Consolidated Balance Sheets
Consolidated Balance Sheets (USD $) | |||
In Thousands | 9 Months Ended
Mar. 27, 2010 | 9 Months Ended
Mar. 28, 2009 | 12 Months Ended
Jun. 27, 2009 |
Current assets | |||
Cash and cash equivalents | $652,792 | $899,117 | $1,087,084 |
Accounts and notes receivable, less allowances of $83,069, $36,078 and $99,535 | 2,633,995 | 2,549,769 | 2,468,511 |
Inventories | 1,751,239 | 1,710,251 | 1,650,666 |
Prepaid expenses and other current assets | 71,761 | 67,131 | 64,418 |
Prepaid income taxes | 22,008 | 0 | 0 |
Total current assets | 5,131,795 | 5,226,268 | 5,270,679 |
Plant and equipment at cost, less depreciation | 3,176,220 | 2,891,893 | 2,979,200 |
Other assets | |||
Goodwill | 1,559,291 | 1,404,993 | 1,510,795 |
Intangibles, less amortization | 114,254 | 87,011 | 121,089 |
Restricted cash | 135,590 | 93,714 | 93,858 |
Prepaid pension cost | 92,757 | 239,773 | 26,746 |
Other assets | 258,320 | 193,400 | 214,252 |
Total other assets | 2,160,212 | 2,018,891 | 1,966,740 |
Total assets | 10,468,227 | 10,137,052 | 10,216,619 |
Current liabilities | |||
Accounts payable | 2,038,922 | 1,830,432 | 1,856,887 |
Accrued expenses | 794,235 | 776,767 | 797,756 |
Accrued income taxes | 0 | 98,179 | 323,983 |
Deferred taxes | 76,258 | 404,185 | 162,365 |
Current maturities of long-term debt | 7,817 | 6,529 | 9,163 |
Total current liabilities | 2,917,232 | 3,116,092 | 3,150,154 |
Other liabilities | |||
Long-term debt | 2,468,517 | 2,463,243 | 2,467,486 |
Deferred taxes | 513,211 | 530,100 | 526,377 |
Other long-term liabilities | 541,229 | 696,440 | 622,900 |
Total other liabilities | 3,522,957 | 3,689,783 | 3,616,763 |
Commitments and contingencies | |||
Shareholders' equity | |||
Preferred stock, par value $1 per share Authorized 1,500,000 shares, issued none | 0 | 0 | 0 |
Common stock, par value $1 per share Authorized 2,000,000,000 shares, issued 765,174,900 shares | 765,175 | 765,175 | 765,175 |
Paid-in capital | 799,278 | 755,408 | 760,352 |
Retained earnings | 6,943,640 | 6,366,304 | 6,539,890 |
Accumulated other comprehensive loss | (167,827) | (200,413) | (277,986) |
Treasury stock at cost, 173,872,949, 175,148,403 and 175,857,763 shares | (4,312,228) | (4,355,297) | (4,337,729) |
Total shareholders' equity | 4,028,038 | 3,331,177 | 3,449,702 |
Total liabilities and shareholders' equity | $10,468,227 | $10,137,052 | $10,216,619 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | |||
In Thousands, except Share data | Mar. 27, 2010
| Jun. 27, 2009
| Mar. 28, 2009
|
Allowance for doubtful accounts | $83,069 | $36,078 | $99,535 |
Preferred Stock Par Value | $1 | $1 | $1 |
Preferred Stock Authorized Shares | 1,500,000 | 1,500,000 | 1,500,000 |
Preferred Stock Issued Shares | 0 | 0 | 0 |
Common Stock Par Value | $1 | $1 | $1 |
Common Stock Authorized Shares | 2,000,000,000 | 2,000,000,000 | 2,000,000,000 |
Common Stock Issued Shares | 765,174,900 | 765,174,900 | 765,174,900 |
Treasury Shares Outstanding | 173,872,949 | 175,148,403 | 175,857,763 |
Consolidated Results of Operati
Consolidated Results of Operations (USD $) | ||||
In Thousands, except Share data | 3 Months Ended
Mar. 27, 2010 | 3 Months Ended
Mar. 28, 2009 | 9 Months Ended
Mar. 27, 2010 | 9 Months Ended
Mar. 28, 2009 |
Sales | $8,945,093 | $8,739,350 | $26,895,018 | $27,766,582 |
Cost of sales | 7,261,721 | 7,102,274 | 21,769,400 | 22,492,837 |
Gross margin | 1,683,372 | 1,637,076 | 5,125,618 | 5,273,745 |
Operating expenses | 1,251,269 | 1,231,753 | 3,733,836 | 3,941,806 |
Operating income | 432,103 | 405,323 | 1,391,782 | 1,331,939 |
Interest expense | 27,654 | 28,233 | 92,976 | 83,043 |
Other income, net | 1,028 | (3,514) | (2,122) | (11,550) |
Earnings before income taxes | 403,421 | 380,604 | 1,300,928 | 1,260,446 |
Income taxes | 155,773 | 154,438 | 458,726 | 519,812 |
Net earnings | $247,648 | $226,166 | $842,202 | $740,634 |
Net earnings: | ||||
Basic earnings per share | 0.42 | 0.38 | 1.42 | 1.24 |
Diluted earnings per share | 0.42 | 0.38 | 1.42 | 1.24 |
Average shares outstanding | 593,129,783 | 590,152,592 | 592,450,575 | 596,653,289 |
Diluted shares outstanding | 594,883,736 | 590,667,577 | 593,397,235 | 597,691,315 |
Dividends declared per common share | 0.25 | 0.24 | 0.74 | 0.7 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (USD $) | ||||
In Thousands | 3 Months Ended
Mar. 27, 2010 | 3 Months Ended
Mar. 28, 2009 | 9 Months Ended
Mar. 27, 2010 | 9 Months Ended
Mar. 28, 2009 |
Net earnings | $247,648 | $226,166 | $842,202 | $740,634 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustment | 5,295 | (6,691) | 89,241 | (125,392) |
Items presented net of tax: | ||||
Amortization of cash flow hedge | 107 | 107 | 321 | 321 |
