Sysco Corporation · NYSE:SYY
Sysco — CAGNY Conference 2014
45 slides from Sysco's conference presentation, Feb 18, 2014
Slide 1: CAGNY Conference February 18, 2014
CAGNY Conference February 18, 2014 Bill DeLaney President and Chief Executive Officer Wayne Shurts Executive Vice President and Chief Technology Officer Chris Kreidler Executive Vice President and Chief Financial Officer 1
Slide 2: Forward-Looking Statements
Forward–Looking Statements 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: Today's Speakers
Today’s Speakers Bill DeLaney Wayne Shurts Chris Kreidler 3
Slide 4: Bill DeLaney, President and Chief Executive Officer
Bill DeLaney President and Chief Executive Officer 4
Slide 5: Quick Facts
Quick Facts The global leader in foodservice distribution FY 2013 sales over $44 billion 425,000 customers Approximately 48,000 associates Over 400,000 products, including approximately 40,000 Sysco Brand products Deliver over 1.2 billion cases every year 5
Slide 6: Quick Facts
Quick Facts The global leader in foodservice distribution One of America’s leading FY 2013 sales over $44 billion foodservice distributors 425,000 customers FY12 sales of $22 billion Approximately 48,000 associates More than 350,000 products, Over 400,000 products, including includin
Slide 7: Sysco Locations Across the U.S., Bahamas, Canada, Ireland & Northern Ireland
Sysco Locations Across the U.S., Bahamas, Canada, Ireland & Northern Ireland 7
Slide 8: Significant Market Potential
Significant Market Potential Foodservice Market ~$255B $44B Sysco Core Market Sales in Canada/ CY13 U.S. Market Ireland $230 B Market $25 B Potential Total Core Market ~$255 B Note: Sysco sales represent CY15 core market sales which exclude IFG and Guest Supply. Market data sources include Technomic
Slide 9: Our Strategy
Our Strategy Profoundly Continuously Expand our Implement an enrich the improve offerings through Explore, assess enterprise-wide experience of productivity in a customer- and pursue new talent doing business all areas of our centric innovation businesses and management with Sysco business program m
Slide 10: Key Areas of Strategic Focus
Key Areas of Strategic Focus Sustainable Profitable Operating Growth Margin Asset Optimization and Free Cash Flow 10
Slide 11: We Continue to Expand our Capabilities
We Continue to Expand our Capabilities 2012 2009 First Acquired acquisition in European Ireland Imports 2001 Acquired Guest Supply 1999 Acquired first meat company 2011 Formed 2013 Announced Intent to 1985 Sysco Ventures Merge with US Foods SYGMA 2002 formed Expansion of 2000 Acquired Canadian first
Slide 12: Key Initiatives
Key Initiatives Category Customer Insights Management - Loyalty - Assortment - Segments Integration Planning - Innovation - Brand - COGS - Day 1 Readiness Reduction - Value Creation - Redesign Organization & Processes Productivity Customer Value Enhancements - Business - Operations Reviews - Selling
Slide 13: Two Great Companies: Bringing Together the Best of Both
Two Great Companies Bringing Together the Best of Both 13
Slide 14: Consistent with Sysco's Strategic Focus
Consistent with Sysco’s Strategic Focus Sustainable Profitable Operating Growth Margin Reduce operating Leverage customer costs insights Lower product costs Enhance and expand channels Continue to develop Sysco Ventures Increase customer retention Further develop Asset Optimization enterprise struct
Slide 15: A Transformational Acquisition
A Transformational Acquisition Benefits all stakeholders Combined strengths deliver greater value, more services and innovation for Customers customers Strengthen our role as our customers’ most valued and trusted business partner Achieve shared efficiencies with suppliers Suppliers Platform
Slide 16: Key Takeaways
Key Takeaways We participate in a large market that should experience modest long-term growth Current market conditions remain difficult, but should improve as 2014 progresses Targeting solid operating performance improvement We are driving transformational change and creating greater value
Slide 17: Wayne Shurts, EVP and Chief Technology Officer
Wayne Shurts Executive Vice President and Chief Technology Officer 17
Slide 18: Overview
Overview The year in review State of play one year ago Progress of the past year Functional deployments Enhanced ERP capabilities OpCo Rollouts re-launched Where we go from here Calendar year 2014 Sysco / US Foods Integration 18
Slide 19: State of Play One Year Ago
State of Play One Year Ago Five Operating Companies were live on ERP Solution Core processes configured in the ERP solution worked As of April 2013, the five live operating companies had: o Captured 1.25 million orders o Shipped 26 million line items o Shipped 45 million pieces o Processed 160,0
Slide 20: Progress: Functional Deployments
Progress: Functional Deployments This approach allowed us to make progress standardizing, centralizing and technology- enabling our business processes for US Broadline: CRM: completed rollout of salesforce.com to all operating companies ERP Maintenance: completed rollout to all operating compani
Slide 21: Progress: Addressed ERP Issues
Progress: Addressed ERP Issues Systems Stability Performance and Scalability Functionality 21
Slide 22: Progress: Systems Stability
Progress: Systems Stability Actions Results Rebuilt infrastructure Night operations incidents greatly reduced (6:1) Major incidents, outages Hardened interfaces reduced (3:1) Speed of incident recovery greatly enhanced 22
Slide 23: Progress: Performance & Scalability
Progress: Performance & Scalability Actions Results Rewrote and tuned Significantly improved pricing routine system speed and response Tuned MA ordering time application Significantly reduced server Tuned other systems jobs capacity utilization for both (run times from hours to average and
