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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 JUNE 28, 1997
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)
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 report), 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
$6,082,000,000 at September 12, 1997 (based on the closing sales price on the
New York Stock Exchange Composite Tape on September 12, 1997, as reported by
The Wall Street Journal (Southwest Edition)). At September 12, 1997, the
registrant had issued and outstanding an aggregate of 171,323,308 shares of its
common stock.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the proxy statement to be filed not later than 120 days after June
28, 1997 are incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS
Sysco Corporation (together with its subsidiaries and divisions hereinafter
referred to as "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. The foodservice industry consists of
two major customer segments -- "traditional" and "chain restaurant".
Traditional 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 foodservice and chain restaurant
customers are supported by similar physical facilities, vehicles, materials
handling equipment and techniques, and administrative and operating staffs.
CUSTOMERS AND PRODUCTS
The traditional 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 9,900 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 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 June 28, 1997. Approximately 5% of
traditional foodservice sales during fiscal 1997 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. No chain
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restaurant customer accounted for as much as 3% of SYSCO's sales for its fiscal
year ended June 28, 1997, and 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 1997 1996 1995
---------------- ------ ------ -----
Restaurants 61% 61% 60%
Hospitals and nursing homes 11 11 12
Schools and colleges 7 7 7
Hotels and motels 6 6 6
Other 15 15 15
---- ---- ----
Totals 100% 100% 100%
==== ==== ====
SOURCES OF SUPPLY
SYSCO estimates that it purchases from thousands of independent sources, none
of which accounts 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.
ACQUISITIONS AND DIVESTITURES
Since its formation as a Delaware corporation in 1969 and commencement of
operations in March 1970, SYSCO has grown both through internal expansion of
existing operations and acquisitions of formerly independent companies. The
shareholders of nine companies exchanged their stock for SYSCO common stock at
the formation of the Company, and through the end of fiscal 1997, fifty-two
companies have been acquired, as follows:
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Date
Company Acquired
------- --------
The Grant Grocer Company June 1970
The Albany Frosted Foods, Inc. and Affiliated Companies September 1970
Arrow Food Distributors, Inc. January 1971
Koon Food Sales, Inc. March 1971
Rome Foods Company October 1971
Saunders Food Distributors, Inc. October 1971
Hallsmith Company, Inc. April 1972
The Miesel Company June 1972
Robert Orr & Company July 1972
Jay Rodgers Co. July 1972
Hardin's, Inc. August 1972
Baraboo Food Products, Inc. May 1973
E. R. Cochran Company December 1973
The Fialkow Company December 1973
Sterling-Keeleys Incorporated December 1973
Harrisonburg Fruit & Produce Co. April 1974
Alabama Complete Foods, Inc. July 1974
Swan Food Sales, Inc. October 1974
Tri-State General Food Supply Co., Inc. December 1974
Marietta Institutional Wholesalers, Inc. June 1975
Monticello Provision Company August 1975
Oregon Film Service, Inc. and Affiliated Companies September 1975
Mid-Central Fish & Frozen Foods, Inc. December 1975
Glen-Webb & Co. December 1978
Select-Union Foods, Inc. April 1979
S.E. Lankford, Jr. Produce, Inc. September 1981
General Management Corporation and Subsidiaries January 1982
Frosted Foods, Inc. January 1982
Pegler & Company October 1983
Bell Distributing Company December 1983
DiPaolo Food Distributors, Inc. June 1985
B. A. Railton Company September 1985
CML Company, Inc. September 1985
New York Tea Company September 1985
Operating divisions of PYA/Monarch, Inc. and
PYA/Monarch of Texas, Inc. (Wholly-owned
subsidiaries of Sara Lee Corporation)
Amarillo, Texas September 1985
Austin, Texas September 1985
Beaumont, Texas September 1985
Trammell, Temple & Staff, Inc. January 1986
Deaktor Brothers Provision Co. March 1986
Bangor Wholesale Foods, Inc. June 1986
General Foodservice Supply, Inc. December 1986
Vogel's June 1987
Major-Hosking's, Inc. July 1987
Foodservice distribution - related businesses of
Staley Continental, Inc. (CFS Continental) August 1988
Olewine's, Inc. December 1988
Oklahoma City-based foodservice distribution
businesses of Scrivner, Inc. April 1990
New York and Pennsylvania-based foodservice
distribution businesses of Scrivner, Inc. April 1991
Benjamin Polakoff & Son, Inc. May 1992
Perloff Brothers, Inc. (Tartan Foods) December 1992
St. Louis Division of Clark Foodservice, Inc. February 1993
Ritter Food Corporation August 1993
Strano Foodservice July 1996
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CORPORATE HEADQUARTERS' SERVICES AND CONTROLS
SYSCO's corporate staff, consisting of approximately 720 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. Also provided are 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(R) 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.
CAPITAL IMPROVEMENTS
To maximize productivity and customer service, the Company continues to
construct and modernize its distribution facilities. During fiscal 1997, 1996
and 1995, approximately $211,000,000, $236,000,000, and $202,000,000,
respectively, were invested in facility expansions, fleet additions and other
capital asset enhancements. The Company estimates its capital expenditures in
fiscal 1998 should be in the range of $220,000,000 to $240,000,000. During the
three years ended June 28, 1997, capital expenditures have been financed
primarily by internally generated funds, the Company's commercial paper program
and bank borrowings.
EMPLOYEES
As of June 28, 1997, the Company had approximately 32,000 employees, 21% of
whom are 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 10% of the Company's union employees expire during fiscal 1998.
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 has less than 10% of
the foodservice industry market in the United States and Canada, SYSCO
believes, based upon industry trade data, that its sales to the
"food-prepared-away-from-home" industry are the largest of any foodservice
distributor. 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.
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DEBT ISSUANCE
On April 22, 1997, in two separate offerings, SYSCO drew down the remaining
$150,000,000 of the $500,000,000 shelf registration filed with the Securities
and Exchange Commission in June 1995. 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. 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.
In May 1996, the Company issued 7.0% senior notes totaling $200,000,000 due May
1, 2006. These notes, which were priced at par, are unsecured, not redeemable
prior to maturity and are not subject to any sinking fund requirement.
GENERAL
Except for the SYSCO (R) trademark, the Company does not own or have the right
to use any patents, trademarks, licenses, franchises or concessions, the loss
of which would have a materially adverse effect on the operations or earnings
of the Company.
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 will continue company-wide through the next several
years and such installations are expected to provide the basis for business
expansion over this period without having a material adverse effect on the
business or operations of the Company. The costs of this project will be
amortized over future earnings as completed portions of the project are put
into use.
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. The Company anticipates that
compliance with these laws will not have a material effect on the capital
expenditures, earnings or competitive position of SYSCO and its subsidiaries.
Sales of the Company do not generally fluctuate on a seasonal basis, and
therefore, the business of the Company is not deemed to be seasonal.
The Company operates 96 facilities within the United States and three in
Canada.
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ITEM 2. PROPERTIES
The table below shows the number of distribution facilities and self-serve
centers occupied by the Company in each state or province and the aggregate
cubic footage devoted to cold and dry storage.
