Sara Lee Corporation today announced results for the fourth quarter and fiscal year ended July 1, 2000.
Reported results for fiscal 2000 are based on a traditional 52-week year, while fiscal 1999 results reflect a 53-week year, with the extra week occurring in the fourth quarter. Where noted, results excluding the impact of the fifty-third week have been included for purposes of comparison.
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Fiscal 2000 dollar sales grew 5% on a constant currency basis, with reported revenues of $20.4 billion up 2%. Excluding the impact of currency, acquisitions, divestitures and last year’s fifty-third week, dollar revenues increased 3% and operating income grew 5%. Unit volumes increased 6%, including companies acquired over the last 12 months, and were flat excluding acquisitions. Excluding the impact of the fifty-third week in fiscal 1999, corporate volumes increased 8% with acquisitions, and grew 2% from base business operations. Net income for fiscal 2000 increased 7% to $1.2 billion, and diluted earnings per share were $1.34, an 11% increase over fiscal 1999, excluding unusual items.
Full-year results exclude a recall-related charge of $76 million in the second quarter of fiscal 1999 and a $137 million pre-tax gain in the first quarter of fiscal 1999 related to the company’s sale of its international tobacco operations. Including these unusual items, net income for the full year rose 3% and diluted earnings per share increased 6%.
For the fourth quarter, constant currency sales increased 4% and reported dollar revenues grew 1% to $5.3 billion. Excluding the impact of currency, acquisitions, divestitures and last year’s fifty-third week, dollar revenues increased 6% and operating income grew 13%. On a reported basis, unit volumes grew 2% including acquisitions, and declined 3% excluding acquisitions. Excluding the fifty-third week, units rose 9% with acquisitions and 4% from base business operations. Net income for the fourth quarter rose 9%, and diluted earnings per share increased 13% from $.31 to $.35.
“Fourth-quarter results continued to reflect the strong sales and profit gains we have enjoyed in our beverage, foodservice, household products and intimates and underwear businesses throughout the year,” said Sara Lee Chief Executive Officer C. Steven McMillan. “In our food operations, I am pleased to note signs of improvement in our global meat business. Our European bakery operations continue to suffer from difficult market conditions, but we currently are taking actions to improve results in this business.
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By GlobalData“Importantly, we are on track with the divestitures we announced this May that make up the first step in reshaping Sara Lee’s business portfolio. Coach and PYA/Monarch have filed registration statements for their partial initial public offerings, and the sales of Champion and International Fabrics should be completed by calendar year end. We believe these transactions will provide Sara Lee with a significant amount of after-tax proceeds that would be available to reduce debt, repurchase shares and make strategic acquisitions that will provide opportunities for growth in our remaining core operations,” added McMillan.
A performance review for each line of business follows. In the fourth quarter of fiscal 2000, the company adopted a new method for defining and measuring segment profitability. As a result of this change, segment profitability is now measured excluding the non-cash impacts of goodwill and trademark amortization. All prior periods have been restated to reflect this change. Restated operating income on a quarterly basis over the past five years is available on the company’s website, www.saralee.com, or by calling 312/558-4966.
SARA LEE FOODS
Fourth Quarter Change Fiscal Year Change
————— —— ————— ——
2000 1999 2000 1999
Sales $ 1,290 $ 1,332 (3.1)% $ 5,088 $ 5,249 (3.1)%
Operating Income $ 73 $ 95 (22.7)% $ 370 $ 473 (21.7)%
Sara Lee Foods, which includes the company’s worldwide Packaged Meats and Bakery businesses, reported a 3% decline in sales for both the fourth quarter and fiscal 2000; operating income fell 23% and 22%, respectively. Excluding the impact of currency, acquisitions, divestitures and last year’s fifty-third week, sales rose 5% in the fourth quarter and were flat for the full year; operating income, computed on the same basis, fell 16% in the fourth quarter and declined 20% for the full year.
