HOUSTON, Nov. 3, 2008 (GLOBE NEWSWIRE) -- Sysco Corporation (NYSE:SYY) today announced financial results for its 13-week first quarter of fiscal 2009 ended September 27, 2008.
First Quarter Fiscal 2009 Highlights
* Sales increased 5.0% to $9.9 billion from $9.4 billion in the first quarter of fiscal 2008. * Operating income increased 11.0% to $505 million compared to $455 million in last year's first quarter. * Diluted earnings per share (EPS) increased 7.0% to $0.46 compared to $0.43 in last year's first quarter.
"Our operating companies continued to generate impressive results in the midst of a prolonged and difficult business environment," said Richard J. Schnieders, Sysco's chairman and chief executive officer. "We're investing in our business and our people are doing an excellent job executing our business plan. I remain confident our company is well positioned for the long term."
First Quarter Fiscal 2009 Summary
Sales for the first quarter grew five percent over the same period last year. Food cost inflation, as estimated by the change in Sysco's cost of goods, was 8.3 percent for the quarter. Operating income for the first quarter grew 11.0 percent over the same period last year. As a percentage of sales, operating income increased 28 basis points to 5.1 percent. The company continued to manage high food cost inflation well, as evidenced by gross profit dollars increasing 5.3 percent while operating expenses grew only 3.4 percent for the period. Diluted EPS increased seven percent from the first quarter of fiscal 2008 to $0.46.
Operating income for the first quarter of fiscal 2009 as compared to the prior year period was unfavorably impacted by a net $20.9 million in additional expenses. The additional expenses were partially related to the combined impact of changes in the cash surrender value of corporate-owned life insurance (COLI) and increased company-sponsored pension expense. These items were partially offset by the impact of prior year provisions related to multi-employer pension plans that were not repeated in the current year and lower current year stock compensation expense, as detailed in the table below:
(000's) Operating Expense impact
1Q09 1Q08 Unfavorable / (Favorable)
Cash surrender value of
COLI $22,908 ($7,093) $30,001
Company-sponsored
pensions 21,102 16,460 4,642
Multi-employer pension
plans 0 9,410 (9,410)
Stock compensation
expense 10,833 15,193 (4,360)
Net impact to operating
expenses $54,843 $33,970 $20,873
In addition, net earnings for the first quarter of fiscal 2009 were unfavorably impacted by a 42.5 percent tax rate for the quarter compared to 38.1 percent in the prior year's first quarter. The primary contributors to this unusually high tax rate were the $22.9 million COLI loss noted above which is not deductible for tax purposes, and a previously unidentified tax contingency arising from a recent tax audit.
"I'm pleased with our company-wide results, particularly at our Broadline companies," said Ken Spitler, Sysco's president and chief operating officer. "We were able to leverage our sales growth, growing operating income 11 percent despite continued pressure from multiple fronts, including high inflation and the unfavorable impact of additional expenses such as the loss on COLI. Our key business initiatives continue to deliver, and our associates are doing a great job consulting with our customers and helping them succeed in this difficult environment."
Capital Spending
Capital expenditures totaled $80 million for the first quarter. The primary areas for investments included facility replacements and expansions, construction of fold-out operations and additions to Sysco's fleet. In addition, we completed construction of our new fold-out facility located in East Texas and began shipping product in October 2008. For full year fiscal 2009, the company projects that capital expenditures will be in the range of $675 million to $725 million.
Conference Call & Webcast
Sysco's first quarter 2009 earnings conference call will be held on Monday, November 3, 2008 at 10:00 a.m. EST. A live webcast of the call, as well as a copy of this press release, will be available online at www.sysco.com in the Investor Relations section.
About Sysco
Sysco is the global leader in selling, marketing and distributing food products to restaurants, healthcare and educational facilities, lodging establishments and other customers who prepare meals away from home. Its family of products also includes equipment and supplies for the foodservice and hospitality industries. The company operates 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.globenewswire.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, the impact of our customer focus on Sysco's business relationships, the company being well-positioned for the long-term 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 28, 2008 as filed with the Securities and Exchange Commission.