Number of Cold Storage Dry Storage
Facilities (Thousands (Thousands
Location and Centers Cubic Feet) Cubic Feet)
-------- ----------- ------------ -----------
Alabama 1 65 324
Alaska 1 331 965
Arizona 1 1,485 3,410
Arkansas 1 1,200 1,145
California 10 8,021 16,155
Colorado 5 2,759 5,476
Connecticut 1 2,489 2,737
Florida 4 8,245 9,355
Georgia 2 3,264 7,017
Idaho 1 998 1,154
Illinois 2 2,824 3,500
Indiana 1 1,404 1,832
Iowa 1 687 1,215
Kansas 1 1,975 2,592
Kentucky 1 2,330 2,648
Louisiana 1 2,575 1,875
Maine 1 429 1,008
Maryland 4 6,308 6,746
Massachusetts 3 4,130 3,696
Michigan 3 4,976 8,107
Minnesota 1 2,085 2,370
Mississippi 2 2,155 2,790
Missouri 1 1,128 1,348
Montana 1 2,043 1,830
Nebraska 1 2,092 2,618
New Jersey 2 1,659 4,145
New Mexico 2 1,856 2,024
New York 8 5,504 9,125
North Carolina 1 1,929 2,421
Ohio 4 6,152 10,778
Oklahoma 3 1,145 2,519
Oregon 2 3,431 3,455
Pennsylvania 4 4,359 6,010
South Dakota 1 5 100
Tennessee 4 6,305 7,351
Texas 8 11,179 17,573
Utah 1 1,810 1,845
Virginia 1 1,186 1,672
Washington 2 2,609 2,812
Wisconsin 2 4,083 3,782
British Columbia, Canada 2 1,426 1,855
Ontario, Canada 1 1,073 1,030
--- -------- --------
Total 99 121,709 170,410
=== ======== ========
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The Company owns approximately 256,000,000 cubic feet of its distribution
facilities and self-serve centers (or 87.6% of the total cubic feet), and the
remainder is occupied under leases expiring at various dates from fiscal 1998
to 2010, 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 $59,271,000 at June 28, 1997. Such mortgage
indebtedness and industrial revenue bond financing arrangements mature at
various dates to 2026.
Facilities in Nashville, Tennessee and Jacksonville, Florida (which in the
aggregate account for approximately 4% of total sales) are operating near
capacity and the Company is currently constructing expansions for these
distribution facilities. The Company is planning to complete construction of
full service distribution facilities near West Palm Beach, Florida and San
Diego, California during fiscal 1998.
The Company's fleet of approximately 5,380 delivery vehicles consists 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 89% 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 balance sheets or
results of operations of the Company when ultimately concluded.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the executive officers of the Company, each of whom holds the
office opposite his name below until the meeting of the Board of Directors
immediately preceding the next Annual Meeting of Stockholders or until his
successor has been elected or qualified. Executive officers who are also
directors serve as directors until the expiration of their terms which, with
respect to each individual, occurs at the Annual Meeting of Stockholders in the
calendar year specified in parentheses below or until their successors have
been elected and qualified.
SERVED IN THIS
NAME OF OFFICER CAPACITY POSITION SINCE AGE
- ------------------------------------------------------------------------------------------------------------
John F. Baugh Senior Chairman of the Board of 1985 81
Directors (1997)
John F. Woodhouse Chairman of the Board 1985 66
of Directors (1998)
Bill M. Lindig President and Chief 1985, 1995 60
Executive Officer and & 1983
Director (1999)
Charles H. Cotros Executive Vice President and 1988, 1995 60
Chief Operating Officer and & 1985
Director (1997)
O. Wayne Duncan Senior Vice President, 1995 59
Operations
George L. Holm Senior Vice President, 1996 41
Operations
Thomas E. Lankford Senior Vice President, 1995 49
Operations
Gregory K. Marshall Senior Vice President 1993 50
Richard J. Schnieders Senior Vice President, 1992 & 49
Merchandising/Multi-Unit Sales 1997
and Director (1997)
John K. Stubblefield, Jr. Senior Vice President and 1993 & 51
Chief Financial Officer 1994
Arthur J. Swenka Senior Vice President, 1995 60
Operations and Director (1997)
James D. Wickus Senior Vice President, 1995 54
Operations
Diane Day Sanders Vice President and Treasurer 1994 48
Each of the executive officers listed above has been employed by the Company,
or a subsidiary or division of the Company, in an executive capacity throughout
the past five years.
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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
---------------------- ---------
High Low Paid
------- ------- ---------
Fiscal 1996
First Quarter $31-3/8 $26-7/8 $.11
Second Quarter 32-5/8 26-3/4 .11
Third Quarter 34-7/8 29-1/2 .13
Fourth Quarter 35-1/4 30-3/4 .13
Fiscal 1997
First Quarter $34-1/2 $27-1/8 $.13
Second Quarter 35-1/2 31-5/8 .13
Third Quarter 35-5/8 29-1/4 .15
Fourth Quarter 38-1/4 33 .15
The approximate number of record owners of SYSCO's Common Stock as of June 28,
1997 was 17,890.
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ITEM 6.
SELECTED FINANCIAL DATA
- ----------------------------------------------------------------------------------------------------------------------------
Fiscal Year Ended
- ----------------------------------------------------------------------------------------------------------------------------
1993
(In thousands except for share data) 1997 1996 1995 1994 (53 Weeks)
- ----------------------------------------------------------------------------------------------------------------------------
Sales $ 14,454,589 $ 13,395,130 $ 12,118,047 $ 10,942,499 $ 10,021,513
Earnings before income taxes 495,955 453,943 417,618 367,582 331,977
Income taxes 193,422 177,038 165,794 150,830 130,170
------------------------------------------------------------------------------------
Net earnings 302,533 276,905 251,824 216,752 201,807
====================================================================================
Earnings per share 1.71 1.52 1.38 1.18 1.08
====================================================================================
Cash dividends per share .56 .48 .40 .32 .26
Total assets 3,436,611 3,325,405 3,097,161 2,811,729 2,530,043
Capital expenditures 210,868 235,891 201,577 161,485 127,879
Long-term debt 685,620 581,734 541,556 538,711 494,062
Shareholders' equity 1,400,472 1,474,678 1,403,603 1,240,909 1,137,216
------------------------------------------------------------------------------------
Total capitalization 2,086,092 2,056,412 1,945,159 1,779,620 1,631,278
====================================================================================
Ratio of long-term debt
to capitalization 32.9% 28.3% 27.8% 30.3% 30.3%
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ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
SYSCO provides marketing and distribution services to foodservice customers and
suppliers throughout the contiguous United States, Alaska 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. Cash generated from operations also is applied toward
a portion of the cost of shares repurchased in the buyback program, while the
remainder of the cost is 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, while maintaining long-term debt to total capital within its
intended target range of 30% to 40%. This ratio was 33% and 28% at June 28,
1997 and June 29, 1996, respectively.
The February 1996 repurchase program authorized a 6,000,000 share buyback of
SYSCO's common stock during calendar 1996. Additionally, in November 1996, the
Board authorized an additional 6,000,000 share buyback to be completed in
calendar 1997 and in July 1997 authorized an additional 6,000,000 share buyback
to be completed in fiscal 1998. The number of shares acquired and their cost
for the past three years was 9,016,400 shares for $305,301,000 in fiscal 1997,
7,314,100 shares for $232,070,000 in fiscal 1996 and 2,100,000 shares for
$53,166,000 in fiscal 1995.
