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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JULY 3, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-6544
SYSCO CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 74-1648137
(State or other jurisdiction of (IRS employer
incorporation or organization identification number)
1390 ENCLAVE PARKWAY, HOUSTON, TEXAS 77077-2099
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (281) 584-1390
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ----------------
Common Stock, $1.00 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such 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
$10,936,571,000 at September 10, 1999 (based on the closing sales price on the
New York Stock Exchange Composite Tape on September 10, 1999, as reported by The
Wall Street Journal (Southwest Edition)). At September 10, 1999, the registrant
had issued and outstanding an aggregate of 329,726,343 shares of its common
stock.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the proxy statement to be filed not later than 120 days after July
3, 1999 are incorporated by reference into Part III.
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TABLE OF CONTENTS
Page No.
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PART I.
Item 1. Business ............................................................................................ 1
Item 2. Properties .......................................................................................... 6
Item 3. Legal Proceedings ................................................................................... 7
Item 4. Submission of Matters to a Vote of Security Holders ................................................. 7
Item 4A. Executive Officers of the Registrant ................................................................ 8
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters ............................... 9
Item 6. Selected Financial Data ............................................................................. 10
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ............... 11
Item 8. Financial Statements and Supplementary Data ......................................................... 18
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ................ 34
PART III.
Item 10. Directors and Executive Officers of the Registrant .................................................. 34
Item 11. Executive Compensation .............................................................................. 34
Item 12. Security Ownership of Certain Beneficial Owners and Management ...................................... 34
Item 13. Certain Relationships and Related Transactions ...................................................... 34
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ..................................... 35
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PART I
ITEM 1. BUSINESS
OVERVIEW
Sysco Corporation (together with its subsidiaries and divisions collectively
referred to as "SYSCO" or the "company"), founded in 1969, is the largest North
American distributor of food and food related products to the foodservice or
"food-prepared-away-from-home" industry. SYSCO provides its products and
services to approximately 300,000 customers, including restaurants, healthcare
and educational facilities, lodging establishments and other foodservice
customers.
SYSCO, which was formed when the stockholders of nine companies exchanged their
stock for SYSCO common stock, commenced operations in March 1970. Since its
formation, the company has grown from $115 million to over $17 billion in annual
sales both through internal expansion of existing operations and acquisitions of
formerly independent companies. Through the end of fiscal 1999, SYSCO had
acquired fifty-four companies or divisions of companies.
In July 1999, the company bought Newport Meat Co. Inc., a distributor in
southern California of fresh aged beef and other meats, seafood and poultry
products. In August 1999, the company acquired Doughtie's Foods, Inc., a food
distributor located in Virginia and bought substantially all of the assets of
Buckhead Beef company, Inc., a distributor located in Georgia of custom-cut
fresh steak and other meats, seafood and poultry products.
SYSCO is organized under the laws of Delaware. The address and telephone number
of the company's executive office are 1390 Enclave Parkway, Houston, Texas
77077-2099, (281) 584-1390. As of July 3, 1999 SYSCO employed approximately
35,100 full-time employees.
CUSTOMERS AND PRODUCTS
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.
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.
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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 10,600 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 July 3, 1999. Approximately 4.5% of
traditional foodservice sales during fiscal 1999 resulted from a process of
competitive bidding. There are no material long-term contracts with any
traditional foodservice customer that may not be cancelled by either party at
its option.
The company's SYGMA Network operations specialize in customized service to chain
restaurants, which service is also provided to a lesser extent by many of the
company's traditional foodservice operations. SYSCO's sales to the chain
restaurant industry consist of a variety of food products necessitated by the
increasingly broad menus of chain restaurants. The company believes that
consistent product quality and timely and accurate service are important factors
in the selection of a chain restaurant supplier. One chain restaurant customer
(Wendy's International, Inc.) accounted for 5.3% of SYSCO's sales for its fiscal
year ended July 3, 1999. 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 1999 1998 1997
---------------- ------ ------ -----
Restaurants 64% 62% 61%
Hospitals and nursing homes 10 11 11
Schools and colleges 7 7 7
Hotels and motels 5 5 6
Other 14 15 15
--- --- ---
Totals 100% 100% 100%
=== === ===
SOURCES OF SUPPLY
SYSCO estimates that it purchases from thousands of independent sources, none of
which individually account for more than 5% of the company's purchases. These
sources of supply consist generally of large corporations selling brand name and
private label merchandise and independent private label processors and packers.
Generally, purchasing is carried out on a decentralized basis through centrally
developed purchasing programs (see "Corporate Headquarters' Services and
Controls" below) and direct purchasing programs established by the company's
various operating subsidiaries and divisions.
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The company continually develops relationships with suppliers but has no
material long-term purchase commitments with any supplier.
CORPORATE HEADQUARTERS' SERVICES AND CONTROLS
SYSCO's corporate staff, consisting of approximately 800 persons, provides a
number of services to the company's operating divisions and subsidiaries. These
persons possess experience and expertise in, among other areas, accounting and
finance, cash management, data processing, employee benefits, engineering and
insurance. Corporate also provides legal, marketing and tax compliance services
as well as warehousing and distribution services which provide assistance in
space utilization, energy conservation, fleet management and work flow.
The corporate staff also administers a consolidated product procurement program
engaged in the task of developing, obtaining and assuring consistent quality
food and nonfood products. The program covers the purchasing and marketing of
SYSCO(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 1999, 1998
and 1997, approximately $287,000,000, $259,000,000 and $211,000,000,
respectively, were invested in facility expansions, fleet additions and other
capital asset enhancements. The company estimates its capital expenditures in
fiscal 2000 should be in the range of $230,000,000 to $250,000,000. During the
three years ended July 3, 1999, capital expenditures have been financed
primarily by internally generated funds, the company's commercial paper program
and bank borrowings.
EMPLOYEES
As of July 3, 1999, SYSCO had approximately 35,100 full-time employees, 22% 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 33% of the company's union employees expire during fiscal 2000.
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 approximately 10%
of the foodservice industry market in the United State 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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GOVERNMENT REGULATION
As a marketer and distributor of food products, SYSCO is subject to the Federal
Food, Drug and Cosmetic Act and regulations promulgated thereunder by the U.S.
Food and Drug Administration ("FDA"). The FDA regulates manufacturing and
holding requirements for foods through its current good manufacturing practice
regulations, specifies the standards of identity for certain foods and
prescribes the format and content of certain information required to appear on
food product labels. For certain product lines, SYSCO is also subject to the
Federal Meat Inspection Act, the Poultry Products Inspection Act, the Perishable
Agricultural Commodities Act and regulations promulgated thereunder by the U.S.
Department of Agriculture ("USDA"). The USDA imposes standards for product
quality and sanitation including the inspection and labeling of meat and poultry
products and the grading and commercial acceptance of produce shipments from the
company's suppliers. The company and its products are also subject to state and
local regulation through such measures as the licensing of its facilities,
enforcement by state and local health agencies of state and local standards for
the company's products and regulation of the company's trade practices in
connection with the sale of its products. SYSCO's facilities are generally
inspected at least annually by state and/or federal authorities. These
facilities are also subject to inspections and regulations issued pursuant to
the Occupational Safety and Health Act by the Department of Labor, which require
the company to comply with certain manufacturing, health and safety standards to
protect its employees from accidents and to establish hazard communication
programs to transmit information on the hazards of certain chemicals present in
products distributed by the company.
The company is also subject to regulation by numerous federal, state, and local
regulatory agencies, including but not limited to the U.S. Department of Labor,
which sets employment practice standards for workers, and the U.S. Department of
Transportation, which regulates transportation of perishable and hazardous
materials and waste, and similar state and local agencies.
The company's distribution facilities have tanks for the storage of diesel fuel
and other petroleum products which are subject to laws regulating such storage
tanks. Other federal, state and local provisions relating to the protection of
the environment or the discharge of materials do not materially impact the
company's use or operation of its facilities.
Compliance with these laws has not and is not anticipated to have a material
effect on the capital expenditures, earnings or competitive position of SYSCO.
GENERAL
Except for the SYSCO(R) trademark, the loss of which would have a materially
adverse effect on the operations or earnings of the company, the company does
not own or have the right to use any patents, trademarks, licenses, franchises
or concessions.
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 be substantially complete by December 1999 and such
installation is expected to provide the basis for business expansion over the
next several years without having a material adverse effect upon the business or
operations of the company.
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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.
As of September 10, 1999 SYSCO operates 97 facilities within the United States,
of which 76 are distribution facilities, and three in Canada, of which two are
distribution facilities.
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ITEM 2. PROPERTIES
The table below shows the number of distribution facilities and self-serve
centers occupied by SYSCO in each state or province and the aggregate cubic
footage devoted to cold and dry storage as of September 10, 1999.
Number of Cold Storage Dry Storage
Facilities (Thousands (Thousands
Location and Centers Cubic Feet) Cubic Feet)
-------- ----------- ------------ -----------
Alabama 2 1,739 2,616
Alaska 1 246 317
Arizona 1 1,485 3,410
Arkansas 1 1,139 3,157
California 11 11,364 17,082
Colorado 4 2,759 5,176
Connecticut 1 2,489 2,737
Florida 6 13,027 16,469
Georgia 3 4,433 6,717
Idaho 1 998 1,154
Illinois 3 3,603 5,050
Indiana 1 1,590 1,832
Iowa 1 687 1,215
Kansas 1 2,735 3,793
Kentucky 1 2,330 2,648
Louisiana 1 2,577 3,254
Maine 1 1,395 1,954
Maryland 4 6,309 6,836
Massachusetts 2 7,638 7,739
Michigan 3 4,976 8,102
Minnesota 1 3,636 3,063
Mississippi 1 2,125 2,690
Missouri 1 1,128 1,348
Montana 1 2,043 1,830
Nebraska 1 2,092 2,618
New Jersey 3 2,121 4,185
New Mexico 1 1,856 1,855
New York 6 4,760 7,759
North Carolina 2 2,351 4,004
Ohio 4 6,829 11,663
Oklahoma 1 921 1,848
Oregon 2 3,431 3,458
Pennsylvania 4 6,048 7,027
South Dakota 1 3 166
Tennessee 4 6,561 9,963
Texas 6 10,803 15,057
Utah 2 1,810 1,845
Virginia 4 2,758 3,022
Washington 1 2,549 3,240
Wisconsin 2 4,083 3,782
British Columbia, Canada 2 1,426 1,855
Ontario, Canada 1 941 1,030
--- ------- -------
Total 100 143,794 194,566
=== ======= =======
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SYSCO owns approximately 298,000,000 cubic feet of its distribution facilities
and self-serve centers (or 88.2% of the total cubic feet), and the remainder is
occupied under leases expiring at various dates from fiscal 2000 to 2009,
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 $44,369,000 at July 3, 1999. Such mortgage indebtedness
and industrial revenue bond financing arrangements mature at various dates to
2026.
