Sysco Corporation (NYSE:SYY) today announced financial results for its 14-week fourth quarter and 53-week fiscal year 2010 ended July 3, 2010.
In fiscal 2009, the fourth quarter included 13 weeks and the year included 52 weeks.
Fourth Quarter Fiscal 2010 Highlights
— Sales were $10.3 billion, an increase of 13.9% from $9.1 billion in the fourth quarter of fiscal 2009. When adjusted to a 13-week basis, sales in the fourth quarter of fiscal 2010 were up 5.8% compared to the prior year period, as discussed below under "Non-GAAP Reconciliations."
— Operating income was $584 million, an increase of 8.1% compared to $540 million in last year's fourth quarter. When adjusted to a 13-week basis, operating income in the fourth quarter of fiscal 2010 increased 0.4% compared to the prior year period.
— Diluted earnings per share (EPS) were $0.57, an increase of 7.5% compared to $0.53 in last year's fourth quarter. When adjusted to a 13-week basis, diluted EPS in the fourth quarter of fiscal 2010 was flat compared to the prior year period.
Fiscal 2010 Highlights
— Sales of $37.2 billion were 1.1% higher compared to $36.9 billion in the prior year. When adjusted to a 52-week basis, sales in fiscal 2010 declined 0.9% compared to the prior year.
— Operating income was $2.0 billion, an increase of 5.5% compared to $1.9 billion in the prior year. When adjusted to a 52-week basis, operating income in fiscal 2010 increased 3.3% compared to the prior year period.
— Diluted EPS was $1.99, an increase of 12.4% compared to $1.77 in the prior year. When adjusted to a 52-week basis, diluted EPS for fiscal 2010 increased 10.2% compared to the prior year period.
"I am pleased and appreciative of the solid financial results our associates produced this past year. Volume trends improved as the year progressed and we executed at a high level both in supporting our customers and improving productivity in all aspects of our business," said Bill DeLaney, Sysco's president and chief executive officer. "While the extent, pace and consistency of the economic recovery are not clear, the foundation of Sysco's business is strong and we are well positioned to capitalize on opportunities that materialize as we move forward."
Fourth Quarter Fiscal 2010 Summary
Sales for the fourth quarter were $10.3 billion, an increase of $1.3 billion, or 13.9% compared to the same period last year. When adjusted to a 13-week basis, sales in the fourth quarter of fiscal 2010 were up 5.8% compared to the prior year period primarily due to case volume growth and the impact of food cost inflation. Food cost inflation, as measured by the estimated change in Sysco's product costs, was 2.2%, driven mainly by increased prices for dairy, meat and produce. In addition, the impact of changes in foreign exchange rates for the fourth quarter increased sales by 1.3%.
Operating expenses increased $175 million, or 14.4%, for the fourth quarter of fiscal 2010 compared to the prior year period. The increase was primarily due to the additional operating week in the current year period which increased expenses approximately $100 million, a $30 million unfavorable change related to Corporate Owned Life Insurance (COLI) and $29 million in higher incentive compensation. Headcount was 2.2% lower year-over-year at the end of the fourth quarter. When adjusted to a 13-week basis, operating expenses in the fourth quarter increased $76 million, or 6.2%, compared to the prior year period.
Operating income increased $44 million, or 8.1%, to $584 million during the fourth quarter. When adjusted to a 13-week basis, operating income in the fourth quarter of fiscal 2010 increased just 0.4% compared to the prior year period due to the unfavorable impacts from changes in the value of COLI and higher incentive compensation discussed above.
Net earnings for the fourth quarter were $338 million, an increase of $22 million, or 7.1%. Diluted EPS was $0.57, including an estimated $0.04 favorable impact from the extra week of operations during the quarter and a $0.02 negative impact from COLI. Diluted EPS in the prior year period was $0.53, which included a $0.03 positive impact from COLI.
Fiscal 2010 Summary
Sales for fiscal 2010 were $37.2 billion, up $0.4 billion, or 1.1% compared to the prior year. When adjusted to a 52-week basis, sales in fiscal 2010 declined 0.9% compared to the prior year primarily due to the impact of food cost deflation and a change in sales mix partially offset by a benefit from the change in foreign exchange rates. Food cost deflation, as measured by the estimated change in Sysco's product costs, was 1.5%. The impact of changes in foreign exchange rates for the fiscal year increased sales by 0.9%. Sales from acquisitions (less than 12 months) increased sales by 0.5%.
Operating expenses declined $33 million, or 0.6%, in fiscal 2010 compared to fiscal 2009. The decrease in operating expenses was primarily a result of a $72 million reduction in fuel expense, a $65 million favorable change related to COLI; and a $40 million decline in bad debt expense. These decreases were partially offset by the additional week of operations in the current year which increased expenses approximately $100 million and a $37 million increase in
company-sponsored pension expense. When adjusted to a 52-week basis, operating expenses in fiscal 2010 declined $132 million, or 2.6%, compared to fiscal 2009.
Operating income increased $104 million, or 5.5%, to $2.0 billion for the fiscal year. When adjusted to a 52-week basis, operating income in fiscal 2010 increased 3.3% compared to the prior year period due to the items discussed above.
Net earnings for fiscal 2010 were $1.2 billion, an increase of $124 million, or 11.7%, compared to the prior year. Diluted EPS was $1.99, aided by a $0.04 favorable impact from COLI, an estimated $0.04 favorable impact from the extra week of operations and a $0.05 tax benefit related to the company's IRS settlement announced in the first quarter of fiscal 2010. Diluted EPS in the prior year period was $1.77 which included a $0.07 negative impact from COLI.
Cash Flow and Capital Spending
Cash flow from operations was $885 million for fiscal year 2010, which is net of $528 million in IRS settlement payments made during this period.
Capital expenditures totaled $157 million and $595 million for the fourth quarter and fiscal year, respectively. The primary areas for investment included facility replacements and expansions, technology, and additions and replacements to Sysco's fleet. For the fiscal year 2011, the company projects capital expenditures will be in the range of $700 million to $750 million.
Conference Call & Webcast
Sysco's fourth quarter 2010 earnings conference call will be held on Monday, August 16, 2010 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 www.sysco.com in the Investor Relations section.
Source: Sysco Corp.