-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, jTYozVzrlg6Oy3KOpJSwt/nwXr7R5efdT2Gzg6koBj5Q5sW3GvBdoJEiFaf659/w crXz6qER27sMVUluACqIUA== 0000950124-94-001506.txt : 19941007 0000950124-94-001506.hdr.sgml : 19941007 ACCESSION NUMBER: 0000950124-94-001506 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19940702 FILED AS OF DATE: 19940930 SROS: MSE SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEE SARA CORP CENTRAL INDEX KEY: 0000023666 STANDARD INDUSTRIAL CLASSIFICATION: 2013 IRS NUMBER: 362089049 STATE OF INCORPORATION: MD FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03344 FILM NUMBER: 94551038 BUSINESS ADDRESS: STREET 1: THREE FIRST NATL PLZ STE 4600 CITY: CHICAGO STATE: IL ZIP: 60602 BUSINESS PHONE: 3127262600 MAIL ADDRESS: STREET 1: THREE FIRST NATL PLZ STREET 2: SUITE 4600 CITY: CHICAGO STATE: IL ZIP: 60602 FORMER COMPANY: FORMER CONFORMED NAME: CONSOLIDATED FOODS CORP DATE OF NAME CHANGE: 19850402 FORMER COMPANY: FORMER CONFORMED NAME: CONSOLIDATED GROCERD CORP DATE OF NAME CHANGE: 19731220 10-K 1 FORM 10-K DATED 7/2/94 1 - - - -------------------------------------------------------------------------------- - - - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JULY 2, 1994 COMMISSION FILE NUMBER 1-3344 ------------------ SARA LEE CORPORATION (Exact name of registrant as specified in its charter) MARYLAND 36-208904 (State of Incorporation) (I.R.S. Employer Identification No.) THREE FIRST NATIONAL PLAZA 60602-4260 CHICAGO, ILLINOIS (Zip Code) (Address of principal executive offices) Registrant's telephone number including area code: (312) 726-2600 ------------------ SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - - - ---------------------------------- ------------------------------------- Common Stock, $1.33 1/3 par value The Chicago Stock Exchange The New York Stock Exchange The Pacific Stock Exchange Amsterdam Stock Exchange The Bourse (Paris) Stock Exchange of Basel Stock Exchange of Geneva The Stock Exchange (London) Stock Exchange of Zurich Preferred Stock Purchase Rights The Chicago Stock Exchange The New York Stock Exchange The Pacific Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE ------------------ Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ State the aggregate market value of the voting stock held by non-affiliates of the registrant: $11,118,166,220 as of September 1, 1994. On September 1, 1994, the registrant had outstanding 481,761,768 shares of common stock of $1.33 1/3 par value, which is registrant's only class of common stock. DOCUMENTS INCORPORATED BY REFERENCE DOCUMENTS FORM 10-K REFERENCE - - - ---------------------- ---------------------- Proxy Statement dated Part III. Items 10-13 September 15, 1994 - - - -------------------------------------------------------------------------------- - - - -------------------------------------------------------------------------------- 2 PART I Item 1. Business (A) GENERAL DEVELOPMENT OF BUSINESS Sara Lee Corporation ("Sara Lee") is a global manufacturer and marketer of high-quality, brand-name products for consumers throughout the world. It was incorporated in Baltimore, Maryland in 1939 as the C.D. Kenney Company and adopted its current name in 1985. In fiscal 1994, the main focus of Sara Lee's two industry segments, Packaged Foods and Packaged Consumer Products, was to continue to build brand equity and improve returns and market share. These objectives were pursued by the introduction of new products and the expansion of existing products into new markets. During the latter part of the fiscal year, Sara Lee announced the implementation of a worldwide restructuring program designed to accelerate the achievement of higher returns and lower costs throughout its lines of business. The restructuring plan involved a fourth quarter charge of $732 million before tax and affected all four of Sara Lee's lines of business--Packaged Meats and Bakery, Coffee and Grocery, Personal Products, and Household and Personal Care--although the majority of the charge was related to worldwide segments of the Personal Products operations. The charge incorporated severance for approximately 9,900 employees, as well as the costs of closing, consolidating, and realigning production and distribution facilities throughout the world. SARA LEE PACKAGED FOODS SARA LEE PACKAGED MEATS AND BAKERY Sara Lee Packaged Meats continued to introduce new food products during fiscal 1994, with an emphasis on "better-for-you" products and convenience foods. Several Sara Lee meat brands introduced reduced-fat products in fiscal 1994 and early fiscal 1995, including Ball Park 97, Bryan Juicy 'N Lean, and Kahn's Extra Lean hot dogs. Hillshire Farm & Kahn's launched the national distribution of low-fat, regular-sliced luncheon meats, and reformulated Hillshire Farm Lite Smoked Sausage and Hillshire Farm Lite Polska Kielbasa to be 85% fat-free, while Jimmy Dean Foods introduced three varieties of single-serve breakfast sandwiches. Outside the United States, Sara Lee's objective of broadening markets served was reflected in its joint venture with AXA Alimentos S. A. de C.V., which owns Kir Alimentos S. A. de C.V., Mexico's second largest packaged meats company and a leading manufacturer of hot dogs, lunch meats, sausages, and ham. Sara Lee Bakery introduced, and/or expanded its distribution of, a number of new products, including Sara Lee Coffee Crumb Cake and Sara Lee Cream Pies. In addition, Sara Lee Bakery's foodservice business introduced a new line of fruit cobbler products, together with a reformulated pumpkin pie that is shelf-stable for up to three days. SARA LEE COFFEE AND GROCERY During fiscal 1994, the Coffee and Grocery line of business introduced such new items as Piazzo D'Oro espresso products and the Douwe Egberts Grand Cafe assortment of flavored instant coffees in the Netherlands, and a decaffeinated version of Maison du Cafe L'Or in France. Sara Lee also entered the Mexican coffee systems market through distributors, and significantly increased its interest in Friele, a Norwegian coffee company that holds a 27% share in the Norwegian roasted coffee market. In the United States, Superior Coffee and Foods became the exclusive coffee system service to the MGM Grand Casino and Theme Park in Las Vegas, the world's largest hotel. The year saw increased volatility in the price of green coffee due, in large part, to a general tightening in supply, social and economic conditions in many producing nations, fluctuation in the commodities market 1 3 caused by investment fund participation, and poor weather conditions in Brazil in early fiscal 1995. Sara Lee's ability to adjust its inventory and pricing practices enabled it to respond successfully to these challenges, which are expected to continue throughout fiscal 1995. New tea products were launched during the fiscal year. Pickwick Cocktails tea, with a mixture of three fruit tastes, and Pickwick Ice Tea Lemon in cans and one-liter bottles were introduced in the Netherlands, while Pickwick black and fruit-flavored teas were introduced in Russia and are now available in every major Russian city. SARA LEE PACKAGED CONSUMER PRODUCTS SARA LEE PERSONAL PRODUCTS Sara Lee Hosiery experienced a decline in 1994 sales and earnings in the United States and Europe due to a number of factors, including changing fashions, more casual lifestyle trends, and lingering recessionary conditions in Europe. Worldwide sheer hosiery unit volumes dropped 6%, excluding acquisitions. Despite these obstacles, Sara Lee Hosiery's leading share in the United States sheer hosiery market remained strong, while the business continued to gain share in many European markets. Sara Lee's response to changing market forces in the hosiery area involved the restructuring of operations to reduce sheer hosiery capacity. Sara Lee has also expanded its product line to include such casual products as tights, opaques, and trouser socks. Further enhancement of brand equity, new product development, and expansion into new markets has also continued with positive results. New products introduced in 1994 emphasized value-added qualities and included L'eggs New Sheer Energy hosiery, with enhanced comfort and fit, Silk Reflections Soft Touch hosiery--featuring all-microfiber construction, Silk Reflections Plus hosiery for full-figured women and, under the Hanes brand, two waist-to-toe figure control products: Smooth Illusions hosiery and the more moderately priced Profiles brand. New markets entered included South Africa--through the acquisition of The South African Hosiery Company (Pty.) Ltd., China--through a joint venture with Shanghai Vocal Enterprise Ltd., and Japan--through the acquisition of Peri Shoji. In addition, full distribution of the Hanes and L'eggs brands began in Canada, while L'eggs and the designer collection of Donna Karan hosiery were introduced in Japan. Sara Lee Knit Products continued to show strong results in the United States, assisted by solid performances in its activewear and underwear segments. European results were weaker due to heavy competition and a continuing recession. During the 1994 fiscal year, challenging market conditions, overcapacity, and low returns necessitated a restructuring program providing for plant closings and realignments in certain U.S. retail fleece categories and in European underwear and activewear. Several less profitable lines of merchandise, including Champion's Spring City private label business, were discontinued. These adjustments are expected to result in significant savings over the next several years and should leave Sara Lee poised to pursue its goals of building business in its core knit products categories through new licensing opportunities, the introduction of new products, and expansion into new geographic markets. Licensing initiatives included those associated with Sara Lee's sponsorship of the 1994 and 1996 Olympic Games, whereby virtually all licensed T-shirts and fleece products related to the Games will be either Hanes or Champion products; the Team Hanes program, which markets licensed college and professional sportswear; new opportunities in the girls' underwear category to license products with graphics based on three film, toy, and television properties: The Lion King, Barbie, and The Flintstones; and a long-term license to distribute a line of Cacherel brand men's briefs and T-shirts in France, Italy, and Spain. New product initiatives during the 1994 fiscal year included the introduction of Hanes Her Way casual leather and canvas shoes for women in the mass-merchandise market, the national launch of Hanes Cool Comfort briefs for men, and the debut of Hanes Signature Collection of premium adult activewear. Sara Lee continues to penetrate new knit product markets as well. New marketing organizations have been established in South and Central America in order to actively market Hanes, Hanes Her Way, and 2 4 Rinbros products. Expansion in the Asia-Pacific markets is also being achieved through Intercon Garments and Upxon, Inc., which were acquired in 1993 and which market products throughout the Philippines and Japan, respectively. Sara Lee Intimates and Accessories focused on the introduction of new products, including the launch of the Wonderbra push-up bra in U. S. department stores, and the Madison collection of tailored day-to-evening handbags by Coach. SARA LEE HOUSEHOLD AND PERSONAL CARE The Sara Lee Household and Personal Care segment continued to grow through acquisitions, new products, and entry into new markets. The acquisition of the European bath and body care businesses of SmithKline Beecham gave Sara Lee powerful branded product lines in a number of key markets, extending the reach of its personal care business and sharpening manufacturing and operating efficiencies. In addition, the baby-care line was expanded by the acquisition of the Fissan and Proderm brands. The Fissan line of products is marketed in Italy and Germany, while the Proderm line has a strong market presence in Greece. The Kiwi and Tana shoe care lines strengthened their positions through product development and strategic partnerships. A joint venture with China's largest shoe care manufacturer, Golden Rooster, provided an entree into China, while an increased interest in a similar alliance in India will provide Sara Lee's Kiwi brand access to that market. In addition to the entrees into the Chinese and Indian markets provided by joint ventures, Sara Lee fortified its presence in the Asia-Pacific region through the introduction of product lines in Malaysia, Hong Kong, and Thailand. It also continued to establish a foundation in Central and Eastern Europe by expanding its Hungarian marketing unit and by making preparations for an expansion program targeting the Czech Republic. Direct selling activities continued to grow through the acquisition of Avroy Shlain Cosmetics (Pty.) Ltd., the number-one direct selling organization in South Africa, and through the expansion of product lines in existing markets in Indonesia, Mexico, and the Philippines. (B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS Sara Lee's businesses are classified into two industry segments: Sara Lee Packaged Foods and Sara Lee Packaged Consumer Products. The financial information about Sara Lee's industry segments can be found on pages F-19 through F-20 of this Report. (C) NARRATIVE DESCRIPTION OF BUSINESS SARA LEE PACKAGED FOODS Sara Lee's Packaged Foods segment is comprised of Sara Lee Packaged Meats and Bakery, and Sara Lee Coffee and Grocery. SARA LEE PACKAGED MEATS AND BAKERY Sara Lee Packaged Meats component of this segment processes and sells pork, poultry, and beef products to supermarkets, warehouse clubs, national chains, and institutions throughout the United States, Europe, and Mexico. Sales are transacted through Sara Lee's own sales force, brokers, and institutional buyers. Some of the more prominent brands within this category include Ball Park, Best's, Bryan, Hillshire Farm, Hygrade, Jimmy Dean, Kahn's, Mr. Turkey, Sara Lee, and Sinai 48. Sara Lee acquired Sara Lee Processed Meats (Europe) B.V., which markets meats under the Stegeman brand in the Netherlands, Dacor in Belgium, Argal in Spain, and Nobre in Portugal; and a 49.9% interest in AXA Alimentos, S.A. de C.V., which owns Kir Alimentos S.A. de C.V., a leading processed meats company in Mexico, in fiscal 1993 and 1994, respectively. 3 5 The products offered by this line of business include smoked sausage, bacon, hot dogs, breakfast sausage, breakfast sandwiches, premium deli and luncheon meats, ham, turkey, and packaged lunch combinations. The ingredients--pork, turkey, and beef--are purchased by Sara Lee from a variety of sources. The prices of these raw materials fluctuate, depending primarily on supply and demand. Sara Lee believes that, because of the range of sources from which these raw materials are available, it will continue to have access to an adequate supply. The Packaged Meats category is highly competitive, with an emphasis on product quality, price, advertising and promotion, and customer service. Sara Lee's competitors include international, national, regional, and local companies. The Packaged Meats category has accounted for 10% or more of Sara Lee's consolidated revenues during the past three fiscal years. Sara Lee believes it is one of the three industry leaders in the United States. Most of Sara Lee's Packaged Meats operations are regulated by the U.S. Department of Agriculture ("USDA"), whose focus is the quality, sanitation, and safety of meat products, and, to some extent, by state and local government agencies. Regulations promulgated by the USDA which took effect in August, 1994, mandate certain new labeling on meat and poultry food products manufactured in the United States. These new regulatory requirements have not had a material adverse impact on Sara Lee's consolidated operations. Sara Lee's Packaged Meats operations in Europe and Mexico are regulated by local authorities. Sara Lee Bakery produces a wide variety of fresh and frozen baked and specialty items. Its core products are pies, cheesecakes, pound cakes, and Danish. These products are sold through supermarkets, foodservice distributors, bakery-deli, and direct channels throughout the United States, United Kingdom, France, Mexico, Australia, and numerous Pacific Rim countries. Sales are transacted through Sara Lee's sales force and independent wholesalers and distributors. The key ingredients for these products--butter, milk, sugar, fruits, eggs, and flour--are purchased from suppliers at prices that are subject to such influences as supply and demand, weather, and government price controls. Because of the number of sources from which such raw materials are generally available, Sara Lee believes it will continue to have access to adequate supplies. Competition in this category is keen, with a large number of participants. Sara Lee seeks to maintain and enhance a leading position in the industry through marketing efforts that are designed to reinforce and build brand recognition, and through superior customer service. In the United States, Sara Lee Bakery products are subject to regulation by the Food and Drug Administration ("FDA"), the federal agency charged, among other things, with enforcing laws pertaining to food processing, content, and labeling, and to a lesser extent, by state and local government agencies. The Nutrition Labeling and Education Act of 1991, which falls under the jurisdiction of the FDA, took effect in August, 1994 and mandates certain new labeling on most food products manufactured in the United States. The statute's labeling requirements have not had a material adverse impact on Sara Lee's consolidated operations to date. Sara Lee Foodservice's business is conducted principally under the PYA/Monarch name. PYA/Monarch is the nation's fifth largest foodservice company and the leader in the Southeast United States. This business distributes dry, refrigerated, and frozen foods, paper products, equipment, and supplies to institutional and commercial foodservice customers. The institutional foodservice distribution industry is highly competitive, with price and service being the major means by which Sara Lee Foodservice competes. This line of business generates lower margins on sales dollars than Sara Lee's other businesses. SARA LEE COFFEE AND GROCERY Sara Lee is one of the largest coffee roasters in the world, and a leader in the European coffee market. It has a significant presence in such countries as the Netherlands, Belgium, France, Denmark, Spain, and Australia, and has established positions in Central and Eastern Europe through acquisitions and expanded sales efforts. While Douwe Egberts is its European flagship brand, its other premium European coffee brands 4 6 include Maison du Cafe, Marcilla, and Merrild. Sara Lee's Pickwick brand, a leader in the European tea market, is expanding its current lines in an effort to appeal to younger consumers. This is a very competitive business with the other participants consisting primarily of other large multi-national companies. Sara Lee seeks to maintain a competitive edge by offering its customers superior quality and value. Sara Lee is also a significant competitor in the out-of-home coffee service business. Its Douwe Egberts Coffee Systems business provides coffee and dispensing equipment in Europe, while its Superior Coffee and Foods business provides similar products and services in the United States. The significant cost item in the production of coffee products is the price of green coffee, which varies depending on such factors as weather (which affects the quality and quantity of available supplies), consumer demand, the political climate in the producing nations, unilateral pricing policies of producing nations, speculation on the commodities market, and the relative valuations and fluctuations of the currencies of producer versus consumer countries. These factors also generally affect Sara Lee's competitors. During the final week of fiscal 1994, and the first two weeks of fiscal 1995, Brazil, the world's largest coffee producer, suffered two major frosts that are expected to have a negative impact on its crop output over the next two to three years. The resulting uncertainty over the availability of supplies has resulted in extreme volatility in the price of green coffee, leading to the highest prices in eight years. Sara Lee has and expects to continue to offset these price increases through careful inventory management, cost cutting, and higher prices for its coffee products. Such price increases are not expected to have a material impact on Sara Lee's coffee business, however, since most of that business is located in Europe, where the corporation is a market leader, and because European coffee drinkers do not appear to be as price-sensitive as their American counterparts. The Sara Lee Coffee and Grocery line of business also manufactures rice products under the Lassie brand in the Netherlands, and snack and nut products under the Duyvis, Felix, and Duyvis Benenuts brands in the Netherlands, Belgium, and France, respectively. The Sara Lee Coffee and Grocery business has accounted for 10% or more of Sara Lee's consolidated revenues during the past three fiscal years. SARA LEE PACKAGED CONSUMER PRODUCTS Sara Lee's Packaged Consumer Products segment is divided into two lines of business: Personal Products and Household and Personal Care. SARA LEE PERSONAL PRODUCTS The Personal Products line of business, which is headquartered in Winston-Salem, North Carolina, includes the Intimates and Accessories, Knit Products, and Hosiery business groups. Sara Lee Intimates business includes bras, panties, and shapewear. These are manufactured and distributed under such labels as Bali, Hanes Her Way, Playtex, WonderBra, and Daisyfresh in North America, and Playtex and Dim in Europe. With the 1993 acquisition of Estelar, a leading Mexican manufacturer of panties, and the acquisition of Maglificio Bellia, a leading Italian manufacturer, at the beginning of fiscal 1994, Sara Lee expects to strengthen its position in those markets as well. Distribution channels for intimate apparel range from department and specialty stores for such premium brands as Bali, and some Hanes and Playtex products, to warehouse clubs and mass-merchandise outlets for some of the value-priced brands. Sales are effected through Sara Lee's sales force. The intimate apparel market is a competitive one based on consumer brand loyalty. Sara Lee endeavors to maintain its competitive edge through increased marketing and promotional efforts, and by offering consumers value through a superior combination of quality and price. Sara Lee Accessories business involves the manufacture and marketing of men's and women's gloves, slippers, and knitwear through its Aris Isotoner division under the Aris and Isotoner brands, and the 5 7 manufacture and marketing of premium leather products through its Coach division, under the Coach and Mark Cross brands. Coach now operates approximately 110 stores in the United States. Sara Lee Knit Products' business involves the manufacture and distribution of men's, women's, and children's underwear and activewear (T-shirts, fleecewear, and other jersey products for casualwear) in North America, South and Central America, Europe, and the Pacific Rim. These products are sold through department stores, mass merchandisers, and discount chains. Principal brands in this category include Champion, Hanes, Hanes Her Way and Rinbros in North America, and Abanderado, Princesa, Champion, Hanes, and Dim in Europe. Sara Lee believes that it has the leading market share in the women's and girls' panties category in the United States, the second largest share in the heavily branded category of men's and boys' underwear in the United States, and the leading position in men's and boys' underwear in Mexico. Activewear is marketed under Sara Lee's Hanes and Champion lines. In addition to targeting the public activewear market, Champion also manufactures and markets authentic uniforms and practicewear for professional and amateur athletic teams, including such organizations as the National Basketball Association, the National Football League, Major League Baseball, the Olympics, and a number of major university sports teams. The principal raw material in this product category is cotton, which Sara Lee believes is readily available from a variety of sources. The knit products business is highly competitive, with products relying on brand recognition, quality, price, and loyalty. Sara Lee is meeting the competition by offering superior value, through its megabranding strategy--marketing various products through common packaging, promotion, and advertising, by increased marketing activity, and low-cost sourcing. The Knit Products business has accounted for 10% or more of Sara Lee's consolidated revenues during the past three fiscal years. Sara Lee Hosiery is the market leader in hosiery markets in the United States, Mexico, Western Europe, Australia, New Zealand, and South Africa. It also continues to establish operations in various Pacific Rim countries, placing it in a strategic position to capitalize on developing markets in that area. The European hosiery business is somewhat seasonal in nature in contrast to the domestic business. Hosiery products consist of a wide variety of branded, packaged consumer products, including pantyhose, stockings, combination panty and pantyhose garments, tights, knee-highs, and socks, many of which are available in both sheer and opaque styles. These products are sold domestically under such brand names as Hanes, L'eggs, Donna Karan, DKNY, and Liz Claiborne (the last three being licensed), and abroad under such labels as Dim, Pretty Polly, Elbeo, Nur Die, Bellinda, Filodoro, Philippe Matignon, and Omero. Sara Lee's Adams-Millis Corporation subsidiary is the largest sock manufacturer in the United States. Hosiery products are sold by Sara Lee's sales force in channels ranging from department and specialty stores (for premium brands such as Hanes, Donna Karan, DKNY, and Liz Claiborne in the United States, and Dim abroad), to supermarkets, warehouse clubs, discount chains, and convenience stores for brands like L'eggs and some Dim products aimed at the price-conscious consumer. The Hosiery business has accounted for 10% or more of Sara Lee's consolidated revenues during the past three fiscal years. The hosiery business is very competitive in both the United States and Europe. In the United States, Sara Lee's major competitors are other hosiery companies, and the primary methods of competition are quality, value, and, with respect to L'eggs products, service and distribution. In Europe, where most of Sara Lee's competitors are small companies who compete in the unbranded sector of the market, the primary focus is on quality. Raw materials--nylon, spandex, and cotton--for the products in this category are generally available from a wide variety of suppliers. In addition, Sara Lee continues to explore opportunities for vertical integration in its hosiery business in order to decrease its reliance on outside suppliers. 6 8 HOUSEHOLD AND PERSONAL CARE Sara Lee's Household and Personal Care line of business includes four primary core categories: shoe care--led by a worldwide line of Kiwi products; body care items--led by the Sanex brand, but also including Duschdas and Badedas; insecticides--sold internationally under the Catch, Bloom, Vapona, and Ridsect brand names; and baby-care products--sold under the Zwitsal, Fissan, and Proderm names. Ambi-Pur air fresheners, Zendium and Prodent oral care products, and Biotex and Neutral specialty detergents are also important categories for Sara Lee. Sara Lee Direct Selling distributes a wide range of products--cosmetics, fragrances, toiletries, personal products, and jewelry--through a network of independent sales representatives. This method of reaching the consumer has been particularly successful at the House of Fuller business in Mexico, the House of Sara Lee businesses in Indonesia and the Philippines, and is being introduced in South Africa through the number-one direct selling organization in that country, Avroy Shlain Cosmetics (Pty.) Ltd., which was a part of the Kiwi Brands (Pty.) Ltd. acquisition. While this segment is very fragmented, Sara Lee believes it has a leading position in many product lines in those countries in which it competes. TRADEMARKS Sara Lee is the owner of over 25,000 trademark registrations in over 180 countries. Trademarks are among Sara Lee's most valuable assets as it pursues its strategy of building brands globally. CUSTOMERS None of Sara Lee's business segments or lines of business is dependent upon a single customer or a small number of customers, the loss of whom would have a material adverse effect on Sara Lee's consolidated operations. Sara Lee considers major mass retailers and supermarket chains in both the United States and Europe to be significant customers across one or more product categories, and it has developed team and partnership approaches to working with them. ENVIRONMENTAL MATTERS Sara Lee is subject to a number of federal, state, and local statutes, rules, regulations, and ordinances in the United States and other countries relating to the discharge of materials into the environment, or otherwise relating to the protection of the environment ("Environmental Laws"). While Sara Lee expects to make capital and other expenditures in compliance with Environmental Laws, it does not anticipate that such compliance will have a material adverse effect on its capital expenditures, earnings, or competitive position. Sara Lee has implemented a program to monitor compliance with Environmental Laws and is continually examining its methods of operation and product packaging to reduce its use of natural resources. EMPLOYEES Sara Lee has approximately 145,900 employees worldwide. (D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES Sara Lee's foreign operations are conducted primarily through wholly or partially-owned subsidiaries incorporated outside the United States. The foreign operations of the Packaged Meats line of business within the Packaged Foods segment are conducted through Sara Lee Processed Meats (Europe) B.V., while the Sara Lee Bakery business includes Kitchens of Sara Lee U.K. Ltd. and Kitchens of Sara Lee (Australia) Pty. Ltd. The Coffee and Grocery line of business within the Packaged Foods segment is conducted by a number of 7 9 subsidiaries, principally European, including Douwe Egberts Nederland B.V., Douwe Egberts France S.A., Douwe Egberts Espana S.A., Merrild Kaffe A/S, Douwe Egberts N.V., Compack Douwe Egberts Rt., Harris/DE Pty. Ltd., and Balirny Douwe Egberts A.S. The Personal Products line of business within the Packaged Consumer Products segment includes numerous foreign businesses, including Dim S.A., Grupo Sans S. A., Sara Lee Personal Products (Australia) Pty. Ltd., Pretty Polly Ltd., Vatter GmbH, the Filodoro Group, Manufacturas Mallorca, S.A. de C.V., Rinbros, S.A. de C.V., and a 60% interest in Maglificio Bellia S.p.A. The Household and Personal Care line of business within the Packaged Consumer Products segment is composed of subsidiaries in over forty countries. The principal subsidiaries are Kiwi Brands Pty. Ltd., Kiwi France S.A., Kortman Intradal B.V., A/S Blumoller, Sara Lee/DE Espana S.A., and Sara Lee Household and Personal Care U.K. Ltd. The financial information about foreign and domestic operations can be found on page F-20 of this Report. Item 2. Properties. Sara Lee operates 310 food processing and consumer product manufacturing plants, each containing more than 20,000 square feet in building area, in 27 states and 35 foreign countries. Sara Lee owns 239 and leases 71 of these plants. It also operates 126 warehouses containing more than 20,000 square feet in building area in 20 states and 19 foreign countries. Of these warehouses, 51 are owned and 75 are leased. The following table identifies the plants and warehouses presently operated by Sara Lee that contain at least 250,000 square feet in building area.*
