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 FOURTH QUARTER DILUTED EPS RISE 16.2%; NET EARNINGS UP 15.6%
HOUSTON, AUGUST 16, 2004 -- SYSCO Corporation (NYSE: SYY), North America's
leading foodservice marketer and distributor, today announced results for the
14-week fourth quarter and 53-week fiscal year that ended July 3, 2004.
FOURTH QUARTER HIGHLIGHTS:
o Diluted earnings per share rose 16.2% to $0.43 compared to $0.37 in the
same period last year.
o Net earnings climbed 15.6% to $280.6 million vs. $242.7 million in last
year's fourth quarter.
o Sales increased 16.7% to $8.14 billion, including sales from acquisitions
of 0.4%, for the 14-week fourth quarter of fiscal 2004 as opposed to $6.97
billion in the 13-week fourth quarter of fiscal 2003. Adjusted for 13 weeks
vs. 13 weeks, sales were up 8.4% for the fourth quarter of fiscal 2004.
o Operating expenses as a percent to sales were 13.66%, a 34 basis point
reduction in comparison to 14.00% in the same period last year.
FISCAL YEAR HIGHLIGHTS:
o Diluted earnings per share rose 16.1% to $1.37 compared to $1.18 last year.
o Net earnings climbed 16.6% to $907.2 million vs. $778.3 million last year.
o Sales increased 12.2% to $29.3 billion, including sales from acquisitions
of 0.8%, for the 53-week fiscal year ended July 3, 2004 as opposed to $26.1
billion for the 52-week fiscal year ended June 28, 2003. Adjusted for 52
weeks vs. 52 weeks, sales rose 10.0% in fiscal 2004.
o Operating expenses as a percent to sales were 14.12%, a 56 basis point
reduction versus last year's 14.68%.
In discussing the quarter, Richard J. Schnieders, SYSCO's chairman and
chief executive officer, said, "SYSCO was able to generate solid sales and
earnings numbers during the fourth quarter while competing in a market that can
best be described as challenging. Our growth strategies, customer service
initiatives and sound operational practices allowed our 49,000 associates to
overcome the effects of 8.0 percent product inflation during the quarter and
again generate positive results for our shareholders.
"A softer foodservice market and prolonged product inflation of 6.3 percent
for the fiscal year were the primary test our operating companies faced and
continue to address," added Mr. Schnieders. "The dairy and meat categories,
which are often sold on a cost-per-pound plus a fee per pound basis rather than
on a percentage markup, experienced the highest rates of inflation. The overall
impact of inflation, particularly on those two items, is a higher sales price
but a lower profit margin as a percent to sales. This margin percentage
contraction persisted throughout the fiscal year, making the foodservice
environment a very tough arena for distributors and suppliers. Our restaurant
operator customers also are experiencing softness in their sales as cost and
price increases impact consumer spending. As a result, we experienced a moderate
slowing of sales in the latter half of the fourth quarter which has continued
for the first five weeks of the current quarter.
Turning to fiscal year 2005, Mr. Schnieders added, "That being said, we
believe our results confirm that we are the best-positioned distributor to deal
with these issues. We are building this company with an eye on the future and
will make the necessary investments, such
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as our supply chain initiative, to position this company for future success. Our
estimates are that we should incur approximately an additional $0.04 to $0.05
per share of expense, including depreciation of the first redistribution center,
in fiscal 2005. We believe that strategic investments such as the redistribution
center will enable us to continue to lower our cost of doing business over the
longer term. In addition, we're working with our customers by consulting with
them in product selection, pricing and quality issues to help them combat this
longer-than-usual period of food cost increases. Finally, while we can't control
inflation and its effects or the consumer spending cycle, we can control our
expenses and we will be renewing our focus in the area of expense controls
during fiscal 2005. These controls include a short-term hiring freeze, continued
benchmarking of our operations and the ongoing sharing of best business
practices at our companies. While moderating sales and the current inflationary
environment are short-term issues, the discipline they impose on us to exercise
sound expense controls will benefit us over the long-term as inflation returns
to more typical levels."
In discussing operations, Thomas E. Lankford, president and chief operating
officer of SYSCO, added, "A persistent focus on profitable customers benefited
us in the quarter. By providing business reviews and business development
services to these valued customers, our ability to achieve our long-term
performance objectives remains on track.
