Sysco 2014 Annual Report Download - page 50

SYSCO CORPORATION-Form10-K38
PARTII
ITEM7Management’s Discussion and Analysis ofFinancial Condition and Results of Operations
Sysco and one of its subsidiaries, Sysco International, ULC, have a revolving credit facility supporting the company’s U.S. and Canadian commercial
paper programs. The facility provides for borrowings in both U.S. and Canadian dollars. Borrowings by Sysco International, ULC under the agreement
are guaranteed by Sysco, and borrowings by Sysco and Sysco International, ULC under the credit agreement are guaranteed by the wholly-owned
subsidiaries of Sysco that are guarantors of the company’s senior notes and debentures. In January 2014, Sysco and Sysco International, ULC extended
and increased the size of the revolving credit facility described above that supports the company’s U.S. and Canadian commercial paper programs. The
facility was increased to $1.5 billion with an expiration date of December 29, 2018, but is subject to further extension. The other terms and conditions of
the extended facility are substantially the same.
As of June 28, 2014, commercial paper issuances outstanding were $130.0 million. As of August 13, 2014, commercial paper issuances outstanding
were $387.6 million. During  scal 2014, 2013 and 2012, aggregate outstanding commercial paper issuances and short-term bank borrowings ranged
from approximately zero to $770.5 million, zero to $330.0 million, and zero to $563.1 million, respectively. During each of  scal 2014, 2013 and 2012, our
aggregate commercial paper issuances and short-term bank borrowings had a weighted average interest rate of 0.16%.
Bridge Facility
In December 2013, we secured a commitment for an unsecured bridge facility in the amount of $3.3865 billion in connection with our proposed
merger with US Foods (discussed further under Strategy). In January 2014, this bridge facility commitment was replaced with a $3.3865 billion bridge
term loan agreement with multiple lenders. We may borrow up to $3.3865 billion in term loans on the closing date of the US Foods acquisition to
fund the acquisition, re nance certain indebtedness of US Foods and pay related fees and expenses. The facility expires on March 8, 2015, but is
subject to extension if regulatory approvals have not yet been obtained. Borrowings under the bridge term loan agreement are guaranteed by the
same subsidiaries of Sysco that guarantee the company’s revolving credit facility, and in certain circumstances, may also be guaranteed by US
Foods after closing of the merger. As an alternative to using our bridge facility, we currently intend to issue longer-term  nancing prior to the closing
of the transaction.
Fixed Rate Debt
Included in current maturities of long-term debt as of June 28, 2014 are the 0.55% senior notes totaling $300.0 million, which mature in June 2015. 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.
In January 2014, we entered into two forward starting swap agreements with notional amounts totaling $2.0 billion. We designated these derivatives as
cash  ow hedges of the variability in the expected cash out ows of interest payments on 10-year and 30-year debt forecasted to be issued in  scal 2015
due to changes in the benchmark interest rates.