<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 December 28, 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: (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 [X] No [ ]
176,653,051 shares of common stock were outstanding as of
January 31, 1997.
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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 June 29, 1996
consolidated balance sheet which was taken from
the audited financial statements included in the
Company's Fiscal 1996 Annual Report on Form
10-K. The financial statements include
consolidated balance sheets, consolidated
results of operations and consolidated cash
flows. Certain amounts in the prior year have
been reclassified to conform to the current
presentation. 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 1996 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.
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3
<TABLE>
SYSCO CORPORATION and its Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In Thousands Except for Share Data)
<CAPTION> Dec. 28, June 29, Dec. 30,
1996 1996 1995
----------- --------- -----------
(Unaudited) (Audited) (Unaudited)
ASSETS
----------
<S> <C> <C> <C>
Current assets
Cash $ 87,651 $ 107,759 $ 117,193
Accounts and notes receivable,
less allowances of $33,550,
$16,380 and $27,521 1,094,169 1,039,759 1,018,231
Inventories 766,343 723,937 742,003
Deferred taxes 39,323 32,429 35,650
Prepaid expenses 22,541 18,443 22,809
---------- ---------- ----------
Total current assets 2,010,027 1,922,327 1,935,886
Plant and equipment at cost,
less depreciation 1,024,961 990,642 971,331
Goodwill and intangibles, less
amortization 251,338 250,473 254,339
Other assets 165,524 161,963 160,375
---------- ---------- ----------
Total assets $3,451,850 $3,325,405 $3,321,931
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities
Notes payable $ 10,967 $ 9,390 $ 52,082
Accounts payable 806,773 779,124 766,744
Accrued expenses 211,654 212,746 196,044
Accrued income taxes 35,200 23,330 13,527
Current maturities of
long-term debt 13,883 12,934 7,103
---------- --------- ----------
Total current liabilities 1,078,477 1,037,524 1,035,500
Long-term debt 682,953 581,734 569,370
Deferred taxes 222,070 231,469 218,637
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 34,763 35,179 36,988
Retained earnings 1,671,711 1,568,589 1,476,055
---------- ---------- ----------
1,897,768 1,795,062 1,704,337
Less cost of treasury stock,
14,113,937, 10,880,919 and
7,453,996 shares 429,418 320,384 205,913
---------- ---------- ----------
Total shareholders' equity 1,468,350 1,474,678 1,498,424
---------- ---------- ----------
Total liabilities and
shareholders' equity $3,451,850 $3,325,405 $3,321,931
========== ========== ==========
<FN>
Note: The June 29, 1996 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> 26-Week Period Ended 13-Week Period Ended
---------------------------- -----------------------------
Dec. 28, Dec. 30, Dec. 28, Dec. 30,
1996 1995 1996 1995
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Sales $ 7,289,571 $ 6,593,495 $ 3,610,348 $ 3,301,585
Costs and expenses
Cost of sales 5,982,959 5,410,459 2,954,481 2,705,801
Operating expenses 1,038,423 939,741 518,694 469,894
Interest expense 22,805 19,704 11,888 10,332
Other, net (259) (794) (18) (350)
------------ ----------- ------------ ------------
Total costs and expenses 7,043,928 6,369,110 3,485,045 3,185,677
------------ ----------- ------------ ------------
Earnings before income taxes 245,643 224,385 125,303 115,908
Income taxes 95,801 87,510 48,868 45,204
------------ ------------ ------------ ------------
Net earnings $ 149,842 $ 136,875 $ 76,435 $ 70,704
============ ============ ============ ============
Average number of shares
outstanding 179,233,095 182,970,451 178,412,247 183,156,420
============ ============ ============ ============
Earnings per share $ 0.84 $ 0.75 $ 0.43 $ 0.39
============ ============ ============ ============
Dividends paid per common
share $ 0.26 $ 0.22 $ 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> 26-Week Period Ended
------------------------
Dec. 28, Dec. 30,
1996 1995
--------- ----------
<S> <C> <C>
Operating activities:
Net earnings $ 149,842 $ 136,875
Add non-cash items:
Depreciation and amortization 78,455 68,650
Interest on Liquid Yield Option Notes ---- 2,274
Deferred tax provision (16,369) 26
Provision for losses on accounts receivable 13,640 8,849
Additional investment in certain assets
and liabilities net of effect of business
acquired:
(Increase) in receivables (61,466) (94,547)
