EXHIBIT 99.1
SYSCO [COMPANY LOGO]
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SYSCO Corporation
1390 Enclave Parkway NEWS RELEASE
Houston, Texas 77077-2099
(281) 584-1390 FOR MORE INFORMATION
CONTACT: John M. Palizza
Assistant Treasurer
(281) 584-1308
SYSCO'S SECOND QUARTER DILUTED EPS INCREASE 21.4%,
NET EARNINGS RISE 20.3%
HOUSTON, JANUARY 26, 2004 -- SYSCO Corporation (NYSE: SYY), North America's
leading foodservice marketer and distributor, today announced results for the
second quarter of its fiscal year 2004.
SECOND QUARTER HIGHLIGHTS:
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o Diluted earnings per share rose 21.4% to $0.34 compared to $0.28 in the
same period last year
o Net earnings climbed 20.3% to $222.0 million vs. $184.6 million in last
year's second quarter
o Sales increased 10.8% to $7.0 billion vs. $6.3 billion in last year's
second quarter
o Operating expenses as a percent to sales improved to 14.17% compared to
last year's 14.76%
Richard J. Schnieders, SYSCO's chairman and chief executive officer, said,
"The solid sales and strong net earnings performance during the quarter was a
direct result of our 47,400 associates and their daily commitment to helping our
customers succeed. Our strategies, skills and products allowed us to increase
market share and record a sales growth rate of 10.8 percent."
Sales from acquisitions contributed 0.8 percentage points to the second
quarter sales increase compared to 6.8 percentage points in last year's second
fiscal quarter.
Mr. Schnieders noted that SYSCO's internally measured food cost inflation
for the quarter was 7.3 percent primarily due to price increases in the meat,
dairy, and poultry categories. This compares to 0.9 percent food cost deflation
during the prior year's second fiscal quarter.
"This marked our third consecutive quarter of increasing food costs," Mr.
Schnieders noted, "and we experienced food cost deflation for three consecutive
quarters prior to that. I am optimistic that the inflationary spike will be
tempered somewhat as we go forward, and that food cost trends will return to
more stable levels.
"For the fifth consecutive quarter we leveraged operating expenses as a
percent to sales to generate increased operating income," Mr. Schnieders
continued. "Our operating expenses as a percent to sales declined 59 basis
points in the second quarter primarily as a result of the knowledge and other
benefits that our technology systems continue to provide and our efforts to
share best business practices at all 145 SYSCO distribution facilities. In
addition, our fixed costs during the quarter were not impacted by inflation,
which also contributed to our reduced operating expenses as a percent to sales.
"That excellent expense control more than offset a 28 basis point decline
in our gross margins during the quarter, which was expected and can be
principally attributed to two factors. The first was a change in our customer
mix - specifically the growth of multi-unit business during the second quarter.
In addition, gross margins were impacted by the inflation effects of the
increased sales of our meat products during the quarter."
Mr. Schnieders added that sales at The SYGMA Network, Inc., the company's
chain restaurant distribution specialist, increased 21.6 percent in the second
quarter to $863.5 million. SYSCO's other specialty operations, including
custom-cut meat, produce, hotel supply and Asian foodservice, combined for sales
of $571.9 million, a 20.2% gain over the prior year's second fiscal quarter.
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Thomas E. Lankford, SYSCO's president and chief operating officer, added,
"Our operating companies continued to record significant gains in key
productivity performance metrics during the second quarter. These results, in
areas including pieces per stop, lines per stop, pieces per error and overtime
costs, contributed to our strong earnings gains in the quarter and also were
beneficial in the expense control efforts. We firmly believe that our people and
our systems are the best in the industry and together they continue to enhance
shareholder value.
"With the recent implementation of the new business development manager
position, our operating companies have done a great job of cultivating new
customer relationships with foodservice operators that have good potential for
future profitability," Mr. Lankford continued. He also noted that sales,
profitability and expense reduction efforts all were positively impacted as
operating companies continued to work with unprofitable customers to develop
strategies to bring them to profitability, adding that in certain cases, this
effort resulted in SYSCO exiting some accounts.
Mr. Lankford also commented on the Company's internal growth efforts,
including an announcement that a fold-out distribution facility would be
constructed in Post Falls, Idaho that is expected to be operational in 2005 and
previously announced fold-out companies in Fargo, North Dakota and Oxnard,
California, are progressing according to plan.
"Strategic investment in our business remains a fundamental component to
our internal and external growth initiatives," continued Mr. Lankford.
