Sysco 2007 Annual Report Download - page 50

Further, we maintain our own product liability insurance with coverage related to this claim. We believe it is probable
that we will be able to recover the recorded loss from one or more of these sources.
Multi-Employer Pension Plans
As discussed in Note 16, Commitments and Contingencies, to the Consolidated Financial Statements in Item 8,
we contribute to several multi-employer defined benefit pension plans based on obligations arising under collective
bargaining agreements covering union-represented employees.
Under current law regarding multi-employer defined benefit plans, a plan’s termination, our voluntary withdrawal or the
mass withdrawal of all contributing employers from any under-funded multi-employer defined benefit plan would require
us to make payments to the plan for our proportionate share of the multi-employer plan’s unfunded vested liabilities.
Based on the information available from plan administrators, we estimate that our share of withdrawal liability on all the
multi-employer plans we participate in, some of which appear to be under-funded, could be as much as $120,000,000.
For those plans that appear to be under-funded, we do not currently believe that it is probable that there will be a mass
withdrawal of employers contributing to these plans or that any of the plans will terminate in the near future. However,
required contributions to multi-employer plans could increase in the future as these plans strive to improve their funding
levels. In addition, the Pension Protection Act, enacted in August 2006, will require under-funded pension plans to improve
their funding ratios within prescribed intervals based on the level of their under-funding, perhaps beginning as soon as
calendar 2008. Unforeseen requirements to pay such increased contributions, withdrawal liability and excise taxes could
cause us to raise additional capital through debt financing or the issuance of equity or we may be required to cancel
planned capital expenditures or share repurchases or a combination of these items.
BSCC Cooperative Structure
Our affiliate, BSCC, is a cooperative taxed under subchapter T of the Unites States Internal Revenue Code. We believe
that the deferred tax liabilities resulting from the business operations and legal ownership of BSCC are appropriate under
the tax laws. However, if the application of the tax laws to the cooperative structure of BSCC were to be successfully
challenged by any federal, state or local tax authority, we could be required to accelerate the payment of all or a portion
of our income tax liabilities associated with BSCC that we otherwise have deferred until future periods, and in that event,
would be liable for interest on such amounts. As of June 30, 2007, we have recorded deferred income tax liabilities of
$988,000,000 related to the BSCC supply chain distributions. This amount represents the income tax liabilities related to
BSCC that were accrued, but the payment had been deferred as of June 30, 2007. In addition, if the IRS or any other taxing
authority determines that all amounts since the inception of BSCC were inappropriately deferred or that BSCC should have
been a taxable entity, we estimate that in addition to making a current payment for amounts previously deferred, as
discussed above, we may have liability, representing interest that would be payable on the cumulative deferred balances
ranging from $185,000,000 to $205,000,000, prior to federal and state income tax benefit, as of June 30, 2007. We
calculated this amount based upon the amounts deferred since the inception of BSCC applying the applicable jurisdictions’
interest rates in effect in each period. During the third quarter of fiscal 2007, the IRS, in connection with its audit of our
2003 and 2004 federal income tax returns, proposed adjustments related to the taxability of BSCC. We are vigorously
protesting these adjustments. We have reviewed the merits of the issues raised by the IRS and based upon our review,
we believe that the resulting interest is not a probable liability and accordingly, have not recorded any related amount in
any period. A taxing authority requiring us to accelerate the payment of these deferred tax liabilities and to pay related
interest, if any, could cause us to raise additional capital through debt financing or the issuance of equity or we may have
to forego or defer planned capital expenditures or share repurchases or a combination of these items.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
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