Sysco Corporation · NYSE:SYY
Sysco — Q3 FY2016 Earnings Presentation
32 slides from Sysco's earnings presentation, May 2, 2016
Slide 1: Sysco 3Q16 Earnings Results
Sysco 3Q16 Earnings Results May 2, 2016
Slide 2: Forward-Looking Statements
Forward-Looking Statements Statements made in this presentation or in our earnings call for the third 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 Re
Slide 3: Bill DeLaney, CEO
Bill DeLaney CEO ‘come from
Slide 4: Sysco's Third Quarter Fiscal 2016 Results
Sysco’s Third Quarter Fiscal 2016 Results Strong third quarter; solid results through first three quarters Reflects the continuously improving execution of our strategy and three-year plan by 52,000 committed associates 4
Slide 5: Industry & Economic Trends Are Mixed
Industry & Economic Trends Are Mixed Consumer Confidence Unemployment Rate & Non-Farm Payroll 115 7.0% U.S. Unemployment Rate 500,000 Change in U.S. Non-Farm Payroll 110 6.5% Pre-recession Level (2006) 106 400,000 105 101.4 102.6 6.0% 5.5% 99.8 5.3% 5.5% 100 96.3 96.1 5.1% 5.0% 5.0% 300,000 5.0% 95
Slide 6: Q3YTD16 Financial Highlights
Q3YTD16 Financial Highlights Adjusted1 Reported $MM, except per share YOY % YOY % Q3YTD16 Q3YTD16 data Change Change Sales $36,719 1.2% $36,719 1.2% Gross Profit $6,538 3.3% $6,538 3.3% Operating $5,157 2.1% $5,234 0.2% Expense Operating $1,381 7.7% $1,304 17.6% Income Net Earnings $848 7.3% $734 19
Slide 7: Sysco's Three-Year Plan
Sysco’s Three-Year Plan To Be Our Customers’ Most Valued and Trusted Business Partner Grow gross profit Leverage supply Reduce chain costs administrative • Accelerate local costs case growth • Improve margins Improve ROIC Our People Enablers: Business Technology 7
Slide 8: Q3 YTD Shows Progress Towards Three-Year Plan
Q3 YTD Shows Progress Towards Three-Year Plan1 Progress against all 4 key levers for achieving three-year targets 1. Accelerate local case growth Broadline +2.9% 2. Improve gross margin Gross margin +35 basis points 3. Leverage supply chain costs Making solid progress 4. Reduce administrativ
Slide 9: Acquisition of Brakes
Acquisition of Brakes Led by exceptional management team and 15,000 highly capable associates Similar customer-centric strategy and culture Provides meaningful EBITDA trajectory Serves as a platform for future growth 9
Slide 10: Sysco is Well Positioned for the Future
Sysco is Well Positioned for the Future Improve customer Strong momentum in the business experience Two years of local case growth Four consecutive quarters of expanded gross margins Enhance associate engagement Executing strategy at a high level Well-positioned to achieve business and fin
Slide 11: Tom Bene, President and COO
Tom Bene President and COO Good things ‘come from
Slide 12: US Broadline Delivered Another Strong Quarter
US Broadline Delivered Another Strong Quarter Gross profit growth +4.8% Gross margin +39 bps Operating income +11.5% US Broadline Case Growth USBL GM% USBL Local 20.0% 5.0% 3.9% 19.1% 4.0% 3.7% 3.6% 3.5% 3.4% 19.0% 19.0% 18.9% 3.1% 18.7% 18.6% 3.0% 3.4% 18.5% 18.5% 2.5% 3.0% 2.0% 18.1% 2.0% 18
Slide 13: Focus on Improving Gross Margins While Managing Operating Expense
Focus on Improving Gross Margins, while also managing operating expense Eight consecutive quarters of local case growth Four consecutive quarters of margin expansion Sysco Brand, Category Management and Revenue Management delivering positive contributions Margin expansion of approximately 40
Slide 14: Supply Chain Progress Continues
Supply Chain Progress Continues Improved overall service levels Improved operating expense trends Increased productivity Continuous improvement process Indirect spend reductions 14
Slide 15: New Market Structure
