<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 December 28, 1996
-------------------------------------
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 December 28, 1996, the Registrant had 481,033,460 outstanding shares of
common stock $1.33 1/3 par value, which is the Registrant's only class of common
stock.
This document contains 22 pages.
Page 1
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
INDEX
PART I -
FINANCIAL STATEMENTS -
Preface 3
Condensed Consolidated Balance Sheets -
At December 28, 1996 and June 29, 1996 4
Consolidated Statements of Income -
For the thirteen and twenty-six weeks ended
December 28, 1996 and December 30, 1995 5
Consolidated Statements of Common Stockholders' Equity -
For the period July 1, 1995 to December 28, 1996 6
Consolidated Statements of Cash Flows - For the
twenty-six weeks ended December 28, 1996
and December 30, 1995 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION 8
PART II -
ITEM 2. - CHANGES IN SECURITIES 12
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURE 13
EXHIBIT 10.1 - Amendment to the 1995 Non-Employee Director
Stock Plan 14
EXHIBIT 10.2 - Amendment to the 1995 Long-Term Incentive
Stock Plan 15
EXHIBIT 10.3 - Amendment to the 1989 Incentive Stock Plan 16
EXHIBIT 10.4 - Amendment to the Supplemental Benefit Plan 17
EXHIBIT 11 - Computation of Net Income Per Common Share 18
EXHIBIT 12.1 - Computation of Ratio of Earnings to Fixed Charges 20
EXHIBIT 12.2 - Computation of Ratio of Earnings to Fixed Charges and
Preferred Stock Dividend Requirements 21
EXHIBIT 27 - Financial Data Schedule 22
Page 2
<PAGE>
PART I
SARA LEE CORPORATION AND SUBSIDIARIES
PREFACE
The consolidated financial statements for the thirteen and twenty-six weeks
ended December 28, 1996 and December 30, 1995 and the balance sheet as of
December 28, 1996 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 December 28, 1996 and the results of
operations and the cash flows for the periods presented herein have been made.
The results of operations for the thirteen and twenty-six weeks ended December
28, 1996 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 29, 1996.
Page 3
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SARA LEE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets at December 28, 1996 and June 29, 1996
(in millions)
Dec. 28, June 29,
1996 1996
----------- -----------
ASSETS
Cash and equivalents $ 276 $ 243
Trade accounts receivable, less allowances 1,962 1,728
Inventories:
Finished goods 1,679 1,802
Work in process 471 381
Materials and supplies 621 624
----------- -----------
2,771 2,807
Other current assets 288 303
----------- -----------
Total current assets 5,297 5,081
Trademarks and other assets 509 636
Property, net 3,120 3,007
Intangible assets 4,173 3,878
----------- -----------
$ 13,099 $ 12,602
----------- -----------
----------- -----------
LIABILITIES AND EQUITY
Notes payable $ 941 $ 319
Accounts payable 1,278 1,592
Accrued liabilities 2,667 2,596
Current maturities of long-term debt 134 135
----------- -----------
Total current liabilities 5,020 4,642
Long-term debt 1,881 1,842
Deferred income taxes 342 333
Other liabilities 589 604
Minority interest in subsidiaries 524 523
Auction preferred stock 300 300
ESOP convertible preferred stock 318 324
Unearned deferred compensation (279) (286)
Common stockholders' equity 4,404 4,320
----------- -----------
$ 13,099 $ 12,602
----------- -----------
----------- -----------
Page 4
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SARA LEE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
For the Thirteen and Twenty-Six Weeks Ended December 28, 1996
and December 30, 1995
(in millions, except per share data)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-------------------------- --------------------------
Dec. 28, Dec. 30, Dec. 28, Dec. 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 5,269 $ 4,898 $ 10,155 $ 9,554
----------- ----------- ----------- -----------
Cost of Sales 3,249 3,020 6,326 5,951
Selling, General and Administrative Expenses 1,509 1,403 2,972 2,799
Interest Expense 54 60 108 119
Interest Income (10) (14) (21) (26)
----------- ----------- ----------- -----------
4,802 4,469 9,385 8,843
----------- ----------- ----------- -----------
Income Before Income Taxes 467 429 770 711
Income Taxes 150 146 247 242
----------- ----------- ----------- -----------
