Sara Lee 2008 Annual Report Download - page 66

Notes to financial statements
Dollars in millions except per share data
64 Sara Lee Corporation and Subsidiaries
The goodwill reported in continuing operations associated with
each business segment and the changes in those amounts during
2008 and 2007 are as follows:
North
North American Household
American Retail International International and
Retail Meats Bakery Foodservice Beverage Bakery Body Care Total
Net book value at July 1, 2006 $92 $294 $«954 $272 $«622 $517 $2,751
Impairment – – – (92) – – (92)
Foreign exchange/other – – –13 –2639
Net book value at June 30, 2007 92 294 954 193 622 543 2,698
Impairments – – (382) – (400) – (782)
Reclass to net assets held for sale – – (19) – – – (19)
Reallocation – 3 48 – (51) – –
Redenomination – – – 24 63 19 106
Foreign exchange/other – – – 46 110 64 220
Net book value at June 28, 2008 $92 $297 $«601 $263 $«344 $626 $2,223
In 2008, non-deductible goodwill of $382 and $400 was
impaired in the Foodservice Bakery and Bakery Spain reporting
units, respectively. These charges are more fully described in Note
3 to the Consolidated Financial Statements, “Impairment Charges.”
In 2007, non-deductible goodwill of $92 was impaired in the
International Beverage segment. Of this amount, $86 relates to the
Brazilian reporting unit and $6 relates to the Austrian reporting unit.
These charges are more fully described in Note 3 to the Consolidated
Financial Statements, “Impairment Charges.”
Note 16 – Contingencies and Commitments
Contingent Asset The corporation sold its European cut tobacco
business in 1999. Under the terms of that agreement, the corpo -
ration will receive an annual cash payment of 95 million euros if
tobacco continues to be a legal product in the Netherlands, Germany
and Belgium through July 15, 2009. The legal status of tobacco in
each country accounts for a portion of the total contingency with
the Netherlands accounting for 67%, Germany 22% and Belgium
11%. If tobacco ceases to be a legal product within any of these
countries, the corporation forfeits the receipt of all future amounts
related to that country. The contingencies associated with the 2008
and prior payments passed in the first quarter of each fiscal year
and the corporation received the annual payments. The 2008 annual
payment was equivalent to $130, the 2007 annual payment was
equivalent to $120 and the 2006 annual payment was equivalent
to $114 based upon the respective exchange rates on the dates of
receipt. These amounts were recognized in the corporation’s earn-
ings when received. The payments increased diluted earnings per
share by $0.18 in 2008, $0.16 in 2007 and $0.15 in 2006.
Contingent Liabilities The corporation is a party to various
pending legal proceedings, claims and environmental actions by
government agencies. In accordance with SFAS No. 5, “Accounting
for Contingencies,” the corporation records a provision with respect
to a claim, suit, investigation or proceeding when it is probable that
a liability has been incurred and the amount of the loss can reason-
ably be estimated. Any provisions are reviewed at least quarterly
and are adjusted to reflect the impact and status of settlements,
rulings, advice of counsel and other information pertinent to the
particular matter. The recorded liabilities for these items were not
material to the Consolidated Financial Statements of the corporation
in any of the years presented. Although the outcome of such items
cannot be determined with certainty, the corporation’s general coun-
sel and management are of the opinion that the final outcome of
these matters will not have a material adverse impact on the con-
solidated financial position, results of operations or liquidity.
Aris Since 1995, three complaints have been filed on behalf
of employees of a former subsidiary of the corporation known as
Aris Philippines, Inc. (Aris) alleging unfair labor practices associated
with Aris’ termination of manufacturing operations in the Philippines.
Each of these three complaints includes allegations with the same
issues and facts. With regard to two of these complaints, Aris
prevailed in the administrative hearings held in the Philippines.
Although implicated in these complaints, the corporation was not
a party. The third complaint is a consolidation of cases filed in the
Republic of the Philippines, Department of Labor and Employment
and the National Labor Relations Commission (NLRC) from 1998
through July 1999 by individual complainants. On December 11,
1998, the third complaint was amended to name the corporation
as a party. The case is styled: Emelinda Mactlang, et al. v. Aris
Philippines, Inc., et al. In the underlying proceedings during 2006,
the arbitrator ruled against the corporation and awarded the plain-
tiffs $60 in damages and fees. The corporation appealed this
administrative ruling. On December 19, 2006, the NLRC issued a
ruling setting aside the arbitrator’s ruling, and remanded the case
to the arbitrator for further proceedings. The complainants and the
corporation have filed motions for reconsideration – the corporation
seeking a final judgment and outright dismissal of the case, instead
of a remand to the arbitrator; and complaints seeking to reinstate