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SYSCO CORPORATION-Form10-K84
PARTII
ITEM8Financial Statements and Supplementary Data
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 de nitions within contingency accounting literature, ranges from remote to reasonably possible to probable. When probable and reasonably
estimable, the losses have been accrued. 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  nancial position
or results of operations of the company. However, the  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  nancial position or results of operations could be materially adversely affected in future periods.
During the  rst quarter of  scal 2014, Sysco was made aware of certain alleged violations of California law relating to its use of remote storage units in the
delivery of products. These are commonly referred to as drop sites. As of June 28, 2014, Sysco has recorded a liability for a settlement of $20 million. In July
2014, Sysco agreed to a $19.4 million settlement, which includes a payment of $15.0 million in penalties, $3.3 million to fund four California Department of
Public Health investigator positions for  ve years, a $1.0 million donation to food banks across California, and $0.1 million in legal fees. The cash portion
of the settlement was paid in August 2014 and the donations to the food banks will occur in  scal 2015.
Fuel Commitments
Sysco routinely enters into forward purchase commitments for a portion of its projected diesel fuel requirements. As of June 28, 2014, we had forward
diesel fuel commitments totaling approximately $187.2 million through June 2015.
Other Commitments
Sysco has committed to aggregate product purchases for resale in order to bene t from a centralized approach to purchasing. A majority of these
agreements expire within one year; however, certain agreements have terms through  scal 2018. These agreements commit the company to a minimum
volume at various pricing terms, including  xed pricing, variable pricing or a combination thereof. Minimum amounts committed to as of June 28, 2014
totaled approximately $2,830.0 million. Minimum amounts committed to by year are as follows:
(Inthousands)
Amount
2015 $ 2,101,096
2016 634,985
2017 93,283
2018 667
Sysco has contracts with various third party service providers to receive information technology services. The services have been committed for periods
up to  scal 2019 and may be extended. As of June 28, 2014, the total remaining cost of the services over that period is expected to be approximately
$624.7 million. A portion of this committed amount may be reduced by Sysco utilizing less than estimated resources and can be increased by Sysco
utilizing more than estimated resources. Certain agreements allow adjustments for in ation. Sysco may also cancel a portion or all of the services provided
subject to termination fees that decrease over time. If Sysco were to terminate all of the services in  scal 2015, the estimated termination fees incurred in
scal 2015 would be approximately $22.5 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 de ned
in the accounting literature related to disclosures about segments of an enterprise. The Broadline reportable segment is an aggregation of the company’s
U.S., Canadian, Caribbean 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, hospitals, schools, hotels, industrial caterers and other venues where foodservice
products are served. These companies 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”  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 and the company’s Sysco Ventures platform, a suite of technology solutions that help support
the business needs of Sysco’s customers.