SYSCO Financial Statement Analysis A Focus on Relevant

SYSCO Financial Statement Analysis: A Focus on Relevant Ratios

SYSCO - Introduction § § § Broadline foodservice distributor History Number one player – $30. 8 billion sales, almost $1 billion net income § Main competitors: § U. S. Foodservice (subsidiary of Ahold) - $19. 8 billion sales § Aramark - $11 billion sales § PFG - $6. 6 billion sales

Liquidity - Numbers Industry 2005 2004 2003 2002 2001 Current Ratio 1. 4 1. 16 1. 23 1. 34 1. 42 1. 43 Quick Ratio 0. 8 0. 73 0. 78 0. 89 0. 92

Liquidity Ratios § Current ratio is below industry and trending lower § Quick ratio - same § Higher fuel costs and major geographical disruptions / low-margin business § SYSCO upgrading systems and supply chain, provoking higher near-term debt

Profitability Ratios Industry 2005 2004 2003 2002 2001 17. 40% 20. 15% 20. 31% 20. 79% 21. 01% 20. 75% Oper Profit Margin 3. 20% 6. 29% 6. 11% 6. 16% 5. 91% Net Profit Margin 2. 00% 3. 18% 3. 09% 2. 98% 2. 91% 2. 74% Return on Assets 6. 90% 11. 63% 11. 56% 11. 22% 11. 35% 10. 92% Return on Equity 20. 30% 34. 85% 35. 38% 35. 42% 31. 88% 27. 80% Gross Profit Margin

Profitability – Analysis § SYSCO is significantly more profitable than the industry on a consistent basis and by all measures § General upward trend with growth § Buying power affords lower COGS

Debt Ratios Industry 2005 2004 2003 2002 2001 Debt Ratio 0. 40 0. 67 0. 68 0. 64 0. 61 Debt/Equity Ratio 0. 66 0. 74 0. 84 0. 93 0. 76 0. 57 Times Interest Earned 7. 20 21. 19 21. 93 18. 34 18. 46 14. 47

Debt - Analysis § Debt ratios higher than industry § Position as #1 player probably affords SYSCO more stable cash flows § Relatively low debt ratios stem from high receivables, higher average collection period (not necessarily good) § Very high Interest Coverage numbers (Times Interest Earned) enables SYSCO to carry more debt

Asset Management Ratios Industry 2005 2004 2003 2002 2001 Inventory Turnover 15. 6 16. 49 16. 65 16. 83 16. 50 16. 26 Average Collection Period 19. 2 27. 53 27. 24 28. 06 27. 52 27. 78 Average Payment Period N/A 38. 72 38. 87 41. 24 38. 15 38. 41 Total Asset Turnover 3. 5 3. 66 3. 74 3. 77 3. 90 3. 98

Asset Management Analysis § Slightly high Inventory Turnover probably reflects SYSCO’s clout as #1 player § SYSCO likely uses its buying power to purchase in large blocks, thereby lowering turnover § Strategy reflected in profitability § Average collection period reflects SYSCO’s greater number of national chain (corporate) accounts § SYSCO certainly dictates a higher Average payment period because of market position

Summary § SYSCO is consistently profitable but may need to address liquidity to forestall downward trend § SYSCO needs to be sure not to let acquisitions and higher costs create perfect storm affecting liquidity § Most variations are positive and reflect SYSCO’s dominance in the foodservice distribution industry

Sources § § § SYSCO, Inc. 2005 Annual Report Yahoo! Finance Section www. moneycentral. com