"Accordingly, capital expenditures for the second quarter totaled $145.6
million, or a six month total of $248.7 million, and we continue to project
capital expenditures of approximately $490 million for the fiscal year. SYSCO's
National Supply Chain project progressed according to plan during the quarter
and to date $154.3 million has been expended on the project since it began in
fiscal 2002." Mr. Lankford also added that second quarter expenditures for the
Northeast Redistribution Center, which is expected to begin operations in the
fall of 2004, were $41.7 million, $33.3 million of which was capitalized.
"Our performance in the second quarter provided further proof that our
growth strategies are fundamentally sound and successful," concluded Mr.
Lankford. "We believe that SYSCO continues to grow sales and earnings at a rate
above the industry average and we remain confident that we will continue to
increase our market share from its current 13 percent level."
SYSCO is the largest foodservice marketing and distribution organization in
North America, providing food and related products and services to approximately
420,000 restaurants, healthcare and educational facilities, lodging
establishments and other foodservice customers. The company generated sales of
$27.5 billion for calendar year 2003. SYSCO's operations are located throughout
the United States and Canada and include broadline companies, specialty produce
and custom-cut meat operations, Asian foodservice and hotel supply operations
and SYGMA, the company's chain restaurant distribution subsidiary. For more
information about SYSCO visit the company's Internet home page at www.sysco.com.
As previously announced, SYSCO's second quarter 2004 earnings conference call
will be held at 10:00 a.m. eastern time on Monday, January 26, 2004. 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.
Forward-Looking Statements
Certain statements made herein are forward-looking statements under the
Private Securities Litigation Reform Act of 1995. They include statements
regarding SYSCO's ability to continue to profitably grow its business, improve
its operational efficiencies and performance and gain market share, as well as
statements regarding inflationary trends, capital expenditures and the expected
timing, cost and benefits of fold-outs, its national supply chain project and
northeast redistribution center. 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 the risks relating to the foodservice
distribution industry's relatively low profit margins and sensitivity to general
economic conditions, including the current economic environment; 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. 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 June 28, 2003 as filed with the
Securities and Exchange Commission.
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SYSCO CORPORATION
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
(In Thousands Except for Share Data)
FOR THE 13-WEEK PERIOD ENDED
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DECEMBER 27, 2003 DECEMBER 28, 2002
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Sales $7,036,520 $6,348,797
Costs and expenses
Cost of sales 5,669,399 5,097,716
Operating expenses 996,853 937,290
Interest expense 16,376 17,503
Other, net (7,052) (2,606)
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Total costs and expenses 6,675,576 6,049,903
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Earnings before income taxes 360,944 298,894
Income taxes 138,963 114,327
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Net earnings $ 221,981 $ 184,567
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Basic earnings per share $ 0.34 $ 0.28
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Diluted earnings per share $ 0.34 $ 0.28
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Average shares outstanding 644,723,466 652,030,164
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Diluted average shares outstanding 661,632,986 664,083,274
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Comparative segment sales data for the second quarter of fiscal years 2004 and 2003 are summarized below.
($000) FOR THE 13-WEEK PERIOD ENDED
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DECEMBER 27, 2003 DECEMBER 28, 2002
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SALES
Broadline $5,681,387 $5,227,677
SYGMA 863,539 710,334
Other 571,873 475,654
Intersegment Sales (80,279) (64,868)
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Total Sales $7,036,520 $6,348,797
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SYSCO CORPORATION
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
(In Thousands Except for Share Data)
FOR THE 26-WEEK PERIOD ENDED
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DECEMBER 27, 2003 DECEMBER 28, 2002
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Sales $14,170,801 $12,773,219
Costs and expenses
Cost of sales 11,423,166 10,252,420
Operating expenses 2,021,189 1,897,925
Interest expense 35,007 34,331
Other, net (9,035) (6,018)
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Total costs and expenses 13,470,327 12,178,658
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Earnings before income taxes 700,474 594,561
Income taxes 269,682 227,420
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Net earnings $ 430,792 $ 367,141
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Basic earnings per share $ 0.67 $ 0.56
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Diluted earnings per share $ 0.65 $ 0.55
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Average shares outstanding 645,301,941 653,240,266
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Diluted average shares outstanding 660,127,514 664,304,371
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Comparative segment sales data for the first half of fiscal years 2004 and 2003 are summarized below.
