10-Q 1 syy-20130330x10q.htm 10-Q 73ceccf4046f469

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549 

________________ 

Form 10-Q 

 

 

 

(Mark One)

 

 

R

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the quarterly period ended March 30, 2013

 

 

 

 

 

 

£

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 1-6544 

________________ 

Blue_NO_tag_R_500x194 

Sysco Corporation 

(Exact name of registrant as specified in its charter) 

 

 

 

 

Delaware

74-1648137

(State or other jurisdiction of

(IRS employer

incorporation or organization)

identification number)

1390 Enclave Parkway

77077-2099

Houston, Texas

(Zip Code)

(Address of principal executive offices)

 

 

Registrant’s 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 R    No £ 

 

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  R    No £ 

 

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. 

 

 

 

 

 

Large Accelerated Filer  R

Accelerated Filer  £

Non-accelerated Filer   £    (Do not check if a smaller reporting company)

Smaller Reporting Company   £

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   

Yes £     No R 

 

593,485,905 shares of common stock were outstanding as of April 27, 2013.

 

 

 

 

 

 


 

 

TABLE OF CONTENTS 

 

 

 

 

 

 

Page No.

 

PART I – FINANCIAL INFORMATION

 

Item 1.

Financial Statements

1

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

39

Item 4.

Controls and Procedures

39

 

 

 

 

PART II – OTHER INFORMATION

 

Item 1.

Legal Proceedings

41

Item 1A.

Risk Factors

41

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

41

Item 3.

Defaults Upon Senior Securities

41

Item 4.

Mine Safety Disclosures

41

Item 5.

Other Information

42

Item 6.

Exhibits

42

 

 

 

Signatures

 

43

 

 

 

 

 

 

  

 

 

 

 


 

PART I – FINANCIAL INFORMATION 

Item 1.  Financial Statements 

Sysco Corporation and its Consolidated Subsidiaries 

CONSOLIDATED BALANCE SHEETS 

(In thousands, except for share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mar. 30, 2013

 

Jun. 30, 2012

 

Mar. 31, 2012

 

(unaudited)

 

 

 

 

(unaudited)

ASSETS

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

331,520 

 

$

688,867 

 

$

350,464 

Accounts and notes receivable, less allowances of
$82,895, $42,919, and $82,762

 

3,396,850 

 

 

2,966,624 

 

 

3,094,175 

Inventories

 

2,413,190 

 

 

2,178,830 

 

 

2,250,460 

Deferred income taxes

 

132,480 

 

 

134,503 

 

 

144,131 

Prepaid expenses and other current assets

 

68,575 

 

 

80,713 

 

 

85,712 

Prepaid income taxes

 

32,967 

 

 

35,271 

 

 

-

Total current assets

 

6,375,582 

 

 

6,084,808 

 

 

5,924,942 

Plant and equipment at cost, less depreciation

 

3,938,277 

 

 

3,883,750 

 

 

3,846,870 

Other assets

 

 

 

 

 

 

 

 

Goodwill

 

1,802,433 

 

 

1,665,611 

 

 

1,659,818 

Intangibles, less amortization

 

150,779 

 

 

113,571 

 

 

116,011 

Restricted cash

 

145,270 

 

 

127,228 

 

 

140,287 

Other assets

 

244,869 

 

 

262,239 

 

 

245,420 

Total other assets

 

2,343,351 

 

 

2,168,649 

 

 

2,161,536 

Total assets

$

12,657,210 

 

$

12,137,207 

 

$

11,933,348 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

 

 

 

 

 

 

 

 

Notes payable

$

32,045 

 

$

-

 

$

3,250 

Accounts payable

 

2,464,215 

 

 

2,209,469 

 

 

2,285,744 

Accrued expenses

 

951,852 

 

 

909,144 

 

 

870,674 

Accrued income taxes

 

-

 

 

50,316 

 

 

88,112 

Current maturities of long-term debt

 

208,792 

 

 

254,650 

 

 

455,972 

Total current liabilities

 

3,656,904 

 

 

3,423,579 

 

 

3,703,752 

Other liabilities

 

 

 

 

 

 

 

 

Long-term debt

 

2,557,314 

 

 

2,763,688 

 

 

2,412,477 

Deferred income taxes

 

116,960 

 

 

115,166 

 

 

245,496 

Other long-term liabilities

 

1,173,671 

 

 

1,149,734 

 

 

693,608 

Total other liabilities

 

3,847,945 

 

 

4,028,588 

 

 

3,351,581 

Commitments and contingencies

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

 

 

Preferred stock, par value $1 per share
    Authorized 1,500,000 shares, issued none

 

-

 

 

-

 

 

-

Common stock, par value $1 per share
    Authorized 2,000,000,000 shares, issued
    765,174,900 shares

 

765,175 

 

 

765,175 

 

 

765,175 

Paid-in capital

 

1,029,443 

 

 

939,179 

 

 

923,189 

Retained earnings

 

8,394,426 

 

 

