Wednesday, October 31, 2001 11:30:06 AM
News...
CHICAGO, Oct 31, 2001 (BUSINESS WIRE) -- Sara Lee Corporation today reported that sales for the first quarter of fiscal 2002, ending September 29, 2001, were $4.5 billion, up 1%, and diluted earnings per share (EPS) were $.26, a decrease of 10% compared to $.29 one year ago. All results exclude unusual items unless otherwise noted. 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 exited during fiscal 2001 and fiscal 2002 in conjunction with this program. Excluding these divested businesses, sales increased 9% in the first quarter of fiscal 2002, reflecting the acquisition of The Earthgrains Company on August 7, 2001, combined with base business gains in Packaged Meats, Knit Products and Household Products. Unit volumes, excluding acquisitions and divestitures, increased 3% during the quarter, with the strongest gains in the company's Knit Products and Household Products operations. Excluding divested businesses, operating income fell 11%, due to higher raw material costs in Packaged Meats combined with increased investments in the form of higher marketing spending and funding for organizational and technology improvements throughout the company. Currency had a minor negative impact on both sales and operating income during the quarter. 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 impact the new accounting standard would have had on prior periods' results. The net income and diluted EPS for the first 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 $282 million and $.32 per share, respectively. "Sara Lee increased marketing spending behind our leading brands and invested in technology, despite some challenging market conditions, as we continued to reshape our business portfolio and consolidate our organization," said C. Steven McMillan, chairman, president and chief executive officer of Sara Lee Corporation. "We are extremely pleased with the strong sales increases in Household Products and Knit Products, and the integration of Earthgrains, our largest acquisition ever, is already producing important gains for Sara Lee Bakery Group. "Fiscal 2002 first quarter results show that our Reshaping program is already producing a more focused and effective organization that is aligned to deliver long-term growth. Toward that end, we recently launched a number of new, innovative products including Jimmy Dean Fresh Taste. Fast! and Jimmy Dean meat snacks; Senseo crema in-home coffee system; a revolutionary seamless bra sold by Playtex and Dim; and a two-in-one toilet bowl cleaner/air freshener under the fast-growing Ambi Pur brand. To support these efforts, first quarter media advertising increased 11% and total advertising and promotion grew 2%." Unusual Items The company's results for the first quarter were affected by the Reshaping program initiated in May 2000. This ongoing program includes a number of business dispositions and the exit of certain high-cost activities. Reshaping actions recognized in the first quarter of 2002 reduced pre-tax income by $1 million and increased net income by $29 million, or $.04 per share. The actions taken include: Business Dispositions During fiscal 2001, Sara Lee's management approved plans to dispose of PYA/Monarch, Coach and 17 other businesses with limited growth opportunities and low returns. At the end of 2001, the disposition of PYA/Monarch, Coach and 10 of 17 other businesses had been completed. During the first quarter of fiscal 2002, the company: -- Completed the disposition of four of the businesses targeted for sale in fiscal 2001. Cash proceeds from these and other business dispositions received in the first quarter were higher than estimated in fiscal 2001 and resulted in a $14 million increase in pre-tax income in the quarter. -- Announced its decision to dispose of Asian-based apparel businesses, which were not included in the original Reshaping plans. These transactions were completed in the first quarter of fiscal 2002 and resulted in a pre-tax loss of $9 million. -- Concluded that it would not be possible to complete the disposition of one of the 17 businesses in a timely manner and, as such, reversed the $2 million pre-tax charge previously recognized for this intended action. Management is currently evaluating alternatives with regard to this business. The net impact of these actions was an increase in pre-tax income of $7 million and an increase in net income of $36 million, or $.04 per share. Exit Activities The Reshaping program includes the exit of certain high-cost manufacturing, distribution and administrative activities. Exit activities recognized in the first quarter of 2002 reduced pre-tax earnings, net income and earnings per share by $8 million, $7 million and less than $.01 per share, respectively. The net pre-tax charge consists of $19 million recognized for exit activities approved by management in the first quarter of fiscal 2002 and the reversal of $11 million of charges recognized in fiscal 2001 as a result of the favorable completion of activities previously initiated. Performance Review A performance review for each line of business follows. Unit volumes exclude acquisitions and divestitures unless otherwise noted. All dollar amounts are in millions. Please note that as a result of the acquisition of The Earthgrains Company in the first quarter of fiscal 2002, meat and bakery results will be reported as separate lines of business.
SARA LEE MEATS
First Quarter Change
--------------------- --------------
2002 2001
Sales $ 1,025 $ 1,026 0% Operating Income 74 86 (14)%
Sara Lee Meats is a leading manufacturer of processed meat products in the United States, Europe and Mexico. While reported sales were flat, base business sales, excluding acquisitions, divestitures and the effects of currency, increased 3%, benefiting from strong Sara Lee deli meat sales and several new product initiatives. Operating income fell 14%, as profits were negatively affected by costs associated with the U.S. meat group Reshaping and by higher commodity costs, especially materials used in the production of hot dogs and smoked sausage. Media advertising to support key brands also rose significantly during the quarter, up 35%.
Unit volumes for Sara Lee Meats were flat in the quarter as strong deli meat and breakfast sausage sales were offset by declines in smoked sausage and hot dogs. The successful launch of Jimmy Dean Fresh Taste. Fast!, a pre-cooked breakfast sausage that can be prepared in less than one minute, and new breakfast sandwich and deli products continued to receive strong consumer acceptance. By geographic region, U.S. volumes fell 1%, although branded unit sales rose 1%; European unit volumes fell 5%; and Mexican unit sales grew 13%. SARA LEE BAKERY First Quarter Change --------------------- -------------- 2002 2001 Sales $ 573 $ 240 NM Operating Income 35 (14) NM Sara Lee Bakery holds the number-one share in frozen baked goods in the United States and Australia, and, through its recent 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 fiscal year 2002 reported figures include the acquisition of Earthgrains on August 7, 2001, and exclude bakery operations in Europe that were divested in the prior year. Excluding acquisitions, divestitures and the effects of currency, sales fell 7% while operating income increased substantially. Improvement at Sara Lee's frozen bakery business in the United States, mostly due to Reshaping activities, led to the increased operating income. The acquisition of Earthgrains, the second largest packaged fresh bread company in the United States, provides Sara Lee with increased exposure to the fast-growing fresh bread category, particularly the premium and super-premium segments, which are growing faster than the overall market. The introduction of the Sara Lee brand to Earthgrains' direct-store distribution system is expected to generate significant incremental sales, and near-term plans include the introduction of Sara Lee bagels and poundcake into Earthgrains' distribution system by the end of calendar 2001. Unit volumes on an ongoing basis, excluding Earthgrains, for Sara Lee Bakery declined 5% as the company continued to exit low-growth and unprofitable frozen products.