Amortization of unrecognized prior service cost | 677 | 729 | 2,030 | 1,690 |
Amortization of unrecognized actuarial losses (gains), net | 6,166 | 2,706 | 18,498 | 8,117 |
Amortization of unrecognized transition obligation | 23 | 23 | 69 | 69 |
Pension liability assumption | 0 | 0 | 0 | (16,450) |
Total other comprehensive income (loss) | 12,268 | (3,126) | 110,159 | (131,645) |
Comprehensive income | $259,916 | $223,040 | $952,361 | $608,989 |
Consolidated Cash Flows
Consolidated Cash Flows (USD $) | ||
In Thousands | 9 Months Ended
Mar. 27, 2010 | 9 Months Ended
Mar. 28, 2009 |
Cash flows from operating activities: | ||
Net earnings | $842,202 | $740,634 |
Adjustments to reconcile net earnings to cash provided by operating activities: | ||
Share-based compensation expense | 51,981 | 46,744 |
Depreciation and amortization | 284,213 | 284,153 |
Deferred taxes | (152,236) | 495,732 |
Provision for losses on receivables | 32,030 | 61,609 |
Other non-cash items | (1,112) | (741) |
Additional investment in certain assets and liabilities, net of effect of businesses acquired: | ||
(Increase) decrease in receivables | (169,520) | 74,131 |
(Increase) decrease in inventories | (79,010) | 96,617 |
(Increase) in prepaid expenses and other current assets | (6,569) | (4,157) |
Increase (decrease) in accounts payable | 156,856 | (179,160) |
(Decrease) in accrued expenses | (21,468) | (125,637) |
(Decrease) in accrued income taxes | (316,074) | (508,628) |
(Increase) decrease in other assets | (39,618) | 3,294 |
(Decrease) increase in other long-term liabilities and prepaid pension cost, net | (115,210) | 2,952 |
Excess tax benefits from share-based compensation arrangements | (518) | (2,818) |
Net cash provided by operating activities | 465,947 | 984,725 |
Cash flows from investing activities: | ||
Additions to plant and equipment | (438,071) | (314,858) |
Proceeds from sales of plant and equipment | 4,106 | 3,224 |
Acquisition of businesses, net of cash acquired | (20,880) | (53,868) |
Purchases of short-term investments | (60,876) | 0 |
Maturities of short-term investments | 60,990 | 0 |
(Increase) in restricted cash | (41,732) | (1,127) |
Net cash used for investing activities | (496,463) | (366,629) |
Cash flows from financing activities: | ||
Other debt borrowings | 5,419 | 502,460 |
Other debt repayments | (8,196) | (7,778) |
Debt issuance costs | (7) | (3,007) |
Common stock reissued from treasury for share-based compensation awards | 54,068 | 98,452 |
Treasury stock purchases | (41,020) | (438,843) |
Dividends paid | (431,916) | (406,689) |
Excess tax benefits from share-based compensation arrangements | 518 | 2,818 |
Net cash used for financing activities | (421,134) | (252,587) |
Effect of exchange rates on cash | 17,358 | (17,944) |
Net (decrease) increase in cash and cash equivalents | (434,292) | 347,565 |
Cash and cash equivalents at beginning of period | 1,087,084 | 551,552 |
Cash and cash equivalents at end of period | 652,792 | 899,117 |
Supplemental disclosures of cash flow information: | ||
Interest | 119,720 | 100,469 |
Income taxes | $973,354 | $510,147 |
Basis of Presentation
Basis of Presentation | |
9 Months Ended
Mar. 27, 2010 | |
Basis of Presentation | 1. BASIS OF PRESENTATION The consolidated financial statements have been prepared by the company, without audit, with the exception of the June27, 2009 consolidated balance sheet which was taken from the audited financial statements included in the companys Fiscal 2009 Annual Report on Form 10-K. The financial statements include consolidated balance sheets, consolidated results of operations, consolidated statements of comprehensive income and consolidated cash flows. In the opinion of management, all adjustments, which consist of normal recurring adjustments, necessary to present fairly the financial position, results of operations, comprehensive income and cash flows for all periods presented have been made. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the companys Fiscal 2009 Annual Report on Form 10-K. A review of the financial information herein has been made by Ernst Young LLP, independent auditors, in accordance with established professional standards and procedures for such a review. A report from Ernst Young LLP concerning their review is included as Exhibit15.1 to this Form 10-Q. |
Changes in Accounting
Changes in Accounting | |
9 Months Ended
Mar. 27, 2010 | |
