Sysco Reports Third Quarter Net Earnings of $260 Million and Diluted EPS of $0.44
Sysco Reports Third Quarter Net Earnings of $260 Million and Diluted EPS of
$0.44
Sales of $10.5 Billion Are the Highest on Record for the Third Quarter
HOUSTON, May 7, 2012 (GLOBE NEWSWIRE) -- Sysco Corporation (NYSE:SYY) today
announced financial results for its 13-week third fiscal quarter ending March
31, 2012.
Third Quarter Fiscal 2012 Highlights
* Sales were $10.5 billion, an increase of 7.6% from $9.8 billion in the
third quarter of fiscal 2011.
* Operating income was $439 million, an increase of 2.7%, compared to $427
million in last year's third quarter.
* Adjusted^1 operating income was $487 million, an increase of 0.9% compared
to $483 million in last year's third quarter.
* Diluted earnings per share (EPS) were $0.44, which was flat compared to
$0.44 in last year's third quarter.
* Adjusted^1 diluted EPS was $0.49, an increase of 2.1% compared to $0.48 in
last year's third quarter.
Year-To-Date Fiscal 2012 Highlights
* Sales were $31.3 billion, an increase of 8.4% from $28.9 billion in the
first 39 weeks of fiscal 2011.
* Operating income was $1.4 billion, an increase of 0.3% compared to the
prior year period.
* Adjusted^1 operating income increased 3.2%, compared to the prior year
period.
* Diluted EPS was $1.38, a decrease of 0.7% compared to EPS of $1.39 in the
prior year.
* Adjusted^1 diluted EPS was $1.50, an increase of 4.2% compared to $1.44 in
the prior year period.
"I am pleased with our volume growth trends as we grew our business throughout
the quarter by remaining focused on supporting the success of our customers,"
said Bill DeLaney, Sysco's president and chief executive officer. "Adjusted
earnings growth fell short of our expectations, however, and our leadership
team is fully committed to improving upon this aspect of our performance as we
complete our fourth quarter and approach the beginning of the new fiscal
year."
^1 "Adjusted" financial results are non-GAAP financial measures. See Non-GAAP
Reconciliations on page 9 for more information.
Third Quarter Fiscal 2012 Summary
Sales for the third quarter were $10.5 billion, an increase of 7.6% compared
to sales in the same period last year. Food cost inflation, as measured by the
estimated change in Sysco's product costs, was 5.5%. While the company's
overall rate of inflation has recently eased somewhat, inflation remains at a
high level, with double-digit price increases in the meat and poultry
categories. Sales from acquisitions (within the last 12 months) increased
sales by 0.7%, and the impact of changes in foreign exchange rates for the
third quarter decreased sales by 0.2%. Case volume for the company's Broadline
and SYGMA operations combined grew 2.9% during the quarter including
acquisitions, and 2.3% excluding acquisitions.
Gross profit for the third quarter was $1.9 billion, an increase of 2.1%,
compared to the prior year. Operating expenses in the third quarter increased
$28 million, or 2.0%, compared to operating expenses in the prior year period.
This was due mainly to a $29 million increase in payroll expense, a $24
million increase in gross business transformation expenses and a $10 million
increase in fuel expense. These increases were partially offset by a $36
million charge in the prior year quarter related to the withdrawal of an
operating company from a multi-employer pension plan (MEPP), which created a
favorable year-over-year variance. Adjusted operating expenses increased 2.6%.
Operating income was $439 million in the third quarter, increasing $11
million, or 2.7% compared to operating income in the prior year. Adjusted
operating income increased 0.9%.
Net earnings for the third quarter were $260 million, an increase of $1
million, or 0.4%, compared to net earnings in the prior year. Diluted EPS in
the third quarter of fiscal 2012 was $0.44 which was flat compared to last
year's third quarter. Adjusted EPS was $0.49, an increase of 2.1% compared to
the prior year period.
Year-To-Date Fiscal 2012 Summary
Sales for the first 39 weeks of fiscal 2012 were $31.3 billion, an increase of
8.4% compared to sales in the same period last year. Food cost inflation for
the period was 6.3%. Inflation continued to be broad-based, but was impacted
most significantly by increased prices for meat and canned/dry products. In
addition, sales from acquisitions (within the last 12 months) increased sales
by 0.7%, and the impact of changes in foreign exchange rates for the first 39
weeks increased sales by 0.1%. Case volume for the company's Broadline and
SYGMA operations combined grew 2.7% during the first 39 weeks including
acquisitions, and 2.1% excluding acquisitions.
