e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended January 1, 2011
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 1-6544
Sysco Corporation
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
1390 Enclave Parkway
Houston, Texas
(Address of principal executive offices)
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74-1648137
(IRS employer
identification number)
77077-2099
(Zip Code) |
Registrants Telephone Number, Including Area Code:
(281) 584-1390
Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large Accelerated Filer þ |
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Accelerated Filer o |
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Non-accelerated Filer o (Do not check if a smaller reporting company) |
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Smaller Reporting Company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
582,708,338 shares of common stock were outstanding as of January 29, 2011.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except for Share Data)
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Jan. 1, 2011 |
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July 3, 2010 |
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Dec. 26, 2009 |
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(unaudited) |
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(unaudited) |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
209,755 |
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$ |
585,443 |
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$ |
574,885 |
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Short-term investments |
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23,511 |
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61,860 |
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Accounts and notes receivable, less
allowances of $67,237, $36,573 and $67,035 |
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2,623,300 |
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2,617,352 |
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2,526,044 |
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Inventories |
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1,963,397 |
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1,771,539 |
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1,790,327 |
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Prepaid expenses and other current assets |
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70,430 |
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70,992 |
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63,674 |
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Prepaid income taxes |
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7,421 |
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Total current assets |
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4,866,882 |
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5,076,258 |
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5,016,790 |
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Plant and equipment at cost, less depreciation |
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3,370,553 |
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3,203,823 |
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3,072,721 |
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Other assets |
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Goodwill |
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1,577,108 |
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1,549,815 |
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1,551,550 |
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Intangibles, less amortization |
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104,511 |
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106,398 |
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118,032 |
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Restricted cash |
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134,579 |
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124,488 |
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128,683 |
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Prepaid pension cost |
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70,753 |
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Other assets |
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274,650 |
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252,919 |
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245,716 |
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Total other assets |
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2,090,848 |
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2,033,620 |
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2,114,734 |
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Total assets |
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$ |
10,328,283 |
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$ |
10,313,701 |
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$ |
10,204,245 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities |
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Accounts payable |
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$ |
1,804,690 |
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$ |
1,953,092 |
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$ |
1,834,024 |
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Accrued expenses |
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761,954 |
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870,114 |
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793,303 |
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Accrued income taxes |
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47,738 |
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56,775 |
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Deferred income taxes |
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99,285 |
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178,022 |
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18,482 |
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Current maturities of long-term debt |
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7,867 |
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7,970 |
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8,438 |
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Total current liabilities |
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2,721,534 |
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3,009,198 |
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2,711,022 |
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Other liabilities |
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Long-term debt |
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2,653,529 |
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2,472,662 |
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2,468,690 |
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Deferred income taxes |
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185,239 |
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271,512 |
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545,863 |
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Other long-term liabilities |
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773,490 |
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732,803 |
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548,383 |
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Total other liabilities |
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3,612,258 |
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3,476,977 |
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3,562,936 |
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Commitments and contingencies |
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Shareholders equity |
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Preferred stock, par value $1 per share
Authorized 1,500,000 shares, issued none |
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Common stock, par value $1 per share
Authorized 2,000,000,000 shares, issued
765,174,900 shares |
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765,175 |
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765,175 |
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765,175 |
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Paid-in capital |
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848,612 |
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816,833 |
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788,138 |
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Retained earnings |
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7,392,996 |
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7,134,139 |
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6,844,095 |
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Accumulated other comprehensive loss |
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(387,421 |
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(480,251 |
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(180,095 |
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Treasury stock at cost, 183,761,810,
176,768,795 and 173,100,605 shares |
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(4,624,871 |
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(4,408,370 |
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(4,287,026 |
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Total shareholders equity |
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3,994,491 |
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3,827,526 |
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3,930,287 |
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Total liabilities and shareholders equity |
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$ |
10,328,283 |
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$ |
10,313,701 |
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$ |
10,204,245 |
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Note: The July 3, 2010
balance sheet has been derived from the audited financial statements at that date.
See Notes to Consolidated Financial Statements
1
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
(In Thousands, Except for Share and Per Share Data)
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26-Week Period Ended |
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13-Week Period Ended |
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Jan. 1, 2011 |
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Dec. 26, 2009 |
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Jan. 1, 2011 |
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Dec. 26, 2009 |
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Sales |
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$ |
19,136,126 |
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$ |
17,949,925 |
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$ |
9,384,852 |
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$ |
8,868,499 |
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Cost of sales |
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15,562,765 |
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14,507,679 |
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7,642,908 |
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7,173,612 |
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Gross margin |
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3,573,361 |
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3,442,246 |
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1,741,944 |
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1,694,887 |
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Operating expenses |
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2,630,096 |
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2,482,567 |
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1,304,919 |
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1,232,536 |
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Operating income |
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943,265 |
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959,679 |
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437,025 |
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462,351 |
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Interest expense |
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59,161 |
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65,322 |
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28,060 |
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31,522 |
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Other expense (income), net |
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(2,984 |
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(3,150 |
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(1,300 |
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(1,138 |
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Earnings before income taxes |
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887,088 |
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897,507 |
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410,265 |
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431,967 |
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Income taxes |
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329,846 |
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302,953 |
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152,092 |
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163,618 |
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Net earnings |
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$ |
557,242 |
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$ |
594,554 |
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$ |
258,173 |
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$ |
268,349 |
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Net earnings: |
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Basic earnings per share |
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$ |
0.95 |
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$ |
1.00 |
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$ |
0.44 |
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$ |
0.45 |
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Diluted earnings per share |
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0.95 |
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$ |
1.00 |
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0.44 |
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$ |
0.45 |
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Average shares outstanding |
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586,827,575 |
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592,110,975 |
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584,943,749 |
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592,651,712 |
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Diluted shares outstanding |
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589,106,837 |
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592,678,989 |
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587,110,338 |
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593,372,477 |
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Dividends declared per common share |
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$ |
0.51 |
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$ |
0.49 |
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$ |
0.26 |
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$ |
0.25 |
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See Notes to Consolidated Financial Statements
2
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In Thousands)
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26-Week Period Ended |
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13-Week Period Ended |
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Jan. 1, 2011 |
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Dec. 26, 2009 |
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Jan. 1, 2011 |
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Dec. 26, 2009 |
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Net earnings |
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$ |
557,242 |
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$ |
594,554 |
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$ |
258,173 |
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$ |
268,349 |
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Other comprehensive income: |
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Foreign currency translation
adjustment |
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66,787 |
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83,946 |
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15,322 |
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46,864 |
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Items presented net of tax: |
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Amortization of cash flow hedge |
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214 |
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214 |
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107 |
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107 |
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Amortization of unrecognized
prior service cost |
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1,276 |
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1,353 |
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638 |
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|
677 |
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Amortization of unrecognized
actuarial loss, net |
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24,507 |
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12,332 |
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12,254 |
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6,166 |
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Amortization of unrecognized
transition obligation |
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46 |
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46 |
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23 |
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23 |
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Total other comprehensive income |
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92,830 |
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97,891 |
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28,344 |
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53,837 |
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Comprehensive income |
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$ |
650,072 |
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$ |
692,445 |
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$ |
286,517 |
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$ |
322,186 |
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See Notes to Consolidated Financial Statements
3
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS (Unaudited)
(In Thousands)
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26-Week Period Ended |
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Jan. 1, 2011 |
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Dec. 26, 2009 |
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Cash flows from operating activities: |
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Net earnings |
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$ |
557,242 |
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$ |
594,554 |
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Adjustments to reconcile net earnings to cash provided by operating activities: |
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Share-based compensation expense |
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37,679 |
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39,913 |
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Depreciation and amortization |
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198,230 |
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189,428 |
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Deferred income taxes |
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(181,295 |
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(172,756 |
) |
Provision for losses on receivables |
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19,522 |
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19,815 |
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Other non-cash items |
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(1,550 |
) |
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|
536 |
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Additional investment in certain assets and liabilities, net of effect of businesses acquired: |
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Decrease (increase) in receivables |
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4,887 |
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(53,597 |
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(Increase) in inventories |
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(167,912 |
) |
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(121,626 |
) |
Decrease in prepaid expenses and other current assets |
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1,183 |
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1,307 |
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(Decrease) increase in accounts payable |
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(172,217 |
) |
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30,110 |
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(Decrease) in accrued expenses |
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(125,849 |
) |
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(16,974 |
) |
Increase (decrease) in accrued income taxes |
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50,130 |
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(236,099 |
) |
(Increase) in other assets |
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(19,556 |
) |
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(30,372 |
) |
Increase (decrease) in other long-term liabilities and
prepaid pension cost, net |
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82,430 |
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(97,343 |
) |
Excess tax benefits from share-based compensation arrangements |
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(277 |
) |
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(475 |
) |
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Net cash provided by operating activities |
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|
282,647 |
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|
146,421 |
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Cash flows from investing activities: |
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Additions to plant and equipment |
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(317,421 |
) |
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(247,575 |
) |
Proceeds from sales of plant and equipment |
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2,916 |
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2,422 |
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Acquisition of businesses, net of cash acquired |
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(26,546 |
) |
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(9,161 |
) |
Purchases of short-term investments |
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(60,162 |
) |
Maturities of short-term investments |
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24,383 |
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(Increase) in restricted cash |
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(10,091 |
) |
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(34,825 |
) |
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Net cash used for investing activities |
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(326,759 |
) |
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(349,301 |
) |
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Cash flows from financing activities: |
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Bank and commercial paper borrowings (repayments), net |
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173,199 |
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Other debt borrowings |
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2,441 |
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|
4,580 |
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Other debt repayments |
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(4,521 |
) |
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(5,601 |
) |
Common stock reissued from treasury for share-based compensation awards |
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65,555 |
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|
36,914 |
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Treasury stock purchases |
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(285,442 |
) |
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Dividends paid |
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(294,089 |
) |
|
|
(283,766 |
) |
Excess tax benefits from share-based compensation arrangements |
|
|
277 |
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|
475 |
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Net cash used for financing activities |
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(342,580 |
) |
|
|
(247,398 |
) |
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Effect of exchange rates on cash |
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11,004 |
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|
6,512 |
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Net (decrease) in cash and cash equivalents |
|
|
(375,688 |
) |
|
|
(443,766 |
) |
Cash and cash equivalents at beginning of period |
|
|
585,443 |
|
|
|
1,018,651 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
209,755 |
|
|
$ |
574,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
59,140 |
|
|
$ |
67,670 |
|
Income taxes |
|
|
467,788 |
|
|
|
759,704 |
|
See Notes to Consolidated Financial Statements
4
Sysco Corporation and its Consolidated Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Unless this Form 10-Q indicates otherwise or the context otherwise requires, the terms we,
our, us, Sysco, or the company as used in this Form 10-Q refer to Sysco Corporation
together with its consolidated subsidiaries and divisions.
1. BASIS OF PRESENTATION
The consolidated financial statements have been prepared by the company, without audit, with
the exception of the July 3, 2010 consolidated balance sheet which was taken from the audited
financial statements included in the companys Fiscal 2010 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.
Prior year amounts within the consolidated balance sheets and consolidated cash flows have
been reclassified to conform to the current year presentation as it relates to the presentation of
cash and accounts payable within these statements. The impact of these reclassifications was
immaterial to the prior year period.
These financial statements should be read in conjunction with the audited financial statements
and notes thereto included in the companys Fiscal 2010 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 Exhibit 15.1 to this Form
10-Q.
2. 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. Short-term
investments consist of commercial paper with original maturities of greater than three months but
less than one year. These investments are considered available-for-sale and are recorded at fair
value. As of each period presented below where short-term investments were held, the difference
between the fair value of the short-term investments and the original cost was not material.
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. |
|
|
Commercial paper included in short-term investments is valued using broker quotes that
utilize observable market inputs. These are included 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. |
5
|
|
The interest rate swap agreements, discussed further in Note 3, Derivative Financial
Instruments, 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 and liabilities measured at fair value on a
recurring basis as of January 1, 2011, July 3, 2010 and December 26, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets Measured at Fair Value as of Jan. 1, 2011 |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
|
(In thousands) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
|
|
|
$ |
107,251 |
|
|
$ |
|
|
|
$ |
107,251 |
|
Restricted cash |
|
|
134,579 |
|
|
|
|
|
|
|
|
|
|
|
134,579 |
|
Other assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements |
|
|
|
|
|
|
13,266 |
|
|
|
|
|
|
|
13,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value |
|
$ |
134,579 |
|
|
$ |
120,517 |
|
|
$ |
|
|
|
$ |
255,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets Measured at Fair Value as of July 3, 2010 |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
|
(In thousands) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
225,400 |
|
|
$ |
199,047 |
|
|
$ |
|
|
|
$ |
424,447 |
|
Short-term investments |
|
|
|
|
|
|
23,511 |
|
|
|
|
|
|
|
23,511 |
|
Restricted cash |
|
|
124,488 |
|
|
|
|
|
|
|
|
|
|
|
124,488 |
|
Other assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements |
|
|
|
|
|
|
11,045 |
|
|
|
|
|
|
|
11,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value |
|
$ |
349,888 |
|
|
$ |
233,603 |
|
|
$ |
|
|
|
$ |
583,491 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets and Liabilities Measured at Fair Value as of Dec. 26, 2009 |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
|
(In thousands) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
357,800 |
|
|
$ |
102,846 |
|
|
$ |
|
|
|
$ |
460,646 |
|
Short-term investments |
|
|
|
|
|
|
61,860 |
|
|
|
|
|
|
|
61,860 |
|
Restricted cash |
|
|
128,683 |
|
|
|
|
|
|
|
|
|
|
|
128,683 |
|
Other assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements |
|
|
|
|
|
|
534 |
|
|
|
|
|
|
|
534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value |
|
$ |
486,483 |
|
|
$ |
165,240 |
|
|
$ |
|
|
|
$ |
651,723 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreement |
|
$ |
|
|
|
$ |
1,109 |
|
|
$ |
|
|
|
$ |
1,109 |
|
The carrying values of accounts receivable and accounts payable approximated their respective
fair values due to the short-term maturities of these instruments. The fair value of Syscos total
debt is estimated based on the quoted market prices for the same or similar issue or on the current
rates offered to the company for debt of the same remaining maturities. The fair value of total
debt approximated $2,857.7 million, $2,774.9 million and $2,604.0 million as of January 1, 2011,
July 3, 2010 and
6
December 26, 2009, respectively. The carrying value of total debt was $2,661.4
million, $2,480.6 million and $2,477.1 million as of January 1, 2011, July 3, 2010 and December 26,
2009, respectively.
3. DERIVATIVE FINANCIAL INSTRUMENTS
Sysco manages its debt portfolio to achieve an overall desired position of fixed and floating
rates and may employ interest rate swaps from time to time to achieve this position. The company
does not use derivative financial instruments for trading or speculative purposes.
In September 2009, the company entered into an interest rate swap agreement that effectively
converted $200.0 million of fixed rate debt maturing in fiscal 2014 to floating rate debt. In
October 2009, the company entered into an interest rate swap agreement that effectively converted
$250.0 million 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 and increasing floating interest
rate exposure. 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 January 1, 2011, July 3, 2010 and December 26, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives |
|
Liability Derivatives |
|
|
Balance Sheet |
|
|
|
|
|
Balance Sheet |
|
|
|
|
Location |
|
Fair Value |
|
Location |
|
Fair Value |
|
|
(In thousands) |
Interest rate swap agreements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan. 1, 2011 |
|
Other assets |
|
$ |
13,266 |
|
|
|
N/A |
|
|
|
N/A |
|
July 3, 2010 |
|
Other assets |
|
|
11,045 |
|
|
|
N/A |
|
|
|
N/A |
|
Dec. 26, 2009 |
|
Other assets |
|
$ |
534 |
|
|
Other long-term
liabilities |
|
|
$ |
1,109 |
|
The location and effect of derivative instruments and related hedged items on the
consolidated results of operations for the 26-week periods ended January 1, 2011 and December 26,
2009 presented on a pre-tax basis are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of (Gain) |
|
|
|
|
or Loss Recognized |
|
Amount of (Gain) or Loss |
|
|
in Income |
|
Recognized in Income |
|
|
|
|
|
|
Jan. 1, 2011 |
|
Dec. 26, 2009 |
|
|
|
|
|
|
(In thousands) |
Fair Value Hedge Relationships: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements |
|
Interest expense |
|
$ |
(4,486 |
) |
|
$ |
(1,558 |
) |
The location and effect of derivative instruments and related hedged items on the consolidated
results of operations for the 13-week periods ended January 1, 2011 and December 26, 2009 presented
on a pre-tax basis are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (Gain) or Loss |
|
|
Location of (Gain) |
|
Recognized in Income |
|
|
or Loss Recognized |
|
Jan. 1, 2011 |
|
Dec. 26, 2009 |
|
|
in Income |
|
(In thousands) |
Fair Value Hedge Relationships: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements |
|
Interest expense |
|
$ |
(3,986 |
) |
|
$ |
(1,691 |
) |
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 26-week periods and 13-week periods ended
January 1, 2011 and December 26, 2009. The interest rate swaps do not contain credit-risk-related
contingent features.
7
4. DEBT
As of January 1, 2011, Sysco had uncommitted bank lines of credit which provided for unsecured
borrowings for working capital of up to $95.0 million, of which none was outstanding.
Sysco and one of its subsidiaries, Sysco International, ULC, have a revolving credit facility
supporting the companys U.S. and Canadian commercial paper programs. The facility in the amount
of $1,000.0 million expires on November 4, 2012, but is subject to extension.
