e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 29, 2008
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-6544
SYSCO CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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74-1648137
(IRS employer
identification number) |
1390 Enclave Parkway
Houston, Texas 77077-2099
(Address of principal executive offices)
(Zip code)
Registrants telephone number, including area code: (281) 584-1390
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act.)
Yes o No þ
600,636,962 shares of the registrants common stock were outstanding as of April 26, 2008.
1
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
SYSCO CORPORATION and its Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except for Share Data)
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Mar. 29, 2008 |
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June 30, 2007 |
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Mar. 31, 2007 |
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(unaudited) |
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(unaudited) |
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ASSETS |
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Current assets |
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Cash |
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$ |
243,919 |
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$ |
207,872 |
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$ |
180,943 |
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Accounts and notes receivable, less
allowances of $65,755, $31,841 and $60,105 |
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2,737,464 |
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2,610,885 |
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2,634,273 |
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Inventories |
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1,836,683 |
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1,714,187 |
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1,693,084 |
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Prepaid expenses and other current assets |
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62,432 |
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123,284 |
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66,939 |
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Prepaid income taxes |
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19,318 |
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Total current assets |
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4,880,498 |
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4,675,546 |
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4,575,239 |
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Plant and equipment at cost, less depreciation |
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2,857,230 |
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2,721,233 |
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2,649,708 |
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Other assets |
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Goodwill |
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1,406,700 |
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1,355,313 |
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1,329,745 |
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Intangibles, less amortization |
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90,242 |
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91,366 |
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89,977 |
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Restricted cash |
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92,135 |
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101,929 |
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101,105 |
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Prepaid pension cost |
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416,151 |
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352,390 |
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423,607 |
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Other assets |
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218,029 |
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221,154 |
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257,940 |
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Total other assets |
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2,223,257 |
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2,122,152 |
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2,202,374 |
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Total assets |
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$ |
9,960,985 |
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$ |
9,518,931 |
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$ |
9,427,321 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities |
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Notes payable |
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$ |
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$ |
18,900 |
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$ |
10,500 |
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Accounts payable |
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2,033,198 |
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1,981,190 |
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1,982,126 |
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Accrued expenses |
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846,989 |
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922,582 |
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810,216 |
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Income taxes |
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159,628 |
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119,919 |
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Deferred taxes |
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385,878 |
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488,849 |
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357,629 |
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Current maturities of long-term debt |
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4,504 |
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3,568 |
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104,882 |
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Total current liabilities |
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3,430,197 |
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3,415,089 |
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3,385,272 |
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Other liabilities |
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Long-term debt |
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2,040,546 |
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1,758,227 |
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1,633,091 |
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Deferred taxes |
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554,137 |
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626,695 |
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688,239 |
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Other long-term liabilities |
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655,158 |
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440,520 |
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385,198 |
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Total other liabilities |
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3,249,841 |
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2,825,442 |
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2,706,528 |
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Commitments and contingencies |
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Shareholders equity |
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Preferred stock, par value $1 per share
Authorized 1,500,000 shares, issued none |
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Common stock, par value $1 per share
Authorized 2,000,000,000 shares, issued
765,174,900 shares |
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765,175 |
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765,175 |
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765,175 |
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Paid-in capital |
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697,970 |
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637,154 |
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618,087 |
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Retained earnings |
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5,839,698 |
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5,544,078 |
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5,357,045 |
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Accumulated other comprehensive income (loss) |
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47,422 |
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(4,061 |
) |
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67,441 |
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7,350,265 |
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6,942,346 |
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6,807,748 |
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Less cost of treasury stock, 165,088,829,
153,334,523 and 148,014,133 shares |
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4,069,318 |
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3,663,946 |
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3,472,227 |
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Total shareholders equity |
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3,280,947 |
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3,278,400 |
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3,335,521 |
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Total liabilities and shareholders equity |
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$ |
9,960,985 |
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$ |
9,518,931 |
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$ |
9,427,321 |
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Note: The June 30, 2007 balance sheet has been derived from the audited financial statements at that date.
See Notes to Consolidated Financial Statements.
2
SYSCO CORPORATION and its Consolidated Subsidiaries
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
(In Thousands, Except for Share and Per Share Data)
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39-Week Period Ended |
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13-Week Period Ended |
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Mar. 29, 2008 |
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Mar. 31, 2007 |
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Mar. 29, 2008 |
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Mar. 31, 2007 |
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Sales |
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$ |
27,791,906 |
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$ |
25,813,781 |
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$ |
9,146,557 |
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$ |
8,572,961 |
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Cost of sales |
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22,498,463 |
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20,856,982 |
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7,412,036 |
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6,938,867 |
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Gross margin |
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5,293,443 |
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4,956,799 |
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1,734,521 |
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1,634,094 |
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Operating expenses |
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3,972,154 |
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3,757,800 |
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1,316,877 |
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1,249,951 |
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Operating income |
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1,321,289 |
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1,198,999 |
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417,644 |
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384,143 |
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Interest expense |
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84,030 |
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79,472 |
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28,744 |
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25,700 |
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Other income, net |
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(18,660 |
) |
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(14,949 |
) |
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(7,285 |
) |
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(2,536 |
) |
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Earnings before income taxes |
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1,255,919 |
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1,134,476 |
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396,185 |
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360,979 |
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Income taxes |
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483,881 |
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436,791 |
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155,284 |
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139,980 |
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Net earnings |
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$ |
772,038 |
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$ |
697,685 |
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$ |
240,901 |
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$ |
220,999 |
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Net earnings: |
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Basic earnings per share |
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$ |
1.27 |
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$ |
1.13 |
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$ |
0.40 |
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$ |
0.36 |
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Diluted earnings per share |
|
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1.26 |
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|
1.11 |
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|
0.40 |
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0.35 |
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Average shares outstanding |
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607,380,306 |
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618,988,223 |
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603,170,150 |
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617,678,739 |
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Diluted shares outstanding |
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612,241,790 |
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626,507,744 |
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605,773,862 |
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625,750,925 |
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Dividends declared per common share |
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$ |
0.63 |
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$ |
0.55 |
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$ |
0.22 |
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$ |
0.19 |
|
See Notes to Consolidated Financial Statements.
3
SYSCO CORPORATION and its Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In Thousands)
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39-Week Period Ended |
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13-Week Period Ended |
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Mar. 29, 2008 |
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Mar. 31, 2007 |
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Mar. 29, 2008 |
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Mar. 31, 2007 |
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Net earnings |
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$ |
772,038 |
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$ |
697,685 |
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$ |
240,901 |
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$ |
220,999 |
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Other comprehensive income, net of tax: |
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|
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|
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|
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|
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|
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Foreign currency translation adjustment |
|
|
23,977 |
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(17,497 |
) |
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(25,919 |
) |
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|
5,191 |
|
Amortization of cash flow hedge |
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|
320 |
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|
320 |
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|
107 |
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|
107 |
|
Amortization of unrecognized prior
service cost |
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2,835 |
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|
946 |
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Amortization of unrecognized actuarial
losses (gains), net |
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1,502 |
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|
500 |
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Amortization of unrecognized transition
obligation |
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69 |
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23 |
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Total other comprehensive income (loss) |
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28,703 |
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(17,177 |
) |
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(24,343 |
) |
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|
5,298 |
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Comprehensive income |
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$ |
800,741 |
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$ |
680,508 |
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$ |
216,558 |
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$ |
226,297 |
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See Notes to Consolidated Financial Statements.
4
SYSCO CORPORATION and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS (Unaudited)
(In Thousands)
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39-Week Period Ended |
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Mar. 29, 2008 |
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Mar. 31, 2007 |
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Cash flows from operating activities: |
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Net earnings |
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$ |
772,038 |
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$ |
697,685 |
|
Adjustments to reconcile net earnings to cash provided by
operating activities: |
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Share-based compensation expense |
|
|
61,154 |
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|
75,749 |
|
Depreciation and amortization |
|
|
275,747 |
|
|
|
270,236 |
|
Deferred tax provision |
|
|
450,569 |
|
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|
405,228 |
|
Provision for losses on receivables |
|
|
25,926 |
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|
|
23,251 |
|
Gain on sale of assets |
|
|
(2,496 |
) |
|
|
(5,791 |
) |
Additional investment in certain assets and liabilities,
net of effect of businesses acquired: |
|
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|
|
|
|
|
|
(Increase) in receivables |
|
|
(138,425 |
) |
|
|
(170,145 |
) |
(Increase) in inventories |
|
|
(112,867 |
) |
|
|
(86,722 |
) |
Decrease (increase) in prepaid expenses and other current assets |
|
|
61,230 |
|
|
|
(7,933 |
) |
Increase in accounts payable |
|
|
41,082 |
|
|
|
101,707 |
|
(Decrease) increase in accrued expenses |
|
|
(81,931 |
) |
|
|
47,928 |
|
(Decrease) in accrued income taxes |
|
|
(362,878 |
) |
|
|
(352,399 |
) |
Decrease (increase) in other assets |
|
|
4,427 |
|
|
|
(26,976 |
) |
Increase (decrease) in other long-term liabilities and prepaid
pension cost, net |
|
|
2,398 |
|
|
|
(12,621 |
) |
Excess tax benefits from share-based compensation
arrangements |
|
|
(3,352 |
) |
|
|
(7,032 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
992,622 |
|
|
|
952,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Additions to plant and equipment |
|
|
(392,706 |
) |
|
|
(457,174 |
) |
Proceeds from sales of plant and equipment |
|
|
11,428 |
|
|
|
14,119 |
|
Acquisition of businesses, net of cash acquired |
|
|
(50,464 |
) |
|
|
(48,534 |
) |
Decrease (increase) in restricted cash |
|
|
2,794 |
|
|
|
(1,331 |
) |
|
|
|
|
|
|
|
Net cash used for investing activities |
|
|
(428,948 |
) |
|
|
(492,920 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Bank and commercial paper borrowings (repayments), net |
|
|
(486,122 |
) |
|
|
(10,235 |
) |
Other debt borrowings |
|
|
755,892 |
|
|
|
4,480 |
|
Other debt repayments |
|
|
(5,497 |
) |
|
|
(7,418 |
) |
Debt issuance costs |
|
|
(4,192 |
) |
|
|
(7 |
) |
Common stock reissued from treasury |
|
|
102,438 |
|
|
|
184,950 |
|
Treasury stock purchases |
|
|
(529,179 |
) |
|
|
(329,342 |
) |
Dividends paid |
|
|
(365,333 |
) |
|
|
(328,029 |
) |
Excess tax benefits from share-based compensation
arrangements |
|
|
3,352 |
|
|
|
7,032 |
|
|
|
|
|
|
|
|
Net cash used for financing activities |
|
|
(528,641 |
) |
|
|
(478,569 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash |
|
|
1,014 |
|
|
|
(1,630 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
|
36,047 |
|
|
|
(20,954 |
) |
Cash at beginning of period |
|
|
207,872 |
|
|
|
201,897 |
|
|
|
|
|
|
|
|
Cash at end of period |
|
$ |
243,919 |
|
|
$ |
180,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
88,514 |
|
|
$ |
86,733 |
|
Income taxes |
|
|
386,570 |
|
|
|
383,076 |
|
See Notes to Consolidated Financial Statements.
SYSCO CORPORATION and its Consolidated Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Basis of Presentation
Unless this Form 10-Q indicates otherwise or the context otherwise requires, the terms
we, our, us, SYSCO, or the company as used in this Form 10-Q refer to Sysco
Corporation together with its consolidated subsidiaries and divisions.
The consolidated financial statements have been prepared by the company, without audit,
with the exception of the June 30, 2007 consolidated balance sheet which was taken from
the audited financial statements included in the companys Fiscal 2007 Annual Report on
Form 10-K. The financial statements include consolidated balance sheets, consolidated
results of operations, consolidated statements of comprehensive income and consolidated
cash flows. Certain amounts in the prior periods presented have been reclassified to
conform to the fiscal 2008 presentation. In the opinion of management, all
adjustments, which consist of normal recurring adjustments, necessary to present fairly
the financial position, results of operations, comprehensive income and cash flows for
all periods presented have been made.
These financial statements should be read in conjunction with the audited financial
statements and notes thereto included in the companys Fiscal 2007 Annual Report on
Form 10-K.
A review of the financial information herein has been made by Ernst & Young LLP,
independent auditors, in accordance with established professional standards and
procedures for such a review. A report from Ernst & Young LLP concerning their review
is included as Exhibit 15.1 to this Form 10-Q.
2. Changes in Accounting
SFAS 158
As of June 30, 2007, SYSCO early adopted the measurement date provision of FASB Statement
of Financial Accounting Standards (SFAS) No. 158, Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans an amendment of FASB Statements No. 87,
88, 106, and 132(R) (SFAS 158). The measurement date provision requires an employer to
measure a plans assets and benefit obligations as of the end of the employers fiscal
year. As a result, beginning in fiscal 2008, the measurement date for SYSCOs defined
benefit pension and other postretirement plans corresponds with fiscal year-end rather
than the May 31st measurement date previously used. The company performed
measurements as of May 31, 2007 and June 30, 2007 of the plan assets and benefit
obligations. SYSCO recorded a charge to beginning retained earnings on July 1, 2007 of
$3,572,000, net of tax, for the impact of the difference in our pension expense between
the two measurement dates. The company also recorded a benefit to beginning accumulated
other comprehensive income (loss) on July 1, 2007 of $22,780,000, net of tax, for the
impact of the difference in the recognition provision between the two measurement dates.
FIN 48
Effective July 1, 2007, SYSCO adopted FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes an Interpretation of FASB Statement No. 109 (FIN 48),
which clarifies the accounting for uncertainty in income taxes recognized in accordance
with SFAS No. 109, Accounting for Income Taxes (SFAS 109). FIN 48 clarifies the
application of SFAS 109 by defining criteria that an individual tax position must meet
for any part of the
benefit of that position to be recognized in the financial statements. Additionally, FIN
48 provides guidance on the measurement, derecognition, classification and disclosure of
tax positions, along with accounting for the related interest and penalties. The impact
of adopting this standard is discussed in Note 9, Income Taxes.
