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ACQUISITIONS | 12 Months Ended
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Jul. 01, 2017
Business Combinations [Abstract] |
ACQUISITIONS | ACQUISITIONS During fiscal 2017, the company paid cash of $2.9 billion for acquisitions, net of cash acquired. Certain prior year acquisitions involved contingent consideration that included earnout agreements that are typically payable over periods of up to three years in the event that certain operating results are achieved. As of July 1, 2017, aggregate contingent consideration outstanding was $15.3 million, of which $5.3 million was recorded as earnout liabilities. Brakes Group On July 5, 2016, Sysco consummated its acquisition of Cucina Lux Investments Limited (a private company limited by shares organized under the laws of England and Wales), a holding company of the Brakes Group, pursuant to an agreement for the sale and purchase of securities in the capital of such holding company, dated as of February 19, 2016 (the Purchase Agreement), by and among Sysco, entities affiliated with Bain Capital Investors, LLC, and members of management of the Brakes Group (the Brakes Acquisition). Following the closing of the Brakes Acquisition, the Brakes Group became a wholly owned subsidiary of Sysco. The Brakes Group is a large European foodservice business supplying fresh, refrigerated and frozen food products, as well as non-food products and supplies, to foodservice customers ranging from large customers, including leisure, pub, restaurant, hotel and contract catering groups, to smaller customers, including independent restaurants, hotels, fast food outlets, schools and hospitals. Brakes Group businesses include: Brakes, Brakes Catering Equipment, Brake France, Country Choice, Davigel, Fresh Direct, Freshfayre, M&J Seafood, Menigo Foodservice, Pauley's, Wild Harvest and Woodward Foodservice. The Brakes Group’s largest businesses are in the U.K., France, and Sweden, in addition to a presence in Ireland, Belgium, Spain and Luxembourg. The principal reason for the Brakes Acquisition was the ability to expand Sysco's footprint and infrastructure in Europe and profitably grow Sysco's business. These contributed to a purchase price that resulted in recognition of goodwill. The assets, liabilities and operating results of the Brakes Group are reflected in the company’s consolidated financial statements in accordance with ASC Topic No. 805, Business Combinations, commencing from the acquisition date. Total consideration has been determined to be as follows (in thousands):
Cash consideration paid, net of cash acquired | $ | 626,442 |
Payment for Brakes outstanding financial debt | 2,284,100 |
Total consideration paid, net of cash acquired | $ | 2,910,542 |
During the fourth quarter of fiscal 2017, the company completed the determination of fair value of the assets acquired and liabilities assumed. The company recorded certain measurement period adjustments during each quarter of fiscal 2017, none of which were individually or in the aggregate material to the company’s financial statements. The final allocation of the purchase price of the Brakes Group was as follows (in thousands):
| Purchase Price Allocation
Accounts receivable | $ | 686,776 |
Inventory | 248,031 |
Plant and equipment | 595,388 |
Other assets | 47,217 |
Goodwill and other intangibles (1) | 2,789,065 |
Total assets | 4,366,477 |
Accounts payable | (707,622 | )
Accrued expenses | (474,501 | )
Deferred tax liabilities | (197,629 | )
Other liabilities | (76,183 | )
Total consideration, net of cash acquired | $ | 2,910,542 |
(1) | The excess purchase price of $1.8 billion was assigned to goodwill, no ne of which is deductible for income tax purposes. This goodwill has been assigned to the International Foodservice Operations reportable segment. Intangible assets added include customer relationships of $832.6 million with a weighted average life of 12 years and trademarks and trade names of $141.0 million that are indefinite lived assets. Amortization expense is recognized on a straight line basis and was $76.2 million for fiscal 2017.
The fiscal year ended July 1, 2017 includes the results of operations of the Brakes Group for the period from July 5, 2016 to July 1, 2017. The consolidated statement of operations for fiscal 2017 includes $5.2 billion of sales and $47.0 million of net earnings attributable to the Brakes Group. Sysco incurred debt in order to fund the Brakes Acquisition; however, the interest expense on that debt is not reflected within the earnings from operations attributable to the Brakes Group. Unaudited Pro Forma Results The following table presents the company’s pro forma consolidated sales, earnings before income taxes, and net earnings for the fiscal year ended July 2, 2016. The unaudited pro forma results include the historical statements of operations information of the company and of Brakes Group, giving effect to the Brakes Acquisition and related financing as if they had occurred at the beginning of the period presented (in thousands, except per share data).
| Year Ended
| Jul. 2, 2016
Sales | $ | 55,922,506 |
Income before taxes | 1,441,667 |
Net earnings | 954,888 |
Net earnings: |
Basic earnings per common share | $ | 1.67 |
Diluted earnings per common share | 1.65 |
The pro forma results include the following pro forma adjustments related to the Brakes Acquisition:
(i) | Additional amortization expense related to the fair value of intangible assets acquired.
(ii) | Additional depreciation expense related to the fair value of property and equipment acquired.
(iii) | The elimination of interest expense, assuming the long-term debt paid off on behalf of the Brakes Group as of the Brakes Acquisition date had been retired as of June 28, 2015, the first day of fiscal 2016.
(iv) | The addition of interest expense incurred by Sysco due to the Brakes Acquisition.
(v) | The elimination of interest income from related party debt instruments issued to the Brakes Group prior to the Brakes Acquisition.
(vi) | The elimination of minority interests in the Brakes Group entities, as the majority of the interests were repurchased before the Brakes Acquisition.
The unaudited pro forma results do not include any operating efficiencies, cost reductions or revenue enhancements that may be achieved through the business combination, or the impact of non-recurring items directly related to the business combination or the nature and amount of any material, nonrecurring pro forma adjustments. The unaudited pro forma results are not necessarily indicative of the operating results that would have occurred if the Brakes Acquisition had been completed as of the date for which the pro forma financial information is presented. In addition, the unaudited pro forma results do not purport to project the future consolidated operating results of the combined companies.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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