Reports Third Quarter Operating Income of $405 Million
HOUSTON, May 4, 2009 (GLOBE NEWSWIRE) -- Sysco Corporation (NYSE:SYY) today announced financial results for its 13-week third quarter of fiscal 2009 ended March 28, 2009.
Third Quarter Fiscal 2009 Highlights
* Sales were $8.7 billion, a decrease of 4.5% from $9.1 billion in
the third quarter of fiscal 2008.
* Operating income was $405 million, a decrease of 3.0% compared to
$418 million in last year's third quarter.
* Diluted earnings per share (EPS) was $0.38, a decrease of 5.0%
compared to $0.40 in last year's third quarter.
Year-To-Date Fiscal 2009 Highlights
* Sales of $27.8 billion were flat compared to the corresponding
period in the prior year.
* Operating income increased 0.8% to $1.3 billion compared to the
results of last year's first 39 weeks. The results include a
$63.3 million loss in the cash surrender value of COLI, or
approximately $0.11 per share, compared to a $9.3 million loss in
the same period last year.
* Diluted EPS was $1.24, a decrease of 1.6% compared to the
corresponding period in the prior year.
"We are pleased to have grown operating income during the first nine months of fiscal 2009," said Bill DeLaney, Sysco's chief executive officer. "Our third quarter results reflect the increasingly difficult market environment that has developed as our fiscal year has progressed. Nevertheless, we are encouraged by our operating companies' ongoing ability to provide excellent customer service while managing costs effectively."
Third Quarter Fiscal 2009 Summary
Sales for the third quarter were $8.7 billion, a decrease of 4.5 percent compared to the same period last year. Food cost inflation, as estimated by the change in Sysco's cost of goods, was 3.3 percent for the quarter. Operating income for the third quarter was $405 million, a decrease of 3.0 percent over the same period last year. Diluted EPS decreased 5.0 percent from the third quarter of fiscal 2008 to $0.38.
Operating expenses decreased $85 million for the third quarter of fiscal 2009 as compared to the prior year period. The decrease in operating expenses was a result of declining payroll expense related to reduced headcount and lower incentive compensation, partially offset by increased bad debt expense. The decrease in operating expenses was also impacted by a net $6.0 million reduction in certain expenses, as outlined in the table below:
Impact of certain
expense items
-------------------------
Operating
expense
impact
Better /
(000's) 3Q09 3Q08 (Worse)
-------------------------
Cash surrender value of COLI $8,680 $14,316 $5,636
Multi-employer pension plans 0 0 0
Company-sponsored pensions 22,537 16,459 (6,078)
Stock compensation expense 11,615 18,036 6,421
-------------------------
Net impact to operating expenses $42,832 $48,811 $5,979
In addition, net earnings for the third quarter of fiscal 2009 were unfavorably impacted by a 40.6 percent tax rate for the quarter compared to 39.2 percent in the prior year's third quarter. The $8.7 million COLI loss for the quarter, which is not deductible for tax purposes, contributed to the high third quarter tax rate.
"Operating expenses were down 6.5% during the quarter," said Ken Spitler, Sysco's vice-chairman, president and chief operating officer. "We continue to manage through these difficult times by focusing on our core business and supporting our customers."
Year-To-Date Fiscal 2009 Summary
Sales in the first 39 weeks of fiscal 2009 were $27.8 billion, which was flat compared to the same period last year. Food cost inflation, as estimated by the change in Sysco's cost of goods, was 6.2 percent through the end of the third quarter. Operating income for the first 39 weeks was $1.3 billion, an increase of approximately 1.0 percent compared to the same period last year. Diluted EPS of $1.24 was $0.02 lower than the same period last year. Diluted EPS was unfavorably impacted by $0.11 due to the lower cash surrender value of COLI, compared to a $0.02 unfavorable impact in the same period last year.
Operating expenses decreased $30 million for the first 39 weeks of fiscal 2009 as compared to the prior year period. The decrease in operating expenses was a result of declining payroll expenses related to reduced headcount and lower incentive compensation, partially offset by increased bad debt expense. This decrease was also impacted by a net $56.6 million increase in certain expenses, as outlined in the table below:
Impact of certain
expense items
----------------------------
Operating
expense
impact
YTD YTD Better /
(000's) FY 2009 FY 2008 (Worse)
----------------------------
Cash surrender value of COLI $63,284 $9,293 ($53,991)
Multi-employer pension plans 9,585 9,410 (175)
Company-sponsored pensions 66,176 49,377 (16,799)
Stock compensation expense 46,744 61,154 14,410
----------------------------
Net impact to operating expenses $185,789 $129,234 ($56,555)
In addition, net earnings for the first 39 weeks of fiscal 2009 were unfavorably impacted by a 41.2 percent tax rate for the first 39 weeks of fiscal 2009 compared to 38.5 percent in the prior year's first 39 weeks. The primary contributor to this high tax rate was the $63.3 million COLI loss noted above, which is not deductible for tax purposes.