Net Income 317 283 523 469
Preferred Dividend Requirements, Net of Tax 6 7 13 14
----------- ----------- ----------- -----------
Net Income Available for Common Stockholders $ 311 $ 276 $ 510 $ 455
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net Income Per Common Share - Primary $ 0.64 $ 0.57 $ 1.05 $ 0.94
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Average Shares Outstanding 486 485 486 484
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net Income Per Common Share - Fully Diluted $ 0.62 $ 0.55 $ 1.02 $ 0.91
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Average Shares Outstanding 504 504 505 503
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Cash Dividends Per Common Share $ 0.21 $ 0.19 $ 0.40 $ 0.36
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
Page 5
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SARA LEE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Common Stockholders' Equity
For the Period July 1, 1995 to December 28, 1996
(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 July 1, 1995 $ 3,939 $ 640 $ 67 $ 3,252 $ 3 $ (23)
Net income 469 -- -- 469 -- --
Cash dividends -
Common ($.36 per share) (174) -- -- (174) -- --
Auction preferred
($2,172.67 per share) (6) -- -- (6) -- --
ESOP convertible preferred
($2.72 per share) (12) -- -- (12) -- --
Stock issuances -
Business acquisition 55 3 52 -- -- --
Stock option and benefit plans 44 3 41 -- -- --
Restricted stock, less
amortization of $7 7 1 16 -- -- (10)
Reacquired shares (58) (3) (55) -- -- --
Translation adjustments (89) -- -- -- (89) --
ESOP tax benefit 5 -- -- 5 -- --
ESOP share redemption 4 -- 4 -- -- --
Other 15 1 14 (1) -- 1
---------- ---------- ---------- ---------- ------------- -----------
Balances at December 30, 1995 4,199 645 139 3,533 (86) (32)
Net income 447 -- -- 447 -- --
Cash dividends -
Common ($.38 per share) (184) -- -- (184) -- --
Auction preferred
($2,046.33 per share) (7) -- -- (7) -- --
ESOP convertible preferred
($2.72 per share) (12) -- -- (12) -- --
Stock issuances -
Stock option and benefit plans 49 3 46 -- -- --
Restricted stock, less
amortization of $6 6 -- 1 -- -- 5
Reacquired shares (45) (1) (44) -- -- --
Translation adjustments (141) -- -- -- (141) --
ESOP tax benefit 5 -- -- 5 -- --
ESOP share redemption 3 -- 3 -- -- --
Other -- (1) (4) 1 -- 4
---------- ---------- ---------- ---------- ------------- -----------
Balances at June 29, 1996 4,320 646 141 3,783 (227) (23)
Net income 523 -- -- 523 -- --
Cash dividends -
Common ($.40 per share) (193) -- -- (193) -- --
Auction preferred
($1,991.67 per share) (6) -- -- (6) -- --
ESOP convertible preferred
($2.72 per share) (12) -- -- (12) -- --
Stock issuances -
Business acquisition 18 1 17 -- -- --
Stock option and benefit plans 42 3 39 -- -- --
Restricted stock, less
amortization of $12 12 -- 9 -- -- 3
Reacquired shares (258) (9) (214) (35) -- --
Translation adjustments (56) -- -- -- (56) --
ESOP tax benefit 5 -- -- 5 -- --
ESOP share redemption 6 -- 6 -- -- --
Other 3 -- 2 -- -- 1
---------- ---------- ---------- ---------- ------------- -----------
Balances at December 28, 1996 $ 4,404 $ 641 $ -- $ 4,065 $ (283) $ (19)
---------- ---------- ---------- ---------- ------------- -----------
---------- ---------- ---------- ---------- ------------- -----------
</TABLE>
Page 6
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED DECEMBER 28, 1996 AND DECEMBER 30, 1995
(IN MILLIONS)
TWENTY-SIX WEEKS ENDED
----------------------
Dec. 28, Dec. 30,
1996 1995
---------- ----------
OPERATING ACTIVITIES -
Net income $ 523 $ 469
Adjustments for non-cash charges included in net income:
Depreciation 246 224
Amortization of intangibles 95 86
Increase in deferred income taxes 6 42
Other (6) (2)
Changes in current assets and liabilities, excluding
businesses acquired and sold (381) (557)
---------- ----------
Net cash from operating activities 483 262
---------- ----------
INVESTING ACTIVITIES -
Purchases of property and equipment (233) (201)
Acquisitions of businesses (540) (72)
Dispositions of investment and business 114 --
Sales of property 32 21
Other 10 18
---------- ----------
Net cash used in investing activities (617) (234)
---------- ----------
FINANCING ACTIVITIES -
Issuances of common stock 42 44
Purchases of common stock (258) (58)
Borrowings of long-term debt 155 297