The company owns its approximately 188,000 square foot headquarters office
complex in Houston, Texas and leases approximately 100,000 square feet of
additional office space in Houston, Texas.
Facilities in Salt Lake City, Utah, New Orleans, Louisiana and Portland, Maine
(which in the aggregate account for approximately 4% of fiscal 1999 sales) are
operating near capacity and the company is currently constructing expansions for
these distribution facilities.
As of September 10, 1999 SYSCO's fleet of approximately 6,460 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 91% of these vehicles
and leases the remainder.
ITEM 3. LEGAL PROCEEDINGS
SYSCO is engaged in various legal proceedings which have arisen but have not
been fully adjudicated. These proceedings, in the opinion of management, will
not have a material adverse effect upon the consolidated financial position or
results of operations of the company when ultimately concluded.
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 SYSCO, each of whom holds the office
opposite his or her name below until the meeting of the Board of Directors
immediately preceding the next Annual Meeting of Stockholders or until his or
her successor has been elected or qualified. Executive officers who 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. Woodhouse Senior Chairman of the Board 1999 68
of Directors and Chairman of the
Executive Committee (2001)
Bill M. Lindig Chairman and Chief 1999, 1995 62
Executive Officer and & 1983
Director (1999)
Charles H. Cotros President and Chief Operating 1999, 1995 62
Officer and Director (2000) & 1985
Larry J. Accardi Senior Vice President, Operations 1999 50
Kenneth J. Carrig Senior Vice President, 1999 42
Administration
O. Wayne Duncan Senior Vice President, 1995 61
Operations
George L. Holm Senior Vice President, Operations 1996 43
Thomas E. Lankford Executive Vice President, 1999 51
Merchandising & Multi-Unit Sales
Gregory K. Marshall Senior Vice President 1993 52
Diane Day Sanders Vice President and Treasurer 1994 50
Richard J. Schnieders Executive Vice President, 1999 & 1997 51
Foodservice Operations and Director
(2000)
John K. Stubblefield, Jr. Senior Vice President, 1993 & 1999 53
Finance and Administration
Arthur J. Swenka Senior Vice President, 1995 & 1994 62
Operations and Director (2000)
James D. Wickus Senior Vice President, 1995 56
Operations
Each of the executive officers listed above has been employed by the company
throughout the past five years except Kenneth J. Carrig. Before joining SYSCO,
Mr. Carrig was Vice President of Human Resources for Continental Airlines, Inc.
from 1995 to 1997 and prior to that he was Senior Director of the Southwest
Region for Pepsi Co from 1987 to 1995.
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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, adjusted for the 2-for-1 stock
split effected by a 100% stock dividend paid on March 20, 1998.
Common Stock Prices Dividends
-------------------------------- --------------
High Low Paid Per Share
---------- --------- --------------
Fiscal 1998
First Quarter $ 19-23/32 $ 17-3/32 $0.075
Second Quarter 23-13/32 17-29/32 0.075
Third Quarter 26-3/4 21-5/8 0.085
Fourth Quarter 26-3/4 21-7/8 0.090
Fiscal 1999
First Quarter $ 25-15/16 $ 19-15/16 $0.090
Second Quarter 28-5/8 23-1/8 0.090
Third Quarter 29-7/8 24-15/16 0.100
Fourth Quarter 31-7/8 25 0.100
The number of record owners of SYSCO's Common Stock as of July 3, 1999 was
15,485.
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ITEM 6. SELECTED FINANCIAL DATA
FISCAL YEAR ENDED
-------------------------------------------------------------------
1999
(53 WEEKS) 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS EXCEPT FOR SHARE DATA)
Sales......................... $17,422,815 $15,327,536 $14,454,589 $13,395,130 $12,118,047
Earnings before income
taxes....................... 593,887 532,493 495,955 453,943 417,618
Income taxes.................. 231,616 207,672 193,422 177,038 165,794
----------- ----------- ----------- ----------- -----------
Earnings before cumulative
effect of accounting
change...................... 362,271 324,821 302,533 276,905 251,824
Cumulative effect of
accounting change........... -- (28,053) -- -- --
----------- ----------- ----------- ----------- -----------
Net earnings........ 362,271 296,768 302,533 276,905 251,824
=========== =========== =========== =========== ===========
Earnings before accounting
change:
Basic earnings per share.... 1.09 0.95 0.85 0.76 0.69
Diluted earnings per
share.................... 1.08 0.95 0.85 0.75 0.68
Cumulative effect of
accounting change:
Basic earnings per share.... -- (0.08) -- -- --
Diluted earnings per
share.................... -- (0.08) -- -- --
Net earnings:
Basic earnings per share.... 1.09 0.87 0.85 0.76 0.69
Diluted earnings per
share.................... 1.08 0.86 0.85 0.75 0.68
Cash dividends per share...... 0.38 0.33 0.28 0.24 0.20
Total assets.................. 4,096,582 3,780,189 3,433,823 3,319,943 3,097,161
Capital expenditures.......... 286,687 259,353 210,868 235,891 201,577
Long-term debt................ 997,717 867,017 685,620 581,734 541,556
Shareholders' equity.......... 1,427,196 1,356,789 1,400,472 1,474,678 1,403,603
----------- ----------- ----------- ----------- -----------
Total
capitalization.... 2,424,913 2,223,806 2,086,092 2,056,412 1,945,159
=========== =========== =========== =========== ===========
Ratio of long-term debt to
capitalization.............. 41.1% 39.0% 32.9% 28.3% 27.8%
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
SYSCO provides marketing and distribution services to foodservice customers
and suppliers throughout the contiguous United States, Alaska and western and
central Canada. The company intends to continue to expand its market share
through profitable sales growth and constant emphasis on the development of its
consolidated buying programs. The company also strives to increase the
effectiveness of its marketing associates and the productivity of its
warehousing and distribution activities. These objectives require continuing
investment. SYSCO's resources include cash provided by operations and access to
capital from financial markets.
SYSCO's operations historically have produced significant cash flow. Cash
generated from operations is first allocated to working capital requirements;
investments in facilities, fleet and other equipment required to meet customers'
needs; cash dividends; and acquisitions fitting within the company's overall
growth strategy. Any remaining cash generated from operations also is applied
toward a portion of the cost of shares repurchased in the buyback program, while
the remainder of the cost may be financed with additional long-term debt.
SYSCO's initial share repurchase program was used primarily to offset shares
issued under various employee benefit and compensation plans. The company
significantly accelerated the repurchase program beginning in February 1996. The
share repurchase program reduced outstanding shares and increased earnings
per share. The long-term debt to total capitalization target ratio was increased
from a range of 30% to 40% to a range of 35% to 40% due to prior and anticipated
accelerated share repurchases and additional debt associated with those
repurchases. This range was exceeded as of July 3, 1999 due to shares
repurchased for acquisitions that closed in early fiscal 2000.
In November 1996, the Board authorized an additional 12,000,000 share
buyback to be completed in calendar 1997; in July 1997 the Board authorized an
additional 12,000,000 share buyback to be completed in fiscal 1998; and in
September 1998 the Board authorized a new 8,000,000 share buyback to be
completed in calendar 1999. The number of shares acquired and their cost for the
past three years was 7,567,300 shares for $203,958,000 in fiscal 1999,
12,129,700 shares for $263,416,000 in fiscal 1998 and 18,032,800 shares for
$305,301,000 in fiscal 1997. On July 9, 1999, the Board authorized a new
8,000,000 share buyback.
Net cash generated from operating activities was $585,303,000 in 1999,
$357,764,000 in 1998 and $498,108,000 in 1997. Expenditures for facilities,
fleet and other equipment were $286,687,000 in 1999, $259,353,000 in 1998 and
$210,868,000 in 1997. Expenditures in fiscal 2000 should be in the range of
$230,000,000 to $250,000,000.
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.
On June 3, 1998 SYSCO filed with the Securities and Exchange Commission a
$500,000,000 shelf registration of debt securities. On July 22, 1998 SYSCO
issued 6.5% debentures totaling $225,000,000 under the shelf registration, due
August 1, 2028. These debentures were priced at 99.685% of par, are unsecured,
are not subject to any sinking fund requirement and include a redemption
provision which allows SYSCO the right to retire the debentures at any time
prior to maturity at the greater of par plus accrued interest or an amount
designed to ensure that the debenture holders are not penalized by the early
redemption. Proceeds from the debentures were used to pay down outstanding
commercial paper.
The net cash provided by operations less cash utilized for capital
expenditures, the stock repurchase program, cash dividends and other uses
resulted in net long-term debt of $997,717,000 at July 3, 1999. About 78% of the
long-term debt is at fixed rates averaging 6.75% and the remainder is at
floating rates averaging 5.15%. Long-term debt to capitalization was 41% at July
3, 1999, up 2% from the 39% at June 27, 1998 and up 8% from the 33% at June 28,
1997. SYSCO continues to have borrowing capacity available and alternative
financing arrangements are evaluated as appropriate.
SYSCO has a commercial paper program that is currently supported by a
$300,000,000 bank credit facility. During fiscal 1999, 1998 and 1997, commercial
paper and short-term bank borrowings ranged from approximately $67,769,000 to
$358,637,000, from approximately $29,581,000 to $417,924,000, and from
approximately $23,376,000 to $263,782,000, respectively.
In summary, SYSCO believes that through continued 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.
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MARKET RISK
SYSCO does not utilize financial instruments for trading purposes and holds
no derivative financial instruments that could expose the company to significant
market risk. SYSCO's exposure to market risk for changes in interest rates
relates primarily to its long-term debt obligations discussed above. At July 3,
1999 the company had outstanding commercial paper of $213,792,000 with
maturities through October 4, 1999. The company's remaining long-term debt
obligations of $783,925,000 were primarily at fixed rates of interest. SYSCO
has no significant cash flow exposure due to interest rate changes for
long-term debt obligations.
SALES
The annual increases in sales of 14% in 1999 (53 weeks) and 6% in 1998
resulted from several factors. Sales in fiscal 1999 and 1998 were affected by
the strong growth in the U.S. economy, as well as in the foodservice industry.
After adjusting for food price increases and acquisitions, real sales growth
including the effect of the 53rd week was about 12% in 1999 and 6% in 1998. The
cost of SYSCO's foodservice products during the first six months of fiscal 1999
were inflated about 2%, while inflation for those costs during the latter half
of the year decreased to about zero, resulting in about 1% inflation for the
entire year. This compares to zero inflation in fiscal 1998. Industry sources
estimate the total foodservice market experienced real growth of approximately
3.5% in calendar 1998 and 2.5% in calendar 1997.
