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.
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> 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>
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)
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>
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.
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:
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.
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
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>