01—Abstract
Summary
Summary of the 10-K filed August 30, 2017. Cited figures are marked; the original filing is the authoritative source.
Sysco Corporation (SYY) reported fiscal 2017 (52 weeks ended July 1, 2017) sales of $55.37 billiona, up 9.9% from $50.37 billion in fiscal 2016, which was a 53-week year.
Net earnings rose 20.3% to $1.14 billionb, and diluted earnings per share rose 26.8% to $2.08. Excluding Certain Items, adjusted diluted earnings per share were $2.48, up 18.1%. The company states that the acquisition of the Brakes Group, closed July 5, 2016 for approximately £2.3 billion (about $3.1 billion), was the main driver of the top-line increase.
On a comparable 52-week basis and excluding Brakes, sales rose 1.6%, and adjusted diluted earnings per share rose 13.6% to $2.34c. Cash flow from operations was $2.18 billion, and free cash flow was $1.51 billion, up 5.9%. Cash paid for acquisitions was $2.9 billion, and the company repurchased $1.9 billion of shares.
Total debt rose to $8.2 billiond from $7.4 billion, and the ratio of long-term debt to capitalization increased to 77.5% from 67.9%. Shareholders' equity fell to $2.38 billion from $3.48 billion, largely because of share repurchases and a larger accumulated other comprehensive loss. Management highlights a deflation of 0.6% for the year and says multi-unit customer case growth declined while local customer case growth improved.
The company also cites a three-year plan with a target of $600 million to $650 million in adjusted operating income improvement by the end of fiscal 2018. Risks flagged in the filing include the U.K.'s exit from the European Union, fuel and product cost volatility, a $4.2 billion pension obligation, and an estimated withdrawal liability on multiemployer plans of as much as $147.9 million.
02—Key points
Key Highlights
- Sales increased 9.9% to $55.37 billion, driven by the Brakes Group acquisition, which contributed $5.2 billion in sales. Sales on a comparable 52-week basis and excluding Brakes rose 1.6%.
- Operating income rose 11.0% to $2.05 billion. Adjusted operating income rose 17.1% to $2.35 billion, and grew 12.4% on a comparable basis excluding Brakes and the extra week.
- Diluted earnings per share were $2.08, up 26.8%. Adjusted diluted earnings per share were $2.48, up 18.1%.
- Free cash flow was $1.51 billion, up 5.9%, while operating cash flow rose to $2.18 billion from $1.93 billion.
- Total debt rose to $8.19 billion from $7.44 billion after the Brakes acquisition, and the long-term debt-to-capitalization ratio rose to 77.5% from 67.9%.
- Share repurchases totaled $1.9 billion in fiscal 2017, and dividends declared rose to $1.30 per share from $1.23.
- The company is targeting an improvement of $600 million to $650 million in adjusted operating income by the end of fiscal 2018, measured against fiscal 2015.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Sysco kept $0.02.
- Revenue$55.37B100.0%
- Cost of revenue−$44.81B80.9%
- Gross profit$10.56B19.1%
- Operating costs−$8.50B15.4%
- Operating income$2.05B3.7%
- Interest, other & tax−$912.1M1.6%
- Net income$1.14B2.1%
Where FY2017 revenue went
$55.37B- Cost of revenue: $44.81B, 81% of revenue
- Operating costs: $8.50B, 15% of revenue
- Net income: $1.14B, 2.1% of revenue
- Interest, other & tax: $912.1M, 1.6% of revenue
Kept 2.1% as net incomeNet income $1.14B · 2.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed August 30, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $55.37B$50.37B | +9.9% |
| Cost of Revenue | $44.81B— | — |
| Gross Profit | $10.56B$9.04B | +16.8% |
| Operating Expenses | $8.50B$7.19B | +18.3% |
| Operating Income | $2.05B$1.85B | +11.0% |
| Net Income | $1.14B$949.62M | +20.3% |
| EPS (Basic) | $2.10$1.66 | +26.5% |
| EPS (Diluted) | $2.08$1.64 | +26.8% |
| Shares Outstanding (Basic) | 543.50M573.06M | −5.2% |
| Shares Outstanding (Diluted) | 548.55M577.39M | −5.0% |
05—Questions
Frequently Asked Questions
What drove the increase in Sysco's fiscal 2017 sales?
Sales rose 9.9% to $55.37 billion. The filing attributes most of the increase to the Brakes Group acquisition, which contributed $5.2 billion in sales. On a comparable 52-week basis and excluding Brakes, sales grew 1.6%, with case growth coming mainly from local customers while multi-unit customer case growth declined.
How did earnings change, and what are the adjusted figures?
Net earnings increased 20.3% to $1.14 billion, and diluted earnings per share increased 26.8% to $2.08. Excluding Certain Items, adjusted diluted earnings per share were $2.48, up 18.1%. Excluding Brakes and the extra week in fiscal 2016, adjusted diluted earnings per share were $2.34, up 13.6%.
How did Sysco fund the Brakes acquisition and how did its debt change?
The Brakes purchase price was approximately £2.3 billion, or about $3.1 billion, paid mainly in cash from debt issuances and cash on hand. Total debt rose to $8.19 billion at July 1, 2017 from $7.44 billion a year earlier. Commercial paper outstanding was $119.7 million at year-end, and the company reported $869.5 million in cash and cash equivalents, about 79.0% of which was held by international subsidiaries.
What risks does the filing highlight for investors?
The filing cites several risks. These include product cost inflation or deflation, fuel price volatility, the U.K.'s exit from the European Union, competition that pressures margins, and dependence on multi-unit customers. It also flags a pension funding requirement, with a $4.2 billion obligation for the company-sponsored Retirement Plan, and estimated multiemployer pension withdrawal liability of as much as $147.9 million.
What are the company's stated priorities for fiscal 2018?
Management expects operating expenses to rise in fiscal 2018, mainly from case volume growth, and expects transportation costs to increase with fuel prices. It plans to invest more in the sales team to drive local case growth. Capital expenditures are estimated at 1.3% to 1.4% of sales, and the company expects to continue growing its dividend.
06—Continue