Sara Lee 2008 Annual Report Download - page 64

Notes to financial statements
Dollars in millions except per share data
The following is a reconciliation of net income (loss) to net income
(loss) per share – basic and diluted – for the years ended June 28,
2008, June 30, 2007 and July 1, 2006:
Shares in millions 2008 2007 2006
Income (loss) from continuing operations $«««(41) $«440 $«««31
Income (loss) from discontinued operations (14) 48 123
Gain (loss) on sale of discontinued operations (24) 16 401
Net income (loss) $«««(79) $«504 $«555
Average shares outstanding – basic 715 741 766
Dilutive effect of stock option
and stock award plans –22
Diluted shares outstanding 715 743 768
Income (loss) from continuing
operations per share
Basic $(0.06) $0.59 $0.04
Diluted $(0.06) $0.59 $0.04
Net income (loss) from discontinued
operations per share
Basic $(0.05) $0.09 $0.68
Diluted $(0.05) $0.09 $0.68
Net income (loss) per share
Basic $(0.11) $0.68 $0.72
Diluted $(0.11) $0.68 $0.72
Note 12 – Long-Term Debt
The composition of the corporation’s long-term debt, which includes
capital lease obligations, is summarized in the following table:
Maturity Date 2008 2007
Senior debt – fixed rate
6.125% notes 2008 $«««««««– $«««806
6.0% – 6.95% medium-term notes 2008 – 227
2.75% notes 2008 – 300
7.05% – 7.40% notes 2008 – 75
6.5% notes 2009 150 150
7.26% – 7.71% notes 2010 25 25
6.25% notes 2012 1,110 1,110
3.875% notes 2013 500 500
10% zero coupon notes 2014 11 10
10% – 14.25% zero coupon notes 2015 50 44
6.125% notes 2033 500 500
Total senior debt 2,346 3,747
Senior debt – variable rate
Euro denominated – euro interbank offered
rate (EURIBOR) plus .10% 2009 394 336
Total senior debt 2,740 4,083
Obligations under capital lease 61 68
Other debt 103 64
Total debt 2,904 4,215
Unamortized discounts (6) (7)
Hedged debt adjustment to fair value 10 (11)
Total long-term debt 2,908 4,197
Less current portion 568 1,427
$2,340 $2,770
Payments required on long-term debt during the years ending 2009
through 2013 are $568, $52, $20, $1,128 and $517, respectively.
The corporation made cash interest payments of $249, $266 and
$311 in 2008, 2007 and 2006, respectively.
Note 13 – Leases
The corporation leases certain facilities, equipment and vehicles under
agreements that are classified as either operating or capital leases.
The building leases have original terms that range from 10 to 15
years, while the equipment and vehicle leases have terms of generally
less than seven years. The gross book value of capital lease assets
included in property at June 28, 2008 and June 30, 2007 was $118
and $138, respectively. The net book value of capital lease assets
included in property at June 28, 2008 and June 30, 2007 was $61
and $68, respectively.
Future minimum payments, by year and in the aggregate, under
capital leases and noncancelable operating leases having an origi-
nal term greater than one year at June 28, 2008 were as follows:
Capital Operating
Leases Leases
2009 $16 $116
2010 19 76
2011 16 53
2012 10 33
2013 526
Thereafter 4 102
Total minimum lease payments 70 $406
Amounts representing interest (9)
Present value of net minimum payments 61
Current portion 12
Noncurrent portion $49
Depreciation expense of capital lease assets was $20 in 2008,
$27 in 2007 and $26 in 2006. Rental expense under operating
leases was $146 in 2008, $130 in 2007 and $135 in 2006.
Contingent Lease Obligation The corporation is contingently liable
for leases on property operated by others. At June 28, 2008, the
maximum potential amount of future payments the corporation could
be required to make, if all of the current operators default on the
rental arrangements, is $172. The minimum annual rentals under
these leases are $29 in 2009, $27 in 2010, $23 in 2011, $18 in
2012, $14 in 2013 and $61 thereafter. The two largest components
of these amounts relate to a number of retail store leases operated
by Coach, Inc. and certain leases related to the corporation’s U.K.
Apparel operations that have been sold. Coach, Inc. is contractually
obligated to provide the corporation, on an annual basis, with a
standby letter of credit approximately equal to the next year’s rental
obligations. The letter of credit in place at the close of 2008 was $13.
This obligation to provide a letter of credit expires when the corpo-
ration’s contingent lease obligation is substantially extinguished.
The corporation has not recognized a liability for the contingent
obligation on the Coach, Inc. leases.
62 Sara Lee Corporation and Subsidiaries