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8-K - FORM 8-K - SYSCO CORP | h85525e8vk.htm |
Exhibit 99.1
SYSCO REPORTS FIRST QUARTER NET EARNINGS OF $303 MILLION AND
DILUTED EPS OF $0.51
DILUTED EPS OF $0.51
HOUSTON, November 7, 2011 Sysco Corporation (NYSE: SYY) today announced financial results for
its 13-week first fiscal quarter ended October 1, 2011.
First Quarter Fiscal 2012 Highlights
| Sales were $10.6 billion, an increase of 8.6% from $9.8 billion in the first quarter of fiscal 2011. | ||
| Operating income was $509 million, an increase of 0.6%, compared to $506 million in last years first quarter, and Syscos highest first quarter on record. | ||
| Adjusted1 operating income increased 6.1%, excluding gross business transformation expenses and the impact of corporate-owned life insurance (COLI). | ||
| Diluted earnings per share (EPS) were $0.51, which included a $0.04 negative impact from gross business transformation expenses. Last years first quarter EPS was also $0.51, but included a $0.02 benefit from COLI and a $0.02 negative impact from gross business transformation expenses. | ||
| Adjusted diluted EPS was $0.55, an increase of 7.8%, excluding gross business transformation expenses and the impact of COLI. |
I am encouraged by our underlying business performance during the quarter as softening consumer
sentiment contributed to ongoing challenges for the foodservice industry, said Bill DeLaney,
Syscos president and chief executive officer. Our associates remain committed to supporting our
customers by meeting and exceeding their expectations each and every day.
First Quarter Fiscal 2012 Summary
Sales for the first quarter were $10.6 billion, an increase of 8.6% compared to sales in the same
period last year. Food cost inflation, as measured by the estimated change in Syscos product
costs, was 7.3%. Inflation continued to be broad-based, but was impacted most significantly by
increased prices for dairy, meat and
1 | Adjusted financial results are non-GAAP financial measures. See Non-GAAP Reconciliations below for more information. |
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canned/dry products. This compares to inflation of 3.3% in the prior year period, and 5.9% in
the fourth quarter of fiscal 2011. In addition, sales from acquisitions (within the last 12 months)
increased sales by 0.7%, and the impact of changes in foreign exchange rates for the first quarter
increased sales by 0.7%. Case volume for the companys Broadline and SYGMA operations combined grew
nearly 2% during the quarter including acquisitions, and more than 1% excluding acquisitions.
Gross profit for the first quarter was $1.9 billion, an increase of 5.5%, compared to the prior
year. Operating expenses in the first quarter increased $98 million, or 7.3%, compared to operating
expenses in the prior year period. This was due mainly to a $40 million increase in payroll
expense, a $16 million increase in gross business transformation expenses, a $14 million increase
in fuel expense and a $13 million lower benefit from COLI, partially offset by a $7 million decline
in expenses for the corporate-sponsored pension plan. Excluding gross business transformation
expenses and the impact of COLI, adjusted operating expenses increased 5.3%. Management believes
that excluding these items better represents the companys underlying business performance.
Operating income was $509 million in the first quarter, increasing $3 million, or 0.6% compared to
operating income in the prior year. Excluding gross business transformation expenses and the impact
of COLI, adjusted operating income increased 6.1%.
Net earnings for the first quarter were $303 million, an increase of $4 million, or 1.2%, compared
to net earnings in the prior year. Diluted EPS in the first quarter of fiscal 2012 was $0.51, which
included a $0.04 negative impact from gross business transformation expenses. Last years first
quarter EPS was also $0.51, but included a $0.02 benefit from COLI and a $0.02 negative impact from
gross business transformation expenses. Excluding gross business transformation expenses and the
impact of COLI, first quarter fiscal 2012 adjusted EPS was $0.55, an increase of 7.8% compared to
the prior year.
Cash Flow and Capital Spending
Cash flow from operations was $255 million for the first quarter of fiscal 2012. Capital
expenditures totaled $227 million for the first quarter, including $45 million related to the
companys business transformation project. The primary areas for investment included facility
replacements and expansions, replacements to Syscos fleet, and technology.
Conference Call & Webcast
Syscos first quarter fiscal 2012 earnings conference call will be held on Monday, November 7, 2011
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.
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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 177 distribution facilities serving approximately
400,000 customers. For the fiscal year 2011 that ended July 2, 2011 the company generated record
sales of more than $39 billion. For more information about Sysco visit the companys Internet home
page at www.sysco.com and for investor relations news follow us at www.twitter.com/SyscoStock.
