01—Abstract
Summary
Summary of the 10-K filed August 30, 2011. Cited figures are marked; the original filing is the authoritative source.
Sysco Corporation (SYY), the largest North American distributor of food and related products to the foodservice (food-away-from-home) industry, reported fiscal 2011 (52 weeks ended July 2, 2011) sales of $39.32 billiona, up 5.6% from $37.24 billion in fiscal 2010 (a 53-week year).
Adjusted for the extra week in fiscal 2010, sales grew 7.7%, driven primarily by inflation-driven price increases and improving case volumes. Operating income declined 2.2% to $1.93 billionb, and net earnings fell 2.4% to $1.15 billion; diluted EPS was $1.96 versus $1.99. Management attributed the margin pressure to product cost inflation that could not be fully passed through, strategic pricing initiatives, and a $36.1 million charge for a partial withdrawal from a multi-employer pension plan.
Gross margin declined to 18.62% from 19.08%. The company's cash flow from operations was $1.09 billionc, down from $1.58 billion in fiscal 2009 but up from $885.4 million in fiscal 2010, which was depressed by IRS settlement payments. Total debt was $2.67 billion, with about 75% at fixed rates, and capital expenditures were $636.4 million.
Management expects fiscal 2012 capital expenditures of $750 million to $800 milliond and fuel costs to rise by $35 million to $45 million. Dividends declared rose to $1.03 per share, and the company repurchased 10.0 million shares for $291.6 million during the year.
Key risks highlighted include the Business Transformation Project (an ERP implementation), which has been delayed by six to twelve months and carries expected fiscal 2012 gross project expenses of $280 million to $300 million. Other risks include potential withdrawal liabilities from multi-employer pension plans, estimated at up to $200.0 million on a voluntary-withdrawal basis, and exposure to fuel and product cost volatility.
02—Key points
Key Highlights
- Fiscal 2011 sales rose 5.6% to $39.32 billion; adjusted for the 53rd week in fiscal 2010, sales increased 7.7%, primarily from inflation-driven pricing and improving case volumes.
- Operating income fell 2.2% to $1.93 billion and net earnings fell 2.4% to $1.15 billion; diluted EPS was $1.96 versus $1.99.
- Gross profit as a percentage of sales declined to 18.62% from 19.08% as product cost inflation (estimated at 4.6%) was not fully passed to customers and strategic pricing initiatives lowered prices.
- A $36.1 million charge was recorded for a partial withdrawal from a multi-employer pension plan in the third quarter of fiscal 2011.
- Business Transformation Project (ERP) has been delayed by approximately six to twelve months; fiscal 2012 gross project expenses are expected at $280 million to $300 million.
- Total debt was $2.67 billion, approximately 75% at fixed rates; the company repurchased 10.0 million shares for $291.6 million and paid dividends declared of $1.03 per share.
- Fiscal 2012 capital expenditures are expected to be $750 million to $800 million, and fuel costs are expected to rise by $35 million to $45 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Sysco kept $0.03.
- Revenue$39.32B100.0%
- Cost of revenue−$31.93B81.2%
- Gross profit$7.39B18.8%
- Operating costs−$5.46B13.9%
- Operating income$1.93B4.9%
- Interest, other & tax−$779.5M2.0%
- Net income$1.15B2.9%
Where FY2011 revenue went
$39.32B- Cost of revenue: $23.51B, 60% of revenue
- Operating costs: $13.88B, 35% of revenue
- Net income: $1.15B, 2.9% of revenue
- Interest, other & tax: $779.5M, 2.0% of revenue
Kept 2.9% as net incomeNet income $1.15B · 2.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed August 30, 2011Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $39.32B$37.24B | +5.6% |
| Cost of Revenue | $23.51B$30.14B | −22.0% |
| Gross Profit | $7.39B$7.19B | +2.9% |
| Operating Expenses | $5.46B$5.21B | +4.8% |
| Operating Income | $1.93B$1.98B | −2.2% |
| Interest Expense | $118.27M$125.48M | −5.7% |
| Net Income | $1.15B$1.18B | −2.4% |
| EPS (Basic) | $1.96$1.99 | −1.5% |
| EPS (Diluted) | $1.96$1.99 | −1.5% |
| Shares Outstanding (Basic) | 586.53M592.16M | −1.0% |
| Shares Outstanding (Diluted) | 588.69M593.59M | −0.8% |
05—Questions
Frequently Asked Questions
How did Sysco perform in fiscal 2011?
Sales grew 5.6% to $39.32 billion, but operating income declined 2.2% to $1.93 billion and net earnings declined 2.4% to $1.15 billion. Diluted EPS was $1.96, compared with $1.99 in fiscal 2010, which was a 53-week year. Adjusted for the extra week, sales rose 7.7%, operating income fell 0.1%, and EPS rose 0.5%.
Why did margins decline in fiscal 2011?
Gross profit as a percentage of sales fell to 18.62% from 19.08%. The filing attributes this to product cost inflation (estimated at 4.6%) that Sysco could not fully pass to customers, ongoing strategic pricing initiatives that lowered prices in certain categories, partly offset by higher fuel surcharges. Operating expenses rose 5.0%, including a $36.1 million multi-employer pension withdrawal charge.
What are the main risks to the business going forward?
The filing highlights delays in the Business Transformation Project (ERP system), with costs expected to exceed benefits through fiscal 2012; potential withdrawal liabilities from underfunded multi-employer pension plans, estimated at up to $200.0 million on a voluntary-withdrawal basis; exposure to fuel and product cost inflation or deflation; and the risk of work stoppages from union contract renegotiations.
How is Sysco financing its operations and growth?
Cash flow from operations was $1.09 billion in fiscal 2011, and capital expenditures were $636.4 million. Total debt was $2.67 billion, with about 75% at fixed rates. Sysco has a $1.3 billion commercial paper program and a $1.0 billion revolving credit facility expiring November 4, 2012. Management expects fiscal 2012 capital expenditures of $750 million to $800 million, financed from internal cash, commercial paper and borrowings.
What did Sysco return to shareholders?
Dividends declared totaled $604.5 million, or $1.03 per share for fiscal 2011, up from $0.99 in fiscal 2010. Sysco repurchased 10.0 million shares for $291.6 million during fiscal 2011, and 13,386,600 shares remained authorized for repurchase as of August 17, 2011. Management expects to repurchase slightly more shares in fiscal 2012 than in fiscal 2011.
06—Continue