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8-K - FORM 8-K - SYSCO CORPd38329d8k.htm

Exhibit 99.1

 

 

LOGO

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, August 10, 2015 — 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.

 

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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

 

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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

 

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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.

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)

(In Thousands, Except for Share and Per Share Data)

 

     13-Week Period Ended     52-Week Period Ended  
     June 27, 2015     June 28, 2014     June 27, 2015     June 28, 2014  

Sales

   $ 12,401,938      $ 12,286,992      $ 48,680,752      $ 46,516,712   

Cost of sales

     10,181,774        10,131,136        40,129,236        38,335,677   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     2,220,164        2,155,856        8,551,516        8,181,035   

Operating expenses

     2,099,169        1,731,334        7,322,154        6,593,913   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     120,995        424,522        1,229,362        1,587,122   

Interest expense

     77,281        31,205        254,807        123,741   

Other expense (income), net

     (25,034     (7,216     (33,592     (12,243
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes

     68,748        400,533        1,008,147        1,475,624   

Income taxes

     (4,278     146,362        321,374        544,091   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

   $ 73,026      $ 254,171      $ 686,773      $ 931,533   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings:

        

Basic earnings per share

   $ 0.12      $ 0.43      $ 1.16      $ 1.59   

Diluted earnings per share

     0.12        0.43        1.15        1.58   

Average shares outstanding

     595,258,654        586,544,337        592,072,308        585,988,084   

Diluted shares outstanding

     599,259,889        591,361,869        596,849,034        590,216,220   

Dividends declared per common share

   $ 0.30      $ 0.29      $ 1.19      $ 1.15   

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Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETS (Unaudited)

(In Thousands, Except for Share Data)

 

     June 27, 2015     June 28, 2014  

ASSETS

    

Current assets

    

Cash and cash equivalents

   $ 5,130,044      $ 413,046   

Accounts and notes receivable, less allowances of $41,720 and $49,902

     3,353,381        3,398,713   

Inventories

     2,691,823        2,602,018   

Deferred income taxes

     135,254        141,225   

Prepaid expenses and other current assets

     93,039        83,745   

Prepaid income taxes

     90,763        43,225   
  

 

 

   

 

 

 

Total current assets

     11,494,304        6,681,972   

Plant and equipment at cost, less depreciation

     3,982,143        3,985,618   

Other assets

    

Goodwill

     1,959,817        1,950,672   

Intangibles, less amortization

     154,809        177,227   

Restricted cash

     168,274        145,412   

Other assets

     229,934        200,212   
  

 

 

   

 

 

 

Total other assets

     2,512,834        2,473,523   
  

 

 

   

 

 

 

Total assets

   $ 17,989,281      $ 13,141,113   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

Current liabilities

    

Notes payable

   $ 70,751      $ 70,975   

Accounts payable

     2,881,953        2,831,028   

Accrued expenses

     1,467,610        1,160,850   

Current maturities of long-term debt

     4,979,301        304,777   
  

 

 

   

 

 

 

Total current liabilities

     9,399,615        4,367,630   

Other liabilities

    

Long-term debt

     2,271,825        2,357,330   

Deferred income taxes

     81,591        121,580   

Other long-term liabilities

     934,722        1,027,878   
  

 

 

   

 

 

 

Total other liabilities

     3,288,138        3,506,788   

Commitments and contingencies

    

Noncontrolling interest

     41,304        —     

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   

Paid-in capital

     1,213,999        1,139,218   

Retained earnings

     8,751,985        8,770,751   

Accumulated other comprehensive loss

     (923,197     (642,663

Treasury stock at cost, 170,857,231, and 179,050,186 shares

     (4,547,738     (4,765,786
  

 

 

   

 

 

 

Total shareholders’ equity

     5,260,224        5,266,695   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 17,989,281      $ 13,141,113   
  

 

 

   

 

 

 

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Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED CASH FLOWS (Unaudited)

(In Thousands)

 

     52-Week Period Ended  
     June 27, 2015     June 28, 2014  

Cash flows from operating activities:

    

