20150915 investor day presentation v_f_webcast version
TRANSCRIPT
Investor Day Presentation
September 15, 2015
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 2
Forward-Looking StatementsCertain statements made herein that look forward in time or express management’s expectations or beliefs with respect to the occurrence of future events are forward-looking statements under the Private Securities Litigation Reform Act of 1995. They include, but are not limited to, statements regarding Sysco’s market potential in the U.S. and Canada; opportunities across market segments; our plans to repurchase $3 billion in Sysco common stock; Sysco’s targeted financial results for FY15-FY18 and the estimated CAGR during that period for those financial metrics; our plans to grow operating income at least $400 million by accelerating local case growth, increasing gross profit, stabilizing gross margins, leveraging supply chain costs and reducing administrative costs; our capital allocation expectations, including projected adjusted operating cash flow and free cash flow; Sysco’s commercial strategy focused on capturing growth in multi-cultural segments, building differentiated products and services and addressing service and support gaps to improve customer experience; estimated future benefits of category management and brand growth; expectations concerning the benefits of various marketing, supply chain and business technology initiatives; plans to reduce administrative costs and the related financial impact; the financial assumptions underlying the strategic business plan for FY15-FY18; Sysco’s plans to achieve ROIC target of 15% by improving working capital management, managing capital spend in a rigorous manner and assessing business segment strategic value and ROIC; and the anticipated timing and amount of the new debt issuance and the intended use of the proceeds.
These statements involve risks and uncertainties and are based on management's current expectations and estimates. Forward looking statements are not guarantees of future performance and our actual results may differ materially. Factors impacting these forward-looking statements include the general risks associated with our business, including the risks of interruption of supplies due to lack of long-term contracts, severe weather, crop conditions, work stoppages, intense competition, technology disruptions, dependence on large regional and national customers, inflation risks, the impact of fuel prices, adverse publicity, and labor issues. Risks and uncertainties also include risks impacting the economy generally, including the risks that the current general economic conditions will deteriorate, or consumer confidence in the economy may not improve and decreases in consumer spending, particularly on food-away-from-home, may not reverse. Market conditions may not improve. If sales from our locally managed customers do not grow at the same rate as sales from regional and national customers, our gross margins may decline. Our ability to meet our long-term strategic objectives to grow the profitability of our business depends largely on the success of our various business initiatives. There are various risks related to these efforts, including the risk that these efforts may not provide the expected benefits in our anticipated time frame, if at all, and may prove costlier than expected; the risk that the actual costs of any initiatives may be greater or less than currently expected; and the risk of adverse effects to our business, results of operations and liquidity if past and future undertakings, and the associated changes to our business, do not prove to be cost effective or do not result in the cost savings and other benefits at the levels that we anticipate. Our plans related to and the timing of any initiatives are subject to change at any time based on management’s subjective evaluation of our overall business needs. If we are unable to realize the anticipated benefits from our cost cutting efforts, we could become cost disadvantaged in the marketplace, and our competitiveness and our profitability could decrease. Capital expenditures may vary from those projected based on changes in business plans and other factors, including risks related to the implementation of various initiatives, the timing and successful completions of acquisitions, construction schedules and the possibility that other cash requirements could result in delays or cancellations of capital spending. Periods of high inflation, either overall or in certain product categories, can have a negative impact on us and our customers, as high food costs can reduce consumer spending in the food-away-from-home market, and may negatively impact our sales, gross profit, operating income and earnings. Expanding into international markets presents unique challenges and risks, including compliance with local laws, regulations and customs and the impact of local political and economic conditions, and such expansion efforts may not be successful. Any business that we acquire may not perform as expected, and we may not realize the anticipated benefits of our acquisitions. Expectations regarding the accounting treatment of any acquisitions may change based on management’s subjective evaluation. Expectations regarding tax rates are subject to various factors beyond management’s control.
Estimates related to future years are particularly difficult to forecast with accuracy and investors should take caution with respect to estimates related to FY16-FY18, as future periods will be impacted by general economic conditions and numerous factors beyond our control. Also, management’s plans with respect to any specific strategies and goals are subject to change based on the needs of our company in general. For a discussion of additional factors impacting Sysco’s business, see the Risk Factors contained in Sysco’s Annual Report on Form 10-K for the year ended June 27, 2015, as filed with the Securities and Exchange Commission, and Sysco’s subsequent filings with the SEC. Except where otherwise noted, the forward-looking statements contained herein speak as of the date of this Presentation. We do not undertake to update the forward-looking statements contained in this Presentation.
This presentation shall not constitute an offer to sell or the solicitation of an offer to buy securities, and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of such jurisdiction.
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
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P A G E 3
Agenda
Topic
BREAK3:00 – 3:15
Business and Strategic Overview
1:00 – 1:45
Business and Commercial Operations
1:45 – 2:30
End-to-End Supply Chain2:30 – 3:00
Business Technology3:15 – 3:45
Financial Overview3:45 – 4:30
Closing Comments4:30 – 5:00
Q&A
Welcome and Agenda12:45 – 1:00
Presenter
Neil Russell, VP of Investor Relations
Bill DeLaney, President and Chief Executive Officer
Tom Bené, EVP and President - Foodservice Operations
Scott Charlton, EVP – Supply Chain
Wayne Shurts, EVP and Chief Technology Officer
Joel Grade, EVP and Chief Financial Officer
Bill DeLaney
Executive Team5:00 – 5:30
Time
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I N V E S T O R D A Y
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P A G E 4
Trian Partners Investment in Sysco
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I N V E S T O R D A Y
• Trian disclosed an approximate 7% stake in SYY on August
14, 2015; Trian is now Sysco’s largest stockholder
• Trian’s Nelson Peltz and Josh Frank joined Sysco’s Board
effective August 21, 2015
• Trian and Sysco have had preliminary and constructive
dialogue
• Today’s presentation reflects the exclusive views of Sysco
management
Sysco will continually update its strategic and financial targets
Business and Strategic
OverviewSysco Investor Day
Bill DeLaneySeptember 15, 2015
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P A G E 6
Our vision
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I N V E S T O R D A Y
Serving our customers as One Sysco
“To be our customers’ most valued and trusted business partner.”
