Sara Lee Announces Fiscal 2005 Results and New Capital Structure Initiatives.CHICAGO Chicago, city, United States Chicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. -- Sara Lee
Sara Lee Corporation (NYSE: SLE) is a global consumer-goods company based in Downers Grove, Illinois, USA. Corporation: --Diluted earnings per share for fiscal 2005 were $.90; diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. for the fourth quarter were a loss of $.19 per share; significant items reduced EPS by $.55 per share in the fourth quarter and full year --Company announces a $2 billion share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program, has decided to maintain a dividend of $.79 per share for fiscal 2006, and plans at least $1.5 billion in debt reduction over the next two years Sara Lee Corporation today announced financial results for fiscal 2005, ending July July: see month. 2, 2005. The company also announced initiatives to return value to shareholders and optimize optimize - optimisation the company's capital structure as it pursues its Transformation plan. Fiscal 2005 Results During the fourth quarter of fiscal 2005, the Direct Selling Direct selling is the marketing of products or services to consumers through sales tactics including presentations, demonstrations, and phone calls. It is sometimes also considered to be a sale that does not utilize a "middle man" such as a retail outlets, distributors or brokers. business has been recognized as a discontinued operation discontinued operation A segment of a business that has been abandoned or sold or for which plans for one or another of these actions have been approved. See also continuing operations. . The prior year's results have been restated to reflect this treatment. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for fiscal 2005 were $19.3 billion, up 1% over fiscal 2004. For the fourth quarter of fiscal 2005, net sales were $4.8 billion, down 5% compared to $5.0 billion in the prior year's fourth quarter, which included the positive effect of a 53rd week. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of (EPS) for the corporation for fiscal 2005 were $.90, versus $1.59 in fiscal 2004, while diluted EPS in the fourth quarter were a loss of $.19 per share, compared to diluted EPS of $.44 for the year-ago period. Both the fiscal 2005 and fourth quarter diluted EPS numbers were reduced by $.55 per share in net charges for exit and business disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of activities; impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of goodwill, intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. and properties; tax on repatriation Repatriation The process of converting a foreign currency into the currency of one's own country. Notes: If you are American, converting British Pounds back to U.S. dollars is an example of repatriation. of foreign earnings; and actions taken to implement the company's Transformation plan. The remaining decrease in diluted EPS in both periods was primarily due to lower operating segment income as a result of the 53rd week in the prior year, higher commodity costs across most lines of business and the difficult European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. retail environment. The reported results of the corporation in both fiscal 2005 and 2004 were impacted by a number of significant events and transactions. Attached to this news release is a detailed analysis of all of these items. A summary of these items is presented below:
Fourth Quarter Fiscal Year
--------------------------------
2005 2004 2005 2004
--------------------------------
Diluted (loss) earnings per share $(.19) $.44 $.90 $1.59
================================
Increase / (decrease) in EPS from:
Impairment charges (.37) - (.37) -
Exit, business disposition and
other costs related to business
transformation (.12) (.03) (.10) (.04)
Impact of 53rd week - .04 - .04
Various income tax charges and exam
resolutions (.06) .08 (.09) .08
--------------------------------
Total(1) $(.55) $.09 $(.55) $.08
================================
(1) EPS amounts are rounded to the nearest $.01 and may not add to the
total.
Capital Structure Initiatives Sara Lee has adopted a plan to return value to shareholders, optimize the company's capital structure and maintain a strong credit profile as it pursues its Transformation plan. Sara Lee intends to maintain the annual dividend of $.79 per share in fiscal 2006, regardless of the timing of dispositions. During the five-year Transformation period, the company also intends to maintain an attractive dividend yield relative to its food peers, which may result in a payout ratio Payout Ratio The percentage of earnings paid out in dividends. It is calculated by dividing dividends per share by earnings per share. Notes: The payout ratio indicates how well earnings support the dividend payments: the lower the ratio, the more secure the dividend. in excess of the company's targeted 40 to 50% payout pay·out n. 1. The act or an instance of paying out. 2. A percentage of corporate earnings that is paid as dividends to shareholders. , excluding the effects of Transformation costs. Sara Lee's Board of Directors has authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: the repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of an additional 100 million shares of company stock, or approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $2 billion in share buy-backs based on the current stock price. Sara Lee plans to repurchase $1 billion of stock under this authorization The right or permission to use a system resource; the process of granting access. See access control. in fiscal 2006 and the remaining purchases will be made early during the Transformation period. In the next two years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time company expects to use divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). proceeds and cash from operations to reduce total debt by at least $1.5 billion. Additional Detail On Fiscal 2005 Total cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses for the corporation was $1.3 billion for fiscal 2005 and $300 million for the fourth quarter of fiscal 2005. Media advertising and promotion (MAP) spending for continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the year was at a similar level to last year, but MAP spending for the Strategic Investment brands, Sara Lee's brands with the highest growth potential, was up 12%. Total MAP spending for continuing operations increased 4% in the fourth quarter. For fiscal 2005, corporate unit volumes decreased 4%, primarily due to softness in U.S. regional white breads, planned exit of unprofitable, non-core bakery business and volume weakness in the global air care, U.S. coffee and European intimate apparel businesses. Corporate unit volumes declined 8% during the fourth quarter of fiscal 2005, primarily due to the effect of the 53rd week in last year's fourth quarter. "Although our business results are in line with what we anticipated, they are not where we want them to be, underscoring the need for the Transformation plan we announced in February February: see month. ," said Brenda C. Barnes Brenda C. Barnes is the president, chairman and chief executive of Sara Lee, and previously was the first female CEO of Sara Lee. She has been listed in Forbes power rankings of The World's 100 Most Powerful Women since 2004. , president and chief executive officer of Sara Lee Corporation. "In less than six months, we've we've Contraction of we have. we've have completed an incredible amount of Transformation work," she added. "Our new organization design is completed and implemented. We have a new headquarters facility just outside of Chicago in Downers Grove Downers Grove, village (1990 pop. 46,858), Du Page co., NE Ill.; settled 1832, inc. 1873. Downers Grove has undergone population growth and commercial development that include the construction of new office complexes. and the first people have already moved in. We have hired Chief Information and Chief Procurement Officers A Chief Procurement Officer (CPO) is an executive role focused on supply management for an enterprise. A report by Aberdeen Group shows a marked acceleration in the significance of procurement's role. and are well along in staffing those organizations. We have developed plans for fiscal 2006 that include initiatives to improve our operational efficiencies. We also continue to move forward with our announced divestitures and the spin-off The situation that arises when a parent corporation organizes a subsidiary corporation, to which it transfers a portion of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the parent corporation's shareholders. of Branded Apparel Americas/Asia. At the same time, we have developed and announced plans to return value to shareholders. "We continue to focus on improving our operating results and believe they will get progressively better over the course of fiscal 2006. We are taking the right steps to make Sara Lee a substantially better company as quickly as possible, and we are making great progress," concluded Barnes Barnes, former municipal borough, SE England. See Richmond upon Thames. . Performance Review A performance review for each line of business follows. Unit volumes exclude acquisitions and divestitures subsequent to the start of fiscal 2004. MEATS Fourth Quarter Highlights --Net sales decreased due to the impact of the 53rd week and business dispositions, partially offset by favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. product mix and foreign currency exchange rates --Global unit volumes were down as a result of the 53rd week and softness in Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. --Operating segment income decreased due to higher commodity costs and the impact of the 53rd week --MAP spending was down 13%
