Sara Lee 2008 Annual Report Download - page 63

Stock Unit Awards Restricted stock units (RSUs) are granted to
certain employees to incent performance and retention over periods
ranging from one to five years. Upon the achievement of defined
parameters, the RSUs are generally converted into shares of the
corporation’s common stock on a one-for-one basis and issued
to the employees. A substantial portion of all RSUs vest solely
upon continued future service to the corporation. A small portion
of RSUs vest based upon continued future employment and the
achievement of certain defined performance measures. The cost
of these awards is determined using the fair value of the shares
on the date of grant, and compensation is recognized over the
period during which the employees provide the requisite service
to the corporation. Compensation expense is recognized in accor-
dance with the provisions of FIN 28. A summary of the changes
in the stock unit awards outstanding under the corporation’s benefit
plans during 2008 is presented below:
Weighted
Weighted Average
Average Remaining Aggregate
Grant Date Contractual Intrinsic
Shares in thousands Shares Fair Value Term (Years) Value
Nonvested share units
at June 30, 2007 6,132 $16.13 1.34 $107
Granted 2,993 16.32
Vested (1,634) 17.58
Forfeited (1,261) 17.16
Nonvested share units
at June 28, 2008 6,230 $15.63 1.47 $««76
Exercisable share units
at June 28, 2008 135 $16.41 4.30 $««««2
The total fair value of share-based units that vested during 2008
and 2007 was $29 and $66, respectively. As of June 28, 2008, the
corporation had $39 of total unrecognized compensation expense
related to stock unit plans that will be recognized over the weighted
average period of 1.81 years.
Expense Recognized for All Stock-Based Compensation For all
share-based payments during 2008, the corporation recognized total
compensation expense of $38 and recognized a tax benefit of $10.
The corporation will satisfy the requirement for common stock for
share-based payments by issuing shares out of authorized but
unissued common stock.
Note 9 – Employee Stock Ownership Plans (ESOP)
The corporation maintains an ESOP that holds common stock of the
corporation and provides a retirement benefit for nonunion domestic
employees. During 2008, 2007 and 2006, the Sara Lee ESOP unal-
located common stock received total dividends of $4 or $0.41 per
share, $4 or $0.50 per share and $7 or $0.79 per share, respectively.
The purchase of the original stock by the Sara Lee ESOP was funded
both with debt guaranteed by the corporation and loans from the
corporation. The debt guaranteed by the corporation was fully paid in
2004, and only loans from the corporation to the ESOP remain. Each
year, the corporation makes contributions that, with the dividends
on the common stock held by the Sara Lee ESOP, are 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 remaining life of the
loan. Plan expense is recognized in accordance with Emerging
Issues Task Force Opinion 89-8.
Sara Lee ESOP-related expenses amounted to $7 in 2008 and
$11 in 2007 and 2006. Payments to the Sara Lee ESOP were $16
in 2008, $19 in 2007 and $20 in 2006.
Note 10 – Minority Interest in Subsidiaries
Minority interest in subsidiaries in 2008 consists of the equity
interest of minority investors in consolidated subsidiaries of
the corporation. The corporation’s consolidated minority interest
income of $10 in 2008, expense of $8 in 2007 and $6 in 2006
is recorded in “Selling, general and administrative expenses” in
the Consolidated Statements of Income.
Note 11 – Earnings per Share
Net income (loss) per share – basic is computed by dividing income
(loss) available to common stockholders by the weighted average
number of common shares outstanding for the period. Net income
(loss) per share – diluted reflects the potential dilution that could
occur if options and fixed awards to be issued under stock-based
compensation arrangements were converted into common stock.
Options to purchase 28.2 million shares of common stock at
June 28, 2008, 35.2 million shares of common stock at June 30,
2007 and 46.0 million shares of common stock at July 1, 2006
were not included in the computation of diluted earnings per share
because the exercise price of these options was greater than the
average market price of the corporation’s outstanding common
stock, and therefore anti-dilutive. Additionally, in 2008, no potential
common shares have been included in the computation of diluted
loss per share as these shares are anti-dilutive.
Sara Lee Corporation and Subsidiaries 61