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P A G E 7
PeoplePartnership Productivity Products Expansion
Profoundly enrich the experience of doing business with Sysco
Continuously improve productivity in all areas of our business
Enhance offer-ings through a customer-centric innovation program
Explore, assess and pursue new businesses and markets
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I N V E S T O R D A Y
The five-point strategy
Our Mission: Market and Deliver Great Products To Our Customers With Exceptional Service
Implement enterprise-wide talent management process
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P A G E 8
Customer centric approach
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I N V E S T O R D A Y
Operating Companies
Markets
Corporate Functions
Operate the Business
Execute Flawlessly
Enable theOperatingCompanies
Provide Resources
and Support
Create Tools, Processes
and Strategy
Customers
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P A G E 9
Strategic plan update: 2016 - 2018
Market context
Sysco overview
Contents
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P A G E 1 0
Industry leader in a $265 billion market
$265B$260B$252B$246B$236B$230B$226B
2.7%CAGR
2015(p)2011 2012 2014201320102009
US and Canada foodservice market size (excluding alcohol)
$B; nominal growth
Source: Technomic Data Digest (2014), Restaurants Canada, Statistics Canada, strategy Inc. & Pannell Kerr Forster
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I N V E S T O R D A Y
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P A G E 1 1
Away from home foodservice sales trending favorably
49%
57%
51%
42%
40%
45%
50%
55%
60% Retail
Foodservice
Source: US Census Bureau (2015)
1 Retail Sales Equivalent Share; Retail includes grocery and other food/beverage sales (excluding foodservice) at all retail establishments
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I N V E S T O R D A Y
% of total food spend; retail sales equivalent1
1997 2008 20151982
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P A G E 1 2
2015 forecasted top distributor sales1
$Billions
Resta
ura
nts
Top Segments
Forecasted 2015-20 Real CAGRPercent
2.1%
1.6%
3.5%
4.2%
1.2%
3.5%13
18
18
27
66
87
Travel andLeisure
Education
Healthcare
FSR
LSR
Retailhosts
Source: Technomic (July 2015), Foodservice Sector Trends & Opportunities
1 US Food and Beverage (Non-Alcoholic only) and Non-foods; Only representing top segments by size, does not include Business and industry as well as all others (e.g., Caterers, military, corrections, etc.) which equal roughly ~$32M
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I N V E S T O R D A Y
Growth forecasted across all segments
Sysco is well positioned to participate in all segments
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P A G E 1 3
Competitors are numerous and varied
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I N V E S T O R D A Y
Foodservice Distribution in the U.S.
• Fragmented
• Low entry barriers
• Product offerings and service level matter
Competition remains acute
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P A G E 1 4
Consumer confidence is near pre-recession levels…
Source: The Conference Board (August 2015)
Index; 1985 level = 100
US consumer confidence
70
0
60
30
40
100
90
80
110
50
10
110
25
Pre-recession level (Jan ‘07)
2011 201420132012 2015
Worst during recession (Feb ‘09)
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I N V E S T O R D A Y
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P A G E 1 5
102.5
101.5
95
96
97
98
99
100
101
102
103
104
…restaurant operators’ outlook is similarly favorableRestaurant current situation and expectations indices
Expectations
Current situation
20132012
Index: Values >100 = Expansion Values <100 = Contraction
2014201120102009 2015
Source: National Restaurant Association (NRA)
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I N V E S T O R D A Y
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P A G E 1 6
Sysco is well positioned for the future
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I N V E S T O R D A Y
• 50,000 highly engaged associates
• Broad array of products and value added services
• Comprehensive geographic footprint
• Enhanced technology platform
• $1 billion of annual free cash flow and strong balance sheet
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 1 7
Contents
Strategic plan update: 2016 - 2018
Market context
Sysco overview
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P A G E 1 80 9 . 1 5 . 1 5
I N V E S T O R D A Y
U.S. Broadline
• 70% of revenue and 90% of profit• Strong local relationships • Pre-tax ROIC of approximately 30%
Specialty companies
• Enhance product portfolio• Provide expertise and service• Increases customer traction
SYGMA
• Represents a large market segment (~ $50B)
• Customized distribution services specializing in service to large national chain restaurants
International
• Canada provides solid foundation
• Represents future growth opportunities
• Supports customer needs
Business segment overview
U.S. Broadline drives our enterprise sales and profitability
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P A G E 1 9
We have enhanced our leadership and
organizational capabilities
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I N V E S T O R D A Y
Committed to developing a more diverse workforce
Improved recruiting, development and retention
High level of associate engagement
Competitive compensation and aligned incentives
Experienced and well-tenured leadership team
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P A G E 2 0
We are building on our recent momentum
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I N V E S T O R D A Y
• Record sales for FY15 of $49 billion
• Local case growth trends are improving
• Gross margins have stabilized
• Generated free cash flow of $1 billion1
• Adjusted ROIC of 13%1
• Distributed $700 million in dividends in FY15
• Recently announced $3 billion share buyback
(1) See Non-GAAP Reconciliations for an explanation of this non-GAAP measure
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P A G E 2 10 9 . 1 5 . 1 5
I N V E S T O R D A Y
US. Broadline annual cases soldUS. Broadline recent trend in local case growth1
Millions Year over year change, %
Local case growth trends are improving
750
700
900
600
550
650
950
1,000
800
0
850
FY 14
FY15
FY13
FY12
FY10
FY10
Total
Local
2.0%
Flat
CAGR‘10- ‘15
1 Case growth excludes acquisitions
0%
1.5%
2.0%
0.5%
1.0%
2.5%
Q3 FY15
Q2 FY15
Q1 FY15
Q4 FY15
FY14
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P A G E 2 2
Gross margin has stabilized
20%
25%
10%
$7
$1
15%
$4
0
$3
$6
$2
$5
$9
$8
+3.3% CAGR
17.6%
$7.8$8.0
FY13
18.4%
$8.2
$7.3
17.6%
19.1%
FY15FY12
$8.6
FY14
$7.5
FY10
19.6%
FY11
18.0%
Gross margin Gross profit
$2.2
15%
$2.0
$1.8
$1.0
$0.4
0
$0.8
$0.6
$0.2
10%
20%$1.6
$1.4
25%
$1.2
$2.4
17.9%
Q3 FY15
$2.1
17.5%
Q4 FY15
$2.2
Q1 FY15
$2.1
Q4 FY14
Q2 FY15
$2.2
17.3%17.6%
$2.2
17.6%
Gross profitGross margin
Total Sysco gross profit and gross margin
$ Billions
Recent trends in gross profit and gross margin
$ Billions
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I N V E S T O R D A Y
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P A G E 2 3
Increased volume and transformative
investments have driven expense growth
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I N V E S T O R D A Y
• Standing up key capabilities comprises about one third of our operating expense growth over the past five years
• These capabilities are primarily in the following areas:
‒ Business technology
‒ Shared services
‒ Sales and marketing
‒ Merchandising
• They are critical to positioning Sysco for long term success
• Our incremental annual spend in these areas will moderate going forward
We have begun to realize the targeted benefits from these investments
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 2 4
Contents
Strategic plan update: 2016 - 2018
Market context
Sysco overview
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P A G E 2 5
Some historical context
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I N V E S T O R D A Y
• Sysco IPO’d on the NYSE
• Food away from home demand increasing
• Sysco begins to build core foundation
• Recorded $1B in annualized sales
1970’s: “Early Days”
• Geographic expansion
– CFS acquisition
