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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JULY 1, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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
Securities Registered Pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
Common Stock, $1.00 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: NONE
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock of the registrant held by
stockholders who were not affiliates (as defined by regulations of the
Securities and Exchange Commission) of the registrant was approximately
$13,855,134,000 at September 8, 2000 (based on the closing sales price on the
New York Stock Exchange Composite Tape on September 8, 2000, as reported by The
Wall Street Journal (Southwest Edition)). At September 8, 2000, the registrant
had issued and outstanding an aggregate of 333,877,879 shares of its common
stock.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the proxy statement to be filed not later than 120 days after
July 1, 2000 are incorporated by reference into Part III.
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TABLE OF CONTENTS
PAGE NO.
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PART I.
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 4
Item 3. Legal Proceedings........................................... 5
Item 4. Submission of Matters to a Vote of Security Holders......... 6
Item 4A. Executive Officers of the Registrant........................ 6
PART II.
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 7
Item 6. Selected Financial Data..................................... 7
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 8
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk........................................................ 13
Item 8. Financial Statements and Supplementary Data................. 14
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 32
PART III.
Item 10. Directors and Executive Officers of the Registrant.......... 32
Item 11. Executive Compensation...................................... 32
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 32
Item 13. Certain Relationships and Related Transactions.............. 32
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 32
Signatures............................................................ 35
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PART I
ITEM 1. BUSINESS
OVERVIEW
Sysco Corporation (together with its subsidiaries and divisions
collectively referred to as "SYSCO" or the "company"), founded in 1969, is the
largest North American distributor of food and food related products to the
foodservice or "food-prepared-away-from-home" industry. SYSCO provides its
products and services to approximately 356,000 customers, including restaurants,
healthcare and educational facilities, lodging establishments and other
foodservice customers.
SYSCO, which was formed when the stockholders of nine companies exchanged
their stock for SYSCO common stock, commenced operations in March 1970. Since
its formation, the company has grown from $115 million to over $19 billion in
annual sales both through internal expansion of existing operations and
acquisitions of formerly independent companies. Through the end of fiscal 2000,
SYSCO had acquired sixty companies or divisions of companies.
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 distributor, located in Georgia 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 distributor of
produce with locations in the U.S. and Canada.
SYSCO is organized under the laws of Delaware. The address and telephone
number of the company's executive office are 1390 Enclave Parkway, Houston,
Texas 77077-2099, (281) 584-1390.
CUSTOMERS AND PRODUCTS
The foodservice industry consists of two major customer
segments -- "traditional" and "chain restaurant." Traditional broadline
foodservice customers include restaurants, hospitals, schools, hotels and
industrial caterers. SYSCO's chain restaurant customers include regional pizza
and national hamburger, chicken and steak chain operations.
Services to the company's traditional broadline foodservice and chain
restaurant customers are supported by similar physical facilities, vehicles,
materials handling equipment and techniques, and administrative and operating
staffs.
The traditional broadline foodservice segment includes businesses and
organizations which prepare and serve food to be eaten away from home. Products
distributed by the company include a full line of frozen foods, such as meats,
fully prepared entrees, fruits, vegetables and desserts, and a full line of
canned and dry goods, fresh meats, imported specialties and fresh produce. The
company also supplies a wide variety of nonfood items, including paper products
such as disposable napkins, plates and cups; tableware such as china and
silverware; restaurant and kitchen equipment and supplies; medical and surgical
supplies; and cleaning supplies. SYSCO distributes both nationally-branded
merchandise and products packaged under its own private brands.
The company believes that prompt and accurate delivery of orders, close
contact with customers and the ability to provide a full array of products and
services to assist customers in their foodservice operations are of primary
importance in the marketing and distribution of products to the traditional
customer segment of the foodservice industry. SYSCO offers daily delivery to
certain customer locations and has the capability of delivering special orders
on short notice. Through its more than 11,450 sales, marketing and service
representatives, the company keeps informed of the needs of its customers and
acquaints them with new products. SYSCO also provides ancillary services
relating to its foodservice distribution such as providing customers with
product usage reports and other data, menu-planning advice, contract services
for installing
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kitchen equipment, installation and service of beverage dispensing machines and
assistance in inventory control.
No single traditional foodservice customer accounted for as much as 5% of
SYSCO's sales for its fiscal year ended July 1, 2000. Approximately 5.6% of
traditional foodservice sales during fiscal 2000 resulted from a process of
competitive bidding. There are no material long-term contracts with any
traditional foodservice customer that may not be cancelled by either party at
its option.
The company's SYGMA Network operations specialize in customized service to
chain restaurants, which service is also provided to a lesser extent by many of
the company's traditional foodservice operations. SYSCO's sales to the chain
restaurant industry consist of a variety of food products necessitated by the
increasingly broad menus of chain restaurants. The company believes that
consistent product quality and timely and accurate service are important factors
in the selection of a chain restaurant supplier. One chain restaurant customer
(Wendy's International, Inc.) accounted for 5.0% of SYSCO's sales for its fiscal
year ended July 1, 2000. There are no material long-term contracts with any
chain restaurant customer that may not be cancelled by either party at its
option.
SYSCO does not record sales on the basis of the type of foodservice
industry customer, but based upon available information, the company estimates
that sales by type of customer during the past three fiscal years were as
follows:
FISCAL FISCAL FISCAL
TYPE OF CUSTOMER 2000 1999 1998
- ---------------- ------ ------ ------
Restaurants................................................. 65% 64% 62%
Hospitals and nursing homes................................. 10 10 11
Schools and colleges........................................ 6 7 7
Hotels and motels........................................... 5 5 5
Other....................................................... 14 14 15
--- --- ---
Totals............................................ 100% 100% 100%
=== === ===
SOURCES OF SUPPLY
SYSCO estimates that it purchases from thousands of independent sources,
none of which individually account for more than 5% of the company's purchases.
These sources of supply consist generally of large corporations selling brand
name and private label merchandise and independent private label processors and
packers. Generally, purchasing is carried out on a decentralized basis through
centrally developed purchasing programs (see "Corporate Headquarters' Services
and Controls" below) and direct purchasing programs established by the company's
various operating subsidiaries and divisions. The company continually develops
relationships with suppliers but has no material long-term purchase commitments
with any supplier.
CORPORATE HEADQUARTERS' SERVICES AND CONTROLS
SYSCO's corporate staff, consisting of approximately 800 persons, provides
a number of services to the company's operating divisions and subsidiaries.
These persons possess experience and expertise in, among other areas, accounting
and finance, cash management, data processing, employee benefits, engineering
and insurance. Corporate also provides legal, marketing and tax compliance
services as well as warehousing and distribution services which provide
assistance in space utilization, energy conservation, fleet management and work
flow.
The corporate staff also administers a consolidated product procurement
program engaged in the task of developing, obtaining and assuring consistent
quality food and nonfood products. The program covers the purchasing and
marketing of SYSCO brand merchandise, as well as private label and national
brand merchandise, encompassing substantially all product lines. The company's
operating subsidiaries and divisions may participate in the program at their
option.
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CAPITAL IMPROVEMENTS
To maximize productivity and customer service, the company continues to
construct and modernize its distribution facilities. During fiscal 2000, 1999
and 1998, approximately $266,000,000, $287,000,000 and $259,000,000,
respectively, were invested in facility expansions, fleet additions and other
capital asset enhancements. The company estimates its capital expenditures in
fiscal 2001 should be in the range of $325,000,000 to $375,000,000. During the
three years ended July 1, 2000, capital expenditures have been financed
primarily by internally generated funds, the company's commercial paper program
and bank borrowings.
EMPLOYEES
As of July 1, 2000, SYSCO had approximately 40,400 full-time employees, 20%
of whom were represented by unions, primarily the International Brotherhood of
Teamsters. Contract negotiations are handled locally with monitoring and
assistance by the corporate staff. Collective bargaining agreements covering
approximately 31% of the company's union employees expire during fiscal 2001.
SYSCO considers its labor relations to be satisfactory.
COMPETITION
The business of SYSCO is competitive with numerous companies engaged in
foodservice distribution. While competition is encountered primarily from local
and regional distributors, a few companies compete with SYSCO on a national
basis. The company believes that, although price and customer contact are
important considerations, the principal competitive factor in the foodservice
industry is the ability to deliver a wide range of quality products and related
services on a timely and dependable basis. Although SYSCO's share of the
foodservice industry market in the United States and Canada was approximately
11% as of July 1, 2000, SYSCO believes, based upon industry trade data, that its
sales to the U.S. "food-prepared-away-from-home" industry were the largest of
any foodservice distributor during fiscal 2000. While adequate industry
statistics are not available, the company believes that in most instances its
local operations are among the leading distributors of food and related nonfood
products to foodservice customers in their respective trading areas.
GOVERNMENT REGULATION
As a marketer and distributor of food products, SYSCO is subject to the
Federal Food, Drug and Cosmetic Act and regulations promulgated thereunder by
the U.S. Food and Drug Administration ("FDA"). The FDA regulates manufacturing
and holding requirements for foods through its current good manufacturing
practice regulations, specifies the standards of identity for certain foods and
prescribes the format and content of certain information required to appear on
food product labels. For certain product lines, SYSCO is also subject to the
Federal Meat Inspection Act, the Poultry Products Inspection Act, the Perishable
Agricultural Commodities Act and regulations promulgated thereunder by the U.S.
Department of Agriculture ("USDA"). The USDA imposes standards for product
quality and sanitation including the inspection and labeling of meat and poultry
products and the grading and commercial acceptance of produce shipments from the
company's suppliers. The company and its products are also subject to state and
local regulation through such measures as the licensing of its facilities,
enforcement by state and local health agencies of state and local standards for
the company's products and regulation of the company's trade practices in
connection with the sale of its products. SYSCO's facilities are generally
inspected at least annually by state and/or federal authorities. These
facilities are also subject to inspections and regulations issued pursuant to
the Occupational Safety and Health Act by the Department of Labor, which require
the company to comply with certain manufacturing, health and safety standards to
protect its employees from accidents and to establish hazard communication
programs to transmit information on the hazards of certain chemicals present in
products distributed by the company.
The company is also subject to regulation by numerous federal, state, and
local regulatory agencies, including but not limited to the U.S. Department of
Labor, which sets employment practice standards for
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workers, and the U.S. Department of Transportation, which regulates
transportation of perishable and hazardous materials and waste, and similar
state and local agencies.
The company's distribution facilities have tanks for the storage of diesel
fuel and other petroleum products which are subject to laws regulating such
storage tanks. Other federal, state and local provisions relating to the
protection of the environment or the discharge of materials do not materially
impact the company's use or operation of its facilities.
Compliance with these laws has not had and is not anticipated to have a
material effect on the capital expenditures, earnings or competitive position of
SYSCO.
GENERAL
SYSCO has numerous trademarks, some of which are of significant importance
to the company. The loss of the SYSCO(R) trademark would have a material adverse
effect on SYSCO's results of operations.
SYSCO is not engaged in material research activities relating to the
development of new products or the improvement of existing products. In fiscal
1996, the company completed an internally developed project that involved the
redesign and development of the computer operating systems through which SYSCO's
operating companies will process, control and report the results of all
transactions. Installation was substantially completed by December 1999 and such
installation is expected to provide the basis for business expansion over the
next several years without having a material adverse effect upon the business or
operations of the company.
Sales of the company do not generally fluctuate on a seasonal basis;
therefore, the business of the company is not deemed to be seasonal.
As of September 8, 2000 SYSCO operated 118 facilities within the United
States, of which 76 are distribution facilities, and seven in Canada, of which
four are distribution facilities.
ITEM 2. PROPERTIES
The table below shows the number of distribution facilities and self-serve
centers occupied by SYSCO in each state or province and the aggregate cubic
footage devoted to cold and dry storage as of September 8, 2000.
