Sara Lee 2009 Annual Report Download - page 69

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 27, 2009 were as follows:
Capital Operating
Leases Leases
2010 $«27 $101
2011 18 75
2012 13 52
2013 635
2014 325
Thereafter 586
Total minimum lease payments 72 $374
Amounts representing interest (12)
Present value of net minimum payments 60
Current portion 19
Noncurrent portion $«41
Depreciation expense of capital lease assets was $22 in 2009,
$20 in 2008 and $27 in 2007. Rental expense under operating
leases was $143 in 2009, $146 in 2008 and $130 in 2007.
Contingent Lease Obligation The corporation is contingently liable
for leases on property operated by others. At June 27, 2009, 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 $135. The minimum annual rentals under
these leases are $28 in 2010, $22 in 2011, $17 in 2012, $14 in
2013, $12 in 2014 and $42 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 2009 was $12.
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 either the Coach, Inc. leases or the U.K. Apparel leases.
Note 14 – Credit Facilities
The corporation has a $1.85 billion credit facility that had an
annual fee of 0.08% as of June 27, 2009. This agreement supports
commercial paper borrowings and other financial instruments. The
corporation’s credit facility and debt agreements contain customary
representations, warranties and events of default, as well as, affir-
mative, negative and financial covenants with which the corporation
is in compliance. One financial covenant includes a requirement
to maintain an interest coverage ratio of not less than 2.0 to 1.0.
The interest coverage ratio is based on the ratio of EBIT to con -
solidated net interest expense with consolidated EBIT equal to net
income plus interest expense, income tax expense, and extraordinary
or non-recurring non-cash charges and gains. For the 12 months
ended June 27, 2009, the corporation’s interest coverage ratio
was 8.4 to 1.0.
Selected data on the corporation’s short-term obligations follow:
2009 2008 2007
Maximum month-end borrowings $469 $280 $1,348
Average borrowings during the year 291 56 271
Year-end borrowings 20 280 23
Weighted average interest rate during the year 3.7% 3.9% 5.2%
Weighted average interest rate at year-end 6.7 3.1 3.9
Note 15 – Intangible Assets and Goodwill
The primary components of the corporation’s intangible assets
reported in continuing operations and the related amortization
expense are as follows:
Accumulated Net Book
Gross Amortization Value
2009
Intangible assets subject to amortization
Trademarks and brand names $÷«703 $322 $÷«381
Customer relationships 427 229 198
Computer software 385 258 127
Other contractual agreements 32 21 11
$1,547 $830 717
Trademarks and brand names
not subject to amortization 89
Net book value of intangible assets $÷«806
2008
Intangible assets subject to amortization
Trademarks and brand names $÷«864 $331 $÷«533
Customer relationships 440 208 232
Computer software 394 244 150
Other contractual agreements 32 21 11
$1,730 $804 926
Trademarks and brand names
not subject to amortization 95
Net book value of intangible assets $1,021
Sara Lee Corporation and Subsidiaries 67