APPROXIMATE INDUSTRY SEGMENT AND BUILDING AREA DIVISION OR SUBSIDIARY LOCATION IN SQUARE FEET - - - --------------------------------------------------- --------------------------- -------------- SARA LEE PACKAGED FOODS Bil Mar Foods...................................... Zeeland, Michigan 567,000 Bryan Foods, Inc. ................................. West Point, Mississippi 763,000 Douwe Egberts Van Nelle Tabaksmaatschappij B.V. ... Rotterdam, the Netherlands 605,000 Hillshire Farm & Kahn's............................ Alexandria, Kentucky 276,000 Hillshire Farm & Kahn's............................ Cincinnati, Ohio 633,000 Hillshire Farm & Kahn's............................ New London, Wisconsin 563,000 Koninklijke Douwe Egberts B.V. .................... Joure, the Netherlands 1,094,000 Koninklijke Douwe Egberts B.V. .................... Utrecht, the Netherlands 577,000 Koninklijke Douwe Egberts B.V. .................... Zaandam, the Netherlands 367,000 Lassie B.V. ....................................... Wormer, the Netherlands 260,000 PYA/Monarch, Inc. ................................. Charlotte, North Carolina 288,000 PYA/Monarch, Inc. ................................. Lexington, South Carolina 309,000 Sara Lee Bakery.................................... Forest, Mississippi 260,000 Sara Lee Bakery.................................... New Hampton, Iowa 294,000 Sara Lee Bakery.................................... Tarboro, North Carolina 346,000 Sara Lee Bakery.................................... Traverse City, Michigan 295,000 Sara Lee Processed Meats (Europe) B.V. ............ Rio Maior, Portugal 348,000 Schloss & Kahn, Inc. .............................. Montgomery, Alabama 276,000 Van Nelle International B.V. ...................... Joure, the Netherlands 302,000**
* In fiscal 1994, Sara Lee announced a restructuring which will result in the closure of 94 manufacturing and distribution facilities. Sixty-three of the facilities to be closed are owned and 31 of the facilities are leased. ** These facilities are leased; the remainder are owned by Sara Lee. 8 10
APPROXIMATE INDUSTRY SEGMENT AND BUILDING AREA DIVISION OR SUBSIDIARY LOCATION IN SQUARE FEET - - - ---------------------------------------------- -------------------------------- -------------- SARA LEE PACKAGED CONSUMER PRODUCTS Adams-Millis Corporation...................... Kernersville, North Carolina 340,000 Aris Isotoner................................. Edison, New Jersey 253,000** Canadelle Inc. ............................... Montreal, Canada 261,000 Champion Products, Inc. ...................... Laurel Hill, North Carolina 268,000 Champion Products, Inc. ...................... Gaffney, South Carolina 265,000 Filodoro Calze S.p.A.......................... Casalmoro, Italy 320,000 Kiwi Brands Inc. ............................. Douglassville, Pennsylvania 290,000 L'eggs Products............................... Clarksville, Arkansas 321,000 L'eggs Products............................... Rockingham, North Carolina 440,000 Kiwi Brands Pty. Ltd. ........................ Clayton, Australia 313,000 Playtex Apparel, Inc. ........................ Dover, Delaware 424,000 Sara Lee/DE Espana S.A. ...................... Santiga, Spain 284,000** Sara Lee/DE Germany........................... Dusseldorf, Germany 333,000** Sara Lee Direct............................... Rural Hall, North Carolina 657,000** Sara Lee Hosiery.............................. East Rockingham, North Carolina 330,000** Sara Lee Hosiery.............................. Winston-Salem, North Carolina 747,000 Sara Lee Hosiery.............................. Darlington, South Carolina 287,000 Sara Lee Household & Personal Care U.K. Limited................................ Slough, England, United Kingdom 331,000 Sara Lee Knit Products........................ Forest City, North Carolina 340,000 Sara Lee Knit Products........................ Eden, North Carolina 418,000 Sara Lee Knit Products........................ Galax, Virginia 424,000 Sara Lee Knit Products........................ Martinsville, Virginia 704,000** Sara Lee Knit Products........................ Martinsville, Virginia 628,000 Sara Lee Knit Products........................ Martinsville, Virginia 442,000 Sara Lee Knit Products........................ Mountain City, Tennessee 562,000 Sara Lee Knit Products........................ Rabun Gap, Georgia 256,000 Sara Lee Knit Products........................ Rural Hall, North Carolina 931,000 Sara Lee Knit Products........................ Sanford, North Carolina 275,000 Sara Lee Knit Products........................ Winston-Salem, North Carolina 568,000 Sara Lee Knit Products........................ Greenwood, South Carolina 500,000 Vatter GmbH................................... Augsburg, Germany 297,000 Vatter GmbH................................... Rheine, Germany 482,000 Vatter GmbH................................... Schongau, Germany 256,000
** These facilities are leased; the remainder are owned by Sara Lee. Item 3. Legal Proceedings. On May 17, 1990, the State of Wisconsin issued a Notice of Violation against Sara Lee's Hillshire Farm & Kahn's division, alleging that the division had illegally constructed and operated smokehouses in New London, Wisconsin in violation of air pollution control permits. In July, 1993, the parties stipulated and agreed that judgment in the amount of $100,000, including a penalty assessment, environmental assessment, and court costs would be entered against Sara Lee. In addition to the foregoing, Sara Lee is a party to several pending legal proceedings and claims, and environmental actions by governmental agencies. Although the outcome of such items cannot be determined with certainty, Sara Lee's General Counsel and management are of the opinion that the final outcomes should not have a material adverse effect on Sara Lee's results of operations or financial position. Item 4. Submission of Matters to a Vote of Security Holders. Not Applicable 9 11 EXECUTIVE OFFICERS OF THE REGISTRANT Pursuant to General Instruction G(3) of Form 10-K, the following list is included as an unnumbered Item in Part I of this Report in lieu of being included in the Proxy Statement for the Annual Meeting of Stockholders to be held on October 27, 1994. The following is a list of names and ages of all of the executive officers of Sara Lee indicating current positions and offices with Sara Lee held by each such person. All such persons have been elected by, and hold office at the pleasure of, the Board of Directors. No person other than those listed below has been chosen to become an executive officer of Sara Lee.
AGE AS OF OCTOBER 27, OFFICES AND FIRST ELECTED NAME 1994 POSITIONS HELD AN OFFICER - - - ---------------------------------------------- ----------- ------------------------ ------------- John H. Bryan................................. 58 Chairman of the Board, 3/28/74 Chief Executive Officer and Director Michael E. Murphy............................. 58 Vice Chairman and Chief 6/28/79 Financial and Administrative Officer and Director Donald J. Franceschini........................ 59 Executive Vice President 8/27/92 and Director C. Steven McMillan............................ 48 Executive Vice President 3/31/83 and Director Gary C. Grom.................................. 47 Senior Vice President 10/25/90 Human Resources Mark J. McCarville............................ 48 Senior Vice President 6/24/82 Corporate Development Gordon H. Newman.............................. 61 Senior Vice President, 5/28/70 Secretary and General Counsel
There are no family relationships between any of the above named executive officers and directors. Each of the executive officers listed above has served Sara Lee or its subsidiaries in various executive capacities for the past five years, except Donald J. Franceschini, who, prior to his election, served in various executive capacities at Playtex Apparel, Inc. prior to its acquisition by Sara Lee. 10 12 PART II Item 5. Market for Sara Lee's Common Equity and Related Stockholder Matters. Sara Lee's securities are traded on the exchanges listed on the cover page of this Form 10-K Report. As of September 1, 1994, Sara Lee had 96,470 holders of record of its Common Stock. Information about the high and low sales prices for each full quarterly period and the amount of cash dividends declared on Sara Lee's Common Stock during the past three fiscal years is set forth on page F-21 of this Report. Item 6. Selected Financial Data. The requisite financial information for Sara Lee for the five fiscal years ending July 2, 1994, is set forth on pages F-2 and F-3 of this Report. Such information should be read in conjunction with the consolidated financial statements and notes thereto of Sara Lee included in Item 8, incorporated by reference from Item 14, of this Report. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. This discussion and analysis of financial condition and results of operations should be read in conjunction with the General Development of Business on pages 1 through 3, Narrative Description of Business on pages 3 through 7, and the consolidated Financial Statements and related Notes to Financial Statements on pages F-4 through F-21 of this Report. RESULTS OF OPERATIONS Net sales increased 6.6% to $15.5 billion in 1994, from $14.6 billion in 1993 and $13.2 billion in 1992. The increase in 1994 was principally attributable to business acquisitions and unit volume growth, offset in part by the weakening of foreign currencies relative to the U.S. dollar. The increase in 1993 resulted principally from business acquisitions, net of dispositions, unit volume growth and the strengthening of foreign currencies relative to the U.S. dollar. Excluding the effects of foreign currencies and acquisitions and dispositions, sales dollars increased 3% in 1994 and 5% in 1993. The gross profit margin was 37.6% in 1994, compared with 38.0% in 1993 and 37.3% in 1992. The decrease in 1994 was attributable to margin declines in European hosiery and knit products businesses, offset in part by improved margins in the Household and Personal Care and Packaged Meats and Bakery operations. The improvement in 1993 was attributable to increased operating efficiencies resulting from business restructuring, tighter cost controls and benefits resulting from capital expenditures. Operating income, which is pretax earnings before interest and corporate expenses, decreased 51.6% to $632 million, from $1,307 million in 1993, while the 1993 operating income reflected an 8.2% increase over the $1,207 million in 1992. On June 6, 1994, the corporation announced a restructuring of its worldwide operations which will result in the closure of 94 manufacturing and distribution facilities and the severance of 9,900 employees. This restructuring reduced 1994 operating income, net income and primary earnings per share by $732 million, $495 million and $1.03, respectively. The 1994 operating income includes charges for restructuring as follows: Personal Products--$630 million; Household and Personal Care--$55 million; Coffee and Grocery--$25 million; and Packaged Meats and Bakery--$22 million. Of the total pretax charge for restructuring, $289 million relates to anticipated losses associated with the disposal of land, buildings and improvements, and machinery and equipment; $112 million relates to anticipated expenditures to close and dispose of the idle facilities; $239 million relates to anticipated payments to severed employees; $33 million relates to the recognition of pension benefits associated with the severed employee group; and $59 million primarily relates to losses associated with the disposal of certain businesses. As of July 2, 1994, no material actions contemplated in the restructuring plan have taken place. 11 13 Restructuring actions are expected to be substantially completed by 1996, and the corporation expects to fund the costs of the plan from internal sources and available borrowing capacity. The corporation expects the restructuring plan to begin lowering operating costs in 1995 and to generate increasing savings in subsequent years, growing to an annual savings of approximately $250 million in 1998. Savings from the planned actions will be used for both business-building initiatives and profit improvement. Excluding the effects of the restructuring charge, acquisitions and fluctuations in foreign exchange rates, operating income in 1994 was virtually unchanged from 1993 and increased by approximately 2% in 1993. In 1994, operating income in the Packaged Foods segment increased 2.3% and Packaged Consumer Products segment decreased 94.5%. Excluding the restructuring charge, operating income in the Packaged Foods segment increased 10.5% while the Packaged Consumer Products segment was virtually unchanged from 1993 results. The increase in the Packaged Foods segment is primarily attributable to higher unit volumes, operating efficiencies, cost controls and business acquisitions, offset in part by the weakening of foreign currencies relative to the U.S. dollar. The flat results in the Packaged Consumer Products segment were primarily attributable to weak performances in the European hosiery and knit products operations and the weakening of foreign currencies relative to the U.S. dollar, offset by the impact of business acquisitions and strong U.S. knit products and worldwide intimates results. Net interest expense was $145 million in 1994, compared with $82 million in 1993 and $94 million in 1992. The increase in 1994 was a result of increased financing needs for acquisitions and capital expenditures. The reduction in 1993 was primarily a result of lower short-term interest rates and the temporary refinancing of maturing long-term debt with short-term notes payable. Unallocated corporate expenses are costs not directly attributable to specific segment operations. Unallocated corporate expenses were $98 million in 1994 and $143 million in 1993. The reduction in 1994 was primarily attributable to lower administrative expenses and costs related to hedging foreign currency movements. Unallocated corporate expenses, excluding the impact of unusual items, were $161 million in 1992. The unusual items recognized in 1992 consisted of a $412 million gain from the sale of the corporation's over-the-counter pharmaceutical business, offset in part by a $190 million provision primarily related to restructuring the Packaged Foods segment. The restructuring consisted primarily of the sale of assets, consolidation and reconfiguration of facilities and certain employee costs. The effective tax rate was 39.9% in 1994, 34.9% in 1993 and 35.2% in 1992. Excluding the impact of unusual items in 1994 and 1992, the effective tax rates were 35.0% and 34.8%, respectively. In fiscal 1994, the corporation adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The cumulative effect of this mandated accounting change was a one-time charge of $35 million, or $.07 per share. In 1994, net income decreased 71.8% to $199 million and primary earnings per share decreased 73.6% to $.37. Excluding the effects of the restructuring charge and the cumulative effect of the accounting change, net income and primary earnings per share in 1994 increased 3.5% and 5.0%, respectively. After giving effect to the two-for-one stock split, which became effective December 1, 1992, primary earnings per share in 1993 decreased 9.1% to $1.40 from $1.54 in 1992. Excluding the unusual items reported in 1992, net income and primary earnings per share increased 13.5% and 12.9%, respectively, in 1993. During 1994, the corporation acquired several companies for an aggregate purchase price of $412 million in cash. The principal acquisitions were the European personal care businesses of SmithKline Beecham (Household and Personal Care), Kiwi Brands (Pty.) Ltd. and subsidiaries (Household and Personal Care and Personal Products) and Maglificio Bellia S.p.A. (Personal Products). During 1993, the corporation acquired several companies for an aggregate purchase price of $352 million in cash and the issuance of common stock having a market value of $69 million. The principal acquisitions were BP Nutrition's Consumer Food Group (Packaged Meats and Bakery) and the Filodoro Group (Personal Products). During 1992, the corporation acquired Playtex Apparel, Inc. (Personal Products), Pretty Polly 12 14 Limited (Personal Products) and several small companies for a total purchase price of $657 million and the issuance of common stock with a market value of $167 million. Also during 1992, the corporation acquired a minority position and an option to acquire the remaining shares of Playtex FP Group Incorporated for $40 million and the issuance of common stock with a market value of $23 million. These transactions are discussed in greater detail in the Acquisitions and Divestments Note to the financial statements on page F-12. Sales and operating income of businesses sold are summarized in the Industry Segment Information Note to the financial statements on pages F-19 through F-20. During the past three years, the general rate of inflation has averaged 2.4%. Additionally, approximately 39% of the corporation's inventories are valued on the last-in, first-out basis. As a result, much of the current cost of production is reflected in operating results and not retained as a component of inventory. FINANCIAL POSITION Cash provided by operations in 1994 of $839 million was comparable to that provided in 1993 and lower than the $976 million generated in 1992. Net cash generated from operating activities in 1994 was adversely impacted by lower gross margins and increased levels of inventory and trade accounts receivable. The reduction in 1993 versus 1992 resulted from expenditures made in restructuring the corporation's domestic Packaged Foods and foreign Packaged Consumer Products segments, offset in part by improved gross margins and operating profits. Net cash used in investment activities was $937 million in 1994, $967 million in 1993 and $381 million in 1992. During 1994, capital expenditures of $628 million decreased from the record level of $728 million in 1993. A significant portion of these expenditures was for the reduction of manufacturing and distribution costs, and for expansion of capacity to meet internal growth. During 1992, expenditures to acquire plant and equipment and businesses were largely offset by approximately $800 million of proceeds received from the sale of the corporation's over-the-counter pharmaceutical business. Capital expenditures are anticipated to decline to between $500 million and $550 million in 1995. The planned level of capital expenditures is needed primarily to complete manufacturing and distribution cost reduction initiatives for the Personal Products businesses and to increase capacity in the Intimates businesses. The 1995 expenditures will be funded from internal sources and available borrowing capacity. The corporation retains substantial flexibility to adjust its spending levels in order to act upon other opportunities, such as business acquisitions. During 1994, cash of $42 million was used in financing activities. In 1994, a domestic subsidiary of the corporation issued $200 million of equity securities, the proceeds of which were used to purchase shares of the corporation's common stock. During 1993, cash of $248 million was provided from financing activities, primarily through the utilization of available short-term debt capacity. As of July 2, 1994, the total-debt-to-total-capital ratio increased to 38.9% from 34.9% at July 3, 1993. The current capital structure is within the corporation's objective of maintaining a total-debt-to-total-capital ratio of no more than 40% over time and provides sufficient financial flexibility to pursue business opportunities. Item 8. Financial Statements and Supplementary Data. The consolidated Financial Statements and related Notes to Financial Statements of Sara Lee identified in the Index to Financial Statements appearing under Item 14, Exhibits, Financial Statement Schedules and Reports on Form 8-K, are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not Applicable 13 15 PART III Item 10. Directors and Executive Officers of Sara Lee. For information with respect to the executive officers of Sara Lee, see "Executive Officers of Sara Lee" on page 10 of this Report. For information with respect to the directors of Sara Lee, see "Election of 18 Directors" on pages 2 through 7 of the Proxy Statement for the Annual Meeting of Stockholders to be held October 27, 1994 ("Proxy Statement"), which is incorporated herein by reference. Item 11. Executive Compensation. The information set forth in the Proxy Statement on pages 10 through 16, under the caption "Executive Compensation", and on pages 16 through 18, under the caption "Retirement Plans", is incorporated herein by reference; provided, however, that the Report of the Compensation and Employee Benefits Committee on Executive Compensation and the Performance Graph contained therein shall not be so deemed incorporated by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. (a) No person or "group" (as that term is used in Section 3(d)(3) of the Securities Exchange Act of 1934) is known by Sara Lee to beneficially own more than five percent of any class of Sara Lee's voting securities, except that State Street Bank & Trust Company of Boston, as Trustee of the Sara Lee Corporation Employee Stock Ownership Plan holds, in trust, 78.2% of Sara Lee's Employee Stock Ownership Plan Convertible Preferred Stock. (b) Security ownership by management as outlined on page 8 of the Proxy Statement under the caption "Ownership of Common Stock by Directors, Nominees and Executive Officers" is incorporated herein by reference. (c) There are no arrangements known to Sara Lee the operation of which may at a subsequent date result in a change in control of Sara Lee. Item 13. Certain Relationships and Related Transactions. During fiscal 1994, Sara Lee paid fees for legal services performed by the law firm of Sidley & Austin, to which Newton N. Minow is counsel, and the law firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P., of which Vernon E. Jordan is a senior partner. Sara Lee paid fees for investment banking services to The First National Bank of Chicago, of which Richard L. Thomas is Chairman of the Board and Chief Executive Officer. Each of the above individuals is a director of Sara Lee. 14 16 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
PAGE ---- (A) 1. FINANCIAL STATEMENTS Report of Independent Public Accountants...................................... F-1 Consolidated Statements of Income -- Years ended June 27, 1992, July 3, 1993, and July 2, 1994.............................................................. F-4 Consolidated Balance Sheets -- June 27, 1992, July 3, 1993, and July 2, 1994.......................................................................... F-5 Consolidated Statements of Common Stockholders' Equity -- Balances at June 27, 1992, July 3, 1993, and July 2, 1994.......................................... F-7 Consolidated Statements of Cash Flows -- Years ended June 27, 1992, July 3, 1993, and July 2, 1994........................................................ F-8 Notes to Financial Statements................................................. F-9 2. FINANCIAL STATEMENT SCHEDULES Report of Independent Public Accountants...................................... F-22 Schedule V -- Property, Plant and Equipment................................... F-23 Schedule VI -- Accumulated Depreciation and Amortization of Property, Plant and Equipment............................. F-24 Schedule VIII -- Valuation and Qualifying Accounts............................ F-25 Schedule X -- Supplementary Income Statement Information...................... F-25
(B) REPORTS ON FORM 8-K On June 7, 1994, Sara Lee filed a Form 8-K which consisted of a press release issued June 6, 1994, that announced the worldwide restructuring of corporate operations and a restructuring charge against earnings. (C) EXHIBITS PAGE/INCORPORATION BY REFERENCE (3a) Articles of Incorporation as Amended and Restated (3b) By-Laws Exhibit (3b) to Report on Form 10-K for Fiscal Year ended July 3, 1993
(4) Sara Lee, by signing this Report, agrees to furnish the Securities and Exchange Commission, upon its request, a copy of any instrument which defines the rights of holders of long-term debt of Sara Lee and all of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed, and which authorizes a total amount of securities not in excess of 10% of the total assets of Sara Lee and its subsidiaries on a consolidated basis. (10) 1. 1979 Stock Option Plan, as amended Exhibit (10) 7 to Report on Form 10-K for Fiscal Year ended June 27, 1987 2. 1981 Stock Option Plan, as amended Exhibit (10) 11 to Report on Form 10-K for Fiscal Year ended July 1, 1989 3. 1988 Non-Qualified Stock Option Plan Exhibit (10) 12 to Report on Form 10-K for Fiscal Year ended July 2, 1988 4. 1989 Incentive Stock Plan, as Exhibit B to 1991 Proxy Statement, amended dated September 20, 1991 5. Supplemental Benefit Plan, as Exhibit (10) 8 to Report on Form 10-K amended for Fiscal Year ended June 30, 1990 6. Short-Term (Annual) Incentive Plan Exhibit (10) 15 to Report on Form 10-K Fiscal Year 1994 for Fiscal Year ended July 3, 1993
15 17 7. Short-Term (Annual) Incentive Plan Fiscal Year 1995 (Draft) 8. Accelerated Growth Incentive Plan Exhibit 10 (12) to Report on Form 10-K Fiscal Years 1990-1994 for Fiscal Year ended June 30, 1990 9. 1991 Non-Qualified Deferred Exhibit 10 (15) to Report on Form 10-K Compensation Plan (Base Salary) for Fiscal Year ended June 29, 1991 10. 1992 Non-Qualified Deferred Compen- Exhibit 10 (15) to Report on Form 10-K sation Plan (Base Salary) for Fiscal Year ended June 27, 1992 11. FY '93 Non-Qualified Deferred Com- Exhibit 10 (16) to Report on Form 10-K pensation Plan (Annual Bonus) for Fiscal Year ended June 27, 1992 12. 1993 Non-Qualified Deferred Compen- Exhibit 10 (19) to Report on Form 10-K sation Plan (Base Salary) for Fiscal Year ended July 3, 1993 13. FY '94 Non-Qualified Deferred Com- Exhibit 10 (20) to Report on Form 10-K pensation Plan (Annual Bonus) for Fiscal Year ended July 3, 1993 14. 1994 Non-Qualified Deferred Compen- sation Plan (Base Salary) 15. FY '95 Non-Qualified Deferred Com- pensation Plan (Annual Bonus) 16. Long Term Performance Incentive Plan FY '95-97 (Draft) 17. Non-Qualified Deferred Compensation Exhibit 10 (21) to Report on Form 10-K Plan for Outside Directors for Fiscal Year ended July 3, 1993 18. Estate Builder Deferred Exhibit (10) 17 to Report on Form 10-K Compensation Plan for Fiscal Year ended June 29, 1985 19. Severance Plan for Corporate Officers 20. Stockholder Rights Agreement Exhibit (4) to Report on Form 10-Q for the quarter ended March 26, 1988 (12) 1. Computation of Ratio of Earnings to Fixed Charges 2. Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements (21) List of Subsidiaries (23) Consent of Arthur Andersen LLP (24) Powers of Attorney from those directors whose names appear on pages 17 and 18 hereof followed by an asterisk (27) Financial Data Schedules