NUMBER OF COLD STORAGE DRY STORAGE
FACILITIES (THOUSANDS (THOUSANDS
LOCATION AND CENTERS CUBIC FEET) CUBIC FEET)
- -------- ----------- ------------ -----------
Alabama................................................... 2 1,677 2,399
Alaska.................................................... 1 246 317
Arizona................................................... 1 1,485 3,410
Arkansas.................................................. 1 1,601 3,157
California................................................ 17 13,112 19,270
Colorado.................................................. 3 3,213 5,051
Connecticut............................................... 1 2,489 2,737
District of Columbia...................................... 1 335 128
Florida................................................... 15 17,031 18,208
Georgia................................................... 6 5,604 7,093
Idaho..................................................... 1 998 1,154
Illinois.................................................. 3 3,603 5,050
Indiana................................................... 1 1,590 1,832
Iowa...................................................... 1 687 1,215
Kansas.................................................... 1 2,735 3,793
Kentucky.................................................. 1 2,330 2,648
Louisiana................................................. 1 2,577 3,254
Maine..................................................... 1 1,508 1,916
Maryland.................................................. 4 6,859 6,361
Massachusetts............................................. 2 7,638 7,739
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NUMBER OF COLD STORAGE DRY STORAGE
FACILITIES (THOUSANDS (THOUSANDS
LOCATION AND CENTERS CUBIC FEET) CUBIC FEET)
- -------- ----------- ------------ -----------
Michigan.................................................. 3 5,021 8,282
Minnesota................................................. 1 3,636 3,063
Mississippi............................................... 1 2,125 2,690
Missouri.................................................. 1 1,128 1,348
Montana................................................... 1 2,043 1,830
Nebraska.................................................. 1 1,721 2,206
Nevada.................................................... 1 411 754
New Jersey................................................ 1 1,659 4,145
New Mexico................................................ 1 1,856 1,855
New York.................................................. 6 4,760 7,759
North Carolina............................................ 2 3,931 5,292
Ohio...................................................... 5 6,979 11,684
Oklahoma.................................................. 2 1,801 3,433
Oregon.................................................... 2 3,384 3,017
Pennsylvania.............................................. 4 6,134 7,212
South Dakota.............................................. 1 2 123
Tennessee................................................. 4 6,561 9,963
Texas..................................................... 8 12,595 16,490
Utah...................................................... 2 1,810 1,845
Virginia.................................................. 4 2,859 2,807
Washington................................................ 1 2,549 3,240
Wisconsin................................................. 2 5,016 4,073
Alberta, Canada........................................... 1 298 399
British Columbia, Canada.................................. 5 2,344 2,939
Ontario, Canada........................................... 1 941 1,030
--- ------- -------
Total........................................... 125 158,882 204,211
=== ======= =======
SYSCO owns approximately 317,000,000 cubic feet of its distribution
facilities and self-serve centers (or 87.3% of the total cubic feet), and the
remainder is occupied under leases expiring at various dates from fiscal 2001 to
2011, exclusive of renewal options. Certain of the facilities owned by the
company are either subject to mortgage indebtedness or industrial revenue bond
financing arrangements totaling $36,198,000 at July 1, 2000. Such mortgage
indebtedness and industrial revenue bond financing arrangements mature at
various dates to 2026.
The company owns its approximately 188,000 square foot headquarters office
complex in Houston, Texas and leases approximately 100,000 square feet of
additional office space in Houston, Texas.
Facilities in Albany, New York, Salt Lake City, Utah, Norfolk, Virginia,
Charlotte, North Carolina, Memphis, Tennessee, West Des Moines, Iowa, Modesto,
California, Irvine California and Peterborough, Ontario, Canada (which in the
aggregate account for approximately 9% of fiscal 2000 sales) are operating near
capacity and the company is currently constructing expansions for these
distribution facilities.
As of September 8, 2000 SYSCO's fleet of approximately 7,290 delivery
vehicles consisted of tractor and trailer combinations, vans and panel trucks,
most of which are either wholly or partially refrigerated for the transportation
of frozen or perishable foods. The company owns approximately 88% of these
vehicles and leases the remainder.
ITEM 3. LEGAL PROCEEDINGS
SYSCO is engaged in various legal proceedings which have arisen but have
not been fully adjudicated. These proceedings, in the opinion of management,
will not have a material adverse effect upon the consolidated financial position
or results of operations of the company when ultimately concluded.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the executive officers of SYSCO, each of whom serves at
the discretion of the Board and holds the office opposite his or her name below
until the meeting of the Board of Directors immediately preceding the next
Annual Meeting of Stockholders or until his or her successor has been elected or
qualified. Executive officers who also serve as directors, serve as directors
until expiration of their terms or until their successors have been elected and
qualified.
SERVED IN THIS
NAME OF OFFICER CAPACITY POSITION SINCE AGE
- --------------- -------- -------------- ---
Charles H. Cotros Chairman and Chief Executive Officer and 2000 & 1985 63
Director
Larry J. Accardi Executive Vice President, Merchandising 2000 51
Services & Multi-Unit Sales
Kenneth J. Carrig Senior Vice President, Administration 1999 43
O. Wayne Duncan Senior Vice President, Operations 1995 62
James C. Graham Senior Vice President, Operations 2000 50
James E. Lankford Senior Vice President, Operations 2000 47
Thomas E. Lankford Executive Vice President, Foodservice 2000 53
Operations and Director
Gregory K. Marshall Senior Vice President 1993 53
Michael C. Nichols Vice President and General Counsel 1999 48
Mitt Parker Senior Vice President 2000 50
Diane Day Sanders Vice President and Treasurer 1994 51
Richard J. Schnieders President and Chief Operating Officer and 2000 & 1999 52
Director
Kenneth F. Spitler Senior Vice President, Operations 2000 51
John K. Stubblefield, Jr. Executive Vice President, Finance and 2000 54
Administration
Arthur J. Swenka Senior Vice President, Operations and Director 1995 & 1994 63
James D. Wickus Senior Vice President, Operations 1995 57
Each of the executive officers listed above has been employed by the
company throughout the past five years except Kenneth J. Carrig and Mitt Parker.
Before joining SYSCO, Mr. Carrig was Vice President of Human Resources for
Continental Airlines, Inc. from 1995 to 1997 and prior to that he was Senior
Director of the Southwest Region for Pepsi Co from 1987 to 1995. Mr. Parker also
serves as Chief Executive Officer and President of FreshPoint, Inc., which
position he has held since 1997. He served as executive vice president of
FreshPoint from 1996 to 1997. FreshPoint was acquired by SYSCO in March 2000.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The principal market for SYSCO's Common Stock is the New York Stock
Exchange. The table below sets forth the high and low sales prices per share for
SYSCO's Common Stock as reported on the New York Stock Exchange Composite Tape
and the cash dividends paid for the periods indicated.
COMMON STOCK
PRICES
------------- DIVIDENDS PAID
HIGH LOW PER SHARE
---- --- --------------
Fiscal 1999:
First Quarter............................................. $25 15/16 $19 15/16 $0.090
Second Quarter............................................ 28 5/8 23 1/8 0.090
Third Quarter............................................. 29 7/8 24 15/16 0.100
Fourth Quarter............................................ 31 7/8 25 0.100
Fiscal 2000:
First Quarter............................................. $36 1/4 $30 1/16 $0.100
Second Quarter............................................ 41 1/8 31 5/8 0.100
Third Quarter............................................. 40 9/16 26 1/8 0.120
Fourth Quarter............................................ 43 3/8 34 3/8 0.120
The number of record owners of SYSCO's Common Stock as of July 1, 2000 was
15,207.
ITEM 6. SELECTED FINANCIAL DATA
FISCAL YEAR ENDED
-------------------------------------------------------------------
1999
2000 (53 WEEKS) 1998 1997 1996
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
Sales.......................... $19,303,268 $17,422,815 $15,327,536 $14,454,589 $13,395,130
Earnings before income taxes... 737,608 593,887 532,493 495,955 453,943
Income taxes................... 283,979 231,616 207,672 193,422 177,038
----------- ----------- ----------- ----------- -----------
Earnings before cumulative
effect of accounting
change....................... 453,629 362,271 324,821 302,533 276,905
Cumulative effect of accounting
change....................... (8,041) -- (28,053) -- --
----------- ----------- ----------- ----------- -----------
Net earnings................... $ 445,588 $ 362,271 $ 296,768 $ 302,533 $ 276,905
=========== =========== =========== =========== ===========
Earnings before accounting
change:
Basic earnings per share..... $ 1.38 $ 1.09 $ 0.95 $ 0.85 $ 0.76
Diluted earnings per share... 1.36 1.08 0.95 0.85 0.75
Cumulative effect of accounting
change:
Basic earnings per share..... (0.02) -- (0.08) -- --
Diluted earnings per share... (0.02) -- (0.08) -- --
Net earnings:
Basic earnings per share..... 1.35 1.09 0.87 0.85 0.76
Diluted earnings per share... 1.33 1.08 0.86 0.85 0.75
Cash dividends per share....... 0.44 0.38 0.33 0.28 0.24
Total assets................... 4,813,955 4,096,582 3,780,189 3,433,823 3,319,943
Capital expenditures........... 266,413 286,687 259,353 210,868 235,891
Long-term debt................. 1,023,642 997,717 867,017 685,620 581,734
Shareholders' equity........... 1,761,568 1,427,196 1,356,789 1,400,472 1,474,678
----------- ----------- ----------- ----------- -----------
Total capitalization........... $ 2,785,210 $ 2,424,913 $ 2,223,806 $ 2,086,092 $ 2,056,412
=========== =========== =========== =========== ===========
Ratio of long-term debt to
capitalization............... 36.8% 41.1% 39.0% 32.9% 28.3%
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
SYSCO provides marketing and distribution services to foodservice customers
and suppliers throughout the contiguous United States, Alaska, the District of
Columbia and western and central Canada. The company intends to continue to
expand its market share through profitable sales growth and constant emphasis on
the development of its consolidated buying programs. The company also strives to
increase the effectiveness of its marketing associates and the productivity of
its warehousing and distribution activities. These objectives require continuing
investment. SYSCO's resources include cash provided by operations and access to
capital from financial markets.
SYSCO's operations historically have produced significant cash flow. Cash
generated from operations is first allocated to working capital requirements;
investments in facilities, fleet and other equipment required to meet customers'
needs; cash dividends; and acquisitions fitting within the company's overall
growth strategy. Any remaining cash generated from operations is applied toward
a portion of the cost of shares repurchased in the share repurchase program,
while the remainder of the cost may be financed with additional long-term debt.
SYSCO's initial share repurchase program was used primarily to offset shares
issued under various employee benefit and compensation plans. The company
significantly accelerated the repurchase program beginning in February 1996. The
share repurchase program reduces outstanding shares and increases earnings per
share. The long-term debt to total capitalization target ratio was increased
from a range of 30% to 40% to a range of 35% to 40% due to prior and anticipated
accelerated share repurchases, additional debt associated with those repurchases
and acquisitions. This ratio was 36.8% and 41.1% at July 1, 2000 and July 3,
1999, respectively.
In November 1996, the Board authorized an additional 12,000,000 share
buyback to be completed in calendar 1997 and in July 1997, authorized an
additional 12,000,000 share buyback to be completed in fiscal 1998; and in
September 1998 the Board authorized an additional 8,000,000 share buyback to be
completed in calendar 1999; and in July 1999 the Board authorized a new
8,000,000 share buyback. The number of shares acquired and their cost for the
past three years was 5,660,400 shares for $186,296,000 in fiscal 2000, 7,567,300
shares for $203,958,000 in fiscal 1999 and 12,129,700 shares for $263,416,000 in
fiscal 1998.
In February 2000, the company filed with the Securities and Exchange
Commission a shelf registration covering 2,850,000 shares of common stock to be
offered from time to time in connection with acquisitions. As of July 1, 2000
all of these shares are available for issuance.
Net cash generated from operating activities was $708,726,000 in 2000,
$585,303,000 in 1999 and $357,764,000 in 1998. Expenditures for facilities,
fleet and other equipment were $266,413,000 in 2000, $286,687,000 in 1999 and
$259,353,000 in 1998. Expenditures in fiscal 2001 should be in the range of
$325,000,000 to $375,000,000.
On June 3, 1998 SYSCO filed with the Securities and Exchange Commission a
$500,000,000 shelf registration of debt securities. On July 22, 1998 SYSCO
issued 6.5% debentures totaling $225,000,000 under the shelf registration, due
August 1, 2028. These debentures were priced at 99.685% of par, are unsecured,
are not subject to any sinking fund requirement and include a redemption
provision which allows SYSCO the right to retire the debentures at any time
prior to maturity at the greater of par plus accrued interest or an amount
designed to insure that the debenture holders are not penalized by the early
redemption. Proceeds from the debentures were used to pay down outstanding
commercial paper.
