Sysco 2012 Annual Report Download - page 56

SYSCO CORPORATION-Form10-K 33
PARTII
ITEM7Management’s Discussion and Analysis of Financial Condition and Results of Operations
Contractual Obligations
The following table sets forth, as of June30,2012, certain information concerning our obligations and commitments to make contractual future payments:
(In thousands)
Payments Due by Period
Total < 1 Year 1-3 Years 3-5 Years
More Than
5Years
Recorded Contractual Obligations:
Long-term debt $ 2,980,291 $ 250,036 $ 505,900 $ 140 $ 2,224,215
Capital lease obligations 38,047 4,614 7,034 4,007 22,392
Deferred compensation(1) 88,883 9,551 14,060 10,215 55,057
SERP and other postretirement plans(2) 298,994 23,739 51,042 57,532 166,681
Multiemployer pension plans(3) 30,695 30,695 - - -
Unrecognized tax benefi ts and interest(4) 80,106
Unrecorded Contractual Obligations:
Interest payments related to debt(5) 1,399,766 126,268 234,625 226,064 812,809
Retirement plan(6) 335,937 - 7,355 147,521 181,061
Long-term non-capitalized leases 225,121 48,680 72,226 43,581 60,634
Purchase obligations(7) 2,263,446 1,919,677 342,108 1,626 35
TOTAL CONTRACTUAL CASH OBLIGATIONS $ 7,741,286 $ 2,413,260 $ 1,234,350 $ 490,686 $ 3,522,884
(1) The estimate of the timing of future payments under the Executive Deferred Compensation Plan involves the use of certain assumptions, including retirement ages and payout periods.
(2) Includes estimated contributions to the unfunded SERP and other postretirement benefit plans made in amounts needed to fund benefit payments for vested participants in these plans through
fiscal 2022, based on actuarial assumptions.
(3) Represents voluntary withdrawal liabilities recorded and excludes normal contributions required under our collective bargaining agreements.
(4) Unrecognized tax benefits relate to uncertain tax positions recorded under accounting standards related to uncertain tax positions. As of June30,2012, we had a liability of $52.2million
for unrecognized tax benefits for all tax jurisdictions and $27.9million for related interest that could result in cash payment. We are not able to reasonably estimate the timing of non-current
payments or the amount by which the liability will increase or decrease over time. Accordingly, the related non-current balances have not been reflected in the “Payments Due by Period” section
of the table.
(5) Includes payments on floating rate debt based on rates as of June30,2012, assuming amount remains unchanged until maturity, and payments on fixed rate debt based on maturity dates.
The impact of our outstanding fixed-to-floating interest rate swaps on the fixed rate debt interest payments is included as well based on the floating rates in effect as of June30,2012.
(6) Provides the estimated minimum contribution to the Retirement Plan through fiscal 2022 to meet ERISA minimum funding requirements under the assumption that we only make minimum
funding requirement contributions each year, based on actuarial assumptions.
(7) For purposes of this table, purchase obligations include agreements for purchases of product in the normal course of business, for which all significant terms have been confirmed, including
minimum quantities resulting from our sourcing initiative. Such amounts included in the table above are based on estimates. Purchase obligations also includes amounts committed with a
third party to provide hardware and hardware hosting services over a ten-year period ending in fiscal 2015 (See discussion under Note20, “Commitments and Contingencies”, to the Notes to
Consolidated Financial Statements in Item8), fixed electricity agreements and fixed fuel purchase commitments. Purchase obligations exclude full requirements electricity contracts where no
stated minimum purchase volume is required.
Certain acquisitions involve contingent consideration, typically payable only in the event that certain operating results are attained or certain outstanding
contingencies are resolved. Aggregate contingent consideration amounts outstanding as of June30,2012 included $66.1million. This amount is not
included in the table above.
Critical Accounting Policies and Estimates
The preparation of fi nancial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that
affect the reported amounts of assets, liabilities, sales and expenses in the accompanying fi nancial statements. Signifi cant accounting policies employed
by Sysco are presented in the notes to the fi nancial statements.
Critical accounting policies and estimates are those that are most important to the portrayal of our fi nancial condition and results of operations. These
policies require our most subjective or complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain.
We have reviewed with the Audit Committee of the Board of Directors the development and selection of the critical accounting policies and estimates
and this related disclosure. Our most critical accounting policies and estimates pertain to the allowance for doubtful accounts receivable, self-insurance
programs, company-sponsored pension plans, income taxes, vendor consideration, goodwill and intangible assets and share-based compensation.
Allowance for Doubtful Accounts
We evaluate the collectability of accounts receivable and determine the appropriate reserve for doubtful accounts based on a combination of factors. We
utilize specifi c criteria to determine uncollectible receivables to be written off, including whether a customer has fi led for or has been placed in bankruptcy,
has had accounts referred to outside parties for collection or has had accounts past due over specifi ed periods. Allowances are recorded for all other
receivables based on analysis of historical trends of write-offs and recoveries. In addition, in circumstances where we are aware of a specifi c customer’s