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8-K - FORM 8-K - SYSCO CORP | h79424e8vk.htm |
Exhibit 99.1
SYSCO REPORTS SECOND QUARTER NET EARNINGS OF $258 MILLION,
AND DILUTED EPS OF $0.44
AND DILUTED EPS OF $0.44
HOUSTON, February 7, 2011 Sysco Corporation (NYSE: SYY) today announced financial results for
its 13-week second quarter ended January 1, 2011.
Second Quarter Fiscal 2011 Highlights
| Sales were $9.4 billion, an increase of 5.8% from $8.9 billion in the second quarter of fiscal 2010. | ||
| Operating income was $437 million, a decrease of 5.5% compared to $462 million in last years second quarter. | ||
| Diluted earnings per share (EPS) were $0.44, including a $0.02 benefit from Corporate Owned Life Insurance (COLI). This result was 2.2% lower than last years second quarter EPS of $0.45, which included a $0.01 benefit from Corporate Owned Life Insurance (COLI). |
First Half Fiscal 2011 Highlights
| Sales were $19.1 billion, an increase of 6.6% from $17.9 billion in the first half of fiscal 2010. | ||
| Operating income was $943 million, a decrease of 1.7% compared to $960 million in last years first half. | ||
| Diluted EPS was $0.95, including a $0.04 benefit from COLI. This result was 5.0% lower than last years first half EPS of $1.00, which included a $0.05 tax benefit related to the companys IRS settlement, and a $0.04 benefit from Corporate Owned Life Insurance (COLI). |
Our financial results for the second quarter reflect the unfavorable impact of certain market
conditions and operational challenges that we were unable to fully overcome in the near term.
Specifically, accelerating and significant food cost inflation negatively impacted our customers
purchasing budgets, contributed to increased gross margin pressure and meaningfully increased our
selling expense. In addition, higher year over year pension and fuel costs also adversely impacted
our ability to grow operating earnings over the prior year, said Bill DeLaney, Syscos president
and chief executive officer. Looking forward, we are highly focused on improving the execution of
our business plan in the second half of our fiscal year and effectively implementing our strategic
priorities over the long term.
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Second Quarter Fiscal 2011 Summary
Sales for the second quarter were $9.4 billion, an increase of $516 million, or 5.8% compared to
the same period last year due primarily to the impact of food cost inflation. Food cost inflation,
as measured by the estimated change in Syscos product costs, was 4.5%, driven by continued
double-digit levels of inflation in the meat, dairy and seafood categories. This compares to
deflation of 3.5% in the prior year period. In addition, sales from acquisitions (within the last
12 months) increased sales by 0.6%, and the impact of changes in foreign exchange rates for the
second quarter increased sales by 0.4%.
Operating income decreased $25 million, or 5.5%, to $437 million during the second quarter.
Operating expense increased $72 million, or 5.9%, for the second quarter while gross margin
increased only $47 million, or 2.8%.
Gross margin as a percentage of sales declined 55 basis points year over year to 18.6%. Pressure
from high inflation, strategic pricing initiatives and changes in segment mix continued to be the
main factors impacting gross margin performance.
Operating expense increased 5.9%, or $72 million, for the second quarter mainly from (1) a $15
million increase in pension costs; (2) a $13 million increase in salaries and related expense due
to increases in sales compensation and other payroll costs; and (3) a $10 million increase in fuel
costs.
Net earnings for the second quarter were $258 million, a decrease of $10 million, or 3.8%. Diluted
EPS was $0.44, including a $0.02 positive impact from COLI. Diluted EPS in the prior year period
was $0.45, which included a $0.01 positive impact from COLI.
First Half Fiscal 2011 Summary
Sales for the first half of fiscal 2011 were $19.1 billion, an increase of 6.6% compared to the
same period last year. Food cost inflation, as measured by the estimated change in Syscos cost of
goods, was 3.9% for the first half of the year. Sales from acquisitions (within the last 12 months)
increased sales by 0.6%. The impact of changes in foreign exchange rates for the first half of the
year increased sales by 0.5%.
Operating income decreased $16 million, or 1.7%, to $943 million during the first half of fiscal
2011. Operating expense increased $148 million, or 5.9%, for the first half of the fiscal year,
while gross margin increased $131 million, or 3.8%.
