Sysco Corp. (SYY)
F4Q10 Earnings Call
August 16, 2010 10:00 AM ET
Neil Russell – Vice President, Investor Relations
Bill DeLaney – President and CEO
Chris Kreidler – Chief Financial Officer
Meredith Adler – Barclays Capital
Andrew Wolf – BB&T Capital Markets
Greg Badishkanian – Citi
Jason Whitmer – Cleveland Research Company
Mark Wiltamuth – Morgan Stanley
Neil Currie – UBS
John Ivankoe – JPMorgan
Previous Statements by SYY
» Sysco Corporation F2Q10 (Qtr End 12/27/09) Earnings Call Transcript
» Sysco Corp. F1Q10 (Qtr End 09/26/2009) Earnings Call Transcript
» Sysco Corporation F4Q09 (Qtr End 06/27/2009) Earnings Call Transcript
At this time for opening remarks and introductions, I’d like to turn the call over to Mr. Neil Russell, Vice President of Investor Relations. Please go ahead, sir.
Thank you, James, and good morning, everyone. Thank you for joining us for Sysco’s fourth quarter and fiscal year 2010 conference call. On today’s call you will hear from Bill DeLaney, our President and Chief Executive Officer; and Chris Kreidler, our Chief Financial Officer.
Before we begin, please note that statements made in the course of this presentation that state the company’s or management’s intentions, beliefs, expectations or predictions of the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ in a material manner.
Additional information concerning factors that could cause actual results to differ in a material manner from those in the forward-looking statements is contained in the company’s SEC filings including, but not limited to, risk factors contained in the company’s annual report on Form 10-K for the year ended June 27, 2009, and in the company’s press release issued earlier this morning.
As disclosed in our earnings release this morning, our operating results this year included an extra week of operations due to the timing of the last day of our fiscal year. As a result, the fourth quarter of fiscal 2010 included 14 weeks of operations, compared to the fourth quarter last year, which included 13 weeks. And fiscal year 2010 included 53 weeks of operations, compared to the prior year, which included 52 weeks.
On the call today, we will discuss year-over-year comparisons that include the impact of the extra week of operations. However, to provide financial results that are more comparable on a year-over-year basis, certain metrics will be provided which remove the estimated impact of the extra week. These adjusted metrics are non-GAAP financial measures. You can find a reconciliation of these non-GAAP measures to the applicable GAAP measures on our Investor Relations website at sysco.com.
Also, all comments about earnings per share refer to diluted earnings per share, unless otherwise noted. Lastly, we ask that you reserve December 2nd on your calendars for our Analyst Day in New York. Additional information will be provided in the next couple of weeks.
With that out of the way I’ll turn the call over to our President and Chief Executive Officer, Bill DeLaney.
Thank you, Neil, and good morning, everyone. I’d like to begin this morning by recognizing our management team and all of our associates for both their commitment and hard work. They kept their full attention on servicing our customers and effectively managing expenses throughout a second consecutive challenging year.
This morning Sysco reported net earnings of $338 million for the fourth quarter of fiscal 2010. We were pleased to see case volumes once again increase year-over-year. While we have seen no consistent pattern of improvement on a week-to-week basis, we are encouraged by the fact that we have now experienced positive volume comparisons for the past several months.
In addition, we experienced food cost inflation as measured by the estimated change in our cost of goods during the fourth quarter for the first time in a year. Specifically, inflation contributed approximately 2.2% of our overall sales growth for the quarter, driven mainly by higher prices in the dairy, meat and produce categories.
I’m particularly pleased with how well our operating companies continue to manage their expenses. Along with supporting the growth of our customers, improving our operational effectiveness remains a key area of focus throughout Sysco. While industry conditions are more favorable than they were a year ago, our marketplace remains highly competitive. This environment has increased pricing pressures which we have and will continue to work through with our customers.
Specifically, we focus our efforts on differentiating our product and service offerings, more effectively utilizing our scale to better integrate our enterprise-wide capabilities and reducing our cost structure overtime. We believe that we’ve been able to take share as a result of these efforts.
Reflecting on the entire fiscal year, we sold more than $37 billion of product, shipped more than 1.2 billion cases, generated $2 billion of operating income, recognized record earnings of $1.99 per diluted share, produced cash flow from operations of $885 million and distributed $580 million of dividends to our shareholders.
Turning to our multi-year business transformation initiative for a moment, we currently have more than 300 people dedicated full-time to the project. Over the past two years, we have completed much of the design and technology development work and are currently testing systems and processes. The project that we track and we currently expect our first operating company to go live early next calendar year.
Subsequent rollouts will occur in waves of 5 to 10 operating companies through the end of 2013. This project is the single most important initiative we have undertaken since the formation of Sysco. As previously communicated, we are investing significant amounts of financial and human capital to better position Sysco for profitable sales growth for years to come. We will continue provide periodic updates as we move forward with the work.