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Hillshire Brands Co 8-K 2006

Documents found in this filing:

  1. 8-K
  2. 8-K
Form 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


FORM 8-K

 


CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 5, 2006

 


Sara Lee Corporation

(Exact name of registrant as specified in charter)

 


 

Maryland   1-3344   36-2089049

(State or Other Jurisdiction

of Incorporation)

  (Commission File Number)  

(IRS Employer

Identification Number)

Three First National Plaza, Chicago, Illinois 60602-4260

(Address of principal executive offices)

Registrant’s telephone number, including area code: (312) 726-2600

 


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 



Item 2.01 Completion of Acquisition or Disposition of Assets

On September 5, the Registrant (“Sara Lee”) completed the spin off of its Branded Apparel Americas / Asia business that is known as Hanesbrands Inc. (“Hanesbrands”). The spin off was completed by means of a pro rata distribution of all outstanding shares of Hanesbrands common stock by Sara Lee to holders of Sara Lee common stock. The Hanesbrands common stock has a par value of $0.01 per share. After the spin off, Hanesbrands became an independent publicly held company that is traded on the New York Stock Exchange.

The distribution was made without the payment of any consideration or the exchange of any shares by Sara Lee shareholders. In the distribution, Sara Lee shareholders received 1 share of Hanesbrands common stock for every 8 shares of Sara Lee stock they held as of the close of business on August 18, 2006, and cash for any fractional shares of Hanesbrands common stock.

Item 9.01 Financial Statements and Exhibits

(b) Pro Forma Financial Information

Unaudited pro forma financial information for Sara Lee Corporation is included on pages F-1 through F-5 of this report.


SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: September 11, 2006

 

SARA LEE CORPORATION
(Registrant)
By:  

/s/ Wayne R. Szypulski

  Senior Vice President and Controller
  (Principal Accounting Officer)


Sara Lee Corporation

Introduction to the Unaudited Pro Forma Consolidated Financial Statements

The following unaudited pro forma consolidated financial statements of Sara Lee Corporation (“Sara Lee”) adjust the historical financial statements for the following businesses that have been or will be disposed of:

 

  The corporation completed the spin off of its Branded Apparel Americas / Asia business, which is known as Hanesbrands Inc. (Hanesbrands) on September 5, 2006.

 

  The corporation has reported the following seven businesses as discontinued operations during 2006: U.S. Retail Coffee, European Branded Apparel, European Nuts and Snacks, U.K. Apparel, U.S. Meat Snacks and European Meats businesses. Each of these businesses, except for the European Meats business, was sold in fiscal year 2006. The European Meats business was sold in early fiscal year 2007.

The historical financial information of Sara Lee set forth below has been derived from the historical audited and unaudited consolidated financial statements of Sara Lee included in the Annual Report on Form 10-K for the year ended July 2, 2005 and the Quarterly Report on Form 10-Q for the quarter ended April 1, 2006. The unaudited pro forma balance sheet was prepared as if the dispositions occurred as of April 1, 2006 and the adjustments give effect to events that are directly attributable to the transaction, regardless if they have a continuing impact or are nonrecurring. The unaudited pro forma consolidated statements of income were prepared as if the dispositions occurred on June 30, 2002 and the adjustments give effect to events that are directly attributable to the transaction and have a continuing impact on the results of operations of Sara Lee. The pro forma adjustments are based on factually supportable available information and certain assumptions that management believes are reasonable.

The unaudited pro forma statements presented do not purport to represent what the results of operations or financial position of Sara Lee would actually have been had the transactions occurred on the dates noted above, or to project the results of operations or financial position of Sara Lee for any future periods. In the opinion of management, all necessary adjustments to the unaudited pro forma financial information have been made.

The unaudited pro forma consolidated financial statements should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and the historical financial statements and related notes thereto of Sara Lee included in the 2005 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the quarter and nine months ended April 1, 2006.

