01—Abstract
Summary
Summary of the 10-Q filed January 31, 2024. Cited figures are marked; the original filing is the authoritative source.
Sysco Corporation's 10-Q for the second quarter of fiscal 2024 (quarter ended December 30, 2023) shows sales of $19.29 billiona, up 3.7% from $18.59 billion a year earlier, with operating income of $700.0 million, up 9.2%.
Net earnings rose 194.0% to $415.2 millionb and diluted earnings per share were $0.82, but the prior-year quarter included a $315.4 million pension settlement charge. On an adjusted basis (excluding Certain Items), net earnings increased 10.1% to $449.0 million and adjusted diluted earnings per share rose 11.3% to $0.89. For the first 26 weeks, sales grew 3.1% to $38.9 billion, and diluted earnings per share were $1.81, up 52.1%, or $1.96 on an adjusted basis, up 11.4%.
Case volume in U.S. Foodservice rose 3.4%c in the quarter, while total enterprise inflation was 1.1%. Management expects slightly positive industry volume growth and slightly positive enterprise inflation for fiscal 2024. Gross margin improved 21 basis points in the quarter, and operating expenses rose 3.9%, driven by higher volumes.
Balance sheet leverage increased during the period. Long-term debt rose to $12.03 billiond from $10.35 billion at fiscal year-end, following the issuance of $1.0 billion in senior notes in November 2023 and $1.17 billion of acquisition payments, primarily for Edward Don & Company, which was acquired for $969.4 million in cash.
Operating cash flow for the first 26 weeks was $855.9 million and free cash flow was $527.4 million. Management raised its fiscal 2024 share repurchase expectation to $1.25 billion from $750.0 million, and expects interest expense to increase by approximately $70 million for fiscal 2024.
02—Key points
Key Highlights
- Second-quarter sales rose 3.7% to $19.29 billion, with U.S. Foodservice case volume up 3.4%.
- Operating income increased 9.2% to $700.0 million; adjusted operating income rose 9.2% to $744.9 million.
- Diluted EPS was $0.82 versus $0.28 a year earlier, which included a $315.4 million pension settlement charge; adjusted diluted EPS rose 11.3% to $0.89.
- Long-term debt increased to $12.03 billion from $10.35 billion, reflecting $1.0 billion of new senior notes issued in November 2023.
- The company acquired Edward Don & Company for $969.4 million in cash in November 2023 and BIX Produce Company in the first quarter.
- Free cash flow for the first 26 weeks was $527.4 million, versus $219.3 million a year earlier.
- Share repurchase expectations for fiscal 2024 were increased to $1.25 billion from $750.0 million; the company expects to return $2.25 billion to shareholders including dividends.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Sysco kept $0.02.
- Revenue$19.29B100.0%
- Cost of revenue−$15.77B81.8%
- Gross profit$3.51B18.2%
- Operating costs−$2.81B14.6%
- Operating income$700.0M3.6%
- Interest, other & tax−$285.0M1.5%
- Net income$415.0M2.2%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed January 31, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $19.29B$18.59B | +3.7% |
| Cost of Revenue | $15.77B$15.24B | +3.5% |
| Gross Profit | $3.51B$3.35B | +4.9% |
| Operating Expenses | $2.81B$2.71B | +3.9% |
| Operating Income | $700.00M$640.82M | +9.2% |
| Net Income | $415.00M$141.22M | +193.9% |
| EPS (Basic) | $0.82$0.28 | +192.9% |
| EPS (Diluted) | $0.82$0.28 | +192.9% |
| Shares Outstanding (Basic) | 504.31M507.61M | −0.6% |
| Shares Outstanding (Diluted) | 505.93M510.15M | −0.8% |
05—Questions
Frequently Asked Questions
How did Sysco's profitability change in the second quarter of fiscal 2024?
Operating income rose 9.2% to $700.0 million and net earnings rose to $415.2 million from $141.2 million. The prior-year quarter included a $315.4 million pension settlement charge, so the 194.0% net earnings increase is largely due to that comparison. Adjusted net earnings, which exclude Certain Items, increased 10.1% to $449.0 million.
What drove sales growth?
Sales growth was primarily driven by volume. U.S. Foodservice case volume increased 3.4% in the second quarter, and the company cited inflation of 1.1% at the enterprise level, primarily in meat and frozen categories. International Foodservice sales increased 9.6%, including 3.7% from inflation and 3.2% from foreign currency.
How did Sysco's debt and cash position change?
Long-term debt increased to $12.03 billion from $10.35 billion at July 1, 2023, mainly from $1.0 billion of senior notes issued in November 2023 and new commercial paper borrowings of $500.0 million. Cash and cash equivalents rose to $962.2 million, and the company stated that about 57% of this cash was held by international subsidiaries.
What are management's outlook and capital return plans for fiscal 2024?
Management expects slightly positive industry volume growth and slightly positive total enterprise inflation in fiscal 2024. It raised its share repurchase expectation to $1.25 billion from $750.0 million and expects to return $2.25 billion to shareholders including dividends. Interest expense is expected to increase by approximately $70 million, primarily due to higher debt from the Edward Don acquisition.
What does the pending share repurchase arrangement involve?
In December 2023, Sysco entered into an accelerated share repurchase agreement with Goldman, Sachs & Co. to buy $500 million of common stock. The company paid $500 million on January 11, 2024 for 6,026,110 shares, subject to final adjustment based on the volume-weighted average share price, and expects completion by the end of March 2024.
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