Reports Second Quarter Operating Income of $422 Million
Second Quarter Fiscal 2009 Highlights
* Sales were $9.1 billion, a decrease of 1.0% from $9.2 billion in
the second quarter of fiscal 2008.
* Operating income was $422 million, a decrease of 6.0% compared to
$449 million in last year's second quarter. The results include a
$31.7 million loss in the cash surrender value of corporate-owned
life insurance (COLI), or approximately $0.05 per share, compared
to a $2.1 million loss in the same period last year.
* Diluted earnings per share (EPS) was $0.40, a decrease of 7.0%
compared to $0.43 in last year's second quarter.
First Half Fiscal 2009 Highlights
* Sales increased 2.0% to $19.0 billion from $18.6 billion in the
first half of fiscal 2008.
* Operating income increased 2.5% to $927 million compared to
$904 million in the first half of fiscal 2008. The results include
a $54.6 million loss in the cash surrender value of COLI, compared
to a $5.0 million gain in the same period last year.
* Diluted EPS remained flat at $0.86 compared to the prior fiscal
year's first six months.
"The business environment remains difficult in the short term, as demonstrated by our decline in sales last quarter," said Richard J. Schnieders, Sysco's chairman and chief executive officer. "However, we remain focused on execution and operational excellence, which we believe will strengthen our position within the industry over the long term."
Second Quarter Fiscal 2009 Summary
Sales for the second quarter were $9.1 billion, a decrease of one percent compared to the same period last year. Food cost inflation, as estimated by the change in Sysco's cost of goods, was seven percent for the quarter. Operating income for the second quarter was $422 million, a decrease of six percent over the same period last year. Diluted EPS decreased seven percent from the second quarter of fiscal 2008 to $0.40. Diluted EPS decreased by $0.05 due to the lower cash surrender value of COLI, compared to no change in the same period last year.
Operating expenses increased $9.5 million for the second quarter of fiscal 2009 as compared to the prior year period. This increase was impacted by a net $41.7 million increase in certain expenses, as outlined in the table below. The additional expenses were primarily related to the combined impact of changes in the cash surrender value of corporate-owned life insurance (COLI), a charge for a withdrawal from one of the company's multi-employer pension plans and increased company-sponsored pension expense. These items were partially offset by the impact of lower stock compensation expense, as detailed in the table below:
Impact of certain expense items
--------------------------------------------
(000's) Operating Expense impact
2Q09 2Q08 Unfavorable / (Favorable)
--------------------------------------------
Cash surrender value of
COLI $31,696 $2,070 $29,626
Multi-employer pension
plans 9,585 0 9,585
Company-sponsored
pensions 22,537 16,459 6,078
Stock compensation
expense 24,296 27,925 (3,629)
--------------------------------------------
Net impact to operating
expenses $88,114 $46,454 $41,660
In addition, net earnings for the second quarter of fiscal 2009 were unfavorably impacted by a 40.4 percent tax rate for the quarter compared to 38.3 percent in the prior year's second quarter. The primary contributor to this high tax rate was the $31.7 million COLI loss noted above, which is not deductible for tax purposes.
First Half Fiscal 2009 Summary
Sales in the first half of fiscal 2009 were $19.0 billion, an increase of two percent over the same period last year. Food cost inflation, as estimated by the change in Sysco's cost of goods, was 7.6 percent through the end of the second quarter. Operating income for the first half was $927 million, an increase of 2.5 percent compared to the same period last year. As a percentage of sales, operating income increased two basis points to 4.87 percent. The company continued to manage high food cost inflation well, as evidenced by gross profit dollars as a percentage of sales increasing three basis points compared to the first half last year. Diluted EPS of $0.86 remained flat compared to the same period last year. Diluted EPS was unfavorably impacted by $0.09 due to the lower cash surrender value of COLI, compared to a $0.01 gain in the same period last year.
Operating expenses increased $55 million for the first half of fiscal 2009 as compared to the prior year period. This increase was impacted by a net $62.5 million increase in certain expenses, as outlined in the table below. The additional expenses were partially related to the combined impact of changes in the cash surrender value of COLI and increased company-sponsored pension expense. These items were partially offset by the impact of lower stock compensation expense, as detailed in the table below:
Impact of certain expense items
--------------------------------------------
(000's) YTD YTD Operating Expense impact
FY 2009 FY 2008 Unfavorable / (Favorable)
--------------------------------------------
Cash surrender value of
COLI $54,604 ($5,023) $59,627
Company-sponsored
pensions 43,639 32,918 10,721
Multi-employer pension
plans 9,585 9,410 175
Stock compensation
expense 35,129 43,118 (7,989)
--------------------------------------------
Net impact to operating
expenses $142,957 $80,423 $62,534
In addition, net earnings for the first half of fiscal 2009 were unfavorably impacted by a 41.5 percent tax rate for the first half of fiscal 2009 compared to 38.2 percent in the prior year's first half. The primary contributor to this high tax rate was the $54.6 million COLI loss noted above, which is not deductible for tax purposes.