Packaged meat profits were up in the fourth quarter, with particular strength in the United States. The improvement in the company’s meat business resulted from increased operating efficiencies and the addition of more production capacity for higher-margin products. A number of new, value-added products were introduced during the fiscal year, including Ball Park Premium Kosher Beef Franks, Ball Park Cheese Singles and Sara Lee brand cheese slices.
Global bakery profits fell as the company’s European operations experienced lower sales due to intense competition and weak market demand. Actions underway to address these issues include an increased focus on branded products, the elimination of many private-label offerings and the introduction of new products currently achieving success in the United States.
Including acquisitions, unit volumes for global packaged meats declined 6% in the fourth quarter and fell 5% for the full year; excluding the impact of acquisitions and last year’s fifty-third week, unit sales fell 1% in the quarter and declined 5% for the year. The higher full year decline in comparable unit sales reflects, in part, the impact of the business disruption caused by the recall of certain meat products in December 1998.
Fourth quarter global bakery units, including acquisitions, were down 17%, while base business unit sales fell 12%, excluding the impact of last year’s extra week. For fiscal 2000, global bakery units fell 9%, as the fifty-third week impact offset acquisitions made during the year. For the full year, strength in U.S. frozen retail and fresh baked products was offset by weakness in international markets.
BEVERAGE
Fourth Quarter Change Fiscal Year Change
————— —— ————— ——
2000 1999 2000 1999
Sales $ 715 $ 661 8.2% $ 2,827 $ 2,627 7.6%
Operating Income $ 115 $ 100 15.0% $ 472 $ 433 9.0%
Bolstered by several strategic acquisitions, Sara Lee’s Beverage (coffee and tea) business reported an 8% increase in sales for both the fourth quarter and fiscal year, with operating income up 15% and 9%, respectively. Excluding the impact of currency, acquisitions and last year’s fifty-third week, fourth-quarter sales increased 3%, with operating income up 22%; on the same basis, full year sales were flat while income grew 11%. While dollar sales growth for this business was affected by significantly lower coffee prices during the year, operating margins benefited significantly from low commodity costs, improved operating efficiencies and increased sales of higher margin products.
Including acquisitions, unit sales for roasted coffee and coffee concentrates rose 23% for the fourth quarter and increased 26% for the year. Excluding the impact of acquisitions and last year’s fifty-third week, unit sales rose 2% for the quarter and 1% for the full year.
From a market perspective, the company maintained its leading category positions in several major European markets, including the Netherlands, Belgium, Spain and Denmark. In the United States, the company strengthened its retail position in fiscal 2000 with the addition of such well-known brands as Chock full o’Nuts and Hills Bros. In Brazil, Sara Lee recently acquired Uniao’s coffee business, giving the company leading retail positions in the world’s two largest coffee consumption countries – the United States and Brazil. Acquisitions and organic growth initiatives also produced significant gains in the company’s U.S. and European coffee foodservice operations.
HOUSEHOLD PRODUCTS
Fourth Quarter Change Fiscal Year Change
————— —— ————— ——
2000 1999 2000 1999
Sales $ 591 $ 615 (3.9)% $ 2,154 $ 2,095 2.8%
Operating Income $ 112 $ 108 3.8% $ 355 $ 328 8.3%
Sara Lee’s most global line of business, Household Products – which includes traditional household and personal care items as well as the company’s Direct Selling operations – reported a decrease in sales of 4% for the fourth quarter and an increase of 3% for the fiscal year; operating income rose 4% and 8%, respectively, in the same periods. Excluding the impact of currency, acquisitions and last year’s fifty-third week, fourth-quarter sales grew 11%, with operating income up 18%; on the same basis, full year sales increased 9% and operating income increased 14%.
More than 80% of the sales from the company’s traditional household and body care operations came from four core categories in fiscal 2000. Including acquisitions, unit volumes for these categories – shoe care, body care, insecticides and air fresheners – grew 1% for the quarter and 10% for the full year; excluding the impact of acquisitions and last year’s fifty-third week, unit volumes grew 8% in the quarter and 10% for the full year. For the full year, all four core categories showed increased unit sales, with double-digit gains recorded for the especially fast-growing insecticide and air freshener businesses.