8,175,230 

 

 

8,024,536 

Accumulated other comprehensive loss

 

(620,720)

 

 

(662,866)

 

 

(286,623)

Treasury stock at cost, 171,925,048,
    179,228,383 and 179,884,245 shares

 

(4,415,963)

 

 

(4,531,678)

 

 

(4,548,262)

Total shareholders' equity

 

5,152,361 

 

 

4,685,040 

 

 

4,878,015 

Total liabilities and shareholders' equity

$

12,657,210 

 

$

12,137,207 

 

$

11,933,348 

 

Note: The June 30, 2012 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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13-Week Period Ended

 

39-Week Period Ended

 

 

Mar. 30, 2013

 

Mar. 31, 2012

 

Mar. 30, 2013

 

Mar. 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

10,926,371 

 

$

10,504,746 

 

$

32,810,177 

 

$

31,335,557 

Cost of sales

 

 

9,016,052 

 

 

8,633,130 

 

 

26,978,748 

 

 

25,670,691 

Gross profit

 

 

1,910,319 

 

 

1,871,616 

 

 

5,831,429 

 

 

5,664,866 

Operating expenses

 

 

1,573,117 

 

 

1,432,786 

 

 

4,632,794 

 

 

4,289,698 

Operating income

 

 

337,202 

 

 

438,830 

 

 

1,198,635 

 

 

1,375,168 

Interest expense

 

 

34,215 

 

 

28,290 

 

 

97,325 

 

 

86,088 

Other expense (income), net

 

 

(3,410)

 

 

(2,248)

 

 

(7,640)

 

 

(5,470)

Earnings before income taxes

 

 

306,397 

 

 

412,788 

 

 

1,108,950 

 

 

1,294,550 

Income taxes

 

 

104,980 

 

 

153,238 

 

 

399,566 

 

 

482,234 

Net earnings

 

$

201,417 

 

$

259,550 

 

$

709,384 

 

$

812,316 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings:

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.34 

 

$

0.44 

 

$

1.21 

 

$

1.38 

Diluted earnings per share

 

 

0.34 

 

 

0.44 

 

 

1.20 

 

 

1.38 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average shares outstanding

 

 

589,149,731 

 

 

585,823,393 

 

 

588,222,833 

 

 

588,004,593 

Diluted shares outstanding

 

 

592,903,799 

 

 

587,214,691 

 

 

591,054,506 

 

 

589,232,150 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.28 

 

$

0.27 

 

$

0.83 

 

$

0.80 

 

 

See Notes to Consolidated Financial Statements

 

  

 

2 


 

Sysco Corporation and its Consolidated Subsidiaries 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13-Week Period Ended

 

39-Week Period Ended

 

 

Mar. 30, 2013

 

Mar. 31, 2012

 

Mar. 30, 2013

 

Mar. 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

201,417 

 

$

259,550 

 

$

709,384 

 

$

812,316 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(27,886)

 

 

26,823 

 

 

(497)

 

 

(57,021)

Items presented net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of cash flow hedges

 

 

96 

 

 

107 

 

 

289 

 

 

321 

Amortization of prior service cost

 

 

1,925 

 

 

773 

 

 

9,386 

 

 

2,319 

Amortization of actuarial loss (gain), net

 

 

10,832 

 

 

9,215 

 

 

33,776 

 

 

27,646 

Amortization of transition obligation

 

 

22 

 

 

24 

 

 

66 

 

 

70 

Prior service cost arising in current year

 

 

-

 

 

-

 

 

(24,828)

 

 

-

Actuarial (loss) gain, net arising in current year

 

 

-

 

 

-

 

 

23,954 

 

 

-

Total other comprehensive (loss) income

 

 

(15,011)

 

 

36,942 

 

 

42,146 

 

 

(26,665)

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

186,406 

 

$

296,492 

 

$

751,530 

 

$

785,651 

 

 

See Notes to Consolidated Financial Statements

 

3 


 

Sysco Corporation and its Consolidated Subsidiaries 

CONSOLIDATED CASH FLOWS (Unaudited) 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39-Week Period Ended

 

 

Mar. 30, 2013

 

Mar. 31, 2012

Cash flows from operating activities:

 

 

 

 

 

 

Net earnings

 

$

709,384 

 

$

812,316 

Adjustments to reconcile net earnings to cash provided by operating
    activities:

 

 

 

 

 

 

Share-based compensation expense

 

 

56,749 

 

 

54,328 

Depreciation and amortization

 

 

379,998 

 

 

304,966 

Deferred income taxes

 

 

(42,069)

 

 

(276,947)

Provision for losses on receivables

 

 

29,068 

 

 

29,663 

Other non-cash items

 

 

1,577 

 

 

(1,267)

Additional investment in certain assets and liabilities, net of effect of
    businesses acquired:

 

 

 

 

 

 

(Increase) in receivables

 

 

(408,186)

 

 

(225,668)

(Increase) in inventories

 

 

(206,244)

 