Changes in Accounting | 2. CHANGES IN ACCOUNTING Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities In June2008, the Financial Accounting Standards Board (FASB)issued FASB Staff Position No. EITF 03-06-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, which was subsequently codified within Accounting Standards Codification (ASC)260, Earnings Per Share. This standard addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. This standard was effective for Sysco beginning in fiscal 2010 and interim periods within that year. All prior-period earnings per share data presented in filings subsequent to adoption must be adjusted retrospectively to conform to the provisions of this standard. Early application of this standard was not permitted. The adoption of this standard did not have a material impact on the companys consolidated financial statements. Interim Disclosures about Fair Value of Financial Instruments In April2009, the FASB issued FASB Staff Position No.FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, which was subsequently codified within ASC 825, Financial Instruments. This standard amended previous guidance to require disclosures about the fair value of financial instruments for interim reporting periods of publicly traded companies. Prior disclosure requirements only applied to annual financial statements. This standard was effective for interim reporting periods ending after June15, 2009, which was the first quarter of fiscal 2010 for Sysco. The company has included the required disclosures for this standard in Note 3, Fair Value Measurements. Measuring Liabilities at Fair Value In August2009, the FASB issued Accounting Standards Update 2009-05, Measuring Liabilities at Fair Value. This update provides additional guidance, including illustrative examples, clarifying the measurement of liabilities at fair value. This update is effective for the first reporting period beginning after its issuance. The company adopted the provisions of this update in the second quarter of fiscal 2010. The adoption of this update did not have a material impact on the companys consolidated financial statements. Improving Disclosures about Fair Value Measurements In January2010, the FASB issued Accounting Standards Update 2010-06, Improving Disclosures about Fair Value Measurements. This update requires some new disclosures and clarifies some existing disclosure requirements about fair value measurements codified within ASC 820, Fair Value Measurements and Disclosures. The majority of the provisions of this update, including those applicable to Sysco, were effective for interim and annual reporting periods beginning after December15, 2009. Early application of the provisions of this update was permitted. The company adopted the applicable provisions of this update in the third quarter of fiscal 2010. The adoption of this update |
Fair Value Measurements
Fair Value Measurements | |
9 Months Ended
Mar. 27, 2010 | |
Fair Value Measurements | 3. FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). The accounting guidance includes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are as follows: Level 1 Unadjusted quoted prices for identical assets or liabilities in active markets; Level 2 Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability; and Level 3 Unobservable inputs for the asset or liability, which include managements own assumption about the assumptions market participants would use in pricing the asset or liability, including assumptions about risk. Syscos policy is to invest in only high-quality investments. Cash equivalents primarily include time deposits, certificates of deposit, commercial paper, high-quality money market funds and all highly liquid instruments with original maturities of three months or less. Restricted cash consists of investments in high-quality money market funds. The following is a description of the valuation methodologies used for assets and liabilities measured at fair value. Time deposits, certificates of deposit and commercial paper included in cash equivalents are valued at amortized cost, which approximates fair value. These are included within cash equivalents as a Level 2 measurement in the tables below. Money market funds are valued at the closing price reported by the fund sponsor from an actively traded exchange. These are included within cash equivalents and restricted cash as Level 1 measurements in the tables below. The interest rate swap agreements are valued using a swap valuation model that utilizes an income approach using observable market inputs including interest rates, LIBOR swap rates and credit default swap rates. These are included as a Level 2 measurement in the tables below. The following tables present the companys assets measured at fair value on a recurring basis as of March27, 2010, June27, 2009 and March28, 2009: Assets Measured at Fair Value as of March 27, 2010 Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents Cash equivalents $ 241,207,000 $ 202,967,000 $ $ 444,174,000 Restricted cash 135,590,000 135,590,000 Other assets Interest rate swap agreements 3,836,000 3,836,000 Total assets at fair value $ 376,797,000 $ 206,803,000 $ $ 583,600,000 Assets Measured at Fair Value as of June 27, 2009 Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents Cash |
