Sysco 2009 Annual Report Download - page 49

Instruments,” and APB Opinion No. 28, “Interim Financial Reporting,” to require disclosures about the fair value of financial instruments for interim
reporting periods of publicly traded companies. Prior disclosure requirements only applied to annual financial statements. This standard is effective
for interim reporting periods ending after June 15, 2009, which is the first quarter of fiscal 2010 for Sysco. We will provide the disclosures about the
fair value of financial instruments required by FSP FAS 107-1 and APB 28-1 in our interim financial statement disclosures beginning in fiscal 2010.
Forward-Looking Statements
Certain statements made herein that look forward in time or express management’s expectations or beliefs with respect to the occurrence of
future events are forward-looking statements under the Private Securities Litigation Reform Act of 1995. They include statements about Sysco’s
ability to increase its sales and market share and grow earnings, the continuing impact of economic conditions on consumer confidence and our
business, sales and expense trends, anticipated multi-employer pension related liabilities and contributions to various multi-employer pension plans,
the estimated impact of the IRS settlement, the impact of ongoing legal proceedings, the loss of SYGMA’s largest customer not having a material
adverse effect on Sysco as a whole, compliance with laws and government regulations not having a material effect on our capital expenditures,
earnings or competitive position, anticipated capital expenditures and the sources of financing for those capital expenditures, continued competitive
advantages and positive results from strategic initiatives, anticipated company-sponsored pension plan liabilities, the availability and adequacy of
insurance to cover liabilities, the impact of future adoption of accounting pronouncements, predictions regarding the impact of changes in estimates
used in impairment analyses, the anticipated impact of changes in foreign currency exchange rates and Sysco’s ability to meet future cash
requirements and remain profitable.
These statements are based on management’s current expectations and estimates; actual results may differ materially due in part to the risk
factors discussed at Item 1.A. above and elsewhere. In addition, the success of Sysco’s strategic initiatives could be affected by conditions in the
economy and the industry and internal factors such as the ability to control expenses, including fuel costs. Company-sponsored pension plan
liabilities are impacted by a number of factors including the discount rate for determining the current value of plan benefits, the assumption for the
rate of increase in future compensation levels and the expected rate of return on plan assets. Legal proceedings are impacted by events,
circumstances and individuals beyond the control of Sysco. The need for additional borrowing or other capital is impacted by factors that include
capital expenditures or acquisitions in excess of those currently anticipated, stock repurchases at historical levels, or other unexpected cash
requirements. The diluted earnings per share impact of the settlement is impacted by share repurchases and the number of anti-dilutive stock
options excluded from the diluted shares calculation. The diluted earnings per share impact of the IRS settlement is impacted by share repurchases
and the number of anti-dilutive stock options excluded from the diluted shares calculation. Predictions regarding the future adoption of accounting
pronouncements involve estimates without the benefit of precedent, and if our estimates turn out to be materially incorrect, our assessment of the
impact of the pronouncement could prove incorrect, as well. The anticipated impact of compliance with laws and regulations also involves the risk
that estimates may turn out to be materially incorrect, and laws and regulations, as well as methods of enforcement, are subject to change.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
We do not utilize financial instruments for trading purposes. Our use of debt directly exposes us to interest rate risk. Floating rate debt, where
the interest rate fluctuates periodically, exposes us to short-term changes in market interest rates. Fixed rate debt, where the interest rate is fixed
over the life of the instrument, exposes us to changes in market interest rates reflected in the fair value of the debt and to the risk that we may need to
refinance maturing debt with new debt at higher rates.
We manage our debt portfolio to achieve an overall desired position of fixed and floating rates and may employ interest rate swaps as a tool to
achieve that goal. The major risks from interest rate derivatives include changes in the interest rates affecting the fair value of such instruments,
potential increases in interest expense due to market increases in floating interest rates and the creditworthiness of the counterparties in such
transactions.
Fiscal 2009
As of June 27, 2009, we had no commercial paper outstanding. Our long-term debt obligations as of June 27, 2009 were $2,476,649,000, of
which approximately 99% were at fixed rates of interest. We had no interest rate swaps outstanding as of June 27, 2009.
29