Sysco 2012 Annual Report Download - page 98

SYSCO CORPORATION-Form10-K 75
PARTII
ITEM8Financial Statements and Supplementary Data
Uncertain Tax Positions
A reconciliation of the beginning and ending amount of gross unrecognized tax benefi ts, excluding interest and penalties, is as follows:
(In thousands) 2012 2011
Unrecognized tax benefi ts at beginning of year $ 72,091 $ 89,851
Additions for tax positions related to prior years 2,479 21,099
Reductions for tax positions related to prior years (2,154) (11,955)
Additions for tax positions related to the current year - -
Reductions for tax positions related to the current year - -
Reductions due to settlements with taxing authorities (2,831) (25,294)
Reductions due to lapse of applicable statute of limitations (1,431) (1,610)
UNRECOGNIZED TAX BENEFITS AT END OF YEAR $ 68,154 $ 72,091
As of June30,2012, $15.9million of the gross liability for unrecognized tax benefi ts was netted within prepaid income taxes relating to a payment that
occurred during fi scal 2011; however, the liability is considered outstanding until the matters have been settled with the respective jurisdiction. As of
June30,2012, the gross amount of liability for accrued interest and penalties related to unrecognized tax benefi ts was $36.6million, of which $8.7million
was netted within prepaid income taxes relating to a payment that occurred during fi scal 2011; however, the liability is considered outstanding until the
matters have been settled with the respective jurisdiction. The expense recorded for interest and penalties related to unrecognized tax benefi ts in fi scal
2012 was $4.7million.
As of July2,2011, $15.9million of the gross liability for unrecognized tax benefi ts was netted within prepaid income taxes relating to a payment that occurred
during fi scal 2011; however, the liability is considered outstanding until the matters have been settled with the respective jurisdiction. As of July2,2011, the
gross amount of liability for accrued interest and penalties related to unrecognized tax benefi ts was $33.2million, of which $8.7million was netted within
prepaid income taxes relating to a payment that occurred during fi scal 2011; however, the liability is considered outstanding until the matters have been
settled with the respective jurisdiction. The expense recorded for interest and penalties related to unrecognized tax benefi ts in fi scal 2011 was $7.2million.
If Sysco were to recognize all unrecognized tax benefi ts recorded as of June30,2012, approximately $37.1millionof the $68.2million reserve would
reduce the effective tax rate. If Sysco were to recognize all unrecognized tax benefi ts recorded as of July2,2011, approximately $40.1millionof the
$72.1million reserve would reduce the effective tax rate. It is reasonably possible that the amount of the unrecognized tax benefi ts with respect to certain
of the company’s unrecognized tax positions will increase or decrease in the next twelve months either because Sysco’s positions are sustained on audit
or because the company agrees to their disallowance. Items that may cause changes to unrecognized tax benefi ts primarily include the consideration of
various fi ling requirements in various states and the allocation of income and expense between tax jurisdictions. In addition, the amount of unrecognized tax
benefi ts recognized within the next twelve months may decrease due to the expiration of the statute of limitations for certain years in various jurisdictions;
however, it is possible that a jurisdiction may open an audit on one of these years prior to the statute of limitations expiring. At this time, an estimate of the
range of the reasonably possible change cannot be made.
The IRS is auditing Sysco’s 2009 and 2010 federal income tax returns. As of June30,2012, Sysco’s tax returns in the majority of the state and local
jurisdictions and Canada are no longer subject to audit for the years before 2007. However, some jurisdictions have audits open prior to 2007, with the
earliest dating back to 2002. Certain tax jurisdictions require partial to full payment on audit assessments or the posting of letters of credit in order to
proceed to the appeals process. Although the outcome of tax audits is generally uncertain, the company believes that adequate amounts of tax, including
interest and penalties, have been accrued for any adjustments that may result from those open years.
Other
Undistributed income of certain consolidated foreign subsidiaries at June30,2012 amounted to $910.6million for which no deferred U.S. income tax provision
has been recorded because Sysco intends to permanently reinvest such income in those foreign operations. An estimate of any U.S. or foreign withholding
taxes that may be applicable upon actual or deemed repatriation is not practical due to the complexities associated with the hypothetical calculation.
NOTE19 Acquisitions
During fi scal 2012, in the aggregate, the company paid cash of $110.6million for operations acquired during fi scal 2012 and for contingent consideration
related to operations acquired in previous fi scal years. During fi scal 2012, Sysco acquired for cash broadline foodservice operations in Sacramento, California;
Quebec, Canada; New Haven, Connecticut; Grand Rapids, Michigan; Minneapolis, Minnesota; Columbia, South Carolina and Spokane, Washington. In
addition, Sysco acquired for cash a company that distributes specialty imported products headquartered in Chicago, Illinois. The fi scal 2012 acquisitions
were immaterial, individually and in the aggregate, to the consolidated fi nancial statements.