UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 26, 2009

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Registrant’s Telephone Number, Including Area Code:
(281) 584-1390

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  þ      No  o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  þ      No  o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o      No  þ

     592,548,417 shares of common stock were outstanding as of January 23, 2010.

 

 

TABLE OF CONTENTS

				Page No.
		PART I — FINANCIAL INFORMATION
Item 1.		Financial Statements			1
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			34
Item 4.		Controls and Procedures			34
		PART II — OTHER INFORMATION
Item 1.		Legal Proceedings			35
Item 1A.		Risk Factors			35
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 3.		Defaults Upon Senior Securities			35
Item 4.		Submission of Matters to a Vote of Security Holders			35
Item 5.		Other Information			36
Item 6.		Exhibits			36
Signatures					39
EX-10.1
EX-10.2
EX-15.1
EX-15.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

PART I — FINANCIAL INFORMATION

See Notes to Consolidated Financial Statements

See Notes to Consolidated Financial Statements

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

     Unless this Form 10-Q indicates otherwise or the context otherwise requires, the terms “we,” “our,” “us,” “Sysco,” or “the company” as used in this Form 10-Q refer to Sysco Corporation together with its consolidated subsidiaries and divisions.

1. BASIS OF PRESENTATION

     The consolidated financial statements have been prepared by the company, without audit, with the exception of the June 27, 2009 consolidated balance sheet which was taken from the audited financial statements included in the company’s Fiscal 2009 Annual Report on Form 10-K. The financial statements include consolidated balance sheets, consolidated results of operations, consolidated statements of comprehensive income and consolidated cash flows. In the opinion of management, all adjustments, which consist of normal recurring adjustments, necessary to present fairly the financial position, results of operations, comprehensive income and cash flows for all periods presented have been made.

     These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the company’s Fiscal 2009 Annual Report on Form 10-K.

     Sysco has evaluated subsequent events through the date these financial statements were issued, February 2, 2010.

     A review of the financial information herein has been made by Ernst & Young LLP, independent auditors, in accordance with established professional standards and procedures for such a review. A report from Ernst & Young LLP concerning their review is included as Exhibit 15.1 to this Form 10-Q.

2. CHANGES IN ACCOUNTING

Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities

     In June 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position No. EITF 03-06-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities”, which was subsequently codified within Accounting Standards Codification (ASC) 260, “Earnings Per Share.” This standard addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. This standard was effective for Sysco beginning in fiscal 2010 and interim periods within that year. All prior-period earnings per share data presented in filings subsequent to adoption must be adjusted retrospectively to conform with the provisions of this standard. Early application of this standard was not permitted. The adoption of this standard did not have a material impact on the company’s consolidated financial statements.

Interim Disclosures about Fair Value of Financial Instruments

     In April 2009, the FASB issued FASB Staff Position No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” which was subsequently codified within ASC 825, “Financial Instruments.” This standard amended previous guidance to require disclosures about the fair value of financial instruments for interim reporting periods of publicly traded companies. Prior disclosure requirements only applied to annual financial statements. This standard was effective for interim reporting periods ending after June 15, 2009, which was the first quarter of fiscal 2010 for Sysco. The company has included the required disclosures for this standard in Note 4, “Fair Value Measurements”.

Measuring Liabilities at Fair Value

     In August 2009, the FASB issued Accounting Standards Update 2009-05, “Measuring Liabilities at Fair Value”. This update provides additional guidance, including illustrative examples, clarifying the measurement of liabilities at fair value. This update is effective for the first reporting period beginning after its issuance. The company adopted the provisions of this update in the second quarter of fiscal 2010. The adoption of this update did not have a material impact on the company’s consolidated financial statements.

