Sysco Corporation · NYSE:SYY
Sysco — CAGNY 2017
40 slides from Sysco's conference presentation, Feb 21, 2017
Slide 1: CAGNY 2017
CAGNY 2017 February 21, 2017 Sood,
Slide 2: Forward Looking Statement
Forward Looking Statement Statements made in this presentation 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 Reform Act of 1995. Such forward-looking statements reflect the
Slide 3: Meeting Agenda
MEETING AGENDA • Market and Strategy Update – Bill DeLaney, CEO • Business Update – Tom Bené, President and COO • Financial Overview – Joel Grade, CFO © Sysco Corporation. All rights reserved.
Slide 4: Market & Strategy Update
MARKET & STRATEGY UPDATE BILL DELANEY, CEO
Slide 5: Sysco is the Global Leader in Foodservice Distribution
Sysco is the Global Leader in Foodservice Distribution 48 500,000 Dividend CUSTOMERS Increases Since 1970 ~ $55 Billion LEVERAGE REDUCE in Annual SUPPLY65,000 CHAIN ADMINISTRATIVE Sales ~ $1.5 EMPLOYEES COSTS COSTS Billion in Annual Free Cash Flow1 ~ $10 Billion 13 COUNTRIES in Annual Gross Profit 0
Slide 6: Our Vision and Our Mission
To be our customers’ Our VISION most valued and trusted business partner. To market and deliver great products to Our MISSION our customers with exceptional service. © Sysco Corporation. All rights reserved.
Slide 7: Our Core Values Represent Who We are and What We Stand for
Our Core Values Represent Who We are and What We Stand for… Integrity Committed to Doing the Right Thing Responsibility Teamwork Accountable to our Working as One to Help Employees, Customers Our Customers Succeed and Communities Inclusiveness Creating an Open, Excellence Diverse and Respectful In E
Slide 8: We Are Executing on our Customer-Centric Strategy
We Are Executing on our Customer-Centric Strategy PARTNERSHIP PRODUCTIVITY Profoundly enrich the Continuously experience of doing improve business productivity in all with Sysco areas of our business PRODUCTS PEOPLE Enhance offerings Leveraging talent, through a customer- structure and centric appro
Slide 9: The U.S. Market is the Foundation of our Business
The U.S. Market is the Foundation of our Business, with Meaningful Growth Potential 2016 Market Size: $279B Broadline SYGMA FreshPoint Meat Companies 02.21.17 CAGNY 2017 9 © Sysco Corporation. All rights reserved. Source: Technomic, Long-term Forecast (Feb 2017), US Food, Beverage (Non-Alcohol only)
Slide 10: Canada is a Substantial and Strategically Important Market
Canada is a Substantial and Strategically Important Market 2016 Market Size: CAD $32B Broadline 02.21.17 CAGNY 2017 10 © Sysco Corporation. All rights reserved. Source: Technomic, Canadian Foodservice Industry, Wallchart October 2016, Operator Purchases, Food, Beverage (Non-Alcohol only) and Non-Foo
Slide 11: We Continue to Expand our Presence in Latin America
We Continue to Expand our Presence in Latin America 02.21.17 CAGNY 2017 11 © Sysco Corporation. All rights reserved.
Slide 12: Our Recent Brakes Acquisition Provides a Platform for Growth in Europe
Our Recent Brakes Acquisition Provides a Platform for Growth in Europe 02.21.17 CAGNY 2017 12 © Sysco Corporation. All rights reserved.
Slide 13: Making Excellent Progress on our Three-Year Plan
Making Excellent Progress on our Three-Year Plan Accelerate Local Case Growth Operating Income Achieve Gross Profit Growth +$350 million1 Manage Expense Growth 2016 Halfway Point 2018 02.21.17 CAGNY 2017 13 Note: Operating Income target excludes Brakes; 1 See Non-GAAP reconciliations at the end of t
Slide 14: We are Very Excited About Sysco's Future
We are Very Excited About Sysco’s Future • Sound Customer-Centric Strategy • Executing at a High Level • Highly Capable Management Team and World-Class Sales Force Committed to Disciplined, Targeted, Profitable Growth 02.21.17 CAGNY 2017 14 © Sysco Corporation. All rights reserved.