As of January 1, 2011, commercial paper issuances outstanding were $173.2 million and were
classified as long-term debt since the companys commercial paper programs are supported by the
long-term revolving credit facility described above.
During the 26-week period ended January 1, 2011, aggregate commercial paper issuances and
short-term bank borrowings ranged from zero to approximately $330.3 million.
5. EMPLOYEE BENEFIT PLANS
The components of net company-sponsored benefit cost for the 26-week period presented are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
Other Postretirement Plans |
|
|
|
Jan. 1, 2011 |
|
|
Dec. 26, 2009 |
|
|
Jan. 1, 2011 |
|
|
Dec. 26, 2009 |
|
|
|
(In thousands) |
|
Service cost |
|
$ |
49,721 |
|
|
$ |
33,326 |
|
|
$ |
198 |
|
|
$ |
164 |
|
Interest cost |
|
|
67,487 |
|
|
|
59,797 |
|
|
|
262 |
|
|
|
281 |
|
Expected return on plan assets |
|
|
(65,960 |
) |
|
|
(52,430 |
) |
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
1,979 |
|
|
|
2,104 |
|
|
|
93 |
|
|
|
93 |
|
Recognized net actuarial loss (gain) |
|
|
39,976 |
|
|
|
20,262 |
|
|
|
(194 |
) |
|
|
(245 |
) |
Amortization of transition obligation |
|
|
|
|
|
|
|
|
|
|
76 |
|
|
|
76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
93,203 |
|
|
$ |
63,059 |
|
|
$ |
435 |
|
|
$ |
369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of net company-sponsored benefit cost for the 13-week period presented are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
Other Postretirement Plans |
|
|
|
Jan. 1, 2011 |
|
|
Dec. 26, 2009 |
|
|
Jan. 1, 2011 |
|
|
Dec. 26, 2009 |
|
|
|
(In thousands) |
|
Service cost |
|
$ |
24,860 |
|
|
$ |
16,663 |
|
|
$ |
99 |
|
|
$ |
82 |
|
Interest cost |
|
|
33,743 |
|
|
|
29,898 |
|
|
|
131 |
|
|
|
141 |
|
Expected return on plan assets |
|
|
(32,980 |
) |
|
|
(26,215 |
) |
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
990 |
|
|
|
1,053 |
|
|
|
46 |
|
|
|
46 |
|
Recognized net actuarial loss (gain) |
|
|
19,988 |
|
|
|
10,130 |
|
|
|
(97 |
) |
|
|
(122 |
) |
Amortization of transition obligation |
|
|
|
|
|
|
|
|
|
|
38 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
46,601 |
|
|
$ |
31,529 |
|
|
$ |
217 |
|
|
$ |
185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syscos contributions to its company-sponsored defined benefit plans were $9.7 million and
$77.7 million during the 26-week periods ended January 1, 2011 and December 26, 2009, respectively.
The company made contributions of $140.0 million to its company-sponsored qualified pension
plan (Retirement Plan) in fiscal 2010 that would normally have been made in fiscal 2011. Additional
contributions to the Retirement Plan are not currently anticipated in fiscal 2011. 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 2011
contributions to fund benefit payments for the SERP and other post-retirement plans are $22.2
million and $0.3 million, respectively.
8
6. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26-Week Period Ended |
|
|
13-Week Period Ended |
|
|
|
Jan. 1, 2011 |
|
|
Dec. 26, 2009 |
|
|
Jan. 1, 2011 |
|
|
Dec. 26, 2009 |
|
|
|
(In thousands, except for share and per share data) |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
557,242 |
|
|
$ |
594,554 |
|
|
$ |
258,173 |
|
|
$ |
268,349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
basic shares
outstanding |
|
|
586,827,575 |
|
|
|
592,110,975 |
|
|
|
584,943,749 |
|
|
|
592,651,712 |
|
Dilutive effect of
share-based awards |
|
|
2,279,262 |
|
|
|
568,014 |
|
|
|
2,166,589 |
|
|
|
720,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
diluted shares
outstanding |
|
|
589,106,837 |
|
|
|
592,678,989 |
|
|
|
587,110,338 |
|
|
|
593,372,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share: |
|
$ |
0.95 |
|
|
$ |
1.00 |
|
|
$ |
0.44 |
|
|
$ |
0.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share: |
|
$ |
0.95 |
|
|
$ |
1.00 |
|
|
$ |
0.44 |
|
|
$ |
0.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 49,700,000 and 65,900,000 for
the first 26 weeks of fiscal 2011 and 2010, 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 51,500,000 and 66,300,000 for the second quarter of fiscal 2011 and
2010, respectively.
7. 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
In the first 26 weeks of fiscal 2011, options to purchase 7,140,250 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 26 weeks of fiscal 2011 was $3.96.
In the first 26 weeks of fiscal 2011, 651,000 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 26 weeks of fiscal 2011 was $28.72.
In the first 26 weeks of fiscal 2011, restricted awards in the amount of 60,973 shares were
granted to non-employee directors from the 2009 Non-Employee Directors Stock Plan. The
non-employee directors may elect to receive these awards in restricted stock shares that will vest
at the end of the awards stated vesting period or as deferred units which convert into shares of
Sysco common stock upon a date selected by the non-employee director that is subsequent to the
awards stated vesting date. The fair value of the restricted 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 awards granted during the first 26 weeks of fiscal 2011 was $28.87.
Under the 2009 Non-Employee Directors Stock Plan, non-employee directors may elect to receive
up to 100% of their annual directors fees in Sysco common stock on either an annual or deferred
basis. In the first 26 weeks of fiscal 2011, 27,979
9
shares with a weighted average grant date fair value of $29.26 were issued for these
elections in the form of fully vested common stock or deferred units.
Employees Stock Purchase Plan
Plan participants purchased 828,087 shares of Sysco common stock under the Sysco Employees
Stock Purchase Plan during the first 26 weeks of fiscal 2011.
The weighted average fair value per share of employee stock purchase rights issued pursuant to
the Employees Stock Purchase Plan was $4.28 during the first 26 weeks of fiscal 2011. The fair
value of the stock purchase rights is estimated as the difference between the stock price and the
employee purchase price.
All Share-Based Payment Arrangements
The total share-based compensation cost that has been recognized in results of operations was
$37.7 million and $39.9 million for the first 26 weeks of fiscal 2011 and fiscal 2010,
respectively.
As of January 1, 2011, there was $80.2 million of total unrecognized compensation cost related
to share-based compensation arrangements. This cost is expected to be recognized over a
weighted-average period of 2.88 years.
8. INCOME TAXES
Internal Revenue Service Settlement
In the first quarter of fiscal 2010, Sysco reached a settlement with the Internal Revenue
Service (IRS) in connection with its audits of the companys 2003 through 2006 federal income tax
returns. As a result of the settlement, Sysco agreed to cease paying U.S. federal taxes related
to its affiliate Baugh Supply Chain Cooperative (BSCC) on a deferred basis and pay the amounts that
were recorded within deferred taxes related to BSCC over a three-year period as follows:
|
|
|
|
|
Amounts paid annually: |
|
(In thousands) |
Fiscal 2010 |
|
$ |
528,000 |
|
Fiscal 2011 |
|
|
212,000 |
|
Fiscal 2012 |
|
|
212,000 |
|
In the first 26 weeks of fiscal 2011, $106.0 million of payments were made related to the
settlement. As noted in the table above, $528.0 million was paid related to the settlement in
fiscal 2010, of which $422.0 million was paid in the first 26 weeks of fiscal 2010. Remaining
amounts to be paid in fiscal 2011 and 2012 will be paid in connection with Syscos quarterly tax
payments, two of which fall in the second quarter, one in the third quarter and one in the fourth
quarter. 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 $29.0 million 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 and at the beginning of fiscal 2011.
Uncertain Tax Positions
As of January 1, 2011, the gross amount of unrecognized tax benefits was $87.4 million and the
gross amount of accrued interest liabilities was $35.5 million. 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 tax benefits primarily include the
consideration of various filing requirements in numerous states and the allocation of income and
expense between tax jurisdictions. At this time, an estimate of the range of the reasonably
possible change cannot be made.
10
Effective Tax Rates
The effective tax rate of 37.18% for the first 26 weeks of fiscal 2011 was favorably impacted
by the adjustment of the carrying values of the companys corporate-owned life insurance (COLI)
policies to their cash surrender values. The gain of $23.9 million recorded in the first 26 weeks
of fiscal 2011 was non-taxable for income tax purposes, and had the impact of decreasing income tax
expense for the period by $9.2 million.
The effective tax rate of 33.75% for the first 26 weeks of fiscal 2010 was favorably impacted
by three items. First, the company recorded an income tax benefit of approximately $29.0 million
resulting from the one-time reversal of previously accrued interest related to the settlement with
the IRS. Second, the gain of $26.3 million recorded to adjust the carrying value of COLI policies
to their cash surrender values in the first 26 weeks of fiscal 2010, which had the impact of
decreasing income tax expense for the period by $10.1 million. Third, the company recorded a tax
benefit of approximately $5.0 million for the reversal of valuation allowances previously recorded
on state net operating loss carryforwards.
The effective tax rate of 37.07% for the second quarter of fiscal 2011 was favorably impacted
by the gain of $10.3 million recorded to adjust the carrying value of COLI policies to their cash
surrender values in the second quarter of fiscal 2011, which had the impact of decreasing income
tax expense for the period by $4.0 million.
The effective tax rate of 37.88% for the second quarter of fiscal 2010 was favorably impacted
by the gain of $5.2 million recorded to adjust the carrying value of COLI policies to their cash
surrender values in the second quarter of fiscal 2010, which had the impact of decreasing income
tax expense for the period by $2.0 million.
Other
The determination of the companys provision for income taxes requires significant judgment,
the use of estimates and the interpretation and application of complex tax laws. The companys
provision for income taxes reflects a combination of income earned and taxed in the various U.S.
federal and state, as well as foreign, jurisdictions. Jurisdictional tax law changes, increases or
decreases in permanent differences between book and tax items, accruals or adjustments of accruals
for tax contingencies or valuation allowances, and the companys change in the mix of earnings from
these taxing jurisdictions all affect the overall effective tax rate.
9. ACQUISITIONS
During the first 26 weeks of fiscal 2011, in the aggregate, the company paid cash of $26.5
million for acquisitions made during fiscal 2011 and for contingent consideration related to
operations acquired in previous fiscal years. Acquisitions in the first 26 weeks of fiscal 2011
were immaterial to the consolidated financial statements.
Certain acquisitions involve contingent consideration typically payable over periods up to
five years only in the event that certain operating results are attained or certain outstanding
contingencies are resolved. As of January 1, 2011, aggregate contingent consideration amounts
outstanding relating to acquisitions was $53.3 million, of which $50.7 million could result in the
recording of additional goodwill.
10. 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
11
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.
Generally, Sysco does not have the greatest share of liability among the participants in any of
these plans. Based on the information available from plan administrators, which has valuation
dates ranging from January 31, 2008 to December 31, 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
$220.0 million as of January 1, 2011, based on a voluntary withdrawal. The majority of the plans
we participate in have a valuation date of calendar year-end. As such, the majority of the
estimated withdrawal liability results from plans for which the valuation date was December 31,
2009; therefore, the companys estimated liability reflects the results incurred by the financial
markets as of that date. Due to the lack of current information, 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 January 1, 2011, Sysco had approximately $6.3
million in liabilities recorded related to certain multi-employer defined benefit plans for which
Syscos voluntary withdrawal had already occurred.
Fuel Commitments
From time to time, Sysco may enter into forward purchase commitments for a portion of its
projected diesel fuel requirements. As of January 1, 2011, outstanding forward diesel fuel
purchase commitments totaled approximately $80.9 million at a fixed price through January 2012.
11. 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. The Broadline reportable segment is an aggregation of
the companys United States, Canadian and European Broadline segments. 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. |
12
The following tables set forth certain financial information for Syscos business segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26-Week Period Ended |
|
|
13-Week Period Ended |
|
|
|
Jan. 1, 2011 |
|
|
Dec. 26, 2009 |
|
|
Jan. 1, 2011 |
|
|
Dec. 26, 2009 |
|
|
|
(In thousands) |
|
Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadline |
|
$ |
15,207,567 |
|
|
$ |
14,393,429 |
|
|
$ |
7,416,293 |
|
|
$ |
7,084,723 |
|
SYGMA |
|
|
2,632,266 |
|
|
|
2,308,174 |
|
|
|
1,312,770 |
|
|
|
1,157,313 |
|
Other |
|
|
1,595,074 |
|
|
|
1,495,543 |
|
|
|
808,149 |
|
|
|
752,666 |
|
Intersegment sales |
|
|
(298,781 |
) |
|
|
(247,221 |
) |
|
|
(152,360 |
) |
|
|
(126,203 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
19,136,126 |
|
|
$ |
17,949,925 |
|
|
$ |
9,384,852 |
|
|
$ |
8,868,499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26-Week Period Ended |
|
|
13-Week Period Ended |
|
|
|
Jan. 1, 2011 |
|
|
Dec. 26, 2009 |
|
|
Jan. 1, 2011 |
|
|
Dec. 26, 2009 |
|
|
|
(In thousands) |
|
Operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadline |
|
$ |
1,009,357 |
|
|
$ |
1,009,924 |
|
|
$ |
473,600 |
|
|
$ |
500,900 |
|
SYGMA |
|
|
28,392 |
|
|
|
17,857 |
|
|
|
13,822 |
|
|
|
12,019 |
|
Other |
|
|
57,073 |
|
|
|
55,799 |
|
|
|
30,198 |
|
|
|
29,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments |
|
|
1,094,822 |
|
|
|
1,083,580 |
|
|
|
517,620 |
|
|
|
542,904 |
|
Corporate expenses |