Net cash generated from operating activities was $498,108,000 in 1997,
$350,434,000 in 1996 and $336,903,000 in 1995. Expenditures for facilities,
fleet and other equipment were $210,868,000 in 1997, $235,891,000 in 1996 and
$201,577,000 in 1995. Expenditures in fiscal 1998 should be in the range of
$220,000,000 to $240,000,000.
In April, 1997, in two separate offerings, SYSCO drew down the remaining
$150,000,000 of the $500,000,000 shelf registration filed with the Securities
and Exchange Commission in June 1995. 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. Also issued were 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. In May 1996, SYSCO issued 7.0% senior notes totaling $200,000,000
due May 1, 2006. These notes, which were priced at par, are unsecured, not
redeemable prior to maturity and are not subject to any sinking fund
requirement.
The net cash provided by operations less cash utilized for capital
expenditures, the stock repurchase program, cash dividends and other uses
resulted in long-term debt of $685,620,000 at June 28, 1997. About 94% of the
long-term debt is at fixed rates averaging 7.28% and the remainder is at
floating rates averaging 5.25%. Long-term debt to capitalization was 33% at
June 28, 1997, up 5% from the 28% at June 29, 1996 and July 1, 1995. SYSCO
continues to have borrowing capacity available and alternative financing
arrangements are evaluated as appropriate.
SYSCO has a commercial paper program which is currently supported by a
$300,000,000 bank credit facility. During fiscal 1997, 1996 and 1995,
commercial paper and short-term bank borrowings ranged from approximately
$23,376,000 to $263,782,000, from approximately $69,200,000 to $355,000,000,
and from approximately $146,200,000 to $425,100,000, respectively.
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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.
SALES
The annual increases in sales of 8% in fiscal 1997 and 11% in fiscal 1996
resulted from several factors. Sales in fiscal 1997 and 1996 were affected by
the relatively modest growth in the U.S. economy, as well as in the foodservice
industry. After adjusting for food price increases, real sales growth was about
5% in 1997 and 8% in 1996. The cost of SYSCO's foodservice products is estimated
to have averaged an increase of about 2.3% from the beginning to the end of
fiscal 1997 compared to an increase of approximately 2.9% in fiscal 1996.
Industry sources estimate the total foodservice market experienced real growth
of approximately 2% in calendar 1996 and 1995.
Sales for fiscal 1995 through 1997 were as follows:
- -------------------------------------------------------------------------------------------------------------------------
Year Sales % Increase
- -------------------------------------------------------------------------------------------------------------------------
1997 $ 14,454,589,000 8%
1996 13,395,130,000 11
1995 12,118,047,000 11
A comparison of the sales mix in the principal product categories during
the last three years is presented below:
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
-----------------------------------------
Medical supplies 1% 1% 1%
Dairy products 9 9 8
Fresh and frozen meats 15 15 15
Seafoods 5 5 6
Poultry 10 10 9
Frozen fruits, vegetables, bakery and other 15 14 15
Canned and dry products 23 24 25
Paper and disposables 8 8 7
Janitorial products 2 2 2
Equipment and smallwares 3 3 3
Fresh produce 6 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:
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
-----------------------------------------
Restaurants 61% 61% 60%
Hospitals and nursing homes 11 11 12
Schools and colleges 7 7 7
Hotels and motels 6 6 6
All other 15 15 15
--------------------------------------
100% 100% 100%
======================================
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COST OF SALES
Cost of sales increased about 8% in 1997 and 11% in 1996. 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.
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 14.4% for fiscal 1997 and 14.3% for fiscal 1996 and 1995. Changes
in the percentage relationship of operating expenses to sales result from an
interplay of several economic influences. Inflationary increases in operating
costs generally have been offset through improved productivity.
INTEREST EXPENSE
Interest expense increased $5,483,000 or approximately 13% in fiscal 1997
as compared to an increase of $2,440,000 or approximately 6% in fiscal 1996.
The increases in fiscal 1997 and 1996 were due primarily to increased
borrowings. Interest capitalized during the past three years was $2,215,000 in
1997, $2,783,000 in 1996 and $2,833,000 in 1995.
OTHER INCOME, NET
Other income decreased $842,000 or about 84% in fiscal 1997 and decreased
$1,219,000 or about 55% in fiscal 1996. Changes between the years result from
fluctuations in miscellaneous activities, primarily gains and losses on the
sale of surplus facilities.
EARNINGS BEFORE INCOME TAXES
Earnings before income taxes rose $42,012,000, or approximately 9%, above
fiscal 1996 which had increased $36,325,000, or approximately 9%, over the
prior year. Additional sales and realization of operating efficiencies
contributed to the increases.
PROVISION FOR INCOME TAXES
The effective tax rate for 1997 and 1996 was approximately 39%, compared to 40%
in 1995.
NET EARNINGS
Fiscal 1997 represents the twenty-first consecutive year of increased earnings
for SYSCO. Net earnings for the year rose $25,628,000 or approximately 9% above
fiscal 1996, which had increased $25,081,000 or approximately 10% over the
prior year.
DIVIDENDS
The quarterly dividend rate of fifteen cents per share was established in
November 1996 when it was increased from the thirteen cents per share set in
November 1995.
RETURN ON SHAREHOLDERS' EQUITY
The return on average shareholders' equity for 1997 was approximately 21%
compared to 19% in 1996 and 1995. Since inception SYSCO has averaged in excess
of a 16% return on shareholders' equity.
FORWARD LOOKING STATEMENTS
Statements made herein regarding management's estimates, including those with
respect to allocation of capital, potential "fold-outs" and acquisitions,
consistency and predictability of earnings growth, improvement in pretax
margins, and continuation of the share repurchase program are forward-looking
statements under the Private Securities Litigation Reform Act of 1995. They are
based on current expectations and actual results may differ materially. Capital
expenditures for "fold-outs" and acquisitions could vary depending upon
construction schedules and the timing of other purchases, such as fleet and
equipment. Acquisitions may depend upon the availability and suitability of
potential candidates and management's allocation of capital. Consistency and
predictability of earnings growth and pretax margin improvement could be
affected by industry growth and share repurchases could be affected by market
prices of the company's stock as well as management's decision to utilize its
capital for other purposes.
13
15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SYSCO CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 28, 1997
Financial Statements:
Page
Report of Management on Internal Accounting Controls....................................... 15
Report of Independent Public Accountants................................................... 17
Consolidated Financial Statements:
Consolidated Balance Sheets.......................................................... 18
Consolidated Results of Operations................................................... 19
Consolidated Shareholders' Equity.................................................... 20
Consolidated Cash Flows.............................................................. 21
Summary of Accounting Policies....................................................... 22
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.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
14
16
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.
15
17
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/ BILL M. LINDIG /s/ JOHN K. STUBBLEFIELD, JR.
- -------------------------------------- -----------------------------------
Bill M. Lindig John K. Stubblefield, Jr.
President and Chief Executive Officer Senior Vice President and
Chief Financial Officer
16
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 June 28, 1997 and
June 29, 1996, and the related statements of consolidated results of
operations, shareholders' equity and cash flows for each of the three years in
the period ended June 28, 1997. 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 generally accepted auditing
standards. 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 June 28, 1997 and June 29, 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended June 28, 1997, in conformity with generally accepted accounting
principles.
