<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 1997
--------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-3344
----------------------------------------------------------
Sara Lee Corporation
---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 36-2089049
- --------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Three First National Plaza, Suite 4600, Chicago, Illinois 60602-4260
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(312) 726-2600
---------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
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
------- --------
On September 27, 1997, the Registrant had 479,969,158 outstanding shares of
common stock $1.33 1/3 par value, which is the Registrant's only class of common
stock.
The document contains 17 pages.
Page 1
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
INDEX
PART I -
FINANCIAL STATEMENTS -
Preface 3
Condensed Consolidated Balance Sheets -
At September 27, 1997 and June 28, 1997 4
Consolidated Statements of Income -
For the thirteen weeks ended September 27, 1997
and September 28, 1996 5
Consolidated Statements of Common Stockholders' Equity -
For the period June 29, 1996 to September 27, 1997 6
Consolidated Statements of Cash Flows -
For the thirteen weeks ended September 27, 1997
and September 28, 1996 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION 8
PART II -
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 11
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURE 13
EXHIBIT 11 - Computation of Net Income Per Common Share 14
EXHIBIT 12.1 - Computation of Ratio of Earnings to Fixed Charges 15
EXHIBIT 12.2 - Computation of Ratio of Earnings to Fixed Charges and
Preferred Stock Dividend Requirements 16
EXHIBIT 27 - Financial Data Schedule 17
Page 2
<PAGE>
PART I
SARA LEE CORPORATION AND SUBSIDIARIES
PREFACE
The consolidated financial statements for the thirteen weeks ended September 27,
1997 and September 28, 1996 and the balance sheet as of September 27, 1997
included herein have not been examined by independent public accountants, but,
in the opinion of Sara Lee Corporation ("Corporation"), all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position at September 27, 1997 and the results of operations and the
cash flows for the periods presented herein have been made. The results of
operations for the thirteen weeks ended September 27, 1997 are not necessarily
indicative of the operating results for the full fiscal year.
The consolidated financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Although the Corporation believes that the disclosures made are adequate to make
the information presented not misleading, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such regulations. These consolidated financial statements should be
read in conjunction with the financial statements and the notes thereto included
in the Corporation's Form 10-K for the year ended June 28, 1997.
Page 3
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS AT SEPTEMBER 27, 1997 AND JUNE 28, 1997
(IN MILLIONS)
Sept. 27, June 28,
1997 1997
---------- ---------
ASSETS
Cash and equivalents $ 173 $ 272
Trade accounts receivable, less allowances 2,014 1,841
Inventories:
Finished goods 1,834 1,803
Work in process 483 497
Materials and supplies 689 673
---------- ---------
3,006 2,973
Other current assets 329 305
---------- ---------
Total current assets 5,522 5,391
Trademarks and other assets 538 536
Property, net 3,093 3,079
Intangible assets 4,057 3,947
---------- ---------
$ 13,210 $ 12,953
---------- ---------
---------- ---------
LIABILITIES AND EQUITY
Notes payable $ 1,048 $ 476
Accounts payable 1,459 1,703
Accrued liabilities 2,525 2,582
Current maturities of long-term debt 178 255
---------- ---------
Total current liabilities 5,210 5,016
Long-term debt 2,195 1,933
Deferred income taxes 445 416
Other liabilities 531 543
Minority interest in subsidiaries 527 523
Auction preferred stock -- 200
ESOP convertible preferred stock 309 314
Unearned deferred compensation (272) (272)
Common stockholders' equity 4,265 4,280
---------- ---------
$ 13,210 $ 12,953
---------- ---------
---------- ---------
Page 4