3. NEW ACCOUNTING STANDARDS

Improving Disclosures About Fair Value Measurements

     In January 2010, the FASB issued Accounting Standards Update 2010-06, “Improving Disclosures about Fair Value Measurements.” This update requires some new disclosures and clarifies some existing disclosure requirements about fair value measurements codified within ASC 820, “Fair Value Measurements and Disclosures.” The majority of the provisions of this update, including those applicable to Sysco, are effective for interim and annual reporting periods beginning after December 15, 2009. Early application of the provisions of this update is permitted. The company will adopt the applicable provisions of this update in the third quarter of fiscal 2010 and is currently evaluating the impact the adoption of these provisions will have on its consolidated financial statement disclosures.

4. FAIR VALUE MEASUREMENTS

     Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). The accounting guidance includes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are as follows:

•		Level 1 — Unadjusted quoted prices for identical assets or liabilities in active markets;
•		Level 2 — Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability; and
•		Level 3 — Unobservable inputs for the asset or liability, which include management’s own assumption about the assumptions market participants would use in pricing the asset or liability, including assumptions about risk.

     Sysco’s policy is to invest in only high-quality investments. Cash equivalents primarily include time deposits, certificates of deposit, commercial paper and all highly liquid instruments with original maturities of three months or less. Short-term investments consist of commercial paper with original maturities of greater than three months but less than one year. These investments are considered available-for-sale and are recorded at fair value. As of December 26, 2009, the difference between the fair value of the short-term investments and the original cost was not material. Restricted cash consists of investments in high-quality money market funds.

     The following is a description of the valuation methodologies used for assets and liabilities measured at fair value.

•		Time deposits, certificates of deposit and commercial paper included in cash equivalents are valued at amortized cost, which approximates fair value.
•		Commercial paper included in short-term investments is valued using broker quotes that utilize observable market inputs.
•		Money market funds are valued at the closing price reported by the fund sponsor on an actively traded exchange.
•		The interest rate swap agreements are valued using a swap valuation model that utilizes observable market inputs.

     The following tables present the company’s assets and liabilities measured at fair value on a recurring basis as of December 26, 2009, June 27, 2009 and December 27, 2008:

     The fair value of Sysco’s total debt is estimated based on the quoted market prices for the same or similar issue or on the current rates offered to the company for debt of the same remaining maturities. The fair value of total debt approximated $2,603,952,000 and $2,548,861,000 as of December 26, 2009 and June 27, 2009, respectively. The carrying value of total debt was $2,477,128,000 and $2,476,649,000 as of December 26, 2009 and June 27, 2009, respectively.

5. DERIVATIVE FINANCIAL INSTRUMENTS

     Sysco manages its debt portfolio by targeting an overall desired position of fixed and floating rates and may employ interest rate swaps from time to time to achieve this goal. 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 $200,000,000 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 $250,000,000 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. 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 December 26, 2009 are as follows:

Asset Derivatives

Liability Derivatives

Balance Sheet

Balance Sheet

Location

Fair Value

Location

Fair Value

Interest rate swap agreements

Other assets

$

534,000

Other long-term liabilities

$

1,109,000

     The location and effect of derivative instruments and related hedged items on the consolidated results of operations for the 26-week period and 13-week period ended December 26, 2009 presented on a pre-tax basis are as follows:

     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 the 26-week period and the 13-week periods ended December 26, 2009. The interest rate swaps do not contain a credit-risk-related contingent feature.

6. DEBT

     As of December 26, 2009, Sysco had uncommitted bank lines of credit which provided for unsecured borrowings for working capital of up to $88,000,000, of which none was outstanding.

     As of December 26, 2009, the company’s Irish Subsidiary, Pallas Foods Limited, had a € 20,000,000 (Euro) committed facility for unsecured borrowings for working capital expiring March 31, 2010, which consisted of a € 12,000,000 (Euro) overdraft and a € 8,000,000 (Euro) revolver. There were no borrowings outstanding under either portion of this facility as of December 26, 2009. In January 2010, the € 8,000,000 (Euro) revolver portion of the facility was discontinued, leaving the € 12,000,000 (Euro) overdraft line portion of the facility with the same expiration date of March 31, 2010.

