1. SYSCO Financial Statement Analysis: A Focus on Relevant Ratios

2. 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

3. Liquidity - Numbers Industry20052004200320022001 Current Ratio 1.41.161.231.341.421.43 Quick Ratio 0.80.730.780.890.920.92

4. 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

5. Profitability Ratios Industry20052004200320022001 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%

6. 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

7. Debt Ratios Industry20052004200320022001 Debt Ratio 0.400.670.670.680.640.61 Debt/Equity Ratio 0.660.740.840.930.760.57 Times Interest Earned 7.2021.1921.9318.3418.4614.47

8. 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

9. Asset Management Ratios Industry20052004200320022001 Inventory Turnover 15.616.4916.6516.8316.5016.26 Average Collection Period 19.227.5327.2428.0627.5227.78 Average Payment Period N/A38.7238.8741.2438.1538.41 Total Asset Turnover 3.53.663.743.773.903.98

10. 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

11. 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

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