20150915 investor day presentation v_f_webcast version

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Investor Day PresentationSeptember 15, 2015 2015 All Rights Reserved. Sysco Corporation. P A G E 2Forward-Looking StatementsCertain statements made herein that look forward in time or express managements 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 Syscos market potential in the U.S. and Canada; opportunities across market segments; our plans to repurchase $3 billion in Sysco common stock; Syscos 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; Syscos 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; Syscos 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 managements 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 managements subjective evaluation. Expectations regarding tax rates are subject to various factors beyond managements 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, managements 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 Syscos business, see the Risk Factors contained in Syscos Annual Report on Form 10-K for the year ended June 27, 2015, as filed with the Securities and Exchange Commission, and Syscos 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 5I N V E S T O R D A Y 2015 All Rights Reserved. Sysco Corporation. P A G E 3AgendaTopicBREAK3:00 3:15Business and Strategic Overview1:00 1:45Business and Commercial Operations1:45 2:30End-to-End Supply Chain2:30 3:00Business Technology3:15 3:45Financial Overview3:45 4:30Closing Comments4:30 5:00Q&AWelcome and Agenda12:45 1:00PresenterNeil Russell, VP of Investor RelationsBill DeLaney, President and Chief Executive OfficerTom Ben, EVP and President - Foodservice Operations Scott Charlton, EVP Supply ChainWayne Shurts, EVP and Chief Technology OfficerJoel Grade, EVP and Chief Financial OfficerBill DeLaneyExecutive Team5:00 5:30Time0 9 . 1 5 . 1 5I N V E S T O R D A Y 2015 All Rights Reserved. Sysco Corporation. P A G E 4Trian Partners Investment in Sysco0 9 . 1 5 . 1 5I 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 Syscos largest stockholder Trians Nelson Peltz and Josh Frank joined Syscos Board effective August 21, 2015 Trian and Sysco have had preliminary and constructive dialogue Todays presentation reflects the exclusive views of Sysco managementSysco will continually update its strategic and financial targetsBusiness and Strategic OverviewSysco Investor DayBill DeLaneySeptember 15, 2015 2015 All Rights Reserved. Sysco Corporation. P A G E 6Our vision0 9 . 1 5 . 1 5I N V E S T O R D A YServing our customers as One SyscoTo be our customers most valued and trusted business partner. 2015 All Rights Reserved. Sysco Corporation. P A G E 7PeoplePartnership Productivity Products ExpansionProfoundly enrich the experience of doing business with SyscoContinuously improve productivity in all areas of our businessEnhance offer-ings through a customer-centric innovation programExplore, assess and pursue new businesses and markets0 9 . 1 5 . 1 5I N V E S T O R D A YThe five-point strategyOur Mission: Market and Deliver Great Products To Our Customers With Exceptional ServiceImplement enterprise-wide talent management process 2015 All Rights Reserved. Sysco Corporation. P A G E 8Customer centric approach0 9 . 1 5 . 1 5I N V E S T O R D A YOperating CompaniesMarketsCorporate Functions Operate the BusinessExecute FlawlesslyEnable theOperatingCompaniesProvide Resources and SupportCreate Tools, Processes and StrategyCustomers 2015 All Rights Reserved. Sysco Corporation. P A G E 9Strategic plan update: 2016 - 2018Market contextSysco overviewContents 2015 All Rights Reserved. Sysco Corporation. P A G E 1 0Industry leader in a $265 billion market$265B$260B$252B$246B$236B$230B$226B2.7%CAGR2015(p)2011 2012 2014201320102009US and Canada foodservice market size (excluding alcohol)$B; nominal growthSource: Technomic Data Digest (2014), Restaurants Canada, Statistics Canada, strategy Inc. & Pannell Kerr Forster0 9 . 1 5 . 1 5I N V E S T O R D A Y 2015 All Rights Reserved. Sysco Corporation. P A G E 1 1Away from home foodservice sales trending favorably49%57%51%42%40%45%50%55%60% RetailFoodserviceSource: US Census Bureau (2015)1 Retail Sales Equivalent Share; Retail includes grocery and other food/beverage sales (excluding foodservice) at all retail establishments 0 9 . 1 5 . 1 5I N V E S T O R D A Y% of total food spend; retail sales equivalent11997 2008 20151982 2015 All Rights Reserved. Sysco Corporation. P A G E 1 22015 forecasted top distributor sales1$Billions RestaurantsTop SegmentsForecasted 2015-20 Real CAGRPercent 2.1%1.6%3.5%4.2%1.2%3.5%131818276687Travel andLeisureEducationHealthcareFSRLSRRetailhostsSource: Technomic (July 2015), Foodservice Sector Trends & Opportunities1 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 ~$32M0 9 . 1 5 . 