Exhibit 99.1
SYSCO REPORTS THIRD QUARTER DILUTED EPS OF $0.38
Reports third quarter operating income of $405 million
HOUSTON, May 4, 2009 —Sysco Corporation (NYSE: SYY) today announced financial results for its 13-week third quarter of fiscal 2009 ended March 28, 2009.
Third Quarter Fiscal 2009 Highlights
• | Sales were $8.7 billion, a decrease of 4.5% from $9.1 billion in the third quarter of fiscal 2008. |
• | Operating income was $405 million, a decrease of 3.0% compared to $418 million in last year’s third quarter. |
• | Diluted earnings per share (EPS) was $0.38, a decrease of 5.0% compared to $0.40 in last year’s third quarter. |
Year-To-Date Fiscal 2009 Highlights
• | Sales of $27.8 billion were flat compared to the corresponding period in the prior year. |
• | Operating income increased 0.8% to $1.3 billion compared to the results of last year’s first 39 weeks. The results include a $63.3 million loss in the cash surrender value of COLI, or approximately $0.11 per share, compared to a $9.3 million loss in the same period last year. |
• | Diluted EPS was $1.24, a decrease of 1.6% compared to the corresponding period in the prior year. |
“We are pleased to have grown operating income during the first nine months of fiscal 2009,” said Bill DeLaney, Sysco’s chief executive officer. “Our third quarter results reflect the increasingly difficult market environment that has developed as our fiscal year has progressed. Nevertheless, we are encouraged by our operating companies’ ongoing ability to provide excellent customer service while managing costs effectively.”
Third Quarter Fiscal 2009 Summary
Sales for the third quarter were $8.7 billion, a decrease of 4.5 percent compared to the same period last year. Food cost inflation, as estimated by the
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change in Sysco’s cost of goods, was 3.3 percent for the quarter. Operating income for the third quarter was $405 million, a decrease of 3.0 percent over the same period last year. Diluted EPS decreased 5.0 percent from the third quarter of fiscal 2008 to $0.38.
Operating expenses decreased $85 million for the third quarter of fiscal 2009 as compared to the prior year period. The decrease in operating expenses was a result of declining payroll expense related to reduced headcount and lower incentive compensation, partially offset by increased bad debt expense. The decrease in operating expenses was also impacted by a net $6.0 million reduction in certain expenses, as outlined in the table below:
Impact of certain expense items | ||||||||||||
Operating expense impact | ||||||||||||
(000’s) | 3Q09 | 3Q08 | Better / (Worse) | |||||||||
Cash surrender value of COLI | $ | 8,680 | $ | 14,316 | $ | 5,636 | ||||||
Multi-employer pension plans | 0 | 0 | 0 | |||||||||
Company-sponsored pensions | 22,537 | 16,459 | (6,078 | ) | ||||||||
Stock compensation expense | 11,615 | 18,036 | 6,421 | |||||||||
Net impact to operating expenses | $ | 42,832 | $ | 48,811 | $ | 5,979 |
In addition, net earnings for the third quarter of fiscal 2009 were unfavorably impacted by a 40.6 percent tax rate for the quarter compared to 39.2 percent in the prior year’s third quarter. The $8.7 million COLI loss for the quarter, which is not deductible for tax purposes, contributed to the high third quarter tax rate.
“Operating expenses were down 6.5% during the quarter,” said Ken Spitler, Sysco’s vice-chairman, president and chief operating officer. “We continue to manage through these difficult times by focusing on our core business and supporting our customers.”
Year-To-Date Fiscal 2009 Summary
Sales in the first 39 weeks of fiscal 2009 were $27.8 billion, which was flat compared to the same period last year. Food cost inflation, as estimated by the change in Sysco’s cost of goods, was 6.2 percent through the end of the third quarter. Operating income for the first 39 weeks was $1.3 billion, an increase of approximately 1.0 percent compared to the same period last year. Diluted EPS of $1.24 was $0.02 lower than the same period last year. Diluted EPS was unfavorably impacted by $0.11 due to the lower cash surrender value of COLI, compared to a $0.02 unfavorable impact in the same period last year.
