Sysco 2010 Annual Report Download - page 27
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Please find page 27 of the 2010 Sysco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Working Capital Practices
Our growth is funded through a combination of cash flow from operations, commercial paper issuances and long-term borrowings. See the
discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources” at Item 7
regarding our liquidity, financial position and sources and uses of funds.
Credit terms we extend to our customers can vary from cash on delivery to 30 days or more based on our assessment of each customer’s credit
worthiness. We monitor each customer’s account and will suspend shipments if necessary.
A majority of our sales orders are filled within 24 hours of when customer orders are placed.We generally maintain inventory on hand to be able
to meet customer demand. The level of inventory on hand will vary by product depending on shelf-life, supplier order fulfillment lead times and
customer demand. We also make purchases of additional volumes of certain products based on supply or pricing opportunities.
We take advantage of suppliers’ cash discounts where appropriate and otherwise generally receive payment terms from our suppliers ranging
from weekly to 30 days or more.
Corporate Headquarters’ Services
Our corporate staff makes available a number of services to our operating companies. Members of the corporate staff possess experience and
expertise in, among other areas, accounting and finance, treasury, cash management, information technology, employee benefits, engineering, risk
management and insurance, sales and marketing, payroll, human resources, training and development, and tax compliance services. The corporate
office also makes available warehousing and distribution services, which provide assistance in operational best practices including space utilization,
energy conservation, fleet management and work flow.
Capital Improvements
To maximize productivity and customer service, we continue to modernize or construct new distribution facilities. During fiscal 2010, 2009 and
2008, approximately $594.6 million, $464.6 million and $516.0 million respectively, were invested in facility expansions, fleet additions and other
capital asset enhancements. We estimate our capital expenditures in fiscal 2011 should be in the range of $700 million to $750 million. During the
three years ended July 3, 2010, capital expenditures were financed primarily by internally generated funds, our commercial paper program and bank
and other borrowings. We expect to finance our fiscal 2011 capital expenditures from the same sources.
We are undertaking a Business Transformation Project, pursuant to which we are developing and implementing an integrated software system
to support a majority of our businesses and further streamline our operations. These systems are commonly referred to as Enterprise Resource
Planning (ERP) systems. We have substantially completed the design and build phases of our Business Transformation Project, and we are currently
testing the underlying ERP system and processes. Implementation is anticipated to begin with the first operating company location in the first half of
calendar 2011 and our shared business services center in fiscal 2011. Approximately $160 million to $180 million of the fiscal 2011 estimated capital
expenditures are related to the Business Transformation Project.
Employees
As of July 3, 2010, we had approximately 46,000 full-time employees, approximately 18% of whom were represented by unions, primarily the
International Brotherhood of Teamsters. Contract negotiations are handled by each individual operating company. Approximately 28% of our union
employees are covered by collective bargaining agreements which have expired or will expire during fiscal 2011 and are subject to renegotiation.
Since July 3, 2010, two contracts covering 452 of such employees have been renegotiated. We consider our labor relations to be satisfactory.
Competition
Industry sources estimate that there are more than 16,500 companies engaged in foodservice distribution in the United States. Our customers
may also choose to purchase products directly from retail outlets or negotiate prices directly with our suppliers. While we compete primarily with
local and regional distributors, a few companies compete with us on a national basis. We believe that the principal competitive factors in the
foodservice industry are effective customer contacts, the ability to deliver a wide range of quality products and related services on a timely and
dependable basis and competitive prices. An additional competitive factor for our larger chain restaurant customers is the ability to provide a
national distribution network. We consider our primary market to be the foodservice market in the United States and Canada and estimate that we
served about 17% of this approximately $210 billion annual market. We believe, based upon industry trade data, that our sales to the United States
and Canada food-away-from-home industry were the highest of any foodservice distributor during fiscal 2010. While adequate industry statistics
are not available, we believe that in most instances our local operations are among the leading distributors of food and related non-food products to
foodservice customers in their respective trading areas. We believe our competitive advantages include our more than 8,000 marketing associates,
our diversified product base, which includes a differentiated group of high quality Sysco brand products, the diversity in the types of customers we
serve, our economies of scale and our wide geographic presence in the United States and Canada, which mitigates some of the impact of regional
economic declines that may occur over time and provides a national distribution network for larger chain restaurant customers. We believe our
liquidity and access to capital provides us the ability to continuously invest in our business including implementation of various supply chain and
operational initiatives to improve efficiency and productivity. We are the only publicly-traded distributor in the food-away-from-home industry in the
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