CHICAGO--Feb. 2, 2006--Sara Lee Corporation (NYSE: SLE):
- Diluted earnings per share for the second quarter were $.57,
helped by a gain on the disposition of the direct selling
business
- Corporate unit volumes increased 1% in the second quarter,
primarily driven by volume growth in the North American retail
meat and foodservice business segments
- Significant progress made on all three pillars of the
transformation: organizing the business around consumers and
customers, achieving operational efficiency and focusing the
portfolio
Sara Lee Corporation (NYSE: SLE) today announced that net sales for
the second quarter of fiscal 2006, ending Dec. 31, 2005, were $4.45
billion compared to $4.51 billion in the prior year's second quarter,
a decrease of 1%. During the second quarter, sales and unit volumes
grew in four out of the eight business segments, specifically North
American retail meats, North American retail bakery, Sara Lee
Foodservice and international beverage.
Diluted earnings per share (EPS) were $.57 for the second quarter
of fiscal 2006, compared to $.41 for the year-ago period. A gain on
the divestiture of the direct selling business and a related tax
benefit increased fiscal 2006 second quarter diluted EPS by $.28 and
$.07 per share, respectively. However, charges related to the
implementation of the company's transformation plan and business exit
activities reduced second quarter diluted EPS by $.08 per share.
Operating results also were negatively impacted by various other
factors including unfavorable foreign currency exchange rates, higher
commodity, packaging and energy costs, and lower unit volumes at
several businesses. Despite these factors, the North American retail
meats, international bakery and branded apparel business segments
reported higher operating segment income in the second quarter.
Impact of Significant Items on
Diluted Earnings per Share Second Quarter Six Months
----------------------------
2006 2005 2006 2005
----------------------------
Diluted earnings per share, as reported $.57 $.41 $.65 $.85
============================
Increase / (decrease) in EPS from:
Impairment charges - - (.22) -
Transformation costs (.04) - (.06) -
Exit activities (.04) - (.06) -
Accelerated depreciation (.01) (.01) (.02) (.02)
Gain / (loss) on business dispositions (.01) .01 .01 .01
Change in vacation policy .01 - .01 -
Sale of businesses .28 - .28 -
Tax benefit from direct selling
transaction .07 - .07 -
Dutch tax rate change - .03 - .03
Curtailment gain - .01 - .02
----------------------------
Total impact of significant items(a) $.26 $.04 $- $.04
============================
(a) Amounts are rounded and may not add to the total.
"In the second quarter, we delivered results that were consistent
with our forecasts. Earnings per share were influenced by several
significant items, but our underlying results actually exceeded our
guidance for the period," said Brenda C. Barnes, chairman and chief
executive officer of Sara Lee Corporation.
"We believe our transformation initiatives are beginning to have
an impact, particularly for the Sara Lee Food & Beverage and Sara Lee
Foodservice businesses, which delivered substantially better results
in the second quarter than in the first. I am encouraged that these
businesses are showing an upward trend. We have been especially
pleased with the success of the Sara Lee fresh bread brand, which
became the U.S. market leader in the fresh bakery category during the
quarter," added Barnes. "At Sara Lee International, household and body
care is facing some challenges and we are taking appropriate actions
to improve performance. Our international beverage business continued
to see commodity cost pressure that hampered results. European meats
results were lower due to the impact of currency and higher spending
on media advertising and promotions, while international bakery
delivered a much improved quarter, returning to more typical bottom
line growth.
"Overall, the transformation is proceeding as we anticipated and
we are now beginning to see the benefits of the multitude of changes
that we have made over the past year," concluded Barnes.
Total media advertising and promotion (MAP) spending for
continuing operations decreased 3% in the second quarter, primarily
because of lower spending behind retail meat and branded apparel
brands in the United States, the weaker euro compared to the year-ago
period and a shift to driving the business through strategic pricing
actions and other marketing activities such as coupons that are not
captured in MAP spending.
The consolidated unit volumes for the corporation increased 1%
during the second quarter of fiscal 2006, driven by unit volume growth
in four out of eight business segments, specifically North American
retail meats, North American retail bakery, Sara Lee Foodservice and
international beverage.
Transformation Plan Update - Second Quarter Fiscal 2006
In February 2005, Sara Lee embarked on a bold, multi-year,
strategic plan to transform the company and tighten its focus on the
food, beverage, and household and body care categories. The
transformation plan is designed to dramatically improve Sara Lee's
performance and better position the company for long-term growth. The
plan is built upon three pillars and a second quarter update for each
pillar follows.
Pillar 1: Organize the business around consumers, customers and
geographic markets
The new organization design for the two continuing North American
businesses - Sara Lee Food & Beverage and Sara Lee Foodservice - was
completed, while the redesign of the corporate functions Procurement,
Information Systems and Process Improvement to Excellence (PIE) is
well underway. Since the beginning of fiscal 2006, Sara Lee has hired
more than 500 new employees in the United States. The plan for
relocating the management of the new North American organization to a
single headquarters in Downers Grove, Ill., is on track for completion
in the fall of 2006. Sara Lee International continues to move forward
with the consolidation of its local offices into one centralized
location per country or region, supported by a shared services
organization for back-office functions. The international business
also made progress with its planned workforce reduction.
Pillar 2: Achieve operational efficiency to fund growth
During the second quarter, the company made significant progress
with the implementation of operational efficiency initiatives such as
centralized procurement, common information technology (IT) systems
and the PIE program. The new global procurement organization is
developing cost reduction initiatives focused on - among other
activities - commodities, packaging and indirect spending. The global
information systems group reached an important milestone with the
on-time and on-budget upgrade of the bakery SAP system to the most
current SAP release without any business interruptions. This IT
platform will ultimately support all of North America. And, the PIE
team advanced its four process improvement projects - innovation,
pricing/trade spending, sales and operations planning, and business
planning - by mapping and designing process flows.
Pillar 3: Focus the portfolio
To date, Sara Lee has made significant progress toward its
portfolio transformation. In the second quarter, the company completed
the sale of its direct selling business and its U.S. retail coffee
business, excluding Senseo. In November, the company announced that it
had reached an agreement to sell its European nuts and snacks business
to PepsiCo for EUR 130 million; the transaction is expected to close
in the fourth quarter of fiscal 2006. Preparations for the spin-off to
shareholders of the Branded Apparel, Americas/Asia business, under the
name Hanesbrands Inc., are on track for completion in the June -
September, 2006 timeframe. In January 2006, after the close of the
second quarter, Sara Lee announced that it had signed an agreement to
acquire Butter-Krust Baking, a Sunbury, Pa.-based, privately held,
fresh bakery business, for approximately $72 million. This acquisition
will enable Sara Lee to expand its mid-Atlantic distribution coverage
to better serve its customers and to reach more than 20 million
additional consumers, increasing its U.S. market coverage from just
over 70% to nearly 80% of the country. The transaction is subject to
regulatory approvals and other customary closing conditions. Finally,
the sale of the branded apparel business in Europe to an affiliate of
Sun Capital Partners, Inc., is expected to close in the near future.
