Sysco Corp. Reports 5.8 Percent Second Quarter Sales Gain

Operating income decreased $16 million, or 1.7 percent, to $943 million during the first half of fiscal 2011. Operating expense increased $148 million, or 5.9 percent, for the first half of the fiscal year, while gross margin increased $131 million, or 3.8 percent.

Gross margin as a percentage of sales declined 50 basis points year over year to 18.7 percent. Pressure from high inflation, strategic pricing initiatives and changes in segment mix were the main factors impacting gross margin performance.

Operating expense increased 5.9 percent, or $148 million, for the first half mainly from a $59 million increase in salaries and related expense due to increases in sales compensation and other payroll costs; and a $30 million increase in pension expense.

Net earnings for the first half of fiscal 2011 were $557 million, a decrease of $37 million, or 6.3 percent. Diluted EPS was $0.95, aided by a $0.04 favorable impact from company owned life insurance. Diluted EPS in the prior year period was $1.00, aided by a $0.05 tax benefit related to the company's IRS settlement and a $0.04 favorable impact from Company owned life insurance.

Cash flow from operations was $283 million for the first half of fiscal 2011. Capital expenditures totaled $174 million for the second quarter, and $317 million in the first half of the fiscal year. The primary areas for investment included facility replacements and expansions, replacements to Sysco's fleet, and technology.