Operating expenses decreased $30 million for the first 39 weeks of fiscal 2009 as compared to the prior year period. The decrease in operating expenses was a result of declining payroll expenses related to reduced headcount and lower incentive compensation, partially offset by increased bad debt expense. This decrease was also impacted by a net $56.6 million increase in certain expenses, as outlined in the table below:
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Impact of certain expense items | ||||||||||||
YTD | YTD | Operating expense impact | ||||||||||
(000’s) | FY 2009 | FY 2008 | Better / (Worse) | |||||||||
Cash surrender value of COLI | $ | 63,284 | $ | 9,293 | ($53,991 | ) | ||||||
Multi-employer pension plans | 9,585 | 9,410 | (175 | ) | ||||||||
Company-sponsored pensions | 66,176 | 49,377 | (16,799 | ) | ||||||||
Stock compensation expense | 46,744 | 61,154 | 14,410 | |||||||||
Net impact to operating expenses | $ | 185,789 | $ | 129,234 | ($56,555 | ) |
In addition, net earnings for the first 39 weeks of fiscal 2009 were unfavorably impacted by a 41.2 percent tax rate for the first 39 weeks of fiscal 2009 compared to 38.5 percent in the prior year’s first 39 weeks. The primary contributor to this high tax rate was the $63.3 million COLI loss noted above, which is not deductible for tax purposes.
Capital Spending
Capital expenditures totaled $136 million and $315 million for the third quarter and first 39 weeks of fiscal 2009, respectively. The primary areas for investments included facility replacements, expansions, technology, and additions to Sysco’s fleet. For full year fiscal 2009, the company projects that capital expenditures will be in the range of $500 million to $550 million. Additionally, during the third quarter, the company completed its stock repurchase program for fiscal year 2009.
Conference Call & Webcast
Sysco’s third quarter 2009 earnings conference call will be held on Monday, May 4, 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 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 control costs and manage through difficult times 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
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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 COLI, pension expense, and 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)
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
(In Thousands, Except for Share and Per Share Data)
39-Week Period Ended | 13-Week Period Ended | |||||||||||||||
Mar. 28, 2009 | Mar. 29, 2008 | Mar. 28, 2009 | Mar. 29, 2008 | |||||||||||||
Sales | $ | 27,766,582 | $ | 27,791,906 | $ | 8,739,350 | $ | 9,146,557 | ||||||||
Cost of sales | 22,492,837 | 22,498,463 | 7,102,274 | 7,412,036 | ||||||||||||
Gross margin | 5,273,745 | 5,293,443 | 1,637,076 | 1,734,521 | ||||||||||||
Operating expenses | 3,941,806 | 3,972,154 | 1,231,753 | 1,316,877 | ||||||||||||
Operating income | 1,331,939 | 1,321,289 | 405,323 | 417,644 | ||||||||||||
Interest expense | 83,043 | 84,030 | 28,233 | 28,744 | ||||||||||||
Other income, net | (11,550 | ) | (18,660 | ) | (3,514 | ) | (7,285 | ) | ||||||||
Earnings before income taxes | 1,260,446 | 1,255,919 | 380,604 | 396,185 | ||||||||||||
Income taxes | 519,812 | 483,881 | 154,438 | 155,284 | ||||||||||||
Net earnings | $ | 740,634 | $ | 772,038 | $ | 226,166 | $ | 240,901 | ||||||||
Net earnings: | ||||||||||||||||
Basic earnings per share | $ | 1.24 | $ | 1.27 | $ | 0.38 | $ | 0.40 | ||||||||
Diluted earnings per share | 1.24 | 1.26 | 0.38 | 0.40 | ||||||||||||
Average shares outstanding | 596,653,289 | 607,380,306 | 590,152,592 | 603,170,150 | ||||||||||||
