Sysco 2015 Annual Report Download - page 17
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Please find page 17 of the 2015 Sysco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.SYSCO CORPORATION-Form10-K 9
PARTI
ITEM1ARisk Factors
We need access to borrowed funds to grow, and any default by us under our indebtedness could have a material
adverse effect on our cash ow and liquidity
A substantial part of our growth historically has been the result of acquisitions and capital expansion. We anticipate additional acquisitions and capital
expansion in the future. As a result, our inability to nance acquisitions and capital expenditures through borrowed funds could restrict our ability to expand.
Moreover, any default under the documents governing our indebtedness could have a signi cant adverse effect on our cash ows, as well as the market
value of our common stock.
Our level of indebtedness and the terms of our indebtedness could adversely affect our business and liquidity position
As described in Note 11, “Debt and Other Financing Arrangements,” as of June 27, 2015, we had approximately $7.3 billion of total indebtedness which
included a commercial paper program allowing us to issue short-term unsecured notes in an aggregate amount not to exceed $1.5 billion; a revolving credit
facility supporting our United States and Canadian commercial paper programs in the amount of $1.5 billion scheduled to expire on December 29, 2018,
and various other smaller bank facilities. In July 2015, we redeemed $5.0 billion in senior notes using cash on hand and the proceeds from borrowings
under our commercial paper program.
Our indebtedness may further increase from time to time for various reasons, including uctuations in operating results, working capital needs, capital
expenditures, potential acquisitions or joint ventures, and we expect to incur additional indebtedness to fund our repurchase of up to $3 billion in Sysco
common stock announced in June 2015. Our increased level of indebtedness and the ultimate cost of such indebtedness could have a negative impact
on our liquidity, cost of future debt nancing and nancial results, and our credit ratings may be adversely affected as a result of the incurrence of additional
indebtedness. 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.
Our liquidity can be negatively impacted by payments required to appeal tax assessments with certain tax jurisdictions
Certain tax jurisdictions require partial to full payment of audit assessments or the posting of letters of credit in order to proceed to the appeals process.
Sysco has posted approximately $90 million in letters of credit to appeal the Canadian Revenue Agency assessments of transfer pricing adjustments relating
to our cross border procurement activities through our former purchasing cooperative on our 2004 through 2009 scal years. If assessed on later years
currently under examination using these same positions, we could have to pay cash or post additional letters of credit of as much as $16 million, in order to
appeal these further assessments. If signi cant further payments are required, the company’s nancial condition or cash ows could be adversely affected.
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
affect 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 an Enterprise Resource Planning (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.
A cybersecurity incident and other technology disruptions could negatively affect our business and our relationships
with customers
We use technology in substantially all aspects of our business operations. We also use mobile devices, social networking and other online activities to connect
with our employees, suppliers, business partners and our customers. Such uses give rise to cybersecurity risks, including security breach, espionage,
system disruption, theft and inadvertent release of information. Our business involves the storage and transmission of numerous classes of sensitive and/
or con dential information and intellectual property, including customers’ and suppliers’ personal information, private information about employees, and
nancial and strategic information about the company and its business partners. Further, as the company pursues its strategy to grow through acquisitions
and to pursue new initiatives that improve our operations and cost structure, the company is also expanding and improving its information technologies,
resulting in a larger technological presence and corresponding exposure to cybersecurity risk. If we fail to assess and identify cybersecurity risks associated
with acquisitions and new initiatives, we may become increasingly vulnerable to such risks. Additionally, while we have implemented measures to prevent
security breaches and cyber incidents, our preventative measures and incident response efforts may not be entirely effective. The theft, destruction, loss,
misappropriation, or release of sensitive and/or con dential information or intellectual property, or interference with our information technology systems or
the technology systems of third parties on which we rely, could result in business disruption, negative publicity, brand damage, violation of privacy laws,
loss of customers, potential liability and competitive disadvantage.