Repayments of long-term debt (146) (159)
Short-term borrowings, net 588 96
Payments of dividends (211) (192)
---------- ----------
Net cash from financing activities 170 28
---------- ----------
Effect of changes in foreign exchange rates on cash (3) (7)
---------- ----------
Increase in cash and equivalents 33 49
Cash and equivalents at beginning of year 243 202
---------- ----------
Cash and equivalents at end of quarter $ 276 $ 251
---------- ----------
---------- ----------
COMPONENTS OF THE CHANGES IN CURRENT ASSETS
AND LIABILITIES:
(Increase) in trade accounts receivable $ (115) $ (134)
Decrease (increase) in inventories 180 (66)
Decrease in other current assets 45 23
(Decrease) in accounts payable (452) (295)
(Decrease) in accrued liabilities (39) (85)
---------- ----------
Changes in current assets and liabilities $ (381) $ (557)
---------- ----------
---------- ----------
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 second
quarter and first half of fiscal 1997 compared to comparable periods of fiscal
1996 and a discussion of the changes in financial condition during the first
half of fiscal 1997.
RESULTS OF OPERATIONS
COMPARISON OF SECOND QUARTER FISCAL 1997 TO SECOND QUARTER FISCAL 1996
Net sales by business segment in the second quarter of fiscal 1997 as compared
to the second quarter of fiscal 1996 were as follows:
Thirteen Weeks Ended
-------------------------
Dec. 28, Dec. 30, Percent
1996 1995 Change
---------- ---------- ---------
Packaged Meats and Bakery $ 2,036 $ 1,732 17.6 %
Coffee and Grocery 731 782 (6.4)
Household and Body Care 440 429 2.5
Personal Products 2,067 1,958 5.6
Intersegment sales (5) (3) NM
---------- ---------- ---------
Net Sales $ 5,269 $ 4,898 7.6 %
---------- ---------- ---------
---------- ---------- ---------
Businesses acquired net of businesses sold subsequent to the start of the
second quarter of last fiscal year increased net sales by approximately 6.8
percentage points. The strengthening of the U.S. dollar relative to foreign
currencies had the effect of reducing sales in the second quarter by
approximately 1.4 percentage points. Thus, on a comparable basis, sales
increased approximately 2.2%. The principal acquisitions in fiscal 1997 were
Aoste, a European manufacturer of processed meat products, and Lovable
Italiana S.p.A., an Italian intimate apparel company.
Page 8
<PAGE>
Cost of sales increased by $229 million or 7.6% and the gross profit margin of
38.3% was unchanged from the second quarter of fiscal 1996. Improved gross
profit margins in the Coffee and Grocery and Household and Body Care segments
offset lower gross profit margins in the Personal Products and Packaged Meats
and Bakery segments.
Selling, general and administrative expenses of $1.51 billion were $106 million
or 7.6% higher than the second quarter of fiscal 1996. This increase was
primarily due to acquisitions offset in part by the strengthening of the U.S.
dollar relative to foreign currencies. Net interest declined from $46 million
last year to $44 million in the current year primarily as a result of lower
borrowing costs.
The effective tax rate decreased from 34.0% to 32.0% of income before income
taxes. The decrease is largely due to the impact of lower foreign taxes.
Net income increased 12.1% to $317 million. Net income per share increased
12.3% to $.64 per share from the $.57 reported last year.
COMPARISON OF FIRST HALF OF FISCAL 1997 TO FIRST HALF OF FISCAL 1996
Net sales by business segment in the first half of fiscal 1997 as compared to
the first half of fiscal 1996 were as follows:
Twenty-Six Weeks Ended
-------------------------
Dec. 28, Dec. 30, Percent
1996 1995 Change
---------- ---------- ---------
Packaged Meats and Bakery $ 3,924 $ 3,345 17.3 %
Coffee and Grocery 1,405 1,507 (6.8)
Household and Body Care 871 860 1.3
Personal Products 3,965 3,847 3.1
Intersegment sales (10) (5) NM
---------- ---------- ---------
Net Sales $ 10,155 $ 9,554 6.3 %
---------- ---------- ---------
---------- ---------- ---------
Businesses acquired net of businesses sold subsequent to the start of fiscal
1996 increased net sales by approximately 6.0 percentage points. The
strengthening of the U.S. dollar relative to foreign currencies had the
effect of reducing sales in fiscal 1997 by approximately 1.4 percentage
points. Thus, on a comparable basis, net sales increased approximately 1.7%.