Gross profit for the first 39 weeks was $5.7 billion, an increase of 4.1%,
compared to the prior year. Operating expenses in the first 39 weeks increased
$220 million, or 5.4%, compared to operating expenses in the prior year
period. This was due mainly to a $127 million increase in payroll expense, a
$52 million increase in gross business transformation expenses and a $34
million increase in fuel expense. Adjusted operating expenses increased 4.5%.
Operating income was $1.4 billion in the first 39 weeks, increasing $4
million, or 0.3% compared to operating income in the prior year. Adjusted
operating income increased 3.2%.
Net earnings for the first 39 weeks were $812 million, a decrease of $3
million, or 0.4%, compared to net earnings in the prior year period. Diluted
EPS in the first 39 weeks of fiscal 2012 was $1.38 compared to last year's
diluted EPS of $1.39. Adjusted EPS for the first 39 weeks of fiscal 2012 was
$1.50, an increase of 4.2% compared to adjusted EPS of $1.44 in the prior year
period.
Cash Flow and Capital Spending
Cash flow from operations was $908 million for the first 39 weeks of fiscal
2012 compared to $666 million in the prior year period. Capital expenditures
totaled $199 million for the third quarter, and $633 million in the first 39
weeks of the fiscal year. This includes spending related to the company's
business transformation project of $39 million for the third quarter and $118
million for the first 39 weeks of fiscal 2012. The primary areas for
investment included facility replacements and expansions, replacements to
Sysco's fleet, and technology.
Conference Call & Webcast
Sysco's third quarter fiscal 2012 earnings conference call will be held on
Monday, May 7, 2012 at 10:00 a.m. Eastern.
For purposes of public disclosure, Sysco plans to use the investor relations
portion of its website as the primary channel for publishing key information
to its investors, some 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.
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 177 distribution facilities
serving approximately 400,000 customers. For the fiscal year 2011 that ended
July 2, 2011 the company generated record sales of more than $39 billion. For
more information about Sysco visit the company's Internet home page at
www.sysco.com and for investor relations news follow us at
www.twitter.com/SyscoStock.
The Sysco Corporation logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=747
Business Risks
General risks associated with our business include the risk of interruption of
supplies due to lack of long-term contracts, severe weather, work stoppages or
otherwise, inflation risks, the impact of fuel prices, and labor issues. Risks
and uncertainties also include risks impacting the economy generally,
including the risk that the current economic downturn will continue, 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 2012 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. In fiscal 2011, we took additional time to test the underlying ERP
system and are taking additional time in fiscal 2012 to improve the underlying
systems prior to larger scale development, and these actions have caused a
delay in the project; until we reach the point where the underlying system
functions as intended, our development timeline is uncertain. Capital
expenditures may vary from those projected based on changes in business plans
and other factors, including risks related to the implementation of our
Business Transformation Project and our regional distribution centers, 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. Fuel expense may vary from projections
based on fluctuations in fuel costs, which are impacted by general economic
conditions beyond our control. In the past, increased fuel prices have
significantly increased our costs and reduced consumers' demand for meals
served away from home. For a discussion of additional factors impacting