3. New Accounting Standards
SFAS 141(R)
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (SFAS 141(R)),
which establishes principles and requirements for how an acquirer recognizes and measures
in its financial statements the identifiable assets acquired, the liabilities assumed and
any noncontrolling interest in a business combination. This statement also establishes
recognition and measurement principles for the goodwill acquired in a business
combination and disclosure requirements to enable financial statement users to evaluate
the nature and financial effects of the business combination. SYSCO will apply this
statement primarily for business combinations beginning in fiscal 2010. Earlier
application of the standard is prohibited.
FSP 157-2
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157),
which establishes a common definition for fair value under generally accepted accounting
principles, establishes a framework for measuring fair value and expands disclosure
requirements about such fair value measurements. In February 2008, the FASB issued FASB
Staff Position 157-2, Effective Date of FASB Statement No. 157 (FSP 157-2), which
partially defers the effective date of SFAS No. 157 for one year for non-financial assets
and liabilities that are recognized or disclosed at fair value in the financial
statements on a non-recurring basis. Consequently, SFAS 157 will be effective for SYSCO
in fiscal 2009 for financial assets and liabilities carried at fair value and
non-financial assets and liabilities that are recognized or disclosed at fair value on a
recurring basis. As a result of the deferral, SFAS 157 will be effective in fiscal 2010
for non-recurring, non-financial assets and liabilities that are recognized or disclosed
at fair value. The company is continuing to evaluate the impact of the provisions of SFAS
157.
SFAS 161
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments
and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161
requires enhanced disclosures about an entitys derivative and hedging activities and
thereby improves the transparency of financial reporting. This Statement will be
effective for SYSCOs financial statements beginning with the third quarter of fiscal
2009. The company is currently evaluating the impact the adoption of SFAS 161 may have
on its financial statement disclosures.
4. Restricted Cash
SYSCO is required by its insurers to collateralize a part of the self-insured portion of
its workers compensation and liability claims. SYSCO has chosen to satisfy these
collateral requirements by depositing funds in insurance trusts or by issuing letters of
credit.
In addition, for certain acquisitions, SYSCO has placed funds into escrow to be disbursed
to the sellers in the event that specified operating results are attained or
contingencies are
resolved. Escrowed funds in the amount of $7,000,000 related to certain acquisitions
were released to sellers of acquired businesses during the first 39 weeks of fiscal 2008.
In addition, escrowed funds in the amount of $2,000,000 were released from escrow
related to an acquisition for which the contingent consideration period expired without
the additional consideration being earned.
A summary of restricted cash balances appears below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mar. 29, 2008 |
|
|
June 30, 2007 |
|
|
Mar. 31, 2007 |
|
Funds deposited in insurance trusts |
|
$ |
92,135,000 |
|
|
$ |
92,929,000 |
|
|
$ |
92,105,000 |
|
Escrow funds related to acquisitions |
|
|
|
|
|
|
9,000,000 |
|
|
|
9,000,000 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
92,135,000 |
|
|
$ |
101,929,000 |
|
|
$ |
101,105,000 |
|
|
|
|
|
|
|
|
|
|
|
5. Debt
In September 2007, an agreement was signed on the revolving credit facility supporting
the companys U.S. and Canadian commercial paper programs, which increased the facility
amount to $1,000,000,000. In addition, the termination date on the facility was extended
from November 4, 2011 to November 4, 2012.
In January 2008, the SEC granted SYSCOs request to terminate its then existing shelf
registration statement that was filed with the SEC in April 2005 for the issuance of debt
securities. In February 2008, SYSCO filed with the SEC an automatically effective
well-known seasoned issuer shelf registration statement for the issuance of up to
$1,000,000,000 in debt securities.
In February 2008, SYSCO issued 4.20% senior notes totaling $250,000,000 due February 12,
2013 (the 2013 notes) and 5.25% senior notes totaling $500,000,000 due February 12,
2018 (the 2018 notes) under its February 2008 shelf registration. The 2013 and 2018
notes, which were priced at 99.835% and 99.310% of par, respectively, are unsecured, are
not subject to any sinking fund requirement and include a redemption provision which
allows SYSCO to retire the notes at any time prior to maturity at the greater of par plus
accrued interest or an amount designed to ensure that the noteholders are not penalized
by the early redemption. Proceeds from the notes were utilized to retire commercial
paper issuances outstanding as of February 2008.
As of March 29, 2008, SYSCO had uncommitted bank lines of credit which provided for
unsecured borrowings for working capital of up to $145,000,000, of which none was
outstanding as of March 29, 2008.
As of March 29, 2008, SYSCOs outstanding commercial paper issuances were $64,604,000 and
were classified as long-term debt since the companys commercial paper programs are
supported by its long-term revolving credit facility in the amount of $1,000,000,000.
During the 39-week period ended March 29, 2008, the aggregate of commercial paper
issuances and short-term bank borrowings ranged from approximately $64,194,000 to
$1,133,241,000.
6. Employee Benefit Plans
The components of net benefit cost for the 39-week periods presented are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
Other Postretirement Plans |
|
|
|
Mar. 29, 2008 |
|
|
Mar. 31, 2007 |
|
|
Mar. 29, 2008 |
|
|
Mar. 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
67,927,000 |
|
|
$ |
63,492,000 |
|
|
$ |
363,000 |
|
|
$ |
339,000 |
|
Interest cost |
|
|
75,913,000 |
|
|
|
68,484,000 |
|
|
|
427,000 |
|
|
|
399,000 |
|
Expected return on plan assets |
|
|
(101,509,000 |
) |
|
|
(87,558,000 |
) |
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
4,490,000 |
|
|
|
4,264,000 |
|
|
|
109,000 |
|
|
|
151,000 |
|
Recognized net actuarial loss (gain) |
|
|
2,556,000 |
|
|
|
7,266,000 |
|
|
|
(117,000 |
) |
|
|
(99,000 |
) |
Amortization of net transition
obligation |
|
|
|
|
|
|
|
|
|
|
114,000 |
|
|
|
114,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
49,377,000 |
|
|
$ |
55,948,000 |
|
|
$ |
896,000 |
|
|
$ |
904,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of net benefit cost for the 13-week periods presented are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
Other Postretirement Plans |
|
|
|
Mar. 29, 2008 |
|
|
Mar. 31, 2007 |
|
|
Mar. 29, 2008 |
|
|
Mar. 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
22,643,000 |
|
|
$ |
21,164,000 |
|
|
$ |
121,000 |
|
|
$ |
113,000 |
|
Interest cost |
|
|
25,304,000 |
|
|
|
22,828,000 |
|
|
|
142,000 |
|
|
|
133,000 |
|
Expected return on plan assets |
|
|
(33,837,000 |
) |
|
|
(29,186,000 |
) |
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
1,498,000 |
|
|
|
1,421,000 |
|
|
|
37,000 |
|
|
|
50,000 |
|
Recognized net actuarial loss (gain) |
|
|
851,000 |
|
|
|
2,422,000 |
|
|
|
(39,000 |
) |
|
|
(33,000 |
) |
Amortization of net transition
obligation |
|
|
|
|
|
|
|
|
|
|
38,000 |
|
|
|
38,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
16,459,000 |
|
|
$ |
18,649,000 |
|
|
$ |
299,000 |
|
|
$ |
301,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SYSCOs contributions to its defined benefit plans were $69,237,000 and $68,168,000 during
the 39-week periods ended March 29, 2008 and March 31, 2007, respectively.
Although contributions to its qualified pension plan (Retirement Plan) are not
required to meet ERISA minimum funding requirements, the company anticipates it will
make voluntary contributions of approximately $80,000,000 during fiscal 2008, of which
$60,000,000 have been made through March 29, 2008. The companys contributions to the
Supplemental Executive Retirement Plan (SERP) and other post-retirement plans are made
in the amounts needed to fund current year benefit payments. The estimated fiscal 2008
contributions to fund benefit payments for the SERP and other post-retirement plans
are $12,433,000 and $268,000, respectively.
7. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39-Week Period Ended |
|
|
13-Week Period Ended |
|
|
|
Mar. 29, 2008 |
|
|
Mar. 31, 2007 |
|
|
Mar. 29, 2008 |
|
|
Mar. 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
772,038,000 |
|
|
$ |
697,685,000 |
|
|
$ |
240,901,000 |
|
|
$ |
220,999,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average basic shares outstanding |
|
|
607,380,306 |
|
|
|
618,988,223 |
|
|
|
603,170,150 |
|
|
|
617,678,739 |
|
Dilutive effect of employee and director
stock options |
|
|
4,861,484 |
|
|
|
7,519,521 |
|
|
|
2,603,712 |
|
|
|
8,072,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average diluted shares outstanding |
|
|
612,241,790 |
|
|
|
626,507,744 |
|
|
|
605,773,862 |
|
|
|
625,750,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
1.27 |
|
|
$ |
1.13 |
|
|
$ |
0.40 |
|
|
$ |
0.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
1.26 |
|
|
$ |
1.11 |
|
|
$ |
0.40 |
|
|
$ |
0.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The number of options that were not included in the diluted earnings per share
calculation because the effect would have been anti-dilutive was approximately 32,700,000
and 22,000,000 for the first 39 weeks of fiscal 2008 and 2007, respectively. The number
of options that were not included in the diluted earnings per share calculation because
the effect would have been anti-dilutive was approximately 46,500,000 and 14,000,000 for
the third quarter of fiscal 2008 and 2007, respectively.
8. Share-Based Compensation
SYSCO provides compensation benefits to employees and non-employee directors under
several share-based payment arrangements including the 2007 Stock Incentive Plan, the
2005 Non-Employee Directors Stock Plan, the Employees Stock Purchase Plan and the 2005
Management Incentive Plan.
SYSCO accounts for share-based compensation using the fair value recognition provisions
of FASB Statement No. 123(R), Share-Based Payment.
Stock Option Plans
SYSCOs 2007 Stock Incentive Plan was adopted in November 2007 and provides for the
issuance of up to 30,000,000 shares of SYSCO common stock for share-based awards to
directors, officers and other employees of the company and its subsidiaries at the fair
market value (as defined in the plan) at the date of grant. Under the 2007 Stock
Incentive Plan, grants may be made of options, stock appreciation rights, restricted
stock, restricted stock units and other types of stock-based awards. In the first 39
weeks of fiscal 2008, options to purchase 6,415,800 shares were granted to employees from
this plan.
Options to purchase 6,504,200 shares were granted to employees in the first 39 weeks of
fiscal 2007 from the 2004 Stock Option Plan. No further grants will be made from the
2004 Plan, which was replaced by the 2007 Stock Incentive Plan discussed above.
In the first 39 weeks of fiscal 2008, 52,430 shares of restricted stock were granted to
non-employee directors from the 2005 Non-Employee Directors Stock Plan. In the first 39
weeks of fiscal 2007, 42,000 shares of restricted stock and options to purchase 35,000
shares were granted to non-employee directors from the 2005 Non-Employee Directors Stock
Plan. Of the 42,000 shares of restricted stock granted to non-employee directors in
fiscal 2007, 12,000 shares in the aggregate were issued to two new non-employee directors
as one-time retainer awards.
The fair value of each option award is estimated as of the date of grant using a
Black-Scholes option pricing model. The weighted average grant-date fair value per share
of options granted during the 39-week periods ended March 29, 2008 and March 31, 2007 was
$6.50 and $6.85, respectively.
Employees Stock Purchase Plan
In November 2007, the SYSCO Employees Stock Purchase Plan was amended to reserve an
additional 6,000,000 shares of SYSCO common stock for issuance under the plan.
Shares of SYSCO common stock purchased by plan participants under the SYSCO Employees
Stock Purchase Plan during the first 39 weeks of fiscal 2008 and 2007 were 1,287,844 and
1,286,176, respectively.
The weighted average fair value per share of employee stock purchase rights issued
pursuant to the Employees Stock Purchase Plan was $4.98 and $5.00 during the first 39
weeks of fiscal 2008 and 2007, respectively. The fair value of the stock purchase rights
was calculated as the difference between the stock price and the employee purchase price.
Management Incentive Compensation
A total of 588,143 shares and 323,822 shares at a fair value per share of $32.99 and
$30.56, respectively, were issued pursuant to the Management Incentive Plan in the first
quarter of fiscal 2008 and fiscal 2007, respectively, for bonuses earned in the preceding
fiscal years.
All Share-Based Payment Arrangements
The total share-based compensation cost that has been recognized in results of operations
was $61,154,000 and $75,749,000 for the first 39 weeks of each of fiscal 2008 and fiscal
2007, respectively.
The total share-based compensation cost that has been recognized in results of operations
was $18,036,000 and $22,096,000 for the third quarter of each of fiscal 2008 and fiscal
2007, respectively.
As of March 29, 2008, there was $78,558,000 of total unrecognized compensation cost
related to share-based compensation arrangements. That cost is expected to be recognized
over a weighted-average period of 2.93 years.
11
9. Income Taxes
SYSCO is subject to income tax primarily in the United States and Canada. As discussed in
Note 2, Changes in Accounting, the company adopted FIN 48 effective July 1, 2007. As a
result of this adoption, the company recognized, as a cumulative effect of change in
accounting principle, a $91,635,000 decrease in its beginning retained earnings on its
July 1, 2007 balance sheet.
As of July 1, 2007, the gross amount of unrecognized tax benefits was $82,639,000, which
represents all tax jurisdictions. As of July 1, 2007, the gross amount of accrued
interest liabilities was $126,795,000 related to unrecognized tax benefits. The company
generally does not anticipate that settlement of the liabilities will require payment of
cash within the next twelve months. The company does not have any accrued liabilities for
penalties related to unrecognized tax benefits. To the extent interest and penalties may
be assessed by taxing authorities on any underpayment of income tax, estimated amounts
required under FIN 48 have been accrued and are classified as a component of income taxes
in the consolidated results of operations. This was the companys accounting policy prior
to the adoption of FIN 48, and SYSCO elected to continue this accounting policy
post-adoption.