1 5I N V E S T O R D A YGrowth forecasted across all segmentsSysco is well positioned to participate in all segments 2015 All Rights Reserved. Sysco Corporation. P A G E 1 3Competitors are numerous and varied0 9 . 1 5 . 1 5I N V E S T O R D A YFoodservice Distribution in the U.S. Fragmented Low entry barriers Product offerings and service level matterCompetition remains acute 2015 All Rights Reserved. Sysco Corporation. P A G E 1 4Consumer confidence is near pre-recession levelsSource: The Conference Board (August 2015)Index; 1985 level = 100US consumer confidence7006030401009080110501011025Pre-recession level (Jan 07)2011 201420132012 2015Worst during recession (Feb 09)0 9 . 1 5 . 1 5I N V E S T O R D A Y 2015 All Rights Reserved. Sysco Corporation. P A G E 1 5102.5101.59596979899100101102103104restaurant operators outlook is similarly favorableRestaurant current situation and expectations indicesExpectationsCurrent situation20132012Index: Values >100 = Expansion Values 2015 All Rights Reserved. Sysco Corporation. P A G E 1 6Sysco is well positioned for the future0 9 . 1 5 . 1 5I 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 7ContentsStrategic plan update: 2016 - 2018Market contextSysco overview 2015 All Rights Reserved. Sysco Corporation. P A G E 1 80 9 . 1 5 . 1 5I N V E S T O R D A YU.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 tractionSYGMA Represents a large market segment (~ $50B) Customized distribution services specializing in service to large national chain restaurantsInternational Canada provides solid foundation Represents future growth opportunities Supports customer needsBusiness segment overviewU.S. Broadline drives our enterprise sales and profitability 2015 All Rights Reserved. Sysco Corporation. P A G E 1 9We have enhanced our leadership and organizational capabilities0 9 . 1 5 . 1 5I N V E S T O R D A YCommitted to developing a more diverse workforceImproved recruiting, development and retention High level of associate engagementCompetitive compensation and aligned incentivesExperienced and well-tenured leadership team 2015 All Rights Reserved. Sysco Corporation. P A G E 2 0We are building on our recent momentum 0 9 . 1 5 . 1 5I 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 2015 All Rights Reserved. Sysco Corporation. P A G E 2 10 9 . 1 5 . 1 5I N V E S T O R D A YUS. Broadline annual cases soldUS. Broadline recent trend in local case growth1Millions Year over year change, %Local case growth trends are improving7507009006005506509501,0008000850FY 14FY15FY13FY12FY10FY10TotalLocal2.0%FlatCAGR10- 151 Case growth excludes acquisitions0%1.5%2.0%0.5%1.0%2.5%Q3 FY15Q2 FY15Q1 FY15Q4 FY15FY14 2015 All Rights Reserved. Sysco Corporation. P A G E 2 2Gross margin has stabilized20%25%10%$7$115%$40$3$6$2$5$9$8+3.3% CAGR17.6%$7.8$8.0FY1318.4%$8.2$7.317.6%19.1%FY15FY12$8.6FY14$7.5FY1019.6%FY1118.0%Gross margin Gross profit$2.215%$2.0$1.8$1.0$0.40$0.8$0.6$0.210%20%$1.6$1.425%$1.2$2.417.9%Q3 FY15$2.117.5%Q4 FY15$2.2Q1 FY15$2.1Q4 FY14Q2 FY15$2.217.3%17.6%$2.217.6%Gross profitGross marginTotal Sysco gross profit and gross margin$ BillionsRecent trends in gross profit and gross margin$ Billions0 9 . 1 5 . 1 5I N V E S T O R D A Y 2015 All Rights Reserved. Sysco Corporation. P A G E 2 3Increased volume and transformative investments have driven expense growth0 9 . 1 5 . 1 5I 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 forwardWe have begun to realize the targeted benefits from these investments 2015 All Rights Reserved. Sysco Corporation. P A G E 2 4ContentsStrategic plan update: 2016 - 2018Market contextSysco overview 2015 All Rights Reserved. Sysco Corporation. P A G E 2 5Some historical context0 9 . 1 5 . 1 5I N V E S T O R D A Y Sysco IPOd on the NYSE Food away from home demand increasing Sysco begins to build core foundation Recorded $1B in annualized sales1970s: 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 expertise1980-2005: Rapid growth2005-2015: Strengthen foundationSysco is well positioned for the future 2015 All Rights Reserved. Sysco Corporation. P A G E 2 6Improve customer experienceAchieve 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 loyalty0 9 . 1 5 . 1 5I N V E S T O R D A YKey targeted results: 2015-2018 2015 All Rights Reserved. Sysco Corporation. P A G E 2 7Key levers to achieving our financial goals0 9 . 1 5 . 1 5I N V E S T O R D A YTo Be Our Customers Most Valued and Trusted Business PartnerImprove ROICEnablers: Grow gross profitLeverage supply chain costsReduce administrative costs Accelerate local case growth Improve marginsOur PeopleBusiness Technology 2015 All Rights Reserved. Sysco Corporation. P A G E 2 80 9 . 1 5 . 1 5I 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 CAGRsRoadmap to at least $400M 2015 All Rights Reserved. Sysco Corporation. P A G E 2 90 9 . 1 5 . 