HOUSTON, Jan. 30, 2006 (PRIMEZONE) -- SYSCO Corporation (NYSE:SYY), North America's leading foodservice marketer and distributor, today announced sales and earnings results for the 13-week second quarter of fiscal year 2006 that ended December 31, 2005.
Second Quarter Fiscal 2006 Highlights:
-- Sales increased 8.7% to $7.971 billion from $7.331 billion
in last year's second quarter.
-- Net earnings were $204.2 million vs. $232.6 million in last
year's second quarter.
-- Diluted earnings per share were $0.33 compared to $0.36
in last year's second quarter.
-- Gross profit margins increased 21 basis points in the quarter
compared to the same period last year, or 19.27% compared
to 19.06%.
-- Second quarter EPS data includes a net expense of $0.04 for
incremental share-based compensation, principally stock option
expense, which was not required to be expensed in fiscal 2005.
First Half Fiscal 2006 Highlights:
-- Sales increased 7.5% to $15.982 billion from $14.863 billion
in the same period last year.
-- Net earnings after the cumulative effect of an accounting
change taken during SYSCO's first fiscal quarter of 2006 were
$412.7 million compared to $458.6 million in the first half
of fiscal 2005.
-- Diluted earnings per share were $0.64 compared to $0.70 in last
year's first 26 weeks.
-- Gross profit margins increased 11 basis points in the first
26 weeks of fiscal 2006 compared to the same period last year,
or 19.18% compared to 19.07%.
-- EPS data for the first 26 weeks of fiscal 2006 includes a net
expense of $0.09 for incremental share-based compensation,
principally stock option expense, which was not required to be
expensed in fiscal 2005.
Richard J. Schnieders, SYSCO's chairman, chief executive officer and president, commented, "I am very pleased with this quarter's sales growth of 8.7 percent, which is a return to SYSCO's historical performance levels. The results were due to sound execution of our growth strategies, including Business Reviews, increased staffing in our key Customer Contact areas and the efforts of our marketing associates. Our strategic investments in these areas were validated by the growth they produced, and we will continue to invest in these areas for future growth. Our industry has endured a variety of challenges in the past several quarters, especially in terms of fuel costs and the effects of food cost inflation. By remaining focused on our long-term goals, we have executed on the basic building blocks of our business and positioned ourselves for future success."
Sales:
The quarter's 8.7 percent sales growth includes sales from non-comparable acquisitions (less than 12 months) of 1.3 percent. Second quarter sales growth also includes inflation, as measured by the change in SYSCO's cost of goods, of 0.6 percent.
SYSCO's Business Review process continued to produce strong customer relationships during the quarter. The process, which tailors value-added products and services such as menu reengineering and customer loyalty programs, was performed with more than 8,500 customers during the second quarter, resulting in sales increases in the mid-teens percentage range during the quarter for those customers reviewed. The company has also increased its Customer Contact personnel by approximately 3.0 percent since the start of fiscal year 2006 -- principally marketing associates and business review and development professionals -- to continue to build on its sales success.
Gross Profit Margins:
Gross profit margins increased 21 basis points in the second quarter, the largest increase in the last 14 consecutive quarters. Customer mix led the gross profit margin increase. Marketing associate-served sales -- sales to SYSCO's core business of independent restaurants -- were 53.3 percent of U.S. broadline sales in the quarter versus 53.1 percent last year.
Expenses:
Operating expenses as a percent to sales were 14.70 percent during the second quarter compared to 13.71 percent in the same quarter a year ago. Major items of expense incurred in the quarter that were in excess of last year's second quarter expenses include an additional $13.0 million in fuel expense; $5.9 million in added pension expense; and a smaller gain in the cash surrender value of corporate owned life insurance in the amount of $3.5 million that resulted in a negative comparison of $10.8 million. Expense for share-based compensation -- an item that is included in second quarter fiscal 2006 expenses but is not included in expenses for the same period last year -- totaled $29.3 million. In addition, costs for the National Supply Chain project, net of benefits, were $14.0 million in the second quarter of fiscal 2006.
Capital Spending:
Capital expenditures during the quarter were $138.6 million. Through the first 26 weeks of fiscal 2006, capital expenditures were $232.8 million. For the entire fiscal year 2006, the company continues to project capital expenditures to be in a range of $425 million to $450 million, which is in line with SYSCO's historical capital spending trends.
Other Recent Developments:
Ramp-up of case volume at SYSCO's Northeast Redistribution Center (RDC) will resume in February. The ramp-up process will continue throughout the remainder of fiscal 2006, with the majority of projected weekly case volume flowing through the facility by the end of the fourth fiscal quarter. Management continues to expect the National Supply Chain project to produce competitive advantages for SYSCO, including better procurement practices and warehousing techniques and overall supply chain efficiencies.
In January of 2006 SYSCO completed the purchase of land in Alachua, Florida for the future site of its second Redistribution Center (RDC). Construction of that facility is expected to be completed within the next 14 to 16 months.