16 18 SIGNATURES Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, Sara Lee Corporation has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. September 30, 1994 SARA LEE CORPORATION By: /s/ GORDON H. NEWMAN ------------------------------------ Gordon H. Newman Senior Vice President, Secretary and General Counsel Pursuant to the requirements of the Securities and Exchange Act of 1934, this Report has been signed below by the following persons on behalf of Sara Lee Corporation and in the capacities indicated on September 30, 1994. SIGNATURE CAPACITY - - - ---------------------------------------- ------------------------------------ /s/ JOHN H. BRYAN Chairman of the Board, Chief - - - ---------------------------------------- Executive Officer and Director John H. Bryan /s/ MICHAEL E. MURPHY Vice Chairman and Chief Financial and - - - ---------------------------------------- Administrative Officer and Director Michael E. Murphy /s/ DONALD J. FRANCESCHINI Executive Vice President and Director - - - ---------------------------------------- Donald J. Franceschini /s/ C. STEVEN MCMILLAN Executive Vice President and Director - - - ---------------------------------------- C. Steven McMillan /s/ WAYNE R. SZYPULSKI Vice President and Controller - - - ---------------------------------------- Wayne R. Szypulski * Director - - - ---------------------------------------- Paul A. Allaire * Director - - - ---------------------------------------- Frans H.J.J. Andriessen * Director - - - ---------------------------------------- Duane L. Burnham * Director - - - ---------------------------------------- Charles W. Coker * Director - - - ---------------------------------------- Willie D. Davis * Director - - - ---------------------------------------- Allen F. Jacobson 17 19 SIGNATURE CAPACITY --------- -------- * Director - - - ---------------------------------------- Vernon E. Jordan, Jr. * Director - - - ---------------------------------------- James L. Ketelsen * Director - - - ---------------------------------------- Baron Gualtherus Kraijenhoff * Director - - - ---------------------------------------- Joan D. Manley * Director - - - ---------------------------------------- Newton N. Minow * Director - - - ---------------------------------------- Sir Arvi H. Parbo A.C. * Director - - - ---------------------------------------- Rozanne L. Ridgway * Director - - - ---------------------------------------- Richard L. Thomas *By Gordon H. Newman as Attorney-in-Fact pursuant to Powers of Attorney executed by the directors listed above, which Powers of Attorney have been filed with the Securities and Exchange Commission. /s/ GORDON H. NEWMAN -------------------------------------- Gordon H. Newman As Attorney-in-Fact 18 20 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders, SARA LEE CORPORATION We have audited the accompanying consolidated balance sheets of SARA LEE CORPORATION (a Maryland corporation) AND SUBSIDIARIES as of July 2, 1994, July 3, 1993, and June 27, 1992, and the related consolidated statements of income, common stockholders' equity, and cash flows for each of the three years in the period ended July 2, 1994. These consolidated financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sara Lee Corporation and Subsidiaries as of July 2, 1994, July 3, 1993, and June 27, 1992, and the results of their operations and their cash flows for each of the three years in the period ended July 2, 1994 in conformity with generally accepted accounting principles. As explained in the Notes to Financial Statements, the Corporation adopted the requirements of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," effective July 4, 1993. /s/ Arthur Andersen LLP Chicago, Illinois, August 1, 1994. F-1 21 SARA LEE CORPORATION AND SUBSIDIARIES FINANCIAL SUMMARY
YEARS ENDED ---------------------- JULY 2, JULY 3, 1994 (1) 1993 (2) -------- -------- (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) RESULTS OF OPERATIONS Net sales............................................................... $ 15,536 $ 14,580 Operating income........................................................ 632 1,307 Income before income taxes.............................................. 389 1,082 Net income.............................................................. 199 704 Effective tax rate...................................................... 39.9% 34.9% - - - ------------------------------------------------------------------------------------------------- FINANCIAL POSITION Total assets............................................................ $ 11,665 $ 10,862 Long-term debt.......................................................... 1,496 1,164 Redeemable preferred stock.............................................. 331 357 Common stockholders' equity............................................. 3,326 3,551 Return on average common stockholders' equity........................... 5.1% 19.6% - - - ------------------------------------------------------------------------------------------------- PER COMMON SHARE (5) Net income -- primary................................................... $ .37 $ 1.40 Average shares outstanding (in millions)........................... 480 485 Net income -- fully diluted............................................. .36 1.37 Average shares outstanding (in millions)........................... 498 504 Dividends (6)........................................................... .63 .56 Book value at year-end.................................................. 6.92 7.31 Market value at year-end................................................ 20.63 24.25 - - - ------------------------------------------------------------------------------------------------- OTHER INFORMATION Capital expenditures.................................................... $ 628 $ 728 Depreciation and amortization........................................... 568 522 Media advertising expense............................................... 371 392 Total advertising and promotion expense................................. 1,498 1,455 Common stockholders of record........................................... 95,600 88,100 Number of employees..................................................... 145,900 138,000 - - - -------------------------------------------------------------------------------------------------
(1) In 1994, a restructuring provision reduced operating income and income before income taxes by $732 and net income by $495. In addition, in 1994, the cumulative effect of adopting a mandated change in the method of accounting for income taxes reduced net income by $35. (2) 53-week year. (3) Fiscal 1992 income before income taxes includes a $412 gain on sale of business offset by a $190 restructuring provision. These transactions increased net income by $140. (4) Fiscal 1989 income before income taxes includes an $87 gain on sales of businesses offset by a $55 restructuring provision. These transactions increased net income by $11. (5) Restated for the 2-for-1 stock splits in fiscal 1993, 1990, 1987 and 1984. (6) Fiscal 1992 includes a $.12 special dividend. The Notes to Financial Statements should be read in conjunction with the Financial Summary. F-2 22 SARA LEE CORPORATION AND SUBSIDIARIES FINANCIAL SUMMARY
YEARS ENDED ------------------------------------------------------------------------------------------------------ JUNE 27 JUNE 29, JUNE 30, JULY 1, JULY 2, JUNE 27, JUNE 28, JUNE 29, JUNE 30, 1992(3) 1991 1990 1989(4) 1988(2) 1987 1986 1985 1984 -------- -------- -------- ------- ------- -------- -------- -------- -------- (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) RESULTS OF OPERATIONS Net sales................. $13,243 $12,381 $11,606 $11,718 $10,424 $9,155 $7,938 $8,117 $7,000 Operating income.......... 1,207 1,085 938 847 753 632 514 474 414 Income before income taxes................... 1,174 830 713 639 513 448 356 345 314 Net income................ 761 535 470 410 325 267 223 206 188 Effective tax rate........ 35.2 % 35.5 % 34.1 % 35.8% 36.7% 40.4% 37.2% 40.3% 40.1% - - - ------------------------------------------------------------------------------------------------------------------ FINANCIAL POSITION Total assets.............. $ 9,989 $ 8,122 $ 7,636 $ 6,523 $ 5,012 $4,192 $3,503 $3,216 $2,822 Long-term debt............ 1,389 1,399 1,524 1,488 893 633 634 464 359 Redeemable preferred stock................... 351 344 338 182 225 75 75 75 75 Common stockholders' equity.................. 3,382 2,550 2,292 1,915 1,575 1,416 1,155 991 957 Return on average common stockholders' equity.... 24.7 % 20.6 % 20.9 % 22.7% 21.1% 20.5% 20.4% 20.5% 19.4% - - - ------------------------------------------------------------------------------------------------------------------ PER COMMON SHARE (5) Net income -- primary..... $ 1.54 $ 1.08 $ .96 $ .88 $ .71 $ .59 $ .51 $ .45 $ .41 Average shares outstanding (in millions)........... 476 464 460 454 447 447 433 443 453 Net income -- fully diluted................. 1.50 1.05 .93 .87 .71 .59 .50 .45 .41 Average shares outstanding (in millions)........... 497 485 480 456 447 447 434 444 454 Dividends (6)............. .61 .46 .41 .35 .29 .24 .20 .18 .16 Book value at year-end.... 7.05 5.48 4.97 4.21 3.56 3.20 2.70 2.32 2.16 Market value at year-end................ 24.81 20.19 14.56 13.47 9.22 11.63 8.91 5.39 3.60 - - - ------------------------------------------------------------------------------------------------------------------ OTHER INFORMATION Capital expenditures...... $ 509 $ 522 $ 595 $ 541 $ 449 $ 287 $ 222 $ 247 $ 155 Depreciation and amortization............ 472 394 351.... 280 251 202 165 153 136 Media advertising expense................. 325 288 313.... 303 253 203 195 202 177 Total advertising and promotion expense....... 1,294 1,067 1,013.. 925 801 637 587 594 513 Common stockholders of record.................. 75,400 69,400 64,800.. 56,500 52,400 50,000 44,900 42,600 40,500 Number of employees....... 128,000 113,400 107,800... 101,800 85,700 92,400 87,000 92,800 90,900 - - - ------------------------------------------------------------------------------------------------------------------
(1) In 1994, a restructuring provision reduced operating income and income before income taxes by $732 and net income by $495. In addition, in 1994, the cumulative effect of adopting a mandated change in the method of accounting for income taxes reduced net income by $35. (2) 53-week year. (3) Fiscal 1992 income before income taxes includes a $412 gain on sales of business offset by a $190 restructuring provision. These transactions increased net income by $140. (4) Fiscal 1989 income before income taxes includes an $87 gain on sales of businesses offset by a $55 restructuring provision. These transactions increased net income by $11. (5) Restated for the 2-for-1 stock splits in fiscal 1993, 1990, 1987 and 1984. (6) Fiscal 1992 includes a $.12 special dividend. The Notes to Financial Statements should be read in conjunction with the Financial Summary. F-3 23 SARA LEE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED -------------------------------- JULY 2, JULY 3, JUNE 27, 1994 1993 1992 ------- ------- -------- (IN MILLIONS EXCEPT PER SHARE DATA) NET SALES................................................... $15,536 $14,580 $ 13,243 ------- ------- -------- Cost of sales............................................... 9,700 9,039 8,306 Selling, general and administrative expenses................ 4,570 4,377 3,891 Interest expense............................................ 188 162 172 Interest income............................................. (43) (80) (78) UNUSUAL ITEMS Gain on sale of a business................................ -- -- (412) Restructuring provision................................... 732 -- 190 ------- ------- -------- 15,147 13,498 12,069 ------- ------- -------- Income before income taxes.................................. 389 1,082 1,174 Income taxes................................................ 155 378 413 ------- ------- -------- NET INCOME BEFORE ACCOUNTING CHANGE......................... 234 704 761 Cumulative effect of accounting change...................... (35) -- -- ------- ------- -------- NET INCOME.................................................. 199 704 761 Preferred dividends, net of tax............................. (24) (26) (29) ------- ------- -------- Net income available for common stockholders................ $ 175 $ 678 $ 732 ======= ======= ======= NET INCOME PER COMMON SHARE -- PRIMARY Before cumulative effect of accounting change............. $ .44 $ 1.40 $ 1.54 Cumulative effect of accounting change.................... (.07) -- -- ------- ------- -------- $ .37 $ 1.40 $ 1.54 ======= ======= ======= Average shares outstanding................................ 480 485 476 ======= ======= ======= NET INCOME PER COMMON SHARE -- FULLY DILUTED Before cumulative effect of accounting change............. $ .43 $ 1.37 $ 1.50 Cumulative effect of accounting change.................... (.07) -- -- ------- ------- -------- $ .36 $ 1.37 $ 1.50 ======= ======= ======= Average shares outstanding................................ 498 504 497 ======= ======= =======
The accompanying Notes to Financial Statements are an integral part of these statements. F-4 24 SARA LEE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
JULY 2, JULY 3, JUNE 27, 1994 1993 1992 ------- ------- -------- (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) Cash and equivalents................................... $ 189 $ 325 $ 198 Trade accounts receivable, less allowances of $164 in 1994 and $154 in 1993 and 1992....................... 1,472 1,171 1,180 Inventories Finished goods....................................... 1,603 1,413 1,311 Work in process...................................... 361 322 325 Materials and supplies............................... 603 545 524 ------- ------- -------- 2,567 2,280 2,160 Other current assets................................... 241 200 157 ------- ------- -------- Total current assets................................... 4,469 3,976 3,695 ------- ------- -------- Investments in associated companies.................... 142 205 186 Trademarks and other assets............................ 492 518 580 Property Land................................................. 131 129 108 Buildings and improvements........................... 1,746 1,570 1,476 Machinery and equipment.............................. 3,077 2,804 2,594 Construction in progress............................. 283 339 231 ------- ------- -------- 5,237 4,842 4,409 Accumulated depreciation............................. 2,337 1,964 1,836 ------- ------- -------- Property, net.......................................... 2,900 2,878 2,573 Intangible assets, net................................. 3,662 3,285 2,955 ------- ------- -------- $11,665 $10,862 $9,989 ======= ======= ======
The accompanying Notes to Financial Statements are an integral part of these balance sheets. F-5 25 SARA LEE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
JULY 2, JULY 3, JUNE 27, 1994 1993 1992 ------- ------- -------- (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) Notes payable.............................................. $ 1,281 $ 843 $ 154 Accounts payable........................................... 1,253 1,151 1,110 Accrued liabilities Payroll and employee benefits............................ 668 429 408 Advertising and promotion................................ 313 282 214 Taxes other than payroll and income...................... 206 179 182 Income taxes............................................. 13 50 4 Other.................................................... 1,103 909 991 Current maturities of long-term debt....................... 82 426 237 ------- ------- -------- Total current liabilities.................................. 4,919 4,269 3,300 ------- ------- -------- Long-term debt............................................. 1,496 1,164 1,389 Deferred income taxes...................................... 290 512 488 Other liabilities.......................................... 783 705 776 Minority interest in subsidiaries.......................... 520 304 303 Preferred stock (authorized 13,500,000 shares; no par value) Convertible adjustable: Issued and outstanding -- 607,000 shares in 1993 and 1992; redeemable at $50 per share................................................. -- 30 30 Auction: Issued and outstanding -- 3,000 shares; redeemable at $100,000 per share...................... 300 300 300 ESOP convertible: Issued and outstanding -- 4,678,857 shares in 1994, 4,755,217 shares in 1993 and 4,792,736 shares in 1992........................................ 339 345 348 Unearned deferred compensation........................... (308) (318) (327) Common stockholders' equity Common stock: (authorized 600,000,000 shares; $1.33 1/3 par value) Issued and outstanding -- 480,765,240 shares in 1994, 485,378,368 shares in 1993 and 239,862,390 shares in 1992.................................................. 641 647 320 Capital surplus.......................................... 76 66 306 Retained earnings........................................ 2,799 3,056 2,649 Translation adjustments.................................. (170) (194) 126 Unearned restricted stock issued for future services..... (20) (24) (19) ------- ------- -------- Total common stockholders' equity.......................... 3,326 3,551 3,382 ------- ------- -------- $11,665 $10,862 $9,989 ======= ======= ======
The accompanying Notes to Financial Statements are an integral part of these balance sheets. F-6 26 SARA LEE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
UNEARNED COMMON CAPITAL RETAINED TRANSLATION RESTRICTED TOTAL STOCK SURPLUS EARNINGS ADJUSTMENTS STOCK ------ ------ ------- -------- ----------- ---------- (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) BALANCES AT JUNE 29, 1991...................... $2,550 $310 $ 68 $2,208 $ (12) $(24) Net income..................................... 761 -- -- 761 -- -- Cash dividends Common ($.6125 per share).................... (290) -- -- (290) -- -- Convertible adjustable preferred ($2.75 per share).................................... (2) -- -- (2) -- -- Auction preferred ($3,824.33 per share)...... (11) -- -- (11) -- -- ESOP convertible preferred ($5.4375 per share).................................... (26) -- -- (26) -- -- Stock issuances Business acquisitions........................ 190 6 184 -- -- -- Stock option and benefit plans............... 51 4 47 -- -- -- Restricted stock, less amortization of $6.... 6 -- 2 -- -- 4 Translation adjustments........................ 138 -- -- -- 138 -- ESOP tax benefit............................... 10 -- -- 10 -- -- Other.......................................... 5 -- 5 (1) -- 1 - - - ---------------------------------------------------------------------------------------------------------- BALANCES AT JUNE 27, 1992...................... 3,382 320 306 2,649 126 (19) Net income..................................... 704 -- -- 704 -- -- Cash dividends Common ($.56 per share)...................... (270) -- -- (270) -- -- Convertible adjustable preferred ($2.75 per share).................................... (2) -- -- (2) -- -- Auction preferred ($2,860.33 per share)...... (8) -- -- (8) -- -- ESOP convertible preferred ($5.4375 per share).................................... (26) -- -- (26) -- -- Two-for-one stock split........................ -- 322 (322) -- -- -- Stock issuances Business acquisitions........................ 69 3 66 -- -- -- Stock option and benefit plans............... 66 6 60 -- -- -- Restricted stock, less amortization of $4.... 4 -- 8 -- -- (4) Reacquired shares.............................. (77) (4) (73) -- -- -- Translation adjustments........................ (320) -- -- -- (320) -- ESOP tax benefit............................... 10 -- -- 10 -- -- Other.......................................... 19 -- 21 (1) -- (1) - - - ---------------------------------------------------------------------------------------------------------- BALANCES AT JULY 3, 1993....................... 3,551 647 66 3,056 (194) (24) Net income..................................... 199 -- -- 199 -- -- Cash dividends Common ($.625 per share)..................... (298) -- -- (298) -- -- Auction preferred ($2,732.33 per share)...... (8) -- -- (8) -- -- ESOP convertible preferred ($5.4375 per share).................................... (26) -- -- (26) -- -- Stock issuances Stock option and benefit plans............... 69 6 63 -- -- -- Restricted stock, less amortization of $4.... 4 -- 2 -- -- 2 Reacquired shares.............................. (224) (12) (82) (130) -- -- Translation adjustments........................ 24 -- -- -- 24 -- ESOP tax benefit............................... 10 -- -- 10 -- -- Other.......................................... 25 -- 27 (4) -- 2 ------ ------ ------ ------ -------- ------- BALANCES AT JULY 2, 1994....................... $3,326 $641 $ 76 $2,799 $(170) $(20) ====== ====== ====== ====== ======== =======
The accompanying Notes to Financial Statements are an integral part of these statements. F-7 27 SARA LEE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED ---------------------------------- JULY 2, JULY 3, JUNE 27, 1994 1993 1992 ------- ------- -------- (DOLLARS IN MILLIONS) OPERATING ACTIVITIES Net income.................................................... $ 199 $ 704 $ 761 Adjustments for noncash charges included in net income Depreciation and amortization of intangibles................ 568 522 472 Unusual items, net.......................................... 732 -- (222) Cumulative effect of accounting change...................... 35 -- -- (Decrease) increase in deferred taxes....................... (222) 27 48 Other noncash credits, net.................................. (109) (117) (93) Changes in current assets and liabilities, net of businesses acquired and sold (Increase) decrease in trade accounts receivable......... (162) 57 (118) (Increase) in inventories................................ (224) (124) (288) (Increase) decrease in other current assets.............. (29) (40) 11 Increase (decrease) in accounts payable.................. 20 (10) 160 Increase (decrease) in accrued liabilities............... 31 (169) 245 ------- ------- -------- Net cash from operating activities.......................... 839 850 976 ------- ------- -------- INVESTMENT ACTIVITIES Purchases of property and equipment........................... (628) (728) (509) Acquisitions of businesses.................................... (412) (352) (657) Returns from (investments in) associated companies............ 48 5 (60) Dispositions of businesses.................................... -- 31 805 Sales of property............................................. 49 51 34 Other......................................................... 6 26 6 ------- ------- -------- Net cash used in investment activities...................... (937) (967) (381) ------- ------- -------- FINANCING ACTIVITIES Issuances of common stock..................................... 69 66 51 Purchases of common stock..................................... (224) (77) -- Redemption of preferred stock................................. (30) -- -- Issuance of equity securities by subsidiary................... 200 -- -- Borrowings of long-term debt.................................. 385 256 64 Repayments of long-term debt.................................. (438) (300) (86) Short-term borrowings (repayments), net....................... 328 609 (232) Payments of dividends......................................... (332) (306) (329) ------- ------- -------- Net cash from (used in) financing activities................ (42) 248 (532) ------- ------- -------- Effect of changes in foreign exchange rates on cash........... 4 (4) 10 ------- ------- -------- Increase (decrease) in cash and equivalents................... (136) 127 73 Cash and equivalents at beginning of year..................... 325 198 125 ------- ------- -------- Cash and equivalents at end of year........................... $ 189 $ 325 $ 198 ===== ===== ======
The accompanying Notes to Financial Statements are an integral part of these statements. F-8 28 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (dollars in millions except per share data) - - - -------------------------------------------------------------------------------- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION The consolidated financial statements include all majority-owned subsidiaries. All significant intercompany transactions of consolidated subsidiaries are eliminated. Acquisitions recorded as purchases are included in the income statement from the date of acquisition. INVESTMENTS IN ASSOCIATED COMPANIES Investments in associated companies consist of minority positions in several companies whose activities are similar to those of the corporation's operating divisions. The equity method of accounting is used when the corporation's ownership exceeds 20% and it exercises significant influence over the investee. Other minority positions are recorded at cost. FISCAL YEAR The corporation's fiscal year ends on the Saturday closest to June 30. Fiscal 1994 and 1992 were 52-week years, while 1993 was a 53-week year. Unless otherwise stated, references to years relate to fiscal years. INTANGIBLE ASSETS The excess of cost over the fair market value of tangible net assets and trademarks of acquired businesses are amortized on a straight-line basis over the periods of expected benefit, which range from 10 years to 40 years. Accumulated amortization of intangible assets amounted to $572 at July 2, 1994, $457 at July 3, 1993 and $366 at June 27, 1992. Subsequent to its acquisition, the corporation continually evaluates whether later events and circumstances have occurred that indicate the remaining estimated useful life of an intangible asset may warrant revision or that the remaining balance of an intangible asset may not be recoverable. When factors indicate that an intangible asset should be evaluated for possible impairment, the corporation uses an estimate of the related business' undiscounted future cash flows over the remaining life of the asset in measuring whether the intangible asset is recoverable. INVENTORY VALUATION Inventories are valued at the lower of cost (in 1994, approximately 39% at last-in, first-out [LIFO] and the remainder at first-in, first-out[FIFO]) or market. Inventories recorded at LIFO were approximately $24 at July 2, 1994, $38 at July 3, 1993 and $35 at June 27, 1992, lower than if they had been valued at FIFO. Inventory cost includes material and conversion costs. The corporation enters into forward foreign exchange contracts to hedge its exposure to currency fluctuations on certain inventory purchases. Gains and losses on these contracts are deferred and included in the cost of the inventory. PROPERTY Property is stated at cost, and depreciation is computed using principally the straight-line method at annual rates of 2% to 20% for buildings and improvements, and 4% to 33% for machinery and equipment. Additions and improvements that substantially extend the useful life of a particular asset and interest costs incurred during the construction period of major properties are capitalized. Repair and maintenance costs are charged to expense. Upon sale, the cost and related accumulated depreciation are removed from the accounts. F-9 29 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) FOREIGN OPERATIONS Foreign-currency-denominated assets and liabilities are translated into U.S. dollars at the exchange rates existing at the balance sheet date. Translation adjustments resulting from fluctuations in exchange rates, and gains and losses on forward exchange contracts and currency swaps used to hedge long-term foreign investments, are recorded as a separate component of common stockholders' equity. Income and expense items are translated at the average exchange rates during the respective periods. NET INCOME PER COMMON SHARE Primary net income per common share is based on the average number of common shares outstanding and common share equivalents and net income reduced for preferred dividends, net of the tax benefits related to the ESOP convertible preferred stock dividends. The fully diluted net income per share calculation assumes conversion of the ESOP convertible preferred stock into common stock and further adjusts net income for the additional ESOP compensation expense, net of tax benefits, resulting from the assumed replacement of the ESOP convertible preferred stock dividends with common stock dividends. INCOME TAXES Income taxes are provided on the income reported in the financial statements, regardless of when such taxes are payable. U.S. income taxes are provided on undistributed earnings of foreign subsidiaries that are intended to be remitted to the corporation. If the permanently reinvested earnings of foreign subsidiaries were remitted, the U.S. income taxes due under current tax law would not be material. ADVERTISING During 1994, the American Institute of Certified Public Accountants issued Statement of Position 93-7, "Reporting on Advertising Costs," which will be effective for the corporation's fiscal 1995 statements. The statement primarily requires that the cost of advertising be expensed no later than the first time the advertising takes place. The impact of adopting this statement is not expected to have a material impact upon the corporation's results of operations or financial position. COMMON STOCK Under the corporation's stock option plans, executive employees may be granted options to purchase common stock at the market value on the date of grant. Under the corporation's non-qualified stock option plans, an active employee will receive a replacement stock option equal to the number of shares surrendered upon a stock-for-stock exercise. The exercise price of the replacement option will be 100% of the market value at the date of exercise of the original option and will remain exercisable for the remaining term of the original option. At July 2, 1994, 7,809,751 common shares were available for granting; options had been granted on 13,018,410 shares at prices ranging from $5.38 to $31.94 per share. During 1994, options on 3,707,564 shares were granted at prices ranging from $20.63 to $27.81; options for 2,321,765 shares were exercised at prices ranging from $3.56 to $25.63; and options for 880,163 shares expired or were canceled. Options exercisable at year-end were: 1994 -- 9,548,858; 1993 -- 10,425,115; and 1992 -- 3,911,336. Employees may purchase up to twenty-five thousand dollars market value of common stock annually at 85% of the market value. At July 2, 1994, 2,173,225 shares of common stock were available for issuance under this stock purchase plan. F-10 30 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) The corporation has a restricted stock plan that provides for awards of common stock to executive employees, subject to forfeiture if employment terminates prior to the end of prescribed periods. The market value of shares awarded under the plan is recorded as unearned compensation. The unearned amount is amortized to compensation expense over the periods the restrictions lapse. Effective December 1, 1992, the corporation declared a two-for-one stock split in the form of a 100% stock dividend. Changes in outstanding common shares for the past three years were:
