IE 11 is not supported. For an optimal experience visit our site on another browser.

Sysco Reports Record Third Quarter Net Earnings of $258 Million, and Diluted EPS of $0.44

/ Source: GlobeNewswire

HOUSTON, May 9, 2011 (GLOBE NEWSWIRE) -- Sysco Corporation (NYSE:SYY) today announced financial results for its 13-week third quarter ended April 2, 2011.

Third Quarter Fiscal 2011 Highlights

  • Sales were $9.8 billion, an increase of 9.1% from $8.9 billion in the third quarter of fiscal 2010.
  • Operating income was $427 million, including a $36 million charge related to the withdrawal of an operating company from a multi-employer pension plan (MEPP). This result was $5 million, or 1.1%, lower than last year's third quarter.
  • Diluted earnings per share (EPS) were $0.44, including a $0.04 negative impact related to the MEPP withdrawal discussed above, and a $0.02 tax benefit related to the recognition of deferred tax assets. This result was 4.8% higher compared to $0.42 in last year's third quarter.

Year-To-Date Fiscal 2011 Highlights

  • Sales were $28.9 billion, an increase of 7.4%, from $26.9 billion in the prior year period.
  • Operating income was $1.4 billion, a decrease of $21 million, or 1.5%, compared to the prior year period.
  • Diluted EPS was $1.39, including a $0.05 benefit from Corporate Owned Life Insurance (COLI), and a net $0.02 negative impact from the MEPP charge and tax benefit discussed above. This result was 2.1% lower than diluted EPS of $1.42 in the prior year period, which included a $0.05 tax benefit related to the company's IRS settlement and a $0.05 benefit from COLI.

"We are pleased with our improved performance in the third quarter as both sales and earnings grew over the prior year. Particularly encouraging is our case volume growth in the midst of ongoing product inflation and a sluggish economic recovery," said Bill DeLaney, Sysco's president and chief executive officer. "Our leadership team remains highly focused on supporting our customers and improving productivity in all aspects of our business."

Third Quarter Fiscal 2011 Summary

Sales for the third quarter were $9.8 billion, an increase of $817 million, or 9.1% compared to the same period last year due primarily to higher prices and case volume growth. Food cost inflation, as measured by the estimated change in Sysco's product costs, was 5.1% driven mainly by high levels of inflation in the meat, seafood and canned/dry categories. This compares to deflation of 0.8% in the prior year period. In addition, sales from acquisitions (within the last 12 months) increased sales by 0.6%, and the impact of changes in foreign exchange rates for the third quarter increased sales by 0.6%. 

Gross margin for the third quarter was $1.8 billion, an increase of $127 million, or 7.6%, compared to the prior year. Gross margin as a percentage of sales declined 27 basis points year over year to 18.6%. While high inflation and strategic pricing initiatives continued to be the main factors impacting gross margin as a percent of sales, the impact was less than in previous periods.

Operating expense increased 10.6%, or $132 million, for the third quarter mainly from (1) a $36 million one-time charge related to the withdrawal of an operating company from an MEPP; (2) a $36 million increase in salaries and related expense due to increases in sales compensation, other payroll costs and incentive compensation; (3) a $15 million increase in costs related to the Company's corporate-sponsored pension plan; and (4) a $14 million increase in fuel costs. As a result, operating income decreased $5 million, or 1.1%, to $427 million during the third quarter.

Income tax expense during the quarter decreased $9 million, or 5.6%. This equated to a tax rate of 36.3%, which was 2.4 percentage points lower than last year's rate due mainly to a $10 million tax benefit related to the recognition of deferred tax assets.

Net earnings for the third quarter were $258 million, an increase of $11 million, or 4.4% compared to the prior year. Diluted EPS was $0.44, including a $0.04 negative impact related to the withdrawal from the MEPP mentioned above and a $0.02 tax benefit also discussed above. Diluted EPS in the prior year period was $0.42.

Year-To-Date Fiscal 2011 Summary

Sales for the first 39 weeks of fiscal 2011 were $28.9 billion, an increase of 7.4% compared to the same period last year driven mainly by higher prices and case volume growth. Food cost inflation, as measured by the estimated change in Sysco's product costs, was 4.2% driven mainly by high levels of inflation in the meat, seafood, and dairy categories. Sales from acquisitions (within the last 12 months) increased sales by 0.6%. The impact of changes in foreign exchange rates for the first three quarters of the year increased sales by 0.5%.

Gross margin for the first 39 weeks was $5.4 billion, an increase of $259 million, or 5.0%, compared to the prior year. Gross margin as a percentage of sales declined 43 basis points year over year to 18.6%. Pressure from high inflation and strategic pricing initiatives were the main factors impacting gross margin as a percent of sales.

Operating expense increased 7.5%, or $280 million, for the first 39 weeks mainly from (1) a $95 million increase in salaries and related expense due to increases in sales compensation and other payroll costs; (2) a $45 million increase in costs related to the Company's corporate-sponsored pension plan; (3) a $36 million charge related to the withdrawal of an operating company from an MEPP; and (4) a $20 million increase in fuel expense. As a result, operating income was $1.4 billion, a decrease of $21 million, or 1.5%, during the first 39 weeks of fiscal 2011. 

Net earnings for the first 39 weeks of fiscal 2011 were $816 million, a decrease of $26 million, or 3.1%. Diluted EPS was $1.39, including a $0.05 favorable impact from COLI, and a net $0.02 negative impact from the MEPP charge and tax benefit discussed above. Diluted EPS in the prior year period was $1.42, including a $0.05 tax benefit related to the company's IRS settlement and a $0.05 favorable impact from COLI.

Cash Flow and Capital Spending

Cash flow from operations was $666 million for the first 39 weeks of fiscal 2011. This compares to $477 million in the prior year period. Capital expenditures totaled $137 million for the third quarter, and $454 million for the first 39 weeks of the fiscal year. The primary areas for investment included facility replacements and expansions, replacements to Sysco's fleet, and technology.

Conference Call & Webcast

Sysco's third quarter 2011 earnings conference call will be held on Monday, May 9, 2011 at 10:00 a.m. Eastern. A live webcast of the call, as well as a copy of this press release, will be available online at 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 approximately 400,000 customers. For the fiscal year 2010 that ended July 3, 2010 the company generated more than $37 billion in sales. For more information about Sysco, visit the company's Internet home page at  and for investor relations news follow us at .

The Sysco Corporation logo is available at

Forward-Looking Statements

Certain statements made herein are forward-looking statements under the Private Securities Litigation Reform Act of 1995. They include statements regarding our focus on supporting our customers and improving productivity in all aspects of our business. These statements involve risks and uncertainties and are based on management's current expectations and estimates; actual results may differ materially. Factors impacting these forward-looking statements include the general risks associated with our business, including 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, which have increased dramatically over the last few months, and labor issues. In the past, increased fuel prices have significantly increased our costs and reduced consumers' demand for meals served away from home. Risks and uncertainties also include risks impacting the economy generally, including the risk that the current economic downturn will continue, that initial signs of economic recovery may not prove long lasting, 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 2011 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. 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, 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. 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 3, 2010, as filed with the Securities and Exchange Commission.

CONTACT: Neil Russell Vice President, Investor Relations T 281-584-1308