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
(In Thousands, Except for Share and Per Share Data)
13-Week Period Ended
--------------------------
Sept. 27, Sept. 29,
2008 2007
------------ ------------
Sales $ 9,877,429 $ 9,405,844
Cost of sales 7,990,873 7,614,702
------------ ------------
Gross margin 1,886,556 1,791,142
Operating expenses 1,381,804 1,336,509
------------ ------------
Operating income 504,752 454,633
Interest expense 26,410 26,371
Other income, net (2,813) (3,032)
------------ ------------
Earnings before income taxes 481,155 431,294
Income taxes 204,341 164,305
------------ ------------
Net earnings $ 276,814 $ 266,989
============ ============
Net earnings:
Basic earnings per share $ 0.46 $ 0.44
Diluted earnings per share 0.46 0.43
Average shares outstanding 602,257,425 610,810,914
Diluted shares outstanding 605,707,175 617,108,313
Dividends declared per common share $ 0.22 $ 0.19
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except for Share Data)
Sept. 27, June 28, Sept. 29,
2008 2008 2007
------------ ------------ ------------
(unaudited) (unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 345,625 $ 551,552 $ 190,154
Accounts and notes
receivable, less allowances
of $46,493, $31,730 and
$42,953 2,873,502 2,723,189 2,765,213
Inventories 1,933,703 1,836,478 1,865,355
Deferred taxes 101,811 -- 91,444
Prepaid expenses and other
current assets 69,065 63,814 117,661
------------ ------------ ------------
Total current assets 5,323,706 5,175,033 5,029,827
Plant and equipment at cost,
less depreciation 2,876,081 2,889,790 2,780,780
Other assets
Goodwill 1,421,460 1,413,224 1,394,814
Intangibles, less
amortization 83,709 87,528 90,393
Restricted cash 93,077 92,587 99,755
Prepaid pension cost 256,017 215,159 389,720
Other assets 231,005 208,972 232,655
------------ ------------ ------------
Total other assets 2,085,268 2,017,470 2,207,337
------------ ------------ ------------
Total assets $ 10,285,055 $ 10,082,293 $ 10,017,944
============ ============ ============
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Notes payable $ -- $ -- $ 2,700
Accounts payable 2,051,112 2,048,759 2,079,131
Accrued expenses 757,455 917,892 779,968
Income taxes 584,608 11,665 509,370
Deferred taxes -- 516,131 --
Current maturities of
long-term debt 5,269 4,896 3,576
------------ ------------ ------------
Total current liabilities 3,398,444 3,499,343 3,374,745
Other liabilities
Long-term debt 1,974,053 1,975,435 1,969,804
Deferred taxes 717,587 540,330 734,169
Other long-term liabilities 689,745 658,199 641,771
------------ ------------ ------------
Total other liabilities 3,381,385 3,173,964 3,345,744
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 727,558 712,208 655,609
Retained earnings 6,185,935 6,041,429 5,600,065
Accumulated other
comprehensive (loss) income (98,308) (68,768) 61,218
Treasury stock, 164,083,709,
163,942,358 and 156,256,910
shares (4,075,134) (4,041,058) (3,784,612)
------------ ------------ ------------
Total shareholders' equity 3,505,226 3,408,986 3,297,455
------------ ------------ ------------
Total liabilities and
shareholders' equity $ 10,285,055 $ 10,082,293 $ 10,017,944
============ ============ ============
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS (Unaudited)
(In Thousands)
13-Week Period Ended
----------------------
Sept. 27, Sept. 29,
2008 2007
---------- ----------
Cash flows from operating activities:
Net earnings $ 276,814 $ 266,989
Adjustments to reconcile net earnings to cash
provided by operating activities:
Share-based compensation expense 10,833 15,193
Depreciation and amortization 94,351 90,456
Deferred tax provision 182,824 155,164
Provision for losses on receivables 11,774 7,281
(Gain) on sale of assets (20) (202)
Additional investment in certain assets and
liabilities, net of effect of businesses
acquired:
(Increase) in receivables (165,659) (144,184)
(Increase) in inventories (100,650) (138,237)
(Increase) decrease in prepaid expenses (5,171) 6,027
and other current assets
Increase in accounts payable 6,269 83,871
(Decrease) in accrued expenses (149,281) (131,699)
(Decrease) in accrued income taxes (34,982) (16,103)
(Increase) in other assets (26,225) (10,679)
(Decrease) increase in other long-term
liabilities and prepaid pension cost, net (34,507) 10,672
Excess tax benefits from share-based
compensation arrangements (3,000) (2,783)
---------- ----------
Net cash provided by operating activities 63,370 191,766
---------- ----------
Cash flows from investing activities:
Additions to plant and equipment (80,046) (131,543)
Proceeds from sales of plant and equipment 1,023 1,071
Acquisition of businesses, net of cash
acquired (13,534) (25,750)
(Increase) decrease in restricted cash (490) 2,174
---------- ----------
Net cash used for investing activities (93,047) (154,048)
---------- ----------
Cash flows from financing activities:
Bank and commercial paper borrowings
(repayments), net -- 194,120
Other debt borrowings 1,153 771
Other debt repayments (1,581) (880)
Common stock reissued from treasury 73,535 52,842
Treasury stock purchases (118,389) (189,484)
Dividends paid (132,383) (116,339)
Excess tax benefits from share-based
compensation arrangements 3,000 2,783
---------- ----------
Net cash used for financing activities (174,665) (56,187)
---------- ----------
Effect of exchange rates on cash (1,585) 751
---------- ----------
Net decrease in cash and cash equivalents (205,927) (17,718)
Cash and cash equivalents at beginning of
period 551,552 207,872
---------- ----------
Cash and cash equivalents at end of period $ 345,625 $ 190,154
========== ==========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 44,446 $ 35,161
Income taxes 42,425 19,834
Sysco Corporation and its Consolidated Subsidiaries
COMPARATIVE SEGMENT DATA (Unaudited)
(In Thousands)
13-Week Period Ended
----------------------
Sept. 27, Sept. 29,
2008 2007
---------- ----------
Sales:
Broadline $7,872,567 $7,506,107
SYGMA 1,228,235 1,134,707
Other 895,740 878,854
Intersegment (119,113) (113,824)
---------- ----------
Total $9,877,429 $9,405,844
========== ==========
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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
----------------------
Sept. 27, Sept. 29,
2008 2007
---------- ----------
Sysco Brand Sales as a %
of MA-Served Sales 49.45% 51.18%
Sysco Brand Sales as a %
of Total Broadline Sales 40.43% 42.16%
MA-Served Sales as a %
of Total Broadline Sales 49.51% 50.06%
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