1994 1993 1992 ---------- ---------- ---------- Beginning balances................................ 485,378,368 239,862,390 232,683,861 Stock issuances Business acquisitions........................... -- 1,924,411 4,334,226 Stock option and benefit plans.................. 4,413,148 4,276,753 2,803,939 Restricted stock plan........................... 87,000 238,700 58,000 Two-for-one stock split......................... -- 241,988,568 -- Stock purchased/retired........................... (9,098,100) (2,922,000) -- Other............................................. (15,176) 9,546 (17,636) ----------- ----------- ----------- Ending balances................................... 480,765,240 485,378,368 239,862,390 =========== =========== ===========
PREFERRED STOCK The corporation redeemed its cumulative convertible adjustable preferred stock on July 26, 1993 for $30. Quarterly dividends were based on the higher of yields of selected U.S. government securities or a minimum annual rate of 5.5%. Six series of 500 shares each of nonvoting auction preferred stock are outstanding. Dividends are cumulative and are determined every 49 days through specific auction procedures. The convertible preferred stock sold to the corporation's Employee Stock Ownership Plan (ESOP) is redeemable at the option of the corporation at any time after December 15, 2001. Each share is currently convertible into four shares of the corporation's common stock and is entitled to 5.133 votes. This stock has a 7.5% annual dividend rate, payable semiannually, and has a liquidation value of $72.50 plus accrued but unpaid dividends. The purchase of the preferred stock by the ESOP was funded with notes guaranteed by the corporation. The loan is included in long-term debt and is offset in the corporation's Consolidated Balance Sheets under the caption Unearned Deferred Compensation. Each year, the corporation makes contributions that, with the dividends on the preferred stock held by the ESOP, will be used to pay loan interest and principal. Shares are allocated to participants based upon the ratio of the current year's debt service to the sum of the total principal and interest payments over the life of the loan. Plan expense is recognized in accordance with methods prescribed by the FASB. ESOP-related expenses amounted to $11 in 1994, $11 in 1993 and $10 in 1992. Payments to the ESOP were $38 in 1994, $35 in 1993 and $32 in 1992. Principal and interest payments by the ESOP amounted to $11 and $27 in 1994, $7 and $28 in 1993, and $4 and $28 in 1992. The fair value of the auction preferred stock approximated its carrying value as of July 2, 1994 and July 3, 1993. The fair value of the ESOP preferred stock was $443 and $530 at July 2, 1994 and July 3, 1993, respectively. F-11 31 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) The corporation has a Preferred Stock Purchase Rights Plan. The Rights are exercisable 10 days after certain events involving the acquisition of 20% or more of the corporation's outstanding common stock or the commencement of a tender or exchange offer for at least 25% of the common stock. Upon the occurrence of such an event, each Right, unless redeemed by the board of directors, entitles the holder to receive common stock equal to twice the exercise price of the Right. The exercise price is $140 multiplied by the number of preferred shares held. There are 3,000,000 shares of preferred stock reserved for issuance upon exercise of the Rights. MINORITY INTEREST IN SUBSIDIARIES A domestic subsidiary of the corporation issued $200 of preferred equity securities in 1994. No gain or loss was recognized as a result of the transaction and the corporation owned substantially all of the voting equity of the subsidiary, both before and after the transaction. The securities issued by the subsidiary provide the holder a rate of return based upon a specified inter-bank borrowing rate, are redeemable in 1996, and may be called at any time by the subsidiary. The subsidiary has the option of redeeming the securities with either cash, debt or equity of the corporation. The subsidiary used the cash proceeds received to purchase the common stock of the corporation on the open market. A wholly owned foreign subsidiary of the corporation issued preferred equity securities in fiscal 1990 and 1991 totaling $295. The securities provide a rate of return based upon specified inter-bank borrowing rates. The securities are redeemable in 1997 in exchange for common shares of the issuer, which may then be put to the corporation for preferred stock. The subsidiary may call the securities at any time. ACQUISITIONS AND DIVESTMENTS During 1994, the corporation acquired several companies for an aggregate purchase price of $412 in cash. The principal acquisitions were the European personal care businesses of SmithKline Beecham; Kiwi Brands (Pty.) Ltd. and subsidiaries, a group of South African companies that manufacture and market personal care products and hosiery; and Maglificio Bellia S.p.A., a manufacturer and marketer of intimate apparel in Italy. During 1993, the corporation acquired several companies for an aggregate purchase price of $352 in cash and the issuance of 1,924,411 shares of common stock having a market value of $69. The principal acquisitions were BP Nutrition's Consumer Food Group, a manufacturer and marketer of packaged meat products in Europe, and the Filodoro Group, a manufacturer and marketer of hosiery in Italy. During 1992, the corporation acquired several companies for an aggregate purchase price of $657 in cash and the issuance of 3,875,622 shares of common stock having a market value of $167. The principal acquisitions were Playtex Apparel, Inc., an international manufacturer and distributor of intimate apparel products, and Pretty Polly Limited, a manufacturer and marketer of hosiery in the United Kingdom. During the year, the corporation also acquired a minority position in Playtex FP Group Incorporated, a manufacturer and marketer of personal care products, for $40 in cash and the issuance of 458,604 shares of common stock having a market value of $23. During 1994, the corporation disposed of substantially all of its investment in Playtex FP Group. During 1992, the corporation sold businesses for proceeds of $805. The most significant disposition was the corporation's European-based, over-the-counter pharmaceutical business, Nicholas. The corporation made several divestments in 1993, which did not have a material effect on operating results or financial position. F-12 32 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) COMMITMENTS AND CONTINGENCIES The corporation enters into interest rate swap agreements to manage interest rate fluctuations and lower its cost of borrowing. The differential to be paid or received on these agreements is accrued as interest rates change and is recognized over the lives of the respective agreements. The terms of swap agreements, which effectively converted short-term variable-rate debt into fixed-rate debt at the respective year-end, are shown below:
1994 1993 1992 ---- ---- ---- Aggregate notional principal........................................ $150 $161 $13 Weighted average interest rate...................................... 8.8% 8.8% 8.1% Weighted average maturity in years.................................. .4 1.3 1.4
The corporation enters into forward foreign exchange contracts to hedge the foreign currency exposure of its net investments in European subsidiaries, intercompany loans and firm commitments. The corporation primarily sells European currencies and purchases U.S. dollars to hedge these foreign currency positions. As of July 2, 1994, the U.S. dollar equivalent of the primary foreign currencies sold forward was $242 French francs, $174 German marks, $151 Italian lira and $104 British pounds. These contracts have maturity dates that are generally less than one year. Similar arrangements were in place in prior years. The corporation utilizes currency swaps to hedge the currency exposure of certain net investments in foreign operations and intercompany loans. The terms of the currency swaps, which effectively converted U.S. dollar-and Swiss franc-denominated debt into Dutch guilder-denominated debt, and hedged certain French franc-denominated intercompany loans at the respective year-end, are shown below:
1994 1993 1992 ---- ---- ---- Aggregate notional principal........................................ $546 $563 $922 Weighted average interest rate...................................... 6.7% 5.8% 6.5% Weighted average maturity in years.................................. 1.2 1.9 1.8
A large number of major international financial institutions are counterparties to the interest rate swaps, currency swaps and forward exchange contracts. The corporation continually monitors its positions and the credit ratings of its counterparties and, by policy, limits the amount of agreements or contracts it enters into with any one party. While the corporation may be exposed to credit losses in the event of nonperformance by these counterparties, it does not anticipate losses, because of the control procedures mentioned. The fair market value of the corporation's interest rate swaps, currency swaps and forward exchange contracts approximated their carrying value in the financial statements as of July 2, 1994 and July 3, 1993. Fair value is estimated based upon the amount that the corporation would receive or pay to terminate the agreements as of the reporting date, utilizing quoted prices for comparable contracts and discounted cash flows. The corporation had third-party guarantees outstanding, aggregating approximately $28 at July 2, 1994, $22 at July 3, 1993 and $24 at June 27, 1992. These guarantees relate primarily to financial arrangements to support various suppliers of the corporation, and are secured by the inventory and fixed assets of suppliers. Trade accounts receivable due from highly leveraged customers were $52 at July 2, 1994, $41 at July 3, 1993 and $48 at June 27, 1992. The financial position of these businesses has been considered in determining allowances for doubtful accounts. F-13 33 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) Rental expense under operating leases amounted to approximately $207 in 1994, $182 in 1993 and $175 in 1992. Future minimum annual fixed rentals required during the years ending in 1995 through 1999 under noncancelable operating leases having an original term of more than one year are $100, $72, $58, $49 and $39, respectively. The aggregate obligation subsequent to 1999 is $106. The corporation is contingently liable for long-term leases on properties operated by others. The minimum annual rentals under these leases average approximately $6 for the years ending in 1995-1999, $2 in 2000-2004 and $1 in 2005-2009. The corporation is a party to several pending legal proceedings and claims, and environmental actions by governmental agencies. Although the outcome of such items cannot be determined with certainty, the corporation's general counsel and management are of the opinion that the final outcome should not have a material effect on the corporation's results of operations or financial position. CREDIT FACILITIES The corporation has numerous credit facilities available, including revolving credit agreements totaling $1,900 that have an average annual fee of .1%. These agreements support commercial paper borrowings. Because of their short maturity, the fair value of notes payable approximates carrying value. Selected data on the corporation's short-term obligations follow:
1994 1993 1992 ------ ------ ------ Maximum period-end borrowings................................ $1,998 $1,484 $1,024 Average borrowings during the year........................... 1,833 1,067 753 Weighted average interest rate during the year............... 4.2% 5.3% 6.2% Weighted average interest rate at year-end................... 5.0 5.0 12.0
LONG-TERM DEBT
INTEREST RATE RANGE MATURITY 1994 1993 1992 ------------------- --------- ------ ------ ------ U.S. dollar obligations: ESOP debt...................... 8.176% 2004 $ 323 $ 334 $ 341 Eurodollar bonds............... -- 150 150 Notes and debentures........... 4.40-9.70 1995-2016 876 548 476 Revenue bonds.................. 2.50-4.40 2001-2019 23 25 28 Zero coupon notes.............. 10.00-14.25 2014-2015 12 11 10 Various other obligations...... 8 17 25 ------ ------ ------ 1,242 1,085 1,030 ------ ------ ------ Foreign currency obligations: Swiss franc.................... 4.75 1998 96 223 243 Dutch guilder.................. 6.50-8.625 1995-1998 123 177 203 Various other obligations...... 117 105 150 ------ ------ ------ 336 505 596 ------ ------ ------ Total long-term debt.............................. 1,578 1,590 1,626 Less current maturities........................... 82 426 237 ------ ------ ------ $1,496 $1,164 $1,389 ====== ====== ======
F-14 34 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) The ESOP debt is guaranteed by the corporation. The zero coupon notes are net of unamortized discounts of $112 in 1994, $113 in 1993 and $114 in 1992. Principal payments of $19 and $105 are due in 2014 and 2015, respectively. Payments required on long-term debt during the years ending in 1995 through 1999 are $82, $93, $121, $253 and $81, respectively. The corporation made cash interest payments of $203, $161 and $171 in 1994, 1993 and 1992, respectively. The estimated fair value of the corporation's long-term debt, including current maturities, was $1,549 at July 2, 1994 and $1,645 at July 3, 1993. The fair value of the corporation's long-term debt, including the current portion, is estimated using discounted cash flows based on the corporation's current incremental borrowing rates for similar types of borrowing arrangements. UNUSUAL ITEMS In the fourth quarter of 1994, the corporation provided for the costs of restructuring its worldwide operations. This restructuring provision reduced 1994 income before income taxes, net income and net income per common share by $732, $495 and $1.03, respectively. Of the total pretax charge, $289 relates to anticipated losses associated with the disposal of land, buildings and improvements, and machinery and equipment; $112 relates to anticipated expenditures to close and dispose of the idle facilities; $239 relates to anticipated payments to severed employees; $33 relates to the recognition of pension benefits associated with the severed employee group; and $59 primarily relates to losses associated with the disposal of certain businesses. As of July 2, 1994, no material actions contemplated in the restructuring plan have taken place. Restructuring actions are expected to be substantially completed by 1996. In 1992, the corporation sold its European-based over-the-counter pharmaceutical business, Nicholas, for a pretax gain of approximately $412 (equivalent to $.56 per share). Also in 1992, the board of directors approved a series of plans primarily related to the Packaged Foods segment designed to improve operating margins through the elimination of excess capacity and the disposition of operations that did not meet strategic goals. The restructuring consisted primarily of the sale of assets, consolidation and reconfiguration of facilities, and certain employee costs. The provision for this restructuring was $190. Together, these 1992 unusual items resulted in a net pretax gain of $222, or $.30 per share. RETIREMENT PLANS The corporation has noncontributory defined benefit plans covering certain of its domestic employees. The benefits under these plans are primarily based on years of service and compensation levels. The plans are funded in conformity with the requirements of applicable government regulations. The plans' assets consist principally of marketable equity securities, corporate and government debt securities and real estate. The corporation's foreign subsidiaries have plans for employees consistent with local practices. The corporation also sponsors defined contribution pension plans at several of its subsidiaries. Contributions are determined as a percent of each covered employee's salary. Certain employees are covered by union-sponsored, collectively bargained, multi-employer pension plans. Contributions are determined in accordance with the provisions of negotiated labor contracts and generally are based on the number of hours worked. F-15 35 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) The annual pension expense for all plans was:
1994 1993 1992 ---- ---- ---- Defined benefit plans................................................. $31 $30 $ 8 Defined contribution plans............................................ 11 13 13 Multi-employer plans.................................................. 4 4 4 ---- ---- ---- Total pension expense $46 $47 $25 ==== ==== ====
The increase in pension expense from 1992 to 1993 resulted from an increase in the benefits provided under certain foreign plans, the use of a lower discount rate in determining plan obligations and the impact of acquisitions. The components of the defined benefit plan expenses were:
1994 1993 1992 ---- ----- ----- Benefits earned by employees...................................... $ 52 $ 50 $ 41 Interest on projected benefit obligations......................... 92 90 73 Actual investment return on plan assets........................... (99) (131) (108) Net amortization and deferral..................................... (14) 21 2 ---- ----- ----- Net pension expense............................................... $ 31 $ 30 $ 8 ==== ===== =====
The status of defined benefit plans at the respective year-end was:
1994 1993 1992 ------ ------ ------ Fair market value of plan assets............................... $1,420 $1,284 $1,244 ------ ------ ------ Actuarial present value of benefits for services rendered: Accumulated benefits based on salaries to date Vested.................................................... 1,144 989 877 Nonvested................................................. 38 42 38 Additional benefits based on estimated future salary levels.................................................... 217 222 218 ------ ------ ------ Projected benefit obligations................................ 1,399 1,253 1,133 ------ ------ ------ Excess of plan assets over projected benefit obligations....... 21 31 111 Unamortized net transitional asset............................. (26) (33) (48) Unrecognized net gain.......................................... (8) (62) (71) Unrecognized prior service cost................................ 88 89 75 ------ ------ ------ Prepaid pension liability recognized on the Consolidated Balance Sheets............................................... $ 75 $ 25 $ 67 ====== ====== ======
Weighted average rates used in determining pension expense and related obligations for defined benefit plans were:
1994 1993 1992 ---- ---- ---- Discount rate......................................................... 7.5% 7.6% 7.9% Rate of compensation increase......................................... 5.2 5.3 5.8 Long-term rate of return on plan assets............................... 8.3 8.8 8.8
F-16 36 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) Effective July 4, 1993, the corporation adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions," (SFAS 106) for its domestic retiree benefit plans. Under SFAS 106, the corporation accrues the estimated cost of retiree health care and life insurance benefits during the employees' active service periods. The corporation's previous method of accounting for postretirement benefits other than pensions was similar to that required by SFAS 106, and as of the start of fiscal 1994, the accumulated benefit obligation for domestic employees had been accrued. The corporation provides health care and life insurance benefits to certain domestic retired employees, their covered dependents and beneficiaries. Generally, employees who have attained age 55 and who have rendered 10 years of service are eligible for these postretirement benefits. Certain retirees are required to contribute to plans in order to maintain coverage. The domestic postretirement benefit expense was $15 in 1994, $18 in 1993 and $14 in 1992. The components of the 1994 expense were:
1994 ---- Benefits earned by employees........................................................ $ 4 Interest on accumulated benefit obligations......................................... 11 ---- Net postretirement benefit expense.................................................. $15 ====
The status of domestic postretirement benefit plans at July 2, 1994 was:
1994 ---- Actuarial present value of benefits for services rendered: Retirees........................................................................... $ 87 Fully eligible active plan participants............................................ 19 Other active participants.......................................................... 48 ---- Accumulated benefit obligations...................................................... 154 Fair market value of plan assets..................................................... 2 ---- Accumulated benefit obligations in excess of plan assets............................. 152 Unrecognized net transitional asset.................................................. 15 Unrecognized net loss................................................................ (4) Unrecognized prior service cost...................................................... (1) ---- Postretirement benefit obligations recognized on Consolidated Balance Sheet.......... $162 ====
The discount rate used to determine the 1994 accumulated postretirement benefit obligations was 7.75%. The assumed health care cost trend rate was 15% in 1994 decreasing to 7% in 2002 and beyond. Increasing the health care cost trend by one percentage point would have increased the 1994 postretirement benefit obligations by approximately 8% and the annual plan expense by approximately 12%. Employees outside the United States are covered principally by government-sponsored plans, and the cost of company-provided plans is not material. The corporation is required to adopt SFAS 106 for its plans outside the United States in 1996. INCOME TAXES Effective July 4, 1993, the corporation adopted Statement of Financial Accounting Standards No. 109; "Accounting for Income Taxes," (SFAS 109). The cumulative effect as of July 4, 1993, of adopting F-17 37 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) SFAS 109, was a one-time charge of $35, or $.07 per share, primarily due to adjusting deferred taxes from historical to current rates. Financial statements for years prior to 1994 have not been restated to reflect the adoption of this standard. The effect of this new standard on 1994 income tax expense, exclusive of the cumulative effect adjustment, is not material. The provisions for income taxes computed by applying the U.S. statutory rate to income before taxes as reconciled to the actual provisions were:
1994 1993 1992 ---------------- ---------------- ---------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- ------ ------- Income before provision for income taxes United States................................ $218 56.0% $ 615 56.8% $ 283 24.1% Foreign...................................... 171 44.0 467 43.2 891 75.9 ------ ------- ------ ------- ------ ------- $389 100.0% $1,082 100.0% $1,174 100.0% ====== ===== ====== ===== ====== ===== Taxes at U.S. statutory rates.................. $136 35.0% $ 368 34.0% $ 399 34.0% State taxes, net of federal benefit............ 24 6.2 22 2.0 17 1.4 Difference between U.S. and foreign rates...... (34) (8.8) (31) (2.8) (28) (2.4) Nondeductible amortization..................... 46 11.7 44 4.0 37 3.2 Other, net..................................... (17) (4.2) (25) (2.3) (12) (1.0) ------ ------- ------ ------- ------ ------- Taxes at effective worldwide tax rates......... $155 39.9% $ 378 34.9% $ 413 35.2% ====== ===== ====== ===== ====== =====
Current and deferred tax provisions were:
1994 1993 1992 ------------------ ------------------ ------------------ CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED ------- -------- ------- -------- ------- -------- United States................................. $ 200 $ (144) $ 175 $ (7) $ 98 $ 24 Foreign....................................... 143 (61) 159 17 238 27 State......................................... 34 (17) 33 1 21 5 ------- -------- ------- --- ------- --- $ 377 $ (222) $ 367 $ 11 $ 357 $ 56 ====== ====== ====== ====== ====== ======
Following are the components of the deferred tax provisions occurring as a result of transactions being reported in different years for financial and tax reporting:
1994 1993 1992 ----- ---- ---- Depreciation........................................................... $ 22 $ 1 $ 8 Unremitted earnings of foreign subsidiaries............................ -- 20 14 Inventory valuation methods............................................ 2 (1) (4) Restructuring reserves................................................. (230) -- -- Other, net............................................................. (16) (9) 38 ----- ---- ---- $(222) $ 11 $ 56 ===== ==== ==== Cash payments for income taxes......................................... $ 295 $304 $381 ===== ==== ====
F-18 38 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) The deferred tax (assets) liabilities as of July 2, 1994, were:
1994 ----- Deferred tax (assets): Pension, postretirement and other employee benefits............................... $ (4) Net operating loss and other tax carryforwards.................................... (15) Restructuring reserves............................................................ (230) Reserves not deductible until paid................................................ (243) Deferred tax liabilities: Property, plant and equipment..................................................... 230 Other............................................................................. 62 ----- Net deferred tax (assets)........................................................... $(200) =====
INDUSTRY SEGMENT INFORMATION The corporation's business segments are described in the Narrative Description of Business on pages 3 through 7.
