Sysco 2011 Annual Report Download - page 52

the most recently available valuation and participant data for the respective plans; amounts are adjusted up to the period of payment to reflect
any changes to these estimates. If any of these plans were to undergo a mass withdrawal, as defined by the Pension Benefit Guaranty Corporation,
within a two year time frame from the point of our withdrawal, we could have additional liability. We do not currently believe any mass
withdrawals are probable to occur in the applicable two year time frame relating to the plans from which we have voluntarily withdrawn.
Required contributions to multi-employer plans could increase in the future as these plans strive to improve their funding levels. In addition,
the Pension Protection Act, enacted in August 2006, requires underfunded pension plans to improve their funding ratios within prescribed
intervals based on the level of their underfunding. We believe that any unforeseen requirements to pay such increased contributions, withdrawal
liability and excise taxes would be funded through cash flow from operations, borrowing capacity or a combination of these items.
During fiscal 2008, we obtained information that a multi-employer pension plan we participated in failed to satisfy minimum funding
requirements for certain periods and concluded that it was probable that additional funding would be required as well as the payment of excise
tax. As a result, during fiscal 2008, we recorded a liability of approximately $16.5 million related to our share of the minimum funding requirements
and related excise tax for these periods. During the first quarter of fiscal 2009, we effectively withdrew from this multi-employer pension plan in an
effort to secure benefits for our employees that were participants in the plan and to manage our exposure to this under-funded plan. We agreed
to pay $15.0 million to the plan, which included the minimum funding requirements. In connection with this withdrawal agreement, we merged
active participants from this plan into Sysco’s company-sponsored Retirement Plan and assumed $26.7 million in liabilities. The payment to the
plan was made in the early part of the second quarter of fiscal 2009.
BSCC Cooperative Structure
Sysco’s affiliate, Baugh Supply Chain Cooperative (BSCC), was a cooperative taxed under subchapter T of the United States Internal Revenue
Code, the operation of which had resulted in a deferral of tax payments. The IRS, in connection with its audits of our 2003 through 2006 federal
income tax returns, proposed adjustments that would have accelerated amounts that we 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 relates to the IRS audit of our 2003 through 2006 federal income tax returns, and settles the matter for all subsequent
periods, including the 2007 and 2008 federal income tax returns already under audit. As a result of the settlement, we agreed to pay the amounts
owed in the following schedule:
(In thousands)
Fiscal 2010 ....................................................................................... $528,000
Fiscal 2011 ....................................................................................... 212,000
Fiscal 2012 ....................................................................................... 212,000
As noted in the table above, payments related to the settlement were $212.0 million and $528.0 million in fiscal 2011 and fiscal 2010,
respectively. Remaining amounts to be paid in 2012 will be paid in connection with our quarterly tax payments, two of which fall in the second
quarter, one in the third quarter and one in the fourth quarter. We believe we have access to sufficient cash on hand, cash flows from operations
and current access to capital to make payments required in fiscal 2012.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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