1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(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 30, 2000
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
incorporation or organization) identification number)
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 [ ]
334,222,489 shares of common stock were outstanding as of October 27, 2000.
================================================================================
EXPLANATORY NOTE
We are filing this amendment to Form 10-Q to include in Item 2 disclosure about
operating segments pursuant to Statement of Financial Accounting Standards No.
131.
================================================================================
2
2
PART I. FINANCIAL INFORMATION
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 in Management's
Discussion and Analysis of Financial Condition and Results of
Operations of the Company's Fiscal 2000 Annual Report on Form 10-K
remains applicable, other than as described below, and should be read
in conjunction with the following discussion.
In Fiscal 1992, the Company began a common stock repurchase program
which continued into the first quarter of Fiscal 2000, resulting in the
cumulative repurchase of approximately 80,000,000 shares of common
stock.
The Board of Directors authorized the repurchase of an additional
8,000,000 shares in July 1999. Under this latest authorization,
4,899,600 shares were purchased through September 30, 2000, including
681,200 shares bought in the first quarter of Fiscal 2001. The increase
in treasury stock purchases in the period ended September 30, 2000
primarily reflects shares repurchased for acquisitions. In November
2000, the Board authorized the repurchase of an additional 8,000,000
shares.
As of September 30, 2000, SYSCO's borrowings under its commercial paper
program were $99,637,000. Such borrowings were $255,248,000 as of
October 28, 2000. During the 13-week period ended September 30, 2000,
commercial paper and short-term bank borrowings ranged from
approximately $157,631,000 to $291,977,000.
Long-term debt to capitalization ratio was 31.8% at September 30, 2000,
less than the 35% to 40% target ratio, due to strong cash flow from
operations and relatively low share repurchases.
Results of Operations
Sales and cost of sales for the first quarter increased approximately
15.1% and 14.0%, respectively, over the same quarter of the prior year.
Real sales growth for the quarter was 8.2%, after adjusting overall
sales growth by 5.25% for acquisitions and 1.69% for food cost
inflation primarily due to higher costs for fresh and frozen meat and
paper and disposables.
Operating expenses for the periods presented remained approximately the
same as a percent of sales.
3
3
Interest expense in the current period decreased over the prior period
due to decreased borrowings.
Income taxes for the periods presented reflect an effective rate of
38.25% this year compared to 38.5% last year.
Pretax earnings and net earnings before the accounting change increased
35.7% and 36.2%, respectively, over the prior year. The increases were
due to the factors discussed above as well as the Company's success in
its continued efforts to increase sales to the Company's territorial
street customers and increasing sales of SYSCO brand products, both of
which generate higher margins.
Basic and diluted earnings per share before the accounting change
increased 34.4% over the same period last year due to the factors
discussed above.
A reconciliation of basic and diluted earnings per share after the
accounting change follows.
The following table sets forth the computation of basic and diluted earnings
per share after the accounting change:
13 - Week Period Ended
------------------------------
Sept. 30, 2000 Oct. 2, 1999
-------------- ------------
Numerator:
Numerator for basic earnings per share --
income available to common shareholders $143,955,000 $ 97,638,000
============ ============
Denominator:
Denominator for basic earnings per share --
weighted-average shares 332,025,934 328,925,219
Effect of dilutive securities:
Employee and director stock options 5,066,831 4,561,936
------------ ------------
Denominator for diluted earnings per share --
adjusted weighted-average shares and
assumed conversions 337,092,765 333,487,155
============ ============
Basic earnings per share $ 0.43 $ 0.30
============ ============
Diluted earnings per share $ 0.43 $ 0.29
============ ============
4
4
Business Segment Information
The Company, through its 101 operating companies, provides food and
other products to the foodservice or "food-prepared-away-from-home"
industry. Each of our operating companies generally represents a
separate operating segment. Under the provisions of SFAS No. 131
"disclosures about Segments of an Enterprise and Related Information"
(SFAS No. 131), the Company has aggregated its operating companies
into four segments, of which only Broadline and SYGMA are reportable
segments as defined in SFAS No. 131. Broadline operating companies
distribute a full line of food products and a wide variety of non-food
products to both our traditional and chain restaurant customers. SYGMA
operating companies distribute a full line of food products and a wide
variety of non-food products to some of our chain restaurant customer
locations. "Other" financial information is attributable to the
Company's two other segments, including the Company's specialty
produce and meat segments. The Company's Canadian operations are
insignificant for geographical disclosure purposes.
