Sysco Corp. (SYY, Financial) filed Quarterly Report for the period ended 2009-09-26.
Sysco Corporation is the largest North American distributor of food and food related products to the foodservice or `food-prepared-away-from-home` industry. The company provides its products and services to restaurants healthcare and educational facilities lodging establishments and other foodservice customers. Sysco Corp. has a market cap of $15.67 billion; its shares were traded at around $26.5 with a P/E ratio of 15 and P/S ratio of 0.4. The dividend yield of Sysco Corp. stocks is 3.6%. Sysco Corp. had an annual average earning growth of 13.3% over the past 10 years. GuruFocus rated Sysco Corp. the business predictability rank of 4-star.
carrying values of the companys corporate-owned life insurance policies are adjusted to their cash surrender values. The gain of $21,152,000 recorded to adjust the carrying value of corporate-owned life insurance to their cash surrender values in the first quarter of fiscal 2010 is non-taxable for income tax purposes and had the impact of decreasing the effective tax rate for the period. Third, the company recorded a tax benefit of approximately $5,000,000 for the reversal of valuation allowances previously recorded on state net operating loss carryforwards.
Operating income increased $1,217,000 in the first quarter of fiscal 2010 over the comparable period of the prior year. Gross margin dollars decreased 10.4% while operating expenses decreased 12.0% in the first quarter of fiscal 2010 from the first quarter fiscal 2009. Contributing to the gross margin decline was a decrease of $7,893,000 in the fuel surcharges charged to customers in the first quarter of fiscal 2010 from the comparable period of the prior year due to lower fuel prices in the first quarter of fiscal 2010. The decline in operating expenses was primarily due to decrease of $6,455,000 in fuel costs in the first quarter of fiscal 2010 from the comparable period of the prior year. We expect fuel surcharges and fuel costs to be significantly lower in the second quarter of fiscal 2010 as compared to the second quarter of fiscal 2009; however, assuming that fuel prices do not greatly rise above recent levels during the remaining portion of fiscal 2010, we expect fuel surcharges and fuel costs in the last half of fiscal 2010 to be more closely comparable to those in the corresponding period in the prior year. Also contributing to the decrease in operating expenses were operational efficiencies in both delivery and warehouse areas, including reduced payroll expense related to headcount reductions.
Cash flow from operations was negatively impacted by decreases in accrued expenses of $33,896,000 for the first quarter of fiscal 2010 and $149,281,000 for the first quarter of fiscal 2009. The decreases in both the first quarters of fiscal 2010 and fiscal 2009 were primarily due to the payment of the respective prior year annual incentive bonuses, partially offset by accruals for current year incentives. The level of prior year annual incentive bonuses paid in fiscal 2010 was significantly lower than in fiscal 2009, due to the operating performance trend in fiscal 2009. In addition, the decrease in the first quarter of fiscal 2009 was affected by the payment of 401(k) matching contributions, partially offset by accruals for current year 401(k) matching contributions.
Cash flow from operations for the first quarter of fiscal 2010 was negatively impacted by changes in deferred tax assets and liabilities of $207,546,000, partially offset by an increase in accrued income taxes of $56,113,000. The main factor affecting both of these items, as well as cash taxes paid, was the IRS settlement, which resulted in the payment of taxes of $316,000,000 in the first quarter of fiscal 2010. Total cash taxes paid were $334,833,000 and $42,425,000 in the first quarters of fiscal 2010 and 2009, respectively.
The net balances of other long-term liabilities and prepaid pension cost decreased $85,596,000 during the first quarter of fiscal 2010 and decreased $34,507,000 during the first quarter of fiscal 2009. The decrease in the first quarter of fiscal 2010 is primarily attributable to three items. First, our liability for unrecognized tax benefits decreased as a result of the settlement with the IRS (discussed below in Other Considerations). Second, our liability for deferred incentive compensation decreased due to accelerated distributions taken by plan participants of all or a portion of their vested balances pursuant to certain transitional relief under the provisions of Section 409A of the Internal Revenue Code. Third, pension contributions to our company-sponsored plans exceeded net company-sponsored pension costs. The decrease in the first quarter of fiscal 2009 was primarily attributable to pension contributions to our company-sponsored plans. This decrease was partially offset by the recording of net
Read the The complete ReportSYY is in the portfolios of Mark Hillman of Hillman Capital Management, Robert Olstein of Olstein Financial Alert Fund, Tom Gayner of Markel Gayner Asset Management Corp, Tweedy Browne of Tweedy Browne CO LLC, Richard Aster Jr of Meridian Fund, PRIMECAP Management.
Sysco Corporation is the largest North American distributor of food and food related products to the foodservice or `food-prepared-away-from-home` industry. The company provides its products and services to restaurants healthcare and educational facilities lodging establishments and other foodservice customers. Sysco Corp. has a market cap of $15.67 billion; its shares were traded at around $26.5 with a P/E ratio of 15 and P/S ratio of 0.4. The dividend yield of Sysco Corp. stocks is 3.6%. Sysco Corp. had an annual average earning growth of 13.3% over the past 10 years. GuruFocus rated Sysco Corp. the business predictability rank of 4-star.