"Though not in line with our historical performance, our results for the quarter were solid given the difficult economic conditions," said Ken Spitler, Sysco's president, chief operating officer and vice-chairman. "Our operating companies continue to execute well and I remain confident about our positioning for the long-term."
Capital Spending
Capital expenditures totaled $99 million and $180 million for the second quarter and first half of fiscal 2009, respectively. The primary areas for investments included facility replacements and expansions, construction of fold-out operations and additions to Sysco's fleet. For full year fiscal 2009, the company projects that capital expenditures will be in the range of $575 million to $625 million.
Conference Call & Webcast
Sysco's second quarter 2009 earnings conference call will be held on Monday, February 2, 2009 at 10:00 a.m. EST. A live webcast of the call, as well as a copy of this press release, will be available online at www.sysco.com in the Investor Relations section.
About Sysco
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. The company operates 180 distribution facilities serving more than 400,000 customers. For the fiscal year 2008 that ended June 28, 2008, the company generated more than $37 billion in sales. For more information about Sysco visit the company's Internet home page at www.sysco.com.
The Sysco Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=747
Forward-Looking Statements
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
(In Thousands, Except for Share and Per Share Data)
26-Week Period Ended 13-Week Period Ended
------------------------ ------------------------
Dec. 27, Dec. 29, Dec. 27, Dec. 29,
2008 2007 2008 2007
----------- ----------- ----------- -----------
Sales $19,027,232 $18,645,349 $ 9,149,803 $ 9,239,505
Cost of sales 15,390,563 15,086,427 7,399,690 7,471,725
----------- ----------- ----------- -----------
Gross margin 3,636,669 3,558,922 1,750,113 1,767,780
Operating expenses 2,710,053 2,655,277 1,328,249 1,318,768
----------- ----------- ----------- -----------
Operating income 926,616 903,645 421,864 449,012
Interest expense 54,810 55,286 28,400 28,915
Other income, net (8,036) (11,375) (5,223) (8,343)
----------- ----------- ----------- -----------
Earnings before
income taxes 879,842 859,734 398,687 428,440
Income taxes 365,374 328,597 161,033 164,292
----------- ----------- ----------- -----------
Net earnings $ 514,468 $ 531,137 $ 237,654 $ 264,148
=========== =========== =========== ===========
Net earnings:
Basic earnings
per share $ 0.86 $ 0.87 $ 0.40 $ 0.43
Diluted earnings
per share 0.86 0.86 0.40 0.43
Average shares
outstanding 599,903,629 609,489,326 597,549,831 608,169,202
Diluted shares
outstanding 601,100,591 615,893,115 598,233,384 614,620,234
Dividends declared
per common share $ 0.46 $ 0.41 $ 0.24 $ 0.22
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except for Share Data)
Dec. 27, June 28, Dec. 29,
2008 2008 2007
----------- ----------- -----------
(unaudited) (unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 373,074 $ 551,552 $ 168,786
Accounts and notes receivable,
less allowances of $67,400,
$31,730 and $54,541 2,623,509 2,723,189 2,754,339
Inventories 1,862,187 1,836,478 1,896,557
Prepaid expenses and other
current assets 60,938 63,814 64,798
----------- ----------- -----------
Total current assets 4,919,708 5,175,033 4,884,480
Plant and equipment at cost,
less depreciation 2,890,641 2,889,790 2,841,229
Other assets
Goodwill 1,384,790 1,413,224 1,408,061
Intangibles, less amortization 78,976 87,528 91,329
Restricted cash 93,541 92,587 95,511
Prepaid pension cost 249,840 215,159 403,064
Other assets 193,926 208,972 229,153
----------- ----------- -----------
Total other assets 2,001,073 2,017,470 2,227,118
----------- ----------- -----------
Total assets $ 9,811,422 $10,082,293 $ 9,952,827
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Notes payable $ -- $ -- $ 4,500
Accounts payable 1,707,331 2,048,759 2,000,419
Accrued expenses 806,055 917,892 773,216
Income taxes 538,790 11,665 264,863
Deferred taxes 234,286 516,131 222,629
Current maturities of
long-term debt 6,747 4,896 3,056
----------- ----------- -----------
Total current liabilities 3,293,209 3,499,343 3,268,683
Other liabilities
Long-term debt 1,972,612 1,975,435 2,135,547
Deferred taxes 539,534 540,330 567,235
Other long-term liabilities 712,055 658,199 651,299
----------- ----------- -----------
Total other liabilities 3,224,201 3,173,964 3,354,081
Commitments and contingencies
Shareholders' equity
Preferred stock, par value $1
per share, Authorized
1,500,000 shares, issued none -- -- --