Construction of SYSCO's fold-out operation that will serve the Raleigh, North Carolina market progressed according to plan during the quarter and that facility is expected to begin distributing product by the end of fiscal 2006. Sysco Food Services - Gulf Coast, Inc., the company's broadline fold-out in Geneva, Alabama, opened in December 2005.
SYSCO's FreshPoint subsidiary completed the acquisition of A-One-A Produce & Dairy (Pompano Beach, FL; $90.8 million in sales for calendar year 2004) during the second quarter of fiscal 2006. In addition, broadliner Western Foods (Little Rock, AR; approximately $62.3 million in sales for its fiscal year 2005) merged into SYSCO's Little Rock operation during the quarter.
Approximately $177.8 million was invested to repurchase 5.6 million shares during the second quarter. SYSCO has approximately 21.5 million shares remaining on its current share repurchase authorizations.
Conference Call & Webcast:
As previously announced, SYSCO's second quarter fiscal 2006 earnings conference call will be held at 10:00 a.m. EDT on Monday, January 30, 2006. A live webcast of the call, as well as a copy of this press release, will be available online at www.sysco.com under Investor Relations.
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. For the fiscal year 2005 that ended July 2, 2005, the company generated $30.3 billion in sales. For more information about SYSCO visit the company's Internet home page at www.sysco.com.
Forward-Looking Statements
Certain statements made herein are forward-looking statements under the Private Securities Litigation Reform Act of 1995. They include statements regarding future capital expenditures; the potential for future success; and the expected timing and benefits of the national supply chain project and regional redistribution centers. 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 consumer spending; increased fuel costs; SYSCO's leverage and debt risks; the successful completion of acquisitions and integration of acquired companies; 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 others factors. 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 fiscal year ended July 2, 2005 as filed with the Securities and Exchange Commission.
The SYSCO Corporation logo is available at: http://www.primezone.com/newsroom/prs/?pkgid=747
SYSCO CORPORATION
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
(In Thousands Except for Share Data)
For the 13-Weeks Ended
----------------------
December 31, 2005 January 1, 2005
----------------- ---------------
Sales $ 7,971,061 $ 7,331,257
Costs and expenses
Cost of sales 6,434,753 5,933,515
Operating expenses 1,171,469 1,004,919
Interest expense 29,227 17,766
Other, net (2,220) (1,693)
----------- -----------
Total costs and
expenses 7,633,229 6,954,507
----------- -----------
Earnings before
income taxes 337,832 376,750
Income taxes 133,650 144,107
----------- -----------
Net earnings $ 204,182 $ 232,643
=========== ===========
Net Earnings:
Basic earnings
per share $ 0.33 $ 0.36
=========== ===========
Diluted earnings
per share $ 0.33 $ 0.36
=========== ===========
Average shares
outstanding 620,137,592 638,638,789
=========== ===========
Diluted average shares
outstanding 627,147,814 652,993,142
=========== ===========
Comparative segment sales data.
(Unaudited) For the 13-Weeks Ended
($000) ----------------------
December 31, 2005 January 1, 2005
----------------- ---------------
Sales:
Broadline $ 6,288,335 $ 5,881,372
SYGMA 1,070,214 941,421
Other 714,187 593,028
Intersegment (101,675) (84,564)
----------- -----------
Total $ 7,971,061 $ 7,331,257
=========== ===========
SYSCO CORPORATION
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
(In Thousands Except for Share Data)
For the 26-Weeks Ended
----------------------
December 31, 2005 January 1, 2005
----------------- ---------------
Sales $15,981,545 $14,863,182
Costs and expenses
Cost of sales 12,915,546 12,028,446
Operating expenses 2,348,125 2,060,331
Interest expense 51,473 35,465
Other, net (5,335) (3,662)
----------- -----------
Total costs and expenses 15,309,809 14,120,580
----------- -----------
Earnings before income
taxes 671,736 742,602
Income taxes 268,344 284,045
----------- -----------
Earnings before cumulative
effect of accounting change 403,392 458,557
Cumulative effect of
accounting change 9,285 --
----------- -----------
Net earnings $ 412,677 $ 458,557
=========== ===========
Earnings before cumulative
effect of accounting change:
Basic earnings per share $ 0.65 $ 0.72
=========== ===========
Diluted earnings per share $ 0.64 $ 0.70
=========== ===========
Net Earnings:
Basic earnings per share $ 0.66 $ 0.72
=========== ===========
Diluted earnings per share $ 0.65 $ 0.70
=========== ===========
Average shares outstanding 623,470,638 638,403,789
=========== ===========
Diluted average shares
outstanding 631,396,186 652,448,434
=========== ===========
Comparative segment sales data.