Net earnings

   $ 686,773      $ 931,533   

Adjustments to reconcile net earnings to cash provided by operating activities:

    

Share-based compensation expense

     73,766        74,328   

Depreciation and amortization

     553,021        547,776   

Amortization of debt issuance and other debt-related costs

     27,943        8,286   

Deferred income taxes

     (4,705     (30,665

Provision for losses on receivables

     17,996        34,429   

Other non-cash items

     (24,205     2,875   

Additional investment in certain assets and liabilities, net of effect of businesses acquired:

    

(Increase) in receivables

     (11,741     (236,320

(Increase) in inventories

     (125,232     (195,845

(Increase) in prepaid expenses and other current assets

     (10,508     (24,787

Increase in accounts payable

     72,516        392,720   

Increase in accrued expenses

     464,403        55,838   

(Decrease) in accrued income taxes

     (32,843     (18,672

(Increase) Decrease in other assets

     (10,745     23,552   

(Decrease) in other long-term liabilities

     (105,501     (63,753

Excess tax benefits from share-based compensation arrangements

     (15,454     (8,480
  

 

 

   

 

 

 

Net cash provided by operating activities

     1,555,484        1,492,815   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Additions to plant and equipment

     (542,830     (523,206

Proceeds from sales of plant and equipment

     24,472        25,790   

Acquisition of businesses, net of cash acquired

     (115,862     (79,338

(Increase) in restricted cash

     (20,126     (84
  

 

 

   

 

 

 

Net cash used for investing activities

     (654,346     (576,838
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Bank and commercial paper borrowings (repayments) net

     (129,999     34,499   

Other debt borrowings

     5,041,032        36,830   

Other debt repayments

     (354,007     (229,507

Debt issuance costs

     (30,980     (22,175

Cash paid for settlement of cash flow hedge

     (188,840     —     

Proceeds from stock option exercises

     240,176        255,613   

Treasury stock purchases

     —          (332,381

Dividends paid

     (695,274     (667,217

Excess tax benefits from share-based compensation arrangements

     15,454        8,480   
  

 

 

   

 

 

 

Net cash provided by (used for) financing activities

     3,897,562        (915,858
  

 

 

   

 

 

 

Effect of exchange rates on cash

     (81,702     642   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     4,716,998        761   

Cash and cash equivalents at beginning of period

     413,046        412,285   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 5,130,044      $ 413,046   
  

 

 

   

 

 

 

Supplemental disclosures of cash flow information:

    

Cash paid during the period for:

    

Interest

   $ 192,939      $ 128,861   

Income taxes

     376,508        591,334   

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Sysco Corporation and its Consolidated Subsidiaries

COMPARATIVE SEGMENT DATA (Unaudited)

(In Thousands)

 

     13-Week Period Ended     52-Week Period Ended  
     June 27, 2015     June 28, 2014     June 27, 2015     June 28, 2014  

Sales:

        

Broadline

   $ 9,869,730      $ 9,723,245      $ 38,652,212      $ 36,808,051   

SYGMA

     1,468,388        1,595,365        6,076,215        6,177,804   

Other

     1,418,336        1,282,747        5,270,518        4,678,954   

Intersegment

     (354,516     (314,365     (1,318,193     (1,148,097
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 12,401,938      $ 12,286,992      $ 48,680,752      $ 46,516,712   
  

 

 

   

 

 

   

 

 

   

 

 

 

Effective with the fourth quarter of fiscal 2015, U.S. Meat operations are now reflected in Other. Fiscal 2014 periods have been reclassified to conform to the current year presentation. Intersegment sales represent the eliminations of sales primarily from our Other segment to our Broadline and SYGMA segments.