Diluted shares outstanding | 597,691,315 | 612,241,790 | 590,667,577 | 605,773,862 | ||||||||||||
Dividends declared per common share | $ | 0.70 | $ | 0.63 | $ | 0.24 | $ | 0.22 |
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Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except for Share Data)
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except for Share Data)
Mar. 28, 2009 | June 28, 2008 | Mar. 29, 2008 | ||||||||||
(unaudited) | (unaudited) | |||||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 899,117 | $ | 551,552 | $ | 243,919 | ||||||
Accounts and notes receivable, less allowances of $99,535, $31,730 and $65,755 | 2,549,769 | 2,723,189 | 2,737,464 | |||||||||
Inventories | 1,710,251 | 1,836,478 | 1,836,683 | |||||||||
Prepaid expenses and other current assets | 67,131 | 63,814 | 62,432 | |||||||||
Total current assets | 5,226,268 | 5,175,033 | 4,880,498 | |||||||||
Plant and equipment at cost, less depreciation | 2,891,893 | 2,889,790 | 2,857,230 | |||||||||
Other assets | ||||||||||||
Goodwill | 1,404,993 | 1,413,224 | 1,406,700 | |||||||||
Intangibles, less amortization | 87,011 | 87,528 | 90,242 | |||||||||
Restricted cash | 93,714 | 92,587 | 92,135 | |||||||||
Prepaid pension cost | 239,773 | 215,159 | 416,151 | |||||||||
Other assets | 193,400 | 208,972 | 218,029 | |||||||||
Total other assets | 2,018,891 | 2,017,470 | 2,223,257 | |||||||||
Total assets | $ | 10,137,052 | $ | 10,082,293 | $ | 9,960,985 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable | $ | 1,830,432 | $ | 2,048,759 | $ | 2,033,198 | ||||||
Accrued expenses | 776,767 | 917,892 | 846,989 | |||||||||
Income taxes | 98,179 | 11,665 | 159,628 | |||||||||
Deferred taxes | 404,185 | 516,131 | 385,878 | |||||||||
Current maturities of long-term debt | 6,529 | 4,896 | 4,504 | |||||||||
Total current liabilities | 3,116,092 | 3,499,343 | 3,430,197 | |||||||||
Other liabilities | ||||||||||||
Long-term debt | 2,463,243 | 1,975,435 | 2,040,546 | |||||||||
Deferred taxes | 530,100 | 540,330 | 554,137 | |||||||||
Other long-term liabilities | 696,440 | 658,199 | 655,158 | |||||||||
Total other liabilities | 3,689,783 | 3,173,964 | 3,249,841 | |||||||||
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 | 755,408 | 712,208 | 697,970 | |||||||||
Retained earnings | 6,366,304 | 6,041,429 | 5,839,698 | |||||||||
Accumulated other comprehensive (loss) income | (200,413 | ) | (68,768 | ) | 47,422 | |||||||
Treasury stock, 175,857,763, 163,942,358 and 165,088,829 shares | (4,355,297 | ) | (4,041,058 | ) | (4,069,318 | ) | ||||||
Total shareholders’ equity | 3,331,177 | 3,408,986 | 3,280,947 | |||||||||
Total liabilities and shareholders’ equity | $ | 10,137,052 | $ | 10,082,293 | $ | 9,960,985 | ||||||
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Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS (Unaudited)
(In Thousands)
CONSOLIDATED CASH FLOWS (Unaudited)
(In Thousands)
39-Week Period Ended | ||||||||
Mar. 28, 2009 | Mar. 29, 2008 | |||||||
Cash flows from operating activities: | ||||||||
Net earnings | $ | 740,634 | $ | 772,038 | ||||
Adjustments to reconcile net earnings to cash provided by operating activities: | ||||||||
Share-based compensation expense | 46,744 | 61,154 | ||||||
Depreciation and amortization | 284,153 | 275,747 | ||||||
Deferred tax provision | 495,732 | 450,569 | ||||||
Provision for losses on receivables | 61,609 | 25,926 | ||||||
(Gain) on sale of assets | (741 | ) | (2,496 | ) | ||||
Additional investment in certain assets and liabilities, net of effect of businesses acquired: | ||||||||
Decrease (increase) in receivables | 74,131 | (138,425 | ) | |||||
