Sysco 2010 Annual Report Download - page 42
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Please find page 42 of the 2010 Sysco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.are incremental from operating expenses incurred by Sysco in the applicable periods in the prior fiscal year. Additionally, certain labor costs, which
would have been expensed absent this project, are being capitalized as software costs as a result of this project. We believe the increase in total
expense, including all pay-related expenses, related to the Business Transformation Project in fiscal 2011 as compared to fiscal 2010 will be
approximately $25 million to $45 million.
We recorded provisions related to multi-employer pension plans of $2.9 million in fiscal 2010, $9.6 million in fiscal 2009 and $22.3 million in
fiscal 2008. See additional discussion of multi-employer pension plans at “Liquidity and Capital Resources, Other Considerations, Multi-Employer
Pension Plans.”
Share-based compensation expense decreased $24.6 million in fiscal 2009 from fiscal 2008. Contributing to the decrease in fiscal 2009 was
reduction in the level of option grants being awarded compared to previous years, resulting in reduced compensation expenses being recognized.
Also affecting the decrease in fiscal 2009 was the removal of the previous stock award component from the Management Incentive Plan annual
bonus awards beginning with fiscal 2009. As a result, the share-based compensation expense related to the stock award component of the incentive
bonuses recorded in previous years was not incurred in fiscal 2009, and overall share-based compensation expense was reduced as compared to
fiscal 2008.
Net Earnings
Net earnings increased 11.7% in fiscal 2010 from fiscal 2009 due primarily to the impact of changes in income taxes discussed below, as well as
the factors discussed above including the additional week in fiscal 2010. Set forth below is a reconciliation of actual net earnings to adjusted net
earnings for the periods presented (see further discussion at “Impact of 53-week fiscal year” above):
2010
(53 Weeks) 2009
Net earnings for the 53/52 week periods . . ......................................... $ 1,179,983 $ 1,055,948
Estimated net earnings for the additional week ....................................... 24,127 —
Adjusted net earnings . . . ..................................................... $ 1,155,856 $ 1,055,948
Actual percentage increase ..................................................... 11.7%
Adjusted percentage increase ................................................... 9.5%
Net earnings declined 4.5% in fiscal 2009 from fiscal 2008 due primarily to the impact of changes in income taxes discussed below, as well as
the factors discussed above.
The effective tax rate was 36.20% in fiscal 2010, 40.37% in fiscal 2009 and 38.25% in fiscal 2008.
The effective tax rate of 36.20% for fiscal 2010 was favorably impacted by two items. First, we recorded an income tax benefit of approximately
$29.0 million resulting from the one-time reversal of a previously accrued liability related to the settlement with the IRS (See “Liquidity and Capital
Resources, Other Considerations, BSCC Cooperative Structure” for additional discussion). Second, the gain of $21.6 million, which had a tax impact
of $8.3 million, recorded to adjust the carrying value of COLI policies to their cash surrender values in fiscal 2010, was non-taxable for income tax
purposes and had the impact of decreasing the effective tax rate in the period.
The effective tax rate of 40.37% for fiscal 2009 was negatively impacted primarily by two factors. First, we recorded tax adjustments related to
federal and state uncertain tax positions of $31.0 million. Second, the loss of $43.8 million, which had a tax impact of $16.8 million, recorded to adjust
the carrying value of COLI policies to their cash surrender values was non-deductible for income tax purposes and had the impact of increasing the
effective tax rate for the period. The effective tax rate for fiscal 2009 was favorably impacted by the reversal of valuation allowances of $7.8 million
previously recorded on Canadian net operating loss deferred tax assets.
The effective tax rate of 38.25% for fiscal 2008 was favorably impacted by tax benefits of approximately $7.7 million resulting from the
recognition of a net operating loss deferred tax asset which arose due to a state tax law change, $8.6 million related to the reversal of valuation
allowances previously recorded on Canadian net operating loss deferred tax assets and $5.5 million related to the reduction in net Canadian deferred
tax liabilities due to a federal tax rate reduction. The effective tax rate for fiscal 2008 was unfavorably impacted by the recording of tax and interest
related to uncertain tax positions, share-based compensation expense and the recognition of losses of $8.7 million, which had an unfavorable tax
impact of $3.3 million, recorded to adjust the carrying value of COLI policies to their cash surrender values.
Earnings Per Share
Both basic earnings per share and diluted earnings per share increased 12.4% in fiscal 2010 from the prior year. Basic earnings per share and
diluted earnings per share decreased 3.3% and 2.2%, respectively, in fiscal 2009 over the prior year. These changes were primarily the result of
factors discussed above including the additional week in fiscal 2010, as well as a net reduction in shares outstanding. The net reduction in average
shares outstanding was primarily due to share repurchases. The net reduction in diluted shares outstanding was primarily due to share repurchases
and an increase in the number of anti-dilutive options excluded from the diluted shares calculation.
Both basic and diluted earnings per share were favorably impacted by $0.09 per share in fiscal 2010 due to the one-time reversal of interest
accruals for the tax contingency related to the IRS settlement and the gains recorded on the adjustment of the carrying value of COLI policies to their
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