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SYSCO Financial Statement Analysis.ppt

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SYSCO Financial Statement Analysis.ppt

  1. 1. SYSCO Financial Statement Analysis: A Focus on Relevant Ratios
  2. 2. SYSCO - Introduction <ul><li>Broadline foodservice distributor </li></ul><ul><li>History </li></ul><ul><li>Number one player – $30.8 billion sales, almost $1 billion net income </li></ul><ul><li>Main competitors: </li></ul><ul><ul><li>U.S. Foodservice (subsidiary of Ahold) - $19.8 billion sales </li></ul></ul><ul><ul><li>Aramark - $11 billion sales </li></ul></ul><ul><ul><li>PFG - $6.6 billion sales </li></ul></ul>
  3. 3. Liquidity - Numbers 2001 2002 2003 2004 2005 Industry 0.92 0.92 0.89 0.78 0.73 0.8 Quick Ratio 1.43 1.42 1.34 1.23 1.16 1.4 Current Ratio
  4. 4. Liquidity Ratios <ul><li>Current ratio is below industry and trending lower </li></ul><ul><li>Quick ratio - same </li></ul><ul><li>Higher fuel costs and major geographical disruptions / low-margin business </li></ul><ul><li>SYSCO upgrading systems and supply chain, provoking higher near-term debt </li></ul>
  5. 5. Profitability Ratios 2001 2002 2003 2004 2005 Industry 27.80% 31.88% 35.42% 35.38% 34.85% 20.30% Return on Equity 10.92% 11.35% 11.22% 11.56% 11.63% 6.90% Return on Assets 2.74% 2.91% 2.98% 3.09% 3.18% 2.00% Net Profit Margin 5.91% 6.16% 6.11% 6.19% 6.29% 3.20% Oper Profit Margin 20.75% 21.01% 20.79% 20.31% 20.15% 17.40% Gross Profit Margin
  6. 6. Profitability – Analysis <ul><li>SYSCO is significantly more profitable than the industry on a consistent basis and by all measures </li></ul><ul><li>General upward trend with growth </li></ul><ul><li>Buying power affords lower COGS </li></ul>
  7. 7. Debt Ratios 2001 2002 2003 2004 2005 Industry 14.47 18.46 18.34 21.93 21.19 7.20 Times Interest Earned 0.57 0.76 0.93 0.84 0.74 0.66 Debt/Equity Ratio 0.61 0.64 0.68 0.67 0.67 0.40 Debt Ratio
  8. 8. Debt - Analysis <ul><li>Debt ratios higher than industry </li></ul><ul><li>Position as #1 player probably affords SYSCO more stable cash flows </li></ul><ul><li>Relatively low debt ratios stem from high receivables, higher average collection period (not necessarily good) </li></ul><ul><li>Very high Interest Coverage numbers (Times Interest Earned) enables SYSCO to carry more debt </li></ul>
  9. 9. Asset Management Ratios 2001 2002 2003 2004 2005 Industry 3.98 3.90 3.77 3.74 3.66 3.5 Total Asset Turnover 38.41 38.15 41.24 38.87 38.72 N/A Average Payment Period 27.78 27.52 28.06 27.24 27.53 19.2 Average Collection Period 16.26 16.50 16.83 16.65 16.49 15.6 Inventory Turnover
  10. 10. Asset Management Analysis <ul><li>Slightly high Inventory Turnover probably reflects SYSCO’s clout as #1 player </li></ul><ul><li>SYSCO likely uses its buying power to purchase in large blocks, thereby lowering turnover </li></ul><ul><li>Strategy reflected in profitability </li></ul><ul><li>Average collection period reflects SYSCO’s greater number of national chain (corporate) accounts </li></ul><ul><li>SYSCO certainly dictates a higher Average payment period because of market position </li></ul>
  11. 11. Summary <ul><li>SYSCO is consistently profitable but may need to address liquidity to forestall downward trend </li></ul><ul><li>SYSCO needs to be sure not to let acquisitions and higher costs create perfect storm affecting liquidity </li></ul><ul><li>Most variations are positive and reflect SYSCO’s dominance in the foodservice distribution industry </li></ul>
  12. 12. Sources <ul><li>SYSCO, Inc. 2005 Annual Report </li></ul><ul><li>Yahoo! Finance Section </li></ul><ul><li>www.moneycentral.com </li></ul>

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