Gross margin as a percentage of sales declined 50 basis points year over year to 18.7%. Pressure
from high inflation, strategic pricing initiatives and changes in segment mix were the main factors
impacting gross margin performance.
Operating expense increased 5.9%, or $148 million, for the first half mainly from (1) a $59 million
increase in salaries and related expense due to increases in sales
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compensation and other payroll costs; and (2) a $30 million increase in pension expense.
Net earnings for the first half of fiscal 2011 were $557 million, a decrease of $37 million, or
6.3%. Diluted EPS was $0.95, aided by a $0.04 favorable impact from COLI. Diluted EPS in the prior
year period was $1.00, aided by a $0.05 tax benefit related to the companys IRS settlement and a
$0.04 favorable impact from COLI.
Cash Flow and Capital Spending
Cash flow from operations was $283 million for the first half of fiscal 2011. Capital expenditures
totaled $174 million for the second quarter, and $317 million in the first half of the fiscal year.
The primary areas for investment included facility replacements and expansions, replacements to
Syscos fleet, and technology.
Conference Call & Webcast
Syscos second quarter 2011 earnings conference call will be held on Monday, February 7, 2011 at
10:00 a.m. Eastern. 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 180 distribution facilities serving approximately
400,000 customers. For the fiscal year 2010 that ended July 3, 2010 the company generated more than
$37 billion in sales. For more information about Sysco visit the companys Internet home page at
www.sysco.com.
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Forward-Looking Statements
Certain statements made herein are forward-looking statements under the Private Securities
Litigation Reform Act of 1995. They include statements regarding our focus on the execution of our
business plan in the second half of our fiscal year and on effectively implementing our strategic
priorities over the long term. These statements involve risks and uncertainties and are based on
managements current expectations and estimates; actual results may differ materially. Factors
impacting these forward-looking statements include the general risks associated with our business,
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. Risks and uncertainties also
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. Also, there are risks related to
our Business Transformation Project, including that the expected costs of our Business
Transformation Project in fiscal 2011 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. For a discussion of additional factors impacting
Syscos business, see the Companys Annual Report on Form 10-K for the year ended July 3, 2010, 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)
26-Week Period Ended | 13-Week Period Ended | |||||||||||||||
Jan. 1, 2011 | Dec. 26, 2009 | Jan. 1, 2011 | Dec. 26, 2009 | |||||||||||||
Sales |
$ | 19,136,126 | $ | 17,949,925 | $ | 9,384,852 | $ | 8,868,499 | ||||||||
Cost of sales |
15,562,765 | 14,507,679 | 7,642,908 | 7,173,612 | ||||||||||||
Gross margin |
3,573,361 | 3,442,246 | 1,741,944 | 1,694,887 | ||||||||||||
Operating expenses |
2,630,096 | 2,482,567 | 1,304,919 | 1,232,536 | ||||||||||||
Operating income |
943,265 | 959,679 | 437,025 | 462,351 | ||||||||||||
Interest expense |
59,161 | 65,322 | 28,060 | 31,522 | ||||||||||||
Other expense (income), net |
(2,984 | ) | (3,150 | ) | (1,300 | ) | (1,138 | ) | ||||||||
Earnings before income taxes |
887,088 | 897,507 | 410,265 | 431,967 | ||||||||||||
Income taxes |
329,846 | 302,953 | 152,092 | 163,618 | ||||||||||||
Net earnings |