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS ENDED SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
(IN MILLIONS, EXCEPT PER SHARE DATA)
THIRTEEN WEEKS ENDED
------------------------
Sept. 27, Sept. 28,
1997 1996
---------- ----------
Net sales $ 4,893 $ 4,886
---------- ---------
Cost of sales 3,074 3,077
Selling, general and administrative expenses 1,454 1,463
Interest expense 48 54
Interest income (9) (11)
---------- ----------
4,567 4,583
---------- ----------
Income before income taxes 326 303
Income taxes 101 97
---------- ----------
Net income 225 206
Preferred dividend requirements, net of tax 4 7
---------- ----------
Net income available for common stockholders $ 221 $ 199
---------- ----------
---------- ----------
Net income per common share - primary $ 0.46 $ 0.41
---------- ----------
---------- ----------
Average shares outstanding 484 486
---------- ----------
---------- ----------
Net income per common share - fully diluted $ 0.44 $ 0.40
---------- ----------
---------- ----------
Average shares outstanding 502 505
---------- ----------
---------- ----------
Cash dividends per common share $ 0.21 $ 0.19
---------- ----------
---------- ----------
Page 5
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
FOR THE PERIOD JUNE 29, 1996 TO SEPTEMBER 27, 1997
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
UNEARNED
COMMON CAPITAL RETAINED TRANSLATION RESTRICTED
TOTAL STOCK SURPLUS EARNINGS ADJUSTMENTS STOCK
-------- -------- -------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balances at June 29, 1996 $ 4,320 $ 646 $ 141 $ 3,783 $ (227) $ (23)
Net income 206 -- -- 206 -- --
Cash dividends -
Common ($.19 per share) (92) -- -- (92) -- --
Auction preferred
($997.00 per share) (3) -- -- (3) -- --
ESOP convertible preferred
($1.36 per share) (6) -- -- (6) -- --
Stock issuances -
Business acquisition 13 1 12 -- -- --
Stock option and benefit plans 18 1 17 -- -- --
Restricted stock, less
amortization of $6 6 -- 7 -- -- (1)
Reacquired shares (95) (4) (91) -- -- --
Translation adjustments (16) -- -- -- (16) --
ESOP tax benefit 2 -- -- 2 -- --
ESOP share redemption 6 1 5 -- -- --
Other 1 -- -- -- -- 1
-------- -------- -------- -------- -------- --------
Balances at September 28, 1996 4,360 645 91 3,890 (243) (23)
Net income 803 -- -- 803 -- --
Cash dividends -
Common ($.63 per share) (302) -- -- (302) -- --
Auction preferred
($3,003.93 per share) (9) -- -- (9) -- --
ESOP convertible preferred
($4.08 per share) (18) -- -- (18) -- --
Stock issuances -
Business acquisitions 5 -- 5 -- -- --
Stock option and benefit plans 75 5 70 -- -- --
Restricted stock, less
amortization of $13 13 -- 6 -- -- 7
Reacquired shares (298) (10) (190) (98) -- --
Translation adjustments (375) -- -- -- (375) --
ESOP tax benefit 8 -- -- 8 -- --
ESOP share redemption 4 -- 4 -- -- --
Other 14 -- 14 -- -- --
-------- -------- -------- -------- -------- --------
Balances at June 28, 1997 4,280 640 -- 4,274 (618) (16)
Net income 225 -- -- 225 -- --
Cash dividends -
Common ($.21 per share) (101) -- -- (101) -- --
Auction preferred ($458.00 per share) (1) -- -- (1) -- --
ESOP convertible preferred
($1.36 per share) (5) -- -- (5) -- --
Stock issuances -
Stock option and benefit plans 21 2 19 -- -- --
Restricted stock, less
amortization of $8 9 -- 41 -- -- (32)
Reacquired shares (104) (3) (57) (44) -- --
Translation adjustments (58) -- -- -- (58) --
ESOP tax benefit 2 -- -- 2 -- --
ESOP share redemption 5 -- 5 -- -- --
Other (8) -- (8) -- -- --
-------- -------- -------- -------- -------- --------
Balances at September 27, 1997 $ 4,265 $ 639 $ -- $ 4,350 $ (676) $ (48)
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
Page 6
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
-------------------------
Sept. 27, Sept. 28,
1997 1996
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES -
Net income $ 225 $ 206
Adjustments for non-cash charges included in net income:
Depreciation 119 121
Amortization of intangibles 52 48
Increase in deferred income taxes 27 5
Other (21) (5)
Changes in current assets and liabilities, excluding
businesses acquired and sold (563) (556)
---------- ----------
