Sysco 2010 Annual Report Download - page 85
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Please find page 85 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.16. INCOME TAXES
Income Tax Provisions
The income tax provision for each fiscal year consists of the following:
2010
(53 Weeks) 2009 2008
(In thousands)
United States federal income taxes . ........................................ $ 542,535 $ 602,595 $ 584,584
State and local income taxes ............................................. 80,492 87,223 79,587
Foreign income taxes .................................................. 46,579 25,068 21,016
Total .............................................................. $ 669,606 $ 714,886 $ 685,187
The current and deferred components of the income tax provisions for each fiscal year are as follows:
2010
(53 Weeks) 2009 2008
(In thousands)
Current ........................................................... $ 791,120 $ 1,010,595 $ 42,830
Deferred .......................................................... (121,514) (295,709) 642,357
Total ............................................................. $ 669,606 $ 714,886 $ 685,187
The deferred tax provisions result from the effects of net changes during the year in deferred tax assets and liabilities arising from temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Affecting the comparison of the deferred tax provisions is the Internal Revenue Service (IRS) settlement discussed below. Beginning in fiscal 2009,
the company is no longer deferring U.S. federal taxes with respect to Baugh Supply Chain Cooperative (BSCC), and the balance of previously deferred
taxes will be paid according to the schedule noted below. The provision for fiscal 2008 reflected Sysco’s treatment of BSCC-related deferred taxes
prior to the IRS settlement was impacted by the reclassification of deferred supply chain distributions from current deferred tax liabilities to accrued
income taxes based on the timing of when payments related to these items became payable.
Internal Revenue Service Settlement
Sysco’s affiliate BSCC, is a cooperative taxed under subchapter T of the United States Internal Revenue Code, the operation of which has
resulted in a deferral of tax payments. The IRS, in connection with its audits of the company’s 2003 through 2006 federal income tax returns,
proposed adjustments that would have accelerated amounts that the company had previously deferred and would have resulted in the payment of
interest on those deferred amounts. Sysco reached a settlement with the IRS in the first quarter of fiscal 2010 to cease paying U.S. federal taxes
related to BSCC on a deferred basis, pay the amounts that were recorded within deferred taxes related to BSCC over a three-year period and make a
one-time payment of $41.0 million, of which approximately $39.0 million was non-deductible.The settlement addressed the BSCC deferred tax issue
as it related to the IRS audit of the company’s 2003 through 2006 federal income tax returns, and settled the matter for all subsequent periods,
including the 2007 and 2008 federal income tax returns already under audit. As a result of the settlement, the company will pay the amounts owed
in the following schedule:
Amounts paid annually: (In thousands)
Fiscal 2010............................................................................ $ 528,000
Fiscal 2011............................................................................ 212,000
Fiscal 2012............................................................................ 212,000
As noted in the table above, $528.0 million was paid related to settlement in fiscal 2010. Amounts to be paid in fiscal 2011 and 2012 will be paid
in connection with Sysco’s quarterly tax payments, two of which fall in the second quarter, one in the third quarter and one in the fourth quarter.The
company believes it has access to sufficient cash on hand, cash flows from operations and current access to capital to make payments on all of the
amounts noted above.The company had previously accrued interest for a portion of the exposure pertaining to the IRS proposed adjustments and as
a result of the settlement with the IRS, Sysco recorded an income tax benefit of approximately $29.0 million in the first quarter of fiscal 2010.
Sysco’s deferred taxes were impacted by the timing of these installment payments. Sysco reclassified amounts due within one year from
deferred taxes to accrued income taxes at the beginning of fiscal 2010. Additionally, beginning in fiscal 2009, the company is not deferring taxes for
federal purposes according to its agreement with the IRS.
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