Sysco 2007 Annual Report Download - page 49

This facility was originally entered into in November 2005 in the amount of $500,000,000 and was increased to
$750,000,000 in March 2006. In September 2006, the termination date on the facility was extended to November 4, 2011,
in accordance with the terms of the agreement. This facility replaced the previous $450,000,000 (U.S. dollar) and
$100,000,000 (Canadian dollar) revolving credit agreements in the U.S. and Canada, respectively, both of which were
terminated in November 2005.
During fiscal 2007, 2006 and 2005, aggregate outstanding commercial paper issuances and short-term bank borrowings
ranged from approximately $356,804,000 to $755,180,000, $126,846,000 to $774,530,000, and $28,560,000 to $253,384,000,
respectively. Outstanding commercial paper issuances were $531,826,000 as of June 30, 2007 and $625,308,000 as of
August 15, 2007.
In June 2005, we repaid the 6.5% senior notes totaling $150,000,000 at maturity utilizing a combination of cash flow from
operations and commercial paper issuances. In July 2005, we repaid the 4.75% senior notes totaling $200,000,000 at
maturity also utilizing a combination of cash flow from operations and commercial paper issuances.
In April 2005, we filed with the Securities and Exchange Commission a shelf registration statement covering
$1,500,000,000 in debt securities. The registration statement was declared effective in May 2005. In September 2005,
we issued 5.375% senior notes totaling $500,000,000 due on September 21, 2035, under the April 2005 shelf registration.
These notes, which were priced at 99.911% of par, are unsecured, are not subject to any sinking fund requirement and
include a redemption provision which allows us to retire the notes at any time prior to maturity at the greater of par plus
accrued interest or an amount designed to ensure that the noteholders are not penalized by the early redemption.
Proceeds from the notes were utilized to retire commercial paper issuances outstanding as of September 2005.
In March 2005, we entered into a forward-starting interest rate swap with a notional amount of $350,000,000 as a cash
flow hedge of the variability in the cash outflows of interest payments on the forecasted debt issuance due to changes in
the benchmark interest rate. The fair value of the swap as of July 2, 2005 was ($32,584,000), which is reflected in Accrued
expenses on the Consolidated Balance Sheet, with the corresponding amount reflected as a loss, net of tax, in Other
comprehensive income (loss). In September 2005, in conjunction with the issuance of the 5.375% senior notes described
above, we settled the $350,000,000 notional amount forward-starting interest rate swap. Upon termination, we paid cash
of $21,196,000, which represented the fair value liability associated with the swap agreement at the time of termination.
This amount is being amortized as interest expense over the 30-year term of the debt, and the unamortized balance is
reflected as a loss, net of tax, in Other comprehensive income (loss).
In May 2006, we repaid at maturity the 7.0% senior notes totaling $200,000,000 utilizing a combination of cash flow from
operations and commercial paper issuances.
In April 2007, we repaid at maturity the 7.25% senior notes totaling $100,000,000 utilizing a combination of cash flow
from operations and commercial paper issuances.
Total debt as of June 30, 2007 was $1,780,695,000, of which approximately 68% was at fixed rates averaging 5.8% and
the remainder was at floating rates averaging 5.2%. Certain loan agreements contain typical debt covenants to protect
noteholders, including provisions to maintain our long-term debt to total capital ratio below a specified level. We were
in compliance with all debt covenants as of June 30, 2007.
As part of normal business activities, we issue letters of credit through major banking institutions as required by certain
vendor and insurance agreements. As of June 30, 2007 and July 1, 2006, letters of credit outstanding were $62,645,000
and $60,000,000, respectively.
Other Considerations
Product Liability Claim
In July, 2007, SYSCO was found contractually liable in arbitration proceedings related to a product liability claim from one
of our former customers. As of June 30, 2007, we have recorded $50,296,000 on our consolidated balance sheet within
accrued expenses related to the accrual of this loss. Also as of June 30, 2007, a corresponding receivable of $48,296,000
is included in the consolidated balance sheet within prepaid expenses and other current assets, which represents the
estimate of the loss less the $2,000,000 deductible on SYSCO’s insurance policy. We have hold harmless agreements with
the product suppliers and are named as an additional insured party under the suppliers’ policies with their insurers.
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