Page 9
<PAGE>
Cost of sales increased by $375 million or 6.3% and the gross profit margin of
37.7% was unchanged from the first half of fiscal 1996. Improved gross profit
margins in the Coffee and Grocery and Household and Body Care segments offset
lower gross profit margins in the Personal Products and Packaged Meats and
Bakery segments.
Selling, general and administrative expenses of $2.97 billion were $173 million
or 6.2% higher than the first half of fiscal 1996. This increase was primarily
due to acquisitions offset in part by the strengthening of the U.S. dollar
relative to foreign currencies. Net interest declined from $93 million to $87
million in the current year primarily as a result of lower borrowing costs.
The effective tax rate decreased from 34.0% to 32.0% of income before income
taxes. The decrease is largely due to the impact of lower foreign taxes.
Net income increased 11.6% to $523 million. Net income per share increased
11.7% to $1.05 per share from the $.94 reported last year.
FINANCIAL CONDITION
During the first half of fiscal 1997, net cash from operating activities was
$483 million as compared to $262 million in the first half of fiscal 1996. The
$221 million improvement in operating cash flows was primarily due to lower
working capital requirements than in the first half of fiscal 1996.
Net cash expended for investing activities was $617 million in the first half
of fiscal 1997 as compared to $234 million in the first half of fiscal 1996.
The increase is primarily due to higher cash expenditures for business
acquisitions, offset in part by cash proceeds from the disposition of an
equity investment and business.
On October 31, 1996, the Corporation's board of directors authorized the
repurchase of up to 20 million shares of the Corporation's outstanding common
stock. This amount was in addition to 12 million shares which remained from
previous repurchase authorizations. During the first half of fiscal 1997, the
Corporation repurchased 7.2 million shares of its outstanding common stock for
$258 million. It is anticipated that future share repurchases will be funded
from internal sources of cash.
During the first half of fiscal 1997, cash and equivalents increased by $33
million while net borrowings produced a cash inflow of $597 million. The
increased borrowing level is primarily attributable to business acquisitions.
Page 10
<PAGE>
RESTRUCTURING
As of September 28, 1996, the Corporation had completed the plant closure and
employee severance actions defined in the fiscal 1994 restructuring plan.
Actions taken as part of the restructuring plan lowered operating costs by $102
million in the first half of fiscal 1997; 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 increased savings in
subsequent quarters growing to an annual savings of approximately $250 million
in 1998. Savings from the planned actions will be used for business building
and profit improvement initiatives.
Page 11
<PAGE>
PART II
ITEM 2. - CHANGES IN SECURITIES
(c) On October 11, 16, 22, 24, and 29, 1996, the Corporation issued 398, 492,
213, 232 and 1,129 shares of its common stock, respectively, upon exercises
of employee stock options to 5 employees of the Corporation and its
subsidiaries for approximately $46,000 in cash in reliance on Section 4(2) of
the Securities Act of 1933.
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
- -------- --------------------------------------- -------------------
10.1 Amendment to the 1995 Non-Employee Director
Stock Plan 14
10.2 Amendment to the 1995 Long-Term Incentive
Stock Plan 15
10.3 Amendment to the 1989 Incentive Stock Plan 16
10.4 Amendment to the Supplemental Benefit Plan 17
11 Computation of Net Income Per Common Share 18
12.1 Computation of Ratio of Earnings to Fixed Charges 20
12.2 Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividend Requirements 21
27 Financial Data Schedule 22
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Registrant during the quarter
for which this report is filed.
