Sysco 2007 Annual Report Download - page 4

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Fiscal 2007 results were significantly improved as we
rebounded from a challenging year in fiscal 2006. It was
particularly gratifying to mark our thirty-seventh year of sales
growth as we reached a milestone $35 billion. Much of the
sales improvement was directly related to the success of our
Business Review program and additional customer contact
associates joining our team during the year.
We were especially pleased that we were able to leverage our
sales to reach a new performance benchmark of $1 billion
in net earnings. The significant operating leverage achieved
reflects our operating companies’ sharp focus on hundreds
of everyday functions to manage our expenses and protect
margins in a challenging inflationary environment. Some
examples over the past several years that might help provide
some perspective include increasing the number of cases we
deliver per trip from 585 to approximately 695 and reducing
handling errors from three per 1,000 cases delivered to less
than one in 1,000 cases. In addition, we have seen overall
injuries per 100 employees drop by 40 percent. Activities like
these have improved the quality of life for our associates,
increased our productivity and helped curb expenses.
Free cash flow, defined as cash flow provided by operating
activities of $1.4 billion less capital expenditures of
$603 million, was approximately $800 million for the year,
up significantly from last year. Return on average
shareholders’ equity was 31 percent this year, compared
to 30 percent in fiscal 2006.
JOHN F. BAUGH [1916-2007]
John F. Baugh, our beloved founder, died March 5, 2007 at 91. His vision of a national
foodservice distribution network became reality when his company, Zero Foods,
and eight other companies joined to form SYSCO in 1969. At the initial public offering
on March 3, 1970, the nine companies had aggregate sales of $115 million and served
a $35 billion market. In 1977 SYSCO became the leading foodservice supplier in
North America. John Baugh was a true visionary, a legendary entrepreneur, an inspiration
to friends and colleagues and a generous philanthropist. His impeccable integrity and
generosity of spirit have been imprinted indelibly on the character of our organization.
We are implementing several business initiatives to
position us well to capture market share in a changing
industry environment. We believe these initiatives will
support our strategy of providing customers the lowest
total procurement cost, accelerate our growth and further
solidify our frontrunner position in the industry. In line with
embedding these initiatives into our operations, we made a
number of organizational changes to ensure that we maintain
our strong financial performance as we expand the scope of
these initiatives. Ken Spitler has assumed responsibilities as
President and Chief Operating Officer, while Larry Pulliam,
as Executive Vice President, Global Sourcing and Supply Chain,
has responsibility for sourcing and supply chain. The Sourcing
and National Supply Chain initiatives focus on lowering our
cost of goods sold by leveraging our purchasing power and
procurement expertise and capitalizing on an end-to-end
view of our supply chain. It is a delicate balance to manage
the changes required by these initiatives and the pace of that
change to ensure that our employees, our customers and
our suppliers understand and embrace the refinements we
believe are key to our future. We are seeing strong results in
the early stages of these initiatives and are excited about the
momentum going forward.
Each of the three key areas of our National Supply Chain
Initiative provides benefits independently, but together their
efficiencies are most powerful. The Northeast Redistribution
Center (RDC) is operating successfully and will achieve our
planned annualized volume in fiscal 2008. The second RDC
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