Sara Lee 2008 Annual Report Download - page 30

Financial review
In 2006, cash proceeds from dispositions of businesses and
assets were $1,101 million, which includes proceeds from the sale
of several businesses that are reported in discontinued operations,
the sale of certain working capital, trademarks and assets related
to certain suncare and rice product lines, proceeds from the sale of
an investment in a foreign company and $114 million in contingent
proceeds from the sale of the corporation’s tobacco product line.
The corporation spent $515 million, $631 million and $625 million
for the purchase of property, equipment, computer software and
intangibles in 2008, 2007, and 2006, respectively. The higher level
of spending in 2007 and 2006 were due in part to an increase in
expenditures for certain information technology assets and for certain
costs for the corporation’s new headquarters facility in Downers
Grove, Illinois and other facilities that are being used to centralize
management. The corporation expects capital expenditures for
property and equipment to be approximately $500 million in 2009
due to a reduction in projected expenditures related to information
technology assets.
In 2008 and 2007, the corporation did not expend any funds to
make any business acquisitions. However, in 2006, the corporation
used $78 million of cash for the purchase of certain businesses,
the largest of which was Butter-Krust Baking, a Mid-Atlantic fresh
bread and baking company for $53 million.
Cash from Financing Activities The total cash used in financing
activities was $1,811 million in 2008, $913 million in 2007 and
$41 million in 2006. The net cash (used in) received from financing
activities is split between continuing and discontinued operations
as follows:
2008 2007 2006
Cash (used in) received
from financing activities
Continuing operations $(1,806) $(857) $«509
Discontinued operations (5) (56) (550)
Total $(1,811) $(913) $÷(41)
Significant items impacting the cash used in financing activities
are discussed below.
Purchases of Common Stock The corporation expended $315
million to repurchase shares of its common stock in 2008, versus
$686 million and $561 million in 2007 and 2006, respectively.
An ongoing share repurchase program is in place that allows the
repurchase of the corporation’s common stock at times management
deems appropriate, given current market valuations. During 2008,
the corporation repurchased 20 million shares of its common
stock. At June 28, 2008, the corporation had approximately 24.8
million shares remaining on its existing share authorization. The
corporation intends to repurchase additional shares in 2009 with
a total value of $500 million. These repurchases will be influenced
by market conditions and other factors.
Long-Term Borrowings During 2008, the corporation had net
repayments of long-term borrowings of $1,456 million. During
2007, the corporation had net borrowings of long-term debt of
$2,479 million versus net repayments of long-term borrowings
of $430 million in 2006. As noted below, prior to the 2007 spin
off, Hanesbrands borrowed $2,558 million, which is included in
the $2,479 million of net borrowings in 2007. In 2008 and 2006,
the corporation utilized a combination of cash on hand and short-
term borrowings to repay maturing long-term debt.
Prior to being spun off by the corporation, Hanesbrands
borrowed $2,600 million from a group of banks. Net of loan origina-
tion fees, Hanesbrands received $2,558 million of cash proceeds,
and this amount is included in the corporation’s borrowings of
long-term debt. Using a portion of the proceeds received from the
borrowing, Hanesbrands paid a dividend of $1,950 million to the
corporation. Immediately following this dividend, the corporation
distributed to stockholders of record one share of Hanesbrands
common stock for every eight shares of Sara Lee common stock
held. A total of $650 million of cash was transferred to Hanesbrands
at the spin off date.
Short-Term Borrowings During 2008 and 2006, the corporation
had net short-term borrowings of $251 million and $1,528 million,
respectively, versus net repayments of short-term borrowings in 2007
of $1,720 million. In 2007, the corporation utilized a combination
of cash on hand and the proceeds from the borrowing of long-term
debt noted above to fund the repayments.
At the end of 2006, the corporation chose not to utilize cash on
hand to repay outstanding notes payable borrowings that had been
made during the year as it had done in prior years. This resulted in
a higher amount of cash on the balance sheet at the end of 2006
and higher borrowings of short-term debt, which are reflected in the
corporation’s cash flow statement as a financing activity.
Cash Dividends Dividends paid during 2008 were $296 million,
as compared to the $374 million paid in 2007 and $605 million
paid in 2006. The decline in dividends paid in 2008 is due to a
lower number of shares outstanding due to the impact of the share
repurchase program. The decline in the dividends paid in 2007
versus 2006 was primarily due to the reduction in the annual divi-
dend rate after the spin off of Hanesbrands, from $0.79 per share
in 2006 to $0.40 per share in 2007. The annual dividend rate
in 2008 was $0.42 per share.
28 Sara Lee Corporation and Subsidiaries