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Commitments and Contingencies | 9 Months Ended
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Mar. 28, 2015
Commitments and Contingencies [Abstract] |
Commitments and Contingencies | 14. COMMITMENTS AND CONTINGENCIES Legal Proceedings As discussed in Note 4, “Acquisitions,” the Federal Trade Commission (the “FTC”) has completed its review of the proposed merger with US Foods, and, in February 2015, the FTC commissioners voted 3 to 2 to authorize the FTC staff to seek a preliminary injunction in the U.S. District Court for the District of Columbia. The preliminary injunction, if granted, would prevent the parties from closing the merger transaction while a parallel administrative proceeding determines the legality of the merger. The hearing on the FTC's preliminary injunction motion is scheduled to begin May 5, 2015. Although Sysco cannot predict with certainty the outcome of these or any future proceedings related to the proposed merger, if the merger agreement were terminated by either party as a result of failure to obtain the required regulatory approvals or because the merger was not consummated by September 8, 2015, Sysco generally would be obligated to pay to the owners of US Foods a termination fee of $300 million. Additionally, Performance Food Group would be entitled to receive a $25 million termination fee if the sale of the divestiture package is terminated before July 6, 2015, increasing to $50 million if the sale of the divestiture package is terminated after July 6, 2015, with each of Sysco and US Foods responsible for one half of the applicable fee. Further, if the merger has not closed by October 8, 2015, or if the merger agreement is terminated on or prior to October 8, 2015, Sysco is required to redeem all of the $5.0 billion in senior notes that were issued in October 2014, at a redemption price equal to 101% of the principal of the senior notes plus accrued interest. This premium is estimated to be approximately $50 million. In addition, there are costs that were deferred or capitalized, as well as settled losses on derivative instruments that are currently recorded within Accumulated other comprehensive income, related to this financing that we would expect to write off or recognize into interest expense. As discussed in Note 6, “Derivative Financial Instruments,” the two forward starting swap agreements used to hedge the October 2014 senior notes issuance were previously terminated and were paid. The resulting amounts recorded as a loss are currently amortizing out of Accumulated other comprehensive income into Interest expense over 10 and 30 years, respectively. If the senior notes are redeemed, the company would expect to recognize the remaining losses into Interest expense. These losses total $184 million as of March 28, 2015. The company would also expect to write off other costs incurred in issuing the debt that have been deferred on the balance sheet, such as debt issuance costs and bond discounts that total $29 million and $18 million, respectively, as of March 28, 2015. Also as discussed in Note 6, “Derivative Financial Instruments,” the company entered into new interest rate swap agreements that effectively converted $500 million of the new senior notes maturing in fiscal 2018 and $750 million of the new senior notes maturing in fiscal 2020 to floating rate debt. If the senior notes are redeemed, these agreements would be terminated simultaneously with any cash settlement required at such time. As of March 28, 2015, the fair value of these agreements was favorable to Sysco in the amount of $16.5 million. Sysco is engaged in various other legal proceedings that have arisen, but have not been fully adjudicated. The likelihood of loss for these legal proceedings, based on definitions within contingency accounting literature, ranges from remote to reasonably possible to probable. When probable, the losses have been accrued. Based on estimates of the range of potential losses associated with these matters, management does not believe that the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect upon the consolidated financial position or results of operations of the company. However, the final results of legal proceedings cannot be predicted with certainty and, if the company failed to prevail in one or more of these legal matters, and the associated realized losses were to exceed the company’s current estimates of the range of potential losses, the company’s consolidated financial position or results of operations could be materially adversely affected in future periods.

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