 

 

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     52-Week Period Ended  
     June 27, 2015     June 28, 2014     June 27, 2015     June 28, 2014  

Sysco Brand Sales as a % of MA-Served Sales

     49.08     49.01     49.18     49.00

Sysco Brand Sales as a % of Broadline Sales

     35.75     35.85     35.58     35.80

MA-Served Sales as a % of Broadline Sales

     40.92     40.94     39.79     39.76

Data excludes U.S. Meat operations

 

 

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Sysco Corporation and its Consolidated Subsidiaries

Non-GAAP Reconciliation (Unaudited)

Impact of Certain Items

(In Thousands, Except for Share and Per Share Data)

Sysco’s results of operations are impacted by certain items which include multiemployer withdrawal charges (MEPP), severance charges, integration planning, litigation and termination costs in connection with the merger that had been proposed with US Foods, Inc., charges from facility closures and US Foods related financing costs. Additional items in FY14 include a change in estimate of self-insurance and charges from a contingency accrual. These FY15 and FY14 items are collectively referred to as “Certain Items”. In FY14, costs from executive retirement plans restructuring were included within Certain Items; however, because these costs in FY15 are comparable to FY14, these were not included in the Certain Items definition for either period. Management believes that adjusting its operating expenses, operating income, interest expense, net earnings and diluted earnings per share to remove these charges 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 company’s underlying operations and facilitates comparisons 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 for GAAP measures in assessing the company’s results of operations for the periods presented. 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 tables that follow, each period presented is adjusted to remove the Certain Items noted above.

 

     13-Week
Period Ended
Jun. 27, 2015
    13-Week
Period Ended
Jun. 28, 2014
    13-Week
Period Change
in Dollars
    13-Week
Period
% Change
 

Operating expenses (GAAP)

   $ 2,099,169      $ 1,731,334      $ 367,835        21.2

Impact of severance charges

     (1,692     (2,093     401        -19.2   

Impact of US Foods merger and integration planning costs

     (386,558     (53,803     (332,755     NM   

Impact of facility closure charges

     —          (945     945        NM   
  

 

 

   

 

 

   

 

 

   

 

 

 

subtotal - Impact of Certain Items on operating expenses

     (388,250     (56,842     (331,408     NM   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses adjusted for certain items (Non-GAAP)

   $ 1,710,919      $ 1,674,492      $ 36,427        2.2

Operating Income (GAAP)

   $ 120,995      $ 424,522      $ (303,527     -71.5

Impact of Certain Items on operating income

     388,250        56,842        331,408        NM   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income adjusted for certain items (Non-GAAP)

   $ 509,245      $ 481,364      $ 27,881        5.8

Interest Expense (GAAP)

   $ 77,281      $ 31,205      $ 46,076        NM

Impact of US Foods financing costs

     (41,331     (3,698     (37,633     NM   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Interest Expense (Non-GAAP)

   $ 35,951      $ 27,507      $ 8,443        30.7

Net earnings (GAAP) (1)

   $ 73,026      $ 254,171      $ (181,145     -71.3

Impact of severance charge (net of tax)

     930        1,328        (398     -30.0   

Impact of US Foods merger and integration planning costs (net of tax)

     212,487        34,142        178,345        NM   

Impact of facility closure charges (net of tax)

     —          600        (600     NM   

Impact of US Foods Financing Costs (net of tax)

     22,719        2,347        20,372        NM   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings adjusted for certain items (Non-GAAP) (1)

   $ 309,162      $ 292,588      $ 16,574        5.7

Diluted earnings per share (GAAP) (1)

   $ 0.12      $ 0.43      $ (0.31     -72.1

Impact of US Foods merger and integration planning costs

     0.35        0.06        0.29        NM   

Impact of US Foods Financing Costs

     0.04        —          0.04        NM   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted EPS adjusted for certain items (Non-GAAP) (1) (2)

   $ 0.52      $ 0.49      $ 0.03        6.1

Diluted shares outstanding

     599,259,889        591,361,869       

 

(1)  The net earnings and diluted earnings per share impacts are shown net of tax. The tax impact of adjustments for Certain Items was $193,445 and $22,122 for the 13-week periods ended June 27, 2015 and June 28, 2014, respectively. Amounts are calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction. In FY14, the impact of the charge from a contingency accrual contained an estimated non-deductible portion.
(2)  Individual components of diluted earnings per share may not add to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings for certain items divided by diluted shares outstanding.