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
July 30, 1997
17
19
CONSOLIDATED BALANCE SHEETS
- ---------------------------------------------------------------------------------------------------------------------------
(In thousands except for share data) JUNE 28, 1997 June 29, 1996
- ---------------------------------------------------------------------------------------------------------------------------
Assets
Current assets
Cash $ 117,696 $ 107,759
Accounts and notes receivable, less allowances of $17,240 and $16,380 1,065,002 1,039,759
Inventories 733,782 723,937
Deferred taxes 26,508 32,429
Prepaid expenses 21,429 18,443
-----------------------------
Total current assets 1,964,417 1,922,327
Plant and equipment at cost, less depreciation 1,058,432 990,642
Other assets
Goodwill and intangibles, less amortization 247,423 250,473
Other 166,339 161,963
-----------------------------
Total other assets 413,762 412,436
-----------------------------
Total assets $ 3,436,611 $ 3,325,405
=============================
Liabilities and shareholders' equity
Current liabilities
Notes payable $ 14,267 $ 9,390
Accounts payable 827,593 779,124
Accrued expenses 240,928 212,746
Income taxes 17,741 23,330
Current maturities of long-term debt 13,285 12,934
-----------------------------
Total current liabilities 1,113,814 1,037,524
Long-term debt 685,620 581,734
Deferred taxes 236,705 231,469
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 500,000,000 shares, issued 191,293,725 shares 191,294 191,294
Paid-in capital 32,258 35,179
Retained earnings 1,771,548 1,568,589
-----------------------------
1,995,100 1,795,062
Less cost of treasury stock, 18,855,458 and 10,880,919 shares 594,628 320,384
-----------------------------
Total shareholders' equity 1,400,472 1,474,678
-----------------------------
Total liabilities and shareholders' equity $ 3,436,611 $ 3,325,405
=============================
See Summary of Accounting Policies and Additional Financial Information.
18
20
CONSOLIDATED RESULTS OF OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended
- ---------------------------------------------------------------------------------------------------------------------------
(In thousands except for share data) JUNE 28, 1997 June 29, 1996 July 1, 1995
- ---------------------------------------------------------------------------------------------------------------------------
Sales $14,454,589 $13,395,130 $12,118,047
Costs and expenses
Cost of sales 11,835,959 10,983,796 9,927,448
Operating expenses 2,076,335 1,917,376 1,736,625
Interest expense 46,502 41,019 38,579
Other income, net (162) (1,004) (2,223)
-------------------------------------------------
Total costs and expenses 13,958,634 12,941,187 11,700,429
-------------------------------------------------
Earnings before income taxes 495,955 453,943 417,618
Income taxes 193,422 177,038 165,794
-------------------------------------------------
Net earnings $ 302,533 $ 276,905 $ 251,824
=================================================
Earnings per share $ 1.71 $ 1.52 $ 1.38
=================================================
See Summary of Accounting Policies and Additional Financial Information.
19
21
CONSOLIDATED SHAREHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------------------
Common Stock Treasury Stock
------------------------ Paid-in Retained ------------------------
(In thousands except for share data) Shares Amount Capital Earnings Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------
BALANCE AT JULY 2, 1994 191,293,725 $191,294 $60,003 $1,200,735 8,224,505 $211,123
Net earnings
for year ended July 1, 1995 251,824
Cash dividends paid,
$.40 per share (73,154)
Treasury stock purchases 2,100,000 53,166
Stock issued upon conversion of
Liquid Yield Option Notes (1,812) (592,700) (15,170)
Stock options exercised (6,297) (437,654) (11,196)
Employees' Stock Purchase Plan (2,635) (623,071) (15,944)
Management Incentive Plan (585) (241,877) (6,209)
------------------------------------------------------------------------------
BALANCE AT JULY 1, 1995 191,293,725 $191,294 $48,674 $1,379,405 8,429,203 $215,770
Net earnings
for year ended June 29, 1996 276,905
Cash dividends paid,
$.48 per share (87,721)
Treasury stock purchases 7,314,100 232,070
Stock issued upon conversion of
Liquid Yield Option Notes (11,190) (3,816,525) (99,776)
Stock options exercised (2,642) (271,406) (7,123)
Employees' Stock Purchase Plan (610) (531,569) (14,339)
Management Incentive Plan 947 (242,884) (6,218)
------------------------------------------------------------------------------
BALANCE AT JUNE 29, 1996 191,293,725 $191,294 $35,179 $1,568,589 10,880,919 $320,384
Net earnings
for year ended June 28, 1997 302,533
Cash dividends paid,
$.56 per share (99,574)
Treasury stock purchases 9,016,400 305,301
Stock options exercised (3,069) (334,139) (9,838)
Employees' Stock Purchase Plan (789) (512,603) (15,474)
Management Incentive Plan 937 (195,119) (5,745)
------------------------------------------------------------------------------
BALANCE AT JUNE 28, 1997 191,293,725 $191,294 $32,258 $1,771,548 18,855,458 $594,628
==============================================================================
See Summary of Accounting Policies and Additional Financial Information.
20
22
CONSOLIDATED CASH FLOWS
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended
- ---------------------------------------------------------------------------------------------------------------------------
(In thousands) JUNE 28, 1997 June 29, 1996 July 1, 1995
- ---------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 302,533 $ 276,905 $ 251,824
Add non-cash items:
Depreciation and amortization 160,292 144,709 130,796
Interest on Liquid Yield Option Notes -- 2,274 6,013
Deferred tax provision 11,081 16,079 35,504
Provision for losses on receivables 21,588 16,427 15,988
Additional investment in certain assets and liabilities, net of effect of
businesses acquired and sold:
(Increase) in receivables (40,247) (123,653) (92,073)
(Increase) in inventories (6,883) (56,076) (65,867)
(Increase) decrease in prepaid expenses (2,534) 242 (2,305)
Increase in accounts payable 43,145 70,744 76,007
Increase in accrued expenses 27,512 6,615 30,088
(Decrease) increase in income taxes (5,589) 12,955 (18,793)
(Increase) in other assets (12,790) (16,787) (30,279)
--------------------------------------------
Net cash provided by operating activities 498,108 350,434 336,903
--------------------------------------------
Cash flows from investing activities:
Additions to plant and equipment (210,868) (235,891) (201,577)
Proceeds from sales of plant and equipment 2,842 11,024 5,088
Acquisition of business, net of cash acquired (5,330) -- --
--------------------------------------------
Net cash used for investing activities (213,356) (224,867) (196,489)
--------------------------------------------
Cash flows from financing activities:
Bank and commercial paper borrowings 92,039 146,775 15,747
Other debt borrowings (repayments) 9,885 (4,053) (6,522)
Common stock reissued from treasury 28,136 25,375 23,832
Treasury stock purchases (305,301) (232,070) (53,166)
Dividends paid (99,574) (87,721) (73,154)
--------------------------------------------
Net cash used for financing activities (274,815) (151,694) (93,263)
--------------------------------------------
Net increase (decrease) in cash 9,937 (26,127) 47,151
Cash at beginning of year 107,759 133,886 86,735
--------------------------------------------
Cash at end of year $ 117,696 $ 107,759 $ 133,886
============================================
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest $ 44,575 $ 38,527 $ 38,487
Income taxes 186,153 141,302 145,596
See Summary of Accounting Policies and Additional Financial Information.