The net cash provided by operations less cash utilized for capital
expenditures, the share repurchase program, cash dividends and other uses
resulted in net long-term debt of $1,023,642,000 at July 1, 2000. About 75% of
the long-term debt is at fixed rates averaging 6.73% and the remainder is at
floating rates averaging 6.77%. Long-term debt to capitalization was 36.8% at
July 1, 2000, down 4.3% from the 41.1% at July 3, 1999 and down 2.2% from the
39.0% at June 27, 1998. SYSCO continues to have borrowing capacity available and
alternative financing arrangements are evaluated as appropriate.
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SYSCO has uncommitted bank lines of credit, which provide for unsecured
borrowings for working capital of up to $246,481,000 of which $31,109,000 and
$13,377,000 were outstanding at July 1, 2000 and July 3, 1999, respectively.
SYSCO has a commercial paper program which is currently supported by a
$300,000,000 bank credit facility. During fiscal 2000, 1999 and 1998, commercial
paper and short-term bank borrowings ranged from approximately $199,028,000 to
$469,094,000, from approximately $67,769,000 to $358,637,000, and from
approximately $29,581,000 to $417,924,000, respectively.
In summary, SYSCO believes that through continual monitoring and management
of assets together with the availability of additional capital in the financial
markets, it will meet its cash requirements while maintaining proper liquidity
for normal operating purposes.
MARKET RISK
SYSCO does not utilize financial instruments for trading purposes and holds
no derivative financial instruments which could expose the company to
significant market risk. SYSCO's exposure to market risk for changes in interest
rates relates primarily to its long-term obligations discussed above. At July 1,
2000 the company had outstanding commercial paper of $247,870,000 with
maturities through September 22, 2000. The company's remaining long-term debt
obligations of $775,772,000 were primarily at fixed rates of interest. SYSCO has
no significant cash flow exposure due to interest rate changes for long-term
debt obligations.
SALES
The annual increases in sales of 11% in 2000 and 14% in 1999 (53 weeks)
resulted from several factors. Sales in fiscal 2000 and 1999 were affected by
the strong growth in the U.S. economy, as well as in the foodservice industry.
After adjusting for food price increases, acquisitions and adjusted for the
extra week in fiscal 1999, real sales growth was about 9% in 2000 and 12% in
1999. Acquisitions represented 3.5% of total sales for fiscal 2000. Food costs,
which experienced minimal inflation during the first two quarters of 2000 and a
slight deflation during the third quarter, returned to about 2% inflation during
the final quarter, resulting in approximately 0.4% inflation for fiscal 2000.
This compares to an increase of approximately 1% in fiscal 1999. Industry
sources estimate the total foodservice market experienced real growth of
approximately 3.1% in calendar year 1999 and 2.8% in calendar year 1998.
Sales for fiscal 1998 through 2000 were as follows:
FISCAL YEAR SALES % INCREASE
- ----------- --------------- ----------
2000.............................................. $19,303,268,000 11%
1999 (53 Weeks)................................... 17,422,815,000 14
1998.............................................. 15,327,536,000 6
9
12
A comparison of the sales mix in the principal product categories during
the last three years is presented below:
2000 1999 1998
---- ---- ----
Medical supplies............................................ 1% 1% 1%
Dairy products.............................................. 9 10 9
Fresh and frozen meats...................................... 17 15 15
Seafoods.................................................... 6 6 6
Poultry..................................................... 10 11 10
Frozen fruits, vegetables, bakery and other................. 14 14 15
Canned and dry products..................................... 21 22 23
Paper and disposables....................................... 8 7 7
Janitorial products......................................... 2 2 2
Equipment and smallwares.................................... 2 3 3
Fresh produce............................................... 7 6 6
Beverage products........................................... 3 3 3
--- --- ---
100% 100% 100%
=== === ===
A comparison of sales by type of customer during the last three years is
presented below:
2000 1999 1998
---- ---- ----
Restaurants................................................. 65% 64% 62%
Hospitals and nursing homes................................. 10 10 11
Schools and colleges........................................ 6 7 7
Hotels and motels........................................... 5 5 5
All other................................................... 14 14 15
--- --- ---
100% 100% 100%
=== === ===
COST OF SALES
Cost of sales increased about 10% in 2000 and 14% in 1999. These increases
were generally in line with the increases in sales. The rate of increase is
influenced by SYSCO's overall customer and product mix as well as economies
realized in product acquisition and higher sales of SYSCO Brand products.
OPERATING EXPENSES
Operating expenses include the costs of warehousing and delivering products
as well as selling and administrative expenses. These expenses as a percent of
sales were 14.7% for fiscal 2000 and 14.6% for fiscal 1999 and for fiscal 1998.
Part of the increase over 1999 was due to expenses related to the closing of a
facility and one-time non-recurring costs associated with the completion of the
SYSCO Uniform Systems implementation. There was also a charge to non-operating
expenses in connection with the facility closing. The costs described above were
approximately $13,000,000. Otherwise, changes in the percentage relationship of
operating expenses to sales result from an interplay of several economic
influences, including customer mix. Inflationary increases in operating costs
generally have been offset through improved productivity.
INTEREST EXPENSE
Interest expense decreased $2,007,000 or approximately 3% in fiscal 2000 as
compared to an increase of $14,417,000 or approximately 25% in fiscal 1999. The
decrease in fiscal 2000 was due primarily to interest income received in the
amount of $3,000,000 related to a Federal income tax refund on an amended tax
return. Without this income, interest expense would have been approximately 1%
above last year due to increased borrowings. The increase in fiscal 1999 was due
primarily to increased borrowings, principally to fund the share repurchase
program, and the replacement of floating rate debt at higher fixed rates.
Interest
10
13
capitalized during the past three years was $964,000 in fiscal 2000, $1,812,000
in fiscal 1999 and $2,095,000 in fiscal 1998.
OTHER, NET
Other decreased $559,000 or about 58% in fiscal 2000 and decreased $910,000
or about 1,717% in fiscal 1999. Changes between the years result from
fluctuations in miscellaneous activities, primarily gains and losses on the sale
of surplus facilities as well as the expenses related to the facility closing
discussed under "operating expenses" above.
EARNINGS BEFORE INCOME TAXES
Earnings before income taxes rose $143,721,000, or approximately 24%, above
fiscal 1999 which had increased $61,394,000, or approximately 12%, over the
prior year. Additional sales and realization of operating efficiencies
contributed to the increases as well as the company's success in its continued
efforts to increase sales to the company's higher margin marketing
associate-served customers and increasingly higher sales of SYSCO Brand
products.
PROVISION FOR INCOME TAXES
The effective tax rate for 2000 was 38.5% and for 1999 was approximately
39%.
EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE
Fiscal 2000 represents the twenty-fourth consecutive year of increased
earnings before the cumulative effect of an accounting change. Earnings before
cumulative effect of accounting change rose $91,358,000, or approximately 25%,
above fiscal 1999 which had increased $37,450,000, or approximately 12%, over
the prior year.
CUMULATIVE EFFECT OF ACCOUNTING CHANGE
In the first quarter of fiscal 2000, SYSCO recorded a one-time, after-tax,
non-cash charge of $8,041,000 to comply with the required adoption of AICPA
Statement of Position 98-5 (SOP 98-5), "Reporting on the Costs of Start-up
Activities." SOP 98-5 requires the write-off of any unamortized costs of
start-up activities and organization costs. Going forward such costs are being
expensed as incurred.
NET EARNINGS
Net earnings for the year increased $83,317,000 or approximately 23% above
fiscal 1999, which had increased $65,503,000 or approximately 22% over the prior
year. The increase was caused by additional sales, operating efficiencies and
other factors discussed above.
DIVIDENDS
SYSCO began paying the quarterly dividend rate of twelve cents per share in
February 2000, an increase from the ten cents per share that became effective in
February 1999.
RETURN ON SHAREHOLDERS' EQUITY
The return on average shareholders' equity before the cumulative effect of
the accounting change for 2000 was approximately 29% compared to 26% in 1999 and
23% in 1998. Since inception SYSCO has averaged in excess of a 17% return on
shareholders' equity before the cumulative effect of the accounting change.
11
14
RISK FACTORS
Low Margin Business; Economic Sensitivity
The foodservice distribution industry is characterized by relatively high
inventory turnover with relatively low profit margins. SYSCO makes a significant
portion of its sales at prices that are based on the cost of products it sells
plus a percentage markup. As a result, SYSCO's profit levels may be negatively
impacted during periods of food price deflation, even though SYSCO's gross
profit percentage may remain relatively constant. The foodservice industry is
sensitive to national and economic conditions. SYSCO's operating results also
are sensitive to, and may be adversely affected by other factors, including
difficulties with the collectability of accounts receivable, inventory control,
competitive price pressures, severe weather conditions and unexpected increases
in fuel or other transportation-related costs. Although such factors have not
had a material adverse impact on SYSCO's past operations, there can be no
assurance that one or more of these factors will not adversely affect future
operating results.
Leverage and Debt Service
Because historically a substantial part of SYSCO's growth has been the
result of acquisitions and capital expansion, SYSCO's continued growth depends,
in large part, on its ability to continue this expansion. As a result, its
inability to finance acquisitions and capital expenditures through borrowed
funds could restrict its ability to expand. Moreover, any default under the
documents governing the indebtedness of SYSCO could have a significant adverse
effect on the market value of SYSCO's common stock. Further, SYSCO's leveraged
position may also increase its vulnerability to competitive pressures.
Product Liability Claims
SYSCO, like any other seller of food, faces the risk of exposure to product
liability claims in the event that the use of products sold by the company
causes injury or illness. With respect to product liability claims, SYSCO
believes it has sufficient primary or excess umbrella liability insurance.
However, this insurance may not continue to be available at a reasonable cost,
or, if available, may not be adequate to cover liabilities. SYSCO generally
seeks contractual indemnification and insurance coverage from parties supplying
its products, but this indemnification or insurance coverage is limited, as a
practical matter, to the creditworthiness of the indemnifying party and the
insured limits of any insurance provided by suppliers. If SYSCO does not have
adequate insurance or contractual indemnification available, product liability
relating to defective products could materially reduce SYSCO's net income and
earnings per share.
Interruption of Supplies
SYSCO obtains all of its foodservice products from other suppliers. For the
most part, SYSCO does not have long-term contracts with any supplier committing
it to provide products to SYSCO. Although SYSCO's purchasing volume can provide
leverage when dealing with suppliers, suppliers may not provide the foodservice
products and supplies needed by SYSCO in the quantities requested. Because SYSCO
does not control the actual production of its products, it is also subject to
delays caused by interruption in production based on conditions outside its
control. These conditions include job actions or strikes by employees of
suppliers, weather, crop conditions, transportation interruptions, and natural
disasters or other catastrophic events. SYSCO's inability to obtain adequate
supplies of its foodservice products as a result of any of the foregoing factors
or otherwise, could mean that SYSCO could not fulfill its obligations to
customers, and customers may turn to other distributors.
Labor Relations
As of July 1, 2000, approximately 8,000 employees were members of 48
different local unions associated with the International Brotherhood of
Teamsters and other labor organizations, at 34 operating companies. In fiscal
2001, 14 agreements covering approximately 2,500 employees will expire. Failure
to effectively renegotiate these contracts could result in work stoppages.
Although SYSCO has not experienced any significant labor disputes or work
stoppages to date, and believes it has satisfactory relationships with its
12
15
unions, a work stoppage due to failure to renegotiate a union contract, or
otherwise, could have a material adverse effect on SYSCO.
Integration of Acquired Companies
If SYSCO is unable to integrate acquired businesses successfully and
realize anticipated economic, operational and other benefits in a timely manner,
its profitability may decrease. Integration of an acquired business may be more
difficult when SYSCO acquires a business in a market in which it has limited or
no expertise, or with a corporate culture different from SYSCO's. If SYSCO is
unable to integrate acquired businesses successfully, it may incur substantial
costs and delays in increasing its customer base. In addition, the failure to
integrate acquisitions successfully may divert management's attention from
SYSCO's existing business and may damage SYSCO's relationships with its key
customers and suppliers.
