Sysco Reports Diluted EPS of $0.47 ($0.50 After Adjusting for Certain Items) for the Fourth Quarter and $1.67 ($1.78 After Adjusting for Certain Items) for Fiscal Year 2013

HOUSTON, Aug. 12, 2013 (GLOBE NEWSWIRE) -- Sysco Corporation (NYSE:SYY) today announced financial results for its 13-week fourth fiscal quarter, and its 52-week fiscal year ended June 29, 2013.

Fourth Quarter Fiscal 2013 Highlights

• Sales were $11.6 billion, an increase of 5.0% from $11.0 billion in the fourth quarter of fiscal 2012.
• Operating income was $460 million, a decrease of 10.8%, compared to $515 million in last year's fourth quarter.
• Diluted earnings per share (EPS) were $0.47, which was 11.3% lower compared to $0.53 in last year's fourth quarter.
• After adjusting for certain items, which mainly related to restructuring charges, adjusted¹ diluted EPS was $0.50. After further adjusting for business transformation expenses, to reflect the performance of the company's underlying business, adjusted diluted EPS was $0.59, compared to $0.63 in the prior year period.

Fiscal 2013 Highlights

• Sales were $44.4 billion, an increase of 4.8% from $42.4 billion in fiscal 2012.
• Operating income was $1.7 billion, a decrease of 12.3%, compared to the prior year.
• Diluted EPS was $1.67, which was 12.1% lower compared to $1.90 in the prior year.
• After adjusting for certain items, which mainly related to a multi-employer pension plan (MEPP) withdrawal and restructuring charges, adjusted diluted EPS was $1.78. After further adjusting for business transformation expenses to reflect the performance of the company's underlying business, adjusted diluted EPS was $2.14, compared to $2.15 in the prior year.
• Cash flow from operations increased 7.6% to $1.5 billion in fiscal 2013 and free cash flow increased 62% to $1.0 billion.

¹ See Non-GAAP Reconciliations below for more information.

"Fiscal year 2013 was a year of transition for Sysco where we made good progress on our multi-year business transformation initiatives. With that said, our financial results announced this morning fell short of our expectations as weak restaurant traffic continued to challenge many of our customers," said Bill DeLaney , Sysco's president and chief executive officer. "While overall sales grew acceptably by about 5 percent for both the fourth quarter and full fiscal year and our cost per case metrics improved as the year progressed, we were unable to grow our gross profit at planned levels due in part to ongoing competitive pressures and a shift in customer mix. Looking forward to fiscal 2014, our earnings performance trends should gradually improve as we realize more of the benefits of our business transformation initiatives and further leverage the capabilities of both our strengthened senior management team and our 48,000 customer focused associates."

Fourth Quarter Fiscal 2013 Summary

Sales for the fourth quarter were $11.6 billion, an increase of 5.0% compared to sales in the same period last year. Food cost inflation was 2.0%, as measured by the estimated change in Sysco's product costs, driven mainly by inflation in the dairy and poultry categories. In addition, sales from acquisitions (within the last 12 months) increased sales by 2.1%, and the impact of changes in foreign exchange rates for the fourth quarter decreased sales by 0.1%. Case volume for the company's Broadline and SYGMA operations combined grew 3.0% during the quarter, including acquisitions, and increased approximately 0.8%, excluding acquisitions.

Gross profit for the fourth quarter was $2.0 billion, an increase of 1.2%, compared to the prior year period. Operating expenses in the fourth quarter increased $80 million, or 5.4%, compared to the prior year period. This increase was due primarily to an $18 million increase in retirement-related expense, and an $18 million increase in business transformation expenses. Excluding certain items and business transformation expenses, adjusted operating expenses increased 4.9%.

Operating income was $460 million in the fourth quarter, decreasing $56 million, or 10.8% compared to operating income in the prior year period. Excluding certain items and business transformation expenses, adjusted operating income decreased 7.3%.

Net earnings for the fourth quarter were $283 million, a decrease of $26 million, or 8.5%, compared to the prior year. Diluted EPS in the fourth quarter of fiscal 2013 was $0.47, which was 11.3% lower compared to last year's fourth quarter. Excluding certain items and business transformation expenses, adjusted diluted EPS was $0.59, which was a decrease of 6.3%, compared to the prior year.

Fiscal 2013 Summary

Sales for fiscal 2013 were $44.4 billion, an increase of 4.8% compared to sales last year. Food cost inflation was 2.2%, as measured by the estimated change in Sysco's product costs, driven mainly by inflation in the poultry and meat categories. In addition, sales from acquisitions (within the last 12 months) increased sales by 1.5%, while foreign exchange did not materially impact sales. Case volume for the company's Broadline and SYGMA operations combined grew 2.6% during fiscal 2013, including acquisitions, and approximately 1.3%, excluding acquisitions.

Gross profit for fiscal 2013 was $7.9 billion, an increase of 2.5%, compared to the prior year. Operating expenses increased $423 million, or 7.3%, compared to the prior year. This increase was due primarily to a $137 million increase in gross business transformation expenses, a $58 million increase in certain items, a $48 million increase in payroll expense (excluding retirement-related expense), a $36 million increase in depreciation and amortization exclusive of our business transformation project, a $19 million increase in fuel expense and a $10 million increase in retirement-related expense. Excluding certain items and business transformation expenses, adjusted operating expenses increased 4.1%.

