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.
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> 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>
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)
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>
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.
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.
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
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
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>