– 110 other acquisitions
• SYGMA created
• Investment in Sysco branded products
• Acquisition of specialty companies
• Industry growth plateaus
• 2009 changes consumer behavior
• Competition intensifies
• Sysco invests significantly in strategic capabilities
• Begins to build new functional expertise
1980-2005: “Rapid growth”
2005-2015: “Strengthen foundation”
Sysco is well positioned for the future…
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P A G E 2 6
Improve customer experience
Achieve our financial objectives
• Grow operating income by at least $400M
• Achieve ROIC of 15%
Enhance associate engagement
• Advance workplace safety
• Improve associate retention and engagement
• Provide attractive career growth opportunities
• Enhance overall service levels
• Improve sales retention
• Drive higher customer loyalty
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I N V E S T O R D A Y
Key targeted results: 2015-2018
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P A G E 2 7
Key levers to achieving our financial goals
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I N V E S T O R D A Y
To Be Our Customers’ Most Valued and Trusted Business Partner
Improve ROIC
Enablers:
Grow gross profit
Leverage supply chain costs
Reduce administrative costs
• Accelerate local case growth
• Improve margins
Our People
Business Technology
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 2 80 9 . 1 5 . 1 5
I N V E S T O R D A Y
• Accelerate local case growth to 2-3%
• Achieve gross profit growth of 4%
• Limit operating expense growth to 3%
Achieve ROIC of 15%
Note: All growth rates are 2015-2018 CAGRs
Roadmap to at least $400M…
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P A G E 2 90 9 . 1 5 . 1 5
I N V E S T O R D A Y
Total gross operating income benefit
Gross incremental cost
Net Operating Income Improvement
$650
At least $400
Gross operating income benefit
Grow gross profit
Leverage supply chain costs
Reduce administrative costs
55-65%
20-25%
15-20%
$(250)
FY 18 impact, $M
Gross operating income impact by lever
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P A G E 3 0
$400M in operating income impact phasing
Cumulative Capture by Year, %
FY2018FY2017FY2016
Operating Income Benefit
20-30% 50-60% 100%
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I N V E S T O R D A Y
Operating income impact is net of incremental costs
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P A G E 3 1
Capital allocation priorities
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I N V E S T O R D A Y
1. Disciplined investment in the business
2. Grow the dividend
3. Pursue attractive strategic acquisitions
4. Opportunistically repurchase shares
$1 billion in annual free cash flow
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P A G E 3 20 9 . 1 5 . 1 5
I N V E S T O R D A Y
• $265B market
• Significant segment and category growth opportunities
• Improved market environment
• Multiple impactful commercial initiatives
• Leverage our supply chain costs
• Reduce administrative costs
• Improve operating income by $400 million
• Achieve 15% ROIC
Substantial market opportunity
Executing our strategy
Improving financial performance(2015-2018)
We are well positioned for success
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P A G E 3 3
Our vision
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I N V E S T O R D A Y
Serving our customers as One Sysco
“To be our customers’ most valued and trusted business partner.”
Business and Commercial
OperationsSysco Investor Day
Tom BenéSeptember 15, 2015
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P A G E 3 50 9 . 1 5 . 1 5
I N V E S T O R D A Y
To Be Our Customers’ Most Valued and Trusted Business Partner
Improve ROIC
Enablers:
Leverage supply chain costs
Reduce administrative costs
Focus of the section
Key levers to achieving our financial goals
Our People
Business technology
Grow gross profit
• Accelerate local case growth
• Improve margins
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P A G E 3 60 9 . 1 5 . 1 5
I N V E S T O R D A Y
Total gross operating income benefit
Gross incremental cost
Net Operating Income Improvement
$650
At least $400
Gross operating income benefit
Grow gross profit
Leverage supply chain costs
Reduce administrative costs
55-65%
20-25%
15-20%
$(250)
FY 18 impact, $M
Growing gross profit will contribute significantly to the strategic plan
Focus of the section
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P A G E 3 7
Objectives for today
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I N V E S T O R D A Y
• Share insights into the needs of our customers and the recent improvement in our overall trends
• Provide an overview of the key Commercial Strategies that will allow us to:
– Accelerate local case growth
– Improve our gross margin
• Highlight the core business enablers that will support our growth strategies
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 3 8
Flat local case growth has contributed to margin
performance over the past few years
17.6%17.6%18.0%18.4%19.1%
FY11
FY13
FY15
FY14
FY12
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I N V E S T O R D A Y
US. Broadline annual cases sold
Millions
1,200
1,000
800
400
0
600
200
FY14
FY11
933
+2.0% CAGR
962917
FY10
869
FY15
901868
FY13
FY12
CMU Local
Flat
CAGR‘10- ‘15
Total Sysco gross margin, %
5.2%
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P A G E 3 9
Our commercial strategy is focused on growing cases and
maintaining margin - recent trends are promising
USBL Local YoY case growth, % Total Sysco gross margin, %
FY15
17.6%
FY14
17.6%
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I N V E S T O R D A Y
Our plans build on recent momentum of accelerating local case growth…
…and stabilizing gross margins
FY16 Plan
2.1%
FY15
1.7%
1.4%1.3%
Q2 FY15
Q4 FY15
2.1%
1.7%
Q1 FY15
Q3 FY15
17.3%
Q1 FY15
Q4 FY15
Q2 FY15
Q3 FY15
17.9%17.5%17.6%
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 4 0
Our commercial initiatives have enabled us to
accelerate local case growth and improve margins
Build a compelling
suite of products and
services
Execute flawlessly to
serve our customers
Know our customers
Grow profitably with our
customers
Key Commercial Focus Areas
• Accelerate investment into customer insights
• Improved tools that drive Customer loyalty
‒ Enhanced Business Review and Menu Planning
• Launched Category Management
• Developed a robust Customer Segmentation approach
‒ Built differentiated solutions by segment
‒ Established segment profitability guardrails
• Suite of selling tools - growth / improve profitability
‒ CRM tool – prospecting, penetration, retention
‒ Strategic / Portfolio Selling w/ key CMU customers
• Consistent management routines – Sales / Operations0 9 . 1 5 . 1 5
I N V E S T O R D A Y
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P A G E 4 1
We remain driven by the needs and expectations
of our core customers to accelerate our growth
The evolving needs of our Customers:
A consistent, fresh, on-trend
product assortment
The ability to order where
and how I want
Consistent, dependable
deliveries and drivers
Innovative and value-added
solutions that enable me to
compete
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I N V E S T O R D A Y
A knowledgeable partner that will help me grow my
business
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P A G E 4 2
Our commercial strategy is focused on 3 key areas
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
Address service and support gaps with our customers to improve their Sysco experience
3
Capture share in growing multi-cultural segments and customer groups
1
Build a differentiated set of products and services to accelerate local sales and improve margins
2
Enabled by Enhanced Selling and Revenue Management Capabilities
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P A G E 4 3
Understanding segment trends and our relative
market share allows us to focus our efforts
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I N V E S T O R D A Y
Retail
Travel and Leisure
Foodservice Mgmt
Government
Education
Healthcare
Segment
Restaurants
Projected industry growth (’15-’20)
H
H
L
L
L
H
M
Source: Technomic (July 2015)
Market share by segment
US and Canada Foodservice Total: ~$260B
Locally ManagedRestaurants
$18B
$61B
Travel andLeisure National
Chains
Healthcare
$93B
$13B
$32B
$18B
$27B
