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 30, 1995 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 [ ] 183,404,837 shares of common stock were outstanding as of February 2, 1996.
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.
3 <TABLE> SYSCO CORPORATION and its Consolidated Subsidiaries CONSOLIDATED BALANCE SHEETS (In Thousands Except for Share Data) <CAPTION> Dec. 30, July 1, Dec. 31, 1995 1995 1994 ----------- --------- ----------- (Unaudited) (Audited) (Unaudited) ASSETS ---------- <S> <C> <C> <C> Current assets Cash $ 117,193 $ 133,886 $ 84,224 Accounts and notes receivable, less allowances of $27,521, $16,001 and $29,448 1,018,231 932,533 919,262 Inventories 742,003 667,861 703,318 Deferred taxes 25,109 33,935 35,837 Prepaid expenses 22,809 18,685 22,000 ---------- ---------- ---------- Total current assets 1,925,345 1,786,900 1,764,641 Plant and equipment at cost, less depreciation 971,331 896,079 839,761 Goodwill and intangibles, less amortization 254,339 258,206 262,072 Other assets 160,375 153,506 146,869 ---------- ---------- ---------- Total assets $3,311,390 $3,094,691 $3,013,343 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities Notes payable $ 52,082 $ 1,181 $ 66,508 Accounts payable 766,744 708,380 688,537 Accrued expenses 196,044 206,131 171,680 Accrued income taxes 13,527 22,462 11,596 Current maturities of long-term debt 7,103 6,569 3,146 ---------- --------- ---------- Total current liabilities 1,035,500 944,723 941,467 Long-term debt 569,370 541,556 561,066 Deferred taxes 208,096 204,809 202,643 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 36,988 48,674 52,078 Retained earnings 1,476,055 1,379,405 1,289,643 ---------- ---------- ---------- 1,704,337 1,619,373 1,533,015 Less cost of treasury stock, 7,453,996, 8,429,203 and 8,805,905 shares 205,913 215,770 224,848 ---------- ---------- ---------- Total shareholders' equity 1,498,424 1,403,603 1,308,167 ---------- ---------- ---------- Total liabilities and shareholders' equity $3,311,390 $3,094,691 $3,013,343 ========== ========== ========== <FN> Note: The July 1, 1995 balance sheet has been taken from the audited financial statements at that date. </TABLE>
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. 30, Dec. 31, Dec. 30, Dec. 31, 1995 1994 1995 1994 ------------ ------------ ------------ -------------- <S> <C> <C> <C> <C> Sales $ 6,593,495 $ 5,989,759 $ 3,301,585 $ 3,006,663 Costs and expenses Cost of sales 5,410,459 4,912,364 2,705,801 2,463,576 Operating expenses 939,741 857,867 469,894 428,276 Interest expense 19,704 18,421 10,332 9,968 Other, net (794) (1,073) (350) (545) ------------ ----------- ------------ ------------ Total costs and expenses 6,369,110 5,787,579 3,185,677 2,901,275 ------------ ----------- ------------ ------------ Earnings before income taxes 224,385 202,180 115,908 105,388 Income taxes 87,510 80,265 45,204 41,839 ------------ ------------ ------------ ------------ Net earnings $ 136,875 $ 121,915 $ 70,704 $ 63,549 ============ ============ ============ ============ Average number of shares outstanding 182,970,451 183,091,860 183,156,420 182,890,596 ============ ============ ============ ============ Earnings per share $ 0.75 $ 0.67 $ 0.39 $ 0.35 ============ ============ ============ ============ Dividends paid per common share $ 0.22 $ 0.18 $ 0.11 $ 0.09 ============ ============ ============ ============ (/Table)
5 </TABLE> <TABLE> SYSCO CORPORATION and its Consolidated Subsidiaries CONSOLIDATED CASH FLOWS - (Unaudited) (In Thousands) <CAPTION> 26-Week Period Ended ------------------------ Dec. 30, Dec. 31, 1995 1994 --------- ---------- <S> <C> <C> Operating activities: Net earnings $ 136,875 $ 121,915 Add non-cash items: Depreciation and amortization 68,650 64,308 Interest on Liquid Yield Option Notes 2,274 2,979 Deferred tax provision 12,113 19,349 Provision for losses on accounts receivable 8,849 10,265 Additional investment in certain assets and liabilities net of effect of business acquired: (Increase) in receivables (94,547) (73,079) (Increase) in inventories (74,142) (101,324) (Increase) in prepaid expenses (4,124) (5,620) Increase in accounts payable 58,364 56,164 (Decrease) in accrued expenses (10,087) (4,363) (Decrease) in accrued income taxes (8,935) (17,572) (Increase) in other assets (11,195) (20,909) -------- -------- Net cash provided by operating activities 84,095 52,113 -------- -------- Investing activities: Additions to plant and equipment (139,538) (82,058) Sales and retirements of plant and equipment 2,171 2,038 -------- -------- Net cash used for investing activities (137,367) (80,020) Financing activities: Bank and commercial paper borrowings 164,608 85,851 Other debt borrowings (repayments) 2,610 (5,799) Common stock reissued from treasury 15,862 16,415 Treasury stock purchases (106,276) (38,064) Dividends paid (40,225) (33,007) -------- -------- Net cash provided by financing activities 36,579 25,396 -------- -------- Net (decrease) in cash (16,693) (2,511) Cash at beginning of period 133,886 86,735 --------- -------- Cash at end of period $ 117,193 $ 84,224 ========= ======== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 19,230 $ 18,542 Income taxes 82,749 78,133 </TABLE>