1 5I N V E S T O R D A YTotal gross operating income benefitGross incremental costNet Operating Income Improvement$650At least $400Gross operating income benefitGrow gross profitLeverage supply chain costsReduce administrative costs55-65%20-25%15-20%$(250)FY 18 impact, $MGross operating income impact by lever 2015 All Rights Reserved. Sysco Corporation. P A G E 3 0$400M in operating income impact phasingCumulative Capture by Year, %FY2018FY2017FY2016Operating Income Benefit20-30% 50-60% 100%0 9 . 1 5 . 1 5I N V E S T O R D A YOperating income impact is net of incremental costs 2015 All Rights Reserved. Sysco Corporation. P A G E 3 1Capital allocation priorities0 9 . 1 5 . 1 5I N V E S T O R D A Y1. Disciplined investment in the business2. Grow the dividend3. Pursue attractive strategic acquisitions4. Opportunistically repurchase shares$1 billion in annual free cash flow 2015 All Rights Reserved. Sysco Corporation. P A G E 3 20 9 . 1 5 . 1 5I 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% ROICSubstantial market opportunityExecuting our strategyImproving financial performance(2015-2018)We are well positioned for success 2015 All Rights Reserved. Sysco Corporation. P A G E 3 3Our vision0 9 . 1 5 . 1 5I N V E S T O R D A YServing our customers as One SyscoTo be our customers most valued and trusted business partner.Business and Commercial OperationsSysco Investor DayTom BenSeptember 15, 2015 2015 All Rights Reserved. Sysco Corporation. P A G E 3 50 9 . 1 5 . 1 5I N V E S T O R D A YTo Be Our Customers Most Valued and Trusted Business PartnerImprove ROICEnablers: Leverage supply chain costsReduce administrative costsFocus of the sectionKey levers to achieving our financial goalsOur PeopleBusiness technologyGrow gross profit Accelerate local case growth Improve margins 2015 All Rights Reserved. Sysco Corporation. P A G E 3 60 9 . 1 5 . 1 5I N V E S T O R D A YTotal gross operating income benefitGross incremental costNet Operating Income Improvement$650At least $400Gross operating income benefitGrow gross profitLeverage supply chain costsReduce administrative costs55-65%20-25%15-20%$(250)FY 18 impact, $MGrowing gross profit will contribute significantly to the strategic planFocus of the section 2015 All Rights Reserved. Sysco Corporation. P A G E 3 7Objectives for today0 9 . 1 5 . 1 5I 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 8Flat local case growth has contributed to margin performance over the past few years17.6%17.6%18.0%18.4%19.1%FY11FY13FY15FY14FY120 9 . 1 5 . 1 5I N V E S T O R D A YUS. Broadline annual cases soldMillions1,2001,0008004000600200FY14FY11933+2.0% CAGR962917FY10869FY15901868FY13FY12CMU LocalFlatCAGR10- 15Total Sysco gross margin, %5.2% 2015 All Rights Reserved. Sysco Corporation. P A G E 3 9Our commercial strategy is focused on growing cases and maintaining margin - recent trends are promisingUSBL Local YoY case growth, % Total Sysco gross margin, %FY1517.6%FY1417.6%0 9 . 1 5 . 1 5I N V E S T O R D A YOur plans build on recent momentum of accelerating local case growthand stabilizing gross marginsFY16 Plan2.1%FY151.7%1.4%1.3%Q2 FY15Q4 FY152.1%1.7%Q1 FY15Q3 FY1517.3%Q1 FY15Q4 FY15Q2 FY15Q3 FY1517.9%17.5%17.6% 2015 All Rights Reserved. Sysco Corporation. P A G E 4 0Our commercial initiatives have enabled us to accelerate local case growth and improve marginsBuild a compelling suite of products and servicesExecute flawlessly to serve our customersKnow our customers Grow profitably with our customersKey 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 5I N V E S T O R D A Y 2015 All Rights Reserved. Sysco Corporation. P A G E 4 1We remain driven by the needs and expectations of our core customers to accelerate our growthThe evolving needs of our Customers:A consistent, fresh, on-trend product assortmentThe ability to order where and how I wantConsistent, dependable deliveries and driversInnovative and value-added solutions that enable me to compete0 9 . 1 5 . 1 5I N V E S T O R D A YA knowledgeable partner that will help me grow my business 2015 All Rights Reserved. Sysco Corporation. P A G E 4 2Our commercial strategy is focused on 3 key areas0 9 . 1 5 . 1 5I N V E S T O R D A YAddress service and support gaps with our customers to improve their Sysco experience3Capture share in growing multi-cultural segments and customer groups 1Build a differentiated set of products and services to accelerate local sales and improve margins2Enabled by Enhanced Selling and Revenue Management Capabilities 2015 All Rights Reserved. Sysco Corporation. P A G E 4 3Understanding segment trends and our relative market share allows us to focus our efforts0 9 . 1 5 . 1 5I N V E S T O R D A YRetailTravel and LeisureFoodservice MgmtGovernmentEducationHealthcareSegmentRestaurantsProjected industry growth (15-20)HHLLLHMSource: Technomic (July 2015)Market share by segmentUS and Canada Foodservice Total: ~$260BLocally ManagedRestaurants$18B$61BTravel andLeisure NationalChainsHealthcare$93B$13B$32B$18B$27BEducationOtherRetail1 2015 All Rights Reserved. Sysco Corporation. P A G E 4 4Two recent examples of accelerating growth exist in both the Retail and Travel and Leisure segments0 9 . 