How did Sysco perform financially in fiscal 1999?

Sales rose 14% to $17.42 billion, and earnings before income taxes increased to $593.9 million from $532.5 million. Net earnings were $362.3 million, or $1.08 per diluted share, compared with $296.8 million, or $0.86 per diluted share, in fiscal 1998, which had a $28.1 million after-tax accounting charge. The filing notes this was the twenty-third consecutive year of increased earnings.

Is Sysco's debt level a concern for investors?

Long-term debt increased to $997.7 million, and long-term debt to total capitalization reached 41.1%, which exceeded the company's 35% to 40% target range. Management attributed this to shares repurchased for acquisitions closing in early fiscal 2000. About 78% of the debt is at fixed rates averaging 6.75%, and the company states it continues to have borrowing capacity.

What are the main risks to Sysco's business according to the filing?

The filing cites a low-margin business sensitive to national and economic conditions, leverage that could limit expansion, product liability exposure, reliance on suppliers without long-term contracts, labor relations with unionized employees (22% of workforce), difficulties integrating acquired companies, and Year 2000 issues affecting suppliers and customers.

What capital spending and shareholder returns does Sysco plan?

Capital expenditures were $286.7 million in fiscal 1999, and the company expects $230 million to $250 million in fiscal 2000. Cash dividends were $0.38 per share for the year, with quarterly dividends raised to ten cents in February 1999. The company repurchased 7,567,300 shares during the year and authorized a new 8,000,000 share buyback on July 9, 1999.

What is Sysco's Year 2000 status?

Sysco states that its mission-critical IT systems were tested in March 1999 and found Year 2000 compliant. Upgrades and replacements of remaining non-compliant systems and embedded-chip equipment are expected to be completed by December 1999. The company does not believe Year 2000 compliance costs will have a material impact on its financial statements, but notes that failures by suppliers, customers or third parties could have a material adverse effect.

SYY 10-K FY1999 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed September 24, 1999. Cited figures are marked; the original filing is the authoritative source.

Sysco Corporation (SYSCO), the largest North American distributor of food and food-related products to the foodservice industry, reported fiscal 1999 (53 weeks ended July 3, 1999) sales of $17.42 billion^a, up 14% from $15.33 billion in fiscal 1998.

Net earnings were $362.3 million^b, or $1.08 diluted earnings per share, compared with $296.8 million, or $0.86 diluted, in fiscal 1998, which included a $28.1 million after-tax non-cash accounting charge. Earnings before income taxes rose to $593.9 million from $532.5 million. Operating cash flow increased to $585.3 million from $357.8 million, and the return on average shareholders' equity was approximately 26%.

Fiscal 1999 marked the company's twenty-third consecutive year of increased earnings. SYSCO's long-term debt rose to $997.7 million^c, and long-term debt to total capitalization reached 41.1%, above the company's 35% to 40% target range, which management attributed to shares repurchased for acquisitions closing in early fiscal 2000. About 78% of long-term debt carries fixed rates averaging 6.75%.

The company repurchased 7,567,300 shares for $204.0 million^d during fiscal 1999 and authorized a new 8,000,000 share buyback on July 9, 1999. Quarterly dividends were increased to ten cents per share in February 1999, and total cash dividends for the year were $0.38 per share. Management expects fiscal 2000 capital expenditures of $230 million to $250 million.

The company reports that its Year 2000 mission-critical systems were found compliant after testing, with remaining upgrades to be completed by December 1999. Management states that the total cost of Year 2000 compliance is not expected to have a material impact on the financial statements. The company also disclosed that its foodservice distribution business operates on low margins and is sensitive to economic conditions, and that it has no material long-term supplier contracts.

02—Key points

Key Highlights

Fiscal 1999 sales of $17,422,815 thousand, up 14% from $15,327,536 thousand in fiscal 1998, with the year including a 53rd week
Net earnings of $362,271 thousand, or $1.08 diluted EPS, versus $296,768 thousand, or $0.86 diluted EPS, in fiscal 1998
Return on average shareholders' equity of approximately 26% in fiscal 1999, compared with 23% in fiscal 1998 before the accounting change
Operating cash flow of $585,303 thousand, up from $357,764 thousand in fiscal 1998
Long-term debt rose to $997,717 thousand, and long-term debt to capitalization was 41.1%, above the company's 35% to 40% target range
Share repurchases of 7,567,300 shares for $203,958 thousand in fiscal 1999, with a new 8,000,000 share buyback authorized July 9, 1999
Acquisitions of Newport Meat Co., Doughtie's Foods, and substantially all assets of Buckhead Beef in July and August 1999

03—Questions

Frequently Asked Questions

How did Sysco perform financially in fiscal 1999?
Sales rose 14% to $17.42 billion, and earnings before income taxes increased to $593.9 million from $532.5 million. Net earnings were $362.3 million, or $1.08 per diluted share, compared with $296.8 million, or $0.86 per diluted share, in fiscal 1998, which had a $28.1 million after-tax accounting charge. The filing notes this was the twenty-third consecutive year of increased earnings.
Is Sysco's debt level a concern for investors?
Long-term debt increased to $997.7 million, and long-term debt to total capitalization reached 41.1%, which exceeded the company's 35% to 40% target range. Management attributed this to shares repurchased for acquisitions closing in early fiscal 2000. About 78% of the debt is at fixed rates averaging 6.75%, and the company states it continues to have borrowing capacity.
What are the main risks to Sysco's business according to the filing?
The filing cites a low-margin business sensitive to national and economic conditions, leverage that could limit expansion, product liability exposure, reliance on suppliers without long-term contracts, labor relations with unionized employees (22% of workforce), difficulties integrating acquired companies, and Year 2000 issues affecting suppliers and customers.
What capital spending and shareholder returns does Sysco plan?
Capital expenditures were $286.7 million in fiscal 1999, and the company expects $230 million to $250 million in fiscal 2000. Cash dividends were $0.38 per share for the year, with quarterly dividends raised to ten cents in February 1999. The company repurchased 7,567,300 shares during the year and authorized a new 8,000,000 share buyback on July 9, 1999.
What is Sysco's Year 2000 status?
Sysco states that its mission-critical IT systems were tested in March 1999 and found Year 2000 compliant. Upgrades and replacements of remaining non-compliant systems and embedded-chip equipment are expected to be completed by December 1999. The company does not believe Year 2000 compliance costs will have a material impact on its financial statements, but notes that failures by suppliers, customers or third parties could have a material adverse effect.

04—Continue

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