Fourth Quarter Change Fiscal Year Change
--------------------------------------------------------
In millions 2005 2004 $ % 2005 2004 $ %
----------------------------------------------------------------------
Net sales $1,066 $1,117 $(51) (4.6)% $4,254 $4,171 $83 2.0%
----------------------------------------------------------------------
Increase/
(decrease) in
net sales
from:
Changes in
foreign
currency
exchange
rates $- $(14) $14 $- $(71) $71
Acquisitions/
dispositions - 23 (23) - 42 (42)
Activity in
the 53rd
week(2) - 83 (83) - 83 (83)
----------------------------------------------------------------------
----------------------------------------------------------------------
Operating
segment
income $72 $102 $(30)(29.7)% $323 $415 $(92) (22.1)%
----------------------------------------------------------------------
Increase/
(decrease) in
operating
segment
income from:
Changes in
foreign
currency
exchange
rates $- $(2) $2 $- $(9) $9
Exit
activities
and business
dispositions (2) - (2) 33 3 30
Transformation/
restructuring
costs (4) - (4) (4) - (4)
Acquisitions/
dispositions - 2 (2) - 4 (4)
Activity in
the 53rd
week(2) - 7 (7) - 7 (7)
Unit volume change vs. 2004(2)
Fourth Fiscal
Quarter Year
2005 2005
------------------
Global unit volume (5)% (3)%
U.S. (4)% (3)%
Europe (6)% (2)%
Mexico (9)% (7)%
(2) Fiscal 2004 was a 53-week year
Retail --Overall U.S. retail sales were down in the quarter due to the 53rd week. By refocusing Noun 1. refocusing - focusing again focalisation, focalization, focusing - the act of bringing into focus on marketing execution, pricing and promotions, core retail businesses such as Ball Park hot dogs and Hillshire Farm Hillshire Farm is a brand of meat products marketed by Sara Lee. External link
adj. Of or relating to the estimated value that is added to a product or material at each stage of its manufacture or distribution: new products such as Jimmy Dean frozen breakfast items and Hillshire Farm Ultra Thin deli meats continued to perform well, driving a positive product mix. Jimmy Dean Breakfast Skillets were launched at the end of the fourth quarter. In fiscal 2005, U.S. retail unit volumes declined, but sales were up. --Higher pork pork, flesh of swine prepared as food, one of the principal commodities of the meatpacking industry. Pork has long been a staple food in most of the world, although religious taboos have limited its use, especially among Jews and Muslims. and beef commodity costs, the 53rd week and charges related to the Transformation drove lower profits in the U.S. retail business in the fourth quarter and fiscal 2005. --The European Meats business reported decreased unit volumes and sales in the fourth quarter, due to the 53rd week. Profits declined in the period due to the 53rd week and higher commodity costs. For fiscal 2005, European unit volumes decreased, sales were up and profits were down. --Unit volumes declined in Mexico in the fourth quarter due to the 53rd week and softness in the supermarket supermarket Large retail store operated on a self-service basis, selling groceries, produce, meat, bakery and dairy products, and sometimes nonfood goods. Supermarkets were first established in the U.S. during the 1930s as no-frills retail stores offering low prices. channel. Sales and profits were up in the quarter on higher net average selling prices The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. . For fiscal 2005, volumes were down, while sales and profits were up. Foodservice The foodservice (or food service) industry (US English; catering industry in British English) encompasses those places, institutions, and companies responsible for any meal eaten away from home. --Foodservice volumes, sales and profits decreased in the fourth quarter, primarily due to the effect of the 53rd week. Higher commodity costs also contributed to lower foodservice profits in the fourth quarter. For fiscal 2005, foodservice volumes declined, sales were up and profits were down. BAKERY Fourth Quarter Highlights --Net sales and unit volumes decreased primarily due to the planned exit from unprofitable non-branded business and the impact of the 53rd week --Operating segment income rose significantly as a result of cost savings from restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). actions and product mix improvements --MAP spending decreased 17%
Fourth Quarter Change Fiscal Year Change
--------------------------------------------------------
In millions 2005 2004 $ % 2005 2004 $ %
----------------------------------------------------------------------
Net sales $816 $898 $(82) (9.2)% $3,297 $3,415 $(118)(3.5)%
----------------------------------------------------------------------
Increase/
(decrease) in
net sales
from:
Changes in
foreign
currency
exchange
rates $- $(10) $10 $- $(48) $48
Activity in
the 53rd
week(3) - 69 (69) - 69 (69)
----------------------------------------------------------------------
----------------------------------------------------------------------
Operating
segment
income $53 $35 $18 49.6% $213 $156 $57 36.4%
----------------------------------------------------------------------
Increase/
(decrease) in
operating
segment
income from:
Changes in
foreign
currency
exchange
rates $- $- $- $- $(4) $4
Exit
activities
and business
dispositions (6) (10) 4 (5) (14) 9
Accelerated
depreciation - - - (10) (5) (5)
Retiree
medical
curtailment
gain - - - 28 - 28
Transformation/
restructuring
costs (4) - (4) (4) - (4)
Activity in
the 53rd
week(3) - 7 (7) - 7 (7)
Unit volume change vs. 2004(3)
Fourth Fiscal
Quarter Year
2005 2005
------------------
Global unit volume (14)% (8)%
Fresh baked goods (15)% (10)%
Refrigerated dough (10)% (2)%
Frozen baked goods (8)% (3)%
(3) Fiscal 2004 was a 53-week year
Fresh Baked Baked can refer to a wide variety of things. Cooking:
--New products continued to drive volume and sales increases for the Sara Lee fresh bread brand in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Sara Lee is America's leading brand in the combined fresh bread, buns, rolls and bagels category according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Information Resources (1) The data and information assets of an organization, department or unit. See data administration. (2) Another name for the Information Systems (IS) or Information Technology (IT) department. See IT. , Inc., share data. New Sara Lee products launched in the fourth quarter included wheat wheat, cereal plant of the genus Triticum of the family Gramineae (grass family), a major food and an important commodity on the world grain market. Wheat Varieties and Their Uses hot dog buns A hot dog bun is a type of bun shaped specifically to contain a hot dog. There are two basic types: top loading, which is popular in New England, and side loading, preferred in the South and Midwest United States. , wheat and white hamburger buns and premium-size 100% whole-wheat whole-wheat adj. 1. Made from the entire grain of wheat, including the bran: whole-wheat flour. 2. Made with whole-wheat flour: whole-wheat bread. hamburger buns. --Total U.S. fresh bread unit volume declines in the fourth quarter and fiscal 2005 resulted from the effect of the 53rd week, planned exit from unprofitable non-branded business, and general category softness in white breads. --Cost savings resulting from restructuring actions and favorable product mix drove higher profits for the U.S. fresh bakery business in the fourth quarter and fiscal 2005. --MAP spending was down in the fourth quarter due to timing between the quarters as well as a shift to other forms of promotion, which are reflected as a deduction deduction, in logic, form of inference such that the conclusion must be true if the premises are true. For example, if we know that all men have two legs and that John is a man, it is then logical to deduce that John has two legs. from sales. --In Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). , fresh bread unit volumes and sales decreased in the
fourth quarter primarily due to the effect of the 53rd week. Sales
