Richard J. Schnieders, chairman, ceo and president, attributed the distributorship's growth to its business reviews and addition of customer contact professionals.
"I am especially pleased with the results in light of the many higher expenses we encountered during the year. I extend my sincere appreciation to all of our associates and operating companies for their tremendous efforts. Entering the first quarter of fiscal 2007, many of the higher expenses we encountered in fiscal 2006 will become more comparable, and I am optimistic about our sales, earnings and market share growth opportunities in the new fiscal year," Schnieders said.
Adoption of EITF 04-13 reduced fiscal sales growth by 0.3% or $99.8 million, the company said, and net earnings after the cumulative effect of the change taken during its first fiscal quarter of 2006 were $855.3 million compared with $961.5 million last year. Diluted earnings per share were $1.36 compared to $1.47 in fiscal year 2005.
Net sales in the first quarter of fiscal 2005 increased 6.6% to $8.509 billion from $7.981 billion in last year's fourth quarter. Net earnings were $254.1 million vs. $284.7 million in last year's fourth quarter and diluted earnings per share were $0.41 compared to $0.44 in last year's fourth quarter.
During the fourth quarter, more than 9,000 business reviews were performed at Sysco's U.S. broadline operations. Sales to customers that participated in the review process continued to increase, on average, in the mid-teens range. An additional 1.2%, or 125, customer contact professionals were also added during the quarter.
Sales for fiscal year 2006 increased 7.8%, including 1.4% from non-comparable acquisitions (less than 12 months) and food cost inflation of 0.59% as measured by the change in Sysco's cost of goods.
Approximately 39,000 business reviews were performed during fiscal 2006 with the company's independent restaurant customers. Sales to customers that participated in the business review process increased, on average, in the mid-teens range. Sysco also added 619 customer contact professionals during the fiscal year, a 6.2% increase over last year's staffing level.
Sysco reported that gross profit margins increased 52 basis points in the fourth quarter to 19.86% compared with 19.34% in last year's fourth quarter, including a 23 basis point benefit from adopting EITF 04-13. This gross profit expansion was primarily the result of deflation, efficient merchandising and customer and category mix, the company explained. For the fiscal year, gross profit margins increased 18 basis points, to 19.28% compared to last year's 19.10%. The adoption of EITF 04-13 contributed 6 basis points to the fiscal year increase in gross margins.
For fiscal year 2006 operating expenses as a percent of sales were 14.70% compared to 13.85% last year. Operating expenses as a percent of sales were 14.75% during the fourth quarter compared to 13.55% in the same quarter last year.
The company said its long-standing executive compensation philosophy directly links potential annual bonus payments for senior management and key executives to the company's results. For the fourth quarter of fiscal 2006, expenses related to management performance-based incentive compensation were approximately $16 million below last year's fourth quarter. For the fiscal year, expenses related to management performance-based incentive compensation were approximately $27 million below last year.
Capital expenditures during the quarter were $150.3 million. For the fiscal year, capital expenditures totaled $514.8 million. The company projects capital expenditures will be in a range of $575 million to $625 million for fiscal 2007 primarily for growth investments in facility replacements and expansions, construction of fold-out operations, additions to fleet and continued investment in the National Supply Chain project.
Sysco's 16th broadline fold-out operation in Raleigh, NC, began receiving product in July and is scheduled to begin distributing product to customers next month. Preparations for the Knoxville, TN, broadline fold-out that was announced this past March continue to progress according to plan. That facility is expected to be operational in the first quarter of fiscal 2008. On Aug. 7, SYSCO also announced plans to construct a broadline fold-out in Longview, Texas, to service customers throughout east Texas and portions of Arkansas and Louisiana.
One acquisition, the purchase of certain foodservice assets of Bunn Capitol Co. in Springfield, IL., was announced on July 18, 2006. It was the fourth this calendar year.