Sysco's business, see the Company's Annual Report on Form 10-K for the year
ended July 2, 2011, 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 39-Week Period Ended
Mar. 31, 2012 Apr. 2, 2011 Mar. 31, 2012 Apr. 2, 2011
Sales $ 10,504,746 $ 9,761,660 $ 31,335,557 $ 28,897,786
Cost of sales 8,633,130 7,929,111 25,670,691 23,457,466
Gross profit 1,871,616 1,832,549 5,664,866 5,440,320
Operating expenses 1,432,786 1,405,062 4,289,698 4,069,568
Operating income 438,830 427,487 1,375,168 1,370,752
Interest expense 28,290 28,972 86,088 88,133
Other expense (income), (2,248) (6,957) (5,470) (9,941)
net
Earnings before income 412,788 405,472 1,294,550 1,292,560
taxes
Income taxes 153,238 146,994 482,234 476,840
Net earnings $ 259,550 $ 258,478 $ 812,316 $ 815,720
Net earnings:
Basic earnings per $ 0.44 $ 0.44 $ 1.38 $ 1.39
share
Diluted earnings per 0.44 0.44 1.38 1.39
share
Average shares 585,823,393 583,722,009 588,004,593 585,792,383
outstanding
Diluted shares 587,214,691 585,421,864 589,232,150 587,878,509
outstanding
Dividends declared per $ 0.27 $ 0.26 $ 0.80 $ 0.77
common share
Sysco Corporation and its
Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands, Except for Share
Data)
Mar. 31, 2012 Jul. 2, 2011 Apr. 2, 2011
ASSETS
Current assets
Cash and cash equivalents $ 350,464 $ 639,765 $ 385,668
Accounts and notes receivable, less
allowances of $82,762, $42,436 and 3,094,175 2,898,283 2,926,033
$86,668
Inventories 2,250,460 2,073,766 2,047,371
Deferred income taxes 144,131 -- --
Prepaid expenses and other current 85,712 72,496 79,485
assets
Prepaid income taxes -- 48,572 --
Total current assets 5,924,942 5,732,882 5,438,557
Plant and equipment at cost, less 3,846,870 3,512,389 3,419,862
depreciation
Other assets
Goodwill 1,659,818 1,633,289 1,596,727
Intangibles, less amortization 116,011 109,938 101,518
Restricted cash 140,287 110,516 110,488
Other assets 204,185 286,541 282,782
Total other assets 2,120,301 2,140,284 2,091,515
Total assets $ 11,892,113 $ 11,385,555 $ 10,949,934
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ 3,250 $ 181,975 $ 2,250
Accounts payable 2,285,744 2,183,417 2,143,219
Accrued expenses 870,674 856,569 800,155
Accrued income taxes 88,112 -- 84,838
Deferred income taxes -- 146,083 98,946
Current maturities of long-term debt 455,972 207,031 7,042
Total current liabilities 3,703,752 3,575,075 3,136,450
Other liabilities
Long-term debt 2,412,477 2,279,517 2,663,470
Deferred income taxes 245,496 204,223 130,453
Other long-term liabilities 652,373 621,498 812,356
Total other liabilities 3,310,346 3,105,238 3,606,279
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 2,000,000,000 765,175 765,175 765,175
shares, issued 765,174,900 shares
Paid-in capital 923,189 887,754 861,835
Retained earnings 8,024,536 7,681,669 7,499,532
Accumulated other comprehensive loss (286,623) (259,958) (330,060)
Treasury stock at cost,
179,884,245, 173,597,346 and (4,548,262) (4,369,398) (4,589,277)
182,347,524 shares
Total shareholders' equity 4,878,015 4,705,242 4,207,205
Total liabilities and shareholders' $ 11,892,113 $ 11,385,555 $ 10,949,934
equity
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS (Unaudited)
(In Thousands)
39-Week Period Ended
Mar. 31, 2012 Apr. 2, 2011
Cash flows from operating activities:
Net earnings $ 812,316 $ 815,720
Adjustments to reconcile net earnings to cash
provided by operating activities:
Share-based compensation expense 54,328 48,518
Depreciation and amortization 304,966 298,307
Deferred income taxes (276,947) (244,658)
Provision for losses on receivables 29,663 35,624
Other non-cash items (1,267) (7,286)
Additional investment in certain assets and
liabilities, net of effect of businesses acquired:
(Increase) in receivables (225,668) (301,932)
(Increase) in inventories (167,964) (244,636)
(Increase) in prepaid expenses and other current (10,380) (7,486)
assets
Increase in accounts payable 104,239 158,488
