Sysco (SYY) 8-K Sysco Reports Second Quarter Diluted Eps of $0.40

Exhibit 99.1

SYSCO REPORTS SECOND QUARTER DILUTED EPS OF $0.40

Reports second quarter operating income of $422 million

HOUSTON, February 2, 2009 —Sysco Corporation (NYSE: SYY) today announced financial results for its 13-week second quarter of fiscal 2009 ended December 27, 2008.

Second Quarter Fiscal 2009 Highlights

§	Sales were $9.1 billion, a decrease of 1.0% from $9.2 billion in the second quarter of fiscal 2008.
§	Operating income was $422 million, a decrease of 6.0% compared to $449 million in last year’s second quarter. The results include a $31.7 million loss in the cash surrender value of corporate-owned life insurance (COLI), or approximately $0.05 per share, compared to a $2.1 million loss in the same period last year.
§	Diluted earnings per share (EPS) was $0.40, a decrease of 7.0% compared to $0.43 in last year’s second quarter.

First Half Fiscal 2009 Highlights

§	Sales increased 2.0% to $19.0 billion from $18.6 billion in the first half of fiscal 2008.
§	Operating income increased 2.5% to $927 million compared to $904 million in the first half of fiscal 2008. The results include a $54.6 million loss in the cash surrender value of COLI, compared to a $5.0 million gain in the same period last year.
§	Diluted EPS remained flat at $0.86 compared to the prior fiscal year’s first six months.

     “The business environment remains difficult in the short term, as demonstrated by our decline in sales last quarter,” said Richard J. Schnieders, Sysco’s chairman and chief executive officer. “However, we remain focused on execution and operational excellence, which we believe will strengthen our position within the industry over the long term.”

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Second Quarter Fiscal 2009 Summary

     Sales for the second quarter were $9.1 billion, a decrease of one percent compared to the same period last year. Food cost inflation, as estimated by the change in Sysco’s cost of goods, was seven percent for the quarter. Operating income for the second quarter was $422 million, a decrease of six percent over the same period last year. Diluted EPS decreased seven percent from the second quarter of fiscal 2008 to $0.40. Diluted EPS decreased by $0.05 due to the lower cash surrender value of COLI, compared to no change in the same period last year.

     Operating expenses increased $9.5 million for the second quarter of fiscal 2009 as compared to the prior year period. This increase was impacted by a net $41.7 million increase in certain expenses, as outlined in the table below. The additional expenses were primarily related to the combined impact of changes in the cash surrender value of corporate-owned life insurance (COLI), a charge for a withdrawal from one of the company’s multi-employer pension plans and increased company-sponsored pension expense. These items were partially offset by the impact of lower stock compensation expense, as detailed in the table below:

	Impact of certain expense items
					Operating Expense impact
(000’s)	2Q09		2Q08		Unfavorable / (Favorable)
Cash surrender value of COLI	$	31,696	$	2,070	$	29,626
Multi-employer pension plans		9,585		0		9,585
Company-sponsored pensions		22,537		16,459		6,078
Stock compensation expense		24,296		27,925		(3,629	)
Net impact to operating expenses	$	88,114	$	46,454	$	41,660

     In addition, net earnings for the second quarter of fiscal 2009 were unfavorably impacted by a 40.4 percent tax rate for the quarter compared to 38.3 percent in the prior year’s second quarter. The primary contributor to this high tax rate was the $31.7 million COLI loss noted above, which is not deductible for tax purposes.

First Half Fiscal 2009 Summary

     Sales in the first half of fiscal 2009 were $19.0 billion, an increase of two percent over the same period last year. Food cost inflation, as estimated by the change in Sysco’s cost of goods, was 7.6 percent through the end of the second quarter. Operating income for the first half was $927 million, an increase of 2.5 percent compared to the same period last year. As a percentage of sales, operating income increased two basis points to 4.87 percent.The company continued to manage high food cost inflation well, as evidenced by gross profit dollars as a percentage of sales increasing three basis points compared to the first half last year. Diluted EPS of $0.86 remained flat compared to the same period last year. Diluted EPS was unfavorably impacted by $0.09 due to the lower cash surrender value of COLI, compared to a $0.01 gain in the same period last year.