 

(167,964)

Decrease (increase) in prepaid expenses and other current assets

 

 

14,826 

 

 

(10,380)

Increase in accounts payable

 

 

210,317 

 

 

104,239 

Increase in accrued expenses

 

 

484 

 

 

4,117 

(Decrease) increase in accrued income taxes

 

 

(54,139)

 

 

141,784 

(Increase) decrease in other assets

 

 

(528)

 

 

67,843 

Increase in other long-term liabilities

 

 

70,005 

 

 

71,274 

Excess tax benefits from share-based compensation arrangements

 

 

(1,834)

 

 

(15)

Net cash provided by operating activities

 

 

759,408 

 

 

908,289 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Additions to plant and equipment

 

 

(373,048)

 

 

(633,196)

Proceeds from sales of plant and equipment

 

 

12,115 

 

 

5,852 

Acquisition of businesses, net of cash acquired

 

 

(210,036)

 

 

(83,354)

(Increase) in restricted cash

 

 

(18,042)

 

 

(29,771)

Net cash used for investing activities

 

 

(589,011)

 

 

(740,469)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Bank and commercial paper borrowings (repayments), net

 

 

 -

 

 

211,267 

Other debt borrowings

 

 

50,629 

 

 

3,090 

Other debt repayments

 

 

(277,339)

 

 

(6,424)

Debt issuance costs

 

 

 -

 

 

(977)

Proceeds from common stock reissued from treasury for share-based
    compensation awards

 

 

497,688 

 

 

82,545 

Treasury stock purchases

 

 

(321,042)

 

 

(272,299)

Dividends paid

 

 

(482,030)

 

 

(464,809)

Excess tax benefits from share-based compensation arrangements

 

 

1,834 

 

 

15 

Net cash used for financing activities

 

 

(530,260)

 

 

(447,592)

 

 

 

 

 

 

 

Effect of exchange rates on cash

 

 

2,516 

 

 

(9,529)

 

 

 

 

 

 

 

Net (decrease) in cash and cash equivalents

 

 

(357,347)

 

 

(289,301)

Cash and cash equivalents at beginning of period

 

 

688,867 

 

 

639,765 

Cash and cash equivalents at end of period

 

$

331,520 

 

$

350,464 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

Interest

 

$

121,740 

 

$

109,618 

Income taxes

 

 

501,499 

 

 

617,640 

 

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 June 30, 2012 consolidated balance sheet which was taken from the audited financial statements included in the company's Fiscal 2012 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 certain tax-related balances within these statements.  The impact of these reclassifications was immaterial to the prior year periods.

 

These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the company's fiscal 2012 Annual Report on Form 10-K.   Certain footnote disclosures included in annual financial statements prepared in accordance with generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to applicable rules and regulations for interim financial statements.

 

A review of the financial information herein has been made by Ernst & Young LLP, independent registered public accounting firm, 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.  CHANGES IN ACCOUNTING 

 

Testing Goodwill for Impairment 

 

In September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-08, “Testing Goodwill for Impairment.”  This update amends Accounting Standards Codification (ASC) 350, “Intangibles–Goodwill and Other” to allow entities an option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test.  Under that option, an entity no longer would be required to calculate the fair value of a reporting unit unless the entity determines, based on that qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount.  In addition, the update provided a revised list of factors that should be considered when evaluating whether a potential goodwill impairment may have occurred at an interim period.  The amendments in this update were effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.  Early adoption was permitted.  The adoption of this update in the first quarter of fiscal 2013 did not result in a material change to the company’s interim consideration of potential goodwill impairment.  Sysco does not believe this update will have an impact on its annual goodwill impairment testing in the fourth quarter of fiscal 2013. 

  

 

3NEW ACCOUNTING STANDARDS

 

Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities

 

In January 2013, the FASB issued ASU 2013-01, “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.”  This update amends ASC 210, “Balance Sheet,” specifically the disclosure requirements created by ASU 2011-11, “Disclosures About Offsetting Assets and Liabilities,” issued by the FASB in December 2011.  This update clarifies the scope of these disclosure requirements to be applicable only to derivatives and securities borrowing and lending transactions that are offset in accordance with GAAP or are subject to an enforceable master netting arrangement or similar agreement.  The disclosure requirements continue to be effective for annual reporting periods, and interim periods within those years, beginning on or after January 1, 2013, which will be fiscal 2014 for Sysco.  Based on the scope clarification of this update, Sysco does not believe it has any financial instruments requiring these disclosures but will continue to evaluate this assessment.

 

5 


 

Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income

 

In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.”  This update amends ASC 220, “Comprehensive Income” to require an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net earnings if the amount is being reclassified in its entirety to net earnings.  For other amounts that are not being reclassified in their entirety to net earnings, an entity is required to cross-reference other disclosures that provide additional detail about those amounts.  The amendments in this update are effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2012, which is fiscal 2014 for Sysco.   Sysco is currently evaluating the impact this update will have on its disclosures.