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: February 10, 1997
Page 13
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
EXHIBIT 10.1
AMENDMENT TO THE 1995 NON-EMPLOYEE DIRECTOR STOCK PLAN
The 1995 Non-Employee Director Stock Plan was amended as follows:
Article IX:
9.1 GRANT OF OPTIONS OR SHARES. On the first day of November of each year,
Options or Shares, or a combination thereof, shall be granted to each
Non-Employee Director who, at least ten business days prior thereto, files
with the Committee or its designee a written election to receive Options or
Shares, or a combination thereof, in lieu of all or a portion of such
Non-Employee Director's Annual Retainer. In the event a Non-Employee
Director does not file a written election in accordance with the preceding
sentence, Options or Shares, or a combination thereof, shall be granted to
such Non-Employee Director on the tenth business day (the "Effective Date")
after the date such Non-Employee Director files with the Committee or its
designee a written election to receive Options or Shares, or a combination
thereof, in lieu of all or a portion of such Non-Employee Director's Annual
Retainer; provided, however, that such election may apply only to the portion
of such Non-Employee Director's Annual Retainer determined by multiplying
such Non-Employee Director's Annual Retainer by a fraction, the numerator of
which is the number of days from and including the Effective Date to and
including the last day of the period for which such Annual Retainer would
otherwise be payable, and the denominator of which is 365 or 366, as the case
may be. An election pursuant to the first sentence of this Section 9.1 shall
be irrevocable on and after the tenth business day prior to the date of grant
of the Options or Shares, as the case may be. An election pursuant to the
second sentence of this Section 9.1 shall be irrevocable.
Article XI:
The Board may amend the Plan from time to time or terminate the Plan at any
time; provided, however, that no action authorized by this Article shall
adversely change the terms and conditions of an outstanding Option without the
Optionee's consent.
Page 14
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
EXHIBIT 10.2
AMENDMENT TO THE 1995 LONG-TERM INCENTIVE STOCK PLAN
The 1995 Long-Term Incentive Stock Plan was amended as follows:
The definition of the term "Committee" in Article II of the 1995 Long-Term
Incentive Stock Plan was amended to delete the reference to "disinterested
directors" and substitute in lieu thereof "Non-Employee Directors".
Page 15
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
EXHIBIT 10.3
AMENDMENT TO THE 1989 INCENTIVE STOCK PLAN
The 1989 Incentive Stock Plan was amended as follows:
Section 3.1 of the 1989 Incentive Stock Plan was amended by deleting the
reference to "disinterested directors" and substituting in lieu thereof "Non-
Employee Directors".
Page 16
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
EXHIBIT 10.4
AMENDMENT TO THE SUPPLEMENTAL BENEFIT PLAN
The Sara Lee Corporation Supplemental Benefit Plan was amended as follows:
2.2(a) ESOP. If the Participant is covered only by the ESOP, the
Participant's accrued Supplemental Benefit as of any date shall consist of the
aggregate Employer contributions that would have been made to the ESOP on behalf
of the Participant for each plan year prior to such date but which were not
contributed because of the limitations of Sections 401(a)(17) or 415 of the
Code, with such aggregate contributions adjusted upward or downward to reflect
the investment experience under the ESOP, provided that for plan years of the
ESOP ending prior to January 1, 1997, the Employer contribution that shall be
considered to have been foregone in any plan year of the ESOP shall not, for
purposes of this Plan, exceed 1.75 percent of that portion of the Participant's
compensation (as determined under the ESOP) for that plan year in excess of the
Code Section 401(a)(17) limit for that year.
Page 17
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE EXHIBIT 11
(in millions except per share data)
<TABLE>
<CAPTION>
FOR THE PERIODS ENDED DECEMBER 28, 1996
--------------------------------------------------------------
PRIMARY FULLY DILUTED
--------------------------- --------------------------
Thirteen Twenty-Six Thirteen Twenty-Six
Weeks Weeks Weeks Weeks
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
EARNINGS:
Net income $ 317 $ 523 $ 317 $ 523
Less: Dividends on Preferred Stocks,
net of tax benefits (6) (13) (3) (6)
Adjustment attributable to conversion of
ESOP Convertible Preferred Stock -- -- (1) (3)
----------- ----------- ----------- -----------
Net Income Available for Common Stockholders $ 311 $ 510 $ 313 $ 514
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SHARES:
Weighted Average Shares Outstanding 480 481 480 481
Add: Common Stock Equivalents -