New Market Structure New market structure: Reducing markets from eight to six Functional approach Standardized approach drives efficiency Consistent with three-year plan objective to reduce administrative costs 15
Slide 16: Joel Grade, EVP and CFO
Joel Grade EVP and CFO ‘come from
Slide 17: 3Q16 Financial Highlights
3Q16 Financial Highlights Adjusted1 Reported $MM, except per share YOY % YOY % 3Q16 3Q16 data Change Change Sales $12,003 2.2% $12,003 2.2% Gross Profit $2,143 4.1% $2,143 4.1% Operating $1,705 1.5% $1,765 2.0% Expense Operating $438 16.0% $378 15.4% Income Net Earnings $261 10.0% $217 22.7% Diluted
Slide 18: Solid Case Growth
Solid Case Growth Total Broadline Case Growth 5.0% 4.0% 3.7% 3.7% 3.6% 3.4% 3.3% 3.0% 3.0% 3.3% 2.9% TBL 2.1% 2.6% 1.8% 2.4% Local 2.0% 2.1% 1.8% 1.0% 1.4% 0.7% 0.0% 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Eight consecutive quarters of local case growth 18
Slide 19: Certain Items
Certain Items QTD YTD $MM, except per share data TY LY TY LY Restructuring cost $59.4 $0.4 $66.9 $6.1 Acquisition costs $0.6 $49.6 $10.4 $168.1 Total Operations $60.0 $50.0 $77.3 $174.2 Acquisition $10.5 $41.3 $105.3 $97.1 Financing Costs Total Operations & $70.5 $91.3 $182.6 $271.3 Acquisition Fin.
Slide 20: 3Q16 Adjusted Operating Expense
3Q16 Adjusted Operating Expense¹ Adjusted operating expense +$25 million, or 1.5% Drivers were increased case volume and incentive accruals Cost reduction initiatives beginning to contribute Indirect spending consolidation and reduction Lower fuel costs Slower administrative expense grow
Slide 21: Constant Currency Comparisons
Constant Currency Comparisons Adjusted1 Constant Currency1 $MM, except per share YOY % YOY % 3Q16 3Q16 data Change Change Sales $12,003 2.2% $12,116 3.1% Gross Profit $2,143 4.1% $2,161 5.0% Operating $1,705 1.5% $1,721 2.4% Expense Operating $438 16.0% $440 16.6% Income Net Earnings $261 10.0% $263
Slide 22: Cash Flow Performance
Cash Flow Performance ($MM) 3QYTD16 3QYTD15 $ Chg. Cash Flow from Operations $989 $861 $128 Capital Expenditures, net1 ($348 ) ($422) ($74) Free Cash Flow² $641 $439 $202 Cash Impact of Certain Items $272 $128 $144 Dividends Paid $524 $517 $7 3Q16 Cash Flow from Operations was $989 million 1) Capita
Slide 23: Summary
Summary Strong quarter, continued momentum in underlying business More work ahead of us to achieve three- year plan objectives Persistent deflationary headwinds and difficult 4Q year over year comparison 23
Slide 24: Good things come from Sysco
Good things Sysco od t ‘come from
Slide 25: Non-GAAP Reconciliations
Non-GAAP Reconciliations Good things ‘come from
Slide 26: Impact of Certain Items 3Q16
Impact of Certain Items 3Q16 Sysco Corporation and its Consolidated Subsidiaries Non-GAAP Reconciliation (Unaudited) Impact of Certain Items (In Thousands, Except for Share and Per Share Data) Sysco’s results of operations are impacted by certain items which include restructuring costs (consisting o
Slide 27: Impact of Certain Items – 3QYTD16
Impact of Certain Items – 3QYTD16 Sysco Corporation and its Consolidated Subsidiaries Non-GAAP Reconciliation (Unaudited) Impact of Certain Items (In Thousands, Except for Share and Per Share Data) 39-Week 39-Week 39-Week 39-Week Period Ended Period Ended Period Change Period Mar. 26, 2016 Mar. 28,
Slide 28: 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 29: 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 30: 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 31: 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
Slide 32: Cost per Case
Cost per Case Sysco Corporation and its Consolidated Subsidiaries Non-GAAP Reconciliation (Unaudited) Cost per Case Cost per case is an important metric management uses to measure our expense performance. This metric is calculated by taking the total operating expense of our U.S. Broadline companies