Sysco 2011 Annual Report Download - page 57

issuances resulting from employee purchases of stock under the Employees’ Stock Purchase Plan is recognized during the quarter in which the
employee payroll withholdings are made.
Certain of our option awards are generally subject to graded vesting over a service period. In those cases, we will recognize compensation
cost on a straight-line basis over the requisite service period for the entire award. In other cases, certain of our option awards provide for graded
vesting over a service period but include a performance-based provision allowing for the vesting to accelerate. In these cases, if it is probable that
the performance condition will be met, we recognize compensation cost on a straight-line basis over the shorter performance period; otherwise,
we recognize compensation cost over the probable longer service period.
In addition, certain of our share-based awards provide that if the award holder retires at certain age and years of service thresholds, the
options continue to vest as if the award holder continued to be an employee or director. In these cases, for awards granted prior to July 2, 2005
(our adoption date for the fair value recognition provisions in current stock compensation accounting standards), we will recognize the
compensation cost for such awards over the remaining service period and accelerate any remaining unrecognized compensation cost when the
employee retires. For awards granted subsequent to July 3, 2005, we will recognize compensation cost for such awards over the period from the
date of grant to the date the employee first becomes eligible to retire with his options continuing to vest after retirement.
Our option grants include options that qualify as incentive stock options for income tax purposes. In the period the compensation cost
related to incentive stock options is recorded, a corresponding tax benefit is not recorded as it is assumed that we will not receive a tax deduction
related to such incentive stock options. We may be eligible for tax deductions in subsequent periods to the extent that there is a disqualifying
disposition of the incentive stock option. In such cases, we would record a tax benefit related to the tax deduction in an amount not to exceed the
corresponding cumulative compensation cost recorded in the financial statements on the particular options multiplied by the statutory tax rate.
Forward-Looking Statements
Certain statements made herein that look forward in time or express management’s expectations or beliefs with respect to the occurrence of
future events are forward-looking statements under the Private Securities Litigation Reform Act of 1995. They include statements about Sysco’s
ability to increase its sales and market share and grow earnings, the continuing impact of economic conditions on consumer confidence and our
business, sales and expense trends, including expectations regarding pay-related expense and pension costs, anticipated multi-employer pension
related liabilities and contributions to various multi-employer pension plans, expectations regarding potential payments of unrecognized tax
benefits and interest, expectations regarding share repurchases, expected trends in fuel pricing, usage costs and surcharges, our expectation
regarding the provision for losses on accounts receivable, expected implementation, costs and benefits of the ERP system, estimated expenses
and capital expenditures related to our Business Transformation Project in fiscal 2012, our plan to continue to explore and identify opportunities
to grow in international markets and adjacent areas that complement our core business, the impact of ongoing legal proceedings, the loss of
SYGMA’s largest customer not having a material adverse effect on Sysco as a whole, compliance with laws and government regulations not having
a material effect on our capital expenditures, earnings or competitive position, anticipated acquisitions and capital expenditures and the sources
of financing for them, continued competitive advantages and positive results from strategic initiatives, anticipated company-sponsored pension
plan liabilities, our expectations regarding cash flow from operations, the availability and adequacy of insurance to cover liabilities, the impactof
future adoption of accounting pronouncements, predictions regarding the impact of changes in estimates used in impairment analyses, the
anticipated impact of changes in foreign currency exchange rates and Sysco’s ability to meet future cash requirements and remain profitable.
These statements are based on management’s current expectations and estimates; actual results may differ materially due in part to the risk
factors discussed at Item 1.A. above and elsewhere. In addition, the success of Sysco’s strategic initiatives could be affected by conditions in the
economy and the industry and internal factors such as the ability to control expenses, including fuel costs. Expected trends related to fuel costs
and usage are impacted by fluctuations in the economy generally and numerous factors affecting the oil industry that are beyond our control. Our
efforts to lower our cost of goods sold may be impacted by factors beyond our control, including actions by our competitors and/or customers.
We have experienced delays in the implementation of our Business Transformation Project and the expected costs of our Business Transformation
Project may be greater or less than currently expected, as we may encounter the need for changes in design or revisions of the project calendar
and budget. Our business and results of operations may be adversely affected if we experience operating problems, scheduling delays, cost
overages, or limitations on the extent of the business transformation during the ERP implementation process. As implementation of the ERP
system and the Business Transformation Project begins, there may be changes in design or timing that impact near-term expense and cause us to
revise the project calendar and budget, and additional hiring and training of employees and consultants may be required, which could also impact
project expense and timing. Company-sponsored pension plan liabilities are impacted by a number of factors including the discount rate for
determining the current value of plan benefits, the assumption for the rate of increase in future compensation levels and the expected rate of
return on plan assets. The amount of shares repurchased in a given period is subject to a number of factors, including available cash and our
general working capital needs at the time. Our plans with respect to growth in international markets and adjacent areas that complement our core
business are subject to the company’s other strategic initiatives and plans and economic conditions generally. Legal proceedings are impacted by
events, circumstances and individuals beyond the control of Sysco. The need for additional borrowing or other capital is impacted by factors that
include capital expenditures or acquisitions in excess of those currently anticipated, stock repurchases at historical levels, or other unexpected
cash requirements. Predictions regarding the future adoption of accounting pronouncements involve estimates without the benefit of precedent,
and if our estimates turn out to be materially incorrect, our assessment of the impact of the pronouncement could prove incorrect, as well. The
anticipated impact of compliance with laws and regulations also involves the risk that estimates may turn out to be materially incorrect, and laws
and regulations, as well as methods of enforcement, are subject to change.
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