Sysco Corporation · NYSE:SYY
Sysco — FY2013 Earnings Presentation
40 slides from Sysco's earnings presentation, Aug 12, 2013
Slide 1: Sysco 4Q & FY13 Earnings Results
Sysco 4Q & FY13 Earnings Results August 12, 2013
Slide 2: Forward-Looking Statements
Forward-Looking Statements Statements made in this presentation or the accompanying earnings call 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 forw
Slide 3: FY13 Overview
FY13 Overview A year of successes and challenges Foodservice industry has not fully participated in the economic recovery Transformational change will help us build on our industry leading position for years to come 3
Slide 4: Foodservice Sales Remain Modest; Traffic Declining
Foodservice Sales Remain Modest; Traffic Declining NPD: Restaurant Spend/Traffic U.S. Retail Data(1) % Change vs. Year Ago % Change vs. Year Ago 10.0% 4% 3.2% 9.0% 2.9% 3% 8.0% 2.5% 3% 2.2% 2.1% 7.0% 2.1% 2.1% 5.7% 6.0% 2% 1.7% 1.5% 1.5% 5.0% 2% 1.2% 1.3% 4.0% 1% 3.0% 1% 2.0% 3.1% 0% 1.0% 0.0% -1% -
Slide 5: Recent Consumer Confidence and Unemployment Reports Have Been Encouraging…
Recent Consumer Confidence and Unemployment Reports Have Been Encouraging… Consumer Confidence U.S. Unemployment Rate 85.0 9.0% 80.0 80.3 75.0 70.0 8.0% 65.0 60.0 7.4% 55.0 7.0% 5
Slide 6: …But We Are Still Well Below 10 Year Records
…But We Are Still Well Below 10 Year Records Consumer Confidence U.S. Unemployment Rate 111.9 11.0% 100.0 80.3 9.0% 80.0 60.0 7.0% 7.4% 40.0 5.0% 20.0 4.4% 3.0% 0.0 6
Slide 7: 4Q13 Highlights
4Q13 Highlights Adjusted Results1 Reported YOY % YOY % $ Millions, except share data 4Q13 4Q13 Change Change Sales $11,601 5.0% $11,601 5.0% Gross Profit $2,036 1.2% $2,036 1.2% Operating Expenses $1,471 4.9% $1,576 5.4% Operating Income $565 (7.3%) $460 (10.8%) Net Earnings $353 (4.2%) $283 (8.5%)
Slide 8: FY13 Highlights
FY13 Highlights Adjusted Results1 Reported YOY % YOY % $ Millions, except share data FY13 FY13 Change Change Sales $44,411 4.8% $44,411 4.8% Gross Profit $7,868 2.5% $7,868 2.5% Operating Expenses $5,784 4.1% $6,209 7.3% Operating Income $2,084 (1.7%) $1,658 (12.3%) Net Earnings $1,267 0.1% $992 (11
Slide 9: Case Growth and Inflation Drive Sales Growth
Case Growth and Inflation Drive Sales Growth (1) Case Growth Sales Growth 3.5% 3.0% 6.0% 5.4% 3.0% 2.9% 2.8% 5.0% 5.0% 4.7% 2.5% 4.0% 4.0% 1.7% 2.0% 3.0% 1.5% 2.0% 1.0% 1.0% 0.5% 0.0% 0.0% -0.5% -1.0% 1Q13 2Q13 3Q13 4Q13 1Q13 2Q13 3Q13 4Q13 Organic Acquisitions Organic Inflation Acquisitions (1) – I
Slide 10: Trends Impacting the Foodservice Industry
Trends Impacting the Foodservice Industry Growth is expected to remain modest Our customers are increasingly value-focused Pricing pressures will likely continue Non-traditional competitors are a factor Consumer trends are shifting focus to fresh, natural and sustainably-produced products
Slide 11: Gross Margin Pressure Persists
Gross Margin Pressure Persists ($ in millions) YOY Decline in Gross Margin (bps) Customer mix has -10 negatively impacted our gross margin due to: -30 (26) -50 (33) (34) Increased sales in our lower margin (54) -70 corporate-managed (66) (75) business -90 (95) -110 Softer sales in our 2Q12 3Q12
Slide 12: Broad ERP Rollout Expected to Continue Around the End of CY2013
Broad ERP Rollout Expected to Continue Around the End of CY2013 We are making progress in developing the required system enhancements We are focused on improving response times and reducing system loads which will lead to improved system stability Next conversion scheduled toward the end of th
Slide 13: We Acquired 14 Companies During FY13 With Annualized Sales Over $1 Billion
We Acquired 14 Companies During FY13 With Annualized Sales Over $1 Billion Servco Foodservices Inc. 13
Slide 14: We Exceeded Our Targeted FY13 Business Transformation Benefits
We Exceeded Our Targeted FY13 Business Transformation Benefits Reduce Cost Lower Product $550-650 Structure Costs million Completed strategic Improved sourcing sales initiatives, participation including CRM Built category Developed operations management FY15 productivity action organization