increased in fiscal 2005 due to growth for crustless bread Crustless bread is bread without crusts. It is very popular among children and people who don't eat their crusts. It is less popular among those who do eat their crusts. in Spain Spain, Span. España (āspä`nyä), officially Kingdom of Spain, constitutional monarchy (2005 est. pop. 40,341,000), 194,884 sq mi (504,750 sq km), including the Balearic and Canary islands, SW Europe. .Refrigerated re·frig·er·ate tr.v. re·frig·er·at·ed, re·frig·er·at·ing, re·frig·er·ates 1. To cool or chill (a substance). 2. To preserve (food) by chilling. and Frozen --Worldwide, refrigerated dough unit volumes and sales decreased in the fourth quarter, primarily because of the 53rd week. For the year, global refrigerated dough sales were up, driven by success with private label products in Europe, particularly sales to discounters in Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). . --In the United States, sales for frozen products at retail were up in the fourth quarter driven by improved product mix and effective promotions. Volumes and sales for frozen products at foodservice declined in the fourth quarter due to the 53rd week and timing of Easter Easter [A.S. Eastre, name of a spring goddess], chief Christian feast, commemorating the resurrection of Jesus after his crucifixion. In the West, Easter is celebrated on the Sunday following the full moon next after the vernal equinox (see calendar); thus, it pie sales. --In Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. , success with new products such as Sara Lee frozen fruits and cookie dough Cookie dough refers to a blend of cookie ingredients which has been mixed into a solid yet malleable form but has not yet been hardened by heat. The dough is often then separated and the portions baked to individual cookies, or eaten as is. drove sales in the fourth quarter and fiscal year. Product launches in the fourth quarter included Sara Lee Bake at Home Refrigerated Muffins and Brownie brownie, in Celtic folklore, household spirit associated with farmsteads. Brownies help with chores, but, if criticized, they will make mischief, such as spoiling crops. If payment other than food is offered a brownie, he vanishes from a farm forever. Batter. BEVERAGE Fourth Quarter Highlights --Net sales increased, driven by favorable foreign currency exchange rates, higher selling prices and a significant increase in Senseo Senseo is a registered trademark for a coffee brewing system from Dutch companies Philips and Douwe Egberts, a subsidiary of Sara Lee Corporation. The two main characteristics of the system are its coffee pods (called pads in some countries) and its design. sales, partially offset by the impact of the 53rd week --Unit volumes were down primarily as a result of the 53rd week and volume softness in the United States --Operating segment income declined as a result of charges for exit activities and impairment --MAP spending was down 6%
Fourth Quarter Change Fiscal Year Change
--------------------------------------------------------
In millions 2005 2004 $ % 2005 2004 $ %
----------------------------------------------------------------------
Net sales $871 $843 $28 3.4% $3,357 $3,157 $200 6.3%
----------------------------------------------------------------------
Increase/
(decrease) in
net sales
from:
Changes in
foreign
currency
exchange
rates $- $(35) $35 $- $(155) $155
Activity in
the 53rd
week(4) - 61 (61) - 61 (61)
----------------------------------------------------------------------
----------------------------------------------------------------------
Operating
segment
income $44 $131 $(87)(66.2)% $388 $492 $(104)(21.2)%
----------------------------------------------------------------------
Increase/
(decrease) in
operating
segment
income from:
Changes in
foreign
currency
exchange
rates $- $(6) $6 $- $(32) $32
Exit
activities
and business
dispositions (37) 2 (39) (37) 2 (39)
Transformation/
restructuring
costs (3) - (3) (3) - (3)
Impairment
charge (45) - (45) (45) - (45)
Activity in
the 53rd
week(4) - 10 (10) - 10 (10)
Unit volume change vs. 2004(4)
Fourth Fiscal
Quarter Year
2005 2005
------------------
Global unit volume (7)% (3)%
Retail (5)% (2)%
Europe (6)% (3)%
U.S. (11)% (8)%
Brazil 1% 4%
Foodservice (12)% (5)%
Europe (5)% 0%
U.S. (15)% (7)%
(4) Fiscal 2004 was a 53-week year
Retail --In fiscal 2005, Senseo continued its impressive growth with sales increasing 39% to $327 million. The number of Senseo machines in the global marketplace grew 56% during the year to over 8 million. --In Europe, Senseo coffee pods Coffee pods are pre-packaged coffee beans in their own filter. Senseo is a patented coffee maker which uses these. A court ruled that their patent does not cover the pods, and that other companies may manufacture and sell pods that are compatible with the Senseo system. continued to show strong unit volume gains in the fourth quarter, particularly in the Netherlands Netherlands (nĕth`ərləndz), Du. Nederland or Koninkrijk der Nederlanden, officially Kingdom of the Netherlands, constitutional monarchy (2005 est. pop. 16,407,000), 15,963 sq mi (41,344 sq km), NW Europe. , Belgium Belgium (bĕl`jəm), Du. België, Fr. La Belgique, officially Kingdom of Belgium, constitutional kingdom (2005 est. pop. 10,364,000), 11,781 sq mi (30,513 sq km), NW Europe. , France and Germany. Total European roast and ground retail coffee volume was down in the quarter and fiscal 2005, primarily due to the effect of the 53rd week and private label competition. --Net sales for European retail coffee increased in the fourth quarter as a result of favorable currency exchange rates and higher consumer prices. Profits declined due to lower unit volumes and higher green coffee prices not entirely offset by price increases. For fiscal 2005, retail coffee sales and profits were up in Europe. --U.S. retail coffee unit volumes declined during the fourth quarter due to the 53rd week and competition in the category. The growth in U.S. retail sales was driven by price increases implemented across the roast and ground coffee brands to offset higher commodity costs, as well as incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. sales for Senseo. Profits decreased in the fourth quarter due to lower volumes and lower margins. For fiscal 2005, U.S. retail coffee sales were up, while volumes and profits decreased. --In Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. , unit volumes were up in the fourth quarter in a very competitive market. Sales rose due to increased unit volumes combined with price increases implemented to offset commodity cost increases. Profits were down in the fourth quarter, due to lower margins as price increases did not entirely offset higher green coffee costs. For the year, volumes and sales were up in Brazil, while profits were down. Foodservice --Worldwide, foodservice coffee sales increased in the fourth quarter due to higher selling prices, while profits decreased as a result of the 53rd week, lower roast and ground coffee volumes and lower margins. For the year, worldwide foodservice coffee sales were up, while profits declined. --Foodservice unit volumes in the United States declined in the fourth quarter due to the 53rd week and volume weakness in the traditional roast and ground coffee market. In Europe, fourth quarter foodservice unit volumes declined as growth of Cafitesse liquid coffee concentrate was not enough to offset the effect of the 53rd week. HOUSEHOLD PRODUCTS Fourth Quarter Highlights --Net sales declined due to the effect of the 53rd week and weakness in air care and insecticides insecticides, chemical, biological, or other agents used to destroy insect pests; the term commonly refers to chemical agents only. Chemical Insecticides , partially offset by favorable currency exchange rates --Total core category unit volumes decreased as a result of the 53rd week and significantly lower air care volumes --Operating segment income was down as a result of unit volume declines, lower margins and restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. --MAP spending was up 6%
Fourth
Quarter(5) Change Fiscal Year(5) Change
---------------------------------------------------------
In millions 2005 2004 $ % 2005 2004 $ %
----------------------------------------------------------------------
Net sales $490 $521 $(31) (5.8)% $1,927 $1,934 $(7) (0.3)%
----------------------------------------------------------------------
Increase/
(decrease)
in net sales
from:
Changes in
foreign
currency
exchange
rates $- $(20) $20 $- $(106) $106
Acquisitions/
dispositions - 5 (5) - 24 (24)
Activity in
the 53rd
week(6) - 46 (46) - 46 (46)
----------------------------------------------------------------------
----------------------------------------------------------------------
Operating
segment
income $72 $112 $(40)(34.9)% $310 $354 $(44)(12.3)%
----------------------------------------------------------------------
Increase/
(decrease)
in operating
segment
income from:
Changes in
foreign
currency
exchange
rates $- $(5) $5 $- $(19) $19
Exit
activities
and business
dispositions (16) 2 (18) 1 - 1
Accelerated
depreciation 1 - 1 (9) - (9)
Acquisitions/
dispositions - 3 (3) - 9 (9)
Activity in
the 53rd
week(6) - 8 (8) - 8 (8)
(5) Prior year's results have been restated to exclude Direct Selling,
which is being reported as a discontinued operation.
