Filed by Sysco Corporation
Commission File No. 001-06544
Pursuant to Rule 425
under the Securities Act of 1933
Subject Company: USF Holding Corp.
CAGNY Conference February 18, 2014
Bill DeLaney
President and Chief Executive Officer
Wayne Shurts
Executive Vice President and Chief Technology Officer
Chris Kreidler
Executive Vice President and Chief Financial Officer
Sysco
Forward–Looking Statements
Statements made in this presentation that look forward in time or that express management’s beliefs, expectations or hopes are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the views of management at the time such statements are made and are subject to a number of risks, uncertainties, estimates, and assumptions that may cause actual results to differ materially from current expectations. These statements include those regarding our on-going business strategies and strategic initiatives, estimates and expectations regarding the foodservice market and our market potential, our plans and expectations related to and the benefits and expected timing of our business transformation initiatives, and our plans and expectations related to and the benefits of the proposed merger with US Foods, including our integration plans and estimates and expectations regarding cost synergies and the benefits of the merger to stakeholders. These statements also include those regarding the uses of our cash and shareholder return, our expectation that the proposed merger will be approved, and our expectations regarding business transformation expenses, expenses to achieve synergies from the proposed merger and the plans to achieve such synergies, and the regulatory review of the proposed merger. The success of our business transformation initiatives and other strategic initiatives and our operating performance are subject to the general risks associated with our business, including the risks of interruption of supplies due to lack of long-term contracts, severe weather, crop conditions, work stoppages, intense competition, technology disruptions, dependence on large regional and national customers, inflation risks, the impact of fuel prices, adverse publicity, and labor issues. Risks and uncertainties also include risks impacting the economy generally, including the risks that the current general economic conditions will deteriorate, or consumer confidence in the economy may not increase and decreases in consumer spending, particularly on food-away-from-home, may not reverse. Market conditions may not improve. If sales from our locally managed customers do not grow at the same rate as sales from regional and national customers, our gross margins may continue to decline. Our ability to meet our long-term strategic objectives to grow the profitability of our business depends largely on the success of our Business Transformation Project. There are various risks related to the project, including the risk that the project and its various components may not provide the expected benefits in our anticipated time frame, if at all, and may prove costlier than expected; the risk that the actual costs of the ERP system may be greater or less than currently expected because we have encountered, and may continue to encounter, the need for changes in design or revisions of the project calendar and budget, including the incurrence of expenses at an earlier or later time than currently anticipated; the risk that our business and results of operations may be adversely affected if we experience continued delays in deployment, additional operating problems, cost overages or limitations on the extent of the business transformation during the ERP implementation process; and the risk of adverse effects to our business, results of operations and liquidity if the ERP system, and the associated process changes, do not prove to be cost effective or do not result in the cost savings and other benefits at the levels that we anticipate. In fiscal 2013, we delayed the deployment of certain components of our ERP system so that we could address certain areas of improvement. In the first half of fiscal 2014, we installed a major scheduled update to the ERP system and deployed the system to one additional location. We deployed the system to two additional locations in January 2014. Planned deployments in the coming months are dependent upon the success of the ERP system and the updates at the current locations. We may experience delays, cost overages or operating problems when we deploy the system to additional locations. Our plans related to and the timing of the implementation of the ERP system, as well as the cost transformation and category management initiatives, are subject to change at any time based on management’s subjective evaluation of our overall business needs. We may fail to realize anticipated benefits, particularly expected cost savings, from our cost transformation initiative. If we are unable to realize the anticipated benefits from our cost cutting efforts, we could become cost disadvantaged in the marketplace, and our competitiveness and our profitability could decrease. We may also fail to