$ | 557,242 | $ | 594,554 | $ | 258,173 | $ | 268,349 | ||||||||
Net earnings: |
||||||||||||||||
Basic earnings per share |
$ | 0.95 | $ | 1.00 | $ | 0.44 | $ | 0.45 | ||||||||
Diluted earnings per share |
0.95 | 1.00 | 0.44 | 0.45 | ||||||||||||
Average shares outstanding |
586,827,575 | 592,110,975 | 584,943,749 | 592,651,712 | ||||||||||||
Diluted shares outstanding |
589,106,837 | 592,678,989 | 587,110,338 | 593,372,477 | ||||||||||||
Dividends declared per common share |
$ | 0.51 | $ | 0.49 | $ | 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)
Jan. 1, 2011 | July 3, 2010 | Dec. 26, 2009 | ||||||||||
ASSETS |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
$ | 209,755 | $ | 585,443 | $ | 574,885 | ||||||
Short-term investments |
| 23,511 | 61,860 | |||||||||
Accounts and notes receivable, less
allowances of $67,237, $36,573 and $67,035 |
2,623,300 | 2,617,352 | 2,526,044 | |||||||||
Inventories |
1,963,397 | 1,771,539 | 1,790,327 | |||||||||
Prepaid expenses and other current assets |
70,430 | 70,992 | 63,674 | |||||||||
Prepaid income taxes |
| 7,421 | | |||||||||
Total current assets |
4,866,882 | 5,076,258 | 5,016,790 | |||||||||
Plant and equipment at cost, less depreciation |
3,370,553 | 3,203,823 | 3,072,721 | |||||||||
Other assets |
||||||||||||
Goodwill |
1,577,108 | 1,549,815 | 1,551,550 | |||||||||
Intangibles, less amortization |
104,511 | 106,398 | 118,032 | |||||||||
Restricted cash |
134,579 | 124,488 | 128,683 | |||||||||
Prepaid pension cost |
| | 70,753 | |||||||||
Other assets |
274,650 | 252,919 | 245,716 | |||||||||
Total other assets |
2,090,848 | 2,033,620 | 2,114,734 | |||||||||
Total assets |
$ | 10,328,283 | $ | 10,313,701 | $ | 10,204,245 | ||||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||||||
Current liabilities |
||||||||||||
Accounts payable |
$ | 1,804,690 | $ | 1,953,092 | $ | 1,834,024 | ||||||
Accrued expenses |
761,954 | 870,114 | 793,303 | |||||||||
Accrued income taxes |
47,738 | | 56,775 | |||||||||
Deferred income taxes |
99,285 | 178,022 | 18,482 | |||||||||
Current maturities of long-term debt |
7,867 | 7,970 | 8,438 | |||||||||
Total current liabilities |
2,721,534 | 3,009,198 | 2,711,022 | |||||||||
Other liabilities |
||||||||||||
Long-term debt |
2,653,529 | 2,472,662 | 2,468,690 | |||||||||
Deferred income taxes |
185,239 | 271,512 | 545,863 | |||||||||
Other long-term liabilities |
773,490 | 732,803 | 548,383 | |||||||||
Total other liabilities |
3,612,258 | 3,476,977 | 3,562,936 | |||||||||
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 |
848,612 | 816,833 | 788,138 | |||||||||
Retained earnings |
7,392,996 | 7,134,139 | 6,844,095 | |||||||||
Accumulated other comprehensive loss |
(387,421 | ) | (480,251 | ) | (180,095 | ) | ||||||
Treasury stock at cost, 183,761,810,
176,768,795 and 173,100,605 shares |
(4,624,871 | ) | (4,408,370 | ) | (4,287,026 | ) | ||||||
Total shareholders equity |
3,994,491 | 3,827,526 | 3,930,287 | |||||||||
Total liabilities and shareholders equity |
$ | 10,328,283 | $ | 10,313,701 | $ | 10,204,245 | ||||||
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Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS (Unaudited)
(In Thousands)
CONSOLIDATED CASH FLOWS (Unaudited)
(In Thousands)
26-Week Period Ended | ||||||||
Jan. 1, 2011 | Dec. 26, 2009 | |||||||
Cash flows from operating activities: |
||||||||
Net earnings |
$ | 557,242 | $ | 594,554 | ||||
Adjustments to reconcile net earnings to cash provided by
operating activities: |
||||||||
Share-based compensation expense |
37,679 | 39,913 | ||||||
Depreciation and amortization |
198,230 | 189,428 | ||||||
Deferred income taxes |
(181,295 | ) | (172,756 | ) | ||||
Provision for losses on receivables |
19,522 | 19,815 | ||||||
Other non-cash items |
(1,550 | ) | 536 | |||||
