Page 1 of 13 UNITED STATES 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 27, 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 [ ] 171,029,030 shares of common stock were outstanding as of October 24, 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 28, 1997, consolidated balance sheet which was taken from the audited financial statements included in the Company's Fiscal 1997 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 1997 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. 27, June 28, Sept 28, 1997 1997 1996 ---------- --------- ----------- (Unaudited) (Audited) (Unaudited) ASSETS ---------- <S> <C> <C> <C> Current assets Cash $ 88,509 $ 117,696 $ 127,928 Accounts and notes receivable, less allowances of $23,299, $17,240 and $23,550 1,205,697 1,065,002 1,132,356 Inventories 793,574 733,782 761,203 Deferred taxes 26,912 23,720 32,785 Prepaid expenses 27,109 21,429 23,144 ---------- ---------- ---------- Total current assets 2,141,801 1,961,629 2,077,416 Plant and equipment at cost, less depreciation 1,075,822 1,058,432 1,001,288 Goodwill and intangibles, less amortization 245,459 247,423 253,298 Other assets 172,395 166,339 166,640 ---------- ---------- ---------- Total assets $3,635,477 $3,433,823 $3,498,642 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities Notes payable $ 16,438 $ 14,267 $ 50,561 Accounts payable 908,370 827,593 862,299 Accrued expenses 239,778 240,928 214,510 Accrued income taxes 58,334 17,741 65,237 Current maturities of long-term debt 13,132 13,285 14,110 ---------- --------- ---------- Total current liabilities 1,236,052 1,113,814 1,206,717 Long-term debt 752,573 685,620 580,776 Deferred taxes 240,398 233,917 231,019 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 32,743 32,258 35,423 Retained earnings 1,825,787 1,771,548 1,618,543 ---------- ---------- ---------- 2,049,824 1,995,100 1,845,260 Less cost of treasury stock, 20,134,890, 18,855,458 and 12,245,484 shares 643,370 594,628 365,130 ---------- ---------- ---------- Total shareholders' equity 1,406,454 1,400,472 1,480,130 ---------- ---------- ---------- Total liabilities and shareholders' equity $3,635,477 $3,433,823 $3,498,642 ========== ========== ========== <FN> Note: The June 28, 1997 balance sheet has been taken from the audited financial statements at that date. Certain amounts have been reclassified to conform to the current presentation. </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. 27, Sept. 28, 1997 1996 ------------ ----------- <s) <C> <C> Sales $ 3,828,244 $ 3,679,223 Costs and expenses Cost of sales 3,130,883 3,028,478 Operating expenses 553,032 519,729 Interest expense 13,140 10,917 Other income, net (122) (241) ------------ ----------- Total costs and expenses 3,696,933 3,558,883 ------------ ----------- Earnings before income taxes 131,311 120,340 Income taxes 51,211 46,933 ------------ ------------ Net earnings $ 80,100 $ 73,407 ============ ============ Average number of shares outstanding 171,842,277 180,048,304 ============ ============ Earnings per share $ 0.47 $ 0.41 ============ ============ Dividends paid per common share $ 0.15 $ 0.13 ============ ============ </TABLE>
5 <TABLE> SYSCO CORPORATION and its Consolidated Subsidiaries CONSOLIDATED CASH FLOWS - (Unaudited) (In Thousands) <CAPTION> 13- Week Period Ended ------------------------ Sept. 27, Sept. 28, 1997 1996 -------- --------- <S> <C> <C> Cash flows from operating activities: Net earnings $ 80,100 $ 73,407 Add non-cash items: Depreciation and amortization 43,287 38,932 Deferred tax provision 3,289 (882) Provision for losses on accounts receivable 4,711 5,401 Additional investment in certain assets and liabilities net of effect of business acquired: (Increase) in receivables (145,406) (91,414) (Increase) in inventories (59,792) (34,304) (Increase) in prepaid expenses (5,680) (4,249) Increase in accounts payable 80,777 77,851 (Decrease) increase in accrued expenses (1,150) 1,094 Increase in accrued income taxes 40,593 41,907 (Increase) in other assets (8,924) (6,873) -------- -------- Net cash provided by operating activities 31,805 100,870 -------- -------- Cash flows from investing activities: Additions to plant and equipment (56,660) (42,175) Proceeds from sales of plant and equipment 815 560 Acquisition of business --- (5,330) -------- -------- Net cash used for investing activities (55,845) (46,945) -------- -------- Cash flows from financing activities: Bank and commercial paper borrowings 70,800 34,518 Other debt (repayments) (1,829) (319) Common stock reissued from treasury 12,577 11,563 Treasury stock purchases (60,834) (56,065) Dividends paid (25,861) (23,453) -------- -------- Net cash used for financing activities (5,147) (33,756) -------- -------- Net (decrease) increase in cash (29,187) 20,169 Cash at beginning of period 117,696 107,759 -------- -------- Cash at end of period $ 88,509 $ 127,928 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 9,828 $ 2,784 Income taxes 7,064 7,734 </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 1997 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 and all shares were purchased by the end of Fiscal 1996. In February 1996, the Board of Directors authorized the repurchase of an additional 6,000,000 shares under this program which was completed during the first half of Fiscal 1997. In November 1996, the Board of Directors authorized the repurchase of an additional 6,000,000 shares which was completed during early Fiscal 1998. The Board of Directors authorized the repurchase of an additional 6,000,000 shares in July 1997. Under this latest authorization, 1,093,500 shares were purchased through September 27, 1997. Results of Operations --------------------- Sales and cost of sales increased about 4% and 3%, respectively, over the same quarter of the prior year. Real sales growth was about 5% after eliminating the effects of approximately 1% food cost deflation, which was due primarily to lower costs of dairy foods and canned and dry products. The foodservice industry as a whole, also experienced moderate sales growth. 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 primarily related to the Company's share repurchase program. Income taxes for the current period reflect an effective rate of 39%, the same as in the prior year.
7 Pretax earnings and net earnings increased about 9% over the prior year due to the factors discussed above as well as the Company's continued efforts to increase sales to the Company's traditional territorial street customers. Earnings per share increased 15% over the prior year due to the factors discussed above, coupled with the decrease in average shares outstanding for the quarter, reflecting purchases of shares made through the Company's share repurchase program. Item 3. Quantitative and Qualitative Disclosures about Market Risks Not applicable.
8 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 5, 1997, 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 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 5, 1997
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 November 5, 1997, re unaudited financial statements 12 27 SYSCO Corporation and its Consolidated Subsidiaries Financial Data Schedule 13 </TABLE>