01—Abstract
Summary
Summary of the 10-K filed August 25, 2009. Cited figures are marked; the original filing is the authoritative source.
Sysco Corporation's fiscal 2009 10-K (fiscal year ended June 27, 2009) reports that sales fell 1.8% to $36,853,330 thousanda as deteriorating economic conditions reduced consumer spending on food away from home.
Operating income decreased 0.4% to $1,872,211 thousandb, or 5.1% of sales, and basic and diluted earnings per share were both $1.77, down 3.3% and 2.2% respectively. Net earnings declined 4.5% to $1,055,948 thousand, and the effective tax rate rose to 40.37%, partly reflecting tax contingency adjustments of $31,000,000 and non-deductible losses on corporate-owned life insurance. Management expects a difficult economic environment to continue into fiscal 2010, with moderate product cost deflation so far that year.
The balance sheet and liquidity picture is mixed. Cash and cash equivalents rose to $1,087,084 thousandc and operating cash flow was $1,582,341 thousand, while total debt was $2,476,649 thousand, about 99% at fixed rates. The long-term debt to total capitalization ratio rose to 41.8% from 36.8%.
A settlement with the IRS on August 21, 2009 requires Sysco to pay $528,000 thousandd in fiscal 2010, $212,000 thousand in fiscal 2011 and $212,000 thousand in fiscal 2012 related to deferred taxes on its affiliate Baugh Supply Chain Cooperative, which the company says it can fund from cash, operations and capital access. Pension exposure also increased, with net actuarial losses of $534,892 thousand and expected fiscal 2010 contributions of about $140,000 thousand to the Retirement Plan. The company continued to invest, with capital expenditures of $464,561 thousand in fiscal 2009 and a planned $600,000 to $650,000 thousand in fiscal 2010, and it repurchased 16,951,200 shares for $438,843 thousand.
Management said it expects to repurchase significantly fewer shares in fiscal 2010. Sysco also began designing an enterprise-wide software system, with a decision on whether to build it expected by the end of calendar 2009.
02—Key points
Key Highlights
- Sales declined 1.8% to $36,853,330 thousand, with management attributing the decline to weaker consumer spending, while product cost inflation was an estimated 4.7%.
- Operating income fell 0.4% to $1,872,211 thousand (5.1% of sales), and net earnings fell 4.5% to $1,055,948 thousand.
- Basic and diluted EPS were both $1.77, down 3.3% and 2.2% respectively, with the effective tax rate rising to 40.37% from 38.25%.
- Sequential quarterly sales trend moved from a positive 8.5% in Q1 fiscal 2008 to a negative 6.6% in Q4 fiscal 2009.
- IRS settlement on August 21, 2009 requires payments of $528,000 thousand (fiscal 2010), $212,000 thousand (fiscal 2011) and $212,000 thousand (fiscal 2012) related to BSCC deferred taxes, with a one-time payment of $41,000,000.
- Total debt was $2,476,649 thousand, up from $1,980,331 thousand, and the long-term debt to total capitalization ratio rose to 41.8% from 36.8%.
- Net company-sponsored pension costs rose $22,877 thousand in fiscal 2009, and the Retirement Plan's net actuarial losses increased to $534,892 thousand.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Sysco kept $0.03.
- Revenue$36.85B100.0%
- Cost of revenue−$29.82B80.9%
- Gross profit$7.04B19.1%
- Operating costs−$5.16B14.0%
- Operating income$1.87B5.1%
- Interest, other & tax−$816.3M2.2%
- Net income$1.06B2.9%
Where FY2009 revenue went
$36.85B- Cost of revenue: $29.82B, 81% of revenue
- Operating costs: $5.16B, 14% of revenue
- Net income: $1.06B, 2.9% of revenue
- Interest, other & tax: $816.3M, 2.2% of revenue
Kept 2.9% as net incomeNet income $1.06B · 2.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed August 25, 2009Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $36.85B$37.52B | −1.8% |
| Cost of Revenue | $29.82B$30.33B | −1.7% |
| Gross Profit | $7.04B$7.19B | −2.2% |
| Operating Expenses | $5.16B$5.31B | −2.8% |
| Operating Income | $1.87B$1.88B | −0.4% |
| Interest Expense | $116.32M$111.54M | +4.3% |
| Net Income | $1.06B$1.11B | −4.5% |
| EPS (Basic) | $1.77$1.83 | −3.3% |
| EPS (Diluted) | $1.77$1.81 | −2.2% |
| Shares Outstanding (Basic) | 595.13M605.91M | −1.8% |
| Shares Outstanding (Diluted) | 596.07M610.97M | −2.4% |
05—Questions
Frequently Asked Questions
How did Sysco perform financially in fiscal 2009?
Sales fell 1.8% to $36,853,330 thousand and operating income declined 0.4% to $1,872,211 thousand. Net earnings were $1,055,948 thousand, down 4.5%, and diluted EPS was $1.77, down 2.2%. Management attributed the weaker results to deteriorating economic conditions that reduced consumer spending on food away from home.
What is the impact of the IRS settlement on Sysco?
On August 21, 2009, Sysco settled with the IRS over deferred taxes tied to its affiliate Baugh Supply Chain Cooperative. Sysco will stop deferring U.S. federal taxes on BSCC, pay currently recorded deferred taxes over three years, and make a one-time payment of $41,000,000. The company expects to record a tax benefit of approximately $30,000,000 in the first quarter of fiscal 2010, which it estimates will add about $0.05 to diluted EPS.
How is Sysco's debt and liquidity position?
Total debt was $2,476,649 thousand as of June 27, 2009, about 99% at fixed rates with a weighted average of 5.6%. Cash and cash equivalents increased to $1,087,084 thousand, and operating cash flow was $1,582,341 thousand. The company stated it was in compliance with all debt covenants and expects its cash flows, commercial paper program and bank lines to meet its needs for at least the next twelve months.
What are the main risks flagged for Sysco's future results?
The filing highlights continued weak consumer confidence and reduced dining out, volatile fuel and food costs, and the risk of work stoppages as 1,900 union employees have agreements expiring in fiscal 2010. It also notes rising pension funding obligations, potential multi-employer pension withdrawal liabilities of up to $80,000,000, and the risks of an enterprise-wide software project that could be written off if discontinued.
06—Continue