Operating income from the Direct Selling operations rose due to a strong sales increase and improved margins. Contributions from operations in a number of developing nations in Latin America were bolstered by continued growth at Fuller Mexico.
FOODSERVICE
Fourth Quarter Change Fiscal Year Change
————— —— ————— ——
2000 1999 2000 1999
Sales $ 790 $ 760 3.9% $ 2,903 $ 2,742 5.9%
Operating Income $ 35 $ 35 0.4% $ 112 $ 105 6.8%
Sara Lee’s Foodservice operations include PYA/Monarch, the nation’s fourth-largest full-line foodservice distributor. This line of business reported sales increases of 4% and 6% for the fourth quarter and full year, respectively, while operating income grew slightly in the quarter and was up 7% for the year. Excluding the impact of acquisitions and last year’s fifty-third week, fourth-quarter sales increased 10% with operating income up 8%; full-year sales increased 6% with operating income up 9%.
Including acquisitions, unit volumes were flat for the quarter and grew 4% for the full year; excluding the impact of acquisitions and last year’s fifty-third week, unit volumes rose 5% for the quarter and increased 4% for the full year.
INTIMATES AND UNDERWEAR
Fourth Quarter Change Fiscal Year Change
————— —— ————— ——
2000 1999 2000 1999
Sales $ 1,910 $ 1,873 2.0% $ 7,598 $ 7,440 2.1%
Operating Income $ 226 $ 208 8.5% $ 844 $ 776 8.7%
Sara Lee’s Intimates and Underwear line of business includes the company’s global Legwear, Knit Products, Intimate Apparel and Accessories operations. This line of business reported a 2% sales increase for both the fourth quarter and fiscal year; operating income rose 9% in both periods. Excluding the impact of currency, acquisitions, divestitures and last year’s fifty-third week, fourth- quarter sales and operating income rose 4% and 20%, respectively; on a similar basis, full year sales increased 3% while operating income increased 11%. On a geographic basis, profit growth was especially strong in North and South America for both the quarter and the full year. By product line, legwear and knitwear reported particularly strong gains, with double-digit increases for the full year.
Including acquisitions, global Intimates and Underwear unit volumes grew 1% in the fourth quarter and rose 5% for the full year; excluding the impact of acquisitions and last year’s fifty-third week, unit volumes grew 9% in the quarter and 6% for the full year.
Including acquisitions, global Knit Products unit sales grew 5% during the quarter, with gains in both North America and Europe. Excluding the impact of acquisitions and last year’s fifty-third week, volumes rose a very strong 12%, with 12% gains globally in both underwear and activewear. In the U.S. underwear category, Sara Lee maintained its leading position in the men’s and boys’ segment over the most recent 12-month period with a 37.2% share. In the women’s and girls’ segment, Sara Lee’s leading share grew nearly half a point to 37.0%. For the full fiscal year, global Knit Products unit volumes rose 8%, including acquisitions, and were up 8% excluding acquisitions and last year’s fifty-third week.
Unaffected by acquisitions during both the fourth quarter and the full year, Legwear unit volumes, excluding the impact of last year’s fifty-third week, fell 5% during the quarter and 2% for the full year. On the same basis, fourth-quarter sheer hosiery units fell 17% while sock unit volumes rose a very strong 20%. Despite the decline in sheer hosiery sales, U.S. profit margins in this business more than doubled due to improved production efficiencies and increased sales of higher margin products. Operating margins for Sara Lee’s U.S. sock operations increased more than 5 percentage points, aided by strong unit gains. For the full year, excluding the impact of the fifty-third week, sheer hosiery unit sales declined 6% while sock units increased 8%.
For the most recent 12-month period, Sara Lee maintained its leading position in the U.S. sheer hosiery category with a dollar share of 47.6%. In the U.S. sock category, Sara Lee’s leading unit share of 15.9% grew by more than one point.
