SYSCO CORPORATION Second Quarter 2003 Fact Book Where Sysco Quality Begins
Company Description SYSCO has been North America's largest marketer and distributor of foodservice products since 1977. The company operates from 146 distribution locations across the United States and Canada including 84 broadline facilities, 17 hotel supply locations, 16 specialty produce facilities, 15 SYGMA distribution centers, 12 custom-cutting meat locations and 2 distributors specializing in the niche Asian foodservice market. SYSCO provides products and services to about 415,000 restaurants, hotels, schools, hospitals, retirement homes and other institutions. Since its initial public offering in 1970, SYSCO s annual sales have grown from approximately $115 million to $24.7 billion in calendar year 2002. Taking advantage of the development and use of information systems, innovations in food technology, improved packaging and advanced transportation techniques, SYSCO provides its customers with quality products, delivered on time at reasonable prices. SYSCO s Mission SYSCO s mission is to help our customers succeed. The SYSCO Philosophy The scale and scope of its operations are such that SYSCO can: Provide high levels of customer service; Buy in quantity on favorable terms; Retain professional marketing and merchandising personnel who possess a wide knowledge of the many different supply markets; Accumulate broad experience which enables the company to work with manufacturers, processors and customers to reduce operating costs; Assure quality and consistency of products produced in thousands of locations; Maintain minimum levels of inventory while supporting customers needs; Consolidate expenses for promotions and advertising; Test new merchandising and marketing methods on a pilot basis; Provide sales aids and training tools to enable marketing associates to represent SYSCO s products and services effectively; and therefore, Undergird the success of SYSCO s customers. Meanwhile, the SYSCO corporate structure ensures that the autonomous nature and entrepreneurial spirit and drive is as strong in the parent company as in each of its subsidiary companies. That spirit a combination of personal interest, drive, creativity and determination to benefit customers is the guiding philosophy of the SYSCO Corporation, the key to its past success and its continued growth. For Additional Information Contact: Investor and Media Relations Department SYSCO Corporation 1390 Enclave Parkway Houston, Texas 77077-2099 Telephone: (281) 584-1390 Internet: http://www.sysco.com John M. Palizza, Assistant Treasurer (281) 584-1308 Toni R. Spigelmyer, Director, Investor/Media Relations (281) 584-1458
Comparative Results of Operations 13-Week Period Ended December 28, December 29, Percentage (In thousands except for per share data) 2002 2001 Change Sales $ 6,348,797 $ 5,590,966 13.6% Costs and expenses Cost of sales 5,097,716 4,481,655 13.7% Operating expenses 937,290 836,355 12.1% Interest expense 17,503 16,513 6.0% Other, net (2,606) (290) 798.6% Total costs and expenses 6,049,903 5,334,233 13.4% Earnings before income taxes 298,894 256,733 16.4% Income taxes 114,327 98,200 16.4% Net earnings $ 184,567 $ 158,533 16.4% Basic earnings per share $ 0.28 $ 0.24 16.7% Diluted earnings per share $ 0.28 $ 0.24 16.7% Average shares outstanding 652,030,164 661,959,339 (1.5%) Diluted average shares outstanding 664,083,274 671,799,409 (1.1%) The comparative segment sales data for the second quarter of fiscal years 2003 and 2002 are summarized below. 