Unit volume change vs. 2004(6)
Fourth Fiscal
Quarter Year
2005 2005
--------------------
Household and Body Care core
category unit volumes (6)% (3)%
Body Care 0% 1%
Air Care (22)% (14)%
Shoe Care (3)% 0%
Insecticides (5)% 3%
(6) Fiscal 2004 was a 53-week year
Household and Body Care --Body care sales were down in the fourth quarter as favorable currency effects and increased sales for the Sanex brand could not entirely offset declines in other body care brands and the effect of the 53rd week. In fiscal 2005, body care unit volumes and sales were up. --Air care unit volumes and sales remained weak in the fourth quarter due to category softness in Europe and strong competition in the challenging European retail environment. To help counter market and competitive pressures, the company continued to launch new products, such as the Pink Clarity Clarity is the property of being clear or transparent. Clarity can refer to one's ability to clearly visualize an object or concept, as in thought, understanding, and the "mind's eye", as well as the traditional notion of visual perception, that is, with the variant variant /var·i·ant/ (var´e-ant) 1. something that differs in some characteristic from the class to which it belongs. 2. exhibiting such variation. var·i·ant adj. of the Ambi Pur Pur (pûr) [Heb.,=lot], in the Bible, lot cast by Haman to determine the time for the murder of the Jews. See Purim. Welcome bathroom A bathroom is a room that may have different functions depending on the cultural context. In the most literal sense, the word bathroom means "a room with a bath". Because the traditional bathtubs have partly made way for modern showers, including steam showers, the more general door air freshener air freshener n → ambientador m air freshener air n → désodorisant m air freshener air n → and the Ambi Pur Electrical Solo Solo: see Surakarta, Indonesia. SOLO - [SOL (Semantic Operating Language) + LOGO]. A variant of LOGO with primitives for dealing with semantic networks and pattern matching rather than lists. Plug. In fiscal 2005, air care unit volumes and sales were down. --Shoe care unit volumes decreased during the fourth quarter as a result of last year's 53rd week. Sales increased as a result of positive product mix and favorable foreign currency effects Foreign Currency Effects The extent to which the changes in a foreign currency affects the return on a foreign investment. Notes: Foreign investments are complicated by the currency fluctuation and conversion between countries. . Following the launches in China and Spain, Kiwi kiwi (kē`wē) or apteryx (ăp`tərĭks), common name for the smallest member of an order of primitive flightless birds related to the ostrich, the emu, and the cassowary. Express Cream was successfully introduced in Europe in the fourth quarter. In fiscal 2005, shoe care unit volumes were flat, while sales were up. --Unit volumes for insecticides decreased in the fourth quarter primarily due to the 53rd week. European unit volumes also were lower as a result of unfavorable weather conditions and the challenging retail environment. Fourth quarter insecticides sales declined as a result of the lower volumes and unfavorable product mix, particularly in India India, officially Republic of India, republic (2005 est pop. 1,080,264,000), 1,261,810 sq mi (3,268,090 sq km), S Asia. The second most populous country in the world, it is also sometimes called Bharat, its ancient name. India's land frontier (c. . For the year, insecticides unit volumes were up, but sales were slightly down. Direct Selling Direct Selling is no longer included in the Household Products business segment as its results are being reported as a discontinued operation. BRANDED APPAREL Fourth Quarter Highlights --Net sales decreased as strong underwear and sock sock white mark on the feet. In horses this means from the coronet to halfway up the cannon. In dogs and cats, it is white from the paws up to the carpus or hock. sales in the United States were more than offset by the impact of last year's 53rd week, sales weakness in Europe and lower printable print·a·ble adj. 1. Capable of being printed or of producing a print: printable negatives. 2. Fit for publication: printable language. T-shirt volumes --C9 by Champion continued to perform well --Operating segment income was down significantly, due to various restructuring and impairment charges, lower sales and higher MAP spending --MAP spending was up 32%
Fourth Quarter Change Fiscal Year Change
--------------------------------------------------------
In millions 2005 2004 $ % 2005 2004 $ %
----------------------------------------------------------------------
Net sales $1,514 $1,644 $(130) (8.0)% $6,426 $6,449 $(23) (0.4)%
----------------------------------------------------------------------
Increase/
(decrease) in
net sales
from:
Changes in
foreign
currency
exchange
rates $- $(19) $19 $- $(134) $134
Acquisitions/
dispositions 1 - 1 77 41 36
Activity in
the 53rd
week(7) - 105 (105) - 105 (105)
----------------------------------------------------------------------
----------------------------------------------------------------------
Operating
segment
income $(265) $148 $(413) NM $114 $549 $(435)(79.2)%
----------------------------------------------------------------------
Increase/
(decrease) in
operating
segment
income from:
Changes in
foreign
currency
exchange
rates $- $(1) $1 $- $(5) $5
Exit
activities
and business
dispositions (48) (31) (17) (40) (35) (5)
Acquisitions/
dispositions - (1) 1 6 (2) 8
Transformation/
restructuring
costs (4) - (4) (4) - (4)
Impairment
charge (305) - (305) (305) - (305)
(Increase)/
decrease in
U.S. underwear
inventory
reserves 2 5 (3) (29) (1) (28)
Activity in
the 53rd
week(7) - 20 (20) - 20 (20)
Unit volume change vs. 2004(7)
Fourth Fiscal
Quarter Year
2005 2005
------------------
Global unit volume (7)% (3)%
Intimate Apparel (5)% (6)%
U.S. (1)% (3)%
Europe (8)% (9)%
Knit Products (8)% (1)%
U.S. (8)% (1)%
Europe (3)% (3)%
Legwear (4)% 0%
Sheer Hosiery (17)% (6)%
Socks 9% 8%
(7) Fiscal 2004 was a 53-week year
Intimate Apparel --Global intimate apparel unit volumes and sales declined in the fourth quarter and in fiscal 2005, due to weak sales in Europe and the 53rd week. --In Europe, intimates volume declined in the fourth quarter and for fiscal 2005, as the transition of a key cutting facility from Scotland Scotland, political division of Great Britain (1991 pop. 4,957,000), 30,414 sq mi (78,772 sq km), comprising the northern portion of the island of Great Britain and many surrounding islands. to Tunisia Tunisia (t  nē`zhə, ty–), Fr. Tunisie, officially Republic of Tunisia, republic (2005 est. pop. caused delivery delays. In addition, the category
faced increased price competition and a soft retail environment.--In the United States, unit volumes declined slightly but sales dollars were up in the fourth quarter due to higher Bali Bali (bä`lē), island and (with two offshore islets) province (1990 pop. 2,777,356), c.2,200 sq mi (5,700 sq km), E Indonesia, westernmost of the Lesser Sundas, just E of Java across the narrow Bali Strait. The capital is Denpasar. and barely there sales to department stores This is a list of department stores. In the case of department store groups the location of the flagship store is given. This list does not include large specialist stores, which sometimes resemble department stores. . Knit Products --Global knit products unit volumes and sales declined in the fourth quarter, mainly due to decreased sales of low-margin commodity T-shirts in the printables channel and the 53rd week. In addition, some casualwear ca·su·al·wear n. Attire for wear on casual occasions: wore casualwear to the outdoor reception. customers took delivery in the third quarter this year compared to the fourth quarter last year. U.S. underwear volumes were up 1% in the fourth quarter, despite the extra week in fiscal 2004. --The re-launch of the Hanes HANES Health And Nutrition Examination Survey A series of dietary surveys first carried out in 1971 by the NIH–US; HANES I determined that Americans consumed suboptimal levels of iron, calcium and vitamins A and C; HANES III is under the auspices of the brand, including new advertising featuring Michael Jordan This article is about the former basketball player. For other uses, see Michael Jordan (disambiguation). Michael Jeffrey Jordan (born February 17 1963) is a retired American professional basketball player. , Matthew Matthew one of the twelve disciples. [N.T.: Matthew] See : Evangelism Perry, Marisa Marisa: see Mareshah. Tomei, Damon Wayans Damon Kyle Wayans (pronounced "Waynes") (born September 4, 1960) is an American stand-up comedian, writer, and actor who began his career as a stand-up comic in 1982. He is one of the Wayans brothers. and Jennifer Jennifer became a common first name for females in English-speaking countries during the 20th century. The name Jennifer is a Cornish variant of Guinevere, deriving ultimately from Proto-Celtic *windo-seibaro- "white ghost", via Brythonic *wino-hibirā (cf. Love Hewitt Hewitt may refer to:
--C9 by Champion, the athleticwear line exclusively sold at Target stores, continued to do well in the fourth quarter. Legwear --Global legwear volumes and sales were down in the fourth quarter, primarily due to the 53rd week. For fiscal 2005, unit volumes were flat and sales were down slightly. --In the United States, sock volumes and sales continued to increase. However, this growth was offset by a decrease in sheer Sheer and similar can mean:
