Highlights of the largest distributor's second quarter are:
Diluted earnings per share rose 5.9% to $0.36 compared to $0.34 in the same period last year.
Net earnings climbed 4.8% to $232.6 million vs. $222.0 million in last year's second quarter.
Sales increased 4.2% to $7.3 billion versus $7.0 billion in the second quarter of fiscal 2004.
Acquisitions contributed 0.7% to sales growth and inflation, as measured by product cost increases, was 3.8% in the second quarter.
Operating expenses as a percent of sales were 13.71%, a 46-basis point reduction in comparison to 14.17% in the same period last year.
Highlights of Sysco's half-year results are:
Diluted earnings per share rose 7.7% to $0.70 compared to $0.65 in the same period last year.
Net earnings climbed 6.4% to $458.6 million vs. $430.8 million in last year's first 26 weeks.
Sales increased 4.9% to $14.9 billion versus $14.2 billion last year.
Acquisitions contributed 0.6% to sales growth and inflation, as measured by product cost increases, was 4.7% during the period.
Operating expenses as a percent of sales were 13.86%, a 40-basis point reduction in comparison to 14.26% in the same period last year.
In analyzing the results, Richard J. Schnieders, chairman and chief executive officer, noted that it sales staff generated "sound results" in the second quarter by controlling expenses, implementing business review and business development strategies and leveraging existing technology to more efficiently and accurately serve customers.
Schnieders also noted that the second quarter represented the corporation's "most difficult comparisons for the year." He said Sysco had to face last year's strong 21.4% increase in earnings per share two negative calendar shifts in the quarter.
"This year, New Year's Day, when many restaurants are closed, fell in our second quarter. Additionally, both Christmas and New Year's Day, which are very low volume restaurant days, fell on a Saturday, which typically is the busiest day of the week for dining traffic. Despite those factors and continued price sensitivity in our foodservice markets, Sysco's committed workforce generated the sales and earnings reported today," Schnieders said.
He said Sysco's our operating companies continue to improve their efficiency and quality metrics and he remains confident that "they are well positioned for future growth as comparisons become easier and foodservice trends pick up."
Reviewing the company's programs for future growth, Thomas E. Lankford, Sysco's president and chief operating officer, said the Northeast Redistribution Center in Front Royal, VA is completed and receiving products. That facility will begin distributing products to Sysco's broadline company near Boston, followed incrementally by 13 additional broadline companies in the Northeast region in two week. By October, all 14 companies will be receiving scheduled products from the Northeast Redistribution Center, Lankford said.
"This project is the largest strategic undertaking in the history of Sysco, and we are convinced that our shareholders, customers and suppliers will benefit from the distribution efficiencies and competitive advantages that it will generate," he said.
Expenditures for the National Supply Chain project were $19.5 million during the second quarter, $13.1 million of which was capitalized and the remainder of which was expensed. The implementation of the project is on time, Lankford continued, and is slightly under budget. At the end of the second quarter total expenditures on the project were $256.3 million, of which $178.6 million has been capitalized.
"Last quarter we advised that start-up expenses related to the Northeast Redistribution Center would have an estimated negative impact of $0.04 to $0.05 on earnings per share (EPS) during fiscal 2005," Lankford said. "Based on our experience to date, we now anticipate a smaller EPS impact of between $0.03 and $0.04 for fiscal 2005 and that effect will be reflected in our third and fourth quarter results. For fiscal 2006 we continue to project that the benefits of the National Supply Chain project will offset any further costs and perhaps even contribute a half-cent to EPS."
During the second quarter Sysco's total capital expenditures were approximately $105.7 million, resulting in total expenditures of $205.6 million for the first 26 weeks of fiscal year 2005. The company continues to anticipate that capital spending for fiscal 2005 will be in a range of $400 to $450 million.
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