|
|
(151,557 |
) |
|
|
(123,901 |
) |
|
|
(80,595 |
) |
|
|
(80,553 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating income |
|
|
943,265 |
|
|
|
959,679 |
|
|
|
437,025 |
|
|
|
462,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
59,161 |
|
|
|
65,322 |
|
|
|
28,060 |
|
|
|
31,522 |
|
Other expense (income), net |
|
|
(2,984 |
) |
|
|
(3,150 |
) |
|
|
(1,300 |
) |
|
|
(1,138 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
$ |
887,088 |
|
|
$ |
897,507 |
|
|
$ |
410,265 |
|
|
$ |
431,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan. 1, 2011 |
|
|
July 3, 2010 |
|
|
Dec. 26, 2009 |
|
|
|
(In thousands) |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Broadline |
|
$ |
6,457,736 |
|
|
$ |
6,218,985 |
|
|
$ |
5,974,238 |
|
SYGMA |
|
|
417,692 |
|
|
|
392,883 |
|
|
|
384,735 |
|
Other |
|
|
968,027 |
|
|
|
937,605 |
|
|
|
922,233 |
|
|
|
|
|
|
|
|
|
|
|
Total segments |
|
|
7,843,455 |
|
|
|
7,549,473 |
|
|
|
7,281,206 |
|
Corporate |
|
|
2,484,828 |
|
|
|
2,764,228 |
|
|
|
2,923,039 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
10,328,283 |
|
|
$ |
10,313,701 |
|
|
$ |
10,204,245 |
|
|
|
|
|
|
|
|
|
|
|
13
12. SUPPLEMENTAL GUARANTOR INFORMATION PARENT GUARANTEE
Sysco International, ULC is an unlimited liability company organized under the laws of the
Province of British Columbia, Canada and is a wholly-owned subsidiary of Sysco. In May 2002, Sysco
International, Co. issued, in a private offering, $200.0 million 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 |
|
|
|
Jan. 1, 2011 |
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sysco |
|
|
Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
Sysco |
|
|
International |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
Current assets |
|
$ |
132,672 |
|
|
$ |
7 |
|
|
$ |
4,734,203 |
|
|
$ |
|
|
|
$ |
4,866,882 |
|
Investment in subsidiaries |
|
|
15,756,646 |
|
|
|
516,940 |
|
|
|
125,075 |
|
|
|
(16,398,661 |
) |
|
|
|
|
Plant and equipment, net |
|
|
540,534 |
|
|
|
|
|
|
|
2,830,019 |
|
|
|
|
|
|
|
3,370,553 |
|
Other assets |
|
|
394,587 |
|
|
|
476 |
|
|
|
1,695,785 |
|
|
|
|
|
|
|
2,090,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
16,824,439 |
|
|
$ |
517,423 |
|
|
$ |
9,385,082 |
|
|
$ |
(16,398,661 |
) |
|
$ |
10,328,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
417,368 |
|
|
$ |
1,342 |
|
|
$ |
2,302,824 |
|
|
$ |
|
|
|
$ |
2,721,534 |
|
Intercompany payables (receivables) |
|
|
9,695,847 |
|
|
|
89,776 |
|
|
|
(9,785,623 |
) |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
2,400,988 |
|
|
|
199,913 |
|
|
|
52,628 |
|
|
|
|
|
|
|
2,653,529 |
|
Other liabilities |
|
|
512,065 |
|
|
|
|
|
|
|
446,664 |
|
|
|
|
|
|
|
958,729 |
|
Shareholders equity |
|
|
3,798,171 |
|
|
|
226,392 |
|
|
|
16,368,589 |
|
|
|
(16,398,661 |
) |
|
|
3,994,491 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
16,824,439 |
|
|
$ |
517,423 |
|
|
$ |
9,385,082 |
|
|
$ |
(16,398,661 |
) |
|
$ |
10,328,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet |
|
|
|
July 3, 2010 |
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sysco |
|
|
Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
Sysco |
|
|
International |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
Current assets |
|
$ |
417,336 |
|
|
$ |
33 |
|
|
$ |
4,658,889 |
|
|
$ |
|
|
|
$ |
5,076,258 |
|
Investment in subsidiaries |
|
|
14,979,871 |
|
|
|
465,641 |
|
|
|
142,925 |
|
|
|
(15,588,437 |
) |
|
|
|
|
Plant and equipment, net |
|
|
425,279 |
|
|
|
|
|
|
|
2,778,544 |
|
|
|
|
|
|
|
3,203,823 |
|
Other assets |
|
|
362,658 |
|
|
|
597 |
|
|
|
1,670,365 |
|
|
|
|
|
|
|
2,033,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
16,185,144 |
|
|
$ |
466,271 |
|
|
$ |
9,250,723 |
|
|
$ |
(15,588,437 |
) |
|
$ |
10,313,701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
444,274 |
|
|
$ |
1,114 |
|
|
$ |
2,563,810 |
|
|
$ |
|
|
|
$ |
3,009,198 |
|
Intercompany payables (receivables) |
|
|
9,405,317 |
|
|
|
73,124 |
|
|
|
(9,478,441 |
) |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
2,225,781 |
|
|
|
199,881 |
|
|
|
47,000 |
|
|
|
|
|
|
|
2,472,662 |
|
Other liabilities |
|
|
411,781 |
|
|
|
|
|
|
|
592,534 |
|
|
|
|
|
|
|
1,004,315 |
|
Shareholders equity |
|
|
3,697,991 |
|
|
|
192,152 |
|
|
|
15,525,820 |
|
|
|
(15,588,437 |
) |
|
|
3,827,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
16,185,144 |
|
|
$ |
466,271 |
|
|
$ |
9,250,723 |
|
|
$ |
(15,588,437 |
) |
|
$ |
10,313,701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet |
|
|
|
Dec. 26, 2009 |
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sysco |
|
|
Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
Sysco |
|
|
International |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
Current assets |
|
$ |
499,453 |
|
|
$ |
10 |
|
|
$ |
4,517,327 |
|
|
$ |
|
|
|
$ |
5,016,790 |
|
Investment in subsidiaries |
|
|
14,134,945 |
|
|
|
458,012 |
|
|
|
137,741 |
|
|
|
(14,730,698 |
) |
|
|
|
|
Plant and equipment, net |
|
|
301,018 |
|
|
|
|
|
|
|
2,771,703 |
|
|
|
|
|
|
|
3,072,721 |
|
Other assets |
|
|
482,452 |
|
|
|
761 |
|
|
|
1,631,521 |
|
|
|
|
|
|
|
2,114,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
15,417,868 |
|
|
$ |
458,783 |
|
|
$ |
9,058,292 |
|
|
$ |
(14,730,698 |
) |
|
$ |
10,204,245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
416,043 |
|
|
$ |
929 |
|
|
$ |
2,294,050 |
|
|
$ |
|
|
|
$ |
2,711,022 |
|
Intercompany payables (receivables) |
|
|
8,590,840 |
|
|
|
79,443 |
|
|
|
(8,670,283 |
) |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
2,219,095 |
|
|
|
199,847 |
|
|
|
49,748 |
|
|
|
|
|
|
|
2,468,690 |
|
Other liabilities |
|
|
425,110 |
|
|
|
|
|
|
|
669,136 |
|
|
|
|
|
|
|
1,094,246 |
|
Shareholders equity |
|
|
3,766,780 |
|
|
|
178,564 |
|
|
|
14,715,641 |
|
|
|
(14,730,698 |
) |
|
|
3,930,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
15,417,868 |
|
|
$ |
458,783 |
|
|
$ |
9,058,292 |
|
|
$ |
(14,730,698 |
) |
|
$ |
10,204,245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Results of Operations |
|
|
|
For the 26-Week Period Ended Jan. 1, 2011 |
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sysco |
|
|
Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
Sysco |
|
|
International |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
Sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
19,136,126 |
|
|
$ |
|
|
|
$ |
19,136,126 |
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
15,562,765 |
|
|
|
|
|
|
|
15,562,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
|
|
|
|
|
|
|
|
3,573,361 |
|
|
|
|
|
|
|
3,573,361 |
|
Operating expenses |
|
|
153,732 |
|
|
|
65 |
|
|
|
2,476,299 |
|
|
|
|
|
|
|
2,630,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(153,732 |
) |
|
|
(65 |
) |
|
|
1,097,062 |
|
|
|
|
|
|
|
943,265 |
|
Interest expense (income) |
|
|
261,856 |
|
|
|
5,677 |
|
|
|
(208,372 |
) |
|
|
|
|
|
|
59,161 |
|
Other expense (income), net |
|
|
(92 |
) |
|
|
|
|
|
|
(2,892 |
) |
|
|
|
|
|
|
(2,984 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) before income taxes |
|
|
(415,496 |
) |
|
|
(5,742 |
) |
|
|
1,308,326 |
|
|
|
|
|
|
|
887,088 |
|
Income tax provision (benefit) |
|
|
(154,494 |
) |
|
|
(2,135 |
) |
|
|
486,475 |
|
|
|
|
|
|
|
329,846 |
|
Equity in earnings of subsidiaries |
|
|
818,244 |
|
|
|
31,747 |
|
|
|
|
|
|
|
(849,991 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
557,242 |
|
|
$ |
28,140 |
|
|
$ |
821,851 |
|
|
$ |
(849,991 |
) |
|
$ |
557,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Results of Operations |
|
|
|
For the 26-Week Period Ended Dec. 26, 2009 |
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sysco |
|
|
Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
Sysco |
|
|
International |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
Sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
17,949,925 |
|
|
$ |
|
|
|
$ |
17,949,925 |
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
14,507,679 |
|
|
|
|
|
|
|
14,507,679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
|
|
|
|
|
|
|
|
3,442,246 |
|
|
|
|
|
|
|
3,442,246 |
|
Operating expenses |
|
|
122,810 |
|
|
|
69 |
|
|
|
2,359,688 |
|
|
|
|
|
|
|
2,482,567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(122,810 |
) |
|
|
(69 |
) |
|
|
1,082,558 |
|
|
|
|
|
|
|
959,679 |
|
Interest expense (income) |
|
|
241,130 |
|
|
|
5,068 |
|
|
|
(180,876 |
) |
|
|
|
|
|
|
65,322 |
|
Other expense (income), net |
|
|
(360 |
) |
|
|
|
|
|
|
(2,790 |
) |
|
|
|
|
|
|
(3,150 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) before income taxes |
|
|
(363,580 |
) |
|
|
(5,137 |
) |
|
|
1,266,224 |
|
|
|
|
|
|
|
897,507 |
|
Income tax provision (benefit) |
|
|
(122,726 |
) |
|
|
(1,734 |
) |
|
|
427,413 |
|
|
|
|
|
|
|
302,953 |
|
Equity in earnings of subsidiaries |
|
|
835,408 |
|
|
|
27,193 |
|
|
|
|
|
|
|
(862,601 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
594,554 |
|
|
$ |
23,790 |
|
|
$ |
838,811 |
|
|
$ |
(862,601 |
) |
|
$ |
594,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Results of Operations |
|
|
|
For the 13-Week Period Ended Jan. 1, 2011 |
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sysco |
|
|
Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
Sysco |
|
|
International |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
Sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
9,384,852 |
|
|
$ |
|
|
|
$ |
9,384,852 |
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
7,642,908 |
|
|
|
|
|
|
|
7,642,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
|
|
|
|
|
|
|
|
1,741,944 |
|
|
|
|
|
|
|
1,741,944 |
|
Operating expenses |
|
|
86,037 |
|
|
|
32 |
|
|
|
1,218,850 |
|
|
|
|
|
|
|
1,304,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(86,037 |
) |
|
|
(32 |
) |
|
|
523,094 |
|
|
|
|
|
|
|
437,025 |
|
Interest expense (income) |
|
|
130,867 |
|
|
|
3,101 |
|
|
|
(105,908 |
) |
|
|
|
|
|
|
28,060 |
|
Other expense (income), net |
|
|
(9 |
) |
|
|
|
|
|
|
(1,291 |
) |
|
|
|
|
|
|
(1,300 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) before income taxes |
|
|
(216,895 |
) |
|
|
(3,133 |
) |
|
|
630,293 |
|
|
|
|
|
|
|
410,265 |
|
Income tax provision (benefit) |
|
|
(80,458 |
) |
|
|
(1,162 |
) |
|
|
233,712 |
|
|
|
|
|
|
|
152,092 |
|
Equity in earnings of subsidiaries |
|
|
394,610 |
|
|
|
16,273 |
|
|
|
|
|
|
|
(410,883 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
258,173 |
|
|
$ |
14,302 |
|
|
$ |
396,581 |
|
|
$ |
(410,883 |
) |
|
$ |
258,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Results of Operations |
|
|
|
For the 13-Week Period Ended Dec. 26, 2009 |
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sysco |
|
|
Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
Sysco |
|
|
International |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
Sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
8,868,499 |
|
|
$ |
|
|
|
$ |
8,868,499 |
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
7,173,612 |
|
|
|
|
|
|
|
7,173,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
|
|
|
|
|
|
|
|
1,694,887 |
|
|
|
|
|
|
|
1,694,887 |
|
Operating expenses |
|
|
77,748 |
|
|
|
35 |
|
|
|
1,154,753 |
|
|
|
|
|
|
|
1,232,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(77,748 |
) |
|
|
(35 |
) |
|
|
540,134 |
|
|
|
|
|
|
|
462,351 |
|
Interest expense (income) |
|
|
120,566 |
|
|
|
2,578 |
|
|
|
(91,622 |
) |
|
|
|
|
|
|
31,522 |
|
Other expense (income), net |
|
|
(6 |
) |
|
|
|
|
|
|
(1,132 |
) |
|
|
|
|
|
|
(1,138 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) before income taxes |
|
|
(198,308 |
) |
|
|
(2,613 |
) |
|
|
632,888 |
|
|
|
|
|
|
|
431,967 |
|
Income tax provision (benefit) |
|
|
(73,262 |
) |
|
|
(979 |
) |
|
|
237,859 |
|
|
|
|
|
|
|
163,618 |
|
Equity in earnings of subsidiaries |
|
|
393,395 |
|
|
|
14,000 |
|
|
|
|
|
|
|
(407,395 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
268,349 |
|
|
$ |
12,366 |
|
|
$ |
395,029 |
|
|
$ |
(407,395 |
) |
|
$ |
268,349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Cash Flows |
|
|
|
For the 26-Week Period Ended Jan. 1, 2011 |
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
Sysco |
|
|
Non-Guarantor |
|
|
Consolidated |
|
|
|
Sysco |
|
|
International |
|
|
Subsidiaries |
|
|
Totals |
|
|
|
(In thousands) |
|
Net cash provided by (used for): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
(132,293 |
) |
|
$ |
28,547 |
|
|
$ |
386,393 |
|
|
$ |
282,647 |
|
Investing activities |
|
|
(140,272 |
) |
|
|
|
|
|
|
(186,487 |
) |
|
|
(326,759 |
) |
Financing activities |
|
|
(340,071 |
) |
|
|
|
|
|
|
(2,509 |
) |
|
|
(342,580 |
) |
Effect of exchange rates on cash |
|
|
|
|
|
|
|
|
|
|
11,004 |
|
|
|
11,004 |
|
Intercompany activity |
|
|
335,748 |
|
|
|
(28,547 |
) |
|
|
(307,201 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) in cash |
|
|
(276,888 |
) |
|
|
|
|
|
|
(98,800 |
) |
|
|
(375,688 |
) |
Cash at the beginning of the period |
|
|
373,523 |
|
|
|
|
|
|
|
211,920 |
|
|
|
585,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at the end of the period |
|
$ |
96,635 |
|
|
$ |
|
|
|
$ |
113,120 |
|
|
$ |
209,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Cash Flows |
|
|
|
For the 26-Week Period Ended Dec. 26, 2009 |
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
Sysco |
|
|
Non-Guarantor |
|
|
Consolidated |
|
|
|
Sysco |
|
|
International |
|
|
Subsidiaries |
|
|
Totals |
|
|
|
(In thousands) |
|
Net cash provided by (used for): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
(154,832 |
) |
|
$ |
23,891 |
|
|
$ |
277,362 |
|
|
$ |
146,421 |
|
Investing activities |
|
|
(87,551 |
) |
|
|
|
|
|
|
(261,750 |
) |
|
|
(349,301 |
) |
Financing activities |
|
|
(248,177 |
) |
|
|
|
|
|
|
779 |
|
|
|
(247,398 |
) |
Effect of exchange rates on cash |
|
|
|
|
|
|
|
|
|
|
6,512 |
|
|
|
6,512 |
|
Intercompany activity |
|
|
57,742 |
|
|
|
(23,891 |
) |
|
|
(33,851 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) in cash |
|
|
(432,818 |
) |
|
|
|
|
|
|
(10,948 |
) |
|
|
(443,766 |
) |
Cash at the beginning of the period |
|
|
899,195 |
|
|
|
|
|
|
|
119,456 |
|
|
|
1,018,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at the end of the period |
|
$ |
466,377 |
|
|
$ |
|
|
|
$ |
108,508 |
|
|
$ |
574,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13. SUPPLEMENTAL GUARANTOR INFORMATION SUBSIDIARY GUARANTEES
On January 19, 2011, the wholly-owned U.S. Broadline subsidiaries of Sysco Corporation entered
into full and unconditional guarantees of all outstanding senior notes and debentures of Sysco
Corporation. As of January 1, 2011, Sysco had a total of approximately $2,225.0 million in senior
notes and debentures outstanding.
