Sara Lee 2010 Annual Report Download - page 43

Sara Lee Corporation and Subsidiaries 41
Payments Due by Fiscal Year
In millions Total 2011 2012 2013 2014 2015 Thereafter
Long-term debt $2,734 $÷÷«16 $1,545 $÷«532 $÷26 $÷74 $÷«541
Interest on debt obligations1907 140 81 58 44 34 550
Operating lease obligations 297 80 57 42 28 21 69
Purchase obligations22,895 1,434 605 312 243 229 72
Other long-term liabilities3434 73 76 78 67 63 77
Subtotal 7,267 1,743 2,364 1,022 408 421 1,309
Contingent lease obligations4105 22 17 14 12 12 28
Total5$7,372 $1,765 $2,381 $1,036 $420 $433 $1,337
1Interest obligations on floating rate debt instruments are calculated for future periods using interest rates in effect at the end of 2010. See Note 12 to the Consolidated Financial Statements
for further details on the corporation’s long-term debt.
2Purchase obligations include expenditures to purchase goods and services in the ordinary course of business for production and inventory needs (such as raw materials, supplies, packaging,
manufacturing arrangements, storage, distribution and union wage agreements); capital expenditures; marketing services; information technology services; and maintenance and other professional
services where, as of the end of 2010, the corporation has agreed upon a fixed or minimum quantity to purchase, a fixed, minimum or variable pricing arrangement and the approximate delivery
date. Future cash expenditures will vary from the amounts shown in the table above. The corporation enters into purchase obligations when terms or conditions are favorable or when a long-
term commitment is necessary. Many of these arrangements are cancelable after a notice period without a significant penalty. Additionally, certain costs of the corporation are not included in
the table since at the end of 2010 an obligation did not exist. An example of these includes situations where purchasing decisions for these future periods have not been made at the end of
2010. Ultimately, the corporation’s decisions and cash expenditures to purchase these various items will be based upon the corporation’s sales of products, which are driven by consumer
demand. The corporation’s obligations for accounts payable and accrued liabilities recorded on the balance sheet are also excluded from the table.
3Represents the projected 2011 pension contribution and the projected payment for long-term liabilities recorded on the balance sheet for deferred compensation, restructuring costs, deferred
income, sales and other incentives. The 2011 projected pension contribution and subsequent years through 2016 include an annual pension contribution of 32 million British pounds related to
the terms of an agreement to fully fund certain U.K. pension obligations. The corporation has employee benefit obligations consisting of pensions and other postretirement benefits, including
medical; other than the projected 2011 pension contribution and the U.K. funding amounts, noted previously, pension and postretirement obligations including any contingent amounts that may
be due related to multi-employer pension plans, have been excluded from the table. A discussion of the corporation’s pension and postretirement plans, including funding matters, is included
in Notes 16 and 17 to the Consolidated Financial Statements. The corporation’s obligations for employee health and property and casualty losses are also excluded from the table. Finally, the
amount does not include any reserves for income taxes because we are unable to reasonably predict the ultimate amount or timing of settlement of our reserves for income taxes. See Note 18
to the corporation’s consolidated financial statements regarding income taxes for further details.
4Contingent lease obligations represent leases on property operated by others that only become an obligation of the corporation in the event that the owners of the businesses are unable to
satisfy the lease liability. A significant portion of these amounts relates to leases operated by Coach, Inc. At July 3, 2010, the corporation has not recognized a contingent lease liability on the
Consolidated Balance Sheets.
5Contractual commitments and obligations identified under the accounting rules associated with accounting for contingencies are reflected and disclosed on the Consolidated Balance Sheets
and in the related notes. Amounts exclude any payments related to deferred tax balances including any tax related to future repatriation of foreign earnings. See Note 18 to the corporation’s
Consolidated Financial Statements regarding income taxes for further details.
Guarantees The corporation is a party to a variety of agreements
under which it may be obligated to indemnify a third party with
respect to certain matters. Typically, these obligations arise as a
result of contracts entered into by the corporation under which the
corporation agrees to indemnify a third party against losses arising
from a breach of representations and covenants related to such
matters as title to assets sold, the collectibility of receivables,
specified environmental matters, lease obligations assumed and
certain tax matters. In each of these circumstances, payment by
the corporation is conditioned on the other party making a claim
pursuant to the procedures specified in the contract. These proce-
dures allow the corporation to challenge the other party’s claims.
In addition, the corporation’s obligations under these agreements
may be limited in terms of time and/or amount, and in some cases
the corporation may have recourse against third parties for certain
payments made by the corporation. It is not possible to predict the
maximum potential amount of future payments under certain of
these agreements, due to the conditional nature of the corporation’s
obligations and the unique facts and circumstances involved in each
particular agreement. Historically, payments made by the corpora-
tion under these agreements have not had a material effect on the
corporation’s business, financial condition or results of operations.
The corporation believes that if it were to incur a loss in any of
these matters, such loss would not have a material effect on the
corporation’s business, financial condition or results of operations.
In 2010, the corporation recognized a $26 million charge for a
tax indemnification related to the corporation’s direct selling business
that was divested in 2006. In October 2009, the Spanish tax admin-
istration upheld the challenge made by its local field examination
team against tax positions taken by the corporation’s Spanish
subsidiaries. The corporation is currently appealing the Court’s
decision and has obtained a bank guarantee of $80 million as
security against all allegations.