(Increase) in inventories (39,444) (74,142)
(Increase) in prepaid expenses (3,646) (4,124)
Increase in accounts payable 22,325 58,364
(Decrease) in accrued expenses (1,762) (10,087)
Increase in accrued income taxes 11,870 3,152
(Increase) in other assets (7,715) (11,195)
-------- --------
Net cash provided by operating activities 145,730 84,095
-------- --------
Investing activities:
Additions to plant and equipment (101,778) (139,538)
Sales and retirements of plant and
equipment 885 2,171
Acquisition of business (5,330) ---
-------- --------
Net cash used for investing activities (106,223) (137,367)
Financing activities:
Bank and commercial paper borrowings 94,237 164,608
Other debt borrowings 2,318 2,610
Common stock reissued from treasury 16,307 15,862
Treasury stock purchases (125,757) (106,276)
Dividends paid (46,720) (40,225)
-------- --------
Net cash (used for) provided by
financing activities (59,615) 36,579
-------- --------
Net (decrease) in cash (20,108) (16,693)
Cash at beginning of period 107,759 133,886
--------- --------
Cash at end of period $ 87,651 $ 117,193
========= ========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 22,801 $ 19,230
Income taxes 101,738 82,749
</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 1996
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 shares in
Fiscal 1996.
In February 1996, the Board of Directors
authorized an additional 6,000,000 shares to
be purchased under this program. All 6,000,000
shares have been purchased under this program
during the first half of Fiscal 1997. In
November 1996, the Board of Directors authorized
an additional 6,000,000 shares to be purchased
under this program. Under this latest
authorization, 217,800 shares were purchased
through December 28, 1996.
Results of Operations
---------------------
Sales increased 11% during the 26 weeks and 9% in
the second quarter of Fiscal 1997 over comparable
periods of the prior year. Cost of sales also
increased 11% during the 26 weeks and 9% in the
second quarter of Fiscal 1997 which is in line
with the sales increases. Operating expenses
for the 26 week periods presented remained
approximately the same as a percent of sales,
while the second quarter of Fiscal 1997 was
above the same period in 1996, due primarily
to a bad debt write-off in connection with a
restaurant customer's bankruptcy.
Interest expense in the current periods increased
over the prior periods due to increased borrowings.
Income taxes for the current periods reflect an
effective rate of 39%, the same as in the prior
year periods.
Increases in pretax earnings, net earnings and
earnings per share for the periods shown resulted
from a combination of the above factors.
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7
PART II. OTHER INFORMATION
-------------------------
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on
November 1, 1996 ("1996 Annual Meeting"). At the 1996
Annual Meeting the following persons were elected to serve
as directors of the Company for three year terms:
John W. Anderson, Judith B. Craven, Bill M. Lindig,
Richard G. Merrill and Phyllis S. Sewell
The terms of the following persons as directors of the
Company continued after the 1996 Annual Meeting:
John F. Baugh, Colin G. Campbell, Charles H. Cotros,
Frank A. Godchaux III, Jonathan Golden, Donald J. Keller,
Frank H. Richardson, Arthur J. Swenka, Thomas B.
Walker, Jr., and John F. Woodhouse.
At the 1996 Annual Meeting, the stockholders voted upon the
election of directors, as noted above, and on:
(a) Approval of the reservation of 5,000,000
additional shares of Sysco Corporation Common
Stock under the Sysco Corporation 1974
Employees' Stock Purchase Plan.
The results of such vote were as follows:
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8
<TABLE>
<CAPTION> Number of Votes Cast
--------------------
Withheld and Broker
Matter Voted Upon For Against Abstained Non-votes
----------------- ----------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
(a) Approval of the reservation
of additional shares under
the 1974 Employees' Stock
Purchase Plan 150,929,968 3,259,826 1,784,418 None
(b) Election as Director:
John W. Anderson 149,309,290 6,665,121 None None
Judith B. Craven 148,987,854 6,986,557 None None
Bill M. Lindig 149,391,171 6,583,240 None None
Richard G. Merrill 149,309,724 6,664,687 None None
Phyllis S. Sewell 149,273,842 6,700,569 None None
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3(i) Restated Certification of
Incorporation, as amended,
incorporated by reference to
Form 10-K for the year ended
June 29, 1991.
