Sysco Corp. ( SYY - Snapshot Report ) delivered second-quarter 2012 earnings (excluding one-time items) of 46 cents per share, which exceeded the Zacks Consensus Estimate of 44 cents. It also exceeded the prior-year earnings of 45 cents per share.

The second-quarter 2012 results exclude the negative impact from gross business transformation expenses of 3 cents, while the second-quarter 2011 earnings exclude 3 cents of negative impact from gross business transformation expenses, partially offset by a 2 cents gain from corporate-owned life insurance (COLI).

Revenue and Operating Income

Sysco's sales advanced 9.2% on a year-over-year basis, to $10.2 billion in the second-quarter of 2012. Acquisition contributed to the sales by 0.7%, while unfavorable currency translation decreased sales by 0.1%. However, food cost inflation increased to 6.3% in the quarter versus 4.5% in the prior-year quarter, which negatively impacted the quarterly sales.

Sales exceeded the Zacks Consensus Estimate of $10.04 billion.

Operating income increased 2.5% in the quarter, excluding gross business transformation expenses and the impact of COLI. However, Sysco's operating income lowered 2.3% in the quarter to $427 million on a reported basis.

Other Financial Updates

Sysco generated $539 million of cash from operations in the first half of 2012, as compared to the $283 million in the prior-year. The company also spent $434 million as capital expenditure in the first half of 2012 related to facility replacements and expansions, replacements to Sysco's fleet, and technology. The company’s capital expenditure included $79 million related to the company's business transformation project.

Cash and cash equivalents were $336.5 million at the end of December 31, 2011, while long-term debt was $2.65 billion.

Headquartered in Houston, Texas, Sysco's multi-year business transformation project is on track, employing 300 full-timers. The company is through with the design and technology development work. Presently, it is testing systems and processes.

We currently have a Zacks #4 Rank on Sysco shares, which translates into a short-term Sell rating. Sysco is the global leader in selling, marketing and distributing food products, and operates 177 distribution facilities serving approximately 400,000 customers. For fiscal year 2011 that ended July 2, 2011 the company generated record sales of more than $39 billion.