Stock options 4 3 4 4
ESOP Convertible Preferred Stock -- -- 18 18
Restricted stock and other 2 2 2 2
----------- ----------- ----------- -----------
Adjusted Weighted Average Shares Outstanding 486 486 504 505
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
NET INCOME PER COMMON SHARE $ 0.64 $ 1.05 $ 0.62 $ 1.02
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
Page 18
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE EXHIBIT 11
(in millions except per share data) (Continued)
<TABLE>
<CAPTION>
FOR THE PERIODS ENDED DECEMBER 30, 1995
--------------------------------------------------------------
PRIMARY FULLY DILUTED
--------------------------- --------------------------
Thirteen Twenty-Six Thirteen Twenty-Six
Weeks Weeks Weeks Weeks
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
EARNINGS:
Net income $ 283 $ 469 $ 283 $ 469
Less: Dividends on Preferred Stocks,
net of tax benefits (7) (14) (3) (7)
Adjustment attributable to conversion of
ESOP Convertible Preferred Stock -- -- (2) (3)
----------- ----------- ----------- -----------
Net Income Available for Common Stockholders $ 276 $ 455 $ 278 $ 459
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SHARES:
Weighted Average Shares Outstanding 481 481 481 481
Add: Common Stock Equivalents -
Stock options 2 2 3 3
ESOP Convertible Preferred Stock -- -- 18 18
Restricted stock and other 2 1 2 1
----------- ----------- ----------- -----------
Adjusted Weighted Average Shares Outstanding 485 484 504 503
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
NET INCOME PER COMMON SHARE $ 0.57 $ 0.94 $ 0.55 $ 0.91
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
Page 19
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12.1
(in millions except ratios)
Twenty-Six Weeks Ended
-------------------------
Dec. 28, Dec. 30,
1996 1995
----------- -----------
Fixed charges:
Interest expense $ 108 $ 119
Interest portion of rental expense 33 36
----------- -----------
Total fixed charges before capitalized interest 141 155
Capitalized interest 5 6
----------- -----------
Total fixed charges $ 146 $ 161
----------- -----------
----------- -----------
Earnings available for fixed charges:
Income before income taxes $ 770 $ 711
Less undistributed income in minority owned companies (4) (3)
Add minority interest in majority-owned subsidiaries 15 19
Add amortization of capitalized interest 12 11
Add fixed charges before capitalized interest 141 155
----------- -----------
Total earnings available for fixed charges $ 934 $ 893
----------- -----------
----------- -----------
Ratio of earnings to fixed charges 6.4 5.5
----------- -----------
----------- -----------
Page 20
<PAGE>
SARA LEE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12.2
AND PREFERRED STOCK DIVIDEND REQUIREMENTS
(in millions except ratios)
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
--------------------------
Dec. 28, Dec. 30,
1996 1995
----------- -----------
<S> <C> <C>
Fixed charges and preferred stock dividend requirements:
Interest expense $ 108 $ 119
Interest portion of rental expense 33 36
----------- -----------
Total fixed charges before capitalized interest
and preferred stock dividend requirements 141 155
Capitalized interest 5 6
Preferred stock dividend requirements (1) 21 22
----------- -----------
Total fixed charges and preferred stock
dividend requirements $ 167 $ 183
----------- -----------
----------- -----------
Earnings available for fixed charges and preferred
stock dividend requirements:
Income before income taxes $ 770 $ 711
Less undistributed income in minority owned companies (4) (3)
Add minority interest in majority-owned subsidiaries 15 19
Add amortization of capitalized interest 12 11
Add fixed charges before capitalized interest and
preferred stock dividend requirements 141 155
----------- -----------
Total earnings available for fixed charges and
preferred stock dividend requirements $ 934 $ 893
----------- -----------
----------- -----------
Ratio of earnings to fixed charges and preferred stock
dividend requirements 5.6 4.9
----------- -----------
----------- -----------
</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 21
<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> 6-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-30-1996
<PERIOD-END> DEC-28-1996
<CASH> 264
<SECURITIES> 12
<RECEIVABLES> 2,203
<ALLOWANCES> 241
<INVENTORY> 2,771
<CURRENT-ASSETS> 5,297
<PP&E> 6,300
<DEPRECIATION> 3,180
<TOTAL-ASSETS> 13,099
<CURRENT-LIABILITIES> 5,020
<BONDS> 1,881
0
339
<COMMON> 641
<OTHER-SE> 3,763
<TOTAL-LIABILITY-AND-EQUITY> 13,099
<SALES> 10,155
<TOTAL-REVENUES> 10,155
<CGS> 6,326
<TOTAL-COSTS> 6,326
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 92
<INTEREST-EXPENSE> 87
<INCOME-PRETAX> 770
<INCOME-TAX> 247
<INCOME-CONTINUING> 523
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 523
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.02
</TABLE>
