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SYSCO CORPORATION-Form10-K 55
PARTII
ITEM8Financial Statements and Supplementary Data
NOTE7 Goodwill and Other Intangibles
The changes in the carrying amount of goodwill and the amount allocated by reportable segment for the years presented are as follows:
(In thousands)
Broadline SYGMA Other Total
Carrying amount as of July3,2010 $ 1,118,882 $ 32,609 $ 398,324 $ 1,549,815
Goodwill acquired during year 43,255 - 792 44,047
Currency translation/other 39,128 - 299 39,427
Carrying amount as of July2,2011 1,201,265 32,609 399,415 1,633,289
Goodwill acquired during year 48,911 - 13,677 62,588
Currency translation/other (30,064) - (202) (30,266)
CARRYING AMOUNT AS OF JUNE30,2012 $ 1,220,112 $ 32,609 $ 412,890 $ 1,665,611
Amortized intangible assets acquired during fi scal 2012 were $33.0million with a weighted-average amortization period of eight years. By intangible asset
category, the amortized intangible assets acquired during fi scal 2012 were customer relationships of $25.9million with a weighted-average amortization
period of nine years, non-compete agreements of $4.8million with a weighted-average amortization period of fi ve years and amortized trademarks of
$2.3million with a weighted-average amortization period of 10years. Indefi nite-lived licenses acquired during fi scal 2012 were $1.0million.
The following table presents details of the company’s amortized intangible assets:
(In thousands)
June30,2012 July2,2011
Gross Carrying
Amount
Accumulated
Amortization Net
Gross Carrying
Amount
Accumulated
Amortization Net
Customer relationships $ 200,801 $ (110,080) $ 90,721 $ 190,112 $ (97,846) $ 92,266
Non-compete agreements 8,453 (2,024) 6,429 4,574 (1,269) 3,305
Trademarks 3,759 (518) 3,241 1,623 (282) 1,341
TOTAL AMORTIZED
INTANGIBLE ASSETS $ 213,013 $ (112,622) $ 100,391 $ 196,309 $ (99,397) $ 96,912
Intangible assets that have been fully amortized have been removed in the schedule above in the period full amortization is reached.
The following table presents details of the company’s indefi nite-lived intangible assets:
(In thousands)
June30,2012 July2,2011
Trademarks $ 12,214 $ 13,026
Licenses 966 -
TOTAL INDEFINITE-LIVED INTANGIBLE ASSETS $ 13,180 $ 13,026
Amortization expense for the past three years was $24.9million in 2012, $21.9million in 2011 and $20.9million in 2010. The estimated future amortization expense
for the next fi ve fi scal years on intangible assets outstanding as of June30,2012 is shown below:
(In thousands)
Amount
2013 $ 24,987
2014 23,525
2015 18,914
2016 12,209
2017 7,505
NOTE8 Derivative Financial Instruments
Sysco manages its debt portfolio to achieve an overall desired position of fi xed and fl oating rates and may employ interest rate swaps from time to time to
achieve this position. The company does not use derivative fi nancial instruments for trading or speculative purposes.
In May2012, the company entered into a treasury lock agreement with a notional amount of $200.0million. The company 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, the company settled
the treasury lock, locking in the effective yields on the related debt. Upon settlement, the company 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, in accumulated other comprehensive loss.
In fi scal 2010, the company entered into two interest rate swap agreements that effectively converted $250.0million of fi xed rate debt maturing in fi scal
2013 and $200.0million of fi xed rate debt maturing in fi scal 2014 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.