OREANDA-NEWS. Sysco Corporation today announced financial results for its 14-week fourth fiscal quarter and 53-week fiscal year 2016 ended July 2, 2016. In fiscal 2015, the fourth quarter included 13 weeks and the year included 52 weeks.?

Fourth Quarter Fiscal 2016 Highlights

  • Sales increased 10.0% to $13.6 billion; on a comparable 13-week basis, sales increased 2.2%
  • Gross profit increased 12.7% to $2.5 billion; gross margin increased 44 basis points to 18.3%; on a comparable 13-week basis, gross profit increased 4.7%
  • Operating income increased 351.9% to $547 million; adjusted operating income increased 23.4% to $628 million; on a comparable 13-week basis, adjusted operating income increased 14.6%
  • Earnings Per Share (EPS) increased $0.26 to $0.38; adjusted EPS increased $0.12 to $0.64; on a comparable 13-week basis, adjusted EPS increased $0.08 to $0.60

Fiscal 2016 Highlights

  • Sales increased 3.5% to $50.4 billion; on a comparable 52-week basis, sales increased 1.5%
  • Gross profit increased 5.7% to $9.0 billion; gross margin increased 38 basis points to 17.9%; on a comparable 52-week basis, gross profit increased 3.6%
  • Operating income increased 50.5% to $1.9 billion; adjusted operating income increased 12.1% to $2.0 billion; on a comparable 52-week basis, adjusted operating income increased 9.6%
  • EPS increased $0.49 to $1.64; adjusted EPS increased $0.26 to $2.10; on a comparable 52-week basis, adjusted EPS increased $0.22 to $2.06

“I am very pleased with our performance during fiscal 2016, as we made significant progress toward our three-year plan financial objectives. During the year, we had strong local case growth, improved our gross profit, managed expenses well and drove increased operating income,” said Bill DeLaney, Sysco’s chief executive officer. “Looking forward, we remain highly focused on supporting the success of our customers, profitably growing our business and achieving the objectives of our three-year plan.”

?Earnings Per Share (EPS) and Adjusted EPS are shown on a diluted basis unless otherwise specified.  Adjusted financial results exclude certain items, which primarily include restructuring and merger-related costs. Results shown on a comparable 13 or 52 week basis are non-GAAP numbers and have been further adjusted to remove dollar amounts equal to 1/14 of the comparable fourth quarter non-GAAP results. Reconciliations of all non-GAAP measures are included in this release.

Fourth Quarter Fiscal 2016 Summary

Sales for the fourth quarter were $13.6 billion, an increase of 10.0% compared to the same period last year. Overall food cost deflation was 1.2% (0.9% in U.S. broadline), as measured by the estimated change in Sysco's product costs, with deflation in the meat and dairy categories partially offset by modest inflation in other categories. In addition, sales from acquisitions completed within the last 12 months increased sales by 1.2%, and the impact of changes in foreign exchange rates decreased sales by 0.5%. Case volume for the company’s U.S. broadline operations increased 10.2% during the quarter.  Local case growth within U.S. broadline operations increased 10.3%. Gross profit was $2.5 billion, an increase of 12.7% compared to the same period last year. Gross margin increased 44 basis points to 18.3%.

On a comparable 13-week basis, sales increased 2.2% and gross profit increased 4.7%. Total broadline case growth was 2.2% higher, and local case growth was 2.4% higher, as compared to the same period last year.

GAAP Operating Income, Net Earnings and EPS (14-week vs. 13-week)
Operating expenses decreased $143 million, or 6.8%, compared to the same period last year, due mainly to the elimination of acquisition-related costs in the prior year. Operating income was $547 million, an increase of $426 million, or 351.9%, compared to the same period last year. Interest expense was $74 million, a decrease of $3 million compared to the same period last year. Other expense, net was $141.3 million, primarily from the remeasurement of foreign denominated cash and losses on foreign currency option contracts. Both related to the purchase price for the acquisition of Brakes, which closed shortly after our fiscal year end. Net earnings were $216 million, an increase of $143 million, or 195.3%, compared to the same period last year. Diluted EPS was $0.38, which was 216.7% higher compared to the same period last year.

