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 December 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
----- -----
669,085,434 shares of common stock were outstanding as of January 26, 2001.
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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.
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2
Part I
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 the items described below, and should be read in
conjunction within the following discussion. All share information
has been adjusted for the 2-for-1 stock split on December 15, 2000, as
applicable.
In Fiscal 1992, the Company began a common stock repurchase program
which continued into the second quarter of Fiscal 2000, resulting in the
cumulative repurchase of approximately 160,000,000 shares of common
stock.
The Board of Directors authorized the repurchase of an additional
16,000,000 shares in July 1999. Under this authorization, 16,000,000
shares were purchased through December 30, 2000, including 7,563,200
shares bought in the first two quarters of Fiscal 2001. The increase in
treasury stock purchases in the period ended December 30, 2000 primarily
reflects shares repurchased for acquisitions. In November 2000, the
Board authorized the repurchase of an additional 16,000,000 shares.
As of December 30, 2000, SYSCO's borrowings under its commercial paper
program were $298,058,000. Such borrowings were $373,371,000 as of
January 27, 2001. During the 26-week period ended December 30, 2000,
commercial paper and short-term bank borrowings ranged from
approximately $157,631,000 to approximately $395,745,000.
Long-term debt to capitalization ratio was 36.8% at December 30, 2000,
within the Company's 35% to 40% targeted ratio. The long-term
debt-to-capitalization ratio may from time to time exceed the target
range in order to take advantage of acquisition and internal growth
opportunities. The ratio may also fall below the target range due to
strong cash flow from operations and relatively low share repurchases.
On November 28, 2000, the Company filed with the Securities and Exchange
Commission a shelf registration covering 15,000,000 shares of common
stock to be issued from time to time in connection with acquisitions. No
shares have been issued under this registration statement.
No shares can be issued in connection with additional acquisitions under
the Company's shelf registration filed on February 10, 2000.
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3
Results of Operations
Sales increased 14.4% during the 26 weeks and 13.7% in the second
quarter of Fiscal 2001 over comparable periods of the prior year. Cost
of sales also increased 13.3% during the 26 weeks and 12.7% in the
second quarter of Fiscal 2001. Real sales growth for the 26 weeks of
Fiscal 2001 was 7.9% after eliminating the effects of 4.9% due to
acquisitions and a 1.6% inflation in food costs, due primarily to higher
costs for fresh and frozen meat and paper and disposables. Real sales
growth for the quarter was 7.6% after adjusting for a 4.6% increase due
to acquisitions and 1.5% for food cost inflation primarily due to higher
costs for paper and disposables and produce.
Operating expenses for the periods presented remained approximately the
same as a percent of sales.
Interest expense in Fiscal 2000 included interest income in the amount
of $3,000,000 related to a Federal income tax refund on an amended
return. After adjusting for this refund, interest expense in the current
Fiscal 2001 periods decreased from the prior periods, primarily 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 for the 26 weeks, before the accounting
change, increased 36.0% and 36.5%, respectively, over the prior year.
Pretax earnings and net earnings for the 13 weeks increased 36.3% and
36.8%, 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 increased 34.4% and 35.5%,
respectively, for the 26 weeks, before the accounting change, and 31.3%
and 40.0%, respectively, for the quarter. The increases were caused by
the factors discussed above.
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The following table sets forth the computation of basic and diluted net earnings
per share:
26-Week Period Ended 13-Week Period Ended
---------------------------- ---------------------------
Dec. 30, 2000 Jan. 1, 2000 Dec. 30, 2000 Jan. 1, 2000
------------- ------------ ------------- ------------
Numerator:
Numerator for basic earnings per share --
income available to common shareholders $283,379,000 $199,534,000 $139,425,000 $101,896,000
============ ============ ============ ============
Denominator:
Denominator for basic earnings per share --
weighted-average shares 664,070,815 657,403,438 664,089,758 656,956,410
Effect of dilutive securities:
Employee and director stock options 11,358,097 9,968,830 11,670,244 10,131,626
------------ ------------ ------------ ------------
Denominator for diluted earnings per share --
adjusted for weighted-average shares 675,428,912 667,372,268 675,760,002 667,088,036
============ ============ ============ ============
Basic earnings per share $ 0.43 $ 0.30 $ 0.21 $ 0.16
============ ============ ============ ============
Diluted earnings per share $ 0.42 $ 0.30 $ 0.21 $ 0.15
============ ============ ============ ============
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5
Business Segment Information
The Company, through its 103 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.
