Sysco 2010 Annual Report Download - page 72
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Please find page 72 of the 2010 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.7. RESTRICTED CASH
Sysco is required by its insurers to collateralize a part of the self-insured portion of its workers’ compensation and liability claims. Sysco has
chosen to satisfy these collateral requirements by depositing funds in insurance trusts or by issuing letters of credit. All amounts in restricted cash at
July 3, 2010 and June 27, 2009 represented funds deposited in insurance trusts.
8. DERIVATIVE FINANCIAL INSTRUMENTS
Sysco manages its debt portfolio to achieve an overall desired position of fixed and floating rates and may employ interest rate swaps from time
to time to achieve this position. The company does not use derivative financial instruments for trading or speculative purposes.
In September 2009, the company entered into an interest rate swap agreement that effectively converted $200.0 million of fixed rate debt
maturing in fiscal 2014 to floating rate debt. In October 2009, the company entered into an interest rate swap agreement that effectively converted
$250.0 million of fixed rate debt maturing in fiscal 2013 to floating rate debt. Both transactions were entered into with the goal of reducing overall
borrowing cost and increasing floating interest rate exposure.These transactions were designated as fair value hedges since the swaps hedge against
the changes in fair value of fixed rate debt resulting from changes in interest rates.
The location and the fair value of derivative instruments in the consolidated balance sheet as of July 3, 2010 are as follows:
Balance Sheet
Location Fair Value
Balance Sheet
Location Fair Value
Asset Derivatives Liability Derivatives
(In thousands)
Interest rate swap agreements . . ................................ Other assets $ 11,045 N/A N/A
The location and effect of derivative instruments and related hedged items on the consolidated results of operations for each fiscal year
presented on a pre-tax basis are as follows:
Location of (Gain)
or Loss Recognized
in Income
2010
(53 Weeks) 2009
Amount of (Gain) or Loss
Recognized in Income
(In thousands)
Fair Value Hedge Relationships:
Interest rate swap agreements . ....................................... Interest expense $ (10,557) $ —
Hedge ineffectiveness represents the difference between the changes in the fair value of the derivative instruments and the changes in fair value
of the fixed rate debt attributable to changes in the benchmark interest rate. Hedge ineffectiveness is recorded directly in earnings within interest
expense and was immaterial for fiscal 2010. The interest rate swaps do not contain a credit-risk-related contingent feature.
9. SELF-INSURED LIABILITIES
Sysco maintains a self-insurance program covering portions of workers’ compensation, general and vehicle liability costs. The amounts in
excess of the self-insured levels are fully insured by third party insurers. The company also maintains a fully self-insured group medical program. A
summary of the activity in self-insured liabilities appears below:
2010 2009 2008
(In thousands)
Balance at beginning of period .......................................... $ 132,551 $ 117,725 $ 125,844
Charged to costs and expenses ......................................... 341,045 353,252 306,571
Payments ........................................................ (344,599) (338,426) (314,690)
Balance at end of period .............................................. $ 128,997 $ 132,551 $ 117,725
10. DEBT AND OTHER FINANCING ARRANGEMENTS
Sysco’s debt consists of the following:
July 3, 2010 June 27, 2009
(In thousands)
Senior notes, interest at 6.1%, maturing in fiscal 2012 ................................... $ 200,186 $ 200,279
Senior notes, interest at 4.2%, maturing in fiscal 2013 ................................... 252,801 249,702
Senior notes, interest at 4.6%, maturing in fiscal 2014 ................................... 208,249 205,219
Senior notes, interest at 5.25%, maturing in fiscal 2018 .................................. 497,379 497,028
Senior notes, interest at 5.375%, maturing in fiscal 2019 . . . .............................. 248,524 248,351
Debentures, interest at 7.16%, maturing in fiscal 2027 ................................... 50,000 50,000
Debentures, interest at 6.5%, maturing in fiscal 2029 .................................... 224,570 224,546
Senior notes, interest at 5.375%, maturing in fiscal 2036 . . . .............................. 499,625 499,611
Senior notes, interest at 6.625%, maturing in fiscal 2039 . . . .............................. 245,364 245,199
Industrial Revenue Bonds and other debt, interest averaging 5.7% as of July 3, 2010 and 5.9% as of
June 27, 2009, maturing at various dates to fiscal 2026 . . . .............................. 53,934 56,714
Total debt . . . ............................................................... 2,480,632 2,476,649
Less current maturities and short-term debt. . ......................................... (7,970) (9,163)
Net long-term debt ............................................................ $ 2,472,662 $ 2,467,486
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