Including acquisitions, global Intimate Apparel unit volumes rose 3% in the fourth quarter and increased 6% over the course of fiscal 2000; excluding the impact of acquisitions and last year’s fifty-third week, unit sales grew 11% in the quarter and 8% for the full year, with gains in both North America and Europe during both periods. In the United States, Sara Lee maintained its leading position in the intimate apparel category with a 33.4% dollar share.
Goodwill amortization of $46 million in the fourth quarter and $177 million for the full year compares with $41 million and $167 million in the same periods last year. Net interest expense was $56 million for the quarter and $176 million for the fiscal year compared with $39 million and $141 million, respectively, for the year-ago period. The increased interest costs for fiscal 2000 reflect higher debt levels to support acquisitions and share repurchase activities.
In the fourth quarter, Sara Lee Corporation repurchased more than 25 million shares of its common stock for a total of $447 million. For the full year, Sara Lee bought back 55 million shares for a total of $1.0 billion, the third consecutive year in which the corporation has spent at least $1 billion to reacquire its stock.
Sara Lee Corporation is a global consumer packaged goods company with approximately $20 billion in annual revenues. Its leading brands include Sara Lee, Douwe Egberts, Hillshire Farm, Hanes and Playtex.
Forward-looking statements: This news release contains certain forward-looking statements concerning Sara Lee’s operations, economic performance and financial condition. These forward-looking statements are based on currently available competitive, financial and economic data and management’s views and assumptions regarding future events. Such forward-looking statements are inherently uncertain, and investors must recognize that actual results may differ from those expressed or implied in the forward-looking statements. Consequently, the corporation wishes to caution readers not to place undue reliance on any forward-looking statements. We have provided additional information in our Form 10-K for fiscal year 1999 and Forms 10-Q for the first, second and third quarters of fiscal 2000, which readers are encouraged to review, concerning factors that could cause actual results to differ materially from those in the forward looking statements.
Sara Lee Corporation (NYSE)
Consolidated Statements of Income
(in millions except per share amounts)
———————————————————————-
Fourth Quarter Ended Year Ended
———————– ———————–
July 1, July 3, Percent July 1, July 3, Percent
2000 1999 Change 2000 1999 Change
——- —— ——- ——- ——- ——-
Net sales $5,253 $5,202 1.0% $20,414 $20,012 2.0%
—— —— ——- ——-
Cost of sales 3,295 3,195 12,553 12,208
Selling, general and
administrative expenses 1,474 1,565 6,012 6,053
Interest expense 77 64 252 237
Interest income (21) (25) (76) (96)
Unusual items:
Product recall (1) — — — 76
Gain on sale
of business (2) — — — (137)
—— —— ——- ——-
4,825 4,799 18,741 18,341
—— —— ——- ——-
Income before
income taxes 428 403 6.3 1,673 1,671 0.1
Income tax expense 115 117 451 480
—— —— ——- ——-
Net income 313 286 9.2 1,222 1,191 2.6
Preferred dividends
– net of tax 3 3 12 12
—— —— ——- ——-
Net income available
to common stockholders $ 310 $ 283 $ 1,210 $ 1,179
====== ====== ======= =======
Net income per
common share – basic $ 0.36 $ 0.32 12.5 $ 1.38 $ 1.31 5.3
====== ====== ======= =======
Average shares
outstanding 858 890 875 903
====== ====== ======= =======
Net income per
common share – diluted $ 0.35 $ 0.31 12.9 $ 1.34 $ 1.26 6.3
====== ====== ======= =======
Average shares
outstanding 895 929 912 944
====== ====== ======= =======
See accompanying notes to financial statements for information
regarding the unusual items.