"From an operational perspective, key metrics at our broadline companies
registered incremental improvements in the fourth quarter, which in turn helped
to drive down expenses by 34 basis points. Specifically, lines per stop
increased approximately five percent and pieces per stop increased approximately
four percent in the quarter compared to last year, indicating expanded sales to
existing customers."
Mr. Lankford also summarized SYSCO's major capital expenditures and
acquisitions for the quarter and fiscal year including the opening of a
broadline fold-out facility in Oxnard, California, that is servicing the
northern Los Angeles foodservice market and the ongoing construction of a
broadline fold-out facility in Post Falls, Idaho that is expected to be
operational in the spring of 2005. SYSCO also expanded its export capabilities
with the acquisition of Plant City, Florida-based International Food Group, a
leading U.S.-based distributor of foodservice products to chain restaurants in
international markets. Another acquisition, Overton Distributors, Inc., a
produce distribution company with locations in Raleigh and Charlotte, North
Carolina and Nashville, Tennessee, occurred at the beginning of the fourth
quarter.
"We have made and will continue to make strategic investments to promote
future growth in our operations and profitability," continued Mr. Lankford, who
also indicated that SYSCO's capital expenditures for fiscal 2004 were $530.1
million, including $150.7 million that was spent in the fourth quarter. For
fiscal 2005 the Company anticipates a slight reduction in capital expenditures
- -- $475 to $500 million -- since several major replacements and fold-outs were
completed in 2004.
The National Supply Chain project progressed according to plan during the
quarter and to date $216.0 million has been expended on the project since it
began in fiscal 2002. Fourth quarter expenditures for the project were $33.4
million, $27.1 million of which was capitalized and is included in the $150.7
million capital spending for the quarter. SYSCO's broadline facility near
Boston, which is scheduled to be the first company to go live with the Northeast
Redistribution Center, began implementing their ramp-up in August and is
scheduled to receive product in February 2005. By the fall of 2005 all 14
operating companies assigned to the Northeast Redistribution Center will be
receiving product.
"With a 16.6 percent increase in net earnings, fiscal 2004 was a solid year
for SYSCO. The results are representative of the most valuable asset we have -
our knowledgeable and dedicated associates," concluded Mr. Lankford. "Through
their efforts, SYSCO's market share increased from 13 percent in fiscal 2003 to
more than 14 percent in fiscal 2004. As they worked with our suppliers and
customers to succeed during some difficult times, their efforts also
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allowed SYSCO to return $918 million to our shareholders in fiscal 2004 in the
form of share repurchases and dividends, or 101.2% of our fiscal 2004 net
earnings. We have the people and strategies in place to maintain consistent
future growth and we are confident we will continue our record of delivering
sound results."
SYSCO is the largest foodservice marketing and distribution organization in
North America, providing food and related products and services to approximately
400,000 restaurants, healthcare and educational facilities, lodging
establishments and other foodservice customers. SYSCO's operations are located
throughout the United States and Canada and include broadline companies,
specialty produce and custom-cut meat operations, Asian foodservice
distributors, 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 fourth
quarter 2004 earnings conference call will be held at 10:00 a.m. EDT on Monday,
August 16, 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 achieve its long-term performance objectives, maintain
consistent future growth and continue to deliver sound results, inflationary
trends, capital expenditures and other future investments, the expected benefits
of cost controls, and the expected timing, cost and benefits of the 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 and consumer spending; the risk that higher costs due to inflation
cannot be passed on to customers or that the current high levels of inflation do
not return to historical levels; 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 14-WEEK AND 13-WEEK PERIODS ENDED
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JULY 3, 2004 JUNE 28, 2003
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Sales $ 8,139,017 $ 6,971,840
Costs and expenses
Cost of sales 6,554,156 5,582,663
Operating expenses 1,111,548 976,123
Interest expense 19,136 19,627
Other, net (2,080) 332
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Total costs and expenses 7,682,760 6,578,745
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Earnings before income taxes 456,257 393,095
Income taxes 175,659 150,359
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Net earnings $ 280,598 $ 242,736
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Basic earnings per share $ 0.44 $ 0.38
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Diluted earnings per share $ 0.43 $ 0.37
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Average shares outstanding 638,405,202 646,157,089
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Diluted average shares outstanding 657,838,265 655,791,441
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Comparative segment sales data for the fourth quarter of fiscal years 2004 and
2003 are summarized below.