BEVERAGE First Quarter Change --------------------- -------------- 2002 2001
Sales $ 640 $ 712 (10)% Operating Income 94 111 (16)% 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. Because this business generates over 50% of its sales outside the United States, it has significant exposure to currency fluctuations. Excluding the impact of currency, sales for this line of business declined 7% and operating income fell 13%. Historically low green coffee prices led to lower retail prices during the quarter producing declines in sales and operating income. A 6% increase in media advertising and promotion spending to support key brands and new product introductions also affected margins. There were no acquisitions or divestitures affecting Beverage results in the quarter. Global unit sales of roasted coffee and coffee concentrate products fell 2% during the quarter as gains in Belgium, Brazil, Norway, Hungary and the United Kingdom were offset by declines in the United States and The Netherlands. Market shares in many major regions showed an increase versus last year. By product line, retail coffee volumes fell 1% on a global basis; out-of-home unit sales fell 5% in both the United States and Europe; and liquid coffee concentrate volumes for the company's innovative coffee systems increased 2%. In new product news, in fiscal 2001, the company successfully launched a joint initiative in The Netherlands with Philips Electronics to sell a unique in-home coffee maker called Senseo crema, which uses pads of coffee produced by Douwe Egberts. Senseo crema continued to enjoy strong consumer acceptance in the first quarter of 2002, and this new product is expected to be rolled out in other parts of Europe in the near future. In the United States, new espresso and cappuccino products were introduced under the Chock full o'Nuts brand.
HOUSEHOLD PRODUCTS First Quarter Change --------------------- -------------- 2002 2001
Sales $ 509 $ 472 8% Operating Income 68 66 3% Household Products includes the company's household and body care businesses and its Direct Selling operations. It is Sara Lee's most global business, selling products in more than 180 countries. The strength of the dollar relative to other currencies had a significant impact on reported results for this line of business; excluding currency, sales grew 12% and operating income rose 6%. Operating income grew less than sales as media advertising and promotion increased 16% to support new product launches and marketing behind key brands. Unit volumes for this segment's four core categories - shoe care, body care, insecticides and air fresheners - grew 11% with increased sales in body care, insecticides and air fresheners. Unit volumes were particularly strong in the air freshener business, led by new product offerings such as Ambi-Pur Flush, a two-in-one toilet bowl cleaner and air freshener that is currently sold in more than 30 countries. The product was successfully introduced under the brand name Ambi-Pur LiquiFresh in the United States in fiscal 2001 and continues to hold the leading market share in its category. Sales from the company's Direct Selling efforts, conducted by 800,000 independent sales representatives who deliver branded toiletries, cosmetics and fragrances directly to consumers in 17 countries, rose 8% over the first quarter of last year, and operating income increased 9%, excluding currency. Results were particularly strong at House of Fuller operations in Mexico.
INTIMATES AND UNDERWEAR First Quarter Change --------------------- -------------- 2002 2001
Sales $ 1,773 $ 2,048 (13)% Operating Income 127 202 (37)%
Sara Lee's Intimates and Underwear line of business includes the company's global Legwear, Knit Products and Intimate Apparel operations. On an ongoing operations basis - excluding divested businesses from the first quarters of fiscal 2001 and 2002 - Intimates and Underwear reported a 1% decrease in sales and a 31% decrease in operating income, reflecting difficult retail markets and continuing pricing pressure from the number-two U.S. men's underwear company. Intimates and Underwear unit volumes rose 6% as strength in the Knit Products segment offset weak hosiery markets.
Unit volumes for worldwide Intimate Apparel declined 1%, mostly due to a soft retail environment. The company did increase its number-one position in the U.S. bra category to a dollar share of 26.1% for the 12-month period ended August 2001. Major new products launched in this quarter included the seamless Barely There Body Revolution and Bali Perfectly Smooth.
Worldwide Knit Products unit volumes grew 13% during the quarter, with gains for both underwear and activewear. Driven by a 50% increase in media advertising spending, unit sales rose at a double-digit rate in the company's U.S. male and female underwear operations while European underwear delivered high single-digit unit growth. In the U.S. underwear category, Hanes and Hanes Her Way maintained their number-one positions in both the male and female underwear categories, with 12-month unit shares as of July 2001 of 36.5% and 36.1%, respectively. Sara Lee also experienced strong casualwear and screen print t-shirt unit volumes in the United States.
Global Legwear unit sales fell 4% during the quarter, as global hosiery markets continued to decline. In the United States, Sara Lee continued to reduce inventory levels and focus its hosiery business on generating strong cash flow. The company retained its number-one position in the U.S. sheer hosiery category with a dollar share of 50.2% as of August 2001, and its leading unit share position in the sock market at 16.9%.
Net interest expense was $51 million for the quarter, compared with $62 million in the first quarter of last year. Interest expense decreased as the company benefited from lower interest rates.
Sara Lee's management currently expects diluted EPS for the second quarter of fiscal 2002 to fall within a range of $.36 to $.40 compared to $.43 from total operations in the year-ago period. Full fiscal year 2002 diluted EPS are expected to fall in a range of $1.37 to $1.43 compared to $1.36 from total operations in fiscal 2001. Fiscal 2002 results reflect the company's adoption of new accounting standards concerning the amortization of goodwill and other intangibles. As a point of comparison, Sara Lee estimates that diluted EPS would have been $.46 for the second quarter of fiscal 2001 and $1.49 for fiscal 2001 under the new accounting standards.
