HOUSTON, Nov. 8, 2010 (GLOBE NEWSWIRE) -- Sysco Corporation (NYSE:SYY) today announced financial results for its 13-week first quarter ended October 2, 2010.
First Quarter Fiscal 2011 Highlights
- Sales were $9.8 billion, an increase of 7.4% from $9.1 billion in the first quarter of fiscal 2010.
- Operating income was $506 million, an increase of 1.8% compared to $497 million in last year's first quarter, and Sysco's highest first quarter on record.
- Diluted earnings per share (EPS) were $0.51, including a $0.02 benefit from Corporate Owned Life Insurance (COLI). This result was 7.3% lower than last year's first quarter EPS of $0.55, which included a $0.05 favorable impact from the company's IRS settlement and a $0.04 benefit from COLI.
"I am pleased with the volume growth and productivity improvements our operating companies produced during the quarter," said Bill DeLaney, Sysco's president and chief executive officer. "While our overall sales increase and operating expense management were encouraging, we missed our goal for operating income growth, largely due to a decline in gross profit margin and higher pension costs. Our entire leadership team is focused on effectively leveraging sales growth as the fiscal year progresses."
First Quarter Fiscal 2011 Summary
Sales for the first quarter were $9.8 billion, an increase of $700 million, or 7.4% compared to the same period last year due primarily to the impact of food cost inflation and the strongest year-over-year Broadline and SYGMA case volume growth since the second quarter of fiscal 2007. Food cost inflation, as measured by the estimated change in Sysco's product costs, was 3.3%, driven by nearly 10% inflation in the combined categories of meat, dairy and seafood. This compares to deflation of 3.4% in the prior year period. In addition, sales from acquisitions (within the last 12 months) increased sales by 0.6%, and the impact of changes in foreign exchange rates for the first quarter increased sales by 0.5%.
Operating income increased $9 million, or 1.8%, to $506 million during the first quarter. While sales increased 7.4% during the first quarter, gross margin increased 4.8%, or $84 million, and operating expense increased 6%.
Operating expense increased $75 million for the first quarter mainly from (1) an approximately $40 million increase in salaries and related expense primarily due to increased costs on higher case volume during the quarter, and (2) a $15 million increase in pension expense. In addition, operating expense includes a $14 million benefit from the impact of COLI, which was $8 million lower than the prior year's benefit from COLI. In addition, while gross margin for the quarter increased 4.8% year-over-year to $1.8 billion, gross margin as a percentage of sales declined 46 basis points to 18.8% due mainly to strategic pricing initiatives and the impact of significant inflation in the categories discussed above.
Net earnings for the first quarter were $299 million, a decrease of $27 million, or 8.3%. Net earnings reflect a $39 million increase in tax expense year-over-year primarily due to the IRS settlement gain and higher non-taxable COLI gains recorded in the prior year.
Diluted EPS was $0.51, including a $0.02 positive impact from COLI. Diluted EPS in the prior year period was $0.55, which included a $0.04 positive impact from COLI and a $0.05 positive impact from the company's IRS settlement announced in August 2009.
Cash Flow and Capital Spending
Cash flow from operations was $227 million for the first quarter of fiscal 2011, and capital expenditures totaled $143 million for the first quarter. The primary areas for investment included facility replacements and expansions, replacements to Sysco's fleet, and technology.
