-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FP1YvQQJMsPej4ZepxrzGtFkNPdwTqjTPpAbNPQ4KxpeotG5+77XDd/xj3jL3dXu joBwyeQwrQmOK0FN952FNw== 0000950124-95-003126.txt : 19951003 0000950124-95-003126.hdr.sgml : 19951003 ACCESSION NUMBER: 0000950124-95-003126 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19950701 FILED AS OF DATE: 19950929 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEE SARA CORP CENTRAL INDEX KEY: 0000023666 STANDARD INDUSTRIAL CLASSIFICATION: SAUSAGE, OTHER PREPARED MEAT PRODUCTS [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: 95577707 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 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 1, 1995 COMMISSION FILE NUMBER 1-3344 ------------------ SARA LEE CORPORATION (Exact name of registrant as specified in its charter) MARYLAND 36-2089049 (State of Incorporation) (I.R.S. Employer Identification No.) THREE FIRST NATIONAL PLAZA CHICAGO, ILLINOIS 60602-4260 (Address of principal executive offices) (Zip Code) 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 the 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/ As of September 1, 1995, the aggregate market value of the voting stock (based upon the closing price per share of Common Stock on The New York Stock Exchange on such date) held by non-affiliates of the registrant was $13,981,096,170. On September 1, 1995, the registrant had outstanding 484,116,512 shares of common stock of $1.33 1/3 par value, which is the registrant's only class of common stock. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Company's Proxy Statement, dated September 20, 1995, are incorporated by reference into Items 10-12 of Part III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 1995, 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. These objectives were pursued through the introduction of new products, the expansion of existing products into new markets, and a significant commitment to marketing support in order to build leadership brands. In fiscal 1995, Sara Lee spent nearly $1.7 billion to retain and grow the equity its brands have with customers, and to support its stable of value-added, high-margin products. This amount represents an increase of 11.8% over fiscal 1994. During fiscal 1995, Sara Lee continued to implement its worldwide restructuring program, which was announced in the latter part of fiscal 1994. As part of the restructuring, 42 manufacturing and distribution facilities were closed and 6,029 employees were terminated during fiscal 1995. Sara Lee anticipates that the restructuring will be substantially completed by the close of calendar year 1996. SARA LEE PACKAGED FOODS SARA LEE PACKAGED MEATS AND BAKERY Sara Lee Packaged Meats continued to introduce new food products during fiscal 1995, with an emphasis on "better-for-you" products and convenience foods. Several Sara Lee meat brands introduced no-fat or reduced-fat products in fiscal 1995, including Ball Park Fat Free Classics, Kahn's Fat Free Franks and Bryan Fat Free Juicy Jumbos. Jimmy Dean Foods introduced Tastefuls! packaged meals, consisting of two small submarine sandwiches, potato chips and cookies. In fiscal 1995, Sara Lee pursued its objectives of building brands and increasing business outside the United States through its acquisition of Imperial Meats Group, Belgium's largest packaged meats producer. The company's Imperial, Cornby, and Marcassou brands are sold in Belgium, France, Germany and the Netherlands. Sara Lee Bakery introduced, and/or expanded its distribution of, a number of new products. In fiscal 1995, Sara Lee added a collection of sweet goods to its fresh-baked line, including Danish, pound cakes, iced cakes, muffins, doughnuts, cookies and pies. Sara Lee Chocolate Chip Cheesecake, Strawberry Swirl Pound Cake, Breakfast Quick Breads, several flavors of reduced-fat, no-sugar-added fruit pies and reduced-fat muffins were new frozen product introductions. In addition, Sara Lee Bakery's foodservice unit introduced a variety of mini-muffins and homestyle cakes. Sara Lee Foodservice's business, PYA/Monarch, strengthened its position as the leading foodservice distributor in the southeastern United States and the third-largest full-line foodservice company in the nation with the acquisition of the remaining outstanding shares of Virginia-based Consolidated Foodservice Companies. SARA LEE COFFEE AND GROCERY During fiscal 1995, the Coffee and Grocery line of business introduced new items to meet growing consumer demand for premium and specialty products, including Marcilla Mocca coffee in Spain, an assortment of roasted coffees under the Moccona label in Australia, and Merrild Gourmet coffee, sold as whole beans that are ground at the point of sale, in Denmark. For the out-of-the-home market, Superior Coffee introduced an Instant Cappuccino beverage. The Cafitesse system of coffee serving equipment was introduced in Europe, and Piazza D'Oro espresso was introduced in Australia. Sara Lee also acquired an interest in the Bravo coffee company in Greece in fiscal 1995. 1 3 Green coffee costs fluctuated severely during fiscal 1995, principally due to unfavorable weather conditions and economic and social instability in several coffee-producing nations. In Brazil, for example, two frosts in a single winter season -- the first such occurrence on record -- were followed by severe drought. These extraordinary events in the green coffee market led to higher retail prices and reduced consumption in fiscal 1995. Sara Lee's retail coffee operations managed price changes on a market-by-market basis in an effort to protect margins and profits. Modest declines in market share were reported in the Netherlands, Belgium, Denmark, the Czech Republic and the United Kingdom for fiscal 1995, while market share remained stable in France and Australia, and improved slightly in Spain and Hungary. Primarily due to the effect of high green coffee costs on consumer buying habits, unit volumes for retail and out-of-home roasted coffee were down 8% for fiscal 1995, excluding the effect of acquisitions. New tea products were launched during the fiscal year. In the Netherlands, major product introductions under the Pickwick brand were Pickwick Framboos fruit tea and Pickwick Seasons variety packs. Pickwick Regelli breakfast tea was introduced in Hungary. To supply growing Russian and Eastern European markets, capacity was expanded at Pickwick's Budapest production facility. SARA LEE PACKAGED CONSUMER PRODUCTS SARA LEE PERSONAL PRODUCTS Sara Lee Intimates introduced new features and products and increased the profitability of its bra, panty and shapewear business in fiscal 1995. North American manufacturing operations faced capacity constraints primarily as a result of the national introduction of the Wonderbra brand in fiscal 1995. Playtex launched a minimizer bra with comfort straps for full-busted women in fiscal 1995. In Europe, Sara Lee introduced a line of coordinating bras and panties under the Liabel brand in Italy. Sara Lee formed the Sara Lee Bodywear Group in fiscal 1995 to manufacture and market exercise wear and activewear under the Champion Jogbra, Body Force and Hanes Her Way names. The group also acquired the license for Spalding Bodywear and will market sports-inspired bodywear under the Spalding name. Sara Lee Accessories opened 17 new Coach retail stores in the United States, including a flagship location in New York City. The major new Coach product introduction of 1995 was the Sonoma Collection, a line of nubuc and natural grain leather handbags, backpacks, wallets and belts. Mark Cross, a premium leather goods company, reintroduced its handbags, business cases and executive accessories into department stores, and resumed its catalog business. Also in fiscal 1995, Aris Isotoner expanded its line of slippers. Aris Isotoner posted weak results in fiscal 1995, due in part to warmer than normal winter temperatures. Sara Lee Knit Products focused on value-added products and cost-effective manufacturing and sourcing in fiscal 1995. In the U.S. women's and girls' panties category, Hanes Her Way and other Sara Lee brands increased their leading market position. The increase in Sara Lee's share of the girls' panties market was partially a result of increased distribution and new licensed character agreements. In fiscal 1995, Hanes underwear was introduced in Brazil and Venezuela. In fiscal 1995, Sara Lee Knit Products became the master licensee to manufacture sports apparel bearing the Spalding name. Hanes Licensed Products, which markets licensed college and professional sportswear, was negatively affected by labor strikes in professional sports. In the retail fleece business, Sara Lee reduced excess capacity. For all apparel categories, Sara Lee began to capitalize on its unique partnership agreement with the 1996 Olympic Games -- the first agreement of its kind to combine Games sponsorship, product licensing and U.S. Team outfitting. An agreement with Warner Brothers and the United States Olympic Committee led to the introduction of Warner Brothers' familiar Looney Tunes characters on Hanes T-shirts to be used in creative apparel relating to the Olympics. 2 4 Sara Lee Hosiery continued to respond to changing market forces in the hosiery area during fiscal 1995 through the introduction of shaping and toning products, new colors and textures, increased durability and special occasion hosiery. The global market for sheer hosiery continued to exhibit weakness, and unit volumes fell 7% as Sara Lee eliminated low-margin items from its product line. However, profits for Sara Lee's worldwide sheer hosiery business increased. In the United States, Sara Lee Hosiery continued to decrease production capacity and improve inventory flow to maximize efficiencies, returns and profitability. In Europe, Sara Lee continued to reduce manufacturing overhead and excess sheer hosiery capacity. L'eggs launched Smooth Silhouettes, a Body Contouring product in fiscal 1995. Hanes introduced its own Body Contouring product, Smooth Illusions, in fiscal 1995, with strong advertising support and a "tag" line of "Liposuction without surgery." Under its licensed designer brand Donna Karan, Sara Lee introduced The Nudes hosiery, an ultrasheer product offering colors to complement a wide array of skin tones. In Mexico, Sara Lee introduced Hanes Her Way hosiery in fiscal 1995. In Europe, Sara Lee introduced several new hosiery products under the Dim brand, including Teint de Soleil, extra-sheer hosiery for warm weather, and Ventre Plat, the first hosiery with tummy control to be introduced in Europe. Pretty Polly introduced Legworks hosiery, which offers thigh and tummy control, in the United Kingdom. In fiscal 1995, Sara Lee introduced the Silk Reflections Casual collection of tights, trouser socks and casual socks in North America, contributing to strong growth in unit and dollar sales of tights and opaque legwear. SARA LEE HOUSEHOLD AND PERSONAL CARE Sara Lee Household and Personal Care continued to grow through the introduction of new products and entry into new markets. Geographic expansion of Sara Lee's shoe care business continued in fiscal 1995, with the introduction of Kiwi products in China, Mexico and Hungary. Also in fiscal 1995, Sara Lee acquired the rights to market Brylcreem products for men in Indonesia. Sanex Sun Care tanning lotions and sunblockers were introduced in the Netherlands during the fiscal year. Also in the Netherlands, Sanex toothpaste debuted. In Spain, the Sanex brand was extended to a line of new shaving creams and aftershaves under the Sanex for Men label. Duschdas Milk & Silk bath and shower foam was introduced in Germany, while Badedas for Kids soap was launched in the Netherlands. The Ambi-Pur electrical diffuser air freshener, introduced in five European markets in fiscal 1994, was extended to Belgium, the United Kingdom and Hungary. The Ambi-Pur Neutraliser air freshener debuted in the Netherlands and Italy. In the oral care line, Prodent Sensitive and Prodent Baking Soda toothpastes were made available in the Netherlands. Sara Lee's Direct Selling business in Mexico, House of Fuller, suffered the negative impact of the peso's devaluation on sales in Mexico. House of Fuller has nevertheless expanded its product offerings, particularly in the area of apparel products and, in fiscal 1995, House of Fuller began selling Playtex intimate apparel. (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 page F-21 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. 3 5 SARA LEE PACKAGED MEATS AND BAKERY Sara Lee Packaged Meats 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 in the United States within this category include Ball Park, Best's Kosher, Bryan, Hillshire Farm, Hygrade, Jimmy Dean, Kahn's, Mr. Turkey, Sara Lee and Sinai 48. Sara Lee's more prominent European brands include Stegemann in the Netherlands, Argal in Spain and Nobre in Portugal. Sara Lee has 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 1995, Sara Lee acquired Imperial Meats Group, Belgium's largest packaged meats producer. The company's Imperial, Cornby and Marcassou brands are sold in Belgium, France, Germany and the Netherlands. 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. Because of the range of sources from which these raw materials are available, Sara Lee believes that it will continue to have access to adequate supplies. 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, whose focus is the quality, sanitation and safety of meat products, and, to some extent, by state and local government agencies. 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 Asia-Pacific 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, the federal agency charged with, among other things, enforcing laws pertaining to food processing, content and labeling, and to a lesser extent, by state and local government agencies. Sara Lee Foodservice's business is conducted principally under the PYA/Monarch name. With the acquisition of the remaining outstanding shares of Virginia-based Consolidated Foodservice Companies in fiscal 1995, PYA/Monarch strengthened its position as the leading foodservice distributor in the southeastern United States and became the third largest full-line foodservice company in the nation. This business distributes dry, refrigerated and frozen foods, paper supplies and foodservice equipment 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. 4 6 SARA LEE COFFEE AND GROCERY Sara Lee believes it is one of the top four coffee roasters in the world, and one of the top three in the European 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 include Maison du Cafe, Marcilla, and Merrild. Sara Lee's Pickwick brand, an important brand in the European tea market, is expanding its current lines in an effort to appeal to younger consumers and is entering the Russian and Eastern European markets. 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. At the end of fiscal 1994, and the beginning of fiscal 1995, Brazil, the world's largest coffee producer, suffered two major frosts, followed by a drought, that negatively affected crop output in fiscal 1995. Uncertainty over the availability of supplies resulted in extreme volatility in the price of green coffee in fiscal 1995, leading to the highest prices in recent years. Sara Lee anticipates that green coffee prices will continue to be affected due to uncertainty over the availability of future supplies. Sara Lee has and expects to continue to offset the negative effect of price increases through careful inventory management, cost cutting, and higher prices for its coffee products. Primarily due to the effect of higher green coffee costs on consumer buying habits, unit volumes for retail and out-of-home roasted coffee were down 8% for fiscal 1995, excluding the effect of acquisitions. 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 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, 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. Sara Lee holds a leading position in the Mexican bra market through its Playtex and Hanes Her Way brand and continued to build market share in Canada during fiscal 1995 through its Playtex, Wonderbra, Daisyfresh and Hanes Her Way brands. Distribution channels for intimate apparel range from department and specialty stores for such premium brands as Bali, and some 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. 5 7 The intimate apparel market is a competitive one based on consumer brand loyalty. Sara Lee endeavors to maintain its competitive edge through 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 premium leather products through its Coach division, under the Coach and Mark Cross brands, and 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. Aris Isotoner products are sold primarily to department stores, while Coach and Mark Cross products are sold through department stores, catalog sales and Sara Lee stores. Coach and Mark Cross now operate approximately 120 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 Asia-Pacific countries. These products are sold through Sara Lee's sales force to department stores, mass merchandisers, discount chains and the screen print trade. 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, the Olympics and a number of major university sports teams. The principal raw material in this product category is cotton. Sara Lee currently believes it has access to an adequate supply of cotton from a variety of sources. The knit products business is highly competitive, with products relying on brand recognition, quality, price and loyalty. Sara Lee competes by offering superior value, utilizing its megabranding strategy -- marketing various products through common packaging, promotion and advertising, increased marketing activity, and low-cost sourcing. The Knit Products business has accounted for 10% or more of Sara Lee's consolidated revenues during each of the past three fiscal years. Sara Lee Hosiery is the market leader in hosiery markets in North America, Western Europe, Australia, New Zealand and South Africa. It also continues to establish operations in various Asia-Pacific 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 and DKNY (the last two being licensed), and abroad under such labels as Dim, Pretty Polly, Elbeo, Nur Die, Bellinda, Filodoro, Philippe Matignon and Omero. Sara Lee 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 and DKNY 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. Hosiery products are also distributed through catalog sales and Sara Lee stores. The hosiery business has accounted for 10% or more of Sara Lee's consolidated revenues during each of 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, function, and, with respect to L'eggs products, service and distribution. In Europe, where most of Sara 6 8 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 readily available to Sara Lee from a variety of sources. HOUSEHOLD AND PERSONAL CARE Sara Lee's Household and Personal Care line of business includes three 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 and baby care products sold under the Zwitsal, Fissan and Proderm names; and insecticides -- sold internationally under the Catch, Bloom, Vapona and Ridsect brand 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 the Avroy Shlain business in South Africa. While this segment is very fragmented, Sara Lee believes it has an important position in many product lines in those countries in which it competes. TRADEMARKS Sara Lee is the owner of over 30,000 trademark registrations and applications in over 140 countries. Sara Lee's trademarks are among its 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 specific approaches to working with individual customers. 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 149,000 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., Balirny Douwe Egberts A.S. and Douwe Egberts Coffee Systems Nederland B.V. 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., Sara Lee Household and Personal Care U.K. Ltd., and Sara Lee/DE Italy S.p.A. The financial information about foreign and domestic operations can be found on page F-22 of this Report. Item 2. Properties. Sara Lee operates 289 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 221 and leases 68 of these plants. It also operates 135 warehouses containing more than 20,000 square feet in building area in 18 states and 20 foreign countries. Of these warehouses, 57 are owned and 78 are leased. The following table identifies the plants and warehouses presently owned or leased 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 769,000 Douwe Egberts Van Nelle Tabaksmaatschappij B.V. ............. Rotterdam, the Netherlands 605,000 Hillshire Farm & Kahn's................ Alexandria, Kentucky 325,000 Hillshire Farm & Kahn's................ Cincinnati, Ohio 556,000 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 PYA/Monarch, Inc. ..................... Charlotte, North Carolina 288,000 PYA/Monarch, Inc. ..................... Lexington, South Carolina 364,000 PYA/Monarch, Inc. ..................... Montgomery, Alabama 276,000 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 Sara Lee Processed Meats (Europe) B.V. ................................ Miralcamp, Spain 260,000 Van Nelle International B.V. .......... Joure, the Netherlands 301,000*
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 297,000* Aris Philippines Manila, Philippines 334,000*** Canadelle Inc. Montreal, Canada 261,000 Champion Products, Inc. Laurel Hill, North Carolina 368,000 Champion Products, Inc. Gaffney, South Carolina 294,000 Champion Products, Inc. Perry, New York 253,000** Champion Products, Inc. Dunn, North Carolina 289,000 Filodoro Calze SpA Casalmoro, Italy 319,000 Kiwi Brands Inc. Douglassville, Pennsylvania 290,000 Kiwi Brands Pty. Ltd. Clayton, Australia 271,000 L'eggs Products Clarksville, Arkansas 321,000 L'eggs Products Rockingham, North Carolina 440,000 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 598,000* Sara Lee Hosiery East Rockingham, North Carolina 330,000* Sara Lee Hosiery Winston-Salem, North Carolina 770,000 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 754,000 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. ** Facilities have been closed as part of 1994 restructuring and are awaiting sale. See pages F-16 through F-17 of this Report for a description of the restructuring. *** Facilities have been closed and are awaiting sale. Item 3. Legal Proceedings. In September 1994, Sara Lee and the State of Wisconsin stipulated and agreed that (i) Sara Lee would pay $200,000 into an escrow fund established at the conclusion of the bankruptcy proceedings of Peck Foods Corporation ("Peck"), a former subsidiary of Sara Lee sold in 1988, in connection with certain allegations that Peck had violated hazardous spill remediation laws, and (ii) judgment in the amount of $218,400, including a penalty assessment, would be entered against Sara Lee in connection with certain allegations that Peck had illegally discharged wastewater in violation of water pollution control laws. The current owners of Peck have reimbursed Sara Lee for approximately $318,000 of these costs. 9 11 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. 10 12 EXECUTIVE OFFICERS OF SARA LEE 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 26, 1995 (the "Proxy Statement"). The following is a list of names and ages of all current executive officers of Sara Lee indicating 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 FIRST OCTOBER 26, OFFICES AND ELECTED NAME 1995 POSITIONS HELD AN OFFICER - ----------------------------------------- ----------- --------------------------------- ----------- John H. Bryan............................ 59 Chairman of the Board, Chief 3/28/74 Executive Officer and Director Michael E. Murphy........................ 59 Vice Chairman, Chief 6/28/79 Administrative Officer and Director Donald J. Franceschini................... 60 Executive Vice President and 8/27/92 Director C. Steven McMillan....................... 49 Executive Vice President and 3/31/83 Director Gary C. Grom............................. 48 Senior Vice President -- Human 10/25/90 Resources Joseph E. Heid........................... 49 Senior Vice President 4/28/94* Janet Langford Kelly..................... 37 Senior Vice President, Secretary 1/25/95 and General Counsel Mark J. McCarville....................... 49 Senior Vice President -- 6/24/82 Corporate Development Frank L. Meysman......................... 43 Senior Vice President 3/31/94* Judith A. Sprieser....................... 42 Senior Vice President and Chief 11/1/94 Financial Officer
- --------------- * Mr. Heid and Mr. Meysman assumed the duties of executive officers (as defined in Rule 3b-7 under the Securities Exchange Act of 1934, as amended) of Sara Lee as of September 26, 1995. 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, Joseph E. Heid and Janet Langford Kelly. Prior to his election, Mr. Franceschini served in various executive capacities at Playtex Apparel, Inc. prior to its acquisition by Sara Lee. Before joining Sara Lee in December 1992, Mr. Heid was President of Guiness America, Inc., a marketer and producer of distilled beverages. Ms. Kelly was a partner in the Chicago office of Sidley & Austin from June 1991 until her election and prior thereto was an associate at Sidley & Austin. 11 13 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, 1995, Sara Lee had approximately 93,200 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-23 of this Report. Item 6. Selected Financial Data. The requisite financial information for Sara Lee for the five fiscal years ending July 1, 1995, 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 related Notes to Financial Statements on pages F-4 through F-23 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-23 of this Report. RESULTS OF OPERATIONS Net sales increased 14.1% to $17.7 billion in 1995, from $15.5 billion in 1994, and $14.6 billion in 1993. The increase in 1995 was due to higher unit volumes and improved product mix, as well as the strengthening of foreign currencies relative to the U.S. dollar and business acquisitions. Business acquisitions and unit volume growth, offset in part by the weakening of foreign currencies relative to the U.S. dollar, were the primary contributing factors in the 1994 increase. Excluding the effects of foreign currencies and acquisitions and dispositions, sales dollars increased 6% in 1995 and 3% in 1994. The gross profit margin was 37.8% in 1995, compared with 37.6% in 1994 and 38.0% in 1993. Improved margins in the corporation's Personal Products and Packaged Meats and Bakery operations, offset in part by lower Coffee and Grocery margins, generated the increase in 1995. The decrease in 1994 was attributable to margin declines in the European hosiery and knit products businesses, offset in part by improved margins in the Household and Personal Care and Packaged Meats and Bakery operations. On June 6, 1994, the corporation announced a restructuring of its worldwide operations that will ultimately result in the closure of 94 manufacturing and distribution facilities and the severance of 9,900 employees. This restructuring reduced 1994 operating income (pretax earnings before interest and corporate expenses), net income and primary earnings per share by $732 million, $495 million and $1.03, respectively. The 1994 operating income included 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 provision of $732 million, non-cash charges of $304 million represent the excess of the net book value of plants to be closed and businesses to be sold over the estimated sales proceeds. The balance of the restructuring provision primarily represents cash outflows. During fiscal 1995, cash payments totaled $173 million. Restructuring actions are expected to be substantially completed by the close of 1996 and the corporation expects to fund the remaining costs of the plan from internal sources and available borrowings. During 1995, 42 manufacturing and distribution facilities were closed and 6,029 employees terminated. Operating costs were lowered in 1995 by $89 million, primarily as a result of lower plant overhead and labor costs. The corporation expects the restructuring plan 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 12 14 used for both business-building initiatives and profit improvement. The restructuring reserve is analyzed in greater detail in the Restructuring Provision note to the financial statements on pages F-16 and F-17. Operating income, excluding the restructuring charge, increased 18.5% in the Packaged Foods segment, while the Packaged Consumer Products segment increased 15.6% from 1994 results. The increase in the Packaged Foods segment is primarily attributable to business acquisitions, the strengthening of foreign currencies relative to the U.S. dollar and cost controls. The increased results in the Packaged Consumer Products segment were primarily attributable to the improved profitability of the worldwide hosiery, knit products and intimates businesses. Business acquisitions and the strengthening of foreign currencies relative to the U.S. dollar also contributed to the improved results of the Packaged Consumer Products segment. Excluding the restructuring charge and the effects of acquisitions and fluctuations in foreign exchange rates, operating income increased 7% in 1995, and in 1994 was virtually unchanged from 1993. Net interest expense was $185 million in 1995, compared with $145 million in 1994 and $82 million in 1993. The 1995 increase was largely due to higher interest rates, while the increase in 1994 interest expense was a result of increased financing needs for acquisitions and capital expenditures. Unallocated corporate expenses are costs not directly attributable to specific segment operations. Unallocated corporate expenses were $192 million in 1995, $98 million in 1994 and $143 million in 1993. Unallocated corporate expenses in 1995 were negatively impacted by the costs of hedging foreign currency movements and expenses associated with minority interests in subsidiaries. In 1993, unallocated corporate expenses were greater than in 1994 because of costs of hedging foreign currency movements and higher administrative expenses. The effective tax rate was 34.1% in 1995, 39.9% in 1994 and 34.9% in 1993. Excluding the impact of unusual items in 1994, the effective tax rate was 35.0%. The reduction of the tax rate from 35.0% in 1994 to 34.1% in 1995 was primarily due to increased earnings in certain foreign jurisdictions that have lower tax rates than the United States. 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. Excluding the effects of the 1994 restructuring charge and the cumulative effect of the accounting change, 1995 net income increased 10.3% to $804 million, and earnings per share increased 10.2% to $1.62. 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. During 1995, the corporation acquired several companies for an aggregate purchase price of $168 million in cash. The principal acquisitions were in the Packaged Meats and Bakery segment, and included the remaining outstanding shares of Consolidated Foodservice Companies, a domestic foodservice distribution business, and the Imperial Meats Group, a European manufacturer and distributor of processed meats. 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). These transactions are discussed in greater detail in the Acquisitions and Divestments note to the financial statements on page F-12. 13 15 During the past three years, the general rate of inflation has averaged 2%. Additionally, approximately 35% 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 Net cash provided from operating activities was $1.4 billion in 1995 as compared to $839 million in 1994. The favorable 1995 results were due to improved gross margins, operating efficiencies resulting in part from the 1994 restructuring, and improved working capital management. Net cash provided from operating activities in 1994 was approximately the same as in 1993. Net cash used in investment activities was $517 million in 1995, $937 million in 1994 and $967 million in 1993. Lower capital expenditures and business acquisition costs were the primary reasons for the reduced 1995 cash use. Capital expenditures were $480 million in 1995, $628 million in 1994 and $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. The corporation expects fiscal 1996 capital expenditures to approximate $600 million. The 1996 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, including business acquisitions. During 1995, cash of $853 million was used for financing activities, primarily to repay $459 million of debt and pay dividends of $358 million. 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 1, 1995, the total-debt-to-total-capital ratio decreased to 33.8% from 38.9% at July 2, 1994. 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. 14 16 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 11 of this Report. For information with respect to the directors of Sara Lee, see "Election of Directors" on pages 2 through 8 of the Proxy Statement, which is incorporated herein by reference. Item 11. Executive Compensation. The information set forth in the Proxy Statement on pages 11 through 19, under the caption "Executive Compensation," and on pages 19 through 21, 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 is specifically excluded and shall not be deemed so 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 5% of any class of Sara Lee's voting securities, except that, as of September 1, 1995, State Street Bank & Trust Company of Boston, as trustee ("Trustee") of the Sara Lee Corporation Employee Stock Ownership Plan ("ESOP"), held in trust 4,514,427 shares (100% of the outstanding shares) of Sara Lee's Employee Stock Ownership Plan Convertible Preferred Stock ("ESOP Stock"), of which 1,168,043 shares (25.87%) were allocated to participant accounts and 3,346,384 shares (74.13%) were unallocated shares, and 9,517 shares of Sara Lee Common Stock (less than 1% of the outstanding shares of Common Stock), all of which were allocated to participant accounts. Each ESOP participant is entitled to direct the Trustee how to vote the shares allocated to such participant's account, as well as a proportionate share of unallocated or unvoted shares. The ESOP Stock votes as a class with the Common Stock and each share of ESOP Stock is entitled to 5.133 votes. Each share of ESOP Stock is convertible into four shares of Sara Lee Common Stock. (b) Security ownership by management as outlined on page 9 of the Proxy Statement under the caption "Ownership of Common Stock and ESOP 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 1995, 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, Jr. 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. 15 17 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 July 3, 1993, July 2, 1994 and July 1, 1995 F-4 Consolidated Balance Sheets -- July 3, 1993, July 2, 1994 and July 1, 1995 F-5 Consolidated Statements of Common Stockholders' Equity -- Balances at July 3, 1993, July 2, 1994 and July 1, 1995 F-7 Consolidated Statements of Cash Flows -- Years ended July 3, 1993, July 2, 1994 and July 1, 1995 F-8 Notes to Financial Statements F-9 2. FINANCIAL STATEMENT SCHEDULES Report of Independent Public Accountants F-24 Schedule II -- Valuation and Qualifying Accounts F-25 (B) REPORTS ON FORM 8-K None. (C) EXHIBITS PAGE/INCORPORATION BY REFERENCE (3a) Articles of Restatement of the Charter, Exhibit 4.1 to Registration Statement as amended No. 33-35760 on Form S-8 dated July 6, 1990, and Exhibit 3(a) to Report on Form 10-K for Fiscal Year ended July 2, 1994 (3b) By-Laws, as amended (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 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, as amended 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 Fiscal Year 1995 7. Accelerated Growth Incentive Plan Exhibit 10 (12) to Report on Form 10-K Fiscal Years 1990-1994 for Fiscal Year ended June 30, 1990 8. 1991 Non-Qualified Deferred Exhibit 10 (15) to Report on Form 10-K Compensation Plan (Base Salary) for Fiscal Year ended June 29, 1991
16 18 EXHIBITS PAGE/INCORPORATION BY REFERENCE 9. 1992 Non-Qualified Deferred Exhibit 10 (15) to Report on Form 10-K Compensation Plan (Base Salary) for Fiscal Year ended June 27, 1992 10. 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 11. 1993 Non-Qualified Deferred Exhibit 10 (19) to Report on Form 10-K Compensation Plan (Base Salary) for Fiscal Year ended July 3, 1993 12. 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 13. 1994 Non-Qualified Deferred Exhibit 10 (14) to Report on Form 10-K Compensation Plan (Base Salary) for Fiscal Year ended July 2, 1994 14. FY '95 Non-Qualified Deferred Exhibit 10 (15) to Report on Form 10-K Compensation Plan (Annual Bonus) for Fiscal Year ended July 2, 1994 15. Performance-Based Annual Incentive Appendix A, Exhibit 99 to Proxy Plan Statement dated September 20, 1995 16. 1995 Long-Term Incentive Stock Plan Appendix B, Exhibit 99 to Proxy Statement dated September 20, 1995 17. 1995 Non-Employee Director Stock Appendix C, Exhibit 99 to Proxy Plan Statement dated September 20, 1995 18. Non-Qualified Deferred Compensation Exhibit 10 (21) to Report on Form 10-K Plan for Outside Directors for Fiscal Year ended July 3, 1993 19. Non-Qualified Estate Builder Exhibit 10 (17) to Report on Form 10-K Deferred Compensation Plan for Fiscal Year ended June 29, 1985 20. Severance Policy for Corporate Exhibit 10 (19) to Report on Form 10-K Officers for Fiscal Year ended July 2, 1994 21. Stockholder Rights Agreement Exhibit 4 to Report on Form 10-Q for the quarter ended March 26, 1988 22. Employment Agreement, dated November 9, 1994, between Sara Lee Corporation and Frank L. Meysman 23. Employment Agreement, dated November 9, 1994, between Sara Lee/DE N.V. and Frank L. Meysman and attachments (translated from Dutch) (11) Computation of Net Income per Common Share (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 18 and 19 hereof followed by an asterisk (27) Financial Data Schedules
17 19 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 29, 1995 SARA LEE CORPORATION By: /s/ JANET LANGFORD KELLY ---------------------------------- Janet Langford Kelly 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 29, 1995.
SIGNATURE CAPACITY - --------------------------------------------- --------------------------------------------- /s/ JOHN H. BRYAN Chairman of the Board, Chief Executive - --------------------------------------------- Officer and Director John H. Bryan /s/ MICHAEL E. MURPHY Vice Chairman, Chief 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/ JUDITH A. SPRIESER Senior Vice President and Chief Financial - --------------------------------------------- Officer Judith A. Sprieser /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
18 20
SIGNATURE CAPACITY --------- -------- * Director - --------------------------------------------- Willie D. Davis * Director - --------------------------------------------- Allen F. Jacobson * Director - --------------------------------------------- Vernon E. Jordan, Jr. * Director - --------------------------------------------- James L. Ketelsen * Director - --------------------------------------------- Hans B. van Liemt * Director - --------------------------------------------- Joan D. Manley * Director - --------------------------------------------- Newton N. Minow * Director - --------------------------------------------- Sir Arvi H. Parbo A.C. * Director - --------------------------------------------- Rozanne L. Ridgway * Director - --------------------------------------------- Richard L. Thomas
*By Janet Langford Kelly 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/ JANET LANGFORD KELLY ------------------------------------ Janet Langford Kelly As Attorney-in-Fact 19 21 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 1, 1995, July 2, 1994, and July 3, 1993, and the related consolidated statements of income, common stockholders' equity, and cash flows for each of the three years in the period ended July 1, 1995. 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 1, 1995, July 2, 1994, and July 3, 1993, and the results of their operations and their cash flows for each of the three years in the period ended July 1, 1995 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, July 31, 1995. F-1 22 SARA LEE CORPORATION AND SUBSIDIARIES FINANCIAL SUMMARY
COMPOUND YEARS ENDED GROWTH RATE ------------------------ -------------------- JULY 1, JULY 2, 5 YEARS 10 YEARS 1995 1994 ------- -------- -------- ----------- (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) RESULTS OF OPERATIONS Net sales.......................................... 8.8% 8.1% $ 17,719 $ 15,536 Operating income................................... 11.2 12.9 1,596 632 Income before income taxes......................... 11.3 13.4 1,219 389 Net income......................................... 11.3 14.6 804 199 Effective tax rate................................. -- -- 34.1% 39.9% - ------------------------------------------------------------------------------------------------------ FINANCIAL POSITION Total assets....................................... 10.2% 14.5% $ 12,431 $ 11,665 Long-term debt..................................... -- -- 1,817 1,496 Redeemable preferred stock......................... -- -- 334 331 Common stockholders' equity........................ 11.4 14.8 3,939 3,326 Return on average common stockholders' equity...... -- -- 21.4% 5.1% - ------------------------------------------------------------------------------------------------------ PER COMMON SHARE Net income -- primary.............................. 11.0% 13.7% $ 1.62 $ .37 Average shares outstanding (in millions)...... -- -- 480 480 Net income -- fully diluted........................ 11.0 13.3 1.57 .36 Average shares outstanding (in millions)...... -- -- 499 498 Dividends ...................................... 10.6 14.3 .67 .63 Book value at year-end............................. 10.5 13.5 8.20 6.92 Market value at year-end........................... 14.4 18.1 28.50 20.63 - ------------------------------------------------------------------------------------------------------ OTHER INFORMATION Capital expenditures............................... (4.2)% 6.9% $ 480 $ 628 Depreciation and amortization...................... 11.5 14.7 606 568 Media advertising expense.......................... 6.2 7.6 422 371 Total advertising and promotion expense............ 10.6 10.9 1,675 1,498 Common stockholders of record...................... -- -- 93,400 95,600 Number of employees................................ -- -- 149,100 145,900 - ------------------------------------------------------------------------------------------------------ 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. 53-week year. 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. 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. Restated for the 2-for-1 stock splits in fiscal 1993, 1990 and 1987. Fiscal 1992 includes a $.12 special dividend.
The Notes to Financial Statements should be read in conjunction with the Financial Summary. F-2 23 SARA LEE CORPORATION AND SUBSIDIARIES FINANCIAL SUMMARY
YEARS ENDED ------------------------------------------------------------------------------------------------------ JULY 3, JUNE 27, JUNE 29, JUNE 30, JULY 1, JULY 2, JUNE 27, JUNE 28, JUNE 29, 1993 1992 1991 1990 1989 1988 1987 1986 1985 ------- -------- -------- -------- ------- -------- -------- -------- -------- (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) RESULTS OF OPERATIONS Net sales................. $14,580 $ 13,243 $12,381 $11,606 $11,718 $10,424 $9,155 $7,938 $8,117 Operating income.......... 1,307 1,207 1,085 938 847 753 632 514 474 Income before income taxes................... 1,082 1,174 830 713 639 513 448 356 345 Net income................ 704 761 535 470 410 325 267 223 206 Effective tax rate........ 34.9% 35.2% 35.5% 34.1% 35.8% 36.7% 40.4% 37.2% 40.3% - -------------------------------------------------------------------------------------------------------------------------------- FINANCIAL POSITION Total assets.............. $10,862 $ 9,989 $ 8,122 $ 7,636 $ 6,523 $ 5,012 $4,192 $3,503 $3,216 Long-term debt............ 1,164 1,389 1,399 1,524 1,488 893 633 634 464 Redeemable preferred stock................... 357 351 344 338 182 225 75 75 75 Common stockholders' equity.................. 3,551 3,382 2,550 2,292 1,915 1,575 1,416 1,155 991 Return on average common stockholders' equity.... 19.6% 24.7% 20.6% 20.9% 22.7% 21.1% 20.5% 20.4% 20.5% - --------------------------------------------------------------------------------------------------------------------------------- PER COMMON SHARE Net income -- primary..... $ 1.40 $ 1.54 $ 1.08 $ .96 $ .88 $ .71 $ .59 $ .51 $ .45 Average shares outstanding (in millions)........... 485 476 464 460 454 447 447 433 443 Net income -- fully diluted................. 1.37 1.50 1.05 .93 .87 .71 .59 .50 .45 Average shares outstanding (in millions)........... 504 497 485 480 456 447 447 434 444 Dividends.............. .56 .61 .46 .41 .35 .29 .24 .20 .18 Book value at year-end.... 7.31 7.05 5.48 4.97 4.21 3.56 3.20 2.70 2.32 Market value at year-end................ 24.25 24.81 20.19 14.56 13.47 9.22 11.63 8.91 5.39 - --------------------------------------------------------------------------------------------------------------------------------- OTHER INFORMATION Capital expenditures...... $ 728 $ 509 $ 522 $ 595 $ 541 $ 449 $ 287 $ 222 $ 247 Depreciation and amortization............ 522 472 394 351 280 251 202 165 153 Media advertising expense................. 392 325 288 313 303 253 203 195 202 Total advertising and promotion expense....... 1,455 1,294 1,067 1,013 925 801 637 587 594 Common stockholders of record.................. 88,100 75,400 69,400 64,800 56,500 52,400 50,000 44,900 42,600 Number of employees....... 138,000 128,000 113,400 107,800 101,800 85,700 92,400 87,000 92,800 - --------------------------------------------------------------------------------------------------------------------------------- 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. 53-week year. 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. 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. Restated for the 2-for-1 stock splits in fiscal 1993, 1990 and 1987. Fiscal 1992 includes a $.12 special dividend.
The Notes to Financial Statements should be read in conjunction with the Financial Summary. F-3 24 SARA LEE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED ------------------------------- JULY 1, JULY 2, JULY 3, 1995 1994 1993 ------- ------- ------- (IN MILLIONS EXCEPT PER SHARE DATA) NET SALES..................................................... $17,719 $15,536 $14,580 ------- ------- ------- Cost of sales................................................. 11,023 9,700 9,039 Selling, general and administrative expenses.................. 5,292 4,570 4,377 Interest expense.............................................. 243 188 162 Interest income............................................... (58) (43) (80) Restructuring provision....................................... -- 732 -- ------- ------- ------- 16,500 15,147 13,498 ------- ------- ------- Income before income taxes.................................... 1,219 389 1,082 Income taxes.................................................. 415 155 378 ------- ------- ------- NET INCOME BEFORE ACCOUNTING CHANGE........................... 804 234 704 Cumulative effect of accounting change........................ -- (35) -- ------- ------- ------- NET INCOME.................................................... 804 199 704 Preferred dividends, net of tax............................... (28) (24) (26) ------- ------- ------- Net income available for common stockholders.................. $ 776 $ 175 $ 678 ======= ======= ======= NET INCOME PER COMMON SHARE -- PRIMARY Before cumulative effect of accounting change............... $ 1.62 $ .44 $ 1.40 Cumulative effect of accounting change...................... -- (.07) -- ------- ------- ------- $ 1.62 $ .37 $ 1.40 ======= ======= ======= Average shares outstanding.................................. 480 480 485 ======= ======= ======= NET INCOME PER COMMON SHARE -- FULLY DILUTED Before cumulative effect of accounting change............... $ 1.57 $ .43 $ 1.37 Cumulative effect of accounting change...................... -- (.07) -- ------- ------- ------- $ 1.57 $ .36 $ 1.37 ======= ======= ======= Average shares outstanding.................................. 499 498 504 ======= ======= =======
The accompanying Notes to Financial Statements are an integral part of these statements. F-4 25 SARA LEE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
JULY 1, JULY 2, JULY 3, 1995 1994 1993 ------- ------- ------- (DOLLARS IN MILLIONS EXCEPT SHARE DATA) ASSETS Cash and equivalents...................................... $ 202 $ 189 $ 325 Trade accounts receivable, less allowances of $192 in 1995, $164 in 1994 and $154 in 1993..................... 1,653 1,472 1,171 Inventories Finished goods.......................................... 1,782 1,603 1,413 Work in process......................................... 423 361 322 Materials and supplies.................................. 625 603 545 ------- ------- ------- 2,830 2,567 2,280 Other current assets...................................... 243 241 200 ------- ------- ------- Total current assets...................................... 4,928 4,469 3,976 ------- ------- ------- Investments in associated companies....................... 109 142 205 Trademarks and other assets............................... 506 492 518 Property Land.................................................... 136 131 129 Buildings and improvements.............................. 1,879 1,746 1,570 Machinery and equipment................................. 3,462 3,077 2,804 Construction in progress................................ 206 283 339 ------- ------- ------- 5,683 5,237 4,842 Accumulated depreciation................................ 2,719 2,337 1,964 ------- ------- ------- Property, net............................................. 2,964 2,900 2,878 Intangible assets, net.................................... 3,924 3,662 3,285 ------- ------- ------- $12,431 $11,665 $10,862 ======= ======= =======
The accompanying Notes to Financial Statements are an integral part of these balance sheets. F-5 26 SARA LEE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
JULY 1, JULY 2, JULY 3, 1995 1994 1993 ------- ------- ------- (DOLLARS IN MILLIONS EXCEPT SHARE DATA) LIABILITIES AND STOCKHOLDERS' EQUITY Notes payable............................................. $ 559 $ 1,281 $ 843 Accounts payable.......................................... 1,436 1,253 1,151 Accrued liabilities Payroll and employee benefits........................... 693 668 429 Advertising and promotion............................... 278 313 282 Taxes other than payroll and income..................... 218 206 179 Income taxes............................................ 66 13 50 Other................................................... 1,373 1,103 909 Current maturities of long-term debt...................... 221 82 426 ------- ------- ------- Total current liabilities................................. 4,844 4,919 4,269 ------- ------- ------- Long-term debt............................................ 1,817 1,496 1,164 Deferred income taxes..................................... 273 290 512 Other liabilities......................................... 705 783 705 Minority interest in subsidiaries......................... 519 520 304 Preferred stock (authorized 13,500,000 shares; no par value) Convertible adjustable: Issued and outstanding -- 607,000 shares in 1993; redeemed in 1994 at $50 per share................................ -- -- 30 Auction: Issued and outstanding -- 3,000 shares; redeemable at $100,000 per share..................... 300 300 300 ESOP convertible: Issued and outstanding -- 4,570,153 shares in 1995, 4,678,857 shares in 1994 and 4,755,217 shares in 1993............................. 331 339 345 Unearned deferred compensation.......................... (297) (308) (318) Common stockholders' equity Common stock: (authorized 600,000,000 shares; $1.33 1/3 par value) Issued and outstanding -- 480,656,301 shares in 1995, 480,765,240 shares in 1994 and 485,378,368 shares in 1993................................................. 640 641 647 Capital surplus......................................... 67 76 66 Retained earnings....................................... 3,252 2,799 3,056 Translation adjustments................................. 3 (170) (194) Unearned restricted stock issued for future services.... (23) (20) (24) ------- ------- ------- Total common stockholders' equity......................... 3,939 3,326 3,551 ------- ------- ------- $12,431 $11,665 $10,862 ======= ======= =======
The accompanying Notes to Financial Statements are an integral part of these balance sheets. F-6 27 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 SHARE DATA) 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 $4.................................. 4 -- 2 -- -- 2 Reacquired shares........................ (224) (12) (82) (130) -- -- Translation adjustments.................. 24 -- -- -- 24 -- ESOP tax benefit......................... 10 -- -- 10 -- -- Other.................................... 25 -- 27 (4) -- 2 - ---------------------------------------------------------------------------------------------------------- BALANCES AT JULY 2, 1994................. 3,326 641 76 2,799 (170) (20) Net income............................... 804 -- -- 804 -- -- Cash dividends Common ($.67 per share)................ (320) -- -- (320) -- -- Auction preferred ($4,188.00 per share).............................. (13) -- -- (13) -- -- ESOP convertible preferred ($5.4375 per share)................. (25) -- -- (25) -- -- Stock issuances Stock option and benefit plans......... 57 4 53 -- -- -- Restricted stock, less amortization of $7.................................. 7 -- 13 -- -- (6) Reacquired shares........................ (93) (5) (88) -- -- -- Translation adjustments.................. 173 -- -- -- 173 -- ESOP tax benefit......................... 10 -- -- 10 -- -- Other.................................... 13 -- 13 (3) -- 3 ------ ------ ------ ------ ------ ----- BALANCES AT JULY 1, 1995................. $3,939 $640 $ 67 $3,252 $ 3 $(23) ====== ====== ====== ====== ====== =====
The accompanying Notes to Financial Statements are an integral part of these statements. F-7 28 SARA LEE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED --------------------------------- JULY 1, JULY 2, JULY 3, 1995 1994 1993 ------- ------- ------- (DOLLARS IN MILLIONS) OPERATING ACTIVITIES Net income.................................................... $ 804 $ 199 $ 704 Adjustments for noncash charges included in net income Depreciation and amortization of intangibles................ 606 568 522 Restructuring provision..................................... -- 732 -- Cumulative effect of accounting change...................... -- 35 -- Increase (decrease) in deferred taxes....................... 88 (222) 27 Other noncash credits, net.................................. (118) (109) (117) Changes in current assets and liabilities, net of businesses acquired and sold (Increase) decrease in trade accounts receivable......... (38) (162) 57 (Increase) in inventories................................ (138) (224) (124) (Increase) decrease in other current assets.............. 18 (29) (40) Increase (decrease) in accounts payable.................. 81 20 (10) Increase (decrease) in accrued liabilities............... 70 31 (169) ------- ------- ------ Net cash from operating activities.......................... 1,373 839 850 ------- ------- ------ INVESTMENT ACTIVITIES Purchases of property and equipment........................... (480) (628) (728) Acquisitions of businesses.................................... (168) (412) (352) Returns from associated companies............................. 43 48 5 Dispositions of businesses.................................... 12 -- 31 Sales of property............................................. 73 49 51 Other......................................................... 3 6 26 ------- ------- ------ Net cash used in investment activities...................... (517) (937) (967) ------- ------- ------ FINANCING ACTIVITIES Issuances of common stock..................................... 57 69 66 Purchases of common stock..................................... (93) (224) (77) Redemption of preferred stock................................. -- (30) -- Issuance of equity securities by subsidiary................... -- 200 -- Borrowings of long-term debt.................................. 573 385 256 Repayments of long-term debt.................................. (289) (438) (300) Short-term borrowings (repayments), net....................... (743) 328 609 Payments of dividends......................................... (358) (332) (306) ------- ------- ------ Net cash (used in) from financing activities................ (853) (42) 248 ------- ------- ------ Effect of changes in foreign exchange rates on cash........... 10 4 (4) ------- ------- ------ Increase (decrease) in cash and equivalents................... 13 (136) 127 Cash and equivalents at beginning of year..................... 189 325 198 ------- ------- ------ Cash and equivalents at end of year........................... $ 202 $ 189 $ 325 ======= ======= ======
The accompanying Notes to Financial Statements are an integral part of these statements. F-8 29 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 1995 and 1994 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 is 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 $710 at July 1, 1995, $572 at July 2, 1994 and $457 at July 3, 1993. 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 1995, approximately 35% at last-in, first-out [LIFO] and the remainder at first-in, first-out [FIFO]) or market. Inventories recorded at LIFO were approximately $18 at July 1, 1995, $24 at July 2, 1994 and $38 at July 3, 1993, lower than if they had been valued at FIFO. Inventory cost includes material and conversion costs. 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 30 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 the exchange rates 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. FINANCIAL INSTRUMENTS The corporation uses financial instruments in its management of foreign currency and interest rate exposures. Financial instruments are not held or issued for trading purposes. Non-U.S. dollar financing transactions generally are effective as hedges of long-term investments or intercompany loans in the corresponding currency. Foreign currency gains and losses on the hedges of long-term investments are recorded as foreign currency translation adjustments included in stockholders' equity. Gains and losses related to hedges of intercompany loans offset the gains and losses on intercompany loans and are recorded in net income. Interest rate exchange agreements are effective at modifying the corporation's interest rate exposures. Net interest is accrued as either interest receivable or payable with the offset recorded in interest expense. The company also uses short-term forward exchange contracts for hedging purposes. Realized and unrealized gains and losses on these instruments are deferred and recorded in the carrying amount of the related hedged asset, liability or firm commitment. 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 The costs of advertising are generally expensed in the year in which the advertising first takes place. 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 nonqualified 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. F-10 31 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) At July 1, 1995, 3,428,746 common shares were available for granting; options had been granted on 15,947,144 shares at prices ranging from $8.30 to $31.94 per share. During 1995, options on 4,798,160 shares were granted at prices ranging from $19.63 to $28.68; options for 1,403,375 shares were exercised at prices ranging from $5.38 to $28.07; and options for 466,051 shares expired or were canceled. Options exercisable at year-end were: 1995-10,111,475; 1994-9,548,858; and 1993-10,425,115. Employees may purchase up to twenty-five thousand dollars market value of common stock annually at 85% of the market value. At July 1, 1995, 10,044,613 shares of common stock were available for issuance under this stock purchase plan. The corporation has restricted stock plans that provide 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 plans is recorded as unearned compensation. The unearned amounts are 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:
1995 1994 1993 ----------- ----------- ----------- Beginning balances.................................. 480,765,240 485,378,368 239,862,390 Stock issuances Business acquisitions............................. -- -- 1,924,411 Stock option and benefit plans.................... 3,157,809 4,413,148 4,276,753 Restricted stock plans............................ 367,650 87,000 238,700 Two-for-one stock split........................... -- -- 241,988,568 Stock purchased/retired............................. (3,932,400) (9,098,100) (2,922,000) Other............................................... 298,002 (15,176) 9,546 ----------- ----------- ----------- Ending balances..................................... 480,656,301 480,765,240 485,378,368 =========== =========== ===========
PREFERRED STOCK 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. F-11 32 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) ESOP-related expenses amounted to $12 in 1995, $11 in 1994, and $11 in 1993. Payments to the ESOP were $38 in 1995, $38 in 1994 and $35 in 1993. Principal and interest payments by the ESOP amounted to $12 and $26 in 1995, $11 and $27 in 1994, and $7 and $28 in 1993. 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. The corporation redeemed for cash its cumulative convertible adjustable preferred stock on July 26, 1993 for $30. MINORITY INTEREST IN SUBSIDIARIES Minority interest in subsidiaries primarily consists of preferred equity securities issued by subsidiaries of the corporation. No gain or loss was recognized as a result of the issuance of these securities and the corporation owned substantially all of the voting equity of the subsidiaries both before and after the transactions. In 1994, a domestic subsidiary of the corporation issued $200 of preferred equity securities. The securities provide the holder a rate of return based upon a specified inter-bank borrowing rate, are redeemable in 1998 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. Minority interest in subsidiaries also includes $295 of preferred equity securities issued by a wholly owned foreign subsidiary of the corporation. 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 1995, the corporation acquired several companies for an aggregate purchase price of $168 in cash. The principal acquisitions were the remaining outstanding shares of the Consolidated Foodservice Companies, a domestic foodservice distribution business, and the Imperial Meats Group, a European manufacturer and distributor of processed meats. 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. No material divestments were made during the last three years. F-12 33 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT INTEREST RATE AND CURRENCY SWAPS To manage interest rate and foreign exchange risk and to lower its cost of borrowing, the corporation has entered into interest rate and currency swaps. The currency swaps effectively hedge long-term Dutch guilder-and Swiss franc-denominated investments and French franc-denominated intercompany loans. The weighted average maturities of interest rate and currency swaps as of July 1, 1995 were 2.6 years and 1.2 years, respectively.
WEIGHTED AVERAGE INTEREST RATES NOTIONAL ---------------- PRINCIPAL RECEIVE PAY ------------ ------- --- INTEREST RATE SWAPS 1995 Receive variable -- pay fixed............................... $200 6.1% 5.7% Receive fixed -- pay variable............................... 45 7.6 5.9 1994 Receive variable -- pay fixed............................... 150 4.3 8.8 1993 Receive variable -- pay fixed............................... 160 3.3 8.8 Receive fixed -- pay variable............................... 1 9.0 4.1 CURRENCY SWAPS 1995 Receive variable -- pay fixed............................... $175 6.4% 7.3% Receive fixed -- pay fixed.................................. 194 6.4 6.6 Receive variable -- pay variable............................ 320 7.9 6.9 1994 Receive variable -- pay fixed............................... 175 4.1 7.3 Receive fixed -- pay fixed.................................. 90 5.1 7.3 Receive variable -- pay variable............................ 281 6.6 6.2 1993 Receive variable -- pay fixed............................... 175 3.5 7.3 Receive fixed -- pay fixed.................................. 90 5.1 7.3 Receive variable -- pay variable............................ 298 11.1 4.4 - --------------- The notional principal is the amount used for the calculation of interest payments which are exchanged over the life of the swap transaction and is equal to the amount of foreign currency or dollar principal exchanged at maturity. The weighted average interest rates are as of the respective balance sheet dates.
FORWARD EXCHANGE CONTRACTS The corporation uses forward exchange contracts to reduce the effect of fluctuating foreign currencies on short-term foreign currency-denominated intercompany transactions, firm third-party product sourcing commitments and other known foreign currency exposures. The table below summarizes by major currency the contractual amounts of the corporation's forward exchange contracts in U.S. dollars. The bought amounts represent the net U.S. dollar equivalent of commitments to purchase foreign currencies, and the sold amounts represent the net U.S. dollar equivalent of commitments to sell foreign currencies. The foreign currency amounts have been translated into a U.S. dollar F-13 34 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) equivalent value using the exchange rate at the reporting date. Forward exchange contracts mature at the anticipated cash requirement date of the hedged transaction, generally within one year.
BOUGHT (SOLD) -------------------------- FOREIGN CURRENCY 1995 1994 1993 - ------------------------------------------------------------------ ---- ---- ---- French franc...................................................... (352) (242) (402) Italian lira...................................................... (254) (151) 1 Belgian franc..................................................... (230) (52) (7) Dutch guilder..................................................... (236) 73 (165) German mark....................................................... 36 (174) (37) Other............................................................. (139) (223) 117
At July 1, 1995, the deferred unrealized gains and losses on forward exchange contracts were not material to the financial position of the corporation. CONCENTRATIONS OF CREDIT RISK A large number of major international financial institutions are counterparties to the corporation's financial instruments. The corporation enters into financial instrument agreements only with those counterparties meeting very stringent credit standards, limiting the amount of agreements or contracts it enters into with any one party and, where legally available, executing master netting agreements. These positions are continuously monitored. While the corporation may be exposed to credit losses in the event of nonperformance by these counterparties, it does not anticipate losses, because of these control procedures. Trade accounts receivable due from highly leveraged customers were $49 at July 1, 1995, $52 at July 2, 1994 and $41 at July 3, 1993. The financial position of these businesses has been considered in determining allowances for doubtful accounts. GUARANTEES The corporation had third-party guarantees outstanding, aggregating approximately $31 at July 1, 1995, $28 at July 2, 1994 and $22 at July 3, 1993. 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. FAIR VALUES The carrying amounts of cash and equivalents, trade receivables, notes payable, accounts payable, and auction preferred shares approximated fair value as of July 1, 1995, July 2, 1994 and July 3, 1993. The fair values of the remaining financial instruments recognized on the Consolidated Balance Sheets of the corporation at the respective year-end were:
1995 1994 1993 ------ ------ ------ Long-term debt, including current portion.................... $2,102 $1,549 $1,645 ESOP convertible preferred stock............................. 567 443 530
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. The fair value of the ESOP preferred shares is based upon the contracted conversion into the corporation's common stock. F-14 35 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) The fair value of the corporation's interest rate swaps, currency swaps, and forward exchange contracts approximate their carrying value in the financial statements as of July 1, 1995, July 2, 1994 and July 3, 1993. The fair value of these instruments was not material to the financial position of the corporation. LONG-TERM DEBT
INTEREST RATE RANGE MATURITY 1995 1994 1993 ------------------- --------- ------ ------ ------ U.S. dollar obligations: ESOP debt...................... 8.176% 2004 $ 311 $ 323 $ 334 Notes and debentures........... 4.40-9.70 1996-2016 1,165 876 548 Revenue bonds.................. 4.10-6.10 2002-2024 36 23 25 Zero coupon notes.............. 10.00-14.25 2014-2015 14 12 11 Eurodollar bonds............... -- -- 150 Various other obligations...... 7 8 17 ------ ------ ------ 1,533 1,242 1,085 ------ ------ ------ Foreign currency obligations: Swiss franc.................... 4.75 1998 111 96 223 Dutch guilder.................. 6.00-6.50 1998 259 123 177 Various other obligations...... 135 117 105 ------ ------ ------ 505 336 505 ------ ------ ------ Total long-term debt.............................. 2,038 1,578 1,590 Less current maturities........................... 221 82 426 ------ ------ ------ $1,817 $1,496 $1,164 ====== ====== ======
The ESOP debt is guaranteed by the corporation. The zero coupon notes are net of unamortized discounts of $110 in 1995, $112 in 1994 and $113 in 1993. Principal payments of $19 and $105 are due in 2014 and 2015, respectively. Payments required on long-term debt during the years ending in 1996 through 2000 are $221, $132, $419, $86 and $241, respectively. The corporation made cash interest payments of $236, $203, and $161 in 1995, 1994 and 1993, respectively. Rental expense under operating leases amounted to approximately $222 in 1995, $207 in 1994 and $182 in 1993. Future minimum annual fixed rentals required during the years ending in 1996 through 2000 under noncancelable operating leases having an original term of more than one year are $113, $95, $81, $68 and $62, respectively. The aggregate obligation subsequent to 2000 is $137. The corporation is contingently liable for long-term leases on properties operated by others. The minimum annual rentals under these leases average approximately $5 for the years ending in 1996-2000 and $2 in 2001-2005. Amounts thereafter are not material. CREDIT FACILITIES The corporation has numerous credit facilities available, including revolving credit agreements totaling $1,920 that had an annual fee of 0.07% as of July 1, 1995. These agreements support commercial paper F-15 36 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) borrowings. Subsequent to July 1, 1995 the corporation reduced its revolving credit facility to $1,635 in anticipation of lower borrowing needs. Selected data on the corporation's short-term obligations follow:
1995 1994 1993 ------ ------ ------ Maximum period-end borrowings.................................... $2,300 $1,998 $1,484 Average borrowings during the year............................... 1,969 1,833 1,067 Weighted average interest rate during the year................... 6.6% 4.2% 5.3% Weighted average interest rate at year-end....................... 6.9 5.0 5.0
CONTINGENCIES 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. RESTRUCTURING PROVISION The composition of the corporation's restructuring reserves is as follows:
WRITEDOWN OF RECOGNITION OF PROPERTY AND CURTAILMENT INVESTMENTS LOSS AND RESTRUCTURING ORIGINAL TO NET SPECIAL FOREIGN RESERVES RESTRUCTURING REALIZABLE TERMINATION CASH EXCHANGE AS OF RESERVE VALUE BENEFITS PAYMENTS IMPACTS JULY 1, 1995 ------------- ------------ -------------- -------- -------- ------------- Anticipated losses associated with disposal of land, buildings and improvements, and machinery and equipment................. $289 $(289) $ -- $ -- $-- $ -- Anticipated expenditures to close and dispose of idle facilities -- includes $33 of noncancelable lease obligations............... 112 -- -- (30) -- 82 Anticipated severance benefits.................. 239 -- -- (99) -- 140 Pension benefits associated with severed employee group..................... 33 -- (33) -- -- -- Anticipated losses associated with the disposal of certain businesses................ 59 (15) -- (44) -- -- ---- ----- ---- ----- --- ---- 732 (304) (33) (173) -- 222 Foreign exchange impacts.... -- -- -- -- 20 20 ---- ----- ---- ----- --- ---- Total restructuring reserves.................. $732 $(304) $(33) $(173) $20 $242 ==== ===== ==== ===== === ====
In the fourth quarter of 1994, the corporation provided for the cost of restructuring its worldwide operations, which will result in the closure of 94 manufacturing and distribution facilities and the severance of 9,900 employees. The restructuring provision reduced 1994 income before income taxes, net income and net F-16 37 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) income per common share by $732, $495 and $1.03, respectively. As of July 2, 1994, no material actions contemplated in the restructuring plan had taken place. During 1995, 42 manufacturing and distribution facilities were closed and 6,029 employees terminated. Operating costs were lowered in 1995 by $89, primarily as a result of lower plant overhead and labor costs. The corporation expects the restructuring plan to generate increasing savings in subsequent years, growing to an annual savings of approximately $250 in 1998. Savings from the planned actions will be used both for business-building initiatives and profit improvement. As of July 1, 1995, $166 of the remaining reserves were classified as current liabilities and $76 as noncurrent. 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. The annual pension expense for all plans was:
1995 1994 1993 ---- ---- ---- Defined benefit plans................................................... $43 $31 $30 Defined contribution plans.............................................. 11 11 13 Multi-employer plans.................................................... 4 4 4 --- --- --- Total pension expense................................................... $58 $46 $47 === === ===
The components of the defined benefit plan expenses were:
1995 1994 1993 ---- ---- ----- Benefits earned by employees..................................... $ 60 $ 52 $ 50 Interest on projected benefit obligations........................ 105 92 90 Actual investment return on plan assets.......................... (47) (99) (131) Net amortization and deferral.................................... (75) (14) 21 ---- ---- ----- Net pension expense.............................................. $ 43 $ 31 $ 30 ==== ==== =====
The increase in the 1995 defined benefit plan expense is primarily attributable to lower asset returns, the strengthening of foreign currencies relative to the U.S. dollar, and benefit increases in certain foreign plans. F-17 38 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) The status of defined benefit plans at the respective year-end was:
1995 1994 1993 ------ ------ ------- Fair market value of plan assets................................ $1,592 $1,420 $ 1,284 ------ ------ ------- Actuarial present value of benefits for services rendered: Accumulated benefits based on salaries to date: Vested..................................................... 1,281 1,144 989 Nonvested.................................................. 47 38 42 Additional benefits based on estimated future salary levels... 204 217 222 ------ ------ ------- Projected benefit obligations................................. 1,532 1,399 1,253 ------ ------ ------- Excess of plan assets over projected benefit obligations........ 60 21 31 Unamortized net transitional asset.............................. (17) (26) (33) Unrecognized net gain........................................... (3) (8) (62) Unrecognized prior service cost................................. 81 88 89 ------ ------ ------- Prepaid pension liability recognized on the Consolidated Balance Sheets........................................................ $ 121 $ 75 $ 25 ====== ====== =======
Weighted average rates used in determining net pension expense and related obligations for defined benefit plans were:
1995 1994 1993 ---- ---- ---- Discount rate........................................................... 7.5% 7.5% 7.6% Rate of compensation increase........................................... 5.2 5.2 5.3 Long-term rate of return on plan assets................................. 8.3 8.3 8.8
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 in 1994. 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 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 components of the expense for these plans were:
1995 1994 ---- ---- Benefits earned by employees................................................. $ 5 $ 4 Interest on projected benefit obligations.................................... 11 11 --- --- Net postretirement benefit expense........................................... $16 $15 === ===
The domestic postretirement benefit expense was $18 in 1993. F-18 39 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) The status of domestic postretirement benefit plans at the respective year-end was:
1995 1994 ---- ---- Actuarial present value of benefits for services rendered: Retirees.................................................................. $ 90 $ 87 Fully eligible active participants........................................ 15 19 Other active participants................................................. 43 48 ---- ---- Accumulated postretirement benefit obligations.............................. 148 154 Fair market value of plan assets............................................ 2 2 ---- ---- Accumulated postretirement benefit obligations in excess of plan assets..... 146 152 Unrecognized net transitional asset......................................... 14 15 Unrecognized net gain (loss)................................................ 14 (4) Unrecognized prior service cost............................................. (1) (1) ---- ---- Postretirement benefit obligations recognized on Consolidated Balance Sheets.................................................................... $173 $162 ==== ====
Actuarial assumptions used to determine the accumulated postretirement benefit obligation include a discount rate of 7.75% for 1995 and 1994. The assumed health care cost trend rate was 14% for 1995, decreasing to 7% by the year 2002 and remaining at that level thereafter. These trend rates reflect the corporation's prior experience and management's expectation that future rates will decline. Increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of July 1, 1995 by 10% and the post-retirement benefit expense for 1995 by 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 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. F-19 40 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) The provisions for income taxes computed by applying the U.S. statutory rate to income before taxes as reconciled to the actual provisions were:
1995 1994 1993 ---------------- ---------------- ---------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- ------ ------- Income before provision for income taxes United States................................ $ 648 53.1% $218 56.0% $ 615 56.8% Foreign...................................... 571 46.9 171 44.0 467 43.2 ------ ----- ---- ----- ------ ----- $1,219 100.0% $389 100.0% $1,082 100.0% ====== ===== ==== ===== ====== ===== Taxes at U.S. statutory rates.................. $ 427 35.0% $136 35.0% $ 368 34.0% States taxes, net of federal benefit........... 16 1.3 24 6.2 22 2.0 Difference between U.S. and foreign rates...... (67) (5.5) (34) (8.8) (31) (2.8) Nondeductible amortization..................... 50 4.1 46 11.7 44 4.0 Other, net..................................... (11) (0.8) (17) (4.2) (25) (2.3) ------ ------ ---- ----- ------ ----- Taxes at effective worldwide tax rates......... $ 415 34.1% $155 39.9% $ 378 34.9% ====== ===== ==== ===== ====== =====
Current and deferred tax provisions were:
1995 1994 1993 ------------------ ------------------ ------------------ CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED ------- -------- ------- -------- ------- -------- United States................................. $154 $39 $200 $(144) $175 $(7) Foreign....................................... 150 47 143 (61) 159 17 State......................................... 23 2 34 (17) 33 1 ---- --- ---- ----- ---- --- $327 $88 $377 $(222) $367 $11 ==== === ==== ===== ==== ===
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:
1995 1994 1993 ----- ----- ---- Depreciation.......................................................... $ 31 $ 22 $ 1 Unremitted earnings of foreign subsidiaries........................... -- -- 20 Inventory valuation methods........................................... (4) 2 (1) Restructuring reserves................................................ 64 (230) -- Other, net............................................................ (3) (16) (9) ---- ----- ---- $ 88 $(222) $ 11 ==== ===== ==== Cash payments for income taxes........................................ $279 $ 295 $304 ==== ===== ====
F-20 41 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) The deferred tax (assets) liabilities at the respective year-end were as follows:
1995 1994 ----- ----- Deferred tax (assets): Restructuring reserves..................................................... $(166) $(230) Reserves not deductible until paid......................................... (213) (243) Pension, postretirement and other employee benefits........................ (8) (4) Net operating loss and other tax carryforwards............................. (3) (15) Deferred tax liabilities: Property, plant and equipment.............................................. 265 230 Other...................................................................... 13 62 ----- ----- Net deferred tax (assets).................................................... $(112) $(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 ---------- ------- -------- ------------- --------- ------- ------- 1995 Sales.................... $6,110 $2,777 $7,151 $1,691 $ -- $ (10) $17,719 Pretax income................ 383 374 658 181 (377) -- 1,219 Assets....................... 2,062 1,986 6,686 1,391 306 -- 12,431 Depreciation and amortization............... 129 82 294 79 22 -- 606 Capital expenditures......... 116 66 262 35 1 -- 480 1994 Sales.................... $5,472 $2,090 $6,449 $1,530 $ -- $ (5) $15,536 Pretax income (loss)..... 318 274 (71) 111 (243) -- 389 Assets....................... 1,662 1,776 6,535 1,335 357 -- 11,665 Depreciation and amortization............... 108 74 289 71 26 -- 568 Capital expenditures......... 108 69 408 41 2 -- 628 1993 Sales.................... $5,148 $2,058 $6,098 $1,279 $ -- $ (3) $14,580 Pretax income................ 287 292 602 126 (225) -- 1,082 Assets....................... 1,560 1,629 6,209 859 605 -- 10,862 Depreciation and amortization............... 99 80 265 55 23 -- 522 Capital expenditures......... 99 87 485 42 15 -- 728 - --------------- Includes sales between segments. Such sales are at transfer prices that are equivalent to market value. Includes net interest expense of $185 in 1995, $145 in 1994 and $82 in 1993 incurred primarily in the United States to finance and support consolidated operations. Principally cash and equivalents and investments in associated companies and certain fixed assets. 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.
Industry segment sales and operating income applicable to businesses sold prior to July 1, 1995 were not material. F-21 42 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) GEOGRAPHIC AREA INFORMATION
ASIA- WESTERN/ PACIFIC/ UNITED CENTRAL LATIN STATES EUROPE AMERICA OTHER CORPORATE INTER-AREA TOTAL ------- -------- ------- ----- --------- ---------- ------- 1995 Sales...................... $10,659 $5,484 $1,160 $439 $ -- $(23) $17,719 Pretax income.................. 880 564 101 51 (377) -- 1,219 Assets..................... 5,729 5,038 999 359 306 -- 12,431 - ---------------------------------------------------------------------------------------------------------------- 1994 Sales...................... $ 9,782 $4,433 $1,006 $348 $ -- $(33) $15,536 Pretax income.............. 330 193 65 44 (243) -- 389 Assets..................... 5,558 4,459 984 307 357 -- 11,665 - ---------------------------------------------------------------------------------------------------------------- 1993 Sales...................... $ 9,423 $4,114 $801 $257 $ -- $(15) $14,580 Pretax income.................. 763 422 94 28 (225) -- 1,082 Assets..................... 5,364 3,880 858 155 605 -- 10,862 - ---------------------------------------------------------------------------------------------------------------- Includes sales between geographic areas. Such sales are at transfer prices that are equivalent to market value. Includes net interest expense of $185 in 1995, $145 in 1994 and $82 in 1993 incurred primarily in the United States to finance and support consolidated operations. The tangible net assets of foreign operations included in the accompanying Consolidated Balance Sheets were $892 at July 1, 1995, $594 at July 2, 1994 and $651 at July 3, 1993. Principally cash and equivalents and investments in associated companies and certain fixed assets. 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.
F-22 43 SARA LEE CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) (dollars in millions except per share data) QUARTERLY FINANCIAL DATA (unaudited)
QUARTER ---------------------------------- FIRST SECOND THIRD FOURTH ------ ------ ------ ------ 1995 Net sales.................................................... $4,290 $4,648 $4,193 $4,588 Gross profit................................................. 1,618 1,764 1,565 1,749 Net income................................................... 165 252 166 221 Per common share Net income................................................. .33 .51 .33 .45 Cash dividends declared.................................... .16 .17 .17 .17 Market price -- high....................................... 23.38 26.00 27.75 29.00 -- low........................................ 19.38 22.38 24.25 26.25 - ------------------------------------------------------------------------------------------------- 1994 Net sales.................................................... $3,796 $4,010 $3,664 $4,066 Gross profit................................................. 1,412 1,533 1,388 1,503 Net income (loss)............................................ 120 236 152 (309) Per common share Net income (loss).......................................... .24 .48 .30 (.65) 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 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 - ------------------------------------------------------------------------------------------------- Includes cumulative effect of accounting change of $35. Includes provision for restructuring of $495. Restated for the 2-for-1 stock split in December 1992.
F-23 44 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 July 31, 1995. Our audit was made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The supplemental schedule II is the responsibility of the Corporation's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly states 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, July 31, 1995. F-24 45 SCHEDULE II SARA LEE CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED JULY 3, 1993, JULY 2, 1994, AND JULY 1, 1995 (IN MILLIONS)
BALANCE AT PROVISION WRITE-OFFS/ OTHER BALANCE BEGINNING CHARGED TO COSTS ALLOWANCES ADDITIONS AT END OF YEAR AND EXPENSES TAKEN (DEDUCTIONS) OF YEAR ---------- ---------------- -------------- ------------ ------- (IN MILLIONS) 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 ==== ==== ====== ==== ===== FOR THE YEAR ENDED JULY 1, 1995: Allowances for bad debts.......... $109 $ 42 $ (30) $ 6 $ 127 Other receivable allowances....... 55 122 (115) 3 65 ---- ---- ------ ---- ----- Total.......................... $164 $164 $ (145) $ 9 $ 192 ==== ==== ====== ==== ===== - --------------- Net of collections on accounts previously written off.
F-25 46 EXHIBIT INDEX
EXHIBITS PAGE/INCORPORATION BY REFERENCE - -------- ----------------------------------------- (3a) Articles of Restatement of the Charter, Exhibit 4.1 to Registration Statement No. as amended 33-35760 on Form S-8 dated July 6, 1990, and Exhibit 3(a) to Report on Form 10-K for Fiscal Year ended July 2, 1994 (3b) By-Laws, as amended (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 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, as amended 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 Fiscal Year 1995 7. Accelerated Growth Incentive Plan Exhibit 10 (12) to Report on Form 10-K Fiscal Years 1990-1994 for Fiscal Year ended June 30, 1990 8. 1991 Non-Qualified Deferred Exhibit 10 (15) to Report on Form 10-K Compensation Plan (Base Salary) for Fiscal Year ended June 29, 1991 9. 1992 Non-Qualified Deferred Exhibit 10 (15) to Report on Form 10-K Compensation Plan (Base Salary) for Fiscal Year ended June 27, 1992 10. 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 11. 1993 Non-Qualified Deferred Exhibit 10 (19) to Report on Form 10-K Compensation Plan (Base Salary) for Fiscal Year ended July 3, 1993 12. 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 13. 1994 Non-Qualified Deferred Exhibit 10 (14) to Report on Form 10-K Compensation Plan (Base Salary) for Fiscal Year ended July 2, 1994 14. FY '95 Non-Qualified Deferred Exhibit 10 (15) to Report on Form 10-K Compensation Plan (Annual Bonus) for Fiscal Year ended July 2, 1994 15. Performance-Based Annual Incentive Appendix A, Exhibit 99 to Proxy Statement Plan dated September 20, 1995 16. 1995 Long-Term Incentive Stock Plan Appendix B, Exhibit 99 to Proxy Statement dated September 20, 1995 17. 1995 Non-Employee Director Stock Plan Appendix C, Exhibit 99 to Proxy Statement dated September 20, 1995
47
EXHIBITS PAGE/INCORPORATION BY REFERENCE - -------- ----------------------------------------- 18. Non-Qualified Deferred Compensation Exhibit 10 (21) to Report on Form 10-K Plan for Outside Directors for Fiscal Year ended July 3, 1993 19. Non-Qualified Estate Builder Deferred Exhibit 10 (17) to Report on Form 10-K Compensation Plan for Fiscal Year ended June 29, 1985 20. Severance Policy for Corporate Exhibit 10 (19) to Report on Form 10-K Officers for Fiscal year ended July 2, 1994 21. Stockholder Rights Agreement Exhibit 4 to Report on Form 10-Q for the quarter ended March 26, 1988 22. Employment Agreement, dated November 9, 1994, between Sara Lee Corporation and Frank L. Meysman 23. Employment Agreement, dated November 9, 1994, between Sara Lee/DE N.V. and Frank L. Meysman and attachments (translated from Dutch) (11) Computation of Net Income per Common Share (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 18 and 19 hereof followed by an asterisk (27) Financial Data Schedules
EX-3.B 2 BY-LAWS 1 EXHIBIT 3b BY-LAWS OF SARA LEE CORPORATION, AS AMENDED ON JUNE 29, 1995 2 TABLE OF CONTENTS
Page ARTICLE 1 -- Meetings of Stockholders ............................... 1 Section 1 -- The Annual Meeting ................................ 1 Section 2 -- Special Meetings .................................. 1 Section 3 -- Place of Meetings ................................. 1 Section 4 -- Presiding Officer ................................. 1 Section 5 -- Notice of Meeting ................................. 1 Section 6 -- Stock Ownership Record Date ....................... 1 Section 7 -- Quorum ............................................ 1 Section 8 -- Voting ............................................ 1 Section 9 -- Organization of Meetings .......................... 2 ARTICLE II -- Board of Directors .................................... 2 Section 1 -- Function and Number of Directors................... 2 Section 2 -- Election .......................................... 2 Section 3 -- Chairman .......................................... 2 Section 4 -- Vacancies ......................................... 2 Section 5 -- Annual Meeting .................................... 2 Section 6 -- Regular Meetings .................................. 2 Section 7 -- Special Meetings .................................. 2 Section 8 -- Quorum; Voting .................................... 2 Section 9 -- Informal Actions .................................. 2
2 3 TABLE OF CONTENTS
Page Section 10 -- Participation in Meetings by Conference Telephone ............................ 3 Section 11 -- Compensation ....................................... 3 ARTICLE III -- Committees of the Board of Directors ................... 3 Section 1 -- Standing Committees and Membership .................. 3 Section 2 -- Selection; Term; Removal ............................ 3 Section 3 -- Meetings; Quorum; Minutes ........................... 3 Section 4 -- Executive Committee ................................. 3 Section 5 -- Finance Committee ................................... 4 Section 6 -- Limitations of Authority of Executive Committee and Finance Committee ............................... 4 Section 7 -- Audit Committee ..................................... 4 Section 8 -- Compensation and Employee Benefits Committee ......................... 5 Section 9 -- Board Affairs Committee ............................. 6 Section 10 -- Employee and Public Responsibility Committee ........................... 6 Section 11 -- Authority to Designate Committees ............................... 6 ARTICLE IV -- Officers ................................................ 7 Section 1 -- Officers ............................................ 7 Section 2 -- Election and Qualification .......................... 7
3 4 TABLE OF CONTENTS
Page Section 3 -- The Chairman of the Board ............................... 7 Section 4 -- The President ........................................... 7 Section 5 -- The Vice Chairman and Vice Presidents ................... 7 Section 6 -- Secretary ............................................... 7 Section 7 -- Treasurer ............................................... 8 Section 8 -- Controller .............................................. 8 Section 9 -- Assistant Secretaries and Assistant Treasurers .................................... 8 ARTICLE V -- Indemnification of Directors, Officers, Employees and Agents ............................... 8 Section 1 -- Right to Indemnification ................................ 8 Section 2 -- Time for Payment Enforcement ............................ 8 Section 3 -- Standard of Conduct ..................................... 8 Section 4 -- General ................................................. 9 Section 5 -- Effective Time .......................................... 9 Section 6 -- Further Action .......................................... 9 ARTICLE VI -- Fiscal Year and Dividends ................................... 9 Section 1 -- Fiscal Year ............................................. 9 Section 2 -- Dividends ............................................... 9 ARTICLE VII -- Auditors ................................................... 9
4 5 TABLE OF CONTENTS
Page ARTICLE VIII -- Corporation Documents ................................... 10 Section 1 -- Execution of Negotiable Instruments .................. 10 Section 2 -- Execution of Documents ............................... 10 ARTICLE IX -- Seal ...................................................... 10 ARTICLE X -- Capital Stock .............................................. 10 Section 1 -- Execution of Stock Certificates ...................... 10 Section 2 -- Transfers ............................................ 10 Section 3 -- Registration ......................................... 10 Section 4 -- Stock Ownership Record Date .......................... 10 Section 5 -- Recognition of Holder ................................ 11 Section 6 -- Replacement Certificates ............................. 11 ARTICLE XI -- Waiver of Notice .......................................... 11 ARTICLE XII -- Making, Altering or Repealing By-Law ..................... 11 Section 1 -- Power Vested in Board of Directors ................... 11 Section 2 -- Scope of By-Laws ..................................... 11
5 6 ARTICLE I MEETINGS OF STOCKHOLDERS SECTION 1. THE ANNUAL MEETING. An annual meeting of the stockholders of the Corporation for the election of directors and the transaction of any other business as may properly come before the meeting shall be held on the last Thursday in October in each year at a time fixed by the Board of Directors (or if such day is a legal holiday, then on the next succeeding business day which is not a holiday). Any business of the Corporation may be transacted at any such annual meeting without being specifically designated in the notice of such meeting, except such business as is specifically required by the Maryland General Corporation Law to be stated in such notice. The meeting may be adjourned from time to time and place to place until its business is completed. SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders shall be held upon the call of the Chairman of the Board, President or a majority of the Board of Directors. The Secretary of the Corporation shall call a special meeting of the stockholders (i) whenever requested in writing to do so by the stockholders of the Corporation entitled to cast at least one-fourth of all of the votes entitled to be cast at the meeting and (ii) on the payment to the Corporation by such requesting stockholders of the reasonably estimated costs of preparing and mailing a notice of the meeting. A request for a special meeting shall state the purpose or purposes of such meeting and the matters proposed to be acted on at it. SECTION 3. PLACE OF MEETINGS. All meetings of the stockholders shall be held at such place within the United States as shall be designated by the Board of Directors. SECTION 4. PRESIDING OFFICER. The Chairman of the Board, or in his absence or at his request, and in the following succession, the President, the Chairman of the Executive Committee, any Executive Vice President, any Senior Vice President, or any Vice President, shall preside at any meeting of the stockholders. SECTION 5. NOTICE OF MEETING. Not less than 10 days nor more than 40 days before the date of each stockholders' meeting, the Secretary shall give to each stockholder entitled to vote at and notice of such meeting, written or printed notice stating the time and place of the meeting, and in the case of a special meeting, the purpose or purposes for which the meeting is called, either by mail or by presenting it to him personally or by leaving it at his residence or usual place of business. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage thereon prepaid, addressed to the stockholder at his address as it appears on the records of the Corporation. SECTION 6. STOCK OWNERSHIP RECORD DATE. The stock ownership record date for the determination of the stockholders entitled to notice of and to vote at any meeting of stockholders and for other purposes shall be the date fixed by the Board of Directors pursuant to Article X, Section 4 of these By-Laws. SECTION 7. QUORUM. At any meeting of stockholders, the presence in person or by proxy of stockholders entitled to cast a majority of the votes entitled to be cast at such meeting shall constitute a quorum. SECTION 8. VOTING. Except as otherwise provided by the Certificate of Incorporation of the Corporation or Maryland 1 7 General Corporation Law, at all meetings of the stockholders, each stockholder entitled to vote at such meeting shall be entitled to (i) one vote upon each matter submitted to a vote at such meeting for each share of common stock of the Corporation owned of record by such stockholder and (ii) such voting rights, if any, as are provided in the applicable Articles Supplementary with respect to any series of preferred stock of the Corporation owned of record by such stockholder. Stockholders may vote either in person or by proxy. Every proxy shall be in writing and dated and shall be signed by the stockholder or his duly authorized attorney-in-fact, but need not be sealed, witnessed or acknowledged, and shall be filed with the Secretary of the Corporation at or prior to the meeting. No proxy shall be valid after 11 months from its date, unless otherwise provided in the proxy. A majority of the votes cast at any meeting of stockholders at which a quorum is present shall be sufficient to take or authorize action upon any matter which may properly come before the meeting, unless more than a majority is required by the Certificate of Incorporation of the Corporation or Maryland General Corporation Law. SECTION 9. ORGANIZATION OF MEETINGS. The order of business and all other matters of procedure at every meeting of the stockholders shall be determined by the presiding officer. ARTICLE II BOARD OF DIRECTORS SECTION 1. FUNCTION AND NUMBER OF DIRECTORS. The business and affairs of the Corporation shall be managed under the direction of a Board of Directors. The majority of the entire Board of Directors may, from time to time, alter the number of directors as set by the Certificate of Incorporation of the Corporation or by the Board of Directors; provided, however, that the number of Directors comprising the Board of Directors shall be no less than three or more than 25. The tenure of office of any director shall not be affected by any alteration in the number of Directors. SECTION 2. ELECTION. The Directors shall be elected at the annual meeting of the stockholders and shall hold office until the next annual meeting of the stockholders or until their successors are elected and qualify. SECTION 3. CHAIRMAN. The Chief Executive Officer of the Corporation shall serve as Chairman. The Chairman shall preside at all meetings of the Board of Directors, and, in his absence, the President, and, in his absence, a director designated by the Board of Directors. SECTION 4. VACANCIES. Any vacancy on the Board of Directors for any cause other than by reason of an increase in the number of Directors, may be filled by a majority of the remaining Directors, though less than a quorum. Any vacancy on the Board of Directors by reason of an increase in the number of Directors may be filled by action of a majority of the entire Board of Directors. A Director elected by the Board of Directors to fill a vacancy shall be elected to hold office until the next annual meeting of stockholders or until his successor is elected and qualifies. SECTION 5. ANNUAL MEETING. An annual meeting of the Board of Directors shall be held on the same day as the annual meeting of stockholders for the purpose of electing the officers of the Corporation, the appointment of the committees of the Board of Directors and for the transaction of any other business. 2 8 SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at such times as may be fixed from time to time by the Board of Directors, without call or notice. SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Chairman of the Board, or the President, upon their own motions, or by the Secretary upon the written request of a majority of the Directors. At least two days' written notice shall be given of all special meetings. SECTION 8. QUORUM; VOTING. At any and all meetings of the Board of Directors, the greater of (a) one-third (calculated in case of a fraction to the next larger whole number) of the duly elected and qualified Directors or (b) two Directors shall constitute a quorum for the transaction of business; but if at any meeting of the Board of Directors there be less than a quorum present, the Directors at the meeting may, without further notice, adjourn the same, from time to time, for a period not exceeding 10 days at any one time, until a quorum is in attendance. A majority of such quorum shall decide any questions that may come before the meeting. SECTION 9. INFORMAL ACTIONS. Any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting, if a written consent to such action is signed by all the members of the Board of Directors or such committee, as the case may be, and filed with the minutes of proceedings of the Board of Directors or committee. SECTION 10. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members of the Board of Directors or of any committee thereof may participate in a meeting of the Board of Directors or any committee by means of conference telephone or similar communications equipment if all persons participating in the meeting can hear each other. Such participation shall constitute presence in person at such meeting. SECTION 11. COMPENSATION. Directors shall be paid such compensation, including retainers and fees for attendance at meetings of the Board of Directors and its committees, as shall be determined from time to time by the vote of the Board of Directors. No compensation for service as a director shall be paid to officers or employees of the Corporation or any subsidiary of the Corporation. ARTICLE III COMMITTEES OF THE BOARD OF DIRECTORS SECTION 1. STANDING COMMITTEES AND MEMBERSHIP. The standing committees of the Board of Directors shall be Executive Committee, Finance Committee, Audit Committee, Compensation and Employee Benefits Committee, Board Affairs Committee and Employee and Public Responsibility Committee. The number of members of each committee, which shall not be less than two, shall be fixed by the Board of Directors from time to time by resolution. The members of each such committee shall be elected by the Board of Directors from among the members of the Board of Directors provided, however, that in the absence of a member or members at a meeting of either the Executive Committee or the Finance Committee, the members present at any meeting of such committee (whether a quorum is present) may appoint Directors who are not members of such committees to act in the place or places of 3 9 such absent member or members in order to constitute a quorum at such meeting. A Director may concurrently serve on more than one of such committees. An employee of the Corporation shall not be eligible to serve as a member of the Audit Committee or the Compensation and Employee Benefits Committee. SECTION 2. SECTION; TERM; REMOVAL. The members of each of the standing committees of the Board of Directors and the chairman thereof shall be elected at the regular annual meeting of the Board of Directors and shall hold office until the next such regular annual meeting of the Board of Directors and until their respective successors are elected and qualified; provided, however, that vacancies during the year on any standing committee shall be filled by the Board of Directors. SECTION 3. MEETINGS; QUORUM; MINUTES. Each of the standing committees of the Board of Directors shall from time to time meet at such time and place as shall be directed by the Chairperson of each committee and, in his or her absence, by the Chairman of the Board of Directors, or in his absence, by the President. A majority of the members of each such committee (including Directors appointed to act at any meeting of the Executive Committee or Finance Committee in the place of absent members thereof as provided in Section 1 above), shall constitute a quorum for that committee meeting and shall have full authority to act for and the action of such quorum shall be taken as the action of the whole of that committee. Each of the committees shall keep minutes of its proceedings and actions and shall submit a report thereof at the next regular meeting of the Board of Directors. The Executive Committee and Finance Committee can only act upon the vote of a majority of all members of each such committee. SECTION 4. EXECUTIVE COMMITTEE. The Executive Committee shall perform such duties and exercise such powers as may be directed or delegated by the Board of Directors, and between meetings of the Board of Directors, it may exercise any and all powers of the Board of Directors in the management of the business and affairs of the Corporation with the same effect as if exercised by the Board of Directors, and the exercise of such powers shall be conclusive of the fact that the Executive Committee had full authority to exercise such powers, subject, however, to the limitations of authority specifically set forth in Section 6 of this Article III of these By-Laws. SECTION 5. FINANCE COMMITTEE. The Finance Committee shall: (a) review (i) the financial structure of the Corporation; its source and use of funds; and its overall financial policies; (ii) the overall corporate annual operating plans and long-range plans for the purpose of analyzing the long-term and short-term debt and financing requirements of the Corporation; and (iii) periodic comparison reports of corporate cash flow and financial position with the annual operating plans; (b) review the terms and conditions of all proposed borrowings and/or the issuance of any other security by the Corporation or any of its subsidiaries for proposed acquisition or for any other purpose; (c) review at least annually (i) the Corporation's overall insurance program; (ii) the Corporation's overall income tax status (including but not limited to a review of pending audits, proposed deficiencies, and 4 10 tax reserves), and (iii) the Corporation's status and program for Foreign Exchange Exposure Risk Management; (d) approve material accounting policy changes of the Corporation as recommended by management; (e) be responsible for (i) the investment management of employee benefit plan assets and, in connection therewith, (ii) the appointment of an Investment Committee comprised of management personnel who will (A) select investment managers, (B) allocate annual contributions to the pension and profit sharing trusts among investment managers or other investment alternatives and (C) establish investment performance objectives; and (iii) reviewing periodic reports on Investment Committee action; and (f) perform such other duties and exercise such other powers as shall be directed and delegated to the Finance Committee by the Board of Directors from time to time. The Finance Committee, at its discretion, shall report its findings and conclusions to the Board of Directors with respect to any of the functions of the Finance Committee enumerated above and make such recommendations with respect thereto as it shall deem appropriate under the circumstances. SECTION 6. LIMITATIONS OF AUTHORITY OF EXECUTIVE COMMITTEE AND FINANCE COMMITTEE. Neither the Executive Committee nor the Finance Committee shall have the authority to (i) declare dividends or distributions, (ii) issue stock, other than as provided by Section 2-411(b) of the Maryland General Corporation Law, (iii) recommend to the stockholders any action which requires stockholder approval, (iv) amend these By-Laws, or (v) approve any merger or share exchange which does not require stockholder approval. SECTION 7. AUDIT COMMITTEE. The Audit Committee shall consist solely of Directors who are neither officers nor employees of the Corporation and shall have the following responsibilities and functions: (a) recommend annually to the Board of Directors the appointment, or the ratification of the appointment by management of, the independent public accountants ("Public Accountants") to audit the books, records and accounts of the Corporation and its subsidiaries with respect to each of their fiscal years ("Annual Audit"); (b) discuss the scope of the prospective Annual Audit and review the proposed fees to be paid therefor with the Public Accountants; (c) review non-audit services of the Public Accountants to assure the audit function is not compromised; (d) review compliance by management of the Corporation with the existing major accounting and financial policies of the Corporation; (e) review, at least annually, the adequacy of reserves established for contingent liabilities of the Corporation and its subsidiaries; (f) without the presence of management employees of the Corporation, review (i) the results of the Annual Audit with the Public Accountants, (ii) the performance, competence and cooperation of the financial officers and staff of the corporate office and operating companies of the Corporation, 5 11 respectively, and (iii) the adequacy of the Corporation's internal auditing program and internal audit staff; (g) review with the Executive Director of Internal Audit who has direct responsibility for the internal audit function of the Corporation (i) the results of audits performed by the internal audit staff during the immediately preceding fiscal year, (ii) the independence from management of the Corporation of the internal audit function to determine audit scopes and (iii) the overall performance of the internal audit staff. (h) following the completion of the review of the Annual Audit and of the performance, competence, cooperation and adequacy of the financial organization of the Corporation, meet with representatives of the Public Accountants and the management of the Corporation for the purpose of discussing and clarifying issues and questions raised by the Public Accountants with respect to the Annual Audit, and report the Audit Committee's findings with respect thereto to the Board of Directors within 60 days after the completion of such meetings; (i) be available from time to time to receive, or at the discretion of the Chairman of the Audit Committee, to meet with respect to reports, suggestions, questions or recommendations from the Public Accountants, the Chief Executive Officer, the Chief Financial Officer, the Chief Accounting Officer, the Executive Director of Internal Audit or the General Counsel of the Corporation, respectively, relating to the responsibilities and functions of the Audit Committee; and (j) review, at least annually, management's procedures and policies to implement and maintain adequate and effective internal accounting controls in the Corporation and review management's programs to assure compliance with the Corporation and review management's programs to assure compliance with the Foreign Corrupt Practices Act of 1977 and accounting and financial recordkeeping provisions under the Securities Exchange Act of 1934 and other federal and state laws. SECTION 8. COMPENSATION AND EMPLOYEE BENEFITS COMMITTEE. The Compensation and Employee Benefits Committee, which shall consist solely of Directors who are not employees or former employees of the Corporation, shall be responsible for the approval and administration of programs affecting the total compensation for key executives. In order to accomplish this objective, the committee shall: (a) review and approve the total compensation philosophy covering officers and other key executives of the Corporation, and periodically review an analysis of the competitiveness of the total compensation practices of the Corporation, comparing the relationship between pay practices and the financial performance of the Corporation; (b) review and approve the salary ranges for the specified position grades of management personnel of the Corporation pursuant to the Corporation's executive salary administration program; (c) review, approve and, when deemed appropriate by the Committee, recommend the definitive approval by the Board of Directors of, the terms and conditions of proposed incentive bonus plans applicable to corporate officers and key operating company executives of the Corporation and specify the standards of performance, or delegate the authority to specify such standards, pursuant to which 6 12 awards may be paid to such executives and officers under such incentive bonus plans; (d) review and approve annual base salaries (as recommended by the Chief Executive Officer and President, respectively, of the Corporation) of all officers of the Corporation and of all other employees with salaries above such amount in such salary grades under the Corporation's salary administration program as shall be determined by the Compensation and Employee Benefits Committee from time to time; (e) review and approve proposed stock option plans, other long-term incentive plans and stock purchase plans, and all proposed changes thereto and, where appropriate, recommend their definitive approval by the Board of Directors and, when deemed appropriate or required by law, approval by the stockholders of the Corporation; (f) administer the stock option and stock purchase plans of the Corporation and designate from time to time the employees of the Corporation and its subsidiaries to whom the options under the stock option plans are to be granted and the number of shares subject to each such option or the executive to whom such duties may be delegated; (g) review and approve special hiring and severance arrangements with executive officers of the Corporation, as defined from time to time by the regulations of the Securities and Exchange Commission and designated by the Board of Directors; (h) review and approve proposed employee benefit plans of the Corporation and proposed changes thereto from time to time (including but not limited to pension and profit sharing plans, group medical plans and insurance programs) and recommend their definitive approval by the Board of Directors when such approval shall be deemed appropriate or required by law; (i) review and approve disclosures to be made in the name of the committee concerning the executive compensation programs of the Corporation, and review other information concerning these programs to be disclosed in the Corporation's annual proxy statement. SECTION 9. BOARD AFFAIRS AND CORPORATE GOVERNANCE COMMITTEE. The Board Affairs and Corporate Governance Committee shall consider and recommend to the Board of Directors from time to time Board policies, procedures and practices, including director compensation, and consider and recommend to the Board of Directors candidates for election as directors of the Corporation. The Committee shall also review the management succession plan and executive resources periodically as determined appropriate by the Committee to assure the continuity and quality of management necessary to provide the financial performance expected by the financial community and the stockholders of the Corporation. SECTION 10. EMPLOYEE AND PUBLIC RESPONSIBILITY COMMITTEE. The Employee and Public Responsibility Committee shall provide oversight and guidance in those areas concerning the Corporation's obligations to its employees and to its major public constituencies, namely its stockholders, customers, consumers and the communities in which it operates. It shall also oversee the Corporation's commitment to employee health and safety, equal employment opportunity and affirmative action, and minority relations. The Committee shall oversee those marketing 7 13 practices relating to advertising standards, product safety, and the handling of consumer complaints and requests for product information. The Committee shall define and oversee the charitable contributions policies and practices of the Corporation, without authority to make, decide or to direct individual contributions. The Committee shall review actions taken by management as the result of current or emerging public policy issues or political and social changes that may affect the affairs and operations of the Corporation. SECTION 11. AUTHORITY TO DESIGNATE COMMITTEES. The Board of Directors may, from time to time, designate committees other than the standing committees set forth in Section 1 of this Article III consisting of two or more Directors by a resolution adopted by a majority of the Directors. Such committees may be delegated any of the powers of the Board of Directors, except the power to declare dividends or other distributions on stock, elect directors, issue stock other than as provided in the next sentence, recommend to the stockholders any action which requires stockholder approval, amend the By-Laws, or approve any merger or share exchange which does not require stockholder approval. If the Board of Directors has given general authorization for the issuance of stock, a committee of the Board, in accordance with a general formula or method specified by the Board by resolution or by adoption of a stock option or other plan, may fix the terms of stock subject to classification or reclassification and the terms on which any stock may be issued, including all terms and conditions required or permitted to be established or authorized by the Board of Directors. The Board of Directors shall have the power at any time to change the members of any committee so designated, to fill vacancies or to dissolve any such committee. ARTICLE IV OFFICERS SECTION 1. OFFICERS. The officers of the Corporation shall be the Chairman of the Board of Directors, the President, Vice Chairman, such Executive Vice Presidents, Senior Vice Presidents, Vice Presidents and Secretary, Treasurer and Controller as the Board of Directors shall elect, and such Assistant Secretaries and Assistant Treasurers or other officers as the Chairman or the Board of Directors shall from time to time deem advisable. SECTION 2. ELECTION AND QUALIFICATION. The officers shall be elected by, and shall hold office at the pleasure of, the Board of Directors. None of the officers, except the Chairman of the Board, the President and Vice Chairman, need be members of the Board of Directors. Any two of the offices set forth in Section 1 of this Article IV may, at the discretion of the Board of Directors, be held by the same person, except that the Chairman of the Board may hold only the additional office of President. No officer shall execute, acknowledge or verify any instrument or document on behalf of the Corporation in more than one capacity, if such instrument or document is required by law or by these By-Laws to be executed, acknowledged or verified by two or more officers. The Board of Directors may from time to time elect or appoint other officers and agents with such powers and duties as they may deem necessary. SECTION 3. THE CHAIRMAN OF THE BOARD. The Chairman of the Board shall be the Chief Executive Officer of the Corporation 8 14 and, subject to the direction of the Board of Directors and to the committees of the Board of Directors, shall have general charge of the business and affairs of the Corporation. He shall preside at all meetings of the stockholders and of the Board of Directors. SECTION 4. THE PRESIDENT. The President shall be the Chief Operating Officer of the Corporation and shall have general charge and supervision of the operations of the Corporation under the direction of the Chairman of the Board and subject to the control of the Board of Directors. He shall perform such other duties as may be assigned to him by the Board of Directors or the Chairman of the Board. In the absence of the Chairman of the Board, or in the case of the inability of the Chairman of the Board to act, the President shall assume the duties of the Chairman of the Board, unless the Board of Directors shall otherwise determine. SECTION 5. THE VICE CHAIRMAN AND VICE PRESIDENTS. The Vice Chairman and each Executive Vice President, Senior Vice President or Vice President, the number of each as the Board of Directors may determine, shall perform such duties and have such authority as shall be assigned to him by the Chairman of the Board or the President, subject to the approval of the Board of Directors. SECTION 6. SECRETARY. The Secretary shall issue or cause to be issued notices for all meetings of the stockholders or Board of Directors, shall keep minutes of such meetings and shall have charge of the seal and corporate books and records. He shall supervise all matters relating to the Securities and Exchange Commission and the stock exchanges on which the shares of the Corporation are listed. He shall perform such other duties as pertain to his office as the Chairman of the Board of Directors may direct. In the abscence of the Secretary from any meetings of the stockholders or Board of Directors, the record of the proceedings shall be kept and authenticated by such person as may be appointed for that purpose by the chairman of the meeting. SECTION 7. TREASURER. The Treasurer shall have charge and custody of the funds, securities and other valuable effects of the Corporation and shall keep full and accurate accounts of all receipts and disbursements. He shall deposit all moneys to the credit of the Corporation in such banks or depositories as he shall designate subject to the control of the Board of Directors or the Finance Committee. He shall cause disbursement of the funds of the corporation as may be required in the conduct of business. Whenever required to do so, he shall render an account of all his transactions as Treasurer of the Corporation. SECTION 8. CONTROLLER. The Controller shall be the Chief Accounting Officer of the Corporation and shall be responsible for the conduct and surveillance of general corporate accounting procedures. He shall supervise the preparation of the Corporation's financial statements and other financial reports and statistics as required by management and governmental agencies, and shall perform such other duties as the Chief Financial Officer of the Corporation or the Board of Directors may from time to time prescribe. SECTION 9. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Assistant Secretaries and Assistant Treasurers shall perform such duties as the Board of Directors may from time to time prescribe or require. In the absence or disability of the Secretary or Treasurer, the Assistant Secretaries or Assistant Treasurers, as the case may be, shall, 9 15 in the order of their seniority, perform the duties and have the powers of the Secretary and Treasurer, respectively. The Board of Directors may, in its discretion, confer upon any Assistant Secretary or Assistant Treasurer any power of the Secretary or Treasurer, respectively, to be exercised jointly with or independently of the Secretary or Treasurer, respectively, as the board of Directors may from time to time determine. ARTICLE V INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS SECTION 1. RIGHT TO INDEMNIFICATION. Subject to the provisions of Section 3 of this Article V, the Corporation (a) shall indemnify its directors and officers, whether serving the Corporation or at its request any other entity, to the full extent required or permitted by the General Laws of the State of Maryland now or hereafter in force, including the advance of expenses under the procedures and to the full extent permitted by law and (b) may indemnify other employees and agents to such extent, if any, as shall be authorized by the Board of Directors and be permitted by law. SECTION 2. TIME FOR PAYMENT ENFORCEMENT. Any indemnification, or payment of expenses in advance of the final disposition of any proceeding, shall be made promptly, and in any event within sixty (60) days, upon the written request of the director or officer entitled to seek indemnification (the "Indemnified Party"). The right to indemnification and advances hereunder shall be enforceable by the Indemnified Party in any court of competent jurisdiction, if (i) the Corporation denies such request, in whole or in part, or (ii) no disposition thereof is made within 60 days. The Indemnified Party's costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation. SECTION 3. STANDARD OF CONDUCT. Anything in these By-Laws to the contrary notwithstanding, except in circumstances where indemnification is required under the General Laws of the State of Maryland now or hereafter in force, no indemnification of a director or officer may be made hereunder unless a determination has been made in accordance with the procedures set forth in Section 2-418(e) of the Maryland General Corporation Law that the party seeking indemnification has met the requisite standard of conduct. A party seeking indemnification shall be deemed to have met the requisite standard of conduct unless it is established that: (a) The act or omission of the director or officer was material to the matter giving rise to the proceeding; and (i) was committed in bad faith; or (ii) was the result of active and deliberate dishonesty; or (b) The director or officer actually received an improper benefit in money, property or services; or (c) In the case of a criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. SECTION 4. GENERAL. The indemnification and advance of expenses 10 16 provided by this By-law shall not be deemed exclusive of any other rights to which a person seeking indemnification or advance of expenses may be entitled under any law (common or statutory), or any agreement, vote of stockholders or disinterested directors or other provision that is not contrary to law, both as to action in his official capacity and as to action in another capacity while holding office or while employed by or acting as agent for the Corporation, shall continue in respect of all events occurring while a person was a director or officer after such person has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of such person. All rights to indemnification and advance of expenses hereunder shall be deemed to be a contract between the Corporation and each director or officer of the Corporation who serves or served in such capacity at any time while this By-law is in effect. SECTION 5. EFFECTIVE TIME. This By-law shall be effective from and after the date of its adoption and shall apply to all proceedings arising prior to or after such date, regardless of whether relating to facts or circumstances occurring prior to or after such date. Nothing herein shall prevent an amendment of this By-law, provided that no such amendment shall diminish the rights of any person hereunder with respect to events occurring or claims made before the adoption of such amendment or as to claims made after such adoption in respect of events occurring before such adoption. SECTION 6. FURTHER ACTION. The Board of Directors may take such action as is necessary to carry out these indemnification provisions and is expressly empowered to adopt, approve and amend from time to time such resolutions or contracts implementing such provisions or such further indemnification arrangements as may be permitted by law. ARTICLE VI FISCAL YEAR AND DIVIDENDS SECTION 1. FISCAL YEAR. The fiscal year of the Corporation shall end on the Saturday nearest to June 30 of each year and commence on the following Sunday. SECTION 2. DIVIDENDS. The Board of Directors from time to time may declare, in accordance with the provisions and limitations of the Certificate of Incorporation of the Corporation and of Section 2-309 of the Maryland General Corporation Law or any amendment to or successor of such Section, dividends on the shares of the Corporation in cash, property or stock of the Corporation. ARTICLE VII AUDITORS At its first meeting of each new fiscal year, the Board of Directors shall appoint a firm of independent certified public accountants to serve for such fiscal year for the purposes of examining the consolidated financial statements of the Corporation and issuing an auditors' report thereon. Such appointment shall be subject to the ratification by the stockholders, to be voted upon at the annual meeting of stockholders in the following October. ARTICLE VIII CORPORATE DOCUMENTS 11 17 SECTION 1. EXECUTION OF NEGOTIABLE INSTRUMENTS. All checks, drafts, notes and other negotiable instruments shall be signed by two officers of the Corporation, or by one officer and any authorized agent, to be determined from time to time by the Board of Directors. SECTION 2. EXECUTION OF DOCUMENTS. Except as otherwise authorized by the Board of Directors, all contracts, conveyances, leases, powers of attorney and other agreements or instruments executed by or on behalf of the Corporation shall be signed by any one of the Chairman of the Board, the Vice Chairman, the President, an Executive Vice President, a Senior Vice President, or a Vice President. A contract, conveyance, lease, power of attorney or other agreement or instrument which relates to a transaction of a division of the Corporation may be signed by or on behalf of such division by its Chairman, President, an Executive Vice President, a Senior Vice President or a Vice President of such division, or if there are no such officer designations in a division, by its Managing Director or General Manager. ARTICLE IX SEAL The seal of the Corporation shall be circular in form and with the words, "SARA LEE CORPORATION - MARYLAND - 1941" inscribed thereon. ARTICLE X CAPITAL STOCK SECTION 1. EXECUTION OF STOCK CERTIFICATES. Certificates of stock shall be issued in such form as may be approved by the Board of Directors, and shall be signed by the Chairman or by the President and by the Secretary, and sealed with the seal of the Corporation; provided, however, that certificates of stock may be issued bearing the facsimile signatures of such officers and the facsimile seal of the Corporation whenever the stock represented thereby is to be transferred and registered by or through a transfer agent and registrar. The said stock shall be issued, transferred and canceled in accordance with such rules and regulations as the Board of Directors shall prescribe. SECTION 2. TRANSFERS. All transfers of stock shall be made on the books of the Corporation, by the holder of the shares, in person or by his attorney, on surrender and cancellation of certificates for a like number of shares. SECTION 3. REGISTRATION. The Board of Directors shall have power and authority to make all such rules and regulations as they may deem expedient concerning the issuance and registration of certificates of stock, including the appointment from time to time of transfer agents and registrars. An original or duplicate stock ledger containing the names and addresses of all stockholders and the number of shares of each class held by each stockholder shall be maintained by the transfer agent or agents of the Corporation, if any, and otherwise at the principal business office of the Corporation. SECTION 4. STOCK OWNERSHIP RECORD DATE. The Board of Directors shall have authority from time to time to fix a date of not less than 10 days and not more than 60 days preceding the date of any meeting of stockholders, any dividend payment date, or 12 18 any date for the allotment of rights, as a record date for the determination of stockholders who are entitled to notice of and to vote at such meeting, or entitled to receive such dividend or rights, as the case may be; and only stockholders of record on such date shall be entitled to notice of and to vote at such meeting, or to receive such dividend or rights, as the case may be; provided, however, that unless the Board of Directors shall fix such date, such record date for determining the stockholders entitled to notice of and to vote at such meeting, or entitled to receive such dividend or rights, as the case may be, shall be a date 30 days preceding the date of such stockholders' meeting or the date of such dividend payment or allotment of rights. SECTION 5. RECOGNITION OF HOLDER. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Maryland. SECTION 6. REPLACEMENT CERTIFICATES. The Board of Directors or the Executive Committee may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, destroyed, stolen or mutilated, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, destroyed, stolen or mutilated, and the Board of Directors or Executive Committee, when authorizing such issue of a new certificate or certificates, may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, destroyed, stolen or mutilated certificate or certificates, or his legal representatives, to give the Corporation a bond in such sums as it may direct as indemnity against any claim that may be made against the Corporation. ARTICLE XI WAIVER OF NOTICE Whenever any notice of the time, place or purpose of any meeting of stockholders, Board of Directors or committee of the Board of Directors is required to be given under the provisions of the laws of Maryland or under the provisions of the Certificate of Incorporation of the Corporation or these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to such notice and filed with the records of the meeting, whether before or after the holding thereof, or actual attendance at the meeting in person or by proxy, shall be deemed equivalent to the giving of such notice to such persons. ARTICLE XII MAKING, ALTERING OR REPEALING BY-LAWS SECTION 1. POWER VESTED IN BOARD OF DIRECTORS. The Board of Directors shall have the power and right to make, alter or repeal any or all By-Laws of the Corporation at any time or from time to time. SECTION 2. SCOPE OF BY-LAWS. The By-Laws may contain any provisions not inconsistent with the laws of Maryland or the Certificate of Incorporation of the Corporation, for the regulation and management of the affairs of the Corporation. 13 EX-10.1 3 1979 STOCK OPTION PLAN 1 EXHIBIT 10.1 SARA LEE CORPORATION 1979 STOCK OPTION PLAN, AS AMENDED 1. PURPOSE OF PLAN. The Purpose of the 1979 Stock Option Plan ("Plan") is to attract and retain able and experienced key management employees and to provide an incentive to, and encourage stock ownership in, Sara Lee Corporation ("Corporation") by the key management employees of the Corporation and its subsidiaries. 2. ADMINISTRATION OF PLAN. This Plan shall be administered by the Compensation and Employee Benefits Committee ("Committee") appointed by the Board of Directors of the Corporation consisting of not less than three (3) members of the Board of Directors of the Corporation ("Board"), all of whom shall be ineligible to participate in this Plan. A majority of the Committee shall constitute a quorum, or actions approved in writing by all the members of the Committee shall constitute the acts of the Committee. The Committee shall have full authority and discretion to (a) determine, consistent with the provisions of this Plan, the employees to be granted options, the times at which options shall be granted, the number of shares subject to each option, the period during which each option becomes exercisable (subject to Section 8), and the terms contained in each option agreement, and (b) adopt rules and regulations and prescribe or approve the forms to carry out the purposes and provisions of this Plan. The Committee's interpretation and construction of any provisions of this Plan or any option granted hereunder shall be binding and conclusive, unless otherwise determined by the Board. Any power that may be exercised or action that may be taken by the Committee under this Plan may also be exercised or taken by the Board. Notwithstanding the provisions of this Plan, the Committee shall have full authority to grant options to Executives (as defined in the Supplement described below) who are subject to the personal income tax laws of the United Kingdom and employed by the Corporation or any of its subsidiaries pursuant to the terms and conditions of the Supplement attached hereto which sets forth a scheme approved by the United Kingdom Inland Revenue under Schedule 10 to the United Kingdom's Finance Act 1984; and the Committee shall have full authority and discretion to amend the Supplement so that its terms and conditions will comply with the applicable requirements of United Kingdom law. No member of the Committee or the Board shall be liable for any action taken or determination made in good faith with respect to this Plan or any option granted hereunder. 3. ELIGIBILITY. The Committee shall from time to time determine the key management employees of the Corporation and any of its subsidiaries (including officers and directors of the Corporation who are also employees) who shall be granted options under this Plan. An employee who has been granted an option may be granted an additional option or options under this Plan if the Committee shall so determine. The granting of an option under this Plan shall not affect any outstanding stock option previously granted to an optionee under 2 this Plan or any other plan of the Corporation. The term "subsidiary" shall mean any domestic or foreign corporation or entity of which the Corporation owns, directly or indirectly, at least 50% of the total combined voting power of such corporation or entity. 4. SHARES SUBJECT TO PLAN. Subject to adjustment as provided in Section 11, the aggregate number of shares which may be issued pursuant to options granted by the Committee under this Plan shall not exceed 2,400,000 shares of Common Stock of the Corporation, par value $1.33 1/3 per share ("Shares"), which may be treasury shares reacquired by the Corporation or authorized and unissued shares, or a combination of both. Any Shares subject to an option under this Plan which shall expire or be terminated for any reason shall be available for the granting of other options during the term of this Plan. 5. OPTION PRICE. The option price per share under each option granted by the Committee shall be not less than 100% of the fair market value per share on the date an option is granted, but in no event less than the par value thereof. The fair market value shall be the average between the highest and lowest quoted selling price per share on the New York Stock Exchange Composite Transactions Tape ("Composite Tape") on the date the option is granted. If there should be no sale of the Shares reported on such date, then the option price per share shall be the average between the highest and lowest quoted selling price per share reported on the Composite Tape on the next preceding day on which there shall have been a sale. 6. STOCK APPRECIATION RIGHTS. (a) At the discretion of the Committee, any option granted under this Plan may, at the time of such grant or thereafter at any time prior to the exercise, termination or expiration of such option, include stock appreciation rights ("SAR"). SAR represents the right of an optionee, without payment to the Corporation (except for applicable withholding taxes), to receive the excess of the fair market value per share on the date on which SAR are exercised over the option price per share as provided in the related underlying option. SAR shall pertain to, and be granted only in conjunction with, a related underlying option granted under this Plan ("related option") and shall be exercisable and exercised only to the extent that the related option is exercisable. The number of SAR included in a related option shall be equal to the number of shares subject to the related option. The Committee may impose conditions upon the grant of exercise of SAR, which conditions may include a condition that SAR may only be exercised in accordance with rules and regulations adopted by the Committee from time to time. Such rules and regulations may govern the right to exercise SAR granted prior to the adoption or amendments of such rules and regulations, as well as SAR granted thereafter. -2- 3 (b) Subject to any restrictions or conditions imposed by the Committee, SAR may be exercised by the optionee only upon the surrender of the exercisable portion of the related option. Upon the exercise of SAR and the surrender of the exercisable portion of the related option, the optionee shall be awarded cash. Shares or a combination of shares and cash having a total value equal to the product obtained by multiplying (i) the excess of the fair market value per share on the date which SAR are exercised ("Exercise Date") over the option price per share by (ii) the number of Shares subject to the exercisable portion of the related option so surrendered. An exercise of SAR shall be made during the period specified in Rule 16b-3 under the Securities Exchange Act of 1934, as in effect at the time of such exercise, or under any law, rule or regulation which may replace or supersede Rule 16b-3. (c) The portion of SAR which may be awarded in cash shall be determined by the Committee from time to time. The number of Shares awardable to an optionee with respect to the non-cash portion of SAR shall be determined by dividing such non-cash portion by the fair market value per share on the Exercise Date. No fractional shares shall be issued. The fair market value per share on the exercise date shall be the average of the highest and lowest quoted selling price per share reported on the Composite Tape on the exercise date. If there shall be no sale on the exercise date, then the fair market value shall be determined on the next preceding day on which there shall have been a sale. 7. EXERCISE OF OPTIONS. (a) Each option granted under the Plan shall be exercisable on the dates and for the number of Shares as shall be provided in a stock option agreement between the Corporation and optionee evidencing the option granted by the Committee and the terms thereof. Shares shall be issued to the optionee pursuant to the exercise of an option only upon receipt by the Corporation from the optionee of payment in full either in cash or by a single exchange of shares of Common Stock of the Corporation previously owned by the optionee for at least six months from the date of a exercise, or a combination of both, in an amount or having a combined value equal to the aggregate purchase price for the Shares subject to the option or portion thereof being exercised. The value of the previously owned shares of Common Stock exchanged in full or partial payment for the Shares purchased upon the exercise of an option shall be equal to the aggregate fair market value, as defined in Section 5, of such shares on the date of the exercise of such options. (b) The optionee may elect to satisfy, in whole or in part, any amount required to be withheld under applicable income tax laws and the amount required to be withheld under the Federal Insurance Contribution Act ("FICA"), if any, upon the exercise of an option by the optionee requesting the Corporation to withhold Shares otherwise issuable which have an aggregate fair market - 3 - 4 value, as defined in Section 5, equal to the amount of taxes required to be withheld ("Share Withholding Election"). The value of the Shares to be withheld shall equal the aggregate amount of withholding tax and the FICA amount, if any, to be withheld on the date such tax and amount are determined ("Tax Date"). The Share Withholding Election shall be (i) made prior to or on the Exercise Date, (ii) irrevocable and (iii) subject to (a) the Committee disapproving any individual election or (b) the Board amending this Plan to rescind all Share Withholding Elections by optionees. If an optionee is an officer of the Corporation, as defined by Rule 3b-2 of the Securities Exchange Act of 1934 ("Officer Optionee"), then (i) the Share Withholding Election must be exercised six months or more before an option is exercised, or (ii) the Share Withholding Election must be made in a 10-day period beginning on the third business day following the date of release of the Corporation's quarterly or annual summary of sales and earnings and ending on the twelfth business day following such date ("Window Period") before the option is exercised, or (iii) an option and the related Share Withholding Election can be both exercised during the same Window Period, or (iv) if the Officer Optionee elects to defer the Tax Date until six months after the Exercise Date ("Deferred Tax Date"), the Share Withholding Election can be made at any time up to and including the Exercise Date, or (v) if the Deferred Tax Date is elected by an Officer Optionee, the Share Withholding Election can be exercised in any subsequent Window Period before the Deferred Tax Date, or the option may be exercised outside the Window Period and the Share Withholding Election exercised during a subsequent Window Period but before the Deferred Tax Date. If an Officer Optionee elects the Deferred Tax Date, such optionee shall execute an agreement with the Corporation agreeing to tender back to the Corporation the proper number of Shares received on the Exercise Date to satisfy the tax withholding requirement on the Deferred Tax Date. 8. TERM OF OPTION. (a) Except with respect to options granted to employees who are residents of the Netherlands and subject to the personal income tax laws of the Netherlands ("Dutch Optionees"), each option granted under the Plan shall be exercisable on the dates and for the number of Shares as shall be provided in a stock option agreement between the Corporation and optionee evidencing the option granted by the Committee and the terms thereof, provided that no option shall be exercisable earlier than six months from the date of the grant of the option, and in no event shall the period of time over which the option may be exercised exceed 10 years from the date of the grant of the option, after which the unexercised portion thereof shall expire. Each option granted to employees who are residents of the Netherlands and subject to the personal income tax laws of the Netherlands shall become exercisable immediately after the grant thereof. Notwithstanding the foregoing, in circumstances under which the Committee shall deem appropriate, the Committee may authorize a future stock option agreement or an amendment to an existing stock option agreement between the -4- 5 Corporation and an individual optionee evidencing an option granted under the Plan to provide that upon the expiration of six months from the date such option is granted, the option subject to such stock option agreement shall become exercisable in its entirety. (b) Change of Control. (i) In the event there shall be a "Change of Control" of the Corporation (as defined below), the unexercised portion of the Option shall become immediately exercisable in its entirety, notwithstanding the provisions of Section 8(a) above. (ii) A "Change of Control" shall occur when: (a) any "Person" (which term, when used in this Section 4, shall have the meaning it has when it is used in Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) is or becomes the "Beneficial Owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of Voting Stock (as defined below) representing twenty percent or more of the votes entitled to be cast by the holders of all then outstanding Shares of the Corporation; or (b) the stockholders of the Corporation approve a definitive agreement or plan to merge or consolidate the Corporation with or into another corporation, or to sell, or otherwise dispose of, all or substantially all of the Corporation's property and assets, or to liquidate the Corporation; or (c) the individuals who are Continuing Directors of the Corporation cease for any reason to constitute at least a majority of the Board of the Corporation. The term "Continuing Director" means (i) any member of the Board who is a member of the Board on June 29, 1989, or (ii) any person who subsequently becomes a member of the Board whose nomination for election or election to the Board is recommended or approved by a majority of the Continuing Directors. The term "Voting Stock" means all capital stock of the Corporation which by its terms may be voted on all matters submitted to stockholders of the Corporation generally. 9. NONTRANSFERABILITY OF OPTION. No option or SAR granted under this Plan shall be transferable except by will or the laws of descent. Each such option or SAR shall be exercisable during the optionee's lifetime only by the optionee. 10. TERMINATION OF EMPLOYMENT AND DEATH OR DISABILITY OF OPTIONEE. (a) If during the term of the Option: (i) the Optionee's employment with the Corporation or any of its subsidiaries is terminated for any reason other than retirement, death or disability, the Option may be exercised within the next successive six- - 5 - 6 month period following the date of termination of employment, but only to the extent that the Optionee was entitled to exercise the Option or any portion thereof on the date of termination, but in no event later than 10 years after the date hereof; (ii) the Optionee shall die or his or her employment with the Corporation or any of its subsidiaries shall be terminated by reason of the Employee's total disability as defined from time to time under the Sara Lee Corporation Long Term Disability Plan, the Option may be exercised by the Optionee's legal representative or estate, as the case may be, within a one-year period following the date of death or termination to the extent that the Option or any portion thereof is or shall become exercisable within such one-year period, but in no event later than 10 years from the date hereof; or (iii) the Optionee's employment with the Corporation or any of its subsidiaries shall be terminated by reason of retirement under the terms and conditions of the Corporation's retirement plans applicable to the Optionee, the Option may be exercised within a two-year period following the date of retirement, to the extent that the Option or any portion thereof is or shall become exercisable within such two-year period, but in no event later than 10 years from the date hereof. (b) The transfer of the Optionee from employment by the Corporation to one of its subsidiaries or by one of its subsidiaries to the Corporation or from one subsidiary to another subsidiary shall not be deemed to be a termination of employment of the Optionee by the Corporation or any of its subsidiaries for purposes of this Agreement. 11. ADJUSTMENT IN NUMBER OF SHARES AND OPTION PRICE. The Committee shall make appropriate and equitable adjustments in the number, option price and kind of Shares with respect to which all outstanding options, or portions thereof then unexercised, shall be exercisable in the event of any subdivision or combination of outstanding Shares of the Corporation by reclassification or otherwise, or in the event of the payment of a stock dividend, a capital reorganization, a reclassification of shares, a consolidation or merger, or the sale, lease or conveyance of substantially all the assets of the Corporation. Any such adjustment made by the Committee shall be final and binding upon all optionees, the Corporation and all other interested persons. 12. AMENDMENT AND DISCONTINUANCE. The Board of Directors of the Corporation may alter, suspend or terminate this Plan; provided, however, that no such action shall increase the period within which options may be granted, or the maximum term for which any option may be granted, the term of any option previously granted, or increase the number of Shares available to be optioned under the Plan (other than as provided in Section 11), or reduce the minimum - 6 - 7 option price per share as provided in Section 5, or otherwise alter or impair any option previously granted under this Plan without the consent of the optionee. 13. REQUIREMENTS OF LAW. The granting of options and the issuance of Shares upon the exercise of an option or SAR shall be subject to all applicable laws, rules and regulations and to such approvals by governmental agencies as may be required. 14. EFFECTIVE DATE AND TERMINATION OF PLAN. The effective date of this Plan shall be October 25, 1979; provided, however, that the holders of at least a majority of the outstanding shares of the Corporation's Common Stock and Preferred Stock, respectively, voting as a single class at the annual meeting of the Corporation's stockholders on October 25, 1979 shall approve and ratify this Plan. - ------------------- As approved by the Board of Directors on October 25, 1979, as amended on June 29, 1989. -7- EX-10.3 4 1988 STOCK OPTION PLAN 1 EXHIBIT 10.3 SARA LEE CORPORATION 1988 STOCK OPTION PLAN, AS AMENDED 1. PURPOSE OF PLAN. The Purpose of the 1988 Non-Qualified Stock Option Plan ("Plan") is to attract and retain able and experienced key management employees and to provide an incentive to those persons to improve operations and increase profits by affording them an opportunity to acquire stock ownership in Sara Lee Corporation ("Corporation"). The options granted under the Plan are not intended to comply with Section 422A of the Internal Revenue Code of 1986, as amended. 2. ADMINISTRATION OF PLAN. This Plan shall be administered by the Compensation and Employee Benefits Committee ("Committee") appointed by the Board of Directors of the Corporation consisting of not less than three members of the Board of Directors of the Corporation ("Board"), none of whom shall be eligible to participate in this Plan or any other stock plan of the Corporation for a period of at least one year prior to appointment. The determinations of the Committee shall be made in accordance with their judgement as to the best interests of the Corporation and its stockholders and in accordance with the purposes of the Plan. A majority of members of the Committee shall constitute a quorum, and all determinations of the Committee shall be made by a majority of its members. Any determination of the Committee under the Plan may be made without notice or meeting of the Committee by a writing signed by all of the Committee members. No member of the Committee or the Board shall be liable for any action taken or determination made in good faith with respect to this Plan or any option granted hereunder. The Committee shall have full authority and discretion to (a) determine, consistent with the provisions of this Plan, the employees to be granted options, the times at which options shall be granted, the number of shares subject to each option, the period during which each option becomes exercisable (subject to Section 8), and the terms contained in each option agreement, and (b) adopt rules and regulations and prescribe or approve the forms to carry out the purposes and provisions of this Plan. The Committee's interpretation and construction of any provisions of this Plan or any option granted hereunder shall be binding and conclusive, unless otherwise determined by the Board. Any power that may be exercised or action that may be taken by the Committee under this Plan may also be exercised or taken by the Board. Notwithstanding any provision to the contrary in this Plan, the Committee shall have full authority to grant options to Executives (as defined in the Supplement described below) who are subject to the personal income tax laws of the United Kingdom and employed by the Corporation or any of its subsidiaries pursuant to the terms and conditions of the Supplement attached hereto which sets forth a plan approved by the United Kingdom Inland Revenue under Schedule 10 to the United Kingdom's Finance Act 1984; and the Committee shall have full 2 authority and discretion to amend the Supplement so that its terms and conditions will comply with the applicable requirements of United Kingdom law. 3. ELIGIBILITY. The Committee shall from time to time determine the key management employees of the Corporation and any of its subsidiaries who shall be granted options under this Plan. An employee who has been granted an option may be granted an additional option or options under this Plan if the Committee shall so determine. The granting of an option under this Plan shall not affect any outstanding stock option previously granted to an optionee under this Plan or any other plan of the Corporation. The term "subsidiary" shall mean any domestic or foreign entity of which the Corporation owns, directly or indirectly, at least 50% of the total combined voting power of such corporation or entity. 4. SHARES SUBJECT TO PLAN. Subject to adjustment as provided in Section 11, the aggregate number of shares which may be issued pursuant to options granted by the Committee under this Plan shall not exceed 1,500,000 shares of Common Stock of the Corporation, par value $1.33 1/3 per share, which may be treasury shares reacquired by the Corporation or authorized and unissued shares, or a combination of both. Any shares subject to an option under this Plan which shall expire or be terminated for any reason shall be available for the granting of other options during the term of this Plan. 5. OPTION PRICE. The option price per share under each option granted by the Committee shall be not less than 100% of the fair market value per share on the date an option is granted, but in no event less than the par value thereof. The fair market value shall be the average between the highest and lowest quoted selling price per share on the New York Stock Exchange Composite Transactions Tape ("Composite Tape") on the date the option is granted. If there should be no sale of the shares reported on such date, then the option price per share shall be the average between the highest and lowest quoted selling price per share reported on the Composite Tape on the next preceding day on which there shall have been a sale. 6. STOCK APPRECIATION RIGHTS. (a) At the discretion of the Committee, any option granted under the Plan may, at the time of such grant or thereafter at any time prior to the exercise, termination or expiration of such option, include stock appreciation rights ("SARs"). SARs represent the right of any optionee, without payment to the Corporation (except for applicable withholding taxes), to receive the excess of the fair market value per share on the date on which SARs are exercised over the option price per share as provided in the related underlying option. SARs shall pertain to, and be granted only in conjunction with, a related underlying option granted under this Plan ("related option") and shall be exercisable and exercised only to the extent that the related option is exercisable. The number of SARs included in a related option shall be equal to the number of shares subject to the related option. The Committee may impose conditions upon the grant or exercise of SARs, which -2- 3 conditions may include a condition that SARs may only be exercised in accordance with rules and regulations adopted by the Committee from time to time. Such rules and regulations may govern the right to exercise SARs granted prior to the adoption or amendments of such rules and regulations, as well as SARs granted thereafter. (b) Subject to any restrictions or conditions imposed by the Committee, SARs may be exercised by the optionee only upon the surrender of the exercisable portion of the related option. Upon the exercise of SARs and the surrender of the exercisable portion of the related option, the optionee shall be awarded cash, shares or a combination of shares and cash having a total value equal to the product obtained by multiplying (i) the excess of the fair market value per share on the date which SARs are exercised ("Exercise Date") over the option price per share by (ii) the number of shares subject to the exercisable portion of the related option so surrendered. (c) The portion of SARs which may be awarded in cash shall be determined by the Committee from time to time. The number of shares awardable to an optionee with respect to the non-cash portion of SARs shall be determined by dividing such non-cash portion by the fair market value per share on the Exercise Date. No fractional shares shall be issued. The fair market value per share on the Exercise Date shall be the average of the highest and lowest quoted selling price per share reported on the Composite Tape on the Exercise Date. If there shall be no sale on the Exercise Date, then the fair market value shall be determined on the next preceding day on which there shall have been a sale. 7. EXERCISE OF OPTIONS. (a) Each option granted under the Plan shall be exercisable on the dates and for the number of shares as shall be provided in a stock option agreement between the Corporation and optionee evidencing the option granted by the Committee and the terms thereof. Shares shall be issued to the optionee pursuant to the exercise of an option only upon receipt by the Corporation from the optionee of payment in full either in cash or by an exchange of shares of Common Stock of the Corporation previously owned by the optionee for at least six months prior to the date of exercise, or a combination of both, in an amount or having a combined value equal to the aggregate purchase price for the shares subject to the option or portion thereof being exercised. In the discretion of the Committee, payment for any shares subject to an option may also be made by delivering a properly executed exercise notice to the Corporation together with a copy of irrevocable instructions to a broker to deliver promptly to the Corporation the amount of sale or loan proceeds to pay the purchase price. To facilitate the foregoing, the Corporation may enter into agreements for coordinated procedures with one or more brokerage firms. The value of the previously owned shares of Common Stock exchanged in full or partial payment for the shares purchased upon the exercise of an option shall be equal to the aggregate fair market value, as defined in Section 5, of such shares on the date of the exercise of such options. -3- 4 (b) The Corporation shall be entitled to withhold the amount of any tax attributable to any amounts payable or shares deliverable under the Plan after giving the person entitled to receive the payment or delivery notice as far in advance as practicable, and the Corporation may defer making payment or delivery of any benefits under the Plan if any tax is payable until indemnified to its satisfaction. The Committee may, in its discretion and subject to rules which it may adopt, permit an optionee to pay all or a portion of all taxes arising in connection with the exercise of an option by electing to (i) have the Corporation withhold shares of Common Stock, (ii) tender back shares of Common Stock received in connection with the benefit or (iii) deliver other shares of Common Stock previously owned by the optionee for at least six months, having a fair market value (as defined in Section 5) equal to the amount to be withheld; provided, however, that the amount to be withheld shall not exceed the optionee's estimated total federal, state and local tax obligations associated with the transaction. The fair market value of fractional shares remaining after payment of the withholding taxes shall be paid to the optionee in cash. 8. TERM OF OPTION. Options granted under the Plan shall become exercisable at such intervals or date or dates and over such period of time ("Exercise Period") and for such number of shares which may be purchased at any one time as shall be determined by the Committee (collectively "Option Terms") to be set forth in the stock option agreements between individual optionees and the Corporation under the Plan ("Option Agreements"), but in no event shall the Exercise Period be more than 10 years after the date of grant. The Committee may authorize existing Option Agreements to be amended to provide for different Option Terms, in whole or in part. Options which are not exercised by the tenth anniversary of the date on which the option was granted shall expire. 9. NONTRANSFERABILITY OF OPTION. No options or SARs granted under this Plan shall be transferable except by will or the laws of descent. Such options or SARs shall be exercisable during the optionee's lifetime only by the optionee. 10. TERMINATION OF EMPLOYMENT AND DEATH OR DISABILITY OF OPTIONEE. (a) In the event that during the term of an unexercised option, an optionee terminates employment with the Corporation or any of its subsidiaries for any reason (other than retirement, death or disability), the option may be exercised within the six successive month period following the date of termination of employment, but only to the extent that the optionee was entitled to exercise such option or any portion thereof at the date of termination of employment, and in no event later than 10 years from the date of the grant of such option. (b) In the event that during the term of an unexercised option, the optionee dies or terminates employment with the Corporation or any of its subsidiaries by reason of the optionee's disability within the meaning of permanent - 4 - 5 and total disability as defined from time to time under the Sara Lee Corporation Long Term Disability Plan, the option may be exercised within a one year period following the date of death or termination of employment to the extent that the option or portion thereof shall become exercisable within such one year period, but in no event later than 10 years from the date of the grant of the option. In the event of an optionee's death or disability, the legal representative of the optionee or the optionee's estate shall be entitled to exercise the option. (c) In the event that during the term of an unexercised option, the optionee terminates employment with the Corporation or any of its subsidiaries by reason of retirement under the terms and conditions of the retirement plans of the Corporation applicable to the optionee, the option may be exercised within a two year period following the date of retirement to the extent the option or portion thereof shall become exercisable within such two year period, but in no event later than 10 years from the date of the grant of the option. (d) The unexercised portion of any option subject to this Section 10 which is not exercised within the six month period, the one year period or the two year period, as the case may be, shall lapse, and the shares subject to such option shall become available for the granting of other options under this Plan. 11. ADJUSTMENT PROVISIONS. (a) If the Corporation shall at any time change the number of issued Shares without new consideration to the Corporation (such as by stock dividend, stock split, recapitalization, reorganization, exchange of shares, liquidation, combination or other change in corporate structure affecting the Shares) or make a distribution of cash or property which has a substantial impact on the value of issued Shares, the total number of Shares reserved for issuance under the Plan shall be appropriately adjusted and the number of Shares covered by each outstanding Award and the option price for each outstanding Option shall be adjusted so that the aggregate consideration payable to the Corporation and the value of each such Award shall not be changed. (b) Notwithstanding any other provision of the Plan, and without affecting the number of Shares reserved or available hereunder, the Board or the Committee may authorize the issuance, continuation or assumption of Awards or provide for other equitable adjustments after changes in the Shares resulting from any merger, consolidation, sale of assets, acquisition of property or stock, recapitalization, reorganization or similar occurrence in which the Corporation is the continuing or surviving corporation, upon such terms and conditions as it may deem equitable and appropriate. (c) In the case of any sale of assets, merger, consolidation or combination of the Corporation with or into another corporation other than a transaction in which the Corporation is the continuing or surviving corporation and which does -5- 6 not result in the outstanding Shares being converted into or exchanged for different securities, cash or other property, or any combination thereof (an "Acquisition"), any Participant to whom an Option has been granted under the Plan shall have the right (subject to the provisions of the Plan and any limitation applicable to the Option) thereafter and during the term of the Option, to receive upon exercise thereof the Acquisition Consideration (as defined below) receivable upon the Acquisition by a holder of the number of Shares which might have been obtained upon exercise of the Option or portion thereof, as the case may be, immediately prior to the Acquisition. The term "Acquisition Consideration" shall mean the kind and amount of shares of the surviving or new corporation, cash, securities, evidence of indebtedness, other property or any combination thereof receivable in respect of one Share of the Corporation upon consummation of an Acquisition. 12. DURATION, AMENDMENT AND TERMINATION. By mutual agreement between the Corporation and an optionee hereunder or under any other stock option plan of the Corporation, options or rights may be granted to the optionee in substitution and exchange for, and in cancellation of, any benefits previously granted to the optionee under this Plan or any other stock option plan of the Corporation. Also, by mutual agreement between the Corporation and an optionee hereunder or under any stock option plan of the Corporation, options or rights may be granted to the optionee in substitution and exchange for, and in cancellation of, any benefits previously granted to the optionee under this Plan or any other stock option plan of the Corporation. The Board of Directors may amend the Plan from time to time or terminate the Plan at any time. However, no action authorized by this Section shall reduce the amount of any existing benefit or change the terms and conditions thereof without the optionee's consent. No amendment of the Plan shall, without approval of the stockholders of the Corporation, (a) materially increase the total number of shares which may be issued under the Plan; (b) materially reduce the minimum purchase price of shares of Common Stock which may be made subject to options under the plan; or (c) materially modify the requirements as to the eligibility for options under the Plan. 13. STOCKHOLDER APPROVAL. The Plan was adopted by the Board of Directors on August 25, 1988 subject to stockholder approval. The Plan and any benefits granted thereunder shall be null and void if stockholder approval is not obtained within twelve months of the adoption of the Plan by the Board of Directors. - --------------------------- As approved by the Board of Directors on August 25, 1988, as amended on June 29, 1989. - 6 - EX-10.6 5 SHORT-TERM INCENTIVE PLAN 1 EXHIBIT 10.6 SARA LEE CORPORATION SHORT-TERM (ANNUAL) INCENTIVE PLAN FISCAL YEAR 1995 PLAN DESCRIPTION 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 as defined by generally accepted accounting principles as of July 3, 1994. g) RETURN ON INVESTMENT ("ROI") shall mean Operating Profit as defined below expressed as a percent of average investment, defined and calculated in accordance 1 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. Operating Profit of businesses divested and NOT included in the Annual Operating Plan as divestments will only be included through the date of divestment. i) ASSET MANAGEMENT refers to various financial standards used to measure performance on a consolidated or divisional basis as determined by the operating officer to whom the group or division reports. 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 or actually paid (as is the practice of the Division) to the participant during FY95, disregarding deferral elections, premiums, allowances, expense reimbursements, commissions, incentives, 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. 2 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 Attachment 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 between five to seven 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 note at the bottom of Attachment I unless those have otherwise been factored in to the individual's annual performance evaluation. 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.). Following are definitions of the various performance levels; OUTSTANDING - performance that demonstrably exceeds the Superior level and where all goals are met and major goals surpassed. Attainment requires significant "stretch". 3 5 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. 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. 4 6 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. 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. 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. 5 EX-10.22 6 AGREEMENT 1 EXHIBIT 10.22 AGREEMENT THIS AGREEMENT entered into this 9th day of November, 1994, by and between Sara Lee Corporation, a Maryland corporation, with its principal place of business at Three First National Plaza, Suite 4600, Chicago, Illinois 60602 United States of America (hereinafter called "Sara Lee"), and Frank L. Meysman, an individual whose principal residence is at Nachtegaallaan 1, 2243 E1 Wassenaar, The Netherlands (hereinafter called "Meysman"). WITNESSETH: WHEREAS, Sara Lee has elected Meysman to serve as a Senior Vice President and has nominated Meysman to serve as Chairman of the Board of Management of Sara Lee/DE N.V., an indirect, wholly-owned subsidiary of Sara Lee incorporated in the Netherlands (hereinafter called "Sara Lee/DE"); and WHEREAS, the Supervisory Board of Sara Lee/DE has approved the nomination of Meysman as Chairman of the Board of Management of Sara Lee/DE; and WHEREAS, Meysman has agreed to serve Sara Lee as a Senior Vice President and Sara Lee/DE as Chairman of its Board of Management in consideration for certain compensation and benefits; and WHEREAS, Meysman has entered into a written employment agreement with Sara Lee/DE dated as of November 9, 1994, providing for certain of the compensation and benefits related to his service as Chairman of the Board of Management of Sara Lee/DE (hereinafter called "Sara Lee/DE Agreement"); and 1 2 WHEREAS, Sara Lee has agreed to provide certain additional benefits to Meysman in consideration for his service as a Senior Vice President; NOW, THEREFORE, Sara Lee and Meysman hereby agree to the following terms and conditions with respect to the additional benefits which Sara Lee shall provide to him: 1. SHORT-TERM (ANNUAL) INCENTIVE PLAN During the term of this Agreement, Meysman shall be entitled to participate in the Sara Lee Corporation Short-Term (Annual) Incentive Plan (hereinafter called the "Annual Plan") applicable for each Sara Lee fiscal year. The Annual Plan shall provide for the payment of additional cash compensation on a fiscal year basis, the amount of which shall be related to the performance of operating businesses for which Meysman is accountable and/or the performance of Sara Lee Corporation in its entirety. Meysman shall be eligible to earn an incentive award of up to ninety-five percent (95%) of the base salary payable to him under the Sara Lee/DE Agreement. The performance standards against which his award will be determined shall be established at the beginning of each fiscal year during the term of this Agreement by the Sara Lee executive to whom Meysman reports and the terms and provisions established for the Annual Plan by Sara Lee's Board of Directors, or a committee thereof. 2. LONG TERM INCENTIVE PLANS During the term of this Agreement, Meysman shall be entitled to participate in any Sara Lee long term incentive compensation plan providing for the payment of additional cash compensation (hereinafter called "Long-Term Plan"). The amount of cash compensation payable under the Long-Term Plan shall be related to the performance of operating businesses for which Meysman is accountable and/or the performance of Sara Lee Corporation in its entirety. The time period for which performance shall be measured, the maximum amount of compensation 2 3 which he may earn and the procedures for determining his earnings under such plans, shall be established by Sara Lee's Board of Directors, or a committee thereof. 3. STOCK OPTION PLANS During the term of this Agreement, Meysman shall be entitled to participate in any stock option plans providing for the granting of options to purchase shares of Sara Lee securities over an extended period of time at the market value of such shares on the date of grant of the option, and in any plans which provide for the distribution or reservation of shares for management personnel, including, without limitation, restricted stock plans. The number of shares to which Meysman shall be entitled pursuant to a grant, distribution or reservation under a particular plan shall be established by Sara Lee's Board of Directors, or a committee thereof. 4. DEFERRED COMPENSATION PLANS During the term of this Agreement, Meysman shall be entitled to participate in any plans which permit management personnel of Sara Lee to defer the payment to him or her of base salary or incentive annual or long term cash compensation. 5. FINANCIAL COUNSELING During the term of this Agreement, Sara Lee shall reimburse Meysman, or pay directly to such financial adviser as Meysman may direct, the fees related to his personal financial counseling, provided that the amount of such fees that Sara Lee shall be obligated to pay during any one calendar year shall not exceed three percent (3%) of Meysman's base salary at the [beginning/end] of such calendar year. 3 4 6. PARTICIPATION SUBJECT TO TERMS OF PLANS Meysman shall be entitled to participate in the above-described benefits plans on the same basis as other Sara Lee management personnel of the same employment grade and rank as Meysman. Meysman's participation in the above-described benefit plans shall be subject at all times to the terms and conditions of such plans, as they may exist from time-to-time, and as established by Sara Lee's Board of Directors, or a committee thereof. Meysman acknowledges that Sara Lee shall have the right to amend or discontinue any plan at any time, subject to the rights which Meysman shall have accrued under such plan prior to the effective date of any amendment or discontinuance. 7. TERMINATION OF AGREEMENT Meysman shall continue to be entitled to participate in the benefit plans provided for in this Agreement until such time as annexes A or B to the Sara Lee/DE Agreement become applicable. 8. OTHERS TERMS AND CONDITIONS OF EMPLOYMENT All other terms and conditions of the Sara Lee/DE Agreement shall remain in full force and effect as set forth in that certain agreement dated November 9, 1994, by and between Meysman and Sara Lee/DE. 4 5 IN WITNESS WHEREOF, Meysman and Sara Lee have signed this Agreement on the date first above written. SARA LEE CORPORATION By: /s/ Gary C. Grom ____________________________ Gary C. Grom Senior Vice President Human Resources /s/ Frank L. Meysman ________________________________ Frank L. Meysman 5 EX-10.23 7 EMPLOYMENT CONTRACT 1 EXHIBIT 10.23 The following is a fair and accurate English translation of the Employment Contract between Sara Lee/DE N.V. and Frank L. Meysman, dated November 9, 1994, which is originally in the Dutch language. Sara Lee Corporation /s/ Janet Langford Kelly ------------------------- By: Janet Langford Kelly Its: Senior Vice President, Secretary and General Counsel 2 Translated from DUTCH EMPLOYMENT CONTRACT THE UNDERSIGNED: 1. SARA LEE/DE N.V., with corporate seat in Joure and administrative offices at Utrecht, in accordance with the provisions of article 24 indent 2, in these presents represented by Mr. H.B. van Liemt in his capacity of Chairman of the Board of Supervisors hereinafter called the "Company", AND 2. Mr. F. Meysman, residing at Nachtegaallaan 1, 2243 El Nassenaar The Netherlands, hereinafter called "Member of the Board of Management". WHEREAS Member of the Board of Management entered the employment of Douwe Egberts N.V. in Belgium on January 16, 1986 in the capacity of Marketing Director Douwe Egberts Belgium, and started his employment with the Company on September 1, 1990, where he consecutively held the positions of Senior Vice President Corporate Strategy & Business Development, member of the Coffee & Grocery Board, and chairman of the Household & Personal Care Board; Member of the Board of Management was appointed Vice President in 1992, and Senior Vice President of Sara Lee Corporation "SLC" on April 6, 1994; the Board of Supervisors of the Company, in its decision dated April 16, 1992, named the Member of the Board of Management a member of the Board of Management of the Company; 1 3 the Board of Supervisors of the Company, in accordance with article 21 indent 1 of the Company's Bylaws, by decision dated April 19, 1994, named the Member of the Board of Management Chairman of the Board of Management of the Company; Member of the Board of Management is familiar with the agreements concluded with SLC such as the memorandum dated June 27, 1977, the agreement of February 24, 1984 and the protocol of February 27, 1987; and the parties wish to settle their employment relations while taking into account the provision of article 22 of the Company's Bylaws; THEREFORE AGREE AS FOLLOWS: Article 1 - Term a. This agreement enters into effect on April 19, 1994 and replaces all employment contracts and/or agreements relating to their service relationship executed prior to that date between the Company and the Member of the Board of Management, which are hereby canceled. b. Without prejudice to the provisions of Attachments A and B to this agreement, this agreement is concluded for an unspecified term and can be terminated by either party by registered letter at the end of a calendar month providing a notice of six months, while taking into account the provisions of the Bylaws of the Company regarding the resignation of members of the Board of Management. c. This agreement terminates in each case legally without requiring any notice when reaching the age at which a member of the Board of Management is obliged to resign in accordance with the Bylaws of the Company. 2 4 Article 2 - Task/Competencies a. The Member of the Board of Management is obliged to carry out his activities in accordance with the pertinent legal provisions and those in the Company's Bylaws. In addition, the Member of the Board of Management is obliged to be always bound by the "Management Regulation" drawn up in accordance with article 20 indent 2 of the Bylaws, if and as long as it remains in existence. b. The Member of the Board of Management is Chairman of the Board of Management which as a Group is entrusted with the Management of the Company. As Chairman, the Member of the Board of Management is in particular entrusted with the following tasks and areas: strategy, complete operational matters, financial policy, internal and external communications, personnel and juridical matters. The Board of Supervisors is at all times authorized, after consultation with the Board of Management and the Member of the Board of Management, to effect changes in and make additions to the task description. c. In addition to his function of Chairman of the Board of Management, the Member of the Board of Management will be requested to take on administrative functions at sister companies and/or subsidiaries of the Company. d. The Member of the Board of Management is obliged to observe the Code of Conduct of SLC, as set forth from time to time. The Code of Conduct contains among others, provisions with regard to limitations which are placed on private investments. Article 3 - Primary Employment Conditions a. Salary The Member of the Board of Management is entitled to an annual salary of DFL 644,000 gross. This salary incorporates all legally 3 5 compulsory payments of whatever nature, including vacation allowance, as well as year-end bonus. b. Payment Payment will be on a monthly basis. c. Raise The salary of the Member of the Board of Management can be raised annually, i.e. on January first on the basis of an evaluation by the Board of Supervisors of the performance of the Member of the Board of Management, as well as of the market developments in relation to the functions on a comparative level. The first raise may take place on January 1, 1996. d. Incapacity During the first year of illness during which the (Dutch) Health Law is applicable, and the two consecutive years during which the incapacity applies according to WAO/AAW, the Company shall supplement the benefits under the Health Law and/or WAO/AAW (or legal regulation taking its place and/or any addition to it) up to 100% of the salary prevalent on the day preceding the first sick day, applied in a manner as described in indent c of this article. Benefits on the basis of above insurances shall, in case the Member of the Board of Management retires during the period of illness or in case of incapacity, be deducted from the pension benefits for the corresponding period. e. Recovery clause The Company is not obligated to make any payment on account of incapacity, as meant in indent d. of this article, if and to the extent the Member of the Board of Management can exercise a claim against a third party with regard to a damage compensation claim because of lost salary. In the latter case, the Company will disburse the amounts as per indent d. of this article by way of advance to the damage compensation to be received from the third party, and against a cash-in waiver by 4 6 Member of the Board of Management of his right to the damage compensation up to the sum of the advances paid out by the Company. The obligation of the Company to turn over to the Member of the Board of Management the cashed-in damage compensation amounts will be legally compensated with the advances disbursed to him. Article 4 - Secondary Employment Conditions a. Vacation Entitlements The Member of the Board of Management is entitled to thirty days of vacation per year. Member of the Board of Management shall take his vacation following mutual consultation with the other members of the Board of Management. In case of a lengthy absence, the Member of the Board of Management shall so advise the Board of Supervisors. b. Pension Provision The pension arrangement is included in Attachment E to this agreement. c. The successors of the Member of the Board of Management are entitled to a benefit, as meant in article 7A:1639.1 of the Civil Code. Article 5 - Tertiary Employment Conditions a. The Member of the Board of Management is and remains insured under the voluntary collective health insurance plan of the Company. The corresponding premiums are totally for account of the Member of the Board of Management. 60% of the premium owed by the Member of the Board of Management is reimbursed on a gross basis by the Company on the basis of insurance class 2a for the Member of the Board of Management and spouse, and class 3 for his children. b. Car Allowance 1. Member of the Board of Management has available to him for business use a suitable vehicle with chauffeur. 2. Besides the car mentioned under b.1., Member of the Board of Management can make use of the car policy applicable to the 5 7 Board of Management for private and business use. c. Telephone Expenses The company reimburses the Member of the Board of Management for the complete subscription and call expenses of the telephone connection at the Member of the Board of Management's home, after he deducts a contribution for private use in accordance with the arrangement applicable to the Board of Management. d. Out-of-pocket Expenses Expenses, which the Member of the Board of Management incurs within the framework of carrying out his tasks as member of the Board of Management for the Company, such as travel and lodging expenses, are reimbursed on a declaration basis. If so desired, the Chairman of the Board of Supervisors can request to inspect the expense account declarations, which are processed on a quarterly basis. e. Non-reimbursable Expenses For the non-reimbursable expenses, the Company pays the Member of the Board of Management a representation compensation, which is set by the Board of Supervisors, from year to year. For 1994, a representation reimbursement of Dfl. 18,000 is applicable. f. Third Party Liability Insurance As Chairman of the Board of Management, and in all functions which he holds on the basis of and in connection with the Company, the Member of the Board of Management is insured during the term of this agreement and after that, as to his third party liability in accordance with the policy affixed as Attachment C. The costs of the insurance are for account of the Company. If the Member of the Board of Management, on the basis of his above-mentioned liability, which does not fall under the coverage of above insurance policy, is held liable for damages according to a judicial decision, the Company shall compensate the Member of the Board of Management for the material damage suffered by the Member of the Board of Management, 6 8 unless it is established by judicial decision that the Member of the Board of Management is guilty of intent or gross neglect. The Member of the Board of Management is obliged to keep the provision of this indent f. secret vis-a-vis third parties. Article 6 If the Member of the Board of Management, owing to a function he occupies by virtue of his capacity as member of the Board of Management of the Company, receives an allowance or compensation, he shall deposit same into the treasury of the Company. Article 7 - Additional Functions The Member of the Board of Management binds himself not to be active for any other employer for the duration of his employment contract, - either directly or indirectly -, to abstain from doing business for own account and not to accept a position, nor to occupy any paid and/or time-consuming unpaid function without the advance written consent of the Chairman of the Board of Supervisors of the Company. The Member of the Board of Management declares that on the date he signs this agreement, he is holding the additional functions as listed in Attachment D, which the Board of Supervisors hereby approves as per above provision. The interest and/or compensations attached to the side functions meant in this article do not need to be deducted from the salary mentioned in article 3, indent a or from any payment or compensation mentioned in this agreement. Article 8 - Non Compete Clause a. The Member of the Board of Management binds himself, during the term of his employment relationship and during a period of 24 months after termination of his employment, neither directly nor indirectly, neither for himself nor for others, to be active or connected in any form whatsoever in or with any enterprise 7 9 with activities similar to, or otherwise competing with those of the Company and its affiliates, nor to lend thereby his intervention as an intermediary, in any form whatsoever, directly or indirectly. Taking into account the potential damage for the Company and its affiliates, the Chairman of the Board of Supervisors can, at the request of the Member of the Board of Management, declare that a specific activity or connection of the Member of the Board of Management falls outside of the sphere of competition. Such a request by the Member of the Board of Management shall not be refused on unreasonable grounds. The Member of the Board of Management furthermore binds himself to abstain during the above defined term from any efforts to solicit any employee(s) of the Company or affiliated companies. b. If the Member of the Board of Management acts in violation of his obligations, by virtue of the provision under a of this article, he shall owe the Company a penalty for each violation without the need to serve notice, the amount of which is equal to one time the last applicable gross annual salary of the Member of the Board of Management, together with a fine equalling Dfl. 50,000 for each day the violation continues following communication of the corresponding discovery by the Company, without prejudice to the Company's right to claim complete compensation of damages instead of the fine. Article 9 - Confidentiality a. The Member of the Board of Management is bound to secrecy with regard to all particulars concerning the affairs of the Company and its affiliates. b. The Member of the Board of Management binds himself both during the term of his employment contract and after the employment agreement has terminated for whatever reason, not to divulge to anybody in any way whatsoever any information, knowledge or data related to the affairs of the Company and its affiliates, about which 8 10 he has obtained knowledge during or as a result of his employment contract with the Company and about which secrecy was imposed on him, or the confidential character of which is known to him and should be known by him. c. The Member of the Board of Management shall only utilize information, knowledge or data as meant under b of this article within the framework of his activities by virtue of his employment contract with the Company. d. If the Member of the Board of Management acts in violation of his obligations by virtue of the provisions in indents a, b and c of this article, he shall owe the Company for each violation a fine in the amount of one time the last applicable gross annual salary, without prejudice to the right of the Company to claim complete compensation of damages instead of the fine. Article 10 - Documents The Member of the Board of Management is prohibited in any way whatsoever from having or keeping in his private possession documents or correspondence or duplicates of them which he received in connection with his activities at the Company, except to the extent and for the period of time this is required for carrying out his activities for the Company. In each case, the Member of the Board of Management is obliged, even without the corresponding request, to immediately turn such documents, correspondence or duplicates of them over to the Company at the end of his service or in case of non-activity for whatever reason. Article 11 - Relief The Company has the right to relieve the Member of the Board of Management of his function as a member of the Board of Management of the Company, without thereby terminating the employment contract with the Member of the Board of Management, if and as long as the Member of the Board of Management of the Company is incapable due to illness or accident or otherwise of 9 11 carrying out his activities as member of the Board of Management in due form, and the Company shall in such case not be held liable for compensation of damages. Without prejudice to the foregoing, the Company retains the right to terminate the employment thereafter in accordance with the provisions of this agreement. Article 12 a. All disputes, which might arise by virtue of the present agreement, as well as of subsequent agreements, which might be the result thereof, will be decided in accordance with the Regulations of the Dutch Arbitrage Institute in Rotterdam. The Arbitration Court shall consist of three arbiters. The arbitrage site shall be Utrecht. b. This agreement shall be subject to Dutch law. c. Amendments or additions to this agreement must be set forth in writing in order to have legal validity. Article 13 The attachments form an integral part of this agreement. They are: A. Regulation concerning voluntary early retirement B. Regulation regarding termination of employment C. Third party liability insurance D. Additional functions E. Pension letter Thus drawn up in duplicate and signed, in Utrecht on November 9, 1994 (signed) (signed) SARA LEE/D.E., N.V. F. Meysman H.B. van Liemt 10 12 Attachment A This Attachment is an integral part of the Labor Agreement dated November 9, 1994. 1. Prior to reaching the pension entitlement age of 62, but after reaching age 57 1/2, the Company has the right to request the Member of the Board of Management to retire as Chairman of the Board of Management for reasons at Company's discretion. If the Company requests the Member of the Board of Management to retire in this manner, whereby the Company observes a notice of at least 6 months, the Member of the Board of Management, without any reservation and with his full cooperation, shall accept such resignation at the desired moment specified to this effect. 2. The Company hereby grants the Member of the Board of Management the right to resign voluntarily upon his request at age 60, whereby the Member of the Board of Management shall observe a notice of at least 6 months. 3. In case of resignation as Chairman of the Board of Management as a result of the provision sub 1, resp. 2 of this Attachment during the period starting on the date of termination of his employment with the Company until the effective date of his pension being 62 years, the Member of the Board of Management shall be entitled to an arrangement for voluntary early retirement, which is applicable or declared to be applicable for members of the Board of Management. 4. For the Member of the Board of Management who retires as a member of the Board of Management in accordance with the provision sub 1 of 2 of this Attachment, in deviation from the regulation in effect for the other employees of the Company, an allowance applies on the basis of 90% of the gross annual salary paid out last during the first year starting on the date of termination of his employment with the Company and on the basis of 80% of the gross annual salary received last for the 11 13 remaining period until reaching age 62, whereby the Board of Supervisors can decide to index the annual salary. The required provision for this arrangement shall be made by the Company. The Company has the right to transfer the rights and obligations by virtue of the arrangement provided for in this Attachment A to a Foundation which is set up for this purpose for the benefit of the members of the Board of Management of the Company. 