21
23
SUMMARY OF ACCOUNTING POLICIES
BUSINESS AND CONSOLIDATION
SYSCO Corporation (SYSCO) is engaged in the marketing and distribution of a
wide range of approximately 200,000 food and related products to the
foodservice or "food-prepared-away-from-home" industry. These services are
performed from 69 distribution facilities for approximately 270,000 customers
located in the 37 states where facilities are situated, 11 adjacent states and
Alaska. The company also has one facility in Vancouver, British Columbia and
one in Peterborough, Ontario, which service customers in those 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 1997 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 $2,215,000 in 1997, $2,783,000 in 1996 and $2,833,000 in 1995.
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 June 28, 1997, June 29, 1996
and July 1, 1995 was $66,521,000, $58,668,000 and $50,935,000, respectively.
COMPUTER SYSTEMS DEVELOPMENT PROJECT
SYSCO has capitalized direct costs incurred in connection with an internal
computer systems development project. The capitalization of these costs began
once it was reasonably certain that the new system would be completed and would
fulfill its intended use. No costs were capitalized in fiscal 1997, while
$2,994,000 and $17,593,000 were capitalized during fiscal 1996 and 1995,
respectively. Amounts capitalized are being amortized as completed portions of
the project are put into use. Accumulated amortization at June 28, 1997, June
29, 1996 and July 1, 1995 was $1,624,000, $753,000 and $232,000, respectively.
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.
22
24
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.
NEW ACCOUNTING STANDARDS
In fiscal 1997, SYSCO adopted SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of." The adoption
of this standard did not have an effect on SYSCO's net earnings or financial
condition in fiscal 1997.
In fiscal 1997, SYSCO adopted SFAS No. 123, "Accounting for Stock-Based
Compensation." SYSCO will continue to apply the existing accounting rules
contained in Accounting Principles Board Opinion (APB) No. 25 "Accounting for
Stock Issued to Employees" and related interpretations. Pro forma disclosures
of the effect on net earnings and earnings per share as if the fair value-based
method prescribed by SFAS No. 123 had been applied in measuring compensation
expense are provided.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share," which is effective for fiscal years ending after
December 15, 1997. SYSCO will adopt SFAS No. 128 in the second quarter of
fiscal 1998. Restatement of all prior periods is required. SYSCO does not
expect that the adoption will have a material effect on the earnings per share
calculation. SYSCO is also required to adopt SFAS No. 130, "Reporting
Comprehensive Income" during its fiscal year ending June 27, 1998. Adoption of
SFAS No. 130 will not have a significant effect on SYSCO's consolidated
financial statements.
ADDITIONAL FINANCIAL INFORMATION
INCOME TAXES
The income tax provisions consist of the following:
- --------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
------------------------------------------------
Federal income taxes $176,754,000 $161,142,000 $144,574,000
State and local income taxes 16,668,000 15,896,000 21,220,000
------------------------------------------------
Total $193,422,000 $177,038,000 $165,794,000
================================================
Included in the income taxes charged to earnings are net deferred tax
provisions of $11,081,000 in 1997, $16,079,000 in 1996 and $35,504,000 in 1995.
The provisions result 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.
23
25
Significant components of the company's deferred tax assets and liabilities
are as follows:
- --------------------------------------------------------------------------------------------------------------------------
JUNE 28, 1997 June 29, 1996
-------------------------------
Deferred tax liabilities:
Excess tax depreciation and basis differences of assets $192,068,000 $191,058,000
Computer systems development project 22,855,000 23,411,000
Other 21,782,000 17,000,000
------------------------------
Total deferred tax liabilities 236,705,000 231,469,000
------------------------------
Deferred tax assets:
Accrued pension expenses 10,221,000 11,109,000
Accrued medical and casualty insurance expenses 5,254,000 7,602,000
Other 11,033,000 13,718,000
------------------------------
Total deferred tax assets 26,508,000 32,429,000
------------------------------
Net deferred tax liabilities $210,197,000 $199,040,000
==============================
The company has enjoyed taxable earnings during each year of its
twenty-eight year existence and knows of no reason such profitability should
not continue. Consequently, the company 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.
Reconciliations of the statutory Federal income tax rate to the effective
income tax rates are as follows:
- --------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
-----------------------------------------
Statutory Federal income tax rate 35% 35% 35%
State and local income taxes, net of Federal income tax benefit 4 4 5
----------------------------------------
39% 39% 40%
========================================
ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
The allowance for doubtful accounts receivable was $17,240,000 as of June 28,
1997, $16,380,000 as of June 29, 1996 and $16,001,000 as of July 1, 1995.
Customer accounts written off, net of recoveries, were $21,183,000 or 0.15% of
sales, $16,048,000 or 0.12% of sales and $15,986,000 or 0.13% of sales for
fiscal years 1997, 1996 and 1995, respectively.
SHAREHOLDERS' EQUITY
Earnings per share have been computed by dividing net earnings by 177,235,085
in 1997, 182,598,897 in 1996 and 182,779,806 in 1995, which represents the
weighted average number of shares of common stock outstanding during those
respective years.
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. As amended,
the Plan provides for a dividend distribution 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
26
PLANT AND EQUIPMENT
A summary of plant and equipment, including the related accumulated
depreciation, appears below:
- --------------------------------------------------------------------------------------------------------------------------
Estimated
June 28, 1997 June 29, 1996 Useful Lives
------------------------------------------------
Plant and equipment, at cost
Land $ 97,384,000 $ 82,247,000
Buildings and improvements 828,591,000 754,733,000 10-40 years
Equipment 1,006,211,000 917,164,000 3-20 years
----------------------------------
1,932,186,000 1,754,144,000
Accumulated depreciation (873,754,000) (763,502,000)
----------------------------------
Net plant and equipment $1,058,432,000 $ 990,642,000
==================================
DEBT
At June 28, 1997 and June 29, 1996 SYSCO had $14,267,000 and $9,390,000,
respectively, of short-term bank borrowings. The level of such borrowings
fluctuates during the year based on working capital requirements.
SYSCO's long-term debt is comprised of the following:
- ---------------------------------------------------------------------------------------------------------------------------
June 28, 1997 June 29, 1996
--------------------------------
Commercial paper, interest averaging 5.6% in 1997
and 5.4% in 1996 $ 18,997,000 $ 75,878,000
Senior notes, interest at 9.95%, maturing in 1999 91,500,000 91,500,000
Senior notes, interest at 6.5%, maturing in 2005 149,283,000 149,193,000
Senior notes, interest at 7.0%, maturing in 2006 200,000,000 200,000,000
Senior notes, interest at 7.25%, maturing in 2007 99,618,000 --
Debentures, interest at 7.16%, maturing in 2027 50,000,000 --
Industrial Revenue Bonds, mortgages and other debt,
interest averaging 6.1% in
1997 and 6.8% in 1996,
maturing at various dates to 2026 89,507,000 78,097,000
--------------------------------
Total long-term debt 698,905,000 594,668,000
Less current maturities (13,285,000) (12,934,000)
--------------------------------
Net long-term debt $ 685,620,000 $ 581,734,000
================================
The principal payments required to be made on long-term debt during the next
five years are shown below:
--------------------------------------------------------------------------------
Year Amount
--------------------------------------------------------------------------------
1998 $ 13,285,000
1999 108,684,000
2000 10,230,000
2001 12,888,000
2002 5,789,000
SYSCO has a $300,000,000 revolving loan agreement maturing in fiscal 2003
which currently supports the company's commercial paper program. The commercial
paper borrowings at June 28, 1997 were $18,997,000.