13-Week Period Ended December 28, December 29, Percentage (In thousands) 2002 2001 Change Sales Broadline $5,227,677 $ 4,575,700 14.2% SYGMA 710,334 657,427 8.0% Other 410,786 357,839 14.8% Intersegment sales (64,868) (45,236) 43.4% Total sales $6,348,797 $ 5,590,966 13.6% SYSCO CORPORATION 1
Second Quarter 2003 Compared to Historical Second Quarter Performance SALES (Billions) Net Earnings* (Millions) 7 6 5 4.7 5.3 5.6 6.3 200 150 139.4 158.5 184.6 4 3 4.2 100 86.4 101.9 2 50 1 0 Second Quarter 0 Second Quarter 1999 2000 2001 2002 2003 1999 2000* 2001 2002 2003 *Before accounting change Quarterly Closing Stock Prices Second Quarter Net Earnings Margin Net Earnings as a Percent of Sales $30 $25 30.0 26.5 29.4 3.00% 2.84 2.91 $20 19.8 2.64 $15 13.7 2.50% $10 $5 $0 1999 2000 2001 2002 2003 2.00% 2.19 2.03 Second Quarter 1999 2000 2001 2002 2003 2 SYSCO CORPORATION
Quarterly Income Statement Ratios Key Operating Ratios (% to sales) Year-over-Year Change in Ratios (basis points) Year-over- Gross Expense Interest Earnings Earnings Year Profit to Operating and bf Income Gross Expense Interest Before Sales % Margin Sales Income Other Taxes Profit to Operating and Income Period (in $000s) Change % % % % % Margin Sales Income Other Taxes FY1998 98-Q1 3,828,244 4.05 18.22 14.45 3.77 (0.34) 3.43 54 33 21 5 16 98-Q2 3,786,096 4.87 18.57 14.58 4.00 (0.38) 3.62 40 21 20 5 15 98-Q3 3,711,822 6.96 18.23 15.01 3.22 (0.41) 2.81 21 24-3 7 (10) 98-Q4 4,001,374 8.30 18.76 14.37 4.39 (0.40) 4.00 18 15 3 8 (4) FY1999-53 weeks 99-Q1 4,192,630 9.52 18.28 14.50 3.79 (0.41) 3.38 6 5 2 7 (5) 99-Q2 4,246,675 12.17 18.30 14.53 3.77 (0.44) 3.34 (27) (5) (22) 6 (28) 99-Q3 4,164,877 12.21 18.31 15.01 3.30 (0.44) 2.86 8 0 8 3 5 99-Q4-14 weeks 4,818,633 20.42 18.86 14.47 4.39 (0.41) 3.98 10 11 (1) 1 (2) FY2000 00-Q1 4,657,034 11.08 18.55 14.48 4.07 (0.38) 3.69 27 (2) 28 (3) 31 00-Q2 4,651,535 9.53 18.91 14.95 3.96 (0.40) 3.56 61 42 18 (4) 22 00-Q3 4,722,935 13.40 18.92 15.02 3.90 (0.39) 3.51 61 1 61 (5) 65 00-Q4 5,271,764 9.40 19.28 14.50 4.78 (0.34) 4.44 42 3 39 (7) 46 FY2001 01-Q1 5,360,174 15.10 19.35 14.69 4.66 (0.31) 4.35 80 21 59 (7) 66 01-Q2 5,290,530 13.74 19.65 15.04 4.61 (0.34) 4.27 74 9 65 (6) 71 01-Q3 5,344,496 13.16 19.52 14.97 4.55 (0.03) 4.22 60 5 65 (36) 71 01-Q4 5,789,297 9.82 19.88 14.67 5.21 (0.34) 4.87 60 17 43 43 FY2002 02-Q1 5,828,678 8.74 19.65 14.83 4.81 (0.26) 4.56 30 14 15 (5) 21 02-Q2 5,590,966 5.68 19.84 14.96 4.88 (0.29) 4.59 19 (8) 27 (5) 32 02-Q3 5,620,324 5.16 19.75 15.15 4.60 (0.24) 4.36 23 18 5 21 14 02-Q4 6,310,536 9.00 20.03 14.50 5.53 (0.24) 5.28 15 (17) 32 (10) 41 FY2003 03-Q1 6,424,422 10.22 19.76 14.95 4.81 (0.21) 4.60 11 12 (5) 4 03-Q2 6,348,797 13.55 19.71 14.76 4.94 (0.23) 4.71 (13) (20) 6 (5) 12 Note - Operating income is calculated by adding interest expense and subtracting other income or adding other expenses to earnings before income taxes. SYSCO CORPORATION 3