Derivative Financial Instrument
Derivative Financial Instruments | |
9 Months Ended
Mar. 27, 2010 | |
Derivative Financial Instruments | 4. DERIVATIVE FINANCIAL INSTRUMENTS Sysco manages its debt portfolio by targeting an overall desired position of fixed and floating rates and may employ interest rate swaps from time to time to achieve this goal. The company does not use derivative financial instruments for trading or speculative purposes. In September2009, the company entered into an interest rate swap agreement that effectively converted $200,000,000 of fixed rate debt maturing in fiscal 2014 to floating rate debt. In October2009, the company entered into an interest rate swap agreement that effectively converted $250,000,000 of fixed rate debt maturing in fiscal 2013 to floating rate debt. Both transactions were entered into with the goal of reducing overall borrowing cost. These transactions were designated as fair value hedges since the swaps hedge against the changes in fair value of fixed rate debt resulting from changes in interest rates. The location and the fair value of derivative instruments in the consolidated balance sheet as of March27, 2010 are as follows: Asset Derivatives Liability Derivatives Balance Sheet Balance Sheet Location Fair Value Location Fair Value Interest rate swap agreements Other assets $ 3,836,000 N/A N/A The location and effect of derivative instruments and related hedged items on the consolidated results of operations for the 39-week period and 13-week period ended March27, 2010 presented on a pre-tax basis are as follows: Amount of (Gain) or Loss Recognized in Income Location of (Gain) 39-Week 13-Week or Loss Recognized Period Ended Period Ended in Income March 27, 2010 March 27, 2010 Fair Value Hedge Relationships: Interest rate swap agreements Interest expense $ (5,638,000 ) $ (4,184,000 ) Hedged items debt Interest expense (766,000 ) (663,000 ) Hedge ineffectiveness represents the difference between the changes in the fair value of the derivative instruments and the changes in fair value of the fixed rate debt attributable to changes in the benchmark interest rate. Hedge ineffectiveness is recorded directly in earnings within interest expense and was immaterial for the 39-week period and the 13-week period ended March27, 2010. The interest rate swaps do not contain a credit-risk-related contingent feature. |
Debt
Debt | |
9 Months Ended
Mar. 27, 2010 | |
Debt | 5. DEBT As of March27, 2010, Sysco had uncommitted bank lines of credit which provided for unsecured borrowings for working capital of up to $88,000,000, of which none was outstanding. As of March27, 2010, the companys Irish Subsidiary, Pallas Foods Limited, had a 10,000,000 (Euro) committed facility for unsecured borrowings for working capital expiring March31, 2011. There were no borrowings outstanding under this facility as of March27, 2010. In January2010, the 8,000,000 (Euro) revolver portion of this facility was discontinued and the overdraft line portion of this facility was extended one year for 10,000,000 (Euro). Sysco and one of its subsidiaries, Sysco International, Co., have a revolving credit facility supporting the companys U.S. and Canadian commercial paper programs. The facility in the amount of $1,000,000,000 expires on November4, 2012, but is subject to extension. As of March27, 2010, there were no commercial paper issuances outstanding. During the 39-week period ended March27, 2010, aggregate commercial paper issuances and short-term bank borrowings ranged from zero to approximately $1,820,000. |
Employee Benefit Plans
Employee Benefit Plans | |
9 Months Ended
Mar. 27, 2010 | |
