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
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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
============ ============
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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
============ ============
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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
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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
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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
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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
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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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