1 5 . 1 5I N V E S T O R D A Y1Foodservice Partnership Joint Business Planning Stable and more consistent pricing Product quality and consistency Guest satisfaction Annual cost savings Value creation for hotel partners ONE Sysco sales approach Operational efficiencies / scale benefits Sysco brand growth International expansionIn-store DeliConvenience StoreFresh Kitchen (Commissary)2,800 locations6 locations800 locations 2015 All Rights Reserved. Sysco Corporation. P A G E 4 5Local restaurants represent a large opportunity and multi-cultural segments lead the growth0 9 . 1 5 . 1 5I N V E S T O R D A YLocal restaurants market size171696765636158585857Flat CAGR+3.1% CAGR17 2011 14 1912 16 181513$ Billions1 Technomic (July 2015); Local defined as Small chains & independentsProjectedActualsCommunity engagementMeasurement and calibrationCustomer insightsTargeted sales and marketing toolsAuthentic product lineCulturally knowledgeable sales forceProven pilot model that can be leveraged across segments1 2015 All Rights Reserved. Sysco Corporation. P A G E 4 6Delivering a differentiated set of products is critical to enabling local restaurant growth0 9 . 1 5 . 1 5I N V E S T O R D A YCategory InnovationFresh Meat and ProduceLocally Grown and Sourced2 2015 All Rights Reserved. Sysco Corporation. P A G E 4 70 9 . 1 5 . 1 5I N V E S T O R D A YOur 3 year journey in Category Management continues to improve margins and accelerate Sysco brand growthFY13-FY15FY16 Plan~$400$500+TotalFY18FY17Gross profit, $MSysco brand growth, % Broadline cases2VarietyA broader set of fresh, local and on-trend products to help customers evolve their menuValueConsistent set of core products to help operators stay competitiveInnovationA pipeline of new products to address the changing consumer needs36%OtherSysco brand64% 2015 All Rights Reserved. Sysco Corporation. P A G E 4 8We are partnering with local suppliers to meet the growing request for locally sourced solutionsI N V E S T O R D A Y0 9 . 1 5 . 1 52 2015 All Rights Reserved. Sysco Corporation. P A G E 4 9We are partnering with local suppliers to meet the growing request for locally sourced solutionsI N V E S T O R D A Y0 9 . 1 5 . 1 52 2015 All Rights Reserved. Sysco Corporation. P A G E 5 0New programs leveraging our specialty meats and produce businesses are driving significant growth0 9 . 1 5 . 1 5I N V E S T O R D A Y2Sysco opportunities Customer needsBetter utilize our Specialty Companies: Specialty meat companies FreshPoint Produce European ImportsCurrent pilot programs are delivering solid results Southeast Fresh Express produce category initiative ONE Sysco Sales / Service model Expanded Product Specialists to support MAsService flexibility, competitive pricing, and customer product offerings (cuts)MeatLong shelf life, service flexibility, and locally-sourced productsProduceImproved pricing (typically delivered by local dairy) and more cheese varietyDairyWhat customers want 2015 All Rights Reserved. Sysco Corporation. P A G E 5 1Bringing value-added services that solve the needs of our customers, builds loyalty and retention0 9 . 1 5 . 1 5I N V E S T O R D A YMenu Analysis and DesignTechnology and TrainingMarketing Tools and Solutions2 2015 All Rights Reserved. Sysco Corporation. P A G E 5 20 9 . 1 5 . 1 5I N V E S T O R D A YCategory Management Core ProductInnovative ProductMenu Analysis and Design represents a significant opportunity to improve customer margins2 2015 All Rights Reserved. Sysco Corporation. P A G E 5 3We are helping customers to better manage their restaurant through social media solutions and tools0 9 . 1 5 . 1 5I N V E S T O R D A YEducation Listening Insights2ChipotleQdobaFreebirdsBullritos 2015 All Rights Reserved. Sysco Corporation. P A G E 5 4AppsFor Restaurants and ConsumersConsumer apps. Restaurant websites and social media.We are investing in technology and training programs that are focused on improving operator performance2Operator trainingTechnology0 9 . 1 5 . 1 5I N V E S T O R D A Y 2015 All Rights Reserved. Sysco Corporation. P A G E 5 5Programs such as My Sysco Truck improve communication and our overall service offering0 9 . 1 5 . 1 5I N V E S T O R D A Y3Nightly emails with estimated delivery time, # cases, out-of-stocks and substitutionsInnovation Delivered 2015 All Rights Reserved. Sysco Corporation. P A G E 5 6Our new customer engagement model allows our partners to order how, when and where they want0 9 . 1 5 . 