Employee Benefit Plans | 6. EMPLOYEE BENEFIT PLANS The components of net company-sponsored benefit cost for the 39-week period presented are as follows: Pension Benefits Other Postretirement Plans March 27, 2010 March 28, 2009 March 27, 2010 March 28, 2009 Service cost $ 49,989,000 $ 60,643,000 $ 246,000 $ 367,000 Interest cost 89,694,000 85,161,000 421,000 468,000 Expected return on plan assets (78,645,000 ) (95,566,000 ) Amortization of prior service cost 3,157,000 2,643,000 139,000 98,000 Recognized net actuarial loss (gain) 30,394,000 13,295,000 (367,000 ) (118,000 ) Amortization of transition obligation 114,000 114,000 Net periodic benefit cost $ 94,589,000 $ 66,176,000 $ 553,000 $ 929,000 The components of net company-sponsored benefit cost for the 13-week period presented are as follows: Pension Benefits Other Postretirement Plans March 27, 2010 March 28, 2009 March 27, 2010 March 28, 2009 Service cost $ 16,663,000 $ 20,256,000 $ 82,000 $ 122,000 Interest cost 29,897,000 28,555,000 140,000 156,000 Expected return on plan assets (26,215,000 ) (31,855,000 ) Amortization of prior service cost 1,053,000 1,149,000 46,000 33,000 Recognized net actuarial loss (gain) 10,132,000 4,432,000 (122,000 ) (39,000 ) Amortization of transition obligation 38,000 38,000 Net periodic benefit cost $ 31,530,000 $ 22,537,000 $ 184,000 $ 310,000 Syscos contributions to its company-sponsored defined benefit plans were $118,340,000 and $91,889,000 during the 39-week periods ended March27, 2010 and March28, 2009, respectively. Sysco has made the minimum required contribution to its company-sponsored qualified pension plan (Retirement Plan) for the calendar 2009 plan year to meet ERISA minimum funding requirements. The company anticipates it will make $140,000,000 of contributions to the Retirement Plan in fiscal 2010, of which $105,000,000 has been made through the first 39weeks of fiscal 2010. The companys contributions to the Supplemental Executive Retirement Plan (SERP)and other post-retirement plans are made in the amounts needed to fund current year benefit payments. The estimated fiscal 2010 contributions to fund benefit payments for the SERP and other post-retirement plans are $19,445,000 and $372,000, respectively. |
Earnings Per Share
Earnings Per Share | |
9 Months Ended
Mar. 27, 2010 | |
Earnings Per Share | 7. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share: 39-Week Period Ended 13-Week Period Ended March 27, 2010 March 28, 2009 March 27, 2010 March 28, 2009 Numerator: Net earnings $ 842,202,000 $ 740,634,000 $ 247,648,000 $ 226,166,000 Denominator: Weighted-average basic shares outstanding 592,450,575 596,653,289 593,129,783 590,152,592 Dilutive effect of share-based awards 946,660 1,038,026 1,703,953 514,985 Weighted-average diluted shares outstanding 593,397,235 597,691,315 594,833,736 590,667,577 Basic earnings per share: $ 1.42 $ 1.24 $ 0.42 $ 0.38 Diluted earnings per share: $ 1.42 $ 1.24 $ 0.42 $ 0.38 The number of options that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was approximately 61,500,000 and 62,600,000 for the first 39weeks of fiscal 2010 and 2009, respectively. The number of options that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was approximately 52,800,000 and 66,600,000 for the third quarter of fiscal 2010 and 2009, respectively. |
Share-Based Compensation
Share-Based Compensation | |
9 Months Ended
Mar. 27, 2010 | |
Share-Based Compensation | 8. SHARE-BASED COMPENSATION Sysco provides compensation benefits to employees and non-employee directors under several share-based payment arrangements including various employee stock incentive plans, the Employees Stock Purchase Plan, and various non-employee director plans. Sysco also previously provided share-based compensation under its Management Incentive Plans. Stock Incentive Plans Syscos 2007 Stock Incentive Plan was amended in November2009 to increase the total number of shares authorized for issuance under the plan from 30,000,000 to 55,000,000 shares. The number of shares available for issuance as options or stock appreciation rights was increased from 25,000,000 to 55,000,000 shares. The number of shares available for issuance as restricted stock, restricted stock units or other types of stock-based awards was increased from 5,000,000 to 10,000,000 shares. The amendment also removed the provision that allowed for issuance of restricted stock, restricted stock units and other types of stock-based awards in excess of the 5,000,000 share limitation if the aggregate number of shares available for issuance under the plan was reduced by four shares for each share issued in excess of the limitation. In the first 39weeks of fiscal 2010, options to purchase 8,494,200 shares were granted to employees from the 2007 Stock Incentive Plan. The fair value of each option award is estimated as of the date of grant using a Black-Scholes option pricing model. The weighted average grant-date fair value per share of options granted during the first 39weeks of fiscal 2010 was $4.53. In the first 39weeks of fiscal 2010, 652,300 restricted stock units were granted to employees from the 2007 Stock Incentive Plan. The majority of these restricted stock units were granted with dividend equivalents. The fair value of each restricted stock unit award granted with a dividend equivalent is based on the companys stock price as