Slide 15: Business Update
BUSINESS UPDATE TOM BENÉ, PRESIDENT AND COO
Slide 16: Our Three-Year Strategic Plan Focuses on Profitable Growth
Our Three-Year Strategic Plan Focuses on Profitable Growth 1 Financial Objectives TO BE OUR CUSTOMERS’ MOST VALUED AND TRUSTED BUSINESS PARTNER Operating • Improve operating Income income by $600-$650M GROW LEVERAGE REDUCE GROSS PROFIT SUPPLY CHAIN ADMINISTRATIVE • Accelerate local COSTS COSTS case
Slide 17: We Are on Target Through the First Half of our Three-Year Plan
We Are on Target Through the First Half of our Three-Year Plan Three-Year Plan Progress / Updated Plan 1 (as of Fall 2015) Accelerate Local Case Growth Average case growth for the most recent 6 quarters ---> 2.4% Target: 2% - 3% 11 consecutive quarters of growth Grow Gross Profit Average growt
Slide 18: Insights Drive our Customer Experience Journey
Insights Drive our Customer Experience Journey and Have Enabled us to Accelerate our Local Growth Value-Added Solutions Know our customers Menu Analytics Business Review Execute Grow profitably flawlessly with our to serve customers our customers Differentiated Products Build a compelling suite of p
Slide 19: Improving the Customer Experience is a Top Priority
Improving the Customer Experience is a Top Priority Customer Service Email Multi-lingual Social media Chat Customer Leads Gen Text Experience MA Digital 02.21.17 CAGNY 2017 19 © Sysco Corporation. All rights reserved.
Slide 20: Solid Improvement in Gross Margin Based on Several Key Drivers
Solid Improvement in Gross Margin Based on Several Key Drivers 1 Total Sysco (excluding Brakes) GM bps 6.0% 80 5.0% GP$ Growth 4.7% 4.1% 60 4.0% 3.4% 2.9% 2.3% 40 2.0% 20 23 50 33 44 70 54 0.0% 0 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Category Management Sysco Brand Revenue Management • Consistent national •
Slide 21: Our Supply Chain Priorities Target Improved Productivity
Our Supply Chain Priorities Target Improved Productivity to Meet our Customers’ Needs Standardize best practices Utilizing technology to OpCo Fleet t in transportation and t improve safety, driver Productivity warehousing to improve Excellence performance and service quality, cost and safety Strateg
Slide 22: We Are Committed to our Customer-Centric Approach to Driving Growth
We Are Committed to our Customer-Centric Approach to Driving Growth, While Improving our Cost Structure • Serving customer needs through value-added solutions, an expansive product offering and technology • Fostering interactions with our customers through multiple channels • Leveraging key initiati
Slide 23: Financial Overview
FINANCIAL OVERVIEW JOEL GRADE, CFO
Slide 24: Through the First Half of our Three-Year Plan, we Have Achieved $350M
Through the First Half of our Three-Year Plan, we Have Achieved $350M of our Target Three-Year Plan 1 (as of Fall 2015) Progress / Updated Plan Grew Operating Income by $350M at Halfway Point Grow Operating Income by at least $400M Raised Target to $600M - $650M 02.21.17 CAGNY 2017 24 Note: Operatin
Slide 25: Strong Execution Gave us Confidence to Raise our Operating Income Goal
Strong Execution in our Business Gave us Confidence to Raise our Operating Income Goal Outperformed Initial Expectations Grown Gap Between Gross Profit and Expense Growth High Confidence in Execution 02.21.17 CAGNY 2017 25 © Sysco Corporation. All rights reserved.
Slide 26: Key Initiatives Result in Strong Gross Profit Dollar Growth
Execution of Key Initiatives Results in Strong Gross Profit Dollar Growth and Solid Expense Management Total Sysco Operating Leverage (excluding Brakes)1 8.0% 7.0% 6.8% 6.0% 6.0% 5.0% 6.1% 4.7% 5.0% 6.0% 4.5% 4.1% 4.0% 3.4% 3.0% 3.1% 2.9% 3.0% 3.1% 2.0% 2.3% 1.0% 2.2% 1.9% 1.8% 1.5% 1.7% 0.0% 0.4% 1
Slide 27: Net Working Capital Has Improved Approximately 2.5 Days
Overall Sysco Net Working Capital Has Improved Approximately 2.5 Days Toward our 4-Day Goal 2Q17 vs. FY15 Working Capital Performance ~ 2.5 days better than FY15 FY15 AR change Inv change AP change 2Q17 02.21.17 CAGNY 2017 27 © Sysco Corporation. All rights reserved.