Consolidated Balance Sheets (unaudited) December 28, December 29, (In thousands except for share data) 2002 2001 Current assets Cash $ 128,574 $ 115,843 Receivables 1,878,315 1,612,464 Inventories 1,270,604 1,076,884 Deferred taxes 95,654 Prepaid expenses 63,286 54,650 Total current assets 3,340,779 2,955,495 Plant and equipment at cost, less depreciation 1,804,691 1,620,462 Other assets Goodwill and intangibles 1,055,271 779,971 Restricted cash 84,056 Other 199,190 186,951 Total other assets 1,338,517 966,922 Total assets $ 6,483,987 $ 5,542,879 Current liabilities Notes payable $ 64,612 $ 27,653 Accounts payable 1,408,475 1,237,374 Accrued expenses 747,303 571,474 Accrued income taxes 25,462 94,199 Deferred taxes 158,719 Current maturities of long-term debt 22,341 12,564 Total current liabilities 2,426,912 1,943,264 Other liabilities Long-term debt 1,394,647 1,078,573 Deferred taxes 461,312 335,867 Total other liabilities 1,855,959 1,414,440 Shareholders equity Common stock, par $l per share 765,175 765,175 Paid-in capital 240,170 214,202 Retained earnings 3,105,487 2,644,005 Other comprehensive loss (65,435) (5,624) Treasury stock (1,844,281) (1,432,583) Total shareholders' equity 2,201,116 2,185,175 Total liabilities and shareholders equity $ 6,483,987 $ 5,542,879 4 SYSCO CORPORATION
Consolidated Cash Flows 26-Week Period Ended December 28, December 29, (In thousands except for share data) 2002 2001 Cash flows from operating activities: Net earnings $367,141 $322,485 Add non-cash items: Depreciation and amortization 133,437 135,239 Deferred tax provision (benefit) 213,488 59,274 Provision for bad debts 15,908 16,717 Additional investment in certain assets and liabilities, net of effect of businesses acquired: (Increase) decrease in receivables (98,222) 25,031 (Increase) in inventories (130,767) (31,241) (Increase) decrease in prepaid expenses (21,251) (14,163) Increase (decrease) in accounts payable 38,411 (36,188) (Decrease) in accrued expenses (42,346) (83,462) (Decrease) in accrued income taxes (12,091) (29,133) (Increase) in other assets (7,171) (2,956) Net cash provided by operating activities 456,537 361,603 Cash flows from investing activities: Additions to plant and equipment (217,799) (215,181) Proceeds from sales of plant and equipment 7,976 4,246 Acquisition of businesses, net of cash acquired (168,244) (12,197) Increase in restricted cash (52,056) Net cash used for investing activities (430,123) (223,132) Cash flows from financing activities: Bank and commercial paper borrowings 208,102 117,264 Other debt repayments (5,255) (13,802) Common stock reissued from treasury 62,650 50,463 Treasury stock purchases (243,381) (218,656) Dividends paid (118,395) (93,640) Net cash used for financing activities (96,279) (158,371) Net decrease in cash (69,865) (19,900) Cash at beginning of period 198,439 135,743 Cash at end of period $128,574 $115,843 Cash paid during the period for: Interest $ 34,492 $ 32,621 Income taxes 29,120 168,504 SYSCO CORPORATION 5
