Sara Lee Corporation Reviews Transformation Plan at CAGNY's Annual Conference

Business Wire, Feb 24, 2005

CHICAGO -- At the Consumer Analyst Group of New York's (CAGNY) annual conference today, Brenda C. Barnes, president and chief executive officer of Sara Lee Corporation, and L.M. (Theo) de Kool, executive vice president and chief financial officer, reviewed the company's transformation plan to drive long-term growth and performance.

On Feb. 10, 2005, Sara Lee announced its plan to transform the organization into a tightly focused food, beverage and household products company, built upon three pillars: organizing business operations around consumers, customers and geographic markets; achieving operational efficiency to fund growth; and focusing the portfolio.

"A transformed Sara Lee will be better positioned to compete in the ever-changing consumer marketplace, to deliver long-term, topline growth and to improve profitability. The key to our success will be an intense focus on executing our strategy, and our leadership team is committed to doing just that," said Barnes.

As part of its transformation, the company intends to sell its European apparel, European packaged meats, U.S. retail coffee (except for Senseo) and direct selling businesses within the next 12 months. In addition, Sara Lee is pursuing a spin-off of its $4.6 billion Branded Apparel Americas/Asia business, and anticipates completing that transaction by the first quarter of fiscal 2007.

Barnes outlined the reorganization of the company's operations into three business segments - Sara Lee Food & Beverage, Sara Lee Foodservice and Sara Lee International - and she and de Kool provided some financial estimates that will result from transforming Sara Lee.

Under the new structure, the company estimates sales in fiscal 2010 will be $14 billion and expects to reach an operating margin of at least 12 percent. This margin improvement will result from a combination of an increase in the mix of more profitable and innovative value-added products plus a comprehensive program to leverage scale and process efficiency to reduce costs across the company.

Specifically, the company expects to support its growth strategy by spending an incremental $250 million annually on media advertising and promotion (MAP) and research and development.

During his remarks, de Kool added that the transformation project is expected to produce savings between $575 million and $810 million on an annualized basis. In addition, by fiscal 2010, which is when the company expects to complete the transformation, Sara Lee estimates that total debt will be reduced to a level between $1.5 billion and $2 billion. Sara Lee reported total debt of $4.8 billion in fiscal 2004.

"Through the transformation plan, we are reducing our costs to fund growth by reinvesting in our core businesses," de Kool said. "We will deliver value to our shareholders by de-levering the balance sheet, paying a competitive dividend and repurchasing shares on an opportunistic basis."

Forward-looking Statements

This press release contains certain forward-looking statements, including statements describing the elements of Sara Lee's strategic transformation plan, the expected impact of such plan on the operations, revenues, costs, total debt, efficiency and profitability of Sara Lee's remaining businesses, and statements preceded by terms such as "estimates," "expects," "intends," "anticipates" or "believes." These forward-looking statements are based on currently available competitive, financial and economic data, as well as management's views and assumptions regarding future events. Such forward-looking statements are inherently uncertain, and actual results may differ from those expressed or implied in the forward-looking statements.

Consequently, readers are cautioned 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 the following: (i) Sara Lee's ability to sell its European branded apparel, European packaged meats, direct selling and U.S. retail coffee (except for Senseo) businesses, and the timing and terms of such transactions; (ii) Sara Lee's ability to obtain a favorable tax ruling, and any other required regulatory approvals, on the proposed spin-off of the balance of its non-European branded apparel business into an independent company; (iii) Sara Lee's ability to effectively integrate its remaining businesses into the contemplated new business structure, including centralized operations in the Chicago area and in Utrecht; and (iv) 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 in accordance with its current plans and assumptions; and (v) Sara Lee's ability to generate the anticipated efficiencies and savings from the various business transformation efforts; and (vi) the impact of the strategic transformation plan on Sara Lee's relationships with its employees, its major customers and vendors and Sara Lee's cost of funds. In addition, Sara Lee'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 it competes. We have provided additional information in our Form 10-K for 2004 and Form 10-Q for the first two quarters of fiscal year 2005, which readers are encouraged to review, concerning factors that could cause actual results to differ materially from those in the forward-looking statements. Sara Lee undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.