Education
Other
Retail
1
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P A G E 4 4
Two recent examples of accelerating growth exist in
both the Retail and Travel and Leisure segments
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I N V E S T O R D A Y
1
Foodservice Partnership Joint Business Planning
• Stable and more consistent pricing
• Product quality and consistency
• Guest satisfaction
• Annual cost savings
• Value creation for hotel partners
• “ONE” Sysco sales approach
• Operational efficiencies / scale benefits
• Sysco brand growth
• International expansion
In-store Deli
Convenience Store
Fresh Kitchen (Commissary)
2,800 locations
6 locations
800 locations
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P A G E 4 5
Local restaurants represent a large opportunity
and multi-cultural segments lead the growth
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I N V E S T O R D A Y
Local restaurants market size1
71696765636158585857
Flat CAGR
+3.1% CAGR
17 ‘20‘11 14 1912 16 181513
$ Billions
1 Technomic (July 2015); Local defined as “Small chains & independents”
ProjectedActuals
Community engagement
Measurement and calibration
Customer insights
Targeted sales and marketing tools
Authentic product line
Culturally knowledgeable sales force
Proven pilot model that can be leveraged across segments
1
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P A G E 4 6
Delivering a differentiated set of products is
critical to enabling local restaurant growth
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
Category Innovation
Fresh Meat and Produce
Locally Grown and Sourced
2
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P A G E 4 70 9 . 1 5 . 1 5
I N V E S T O R D A Y
Our 3 year journey in Category Management continues
to improve margins and accelerate Sysco brand growth
FY13-FY15
FY16 Plan
~$400
$500+
TotalFY18FY17
Gross profit, $M
Sysco brand growth, % Broadline cases
2
Variety
A broader set of fresh, local and on-trend products to help customers evolve their menu
Value
Consistent set of core products to help operators stay competitive
Innovation
A pipeline of new products to address the changing consumer needs
36%
Other
Sysco brand
64%
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P A G E 4 8
We are partnering with local suppliers to meet the
growing request for locally sourced solutions
I N V E S T O R D A Y
0 9 . 1 5 . 1 5
2
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P A G E 4 9
We are partnering with local suppliers to meet the
growing request for locally sourced solutions
I N V E S T O R D A Y
0 9 . 1 5 . 1 5
2
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P A G E 5 0
New programs leveraging our specialty meats and
produce businesses are driving significant growth
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
2
Sysco opportunities Customer needs
Better utilize our Specialty Companies:
• Specialty meat companies
• FreshPoint Produce
• European Imports
Current pilot programs are delivering solid results
• Southeast Fresh Express produce category initiative
• “ONE” Sysco Sales / Service model
• Expanded Product Specialists to support MAs
Service flexibility, competitive pricing, and customer product offerings (cuts)
Meat
Long shelf life, service flexibility, and locally-sourced products
Produce
Improved pricing (typically delivered by local dairy) and more cheese variety
Dairy
What customers want
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P A G E 5 1
Bringing value-added services that solve the needs
of our customers, builds loyalty and retention
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
Menu Analysis and Design
Technology and Training
Marketing Tools and Solutions
2
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 5 20 9 . 1 5 . 1 5
I N V E S T O R D A Y
Category
Management
Core Product
Innovative
Product
Menu Analysis and Design represents a significant
opportunity to improve customer margins
2
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 5 3
We are helping customers to better manage their
restaurant through social media solutions and tools
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
Education Listening “Insights”
2
Chipotle
Qdoba
Freebirds
Bullritos
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 5 4
AppsFor Restaurants and ConsumersConsumer apps. Restaurant websites and
social media.
We are investing in technology and training programs
that are focused on improving operator performance
2
Operator trainingTechnology
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 5 5
Programs such as “My Sysco Truck” improve
communication and our overall service offering
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
3
Nightly emails with estimated delivery time, # cases, out-of-stocks and substitutions
Innovation Delivered
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 5 6
Our new customer engagement model allows our
partners to order how, when and where they want
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
Customer
Experience
Leads Gen
Chat
Text
Multi-lingual
Social media
MAMOBILE
3
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 5 7
3 We are scaling the new mobile ordering
platform based on pilot success
A new way to order… …has been well received
28% growth in customer accounts using mobile vs. prior trailing quarter
20%+ increase in overall eCommerce activity over the past 60 days –driven as a side effect of mobile usage
53% increase in transaction count vs. prior trailing quarter
Customers rate ease of ordering as the #1 driver of their ordering experience
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 5 8
We are focused on becoming our customers’ most trusted advisor
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
More helpful More relevant More convenient
• Insights driven products and services
• “Value-Added” business solutions
• Innovative and on-trend products
• Tailored customer specific promotions
• Offer a flexible engagement model
• Dependable service and support
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 5 9
We are building a more capable sales force by
leveraging new tools and processes across Sysco
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
World-classsales engine driving
growth
Leading capabilities and talent
Consistent, winning routines
Data-driven deployment
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 6 0
Improving the CMU Customer Experience represents an
opportunity to improve retention and drive growth
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
Advantages to consolidating
To Sysco…
• Better manage pricing and revenue cycle
• Increase expertise
• Frees up time for local CMU account managers
To our customers…
• More consistency
• Higher service levels
• Single point of contact
Corp
CMU activities are currently fragmented…
…and will be consolidated under Shared Services
Customer
Shared Services
OpCo
Shared Services
Customer
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 6 1
Revenue management tools and routines have laid a
solid foundation for ongoing margin improvement
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
Mix ManagementDisciplined Approach Tools and Insights
• Increase Sysco brand penetration
• Grow share in profitable categories
• Identify profitable customers
• New revenue management organization
• Enhanced training and coaching in the field
VP, RevMan
Field
…
Corp
FY14FY13 FY15
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 6 2
Key takeaways
We have solid momentum and are confident we will accelerate local case growth and improve margins
• Favorable market environment
• Significant segment growth opportunities
• Multiple impactful commercial initiatives
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 6 30 9 . 1 5 . 1 5
I N V E S T O R D A Y
Total gross operating income benefit
Gross incremental cost
Net Operating Income Improvement
$650
At least $400
Gross operating income benefit
Grow gross profit
Leverage supply chain costs
Reduce administrative costs
55-65%
20-25%
15-20%
$(250)
FY 18 impact, $M
Growing gross profit will contribute significantly
to the strategic plan
Focus of the section
Scott CharltonSeptember 15, 2015
End-to-End Supply ChainSysco Investor Day
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 6 50 9 . 1 5 . 1 5
I N V E S T O R D A Y
To Be Our Customers’ Most Valued and Trusted Business Partner