Net cash used in operating activities (161) (181)
---------- ----------
INVESTING ACTIVITIES -
Purchases of property and equipment (91) (107)
Acquisitions of businesses (207) (520)
Sales of property 9 19
Other (5) 1
---------- ----------
Net cash used in investing activities (294) (607)
---------- ----------
FINANCING ACTIVITIES -
Issuances of common stock 21 18
Purchases of common stock (104) (95)
Redemption of preferred stock (200) ---
Borrowings of long-term debt 277 78
Repayments of long-term debt (99) (28)
Short-term borrowings, net 571 913
Payments of dividends (107) (101)
---------- ----------
Net cash from financing activities 359 785
---------- ----------
Effect of changes in foreign exchange rates on cash (3) - -
---------- ----------
Decrease in cash and equivalents (99) (3)
Cash and equivalents at beginning of year 272 243
---------- ----------
Cash and equivalents at end of quarter $ 173 $ 240
---------- ----------
---------- ----------
COMPONENTS OF THE CHANGES IN CURRENT ASSETS
AND LIABILITIES:
(Increase) in trade accounts receivable $ (209) $ (218)
(Increase) decrease in inventories (90) 5
(Increase) decrease in other current assets (27) 10
(Decrease) in accounts payable (218) (336)
(Decrease) in accrued liabilities (19) (17)
---------- ----------
Changes in current assets and liabilities $ (563) $ (556)
---------- ----------
---------- ----------
</TABLE>
Page 7
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
The following is a discussion of the results of operations for the first quarter
of fiscal 1998 compared to the first quarter of fiscal 1997 and a discussion of
the changes in financial condition during the first three months of fiscal 1998.
RESULTS OF OPERATIONS
COMPARISON OF FIRST QUARTER FISCAL 1998 TO FIRST QUARTER FISCAL 1997
Operating results by business segment in the first quarter of fiscal 1998 as
compared to the first quarter of fiscal 1997 were as follows:
THIRTEEN WEEKS ENDED
---------------------------------------
(in millions)
Sales Operating Income
------------------- -------------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
1997 1996 1997 1996
--------- --------- --------- ---------
Packaged Meats and Bakery $1,961 $1,888 $ 97 $ 95
Coffee & Grocery 633 673 106 117
Household and Body Care 453 431 40 40
Personal Products 1,851 1,898 150 152
----- ----- --- ---
Total sales and operating income 4,898 4,890 393 404
Intersegment sales (5) (4) ---- ----
Interest, net ---- ---- (39) (43)
Unallocated corporate expense ---- ---- (28) (58)
------ ------ ----- -----
Net sales and income before $4,893 $4,886 $326 $303
income taxes ------ ------ ---- ----
------ ------ ---- ----
Consolidated net sales increased 0.1% in the first quarter. Businesses
acquired net of businesses sold subsequent to the start of the first quarter
of last fiscal year increased net sales by approximately 2.3 percentage
points. The strengthening of the U.S. dollar relative to foreign currencies
had the effect of reducing sales by approximately 5.7 percentage points.
Thus, on a comparable basis sales increased 3.5%. Operating income decreased
2.5% in the quarter. The strengthening of the U.S. dollar relative to other
currencies reduced operating income by approximately 7.9 percentage points.
Excluding the impact of business acquisitions, dispositions and changes in
foreign currency exchange rates, operating income decreased 1.6%. Net
interest expense decreased by $4 million due in part to the effect of the
strengthening of the U.S. dollar on foreign currency denominated interest
expense. The decrease in unallocated corporate expense was primarily due to
improved results from hedging foreign currency movements and the effect of
the strengthening of the U.S. dollar on foreign currency denominated minority
interest expense. Income before income taxes increased 7.6%.
Page 8
<PAGE>
The effective tax rate decreased from 32.0% to 31.0% of pre-tax income. This
decrease is largely due to lower foreign taxes. Net income increased 9.2%
while primary earnings per share increased 12.2%. Earnings per share
increased at a rate in excess of net income because of lower preferred
dividends and fewer shares outstanding during the period.