of the date of grant. For restricted stock unit awards granted without dividend equivalents, the fair value was reduced by the present value of expected dividends during the vesting period. The weighted average grant-date fair value per share of restricted stock units granted during the first 39weeks of fiscal 2010 was $27.24. In the first 39weeks of fiscal 2010, 58,310 shares of restricted stock were granted to non-employee directors from the 2005 Non-Employee Directors Stock Plan. The fair value of the restricted stock awards is based on the companys stock price as of the date of grant. The weighted average grant-date fair value per share of restricted stock granted during the first 39 weeks of fiscal 2010 was $27.44. Syscos 2009 Non-Employee Directors Stock Plan was adopted in November2009 and provides for the issuance of up to 750,000 shares of Sysco common stock for share-based awards to non-employee directors. The authorized shares may be granted as restricted stock, restricted stock units, elected shares or additional shares. This plan will replace the 2005 Non-Employee Directors Stock Plan once all remaining shares in the 2005 Plan have been issued. Employees Stock Purchase Plan Plan participants purchased |
Income Taxes
Income Taxes | |
9 Months Ended
Mar. 27, 2010 | |
Income Taxes | 9. INCOME TAXES Internal Revenue Service Settlement Syscos affiliate, Baugh Supply Chain Cooperative (BSCC), is a cooperative taxed under subchapter T of the United States Internal Revenue Code, the operation of which has resulted in a deferral of tax payments. The Internal Revenue Service (IRS), in connection with its audits of the companys 2003 through 2006 federal income tax returns, proposed adjustments that would have accelerated amounts that the company had previously deferred and would have resulted in the payment of interest on those deferred amounts. Sysco reached a settlement with the IRS on August21, 2009 to cease paying U.S. federal taxes related to BSCC on a deferred basis, pay the amounts that were recorded within deferred taxes related to BSCC over a three-year period and make a one-time payment of $41,000,000, of which approximately $39,000,000 was non-deductible. The settlement addresses the BSCC deferred tax issue as it relates to the IRS audit of the companys 2003 through 2006 federal income tax returns, and settles the matter for all subsequent periods, including the 2007 and 2008 federal income tax returns already under audit. As a result of the settlement, the company will pay the amounts owed in the following schedule: Amounts paid annually: Fiscal 2010 $ 528,000,000 Fiscal 2011 212,000,000 Fiscal 2012 212,000,000 Of the amounts to be paid in fiscal 2010 included in the table above, $475,000,000 was paid in the first 39weeks of fiscal 2010 and the remaining payments will be paid in equal installments with Syscos remaining quarterly tax payments. Amounts to be paid in fiscal 2011 and 2012 will be paid with Syscos quarterly tax payments. The company believes it has access to sufficient cash on hand, cash flow from operations and current access to capital to make payments on all of the amounts noted above. The company had previously accrued interest for a portion of the exposure pertaining to the IRS proposed adjustments and as a result of the settlement with the IRS, Sysco recorded an income tax benefit of approximately $29,000,000 in the first quarter of fiscal 2010. Syscos deferred taxes were impacted by the timing of these installment payments. Sysco reclassified amounts due within one year from deferred taxes to accrued income taxes at the beginning of fiscal 2010. Additionally, beginning in fiscal 2010, the company is not deferring taxes for federal purposes according to its agreement with the IRS. Uncertain Tax Benefits As of March27, 2010, the gross amount of unrecognized tax benefits was $86,899,000 and the gross amount of accrued interest liabilities was $38,141,000. Accrued interest decreased from the amount accrued as of June27, 2009 of $146,998,000 due to the settlement with the IRS. It is reasonably possible that the amount of the unrecognized tax benefits with respect to certain of the companys unrecognized tax positions will increase or decrease in the next twelve months either because Sysco prevails on positions that were being challenged upon audit or because the company agrees to their disallowance. Items that may cause changes to unrecognized t |
Acquisitions
Acquisitions | |
9 Months Ended
Mar. 27, 2010 | |
