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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
SYSCO CORPORATION and its Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In Thousands Except for Share Data)
Sept. 27, June 28, Sept 28,
1997 1997 1996
---------- --------- -----------
(Unaudited) (Audited) (Unaudited)
ASSETS
----------
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.
4
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)
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
============ ============
5
SYSCO CORPORATION and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS - (Unaudited)
(In Thousands)
13- Week Period Ended
------------------------
Sept. 27, Sept. 28,
1997 1996
-------- ---------
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
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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
EXHIBIT INDEX
----------------------
SEQUENTIAL
NO. DESCRIPTION PAGE NUMBER
- ----- ----------------------------------------- -------------
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