By line of business, management expects fiscal 2002 second quarter operating income performance for Sara Lee Meats and Sara Lee Bakery to be similar to that of the first quarter; higher comodity costs and continued investment spending will impact operating margins in the meat business, while base business gains and the addition of Earthgrains' operating income will positively impact Bakery results. Given their significant exposure to foreign currency, particularly the euro, 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. The Intimates and Underwear line of business is expected to report lower operating income in the second quarter, reflecting challenging market conditions, increased investment spending and the loss of operating income from divested operations.
For the full year, Sara Lee Meats operating income should be flat to up slightly, as this line of business is expected to show improved results in the second half, benefiting from easier commodity cost comparisons. Sara Lee Bakery is expected to benefit from base business gains and the Earthgrains acquisition throughout the year. Beverage and Household Products operating income will depend on foreign currency relationships. Intimates and Underwear is projected to report lower operating income for the year, although profitability is expected to improve in the second half.
Janet Bergman, senior vice president, investor relations and corporate affairs, will discuss the first quarter results live via the Internet today at 9:00 am (CDT). 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) the financial impact of Sara Lee's decision to dispose of certain non-core business units; (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 impacted by the disease used in the production of finished goods; (ix) Sara Lee's ability to complete transactions anticipated in its business reshaping programs; (x) Sara Lee's ability to realize forecasted savings, as well as improvements in productivity and efficiency from its business reshaping programs; and (xi) inherent risks in the marketplace associated with new product introductions, including uncertainties about trade and consumer acceptance.
In addition, the Corporation'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 corporation 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, 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 Corporation (www.saralee.com) is a global branded consumer packaged goods company with approximately $20 billion in annual revenues. Its leading brands include Sara Lee, Douwe Egberts, Hillshire Farm, Hanes and Playtex. Sara Lee Corporation Executive Summary of Performance First quarter fiscal 2002 (All results exclude unusual items) Percentage change ---------------------------------------------------------------------- Sara Lee Sara Lee Meats(1) Bakery(2) Beverage(3) ------- -------- ---------- Reported sales 0% NM (10)% Sales from ongoing operations(+) 3% NM (10)% ---------------------------------------------------------------------- Base sales(++) 3% (7)% (7)% ---------------------------------------------------------------------- Reported operating Income (14)% NM (16)% Operating income from ongoing operations(+) (15)% NM (16)% ---------------------------------------------------------------------- Base operating income(++) (15)% NM (13)% ---------------------------------------------------------------------- Base unit volumes(+++) 0% (5)% (2)% ---------------------------------------------------------------------- Diluted earnings per share - - - Total advertising and promotional expense(+) (4)% NM 6% ---------------------------------------------------------------------- Media advertising expense(+) 35% NM (12)% ---------------------------------------------------------------------- Promotional expense(+) (9)% NM 13% Household Intimates Products(3) and Underwear(4) Total SLE ----------- ---------------- --------- Reported sales 8% (13)% 1% Sales from ongoing operations(+) 8% (1)% 9% ---------------------------------------------------------------------- Base sales(++) 12% (4)% 0% ---------------------------------------------------------------------- Reported operating Income 3% (37)% (12)% Operating income from ongoing operations(+) 3% (31)% (11)% ---------------------------------------------------------------------- Base operating income(++) 6% (31)% (17)% ---------------------------------------------------------------------- Base unit volumes(+++) 11% 6% 3% ---------------------------------------------------------------------- Diluted earnings per share - - (10)% Total advertising and promotional expense(+) 16% (2)% 2% ---------------------------------------------------------------------- Media advertising expense(+) 6% 3% 11% ---------------------------------------------------------------------- Promotional expense(+) 23% 0% 1% (+) Ongoing operations reflect results excluding divested businesses from FY02 and FY01 results. (++) Base business results exclude acquisitions, divestitures and the effect of currency. (+++) Base unit volumes exclude acquisitions and divestitures. (1) There were no divestitures in this segment in 1Q02. 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. The following businesses were divested in FY01: Nutrine, Brossard, and U.K. Bakery. (3) There were no divestitures in this segment in 1Q02 or in FY01. (4) The following businesses were sold in 1Q02: International Fabrics operations in France, Italy, Spain, Portugal, the U.K., and Courtaulds China; 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) ---------------------------------------------------------------------- First Quarter Ended ------------------------------------- Sept. 29, Sept. 30, Percent 2001 2000 Change ---------- --------- --------- Net sales $ 4,518 $ 4,455 1.4% ---------- --------- --------- Cost of sales 2,677 2,600 Cost of sales - product line exit (3) -- Selling, general and administrative expenses 1,527 1,489 Interest expense 74 82 Interest income (23) (20) Unusual Items - Business reshaping: Business dispositions and other charges 4 -- ---------- --------- 4,256 4,151 ---------- --------- Income from continuing operations before income taxes 262 304 (13.8) Income taxes 20 66 ---------- --------- Income from continuing operations 242 238 1.6 Income from discontinued operations, net of income taxes -- 16 ---------- --------- Net income $ 242 $ 254 (4.9) ========== ========= Income from continuing operations per common share Basic $ 0.31 $ 0.28 10.7 ========== ========= Diluted $ 0.30 $ 0.27 11.1 ========== ========= Net income per common share Basic $ 0.31 $ 0.30 3.3 ========== ========= Diluted $ 0.30 $ 0.29 3.4 ========== ========= Average shares outstanding Basic 783 841 ========== ========= Diluted 816 877 ========== ========= Sara Lee Corporation (NYSE) --------------------------- Operating Results by Industry Segment Unusual Items not Allocated to Industry Segments (in millions) First Quarter Ended ---------------------------------------------------------------------- Sales Operating Income --------------------- -------------------- Sept. 