PACKAGED CONSUMER PACKAGED FOODS PRODUCTS -------------------- ------------------------ PACKAGED COFFEE HOUSEHOLD MEATS AND PERSONAL AND INTER- AND BAKERY GROCERY PRODUCTS PERSONAL CARE CORPORATE SEGMENT TOTAL ---------- ------- -------- ------------- --------- ------- ------- 1994 Sales (1)...................... $5,472 $ 2,090 $6,449 $ 1,530 $ -- $(5) $15,536 Pretax income (loss)(2)........ 318 274 (71) 111 (243)(3) -- 389 Assets......................... 1,662 1,776 6,535 1,335 357 (5) -- 11,665 Depreciation and amortization................. 108 74 289 71 26 -- 568 Capital expenditures........... 108 69 408 41 2 -- 628 1993 Sales (1)...................... $5,148 $ 2,058 $6,098 $ 1,279 $ -- $(3) $14,580 Pretax income.................. 287 292 602 126 (225)(3) -- 1,082 Assets......................... 1,560 1,629 6,209 859 605 (5) -- 10,862 Depreciation and amortization................. 99 80 265 55 23 -- 522 Capital expenditures........... 99 87 485 42 15 -- 728 1992 Sales (1)...................... $4,703 $ 1,919 $5,398 $ 1,227 $ -- $(4) $13,243 Pretax income.................. 264 254 582 107 (33)(3,4) -- 1,174 Assets......................... 1,253 1,851 5,395 970 520 (5) -- 9,989 Depreciation and amortization................. 97 68 232 53 22 -- 472 Capital expenditures........... 96 73 271 44 25 -- 509
- - - --------------- (1) Includes sales between segments. Such sales are at transfer prices that are equivalent to market value. (2) Includes provisions for restructuring reported in the 1994 Consolidated Statement of Income, as follows: Packaged Meats and Bakery $22; Coffee and Grocery $25; Personal Products $630; and Household and Personal Care $55. (3) Includes net interest expense of $145 in 1994, $82 in 1993 and $94 in 1992 incurred primarily in the United States to finance and support consolidated operations. (4) Includes unusual items reported in the 1992 Consolidated Statement of Income. The gain of $412 relates to the Packaged Consumer Products segment. Restructuring charges of $126 and $64 are related to Packaged Foods and Packaged Consumer Products, respectively. (5) Principally cash and equivalents and investments in associated companies and certain fixed assets. F-19 39 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) Included in sales and operating income in the Industry Segment Information above are the following sales and pretax income (loss) applicable to businesses sold prior to July 2, 1994:
1994 1993 1992 --------------- --------------- --------------- PRETAX PRETAX PRETAX SALES INCOME SALES INCOME SALES INCOME ----- ------ ----- ------ ----- ------ Packaged Meats and Bakery........................... -- -- $88 $ (1) $ 160 $ (6) Household and Personal Care......................... -- -- 8 -- 55 3
GEOGRAPHIC AREA INFORMATION
WESTERN/CENTRAL ASIA-PACIFIC/ UNITED STATES EUROPE LATIN AMERICA OTHER CORPORATE INTER-AREA TOTAL ------------- --------------- ------------- ----- --------- ---------- ------- 1994 Sales(1)................ $ 9,782 $ 4,433 $ 1,006 $ 348 $ -- $(33) $15,536 Pretax income(2)........ 330 193 65 44 (243)(3) -- 389 Assets(6)............... 5,558 4,459 984 307 357 (5) -- 11,665 1993 Sales(1)................ $ 9,423 $ 4,114 $ 801 $ 257 $ -- $(15) $14,580 Pretax income........... 763 422 94 28 (225)(3) -- 1,082 Assets(6)............... 5,364 3,880 858 155 605 (5) -- 10,862 1992 Sales(1)................ $ 8,736 $ 3,605 $ 655 $ 265 $ -- $(18) $13,243 Pretax income........... 697 418 65 27 (33)(3,4) -- 1,174 Assets(6)............... 4,731 4,053 597 88 520 (5) -- 9,989
- - - --------------- (1) Includes sales between geographic areas. Such sales are at transfer prices that are equivalent to market value. (2) Includes provisions for restructuring reported in the 1994 Consolidated Statement of Income, as follows: United States $483; Western/Central Europe $200; Asia-Pacific/Latin America $42; and Other $7. (3) Includes net interest expense of $145 in 1994, $82 in 1993 and $94 in 1992 incurred primarily in the United States to finance and support consolidated operations. (4) Includes the unusual items reported in the 1992 Consolidated Statement of Income. The gain of $412 relates to operating activities outside the United States, and substantially all restructuring charges of $190 relate to operating activities within the United States. (5) Principally cash and equivalents and investment in associated companies and certain fixed assets. (6) The tangible net assets of foreign operations included in the accompanying Consolidated Balance Sheets were $594 at July 2, 1994, $651 at July 3, 1993 and $863 at June 27, 1992. F-20 40 SARA LEE CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL DATA (unaudited)
QUARTER ----------------------------------- FIRST SECOND THIRD FOURTH ------ ------ ------ ------ 1994 Net sales..................................................... $3,796 $4,010 $3,664 $4,066 Gross profit.................................................. 1,412 1,533 1,388 1,503 Net income (loss)............................................. 120(1) 236 152 (309)(2) Per common share Net income (loss)........................................... .24(1) .48 .30 (.65)(2) Cash dividends declared..................................... .145 .16 .16 .16 Market price -- high........................................ 26.63 28.25 26.00 23.75 -- low......................................... 21.00 23.38 21.00 20.13 - - - ---------------------------------------------------------------------------------------------------- 1993 Net sales..................................................... $3,583 $3,840 $3,308 $3,849 Gross profit.................................................. 1,355 1,493 1,259 1,434 Net income.................................................... 142 220 152 190 Per common share(5) Net income.................................................. .28 .44 .30 .38 Cash dividends declared..................................... .125 .145 .145 .145 Market price -- high........................................ 29.19 32.44 31.88 28.13 -- low......................................... 24.75 27.63 27.00 23.25 - - - ---------------------------------------------------------------------------------------------------- 1992 Net sales..................................................... $3,107 $3,594 $3,143 $3,399 Gross profit.................................................. 1,098 1,316 1,195 1,328 Net income.................................................... 263(3) 190 138 170 Per common share(5) Net income.................................................. .55(3) .38 .27 .34 Cash dividends declared..................................... .118 .245(4) .125 .125 Market price -- high........................................ 22.88 28.38 29.07 26.63 -- low......................................... 20.13 20.63 24.50 23.32 - - - ----------------------------------------------------------------------------------------------------
(1) Includes cumulative effect of accounting change of $35. (2) Includes provision for restructuring of $495. (3) Includes nonrecurring net gain of $140. (4) Includes $.12 special dividend. (5) Restated for the 2-for-1 stock split in December 1992. F-21 41 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Management of SARA LEE CORPORATION We have audited in accordance with generally accepted auditing standards, the consolidated financial statements of Sara Lee Corporation included in this Form 10-K, and have issued our report thereon dated August 1, 1994. Our audit was made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The supplemental schedules V, VI, VIII, and X are the responsibility of the Corporation's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These supplemental schedules have been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. /s/ Arthur Andersen LLP Chicago, Illinois, August 1, 1994. F-22 42 SCHEDULE V SARA LEE CORPORATION AND SUBSIDIARIES PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED JUNE 27, 1992, JULY 3, 1993 AND JULY 2, 1994 (IN MILLIONS)
RETIREMENTS, BALANCE AT PROPERTY OF SALES AND BALANCE BEGINNING PURCHASED ADDITIONS OTHER AT END OF YEAR COMPANIES AT COST CHANGES OF YEAR ---------- ----------- --------- ------------- ------- For the Year Ended June 27, 1992: Land.................................... $ 93 $ 9 $ 8 $ (2) $ 108 Buildings and improvements.............. 1,253 65 148 10 1,476 Machinery and equipment................. 2,279 66 445 (196) 2,594 Construction in progress................ 323 3 (92) (3) 231 ------ ----- ----- ----- ------- $3,948 $ 143 $ 509 $(191) $ 4,409 ====== ===== ===== ====== ======= For the Year ended July 3, 1993: Land.................................... $ 108 $ 5 $ 8 $ 8 $ 129 Buildings and improvements.............. 1,476 60 163 (129) 1,570 Machinery and equipment................. 2,594 80 440 (310) 2,804 Construction in progress................ 231 3 117 (12) 339 ------ ----- ----- ----- ------- $4,409 $ 148 $ 728 $(443) $ 4,842 ====== ===== ===== ====== ======= For the Year ended July 2, 1994: Land.................................... $ 129 $ 6 $ 5 $ (9) $ 131 Buildings and improvement............... 1,570 36 177 (37) 1,746 Machinery and equipment................. 2,804 56 504 (287) 3,077 Construction in progress................ 339 3 (58) (1) 283 ------ ----- ----- ----- ------- $4,842 $ 101 $ 628 $(334) $ 5,237 ====== ===== ===== ====== =======
- - - --------------- Refer to "Notes to Financial Statements, Summary of Significant Accounting Policies" on Page F-9 of this Report for depreciation methods and estimated useful lives. F-23 43 SCHEDULE VI SARA LEE CORPORATION AND SUBSIDIARIES ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED JUNE 27, 1992, JULY 3, 1993 AND JULY 2, 1994 (IN MILLIONS)
BALANCE AT PROVISION RETIREMENTS, BALANCE BEGINNING CHARGED TO SALES AND AT END OF YEAR EARNINGS OTHER CHANGES OF YEAR ---------- ---------- ------------- ------- For the Year Ended June 27, 1992: Buildings and improvements....................... $ 444 $ 73 $ 103 $ 620 Machinery and equipment.......................... 1,115 281 (180) 1,216 ------- ----- ------ ------- $1,559 $354 $ (77) $ 1,836 ======= ===== ====== ======= For the Year Ended July 3, 1993: Buildings and improvements....................... $ 620 $ 81 $ (37) $ 664 Machinery and equipment.......................... 1,216 302 (218) 1,300 ------- ----- ------ ------- $1,836 $383 $(255) $ 1,964 ======= ===== ====== ======= For the Year Ended July 2, 1994: Buildings and improvements....................... $ 664 $ 92 $ (19) $ 737 Machinery and equipment.......................... 1,300 322 (22) 1,600 ------- ----- ------ ------- $1,964 $414 $ (41) $ 2,337 ======= ===== ====== =======
- - - --------------- Refer to "Notes to Financial Statements, Summary of Significant Accounting Policies" on Page F-9 of this Report for depreciation methods and estimated useful lives. F-24 44 SCHEDULE VIII SARA LEE CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED JUNE 27, 1992, JULY 3, 1993 AND JULY 2, 1994 (IN MILLIONS)
BALANCE AT PROVISION WRITE-OFFS(1)/ OTHER BALANCE BEGINNING CHARGED TO COSTS ALLOWANCES ADDITIONS AT END OF YEAR AND EXPENSES TAKEN (DEDUCTIONS) OF YEAR ---------- ---------------- -------------- ------------ ------- For the Year Ended June 27, 1992: Allowances for bad debts.......... $ 69 $ 34 $ (16) $ 14 $ 101 Other receivable allowances....... 37 97 (101) 20 53 ----- ----- ------- ----- ------ Total........................ $106 $131 $ (117) $ 34 $ 154 ===== ===== ======= ===== ====== For the Year Ended July 3, 1993: Allowances for bad debts.......... $101 $ 23 $ (19) $ (6) $ 99 Other receivable allowances....... 53 86 (97) 13 55 ----- ----- ------- ----- ------ Total........................ $154 $109 $ (116) $ 7 $ 154 ===== ===== ======= ===== ====== For the Year Ended July 2, 1994: Allowances for bad debts.......... $ 99 $ 30 $ (21) $ 1 $ 109 Other receivable allowances....... 55 78 (81) 3 55 ----- ----- ------- ----- ------ Total........................ $154 $108 $ (102) $ 4 $ 164 ===== ===== ======= ===== ======
- - - --------------- NOTE: (1) Net of collections on accounts previously written off. SCHEDULE X SARA LEE CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED JUNE 27, 1992, JULY 3, 1993, AND JULY 2, 1994
CHARGED TO COSTS AND EXPENSES ------------------------ ITEM 1992 1993 1994 - - - -------------------------------------------------------------------- ---- ---- ---- (IN MILLIONS) Maintenance and repairs............................................. $191 $211 $216 ==== ==== ==== Excise Taxes........................................................ $389 $502 $515 ==== ==== ==== Media advertising................................................... $325 $392 $371 ==== ==== ====
F-25 45 EXHIBIT INDEX
EXHIBITS PAGE/INCORPORATION BY REFERENCE -------- ---------------------------------------- (3a) Articles of Incorporation as Amended and Restated (3b) By-Laws Exhibit (3b) to Report on Form 10-K for Fiscal Year ended July 3, 1993 (4) Sara Lee, by signing this Report, agrees to furnish the Securities and Exchange Commission, upon its request, a copy of any instrument which defines the rights of holders of long-term debt of Sara Lee and all of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed, and which authorizes a total amount of securities not in excess of 10% of the total assets of Sara Lee and its subsidiaries on a consolidated basis. (10) 1. 1979 Stock Option Plan, as amended Exhibit (10) 7 to Report on Form 10-K for Fiscal Year ended June 27, 1987 2. 1981 Incentive Stock Option Plan, as Exhibit (10) 11 to Report on Form 10-K amended for Fiscal Year ended July 1, 1989 3. 1988 Non-Qualified Stock Option Plan Exhibit (10) 12 to Report on Form 10-K for Fiscal Year ended July 2, 1988 4. 1989 Incentive Stock Plan, as amended Exhibit B to 1991 Proxy Statement, dated September 20, 1991 5. Supplemental Benefit Plan, as amended Exhibit (10) 8 to Report on Form 10-K for Fiscal Year ended June 30, 1990 6. Short-Term (Annual) Incentive Plan Exhibit (10) 15 to Report on Form 10-K Fiscal Year 1994 for Fiscal Year ended July 3, 1993 7. Short-Term (Annual) Incentive Plan Fiscal Year 1995 (Draft) 8. Accelerated Growth Incentive Plan Exhibit 10 (12) to Report on Form 10-K Fiscal Years 1990-1994 for Fiscal Year ended June 30, 1990 9. 1991 Non-Qualified Deferred Exhibit 10 (15) to Report on Form 10-K Compensation Plan (Base Salary) for Fiscal Year ended June 29, 1991 10. 1992 Non-Qualified Deferred Exhibit 10 (15) to Report on Form 10-K Compensation Plan (Base Salary) for Fiscal Year ended June 27, 1992 11. FY '93 Non-Qualified Deferred Exhibit 10 (16) to Report on Form 10-K Compensation Plan (Annual Bonus) for Fiscal Year ended June 27, 1992 12. 1993 Non-Qualified Deferred Exhibit 10 (19) to Report on Form 10-K Compensation Plan (Base Salary) for Fiscal Year ended July 3, 1993 13. FY '94 Non-Qualified Deferred Exhibit 10 (20) to Report on Form 10-K Compensation Plan (Annual Bonus) for Fiscal Year ended July 3, 1993 14. 1994 Non-Qualified Deferred Compensation Plan (Base Salary) 15. FY '95 Non-Qualified Deferred Compensation Plan (Annual Bonus) 16. Long Term Performance Incentive Plan FY '95-97 (Draft) 17. Non-Qualified Deferred Compensation Exhibit 10 (21) to Report on Form 10-K Plan for Outside Directors for Fiscal Year ended July 3, 1993
46
EXHIBITS PAGE/INCORPORATION BY REFERENCE -------- ---------------------------------------- 18. Estate Builder Deferred Compensation Exhibit (10) 17 to Report on Form 10-K Plan for Fiscal Year ended June 29, 1985 19. Severance Plan for Corporate Officers 20. Stockholder Rights Agreement Exhibit (4) to Report on Form 10-Q for the quarter ended March 26, 1988 (12) 1. Computation of Ratio of Earnings to Fixed Charges 2. Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements (21) List of Subsidiaries (23) Consent of Arthur Andersen LLP (24) Powers of Attorney from those directors whose names appear on pages 17 and 18 hereof followed by an asterisk (27) Financial Data Schedules
EX-3.A 2 ARTICLES OF AMENDMENT 1 Exhibit (3a) SARA LEE CORPORATION ARTICLES OF AMENDMENT Sara Lee Corporation, a Maryland corporation, having its principal office in Chicago, Illinois (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland, that: FIRST: The charter of the Corporation is hereby amended by striking out paragraph (a) of ARTICLE FIFTH of the Articles of Incorporation and inserting the following: "FIFTH: AUTHORIZED: The total number of shares of all classes which the Corporation has authority to issue is Six Hundred Thirteen Million Five Hundred Thousand (613,500,000), consisting of the following number of shares of the following classes: (a) The Common Stock. Six Hundred Million (600,000,000) shares of Common Stock of the par value of One Dollar and Thirty-three and One-third Cents ($1.33-1/3) per share, having an aggregate par value, of $800,000,000 and" SECOND: The board of directors of the Corporation, at a meeting duly convened and held on August 27, 1992, adopted a resolution in which set forth the foregoing amendment to the charter, declaring that the said amendment of the charter as proposed was advisable and directing that it be submitted for action thereon by the stockholders of the Corporation at the annual meeting of stockholders to be held on October 29, 1992. THIRD: Notice of the said annual meeting setting forth a summary of the changes to be effected by said amendment of the charter and stating that a purpose of the said annual meeting of stockholders would be to take action thereon was given, as required by law, to all stockholders entitled to vote thereon. The amendment of the charter of the Corporation, as hereinabove set forth, was approved by the stockholders of the Corporation at said annual meeting of stockholders by an affirmative vote in excess of two-thirds (2/3) of all the issued and outstanding shares of Common Stock of the Corporation entitled to vote thereon. 1 2 FOURTH: The amendment of the charter of the Corporation, as hereinabove set forth, has been duly advised by the board of directors and approved by the stockholders of the Corporation. FIFTH: (a) The total number of all classes of stock which the Corporation was heretofore authorized to issue is Three Hundred and Thirteen Million, Five Hundred Thousand (313,500,000) of capital stock, divided into Three Hundred Million (300,000,000) shares of Common Stock of the par value one Dollar and Thirty-Three and One-third Cents ($1.33-1/3) per share, having the aggregate par value $400,000,000; Twelve Million (12,000,000) shares of Preferred Stock, without par value, and One Million Five Hundred Thousand (1,500,000) shares of Convertible Adjustable Preferred Stock, without par value. (b) The total number of shares as increased and the number and par value of the shares of each class are as set forth in Article FIFTH of the Articles of Amendment of the Corporation, as amended by these Articles of Amendment. (c) The preferences, rights, voting powers, restrictions and qualifications of the Common Stock as increased are as set forth in the Articles of Incorporation of the Corporation, as heretofore amended; and the preferences, rights, voting powers, restrictions and qualifications of, the dividends on, the times and prices of redemption of, and the conversion rights of, the unclassified shares of Preferred Stock will be fixed prior to issuance by the board of directors in conformity with the provisions of the Articles of Incorporation, as amended, which shall be applicable generally to all such shares, pursuant to the authority and power therein conferred upon the board of directors and will be set forth in Articles Supplementary, as provided in the Maryland General Corporation Law. (d) The description of the Convertible Adjustable Preferred Stock, with its preferences, voting powers, restrictions and qualifications thereof, are set forth in the Articles Supplementary to the Charter of the Corporation dated September 20, 1983, and filed with and approved for record by the State Department of Assessments and Taxation on September 22, 1983, and sets forth the classification by the board of directors of the Corporation a total of One Million Five Hundred Thousand (1,500,000) shares of the then authorized Four Million (4,000,000) shares of Preferred Stock, without par value. SIXTH: The Articles of Amendment shall become effective upon filing. IN WITNESS WHEREOF, SARA LEE CORPORATION, has caused these presents to be signed in its name and on its behalf by its Senior Vice President 2 3 and its corporate seal to be hereunto affixed and attested by its Assistant Secretary, on October 30, 1992. SARA LEE CORPORATION /s/ Gordon H. Newman - - - -------------------- Gordon H. Newman Senior Vice President ATTEST: /s/ Ronald L. Scherubel - - - ----------------------- Ronald L. Scherubel Assistant Secretary SEAL ACKNOWLEDGMENT The undersigned, Gordon H. Newman, Senior Vice President of Sara Lee Corporation, who executed on behalf of said corporation the foregoing Articles of Amendment, of which this certificate is made a part, hereby acknowledges, in the name and on behalf of said corporation, the foregoing Articles of Amendment to be the corporate act of said corporation and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under penalties of perjury. /s/ Gordon H. Newman - - - -------------------- Gordon H. Newman Senior Vice President VERIFICATION (State of Illinois) ) ss: County of Cook ) Gordon H. Newman, being first duly sworn on his oath states that he is Secretary of Sara Lee Corporation, that as such Secretary he acted as Secretary of the regular meeting of the Board of Directors of Sara Lee Corporation held on August 27, 1992, at Three First National Plaza, Chicago, Illinois, at which meeting a quorum of the said Board of Directors unanimously approved the foregoing Articles of Amendment, and that he acted as Secretary of the annual meeting of 4 stockholders of Sara Lee Corporation on October 29, 1992, at Chicago, Illinois, at which in excess of 2/3rds of all the outstanding shares of Common Stock approved the foregoing Articles of Amendment. Affiant further states that the matters and facts set forth in the foregoing Articles of Amendment are true and correct in all respects. /s/ Gordon H. Newman - - - -------------------- Gordon H. Newman Secretary I HEREBY CERTIFY that on this 30th day of October, before me, the subscriber, a Notary Public, in and for the County of Cook and State of Illinois, personally appeared Gordon H. Newman, to me known, and acknowledged the foregoing Articles of Amendment as the corporate act and deed of Sara Lee Corporation. WITNESS my hand and Notarial Seal the day and year last above written. /s/ Karen A. French - - - ------------------- Karen A. French Notary Public [SEAL] EX-10.7 3 SHORT-TERM INCENTIVE PLAN DESCRIPTION 1 EXHIBIT (10.)7 SARA LEE CORPORATION SHORT-TERM (ANNUAL) INCENTIVE PLAN Fiscal Year 1995 PLAN DESCRIPTION 1 2 PURPOSE The purpose of the FY95 Short-Term (Annual) Incentive Plan is to advance the interests of Sara Lee Corporation (hereafter called "SLC") by: a) achieving consistently superior performance; b) enabling SLC to attract and retain talented executives by providing incentive opportunities which are more attractive than those generally available in the executive labor market; c) rewarding those executives whose duties and responsibilities provide an opportunity to make a material and substantial contribution to the performance of SLC; d) providing meaningful awards which are directly related to such performance; and e) distinguishing among the performance contributions of individual executives. DEFINITIONS a) INCENTIVE YEAR shall be the same as SLC's fiscal year ending July 1, 1995 ("FY95"). b) THE BOARD shall mean the Board of Directors of SLC. c) THE COMMITTEE shall mean the Compensation and Employee Benefits Committee of the Board. d) DIVISION shall mean the operating profit centers of SLC. e) PARTICIPANT in the Plan shall mean an "A", "B" or "C" level executive throughout the Corporation. f) EARNINGS PER SHARE ("EPS") shall mean reported primary earnings per share for FY95. g) RETURN ON INVESTMENT ("ROI") shall mean Operating Profit as defined below expressed as a percent of average investment, defined and calculated in accordance 2 3 with SLC Finance Manual Policy No. 130 as revised July 1, 1992, subject to the following adjustments, if any, to the average investment: Tangible net assets (as defined by Policy No. 130) at the date of acquisition for acquisitions made during the year and NOT included in the Annual Operating Plan shall be excluded from the computation of average investment from the date of acquisition to the end of the fiscal year. Tangible net assets, as defined, for those businesses divested during the year and NOT included in the Annual Operating Plan as divestments shall be included in the computation of average investment from the date of divestment to the end of the fiscal year at planned amounts. h) OPERATING PROFIT shall mean operating profits as shown on Line 16 of the EO-200 income statement, with the following adjustment(s): Operating Profit of businesses acquired during the year and NOT included in the Annual Operating Plan shall be EXCLUDED. Planned Operating Profit of businesses divested and NOT included in the Annual Operating Plan as divestments shall be INCLUDED from the date of divestment to the end of the fiscal year. i) ASSET MANAGEMENT refers to various financial standards used to measure performance on a consolidated or divisional basis. For operations participants this may typically include ROI, cash flow or other measures related to the management of assets. j) BASE SALARY shall mean base salary earned by the participant during FY95, regardless of deferral elections, excluding any premiums, allowances, expense reimbursements, commissions, incentives, amounts paid as severance or termination pay, payments under deferred salary or incentive agreements and compensation attributable to the exercise of stock options. k) TOTAL DISABILITY shall be defined as per the Long-Term Disability Plan of the Corporation under which the participant is covered. 3 4 STANDARDS OF PERFORMANCE AND INCENTIVE OPPORTUNITY Standards of performance will be established early in the plan year for both financial and individual performance. A summary of suggested incentive components and the corresponding incentive opportunities are shown in Appendix I. The following applies to the incentive plan goals: The financial and individual weightings for Operations Participants may be adjusted, with the approval of the appropriate SLC Operating Executive Vice President, to reflect different priorities during the Incentive Year. Financial and individual goals are established at the beginning of the fiscal year and approved by the Committee or Corporate Officer, as appropriate. The financial standards of performance which have been approved for corporate earnings per share are listed in Attachment II. NON-FINANCIAL INDIVIDUAL PERFORMANCE All participants in the plan must have pre-determined individual standards of performance. Pre-determined individual standards should be established at the beginning of the fiscal year by agreement between the participant and the individual responsible for appraising his/her performance. Approval of standards should be received from the responsible superior two levels up. The standards should be as specific and as quantifiable as possible, should represent the key goals for the individual's responsibility during the next fiscal year, and should relate to AOP objectives and action plans. Standards should include seven to 10 objectives (hence, should prioritize the individual's activities). One objective, worth 5% for A-level individuals in operating companies, should contain the two Human Resource areas which are described in the footnote in Attachment I. Standards should be skewed to longer-term objectives and away from sub-elements of this year's earnings and asset management goals since these standards are covered in the financial standards section. The exception would be current operating problems (such as inventory turns, unit sales volume, etc.). Generally, there should be three major areas of standards: (a) Fiscal year operating plan - sales, expenses, working capital, inventory, market share, unit volume, cost improvement, etc. - those areas which are problems and/or important to the Long-Range Plan. 4 5 (b) Consumer Value - include programs and projects that support the company's focus on delivering value to the consumer, particularly focusing on meeting or exceeding the expectations of our customers. (c) Organizational/manpower - strategic diversity, organizational changes, hiring/replacing key people, turnover, training and development, affirmative action, safety programs, personnel development, succession plans and development, etc. It is within this context that the following performance levels are defined: OUTSTANDING - performance that demonstrably exceeds the Superior level and where all goals are met and major goals surpassed. Attainment requires significant "stretch". SUPERIOR - the expected level of performance where attainment requires normal "stretch". Most goals are met or surpassed. ACCEPTABLE - performance which is acceptable in the short term because it demonstrates progress relative to goals and to the past, but it falls below the superior level. Performance where attainment requires little or no "stretch". MARGINAL - performance which is judged marginally acceptable in the short term, but which is unacceptable and requires corrective action in the longer term. RANGES OF INCENTIVE AWARDS Incentive award ratings shall be determined as follows: Outstanding = Maximum Superior = 67% of Maximum Acceptable = 33% of Maximum Marginal = 0%