Conference Call & Webcast
Sysco's first quarter 2011 earnings conference call will be held on Monday, November 8, 2010 at 10:00 a.m. Eastern. 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 approximately 400,000 customers. For the fiscal year 2010 that ended July 3, 2010 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 our leadership team's focus on effectively leveraging sales growth as the fiscal year progresses. These statements involve risks and uncertainties and are based on management's current expectations and estimates; actual results may differ materially. Factors impacting our ability to effectively leverage sales growth include the general risks associated with our business, 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. Risks and uncertainties also 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. Also, there are risks related to our Business Transformation Project, including that the expected costs of our Business Transformation Project in fiscal 2011 may be greater or less than currently expected because we may encounter the need for changes in design or revisions of the project calendar and budget, including the incurrence of expenses at an earlier or later time than currently anticipated; the risk that our business and results of operations may be adversely affected if we experience operating problems, scheduling delays, cost overages or limitations on the extent of the business transformation during the ERP implementation process; and the risk of adverse effects if the ERP system, and the associated process changes, do not prove to be cost effective or result in the cost savings and other benefits that we anticipate. For a discussion of additional factors impacting Sysco's business, see the Company's Annual Report on Form 10-K for the year ended July 3, 2010, 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) |
| |
|
|
| |
13-Week Period Ended |
| |
Oct. 2, 2010 |
Sept. 26, 2009 |
| |
|
|
| Sales |
$9,751,274 |
$9,081,426 |
| Cost of sales |
7,919,857 |
7,334,067 |
| Gross margin |
1,831,417 |
1,747,359 |
| Operating expenses |
1,325,177 |
1,250,031 |
| Operating income |
506,240 |
497,328 |
| Interest expense |
31,101 |
33,800 |
| Other expense (income), net |
(1,684) |
(2,012) |
| Earnings before income taxes |
476,823 |
465,540 |
| Income taxes |
177,754 |
139,335 |
| Net earnings |
$299,069 |
$326,205 |
| |
|
|
| Net earnings: |
|
|
| Basic earnings per share |
$0.51 |
$0.55 |
| Diluted earnings per share |
0.51 |
0.55 |
| |
|
|
| Average shares outstanding |
588,711,412 |
591,568,212 |
| Diluted shares outstanding |
591,103,346 |
591,983,474 |
| |
|
|
| Dividends declared per common share |
$0.25 |
$0.24 |
| |
| |
| Sysco Corporation and its Consolidated Subsidiaries |
| CONSOLIDATED BALANCE SHEETS (Unaudited) |
| (In Thousands, Except for Share Data) |
| |
|
|
|
| |
Oct. 2, 2010 |
July 3, 2010 |
Sept. 26, 2009 |
| |
|
|
|
| ASSETS |
|
|
|
| Current assets |
|
|
|
| Cash and cash equivalents |
$448,374 |
$585,443 |
$773,770 |
| Short-term investments |
-- |
23,511 |
27,438 |
| Accounts and notes receivable, less allowances of $49,376, $36,573 and $51,089 |
2,814,958 |
2,617,352 |
2,575,293 |
| Inventories |
1,875,242 |
1,771,539 |
1,747,773 |
| Deferred income taxes |
74,419 |
-- |
91,262 |
| Prepaid expenses and other current assets |
76,418 |
70,992 |
69,013 |
| Prepaid income taxes |
-- |
7,421 |
-- |
| Total current assets |
5,289,411 |
5,076,258 |
5,284,549 |
| Plant and equipment at cost, less depreciation |
3,277,583 |
3,203,823 |
3,014,341 |
| Other assets |
|
|
|
| Goodwill |
1,577,691 |
1,549,815 |
1,529,066 |
| Intangibles, less amortization |
110,974 |
106,398 |
116,731 |
| Restricted cash |
129,532 |
124,488 |
121,755 |
| Prepaid pension cost |
-- |
-- |
48,750 |
| Other assets |
270,219 |
252,919 |
237,247 |
| Total other assets |
2,088,416 |
2,033,620 |
2,053,549 |
| Total assets |
$10,655,410 |
$10,313,701 |
$10,352,439 |
| |
|
|
|
| LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
| Current liabilities |
|
|
|
| Accounts payable |
$1,998,982 |
$1,953,092 |
$1,883,088 |
| Accrued expenses |
751,640 |
870,114 |
767,742 |
| Accrued income taxes |
337,001 |
-- |
345,420 |
| Deferred income taxes |
50,561 |
178,022 |
-- |
| Current maturities of long-term debt |
7,837 |
7,970 |
8,743 |
| Total current liabilities |
3,146,021 |
3,009,198 |
3,004,993 |
| Other liabilities |
|
|
|
| Long-term debt |
2,486,646 |
2,472,662 |
2,468,783 |
| Deferred income taxes |
282,836 |