Return on Average Equity* Return on Invested Capital* 35% 30% 25% 20% 22.0 26.6 29.8 31.3 31.2 30.0% 25.0% 25.4 27.6 15% 10% 5% 20.0% 15.9 17.1 20.1 0% 1998 1999 2000 2001 2002 15.0% 1998 1999 2000 2001 2002 *Before accounting change *Before accounting change Working Capital to Sales Long-Term Debt to Total Capitalization (in millions) Long-Term Debt Shareholders Equity 6.00% 5.00% 4.00% 3.00% 2.00% 5.4 5.4 4.4 3.6 4.1 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 2,392 998 1,394 2,745 1,024 1,721 3,309 3,062 1,176 961 2,101 2,133 3,596 1,395 2,201 1.00% $500 0% 1998 1999 2000 2001 2002 $0 1999 2000 2001 2002 2003 Ratio 2nd Qtr FY 41.7% 37.3% 31.4% 35.6% 38.8% Note - Return on invested capital is calculated by dividing net earnings by invested capital at the applicable period end. Invested capital is comprised of shareholders equity plus total debt less goodwill. 6 SYSCO CORPORATION
Key Ratios s 1998 1999 2000 2001 2002 53 WEEKS Returns* Return on average equity 22.0 26.6 29.8 31.3 31.2 Return on invested capital 15.9 17.1 20.1 25.4 27.6 Return on average assets 9.0 9.2 10.3 11.8 12.0 Working capital efficiency** Working capital $ 825,727 $ 948,252 $ 840,608 $ 772,770 $ 945,932 Working capital to sales 5.4 5.4 4.4 3.6 4.1 Inventory days outstanding 18.1 17.3 16.8 16.6 16.0 Accounts receivable days outstanding 23.9 23.2 22.2 22.4 21.7 Capitalization Long-term debt $ 867,017 $ 997,717 $ 1,023,642 $ 961,421 $ 1,176,307 Shareholders equity 1,326,639 1,394,221 1,721,584 2,100,535 2,132,519 Total Capitalization 2,193,656 2,391,938 2,745,226 3,061,956 3,308,826 Ratio of long-term debt to capitalization 39.5 41.7 37.3 31.4 35.6 Common stock data*** Market price High $ 13.38 $ 15.94 $ 21.69 $ 30.44 $ 30.35 Low $ 8.55 $ 9.97 $ 13.06 $ 19.38 $ 21.75 Close $ 12.75 $ 15.38 $ 21.06 $ 27.15 $ 27.22 Yearly stock price return 37.8% 20.6% 36.9% 28.9% 0.3% Dividends paid $ 0.1625 $ 0.19 $ 0.22 $ 0.26 $ 0.32 Total return 39.6% 22.1% 38.4% 30.2% 1.4% P/E ratio (trailing 12 months earnings per share) 27.12 28.48 30.97 30.85 26.95 * Before accounting change. ** Calculated using average sales and inventories. *** Adjusted for 2-for-1 stock splits of March 20, 1998 and December 15, 2000. Recent Acquisitions Date Company (Location) Description 1/6/97 Alaska Fish and Farm, Inc. (Anchorage, AK) Broadline Distributor 5/27/98 Foodservice Distribution Division of Jordan s Meats, Inc. (Portland, ME) Broadline Distributor 6/1/98 Foodservice Distribution Business of Beaver Street Fisheries, Inc. (Jacksonville, FL) Broadline Distributor 7/30/99 Newport Meat Company (Irvine CA) Custom-Cut Meat Distributor 8/20/99 Buckhead Beef Company (Atlanta, GA) Custom-Cut Meat Distributor 8/27/99 Doughtie s Foods (Hampton Roads, VA) Broadline Distributor 11/19/99 Malcolm Meats (Toledo, OH) Custom-Cut Meat Distributor 1/26/00 Watson Foodservice (Lubbock, TX) Broadline Distributor 3/17/00 FreshPoint Holdings (Dallas, TX) Specialty Produce Distributor 12/7/00 North Douglas Distributors (Vancouver Island, B.C., Canada) Broadline Distributor 12/13/00 Albert M. Briggs (Washington, D.C.) Custom-Cut Meat Distributor 1/16/01 Freedman Companies (Houston, TX) Custom-Cut Meat Distributor 1/22/01 Guest Supply (Monmouth Junction, NJ) Hotel Operating Supplies Distributor 2/16/01 HRI Supply (Kelowna, B.C., Canada) Broadline Distributor 7/2/01 Fulton Provision Co. (Portland, OR) Custom-Cut Meat Distributor 9/28/01 Franklin Supply Co. (Louisburg, NC) Hotel Operating Supplies Distributor 4/1/02 SERCA Foodservice (Toronto, Ontario, Canada) Broadline Distributor 9/27/02 Abbott Foods, Inc. (Columbus, OH) Broadline Distributor 9/30/02 Pronamics, Inc. (Mississauga, Ontario, Canada) Chain Restaurant Distributor 11/22/02 Asian Foods, Inc. (St. Paul, MN) Specialty Asian Foodservice Distributor 12/27/02 Denver Assets of Marriott Distribution Services, Inc. Chain Restaurant Distributor SYSCO CORPORATION 7
