Sysco 2010 Annual Report Download - page 86
Download and view the complete annual report
Please find page 86 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.Deferred Tax Assets and Liabilities
Significant components of Sysco’s deferred tax assets and liabilities are as follows:
July 3, 2010 June 27, 2009
(In thousands)
Deferred tax liabilities:
Deferred supply chain distributions............................................... $ 542,424 $ 750,755
Excess tax depreciation and basis differences of assets . . .............................. 288,122 254,131
Goodwill and intangible assets .................................................. 157,943 141,525
Other ................................................................... 26,032 14,190
Total deferred tax liabilities ................................................... 1,014,521 1,160,601
Deferred tax assets:
Net operating tax loss carryforwards ............................................. 70,439 75,079
Benefit on unrecognized tax benefits ............................................. 32,790 55,609
Pension . . ............................................................... 213,398 121,995
Share-based compensation .................................................... 54,426 33,553
Deferred compensation . . .................................................... 39,823 55,746
Self-insured liabilities ........................................................ 40,623 40,912
Receivables............................................................... 54,511 44,799
Inventory . ............................................................... 47,256 39,491
Other ................................................................... 34,836 29,669
Total deferred tax assets .................................................... 588,102 496,853
Valuation allowances ........................................................ 23,115 24,994
Total net deferred tax liabilities ................................................... $ 449,534 $ 688,742
The company had state and Canadian net operating tax losses as of July 3, 2010 and June 27, 2009. The net operating tax losses outstanding as
of July 3, 2010 expire in fiscal years 2011 through 2030. Valuation allowances of $23.1 million and $25.0 million were recorded for the state tax loss
carryforwards as of July 3, 2010 and June 27, 2009, respectively, as management believes that it is more likely than not that a portion of the benefits
of these state tax loss carryforwards will not be realized.
Effective Tax Rates
Reconciliations of the statutory federal income tax rate to the effective income tax rates for each fiscal year are as follows:
2010 2009 2008
United States statutory federal income tax rate ........................................... 35.00% 35.00% 35.00%
State and local income taxes, net of any applicable federal income tax benefit ...................... 2.89 2.59 2.25
Foreign income taxes . ............................................................ (0.31) (0.96) (1.11)
Impact of uncertain tax benefits ...................................................... (1.46) 1.75 0.64
Impact of adjusting carrying value of corporate-owned life insurance policies to their cash surrender
values ...................................................................... (0.45) 0.95 0.19
Other . ....................................................................... 0.53 1.04 1.28
36.20% 40.37% 38.25%
The effective tax rate of 36.20% for fiscal 2010 was favorably impacted by two items. First, as discussed above, the company recorded an
income tax benefit of approximately $29.0 million resulting from the one-time reversal of previously accrued interest related to the settlement with
the IRS. 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 unfavorably impacted primarily by two factors. First, the company 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.
Uncertain Tax Positions
Effective July 1, 2007, the company adopted the accounting and disclosure provisions related to uncertain tax positions. This guidance provides
that a tax benefit from an uncertain tax position is recognized when it is more likely than not that the position will be sustained upon examination,
including resolutions of any related appeals or litigation processes, based on the technical merits of the position. The amount recognized is measured
as the largest amount of tax benefit that has greater than a 50% likelihood of being realized upon settlement. As a result of this adoption, the
62