26 Weeks Ended 13 Weeks Ended
---------------------------- ----------------------------
Dec. 30, 2000 Jan. 1, 2000 Dec. 30, 2000 Jan. 1, 2000
------------- ------------ ------------- ------------
Sales (in thousands, unaudited):
Broadline $ 8,932,215 $ 8,121,092 $ 4,419,967 $ 4,035,229
SYGMA 1,196,380 1,065,501 596,134 532,309
Other 567,358 127,892 298,991 88,222
Intersegment sales (45,249) (5,916) (24,562) (4,225)
------------ ----------- ------------ -----------
Total $ 10,650,704 $ 9,308,569 $ 5,290,530 $ 4,651,535
============ =========== ============ ===========
26 Weeks Ended 13 Weeks Ended
---------------------------- ----------------------------
Dec. 30, 2000 Jan. 1, 2000 Dec. 30, 2000 Jan. 1, 2000
------------- ------------ ------------- ------------
Earnings before income taxes and
cumulative effect of accounting change
(in thousands, unaudited):
Broadline $481,638 $375,444 $234,637 $185,173
SYGMA 5,801 (1,879) 1,927 (3,452)
Other 19,142 6,676 13,302 4,713
-------- -------- -------- --------
Total segments 506,581 380,241 249,866 186,434
Unallocated corporate expenses (47,667) (42,721) (24,077) (20,749)
-------- -------- -------- --------
Total $458,914 $337,520 $225,789 $165,685
======== ======== ======== ========
Dec. 30, 2000 July 1, 2000 Jan. 1, 2000
------------- ------------ ------------
(Unaudited) (Audited) (Unaudited)
Assets (in thousands):
Broadline $ 3,423,548 $ 3,302,796 $ 3,211,259
SYGMA 155,872 180,811 154,141
Other 203,758 238,761 52,433
------------ ----------- -----------
Total segments 3,783,178 3,722,368 3,417,833
Corporate 1,205,140 1,091,587 1,000,630
------------ ----------- -----------
Total $ 4,988,318 $ 4,813,955 $ 4,418,463
============ =========== ===========
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Broadline Segment
The Broadline segment had 10.0% and 9.5% sales increases for the twenty-six
weeks and thirteen weeks ended December 30, 2000, respectively, as compared to
sales for the comparable periods ended January 1, 2000. These increases were
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 87% for the
twenty-six weeks and thirteen weeks ended January 1, 2000 to 84% for the
twenty-six weeks and thirteen weeks ended December 30, 2000, respectively. This
decrease is due to acquisitions of produce and specialty meat companies.
Pretax earnings for the Broadline segment increased by 28% and 27% for the
twenty-six weeks and thirteen weeks ended December 30, 2000, respectively, over
the prior year periods. 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
The SYGMA segment had a 12.3% sales increase for the twenty-six weeks and a
12.0% increase for the thirteen weeks ended December 30, 2000, respectively, as
compared to sales for the comparable periods ended January 1, 2000. These
increases were 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 twenty-six weeks and thirteen weeks ended January 1, 2000 to 11.2% and
11.3% for the twenty-six weeks and thirteen weeks ended December 30, 2000,
respectively.