Sales for fiscal 1997 through 1999 were as follows:
YEAR SALES % INCREASE
- ---- --------------- ----------
1999 (53 Weeks).......................................... $17,422,815,000 14%
1998..................................................... 15,327,536,000 6
1997..................................................... 14,454,589,000 8
A comparison of the sales mix in the principal product categories during
the last three years is presented below:
1999 1998 1997
---- ---- ----
Medical supplies............................................ 1% 1% 1%
Dairy products.............................................. 10 9 9
Fresh and frozen meats...................................... 15 15 15
Seafoods.................................................... 6 6 5
Poultry..................................................... 11 10 10
Frozen fruits, vegetables, bakery and other................. 14 15 15
Canned and dry products..................................... 22 23 23
Paper and disposables....................................... 7 7 8
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:
1999 1998 1997
---- ---- ----
Restaurants................................................. 64% 62% 61%
Hospitals and nursing homes................................. 10 11 11
Schools and colleges........................................ 7 7 7
Hotels and motels........................................... 5 5 6
All other................................................... 14 15 15
--- --- ---
100% 100% 100%
=== === ===
12
15
COST OF SALES
Cost of sales increased about 14% in 1999 and 6% in 1998. 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 14.6% for fiscal 1999 and 1998, and 14.4% for 1997. Changes in the
percentage relationship of operating expenses to sales result from an interplay
of several economic influences, including customer mix. Inflationary increases
in operating costs generally have been offset through improved productivity.
INTEREST EXPENSE
Interest expense increased $14,417,000 or approximately 25% in fiscal 1999
as compared to an increase of $11,920,000 or approximately 26% in fiscal 1998.
The increases in fiscal 1999 and 1998 were due primarily to increased
borrowings, principally to fund the share repurchase program, and the
replacement of floating rate debt at higher fixed rates in fiscal 1999. Interest
capitalized during the past three years was $1,812,000 in fiscal 1999,
$2,095,000 in 1998, and $2,215,000 in 1997.
OTHER, NET
Other decreased $910,000 or about 1,717% in fiscal 1999 and decreased
$215,000 or about 133% in fiscal 1998. 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 $61,394,000, or approximately 12% above
fiscal 1998, which had increased $36,538,000, or approximately 7%, above the
prior year. Additional sales and realization of operating efficiencies
contributed to the increases, as well as the effect of the 53rd week.
PROVISION FOR INCOME TAXES
The effective tax rate for 1999 and 1998 was approximately 39%.
EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE
Fiscal 1999 represents the twenty-third consecutive year of increased
earnings. Including the effect of the 53rd week and before the cumulative effect
of an accounting change in fiscal 1998, fiscal 1999 earnings rose $37,450,000,
or approximately 12% above fiscal 1998 which had increased $22,288,000, or
approximately 7%, over the prior year.
CUMULATIVE EFFECT OF ACCOUNTING CHANGE
In the second quarter of fiscal 1998, SYSCO recorded a one-time, after-tax,
non-cash charge of $28,053,000 to comply with a new consensus ruling by the
Emerging Issues Task Force of the Financial Accounting Standards Board, (EITF
Issue No. 97-13), requiring reengineering costs associated with computer systems
development to be expensed as they are incurred. Prior to this change, SYSCO had
capitalized business process reengineering costs incurred in connection with its
SYSCO Uniform Systems information systems redevelopment project in accordance
with generally accepted accounting principles.
NET EARNINGS
Net earnings for the year increased $65,503,000, or approximately 22% above
fiscal 1998, which had decreased $5,765,000, or approximately 2% below the prior
year. The increase was caused by the accounting change discussed above in fiscal
1998, as well as additional sales and operating efficiencies and the effect of
the 53rd week.
DIVIDENDS
The quarterly dividend rate of ten cents per share was established in
February 1999 when it was increased from the nine cents per share set in
February 1998.
13
16
RETURN ON SHAREHOLDERS' EQUITY
The return on average shareholders' equity for fiscal 1999 was
approximately 26% compared to 23% in fiscal 1998 before the cumulative effect of
the accounting change and 21% in 1997. Since inception SYSCO has averaged in
excess of a 17% return on shareholders' equity before the cumulative effect of
the accounting change.
YEAR 2000
SYSCO has been replacing and enhancing its information systems to gain
operational efficiencies with the implementation of the SYSCO Uniform System
(SUS). SUS is Year 2000 compliant and implementation will be substantially
complete by December 1999.
To address the Year 2000 issue, SYSCO instituted an enterprise-wide Year
2000 compliance project in January 1998. SYSCO's Year 2000 project used two
outside technology consulting firms -- one with expertise in information
technology (IT) and project management and the other with expertise in
engineering to identify Year 2000 issues in non-IT systems and equipment that
have embedded microchips. SYSCO established a formal project management
methodology to address the Year 2000 issue. SYSCO's Year 2000 project consists
of four phases: i) Information Gathering and Planning -- This phase consisted of
gathering information about SYSCO's IT and non-IT systems, as well as
identifying significant suppliers, customers and other third parties. The
primary objective was to build a detailed inventory of information; ii)
Assessment -- This phase consisted of analyzing the information gathered during
the first phase. The process included examining and evaluating SYSCO's IT
systems and non-IT systems with embedded microchips for exposure to date
sensitivity. The primary objective of the assessment phase was to identify
components that are not Year 2000 compliant so that they could be corrected,
replaced or eliminated; iii) Remediation -- This phase consisted of correcting,
replacing or eliminating any components found during the assessment phase that
were not Year 2000 compliant. This included addressing SYSCO's internally
developed mission critical IT systems, purchased hardware and software, and
non-IT systems and equipment with embedded microchips; and iv) Testing -- This
phase consisted of systems integration testing of SYSCO's mission critical IT
systems used throughout the company, as well as specific systems interface
testing with certain customers and certain suppliers to ensure their Year 2000
readiness.
In March 1999, SYSCO completed extensive testing of its mission critical IT
systems using multiple Year 2000 date scenarios to simulate fiscal and calendar
crossovers. These systems were found to be Year 2000 compliant. SYSCO has also
completed a comprehensive assessment of its IT systems and non-IT systems with
embedded microchips and is completing upgrades and replacements of non-compliant
systems and equipment. Although the percentages of work completed vary across
SYSCO's operations, SYSCO plans to complete the remaining upgrades and
replacements by December 1999.
An important component of SYSCO's Year 2000 readiness efforts has focused
on verifying to the extent possible that its significant suppliers are currently
Year 2000 compliant or have adequate remediation plans in place to ensure Year
2000 compliance. SYSCO analyzed and categorized its suppliers and then contacted
in writing the significant suppliers to solicit information on their Year 2000
preparedness efforts. SYSCO has obtained Year 2000 information from the majority
of the identified suppliers and is in the process of contacting those few
suppliers who have not yet responded.
SYSCO does not believe that the total costs which will be incurred to
provide Year 2000 compliance will have a material impact on the financial
statements of the company.
The company has identified three most reasonably likely worst case
scenarios: (1) loss of public power supplies; (2) loss of communication
infrastructure; and (3) failure of the company's mission critical IT systems and
infrastructure. Within the three most reasonably likely worst case scenarios,
SYSCO's goal is to identify actions that can be taken prior to January 2000
that would minimize or mitigate the failures should they occur. Contingency
plans have been developed for the core business functions and are being
deployed to SYSCO's distribution centers for review and implementation.
Although SYSCO's Year 2000 efforts are intended to minimize the adverse
effects of the Year 2000 issue on its business and operations, the actual
effects of the issue and the success or failure of the company's efforts
described above cannot be known until the Year 2000. Failure by SYSCO, its
suppliers, customers and other third parties to address adequately their
respective Year 2000 issues in a timely manner, insofar as such issues relate to
the company's business and operations, could have a material adverse effect on
SYSCO.
14
17
RISK FACTORS
Low Margin Business; Economic Sensitivity
The foodservice distribution industry is characterized by relatively high
inventory turnover with relatively low profit margins. SYSCO makes a significant
portion of its sales at prices that are based on the cost of products it sells
plus a percentage markup. As a result, SYSCO's profit levels may be negatively
impacted during periods of food price deflation, even though SYSCO's gross
profit percentage may remain relatively constant. The foodservice industry is
sensitive to national and economic conditions. SYSCO's operating results also
are sensitive to, and may be adversely affected by other factors, including
difficulties with the collectability of accounts receivables, inventory control,
competitive price pressures, severe weather conditions and unexpected increases
in fuel or other transportation-related costs. Although such factors have not
had a material adverse impact on SYSCO's past operations, there can be no
assurance that one or more of these factors will not adversely affect future
operating results.
Leverage and Debt Service
Because historically a substantial part of SYSCO's growth has been the result of
acquisitions and capital expansion, SYSCO's continued growth depends, in large
part, on its ability to continue this expansion. As a result, its inability to
finance acquisitions and capital expenditures through borrowed funds could
restrict its ability to expand. Moreover, any default under the documents
governing the indebtedness of SYSCO could have a significant adverse effect on
the market value of SYSCO's common stock. Further, SYSCO's leveraged position
may also increase its vulnerability to competitive pressures.
Product Liability Claims
SYSCO, like any other seller of food, faces the risk of exposure to product
liability claims in the event that the use of products sold by the company
causes injury or illness. With respect to product liability claims, SYSCO
believes it has sufficient primary or excess umbrella liability insurance.
However, this insurance may not continue to be available at a reasonable cost,
or, if available, may not be adequate to cover liabilities. SYSCO generally
seeks contractual indemnification and insurance coverage from parties supplying
its products, but this indemnification or insurance coverage is limited, as a
practical matter, to the creditworthiness of the indemnifying party and the
insured limits of any insurance provided by suppliers. If SYSCO does not have
adequate insurance or contractual indemnification available, product liability
relating to defective products could materially reduce SYSCO's net income and
earnings per share.
Interruption of Supplies
SYSCO obtains all of its foodservice products from other suppliers. For the most
part, SYSCO does not have long-term contracts with any supplier committing it to
provide products to SYSCO. Although SYSCO's purchasing volume can provide
leverage when dealing with suppliers, suppliers may not provide the foodservice
products and supplies needed by SYSCO in the quantities requested. Because SYSCO
does not control the actual production of its products, it is also subject to
delays caused by interruption in production based on conditions outside its
control. These conditions include: job actions or strikes by employees of
suppliers, weather, crop conditions, transportation interruptions, and natural
disasters or other catastrophic events. SYSCO's inability to obtain adequate
supplies of its foodservice products as a result of any of the foregoing factors
or otherwise, could mean that SYSCO could not fulfill its obligations to
customers, and customers may turn to other suppliers.
15
18
Labor Relations
As of July 3, 1999, 7,641 employees are members of 45 different local unions
associated with the International Brotherhood of Teamsters and other labor
organizations, at 34 operating companies. In fiscal 2000, 18 agreements covering
2,557 employees will expire. Failure to effectively renegotiate these contracts
could result in work stoppages. Although SYSCO has not experienced any
significant labor disputes or work stoppages to date, and believes it has
satisfactory relationships with its unions, a work stoppage due to failure to
renegotiate a union contract, or otherwise, could have a material adverse effect
on SYSCO.
