<PAGE>
Page 1 of 13
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-6544
SYSCO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 74-1648137
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1390 Enclave Parkway
Houston, Texas 77077-2099
(Address of principal executive offices)
(Zip code)
Registrant's telephone number, including area code: (713) 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 [X] No [ ]
181,780,872 shares of common stock were outstanding as of
May 3, 1996.
<PAGE>
2
PART I. FINANCIAL INFORMATION
---------------------------------------------------
Item 1. Financial Statements
The following consolidated financial statements
have been prepared by the Company, without
audit, with the exception of the July 1, 1995
consolidated balance sheet which was taken from
the audited financial statements included in the
Company's Fiscal 1995 Annual Report on Form
10-K. The financial statements include
consolidated balance sheets, consolidated
results of operations 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 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 1995 Annual Report on Form
10-K.
A review of the financial information herein has
been made by Arthur Andersen LLP, independent
public accountants, in accordance with established
professional standards and procedures for such a
review. A letter from Arthur Andersen LLP
concerning their review is included as Exhibit 15.
<PAGE>
3
<TABLE>
SYSCO CORPORATION and its Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In Thousands Except for Share Data)
<CAPTION> March 30, July 1, April 1,
1996 1995 1995
(Unaudited) (Audited) (Unaudited)
----------- ---------- -----------
ASSETS
----------
<S> <C> <C> <C>
Current assets:
Cash $ 74,281 $ 133,886 $ 78,065
Accounts and notes receivable,
less allowances of $32,067,
$16,001 and $34,449 1,050,209 932,533 934,482
Inventories 736,068 667,861 677,293
Deferred taxes 16,111 33,935 24,153
Prepaid expenses 23,829 18,685 21,783
---------- ---------- ----------
Total current assets 1,900,498 1,786,900 1,735,776
Plant and equipment at cost, less
depreciation 993,052 896,079 875,687
Goodwill and intangibles, less
amortization 252,406 258,206 260,139
Other assets 161,234 153,506 149,677
---------- ---------- ----------
Total assets $ 3,307,190 $3,094,691 $3,021,279
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable $ 29,044 $ 1,181 $ 50,830
Accounts payable 808,877 708,380 702,605
Accrued expenses 204,454 206,131 189,500
Accrued income taxes 16,349 22,462 14,088
Current maturities of long-term
debt 9,196 6,569 5,234
---------- --------- ----------
Total current liabilities 1,067,920 944,723 962,257
Long-term debt 559,079 541,556 530,268
Deferred taxes 213,399 204,809 196,619
Shareholders' equity
Preferred stock, par value $1 per
share:
Authorized 1,500,000 shares;
issued none --- --- ---
Common stock, par value $1 per
share:
Authorized 500,000,000 shares;
issued 191,293,725 shares 191,294 191,294 191,294
Paid-in capital 36,137 48,674 51,282
Retained earnings 1,508,511 1,379,405 1,322,345
---------- ---------- ----------
1,735,942 1,619,373 1,564,921
Less cost of treasury stock,
9,357,492, 8,429,203 and
9,099,381 shares 269,150 215,770 232,786
---------- ---------- ----------
Total shareholders' equity 1,466,792 1,403,603 1,332,135
---------- ---------- ----------
Total liabilities and
shareholders' equity $3,307,190 $3,094,691 $3,021,279
========== ========== ==========
<FN>
Note: The July 1, 1995 balance sheet has been taken from the audited
financial statements at that date.