In June 1995, SYSCO issued 6.5% senior notes totaling $150,000,000 due
June 15, 2005, under a $500,000,000 shelf registration filed with the
Securities and Exchange Commission in June 1995. 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 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
25
27
$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.
The Industrial Revenue Bonds have varying structures. Final maturities range
from one to twenty-nine years and certain of the bonds provide SYSCO the right
to redeem (a 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. Certain bonds have provisions whereby the holder may
require SYSCO to purchase or redeem the bonds (a put) under certain
circumstances. If certain of these bonds are purchased from bondholders, they
can be remarketed at the then prevailing interest rates.
Long-term debt at June 28, 1997 was $685,620,000, of which 94% is at fixed
rates averaging 7.28% with an average life of nine years, while the remainder
is financed at floating rates averaging 5.25%. Certain loan agreements contain
typical covenants to protect noteholders including provisions to maintain
tangible net worth and funded indebtedness at specified levels.
The fair value of SYSCO's 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
long-term debt approximates $701,810,000 at June 28, 1997.
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 June 28, 1997 and June 29, 1996, letters of credit
outstanding were $14,407,000 and $33,164,000, respectively. As of June 28, 1997
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 $33,343,000,
$31,728,000 and $32,105,000 in fiscal 1997, 1996 and 1995, respectively.
Contingent rentals, subleases, assets and obligations under capital leases are
not significant.
Aggregate minimum lease payments under existing non-capitalized long-term
leases are as follows:
--------------------------------------------------------------------------------
Year Amount
--------------------------------------------------------------------------------
1998 $ 14,328,000
1999 11,545,000
2000 7,659,000
2001 5,979,000
2002 4,549,000
Later years 9,989,000
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.
26
28
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 July 2, 1994 1,600,594 $16.49 1,804,747 $17.14
Granted -- --
Cancelled (153,024) 15.30
Exercised (558,506) 14.40
---------
Balance at July 1, 1995 1,093,217 18.80 1,093,217 18.80
Granted -- --
Cancelled (140,393) 16.46
Exercised (271,570) 17.83
---------
Balance at June 29, 1996 681,254 19.67 681,254 19.67
Granted -- --
Cancelled (74,771) 22.15
Exercised (195,224) 19.33
---------
BALANCE AT JUNE 28, 1997 411,259 $19.39 411,259 $19.39
=========
The options outstanding at June 28, 1997 under this plan have exercise
prices ranging from $14.81 to $22.25 and have a weighted average remaining
contractual life of 3.6 years.
1991 Stock Option Plan
The 1991 Stock Option Plan was adopted in fiscal 1992 and originally
reserved 3,000,000 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 8,000,000 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 options issued
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 July 2, 1994 163,305 $25.25 1,114,415 $27.28
Granted 1,004,100 25.50
Cancelled (83,168) 26.83
Exercised (4,901) 25.25
---------
Balance at July 1, 1995 504,915 26.66 2,030,446 26.42
Granted 1,104,450 28.75
Cancelled (77,247) 27.18
Exercised (62,834) 25.88
---------
Balance at June 29, 1996 1,095,345 26.55 2,994,815 27.27
Granted 1,223,900 31.75
Cancelled (118,017) 28.33
Exercised (218,068) 26.65
---------
BALANCE AT JUNE 28, 1997 1,723,314 $27.05 3,882,630 $28.69
=========
27
29
The options outstanding at June 28, 1997 under this plan have exercise
prices ranging from $25.13 to $31.88 and have a weighted average remaining
contractual life of 7 years.
Non-Employee Directors Stock Option Plan
The Non-Employee Directors Stock Option Plan adopted in fiscal 1996 permits the
issuance of up to 200,000 shares of common stock to directors who are not
employees of SYSCO. Under this plan options to purchase 2,000 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
June 28, 1997, options for 56,000 shares had been granted to ten non-employee
directors under this plan, none of which are currently exercisable.
Employees' Stock Purchase Plan
SYSCO has an Employees' Stock Purchase Plan which permits employees (other than
directors) who have been employed for at least one year 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 1997, 511,067 shares
of SYSCO common stock were purchased by the participants as compared to 522,965
purchased in 1996 and 584,526 purchased in 1995. The total number of shares
which may be sold pursuant to the plan may not exceed 17,000,000 shares, of
which 5,072,521 remained available at June 28, 1997.
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-based
method of SFAS No. 123, SYSCO's pro forma net earnings and earnings per share
would have been $298,895,000 and $1.69 in fiscal 1997 and $274,291,000 and
$1.50 in fiscal 1996. The disclosure requirements of SFAS No. 123 are
applicable to options granted after fiscal 1995. The pro forma effects for
fiscal 1997 and 1996 are not necessarily indicative of the pro forma effects in
future years.
The weighted average fair value of options granted was $11.19 and $9.98
during fiscal 1997 and 1996, 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 1997 and 1996,
respectively: dividend yield of 0.88% and 0.86%; expected volatility of 0.24%
and 0.26%; risk-free interest rates of 7% and 6.3%; and expected lives of 8
years.
The weighted average fair value of employee stock purchase rights issued was
$5.05 and $4.55 during fiscal 1997 and 1996, 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.
EMPLOYEE BENEFIT PLANS
SYSCO and each of its subsidiaries have defined benefit and defined
contribution retirement plans for their employees. Also, the company
contributes to various multi-employer plans under collective bargaining
agreements.
The defined benefit pension plans pay benefits to employees at
retirement using formulas based on a participant's years of service and
compensation. 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
$4,975,000 in 1997, $4,629,000 in 1996 and $4,254,000 in 1995.
28
30
The funded status of the defined benefit plans is as follows:
- ------------------------------------------------------------------------------------------------------------------------------
June 28, 1997 June 29, 1996
--------------------------------
Assets available for benefits $ 247,783,000 $ 191,220,000
Projected benefit obligation
Vested (182,005,000) (153,071,000)
Nonvested (12,696,000) (10,755,000)
-------------------------------
Total accumulated benefit obligation (194,701,000) (163,826,000)
Effect of projected future compensation increases (30,203,000) (24,679,000)
-------------------------------
Total actuarial projected benefit obligation (224,904,000) (188,505,000)
-------------------------------
Assets more than projected obligation $ 22,879,000 $ 2,715,000
===============================
Consisting of:
Amounts to be offset against (charged to) future pension costs
Remaining assets in excess of obligation existing at
adoption of SFAS 87 in 1986 $ 6,777,000 $ 7,956,000
Unrecognized actuarial gain (loss) due to differences in
assumptions and actual experience 8,974,000 (1,424,000)
Unrecognized prior service cost 7,199,000 8,136,000
Accrued pension costs (71,000) (11,953,000)
-------------------------------
$ 22,879,000 $ 2,715,000
===============================
The projected unit credit method was used to determine the actuarial present
value of the accumulated benefit obligation and the projected benefit
obligation. The discount rate used was 8% in 1997, 7.75% in 1996 and 8% in 1995
and the rate of increase in future compensation levels used was 5.5% in each
year. The expected long-term rate of return on assets used was 9% in each year.
The plans invest primarily in marketable securities and time deposits.