Integration of Acquired Companies
If SYSCO is unable to integrate acquired businesses successfully and realize
anticipated economic, operational and other benefits in a timely manner, its
profitability may decrease. Integration of an acquired business may be more
difficult when SYSCO acquires a business in a market in which it has limited or
no expertise, or with a corporate culture different from SYSCO's. If SYSCO is
unable to integrate acquired businesses successfully, it may incur substantial
costs and delays in increasing its customer base. In addition, the failure to
integrate acquisitions successfully may divert management's attention from
SYSCO's existing business and may damage SYSCO's relationships with its key
customers and suppliers.
Charter and Stockholder Rights Plan
Under its Restated Certificate of Incorporation, SYSCO's Board of Directors is
authorized to issue up to 1.5 million shares of preferred stock without
stockholder approval. Issuance of these shares would make it more difficult for
anyone to acquire SYSCO without approval of the Board of Directors because more
shares would have to be acquired to gain control. If anyone attempts to acquire
SYSCO without approval of the Board of Directors of SYSCO, the stockholders of
SYSCO have the right to purchase preferred stock of SYSCO, which also means more
shares would have to be acquired to gain control. Both of these devices may
deter hostile takeover attempts that might result in an acquisition of SYSCO
that would have been financially beneficial to SYSCO's stockholders.
16
19
FORWARD-LOOKING STATEMENTS
Certain statements made herein are forward-looking statements under the Private
Securities Litigation Reform Act of 1995. They include projected sales
increases, anticipated capital expenditures, customer mix, product cost
inflation/deflation, implementation and anticipated results of "fold-outs",
potential acquisitions and any potential benefits resulting therefrom, payment
of dividends, consistency and predictability of earnings and cash flow growth,
continuation of the share repurchase program, projected sales to particular
customers, including but not limited to Wendy's International, Inc., and Year
2000 readiness efforts and time-tables and the anticipated costs of these
efforts.
These statements are based on current expectations and management's estimates
and actual results may differ materially. Decisions to pursue "fold-outs" and
acquisitions and expenditures for such could vary depending upon construction
schedules and the timing of other purchases, such as fleet and equipment, while
results from "fold-outs" and acquisitions could be impacted by competitive
conditions, labor issues and other matters. Acquisitions also depend upon the
availability and suitability of potential candidates and management's allocation
of capital. Industry growth, sales increases, customer mix, product cost
inflation/deflation, payment of dividends, the consistency and predictability of
earnings and cash flow growth and Year 2000 costs and compliance efforts could
be affected by conditions in the economy, the industry and internal factors that
may alter planned results.
Furthermore, potential Year 2000 costs and compliance efforts could be affected
by the ability of SYSCO's suppliers and customers to effectively address Year
2000 issues. Sales to particular customers could be affected by conditions in
the economy and the customer's ability to make planned levels of sales available
to SYSCO. The share repurchase program could be affected by market prices of the
company's stock as well as management's decision to utilize its capital for
other purposes.
17
20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SYSCO CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Statements:
Page
----
Report of Management on Internal Accounting Controls....................................... 19
Report of Independent Public Accountants................................................... 20
Consolidated Financial Statements:
Consolidated Balance Sheets.......................................................... 21
Consolidated Results of Operations................................................... 22
Consolidated Shareholders' Equity.................................................... 23
Consolidated Cash Flows.............................................................. 24
Summary of Accounting Policies....................................................... 25
Additional Financial Information..................................................... 26
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.
18
21
REPORT OF MANAGEMENT ON INTERNAL ACCOUNTING CONTROLS
The management of SYSCO is responsible for the preparation and integrity of the
consolidated financial statements of the company. The accompanying consolidated
financial statements have been prepared by the management of the company, in
accordance with generally accepted accounting principles, using management's
best estimates and judgment where necessary. Financial information appearing
throughout this Annual Report is consistent with that in the consolidated
financial statements.
To help fulfill its responsibility, management maintains a system of internal
controls designed to provide reasonable assurance that assets are safeguarded
against loss or unauthorized use and that transactions are executed in
accordance with management's authorizations and are reflected accurately in the
company's records. The concept of reasonable assurance is based on the
recognition that the cost of maintaining a system of internal accounting
controls should not exceed benefits expected to be derived from the system.
SYSCO believes that its long-standing emphasis on the highest standards of
conduct and ethics, embodied in comprehensive written policies, serves to
reinforce its system of internal controls.
The company's operations review function monitors the operation of the internal
control system and reports findings and recommendations to management and the
Board of Directors. It also oversees actions taken to address control
deficiencies and seeks opportunities for improving the effectiveness of the
system.
Arthur Andersen LLP, independent public accountants, has been engaged to express
an opinion regarding the fair presentation of the company's financial condition
and operating results. As part of their audit of the company's financial
statements, Arthur Andersen LLP considered the company's system of internal
controls to the extent they deemed necessary to determine the nature, timing and
extent of their audit tests.
The Board of Directors oversees the company's financial reporting through its
Audit Committee which consists entirely of outside directors. The Board, after a
recommendation from the Audit Committee, selects and engages the independent
public accountants annually. The Audit Committee reviews both the scope of the
accountants' audit and recommendations from both the independent public
accountants and the internal operations review function for improvements in
internal controls. The independent public accountants have free access to the
Audit Committee and from time to time confer with them without management
representation.
SYSCO recognizes its responsibility to conduct business in accordance with high
ethical standards. This responsibility is reflected in a comprehensive code of
business conduct that, among other things, addresses potentially conflicting
outside business interests of company employees and provides guidance as to the
proper conduct of business activities. Ongoing communications and review
programs are designed to help ensure compliance with this code.
The company believes that its system of internal controls is effective and
adequate to accomplish the objectives discussed above.
/s/ BILL M. LINDIG /s/ JOHN K. STUBBLEFIELD, JR.
- ---------------------------------------- ----------------------------------
Bill M. Lindig John K. Stubblefield, Jr.
Chairman and Chief Executive Officer Senior Vice President,
Finance and Administration
19
22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Sysco Corporation
We have audited the accompanying consolidated balance sheets of Sysco
Corporation (a Delaware corporation) and subsidiaries as of July 3, 1999 and
June 27, 1998, and the related statements of consolidated results of operations,
shareholders' equity and cash flows for each of the three years in the period
ended July 3, 1999. 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 July 3, 1999 and June 27, 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
July 3, 1999, 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
August 4, 1999
20
23
CONSOLIDATED BALANCE SHEETS
ASSETS
JULY 3, 1999 JUNE 27, 1998
------------ -------------
(IN THOUSANDS EXCEPT
FOR SHARE DATA)
Current assets
Cash...................................................... $ 149,303 $ 110,288
Accounts and notes receivable, less allowances of $21,095
and $20,081............................................ 1,334,371 1,215,610
Inventories............................................... 851,965 790,501
Deferred taxes............................................ 43,353 37,073
Prepaid expenses.......................................... 29,775 26,595
---------- ----------
Total current assets.............................. 2,408,767 2,180,067
Plant and equipment at cost, less depreciation............ 1,227,669 1,151,054
Other assets
Goodwill and intangibles, less amortization............... 302,100 307,959
Other..................................................... 158,046 141,109
---------- ----------
Total other assets................................ 460,146 449,068
---------- ----------
Total assets...................................... $4,096,582 $3,780,189
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable............................................. $ 13,377 $ 42,333
Accounts payable.......................................... 1,013,302 849,159
Accrued expenses.......................................... 374,271 292,255
Income taxes.............................................. 6,103 25,523
Current maturities of long-term debt...................... 20,487 114,920
---------- ----------
Total current liabilities......................... 1,427,540 1,324,190
Long-term debt.............................................. 997,717 867,017
Deferred taxes.............................................. 244,129 232,193
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 382,587,450
shares................................................ 382,587 382,587
Paid-in capital........................................... 872 --
Retained earnings......................................... 2,032,068 1,796,488
---------- ----------
2,415,527 2,179,075
Less cost of treasury stock, 52,915,065 and 47,578,288
shares................................................. 988,331 822,286
---------- ----------
Total shareholders' equity........................ 1,427,196 1,356,789
---------- ----------
Total liabilities and shareholders' equity........ $4,096,582 $3,780,189
========== ==========
See Summary of Accounting Policies and Additional Financial Information.
21
24
CONSOLIDATED RESULTS OF OPERATIONS
YEAR ENDED
--------------------------------------------
JULY 3, 1999
(53 WEEKS) JUNE 27, 1998 JUNE 28, 1997
------------ ------------- -------------
(IN THOUSANDS EXCEPT FOR SHARE DATA)
Sales................................................. $17,422,815 $15,327,536 $14,454,589
Costs and expenses
Cost of sales....................................... 14,207,860 12,499,636 11,835,959
Operating expenses.................................. 2,547,266 2,236,932 2,076,335
Interest expense.................................... 72,839 58,422 46,502
Other, net.......................................... 963 53 (162)
----------- ----------- -----------
Total costs and expenses.................... 16,828,928 14,795,043 13,958,634
----------- ----------- -----------
Earnings before income taxes.......................... 593,887 532,493 495,955
Income taxes.......................................... 231,616 207,672 193,422
----------- ----------- -----------
Earnings before cumulative effect of accounting
change.............................................. 362,271 324,821 302,533
Cumulative effect of accounting change................ -- (28,053) --
----------- ----------- -----------
Net earnings................................ $ 362,271 $ 296,768 $ 302,533
=========== =========== ===========
Earnings before accounting change:
Basic earnings per share............................ $ 1.09 $ 0.95 $ 0.85
Diluted earnings per share.......................... 1.08 0.95 0.85
Cumulative effect of accounting change:
Basic earnings per share............................ -- (0.08) --
Diluted earnings per share.......................... -- (0.08) --
Net earnings:
Basic earnings per share............................ 1.09 0.87 0.85
Diluted earnings per share.......................... 1.08 0.86 0.85
See Summary of Accounting Policies and Additional Financial Information.
22
25
CONSOLIDATED SHAREHOLDERS' EQUITY
COMMON STOCK TREASURY STOCK
---------------------- PAID-IN RETAINED ---------------------
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT
----------- -------- -------- ---------- ---------- --------
(IN THOUSANDS EXCEPT FOR SHARE DATA)
Balance at June 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, $.28 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
Net earnings for year ended
June 27, 1998............... 296,768
Cash dividends paid, $.33 per
share....................... (110,928)
Treasury stock purchases...... 6,064,850 263,416
Stock options exercised....... (4,308) (491,795) (15,174)
Employees' Stock Purchase
Plan........................ 1,359 (433,419) (14,048)
Management Incentive Plan..... 1,084 (205,950) (6,536)
2-for-1 stock split........... 191,293,725 191,293 (30,393) (160,900) 23,789,144
----------- -------- -------- ---------- ---------- --------
Balance at June 27, 1998...... 382,587,450 $382,587 $ -- $1,796,488 47,578,288 $822,286
Net earnings for year ended
July 3, 1999................ 362,271
Cash dividends paid, $.38 per
share....................... (126,691)
Treasury stock purchases...... 7,567,300 203,958
Stock options exercised....... (5,621) (988,679) (15,954)
Employees' Stock Purchase
Plan........................ 3,679 (894,094) (15,906)
Management Incentive Plan..... 2,814 (347,750) (6,053)
----------- -------- -------- ---------- ---------- --------
Balance at July 3, 1999....... 382,587,450 $382,587 $ 872 $2,032,068 52,915,065 $988,331
=========== ======== ======== ========== ========== ========
See Summary of Accounting Policies and Additional Financial Information.
