HOUSTON, Aug. 11, 2008 (PRIME NEWSWIRE) -- SYSCO Corporation (NYSE:SYY) today announced financial results for its 13-week fourth quarter and 52 weeks of fiscal 2008 ended June 28, 2008.
Fourth Quarter Fiscal 2008 Highlights
* Sales increased 5.4% to $9.7 billion from $9.2 billion in the fourth quarter of fiscal 2007. * Operating income increased 9.7% to $559 million compared to $509 million in last year's fourth quarter. * Diluted earnings per share (EPS) increased 12.2% to $0.55 compared to $0.49 in last year's fourth quarter.
Fiscal 2008 Highlights
* Sales increased 7.1% to $37.5 billion from $35.0 billion in fiscal 2007. * Operating income increased 10.0% to $1.9 billion compared to $1.7 billion in the prior year. * Diluted EPS increased 13.1% to $1.81 compared to $1.60 in the prior year.
"For the eighth time in the last ten years -- and the eighth quarter in a row -- we have generated double digit earnings per share growth. The accomplishment is particularly notable this year as we overcame significant obstacles, including market forces such as prolonged inflation and high fuel costs," said Richard J. Schnieders, SYSCO's chairman and chief executive officer. "I'm pleased with our operating results in fiscal 2008, and I am encouraged that we leveraged 7.1% sales growth into 13.1% growth in earnings per share while continuing to invest in our business. Key to this performance was solid execution of our business plan, especially in the area of cost containment."
Fourth Quarter Fiscal 2008 Summary
Sales for the fourth quarter grew 5.4% over the same period last year. Food cost inflation, as estimated by the change in SYSCO's cost of goods, was 6.2% for the quarter. Operating income for the fourth quarter grew 9.7% over the same period last year. As a percentage of sales, operating income increased 22 basis points. The company continued to manage high food cost inflation, as evidenced by gross profit dollars increasing 5.6% while operating expenses grew only 4.0% for the period. Diluted EPS increased 12.2% from the fourth quarter of fiscal 2007 to $0.55.
Operating income for the fourth quarter was unfavorably impacted by a net $16.4 million in additional expenses related to the combined impact of changes in the cash surrender value of corporate-owned life insurance (COLI), increased provisions related to multi-employer pension plans, company-sponsored pension expense and stock compensation expense, as detailed in table 1 below:
(000's) Table 1 ----------------------------------------- Operating Expense Impact 4Q08 4Q07 Unfavorable (Favorable) ---- ---- ------------------------ Cash surrender value of COLI $ (575)$ (8,971) $ 8,396 Multi-employer pension plans 12,900 0 12,900 Company-sponsored pensions 16,459 18,643 (2,184) Stock compensation expense 19,496 22,235 (2,739) -------- -------- ------------------------ Net impact to operating expenses $48,280 $31,907 $16,373
"Our Broadline business managed margins and expenses particularly well to produce another strong quarter in a challenging environment," said Ken Spitler, SYSCO's president and chief operating officer. "This would not have been possible without the focus and commitment of our nearly 50,000 associates."
Fiscal 2008 Summary
Sales for fiscal 2008 grew 7.1% over the prior year. Food cost inflation, as estimated by the change in SYSCO's cost of goods, was 6.0% in fiscal 2008. Operating income grew 10.0% over the prior year as a result of gross profit dollars increasing 6.5% and operating expenses growing 5.3%. As a percentage of sales, operating income increased 13 basis points for fiscal 2008. Diluted earnings per share increased 13.1% for fiscal 2008 to $1.81.
Throughout fiscal 2008, SYSCO experienced increased demand for its industry leading business reviews and other customer support services. This appreciation for SYSCO's customer-centered approach, coupled with stringent cost control measures, helped increase operating income to $1.9 billion in fiscal 2008.