Capital Spending
Capital expenditures totaled $136 million and $315 million for the third quarter and first 39 weeks of fiscal 2009, respectively. The primary areas for investments included facility replacements, expansions, technology, and additions to Sysco's fleet. For full year fiscal 2009, the company projects that capital expenditures will be in the range of $500 million to $550 million. Additionally, during the third quarter, the company completed its stock repurchase program for fiscal year 2009.
Conference Call & Webcast
Sysco's third quarter 2009 earnings conference call will be held on Monday, May 4, 2009 at 10:00 a.m. ET. 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
Certain statements made herein are forward-looking statements under the Private Securities Litigation Reform Act of 1995. They include statements regarding the company's ability to control costs and manage through difficult times and projections regarding capital expenditures. These statements involve risks and uncertainties and are based on management's current expectations and estimates; actual results may differ materially. Those risks and uncertainties that could impact these statements include risks that pertain to Sysco's business, including the risks relating to the foodservice distribution industry's relatively low profit margins and sensitivity to general economic conditions, including the current economic environment and decreases in consumer spending; increased fuel costs; Sysco's leverage and debt risks; the successful completion of acquisitions and integration of acquired companies as well as the risk that acquisitions could negatively impact the Company's stock price, operating results or debt ratio or significantly increase the Company's liquidity requirements; the risk of interruption of supplies due to lack of long-term contracts, severe weather, work stoppages or otherwise; construction schedules; management's allocation of capital and the timing of capital purchases such as fleet and equipment; competitive conditions; labor issues; and internal factors such as the ability to control expenses. Earnings are also impacted by COLI, pension expense, and option expensing, which is based on certain assumptions regarding the number and fair value of options granted, resulting tax benefits and shares outstanding. Capital expenditures may vary from those projected based on changes in business plans and other factors, including those described above. For a discussion of additional factors that could cause actual results to differ from those described in the forward-looking statements, see the Company's Annual Report on Form 10-K for the year ended June 28, 2008 as filed with the Securities and Exchange Commission.
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
(In Thousands, Except for Share and Per Share Data)
39-Week Period Ended 13-Week Period Ended
-------------------------- --------------------------
Mar. 28, 2009 Mar. 29, 2008 Mar. 28, 2009 Mar. 29, 2008
------------ ------------ ------------ ------------
Sales $ 27,766,582 $ 27,791,906 $ 8,739,350 $ 9,146,557
Cost of sales 22,492,837 22,498,463 7,102,274 7,412,036
------------ ------------ ------------ ------------
Gross margin 5,273,745 5,293,443 1,637,076 1,734,521
Operating
expenses 3,941,806 3,972,154 1,231,753 1,316,877
------------ ------------ ------------ ------------
Operating
income 1,331,939 1,321,289 405,323 417,644
Interest
expense 83,043 84,030 28,233 28,744
Other income,
net (11,550) (18,660) (3,514) (7,285)
------------ ------------ ------------ ------------
Earnings before
income taxes 1,260,446 1,255,919 380,604 396,185
Income taxes 519,812 483,881 154,438 155,284
------------ ------------ ------------ ------------
Net earnings $ 740,634 $ 772,038 $ 226,166 $ 240,901
============ ============ ============ ============
Net earnings:
Basic earnings
per share $ 1.24 $ 1.27 $ 0.38 $ 0.40
Diluted
earnings
per share 1.24 1.26 0.38 0.40
Average shares
outstanding 596,653,289 607,380,306 590,152,592 603,170,150
Diluted shares
outstanding 597,691,315 612,241,790 590,667,577 605,773,862
Dividends
declared per
common share $ 0.70 $ 0.63 $ 0.24 $ 0.22
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except for Share Data)
Mar. 28, 2009 June 28, 2008 Mar. 29, 2008
------------ ------------ ------------
(unaudited) (unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 899,117 $ 551,552 $ 243,919
Accounts and notes
receivable, less
allowances of $99,535,
$31,730 and $65,755 2,549,769 2,723,189 2,737,464
Inventories 1,710,251 1,836,478 1,836,683
Prepaid expenses and other
current assets 67,131 63,814 62,432
------------ ------------ ------------
Total current assets 5,226,268 5,175,033 4,880,498
Plant and equipment at cost,
less depreciation 2,891,893 2,889,790 2,857,230
Other assets
Goodwill 1,404,993 1,413,224 1,406,700
Intangibles,
less amortization 87,011 87,528 90,242
Restricted cash 93,714 92,587 92,135
Prepaid pension cost 239,773 215,159 416,151
Other assets 193,400 208,972 218,029
------------ ------------ ------------
Total other assets 2,018,891 2,017,470 2,223,257
------------ ------------ ------------
Total assets $ 10,137,052 $ 10,082,293 $ 9,960,985