The accounting policies for the segments are the same as those
disclosed in the Company's Fiscal 2000 Annual Report on Form 10-K.
Intersegment sales represent specialty produce and meat company
products distributed by the Broadline and SYGMA operating companies.
The segment results include allocation of centrally incurred costs for
shared services that eliminate upon consolidation. Centrally incurred
costs are allocated based upon the relative level of service used by
each operating company.
13 Weeks Ended
------------------------------
Sept. 30, 2000 Oct. 2, 1999
-------------- ------------
Sales (in thousands, unaudited):
Broadline $ 4,512,248 $ 4,085,863
SYGMA 600,246 533,192
Other 266,550 39,670
Intersegment sales (18,870) (1,691)
------------- -------------
Total $ 5,360,174 $ 4,657,034
============= =============
13 Weeks Ended
------------------------------
Sept. 30, 2000 Oct. 2, 1999
-------------- ------------
Earnings before income taxes and
cumulative effect of accounting
change (in thousands, unaudited):
Broadline $ 247,052 $ 190,224
SYGMA 3,891 1,679
Other 5,770 1,904
------------- -------------
Total segments 256,713 193,807
Unallocated corporate expenses (23,588) (21,972)
------------- -------------
Total $ 233,125 $ 171,835
============= =============
Sept. 30, 2000 July 1, 2000 Oct. 2, 1999
-------------- ------------ ------------
(Unaudited) (Audited) (Unaudited)
Assets (in thousands):
Broadline $ 3,442,040 $ 3,302,796 $ 3,228,344
SYGMA 150,348 180,811 166,575
Other 284,221 238,761 40,087
------------- ------------ ------------
Total segments 3,876,609 3,722,368 3,435,006
Corporate 1,054,901 1,091,587 963,984
------------- ------------ ------------
Total $ 4,931,510 $ 4,813,955 $ 4,398,990
============= ============ ============
5
5
Broadline Segment
Broadline segment sales increased by 10.4% for the thirteen weeks ended
September 30, 2000, as compared to the thirteen weeks ended October 2, 1999.
This increase was due primarily to increased sales to marketing associate-served
and multi-unit customers as well as increased sales of SYSCO brand products.
Broadline segment sales as a percentage of total SYSCO sales decreased from 88%
for the thirteen weeks ended October 2, 1999 to 84% for the thirteen weeks ended
September 30, 2000. This decrease is due primarily to acquisitions of produce
and specialty meat companies.
Pretax earnings for the Broadline segment increased by 29.9% for the
thirteen weeks ended September 30, 2000 as compared to the thirteen weeks ended
October 2, 1999. The increase in pretax earnings was primarily a result of
increases in sales described above and sales of SYSCO brand products, both of
which generate higher margins.
SYGMA Segment
SYGMA segment sales increased by 12.6% for the thirteen weeks ended
September 30, 2000, as compared to the thirteen weeks ended October 2, 1999.
This increase was due primarily to sales growth in SYGMA's existing customer
base. SYGMA segment sales as a percentage of total SYSCO sales decreased from
11.4% for the thirteen weeks ended October 2, 1999 to 11.2% for the thirteen
weeks ended September 30, 2000.
Pretax earnings for the SYGMA segment increased by 231.7% for the thirteen
weeks ended September 30, 2000, as compared to the thirteen weeks ended October
2, 1999. The increase in pretax earnings was primarily a result of operating
efficiencies and improved labor costs realized.
Other Segments
Increases in sales and pretax earnings for the Other segments were due
primarily to the timing of acquisitions made during the periods presented.
6
6
Acquisitions
In July 1999, SYSCO acquired Newport Meat Co. Inc., a southern
California based distributor of fresh aged beef and other meats,
seafood and poultry products. In August 1999, the company acquired
Doughtie's Foods, Inc., a food distributor located in Virginia, and
bought substantially all of the assets of Buckhead Beef Company, Inc.,
a Georgia based distributor of custom-cut fresh steaks and other meats,
seafood and poultry products. In November 1999, SYSCO acquired Malcolm
Meats, an Ohio based distributor of custom-cut fresh steaks and other
meat and poultry products. In January 2000, SYSCO acquired Watson
Foodservice Inc., a broadline foodservice distributor located in
Lubbock, Texas. In March 2000, SYSCO acquired FreshPoint Inc., a North
America based distributor of produce.