29, Sept. 30, Percent Sept. 29, Sept. 30, Percent 2001 2000 Change 2001 2000 Change --------- --------- ------- --------- --------- ------- Sara Lee Meats $ 1,025 $ 1,026 (0.1)% $ 74 $ 86 (14.4)% Sara Lee Bakery 573 240 NM 35 (14) NM Beverage 640 712 (10.0) 94 111 (15.7) Household Products 509 472 7.9 68 66 3.1 Intimates and Underwear 1,773 2,048 (13.4) 127 202 (36.9) --------- --------- ------- --------- --------- ------- Total sales and operating companies income 4,520 4,498 0.5 398 451 (11.8) Intersegment sales (2) (43) 94.9 -- -- -- Amortization of goodwill and trademarks -- -- -- (14) (46) 70.6 General corporate expenses -- -- -- (70) (39) (81.7) Business dispositions and other charges (1) -- -- -- (1) -- NM --------- --------- ------- --------- --------- ------- Total net sales and operating income 4,518 4,455 1.4 313 366 (14.5) Net interest expense -- -- -- (51) (62) 17.6 --------- --------- ------- --------- --------- ------- Net sales and income from continuing operations before income taxes $ 4,518 $ 4,455 1.4 % $ 262 $ 304 (13.8)% ========= ========= ======= ========= ========= ======= 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) First Quarter Ended ---------------------------------------------------------------------- Sales Operating Income --------------------- -------------------- Sept. 29, Sept. 30, Percent Sept. 29, Sept. 30, Percent 2001 2000 Change 2001 2000 Change --------- --------- ------- --------- --------- ------- Sara Lee Meats $ 1,025 $ 1,026 (0.1)% $ 68 $ 86 (20.1)% Sara Lee Bakery 573 240 NM 33 (14) NM Beverage 640 712 (10.0) 96 111 (13.7) Household Products 509 472 7.9 68 66 2.3 Intimates and Underwear 1,773 2,048 (13.4) 132 202 (34.5) --------- --------- ------- --------- --------- ------- Total sales and operating companies income 4,520 4,498 0.5 397 451 (12.0) Intersegment sales (2) (43) 94.9 -- -- -- Amortization of goodwill and trademarks -- -- -- (14) (46) 70.6 General corporate expenses -- -- -- (70) (39) (81.7) --------- --------- ------- --------- --------- ------- Total net sales and operating income 4,518 4,455 1.4 313 366 (14.5) Net interest expense -- -- -- (51) (62) 17.6 --------- --------- ------- --------- --------- ------- Net sales and income from continuing operations before income taxes $ 4,518 $ 4,455 1.4 % $ 262 $ 304 (13.8)% ========= ========= ======= ========= ========= ======= See accompanying notes to financial statements for information regarding the unusual items. Sara Lee Corporation (NYSE) Consolidated Balance Sheets (in millions) ---------------------------------------------------------------------- Sept. 29, June 30, Sept. 30, 2001 2001 2000 ---------- --------- --------- ASSETS Cash and equivalents $ 361 $ 548 $ 225 Trade accounts receivable 1,994 1,538 1,826 Inventories 2,689 2,582 2,999 Other current assets 360 321 392 Net assets of businesses held for sale 5 94 629 ---------- --------- --------- Total current assets 5,409 5,083 6,071 Other non-current assets 331 304 433 Property, net 3,117 2,146 2,290 Trademarks and other identifiable intangibles, net 1,956 1,097 1,099 Goodwill, net 3,124 1,537 1,840 ---------- --------- --------- $ 13,937 $10,167 $11,733 ========== ========= ========= LIABILITIES AND EQUITY Notes payable $ 1,141 $ 101 $ 2,104 Accounts payable 1,439 1,505 1,518 Accrued liabilities 2,848 2,872 2,470 Current maturities of long-term debt 439 480 222 ---------- --------- --------- Total current liabilities 5,867 4,958 6,314 Long-term debt 4,787 2,640 2,966 Deferred income taxes 543 244 208 Other non-current liabilities 839 563 576 Minority interest in subsidiaries 636 625 624 Preferred stock 7 15 19 Common stockholders' equity 1,258 1,122 1,026 ---------- --------- --------- $ 13,937 $ 10,167 $11,733 ========== ========= ========= 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 life 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 amoritizable intangible assets acquired by the Corporation are software and licenses. SFAS 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, basic earnings per share and diluted earnings per share for the first quarter of 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 provisions of SFAS No. 142, were $282 million, $.33 per share and $.32 per share, respectively. The net income, basic earnings per share 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, $2.89 per share and $2.78 respectively. 2.) The Corporation's results for the first quarter were affected by the reshaping program initiated in May 2000. This ongoing program includes a number of business dispositions and the exit of certain high-cost activities. Reshaping actions recognized in the first quarter of 2002 reduced pre-tax income by $1 million and increased net income by $29 million or $.04 per share. The actions taken include: Business Dispositions- During fiscal 2001, the Corporation's management approved plans to dispose of PYA/Monarch, Coach and 17 other businesses with limited growth opportunities and low returns. At the end of 2001, the disposition of PYA/Monarch, Coach and 10 of 17 other businesses had been completed. During the first quarter of fiscal 2002 the Corporation: -- Completed the disposition of four of the businesses targeted for sale in fiscal 2001. Cash proceeds from these and other business dispositions received in the first quarter were higher than estimated in fiscal 2001 and resulted in a $14 million increase in pre-tax income in the quarter. -- Announced its decision to dispose of Asian-based apparel businesses which were not included in the fiscal 2001 Reshaping Plans. These transactions were completed in the first quarter of fiscal 2002 and resulted in a pre-tax loss of $9 million. -- Concluded that it would not be possible to complete the disposition of one of the 17 businesses in a timely manner and as such, reversed the $2 million pre-tax charge previously recognized for this intended action. Management is currently evaluating alternatives with regard to this business. The net impact of these actions was an increase in pre-tax income of $7 million and an increase in net income of $36 million or $.04 per share. Exit Activities- The reshaping program includes the exit of certain high-cost manufacturing, distribution and administrative activities. Exit activities recognized in the first quarter of 2002 reduced pre-tax earnings, net income and earnings per share by $8 million, $7 million and less than $.01 per share, respectively. The net pre-tax charge consists of $19 million recognized for exit activities approved by management in the first quarter of fiscal 2002 and the reversal of $11 million of charges recognized in fiscal 2001 as a result of the favorable completion of activities previously initiated. 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 quarter ended September 29, 2001 were $394 million and $34 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 URL: www.saralee.com http://www.businesswire.com Today's News On The Net - Business Wire's full file on the Internet with Hyperlinks to your home page.