The following condensed consolidating financial statements present separately the financial
position, results of operations and cash flows of the guarantors (U.S. Broadline subsidiaries), the
parent issuer (Sysco Corporation) and all other non-guarantor subsidiaries of Sysco (Other
Non-Guarantor Subsidiaries) on a combined basis with eliminating entries.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet |
|
|
|
Jan. 1, 2011 |
|
|
|
U.S. |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
Broadline |
|
|
|
|
|
|
Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
Subsidiaries |
|
|
Sysco |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
Current assets |
|
$ |
3,248,279 |
|
|
$ |
132,672 |
|
|
$ |
1,485,931 |
|
|
$ |
|
|
|
$ |
4,866,882 |
|
Investment in subsidiaries |
|
|
|
|
|
|
15,756,646 |
|
|
|
|
|
|
|
(15,756,646 |
) |
|
|
|
|
Plant and equipment, net |
|
|
1,784,365 |
|
|
|
540,534 |
|
|
|
1,045,654 |
|
|
|
|
|
|
|
3,370,553 |
|
Other assets |
|
|
495,369 |
|
|
|
394,587 |
|
|
|
1,200,892 |
|
|
|
|
|
|
|
2,090,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
5,528,013 |
|
|
$ |
16,824,439 |
|
|
$ |
3,732,477 |
|
|
$ |
(15,756,646 |
) |
|
$ |
10,328,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
813,532 |
|
|
$ |
417,368 |
|
|
$ |
1,490,634 |
|
|
$ |
|
|
|
$ |
2,721,534 |
|
Intercompany payables (receivables) |
|
|
(9,695,821 |
) |
|
|
9,695,847 |
|
|
|
(26 |
) |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
24,561 |
|
|
|
2,400,988 |
|
|
|
227,980 |
|
|
|
|
|
|
|
2,653,529 |
|
Other liabilities |
|
|
336,429 |
|
|
|
512,065 |
|
|
|
110,235 |
|
|
|
|
|
|
|
958,729 |
|
Shareholders equity |
|
|
14,049,312 |
|
|
|
3,798,171 |
|
|
|
1,903,654 |
|
|
|
(15,756,646 |
) |
|
|
3,994,491 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
5,528,013 |
|
|
$ |
16,824,439 |
|
|
$ |
3,732,477 |
|
|
$ |
(15,756,646 |
) |
|
$ |
10,328,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet |
|
|
|
July 3, 2010 |
|
|
|
U.S. |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
Broadline |
|
|
|
|
|
|
Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
Subsidiaries |
|
|
Sysco |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
Current assets |
|
$ |
3,165,121 |
|
|
$ |
417,336 |
|
|
$ |
1,493,801 |
|
|
$ |
|
|
|
$ |
5,076,258 |
|
Investment in subsidiaries |
|
|
|
|
|
|
14,979,871 |
|
|
|
|
|
|
|
(14,979,871 |
) |
|
|
|
|
Plant and equipment, net |
|
|
1,762,580 |
|
|
|
425,279 |
|
|
|
1,015,964 |
|
|
|
|
|
|
|
3,203,823 |
|
Other assets |
|
|
484,887 |
|
|
|
362,658 |
|
|
|
1,186,075 |
|
|
|
|
|
|
|
2,033,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
5,412,588 |
|
|
$ |
16,185,144 |
|
|
$ |
3,695,840 |
|
|
$ |
(14,979,871 |
) |
|
$ |
10,313,701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
918,449 |
|
|
$ |
444,274 |
|
|
$ |
1,646,475 |
|
|
$ |
|
|
|
$ |
3,009,198 |
|
Intercompany payables (receivables) |
|
|
(9,408,645 |
) |
|
|
9,405,317 |
|
|
|
3,328 |
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
18,860 |
|
|
|
2,225,781 |
|
|
|
228,021 |
|
|
|
|
|
|
|
2,472,662 |
|
Other liabilities |
|
|
491,528 |
|
|
|
411,781 |
|
|
|
101,006 |
|
|
|
|
|
|
|
1,004,315 |
|
Shareholders equity |
|
|
13,392,396 |
|
|
|
3,697,991 |
|
|
|
1,717,010 |
|
|
|
(14,979,871 |
) |
|
|
3,827,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
5,412,588 |
|
|
$ |
16,185,144 |
|
|
$ |
3,695,840 |
|
|
$ |
(14,979,871 |
) |
|
$ |
10,313,701 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet |
|
|
|
Dec. 26, 2009 |
|
|
|
U.S. |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
Broadline |
|
|
|
|
|
|
Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
Subsidiaries |
|
|
Sysco |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
Current assets |
|
$ |
3,091,599 |
|
|
$ |
499,453 |
|
|
$ |
1,425,738 |
|
|
$ |
|
|
|
$ |
5,016,790 |
|
Investment in subsidiaries |
|
|
|
|
|
|
14,134,945 |
|
|
|
|
|
|
|
(14,134,945 |
) |
|
|
|
|
Plant and equipment, net |
|
|
1,770,201 |
|
|
|
301,018 |
|
|
|
1,001,502 |
|
|
|
|
|
|
|
3,072,721 |
|
Other assets |
|
|
443,948 |
|
|
|
482,452 |
|
|
|
1,188,334 |
|
|
|
|
|
|
|
2,114,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
5,305,748 |
|
|
$ |
15,417,868 |
|
|
$ |
3,615,574 |
|
|
$ |
(14,134,945 |
) |
|
$ |
10,204,245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
778,594 |
|
|
$ |
416,043 |
|
|
$ |
1,516,385 |
|
|
$ |
|
|
|
$ |
2,711,022 |
|
Intercompany payables (receivables) |
|
|
(8,690,235 |
) |
|
|
8,590,840 |
|
|
|
99,395 |
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
19,132 |
|
|
|
2,219,095 |
|
|
|
230,463 |
|
|
|
|
|
|
|
2,468,690 |
|
Other liabilities |
|
|
540,585 |
|
|
|
425,110 |
|
|
|
128,551 |
|
|
|
|
|
|
|
1,094,246 |
|
Shareholders equity |
|
|
12,657,672 |
|
|
|
3,766,780 |
|
|
|
1,640,780 |
|
|
|
(14,134,945 |
) |
|
|
3,930,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
5,305,748 |
|
|
$ |
15,417,868 |
|
|
$ |
3,615,574 |
|
|
$ |
(14,134,945 |
) |
|
$ |
10,204,245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Results of Operations |
|
|
|
For the 26-Week Period Ended Jan. 1, 2011 |
|
|
|
U.S. |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
Broadline |
|
|
|
|
|
|
Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
Subsidiaries |
|
|
Sysco |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
Sales |
|
$ |
13,233,437 |
|
|
$ |
|
|
|
$ |
6,201,470 |
|
|
$ |
(298,781 |
) |
|
$ |
19,136,126 |
|
Cost of sales |
|
|
10,546,584 |
|
|
|
|
|
|
|
5,271,684 |
|
|
|
(255,503 |
) |
|
|
15,562,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
2,686,853 |
|
|
|
|
|
|
|
929,786 |
|
|
|
(43,278 |
) |
|
|
3,573,361 |
|
Operating expenses |
|
|
1,767,484 |
|
|
|
153,732 |
|
|
|
752,158 |
|
|
|
(43,278 |
) |
|
|
2,630,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
919,369 |
|
|
|
(153,732 |
) |
|
|
177,628 |
|
|
|
|
|
|
|
943,265 |
|
Interest expense (income) |
|
|
(201,197 |
) |
|
|
261,856 |
|
|
|
(1,498 |
) |
|
|
|
|
|
|
59,161 |
|
Other expense (income), net |
|
|
(922 |
) |
|
|
(92 |
) |
|
|
(1,970 |
) |
|
|
|
|
|
|
(2,984 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) before income taxes |
|
|
1,121,488 |
|
|
|
(415,496 |
) |
|
|
181,096 |
|
|
|
|
|
|
|
887,088 |
|
Income tax provision (benefit) |
|
|
417,002 |
|
|
|
(154,494 |
) |
|
|
67,338 |
|
|
|
|
|
|
|
329,846 |
|
Equity in earnings of subsidiaries |
|
|
|
|
|
|
818,244 |
|
|
|
|
|
|
|
(818,244 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
704,486 |
|
|
$ |
557,242 |
|
|
$ |
113,758 |
|
|
$ |
(818,244 |
) |
|
$ |
557,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Results of Operations |
|
|
|
For the 26-Week Period Ended Dec. 26, 2009 |
|
|
|
U.S. |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
Broadline |
|
|
|
|
|
|
Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
Subsidiaries |
|
|
Sysco |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
Sales |
|
$ |
12,543,265 |
|
|
$ |
|
|
|
$ |
5,653,881 |
|
|
$ |
(247,221 |
) |
|
$ |
17,949,925 |
|
Cost of sales |
|
|
9,929,965 |
|
|
|
|
|
|
|
4,785,222 |
|
|
|
(207,508 |
) |
|
|
14,507,679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
2,613,300 |
|
|
|
|
|
|
|
868,659 |
|
|
|
(39,713 |
) |
|
|
3,442,246 |
|
Operating expenses |
|
|
1,697,216 |
|
|
|
122,810 |
|
|
|
702,254 |
|
|
|
(39,713 |
) |
|
|
2,482,567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
916,084 |
|
|
|
(122,810 |
) |
|
|
166,405 |
|
|
|
|
|
|
|
959,679 |
|
Interest expense (income) |
|
|
(177,983 |
) |
|
|
241,130 |
|
|
|
2,175 |
|
|
|
|
|
|
|
65,322 |
|
Other expense (income), net |
|
|
(1,197 |
) |
|
|
(360 |
) |
|
|
(1,593 |
) |
|
|
|
|
|
|
(3,150 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) before income taxes |
|
|
1,095,264 |
|
|
|
(363,580 |
) |
|
|
165,823 |
|
|
|
|
|
|
|
897,507 |
|
Income tax provision (benefit) |
|
|
369,705 |
|
|
|
(122,726 |
) |
|
|
55,974 |
|
|
|
|
|
|
|
302,953 |
|
Equity in earnings of subsidiaries |
|
|
|
|
|
|
835,408 |
|
|
|
|
|
|
|
(835,408 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
725,559 |
|
|
$ |
594,554 |
|
|
$ |
109,849 |
|
|
$ |
(835,408 |
) |
|
$ |
594,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Results of Operations |
|
|
|
For the 13-Week Period Ended Jan. 1, 2011 |
|
|
|
U.S. |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
Broadline |
|
|
|
|
|
|
Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
Subsidiaries |
|
|
Sysco |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
Sales |
|
$ |
6,446,806 |
|
|
$ |
|
|
|
$ |
3,090,406 |
|
|
$ |
(152,360 |
) |
|
$ |
9,384,852 |
|
Cost of sales |
|
|
5,143,121 |
|
|
|
|
|
|
|
2,630,567 |
|
|
|
(130,780 |
) |
|
|
7,642,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
1,303,685 |
|
|
|
|
|
|
|
459,839 |
|
|
|
(21,580 |
) |
|
|
1,741,944 |
|
Operating expenses |
|
|
867,536 |
|
|
|
86,037 |
|
|
|
372,926 |
|
|
|
(21,580 |
) |
|
|
1,304,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
436,149 |
|
|
|
(86,037 |
) |
|
|
86,913 |
|
|
|
|
|
|
|
437,025 |
|
Interest expense (income) |
|
|
(101,664 |
) |
|
|
130,867 |
|
|
|
(1,143 |
) |
|
|
|
|
|
|
28,060 |
|
Other expense (income), net |
|
|
(444 |
) |
|
|
(9 |
) |
|
|
(847 |
) |
|
|
|
|
|
|
(1,300 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) before income taxes |
|
|
538,257 |
|
|
|
(216,895 |
) |
|
|
88,903 |
|
|
|
|
|
|
|
410,265 |
|
Income tax provision (benefit) |
|
|
199,582 |
|
|
|
(80,458 |
) |
|
|
32,968 |
|
|
|
|
|
|
|
152,092 |
|
Equity in earnings of subsidiaries |
|
|
|
|
|
|
394,610 |
|
|
|
|
|
|
|
(394,610 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
338,675 |
|
|
$ |
258,173 |
|
|
$ |
55,935 |
|
|
$ |
(394,610 |
) |
|
$ |
258,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Results of Operations |
|
|
|
For the 13-Week Period Ended Dec. 26, 2009 |
|
|
|
U.S. |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
Broadline |
|
|
|
|
|
|
Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
Subsidiaries |
|
|
Sysco |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
Sales |
|
$ |
6,176,500 |
|
|
$ |
|
|
|
$ |
2,818,202 |
|
|
$ |
(126,203 |
) |
|
$ |
8,868,499 |
|
Cost of sales |
|
|
4,893,533 |
|
|
|
|
|
|
|
2,386,077 |
|
|
|
(105,998 |
) |
|
|
7,173,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
1,282,967 |
|
|
|
|
|
|
|
432,125 |
|
|
|
(20,205 |
) |
|
|
1,694,887 |
|
Operating expenses |
|
|
827,905 |
|
|
|
77,748 |
|
|
|
347,088 |
|
|
|
(20,205 |
) |
|
|
1,232,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
455,062 |
|
|
|
(77,748 |
) |
|
|
85,037 |
|
|
|
|
|
|
|
462,351 |
|
Interest expense (income) |
|
|
(89,971 |
) |
|
|
120,566 |
|
|
|
927 |
|
|
|
|
|
|
|
31,522 |
|
Other expense (income), net |
|
|
(454 |
) |
|
|
(6 |
) |
|
|
(678 |
) |
|
|
|
|
|
|
(1,138 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) before income taxes |
|
|
545,487 |
|
|
|
(198,308 |
) |
|
|
84,788 |
|
|
|
|
|
|
|
431,967 |
|
Income tax provision (benefit) |
|
|
205,160 |
|
|
|
(73,262 |
) |
|
|
31,720 |
|
|
|
|
|
|
|
163,618 |
|
Equity in earnings of subsidiaries |
|
|
|
|
|
|
393,395 |
|
|
|
|
|
|
|
(393,395 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
340,327 |
|
|
$ |
268,349 |
|
|
$ |
53,068 |
|
|
$ |
(393,395 |
) |
|
$ |
268,349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Cash Flows |
|
|
|
For the 26-Week Period Ended Jan. 1, 2011 |
|
|
|
U.S. |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Broadline |
|
|
|
|
|
|
Non-Guarantor |
|
|
Consolidated |
|
|
|
Subsidiaries |
|
|
Sysco |
|
|
Subsidiaries |
|
|
Totals |
|
|
|
(In thousands) |
|
Net cash provided by (used for): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
474,309 |
|
|
$ |
(132,293 |
) |
|
$ |
(59,369 |
) |
|
$ |
282,647 |
|
Investing activities |
|
|
(147,795 |
) |
|
|
(140,272 |
) |
|
|
(38,692 |
) |
|
|
(326,759 |
) |
Financing activities |
|
|
(1,321 |
) |
|
|
(340,071 |
) |
|
|
(1,188 |
) |
|
|
(342,580 |
) |
Effect of exchange rates on cash |
|
|
|
|
|
|
|
|
|
|
11,004 |
|
|
|
11,004 |
|
Intercompany activity |
|
|
(337,651 |
) |
|
|
335,748 |
|
|
|
1,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) in cash |
|
|
(12,458 |
) |
|
|
(276,888 |
) |
|
|
(86,342 |
) |
|
|
(375,688 |
) |
Cash at the beginning of the period |
|
|
31,935 |
|
|
|
373,523 |
|
|
|
179,985 |
|
|
|
585,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at the end of the period |
|
$ |
19,477 |
|
|
$ |
96,635 |
|
|
$ |
93,643 |
|
|
$ |
209,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Cash Flows |
|
|
|
For the 26-Week Period Ended Dec. 26, 2009 |
|
|
|
U.S. |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Broadline |
|
|
|
|
|
|
Non-Guarantor |
|
|
Consolidated |
|
|
|
Subsidiaries |
|
|
Sysco |
|
|
Subsidiaries |
|
|
Totals |
|
|
|
(In thousands) |
|
Net cash provided by (used for): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
267,749 |
|
|
$ |
(154,832 |
) |
|
$ |
33,504 |
|
|
$ |
146,421 |
|
Investing activities |
|
|
(122,091 |
) |
|
|
(87,551 |
) |
|
|
(139,659 |
) |
|
|
(349,301 |
) |
Financing activities |
|
|
707 |
|
|
|
(248,177 |
) |
|
|
72 |
|
|
|
(247,398 |
) |
Effect of exchange rates on cash |
|
|
|
|
|
|
|
|
|
|
6,512 |
|
|
|
6,512 |
|
Intercompany activity |
|
|
(155,092 |
) |
|
|
57,742 |
|
|
|
97,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) in cash |
|
|
(8,727 |
) |
|
|
(432,818 |
) |
|
|
(2,221 |
) |
|
|
(443,766 |
) |
Cash at the beginning of the period |
|
|
32,216 |
|
|
|
899,195 |
|
|
|
87,240 |
|
|
|
1,018,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at the end of the period |
|
$ |
23,489 |
|
|
$ |
466,377 |
|
|
$ |
85,019 |
|
|
$ |
574,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
This discussion should be read in conjunction with our consolidated financial statements as of
July 3, 2010, and the fiscal year then ended, and Managements Discussion and Analysis of Financial
Condition and Results of Operations, both contained in our Annual Report on Form 10-K for the
fiscal year ended July 3, 2010.
Overview
Sysco distributes food and related products to restaurants, healthcare and educational
facilities, lodging establishments and other foodservice customers. Our primary operations are
located throughout the United States, Canada and Ireland and include broadline companies, specialty
produce companies, custom-cut meat operations, hotel supply operations, SYGMA (our chain restaurant
distribution subsidiary) and a company that distributes to international customers.
We consider our primary market to be the foodservice market in the United States and Canada
and estimate that we serve about 17% of this approximately $210 billion annual market as measured
at the end of fiscal 2010. According to industry sources, the foodservice, or food-away-from-home,
market represents approximately half of the total dollars spent on food purchases made at the
consumer level in the United States.
Highlights
A slow economic recovery in the United States and Canada combined with continued low levels of
consumer confidence and rising product cost inflation, contributed to a challenging environment in
the first 26 weeks of fiscal 2011. Sales increased during the first 26 weeks and second quarter of
fiscal 2011, however gross margin dollars grew at a slower rate than sales and operating expenses
increased faster than gross margins. This resulted in a decline in operating income, net earnings
and earnings per share for both the first 26 weeks of fiscal 2011 and the second quarter of fiscal
2011 as compared to the same periods in fiscal 2010.
First 26 Weeks
|
|
Sales increased 6.6% in the first 26 weeks of fiscal 2011 from the comparable prior year
period to $19.1 billion primarily due to increased prices due to inflation and improving case
volumes. Inflation, as measured by changes in our product costs, was an estimated 3.9% during
the first 26 weeks of fiscal 2011. Sales from acquisitions within the last 12 months
favorably impacted sales by 0.6%, and the exchange rates used to translate our foreign sales
into U.S. dollars positively impacted sales by 0.5%. |
|
|
Operating income decreased to $943.3 million, a 1.7% decrease from the comparable prior
year period, primarily driven by gross margin dollars growing at a slower rate than sales and
operating expenses increasing faster than gross margins. Gross margin dollars increased 3.8%
in the first 26 weeks of fiscal 2011 from the first 26 weeks of fiscal 2010 but declined as a
percentage of sales primarily due to the impact of significant inflation in certain product
categories, strategic pricing initiatives and growth in our SYGMA segment, which is a lower
margin business than our Broadline business. Operating expenses increased 5.9% primarily due
to higher pay-related expense related to increased sales and an increase in net
company-sponsored pension costs. |
|
|
Net earnings decreased to $557.2 million, a 6.3% decrease from the comparable prior year
period, primarily due to the decline in operating income and an increase in the effective tax
rate. The effective tax rate for the first 26 weeks of fiscal 2011 was 37.18%, compared to an
effective tax rate of 33.75% for the first 26 weeks of fiscal 2010. The difference between
the tax rates for the two periods resulted largely from the one-time reversal of interest
accruals for tax contingencies related to our settlement with the Internal Revenue Service
(IRS) in the first quarter of fiscal 2010. |
|
|
Basic and diluted earnings per share in the first 26 weeks of fiscal 2011 were both $0.95,
a decrease of 5.0% from the comparable prior year period primarily due to the factors
discussed above. Both basic and diluted earnings per share were favorably impacted by $0.04
per share in the first 26 weeks of fiscal 2011 due to the gains recorded on the adjustment of
the carrying value of corporate-owned life insurance (COLI) policies to their cash surrender
values. Both basic and diluted earnings per share were favorably impacted by $0.09 per share
in the first 26 weeks of fiscal 2010 from the one-time reversal of a previously accrued
liability related to the settlement of an outstanding tax matter with the IRS of $0.05 per |
21
|
|
share and the gains recorded on the adjustment of the carrying value of COLI policies to their
cash surrender values of $0.04 per share. |
Second Quarter
|
|
Sales increased 5.8% in the second quarter of fiscal 2011 over the comparable prior year
period to $9.4 billion primarily resulting from increased prices due to inflation. Inflation,
as measured by changes in our product costs, was an estimated 4.5% during the second quarter
of fiscal 2011. Sales from acquisitions within the last 12 months favorably impacted sales by
0.6%, and the exchange rates used to translate our foreign sales into U.S. dollars positively
impacted sales by 0.4%. |
|
|
Operating income decreased to $437.0 million, a 5.5% decrease from the comparable prior
year period, primarily driven by gross margin dollars growing at a slower rate than sales and
operating expenses increasing faster than gross margin dollars. Gross margin dollars
increased 2.8% in the second quarter of fiscal 2011 from the second quarter of fiscal 2010 but
declined as a percentage of sales primarily due to the impact of significant inflation in
certain product categories, strategic pricing initiatives and growth in our SYGMA segment,
which is a lower margin business than our Broadline business. Operating expenses increased
5.9% primarily due to higher pay-related expense related to increased sales and an increase in
net company-sponsored pension costs and greater fuel costs. |
|
|
Net earnings decreased to $258.2 million, a 3.8% decrease from the comparable prior year
period. Basic and diluted earnings per share in the second quarter of fiscal 2011 were both
$0.44, a decrease of 2.2% from the comparable prior year period. These declines were
primarily due to the decline in operating income. Both basic and diluted earnings per share
were favorably impacted by $0.02 per share in the second quarter of fiscal 2011 due to the
gains recorded on the adjustment of the carrying value of COLI policies to their cash
surrender values. Both basic and diluted earnings per share were favorably impacted by $0.01
per share in the second quarter of fiscal 2010 from gains recorded on the adjustment of the
carrying value of COLI policies to their cash surrender values. |
Trends and Strategy
Trends
General economic conditions and consumer confidence can affect the frequency of purchases and
amounts spent by consumers for food-away-from-home and, in turn, can impact our customers and our
sales. We believe the current general economic conditions, including pressure on consumer
disposable income, have contributed to a slow rate of recovery in the foodservice market.