Sales by Major Product Category 2002 2001 2000 Canned and dry products 19% 19% 21% Fresh and frozen meats 18 18 17 Frozen fruits, vegetables, bakery and other 13 13 14 Poultry 10 10 10 Dairy products 9 9 9 Fresh produce 9 9 7 Paper and disposables 8 8 8 Seafoods 6 6 6 Beverage products 3 3 3 Equipment and smallwares 2 2 2 Janitorial and chemical products 2 2 2 Medical supplies 1% 1% 1% Total 100% 100% 100% Sales by Customer Type 2002 2001 2000 Restaurants 63% 64% 65% Hospitals and nursing homes 10 11 10 Schools and colleges 6 6 6 Hotels and motels 6 5 5 All other 15 14 14 Total 100% 100% 100% Ratio of Employees per Million $ of Sales * 2002 2001 2000 Warehouse 0.80 0.80 0.81 Delivery 0.85 0.83 0.76 Selling 0.73 0.75 0.74 General and administrative 0.40 0.37 0.40 Total 2.78 2.73 2.70 *Adjusted for SYSCO s internal inflation index. Sales of SYSCO Brand Products Second Quarter 2003 2002 2002 2001 As a percentage of Marketing Associate-Served sales 54.7% 53.7% 55.9% 56.1% As a percentage of Traditional Broadline sales 48.7% 48.1% 48.3% 46.2% As a percentage of Traditional Broadline and SYGMA sales 42.6% 42.1% 42.3% 41.1% Marketing Associate-Served Sales Second Quarter 2003 2002 2002 2001 As a percentage of Broadline sales 54.7% 54.1% 56.3% 54.5% 8 SYSCO CORPORATION
Real Sales Growth (1) Reported Food Cost Inflation Real Sales Growth Acquisitions (Deflation) (2) Sales Growth Fiscal 1983 17.7% 6.3% 1.1% 10.3% Fiscal 1984 18.7 3.1 2.7 12.9 Fiscal 1985 14.4 1.6 0.7 12.1 Fiscal 1986 21.2 6.5 (2.2) 16.9 Fiscal 1987 15.7 2.6 1.6 11.5 Fiscal 1988 17.6 3.4 1.9 12.3 Fiscal 1989 54.7 39.4 5.5 9.8 Fiscal 1990 13.0 2.1 3.0 7.9 Fiscal 1991 10.0 0.8 1.2 8.0 Fiscal 1992 9.5 1.6 (1.7) 9.6 Fiscal 1993 11.6 1.8 1.2 8.6 Fiscal 1994 9.3 0.3 1.9 7.1 Fiscal 1995 10.7 2.0 8.7 Fiscal 1996 10.5 2.8 7.7 Fiscal 1997 (3) 7.9 0.6 2.3 5.1 Fiscal 1998 6.0 0.1 0.0 5.9 Fiscal 1999 (53 weeks) 13.7 1.1 1.0 11.6 Fiscal 2000 (4) 10.8 3.5 0.4 6.9 Fiscal 2001 12.8 4.5 2.5 5.8 Fiscal 2002 7.2 3.4 1.1 2.7 Fiscal 2003 First Quarter 10.2 5.4 (2.2) 7.0 Second Quarter (3) 13.6 6.8 (0.9) 7.6 (1) Results from 1983 through 1993 are calculated on traditional foodservice only. (2) Based on internal tests. (3) Numbers do not add due to rounding. (4) On a 52-week vs. 52-week comparison, real sales growth was 9.2%. Real Sales Growth - SYSCO versus Foodservice Industry Calendar Foodservice SYSCO Ahead Year Industry* SYSCO of Industry 1983 2.5% 11.4% 8.9% 1984 3.0 12.7 9.7 1985 2.2 16.2 14.0 1986 3.6 15.0 11.4 1987 3.2 13.3 10.1 1988 4.3 11.1 6.8 1989 1.8 7.7 5.9 1990 2.0 7.7 5.7 1991 0.2 8.2 8.0 1992 1.5 10.4 8.9 1993 1.9 7.0 5.1 1994 2.8 8.6 5.8 1995 1.8 7.4 5.6 1996 1.9 7.7 5.8 1997 2.3 4.3 2.0 1998 2.9 7.1 4.2 1999 3.1 9.5 6.4 2000 2.7 8.1 5.4 2001 0.5 2.2 1.7 2002 (0.2) 8.5 8.7 *Source: Technomic, Inc. SYSCO CORPORATION 9
SYSCO Corporation 1390 Enclave Parkway Houston, Texas 77077-2099 (281) 584-1390 www.sysco.com