 

 

  

4.  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 management’s own assumption about the assumptions market participants would use in pricing the asset or liability, including assumptions about risk. 

 

Sysco’s policy is to invest in only high-quality investments.  Cash equivalents primarily include time deposits, certificates of deposit, commercial paper, high-quality money market funds and all highly liquid instruments with original maturities of three months or less.   Restricted cash consists of investments in high-quality money market funds.    

 

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value. 

·

Time deposits and commercial paper included in cash equivalents are valued at amortized cost, which approximates fair value.  These are included within cash equivalents as a Level 2 measurement in the tables below. 

·

Money market funds are valued at the closing price reported by the fund sponsor from an actively traded exchange.  These are included within cash equivalents and restricted cash as Level 1 measurements in the tables below. 

·

The interest rate swap agreements, discussed further in Note 5, “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 within prepaid expenses and other current assets and other assets as Level 2 measurements in the tables below. 

 

The following tables present the company’s assets measured at fair value on a recurring basis as of March 30, 2013, June 30, 2012 and March 31, 2012:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets Measured at Fair Value as of Mar. 30, 2013

 

Level 1

 

Level 2

 

Level 3

 

Total

 

(In thousands)

Assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

$

122,140 

 

$

138,639 

 

$

 -

 

$

260,779 

Prepaid expenses and other current assets

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap agreement

 

 -

 

 

3,990 

 

 

 -

 

 

3,990 

Restricted cash

 

145,270 

 

 

 -

 

 

 -

 

 

145,270 

Total assets at fair value

$

267,410 

 

$

142,629 

 

$

 -

 

$

410,039 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets Measured at Fair Value as of Jun. 30, 2012

 

Level 1

 

Level 2

 

Level 3

 

Total

 

(In thousands)

Assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

$

228,310 

 

$

248,714 

 

$

 -

 

$

477,024 

Prepaid expenses and other current assets

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap agreement

 

 -

 

 

2,475 

 

 

 -

 

 

2,475 

Restricted cash

 

127,228 

 

 

 -

 

 

 -

 

 

127,228 

Other assets

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap agreement

 

 -

 

 

6,219 

 

 

 -

 

 

6,219 

Total assets at fair value

$

355,538 

 

$

257,408 

 

$

 -

 

$

612,946 

6 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets Measured at Fair Value as of Mar. 31, 2012

 

Level 1

 

Level 2

 

Level 3

 

Total

 

(In thousands)

Assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

$

 -

 

$

140,283 

 

$

 -

 

$

140,283 

Prepaid expenses and other current assets

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap agreement

 

 -

 

 

3,440 

 

 

 -

 

 

3,440 

Restricted cash

 

140,287 

 

 

 -

 

 

 -

 

 

140,287 

Other assets

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap agreement

 

 -

 

 

7,005 

 

 

 -

 

 

7,005 

Total assets at fair value

$

140,287 

 

$

150,728 

 

$

 -

 

$

291,015 

 

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 Sysco’s 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 and is considered a Level 2 measurement.  The fair value of total debt approximated $3,281.9 million, $3,539.3 million and $3,264.0 million as of March 30, 2013, June 30, 2012 and March 31, 2012, respectively. The carrying value of total debt was $2,798.2 million, $3,018.3 million and $2,871.7 million as of March 30, 2013, June 30, 2012 and March 31, 2012, respectively.

 

  

 

7 


 

5.  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 fiscal 2010, the company entered into two interest rate swap agreements that effectively converted $250.0 million of fixed rate debt maturing in fiscal 2013 and $200.0 million of fixed rate debt maturing in fiscal 2014 to floating rate debt.  These 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 swap agreement related to the fiscal 2013 debt was settled upon maturity of the senior notes in February 2013, leaving one remaining outstanding swap agreement outstanding as of March 30, 2013.    

 

 

The location and the fair value of derivative instruments in the consolidated balance sheet as of March 30, 2013, June 30, 2012 and March 31, 2012 are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset Derivatives

 

Liability Derivatives

 

Balance Sheet Location

 

Fair Value

 

Balance Sheet Location

 

Fair Value

 

(In thousands)

Fair value hedge relationships:

 

 

 

 

 

 

 

 

Interest rate swap agreements

 

 

 

 

 

 

 

 

Mar. 30, 2013

Prepaid expenses and
other current assets

 

$

3,990 

 

N/A

 

N/A

Jun. 30, 2012

Prepaid expenses and
other current assets

 

 

2,475 

 

N/A

 

N/A

Jun. 30, 2012

Other assets

 

 

6,219 

 

N/A

 

N/A

Mar. 31, 2012

Prepaid expenses and
other current assets

 

 

3,440 

 

N/A

 

N/A

Mar. 31, 2012

Other assets

 

 

7,005 

 

N/A

 

N/A

 

 

The location and effect of derivative instruments and related hedged items on the consolidated results of operations for the 13-week periods ended March 30, 2013 and March 31, 2012 presented on a pre-tax basis are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Location of (Gain) or Loss
Recognized in Income

