Sysco 2013 Annual Report Download - page 21

SYSCO CORPORATION-Form10-K10
PARTI
ITEM1ARisk Factors
Our level of indebtedness and the terms of our indebtedness could adversely affect our business and liquidity position
As of June29,2013, we had approximately $3billion of total indebtedness. 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; a revolving credit facility supporting our U.S.and Canadian commercial
paper programs in the amount of $1.0billion set to expire on December29,2016, with $925million extended to December29,2017; certain uncommitted
bank lines of credit providing for unsecured borrowings for working capital of up to $95.0million; and a €75.0million (Euro) multicurrency revolving credit
facility for use by our Irish subsidiary set to expire September25,2013, which is subject to extension. Our indebtedness may further increase from time to
time for various reasons, including  uctuations in operating results, working capital needs, capital expenditures and potential acquisitions or joint ventures.
Our increased level of indebtedness and the ultimate cost of such indebtedness could have a negative impact on our liquidity, cost of capital and  nancial
results. In the future, our cash  ow and capital resources may not be suf cient for payments of interest on and principal of our debt, and any alternative
 nancing measures available may not be successful and may not permit us to meet our scheduled debt service obligations.
We rely on technology in our business and any technology disruption or delay in implementing new technology could
have a material negative impact on our business
Our ability to decrease costs and increase pro ts, as well as our ability to serve customers most effectively, depends on the reliability of our technology
network. We use software and other technology systems, among other things, to generate and select orders, to load and route trucks, to make purchases,
manage our warehouses and to monitor and manage our business on a day-to-day basis. Any disruption to these computer systems could adversely
impact our customer service, decrease the volume of our business and result in increased costs and lower pro ts.
Furthermore, process changes will be required as we continue to use our existing warehousing, delivery, and payroll systems to support operations as we
implement the ERP system. While Sysco has invested and continues to invest in technology security initiatives and disaster recovery plans, these measures
cannot fully insulate us from technology disruption that could result in adverse effects on operations and pro ts.
We may be required to pay material amounts under multiemployer defi ned benefi t pension plans
We contribute to several multiemployer de ned bene t pension plans based on obligations arising under collective bargaining agreements covering union-
represented employees. Approximately 10% of our current employees are participants in such multiemployer plans. In  scal 2013, our total contributions to
these plans were approximately $66million, which included payments for withdrawal liabilities of $32million. The costs of providing bene ts through such
plans have increased in recent years. The amount of any increase or decrease in our required contributions to these multiemployer plans will depend upon
many factors, including the outcome of collective bargaining, actions taken by trustees who manage the plans, government regulations, the actual return
on assets held in the plans and the potential payment of a withdrawal liability if we choose to exit. Based upon the information available to us from plan
administrators, we believe that several of these multiemployer plans are underfunded. The unfunded liabilities of these plans may result in increased future
payments by us and the other participating employers. Underfunded multiemployer pension plans may impose a surcharge requiring additional pension
contributions. Our risk of such increased payments may be greater if any of the participating employers in these underfunded plans withdraws from the
plan due to insolvency and is not able to contribute an amount suf cient to fund the unfunded liabilities associated with its participants in the plan. Based
on the latest information available from plan administrators, we estimate our share of the aggregate withdrawal liability on the multiemployer plans in which
we participate could have been as much as $220million as of June29,2013. A signi cant increase to funding requirements could adversely affect the
Company’s  nancial condition, results of operations or cash  ows.
Our funding requirements for our company-sponsored qualifi ed pension plan may increase should fi nancial markets
experience future declines
At the end of  scal 2012, we decided to freeze future bene t accruals under the company-sponsored quali ed pension plan (Retirement Plan) as of
December31,2012 for all U.S.-based salaried and non-union hourly employees. Effective January1,2013, these employees were eligible for additional
contributions under an enhanced, de ned contribution plan. While these actions will serve to limit future growth in our pension liabilities, we had a sizable
pension obligation of $2.7billion as of June29,2013 therefore  nancial market factors could impact our funding requirements. Although recent pension
funding relief legislation has served to defer some required funding, additional contributions may be required if our plan is not fully funded when the provisions
that provided the relief are phased out. See Note13, “Company-Sponsored Employee Bene t Plans” to the Consolidated Financial Statements in Item8
for a discussion of the funded status of the Retirement Plan.
The amount of our annual contribution to the plan is dependent upon, among other things, the returns on the plan’s assets and discount rates used to
calculate the plan’s liability. Our Retirement Plan holds investments in both equity and  xed income securities. Fluctuations in asset values can cause the
amount of our anticipated future contributions to the plan to increase. The projected liability of the plan will be impacted by the  uctuations of interest rates
on high quality bonds in the public markets as these are inputs in determining our minimum funding requirements. Speci cally, decreases in these interest
rates may have an adverse impact on our funding obligations. To the extent  nancial markets experience future declines similar to those experienced in
 scal 2008 through the beginning of  scal 2010, and/or interest rates on high quality bonds in the public markets decline, our required contributions may
increase for future years as our funded status decreases, which could have an adverse impact on our liquidity.