For fiscal 2008, operating income was unfavorably impacted by a net $24.2 million in additional expenses related to the combined impact of changes in the cash surrender value of COLI, increased provisions related to multi-employer pension plans, company-sponsored pension expense and stock compensation expense, as detailed in table 2 below:
(000's) Table 2 ----------------------------------------- Operating Expense Impact FY2008 FY2007 Unfavorable (Favorable) ------ ------ ------------------------- Cash surrender value of COLI $ 8,718 $(23,922) $ 32,640 Multi-employer pension plans 22,310 4,700 17,610 Company-sponsored pensions 65,836 74,591 (8,755) Stock compensation expense 80,650 97,985 (17,335) -------- -------- ------------------------ Net impact to operating expenses $177,514 $153,354 $ 24,160
Mr. Schnieders concluded, "Our focus remains on supporting our customers, especially during these difficult times. Our sales and marketing associates continue to find creative business solutions to the many challenges our customers are facing in today's marketplace."
Capital Spending
Capital expenditures for fiscal 2008 totaled $516 million, below original estimates of $625 million to $650 million. The lower amount spent in fiscal 2008 was primarily due to delays on certain projects that will shift significant expenditures to fiscal 2009. As a result, the company projects that capital expenditures for fiscal 2009 will be in the range of approximately $675 million to $725 million.
The primary areas for investments in fiscal 2008 included facility replacements and expansions, construction of fold-out operations and additions to SYSCO's fleet. In addition, the new redistribution center in Alachua, Florida, SYSCO's second RDC facility, opened on schedule in April and is currently shipping product to our five operating companies in Florida. In fiscal 2009 the company expects to complete construction of a fold-out facility located in East Texas.
Conference Call & Webcast
SYSCO's fourth quarter 2008 earnings conference call will be held on Monday, August 11, 2008 at 10:00 a.m. EDT. 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 more than 400,000 customers. For the fiscal year 2008 that ended June 28, 2008, the company generated more than $37 billion in sales. For more information about SYSCO visit the company's Internet home page at www.sysco.com.
The SYSCO Corporation logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=747
Forward-Looking Statements
Certain statements made herein are forward-looking statements under the Private Securities Litigation Reform Act of 1995. They include statements regarding the company's ability to leverage in current and future periods, anticipated fuel expense, the impact of our customer focus on SYSCO's business relationships and 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 these statements include risks that pertain to SYSCO's business, including the risks relating to the foodservice distribution industry's relatively low profit margins and sensitivity to general economic conditions, including the current economic environment and decreases in consumer spending; increased fuel costs; SYSCO's leverage and debt risks; the successful completion of acquisitions and integration of acquired companies as well as the risk that acquisitions could negatively impact the Company's stock price, operating results or debt ratio or significantly increase the Company's liquidity requirements; the risk of interruption of supplies due to lack of long-term contracts, severe weather, work stoppages or otherwise; construction schedules; management's allocation of capital and the timing of capital purchases such as fleet and equipment; competitive conditions; labor issues; and internal factors such as the ability to control expenses. Earnings are also impacted by option expensing, which is based on certain assumptions regarding the number and fair value of options granted, resulting tax benefits and shares outstanding. Capital expenditures may vary from those projected based on changes in business plans and other factors, including those described above. For a discussion of additional factors that could cause actual results to differ from those described in the forward-looking statements, see the Company's Annual Report on Form 10-K for the year ended June 30, 2007 as filed with the Securities and Exchange Commission.
