Sara Lee 2011 Annual Report Download - page 103

Note 14 – Contingencies and Commitments Contingent Liabilities The corporation is a party to various pending legal proceedings, claims and environmental actions by government agencies. 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. Aris
This is a consolidation of cases filed by individual complainants
with the Republic of the Philippines, Department of Labor and Employment and the National Labor Relations Commission (NLRC) from 1998 through July 1999. The complaint alleges unfair labor practices due to the termination of manufacturing operations in the Philippines by Aris Philippines, Inc. (Aris), a former subsidiary of the corporation. The complaint names the corporation as a party defen- dant. In 2006, the arbitrator ruled against the corporation and awarded the plaintiffs $80 million in damages and fees. This ruling was appealed by the corporation and subsequently set aside by the NLRC in December 2006. Both the complainants and the corporation have filed motions for reconsideration. The corporation continues to believe that the plaintiffs’ claims are without merit; however, it is reasonably possible that this case will be ruled against the corpora- tion and have a material adverse impact on the corporation’s results of operations and cash flows.
Hanesbrands Inc.
In September 2006, the corporation spun off
its branded apparel business into an independent publicly-traded company named Hanesbrands Inc. (“HBI”). In connection with the HBI spin-off, the corporation and HBI entered into a tax sharing agreement that governs the allocation of tax assets and liabilities between the parties. As previously disclosed, HBI initiated binding arbitration claiming that it was owed $72 million from the corpora- tion under the tax sharing agreement. In Phase I of the bifurcated arbitration, the tribunal ruled in favor of the corporation on all issues and the corporation’s interpretation prevailed. Accordingly, Sara Lee owes $3.3 million, plus interest, to HBI. The corporation had already conceded this amount was owed and had previously established a reserve reflecting this liability. The time period for HBI to challenge the tribunal’s ruling has not yet lapsed; however the corporation believes that the likelihood of an unfavorable outcome is remote.
Selected data on the corporation’s short-term obligations follow:
In millions 2011 2010 2009 Maximum month-end borrowings $605 $132 $461 Average borrowings during the year 323 69 289 Year-end borrowings 238 47 20 Weighted average interest rate
during the year 2.36% 2.67% 3.60%
Weighted average interest rate
at year-end 1.34 2.69 6.68
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.
July 2, July 3,
In millions 2011 2010 Gross book value of capital lease assets
included in property $10 $10
Net book value of capital lease assets
included in property 3 3
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 July 2, 2011 were as follows:
Capital Operating
In millions Leases Leases 2012 $1 $÷58 2013 143 2014 131 2015 –25 2016 –17 Thereafter –69 Total minimum lease payments 3 $243 Amounts representing interest – Present value of net minimum payments 3 Current portion 1 Noncurrent portion $2 In millions 2011 2010 2009 Depreciation of capital lease assets $÷1 $÷2 $÷3 Rental expense under operating leases 77 87 92 100/101 Sara Lee Corporation and Subsidiaries