Sara Lee Corporation (NYSE)
Operating Results by Industry Segment
Unusual Items not Allocated to Industry Segments
(in millions) Fourth Quarter Ended
———————————————————————-
Sales Operating Income (3)
———————– ———————–
July 1, July 3, Percent July 1, July 3, Percent
2000 1999 Change 2000 1999 Change
——- ——- ——- ——- ——- ——-
Food $ 1,290 $ 1,332 (3.1)% $ 73 $ 95 (22.7)%
Beverage 715 661 8.2 115 100 15.0
Household Products 591 615 (3.9) 112 108 3.8
Foodservice 790 760 3.9 35 35 0.4
Intimates and Underwear 1,910 1,873 2.0 226 208 8.5
——- ——- ——- ——- ——- ——-
Total sales and
operating income 5,296 5,241 1.1 561 546 2.8
Intersegment sales (43) (39)(10.3) — — —
Interest, net — — — (56) (39)(46.0)
Goodwill and
trademark amortization — — — (46) (41)(12.2)
Unallocated
corporate expense — — — (31) (63) 51.4
——- ——- ——- ——- ——- ——-
Net sales and
pre-tax income $ 5,253 $ 5,202 1.0 % $ 428 $ 403 6.3 %
======= ======= ======= ======= ======= =======
Year Ended
———————————————————————-
Sales Operating Income (3)
———————– ———————–
July 1, July 3, Percent July 1, July 3, Percent
2000 1999 Change 2000 1999 Change
——- ——- ——- ——- ——- ——-
Food $ 5,088 $ 5,249 (3.1)% $ 370 $ 473 (21.7)%
Beverage 2,827 2,627 7.6 472 433 9.0
Household Products 2,154 2,095 2.8 355 328 8.3
Foodservice 2,903 2,742 5.9 112 105 6.8
Intimates and Underwear 7,598 7,440 2.1 844 776 8.7
——- ——- ——- ——- ——- ——-
Total sales and
operating income 20,570 20,153 2.1 2,153 2,115 1.8
Intersegment sales (156) (141)(10.9) — — —
Interest, net — — — (176) (141)(25.2)
Goodwill and
trademark amortization — — — (177) (167) (5.7)
Product recall (1) — — — — (76) NM
Gain on sale
of business (2) — — — — 137 NM
Unallocated
corporate expense — — — (127) (197) 35.5
——- ——- ——- ——- ——- ——-
Net sales and
pre-tax income $20,414 $20,012 2.0 % $ 1,673 $ 1,671 0.1 %
======= ======= ======= ======= ======= =======
See accompanying notes to financial statements for information
regarding the unusual items.
Sara Lee Corporation (NYSE)
Operating Results by Industry Segment
Unusual Items Allocated to Industry Segments
(in millions) Fourth Quarter Ended
———————————————————————-
Sales Operating Income (3)
———————– ———————–
July 1, July 3, Percent July 1, July 3, Percent
2000 1999 Change 2000 1999 Change
——- ——- ——- ——- ——- ——-
Food $ 1,290 $ 1,332 (3.1)% $ 73 $ 95 (22.7)%
Beverage 715 661 8.2 115 100 15.0
Household Products 591 615 (3.9) 112 108 3.8
Foodservice 790 760 3.9 35 35 0.4
Intimates and Underwear 1,910 1,873 2.0 226 208 8.5
——- ——- ——- ——- ——- ——-
Total sales and
operating income 5,296 5,241 1.1 561 546 2.8
Intersegment sales (43) (39)(10.3) — — —
Interest, net — — — (56) (39)(46.0)
Goodwill and
trademark amortization — — — (46) (41)(12.2)
Unallocated
corporate expense — — — (31) (63) 51.4
——- ——- ——- ——- ——- ——-
Net sales and
pre-tax income $ 5,253 $ 5,202 1.0 % $ 428 $ 403 6.3 %
======= ======= ======= ======= ======= =======
Year Ended
———————————————————————-
Sales Operating Income (3)
———————– ———————–
July 1, July 3, Percent July 1, July 3, Percent
2000 1999 Change 2000 1999 Change
——- ——- ——- ——- ——- ——-
Food (1) $ 5,088 $ 5,249 (3.1)% $ 370 $ 397 (6.7)%
Beverage (2) 2,827 2,627 7.6 472 570 (17.2)
Household Products 2,154 2,095 2.8 355 328 8.3
Foodservice 2,903 2,742 5.9 112 105 6.8
Intimates and Underwear 7,598 7,440 2.1 844 776 8.7
——- ——- ——- ——- ——- ——-
Total sales and
operating income 20,570 20,153 2.1 2,153 2,176 (1.0)
Intersegment sales (156) (141)(10.9) — — —
Interest, net — — — (176) (141)(25.2)
Goodwill and
trademark amortization — — — (177) (167) (5.7)
Unallocated
corporate expense — — — (127) (197) 35.5
——- ——- ——- ——- ——- ——-
Net sales and
pre-tax income $20,414 $20,012 2.0 % $ 1,673 $ 1,671 0.1 %
======= ======= ======= ======= ======= =======
See accompanying notes to financial statements for information
regarding the unusual items.