SYSCO CORPORATION CONSOLIDATED RESULTS OF OPERATIONS (Unaudited) (In Thousands Except for Share Data) For the 13-Weeks Ended ---------------------- June 28, 2008 June 30, 2007 ------------- ------------- Sales $ 9,730,205 $ 9,228,294 Cost of sales 7,828,791 7,427,621 ------------- ------------- Gross margins 1,901,414 1,800,673 Operating expenses 1,342,754 1,291,190 ------------- ------------- Operating income 558,660 509,483 Interest expense 27,511 25,530 Other income, net (4,270) (2,786) ------------- ------------- Earnings before income taxes 535,419 486,739 Income taxes (37.60% in '08; 37.67% in '07) 201,306 183,348 ------------- ------------- Net earnings $ 334,113 $ 303,391 ============= ============= Net earnings: Basic earnings per share $ 0.56 $ 0.49 ============= ============= Diluted earnings per share $ 0.55 $ 0.49 ============= ============= Average shares outstanding 601,481,271 616,366,328 ============= ============= Diluted average shares outstanding 605,081,076 623,993,792 ============= ============= ------------------------------------------------------------------- ------------------------------------------------------------------- COMPARATIVE SEGMENT SALES DATA (Unaudited) (In Thousands) For the 13-Weeks Ended ---------------------- June 28, 2008 June 30, 2007 ------------- ------------- Sales: Broadline $ 7,732,110 $ 7,289,746 SYGMA 1,203,187 1,140,249 Other 916,309 922,441 Intersegment (121,401) (124,142) ------------- ------------- Total $ 9,730,205 $ 9,228,294 ============= ============= -------------------------------------------------------------------- SYSCO CORPORATION CONSOLIDATED RESULTS OF OPERATIONS (Unaudited) (In Thousands Except for Share Data) For the 52-Weeks Ended ---------------------- June 28, 2008 June 30, 2007 ------------- ------------- Sales $ 37,522,111 $ 35,042,075 Cost of sales 30,327,254 28,284,603 ------------- ------------- Gross margins 7,194,857 6,757,472 Operating expenses 5,314,908 5,048,990 ------------- ------------- Operating income 1,879,949 1,708,482 Interest expense 111,541 105,002 Other income, net (22,930) (17,735) ------------- ------------- Earnings before income taxes 1,791,338 1,621,215 Income taxes (38.25% in '08 and '07) 685,187 620,139 ------------- ------------- Net earnings $ 1,106,151 $ 1,001,076 ============= ============= Net earnings: Basic earnings per share $ 1.83 $ 1.62 ============= ============= Diluted earnings per share $ 1.81 $ 1.60 ============= ============= Average shares outstanding 605,905,545 618,338,752 ============= ============= Diluted average shares outstanding 610,970,783 626,336,798 ============= ============= -------------------------------------------------------------------- -------------------------------------------------------------------- COMPARATIVE SEGMENT SALES DATA (Unaudited) (In Thousands) For the 52-Weeks Ended ---------------------- June 28, 2008 June 30, 2007 ------------- ------------- Sales: Broadline $ 29,792,931 $ 27,560,375 SYGMA 4,574,880 4,380,955 Other 3,622,360 3,571,213 Intersegment (468,060) (470,468) ------------- ------------- Total $ 37,522,111 $ 35,042,075 ============= ============= -------------------------------------------------------------------- SYSCO CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands) June 28, 2008 June 30, 2007 ------------- ------------- ASSETS Current assets Cash $ 551,552 $ 207,872 Receivables 2,723,189 2,610,885 Inventories 1,836,478 1,714,187 Prepaid expenses and other current assets 63,814 123,284 ------------- ------------- Total current assets 5,175,033 4,675,546 Plant and equipment at cost, less depreciation 2,889,790 2,721,233 Other assets Goodwill 1,413,224 1,355,313 Intangibles 87,528 91,366 Restricted cash 92,587 101,929 Prepaid pension cost 215,159 352,390 Other 208,972 221,154 ------------- ------------- Total other assets 2,017,470 2,122,152 ------------- ------------- Total assets $ 10,082,293 $ 9,518,931 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable $ -- $ 18,900 Accounts payable 2,048,759 1,981,190 Accrued expenses 917,892 922,582 Accrued income taxes 11,665 -- Deferred taxes 516,131 488,849 Current maturities of long-term debt 4,896 3,568 ------------- ------------- Total current liabilities 3,499,343 3,415,089 Other liabilities Long-term debt 1,975,435 1,758,227 Deferred taxes 540,330 