</TABLE>
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4
<TABLE>
SYSCO CORPORATION and its Consolidated Subsidiaries
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
(In Thousands Except for Share Data)
<CAPTION> 39-Week Period Ended 13-Week Period Ended
---------------------------- -----------------------------
March 30, April 1, March 30, April 1,
1996 1995 1996 1995
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Sales $ 9,850,605 $ 8,956,114 $ 3,257,110 $ 2,966,355
Costs and expenses
Cost of sales 8,086,303 7,345,041 2,675,844 2,432,677
Operating expenses 1,418,850 1,294,310 479,109 436,443
Interest expense 29,975 28,738 10,271 10,317
Other income, net (1,205) (1,697) (411) (624)
------------ ----------- ------------ ------------
Total costs and expenses 9,533,923 8,666,392 3,164,813 2,878,813
------------ ----------- ------------ ------------
Earnings before income taxes 316,682 289,722 92,297 87,542
Income taxes 123,506 115,019 35,996 34,754
------------ ------------ ------------ ------------
Net earnings $ 193,716 $ 174,703 $ 56,301 $ 52,788
============ ============ ============ ============
Average number of shares
outstanding 182,985,177 182,905,450 183,014,629 182,531,301
============ ============ ============ ============
Earnings per share $ 1.06 $ 0.96 $ 0.31 $ 0.29
============ ============ ============ ============
Dividends paid per common
share $ 0.35 $ 0.29 $ 0.13 $ 0.11
============ ============ ============ ============
(/Table)
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5
</TABLE>
<TABLE>
SYSCO CORPORATION and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS - (Unaudited)
(In Thousands)
<CAPTION> 39-Week Period Ended
------------------------
March 30, April 1,
1996 1995
-------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 193,176 $174,703
Add non-cash items:
Depreciation and amortization 105,971 97,224
Interest on Liquid Yield Option Notes 2,274 4,500
Deferred tax provision 26,414 25,009
Provision for losses on accounts receivable 12,861 14,209
Additional investment in certain assets
and liabilities acquired:
(Increase) in receivables (130,537) (92,243)
(Increase) in inventories (68,207) (75,299)
(Increase) in prepaid expenses (5,144) (5,403)
Increase in accounts payable 100,497 70,232
(Decrease) increase in accrued expenses (1,677) 13,457
(Decrease) in accrued income taxes (6,113) (15,080)
(Increase) in other assets (13,924) (24,941)
-------- --------
Net cash provided by operating activities 215,591 186,368
-------- --------
Cash flows from investing activities:
Additions to plant and equipment (196,302) (149,514)
Sales and retirements of plant and equipment 3,696 3,809
-------- --------
Net cash used for investing activities (192,606) (145,705)
-------- --------
Cash flows from financing activities:
Bank and commercial paper borrowings 132,615 40,406
Other debt borrowings (repayments) 3,368 (6,257)
Common stock reissued from treasury 20,624 20,122
Treasury stock purchases (175,127) (50,511)
Dividends paid (64,070) (53,093)
-------- --------
Net cash used for financing activities (82,590) (49,333)
-------- --------
Net (decrease) in cash (59,605) (8,670)
Cash at beginning of period 133,886 86,735
-------- --------
Cash at end of period $ 74,281 $ 78,065
======== ========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 24,821 $ 26,697
Income taxes 100,814 104,536
</TABLE>
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6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
-------------------------------
The liquidity and capital resources discussion
included on page 11 of the Company's Fiscal 1995
Annual Report on Form 10-K remains applicable,
other than the common stock repurchase program
described below.
In Fiscal 1992, the Company began a common stock
repurchase program and purchased 8,000,000 shares
in Fiscal 1992 and 1993. In September 1993, the
Board of Directors authorized an additional
10,000,000 shares to be purchased under this stock
repurchase program. Under this program, 3,000,000
shares were purchased in Fiscal 1994, 2,100,000
shares in Fiscal 1995, and 4,900,000 in Fiscal
1996. In February 1996, the Board of
Directors authorized an additional 6,000,000
shares to be purchased under this program. Under
this latest authorization, 691,000 shares were
purchased through March 30, 1996.