23
26
CONSOLIDATED CASH FLOWS
YEAR ENDED
--------------------------------------------
JULY 3, 1999
(53 WEEKS) JUNE 27, 1998 JUNE 28, 1997
------------ ------------- -------------
(IN THOUSANDS)
Cash flows from operating activities:
Net earnings.......................................... $ 362,271 $ 296,768 $ 302,533
Add non-cash items:
Cumulative effect of accounting change............. -- 28,053 --
Depreciation and amortization...................... 205,005 181,234 160,292
Deferred tax provision (benefit)................... 5,656 (15,077) 11,081
Provision for losses on receivables................ 26,208 22,959 21,588
Additional investment in certain assets and
liabilities, net of effect of businesses acquired:
(Increase) in receivables.......................... (144,969) (162,276) (40,247)
(Increase) in inventories.......................... (61,464) (48,483) (6,883)
(Increase) in prepaid expenses..................... (3,180) (4,871) (2,534)
Increase in accounts payable....................... 164,143 14,114 43,145
Increase in accrued expenses....................... 82,016 50,875 27,512
(Decrease) increase in income taxes................ (19,420) 7,782 (5,589)
(Increase) in other assets......................... (30,963) (13,314) (12,790)
--------- --------- ---------
Net cash provided by operating activities..... 585,303 357,764 498,108
--------- --------- ---------
Cash flows from investing activities:
Additions to plant and equipment...................... (286,687) (259,353) (210,868)
Proceeds from sales of plant and equipment............ 24,952 8,296 2,842
Acquisition of businesses, net of cash acquired....... -- (84,473) (5,330)
--------- --------- ---------
Net cash used for investing activities........ (261,735) (335,530) (213,356)
--------- --------- ---------
Cash flows from financing activities:
Bank and commercial paper (repayments) borrowings..... (109,962) 303,996 92,039
Other debt borrowings................................. 117,273 6,813 9,885
Common stock reissued from treasury................... 38,785 33,893 28,136
Treasury stock purchases.............................. (203,958) (263,416) (305,301)
Dividends paid........................................ (126,691) (110,928) (99,574)
--------- --------- ---------
Net cash used for financing activities........ (284,553) (29,642) (274,815)
--------- --------- ---------
Net increase (decrease) in cash......................... 39,015 (7,408) 9,937
Cash at beginning of year............................... 110,288 117,696 107,759
--------- --------- ---------
Cash at end of year..................................... $ 149,303 $ 110,288 $ 117,696
========= ========= =========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest........................................... $ 66,706 $ 58,306 $ 44,575
Income taxes....................................... 237,990 195,133 186,153
See Summary of Accounting Policies and Additional Financial Information.
24
27
SUMMARY OF ACCOUNTING POLICIES
BUSINESS AND CONSOLIDATION
SYSCO Corporation (SYSCO) is engaged in the marketing and distribution of a
wide range of food and related products to the foodservice or
"food-prepared-away-from-home" industry. These services are performed from 76
distribution facilities for approximately 300,000 customers located in the 38
states where facilities are situated, in 10 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 1999 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 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 $1,812,000 in 1999, $2,095,000 in 1998 and $2,215,000 in 1997.
GOODWILL AND INTANGIBLES
Goodwill and intangibles represent the excess of cost over the fair value
of tangible net assets acquired and are amortized over 40 years using the
straight-line method. Accumulated amortization at July 3, 1999, June 27, 1998
and June 28, 1997 was $84,160,000, $74,554,000 and $66,521,000, respectively.
COMPUTER SYSTEMS DEVELOPMENT PROJECT
In the second quarter of fiscal 1998, SYSCO recorded a one-time, after-tax,
non-cash charge of $28,053,000 to comply with a consensus ruling by the Emerging
Issues Task Force of the Financial Accounting Standards Board (EITF Issue No.
97-13), requiring reengineering costs associated with computer systems
development to be expensed as they are incurred. Prior to this ruling, SYSCO had
capitalized business process reengineering costs incurred in connection with its
SYSCO Uniform System information systems redevelopment project in accordance
with generally accepted accounting principles.
No costs were capitalized in fiscal 1999, 1998 and 1997. Amounts
capitalized are being amortized as completed portions are put into use.
Accumulated amortization, including the one-time charge, at July 3, 1999, June
27, 1998 and June 28, 1997 was $38,929,000, $36,532,000 and $1,624,000,
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.
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.
25
28
NEW ACCOUNTING STANDARDS
In fiscal 1998, SYSCO adopted SFAS No. 130, "Reporting Comprehensive
Income." The adoption of this standard did not have an effect on SYSCO's
reported net earnings as SYSCO has no additional comprehensive income under the
statement.
In fiscal 1999, SYSCO adopted SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits."This statement does not change the
measurement or recognition of those plans, but revises the disclosure
requirements for pensions and other postretirement plans.
In March 1998, the AICPA issued Statement of Position (SOP) 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." The SOP provides guidance with respect to accounting for the
various types of costs incurred for computer software developed or obtained for
SYSCO's use. SYSCO is required to and will adopt SOP 98-1 in the first quarter
of fiscal 2000 and believes that adoption will not have a significant effect on
its consolidated results of operations or financial position.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities." At adoption, SOP 98-5 requires SYSCO to write-off any
unamortized start-up costs as a cumulative effect of a change in accounting
principle and, going forward, expense all start-up activity costs as they are
incurred. SYSCO is required to and will adopt SOP 98-5 in the first quarter of
fiscal 2000 and estimates that this charge will be in the range of $8,000,000 to
$10,000,000, after taxes.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which was
effective for fiscal years beginning after June 15, 1999. SFAS No. 133 was
amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of SFAS No. 133,"which delayed the
effective date of implementation by one year. SYSCO is required to and will
adopt SFAS No. 133 in the first quarter of fiscal 2001. SYSCO does not expect
adoption to have a significant effect on its consolidated results of operations
or financial position.
ADDITIONAL FINANCIAL INFORMATION
INCOME TAXES
The income tax provisions consist of the following:
1999 1998 1997
------------ ------------ ------------
Federal income taxes....................... $211,478,000 $189,758,000 $176,754,000
State and local income taxes............... 20,138,000 17,914,000 16,668,000
------------ ------------ ------------
Total............................ $231,616,000 $207,672,000 $193,422,000
============ ============ ============
Included in the income taxes charged to earnings are net deferred tax
provisions of $5,656,000 in 1999, deferred tax benefits of $15,077,000 in 1998
and deferred tax provisions of $11,081,000 in 1997. These components 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.
Significant components of the company's deferred tax assets and liabilities
are as follows:
JULY 3, 1999 JUNE 27, 1998
------------ -------------
Deferred tax liabilities:
Excess tax depreciation and basis differences of
assets.............................................. $203,524,000 $196,429,000
Computer systems development project................... 10,991,000 11,109,000
Other.................................................. 29,614,000 24,655,000
------------ ------------
Total deferred tax liabilities................. 244,129,000 232,193,000
------------ ------------
Deferred tax assets:
Accrued pension expenses............................... 24,179,000 19,759,000
Accrued medical and casualty insurance expenses........ 6,647,000 6,709,000
Other.................................................. 12,527,000 10,605,000
------------ ------------
Total deferred tax assets...................... 43,353,000 37,073,000
------------ ------------
Net deferred tax liabilities................... $200,776,000 $195,120,000
============ ============
26
29
The company has enjoyed taxable earnings during each year of its thirty
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:
1999 1998 1997
---- ---- ----
Statutory Federal income tax rate........................... 35% 35% 35%
State and local income taxes, net of Federal income tax
benefit................................................... 4 4 4
-- -- --
39% 39% 39%
== == ==
ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
The allowance for doubtful accounts receivable was $21,095,000 as of July
3, 1999, $20,081,000 as of June 27, 1998 and $17,240,000 as of June 28, 1997.
Customer accounts written off, net of recoveries, were $25,914,000 or 0.15% of
sales, $21,218,000 or 0.14% of sales and $21,183,000 or 0.15% of sales for
fiscal years 1999, 1998 and 1997, respectively.
SHAREHOLDERS' EQUITY
On February 11, 1998 the Board of Directors declared a 2-for-1 stock split
effected by a 100% stock dividend paid on March 20, 1998 to shareholders of
record on February 27, 1998. All share and per share data in these financial
statements have been restated to reflect the stock split.
In fiscal 1998, SYSCO adopted the provisions of SFAS No. 128, "Earnings Per
Share," which replaced primary and fully diluted earnings per share with a
presentation of basic and diluted earnings per share. Basic earnings per share
have been computed by dividing net earnings by 332,913,546 in 1999, 340,380,477
in 1998 and 354,470,170 in 1997, which represents the weighted average number of
shares of common stock outstanding during those respective years. Diluted
earnings per share have been computed by dividing net earnings by 336,796,669 in
1999, 343,440,181 in 1998 and 356,083,594 in 1997, which represents the weighted
average number of shares of common stock outstanding during those respective
years adjusted for the dilutive effect of stock options outstanding under the
treasury stock method.
In May 1986, the Board of Directors adopted a Warrant Dividend Plan
designed to protect against those unsolicited attempts to acquire control of
SYSCO that the Board believes are not in the best interest of the shareholders.
The Board of Directors adopted an amended and restated plan in May 1996, which,
among other things, extends the expiration of the plan through May 2006, and
amended it in May 1999. As amended, the plan provides for a dividend
distribution of one-half of one Preferred Stock Purchase Right (Right) for each
outstanding share of SYSCO common stock. Each Right may be exercised to purchase
one two-thousandth of a share of Series A Junior Participating Preferred Stock
at an exercise price of $175, subject to adjustment. The Rights will not be
exercisable until a party either acquires 10% of the company's common stock or
makes a tender offer for 10% or more of its common stock. In the event of a
merger or other business combination transaction, each Right effectively
entitles the holder to purchase $350 worth of stock of the surviving company for
a purchase price of $175.
The Rights expire on May 21, 2006, and may be redeemed before expiration by
the company at a price of $0.01 per Right until a party acquires 10% of the
company's common stock or thereafter under certain circumstances. As a result of
the Rights distribution, 450,000 of the 1,500,000 authorized preferred shares
have been reserved for issuance as Series A Junior Participating Preferred
Stock.