The transactions were accounted for using the purchase method of
accounting and the accompanying financial statements for the 13 weeks
ended September 30, 2000 include the results of the acquired companies
from the respective dates they joined SYSCO. There was no material
effect, individually or in the aggregate, on SYSCO's consolidated
operating results or financial position from these transactions.
The purchase price was allocated to the net assets acquired based on
the estimated fair value at the date of acquisition. The balances
included in the Consolidated Financial Position related to acquisitions
are based upon preliminary information and are subject to change when
final asset and liability valuations are obtained. Material changes to
the preliminary allocations are not anticipated by management.
New Accounting Pronouncements
In the first quarter of Fiscal 2001, SYSCO adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The
adoption of SFAS No. 133 did not have a significant effect on SYSCO's
consolidated results of operations or financial position.
In December 1999, the Securities and Exchange Commission staff released
Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition." The SAB
provides guidance on the recognition, presentation and disclosure of
revenue in financial statements. SYSCO is required to and will adopt
SAB 101 in the fourth quarter of fiscal 2001 and believes that adoption
will not have a significant effect on its consolidated results of
operations or financial position.
In September 2000, the FASB issued its final consensus on Emerging
Issues Task Force Issue No. 00-10, "Accounting for Shipping and
Handling Fees and Costs" (EITF 00-10). SYSCO is required to and will
adopt EITF 00-10 in the fourth quarter of Fiscal 2001 and believes that
adoption will have no effect on its consolidated results of operations
or financial position.
7
7
Forward-Looking Statements
Statements made herein regarding continuation of the share repurchase
program and SYSCO's market risks are forward-looking statements under
the Private Securities Litigation Reform Act of 1995. These statements
involve risks and uncertainties and are based on current expectations
and management's estimates; actual results may differ materially. Share
repurchases could be affected by market prices of the Company's stock
as well as management's decision to utilize its capital for other
purposes. The effect of market risks could be impacted by future
borrowing levels and certain economic factors, such as interest rates.
Those risks and uncertainties that could impact these statements
include the risks relating to the foodservice industry's relatively low
profit margins and sensitivity to economic conditions, SYSCO's leverage
and debt risks and other risks detailed in the Company's Fiscal 2000
Annual Report on Form 10-K.
PART II. OTHER INFORMATION
8
8
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
3(a) Restated Certificate of Incorporation, incorporated
by reference to Exhibit 3(a) to Form 10-K for the
year ended June 28, 1997 (File No. 1-6544).
3(b) Bylaws, as amended May 12, 1999, incorporated by
reference to Exhibit 3(b) to Form 10-K for the year
ended July 3, 1999 (File No. 1-6544).
3(c) Form of Amended Certificate of Designation,
Preferences and Rights of Series A Junior
Participating Preferred Stock, incorporated by
reference to Exhibit 3(c) to Form 10-K for the year
ended June 29, 1996 (File No. 1-6544).
3(d) Certificate of Amendment of Certificate of
Incorporation increasing authorized shares,
incorporated by reference to Exhibit 3(d) to Form
10-Q for the quarter ended January 1, 2000 (File No.
1-6544).
4(a) Sixth Amendment and Restatement of Competitive
Advance and Revolving Credit Facility Agreement dated
May 31, 1996, incorporated by reference to Exhibit
4(a) to Form 10-K for the year ended June 27, 1996
(File No. 1-6544).
4(b) Agreement and Seventh Amendment to Competitive
Advance and Revolving Credit Facility Agreement dated
as of June 27, 1997, incorporated by reference to
Exhibit 4(a) to Form 10-K for the year ended June 28,
1997 (File No. 1-6544).
4(c) Agreement and Eighth Amendment to Competitive Advance
and Revolving Credit Facility Agreement dated as of
June 22, 1998, incorporated by reference to Exhibit
4(c) to Form 10-K for the year ended July 3, 1999
(File No. 1-6544).
4(d) Senior Debt Indenture, dated as of June 15, 1995,
between Sysco Corporation and First Union National
Bank of North Carolina, Trustee, incorporated by
reference to Exhibit 4(a) to Registration Statement
on Form S-3 filed June 6, 1995 (File No. 33-60023).