Sara Lee Corporation (NYSE)
Notes to Financial Statements:
Note 1- On December 22, 1998, the Corporation announced it was
recalling specific production lots of hot dog and other
packaged meat products that could contain Listeria bacteria.
The estimated cost of this action was recognized in the second
quarter of fiscal 1999. This charge, which is associated with
the Corporation’s Sara Lee Foods segment, reduced fiscal 1999
income before taxes, net income, and diluted earnings per
share by $76 million, $50 million, $.05 per share,
respectively, for the year ended July 3, 1999.
Note 2- In the first quarter of fiscal 1999, the Corporation sold its
international tobacco operations. The gain on the sale of this
business, which was part of the Beverage segment, increased
income before taxes and diluted earnings per share by $137
million, and $.10 per share, respectively, for the year ended
July 3, 1999.
Note 3- A new method for defining and measuring segment profitability
was adopted by the senior operating decision makers of the
Corporation in the fourth quarter of fiscal 2000. As a result
of this change, segment profitability is now measured
excluding the non-cash impacts of goodwill and trademark
amortization. All prior periods have been restated to reflect
this change.
Fiscal 2000 Fourth Quarter
Sara Lee Household Intimates Total
Foods Foodservice Beverage Products & Underwear Sara Lee
——– ———– ——– ——— ———– ——–
As Reported
———–
Sales (3)% 4% 8% (4)% 2% 1%
Operating
Profits (23)% 0% 15% 4% 9% 3%
Unit
Volumes 0% 23% 1% 1% 2%
(6)% (12)%
Global Meats Global Legwear
(17)% 5%
Global Bakery Global Knits
3%
Global Intimates
———————————————————————-
Base Business
————-
(ex
acquisitions,
divestitures,
currency, 4Q99
53rd week)
Sales 5% 10% 3% 11% 4% 6%
Operating
Profits (16)% 8% 22% 18% 20% 13%
Unit
Volumes 5% 2% 8% 9% 4%
(1)% (5)%
Global Meats Global Legwear
(12)% 12%
Global Bakery Global Knits
11%
Global Intimates
———————————————————————-
Fiscal 2000 Fiscal Year
Sara Lee Household Intimates Total
Foods Foodservice Beverage Products & Underwear Sara Lee
——– ———– ——– ——— ———– ——–
As Reported
———–
Sales (3)% 6% 8% 3% 2% 2%
Operating
Profits (22)% 7% 9% 8% 9% 2%
Unit
Volumes 4% 26% 10% 5% 6%
(5)% (4)%
Global Meats Global Legwear
(9)% 8%
Global Bakery Global Knits
6%
Global Intimates
———————————————————————-
Base Business
————-
(ex
acquisitions,
divestitures,
currency, 4Q99
53rd week)
Sales 0% 6% 0% 9% 3% 3%
Operating
Profits (20)% 9% 11% 14% 11% 5%
Unit
Volumes 4% 1% 10% 6% 2%
(5)% (2)%
Global Meats Global Legwear
(9)% 8%
Global Bakery Global Knits
8%
Global Intimates