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CHICAGO, Oct 31, 2001 (BUSINESS WIRE) -- Sara Lee Corporation today reported that sales for the first quarter of fiscal 2002, ending September 29, 2001, were $4.5 billion, up 1%, and diluted earnings per share (EPS) were $.26, a decrease of 10% compared to $.29 one year ago. All results exclude unusual items unless otherwise noted. 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 exited during fiscal 2001 and fiscal 2002 in conjunction with this program. Excluding these divested businesses, sales increased 9% in the first quarter of fiscal 2002, reflecting the acquisition of The Earthgrains Company on August 7, 2001, combined with base business gains in Packaged Meats, Knit Products and Household Products. Unit volumes, excluding acquisitions and divestitures, increased 3% during the quarter, with the strongest gains in the company's Knit Products and Household Products operations. Excluding divested businesses, operating income fell 11%, due to higher raw material costs in Packaged Meats combined with increased investments in the form of higher marketing spending and funding for organizational and technology improvements throughout the company. Currency had a minor negative impact on both sales and operating income during the quarter. 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 impact the new accounting standard would have had on prior periods' results. The net income and diluted EPS for the first 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 $282 million and $.32 per share, respectively. "Sara Lee increased marketing spending behind our leading brands and invested in technology, despite some challenging market conditions, as we continued to reshape our business portfolio and consolidate our organization," said C. Steven McMillan, chairman, president and chief executive officer of Sara Lee Corporation. "We are extremely pleased with the strong sales increases in Household Products and Knit Products, and the integration of Earthgrains, our largest acquisition ever, is already producing important gains for Sara Lee Bakery Group. "Fiscal 2002 first quarter results show that our Reshaping program is already producing a more focused and effective organization that is aligned to deliver long-term growth. Toward that end, we recently launched a number of new, innovative products including Jimmy Dean Fresh Taste. Fast! and Jimmy Dean meat snacks; Senseo crema in-home coffee system; a revolutionary seamless bra sold by Playtex and Dim; and a two-in-one toilet bowl cleaner/air freshener under the fast-growing Ambi Pur brand. To support these efforts, first quarter media advertising increased 11% and total advertising and promotion grew 2%." Unusual Items The company's results for the first quarter were affected by the Reshaping program initiated in May 2000. This ongoing program includes a number of business dispositions and the exit of certain high-cost activities. Reshaping actions recognized in the first quarter of 2002 reduced pre-tax income by $1 million and increased net income by $29 million, or $.04 per share. The actions taken include: Business Dispositions During fiscal 2001, Sara Lee's management approved plans to dispose of PYA/Monarch, Coach and 17 other businesses with limited growth opportunities and low returns. At the end of 2001, the disposition of PYA/Monarch, Coach and 10 of 17 other businesses had been completed. During the first quarter of fiscal 2002, the company: -- Completed the disposition of four of the businesses targeted for sale in fiscal 2001. Cash proceeds from these and other business dispositions received in the first quarter were higher than estimated in fiscal 2001 and resulted in a $14 million increase in pre-tax income in the quarter. -- Announced its decision to dispose of Asian-based apparel businesses, which were not included in the original Reshaping plans. These transactions were completed in the first quarter of fiscal 2002 and resulted in a pre-tax loss of $9 million. -- Concluded that it would not be possible to complete the disposition of one of the 17 businesses in a timely manner and, as such, reversed the $2 million pre-tax charge previously recognized for this intended action. Management is currently evaluating alternatives with regard to this business. The net impact of these actions was an increase in pre-tax income of $7 million and an increase in net income of $36 million, or $.04 per share. Exit Activities The Reshaping program includes the exit of certain high-cost manufacturing, distribution and administrative activities. Exit activities recognized in the first quarter of 2002 reduced pre-tax earnings, net income and earnings per share by $8 million, $7 million and less than $.01 per share, respectively. The net pre-tax charge consists of $19 million recognized for exit activities approved by management in the first quarter of fiscal 2002 and the reversal of $11 million of charges recognized in fiscal 2001 as a result of the favorable completion of activities previously initiated. Performance Review A performance review for each line of business follows. Unit volumes exclude acquisitions and divestitures unless otherwise noted. All dollar amounts are in millions. Please note that as a result of the acquisition of The Earthgrains Company in the first quarter of fiscal 2002, meat and bakery results will be reported as separate lines of business.
SARA LEE MEATS
First Quarter Change
--------------------- --------------
2002 2001
Sales $ 1,025 $ 1,026 0% Operating Income 74 86 (14)%
Sara Lee Meats is a leading manufacturer of processed meat products in the United States, Europe and Mexico. While reported sales were flat, base business sales, excluding acquisitions, divestitures and the effects of currency, increased 3%, benefiting from strong Sara Lee deli meat sales and several new product initiatives. Operating income fell 14%, as profits were negatively affected by costs associated with the U.S. meat group Reshaping and by higher commodity costs, especially materials used in the production of hot dogs and smoked sausage. Media advertising to support key brands also rose significantly during the quarter, up 35%.
Unit volumes for Sara Lee Meats were flat in the quarter as strong deli meat and breakfast sausage sales were offset by declines in smoked sausage and hot dogs. The successful launch of Jimmy Dean Fresh Taste. Fast!, a pre-cooked breakfast sausage that can be prepared in less than one minute, and new breakfast sandwich and deli products continued to receive strong consumer acceptance. By geographic region, U.S. volumes fell 1%, although branded unit sales rose 1%; European unit volumes fell 5%; and Mexican unit sales grew 13%. SARA LEE BAKERY First Quarter Change --------------------- -------------- 2002 2001 Sales $ 573 $ 240 NM Operating Income 35 (14) NM Sara Lee Bakery holds the number-one share in frozen baked goods in the United States and Australia, and, through its recent 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 fiscal year 2002 reported figures include the acquisition of Earthgrains on August 7, 2001, and exclude bakery operations in Europe that were divested in the prior year. Excluding acquisitions, divestitures and the effects of currency, sales fell 7% while operating income increased substantially. Improvement at Sara Lee's frozen bakery business in the United States, mostly due to Reshaping activities, led to the increased operating income. The acquisition of Earthgrains, the second largest packaged fresh bread company in the United States, provides Sara Lee with increased exposure to the fast-growing fresh bread category, particularly the premium and super-premium segments, which are growing faster than the overall market. The introduction of the Sara Lee brand to Earthgrains' direct-store distribution system is expected to generate significant incremental sales, and near-term plans include the introduction of Sara Lee bagels and poundcake into Earthgrains' distribution system by the end of calendar 2001. Unit volumes on an ongoing basis, excluding Earthgrains, for Sara Lee Bakery declined 5% as the company continued to exit low-growth and unprofitable frozen products.