If SYSCO were to recognize all unrecognized tax benefits recorded as of July 1, 2007,
approximately $56,034,000 of the $82,639,000 reserve would reduce the effective tax rate.
As of the date of adoption of FIN 48 and as of March 29, 2008, the company does not
anticipate that any of its unrecognized tax benefits will significantly increase or
decrease within the next twelve months. The company does not anticipate accrued interest
on unrecognized tax benefits to be material for fiscal 2008.
SYSCO is currently in appeals as it relates to certain adjustments from the Internal
Revenue Service (IRS) in relation to its audit of the companys 2003 and 2004 federal
income tax returns. See further discussion in Note 11, Commitments and Contingencies,
under the caption BSCC Cooperative Structure. The IRS is also auditing SYSCOs 2005 and
2006 federal income tax returns; however, the company does not believe these audits will
conclude in fiscal 2008. At the date of the adoption of FIN 48, SYSCOs tax returns in
the majority of the state and local jurisdictions and Canada were no longer subject to
audit for years before 2003. As of March 29, 2008, SYSCOs tax returns in the majority
of the state and local jurisdictions and Canada are no longer subject to audit for the
years before 2004. However, some jurisdictions have audits open prior to 2003, with the
earliest dating back to 1996. Although the outcome of tax audits is generally uncertain,
the company believes that adequate amounts of tax, including interest and penalties, have
been accrued for any adjustments that may result from those years.
Reflected in the changes in the net deferred tax liability and prepaid/accrued income tax
balances from June 30, 2007 to March 29, 2008 is the reclassification of deferred tax
liabilities to accrued income taxes related to supply chain distributions. This
reclassification reflects the tax payments to be made during the next twelve months
related to previously deferred supply chain distributions.
The effective tax rate was 38.5% for both the first 39 weeks of fiscal 2008 and fiscal
2007. The effective tax rate for the first 39 weeks of fiscal 2008 was favorably
impacted by tax benefits of approximately $7,700,000 resulting from the recognition of a
net operating loss deferred tax asset which arose due to a recently enacted state tax law
and $7,300,000 related to the reversal of valuation allowances previously recorded on
certain Canadian net operating loss deferred tax assets. The effective tax rate for the
first 39 weeks of fiscal 2008 was negatively impacted by the recognition of losses to
adjust the carrying value of corporate-owned life insurance policies to their cash
surrender values.
12
The effective tax rate for the third quarter of fiscal 2008 was 39.2%, an increase from
the effective tax rate of 38.8% for the third quarter of fiscal 2007. The tax rate was
negatively impacted in the third quarter of fiscal 2008 by the recognition of losses to
adjust the carrying value of corporate-owned life insurance policies to their cash
surrender values, as compared to the favorable impact of the recognition of gains related
to these policies in the third quarter of fiscal 2007. The effective tax rate for the
third quarter of fiscal 2008 was favorably impacted by the reversal of valuation
allowances previously recorded on certain Canadian net operating loss deferred tax
assets.
The determination of the companys overall effective tax rate requires the use of
estimates. The effective tax rate reflects a combination of income earned and taxed in
the various U.S. federal and state, as well as Canadian federal and provincial,
jurisdictions. Jurisdictional tax law changes, increases/decreases in permanent
differences between book and tax items, tax credits and the companys change in earnings
from these taxing jurisdictions all affect the overall effective tax rate.
10. Acquisitions
During the first 39 weeks of fiscal 2008, the company paid $50,464,000 for acquisitions
made during fiscal 2008 and for contingent consideration related to operations acquired
in previous fiscal years. In addition, escrowed funds in the amount of $7,000,000 were
released to sellers of previously acquired businesses during the first 39 weeks of fiscal
2008.
Some of the companys acquisitions involve contingent consideration typically payable
only in the event that specified operating results are attained or certain outstanding
contingencies are resolved. Aggregate contingent consideration amounts outstanding as of
March 29, 2008 included $75,457,000 in cash, which, if distributed, could result in the
recording of additional goodwill. Such amounts are to be paid out over periods of up to
four years from the date of acquisition if the contingent criteria are met.
11. Commitments and Contingencies
SYSCO is engaged in various legal proceedings which have arisen but have not been fully
adjudicated. Management believes these proceedings will not have a material adverse
effect upon the consolidated financial position or results of operations of the company
when ultimately concluded.
Product Liability Claim
In October 2007, an arbitration judgment against the company was issued related to a
product liability claim from one of SYSCOs former customers, which formalized a
preliminary award by the arbitrator in July 2007. As of the year ended June 30, 2007, the
company had recorded $50,296,000 on its consolidated balance sheet within accrued
expenses related to the accrual of this loss and a corresponding receivable of
$48,296,000 within prepaid expenses and other current assets, which represented the
estimate of the loss less the $2,000,000 deductible on SYSCOs insurance policy, as the
company anticipated recovery from various parties. In December 2007, the company paid its
deductible on its insurance policy and made arrangements with its insurance carrier and
other parties who paid the remaining amount of the judgment in excess of the companys
deductible. The company no longer has any remaining contingent liabilities related to
this claim.
13
Multi-Employer Pension Plans
SYSCO contributes to several multi-employer defined benefit pension plans based on
obligations arising under collective bargaining agreements covering union-represented
employees. SYSCO does not directly manage these multi-employer plans, which are
generally managed by boards of trustees, half of whom are appointed by the unions and the
other half by other employers contributing to the plan. Based upon the information
available from plan administrators, management believes that several of these
multi-employer plans are underfunded. In addition, the Pension Protection Act, enacted
in August 2006, requires underfunded pension plans to improve their funding ratios within
prescribed intervals based on the level of their underfunding. As a result, SYSCO
expects its contributions to these plans to increase in the future.
Under current law regarding multi-employer defined benefit plans, a plans termination,
SYSCOs voluntary withdrawal, or the mass withdrawal of all contributing employers from
any underfunded multi-employer defined benefit plan would require SYSCO to make payments
to the plan for SYSCOs proportionate share of the multi-employer plans unfunded vested
liabilities. Based on the information available from plan administrators, SYSCO
estimates that its share of withdrawal liability on all the multi-employer plans it
participates in could be as much as $135,000,000 based on a voluntary withdrawal. In
addition, if a multi-employer defined benefit plan fails to satisfy certain minimum
funding requirements, the IRS may impose a nondeductible excise tax of 5% on the amount
of the accumulated funding deficiency for those employers contributing to the fund. Of
the plans in which SYSCO participates, one plan is more critically underfunded than the
others. During the first quarter of fiscal 2008, SYSCO obtained information that this
plan failed to satisfy minimum funding requirements for certain periods and believes it
is probable that additional funding will be required as well as the payment of excise
tax. As a result, SYSCO recorded a liability of approximately $9,500,000 related to its
share of the minimum funding requirements and related excise tax for these periods.
Currently, management cannot estimate when the payment of this contribution will be
required and is continuing to explore SYSCOs alternatives as it relates to this plan.
BSCC Cooperative Structure
SYSCOs affiliate, Baugh Supply Chain Cooperative (BSCC), is a cooperative taxed under
subchapter T of the United States Internal Revenue Code. SYSCO believes that the
deferred tax liabilities resulting from the business operations and legal ownership of
BSCC are appropriate under the tax laws. However, if the application of the tax laws to
the cooperative structure of BSCC were to be successfully challenged by any federal,
state or local tax authority, SYSCO could be required to accelerate the payment of all or
a portion of its income tax liabilities associated with BSCC that it otherwise has
deferred until future periods, and in that event, SYSCO would be liable for interest on
such amounts. As of March 29, 2008, SYSCO has recorded deferred income tax liabilities
of $890,926,000, net of federal benefit, related to the BSCC supply chain distributions.
If the IRS and any other relevant taxing authorities determine that all amounts since the
inception of BSCC were inappropriately deferred, and the determination is upheld, SYSCO
estimates that in addition to making a current payment for amounts previously deferred,
as discussed above, the company may be required to pay interest on the cumulative
deferred balances. These interest amounts could range from $270,000,000 to $295,000,000,
prior to federal and state income tax benefit, as of March 29, 2008. SYSCO calculated
this amount based upon the amounts deferred since the inception of BSCC applying the
applicable jurisdictions interest rates in effect in each period. The IRS, in
connection with its audit of the companys 2003 and 2004 federal income tax returns,
proposed adjustments related to the taxability of the cooperative structure. The company
is vigorously protesting these adjustments. The company has reviewed the merits of
14
the issues raised by the IRS, and, while management believes it is probable the company
will prevail, the company concluded the measurement model of FIN 48 required an accrual
for a portion of the interest exposure.
Fuel Commitments
From time to time, SYSCO may enter into forward purchase commitments for a portion of its
projected diesel fuel requirements. As of March 29, 2008, outstanding forward diesel
fuel purchase commitments total approximately $28,336,000 at a fixed price through the
end of fiscal 2008. These agreements meet the definition of a derivative. However, the
company elected to use the normal purchase and sale exemption available under relevant
accounting literature, which allows SYSCO to account for these agreements on an accrual
basis and thus they are not recorded at fair value.
12. Business Segment Information
The company has aggregated its operating companies into a number of segments, of which
only Broadline and SYGMA are reportable segments as defined in SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information. Broadline operating companies
distribute a full line of food products and a wide variety of non-food products to both
traditional and chain restaurant customers. SYGMA operating companies distribute a full
line of food products and a wide variety of non-food products to certain chain restaurant
customer locations. Other financial information is attributable to the companys other
operating segments, including the companys specialty produce, custom-cut meat and
lodging industry segments and a company that distributes to international customers.
The accounting policies for the segments are the same as those disclosed by SYSCO.
Intersegment sales represent specialty produce and meat company products distributed by
the Broadline and SYGMA operating companies. The segment results include allocation of
centrally incurred costs for shared services that are eliminated upon consolidation.
Centrally incurred costs are allocated based upon the relative level of service used by
each operating company.
Included in unallocated corporate expenses are share-based compensation expense related
to stock option grants, issuances of stock pursuant to the Employees Stock Purchase Plan
and stock grants to non-employee directors and gains or losses recognized to adjust
corporate-owned life insurance policies to their cash surrender values. The increase in
unallocated corporate expenses for both the first 39 weeks and third quarter of fiscal
2008 over the comparable prior year periods is primarily attributable to losses
recognized in fiscal 2008 to adjust corporate-owned life insurance policies to their cash
surrender values compared to gains recognized related to these policies in fiscal 2007,
partially offset by reduced share-based compensation expense.