Operating income was $1.7 billion in fiscal 2013, decreasing $232 million, or 12.3%, compared to the prior year. Excluding certain items and business transformation expenses, adjusted operating income decreased 1.7%.

Net earnings for the fiscal year were $992 million, a decrease of $129 million, or 11.5%, compared to the prior year. Diluted EPS in fiscal 2013 was $1.67, which was 12.1% lower compared to the prior year. Excluding certain items and business transformation expenses, adjusted diluted EPS was $2.14, which was 0.5% lower compared to the prior year.

Cash Flow and Capital Spending

Cash flow from operations was $1.5 billion for fiscal 2013, compared to $1.4 billion in fiscal 2012, an increase of $107 million or 7.6%. Capital expenditures totaled $139 million for the fourth quarter and $512 million for the year. The primary areas for investment included facility replacements and expansions, as well as replacements to Sysco's fleet.

Free cash flow¹ increased $387 million, or 62% compared to fiscal 2012, to $1.0 billion in fiscal 2013.

Conference Call & Webcast

Sysco's fourth quarter fiscal 2013 earnings conference call will be held on Monday, August 12, 2013, at 10:00 a.m. Eastern. A live webcast of the call, a copy of this press release and a slide presentation, will be available online at www.sysco.com in the Investors 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 193 distribution facilities serving approximately 425,000 customers. For Fiscal Year 2013 that ended June 29, 2013, the company generated sales of more than $44 billion. For more information, visit www.sysco.com or connect with Sysco on Facebook at www.facebook.com/SyscoCorporation or Twitter at www.twitter.com/Sysco_Corp. For important news regarding Sysco, visit the Investor Relations portion of the company's Internet home page at www.sysco.com/investors, follow us at www.twitter.com/SyscoStock and download the new Sysco IR App, available on the iTunes App Store and the Google Play Market. In addition, investors should also continue to review our press releases and filings with the Securities and Exchange Commission. It is possible that the information we disclose through any of these channels of distribution could be deemed to be material information.

¹ See Non-GAAP Reconciliations below for more information.

Forward-Looking Statements

Statements made in this press release or in our earnings call for the fourth quarter of fiscal 2013 and for fiscal year 2013 that look forward in time or that express management's beliefs, expectations or hopes are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the views of management at the time such statements are made and are subject to a number of risks, uncertainties, estimates, and assumptions that may cause actual results to differ materially from current expectations. These statements include our intentions and plans in fiscal 2014 related to executing on our business transformation plan, and expectations with respect to fiscal 2014 earnings performance. The success of our business transformation initiatives and other business plans are subject to the general risks associated with our business, including the risk of interruption of supplies due to lack of long-term contracts, intense competition, severe weather, crop conditions, work stoppages, inflation risks, the impact of fuel prices, adverse publicity, and labor issues. Risks and uncertainties also include risks impacting the economy generally, including the risks that the current general economic conditions will deteriorate, or that consumer confidence in the economy may not increase and decreases in consumer spending, particularly on food-away-from-home, may not reverse. Our ability to meet our long-term strategic objectives to grow the profitability of our business depends largely on the success of our Business Transformation Project, and the risk exists that the project and its various components may not be successfully implemented and may not provide the anticipated benefits. Also, there are other risks related to our project, including that the expected costs of our Business Transformation Project 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 and deployment 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. Beginning in fiscal 2011, we have taken additional time to test and improve the underlying ERP system prior to larger scale development, and these actions have caused a delay in the project. We have temporarily halted the deployment of certain components of our ERP system as we have identified areas of improvement that we want to address before we continue fully deploying to additional locations. We may experience further delays, cost overages and/or operating problems as we address these areas of improvement or when we deploy the complete system on a larger scale. Planned deployments in the coming quarters are dependent upon the success of current ERP refinement efforts and plans are subject to change at any time based on management's subjective evaluation of our overall business needs. Other aspects of our business transformation initiatives, including our category management initiative, our cost transformation initiative and our product cost initiative, may fail to provide the expected benefits in a timely fashion, if 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 and our regional distribution centers, the timing and successful completions of acquisitions, construction schedules and the possibility that other cash requirements could result in delays or cancellations of capital spending. We may not realize the benefits of acquisitions as soon as expected, if at all, and the successful integration of acquisitions into our business may not occur or may require the expenditure of additional resources. Potential acquisitions may not close, or may be delayed, because of factors beyond our control, including the need for regulatory approvals. Fuel expense may vary from projections based on fluctuations in fuel costs, which are impacted by general economic conditions beyond our control. In the past, increased fuel prices have significantly increased our costs and reduced consumers' demand for meals served away from home. 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 30, 2012, as filed with the Securities and Exchange Commission, the Company's subsequent filings with the SEC, and the Company's Annual Report on Form 10-K to be filed shortly for the year ended June 29, 2013. Sysco does not undertake to update its forward-looking statements.

CONTACT: For more information
         Contact:
         Neil Russell
         Vice President, Investor Relations
         T 281-584-1308

         Charley Wilson
         Vice President, Corporate Communications
         T 281-584-2423

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