Increase (decrease) in accrued expenses 4,117 (83,826)
Increase in accrued income taxes 141,784 83,580
Decrease (increase) in other assets 67,443 (26,622)
Increase in other long-term liabilities 71,674 142,253
Excess tax benefits from share-based compensation (15) (285)
arrangements
Net cash provided by operating activities 908,289 665,759
Cash flows from investing activities:
Additions to plant and equipment (633,196) (454,054)
Proceeds from sales of plant and equipment 5,852 15,286
Acquisition of businesses, net of cash acquired (83,354) (35,486)
Maturities of short-term investments -- 24,713
(Increase) decrease in restricted cash (29,771) 14,000
Net cash used for investing activities (740,469) (435,541)
Cash flows from financing activities:
Bank and commercial paper borrowings (repayments) 211,267 188,249
net
Other debt borrowings 3,090 2,592
Other debt repayments (6,424) (6,516)
Debt issuance costs (977) (7)
Proceeds from common stock reissued from treasury 82,545 103,328
for share-based compensation awards
Treasury stock purchases (272,299) (291,600)
Dividends paid (464,809) (445,406)
Excess tax benefits from share-based compensation 15 285
arrangements
Net cash used for financing activities (447,592) (449,075)
Effect of exchange rates on cash (9,529) 19,082
Net (decrease) in cash and cash equivalents (289,301) (199,775)
Cash and cash equivalents at beginning of period 639,765 585,443
Cash and cash equivalents at end of period $ 350,464 $ 385,668
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 109,618 $ 111,924
Income taxes 617,640 657,961
Sysco Corporation and its Consolidated Subsidiaries
COMPARATIVE SEGMENT DATA (Unaudited)
(In Thousands)
13-Week Period Ended 39-Week Period Ended
Mar. 31, 2012 Apr. 2, Mar. 31, 2012 Apr. 2,
2011 2011
Sales:
Broadline $ 8,513,483 $ $ 25,493,000 $
7,910,994 23,453,164
SYGMA 1,445,214 1,315,439 4,233,238 3,947,705
Other 586,440 586,050 1,734,123 1,627,588
Intersegment (40,391) (50,823) (124,804) (130,671)
Total $ 10,504,746 $ $ 31,335,557 $
9,761,660 28,897,786
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 39-Week Period Ended
Mar. 31, 2012 Apr. 2, Mar. 31, 2012 Apr. 2,
2011 2011
Sysco Brand Sales as a % of MA-Served Sales 45.97% 45.64% 46.13% 45.77%
Sysco Brand Sales as a % of Broadline Sales 35.49% 35.84% 35.83% 36.21%
MA-Served Sales as a % of Broadline Sales 42.21% 42.49% 43.72% 43.90%
Data excludes U.S. Meat operations
Sysco Corporation and its Consolidated Subsidiaries
Non-GAAP Reconciliation (Unaudited)
Impact of Business Transformation Expenses, Multiemployer Pension Plan
Expenses, COLI and Tax Benefits
(In Thousands, Except for Share and Per Share Data)
Sysco's results of operations are impacted by costs from our multi-year
Business Transformation Project, significant charges from the withdrawal from
multiemployer pension plan and recognized tax benefits. Additionally, near the
end of fiscal 2011, we reallocated all of our investments in our COLI policies
into low-risk, fixed-income securities and therefore we do not expect
significant volatility in operating expenses, operating income, net earnings
and diluted earnings per share in future periods related to these policies. We
experienced significant gains in these policies during fiscal 2011. Management
believes that adjusting its operating expenses, operating income, net earnings
and diluted earnings per share to remove the impact of the Business
Transformation Project expenses, multiemployer pension plan charges, COLI
gains and tax benefits 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 comparison 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 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 expenses related to the Business Transformation Project,
significant charges incurred from the withdrawal from a multiemployer pension
plan, gains recorded on the adjustments to the carrying value of COLI policies
and to remove the impact of tax benefits in fiscal 2011.