 

Amount of (Gain) or Loss
Recognized in Income

 

 

 

 

13-Week Period Ended

 

 

 

 

Mar. 30, 2013

 

Mar. 31, 2012

 

 

 

 

(In thousands)

Fair Value Hedge Relationships:

 

 

 

 

 

 

 

 

Interest rate swap agreements

 

Interest expense

 

$

832 

 

$

(2,163)

 

 

 

 

 

 

 

 

 

Cash Flow  Hedge Relationships:

 

 

 

 

 

 

 

 

Interest rate contracts

 

Interest expense

 

 

156 

 

 

174 

 

8 


 

The location and effect of derivative instruments and related hedged items on the consolidated results of operations for the 39-week periods ended March 30, 2013 and March 31, 2012 presented on a pre-tax basis are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Location of (Gain) or Loss
Recognized in Income

 

Amount of (Gain) or Loss
Recognized in Income

 

 

 

 

39-Week Period Ended

 

 

 

 

Mar. 30, 2013

 

Mar. 31, 2012

 

 

 

 

(In thousands)

Fair Value Hedge Relationships:

 

 

 

 

 

 

 

 

Interest rate swap agreements

 

Interest expense

 

$

(3,492)

 

$

(5,993)

 

 

 

 

 

 

 

 

 

Cash Flow  Hedge Relationships:

 

 

 

 

 

 

 

 

Interest rate contracts

 

Interest expense

 

 

469 

 

 

522 

 

 

 

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 13-week periods and 39-week periods ended March 30, 2013 and March 31, 2012.  The interest rate swaps do not contain credit-risk-related contingent features. 

 

  

 

6.  DEBT 

 

As of March 30, 2013, 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 company’s United States and Canadian commercial paper programs.  The facility provides for borrowings in both United States and Canadian dollars.  Borrowings by Sysco International, ULC under the agreement are guaranteed by Sysco, and borrowings by Sysco and Sysco International, ULC under the credit agreement are guaranteed by the wholly-owned subsidiaries of Sysco that are guarantors of the company’s senior notes and debentures.   The original facility in the amount of $1,000.0 million expires on December 29, 2016.   In December 2012, a portion of the facility was extended for an additional year.  This extended facility, which expires on December 29, 2017, is for $925.0 million of the original $1,000.0 million facility, but is subject to further extension.   There were no commercial paper issuances outstanding as of March 30, 2013.   

 

During the 39-week period ended March 30, 2013, aggregate commercial paper issuances and short-term bank borrowings ranged from zero to approximately $330.0 million. 

 

In September 2012, the company’s Irish subsidiary, Pallas Foods, entered into a €75.0 million (Euro) multicurrency revolving credit facility, which will be utilized for capital needs for the company’s European subsidiaries.  This facility provides for unsecured borrowings and expires September 25, 2013, but is subject to extension.  Outstanding borrowings under this facility were €25.0 million (Euro) as of March 30, 2013, located within Notes payable on the consolidated balance sheet. 

 

In February 2013, Sysco repaid the 4.2% senior notes totaling $250.0 million at maturity utilizing a combination of cash flow from operations and cash on hand.

 

 

 

9 


 

7.  COMPANY-SPONSORED EMPLOYEE BENEFIT PLANS 

 

The components of net company-sponsored benefit cost for the 13-week periods presented are as follows.  The caption “Pension Benefits” in the table below includes both the company-sponsored qualified pension plan (Retirement Plan) and the Supplemental Executive Retirement Plan (SERP). 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Benefits

 

Other Postretirement Plans

 

Mar. 30, 2013

 

Mar. 31, 2012

 

Mar. 30, 2013

 

Mar. 31, 2012

 

(In thousands)

Service cost

$

17,399 

 

$

27,055 

 

$

135 

 

$

114 

Interest cost

 

36,805 

 

 

36,878 

 

 

154 

 

 

158 

Expected return on plan assets

 

(42,801)

 

 

(40,401)

 

 

 -

 

 

 -

Amortization of prior service cost

 

3,083 

 

 

1,202 

 

 

42 

 

 

53 

Amortization of actuarial loss (gain)

 

17,637 

 

 

15,042 

 

 

(51)

 

 

(82)

Amortization of transition obligation

 

 -

 

 

 -

 

 

35 

 

 

39 

Net periodic benefit cost

$

32,123 

 

$

39,776 

 

$

315 

 

$

282 

 

The components of net company-sponsored benefit cost for the 39-week periods are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Benefits

 

Other Postretirement Plans

 

Mar. 30, 2013

 

Mar. 31, 2012

 

Mar. 30, 2013

 

Mar. 31, 2012

 

(In thousands)

Service cost

$

52,768 

 

$

81,166 

 

$

406 

 

$

342 

Interest cost

 

111,758 

 

 

110,635 

 

 

461 

 

 

474 

Expected return on plan assets

 