     Sysco and one of its subsidiaries, Sysco International, Co., have a revolving credit facility supporting the company’s U.S. and Canadian commercial paper programs. The facility in the amount of $1,000,000,000 expires on November 4, 2012, but is subject to extension.

     As of December 26, 2009, there were no commercial paper issuances outstanding. During the 26-week period ended December 26, 2009, aggregate commercial paper issuances and short-term bank borrowings ranged from zero to approximately $1,820,000.

7. EMPLOYEE BENEFIT PLANS

     The components of net company-sponsored benefit cost for the 26-week period presented are as follows:

     The components of net company-sponsored benefit cost for the 13-week period presented are as follows:

     Sysco’s contributions to its company-sponsored defined benefit plans were $77,690,000 and $87,394,000 during the 26-week periods ended December 26, 2009 and December 27, 2008, respectively.

     Sysco’s minimum required contribution to its company-sponsored qualified pension plan (Retirement Plan) for the calendar 2009 plan year was estimated at $95,000,000 to meet ERISA minimum funding requirements. The company will be required to pay quarterly contributions for the calendar 2010 plan year, the first installment of which must be made in fiscal 2010. The company anticipates it will make $140,000,000 of contributions to the Retirement Plan in fiscal 2010. The company’s contributions to the Supplemental Executive Retirement Plan (SERP) and other post-retirement plans are made in the amounts needed to fund current year benefit payments. The estimated fiscal 2010 contributions to fund benefit payments for the SERP and other post-retirement plans are $19,445,000 and $372,000, respectively.

8. EARNINGS PER SHARE

     The following table sets forth the computation of basic and diluted earnings per share:

     The number of options that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was approximately 65,900,000 and 61,300,000 for the first 26 weeks of fiscal 2010 and 2009, respectively. The number of options that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was approximately 66,300,000 and 63,000,000 for the second quarter of fiscal 2010 and 2009, respectively.

9. SHARE-BASED COMPENSATION

     Sysco provides compensation benefits to employees and non-employee directors under several share-based payment arrangements including various employee stock incentive plans, the Employees’ Stock Purchase Plan, and various non-employee director plans. Sysco also previously provided share-based compensation under its Management Incentive Plans.

Stock Incentive Plans

     Sysco’s 2007 Stock Incentive Plan was amended in November 2009 to increase the total number of shares authorized for issuance under the plan from 30,000,000 to 55,000,000 shares. The number of shares available for issuance as options or stock appreciation rights was increased from 25,000,000 to 55,000,000 shares. The number of shares available for issuance as restricted stock, restricted stock units or other types of stock-based awards was increased from 5,000,000 to 10,000,000 shares. The amendment also removed the provision that allowed for issuance of restricted stock, restricted stock units and other types of stock-based awards in excess of the 5,000,000 share limitation if the aggregate number of shares available for issuance under the plan was reduced by four shares for each share issued in excess of the limitation.

     In the first 26 weeks of fiscal 2010, options to purchase 8,494,200 shares were granted to employees from the 2007 Stock Incentive Plan. The fair value of each option award is estimated as of the date of grant using a Black-Scholes option pricing model. The weighted average grant-date fair value per share of options granted during the first 26 weeks of fiscal 2010 was $4.53.

     In the first 26 weeks of fiscal 2010, 652,300 restricted stock units were granted to employees from the 2007 Stock Incentive Plan. The majority of these restricted stock units were granted with dividend equivalents. The fair value of each restricted stock unit award granted with a dividend equivalent is based on the company’s stock price as of the date of grant. For restricted stock unit awards granted without dividend equivalents, the fair value was reduced by the present value of expected dividends during the vesting period. The weighted average grant-date fair value per share of restricted stock units granted during the first 26 weeks of fiscal 2010 was $27.24.

