Sysco 2008 Annual Report Download - page 46

Fixed Rate Debt
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 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 September 2005, in conjunction with the issuance of the 5.375% senior notes described above, we settled a $350,000,000 notional
amount forward-starting interest rate swap we had entered into in March 2005. 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.
In January 2008, the SEC granted our request to terminate our then existing shelf registration statement that was filed with the SEC in
April 2005 for the issuance of debt securities. In February 2008, we filed an automatically effective well-known seasoned issuer shelf
registration statement for the issuance of up to $1,000,000,000 in debt securities with the SEC.
In February 2008, we issued 4.20% senior notes totaling $250,000,000 due February 12, 2013 (the “2013 notes”) and 5.25% senior
notes totaling $500,000,000 due February 12, 2018 (the “2018 notes”) under our February 2008 shelf registration. The 2013 and 2018
notes, which were priced at 99.835% and 99.310% of par, respectively, 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 February 2008.
Total Debt
Total debt as of June 28, 2008 was $1,980,331,000, of which approximately 99% was at fixed rates averaging 5.4% and the remainder
was at floating rates averaging 2.2%. 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 28, 2008.
Other
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 28, 2008 and June 30, 2007, letters of credit outstanding were $35,785,000 and $62,645,000,
respectively.
Other Considerations
Multi-Employer Pension Plans
As discussed in Note 18, 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 underfunded 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 most of the multi-employer plans we participate in, some of which
appear to be underfunded, could be as much as $140,000,000 based on a voluntary withdrawal.
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, requires underfunded pension plans to improve their funding ratios within
prescribed intervals based on the level of their underfunding. We believe that any unforeseen 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. Of the plans in which SYSCO participates, one plan is more critically underfunded than the others. During fiscal 2008, we
obtained information that this plan failed to satisfy minimum funding requirements for certain periods and believe it is probable that
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