9
9
4(e) First Supplemental Indenture, dated June 27, 1995,
between Sysco Corporation and First Union National
Bank of North Carolina, Trustee, as amended,
incorporated by reference to Exhibit 4(e) to Form
10-K for the year ended June 29, 1996
(File No. 1-6544).
4(f) Second Supplemental Indenture, dated as of May 1,
1996, between Sysco Corporation and First Union
National Bank of North Carolina, Trustee, as amended,
incorporated by reference to Exhibit 4(f) to Form
10-K for the year ended June 29, 1996 (File No.
1-6544).
4(g) Third Supplemental Indenture, dated as of April 25,
1997, between Sysco Corporation and First Union
National Bank of North Carolina, Trustee,
incorporated by reference to Exhibit 4(g) to Form
10-K for the year ended June 28, 1997 (File No.
1-6544).
4(h) Fourth Supplemental Indenture, dated as of April 25,
1997, between Sysco Corporation and First Union
National Bank of North Carolina, Trustee,
incorporated by reference to Exhibit 4(h) to Form
10-K for the year ended June 28, 1997 (File No.
1-6544).
4(i) Fifth Supplemental Indenture, dated as of July 27,
1998, between Sysco Corporation and First Union
National Bank, Trustee, incorporated by reference to
Exhibit 4(h) to Form 10-K for the year ended June
27, 1998 (File No. 1-6554).
4(j) Agreement and Ninth Amendment to Competitive Advance
and Revolving Credit Facility Agreement dated as of
December 1, 1999, incorporated by reference to
Exhibit 4(j) to Form 10-Q for the quarter ended
January 1, 2000 (File No. 1-6544).
10(a) Second Amendment dated as of May 10, 2000, to the
Fifth Amended and Restated SYSCO Corporation
Supplemental Executive Retirement Plan, incorporated
by reference to Exhibit 10(a) to Form 10-Q for the
quarter ended September 30, 2000 filed on
November 13, 2000.
10(b) Second Amendment dated as of May 10, 2000, to Amended
and Restated SYSCO Corporation Executive Deferred
Compensation Plan, incorporated by reference to
Exhibit 10(b) to Form 10-Q for the quarter ended
September 30, 2000 filed on November 13, 2000.
10(c) First Amendment dated as of May 10, 2000, to Amended
and Restated SYSCO Corporation Board of Directors
Deferred Compensation Plan, incorporated by reference
to Exhibit 10(c) to Form 10-Q for the quarter ended
September 30, 2000 filed on November 13, 2000.
10
10
10(d) First Amendment, dated September 1, 2000, to the
Executive Compensation Adjustment Agreement between
Sysco and Charles H. Cotros, incorporated by
reference to Exhibit 10(d) to Form 10-Q for the
quarter ended September 30, 2000 filed on
November 13, 2000.
15(a) Letter from Arthur Andersen LLP dated November 10,
2000, re: unaudited financial statements,
incorporated by reference to Exhibit 15(a) to
Form 10-Q for the quarter ended September 30, 2000
filed on November 13, 2000.
*15(b) Acknowledgement letter from Arthur Andersen LLP.
27 Financial Data Schedule, incorporated by reference to
Exhibit 27 to Form 10-Q for the quarter ended
September 30, 2000 filed on November 13, 2000.
----------
* Filed herewith.
(b) Reports on Form 8-K:
On August 3, 2000, the Company filed a Form 8-K to attach a
press release dated August 2, 2000 announcing results of
operations for the fiscal year ended July 1, 2000 (File No.
1-6544).
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report on Form 10-Q/A 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.
Executive Vice President,
Finance & Administration
Date: May 14, 2001
12
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3(a) Restated Certificate of Incorporation, incorporated
by reference to Exhibit 3(a) to Form 10-K for the
year ended June 28, 1997 (File No. 1-6544).
3(b) Bylaws, as amended May 12, 1999, incorporated by
reference to Exhibit 3(b) to Form 10-K for the year
ended July 3, 1999 (File No. 1-6544).
3(c) Form of Amended Certificate of Designation,
Preferences and Rights of Series A Junior
Participating Preferred Stock, incorporated by
reference to Exhibit 3(c) to Form 10-K for the year
ended June 29, 1996 (File No. 1-6544).
3(d) Certificate of Amendment of Certificate of
Incorporation increasing authorized shares,
incorporated by reference to Exhibit 3(d) to Form 10-Q
for the quarter ended January 1, 2000 (File No. 1-6544).
