SYSCO CORP 10-K Summary: Fiscal Year Ended July 1, 1995
Business Context and Reporting Period
This Form 10-K covers the fiscal year ended July 1, 1995. SYSCO Corporation is the largest foodservice distributor in the United States, marketing and distributing a wide range of food and related products to the "away-from-home-eating" industry. The customer base is split primarily between traditional foodservice (restaurants, hospitals, schools, hotels) and chain restaurants. The company operates 105 distribution facilities across the U.S. and Canada.
Key Financial Metrics
| Metric | Fiscal 1995 | Fiscal 1994 | Fiscal 1993 |
|---|---|---|---|
| Sales | $12,118,047,000 | $10,942,499,000 | $10,021,513,000 |
| Net Earnings | $251,824,000 | $216,752,000 | $201,807,000 |
| Earnings Per Share | $1.38 | $1.18 | $1.08 |
| Operating Expenses (% of Sales) | 14.3% | 14.3% | 14.2% |
| Net Cash from Operations | $336,903,000 | $282,515,000 | $257,165,000 |
| Capital Expenditures | $201,577,000 | $161,485,000 | $127,879,000 |
| Long-Term Debt | $541,556,000 | $538,711,000 | $494,062,000 |
| Debt to Capitalization | 27.8% | 30.3% | 30.3% |
| Return on Equity | 19% | 18% | 18% |
Material Changes vs. Prior Period
- Sales Growth: Sales increased 11% to $12.1 billion, driven by real sales growth of approximately 9% and modest food price increases (approx. 2%).
- Profitability: Net earnings rose 16% to $251.8 million, marking the 19th consecutive year of increased earnings. Earnings before taxes increased 14%.
- Debt Structure: In June 1995, the company issued $150 million in 6.5% Senior Notes due 2005. The ratio of long-term debt to capitalization improved to 27.8% from 30.3% in the prior year.
- Capital Investment: Capital expenditures increased to $201.6 million (up from $161.5 million) to fund facility expansions and fleet additions.
- Dividends: The quarterly dividend was increased to $0.11 per share in the third and fourth quarters of fiscal 1995, up from $0.09 in the first two quarters.
Guidance, Outlook, and Risks
- Capital Expenditure Outlook: Management estimates capital expenditures for fiscal 1996 will range between $210 million and $230 million.
- Expansion Plans: The company is constructing or planning replacements for facilities operating near maximum capacity in several key markets (including Newark, NJ; San Antonio, TX; and Cleveland, OH). New facilities are planned for Milwaukee, WI, and Tampa, FL.
- Technology Investment: The company is continuing a company-wide installation of redesigned computer operating systems to support business expansion.
- Risks and Contingencies:
- Competition: The industry is competitive, with price and service reliability being key factors. SYSCO holds less than 10% of the total U.S. foodservice market.
- Labor Relations: Approximately 23% of employees are unionized. Collective bargaining agreements covering 49% of union employees expire during fiscal 1996.
- Legal: The company is engaged in various legal proceedings, which management believes will not have a material adverse effect.
Investor Verification Checklist
- Verify the sustainability of the 11% sales growth rate against the estimated 3% real growth in the broader foodservice industry.
- Monitor the outcome of collective bargaining negotiations for the 49% of union employees whose contracts expire in fiscal 1996.
- Confirm the execution of planned capital projects in Milwaukee and Tampa and the impact on operating efficiency.
- Review the impact of the new $150 million senior note issuance on future interest expense and cash flow.
- Assess the progress of the internal computer systems development project and its amortization schedule.