============ ============ ============
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Current liabilities
Accounts payable $ 1,830,432 $ 2,048,759 $ 2,033,198
Accrued expenses 776,767 917,892 846,989
Income taxes 98,179 11,665 159,628
Deferred taxes 404,185 516,131 385,878
Current maturities
of long-term debt 6,529 4,896 4,504
------------ ------------ ------------
Total current liabilities 3,116,092 3,499,343 3,430,197
Other liabilities
Long-term debt 2,463,243 1,975,435 2,040,546
Deferred taxes 530,100 540,330 554,137
Other long-term liabilities 696,440 658,199 655,158
------------ ------------ ------------
Total other liabilities 3,689,783 3,173,964 3,249,841
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 755,408 712,208 697,970
Retained earnings 6,366,304 6,041,429 5,839,698
Accumulated other
comprehensive
(loss) income (200,413) (68,768) 47,422
Treasury stock,
175,857,763, 163,942,358
and 165,088,829 shares (4,355,297) (4,041,058) (4,069,318)
------------ ------------ ------------
Total shareholders' equity 3,331,177 3,408,986 3,280,947
------------ ------------ ------------
Total liabilities and
shareholders' equity $ 10,137,052 $ 10,082,293 $ 9,960,985
============ ============ ============
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS (Unaudited)
(In Thousands)
39-Week Period Ended
--------------------------
Mar. 28, 2009 Mar. 29, 2008
------------ ------------
Cash flows from operating activities:
Net earnings $ 740,634 $ 772,038
Adjustments to reconcile net earnings
to cash provided by operating activities:
Share-based compensation expense 46,744 61,154
Depreciation and amortization 284,153 275,747
Deferred tax provision 495,732 450,569
Provision for losses on receivables 61,609 25,926
(Gain) on sale of assets (741) (2,496)
Additional investment in certain assets
and liabilities, net of effect of
businesses acquired:
Decrease (increase) in receivables 74,131 (138,425)
Decrease (increase) in inventories 96,617 (112,867)
(Increase) decrease in prepaid expenses
and other current assets (4,157) 61,230
(Decrease) increase in accounts payable (179,160) 41,082
(Decrease) in accrued expenses (125,637) (81,931)
(Decrease) in accrued income taxes (508,628) (362,878)
Decrease in other assets 3,294 4,427
Increase in other long-term liabilities
and prepaid pension cost, net 2,952 2,398
Excess tax benefits from share-based
compensation arrangements (2,818) (3,352)
------------ ------------
Net cash provided by operating activities 984,725 992,622
------------ ------------
Cash flows from investing activities:
Additions to plant and equipment (314,858) (392,706)
Proceeds from sales of plant and equipment 3,224 11,428
Acquisition of businesses,
net of cash acquired (53,868) (50,464)
(Increase) decrease in restricted cash (1,127) 2,794
------------ ------------
Net cash used for investing activities (366,629) (428,948)
------------ ------------
Cash flows from financing activities:
Bank and commercial paper borrowings
(repayments), net -- (486,122)
Other debt borrowings 502,460 755,892
Other debt repayments (7,778) (5,497)
Debt issuance costs (3,007) (4,192)
Common stock reissued from treasury 98,452 102,438
Treasury stock purchases (438,843) (529,179)
Dividends paid (406,689) (365,333)
Excess tax benefits from share-based
compensation arrangements 2,818 3,352
------------ ------------
Net cash used for financing activities (252,587) (528,641)
------------ ------------
Effect of exchange rates on cash (17,944) 1,014
------------ ------------
Net increase in cash and cash equivalents 347,565 36,047
Cash and cash equivalents at
beginning of period 551,552 207,872
------------ ------------
Cash and cash equivalents at end of period $ 899,117 $ 243,919
============ ============
Supplemental disclosures of cash flow
information: Cash paid during the
period for:
Interest $ 100,469 $ 88,514
Income taxes 510,147 386,570
Sysco Corporation and its Consolidated Subsidiaries
COMPARATIVE SEGMENT DATA (Unaudited)
(In Thousands)
39-Week Period Ended 13-Week Period Ended
-------------------------- --------------------------
Mar. 28, 2009 Mar. 29, 2008 Mar. 28, 2009 Mar. 29, 2008
------------ ------------ ------------ ------------
Sales:
Broadline $ 21,976,065 $ 22,084,857 $ 6,898,126 $ 7,236,940
SYGMA 3,655,045 3,371,693 1,194,236 1,138,660
Other 2,478,273 2,682,015 751,476 882,075
Intersegment (342,801) (346,659) (104,488) (111,118)
------------ ------------ ------------ ------------
Total $ 27,766,582 $ 27,791,906 $ 8,739,350 $ 9,146,557
------------ ------------ ------------ ------------
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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.
39-Week Period Ended 13-Week Period Ended
-------------------------- --------------------------
Mar. 28, 2009 Mar. 29, 2008 Mar. 28, 2009 Mar. 29, 2008
------------ ------------ ------------ ------------
Sysco Brand
Sales as a %
of MA-Served
Sales 48.82% 51.25% 48.03% 50.93%
Sysco Brand
Sales as a % of
Total Broadline
Sales 39.63% 42.07% 38.82% 41.56%
MA-Served Sales
as a % of
Total Broadline
Sales 47.12% 47.86% 45.61% 46.46%
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CONTACT: Sysco Corporation
Neil Russell, Vice President, Investor Relations
281-584-1308