(Unaudited) FOR THE 14-WEEK AND 13-WEEK PERIODS ENDED
($000) ------------------------------------------
JULY 3, 2004 JUNE 28, 2003
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SALES
Broadline $ 6,562,356 $ 5,693,056
SYGMA 987,247 782,922
Other 675,958 573,678
Intersegment Sales (86,544) (77,816)
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Total Sales $ 8,139,017 $ 6,971,840
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SYSCO CORPORATION
CONSOLIDATED RESULTS OF OPERATIONS (UNAUDITED)
(In Thousands Except for Share Data)
FOR THE 53-WEEK AND 52-WEEK PERIODS ENDED
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JULY 3, 2004 JUNE 28, 2003
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Sales $ 29,335,403 $ 26,140,337
Costs and expenses
Cost of sales 23,661,514 20,979,556
Operating expenses 4,141,230 3,836,507
Interest expense 69,880 72,234
Other, net (12,365) (8,347)
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Total costs and expenses 27,860,259 24,879,950
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Earnings before income taxes 1,475,144 1,260,387
Income taxes 567,930 482,099
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Net earnings $ 907,214 $ 778,288
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Basic earnings per share $ 1.41 $ 1.20
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Diluted earnings per share $ 1.37 $ 1.18
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Average shares outstanding 642,688,614 650,600,652
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Diluted average shares outstanding 661,919,234 661,535,382
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Comparative segment sales data for the 53-weeks and 52-weeks of fiscal years
2004 and 2003 are summarized below.
FOR THE 53-WEEK AND 52-WEEK PERIODS ENDED
(Unaudited) ------------------------------------------
($000) JULY 3, 2004 JUNE 28, 2003
SALES ------------------- -------------------
Broadline $ 23,718,955 $ 21,489,862
SYGMA 3,548,693 2,916,174
Other 2,383,692 2,003,060
Intersegment Sales (315,937) (268,759)
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Total Sales $ 29,335,403 $ 26,140,337
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SYSCO CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In Thousands)
JULY 3, 2004 JUNE 28, 2003
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ASSETS
Current assets
Cash $ 199,706 $ 337,447
Receivables 2,189,127 2,009,627
Inventories 1,404,410 1,230,080
Prepaid expenses 54,903 52,380
Prepaid income taxes 3,265 -
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Total current assets 3,851,411 3,629,534
Plant and equipment at cost,
less depreciation 2,166,809 1,922,660
Other assets
Goodwill and intangibles 1,218,700 1,113,960
Restricted cash 169,326 83,807
Prepaid pension cost 243,996 -
Other 197,390 186,560
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Total other assets 1,829,412 1,384,327
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Total assets $ 7,847,632 $ 6,936,521
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ 73,834 $ 101,822
Accounts payable 1,742,578 1,637,505
Accrued expenses 724,970 624,451
Accrued income taxes - 9,193
Deferred taxes 422,419 307,211
Current maturities of long-term debt 162,833 20,947
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Total current liabilities 3,126,634 2,701,129
Other liabilities
Long-term debt 1,231,493 1,249,467
Deferred taxes 686,705 498,396
Other long-term liabilities 238,294 289,998
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Total other liabilities 2,156,492 2,037,861
Contingencies
Shareholders' equity
Preferred stock - -
Common stock, par $l per share 765,175 765,175
Paid-in capital 332,041 249,235
Retained earnings 3,959,714 3,373,853
Other comprehensive income (loss) 17,640 (152,381)
Treasury stock (2,510,064) (2,038,351)
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Total shareholders' equity 2,564,506 2,197,531
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Total liabilities and
shareholders' equity $ 7,847,632 $ 6,936,521
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SYSCO CORPORATION
CONSOLIDATED CASH FLOWS (UNAUDITED)
(In Thousands)
FOR THE 53-WEEK AND 52-WEEK PERIODS ENDED
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JULY 3, 2004 JUNE 28, 2003
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Cash flows from operating activities:
Net earnings $ 907,214 $ 778,288
Add non-cash items:
Depreciation and amortization 283,595 273,142
Deferred tax provision 608,152 481,330
Provision for losses on receivables 27,377 27,133
Additional investment in certain
assets and liabilities, net of
effect of businesses acquired:
(Increase) in receivables (177,058) (218,150)
(Increase) in inventories (162,502) (69,959)
(Increase) in prepaid expenses (2,183) (9,509)
Increase in accounts payable 95,874 237,360
Increase (Decrease) in accrued
expenses and other
long-term liabilities 26,488 (85,294)
(Decrease) in accrued income taxes (392,197) (33,121)