The spin off of Hanesbrands will be accounted for as a discontinued operation under Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” when Sara Lee issues financial statements for the first period that ends after completing the spin. These will be the financial statements for the first quarter of fiscal 2007. The Hanesbrands business was included in the corporation’s Branded Apparel segment in the corporation’s historical Consolidated Financial Statements. The unaudited pro forma financial information reflects Hanesbrands as a discontinued operation and, accordingly, net assets and results of operations are excluded from the continuing operations of Sara Lee.


Sara Lee Corporation

Unaudited Pro Forma Consolidated Statement of Income

Nine Months Ended April 1, 2006

 

Amounts in millions except per share data

  

(a)

As
Originally
Reported

    (b)
Disposition
of
Hanesbrands
    Pro Forma  

Continuing operations:

      

Net sales

   $ 11,844     $ (3,353 )   $ 8,491  

Cost and expenses:

      

Cost of sales

     7,461       (2,239 )     5,222  

Selling, general and administrative expenses

     3,583       (708 )     2,875  

Charges for (income from) exit activities and business dispositions

     43       (1 )     42  

Contingent sale proceeds

     (114 )       (114 )

Interest expense

     226       (2 )     224  

Interest income

     (58 )     3       (55 )
                        
     11,141       (2,947 )     8,194  
                        

Income from continuing operations before income taxes

     703       (406 )     297  

Income taxes

     182       (102 )     80  
                        

Income from continuing operations

   $ 521     $ (304 )   $ 217  
                        

Net income from continuing operations per common share

      

Basic

   $ 0.68       $ 0.28  
                  

Diluted

   $ 0.68       $ 0.28  
                  

Shares used to compute net income from continuing operations per common share

      

Basic

     768         768  
                  

Diluted

     770         770  
                  

Notes

 

(a)   -   Amounts as originally reported by Sara Lee in its third quarter report filed on form 10-Q. Businesses reported as discontinued operations are excluded from these results.
(b)   -   Represents the Hanesbrands Inc. results of operations for the period.

 

F-1


Sara Lee Corporation

Unaudited Pro Forma Consolidated Statement of Income

Fiscal Year Ended July 2, 2005

 

Amounts in millions except per share data

  

(a)

As
Originally
Reported

   

(b)

Results of
Businesses
Reported As
Discontinued
Operations in
Fiscal 2006

    Subtotal     (c)
Disposition
of
Hanesbrands
    Pro Forma  
Continuing operations:           

Net sales

   $ 19,254     $ (3,225 )   $ 16,029     $ (4,682 )   $ 11,347  

Cost and expenses:

          

Cost of sales

     12,284       (2,260 )     10,024       (3,229 )     6,795  

Selling, general and administrative expenses

     5,524       (861 )     4,663       (983 )     3,680  

Charges for (income from) exit activities and business dispositions

     93       (3 )     90       (47 )     43  

Impairment charges

     350       (350 )     —           —    

Contingent sale proceeds

     (117 )     —         (117 )       (117 )

Interest expense

     290       (2 )     288       (3 )     285  

Interest income

     (104 )     5       (99 )     13       (86 )
                                        
     18,320       (3,471 )     14,849       (4,249 )     10,600  
                                        

Income from continuing operations before income taxes

     934       246       1,180       (433 )     747  

Income taxes

     203       (104 )     99       33       132  
                                        

Income from continuing operations

   $ 731     $ 350     $ 1,081     $ (466 )   $ 615  
                                        

Net income from continuing operations per common share

          

Basic

   $ 0.93           $ 0.78  
                      

Diluted

   $ 0.92           $ 0.77  
                      

Shares used to compute net income from continuing operations per common share

          

Basic

     789             789  
                      

Diluted

     796             796  
                      

Notes

 

(a)   -   Amounts as originally reported by Sara Lee in its fiscal year 2005 annual report filed on form 10-K.
(b)   -   The amounts in column (a) for fiscal year 2005 include the results of businesses that were reported as discontinued operations in 2006. Column (b) represents the 2005 financial results of those businesses reported as discontinued operations in fiscal year 2006 and consists of the U.S. Retail Coffee, European Branded Apparel, European Nuts and Snacks, U.K. Apparel, U.S. Meat Snacks, and European Meats businesses. Each of these businesses, except the European Meats business, was sold in fiscal year 2006. The European Meats business was sold in early fiscal year 2007.
(c)   -   Represents the Hanesbrands Inc. results of operations for the period.

