Sysco 2007 Annual Report Download - page 34

our earnings per share may decrease. Integration of an acquired business may be more difficult when we acquire a
business in a market in which we have limited or no expertise, or with a culture different from SYSCO’s. A significant
expansion of our business and operations, in terms of geography or magnitude, could strain our administrative and
operational resources. Significant acquisitions may also require the issuance of material additional amounts of debt or
equity, which could materially alter our debt to equity ratio, increase our interest expense and decrease earnings per
share, and make it difficult for us to obtain favorable financing for other acquisitions or capital investments.
Expanding into International Markets Presents Unique Challenges and our Expansion Efforts and International
Operations may not be Successful
In addition to our importing and exporting activities, our strategy includes expansion of operations into new international
markets. Our ability to successfully operate in international markets may be adversely affected by local laws and customs,
legal and regulatory constraints, political and economic conditions and currency regulations of the countries or regions
in which we currently operate or intend to operate in the future. Risks inherent in our existing and future international
operations also include, among others, the costs and difficulties of managing international operations, difficulties in
identifying and gaining access to local suppliers, suffering possible adverse tax consequences, maintaining product
quality and greater difficulty in enforcing intellectual property rights. Additionally, foreign currency exchange rates and
fluctuations may have an impact on our future costs or on future cash flows from our international operations.
Our Preferred Stock Provides Anti-Takeover Benefits that may not be Beneficial to Stockholders
Under our Restated Certificate of Incorporation, SYSCO’s Board of Directors is authorized to issue up to 1,500,000 shares
of preferred stock without stockholder approval. Issuance of these shares could make it more difficult for anyone to
acquire SYSCO without approval of the Board of Directors, depending on the rights and preferences of the stock issued.
In addition, if anyone attempts to acquire SYSCO without approval of the Board of Directors of SYSCO, the existence of
this undesignated preferred stock could allow the Board of Directors to adopt a shareholder rights plan without obtaining
stockholder approval, which could result in substantial dilution to a potential acquirer. As a result, hostile takeover
attempts that might result in an acquisition of SYSCO, that could otherwise have been financially beneficial to our
stockholders, could be deterred.
Technology Dependence Could have a Material Negative Impact on our Business
Our ability to decrease costs and increase profits, as well as our ability to serve customers most effectively, depends
on the reliability of our technology network. We use software and other technology systems to load trucks in the most
efficient manner to optimize the use of storage space and minimize the time spent at each stop. Any disruption to these
computer systems could adversely impact our customer service, decrease the volume of our business and result in
increased costs. While SYSCO has invested and continues to invest in technology security initiatives and disaster recovery
plans, these measures cannot fully insulate us from technology disruption that could result in adverse effects on
operations and profits.
ITEM 1B. Unresolved Staff Comments
None.
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