Pretax earnings for the SYGMA segment increased by 409.0% and 156.0% for
the twenty-six weeks and thirteen weeks ended December 30, 2000, respectively,
over the prior year periods. The increase in pretax earnings for the twenty-six
weeks ended December 30, 2000, compared to the prior year period was due to
operating efficiencies and improved labor costs realized during the current
fiscal year, as well as the $8.3 million charge recorded during the second
quarter of fiscal year 2000 for the shutdown of one of the SYGMA facilities. The
increase in pretax earnings for the current quarter compared to the prior year
was due to lower operating expenses and an increase in operating leverage of
added sales to fixed costs.
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.
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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.
In December 2000, SYSCO acquired North Douglas Distributors, Ltd., a
broadline foodservice distributor operating on Vancouver Island, British
Columbia and Albert M. Briggs Company, a specialty meat distributor in
Washington, D.C.
The transactions were accounted for using the purchase method of
accounting and the accompanying financial statements for the 13 weeks
and 26 weeks ended December 30, 2000 and January 1, 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 Balance Sheets 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.
Subsequent Events
On January 16, 2001, SYSCO acquired certain operations of the Freedman
Companies, a specialty meat supplier based in Houston, Texas.
On January 22, 2001, SYSCO entered into a definitive merger agreement
and plan of reorganization pursuant to which SYSCO will acquire Guest
Supply, Inc., through an exchange offer followed by a merger. Guest
Supply is a specialty distributor to the lodging industry headquartered
in Monmouth Junction, New Jersey.
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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." SAB 101
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 not have a significant effect on SYSCO's consolidated results of
operations or financial position.
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Forward-Looking Statements
Certain statements made herein are forward-looking statements under the
Private Securities Litigation Reform Act of 1995. They include
statements regarding potential future repurchases under the share
repurchase program, market risks, the impact of ongoing legal
proceedings, anticipated capital expenditures, and SYSCO's ability to
meet cash requirements while maintaining proper liquidity. These
statements involve risks and uncertainties and are based on management's
current expectations and estimates; actual results may differ
materially. Those risks and uncertainties that could impact these
statements include the risks relating to the foodservice distribution
industry's relatively low profit margins and sensitivity to general
economic conditions; SYSCO's leverage and debt risks; the ultimate
outcome of litigation, and internal factors such as the ability to
control expenses. In addition, share repurchases could be affected by
market prices for the Company's securities 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. For a discussion of additional factors
that could cause actual results to differ from those contained in the
forward-looking statements, see SYSCO's Form 10-K for the fiscal year
ended July 1, 2000 filed with the Securities and Exchange Commission.
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PART II. OTHER INFORMATION
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 3(b) 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 Form10-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).
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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).
15(a) Letter from Arthur Andersen LLP dated February 9, 2001,
re: unaudited financial statements, incorporated by reference
to Exhibit 15(a) to Form 10-Q for the quarter ended
December 30, 2000 filed on February 12, 2001.
*15(b) Acknowledgement letter from Arthur Andersen LLP.
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* Filed herewith.
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(b) Reports on Form 8-K:
On October 20, 2000, the Company filed a Form 8-K to attach a press release
dated October 18, 2000 announcing results of operations for the 13 weeks
ended September 30, 2000. (File No. 1-6544).
On October 26, 2000, the Company filed a Form 8-K to update the description
of its capital stock. (File No. 1-6544).
On November 6, 2000, the Company filed a Form 8-K to attach a press release
dated November 3, 2000 announcing a two-for-one stock split, an increase in
the quarterly cash dividend and approval of the repurchase of 16 million
shares of the Company's stock. (File No. 1-6544).
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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 and Administration
Date: May 14, 2001
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EXHIBIT INDEX
NO. DESCRIPTION
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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) 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 Form10-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).
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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).
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15(a) Letter from Arthur Andersen LLP dated February 9, 2001,
re: unaudited financial statements, incorporated by reference
to Exhibit 15(a) to Form 10-Q for the quarter ended
December 30, 2000 filed on February 12, 2001.
*15(b) Acknowledgement letter from Arthur Andersen LLP.
------------
* Filed herewith.