Historically, we have grown at a faster rate than the overall industry and have grown our market
share in this fragmented industry.
We have experienced higher levels of product cost inflation this fiscal year as compared to
fiscal 2010, which we were unable to pass through completely without negatively impacting our
customers business and therefore our business. While we cannot predict whether inflation will
continue at current levels, prolonged periods of high inflation, either overall or in certain
product categories, can have a negative impact on us and our customers, as high food costs can
reduce consumer spending in the food-away-from-home market, and may negatively impact our sales,
gross margins and earnings.
We have also experienced higher costs this fiscal year from increased pay-related expense due
to increased sales as well as higher pension and fuel costs. We believe pay-related expense could
continue to increase if sales increase, as a portion of these costs are variable in nature. We
believe increased pension and fuel costs will continue for the remainder of the fiscal year. Our
Business Transformation Project is a key part of our strategy to control costs and continue to grow
the business. The expense related to this project through the first 26 weeks of fiscal 2011 has
largely been comparable to the costs incurred through the first 26 weeks of fiscal 2010, despite
increased spend on the project. We believe these expenses will increase in the last 26 weeks of
fiscal 2011 as compared to the last 27 weeks of fiscal 2010 as we prepare to deploy the project to
our operating companies.
Strategy
We continue to invest in our core business to expand our market share and grow earnings. We
will continue to use our strategies to leverage our market leadership position to continuously
improve how we buy, handle and market products for our customers. These strategies include: growing
our sales, our Business Transformation Project, achieving productivity gains and lowering
procurement costs. These strategies are described in Managements Discussion and Analysis of
Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year
ended July 3, 2010.
22
Our primary focus is on growing and optimizing our core foodservice distribution business in
North America; however, we will continue to explore and identify opportunities to grow in new
international markets and in other areas of business that complement our core foodservice
distribution service. As a part of our ongoing strategic analysis, we regularly evaluate business
opportunities, including potential acquisitions and sales of assets and businesses.
Business Transformation Project
We
have substantially completed the design and building phase of our Business Transformation
Project and we are currently testing the underlying Enterprise Resource Planning system and
processes. Over the remainder of this fiscal year, our pilot operating company will implement the
project and our shared services center will be active in its support role. Implementation is
anticipated to occur across the majority of our Broadline and SYGMA operating companies by the end
of fiscal 2013. Although we expect the investment in the business transformation project to
provide meaningful benefits to the company over the long-term, the costs will exceed the benefits
during the early stages of implementation, including fiscal 2011.
We expect the total cash outlay for the Business Transformation Project to be approximately
$900 million. Approximately $145 million and $86 million of cash outlay occurred in the first 26
weeks of fiscal 2011 and fiscal 2010, respectively. Expenses related to our Business
Transformation Project, inclusive of pay-related expense, in the first 26 weeks and second quarter
of fiscal 2011 have not significantly increased as compared to the expenses in comparable periods
of fiscal 2010. We believe these expenses will increase in the last 26 weeks of fiscal 2011 as
compared to the last 27 weeks of fiscal 2010 in the amount of $25 million to $45 million, as we
prepare to deploy the project to our operating companies. Sysco redeployed employees to work on
the Business Transformation Project and did not backfill all of these positions; therefore, not all
expenses related to this project are incremental from operating expenses incurred by Sysco.
Additionally, certain labor costs, which would have been expensed absent this project, are being
capitalized as software costs as a result of this project.
Results of Operations
The following table sets forth the components of the Results of Operations expressed as a
percentage of sales for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26-Week Period Ended |
|
13-Week Period Ended |
|
|
January 1, 2011 |
|
December 26, 2009 |
|
January 1, 2011 |
|
December 26, 2009 |
Sales |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of sales |
|
|
81.3 |
|
|
|
80.8 |
|
|
|
81.4 |
|
|
|
80.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
18.7 |
|
|
|
19.2 |
|
|
|
18.6 |
|
|
|
19.1 |
|
Operating expenses |
|
|
13.8 |
|
|
|
13.9 |
|
|
|
13.9 |
|
|
|
13.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
4.9 |
|
|
|
5.3 |
|
|
|
4.7 |
|
|
|
5.2 |
|
Interest expense |
|
|
0.3 |
|
|
|
0.4 |
|
|
|
0.3 |
|
|
|
0.4 |
|
Other expense (income), net |
|
|
(0.0 |
) |
|
|
(0.0 |
) |
|
|
(0.0 |
) |
|
|
(0.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
4.6 |
|
|
|
4.9 |
|
|
|
4.4 |
|
|
|
4.8 |
|
Income taxes |
|
|
1.7 |
|
|
|
1.7 |
|
|
|
1.6 |
|
|
|
1.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
2.9 |
% |
|
|
3.2 |
% |
|
|
2.8 |
% |
|
|
3.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
The following table sets forth the change in the components of the Results of Operations
expressed as a percentage increase or decrease over the comparable period in the prior year:
|
|
|
|
|
|
|
|
|
|
|
26-Week Period |
|
13-Week Period |
Sales |
|
|
6.6 |
% |
|
|
5.8 |
% |
Cost of sales |
|
|
7.3 |
|
|
|
6.5 |
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
3.8 |
|
|
|
2.8 |
|
Operating expenses |
|
|
5.9 |
|
|
|
5.9 |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
(1.7 |
) |
|
|
(5.5 |
) |
Interest expense |
|
|
(9.4 |
) |
|
|
(11.0 |
) |
Other expense (income), net |
|
|
(5.3 |
) |
|
|
14.2 |
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
(1.2 |
) |
|
|
(5.0 |
) |
Income taxes |
|
|
8.9 |
|
|
|
(7.0 |
) |
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
(6.3 |
)% |
|
|
(3.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
|
(5.0 |
)% |
|
|
(2.2 |
)% |
Diluted earnings per share |
|
|
(5.0 |
) |
|
|
(2.2 |
) |
|
|
|
|
|
|
|
|
|
Average shares outstanding |
|
|
(0.9 |
) |
|
|
(1.3 |
) |
Diluted shares outstanding |
|
|
(0.6 |
) |
|
|
(1.1 |
) |
Sales
Sales were 6.6% higher in the first 26 weeks and 5.8% higher in the second quarter of fiscal
2011 than the comparable periods of the prior year. Product cost inflation and the resulting
increase in selling prices, combined with improving case volumes, had an impact on sales in the
first 26 weeks of fiscal 2011. Product cost inflation was the primary factor that increased sales
in the second quarter of fiscal 2011. Changes in product costs, an internal measure of inflation
or deflation, were estimated as inflation of 3.9% during the first 26 weeks and 4.5% during the
second quarter of fiscal 2011, as compared to deflation of 3.4% during the first 26 weeks and 3.5%
during the second quarter of fiscal 2010. Sales from acquisitions within the last 12 months
favorably impacted sales by 0.6% for both the first 26 weeks and the second quarter of fiscal 2011.
The exchange rates used to translate our foreign sales into U.S. dollars positively impacted sales
by 0.5% in the first 26 weeks and 0.4% in the second quarter of fiscal 2011 compared to the first
26 weeks and the second quarter of fiscal 2010, respectively.
We believe that our continued focus on the use of business reviews and business development
activities, commitment to quality, investment in customer contact personnel and the efforts of our
marketing associates and sales support personnel are key drivers to strengthening customer
relationships and growing sales with new and existing customers. We also believe these activities
help our customers in this challenging economic environment.
Operating Income
Cost of sales primarily includes our product costs, net of vendor consideration, and includes
in-bound freight. Operating expenses include the costs of facilities, product handling, delivery,
selling and general and administrative activities. Fuel surcharges are reflected within sales and
gross margins; fuel costs are reflected within operating expenses.
Operating income decreased 1.7% in the first 26 weeks of fiscal 2011 from the first 26 weeks
of fiscal 2010 to $943.3 million, and as a percentage of sales, declined to 4.9% of sales.
Operating income decreased 5.5% in the second quarter of fiscal 2011 from the second quarter of
fiscal 2010 to $437.0 million, and as a percentage of sales, declined to 4.7% of sales. This
decrease in operating income for both periods was primarily due to gross margin dollars growing at
a slower rate than sales and operating expenses increasing faster than gross margin dollars.
Gross margin dollars increased in the first 26 weeks and second quarter of fiscal 2011 as
compared to the first 26 weeks and second quarter of fiscal 2010 primarily due to increased sales.
Gross margin, as a percentage of sales, was 18.67% in the first 26 weeks of fiscal 2011, a decline
of 50 basis points from the gross margin percentage of 19.18% in the first 26 weeks of fiscal 2010.
Gross margin, as a percentage of sales, was 18.56% in the second quarter of fiscal 2011, a decline
of 55 basis
24
points from the gross margin percentage of 19.11% in the second quarter of fiscal 2010. This
decline in gross margin percentage was primarily the result of three factors.
First, Syscos product cost inflation was estimated as inflation of 3.9% during the first 26
weeks and 4.5% during the second quarter of fiscal 2011. We experienced higher levels of inflation
in the dairy, meat and seafood product categories in the range of 9% to 12% during the first 26
weeks of fiscal 2011. While we are generally able to pass through modest levels of inflation to
our customers, we were unable to fully pass on these higher levels of inflation in these product
categories without negatively impacting our customers business and therefore our business. While
we cannot predict whether inflation will continue at these levels, prolonged periods of high
inflation, either overall or in certain product categories, can have a negative impact on us and
our customers, as high food costs can reduce consumer spending in the food-away-from-home market,
and may negatively impact our sales, gross margins and earnings.
Second, certain ongoing strategic pricing initiatives largely lowered our prices to our
customers in specific product categories in order to increase sales volumes. These initiatives are
being phased in over time and resulted in short-term gross margin declines as a percentage of
sales, but we believe will result in long-term gross margin dollar growth due to higher sales
volumes and increased market share. We have experienced double digit year over year volume growth
with those items included in these programs and believe the long-term benefits of these strategic
initiatives will result in profitable market share growth.
Third, case volumes increased at a greater rate in both the first 26 weeks and second quarter
of fiscal 2011 within our SYGMA segment which is a lower margin business than our Broadline
business. SYGMAs case growth in both periods was largely attributable to new customers. Our
strategy includes pursuing growth in our SYGMA segment and if this segment grows faster than other
segments, gross margin dollars should increase; however, our gross margin as a percentage of sales
could decline.
Operating expenses for the first 26 weeks and second quarter of fiscal 2011 were higher than
in the comparable prior year periods primarily due to higher pay-related expense related to
increased sales and an increase in net company-sponsored pension costs. Fuel costs also increased
in the second quarter of fiscal 2011 as compared to the second quarter of fiscal 2010. Operating
expenses were also favorably impacted by the adjustment of the carrying value of our COLI policies
to their cash surrender value.
Pay-related expense, excluding labor costs associated with our Business Transformation
Project, increased by $63.1 million and $14.2 million in the first 26 weeks and second quarter of
fiscal 2011, respectively, from the comparable prior year periods primarily due to our increased
sales. These increases included both sales compensation and delivery personnel costs. Portions of
our pay-related expense are variable in nature and are expected to increase when sales increase.
Partially offsetting these increased variable costs were lower provisions for management incentive
compensation. The criteria for paying annual bonuses to our corporate officers and certain
operating company management are tied to overall company performance. Our fiscal 2011 performance
through 26 weeks has led to lower bonus accruals as compared to the comparable period in fiscal
2010. Expense related to management incentive accruals decreased by $13.2 million and $13.3
million in the first 26 weeks and second quarter of fiscal 2011, respectively, from the comparable
prior year periods.
Net company-sponsored pension costs in the first 26 weeks and second quarter of fiscal 2011
were $30.1 million and $15.1 million higher, respectively, than in the comparable prior year
periods, due primarily to a decrease in discount rates used to calculate our projected benefit
obligation and related pension expense at the end of fiscal 2010, partially offset by reduced
amortization of our net actuarial loss resulting from actuarial gains from higher returns on assets
of Syscos Retirement Plan during fiscal 2010. Net company-sponsored pension costs for each
fiscal year are determined as of the previous fiscal year ends plan measurement date and therefore
the rate of increase for each quarter is known at that time.
Syscos fuel costs in the first 26 weeks and second quarter of fiscal 2011 were $6.0 million
and $10.0 million higher, respectively, than in the comparable prior year periods. The increase
for the first 26 weeks of fiscal 2011 is largely attributable to increased gallon usage due to
increased miles from higher sales. To a lesser extent, rising diesel prices also contributed to
the increase in fuel costs in the first 26 weeks of fiscal 2011 as compared to the prior period.
The increase for the second quarter of fiscal 2011 is primarily due to increased diesel prices.
Syscos costs per gallon increased 19.8% in the second quarter of fiscal 2011 over fiscal 2010.
Syscos activities to mitigate increasing fuel costs include reducing miles driven by our trucks
through improved routing techniques, improving fleet utilization by adjusting idling time and
maximum speeds and using fuel surcharges.
25
From time to time, we will enter into forward purchase commitments for a portion of our
projected monthly diesel fuel requirements with a goal of mitigating a portion of the volatility in
fuel prices. These commitments will result in either additional fuel costs or avoided fuel costs
based on the comparison of the prices on the fixed price contracts and market prices for the
respective periods. In the first 26 weeks of fiscal 2011, our forward fuel purchase commitments
resulted in an estimated $4.7 million of avoided fuel costs as the fixed prices on the contracts
were lower than market prices for the contracted volumes. In the first 26 weeks of fiscal 2010, our
forward purchase commitments resulted in an estimated $8.4 million of additional fuel costs as the
fixed price contracts were higher than market prices for the contracted volumes. As of January 1,
2011, we had forward diesel fuel commitments totaling approximately $80.9 million through January
2012. These contracts will lock in the price of approximately 30% to 35% of our fuel purchase
needs for the contracted periods at prices slightly lower than the current market price for diesel.
Assuming that fuel prices do not rise significantly over recent levels during the remainder of
fiscal 2011, fuel costs for the last 26 weeks of fiscal 2011 exclusive of any amounts recovered
through fuel surcharges, are expected to increase by approximately $10 million to $20 million as
compared to the last 27 weeks in fiscal 2010. Our estimate is based upon current, published
quarterly market price projections for diesel, the cost committed to in our forward fuel purchase
agreements currently in place for the remainder of fiscal 2011 and estimates of fuel consumption.
Actual fuel costs could vary from our estimates if any of these assumptions change, in particular
if future fuel prices vary significantly from our current estimates. We continue to evaluate all
opportunities to offset potential increases in fuel expense, including the use of fuel surcharges
and overall expense management.
We adjust the carrying values of our COLI policies to their cash surrender values on an
ongoing basis. The cash surrender values of these policies are partially based on the values of
underlying investments, which include equity securities. As a result, the cash surrender values of
these policies will fluctuate with changes in the market value of such securities. The changes in
the financial markets resulted in gains for these policies of $23.9 million and $10.3 million in
the first 26 weeks and second quarter of fiscal 2011, respectively. These gains compared to the
recognition of gains of $26.3 million and $5.2 million in the first 26 weeks and second quarter of
fiscal 2010, respectively. The performance of the financial markets will continue to influence the
cash surrender values of our COLI policies, which could cause volatility in operating income, net
earnings and earnings per share.
Net Earnings
Net earnings decreased 6.3% in the first 26 weeks of fiscal 2011 from the comparable period of
the prior year primarily due to the decline in operating income and an increase in the effective
tax rate. The difference between the tax rates for the two periods resulted largely from the
one-time reversal of interest accruals for tax contingencies related to our settlement with the IRS
in the first quarter of fiscal 2010. Net earnings decreased 3.8% in the second quarter of fiscal
2011 from the comparable period of the prior year primarily due to the decline in operating income.