Sara Lee's branded apparel U.K. operation, Sara Lee Courtaulds, which
manufactures private-label clothing for retailers, is not part of this
transaction.
Separately, the company currently is evaluating options to
maximize shareholder value relative to its European meats business,
and no longer expects to complete a sale in the third quarter of
fiscal 2006, as previously announced. Regardless of decisions about
the business, the company remains dedicated to its capital structure
commitments, including buying back $2 billion of stock over the next
several years, reducing debt by at least $1.5 billion and paying a
dividend of $.79 per share for fiscal 2006. The company also continues
to expect total after-tax proceeds from all dispositions to exceed $3
billion with more than half coming from the dividend from the spin-off
of Branded Apparel, Americas/Asia.
Year-to-Date Financial Highlights
For the first six months of fiscal 2006, ending Dec. 31, 2005,
Sara Lee reported net sales of $8.64 billion, down 1% over the same
period a year ago. Diluted EPS for the first half of fiscal 2006 were
$.65, compared to $.85 for the year-ago period. Net cash flow from
operating activities was approximately $850 million for the first six
months of fiscal 2006, compared to approximately $800 million in the
comparable period last year. Total MAP spending decreased 2% compared
to the first half of fiscal 2005 and corporate unit volumes decreased
1% in the six month period year over year.
Business Performance Review
In the second quarter of fiscal 2006, the U.K. branded apparel
private-label division has been reported as a discontinued operation.
Prior year amounts have been restated to conform with the current
year's earnings presentation.
Sara Lee Food & Beverage
The Sara Lee Food & Beverage business is the company's North
American retail food group, comprising the retail meats and retail
bakery segments, the latter including the Senseo single-serve coffee
innovation.
North American Retail Meats
Net sales in the North American retail meats segment were up 4% to
$672 million on the strength of an 8% increase in unit volumes, driven
by new product success and strategic pricing actions. Sales increased
despite the negative sales impact of the disposition of two brands in
the prior year.
Reported operating segment income for the second quarter was $50
million, an increase of $1 million or 1%, which included a $20 million
net decrease related to transformation charges, exit activities and
other significant items as described in the attached Operating Results
by Business Segment schedule. The remaining operating segment income
increase of $21 million, or 46%, was primarily due to higher unit
volumes, favorable sales mix and lower commodity costs, partially
offset by significantly higher energy costs and the impact of
strategic pricing actions. During the quarter, dollar-share gains were
recorded in six of the eight retail packaged meat categories in which
Sara Lee competes, primarily resulting from improved marketing
execution and the success of strategic pricing actions. Sales of Jimmy
Dean Skillets, Breakfast Sandwiches and Breakfast Sausage drove
double-digit sales growth for the brand, while sales of the Hillshire
Farm brand grew on the strength of Smoked Sausage and Deli Select
Ultra Thin lunchmeats performance.
For the six months ending Dec. 31, 2005, North American retail
meats reported net sales of $1.29 billion, up 3% from $1.25 billion in
the year-ago period. Operating segment income for the first six months
of fiscal 2006 was $67 million, compared to $73 million in the
corresponding period of fiscal 2005, with the decline resulting from
restructuring charges, transformation costs and non-recurring gains on
business dispositions reported in the first half of fiscal 2005.
North American Retail Bakery (including Senseo coffee)
North American retail bakery posted a 3% increase in net sales to
$463 million driven by overall unit volume growth and favorable sales
mix in the U.S. fresh bakery business. Volume growth was driven by
Sara Lee fresh bread sales, partially offset by the exit of certain
regional bread business in fiscal 2005. Operating segment income
decreased by $6 million from a loss of $11 million to a loss of $17
million. $10 million of the decrease related to transformation
charges, exit activities and other significant items described in the
attached Operating Results by Business Segment schedule. The remaining
operating segment income increase of $4 million, or 31%, was primarily
due to increased unit volumes, improved productivity and certain price
increases, which were partially offset by higher energy and labor
costs and increased MAP spending on Senseo.
The Sara Lee fresh bakery brand, which was primarily a small West
Coast bagel business four years ago, has rapidly surpassed competitors
in the U.S. fresh bakery category. During the second quarter, Sara Lee
became the leading fresh bakery brand in America with a 5.7% share of
the market in the combined packaged bread, buns, rolls, bagels and
English muffins category according to Information Resources, Inc.
share data. Sara Lee Soft & Smooth whole-grain white bread, which was
launched only six months ago, has been the best-selling fresh bread
stock keeping unit (SKU) in the United States since its launch, and
the product was selected as one of BusinessWeek's best new products of
2005. At the end of the quarter, the Sara Lee brand launched its first
products in the sweet breakfast breads and English muffins segments,
expanding its portfolio of products that use a blend of whole-grain
and refined-grain flour to preserve great taste and offer nutritional
benefits.
Unit volumes and sales for Senseo single-serve coffee pods
increased significantly compared to last year's second quarter. During
the 2005 holiday season, Sara Lee's business partner Philips
Electronics sold 229,000 Senseo coffee machines in the United States,
bringing the total number of machines in U.S. homes to more than
630,000.
For the six months ending Dec. 31, 2005, North American retail
bakery reported net sales of $923 million, up from $920 million in the
year-ago period. An operating segment loss of $21 million was reported
for the first six months of fiscal 2006, compared to a loss of $2
million in the corresponding period of fiscal 2005, with the decline
resulting primarily from restructuring charges, transformation costs
and a non-recurring curtailment gain in the first half of fiscal 2005.
For the second quarter, net sales for the Sara Lee Food & Beverage
business, on an aggregate basis, increased 3% to $1.14 billion.
Quarterly profits were $33 million, down 11% from the prior year. For
the first half of fiscal 2006, Sara Lee Food & Beverage reported a net
sales increase of 2% to $2.21 billion and profits of $46 million
compared to $71 million in the year-ago period.
Sara Lee Foodservice
The Sara Lee Foodservice business is a leading supplier of coffee,
meats and bakery solutions to a broad base of foodservice operators
across North America.
Sara Lee Foodservice unit volumes increased 5% during the second
quarter, primarily due to strong volumes for refrigerated dough, hot
dogs, corn dogs, cooked breakfast sausages and lunchmeats. Liquid
coffee concentrate unit volumes increased by double-digits in the
second quarter, but this was more than offset by volume declines in
the traditional roast and ground coffee business.