Charter and Stockholder Rights Plan
Under its Restated Certificate of Incorporation, SYSCO's Board of Directors
is authorized to issue up to 1.5 million shares of preferred stock without
stockholder approval. Issuance of these shares would make it more difficult for
anyone to acquire SYSCO without approval of the Board of Directors because more
shares would have to be acquired to gain control. If anyone attempts to acquire
SYSCO without approval of the Board of Directors of SYSCO, the stockholders of
SYSCO have the right to purchase preferred stock of SYSCO, which also means more
shares would have to be acquired to gain control. Both of these devices may
deter hostile takeover attempts that might result in an acquisition of SYSCO
that would have been financially beneficial to SYSCO's stockholders.
FORWARD-LOOKING STATEMENTS
Certain statements made herein that look forward in time or express
management's expectations or beliefs with respect to the occurrence of future
events are forward-looking statements under the Private Securities Litigation
Reform Act of 1995. They include statements about anticipated industry growth,
SYSCO's long-term growth objectives, anticipated capital expenditures, and
implementation and timing of "fold-outs" and acquisitions.
These statements are based on current expectations and management
estimates; actual results may differ materially due in part to the risk factors
discussed above. In addition, decisions to pursue "fold-outs" and acquisitions
and expenditures for such could vary depending upon construction schedules and
the timing of other purchases, such as fleet and equipment, while the timing and
implementation of "fold-outs" and acquisitions could be impacted by competitive
conditions, labor issues and other matters. The ability to pursue acquisitions
also depends upon the availability and suitability of potential candidates and
management's allocation of capital. Industry growth and SYSCO's long-term growth
objectives could be affected by conditions in the economy, the industry and
internal factors that may alter planned results.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For a discussion of market risk see "Market Risk" under Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
13
16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SYSCO CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Financial Statements:
Report of Management on Internal Accounting Controls...... 15
Report of Independent Public Accountants.................. 16
Consolidated Financial Statements:
Consolidated Balance Sheets............................... 17
Consolidated Results of Operations........................ 18
Consolidated Shareholders' Equity......................... 19
Consolidated Cash Flows................................... 20
Summary of Accounting Policies............................ 21
Additional Financial Information.......................... 23
Schedule:
II -- Valuation and Qualifying Accounts................... S-1
All other schedules are omitted because they are not applicable or the
information is set forth in the consolidated financial statements or notes
thereto.
14
17
REPORT OF MANAGEMENT ON INTERNAL ACCOUNTING CONTROLS
The management of SYSCO is responsible for the preparation and integrity of
the consolidated financial statements of the company. The accompanying
consolidated financial statements have been prepared by the management of the
company, in accordance with generally accepted accounting principles, using
management's best estimates and judgment where necessary. Financial information
appearing throughout this Annual Report is consistent with that in the
consolidated financial statements.
To help fulfill its responsibility, management maintains a system of
internal controls designed to provide reasonable assurance that assets are
safeguarded against loss or unauthorized use and that transactions are executed
in accordance with management's authorizations and are reflected accurately in
the company's records. The concept of reasonable assurance is based on the
recognition that the cost of maintaining a system of internal accounting
controls should not exceed benefits expected to be derived from the system.
SYSCO believes that its long-standing emphasis on the highest standards of
conduct and ethics, embodied in comprehensive written policies, serves to
reinforce its system of internal controls.
The company's operations review function monitors the operation of the
internal control system and reports findings and recommendations to management
and the Board of Directors. It also oversees actions taken to address control
deficiencies and seeks opportunities for improving the effectiveness of the
system.
Arthur Andersen LLP, independent public accountants, has been engaged to
express an opinion regarding the fair presentation of the company's financial
condition and operating results. As part of their audit of the company's
financial statements, Arthur Andersen LLP considered the company's system of
internal controls to the extent they deemed necessary to determine the nature,
timing and extent of their audit tests.
The Board of Directors oversees the company's financial reporting through
its Audit Committee which consists entirely of outside directors. The Board,
after a recommendation from the Audit Committee, selects and engages the
independent public accountants annually. The Audit Committee reviews both the
scope of the accountants' audit and recommendations from both the independent
public accountants and the internal operations review function for improvements
in internal controls. The independent public accountants have free access to the
Audit Committee and from time to time confer with them without management
representation.
SYSCO recognizes its responsibility to conduct business in accordance with
high ethical standards. This responsibility is reflected in a comprehensive code
of business conduct that, among other things, addresses potentially conflicting
outside business interests of company employees and provides guidance as to the
proper conduct of business activities. Ongoing communications and review
programs are designed to help ensure compliance with this code.
The company believes that its system of internal controls is effective and
adequate to accomplish the objectives discussed above.
/s/ CHARLES H. COTROS /s/ JOHN K. STUBBLEFIELD, JR.
- ----------------------------------------------------- -----------------------------------------------------
Charles H. Cotros John K. Stubblefield, Jr.
Chairman and Chief Executive Officer Executive Vice President,
Finance and Administration
15
18
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Sysco Corporation
We have audited the accompanying consolidated balance sheets of Sysco
Corporation (a Delaware corporation) and subsidiaries as of July 1, 2000 and
July 3, 1999, and the related statements of consolidated results of operations,
shareholders' equity and cash flows for each of the three years in the period
ended July 1, 2000. These financial statements and the schedule referred to
below are the responsibility of the company's management. Our responsibility is
to express an opinion on these financial statements and the schedule based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Sysco
Corporation and subsidiaries as of July 1, 2000 and July 3, 1999, and the
results of their operations and their cash flows for each of the three years in
the period ended July 1, 2000, in conformity with accounting principles
generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 14(a) is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not a required part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in our
audits of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
------------------------------------
Arthur Andersen LLP
Houston, Texas
August 2, 2000
16
19
SYSCO
CONSOLIDATED BALANCE SHEETS
JULY 1, 2000 JULY 3, 1999
------------ ------------
(IN THOUSANDS EXCEPT FOR
SHARE DATA)
ASSETS
Current Assets
Cash...................................................... $ 159,128 $ 149,303
Accounts and notes receivable, less allowances of $27,628
and $21,095............................................ 1,519,038 1,334,371
Inventories............................................... 937,899 851,965
Deferred taxes............................................ 72,041 43,353
Prepaid expenses.......................................... 45,109 29,775
---------- ----------
Total current assets.............................. 2,733,215 2,408,767
Plant and equipment at cost, less depreciation.............. 1,344,693 1,227,669
Other assets
Goodwill and intangibles, less amortization............... 503,039 302,100
Other..................................................... 233,008 158,046
---------- ----------
Total other assets................................ 736,047 460,146
---------- ----------
Total assets...................................... $4,813,955 $4,096,582
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable............................................. $ 31,109 $ 13,377
Accounts payable.......................................... 1,186,721 1,013,302
Accrued expenses.......................................... 527,233 374,271
Income taxes.............................................. 17,914 6,103
Current maturities of long-term debt...................... 19,958 20,487
---------- ----------
Total current liabilities......................... 1,782,935 1,427,540
Long-term debt.............................................. 1,023,642 997,717
Deferred taxes.............................................. 245,810 244,129
Contingencies
Shareholders' equity
Preferred stock, par value $1 per share
Authorized 1,500,000 shares, issued none............... -- --
Common stock, par value $1 per share
Authorized 1,000,000,000 shares, issued 382,587,450
shares................................................ 382,587 382,587
Paid-in capital........................................... 76,967 872
Retained earnings......................................... 2,332,238 2,032,068
---------- ----------
2,791,792 2,415,527
Less cost of treasury stock, 51,102,663 and 52,915,065
shares................................................. 1,030,224 988,331
---------- ----------
Total shareholders' equity................................ 1,761,568 1,427,196
---------- ----------
Total liabilities and shareholders' equity........ $4,813,955 $4,096,582
========== ==========
See Summary of Accounting Policies and Additional Financial Information.
17
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SYSCO
CONSOLIDATED RESULTS OF OPERATIONS
YEAR ENDED
-------------------------------------------
JULY 3, 1999
JULY 1, 2000 (53 WEEKS) JUNE 27, 1998
------------ ------------ -------------
(IN THOUSANDS EXCEPT FOR SHARE DATA)
Sales................................................. $19,303,268 $17,422,815 $15,327,536
Costs and expenses
Cost of sales....................................... 15,649,551 14,207,860 12,499,636
Operating expenses.................................. 2,843,755 2,547,266 2,236,932
Interest expense.................................... 70,832 72,839 58,422
Other, net.......................................... 1,522 963 53
----------- ----------- -----------
Total costs and expenses.................... 18,565,660 16,828,928 14,795,043
----------- ----------- -----------
Earnings before income taxes.......................... 737,608 593,887 532,493
Income taxes.......................................... 283,979 231,616 207,672
----------- ----------- -----------
Earnings before cumulative effect of accounting
change.............................................. 453,629 362,271 324,821
Cumulative effect of accounting change................ (8,041) -- (28,053)
----------- ----------- -----------
Net earnings.......................................... $ 445,588 $ 362,271 $ 296,768
=========== =========== ===========
Earnings before accounting change:
Basic earnings per share............................ $ 1.38 $ 1.09 $ 0.95
Diluted earnings per share.......................... 1.36 1.08 0.95
Cumulative effect of accounting change:
Basic earnings per share............................ (0.02) -- (0.08)
Diluted earnings per share.......................... (0.02) -- (0.08)
Net earnings:
Basic earnings per share............................ 1.35 1.09 0.87
Diluted earnings per share.......................... 1.33 1.08 0.86
See Summary of Accounting Policies and Additional Financial Information.
18
21
SYSCO
CONSOLIDATED SHAREHOLDERS' EQUITY
COMMON STOCK TREASURY STOCK
---------------------- PAID-IN RETAINED -----------------------
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT
----------- -------- -------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT FOR SHARE DATA)
Balance at June 28, 1997...... 191,293,725 $191,294 $ 32,258 $1,771,548 18,855,458 $ 594,628
Net earnings for year ended
June 27, 1998............... 296,768
Cash dividends paid, $0.33 per
share....................... (110,928)
Treasury stock purchases...... 6,064,850 263,416
Stock options exercised....... (4,308) (491,795) (15,174)
Employees' Stock Purchase
Plan........................ 1,359 (433,419) (14,048)
Management Incentive Plan..... 1,084 (205,950) (6,536)
2-for-1 stock split........... 191,293,725 191,293 (30,393) (160,900) 23,789,144
----------- -------- -------- ---------- ---------- ----------
Balance at June 27, 1998...... 382,587,450 $382,587 $ -- $1,796,488 47,578,288 $ 822,286
Net earnings for year ended
July 3, 1999................ 362,271
Cash dividends paid, $0.38 per
share....................... (126,691)
Treasury stock purchases...... 7,567,300 203,958
Stock options exercised....... (5,621) (988,679) (15,954)
Employees' Stock Purchase
Plan........................ 3,679 (894,094) (15,906)
Management Incentive Plan..... 2,814 (347,750) (6,053)
----------- -------- -------- ---------- ---------- ----------
Balance at July 3, 1999....... 382,587,450 $382,587 $ 872 $2,032,068 52,915,065 $ 988,331
Net earnings for year ended
July 1, 2000................ 445,588
Cash dividends paid, $0.44 per
share....................... (145,418)
Treasury stock purchases...... 5,660,400 186,296
Treasury stock issued for
acquisitions................ 69,794 (4,984,497) (98,362)
Stock options exercised....... (7,526) (1,163,222) (20,104)
Employees' Stock Purchase
Plan........................ 9,446 (943,530) (18,585)
Management Incentive Plan..... 4,381 (381,553) (7,352)
----------- -------- -------- ---------- ---------- ----------
Balance at July 1, 2000....... 382,587,450 $382,587 $ 76,967 $2,332,238 51,102,663 $1,030,224
=========== ======== ======== ========== ========== ==========
See Summary of Accounting Policies and Additional Financial Information.