1 5I N V E S T O R D A YCustomerExperienceEmailLeads GenChatTextMulti-lingualSocial mediaMAMOBILE3 2015 All Rights Reserved. Sysco Corporation. P A G E 5 73 We are scaling the new mobile ordering platform based on pilot successA new way to order has been well received28% growth in customer accounts using mobile vs. prior trailing quarter20%+ increase in overall eCommerce activity over the past 60 days driven as a side effect of mobile usage53% increase in transaction count vs. prior trailing quarterCustomers rate ease of ordering as the #1 driver of their ordering experience0 9 . 1 5 . 1 5I N V E S T O R D A Y 2015 All Rights Reserved. Sysco Corporation. P A G E 5 8We are focused on becoming our customers most trusted advisor0 9 . 1 5 . 1 5I N V E S T O R D A YMore 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 9We are building a more capable sales force by leveraging new tools and processes across Sysco0 9 . 1 5 . 1 5I N V E S T O R D A YWorld-classsales engine drivinggrowthLeading capabilities and talentConsistent, winning routinesData-driven deployment 2015 All Rights Reserved. Sysco Corporation. P A G E 6 0Improving the CMU Customer Experience represents an opportunity to improve retention and drive growth0 9 . 1 5 . 1 5I N V E S T O R D A YAdvantages to consolidatingTo Sysco Better manage pricing and revenue cycle Increase expertise Frees up time for local CMU account managersTo our customers More consistency Higher service levels Single point of contactCorpCMU activities are currently fragmentedand will be consolidated under Shared ServicesCustomerShared ServicesOpCoShared ServicesCustomer 2015 All Rights Reserved. Sysco Corporation. P A G E 6 1Revenue management tools and routines have laid a solid foundation for ongoing margin improvement0 9 . 1 5 . 1 5I N V E S T O R D A Y0 9 . 1 5 . 1 5I N V E S T O R D A YMix 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 fieldVP, RevManFieldCorpFY14FY13 FY15 2015 All Rights Reserved. Sysco Corporation. P A G E 6 2Key takeawaysWe 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 initiatives0 9 . 1 5 . 1 5I 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 5I N V E S T O R D A YTotal gross operating income benefitGross incremental costNet Operating Income Improvement$650At least $400Gross operating income benefitGrow gross profitLeverage supply chain costsReduce administrative costs55-65%20-25%15-20%$(250)FY 18 impact, $MGrowing gross profit will contribute significantly to the strategic planFocus of the sectionScott CharltonSeptember 15, 2015End-to-End Supply ChainSysco Investor Day 2015 All Rights Reserved. Sysco Corporation. P A G E 6 50 9 . 1 5 . 1 5I N V E S T O R D A YTo Be Our Customers Most Valued and Trusted Business PartnerImprove ROICEnablers: Grow gross profitLeverage supply chain costsReduce administrative costsFocus of the sectionKey levers to achieving our financial goalsOur PeopleBusiness technology Accelerate local case growth Improve margins 2015 All Rights Reserved. Sysco Corporation. P A G E 6 60 9 . 1 5 . 1 5I N V E S T O R D A YTotal gross operating income benefitGross incremental costNet Operating Income Improvement$650At least $400Gross operating income benefitGrow gross profitLeverage supply chain costsReduce administrative costs55-65%20-25%15-20%$(250)FY 18 impact, $MLeveraging supply chain costs will contribute 20-25% of the FY18 gross impactFocus of the section 2015 All Rights Reserved. Sysco Corporation. P A G E 6 7Objectives for today0 9 . 1 5 . 1 5I 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 8The end-to-end supply chain focuses on a customer centric approach0 9 . 1 5 . 1 5I N V E S T O R D A YForecast demandTransport and receiveReplenish inventoryDeliverWarehouseManage facilities, construction and real estateManage fleet and indirect sourcing 2015 All Rights Reserved. Sysco Corporation. P A G E 6 9The Sysco supply chain is extensive and complex0 9 . 1 5 . 1 5I N V E S T O R D A Y2014 top 10 private fleets in North America (by tractor count)Tractors TrailersCompany12,132 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 0Broad geographic coverage across the US and Canada0 9 . 1 5 . 1 5I N V E S T O R D A YAlaskaNote: 96 Broadline 2015 All Rights Reserved. Sysco Corporation. P A G E 7 1Safety Service levelsImportant supply chain priorities going forward0 9 . 1 5 . 1 5I N V E S T O R D A Y Improve customer service levels Food safety Workplace safetyCost per case Improve productivity and efficiency 2015 All Rights Reserved. Sysco Corporation. P A G E 7 27 key supply chain areas of focus0 9 . 1 5 . 1 5I N V E S T O R D A YFacilities 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 costOpCoproductivity 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 practicesInventory 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 NetworkPrioritized 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 5I N V E S T O R D A YTransportation and Warehouse productivity performance by OpCoKey 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 effortsStandardized 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 5I N V E S T O R D A YExample indirect categories by spendKey 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 packagingStrategically sourcing indirect spend will lead to significant savingsBulk fuelUniformsOffice equipment and furnitureAirfareVehicle repair servicesFacilities servicesFleet rentalsMeals and entertainmentUtilitiesHotel and rental cars 2015 All Rights Reserved. Sysco Corporation. P A G E 7 50 9 . 