realize the full anticipated benefits of our category management initiative, and may be unable to successfully execute the initiative in our anticipated timeline. The consummation of the merger with US Foods is subject to regulatory approval and the satisfaction of certain conditions, and we cannot predict whether the necessary conditions will be satisfied or waived and the requisite regulatory approvals received. The merger with US Foods may not close in the anticipated timeframe, if at all. Sysco and US Foods may be required to take certain actions to obtain regulatory approval for the merger, including the divestiture of assets, which could negatively impact the projected benefits of the merger. Termination of the merger agreement with US Foods could require Sysco to make a termination payment of $300 million, which could adversely impact Sysco’s stock price, liquidity and financial condition. As a result of uncertainties surrounding the proposed merger, prospective suppliers and customers may delay or decline to enter into agreements with us, and we may also lose current suppliers and customers, and fail to retain key employees. The pending merger and our current pre-merger integration planning efforts may divert our management’s attention from day-to-day business operations and the execution of our business transformation initiatives, which could result in performance shortfalls. Integration of the businesses of Sysco and US Foods may be more difficult, costly or time consuming than expected, and the merger may not result in any or all of the anticipated benefits, including cost synergies and other expected benefits to stakeholders. The integration of Sysco and US Foods will be complex, and we will be required to incur substantial costs to integrate Sysco’s and US Foods’ business practices, policies, cultures and operations. Failure to effectively integrate the businesses could adversely impact the expected benefits of the merger. The integration process could also result in the loss of key employees, and the disruption of each company’s ongoing businesses, which could materially impact the combined company’s future financial results. We may fail to retain some of US Foods’ vendors and customers after the proposed merger. Consummation of the merger will require Sysco to incur significant additional indebtedness, which could adversely impact our financial condition and may hinder our ability to obtain additional financing and pursue other business and investment opportunities. For a discussion of additional factors impacting Sysco’s business, see the Company’s Annual Report on Form 10-K for the year ended June 29, 2013, as filed with the Securities and Exchange Commission, and the Company’s subsequent filings with the SEC. Sysco does not undertake to update its forward-looking statements.
Additional Information for US Foods Stockholders
In connection with the proposed transaction, Sysco currently intends to file a Registration Statement on Form S-4 that will include a consent solicitation statement of US Foods. Sysco also plans to file other relevant materials with the SEC. Stockholders of US Foods are urged to read the consent solicitation statement/prospectus contained in the Registration Statement and other relevant materials because these materials will contain important information about the proposed transaction. These materials will be made available to the stockholders of US Foods at no expense to them. The consent solicitation statement/prospectus, Registration Statement and other relevant materials, including any documents incorporated by reference therein, may be obtained free of charge at the SEC’s website at www.sec.gov or for free from Sysco at www.sysco.com/investors or by emailing investor_relations@corp.sysco.com. Such documents are not currently available. You may also read and copy any reports, statements and other information filed by Sysco with the SEC at the SEC public reference room at 100 F Street N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at (800) 732-0330 or visit the SEC’s website for further information on its public reference room.
This document shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
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Today’s Speakers
Bill DeLaney
Wayne Shurts
Chris Kreidler
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Bill DeLaney
President and Chief Executive Officer
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Quick Facts
Good things come from Sysco
The global leader in foodservice distribution
FY 2013 sales over $44 billion
425,000 customers
Approximately 48,000 associates
Over 400,000 products, including approximately 40,000 Sysco Brand products
Deliver over 1.2 billion cases every year
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Quick Facts
Good things come from Sysco
The global leader in foodservice distribution
FY 2013 sales over $44 billion
425,000 customers
Approximately 48,000 associates
Over 400,000 products, including approximately 40,000 Sysco Brand products
Deliver over 1.2 billion cases every year
US. FOODS
KEEPING KITCHENS COOKING.