Decrease (increase) in inventories | 96,617 | (112,867 | ) | |||||
(Increase) decrease in prepaid expenses and other current assets | (4,157 | ) | 61,230 | |||||
(Decrease) increase in accounts payable | (179,160 | ) | 41,082 | |||||
(Decrease) in accrued expenses | (125,637 | ) | (81,931 | ) | ||||
(Decrease) in accrued income taxes | (508,628 | ) | (362,878 | ) | ||||
Decrease in other assets | 3,294 | 4,427 | ||||||
Increase in other long-term liabilities and prepaid pension cost, net | 2,952 | 2,398 | ||||||
Excess tax benefits from share-based compensation arrangements | (2,818 | ) | (3,352 | ) | ||||
Net cash provided by operating activities | 984,725 | 992,622 | ||||||
Cash flows from investing activities: | ||||||||
Additions to plant and equipment | (314,858 | ) | (392,706 | ) | ||||
Proceeds from sales of plant and equipment | 3,224 | 11,428 | ||||||
Acquisition of businesses, net of cash acquired | (53,868 | ) | (50,464 | ) | ||||
(Increase) decrease in restricted cash | (1,127 | ) | 2,794 | |||||
Net cash used for investing activities | (366,629 | ) | (428,948 | ) | ||||
Cash flows from financing activities: | ||||||||
Bank and commercial paper borrowings (repayments), net | — | (486,122 | ) | |||||
Other debt borrowings | 502,460 | 755,892 | ||||||
Other debt repayments | (7,778 | ) | (5,497 | ) | ||||
Debt issuance costs | (3,007 | ) | (4,192 | ) | ||||
Common stock reissued from treasury | 98,452 | 102,438 | ||||||
Treasury stock purchases | (438,843 | ) | (529,179 | ) | ||||
Dividends paid | (406,689 | ) | (365,333 | ) | ||||
Excess tax benefits from share-based compensation arrangements | 2,818 | 3,352 | ||||||
Net cash used for financing activities | (252,587 | ) | (528,641 | ) | ||||
Effect of exchange rates on cash | (17,944 | ) | 1,014 | |||||
Net increase in cash and cash equivalents | 347,565 | 36,047 | ||||||
Cash and cash equivalents at beginning of period | 551,552 | 207,872 | ||||||
Cash and cash equivalents at end of period | $ | 899,117 | $ | 243,919 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 100,469 | $ | 88,514 | ||||
Income taxes | 510,147 | 386,570 |
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Sysco Corporation and its Consolidated Subsidiaries
COMPARATIVE SEGMENT DATA (Unaudited)
(In Thousands)
COMPARATIVE SEGMENT DATA (Unaudited)
(In Thousands)
39-Week Period Ended | 13-Week Period Ended | |||||||||||||||
Mar. 28, 2009 | Mar. 29, 2008 | Mar. 28, 2009 | Mar. 29, 2008 | |||||||||||||
Sales: | ||||||||||||||||
Broadline | $ | 21,976,065 | $ | 22,084,857 | $ | 6,898,126 | $ | 7,236,940 | ||||||||
SYGMA | 3,655,045 | 3,371,693 | 1,194,236 | 1,138,660 | ||||||||||||
Other | 2,478,273 | 2,682,015 | 751,476 | 882,075 | ||||||||||||
Intersegment | (342,801 | ) | (346,659 | ) | (104,488 | ) | (111,118 | ) | ||||||||
Total | $ | 27,766,582 | $ | 27,791,906 | $ | 8,739,350 | $ | 9,146,557 | ||||||||
Comparative Supplemental Statistical Information Related to Sales (Unaudited)
Comparative Sysco Brand Sales and Marketing Associate-Served Sales data are summarized below.
Comparative Sysco Brand Sales and Marketing Associate-Served Sales data are summarized below.
39-Week Period Ended | 13-Week Period Ended | |||||||||||||||
Mar. 28, 2009 | Mar. 29, 2008 | Mar. 28, 2009 | Mar. 29, 2008 | |||||||||||||
Sysco Brand Sales as a % of MA-Served Sales | 48.82 | % | 51.25 | % | 48.03 | % | 50.93 | % | ||||||||
Sysco Brand Sales as a % of Total Broadline Sales | 39.63 | % | 42.07 | % | 38.82 | % | 41.56 | % | ||||||||
MA-Served Sales as a % of Total Broadline Sales | 47.12 | % | 47.86 | % | 45.61 | % | 46.46 | % |
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