Sysco 2011 Annual Report Download - page 55

Pension accounting standards require the recognition of the funded status of our defined benefit plans in the statement of financial position,
with a corresponding adjustment to accumulated other comprehensive income, net of tax. The amount reflected in accumulated other
comprehensive loss related to the recognition of the funded status of our defined benefit plans as of July 2, 2011 was a charge, net of tax, of
$501.1 million. The amount reflected in accumulated other comprehensive loss related to the recognition of the funded status of our defined
benefit plans as of July 3, 2010 was a charge, net of tax, of $598.8 million.
Changes in the assumptions, including changes to the discount rate discussed above, together with the normal growth of the plans, the
impact of actuarial losses from prior periods and the timing and amount of contributions, increased net company-sponsored pension costs by
approximately $60 million in fiscal 2011. Changes in the assumptions, including changes to the discount rate discussed above, together with the
normal growth of the plans, the impact of actuarial losses from prior periods, the impact of plan amendments and the timing and amount of
contributions are expected to decrease net company-sponsored pension costs in fiscal 2012 by approximately $27 million.
We made cash contributions to our company-sponsored pension plans of $161.7 million and $297.9 million in fiscal years 2011 and 2010,
respectively. Included in the $161.7 million of contributions in fiscal 2011 was a $140.0 million contribution to our Retirement Plan that would
normally have been made in fiscal 2012. We did not have a minimum required contribution to the Retirement Plan for the calendar 2010 plan year
to meet ERISA minimum funding requirements. Included in the $297.9 million of contributions in fiscal 2010 the minimum required contribution
for the calendar 2009 plan year to meet ERISA minimum funding requirements, as well as a $140.0 million contribution to our Retirement Plan that
would normally have been made in fiscal 2011. We do not have a minimum required contribution to the Retirement Plan for the calendar 2011
plan year to meet ERISA minimum funding requirements that must be made in fiscal 2012. Additional contributions to our Retirement Plan are not
currently anticipated in fiscal 2012, however we will evaluate our funding position at the end of fiscal 2012 and select the timing for a contribution
at that time. The estimated fiscal 2012 contributions to fund benefit payments for the SERP plan are approximately $23 million.
Income Taxes
The determination of our provision for income taxes requires significant judgment, the use of estimates and the interpretation and
application of complex tax laws. Our provision for income taxes primarily reflects a combination of income earned and taxed in the various
U.S. federal and state, as well as foreign jurisdictions. Jurisdictional tax law changes, increases or decreases in permanent differences between
book and tax items, accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances, and our change in the mix of
earnings from these taxing jurisdictions all affect the overall effective tax rate.
Our liability for unrecognized tax benefits contains uncertainties because management is required to make assumptions and to apply
judgment to estimate the exposures associated with our various filing positions. We believe that the judgments and estimates discussed herein
are reasonable; however, actual results could differ, and we may be exposed to losses or gains that could be material. To the extent we prevail in
matters for which a liability has been established, or pay amounts in excess of recorded liabilities, our effective income tax rate in a given financial
statement period could be materially affected. An unfavorable tax settlement generally would require use of our cash and may result in an
increase in our effective income tax rate in the period of resolution. A favorable tax settlement may be recognized as a reduction in our effective
income tax rate in the period of resolution.
Vendor Consideration
We recognize consideration received from vendors when the services performed in connection with the monies received are completed and
when the related product has been sold by Sysco. There are several types of cash consideration received from vendors. In many instances, the
vendor consideration is in the form of a specified amount per case or per pound. In these instances, we will recognize the vendor consideration as
a reduction of cost of sales when the product is sold. In some instances, vendor consideration is received upon receipt of inventory in our
distribution facilities. We estimate the amount needed to reduce our inventory based on inventory turns until the product is sold. Our inventory
turnover is usually less than one month; therefore, amounts deferred against inventory do not require long-term estimation. In the situations
where the vendor consideration is not related directly to specific product purchases, we will recognize these as a reduction of cost of sales when
the earnings process is complete, the related service is performed and the amounts realized. Historically, adjustments to our estimates related to
vendor consideration have not been significant.
Goodwill and Intangible Assets
Goodwill and intangible assets represent the excess of consideration paid over the fair value of tangible net assets acquired. Certain
assumptions and estimates are employed in determining the fair value of assets acquired, including goodwill and other intangible assets, as well
as determining the allocation of goodwill to the appropriate reporting unit.
In addition, annually in our fourth quarter or more frequently as needed, we assess the recoverability of goodwill and indefinite-lived
intangibles by determining whether the fair values of the applicable reporting units exceed the carrying values of these assets. The reporting units
used in assessing goodwill impairment are our eight operating segments as described in Note 19, “Business Segment Information,” to the
Consolidated Financial Statements in Item 8. The components within each of our eight operating segments have similar economic characteristics
and therefore are aggregated into eight reporting units.
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