271,512 |
616,142 |
| Other long-term liabilities |
758,912 |
732,803 |
548,163 |
| Total other liabilities |
3,528,394 |
3,476,977 |
3,633,088 |
| 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 |
825,930 |
816,833 |
764,902 |
| Retained earnings |
7,286,409 |
7,134,139 |
6,724,058 |
| Accumulated other comprehensive loss |
(415,765) |
(480,251) |
(233,932) |
| Treasury stock at cost, 178,993,904, 176,768,795 and 173,860,981 shares |
(4,480,754) |
(4,408,370) |
(4,305,845) |
| Total shareholders' equity |
3,980,995 |
3,827,526 |
3,714,358 |
| Total liabilities and shareholders' equity |
$10,655,410 |
$10,313,701 |
$10,352,439 |
| |
| |
| Sysco Corporation and its Consolidated Subsidiaries |
| CONSOLIDATED CASH FLOWS (Unaudited) |
| (In Thousands) |
| |
13-Week Period Ended |
| |
Oct. 2, 2010 |
Sept. 26, 2009 |
| Cash flows from operating activities: |
|
|
| Net earnings |
$299,069 |
$326,205 |
Adjustments to reconcile net earnings to cash provided by
operating activities: |
|
|
| Share-based compensation expense |
10,148 |
12,748 |
| Depreciation and amortization |
101,714 |
93,906 |
| Deferred income taxes |
(198,900) |
(207,546) |
| Provision for losses on receivables |
5,670 |
8,152 |
| Other non-cash items |
1,973 |
(157) |
| Additional investment in certain assets and liabilities, net of effect of businesses acquired: |
|
|
| (Increase) in receivables |
(178,499) |
(100,167) |
| (Increase) in inventories |
(85,649) |
(86,167) |
| (Increase) in prepaid expenses and other current assets |
(4,958) |
(4,242) |
| Increase in accounts payable |
25,468 |
84,798 |
| (Decrease) in accrued expenses |
(124,601) |
(33,895) |
| Increase in accrued income taxes |
342,129 |
56,113 |
| (Increase) in other assets |
(13,539) |
(22,083) |
| Increase (decrease) in other long-term liabilities and prepaid pension cost, net |
47,034 |
(85,596) |
| Excess tax benefits from share-based compensationarrangements |
(277) |
(465) |
| Net cash provided by operating activities |
226,782 |
41,604 |
| |
|
|
| Cash flows from investing activities: |
|
|
| Additions to plant and equipment |
(142,924) |
(109,405) |
| Proceeds from sales of plant and equipment |
354 |
1,346 |
| Acquisition of businesses, net of cash acquired |
(23,891) |
(8,334) |
| Purchases of short-term investments |
-- |
(27,217) |
| Maturities of short-term investments |
24,075 |
-- |
| (Increase) in restricted cash |
(5,044) |
(27,897) |
| Net cash used for investing activities |
(147,430) |
(171,507) |
| |
|
|
| Cash flows from financing activities: |
|
|
| Other debt borrowings |
626 |
2,417 |
| Other debt repayments |
(2,273) |
(2,593) |
| Common stock reissued from treasury for share-based compensation awards |
40,834 |
21,907 |
| Treasury stock purchases |
(116,699) |
-- |
| Dividends paid |
(146,868) |
(141,729) |
| Excess tax benefits from share-based compensationarrangements |
277 |
465 |
| Net cash used for financing activities |
(224,103) |
(119,533) |
| |
|
|
| Effect of exchange rates on cash |
7,682 |
4,555 |
| |
|
|
| Net (decrease) in cash and cash equivalents |
(137,069) |
(244,881) |
| Cash and cash equivalents at beginning of period |
585,443 |
1,018,651 |
| Cash and cash equivalents at end of period |
$448,374 |
$773,770 |
| |
|
|
| Supplemental disclosures of cash flow information: |
|
|
| Cash paid during the period for: |
|
|
| Interest |
$54,302 |
$59,509 |
| Income taxes |
35,180 |
334,833 |
| |
| |
| Sysco Corporation and its Consolidated Subsidiaries |
| COMPARATIVE SEGMENT DATA(Unaudited) |
| (In Thousands) |
|
|
| |
13-Week Period Ended |
| |
Oct. 2, 2010 |
Sept. 26, 2009 |
| Sales: |
|
|
| Broadline |
$7,791,274 |
$7,308,706 |
| SYGMA |
1,319,496 |
1,150,861 |
| Other |
786,925 |
742,877 |
| Intersegment |
(146,421) |
(121,018) |
| Total |
$9,751,274 |
$9,081,426 |
| |
|
|
| |
| |
|
|
| |
| ComparativeSupplementalStatisticalInformationRelatedtoSales(Unaudited) |
| Comparative Sysco Brand Sales and Marketing Associate-Served Sales data are summarized below. |
| |
|
|
| |
13-Week Period Ended |
| |
Oct. 2, 2010 |
Sept. 26, 2009 |
| Sysco Brand Sales as a % |
|
|
| of MA-Served Sales |
45.34% |
47.02% |
| Sysco Brand Sales as a % |
|
|
| of Total Broadline Sales |
36.52% |
38.40% |
| MA-Served Sales as a % |
|
|
| of Total Broadline Sales |
47.39% |
47.16% |
| |
| Note: Statistical sales mix information represents data for U.S. and Canadian Broadline companies only. |
CONTACT: Sysco Corporation
Neil Russell, Vice President, Investor Relations
281-584-1308