Business Context and Reporting Period
Company: SYSCO CORPORATION
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Quarter ended April 1, 1995 (13-week period) and 39-week period ended April 1, 1995.
Business Overview: Sysco Corporation is a foodservice distribution company. The financial statements are unaudited but have been reviewed by Arthur Andersen LLP.
Key Financial Metrics
Results of Operations (13-Week Period Ended April 1, 1995)
- Sales: $2,966,355,000
- Cost of Sales: $2,432,677,000
- Operating Expenses: $436,443,000
- Net Earnings: $52,788,000
- Earnings Per Share (EPS): $0.29
- Dividends Paid Per Share: $0.11
Results of Operations (39-Week Period Ended April 1, 1995)
- Sales: $8,956,114,000
- Net Earnings: $174,703,000
- Earnings Per Share (EPS): $0.96
Balance Sheet Highlights (As of April 1, 1995)
- Total Assets: $3,021,279,000
- Cash and Cash Equivalents: $78,065,000
- Total Current Liabilities: $962,257,000
- Long-Term Debt: $530,268,000
- Total Shareholders' Equity: $1,332,135,000
Cash Flow (39-Week Period)
- Net Cash Provided by Operating Activities: $186,368,000
- Net Cash Used for Investing Activities: $(145,705,000)
- Net Cash Used for Financing Activities: $(49,333,000)
Material Changes vs. Prior Period
- Sales Growth: Sales increased 10% in the third quarter and 11% for the 39-week period compared to the prior year.
- Cost of Sales: Increased 10% in the quarter and 11% for the 39-week period, generally tracking with sales volume.
- Operating Expenses: Remained approximately the same as a percentage of sales.
- Interest Expense: Increased due to higher borrowings and interest rates.
- Profitability: Pretax earnings, net earnings, and EPS increased due to sales growth and expense management.
- Tax Provision: The prior year's 39-week period included a $4.9 million tax provision related to the Omnibus Budget Reconciliation Act of 1993. Excluding this, the effective tax rate for both periods was 39.7%.
Guidance, Outlook, and Management Commentary
- Stock Repurchase Program: The Board authorized an additional 10,000,000 shares in September 1993. Through April 1, 1995, 2,000,000 shares were purchased under this specific authorization (3,000,000 in Fiscal 1994).
- Liquidity: Management states that the liquidity discussion from the Fiscal 1994 Annual Report remains applicable, aside from the stock repurchase updates.
- Investing Activities: Significant cash outflow for additions to plant and equipment ($149,514,000 for the 39-week period).
- Financing Activities: Net cash used for financing was driven by treasury stock purchases ($50,511,000) and dividends paid ($53,093,000), partially offset by borrowings and stock reissues.
Investor Verification Checklist
- Verify the impact of rising interest rates on future interest expense given the noted increase in borrowings.
- Confirm the status and remaining authorization of the common stock repurchase program.
- Review the composition of "Other assets" which increased significantly from $112,675,000 (April 1994) to $149,677,000 (April 1995).
- Monitor the trend in accounts receivable allowances, which increased from $15,999,000 (July 1994) to $34,449,000 (April 1995).
- Assess the sustainability of the 39.7% effective tax rate excluding one-time legislative impacts.