 

F-2


Sara Lee Corporation

Unaudited Pro Forma Consolidated Statement of Income

Fiscal Year Ended July 3, 2004

 

Amounts in millions except per share data

  

(a)

As
Originally
Reported

   

(b)

Results of
Businesses
Reported As
Discontinued
Operations in
Fiscal 2006

    Subtotal     (c)
Disposition
of
Hanesbrands
    Pro Forma  
Continuing operations:           

Net sales

   $ 19,119     $ (3,227 )   $ 15,892     $ (4,637 )   $ 11,255  

Cost and expenses:

          

Cost of sales

     11,867       (2,183 )     9,684       (3,098 )     6,586  

Selling, general and administrative expenses

     5,653       (842 )     4,811       (1,042 )     3,769  

Charges for (income from) exit activities and business dispositions

     48       (17 )     31       (27 )     4  

Impairment charges

     —           —           —    

Contingent sale proceeds

     (119 )     —         (119 )       (119 )

Interest expense

     271       (1 )     270       (1 )     269  

Interest income

     (88 )     8       (80 )     4       (76 )
                                        
     17,632       (3,035 )     14,597       (4,164 )     10,433  
                                        

Income from continuing operations before income taxes

     1,487       (192 )     1,295       (473 )     822  

Income taxes

     248       (4 )     244       28       272  
                                        

Income from continuing operations

   $ 1,239     $ (188 )   $ 1,051     $ (501 )   $ 550  
                                        

Net income from continuing operations per common share

          

Basic

   $ 1.57           $ 0.70  
                      

Diluted

   $ 1.55           $ 0.69  
                      

Shares used to compute net income from continuing operations per common share

          

Basic

     788             788  
                      

Diluted

     798             798  
                      

Notes

 

(a)   -   Amounts as originally reported by Sara Lee in its fiscal year 2005 annual report filed on form 10-K.
(b)   -   The amounts in column (a) for fiscal year 2004 include the results of businesses that were reported as discontinued operations in 2006. Column (b) represents the 2004 financial results of those businesses reported as discontinued operations in fiscal year 2006 and consists of the U.S. Retail Coffee, European Branded Apparel, European Nuts and Snacks, U.K. Apparel, U.S. Meat Snacks, and European Meats businesses. Each of these businesses, except the European Meats business, was sold in fiscal year 2006. The European Meats business was sold in early fiscal year 2007.
(c)   -   Represents the Hanesbrands Inc. results of operations for the period.

 

F-3


Sara Lee Corporation

Unaudited Pro Forma Consolidated Statement of Income

Fiscal Year Ended June 28, 2003

 

Amounts in millions except per share data

  

(a)

As
Originally
Reported

   

(b)

Results of
Businesses
Reported As
Discontinued
Operations in
Fiscal 2006

    Subtotal     (c)
Disposition
of
Hanesbrands
    Pro Forma  
Continuing operations:           

Net sales

   $ 17,888     $ (2,969 )   $ 14,919     $ (4,669 )   $ 10,250  

Cost and expenses:

          

Cost of sales

     10,931       (2,002 )     8,929       (2,994 )     5,935  

Selling, general and administrative expenses

     5,334       (799 )     4,535       (1,022 )     3,513  

Charges for (income from) exit activities and business dispositions

     (11 )     8       (3 )     14       11  

Impairment charges

     —           —           —    

Contingent sale proceeds

     —           —           —    

Interest expense

     276       (4 )     272       (2 )     270  

Interest income

     (76 )     9       (67 )     4       (63 )
                                        
