Sysco Corporation · NYSE:SYY
Sysco — Q2 FY2016 Earnings Presentation
36 slides from Sysco's earnings presentation, Feb 1, 2016
Slide 1: Sysco 2Q16 Earnings Results
Sysco 2Q16 Earnings Results February 1, 2016
Slide 2: Forward-Looking Statements
Forward-Looking Statements Statements made in this presentation or in our earnings call for the second quarter of fiscal 2016 that look forward in time or that express management’s beliefs, expectations or hopes are forward-looking statements within the meaning of the Private Securities Litigation R
Slide 3: Bill DeLaney, CEO
Bill DeLaney CEO
Slide 4: Sysco's Second Quarter Fiscal 2016 Results
Sysco’s Second Quarter Fiscal 2016 Results Strong second quarter; solid first half of the year Reflects the continuously improving execution of our associates and our focus on improving our customers’ experience 4
Slide 5: Industry & Economic Trends Are Mixed
Industry & Economic Trends Are Mixed Consumer Confidence Unemployment Rate & Non-Farm Payroll 115.0 7.0% U.S. Unemployment Rate 500,000 Change in U.S. Non-Farm Payroll 110.0 Pre-recession Level (2006) 6.5% 102.6 106 400,000 105.0 101.4 6.0% 5.6% 5.5% 99.8 5.5% 5.3% 5.0% 100.0 96.5 300,000 5.1% 93.1
Slide 6: 2Q16 Results Include 10% Adjusted Operating Income Growth
2Q16 Results Include 10% Adjusted Operating Income Growth1 Total Broadline case growth +3.4%; local case growth +2.9% Sales and gross profit adversely impacted by deflation and foreign exchange Sales +0.6% Gross profits +3.4% Gross margin +50 basis points Adjusted operating income +10.2%
Slide 7: 1H16 Shows Progress Towards Three-Year Plan
1H16 Shows Progress Towards Three-Year Plan1 Progress against all 4 key levers for achieving three-year targets 1. Accelerate local case growth Broadline +2.8% 2. Improve gross margin Gross margin +36 basis points 3. Leverage supply chain costs Making solid progress 4. Reduce administrative
Slide 8: 1H16 Financial Highlights
1H16 Financial Highlights Adjusted1 Reported $MM, except per share YOY % YOY % 1H16 1H16 data Change Change Sales $24,716 0.8% $24,716 0.8% Gross Profit $4,395 2.8% $4,395 2.8% Operating $3,451 2.5% $3,469 -0.7% Expense Operating $943 4.2% $926 18.6% Income Net Earnings $587 6.1% $517 18.3% Diluted
Slide 9: Sysco is Well Positioned for the Future
Sysco is Well Positioned for the Future Improve customer experience Strong momentum in the business Persistent deflationary pressure needs to be managed Enhance associate Aggressively reviewing all aspects of business for engagement incremental cost savings Well-positioned to achieve 2018 fi
Slide 10: Tom Bene, President and COO
Tom Bene President and COO Good things
Slide 11: Customer Insights Guide our Improvement Efforts
Customer Insights Guide our Improvement Efforts Better serve customers and shareholders by strengthening partnerships between business operations, commercial functions and supply chain Enhances organizational alignment Customer insights work driving improvement Improved processes and tools p
Slide 12: US Broadline Delivered Another Strong Quarter
US Broadline Delivered Another Strong Quarter Gross profit growth +5.5% Gross margin +57 bps Operating income +9% US Broadline Case Growth USBL Local 5.0% 3.7% 3.5% 4.0% 3.9% 3.1% 3.4% 2.5% 3.0% 3.0% 2.0% 2.1% 2.0% 2.0% 1.7% 1.0% 1.5% 1.4% 1.4% 0.0% 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 12
Slide 13: Marketing Update: Fresh & Local Differentiators
Marketing Update: Fresh & Local Differentiators Fresh & Local - educating customers about our capabilities Drives incremental case and gross profit growth for the category Example of Differentiation – Partnership with Produce Marketing Associations to deliver Good Agricultural Practices (GAP)
Slide 14: Focus on Improving Gross Margins
Focus on Improving Gross Margins Managing deflationary environment well Sysco Brand and Category Management have positive contributions Category Management - leveraging scale and ability to commit consistent volumes is a differentiator Category management continues to deliver incremental ben
Slide 15: Customer Experience: Mobile Order Entry
Customer Experience: Mobile Order Entry Mobile order-entry platform The first phase of a platform agnostic digital commerce strategy Pilots went very well – strong adoption rates Fully-deployed to all OpCo’s by end of fiscal 2016 Focus will be on customer and MA adoption Pilots for next ph
Slide 16: Supply Chain Progress Continues
Supply Chain Progress Continues Solid progress against initiatives Focus on customer service while driving improved productivity Continuous improvement mentality More structured approach to managing expenses Continued work to be done 16
Slide 17: Joel Grade, EVP and CFO
Joel Grade EVP and CFO Good things
Slide 18: 2Q16 Financial Highlights
2Q16 Financial Highlights Adjusted1 Reported $MM, except per share YOY % YOY % 2Q16 2Q16 data Change Change Sales $12,154 0.6% $12,154 0.6% Gross Profit $2,157 3.4% $2,157 3.4% Operating $1,720 1.8% $1,724 -2.6% Expense Operating $437 10.2% $433 37.1% Income Net Earnings $275 12.6% $272 72.4% Dilute
Slide 19: 2Q16 Modest Sales Growth…