Net pension costs were as follows:
- --------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
------------------------------------------------
Defined benefit plans
Benefits earned during the year $ 20,599,000 $ 19,885,000 $ 17,622,000
Interest accrued on benefits earned in prior years 16,412,000 13,812,000 11,476,000
Actual return on plan assets (34,477,000) (31,865,000) (19,078,000)
Net amortization and deferral 14,744,000 16,999,000 7,125,000
------------------------------------------------
Net pension costs from defined benefit plans 17,278,000 18,831,000 17,145,000
Defined contribution plans 4,975,000 4,629,000 4,274,000
Multi-employer pension plans 18,427,000 16,560,000 13,550,000
------------------------------------------------
Net pension costs $ 40,680,000 $ 40,020,000 $ 34,969,000
================================================
SYSCO also has a Management Incentive Plan that compensates key management
personnel for specific performance achievements. The awards under this plan
were $17,633,000 in 1997, $15,208,000 in 1996 and $16,545,000 in 1995 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. This plan is a nonqualified, unfunded supplementary retirement plan. In
order to meet its obligations under this
29
31
plan, SYSCO maintains life insurance policies on the lives of the participants
with carrying values of $46,692,000 at June 28, 1997 and $43,354,000 at June
29, 1996. SYSCO is the sole owner and beneficiary of such policies. The
periodic pension costs of this plan were $4,681,000 in 1997 and $3,830,000 in
1996. The actuarially determined accumulated benefit obligation for this plan
included in accrued expenses was $28,923,000 at June 28, 1997 and $23,556,000
at June 29, 1996. After taking into consideration the effect of future
compensation increases, the projected benefit obligation of this plan was
$38,057,000 at June 28, 1997 and $33,472,000 at June 29, 1996.
In addition to providing pension benefits, SYSCO provides certain health
care benefits to eligible retirees and their dependents in the United States.
Net periodic postretirement benefit costs were as follows:
- --------------------------------------------------------------------------------------------------------------------------
1997 1996
----------------------------
Service cost - benefits earned during the period $ 140,000 $ 312,000
Interest cost 177,000 366,000
Amortization of transition obligation 153,000 153,000
Amortization of unrecognized (gain) (193,000) --
Amortization of prior service cost 83,000 83,000
----------------------------
Net periodic postretirement benefit cost $ 360,000 $ 914,000
============================
The components of the postretirement benefit obligation, included in accrued
expenses at June 28, 1997 and June 29, 1996 were:
- --------------------------------------------------------------------------------------------------------------------------
June 28, 1997 June 29, 1996
-------------------------------
Retirees $ 199,000 $ 233,000
Fully eligible active participants 773,000 1,773,000
Other active employees 1,227,000 2,500,000
------------------------------
Accumulated postretirement benefit obligation 2,199,000 4,506,000
Unrecognized net gain and effects of changes in assumptions 3,250,000 969,000
Unrecognized prior service cost (732,000) (929,000)
Unrecognized transition obligation (2,454,000) (2,607,000)
------------------------------
Accrued postretirement benefit liability $ 2,263,000 $ 1,939,000
==============================
The discount rate used to determine the accumulated postretirement benefit
obligation was 8% in 1997 and 7.75% in 1996. 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.
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
32
QUARTERLY RESULTS (UNAUDITED)
Financial information for each quarter in the years ended June 28, 1997 and
June 29, 1996:
- ---------------------------------------------------------------------------------------------------------------------------
1997 Quarter Ended
---------------------------------------------------------------
(In thousands except for share data) September 28 December 28 March 29 June 28 Fiscal Year
- ---------------------------------------------------------------------------------------------------------------------------
Sales $ 3,679,223 $ 3,610,348 $ 3,470,334 $ 3,694,684 $ 14,454,589
Cost of sales 3,028,478 2,954,481 2,844,881 3,008,119 11,835,959
Operating expenses 519,729 518,694 512,563 525,349 2,076,335
Interest expense 10,917 11,888 11,580 12,117 46,502
Other income, net (241) (18) 307 (210) (162)
-----------------------------------------------------------------------------------
Earnings before income taxes 120,340 125,303 101,003 149,309 495,955
Income taxes 46,933 48,868 39,391 58,230 193,422
-----------------------------------------------------------------------------------
Net earnings $ 73,407 $ 76,435 $ 61,612 $ 91,079 $ 302,533
===================================================================================
Per share:
Earnings $ .41 $ .43 $ .35 $ .52 $ 1.71
Cash dividends .13 .13 .15 .15 .56
Market price 35-27 36-32 36-29 38-33 38-27
- ---------------------------------------------------------------------------------------------------------------------------
1996 Quarter Ended
---------------------------------------------------------------
(In thousands except for share data) September 30 December 30 March 30 June 29 Fiscal Year
- ---------------------------------------------------------------------------------------------------------------------------
Sales $ 3,291,910 $ 3,301,585 $ 3,257,110 $ 3,544,525 $ 13,395,130
Cost of sales 2,704,658 2,705,801 2,675,844 2,897,493 10,983,796
Operating expenses 469,847 469,894 479,109 498,526 1,917,376
Interest expense 9,372 10,332 10,271 11,044 41,019
Other income, net (444) (350) (411) 201 (1,004)
-----------------------------------------------------------------------------------
Earnings before income taxes 108,477 115,908 92,297 137,261 453,943
Income taxes 42,306 45,204 35,996 53,532 177,038
-----------------------------------------------------------------------------------
Net earnings $ 66,171 $ 70,704 $ 56,301 $ 83,729 $ 276,905
===================================================================================
Per share:
Earnings $ .36 $ .39 $ .31 $ .46 $ 1.52
Cash dividends .11 .11 .13 .13 .48
Market price 31-27 33-27 35-30 35-31 35-27
- ---------------------------------------------------------------------------------------------------------------------------
Percentage increases--1997 vs. 1996:
Sales 12% 9% 7% 4% 8%
Earnings before income taxes 11 8 9 9 9
Net earnings 11 8 9 9 9
Earnings per share 14 10 13 13 13
31
33
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 will be filed
pursuant to Regulation 14A under the Securities Exchange Act of 1934 no later
than 120 days after the close of the 1997 fiscal year, and said proxy statement
is 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 8).
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
32
34
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.
3(b) Bylaws, as amended, incorporated by reference to
Form 10-K for the year ended July 2, 1994.
3(c) Amended Certificate of Designation, incorporated by
reference to Form 10-K for the year ended June 29,
1996.
4(a) SEVENTH AMENDMENT AND RESTATEMENT OF COMPETITIVE
ADVANCE AND REVOLVING CREDIT FACILITY AGREEMENT
DATED AS OF JUNE 27, 1997.
4(b) SYSCO CORPORATION NOTE AGREEMENT DATED AS OF JUNE 1,
1989.
4(c) Indenture, dated as of October 1, 1989, between
Sysco Corporation and Chemical Bank, Trustee,
incorporated by reference to Registration Statement
on Form S-3 (File No. 33-31227).
4(d) Indenture, dated as of June 15, 1995, between Sysco
Corporation and First Union National Bank of North
Carolina, Trustee, incorporated by reference to
Registration Statement on Form S-3 (File No.
33-60023).
4(e) First Supplemental Indenture, dated as of June 27,
1995, between Sysco Corporation and First Union Bank
of North Carolina, Trustee as amended, incorporated
by reference to Form 10-K for the year ended June
29, 1996.
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 Form 10-K for the year ended June
29, 1996.