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39-Week Period Ended |
|
|
13-Week Period Ended |
|
|
|
Mar. 29, 2008 |
|
|
Mar. 31, 2007 |
|
|
Mar. 29, 2008 |
|
|
Mar. 31, 2007 |
|
Sales (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadline |
|
$ |
22,060,821 |
|
|
$ |
20,270,627 |
|
|
$ |
7,230,350 |
|
|
$ |
6,716,512 |
|
SYGMA |
|
|
3,371,693 |
|
|
|
3,240,706 |
|
|
|
1,138,660 |
|
|
|
1,082,534 |
|
Other |
|
|
2,706,051 |
|
|
|
2,648,772 |
|
|
|
888,665 |
|
|
|
887,156 |
|
Intersegment sales |
|
|
(346,659 |
) |
|
|
(346,324 |
) |
|
|
(111,118 |
) |
|
|
(113,241 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
27,791,906 |
|
|
$ |
25,813,781 |
|
|
$ |
9,146,557 |
|
|
$ |
8,572,961 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39-Week Period Ended |
|
|
13-Week Period Ended |
|
|
|
Mar. 29, 2008 |
|
|
Mar. 31, 2007 |
|
|
Mar. 29, 2008 |
|
|
Mar. 31, 2007 |
|
Earnings before income taxes
(in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadline |
|
$ |
1,322,103 |
|
|
$ |
1,195,941 |
|
|
$ |
425,197 |
|
|
$ |
375,944 |
|
SYGMA |
|
|
8,846 |
|
|
|
9,858 |
|
|
|
4,318 |
|
|
|
4,077 |
|
Other |
|
|
96,391 |
|
|
|
93,438 |
|
|
|
32,051 |
|
|
|
31,631 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segments |
|
|
1,427,340 |
|
|
|
1,299,237 |
|
|
|
461,566 |
|
|
|
411,652 |
|
Unallocated corporate expenses |
|
|
(171,421 |
) |
|
|
(164,761 |
) |
|
|
(65,381 |
) |
|
|
(50,673 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,255,919 |
|
|
$ |
1,134,476 |
|
|
$ |
396,185 |
|
|
$ |
360,979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mar. 29, 2008 |
|
|
June 30, 2007 |
|
|
Mar. 31, 2007 |
|
Assets (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
Broadline |
|
$ |
5,898,385 |
|
|
$ |
5,573,079 |
|
|
$ |
5,543,427 |
|
SYGMA |
|
|
400,399 |
|
|
|
385,470 |
|
|
|
378,481 |
|
Other |
|
|
1,011,115 |
|
|
|
929,573 |
|
|
|
934,794 |
|
|
|
|
|
|
|
|
|
|
|
Total segments |
|
|
7,309,899 |
|
|
|
6,888,122 |
|
|
|
6,856,702 |
|
Corporate |
|
|
2,651,086 |
|
|
|
2,630,809 |
|
|
|
2,570,619 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
9,960,985 |
|
|
$ |
9,518,931 |
|
|
$ |
9,427,321 |
|
|
|
|
|
|
|
|
|
|
|
16
13. |
|
Supplemental Guarantor Information |
|
|
|
SYSCO International, Co. is an unlimited liability company organized under the laws of
the Province of Nova Scotia, Canada and is a wholly owned subsidiary of SYSCO. In May
2002, SYSCO International, Co. issued, in a private offering, $200,000,000 of 6.10% notes
due in 2012. These notes are fully and unconditionally guaranteed by SYSCO. |
|
|
|
The following condensed consolidating financial statements present separately the
financial position, results of operations and cash flows of the parent guarantor (SYSCO),
the subsidiary issuer (SYSCO International) and all other non-guarantor subsidiaries of
SYSCO (Other Non-Guarantor Subsidiaries) on a combined basis and eliminating entries. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet |
|
|
|
March 29, 2008 |
|
|
|
|
|
|
|
SYSCO |
|
|
Other Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
SYSCO |
|
|
International |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
Current assets |
|
$ |
219,823 |
|
|
$ |
|
|
|
$ |
4,660,675 |
|
|
$ |
|
|
|
$ |
4,880,498 |
|
Investment in
subsidiaries |
|
|
13,756,751 |
|
|
|
381,547 |
|
|
|
114,990 |
|
|
|
(14,253,288 |
) |
|
|
|
|
Plant and equipment, net |
|
|
223,576 |
|
|
|
|
|
|
|
2,633,654 |
|
|
|
|
|
|
|
2,857,230 |
|
Other assets |
|
|
700,782 |
|
|
|
1,328 |
|
|
|
1,521,147 |
|
|
|
|
|
|
|
2,223,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
14,900,932 |
|
|
$ |
382,875 |
|
|
$ |
8,930,466 |
|
|
$ |
(14,253,288 |
) |
|
$ |
9,960,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
293,155 |
|
|
$ |
3,997 |
|
|
$ |
3,133,045 |
|
|
$ |
|
|
|
$ |
3,430,197 |
|
Intercompany payables
(receivables) |
|
|
9,144,719 |
|
|
|
83,461 |
|
|
|
(9,228,180 |
) |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
1,779,350 |
|
|
|
214,426 |
|
|
|
46,770 |
|
|
|
|
|
|
|
2,040,546 |
|
Other liabilities |
|
|
560,238 |
|
|
|
|
|
|
|
649,057 |
|
|
|
|
|
|
|
1,209,295 |
|
Shareholders equity |
|
|
3,123,470 |
|
|
|
80,991 |
|
|
|
14,329,774 |
|
|
|
(14,253,288 |
) |
|
|
3,280,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity |
|
$ |
14,900,932 |
|
|
$ |
382,875 |
|
|
$ |
8,930,466 |
|
|
$ |
(14,253,288 |
) |
|
$ |
9,960,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet |
|
|
|
June 30, 2007 |
|
|
|
|
|
|
|
SYSCO |
|
|
Other Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
SYSCO |
|
|
International |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
$ |
244,441 |
|
|
$ |
|
|
|
$ |
4,431,105 |
|
|
$ |
|
|
|
$ |
4,675,546 |
|
Investment in
subsidiaries |
|
|
12,675,360 |
|
|
|
349,367 |
|
|
|
126,364 |
|
|
|
(13,151,091 |
) |
|
|
|
|
Plant and equipment, net |
|
|
170,288 |
|
|
|
|
|
|
|
2,550,945 |
|
|
|
|
|
|
|
2,721,233 |
|
Other assets |
|
|
654,287 |
|
|
|
|
|
|
|
1,467,865 |
|
|
|
|
|
|
|
2,122,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
13,744,376 |
|
|
$ |
349,367 |
|
|
$ |
8,576,279 |
|
|
$ |
(13,151,091 |
) |
|
$ |
9,518,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
371,149 |
|
|
$ |
1,034 |
|
|
$ |
3,042,906 |
|
|
$ |
|
|
|
$ |
3,415,089 |
|
Intercompany payables
(receivables) |
|
|
8,251,239 |
|
|
|
44,757 |
|
|
|
(8,295,996 |
) |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
1,471,428 |
|
|
|
243,786 |
|
|
|
43,013 |
|
|
|
|
|
|
|
1,758,227 |
|
Other liabilities |
|
|
505,660 |
|
|
|
|
|
|
|
561,555 |
|
|
|
|
|
|
|
1,067,215 |
|
Shareholders equity |
|
|
3,144,900 |
|
|
|
59,790 |
|
|
|
13,224,801 |
|
|
|
(13,151,091 |
) |
|
|
3,278,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity |
|
$ |
13,744,376 |
|
|
$ |
349,367 |
|
|
$ |
8,576,279 |
|
|
$ |
(13,151,091 |
) |
|
$ |
9,518,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Balance Sheet |
|
|
|
March 31, 2007 |
|
|
|
|
|
|
|
SYSCO |
|
|
Other Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
SYSCO |
|
|
International |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
$ |
164,981 |
|
|
$ |
2 |
|
|
$ |
4,410,256 |
|
|
$ |
|
|
|
$ |
4,575,239 |
|
Investment in
subsidiaries |
|
|
12,255,418 |
|
|
|
320,454 |
|
|
|
148,061 |
|
|
|
(12,723,933 |
) |
|
|
|
|
Plant and equipment, net |
|
|
149,780 |
|
|
|
|
|
|
|
2,499,928 |
|
|
|
|
|
|
|
2,649,708 |
|
Other assets |
|
|
755,940 |
|
|
|
|
|
|
|
1,446,434 |
|
|
|
|
|
|
|
2,202,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
13,326,119 |
|
|
$ |
320,456 |
|
|
$ |
8,504,679 |
|
|
$ |
(12,723,923 |
) |
|
$ |
9,427,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
388,834 |
|
|
$ |
4,070 |
|
|
$ |
2,992,368 |
|
|
$ |
|
|
|
$ |
3,385,272 |
|
Intercompany payables
(receivables) |
|
|
7,787,418 |
|
|
|
27,058 |
|
|
|
(7,814,476 |
) |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
1,367,978 |
|
|
|
223,920 |
|
|
|
41,193 |
|
|
|
|
|
|
|
1,633,091 |
|
Other liabilities |
|
|
537,318 |
|
|
|
|
|
|
|
536,119 |
|
|
|
|
|
|
|
1,073,437 |
|
Shareholders equity |
|
|
3,244,571 |
|
|
|
65,408 |
|
|
|
12,749,475 |
|
|
|
(12,723,933 |
) |
|
|
3,335,521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity |
|
$ |
13,326,119 |
|
|
$ |
320,456 |
|
|
$ |
8,504,679 |
|
|
$ |
(12,723,933 |
) |
|
$ |
9,427,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Results of Operations |
|
|
|
For the 39-Week Period Ended March 29, 2008 |
|
|
|
|
|
|
|
SYSCO |
|
|
Other Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
SYSCO |
|
|
International |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
27,791,906 |
|
|
$ |
|
|
|
$ |
27,791,906 |
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
22,498,463 |
|
|
|
|
|
|
|
22,498,463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
|
|
|
|
|
|
|
|
5,293,443 |
|
|
|
|
|
|
|
5,293,443 |
|
Operating expenses |
|
|
157,668 |
|
|
|
108 |
|
|
|
3,814,378 |
|
|
|
|
|
|
|
3,972,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
(157,668 |
) |
|
|
(108 |
) |
|
|
1,479,065 |
|
|
|
|
|
|
|
1,321,289 |
|
Interest expense (income) |
|
|
341,523 |
|
|
|
8,871 |
|
|
|
(266,364 |
) |
|
|
|
|
|
|
84,030 |
|
Other income, net |
|
|
(6,372 |
) |
|
|
|
|
|
|
(12,288 |
) |
|
|
|
|
|
|
(18,660 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) before
income
taxes |
|
|
(492,819 |
) |
|
|
(8,979 |
) |
|
|
1,757,717 |
|
|
|
|
|
|
|
1,255,919 |
|
Income tax (benefit) provision |
|
|
(189,874 |
) |
|
|
(3,459 |
) |
|
|
677,214 |
|
|
|
|
|
|
|
483,881 |
|
Equity in earnings of
subsidiaries |
|
|
1,074,983 |
|
|
|
20,621 |
|
|
|
|
|
|
|
(1,095,604 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
772,038 |
|
|
$ |
15,101 |
|
|
$ |
1,080,503 |
|
|
$ |
(1,095,604 |
) |
|
$ |
772,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Results of Operations |
|
|
|
For the 39-Week Period Ended March 31, 2007 |
|
|
|
|
|
|
|
SYSCO |
|
|
Other Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
SYSCO |
|
|
International |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
25,813,781 |
|
|
$ |
|
|
|
$ |
25,813,781 |
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
20,856,982 |
|
|
|
|
|
|
|
20,856,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
|
|
|
|
|
|
|
|
4,956,799 |
|
|
|
|
|
|
|
4,956,799 |
|
Operating expenses |
|
|
156,120 |
|
|
|
96 |
|
|
|
3,601,584 |
|
|
|
|
|
|
|
3,757,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
(156,120 |
) |
|
|
(96 |
) |
|
|
1,355,215 |
|
|
|
|
|
|
|
1,198,999 |
|
Interest expense (income) |
|
|
303,451 |
|
|
|
9,059 |
|
|
|
(233,038 |
) |
|
|
|
|
|
|
79,472 |
|
Other income, net |
|
|
(8,129 |
) |
|
|
|
|
|
|
(6,820 |
) |
|
|
|
|
|
|
(14,949 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) before
income
taxes |
|
|
(451,442 |
) |
|
|
(9,155 |
) |
|
|
1,595,073 |
|
|
|
|
|
|
|
1,134,476 |
|
Income tax (benefit) provision |
|
|
(182,032 |
) |
|
|
(3,572 |
) |
|
|
622,395 |
|
|
|
|
|
|
|
436,791 |
|
Equity in earnings of
subsidiaries |
|
|
967,095 |
|
|
|
12,377 |
|
|
|
|
|
|
|
(979,472 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
697,685 |
|
|
$ |
6,794 |
|
|
$ |
972,678 |
|
|
$ |
(979,472 |
) |
|
$ |
697,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Results of Operations |
|
|
|
For the 13-Week Period Ended March 29, 2008 |
|
|
|
|
|
|
|
SYSCO |
|
|
Other Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
SYSCO |
|
|
International |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
Sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
9,146,557 |
|
|
$ |
|
|
|
$ |
9,146,557 |
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
7,412,036 |
|
|
|
|
|
|
|
7,412,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
|
|
|
|
|
|
|
|
1,734,521 |
|
|
|
|
|
|
|
1,734,521 |
|
Operating expenses |
|
|
59,709 |
|
|
|
34 |
|
|
|
1,257,134 |
|
|
|
|
|
|
|
1,316,877 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
(59,709 |
) |
|
|
(34 |
) |
|
|
477,387 |
|
|
|
|
|
|
|
417,644 |
|
Interest expense (income) |
|
|
117,441 |
|
|
|
2,913 |
|
|
|
(91,610 |
) |
|
|
|
|
|
|
28,744 |
|
Other income, net |
|
|
(939 |
) |
|
|
|
|
|
|
(6,346 |
) |
|
|
|
|
|
|
(7,285 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) before
income
taxes |
|
|
(176,211 |
) |
|
|
(2,947 |
) |
|
|
575,343 |
|
|
|
|
|
|
|
396,185 |
|
Income tax (benefit) provision |
|
|
(68,864 |
) |
|
|
(1,154 |
) |
|
|
225,302 |
|
|
|
|
|
|
|
155,284 |
|
Equity in earnings of
subsidiaries |
|
|
348,248 |
|
|
|
5,756 |
|
|
|
|
|
|
|
(354,004 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
240,901 |
|
|
$ |
3,963 |
|
|
$ |
350,041 |
|
|
$ |
(354,004 |
) |
|
$ |
240,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Results of Operations |
|
|
|
For the 13-Week Period Ended March 31, 2007 |
|
|
|
|
|
|
|
SYSCO |
|
|
Other Non-Guarantor |
|
|
|
|
|
|
Consolidated |
|
|
|
SYSCO |
|
|
International |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Totals |
|
|
|
(In thousands) |
|
Sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
8,572,961 |
|
|
$ |
|
|
|
$ |
8,572,961 |
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
6,938,867 |
|
|
|
|
|
|
|
6,938,867 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
|
|
|
|
|
|
|
|
1,634,094 |
|
|
|
|
|
|
|
1,634,094 |
|
Operating expenses |
|
|
54,999 |
|
|
|
33 |
|
|
|
1,194,919 |
|
|
|
|
|
|
|
1,249,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
(54,999 |
) |
|
|
(33 |
) |
|
|
439,175 |
|
|
|
|
|
|
|
384,143 |
|
Interest expense (income) |
|
|
103,727 |
|
|
|
3,019 |
|
|
|
(81,046 |
) |
|
|
|
|
|
|
25,700 |
|
Other income, net |
|
|
(961 |
) |
|
|
|
|
|
|
(1,575 |
) |
|
|
|
|
|
|
(2,536 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) before
income
taxes |
|
|
(157,765 |
) |
|
|
(3,052 |
) |
|
|
521,796 |
|
|
|
|
|
|
|
360,979 |
|
Income tax (benefit) provision |
|
|
(63,286 |
) |
|
|
(1,195 |
) |
|
|
204,461 |
|
|
|
|
|
|
|
139,980 |
|
Equity in earnings of
subsidiaries |
|
|
315,478 |
|
|
|
585 |
|
|
|
|
|
|
|
(316,063 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
220,999 |
|
|
$ |
(1,272 |
) |
|
$ |
317,335 |
|
|
$ |
(316,063 |
) |
|
$ |
220,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Cash Flows |
|
|
|
39-Week Period Ended March 29, 2008 |
|
|
|
|
|
|
|
SYSCO |
|
|
Other Non-Guarantor |
|
|
Consolidated |
|
|
|
SYSCO |
|
|
International |
|
|
Subsidiaries |
|
|
Totals |
|
|
|
(In thousands) |
|
Net cash provided by (used for): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
(191,748 |
) |
|
$ |
16,737 |
|
|
$ |
1,167,633 |
|
|
$ |
992,622 |
|
Investing activities |
|
|
(73,707 |
) |
|
|
|
|
|
|
(355,241 |
) |
|
|
(428,948 |
) |
Financing activities |
|
|
(504,425 |
) |
|
|
(29,361 |
) |
|
|
5,145 |
|
|
|
(528,641 |
) |
Effect of exchange rate on
Cash |
|
|
|
|
|
|
|
|
|
|
1,014 |
|
|
|
1,014 |
|
Intercompany activity |
|
|
815,269 |
|
|
|
12,624 |
|
|
|
(827,893 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash |
|
|
45,389 |
|
|
|
|
|
|
|
(9,342 |
) |
|
|
36,047 |
|
Cash at the beginning of the
period |
|
|
135,879 |
|
|
|
|
|
|
|
71,993 |
|
|
|
207,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at the end of the
period |
|
$ |
181,268 |
|
|
$ |
|
|
|
$ |
62,651 |
|
|
$ |
243,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidating Cash Flows |
|
|
|
39-Week Period Ended March 31, 2007 |
|
|
|
|
|
|
|
SYSCO |
|
|
Other Non-Guarantor |
|
|
Consolidated |
|
|
|
SYSCO |
|
|
International |
|
|
Subsidiaries |
|
|
Totals |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
Net cash provided by (used for): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
(107,737 |
) |
|
$ |
(2,500 |
) |
|
$ |
1,062,402 |
|
|
$ |
952,165 |
|
Investing activities |
|
|
(1,531 |
) |
|
|
|
|
|
|
(491,389 |
) |
|
|
(492,920 |
) |
Financing activities |
|
|
(474,423 |
) |
|
|
(327 |
) |
|
|
(3,819 |
) |
|
|
(478,569 |
) |
Effect of exchange rate on
cash |
|
|
|
|
|
|
|
|
|
|
(1,630 |
) |
|
|
(1,630 |
) |
Intercompany activity |
|
|
577,074 |
|
|
|
2,827 |
|
|
|
(579,901 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash |
|
|
(6,617 |
) |
|
|
|
|
|
|
(14,337 |
) |
|
|
(20,954 |
) |
Cash at the beginning of the
period |
|
|
131,275 |
|
|
|
|
|
|
|
70,622 |
|
|
|
201,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at the end of the
period |
|
$ |
124,658 |
|
|
$ |
|
|
|
$ |
56,285 |
|
|
$ |
180,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
This discussion should be read in conjunction with our consolidated financial statements
as of June 30, 2007, and the fiscal year then ended, and Managements Discussion and
Analysis of Financial Condition and Results of Operations, both contained in our Annual
Report on Form 10-K for the fiscal year ended June 30, 2007, as well as our financial
statements included within Item 1 in this Form 10-Q.
