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 29, 1997 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 [ ] 174,407,385 shares of common stock were outstanding as of May 2, 1997.
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.
3 <TABLE> SYSCO CORPORATION and its Consolidated Subsidiaries CONSOLIDATED BALANCE SHEETS (In Thousands Except for Share Data) <CAPTION> March 29, June 29, March 30, 1997 1996 1996 (Unaudited) (Audited) (Unaudited) ----------- ---------- ----------- ASSETS ---------- <S> <C> <C> <C> Current assets: Cash $ 84,093 $ 107,759 $ 74,281 Accounts and notes receivable, less allowances of $39,402, $16,380 and $32,446 1,075,408 1,039,759 1,050,209 Inventories 745,304 723,937 736,068 Deferred taxes 44,739 32,429 25,890 Prepaid expenses 24,405 18,443 23,829 ---------- ---------- ---------- Total current assets 1,973,949 1,922,327 1,910,277 Plant and equipment at cost, less depreciation 1,034,711 990,642 993,052 Goodwill and intangibles, less amortization 249,375 250,473 252,406 Other assets 164,678 161,963 161,234 ---------- ---------- ---------- Total other assets 414,053 412,436 413,640 ---------- ---------- ---------- Total assets $ 3,422,713 $ 3,325,405 $3,316,969 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities: Notes payable $ 13,103 $ 9,390 $ 29,044 Accounts payable 827,322 779,124 808,877 Accrued expenses 241,939 212,746 204,454 Accrued income taxes 33,563 23,330 16,349 Current maturities of long-term debt 9,525 12,934 9,196 ---------- --------- ---------- Total current liabilities 1,125,452 1,037,524 1,067,920 Long-term debt 623,158 581,734 559,079 Deferred taxes 236,224 231,469 223,178 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 33,391 35,179 36,137 Retained earnings 1,706,749 1,568,589 1,508,511 ---------- ---------- ---------- 1,931,434 1,795,062 1,735,942 Less cost of treasury stock, 15,994,038, 10,880,919 and 9,357,492 shares 493,555 320,384 269,150 ---------- ---------- ---------- Total shareholders' equity 1,437,879 1,474,678 1,466,792 ---------- ---------- ---------- Total liabilities and shareholders' equity $3,422,713 $3,325,405 $3,316,969 ========== ========== ========== <FN> Note: The June 29, 1996 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> 39-Week Period Ended 13-Week Period Ended ---------------------------- ----------------------------- March 29, March 30, March 29, March 30, 1997 1996 1997 1996 ------------ ------------ ------------ ----------- <S> <C> <C> <C> <C> Sales $ 10,759,905 $ 9,850,605 $ 3,470,334 $ 3,257,110 Costs and expenses Cost of sales 8,827,840 8,086,303 2,844,881 2,675,844 Operating expenses 1,550,986 1,418,850 512,563 479,109 Interest expense 34,385 29,975 11,580 10,271 Other, net 48 (1,205) 307 (411) ------------ ----------- ------------ ------------ Total costs and expenses 10,413,259 9,533,923 3,369,331 3,164,813 ------------ ----------- ------------ ------------ Earnings before income taxes 346,646 316,682 101,003 92,297 Income taxes 135,192 123,506 39,391 35,996 ------------ ------------ ------------ ------------ Net earnings $ 211,454 $ 193,176 $ 61,612 $ 56,301 ============ ============ ============ ============ Average number of shares outstanding 178,333,249 182,985,177 176,534,015 183,014,629 ============ ============ ============ ============ Earnings per share $ 1.19 $ 1.06 $ 0.35 $ 0.31 ============ ============ ============ ============ Dividends paid per common share $ 0.41 $ 0.35 $ 0.15 $ 0.13 ============ ============ ============ ============ (/Table)
5 </TABLE> <TABLE> SYSCO CORPORATION and its Consolidated Subsidiaries CONSOLIDATED CASH FLOWS - (Unaudited) (In Thousands) <CAPTION> 39-Week Period Ended ------------------------ March 29, March 30, 1997 1996 -------- ---------- <S> <C> <C> Cash flows from operating activities: Net earnings $ 211,454 $193,176 Add non-cash items: Depreciation and amortization 118,904 105,971 Interest on Liquid Yield Option Notes --- 2,274 Deferred tax provision (7,631) 14,327 Provision for losses on accounts receivable 18,541 12,861 Additional investment in certain assets and liabilities net of effect of business acquired: (Increase) in receivables (47,606) (130,537) (Increase) in inventories (18,405) (68,207) (Increase) in prepaid expenses (5,510) (5,144) Increase in accounts payable 42,874 100,497 Increase (decrease) in accrued expenses 28,523 (1,677) Increase in accrued income taxes 10,233 5,974 (Increase) in other assets (8,804) (13,924) -------- -------- Net cash provided by operating activities 342,573 215,591 -------- -------- Cash flows from investing activities: Additions to plant and equipment (149,072) (196,302) Sales and retirements of plant and equipment 1,878 3,696 Acquisition of business (5,330) --- -------- -------- Net cash used for investing activities (152,524) (192,606) -------- -------- Cash flows from financing activities: Bank and commercial paper borrowings 33,005 132,615 Other debt borrowings 1,533 3,368 Common stock reissued from treasury 22,551 20,624 Treasury stock purchases (197,510) (175,127) Dividends paid (73,294) (64,070) -------- -------- Net cash used for financing activities (213,715) (82,590) -------- -------- Net (decrease) in cash (23,666) (59,605) Cash at beginning of period 107,759 133,886 -------- -------- Cash at end of period $ 84,093 $ 74,281 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 26,026 $ 24,821 Income taxes 134,716 100,814 </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 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 additional authority 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. All 6,000,000 shares were 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 for repurchase. Under this latest authorization, 2,349,100 shares were purchased through March 29, 1997. On April 22, 1997, in two separate offerings, the Company drew down the remaining $150,000,000 of the $500,000,000 shelf debt registration filed with the Securities and Exchange Commission in June 1995. The Company issued 7.16% debentures totaling $50,000,000 due April 15, 2027. These debentures were priced at par, are unsecured, are not subject to any sinking fund requirement and are redeemable at the option of the holder on April 15, 2007, but otherwise are not redeemable prior to maturity. The Company also issued 7.25% Senior Notes totaling $100,000,000 due April 15, 2007. These notes were priced at 99.611% of par and are unsecured, not redeemable prior to maturity and not subject to any sinking fund requirement.
7 Results of Operations --------------------- Sales increased 9% during the 39 weeks and 7% in the third quarter of Fiscal 1997 over comparable periods of the prior year. Cost of sales increased 9% during the 39 weeks and 6% in the third quarter of Fiscal 1997 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%, 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. 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 April 18, 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.
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: May 7, 1997
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 April 18, 1997, re unaudited financial statements 12 27 SYSCO Corporation and its Consolidated Subsidiaries Financial Data Schedule 13 </TABLE>