The effective tax rate of 37.18% for the first 26 weeks of fiscal 2011 was favorably impacted
by the adjustment of the carrying values of our COLI policies to their cash surrender values. The
gain of $23.9 million recorded in the first 26 weeks of fiscal 2011 was non-taxable for income tax
purposes, and had the impact of decreasing income tax expense for the period by $9.2 million.
The effective tax rate of 33.75% for the first 26 weeks of fiscal 2010 was favorably impacted
by three items. First, we recorded an income tax benefit of approximately $29.0 million resulting
from the one-time reversal of previously accrued interest related to the settlement with the IRS
(see Other Considerations for additional discussion). Second, the gain of $26.3 million recorded
to adjust the carrying value of COLI policies to their cash surrender values in the first 26 weeks
of fiscal 2010, which had the impact of decreasing income tax expense for the period by $10.1
million. Third, we recorded a tax benefit of approximately $5.0 million for the reversal of
valuation allowances previously recorded on state net operating loss carryforwards.
The effective tax rate of 37.07% for the second quarter of fiscal 2011 was favorably impacted
by the gain of $10.3 million recorded to adjust the carrying value of COLI policies to their cash
surrender values in the second quarter of fiscal 2011, which had the impact of decreasing income
tax expense for the period by $4.0 million.
The effective tax rate of 37.88% for the second quarter of fiscal 2010 was favorably impacted
by the gain of $5.2 million recorded to adjust the carrying value of COLI policies to their cash
surrender values in the second quarter of fiscal 2010, which had the impact of decreasing income
tax expense for the period by $2.0 million.
26
Earnings Per Share
Basic and diluted earnings per share decreased 5.0% in the first 26 weeks and 2.2% in the
second quarter of fiscal 2011 from the comparable periods of the prior year. These decreases were
primarily the result of factors discussed above, as well as a small net reduction in shares
outstanding. The net reduction in both average and diluted shares outstanding was primarily due to
share repurchases.
Both basic and diluted earnings per share were favorably impacted by $0.04 per share in the
first 26 weeks of fiscal 2011 due to the gains recorded on the adjustment of the carrying value of
COLI policies to their cash surrender values. Both basic and diluted earnings per share were
favorably impacted by $0.09 per share in the first 26 weeks of fiscal 2010 from the one-time
reversal on interest accruals for the tax contingencies related to IRS settlement of $0.05 per
share and the gain recorded on the adjustment of the COLI policies to their cash surrender values
of $0.04 per share.
Both basic and diluted earnings per share were favorably impacted by $0.02 per share in the
second quarter of fiscal 2011 due to the gains recorded on the adjustment of the carrying value of
COLI policies to their cash surrender values. Both basic and diluted earnings per share were
favorably impacted by $0.01 per share in the second quarter of fiscal 2010 due to the gain recorded
on the adjustment of the COLI policies to their cash surrender values.
Segment Results
We have aggregated our 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. The accounting policies for the segments are the same as those
disclosed by Sysco for our consolidated financial statements. Intersegment sales generally
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 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. While a
segments operating income may be impacted in the short term by increases or decreases in margins,
expenses, or a combination thereof, over the long term each business segment is expected to
increase its operating income at a greater rate than sales growth. This is consistent with our
long-term goal of leveraging earnings growth at a greater rate than sales growth.
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 our Business Transformation Project; and |
|
|
|
|
Corporate-level depreciation and amortization expense. |
The following table sets forth the operating income of each of our reportable segments and the
other segment expressed as a percentage of each segments sales for each period reported and should
be read in conjunction with Note 11, Business Segment Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income as a |
|
Operating Income as a |
|
|
Percentage of Sales |
|
Percentage of Sales |
|
|
26-Week Period |
|
13-Week Period |
|
|
January 1, 2011 |
|
December 26, 2009 |
|
January 1, 2011 |
|
December 26, 2009 |
Broadline |
|
|
6.6 |
% |
|
|
7.0 |
% |
|
|
6.4 |
% |
|
|
7.1 |
% |
SYGMA |
|
|
1.1 |
|
|
|
0.8 |
|
|
|
1.1 |
|
|
|
1.0 |
|
Other |
|
|
3.6 |
|
|
|
3.7 |
|
|
|
3.7 |
|
|
|
4.0 |
|
27
The following table sets forth the change in the selected financial data of each of our
reportable segments and the other segment expressed as a percentage increase or decrease over the
comparable period in the prior year and should be read in conjunction with Note 11, Business
Segment Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26-Week Period |
|
13-Week Period |
|
|
|
|
|
|
Operating |
|
|
|
|
|
Operating |
|
|
Sales |
|
Income |
|
Sales |
|
Income |
Broadline |
|
|
5.7 |
% |
|
|
(0.1 |
)% |
|
|
4.7 |
% |
|
|
(5.5 |
)% |
SYGMA |
|
|
14.0 |
|
|
|
59.0 |
|
|
|
13.4 |
|
|
|
15.0 |
|
Other |
|
|
6.7 |
|
|
|
2.3 |
|
|
|
7.4 |
|
|
|
0.7 |
|
The following tables set forth sales and operating income of each of our reportable
segments, the other segment, and intersegment sales, expressed as a percentage of aggregate segment
sales, including intersegment sales, and operating income, respectively. For purposes of these
statistical tables, operating income of our segments excludes corporate expenses of $151.6 million
and $80.6 million in the first 26 weeks and second quarter of fiscal 2011, as compared to $123.9
million and $80.6 million in the first 26 weeks and second quarter of fiscal 2010, that is not
charged to our segments. This information should be read in conjunction with Note 11, Business
Segment Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26-Week Period Ended |
|
|
January 1, 2011 |
|
December 26, 2009 |
|
|
|
|
|
|
Segment Operating |
|
|
|
|
|
Segment Operating |
|
|
Sales |
|
Income |
|
Sales |
|
Income |
Broadline |
|
|
79.5 |
% |
|
|
92.2 |
% |
|
|
80.2 |
% |
|
|
93.2 |
% |
SYGMA |
|
|
13.8 |
|
|
|
2.6 |
|
|
|
12.9 |
|
|
|
1.7 |
|
Other |
|
|
8.3 |
|
|
|
5.2 |
|
|
|
8.3 |
|
|
|
5.1 |
|
Intersegment sales |
|
|
(1.6 |
) |
|
|
|
|
|
|
(1.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13-Week Period Ended |
|
|
January 1, 2011 |
|
December 26, 2009 |
|
|
|
|
|
|
Segment Operating |
|
|
|
|
|
Segment Operating |
|
|
Sales |
|
Income |
|
Sales |
|
Income |
Broadline |
|
|
79.0 |
% |
|
|
91.5 |
% |
|
|
79.9 |
% |
|
|
92.3 |
% |
SYGMA |
|
|
14.0 |
|
|
|
2.7 |
|
|
|
13.0 |
|
|
|
2.2 |
|
Other |
|
|
8.6 |
|
|
|
5.8 |
|
|
|
8.5 |
|
|
|
5.5 |
|
Intersegment sales |
|
|
(1.6 |
) |
|
|
|
|
|
|
(1.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadline Segment
Broadline operating companies distribute a full line of food products and a wide variety of
non-food products to both traditional and chain restaurant customers. In the first 26 weeks of
fiscal 2011, the Broadline operating results represented 79.5% of Syscos overall sales and 92.2%
of the aggregated operating income of Syscos segments, which excludes corporate expenses and
consolidated adjustments.
Sales
Sales were 5.7% greater in the first 26 weeks and 4.7% greater in the second quarter of fiscal
2011 than in the comparable periods of the prior year. Product cost inflation and the resulting
increase in selling prices, combined with case volume improvement, contributed to the increase in
sales in the first 26 weeks of fiscal 2011. Product cost inflation was the primary factor that
increased sales in the second quarter of fiscal 2011. Changes in product costs, an internal
measure of inflation or deflation, were estimated as inflation of 4.0% and 4.6% during the first 26
weeks and second quarter of fiscal 2011, respectively, as compared to deflation of 3.5% during both
the first 26 weeks and second quarter of fiscal 2010. Sales from
28
acquisitions within the last 12 months favorably impacted sales by 0.7% for the first 26 weeks
and 0.8% in the second quarter of fiscal 2011. The exchange rates used to translate our foreign
sales into U.S. dollars positively impacted sales by 0.5% in both the first 26 weeks and second
quarter of fiscal 2011 compared to the first 26 weeks and second quarter of fiscal 2010.
Operating Income
Operating income decreased 0.1% in the first 26 weeks and 5.5% in the second quarter of fiscal
2011. This decrease in operating income for both periods was primarily due to gross margin dollars
growing at a slower rate than sales and operating expenses increasing faster than gross margin
dollars. Gross margin dollars increased 2.8% while operating expenses increased 4.4% in the first
26 weeks of fiscal 2011 as compared to the first 26 weeks of fiscal 2010. Gross margin dollars
increased 1.2% while operating expenses increased 4.8% in the second quarter of fiscal 2011 as
compared to the second quarter of fiscal 2010.
Gross margin dollars increased in the first 26 weeks and second quarter of fiscal 2011
primarily due to increased sales; however, gross margin dollars increased at a lower rate than
sales. This slower growth in gross margin dollars was primarily the result of two factors.
First, we experienced higher levels of inflation in the dairy, meat and seafood product categories
in the range of 9% to 12% during the first 26 weeks of fiscal 2011. While we are generally able to
pass through modest levels of inflation to our customers, we were unable to fully pass on these
higher levels of inflation in these product categories without negatively impacting our customers
business and therefore our business. While we cannot predict whether inflation will continue at
these levels, prolonged periods of high inflation, either overall or in certain product categories,
can have a negative impact on our customers, as high food costs can reduce consumer spending in the
food-away-from-home market, and may negatively impact the Broadline segments sales, gross margins
and earnings. Second, certain ongoing strategic pricing initiatives largely lowered our prices to
our customers in specific product categories in order to increase sales volumes. These initiatives
are being phased in over time and resulted in short-term gross margin declines as a percentage of
sales, but we believe will result in long-term gross margin dollar growth due to higher sales
volumes and increased market share. We have experienced double digit year over year volume growth
with those items included in these programs and believe the long-term benefits of these strategic
initiatives will result in profitable market share growth.
The expense increases in fiscal 2011 were driven largely by an increase in pay-related
expenses relating to the sales increase, including both sales compensation and delivery personnel
costs. Portions of our pay-related expense are variable in nature and are expected to increase
when sales increase. Fuel costs were $2.8 million higher in the first 26 weeks and $7.1 higher in
the second quarter of fiscal 2011 than in the comparable periods of the prior year. Assuming that
fuel prices do not rise significantly over recent levels during fiscal 2011, fuel costs for the
last 26 weeks of fiscal 2011 exclusive of any amounts recovered through fuel surcharges, are
expected to increase by approximately $7 million to $13 million as compared to the last 27 weeks in
fiscal 2010. Our estimate is based upon current, published quarterly market price projections for
diesel, the cost committed to in our forward fuel purchase agreements currently in place for fiscal
2011 and estimates of fuel consumption. Actual fuel costs could vary from our estimates if any of
these assumptions change, in particular if future fuel prices vary significantly from our current
estimates. We continue to evaluate all opportunities to offset potential increases in fuel
expense, including the use of fuel surcharges and overall expense management.
SYGMA Segment
SYGMA operating companies distribute a full line of food products and a wide variety of
non-food products to certain chain restaurant customer locations.
Sales
Sales were 14.0% greater in the first 26 weeks and 13.4% greater in the second quarter of
fiscal 2011 than in the comparable periods of the prior year primarily due to case volume
improvement. The case growth in both periods was largely attributable to new customers. Also
contributing to the case growth to a lesser extent was an increase in volume from certain existing
customers. However, sales to other existing customers were affected by the weak economic
environment which applied continued pressure to consumer discretionary spending and negatively
impacted overall restaurant traffic counts.
Operating Income
Operating income increased $10.5 million in the first 26 weeks and $1.8 million in the second
quarter of fiscal 2011 over the comparable periods of the prior year due to increased sales and
improved productivity. Gross margin dollars increased 13.9% while operating expenses increased 9.4%
in the first 26 weeks of fiscal 2011 from the first 26 weeks of fiscal 2010.
29
Gross margin dollars increased 12.0% while operating expenses increased 11.6% in the second
quarter of fiscal 2011 from the second quarter of fiscal 2010.
Contributing to the gross margin increase in the first 26 weeks and second quarter were
increased sales and an increase of approximately $2.1 million and $0.9 million in the fuel
surcharges charged to customers in the first 26 weeks and second quarter of fiscal 2011 from the
comparable period of the prior year due to higher fuel prices in fiscal 2011. The increase in
operating expenses was largely driven by increased delivery and warehouse personnel payroll costs
resulting from increased sales. Productivity improvements occurred within our warehouse, delivery
and administrative functions in the first 26 weeks of fiscal 2011 and within our administrative
functions only in the second quarter of fiscal 2011. Also contributing to the increase in
operating expenses were increases in fuel costs in the first 26 weeks and second quarter of fiscal
2011 over the comparable prior year periods of $3.6 million and $2.8 million, respectively.
Other Segment
Other financial information is attributable to our other operating segments, including our
specialty produce, custom-cut meat and lodging industry products and a company that distributes to
international customers. These operating segments are discussed on an aggregate basis as they do
not represent reportable segments under segment accounting literature.
Operating income increased 2.3% for the first 26 weeks and 0.7% for the second quarter of
fiscal 2011 from the comparable periods of the prior year. The increase in operating income for
both the first 26 weeks and second quarter of fiscal 2011 was caused primarily by increased sales
and favorable expense management in the specialty meat segment.
Liquidity and Capital Resources
Syscos strategic objectives require continuing investment and our financial resources include
cash provided by operations and access to capital from financial markets. Our operations
historically have produced significant cash flow. Cash generated from operations is generally
allocated to working capital requirements; investments in facilities, systems, fleet, other
equipment and technology; acquisitions compatible with our overall growth strategy; and cash
dividends. Any remaining cash generated from operations may be invested in high-quality,
short-term instruments or applied toward the cost of the share repurchase program. As a part of
our ongoing strategic analysis, we regularly evaluate business opportunities, including potential
acquisitions and sales of assets and businesses, and our overall capital structure. Any
transactions resulting from these evaluations may materially impact our liquidity, borrowing
capacity, leverage ratios and capital availability.
Our liquidity and capital resources can be influenced by economic trends and conditions
primarily due to their impact on our cash flows from operations. Weak economic conditions and low
levels of consumer confidence and the resulting pressure on consumer disposable income can lower
our sales growth and potentially our cash flows from operations. While these factors were present
in fiscal 2010 and fiscal 2011 to date, they had only a modest impact our fiscal 2011 cash flows
from operations due in large part to effective working capital management. We do not believe
current economic conditions will significantly impact our cash flows from operations in the
remainder of fiscal 2011, as we can respond to reduced consumer demand, if it were to occur, by
lowering our working capital. Additionally, approximately one-third of our customers are not
impacted by general economic conditions to the same extent as restaurants and other food retailers.
These customers include hospitals, nursing homes, schools and colleges. In addition, product cost
inflation can potentially lower our gross margins and cash flow from operations if we are unable to
pass through all of the increased product costs to our customers. We believe our mechanisms to
manage product cost inflation, some of which are contractual, are sufficient to limit the impact on
our cash flows from operations.
We believe that our cash flows from operations, the availability of additional capital under
our existing commercial paper programs and bank lines of credit and our ability to access capital
from financial markets, including issuances of debt securities, either privately or under our shelf
registration statement filed with the Securities and Exchange Commission (SEC), will be sufficient
to meet our anticipated cash requirements for the next twelve months and beyond, while maintaining
sufficient liquidity for normal operating purposes. We believe that we will continue to be able to
access the commercial paper market effectively as well as the long-term capital markets, if
necessary. To further maintain and enhance our credit ratings on current and future debt, on
January 19, 2011, the wholly-owned U.S. Broadline subsidiaries of Sysco Corporation entered into
full and unconditional guarantees of all outstanding senior notes and debentures of Sysco
Corporation. As of January 1, 2011, Sysco had a total of approximately $2.2 billion in senior
notes and debentures outstanding.
30
Operating Activities
We generated $282.6 million in cash flow from operations in the first 26 weeks of fiscal 2011,
as compared to $146.4 million in the first 26 weeks of fiscal 2010. The increase of $136.2 million
between the two periods was driven largely by $106.0 million of payments made in relation to the
IRS settlement in the first 26 weeks of fiscal 2011 as compared to $422.0 million in the first 26
weeks of fiscal 2010, partially offset by changes in working capital discussed in more detail
below.
Cash flow from operations in the first 26 weeks of fiscal 2011 was primarily generated by net
income, reduced by changes in deferred tax assets and liabilities, a decrease in accounts payable
balances, an increase in inventory balances and a decrease in accrued expenses, partially offset by
non-cash depreciation and amortization expense. Cash flow from operations in the first 26 weeks of
fiscal 2010 was primarily generated by net income, reduced by changes in deferred tax assets and
liabilities, an increase in inventory balances, decreases in accrued income taxes and the net
balances of other long-term liabilities and prepaid pension cost, partially offset by non-cash
depreciation and amortization expense.