Forward Looking Statements
General risks associated with our business include the risk of interruption of
supplies due to lack of long-term contracts, severe weather, work stoppages or otherwise, inflation
risks, the impact of fuel prices, and labor issues. Risks and uncertainties also include risks
impacting the economy generally, including the risk that the current economic downturn will
continue, 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 2012 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. In fiscal 2011, we took additional time to test the
underlying ERP system and are taking additional time in fiscal 2012 to improve the underlying
systems prior to larger scale development, and these actions have caused a delay in the project;
until we reach the point where the underlying system functions as intended, our development
timeline is uncertain. 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. 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 Syscos business, see the Companys Annual Report on Form 10-K for the year ended July 2,
2011, 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)
(In Thousands, Except for Share and Per Share Data)
13-Week Period Ended | ||||||||
Oct. 1, 2011 | Oct. 2, 2010 | |||||||
Sales |
$ | 10,586,390 | $ | 9,751,274 | ||||
Cost of sales |
8,638,790 | 7,905,170 | ||||||
Gross profit |
1,947,600 | 1,846,104 | ||||||
Operating expenses |
1,438,260 | 1,339,864 | ||||||
Operating income |
509,340 | 506,240 | ||||||
Interest expense |
29,474 | 31,101 | ||||||
Other expense (income), net |
250 | (1,684 | ) | |||||
Earnings before income taxes |
479,616 | 476,823 | ||||||
Income taxes |
176,963 | 177,754 | ||||||
Net earnings |
$ | 302,653 | $ | 299,069 | ||||
Net earnings: |
||||||||
Basic earnings per share |
$ | 0.51 | $ | 0.51 | ||||
Diluted earnings per share |
0.51 | 0.51 | ||||||
Average shares outstanding |
592,003,631 | 588,711,412 | ||||||
Diluted shares outstanding |
593,449,101 | 591,103,346 | ||||||
Dividends declared per common share |
$ | 0.26 | $ | 0.25 |
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Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In Thousands, Except for Share Data)
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In Thousands, Except for Share Data)
Oct. 1, 2011 | July 2, 2011 | Oct. 2, 2010 | ||||||||||
ASSETS |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
$ | 284,101 | $ | 639,765 | $ | 448,374 | ||||||
Accounts and notes receivable, less |
||||||||||||
allowances of $53,796, $42,436 and $49,376 |
3,061,145 | 2,898,283 | 2,814,958 | |||||||||
Inventories |
2,137,451 | 2,073,766 | 1,875,242 | |||||||||
Deferred taxes |
135,962 | | 74,419 | |||||||||
Prepaid expenses and other current assets |
77,575 | 72,496 | 76,418 | |||||||||
Prepaid income taxes |
| 48,572 | | |||||||||
Total current assets |
5,696,234 | 5,732,882 | 5,289,411 | |||||||||
Plant and equipment at cost, less depreciation |
3,615,361 | 3,512,389 | 3,277,583 | |||||||||
Other assets |
||||||||||||
Goodwill |
1,621,257 | 1,633,289 | 1,577,691 | |||||||||
Intangibles, less amortization |
108,610 | 109,938 | 110,974 | |||||||||
Restricted cash |
123,773 | 110,516 | 129,532 | |||||||||
Other assets |
281,628 | 286,541 | 270,219 | |||||||||
Total other assets |
2,135,268 | 2,140,284 | 2,088,416 | |||||||||
Total assets |
$ | 11,446,863 | $ | 11,385,555 | $ | 10,655,410 | ||||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||||||
Current liabilities |
||||||||||||
Notes payable |
$ | 5,350 | $ | 181,975 | | |||||||
Accounts payable |
2,164,695 | 2,183,417 | $ | 1,998,982 | ||||||||
Accrued expenses |
817,703 | 856,569 | 751,640 | |||||||||
Accrued income taxes |
384,613 | | 337,001 | |||||||||
Deferred income taxes |
| 146,083 | 50,561 | |||||||||
Current maturities of long-term debt |
206,329 | 207,031 | 7,837 | |||||||||
Total current liabilities |
3,578,690 | 3,575,075 | 3,146,021 | |||||||||
Other liabilities |
||||||||||||
Long-term debt |
2,384,986 | 2,279,517 | 2,486,646 | |||||||||
Deferred income taxes |
212,583 | 204,223 | 282,836 | |||||||||
Other long-term liabilities |
616,349 | 621,498 | 758,912 | |||||||||
Total other liabilities |
3,213,918 | 3,105,238 | 3,528,394 | |||||||||
