Sysco 2010 Annual Report Download - page 87
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Please find page 87 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.company recognized, as a cumulative effect of change in accounting principle, a $91.6 million decrease in its beginning retained earnings on its July 1,
2007 balance sheet.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, excluding interest and penalties, is as follows:
2010 2009
(In thousands)
Unrecognized tax benefits at beginning of year ........................................... $ 92,145 $ 87,929
Additions for tax positions related to prior years........................................... 2,796 21,645
Reductions for tax positions related to prior years ......................................... (8,645) (1,959)
Additions for tax positions related to the current year . . ..................................... 19,595 10,935
Reductions for tax positions related to the current year ..................................... — —
Reductions due to settlements with taxing authorities . ..................................... (15,608) (24,817)
Reductions due to lapse of applicable statute of limitations ................................... (432) (1,588)
Unrecognized tax benefits at end of year ............................................... $ 89,851 $ 92,145
As of July 3, 2010, $15.9 million of the gross liability for unrecognized tax benefits was netted within prepaid income taxes as payment was
expected to occur during fiscal 2011. As of July 3, 2010, the gross amount of liability for accrued interest and penalties related to unrecognized tax
benefits was $40.6 million, of which $8.7 million was netted within prepaid income taxes as payment was expected to occur during fiscal 2011. The
expense recorded for interest and penalties related to unrecognized tax benefits in fiscal 2010 was $12.0 million.
As of June 27, 2009, the gross amount of liability for accrued interest and penalties related to unrecognized tax benefits was $147.0 million, of
which $41.0 million was classified within accrued income taxes as payment was to occur during fiscal 2010. The expense recorded for interest and
penalties related to unrecognized tax benefits in fiscal 2009 was $18.7 million.
To the extent interest and penalties may be assessed by taxing authorities on any underpayment of income tax, estimated amounts required by
the accounting guidance related to uncertain tax positions have been accrued and are classified as a component of income taxes in the consolidated
results of operations.
If Sysco were to recognize all unrecognized tax benefits recorded as of July 3, 2010, approximately $62.4 million of the $89.9 million reserve
would reduce the effective tax rate. It is reasonably possible that the amount of the unrecognized tax benefits with respect to certain of the
company’s unrecognized tax positions will increase or decrease in the next twelve months either because Sysco’s positions are sustained on audit or
because the company agrees to their disallowance. Items that may cause changes to unrecognized tax benefits primarily include the consideration of
various filing requirements in various states and the allocation of income and expense between tax jurisdictions. In addition, the amount of
unrecognized tax benefits recognized within the next twelve months may decrease due to the expiration of the statute of limitations for certain years
in various jurisdictions; however, it is possible that a jurisdiction may open an audit on one of these years prior to the statute of limitations expiring.
At this time, an estimate of the range of the reasonably possible change cannot be made.
The IRS is auditing Sysco’s 2007 and 2008 federal income tax returns. As of July 3, 2010, Sysco’s tax returns in the majority of the state and
local jurisdictions and Canada are no longer subject to audit for the years before 2003. However, some jurisdictions have audits open prior to 2003,
with the earliest dating back to 1996. Although the outcome of tax audits is generally uncertain, the company believes that adequate amounts of tax,
including interest and penalties, have been accrued for any adjustments that may result from those open years.
Other
The company intends to permanently reinvest the undistributed earnings of its foreign subsidiaries in those businesses outside of the United
States and, therefore, has not provided for U.S. deferred income taxes on such undistributed foreign earnings.The determination of the amount of the
unrecognized deferred tax liability related to the undistributed earnings is not practicable.
The determination of the company’s provision for income taxes requires significant judgment, the use of estimates and the interpretation and
application of complex tax laws. The company’s provision for income taxes primarily reflects a combination of income earned and taxed in the
various U.S. federal and state, as well as various foreign jurisdictions. Jurisdictional tax law changes, increases or decreases in permanent differences
between book and tax items, accruals or adjustments of accruals for tax contingencies or valuation allowances, and the company’s change in the mix
of earnings from these taxing jurisdictions all affect the overall effective tax rate.
17. ACQUISITIONS
During fiscal 2010, in the aggregate, the company paid cash of $29.3 million for operations acquired during fiscal 2010 and for contingent
consideration related to operations acquired in previous fiscal years. During fiscal 2010, Sysco acquired for cash a broadline foodservice operation in
Syracuse, New York, a produce distributor in Atlanta, Georgia and a seafood distributor in Edmonton, Alberta, Canada. The fiscal 2010 acquisitions
were immaterial, individually and in the aggregate, to the consolidated financial statements.
Certain acquisitions involve contingent consideration typically payable over periods up to five years only in the event that certain outstanding
contingencies are resolved. As of July 3, 2010, aggregate contingent consideration amounts outstanding relating to acquisitions was $52.8 million,of
which $51.0 million could result in the recording of additional goodwill.
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