PLANT AND EQUIPMENT
A summary of plant and equipment, including the related accumulated
depreciation, appears below:
ESTIMATED
JULY 3, 1999 JUNE 27, 1998 USEFUL LIVES
--------------- -------------- ------------
Plant and equipment, at cost
Land.................................. $ 93,107,000 $ 100,855,000
Buildings and improvements............ 957,389,000 895,915,000 10-40 years
Equipment............................. 1,266,548,000 1,146,192,000 3-20 years
--------------- --------------
2,317,044,000 2,142,962,000
Accumulated depreciation................ (1,089,375,000) (991,908,000)
--------------- --------------
Net plant and equipment................. $ 1,227,669,000 $1,151,054,000
=============== ==============
27
30
DEBT
At July 3, 1999 and June 27, 1998 SYSCO had $13,377,000 and $42,333,000,
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:
JULY 3, 1999 JUNE 27, 1998
-------------- -------------
Commercial paper, interest averaging 5.2% in 1999 and
5.7% in 1998........................................ $ 213,792,000 $ 294,798,000
Senior notes, interest at 9.95%, maturing in 1999..... -- 91,500,000
Senior notes, interest at 6.5%, maturing in 2005...... 149,463,000 149,373,000
Senior notes, interest at 7.0%, maturing in 2006...... 200,000,000 200,000,000
Senior notes, interest at 7.25%, maturing in 2007..... 99,696,000 99,657,000
Debentures, interest at 7.16%, maturing in 2027....... 50,000,000 50,000,000
Debentures, interest at 6.50%, maturing in 2029....... 224,313,000 --
Industrial Revenue Bonds, mortgages and other debt,
interest averaging 5.9% in 1999 and 6.0% in 1998,
maturing at various dates to 2026................... 80,940,000 96,609,000
-------------- -------------
Total long-term debt........................ 1,018,204,000 981,937,000
Less current maturities............................... (20,487,000) (114,920,000)
-------------- -------------
Net long-term debt.......................... $ 997,717,000 $ 867,017,000
============== =============
The principal payments required to be made on long-term debt during the
next five years are shown below:
YEAR AMOUNT
- ---- ------------
2000................................................... $ 20,487,000
2001................................................... 19,739,000
2002................................................... 7,289,000
2003................................................... 15,019,000
2004................................................... 214,901,000
SYSCO has a $300,000,000 revolving loan agreement maturing in fiscal 2004
which currently supports the company's commercial paper program. The commercial
paper borrowings at July 3, 1999 were $213,792,000.
In June 1995, SYSCO issued 6.5% senior notes totaling $150,000,000 due June
12, 2005, under a $500,000,000 shelf registration filed with the Securities and
Exchange Commission 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 $50,000,000 due April 15,
2027. These debentures were priced at par, are unsecured, are not subject to any
sinking fund requirement and are redeemable at the option of the holder on April
15, 2007, but otherwise are not redeemable prior to maturity. At that time SYSCO
also issued 7.25% senior notes totaling $100,000,000 due April 15, 2007. These
notes were priced at 99.611% of par and are unsecured, not redeemable prior to
maturity and not subject to any sinking fund requirement.
On June 3, 1998 SYSCO filed with the Securities and Exchange Commission a
$500,000,000 shelf registration of debt securities. On July 22, 1998 SYSCO
issued 6.5% debentures totaling $225,000,000 under the shelf registration, due
on August 1, 2028. These debentures were priced at 99.685% of par, are
unsecured, are not subject to any sinking fund requirement and include a
redemption provision which allows SYSCO the right to retire the debentures at
any time prior to maturity at the greater of par plus accrued interest or an
amount designed to ensure that the debenture holders are not penalized by the
early redemption. Proceeds from the debentures were used to pay down outstanding
commercial paper.
The Industrial Revenue Bonds have varying structures. Final maturities
range from one to twenty-seven 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.
28
31
Net long-term debt at July 3, 1999 was $997,717,000, of which 78% is at
fixed rates averaging 6.75% with an average life of fourteen years, while the
remainder is financed at floating rates averaging 5.15%. Certain loan agreements
contain typical covenants to protect noteholders including provisions to
maintain tangible net worth at specified levels.
The fair value of SYSCO's total long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered to the company for debt of the same remaining maturities. The fair value
of total long-term debt approximates $994,275,000 at July 3, 1999.
As part of normal business activities, SYSCO issues letters of credit
through major banking institutions as required by certain supplier and insurance
agreements. As of July 3, 1999 and June 27, 1998, letters of credit outstanding
were $21,460,000 and $14,464,000, respectively. As of July 3, 1999 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 $36,904,000,
$31,324,000 and $33,343,000 in fiscal 1999, 1998 and 1997, respectively.
Contingent rentals, subleases and assets and obligations under capital leases
are not significant.
Aggregate minimum lease payments under existing non-capitalized long-term
leases are as follows:
YEAR AMOUNT
- ---- -----------
2000.................................................... $18,355,000
2001.................................................... 16,615,000
2002.................................................... 14,262,000
2003.................................................... 11,178,000
2004.................................................... 9,661,000
Later years............................................. 18,218,000
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.
The following summary presents information with regard to incentive options
under this plan:
OPTIONS EXERCISABLE OPTIONS OUTSTANDING
--------------------------- -------------------------
MAXIMUM WEIGHTED SHARES WEIGHTED
SHARES AVERAGE PRICE UNDER AVERAGE PRICE
EXERCISABLE PER SHARE OPTION PER SHARE
----------- ------------- --------- -------------
Balance at June 29, 1996.............. 1,362,508 $9.84 1,362,508 $ 9.84
Granted............................. -- --
Cancelled........................... (149,542) 11.08
Exercised........................... (390,448) 9.67
---------
Balance at June 28, 1997.............. 822,518 9.70 822,518 9.70
Granted............................. -- --
Cancelled........................... -- --
Exercised........................... (303,251) 9.65
---------
Balance at June 27, 1998.............. 519,267 9.72 519,267 9.72
Granted............................. -- --
Cancelled........................... -- --
Exercised........................... (161,739) 9.22
---------
Balance at July 3, 1999............... 357,528 $9.94 357,528 $ 9.94
=========
29
32
The options outstanding at July 3, 1999 under this plan have exercise
prices ranging from $7.66 to $11.13 and have a weighted average remaining
contractual life of 1.7 years.
1991 Stock Option Plan
The 1991 Stock Option Plan was adopted in fiscal 1992 and originally
reserved 6,000,000 shares of SYSCO common stock for options to directors,
officers and key personnel of the company and its subsidiaries at the market
price at date of grant. This plan provides for the issuance of options which are
qualified as incentive stock options under the Internal Revenue Code of 1986,
options which are not so qualified and stock appreciation rights. During fiscal
1996, the shareholders approved an amendment to the plan for an additional
16,000,000 shares to be made available for future grants of options. To date,
the company has issued stock options but no stock appreciation rights under this
plan.
The following summary presents information with regard to 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 June 29, 1996.............. 2,190,690 $13.28 5,989,630 $13.64
Granted............................. 2,447,800 15.88
Cancelled........................... (236,034) 14.17
Exercised........................... (436,136) 13.33
---------
Balance at June 28, 1997.............. 3,446,628 13.53 7,765,260 14.35
Granted............................. 1,901,416 17.50
Cancelled........................... (315,422) 14.97
Exercised........................... (841,462) 13.50
---------
Balance at June 27, 1998.............. 4,886,528 13.98 8,509,792 15.11
Granted............................. 1,550,605 21.88
Cancelled........................... (307,879) 15.89
Exercised........................... (982,769) 14.11
---------
Balance at July 3, 1999............... 5,341,504 $14.66 8,769,749 $16.39
=========
The options outstanding at July 3, 1999 under this plan have exercise
prices ranging from $12.63 to $26.25 and have a weighted average remaining
contractual life of 6.8 years.
Non-Employee Directors Stock Option Plan
The Non-Employee Directors Stock Option Plan adopted in fiscal 1996
permitted the issuance of up to 400,000 shares of common stock to directors who
are not employees of SYSCO. Under this plan, options to purchase 4,000 shares of
common stock at the fair market value on the date of the grant were granted to
each non-employee director annually, provided certain earnings goals were met.
As of July 3, 1999, options for 136,000 shares had been granted to nine
non-employee directors under this plan, of which options for 9,331 shares are
available for exercise. No further grants will be made under this plan, which
was replaced with the Non-Employee Directors Stock Plan.
Non-Employee Directors Stock Plan
The Non-Employee Directors Stock Plan adopted in fiscal 1999 permits the
issuance of up to 400,000 shares of common stock to directors who are not
employees of SYSCO. Under this plan non-employee directors will receive a one
time retainer stock award of 2,000 shares when first elected as a non-employee
director and an annual automatic grant of options to purchase 4,000 shares of
common stock provided certain earnings goals are met. As of July 3, 1999,
options for 40,000 shares had been granted to ten non-employee directors under
this plan, none of which were exercisable.
Employees' Stock Purchase Plan
SYSCO has an Employees' Stock Purchase Plan which permits employees (other
than directors) to invest by means of periodic payroll deductions in SYSCO
common stock at 85% of the closing price on the last business day of each
calendar quarter. During 1999, 945,711 shares of SYSCO common stock were
purchased by the participants as compared to 825,129 purchased in 1998 and
1,022,134 purchased in 1997. The total number of shares which may be sold
pursuant to the plan may not exceed 34,000,000 shares, of which 8,374,202
remained available at July 3, 1999.
Accounting Issues Relating to all Plans
SYSCO accounts for these plans under APB Opinion No. 25 and related
interpretations under which no compensation cost has been recognized. Had
compensation cost for these plans been determined using the fair value method of
SFAS No. 123,
30
33
SYSCO's pro forma net earnings and diluted earnings per share would have been
$357,148,000 and $1.06 in fiscal 1999, $292,824,000 and $0.86 in fiscal 1998
and $298,895,000 and $0.85 in fiscal 1997. The disclosure requirements of SFAS
No. 123 are applicable to options granted after 1995. The pro forma effects for
fiscal 1999, 1998 and 1997 are not necessarily indicative of the pro forma
effects in future years.
The weighted average fair value of options granted was $7.05 and $6.28
during 1999 and 1998, 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 1999 and 1998, respectively;
dividend yield of 1.65% and 1.71%; expected volatility of 23% and 24%; risk-free
interest rates of 5.1% and 6.4%; and expected lives of 8 years.
The weighted average fair value of employee stock purchase rights issued
was $3.86 and $3.14 during fiscal 1999 and 1998, 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 has defined benefit and defined contribution retirement plans for its
employees. Also, the company contributes to various multi-employer plans under
collective bargaining agreements.