3(ii) Bylaws, as amended, incorporated
by reference to Form 10-K for
the year ended July 2, 1994.
11 Statement re computation of per
share earnings.
15 Letter from Arthur Andersen LLP
dated February 5, 1997, re unaudited
financial statements.
27 Financial Data Schedule.
(b) No reports on Form 8-K have been filed
during the quarter for which this
report is filed.
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9
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: February 5, 1997
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10
<TABLE>
EXHIBIT INDEX
----------------------
<CAPTION> SEQUENTIAL
NO. DESCRIPTION PAGE NUMBER
- ----- ----------------------------------------- -------------
<S> <C> <C>
3(i) Restated Certification of Incorporation,
as amended, incorporated by reference to
Form 10-K for the year ended June 29, 1991.
3(ii) Bylaws, as amended, incorporated by
reference to Form 10-K for the year ended
July 2, 1994.
11 Sysco Corporation and its Consolidated
Subsidiaries statement re computation
of per share earnings. 11
15 Letter from Arthur Andersen LLP dated
February 5, 1997, re unaudited financial
statements. 12
27 Sysco Corporation and its Consolidated
Subsidiaries Financial Data Schedule. 13
</TABLE>
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11
Exhibit 11
SYSCO CORPORATION AND ITS CONSOLIDATED SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION> 26-Week Period Ended 13-Week Period Ended
----------------------------- -----------------------------
Dec. 28, 1996 Dec. 30, 1995 Dec. 28, 1996 Dec. 30, 1995
------------- -------------- ------------- --------------
Calculation of Primary Earnings Per Share:
- -----------------------------------------
<S> <C> <C> <C> <C>
Net earnings applicable to common stock $ 149,842,000 $ 136,875,000 $ 76,435,000 $ 70,704,000
============= ============= ============= =============
Average number of common shares and common
stock equivalents outstanding 179,233,095 182,970,451 178,412,247 183,156,420
Dilutive effect of stock options <F1> --- --- --- ---
------------- ------------- ------------- -------------
179,233,095 182,970,451 178,412,247 183,156,420
============= ============= ============= =============
Primary earnings per share $ 0.84 $ 0.75 $ 0.43 $ 0.39
============= ============= ============= =============
Calculation of Fully Diluted
Earnings Per Share:
- ----------------------------
Net earnings applicable to common stock $ 149,842,000 $ 136,875,000 $ 76,435,000 $ 70,704,000
============= ============= ============= =============
Average number of shares outstanding
on a fully diluted basis - same as
for calculation of primary earnings
per share 179,233,095 182,970,451 178,412,247 183,156,420
Dilutive effect of stock options and
Liquid Yield Option Notes <F2> --- --- --- ---
------------- ------------- ------------- ------------
179,233,095 182,970,451 178,412,247 183,156,420
============= ============= ============= ============
Fully diluted earnings per share $ 0.84 $ 0.75 $ 0.43 $ 0.39
============= ============= ============= ============
<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
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 its consolidated subsidiaries as of
December 28, 1996, and the related consolidated
statements of results of operations and cash
flows for the twenty-six 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
February 5, 1997
<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> 6-Mos
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-END> DEC-28-1996
<CASH> 87,651
<SECURITIES> 0
<RECEIVABLES> 1,127,719
<ALLOWANCES> (33,550)
<INVENTORY> 766,343
<CURRENT-ASSETS> 2,010,027
<PP&E> 1,838,800
<DEPRECIATION> (813,839)
<TOTAL-ASSETS> 3,451,850
<CURRENT-LIABILITIES> 1,078,477
<BONDS> 682,953
<COMMON> 191,294
0
0
<OTHER-SE> 1,277,056
<TOTAL-LIABILITY-AND-EQUITY> 3,451,850
<SALES> 7,289,571
<TOTAL-REVENUES> 7,289,571
<CGS> 5,982,959
<TOTAL-COSTS> 7,043,928
<OTHER-EXPENSES> (259)
<LOSS-PROVISION> 13,640
<INTEREST-EXPENSE> 22,805
<INCOME-PRETAX> 245,643
<INCOME-TAX> 95,801
<INCOME-CONTINUING> 149,842
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 149,842
<EPS-PRIMARY> 0.84
<EPS-DILUTED> 0.84
</TABLE>