On December 4, 1995, the Company redeemed all
outstanding Liquid Yield Option Notes (LYON's)
at a price of $579.92 per $1,000 principal amount
at maturity, or approximately $90,400,000 in the
aggregate. These zero coupon subordinated notes
were outstanding and convertible into common
stock at the rate of 24.512 shares per $1,000
principal amount at maturity. During the
second quarter of Fiscal 1996, in lieu of
redemption, bondholders converted 155,685 of the
155,815 outstanding LYON's into common stock,
resulting in the issuance of 3,816,133 shares.
On May 1, 1996, the Company issued 7.0%
senior notes totaling $200,000,000 due May 1,
2006. These notes which were priced at par,
are unsecured, not redeemable prior to
maturity and are not subject to any sinking
fund requirement. The notes were the second
draw down issued under a $500,000,000 shelf
registration filed with the Securities and
Exchange Commission in June 1995, of which
$150,000,000 is still available.
Results of Operations
---------------------
Sales increased 10% during the 39 weeks and in
the third quarter of Fiscal 1996 over comparable
periods of the prior year. Cost of sales increased
10% during both periods presented which is
generally in line with the sales increases. Operating
expenses for the periods presented remained
approximately the same as a percent of sales.
Overall sales improvement for the quarter was
satisfactory, particularly in terms of real volumes.
However, the Company's ability to leverage earnings
was adversely impacted by the inclement weather that
plagued the country during the quarter. The most
severe winter weather experienced since the Company's
founding in 1969 forced temporary closings or reduced
operations for many restaurant customers and the
Company's distribution centers, contributing to
higher operating costs. A precise measurement of
the impact on earnings cannot be made.
<PAGE> 7
Interest expense for the 39 week period increased
over the prior period due to increased borrowings.
Income taxes for the current periods reflect an
effective rate of 39% as comapred to 39.7% in the
prior year. The rate reduction results from the
effects of several tax savings initiatives.
Increases in pretax earnings, net earnings and
earnings per share for the periods shown resulted
from a combination of the above factors.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11, Statement re computation of per
share earnings.
Exhibit 15, Letter from Arthur Andersen LLP
dated May 7, 1996, re unaudited financial
statements.
Exhibit 27, Financial Data Schedule.
(b) No reports on Form 8-K have been filed during
the quarter for which this report is filed.
<PAGE>
8
SIGNATURES
------------------
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYSCO CORPORATION
(Registrant)
By /s/ JOHN K. STUBBLEFIELD, JR.
-----------------------------
John K. Stubblefield, Jr.
Senior Vice President &
Chief Financial Officer
Date: May 7, 1996
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9
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of Sysco Corporation:
We have reviewed the consolidated balance sheet
of Sysco Corporation (a Delaware corporation)
and subsidiaries as of March 30, 1996, and the
related consolidated statements of results of
operations and cash flows for the thirty-nine
week and thirteen week periods then ended
included in the Company's Quarterly Report on
Form 10-Q. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with
standards established by the American Institute
of Certified Public Accountants. A review of
interim financial information consists
principally of applying analytical procedures
to financial data and making inquiries of
persons responsible for financial and
accounting matters. It is substantially
less in scope than an audit conducted in
accordance with generally accepted auditing
standards, the objective of which is the
expression of an opinion regarding the
financial statements taken as a whole.
Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any
material modifications that should be made
to the financial statements referred to above
for them to be in conformity with generally
accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Houston, Texas
April 24, 1996
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10
<TABLE>
EXHIBIT INDEX
----------------------
<CAPTION> SEQUENTIAL
NO. DESCRIPTION PAGE NUMBER
- ----- ----------------------------------------- -------------
<S> <C> <C>
11 SYSCO Corporation and its Consolidated
Subsidiaries statement re computation of
per share earnings 11
15 Letter from Arthur Andersen LLP dated
May 7, 1996, re unaudited financial
statements 12
27 SYSCO Corporation and its Consolidated
Subsidiaries Financial Data Schedule 13
</TABLE>
<PAGE>
11
Exhibit 11
SYSCO CORPORATION AND ITS CONSOLIDATED SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION> 39-Week Period Ended 13-Week Period Ended
---------------------------- -----------------------------
Mar. 30, 1996 April 1, 1995 Mar. 30, 1996 April 1, 1995
------------- ------------- ------------- --------------
Calculation of Primary Earnings Per Share:
<S> <C> <C> <C> <C>
Net earnings applicable to common stock $ 193,176,000 $ 174,703,000 $ 56,301,000 $ 52,788,000
============= ============= ============= =============
Average number of common shares and common
stock equivalents outstanding 182,985,177 182,905,450 183,014,629 182,531,301
Dilutive effect of stock options <F1> --- --- --- ---
------------- ------------- ------------- -------------
182,985,177 182,905,450 183,014,629 182,531,301
============= ============= ============= =============
Primary earnings per share $ 1.06 $ 0.96 $ 0.31 $ 0.29
============= ============= ============= =============
Calculation of Fully Diluted Earnings
Per Share:
Net earnings applicable to common stock $ 193,176,000 $ 174,703,000 $ 56,301,000 $ 52,788,000
============= ============= ============= =============
Average number of shares outstanding on a
fully diluted basis - same as for
calculation of primary earnings
per share 182,985,177 182,905,450 183,014,629 182,531,301
Dilutive effect of stock options and Liquid
Yield Option Notes <F2> --- --- --- ---
------------- ------------- ------------- ------------
182,985,177 182,905,450 183,014,629 182,531,301
============= ============= ============= ============
Fully diluted earnings per share $ 1.06 $ 0.96 $ 0.31 $ 0.29
============= ============= ============= ============
<FN>
<F1> Maximum possible dilutive effect of outstanding options in each period is less than 3%.
<F2> Maximum possible dilutive effect of outstanding options and Liquid Yield
Option Notes during each period is less than 3%.
</TABLE>
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12
Exhibit 15
May 7, 1996
SYSCO Corporation:
We are aware that SYSCO Corporation has
incorporated by reference in its Registration
Statements No. 2-73392, 33-10906, 2-76096,
33-45804, 33-45820, 33-60023, 333-01255,
333-01257 and 333-01259 its Form 10Q for the
quarters ended September 30, 1995,
December 30, 1995 and March 30, 1996, which
include our reports dated November 9, 1995,
February 8, 1996 and April 24, 1996,
respectively, covering the unaudited interim
financial information contained therein.
Pursuant to Regulation C of the Securities
Act of 1933, those reports are not considered
a part of those registration statements
prepared or certified by our firm or reports
prepared or certified by our firm within
the meaning of Sections 7 and 11 of the Act.
Very truly yours,
/s/ ARTHUR ANDERSEN LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from Item 1. Financial Statements and is
qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> MAR-30-1996
<CASH> $ 74,281
<SECURITIES> 0
<RECEIVABLES> 1,082,276
<ALLOWANCES> (32,067)
<INVENTORY> 736,068
<CURRENT-ASSETS> 1,900,498
<PP&E> 1,732,835
<DEPRECIATION> (739,783)
<TOTAL-ASSETS> 3,307,190
<CURRENT-LIABILITIES> 1,067,920
<BONDS> 559,079
0
0
<COMMON> 191,294
<OTHER-SE> 1,275,498
<TOTAL-LIABILITY-AND-EQUITY> 3,307,190
<SALES> 9,850,605
<TOTAL-REVENUES> 9,850,605
<CGS> 8,086,303
<TOTAL-COSTS> 9,533,923
<OTHER-EXPENSES> (1,205)
<LOSS-PROVISION> 12,861
<INTEREST-EXPENSE> 29,975
<INCOME-PRETAX> 316,682
<INCOME-TAX> 123,506
<INCOME-CONTINUING> 193,176
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 193,176
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.06
</TABLE>