Knit or woven coverings for the feet and legs, worn inside shoes. In the 8th century BC, Hesiod referred to linings for shoes; the Romans wrapped their feet, ankles, and legs in long strips of leather or woven cloth. volumes and sales due to ongoing category declines. Net Interest Expense, General Corporate Expenses, Tax Rate and Share Repurchase For fiscal 2005, net interest expense was $186 million, compared to $183 million in fiscal 2004. Interest expense was $50 million for the fourth quarter, compared to $48 million in last year's quarter. The increase for both periods was due primarily to higher net average interest rates. In fiscal 2005, general corporate expenses were $231 million, compared to $313 million in fiscal 2004. Of the change, $38 million was related to non-recurring stock compensation costs in fiscal 2004 for certain former Earthgrains employees and the remainder was due primarily to lower administrative and employee benefits costs. General corporate expenses were $53 million in the fourth quarter of fiscal 2005, compared to $46 million in the comparable period of the prior year. The increase in the quarter was primarily due to costs related to the implementation of the Transformation plan. In fiscal 2005, the effective tax rate on the continuing operations of the business was 21.7% as compared to 16.7% in fiscal 2004. The effective tax rate on the continuing operations of the business for the fourth quarter of fiscal 2005 was 29.3% as compared to 14.9% in the fourth quarter of fiscal 2004. The fiscal 2005 effective tax rate was impacted by a number of significant items including costs associated with the remittance Money sent from one individual to another in the form of cash, check, or some other manner. Financial statements sent by a creditor to a debtor frequently refer to the process of submitting a monthly remittance. REMITTANCE, comm. law. of current year foreign earnings to the United States (including $48 million of tax under the Homeland A homeland (rel. country of origin and native land) is the concept of the territory (cultural geography) to which an ethnic group holds a long history and a deep cultural association with —the country in which a particular national identity began. Investment Act); the impairment of goodwill, trademarks and property, plant and equipment in certain businesses; the recognition of deferred taxes on foreign subsidiaries which are no longer considered permanently invested and the finalization Writing the table of contents (TOC) on a recordable CD or DVD disc. The finalization process ensures that the disc can be played back on most CD and DVD players. See disc-at-once. of various tax audits and reviews. These amounts are quantified on the schedules attached to this news release. In fiscal 2005, the company repurchased 18.3 million shares of its common stock at an average price of $21.65 per share. During the fourth quarter of fiscal 2005, the company repurchased 2.4 million shares of its common stock at an average price of $21.20 per share. On Aug. 1, 2005, the Board of Directors increased the number of shares authorized Shares authorized The maximum number of shares of stock of a company allowed in the articles of incorporation, which may be changed only by a shareholder vote. See: Issued and outstanding. shares authorized See authorized capital stock. for repurchase under the corporation's continuing stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program by 100 million shares. As a result, approximately 116 million shares are authorized for repurchase. Exit Activities, Business Dispositions and Other Transformation Activity The reported results for fiscal 2005 and 2004 and the fourth quarter results of those years reflect amounts recognized for exit activities and business dispositions, as well as other costs associated with the corporation's previously announced Transformation plan. The following table illustrates where the costs (income) associated with all exit and disposal activities are recognized in the Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: Statements of Income of the corporation.
In millions
Fourth Quarter Fiscal Year
2005 2004 2005 2004
----------------------------
Cost of sales
Curtailment gain from Bakery workforce
reduction $- $- $(28) $-
Accelerated depreciation related to
facility closures in:
Bakery segment - - 10 5
Household Products segment (1) - 9 -
Other transformation costs 2 - 2 -
Selling, general and administrative
expenses 13 - 22 1
Charges for (income from):
Exit activities 116 37 119 57
Business dispositions 12 - (26) (9)
----------------------------
Decrease in income from continuing
operations before taxes 142 37 108 54
Income tax benefit (48) (13) (34) (18)
----------------------------
Decrease in income from continuing
operations $94 $24 $74 $36
============================
The $22 million of costs recognized in selling, general and administrative expenses in fiscal 2005 relate to the accelerated amortization of certain bakery intangibles being exited, the accelerated depreciation Accelerated Depreciation Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years of the life of an asset. Notes: The straight-line depreciation method spreads the cost evenly over the life of an asset. of certain leasehold improvements Leasehold Improvement Improvements on a leased asset that increase the value of the asset. Notes: A leasehold improvement is classified as an asset that must be depreciated over time. in the Branded Apparel segment to be exited, consulting costs associated with the Transformation plan and various employee relocation RELOCATION, Scotch law, contracts. To let again to renew a lease, is called a relocation. 2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. and recruitment recruitment /re·cruit·ment/ (re-krldbomact´ment) 1. the gradual increase to a maximum in a reflex when a stimulus of unaltered intensity is prolonged. 2. efforts. Exit activities in fiscal 2005 consisted of a $119 million net charge, of which $116 million was recognized in the fourth quarter of fiscal 2005. The $119 million consists of a $123 million charge related to the planned termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. of approximately 2,000 employees and an $8 million charge related to the exit of leases and other contractual commitments offset in part by a $12 million credit from completing certain previous exit activities for amounts more favorable than originally estimated. The $57 million of exit activities recognized in fiscal 2004 primarily consisted of $70 million of costs associated with the planned termination of 6,222 individuals offset in part by income related to the disposal of assets and the settlement of lease and employee termination obligations for amounts less than originally anticipated. The $26 million of income related to business disposition activities in fiscal 2005 consists of $60 million of gains from the disposition of the various trademarks and productive assets used in the Sara Lee Meats and Household Products segments, offset in part by professional fees and employee costs associated with businesses targeted for future disposition. The $9 million of gains related to fiscal 2004 business dispositions consist of a $13 million gain on the sale of an equity method investment in Johnsonville Foods Johnsonville Sausage is a Wisconsin-based sausage producer, founded in 1945 by Ralph F. & Alice Stayer. Johnsonville Foods produces various varieties of sausage including fresh bratwurst, Italian sausage, smoked-cooked links and fresh breakfast sausage links. offset in part by a loss on the disposal of the assets of an Italian hosiery operation. Impairment Charges The corporation recognized in fiscal 2005 an impairment charge that reduced income from continuing operations before income taxes by $350 million, reduced income from continuing operations by $291 million, and reduced diluted EPS by $.37. The $350 million pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern charge consists of a $305 million charge for the European Branded Apparel business and a $45 million charge for the U.S. retail coffee business. Outlook Sara Lee's management currently expects fiscal 2006 corporate unit volumes to be flat to slightly up, compared to a decrease of 4% in fiscal 2005. Net sales are forecasted to be flat to slightly down, primarily due to unfavorable foreign currency exchange rates, compared to an increase of 1% to $19.3 billion in fiscal 2005. Cash flow from operations for the corporation is projected to be $1.6 billion in fiscal 2006, compared to $1.3 billion in fiscal 2005. Diluted EPS for the corporation for the first quarter of fiscal 2006 are expected to fall within a range of $.22 to $.27 per share, compared to $.44 per share in the year-ago period. In July 2005, a portion of the contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. associated with the sale of a European cut tobacco business in fiscal 1999 was resolved and the corporation received a third cash payment of $114 million, contributing approximately $.14 per share to first quarter and full year 2006 earnings, compared to $117 million, or $.15 per share in fiscal 2005. Full year fiscal 2006 diluted EPS for the corporation are expected to be in a range of $1.24 to $1.34 per share, compared to $.90 per share in fiscal 2005, which included $.55 per share in net charges related to significant items. The first quarter and full fiscal year 2006 guidance does not take into consideration any dispositions and excludes Transformation costs that are estimated to be $325 million to $375 million for the year, but includes anticipated Transformation benefits of $48 million for the year. The fiscal 2006 plan anticipates $50 million in additional marketing