BEVERAGE First Quarter Change --------------------- -------------- 2002 2001
Sales $ 640 $ 712 (10)% Operating Income 94 111 (16)% 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. Because this business generates over 50% of its sales outside the United States, it has significant exposure to currency fluctuations. Excluding the impact of currency, sales for this line of business declined 7% and operating income fell 13%. Historically low green coffee prices led to lower retail prices during the quarter producing declines in sales and operating income. A 6% increase in media advertising and promotion spending to support key brands and new product introductions also affected margins. There were no acquisitions or divestitures affecting Beverage results in the quarter. Global unit sales of roasted coffee and coffee concentrate products fell 2% during the quarter as gains in Belgium, Brazil, Norway, Hungary and the United Kingdom were offset by declines in the United States and The Netherlands. Market shares in many major regions showed an increase versus last year. By product line, retail coffee volumes fell 1% on a global basis; out-of-home unit sales fell 5% in both the United States and Europe; and liquid coffee concentrate volumes for the company's innovative coffee systems increased 2%. In new product news, in fiscal 2001, the company successfully launched a joint initiative in The Netherlands with Philips Electronics to sell a unique in-home coffee maker called Senseo crema, which uses pads of coffee produced by Douwe Egberts. Senseo crema continued to enjoy strong consumer acceptance in the first quarter of 2002, and this new product is expected to be rolled out in other parts of Europe in the near future. In the United States, new espresso and cappuccino products were introduced under the Chock full o'Nuts brand.
HOUSEHOLD PRODUCTS First Quarter Change --------------------- -------------- 2002 2001
Sales $ 509 $ 472 8% Operating Income 68 66 3% Household Products includes the company's household and body care businesses and its Direct Selling operations. It is Sara Lee's most global business, selling products in more than 180 countries. The strength of the dollar relative to other currencies had a significant impact on reported results for this line of business; excluding currency, sales grew 12% and operating income rose 6%. Operating income grew less than sales as media advertising and promotion increased 16% to support new product launches and marketing behind key brands. Unit volumes for this segment's four core categories - shoe care, body care, insecticides and air fresheners - grew 11% with increased sales in body care, insecticides and air fresheners. Unit volumes were particularly strong in the air freshener business, led by new product offerings such as Ambi-Pur Flush, a two-in-one toilet bowl cleaner and air freshener that is currently sold in more than 30 countries. The product was successfully introduced under the brand name Ambi-Pur LiquiFresh in the United States in fiscal 2001 and continues to hold the leading market share in its category. Sales from the company's Direct Selling efforts, conducted by 800,000 independent sales representatives who deliver branded toiletries, cosmetics and fragrances directly to consumers in 17 countries, rose 8% over the first quarter of last year, and operating income increased 9%, excluding currency. Results were particularly strong at House of Fuller operations in Mexico.
INTIMATES AND UNDERWEAR First Quarter Change --------------------- -------------- 2002 2001
Sales $ 1,773 $ 2,048 (13)% Operating Income 127 202 (37)%
Sara Lee's Intimates and Underwear line of business includes the company's global Legwear, Knit Products and Intimate Apparel operations. On an ongoing operations basis - excluding divested businesses from the first quarters of fiscal 2001 and 2002 - Intimates and Underwear reported a 1% decrease in sales and a 31% decrease in operating income, reflecting difficult retail markets and continuing pricing pressure from the number-two U.S. men's underwear company. Intimates and Underwear unit volumes rose 6% as strength in the Knit Products segment offset weak hosiery markets.
Unit volumes for worldwide Intimate Apparel declined 1%, mostly due to a soft retail environment. The company did increase its number-one position in the U.S. bra category to a dollar share of 26.1% for the 12-month period ended August 2001. Major new products launched in this quarter included the seamless Barely There Body Revolution and Bali Perfectly Smooth.
Worldwide Knit Products unit volumes grew 13% during the quarter, with gains for both underwear and activewear. Driven by a 50% increase in media advertising spending, unit sales rose at a double-digit rate in the company's U.S. male and female underwear operations while European underwear delivered high single-digit unit growth. In the U.S. underwear category, Hanes and Hanes Her Way maintained their number-one positions in both the male and female underwear categories, with 12-month unit shares as of July 2001 of 36.5% and 36.1%, respectively. Sara Lee also experienced strong casualwear and screen print t-shirt unit volumes in the United States.
Global Legwear unit sales fell 4% during the quarter, as global hosiery markets continued to decline. In the United States, Sara Lee continued to reduce inventory levels and focus its hosiery business on generating strong cash flow. The company retained its number-one position in the U.S. sheer hosiery category with a dollar share of 50.2% as of August 2001, and its leading unit share position in the sock market at 16.9%.
Net interest expense was $51 million for the quarter, compared with $62 million in the first quarter of last year. Interest expense decreased as the company benefited from lower interest rates.
Sara Lee's management currently expects diluted EPS for the second quarter of fiscal 2002 to fall within a range of $.36 to $.40 compared to $.43 from total operations in the year-ago period. Full fiscal year 2002 diluted EPS are expected to fall in a range of $1.37 to $1.43 compared to $1.36 from total operations in fiscal 2001. Fiscal 2002 results reflect the company's adoption of new accounting standards concerning the amortization of goodwill and other intangibles. As a point of comparison, Sara Lee estimates that diluted EPS would have been $.46 for the second quarter of fiscal 2001 and $1.49 for fiscal 2001 under the new accounting standards.