     In the first 26 weeks of fiscal 2010, 58,310 shares of restricted stock were granted to non-employee directors from the 2005 Non-Employee Directors Stock Plan. The fair value of the restricted stock awards is based on the company’s stock price as of the date of grant. The weighted average grant-date fair value per share of restricted stock granted during the first 26 weeks of fiscal 2010 was $27.44.

     Sysco’s 2009 Non-Employee Directors Stock Plan was adopted in November 2009 and provides for the issuance of up to 750,000 shares of Sysco common stock for share-based awards to non-employee directors. The authorized shares may be granted as restricted stock, restricted stock units, elected shares or additional shares. This plan will replace the 2005 Non-Employee Directors Stock Plan once all remaining shares in the 2005 Plan have been issued.

Employees’ Stock Purchase Plan

     Plan participants purchased 1,025,706 shares of Sysco common stock under the Sysco Employees’ Stock Purchase Plan during the first 26 weeks of fiscal 2010.

     The weighted average fair value per share of employee stock purchase rights issued pursuant to the Employees’ Stock Purchase Plan was $3.54 during the first 26 weeks of fiscal 2010. The fair value of the stock purchase rights is estimated as the difference between the stock price and the employee purchase price.

All Share-Based Payment Arrangements

     The total share-based compensation cost that has been recognized in results of operations was $39,913,000 and $35,129,000 for the first 26 weeks of fiscal 2010 and fiscal 2009, respectively.

     As of December 26, 2009, there was $86,110,000 of total unrecognized compensation cost related to share-based compensation arrangements. This cost is expected to be recognized over a weighted-average period of 3.16 years.

10. INCOME TAXES

Internal Revenue Service Settlement

     Sysco’s affiliate, Baugh Supply Chain Cooperative (BSCC), is a cooperative taxed under subchapter T of the United States Internal Revenue Code, the operation of which has resulted in a deferral of tax payments. The Internal Revenue Service (IRS), in connection with its audits of the company’s 2003 through 2006 federal income tax returns, proposed adjustments that would have accelerated amounts that the company had previously deferred and would have resulted in the payment of interest on those deferred amounts. Sysco reached a settlement with the IRS on August 21, 2009 to cease paying U.S. federal taxes related to BSCC on a deferred basis, pay the amounts that were recorded within deferred taxes related to BSCC over a three year period and make a one-time payment of $41,000,000, of which approximately $39,000,000 was non-deductible. The settlement addresses the BSCC deferred tax issue as it relates to the IRS audit of the company’s 2003 through 2006 federal income tax returns, and settles the matter for all subsequent periods, including the 2007 and 2008 federal income tax returns already under audit. As a result of the settlement, the company will pay the amounts owed in the following schedule:

Amounts paid annually:
Fiscal 2010		$	528,000,000
Fiscal 2011			212,000,000
Fiscal 2012			212,000,000

     Of the amounts to be paid in fiscal 2010 included in the table above, $422,000,000 was paid in the first 26 weeks of fiscal 2010 and the remaining payments will be paid in equal installments with Sysco’s remaining quarterly tax payments. Amounts to be paid in fiscal 2011 and 2012 will be paid with Sysco’s quarterly tax payments. The company believes it has access to sufficient cash on hand, cash flow from operations and current access to capital to make payments on all of the amounts noted above. The company had previously accrued interest for a portion of the exposure pertaining to the IRS proposed adjustments and as a result of the settlement with the IRS, Sysco recorded an income tax benefit of approximately $29,000,000 in the first quarter of fiscal 2010.

     Sysco’s deferred taxes were impacted by the timing of these installment payments. Sysco reclassified amounts due within one year from deferred taxes to accrued income taxes at the beginning of fiscal 2010. Additionally, beginning in fiscal 2010, the company is not deferring taxes for federal purposes according to its agreement with the IRS.