Highlight of Business Operations:
Gross margin dollars declined primarily due to lower sales, which reflected product cost deflation in the first quarter of fiscal 2010 as compared to product cost inflation in the first quarter fiscal 2009. We may be negatively impacted by prolonged periods of product cost deflation because we make a significant portion of our sales at prices that are based on the cost of products we sell plus a percentage markup. As a result, our profit levels may be negatively impacted during periods of product cost deflation, even though our gross profit percentage may remain relatively constant. Gross margin dollars were also impacted by lower fuel surcharges. Fuel surcharges were approximately $29,000,000 lower in the first quarter of fiscal 2010 as compared to the first quarter of fiscal 2009. We expect fuel surcharge revenue to be up to $25,000,000 lower in the second quarter of fiscal 2010 as compared to the second quarter of fiscal 2009; however, assuming that fuel prices do not greatly rise above recent levels during the remaining portion of fiscal 2010, we expect fuel surcharges in the last half of fiscal 2010 to be more closely comparable to those in the corresponding period in the prior year.carrying values of the companys corporate-owned life insurance policies are adjusted to their cash surrender values. The gain of $21,152,000 recorded to adjust the carrying value of corporate-owned life insurance to their cash surrender values in the first quarter of fiscal 2010 is non-taxable for income tax purposes and had the impact of decreasing the effective tax rate for the period. Third, the company recorded a tax benefit of approximately $5,000,000 for the reversal of valuation allowances previously recorded on state net operating loss carryforwards.
Operating income increased $1,217,000 in the first quarter of fiscal 2010 over the comparable period of the prior year. Gross margin dollars decreased 10.4% while operating expenses decreased 12.0% in the first quarter of fiscal 2010 from the first quarter fiscal 2009. Contributing to the gross margin decline was a decrease of $7,893,000 in the fuel surcharges charged to customers in the first quarter of fiscal 2010 from the comparable period of the prior year due to lower fuel prices in the first quarter of fiscal 2010. The decline in operating expenses was primarily due to decrease of $6,455,000 in fuel costs in the first quarter of fiscal 2010 from the comparable period of the prior year. We expect fuel surcharges and fuel costs to be significantly lower in the second quarter of fiscal 2010 as compared to the second quarter of fiscal 2009; however, assuming that fuel prices do not greatly rise above recent levels during the remaining portion of fiscal 2010, we expect fuel surcharges and fuel costs in the last half of fiscal 2010 to be more closely comparable to those in the corresponding period in the prior year. Also contributing to the decrease in operating expenses were operational efficiencies in both delivery and warehouse areas, including reduced payroll expense related to headcount reductions.
Cash flow from operations was negatively impacted by decreases in accrued expenses of $33,896,000 for the first quarter of fiscal 2010 and $149,281,000 for the first quarter of fiscal 2009. The decreases in both the first quarters of fiscal 2010 and fiscal 2009 were primarily due to the payment of the respective prior year annual incentive bonuses, partially offset by accruals for current year incentives. The level of prior year annual incentive bonuses paid in fiscal 2010 was significantly lower than in fiscal 2009, due to the operating performance trend in fiscal 2009. In addition, the decrease in the first quarter of fiscal 2009 was affected by the payment of 401(k) matching contributions, partially offset by accruals for current year 401(k) matching contributions.
Cash flow from operations for the first quarter of fiscal 2010 was negatively impacted by changes in deferred tax assets and liabilities of $207,546,000, partially offset by an increase in accrued income taxes of $56,113,000. The main factor affecting both of these items, as well as cash taxes paid, was the IRS settlement, which resulted in the payment of taxes of $316,000,000 in the first quarter of fiscal 2010. Total cash taxes paid were $334,833,000 and $42,425,000 in the first quarters of fiscal 2010 and 2009, respectively.
The net balances of other long-term liabilities and prepaid pension cost decreased $85,596,000 during the first quarter of fiscal 2010 and decreased $34,507,000 during the first quarter of fiscal 2009. The decrease in the first quarter of fiscal 2010 is primarily attributable to three items. First, our liability for unrecognized tax benefits decreased as a result of the settlement with the IRS (discussed below in Other Considerations). Second, our liability for deferred incentive compensation decreased due to accelerated distributions taken by plan participants of all or a portion of their vested balances pursuant to certain transitional relief under the provisions of Section 409A of the Internal Revenue Code. Third, pension contributions to our company-sponsored plans exceeded net company-sponsored pension costs. The decrease in the first quarter of fiscal 2009 was primarily attributable to pension contributions to our company-sponsored plans. This decrease was partially offset by the recording of net
Read the The complete ReportSYY is in the portfolios of Mark Hillman of Hillman Capital Management, Robert Olstein of Olstein Financial Alert Fund, Tom Gayner of Markel Gayner Asset Management Corp, Tweedy Browne of Tweedy Browne CO LLC, Richard Aster Jr of Meridian Fund, PRIMECAP Management.