Acquisitions | 10. ACQUISITIONS During the first 39weeks of fiscal 2010, in the aggregate, the company paid cash of $20,880,000 for acquisitions made during fiscal 2010 and for contingent consideration related to operations acquired in previous fiscal years. The fiscal 2010 acquisitions were immaterial to the consolidated financial statements. Certain acquisitions involve contingent consideration typically payable over periods up to four years only in the event that certain operating results are attained or certain outstanding contingencies are resolved. As of March27, 2010, aggregate contingent consideration amounts outstanding relating to acquisitions was $60,404,000, of which $58,456,000 could result in the recording of additional goodwill. |
Commitments and Contingencies
Commitments and Contingencies | |
9 Months Ended
Mar. 27, 2010 | |
Commitments and Contingencies | 11. COMMITMENTS AND CONTINGENCIES Sysco is engaged in various legal proceedings which have arisen but have not been fully adjudicated. These proceedings, in the opinion of management, will not have a material adverse effect upon the consolidated financial position or results of operations of the company when ultimately concluded. Multi-Employer Pension Plans Sysco contributes to several multi-employer defined benefit pension plans based on obligations arising under collective bargaining agreements covering union-represented employees. Sysco does not directly manage these multi-employer plans, which are generally managed by boards of trustees, half of whom are appointed by the unions and the other half by other employers contributing to the plan. Based upon the information available from plan administrators, management believes that several of these multi-employer plans are underfunded. In addition, pension-related legislation requires underfunded pension plans to improve their funding ratios within prescribed intervals based on the level of their underfunding. As a result, Sysco expects its contributions to these plans to increase in the future. Under current law regarding multi-employer defined benefit plans, a plans termination, Syscos voluntary withdrawal, or the mass withdrawal of all contributing employers from any underfunded multi-employer defined benefit plan would require Sysco to make payments to the plan for Syscos proportionate share of the multi-employer plans unfunded vested liabilities. Based on the information available from plan administrators, which has valuation dates ranging from December 31, 2007 to June30, 2009, Sysco estimates its share of withdrawal liability on most of the multi-employer plans in which it participates could have been as much as $173,000,000 as of March 27, 2010, based on a voluntary withdrawal. The majority of the estimated withdrawal liability results from plans for which the valuation date was December31, 2008; therefore, the companys estimated liability reflects the asset losses incurred by the financial markets as of that date. In general, the financial markets have improved since December31, 2008; therefore, management believes Syscos current share of the withdrawal liability could differ from this estimate. In addition, if a multi-employer defined benefit plan fails to satisfy certain minimum funding requirements, the IRS may impose a nondeductible excise tax of 5% on the amount of the accumulated funding deficiency for those employers contributing to the fund. As of March27, 2010, Sysco had approximately $16,000,000 in liabilities recorded in total related to certain multi-employer defined benefit plans for which Syscos voluntary withdrawal had already occurred, the majority of which are expected to be paid during fiscal 2010. Fuel Commitments From time to time, Sysco may enter into forward purchase commitments for a portion of its projected diesel fuel requirements. As of March27, 2010, outstanding forward diesel fuel purchase commitments totaled approximately $71,000,000 at a fixed price through March2011. |
Business Segment Information
Business Segment Information | |
9 Months Ended
Mar. 27, 2010 | |
Business Segment Information | 12. BUSINESS SEGMENT INFORMATION The company has aggregated its operating companies into a number of segments, of which only Broadline and SYGMA are reportable segments as defined in the accounting literature related to disclosures about segments of an enterprise. Broadline operating companies distribute a full line of food products and a wide variety of non-food products to their customers. SYGMA operating companies distribute a full line of food products and a wide variety of non-food products to certain chain restaurant customer locations. Other financial information is attributable to the companys other operating segments, including the companys specialty produce, custom-cut meat and lodging industry segments and a company that distributes to international