2Q16 Modest Sales Growth… Sales increased approximately 1% vs. prior year Deflation of 1.2% vs. inflation of 6.0% in prior year Lower impact relative to the industry FX Impact -1.7% Sales: +2.2% on a constant currency basis Strong USD vs. CND Sysco’s Estimated Product Cost Inflation 6.0% 4
Slide 20: …But Very Solid Case Growth
…But Very Solid Case Growth Total Broadline Case Growth TBL Local 5.0% 3.7% 3.6% 3.7% 4.0% 3.0% 3.4% 3.0% 2.1% 2.9% 2.0% 2.6% 2.4% 2.1% 1.0% 1.8% 0.7% 0.0% -1.0% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Broadline case growth combines US and International operations 20
Slide 21: Improved Gross Margin Performance in 2Q16
Improved Gross Margin Performance in 2Q16 YOY % Change in Gross Profit 7.0% 6.0% 6.1% 6.0% Gross profits were +5.0% on 5.0% 4.0% a constant currency basis 4.0% 3.4% 3.1% 3.0% 3.0% 2.7% 2.3% 2.0% 1.0% 0.7% 0.0% 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Gross margin improvement Gross Margin Seasona
Slide 22: 2Q16 Adjusted Operating Expense
2Q16 Adjusted Operating Expense¹ Adjusted operating expense +$31 million, or 1.8% Drivers were increased case volume and planned business technology investment Cost reduction initiatives beginning to contribute Indirect spending consolidation and reduction Lower fuel costs Slower adminis
Slide 23: 2Q16 Operating Income, Net Income, EPS
2Q16 Operating Income, Net Income, EPS¹ Adjusted operating income +10.2% Adjusted operating income +11.6% on a constant currency basis Previously disclosed $21 million income tax expense benefit from favorable resolution of tax contingencies; +$0.03 per share Adjusted net earnings +12.2% Adjus
Slide 24: Constant Currency Comparisons
Constant Currency Comparisons Adjusted1 Constant Currency1 $MM, except per share YOY % YOY % 2Q16 2Q16 data Change Change Sales $12,154 0.6% $12,351 2.2% Gross Profit $2,157 3.4% $2,190 5.0% Operating $1,720 1.8% $1,748 3.5% Expense Operating $437 10.2% $442 11.6% Income Net Earnings $275 12.6% $279
Slide 25: Cash Flow Performance
Cash Flow Performance ($MM) 1H16 1H15 $ Chg. Cash Flow from Operations $469 $452 $16 Capital Expenditures, net1 ($237 ) ($296) ($59) Free Cash Flow² $231 $157 $75 Cash Impact of Certain Items ($264) ($102) ($162) Dividends Paid $348 $341 $7 2Q16 Cash Flow from Operations was $730 million 1) Capital
Slide 26: Strategic Investments in Capital Expenditures
Strategic Investments in Capital Expenditures Gross Capex CapEx as a % of Sales $MM $298 $248 1.2% 1.1% 1.1% 1.0% 1H15 1H16 2013 2014 2015 1H16 CapEx as a % of Sales Facilities Fleet IT-Other 26
Slide 27: Fiscal 2016 Commentary
Fiscal 2016 Commentary On track to achieve fiscal 2016 plan Deflation is expected to persist for at least the remainder of the fiscal year 4Q15 presents a challenging comparison to prior year Capex expected to be near the low-end of $550-$600 million range Expect a normalized tax rate of 3
Slide 28: Summary
Summary Strong quarter, continued momentum in underlying business More work ahead of us to achieve fiscal 2016 and three-year plan objectives More rigorous process for expense management in place Aggressively reviewing all aspects of our business for incremental cost savings 28
Slide 29: Good things
Good things Sysco
Slide 30: Non-GAAP Reconciliations
Non-GAAP Reconciliations Good things
Slide 31: Impact of Certain Items 2Q16
Impact of Certain Items 2Q16 Sysco Corporation and its Consolidated Subsidiaries Non-GAAP Reconciliation (Unaudited) Impact of Certain Items (In Thousands, Except for Share and Per Share Data) Sysc o’s results of operations are impac ted by c ertain items whic h inc lude restruc turing c osts (c ons
Slide 32: Impact of Certain Items – 1H16
Impact of Certain Items – 1H16 Sysco Corporation and its Consolidated Subsidiaries Non-GAAP Reconciliation (Unaudited) Impact of Certain Items (In Thousands, Except for Share and Per Share Data) 26-Week 26-Week 26-Week 26-Week Period Ended Period Ended Period Change Period Dec. 26, 2015 Dec. 27, 201
Slide 33: Adjusted Cash Flow From Operations
Adjusted Cash Flow From Operations Sysco Corporation and its Consolidated Subsidiaries Non-GAAP Reconciliation (Unaudited) Adjusted Cash Flows Used in / Provided by Operating Activities (In Thousands) Adjusted cash flows provided by operating activities adjusts out the cash impact of our Certain Ite
Slide 34: Free Cash Flow
Free Cash Flow Sysco Corporation and its Consolidated Subsidiaries Non-GAAP Reconciliation (Unaudited) Free Cash Flow and Adjusted Free Cash Flow (In Thousands) Free cash flow represents net cash provided from operating activities less purchases of plant and equipment and includes proceeds from sale
Slide 35: ROIC
ROIC Adjusted Return on Invested Capital (ROIC) Target We have an ROIC target of 15% that we expect to achieve by fiscal 2018. We cannot predict with certainty when we will achieve these results or whether the calculation of our ROIC in such future period will be on an adjusted basis due to the effe
Slide 36: Constant Currency Impact
Constant Currency Impact Sysco Corporation and its Consolidated Subsidiaries Non-GAAP Reconciliation (Unaudited) Impact of Foreign Currency on Results of Operations Metrics (In Thousands, Except for Share and Per Share Data) Sysco’s results of operations are impacted by the strengthening U.S. dollar