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 |
891,645 | 887,754 | 825,930 | |||||||||
Retained earnings |
7,831,330 | 7,681,669 | 7,286,409 | |||||||||
Accumulated other comprehensive loss |
(352,107 | ) | (259,958 | ) | (415,765 | ) | ||||||
Treasury stock at cost, 177,669,492, |
||||||||||||
173,597,346 and 178,993,904 shares |
(4,481,788 | ) | (4,369,398 | ) | (4,480,754 | ) | ||||||
Total shareholders equity |
4,654,255 | 4,705,242 | 3,980,995 | |||||||||
Total liabilities and shareholders equity |
$ | 11,446,863 | $ | 11,385,555 | $ | 10,655,410 | ||||||
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Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS (Unaudited)
(In Thousands)
(In Thousands)
13-Week Period Ended | ||||||||
Oct. 1, 2011 | Oct. 2, 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net earnings |
$ | 302,653 | $ | 299,069 | ||||
Adjustments to reconcile net earnings to cash provided by
operating activities: |
||||||||
Share-based compensation expense |
9,842 | 10,148 | ||||||
Depreciation and amortization |
99,641 | 101,714 | ||||||
Deferred income taxes |
(290,671 | ) | (198,900 | ) | ||||
Provision for losses on receivables |
7,075 | 5,670 | ||||||
Other non-cash items |
226 | 1,973 | ||||||
Additional investment in certain assets and liabilities, net of
effect of businesses acquired: |
||||||||
(Increase) in receivables |
(195,451 | ) | (178,499 | ) | ||||
(Increase) in inventories |
(82,322 | ) | (85,649 | ) | ||||
(Increase) in prepaid expenses and other current assets |
(6,347 | ) | (4,958 | ) | ||||
(Decrease) increase in accounts payable |
(784 | ) | 25,468 | |||||
(Decrease) in accrued expenses |
(40,867 | ) | (124,601 | ) | ||||
Increase in accrued income taxes |
444,905 | 342,129 | ||||||
(Increase) in other assets |
(3,448 | ) | (13,539 | ) | ||||
Increase in other long-term liabilities |
10,895 | 47,034 | ||||||
Excess tax benefits from share-based compensation
arrangements |
(4 | ) | (277 | ) | ||||
Net cash provided by operating activities |
255,343 | 226,782 | ||||||
Cash flows from investing activities: |
||||||||
Additions to plant and equipment |
(226,547 | ) | (142,924 | ) | ||||
Proceeds from sales of plant and equipment |
2,092 | 354 | ||||||
Acquisition of businesses, net of cash acquired |
(36,118 | ) | (23,891 | ) | ||||
Maturities of short-term investments |
| 24,075 | ||||||
(Increase) in restricted cash |
(13,257 | ) | (5,044 | ) | ||||
Net cash used for investing activities |
(273,830 | ) | (147,430 | ) | ||||
Cash flows from financing activities: |
||||||||
Bank and commercial paper borrowings (repayments) net |
(68,625 | ) | | |||||
Other debt borrowings |
984 | 626 | ||||||
Other debt repayments |
(2,165 | ) | (2,273 | ) | ||||
Common stock reissued from treasury for share-based
compensation awards |
31,216 | 40,834 | ||||||
Treasury stock purchases |
(133,370 | ) | (116,699 | ) | ||||
Dividends paid |
(153,790 | ) | (146,868 | ) | ||||
Excess tax benefits from share-based compensation
arrangements |
4 | 277 | ||||||
Net cash used for financing activities |
(325,746 | ) | (224,103 | ) | ||||
Effect of exchange rates on cash |
(11,431 | ) | 7,682 | |||||
Net (decrease) in cash and cash equivalents |
(355,664 | ) | (137,069 | ) | ||||
Cash and cash equivalents at beginning of period |
639,765 | 585,443 | ||||||
Cash and cash equivalents at end of period |
$ | 284,101 | $ | 448,374 | ||||
Supplemental disclosures of cash flow information: |
||||||||
Cash paid during the period for: |
||||||||
Interest |
$ | 52,765 | $ | 54,302 | ||||
Income taxes |
21,913 | 35,180 |
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Sysco Corporation and its Consolidated Subsidiaries
COMPARATIVE SEGMENT DATA (Unaudited)
(In Thousands)
COMPARATIVE SEGMENT DATA (Unaudited)
(In Thousands)
13-Week Period Ended | ||||||||
Oct. 1, 2011 | Oct. 2, 2010 | |||||||
Sales: |
||||||||
Broadline |
$ | 8,658,521 | $ | 7,947,673 | ||||
SYGMA |
1,384,469 | 1,319,496 | ||||||
Other |
588,561 | 525,867 | ||||||
Intersegment |
(45,161 | ) | (41,762 | ) | ||||
Total |
$ | 10,586,390 | $ | 9,751,274 | ||||
Beginning with the third quarter of fiscal 2011, U.S. Meat operations are included in
the Broadline segment. All prior periods have been restated for comparability.
