Sysco Reports Strong Local Case Growth in First Quarter and Delivers Adjusted Diluted EPS of $0.52; $0.41 on a GAAP Basis

Continued Gross Margin Stabilization Mitigates Deflation and Currency Translation Pressure

HOUSTON, Nov. 2, 2015 (GLOBE NEWSWIRE) -- Sysco Corporation (NYSE:SYY) today announced financial results for its 13-week first fiscal quarter ended September 26, 2015.¹

First Quarter Fiscal 2016 Highlights²

• Sales increased 0.9% to $12.6 billion;
• Gross profit increased 2.3% to $2.2 billion; gross margin increased 23 basis points to 17.81%;
• Adjusted operating income decreased 0.5% to $506 million; and
• Adjusted Earnings Per Share (EPS) was flat at $0.52.

"Our first quarter results demonstrate important early progress toward achieving our recently established three-year financial goals," said Bill DeLaney, Sysco president and chief executive officer. "Specifically, our U.S. Broadline operations delivered strong local case growth and excellent gross margin management in a challenging deflationary environment."

First Quarter Fiscal 2016 Summary

Sales for the first quarter were $12.6 billion, an increase of 0.9% compared to the same period last year. Overall food cost deflation was 0.2% (1.1% in US Broadline) as measured by the estimated change in Sysco's product costs, with deflation in the dairy, meat, poultry and seafood categories, partially offset by modest inflation in other 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 2.0%. Case volume for the company's U.S. Broadline operations grew 3.4% during the quarter. Local case growth within U.S. Broadline operations grew 2.0%. Gross profit was $2.2 billion, an increase of 2.3% compared to the same period last year. Gross margin increased 23 basis points to 17.81%.

^¹Financial 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.

^²On a GAAP basis, first quarter 2015 operating income was $493 million, an increase of 6.0% from the prior year, and diluted EPS was $0.41, a decrease of 12.8% from the prior year.

Non-GAAP Operating Income, Net Earnings and EPS

Adjusted operating expenses increased $52 million, or 3.1%, 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 $506 million, a decrease of $3 million, or 0.5%, compared to the same period last year. Adjusted interest expense was $32 million, an increase of $5 million compared to the same period last year. Adjusted net earnings were $312 million, an increase of $3 million, or 0.9%, compared to the same period last year. Adjusted diluted EPS was $0.52, which was flat compared to the same period last year.

GAAP Operating Income, Net Earnings and EPS

Operating expenses increased $21 million, or 1.2%, compared to the same period last year, due mainly to higher payroll expenses, which were driven by higher case volume, incentive accruals and $10 million in merger termination expenses. Operating income was $493 million, an increase of $28 million, or 6.0%, compared to the same period last year. Interest expense was $127 million, including the impact of $95 million in merger termination-related debt costs. Net earnings were $244 million, a decrease of $34 million, or 12.3%, compared to the same period last year. Diluted EPS was $0.41, which was 12.8% lower compared to the same period last year.

Capital Allocation

On September 23, 2015, Sysco priced $2 billion of senior notes at a weighted average coupon of 3.59%. The proceeds were immediately used to execute the $1.5 billion accelerated stock repurchase program (ASR) and to pay down $500 million of commercial paper. The ASR resulted in the repurchase of 32 million shares of Sysco stock on September 28, 2015.

Capital Spending and Cash Flow

Capital expenditures, net of proceeds from sales of plant and equipment, totaled $120 million for the first 13 weeks of fiscal 2016, which was essentially flat compared to the same period last year. The primary areas for investment included fleet replacements and business technology.

Both cash flow from operations and free cash flow included a negative $260 million cash impact from certain items related to the termination of the proposed merger with US Foods. Including this impact, cash flow from operations was negative $261 million for the first 13 weeks of fiscal 2016, which was $324 million lower compared to the same period last year. Free cash flow was negative $381 million, which was $326 million lower compared to the same period last year.

Conference Call & Webcast

Sysco's first quarter fiscal 2016 earnings conference call will be held on Monday, November 2, 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 investors.sysco.com.

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 investors.sysco.com. 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 investors.sysco.com, 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 first quarter of fiscal 2016 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 our three-year financial goals, including targets for operating income and adjusted ROIC, and the key levers for realizing these goals, expectations regarding food cost inflation and deflation and currency translation, expectations regarding share repurchases, and expectations regarding earnings per share. The success of our plans and expectations regarding our operating performance, including expectations regarding our three-year financial goals and earnings per share, 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 or consumer spending, particularly on food-away-from-home, may decline. 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 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 efforts, we could become cost disadvantaged in the marketplace, and our competitiveness and our profitability could decrease. Capital expenditures may vary based on changes in business plans and other factors, including risks related to the implementation of various initiatives, 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. 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, and periods of deflation can be difficult to manage effectively. Fluctuations in inflation and deflation, as well as fluctuations in the value of foreign currencies, are beyond our control and subject to broader market forces. 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 share repurchases are subject to various factors beyond management's control, including fluctuations in the stock market, and decisions regarding share repurchases are subject to change based on management's subjective evaluation of the Company's needs. 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, 2015, as filed with the Securities and Exchange Commission, and the Company's subsequent filings with the SEC. 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