HOUSTON, May 7, 2007 (PRIME NEWSWIRE) -- SYSCO Corporation (NYSE:SYY) announced today that it will amend its quarterly reports on Form 10-Q for the first and second quarters as well as the third quarter earnings news release, for fiscal 2007, in order to correct the accounting for its corporate-owned life insurance policies. The effect of the correction will increase previously reported earnings before cumulative effect of accounting change and net earnings for the 39 weeks of fiscal 2007 by $15.0 million and $54.7 million, or $0.02 and $0.08 per diluted share, respectively.
In the first quarter of fiscal 2007, SYSCO adopted the provisions of FASB Staff Position No. FTB 85-4-1, Accounting for Life Settlement Contracts by Third-Party Investors (FSP FTB 85-4-1), which resulted in a charge to earnings of $39.7 million related to the cumulative effect of the accounting change. In accordance with FSP FTB 85-4-1, SYSCO also ceased to recognize adjustments for increases or decreases in the cash surrender values of these policies. It has since been determined that SYSCO's corporate owned-life insurance policies are not subject to the accounting treatment as defined by FSP FTB 85-4-1, and, therefore, SYSCO incorrectly applied the accounting standard.
The effect of the amendments is two-fold: first, the $39.7 million charge in the first quarter is reversed, and, second, the company recognizes gains related to changes in the cash surrender value of these policies in the amounts of $1.4 million in the first quarter, $9.8 million in the second quarter and $3.8 million in the third quarter. The amendment has no impact on the Company's previously reported net income for financial statements for any period prior to fiscal 2007.
This morning the Company filed its amended first and second quarter fiscal 2007 Form 10-Qs reflecting the adjustments. SYSCO's third quarter fiscal 2007 Form 10-Q is expected to be filed on or before its required filing date of May 10, 2007. Included with this press release are the amended financial statements from the third quarter earnings news release originally distributed on April 30, 2007.
The following table details the changes to the affected quarters' financial results:
As Reported Restated ----------- -------- Earnings before cumulative effect of accounting change: First quarter $ 228,753 $ 230,148 Second quarter 236,686 246,538 Third quarter 217,241 220,999 39 Weeks 682,680 697,685 Net earnings: First quarter $ 189,018 $ 230,148 Second quarter 236,686 246,538 Third quarter 217,241 220,999 39 Weeks 642,945 697,685 As Reported Restated ----------- -------- Basic EPS Diluted EPS Basic EPS Diluted EPS ----------------------- ----------------------- Earnings before cumulative effect of accounting change: First quarter $ 0.37 $ 0.37 $ 0.37 $ 0.37 Second quarter 0.38 0.38 0.40 0.39 Third quarter 0.35 0.35 0.36 0.35 39 Weeks 1.10 1.09 1.13 1.11 Net earnings: First quarter $ 0.30 $ 0.30 $ 0.37 $ 0.37 Second quarter 0.38 0.38 0.40 0.39 Third quarter 0.35 0.35 0.36 0.35 39 Weeks 1.04 1.03 1.13 1.11 SYSCO CORPORATION CONSOLIDATED RESULTS OF OPERATIONS (Unaudited) (In Thousands Except for Share Data) For the 13-Weeks Ended ---------------------- March 31, April 1, 2007 2006 ------------ ------------ Sales $ 8,572,961 $ 8,137,816 Costs and expenses Cost of sales 6,938,867 6,602,102 Operating expenses 1,249,951 1,193,270 Interest expense 25,700 29,441 Other, net (2,536) (819) ------------ ------------ Total costs and expenses 8,211,982 7,823,994 ------------ ------------ Earnings before income taxes 360,979 313,822 Income taxes (38.78% in '07; 39.92% in '06) 139,980 125,283 ------------ ------------ Net earnings $ 220,999 $ 188,539 ============ ============ Net earnings: Basic earnings per share $ 0.36 $ 0.30 ============ ============ Diluted earnings per share $ 0.35 $ 0.30 ============ ============ Average shares outstanding 617,678,739 618,973,143 ============ ============ Diluted average shares outstanding 625,750,925 625,101,592 ============ ============ ------------------------------------------------------------------- ------------------------------------------------------------------- Comparative segment sales data (Unaudited) ($000) For the 13-Weeks Ended ---------------------- March 31, April 1, 2007 2006 ------------ ------------ Sales: Broadline $ 6,716,512 $ 6,386,905 SYGMA 1,082,534 1,035,287 Other 887,156 815,812 Intersegment (113,241) (100,188) ------------ ------------ Total $ 8,572,961 $ 8,137,816 ============ ============ ------------------------------------------------------------------- SYSCO CORPORATION CONSOLIDATED RESULTS OF OPERATIONS (Unaudited) (In Thousands Except for Share Data) For the 39-Weeks Ended ---------------------- March 31, April 1, 2007 2006 ------------ ------------ Sales $ 25,813,781 $ 24,119,361 Costs and expenses Cost of sales 20,856,982 19,517,648 Operating expenses 3,757,800 3,541,395 Interest expense 79,472 80,914 Other, net (14,949) (6,154) ------------ ------------ Total costs and expenses 24,679,305 23,133,803 ------------ ------------ Earnings before income taxes 1,134,476 985,558 Income taxes (38.50% in '07; 39.94% in '06) 436,791 393,627 ------------ ------------ Earnings before cumulative effect of accounting change 697,685 591,931 Cumulative effect of accounting change -- 9,285 ------------ ------------ Net earnings $ 697,685 $ 601,216 ============ ============ Earnings before cumulative effect of accounting change: Basic earnings per share $ 1.13 $ 0.95 ============ ============ Diluted earnings per share $ 1.11 $ 0.94 ============ ============ Net earnings: Basic earnings per share $ 1.13 $ 0.97 ============ ============ Diluted earnings per share $ 1.11 $ 0.95 ============ ============ Average shares outstanding 618,988,223 621,995,157 ============ ============ Diluted average shares outstanding 626,507,744 629,661,119 ============ ============ -------------------------------------------------------------------- Comparative segment sales data (Unaudited) For the 39-Weeks Ended ($000) ---------------------- March 31, April 1, 2007 2006 ------------ ------------ Sales: Broadline $ 20,270,627 $ 19,098,232 SYGMA 3,240,706 3,062,546 Other 2,648,772 2,246,939 Intersegment (346,324) (288,356) ------------ ------------ Total $ 25,813,781 $ 24,119,361 ============ ============ -------------------------------------------------------------------- SYSCO CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands) March 31, April 1, ASSETS 2007 2006 --------- -------- Current assets Cash $ 180,943 $ 205,605 Receivables 2,634,273 2,467,308 Inventories 1,693,084 1,601,250 Prepaid expenses 66,939 72,049 ----------- ----------- Total current assets 4,575,239 4,346,212 Plant and equipment at cost, less depreciation 2,649,708 2,399,345 Other assets Goodwill 1,329,745 1,292,527 Intangibles 89,977 97,733 Restricted cash 101,105 103,301 Prepaid pension cost 423,607 408,183 Other 257,940 236,787 ----------- ----------- Total other assets 2,202,374 2,138,531 ----------- ----------- Total assets $ 9,427,321 $ 8,884,088 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable $ 10,500 $ 12,000 Accounts payable 1,982,126 1,839,477 Accrued expenses 810,216 736,798 Accrued income taxes 119,919 47,647 Deferred taxes 357,629 346,980 Current maturities of long-term debt 104,882 208,570 ----------- ----------- Total current liabilities 3,385,272 3,191,472 Other liabilities Long-term debt 1,633,091 1,787,155 Deferred taxes 688,239 692,176 Other long-term liabilities 385,198 413,455 ----------- ----------- Total other liabilities 2,706,528 2,892,786 Contingencies Shareholders' equity Preferred stock -- -- Common stock, par $l per share 765,175 765,175 Paid-in capital 618,087 498,322 Retained earnings 5,357,045 4,849,518 Other comprehensive income 67,441 19,870 Treasury stock (3,472,227) (3,333,055) ----------- ----------- Total shareholders' equity 3,335,521 2,799,830 ----------- ----------- Total liabilities and shareholders' equity $ 9,427,321 $ 8,884,088 =========== =========== SYSCO CORPORATION CONSOLIDATED CASH FLOWS (Unaudited) (In Thousands) For the 39-Weeks Ended ---------------------- March 31, April 1, 2007 2006 --------- --------- Cash flows from operating activities: Net earnings $ 697,685 $ 601,216 Adjustments to reconcile net earnings to cash provided by operating activities: Cumulative effect of accounting change -- (9,285) Share-based compensation expense 69,510 101,944 Depreciation and amortization 270,236 251,955 Deferred tax provision 405,228 365,548 Provision for losses on receivables 23,251 22,508 (Gain) loss on sale of assets (5,791) 908 Additional investment in certain assets and liabilities, net of effect of businesses acquired: (Increase) in receivables (170,145) (158,778) (Increase) in inventories (86,722) (118,535) (Increase) in prepaid expenses (7,933) (11,333) Increase in accounts payable 101,707 11,452 Increase in accrued expenses 54,167 15,387 (Decrease) in accrued income taxes (352,399) (449,976) (Increase) in other assets (26,976) (18,040) (Increase) decrease in prepaid pension cost and other long-term liabilities, net (12,621) 39,724 Excess tax benefits from share-based compensation arrangements (7,032) (5,484) --------- --------- Net cash provided by operating activities 952,165 639,211 --------- --------- Cash flows from investing activities: Additions to plant and equipment (457,174) (363,909) Proceeds from sales of plant and equipment 14,119 13,493 Acquisition of businesses, net of cash acquired (48,534) (109,423) Increase in restricted cash balances (1,331) (1,570) --------- --------- Net cash used for investing activities (492,920) (461,409) --------- --------- Cash flows from financing activities: Bank and commercial paper borrowings (repayments), net (10,235) 282,460 Other debt borrowings 4,480 500,436 Other debt repayments (7,418) (209,625) Debt issuance costs (7) (3,998) Cash paid for termination of interest rate swap -- (21,196) Common stock reissued from treasury 184,950 104,782 Treasury stock purchases (329,342) (527,616) Dividends paid (328,029) (293,535) Excess tax benefits from share-based compensation arrangements 7,032 5,484 --------- --------- Net cash used for financing activities (478,569) (162,808) --------- --------- Effect of exchange rate changes on cash (1,630) (1,067) --------- --------- Net (decrease) increase in cash (20,954) 13,927 Cash at beginning of period 201,897 191,678 --------- --------- Cash at end of period $ 180,943 $ 205,605 ========= ========= Cash paid during the period for: Interest $ 86,733 $ 80,064 Income taxes 383,076 472,063
SYSCO is the global leader in selling, marketing and distributing food products to restaurants, healthcare and educational facilities, lodging establishments and other customers who prepare meals away from home. Its family of products also includes equipment and supplies for the foodservice and hospitality industries. For the calendar year 2006, the company generated $33.9 billion in sales. For more information about SYSCO visit www.sysco.com.
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