Interpolations will be used for results which fall between the various ratings. 5 6 INCENTIVE DISTRIBUTION Incentive awards shall be distributed on or about September 1, 1995 after the final financial results of SLC have been publicly announced and after the August, 1995 meeting of the Committee. Unless otherwise provided in the plan, a participant must be an employee at the conclusion of the fiscal year in order to be eligible to receive an incentive award. ADMINISTRATION The Plan shall be administered jointly by the Committee and the Chief Executive Officer of SLC, whose decisions shall be final. The Senior Vice President, Human Resources, will be responsible for the administrative procedures governing the Plan including assuring the existence of approved standards of performance and presenting the results of the Plan to the Committee for final approval. The following administrative procedures shall govern: a) Individual incentive awards for corporate officers will be approved by the Committee. All other incentive awards shall be approved by the Chief Executive Officer. b) All incentive awards shall be made in cash. However, a participant may elect to partially or totally defer his/her incentive award pursuant to the terms and conditions of the SLC Non-Qualified Deferred Compensation Plan if applicable. c) A new participant who begins participation during the plan year may be eligible for a pro-rata incentive award from the date of entry into the Plan with the approval of the Chief Executive Officer or the Senior Vice President, Human Resources. d) In the case of death, total disability, or retirement under a SLC retirement plan, a pro-rata incentive award shall be distributed on or about September 1, 1995, based on actual service during the Incentive Year, unless otherwise deferred under the SLC Non-Qualified Deferred Compensation Plan. e) Unless otherwise approved by the Chief Executive Officer, any participant who resigns or is terminated during the Incentive Year (except as provided for above) shall not be entitled to any incentive award attributable to the Incentive Year. 6 7 f) A participant who is employed as of the end of the Incentive Year shall be entitled to receive an incentive award regardless of whether the participant resigns or is terminated between the end of the Incentive Year and the date the incentive awards are distributed. g) Nothing herein shall be construed as an agreement or commitment to employ any participant or to employ a participant for any fixed period of time or constitute a commitment by SLC that any participant will continue to receive an incentive award or will continue as a participant in the Plan. h) The Committee may delegate certain administrative responsibilities to the Chief Executive Officer except that: 1) The Committee must approve any actions affecting the Chief Executive Officer, and other elected officers of SLC; 2) The Committee shall approve corporate incentive standards at the beginning of the fiscal year; and 3) The Committee shall approve any substantive changes or amendments to the Plan. 7 8 Attachment I FY95 SHORT-TERM INCENTIVE COMPONENTS AND INCENTIVE OPPORTUNITY GUIDELINES
MAXIMUM BONUS AS A PERCENT OF BASE SALARY* ------------------------------------------------------------------ FINANCIAL STANDARDS --------------------------------------------- TOTAL CORPORATE INDIVIDUAL EXECUTIVE INCENTIVE OPERATING FINANCIAL PERFORMANCE LEVEL TITLE OPPORTUNITY EPS PROFITS GOALS STANDARDS - - - ---------- ------ ------------ ----- ------------- ---------- ------------- CORPORATE STAFF PARTICIPANTS A Chairman/CEO 125% 70% -- 30% 25% A Vice Chairman 120% 60% -- 30% 30% A Senior 95% 50% -- 20% 25% Vice Presidents A Vice 80% 40% -- 20% 20% Presidents B Executive 60% 40% -- -- 20% Directors C Directors 30% 15% -- -- 15% MAXIMUM BONUS AS A PERCENT OF BASE SALARY* ---------------------------------------------------------------------- FINANCIAL STANDARDS ----------------------------------------------- TOTAL OPER. UNIT INDIVIDUAL EXECUTIVE INCENTIVE OPERATING FINANCIAL PERFORMANCE LEVEL TITLE OPPORTUNITY EPS PROFITS GOALS STANDARDS - - - --------- ------ ----------- --- --------- --------- ----------- OPERATIONS PARTICIPANTS A Executive 110% 30% 30% 30% 20% Vice Presidents A Corporate Senior 95% 10% 35% 30% 20% Vice Presidents A Corporate 90% 10% 30% 30% 20% Vice Presidents A Division Presidents 87.5% -- 35% 32.5% 20% A Other Designated 80% -- 30% 30% 20% A-Level Executives B Operating 60% -- 20% 20% 20% Executives C Operating 30% -- 10% 10% 10% Executives
Note: "A" level participants should have a 5% minimum weighting for Management Development/Diversity as an Individual Performance Standard. * Superior Performance and Acceptable Performance result in payouts of 2/3 and 1/3 of Maximum respectively. Straight line interpolations are used to determine payout levels between performance levels. 9 Attachment II FY95 CORPORATE STANDARDS OF PERFORMANCE
EARNINGS PER SHARE (EPS) Outstanding = $1.62 Superior = $1.59 Acceptable = $1.55 Marginal = $1.47
8 EX-10.14 4 1994 NON-QUALIFIED DEFERRED COMPENSATION PLAN 1 EXHIBIT (10.)14 SARA LEE CORPORATION 1994 NON-QUALIFIED DEFERRED COMPENSATION PLAN (BASE SALARY) 1. Purpose: The purpose of the Sara Lee Corporation 1994 Non-Qualified Deferred Compensation Plan (Base Salary) ("Plan") is to permit a Participant, as defined in Section 2 below, to defer the payment of all or a portion of calendar year 1994 base salary for one or more calendar years. 2. ELIGIBLE PARTICIPANT: An eligible participant shall mean "A" and "B" level Executives of Sara Lee Corporation or any of its subsidiaries incorporated under the laws of any state in the United States (the "Company") and any other Company employees deemed eligible by general management ("Participant"). 3. ADMINISTRATION OF PLAN: The Plan shall be administered by the Compensation and Employee Benefits Committee of the Board of Directors of the Company (the "Committee"). The Committee may delegate certain administrative authority to employee(s) of the Company, but shall retain the responsibility for interpretation and modification of the Plan. 4. DEFERRED COMPENSATION: Each Participant shall be permitted to defer an amount of calendar year 1994 base salary in accordance with the terms of Paragraphs 5a and 5b of the Plan. ("Deferred Compensation"). 5a. ELECTION TO DEFER COMPENSATION: A Participant may elect to defer all or some portion of his/her calendar year 1994 base salary provided the deferral amount equals or exceeds $500 per month. The deferral shall be effected by executing a 1994 Base Salary Deferred Compensation Agreement ("Agreement") as set forth in Exhibit A to this Plan, and filing the Agreement prior to December 31, 1993, with the Participant's payroll department or any other department designated by the Company's management (except as provided for in paragraph 5b). 5b. AGREEMENTS FILED AFTER DECEMBER 31, 1993: A Participant may file an Agreement after December 31, 1993 to defer calendar year 1994 base salary not yet earned provided the provisions in paragraph 5a (other than filing date) are satisfied and further provided the deferral period is no less than two (2) years. 6. PAVMENT OF DEFERRED COMNENSATION: A Participant may elect to receive the payments of Deferred Compensation in installments (annual or quarterly) or in a lump sum, provided that the payment(s) does not commence during the tax year in which it is earned, and the provisions of paragraph 5b are met, if applicable. The payments shall be made on the payroll date closest to the scheduled payment date. 7. CHANGE OF ELECTION: A Participant may prospectively elect to cease or change his/her deferral election by revoking this Agreement and, where applicable, executing a new Agreement and submitting the revoked and executed Agreements to the designated 2 department of his/her Company. Deferral elections related to amounts which have already been earned and deferred cannot be terminated or changed except as provided in Paragraphs 10 and 12 below. Any Participant who changes his/her deferral election for compensation not yet earned and executes a new Agreement for calendar year 1994 must designate a deferral period of at least two (2) years. 8. MAINTENANCE OF DEFERRED COMNENSATION ACCOUNTS: The Company will maintain a separate Deferred Compensation Account ("Account") for each Participant. On June 30 and December 31 of each year and on the date of final payment from the Account, the Company will credit the Account with interest on the outstanding average balance (principal and accrued interest to date). The rate of interest for each fiscal year will be set at the beginning of each fiscal year based on the current cost to Sara Lee Corporation of issuing five year maturity debt. The rate will be the average of quotes from two prominent investment banks, but will not be lower than comparable maturity debt for a company rated comparably to Sara Lee Corporation. 9. RETIREMENT: In the event that the Participant retires before all the Deferred Compensation is paid from his/her Account, the Plan shall remain in effect and each Account shall continue to be maintained by the Company for the benefit of the Participant and paid in accordance with the Agreement. 10. DEATH OR TOTAL DISABILITY OF PARTICIPANT: Upon the death or total disability (as defined below) of a Participant, the payment of Account balances shall be made as requested by the totally disabled Participant, designated beneficiary or the Executor/Executrix of the Participant's estate. This request must be made in writing to the Senior Vice President - Human Resources of Sara Lee Corporation within 180 days following the death or total disability of a Participant. If this request is not made within 180 days following the death or total disability of a Participant, the deferral amount will be paid in accordance with the Agreement. Total disability shall mean the inability to perform each and all of the duties relative to a Participant's occupation, and his/her not being gainfully employed in another job for which he/she is qualified. 11. TERMINATION OF EMPLOYMENT: The Plan shall remain in effect and the Account shall continue to be maintained by the Company for the benefit of the Participant and paid in accordance with the Agreement in the event that the Participant terminates employment with the Company for any reason before all the Deferred Compensation is paid from his or her Account. 12. FINANCIAL HARDSHIP: Notwithstanding the time and frequency of the date of payment of Deferred Compensation designated in the Agreement or in paragraphs 9, 10 and 11 hereof, the Senior Vice President, Human Resources of Sara Lee Corporation as the representative for the Committee may authorize, upon written application by the Participant, his/her designated beneficiary or the Executor/Executrix of the Participant's estate, the acceleration of Deferred Payments (including a lump sum payment) provided that it can be substantiated to the reasonable satisfaction of the Senior Vice President, Human Resources of Sara Lee Corporation as the representative for the Committee that adherence to the designated payment form and/or schedule set forth in the Agreement would result in severe financial hardship to the Participant, his/her designated beneficiary 3 or to his/her estate. A bona fide financial hardship must be the result of an unanticipated event. Such accelerated or lump sum payment shall not exceed the amount required to meet the financial need of the Participant, his/her designated beneficiary or his/her estate. 13. NO RIGHTS OF EMPLOYMENT: Participation in the Plan in no way constitutes a contract or agreement to continue employment of the Participant by the Company for any fixed period of time. 14. STATUS OF OBLIGATION: The balances accumulated in the Accounts under the terms of the Plan shall constitute general contractual obligations of the Company. The Company shall not segregate assets, create any security interest, or encumber its assets in order to provide for the payment(s) of the balance(s) which shall accumulate in the Accounts. Notwithstanding the preceding sentence, the Company may, in its sole discretion, establish an irrevocable grantor trust, the assets of which shall be subject to the claims of the Company's creditors in the event of the Company's bankruptcy or insolvency, and if so established, benefits payable under the Plan shall be paid from such trust to the extent not otherwise paid from the Company's general assets. 15. NON-ASSIGNABILITY: The rights and benefits of a Participant under the Plan are personal and cannot be pledged, transferred or assigned except by designation of a beneficiary, will or the laws of descent and distribution. 16. AMENDMENT(S): Any substantive amendment(s) to the Plan shall be approved by the Committee. No amendment(s) shall be made which would adversely affect the tax status of the Deferred Compensation accumulated in the Accounts. 17. EFFECTIVE DATE: TERMINATION: The Plan shall become effective January 1, 1994. The Committee may terminate the Plan at any time; however, such termination shall not affect the rights of Participants accrued under any predecessor Deferred Compensation (Base Salary) Plans. In the event of a termination, the Committee will comply with a Participant's election regarding the distribution of the deferred amount(s). 18. PREDECESSOR PLANS: The rights and provisions as described in this document are applicable to this Plan only and shall not apply to any other Deferred Compensation Plan of the Company in which a Participant is a participant. 4 EXHIBIT A SARA LEE CORPORATION BASE SALARY DEFERRED COMPENSATION AGREEMENT FOR CALENDAR YEAR 1994 This Agreement is made and entered into this ________ day of _________, 199_, by and between Sara Lee Corporation, a Maryland Corporation ("SLC"), and _________ ("Employee"). WITNESSETH WHEREAS, SLC has a 1994 Non-Qualified Deferred Compensation Plan (Base Salary), a copy of which is attached hereto ("Deferred Compensation Plan"), in which the Employee is eligible to participate; and WHEREAS, Employee desires to defer all or a portion of Employee's base salary to be earned and paid during calendar year 1994 in accordance with the terms and conditions of the Deferred Compensation Plan and this Agreement; NOW, THEREFORE, the parties hereto agree as follows: 1. EMPLOYEE'S ELECTION TO DEFER BASE SALARY. Employee hereby elects to defer all or a portion of Employee's future base salary payments in calendar year 1994 equal to________________ dollars ($___________) to be deferred on a ( ) WEEKLY; ( ) BI-WEEKLY; ( ) MONTHLY basis, for a total of ______________ dollars ($__________), beginning with the pay period which commences on ____________________, 1994 and ending with the pay period which ends on _____________________________________, 1994 or (if no ending date is indicated herein) on the date of the last pay period of calendar year 1994 unless Employee shall revoke the foregoing election in accordance with Section 7 of the Deferred Compensation Plan. 2. AGREEMENT OF SLC TO DEFER BASE SALARY. SLC agrees to establish a separate account on its books for the benefit and in the name of Employee ("Account") in which the amount of base salary deferred by Employee ("Deferred Compensation") for each pay period under this Agreement shall be credited. The Account shall be maintained by SLC in accordance with Section 8 of the Deferred Compensation Plan. 3. PAYMENT OF DEFERRED COMPENSATION. Employee hereby elects to receive the payment of, and SLC hereby agrees to pay Employee, the Deferred Compensation as follows: (a) ( ) a lump sum payment in _________ [insert month and year] or (b) equal ( ) QUARTERLY or ( ) ANNUAL installments commencing in _______________________ [insert month and year] and ending in _______________________ [insert month and year], together with interest as determined in Section 4 below. 4. PAYOUT CALCULATION. The amount of each installment payment shall be computed in accordance with the following formula: (a) the amount of principal payment of each installment shall be determined by dividing the current principal balance by the number of remaining installment payments; (b) the amount of the interest payment of each installment shall be determined by dividing the current interest balance (at latest interest credit date) by the number of remaining installment payments. Payments of Deferred Compensation shall be made at the end of the last pay period of the calendar month. 5. DEATH OF EMPLOYEE. In the event that Employee shall die prior to the payment of the unpaid balance of the Deferred Compensation in the Employee's Account, such unpaid balance shall be paid to ( ) EMPLOYEE'S ESTATE or to ( ) EMPLOYEE'S BENEFICIARY. ______________________________________________________________________________ __________________________________________ (fill in name, current address and social security number of beneficiary). 6. INCORPORATION OF DEFERRED COMPENSATION PLAN. The terms and conditions of the Deferred Compensation Plan are hereby incorporated by reference and form a part of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. ATTEST: SARA LEE CORPORATION By:______________________ By:______________________ Officer (Operating Unit) Officer (Operating Unit) _________________________ _________________________ City and state in which Employee Signature salary earned _________________________ Employee's Social Security Print Name Number: __________________ _________________________ Home Address _________________________ City State Zip Code __________________________ Division (Company) EX-10.15 5 FY 95 NON-QUALIFIED DEFERRED COMPENSATION PLAN 1 EXHIBIT (10.)15 SARA LEE CORPORATION FY95 NON-QUALIFIED DEFERRED COMPENSATION PLAN (ANNUAL BONUS) 1. PURPOSE: The purpose of the Sara Lee Corporation FY95 Non-Qualified Deferred Compensation Plan (Annual Bonus) (the "Plan") is to permit a Participant, as defined below, to defer the payment of 25% or more of his/her FY95 annual bonus award earned under the provisions of an annual (short-term) bonus plan of Sara Lee Corporation or any of its subsidiaries incorporated under the laws of any state in the United States (the "Company"). 2. PARTICIPANTS: A Participant shall mean an employee of the Company who is a participant in a short-term (annual) incentive plan for fiscal year 1995 ("Participant"). 3. ADMINISTRATION OF THE PLAN: The Plan shall be administered by the Compensation and Employee Benefits Committee of the Board of Directors of Sara Lee Corporation (the "Committee"). The Committee may delegate certain administrative authority to employee(s) of the Company, but shall retain the responsibility for interpretation and modification of the Plan. 4. DEFERRED COMPENSATION: "Deferred Compensation" shall mean the amount of the FY95 annual bonus awarded but deferred in accordance with the terms of Paragraph 5 of the Plan. 5. ELECTION TO DEFER COMPENSATION: A Participant may elect to defer at least 25% of his/her FY95 bonus award earned under an annual (short-term) bonus plan. Such deferral shall be effected by executing a FY95 Annual Bonus Deferred Compensation Agreement ("Agreement"), in the form set forth in EXHIBIT A of the Plan, and filing the Agreement with the Company's Human Resources Department prior to July 3, 1994. 6. PAYMENT OF DEFERRED COMPENSATION: A Participant may elect to receive the payment(s) of Deferred Compensation in annual installments or in a lump sum, provided that the payment(s) does not commence during the tax year in which it is earned. 7. IRREVOCABILITY: An election to defer, filed in accordance with paragraph 5, is binding and irrevocable except as specified in paragraphs 10 and 12 below. 8. MAINTENANCE OF DEFERRED COMPENSATION ACCOUNTS: The Company will maintain a separate Deferred Compensation Account ("Account") for each Participant. On June 30 and December 31 of each year and on the date of final payment from the Account, the Company will credit the Account with interest on the outstanding balance (principal and interest to date). The rate of interest for each fiscal year will be set at the beginning of each fiscal year based on the current cost to Sara Lee Corporation of issuing five year maturity debt. The rate will be the average of quotes from two prominent investment banks, but will not be lower than five year maturity debt for a company whose credit rating is comparable to that of Sara Lee Corporation. 2 9. RETIREMENT: In the event that a Participant retires before all the Deferred Compensation is paid from his/her Account, the Plan shall remain in effect and his/her Account shall continue to be maintained by the Company for the benefit of the Participant and paid in accordance with the Agreement. 10. DEATH OR TOTAL DISABILITY OF PARTICIPANT: Upon the death or total disability of a Participant (total disability as defined in the Sara Lee Corporation Key Executive Disability Income Plan), the payment of the Account balance shall be made as requested by the totally disabled Participant, designated beneficiary (or beneficiaries) or the Executor/Executrix of the Participant's estate. This request must be made in writing to the Corporate Compensation Department within 180 days following the death or total disability of a Participant. If this request is not made within 180 days following the death or total disability of a Participant, the Deferral Compensation will be paid in accordance with the Agreement. 11. TERMINATION OF EMPLOYMENT: The Plan shall remain in effect and the Account shall continue to be maintained by the Company for the benefit of a Participant and paid in accordance with the Agreement in the event that the Participant terminates employment with the Company for any reason before all the Deferred Compensation is paid from his/her Account. 12. FINANCIAL HARDSHIP: Notwithstanding the time and frequency of the date of payment of Deferred Compensation designated in the Agreement or in paragraphs 9, 10 and 11 hereof, the Senior Vice President-Human Resources of Sara Lee Corporation as the representative for the Committee, may authorize, upon written application to the Corporate Compensation Department by the Participant, his/her designated beneficiary or the Executor/Executrix of the Participant's estate, the acceleration of Deferred Payments (including a lump sum payment). Provided that the requesting party can substantiate to the reasonable satisfaction of the Senior Vice President-Human Resources of Sara Lee Corporation as the representative for the Committee that adherence to the designated payment form and/or schedule set forth in the Agreement would result in severe financial hardship to the Participant, his/her designated beneficiary or to his/her estate. A bonafide financial hardship must be the result of an unanticipated event. Such accelerated or lump sum payment shall not exceed the amount required to meet the financial need of the Participant, his/her designated beneficiary or his/her estate. 13. NO RIGHTS OF EMPLOYMENT: Participation in the Plan in no way constitutes a contract or agreement to continued employment of the Participant by the Company for any fixed period of time. 14. STATUS OF OBLIGATION: The balances accumulated in the Accounts under the terms of the Plan shall constitute general contractual obligations of the Company. The Company shall not segregate assets, create any security interest, or encumber its assets in order to provide for the payment(s) of the balance(s) which shall accumulate in the Accounts. Notwithstanding the preceding sentence, the Company may, in its sole discretion, establish an irrevocable grantor trust, the assets of which shall be subject to the claims of the Company's creditors in the event of the Company's bankruptcy or insolvency, and if so established, benefits payable under the Plan shall be paid from such trust to the extent not otherwise paid from the Company's general assets. 3 15. NON-ASSIGNABILITY: The rights and benefits of a Participant under the Plan are personal and cannot be pledged, transferred or assigned except by designation of a beneficiary (or beneficiaries), will or the laws of descent and distribution. 16. AMENDMENT(S): Any substantive amendment(s) to the Plan shall be approved by the Committee. No amendment(s) shall be made which would adversely affect the tax status of the Deferred Compensation accumulated in the Accounts. 17. EFFECTIVE DATE; TERMINATION: The Plan shall become effective July 3, 1994, subject to approval by the Committee. The Committee may terminate the Plan at any time; however, such termination shall not affect the rights of Participants accrued prior to such termination. In the event of a termination, the Committee will comply with a Participant's election regarding the distribution of the Deferred Compensation. 18. PREDECESSOR PLANS: The rights and provisions as described in this document are applicable to this Plan only and shall not apply to any other deferred compensation plan of the Company in which a Participant is a participant. 