Sysco 2011 Annual Report Download - page 27

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 And Shared Services Center
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, legal, cash management, information technology, employee benefits,
engineering, real estate and construction, risk management and insurance, sales and marketing, payroll, human resources, training and
development, strategy, 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.
We are in the early stages of implementing a shared services center that will perform support services for employees, suppliers and
customers, payroll administration, human resources, customer and vendor contract administration, financial services such as vendor payments,
invoicing, cash application, certain credit services, accounting and sales and use tax administration, procurement and maintenance support and
sales support for our operating companies.
Capital Improvements
To maximize productivity and customer service, we continue to modernize, expand and construct new distribution facilities. During fiscal
2011, 2010 and 2009, approximately $636.4 million, $594.6 million and $464.6 million respectively, were invested in technology, facilities, delivery
fleet and other capital asset enhancements. We estimate our capital expenditures in fiscal 2012 should be in the range of $750 million to
$800 million. During the three years ended July 2, 2011, capital expenditures were financed primarily by internally generated funds, our
commercial paper program and bank and other borrowings. We expect to finance our fiscal 2012 capital expenditures from the same sources.
We are undertaking a multi-year 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. Approximately $100 million to $120 million of the fiscal 2012 estimated capital expenditures are
related to the Business Transformation Project.
Employees
As of July 2, 2011, we had approximately 46,000 full-time employees, approximately 17% of whom were represented by unions, primarily the
International Brotherhood of Teamsters. Contract negotiations are handled by each individual operating company. Approximately 25% of our
union employees are covered by collective bargaining agreements which have expired or will expire during fiscal 2012 and are subject to
renegotiation. Since July 2, 2011, two contracts covering 85 of such employees have been renegotiated. We consider our labor relations to be
satisfactory.
Competition
Industry sources estimate that there are more than 15,000 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 organizations 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 serve about 17% of this approximately $220 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 2011. 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 business improvements. We are the only
publicly-traded distributor in the food-away-from-home industry in the United States. While our public company status provides us with some
advantages, including access to capital, we believe it also provides us with some disadvantages that our competitors do not have in terms of
additional costs related to complying with regulatory requirements.
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