Improve ROIC
Enablers:
Grow gross profit
Leverage supply chain costs
Reduce administrative costs
Focus of the section
Key levers to achieving our financial goals
Our People
Business technology
• Accelerate local case growth
• Improve margins
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 6 60 9 . 1 5 . 1 5
I N V E S T O R D A Y
Total gross operating income benefit
Gross incremental cost
Net Operating Income Improvement
$650
At least $400
Gross operating income benefit
Grow gross profit
Leverage supply chain costs
Reduce administrative costs
55-65%
20-25%
15-20%
$(250)
FY 18 impact, $M
Leveraging supply chain costs will contribute
20-25% of the FY18 gross impact
Focus of the section
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 6 7
Objectives for today
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
• Provide an overview of the Sysco end-to-end supply chain
• Review key areas of supply chain focus
• Discuss detailed examples of cost reduction opportunities
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 6 8
The end-to-end supply chain focuses on a customer centric approach
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
Forecast demandTransport and
receiveReplenish inventory
DeliverWarehouse
Manage facilities, construction and real estate
Manage fleet and indirect sourcing
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 6 9
The Sysco supply chain is extensive and complex
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
2014 top 10 private fleets in North America (by tractor count)
Tractors TrailersCompany
12,132 10,548
7,647 9,577
7,479 9,523
6,239 61,743
5,438 6,472
3,650 4,867
3,395 4,431
3,052 3,972
3,002 4,048
5,025 8,437
• 7,500+ tractors and 7,000 drivers
• $4.8 billion in cost
• ~400,000 SKUs
• 25M+ drops per year
• 1B+ cases per year
• Our scale presents tremendous opportunities
• At the same time, the distributed/fragmented nature of our network complicates implementation of improvement levers
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 7 0
Broad geographic coverage across the US and Canada
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
Alaska
Note: 96 Broadline
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 7 1
Safety Service levels
Important supply chain priorities going forward
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
• Improve customer service levels
• Food safety
• Workplace safety
Cost per case
• Improve productivity and efficiency
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 7 2
7 key supply chain areas of focus
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
Facilities excellence
• Use best-in-class capacity planning to defer capital• Standardize maintenance, construction and real estate
practices
• Standardize best practices in Warehousing and Distribution to improve safety, service and costOpCo
productivity
• Strategically source ~$1B of indirect spend• Increase purchasing complianceIndirect
sourcing
• Build process discipline to fully leverage technology • Improve service levels and reduce inventory days through
advanced inventory management practices
Inventory management
• Right size the fleet and degree of outsourcing• Optimize preventative maintenance and shop executionFleet
excellence
• Completed national freight bid• Increase backhaul utilization• Shift freight to lower cost modes (backhaul and intermodal)
Inbound logistics
• Support commercial strategy by integrating enterprise spend and supply chain networks One Sysco
Network
Prioritized 4 areas in the near term based on impact
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 7 30 9 . 1 5 . 1 5
I N V E S T O R D A Y
Transportation and Warehouse productivity performance by OpCo
Key priorities:
• Distribution continuous improvement program
• Workforce staffing and productivity management tools
• Routing and customer service tools and technology
• New unloading and delivery methods
• Fleet maintenance cost and MPG improvement efforts
Standardized best practices across the supply chain will improve OpCo productivity
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 7 40 9 . 1 5 . 1 5
I N V E S T O R D A Y
Example indirect categories by spend
Key priorities:
• Significant opportunity in indirect spend
• Successfully implemented first wave of categories
• In process of tackling new categories (e.g., fleet rentals, bulk fuel, hotels, rental cars)
• Additionally tackling corrugated packaging
Strategically sourcing indirect spend will lead to significant savings
Bulk fuel
Uniforms
Office equipment and furniture
Airfare
Vehicle repair services
Facilities services
Fleet rentals
Meals and entertainment
Utilities
Hotel and rental cars
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 7 50 9 . 1 5 . 1 5
I N V E S T O R D A Y
Key drivers to improving inventory management…
• Rolled out demand planning and replenishment tool
• Leverage Center of Excellence (COE)
• Reducing inactive and aged inventories
…done in conjunction with enhancing service levels
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 7 6
Best-in-class capacity planning will defer capital
expenditures
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
Actively addressing capacity planning in a number of ways, for example:
• New tools to assess, redesign and improve overall productivity
• Continuously piloting new technology
• Leverage inventory management best practices
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 7 7
Key takeaways
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
• Our supply chain is extensive and complex
• We have and will further develop a sustainable competitive advantage
• Our organization is set up to drive results
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 7 80 9 . 1 5 . 1 5
I N V E S T O R D A Y
Total gross operating income benefit
Gross incremental cost
Net Operating Income Improvement
$650
At least $400
Gross operating income benefit
Grow gross profit
Leverage supply chain costs
Reduce administrative costs
55-65%
20-25%
15-20%
$(250)
FY 18 impact, $M
Leveraging supply chain costs will contribute 20-
25% of the FY18 gross impact
Focus of the section
Wayne ShurtsSeptember 15, 2015
Business TechnologySysco Investor Day
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 8 00 9 . 1 5 . 1 5
I N V E S T O R D A Y
To Be Our Customers’ Most Valued and Trusted Business Partner
Improve ROIC
Enablers:
Grow gross profit
Leverage supply chain costs
Reduce administrative costs
Focus of the section
Key levers to achieving our financial goals
Our People
Business technology
• Accelerate local case growth
• Improve margins
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 8 1
Objectives for today
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
• Provide an overview of our technology platform
• Present business technology initiatives
• Review how these initiatives support the business strategy
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 8 2
Business Technology (BT) supports the business through a robust ecosystem
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
Infrastructure
Agility platform
Analytic platform
Operational platform
Enterprise applications
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 8 30 9 . 1 5 . 1 5
I N V E S T O R D A Y
Enterprise Applications
Infrastructure
Operational Platform
Demand Planning
Replenish-ment
Truck Routing
Order Entry
Order Management
Inventory Management
Warehouse Management
Financial and HR Systems
Analytics Platform• Business Intelligence• Reporting • Analytics/insights
Agility Platform• Systems of Engagement• Example: My Sysco Truck
Sysco WarehouseReceivePickPackShip
CustomersRestaurantsHospitalsSchoolsHotels
Suppliers
Technology platform
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 8 4
SAP look back
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
• Rolled out SAP to 5 OpCos (initial approach was a full roll-out OpCo by OpCo)
• Paused the roll-out to rebuild and enhance the solution
• Successfully implemented 7 OpCos (larger and diverse OpCos) in 8 months
• Major upgrade to latest SAP version
• Improved approach to the SAP roll-out • Deployed Demand Planning to all USBL
2010 – Fall 2012
Fall 2012 –Fall 2013
Fall 2013 –Summer 2014
Fall 2014
2015
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 8 5
Improved approach to rolling out technology platform
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