Slide 24: Progress: Functionality
Progress: Functionality Actions Results Simplified and improved Customer service levels replenishment systems and rebounded processes Merchandiser satisfaction National Account SWAT increased team Marketing associates Delivered multiple ERP satisfaction increased releases with 1,800+ enh
Slide 25: Progress: OpCo Rollouts Re-launched
Progress: OpCo Rollouts Re-launched Idaho OpCo – Nov 2013 Vegas OpCo – Jan 2014 Arizona OpCo – Jan 2014 New Orleans OpCo – April 2014 Denver OpCo – April 2014 25
Slide 26: Where do we go from here
Where do we go from here: In calendar year 2014, we expect: Implement major performance enhancements to further increase system speed and scalability Additional Operating Company rollouts Steady diet of functional enhancements ERP software upgrade 26
Slide 27: Merger Integration Planning: Interim
Merger Integration Planning Sysco US Foods Integration – Interim Implement an Interim Unifying Platform enabling the companies’ two legacy systems to deliver consistent pricing, service, reporting to our customers Interim Unifying Platform 27
Slide 28: Merger Integration Planning: Targeted End State
Merger Integration Planning Sysco US Foods Integration – Targeted End State Combining Sysco ERP back end with US Foods customer facing front end US Foods Customer Facing System Interim SyscoSolution ERP 28
Slide 29: Chris Kreidler, EVP and Chief Financial Officer
Chris Kreidler Executive Vice President and Chief Financial Officer 29
Slide 30: Business Transformation
Business Transformation Annual Budget: $300-350 Business million Transformation Including Lower product costs Reduce cost Successfully by structure by $300- implement $250-300 million 350 million annually technology platform annually Benefits: $550-650 million annually 30
Slide 31: Business Transformation Benefits
Business Transformation Benefits $550-650 million Goal FY15 100% FY14 ~50%-70% FY13 ~25% Annualized Benefits 31
Slide 32: Business Transformation Benefits – Progress After One Year
Business Transformation Benefits – Progress After One Year $550-650 million Goal FY15 100% As of 4Q13 FY14 ~50%-70% FY13 ~25% Annualized Benefits 32
Slide 33: Business Transformation Benefits – Progress
Business Transformation Benefits – Progress After 18 Months $550-650 million Goal FY15 100% As of 2Q14 FY14 ~50%-70% FY13 ~25% Annualized Benefits 33
Slide 34: Business Transformation Benefits – Progress After 18 Months
Business Transformation Benefits – Progress After 18 Months Reduce Cost Structure Lower Product Costs $550-650 million Completed strategic sales Developed teams and Goal initiatives, including CRM processes FY15 Completed retirement plan Majority of wave one 100% & IT function restructuring
Slide 35: Two Great Companies: Bringing Together the Best of Both
Two Great Companies Bringing Together the Best of Both 35
Slide 36: Transaction Financing Structure
Transaction Financing Structure Approximate Total Transaction Value: Equity 3.0B Equity holders of US Foods will own approx. 87 million shares or, 13%, of combined company at closing, and A representative of each of US Foods’ majority shareholders will join Sysco’s Board of Directors Cash 0.5B U
Slide 37: Merger Will Deliver Significant Financial Value
Merger Will Deliver Significant Financial Value Accretive in year one Annual cost synergies of at least $600 million Synergy estimates are realistic and achievable These synergies will phase in over 3-4 years Total expenses to achieve synergies of $700 - $800 million, spread over three yea
Slide 38: Synergy Estimates are Realistic and Achievable
Synergy Estimates are Realistic and Achievable At least $600 million in annual synergies after three to four years in five key areas, including: Distribution Network General & Administrative Cost of Goods Sold Warehouse and Distribution Productivity Selling and Field Productivity Current e
Slide 39: At Least $600 Million in Estimated Annual Synergies
At Least $600 Million in Estimated Annual Synergies Identify duplicative General & resources Admin. Network rationalization Delivery Distribution Leverage combined Network COGS spend consolidation & efficient routing Determine combined Synergy category management approach Warehouse Selling and a
Slide 40: What's Next
What’s Next Integration Team Announced integration planning leadership in January Full integration planning now in place, includes key employees from both companies Enlisted the help of McKinsey; vast experience in large, complex integrations Committed to achievement of synergies Regulatory
Slide 41: Integration Planning Team
Integration Planning Team Steering Committee Sr. Execs from both companies Integration Leader Chris Kreidler Integration Management Office (IMO) IMO will lead, plan and track the integration Business teams Merchandising/ Sales Operations Corporate Functions Day 1 readiness Product Marketing
Slide 42: Key Areas of Strategic Focus
Key Areas of Strategic Focus Sustainable Profitable Operating Growth Margin Asset Optimization and Free Cash Flow 42
Slide 43: When We Execute…Tremendous Return to our Shareholders
When We Execute…Tremendous Return to our Shareholders CAGNY 2013 Uses of Sysco’s Cash (FY13 - FY17) As presented in Feb. 2013 – projections Billions & credit ratings not updated $11 BBB $10 $9 $4B Reinvest in BBB+ Acquisitions $8 Business & Capital Spending Borrowing $7 $11B Capacity A- $6 $4B Retur
Slide 44: Key Takeaways
Key Takeaways Challenging and exciting times We are encouraged by progress on our initiatives Proposed US Foods merger presents opportunities to advance Sysco and the industry Well positioned for future success Investments in our business More confident in technology transformation Cas
Slide 45: Good things
Good things Sysco