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SYSCO CORPORATION-Form10-K 33
PARTII
ITEM7Management’s Discussion and Analysis ofFinancial Condition and Results of Operations
Operating income decreased by 14.7% in  scal 2013 from  scal 2012. Gross pro t dollars decreased 0.9% while operating expenses increased 1.2% in
scal 2013 over  scal 2012. These gross pro t results largely re ect the sluggish sales environment. Operating expenses increased in  scal 2013 largely
due to increased delivery costs including pay-related expenses. Our enhanced de ned contribution plan became effective January 1, 2013 and contributed
to the increase in pay-related expense.
Other Segment
“Other”  nancial information is attributable to our other operating segments, including our specialty produce and lodging industry products segments, a
company that distributes specialty imported products, a company that distributes to international customers and our Sysco Ventures platform, our suite
of technology solutions that help support the business needs of our customers. These operating segments are discussed on an aggregate basis as they
do not represent reportable segments under segment accounting literature.
On an aggregate basis, our “Other” segment has had a lower operating income as a percentage of sales than Sysco’s Broadline segment. Sysco has acquired
some of the operating companies within this segment in relatively recent years. These operations generally operate in a niche within the foodservice industry
except for our lodging industry supply company. Each individual operation is also generally smaller in sales and scope than an average Broadline operation
and each of these operating segments is considerably smaller in sales and overall scope than the Broadline segment. In  scal 2014, in the aggregate,
the “Other” segment represented approximately 6.3% of Sysco’s overall sales and 3.6% of the aggregate operating income of Sysco’s segments, which
excludes corporate expenses and adjustments.
Operating income decreased 5.0%, or $4.9 million, in  scal 2014 as compared to  scal 2013. The decrease in operating income was largely due to startup
costs from our Sysco Ventures operations, partially offset by increased earnings from our specialty produce and lodging industry products segments.
Additionally, retirement-related expenses were greater for these companies for  scal 2014 as our enhanced de ned contribution plan became effective
January 1, 2013, and some of these operations were not a part of prior bene t plans.
Operating income increased 8.3% for fiscal 2013 over fiscal 2012. The increase in operating income was primarily driven by earnings from our
lodging industry products segment, our specialty import business, that was acquired in the third quarter of fiscal 2012, and our company that
distributes to international customers. An additional item partially offsetting the increase in operating income was an increase in retirement-related
expense for these companies. Our enhanced defined contribution plan became effective January 1, 2013 and contributed to increased expense
at these companies.
Liquidity and Capital Resources
Highlights
Comparisons of the cash  ows from  scal 2014 to  scal 2013:
•Cash  ows from operations were $1.49 billion this year compared to $1.51 billion last year.
•Capital expenditures totaled $523.2 million this year compared to $511.9 million last year.
•
Free cash  ow was $995.4 million this year compared to $1.0 billion last year (See Non-GAAP reconciliation below under the heading “Free Cash Flow.”)
•Cash used for acquisition of businesses was $79.3 million this year compared to $397.4 million last year.
•Net bank borrowings were a net borrowing of $34.5 million this year compared to a net borrowing of $95.5 million last year.
•Proceeds from exercises of share-based compensation awards was $255.6 million this year compared to $628.7 million last year.
•Treasury stock purchases were $332.4 million this year compared to $721.6 million last year.
•Dividends paid were $667.2 million this year compared to $648.3 million last year.
Sources and Uses of Cash
Sysco’s strategic objectives include continuous investment in our business; these investments are funded by a combination of cash from operations and
access to capital from  nancial markets. Our operations historically have produced signi cant cash  ow. Cash generated from operations is generally
allocated to:
•working capital requirements;
•investments in facilities, systems,  eet, other equipment and technology;
•return of capital to shareholders, including cash dividends and share repurchases;