One of America’s leading
foodservice distributors
FY12 sales of $22 billion
More than 350,000 products,
including private brands
Approximately 25,000 associates
80 operating facilities in 36 states
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Sysco Locations Across the U.S., Bahamas, Canada, Ireland & Northern Ireland
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Significant Market Potential
Foodservice Market ~$255B
$44B Sysco Core Market Sales in CY13
Potential
U.S. Market $230 B
Canada/ Ireland Market $25 B
Total Core Market ~$255 B
Note: Sysco sales represent CY15 core market sales which exclude IFG and Guest Supply. Market data sources include Technomic, CRFA and Bord Bia (Irish Food Market)
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Our Strategy
| Profoundly |
Continuously |
Expand our |
Implement an | |||||
| enrich the |
improve |
offerings through |
Explore, assess |
enterprise-wide | ||||
| experience of |
productivity in |
a customer- |
and pursue new |
talent | ||||
| doing business |
all areas of our |
centric innovation |
businesses and |
management | ||||
| with Sysco |
business |
program |
markets |
process | ||||
| Partnership |
Productivity |
Products |
Expansion |
People |
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Key Areas of Strategic Focus
Sustainable Profitable Growth
Asset Optimization and Free Cash Flow
Operating Margin
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We Continue to Expand our Capabilities
1985 SYGMA formed
1999 Acquired first meat company
2001 Acquired Guest Supply
2009 First acquisition in Ireland
2012 Acquired European Imports
Traditional Foodservice
1988 Acquired CFS
2000 Acquired first produce company
2002 Expansion of Canadian operations
2011 Formed Sysco Ventures
2013 Announced Intent to Merge with US Foods
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Key Initiatives
Customer Insights
- Loyalty
- Segments
- Brand
Integration Planning
- Day 1 Readiness
- Value Creation
- Redesign Organization & Processes
Category Management
- Assortment
- Innovation
- COGS Reduction
Customer Value
- Business Reviews
- Inside Sales
- Sysco Ventures
Productivity Enhancements
- Operations
- Selling
- Administration
Technology Platform is the Foundation
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Two Great Companies
Bringing Together the Best of Both
Good things come from Sysco®
US. FOODS™
KEEPING KITCHENS COOKING.™
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Consistent with Sysco’s Strategic Focus
| Sustainable Profitable Growth |
Operating Margin | |||
| Leverage customer insights |
Sysco® |
Reduce operating costs | ||
| Enhance and expand channels |
Lower product costs Continue to | |||
| Increase customer retention Execute fold-in and regional acquisitions |
Asset Optimization and Free Cash Flow |
Further develop enterprise structure | ||
| Build human capital |
Invest prudently in the core |
margin products | ||
| Expand international growth |
Increase working capital efficiency Increase capital efficiency |
|||
| Use our capital structure as a competitive advantage | ||||
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A Transformational Acquisition
Benefits all stakeholders
Customers
Suppliers
Employees
Shareholders
Combined strengths deliver greater value, more services and innovation for customers
Strengthen our role as our customers’ most valued and trusted business partner
Achieve shared efficiencies with suppliers
Platform for enhanced innovation and development of exclusive products
Greater opportunities for career development
Enhanced financial stability drives benefits to employees
Leverage revenue growth through best-in-class operating efficiencies and lowest-cost to serve
Strong EPS growth and substantial cash flow
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Key Takeaways
We participate in a large market that should experience modest long-term growth
Current market conditions remain difficult, but should improve as 2014 progresses
Targeting solid operating performance improvement
We are driving transformational change and creating greater value for our customers
US Foods Merger will benefit all of our stakeholders
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Wayne Shurts
Executive Vice President and Chief Technology Officer
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Overview
The year in review
State of play one year ago
Progress of the past year
Functional deployments
Enhanced ERP capabilities
OpCo Rollouts re-launched
Where we go from here
Calendar year 2014
Sysco / US Foods Integration
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State of Play One Year Ago
Five Operating Companies were live on ERP Solution
Core processes configured in the ERP solution worked
As of April 2013, the five live operating companies had:
Captured 1.25 million orders
Shipped 26 million line items
Shipped 45 million pieces
Processed 160,000 invoices
