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| 8-K - FORM 8-K - SYSCO CORP | h72563e8vk.htm |
SYSCO REPORTS THIRD FISCAL QUARTER DILUTED EPS OF $0.42,
AN INCREASE OF 10.5% COMPARED TO THE PRIOR YEAR
HOUSTON, May 3, 2010 — 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.”
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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.
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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. EST. 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.
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.
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Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
(In Thousands, Except for Share and Per Share Data)
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
(In Thousands, Except for Share and Per Share Data)
| 39-Week Period Ended | 13-Week Period Ended | |||||||||||||||
| March 27, 2010 | March 28, 2009 | March 27, 2010 | March 28, 2009 | |||||||||||||
Sales |
$ | 26,895,018 | $ | 27,766,582 | $ | 8,945,093 | $ | 8,739,350 | ||||||||
Cost of sales |
21,769,400 | 22,492,837 | 7,261,721 | 7,102,274 | ||||||||||||
Gross margin |
5,125,618 | 5,273,745 | 1,683,372 | 1,637,076 | ||||||||||||
Operating expenses |
3,733,836 | 3,941,806 | 1,251,269 | 1,231,753 | ||||||||||||
Operating income |
1,391,782 | 1,331,939 | 432,103 | 405,323 | ||||||||||||
Interest expense |
92,976 | 83,043 | 27,654 | 28,233 | ||||||||||||
Other income, net |
(2,122 | ) | (11,550 | ) | 1,028 | (3,514 | ) | |||||||||
Earnings before income taxes |
1,300,928 | 1,260,446 | 403,421 | 380,604 | ||||||||||||
Income taxes |
458,726 | 519,812 | 155,773 | 154,438 | ||||||||||||
Net earnings |
$ | 842,202 | $ | 740,634 | $ | 247,648 | $ | 226,166 | ||||||||
Net earnings: |
||||||||||||||||
Basic earnings per share |
$ | 1.42 | $ | 1.24 | $ | 0.42 | $ | 0.38 | ||||||||
Diluted earnings per share |
1.42 | 1.24 | 0.42 | 0.38 | ||||||||||||
Average shares outstanding |
592,450,575 | 596,653,289 | 593,129,783 | 590,152,592 | ||||||||||||
Diluted shares outstanding |
593,397,235 | 597,691,315 | 594,833,736 | 590,667,577 | ||||||||||||
Dividends declared per common share |
$ | 0.74 | $ | 0.70 | $ | 0.25 | $ | 0.24 | ||||||||
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Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except for Share Data)
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except for Share Data)
| March 27, 2010 | June 27, 2009 | March 28, 2009 | ||||||||||
| (unaudited) | (unaudited) | |||||||||||
ASSETS |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
$ | 652,792 | $ | 1,087,084 | $ | 899,117 | ||||||
Accounts and notes receivable, less
allowances of $83,069 $36,078 and $99,535 |
2,633,995 | 2,468,511 | 2,549,769 | |||||||||
Inventories |
1,751,239 | 1,650,666 | 1,710,251 | |||||||||
Prepaid expenses and other current assets |
71,761 | 64,418 | 67,131 | |||||||||
Prepaid income taxes |
22,008 | — | — | |||||||||
Total current assets |
5,131,795 | 5,270,679 | 5,226,268 | |||||||||
Plant and equipment at cost, less depreciation |
3,176,220 | 2,979,200 | 2,891,893 | |||||||||
Other assets |
||||||||||||
Goodwill |
1,559,291 | 1,510,795 | 1,404,993 | |||||||||
Intangibles, less amortization |
114,254 | 121,089 | 87,011 | |||||||||
Restricted cash |
135,590 | 93,858 | 93,714 | |||||||||
Prepaid pension cost |
92,757 | 26,746 | 239,773 | |||||||||
Other assets |
258,320 | 214,252 | 193,400 | |||||||||
Total other assets |
2,160,212 | 1,966,740 | 2,018,891 | |||||||||
Total assets |
$ | 10,468,227 | $ | 10,216,619 | $ | 10,137,052 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||||||
Current liabilities |
||||||||||||
Accounts payable |
$ | 2,038,922 | $ | 1,856,887 | $ | 1,830,432 | ||||||
Accrued expenses |
794,235 | 797,756 | 776,767 | |||||||||
Accrued income taxes |
— | 323,983 | 98,179 | |||||||||
Deferred taxes |
76,258 | 162,365 | 404,185 | |||||||||
Current maturities of long-term debt |
7,817 | 9,163 | 6,529 | |||||||||
Total current liabilities |
2,917,232 | 3,150,154 | 3,116,092 | |||||||||
Other liabilities |
||||||||||||
Long-term debt |
2,468,517 | 2,467,486 | 2,463,243 | |||||||||
Deferred taxes |
513,211 | 526,377 | 530,100 | |||||||||
Other long-term liabilities |
541,229 | 622,900 | 696,440 | |||||||||
Total other liabilities |
3,522,957 | 3,616,763 | 3,689,783 | |||||||||
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 |
799,278 | 760,352 | 755,408 | |||||||||
Retained earnings |
6,943,640 | 6,539,890 | 6,366,304 | |||||||||
Accumulated other comprehensive loss |
(167,827 | ) | (277,986 | ) | (200,413 | ) | ||||||
Treasury stock at cost, 173,872,949,
175,148,403 and 175,857,763 shares |
(4,312,228 | ) | (4,337,729 | ) | (4,355,297 | ) | ||||||
Total shareholders’ equity |
4,028,038 | 3,449,702 | 3,331,177 | |||||||||
