The distributorship reported that diluted earnings per share rose 15.4% to 30 cents compared with 26 cents in the same period last year. Sales increased 9.9% to $7 billion vs. $6.4 billion in the third quarter of FY 2003. Operating expenses as a percent to sales declined 70 basis points or to 14.35% compared with 15.05% last year.
Richard J. Schnieders, chairman and ceo, said, "I am extremely proud of the way our associates performed during the third quarter. They quite literally weathered the storm and in the process helped our customers do the same. Our sales and earnings performance was exceptional in a quarter which historically has been a soft period and which this year was marked by eight weeks of severe winter weather in a number of markets. The continued implementation of business development and business relationship strategies, the sharing of best business practices, and our expense reduction efforts all contributed to the strong third quarter results.
"Another equally encouraging sign was that the sales momentum our companies exhibited in the final weeks of the third quarter continued as we began the fourth quarter," continued Schnieders. "In fact, the fourth quarter opened with record sales of $583.4 million for the week ended April 3 and we are very encouraged about our fourth quarter opportunities."
Schnieders noted that the uncharacteristically high food cost inflation that has plagued the industry in the last 12 months is slowly declining, although, he continued, during the quarter inflation continued to impact many of the company's product categories, including dairy, canned and dry goods, fresh and frozen meats, poultry and produce. Schnieders added that acquisitions contributed 0.4% to the overall sales growth of 9.9% in the quarter while food cost inflation for the quarter was 5.2%. By comparison, during the same period last year acquisitions represented 7.3% of sales growth and food cost inflation was 0.8%.
"During the quarter we continued appointing sales management personnel to the newly created positions of either business development manager or business relationship manager," said Schnieders. "The individuals charged with business development assist marketing associates in cultivating new customer relationships, while the business relationship managers team with marketing associates to strengthen the partnerships they already have with existing customers. We are encouraged by the early success of this program and believe the additional focus it provides will be very beneficial to our customers."
Thomas E. Lankford, president and chief operating officer, said, "Our operating companies once again did an exceptional job in controlling expenses, which as a percent to sales declined 70 basis points in the quarter."
Two key components contributed to this performance, he said. First, by increasing pieces per stop and pieces per trip, Sysco delivery vehicles were more efficiently utilized and the company's delivery costs were reduced. Secondly, the activity-based compensation (ABC) programs for delivery associates enhanced productivity and performance in the quarter. In doing so, he continued, the ABC program provided an opportunity for our associates to earn more while minimizing overtime costs.
Lankford stated that the company's Fargo, ND, broadline fold-out was completed and began distributing products during the third quarter and that fold-out facilities in Post Falls, Idaho and Oxnard, Calif., are progressing according to plan. Sysco's acquisition of Overton Distributors, Inc., a produce distribution company with locations in Raleigh and Charlotte, NC, and Nashville, TN, was completed at the beginning of the fourth quarter.
"Capital expenditures have totaled $379 million for the three quarters of the fiscal year, of which $131 million was spent in the third quarter," Lankford continued. "The National Supply Chain project continued to progress according to plan during the quarter and to date $183 million has been expended on the project since it began in fiscal 2002."
Lankford added that third-quarter expenditures for the Northeast Redistribution Center were $28 million, $25 million of which was capitalized. Sysco expects total capital expenditures for the year to be approximately $500 million.