Sysco Reports Record Sales for Fiscal 2015; Strong Fourth Quarter Performance

Local and Corporate-Managed Sales Growth, Category Management Benefits and Improving Expense Management Contribute to Favorable Operating Results

HOUSTON, Aug. 10, 2015 (GLOBE NEWSWIRE) -- Sysco Corporation (NYSE:SYY) today announced financial results for its fourth quarter and fiscal year ended June 27, 2015.*

Fourth Quarter Fiscal 2015 Highlights

• Sales increased 0.9% to $12.4 billion;
• Gross profit increased 3.0% to $2.2 billion; gross margin increased 35 basis points to 17.9%;
• Adjusted operating income increased 5.8% to $509 million; and
• Adjusted EPS increased 6.1% to $0.52.

Fiscal 2015 Highlights

• Sales increased 4.7% to $48.7 billion;
• Gross profit increased 4.5% to $8.6 billion; gross margin was flat at 17.6%;
• Adjusted operating income increased 3.4% to $1.8 billion;
• Adjusted EPS increased 5.1% to $1.84; and
• Cash flow from operations was $1.6 billion; and free cash flow was $1.0 billion.

"I am pleased with our results for fiscal 2015 and particularly encouraged by our performance in the fourth quarter," said Bill DeLaney, Sysco president and chief executive officer. "For the year, we delivered solid earnings growth on an adjusted basis by providing our customers with excellent service, growing our business with both our locally and corporate managed customers, and stabilizing our gross margins by successfully implementing several value-added commercial initiatives. Our expense management improved in the fourth quarter and contributed to our six percent growth in adjusted operating income. Looking forward, we remain highly focused on supporting the success of our customers, profitably growing our business and improving our return on invested capital. As previously announced, we plan to repurchase an incremental $3 billion in Sysco shares over the next two years, including $1.5 billion through an accelerated share repurchase in Fiscal 2016. We will also continue to further evaluate opportunities to optimize our capital structure."

* Financial comparisons presented in this release are compared to the same period in the prior year. Earnings Per Share (EPS) and Adjusted EPS are shown on a diluted basis unless otherwise specified. Adjusted financial results exclude certain items, which primarily include merger-related costs. A reconciliation of non-GAAP measures is included in this release.

Fourth Quarter Fiscal 2015 Summary

Sales for the fourth quarter were $12.4 billion, an increase of 0.9% compared to the same period last year. Food cost inflation was flat, as measured by the estimated change in Sysco's product costs, with modest inflation in the meat, poultry and frozen categories, offset by modest deflation in the dairy, produce and seafood categories. In addition, sales from acquisitions (completed within the last 12 months) increased sales by 0.4%, and the impact of changes in foreign exchange rates decreased sales by 1.4%. Case volume for the company's Broadline operations grew 3.6% during the quarter, and approximately 3.2% excluding acquisitions. Case volume for Broadline and SYGMA operations combined grew 2.2% and approximately 1.9% excluding acquisitions.

Gross profit was $2.2 billion, an increase of 3.0% compared to the same period last year. Gross margin increased 35 basis points to 17.9%.

Non-GAAP Operating Income, Net Earnings and EPS

Adjusted operating expenses increased $36 million, or 2.2%, compared to the same period last year, due mainly to higher payroll expenses which were driven by higher case volume and incentive accruals. Adjusted operating income was $509 million, an increase of $28 million, or 5.8%, compared to the same period last year. Adjusted interest expense was $36 million, an increase of $8 million compared to the same period last year. Adjusted net earnings were $309 million, an increase of $17 million, or 5.7%, compared to the same period last year. Adjusted diluted EPS was $0.52, which was 6.1% higher compared to the same period last year.

GAAP Operating Income, Net Earnings and EPS

Operating expenses increased $368 million, or 21%, compared to the same period last year, primarily due to $313 million in merger termination expenses. Operating income was $121 million, a decrease of $304 million, or 72%, compared to the same period last year. Interest expense was $77 million, including the impact of $41 million in debt financing costs related to the merger with US Foods. Net earnings were $73 million, a decrease of $181 million, or 71%, compared to the same period last year. Diluted EPS was $0.12, which was 72% lower compared to the same period last year.

Fiscal 2015 Summary

Sales for fiscal 2015 were $48.7 billion, an increase of 4.7% compared to the same period last year. Food cost inflation was 3.7%, as measured by the estimated change in Sysco's product costs, driven mainly by inflation in the meat, dairy and poultry categories. In addition, sales from acquisitions (completed within the last 12 months) contributed 0.6% to sales, and the impact of changes in foreign exchange rates decreased sales by 1.0%. Case volume for the company's Broadline operations grew 3.1%, and approximately 2.8% excluding acquisitions. Broadline and SYGMA operations combined grew 2.6%, and approximately 2.4% excluding acquisitions.

Gross profit was $8.6 billion, an increase of 4.5% compared to the same period last year. Gross margin was flat at 17.6%.