Non-GAAP Operating Income, Net Earnings and EPS (14-week vs. 13-week)
Adjusted operating expenses increased $164 million, or 9.6%, compared to the same period last year, due mainly to higher case volume-related expenses. Adjusted operating income was $628 million, an increase of $119 million, or 23.4%, compared to the same period last year. Adjusted interest expense was $56 million, an increase of $20 million compared to the same period last year, reflecting increased debt, the proceeds from which were used primarily to fund the company’s accelerated share repurchase program. Adjusted net earnings were $366 million, an increase of $57 million, or 18.3%, compared to the same period last year. Adjusted diluted EPS was $0.64, which was 23.1% higher compared to the same period last year.

Comparable Non-GAAP Operating Income, Net Earnings and EPS (13-week vs. 13-week)
For comparable results on a 13-week basis, including case growth, please see Table 1.

Fiscal 2016 Summary

Sales for fiscal 2016 were $50.4 billion, an increase of 3.5% compared to the same period last year. Overall food cost deflation was 0.7% (0.9% in U.S. broadline), as measured by the estimated change in Sysco's product costs, with deflation in the meat, seafood, dairy and poultry categories partially offset by modest inflation in other categories. In addition, sales from acquisitions completed within the last 12 months increased sales by 0.7%, and the impact of changes in foreign exchange rates decreased sales by 1.3%. Case volume for the company’s U.S. broadline operations grew 5.3% compared to the same period last year. Local case growth within U.S. broadline operations increased 4.7%. Gross profit was $9.0 billion, an increase of 5.7% compared to the same period last year. Gross margin increased 38 basis points to 17.9%.

On a comparable 52-week basis, sales increased 1.5% and gross profit increased 3.6%. Total broadline case growth was 3.0% higher, and local case growth was 2.7% higher, as compared to the same period last year.

GAAP Operating Income, Net Earnings and EPS (53-week vs. 52-week)
Operating expenses decreased $132 million, or 1.8%, compared to the same period last year, due mainly to the elimination of acquisition-related costs in the prior year. Operating income was $1.9 billion, an increase of $621 million, or 50.5%, compared to the same period last year. Interest expense was $306 million, an increase of $51 million compared to the same period last year. Other expense, net was $111.3 million, primarily from the remeasurement of foreign denominated cash and losses on foreign currency option contracts. Both related to the purchase price for the acquisition of Brakes, which closed shortly after our fiscal year end. Net earnings were $950 million, an increase of $263 million, or 38.3%, compared to the same period last year. Diluted EPS was $1.64, which was 42.6% higher compared to the same period last year.

Non-GAAP Operating Income, Net Earnings and EPS (53-week vs. 52-week)
Adjusted operating expenses increased $272 million, or 4.0%, compared to the same period last year, due mainly to higher case volume-related expenses and incentive expense. Adjusted operating income was $2.0 billion, an increase of $217 million, or 12.1%, compared to the same period last year. Adjusted interest expense was $182 million, an increase of $66 million compared to the same period last year, reflecting increased debt, the proceeds from which were used primarily to fund the company’s accelerated share repurchase program. Adjusted net earnings were $1.2 billion, an increase of $114 million, or 10.4%, compared to the same period last year. Adjusted diluted EPS was $2.10, which was 14.1% higher compared to the same period last year.

Comparable Non-GAAP Operating Income, Net Earnings and EPS (52-week vs. 52-week)
For comparable results on a 52-week basis, including case growth, please see Table 1.

Capital Spending and Cash Flow

Capital expenditures, net of proceeds from sales of plant and equipment, totaled $504 million for fiscal year 2016. Cash flow from operations was $1.9 billion for fiscal 2016, which was $378 million higher compared to the same period last year. Free cash flow for fiscal 2016 was $1.4 billion, which was $392 million higher compared to the same period last year.