Sysco Corporation (SYY)

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Sysco Corporation (SYY)

F4Q09 Earnings Call

August 10, 2009 10:00 am ET

Executives

Neil A. Russell – Vice President of Investor Relations

William J. DeLaney III – Chief Executive Officer

Kenneth F. Spitler – Vice Chairman, President and Chief Operating Officer

Analysts

Mark Wiltamuth - Morgan Stanley

Simeon Gutman - Canaccord Adams

Jason Whitmer - Cleveland Research Company

Meredith Adler - Barclays Capital

John Heinbockel - Goldman Sachs

[Alvin] for Greg Badishkanian – Citigroup

John Ivankoe - J.P. Morgan

Robert Cummins - Shields & Company

Presentation

Operator

Please stand by. We’re about to begin. Good day, everyone, and welcome to today’s Sysco Corporation fourth quarter and year end 2009 earnings conference call. As a reminder, today’s call is being recorded.

At this time for opening remarks and introductions, I would like to turn the conference over to Mr. Neil Russell, Vice President of Investor Relations. Please go ahead, sir.

Neil A. Russell

Thank you [Daryl], and good morning everyone. Thank you for joining us for Sysco’s fourth quarter and fiscal year 2009 conference call. On today’s call you will hear from Bill DeLaney our Chief Executive Officer, and Ken Spitler our Vice Chairman, President and Chief Operating Officer.

Before we begin, please note that statements made in the course of this presentation that state the company’s or management’s intentions, beliefs, expectations, or predictions of the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ in a material manner. Additional information concerning factors that could cause actual results to differ in a material manner from those in the forward-looking statements is contained in the company’s SEC filings including, but not limited to, risk factors contained in the company’s annual report on Form 10-K for the year ended June 28, 2008, and in the company’s press release issued earlier this morning.

Please understand that all comparisons given during the call refer to changes between the fourth quarter of fiscal 2009 and the fourth quarter of fiscal 2008, or between full year fiscal 2009 and the full year of fiscal 2008, unless otherwise noted. Also, all comments about earnings per share refer to diluted earnings per share unless otherwise noted.

Lastly, we ask that you reserve December 14 through 15 on your calendars for a potential analysts day in New York. More information will be forthcoming from my office in the coming weeks.

With that out of the way, I’ll turn the call over to our Chief Executive Officer, Bill DeLaney.

William J. DeLaney III

Thank you, Neil, and good morning everyone. Earlier this morning Sysco reported net earnings of $315 million for the fourth quarter and nearly $1.1 billion for fiscal 2009. These results were generated through the consistent support of our customers and the dedicated efforts of our associates in the midst of the most difficult business environment that our industry has ever experienced.

While financial performance in general does not reflect the type of year-over-year improvement that Sysco typically produces, we are pleased both with the absolute results and our operating company’s ability to compete successfully by providing excellent service and business solutions to their customers. We’re particularly encouraged by our ability to manage costs effectively throughout our organization in a year when revenues declined for the first time in Sysco’s history. Ken will address this aspect of our operating performance in more detail in just a minute.

In addition to controlling costs well, we also generated strong cash flow from operations for the year and enhanced our liquidity by securing $500 million in long term financing. As a result, we were able to invest appropriately in capital projects, modestly increase our acquisition activity over the prior year, and return a large portion of our free cash flow to shareholders.

For now I’ll turn it over to Ken for a discussion on operational results, and then I’ll come back to provide further detail on our financial results. Ken?

Kenneth F. Spitler

Thanks, Bill. Overall I’m pleased with the operational results we achieved during last year. For 2009 we sold $37 billion of product, generated $1.9 million of operating income, produced cash flow from operations of $1.6 billion and returned $1 billion of capital to our shareholders. Without question, 2009 represented the most challenging sales year we’ve had in Sysco’s 40 year history. However, as has always been Sysco’s focus, our dedicated associates remain committed to serving our customers.

Our cost control efforts have not only helped support operating earnings, but have positioned us well for when the economy begins to recover. The key to our success has been improving operational efficiency, and I’m pleased with how our operations continue to perform. For example, in our broad line companies during 2009 our diesel gallon usage decreased 7% compared to a mileage decrease of 5%. Kilowatt hours decreased 7%. Cases per trip increased 2%. Warehouse cases per man hour improved 4% and total sales per employee increased approximately 5%.

Capital expenditures for 2009 totaled $465 million. Looking ahead, we remain committed to continuing to invest in our business so as to leverage our leadership position and profitably gain market share. As a result, I expect capital spending for the next year to be in the range of $600 million to $650 million. This spending will be relatively balanced between maintenance items such as ongoing fleet replacement and facility repairs, and growth items such as expansions of current facilities and potential fold-outs.

Also included in this amount is technology, a significant portion of which is dedicated to our ongoing ERP project. With the ERP project, we are taking the opportunity to review many of our processes and finding ways to further streamline our operation. It’s important to note that this project is about a lot more than technology. In the end, the technology is an enabler for what we are designing, which is a business transformation. We have signed a contract with SAP and continue to make progress on the design of our new technology platform. We expect to have design work completed by the end of calendar year and will provide a comprehensive update on the project at the analysts’ day in December that Neil mentioned earlier.

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