Total liabilities and shareholders’ equity |
$ | 10,468,227 | $ | 10,216,619 | $ | 10,137,052 | ||||||
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Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS (Unaudited)
(In Thousands)
CONSOLIDATED CASH FLOWS (Unaudited)
(In Thousands)
| 39-Week Period Ended | ||||||||
| March 27, 2010 | March 28, 2009 | |||||||
Cash flows from operating activities: |
||||||||
Net earnings |
$ | 842,202 | $ | 740,634 | ||||
Adjustments to reconcile net earnings to cash provided by
operating activities: |
||||||||
Share-based compensation expense |
51,981 | 46,744 | ||||||
Depreciation and amortization |
284,213 | 284,153 | ||||||
Deferred taxes |
(152,236 | ) | 495,732 | |||||
Provision for losses on receivables |
32,030 | 61,609 | ||||||
Other non-cash items |
(1,112 | ) | (741 | ) | ||||
Additional investment in certain assets and liabilities, net of
effect of businesses acquired: |
||||||||
(Increase) decrease in receivables |
(169,520 | ) | 74,131 | |||||
(Increase) decrease in inventories |
(79,010 | ) | 96,617 | |||||
(Increase) in prepaid expenses and other current assets |
(6,569 | ) | (4,157 | ) | ||||
Increase (decrease) in accounts payable |
156,856 | (179,160 | ) | |||||
(Decrease) in accrued expenses |
(21,468 | ) | (125,637 | ) | ||||
(Decrease) in accrued income taxes |
(316,074 | ) | (508,628 | ) | ||||
(Increase) decrease in other assets |
(39,618 | ) | 3,294 | |||||
(Decrease) increase in other long-term liabilities and
prepaid pension cost, net |
(115,210 | ) | 2,952 | |||||
Excess tax benefits from share-based compensation
arrangements |
(518 | ) | (2,818 | ) | ||||
Net cash provided by operating activities |
465,947 | 984,725 | ||||||
Cash flows from investing activities: |
||||||||
Additions to plant and equipment |
(438,071 | ) | (314,858 | ) | ||||
Proceeds from sales of plant and equipment |
4,106 | 3,224 | ||||||
Acquisition of businesses, net of cash acquired |
(20,880 | ) | (53,868 | ) | ||||
Purchases of short-term investments |
(60,876 | ) | — | |||||
Maturities of short-term investments |
60,990 | — | ||||||
(Increase) in restricted cash |
(41,732 | ) | (1,127 | ) | ||||
Net cash used for investing activities |
(496,463 | ) | (366,629 | ) | ||||
Cash flows from financing activities: |
||||||||
Other debt borrowings |
5,419 | 502,460 | ||||||
Other debt repayments |
(8,196 | ) | (7,778 | ) | ||||
Debt issuance costs |
(7 | ) | (3,007 | ) | ||||
Common stock reissued from treasury for share-based
compensation awards |
54,068 | 98,452 | ||||||
Treasury stock purchases |
(41,020 | ) | (438,843 | ) | ||||
Dividends paid |
(431,916 | ) | (406,689 | ) | ||||
Excess tax benefits from share-based compensation
arrangements |
518 | 2,818 | ||||||
Net cash used for financing activities |
(421,134 | ) | (252,587 | ) | ||||
Effect of exchange rates on cash |
17,358 | (17,944 | ) | |||||
Net (decrease) increase in cash and cash equivalents |
(434,292 | ) | 347,565 | |||||
Cash and cash equivalents at beginning of period |
1,087,084 | 551,552 | ||||||
Cash and cash equivalents at end of period |
$ | 652,792 | $ | 899,117 | ||||
Supplemental disclosures of cash flow information: |
||||||||
Cash paid during the period for: |
||||||||
Interest |
$ | 119,720 | $ | 100,469 | ||||
Income taxes |
973,354 | 510,147 | ||||||
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Sysco Corporation and its Consolidated Subsidiaries
COMPARATIVE SEGMENT DATA (Unaudited)
(In Thousands)
COMPARATIVE SEGMENT DATA (Unaudited)
(In Thousands)
| 39-Week Period Ended | 13-Week Period Ended | |||||||||||||||
| March 27, 2010 | March 28, 2009 | March 27, 2010 | March 28, 2009 | |||||||||||||
Sales: |
||||||||||||||||
Broadline |
$ | 21,502,023 | $ | 21,976,065 | $ | 7,108,594 | $ | 6,898,126 | ||||||||
SYGMA |
3,505,710 | 3,655,045 | 1,197,536 | 1,194,236 | ||||||||||||
Other |
2,264,461 | 2,478,273 | 768,918 | 751,476 | ||||||||||||
Intersegment |
(377,176 | ) | (342,801 | ) | (129,955 | ) | (104,488 | ) | ||||||||
Total |
$ | 26,895,018 | $ | 27,766,582 | $ | 8,945,093 | $ | 8,739,350 | ||||||||
Comparative Supplemental Statistical Information Related to Sales (Unaudited)
Comparative Sysco Brand Sales and Marketing Associate-Served Sales data are summarized below.
Comparative Sysco Brand Sales and Marketing Associate-Served Sales data are summarized below.
| 39-Week Period Ended | 13-Week Period Ended | |||||||||||||||
| March 27, 2010 | March 28, 2009 | March 27, 2010 | March 28, 2009 | |||||||||||||
Sysco Brand Sales as a %
of MA-Served Sales |
46.41 | % | 48.82 | % | 45.53 | % | 48.02 | % | ||||||||
Sysco Brand Sales as a %
of Total Broadline Sales |
37.44 | % | 39.88 | % | 36.37 | % | 38.87 | % | ||||||||
MA-Served Sales as a %
of Total Broadline Sales |
45.84 | % | 46.25 | % | 44.47 | % | 44.58 | % | ||||||||
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