Sysco Q1 Profit Up, Tops View - Update

(RTTNews) - Food products distributor Sysco Corp. (SYY | Quote | Chart | News | PowerRating) on Monday posted higher profit for the first quarter, favorably impacted by a one-time tax benefit from IRS settlement. Per share earnings advanced 20% from the same period last year and topped the Street view.

The Houston, Texas-based company's first-quarter net income was $326.2 million, up 17.8% from $276.8 million in the year-ago quarter. On a per share basis, earnings grew 19.6% to $0.55 from $0.46 in the same quarter of last year.

On average, 9 analysts polled by Thomson Reuters expected the company to post earnings of $0.45 per share. Analysts' estimates typically exclude special items.

The company noted that the first quarter results were benefited from a $0.04 per share impact from the change in the value of corporate owned life insurance or COLI, and a $0.05 per share impact from the company's IRS settlement which was previously announced in August 2009.

However, quarterly sales totaled $9.08 billion, 8.1% lower than the previous year's sales of $9.88 billion, and fell behind the $9.16 billion revenue consensus estimate of six analysts polled by Thomson Reuters.

Sysco said its first-quarter sales decline was largely due to the impact of reduced consumer spending experienced by much of its customer base, as well as significant food cost deflation.

While commenting on the first-quarter results, Bill DeLaney, chief executive officer of Sysco, said, "In the midst of what continues to be an extremely challenging business environment, our operating companies managed expenses extraordinarily well."

Operating income for the latest quarter was $497 million, a decrease of 1.5% compared to $505 million in the corresponding quarter of the previous year. Operating margin was 5.5%, up 0.4 points from the corresponding period last year.

Food cost deflation, as measured by the estimated change in Sysco's cost of goods, was 3.4% for the quarter. Sales from acquisitions increased sales by 0.6%, while the impact of changes in foreign exchange rates for the quarter reduced sales by 0.5%.

During the recent quarter, operating expenses fell 9.5% to $1.25 billion from $1.38 billion in the prior-year quarter, primarily due to declining payroll expense related to reduced headcount and lower incentive compensation, as well as a change in the value of COLI.

Capital expenditures totaled $109 million for the first quarter of fiscal 2010. The primary areas for investments included facility replacements and expansions, technology, and additions and replacements to Sysco's fleet.

Looking ahead, the company, which provides food products to restaurants, healthcare and educational facilities, continues to expect fiscal 2010 capital expenditures between $600 million and $650 million.

DeLaney added, "we are encouraged by the stabilization of our volume trends in recent weeks and we remain committed to supporting our customers through this most difficult period in our industry's history."

In the preceding fourth quarter, the company reported net income of $315.31 million or $0.53 per share, lower than $334.11 million or $0.55 per share reported a year earlier. Sales for the quarter declined to $9.09 billion from $9.73 billion last year, in a recession-hit economy that has led to people restricting frequent restaurant visits.

Sysco shares, which have been trading between $19.39 and $27.85 in the past 52 weeks, closed Friday's trading session at $26.45.

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