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 3,484,000 shares in the first half of Fiscal 1996. In November, 1995 the Company determined to redeem all outstanding Liquid Yield Option Notes (LYON's) on December 4, 1995 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 this quarter, 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. Results of Operations --------------------- Sales increased 10% during the 26 weeks and 9.8% in the second quarter of Fiscal 1996 over comparable periods of the prior year. Cost of sales increased 10% during the 26 weeks and 9.8% in the second quarter of Fiscal 1996 which is generally in line with the sales increases. Operating expenses for the periods presented remained approximately the same as a percent of sales. 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% as compared 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.
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 3, 1995 ("1995 Annual Meeting"). At the 1995 Annual Meeting the following persons were elected to serve as directors of the Company for three year terms: Colin T. Campbell, Frank A. Godchaux III, Donald J. Keller, Frank H. Richardson and John F. Woodhouse. The terms of the following persons as directors of the Company continued after the 1995 Annual Meeting: John F. Baugh, John W. Anderson, Charles H. Cotros, Jonathan Golden, Bill M. Lindig, Richard G. Merrill, Donald H. Pegler, Jr., Phyllis S. Sewell, Arthur J. Swenka and Thomas B. Walker, Jr. At the 1995 Annual Meeting, the stockholders voted upon the election of directors, as noted above, and on: (a) Approval of the Sysco Corporation 1995 Management Incentive Plan; (b) Approval of the Sysco Corporation Non-Employee Directors Stock Option Plan; and (c) Approval of the reservation of 8,000,000 additional shares of Sysco Corporation Common Stock under the Sysco Corporation 1991 Stock Option Plan. The results of such vote were as follows:
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 Management Incentive Plan 134,674,843 12,605,590 5,592,584 4,586,394 (b) Approval of the Non- Employee Directors Stock Option Plan 139,215,399 7,736,746 5,448,001 5,059,265 (c) Approval of the reservation of additional shares under the 1991 Stock Option Plan 127,847,907 18,931,506 5,620,732 5,059,265 (d) Election of Director: Colin G. Campbell 156,131,695 1,327,716 -- -- Frank A. Godchaux III 155,580,990 1,878,421 -- -- Donald J. Keller 156,158,967 1,300,444 -- -- Frank H. Richardson 156,155,717 1,303,694 -- -- John F. Woodhouse 155,705,807 1,753,604 -- -- </TABLE> Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 10(e) Sysco Corporation 1995 Management Incentive Plan incorporated by reference to Form 10-K for the year ended July 1, 1995 Exhibit 10(g) Sysco Corporation Non-Employee Directors Stock Option Plan incorporated by reference to Form 10-K for the year ended July 1, 1995 Exhibit 11, Statement re computation of per share earnings. Exhibit 15, Letter from Arthur Andersen LLP dated February 8, 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.
9 SIGNATURES ------------------ Pursuant to the requirements of the Securities and 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 8, 1996
10 <TABLE> EXHIBIT INDEX ---------------------- <CAPTION> SEQUENTIAL NO. DESCRIPTION PAGE NUMBER - ----- ----------------------------------------- ------------- <S> <C> <C> 10(e) Sysco Corporation 1995 Management Incentive Plan incorporated by reference to Form 10-K for the year ended July 1, 1995 10(g) Sysco Corporation Non-Employee Directors Stock Option Plan incorporated by reference to Form 10-K for the year ended July 1, 1995 11 Sysco Corporation and its Consolidated Subsidiaries statement re computation of per share earnings 11 15 Letter from Arthur Andersen LLP dated February 8, 1996, re unaudited financial statements 12 27 Sysco Corporation and its Consolidated Subsidiaries Financial Data Schedule 13 </TABLE>