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Sysco Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 8, 2011 08:22AM

Sysco Corp. (SYY) filed Quarterly Report for the period ended 2011-10-01. Sysco Corp. has a market cap of $16.5 billion; its shares were traded at around $27.88 with a P/E ratio of 14.5 and P/S ratio of 0.4. The dividend yield of Sysco Corp. stocks is 3.7%. Sysco Corp. had an annual average earning growth of 7.1% over the past 10 years. GuruFocus rated Sysco Corp. the business predictability rank of 3.5-star.



Highlight of Business Operations:

Sales were 8.6% higher in the first quarter of fiscal 2012 than in the comparable period of the prior year. Product cost inflation, and the resulting increase in selling prices, impacted sales in the first quarter of fiscal 2012. Changes in product costs, an internal measure of inflation or deflation, were estimated as inflation of 7.3% during the first quarter of fiscal 2012, as compared to inflation of 3.3% during the first quarter of fiscal 2011. Case volumes improved approximately 2.0% including acquisitions within the last 12 months, or approximately 1.0% excluding these acquisitions. Sales from acquisitions within the last 12 months favorably impacted sales by 0.7% for the first quarter of fiscal 2012. The exchange rates used to translate our foreign sales into U.S. dollars positively impacted sales by 0.7% in the first quarter of fiscal 2012 compared to the first quarter fiscal 2011.

Gross profit dollars increased in the first quarter of fiscal 2012 as compared to the first quarter of fiscal 2011 primarily due to increased sales. Gross margin, which is gross profit as a percentage of sales, was 18.40% in the first quarter of fiscal 2012, a decline of 53 basis points from the gross margin of 18.93% in the first quarter of fiscal 2011. This decline in gross margin was primarily the result of product cost inflation. Sysco’s product cost inflation was estimated to be 7.3% during the first quarter of fiscal 2012. Based on our product sales mix for the first quarter of fiscal 2012, we were most impacted by higher levels of inflation in the dairy, meat and canned and dry product categories. While we are generally able to pass through modest levels of inflation to our customers, we were unable to fully pass through these higher levels of product cost inflation with the same

We adjust the carrying values of our COLI policies to their cash surrender values on an ongoing basis. The cash surrender values of these policies are largely based on the values of underlying investments, which through fiscal 2011 included publicly traded securities. As a result, the cash surrender values of these policies fluctuated with changes in the market value of such securities. The changes in the financial markets resulted in gains for these policies of $13.5 million in the first quarter of fiscal 2011. Near the end of fiscal 2011, we reallocated all of our policies into low-risk, fixed-income securities to reduce earnings volatility and therefore our adjustments for the first quarter of fiscal 2012 were not significant. While we expect a year over year impact from COLI adjustments during the remaining quarters of fiscal 2012 as compared to the comparable periods of fiscal 2011, we do not expect a significant impact on fiscal 2012’s operating income, net earnings and earnings per share from these policies.

The following table sets forth sales and operating income of each of our reportable segments, the other segment, and intersegment sales, expressed as a percentage of aggregate segment sales, including intersegment sales, and operating income, respectively. For purposes of these statistical tables, operating income of our segments excludes corporate expenses of $155.0 million in the first quarter of fiscal 2012, as compared to $122.3 million in the first quarter of fiscal 2011, that is not charged to our segments. This information should be read in conjunction with Note 12, “Business Segment Information”:

Sales for the first quarter of fiscal 2012 were 8.9% greater than the comparable prior year period. Product cost inflation and the resulting increase in selling prices, combined with case volume improvement, contributed to the increase in sales in the first quarter of fiscal 2012. Changes in product costs, an internal measure of inflation or deflation, were estimated as inflation of 7.6% in the first quarter of fiscal 2012. Non-comparable acquisitions contributed 0.8% to the overall sales comparison for the first quarter of fiscal 2012. The changes in the exchange rates used to translate our foreign sales into U.S. dollars positively impacted sales by 0.8% compared to the first quarter of fiscal 2011.

Read the The complete Report



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