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SYSCO CORPORATION-Form10-K 35
PARTII
ITEM7Management’s Discussion and Analysis ofFinancial Condition and Results of Operations
$24.8 million in  scal 2014, which resulted in a decrease to other long-term liabilities. Pension expense was $138.3 million and pension contributions were
$93.6 million in  scal 2013, which resulted in an increase to other long-term liabilities.
Included in the change in accrued expenses was a negative comparison of $49.4 million on multiemployer withdrawal provisions and payments. Fiscal
2014 included a provision for multiemployer pension withdrawal of $1.5 million and payments of $40.8 million, which resulted in a decrease to accrued
expenses. Fiscal 2013 included a provision for multiemployer pension withdrawal of $41.9 million and payments of $31.8 million, which resulted in an
increase to accrued expenses. Partially offsetting the unfavorable impact of the multiemployer accrual comparison were several signi cant accruals unique
to  scal 2014, which contributed $48.5 million to cash  ow from operations for  scal 2014 to  scal 2013.
Changes in working capital, speci cally accounts receivable, inventory and accounts payable, had a favorable comparison of $129.7 million on the
comparison of cash  ow from operations for  scal 2014 to  scal 2013. There was a favorable comparison on accounts payable, which was partially offset
by unfavorable comparisons on accounts receivable and inventory. Accounts receivable increased in both periods as a result of increases in sales. Our
sales growth in  scal 2014 has been greater with our corporate-managed customers and payment terms for these types of customers are traditionally
longer than average. This mix of longer-term receivables contributed to the unfavorable comparison on cash  ow from  scal 2014 to  scal 2013. Inventory
increased in both periods as a result of increases in sales. However, inventory turnover improved in  scal 2014, as compared to a deterioration of inventory
turnover in  scal 2013, due to working capital improvements in inventory. Fiscal 2014 also included an increase in inventory in transit, which offset the
favorable comparison due to working capital improvements, resulting in an overall unfavorable comparison on cash  ow from  scal 2014 to  scal 2013.
Accounts payable increased in both periods as a result of increases in sales. The year-over-year impact of the change in accounts payable is favorable
to cash  ow from operations due to working capital improvements in accounts payable as well as an increase in  scal 2014 in accounts payable related
to inventory in transit.
Fiscal 2013 vs. Fiscal 2012
We generated $1.5 billion in cash  ow from operations in  scal 2013, as compared to $1.4 billion in  scal 2012. The increase of $107.4 million or 7.6%, was
largely attributable to a favorable comparison year-over-year on the settlement payments made to the Internal Revenue Service (IRS), an increase in non-
cash depreciation and amortization expense and a favorable comparison for multiemployer and company-sponsored pension expense and contributions.
These decreases were partially offset by a reduction in net earnings, the redemption of some of our corporate-owned life insurance (COLI) policies in  scal
2012 and a reduction in taxes. Changes in working capital, including accounts receivable, inventory and accounts payable, did not have a signi cant impact
on the comparison of cash  ow from operations from  scal 2013 to  scal 2012. These items are more fully described below.
In  scal 2012, we paid $212 million in settlement payments to the IRS. We completed these settlement payments in  scal 2012, which resulted in a favorable
comparison in cash  ow from operations related to this item in  scal 2013. Excluding the IRS settlement payment comparison, the combined impact of
changes in deferred taxes and changes in accrued income taxes was a decrease of $171.5 in cash  ow from operations in  scal 2013 as compared to
scal 2012. This decrease resulted primarily from decreased tax expense of $107.4 million year over year and an increase in non-IRS tax payments of
$59.6million which were primarily foreign tax payments related to a one-time transaction as well as increased earnings in these jurisdictions.
The increase in non-cash depreciation and amortization expense of $95.6 million was primarily related to assets that were not in service in  scal 2012
that were in service in  scal 2013. These assets include our software related to our Business Transformation Project, which was placed into service in
August2012, as well as various new facilities and expansions.
Multiemployer and company-sponsored pension expense and contributions resulted in a favorable comparison of $69.9 million in cash  ow from operations
in  scal 2013 as compared to  scal 2012. Provisions for multiemployer pension withdrawals increased $20.0 million in  scal 2013 as compared to  scal
2012, and payments for withdrawals decreased $1.8 million. Company-sponsored pension contributions decreased $68.9 million year over year, which
was partially offset by a decrease in company-sponsored pension expense of $20.8 million.
The comparison of cash  ow from operations from  scal 2013 to  scal 2012 was negatively impacted by an unfavorable change of $56.4 million in other
assets. This unfavorable change resulted primarily from an increase in cash in the prior year from the redemption of approximately $75 million of our COLI
policies. These COLI policies were maintained to meet a portion of our obligations under the SERP and were replaced by less volatile corporate-owned
real estate assets as part of our plan to reduce the market-driven COLI impact on our earnings. There was no similar redemption in  scal 2013. Other
miscellaneous changes in other assets partially offset this decrease year over year.
Investing Activities
Fiscal 2014 capital expenditures included:
• eet replacements;
•construction of fold-out facilities in Ontario, Canada and Dublin, Ireland;
•
replacement or signi cant expansion of facilities in Phoenix, Arizona; Sacramento, California; Philadelphia, Pennsylvania and Harrisonburg, Virginia; and
•investments in technology.