1 5 . 1 5I N V E S T O R D A YKey drivers to improving inventory management Rolled out demand planning and replenishment tool Leverage Center of Excellence (COE) Reducing inactive and aged inventoriesdone in conjunction with enhancing service levels 2015 All Rights Reserved. Sysco Corporation. P A G E 7 6Best-in-class capacity planning will defer capital expenditures0 9 . 1 5 . 1 5I N V E S T O R D A YActively 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 7Key takeaways0 9 . 1 5 . 1 5I 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 5I N V E S T O R D A YTotal gross operating income benefitGross incremental costNet Operating Income Improvement$650At least $400Gross operating income benefitGrow gross profitLeverage supply chain costsReduce administrative costs55-65%20-25%15-20%$(250)FY 18 impact, $MLeveraging supply chain costs will contribute 20-25% of the FY18 gross impactFocus of the sectionWayne ShurtsSeptember 15, 2015Business TechnologySysco Investor Day 2015 All Rights Reserved. Sysco Corporation. P A G E 8 00 9 . 1 5 . 1 5I N V E S T O R D A YTo Be Our Customers Most Valued and Trusted Business PartnerImprove ROICEnablers: Grow gross profitLeverage supply chain costsReduce administrative costsFocus of the sectionKey levers to achieving our financial goalsOur PeopleBusiness technology Accelerate local case growth Improve margins 2015 All Rights Reserved. Sysco Corporation. P A G E 8 1Objectives for today0 9 . 1 5 . 1 5I 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 2Business Technology (BT) supports the business through a robust ecosystem0 9 . 1 5 . 1 5I N V E S T O R D A YInfrastructureAgility platformAnalytic platformOperational platformEnterprise applications 2015 All Rights Reserved. Sysco Corporation. P A G E 8 30 9 . 1 5 . 1 5I N V E S T O R D A YEnterprise ApplicationsInfrastructureOperational PlatformDemand Planning Replenish-mentTruck RoutingOrder EntryOrder ManagementInventory ManagementWarehouse Management Financial and HR Systems Analytics Platform Business Intelligence Reporting Analytics/insights Agility Platform Systems of Engagement Example: My Sysco Truck Sysco WarehouseReceivePickPackShipCustomersRestaurantsHospitalsSchoolsHotelsSuppliersTechnology platform 2015 All Rights Reserved. Sysco Corporation. P A G E 8 4SAP look back0 9 . 1 5 . 1 5I 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 USBL2010 Fall 2012Fall 2012 Fall 2013Fall 2013 Summer 2014Fall 20142015 2015 All Rights Reserved. Sysco Corporation. P A G E 8 5Improved approach to rolling out technology platform0 9 . 1 5 . 1 5I 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 stakeholdersRationaleDemand Planning Replenish-mentTruck RoutingOrder EntryOrder ManagementInventory ManagementWarehouse Management Financial and HR Systems 2015 All Rights Reserved. Sysco Corporation. P A G E 8 6BT is focused on enabling the strategic plan with immediate priority on enhancing the customer experienceI N V E S T O R D A Y0 9 . 1 5 . 1 5Business technology projectsStrategic GoalsAccelerate local case growthImprove gross marginsLeverage supply chain costsReduce admin costsImprove ROICCMU Optimiz-ationRevenue mgmt. projectOBC(On-board Computers/ Telogis)Demand, Planning, ReplenishmentSC Incentives ODI and DCIPDigital customer experienceReduce telecom expensesTechnology platformMaster data management and Business Intelligence12345 2015 All Rights Reserved. Sysco Corporation. P A G E 8 7Customer Facing TechnologyRestaurant TechnologyEnterprise TechnologyCompetitor FocusMAJOR VARIED but MINORVARIED but MINOR Competition has predominately aged legacy system environmentsMINOR INVESTING Primarily CakeMAJOR 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 betterDescriptionswe plan to overweight our near-term spend on customer facing technologiesImmediate focusI N V E S T O R D A Y0 9 . 1 5 . 1 51 In recent years, we have focused on enterprise technology, driving business efficienciesACCELERATE LOCAL CASE GROWTH 2015 All Rights Reserved. Sysco Corporation. P A G E 8 8We are encouraged with our mobile success and expanding our digital capabilitiesThis technology is directly tied to our ability to improve local growthI N V E S T O R D A Y0 9 . 1 5 . 