Sysco Reports Third Fiscal Quarter Diluted EPS of $0.42, an Increase of 10.5% Compared to the Prior Year

HOUSTON, May 3, 2010 (GLOBE NEWSWIRE) -- Sysco Corporation (NYSE:SYY) today announced financial results for its 13-week third quarter ended March 27, 2010.

Third Quarter Fiscal 2010 Highlights

• Sales were $8.9 billion, an increase of 2.4% from $8.7 billion in the third quarter of fiscal 2009.
• Operating income was $432 million, an increase of 6.6% compared to $405 million in last year's third quarter.
• Diluted earnings per share (EPS) was $0.42, an increase of 10.5% compared to $0.38 in last year's third quarter.

Year-To-Date Fiscal 2010 Highlights

• Sales were $26.9 billion, a decrease of 3.1% from $27.8 billion in the corresponding period in the prior year.
• Operating income was $1.4 billion, an increase of 4.5% compared to $1.3 billion in the prior year period.
• Diluted EPS was $1.42, an increase of 14.5% compared to $1.24 in the prior year period.

"I am very pleased with the favorable sales trends we experienced in the third quarter – the first quarter since September 2008 in which we produced year-over-year sales growth," said Bill DeLaney, Sysco's president and chief executive officer. "The underlying business environment appears to be improving, as evidenced by both the case volume growth and easing of deflation that we realized as the quarter progressed. I am especially appreciative to our associates for their efforts and commitment to the success of our customers in a market environment that remains highly competitive."

Third Quarter Fiscal 2010 Summary

Sales for the third quarter were $8.9 billion, an increase of 2.4% compared to the same period last year. In addition to case volume growth, the impact of changes in foreign exchange rates for the quarter increased sales by 1.6%, and sales from acquisitions (within the last 12 months) increased sales by 0.6%. Offsetting these increases, deflation was 0.8% percent for the quarter, as measured by the estimated change in Sysco's product costs.

Operating expenses increased $20 million, or 1.6%, for the third quarter of fiscal 2010 compared to the prior year period, primarily due to higher payroll expense.  The increase in payroll expense was driven mainly by higher incentive compensation accruals and the impact of foreign exchange rates.  Headcount was 2.6% lower year-over-year at the end of the third quarter. Operating income increased $27 million, or 6.6%, to $432 million during the third quarter, and operating margin was 4.8%.

Net earnings for the third quarter were $248 million, an increase of $21 million, or 9.5%, and the highest third quarter on record.Diluted EPS was $0.42, aided by a $0.01 favorable impact from corporate owned life insurance (COLI), compared to $0.38 in the prior year period, which included a $0.01 negative impact from COLI.

Year-To-Date Fiscal 2010 Summary

Sales for the first 39 weeks of fiscal 2010 were $26.9 billion, a decrease of 3.1% compared to the same period last year. Deflation, as measured by the estimated change in Sysco's product costs, was 2.7% percent for the first 39 weeks of the year. The impact of changes in foreign exchange rates for the first three quarters of the year increased sales by 0.7%. Sales from acquisitions (within the last 12 months) increased sales by 0.6%.

Operating expenses declined $208 million, or 5.3%, for the first 39 weeks of fiscal 2010 compared to the prior year period. The decrease in operating expenses was primarily a result of a $95 million favorable change in the value of COLI; a $69 million decline in payroll expense driven by reduced headcount, partially offset by changes in foreign exchange rates; and a $68 million reduction in fuel expense. Operating income increased $60 million, or 4.5%, to $1.4 billion during the first 39 weeks of fiscal 2010, and operating margin was 5.2%.

Net earnings for the first 39 weeks of fiscal 2010 were $842 million, an increase of $102 million, or 13.7%, compared to the same period last year. Diluted EPS was $1.42, aided by a $0.05 favorable impact from COLI and a $0.05 tax benefit related to the company's IRS settlement announced in the first quarter of fiscal 2010. Diluted EPS in the prior year period was $1.24 which included an $0.11 negative impact from COLI.

Cash Flow and Capital Spending

Cash flow from operations was $466 million for the first 39 weeks of fiscal 2010, which is net of $475 million in IRS settlement payments made during this period.

Capital expenditures totaled $190 million and $438 million for the third quarter and first 39 weeks of fiscal 2010, respectively. The primary areas for investments included facility replacements and expansions, including a facility for our future shared services operations; technology; and additions and replacements to Sysco's fleet. For the fiscal 2010 year, the company projects capital expenditures will be in the range of $575 million to $625 million.

Conference Call & Webcast

Sysco's third quarter fiscal 2010 earnings conference call will be held on Monday, May 3, 2010 at 10:00 a.m. EDT. 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 186 distribution facilities serving approximately 400,000 customers. For the fiscal year 2009 that ended June 27, 2009, the company generated more than $36 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 easing of deflation pressures and improvements in sales trends, as well as 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 deflation and sales trends include risks impacting the economy generally, including the risk that the current economic downturn will continue, that initial signs of economic recovery may not prove long-lasting, or that consumer confidence in the economy may not increase and decreases in consumer spending, particularly on food prepared outside the home, may not reverse. Even if these forward looking statements prove accurate, Sysco's business is subject to a number of additional risks, including the risk of interruption of supplies due to lack of long-term contracts, severe weather, work stoppages or otherwise; inflation risks; and labor issues. Also, our business transformation project may not provide the benefits anticipated, on a timely basis or at all. Capital expenditures may vary from those projected based on changes in business plans and other factors, including risks related to the implementation of our business transformation project, the timing and successful completion of acquisitions, construction schedules and the possibility that other cash requirements could result in delays or cancellations of capital spending. For a discussion of additional factors impacting Sysco's business, see the Company's Annual Report on Form 10-K for the year ended June 27, 2009 as filed with the Securities and Exchange Commission.

CONTACT: Sysco Corporation 
Neil Russell, Vice President, Investor Relations 
281-584-1308