By line of business, management expects fiscal 2002 second quarter operating income performance for Sara Lee Meats and Sara Lee Bakery to be similar to that of the first quarter; higher comodity costs and continued investment spending will impact operating margins in the meat business, while base business gains and the addition of Earthgrains' operating income will positively impact Bakery results. Given their significant exposure to foreign currency, particularly the euro, 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. The Intimates and Underwear line of business is expected to report lower operating income in the second quarter, reflecting challenging market conditions, increased investment spending and the loss of operating income from divested operations.
For the full year, Sara Lee Meats operating income should be flat to up slightly, as this line of business is expected to show improved results in the second half, benefiting from easier commodity cost comparisons. Sara Lee Bakery is expected to benefit from base business gains and the Earthgrains acquisition throughout the year. Beverage and Household Products operating income will depend on foreign currency relationships. Intimates and Underwear is projected to report lower operating income for the year, although profitability is expected to improve in the second half.
Janet Bergman, senior vice president, investor relations and corporate affairs, will discuss the first quarter results live via the Internet today at 9:00 am (CDT). 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) the financial impact of Sara Lee's decision to dispose of certain non-core business units; (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 impacted by the disease used in the production of finished goods; (ix) Sara Lee's ability to complete transactions anticipated in its business reshaping programs; (x) Sara Lee's ability to realize forecasted savings, as well as improvements in productivity and efficiency from its business reshaping programs; and (xi) inherent risks in the marketplace associated with new product introductions, including uncertainties about trade and consumer acceptance.
In addition, the Corporation'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 corporation 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, 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 Corporation (www.saralee.com) is a global branded consumer packaged goods company with approximately $20 billion in annual revenues. Its leading brands include Sara Lee, Douwe Egberts, Hillshire Farm, Hanes and Playtex. Sara Lee Corporation Executive Summary of Performance First quarter fiscal 2002 (All results exclude unusual items) Percentage change ---------------------------------------------------------------------- Sara Lee Sara Lee Meats(1) Bakery(2) Beverage(3) ------- -------- ---------- Reported sales 0% NM (10)% Sales from ongoing operations(+) 3% NM (10)% ---------------------------------------------------------------------- Base sales(++) 3% (7)% (7)% ---------------------------------------------------------------------- Reported operating Income (14)% NM (16)% Operating income from ongoing operations(+) (15)% NM (16)% ---------------------------------------------------------------------- Base operating income(++) (15)% NM (13)% ---------------------------------------------------------------------- Base unit volumes(+++) 0% (5)% (2)% ---------------------------------------------------------------------- Diluted earnings per share - - - Total advertising and promotional expense(+) (4)% NM 6% ---------------------------------------------------------------------- Media advertising expense(+) 35% NM (12)% ---------------------------------------------------------------------- Promotional expense(+) (9)% NM 13% Household Intimates Products(3) and Underwear(4) Total SLE ----------- ---------------- --------- Reported sales 8% (13)% 1% Sales from ongoing operations(+) 8% (1)% 9% ---------------------------------------------------------------------- Base sales(++) 12% (4)% 0% ---------------------------------------------------------------------- Reported operating Income 3% (37)% (12)% Operating income from ongoing operations(+) 3% (31)% (11)% ---------------------------------------------------------------------- Base operating income(++) 6% (31)% (17)% ---------------------------------------------------------------------- Base unit volumes(+++) 11% 6% 3% ---------------------------------------------------------------------- Diluted earnings per share - - (10)% Total advertising and promotional expense(+) 16% (2)% 2% ---------------------------------------------------------------------- Media advertising expense(+) 6% 3% 11% ---------------------------------------------------------------------- Promotional expense(+) 23% 0% 1% (+) Ongoing operations reflect results excluding divested businesses from FY02 and FY01 results. (++) Base business results exclude acquisitions, divestitures and the effect of currency. (+++) Base unit volumes exclude acquisitions and divestitures. (1) There were no divestitures in this segment in 1Q02. 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. The following businesses were divested in FY01: Nutrine, Brossard, and U.K. Bakery. (3) There were no divestitures in this segment in 1Q02 or in FY01. (4) The following businesses were sold in 1Q02: International Fabrics operations in France, Italy, Spain, Portugal, the U.K., and Courtaulds China; 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) ---------------------------------------------------------------------- First Quarter Ended ------------------------------------- Sept. 29, Sept. 30, Percent 2001 2000 Change ---------- --------- --------- Net sales $ 4,518 $ 4,455 1.4% ---------- --------- --------- Cost of sales 2,677 2,600 Cost of sales - product line exit (3) -- Selling, general and administrative expenses 1,527 1,489 Interest expense 74 82 Interest income (23) (20) Unusual Items - Business reshaping: Business dispositions and other charges 4 -- ---------- --------- 4,256 4,151 ---------- --------- Income from continuing operations before income taxes 262 304 (13.8) Income taxes 20 66 ---------- --------- Income from continuing operations 242 238 1.6 Income from discontinued operations, net of income taxes -- 16 ---------- --------- Net income $ 242 $ 254 (4.9) ========== ========= Income from continuing operations per common share Basic $ 0.31 $ 0.28 10.7 ========== ========= Diluted $ 0.30 $ 0.27 11.1 ========== ========= Net income per common share Basic $ 0.31 $ 0.30 3.3 ========== ========= Diluted $ 0.30 $ 0.29 3.4 ========== ========= Average shares outstanding Basic 783 841 ========== ========= Diluted 816 877 ========== ========= Sara Lee Corporation (NYSE) --------------------------- Operating Results by Industry Segment Unusual Items not Allocated to Industry Segments (in millions) First Quarter Ended ---------------------------------------------------------------------- Sales Operating Income --------------------- -------------------- Sept. 29, Sept. 30, Percent Sept. 29, Sept. 