Highlights
First 39 Weeks
Sales increased 7.7% in the first 39 weeks of fiscal 2008 over the comparable prior-year
period. Product costs increased an estimated 6.0% during the 39 weeks of fiscal 2008
over the comparable prior year period. Operating income increased 10.2% over the
comparable prior-year period, increasing to 4.7% of sales. Net earnings and diluted
earnings per share increased 12.4% and 13.5%, respectively, over the comparable
prior-year period.
Fiscal 2008 continues to be a challenging economic environment. For the past several
months, our industry has experienced various macro-economic pressures, including high
fuel costs and rising food prices, that continue to restrict growth. High food cost
inflation prevailed for the fourth consecutive quarter. In spite of these conditions, we
continue to manage margins and expenses effectively. Gross profit dollars increased 6.8%
while operating expenses grew only 5.7% for the period.
In addition, operating expenses were negatively impacted by losses on the adjustment of
the carrying value of corporate-owned life insurance policies to their cash surrender
values, increased fuel costs and increased provisions related to multi-employer pension
funds, partially offset by lower share-based compensation expense and lower pension
expense.
Third Quarter
Sales increased 6.7% in the third quarter of fiscal 2008 over the comparable prior-year
period. Product costs increased an estimated 6.2% during the third quarter of fiscal
2008 over the comparable prior year period. Operating income increased 8.7% over the
comparable prior-year period, increasing to 4.6% of sales. Gross profit dollars
increased 6.2% while operating expenses grew only 5.4% for the period. Net earnings and
diluted earnings per share increased 11.1% and 14.3%, respectively, in the third quarter
of fiscal 2008 over the comparable prior-year period. Operating expenses were negatively
impacted by losses on the adjustment of the carrying value of corporate-owned life
insurance policies to their cash surrender values and increased fuel costs, partially
offset by lower share-based compensation and lower pension expense.
Overview
SYSCO distributes food and related products to restaurants, healthcare and educational
facilities, lodging establishments and other foodservice customers. Our operations are
located throughout the United States and Canada and include broadline companies,
specialty produce companies, custom-cut meat operations, hotel supply operations, SYGMA
(our chain restaurant distribution subsidiary) and a company that distributes to
international customers.
We estimate that we serve about 15% of an approximately $225 billion annual market that
includes the foodservice market and the hotel amenity, furniture and textile market both
in
20
the United States and Canada. According to industry sources, the foodservice, or
food-prepared-away-from-home, market represents approximately one-half of the total
dollars spent on food purchases made at the consumer level in the United States and
Canada. This share grew from about 37% in 1972 to about 50% in 1998 and has not changed
materially since that time.
General economic conditions and consumer confidence can affect the frequency of purchases
and amounts spent by consumers for food-prepared-away-from-home and, in turn, can impact
our customers and our sales. We believe the current general economic conditions,
including pressure on consumer disposable income, are contributing to a decline in the
foodservice market. Historically, we have grown at a faster rate than the overall
industry and have grown our market share in this fragmented industry. We intend to
continue our efforts to expand our market share and grow earnings by focusing on sales
growth, margin management, productivity gains and supply chain management.
Strategic Business Initiatives
Our strategic business initiatives are designed to help us grow by leveraging our market
leadership position to continuously improve how our associates buy, handle and market
products for our customers. The following areas, which are described in Managements
Discussion and Analysis of Financial Condition and Results of Operations in our Annual
Report on Form 10-K for the fiscal year ended June 30, 2007, generally comprise the
initiatives that will serve as the foundation of our efforts to ensure a sustainable
future:
|
|
|
Sourcing and National Supply Chain |
|
|
|
|
Integrated Delivery |
|
|
|
|
Demand |
|
|
|
|
Organizational Capabilities |
A major component of our National Supply Chain project entails the use of redistribution
centers (RDCs). Construction of our second RDC site in Alachua, Florida is complete, and
operations to service our five broadline operating companies in Florida began in April
2008.
As a part of our on going strategic analysis, we regularly evaluate business
opportunities, including potential acquisitions and sales of assets and businesses, and
our results of operations and liquidity and capital resources may be materially impacted
by these transactions.
Accounting Changes
SFAS 158
As of June 30, 2007, we early adopted the measurement date provision of FASB Statement of
Financial Accounting Standards (SFAS) No. 158, Employers Accounting for Defined Benefit
and Other Postretirement Plans an amendment of FASB Statements No. 87, 88, 106, and
132(R) (SFAS 158). The measurement date provision requires an employer to measure a
plans assets and benefit obligations as of the date of the employers fiscal year-end
statement of financial position. As a result, beginning in fiscal 2008, the measurement
date for our defined benefit pension and other postretirement plans corresponds with our
fiscal year-end rather than the May 31st measurement date previously used. We
have performed measurements as of May 31, 2007 and June 30, 2007 of our plan assets and
benefit obligations. We recorded a charge to beginning retained earnings on July 1, 2007
of $3,572,000, net of tax, for the impact of the cumulative difference in our pension
expense between the two measurement dates. We also recorded a benefit to beginning accumulated
21
other comprehensive income (loss) on July 1, 2007 of $22,780,000, net of tax, for the
impact of the difference in our balance sheet recognition provision between the two
measurement dates.
FIN 48
As of July 1, 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes an Interpretation of FASB Statement No. 109 (FIN 48), which clarifies
the accounting for uncertainty in income taxes recognized in accordance with SFAS No.
109, Accounting for Income Taxes (SFAS 109). FIN 48 clarifies the application of SFAS
109 by defining criteria that an individual tax position must meet for any part of the
benefit of that position to be recognized in the financial statements. Additionally, FIN
48 provides guidance on the measurement, derecognition, classification and disclosure of
tax positions, along with accounting for the related interest and penalties. As a result
of this adoption, we recognized, as a cumulative effect of change in accounting
principle, a $91,635,000 decrease in our beginning retained earnings on our July 1, 2007
balance sheet.
Results of Operations
The following table sets forth the components of our results of operations expressed as a
percentage of sales for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39-Week Period Ended |
|
13-Week Period Ended |
|
|
Mar. 29, 2008 |
|
Mar. 31, 2007 |
|
Mar. 29, 2008 |
|
Mar. 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of sales |
|
|
81.0 |
|
|
|
80.8 |
|
|
|
81.0 |
|
|
|
80.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
19.0 |
|
|
|
19.2 |
|
|
|
19.0 |
|
|
|
19.1 |
|
Operating expenses |
|
|
14.3 |
|
|
|
14.6 |
|
|
|
14.4 |
|
|
|
14.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
4.7 |
|
|
|
4.6 |
|
|
|
4.6 |
|
|
|
4.5 |
|
Interest expense |
|
|
0.3 |
|
|
|
0.3 |
|
|
|
0.3 |
|
|
|
0.3 |
|
Other income, net |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
(0.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
4.5 |
|
|
|
4.4 |
|
|
|
4.4 |
|
|
|
4.2 |
|
Income taxes |
|
|
1.7 |
|
|
|
1.7 |
|
|
|
1.8 |
|
|
|
1.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
2.8 |
% |
|
|
2.7 |
% |
|
|
2.6 |
% |
|
|
2.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
22
The following table sets forth the change in the components of our results of operations
expressed as a percentage increase or decrease over the comparable period in the prior
year:
|
|
|
|
|
|
|
|
|
|
|
39-Week Period |
|
13-Week Period |
|
|
|
|
|
|
|
|
|
Sales |
|
|
7.7 |
% |
|
|
6.7 |
% |
Cost of sales |
|
|
7.9 |
|
|
|
6.8 |
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
6.8 |
|
|
|
6.2 |
|
Operating expenses |
|
|
5.7 |
|
|
|
5.4 |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
10.2 |
|
|
|
8.7 |
|
Interest expense |
|
|
5.7 |
|
|
|
11.8 |
|
Other income, net |
|
|
(24.8 |
) |
|
|
187.3 |
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
10.7 |
|
|
|
9.8 |
|
Income taxes |
|
|
10.8 |
|
|
|
10.9 |
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
10.7 |
% |
|
|
9.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
|
12.4 |
% |
|
|
11.1 |
% |
Diluted earnings per share |
|
|
13.5 |
|
|
|
14.3 |
|
|
|
|
|
|
|
|
|
|
Average shares outstanding |
|
|
(1.9 |
) |
|
|
(2.4 |
) |
Diluted shares outstanding |
|
|
(2.3 |
) |
|
|
(3.2 |
) |
Sales
Sales were 7.7% greater in the first 39 weeks and 6.7% greater in the third quarter
of fiscal 2008 than in the comparable periods of the prior year. Product cost
inflation was a significant contributor to sales growth. Estimated product cost
increases, an internal measure of inflation, were 6.0% during the first 39 weeks and
6.2% during the third quarter of fiscal 2008, as compared to 2.6% during the first 39
weeks and 2.9% during the third quarter of fiscal 2007. Non-comparable acquisitions
contributed 0.1% to the overall sales growth rate for the first 39 weeks of fiscal
2008 and did not have an impact on the overall sales growth rate for the third quarter
of fiscal 2008.
Our continued focus on the use of business reviews and business development
activities, investment in customer contact personnel and the efforts of our marketing
associates and sales support personnel also contributed to our sales growth by
strengthening customer relationships and growing sales with existing customers.
Operating Income
Operating income increased 10.2% in the first 39 weeks of fiscal 2008 and 8.7% in the
third quarter of fiscal 2008 over the comparable periods of the prior year. We were
able to manage our business effectively in the current inflationary environment for
both the first 39 weeks and the third quarter of fiscal 2008, with gross margins
increasing at a faster pace than expenses. Gross margin dollars increased 6.8% and 6.2%
in those periods, respectively. Operating expenses increased 5.7% for the first 39 weeks
of fiscal 2008 and 5.4% for the third quarter of fiscal 2008.
The high rate of product cost increases and the accompanying increases in sales in the
first 39 weeks and third quarter of fiscal 2008 impacts the comparison of gross margins
and operating expenses as a percentage of sales between the periods. As sales prices
increased, gross margin dollars were earned and operating expense dollars were incurred
on a higher sales
23
dollar base. In addition, operating expense dollars increased at a
lower rate than sales growth because of improvements in operating efficiencies.
We cannot predict if the high rate of product cost inflation will continue in future
periods; however, in general, we believe prolonged periods of high inflation, such as
the current rate, have a negative impact on our customers and, as a result, may
negatively impact our sales, gross margins and earnings.
Operating expenses were increased by the recognition of a loss of $9,293,000 in the
first 39 weeks and $14,316,000 in the third quarter of fiscal 2008, to adjust the
carrying value of corporate-owned life insurance policies to their cash surrender
values. This compared to the recognition of a gain of $15,005,000 in the first 39 weeks
and $3,758,000 in the third quarter of fiscal 2007.
Fuel costs in the first 39 weeks of fiscal 2008 were $17,796,000 higher than the first
39 weeks of fiscal 2007. Fuel costs in the third quarter of fiscal 2008 were
$12,227,000 higher than the third quarter of fiscal 2008.
We had fixed price forward diesel purchase contracts in place for approximately 60% of
our fuel purchase requirements for the first 26 weeks of fiscal 2008. These agreements
expired at the end of December 2007 and were generally at favorable prices as compared
to market prices. These agreements helped us manage the impact of rising market fuel
prices during the first half of fiscal 2008. We entered into new contracts for
approximately 40% of our fuel purchase needs for the second half of fiscal 2008. These
new contracts are at fixed prices greater than those we paid during the same period last
fiscal year. We estimate that fuel costs will be greater in the fourth quarter of
fiscal 2008 over the prior year by $20,000,000 to $25,000,000. Our estimate is based
upon both current market prices for diesel and the cost committed to in our forward fuel
purchase agreements currently in place. We attempt to mitigate the impact of increased
fuel costs through managing miles driven and improving productivity. In addition, we
have begun to increase our use of fuel surcharges, the impact of which is reflected in
sales; however, the increase in our fuel surcharges in the first 39 weeks and the third
quarter of fiscal 2008 have not been significant as compared to the same periods in the
prior year.