19
22
SYSCO
CONSOLIDATED CASH FLOWS
YEAR ENDED
-------------------------------------------
JULY 3, 1999
JULY 1, 2000 (53 WEEKS) JUNE 27, 1998
------------ ------------ -------------
(IN THOUSANDS)
Cash flows from operating activities:
Net earnings........................................... $ 445,588 $ 362,271 $ 296,768
Add non-cash items:
Cumulative effect of accounting change.............. 8,041 -- 28,053
Depreciation and amortization....................... 220,661 205,005 181,234
Deferred tax (benefit) provision.................... (25,528) 5,656 (15,077)
Provision for losses on receivables................. 27,082 26,208 22,959
Additional investment in certain assets and
liabilities, net of effect of businesses acquired:
(Increase) in receivables........................... (118,578) (144,969) (162,276)
(Increase) in inventories........................... (56,943) (61,464) (48,483)
Decrease (increase) in prepaid expenses............. 3,378 (3,180) (4,871)
Increase in accounts payable........................ 105,790 164,143 14,114
Increase in accrued expenses........................ 128,174 82,016 50,875
Increase (decrease) in income taxes................. 16,254 (19,420) 7,782
(Increase) in other assets.......................... (45,193) (30,963) (13,314)
--------- --------- ---------
Net cash provided by operating activities.............. 708,726 585,303 357,764
--------- --------- ---------
Cash flows from investing activities:
Additions to plant and equipment....................... (266,413) (286,687) (259,353)
Proceeds from sales of plant and equipment............. 18,922 24,952 8,296
Acquisition of businesses, net of cash acquired........ (211,901) -- (84,473)
--------- --------- ---------
Net cash used for investing activities................. (459,392) (261,735) (335,530)
--------- --------- ---------
Cash flows from financing activities:
Bank and commercial paper borrowings (repayments)...... 51,810 (109,962) 303,996
Other debt (repayments) borrowings..................... (11,947) 117,273 6,813
Common stock reissued from treasury.................... 52,342 38,785 33,893
Treasury stock purchases............................... (186,296) (203,958) (263,416)
Dividends paid......................................... (145,418) (126,691) (110,928)
--------- --------- ---------
Net cash used for financing activities................. (239,509) (284,553) (29,642)
--------- --------- ---------
Net increase (decrease) in cash.......................... 9,825 39,015 (7,408)
Cash at beginning of year................................ 149,303 110,288 117,696
--------- --------- ---------
Cash at end of year...................................... $ 159,128 $ 149,303 $ 110,288
========= ========= =========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest............................................ $ 70,977 $ 66,706 $ 58,306
Income taxes........................................ 272,022 237,990 195,133
See Summary of Accounting Policies and Additional Financial Information.
20
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SUMMARY OF ACCOUNTING POLICIES
BUSINESS AND CONSOLIDATION
SYSCO Corporation (SYSCO or the company) is engaged in the marketing and
distribution of a wide range of food and related products to the foodservice or
"food-prepared-away-from-home" industry. These services are performed from 95
distribution facilities for approximately 356,000 customers located in the 39
states where facilities are situated, in nine adjacent states, Alaska and the
District of Columbia. The company also has four facilities in Vancouver, British
Columbia, one in Peterborough, Ontario and one in Edmonton, Alberta which
service customers in those surrounding areas.
The accompanying financial statements include the accounts of SYSCO and its
subsidiaries. All significant intercompany transactions and account balances
have been eliminated. Certain amounts in the prior years have been reclassified
to conform to the 2000 presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates that affect
the reported amounts of assets, liabilities, sales and expenses. Actual results
could differ from the estimates used.
Earnings of acquisitions recorded as purchases are included in SYSCO's
results of operations from the date of acquisition.
INVENTORIES
Inventories consist of food and related products held for resale and are
valued at the lower of cost (first-in, first-out method) or market.
PLANT AND EQUIPMENT
Capital additions, improvements and major renewals are classified as plant
and equipment and are carried at cost. Depreciation is recorded using the
straight-line method which reduces the book value of each asset in equal amounts
over its estimated useful life. Maintenance, repairs and minor renewals are
charged to earnings when they are incurred. Upon the disposition of an asset,
its accumulated depreciation is deducted from the original cost, and any gain or
loss is reflected in current earnings.
Applicable interest charges incurred during the construction of new
facilities are capitalized as one of the elements of cost and are amortized over
the assets' estimated useful lives. Interest capitalized during the past three
years was $964,000 in 2000, $1,812,000 in 1999 and $2,095,000 in 1998.
GOODWILL AND INTANGIBLES
Goodwill and intangibles represent the excess of cost over the fair value
of tangible net assets acquired and are amortized over 40 years using the
straight-line method. Accumulated amortization at July 1, 2000, July 3, 1999 and
June 27, 1998 was $96,862,000, $84,160,000 and $74,554,000, respectively.
COMPUTER SYSTEMS DEVELOPMENT PROJECT
In the second quarter of fiscal 1998, SYSCO recorded a one-time, after-tax,
non-cash charge of $28,053,000 to comply with a new consensus ruling by the
Emerging Issues Task Force of the Financial Accounting Standards Board (EITF
Issue No. 97-13), requiring reengineering costs associated with computer systems
development to be expensed as they are incurred. Prior to this ruling, SYSCO had
capitalized business process reengineering costs incurred in connection with its
SYSCO Uniform Systems information systems redevelopment project in accordance
with generally accepted accounting principles.
No costs were capitalized in fiscal 2000, fiscal 1999 and fiscal 1998.
Amounts capitalized are being amortized as completed portions are put into use.
Accumulated amortization, including the one-time charge, at July 1, 2000, July
3, 1999 and June 27, 1998 was $42,001,000, $38,929,000 and $36,532,000,
respectively.
21
24
COSTS OF START-UP ACTIVITIES
In the first quarter of fiscal 2000, SYSCO recorded a one-time, after-tax,
non-cash charge of $8,041,000 to comply with the required adoption of AICPA
Statement of Position 98-5 (SOP 98-5), "Reporting on the Costs of Start-up
Activities." SOP 98-5 requires the write-off of any unamortized costs of
start-up activities and organization costs. Going forward such costs are being
expensed as incurred.
INSURANCE PROGRAM
SYSCO maintains a self-insurance program covering portions of workers'
compensation and general and automobile liability costs. The amounts in excess
of the self-insured levels are fully insured. Self-insurance accruals are based
on claims filed and an estimate for significant claims incurred but not
reported.
INCOME TAXES
SYSCO follows the liability method of accounting for income taxes as
required by the provisions of Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes."
CASH FLOW INFORMATION
For cash flow purposes, cash includes cash equivalents such as time
deposits, certificates of deposit and all highly liquid instruments with
original maturities of three months or less.
ACQUISITIONS
During fiscal 2000, SYSCO acquired for cash and stock, three custom-meat
operations, two broadline foodservice companies and one specialty produce
company. In the aggregate, SYSCO paid cash of $211,901,000 and issued 4,984,497
unregistered, restricted shares to the former owners of the acquired companies.
The transactions were accounted for using the purchase method of accounting and
the financial statements for fiscal 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 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 the current year 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 STANDARDS
In fiscal 1998, SYSCO adopted SFAS No. 130, "Reporting Comprehensive
Income." The adoption of this standard did not have an effect on SYSCO's
reported net earnings as SYSCO has no components of other comprehensive income
under the statement.
In fiscal 1999, SYSCO adopted SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." This statement does not change the
measurement or recognition of those plans, but revises the disclosure
requirements for pensions and other postretirement plans.
In fiscal 2000, SYSCO adopted the AICPA issued Statement of Position (SOP)
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." The SOP provides guidance with respect to accounting for the
various types of costs incurred for computer software developed or obtained for
SYSCO's use. The adoption of this SOP did not have a significant effect on
SYSCO's consolidated results of operations or financial position.
In June 1998, June 1999 and June 2000, the Financial Accounting Standards
Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of SFAS No. 133," and SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities -- an
22
25
amendment of SFAS No. 133." These statements outline the accounting treatment
for all derivative activity. SYSCO is required to and will adopt SFAS No. 133 in
the first quarter of fiscal 2001 and does not expect adoption to have a
significant effect on its 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.
ADDITIONAL FINANCIAL INFORMATION
INCOME TAXES
The income tax provisions consist of the following:
2000 1999 1998
------------ ------------ ------------
Federal income taxes....................... $250,309,000 $200,537,000 $178,226,000
State, local and other income taxes........ 33,670,000 31,079,000 29,446,000
------------ ------------ ------------
Total............................ $283,979,000 $231,616,000 $207,672,000
============ ============ ============
Included in the income taxes charged to earnings are net deferred tax
benefits of $25,528,000 in 2000, and deferred tax provisions of $5,656,000 in
1999 and deferred tax benefits of $15,077,000 in 1998. The deferred tax benefit
or deferred tax provision results from the effects of net changes during the
year in deferred tax assets and liabilities arising from temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Significant components of SYSCO's deferred tax assets and liabilities are
as follows:
JULY 1, 2000 JULY 3, 1999
------------ ------------
Deferred tax liabilities:
Excess tax depreciation and basis differences of
assets.............................................. $219,786,000 $203,524,000
Computer systems development project................... 9,838,000 10,991,000
Inventory.............................................. 7,961,000 12,858,000
Other.................................................. 8,225,000 16,756,000
------------ ------------
Total deferred tax liabilities................. 245,810,000 244,129,000
------------ ------------
Deferred tax assets:
Accrued pension expenses............................... 20,008,000 24,179,000
Accrued medical and casualty insurance expenses........ 16,387,000 6,647,000
Other.................................................. 35,646,000 12,527,000
------------ ------------
Total deferred tax assets...................... 72,041,000 43,353,000
------------ ------------
Net deferred tax liabilities............................. $173,769,000 $200,776,000
============ ============
The company has enjoyed taxable earnings during each year of its thirty-one
year existence and knows of no reason such profitability should not continue.
Consequently, SYSCO believes that it is more likely than not that the entire
benefit of existing temporary differences will be realized and therefore no
valuation allowance has been established for deferred~tax assets.
23
26
Reconciliations of the statutory Federal income tax rate to the effective
income tax rates are as follows:
2000 1999 1998
---- ---- ----
Statutory Federal income tax rate........................... 35.0% 35.0% 35.0%
State and local income taxes, net of Federal income tax
benefit................................................... 3.0 3.8 3.8
Other....................................................... 0.5 0.2 0.2
---- ---- ----
38.5% 39.0% 39.0%
==== ==== ====
ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
The allowance for doubtful accounts receivable was $27,628,000 as of July
1, 2000, $21,095,000 as of July 3, 1999 and $20,081,000 as of June 27, 1998.
Customer accounts written off, net of recoveries, were $24,881,000 or 0.13% of
sales, $25,914,000 or 0.15% of sales and $21,218,000 or 0.14% of sales for
fiscal years 2000, 1999 and 1998, respectively.
SHAREHOLDERS' EQUITY
On February 11, 1998, the Board of Directors declared a 2-for-1 stock split
effected by a 100% stock dividend paid on March 20, 1998 to shareholders of
record on February 27, 1998. All share and per share data in these financial
statements have been restated to reflect the stock split.
In fiscal 1998, SYSCO adopted the provisions of SFAS No. 128, "Earnings Per
Share," which replaced primary and fully-diluted earnings per share with a
presentation of basic and diluted earnings per share. Basic earnings per share
have been computed by dividing net earnings by 329,582,474 in 2000, 332,913,546
in 1999 and 340,380,477 in 1998, which represents the weighted average number of
shares of common stock outstanding during those respective years. Diluted
earnings per share have been computed by dividing net earnings by 334,777,928 in
2000, 336,796,669 in 1999 and 343,440,181 in 1998, which represents the weighted
average number of shares of common stock outstanding during those respective
years adjusted for the diluted effect of stock options outstanding under the
treasury stock method.
In May 1986, the Board of Directors adopted a Warrant Dividend Plan
designed to protect against those unsolicited attempts to acquire control of
SYSCO that the Board believes are not in the best interest of the shareholders.