(Unaudited) For the 26-Weeks Ended
($000) ----------------------
December 31, 2005 January 1, 2005
------------------ ---------------
Sales:
Broadline $ 12,671,189 $ 12,009,666
SYGMA 2,129,995 1,857,201
Other 1,368,529 1,158,762
Intersegment (188,168) (162,447)
------------- -------------
Total $ 15,981,545 $ 14,863,182
============= =============
SYSCO CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In Thousands)
December 31, 2005 January 1, 2005
----------------- ---------------
ASSETS
Current assets
Cash $ 253,938 $ 152,926
Receivables 2,360,132 2,167,931
Inventories 1,672,908 1,546,007
Prepaid expenses 65,273 64,714
----------- -----------
Total current assets 4,352,251 3,931,578
Plant and equipment at cost,
less depreciation 2,344,423 2,232,172
Other assets
Goodwill and intangibles 1,346,228 1,258,716
Restricted cash 102,723 185,660
Prepaid pension cost 428,005 289,464
Other 236,557 203,297
----------- -----------
Total other assets 2,113,513 1,937,137
----------- -----------
Total assets $ 8,810,187 $ 8,100,887
=========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Notes payable $ 31,814 $ 67,153
Accounts payable 1,813,247 1,684,567
Accrued expenses 689,048 626,651
Accrued income taxes 189,593 239,984
Deferred taxes 208,224 183,748
Current maturities of
long-term debt 209,247 367,853
----------- -----------
Total current liabilities 3,141,173 3,169,956
Other liabilities
Long-term debt 1,827,586 1,101,852
Deferred taxes 727,084 716,977
Other long-term liabilities 403,087 268,878
----------- -----------
Total other liabilities 2,957,757 2,087,707
Contingencies
Shareholders' equity
Preferred stock -- --
Common stock, par
$l per share 765,175 765,175
Paid-in capital 470,274 364,738
Retained earnings 4,766,135 4,239,352
Other comprehensive income 21,980 52,813
Treasury stock (3,312,307) (2,578,854)
----------- -----------
Total shareholders' equity 2,711,257 2,843,224
----------- -----------
Total liabilities and
shareholders' equity $ 8,810,187 $ 8,100,887
=========== ===========
SYSCO CORPORATION
CONSOLIDATED CASH FLOWS (Unaudited)
(In Thousands)
For the 26-Weeks Ended
----------------------
Dec. 31, Jan. 1,
2005 2005
-------- -------
Cash flows from operating activities:
Net earnings $ 412,677 $ 458,557
Add non-cash items:
Cumulative effect of accounting change (9,285) --
Share-based compensation expense 74,168 11,697
Depreciation and amortization 169,558 150,294
Deferred tax provision 261,766 265,289
Provision for losses on receivables 16,654 15,019
Additional investment in certain assets
and liabilities, net of effect of
businesses acquired:
(Increase) decrease in receivables (57,632) 32,612
(Increase) in inventories (193,578) (123,510)
(Increase) in prepaid expenses (4,716) (9,378)
(Decrease) in accounts payable (8,753) (78,330)
(Decrease) in accrued expenses (30,287) (119,306)
(Decrease) in accrued income taxes (311,809) (224,079)
(Increase) in other assets (18,001) (7,689)
Increase (decrease) in other long-term
liabilities and prepaid pension cost,
net 9,534 (9,453)
Excess tax benefits from share-based
compensation arrangements (3,080) --
--------- ---------
Net cash provided by operating
activities 307,216 361,723
--------- ---------
Cash flows from investing activities:
Additions to plant and equipment (232,790) (205,585)
Proceeds from sales of plant and
equipment 12,822 7,331
Acquisition of businesses, net of cash
acquired (54,776) (33,439)
Increase in restricted cash balances (992) (16,334)
--------- ---------
Net cash used for investing activities (275,736) (248,027)
--------- ---------
Cash flows from financing activities:
Bank and commercial paper repayments (32,184) (6,881)
Other debt borrowings 667,497 68,973
Cash paid for termination of interest
rate swap (21,196) --
Common stock reissued from treasury 76,215 103,168
Treasury stock purchases (473,181) (154,858)
Dividends paid (188,159) (166,234)
Excess tax benefits from share-based
compensation arrangements 3,080 --
--------- --------
Net cash provided by (used for)
financing activities 32,072 (155,832)
--------- ---------
Effect of exchange rate changes on cash (1,292) (4,644)
--------- ---------
Net increase (decrease) in cash 62,260 (46,780)
Cash at beginning of period 191,678 199,706
--------- ---------
Cash at end of period $ 253,938 $ 152,926
========= ========
Cash paid during the period for:
Interest $ 47,664 $ 34,841
Income taxes 313,493 237,694
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
----------------------
December 31, 2005 January 1, 2005
----------------- ---------------
SYSCO Brand Sales as a % of
MA-Served Sales 55.7% 57.4%
SYSCO Brand Sales as a % of
Total Traditional Broadline
Sales in the U.S. 48.2% 49.7%
MA-Served Sales as a % of
Total Traditional Broadline
Sales in the U.S. 53.3% 53.1%
---------------------------------------------------------------------
For the 26-Weeks Ended
----------------------
December 31, 2005 January 1, 2005
----------------- ---------------
SYSCO Brand Sales as a % of
MA-Served Sales 56.2% 57.7%
SYSCO Brand Sales as a % of
Total Traditional Broadline
Sales in the U.S. 48.6% 49.9%
MA-Served Sales as a % of
Total Traditional Broadline
Sales in the U.S. 54.2% 53.9%
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