• Former: Rollout all new functional systems to an OpCo all at once
• New: Rollout a single functional system across all OpCosDeployment
• Introduces less simultaneous change and disruption to the customer and OpCo
• Introduces benefits more quickly to stakeholders
Rationale
Demand Planning
Replenish-ment
Truck Routing
Order Entry
Order Management
Inventory Management
Warehouse Management
Financial and HR Systems
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 8 6
BT is focused on enabling the strategic plan with
immediate priority on enhancing the customer experience
I N V E S T O R D A Y
0 9 . 1 5 . 1 5
Business technology projects
Strategic Goals
Accelerate local case growth
Improve gross margins
Leverage supply chain costs
Reduce admin costs
Improve ROIC
CMU Optimiz-
ation
Revenue mgmt. project
OBC(On-board Computers/ Telogis)
Demand, Planning, Replenish
ment
SC Incentives ODI and
DCIP
Digital customer
experience
Reduce telecom
expenses
Technology platform
Master data management and Business Intelligence
1
2
3
4
5
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 8 7
Customer Facing Technology
Restaurant TechnologyEnterprise Technology
Competitor Focus
MAJOR VARIED but MINORVARIED but MINOR• Competition has
predominately aged legacy system environments
MINOR INVESTING• Primarily Cake
MAJOR• SAP, SWMS, DPR,
OBC, etc.Sysco Focus
• Technology that helps your customer interact and conduct business with you
• Technology that helps the restaurant run their business
• Technology that helps you run your company betterDescriptions
…we plan to overweight our near-term spend on customer facing technologies
Immediate focus
I N V E S T O R D A Y
0 9 . 1 5 . 1 5
1 In recent years, we have focused on enterprise
technology, driving business efficiencies…
ACCELERATE LOCAL CASE GROWTH
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 8 8
We are encouraged with our mobile success
and expanding our digital capabilities
This technology is directly tied to our ability to improve local growth
I N V E S T O R D A Y
0 9 . 1 5 . 1 5
Expanding the capabilities of Sysco Mobile…
…And building additional digital opportunities
Integrated digital updates on delivery and current inventory
Multiple channels for ordering and product lists
Integrated system for invoices, returns, credits and payment
Online products and service details for prospects and new customers
Focus on improving the efficiency of our customers’ ordering experience
Include inventory management
Extend visibility to menu analysis and food cost
Enhance search and product information (e.g., pictures, nutritional)
Custom list creation and management
1
ACCELERATE LCOAL CASE GROWTH
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 8 9
I N V E S T O R D A Y
0 9 . 1 5 . 1 5
BT is implementing technology to fully support
Revenue Management enabling margins
Price Manager
Customer Investment
Manager
Performance Manager
2
IMPROVE GROSS MARGINS
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 9 0
Supply chain initiative
Inventory Management
Indirect sourcing
BT enabler
ARIBA (on-line marketplace)
Telecom expense
OBC (On-board Computers / Telogis)
Supply Chain Incentives DCIP/ODI
Demand forecaster
Demand, Planning, ReplenishmentI N V E S T O R D A Y
0 9 . 1 5 . 1 5
OpCoproductivity
Achieving supply chain cost reductions will rely on new
functionality from technology systems and platforms
3
LEVERAGE SUPPLY CHAIN COSTS
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 9 1
I N V E S T O R D A Y
0 9 . 1 5 . 1 5
Improved CMU customer experience and cost efficiency
driven by technology and Shared Services
…is enabled by BT solutions and tools
• Service request tool
• Consolidated payment tool
• DPM tool (pricing management)
Corp
CMU activities are currently fragmented…
…and will be consolidated under Shared Services
Customer
Shared Services
OpCo
Shared Services
Customer
4
REDUCE ADMINISTRATIVE COSTS
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 9 2
I N V E S T O R D A Y
0 9 . 1 5 . 1 5
Master Data Management and Business Intelligence
are key enablers for delivering the business strategyBusiness technology projects
Strategic Goals
Accelerate local case growth
Improve gross margins
Leverage supply chain costs
Reduce admin costs
Improve ROIC
CMU Optimiz-
ation
Revenue mgmt. project
OBC(On-board Computers/ Telogis)
Demand, Planning, Replenish
ment
SC Incentives ODI and
DCIP
Digital customer
experience
Reduce telecom
expenses
Technology platform
Master data management and Business Intelligence
1
2
3
4
5
5
TECHNOLOGY PLATFORM
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 9 3
Key takeaways
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
• Supporting our business objectives
• Accelerating local case growth
• Improving margins
• Leveraging supply chain costs
• Reducing administrative costs
• Priorities going forward are customer oriented
• Building our digital capabilities
Joel GradeSeptember 15, 2015
Financial OverviewSysco Investor Day
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 9 5
Contents
Return on Invested Capital
Sysco financial overview
$400M operating income improvement
Financial roadmap
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 9 6
We have recent momentum of accelerating
local case growth and improving margins
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
As Tom mentioned earlier…we are accelerating our local case growth
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 9 7
Our end-to-end supply chain is creating
sustainable competitive advantages
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
As Scott mentioned earlier…we have many supply chain advantages
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 9 8
We generate significant cash flow
Adjusted free cash flow1
FY13
1.11.3
FY15FY14
1.0
I N V E S T O R D A Y
0 9 . 1 5 . 1 5
$ Billions
1) See Non-GAAP Reconciliations for an explanation of this non-GAAP measure
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 9 9
Strong balance sheet provides flexibility
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
Current balance sheet
Upcoming debt issuance
• $2B in new debt issuance around the end of fiscal 1Q16
– $1.5B to fund Accelerated Share Repurchase
– $0.5B to term out commercial paper
• Will result in adjusted interest expense being higher in FY16 vs. FY15
• Post announcement of the levered recapitalization, S&P and Moody’s published new ratings
– Moody’s: A2 negative watch
– S&P: A- stable
• Solid investment-grade credit rating
• Substantial flexibility to pursue strategic transactions where appropriate
Further leverage balance sheet for the right opportunity
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 1 0 0
Contents
Return on Invested Capital
Sysco financial overview
$400M operating income improvement
Financial roadmap
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 1 0 10 9 . 1 5 . 1 5
I N V E S T O R D A Y
To Be Our Customers’ Most Valued and Trusted Business Partner
Improve ROIC
Enablers:
Grow gross profit
Leverage supply chain costs
Reduce administrative costs
Focus of the section
We are committed to achieving at least $400M in operating income improvement
Our People
Business technology
• Accelerate local case growth
• Improve margins
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 1 0 20 9 . 1 5 . 1 5
I N V E S T O R D A Y
Total gross operating income benefit
Gross incremental cost
Net Operating Income Improvement
$650
At least $400
Gross operating income benefit
Grow gross profit
Leverage supply chain costs
Reduce administrative costs
55-65%
20-25%
15-20%
$(250)
FY 18 impact, $M
Reducing administrative costs will contribute
15-20% of the FY18 gross impact
Focus of the section
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 1 0 3
I N V E S T O R D A Y
0 9 . 1 5 . 1 5
We will reduce administrative costs through a variety of different levers
Focus on priorities that drive the most
valueOptimize
organizational structure
Integrate support
functions
Utilize technology to
enable efficiency
Leverage third party
spend
Streamline the work
Focus on the customer
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 1 0 4
Contents
Return on Invested Capital
Sysco financial overview
$400M operating income improvement
Financial roadmap
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 1 0 5
We will achieve our ROIC target of 15% by focusing on 3 key activities