customers. The accounting policies for the segments are the same as those disclosed by Sysco for its consolidated financial statements. Intersegment sales represent specialty produce and meat company products distributed by the Broadline and SYGMA operating companies. The segment results include certain centrally incurred costs for shared services that are charged to our segments. These centrally incurred costs are charged based upon the relative level of service used by each operating company consistent with how Syscos management views the performance of its operating segments. Management evaluates the performance of each of our operating segments based on its respective operating income results, which include the allocation of certain centrally incurred costs. Included in corporate expenses, among other items, are: Gains and losses recorded to adjust COLI policies to their cash surrender values; Share-based compensation expense; Expenses related to the companys business transformation project; and Corporate-level depreciation and amortization expense. The following table sets forth certain financial information for Syscos business segments: 39-Week Period Ended 13-Week Period Ended March 27, 2010 March 28, 2009 March 27, 2010 March 28, 2009 Sales (in thousands): Broadline $ 21,502,023 $ 21,976,065 $ 7,108,594 $ 6,898,126 SYGMA 3,505,710 3,655,045 1,197,536 1,194,236 Other 2,264,461 2,478,273 768,918 751,476 Intersegment sales (377,176 ) (342,801 ) (129,955 ) (104,488 ) Total $ 26,895,018 $ 27,766,582 $ 8,945,093 $ 8,739,350 39-Week Period Ended 13-Week Period Ended March 27, 2010 March 28, 2009 March 27, 2010 March 28, 2009 Operating income (in thousands): Broadline $ 1,463,245 $ 1,416,181 $ 453,321 $ 421,057 SYGMA 31,365 23,795 13,508 9,453 Other 86,640 86,936 30,841 26,481 Total segments 1,581,250 1,526,912 497,670 456,991 Corporate expenses (189,468 ) (194,973 ) (65,567 ) (51,668 ) |
Supplemental Guarantor Informat
Supplemental Guarantor Information | |
9 Months Ended
Mar. 27, 2010 | |
Supplemental Guarantor Information | 13. SUPPLEMENTAL GUARANTOR INFORMATION Sysco International, Co. is an unlimited liability company organized under the laws of the Province of Nova Scotia, Canada and is a wholly-owned subsidiary of Sysco. In May2002, Sysco International, Co. issued, in a private offering, $200,000,000 of 6.10% notes due in 2012. These notes are fully and unconditionally guaranteed by Sysco. The following condensed consolidating financial statements present separately the financial position, results of operations and cash flows of the parent guarantor (Sysco), the subsidiary issuer (Sysco International) and all other non-guarantor subsidiaries of Sysco (Other Non-Guarantor Subsidiaries) on a combined basis with eliminating entries. Condensed Consolidating Balance Sheet March 27, 2010 Other Non-Guarantor Sysco Sysco International Subsidiaries Eliminations Consolidated Totals (In thousands) Current assets $ 420,468 $ 49 $ 4,711,278 $ $ 5,131,795 Investment in subsidiaries 14,493,372 473,766 134,043 (15,101,181 ) Plant and equipment, net 372,716 2,803,504 3,176,220 Other assets 542,736 700 1,616,776 2,160,212 Total assets $ 15,829,292 $ 474,515 $ 9,265,601 $ (15,101,181 ) $ 10,468,227 Current liabilities $ 389,464 $ 3,941 $ 2,523,827 $ $ 2,917,232 Intercompany payables (receivables) 8,923,960 84,904 (9,008,864 ) Long-term debt 2,219,676 199,863 48,978 2,468,517 Other liabilities 436,957 617,483 1,054,440 Shareholders equity 3,859,235 185,807 15,084,177 (15,101,181 ) 4,028,038 Total liabilities and shareholders equity $ 15,829,292 $ 474,515 $ 9,265,601 $ (15,101,181 ) $ 10,468,227 Condensed Consolidating Balance Sheet June 27, 2009 Other Non-Guarantor Sysco Sysco International Subsidiaries Eliminations Consolidated Totals (In thousands) Current assets $ 937,335 $ 36 $ 4,333,308 $ $ 5,270,679 Investment in subsidiaries 13,293,437 403,363 165,197 (13,861,997 ) Plant and equipment, net 264,657 2,714,543 2,979,200 Other assets 421,371 830 1,544,539 1,966,740 Total assets $ 14,916,800 $ 404,229 $ 8,757,587 $ (13,861,997 ) $ 10,216,619 Current liabilities $ 380,195 $ 954 $ 2,769,005 $ $ 3,150,154 Intercompany payables (receivables) 8,533,159 54,785 (8,587,944 ) |
Document and Entity Information
Document and Entity Information | ||
9 Months Ended
Mar. 27, 2010 | Apr. 24, 2010
| |
Entity Registrant Name | Sysco Corporation | |
Entity Central Index Key | 0000096021 | |
Current Fiscal Year End Date | --07-03 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 591,586,557 | |
Document Type | 10-Q | |
Document Fiscal Year Focus | 2,010 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Document Period End Date | 2010-03-27 |