The small decrease in accounts receivable balances for the first 26 weeks of fiscal 2011 was
primarily due to timing. The second quarter of fiscal 2011 ended with two lower volume holiday
sales weeks, which resulted in lower than normal accounts receivable outstanding as of quarter-end
as receivables from higher volume sales weeks had already been collected before the fiscal quarter
ended. The increase in accounts receivable balances for the first 26 weeks of fiscal 2010 was
primarily due to a seasonal change in volume and customer mix, partially offset by the sales
decline. Due to normal seasonal patterns, sales to multi-unit customers and school districts
represented a larger percentage of our sales at the end of each first 26 week period as compared to
the end of each prior fiscal year. Payment terms for these types of customers are traditionally
longer than average.
The increase in inventory balances for the first 26 weeks of fiscal 2011 was primarily due to
higher inventory levels typically experienced at the end of the second quarter as well as product
cost inflation. Historically, we have experienced elevated inventory levels during the holiday
period that occurs at the end of the second quarter. Sales in the last weeks of the quarter are at
lower volumes due to the holiday period, causing an increase in inventory levels. In addition,
purchasing levels are typically increased at the end of the quarter in anticipation of increased
sales volumes from the re-opening of schools after the holiday period. The increase in inventory
balances for the first 26 weeks of fiscal 2010 was primarily due to the increase in volumes related
to seasonal patterns described above, partially offset by the sales decline.
The decrease in accounts payable balances for the first 26 weeks of fiscal 2011 was primarily
due to timing of payments for the seasonal increase in inventory described above. Due to the
quarter ending in two lower volume holiday sales weeks, the payments for these inventory purchases
were made in advance of quarter-end, resulting in a large decrease in accounts payable balances as
compared to fiscal 2010 year-end. The increase in accounts payable balances for the first 26 weeks
of fiscal 2010 was primarily due to the seasonal growth in inventory discussed above. In addition,
accounts payable balances are impacted by many factors, including changes in product mix, cash
discount terms and changes in payment terms with vendors.
Cash flow from operations was negatively impacted by decreases in accrued expenses of $125.8
million for the first 26 weeks of fiscal 2011 and $17.0 million for the first 26 weeks of fiscal
2010. The decrease in the first 26 weeks of fiscal 2011 was primarily due to the payment of the
respective prior year annual incentive bonuses, partially offset by accruals for current year
compensation incentives at lower levels than the same period in the prior year. The remainder of
the decrease for the first 26 weeks of fiscal 2011 was due to offsetting changes in multiple
accruals, of which no item was individually significant. The decrease for the first 26 weeks of
fiscal 2010 was due to offsetting changes in multiple accruals, of which no item was individually
significant.
Cash flow from operations for the first 26 weeks of fiscal 2011 was negatively impacted by
changes in deferred tax assets and liabilities of $181.3 million, partially offset by an increase
in accrued income taxes of $50.1 million. Cash flow from operations for the first 26 weeks of
fiscal 2010 was negatively impacted by changes in deferred tax assets and liabilities of $172.8
million and a decrease in accrued income taxes of $236.1 million. The main factor affecting both
of these items, as well as cash taxes paid, was the IRS settlement, which resulted in the payment
of taxes of $106.0 million in the first 26 weeks of fiscal 2011 and $422.0 million in the first 26
weeks of fiscal 2010. Total cash taxes paid were $467.8 million and $759.7 million in the first 26
weeks of fiscal 2011 and 2010, respectively. The changes in both the first 26 weeks of fiscal 2011
and the first 26 weeks of fiscal 2010 were also impacted by the current tax provision.
Other long-term liabilities increased $82.4 million during the first 26 weeks of fiscal 2011
primarily as a result of net company sponsored pension costs exceeding contributions to our
company-sponsored pension plans during the period.
31
The net balances of other long-term liabilities and prepaid pension cost decreased $97.3
million during the first 26 weeks of fiscal 2010. The decrease was primarily attributable to three
items. First, our liability for uncertain tax positions decreased as a result of the settlement
with the IRS. Second, our liability for deferred incentive compensation decreased due to
accelerated distributions taken by plan participants during the first 26 weeks of fiscal 2010 of
all or a portion of their vested balances pursuant to certain transitional relief under the
provisions of Section 409A of the Internal Revenue Code. Third, pension contributions to our
company-sponsored plans exceeded net company-sponsored pension costs.
We recorded net company-sponsored pension costs of $93.2 million and $63.1 million in the
first 26 weeks of fiscal 2011 and fiscal 2010, respectively. Our contributions to our
company-sponsored defined benefit plans were $9.7 million and $77.7 million in the first 26 weeks
of fiscal 2011 and fiscal 2010, respectively. The difference in the level of contributions in the
first 26 weeks of fiscal 2011 and fiscal 2010 is due to the timing and amount of our contributions
to the Retirement Plan. In fiscal 2010, we contributed $35.0 million per quarter to the Retirement
Plan and made an additional contribution of $140.0 million in the fourth quarter that would
normally have been made in fiscal 2011. Additional contributions to the Retirement Plan are not
currently anticipated in fiscal 2011.
Investing Activities
Capital expenditures in both the first 26 weeks of fiscal 2011 and the first 26 weeks of
fiscal 2010 primarily included facility replacements and expansions, investments in technology
including our Business Transformation Project and fleet replacements.
During the first 26 weeks of fiscal 2011, we paid cash of $26.5 million for operations
acquired during fiscal 2011 and for contingent consideration related to operations acquired in
previous years.
Financing Activities
During the first 26 weeks of fiscal 2011, a total of 9,790,000 shares were repurchased at a
cost of $285.4 million. There were no shares repurchased in the first 26 weeks of fiscal 2010. On
August 27, 2010, the Board of Directors approved a new share repurchase program covering an
additional 20,000,000 shares. An additional 210,000 shares were repurchased at a cost of $6.2
million through January 29, 2011, resulting in a remaining authorization by our Board of Directors
to repurchase up to 13,386,600 shares, based on the trades made through that date. We anticipate
our share repurchase activity in the last 26 weeks of fiscal 2011 will be substantially less than
the level of activity experienced in the first 26 weeks of fiscal 2011.
Dividends paid in the first 26 weeks of fiscal 2011 were $294.1 million, or $0.50 per share,
as compared to $283.8 million, or $0.48 per share, in the first 26 weeks of fiscal 2010. In
November 2011, we declared our regular quarterly dividend for the third quarter of fiscal 2011 of
$0.26 per share, which was paid in January 2011.
We have uncommitted bank lines of credit, which provide for unsecured borrowings for working
capital of up to $95.0 million, of which none was outstanding as of January 1, 2011. Such
borrowings were $2.8 million as of January 29, 2011.
Sysco and one of our subsidiaries, Sysco International, ULC, have a revolving credit facility
supporting our U.S. and Canadian commercial paper programs. The facility, in the amount of $1.0
billion, expires on November 4, 2012, but is subject to extension.
As of January 1, 2011, commercial paper issuances outstanding were $173.2 million. As of
January 29, 2011, commercial paper issuances outstanding were $120.0 million. During the 26-week
period ended January 1, 2011, aggregate commercial paper issuances and short-term bank borrowings
ranged from zero to approximately $330.3 million.
Other Considerations
Multi-Employer Pension Plans
As discussed in Note 10, Commitments and Contingencies, we contribute to several
multi-employer defined benefit pension plans based on obligations arising under collective
bargaining agreements covering union-represented employees.
32
Under current law regarding multi-employer defined benefit plans, a plans termination, our
voluntary withdrawal or the mass withdrawal of all contributing employers from any underfunded
multi-employer defined benefit plan would require us to make payments to the plan for our
proportionate share of the multi-employer plans unfunded vested liabilities. Generally, Sysco does
not have the greatest share of liability among the participants in any of these plans. Based on the
information available from plan administrators, which has valuation dates ranging from January 31,
2008 to December 31, 2009, we estimate our share of withdrawal liability on most of the
multi-employer plans in which we participate could have been as much as $220.0 million as of
January 1, 2011 based on a voluntary withdrawal. The majority of the plans we participate in have
a valuation date of calendar year-end. As such, the majority of our estimated withdrawal liability
results from plans for which the valuation date was December 31, 2009; therefore, our estimated
liability reflects the results incurred by the financial markets as of that date. Due to the lack
of current information, we believe our 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 non-deductible excise tax of 5% on the amount of
the accumulated funding deficiency for those employers contributing to the fund. As of January 1,
2011, we have approximately $6.3 million in liabilities recorded related to certain multi-employer
defined benefit plans for which our voluntary withdrawal had already occurred.
Required contributions to multi-employer plans could increase in the future as these plans
strive to improve their funding levels. In addition, pension-related legislation requires
underfunded pension plans to improve their funding ratios within prescribed intervals based on the
level of their underfunding. We believe that any requirements to pay such increased contributions,
withdrawal liability and excise taxes would be funded through cash flow from operations, borrowing
capacity or a combination of these items.
BSCC Cooperative Structure
In the first quarter of fiscal 2010, Sysco reached a settlement with the IRS in connection
with its audits of our 2003 through 2006 federal income tax returns. As a result of the
settlement, we agreed to cease paying U.S. federal taxes related to its affiliate Baugh Supply
Chain Cooperative (BSCC) on a deferred basis and pay the amounts that were recorded within deferred
taxes related to BSCC over a three-year period as follows:
|
|
|
|
|
Amounts paid annually: |
|
(In thousands) |
Fiscal 2010 |
|
$ |
528,000 |
|
Fiscal 2011 |
|
|
212,000 |
|
Fiscal 2012 |
|
|
212,000 |
|
In the first 26 weeks of fiscal 2011, $106.0 million of payments were made related to the
settlement. As noted in the table above, $528.0 million was paid related to the settlement in
fiscal 2010, of which $422.0 million was paid in the first 26 weeks of fiscal 2010. Remaining
amounts to be paid in fiscal 2011 and 2012 will be paid in connection with our quarterly tax
payments, two of which fall in the second quarter, one in the third quarter and one in the fourth
quarter. We believe we have 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.
Contractual Obligations
Our Annual Report on Form 10-K for the fiscal year ended July 3, 2010 contains a table that
summarizes our obligations and commitments to make contractual future cash payments as of July 3,
2010. Since July 3, 2010, there have been no material changes to our contractual obligations.
Critical Accounting Policies and Estimates
Critical accounting policies and estimates are those that are most important to the portrayal
of our financial position and results of operations. These policies require our most subjective or
complex judgments, often employing the use of estimates about the effect of matters that are
inherently uncertain. Syscos most critical accounting policies and estimates include those that
pertain to the allowance for doubtful accounts receivable, self-insurance programs, pension plans,
income taxes, vendor consideration, accounting for business combinations and share-based
compensation, which are described in Item 7 of our Annual Report on Form 10-K for the year ended
July 3, 2010.
33
Forward-Looking Statements
Certain statements made herein that look forward in time or express managements expectations
or beliefs with respect to the occurrence of future events are forward-looking statements under the
Private Securities Litigation Reform Act of 1995. They include statements about:
|
|
|
Syscos ability to increase its sales and market share and grow earnings; |
|
|
|
|
the continuing impact of economic conditions on consumer confidence and our business; |
|
|
|
|
the expected implementation, benefits and costs of our business transformation project; |
|
|
|
|
sales and operating income trends; |
|
|
|
|
expectations regarding the impact of increased growth in Broadline and SYGMA segments; |
|
|
|
|
anticipated multi-employer pension-related liabilities and contributions to various
multi-employer pension plans, and the source of funds for any such contributions; |
|
|
|
|
source and adequacy of funds for required payments under the IRS settlement; |
|
|
|
|
the impact of ongoing legal proceedings; |
|
|
|
|
anticipated company-sponsored pension plan contributions; |
|
|
|
|
expectations regarding unrecognized tax benefits; |
|
|
|
|
our plan to continue to explore and identify opportunities to grow in international
markets and complimentary lines of business; |
|
|
|
|
Syscos ability to meet future cash requirements, including the ability to access debt
markets effectively, and remain profitable; |
|
|
|
|
the impact of the financial markets on the cash surrender values of our COLI policies; |
|
|
|
|
our expectations regarding trends in pay-related expense and pension and fuel costs; |
|
|
|
|
expected results of ongoing strategic pricing initiatives; |
|
|
|
|
expectations regarding cash flows from operations and our ability to manage working
capital and product cost inflation; |
|
|
|
|
expectations regarding our share repurchase activity; |
|
|
|
|
fuel costs and expectations regarding the use of fuel surcharges and plans to mitigate
fuel costs; and |
|
|
|
|
expectations regarding operating income and sales for our business segments. |
These statements are based on managements current expectations and estimates; actual results
may differ materially due in part to the risk factors set forth below and those discussed in Item
1A of our Annual Report on Form 10-K for the fiscal year ended July 3, 2010:
|
|
|
risks relating to difficult economic conditions and heightened uncertainty in the
financial markets and their effect on consumer confidence; |
|
|
|
|
periods of significant or prolonged inflation or deflation and their impact on our
product costs and profitability; |
|
|
|
|
risks related to our Business Transformation Project, including the risk that the
project may not be successfully implemented, may not prove cost effective and may have a
material adverse effect on our liquidity and results of operations; |
|
|
|
|
the risk that we may not be able to compensate for increases in fuel costs; |
|
|
|
|
the risk of interruption of supplies due to lack of long-term contracts, severe weather
or prolonged climate change, work stoppages or otherwise; |
|
|
|
|
Syscos leverage and debt risks, capital and borrowing needs and changes in interest
rates; |
|
|
|
|
the potential impact of product liability claims and adverse publicity; |
|
|
|
|
difficulties in successfully entering and operating in international markets and
complimentary lines of business; |
|
|
|
|
the successful completion of acquisitions and integration of acquired companies, as well
as the risk that acquisitions could require additional debt or equity financing and
negatively impact our stock price or operating results; |
|
|
|
|
our dependence on technology and the reliability of our technology network; |
|
|
|
|
the risk that other sponsors of our multi-employer pension plans will withdraw or become
insolvent; |
|
|
|
|
that the IRS may impose an excise tax on the unfunded portion of our multi-employer
pension plans or that the Pension Protection Act could require that we make additional
pension contributions; |
|
|
|
|
the impact of financial market changes on the cash surrender values of our COLI policies
and on the assets held by our company-sponsored Retirement Plan and by the multi-employer
pension plans in which we participate; |
|
|
|
|
labor issues, including the renegotiation of union contracts and shortage of qualified
labor; and |
|
|
|
|
the risk that the anti-takeover benefits provided by our preferred stock may not be
viewed as beneficial to stockholders. |
34
For a more detailed discussion of factors that could cause actual results to differ from those
contained in the forward-looking statements, see the risk factors discussion contained in Item 1A
of our Annual Report on Form 10-K for the fiscal year ended July 3, 2010.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Our market risks consist of interest rate risk, foreign currency exchange rate risk, fuel
price risk and investment risk. For a discussion on our exposure to market risk, see Part II, Item
7A, Quantitative and Qualitative Disclosures about Market Risks in our Annual Report on Form 10-K
for the fiscal year ended July 3, 2010. There have been no significant changes to our market risks
since July 3, 2010 except as noted below.
Interest Rate Risk
At January 1, 2011, we had $173.2 million of commercial paper issuances outstanding at
variable rates of interest with maturities through January 3, 2011. Excluding commercial paper
issuances, our long-term debt obligations at January 1, 2011 were $2.5 billion, of which
approximately 81% were at fixed rates of interest, including the impact of our interest rate swap
agreements.
In fiscal 2010, we entered into two interest rate swap agreements that effectively converted
$200 million of fixed rate debt maturing in fiscal 2014 (the fiscal 2014 swap) and $250 million of
fixed rate debt maturing in fiscal 2013 (the fiscal 2013 swap) to floating rate debt. Both
transactions were entered into with the goal of reducing overall borrowing cost. The major risks
from interest rate derivatives include changes in interest rates affecting the fair value of such
instruments, potential increases in interest expense due to market increases in floating interest
rates and the creditworthiness of the counterparties in such transactions. 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.
As of January 1, 2011, the fiscal 2014 swap was recognized as an asset within the consolidated
balance sheet at fair value within other assets of $6.7 million. The fixed interest rate on the
hedged debt is 4.6% and the floating interest rate on the swap is three-month LIBOR which resets
quarterly. As of January 1, 2011, the fiscal 2013 swap was recognized as an asset within the
consolidated balance sheet at fair value within other assets of $6.6 million. The fixed interest
rate on the hedged debt is 4.2% and the floating interest rate on the swap is three-month LIBOR
which resets quarterly.
Fuel Price Risk
Due to the nature of our distribution business, we are exposed to potential volatility in fuel
prices. During the first 26 weeks of both fiscal 2011 and fiscal 2010, fuel costs related to
outbound deliveries represented approximately 0.6% of sales. From time to time, we will enter into
forward purchase commitments for a portion of our projected monthly diesel fuel requirements with a
goal of mitigating a portion of the volatility in fuel prices. These commitments will result in
either additional fuel costs or avoided fuel costs based on the comparison of the prices on the
fixed price contracts and market prices for the respective periods. In the first 26 weeks of
fiscal 2011, our forward fuel purchase commitments resulted in an estimated $4.7 million of avoided
fuel costs as the fixed prices on the contracts were lower than market prices for the contracted
volumes. In the first 26 weeks of fiscal 2010, our forward purchase commitments resulted in an
estimated $8.4 million of additional fuel costs as the fixed price contracts were higher than
market prices for the contracted volumes. As of January 1, 2011, we had forward diesel fuel
commitments totaling approximately $80.9 million through January 2012. These contracts will lock
in the price of approximately 30% to 35% of our fuel purchase needs for the contracted periods at
prices slightly lower than the current market price for diesel.