626,695 Other long-term liabilities 658,199 440,520 ------------- ------------- Total other liabilities 3,173,964 2,825,442 Commitments and contingencies Shareholders' equity Preferred stock -- -- Common stock 765,175 765,175 Paid-in capital 712,208 637,154 Retained earnings 6,041,429 5,544,078 Accumulated other comprehensive loss (68,768) (4,061) Treasury stock (4,041,058) (3,663,946) ------------- ------------- Total shareholders' equity 3,408,986 3,278,400 ------------- ------------- Total liabilities and shareholders' equity $ 10,082,293 $ 9,518,931 ============= ============= -------------------------------------------------------------------- SYSCO CORPORATION CONSOLIDATED CASH FLOWS (Unaudited) (In Thousands) For the 52-Weeks Ended ---------------------- June 28, 2008 June 30, 2007 ------------- ------------- Cash flows from operating activities: Net earnings $ 1,106,151 $ 1,001,076 Adjustments to reconcile net earnings to cash provided by operating activities: Share-based compensation expense 80,650 97,985 Depreciation and amortization 372,529 362,559 Deferred tax provision 643,480 545,971 Provision for losses on receivables 32,184 28,156 Gain on sale of assets (2,747) (6,279) Additional investment in certain assets and liabilities, net of effect of businesses acquired: (Increase) in receivables (128,017) (134,153) (Increase) in inventories (110,925) (95,932) Decrease (increase) in prepaid expenses and other current assets 59,896 (62,773) Increase in accounts payable 54,451 85,422 (Decrease) increase in accrued expenses (22,721) 132,936 (Decrease) in accrued income taxes (509,783) (491,993) Decrease (increase) in other assets 11,926 (36,426) Increase (decrease) in other long-term liabilities and prepaid pension cost, net 13,459 (14,817) Excess tax benefits from share- based compensation arrangements (4,404) (8,810) ------------- ------------- Net cash provided by operating activities 1,596,129 1,402,922 ------------- ------------- Cash flows from investing activities: Additions to plant and equipment (515,963) (603,242) Proceeds from sales of plant and equipment 13,320 16,008 Acquisition of businesses, net of cash acquired (55,259) (59,322) Decrease (increase) in restricted cash 2,342 (2,155) ------------- ------------- Net cash used for investing activities (555,560) (648,711) ------------- ------------- Cash flows from financing activities: Bank and commercial paper borrowings (repayments ), net (550,726) 121,858 Other debt borrowings 757,972 5,290 Other debt (repayments) (7,628) (109,656) Debt issuance costs (4,192) (7) Common stock reissued from treasury 128,238 221,736 Treasury stock purchases (529,179) (550,865) Dividends paid (497,467) (445,416) Excess tax benefits from share- based compensation arrangements 4,404 8,810 ------------- ------------- Net cash used for financing activities (698,578) (748,250) ------------- ------------- Effect of exchange rates on cash 1,689 14 ------------- ------------- Net increase in cash 343,680 5,975 Cash at beginning of period 207,872 201,897 ------------- ------------- Cash at end of period $ 551,552 $ 207,872 ============= ============= Cash paid during the period for: Interest $ 98,330 $ 107,109 Income taxes 530,169 563,968 -------------------------------------------------------------------- Comparative Supplemental Statistical Information Related to Sales (Unaudited) Comparative SYSCO Brand Sales and Marketing Associate-Served Sales data are summarized below. For the 13-Weeks Ended ---------------------- June 28, 2008 June 30, 2007 ------------- ------------- SYSCO Brand Sales as a % of MA-Served Sales 49.93% 50.63% SYSCO Brand Sales as a % of Total Broadline Sales 41.87% 44.01% MA-Served Sales as a % of Total Broadline Sales 49.35% 50.66% --------------------------------------------------------------------- For the 52-Weeks Ended ---------------------- June 28, 2008 June 30, 2007 ------------- ------------- SYSCO Brand Sales as a % of MA-Served Sales 50.73% 51.52% SYSCO Brand Sales as a % of Total Broadline Sales 41.86% 43.41% MA-Served Sales as a % of Total Broadline Sales 48.98% 49.76% --------------------------------------------------------------------- Note: Beginning with the earnings release for the first quarter of fiscal 2008, this information is now presented to include Canadian broadline sales statistics.