Sysco 2011 Annual Report Download - page 60

fuel costs impact the costs we incur to deliver product to our customers. During fiscal 2011, 2010 and 2009, fuel costs related to outbound
deliveries represented approximately 0.6%, 0.6% and 0.8% of sales, respectively. Fuel costs, excluding any amounts recovered through fuel
surcharges, incurred by Sysco increased by approximately $33.0 million in fiscal 2011 from fiscal 2010 and decreased by $71.8 million in fiscal 2010
over fiscal 2009.
We routinely enter into forward purchase commitments for a portion of our projected monthly diesel fuel requirements. As of July 2, 2011, we
had forward diesel fuel commitments totaling approximately $86 million through June 2012. These contracts will lock in the price of
approximately 30% to 35% of our fuel purchase needs for the contracted periods at prices lower than the current market price for diesel
for the first 26 weeks of fiscal 2012 and near the current market price for diesel for the remainder of the fiscal year.
Fuel costs in fiscal 2012, exclusive of any amounts recovered through fuel surcharges, are expected to increase by approximately $35 million
to $45 million as compared to fiscal 2011. Our estimate is based upon current, published quarterly market price projections for diesel, the cost
committed to in our forward fuel purchase agreements currently in place for fiscal 2012 and estimates of fuel consumption. Actual fuel costs could
vary from our estimates if any of these assumptions change, in particular if future fuel prices vary significantly from our current estimates. A 10%
unfavorable change in diesel prices from the market price used in our estimates above would change the range of potential increase to $55 million
to $65 million.
Investment Risk
Our company-sponsored qualified pension plan (Retirement Plan) holds investments in both equity and fixed income securities. The amount
of our annual contribution to the plan is dependent upon, among other things, the return on the plan’s assets and discount rates used to calculate
the plan’s liability. Fluctuations in asset values can cause the amount of our anticipated future contributions to the plan to increase and pension
expense to increase and can result in a reduction to shareholders’ equity on our balance sheet as of fiscal year-end, which is when this plan’s
funded status is measured. Also, the projected liability of the plan will be impacted by the fluctuations of interest rates on high quality bonds in
the public markets. Specifically, decreases in these interest rates may have a material impact on our results of operations. To the extent the
financial markets experience declines, our anticipated future contributions, pension expense and funded status will be affected for future years. A
10% unfavorable change in the value of the investments held by our company-sponsored Retirement Plan at the plan’s fiscal year end
(December 31, 2010) would not have a material impact on our anticipated future contributions for fiscal 2012; however, this unfavorable change
would increase our pension expense for fiscal 2012 by $39.8 million and would reduce our shareholders’ equity on our balance sheet as of July 2,
2011 by $129.7 million.
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