NM represents that the percentage change is not meaningful

 

 

- more -

 

9


Sysco Corporation and its Consolidated Subsidiaries

Non-GAAP Reconciliation (Unaudited)

Impact of Certain Items

(In Thousands, Except for Share and Per Share Data)

 

     52-Week
Period Ended
Jun. 27, 2015
    52-Week
Period Ended
Jun. 28, 2014
    52-Week
Period Change
in Dollars
    52-Week
Period
% Change
 

Operating expenses (GAAP)

   $ 7,322,154      $ 6,593,913      $ 728,241        11.0

Impact of MEPP charge

     —          (1,451     1,451        NM   

Impact of severance charge

     (5,598     (7,202     1,604        -22.3   

Impact of US Foods merger and integration planning costs

     (554,667     (90,571     (464,095     NM   

Impact of change in estimate of self insurance

     —          (23,841     23,841        NM   

Impact of contingency accrual

     —          (20,000     20,000        NM   

Impact of facility closure charges

     (2,203     (3,443     1,240        -36.0   
  

 

 

   

 

 

   

 

 

   

 

 

 

subtotal - Impact of Certain Items on operating expenses

     (562,468     (146,508     (415,959     NM   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses adjusted for certain items (Non-GAAP)

   $ 6,759,687      $ 6,447,405      $ 312,282        4.8

Operating Income (GAAP)

   $ 1,229,362      $ 1,587,122      $ (357,760     -22.5

Impact of Certain Items on operating income

     562,468        146,508        415,959        NM   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income adjusted for certain items (Non-GAAP)

   $ 1,791,830      $ 1,733,630      $ 58,200        3.4

Interest Expense (GAAP)

   $ 254,807      $ 123,741      $ 131,066        105.9

Impact of US Foods financing costs

     (138,422     (6,790     (131,632     NM   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Interest Expense (Non-GAAP)

   $ 116,385      $ 116,951      $ (566     -0.5

Net earnings (GAAP)(1)

   $ 686,773      $ 931,533      $ (244,760     -26.3

Impact of MEPP charge (net of tax)

     —          916        (916     NM   

Impact of severance charge (net of tax)

     3,302        4,546        (1,244     -27.4   

Impact of US Foods merger and integration planning costs (net of tax)

     327,149        57,176        269,973        NM   

Impact of change in estimate of self insurance (net of tax)

     —          15,050        (15,050     NM   

Impact of contingency accrual (net of applicable tax)

     —          18,156        (18,156     NM   

Impact of facility closure charges (net of tax)

     1,299        2,173        (874     -40.2   

Impact of US Foods Financing Costs (net of tax)

     81,643        4,286        77,357        NM   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings adjusted for certain items (Non-GAAP) (1)

   $ 1,100,166      $ 1,033,836      $ 66,330        6.4

Diluted earnings per share (GAAP) (1)

   $ 1.15      $ 1.58      $ (0.43     -27.2

Impact of severance charge

     0.01        0.01        —          —     

Impact of US Foods merger and integration planning costs

     0.55        0.10        0.45        NM   

Impact of change in estimate of self insurance

     —          0.03        (0.03     NM   

Impact of contingency accrual

     —          0.03        (0.03     NM   

Impact of US Foods Financing Costs

     0.14        0.01        0.13        NM   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted EPS adjusted for certain items (Non-GAAP)(1)(2)

   $ 1.84      $ 1.75      $ 0.09        5.1

Diluted shares outstanding

     596,849,034        590,216,220       

 

(1)  The net earnings and diluted earnings per share impacts are shown net of tax. Tax impact of adjustments for Certain Items was $287,497 and $55,844 for the 52-week periods ended June 27, 2015 and June 28, 2014, respectively. Amounts are calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction. In FY14, the impact of the charge from a contingency accrual contained an estimated non-deductible portion.
(2)  Individual components of diluted earnings per share may not add to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings for certain items divided by diluted shares outstanding.