However, several issues surfaced that caused us to pause operating company rollouts until they were addressed:
System Stability
Performance and Scalability
Functionality Gaps
During the pause we accelerated certain modules and functional deployments
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Progress: Functional Deployments
This approach allowed us to make progress standardizing, centralizing and technology-enabling our business processes for US Broadline:
CRM: completed rollout of salesforce.com to all operating companies
ERP Maintenance: completed rollout to all operating companies
Finance: completed centralized general ledger for all operating companies
HR: completed rollout to 53 operating companies to date, to be fully completed by early FY15
Shared Business Services: completed process and performance improvement programs supporting ERP and all functions deployment
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Progress: Addressed ERP Issues
Systems Stability
Performance and Scalability
Functionality
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Progress: Systems Stability
Actions
Rebuilt infrastructure
Hardened interfaces
Results
Night operations incidents greatly reduced (6:1)
Major incidents, outages reduced (3:1)
Speed of incident recovery greatly enhanced
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Progress: Performance & Scalability
Actions
Rewrote and tuned pricing routine
Tuned MA ordering application
Tuned other systems jobs
(run times from hours to minutes)
Results
Significantly improved system speed and response time
Significantly reduced server capacity utilization for both average and peak times
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Progress: Functionality
Actions
Simplified and improved replenishment systems and processes
National Account SWAT team
Delivered multiple ERP releases with 1,800+ enhancements
Improved training – content, design, timing
Results
Customer service levels rebounded
Merchandiser satisfaction increased
Marketing associates satisfaction increased
National Account satisfaction increased
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Progress: OpCo Rollouts Re-launched
Idaho OpCo – Nov 2013
Vegas OpCo – Jan 2014
Arizona OpCo – Jan 2014
New Orleans OpCo – April 2014
Denver OpCo – April 2014
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Where do we go from here:
In calendar year 2014, we expect:
Implement major performance enhancements to further increase system speed and scalability
Additional Operating Company rollouts
Steady diet of functional enhancements
ERP software upgrade
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Merger Integration Planning
Sysco US Foods Integration – Interim
Implement an Interim Unifying Platform enabling the companies’ two legacy systems to deliver consistent pricing, service, reporting to our customers
Interim Unifying Platform
Good things come from Sysco®
US. FOODS™
KEEPING KITCHENS COOKING.™
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Merger Integration Planning
Sysco US Foods Integration – Targeted End State
Combining Sysco ERP back end with US Foods customer facing front end
US Foods Customer Facing System
Sysco ERP
Good things come from Sysco®
US. FOODS™
KEEPING KITCHENS COOKING.™
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Chris Kreidler
Executive Vice President and Chief Financial Officer
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Business Transformation
Business Transformation
Lower product costs by $250-300 million annually
Including
Reduce cost structure by $300-350 million annually
Annual Budget: $300-350 million
Successfully implement technology platform
Benefits: $550-650 million annually
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Business Transformation Benefits
$550-650
million
Goal
FY15
100%
FY14
~50%-70%
FY13
~25%
Annualized Benefits
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Business Transformation Benefits – Progress After One Year
$550-650 million
Goal
FY15
100%
FY14
~50%-70%
FY13
~25%
Annualized Benefits
As of 4Q13
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Business Transformation Benefits – Progress After 18 Months
$550-650 million
Goal
FY15
100%
FY14
~50%-70%
FY13
~25%
Annualized Benefits
As of 2Q14
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Business Transformation Benefits – Progress After 18 Months
$550-650
million
Goal
FY15
100%
FY14
~50%-70%
FY13
~25%
Annualized Benefits
Reduce Cost Structure
Completed strategic sales initiatives, including CRM
Completed retirement plan & IT function restructuring
Implemented maintenance module and centralized finance, HR module nearly
complete
Launching new warehouse scorecard to drive performance
Accelerated routing and fleets optimization initiative
Lower Product Costs
Developed teams and processes
Majority of wave one categories launched
Wave two is expected to launch during the second half of FY14
