,
net of tax 143 317 (55.0) 114 317 (64.2)
-------- ------- ------- --------- --------- -------
Income from
continuing
operations
excluding
unusual items 303 363 (16.6)% 516 601 (14.2)%
Adjust prior
year for change
in accounting
for amortization
of goodwill and
intangibles -- 29 NM -- 57 NM
-------- ------- ------- --------- --------- -------
Income from
continuing
operations
adjusted for
amortization
change and
excluding
unusual
items $ 303 $ 392 (22.6)% $ 516 $ 658 (21.6)%
======== ======= ======= ========= ========= =======
Diluted EPS -
continuing
operations(1) $ 0.20 $ 0.17 17.6% $ 0.49 $ 0.44 11.4%
Exclude gain in
connection with
initial public
offering -- (0.12) NM -- (0.12) NM
Exclude unusual
charges
relating to
business
reshaping 0.17 0.37 (54.1) 0.14 0.36 (61.1)
-------- ------- ------- --------- --------- -------
Diluted EPS -
continuing
operations
excluding
unusual items 0.37 0.42 (11.9)% 0.63 0.69 (8.7)%
Adjust prior
year for change
in accounting
for amortization
of goodwill and
intangibles -- 0.03 NM -- 0.06 NM
-------- ------- ------- --------- --------- -------
Diluted EPS -
continuing
operations
adjusted for
amortization
change and
excluding
unusual
items $ 0.37 $ 0.45 (17.8)% $ 0.63 $ 0.75 (16.0)%
======== ======= ======= ========= ========= =======
(1) EPS amounts are rounded to nearest cent, and individual amounts
will not necessarily foot.
Notes to the Financial Statements (continued)
3.) On August 7, 2001, the Corporation acquired substantially all
of the outstanding common stock of The Earthgrains Company and
began consolidating the results of that company's operations.
Earthgrains is a manufacturer of fresh packaged bread and
refrigerated dough in the United States and Europe. The sales
and operating income of the Earthgrains' business in the
second quarter ended December 29, 2001 were $675 million and
$38 million, respectively. The sales and operating income of
the Earthgrains' business since the date of acquisition were
$1,069 million and $72 million, respectively.
The Earthgrains' business when combined with the Corporation's
existing bakery operations constitutes a reportable segment.
The Corporation's Meat and Bakery businesses were previously
combined in the Sara Lee Foods segment. Under the revised
segment presentation Sara Lee Meats and Sara Lee Bakery are
separate business segments and prior year financial
presentations have been adjusted to reflect this change.
CONTACT: Sara Lee Corporation
Julie Ketay (Media), 312/558-8727
Janet Bergman (Analysts), 312/558-8651
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