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SYSCO CORPORATION-Form10-K76
PARTII
ITEM8Financial Statements and Supplementary Data
Certain acquisitions involve contingent consideration typically payable over periods up to fi ve years only in the event that certain outstanding contingencies
are resolved. As of June30,2012, aggregate contingent consideration amounts outstanding relating to acquisitions was $66.1million, of which $36.4million
could result in the recording of additional goodwill.
NOTE20 Commitments and Contingencies
Legal Proceedings
Sysco is engaged in various legal proceedings which have arisen but have not been fully adjudicated. The likelihood of loss for these legal proceedings,
based on defi nitions within contingency accounting literature, ranges from remote to reasonably possible and to probable. Based on estimates of the range
of potential losses associated with these matters, management does not believe the ultimate resolution of these proceedings, either individually or in the
aggregate, will have a material adverse effect upon the consolidated fi nancial position or results of operations of the company. However, the fi nal results
of legal proceedings cannot be predicted with certainty and if the company failed to prevail in one or more of these legal matters, and the associated
realized losses were to exceed the company’s current estimates of the range of potential losses, the company’s consolidated fi nancial position or results
of operations could be materially adversely affected in future periods.
Fuel Commitments
Sysco routinely enters into forward purchase commitments for a portion of its projected diesel fuel requirements. As of June30,2012, we had forward
diesel fuel commitments totaling approximately $95.6million through April2013.
Other Commitments
Sysco has committed to product purchases for resale in order to benefi t from the company’s purchasing power. A majority of these agreements expire within
one year; however, certain agreements have terms through fi scal 2017. These agreements commit the company to a minimum volume at various pricing terms,
including fi xed pricing, variable pricing or a combination thereof. Minimum amounts committed to as of June30,2012 totaled approximately $1,045.4million.
Minimum amounts committed to by year are as follows:
(In thousands)
Amount
2013 $ 855,444
2014 187,062
2015 1,323
2016 1,000
2017 591
Sysco has committed with a third party service provider to provide hardware and hardware hosting services. The services are to be provided over a ten-year
period beginning in fi scal 2005 and ending in fi scal 2015. The total cost of the services over that period is expected to be approximately $586.9million.
This amount may be reduced by Sysco utilizing less than estimated resources and can be increased by Sysco utilizing more than estimated resources
and the adjustments for infl ation provided for in the agreements. Sysco may also cancel a portion or all of the services provided subject to termination
fees which decrease over time. If Sysco were to terminate all of the services in fi scal 2013, the estimated termination fee incurred in fi scal 2013 would be
approximately $14.1million.
NOTE21 Business Segment Information
The company has aggregated its operating companies into a number of segments, of which only Broadline and SYGMA are reportable segments as defi ned
in the accounting literature related to disclosures about segments of an enterprise. The Broadline reportable segment is an aggregation of the company’s
UnitedStates, Canadian and European Broadline segments. Broadline operating companies distribute a full line of food products and a wide variety of non-
food products to both traditional and chain restaurant customers and also provide custom-cut meat operations. SYGMA operating companies distribute a
full line of food products and a wide variety of non-food products to certain chain restaurant customer locations. “Other” fi nancial information is attributable
to the company’s other operating segments, including the company’s specialty produce and lodging industry segments, a company that distributes specialty
imported products and a company that distributes to international customers.
The accounting policies for the segments are the same as those disclosed by Sysco for its consolidated fi nancial statements. Intersegment sales represent
specialty produce and imported specialty products distributed by the Broadline and SYGMA operating companies. Management evaluates the performance of
each of our operating segments based on its respective operating income results. Corporate expenses generally include all expenses of the corporate offi ce and
Sysco’s shared service center. These also include all share-based compensation costs and expenses related to the company’s Business Transformation Project.