Slide 15: Category Management is Designed to Drive Growth
Category Management is Designed to Drive Growth Customer and market insights Create the right supplier relationships Provide the right assortment at the right cost Enable our MAs 15
Slide 16: Cost per Case Declined YOY
Cost per Case Declined YOY Cost per Case1 $ Change FY13 vs. FY12 The decline in cost per $0.10 case from FY12 was primarily due to: $0.05 Business Transformation $0.00 Benefits -$0.05 Partially offset by: Increased delivery -$0.10 costs -$0.15 Total SG&A Operations 1 Represents cost/case for Bro
Slide 17: Business Transformation Impacts SG&A Expense
Business Transformation Impacts SG&A Expense In conjunction with Business Transformation, several key initiatives impacted our sales organization Sales management structure was flattened Rolled out the CRM module We adjusted the compensation plans for MAs We reduced the number of unproduct
Slide 18: Free Cash Flow Increased More Than 60% in FY13
Free Cash Flow Increased More Than 60% in FY13 $ Millions FY13 FY12 Cash Flow from Operations $1,512 $1,404 (1) Capital Expenditures $496 $776 (2) Free Cash Flow $1,015 $628 Dividends Paid $648 $623 (1) Net of proceeds from sales of plant and equipment (2) Free Cash Flow table may not foot due to ro
Slide 19: We Have Made Significant Progress on Many Other Business Transformation Initiatives
We Have Made Significant Progress on Many Other Business Transformation Initiatives During FY13, we completed the rollout of our Customer Relationship Management platform (CRM) to all North American Broadline operating companies and the SAP Maintenance module has been rolled out to all U.S. Broadl
Slide 20: Sysco Has Paid a Dividend Every Quarter Since Our Founding in 1970
Sysco Has Paid a Dividend Every Quarter Since Our Founding in 1970 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 20
Slide 21: Looking into Fiscal 2014
Looking into Fiscal 2014 Key operational and financial metrics: Case growth and mix Gross profit dollar growth Cost per case We expect our earnings performance trends in fiscal 2014 to gradually improve through Achieving Business Transformation benefits Growing both our corporate and l
Slide 22: In Closing …
In Closing … Record sales in FY13 of $44 billion; net earnings and free cash flow of approximately $1 billion We take our leadership position in the $235 billion foodservice industry very seriously Due to industry maturity, transformational change is required to expand leadership position We
Slide 23: 4Q13 Highlights
4Q13 Highlights Adjusted Results1 Reported YOY % YOY % $ Millions, except share data 4Q13 4Q13 Change Change Sales $11,601 5.0% $11,601 5.0% Gross Profit $2,036 1.2% $2,036 1.2% Operating Expenses $1,471 4.9% $1,576 5.4% Operating Income $565 (7.3%) $460 (10.8%) Net Earnings $353 (4.2%) $283 (8.5%)
Slide 24: 4Q13 Operating Expenses
4Q13 Operating Expenses (YOY change; $ in millions) $44 $18 4Q13 $18 Reported operating expense +5.4% Adjusted1 operating $1,576 $1,496 expense +4.9% 4Q12 Retirement- Business Other 4Q13 Related Transformation 1 See Non-GAAP reconciliations at the end of this presentation. 24
Slide 25: FY13 Highlights
FY13 Highlights Adjusted Results1 Reported YOY % YOY % $ Millions, except share data FY13 FY13 Change Change Sales $44,411 4.8% $44,411 4.8% Gross Profit $7,868 2.5% $7,868 2.5% Operating Expenses $5,784 4.1% $6,209 7.3% Operating Income $2,084 (1.7%) $1,658 (12.3%) Net Earnings $1,267 0.1% $992 (11
Slide 26: FY13 Operating Expenses
FY13 Operating Expenses (YOY change; $ in millions) FY13 Reported operating expense +7.3% $114 $36 $19 $10 Adjusted1 operating $58 expense +4.1% $48 $137 $6,209 $5,786 FY12 Business Certain D&A Retirement- Other FY13 Payroll Fuel Transf. Items (ex-BT) Related 1 See Non-GAAP reconciliations at th
Slide 27: FY13 Retirement-Related Expense