Net sales and operating income in the Packaged Meats and Bakery segment
increased 3.9% and 2.4%, respectively. Excluding the impact of acquisitions
and changes in foreign currency exchange rates, Packaged Meats and Bakery
sales and operating income increased approximately 3.5% and 7.6%,
respectively. Improved gross margins in the Packaged Meats and Foodservice
businesses along with improved unit volumes were largely responsible for the
increase in the segment's profitability. Excluding acquisitions, unit volumes
for the worldwide Packaged Meats businesses rose 1% and Bakery volumes rose
7% during the quarter. Foodservice units rose 6% during the quarter.
Coffee and Grocery sales and operating income declined 6.0% and 9.4%,
respectively. A stronger U.S. dollar relative to other currencies negatively
impacted the translated results for sales and operating income by
approximately 15.0 percentage points. Excluding the impact of acquisitions
and changes in foreign currency exchange rates, Coffee and Grocery sales and
operating income increased 8.0% and 6.2%, respectively. Unit volumes for
roasted coffee, excluding acquisitions, were down 11%, reflecting higher
green coffee costs and hoarding in earlier periods as consumers increased
their purchases in anticipation of rising consumer coffee prices.
Net sales in the Household and Body Care segment increased 5.1% while
operating income increased 1.3%. Operating results benefited from several
key acquisitions in the Direct Selling area, including Nutri-Metics and
HomCare and a focus on the core Household and Body Care
product categories, which include shoe care, body care and insecticides.
Reported sales and operating income for this line of business were negatively
impacted by approximately 11.0 and 8.5 percentage points, respectively, as a
result of the strengthening of the U.S. dollar in relation to foreign
currencies.
Personal Products sales declined 2.5% while operating income declined 1.4%.
The stronger U.S. dollar negatively impacted sales and operating income of
this segment by approximately 4.0 percentage points. Profit improvements in
the Worldwide Intimates and Knit Products businesses were offset by a
continued decline in profitability for sheer hosiery. Unit volumes for
worldwide legwear were flat, reflecting a 9% decline in sheer hoisery offset
by a strong 28% increase for socks. Worldwide Knit Products sales volume
increased 9% and Intimate Apparel unit volumes improved 2%.
Page 9
<PAGE>
FINANCIAL CONDITION
During the first three months of fiscal 1998, net cash used in operating
activities was $161 million as compared to $181 million in the comparable
period in fiscal 1997. The $20 million improvement in operating cash flows
was primarily due to higher net income partially offset by additional working
capital requirements.
Net cash expended for investing activities was $294 million in the first
three months of fiscal 1998 as compared to $607 million in fiscal 1997. The
decrease is primarily due to lower cash expenditures for business
acquisitions and reduced capital spending.
During the first quarter of fiscal 1998, cash and equivalents decreased by
$99 million to $173 million while net borrowings produced a cash inflow of
$749 million. This cash was used to fund acquisitions, the payment of
dividends and working capital requirements. During the first quarter, the
Corporation redeemed $200 million of auction preferred stock at book value.
In addition, 2.2 million shares of the Corporation's outstanding common stock
were repurchased for $104 million.
RESTRUCTURING
As of the end of the first quarter of fiscal 1997, the Corporation had
completed the plant closures and employee severance actions defined in the
fiscal 1994 restructuring plan. Actions taken as part of the restructuring
plan lowered operating costs by $57 million in the first three months of
fiscal 1998; however, a significant portion of this benefit has been used for
business building and profit improvement initiatives. The Corporation expects
the restructuring plan to generate savings of approximately $250 million in
the current year.
FORWARD LOOKING INFORMATION
On September 15, 1997, the Corporation announced that it is considering the
adoption of a three-year strategic program which would result in the
divestment of operating assets and further cost reduction programs. This
program, if adopted, would result in an after-tax charge of approximately
$1.6 billion.
The Corporation is targeting to raise $3 billion in cash over the next three
years through these actions. Proceeds are expected to be used to acquire
shares of its outstanding common stock.
