Sara Lee 2009 Annual Report Download - page 66

Notes to financial statements
Dollars in millions except per share data
Common stock dividends and dividend-per-share amounts
declared on outstanding shares of common stock were $306 and
$0.44 in 2009, $298 and $0.42 in 2008 and $368 and $0.50 in
2007. The corporation is incorporated in the state of Maryland and
under those laws repurchased shares are retired as repurchased.
Note 7 – Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income are
as follows:
Net Unrealized
Gain (Loss) Pension/
on Qualifying Post- Accumulated
Cumulative Cash Flow retirement Other
Translation Hedges Liability Comprehensive
Adjustment and Other Adjustment Income (Loss)
Balance at July 1, 2006 $(661) $(42) $(636) $(1,339)
Spin off of Hanesbrands, Inc. 5 4 58 67
Adjustment to apply
SAB No. 108 5–– 5
Adjustment to initially apply
SFAS No. 158 – – (168) (168)
Disposition of European
Meat business 229 – – 229
Other comprehensive
income (loss) activity 275 34 143 452
Balance at June 30, 2007 (147) (4) (603) (754)
Goodwill redenomination 106 – – 106
Disposition of Mexican
Meat business 31 – – 31
Amortization of net actuarial
loss and prior service credit – – 27 27
Net actuarial gain
arising during the period – – 165 165
Other comprehensive
income (loss) activity 549 25 – 574
Balance at June 28, 2008 539 21 (411) 149
Measurement date adjustment ––3 3
Amortization of net actuarial
loss and prior service credit ––1 1
Net actuarial loss
arising during the period – – (220) (220)
Postretirement plan
amendments – – 55 55
Other comprehensive
income (loss) activity (561) (32) – (593)
Balance at June 27, 2009 $««(22) $(11) $(572) $÷«(605)
Note 8 – Stock-Based Compensation
The corporation has various stock option, employee stock purchase
and stock award plans. At June 27, 2009, 99.0 million shares
were available for future grant in the form of options, restricted
shares or stock appreciation rights out of 118.7 million shares
originally authorized.
Stock Options The exercise price of each stock option equals the
market price of the corporation’s stock on the date of grant. Options
can generally be exercised over a maximum term of 10 years. Options
generally cliff vest and expense is recognized on a straightline basis
during the vesting period. The fair value of each option grant is esti-
mated on the date of grant using the Black-Scholes option-pricing
model and the following weighted average assumptions:
2009 2008 2007
Weighted average
expected lives 8.0 years 8.0 years 6.1 years
Weighted average
risk-free interest rates 3.1% 4.2% 4.8%
Range of risk-free
interest rates 3.1% 4.2% 4.7«–«4.9%
Weighted average
expected volatility 22.1% 24.3% 22.3%
Range of
expected volatility 22.1% 24.3% 21.5«–«22.4%
Dividend yield 3.0% 2.4% 2.8%
The corporation uses historical volatility for a period of time
that is comparable to the expected life of the option to determine
volatility assumptions.
A summary of the changes in stock options outstanding under
the corporation’s option plans during 2009 is presented below:
Weighted
Weighted Average
Average Remaining Aggregate
Exercise Contractual Intrinsic
Shares in thousands Shares Price Term (Years) Value
Options outstanding
at June 28, 2008 31,931 $18.20 3.2 $«–
Granted 1,880 13.83 – –
Exercised (17) 13.32 – –
Canceled/expired (6,017) 19.79 – –
Options outstanding
at June 27, 2009 27,777 $17.54 3.0 $«–
Options exercisable
at June 27, 2009 22,721 $18.13 1.9 $«–
64 Sara Lee Corporation and Subsidiaries