Sysco 2013 Annual Report Download - page 45

SYSCO CORPORATION-Form10-K34
PARTII
ITEM7Management’s Discussion and Analysis ofFinancial Condition and Results of Operations
Commercial Paper and Revolving Credit Facility
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.
In December2011, we terminated our previously existing revolving credit facility that supported the company’s U.S. and Canadian commercial paper
programs. At the same time, Sysco and one of its subsidiaries, Sysco International, ULC, entered into a new $1.0billion credit facility supporting the
company’s U.S. and Canadian commercial paper programs. This facility provides for borrowings in both U.S. and Canadian dollars. Borrowings by Sysco
International, ULC under the credit agreement are guaranteed by Sysco, and borrowings by Sysco and Sysco International, ULC under the credit agreement
are guaranteed by all the wholly-owned subsidiaries of Sysco that are guarantors of the company’s senior notes and debentures. The original facility in
the amount of $1.0billion expires on December29,2016. In December2012, a portion of the facility was extended for an additional year. This extended
facility, which expires on December29,2017, is for $925.0million of the original $1.0billion facility, but is subject to further extension.
As of June29,2013, commercial paper issuances outstanding were $95.5million. As of August14,2013, commercial paper issuances outstanding
were $76.0million. During  scal 2013,2012 and 2011, aggregate outstanding commercial paper issuances and short-term bank borrowings ranged from
approximately zero to $330.0million, zero to $563.1million, and zero to $330.3million, respectively. During  scal 2013,2012 and 2011, our aggregate
commercial paper issuances and short-term bank borrowings had a weighted average interest rate of 0.16%, 0.16% and 0.25%, respectively.
Fixed Rate Debt
Included in current maturities of long-term debt as of June29,2013 are the 4.6% senior notes totaling $200.0million, which mature in March2014. It is
our intention to fund the repayment of these notes at maturity through cash on hand, cash  ow from operations, issuances of commercial paper, senior
notes or a combination thereof.
In February2012, we  led with the SEC an automatically effective well-known seasoned issuer shelf registration statement for the issuance of an indeterminate
amount of common stock, preferred stock, debt securities and guarantees of debt securities that may be issued from time to time.
In June2012, we repaid the 6.1% senior notes totaling $200.0million at maturity utilizing a combination of cash  ow from operations and commercial
paper issuances.
In May2012, we entered into an agreement with a notional amount of $200.0million to lock in a component of the interest rate on our then forecasted debt
offering. We designated this derivative as a cash  ow hedge of the variability in the cash out 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  scal 2022, we settled the treasury lock, locking in the effective yields on the related debt. Upon settlement, we 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 re ected as a gain, net of tax, Accumulated other comprehensive loss.
In June2012, we issued 0.55% senior notes totaling $300.0million due June12,2015 (the 2015 notes) and 2.6% senior notes totaling $450.0million
due June12,2022 (the 2022 notes) under its February2012 shelf registration. The 2015 and 2022 notes, which were priced at 99.319% and 98.722% of
par, respectively, are unsecured, are not subject to any sinking fund requirement and include a redemption provision which allows Sysco to retire the notes
at any time prior to maturity at the greater of par plus accrued interest or an amount designed to ensure that the note holders are not penalized by early
redemption. Proceeds from the notes will be utilized over a period of time for general corporate purposes, which may include acquisitions, re nancing of
debt, working capital, share repurchases and capital expenditures.
In February2013, we repaid the 4.2% senior notes totaling $250.0million at maturity utilizing a combination of cash  ow from operations and cash on hand.
In August2013, we entered into an interest rate swap agreement that effectively converted $500million of  xed rate debt maturing in  scal 2018 to  oating
rate debt. This transaction was entered into with the goal of reducing overall borrowing cost and was designated as a fair value hedge against the changes
in fair value of  xed rate debt resulting from changes in interest rates.
Total Debt
Total debt as of June29,2013 was $3.0billion of which approximately 88% was at  xed rates with a weighted average of 4.7% and an average life of 13
years, and the remainder was at  oating rates with a weighted average of 1.4% and an average life of one year. Certain loan agreements contain typical
debt covenants to protect note holders, including provisions to maintain the company’s long-term debt to total capital ratio below a speci ed level. We are
currently in compliance with all debt covenants.
Other
As part of normal business activities, we issue letters of credit through major banking institutions as required by certain vendor and insurance agreements.
In addition, in connection with our audits in certain tax jurisdictions, we have posted of letters of credit in order to proceed to the appeals process. As of
June29,2013, letters of credit outstanding were $42.2million.