33
35
4(g) THIRD SUPPLEMENTED INDENTURE, DATED AS OF APRIL 25,
1997, BETWEEN SYSCO CORPORATION AND FIRST UNION
NATIONAL BANK OF NORTH CAROLINA, TRUSTEE.
4(h) FOURTH SUPPLEMENTAL INDENTURE, DATED AS OF APRIL 25,
1997, BETWEEN SYSCO CORPORATION AND FIRST UNION
NATIONAL BANK OF NORTH CAROLINA, TRUSTEE.
10(a) Amended and Restated Sysco Corporation Executive
Deferred Compensation Plan incorporated by reference
to Form 10-K for the year ended July 1, 1995. *
10(b) FIFTH AMENDED AND RESTATED SYSCO CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. *
10(c) Sysco Corporation Employee Incentive Stock Option
Plan incorporated by reference to the Form S-8 filed
under the Securities Act of 1933, as amended, dated
April 1, 1987, as amended. *
10(d) Sysco Corporation 1995 Management Incentive Plan
incorporated by reference to Form 10-K for the year
ended July 1, 1995. *
10(e) Sysco Corporation 1991 Stock Option Plan
incorporated by reference to Form 10-K for the year
ended June 27, 1992. *
10(f) AMENDMENTS TO SYSCO CORPORATION 1991 STOCK OPTION
PLAN. *
10(g) SYSCO CORPORATION AMENDED AND RESTATED NON-EMPLOYEE
DIRECTORS STOCK OPTION PLAN. *
10(h) Amended and Restated Shareholder Rights Agreement,
incorporated by reference to registration statement
on Form 8-A/A, filed May 29, 1996.
11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
21 SUBSIDIARIES OF THE REGISTRANT
23 INDEPENDENT PUBLIC ACCOUNTANTS' CONSENT
27 FINANCIAL DATA SCHEDULE
- -------------------------
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
None
34
36
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 5th day of
September, 1997.
SYSCO CORPORATION
By /s/ BILL M. LINDIG
-------------------------------------
Bill M. Lindig
President 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/ JOHN F. WOODHOUSE
- ---------------------------------
John F. Woodhouse Chairman of the Board
/s/ JOHN K. STUBBLEFIELD, JR. Senior Vice President and
- --------------------------------- Chief Financial Officer
John K. Stubblefield, Jr.
35
37
DIRECTORS:
/s/ JOHN W. ANDERSON /s/ BILL M. LINDIG
- --------------------------------- -------------------------------
John W. Anderson Bill M. Lindig
/s/ JOHN F. BAUGH /s/ RICHARD G. MERRILL
- --------------------------------- -------------------------------
John F. Baugh Richard G. Merrill
/s/ COLIN G. CAMPBELL /s/ FRANK H. RICHARDSON
- --------------------------------- -------------------------------
Colin G. Campbell Frank H. Richardson
/s/ CHARLES H. COTROS /s/ RICHARD J. SCHNIEDERS
- --------------------------------- -------------------------------
Charles H. Cotros Richard J. Schnieders
/s/ JUDITH B. CRAVEN /s/ PHYLLIS S. SEWELL
- --------------------------------- -------------------------------
Judith B. Craven Phyllis S. Sewell
/s/ FRANK A. GODCHAUX III /s/ ARTHUR J. SWENKA
- --------------------------------- -------------------------------
Frank A. Godchaux III Arthur J. Swenka
/s/ JONATHAN GOLDEN /s/ THOMAS B. WALKER, JR.
- --------------------------------- -------------------------------
Jonathan Golden Thomas B. Walker, Jr.
/s/ DONALD J. KELLER /s/ JOHN F. WOODHOUSE
- --------------------------------- -------------------------------
Donald J. Keller John F. Woodhouse
36
38
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
----------------------------------------------------------------------------------------------------
Allowance
For year ended for doubtful
July 1, 1995............. accounts $15,999,000 $15,988,000 $ -- $15,986,000 $16,001,000
Allowance
For year ended for doubtful
June 29, 1996............ accounts $16,001,000 $16,427,000 $ -- $16,048,000 $16,380,000
Allowance
For year ended for doubtful
June 28, 1997............ accounts $16,380,000 $21,588,000 $455,000 $21,183,000 $17,240,000
(1) Allowance accounts resulting from acquisitions.
(2) Customer accounts written off, net of recoveries.
S-1
39
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 28, 1997 Commission File No. 1-6544
SYSCO CORPORATION
(Exact Name of Registrant as Specified in its Charter)
EXHIBITS
40
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
- ------- ----------------------
3(a) RESTATED CERTIFICATE OF INCORPORATION.
3(b) Bylaws, as amended, incorporated by reference to Form 10-K for the year ended July 2, 1994.
3(c) Amended Certificate of Designation, incorporated by reference to Form 10-K for the year ended June 29, 1996.
4(a) SEVENTH AMENDMENT AND RESTATEMENT OF COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY AGREEMENT DATED AS OF
JUNE 27, 1997.
4(b) SYSCO CORPORATION NOTE AGREEMENT DATED AS OF JUNE 1, 1989.
4(c) Indenture, dated as of October 1, 1989, between Sysco Corporation and Chemical Bank, Trustee, incorporated by
reference to Registration Statement on Form S-3 (File No. 33-31227).
4(d) Indenture, dated as of June 15, 1995, between Sysco Corporation and First Union National Bank of North Carolina,
Trustee, incorporated by reference to Registration Statement on Form S-3 (File No. 33-60023).
4(e) First Supplemental Indenture, dated as of June 27, 1995, between Sysco Corporation and First Union Bank of North
Carolina, Trustee as amended, incorporated by reference to Form 10-K for the year ended June 29, 1996.
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 Form 10-K for the year ended June 29, 1996.
4(g) THIRD SUPPLEMENTED INDENTURE, DATED AS OF APRIL 25, 1997, BETWEEN SYSCO CORPORATION AND FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, TRUSTEE.
41
4(h) FOURTH SUPPLEMENTAL INDENTURE, DATED AS OF APRIL 25, 1997, BETWEEN SYSCO CORPORATION AND FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, TRUSTEE.
10(a) Amended and Restated Sysco Corporation Executive Deferred Compensation Plan incorporated by reference to Form 10-K
for the year ended July 1, 1995.
10(b) FIFTH AMENDED AND RESTATED SYSCO CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. *
10(c) Sysco Corporation Employee Incentive Stock Option Plan incorporated by reference to the Form S-8 filed under the
Securities Act of 1933, as amended, dated April 1, 1987, as amended. *
10(d) Sysco Corporation 1995 Management Incentive Plan incorporated by reference to Form 10-K for the year ended
July 1, 1995. *
10(e) Sysco Corporation 1991 Stock Option Plan incorporated by reference to Form 10-K for the year ended June 27, 1992. *
10(f) AMENDMENTS TO SYSCO CORPORATION 1991 STOCK OPTION PLAN. *
10(g) SYSCO CORPORATION AMENDED AND RESTATED NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN. *
10(h) Amended and Restated Shareholder Right Agreement, incorporated by reference to registration statement on Form 8-A/A,
filed May 29, 1996.
11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
21 SUBSIDIARIES OF THE REGISTRANT
23 INDEPENDENT PUBLIC ACCOUNTANTS' CONSENT
27 FINANCIAL DATA SCHEDULE