01—Abstract
Summary
Summary of the 10-K filed August 26, 2008. Cited figures are marked; the original filing is the authoritative source.
Sysco Corporation reported fiscal 2008 (year ended June 28, 2008) sales of $37.52 billiona, up 7.1% from $35.04 billion in fiscal 2007, with net earnings of $1.106 billion, up 10.5%, and diluted earnings per share of $1.81, up 13.1%.
Operating income rose 10.0% to $1.88 billionb, or 5.0% of sales. The company attributed sales growth mainly to product cost inflation, estimated at 6.0% in fiscal 2008, while the rate of sales growth slowed from 8.5% in the first quarter to 5.4% in the fourth quarter. Management said current economic conditions, including pressure on consumer disposable income, are contributing to a decline in the foodservice market and expects fiscal 2009 sales growth to be lower than fiscal 2008.
Fuel costs and multi-employer pension provisions weighed on results. Fuel costs rose $34.0 millionc in fiscal 2008, and the company expects fuel costs in the first 26 weeks of fiscal 2009 to rise by approximately $55 million to $65 million versus the prior-year period. Fiscal 2008 operating expenses also absorbed a $22.3 million provision related to an underfunded multi-employer pension plan and a withdrawal, and the company estimates its share of withdrawal liability could be as much as $140 million.
Capital expenditures fell to $515.963 milliond from $603.242 million, and fiscal 2009 capital expenditures are expected to be $675 million to $725 million. The balance sheet shows total debt of $1.98 billion, with about 99% at fixed rates averaging 5.4%, and a long-term debt to total capitalization ratio of 36.8%, up from 35.0%. Cash flow from operations was $1.596 billion.
The company's most significant tax exposure is the Baugh Supply Chain Cooperative structure: it carries $1.054 billion of deferred tax liabilities related to BSCC, and the IRS has proposed adjustments that Sysco is vigorously protesting. Interest on the deferred balances could range from $290 million to $320 million before tax benefit.
02—Key points
Key Highlights
- Net sales rose 7.1% to $37.52 billion in fiscal 2008, with product cost inflation of approximately 6.0% a major contributor to growth.
- Net earnings increased 10.5% to $1.106 billion, and diluted earnings per share rose 13.1% to $1.81.
- Operating income increased 10.0% to $1.88 billion, or 5.0% of sales, versus 4.9% in fiscal 2007.
- Quarterly sales growth slowed from 8.5% in the first quarter of fiscal 2008 to 5.4% in the fourth quarter, and management expects fiscal 2009 sales growth to be lower.
- Fuel costs and pension charges pressured margins; fiscal 2009 fuel costs in the first half are expected to rise $55 million to $65 million.
- Potential BSCC tax exposure: $1.054 billion of deferred tax liabilities, plus possible interest of $290 million to $320 million if the IRS challenge succeeds.
- Total debt of $1.98 billion, 99% at fixed rates averaging 5.4%; long-term debt to capitalization rose to 36.8% from 35.0%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2008, Sysco kept $0.03.
- Revenue$37.52B100.0%
- Cost of revenue−$30.33B80.8%
- Gross profit$7.19B19.2%
- Operating costs−$5.31B14.2%
- Operating income$1.88B5.0%
- Interest, other & tax−$773.8M2.1%
- Net income$1.11B2.9%
Where FY2008 revenue went
$37.52B- Cost of revenue: $30.33B, 81% of revenue
- Operating costs: $5.31B, 14% of revenue
- Net income: $1.11B, 2.9% of revenue
- Interest, other & tax: $773.8M, 2.1% of revenue
Kept 2.9% as net incomeNet income $1.11B · 2.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2008filed August 26, 2008Financial Statements
| Revenue | $37.52B |
| Cost of Revenue | $30.33B |
| Gross Profit | $7.19B |
| Operating Expenses | $5.31B |
| Operating Income | $1.88B |
| Interest Expense | $111.54M |
| Net Income | $1.11B |
| EPS (Basic) | $1.83 |
| EPS (Diluted) | $1.81 |
| Shares Outstanding (Basic) | 605.91M |
| Shares Outstanding (Diluted) | 610.97M |
05—Questions
Frequently Asked Questions
How did Sysco perform financially in fiscal 2008?
Sales grew 7.1% to $37.52 billion, operating income rose 10.0% to $1.88 billion, and net earnings increased 10.5% to $1.106 billion. Diluted earnings per share were $1.81, up 13.1%.
What is driving sales growth and what is the outlook?
Product cost inflation of about 6.0% was the primary contributor to sales growth. Sales growth slowed through the year, from 8.5% in the first quarter to 5.4% in the fourth, and management expects fiscal 2009 sales growth to be lower than fiscal 2008 if current conditions persist.
What are the main cost pressures?
Fuel costs rose $34.0 million in fiscal 2008, and fuel costs in the first 26 weeks of fiscal 2009 are expected to increase $55 million to $65 million. The company also recorded a $22.3 million provision related to multi-employer pension plans and estimates its potential withdrawal liability at up to $140 million.
What is the Baugh Supply Chain Cooperative tax risk?
Sysco has recorded $1.054 billion of deferred tax liabilities related to BSCC. The IRS has proposed adjustments on the cooperative structure, which Sysco is vigorously protesting. If challenged successfully, the company could have to accelerate tax payments and pay interest estimated at $290 million to $320 million before tax benefit.
How is Sysco funding its operations and capital spending?
Cash flow from operations was $1.596 billion in fiscal 2008. Capital expenditures were $515.963 million, with fiscal 2009 expected at $675 million to $725 million. Total debt was $1.98 billion, and the company has a $1.0 billion revolving credit facility supporting its commercial paper programs, with no commercial paper outstanding at year-end.
06—Continue