1 5Expanding the capabilities of Sysco MobileAnd building additional digital opportunitiesIntegrated digital updates on delivery and current inventoryMultiple channels for ordering and product listsIntegrated system for invoices, returns, credits and paymentOnline products and service details for prospects and new customersFocus on improving the efficiency of our customers ordering experience Include inventory managementExtend visibility to menu analysis and food costEnhance search and product information (e.g., pictures, nutritional)Custom list creation and management1ACCELERATE LCOAL CASE GROWTH 2015 All Rights Reserved. Sysco Corporation. P A G E 8 9I N V E S T O R D A Y0 9 . 1 5 . 1 5BT is implementing technology to fully support Revenue Management enabling marginsPrice ManagerCustomer Investment ManagerPerformance Manager2IMPROVE GROSS MARGINS 2015 All Rights Reserved. Sysco Corporation. P A G E 9 0Supply chain initiativeInventory ManagementIndirect sourcingBT enablerARIBA (on-line marketplace)Telecom expenseOBC (On-board Computers / Telogis)Supply Chain Incentives DCIP/ODIDemand forecasterDemand, Planning, ReplenishmentI N V E S T O R D A Y0 9 . 1 5 . 1 5OpCoproductivityAchieving supply chain cost reductions will rely on new functionality from technology systems and platforms3LEVERAGE SUPPLY CHAIN COSTS 2015 All Rights Reserved. Sysco Corporation. P A G E 9 1I N V E S T O R D A Y0 9 . 1 5 . 1 5Improved CMU customer experience and cost efficiency driven by technology and Shared Servicesis enabled by BT solutions and tools Service request tool Consolidated payment tool DPM tool (pricing management)CorpCMU activities are currently fragmentedand will be consolidated under Shared ServicesCustomerShared ServicesOpCoShared ServicesCustomer4REDUCE ADMINISTRATIVE COSTS 2015 All Rights Reserved. Sysco Corporation. P A G E 9 2I N V E S T O R D A Y0 9 . 1 5 . 1 5Master Data Management and Business Intelligence are key enablers for delivering the business strategyBusiness technology projectsStrategic GoalsAccelerate local case growthImprove gross marginsLeverage supply chain costsReduce admin costsImprove ROICCMU Optimiz-ationRevenue mgmt. projectOBC(On-board Computers/ Telogis)Demand, Planning, ReplenishmentSC Incentives ODI and DCIPDigital customer experienceReduce telecom expensesTechnology platformMaster data management and Business Intelligence123455TECHNOLOGY PLATFORM 2015 All Rights Reserved. Sysco Corporation. P A G E 9 3Key takeaways0 9 . 1 5 . 1 5I 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 capabilitiesJoel GradeSeptember 15, 2015Financial OverviewSysco Investor Day 2015 All Rights Reserved. Sysco Corporation. P A G E 9 5ContentsReturn on Invested CapitalSysco financial overview$400M operating income improvementFinancial roadmap 2015 All Rights Reserved. Sysco Corporation. P A G E 9 6We have recent momentum of accelerating local case growth and improving margins0 9 . 1 5 . 1 5I N V E S T O R D A YAs Tom mentioned earlierwe are accelerating our local case growth 2015 All Rights Reserved. Sysco Corporation. P A G E 9 7Our end-to-end supply chain is creating sustainable competitive advantages0 9 . 1 5 . 1 5I N V E S T O R D A YAs Scott mentioned earlierwe have many supply chain advantages 2015 All Rights Reserved. Sysco Corporation. P A G E 9 8We generate significant cash flowAdjusted free cash flow1FY131.11.3FY15FY141.0I N V E S T O R D A Y0 9 . 1 5 . 1 5$ Billions1) See Non-GAAP Reconciliations for an explanation of this non-GAAP measure 2015 All Rights Reserved. Sysco Corporation. P A G E 9 9Strong balance sheet provides flexibility0 9 . 1 5 . 1 5I N V E S T O R D A YCurrent balance sheetUpcoming 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 Moodys published new ratings Moodys: A2 negative watch S&P: A- stable Solid investment-grade credit rating Substantial flexibility to pursue strategic transactions where appropriateFurther leverage balance sheet for the right opportunity 2015 All Rights Reserved. Sysco Corporation. P A G E 1 0 0ContentsReturn on Invested CapitalSysco financial overview$400M operating income improvementFinancial roadmap 2015 All Rights Reserved. Sysco Corporation. P A G E 1 0 10 9 . 1 5 . 1 5I N V E S T O R D A YTo Be Our Customers Most Valued and Trusted Business PartnerImprove ROICEnablers: Grow gross profitLeverage supply chain costsReduce administrative costsFocus of the sectionWe are committed to achieving at least $400M in operating income improvementOur PeopleBusiness technology Accelerate local case growth Improve margins 2015 All Rights Reserved. Sysco Corporation. P A G E 1 0 20 9 . 1 5 . 1 5I N V E S T O R D A YTotal gross operating income benefitGross incremental costNet Operating Income Improvement$650At least $400Gross operating income benefitGrow gross profitLeverage supply chain costsReduce administrative costs55-65%20-25%15-20%$(250)FY 18 impact, $MReducing administrative costs will contribute 15-20% of the FY18 gross impactFocus of the section 2015 All Rights Reserved. Sysco Corporation. P A G E 1 0 3I N V E S T O R D A Y0 9 . 1 5 . 