Uncertain Tax Benefits

     As of December 26, 2009, the gross amount of unrecognized tax benefits was $86,740,000 and the gross amount of accrued interest liabilities was $36,483,000. Accrued interest decreased from the amount accrued as of June 27, 2009 of $146,998,000 due to the settlement with the IRS. It is reasonably possible that the amount of the unrecognized tax benefits with respect to certain of the company’s unrecognized tax positions will increase or decrease in the next twelve months either because Sysco prevails on positions that were being challenged upon audit or because the company agrees to their disallowance. Items that may cause changes to unrecognized tax benefits primarily include the consideration of various filing requirements in various states and the allocation of income and expense between tax jurisdictions. At this time, an estimate of the range of the reasonably possible change cannot be made.

Effective Tax Rates

     The effective tax rate of 33.75% for the first 26 weeks of fiscal 2010 was favorably impacted by three items. First, as discussed above, the company recorded an income tax benefit of approximately $29,000,000 resulting from the one-time reversal of previously accrued interest related to the settlement with the IRS. Second, the carrying values of the company’s corporate-owned life insurance (COLI) policies are adjusted to their cash surrender values. The gain of $26,341,000 recorded to adjust the carrying value of COLI policies to their cash surrender values in the first 26 weeks of fiscal 2010 is non-taxable for income tax purposes and had the impact of decreasing the effective tax rate for the period. Third, the company recorded a tax benefit of approximately $5,000,000 for the reversal of valuation allowances previously recorded on state net operating loss carryforwards.

     The effective tax rate of 41.53% for the first 26 weeks of fiscal 2009 was unfavorably impacted by two items. First, a loss of $54,604,000 was recorded to adjust the carrying value of COLI policies to their cash surrender values in the first 26 weeks of fiscal 2009. Second, the company recorded a tax adjustment of approximately $11,000,000 to accrue for a previously unidentified tax contingency arising from a tax audit. The effective tax rate for the first 26 weeks of fiscal 2009 was favorably impacted by a decrease in a tax provision for a foreign tax liability of approximately $6,600,000 resulting from changes in exchange rates.

     The effective tax rate of 37.88% for the second quarter of fiscal 2010 was favorably impacted by the gain of $5,189,000 recorded to adjust the carrying value of COLI policies to their cash surrender values in the second quarter of fiscal 2010.

     The effective tax rate of 40.39% for the second quarter of fiscal 2009 was unfavorably impacted by the loss of $31,696,000 recorded to adjust the carrying value of COLI policies to their cash surrender values in the second quarter of fiscal 2009. The effective tax rate for the second quarter of fiscal 2009 was favorably impacted by a decrease in a tax provision for a foreign tax liability of approximately $5,700,000 resulting from changes in exchange rates.

Other

     The determination of the company’s provision for income taxes requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. The company’s provision for income taxes reflects a combination of income earned and taxed in the various U.S. federal and state, as well as foreign jurisdictions. Jurisdictional tax law changes, increases or decreases in permanent differences between book and tax items, accruals or adjustments of accruals for tax contingencies or valuation allowances, and the company’s change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.

11. ACQUISITIONS

     During the first 26 weeks of fiscal 2010, in the aggregate, the company paid cash of $9,161,000 primarily for contingent consideration related to operations acquired in previous fiscal years and for acquisitions made during fiscal 2010. The fiscal 2010 acquisitions were immaterial to the consolidated financial statements.

     Certain acquisitions involve contingent consideration typically payable over periods up to four years only in the event that certain operating results are attained or certain outstanding contingencies are resolved. As of December 26, 2009, aggregate contingent consideration amounts outstanding relating to acquisitions completed prior to fiscal 2010 included $73,383,000 in cash which, if earned, could result in the recording of additional goodwill.

12. COMMITMENTS AND CONTINGENCIES

     Sysco is engaged in various legal proceedings which have arisen but have not been fully adjudicated. These proceedings, in the opinion of management, will not have a material adverse effect upon the consolidated financial position or results of operations of the company when ultimately concluded.