Additional investment in certain assets and liabilities, net of
effect of businesses acquired: |
||||||||
Decrease (increase) in receivables |
4,887 | (53,597 | ) | |||||
(Increase) in inventories |
(167,912 | ) | (121,626 | ) | ||||
Decrease in prepaid expenses and other current assets |
1,183 | 1,307 | ||||||
(Decrease) increase in accounts payable |
(172,217 | ) | 30,110 | |||||
(Decrease) in accrued expenses |
(125,849 | ) | (16,974 | ) | ||||
Increase (decrease) in accrued income taxes |
50,130 | (236,099 | ) | |||||
(Increase) in other assets |
(19,556 | ) | (30,372 | ) | ||||
Increase (decrease) in other long-term liabilities and
prepaid pension cost, net |
82,430 | (97,343 | ) | |||||
Excess tax benefits from share-based compensation
arrangements |
(277 | ) | (475 | ) | ||||
Net cash provided by operating activities |
282,647 | 146,421 | ||||||
Cash flows from investing activities: |
||||||||
Additions to plant and equipment |
(317,421 | ) | (247,575 | ) | ||||
Proceeds from sales of plant and equipment |
2,916 | 2,422 | ||||||
Acquisition of businesses, net of cash acquired |
(26,546 | ) | (9,161 | ) | ||||
Purchases of short-term investments |
| (60,162 | ) | |||||
Maturities of short-term investments |
24,383 | | ||||||
(Increase) in restricted cash |
(10,091 | ) | (34,825 | ) | ||||
Net cash used for investing activities |
(326,759 | ) | (349,301 | ) | ||||
Cash flows from financing activities: |
||||||||
Bank and commercial paper borrowings (repayments) net |
173,199 | | ||||||
Other debt borrowings |
2,441 | 4,580 | ||||||
Other debt repayments |
(4,521 | ) | (5,601 | ) | ||||
Common stock reissued from treasury for share-based
compensation awards |
65,555 | 36,914 | ||||||
Treasury stock purchases |
(285,442 | ) | | |||||
Dividends paid |
(294,089 | ) | (283,766 | ) | ||||
Excess tax benefits from share-based compensation
arrangements |
277 | 475 | ||||||
Net cash used for financing activities |
(342,580 | ) | (247,398 | ) | ||||
Effect of exchange rates on cash |
11,004 | 6,512 | ||||||
Net (decrease) in cash and cash equivalents |
(375,688 | ) | (443,766 | ) | ||||
Cash and cash equivalents at beginning of period |
585,443 | 1,018,651 | ||||||
Cash and cash equivalents at end of period |
$ | 209,755 | $ | 574,885 | ||||
Supplemental disclosures of cash flow information: |
||||||||
Cash paid during the period for: |
||||||||
Interest |
$ | 59,140 | $ | 67,670 | ||||
Income taxes |
467,788 | 759,704 |
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Sysco Corporation and its Consolidated Subsidiaries
COMPARATIVE SEGMENT DATA (Unaudited)
(In Thousands)
COMPARATIVE SEGMENT DATA (Unaudited)
(In Thousands)
26-Week Period Ended | 13-Week Period Ended | |||||||||||||||
Jan. 1, 2011 | Dec. 26, 2009 | Jan. 1, 2011 | Dec. 26, 2009 | |||||||||||||
Sales: |
||||||||||||||||
Broadline |
$ | 15,207,567 | $ | 14,393,429 | $ | 7,416,293 | $ | 7,084,723 | ||||||||
SYGMA |
2,632,266 | 2,308,174 | 1,312,770 | 1,157,313 | ||||||||||||
Other |
1,595,074 | 1,495,543 | 808,149 | 752,666 | ||||||||||||
Intersegment |
(298,781 | ) | (247,221 | ) | (152,360 | ) | (126,203 | ) | ||||||||
Total |
$ | 19,136,126 | $ | 17,949,925 | $ | 9,384,852 | $ | 8,868,499 | ||||||||
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.
26-Week Period Ended | 13-Week Period Ended | |||||||||||||||
Jan. 1, 2011 | Dec. 26, 2009 | Jan. 1, 2011 | Dec. 26, 2009 | |||||||||||||
Sysco Brand Sales as a %
of MA-Served Sales |
45.36 | % | 47.02 | % | 45.38 | % | 47.01 | % | ||||||||
Sysco Brand Sales as a %
of Total Broadline Sales |
36.31 | % | 38.10 | % | 36.09 | % | 37.80 | % | ||||||||
MA-Served Sales as a %
of Total Broadline Sales |
45.46 | % | 45.45 | % | 44.00 | % | 43.68 | % |
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