30, Percent 2001 2000 Change 2001 2000 Change --------- --------- ------- --------- --------- ------- Sara Lee Meats $ 1,025 $ 1,026 (0.1)% $ 74 $ 86 (14.4)% Sara Lee Bakery 573 240 NM 35 (14) NM Beverage 640 712 (10.0) 94 111 (15.7) Household Products 509 472 7.9 68 66 3.1 Intimates and Underwear 1,773 2,048 (13.4) 127 202 (36.9) --------- --------- ------- --------- --------- ------- Total sales and operating companies income 4,520 4,498 0.5 398 451 (11.8) Intersegment sales (2) (43) 94.9 -- -- -- Amortization of goodwill and trademarks -- -- -- (14) (46) 70.6 General corporate expenses -- -- -- (70) (39) (81.7) Business dispositions and other charges (1) -- -- -- (1) -- NM --------- --------- ------- --------- --------- ------- Total net sales and operating income 4,518 4,455 1.4 313 366 (14.5) Net interest expense -- -- -- (51) (62) 17.6 --------- --------- ------- --------- --------- ------- Net sales and income from continuing operations before income taxes $ 4,518 $ 4,455 1.4 % $ 262 $ 304 (13.8)% ========= ========= ======= ========= ========= ======= 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) First Quarter Ended ---------------------------------------------------------------------- Sales Operating Income --------------------- -------------------- Sept. 29, Sept. 30, Percent Sept. 29, Sept. 30, Percent 2001 2000 Change 2001 2000 Change --------- --------- ------- --------- --------- ------- Sara Lee Meats $ 1,025 $ 1,026 (0.1)% $ 68 $ 86 (20.1)% Sara Lee Bakery 573 240 NM 33 (14) NM Beverage 640 712 (10.0) 96 111 (13.7) Household Products 509 472 7.9 68 66 2.3 Intimates and Underwear 1,773 2,048 (13.4) 132 202 (34.5) --------- --------- ------- --------- --------- ------- Total sales and operating companies income 4,520 4,498 0.5 397 451 (12.0) Intersegment sales (2) (43) 94.9 -- -- -- Amortization of goodwill and trademarks -- -- -- (14) (46) 70.6 General corporate expenses -- -- -- (70) (39) (81.7) --------- --------- ------- --------- --------- ------- Total net sales and operating income 4,518 4,455 1.4 313 366 (14.5) Net interest expense -- -- -- (51) (62) 17.6 --------- --------- ------- --------- --------- ------- Net sales and income from continuing operations before income taxes $ 4,518 $ 4,455 1.4 % $ 262 $ 304 (13.8)% ========= ========= ======= ========= ========= ======= See accompanying notes to financial statements for information regarding the unusual items. Sara Lee Corporation (NYSE) Consolidated Balance Sheets (in millions) ---------------------------------------------------------------------- Sept. 29, June 30, Sept. 30, 2001 2001 2000 ---------- --------- --------- ASSETS Cash and equivalents $ 361 $ 548 $ 225 Trade accounts receivable 1,994 1,538 1,826 Inventories 2,689 2,582 2,999 Other current assets 360 321 392 Net assets of businesses held for sale 5 94 629 ---------- --------- --------- Total current assets 5,409 5,083 6,071 Other non-current assets 331 304 433 Property, net 3,117 2,146 2,290 Trademarks and other identifiable intangibles, net 1,956 1,097 1,099 Goodwill, net 3,124 1,537 1,840 ---------- --------- --------- $ 13,937 $10,167 $11,733 ========== ========= ========= LIABILITIES AND EQUITY Notes payable $ 1,141 $ 101 $ 2,104 Accounts payable 1,439 1,505 1,518 Accrued liabilities 2,848 2,872 2,470 Current maturities of long-term debt 439 480 222 ---------- --------- --------- Total current liabilities 5,867 4,958 6,314 Long-term debt 4,787 2,640 2,966 Deferred income taxes 543 244 208 Other non-current liabilities 839 563 576 Minority interest in subsidiaries 636 625 624 Preferred stock 7 15 19 Common stockholders' equity 1,258 1,122 1,026 ---------- --------- --------- $ 13,937 $ 10,167 $11,733 ========== ========= ========= 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 life 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 amoritizable intangible assets acquired by the Corporation are software and licenses. SFAS 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, basic earnings per share and diluted earnings per share for the first quarter of 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 provisions of SFAS No. 142, were $282 million, $.33 per share and $.32 per share, respectively. The net income, basic earnings per share 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, $2.89 per share and $2.78 respectively. 2.) The Corporation's results for the first quarter were affected by the reshaping program initiated in May 2000. This ongoing program includes a number of business dispositions and the exit of certain high-cost activities. Reshaping actions recognized in the first quarter of 2002 reduced pre-tax income by $1 million and increased net income by $29 million or $.04 per share. The actions taken include: Business Dispositions- During fiscal 2001, the Corporation's management approved plans to dispose of PYA/Monarch, Coach and 17 other businesses with limited growth opportunities and low returns. At the end of 2001, the disposition of PYA/Monarch, Coach and 10 of 17 other businesses had been completed. During the first quarter of fiscal 2002 the Corporation: -- Completed the disposition of four of the businesses targeted for sale in fiscal 2001. Cash proceeds from these and other business dispositions received in the first quarter were higher than estimated in fiscal 2001 and resulted in a $14 million increase in pre-tax income in the quarter. -- Announced its decision to dispose of Asian-based apparel businesses which were not included in the fiscal 2001 Reshaping Plans. These transactions were completed in the first quarter of fiscal 2002 and resulted in a pre-tax loss of $9 million. -- Concluded that it would not be possible to complete the disposition of one of the 17 businesses in a timely manner and as such, reversed the $2 million pre-tax charge previously recognized for this intended action. Management is currently evaluating alternatives with regard to this business. The net impact of these actions was an increase in pre-tax income of $7 million and an increase in net income of $36 million or $.04 per share. Exit Activities- The reshaping program includes the exit of certain high-cost manufacturing, distribution and administrative activities. Exit activities recognized in the first quarter of 2002 reduced pre-tax earnings, net income and earnings per share by $8 million, $7 million and less than $.01 per share, respectively. The net pre-tax charge consists of $19 million recognized for exit activities approved by management in the first quarter of fiscal 2002 and the reversal of $11 million of charges recognized in fiscal 2001 as a result of the favorable completion of activities previously initiated. 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 quarter ended September 29, 2001 were $394 million and $34 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 URL: www.saralee.com http://www.businesswire.com Today's News On The Net - Business Wire's full file on the Internet with Hyperlinks to your home page.
Copyright (C) 2001 Business Wire. All rights reserved.
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