PLEASE NOTE THE PART IN HIGHLIGHT

Sysco Corporation -- Houston, TX -- Merger costs
continue to impact Sysco's earnings
Sysco Corporation said November 3 that merger and integration
planning costs in connection with the planned US Foods Inc
acquisition and amortization of US Foods-related financing costs,
along with severance and facility closure charges, resulted in a
decline in earnings for its fiscal 2015 first quarter ended September
27.
The company's first quarter net earnings totaled $278.8 million, a
2.4% drop from net earnings of $285.6 million in the first quarter of
fiscal 2014.
Sales in Sysco's fiscal 2015 first quarter climbed 6.2% to $12.44
billion from $11.71 billion in the first quarter a year ago.
The company conveyed that food cost inflation in the fiscal 2015
first quarter was 4.9%, as measured by the estimated change in
Sysco's product costs, driven mainly by inflation in the meat, dairy
and seafood categories. In addition, the company said that sales
from acquisitions within the last 12 months increased total sales
.6%, while the impact of changes in foreign exchange rates for the
fiscal 2015 first quarter decreased sales .5%. Case volume for
Sysco's broadline and SYGMA operations combined grew 2.3%
during the recently ended quarter, including acquisitions, and
increased around 2.2%, excluding acquisitions.
The company's gross profit for the fiscal 2015 first quarter rose 6%
to $2.19 billion from $2.06 billion in the fiscal 2014 first quarter.
Operating expenses in the first quarter of fiscal 2015 were up $136
million, or 8.6%, compared to the prior year's first quarter. Sysco
attributed the higher operating expenses to a $67 million rise in
payroll expense and a $41 million increase in certain items primarily
related to merger and integration planning costs. The company said
its adjusted operating income was 6.1% higher in the fiscal 2015
first quarter compared to the prior year's first quarter.
Sysco's fiscal 2015 first quarter operating income was $465.6
million, a 2.6% decline compared to operating income of $478.2
million in last year's same quarter. After excluding certain items
related to merger and integration planning expenses, amortization
of US Foods-related financing costs and severance and facility
closure charges, the company's fiscal 2015 first quarter adjusted
operated income rose 5.9% versus the fiscal 2014 first quarter.
Commenting on the pending US Foods transaction, Sysco
conveyed November 3 that it continues to be in productive
discussions with the Federal Trade Commission (FTC) on a
solution to permit the commission to conclude its review of the deal.
Sysco explained that due to the amount of work remaining, and
considering the upcoming holidays, it does not currently expect to
complete the transaction before the first calendar quarter of 2015.
Last December, Sysco and US Foods Inc revealed that they
reached an agreement to merge in a transaction with a total
enterprise value of approximately $8.2 billion. Sysco will pay around
$3.5 billion for the equity of US Foods, comprised of $3 billion in
Sysco common stock and $500 million in cash. As part of the
transaction, Sysco will also assume or refinance US Foods' net
debt, which is currently around $4.7 billion. After completion of the
transaction the equity holders of US Foods will own roughly 87
million shares, or approximately 13%, of Sysco. (#172988)