Sysco 2012 Annual Report Download - page 54

SYSCO CORPORATION-Form10-K 31
PARTII
ITEM7Management’s Discussion and Analysis of Financial Condition and Results of Operations
In November2000, we fi led with the SEC a shelf registration statement covering 30,000,000shares of common stock to be offered from time to time in
connection with acquisitions. As of August15,2012, 29,477,835 shares remained available for issuance under this registration statement.
Debt Activity and Borrowing Availability
Short-term Borrowings
We have uncommitted bank lines of credit, which provided for unsecured borrowings for working capital of up to $95.0million, of which none was
outstanding as of June30,2012 or August15,2012.
Our Irish subsidiary, Pallas Foods Limited, has a €10.0million (Euro) committed facility for unsecured borrowings for working capital. There were no
borrowings outstanding under this facility as of June30,2012 or August15,2012.
On June30,2011, a Canadian subsidiary of Sysco entered into a short-term demand loan facility for the purpose of facilitating a distribution from the
Canadian subsidiary to Sysco, and Sysco concurrently entered into an agreement with the bank to guarantee the loan. The amount borrowed was
$182.0million and was repaid in full on July4,2011.
Commercial Paper and Revolving Credit Facility
We have a Board-approved commercial paper program allowing us to issue short-term unsecured notes in an aggregate amount not to exceed $1.3billion.
In December2011, we terminated our previously existing revolving credit facility that supported the company’s U.S. and Canadian commercial paper
programs. At the same time, Sysco and one of its subsidiaries, Sysco International, ULC, entered into a new $1.0billion credit facility supporting the
company’s U.S. and Canadian commercial paper programs. This facility provides for borrowings in both U.S. and Canadian dollars. Borrowings by Sysco
International, ULC under the credit agreement are guaranteed by Sysco, and borrowings by Sysco and Sysco International, ULC under the credit agreement
and guaranteed by all the wholly-owned subsidiaries of Sysco that are guarantors of the company’s senior notes and debentures. The facility expires on
December29,2016, but is subject to extension.
There were no commercial paper issuances outstanding as of June30,2012 or August15,2012. During fi scal 2012,2011 and 2010, aggregate
outstanding commercial paper issuances and short-term bank borrowings ranged from approximately zero to $563.1million, zero to $330.3million, and
zero to $1.8million, respectively. During fi scal 2012,2011 and 2010, our aggregate commercial paper issuances and short-term bank borrowings had a
weighted average interest rate of 0.16%, 0.25% and 0.80%, respectively.
Fixed Rate Debt
Included in current maturities of long-term debt as June30,2012 are the 4.2% senior notes totaling $250.0million, which mature in February2013. It is
our intention to fund the repayment of these notes at maturity through cash on hand, cash fl ow from operations, issuances of commercial paper, senior
notes or a combination thereof.
In September2009, we entered into an interest rate swap agreement that effectively converted $200.0million of fi xed rate debt maturing in fi scal 2014 to
fl oating rate debt. In October2009, we entered into an interest rate swap agreement that effectively converted $250.0million of fi xed rate debt maturing
in fi scal 2013 to fl oating rate debt. Both transactions were entered into with the goal of reducing overall borrowing cost and increasing fl oating interest rate
exposure. These transactions were designated as fair value hedges since the swaps hedge against the changes in fair value of fi xed rate debt resulting
from changes in interest rates.
In February2012, we fi led with the SEC an automatically effective well-known seasoned issuer shelf registration statement for the issuance of an indeterminate
amount of common stock, preferred stock, debt securities and guarantees of debt securities that may be issued from time to time.
In June2012, we repaid the 6.1% senior notes totaling $200.0million at maturity utilizing a combination of cash fl ow from operations and commercial
paper issuances.
In May2012, we entered into an agreement with a notional amount of $200.0million to lock in a component of the interest rate on our then forecasted debt
offering. We designated this derivative as a cash fl ow hedge of the variability in the cash outfl ows of interest payments on a portion of the then forecasted
June2012 debt issuance due to changes in the benchmark interest rate. In June2012, in conjunction with the issuance of the $450.0million senior notes
maturing in fi scal 2022, we settled the treasury lock, locking in the effective yields on the related debt. Upon settlement, we received cash of $0.7million,
which represented the fair value of the swap agreement at the time of settlement. This amount is being amortized as an offset to interest expense over the
10-year term of the debt, and the unamortized balance is refl ected as a gain, net of tax, Accumulated other comprehensive loss.
In June2012, we issued 0.55% senior notes totaling $300.0million due June12,2015 (the 2015 notes) and 2.6% senior notes totaling $450.0million
due June12,2022 (the 2022 notes) under its February2012 shelf registration. The 2015 and 2022 notes, which were priced at 99.319% and 98.722% of
par, respectively, are unsecured, are not subject to any sinking fund requirement and include a redemption provision which allows Sysco to retire the notes