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Sysco Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 6, 2012 09:35AM
Sysco Corp. (SYY) filed Quarterly Report for the period ended 2012-09-29. Sysco Corporation has a market cap of $18.1 billion; its shares were traded at around $30.88 with a P/E ratio of 15.2 and P/S ratio of 0.4. The dividend yield of Sysco Corporation stocks is 3.5%. Sysco Corporation had an annual average earning growth of 6.3% over the past 10 years. GuruFocus rated Sysco Corporation the business predictability rank of 3-star.
Highlight of Business Operations:Sales were 4.7% higher in the first quarter of fiscal 2013 than in the comparable period of the prior year. Sales for the first quarter of fiscal 2013 increased as a result of product cost inflation, and the resulting increase in selling prices, along with improving case volumes. Changes in product costs, an internal measure of inflation or deflation, were estimated as inflation of 2.2% during the first quarter of fiscal 2013. Case volumes including acquisitions within the last 12 months improved approximately 2.9% in the first quarter of fiscal 2013. Case volumes excluding acquisitions within the last 12 months improved approximately 2.6% in the first quarter of fiscal 2013. Our case volumes represent our results from our Broadline and SYGMA segments only. Sales from acquisitions within the last 12 months favorably impacted sales by 0.5% for the first quarter of fiscal 2013. The exchange rates used to translate our foreign sales into United States dollars negatively impacted sales by 0.3% in the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012.
We estimate that Sysco’s product cost inflation was 2.2% during the first quarter of fiscal 2013. We generally view this level of product cost inflation as normal in our industry; however, product categories may have varying levels of inflation or deflation within this overall amount. Based on our product sales mix for the first quarter of fiscal 2013, we were most impacted by higher levels of inflation in the poultry and meat product categories in the range of 6% to 11%. Our dairy category experienced deflation of 8%. Our gross margin trends are improving with these more modest inflation amounts which are beneficial to us and our customers. In the summer months of 2012, certain agricultural areas of the United States experienced severe drought. The impact of this drought is uncertain and could result in volatile input costs. Input costs could increase at any point in time for a large portion of the products that we sell for a prolonged period. While we cannot predict whether inflation will occur, prolonged periods of high inflation, either overall or in certain product categories, can have a negative impact on us and our customers, as high food costs can reduce consumer spending in the food-away-from-home market, and may negatively impact our sales, gross profit and earnings.
Sales were 4.6% greater in the first quarter of fiscal 2013 than the comparable prior year period. Case volume improvement and product cost inflation and the resulting increase in selling prices contributed to the increase in sales in the first quarter of fiscal 2013. Changes in product costs, an internal measure of inflation or deflation, were estimated as inflation of 2.4% in the first quarter of fiscal 2013. Non-comparable acquisitions contributed 0.3% to the overall sales comparison for the first quarter of fiscal 2013. The exchange rates used to translate our foreign sales into United States dollars negatively impacted sales by 0.3% in the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012.
comparison in the provisions recorded for the withdrawal from multiemployer pension plans in each period. The increase was primarily due to increased delivery and warehouse compensation, partially attributable to case growth, and added costs from companies acquired in the last 12 months. Delivery and warehouse compensation includes activity-based pay which is driven by case volumes. Since these drivers are variable in nature, increased case volumes can increase delivery and warehouse compensation. Labor shortages also impacted costs in some of the markets that we operate in due to labor demand from increased oil exploration. These increases were partially offset by reduced sales and general and administrative pay-related expenses. Fuel costs were $6.0 million higher in the first quarter of fiscal 2013 than in the comparable prior year period. Assuming that fuel prices do not rise significantly over recent levels during fiscal 2013, fuel costs exclusive of any amounts recovered through fuel surcharges, are expected to increase by approximately $5 million to $15 million as compared to fiscal 2012. Our estimate is based upon current, published quarterly market price projections for diesel, the cost committed to in our forward fuel purchase agreements currently in place for fiscal 2013 and estimates of fuel consumption. Actual fuel costs could vary from our estimates if any of these assumptions change, in particular if future fuel prices vary significantly from our current estimates. We continue to evaluate all opportunities to offset potential increases in fuel expense, including the use of fuel surcharges and overall expense management.
We generated $213.2 million in cash flow from operations in the first quarter of fiscal 2013, as compared to $255.3 million in the first quarter of fiscal 2012. This decrease of $42.1 million was largely attributable to the year-over-year impact of tax provisions and payments and a reduction in net earnings. These decreases were partially offset by an increase in non-cash depreciation and amortization expense and changes in working capital. These items are more fully described below.
Stocks Discussed: SYY,