1 5We will reduce administrative costs through a variety of different leversFocus on priorities that drive the most valueOptimize organizational structureIntegrate support functionsUtilize technology to enable efficiencyLeverage third party spendStreamline the workFocus on the customer 2015 All Rights Reserved. Sysco Corporation. P A G E 1 0 4ContentsReturn on Invested CapitalSysco financial overview$400M operating income improvementFinancial roadmap 2015 All Rights Reserved. Sysco Corporation. P A G E 1 0 5We will achieve our ROIC target of 15% by focusing on 3 key activities0 9 . 1 5 . 1 5I N V E S T O R D A Y1) Improving working capital management 2) Continue to manage capital spend in a rigorous manner3) Continually assess business segment strategic value and ROIC 231The path to 15% ROIC will not be linear 2015 All Rights Reserved. Sysco Corporation. P A G E 1 0 6DescriptionAccounts Payable Improve payment terms Enhance vendor relationshipsAccounts 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 capabilityInventory Improve inventory management practices Prevent inventory from becoming aged/obsoleteWe plan to achieve an improvement in working capital by ~ 4 daysI N V E S T O R D A Y0 9 . 1 5 . 1 5Improving 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, $ millions543523550-600FY15FY14FY13 Plan FY16512I N V E S T O R D A Y0 9 . 1 5 . 1 5Sysco continues to follow a disciplined approach to capital spend 1.1% 2015 All Rights Reserved. Sysco Corporation. P A G E 1 0 8ContentsReturn on Invested CapitalSysco financial overview$400M operating income improvementFinancial roadmap 2015 All Rights Reserved. Sysco Corporation. P A G E 1 0 9Targeted financial resultsFY 2018FY 2015CAGR2015 - 2018Adjusted EPS2Adjusted Operating Income2$1,792Sales ($ 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 5I N V E S T O R D A Y15%Targeting at least $400M in Operating Incomeimprove-ment1) 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 0MetricKey underlying assumptionsAssumptionDividend Moderate growth0 9 . 1 5 . 1 5I N V E S T O R D A YShares 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 buybacksAcquisition 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 1I N V E S T O R D A Y0 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 capacityNote: Assumes 3.5x leverage; 10x multiple 2015 All Rights Reserved. Sysco Corporation. P A G E 1 1 2Our Financial RoadmapI N V E S T O R D A Y0 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 opportunityClosing CommentsSysco Investor DayBill DeLaneySeptember 15, 2015 2015 All Rights Reserved. Sysco Corporation. P A G E 1 1 40 9 . 1 5 . 1 5I N V E S T O R D A YTo Be Our Customers Most Valued and Trusted Business PartnerImprove ROICEnablers: Grow gross profitLeverage supply chain costsReduce administrative costsKey levers to achieving our financial goalsOur PeopleBusiness technology Accelerate local case growth Improve margins 2015 All Rights Reserved. Sysco Corporation. P A G E 1 1 5Governance structure to support execution0 9 . 1 5 . 1 5I N V E S T O R D A YLeverage supply chain costsProgram managementSteering Committee Grow gross profitReduce administrative costsImprove ROICExecutive compensation will be aligned with the metrics shared with you today 2015 All Rights Reserved. Sysco Corporation. P A G E 1 1 6Sysco is well positioned for the futureI N V E S T O R D A Y0 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 DaySeptember 15, 2015 2015 All Rights Reserved. Sysco Corporation. P A G E 1 1 80 9 . 1 5 . 1 5I N V E S T O R D A YImpact of Certain Items - Fiscal 2015Non-GAAP Reconciliation (Unaudited)Sysco Corporation and its Consolidated Subsidiaries(In Thousands, Except for Share and Per Share Data)Syscos 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 basisThe 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 companys 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 above52-Week Period Ended Jun. 27, 2015Sales (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 jurisdiction2 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. P A G E 1 1 90 9 . 1 5 . 1 5I N V E S T O R D A YSysco Corporation and its Consolidated SubsidiariesNon-GAAP Reconciliation (Unaudited)Return on Invested Capital (ROIC) and Adjusted ROIC(In Thousands)We calculate ROIC as net earnings divided by (i) stockholders 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 stockholders 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 2015Net 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. P A G E 1 2 00 9 . 1 5 . 1 5I N V E S T O R D A YSysco Corporation and its Consolidated SubsidiariesNon-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 companys 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, 201352-Week Period Ended Jul. 28, 201452-Week Period Ended Jun. 27, 2015Net 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.