($000) FOR THE 26-WEEK PERIOD ENDED
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DECEMBER 27, 2003 DECEMBER 28, 2002
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SALES
Broadline $11,508,476 $10,548,934
SYGMA 1,688,102 1,419,918
Other 1,133,333 927,004
Intersegment Sales (159,110) (122,637)
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Total Sales $14,170,801 $12,773,219
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SYSCO CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In Thousands)
December 27, 2003 December 28, 2002
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ASSETS
Current assets
Cash $ 232,595 $ 128,574
Receivables 2,086,107 1,878,315
Inventories 1,359,886 1,270,604
Prepaid expenses 60,201 63,286
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Total current assets 3,738,789 3,340,779
Plant and equipment at cost, less depreciation 2,029,718 1,804,691
Other assets
Goodwill and intangibles 1,166,336 1,055,271
Restricted cash 170,877 84,056
Other 199,857 199,190
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Total other assets 1,537,070 1,338,517
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Total assets $ 7,305,577 $6,483,987
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ 124,609 $ 64,612
Accounts payable 1,645,948 1,408,475
Accrued expenses 589,394 571,291
Accrued income taxes 172,420 25,462
Deferred taxes 190,175 158,719
Current maturities of long-term debt 12,322 22,341
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Total current liabilities 2,734,868 2,250,900
Other liabilities
Long-term debt 1,395,981 1,394,647
Deferred taxes 524,989 461,312
Other long-term liabilities 283,915 176,012
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Total other liabilities 2,204,885 2,031,971
Contingencies
Shareholders' equity
Preferred stock - -
Common stock, par $l per share 765,175 765,175
Paid-in capital 290,744 240,170
Retained earnings 3,649,583 3,105,487
Other comprehensive loss (142,027) (65,435)
Treasury stock (2,197,651) (1,844,281)
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Total shareholders' equity 2,365,824 2,201,116
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Total liabilities and shareholders' equity $ 7,305,577 $6,483,987
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SYSCO CORPORATION
CONSOLIDATED CASH FLOWS (Unaudited)
(In Thousands)
For the 26-Week Period Ended
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December 27, 2003 December 28, 2002
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Cash flows from operating activities:
Net earnings $ 430,792 $ 367,141
Add non-cash items:
Depreciation and amortization 138,679 133,437
Deferred tax provision 265,053 213,488
Provision for bad debts 14,895 15,908
Additional investment in certain assets and liabilities, net
of effect of businesses acquired:
(Increase) in receivables (73,428) (98,222)
(Increase) in inventories (120,215) (130,767)
(Increase) in prepaid expenses (7,755) (21,251)
Increase in accounts payable 3,905 38,411
(Decrease) in accrued expenses and other
long-term liabilities (75,854) (42,346)
(Decrease) in accrued income taxes (186,649) (12,091)
(Increase) in other assets (24,644) (7,171)
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Net cash provided by operating activities 364,779 456,537
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Cash flows from investing activities:
Additions to plant and equipment (248,697) (217,799)
Proceeds from sales of plant and equipment 9,815 7,976
Acquisition of businesses, net of cash acquired (33,703) (168,244)
Increase in restricted cash balances (90,000) (52,056)
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Net cash used for investing activities (362,585) (430,123)
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Cash flows from financing activities:
Bank and commercial paper borrowings 182,739 208,102
Other debt repayments (12,964) (5,255)
Common stock reissued from treasury 86,337 62,650
Treasury stock purchases (218,149) (243,381)
Dividends paid (142,501) (118,395)
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Net cash used for financing activities (104,538) (96,279)
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Effect of exchange rate changes on cash (2,508) -
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Net decrease in cash (104,852) (69,865)
Cash at beginning of period 337,447 198,439
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Cash at end of period $ 232,595 $ 128,574
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Cash paid during the period for:
Interest $ 36,598 $ 34,492
Income taxes $ 190,761 $ 29,120
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COMPARATIVE SUPPLEMENTAL STATISTICAL INFORMATION RELATED TO SALES
Comparative SYSCO Brand Sales and Marketing Associate-Served Sales data for the
second quarter of fiscal years 2004 and 2003 is summarized below.
FOR THE 13-WEEK PERIOD ENDED
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DECEMBER 27, 2003 DECEMBER 28, 2002
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SYSCO Brand Sales as a % of MA-Served Sales 57.2% 56.8%
SYSCO Brand Sales as a % of Total
Traditional Broadline Sales in the U.S. 49.0% 49.0%
MA-Served Sales as a % of Total Traditional
Broadline Sales in the U.S. 53.6% 53.8%
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Comparative SYSCO Brand Sales and Marketing Associate-Served Sales data for the
first half of fiscal years 2004 and 2003 is summarized below.
FOR THE 26-WEEK PERIOD ENDED
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DECEMBER 27, 2003 DECEMBER 28, 2002
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SYSCO Brand Sales as a % of MA-Served Sales 57.1% 56.8%
SYSCO Brand Sales as a % of Total
Traditional Broadline Sales in the U.S. 49.0% 49.0%
MA-Served Sales as a % of Total Traditional
Broadline Sales in the U.S. 54.8% 55.1%
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