     16,454       (2,788 )     13,666       (4,000 )     9,666  
                                        

Income from continuing operations before income taxes

     1,434       (181 )     1,253       (669 )     584  

Income taxes

     247 (d)     (110 )     136       (153 )     (17 )
                                        

Income from continuing operations

   $ 1,187     $ (71 )   $ 1,117     $ (516 )   $ 601  
                                        

Net income from continuing operations per common share

          

Basic

   $ 1.51           $ 0.77  
                      

Diluted

   $ 1.46           $ 0.74  
                      

Shares used to compute net income from continuing operations per common share

          

Basic

     781             781  
                      

Diluted

     812             812  
                      

Notes

 

(a)   -   Amounts as originally reported by Sara Lee in its fiscal year 2005 annual report filed on form 10-K.
(b)   -   The amounts in column (a) for fiscal year 2003 include the results of businesses that were reported as discontinued operations in 2006. Column (b) represents the 2003 financial results of those businesses reported as discontinued operations in fiscal year 2006 and consists of the U.S. Retail Coffee, European Branded Apparel, European Nuts and Snacks, U.K. Apparel, U.S. Meat Snacks, and European Meats businesses. Each of these businesses, except the European Meats business, was sold in fiscal year 2006. The European Meats business was sold in early fiscal year 2007.
(c)   -   Represents the Hanesbrands Inc. results of operations for the period.
(d)   -  

In preparing its financial statements, the corporation recognizes an additional minimum pension obligation if the difference between the accumulated benefit obligation of a plan and its related assets exceeds the liability recognized on the balance sheet. In establishing the required additional minimum obligation, a charge is recognized in other comprehensive income. The tax effect of any charge is also recognized in other comprehensive income. However, in accordance with FAS 109, the establishment of a valuation allowance relating to a previously established deferred tax asset is reflected as a charge against earnings, even when the beginning of year deferred tax asset relates to an amount in other comprehensive income.

   

During the preparation of the fiscal 2006 financial statements, it was determined that the corporation had inadvertently excluded deferred tax assets related to the additional minimum pension obligation in the United Kingdom (UK) in connection with establishing a valuation allowance against its UK deferred tax assets for fiscal years 2003, 2004 and 2005. Consistent with the manner in which other deferred tax assets in the UK were evaluated in fiscal 2003, the corporation should have recognized a full valuation allowance on deferred tax assets established in fiscal 2003 and prior years. In addition, consistent with the manner in which other deferred tax assets in the UK were evaluated in fiscal 2004 and 2005, the corporation should have also recognized a full valuation allowance on the incremental deferred tax assets related to changes in the additional minimum pension obligation in those years.

    The effect of understating the valuation allowance as described above had no impact on net income in fiscal 2004 or 2005, but resulted in the understatement of income tax expense and overstatement of net income in fiscal 2003 by $47 million ($0.06 per diluted share). In addition, deferred tax assets and shareholders’ equity were each overstated by $186 million, $189 million and $206 million in fiscal 2003, 2004 and 2005, respectively. Accumulated other comprehensive income was overstated by $139 million, $142 million and $159 million in fiscal 2003, 2004 and 2005, respectively.
    The corporation expects to file its fiscal 2006 Form 10-K on September 14, 2006. The historical financial statements included in the Form 10-K will be restated to reflect the corrections noted above.