The defined contribution 401(k) plan provides that under certain
circumstances the company may make matching contributions of up to 50% of the
first 6% of a participant's compensation. SYSCO's contribution to this plan was
$5,813,000 in 1999, $5,660,000 in 1998 and $4,975,000 in 1997. The defined
benefit pension plans pay benefits to employees at retirement using formulas
based on a participant's years of service and compensation.
SYSCO also has a Management Incentive Plan that compensates key management
personnel for specific performance achievements. The awards under this plan were
$27,197,000 in 1999, $20,478,000 in 1998 and $17,633,000 in 1997 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 plan, SYSCO maintains life insurance policies on the
lives of the participants with carrying values of $55,975,000 at July 3, 1999
and $50,020,000 at June 27, 1998. SYSCO is the sole owner and beneficiary of
such policies.
In addition to providing pension benefits, SYSCO provides certain health
care benefits to eligible retirees and their dependents in the United States.
The funded status of the company's pension and other postretirement benefit
plans is as follows:
PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS
---------------------------- ------------------------------
JULY 3, 1999 JUNE 27, 1998 JULY 3, 1999 JUNE 27, 1998
------------ ------------- ------------- --------------
Change in benefit obligation:
Benefit obligation at beginning of
year.............................. $354,646,000 $261,734,000 $ 1,781,000 $ 2,199,000
Service cost......................... 31,058,000 24,279,000 125,000 154,000
Interest cost........................ 27,138,000 22,437,000 135,000 185,000
Amendments........................... 197,000 498,000 -- --
Actuarial (gain) loss................ (8,749,000) 54,799,000 18,000 (562,000)
Actual expenses...................... (2,418,000) (2,298,000) -- --
Total disbursements.................. (8,753,000) (6,803,000) 13,000 (195,000)
------------ ------------ ----------- -----------
Benefit obligation at end of year.... 393,119,000 354,646,000 2,072,000 1,781,000
------------ ------------ ----------- -----------
Change in plan assets:
Fair value of plan assets at
beginning of year................. 287,482,000 246,513,000 -- --
Actual return on plan assets......... 38,871,000 48,932,000 -- --
Employer contribution................ 15,259,000 1,138,000 (13,000) 195,000
Actual expenses...................... (2,418,000) (2,298,000) -- --
Total disbursements.................. (8,753,000) (6,803,000) 13,000 (195,000)
------------ ------------ ----------- -----------
Fair value of plan assets at end of
year.............................. 330,441,000 287,482,000 -- --
------------ ------------ ----------- -----------
Funded status........................ (62,678,000) (67,164,000) (2,072,000) (1,781,000)
Unrecognized net actuarial loss
(gain)............................ 10,866,000 29,415,000 (3,388,000) (3,623,000)
Unrecognized net (asset) obligation
due to initial application of SFAS
87................................ (2,813,000) (3,660,000) 2,147,000 2,301,000
Unrecognized prior service cost...... (1,612,000) (2,449,000) 589,000 661,000
------------ ------------ ----------- -----------
Accrued benefit cost................. $(56,237,000) $(43,858,000) $(2,724,000) $(2,442,000)
============ ============ =========== ===========
31
34
The assumptions used to value obligations at year end were:
PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS
---------------------------- ------------------------------
JULY 3, 1999 JUNE 27, 1998 JULY 3, 1999 JUNE 27, 1998
------------ ------------- ------------- --------------
Weighted-average assumptions as of
year end:
Discount rate...................... 7.50% 7.25% 7.50% 7.25%
Expected rate of return............ 10.50% 10.50% -- --
Rate of compensation increase...... 4.50% 5.60% -- --
A health care cost trend rate is not used in the calculations because SYSCO
subsidizes the cost of postretirement medical coverage by a fixed dollar amount
with the retiree responsible for the cost of coverage in excess of the subsidy,
including all future cost increases.
The components of net pension and other postretirement benefit costs are as
follows:
PENSION BENEFITS OTHER POSTRETIREMENT BENEFITS
---------------------------- ------------------------------
JULY 3, 1999 JUNE 27, 1998 JULY 3, 1999 JUNE 27, 1998
------------ ------------- ------------- --------------
Components of net periodic
benefit cost:
Service cost................... $ 31,058,000 $ 24,279,000 $ 125,000 $ 154,000
Interest cost.................. 27,138,000 22,437,000 135,000 185,000
Expected return on plan
assets...................... (29,723,000) (25,499,000) -- --
Amortization of prior service
cost........................ (640,000) (677,000) 72,000 72,000
Recognized net actuarial loss
(gain)...................... 652,000 289,000 (216,000) (189,000)
Amortization of net transition
obligation.................. (847,000) (847,000) 153,000 153,000
------------ ------------ --------- ---------
Net pension costs...... $ 27,638,000 $ 19,982,000 $ 269,000 $ 375,000
============ ============ ========= =========
Multi-employer pension costs were $22,375,000 and $19,633,000 in 1999 and
1998, respectively.
The projected benefit obligation and accumulated benefit obligation were
$52,721,000 and $38,860,000, respectively, as of July 3, 1999 and $47,495,000
and $34,910,000, respectively, as of June 27, 1998. There were no pension plans
with accumulated benefit obligations in excess of plan assets.
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.
32
35
QUARTERLY RESULTS (UNAUDITED)
Financial information for each quarter in the years ended July 3, 1999 and
June 27, 1998:
QUARTER ENDED
----------------------------------------------------
JULY 3 FISCAL YEAR
SEPTEMBER 26 DECEMBER 26 MARCH 27 (14 WEEKS) (53 WEEKS)
------------ ----------- ---------- ---------- -----------
(IN THOUSANDS EXCEPT FOR SHARE DATA)
1999
Sales.............................. $4,192,630 $4,246,675 $4,164,877 $4,818,633 $17,422,815
Cost of sales...................... 3,426,045 3,469,496 3,402,463 3,909,856 14,207,860
Operating expenses................. 607,812 616,899 625,111 697,444 2,547,266
Interest expense................... 16,931 18,397 18,414 19,097 72,839
Other, net......................... 170 245 (93) 641 963
---------- ---------- ---------- ---------- -----------
Earnings before income taxes....... 141,672 141,638 118,982 191,595 593,887
Income taxes....................... 55,252 55,239 46,403 74,722 231,616
---------- ---------- ---------- ---------- -----------
Net earnings............. $ 86,420 $ 86,399 $ 72,579 $ 116,873 $ 362,271
========== ========== ========== ========== ===========
Per share:
Diluted net earnings............. $ 0.26 $ 0.26 $ 0.22 $ 0.35 $ 1.08
Cash dividends................... 0.09 0.09 0.10 0.10 0.38
Market price -- high/low......... 26-20 29-23 30-25 32-25 32-20
QUARTER ENDED
----------------------------------------------------
SEPTEMBER 27 DECEMBER 27 MARCH 28 JUNE 27 FISCAL YEAR
------------ ----------- ---------- ---------- -----------
(IN THOUSANDS EXCEPT FOR SHARE DATA)
1998
Sales.............................. $3,828,244 $3,786,096 $3,711,822 $4,001,374 $15,327,536
Cost of sales...................... 3,130,883 3,082,913 3,035,112 3,250,728 12,499,636
Operating expenses................. 553,032 551,889 557,136 574,875 2,236,932
Interest expense................... 13,140 14,500 15,170 15,612 58,422
Other, net......................... (122) (303) 179 299 53
---------- ---------- ---------- ---------- -----------
Earnings before income taxes....... 131,311 137,097 104,225 159,860 532,493
Income taxes....................... 51,211 53,468 40,648 62,345 207,672
---------- ---------- ---------- ---------- -----------
Earnings before accounting
change........................... 80,100 83,629 63,577 97,515 324,821
Accounting change.................. -- (28,053) -- -- (28,053)
---------- ---------- ---------- ---------- -----------
Net earnings............. $ 80,100 $ 55,576 $ 63,577 $ 97,515 $ 296,768
========== ========== ========== ========== ===========
Per share:
Diluted earnings before
accounting change............. $ 0.23 $ 0.24 $ 0.19 $ 0.29 $ 0.95
Diluted earnings accounting
change effect................. -- (0.08) -- -- (0.08)
Diluted net earnings............. 0.23 0.16 0.19 0.29 0.86
Cash dividends................... 0.08 0.08 0.08 0.09 0.33
Market price -- high/low......... 20-17 23-18 27-22 27-22 27-17
Percentage increases -- 1999 vs.
1998:
Sales............................ 10% 12% 12% 20% 14%
Earnings before income taxes..... 8 3 14 20 12
Earnings before accounting
change........................ 8 3 14 20 12
Net earnings..................... 8 55 14 20 22
Diluted earnings per share before
accounting change............. 13 8 16 21 14
Diluted net earnings per share... 13 63 16 21 26
33
36
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
Except as otherwise indicated, the information required by Items 10, 11, 12 and
13 is included in the company's definitive proxy statement which was filed
pursuant to Regulation 14A under the Securities Exchange Act of 1934 on
September 17, 1999 and such portions of said proxy statement are hereby
incorporated by reference thereto.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning Executive Officers is included in Part I (Item 4A) of
this Form 10-K (page 8).
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
34
37
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 18 of this Form 10-K.
2. Financial Statement Schedule. See page 18 of this Form 10-K.
3. Exhibits.
3(a) Restated Certificate of Incorporation incorporated by
reference to Exhibit 3(a) to Form 10-K for the year
ended June 28, 1997 (File No. 1-6544).
3(b)# Bylaws of Sysco Corporation as amended May 12, 1999.
3(c) Form of Amended Certificate of Designation
Preferences and Rights of Series A Junior
Participating Preferred Stock, incorporated by
reference to Exhibit 3(c) to Form 10-K for the year
ended June 29, 1996 (File No. 1-6544).
4(a) Sixth Amendment and Restatement of Competitive
Advance and Revolving Credit Facility Agreement dated
May 31, 1996, incorporated by reference to Exhibit
4(a) to Form 10-K in the year ended June 27, 1996
(File No. 1-6544).
4(b) Agreement and Seventh Amendment to Competitive
Advance and Revolving Credit Facility Agreement dated
as of June 27, 1997 incorporated by reference to
Exhibit 4(a) to Form 10-K for the year ended June 28,
1997 (File No. 1-6544).
4(c)# Agreement and Eighth Amendment to Competitive Advance
and Revolving Credit Facility Agreement dated as of
June 22, 1998.
4(d) Senior Debt, dated as of June 15, 1995, between Sysco
Corporation and First Union National Bank of North
Carolina, Trustee, incorporated by reference to
Exhibit 4(a) to Registration Statement on Form S-3
filed June 6, 1995 (File No. 33-60023).
35
38
4(e) First Supplemental Indenture, dated June 27, 1995,
between Sysco Corporation and First Union Bank of
North Carolina, Trustee as amended, incorporated by
reference to Exhibit 4(e) to Form 10-K for the year
ended June 29, 1996 (File No. 1-6544).