In May 1996, the Board of Directors adopted an amended and restated plan which,
among other things, extends the expiration of the plan through May 2006, and
amended it again in May 1999. As amended, the plan provides for a dividend
distribution of one-half of one Preferred Stock Purchase Right (Right) for each
outstanding share of SYSCO common stock. Each Right may be exercised to purchase
one two-thousandth of a share of Series A Junior Participating Preferred Stock
at an exercise price of $175, subject to adjustment. The Rights will not be
exercisable until a party either acquires 10% of the company's common stock or
makes a tender offer for 10% or more of its common stock. In the event of a
merger or other business combination transaction, each Right effectively
entitles the holder to purchase $350 worth of stock of the surviving company for
a purchase price of $175.
The Rights expire on May 21, 2006, and may be redeemed before expiration by
the company at a price of $0.01 per Right until a party acquires 10% of the
company's common stock or thereafter under certain circumstances. As a result of
the Rights distribution, 450,000 of the 1,500,000 authorized preferred shares
have been reserved for issuance as Series A Junior Participating Preferred
Stock.
24
27
PLANT AND EQUIPMENT
A summary of plant and equipment, including the related accumulated
depreciation, appears below:
ESTIMATED
JULY 1, 2000 JULY 3, 1999 USEFUL LIVES
--------------- --------------- ------------
Plant and equipment, at cost
Land................................. $ 110,546,000 $ 93,107,000
Buildings and improvements........... 1,050,417,000 957,389,000 10-40 years
Equipment............................ 1,398,555,000 1,266,548,000 3-20 years
--------------- ---------------
2,559,518,000 2,317,044,000
Accumulated depreciation............... (1,214,825,000) (1,089,375,000)
--------------- ---------------
Net plant and equipment................ $ 1,344,693,000 $ 1,227,669,000
=============== ===============
DEBT
SYSCO has uncommitted bank lines of credit, which provide for unsecured
borrowings for working capital of up to $246,481,000 of which $31,109,000 and
$13,377,000 were outstanding at July 1, 2000 and July 3, 1999, respectively.
SYSCO's long-term debt consists of the following:
JULY 1, 2000 JULY 3, 1999
-------------- --------------
Commercial paper, interest averaging 6.9% in 2000 and
5.2% in 1999........................................ $ 247,870,000 $ 213,792,000
Senior notes, interest at 6.5%, maturing in 2005...... 149,553,000 149,463,000
Senior notes, interest at 7.0%, maturing in 2006...... 200,000,000 200,000,000
Senior notes, interest at 7.25%, maturing in 2007..... 99,735,000 99,696,000
Debentures, interest at 7.16%, maturing in 2027....... 50,000,000 50,000,000
Debentures, interest at 6.50%, maturing in 2029....... 224,336,000 224,313,000
Industrial Revenue Bonds, mortgages and other debt,
interest averaging 5.8% in 2000 and 5.9% in 1999,
maturing at various dates to 2026................... 72,106,000 80,940,000
-------------- --------------
Total long-term debt.................................. 1,043,600,000 1,018,204,000
Less current maturities............................... (19,958,000) (20,487,000)
-------------- --------------
Net long-term debt.................................... $1,023,642,000 $ 997,717,000
============== ==============
The principal payments required to be made on long-term debt during the
next five years are shown below:
FISCAL YEAR AMOUNT
- ----------- ------------
2001.................................................. $ 19,958,000
2002.................................................. 17,861,000
2003.................................................. 7,306,000
2004.................................................. 257,525,000
2005.................................................. 149,809,000
SYSCO has a $300,000,000 revolving loan agreement maturing in fiscal 2004
which currently supports the company's commercial paper program. The commercial
paper borrowings at July 1, 2000 were $247,870,000.
In June 1995, SYSCO issued 6.5% senior notes totaling $150,000,000 due June
12, 2005, under a $500,000,000 shelf registration filed with the Securities and
Exchange Commission. These notes, which were priced at 99.4% of par, are
unsecured, not redeemable prior to maturity and are not subject to any sinking
fund requirement. In May 1996, SYSCO issued 7.0% senior notes totaling
$200,000,000 due May 1, 2006, under
25
28
this shelf registration. These notes, which were priced at par, are unsecured,
not redeemable prior to maturity and are not subject to any sinking fund
requirement. On April 22, 1997, in two separate offerings, SYSCO drew down the
remaining $150,000,000 of the $500,000,000 shelf registration. SYSCO issued
7.16% debentures totaling $50,000,000 due April 15, 2027. These debentures were
priced at par, are unsecured, are not subject to any sinking fund requirement
and are redeemable at the option of the holder on April 15, 2007, but otherwise
are not redeemable prior to maturity. At that time SYSCO also issued 7.25%
senior notes totaling $100,000,000 due April 15, 2007. These notes were priced
at 99.611% of par and are unsecured, not redeemable prior to maturity and not
subject to any sinking fund requirement.
On June 3, 1998 SYSCO filed with the Securities and Exchange Commission a
$500,000,000 shelf registration of debt securities. On July 22, 1998 SYSCO
issued 6.5% debentures totaling $225,000,000 under the shelf registration, due
on August 1, 2028. These debentures were priced at 99.685% of par, are
unsecured, are not subject to any sinking fund requirement and include a
redemption provision which allows SYSCO the right to retire the debentures at
any time prior to maturity at the greater of par plus accrued interest or an
amount designed to ensure that the debenture holders are not penalized by the
early redemption. Proceeds from the debentures were used to pay down outstanding
commercial paper.
The Industrial Revenue Bonds have varying structures. Final maturities
range from one to twenty-six years and certain of the bonds provide SYSCO the
right to redeem (call) at various dates. These call provisions generally provide
the bondholder a premium in the early call years, declining to par value as the
bonds approach maturity.
Net long-term debt at July 1, 2000 was $1,023,642,000, of which 75% is at
fixed rates averaging 6.73% with an average life of fourteen years, while the
remainder is financed at floating rates averaging 6.77%. Certain loan agreements
contain typical debt covenants to protect noteholders including provisions to
maintain tangible net worth in excess of a specified level. SYSCO is in
compliance with all debt covenants at July 1, 2000.
The fair value of SYSCO's total long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered to the company for debt of the same remaining maturities. The fair value
of total long-term debt approximated $986,966,000 at July 1, 2000 and
$994,275,000 at July 3, 1999.
As part of normal business activities, SYSCO issues letters of credit
through major banking institutions as required by certain vendor and insurance
agreements. As of July 1, 2000 and July 3, 1999, letters of credit outstanding
were $37,319,000 and $21,460,000, respectively. As of July 1, 2000 SYSCO has not
entered into any significant derivative or other off-balance-sheet financing
arrangements.
LEASES
Although SYSCO normally purchases assets, it has obligations under capital
and operating leases for certain distribution facilities, vehicles and
computers. Total rental expense under operating leases was $44,015,000,
$36,904,000 and $31,324,000 in fiscal 2000, 1999 and 1998, respectively.
Contingent rentals, subleases and assets and obligations under capital leases
are not significant.
Aggregate minimum lease payments under existing non-capitalized long-term
leases are as follows:
FISCAL YEAR AMOUNT
- ----------- -----------
2001................................................... $29,934,000
2002................................................... 24,123,000
2003................................................... 18,750,000
2004................................................... 15,056,000
2005................................................... 12,000,000
Later years............................................ 19,997,000
26
29
STOCK COMPENSATION PLANS
Employee Incentive Stock Option Plan
The Employee Incentive Stock Option Plan adopted in fiscal 1982 provided
for the issuance of options to purchase SYSCO common stock to officers and key
personnel of the company and its subsidiaries at the market price at date of
grant, as adjusted for stock splits. No further grants will be made under this
plan which expired in November 1991 and was replaced by the 1991 Stock Option
Plan.
The following summary presents information with regard to incentive options
under this plan:
OPTIONS EXERCISABLE OPTIONS OUTSTANDING
--------------------------- ------------------------
MAXIMUM WEIGHTED SHARES WEIGHTED
SHARES AVERAGE PRICE UNDER AVERAGE PRICE
EXERCISABLE PER SHARE OPTION PER SHARE
----------- ------------- -------- -------------
Balance at June 28, 1997....................... 822,518 $ 9.70 822,518 $ 9.70
Exercised.................................... (303,251) 9.65
--------
Balance at June 27, 1998....................... 519,267 9.72 519,267 9.72
Exercised.................................... (161,739) 9.22
--------
Balance at July 3, 1999........................ 357,528 9.94 357,528 9.94
Exercised.................................... (160,739) 9.78
--------
Balance at July 1, 2000........................ 196,789 $10.08 196,789 $10.08
========
The options outstanding at July 1, 2000 under this plan have exercise
prices ranging from $7.66 to $11.13 and have a weighted average remaining
contractual life of less than one year.
1991 Stock Option Plan
The 1991 Stock Option Plan was adopted in fiscal 1992 and originally
reserved 6,000,000 shares of SYSCO common stock for options to directors,
officers and key personnel of the company and its subsidiaries at the market
price at date of grant. This plan provides for the issuance of options which are
qualified as incentive stock options under the Internal Revenue Code of 1986,
options which are not so qualified and stock appreciation rights. During fiscal
1996, the shareholders approved an amendment to the plan for an additional
16,000,000 shares to be made available for future grants of options. To date,
the company has issued stock options but no stock appreciation rights under this
plan:
The following summary presents information with regard to incentive options
under the 1991 plan:
OPTIONS EXERCISABLE OPTIONS OUTSTANDING
--------------------------- --------------------------
MAXIMUM WEIGHTED SHARES WEIGHTED
SHARES AVERAGE PRICE UNDER AVERAGE PRICE
EXERCISABLE PER SHARE OPTION PER SHARE
----------- ------------- ---------- -------------
Balance at June 28, 1997............. 3,446,628 $13.53 7,765,260 $14.35
Granted............................ 1,901,416 17.50
Cancelled.......................... (315,422) 14.97
Exercised.......................... (841,462) 13.50
----------
Balance at June 27, 1998............. 4,886,528 13.98 8,509,792 15.11
Granted............................ 1,550,605 21.88
Cancelled.......................... (307,879) 15.89
Exercised.......................... (982,769) 14.11
----------
Balance at July 3, 1999.............. 5,341,504 14.66 8,769,749 16.39
Granted............................ 2,475,392 32.66
Cancelled.......................... (473,344) 17.55
Exercised.......................... (1,156,063) 14.71
----------
Balance at July 1, 2000.............. 5,661,846 $15.80 9,615,734 $20.72
==========
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30
The options outstanding at July 1, 2000 under this plan have exercise
prices ranging from $12.63 to $40.06 and have a weighted average remaining
contractual life of 6.8 years.
Non-Employee Directors Stock Option Plan
The Non-Employee Directors Stock Option Plan adopted in fiscal 1996 permits
the issuance of up to 400,000 shares of common stock to directors who are not
employees of SYSCO. Under this plan options to purchase 4,000 shares of common
stock at the fair market value on the date of the grant are granted to each
non-employee director annually, provided certain earnings goals are met. As of
July 1, 2000, options for 136,000 shares had been granted to nine non-employee
directors under this plan, of which options for 128,000 shares are available for
exercise. No further grants will be made under this plan, which was replaced by
the Non-Employee Directors Stock Plan.
Non-Employee Directors Stock Plan
The Non-Employee Directors Stock Option Plan adopted in fiscal 1999 permits
the issuance of up to 400,000 shares of common stock to directors who are not
employees of SYSCO. Under this plan non-employee directors will receive a one
time retainer stock award of 2,000 shares when first elected as a non-employee
director and an annual automatic grant of options to purchase 4,000 shares of
common stock provided certain earnings goals are met. As of July 1, 2000,
options for 80,000 shares had been granted to ten non-employee directors under
this plan, of which 39,990 shares are available for exercise.
Employees' Stock Purchase Plan
SYSCO has an Employees' Stock Purchase Plan which permits employees (other
than directors) to invest by means of periodic payroll deductions in SYSCO
common stock at 85% of the closing price on the last business day of each
calendar quarter. During fiscal 2000, 910,376 shares of SYSCO common stock were
purchased by the participants as compared to 945,711 purchased in fiscal 1999
and 825,129 purchased in fiscal 1998. The total number of shares which may be
sold pursuant to the plan may not exceed 34,000,000 shares, of which 7,463,826
remained available at July 1, 2000.