Learnings from pilot wave helped improve wave one execution
Confident in the benefits of Category Management
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Two Great Companies
Bringing Together the Best of Both
Good things come from Sysco®
US. FOODS™
KEEPING KITCHENS COOKING.™
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Transaction Financing Structure
Approximate Total Transaction Value:
Equity
Cash
US Foods Net Debt
Total Enterprise Value
3.0B
0.5B
$4.7B
$8.2B
Equity holders of US Foods will own approx. 87 million shares or, 13%, of combined company at closing, and
A representative of each of US Foods’ majority shareholders will join Sysco’s Board of Directors
Sysco to assume or refinance
Represents 9.9x US Foods LTM adjusted EBITDA of $826 million1
1 US Foods LTM adjusted EBITDA of $826 million is as of September 28, 2013
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Merger Will Deliver Significant Financial Value
Accretive in year one
Annual cost synergies of at least $600 million
Synergy estimates are realistic and achievable
These synergies will phase in over 3-4 years
Total expenses to achieve synergies of $700 - $800 million, spread over three years
Additional capital requirements under development
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Synergy Estimates are Realistic and Achievable
At least $600 million in annual synergies after three to four years in five key areas, including:
Distribution Network
General & Administrative
Cost of Goods Sold
Warehouse and Distribution Productivity
Selling and Field Productivity
Current estimates developed using both bottom up and top down approach
Estimates developed by functional area, but
Based generally on public data
Integration team will further refine synergy estimates
Estimates will be refined using people and knowledge from both companies
We hope to identify more synergies in areas we have not reviewed yet (e.g. shared business services)
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At Least $600 Million in Estimated Annual Synergies
Network rationalization
Delivery consolidation & efficient routing
Leverage one sales model
Combine evolving ecommerce and social media initiatives
Distribution Network
Selling and Field Productivity
Warehouse and Distribution Productivity
COGS
General & Admin.
Synergy
Identify duplicative resources
Leverage combined spend
Determine combined category management approach
Apply warehouse best practices
Technology driven efficiencies
Inbound freight optimization
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What’s Next
Integration Team
Regulatory
Review
Announced integration planning leadership in January
Full integration planning now in place, includes key employees from both companies
Enlisted the help of McKinsey; vast experience in large, complex integrations
Committed to achievement of synergies
Expect 6-9 month review process
FTC is conducting review
We expect a collaborative process
This deal is good for customers, we’re confident merger will be approved
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Integration Planning Team
Steering Committee
Integration Leader
Integration Management Office (IMO)
Sr. Execs from both companies
Chris Kreidler
IMO will lead, plan and track the integration
Business teams
Merchandising/ Product Marketing
Business Area
Business Area
Sales
Business Area
Business Area
Operations
Business Area
Business Area
Corporate Functions
Business Area
Business Area
Day 1 readiness
Value creation
Redesign organization and processes
Functional teams
Organizational Design
Technology & Systems
Talent & Staffing
Culture
Cross-cutting work that informs and guides the business teams
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Key Areas of Strategic Focus
Sustainable
Profitable Operating Growth Margin
Asset Optimization and Free Cash Flow
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When We Execute…Tremendous Return to our Shareholders
Billions $11 $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $0
$11B
Cash on Hand & Generated
Uses of Sysco’s Cash (FY13 - FY17)
$4B Acquisitions & Capital Spending
Reinvest in Business
$4B Dividends & Share Repurchase
Return to Shareholders
Uses of Cash
CAGNY 2013
As presented in Feb. 2013 – projections & credit ratings not updated
BBB
BBB+
A-
$3B
Remaining
Cash Available
Borrowing Capacity
Remaining Cash
$3B of cash remaining for new strategic investments or enhanced returns to shareholders
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Key Takeaways
Challenging and exciting times
We are encouraged by progress on our initiatives
Proposed US Foods merger presents opportunities to advance Sysco and the industry
Well positioned for future success
Investments in our business
More confident in technology transformation
Cash flow continues to grow
Strengthened management team
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Good things come from Sysco®
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