Page 1 of 12 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 September 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 [ ] 178,862,681 shares of common stock were outstanding as of October 25, 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 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> Sept. 28, June 29, Sept 30, 1996 1996 1995 ---------- --------- ----------- (Unaudited) (Audited) (Unaudited) ASSETS ---------- <S> <C> <C> <C> Current assets Cash $ 127,928 $ 107,759 $ 90,265 Accounts and notes receivable, less allowances of $23,550, $16,380 and $22,023 1,132,356 1,039,759 1,037,871 Inventories 761,203 723,937 730,550 Deferred taxes 32,785 32,429 36,579 Prepaid expenses 23,144 18,443 22,950 ---------- ---------- ---------- Total current assets 2,077,416 1,922,327 1,918,215 Plant and equipment at cost, less depreciation 1,001,288 990,642 926,720 Goodwill and intangibles, less amortization 253,298 250,473 256,253 Other assets 166,640 161,963 158,090 ---------- ---------- ---------- Total assets $3,498,642 $3,325,405 $3,259,278 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities Notes payable $ 50,561 $ 9,390 $ 22,190 Accounts payable 862,299 779,124 806,844 Accrued expenses 214,510 212,746 188,116 Accrued income taxes 65,237 23,330 52,917 Current maturities of long-term debt 14,110 12,934 6,925 ---------- --------- ---------- Total current liabilities 1,206,717 1,037,524 1,076,992 Long-term debt 580,776 581,734 535,591 Deferred taxes 231,019 231,469 207,243 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 191,293,725 191,294 191,294 191,294 Paid-in capital 35,423 35,179 49,047 Retained earnings 1,618,543 1,568,589 1,425,444 ---------- ---------- ---------- 1,845,260 1,795,062 1,665,785 Less cost of treasury stock, 12,245,484, 10,880,919 and 8,762,008 shares 365,130 320,384 226,333 ---------- ---------- ---------- Total shareholders' equity 1,480,130 1,474,678 1,439,452 ---------- ---------- ---------- Total liabilities and shareholders' equity $3,498,642 $3,325,405 $3,259,278 ========== ========== ========== <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) 13-Week Period Ended ---------------------------- Sept. 28, Sept. 30, 1996 1995 ------------ ----------- <s) <C> <C> Sales $ 3,679,223 $ 3,291,910 Costs and expenses Cost of sales 3,028,478 2,704,658 Operating expenses 519,729 469,847 Interest expense 10,917 9,372 Other income, net (241) (444) ------------ ----------- Total costs and expenses 3,558,883 3,183,433 ------------ ----------- Earnings before income taxes 120,340 108,477 Income taxes 46,933 42,306 ------------ ------------ Net earnings $ 73,407 $ 66,171 ============ ============ Average number of shares outstanding 180,048,304 182,791,952 ============ ============ Earnings per share $ 0.41 $ 0.36 ============ ============ Dividends paid per common share $ 0.13 $ 0.11 ============ ============ </TABLE>
5 <TABLE> SYSCO CORPORATION and its Consolidated Subsidiaries CONSOLIDATED CASH FLOWS - (Unaudited) (In Thousands) <CAPTION> 13- Week Period Ended ------------------------ Sept. 28, Sept. 30, 1996 1995 -------- --------- <S> <C> <C> Cash flows from operating activities: Net earnings $ 73,407 $ 66,171 Add non-cash items: Depreciation and amortization 38,932 33,916 Interest on Liquid Yield Option Notes --- 1,350 Deferred tax provision (882) (12,297) Provision for losses on accounts receivable 5,401 4,631 Additional investment in certain assets and liabilities net of effect of business acquired: (Increase) in receivables (91,414) (109,969) (Increase) in inventories (34,304) (62,689) (Increase) in prepaid expenses (4,249) (4,265) Increase in accounts payable 77,851 98,464 Increase (decrease) in accrued expenses 1,094 (18,015) Increase in accrued income taxes 41,907 42,542 (Increase) in other assets (6,873) (5,969) -------- -------- Net cash provided by operating activities 100,870 33,870 -------- -------- Cash flows from investing activities: Additions to plant and equipment (42,175) (61,469) Proceeds from sales of plant and equipment 560 250 Acquisition of business (5,330) --- -------- -------- Net cash used for investing activities (46,945) (61,219) -------- -------- Cash flows from financing activities: Bank and commercial paper borrowings 34,518 11,018 Other debt borrowings (repayments) (319) 3,041 Common stock reissued from treasury 11,563 11,415 Treasury stock purchases (56,065) (21,614) Dividends paid (23,453) (20,132) -------- -------- Net cash used for financing activities (33,756) (16,272) -------- -------- Net increase (decrease) in cash 20,169 (43,621) Cash at beginning of period 107,759 133,886 -------- -------- Cash at end of period $ 127,928 $ 90,265 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 2,784 $ 4,724 Income taxes 7,734 10,688 </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 its 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. Under this latest authorization, 4,164,100 shares were purchased through September 28, 1996. Results of Operations --------------------- Sales and cost of sales increased 12% during the first quarter of Fiscal 1997 over the same quarter of the prior year. Operating expenses for the periods presented remained approximately the same as a percent of sales. Interest expense in the current period increased over the prior period due to increased borrowings. Income taxes for the current period reflects an effective rate of 39%, the same as in the prior year. 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 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 November 6, 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 and Chief Financial Officer Date: November 6, 1996
9 <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 10 15 Letter from Arthur Andersen LLP dated November 6, 1996, re unaudited financial statements 11 27 SYSCO Corporation and its Consolidated Subsidiaries Financial Data Schedule 12 </TABLE>