To Our Shareholders
Throughout this letter, we will address our fiscal 2010 financial results, provide context on the market and industry environment, outline Sysco’s initiatives to drive profitable growth, update you on recent leadership changes and share our view for the future.
For the fiscal year ending July 3, 2010, we achieved sales of $37.2 billion and operating income of $2.0 billion. This year we had the advantage of a 53-week year, but even adjusted for the extra week, our earnings per share was our highest on record. We are proud of the results our associates produced this year and gratified to be able to continue to invest substantial sums of capital in our business.
We did see a more favorable market environment begin to emerge in the second half of the fiscal year, as evidenced by both modest case volume growth and moderate food cost inflation. While the extent, pace and consistency of the economic recovery are not clear, our strong operating cash flow and balance sheet position us well to capitalize on opportunities moving forward.
What is clear is that consumer confidence is still suffering and, as a result, people are making more value-focused spending decisions. We’ve seen, however, that they are still willing to spend money on food away from home – foodservice has become an essential industry and has demonstrated remarkable resilience during a tough economy. Eating out remains a relatively low-cost form of entertainment in which people still want to invest.
Similarly, Sysco’s Management made the same kinds of value-conscious decisions on how we would allocate our investment capital during fiscal 2010. In pursuing our mission, we continually focus on the core of our business:
In addition, we continue to move forward on our business transformation initiative that will position us even more strongly for the future by streamlining our processes, reducing costs and improving data availability. This transformation will be supported by an enterprise resource planning system that we are ready to begin piloting in fiscal 2011, but the process goes much deeper than just our systems.
The business case for the initiative is compelling. We have identified opportunities to reduce cost in many areas – in some immediately – by establishing a shared business services function that moves many of our administrative services, currently scattered across our operating companies, into a single center.
The transformational opportunity is truly exciting. By combining a robust data-driven system with our already strong focus on customer service, we will provide our sales force and customers with more effective tools and capabilities that will enhance their productivity, and position Sysco to gain additional market share in our very fragmented industry. And by streamlining our processes and improving our access to data, we will create new opportunities to expand the core of our business.
We are approaching this transformation with the same level of thoughtful planning and risk mitigation that we apply across all our activities. We are working from a timeline that allows us to thoroughly pilot and test each aspect of the system before proceeding further. Overall, we are allowing more than two years from the initial pilot to a full rollout to all our broadline companies.
Managing a change of this magnitude is about much more than technology. Throughout the process, we have sought the perspective and wisdom of our most tenured associates, and have engaged them in the transformation project from the outset. We have proceeded in this manner so as to ensure that Sysco’s future framework incorporates the best practices we have developed over the past 40 years.
Our leadership structure is also changing. Ken Spitler, vice-chairman, president and chief operating officer of Sysco, retired in June. We thank Ken for his immeasurable contributions to our organization over the past 24 years, and know that his leadership has driven our continuous operational improvements – especially in the toughest times. Steve Smith, executive vice president, also retired at the end of the fiscal year, after 30 years of dedicated service to our company.
Mike Green has assumed responsibility for overseeing all U.S. broadline operations. Larry Pulliam continues to lead contract sales, SYGMA, distribution services and our specialty companies. We have named three additional individuals to executive management-level positions: Chris Kreidler joined us as chief financial officer with a wealth of experience in food industry finance; Jim Hope, who is leading our business transformation process, was promoted to executive vice president in November; and Bill Day, who oversees our merchandising and supply chain activities, was also promoted to executive vice president in July.
In addition, we have realigned our broadline leadership into eleven geographic markets. This action, combined with the above leadership changes, enhances our go-to-market strategy, allows us to more effectively implement our business transformation, helps us to develop and strengthen customer relationships that cross over local lines, and improves our approach to building a pipeline of acquisitions. In addition, this new structure provides a broader platform to further develop our most talented and experienced leaders, now and in the future.
As we enter our fifth decade, we move forward from a position of strength to an even stronger future. We will continue to invest in profitably growing our business, both organically and through acquisitions. The business transformation we are undergoing will enhance our organizational effectiveness in many ways, most importantly by supporting our efforts to become Sysco’s customers’ most valued and trusted business partner.
Manny Fernandez
Chairman of the Board
September 29, 2010
Bill DeLaney
President and Chief Executive Officer
September 29, 2010