4 EXHIBIT A SARA LEE CORPORATION DEFERRED COMPENSATION AGREEMENT FOR THE FISCAL YEAR ENDED JULY 1, 1995 THIS AGREEMENT is made and entered into this _____ day of______, 1994, by and between Sara Lee Corporation, a Maryland corporation ("SLC") and ____________________________________________________ ("Employee"). WITNESSETH: WHEREAS SLC has a FY95 Non-Qualified Deferred Compensation Plan (Annual Bonus), a copy of which is attached hereto ("Deferred Compensation Plan"), in which the Employee is eligible to participate and WHEREAS Employee desires to defer the current payment of 25% or more of the bonus award payable to Employee with respect to the fiscal year of SLC ending July 1 1995, in accordance with the terms and conditions of the Deferred Compensation Plan and this Agreement: NOW, THEREFORE, the parties hereto agree as follows: 1. EMPLOYEE'S ELECTION TO DEFER BONUS AWARD. Employee hereby irrevocably elects, except as provided for in paragraphs 10 and 12 of the Deferred Compensation Plan to defer payment of ______ % of the bonus award earned by and payable to Employee with respect to the fiscal year of SLC ending July 1, 1995. 2. AGREEMENT OF SLC TO DEFER BONUS AWARD. SLC agrees to establish a separate account on its books for the benefit and in the name of Employee ("Account") in which the amount of bonus award deferred by Employee ("Deferred Compensation") under this agreement shall be credited. The Account shall be maintained by SLC in accordance with Section 8 of the Deferred Compensation Plan. 3. PAYMENT OF DEFERRED COMPENSATION. Employee hereby elects to receive the payment of, and SLC hereby agrees to pay Employee the Deferred Compensation as follows: A lump sum payment in __________________________ (insert month and year) or in __________ equal consecutive annual installments commencing on January 1, ____ (year) and on each subsequent January 1, until all installments have been paid. The final installment shall be paid on January 1, ____ (year). The lump sum payment of each such installment payment shall be paid together with interest thereon as determined in Paragraph 8 of the Deferred Compensation Plan. 4. CALCULATION OF PAYMENT AMOUNTS. The amount of each installment payment and the interest thereon shall be computed in accordance with the following formula; (a) the amount of the principal payment of each installment shall be determined by dividing the current principal balance by the number of remaining installment payments (b) the amount of the interest payment shall be determined by dividing the current interest balance by the number of remaining installment payments. 5. DEATH OF EMPLOYEE. In the event that Employee shall die prior to the payment of the unpaid balance of the Deferred Compensation in the Employee's Account, such unpaid balance shall be paid to ( ) EMPLOYEE'S ESTATE or to ( ) EMPLOYEE'S BENEFICIARY (OR BENEFICIARIES). __________________________________________________ __________________________________________________________________ (fill in name, current social security number of beneficiary). 6. INCORPORATION OF DEFERRED COMPENSATION PLAN. The terms and conditions of the Deferred Compensation Plan are hereby incorporated by reference and form a part of this agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. ATTEST: SARA LEE CORPORATION By_________________________ By_________________________ Officer (Operating Unit) Officer (Operating Unit) ___________________________ Employee's Signature ___________________________ Print Name ___________________________ Home Address Employee's Social Security Number ___________________________ __________________________________ ___________________________ Division (Employer) EX-10.16 6 LONG-TERM PERFORMANCE INCENTIVE PLAN 1 EXHIBIT (10.)16 SARA LEE CORPORATION LONG-TERM PERFORMANCE INCENTIVE PLAN FlSCAL YEARS 1995 - 1997 2 HIGHLIGHTS This booklet explains the plan provisions of the Sara Lee Corporation Long-Term Performance Incentive Plan covering fiscal years 1995 through 1997. The pages which follow provide detailed information relating to the grant you have received. In the case of any discrepancy between this and the 1989 Stock Incentive Plan, that plan governs. The key features of this plan are summarized below. In some countries outside the United States, variations may occur to comply with local tax provisions. RESTRICTED PERFORMANCE SHARES * Shares of Sara Lee stock are issued in your name, and held at Corporate Office. * You have voting rights on all shares throughout the Performance Cycle. * Number of shares actually earned depends on group and corporate performance. * An opportunity to earn additional shares if performance exceeds target is also provided. DIVIDENDS * Dividends are accrued on your behalf through the Performance Cycle. * Interest on accrued dividends is credited at same rate applicable under the SLC Deferred Compensation Program. * Dividends and interest on shares originally granted are distributed to you to the extent shares are earned at the end of the Performance Cycle. PERFORMANCE MEASURES * Operating Group performance is a key measure during this Performance Cycle. * One or more of the following measures apply: => SLC Earnings Per Share => SLC Return on Invested Capital => SLC Return on Average Common Equity => Group Operating Profit => Group Return on Investment 1 3 PURPOSE Sara Lee Corporation ("SLC") has adopted the Fiscal Years 1995 - 1997 Long-Term Performance Incentive Plan (the "LTPIP") for A-level executives employed in one of the Groups listed in Appendix I as periodically updated to reflect organizational changes. The LTPIP exists in order to: * Support the Entrepreneurial Management initiative by recognizing improvements in operating group performance; * Create incentives for management actions which will result in the accomplishment of earnings per share, return on equity and return on capital targets; * Focus corporate and operating management's attention on long-term results; * Promote cooperation and teamwork among the Operating Companies and Divisions of the Corporation; and * Enhance the competitiveness of the Corporation's long-term compensation program to aid in attracting and retaining highly qualified executives. RESTRICTED PERFORMANCE SHARES Under the LTPIP, the awards are authorized by the Sara Lee Corporation 1989 Incentive Stock Plan (the "Stock Plan") and will be issued as restricted shares of common stock ("Shares"). Dividends which are payable on restricted shares that are granted will be escrowed on behalf of the Participant and credited with interest at the same rate paid on balances under SLC's non-qualified deferred compensation plans, subject to the conditions described below. These shares have special restrictions which are based on both continued service and performance against financial targets which have been established. These restrictions prohibit the transfer of these shares during the Performance Cycle. The financial measures and weightings are contained in Appendix II. SLC may substitute alternative incentives, such as restricted cash units or stock options with special provisions, in the event it determines that tax regulations in some countries outside the United States provide more favorable treatment for these alternatives. 2 4 DIVIDENDS During the Performance Cycle, dividends paid on restricted shares will be escrowed on behalf of each Participant. Interest will be credited annually on the escrowed amounts at the rate in effect under SLC's non-qualified deferred compensation plans at the time. Amounts credited to the escrowed dividend account at the end of the Performance Cycle will be distributed in the same proportion as the restrictions on the shares lapse. For example, if 75% of the restricted shares are earned, then 75% of the balance in the escrowed dividend account will be paid as soon as possible after the end of FY97. Any remaining balance in the dividend account will be forfeited. PERFORMANCE STANDARDS Performance under the LTPIP will be measured using one or more of the following financial measures depending on the Participant's position and executive level within SLC. * Cumulative SLC Earnings Per Share during the Performance Period * Average SLC Return on Capital during the Performance Period * Average SLC Return on Average Common Equity during the Performance Period * Cumulative Group Operating Profit during the Performance Period * Average Group Return on Investment during the Performance Period Definitions of these measures are included in Appendix III. For each measure, performance levels have been defined. Corporate EPS and ROC targets have been included in Appendix II. Group Operating Profit targets have or will be communicated to the appropriate Participants. The performance levels and the percentage of shares which will be distributed are as follows:
PERFORMANCE LEVEL % OF SHARES DISTRIBUTED ------------------ ----------------------- THRESHOLD 25% TARGET 100% MAXIMUM 125%
Interpolations will be used for results which fall between threshold, target and maximum. For performance above target, additional shares will be issued after the end of the 3 5 Performance Cycle. No dividends will be paid on any additional shares issued for performance above target. No shares will be earned for performance below threshold. AWARD AGREEMENT Each Participant will receive an Award Agreement specifying the number of shares which has been granted, and the specific terms and conditions applicable to this grant. This Agreement is executed by the Corporation and must be signed by the Participant to receive the shares. Additionally, this Agreement serves as power of attorney for the Corporation to facilitate the re-issuance of the Shares at the end of the Performance Cycle or in the event that the terms and conditions of the grant are not fulfilled. TAX CONSEQUENCES United States Under current United States tax legislation, a Participant receives no taxable income from shares awarded, dividends escrowed or interest credited until the restrictions on the shares lapse (vesting). When the shares are earned, both the market value of the shares on the date of vesting as well as the dividends and interest distributed are credited as income and subject to applicable federal, state and local withholding. Amounts necessary to settle this withholding obligation may be withheld from the cash or stock amounts due the Participant. Within thirty days of the award date, as specified in the Agreement, the Participant may elect immediate taxation under Section 83(b) of the Internal Revenue Code for the value of the shares awarded. This election is effected by filing an election form with the Internal Revenue Service within the applicable time frame. A copy of this election must be sent to the Chief Accounting Officer of SLC, and the applicable withholding taxes on the value of the award must be paid to the appropriate payroll department. If this election is made, the Participant is responsible for all taxes at the time of grant, which will not be refunded if some or all shares are not eventually distributed. Dividends will continue to be escrowed, and will result in no income until distributed. If a Section 83(b) election is made, the basis of the shares for determination of capital gains under current tax law is the Fair Market Value, as defined in the Stock Plan, on the award date. If this election is not made, the basis of the shares will be Fair Market Value on the date the restrictions lapse. 4 6 COUNTRIES OTHER THAN THE UNITED STATES Tax laws vary significantly from country to country, so advice should be obtained from appropriate counsel concerning the effect of this grant in that country. In most cases, a Participant receives no taxable income from shares awarded, dividends escrowed or interest credited until the restrictions on the shares lapse (vesting). When the shares are earned, both the market value of the shares on the date of vesting as well as the dividends and interest distributed are credited as income. No amounts will be withheld related to any tax withholding obligation which may arise. The Participant is responsible for compliance with the relevant legal and tax regulations in the appropriate jurisdiction. IMPACT ON OTHER BENEFITS Shares, dividends or interest earned under the LTPIP are not considered compensation for purposes of any retirement plan or other benefit plan for which the Participant may be eligible. ADMINISTRATIVE GUIDELINES The following will serve as guidelines for administering the LTPIP: * The Committee has final approval of the LTPIP and functions as the Plan Administrator. * The SLC Controller's Department will be responsible for providing financial results under the LTPIP. The awards for all Corporate Officers will be approved by the Committee. * The portion of the restricted shares earned along with the related balance of the escrowed dividend account will be distributed on or about September 1, 1997, after the financial results of SLC for FY97 have been publicly announced. * The number of Shares distributed to Participants who change operating groups during the Performance Cycle will be adjusted pro-rata reflecting the number of full months under performance standards for each operating group in which they participated. * Performance standards may be restated during the Performance Cycle to reflect reorganizations provided that after Adjustments and Exclusions aggregate pre-established performance goals remain unchanged; the number of shares distributed to Participants will be adjusted pro-rata as described above. 5 7 * The results of acquisitions will be included in and divestitures excluded from Operating Profit and ROI if they were included in the goals at the beginning of the Performance Cycle. * Awards may be made to new Participants during the first year of the Performance Cycle. The number of shares awarded may be adjusted to reflect that the executive is not a Participant for the entire Performance Cycle. * Adjustment awards may be made to Participants who change positions during the first year of the Performance Cycle, if such a change would have resulted in qualifying for an increased level of award. * In the event of death, disability or retirement under an SLC retirement plan on or prior to the last day of fiscal year 1997, the restrictions may lapse on a pro-rata number of the restricted shares which are EARNED under the provisions described earlier in this plan. If applicable, the shares and related dividends and interest will be distributed at the normal payout time (i.e., on or about September 1, 1997). * Unless otherwise approved in writing by the Committee, a Participant who resigns or is terminated during the Performance Cycle forfeits the rights to all shares and any dividends or interest which have been accrued. * Should a change in control occur (as defined in the Stock Plan), the Committee will decide what effect, if any, this should have on the awards which are outstanding under this plan. * Nothing in the LTPIP shall confer on a Participant any right to continue in the employ of SLC or in any way affect SLC's right to terminate the Participant's employment without prior notice at any time for any or no reason. * The Comittee may adjust final results to include any amounts automatically excluded if it determines that management is accountable for those items, provided that these result only in "negative discretion." * The Committee may make additional changes which it deems appropriate to the effective administration of the LTPIP, including the establishment of appropriate performance measure weights for newly created executive levels. However, other than as described above, these changes may not reduce the benefits to which Participants are entitled under the LTPIP, nor change the pre-established performance measures and goals which have been approved. 6 8 APPENDIX I OPERATING GROUPS CORPORATE SL|DE/PACKAGED MEATS & BAKERY * Overall Group PERSONAL PRODUCTS * SL/DE * Overall Group * Coffee & Grocery * SLKP and Direct * Household & Personal Care * Hosiery Group * Direct Selling * SLPP Pacific Rim * Packaged Meats * Accessories/NA Intimate * Bakery Apparel/Champion * SLPP Europe * PYA/Monarch 9 Appendix II PERFORMANCE MEASURES AND WEIGHTS
FULLY GROUP DILUTED OPERATING GROUP EPS ROC ROE PROFIT ROI ------- ------- ------- ---------- ------- Corporate Staff 50.0% 25.0% 25.0% -- -- Executive Vice President 25.0% 12.5% 12.5% 25.0% 25.0% SLC Sr. Vice Presidents 10.0% 45.0% 45.0% (Operating Groups) SLC Vice Presidents (Operating Groups) 10.0% -- -- 45.0% 45.0% Division Presidents and other A - level -- -- -- 50.0% 50.0% Operating Executives CORPORATE PERFORMANCE GOALS THREE YEAR CUMULATIVE FULLY DILUTED EARNINGS RETURN ON PER SHARE CAPITAL RETURN ON EQUITY ------------------- ----------- ------------------- Threshold $4.86 12.5% 19.5% Target $5.36 14.0% 21.5% Maximum $5.64 15.0% 22.0%
10 Appendix III DEFINITIONS a) PERFORMANCE CYCLE is the three year period consisting of SLC's fiscal years 1995 through 1997. b) THE COMMITTEE means the Compensation and Employee Benefits Committee of the Board of Directors of SLC c) AGREEMENT means the document executed by both SLC and the Participant specifying the number of shares granted and the terms and conditions under which this grant is being made d) DIVISION means the operating profit centers of SLC. e) GROUP means designated combinations of Divisions which are specified in Appendix II of this plan or may be specified by the Senior Vice President of Human Resources from time to time. f) PARTICIPANT means an executive of the SLC who has received and executed a grant Agreement specifying the terms of participation in this plan g) EARNINGS PER SHARE ("EPS") means reported primary earnings per share for the fiscal years in the Performance Cycle subject to applicable Adjustments and Exclusions as defined below h) ADJUSTMENTS means changes to the goal to appropriately reflect the effect of stock splits or combinations, stock dividends and spin-offs or special distributions to stockholders other than normal cash dividends i) EXCLUSIONS means the automatic exclusion of the following from relevant financial data for purposes of measuring performance against the goal: -- extraordinary or unusual charges (accounting definition) -- revisions to the U.S Internal Revenue Code -- changes in generally accepted accounting principles -- losses from discontinued operations (accounting definition) -- changes in definition of primary EPS -- restructuring charges -- any other extraordinary or unusual charges that are quantified and identified separately in the Management Discussion and Analysis section of the Annual Report or in footnotes to the audited financial statements j) RETURN ON AVERAGE EQUITY ("ROE") MEANS the ratio of SLC net income available for common stock to SLC average common equity; average common equity is the sum of beginning year equity and ending year equity, which is then divided by 2; AVERAGE ROE is calculated as the simple average of ROE for each of the three fiscal years in the Performance Cycle, subject to the applicable Adjustments and Exclusions defined above. k) EARNINGS BEFORE INTEREST AND AMORTIZATION (EBIA) means SLC pre-tax income adjusted to add back the following: after-tax interest expense, non-cash amortization including that on goodwill and trademarks, and the change in deferred taxes from the consolidated statement of cash flow; this value is then reduced by the tax provision on the consolidated income statement. l) RETURN ON CAPITAL ("ROC") means the ratio of SLC EBIA to SLC average total capital (on a two point basis) as defined by First Boston; AVERAGE ROC is calculated as the simple average of ROC for each of the three fiscal years in the Performance Cycle, subject to the applicable Adjustments and Exclusions defined above. m) OPERATING PROFIT means FIFO operating profits as shown on Line 16 of the EO-200 income subject to applicable Exclusions defined above; this will include line 15 calculated consistent with provisions under Finance Policy 610 in effect in FY95; Operating Profit will be denominated in U.S. dollars using AOP pegged rates in effect for each fiscal year. n) RETURN ON AVERAGE INVESTMENT ("ROI") is set forth in Finance Policy 130; AVERAGE ROI is calculated as the simple average of ROI for each of the three fiscal years in the Performance Cycle, subject to the applicable Exclusions defined above. o) TOTAL DISABILITY is defined per the Long-Term Disability Plan of SLC under which the Participant is covered EX-10.19 7 SEVERANCE POLICY FOR CORPORATE OFFICERS 1 EXHIBIT (10.)19 SARA LEE CORPORATION SEVERANCE POLICY FOR CORPORATE OFFICERS Effective February 1, 1994 1. Introduction. This document sets forth the policy of Sara Lee Corporation ("Corporation") governing severance payments and benefits ("Severance") to be made in the event of the involuntary termination of employment with the Corporation of an officer of the Corporation elected by the Board of Directors and eligible to participate in the Corporation's Long-Term Performance Incentive Plans ("Officer" or "Terminated Officer"). 2. Statement of General Policy. It is the policy of the Corporation that an Officer whose employment with the Corporation has been involuntarily terminated for any reason other than for "Cause" (as defined in Section 3(i) below), death, disability or retirement shall be entitled to specified Severance. This Policy duly recognizes the circumstances of termination, years of service with the Corporation and age on the date of termination as factors to be considered in the determination of the amount of Severance to be paid to a Terminated Officer. The objectives of this Policy are to: (1) provide a Terminated Officer with reasonable compensation to bridge the Terminated Officer until reemployment or normal retirement, and (2) provide reasonable consideration for the release of the Corporation of all claims against it by a Terminated Officer. This Policy is inapplicable to a Terminated Officer in circumstances where (i) the Officer is relieved of his or her responsibility and is immediately offered new employment with the Corporation or is transferred to a subsidiary or affiliate of the Corporation, with the consent of the Officer, (ii) the Corporation divests itself of a subsidiary, division or operation as a going concern which employed the Officer and the employment of the Officer by such division, subsidiary or operation is continued by the new or acquiring entity either on substantially the same financial terms and conditions as prior to the disposition of such division, subsidiary or operation or on such financial terms and conditions acceptable to the Officer, or (iii) the Terminated Officer voluntarily resigns. 3. Categories of Termination of Employment. The categories of termination, which shall determine the amount of Severance to be paid to a Terminated Officer, are: (i) Termination for Cause ("Category I Termination"). Termination for Cause is a ter- 2 mination of employment by the Corporation when the Officer has willfully engaged in conduct demonstrably and materially injurious to the Corporation or is convicted of or confesses to a crime involving dishonesty, moral turpitude or other disreputable behavior. (ii) Termination for Good Reason ("Category II Termination"). Termination for Good Reason is a termination of employment when (a) the Officer is terminated because of unacceptable performance, (b) the Officer's employment is terminated involuntarily due to an organization restructuring which results in the elimination of the Officer's position or function, or (c) the Officer terminates his or her employment at the request of the Corporation. The characterization of an Officer's termination under this Policy shall be made by the Corporation's Senior Vice President-Human Resources. 4. Severance Benefits Payable. Category I Termination. An Officer terminated under the circumstances of a Category I Termination shall receive no Severance from the Corporation under this Policy. Category II Termination. An Officer terminated under the circumstances of a Category II Termination shall: (A) receive, for each full year of employment with the Corporation or any subsidiary or affiliate of the Corporation (including the years of employment with a corporation acquired by the Corporation), three (3) months' salary (in effect on the date of termination), if he or she is an Executive Vice President or an officer senior thereto and a Director of the Corporation; two (2) months' salary (in effect on the date of termination), if he or she is a Senior Vice President; or one (1) month's salary (in effect on the date of termination), if he or she is a Vice President, but in no event shall this Salary Portion of Severance be less than twelve (12) months' salary or more than twenty four (24) months' salary; (B) be paid a pro-rata amount (to the effective date of termination of employment) of -2- 3 (i) the annual bonus payable under the Annual Bonus Plan of the Corporation in effect with respect to the fiscal year in which the termination of employment shall occur, assuming a Superior level of performance with respect to the non-discretionary portion of such bonus; and (ii) the long-term bonus payable under the Long-Term Performance Bonus Plan of the Corporation terminating at the end of the fiscal year closest to the date of termination (forfeiting participation in any long-term bonus plans ending thereafter); and (C) at the discretion of the Chief Executive Officer of the Corporation, be paid an additional Salary Portion of Severance up to three (3) additional months' salary if the Officer is age 40 years or older but less than age 50 on the date of termination of employment or up to six (6) additional months' salary if the Officer is age 50 or older on the date of termination of employment. Termination of Benefits. All Severance shall cease on the earliest of (1) the Terminated Officer's 62nd birthday, provided that he or she is eligible to begin to receive pension benefits under the Sara Lee Corporation Consolidated Pension and Retirement Plan or any other qualified retirement plan of the Corporation (a "Retirement Plan") at age 62, (2) the date the Terminated Officer becomes employed by a competitor of the Corporation or any of its subsidiaries or becomes reemployed by the Corporation and (3) the date the Terminated Officer begins to receive benefits from a Retirement Plan. Health Coveraqe. If a Terminated Officer eligible for Severance elects to continue health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), the period such coverage will be offered will not be less than the Severance Period (i.e. the period the Terminated Officer is expected to receive the Salary Portion of Severance) and the Corporation will subsidize the premium for such continuation coverage during the Severance Period to the extent that the Terminated Officer would otherwise be required to pay more for such coverage during that period than a similarly situated active employee would be required to pay for comparable coverage. After the end of the Severance Period, the Terminated Officer will be required to pay the full COBRA premium. If the Terminated Officer is eligible for early retirement under the terms of the Sara Lee Corporation Consolidated Pension and Retirement Plan (or would become eligible if the Severance Period is considered as -3- 4 employment) the Terminated Officer may elect to receive retiree health care coverage. Participation in Other Plans. Except as otherwise provided herein, participation in all other plans available to the Executive Benefit Group, including but not limited to, qualified pension plans, stock purchase plans, 401(k) plans and ESOPs, personal accident insurance, travel accident insurance, short and long term disability insurance and accidental death and dismemberment insurance, shall cease on the Officer's date of termination. Non-qualified supplemental ESOP and pension benefits will be provided to a Terminated Officer eligible for Severance through the Corporation's Supplemental Benefit Plan by treating the Severance Period as a period of employment with the Corporation. The Corporation shall continue to pay premiums during the Severance Period on any policy purchased by such a Terminated Officer under the Executive Life Insurance Program and will continue to pay premiums after the Severance Period pursuant to the Executive Life Insurance Program if the Terminated Officer is eligible for early retirement or becomes eligible for early retirement during the Severance Period. Any stock option awards such Terminated Officer received prior to the date of termination shall continue to vest during the Severance Period pursuant to the terms of the stock option plan. Any stock option awards that vest prior to the end of the Severance Period must be exercised by the Terminated Officer within the applicable periods specified in the option plan. A Terminated Officer who continues to be eligible for Severance shall continue to participate in the Estate Builder Plan at the Target Rate. The Terminated Officer can surrender the Corporation car at termination of employment or purchase the car from the Corporation at the car's then fair market value. Reimbursement of club memberships and expenses incurred after the Terminated Officer terminates employment shall cease on the termination of employment and the Matching Grant Program shall also terminate at termination of employment. 6. Mode of Payment of Severance. The Salary Portion of the Severance shall be paid bi-weekly in accordance with the Corporation's Corporate Office pay schedule, unless the Chief Executive Officer of the Corporation, at his sole discretion, shall elect to pay the Salary Portion in a lump sum payment or a combination of bi-weekly payments and a lump sum payment. The bonus payment segment, if any, of the Severance shall be paid to the Terminated Officer on the same date the active participants under the bonus plans are paid. 7. Release Aqreement. No benefits under this Policy shall be payable to any Terminated Officer until the Terminated Officer and the Corporation have executed a release (in a form approved by the Corporation) of all of such Terminated Officer's then existing rights and legal claims against the Corporation and -4- 5 the payment of benefits under this Policy shall be subject to the terms and conditions of such release agreement. 8. Death of Terminated Officer. In the event that the Terminated Officer shall die prior to the completion of the payments of the Salary Portion and prior to the payment of the bonus payment segment of the Severance, the Terminated Officer's estate or beneficiary, whichever is applicable, shall be paid the remaining payments of the Salary Portion and the unpaid bonus payment. Such payments shall not affect or reduce any other death benefits which the Terminated Officer's estate or beneficiary shall be entitled to receive under other plans of the Corporation. 9. Policy Interpretations and Variations. The Compensation and Employee Benefits Committee of the Corporation shall administer this Policy, the Committee or its representative shall decide any issues and disputes arising under this Policy, and the decision of the Committee shall be binding and conclusive on the Terminated Officer and the Corporation. Any variations from the Policy may only be made by the Committee in its sole discretion. - - - ------------ As revised by the Compensation and Employee Benefits Committee on January 27, 1994. -5- EX-12.1 8 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT (12.)1 SARA LEE CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (In millions except ratios)