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
1) Improving working capital management
2) Continue to manage capital spend in a rigorous manner
3) Continually assess business segment strategic value and ROIC
2
3
1
The path to 15% ROIC will not be linear
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 1 0 6
Description
Accounts Payable
• Improve payment terms
• Enhance vendor relationships
Accounts Receivable
• Leverage technology to improve speed and reliability of customer payments:
– Mobile check scanning encourages faster check deposits
– Online invoice management improve process speed and reliability
– Real time payment reminders and capability
Inventory
• Improve inventory management practices
• Prevent inventory from becoming aged/obsolete
We plan to achieve an improvement in working capital by ~ 4 days
I N V E S T O R D A Y
0 9 . 1 5 . 1 5
Improving working capital is centered around
three areas
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 1 0 71.1% 1.1%
% of Sales
Gross capital expenditures, $ millions
543523550-600
FY15FY14FY13 Plan FY16
512
I N V E S T O R D A Y
0 9 . 1 5 . 1 5
Sysco continues to follow a disciplined
approach to capital spend
1.1%
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 1 0 8
Contents
Return on Invested Capital
Sysco financial overview
$400M operating income improvement
Financial roadmap
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 1 0 9
Targeted financial results
FY 2018FY 2015
CAGR2015 - 2018
Adjusted EPS2
Adjusted Operating Income2
$1,792
Sales ($ Millions) $48,681 4%
7%
$1.84 $2.40-2.50 10%
Gross Profit($Millions)
(%)
Adjusted Expenses2
($Millions)
(%)
($Millions)
(%) 3.7%
Adjusted Net Income2 ($Millions)
$8,552 4%
17.6%
$6,760 3%
13.9%
$1,100 5%
Adjusted ROIC2 13%
Cases1 (Millions) ~1,400 2%
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
15%
Targeting at least $400M in Operating
Incomeimprove-
ment
1) Represents cases for total Broadline and SYGMA2) See Non-GAAP Reconciliations for an explanation of these non-GAAP measures
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 1 1 0
Metric
Key underlying assumptions
Assumption
Dividend• Moderate growth
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
Shares outstanding
• Reduce diluted shares outstanding
– $3B in Share Buyback program over the next two years
– Additionally, any new share issuances will be covered with standard buybacks
Acquisition investment
• Continue to pursue core portfolio acquisitions
• Ongoing assessment of other strategic opportunities
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 1 1 1
I N V E S T O R D A Y
0 9 . 1 5 . 1 5
• Sysco has announced a 2 year, $3B repurchase program
• We have approximately $5 - $7 billion of borrowing capacity remaining for acquisitions assuming a BBB credit rating
• Alternatively, borrowing capacity remaining would be approximately $3 - $5 billion if proceeds were used for share repurchases
Sysco has substantial borrowing capacity
Note: Assumes 3.5x leverage; 10x multiple
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 1 1 2
Our Financial Roadmap
I N V E S T O R D A Y
0 9 . 1 5 . 1 5
• Improve Operating Income by at least $400 million
– Grow gross profit at a faster rate than operating expenses
• Achieve 15% ROIC
• Grow EPS at a faster rate than operating income
• Generate $1 billion+ in free cash flow
• Leverage Balance Sheet for the right strategic opportunity
Closing CommentsSysco Investor Day
Bill DeLaneySeptember 15, 2015
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 1 1 40 9 . 1 5 . 1 5
I N V E S T O R D A Y
To Be Our Customers’ Most Valued and Trusted Business Partner
Improve ROIC
Enablers:
Grow gross profit
Leverage supply chain costs
Reduce administrative costs
Key levers to achieving our financial goals
Our People
Business technology
• Accelerate local case growth
• Improve margins
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 1 1 5
Governance structure to support execution
0 9 . 1 5 . 1 5
I N V E S T O R D A Y
Leverage supply chain
costs
Program management
Steering Committee
Grow gross profit
Reduce administrative
costs
Improve ROIC
Executive compensation will be aligned with the metrics shared with you today
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 1 1 6
Sysco is well positioned for the future
I N V E S T O R D A Y
0 9 . 1 5 . 1 5
• Leader in $265 billion market
• Committed to disciplined and profitable growth
• Targeting at least $400 million increase operating income improvement over the next three years
• Achieve 15% ROIC by 2018
• Grow dividend
• Leverage balance sheet for strategic opportunities
Non-GAAP ReconciliationsSysco Investor Day
September 15, 2015
© 2015 All Rights Reserved. Sysco Corporation.
P A G E 1 1 80 9 . 1 5 . 1 5
I N V E S T O R D A Y
Impact of Certain Items - Fiscal 2015
Non-GAAP Reconciliation (Unaudited)
Sysco Corporation and its Consolidated Subsidiaries
(In Thousands, Except for Share and Per Share Data)
Sysco’s results of operations are impacted by certain items that include multiemployer withdrawal charges (MEPP), severance charges, integration planning, litigation and termination costs in connection with the merger that had been proposed with US Foods, Inc. (US Foods), charges from facility closures and US Foods related financing costs. These items are collectively referred to as "Certain Items." Management believes that adjusting its operating expenses, operating expenses as a percentage of sales, operating income, operating income as a percentage of sales, interest expense, net earnings and diluted earnings per share to remove these charges provides an important perspective of underlying business trends and results and provides meaningful supplemental information to both management and investors that is indicative of the performance of the company's underlying operations and facilitates comparisons on a year-over-year basis
The company uses these non-GAAP measures when evaluating its financial results, as well as for internal planning and forecasting purposes. These financial measures should not be used as a substitute for GAAPmeasures in assessing the company’s results of operations for the periods presented. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. As a result, in the tables that follow, fiscal 2015 is adjusted to remove the Certain Items noted above
52-Week Period Ended Jun. 27, 2015
Sales (GAAP) $ 48,680,752
Operating expenses (GAAP) $ 7,322,154
Impact of severance charge (5,598)
Impact of US Foods merger and integration planning costs (554,667)
Impact of facility closure charges (2,203)
Subtotal - Impact of Certain Items on operating expenses (562,468)
Operating expenses adjusted for Certain Items (Non-GAAP) $ 6,759,687
Operating expenses as a percentage of sales (GAAP) 15.0%
Adjusted operating expenses as a percentage of sales (Non-GAAP) 13.9%
Operating income (GAAP) $ 1,229,362
Impact of Certain Items on operating income 562,468
Operating income adjusted for Certain Items (Non-GAAP) $ 1,791,830
Operating income as a percentage of sales (GAAP) 2.5%
Adjusted operating income as a percentage of sales (Non-GAAP) 3.7%
Interest Expense (GAAP) 254,807
Impact of US Foods financing costs (138,422)
Adjusted Interest Expense (Non-GAAP) 116,385
Net earnings (GAAP)1 686,773
Impact of severance charge (net of tax) 3,302
Impact of US Foods merger and integration planning costs (net of tax) 327,149
Impact of facility closure charges (net of tax) 1,299
Impact of US Foods Financing Costs (net of tax) 81,643
Subtotal - Impact of Certain Items on net earnings 413,393
Net earnings adjusted for Certain Items (Non-GAAP)1 1,100,166
Diluted earnings per share (GAAP) 1 1.15
Impact of severance charge 0.01
Impact of US Foods merger and integration planning costs 0.55
Impact of US Foods Financing Costs 0.14
Diluted EPS adjusted for Certain Items (Non-GAAP)12 1.84
Diluted shares outstanding 596,849,034
1 The net earnings and diluted earnings per share impacts are shown net of tax. Tax impact of adjustments for Certain Items was $287,497 for the 52-week periods ended June 27, 2015. The amount is calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction
2 Individual components of diluted earnings per share may not add to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings for certain items divided by diluted shares outstanding
© 2015 All Rights Reserved. Sysco Corporation.
