Long-Term Debt Maturities

 

11. DEBT AND OTHER FINANCING ARRANGEMENTS

 

Sysco’s debt consists of the following:

 

 

As of June 28, 2014, the principal payments required to be made during the next five fiscal years on long-term debt, excluding notes payable and commercial paper, are shown below:

 

 

 

Short-term Borrowings

 

As of June 28, 2014, Sysco had uncommitted bank lines of credit, which provided for unsecured borrowings for working capital of up to $95.0 million.  There were no borrowings outstanding under these lines of credit as of June 28, 2014 or June 29, 2013, respectively.  

 

The company’s Irish subsidiary, Pallas Foods, has a multicurrency revolving credit facility, which provides for capital needs for the company’s European subsidiaries.  In September 2013, this facility was extended and increased to €100.0 million (Euro).  This facility provides for unsecured borrowings and expires September 24, 2014, but is subject to extension.  Outstanding borrowings under this facility were €52.0 million (Euro) and €32.0  million (Euro) as of June 28, 2014 and June 29, 2013, respectively, located within Notes payable on the consolidated balance sheet. 

 

On June 30, 2011, a Canadian subsidiary of Sysco entered into a short-term demand loan facility for the purpose of facilitating a distribution from the Canadian subsidiary to Sysco, and Sysco concurrently entered into an agreement with the bank to guarantee the loan.  As of July 2, 2011, the amount outstanding under the facility was $182.0 million.  The interest rate under the facility was 2.0% and payable on the due date.  The loan was repaid in full on July 4, 2011.

 

Commercial Paper and Revolving Credit Facility

 

Sysco has a Board-approved commercial paper program allowing the company to issue short-term unsecured notes in an aggregate amount not to exceed $1,300.0 million. 

 

Sysco and one of its subsidiaries, Sysco International, ULC, have a revolving credit facility supporting the company’s U.S. and Canadian commercial paper programs.  The facility provides for borrowings in both U.S. and Canadian dollars.  Borrowings by Sysco International, ULC under the agreement are guaranteed by Sysco, and borrowings by Sysco and Sysco International, ULC under the credit agreement are guaranteed by the wholly-owned subsidiaries of Sysco that are guarantors of the company’s senior notes and debentures.  In January 2014, Sysco and Sysco International, ULC, extended and increased the size of the revolving credit facility described above that supports the company’s U.S. and Canadian commercial paper programs.  The facility was increased to $1.5 billion with an expiration date of December 29, 2018, but is subject to further extension.  The other terms and conditions of the extended facility are substantially the same.  Commercial paper issuances outstanding were $130.0 million and $95.5 million as of June 28, 2014 and June 29, 2013, respectively, and were classified as long-term debt, as the company’s commercial paper programs are supported by the long-term revolving credit facility described above. 

 

During fiscal 2014, 2013, and 2012, aggregate outstanding commercial paper issuances and short-term bank borrowings ranged from approximately zero to $770.5 million,  zero to $330.0 million, and zero to $563.1 million, respectively.

 

Bridge Facility

 

In December 2013, Sysco secured a commitment for an unsecured bridge facility in the amount of $3.3865 billion in connection with its proposed merger with US Foods (discussed further in Note 4, Acquisitions).  In January 2014, this bridge facility commitment was replaced with a $3.3865 billion bridge term loan agreement with multiple lenders.  Sysco  may borrow up to $3.3865 billion in term loans on the closing date of the US Foods acquisition to fund the acquisition, refinance certain indebtedness of US Foods and pay related fees and expenses.  The facility expires on March 8, 2015, but is subject to extension if regulatory approvals have not yet been obtained.  Borrowings under the bridge term loan agreement are guaranteed by the same subsidiaries of Sysco that guarantee the company’s revolving credit facility, and in certain circumstances, may also be guaranteed by US Foods after closing of the merger.

 

Fixed Rate Debt

 

In February 2012, Sysco filed with the Securities and Exchange Commission (SEC) an automatically effective well-known seasoned issuer shelf registration statement for the issuance of an indeterminate amount of common stock, preferred stock, debt securities and guarantees of debt securities that may be issued from time to time.

 

In June 2012, Sysco repaid the 6.1% senior notes totaling $200.0 million at maturity utilizing a combination of cash flow from operations and commercial paper issuances.

 

In June 2012, Sysco issued 0.55% senior notes totaling $300.0 million due June 12, 2015 (the 2015 notes) and 2.6% senior notes totaling $450.0 million due June 12, 2022 (the 2022 notes) under its February 2012 shelf registration.  The 2015 and 2022 notes, which were priced at 99.319% and 98.722% of par, respectively, are unsecured, are not subject to any sinking fund requirement and include a redemption provision which allows Sysco to retire the notes at any time prior to maturity at the greater of par plus accrued interest or an amount designed to ensure that the note holders are not penalized by early redemption.  Proceeds from the notes will be utilized over a period of time for general corporate purposes, which may include acquisitions, refinancing of debt, working capital, share repurchases and capital expenditures.

 

In February 2013, Sysco repaid the 4.2% senior notes totaling $250.0 million at maturity utilizing a combination of cash flow from operations and cash on hand.

 

In March 2014, Sysco repaid the 4.6% senior notes totaling $200.0 million at maturity utilizing a combination of cash flow from operations and commercial paper issuances.

 

The  5.25% senior notes due February 12, 2018, the 5.375% senior notes due March 17, 2019, the 6.5% debentures due August 1, 2028, the 5.375% senior notes due September 21, 2035 and the 6.625% senior notes due March 17, 2039 are unsecured, are not subject to any sinking fund requirement and include a redemption provision that allows Sysco to retire the debentures and notes at any time prior to maturity at the greater of par plus accrued interest or an amount designed to ensure that the debenture and note holders are not penalized by the early redemption.

 

The 7.16% debentures due April 15, 2027 are unsecured, are not subject to any sinking fund requirement and are no longer redeemable prior to maturity.

 

Total Debt

 

Total debt as of June 28, 2014 was $2,759.9 million, of which approximately 74% was at fixed rates with a weighted average of  4.6% and an average life of 13 years, and the remainder was at floating rates with a weighted average of 2.7% and an average life of three years.  Certain loan agreements contain typical debt covenants to protect note holders, including provisions to maintain the company’s long-term debt to total capital ratio below a specified level.  Sysco is currently in compliance with all debt covenants.

 

Other

 

As of June 28, 2014 and June 29, 2013, letters of credit outstanding were $45.7 million and $42.2 million, respectively.