Item 4. Controls and Procedures
Syscos management, with the participation of our chief executive officer and chief financial
officer, evaluated the effectiveness of our disclosure controls and procedures as of January 1,
2011. The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act, means controls and other procedures of a company that are designed to
ensure that information required to be disclosed by a company in the reports that it files or
submits under the
35
Exchange Act is recorded, processed, summarized and reported, within the time periods
specified in the SECs rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required to be disclosed by
a company in the reports that it files or submits under the Exchange Act is accumulated and
communicated to the companys management, including its principal executive and principal financial
officers, as appropriate to allow timely decisions regarding the required disclosure. Management
recognizes that any controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving their objectives and management necessarily applies its
judgment in evaluating the cost-benefit relationship of possible controls and procedures. Syscos
disclosure controls and procedures have been designed to provide reasonable assurance of achieving
their objectives. Based on the evaluation of our disclosure controls and procedures as of January
1, 2011, our chief executive officer and chief financial officer concluded that, as of such date,
Syscos disclosure controls and procedures were effective at the reasonable assurance level.
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended January 1, 2011 that has
materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
36
PART II OTHER INFORMATION
Item 1. Legal Proceedings
We are 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 statements of Sysco when ultimately concluded.
Item 1A. Risk Factors
The information set forth in this report should be read in conjunction with the risk factors
discussed in Item 1A of our Annual Report on Form 10-K for the year ended July 3, 2010, which could
materially impact our business, financial condition or future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
We made the following share repurchases during the second quarter of fiscal 2011:
ISSUER PURCHASES OF EQUITY SECURITIES
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(c) Total Number of |
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(d) Maximum Number of |
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Shares Purchased as Part |
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Shares that May Yet Be |
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(a) Total Number of |
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(b) Average Price |
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of Publicly Announced |
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Purchased Under the Plans or |
Period |
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Shares Purchased (1) |
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Paid per Share |
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Plans or Programs |
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Programs |
Month #1 |
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October 3 October 30 |
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1,366,967 |
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$ |
28.96 |
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1,360,000 |
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18,026,600 |
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Month #2 |
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October 31 November 27 |
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1,810,000 |
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29.17 |
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1,810,000 |
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16,216,600 |
|
Month #3 |
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November 28 January 1 |
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2,620,000 |
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29.22 |
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2,620,000 |
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13,596,600 |
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Total |
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5,796,967 |
|
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$ |
29.14 |
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|
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5,790,000 |
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|
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13,596,600 |
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(1) |
|
The total number of shares purchased includes 6,967 shares tendered by individuals
in connection with stock option exercises in Month #1. There were no shares tendered by
individuals in connection with stock option exercises in Month #2 and Month #3. All other
shares were purchased pursuant to the publicly announced program described below. |
On August 27, 2010, we announced that the Board of Directors approved the repurchase of
20,000,000 shares. Pursuant to this repurchase program, shares may be acquired in the open market
or in privately negotiated transactions at the companys discretion, subject to market conditions
and other factors.
In July 2004, the Board of Directors authorized us to enter into agreements from time to time
to extend our ongoing repurchase program to include repurchases during company announced blackout
periods of such securities in compliance with Rule 10b5-1 promulgated under the Exchange Act.
Item 3. Defaults Upon Senior Securities
None
Item 5. Other Information
None
37
Item 6. Exhibits
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3.1
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Restated Certificate of Incorporation, incorporated by reference to Exhibit 3(a) to Form
10-K for the year ended June 28, 1997 (File No. 1-6544). |
|
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|
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3.2
|
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|
Certificate of Amendment of Certificate of Incorporation increasing authorized shares,
incorporated by reference to Exhibit 3(d) to Form 10-Q for the quarter ended January 1,
2000 (File No. 1-6544). |
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3.3
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Certificate of Amendment to Restated Certificate of Incorporation increasing authorized
shares, incorporated by reference to Exhibit 3(e) to Form 10-Q for the quarter ended
December 27, 2003 (File No. 1-6544). |
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3.4
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|
Form of Amended Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock, incorporated by reference to Exhibit 3(c) to Form 10-K
for the year ended June 29, 1996 (File No. 1-6544). |
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3.5
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|
Amended and Restated Bylaws of Sysco Corporation dated July 18, 2008, incorporated by
reference to Exhibit 3.5 to Form 8-K filed on July 23, 2008 (File No. 1-6544). |
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4.1
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|
Senior Debt Indenture, dated as of June 15, 1995, between Sysco Corporation and First
Union National Bank of North Carolina, Trustee, incorporated by reference to Exhibit
4(a) to Registration Statement on Form S-3 filed June 6, 1995 (File No. 33-60023). |
|
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|
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4.2
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|
|
|
Third Supplemental Indenture, dated as of April 25, 1997 between Sysco Corporation and
First Union National Bank of North Carolina, Trustee, incorporated by reference to
Exhibit 4(g) to Form 10-K for the year ended June 28, 1997 (File No. 1-6544). |
|
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|
|
|
4.3
|
|
|
|
Fifth Supplemental Indenture, dated as of July 27, 1998 between Sysco Corporation and
First Union National Bank, Trustee, incorporated by reference to Exhibit 4(h) to Form
10-K for the year ended June 27, 1998 (File No. 1-6544). |
|
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|
|
|
4.4
|
|
|
|
Seventh Supplemental Indenture, including form of Note, dated March 5, 2004 between
Sysco Corporation, as Issuer, and Wachovia Bank, National Association (formerly First
Union National Bank of North Carolina), as Trustee, incorporated by reference to Exhibit
4(j) to Form 10-Q for the quarter ended March 27, 2004 (File No. 1-6544). |
|
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|
|
4.5
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|
|
Eighth Supplemental Indenture, including form of Note, dated September 22, 2005 between
Sysco Corporation, as Issuer, and Wachovia Bank, National Association, as Trustee,
incorporated by reference to Exhibits 4.1 and 4.2 to Form 8-K filed on September 20,
2005 (File No. 1-6544). |
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4.6
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|
|
Ninth Supplemental Indenture, including form of Note, dated February 12, 2008 between
Sysco Corporation, as Issuer, and the Trustee, incorporated by reference to Exhibit 4.1
to Form 8-K filed on February 12, 2008 (File No. 1-6544). |
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|
4.7
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|
|
Tenth Supplemental Indenture, including form of Note, dated February 12, 2008 between
Sysco Corporation, as Issuer, and the Trustee, incorporated by reference to Exhibit 4.3
to Form 8-K filed on February 12, 2008 (File No. 1-6544). |
|
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|
|
4.8
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|
|
Form of Eleventh Supplemental Indenture, including form of Note, dated March 17, 2009
between Sysco Corporation, as Issuer, and the Trustee, incorporated by reference to
Exhibit 4.1 to Form 8-K filed on March 13, 2009 (File No. 1-6544). |
|
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|
|
4.9
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|
Form of Twelfth Supplemental Indenture, including form of Note, dated March 17, 2009
between Sysco Corporation, as Issuer, and the Trustee, incorporated by reference to
Exhibit 4.3 to Form 8-K filed on March 13, 2009 (File No. 1-6544). |
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|
4.10
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|
Form of Guarantee of Indebtedness of Sysco Corporation under Exhibits 4.1 through 4.9 as
executed by Syscos U.S. Broadline subsidiaries, incorporated by reference to Exhibit
4.1 to Form 8-K filed on January 20, 2011 (File No. 1-6544). |
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|
4.11
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Indenture dated May 23, 2002 between Sysco International, Co., Sysco Corporation and
Wachovia Bank, National Association, incorporated by reference to Exhibit 4.1 to
Registration Statement on Form S-4 filed August 21, 2002 (File No. 333-98489). |
38
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4.12
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|
Form of Supplemental Indenture No. 1, dated July 2, 2010, between Sysco International,
ULC, as successor by conversion and name change to Sysco International Co., Sysco
Corporation, as Guarantor, and the Trustee, incorporated by reference to Exhibit 4.12 to
Form 10-K for the year ended July 3, 2010 filed on August 31, 2010 (File No. 1-6544). |
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4.13
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|
Agreement of Resignation, Appointment and Acceptance, dated February 13, 2007, by and
among Sysco Corporation and Sysco International Co., a wholly-owned subsidiary of Sysco
Corporation, U.S. Bank National Association and The Bank of New York Trust Company,
N.A., incorporated by reference to Exhibit 4(h) to Registration Statement on Form S-3
filed on February 6, 2008 (File No. 333-149086). |
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10.1#
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Form of Performance Unit Grant Agreement issued to executive officers effective November
11, 2010, under the First Amended and Restated 2008 Cash Performance Unit Plan. |
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10.2#
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Description of Compensation Arrangements with Non-Employee Directors, including the
Non-Executive Chairman. |
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10.3#
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Description of Sysco Corporations Executive Relocation Expense Reimbursement Policy. |
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15.1#
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Report from Ernst & Young LLP dated February 8, 2011, re: unaudited financial statements. |
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15.2#
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|
Acknowledgement letter from Ernst & Young LLP. |
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31.1#
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CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2#
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CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1#
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|
CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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32.2#
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|
CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
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|
101.1#
|
|
|
|
The following financial information from Sysco Corporations Quarterly Report on Form
10-Q for the quarter ended January 1, 2011 filed with the SEC on February 8, 2011,
formatted in XBRL includes: (i) Consolidated Balance Sheets as of January 1, 2011, July
3, 2010 and December 26, 2009, (ii) Consolidated Results of Operations for the
twenty-six and thirteen week periods ended January 1, 2011 and December 26, 2009, (iii)
Consolidated Statements of Comprehensive Income for the twenty-six and thirteen week
periods ended January 1, 2011 and December 26, 2009, (iv) Consolidated Cash Flows for
the twenty-six and thirteen week periods ended January 1, 2011 and December 26, 2009,
and (v) the Notes to Consolidated Financial Statements. |
39
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Sysco Corporation
(Registrant) |
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By
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/s/ WILLIAM J. DELANEY |
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William J. DeLaney
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President and Chief Executive Officer |
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Date: February 8, 2011 |
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By
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/s/ ROBERT C. KREIDLER |
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Robert C. Kreidler
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Executive Vice President and |
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Chief Financial Officer |
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Date: February 8, 2011 |
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By
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/s/ G. MITCHELL ELMER |
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G. Mitchell Elmer
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Senior Vice President, Controller and |
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Chief Accounting Officer |
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Date: February 8, 2011 |
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40
EXHIBIT INDEX
|
|
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|
|
3.1
|
|
|
|
Restated Certificate of Incorporation, incorporated by reference to Exhibit 3(a) to Form
10-K for the year ended June 28, 1997 (File No. 1-6544). |
|
|
|
|
|
3.2
|
|
|
|
Certificate of Amendment of Certificate of Incorporation increasing authorized shares,
incorporated by reference to Exhibit 3(d) to Form 10-Q for the quarter ended January 1,
2000 (File No. 1-6544). |
|
|
|
|
|
3.3
|
|
|
|
Certificate of Amendment to Restated Certificate of Incorporation increasing authorized
shares, incorporated by reference to Exhibit 3(e) to Form 10-Q for the quarter ended
December 27, 2003 (File No. 1-6544). |
|
|
|
|
|
3.4
|
|
|
|
Form of Amended Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock, incorporated by reference to Exhibit 3(c) to Form 10-K
for the year ended June 29, 1996 (File No. 1-6544). |
|
|
|
|
|
3.5
|
|
|
|
Amended and Restated Bylaws of Sysco Corporation dated July 18, 2008, incorporated by
reference to Exhibit 3.5 to Form 8-K filed on July 23, 2008 (File No. 1-6544). |
|
|
|
|
|
4.1
|
|
|
|
Senior Debt Indenture, dated as of June 15, 1995, between Sysco Corporation and First
Union National Bank of North Carolina, Trustee, incorporated by reference to Exhibit
4(a) to Registration Statement on Form S-3 filed June 6, 1995 (File No. 33-60023). |
|
|
|
|
|
4.2
|
|
|
|
Third Supplemental Indenture, dated as of April 25, 1997 between Sysco Corporation and
First Union National Bank of North Carolina, Trustee, incorporated by reference to
Exhibit 4(g) to Form 10-K for the year ended June 28, 1997 (File No. 1-6544). |
|
|
|
|
|
4.3
|
|
|
|
Fifth Supplemental Indenture, dated as of July 27, 1998 between Sysco Corporation and
First Union National Bank, Trustee, incorporated by reference to Exhibit 4(h) to Form
10-K for the year ended June 27, 1998 (File No. 1-6544). |
|
|
|
|
|
4.4
|
|
|
|
Seventh Supplemental Indenture, including form of Note, dated March 5, 2004 between
Sysco Corporation, as Issuer, and Wachovia Bank, National Association (formerly First
Union National Bank of North Carolina), as Trustee, incorporated by reference to Exhibit
4(j) to Form 10-Q for the quarter ended March 27, 2004 (File No. 1-6544). |
|
|
|
|
|
4.5
|
|
|
|
Eighth Supplemental Indenture, including form of Note, dated September 22, 2005 between
Sysco Corporation, as Issuer, and Wachovia Bank, National Association, as Trustee,
incorporated by reference to Exhibits 4.1 and 4.2 to Form 8-K filed on September 20,
2005 (File No. 1-6544). |
|
|
|
|
|
4.6
|
|
|
|
Ninth Supplemental Indenture, including form of Note, dated February 12, 2008 between
Sysco Corporation, as Issuer, and the Trustee, incorporated by reference to Exhibit 4.1
to Form 8-K filed on February 12, 2008 (File No. 1-6544). |
|
|
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|
4.7
|
|
|
|
Tenth Supplemental Indenture, including form of Note, dated February 12, 2008 between
Sysco Corporation, as Issuer, and the Trustee, incorporated by reference to Exhibit 4.3
to Form 8-K filed on February 12, 2008 (File No. 1-6544). |
|
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|
4.8
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|
|
Form of Eleventh Supplemental Indenture, including form of Note, dated March 17, 2009
between Sysco Corporation, as Issuer, and the Trustee, incorporated by reference to
Exhibit 4.1 to Form 8-K filed on March 13, 2009 (File No. 1-6544). |
|
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|
4.9
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|
|
Form of Twelfth Supplemental Indenture, including form of Note, dated March 17, 2009
between Sysco Corporation, as Issuer, and the Trustee, incorporated by reference to
Exhibit 4.3 to Form 8-K filed on March 13, 2009 (File No. 1-6544). |
|
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|
|
4.10
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|
|
Form of Guarantee of Indebtedness of Sysco Corporation under Exhibits 4.1 through 4.9 as
executed by Syscos U.S. Broadline subsidiaries, incorporated by reference to Exhibit
4.1 to Form 8-K filed on January 20, 2011 (File No. 1-6544). |
|
|
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|
|
4.11
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|
|
Indenture dated May 23, 2002 between Sysco International, Co., Sysco Corporation and
Wachovia Bank, National Association, incorporated by reference to Exhibit 4.1 to
Registration Statement on Form S-4 filed August 21, 2002 (File No. 333-98489). |
|
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|
|
4.12
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|
|
Form of Supplemental Indenture No. 1, dated July 2, 2010, between Sysco International,
ULC, as successor by conversion and name change to Sysco International Co., Sysco
Corporation, as Guarantor, and the Trustee, incorporated by reference to Exhibit 4.12 to
Form 10-K for the year ended July 3, 2010 filed on August 31, 2010 (File No. 1-6544). |
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|
4.13
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|
|
Agreement of Resignation, Appointment and Acceptance, dated February 13, 2007, by and
among Sysco Corporation and Sysco International Co., a wholly-owned subsidiary of Sysco
Corporation, U.S. Bank National Association and The Bank of New York Trust Company,
N.A., incorporated by reference to Exhibit 4(h) to Registration Statement on Form S-3
filed on February 6, 2008 (File No. 333-149086). |
|
|
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|
|
10.1#
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|
|
Form of Performance Unit Grant Agreement issued to executive officers effective November
11, 2010, under the First Amended and Restated 2008 Cash Performance Unit Plan. |
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|
|
10.2#
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|
|
Description of Compensation Arrangements with Non-Employee Directors, including the
Non-Executive Chairman. |
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|
|
10.3#
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|
|
Description of Sysco Corporations Executive Relocation Expense Reimbursement Policy. |
|
|
|
|
|
15.1#
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|
|
Report from Ernst & Young LLP dated February 8, 2011, re: unaudited financial statements. |
|
|
|
|
|
15.2#
|
|
|
|
Acknowledgement letter from Ernst & Young LLP. |
|
|
|
|
|
31.1#
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|
|
|
CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
31.2#
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|
|
CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
32.1#
|
|
|
|
CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
32.2#
|
|
|
|
CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
101.1#
|
|
|
|
The following financial information from Sysco Corporations Quarterly Report on Form
10-Q for the quarter ended January 1, 2011 filed with the SEC on February 8, 2011,
formatted in XBRL includes: (i) Consolidated Balance Sheets as of January 1, 2011, July
3, 2010 and December 26, 2009, (ii) Consolidated Results of Operations for the
twenty-six and thirteen week periods ended January 1, 2011 and December 26, 2009, (iii)
Consolidated Statements of Comprehensive Income for the twenty-six and thirteen week
periods ended January 1, 2011 and December 26, 2009, (iv) Consolidated Cash Flows for
the twenty-six and thirteen week periods ended January 1, 2011 and December 26, 2009,
and (v) the Notes to Consolidated Financial Statements. |