(128,402)

 

 

(121,204)

 

 

 -

 

 

 -

Amortization of prior service cost

 

6,817 

 

 

3,604 

 

 

126 

 

 

161 

Recognized net actuarial loss (gain)

 

54,987 

 

 

45,125 

 

 

(152)

 

 

(248)

Amortization of transition obligation

 

 -

 

 

 -

 

 

106 

 

 

115 

Curtailment loss

 

8,293 

 

 

 -

 

 

 -

 

 

 -

Net periodic benefit cost

$

106,221 

 

$

119,326 

 

$

947 

 

$

844 

 

 

 

At the end of fiscal 2012, Sysco approved a plan to freeze future benefit accruals under the Retirement Plan as of December 31, 2012 for all United States-based salaried and non-union hourly employees.  Effective January 1, 2013, these employees are eligible for additional contributions under the company’s defined contribution 401(k) plan.  The measurements for the Retirement Plan at June 30, 2012 and the resulting expense for fiscal 2013 included the impact of the freeze. 

 

In November 2012, Sysco approved a plan to restructure its executive nonqualified retirement program including the SERP.   Future benefit accruals will have frozen under this plan by June 29, 2013 for all participants.   As a result of this change, the liabilities of this plan were remeasured using a discount rate of 3.96%.  A curtailment gain of $73.0 million was recognized as a component of actuarial losses (net of tax) within other comprehensive income with an offsetting reduction to benefits obligations to accumulated benefits.  Further, an $8.3 million loss was recognized in the income statement arising from the write-off of prior service costs.  In addition to the plan freeze, participants will be fully vested in their frozen benefits on their date of freeze.  This resulted in an increase in the benefit obligation of $48.6 million which was reflected as unrecognized prior service cost in other comprehensive income.  This amount will amortize into pension expense over the next seven years.  The SERP benefit obligation resulting after these changes on the date of the approved plan was $486.6 million.

 

Sysco’s contributions to its company-sponsored defined benefit plans were $17.5 million and $16.7 million during the 39-week periods ended March 30, 2013 and March 31, 2012, respectively. 

 

 

 

10 


 

8.  MULTIEMPLOYER EMPLOYEE BENEFIT PLANS 

 

Sysco contributes to several multiemployer defined benefit pension plans in the United States and Canada based on obligations arising under collective bargaining agreements covering union-represented employees. Sysco does not directly manage these multiemployer plans, which are generally managed by boards of trustees, half of whom are appointed by the unions and the other half by Sysco and the other employers contributing to the plan.   

 

Based upon the information available from plan administrators, management believes that several of these multiemployer plans are underfunded.  In addition, pension-related legislation in the United States requires underfunded pension plans to improve their funding ratios within prescribed intervals based on the level of their underfunding.  As a result, Sysco expects its contributions to these plans to increase in the future.  In addition, if a United States multiemployer defined benefit plan fails to satisfy certain minimum funding requirements, the Internal Revenue Service may impose a nondeductible excise tax of 5% on the amount of the accumulated funding deficiency for those employers contributing to the fund.   

 

Withdrawal Activity 

 

Sysco has voluntarily withdrawn from various multiemployer pension plans.  Total withdrawal liability provisions recorded were $43.2 million in the first 39 weeks of fiscal 2013 and $5.2 million in the first 39 weeks of fiscal 2012.  As of March 30, 2013, June 30, 2012 and March 31, 2012, Sysco had approximately $54.8 million, $30.7 million and $47.7 million, respectively, in liabilities recorded related to certain multiemployer defined benefit plans for which Sysco’s voluntary withdrawal had already occurred.   Recorded withdrawal liabilities are estimated at the time of withdrawal based on the most recently available valuation and participant data for the respective plans; amounts are subsequently adjusted to the period of payment to reflect any changes to these estimates.  If any of these plans were to undergo a mass withdrawal, as defined by the Pension Benefit Guaranty Corporation, within a two year time frame from the point of our withdrawal, Sysco could have additional liability.  The company does not currently believe any mass withdrawals are probable to occur in the applicable two year time frame relating to the plans from which Sysco has voluntarily withdrawn. 

 

Potential Withdrawal Liability 

 

Under current law regarding multiemployer defined benefit plans, a plan’s termination, Sysco’s voluntary withdrawal, or the mass withdrawal of all contributing employers from any underfunded multiemployer defined benefit plan would require Sysco to make payments to the plan for Sysco’s proportionate share of the multiemployer plan’s unfunded vested liabilities.  Generally, Sysco does not have the greatest share of liability among the participants in any of the plans in which it participates.  Sysco believes that one of the above-mentioned events is reasonably possible for certain plans in which it participates and estimates its share of withdrawal liability for these plans could have been as much as $80.0  million as of March 30, 2013.  This estimate excludes plans for which Sysco has recorded withdrawal liabilities or where the likelihood of the above-mentioned events is deemed remote.  This estimate is based on the information available from plan administrators, which had a  valuation date of December 31, 2011. As the valuation date for all of these plans was December 31, 2011, the company’s estimate reflects the condition of the financial markets as of that date.  Due to the lack of current information, management believes Sysco’s current share of the withdrawal liability could materially differ from this estimate. 