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Sysco Corporation and its Consolidated Subsidiaries
Non-GAAP Reconciliation (Unaudited)
Return on Invested Capital (ROIC) and Adjusted ROIC
(In Thousands)
We calculate ROIC as net earnings divided by (i) stockholder’s equity, computed as the average of adjusted stockholders’ equity at the beginning of the year and at the end of each fiscal quarter during the year; and (ii) long-term debt, computed as the average of the long-term debt at the beginning of the year and at the end of each fiscal quarter during the year. All components of our ROIC calculation are impacted by Certain Items. As a result, in the non-GAAPreconciliation below for fiscal 2015, adjusted total invested capital is computed as the sum of (i) adjusted stockholder’s equity, computed as the average of adjusted stockholders’ equity at the beginning of the year and at the end of each fiscal quarter during the year; and (ii) adjusted long-term debt, computed as the average of the adjusted long-term debt at the beginning of the year and at the end of each fiscal quarter during the year. Sysco considers adjusted ROIC to be a measure that provides useful information to management and investors in evaluating the efficiency and effectiveness of the company's long-term capital investments, and we have used ROIC as a performance criteria in our managment incentive programs. It is possible that a different definition of ROIC may be used by other companies since it can be defined differently. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. In the table that follows, adjusted ROIC for fiscal 2015 is reconciled to a GAAP based calculation of ROIC.
With respect to our target adjusted ROIC of 15%, which we expect to achieve by FY18, we cannot provide a quantitative reconciliation to the most directly comparable GAAP measure without unreasonable effort due to uncertainty related to the timing of achieving such results. However, we would expect to calculate adjusted ROIC in the same manner that we calculated FY15 adjusted ROIC as described above and reflected in the table below.
Fiscal 2015
Net earnings (GAAP) $ 686,773
Impact of Certain Items on net earnings 413,393
Adjusted net earnings (Non-GAAP) $ 1,100,166
Invested Capital (GAAP) $ 10,985,527
Adjustments to invested capital (1) (2,565,346)
Adjusted Invested capital (GAAP) $ 8,420,181
Return on invested capital (GAAP) 6.3%
Return on invested capital (Non-GAAP) 13.1%
(1) Adjustments to invested capital includes the removal of excess cash obtained from debt incurred for the US Foods merger that had been proposed and the debt issuance costs and hedge settlement borrowings that would not have been borrowed absent this merger-related debt. Shareholder's equity adjustments include the impact of Certain Items from earnings and removal of foreign currency translation adjustments that arose in fiscal 2015.
© 2015 All Rights Reserved. Sysco Corporation.
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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 sales of plant and equipment. Adjusted free cash flow adjusts out the cash impact of our Certain Items representing primarily payments for integration planning, litigation and termination costs in connection with the merger that had been proposed with US Foods, interest payments on debt we had issued in connection with the proposed merger, and a payment for a contingency accrual that arose in fiscal 2014. Sysco considers free cash flow and adjusted free cash flow to be liquidity measures that provide useful information to management and investors about the amount of cash generated by the business after the purchases and sales of buildings, fleet, equipment and technology, which may potentially be used to pay for, among other things, strategic uses of cash including dividend payments, share repurchases and acquisitions. Adjusted free cash flow further provides the amount of cash generated excluding larger payments sometimes incurred with our Certain Items. However, free cash flow may not be available for discretionary expenditures, as it may be necessary that we use it to make mandatory debt service or other payments Free cash flow and adjusted free cash flow should not be used as a substitute in assessing the company’s liquidity. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. In the table that follows, free cash flow and adjusted free cash flow for fiscal 2015 is reconciled to net cash provided by operating activities.
With respect to our expectation to generate more than $1 billion in free cash flow in each fiscal year through FY18, we cannot provide a quantitative reconciliation to the most directly comparable GAAP measure without unreasonable effort due to the uncertainty associated with the impacts of unforeseen future special items. However, for FY16, we expect our free cash flow to reflect adjustments for (1) cash payments associated with the termination of the merger that had been proposed with US Foods and related interest payments associated with the redemption of debt that had been issued in contemplation of the proposed merger and (2) the amount of plant and equipment, which the company projects to be in the range of $550-600 million. We would expect to calculate our free cash flow for each of the periods in the same manner that we calculated FY15 free cash flow as described above and reflected in the table below.
52-Week Period Ended Jun. 29, 2013
52-Week Period Ended Jul. 28, 2014
52-Week Period Ended Jun. 27, 2015
Net cash provided by operating activities (GAAP) $ 1,511,594 $ 1,492,815 $ 1,555,484
Additions to plant and equipment (511,862) (523,206) (542,830)
Proceeds from sales of plant and equipment 15,527 25,790 24,472
Free Cash Flow (Non-GAAP) $ 1,015,259 $ 995,399 $ 1,037,126
Cash impact of Certain Items 34,445 84,210 230,837
Adjusted Free Cash Flow (Non-GAAP) $ 1,049,704 $ 1,079,609 $ 1,267,963
Adjustments represent the cash impact of Certain Items. Adjustments for fiscal 2013 primarily included payments related to these items an MEPP withdrawal, severance and an acquisition related payment. Adjustments for fiscal 2014 primarily included payments related to integration planning costs in connection with the merger that had been proposed with US Foods and an MEPP withdrawal. Adjustments for fiscal 2015 included $159.2 million related to integration planning, litigation costs and termination costs in connection with the merger that had been proposed with US Foods, interest payments of $49.8 million related to the debt that had been issued for the proposed merger and $17.2 million related to the payment of a contingency accrual that arose in fiscal 2014 that was considered a Certain Item in fiscal 2014 and $5.7 million for all remaining applicable Certain Items. These amounts will differ from the earnings impact of Certain Items; as the timing of payments for these items may occur in a different period from the period in which the Certain Item charges were recognized in the Statement of Consolidated Results of Operations. In fiscal 2013 and fiscal 2015, there were pension contributions of $70.0 million and $50.0 million.