4(a) Sixth Amendment and Restatement of Competitive
Advance and Revolving Credit Facility Agreement dated
May 31, 1996, incorporated by reference to Exhibit
4(a) to Form 10-K for the year ended June 27, 1996
(File No. 1-6544).
4(b) Agreement and Seventh Amendment to Competitive
Advance and Revolving Credit Facility Agreement dated
as of June 27, 1997, incorporated by reference to
Exhibit 4(a) to Form 10-K for the year ended June 28,
1997 (File No. 1-6544).
4(c) Agreement and Eighth Amendment to Competitive Advance
and Revolving Credit Facility Agreement dated as of
June 22, 1998, incorporated by reference to Exhibit
4(c) to Form 10-K for the year ended July 3, 1999
(File No. 1-6544).
13
4(d) Senior Debt Indenture, dated as of June 15, 1995,
between Sysco Corporation and First Union National
Bank of North Carolina, Trustee, incorporated by
reference to Exhibit 4(a) to Registration Statement
on Form S-3 filed June 6, 1995 (File No. 33-60023).
4(e) First Supplemental Indenture, dated June 27, 1995,
between Sysco Corporation and First Union National
Bank of North Carolina, Trustee, as amended,
incorporated by reference to Exhibit 4(e) to Form
10-K for the year ended June 29, 1996 (File No. 1-6544).
4(f) Second Supplemental Indenture, dated as of May 1,
1996, between Sysco Corporation and First Union
National Bank of North Carolina, Trustee, as amended,
incorporated by reference to Exhibit 4(f) to Form
10-K for the year ended June 29, 1996 (File No. 1-6544).
4(g) Third Supplemental Indenture, dated as of April 25,
1997, between Sysco Corporation and First Union
National Bank of North Carolina, Trustee,
incorporated by reference to Exhibit 4(g) to Form
10-K for the year ended June 28, 1997 (File No. 1-6544).
4(h) Fourth Supplemental Indenture, dated as of April 25,
1997, between Sysco Corporation and First Union
National Bank of North Carolina, Trustee,
incorporated by reference to Exhibit 4(h) to Form
10-K for the year ended June 28, 1997 (File No. 1-6544).
4(i) Fifth Supplemental Indenture, dated as of July 27,
1998, between Sysco Corporation and First Union
National Bank, Trustee, incorporated by reference to
Exhibit 4(h) to Form 10-K for the year ended June
27, 1998 (File No. 1-6554).
4(j) Agreement and Ninth Amendment to Competitive Advance
and Revolving Credit Facility Agreement dated as of
December 1, 1999, incorporated by reference to
Exhibit 4(j) to Form 10-Q for the quarter ended
January 1, 2000 (File No. 1-6544).
14
10(a) Second Amendment dated as of May 10, 2000, to the
Fifth Amended and Restated SYSCO Corporation
Supplemental Executive Retirement Plan, incorporated
by reference to Exhibit 10(a) to Form 10-Q for the
quarter ended September 30, 2000 filed on
November 13, 2000.
10(b) Second Amendment dated as of May 10, 2000, to Amended
and Restated SYSCO Corporation Executive Deferred
Compensation Plan, incorporated by reference to
Exhibit 10(b) to Form 10-Q for the quarter ended
September 30, 2000 filed on November 13, 2000.
10(c) First Amendment dated as of May 10, 2000, to Amended
and Restated SYSCO Corporation Board of Directors
Deferred Compensation Plan, incorporated by reference
to Exhibit 10(c) to Form 10-Q for the quarter ended
September 30, 2000 filed on November 13, 2000.
10(d) First Amendment, dated September 1, 2000, to the
Executive Compensation Adjustment Agreement between
Sysco and Charles H. Cotros, incorporated by
reference to Exhibit 10(d) to Form 10-Q for the
quarter ended September 30, 2000 filed on
November 13, 2000.
15(a) Letter from Arthur Andersen LLP dated November 10,
2000, re: unaudited financial statements,
incorporated by reference to Exhibit 15(a) to
Form 10-Q for the quarter ended September 30, 2000
filed on November 13, 2000.
*15(b) Acknowledgement letter from Arthur Andersen LLP.
27 Financial Data Schedule, incorporated by reference to
Exhibit 27 to Form 10-Q for the quarter ended
September 30, 2000 filed on November 13, 2000.
----------
* Filed herewith.