Multi-Employer Pension Plans

     Sysco contributes to several multi-employer defined benefit pension plans based on obligations arising under collective bargaining agreements covering union-represented employees. Sysco does not directly manage these multi-employer plans, which are generally managed by boards of trustees, half of whom are appointed by the unions and the other half by other employers contributing to the plan. Based upon the information available from plan administrators, management believes that several of these multi-employer plans are underfunded. In addition, pension-related legislation requires underfunded pension plans to improve their funding ratios within prescribed intervals based on the level of their underfunding. As a result, Sysco expects its contributions to these plans to increase in the future.

     Under current law regarding multi-employer defined benefit plans, a plan’s termination, Sysco’s voluntary withdrawal, or the mass withdrawal of all contributing employers from any underfunded multi-employer defined benefit plan would require Sysco to make payments to the plan for Sysco’s proportionate share of the multi-employer plan’s unfunded vested liabilities. Based on the information available from plan administrators, which has valuation dates ranging from December 31, 2007 to June 30, 2009, Sysco estimates its share of withdrawal liability on most of the multi-employer plans in which it participates could have been as much as $174,000,000 as of December 26, 2009 based on a voluntary withdrawal. The majority of the estimated withdrawal liability results from plans for which the valuation date was December 31, 2008; therefore, the company’s estimated liability reflects the asset losses incurred by the financial markets as of that date. In general, the financial markets improved during calendar year 2009; therefore, management believes Sysco’s current share of the withdrawal liability could differ from this estimate. In addition, if a multi-employer defined benefit plan fails to satisfy certain minimum funding requirements, the IRS may impose a nondeductible excise tax of 5% on the amount of the accumulated funding deficiency for those employers contributing to the fund. As of December 26, 2009, Sysco had approximately $17,000,000 in liabilities recorded in total related to certain multi-employer defined benefit plans for which Sysco’s voluntary withdrawal had already occurred, all of which are expected to be paid during fiscal 2010.

Fuel Commitments

     From time to time, Sysco may enter into forward purchase commitments for a portion of its projected diesel fuel requirements. As of December 26, 2009, outstanding forward diesel fuel purchase commitments totaled approximately $66,000,000 at a fixed price through December 2010.

13. 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 defined in the accounting literature related to disclosures about segments of an enterprise. Broadline operating companies distribute a full line of food products and a wide variety of non-food products to their customers. 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” financial information is attributable to the company’s other operating segments, including the company’s specialty produce, custom-cut meat and lodging industry segments and a company that distributes to international customers.

     The accounting policies for the segments are the same as those disclosed by Sysco for its consolidated financial statements. Intersegment sales represent specialty produce and meat company products distributed by the Broadline and SYGMA operating companies. The segment results include certain centrally incurred costs for shared services that are charged to our segments. These centrally incurred costs are charged based upon the relative level of service used by each operating

company consistent with how Sysco’s management views the performance of its operating segments. Management evaluates the performance of each of our operating segments based on its respective operating income results, which include the allocation of certain centrally incurred costs.

     Included in corporate expenses, among other items, are:

	•		Gains and losses recognized to adjust COLI policies to their cash surrender values;
	•		Share-based compensation expense related to stock option grants, restricted stock grants, issuances of stock pursuant to the Employees’ Stock Purchase Plan and restricted stock grants to non-employee directors; and
	•		Corporate-level depreciation and amortization expense.

     The following table sets forth certain financial information for Sysco’s business segments:

14. SUPPLEMENTAL GUARANTOR INFORMATION

     Sysco International, Co. is an unlimited liability company organized under the laws of the Province of Nova Scotia, Canada and is a wholly-owned subsidiary of Sysco. In May 2002, Sysco International, Co. issued, in a private offering, $200,000,000 of 6.10% notes due in 2012. These notes are fully and unconditionally guaranteed by Sysco.

     The following condensed consolidating financial statements present separately the financial position, results of operations and cash flows of the parent guarantor (Sysco), the subsidiary issuer (Sysco International) and all other non-guarantor subsidiaries of Sysco (Other Non-Guarantor Subsidiaries) on a combined basis with eliminating entries.