Share-based compensation cost in the first 39 weeks of fiscal 2008 was $14,595,000 less
than the first 39 weeks of fiscal 2007. Share-based compensation cost in the third
quarter of fiscal 2008 was $4,060,000 less than the third quarter of fiscal 2007.
Share-based compensation expense is expected to be approximately $15,000,000 to
$20,000,000 lower in fiscal 2008 as compared to fiscal 2007, due primarily to lower
levels of stock option grants in recent years as compared to previous years.
Net pension costs in the first 39 weeks of fiscal 2008 were $6,571,000 less than the
first 39 weeks of fiscal 2007. Net pension costs in the third quarter of fiscal 2008
were $2,190,000 less than the third quarter of fiscal 2007. Net pension costs are
expected to be approximately $9,000,000 lower in fiscal 2008 as compared to fiscal 2007,
due
primarily to the funding status and the projected asset performance of the qualified
pension plan.
In addition, we recorded a provision of $9,410,000 in the first 39 weeks of fiscal 2008
related to additional amounts that we expect to be required to contribute to an
underfunded multi-employer pension fund. We recorded a provision of $4,700,000 in the
first 39 weeks of fiscal 2007 related to our withdrawal from a multi-employer pension
fund. See additional discussion of multi-employer pension plans at Liquidity and
Capital Resources, Other Considerations.
24
Net Earnings
Net earnings increased 10.7% in the first 39 weeks and 9.0% in the third quarter of
fiscal 2008 over the comparable periods of the prior year. The increases were due
primarily to the factors discussed above.
Interest expense increased 5.7% for the first 39 weeks of fiscal 2008 and 11.8% for the
third quarter of fiscal 2008. The increase in interest expense for the third quarter is
due to higher debt levels compared to the prior year and higher interest rates. The
debt offering in February 2008 (discussed below under Financing Activities) changed
the mix of our fixed rate versus variable rate debt and thus increased our average
borrowing rate.
Other income increased $3,711,000 in the first 39 weeks of fiscal 2008 from the
comparable prior year period, and increased $4,749,000 in the third quarter of fiscal
2008 over the third quarter of fiscal 2007. These increases were primarily due to gains
from the sale of land and facilities as well as the sale of a minority interest in a
business.
The effective tax rate was 38.5% for both the first 39 weeks of fiscal 2008 and fiscal
2007. The effective tax rate for the first 39 weeks of fiscal 2008 was favorably
impacted by tax benefits of approximately $7,700,000 resulting from the recognition of a
net operating loss deferred tax asset which arose due to a recently enacted state tax
law and $7,300,000 related to the reversal of valuation allowances previously recorded
on certain Canadian net operating loss deferred tax assets. The effective tax rate for
the first 39 weeks of fiscal 2008 was negatively impacted by the recognition of losses
to adjust the carrying value of corporate-owned life insurance policies to their cash
surrender values.
The effective tax rate for the third quarter of fiscal 2008 was 39.2%, an increase from
the effective tax rate of 38.8% for the third quarter of fiscal 2007. The tax rate was
negatively impacted in the third quarter of fiscal 2008 by the recognition of losses to
adjust the carrying value of corporate-owned life insurance policies to their cash
surrender values, as compared to the favorable impact of the recognition of gains
related to these policies in the third quarter of fiscal 2007. The effective tax rate
for the third quarter of fiscal 2008 was favorably impacted by the reversal of valuation
allowances previously recorded on certain Canadian net operating loss deferred tax
assets.
Earnings Per Share
Basic earnings per share increased 12.4% and 11.1% in the first 39 weeks and third
quarter of fiscal 2008, respectively, over the comparable periods of the prior year.
Diluted earnings per share increased 13.5% and 14.3% in the first 39 weeks and third
quarter of fiscal 2008, respectively, over the comparable periods of the prior year.
These increases were due primarily to the factors discussed above, as well as a net
reduction in shares outstanding. The net reduction in average shares outstanding was
primarily due to share repurchases. The net reduction in diluted shares outstanding was
primarily due to share repurchases and an increase in the number of anti-dilutive
options excluded from the diluted share calculation.
25
Segment Results
The following table sets forth the change in the selected financial data of each of our
reportable segments expressed as a percentage increase over the comparable period in the
prior year and should be read in conjunction with Note 12, Business Segment Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39-Week Period |
|
13-Week Period |
|
|
|
|
|
|
Earnings |
|
|
|
|
|
Earnings |
|
|
|
|
|
|
before |
|
|
|
|
|
before |
|
|
Sales |
|
taxes |
|
Sales |
|
taxes |
Broadline |
|
|
8.8 |
% |
|
|
10.5 |
% |
|
|
7.7 |
% |
|
|
13.1 |
% |
SYGMA |
|
|
4.0 |
|
|
|
(10.3 |
) |
|
|
5.2 |
|
|
|
5.9 |
|
Other |
|
|
2.2 |
|
|
|
3.2 |
|
|
|
0.2 |
|
|
|
1.3 |
|
The following tables set forth sales and earnings before income taxes of each of our
reportable segments expressed as a percentage of the respective consolidated total and
should be read in conjunction with Note 12, Business Segment Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39-Week Period Ended |
|
|
Mar. 29, 2008 |
|
Mar. 31, 2007 |
|
|
|
|
|
|
Earnings |
|
|
|
|
|
Earnings |
|
|
|
|
|
|
before |
|
|
|
|
|
before |
|
|
Sales |
|
taxes |
|
Sales |
|
taxes |
Broadline |
|
|
79.4 |
% |
|
|
105.3 |
% |
|
|
78.5 |
% |
|
|
105.4 |
% |
SYGMA |
|
|
12.1 |
|
|
|
0.7 |
|
|
|
12.5 |
|
|
|
0.9 |
|
Other |
|
|
9.8 |
|
|
|
7.7 |
|
|
|
10.3 |
|
|
|
8.2 |
|
Intersegment sales |
|
|
(1.3 |
) |
|
|
|
|
|
|
(1.3 |
) |
|
|
|
|
Unallocated corporate expenses |
|
|
|
|
|
|
(13.7 |
) |
|
|
|
|
|
|
(14.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13-Week Period Ended |
|
|
Mar. 29, 2008 |
|
Mar. 31, 2007 |
|
|
|
|
|
|
Earnings |
|
|
|
|
|
Earnings |
|
|
|
|
|
|
before |
|
|
|
|
|
before |
|
|
Sales |
|
taxes |
|
Sales |
|
taxes |
Broadline |
|
|
79.1 |
% |
|
|
107.3 |
% |
|
|
78.4 |
% |
|
|
104.1 |
% |
SYGMA |
|
|
12.4 |
|
|
|
1.1 |
|
|
|
12.6 |
|
|
|
1.1 |
|
Other |
|
|
9.7 |
|
|
|
8.1 |
|
|
|
10.3 |
|
|
|
8.8 |
|
Intersegment sales |
|
|
(1.2 |
) |
|
|
|
|
|
|
(1.3 |
) |
|
|
|
|
Unallocated corporate expenses |
|
|
|
|
|
|
(16.5 |
) |
|
|
|
|
|
|
(14.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in unallocated corporate expenses are share-based compensation expense related
to stock option grants, issuances of stock pursuant to the Employees Stock Purchase
Plan and stock grants to non-employee directors and gains or losses
recognized to adjust corporate-owned life insurance policies to their cash surrender
values. The increase in unallocated corporate expenses for both the first 39 weeks and
third quarter of fiscal 2008 over the comparable prior year periods is primarily
attributable to losses recognized in fiscal 2008 to
26
adjust corporate-owned life
insurance policies to their cash surrender values compared to gains recognized related
to these policies in fiscal 2007, partially offset by reduced share-based compensation
expense.
Broadline Segment
Sales were 8.8% greater in the first 39 weeks and 7.7% greater in the third quarter of
fiscal 2008 than in the comparable periods of the prior year. Product cost inflation
was a significant contributor to sales growth. Our continued focus on the use of
business reviews and business development activities, continued investment in customer
contact personnel and the efforts of our marketing associates and sales support
personnel also contributed to our sales growth by strengthening customer relationships
and growing sales with existing customers. Non-comparable acquisitions did not have an
impact on the overall sales growth rate for the first 39 weeks or third quarter of
fiscal 2008.
The increases in earnings before income taxes in the first 39 weeks and third quarter of
fiscal 2008 were primarily due to gross margin dollars increasing at a faster pace than
expenses. We were able to manage our business effectively in the current inflationary
environment and improve operating efficiencies.
SYGMA Segment
Sales were 4.0% greater in the first 39 weeks and 5.2% greater in the third quarter of
fiscal 2008 than in the comparable periods of the prior year. Non-comparable
acquisitions contributed 0.5% to the overall sales growth rate for the first 39 weeks of
fiscal 2008 and did not have an impact on the overall sales growth rate for the third
quarter of fiscal 2008. Sales growth was primarily due to product cost inflation, sales
to new customers and sales growth in SYGMAs existing customer base related to new
locations added by those customers. Sales growth was partially offset by lost sales,
lower case volumes and transferring certain customers to Broadline operations during the
first quarter of fiscal 2008.
The decrease in earnings before income taxes in the first 39 weeks of fiscal 2008 was
due to several factors. Some of SYGMAs customers have experienced a slowdown in their
business resulting in lower cases per delivery and therefore reduced gross margin
dollars per stop. In addition, SYGMA has experienced increased driver compensation
expense, increased fuel costs, higher depreciation expense resulting from facility
expansions and increased auto liability costs. The increase in earnings before income
taxes in the third quarter of fiscal 2008 was primarily due to improved margin
management partially offset by increased fuel costs and increased driver compensation
expense.
Liquidity and Capital Resources
We may apply cash provided by operating activities, as supplemented by commercial paper
issuances and bank borrowings, towards investments in facilities, fleet and other
equipment; cash dividends; acquisitions consistent with our overall growth strategy;
and our share repurchase program. As a part of our on going strategic analysis, we
regularly evaluate business opportunities, including potential acquisitions and sales of
assets and businesses, and our liquidity, borrowing capacity and capital availability
may be materially impacted by these transactions.
We believe that our cash flows from operations, the availability of additional capital
under our existing commercial paper programs and bank lines of credit and our ability to
access capital from financial markets in the future, including issuances of debt
securities under our
27
shelf registration statement filed with the Securities Exchange
Commission (SEC), will be sufficient to meet our anticipated cash requirements over at
least the next twelve months, while maintaining sufficient liquidity for normal
operating purposes.
Operating Activities
We generated $992,622,000 in cash flow from operations in the first 39 weeks of fiscal
2008, as compared to $952,165,000 in the first 39 weeks of fiscal 2007. Cash flow from
operations in the first 39 weeks of fiscal 2008 was negatively impacted by increases in
accounts receivable and inventory balances and a decrease in accrued expenses, offset by
an increase in accounts payable balances. Cash flow from operations in the first 39
weeks of fiscal 2007 was negatively impacted by increases in accounts receivable and
inventory balances, offset by increases in accounts payable balances and accrued
expenses.
The increases in accounts receivable and inventory balances in the first 39 weeks of
fiscal 2008 were primarily due to sales growth. The increase in accounts receivable
balances were also due to seasonal changes in customer mix with greater balances from
customers with longer terms at the end of the first 39 weeks of fiscal 2008 as compared
to the end of fiscal 2007. The increase in inventory balances were also due to seasonal
changes in product mix as products held in inventory for a longer duration were a
greater portion of our inventory at the end of the first 39 weeks of fiscal 2008 as
compared to the end of fiscal 2007. Accounts payable balances are impacted by many
factors, including changes in product mix, cash discount terms and changes in payment
terms with vendors due to the use of more efficient electronic payment methods.
The increases in accounts receivable, inventory and accounts payable balances in the
first 39 weeks of fiscal 2007 were primarily due to sales growth. March 2007 inventory
days sales outstanding ratios (using an average of the last five weeks of cost of sales)
were improved as compared to March 2006, a result which we believe was driven by our
inventory management efforts.
Cash flow from operations was negatively impacted by a decrease in accrued expenses of
$81,931,000 for the first 39 weeks of fiscal 2008 and an increase of $47,928,000 for the
first 39 weeks of fiscal 2007. The decrease in fiscal 2008 was primarily due to the
payment of fiscal 2007 incentive bonuses partially offset by the accrual for fiscal 2008
incentive bonuses. The increase in fiscal 2007 was primarily due to accruals for fiscal
2007 incentive bonuses outpacing the payment of fiscal 2006 incentive bonuses due to
improved operating results over the previous year.
Also affecting the decrease in accrued expenses and the decrease in prepaid expenses and
other current assets during the first 39 weeks of fiscal 2008 was the reversal of an
accrual for a product liability claim of $50,296,000 and the corresponding receivable of
$48,296,000 recorded in fiscal 2007, as our insurance carrier and other parties paid the
full amount of the judgment in excess of our deductible. See further discussion of the
product liability claim under Other Considerations.
Other long-term liabilities and prepaid pension cost, net, increased $2,398,000 during
the first 39 weeks of fiscal 2008 and decreased $12,621,000 during the first 39 weeks of
fiscal 2007. The increase in the first 39 weeks of fiscal 2008 was primarily
attributable to an increase in deferred compensation from incentive compensation
deferrals of prior-year annual incentive bonuses and the accrual of interest on our
liability for unrecognized tax benefits. These increases were partially offset by the
recording of net pension costs and the timing of pension contributions to our
company-sponsored plans. In the first 39 weeks of fiscal 2008, we
28
recorded net pension
costs of $49,377,000 and contributed $69,237,000 to our pension plans. The decrease in
the first 39 weeks of fiscal 2007 was related to the recording of net pension costs and
the timing of pension contributions to our company-sponsored plans. In the first 39
weeks of fiscal 2007, we recorded net pension costs of $55,948,000 and contributed
$68,168,000 to our pension plans.