  

 

11 


 

9.  EARNINGS PER SHARE 

 

The following table sets forth the computation of basic and diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13-Week Period Ended

 

39-Week Period Ended

 

 

Mar. 30, 2013

 

Mar. 31, 2012

 

Mar. 30, 2013

 

Mar. 31, 2012

 

 

(In thousands, except for share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

201,417 

 

$

259,550 

 

$

709,384 

 

$

812,316 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average basic shares outstanding

 

 

589,149,731 

 

 

585,823,393 

 

 

588,222,833 

 

 

588,004,593 

Dilutive effect of share-based awards

 

 

3,754,068 

 

 

1,391,298 

 

 

2,831,673 

 

 

1,227,557 

Weighted-average diluted shares outstanding

 

 

592,903,799 

 

 

587,214,691 

 

 

591,054,506 

 

 

589,232,150 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share:

 

$

0.34 

 

$

0.44 

 

$

1.21 

 

$

1.38 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share:

 

$

0.34 

 

$

0.44 

 

$

1.20 

 

$

1.38 

 

The number of options that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was approximately 10,800,000 and 50,000,000 for the third quarter of fiscal 2013 and fiscal 2012, 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 24,200,000 and 49,700,000 for the first 39 weeks of fiscal 2013 and 2012, respectively. 

 

 

10.  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. 

 

Stock Incentive Plans 

 

In the first 39 weeks of fiscal 2013, options to purchase 6,212,716 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 39 weeks of fiscal 2013 was $3.20. 

 

In the first 39 weeks of fiscal 2013, 1,688,848 restricted stock units were granted to employees from the 2007 Stock Incentive Plan. Some 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 company’s 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 39 weeks of fiscal 2013 was $29.65

 

In the first 39 weeks of fiscal 2013, restricted awards in the amount of 48,069 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 award’s 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 award’s stated vesting date. The fair value of the restricted awards is based on the company’s stock price as of the date of grant. The weighted average grant-date fair value per share of restricted awards granted during the first 39 weeks of fiscal 2013 was $29.96.

 

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.  Sysco provides a matching grant of 50% of the number of shares received for the stock election subject to certain limitations.  In the first 39 weeks of fiscal 2013, 26,702 shares with a weighted average grant date fair value of $30.38 were issued for these elections in the form of fully vested common stock or deferred units.

 

12 


 

Employees' Stock Purchase Plan 

 

Plan participants purchased 1,144,675 shares of Sysco common stock under the Sysco Employees’ Stock Purchase Plan during the first 39 weeks of fiscal 2013. 

 

The weighted average fair value per share of employee stock purchase rights issued pursuant to the Employees' Stock Purchase Plan was $4.63 during the first 39 weeks of fiscal 2013. 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 $56.7 million and $54.3 million for the first 39 weeks of fiscal 2013 and fiscal 2012, respectively. 

 

As of March 30, 2013, there was $81.0 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 2.52 years.

 

 

11.  INCOME TAXES 

 

Uncertain Tax Positions 

 

As of March 30, 2013, the gross amount of unrecognized tax benefits was $98.4 million and the gross amount of liability for accrued interest related to unrecognized tax benefits was $44.3 million. In the third quarter of fiscal 2013, we reclassified a receivable that would arise upon the resolution of an unrecognized tax benefit from a net position in other long-term liabilities to a gross position in other assets on our consolidated balance sheet.  Prior year amounts within the consolidated balance sheets have been reclassified to conform to the current year presentation.  It is reasonably possible that the amount of the unrecognized tax benefits with respect to certain of the company’s 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. 

 

 Effective Tax Rates 

 

The effective tax rate of 34.26% for the third quarter of fiscal 2013 was favorably impacted by the recording of $4.6 million of domestic tax benefit related to a foreign tax payment and $4.5 million of tax benefit related to disqualifying dispositions of Sysco stock pursuant to share-based compensation arrangements.  Indefinitely reinvested earnings taxed at foreign statutory rates less than our domestic tax rate also had the impact of reducing the effective tax rate. 

 

The effective tax rate for the third quarter of fiscal 2012 was 37.12%.  Indefinitely reinvested earnings taxed at foreign statutory rates less than our domestic tax rate had the impact of reducing the effective tax rate. 

 

The effective tax rate of 36.03% for the first 39 weeks of fiscal 2013 was favorably impacted by the recording of $7.1 million of tax benefit related to disqualifying dispositions of Sysco stock pursuant to share-based compensation arrangements and $4.6 million of domestic tax benefit related to a foreign tax payment.  Indefinitely reinvested earnings taxed at foreign statutory rates less than our domestic tax rate also had the impact of reducing the effective tax rate. 