NM represents that the percentage change is not meaningful

 

 

- more -

 

10


Sysco Corporation and its Consolidated Subsidiaries

Non-GAAP Reconciliation (Unaudited)

Free Cash Flow

(In Thousands)

Free cash flow represents net cash provided from operating activities less purchases of plant and equipment and includes proceeds from sales of plant and equipment. Sysco considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after the purchases and sales of buildings, fleet, equipment and technology, which may potentially be used to pay for, among other things, strategic uses of cash including dividend payments, share repurchases and acquisitions. However, free cash flow may not be available for discretionary expenditures, as it may be necessary that we use it to make mandatory debt service or other payments Free cash flow should not be used as a substitute in assessing the company’s liquidity for the periods presented. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. In the table that follows, free cash flow for each period presented are reconciled to net cash provided by operating activities.

 

     52-Week
Period Ended
June 27, 2015
    52-Week
Period Ended
June 28, 2014
    52-Week
Period Change
in Dollars
    52-Week
Period
% Change
 

Net cash provided by operating activities (GAAP)

   $ 1,555,484      $ 1,492,815      $ 62,669        4.2

Additions to plant and equipment

     (542,830     (523,206     (19,624     -3.8   

Proceeds from sales of plant and equipment

     24,472        25,790        (1,318     -5.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Free Cash Flow (Non-GAAP)

   $ 1,037,126      $ 995,399      $ 41,727        4.2

 

 

- more -

 

11


Sysco Corporation and its Consolidated Subsidiaries

COMPARATIVE SEGMENT DATA RECLASSIFIED FOR NEW SEGMENT REPORTING STRUCTURE (Unaudited)

(In Thousands)

 

     Q4 FY15     Q3 FY15     Q2 FY15     Q1 FY15     52-Week Period  
     June 27, 2015     Mar. 28, 2015     Dec. 27, 2014     Sep. 27, 2014     June 27, 2015  

Sales:

          

Broadline

   $ 9,869,730      $ 9,262,260      $ 9,548,847      $ 9,971,375      $ 38,652,212   

SYGMA

     1,468,388        1,506,352        1,559,863        1,541,612        6,076,215   

Other

     1,418,336        1,294,917        1,305,179        1,252,086        5,270,518   

Intersegment

     (354,516     (316,870     (326,815     (319,992     (1,318,193
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 12,401,938      $ 11,746,659      $ 12,087,074      $ 12,445,081      $ 48,680,752   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Q4 FY14     Q3 FY14     Q2 FY14     Q1 FY14     52-Week Period  
     June 28, 2014     Mar. 29, 2014     Dec. 28, 2013     Sep. 28, 2013     June 28, 2014  

Sales:

          

Broadline

   $ 9,723,245      $ 8,874,748      $ 8,872,641      $ 9,337,417        36,808,051   

SYGMA

     1,595,365        1,522,978        1,536,271        1,523,190        6,177,804   

Other

     1,282,747        1,163,315        1,123,405        1,109,487        4,678,954   

Intersegment

     (314,365     (283,557     (294,348     (255,827     (1,148,097
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 12,286,992      $ 11,277,484      $ 11,237,969      $ 11,714,267        46,516,712   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Q4 FY15     Q3 FY15     Q2 FY15     Q1 FY15     52-Week Period  
     June 27, 2015     Mar. 28, 2015     Dec. 27, 2014     Sep. 27, 2014     June 27, 2015  

Operating Income:

          

Broadline

   $ 724,289      $ 574,691      $ 582,598      $ 686,375      $ 2,567,953   

SYGMA

     2,411        5,158        7,803        5,150        20,522   

Other

     33,224        31,239        33,695        37,727        135,885   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 759,924      $ 611,088      $ 624,096      $ 729,252      $ 2,724,360   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Q4 FY14     Q3 FY14     Q2 FY14     Q1 FY14     52-Week Period  
     June 28, 2014     Mar. 29, 2014     Dec. 28, 2013     Sep. 28, 2013     June 28, 2014  

Operating Income:

          

Broadline

   $ 661,313      $ 573,535      $ 547,362      $ 644,698      $ 2,426,908   

SYGMA

     10,739        8,754        10,212        8,343        38,048   

Other

     36,264        39,365        34,240        32,550        142,419   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 708,316      $ 621,654      $ 591,814      $ 685,591      $ 2,607,375   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

12