spending, $60 million in higher interest expense and $700 million in capital expenditures. Finally, the fiscal 2006 outlook is based on a euro rate of $1.20 versus $1.27 in fiscal 2005 and a tax rate of 21%. For fiscal 2006, net sales for the Sara Lee Food & Beverage operating group are expected to be flat to slightly up. Net sales for the Sara Lee Foodservice operating group are anticipated to be up low single digits, net sales for Sara Lee International are expected to be flat to slightly down, and net sales for Branded Apparel are expected to be down single digits. The corporation recognized significant Transformation, restructuring and impairment charges in fiscal 2005, which will favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. affect the comparison to fiscal 2006 results as costs of this nature have not been included in fiscal 2006 projections. The following guidance summarizes the remaining expected change in income in each of the corporation's operating groups. The Sara Lee Food & Beverage and Sara Lee Foodservice operating groups are expected to show double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. gains in income. Sara Lee International's profit is expected to be down low double digits Double Digits was a pricing game on the American television game show, The Price Is Right. Played from April 20, 1973 through May 18, 1973's show, it was played for a car and used small prizes. , while Branded Apparel's income is expected to decrease low single digits. Webcast Sara Lee Corporation's review of fourth quarter results for fiscal 2005 will be broadcast live via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the today at 10 a.m. CDT CDT abbr. Central Daylight Time CDT Central Daylight Time CDT n abbr (US) (= Central Daylight Time) → hora de verano del centro; (BRIT . During the webcast, the company will discuss fourth quarter and fiscal year 2005 results and provide an outlook for fiscal year 2006. The live webcast can be accessed at www.saralee.com and is anticipated to conclude by 11:30 a.m. CDT. The webcast will resume at 12:45 p.m. CDT with Sara Lee's "Meet the Management" analyst day. During this analyst meeting, Brenda C. Barnes will provide an update on the company's Transformation plan. In addition, the meeting will feature Sara Lee's operating management, who will discuss the strategies to drive growth in the company's ongoing businesses. The live webcast is anticipated to conclude by 4 p.m. CDT. For people who are unable to listen to the webcasts live, they will be available at 7 p.m. on Thursday Thursday: see week. , Aug. 4, in the Investors section of the Sara Lee corporate Web site until Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , Feb. 3, 2006. Forward-looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This news release contains forward-looking statements regarding Sara Lee's business plans, operating results and capital structure initiatives, including statements contained under the heading "Outlook." 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," "projects" 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 Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. 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 relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc : --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  Editing of this page by unregistered or newly registered users is currently disabled due to vandalism. , 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 reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. 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 Cost of Funds The interest rate paid on an outstanding loan. Notes: Money isn't free! Cost of funds is the cost of borrowing money. See also: Interest Rate Cost of funds Interest rate associated with borrowing money. ; --Sara Lee's international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. , 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 Western Europe The countries of western Europe, especially those that are allied with the United States and Canada in the North Atlantic Treaty Organization (established 1949 and usually known as NATO). ; 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 Import quotas are a form of protectionism. An import quota fixes the quantity of a particular good that foreign producers may bring into a country over a specific period, usually a year. The U.S. government imposes quotas to protect domestic industries from foreign competition. 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 Credit Rating Agencies Firms that compile information on and issue public credit ratings for a large number of companies. and the impact these ratings have on Sara Lee's cost to borrow Borrow To obtain or receive money on loan with the promise or understanding that it will be repaid. 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 le·gal·i·ty n. pl. le·gal·i·ties 1. The state or quality of being legal; lawfulness. 2. Adherence to or observance of the law. 3. A requirement enjoined by law. Often used in the plural. of tobacco products in the Netherlands, Germany and Belgium. 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. We have provided additional information in our Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for fiscal 2004, 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 global manufacturer and marketer of high-quality, brand-name products for consumers throughout the world. With headquarters in Chicago, Sara Lee has operations in 58 countries and markets products in nearly 200 nations.
Brand Segmentation Strategy Update
Fiscal Year 2005
Sales by Segment
($ in millions)
% Change Effect of Currency
Fiscal Year vs. Fiscal Rate Changes(9)
2005 Year 2004(8) (percentage points)
-------------------------------------------------
Strategic Investment $3,773 11% 3 pts.
Support and Grow 5,167 - 3
Sustain 3,987 (3) 2
Manage for Cash 3,231 (8) 3
-------------------------------------------------
Total Retail 16,158 - 3
Foodservice/Other 3,096 5 2
-------------------------------------------------
Total $19,254 1% 3 pts.
=================================================
Strategic Investment Brand Sales
($ in millions)
Effect of Currency
Fiscal Year Fiscal Year Rate Changes(9)
2005 2004(8) % Change (percentage points)
--------------------------------------------------------
Sara Lee $802 $671 20% 1 pt.
Ball Park 261 264 (1) -
Hillshire Farm 574 552 4 -
Jimmy Dean 399 350 14 -
Senseo 327 234 39 8
Ambi Pur 380 419 (9) 6
Champion 450 330 37 1
Dim 411 414 (1) 6
Just My Size 169 181 (6) 1
--------------------------------------------------------
Total $3,773 $3,415 11% 3 pts.
========================================================
Retail Sales and MAP Spending - Percent to Total Retail
Fiscal Year Fiscal Year Fiscal Year Fiscal Year
2005 Sales 2005 MAP 2004 Sales(8) 2004 MAP(8)
--------------------------------------------------
Strategic Investment 23% 35% 21% 32%
Support and Grow 32 38 32 37
Sustain 25 20 25 22
Manage for Cash 20 7 22 9
--------------------------------------------------
Total Retail 100% 100% 100% 100%
==================================================
(8) Fiscal Year 2004 was a 53-week year.
(9) In order to calculate the % change in sales on a constant
currency basis, the reported % change vs. Fiscal Year 2004 should
be decreased by the effect of currency rate changes.
For more information on Sara Lee's Brand Segmentation Strategy, please refer to the company's earnings release for the fourth quarter of fiscal year 2004. The release is archived in the Newsroom section of the Sara Lee Web site (www.saralee.com) under Corporate News 2004.
Sara Lee Corporation (NYSE)
---------------------------
Consolidated Statements of Income
(In millions, except per share amounts)
----------------------------------------------------------------------
Fourth Quarter Ended Years Ended
------------------------ -------------------------
July 2, July 3, Percent July 2, July 3, Percent
2005 2004 Change 2005 2004 Change
-------- ------- ------- -------- -------- -------
Continuing
operations
Net sales $4,754 $5,020 (5.3)% $19,254 $19,119 0.7%
-------- ------- -------- --------
Cost of sales 3,024 3,147 12,284 11,867
Selling,
general and
administrative
expenses 1,357 1,383 5,524 5,653
Charges for
(income from)
exit
activities and
business
dispositions 127 37 93 48
Impairment
charges 350 -- 350 --
Contingent sale
proceeds -- -- (117) (119)
Interest
expense 76 76 290 271
Interest income (26) (28) (104) (88)
-------- ------- -------- --------
4,908 4,615 18,320 17,632
-------- ------- -------- --------
(Loss) income
from
continuing
operations
before income
taxes (154) 405 NM 934 1,487 (37.2)
Income tax
(benefit)
expense (45) 60 203 248
-------- ------- -------- --------
(Loss) income from
continuing
operations (109) 345 NM 731 1,239 (41.0)
-------- ------- -------- --------
(Loss) income from
discontinued
operations (39) 9 (12) 33
-------- ------- -------- --------
Net (loss) income $(148) $354 NM $719 $1,272 (43.5)
======== ======= ======== ========
(Loss) Income from
continuing
operations per
common share
Basic $(0.14) $0.44 NM $0.93 $1.57 (40.8)
======== ======= ======== ========
Diluted $(0.14) $0.43 NM $0.92 $1.55 (40.6)
======== ======= ======== ========
Net (loss) income
per common share
Basic $(0.19) $0.45 NM $0.91 $1.61 (43.5)
======== ======= ======== ========
Diluted $(0.19) $0.44 NM $0.90 $1.59 (43.4)
======== ======= ======== ========
Average shares
outstanding
Basic 787 793 789 788
======== ======= ======== ========
Diluted 787 799 796 798
======== ======= ======== ========
See accompanying Notes to Financial Statements.