Comparative Supplemental Statistical Information Related to Sales (Unaudited)
Comparative Sysco Brand Sales and Marketing Associate-Served Sales data are summarized below.
13-Week Period Ended | ||||||||
Oct. 1, 2011 | Oct. 2, 2010 | |||||||
Sysco Brand Sales as a % of MA-Served Sales |
45.74 | % | 45.59 | % | ||||
Sysco Brand Sales as a % of Broadline Sales |
35.99 | % | 36.53 | % | ||||
MA-Served Sales as a % of Broadline Sales |
46.12 | % | 45.92 | % |
Data excludes U.S. Meat operations
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Non-GAAP Reconciliations
Sysco Corporation and its Consolidated Subsidiaries
Non-GAAP Reconciliation (Unaudited)
Impact of Business Transformation Expenses and COLI
(In thousands, except for per share data)
Non-GAAP Reconciliation (Unaudited)
Impact of Business Transformation Expenses and COLI
(In thousands, except for per share data)
Syscos results of operations are impacted by costs from our multi-year Business Transformation
Project. Additionally, near the end of fiscal 2011, we reallocated all of our investments in our
COLI policies into low-risk, fixed-income securities and therefore we do not expect significant
volatility in operating expenses, operating income, net earnings and diluted earnings per share in
future periods related to these policies. We experienced significant gains in these policies during
fiscal 2011. We do not expect a significant impact on fiscal 2012s operating income, net earnings
and diluted earnings per share in future periods from these policies. Management believes that
adjusting its operating expenses, operating income, net earnings and diluted earnings per share to
remove the impact of the Business Transformation Project expenses and COLI gains provides an
important perspective of underlying business trends and results and provides meaningful
supplemental information to both management and investors that is indicative of the performance of
the companys underlying operations and facilitates comparison on a year-over year basis.
The company uses these non-GAAP measures when evaluating its financial results as well as for
internal planning and forecasting purposes. These financial measures should not be used as a
substitute in assessing the companys results of operations for the 13-week periods ending October
1, 2011 and October 2, 2010. An analysis of any non-GAAP financial measure should be used in
conjunction with results presented in accordance with GAAP. As a result, in the table below, the
results for the first quarter of fiscal 2012 and the first quarter of fiscal 2011 are adjusted to
remove expenses related to the Business Transformation Project and gains recorded on the
adjustments to the carrying value of COLI policies. Set forth below is a reconciliation of actual
operating expenses, operating income, net earnings and diluted earnings per share to adjusted
results for these measures for the periods presented:
13-Week Period Ended October 1, 2011 | ||||||||||||||||
Business | ||||||||||||||||
GAAP | Transformation | COLI | Non-GAAP | |||||||||||||
Operating expenses |
$ | 1,438,260 | $ | (37,005 | ) | $ | 794 | $ | 1,402,049 | |||||||
Operating income |
509,340 | 37,005 | (794 | ) | 545,551 | |||||||||||
Tax impact of adjustments |
13,655 | 13,655 | ||||||||||||||
Net earnings |
302,653 | 23,350 | (794 | ) | 325,209 | |||||||||||
Diluted earnings per share |
$ | 0.51 | $ | 0.04 | $ | | $ | 0.55 |
13-Week Period Ended October 2, 2010 | ||||||||||||||||
Business | ||||||||||||||||
GAAP | Transformation | COLI | Non-GAAP | |||||||||||||
Operating expenses |
$ | 1,339,864 | $ | (21,476 | ) | $ | 13,518 | $ | 1,331,906 | |||||||
Operating income |
506,240 | 21,476 | (13,518 | ) | 514,198 | |||||||||||
Tax impact of adjustments |
8,006 | 8,006 | ||||||||||||||
Net earnings |
299,069 | 13,470 | (13,518 | ) | 299,021 | |||||||||||
Diluted earnings per share |
$ | 0.51 | $ | 0.02 | $ | (0.02 | ) | $ | 0.51 |
13-Week Period Change in | 13-Week Period % | |||||||||||||||
Dollars | Change | |||||||||||||||
GAAP | Non-GAAP | GAAP | Non-GAAP | |||||||||||||
Operating expenses |
$ | 98,396 | $ | 70,143 | 7.3 | % | 5.3 | % | ||||||||
Operating income |
3,100 | 31,353 | 0.6 | % | 6.1 | % | ||||||||||
Net earnings |
3,584 | 26,188 | 1.2 | % | 8.8 | % | ||||||||||
Diluted earnings per share |
$ | | $ | 0.04 | 0.0 | % | 7.8 | % |
***
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