Accounting Issues Relating to all Plans
SYSCO accounts for these plans under APB Opinion No. 25 and related
interpretations under which no compensation cost has been recognized. Had
compensation cost for these plans been determined using the fair value method of
SFAS No. 123, SYSCO's pro forma net earnings and diluted earnings per share
would have been $437,773,000 and $1.31 in fiscal 2000, $357,148,000 and $1.06 in
fiscal 1999 and $292,824,000 and $0.86 in fiscal 1998. The disclosure
requirements of SFAS No. 123 are applicable to options granted after 1995. The
pro forma effects for fiscal 2000, 1999 and 1998 are not necessarily indicative
of the pro forma effects in future years.
The weighted average fair value of options granted was $12.27 and $7.05
during fiscal 2000 and 1999, respectively. The fair value was estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions used for grants in fiscal 2000 and 1999,
respectively; dividend yield of 1.20% and 1.65%; expected volatility of 23% in
both years; risk-free interest rates of 6.1% and 5.1%; and expected lives of 8
years.
The weighted average fair value of employee stock purchase rights issued
was $5.24 and $3.86 during fiscal 2000 and 1999, respectively. The fair value of
the stock purchase rights was calculated as the difference between the stock
price at date of issuance and the employee purchase price.
28
31
EMPLOYEE BENEFIT PLANS
SYSCO has defined benefit and defined contribution retirement plans for its
employees. Also, the company contributes to various multi-employer plans under
collective bargaining agreements.
The defined contribution 401(k) plan provides that under certain
circumstances the company may make matching contributions of up to 50% of the
first 6% of a participant's compensation. SYSCO's contribution to this plan was
$15,899,000 in 2000, $5,813,000 in 1999 and $5,660,000 in 1998. The defined
benefit pension plan pays benefits to employees at retirement using formulas
based on a participant's years of service and compensation.
SYSCO also has a Management Incentive Plan that compensates key management
personnel for specific performance achievements. The awards under this plan were
$40,977,000 in 2000, $27,197,000 in 1999 and $20,478,000 in 1998 and were paid
in both cash and stock. In addition to receiving benefits upon retirement under
the company's defined benefit plan, participants in the Management Incentive
Plan will receive benefits under a Supplemental Executive Retirement Plan
(SERP). This plan is a nonqualified, unfunded defined benefit supplementary
retirement plan. In order to meet its obligations under this plan, SYSCO
maintains life insurance policies on the lives of the participants with carrying
values of $76,480,000 at July 1, 2000 and $55,975,000 at July 3, 1999. SYSCO is
the sole owner and beneficiary of such policies.
In addition to providing pension benefits, SYSCO provides certain health
care benefits to eligible retirees and their dependents in the United States.
The funded status of the defined benefit plan is as follows:
PENSION BENEFITS OTHER POSTRETIREMENT PLANS
--------------------------- ---------------------------
JULY 1, 2000 JULY 3, 1999 JULY 1, 2000 JULY 3, 1999
------------ ------------ ------------ ------------
Change in benefit obligation:
Benefit obligation at beginning of
year................................. $393,119,000 $354,646,000 $ 2,072,000 $ 1,781,000
Service cost........................... 35,451,000 31,058,000 145,000 125,000
Interest cost.......................... 29,109,000 27,138,000 150,000 135,000
Amendments............................. 13,568,000 197,000 1,486,000 --
Actuarial (gain) loss.................. (22,883,000) (8,749,000) (152,000) 18,000
Actual expenses........................ (3,041,000) (2,418,000) -- --
Settlements............................ (2,830,000) -- -- --
Total disbursements.................... (9,170,000) (8,753,000) (86,000) 13,000
------------ ------------ ----------- -----------
Benefit obligation at end of year...... 433,323,000 393,119,000 3,615,000 2,072,000
------------ ------------ ----------- -----------
Change in plan assets:
Fair value of plan assets at beginning
of year.............................. 330,441,000 287,482,000 -- --
Actual return on plan assets........... 32,838,000 38,871,000 -- --
Employer contribution.................. 40,563,000 15,259,000 86,000 (13,000)
Actual expenses........................ (3,041,000) (2,418,000) -- --
Total disbursements.................... (9,170,000) (8,753,000) (86,000) 13,000
------------ ------------ ----------- -----------
Fair value of plan assets at end of
year................................. 391,631,000 330,441,000 -- --
------------ ------------ ----------- -----------
Funded status.......................... (41,692,000) (62,678,000) (3,615,000) (2,072,000)
Unrecognized net actuarial (gain)
loss................................. (12,042,000) 10,866,000 (3,346,000) (3,388,000)
Unrecognized net (asset) obligation due
to initial application of SFAS 87.... (1,967,000) (2,813,000) 1,994,000 2,147,000
Unrecognized prior service cost........ 12,581,000 (1,612,000) 2,003,000 589,000
------------ ------------ ----------- -----------
Accrued benefit cost................... $(43,120,000) $(56,237,000) $(2,964,000) $(2,724,000)
============ ============ =========== ===========
29
32
The assumptions used to value obligations at year end were:
PENSION BENEFITS OTHER POSTRETIREMENT PLANS
--------------------------- ---------------------------
JULY 1, 2000 JULY 3, 1999 JULY 1, 2000 JULY 3, 1999
------------ ------------ ------------ ------------
Weighted-average assumptions as of year end:
Discount rate.................................. 8.00% 7.50% 8.00% 7.50%
Expected rate of return........................ 10.50% 10.50% -- --
Rate of compensation increase.................. 4.50% 4.50% -- --
A health care cost trend rate is not used in the calculations because SYSCO
subsidizes the cost of postretirement medical coverage by a fixed dollar amount
with the retiree responsible for the cost of coverage in excess of the subsidy,
including all future cost increases.
The components of net pension and other postretirement benefit costs are as
follows:
PENSION BENEFITS OTHER POSTRETIREMENT PLANS
--------------------------- ---------------------------
JULY 1, 2000 JULY 3, 1999 JULY 1, 2000 JULY 3, 1999
------------ ------------ ------------ ------------
Components of net periodic benefit cost:
Service cost.............................. $ 35,451,000 $ 31,058,000 $ 145,000 $ 125,000
Interest cost............................. 29,109,000 27,138,000 150,000 135,000
Expected return on plan assets............ (34,168,000) (29,723,000) -- --
Amortization of prior service cost........ (625,000) (640,000) 72,000 72,000
Recognized net actuarial loss (gain)...... 628,000 652,000 (194,000) (216,000)
Amortization of net transition
obligation.............................. (847,000) (847,000) 153,000 153,000
------------ ------------ --------- ---------
Net pension costs......................... $ 29,548,000 $ 27,638,000 $ 326,000 $ 269,000
============ ============ ========= =========
Multi-employer pension costs were $23,540,000 and $22,375,000 in 2000 and
1999, respectively.
The projected benefit obligation and accumulated benefit obligation for the
defined benefit pension plan were $365,934,000 and $319,067,000, respectively,
as of July 1, 2000 and $340,398,000 and $294,366,000, respectively, as of July
3, 1999. The projected benefit obligation and accumulated benefit obligation for
the SERP were $67,389,000 and $50,232,000, respectively, as of July 1, 2000 and
$52,721,000 and $38,860,000, respectively, as of July 3, 1999.
CONTINGENCIES
SYSCO is engaged in various legal proceedings which have arisen but have
not been fully adjudicated. These proceedings, in the opinion of management,
will not have a material adverse effect upon the consolidated financial position
or results of operations of the company when ultimately concluded.
30
33
QUARTERLY RESULTS (UNAUDITED)
Financial information for each quarter in the years ended July 1, 2000 and
July 3, 1999:
QUARTER ENDED
-------------------------------------------------
OCTOBER 2 JANUARY 1 APRIL 1 JULY 1 FISCAL YEAR
---------- ---------- ---------- ---------- -----------
(IN THOUSANDS EXCEPT FOR SHARE DATA)
2000
Sales......................................... $4,657,034 $4,651,535 $4,722,935 $5,271,764 $19,303,268
Cost of sales................................. 3,793,200 3,771,998 3,829,148 4,255,205 15,649,551
Operating expenses............................ 674,244 695,418 709,499 764,594 2,843,755
Interest expense.............................. 17,944 16,680 18,354 17,854 70,832
Other, net.................................... (189) 1,754 88 (131) 1,522
---------- ---------- ---------- ---------- -----------
Earnings before income taxes.................. 171,835 165,685 165,846 234,242 737,608
Income taxes.................................. 66,156 63,789 63,851 90,183 283,979
---------- ---------- ---------- ---------- -----------
Earnings before accounting change............. 105,679 101,896 101,995 144,059 453,629
Accounting change............................. (8,041) -- -- -- (8,041)
---------- ---------- ---------- ---------- -----------
Net earnings.................................. $ 97,638 $ 101,896 $ 101,995 $ 144,059 $ 445,588
========== ========== ========== ========== ===========
Per share:
Diluted net earnings before accounting
change.................................... $ 0.32 $ 0.31 $ 0.31 $ 0.43 $ 1.36
Diluted earnings accounting change effect... (0.02) -- -- -- (0.02)
Diluted net earnings........................ 0.29 0.31 0.31 0.43 1.33
Cash dividends.............................. 0.10 0.10 0.12 0.12 0.44
Market price -- high/low.................... 36-30 41-32 41-26 43-34 43-26
QUARTER ENDED
----------------------------------------------------
JULY 3 FISCAL YEAR
SEPTEMBER 26 DECEMBER 26 MARCH 27 (14 WEEKS) (53 WEEKS)
------------ ----------- ---------- ---------- -----------
(IN THOUSANDS EXCEPT FOR SHARE DATA)
1999
Sales...................................... $4,192,630 $4,246,675 $4,164,877 $4,818,633 $17,422,815
Cost of sales.............................. 3,426,045 3,469,496 3,402,463 3,909,856 14,207,860
Operating expenses......................... 607,812 616,899 625,111 697,444 2,547,266
Interest expense........................... 16,931 18,397 18,414 19,097 72,839
Other, net................................. 170 245 (93) 641 963
---------- ---------- ---------- ---------- -----------
Earnings before income taxes............... 141,672 141,638 118,982 191,595 593,887
Income taxes............................... 55,252 55,239 46,403 74,722 231,616
---------- ---------- ---------- ---------- -----------
Net earnings............................... $ 86,420 $ 86,399 $ 72,579 $ 116,873 $ 362,271
========== ========== ========== ========== ===========
Per share:
Diluted net earnings..................... $ 0.26 $ 0.26 $ 0.22 $ 0.35 $ 1.08
Cash dividends........................... 0.09 0.09 0.10 0.10 0.38
Market price -- high/low................. 26-20 29-23 30-25 32-25 32-20
PERCENTAGE INCREASES -- 2000 VS. 1999:
Sales...................................... 11% 10% 13% 9% 11%
Earnings before income taxes............... 21 17 39 22 24
Earnings before accounting change.......... 22 18 41 23 25
Net earnings............................... 13 18 41 23 23
Diluted earnings per share before
accounting change........................ 23 19 41 23 26
Diluted net earnings per share............. 12 19 41 23 23
31
34
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
Except as otherwise indicated, the information required by Items 10, 11, 12
and 13 is included in the company's definitive proxy statement which was filed
pursuant to Regulation 14A under the Securities Exchange Act of 1934 on
September 25, 2000 and such portions of said proxy statement are hereby
incorporated by reference thereto.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning Executive Officers is included in Part I (Item 4A)
of this Form 10-K (page 6).
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed, or incorporated by reference, as
part of this Form 10-K:
1. All financial statements. See index to Consolidated Financial
Statements on page 14 of this Form 10-K.
2. Financial Statement Schedule. See page 14 of this Form 10-K.
3. 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 of Sysco Corporation 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 in 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).
32
35
4(e) -- First Supplemental Indenture, dated June 27, 1995,
between Sysco Corporation and First Union 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 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)+ -- Amended and Restated Sysco Corporation Executive Deferred
Compensation Plan, incorporated by reference to Exhibit
10(a) to Form 10-K for the year ended July 1, 1995 (File
No. 1-6544).
10(b)+ -- Fifth Amended and Restated Sysco Corporation Supplemental
Executive Retirement Plan, incorporated by reference to
Exhibit 10(b) to Form 10-K for the year ended June 28,
1997 (File No. 1-6544).