For the second quarter of fiscal 2006, Sara Lee Foodservice
reported net sales of $609 million, an increase of 5% from $580
million in the second quarter of fiscal 2005. Sales grew as a result
of increased overall unit volumes and higher coffee prices, partially
offset by an unfavorable sales mix. Operating segment income for the
second quarter of fiscal 2006 was $56 million, compared to $62 million
for the corresponding period a year ago. Operating segment income in
the quarter was negatively impacted by transformation costs, a
non-recurring curtailment gain in the prior year's period and
increased energy costs.
During the quarter, Sara Lee Foodservice made progress on the
opportunity to cross-sell its meats, bakery and coffee products to
existing customers that previously only had bought products from one
or two of the three categories. Strong volumes for BK Joe, Burger
King's new coffee concept based on Sara Lee's proprietary liquid
coffee concentrate, was another success of the segment's customer
focus initiatives.
For the six months ending Dec. 31, 2005, Sara Lee Foodservice
reported net sales of $1.15 billion, up 2% from $1.12 billion in the
prior year's first half. Operating segment income for the first six
months of fiscal 2006 was $72 million, a decrease of 32% compared to
$105 million for the same period in fiscal 2005, primarily because of
lower profits in the roast and ground coffee business, higher selling,
general and administrative (SG&A) expenses, transformation costs and a
comparison to a non-recurring curtailment gain in first half of fiscal
2005.
Sara Lee International
The Sara Lee International business comprises international
beverage, European meats, international bakery and the global
household and body care segment. Results for the European meats
business, which were formerly included in international beverage, are
now included in Sara Lee International as a separate business segment.
International Beverage
International beverage unit volumes were up 1% in the second
quarter of fiscal 2006, particularly driven by volume growth in
Brazil, the Netherlands and Germany. Net sales in the international
beverage segment increased 1% to $598 million in the second quarter.
Reported operating segment income decreased $47 million or 42%, of
which $42 million of the decrease related to transformation charges,
exit activities and other significant items as described in the
attached Operating Results by Business Segment schedule. The remaining
operating segment income decrease of $5 million, or 5%, was primarily
due to higher commodity costs and a challenging retail environment in
Europe.
For the first half of fiscal 2006, international beverage sales
were $1.12 billion, up 2% from $1.10 billion in the year-ago period.
Operating segment income for the first six months of fiscal 2006 was
$126 million, compared to $210 million in the corresponding period of
fiscal 2005, or a decrease of 40%, resulting primarily from lower
margins, lower first quarter unit volumes, transformation costs and
unfavorable foreign currency exchange rates.
European Meats
Unit volumes in the European meats segment were down 1% in the
second quarter, primarily due to weakness in France. Net sales for the
European meats segment decreased 8% to $285 million in the second
quarter due to unfavorable foreign currency exchange rates and
slightly lower unit volumes. Operating segment income was $21 million
in the second quarter of fiscal 2006, compared to $31 million in the
year-ago period, the decline was primarily due to unfavorable foreign
currency effects, restructuring costs and higher MAP spending, the
latter particularly in France behind the Aoste brand.
For the six months ending Dec. 31, 2005, European meats reported
net sales of $569 million, down 3% from $588 million in the year-ago
period. Operating segment income for the first six months of fiscal
2006 was $51 million, compared to $64 million in the first half of
fiscal 2005, with the 20% decline resulting primarily from
restructuring charges, higher MAP spending and unfavorable foreign
currency exchange rates.
International Bakery
Unit volumes in the international bakery segment were flat in the
second quarter as unit volume growth in the European refrigerated
dough business was offset by lower unit volumes for the fresh bakery
business in Spain and frozen bakery in Australia. Net sales for the
international bakery segment decreased 5% to $190 million in the
second quarter due primarily to unfavorable foreign currency exchange
rates. Operating segment income was $21 million in the second quarter
of fiscal 2006, compared to $20 million in the year-ago period. The
increase of 3% was mainly due to procurement savings and higher
margins that more than offset unfavorable foreign currency effects.
For the six months ending Dec. 31, 2005, international bakery
reported net sales of $382 million, down 1% from $387 million in the
year-ago period. Operating segment income for the first six months of
fiscal 2006 was $33 million, compared to $41 million in the first half
of fiscal 2005, with the 20% decline resulting primarily from
restructuring charges, higher MAP spending and unfavorable foreign
currency exchange rates.
Household and Body Care
Unit volumes in the household and body care segment's four core
categories declined 2% in the second quarter, as higher unit volumes
for body care, shoe care and insecticides were more than offset by
lower unit volumes for air care, the latter particularly in Europe. In
the body care category, the Sanex brand continued to perform well,
driven by new products such as Sanex Excel, a concentrated deodorant
spray, and Sanex Vitality, a body care line for women. However, growth
for the Sanex brand could not fully offset sales softness in some of
the other bath and shower brands, particularly Radox in the United
Kingdom and Duschdas in Germany. After a challenging first quarter,
sales rebounded for Kiwi shoe care products, particularly in the
United States, driving sales growth in the shoe care category. Strong
sales in India and Malaysia drove sales growth in the insecticides
category. Air care unit volumes and sales continued to decline,
particularly in Europe where the Ambi Pur brand is facing tough price
competition. The company continues to focus on new product development
and product re-launches to reverse the trend.
The lower overall unit volume, combined with lower selling prices
and unfavorable foreign currency exchange rates, translated into lower
net sales for household and body care in the second quarter, down 8%
to $451 million. Reported operating segment income declined $46
million, or 57% in the second quarter of fiscal 2006, of which $28
million of the decrease related to transformation charges, exit
activities and other significant items as described in the attached
Operating Results by Business Segment schedule. The remaining
operating segment income decrease of $18 million, or 29%, was
primarily due to lower unit volumes and margins, especially in air
care.
For the first six months of fiscal 2006, household and body care
sales were $897 million, down 6% from $953 million in the year-ago
period. Operating segment income for the first half of fiscal 2006 was
$115 million, compared to $149 million in the corresponding period of
fiscal 2005, or a decrease of 23%, resulting primarily from lower unit
volumes and margins, transformation costs and unfavorable foreign
currency exchange rates.
On a combined basis, net sales for the Sara Lee International
business were down 4% to $1.52 billion in the second quarter of fiscal
2006, while profits were down 42% to $142 million. Year-to-date, Sara
Lee International net sales were $2.97 billion, down 2%, and profits
were down 30% to $325 million.
Branded Apparel
Branded Apparel markets a portfolio of apparel brands in the
outerwear (e.g., T-shirts, casualwear and activewear), innerwear
(e.g., underwear, socks and intimate apparel) and hosiery categories
sold primarily in the Americas/Asia. The Branded Apparel business is
currently preparing to be spun off from Sara Lee between June and
September, 2006, under the new corporate name Hanesbrands Inc.