Slide 28: Strong Track Record of Turning Earnings Into Cash
Strong Track Record of Turning Earnings Into Cash Free Cash Conversion: Free Cash Flow ($B)1 • Strong Earnings Performance • Working Capital 1.4 Management 1.0 1.0 • Disciplined Capital Spend 2014 2015 2016 02.21.17 CAGNY 2017 28 1 See Non-GAAP reconciliations at the end of this presentation. © Sysc
Slide 29: Capital Allocation Priorities
Capital Allocation Priorities 1 Invest in the Business 2 Grow the Dividend 3 Strategic M&A 4 Pay Down Debt Opportunistic Share Repurchase 02.21.17 CAGNY 2017 29 © Sysco Corporation. All rights reserved.
Slide 30: In Summary
In Summary… • Sysco has had strong business performance • We’ve recently raised our three-year operating income target • We are in the early stages of next three-year plan development 02.21.17 CAGNY 2017 30 © Sysco Corporation. All rights reserved.
Slide 31: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS
Slide 32: Impact of Certain Items
Impact of Certain Items Sysco’s results of operations are impacted by restructuring costs consisting of (1) severance charges, (2) professional fees related to our three-year strategic plan, (3) restructuring expenses within our Brakes Group operations and (4) expenses associated with our revised bu
Slide 33: Operating Income Growth
Operating Income Growth Operating Income Growth Year Ended July 2, 2016 June 27, 2015 Period Change 26-Week 26-Week Period Change Cumulative Sales $ 50,366,919 $ 48,680,752 $ 1,686,167 $ 27,425,922 $ 24,716,237 $ 2,709,685 Impact of Brakes - - - (2,612,423) - (2,612,423) Sales excluding the impact o
Slide 34: Total Sysco Operating Leverage
Total Sysco Operating Leverage Sysco Corporation and its Consolidated Subsidiaries Non-GAAP Reconciliation (Unaudited) Total Sysco Operating Leverage (excluding Brakes) (In Thousands) (a) Average gross profit (GAAP) 10.3% (b) Average gross profit excluding the impact of Brakes (Non-GAAP) 3.7% (c) Av
Slide 35: Total Sysco Operating Leverage (continued)
Total Sysco Operating Leverage (continued) 13-Week 13-Week 13-Week 13-Week Period Ended Period Ended Period Change Period Oct. 1, 2016 Sep. 26, 2015 in Dollars % Change Gross profit $ 2,691,919 $ 2,237,995 $ 453,924 20.3% (a) Impact of Brakes (343,051) - (343,051) NM Gross profit excluding the impac
Slide 36: Total Sysco Operating Leverage (continued)
Total Sysco Operating Leverage (continued) 13-Week 13-Week 13-Week 13-Week Period Ended Period Ended Period Change Period Mar. 26, 2016 Mar. 28, 2015 in Dollars % Change Gross profit $ 2,142,825 $ 2,057,498 $ 85,327 4.1% (a) Gross margin 17.9% 17.5% 0.33 Operating expenses (GAAP) $ 1,765,207 $ 1,730
Slide 37: Total Sysco Operating Leverage (continued)
Total Sysco Operating Leverage (continued) 13-Week 13-Week 13-Week 13-Week Period Ended Period Ended Period Change Period Sep. 26, 2015 Sep. 27, 2014 in Dollars % Change Gross profit $ 2,237,995 $ 2,188,717 $ 49,278 2.3% (a) Gross margin 17.8% 17.6% 0.23 Operating expenses (GAAP) $ 1,744,521 $ 1,723
Slide 38: Total Sysco Operating Leverage (continued)
Total Sysco Operating Leverage (continued) 13-Week 13-Week 13-Week 13-Week Period Ended Period Ended Period Change Period Mar. 28, 2015 Mar. 29, 2014 in Dollars % Change Gross profit $ 2,057,498 $ 1,994,741 $ 62,757 3.1% Operating expenses (GAAP) $ 1,730,190 $ 1,662,116 $ 68,074 4.1% Impact of certa
Slide 39: Adjusted Operating Income Target
Adjusted Operating Income Target Adjusted Operating Income Target We expect to achieve our adjusted operating income target by fiscal 2018. Due to the uncertainties within these projected amounts, we cannot provide a quantitative reconciliation of these non-GAAP measures to the most directly compara
Slide 40: Free Cash Flow
Free Cash Flow Sysco Corporation and its Consolidated Subsidiaries Non-GAAP Reconciliation (Unaudited) 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 sales of plant and equipment. Sy