Sara Lee Corporation (NYSE)
---------------------------
Operating Results by Industry Segment
(In millions) Fourth Quarter Ended
----------------------------------------------------------------------
Sales Operating Income
----------------- -----------------
July 2, July 3, Percent July 2, July 3, Percent
2005 2004 Change 2005 2004 Change
-------- -------- ------- --------- ------- -------
Sara Lee Meats $1,066 $1,117 (4.6)% $72 $102 (29.7)%
Sara Lee Bakery 816 898 (9.2) 53 35 49.6
Beverage 871 843 3.4 44 131 (66.2)
Household Products 490 521 (5.8) 72 112 (34.9)
Branded Apparel 1,514 1,644 (8.0) (265) 148 NM
-------- -------- ------- --------- ------- -------
Total sales and
operating
segment (loss)
income 4,757 5,023 (5.3) (24) 528 NM
Intersegment sales (3) (3) (9.1) -- -- --
Amortization of
identifiable
intangibles -- -- -- (27) (29) 6.2
General corporate
expenses -- -- -- (53) (46) (12.0)
Contingent sale
proceeds -- -- -- -- -- NM
-------- -------- ------- --------- ---------------
Total net sales
and operating
(loss) income 4,754 5,020 (5.3) (104) 453 NM
Net interest
expense -- -- -- (50) (48) (4.2)
-------- -------- ------- --------- ------- -------
Net sales and
(loss) income
from continuing
operations
before income
taxes $4,754 $5,020 (5.3)% $(154) $405 NM%
======== ======== ======= ========= ======= =======
Years Ended
----------------------------------------------------------------------
Sales Operating Income
----------------- -----------------
July 2, July 3, Percent July 2, July 3, Percent
2005 2004 Change 2005 2004 Change
-------- -------- ------- --------- ------- -------
Sara Lee Meats $4,254 $4,171 2.0% $323 $415 (22.1)%
Sara Lee Bakery 3,297 3,415 (3.5) 213 156 36.4
Beverage 3,357 3,157 6.3 388 492 (21.2)
Household Products 1,927 1,934 (0.3) 310 354 (12.3)
Branded Apparel 6,426 6,449 (0.4) 114 549 (79.2)
-------- -------- ------- --------- ------- -------
Total sales and
operating
segment income 19,261 19,126 0.7 1,348 1,966 (31.4)
Intersegment sales (7) (7) (1.5) -- -- --
Amortization of
identifiable
intangibles -- -- -- (114) (102) (11.9)
General corporate
expenses -- -- -- (231) (313) 26.2
Contingent sale
proceeds -- -- -- 117 119 (1.8)
-------- -------- ------- --------- ------- -------
Total net sales
and operating
income 19,254 19,119 0.7 1,120 1,670 (32.9)
Net interest
expense -- -- -- (186) (183) (1.6)
-------- -------- ------- --------- ------- -------
Net sales and
(loss) income
from continuing
operations before
income taxes $19,254 $19,119 0.7% $934 $1,487 (37.2)%
======== ======== ======= ========= ======= =======
See accompanying Notes to Financial Statements.
Sara Lee Corporation
Impact of Significant Items on Income from
Continuing Operations and Net Income
Amounts in millions
13 Weeks Ended July 2, 2005
---------------------------
Diluted
Pretax Net EPS
Note Impact Tax Income Impact
---- ------ ----- ------ -------
Income (loss) from continuing
operations $(154) $45 $(109) $(0.14)
====== ===== ====== =======
Net (loss) income $(148) $(0.19)
====== =======
Significant items affecting
comparability of income from
continuing operations and net income:
Impairment charges A $(350) $59 $(291) $(0.37)
Charges for Exit Activities and
Business Dispositions:
Charges for exit activities B (116) 38 (78) (0.10)
Charges for business disposition
activities B (12) 4 (8) (0.01)
Transformation charges in cost of
sales and SG&A B (14) 6 (8) (0.01)
Bakery curtailment gain B - - - -
Impact of 53rd week C - - - -
Impact of significant items on income
from continuing operations ------ ----- ------ -------
before income taxes (492) 107 (385) (0.49)
------ ----- ------ -------
Significant tax matters affecting
comparability
Finalization of tax audits and
reviews D - 348 348 0.44
Tax on remittance of foreign
earnings E - (314) (314) (0.40)
Netherlands tax rate change F - - - -
Deferred taxes provided on earnings
of foreign subsidiaries G - (30) (30) (0.04)
Impact of significant items on income ------ ----- ------ -------
from continuing operations: (492) 111 (381) (0.48)
------ ----- ------ -------
Deferred taxes provided on earnings
of Direct Selling business reported
as a discontinued operation H - (50) (50) (0.06)
------ ----- ------ -------
Impact of significant items on net
income $(492) $61 $(431) $(0.55)
====== ===== ====== =======
14 Weeks Ended July 3, 2004
---------------------------
Diluted
Pretax Net EPS
Note Impact Tax Income Impact
---- ------ ----- ------ -------
Income (loss) from continuing
operations $405 $(60) $345 $0.43
====== ===== ====== =======
Net (loss) income $354 $0.44
====== =======
Significant items affecting
comparability of income from
continuing operations and net income:
Impairment charges A $- $- $- $-
Charges for Exit Activities and
Business Dispositions:
Charges for exit activities B (37) 13 (24) (0.03)
Charges for business disposition
activities B - - - -
Transformation charges in cost of
sales and SG&A B - - - -
Bakery curtailment gain B - - - -
Impact of 53rd week C 48 (17) 31 0.04
Impact of significant items on income
from continuing operations ------ ----- ------ -------
before income taxes 11 (4) 7 0.01
------ ----- ------ -------
Significant tax matters affecting
comparability
Finalization of tax audits and
reviews D - 207 207 0.26
Tax on remittance of foreign
earnings E - (140) (140) (0.18)
Netherlands tax rate change F - - - -
Deferred taxes provided on earnings
of foreign subsidiaries G - - - -
Impact of significant items on income ------ ----- ------ -------
from continuing operations: 11 63 74 0.09
------ ----- ------ -------
Deferred taxes provided on earnings
of Direct Selling business reported
as a discontinued operation H - - - -
------ ----- ------ -------
Impact of significant items on net
income $11 $63 $74 $0.09
====== ===== ====== =======
NOTES
EPS amounts are rounded to the nearest $0.01 and may not add to the
total.
Tax impact on the impact of the 53rd week is assumed at 35%.
See accompanying Notes to Financial Statements.
Sara Lee Corporation
Impact of Significant Items on Income from
Continuing Operations and Net Income
Amounts in millions
52 Weeks Ended July 2, 2005
------------------------------
Diluted
Pretax Net EPS
Note Impact Tax Income Impact
----- ------- ------ ------- -------
Income from continuing operations $934 $(203) $731 $0.92
======= ====== ======= =======
Net Income $719 $0.90
======= =======
Significant items affecting
comparability of income from
continuing operations and net income:
Impairment charges A $(350) $59 $(291) $(0.37)
Charges for Exit Activities and
Business Dispositions:
Charges for exit activities B (119) 41 (78) (0.10)
Income from business
disposition activity B 26 (9) 17 0.02
Transformation charges in cost of
sales and SG&A B (43) 12 (31) (0.04)
Bakery curtailment gain B 28 (10) 18 0.02
Impact of 53rd week C - - - -
Impact of significant items on
income from continuing operations ------- ------ ------- -------
before income taxes (458) 93 (365) (0.47)
------- ------ ------- -------
Significant tax matters affecting
comparability:
Finalization of tax audits and
reviews D - 348 348 0.44
Tax on remittance of foreign
earnings E - (365) (365) (0.46)
Netherlands tax rate change F - 24 24 0.03
Deferred taxes provided on
earnings of foreign
subsidiaries G - (30) (30) (0.04)
Impact of significant items on income ------- ------ ------- -------
from continuing operations: (458) 70 (388) (0.49)
------- ------ ------- -------
Deferred taxes provided on
earnings of Direct Selling
business reported as a
discontinued operation H - (50) (50) (0.06)
------- ------ ------- -------
Impact of significant items on net
income $(458) $20 $(438) $(0.55)
======= ====== ======= =======
53 Weeks Ended July 3, 2004
------------------------------
Diluted
Pretax Net EPS
Note Impact Tax Income Impact
---- ------- ------ ------- -------
Income from continuing operations $1,487 $(248) $1,239 $1.55
======= ====== ======= =======
Net Income $1,272 $1.59
======= =======
Significant items affecting
comparability of income from
continuing operations and net income:
Impairment charges A $- $- $- $-
Charges for Exit Activities and
Business Dispositions:
Charges for exit activities B (57) 20 (37) (0.04)
Income from business disposition
activity B 9 (4) 5 0.01
Transformation charges in cost of
sales and SG&A B (6) 2 (4) (0.01)
Bakery curtailment gain B - - - -
Impact of 53rd week C 48 (17) 31 0.04
Impact of significant items on
income from continuing operations ------- ------ ------- -------
before income taxes (6) 1 (5) -
------- ------ ------- -------
Significant tax matters affecting
comparability:
Finalization of tax audits and
reviews D - 207 207 0.26
Tax on remittance of foreign
earnings E - (140) (140) (0.18)
Netherlands tax rate change F - - - -
Deferred taxes provided on
earnings of foreign
subsidiaries G - - - -
Impact of significant items on income ------- ------ ------- -------
from continuing operations: (6) 68 62 0.08
------- ------ ------- -------
Deferred taxes provided on
earnings of Direct Selling
business reported as a
discontinued operation H - - - -
------- ------ ------- -------
Impact of significant items on net
income $(6) $68 $62 $0.08
======= ====== ======= =======
NOTES
EPS amounts are rounded to the nearest $0.01 and may not add to the
total.
