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 Current Ratio Quick Ratio

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 Gross Profit Margin 17.40%20.15%20.31%20.79%21.01%20.75% Oper Profit Margin 3.20%6.29%6.19%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%

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 Debt Ratio Debt/Equity Ratio Times Interest Earned

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 Inventory Turnover Average Collection Period Average Payment Period N/A Total Asset Turnover

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 Annual Report  Yahoo! Finance Section 