FY13 Retirement-Related Expense Without retirement plan changes: FY13 vs. FY12 Projected increase in pension expense ~$100 million With retirement plan changes: YOY Change H (L) Certain ($ in millions) FY13 FY12 Recurring Total Items Total Pension, SERP and Other $140 $160 $12 ($33) ($21) 401(k) and
Slide 28: Executing on Our Goal of Increasing Sales Through Acquisitions
Executing on Our Goal of Increasing Sales Through Acquisitions Annualized acquired sales ($ in millions) $1,049 $435 $326 $270 $75 $41 FY08 FY09 FY10 FY11 FY12 FY13 Acquired Company Sales as % of 0.2% 0.9% 0.1% 1.1% 0.6% ~2.5% Sysco Sales # of Deals 4 4 3 5 9 14 28 Note: Retained sales may be less t
Slide 29: Business Transformation Project Costs
Business Transformation Project Costs (in millions) 4Q13 4Q12 FY13 FY12 Operating expense $88 $70 $331 $193 Capital investment $6 $23 $20 $146 Cash outlay $73 $89 $274 $322 29
Slide 30: Business Transformation Benefits Began to Flow in FY13
Business Transformation Benefits Began to Flow in FY13 Retirement plan expenses are significantly lower than they would have been if we did not freeze our old plans Restructuring both our IT & Sales organizations has led to significantly lower expenses compared to the prior year Increased comp
Slide 31: Capital Expenditures
Capital Expenditures ($ millions) The decline in capex is driven by: A decrease in business transformation capital spend; A reduction in the number of major facilities projects this year; and A more disciplined capital allocation and approval process $785 $785 $512 $512 FY12 FY13 FY12 FY13 1Q
Slide 32: Free Cash Flow Increased More Than 60% in FY13
Free Cash Flow Increased More Than 60% in FY13 $ Millions FY13 FY12 Cash Flow from Operations $1,512 $1,404 (1) Capital Expenditures $496 $776 (2) Free Cash Flow $1,015 $628 Dividends Paid $648 $623 (1) Net of proceeds from sales of plant and equipment (2) Free Cash Flow table may not foot due to ro
Slide 33: Retirement-Related Expenses Will Decline in FY14
Retirement-Related Expenses Will Decline in FY14 FY14 Change YOY Higher (Lower) (in millions of dollars) 1Q 2Q 3Q 4Q FY Total Expense (8-12) (15-20) (23-27) (25-30) (75-85) Adjusted Expense1 (8-12) (3-8) (18-22) (22-27) (50-60) 1) Estimate of retirement-related expenses; includes pension plan, SERP
Slide 34: FY14 Guidance
FY14 Guidance Guidance FY14 Acquisitions At least 1% sales growth contribution Adjusted retirement-related expenses $50-60 million lower Broadline cost per case $0.05 decline Fuel expense Up $10-20 million Capital spending $550- 600 million Business Transformation: Expense $300 - 350 million Capital
Slide 35: Good things come from Sysco
Good things Sysco od ‘come from
Slide 36: Non-GAAP Reconciliations
Non-GAAP Reconciliations
Slide 37: 4Q13 & FY13 Non-GAAP Reconciliations
4Q13 & FY13 Non-GAAP Reconciliations Sysco’s results of operations are impacted by certain items which include charges from restructuring our executive retirement plans, charges from the withdrawal from multiemployer pension plans, severance charges, one-time acquisition-related charges and charges
Slide 38: 4Q13 Non-GAAP Reconciliation
4Q13 Non-GAAP Reconciliation 13-Week 13-Week 13-Week 13-Week Period Ended June 29, Period Ended June 30, Period Change Period 2013 2012 in Dollars % Change Operating expenses (GAAP) $ 1,576,319 $ 1,496,247 $ 80,072 5.4% Impact of Restructuring Executive Retirement Plans (3,382) - (3,382) NM Impact o
Slide 39: FY13 Non-GAAP Reconciliation
FY13 Non-GAAP Reconciliation 52-Week 52-Week 52-Week 52-Week Period Ended June 29, Period Ended June Period Change Period 2013 30, 2012 in Dollars % Change Operating expenses (GAAP) $ 6,209,113 $ 5,785,945 $ 423,168 7.3% Impact of Restructuring Executive Retirement Plans (20,990) - (20,990) NM Impac
Slide 40: FY13 Non-GAAP Reconciliation
FY13 Non-GAAP Reconciliation Free cash flow represents net cash provided from operating activities less purchases of plant and equipment. Sysco considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the bu