Non-GAAP Operating Income, Net Earnings and EPS

Adjusted operating expenses increased $312 million, or 4.8%, compared to the same period last year, due mainly to higher payroll expenses which were driven by higher case volume and incentive accruals. Adjusted operating income was $1.8 billion, an increase of $58 million, or 3.4%, compared to the same period last year. Adjusted interest expense was $116 million and was flat compared to the same period last year. Adjusted net earnings were $1.1 billion, an increase of $66 million, or 6.4%, compared to the same period last year. Adjusted diluted EPS was $1.84, which was 5.1% higher compared to the same period last year.

GAAP Operating Income, Net Earnings and EPS

Operating expenses increased $728 million, or 11.0%, compared to the same period last year, primarily due to an increase in in adjusted operating expenses noted above as well as a $416 million increase in certain items that primarily related to merger integration planning and termination expenses.Operating income was $1.2 billion, a decrease of $358 million, or 23%, compared to the same period last year. Interest expense was $255 million, including the impact of $138 million in merger financing costs. Net earnings were $687 million, a decrease of $245 million, or 26%, compared to the same period last year. Diluted EPS was $1.15, which was 27% lower compared to the same period last year.

Capital Spending and Cash Flow

Capital expenditures, net of proceeds from sales of plant and equipment, totaled $518 million for fiscal 2015, which was $21 million higher than the same period last year. The primary areas for investment included fleet replacements, business technology and facility expansions and replacements.

Cash flow from operations was $1.6 billion for fiscal 2015, which was $63 million higher compared to the same period last year. Free cash flow was $1.0 billion, which was $42 million higher compared to the same period last year. Both cash flow from operations and free cash flow would have been approximately $280 million higher after adjusting for the cash impact of certain items and the difference in timing of pension contributions year-over-year.

Conference Call & Webcast

Sysco's fourth quarter fiscal 2015 earnings conference call will be held on Monday, August 10, 2015, 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.

For purposes of public disclosure, Sysco plans to use the investor relations portion of its website as a primary channel for publishing key information to its investors, some of which may contain material and previously non-public information. As a result, 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. We encourage investors to consult that section of our website regularly for important information about us.

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 194 distribution facilities serving approximately 425,000 customers. For Fiscal Year 2015 that ended June 27, 2015, the company generated sales of more than $48 billion. For more information, visit www.sysco.com or connect with Sysco on Facebook at www.facebook.com/SyscoCorporation or Twitter at https://twitter.com/Sysco. For important news regarding Sysco, visit the Investor Relations section 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.

Forward-Looking Statements

Statements made in this press release or in our earnings call for the fourth quarter of fiscal 2015 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 plans and expectations related to and the benefits and expected timing of our goals and initiatives to increase profitability, manage expenses and grow our business, and our outlook and expectations for fiscal 2016. The success of our initiatives and expectations regarding our operating performance are subject to the general risks associated with our business, including the risks of interruption of supplies due to lack of long-term contracts, severe weather, crop conditions, work stoppages, intense competition, technology disruptions, dependence on large regional and national customers, 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 consumer confidence in the economy may not improve and decreases in consumer spending, particularly on food-away-from-home, may not reverse. Market conditions may not improve. If sales from our locally managed customers do not grow at the same rate as sales from regional and national customers, our gross margins may decline. Our ability to meet our long-term strategic objectives to grow the profitability of our business depends largely on the success of our various business initiatives. There are various risks related to these efforts, including the risk that these efforts may not provide the expected benefits in our anticipated time frame, if at all, and may prove costlier than expected; the risk that the actual costs of any initiatives may be greater or less than currently expected; and the risk of adverse effects to our business, results of operations and liquidity if past and future undertakings, and the associated changes to our business, do not prove to be cost effective or do not result in the cost savings and other benefits at the levels that we anticipate. Our plans related to and the timing of any initiatives are subject to change at any time based on management's subjective evaluation of our overall business needs. If we are unable to realize the anticipated benefits from our cost cutting efforts, we could become cost disadvantaged in the marketplace, and our competitiveness and our profitability could decrease. Capital expenditures may vary from those projected based on changes in business plans and other factors, including risks related to the implementation of various initiatives, 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. Periods of high inflation, either overall or in certain product categories, can have a negative impact on us and our customers, as high food costs can reduce consumer spending in the food-away-from-home market, and may negatively impact our sales, gross profit, operating income and earnings. Expanding into international markets presents unique challenges and risks, including compliance with local laws, regulations and customs and the impact of local political and economic conditions, and such expansion efforts may not be successful. Any business that we acquire may not perform as expected, and we may not realize the anticipated benefits of our acquisitions. Expectations regarding the accounting treatment of any acquisitions may change based on management's subjective evaluation. Expectations regarding tax rates are subject to various factors beyond management's control. 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 28, 2014, as filed with the Securities and Exchange Commission, and the Company's subsequent filings with the SEC, including the Company's Annual Report on Form 10-K that will be filed for the year ended June 27, 2015. 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