13 Week Period 13 Week Period 13 Week 13 Week
Ended Mar. 31, Ended Apr. 2, Period Period %
2012 2011 Change in Change
Dollars
Operating expenses $ 1,432,786 $ 1,405,062 $ 27,724 2.0%
(GAAP)
Impact of Business
Transformation (49,478) (25,158) (24,320) 96.7
Project costs
Impact of MEPP charge -- (36,118) 36,118
Impact of COLI 872 5,655 (4,783) -84.6
Adjusted operating $ 1,384,180 $ 1,349,441 $ 34,739 2.6%
expenses (Non-GAAP)
Operating Income $ 438,830 $ 427,487 $ 11,343 2.7%
(GAAP)
Impact of Business
Transformation 49,478 25,158 24,320 96.7
Project costs
Impact of MEPP charge -- 36,118 (36,118)
Impact of COLI (872) (5,655) 4,783 -84.6
Adjusted operating $ 487,436 $ 483,108 $ 4,328 0.9%
income (Non-GAAP)
Net earnings (GAAP) $ 259,550 $ 258,478 $ 1,072 0.4%
Impact of Business
Transformation 31,112 16,038 15,074 94.0
Project costs (net of
tax)
Impact of MEPP charge -- 23,025 (23,025)
(net of tax)
Impact of COLI (872) (5,655) 4,783 -84.6
Impact of tax -- (10,000) 10,000
benefits
Adjusted net earnings $ 289,790 $ 281,886 $ 7,904 2.8%
(Non-GAAP)
Diluted earnings per $ 0.44 $ 0.44 $ -- 0.0%
share (GAAP)
Impact of Business
Transformation 0.05 0.03 0.02 66.7
Project costs (net of
tax) ^(1)
Impact of MEPP charge -- 0.04 (0.04)
(net of tax) ^(1)
Impact of COLI -- (0.01) 0.01
Impact of tax -- (0.02) 0.02
benefits
Adjusted diluted
earnings per share $ 0.49 $ 0.48 $ 0.01 2.1%
(Non-GAAP)
Diluted shares 587,214,691 585,421,864
outstanding
^(1) Tax impact of adjustments for Business Transformation and Multiemployer
Pension Plan expenses was $18,366 and $22,213 for the 13-week periods ended
March 31, 2012 and April 2, 2011, respectively.
Sysco Corporation and its Consolidated Subsidiaries
Non-GAAP Reconciliation (Unaudited)
Impact of Business Transformation Expenses, Multiemployer Pension Plan
Expenses, COLI and Tax Benefits - continued
(In Thousands, Except for Share and Per Share Data)
39 Week 39 Week 39 Week 39 Week
Period Ended Period Ended Period Period %
Mar. 31, 2012 Apr. 2, 2011 Change in Change
Dollars
Operating expenses (GAAP) $ 4,289,698 $ 4,069,568 $ 220,130 5.4%
Impact of Business
Transformation Project (122,839) (71,130) (51,709) 72.7
costs
Impact of MEPP charge -- (36,118) 36,118
Impact of COLI 2,651 29,508 (26,857) -91.0
Adjusted operating $ 4,169,510 $ 3,991,828 $ 177,682 4.5%
expenses (Non-GAAP)
Operating Income (GAAP) $ 1,375,168 $ 1,370,752 $ 4,416 0.3%
Impact of Business
Transformation Project 122,839 71,130 51,709 72.7
costs
Impact of MEPP charge -- 36,118 (36,118)
Impact of COLI (2,651) (29,508) 26,857 -91.0
Adjusted operating income $ 1,495,356 $ 1,448,492 $ 46,864 3.2%
(Non-GAAP)
Net earnings (GAAP) $ 812,316 $ 815,720 $ (3,404) -0.4%
Impact of Business
Transformation Project 77,081 44,890 32,191 71.7
costs (net of tax) ^(1)
Impact of MEPP charge -- 22,794 (22,794)
(net of tax) ^(1)
Impact of COLI (2,651) (29,508) 26,857 -91.0
Impact of tax benefits -- (10,000) 10,000
Adjusted net earnings $ 886,746 $ 843,896 $ 42,850 5.1%
(Non-GAAP)
Diluted earnings per $ 1.38 $ 1.39 $ (0.01) -0.7%
share (GAAP)
Impact of Business
Transformation Project 0.12 0.08 0.04 50.0
costs
Impact of MEPP charge -- 0.04 (0.04)
Impact of COLI -- (0.05) 0.05
Impact of tax benefits -- (0.02) 0.02
Adjusted diluted earnings $ 1.50 $ 1.44 $ 0.06 4.2%
per share (Non-GAAP)
Diluted shares 589,232,150 587,878,509
outstanding
^(1) Tax impact of adjustments for Business Transformation and Multiemployer
Pension Plan expenses was $45,758 and $39,564 for the 39-week periods ended
March 31, 2012 and April 2, 2011, respectively.
CONTACT: Neil Russell
Vice President, Investor Relations
T 281-584-1308
Charley Wilson
Vice President, Corporate Communications
T 281-584-2423
Sysco Corporation
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