 

F-4


Sara Lee Corporation

Unaudited Pro Forma Consolidated Balance Sheet

At April 1, 2006

 

Amounts in millions

  

(a)

As

Originally

Reported

   

(b)

Disposition

of

Hanesbrands

    Pro Forma

Assets

      

Cash and equivalents

   $ 1,972     $ 2,400 (c)   $ 4,372

Trade accounts receivable

     1,609       (489 )     1,120

Inventories

     2,187       (1,265 )     922

Other current assets

     308       (44 )     264

Assets of discontinued operations held for sale

     461       —         461
         —  
                      

Total current assets

     6,537       602       7,139
                      

Other non-current assets

     170       (6 )     164

Deferred tax asset

     431 (d)     (230 )     201

Property, net

     2,813       (611 )     2,202

Trademarks and other identifiable intangibles, net

     1,336       (139 )     1,197

Goodwill

     3,067       (279 )     2,788

Assets of discontinued operations held for sale

     390       —         390
         —  
                      

Total Assets

   $ 14,744     $ (663 )   $ 14,081
                      

Liabilities and Stockholders’ Equity

      

Notes payable

     1,595       (32 )     1,563

Accounts payable

     1,107       (186 )     921

Accrued liabilities

     2,475       (458 )     2,017

Current maturities of long-term debt

     560       (3 )     557

Liabilities of discontinued operations held for sale

     413       —         413
         —  
                      

Total current liabilities

     6,150       (679 )     5,471
                      

Long-term debt

     3,765       (3 )     3,762

Pension obligation

     858       (203 )     655

Other liabilities

     1,341       (99 )     1,242

Liabilities of discontinued operations held for sale

     56       36       92

Minority interest in subsidiaries

     71       (6 )     65

Common stockholders’ equity

     2,503 (d)     (2,109 )  
       2,400 (c)     2,794
                      

Total Liabilities and Stockholders’ Equity

   $ 14,744     $ (663 )   $ 14,081
                      

Notes

 

(a)   -   Amounts as originally reported by Sara Lee in its fiscal year 2006 third quarter report filed on Form 10-Q adjusted for discontinued operations.
(b)   -   Represents the Hanesbrands Inc. consolidated assets and liabilities at the end of the period.
(c)   -   Immediately prior to the spin off of Hanesbrands, Sara Lee received $2,400 million as a dividend and loan payment from Hanesbrands Inc.
(d)   -  

In preparing its financial statements, the corporation recognizes an additional minimum pension obligation if the difference between the accumulated benefit obligation of a plan and its related assets exceeds the liability recognized on the balance sheet. In establishing the required additional minimum obligation, a charge is recognized in other comprehensive income. The tax effect of any charge is also recognized in other comprehensive income. However, in accordance with FAS 109, the establishment of a valuation allowance relating to a previously established deferred tax asset is reflected as a charge against earnings, even when the beginning of year deferred tax asset relates to an amount in other comprehensive income.

   

During the preparation of the fiscal 2006 financial statements, it was determined that the corporation had inadvertently excluded deferred tax assets related to the additional minimum pension obligation in the United Kingdom (UK) in connection with establishing a valuation allowance against its UK deferred tax assets for fiscal years 2003, 2004 and 2005. Consistent with the manner in which other deferred tax assets in the UK were evaluated in fiscal 2003, the corporation should have recognized a full valuation allowance on deferred tax assets established in fiscal 2003 and prior years. In addition, consistent with the manner in which other deferred tax assets in the UK were evaluated in fiscal 2004 and 2005, the corporation should have also recognized a full valuation allowance on the incremental deferred tax assets related to changes in the additional minimum pension obligation in those years.

    The effect of understating the valuation allowance as described above had no impact on net income in fiscal 2004 or 2005, but resulted in the understatement of income tax expense and overstatement of net income in fiscal 2003 by $47 million ($0.06 per diluted share). In addition, deferred tax assets and shareholders’ equity were each overstated by $186 million, $189 million and $206 million in fiscal 2003, 2004 and 2005, respectively. Accumulated other comprehensive income was overstated by $139 million, $142 million and $159 million in fiscal 2003, 2004 and 2005, respectively.
    The corporation expects to file its fiscal 2006 Form 10-K on September 14, 2006. The historical financial statements included in the Form 10-K will be restated to reflect the corrections noted above.

 

F-5

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