(Increase) in other assets (25,238) (8,380)
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Net cash provided by operating
activities 1,189,522 1,372,840
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Cash flows from investing activities:
Additions to plant and equipment (530,086) (435,637)
Proceeds from sales of plant
and equipment 15,851 14,629
Acquisition of businesses,
net of cash acquired (79,247) (209,010)
Increase in restricted cash balances (90,329) (51,807)
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Net cash used for investing
activities (683,811) (681,825)
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Cash flows from financing activities:
Bank and commercial paper
(repayments) / borrowings (77,849) 85,224
Other debt borrowings / (repayments) 185,087 (12,098)
Cash from termination of
interest rate swap 1,305 15,359
Common stock reissued from treasury 167,652 101,312
Treasury stock purchases (608,506) (478,471)
Dividends paid (309,540) (261,854)
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Net cash used for financing
activities (641,851) (550,528)
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Effect of exchange rate changes on cash (1,601) (1,479)
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Net (decrease) increase in cash (137,741) 139,008
Cash at beginning of period 337,447 198,439
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Cash at end of period $ 199,706 $ 337,447
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Cash paid during the period for:
Interest $ 68,481 $ 69,103
Income taxes $ 344,414 $ 28,747
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COMPARATIVE SUPPLEMENTAL STATISTICAL INFORMATION RELATED TO SALES (UNAUDITED)
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Comparative SYSCO Brand Sales and Marketing Associate-Served Sales data for the
14-weeks and 13-weeks of the fourth quarter of fiscal years 2004 and 2003 are
summarized below.
FOR THE 14-WEEK AND 13-WEEK PERIODS ENDED
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JULY 3, 2004 JUNE 28, 2003
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SYSCO Brand Sales as a % of MA-Served Sales 57.9% 56.7%
SYSCO Brand Sales as a % of Total
Traditional Broadline Sales in the U.S. 49.7% 48.7%
MA-Served Sales as a % of Total Traditional
Broadline Sales in the U.S. 55.1% 55.3%
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Comparative SYSCO Brand Sales and Marketing Associate-Served Sales data for the
53-weeks and 52-weeks of fiscal years 2004 and 2003 is summarized below.
FOR THE 53-WEEK AND 52-WEEK PERIODS ENDED
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JULY 3, 2004 JUNE 28, 2003
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SYSCO Brand Sales as a % of MA-Served Sales 57.5% 56.8%
SYSCO Brand Sales as a % of Total
Traditional Broadline Sales in the U.S. 49.1% 48.7%
MA-Served Sales as a % of Total Traditional
Broadline Sales in the U.S. 54.3% 54.6%
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Because the fourth quarter of fiscal 2004 contained an additional week as
compared to fiscal 2003, sales growth for fiscal 2004 is not comparable to the
prior year. In order to provide a more comparable picture of sales growth during
fiscal 2004, management believes that it is appropriate to adjust the sales
figures for fiscal 2004 by estimating the impact of the additional week. As a
result, sales for the fiscal 2004 periods presented are adjusted by
one-fourteenth of total sales for the fourth quarter. Failure to make these
adjustments might cause investors to overstate the amount of actual sales growth
due to the additional week of sales included in the 2004 periods. Set forth
below is a reconciliation of actual year-over-year sales growth to adjusted
year-over-year sales growth:
Comparative fourth quarter fiscal 2004 and 2003 sales adjusted for a 13-week vs.
13-week comparison. (In thousands)
FOR THE 14-WEEK AND 13-WEEK PERIODS ENDED
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JULY 3, 2004 JUNE 28, 2003
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Sales $ 8,139,017 $ 6,971,840
Less 1 week average sales 581,358 -
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Comparable 13-week vs. 13-week sales $ 7,557,659 $ 6,971,840
Actual year-over-year percentage increase 16.7%
Adjusted year-over-year percentage increase 8.4%
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Comparative fiscal 2004 and 2003 sales adjusted for a 52-week vs. 52-week comparison.
(In thousands)
FOR THE 53-WEEK AND 52-WEEK PERIODS ENDED
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JULY 3, 2004 JUNE 28, 2003
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Sales $29,335,403 $26,140,337
Less 1 week average sales in 4Q fiscal 2004 581,358 -
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Comparable 52-week vs. 52-week sales $28,754,045 $26,140,337
Actual year-over-year percentage increase 12.2%
Adjusted year-over-year percentage increase 10.0%
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