The Corporation is also considering the divestiture of certain businesses
with sales of less than $1 billion. No business unit is anticipated to be
sold unless an economically attractive valuation is received.
Page 10
<PAGE>
PART II
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Registrant's 1997 Annual Meeting of Stockholders was held on October
30,1997, in Chicago, Illinois ("Annual Meeting").
(b) Not applicable.
(c) (i) A total of 415,373,005 votes (82.6% of all votes entitled to vote at
the Annual Meeting) were represented by proxy or ballot at the Annual
Meeting. The stockholders of the Registrant were requested to elect
18 directors as nominated by management. All nominees were elected as
indicated by the following voting tabulation:
NAME FOR WITHHELD
---- --- --------
Paul A. Allaire 411,320,260 4,052,745
Frans H.J.J. Andriessen 411,327,883 4,045,122
John H. Bryan 411,216,271 4,156,734
Duane L. Burnham 411,359,246 4,013,759
Charles W. Coker 411,368,001 4,005,004
Willie D. Davis 411,193,345 4,179,660
Donald J. Franceschini 411,160,552 4,212,453
Allen F. Jacobson 410,820,541 4,552,464
Vernon E. Jordan, Jr. 407,193,101 8,179,904
James L. Ketelsen 411,007,321 4,365,684
Hans B. van Liemt 411,018,887 4,354,118
Joan D. Manley 411,075,902 4,297,103
C. Steven McMillan 411,152,466 4,220,539
Frank L. Meysman 411,374,580 3,998,425
Newton N. Minow 407,048,041 8,324,964
Sir Arvi H. Parbo A.C. 410,910,961 4,462,044
Rozanne L. Ridgway 411,182,050 4,190,955
Richard L. Thomas 409,661,111 5,711,894
(ii) The stockholders were requested to ratify the appointment of Arthur
Andersen LLP as the independent public accountants of the Corporation
for its fiscal year 1998. The appointment of Arthur Andersen LLP was
ratified by the stockholders, as 412,041,319 votes were cast for the
proposal, 1,472,300 votes were cast against the proposal, and
1,859,386 votes abstained.
(iii) The stockholders were requested to vote on a resolution asking
management to take steps to accomplish a separation of the
Corporation's tobacco business from all its non-tobacco businesses by
January 1, 1998. The resolution was not adopted by the stockholders,
as 34,180,811 votes were cast for the proposal, 303,453,123 votes were
cast against the proposal, 16,000,354 votes abstained and there were
61,738,717 broker non-votes.
(d) Not applicable.
Page 11
<PAGE>
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
PAGE NUMBER OR
EXHIBIT INCORPORATED HEREIN
NUMBER DESCRIPTION BY REFERENCE TO
------- ----------- -------------------
11 Computation of Net Income
Per Common Share 14
12.1 Computation of Ratio of
Earnings to Fixed Charges 15
12.2 Computation of Ratio of
Earnings to Fixed Charges
and Preferred Stock Dividend
Requirements 16
27 Financial Data Schedule 17
(b) Reports on Form 8-K
A Form 8-K was filed by the Corporation on September 15, 1997. It
reported the issuance of a press release announcing that the Corporation
is considering the adoption of a three-year strategic program which
would result in the divestment of operating assets and further cost
reduction programs. This program, if adopted, would result in an
after-tax charge of approximately $1.6 billion.
The Corporation is targeting to raise $3 billion in cash over the next
three years through these actions. Proceeds are expected to be used to
acquire shares of the Corporation's outstanding common stock.
