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SYSCO CORPORATION-Form10-K28
PARTII
ITEM7Management’s Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
Highlights
Comparisons of the cash fl ows from fi scal 2012 to fi scal 2011:
•Cash fl ows from operations were $1.4billion this year compared to $1.1billion last year.
•Settlement payments to the IRS were $212.0million in both periods.
•Capital expenditures totaled $784.5million this year compared to $636.4million last year.
•Bank borrowings, net were a net repayment of $182.0million this year compared to a net borrowing $182.0million last year.
•Treasury stock purchases were $272.3million this year compared to $291.6million last year.
•Dividends paid were $622.9million this year compared to $597.1million last year.
Sources and Uses of Cash
Sysco’s strategic objectives include continuous investment in our business; these investments are funded by a combination of cash from operations and access
to capital from fi nancial markets. Our operations historically have produced signifi cant cash fl ow. Cash generated from operations is generally allocated to:
•working capital requirements;
•investments in facilities, systems, fl eet, other equipment and technology;
•cash dividends;
•acquisitions compatible with our overall growth strategy;
•contributions to our various retirement plans; and
•debt repayments.
Any remaining cash generated from operations may be invested in high-quality, short-term instruments or applied toward the cost of the share repurchase
program. As a part of our ongoing strategic analysis, we regularly evaluate business opportunities, including potential acquisitions and sales of assets and
businesses, and our overall capital structure. Any transactions resulting from these evaluations may materially impact our liquidity, borrowing capacity,
leverage ratios and capital availability.
We continue to generate substantial cash fl ows from operations and remain in a strong fi nancial position, however our liquidity and capital resources can
be infl uenced by economic trends and conditions. Uncertain economic conditions and uneven levels of consumer confi dence and the resulting pressure on
consumer disposable income have lowered our sales growth and our cash fl ows from operations. Product cost infl ation has lowered our gross profi t and
cash fl ows from operations as we were unable to pass through all of the increased product costs with the same gross margin to our customers. We believe
our mechanisms to manage working capital, such as credit monitoring, optimizing inventory levels and maximizing payment terms with vendors, and our
mechanisms to manage product cost infl ation have been suffi cient to limit a signifi cant unfavorable impact on our cash fl ows from operations. We believe
these mechanisms will continue prevent a signifi cant unfavorable impact on our cash fl ows from operations. At June30,2012, we had $688.9million in
cash and cash equivalents, approximately 20% of which was held by our international subsidiaries generated from our earnings of international operations.
If these earnings were transferred among countries or repatriated to the U.S., such amounts may be subject to additional tax obligations; however, we do
not currently anticipate the need to relocate this cash.
We believe the following sources will be suffi cient to meet our anticipated cash requirements for the next twelve months and beyond, while maintaining suffi cient
liquidity for normal operating purposes:
•our cash fl ows from operations;
•the availability of additional capital under our existing commercial paper programs, supported by our revolving credit facility, and bank lines of credit;
•our ability to access capital from fi nancial markets, including issuances of debt securities, either privately or under our shelf registration statement fi led
with the Securities and Exchange Commission (SEC).
Due to our strong fi nancial position, we believe that we will continue to be able to effectively access the commercial paper market and long-term capital
markets, if necessary. We believe our cash fl ows from operations will improve in fi scal 2013 due to benefi ts from our Business Transformation Project and
initiatives to improve our working capital management.