     Operating expenses increased $55 million for the first half of fiscal 2009 as compared to the prior year period. This increase was impacted by a net $62.5

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million increase in certain expenses, as outlined in the table below. The additional expenses were partially related to the combined impact of changes in the cash surrender value of COLI and increased company-sponsored pension expense. These items were partially offset by the impact of lower stock compensation expense, as detailed in the table below:

	Impact of certain expense items
	YTD		YTD			Operating Expense impact
(000’s)	FY 2009		FY 2008			Unfavorable / (Favorable)
Cash surrender value of COLI	$	54,604	$	(5,023	)	$	59,627
Company-sponsored pensions		43,639		32,918			10,721
Multi-employer pension plans		9,585		9,410			175
Stock compensation expense		35,129		43,118			(7,989	)
Net impact to operating expenses	$	142,957	$	80,423		$	62,534

     In addition, net earnings for the first half of fiscal 2009 were unfavorably impacted by a 41.5 percent tax rate for the first half of fiscal 2009 compared to 38.2 percent in the prior year’s first half. The primary contributor to this high tax rate was the $54.6 million COLI loss noted above, which is not deductible for tax purposes.

     “Though not in line with our historical performance, our results for the quarter were solid given the difficult economic conditions,” said Ken Spitler, Sysco’s president, chief operating officer and vice-chairman. “Our operating companies continue to execute well and I remain confident about our positioning for the long-term.”

Capital Spending

     Capital expenditures totaled $99 million and $180 million for the second quarter and first half of fiscal 2009, respectively. The primary areas for investments included facility replacements and expansions, construction of fold-out operations and additions to Sysco’s fleet. For full year fiscal 2009, the company projects that capital expenditures will be in the range of $575 million to $625 million.

Conference Call & Webcast

     Sysco’s second quarter 2009 earnings conference call will be held on Monday, February 2, 2009 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

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than $37 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 the company’s ability to strengthen its position within the industry over 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 onForm 10-K for the year ended June 28, 2008 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)

	26-Week Period Ended						13-Week Period Ended
	Dec. 27, 2008			Dec. 29, 2007			Dec. 27, 2008			Dec. 29, 2007
Sales	$	19,027,232		$	18,645,349		$	9,149,803		$	9,239,505
Cost of sales		15,390,563			15,086,427			7,399,690			7,471,725
Gross margin		3,636,669			3,558,922			1,750,113			1,767,780
Operating expenses		2,710,053			2,655,277			1,328,249			1,318,768
Operating income		926,616			903,645			421,864			449,012
Interest expense		54,810			55,286			28,400			28,915
Other income, net		(8,036	)		(11,375	)		(5,223	)		(8,343	)
Earnings before income taxes		879,842			859,734			398,687			428,440
Income taxes		365,374			328,597			161,033			164,292
Net earnings	$	514,468		$	531,137		$	237,654		$	264,148
Net earnings:
Basic earnings per share	$	0.86		$	0.87		$	0.40		$	0.43
Diluted earnings per share		0.86			0.86			0.40			0.43
Average shares outstanding		599,903,629			609,489,326			597,549,831			608,169,202
Diluted shares outstanding		601,100,591			615,893,115			598,233,384			614,620,234
Dividends declared per common share	$	0.46		$	0.41		$	0.24		$	0.22

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Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except for Share Data)

	Dec. 27, 2008			June 28, 2008			Dec. 29, 2007
	(unaudited)						(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	373,074		$	551,552		$	168,786
Accounts and notes receivable, less allowances of $67,400, $31,730 and $54,541		2,623,509			2,723,189			2,754,339
Inventories		1,862,187			1,836,478			1,896,557
Prepaid expenses and other current assets		60,938			63,814			64,798
Total current assets		4,919,708			5,175,033			4,884,480
Plant and equipment at cost, less depreciation		2,890,641			2,889,790			2,841,229
Other assets
Goodwill		1,384,790			1,413,224			1,408,061
Intangibles, less amortization		78,976			87,528			91,329
Restricted cash		93,541			92,587			95,511
Prepaid pension cost		249,840			215,159			403,064
Other assets		193,926			208,972			229,153
Total other assets		2,001,073			2,017,470			2,227,118
Total assets	$	9,811,422		$	10,082,293		$	9,952,827
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Notes payable	$	—		$	—		$	4,500
Accounts payable		1,707,331			2,048,759			2,000,419
Accrued expenses		806,055			917,892			773,216
Income taxes		538,790			11,665			264,863
Deferred taxes		234,286			516,131			222,629
Current maturities of long-term debt		6,747			4,896			3,056
Total current liabilities		3,293,209			3,499,343			3,268,683
Other liabilities
Long-term debt		1,972,612			1,975,435			2,135,547
Deferred taxes		539,534			540,330			567,235
Other long-term liabilities		712,055			658,199			651,299
Total other liabilities		3,224,201			3,173,964			3,354,081
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		750,843			712,208			684,091
Retained earnings		6,281,575			6,041,429			5,731,024
Accumulated other comprehensive (loss) income		(197,287	)		(68,768	)		71,765
Treasury stock, 173,746,062, 163,942,358 and 160,126,587 shares		(4,306,294	)		(4,041,058	)		(3,921,992	)
Total shareholders’ equity		3,294,012			3,408,986			3,330,063
Total liabilities and shareholders’ equity	$	9,811,422		$	10,082,293		$	9,952,827

