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 Sysco
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
Slide 4: Bill DeLaney
Bill DeLaney President and Chief Executive Officer
Slide 5: Quick Facts
Quick Facts Good things come from Sysco 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
Slide 6: Quick Facts
Quick Facts Good things come from Sysco 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 US. FOODS KEEPIN
Slide 7: Sysco Locations Across the U.S., Bahamas, Canada, Ireland & Northern Ireland
Sysco Locations Across the U.S., Bahamas, Canada, Ireland & Northern Ireland
Slide 8: Significant Market Potential
Significant Market Potential Foodservice Market ~$255B $44B Sysco Core Market Sales in CY13 Potential U.S. Market $230 B Canada/ Ireland Market $25 B 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 Growth Asset Optimization and Free Cash Flow Operating Margin
Slide 11: We Continue to Expand our Capabilities
We Continue to Expand our Capabilities 1985 SYGMA formed 1999 Acquired first meat company 2001 Acquired Guest Supply 2009 First acquisition in Ireland 2012 Acquired European Imports Traditional Foodservice 1988 Acquired CFS 2000 Acquired first produce company Expansion of Canadian operations 2011 Fo
Slide 12: Key Initiatives
Key Initiatives Customer Insights - Loyalty - Segments - Brand Integration Planning - Day 1 Readiness - Value Creation - Redesign Organization & Processes Category Management - Assortment - Innovation - COGS Reduction Customer Value - Business Reviews - Inside Sales - Sysco Ventures Productivity Enh
Slide 13: Two Great Companies
Two Great Companies Bringing Together the Best of Both Good things come from Sysco® US. FOODS™ KEEPING KITCHENS COOKING.™
Slide 14: Consistent with Sysco’s Strategic Focus
Consistent with Sysco’s Strategic Focus Sustainable Profitable Growth Operating Margin Leverage customer insights Sysco® Reduce operating costs Enhance and expand channels Lower product costs Continue to develop Sysco Ventures Increase customer retention Execute fold-in and regional acquisitions Ass
Slide 15: A Transformational Acquisition
A Transformational Acquisition Benefits all stakeholders Customers Suppliers Employees Shareholders Combined strengths deliver greater value, more services and innovation for customers Strengthen our role as our customers’ most valued and trusted business partner Achieve shared efficiencies with sup
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 for our
Slide 17: Wayne Shurts
Wayne Shurts Executive Vice President and Chief Technology Officer
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
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: Captured 1.25 million orders Shipped 26 million line items Shipped 45 million pieces Processed 160,000 invoices
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 companies Fi
Slide 21: Progress: Addressed ERP Issues
Progress: Addressed ERP Issues Systems Stability Performance and Scalability Functionality
Slide 22: Progress: Systems Stability
Progress: Systems Stability Actions Rebuilt infrastructure Hardened interfaces Results Night operations incidents greatly reduced (6:1) Major incidents, outages reduced (3:1) Speed of incident recovery greatly enhanced
Slide 23: Progress: Performance & Scalability
Progress: Performance & Scalability Actions Rewrote and tuned pricing routine Tuned MA ordering application Tuned other systems jobs (run times from hours to minutes) Results Significantly improved system speed and response time Significantly reduced server capacity utilization for both average and
Slide 24: Progress: Functionality
Progress: Functionality Actions Simplified and improved replenishment systems and processes National Account SWAT team Delivered multiple ERP releases with 1,800+ enhancements Improved training – content, design, timing Results Customer service levels rebounded Merchandiser satisfaction increased Ma
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
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
Slide 27: Merger Integration Planning
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 Good things come from Sysco® US. FOODS™ KEEPING KITCHENS COO
Slide 28: Merger Integration Planning
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 Sysco ERP Good things come from Sysco® US. FOODS™ KEEPING KITCHENS COOKING.™
Slide 29: Chris Kreidler
Chris Kreidler Executive Vice President and Chief Financial Officer
Slide 30: Business Transformation
Business Transformation Business Transformation Lower product costs by $250-300 million annually Including Reduce cost structure by $300-350 million annually Annual Budget: $300-350 million Successfully implement technology platform Benefits: $550-650 million annually
Slide 31: Business Transformation Benefits
Business Transformation Benefits $550-650 million Goal FY15 100% FY14 ~50%-70% FY13 ~25% Annualized Benefits
Slide 32: Business Transformation Benefits – Progress After One Year
Business Transformation Benefits – Progress After One Year $550-650 million Goal FY15 100% FY14 ~50%-70% FY13 ~25% Annualized Benefits As of 4Q13
Slide 33: Business Transformation Benefits – Progress After Months
Business Transformation Benefits – Progress After 18 Months $550-650 million Goal FY15 100% FY14 ~50%-70% FY13 ~25% Annualized Benefits As of 2Q14
Slide 34: Business Transformation Benefits – Progress After Months
Business Transformation Benefits – Progress After 18 Months $550-650 million Goal FY15 100% FY14 ~50%-70% FY13 ~25% Annualized Benefits Reduce Cost Structure Completed strategic sales initiatives, including CRM Completed retirement plan & IT function restructuring Implemented maintenance module and
Slide 35: Two Great Companies
Two Great Companies Bringing Together the Best of Both Good things come from Sysco® US. FOODS™ KEEPING KITCHENS COOKING.™
Slide 36: Transaction Financing Structure
Transaction Financing Structure Approximate Total Transaction Value: Equity Cash US Foods Net Debt Total Enterprise Value 3.0B 0.5B $4.7B $8.2B 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 sh
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 years Additio
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 estimates d
Slide 39: At Least $600 Million in Estimated Annual Synergies
At Least $600 Million in Estimated Annual Synergies Network rationalization Delivery consolidation & efficient routing Leverage one sales model Combine evolving ecommerce and social media initiatives Distribution Network Selling and Field Productivity Warehouse and Distribution Productivity COGS Gen
Slide 40: What’s Next
What’s Next Integration Team Regulatory Review 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 E
Slide 41: Integration Planning Team
Integration Planning Team Steering Committee Integration Leader Integration Management Office (IMO) Sr. Execs from both companies Chris Kreidler IMO will lead, plan and track the integration Business teams Merchandising/ Product Marketing Business Area Business Area Sales Business Area Business Area
Slide 42: Key Areas of Strategic Focus
Key Areas of Strategic Focus Sustainable Profitable Operating Growth Margin Asset Optimization and Free Cash Flow
Slide 43: When We Execute…Tremendous Return to our Shareholders
When We Execute…Tremendous Return to our Shareholders Billions $11 $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $0 $11B Cash on Hand & Generated Uses of Sysco’s Cash (FY13 - FY17) $4B Acquisitions & Capital Spending Reinvest in Business $4B Dividends & Share Repurchase Return to Shareholders Uses of Cash CAGNY 20
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 Cash flow continu
Slide 45: Good things come from Sysco®
Good things come from Sysco®