Investing Activities
We expect total capital expenditures in fiscal 2008 to be in the range of $550,000,000
to $575,000,000. Fiscal 2008 and fiscal 2007 expenditures included the continuation of
the fold-out program; facility, fleet and other equipment replacements and expansions;
the corporate office expansion; the companys National Supply Chain project; and
investments in technology.
Financing Activities
During the first 39 weeks of fiscal 2008, we repurchased a total of 16,769,900 shares of
our common stock at a cost of $529,179,000, as compared to 9,538,700 shares at a cost of
$329,342,000 for the comparable period in fiscal 2007. There were no additional shares
purchased through April 26, 2008, resulting in a remaining authorization by our Board of
Directors to repurchase up to 6,337,800 shares, based on the trades made through that
date.
Dividends paid in the first 39 weeks of fiscal 2008 were $365,333,000, or $0.60 per
share, as compared to $328,029,000, or $0.53 per share, in the comparable period of
fiscal 2007. In February 2008, we declared our regular quarterly dividend for the
fourth quarter of fiscal 2008, which was paid in April 2008.
As of March 29, 2008, we had uncommitted bank lines of credit, which provide for
unsecured borrowings for working capital of up to $145,000,000, of which none was
outstanding at March 29, 2008. Such borrowings were $5,300,000 as of April 26, 2008.
As of March 29, 2008, our outstanding commercial paper issuances were $64,604,000. Such
borrowings were $74,335,000 as of April 26, 2008. During the 39-week period ended March
29, 2008, the aggregate of commercial paper and short-term bank borrowings ranged from
approximately $64,194,000 to $1,133,241,000.
In September 2007, an agreement was signed on the revolving credit facility supporting
our U.S. and Canadian commercial paper programs, which increased the facility amount to
$1,000,000,000. In addition, the termination date on the facility was extended from
November 4, 2011 to November 4, 2012 in accordance with the terms of the agreement.
In January 2008, the SEC granted our request to terminate our then existing shelf
registration statement that was filed with the SEC in April 2005 for the issuance of debt
securities. In February 2008, we filed an automatically effective well-known seasoned
issuer shelf registration statement for the issuance of up to $1,000,000,000 in debt
securities with the SEC.
In February 2008, we issued 4.20% senior notes totaling $250,000,000 due February 12,
2013 (the 2013 notes) and 5.25% senior notes totaling $500,000,000 due February 12,
2018 (the 2018 notes) under our February 2008 shelf registration. The 2013 and 2018
notes, which were priced at 99.835% and 99.310% of par, respectively, are unsecured, are
not subject to any sinking fund requirement and include a redemption provision which
allows us to retire the notes at any time prior to maturity at the greater of par plus
accrued interest or an
29
amount designed to ensure that the noteholders are not penalized
by the early redemption. Proceeds from the notes were utilized to retire commercial
paper issuances outstanding as of February 2008.
Our long-term debt to capitalization ratio was 38.4% at March 29, 2008. For purposes of
calculating this ratio, long-term debt includes both the current maturities and
long-term portions.
Other Considerations
Product Liability
In October 2007, an arbitration judgment was issued against us related to a product
liability claim from one of our former customers. This judgment formalized a
preliminary award by the arbitrator in July 2007. As of the year ended June 30, 2007, we
had recorded $50,296,000 on our consolidated balance sheet within accrued expenses
related to the accrual of this loss and a corresponding receivable of $48,296,000 within
prepaid expenses and other current assets, which represented the estimate of the loss
less the $2,000,000 deductible on SYSCOs insurance policy as we anticipated recovery
from various parties. In December 2007, we paid our deductible on our insurance policy
and made arrangements with our insurance carrier and other parties who paid the
remaining amount of the judgment in excess of our deductible. We no longer have any
remaining contingent liabilities related to this claim.
Multi-Employer Pension Plans
As discussed in Note 11, Commitments and Contingencies, we contribute to several
multi-employer defined benefit pension plans based on obligations arising under
collective bargaining agreements covering union-represented employees.
Under current law regarding multi-employer defined benefit plans, a plans termination,
our voluntary withdrawal or the mass withdrawal of all contributing
employers from any underfunded multi-employer defined benefit plan would require us to
make payments to the plan for our proportionate share of the multi-employer plans
unfunded vested liabilities. Based on the information available from plan
administrators, we estimate that our share of withdrawal liability on all the
multi-employer plans we participate in, some of which appear to be underfunded, could be
as much as $135,000,000 based on a voluntary withdrawal.
Required contributions to multi-employer plans could increase in the future as these
plans strive to improve their funding levels. In addition, the Pension Protection Act,
enacted in August 2006, requires underfunded pension plans to improve their funding
ratios within prescribed intervals based on the level of their underfunding. We believe
that any unforeseen requirements to pay such increased contributions, withdrawal
liability and excise taxes would be funded through cash flow from operations, borrowing
capacity or a combination of these items. Of the plans in which SYSCO participates, one
plan is more critically underfunded than the others. During the first quarter of fiscal
2008, we obtained information that this plan failed to satisfy minimum funding
requirements for certain periods and believe it is probable that additional funding will
be required as well as the payment of excise tax. As a result, we recorded a liability
of approximately $9,500,000 related to our share of the minimum funding requirements and
related excise tax for these periods. Currently, we cannot estimate when the payment of
this contribution will be required and are continuing to explore our alternatives as it
relates to this plan.
30
BSCC Cooperative Structure
Our affiliate, BSCC, is a cooperative taxed under subchapter T of the United States
Internal Revenue Code. We believe that the deferred tax liabilities resulting from the
business operations and legal ownership of BSCC are appropriate under the tax laws.
However, if the application of the tax laws to the cooperative structure of BSCC were to
be successfully challenged by any federal, state or local tax authority, we could be
required to accelerate the payment of all or a portion of our income tax liabilities
associated with BSCC that we otherwise have deferred until future periods, and in that
event, we would be liable for interest on such amounts. As of March 29, 2008, SYSCO has
recorded deferred income tax liabilities of $890,926,000, net of federal benefit,
related to the BSCC supply chain distributions. If the IRS and any other relevant
taxing authorities determine that all amounts since the inception of BSCC were
inappropriately deferred, and the determination is upheld, we estimate that in addition
to making a current payment for amounts previously deferred, as discussed above, we may
be required to pay interest on the cumulative deferred balances. These interest amounts
could range from $270,000,000 to $295,000,000, prior to federal and state income tax
benefit, as of March 29, 2008. SYSCO calculated this amount based upon the amounts
deferred since the inception of BSCC applying the applicable jurisdictions interest
rates in effect in each period. The IRS, in connection with its audit of our 2003 and
2004 federal income tax returns, proposed adjustments related to the taxability of the
cooperative structure. We are vigorously protesting these adjustments. We have
reviewed the merits of the issues raised by the IRS, and while management believes it is
probable we will prevail, we concluded the measurement model of FIN 48 required us to
provide an accrual for a portion of the interest exposure. We do not expect that this
matter will be resolved within the next 12 months. If a taxing authority requires us to
accelerate the payment of these deferred
tax liabilities and to pay related interest, if any, we may be required to raise
additional capital through debt financing or the issuance of equity or we may have to
forego or defer planned capital expenditures or share repurchases or a combination of
these items.
Contractual Obligations
Our Annual Report on Form 10-K for the fiscal year ended June 30, 2007 contains a table
that summarizes our obligations and commitments to make contractual future payments as
of June 30, 2007. Since June 30, 2007, there have been two material changes to our
contractual obligations table. First, the product liability claim has been paid by our
insurance company and other various parties as described within Other Considerations.
Second, we have added our liability for unrecognized tax benefits and related interest
due to our adoption of FIN 48 on July 1, 2007. As of March 29, 2008, we had a liability
of $60,750,000 for unrecognized tax benefits for all tax jurisdictions and $136,157,000
for related interest that could result in cash payment. We do not anticipate that any
of our unrecognized tax benefits and related interest will significantly increase or
decrease within the next 12 months. In addition, we do not anticipate that settlement
of the liabilities will require payment of cash within the next 12 months. For further
discussion of the impact of adopting FIN 48, see Note 9, Income Taxes.
Critical Accounting Policies and Estimates
Critical accounting policies and estimates are those that are most important to the
portrayal of our financial position and results of operations. These policies require
our most subjective or complex judgments, often employing the use of estimates about the
effect of matters that are inherently uncertain. SYSCOs most critical accounting
policies and estimates include those that pertain to the allowance for doubtful accounts
receivable, self-insurance programs, pension plans, income taxes, vendor consideration,
accounting for business combinations and
31
share-based compensation, which are described
in Item 7 of our Annual Report on Form 10-K for the year ended June 30, 2007.
New Accounting Standards
SFAS 141(R)
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (SFAS
141(R)), which establishes principles and requirements for how an acquirer recognizes
and measures in its financial statements the identifiable assets acquired, the
liabilities assumed and any noncontrolling interest in a business combination. This
statement also establishes recognition and measurement principles for the goodwill
acquired in a business combination and disclosure requirements to enable financial
statement users to evaluate the nature and financial effects of the business
combination. We will apply this statement primarily for business combinations beginning
in fiscal 2010. Earlier application of the standard is prohibited.
FSP 157-2
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157),
which establishes a common definition for fair value under generally accepted accounting
principles, establishes a framework for measuring fair value and expands disclosure
requirements about such fair value measurements. In February 2008, the FASB issued FASB
Staff Position 157-2, Effective Date of FASB Statement No. 157 (FSP 157-2), which
partially defers the effective date of SFAS No. 157 for one year for non-financial
assets and liabilities that are recognized or disclosed at fair value in the financial
statements on a non-recurring basis. Consequently, SFAS 157 will be effective for SYSCO
in fiscal 2009 for financial assets and liabilities carried at fair value and
non-financial assets and liabilities that are recognized or disclosed at fair value on a
recurring basis. As a result of the deferral, SFAS 157 will be effective in fiscal 2010
for non-recurring, non-financial assets and liabilities that are recognized or disclosed
at fair value. We are continuing to evaluate the impact of the provisions of SFAS 157.
SFAS 161
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments
and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161
requires enhanced disclosures about an entitys derivative and hedging activities and
thereby improves the transparency of financial reporting. This Statement will be
effective for SYSCOs financial statements beginning with the third quarter of fiscal
2009. We are currently evaluating the impact the adoption of SFAS 161 may have on its
financial statement disclosures.
Forward-Looking Statements
Certain statements made herein are forward-looking statements under the Private
Securities Litigation Reform Act of 1995. They include statements regarding: expense
trends; the impact of ongoing legal proceedings; the timing of the National Supply Chain
project and regional distribution centers; the ability to increase sales and market
share and grow earnings; continued competitive advantages and positive results from
strategic business initiatives; the potential for future success; anticipated pension
plan liabilities and contributions of various pension plans; the outcome of ongoing tax
audits; the continuing impact of economic conditions on sales growth; growth strategies;
and our ability to meet our cash requirements
32
while maintaining sufficient liquidity.
These statements involve risks and uncertainties and are based on managements current
expectations and estimates; actual results may differ materially. Those risks and
uncertainties that could impact these statements include the risks discussed in Item 1A
of our Annual Report on Form 10-K for the fiscal year ended June 30, 2007, including
risks relating to: the foodservice distribution industrys relatively low profit margins
and sensitivity to general economic conditions, including inflation, the current
economic environment, increased fuel costs and consumer spending; SYSCOs leverage and
debt risks; the successful completion of acquisitions and integration of acquired
companies, as well as the risk that acquisitions could require additional debt or equity
financing and negatively impact our stock price or operating results; the effects of
competition on us and our customers; the ultimate outcome of litigation; potential
impact of product liability claims; the risk of interruption of supplies due to lack of
long-term contracts, severe weather, work stoppages or otherwise; labor issues;
construction schedules; managements allocation of capital and the timing of capital
purchases; risks relating to the national supply chain
project including the successful operation of the Southeast Redistribution Center at
full capacity; the risk that the IRS or other taxing authorities will disagree with our
tax positions and seek to impose interest or penalties; the risk that other sponsors of
our multi-employer pension plans will withdraw or become insolvent; that the IRS may
impose an excise tax on the unfunded portion of our multi-employer pension plans; or
that the Pension Protection Act could require that we make additional pension
contributions; and internal factors such as the ability to increase efficiencies,
control expenses and successfully execute growth strategies. The expected impact of
option expensing is based on certain assumptions regarding the number and fair value of
options granted, resulting tax benefits and shares outstanding. The actual impact of
option expensing could vary significantly to the extent actual results vary
significantly from assumptions.
In addition, share repurchases could be affected by market prices for the companys
securities as well as managements decision to utilize our capital for other purposes.
Interest paid is impacted by capital and borrowing needs and changes in interest rates.
The effect of market risks could be impacted by future borrowing levels and economic
factors such as interest rates.
For a more detailed discussion of these and other factors that could cause actual
results to differ from those contained in the forward-looking statements, see the risk
factors discussion contained in Item 1A of our Annual Report on Form 10-K for the fiscal
year ended June 30, 2007.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We do not utilize financial instruments for trading purposes. Our use of debt directly
exposes us to interest rate risk. Floating rate debt, for which the interest rate
fluctuates periodically, exposes us to short-term changes in market interest rates.
Fixed rate debt, for which the interest rate is fixed over the life of the instrument,
exposes us to changes in market interest rates reflected in the fair value of the debt
and to the risk we may need to refinance maturing debt with new debt at higher rates.
We manage our debt portfolio to achieve an overall desired position of fixed and
floating rates and may employ interest rate swaps as a tool to achieve that goal. The
major risks from interest rate derivatives include changes in interest rates affecting
the fair value of such instruments, potential increases in interest expense due to
market increases in floating interest rates and the creditworthiness of the
counterparties in such transactions.