Common stock, par value $1
per share, Authorized
2,000,000,000 shares, issued
765,174,900 shares 765,175 765,175 765,175
Paid-in capital 750,843 712,208 684,091
Retained earnings 6,281,575 6,041,429 5,731,024
Accumulated other comprehensive
(loss) income (197,287) (68,768) 71,765
Treasury stock, 173,746,062,
163,942,358 and 160,126,587
shares (4,306,294) (4,041,058) (3,921,992)
----------- ----------- -----------
Total shareholders' equity 3,294,012 3,408,986 3,330,063
----------- ----------- -----------
Total liabilities and
shareholders' equity $ 9,811,422 $10,082,293 $ 9,952,827
=========== =========== ===========
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS (Unaudited)
(In Thousands)
26-Week Period Ended
----------------------
Dec. 27, Dec. 29,
2008 2007
---------- ----------
Cash flows from operating activities:
Net earnings $ 514,468 $ 531,137
Adjustments to reconcile net earnings to cash
provided by operating activities:
Share-based compensation expense 35,129 43,118
Depreciation and amortization 190,609 180,640
Deferred tax provision 337,453 301,276
Provision for losses on receivables 30,652 16,087
(Gain) on sale of assets (112) (653)
Additional investment in certain assets and
liabilities, net of effect of businesses
acquired:
Decrease (increase) in receivables 26,769 (136,544)
(Increase) in inventories (57,859) (166,259)
Decrease in prepaid expenses and other
current assets 2,144 58,939
(Decrease) increase in accounts payable (301,018) 1,277
(Decrease) in accrued expenses (149,811) (165,581)
(Decrease) in accrued income taxes (68,877) (260,725)
Decrease (increase) in other assets 2,087 (8,019)
Increase in other long-term liabilities and 2,889 9,240
prepaid pension cost, net
Excess tax benefits from share-based
compensation arrangements (2,774) (3,029)
---------- ----------
Net cash provided by operating activities 561,749 400,904
---------- ----------
Cash flows from investing activities:
Additions to plant and equipment (178,596) (277,552)
Proceeds from sales of plant and equipment 2,077 4,711
Acquisition of businesses, net of cash
acquired (16,277) (34,729)
(Increase) decrease in restricted cash (954) 1,418
---------- ----------
Net cash used for investing activities (193,750) (306,152)
---------- ----------
Cash flows from financing activities:
Bank and commercial paper borrowings
(repayments), net -- 361,954
Other debt borrowings 9,316 3,340
Other debt repayments (5,610) (4,303)
Debt issuance costs -- (7)
Common stock reissued from treasury 85,628 84,352
Treasury stock purchases (358,751) (352,832)
Dividends paid (264,687) (232,130)
Excess tax benefits from share-based
compensation arrangements 2,774 3,029
---------- ----------
Net cash used for financing activities (531,330) (136,597)
---------- ----------
Effect of exchange rates on cash (15,147) 2,759
---------- ----------
Net decrease in cash and cash equivalents (178,478) (39,086)
Cash and cash equivalents at beginning of
period 551,552 207,872
---------- ----------
Cash and cash equivalents at end of period $ 373,074 $ 168,786
========== ==========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 55,577 $ 55,670
Income taxes 73,830 277,455
Sysco Corporation and its Consolidated Subsidiaries
COMPARATIVE SEGMENT DATA (Unaudited)
(In Thousands)
26-Week Period Ended 13-Week Period Ended
------------------------ ------------------------
Dec. 27, Dec. 29, Dec. 27, Dec. 29,
2008 2007 2008 2007
----------- ----------- ----------- -----------
Sales:
Broadline $15,077,939 $14,847,917 $ 7,205,372 $ 7,341,810
SYGMA 2,460,809 2,233,033 1,232,574 1,098,326
Other 1,726,797 1,799,940 831,057 921,086
Intersegment (238,313) (235,541) (119,200) (121,717)
----------- ----------- ----------- -----------
Total $19,027,232 $18,645,349 $ 9,149,803 $ 9,239,505
=========== =========== =========== ===========
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----------------------------------------------------------------------
Comparative Supplemental Statistical Information Related to Sales
(Unaudited)
Comparative Sysco Brand Sales and Marketing Associate-Served Sales
data are summarized below.
26-Week Period Ended 13-Week Period Ended
------------------------ ------------------------
Dec. 27, Dec. 29, Dec. 27, Dec. 29,
2008 2007 2008 2007
----------- ----------- ----------- -----------
Sysco Brand Sales
as a % of
MA-Served Sales 49.15% 51.43% 48.79% 51.45%
Sysco Brand Sales
as a % of Total
Broadline Sales 40.09% 42.39% 39.73% 42.31%
MA-Served Sales as
a % of Total
Broadline Sales 47.82% 48.55% 46.02% 47.01%
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CONTACT: Sysco Corporation
Neil Russell, Vice President, Investor Relations
281-584-1308