For the second quarter of fiscal 2006, Branded Apparel reported
net sales of $1.18 billion, down 5% compared to the same period last
year. This decrease was largely driven by overall volume declines of
3%, primarily due to planned exits of certain low-margin fleece and
sleepwear businesses and continued weakness in the hosiery category.
Sales volumes were strong for Hanes men's and boy's underwear and C9
by Champion athleticwear.
Operating segment income for the second quarter of fiscal 2006 was
$169 million, compared to $154 million for the second quarter of
fiscal 2005, up 10%. Improved inventory management, lower SG&A
expenses and favorable cotton costs more than offset the effects of
lower unit volumes and pricing pressure during the quarter.
Year-to-date, Branded Apparel reported net sales of $2.32 billion,
down 6% from $2.46 billion in the prior year's first half. Operating
segment income for the first six months of fiscal 2006 was $291
million, a decrease of 3% compared to $300 million for the same period
in fiscal 2005.
Net Interest Expense, General Corporate Expenses, Tax Rate and
Share Repurchase
Net interest expense was $57 million for the second quarter of
fiscal 2006, an increase of $11 million compared to the year-ago
period, resulting from higher net average interest rates. General
corporate expenses were $80 million in the second quarter, compared to
$74 million in the comparable period of the prior year. The effective
tax rate for continuing operations was 19.2% for the second quarter of
fiscal 2006, compared to 12.7% in last year's second quarter. During
the second quarter of fiscal 2006, the company did not repurchase any
shares of its common stock. Approximately 87 million shares remain
authorized by the board of directors for repurchase.
Outlook
Sara Lee's management currently expects diluted EPS for the third
quarter of fiscal 2006 to fall within a range of $.21 to $.26,
compared to $.24 in the year-ago period. The third quarter guidance
does not include any results for discontinued operations, gains or
losses on dispositions or any charges associated with the
transformation that may be recognized during the quarter.
Full-year fiscal 2006 diluted EPS for the corporation are expected
to be in a range of $1.17 to $1.27, compared to $.90 in fiscal 2005,
which was negatively impacted by $.55 per share in net charges related
to significant items. The current full-year guidance includes only
those significant items reported in the first and second quarters of
fiscal 2006 (including impairment charges, exit activities,
transformation costs and gains on business dispositions), and they had
no net impact on EPS. It does not include any results for discontinued
operations, transformation related charges, gains or losses from
business dispositions, or further impairment charges that may occur in
subsequent quarters.
The company expects to complete its $1 billion share repurchase
plan either at the end of fiscal 2006 or early in fiscal 2007. The
repurchase will likely occur after the spin-off of Branded Apparel,
Americas/Asia and will provide better economic value for the company
post-spin. There are no benefits from the additional share repurchase
in the EPS guidance for fiscal 2006. The company expects to repurchase
another $1 billion of stock in the early years of the transformation.
For the third quarter of fiscal 2006, operating segment income is
expected to increase compared to last year's third quarter in five of
the eight business segments: North American retail meats and retail
bakery, foodservice, international bakery and Branded Apparel,
Americas/Asia. The company currently expects base business
profitability to improve over the course of the fiscal year for each
of its business segments with the exception of European Meats and
Household and Body Care.
Webcast
Sara Lee Corporation's review of second quarter results for fiscal
2006 will be broadcast live via the Internet today at 9 a.m. CST.
During the webcast, the company will discuss second quarter results
and provide an outlook for the third quarter and full fiscal year. The
live webcast can be accessed at www.saralee.com and is anticipated to
conclude by 10 a.m. CST. For people who are unable to listen to the
webcast live, the earnings review will be available two hours
following the completion of the webcast in the Investors section of
the Sara Lee corporate Web site until Wednesday, Aug. 2, 2006.
Forward-looking Statements
This news release contains forward-looking statements regarding
Sara Lee's business prospects, costs and operating results, including
statements contained under the heading "Outlook," and the timing and
expected net proceeds from planned business divestitures. In addition,
from time to time, in oral statements and written reports, the
corporation discusses its expectations regarding the corporation's
future performance by making forward-looking statements preceded by
terms such as "expects," "likely" or "believes." 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. Consequently,
the corporation wishes to caution readers not to place undue reliance
on any forward-looking statements. Among the factors that could cause
Sara Lee's actual results to differ from such forward-looking
statements are factors relating to:
- Sara Lee's relationship with its customers, such as (i) a
significant change in Sara Lee's business with any of its
major customers, such as Wal-Mart, the corporation's largest
customer, including changes in the level of inventory these
customers maintain; and (ii) credit and other business risks
associated with customers operating in a highly competitive
retail environment;
- The consumer marketplace, such as (iii) significant
competition, including advertising, promotional and price
competition, and changes in consumer demand for Sara Lee's
products; (iv) fluctuations in the availability and cost of
raw materials, Sara Lee's ability to increase product prices
in response and the impact on Sara Lee's profitability; (v)
the impact of various food safety issues on sales and
profitability of Sara Lee products; and (vi) inherent risks in
the marketplace associated with new product introductions,
including uncertainties about trade and consumer acceptance;
- Sara Lee's transformation plan, such as (vii) Sara Lee's
ability to complete planned business dispositions, and the
timing and terms of such transactions; (viii) Sara Lee's
ability to obtain a favorable tax ruling, and any other
required regulatory approvals, on the proposed spin-off of its
Branded Apparel, Americas/Asia business; (ix) Sara Lee's
ability to effectively integrate its remaining businesses into
the contemplated new business structure, including Sara Lee's
ability to transition customers to different Bakery brands,
transition to common information systems and processes and
manage plant capacity and workforce reductions; (x) Sara Lee's
ability to generate the anticipated efficiencies and savings
from the transformation plan; and (xi) the impact of the
transformation plan on Sara Lee's relationships with its
employees, its major customers and vendors and Sara Lee's cost
of funds;
- Sara Lee's international operations, such as (xii) 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; and
(xiii) Sara Lee's ability to continue to source production and
conduct manufacturing and selling operations in various
countries due to changing business conditions, political
environments, import quotas and the financial condition of
suppliers; and
- Previous business decisions, such as (xiv) Sara Lee's ability
to achieve planned cash flows from capital expenditures and
acquisitions, particularly Earthgrains, and the impact of
changing interest rates and the cost of capital on the
discounted value of those planned cash flows; (xv) credit
ratings issued by the three major credit rating agencies and
the impact these ratings have on Sara Lee's cost to borrow
funds; (xvi) the settlement of a number of ongoing reviews of
Sara Lee's income tax filing positions in various
jurisdictions and inherent uncertainties related to the
interpretation of tax regulations in the jurisdictions in
which Sara Lee transacts business; and (xvii) the continued
legality of tobacco products in the Netherlands, Germany and
Belgium.
In addition, the corporation's results also may 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. We have
provided additional information in our Form 10-K for fiscal 2005,
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.
Company Description
Sara Lee Corporation (www.saralee.com) is a Chicago-based global
manufacturer and marketer of high-quality, brand-name products for
consumers throughout the world. In February 2005, the company began
executing a bold and ambitious multi-year plan to transform Sara Lee
into a company focused on its food, beverage, and household and body
care businesses around the world. As part of its transformation plan,
Sara Lee will drive growth in its key categories via such strong
brands as Ball Park, Douwe Egberts, Hillshire Farm, Jimmy Dean, Kiwi,
Sanex, Senseo and its namesake, Sara Lee.
Consolidated Statements of Income Sara Lee Corporation (NYSE)
---------------------------
(In millions, except per share amounts)
----------------------------------------------------------------------
Second Quarter Ended
----------------------------------
December 31, January 1, Percent
2005 2005 Change
------------ ------------ --------
Continuing operations
Net sales $4,448 $4,512 (1.4)%
------------ ------------
Cost of sales 2,813 2,852
Selling, general and
administrative expenses 1,281 1,270
Charges for (income from) exit
activities and business
dispositions 58 (10)
Contingent sale proceeds - -
Interest expense 76 71
Interest income (19) (25)
------------ ------------
4,209 4,158
------------ ------------
Income from continuing operations
before income taxes 239 354 (32.8)
Income taxes 46 45
------------ ------------
Income from continuing operations 193 309 (37.8)
------------ ------------
Income (loss) from discontinued
operations, net of tax 30 17
Gain on sale of Discontinued
Operations, net of tax 215 -
------------ ------------
Net income $438 $326 34.4
============ ============
Income from continuing operations
per common share
Basic $0.25 $0.39 (35.9)
============ ============
Diluted $0.25 $0.39 (35.9)
============ ============
Net income per common share
Basic $0.58 $0.41 41.5
============ ============
Diluted $0.57 $0.41 39.0
============ ============
Average shares outstanding
Basic 761 788
============ ============
Diluted 765 795
============ ============
Six Months Ended
----------------------------------
December 31, January 1, Percent
2005 2005 Change
------------ ------------ --------
Continuing operations
Net sales $8,640 $8,763 (1.4)%
------------ ------------
Cost of sales 5,504 5,541
Selling, general and
administrative expenses 2,534 2,488
Charges for (income from) exit
activities and business
dispositions 57 (16)
Contingent sale proceeds (114) (117)
Interest expense 150 137
Interest income (40) (51)
------------ ------------
8,091 7,982
------------ ------------
Income from continuing operations
before income taxes 549 781 (29.8)
Income taxes 111 128
------------ ------------
Income from continuing operations 438 653 (32.9)
------------ ------------
Income (loss) from discontinued
operations, net of tax (148) 25
Gain on sale of Discontinued
Operations, net of tax 215 -
------------ ------------
Net income $505 $678 (25.6)
============ ============
Income from continuing operations
per common share
Basic $0.57 $0.83 (31.3)
============ ============
Diluted $0.56 $0.82 (31.7)
============ ============
Net income per common share
Basic $0.65 $0.86 (24.4)
============ ============
Diluted $0.65 $0.85 (23.5)
============ ============
Average shares outstanding
Basic 771 790
============ ============
Diluted 775 796
============ ============
Please see the corporation's quarterly report on Form 10-Q which will
be filed with the Securities and Exchange Commission for further
information and details regarding the corporation's reported results.
Operating Results by Industry Segment Sara Lee Corporation (NYSE)
---------------------------
(In millions) Second Quarter Ended
----------------------------------------------------------------------
Sales
-------------------------
December 31, January 1, Percent
2005 2005 Change
------------ ------------ --------
North American Retail Meats $672 $650 3.5%
North American Retail Bakery 463 449 3.1
Foodservice 609 580 4.9
International Beverage 598 592 0.8
European Meats 285 311 (8.2)
International Bakery 190 200 (4.8)
Household & Body Care 451 491 (8.0)
Branded Apparel 1,182 1,241 (4.8)
------------ ------------ --------
Total sales and operating segment
income 4,450 4,514 (1.4)
Intersegment sales (2) (2) (50.9)
Amortization of identifiable
intangibles -- -- --
General corporate expenses -- -- --
Contingent sale proceeds -- -- --
------------ ------------ --------
Total net sales and operating
income 4,448 4,512 (1.4)
Net interest expense -- -- --
------------ ------------ --------
Net sales and income from
continuing operations
before income taxes $4,448 $4,512 (1.4)%
============ ============ ========
Income from Continuing
Operations Before
Income Taxes
-------------------------
December 31, January 1, Percent
2005 2005 Change
------------ ------------ --------
North American Retail Meats $50 $49 1.1%
North American Retail Bakery (17) (11) (41.0)
Foodservice 56 62 (9.4)
International Beverage 64 111 (42.4)
European Meats 21 31 (32.2)
International Bakery 21 20 3.4
Household & Body Care 36 82 (57.5)
Branded Apparel 169 154 9.7
------------ ------------ --------
Total sales and operating segment
income 400 498 (19.9)
Intersegment sales -- -- --
Amortization of identifiable
intangibles (24) (24) 1.7
General corporate expenses (80) (74) (8.6)
Contingent sale proceeds -- -- --
------------ ------------ --------
Total net sales and operating
income 296 400 (26.3)
Net interest expense (57) (46) (24.5)
------------ ------------ --------
Net sales and income from
continuing operations
before income taxes $239 $354 (32.8)%
============ ============ ========
Six Months Ended
----------------------------------------------------------------------
Sales
-------------------------
December 31, January 1, Percent
2005 2005 Change
------------ ------------ --------
North American Retail Meats $1,287 $1,246 3.3%
North American Retail Bakery 923 920 0.3
Foodservice 1,145 1,118 2.4
International Beverage 1,123 1,096 2.4
European Meats 569 588 (3.2)
International Bakery 382 387 (1.3)
Household & Body Care 897 953 (5.8)
Branded Apparel 2,319 2,459 (5.7)
------------ ------------ --------
Total sales and operating segment
income 8,645 8,767 (1.4)
Intersegment sales (5) (4) (48.0)
Amortization of identifiable
intangibles -- -- --
General corporate expenses -- -- --
Contingent sale proceeds -- -- --
------------ ------------ --------
Total net sales and operating
income 8,640 8,763 (1.4)
Net interest expense -- -- --
------------ ------------ --------
Net sales and income from
continuing operations
before income taxes $8,640 $8,763 (1.4)%
============ ============ ========
Income from Continuing
Operations Before
Income Taxes
-------------------------
December 31, January 1, Percent
2005 2005 Change
------------ ------------ --------
North American Retail Meats $67 $73 (8.5)%
North American Retail Bakery (21) (2) NM
Foodservice 72 105 (31.9)
International Beverage 126 210 (40.1)
European Meats 51 64 (20.4)
International Bakery 33 41 (19.8)
Household & Body Care 115 149 (22.9)
Branded Apparel 291 300 (3.0)
------------ ------------ --------
Total sales and operating segment
income 734 940 (22.0)
Intersegment sales -- -- --
Amortization of identifiable
intangibles (48) (54) 11.3
General corporate expenses (141) (136) (4.0)
Contingent sale proceeds 114 117 (2.3)
------------ ------------ --------
Total net sales and operating
income 659 867 (24.1)
Net interest expense (110) (86) (27.7)
------------ ------------ --------
Net sales and income from
continuing operations
before income taxes $549 $781 (29.8)%
============ ============ ========
Please see the corporation's quarterly report on Form 10-Q which will
be filed with the Securities and Exchange Commission for further
information and details regarding the corporation's reported results.
Consolidated Balance Sheets Sara Lee Corporation (NYSE)
---------------------------
(In millions)
----------------------------------------------------------------------
December 31, July 2,
2005 2005
------------ ------------
ASSETS
Cash and equivalents $1,955 $538
Trade accounts receivable 1,746 1,798
Inventories 2,184 2,284
Other current assets 482 336
Assets of discontinued operations held for
sale 580 860
------------ ------------
Total current assets 6,947 5,816
Other noncurrent assets 129 117
Deferred tax asset 391 303
Property, net 2,992 3,030
Trademarks and other identifiable
intangibles, net 1,490 1,574
Goodwill 3,142 3,154
Assets of discontinued operations held for
sale 52 429
------------ ------------
$15,143 $14,423
============ ============
LIABILITIES AND EQUITY
Notes payable $1,378 $239
Accounts payable 1,244 1,255
Accrued liabilities 2,817 2,507
Current maturities of long-term debt 599 381
Liabilities of discontinued operations held
for sale 386 591
------------ ------------
Total current liabilities 6,424 4,973
Long-term debt 3,736 4,114
Pension obligation 858 858
Other liabilities 1,373 1,354
Liabilities of discontinued operations held
for sale 119 124
Minority interest in subsidiaries 68 62
Common stockholders' equity 2,565 2,938
------------ ------------
$15,143 $14,423
============ ============
Please see the corporation's quarterly report on Form 10-Q which will
be filed with the Securities and Exchange Commission for further
information and details regarding the corporation's reported results.
Sara Lee Corporation
Operating Results by Business Segment
(in millions)
Dollar Percent
Second Quarter Change Change
------------------ ---------------
2006 2005
--------- --------
North American Retail Meats
Net Sales $672 $650 $22 3.5%
--------- ========= ======== ======= =======
Increase/(decrease) in net sales
from:
Changes in foreign currency
exchange rates $- $(3) $3
Dispositions - 22 (22)
--------- -------- -------
Total $- $19 $(19)
========= ======== =======
Operating segment income $50 $49 $1 1.1%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Exit activities and business
dispositions $(6) $5 $(11)
Transformation charges (8) - (8)
Accelerated depreciation (1) - (1)
Change in vacation policy 3 - 3
Dispositions - 3 (3)
--------- -------- -------
Total $(12) $8 $(20)
========= ======== =======
Dollar Percent
Second Quarter YTD Change Change
------------------ ---------------
2006 2005
--------- --------
North American Retail Meats
Net Sales $1,287 $1,246 $41 3.3%
--------- ========= ======== ======= =======
Increase/(decrease) in net sales
from:
Changes in foreign currency
exchange rates $- $(7) $7
Dispositions - 43 (43)
--------- -------- -------
Total $- $36 $(36)
========= ======== =======
Operating segment income $67 $73 $(6) (8.5)%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Exit activities and business
dispositions $(10) $5 $(15)
Transformation charges (13) - (13)
Accelerated depreciation (2) - (2)
Change in vacation policy 3 - 3
Dispositions - 5 (5)
--------- -------- -------
Total $(22) $10 $(32)
========= ======== =======
----------------------------------------------------------------------
Dollar Percent
Second Quarter Change Change
------------------ ---------------
2006 2005
--------- --------
North American Retail Bakery
Net Sales $463 $449 $14 3.1%
--------- ========= ======== ======= =======
Operating segment income $(17) $(11) $(6) (41.0)%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Exit activities and business
dispositions $(1) $1 $(2)
Transformation charges (6) - (6)
Accelerated depreciation (1) - (1)
Change in vacation policy 3 - 3
Benefit plan curtailment gain - 4 (4)
--------- -------- -------
Total $(5) $5 $(10)
========= ======== =======
Dollar Percent
Second Quarter YTD Change Change
------------------ ---------------
2006 2005
--------- --------
North American Retail Bakery
Net Sales $923 $920 $3 0.3%
--------- ========= ======== ======= =======
Operating segment income $(21) $(2) $(19) NM
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Exit activities and business
dispositions $(2) $1 $(3)
Transformation charges (10) - (10)
Accelerated depreciation (5) (4) (1)
Change in vacation policy 3 - 3
Benefit plan curtailment gain - 12 (12)
--------- -------- -------
Total $(14) $9 $(23)
========= ======== =======
----------------------------------------------------------------------
Dollar Percent
Second Quarter Change Change
------------------ ---------------
2006 2005
--------- --------
Total Sara Lee Food & Beverage
Business
Net Sales $1,135 $1,099 $36 3.3%
--------- ========= ======== ======= =======
Increase/(decrease) in net sales
from:
Changes in foreign currency
exchange rates $- $(3) $3
Dispositions - 22 (22)
--------- -------- -------
Total $- $19 $(19)
========= ======== =======
Operating segment income $33 $38 $(5) (11.0)%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Exit activities and business
dispositions $(7) $6 $(13)
Transformation charges (14) - (14)
Accelerated depreciation (2) - (2)
Change in vacation policy 6 - 6
Dispositions - 3 (3)
Benefit plan curtailment gain - 4 (4)
--------- -------- -------
Total $(17) $13 $(30)
========= ======== =======
Dollar Percent
Second Quarter YTD Change Change
------------------ ---------------
2006 2005
--------- --------
Total Sara Lee Food & Beverage
Business
Net Sales $2,210 $2,166 $44 2.0%
--------- ========= ======== ======= =======
Increase/(decrease) in net sales
from:
Changes in foreign currency
exchange rates $- $(7) $7
Dispositions - 43 (43)
--------- -------- -------
Total $- $36 $(36)
========= ======== =======
Operating segment income $46 $71 $(25) (34.6)%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Exit activities and business
dispositions $(12) $6 $(18)
Transformation charges (23) - (23)
Accelerated depreciation (7) (4) (3)
Change in vacation policy 6 - 6
Dispositions - 5 (5)
Benefit plan curtailment gain - 12 (12)
--------- -------- -------
Total $(36) $19 $(55)
========= ======== =======
Sara Lee Corporation
Operating Results by Business Segment
(in millions)
Dollar Percent
Second Quarter Change Change
------------------ ---------------
2006 2005
--------- --------
Sara Lee Foodservice
Net Sales $609 $580 $29 4.9%
--------- ========= ======== ======= =======
Increase/(decrease) in net sales
from:
Changes in foreign currency
exchange rates $- $- $-
Dispositions - 1 (1)
--------- -------- -------
Total $- $1 $(1)
========= ======== =======
Operating segment income $56 $62 $(6) (9.4)%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Changes in foreign currency
exchange rates $- $- $-
Transformation charges (2) - (2)
Accelerated depreciation (1) (3) 2
Benefit plan curtailment gain - 5 (5)
Dispositions - 1 (1)
Change in vacation policy 4 - 4
Hurricane losses (2) - (2)
--------- -------- -------
Total $(1) $3 $(4)
========= ======== =======
Dollar Percent
Second Quarter YTD Change Change
------------------ ---------------
2006 2005
--------- --------
Sara Lee Foodservice
Net Sales $1,145 $1,118 $27 2.4%
--------- ========= ======== ======= =======
Increase/(decrease) in net sales
from:
Changes in foreign currency
exchange rates $- $(1) $1
Dispositions - 2 (2)
--------- -------- -------
Total $- $1 $(1)
========= ======== =======
Operating segment income $72 $105 $(33) (31.9)%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Changes in foreign currency
exchange rates $- $- $-
Transformation charges (4) - (4)
Accelerated depreciation (2) (7) 5
Benefit plan curtailment gain - 14 (14)
Dispositions - 1 (1)
Change in vacation policy 4 - 4
Hurricane losses (5) - (5)
--------- -------- -------
Total $(7) $8 $(15)
========= ======== =======
Sara Lee Corporation
Operating Results by Business Segment
(in millions)
Dollar Percent
Second Quarter Change Change
------------------ ---------------
2006 2005
--------- --------
International Beverage
Net Sales $598 $592 $6 0.8%
--------- ========= ======== ======= =======
Increase/(decrease) in net sales
from:
Changes in foreign currency
exchange rates $- $30 $(30)
========= ======== =======
Operating segment income $64 $111 $(47) (42.4)%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Changes in foreign currency
exchange rates $- $8 $(8)
Exit activities and business
dispositions (29) - (29)
Accelerated depreciation (3) - (3)
Transformation charges (2) - (2)
--------- -------- -------
Total $(34) $8 $(42)
========= ======== =======
Dollar Percent
Second Quarter YTD Change Change
------------------ ---------------
2006 2005
--------- --------
International Beverage
Net Sales $1,123 $1,096 $27 2.4%
--------- ========= ======== ======= =======
Increase/(decrease) in net sales
from:
Changes in foreign currency
exchange rates $- $15 $(15)
========= ======== =======
Operating segment income $126 $210 $(84) (40.1)%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Changes in foreign currency
exchange rates $- $7 $(7)
Exit activities and business
dispositions (45) - (45)
Accelerated depreciation (3) - (3)
Transformation charges (4) - (4)
--------- -------- -------
Total $(52) $7 $(59)
========= ======== =======
----------------------------------------------------------------------
Dollar Percent
Second Quarter Change Change
------------------ ---------------
2006 2005
--------- --------
European Meats
Net Sales $285 $311 $(26) (8.2)%
--------- ========= ======== ======= =======
Increase/(decrease) in net sales
from:
Changes in foreign currency
exchange rates $- $25 $(25)
========= ======== =======
Operating segment income $21 $31 $(10) (32.2)%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Changes in foreign currency
exchange rates $- $3 $(3)
Exit activities and business
dispositions (3) - (3)
Transformation charges - - -
--------- -------- -------
Total $(3) $3 $(6)
========= ======== =======
Dollar Percent
Second Quarter YTD Change Change
------------------ ---------------
2006 2005
--------- --------
European Meats
Net Sales $569 $588 $(19) (3.2)%
--------- ========= ======== ======= =======
Increase/(decrease) in net sales
from:
Changes in foreign currency
exchange rates $- $26 $(26)
========= ======== =======
Operating segment income $51 $64 $(13) (20.4)%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Changes in foreign currency
exchange rates $- $3 $(3)
Exit activities and business
dispositions (3) - (3)
Transformation charges (1) - (1)
--------- -------- -------
Total $(4) $3 $(7)
========= ======== =======
----------------------------------------------------------------------
Dollar Percent
Second Quarter Change Change
------------------ ---------------
2006 2005
--------- --------
International Bakery
Net Sales $190 $200 $(10) (4.8)%
--------- ========= ======== ======= =======
Increase/(decrease) in net sales
from:
Changes in foreign currency
exchange rates $- $14 $(14)
========= ======== =======
Operating segment income $21 $20 $1 3.4%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Changes in foreign currency
exchange rates $- $1 $(1)
Exit activities and business
dispositions - - -
Transformation charges (1) - (1)
--------- -------- -------
Total $(1) $1 $(2)
========= ======== =======
Dollar Percent
Second Quarter YTD Change Change
------------------ ---------------
2006 2005
--------- --------
International Bakery
Net Sales $382 $387 $(5) (1.3)%
--------- ========= ======== ======= =======
Increase/(decrease) in net sales
from:
Changes in foreign currency
exchange rates $- $13 $(13)
========= ======== =======
Operating segment income $33 $41 $(8) (19.8)%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Changes in foreign currency
exchange rates $- $1 $(1)
Exit activities and business
dispositions (5) - (5)
Transformation charges (1) - (1)
--------- -------- -------
Total $(6) $1 $(7)
========= ======== =======
----------------------------------------------------------------------
Sara Lee Corporation
Operating Results by Business Segment
(in millions)
Dollar Percent
Second Quarter Change Change
------------------ ---------------
2006 2005
--------- --------
Household & Body Care
Net Sales $451 $491 $(40) (8.0)%
--------- ========= ======== ======= =======
Increase/(decrease) in net sales
from:
Changes in foreign currency
exchange rates $- $28 $(28)
Dispositions - 3 (3)
--------- -------- -------
Total $- $31 $(31)
========= ======== =======
Operating segment income $36 $82 $(46) (57.5)%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Changes in foreign currency
exchange rates $- $4 $(4)
Exit activities and business
dispositions (6) 14 (20)
Accelerated depreciation (5) (3) (2)
Transformation charges (2) - (2)
Dispositions - - -
--------- -------- -------
Total $(13) $15 $(28)
========= ======== =======
Dollar Percent
Second Quarter YTD Change Change
------------------ ---------------
2006 2005
--------- --------
Household & Body Care
Net Sales $897 $953 $(56) (5.8)%
--------- ========= ======== ======= =======
Increase/(decrease) in net sales
from:
Changes in foreign currency
exchange rates $- $27 $(27)
Dispositions - 6 (6)
--------- -------- -------
Total $- $33 $(33)
========= ======== =======
Operating segment income $115 $149 $(34) (22.9)%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Changes in foreign currency
exchange rates $- $4 $(4)
Exit activities and business
dispositions 20 14 6
Accelerated depreciation (9) (6) (3)
Transformation charges (4) - (4)
Dispositions - 2 (2)
--------- -------- -------
Total $7 $14 $(7)
========= ======== =======
----------------------------------------------------------------------
Dollar Percent
Second Quarter Change Change
------------------ ---------------
2006 2005
--------- --------
Total Sara Lee International
Business
Net Sales $1,524 $1,594 $(70) (4.3)%
--------- ========= ======== ======= =======
Increase/(decrease) in net sales
from:
Changes in foreign currency
exchange rates $- $97 $(97)
Dispositions - 3 (3)
--------- -------- -------
Total $- $100 $(100)
========= ======== =======
Operating segment income $142 $244 $(102) (42.5)%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Changes in foreign currency
exchange rates $- $16 $(16)
Exit activities and business
dispositions (38) 14 (52)
Accelerated depreciation (8) (3) (5)
Transformation charges (5) - (5)
Dispositions - - -
--------- -------- -------
Total $(51) $27 $(78)
========= ======== =======
Dollar Percent
Second Quarter YTD Change Change
------------------ ---------------
2006 2005
--------- --------
Total Sara Lee International
Business
Net Sales $2,971 $3,024 $(53) (1.8)%
--------- ========= ======== ======= =======
Increase/(decrease) in net sales
from:
Changes in foreign currency
exchange rates $- $81 $(81)
Dispositions - 6 (6)
--------- -------- -------
Total $- $87 $(87)
========= ======== =======
Operating segment income $325 $464 $(139) (30.1)%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Changes in foreign currency
exchange rates $- $15 $(15)
Exit activities and business
dispositions (33) 14 (47)
Accelerated depreciation (12) (6) (6)
Transformation charges (10) - (10)
Dispositions - 2 (2)
--------- -------- -------
Total $(55) $25 $(80)
========= ======== =======
----------------------------------------------------------------------
Dollar Percent
Second Quarter Change Change
------------------ ---------------
2006 2005
--------- --------
Branded Apparel
Net Sales $1,182 $1,241 $(59) (4.8)%
--------- ========= ======== ======= =======
Increase/(decrease) in net sales
from:
Changes in foreign currency
exchange rates $- $(1) $1
Acquisitions 14 24 (10)
--------- -------- -------
Total $14 $23 $(9)
========= ======== =======
Operating segment income $169 $154 $15 9.7%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Changes in foreign currency
exchange rates $- $1 $(1)
Exit activities and business
dispositions - 2 (2)
Restructuring charges (1) - (1)
Acquisitions 1 - 1
--------- -------- -------
Total $- $3 $(3)
========= ======== =======
Dollar Percent
Second Quarter YTD Change Change
------------------ ---------------
2006 2005
--------- --------
Branded Apparel
Net Sales $2,319 $2,459 $(140) (5.7)%
--------- ========= ======== ======= =======
Increase/(decrease) in net sales
from:
Changes in foreign currency
exchange rates $- $(6) $6
Acquisitions 20 24 (4)
--------- -------- -------
Total $20 $18 $2
========= ======== =======
Operating segment income $291 $300 $(9) (3.0)%
------------------------ ========= ======== ======= =======
Increase/(decrease) in operating
segment income from:
Changes in foreign currency
exchange rates $- $- $-
Exit activities and business
dispositions - 8 (8)
Restructuring charges (1) - (1)
Acquisitions 1 - 1
--------- -------- -------
Total $- $8 $(8)
========= ======== =======
Second Quarter Fiscal 2006 Unit Volume Overview
-----------------------------------------------
Unit volume changes versus Fiscal 2005
Second Quarter Six Months
Fiscal 2006 Fiscal 2006
--------------- ---------------
Sara Lee Corporation 1% (1)%
Sara Lee Food & Beverage 4% 1%
North American Retail Meats 8% 6%
North American Retail
Bakery (incl. Senseo) 1% (2)%
Sara Lee Foodservice 5% 3%
Sara Lee International 0% (4)%
International Beverage
(roast and ground coffee) 1% (7)%
European Meats (1)% 1%
International Bakery 0% 0%
Global Household & Body
Care (four core
categories) (2)% (3)%
Branded Apparel(a) (3)% (3)%
(a) Excludes unit volume impacts from the European branded apparel
businesses, which have been reported as discontinued operations.
Brand Segmentation Strategy Update
Fiscal 2006 - Six Months Year-to-Date
Sales by Segment
($ in millions)
Positive/(Negative)
% Change Effect of Currency
Six Months vs. Rate Changes(a)
FY 2006 FY 2005(a) (percentage points)
-------------------------------------------------
Strategic Investment $1,814 9% (1) pts.
Support and Grow 2,164 (5) -
Sustain 1,700 (3) (2)
Manage for Cash 1,512 (8) (1)
-------------------------------------------------
Total Retail 7,190 (2) (1)
Foodservice/Other 1,450 2 (1)
-------------------------------------------------
Total $8,640 (1)% - pts.
=================================================
Strategic Investment Brand Sales
($ in millions)
Positive/(Negative)
% Change Effect of Currency
Six Months vs. Rate Changes(a)
FY 2006 FY 2005(a) (percentage points)
-------------------------------------------------
Sara Lee $452 19% - pt.
Ball Park 119 4 -
Hillshire Farm 342 13 -
Jimmy Dean 232 15 -
Senseo 163 7 (5)
Ambi Pur 170 (16) (2)
Champion 258 9 (1)
Just My Size 78 1 -
-------------------------------------------------
Total $1,814 9% (1) pts.
=================================================
Retail Sales and MAP Spending - Percent to Total Retail
Six Months Sales Six Months MAP
FY 2006 FY 2005 FY 2006 FY 2005
----------------------------------------
Strategic Investment 25% 23% 37% 38%
Support and Grow 30 31 37 36
Sustain 24 24 17 18
Manage for Cash 21 22 9 8
----------------------------------------
Total Retail 100% 100% 100% 100%
========================================
(a) In order to calculate the % change in sales on a constant currency
basis, the reported % change vs. Fiscal Year 2005 should be
increased by the negative currency rate changes and decreased by
the positive currency rate changes.