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Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS (Unaudited)
(In Thousands)

	26-Week Period Ended
	Dec. 27, 2008			Dec. 29, 2007
Cash flows from operating activities:
Net earnings	$	514,468		$	531,137
Adjustments to reconcile net earnings to cash provided by operating activities:
Share-based compensation expense		35,129			43,118
Depreciation and amortization		190,609			180,640
Deferred tax provision		337,453			301,276
Provision for losses on receivables		30,652			16,087
(Gain) on sale of assets		(112	)		(653	)
Additional investment in certain assets and liabilities, net of effect of businesses acquired:
Decrease (increase) in receivables		26,769			(136,544	)
(Increase) in inventories		(57,859	)		(166,259	)
Decrease in prepaid expenses and other current assets		2,144			58,939
(Decrease) increase in accounts payable		(301,018	)		1,277
(Decrease) in accrued expenses		(149,811	)		(165,581	)
(Decrease) in accrued income taxes		(68,877	)		(260,725	)
Decrease (increase) in other assets		2,087			(8,019	)
Increase in other long-term liabilities and prepaid pension cost, net		2,889			9,240
Excess tax benefits from share-based compensation arrangements		(2,774	)		(3,029	)
Net cash provided by operating activities		561,749			400,904
Cash flows from investing activities:
Additions to plant and equipment		(178,596	)		(277,552	)
Proceeds from sales of plant and equipment		2,077			4,711
Acquisition of businesses, net of cash acquired		(16,277	)		(34,729	)
(Increase) decrease in restricted cash		(954	)		1,418
Net cash used for investing activities		(193,750	)		(306,152	)
Cash flows from financing activities:
Bank and commercial paper borrowings (repayments), net		—			361,954
Other debt borrowings		9,316			3,340
Other debt repayments		(5,610	)		(4,303	)
Debt issuance costs		—			(7	)
Common stock reissued from treasury		85,628			84,352
Treasury stock purchases		(358,751	)		(352,832	)
Dividends paid		(264,687	)		(232,130	)
Excess tax benefits from share-based compensation arrangements		2,774			3,029
Net cash used for financing activities		(531,330	)		(136,597	)
Effect of exchange rates on cash		(15,147	)		2,759
Net decrease in cash and cash equivalents		(178,478	)		(39,086	)
Cash and cash equivalents at beginning of period		551,552			207,872
Cash and cash equivalents at end of period	$	373,074		$	168,786
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	55,577		$	55,670
Income taxes		73,830			277,455

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Sysco Corporation and its Consolidated Subsidiaries
COMPARATIVE SEGMENT DATA (Unaudited)
(In Thousands)

	26-Week Period Ended						13-Week Period Ended
	Dec. 27, 2008			Dec. 29, 2007			Dec. 27, 2008			Dec. 29, 2007
Sales:
Broadline	$	15,077,939		$	14,847,917		$	7,205,372		$	7,341,810
SYGMA		2,460,809			2,233,033			1,232,574			1,098,326
Other		1,726,797			1,799,940			831,057			921,086
Intersegment		(238,313	)		(235,541	)		(119,200	)		(121,717	)
Total	$	19,027,232		$	18,645,349		$	9,149,803		$	9,239,505

Comparative Supplemental Statistical Information Related to Sales (Unaudited)

Comparative Sysco Brand Sales and Marketing Associate-Served Sales data are summarized below.

	26-Week Period Ended						13-Week Period Ended
	Dec. 27, 2008			Dec. 29, 2007			Dec. 27, 2008			Dec. 29, 2007
Sysco Brand Sales as a % of MA-Served Sales		49.15	%		51.43	%		48.79	%		51.45	%
Sysco Brand Sales as a % of Total Broadline Sales		40.09	%		42.39	%		39.73	%		42.31	%
MA-Served Sales as a % of Total Broadline Sales		47.82	%		48.55	%		46.02	%		47.01	%

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