Tax impact on the impact of the 53rd week is assumed at 35%.
See accompanying Notes to Financial Statements.
Notes to the Financial Statements and the Impact of Significant Items
on Income From Continuing Operations and Net Income
Note A - Impairment Charges The corporation recognized in fiscal 2005 an impairment charge that reduced income from continuing operations before income taxes by $350 million, reduced income from continuing operations by $291 million, and reduce diluted earnings per share ("EPS") by $0.37. The $350 million pretax charge consists of a $305 million charge for the European Branded Apparel business and a $45 million charge for the U.S. retail coffee business. Note B - Charges for Exit Activities, Business Dispositions and Other Transformation Activity The reported results for fiscal 2005 and 2004 and the fourth quarter results of those years reflect amounts recognized for exit activities and business dispositions, as well as other costs associated with the corporation's previously announced Transformation plan. The following table illustrates where the costs (income) associated with all exit and disposal activities are recognized in the Consolidated Statements of Income of the corporation.
In millions
-----------
Fourth Quarter Fiscal Year
2005 2004 2005 2004
----------------------------
Cost of sales
Curtailment gain from Bakery workforce
reduction $- $- $(28) $-
Accelerated depreciation related to
facility closures in:
Bakery segment - - 10 5
Household Products segment (1) - 9 -
Other transformation costs 2 - 2 -
Selling, general and administrative
expenses 13 - 22 1
Charges for (income from):
Exit activities 116 37 119 57
Business dispositions 12 - (26) (9)
----------------------------
Decrease in income from continuing
operations before taxes 142 37 108 54
Income tax benefit (48) (13) (34) (18)
----------------------------
Decrease in income from continuing
operations $94 $24 $74 $36
============================
The $22 million of costs recognized in selling, general and administrative expenses in fiscal 2005 relate to the accelerated amortization of certain bakery intangibles being exited, the accelerated depreciation of certain leasehold improvements in the Branded Apparel segment to be exited, consulting costs associated with the Transformation plan and various employee relocation and recruitment efforts. Exit activities in fiscal 2005 consisted of a $119 million net charge, of which $116 million was recognized in the fourth quarter of fiscal 2005. The $119 million consists of a $123 million charge related to the planned termination of approximately 2,000 employees and an $8 million charge related to the exit of leases and other contractual commitments, offset in part by a $12 million credit from completing certain previous exit activities for amounts more favorable than originally estimated. The $57 million of exit activities recognized in fiscal 2004 primarily consisted of $70 million of costs associated with the planned termination of 6,222 individuals offset in part by income related to the disposal of assets and the settlement of lease and employee termination obligations for amounts less than originally anticipated. The $26 million of income related to business disposition activities in fiscal 2005 consists of $60 million of gains from the disposition of the various trademarks and productive assets used in the Sara Lee Meats and Household Products segments, offset in part by professional fees and employee costs associated with businesses targeted for future disposition. The $9 million of gains related to fiscal 2004 business dispositions consist of a $13 million gain on the sale of an equity method investment in Johnsonville Foods offset in part by a loss on the disposal of the assets of an Italian hosiery operation. Note C - Impact of 53-Week Year Fiscal year 2005 is a 52-week year, while fiscal year 2004 was a 53-week year. Note D - Finalization of Tax Audits and Reviews The corporation finalized See finalization. certain tax reviews for amounts less than originally anticipated and recognized a tax credit of $348 million that increased diluted EPS for the year and the fourth quarter of 2005 by $0.44. In 2004, certain tax audits were finalized and the corporation recognized a tax credit of $207 million that increased diluted EPS for both the year and the fourth quarter of fiscal 2004 by $0.26. Note E - Tax on Remittance of Foreign Earnings The corporation recognized a tax provision of $365 million in fiscal 2005, of which $314 million was recognized in the fourth quarter, related to the repatriation to the U.S. of certain foreign earnings of the corporation that reduced diluted EPS for the year by $0.46 and in the fourth quarter of fiscal 2005 by $0.40. Earlier in the year, the corporation provided $48 million of tax expense for cash repatriation under the Homeland Investment Act. In fiscal 2004, the corporation recognized a tax provision of $140 million related to the repatriation of certain foreign earnings that reduced diluted EPS in both the year and fourth quarter by $0.18. Note F - Netherlands Tax Rate Change The government of the Netherlands passed legislation that will reduce the statutory tax rate on profits from 34.5% to 30.0% by calendar 2007. The rate reduction that went into effect on January January: see month. 1, 2005 was a reduction to 31.5%. The impact of this change reduced the corporation's deferred tax liability by $24 million during fiscal 2005, which increased diluted EPS for the year by $0.03. Note G - Deferred Taxes Provided on Earnings of Foreign Subsidiaries The corporation recognized a tax provision of $30 million to record deferred taxes after it became apparent that undistributed Adj. 1. undistributed - (of investments) not distributed among a variety of securities undiversified - not diversified foreign earnings of certain subsidiaries that had previously been deemed permanently invested would be remitted to the U.S. and become taxable due to the corporation's Transformation plan and related business dispositions. These earnings are invested in foreign subsidiaries and will become taxable upon the sale of the business. This decreased diluted EPS in both the year and the fourth quarter by $0.04. Note H - Deferred Taxes Provided on Earnings of Direct Selling Business Reported as a Discontinued Operation The corporation recognized a tax provision of $50 million in discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. to record deferred taxes after it became apparent that undistributed foreign earnings of the direct selling business that had previously been deemed permanently invested would become taxable upon the sale of the business. This tax provision decreased diluted EPS in both the year and fourth quarter of fiscal 2005 by $0.06. Note I - Receipt of Contingent Fortuitous; dependent upon the possible occurrence of a future event, the existence of which is not assured. The word contingent denotes that there is no present interest or right but only a conditional one which will become effective upon the happening of the Sale Proceeds The corporation sold its European cut tobacco business in fiscal 1999. Under the terms of that agreement, the corporation will receive an annual cash payment of 95 million euros if tobacco continues to be a legal product in the Netherlands, Germany and Belgium through 2010. The legal status of tobacco in each country accounts for a portion of the total contingency contingency n. an event that might not occur. with the Netherlands accounting for 67%, Germany 22% and Belgium 11%. If tobacco ceases to be a legal product within any of these countries, the corporation forfeits the receipt of all future amounts related to that country. The contingencies associated with the fiscal 2005 payment passed in the first quarter of fiscal 2005 and the corporation received the payment that was equivalent to $117 million based upon exchange rates on the date of receipt. These amounts are recognized in the corporation's earnings when received and this payment increased diluted earnings per share by $0.15 when it was recognized. |
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