Page 12
<PAGE>
S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SARA LEE CORPORATION
(Registrant)
By: /s/ Wayne R. Szypulski
--------------------------------------
Wayne R. Szypulski
Vice President and Controller
DATE: November 10, 1997
Page 13
<PAGE>
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE EXHIBIT 11
(in millions except per share data)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirteen Weeks Ended
September 27, 1997 September 28, 1996
------------------------- -------------------------
Fully Fully
Primary Diluted Primary Diluted
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
EARNINGS:
Net income $ 225 $ 225 $ 206 $ 206
Less: Dividends on Preferred Stocks,
net of tax benefits (4) (1) (7) (3)
Adjustment attributable to conversion of
ESOP Convertible Preferred Stock -- (1) -- (2)
--------- --------- --------- ---------
Net Income Available for Common Stockholders $ 221 $ 223 $ 199 $ 201
--------- --------- --------- ---------
--------- --------- --------- ---------
SHARES:
Weighted Average Shares Outstanding 478 478 482 482
Add: Common Stock Equivalents -
Stock options 4 5 2 3
ESOP Convertible Preferred Stock -- 17 -- 18
Restricted stock and other 2 2 2 2
--------- --------- --------- ---------
Adjusted Weighted Average Shares Outstanding 484 502 486 505
--------- --------- --------- ---------
--------- --------- --------- ---------
NET INCOME PER COMMON SHARE $ 0.46 $ 0.44 $ 0.41 $ 0.40
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Page 14
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12.1
(IN MILLIONS EXCEPT RATIOS)
Thirteen Weeks Ended
------------------------
Sept. 27, Sept. 28,
1997 1996
---------- -----------
Fixed charges:
Interest expense $ 48 $ 54
Interest portion of rental expense 16 17
---------- ----------
Total fixed charges before capitalized interest 64 71
Capitalized interest 4 2
---------- ----------
Total fixed charges $ 68 $ 73
---------- ----------
---------- ----------
Earnings available for fixed charges:
Income before income taxes $ 326 $ 303
Less undistributed income in minority-owned companies (1) (2)
Add minority interest in majority-owned subsidiaries 7 8
Add amortization of capitalized interest 6 6
Add fixed charges before capitalized interest 64 71
---------- ----------
Total earnings available for fixed charges $ 402 $ 386
---------- ----------
---------- ----------
Ratio of earnings to fixed charges 5.9 5.3
---------- ----------
---------- ----------
Page 15
<PAGE>
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)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
-------------------------
Sept. 27, Sept. 28,
1997 1996
---------- ----------
<S> <C> <C>
Fixed charges and preferred stock dividend requirements:
Interest expense $ 48 $ 54
Interest portion of rental expense 16 17
---------- ----------
Total fixed charges before capitalized interest
and preferred stock dividend requirements 64 71
Capitalized interest 4 2
Preferred stock dividend requirements (1) 7 10
---------- ----------
Total fixed charges and preferred stock
dividend requirements $ 75 $ 83
---------- ----------
---------- ----------
Earnings available for fixed charges and preferred
stock dividend requirements:
Income before income taxes $ 326 $ 303
Less undistributed income in minority-owned companies (1) (2)
Add minority interest in majority-owned subsidiaries 7 8
Add amortization of capitalized interest 6 6
Add fixed charges before capitalized interest and
preferred stock dividend requirements 64 71
---------- ----------
Total earnings available for fixed charges and
preferred stock dividend requirements $ 402 $ 386
---------- ----------
---------- ----------
Ratio of earnings to fixed charges and preferred stock
dividend requirements 5.4 4.7
---------- ----------
---------- ----------
</TABLE>
(1) 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.
Page 16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-START> JUN-29-1997
<PERIOD-END> SEP-27-1997
<CASH> 151
<SECURITIES> 22
<RECEIVABLES> 2,215
<ALLOWANCES> 201
<INVENTORY> 3,006
<CURRENT-ASSETS> 5,522
<PP&E> 6,385
<DEPRECIATION> 3,292
<TOTAL-ASSETS> 13,210
<CURRENT-LIABILITIES> 5,210
<BONDS> 2,195
0
37
<COMMON> 639
<OTHER-SE> 3,626
<TOTAL-LIABILITY-AND-EQUITY> 13,210
<SALES> 4,893
<TOTAL-REVENUES> 4,893
<CGS> 3,074
<TOTAL-COSTS> 3,074
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 31
<INTEREST-EXPENSE> 39
<INCOME-PRETAX> 326
<INCOME-TAX> 101
<INCOME-CONTINUING> 225
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 225
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.44
</TABLE>
