Sysco 2010 Annual Report Download - page 38
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Please find page 38 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.of our sales force are key factors in maintaining and growing sales. We continue to improve our pricing models to ensure our pricing is
market relevant in order to grow sales.
•Business Transformation Project: We are developing and implementing an integrated software system to support a majority of our business
processes to further streamline our operations and reduce costs. These systems are commonly referred to as Enterprise Resource Planning
(ERP) systems. ERP implementations are complex and time-consuming projects that involve substantial investments in system software
and implementation activities over a multi-year timeframe. As is the case in most ERP implementations, we expect that the implementation
of our ERP system will require transformation of business processes in order to realize the full benefits of the project. We view the
technology as an important enabler of this project, however the larger outcome of this project will be from transformed processes that
standardize portions of our operations. This will include the addition of a shared business service center to centrally manage certain back-
office functions which are currently duplicated at each operating company location.
•Productivity Gains: We continue to optimize warehouse and delivery activities across the corporation to achieve a more efficient delivery of
products to our customers. In our distribution centers we are focused on improving the speed and accuracy of processing orders by utilizing
state-of-the-art software and equipment. We continue to implement and enhance truck routing programs to minimize miles driven and fuel
consumed while increasing cases delivered on each truck route.
•Lowering Procurement Costs: We intend to lower our cost of goods sold by leveraging Sysco’s purchasing power and procurement expertise
and capitalizing on an end-to-end view of our supply chain. Our National Supply Chain initiative is focused on inventory levels, inbound
freight costs, product costs, operating costs, working capital requirements and future facility expansion needs at our operating companies
while providing greater value to our suppliers and customers. A component of our National Supply Chain initiative is the use of redistribution
centers (RDCs) which aggregate inventory demand to optimize the supply chain activities for certain products for all Sysco broadline
operating companies in a geographic region.We currently have two RDCs located in Virginia and Florida and have made initial investments
to build two additional RDCs. We are evaluating the most appropriate timing for the building of these RDCs, balancing both market
conditions and the spending on our Business Transformation Project discussed below.
Our primary focus is on growing and optimizing our core foodservice distribution business in North America; however, we will continue to
explore and identify opportunities to expand the core business by growth in new international markets and in other areas of business that
complement our core foodservice distribution business. As a part of our ongoing strategic analysis, we regularly evaluate business opportunities,
including potential acquisitions and sales of assets and businesses.
Business Transformation Project
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. Implementation is anticipated to occur across the majority of our Broadline and SYGMA
operating companies by the end of fiscal 2013. Although we expect the investment in the Business Transformation Project to provide meaningful
benefits to the company over the long-term, the costs will exceed the benefits during the early stages of implementation, including fiscal 2011.
We expect total cash outlay for the Business Transformation Project to be approximately $900 million. Approximately $246 million of cash
outlay was incurred in fiscal 2010, of which approximately $172 million was capitalized. Approximately $260 million to $300 million of cash outlay is
expected in fiscal 2011, of which approximately $160 million to $180 million will be capitalized.
Results of Operations
The following table sets forth the components of our consolidated results of operations expressed as a percentage of sales for the periods
indicated:
2010
(53 Weeks) 2009 2008
Sales ................................................................... 100.0% 100.0% 100.0%
Cost of sales .............................................................. 80.9 80.9 80.8
Gross margin.............................................................. 19.1 19.1 19.2
Operating expenses ......................................................... 13.8 14.0 14.2
Operating income . ......................................................... 5.3 5.1 5.0
Interest expense . . ......................................................... 0.3 0.3 0.3
Other income, net . ......................................................... 0.0 (0.0) (0.1)
Earnings before income taxes .................................................. 5.0 4.8 4.8
Income taxes ............................................................. 1.8 1.9 1.8
Net earnings .............................................................. 3.2% 2.9% 3.0%
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