10(c)+ -- Sysco Corporation Employee Incentive Stock Option Plan,
incorporated by reference to Exhibit 10(c) to Form 10-K
for the year ended July 3, 1999 (File No. 1-6544).
10(d)+ -- Sysco Corporation 1995 Management Incentive Plan,
incorporated by reference to Exhibit 10(e) to Form 10-K
for the year ended July 1, 1995 (File No. 1-6544).
10(e)+ -- Sysco Corporation 1991 Stock Option Plan, incorporated by
reference to Exhibit 10(e) to Form 10-K for the year
ended July 3, 1999 (File No. 1-6544).
10(f)+ -- Amendments to Sysco Corporation 1991 Stock Option Plan
dated effective September 4, 1997, incorporated by
reference to Exhibit 10(f) to Form 10-K for the year
ended June 28, 1997 (File No. 1-6554).
10(g)+ -- Amendments to Sysco Corporation 1991 Stock Option Plan
dated effective November 5, 1998, incorporated by
reference to Exhibit 10(g) to Form 10-K for the year
ended July 3, 1999 (File No. 1-6544).
10(h)+ -- Sysco Corporation Amended and Restated Non-Employee
Directors Stock Option Plan, incorporated by reference to
Exhibit 10(g) to Form 10-K for the year ended June 28,
1997 (File No. 1-6544).
10(i)+ -- Amendment to the Amended and Restated Non-Employee
Directors Stock Option Plan dated effective November 5,
1998, incorporated by reference to Exhibit 10(i) to Form
10-K for the year ended July 3, 1999 (File No. 1-6544).
10(j)+ -- Sysco Corporation Non-Employee Directors Stock Plan,
incorporated by reference to Appendix A of the 1998 Proxy
Statement (File No. 1-06544).
33
36
10(k) -- Amended and Restated Shareholder Rights Agreement,
incorporated by reference to Registration Statement on
Form 8-A/A, filed May 29, 1996 (File No. 1-06544).
10(l) -- Amendment to the Amended and Restated Shareholder Rights
Agreement dated as of May 20, 1996, incorporated by
reference to Exhibit 1 to Registration Statement on Form
8-A/A, filed July 16, 1999 (File No. 1-06544).
10(m)+ -- Sysco Corporation Split Dollar Life Insurance Plan,
incorporated by reference to Exhibit 10(m) to Form 10-Q
for the quarter ended January 1, 2000 (File No. 1-6544).
10(n)+ -- Executive Compensation Adjustment Agreement -- Bill M.
Lindig, incorporated by reference to Exhibit 10(n) to
Form 10-Q for the quarter ended January 1, 2000 (File No.
1-6544).
10(o)+ -- Executive Compensation Adjustment Agreement -- Charles H.
Cotros, incorporated by reference to Exhibit 10(o) to
Form 10-Q for the quarter ended January 1, 2000 (File No.
1-6544).
10(p)+ -- First Amendment to Fifth Amended and Restated Sysco
Corporation Supplemental Executive Retirement Plan dated
effective June 29, 1997, incorporated by reference to
Exhibit 10(p) to Form 10-Q for the quarter ended January
1, 2000 (File No. 1-6544).
10(q)+ -- First Amendment to Amended and Restated Sysco Corporation
Executive Deferred Compensation Plan dated effective June
29, 1997, incorporated by reference to Exhibit 10(q) to
Form 10-Q for the quarter ended January 1, 2000 (File No.
1-6544).
10(r)+ -- First Amendment to Sysco Corporation 1995 Management
Incentive Plan dated effective June 29, 1997,
incorporated by reference to Exhibit 10(r) to Form 10-Q
for the quarter ended January 1, 2000 (File No. 1-6544).
10(s)+ -- 2000 Management Incentive Plan, incorporated by reference
to Appendix A to Proxy Statement filed September 25, 2000
(File No. 1-6544).
10(t)+ -- 2000 Stock Incentive Plan, incorporated by reference to
Appendix B to Proxy Statement filed on September 25, 2000
(File No. 1-6544).
21# -- Subsidiaries of the Registrant
23# -- Independent Public Accountants' Consent
27# -- Financial Data Schedule
- ---------------
+ Executive Compensation Arrangement pursuant to 601(b)(10)(iii)(A) of
Regulation S-K
# Filed Herewith
(b) The following reports on Form 8-K were filed during the fourth quarter
of fiscal 2000:
1. On April 14, 2000, the company filed a Form 8-K announcing certain
changes in senior management.
2. On May 4, 2000, the company filed a Form 8-K announcing the results
of its third quarter ended April 1, 2000.
34
37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Sysco Corporation has duly caused this Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized, on this 8th
day of September, 2000.
SYSCO CORPORATION
By: /s/ CHARLES H. COTROS
----------------------------------
Charles H. Cotros
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated and on the date indicated above.
PRINCIPAL EXECUTIVE, FINANCIAL & ACCOUNTING OFFICERS:
/s/ CHARLES H. COTROS Chairman of the Board and Chief Executive
- ----------------------------------------------------- Officer
Charles H. Cotros
/s/ JOHN K. STUBBLEFIELD, JR. Executive Vice President, Finance and
- ----------------------------------------------------- Administration
John K. Stubblefield, Jr.
35
38
DIRECTORS:
/s/ JOHN W. ANDERSON /s/ RICHARD G. MERRILL
- ----------------------------------------------------- -----------------------------------------------------
John W. Anderson Richard G. Merrill
- ----------------------------------------------------- -----------------------------------------------------
Gordon M. Bethune Frank H. Richardson
/s/ RICHARD J. SCHNIEDERS
- ----------------------------------------------------- -----------------------------------------------------
Colin G. Campbell Richard J. Schnieders
/s/ CHARLES H. COTROS /s/ PHYLLIS S. SEWELL
- ----------------------------------------------------- -----------------------------------------------------
Charles H. Cotros Phyllis S. Sewell
/s/ JUDITH B. CRAVEN /s/ ARTHUR J. SWENKA
- ----------------------------------------------------- -----------------------------------------------------
Judith B. Craven Arthur J. Swenka
/s/ FRANK A. GODCHAUX III /s/ THOMAS B. WALKER, JR.
- ----------------------------------------------------- -----------------------------------------------------
Frank A. Godchaux III Thomas B. Walker, Jr.
/s/ JONATHAN GOLDEN /s/ JOHN F. WOODHOUSE
- ----------------------------------------------------- -----------------------------------------------------
Jonathan Golden John F. Woodhouse
/s/ THOMAS E. LANKFORD
- -----------------------------------------------------
Thomas E. Lankford
36
39
SYSCO CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER ACCOUNTS DEDUCTIONS END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE(1) DESCRIBE(2) PERIOD
------------ ----------- ----------- -------------- ----------- -----------
For year ended
June 27, 1998........ Allowance
for doubtful
accounts $17,240,000 $22,959,000 $1,100,000 $21,218,000 $20,081,000
For year ended
July 3, 1999......... Allowance
for doubtful
accounts $20,081,000 $26,208,000 -- $25,194,000 $21,095,000
For year ended
July 1, 2000......... Allowance
for doubtful
accounts $21,095,000 $27,082,000 $4,332,000 $24,881,000 $27,628,000
- ---------------
(1) Allowance accounts resulting from acquisitions.
(2) Customer accounts written off, net of recoveries.
S-1
40
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
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 of Sysco Corporation 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 in 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).
4(e) -- First Supplemental Indenture, dated June 27, 1995,
between Sysco Corporation and First Union 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 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).
41
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10(a)+ -- Amended and Restated Sysco Corporation Executive Deferred
Compensation Plan, incorporated by reference to Exhibit
10(a) to Form 10-K for the year ended July 1, 1995 (File
No. 1-6544).
10(b)+ -- Fifth Amended and Restated Sysco Corporation Supplemental
Executive Retirement Plan, incorporated by reference to
Exhibit 10(b) to Form 10-K for the year ended June 28,
1997 (File No. 1-6544).
10(c)+ -- Sysco Corporation Employee Incentive Stock Option Plan,
incorporated by reference to Exhibit 10(c) to Form 10-K
for the year ended July 3, 1999 (File No. 1-6544).
10(d)+ -- Sysco Corporation 1995 Management Incentive Plan,
incorporated by reference to Exhibit 10(e) to Form 10-K
for the year ended July 1, 1995 (File No. 1-6544).
10(e)+ -- Sysco Corporation 1991 Stock Option Plan, incorporated by
reference to Exhibit 10(e) to Form 10-K for the year
ended July 3, 1999 (File No. 1-6544).
10(f)+ -- Amendments to Sysco Corporation 1991 Stock Option Plan
dated effective September 4, 1997, incorporated by
reference to Exhibit 10(f) to Form 10-K for the year
ended June 28, 1997 (File No. 1-6554).
10(g)+ -- Amendments to Sysco Corporation 1991 Stock Option Plan
dated effective November 5, 1998, incorporated by
reference to Exhibit 10(g) to Form 10-K for the year
ended July 3, 1999 (File No. 1-6544).
10(h)+ -- Sysco Corporation Amended and Restated Non-Employee
Directors Stock Option Plan, incorporated by reference to
Exhibit 10(g) to Form 10-K for the year ended June 28,
1997 (File No. 1-6544).
10(i)+ -- Amendment to the Amended and Restated Non-Employee
Directors Stock Option Plan dated effective November 5,
1998, incorporated by reference to Exhibit 10(i) to Form
10-K for the year ended July 3, 1999 (File No. 1-6544).
10(j)+ -- Sysco Corporation Non-Employee Directors Stock Plan,
incorporated by reference to Appendix A of the 1998 Proxy
Statement (File No. 1-06544).
10(k) -- Amended and Restated Shareholder Rights Agreement,
incorporated by reference to Registration Statement on
Form 8-A/A, filed May 29, 1996 (File No. 1-06544).
10(l) -- Amendment to the Amended and Restated Shareholder Rights
Agreement dated as of May 20, 1996, incorporated by
reference to Exhibit 1 to Registration Statement on Form
8-A/A, filed July 16, 1999 (File No. 1-06544).
10(m)+ -- Sysco Corporation Split Dollar Life Insurance Plan,
incorporated by reference to Exhibit 10(m) to Form 10-Q
for the quarter ended January 1, 2000 (File No. 1-6544).
10(n)+ -- Executive Compensation Adjustment Agreement -- Bill M.
Lindig, incorporated by reference to Exhibit 10(n) to
Form 10-Q for the quarter ended January 1, 2000 (File No.
1-6544).
10(o)+ -- Executive Compensation Adjustment Agreement -- Charles H.
Cotros, incorporated by reference to Exhibit 10(o) to
Form 10-Q for the quarter ended January 1, 2000 (File No.
1-6544).
10(p)+ -- First Amendment to Fifth Amended and Restated Sysco
Corporation Supplemental Executive Retirement Plan dated
effective June 29, 1997, incorporated by reference to
Exhibit 10(p) to Form 10-Q for the quarter ended January
1, 2000 (File No. 1-6544).
10(q)+ -- First Amendment to Amended and Restated Sysco Corporation
Executive Deferred Compensation Plan dated effective June
29, 1997, incorporated by reference to Exhibit 10(q) to
Form 10-Q for the quarter ended January 1, 2000 (File No.
1-6544).
42
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
10(r)+ -- First Amendment to Sysco Corporation 1995 Management
Incentive Plan dated effective June 29, 1997,
incorporated by reference to Exhibit 10(r) to Form 10-Q
for the quarter ended January 1, 2000 (File No. 1-6544).
10(s)+ -- 2000 Management Incentive Plan, incorporated by reference
to Appendix A to Proxy Statement filed September 25, 2000
(File No. 1-6544).
10(t)+ -- 2000 Stock Incentive Plan, incorporated by reference to
Appendix B to Proxy Statement filed on September 25, 2000
(File No. 1-6544).
21# -- Subsidiaries of the Registrant
23# -- Independent Public Accountants' Consent
27# -- Financial Data Schedule
- ---------------
+ Executive Compensation Arrangement pursuant to 601(b)(10)(iii)(A) of
Regulation S-K
# Filed Herewith