Year Ended ------------------- July 2, July 3, 1994 1993 -------- ------- Fixed charges: Interest expense $188 $162 Interest portion of rental expense 60 53 ---- ------ Total fixed charges before capitalized interest 248 215 Capitalized interest 21 20 ---- ------ Total fixed charges $269 $235 ==== ====== Earnings available for fixed charges: Income before income taxes $389 $1,082 Less undistributed income in minority owned companies (8) (7) Add minority interest in majority-owned subsidiaries 25 25 Add amortization of capitalized interest 19 18 Add fixed charges before capitalized interest 248 215 ---- ------ Total earnings available for fixed charges $673 $1,333 ==== ====== Ratio of earnings to fixed charges 2.5 5.7 ==== ======
(1) During the fourth quarter of fiscal 1994, the corporation recorded a pretax charge of $732 million in connection with various restructuring actions. EX-12.2 9 COMPUTATION OF RATIO 1 EXHIBIT (12.)2 SARA LEE CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS (IN MILLIONS EXCEPT RATIOS)
Year Ended ---------------------------- July 2, July 3, 1994 1993 --------- --------- Fixed charges and preferred stock dividend requirements: Interest expense $188 $162 Interest portion of rental expense 60 53 ------- ------- Total fixed charges before capitalized interest 248 215 and preferred stock dividend requirements Capitalized interest 21 20 Preferred stock dividend requirements (2) 38 42 ------- ------- Total fixed charges and preferred stock dividend requirements 307 277 ======= ======= Earnings available for fixed charges and preferred stock stock dividend requirements: Income before income taxes $389 $1,082 Less undistributed income in minority owned companies (8) (7) Add minority interest in majority-owned subsidiaries 25 25 Add amortization of capitalized interest 19 18 Add fixed charges before capitalized interest and preferred stock dividend requirements 248 215 ------- ------- Total earnings available for fixed charges and preferred stock dividend requirements $673 $1,333 ======= ======= Ratio of earnings to fixed charges and preferred stock dividend requirements 2.2 4.8 ======= =======
(1) During the fourth quarter of fiscal 1994, the corporation recorded a pretax charge of $732 million in connection with various restructuring actions. (2) Preferred stock dividends in the computation have been increased to an amount representing the pretax earnings that would have been required to cover such dividends. EX-21 10 SUBSIDIARIES OF SARA LEE CORPORATION 1 EXHIBIT (21) SUBSIDIARIES OF SARA LEE CORPORATION The following is a list of all active subsidiary corporations of Sara Lee. Subsidiaries which are inactive or exist solely to protect the business names, but conduct no business, have been omitted; such omitted subsidiaries considered in the aggregate do not constitute a significant subsidiary. Domestic Subsidiaries PLACE OF NAME INCORPORATION - - - ---- ------------- Adams-Millis Corporation North Carolina Bali Company Delaware Bali Foundations, Inc. Delaware Bessin Corporation Illinois BG Marketing Corp. Delaware Bil Mar Farms, Inc. Delaware Bil Mar Foods, Inc. Delaware Bryan Foods, Inc. Delaware Canadelle Intimate Fashions, Inc. Nevada Champion Products Inc. New York Coach Distribution Company Delaware Coach Stores, Inc. Delaware Coach Leatherware Company, Inc. New Jersey Coach Leatherware International, Inc. Delaware 2 DEA Leasing Corporation Delaware D.E. Direct, Inc. Delaware Douwe Egberts/Van Nelle, Inc. Kentucky Frigid Freeze Foods, Inc. Delaware The Fuller Brush Company Connecticut GPI Corp. Nebraska Hanes Menswear, Inc. Delaware Hanes Puerto Rico, Inc. Delaware Hygrade Food Products Corporation New York International Baking Co., Inc. Delaware Jimmy Dean Manufacturing Company Delaware Kiwi Brands Inc. Delaware Kiwi (Europe) Corporation Delaware L'eggs Brands, Inc. Delaware Milky Way Products Company Delaware Ozark Salad Company, Inc. Delaware Playtex Apparel, Inc. Delaware Playtex Dorado Corporation Delaware Playtex Holding Company Delaware 3 Playtex Industries, Inc. Delaware PYA General Partner Corp. Delaware PYA Holding, Inc. Delaware PYA Limited Partner Corp. Delaware PYA/Monarch, Inc. Delaware Rice Hosiery Corporation North Carolina Sara Lee Bond Investment Corp. Delaware Sara Lee Champion Europe Inc. Delaware Sara Lee/DE Asia, Inc. Delaware Sara Lee French Investment Company, Inc. Delaware Sara Lee International Corporation Delaware Sara Lee Investments, Inc. Delaware Sara Lee-Kiwi Holdings, Inc. Delaware Sara Lee Corporation Asia, Inc. Delaware Sara Lee U.K. Holdings, Inc. Delaware Saramar Corporation Delaware Schloss & Kahn, Inc. Delaware Scotch Maid, Inc. Delaware Seitz Foods, Inc. Delaware SLE, Inc. Delaware Smoky Hollow Foods, Inc. Delaware 4 Southern Belle, Inc. Delaware Spring City Knitting Co., Inc. Delaware State Fair Foods, Inc. Texas Super Products, Inc. Delaware Sweet Sue Kitchens, Inc. Delaware Tailby-Nason Company, Inc. Delaware Wolferman's, Inc. Delaware 5 Foreign Subsidiaries Abel Bonnex S. A, France ACP B.V. Netherlands Agepal SarL Luxemburg Allende International, S.A. de C.V. Mexico Aris Isotoner S.A. France Aris Isotoner U.K. Limited England Aris Isotoner Handschuhe GmbH Germany Aris (Philippines) Inc. Philippines Arno Leasing B.V. Netherlands Ashe Limited England Ashe Pension Trustees Ltd. England Auragate Pty. Ltd. Australia Avroy Shlain Cosmetics (Pty.) Ltd. South Africa Balirny Douwe Egberts AS. Czechoslovakia Ballograf Bic Austria Vertriebs Ges. mbh Austria Bal-Mex S.A. de C.V. Mexico Beheersmaatschappij Bevem B.V. Netherlands Beleggingsmaatschappij Argona B.V. Netherlands Beviston Pty. Ltd. Australia A/S Blumoller Denmark Boers Groothandel B.V. Netherlands Boers Vleeswaren B.V. Netherlands 6 Buhler Fontaine S.A. France Butress B.V. Netherlands Cafes de l'Elephant Noir S.A. France Caitlin Financial Corporation N.V. Netherlands Antilles Canadelle Incorporated Canada Casual Wear de Mexico, S.A. de C.V. Mexico Charter de Mexico, S.A. Mexico Coach Leatherwear GmbH Germany Coach (UK) Limited England Coffenco International GmbH Germany Cofico N.V. Netherland Antilles Comercial de Puntillas, S.A. Spain Comercial Rin-bros, S.A. de C.V. Mexico Commandant B.V. Netherlands Compack Douwe Egberts Rt Hungary Confeccionadora Canarias, S.A. de C.V. Mexico Confecciones de Monclova, S.A. de C.V. Mexico Confecciones de Montrerrey, S.A. de C.V. Mexico Confecciones de Nueva Rosita, S.A. de C.V. Mexico Confecciones El Pedregal S.A. de C.V. El Salvador Conoplex Insurance Company Bermuda Corjan, S.A. Panama 7 Corporacion H.M., S.A. de C.V. Mexico Cruz Verde Portugal - Productos de Consumo Lda. Portugal Dacor N.V. Belgium DEA (Bermuda) Ltd. Bermuda Decaf B.V. Netherlands Decaf N.V. Belgium Decem B.V. Netherlands Decotrade A.G. Switzerland Defacto B.V. Netherlands DEF Finance S.A. France DEF Holding S.A. France Defico N.V. Netherland Antilles Detrex B.V. Netherlands Difan S.A.M. Monaco Dim S.A. France Dim-Rosy AB Sweden Dim-Rosy AG Switzerland Dim-Rosy A/S Denmark Dim-Rosy Benelux N.V. Belgium Dim-Rosy GmbH Germany Dim-Rosy Inc. Canada Dim-Rosy Portugal Lda Portugal Dim-Rosy S.p.A. Italy 8 Dim-Rosy Textiles, Inc. Canada Dimtex S.A. France Douwe Egberts N.V. Belgium Douwe Egberts Agio GmbH Germany Douwe Egberts Coffee & Tea International B.V. Netherlands Douwe Egberts Coffee Systems France S.A. France Douwe Egberts Coffee Systems Ltd. Canada Douwe Egberts Coffee Systems Ltd. England Douwe Egberts Coffee Systems International B.V. Netherlands Douwe Egberts Coffee Systems Nederland N.V. Netherlands Douwe Egberts Compack Kft. Hungary Douwe Egberts Espana S.A. Spain Douwe Egberts France S.A. France Douwe Egberts Kaffee Systeme GmbH Germany Douwe Egberts Kaffee Systeme GmbH & Co., K.G Germany Douwe Egberts GmbH Germany Douwe Egberts Kaffee B.V. Netherlands Douwe Egberts Limited Canada Douwe Egberts Nederland B.V. Netherlands Douwe Egberts (P) B.V. Netherlands Douwe Egberts (Portugal) Produtos Almentares Lda. Portugal Douwe Egberts Van Nelle Diensten B.V. Netherlands Douwe Egberts Van Nelle Tabaksmaatschappij B.V. Netherlands 9 Douwe Egberts Van Nelle Tabaksproduktiemaatschappij B.V. Netherlands Douwe Egberts Van Nelle Tobacco Belgium N.V. Belgium Douwe Egberts Van Nelle Tobacco International B.V. Netherlands Douwe Egberts UK Limited England Douwe Egberts (Z) B.V. Netherlands Duyvis B.V. Netherlands Elbeo Ltd. England Era Expeditie B.V. Netherlands Eri Feine Schuhpflege Vertriebs GmbH Germany Esa Eppinger GmbH Germany F. Whitlock & Sons Ltd. New Zealand AB Fenom Sweden Filati Calze S.p.A. Italy De Freische Erven B.V. Netherlands Fujian Sara Lee Consumer Products Company Ltd. People's Republic of China Grada B.V. Netherlands Grup Industrial Pemsa S.A. de C.V. Mexico Hanes Caribe Ltd. Cayman Islands Hanes Choloma Ltd. Cayman Islands Hanes de Centroamerica S.A. Guatemala Hanes (Deutschland) GmbH Germany Hanes Foreign Sales Company B.V. Netherlands 10 Hanes France S.A. France Hanes International N.V. Belgium Hanes de Mexico, S.A. de C.V. Mexico Hanes Panama, Inc. Panama Hanes Jamaica Limited Jamaica Hanes Tejidos Costa Rica Ltd. Costa Rica Hanes U.K. Limited England Harris/DE Pty. Ltd. Australia Hesperia de Alimentacion S.A. Spain Hesperia Sur S.A. Spain Hesperia Noroeste S.A. Spain Hesperia Levante S.A. Spain Hesperia Centro S.A. Spain Hilton Bonds N.Z. (1991) Limited New Zealand House of Fuller, S.A. de C.V. Mexico Household & Personal Care Research B.V. Netherlands International Food Service B.V. Netherlands Internacional Manufacturas, S.A. de C.V. Mexico Inco Hellas A.E. Cosmetics, Dietetics and Greece Pharmaceutical Products Industry Industrias Carnicas Navarras S.A. Spain Industrias de Carnes Nobre S.A. Portugal Industrias Internacionales de San Pedro, S.A. de C.V. Mexico Inmobiliaria Meck-Mex, S.A. de C.V. Mexico 11 Intec B.V. Netherlands Inter Food Service Ltd. England INTEX Dessous GmbH Germany INTEX Textil-Vertriebsgesellscaft GmbH Germany Internacional Manufacturera, S.A. Mexico International Underwear Ltd. Morocco Intradal Produktie Belgium N.V. Belgium I. Tas Ezn B.V. Netherlands Itesa B.V. Netherlands Kaffehuset Friele A/S Norway King Gee Clothing Company Pty. Ltd. Australia Kitchens of Sara Lee (Australia) Pty. Ltd. Australia Kitchens of Sara Lee U.K. Limited England Kiwi Brands Ltd. Kenya Kiwi Brands Ltd. Malawi Kiwi Brands (Pty.) Ltd. South Africa Kiwi Brands Ltd. Zambia Kiwi Brands Pty. Ltd. Australia Kiwi Brands (Malaysia) Sdn. Bhd. Malaysia Kiwi Brands (N.Z.) Ltd. New Zealand Kiwi Brands (Private) Limited Zimbabwe Kiwi Caribbean Limited England P.T. Kiwi Distribution Company Indonesia 12 Kiwi (EA) Ltd. England Kiwi European Holdings B.V. Netherlands Kiwi France S.A. France Kiwi Holding S.A. France Kiwi Holdings Limited England Kiwi Hong Kong Ltd. Hong Kong P.T. Kiwi Indonesia Indonesia Kiwi International Pte. Ltd. Singapore Kiwi Korea Ltd. Korea Kiwi (Manufacturing) Sdn Bhd Malaysia Kiwi (Nigeria) Limited Nigeria Kiwi (Thailand) Limited Thailand Kiwi TTK Limited India Kiwi United Taiwan Co. Ltd. Republic of China De Koffiewacht B.V. Netherlands Koffie en Theehandel De Hanze B.V. Netherlands Koffiebranderijen-Theehandel Kanis & Gunnik B.V. Netherlands Koninklijke Douwe Egberts B.V. Netherlands Kortman Intradal B.V. Netherlands Kortman Nederland B.V. Netherlands N.V. Kortman Intradal S.A. Belgium Lassie B.V. Netherlands Maglificio Bellia S.p.A. Italy 13 Marcilla Coffee System S.A. Spain Manufacturera de Cartago, S.A. Costa Rica Manufacturera Libra, S.A. de C.V. Mexico Manufacturas Mallorca, S.A. de C.V. Mexico Marander Assurantie Compagnie B.V. Netherlands Marketing-en Verkoopmaatschappij Stegeman B.V. Netherlands Merrild Coffee Systems AB Sweden Merrild Kaffe A/S Denmark Nicholas Manufacturing Limited England Nihon Kiwi K.K. Japan Nihon Sara Lee K.K. Japan Opus Chemical AB Sweden Oxwall Tools B.V. Netherlands Palas de Mexico, S.A. de C.V. Mexico Pessi Guttalin S.p.A. Italy Playtex Cadereyta, S.A. de C.V. Mexico Playtex Dominicana, S.A. Dominican Republic Playtex Espana, S.A. Spain Playtex France S.A. France Playtex Holdings Limited England Playtex Investments Europe S.A. France Playtex Limited England 14 Playtex Mexicana, S.A. de C.V. Mexico Playtex Pty. Limited Australia Playtex Trading Limited England PLUSTEX B.V. Netherlands PLUSTEX S.A. Belgium Pretty Polly Limited England Pretty Polly (Killarney) Limited Ireland Pretty Polly Pension Trustees Ltd. England Probemex S.A. de C.V. Mexico P.T. Prodenta Indonesia Indonesia Playtex Tunisia Tunisia Product Suppliers A.G. Switzerland Raycass S.A. Chile Rinbros, S.A. de C.V. Mexico Sagepar SaRL France Sans & Sportwear S.A. Spain Sara Lee Bakery Company Limited Hong Kong Sara Lee (Bakery Employees) Ltd. England Sara Lee Champion France S.A. France Sara Lee Charcuterie, S.A. France Sara Lee Corporation of Canada Ltd. Canada Sara Lee de Costa Rica, S.A. Costa Rica Sara Lee/DE N.V. Netherlands 15 Sara Lee/DE Espana S.A. Spain Sara Lee/DE Finance B.V. Netherlands Sara Lee/DE Italia S.p.A. Italy Sara Lee/DE Italy S.p.A. Italy Sara Lee Europe Direct Marketing S.A. France Sara Lee Europe Finance S.A. France Sara Lee France SNC France Sara Lee Germany GmbH Germany Sara Lee Holdings (Australia) Pty. Ltd. Australia Sara Lee (Hong Kong) Limited Partnership Hong Kong Sara Lee Hosiery Canada Ltd. Canada Sara Lee Household & Personal Care UK Limited England Sara Lee International B.V. Netherlands Sara Lee Intimates de Mexico, S.A. de C.V. Mexico Sara Lee Mexicana S.A. de C.V. Mexico Sara Lee Overseas Finance N.V. Netherlands Antilles Sara Lee Personal Products S.A. France Sara Lee Personal Products (Argentina) S.A. Argentina Sara Lee Personal Products (Australia) Pty. Ltd. Australia Sara Lee Personal Products (Columbia) S.A. Columbia Sara Lee Personal Products Espana S.A. Spain Sara Lee Personal Products (Venezuela) S.A. Venezuela Sara Lee Philippines Inc. Philippines 16 Sara Lee Processed Meats (Europe) B.V. Netherlands Sara Lee Spain S.A. France Sara Lee (Taiwan) Ltd. Republic of China/Delaware Sara Lee Trading Ltd. Thailand Sara Lee (UK) Holdings Limited England Sara Lee (UK Investments) Limited England Siamcom (Thailand) Ltd. Thailand Simon H. Taconis Tabakscompagnie, B.V. Netherlands South African Hosiery Company (Pty.) Ltd. South Africa Spantex, S.A. de C.V. Mexico Spring City de El Salvador, S.A. de C.V. Honduras Spring City de Honduras, S.A. Honduras Stegeman, B.V. Netherlands The Stubbies Clothing Company Pty. Ltd. Australia Tana B.V. Netherlands Tana Canada Inc. Canada Tana France S.A. France Tana Schuhpflege AG Switzerland Tejidos Flex Corporation Dominican Republic Telec S.A. Switzerland Temana Ges. mbH Austria Temana International Ltd. England 17 Temana Verkaufs-AG Switzerland Tomten A/S Norway Tuxan Schuhpflegemittel GmbH Austria UFIMA S.A. France Underwear Ltd. Malta Valma B.V. Netherlands Van Nelle Foodservices Nederland B.V. Netherlands Van Nelle Holding (Germany) GmbH Germany Van Nelle International B.V. Netherlands Van Nelle Produktie B.V. Netherlands Vatter GmbH Germany B.V. Vereenigde Sneeker Tabaksfabrieken Netherlands Verpakkingsindustrie Boers B.V. Netherlands NV Zwarte Ket/Cle d'Or Belgium EX-23 11 CONSENT OF ARTHUR ANDERSEN LLP 1 Exhibit (23) Consent of Independent Public Accountants To the Board of Directors and Management of Sara Lee Corporation As independent public accountants, we hereby consent to the incorporation of our reports dated August 1, 1994, included in this Form 10-K, into the Corporation's previously filed Form S-8 registration statement Nos. 33-33245, 33-35760 and the first and second amendments thereto, 33-37575, 33-41487, 33-49212, and 33-59002, and Form S-3 registration statement Nos. 33-44190, 33-51715, 33-56190, and 33-58046. /s/ Arthur Andersen LLP Chicago, Illinois, September 30, 1994. EX-24 12 POWER OF ATTORNEY 1 EXHIBIT (24) POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears below constitutes and appoints John H. Bryan and Gordon H. Newman, each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to act for him and in his name, place and stead, in any and all capabilities to sign the Annual Report on Form 10-K of Sara Lee Corporation for the fiscal year ending July 2, 1994, and any and all amendments thereto and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue himself. Dated: August 24,1994 /s/ Paul A. Allaire --------------------------- Paul A. Allaire 2 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears below constitutes and appoints John H. Bryan and Gordon H. Newman, each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to act for him and in his name, place and stead, in any and all capabilities to sign the Annual Report on Form 10-K of Sara Lee Corporation for the fiscal year ending July 2, 1994, and any and all amendments thereto and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue himself. Dated: August 24, 1994 /s/ Frans H. J. J. Andriessen ----------------------------- Frans H. J. J. Andriessen 3 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears below constitutes and appoints John H. Bryan and Gordon H. Newman, each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to act for him and in his name, place and stead, in any and all capabilities to sign the Annual Report on Form 10-K of Sara Lee Corporation for the fiscal year ending July 2, 1994, and any and all amendments thereto and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue himself. Dated: August 24, 1994 /s/ Duane L. Burnham --------------------------- Duane L. Burnham 4 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears below constitutes and appoints John H. Bryan and Gordon H. Newman, each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to act for him and in his name, place and stead, in any and all capabilities to sign the Annual Report on Form 10-K of Sara Lee Corporation for the fiscal year ending July 2, 1994, and any and all amendments thereto and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue himself. Dated: August 24,1994 /s/ Charles W. Coker --------------------------- Charles W. Coker 5 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears below constitutes and appoints John H. Bryan and Gordon H. Newman, each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to act for him and in his name, place and stead, in any and all capabilities to sign the Annual Report on Form 10-K of Sara Lee Corporation for the fiscal year ending July 2, 1994, and any and all amendments thereto and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue himself. Dated: August 24, 1994 /s/ Willie D. Davis --------------------------- Willie D. Davis 6 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears below constitutes and appoints John H. Bryan and Gordon H. Newman, each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to act for him and in his name, place and stead, in any and all capabilities to sign the Annual Report on Form 10-K of Sara Lee Corporation for the fiscal year ending July 2, 1994, and any and all amendments thereto and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue himself. Dated: August 24, 1994 /s/ Allen F. Jacobson --------------------------- Allen F. Jacobson 7 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears below constitutes and appoints John H. Bryan and Gordon H. Newman, each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to act for him and in his name, place and stead, in any and all capabilities to sign the Annual Report on Form 10-K of Sara Lee Corporation for the fiscal year ending July 2, 1994, and any and all amendments thereto and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue himself. Dated: August 24, 1994 /s/ Vernon E. Jordan, Jr. --------------------------- Vernon E. Jordan, Jr. 8 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears below constitutes and appoints John H. Bryan and Gordon H. Newman, each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to act for him and in his name, place and stead, in any and all capabilities to sign the Annual Report on Form 10-K of Sara Lee Corporation for the fiscal year ending July 2, 1994, and any and all amendments thereto and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue himself. Dated: August 24, 1994 /s/ James L. Ketelsen --------------------------- James L. Ketelsen 9 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears below constitutes and appoints John H. Bryan and Gordon H. Newman, each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to act for him and in his name, place and stead, in any and all capabilities to sign the Annual Report on Form 10-K of Sara Lee Corporation for the fiscal year ending July 2, 1994, and any and all amendments thereto and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue himself. Dated: August 23,1994 /s/ Baron Gualtherus Kraijenhoff ------------------------------------- Baron Gualtherus Kraijenhoff 10 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears below constitutes and appoints John H. Bryan and Gordon H. Newman, each of them, her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to act for her and in her name, place and stead, in any and all capabilities to sign the Annual Report on Form 10-K of Sara Lee Corporation for the fiscal year ending July 2, 1994, and any and all amendments thereto and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue himself. Dated: August 24, 1994 /s/ Joan D. Manley --------------------------- Joan D. Manley 11 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears below constitutes and appoints John H. Bryan and Gordon H. Newman, each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to act for him and in his name, place and stead, in any and all capabilities to sign the Annual Report on Form 10-K of Sara Lee Corporation for the fiscal year ending July 2, 1994, and any and all amendments thereto and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue himself. Dated: August 24,1994 /s/ Newton N. Minow --------------------------- Newton N. Minow 12 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears below constitutes and appoints John H. Bryan and Gordon H. Newman, each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to act for him and in his name, place and stead, in any and all capabilities to sign the Annual Report on Form 10-K of Sara Lee Corporation for the fiscal year ending July 2, 1994, and any and all amendments thereto and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue himself. Dated: August 23,1994 /s/ Sir Arvi H. Parbo --------------------------- Sir Arvi H. Parbo A.C. 13 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears below constitutes and appoints John H. Bryan and Gordon H. Newman, each of them, her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to act for her and in her name, place and stead, in any and all capabilities to sign the Annual Report on Form 10-K of Sara Lee Corporation for the fiscal year ending July 2, 1994, and any and all amendments thereto and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue himself. Dated: August 25, 1994 /s/ Rozanne L. Ridgway --------------------------- Rozanne L. Ridgway 14 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears below constitutes and appoints John H. Bryan and Gordon H. Newman, each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, to act for him and in his name, place and stead, in any and all capabilities to sign the Annual Report on Form 10-K of Sara Lee Corporation for the fiscal year ending July 2, 1994, and any and all amendments thereto and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute, may lawfully do or cause to be done by virtue himself. Dated: August 24, 1994 /s/ Richard L. Thomas --------------------------- Richard L. Thomas EX-27 13 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the consolidated statement of income and consolidated balance sheet and is qualified in its entirety by reference to such financial statements. 1,000,000 YEAR JUL-02-1994 JUL-02-1994 164 25 1,636 164 2,567 4,469 5,237 2,337 11,665 4,919 1,496 641 0 331 2,685 11,665 15,536 15,536 9,700 9,700 0 108 145 389 155 234 0 0 (35) 199 .37 .36
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