4(f) Second Supplemental Indenture, dated as of May 1,
1996, between Sysco Corporation and First Union Bank
of North Carolina, Trustee as amended, incorporated
by reference to Exhibit 4(f) to Form 10-K for the
year ended June 29, 1996 (File No. 1-6544).
4(g) Third Supplemental Indenture, dated as of April 25,
1997, between Sysco Corporation and First Union
National Bank of North Carolina, Trustee incorporated
by reference to Exhibit 4(g) to Form 10-K for the
year ended June 28, 1997 (File No. 1-6544).
4(h) Fourth Supplemental Indenture, dated as of April 25,
1997, between Sysco Corporation and First Union
National Bank of North Carolina, Trustee incorporated
by reference to Exhibit 4(h) to Form 10-K for the
year ended June 28,1997 (File No. 1-6544).
4(i) Fifth Supplemental Indenture, dated as of July 27,
1998 between Sysco Corporation and First Union
National Bank, Trustee incorporated by reference to
Exhibit 4 (h) to Form 10-K for the year ended June
27, 1998 (File No. 1-6554).
10(a)+ Amended and Restated Sysco Corporation Executive
Deferred Compensation Plan incorporated by reference
to Exhibit 10(a) to Form 10-K for the year ended July
1, 1995 (File No. 1-6544).
10(b)+ Fifth Amended and Restated Sysco Corporation
Supplemental Executive Retirement Plan incorporated
by reference to Exhibit 10(b) to Form 10-K for the
year ended June 28, 1997 (File No. 1-6544).
10(c)# Sysco Corporation Employee Incentive Stock Option
Plan.
10(d)+ Sysco Corporation 1995 Management Incentive Plan
incorporated by reference to Exhibit 10(e) to Form
10-K for the year ended July 1, 1995 (File No.
1-6544).
10(e)+# Sysco Corporation 1991 Stock Option Plan.
36
39
10(f)+ Amendments to Sysco Corporation 1991 Stock Option
Plan dated effective September 4, 1997, incorporated
by reference to Exhibit 10(f) to Form 10-K for the
year ended June 28, 1997 (File No. 1-6554).
10(g)+# Amendments to Sysco Corporation 1991 Stock Option
Plan dated effective November 5, 1998.
10(h)+ Sysco Corporation Amended and Restated Non-Employee
Directors Stock Option Plan, incorporated by
reference to Exhibit 10(g) to Form 10-K for the year
ended June 28, 1997 (File No. 1-6544).
10(i)+# Amendment to the Amended and Restated Non-Employee
Directors Stock Option Plan dated effective November
5, 1998.
10(j)+ Sysco Corporation Non-Employee Directors Stock
Plan incorporated by reference to Appendix A of the
1998 Proxy Statement (File No. 1-06544).
10(k) Amended and Restated Shareholder Rights Agreement,
incorporated by reference to Registration Statement
on Form 8-A/A, filed May 29, 1996 (File No. 1-06544).
10(l) Amendment to the Amended and Restated Shareholder
Rights Agreement dated as of May 20, 1996,
incorporated by reference to Exhibit 1 to
Registration Statement on Form 8-A/A, filed July 16,
1999 (File No. 1-06544).
21# Subsidiaries of the Registrant
23# Independent Public Accountants' Consent
27# Financial Data Schedule
--------------------------------
+ Executive Compensation Arrangement pursuant to
601(b)(10)(iii)(A) of Regulation S-K
# Filed Herewith
37
40
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 3rd day of
September, 1999.
SYSCO CORPORATION
By /s/ BILL M. LINDIG
-----------------------------
Bill M. Lindig
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities indicated and on the date indicated above.
PRINCIPAL EXECUTIVE, FINANCIAL & ACCOUNTING OFFICERS:
/s/ BILL M. LINDIG
- ------------------------------------- Chairman of the Board
Bill M. Lindig and Chief Executive Officer
/s/ JOHN K. STUBBLEFIELD, JR.
- ------------------------------------- Senior Vice President,
John K. Stubblefield, Jr. Finance and Administration
38
41
DIRECTORS:
/s/ JOHN W. ANDERSON /s/ RICHARD G. MERRILL
- --------------------------------------- -------------------------------
John W. Anderson Richard G. Merrill
- --------------------------------------- -------------------------------
Gordon M. Bethune Frank H. Richardson
/s/ COLIN G. CAMPBELL /s/ RICHARD J. SCHNIEDERS
- --------------------------------------- -------------------------------
Colin G. Campbell Richard J. Schnieders
/s/ CHARLES H. COTROS /s/ PHYLLIS S. SEWELL
- --------------------------------------- -------------------------------
Charles H. Cotros Phyllis S. Sewell
/s/ JUDITH B. CRAVEN /s/ ARTHUR J. SWENKA
- --------------------------------------- -------------------------------
Judith B. Craven Arthur J. Swenka
/s/ FRANK A. GODCHAUX III /s/ THOMAS B. WALKER, JR.
- --------------------------------------- -------------------------------
Frank A. Godchaux III Thomas B. Walker, Jr.
/s/ JONATHAN GOLDEN /s/ JOHN F. WOODHOUSE
- --------------------------------------- -------------------------------
Jonathan Golden John F. Woodhouse
/s/ BILL M. LINDIG
- ---------------------------------------
Bill M. Lindig
39
42
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
June 28, 1997......... accounts $16,380,000 $21,588,000 $ 455,000 $21,183,000 $17,240,000
Allowance
For year ended for doubtful
June 27, 1998......... accounts $17,240,000 $22,959,000 $1,100,000 $21,218,000 $20,081,000
Allowance
For year ended for doubtful
July 3, 1999.......... accounts $20,081,000 $26,208,000 $ -- $25,194,000 $21,095,000
(1) Allowance accounts resulting from acquisitions.
(2) Customer accounts written off, net of recoveries.
S-1
43
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
3(a) Restated Certificate of Incorporation incorporated by reference
to Exhibit 3(a) to Form 10-K for the year ended June 28, 1997
(File No. 1-6544).
3(b)# Bylaws of Sysco Corporation as amended May 12, 1999.
3(c) Form of Amended Certificate of Designation Preferences and Rights
of Series A Junior Participating Preferred Stock, incorporated by
reference to Exhibit 3(c) to Form 10-K for the year ended June
29, 1996 (File No. 1-6544).
4(a) Sixth Amendment and Restatement of Competitive Advance and
Revolving Credit Facility Agreement dated May 31, 1996,
incorporated by reference to Exhibit 4(a) to Form 10-K in the
year ended June 27, 1996 (File No. 1-6544).
4(b) Agreement and Seventh Amendment to Competitive Advance and
Revolving Credit Facility Agreement dated as of June 27, 1997
incorporated by reference to Exhibit 4(a) to Form 10-K for the
year ended June 28, 1997 (File No. 1-6544).
4(c)# Agreement and Eighth Amendment to Competitive Advance and
Revolving Credit Facility Agreement dated as of June 22, 1998.
4(d) Senior Debt, dated as of June 15, 1995, between Sysco Corporation
and First Union National Bank of North Carolina, Trustee,
incorporated by reference to Exhibit 4(a) to Registration
Statement on Form S-3 filed June 6, 1995 (File No. 33-60023).
44
4(e) First Supplemental Indenture, dated June 27, 1995, between Sysco
Corporation and First Union Bank of North Carolina, Trustee as
amended, incorporated by reference to Exhibit 4(e) to Form 10-K
for the year ended June 29, 1996 (File No. 1-6544).
4(f) Second Supplemental Indenture, dated as of May 1, 1996, between
Sysco Corporation and First Union Bank of North Carolina, Trustee
as amended, incorporated by reference to Exhibit 4(f) to Form
10-K for the year ended June 29, 1996 (File No. 1-6544).
4(g) Third Supplemental Indenture, dated as of April 25, 1997, between
Sysco Corporation and First Union National Bank of North
Carolina, Trustee incorporated by reference to Exhibit 4(g) to
Form 10-K for the year ended June 28, 1997 (File No. 1-6544).
4(h) Fourth Supplemental Indenture, dated as of April 25, 1997,
between Sysco Corporation and First Union National Bank of North
Carolina, Trustee incorporated by reference to Exhibit 4(h) to
Form 10-K for the year ended June 28,1997 (File No. 1-6544).
4(i) Fifth Supplemental Indenture, dated as of July 27, 1998 between
Sysco Corporation and First Union National Bank, Trustee
incorporated by reference to Exhibit 4 (h) to Form 10-K for the
year ended June 27, 1998 (File No. 1-6554).
10(a)+ Amended and Restated Sysco Corporation Executive Deferred
Compensation Plan incorporated by reference to Exhibit 10(a) to
Form 10-K for the year ended July 1, 1995 (File No. 1-6544).
10(b)+ Fifth Amended and Restated Sysco Corporation Supplemental
Executive Retirement Plan incorporated by reference to Exhibit
10(b) to Form 10-K for the year ended June 28, 1997 (File No.
1-6544).
10(c)# Sysco Corporation Employee Incentive Stock Option Plan.
10(d)+ Sysco Corporation 1995 Management Incentive Plan incorporated by
reference to Exhibit 10(e) to Form 10-K for the year ended July
1, 1995 (File No. 1-6544).
10(e)+# Sysco Corporation 1991 Stock Option Plan.
45
10(f)+ Amendments to Sysco Corporation 1991 Stock Option Plan dated
effective September 4, 1997, incorporated by reference to Exhibit
10(f) to Form 10-K for the year ended June 28, 1997 (File No.
1-6554).
10(g)+# Amendments to Sysco Corporation 1991 Stock Option Plan dated
effective November 5, 1998.
10(h)+ Sysco Corporation Amended and Restated Non-Employee Directors
Stock Option Plan, incorporated by reference to Exhibit 10(g) to
Form 10-K for the year ended June 28, 1997 (File No. 1-6544).
10(i)+# Amendment to the Amended and Restated Non-Employee Directors
Stock Option Plan dated effective November 5, 1998.
10(j)+ Sysco Corporation Non-Employee Directors Stock Plan incorporated
by reference to Appendix A of the 1998 Proxy Statement
(File No. 1-06544).
10(k) Amended and Restated Shareholder Rights Agreement, incorporated
by reference to Registration Statement on Form 8-A/A, filed May
29, 1996 (File No. 1-06544).
10(l) Amendment to the Amended and Restated Shareholder Rights
Agreement dated as of May 20, 1996, incorporated by reference to
Exhibit 1 to Registration Statement on Form 8-A/A, filed July 16,
1999 (File No. 1-06544).
21# Subsidiaries of the Registrant
23# Independent Public Accountants' Consent
27# Financial Data Schedule
-------------------------------
+ Executive Compensation Arrangement pursuant to 601(b)(10)(iii)
(A) of Regulation S-K
# Filed Herewith