Sysco 2015 Annual Report Download - page 42
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PARTII
ITEM7Management’s Discussion and Analysis ofFinancial Condition and Results of Operations
Contractual Obligations
The following table sets forth, as of June 27, 2015, certain information concerning our obligations and commitments to make contractual future payments:
(In thousands)
Payments Due by Period
Total < 1 Year 1-3 Years 3-5 Years
More Than
5 Years
Recorded Contractual Obligations:
Principal payments of long-term debt $ 7,271,831 $ 5,002,972 $ 526,291 $ 266,972 $ 1,475,596
Mandatory senior note redemption premium 50,000 50,000
Merger-termination payments 312,500 312,500
Other debt repayments 69,542 69,542
Capital leases obligations 32,939 4,971 9,543 5,946 12,479
Deferred compensation(1) 82,925 7,288 11,945 9,186 54,506
Pension Plan(2) 44,900 44,900
SERP and other postretirement plans(3) 306,424 28,268 58,908 61,409 157,839
Unrecognized tax bene ts and interest(4) 70,992 70,992
Unrecorded Contractual Obligations:
Interest payments related to debt(5) 1,453,240 143,851 215,523 164,017 929,849
Operating lease obligations 196,223 47,559 66,013 36,981 45,670
Purchase obligations(6) 5,032,523 3,823,783 1,098,488 108,761 1,491
TOTAL CONTRACTUAL CASH OBLIGATIONS $ 14,924,039 $ 9,561,726 $ 1,986,711 $ 653,272 $ 2,722,330
(1) The estimate of the timing of future payments under the Executive Deferred Compensation Plan involves the use of certain assumptions, including retirement ages and payout periods.
(2) The estimated contributions through fiscal 2024 to meet ERISA minimum funding requirements based on actuarial assumptions include the extension of funding relief included in the Highway and
Transportation Funding Act of 2014.
(3) Includes estimated contributions to the unfunded SERP and other postretirement benefit plans made in amounts needed to fund benefit payments for vested participants in these plans through
fiscal 2025, based on actuarial assumptions.
(4) Unrecognized tax benefits relate to uncertain tax positions recorded under accounting standards related to uncertain tax positions. As of June 27, 2015, we had a liability of $37.5 million
for unrecognized tax benefits for all tax jurisdictions and $33.4 million for related interest that could result in cash payment. We are not able to reasonably estimate the timing of non-current
payments or the amount by which the liability will increase or decrease over time. Accordingly, the related non-current balances have not been reflected in the “Payments Due by Period” section
of the table.
(5) Includes payments on floating rate debt based on rates as of June 27, 2015, assuming amount remains unchanged until maturity, and payments on fixed rate debt based on maturity dates. The
impact of our outstanding fixed-to-floating interest rate swap on the fixed rate debt interest payments is included as well based on the floating rates in effect as of June 27, 2015.
(6) For purposes of this table, purchase obligations include agreements for purchases of product in the normal course of business, for which all significant terms have been confirmed, including
minimum quantities resulting from our category management initiative. As we progress with this initiative, our purchase obligations are increasing. Such amounts included in the table above are
based on estimates. Purchase obligations also includes amounts committed with various third party service providers to provide information technology services for period up to fiscal 2019 (See
discussion under Note 20, “Commitments and Contingencies”, to the Notes to Consolidated Financial Statements in Item 8) and fixed fuel purchase commitments. Purchase obligations exclude
full requirements electricity contracts where no stated minimum purchase volume is required.
Certain acquisitions involve contingent consideration, typically payable only in the event that certain operating results are attained or certain outstanding
contingencies are resolved. Aggregate contingent consideration amounts outstanding as of June 27, 2015 were $39 million. This amount is not included
in the table above.
Critical Accounting Policies and Estimates
The preparation of nancial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that
affect the reported amounts of assets, liabilities, sales and expenses in the accompanying nancial statements. Signi cant accounting policies employed
by Sysco are presented in the notes to the nancial statements.
Critical accounting policies and estimates are those that are most important to the portrayal of our nancial position and results of operations. These policies
require our most subjective or complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. We
have reviewed with the Audit Committee of the Board of Directors the development and selection of the critical accounting policies and estimates and this
related disclosure. Our most critical accounting policies and estimates pertain to the allowance for doubtful accounts receivable, self-insurance programs,
company-sponsored pension plans, income taxes, vendor consideration, goodwill and intangible assets and share-based compensation.
Allowance for Doubtful Accounts
We evaluate the collectability of accounts receivable and determine the appropriate reserve for doubtful accounts based on a combination of factors. We utilize
speci c criteria to determine uncollectible receivables to be written off, including whether a customer has led for or has been placed in bankruptcy, has had
accounts referred to outside parties for collection or has had accounts past due over speci ed periods. In these instances, a speci c allowance for doubtful
accounts is recorded to reduce the receivable to the net amount reasonably expected to be collected. Allowances are recorded for all other receivables
based on an analysis of historical trends of write-offs and recoveries. Our judgment is required as to the impact of certain of these items and other factors
as to ultimate realization of our accounts receivable. If the nancial condition of our customers were to deteriorate, additional allowances may be required.