33
At March 29, 2008, we had outstanding $64,604,000 of commercial paper issuances at
variable rates of interest with maturities through April 15, 2008. Excluding commercial
paper issuances, our long-term debt obligations at March 29, 2008 were $1,980,446,000,
of which approximately 97% were at fixed rates of interest.
In order to partially manage the volatility and uncertainty of fuel costs, from time to
time we may enter into forward purchase commitments for a portion of our projected diesel
fuel requirements. As of March 29, 2008, outstanding forward diesel fuel purchase
commitments total approximately $28,336,000, which will lock in the price on
approximately 40% of our fuel purchases through the end of fiscal 2008. These new
contracts are at fixed prices greater than the same period last fiscal year. We estimate
that fuel costs will be greater in the fourth quarter of fiscal year 2008 over the prior
year by $20,000,000 to $25,000,000. Our estimate is based upon both current market
prices for diesel and the cost committed to in our forward purchase commitments.
Item 4. Controls and Procedures
SYSCOs management, with the participation of our chief executive officer and chief
financial officer, evaluated the effectiveness of our disclosure controls and procedures
as of March 29, 2008. The term disclosure controls and procedures, as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a
company that are designed to ensure that information required to be disclosed by a
company in the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the SECs rules
and forms. Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by a company in
the reports that it files or submits under the Exchange Act is accumulated and
communicated to the companys management, including its principal executive and principal
financial officers, as appropriate to allow timely decisions regarding the required
disclosure. Management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving their
objectives and management necessarily applies its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. Based on the evaluation of our
disclosure controls and procedures as of March 29, 2008, our chief executive officer and
chief financial officer concluded that, as of such date, SYSCOs disclosure controls and
procedures were effective at the reasonable assurance level.
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended March 29, 2008 that has
materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
34
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are 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 statements of
SYSCO when ultimately concluded.
Item 1A. Risk Factors
There have been no material changes in our Risk Factors as set forth in Item 1A
of our Form 10-K for the fiscal year ended June 30, 2007.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
We made the following share repurchases during the third quarter of fiscal 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ISSUER PURCHASES OF EQUITY SECURITIES |
|
|
|
|
|
|
|
|
|
|
|
(c) Total Number of |
|
|
(d) Maximum Number |
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased as |
|
|
of Shares that May |
|
|
|
(a) Total Number of |
|
|
|
|
|
|
Part of Publicly |
|
|
Yet Be Purchased |
|
|
|
Shares Purchased |
|
|
(b) Average Price |
|
|
Announced Plans or |
|
|
Under the Plans or |
|
Period |
|
(1) |
|
|
Paid per Share |
|
|
Programs |
|
|
Programs |
|
Month #1
Dec. 30 Jan. 26 |
|
|
2,131,436 |
|
|
$ |
29.66 |
|
|
|
2,130,000 |
|
|
|
10,254,000 |
|
Month #2
Jan. 27 Feb. 23 |
|
|
1,416,200 |
|
|
|
29.23 |
|
|
|
1,416,200 |
|
|
|
8,837,800 |
|
Month #3
Feb. 24 Mar. 29 |
|
|
2,505,424 |
|
|
|
28.71 |
|
|
|
2,500,000 |
|
|
|
6,337,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total |
|
|
6,053,060 |
|
|
|
29.17 |
|
|
|
6,046,200 |
|
|
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6,337,800 |
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|
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|
|
|
|
|
|
|
|
(1) |
|
The total number of shares purchased
includes 1,436, zero and 5,424 shares tendered by
individuals in connection with stock option exercises
in Month #1, Month #2 and Month #3, respectively.
All other shares were purchased pursuant to the
publicly announced programs described below. |
On July 18, 2007, we announced that our Board of
Directors approved the repurchase of 20,000,000
shares. Pursuant to this repurchase program, shares
may be acquired in the open market or in privately
negotiated transactions at our discretion, subject to
market conditions and other factors.
In July 2004, our Board of Directors authorized us to
enter into agreements from time to time to extend our
ongoing repurchase program to include repurchases
during company announced blackout periods of such
securities in compliance with Rule 10b5-1 promulgated
under the Exchange Act.
On September 17, 2007 we entered into a stock
purchase plan with Shields & Company to purchase up
to 3,400,000 shares of SYSCO common stock pursuant to
Rules 10b5-1 and 10b-18 under the Exchange Act and
pursuant to SYSCOs previously announced share
repurchase program. A total of 2,775,000 shares were
purchased between September 17, 2007 and November 6,
2007, including during company blackout periods. By
its terms, the agreement terminated on November 6,
2007.
35
On December 17, 2007 we entered into a stock purchase
plan with BNY Convergex Execution Solutions to
purchase up to 3,000,000 shares of SYSCO common stock
pursuant to Rules 10b5-1 and 10b-18 under the
Exchange Act and pursuant to SYSCOs previously
announced share repurchase program. A total of
3,000,000 shares were purchased between December 17,
2007 and January 24, 2008, including during company
blackout periods. By its terms, the agreement
terminated on January 29, 2008.
As of April 26, 2008, there were 6,337,800 shares
remaining available for repurchase under the publicly
announced repurchase program.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits
|
1.1 |
|
Underwriting Agreement dated February 7, 2008 between SYSCO and
Goldman, Sachs & Co. Merrill Lynch, Pierce, Fenner & Smith
Incorporated and J.P. Morgan Securities Inc., as representatives of
the several underwriters, incorporated by reference to Exhibit 1.1 to
Form 8-K filed on February 12, 2008 (File No. 1-6544). |
|
|
3.1 |
|
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). |
|
|
3.2 |
|
Certificate of Amendment of Certificate of Incorporation increasing
authorized shares, incorporated by reference to Exhibit 3(d) to Form
10-Q for the quarter ended January 1, 2000 (File No. 1-6544). |
|
|
3.3 |
|
Certificate of Amendment to Restated Certificate of Incorporation
increasing authorized shares, incorporated by reference to Exhibit
3(e) to Form 10-Q for the quarter ended December 27, 2003 (File No.
1-6544). |
|
|
3.4 |
|
Form of Amended Certificate of Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock, incorporated by
reference to Exhibit 3(c) to Form 10-K for the year ended June 29,
1996 (File No. 1-6544). |
|
|
3.5 |
|
Amended and Restated Bylaws of Sysco Corporation dated May 11, 2007,
incorporated by reference to Exhibit 3.5 to Form 8-K filed on May 15,
2007 (File No. 1-6544). |
36
|
4.1 |
|
Senior Debt Indenture, dated as of June 15, 1995, between Sysco
Corporation and First Union National Bank of North Carolina, Trustee,
incorporated by reference to Exhibit 4(a) to Registration Statement on
Form S-3 filed on June 6, 1995 (File No. 33-60023). |
|
|
4.2 |
|
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). |
|
|
4.3 |
|
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. 1-6544). |
|
|
4.4 |
|
Seventh Supplemental Indenture, including form of Note, dated March 5,
2004 between Sysco Corporation, as Issuer, and Wachovia Bank, National
Association (formerly First Union National Bank of North Carolina), as
Trustee, incorporated by reference to Exhibit 4(j) to Form 10-Q for
the quarter ended March 27, 2004 (File No. 1-6544). |
|
|
4.5 |
|
Eighth Supplemental Indenture, including form of Note, dated September
22, 2005 between Sysco Corporation, as Issuer, and Wachovia Bank,
National Association, as Trustee, incorporated by reference to
Exhibits 4.1 and 4.2 to Form 8-K filed on September 20, 2005 (File No.
1-6544). |
|
|
4.6 |
|
Ninth Supplemental Indenture, including form of Note, dated February
12, 2008 between Sysco Corporation, as Issuer, and the Trustee,
incorporated by reference to Exhibit 4.1 to Form 8-K filed on February
12, 2008 (File No. 1-6544). |
|
|
4.7 |
|
Tenth Supplemental Indenture, including form of Note, dated February
12, 2008 between Sysco Corporation, as Issuer, and the Trustee,
incorporated by reference to Exhibit 4.3 to Form 8-K filed on February
12, 2008 (File No. 1-6544). |
|
|
4.8 |
|
Indenture dated May 23, 2002 between Sysco International, Co., Sysco
Corporation and Wachovia Bank, National Association, incorporated by
reference to Exhibit 4.1 to Registration Statement on Form S-4 filed
on August 21, 2002 (File No. 333-98489). |
|
|
4.9 |
|
Letter from Sysco Corporation regarding appointment of new Trustee
under the Senior Debt Indenture, incorporated by reference to Exhibit
4.7 to Form 10-Q for the quarter ended December 29, 2007 (File No.
1-6544). |
|
|
10.1# |
|
Form of Restricted Stock Agreement under the Amended
and Restated 2005 Non-Employee Directors Stock Plan. |
|
|
10.2# |
|
First Amendment to the 2004 Stock Option Plan. |
|
|
15.1# |
|
Report from Ernst & Young LLP dated May 5, 2008, re:
unaudited financial statements. |
37
|
|
15.2# |
|
Acknowledgment letter from Ernst & Young LLP. |
|
|
31.1# |
|
CEO Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
31.2# |
|
CFO Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
32.1# |
|
CEO Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
|
32.2# |
|
CFO Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
38
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
SYSCO CORPORATION
(Registrant)
|
|
|
By |
/s/ RICHARD J. SCHNIEDERS
|
|
|
|
Richard J. Schnieders |
|
|
|
Chairman of the Board,
Chief Executive Officer and President |
|
|
Date: May 6, 2008
|
|
|
|
|
|
|
|
|
By |
/s/ WILLIAM J. DELANEY
|
|
|
|
William J. DeLaney
Executive Vice President and
Chief Financial Officer |
|
|
Date: May 6, 2008
|
|
|
|
|
|
|
|
|
By |
/s/ G. MITCHELL ELMER
|
|
|
|
G. Mitchell Elmer |
|
|
|
Vice President, Controller and
Chief Accounting Officer |
|
|
Date: May 6, 2008
EXHIBIT INDEX
|
|
|
NO. |
|
DESCRIPTION |
|
1.1
|
|
Underwriting Agreement dated February 7, 2008 between SYSCO and Goldman,
Sachs & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P.
Morgan Securities Inc., as representatives of the several underwriters,
incorporated by reference to Exhibit 1.1 to Form 8-K filed on February 12,
2008 (File No. 1-6544). |
|
|
|
3.1
|
|
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). |
|
|
|
3.2
|
|
Certificate of Amendment of Certificate of Incorporation increasing
authorized shares, incorporated by reference to Exhibit 3(d) to Form 10-Q
for the quarter ended January 1, 2000 (File No. 1-6544). |
|
|
|
3.3
|
|
Certificate of Amendment to Restated Certificate of Incorporation
increasing authorized shares, incorporated by reference to Exhibit 3(e) to
Form 10-Q for the quarter ended December 27, 2003 (File No. 1-6544). |
|
|
|
3.4
|
|
Form of Amended Certificate of Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock, incorporated by reference to
Exhibit 3(c) to Form 10-K for the year ended June 29, 1996 (File No.
1-6544). |
|
|
|
3.5
|
|
Amended and Restated Bylaws of Sysco Corporation dated May 11, 2007,
incorporated by reference to Exhibit 3.5 to Form 8-K filed on May 15, 2007
(File No. 1-6544). |
|
|
|
4.1
|
|
Senior Debt Indenture, dated as of June 15, 1995, between Sysco Corporation
and First Union National Bank of North Carolina, Trustee, incorporated by
reference to Exhibit 4(a) to Registration Statement on Form S-3 filed on
June 6, 1995 (File No. 33-60023). |
|
|
|
4.2
|
|
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). |
|
|
|
4.3
|
|
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. 1-6544). |
|
|
|
4.4
|
|
Seventh Supplemental Indenture, including form of Note, dated March 5, 2004
between Sysco Corporation, as Issuer, and Wachovia Bank, National
Association (formerly First Union National Bank of North Carolina), as
Trustee, incorporated by reference to Exhibit 4(j) to Form 10-Q for the
quarter ended March 27, 2004 (File No. 1-6544). |
|
|
|
4.5
|
|
Eighth Supplemental Indenture, including form of Note, dated September 22,
2005 between Sysco Corporation, as Issuer, and Wachovia Bank, National |
|
|
|
NO. |
|
DESCRIPTION |
|
|
|
Association, as Trustee, incorporated by reference to Exhibits 4.1 and 4.2
to Form 8-K filed on September 20, 2005 (File No. 1-6544). |
|
|
|
4.6
|
|
Ninth Supplemental Indenture, including form of Note, dated February 12,
2008 between Sysco Corporation, as Issuer, and the Trustee, incorporated by
reference to Exhibit 4.1 to Form 8-K filed on February 12, 2008 (File No.
1-6544). |
|
|
|
4.7
|
|
Tenth Supplemental Indenture, including form of Note, dated February 12,
2008 between Sysco Corporation, as Issuer, and the Trustee, incorporated by
reference to Exhibit 4.3 to Form 8-K filed on February 12, 2008 (File No.
1-6544). |
|
|
|
4.8
|
|
Indenture dated May 23, 2002 between Sysco International, Co., Sysco
Corporation and Wachovia Bank, National Association, incorporated by
reference to Exhibit 4.1 to Registration Statement on Form S-4 filed on
August 21, 2002 (File No. 333-98489). |
|
|
|
4.9
|
|
Letter from Sysco Corporation regarding appointment of new Trustee under
the Senior Debt Indenture, incorporated by reference to Exhibit 4.7 to Form
10-Q for the quarter ended December 29, 2007 (File No. 1-6544). |
|
|
|
10.1#
|
|
Form of Restricted Stock Agreement under the Amended and Restated 2005
Non-Employee Directors Stock Plan. |
|
|
|
10.2#
|
|
First Amendment to the 2004 Stock Option Plan. |
|
|
|
15.1#
|
|
Report from Ernst & Young LLP dated May 5, 2008, re: unaudited financial
statements. |
|
|
|
15.2#
|
|
Acknowledgment letter from Ernst & Young LLP. |
|
|
|
31.1#
|
|
CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
31.2#
|
|
CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.1#
|
|
CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.2#
|
|
CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |