UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 28, 2002
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 1-3344
Sara Lee Corporation
(Exact name of registrant as specified in its charter)
| Maryland |
36-2089049 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
Three First National Plaza, Suite 4600, Chicago, Illinois 60602-4260
(Address of principal executive offices)
(Zip Code)
(312) 726-2600
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
On December 28, 2002, the Registrant had 782,694,762 outstanding shares of common stock $.01 par value, which is the Registrant’s only class of common stock.
SARA LEE CORPORATION AND SUBSIDIARIES
INDEX
| PART I— |
||||
| ITEM 1—FINANCIAL STATEMENTS |
||||
| 3 | ||||
|
Condensed Consolidated Balance Sheets— |
4 | |||
| 5 | ||||
| 6 | ||||
| 7 | ||||
| 8 | ||||
| ITEM 2—MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
17 | |||
| 41 | ||||
| PART II— |
||||
| 42 | ||||
| 43 | ||||
| EXHIBIT 12.1 |
– Computation of Ratio of Earnings to Fixed Charges |
|||
| EXHIBIT 12.2 |
– Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividend Requirements |
|||
| EXHIBIT 99.1 |
– Certificate of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002 |
|||
| EXHIBIT 99.2 |
– Certificate of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002 |
|||
2
SARA LEE CORPORATION AND SUBSIDIARIES
Preface
The consolidated financial statements for the thirteen and twenty-six weeks ended December 28, 2002 and December 29, 2001 and the balance sheet as of December 28, 2002 included herein have not been audited by independent public accountants, but in the opinion of Sara Lee Corporation (“the Corporation”), all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at December 28, 2002 and the results of operations and the cash flows for the periods presented herein have been made. The condensed consolidated balance sheet as of June 29, 2002 and the consolidated statements of common stockholders’ equity for the period June 30, 2001 to June 29, 2002 have been derived from the Corporation’s audited financial statements included in our annual report on Form 10-K for the year ended June 29, 2002. The results of operations for the thirteen and twenty-six weeks ended December 28, 2002 are not necessarily indicative of the operating results to be expected for the full fiscal year.
The consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Although the Corporation believes the disclosures made are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such regulations. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Corporation’s Form 10-K for the year ended June 29, 2002 and other financial information filed with the Securities and Exchange Commission.
3
SARA LEE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets at December 28, 2002 and June 29, 2002
(In millions)
| (Unaudited) |
||||||||
| December 28, 2002 |
June 29, 2002 |
|||||||
| ASSETS |
||||||||
| Cash and equivalents |
$ |
429 |
|
$ |
298 |
| ||
| Trade accounts receivable, less allowances |
|
1,913 |
|
|
1,831 |
| ||
| Inventories: |
||||||||
| Finished goods |
|
1,649 |
|
|
1,619 |
| ||
| Work in process |
|
370 |
|
|
411 |
| ||
| Materials and supplies |
|
463 |
|
|
479 |
| ||
|
|
2,482 |
|
|
2,509 |
| |||
| Other current assets |
|
363 |
|
|
341 |
| ||
| Assets held for sale |
|
— |
|
|
7 |
| ||
| Total current assets |
|
5,187 |
|
|
4,986 |
| ||
| Other non-current assets |
|
271 |
|
|
192 |
| ||
| Property, net |
|
3,185 |
|
|
3,155 |
| ||
| Trademarks and other identifiable intangibles, net |
|
2,095 |
|
|
2,106 |
| ||
| Goodwill |
|
3,322 |
|
|
3,314 |
| ||
| $ |
14,060 |
|
$ |
13,753 |
| |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Notes payable |
$ |
111 |
|
$ |
468 |
| ||
| Accounts payable |
|
1,185 |
|
|
1,321 |
| ||
| Accrued liabilities |
|
2,931 |
|
|
2,953 |
| ||
| Current maturities of long-term debt |
|
1,101 |
|
|
721 |
| ||
| Total current liabilities |
|
5,328 |
|
|
5,463 |
| ||
| Long-term debt |
|
4,276 |
|
|
4,326 |
| ||
| Deferred income taxes |
|
532 |
|
|
534 |
| ||
| Other non-current liabilities |
|
1,091 |
|
|
1,038 |
| ||
| Minority interests in subsidiaries |
|
631 |
|
|
632 |
| ||
| ESOP convertible preferred stock |
|
221 |
|
|
226 |
| ||
| Unearned deferred compensation |
|
(205 |
) |
|
(208 |
) | ||
| Common stockholders’ equity |
|
2,186 |
|
|
1,742 |
| ||
| $ |
14,060 |
|
$ |
13,753 |
| |||
See accompanying Notes to Consolidated Financial Statements.
4
SARA LEE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
For the Thirteen and Twenty-Six Weeks Ended December 28, 2002 and December 29, 2001
(In millions, except per share data)
Unaudited
| Thirteen Weeks Ended |
Twenty-Six Weeks Ended |
|||||||||||||||
| December 28, 2002 |
December 29, 2001 |
December 28, 2002 |
December 29, 2001 |
|||||||||||||
| Net sales |
$ |
4,776 |
|
$ |
4,685 |
|
$ |
9,310 |
|
$ |
8,933 |
| ||||
| Cost of sales |
|
2,874 |
|
|
2,892 |
|
|
5,626 |
|
|
5,608 |
| ||||
| Cost of sales—product line exit costs |
|
— |
|
|
(1 |
) |
|
— |
|
|
(4 |
) | ||||
| Selling, general and administrative expenses |
|
1,434 |
|
|
1,360 |
|
|
2,800 |
|
|
2,578 |
| ||||
| (Income from) charges for exit activities and business dispositions |
|
(3 |
) |
|
188 |
|
|
(12 |
) |
|
192 |
| ||||
| Interest expense |
|
68 |
|
|
80 |
|
|
135 |
|
|
154 |
| ||||
| Interest income |
|
(18 |
) |
|
(20 |
) |
|
(37 |
) |
|
(43 |
) | ||||
|
|
4,355 |
|
|
4,499 |
|
|
8,512 |
|
|
8,485 |
| |||||
| Income before income taxes |
|
421 |
|
|
186 |
|
|
798 |
|
|
448 |
| ||||
| Income taxes |
|
73 |
|
|
26 |
|
|
142 |
|
|
46 |
| ||||
| Net income |
|
348 |
|
|
160 |
|
|
656 |
|
|
402 |
| ||||
| Preferred stock dividends, net of tax |
|
2 |
|
|
2 |
|
|
5 |
|
|
5 |
| ||||
| Income available for common stockholders |
$ |
346 |
|
$ |
158 |
|
$ |
651 |
|
$ |
397 |
| ||||
| Net income per common share |
||||||||||||||||
| Basic |
$ |
0.44 |
|
$ |
0.20 |
|
$ |
0.83 |
|
$ |
0.51 |
| ||||
| Diluted |
$ |
0.42 |
|
$ |
0.20 |
|
$ |
0.80 |
|
$ |
0.49 |
| ||||
| Average shares outstanding |
||||||||||||||||
| Basic |
|
783 |
|
|
785 |
|
|
783 |
|
|
784 |
| ||||
| Diluted |
|
818 |
|
|
819 |
|
|
816 |
|
|
818 |
| ||||
| Cash dividends per common share |
$ |
0.155 |
|
$ |
0.150 |
|
$ |
0.305 |
|
$ |
0.295 |
| ||||
See accompanying Notes to Consolidated Financial Statements.
5
SARA LEE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Common Stockholders’ Equity
For the Period June 30, 2001 to December 28, 2002
(In millions, except per share data)
| TOTAL |
COMMON STOCK |
CAPITAL SURPLUS |
RETAINED EARNINGS |
UNEARNED STOCK |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
COMPREHENSIVE INCOME |
|||||||||||||||||||||
| Balances at June 30, 2001 |
| ||||||||||||||||||||||||||