 

The effective tax rate for the first 39 weeks of fiscal 2012 was 37.25%.  Indefinitely reinvested earnings taxed at foreign statutory rates less than our domestic tax rate had the impact of reducing the effective tax rate. 

 

Other 

 

The determination of the company’s provision for income taxes requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. The company’s provision for income taxes reflects a combination of income earned and taxed in the various United States 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 company’s change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.

 

  

 

13 


 

12.  ACQUISITIONS 

 

During the first 39 weeks of fiscal 2013, in the aggregate, the company paid cash of $210.0 million for acquisitions made during fiscal 2013.  Acquisitions in the first 39 weeks of fiscal 2013 were immaterial, individually and in the aggregate, 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 March 30, 2013, aggregate contingent consideration amounts outstanding relating to acquisitions were  $102.2 million, of which $36.4 million could result in the recording of additional goodwill when paid and $51.1 million was recorded as earnout liabilities as of March 30, 2013. 

 

  

13.  COMMITMENTS AND CONTINGENCIES 

 

Legal Proceedings 

 

Sysco is engaged in various legal proceedings which have arisen but have not been fully adjudicated.  The likelihood of loss for these legal proceedings, based on definitions within contingency accounting literature, ranges from remote to reasonably possible to probable.  When probable, the losses have been accrued.  Based on estimates of the range of potential losses associated with these matters, management does not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect upon the consolidated financial position or results of operations of the company.  However, the final results of legal proceedings cannot be predicted with certainty and if the company failed to prevail in one or more of these legal matters, and the associated realized losses were to exceed the company’s current estimates of the range of potential losses, the company’s consolidated financial position or results of operations could be materially adversely affected in future periods. 

 

Fuel Commitments 

 

Sysco routinely enters into forward purchase commitments for a portion of its projected diesel fuel requirements.  As of March 30, 2013, outstanding forward diesel fuel purchase commitments totaled approximately $227.8 million at a fixed price through June 2014. 

 

Other Commitments 

 

Sysco has committed to aggregate product purchases for resale in order to benefit from a centralized approach to purchasing.  A majority of these agreements expire within one year;  however, certain agreements have terms through fiscal 2018.  These agreements commit the company to a minimum volume at various pricing terms, including fixed pricing, variable pricing or a combination thereof.  Minimum amounts committed to as of March 30, 2013 totaled approximately $1,346.9 million.

 

Sysco has committed with various third party service providers to provide information technology services. The services have been committed for periods up to fiscal 2016 and may be extended.  As of March 30, 2013, the total remaining cost of the services over that period is expected to be approximately $401.6 million. A portion of this amount may be reduced by Sysco utilizing less than estimated resources and can be increased by Sysco utilizing more than estimated resources.  Certain agreements allow adjustments for inflation. Sysco may also cancel a portion or all of the services provided subject to termination fees which decrease over time. If Sysco were to terminate all of the services in fiscal 2013, the estimated termination fees incurred in fiscal 2013 would be approximately $35.9 million.

 

 

 14.  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 company’s 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 both traditional and chain restaurant customers, hospitals, schools, hotels, industrial caterers and other venues where foodservice products are served.  These companies also provide custom-cut meat operations.  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 company's other operating segments, including the company's specialty produce and lodging industry segments, a company that distributes specialty imported products and a company that distributes to international customers.   

 

14 


 

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 imported specialty products distributed by the Broadline and SYGMA operating companies. Management evaluates the performance of each of the operating segments based on its respective operating income results.  Corporate expenses generally include all expenses of the corporate office and Sysco’s shared service center.  These also include all share-based compensation costs and expenses related to the company’s Business Transformation Project. 

 

The following tables set forth certain financial information for Sysco’s business segments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13-Week Period Ended

 

39-Week Period Ended

 

Mar. 30, 2013

 

Mar. 31, 2012

 

Mar. 30, 2013

 

Mar. 31, 2012

Sales:

(In thousands)

Broadline

$

8,861,568 

 

$

8,513,483 

 

$

26,698,301 

 

$

25,493,000 

SYGMA

 

1,425,975 

 

 

1,445,214 

 

 

4,258,545 

 

 

4,233,238 

Other

 

699,505 

 

 

586,440 

 

 

2,019,967 

 

 

1,734,123 

Intersegment sales

 

(60,677)

 

 

(40,391)

 

 

(166,636)

 

 

(124,804)

Total

$

10,926,371 

 

$

10,504,746 

 

$

32,810,177 

 

$

31,335,557 

 

 

 

 

 

 

 

 

 

 

 

 

 

13-Week Period Ended

 

39-Week Period Ended

 

Mar. 30, 2013

 

Mar. 31, 2012

 

Mar. 30, 2013

 

Mar. 31, 2012

Operating income:

(In thousands)

Broadline

$

517,842 

 

$

564,603 

 

$

1,740,935 

 

$

1,753,599 

SYGMA

 

13,823 

 

 

17,063 

 

 

39,347 

 

 

46,050 

Other

 

28,691