5. To the extent that the Member of the Board of Management after above-mentioned arrangement becomes effective receives income from other sources or acquires income from his independent enterprise, while such income on a gross basis together with the allowances according to sub 3 and 4 of Attachment A exceeds 100% of above-mentioned gross annual salary paid out last, the excess shall be withheld from the allowance owed by the Company. Remuneration paid for carrying out the Supervisor's function is not deemed to form part of above-mentioned income from employment or from independent entrepreneurship. Of this type of income meant here, the Member of the Board of Management shall always prepare and submit a detailed accounting to the Company. 6. At the end of the employment contract, the Member of the Board of Management shall resign all directorships/administrative functions in enterprises affiliated with the Company and to affix all signatures required to this effect and to lend his cooperation. Thus drawn up in duplicate and signed in Utrecht on Nov. 9, 1994. (signed) (signed) SARA LEE/DE N.V. F. Meysman H.B. van Liemt 12 14 Attachment B This attachment forms an integral part of the Labor Agreement dated November 9, 1994. The following arrangement applies to the Member of the Board of Management for the period starting with his appointment as Chairman of the Board of Management until he reaches age 57 1/2. 1. If the Company terminates the employment prior to the Member of the Board of Management reaching age 57 1/2 without observing the 6 months' notice, or while observing the six months' notice for reasons other than for cause, as meant in article 7A:1639.p of the Civil Code - if necessary, in case of a difference of opinion about this as decided by a judge of the highest instance - the Company shall owe the Member of the Board of Management an amount equal to: a) either 2.5 (two and a half) times the gross annual salary received last, as meant in article 3 indent a of the employment contract, in case of termination without observing the notice of six months; b) or 2 (two) times the gross annual salary received last, as meant in article 3 indent a of the employment contract, in case of termination while observing the notice of six months; c) increased by one gross monthly salary, as meant in article 3 indent a of the employment contract for each year the Member of the Board of Management exceeds age 50. This allowance shall be paid out by the Company in monthly installments, each amounting to 1:30 of the total amount in case of sub a, or 1:24 of the total amount, in case of sub b, such increased each time by the number of installments in accordance with the provision sub c, this however while making all mandatory withholdings and furthermore without prejudice to provision sub 2 of this Attachment. During the period mentioned no employment agreement exists between the Member of the Board of Management and the Company. 13 15 By the end of the employment contract, a premium-free policy will be provided for the pension entitlements built up during the period of employment, on the basis of an actuarial computation. The Member of the Board of Management can remain insured under the collective health plan subscribed to by the Company, however without being entitled to a Company contribution in the premiums. All employment conditions, to the extent not explicitly provided for otherwise, are automatically terminated at the end of the employment contract. 2. Over the payments meant under sub 1, the Company shall withhold the pro rata portion of 2/3 of all income of the Member of the Board of Management as mentioned below, acquired during the first year after termination of employment and 1/3 of all income mentioned hereinafter acquired from the beginning of the second year after termination of employment for a period ending on the last day of the month during which the final installment payment meant sub 1 takes place. "All income" means all earnings from employments and/or independent entrepreneurship and/or as adviser and/or supervisor, if such an activity or connection relates to an enterprise with activities in a field which are similar to or otherwise competing with those of the Company and its affiliates. In order to be able to apply these deductions, the Member of the Board of Management shall supply the Company with a monthly statement of all income mentioned above. To verify this, the Company shall have the right to request all relevant information from a relevant income tax inspector, as well as from the employers of the Member of the Board of Management. 3. At the end of the employment contract, the Member of the Board of Management shall resign all directorships/administrative functions with the Company's affiliates and shall execute all documents and 14 16 lend his full cooperation to this effect. Thus drawn up in duplicate and signed in Utrecht on November 9, 1994. (signed) (signed) SARA LEE/DE N.V. F. Meysman H.B. van Liemt 15 17 Attachment C This attachment forms an integral part of the Labor Agreement dated November 9, 1994. (W.A. Policy) This attachment refers to a third-party insurance policy which is part of an overall corporate insurance policy in Dutch language and which contains confidential information. 16 18 Attachment D This attachment forms an integral part of the Labor Agreement dated Nov. 9, 1994. Additional functions held by the Member of the Board of Management at the time of signing this agreement: None 17 19 Stichting Attachment E "Excedentenpensioenfonds Douwe Egberts" Translation from originial Dutch version - --------------------------------------- Posrbus 1428 3600 BK MAARSSEN Mr. F.L.V. Meysman Nachtegaallaan 1, 2243 El Nassenaar, The Netherlands Utrecht, February 16, 1995 (L-0995.02) Dear Mr. Meysman, Based on your membership of the "Excedentenpensioenfonds Douwe Egberts" Foundation and in accordance with the provisions of Article 11, clause 5 of the Foundation's by-laws, the following pension entitlements apply to you with effect from 19 April 1994, subject to the terms and provisions of the Foundation's by-laws. a. An old-age pension, commencing on the first day of the month in which you reach the age of 62, set at 50% of your last annual salary. In addition, until the date on which you become eligible for a statutory old-age pension (AOW) the required employee's and employer's social security insurances contributions will be paid/refunded by the Foundation; however, with effect from the date of commencement of the AOW pension an amount will be deducted from the old-age pension in respect of AOW, calculated according to the formula: SMW x 0.0125 ------ 0.0175 where SMW - statutory minimum wage including holiday bonus as of 1 January of the year of your retirement, or 10/7 x the joint gross AOW pension entitlements, including holiday payments, applicable at the same date to an eligible married couple, both of whom are aged 65 or over, if this results in a lower total. N.B. For the purpose of calculating your severance rights the date of commencement of this pension commitment shall be taken as 16 April 1992. The AOW amount to be deducted in determining the Foundation's obligations issuing from your severance rights is calculated as follows: 1 SMW x 0.0125 x m ------ - 0.0175 n 20 STITCHTING "EXEEDENTENPENSIOENFONDS DOUWE EGBERTS" -2- where SMW(1) represents the above-mentioned minimum wage as of 1 January of the year used for computation, in the number of years' service with Douwe Egberts and in the number of years between the commencement of your employment with Douwe Egberts and the date of commencement of your AOW pension. For the year 1994 you are entitled to an old-age pension from the age of 62 in the amount of NLG 332,000, - p.a., from which there will be an AOW deduction of NLG 25,314.00 p.a. from age 65. The old-age pension is payable from the first day of the month in which you reach your sixty-second birthday and will terminate on the last day of the month of your decease. b. A widow's pension totalling 70% of the old-age pension described under a. In the case of your death in service, the widow's pension to which your spouse is entitled will be increased on a temporary basis. This temporary supplement to the widow's pension will be paid at the same time as the widow's pension, but in no case beyond the first day of the month in which the widow reaches the age of 65, and will total 30% of the old-age pension to which there is an entitlement at that pension date. For 1994 the widow's pension totals NLG 255,400,- p.a. and the temporary widow's pension NLG 96,600,-p.a. The widow's pension will be payable from the date of your decease, or - if you were already in receipt of an old-age pension - on the first day of the month following your decease and will terminate on the last day of the month of decease of the widow. c. Orphans' pension for all eligible orphans together will be calculated on the basis of the following table of percentages of the old-age pension described under a: no. of children no. of children having having lost one parent % lost both parents % ---------------------- ---- ---------------------- ----- 1 20 1 20 2 30 2 45 3 or more 40 3 60 4 or more 75 the total orphans' pension will be divided equally among the eligible children. 21 STICHTING "EXEDENTENPENSIOENFONDS DOUWE EGBERTS" -3- The pensions will be paid monthly in arrears. Pension entitlements which (may) accrue to yourself or your next-of-kin from Stichting Pensioenfonds Douwe Egberts, and any pension entitlements deriving from previous employers are deducted from the total pension entitlements described under a-c above, so that there will be claims on this Foundation only to the extent that entitlement exceeds the latter entitlements. In order to simplify the procedure for deducting pensions deriving from pensionschemes elsewhere, it will be sufficient if you or your next-of-kin report annually to this Foundation of the pension payments received on account of pensionschemes with previous employers, so that these can be offset against your claims on this Foundation. You will receive an annual pension statement indicating the amount of the entitlements listed under a-c above. Stichting Excedentenpensioenfonds Douwe Egberts EX-11 8 COMP. OF NET INCOME PER COMMON SHARE 1 EXHIBIT 11 SARA LEE CORPORATION AND SUBSIDIARIES COMPUTATION OF NET INCOME PER COMMON SHARE ------------------------------------------ (In millions except per share data)
FOR THE YEAR ENDED JULY 1, 1995 --------------------------------- PRIMARY FULLY DILUTED ------------- ----------------- EARNINGS: Net income $ 804 $ 804 Less: Dividends on preferred stocks, net of tax benefits (28) (12) Adjustment attributable to conversion of ESOP convertible preferred stock -- (8) ------ ------ Net income available for common stockholders $ 776 $ 784 ====== ====== SHARES: Average shares outstanding 478 478 Add: Common stock equivalents - Stock options 1 2 ESOP convertible preferred stock -- 18 Restricted stock and other 1 1 ------ ------ Adjusted weighted average shares outstanding 480 499 ====== ====== NET INCOME PER COMMON SHARE $ 1.62 $ 1.57 ====== ======
2 EXHIBIT 11 (continued) SARA LEE CORPORATION AND SUBSIDIARIES COMPUTATION OF NET INCOME PER COMMON SHARE (In millions except per share data)
FOR THE YEAR ENDED JULY 2, 1994 --------------------------------- PRIMARY FULLY DILUTED -------- ------------- EARNINGS: Net income before accounting change $ 234 $ 234 Cumulative effect of accounting change (35) (35) -------- -------- Net income 199 199 Less: Dividends on preferred stocks, net of tax benefits (24) (12) Adjustment attributable to conversion of ESOP convertible preferred stock -- (9) -------- -------- Net income available for common stockholders $ 175 $ 178 ======== ======== SHARES: Average shares outstanding 478 478 Add: Common stock equivalents - Stock options 1 1 ESOP convertible preferred stock -- 18 Restricted stock and other 1 1 -------- -------- Adjusted weighted average shares outstanding 480 498 ======== ======== NET INCOME PER COMMON SHARE: Before cumulative effect of accounting change $ 0.44 $ 0.43 Cumulative effect of accounting change (0.07) (0.07) -------- -------- $ 0.37 $ 0.36 ======== ========
EX-12.1 9 RATIO OF EARNINGS TO FIXED CHANGES 1 EXHIBIT 12.1 SARA LEE CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (In millions except ratios)
Year Ended ------------------------- July 1, July 2, 1995 1994 ---------- ---------- Fixed charges: Interest expense $243 $188 Interest portion of rental expense 68 60 ---------- ---------- Total fixed charges before capitalized interest 311 248 Capitalized interest 12 21 ---------- ---------- Total fixed charges $323 $269 ========== ========== Earnings available for fixed charges: Income before income taxes $1,219 $389 Less undistributed income in minority-owned companies (10) (8) Add minority interest in majority-owned subsidiaries 36 25 Add amortization of capitalized interest 21 19 Add fixed charges before capitalized interest 311 248 ---------- ---------- Total earnings available for fixed charges $1,577 $673 ========== ========== Ratio of earnings to fixed charges 4.9 2.5 ========== ========== 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 10 RATIO OF EARNINGS TO FIX CHARGES & PREF STOCK REQ 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 1, July 2, 1995 1994 ----------- ----------- Fixed charges and preferred stock dividend requirements: Interest expense $243 $188 Interest portion of rental expense 68 60 ----------- ----------- Total fixed charges before capitalized interest and preferred stock dividend requirements 311 248 Capitalized interest 12 21 Preferred stock dividend requirements 44 38 ----------- ----------- Total fixed charges and preferred stock dividend requirements $367 $307 =========== =========== Earnings available for fixed charges and preferred stock dividend requirements: Income before income taxes $1,219 $389 Less undistributed income in minority-owned companies (10) (8) Add minority interest in majority-owned subsidiaries 36 25 Add amortization of capitalized interest 21 19 Add fixed charges before capitalized interest and preferred stock dividend requirements 311 248 ----------- ----------- Total earnings available for fixed charges and preferred stock dividend requirements $1,577 $673 =========== =========== Ratio of earnings to fixed charges and preferred stock dividend requirements 4.3 2.2 =========== =========== During the fourth quarter of fiscal 1994, the corporation recorded a pretax charge of $732 million in connection with various restructuring actions. 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 11 SUBSIDIARIES 1 EXHIBIT 21 SUBSIDIARIES OF SARA LEE CORPORATION The following is a list of the Registrant's subsidiary corporations. Certain subsidiaries which are inactive or exist solely to protect 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 APD Chemicals Corporation Delaware Aris Isotoner, Inc. Delaware Aris (Philippines), Inc. Delaware Bali Company Delaware Bali Foundations, Inc. Delaware Bessin Corporation Illinois BG Marketing Corp. Delaware Bil Mar Farms, Inc. Delaware Bil Mar Foods, Inc. Delaware BNH, Inc. Delaware Bryan Foods, Inc. Delaware Canadelle Intimate Fashions, Inc. Nevada Champion Products Inc. New York Coach Stores, Inc. Delaware 2 Coach Leatherware International, Inc. Delaware DEA Leasing Corporation Delaware D.E. Direct, Inc. Delaware Douwe Egberts/Van Nelle, Inc. Kentucky 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 Interstar, Inc. Florida JPF Holdings, Inc. Delaware JP Foodservice, Inc. Delaware Jogbra Inc. Delaware Kiwi (Europe) Corporation Delaware L'eggs Brands, Inc. Delaware Lyon's Restaurants, Inc. California Milky Way Products Company Delaware Nihon Sara Lee KK Corporation Delaware Ozark Salad Company, Inc. Delaware PAI Subsidiary, Inc. Delaware Playtex Apparel, Inc. Delaware 2 3 Playtex Dorado Corporation Delaware Playtex Industries, Inc. Delaware Playtex Marketing Corporation Delaware PYA Holding, Inc. Delaware PYA, Inc. Delaware PYA/Monarch, Inc. Delaware Rice Hosiery Corporation North Carolina Sara Lee Bond Investment Corp. Delaware Sara Lee Champion Europe Inc. Delaware Sara Lee Corporation Asia, Inc. Delaware Sara Lee/DE Asia, Inc. Delaware Sara Lee Foundation Illinois Sara Lee French Investment Company, Inc. Delaware Sara Lee International Corporation Delaware Sara Lee International Finance Corporation Delaware Sara Lee Investments, Inc. Delaware Sara Lee JV Corp. Delaware Sara Lee - Kiwi Holdings, Inc. Delaware Sara Lee Leasing Company Illinois Sara Lee U.K. Holdings, Inc. Delaware Saramar Corporation Delaware Schloss & Kahn, Inc. Delaware Scotch Maid, Inc. Delaware Sealily, Inc. Delaware 3 4 Seaotter, Inc. Delaware Seitz Foods, Inc. Delaware SL Alaska II, Inc. Delaware SL Associates Delaware SLC Leasing (Nevada)-II, Inc. Delaware SLC Leasing (Wyoming), Inc. Delaware SLE, Inc. Delaware SLI Administrative Services Company, Inc. Delaware SLKP Sales, Inc. Delaware Smoky Hollow Foods, Inc. Delaware 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
4 5 FOREIGN SUBSIDIARIES Abel Bonnex S.A. France Agepal SarL Luxemburg Allende International, S.A. de C.V. Mexico A.P. Developments Limited Zambia Aris Isotoner S.A. France Aris Isotoner UK Limited England Aris (Philippines) Inc. Philippines Arno Leasing B.V. Netherlands Ashe Limited England Ashe Pension Trustees Ltd. England Auragate Pty. Ltd. Australia Avroy Shlain Cosmestics (Pty) Ltd. South Africa Balirny Douwe Egberts AS Czech Republic Ballograf Bic Austria Vertriebs Ges. mbh Austria Bal-Mex S.A. de C.V. Mexico Beviston Pty. Ltd. Australia A/S Blumoller Denmark Boers Groothandel B.V. Netherlands Boers Vleeswaren B.V. Netherlands Buhler Fontaine S.A. France Caitlin Financial Corporation N.V. Netherlands Antilles Canadelle Incorporated Canada 5 6 Casual Wear de Mexico, S.A. de C.V. Mexico Champion Products, S.A. de C.V. Mexico Champion UK Ltd. England Charter de Mexico, S.A. de C.V. Mexico Coach (UK) Limited England Coffenco International GmbH Germany Cofico N.V. Netherlands Antilles Comercial de Puntillas, S.A. Spain Comercial Rinbros, 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 Monterrey, 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 Congelacion y Conservacion de Alimentos Mexico Conoplex Insurance Company Bermuda Contex, Sociedad Anomina de Capital Variable El Salvador Corjan, S.A. Panama Corporacion Champion de El Salvador, S.A. de C.V. El Salvador Corporacion H.M., S.A. de C.V. Mexico Cruz Verde Portugal - Productos de Consumo Lda. Portugal
6 7 Dacor N.V. Belgium DEA (Bermuda) Ltd. Bermuda Decaf B.V. Netherlands Decaf N.V. Belgium Decem B.V. Netherlands Decotrade A.G. Switzerland DEF Finance S.A. France DEF Holding S.A. France Defico N.V. Netherlands 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 Portugal Lda Portugal Dim-Rosy S.p.A. Italy Dim Rosy Textiles, Incorporated Canada Dimtex S.A. France Douwe Egberts N.V. Belgium Douwe Egberts Agio GmbH Germany Douwe Egberts Coffee & Tea International B.V. Netherlands
7 8 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 B.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 (Portugal) Produtos Almentares Lda. Portugal Douwe Egberts Van Nelle Diensten B.V. Netherlands Douwe Egberts Van Nelle Operating B.V. Netherlands Douwe Egberts Van Nelle Tabaksmaatschappij B.V. Netherlands Douwe Egberts Van Nelle Netherlands Tabaksproduktiemaatschappij B.V. Douwe Egberts Van Nelle Tobacco Belgium N.V. Belgium Douwe Egberts Van Nelle Tobacco International B.V. Netherlands Duyvis B.V. Netherlands Era Expeditie B.V. Netherlands Eri Feine Schuhpflege Vertriebs GmbH Germany
8 9 Esa Eppinger GmbH Germany AB Fenom Sweden Filodoro Calze S.p.A. Italy De Friesche Erven B.V. Netherlands Fujian Sara Lee Consumer Products Company Ltd. China Gromtex S.A. Tunisia Hanes Caribe Ltd. Cayman Islands Hanes Choloma Ltd. Cayman Islands Hanes de Centroamerica S.A. Guatemala Hanes (Deutschland) GmbH Germany Hanes Dominican Inc. Dominican Republic Hanes de El Salvador, S.A. de C.V. El Salvador Hanes Europe N.V. Belgium Hanes Foreign Sales Company B.V. Netherlands 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 H.D.I. S.A. France
9 10 Hesperia de Alimentacion S.A. Spain Hesperia Centro S.A. Spain Hesperia Levante S.A. Spain Hesperia Noroeste S.A. Spain Hesperia Sur S.A. Spain Hilton Bonds N.Z. (1991) Limited New Zealand Holmeats Belgium Home Safe Products Sdn Bhd Malaysia House of Fuller, S.A. de C.V. Mexico Household & Personal Care Research B.V. Netherlands Imperial Meats Belgium International Food Service B.V. Netherlands 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 Industrias Mallorca, S.A. de C.V. Mexico Inmobiliaria Meck-Mex, S.A. de C.V. Mexico Intec B.V. Netherlands Inter Food Service Ltd. England Internacional Manufacturera, S.A. Mexico International Underwear Ltd. Morocco INTEX Dessous GmbH Germany INTEX Textil-Vertriebsgesellschaft AG Switzerland
10 11 Intradal Produktie Belgium N.V. Belgium I. Tas Ezn 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, SNC France Kitchens of Sara Lee U.K. Limited England Kiwi Brands (Tinanjin) Co. Ltd. China Kiwi Brands Hong Kong Ltd. Hong Kong Kiwi Brands Ltd. Kenya Kiwi Brands Ltd. Malawi Kiwi Brands Ltd. Zambia Kiwi Brands Pty. Ltd. Australia Kiwi Brands Pty. Ltd. South Africa 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 Kiwi (EA) Ltd. England Kiwi European Holdings B.V. Netherlands Kiwi France S.A. France Kiwi Holdings S.A. France Kiwi Holdings Limited England P.T. Kiwi Indonesia Indonesia
11 12 Kiwi International Pte. Ltd. Singapore Kiwi (Manufacturing) Sdn Bhd Malaysia Kiwi (Nigeria) Limited Nigeria Kiwi (Thailand) Limited Thailand Kiwi TTK Limited India Kiwi United Taiwan Company Ltd. China Koffiebranderijen Theehandel Kanis & Gunnink 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 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
12 13 Opus Chemical AB Sweden Oxwall Tools B.V. Netherlands Palas de Mexico, S.A. de C.V. Mexico Pamyc, S.A. de C.V. Mexico Playtex Dominicana, S.A. Dominican Republic Playtex Espana, S.A. Spain Playtex France S.A. France Playtex Investments Europe S.A. France Playtex Limited England Playtex Trading Limited England Plustex B.V. Netherlands Plustex S.A. Belgium Pretty Polly (Killarney) Limited Ireland Pretty Polly Pension Trustees Ltd. England Probemex, S.A. de C.V. Mexico PT Premier Ventures Indonesia PT Prodenta Indonesia PT Suria Yozani Indonesia PTX Tunisie S.A. Tunisia Product Suppliers A.G. Switzerland Rinbros, S.A. de C.V. Mexico Sagepar SaRL France Sara Lee Bakery Malaysia Sara Lee Bakery Company Limited Hong Kong
13 14 Sara Lee Champion France S.A. France Sara Lee Charcuterie, S.A. France Sara Lee Chile S.A. Chile Sara Lee Corporation of Canada Ltd. Canada Sara Lee de Costa Rica, S.A. Costa Rica Sara Lee/DE Espania S.A. Spain Sara Lee/DE Finance B.V. Netherlands Sara Lee/DE Italy S.p.A Italy Sara Lee/DE N.V. Netherlands Sara Lee Europe Direct Marketing S.A. France Sara Lee Europe Finance S.A. France Sara Lee France SNC France Sara Lee Foreign Sales Corporation Barbados Sara Lee Germany GmbH Germany Sara Lee (Hong Kong) Limited Partnership Hong Kong Sara Lee Hosiery Canada Ltd. Canada Sara Lee Hosiery de Mexico, S.A. de C.V. Mexico Sara Lee Household & Personal Care UK Limited England 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 S.p.A. Italy Sara Lee Personal Products (Argentina) S.A. Argentina Sara Lee Personal Products (Australia) Pty. Ltd. Australia
14 15 Sara Lee Personal Products (Colombia) S.A. Colombia Sara Lee Personal Products (South Africa) (Pty.) Ltd. South Africa Sara Lee Personal Products (Venezuela) S.A. Venezuela Sara Lee Philippines Inc. Philippines Sara Lee Processed Meats Belgium N.V. Belgium Sara Lee Processed Meats (Europe) B.V. Netherlands Sara Lee Trading Ltd. Thailand Sara Lee UK Holdings Plc England Sara Lee (UK Investments) Limited England Servicios Administrativos Sara Lee, S.A. de C.V. Mexico Shanghai Vocal Enterprise Limited China Siamcona Ltd. Thailand Spantex, S.A. de C.V. Mexico Spring City de Honduras, S.A. Honduras Stegeman B.V. Netherlands The Stubbies Clothing Company Pty. Ltd. Australia Tana B.V. Netherlands Tana Canada Incorporated Canada Tana France S.A. France Tana Schuhpflege AG Switzerland Tejidos Flex Corporation Dominican Republic Telec A.G. Switzerland Temana Ges. mbH Austria Temana International Ltd. England
15 16 Temana Verkaufs-AG Switzerland Textiles Tropicales, Sociedad Anonima Costa Rica Tomten A/S Norway Tuxan Schuhpflegemittel GmbH Austria Underwear Ltd. Malta Valma B.V. Netherlands Van Nelle Holding (Germany) GmbH Germany Van Nelle Produktie B.V. Netherlands Vatter GmbH Germany Verpakkingsindustrie Boers B.V. Netherlands Nv Zwarte Kat/Cle d'Or Belgium 168765 Canada Inc. Canada 24762030 Nova Scotia Ltd. Canada 1116-9087 Quebec Inc. Canada
16 EX-23 12 CONSENT OF ARTHUR ANDERSEN 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 July 31, 1995, included in this Form 10-K, into the Corporation's previously filed Form S-8 registration statement Nos. 33-35760 and the first and second amendments thereto, 33-57615, 33-60837, and Form S-3 registration statement No. 33-60071. /s/ Arthur Andersen LLP Chicago, Illinois, September 29, 1995. EX-24 13 POWERS 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 Janet Langford Kelly, 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 1, 1995, 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. /s/ Paul A. Allaire ------------------- Paul A. Allaire Dated: 8/28/95 ---------------- 2 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 Janet Langford Kelly, 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 1, 1995, 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. /s/ Frans H.J.J. Andriessen ----------------------------- Frans H.J.J. Andriessen Dated: 8/30/95 ---------------- 3 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 Janet Langford Kelly, 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 1, 1995, 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. /s/ Duane L. Burnham -------------------- Duane L. Burnham Dated: 8/28/95 ---------------- 4 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 Janet Langford Kelly, 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 1, 1995, 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. /s/ Charles W. Coker --------------------------- Charles W. Coker Dated: August 29, 1995 --------------------- 5 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 Janet Langford Kelly, 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 1, 1995, 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. /s/ Willie D. Davis ------------------- Willie D. Davis Dated: 8/30/95 ---------------- 6 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 Janet Langford Kelly, 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 1, 1995, 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. /s/ Allen F. Jacobson --------------------- Allen F. Jacobson Dated: 8/31/95 ---------------- 7 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 Janet Langford Kelly, 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 1, 1995, 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. /s/ Vernon E. Jordan, Jr. ------------------------- Vernon E. Jordan, Jr. Dated: 8/30/95 ---------------- 8 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 Janet Langford Kelly, 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 1, 1995, 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. /s/ James L. Ketelsen --------------------- James L. Ketelsen Dated: 8/30/95 ---------------- 9 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 Janet Langford Kelly, 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 1, 1995, 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. /s/ Hans B. van Liemt --------------------- Hans B. van Liemt Dated: 8/30/95 ---------------- 10 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 Janet Langford Kelly, 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 1, 1995, 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. /s/ Joan D. Manley ------------------ Joan D. Manley Dated: 8/30/95 ---------------- 11 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 Janet Langford Kelly, 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 1, 1995, 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. /s/ Newton N. Minow ------------------- Newton N. Minow Dated: 8/29/95 ---------------- 12 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 Janet Langford Kelly, 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 1, 1995, 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. /s/ Sir Arvi H. Parbo A. C. --------------------------- Sir Arvi H. Parbo A. C. Dated: 8/31/95 ---------------- 13 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 Janet Langford Kelly, 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 1, 1995, 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. /s/ Rozanne L. Ridgway ---------------------- Rozanne L. Ridgway Dated: 8/31/95 ---------------- 14 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 Janet Langford Kelly, 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 1, 1995, 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. /s/ Richard L. Thomas --------------------- Richard L. Thomas Dated: 8/29/95 ---------------- EX-27 14 FINANCIAL DATA SCHEDULE
5 THE 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. 12-MOS JUL-01-1995 JUL-03-1994 JUL-01-1995 167 35 1,845 192 2,830 4,928 5,683 2,719 12,431 4,844 1,817 640 0 334 3,299 12,431 17,719 17,719 11,023 11,023 0 164 185 1,219 415 804 0 0 0 804 1.62 1.57
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