Edgar Filing: SYSCO CORP

425

Sysco 3Q14 Earnings Results

May 5, 2014

Filed by Sysco Corporation

Commission File No. 001-06544

Pursuant to Rule 425

under the Securities Act of 1933

Subject Company: USF Holding Corp.

Forward-Looking Statements

Statements made in this presentation or the accompanying earnings call 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 our plans and expectations related to and the

benefits and expected timing of our business transformation initiatives, our plans and expectations related to and the benefits of the proposed merger with US Foods, and our plans and expectations

related to acquisitions. These statements also include expectations regarding our operating performance results, market conditions and trends, inflation, retirement-related expenses, our expense

management and Broadline cost per case performance, business transformation costs and expenses, free cash flow and capital expenditures. The success of our business transformation initiatives and

expectations regarding 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 as anticipated. 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 delays in deployment, 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. We installed a major scheduled update to the ERP system and deployed the system to three

additional locations in the first 39 weeks of fiscal 2014, and have deployed the system to two additional locations in April 2014. Planned deployments in the coming quarters 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. Capital expenditures may vary from those projected based

on changes in business plans and other factors, including risks related to the implementation of our business transformation initiatives and our regional distribution centers, the timing and successful

completions of acquisitions, construction schedules and the possibility that other cash requirements could result in delays or cancellations of capital spending. Periods of high inflation, either overall or in

certain product categories, can have a negative impact on us and our customers, as high food costs can reduce consumer spending in the food-away-from-home market, and may negatively impact our

sales, gross profit, operating income and earnings. Expanding into international markets presents unique challenges and risks, including compliance with local laws, regulations and customs and the

impact of local political and economic conditions, and such expansion efforts may not be successful. Any business we acquire may not perform as expected, and we may not realize the anticipated

benefits of our acquisitions. 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. 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. 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.

3Q14 Highlights

See Non-GAAP reconciliations at the end of this presentation.

Reported

Adjusted for Certain

Items Results

$ Millions, except

share data

3Q14

YOY %

Change

3Q14

YOY %

Change

Sales

$11,277

3.2%

$11,277

3.2%

Gross Profit

$1,995

2.7%

$1,995

2.7%

Operating

Expenses

$1,662

3.5%

$1,606

3.3%

Operating

Income

$333

(1.4%)

$388

0.3%

Net Earnings

$181

(10.2%)

$223

(5.0%)

Diluted EPS

$0.31

(8.8%)

$0.38

(5.0%)

Consumer Spending Rebounded as Weather Improved

Restaurant Spend

Restaurant Traffic

Restaurant Spend/Traffic

(1)

% Change vs. Year Ago

U.S. Retail Data

(2)

% Change vs. Year Ago

1) Source: NPD Crest

2) Source: U.S. Dept. of Commerce

Business Transformation Progress

Technology

Product Costs

Operating Costs

Successfully converted

5 operating companies

this fiscal year

Significant progress in

System stability

Performance and

scalability

Functionality

Working to ensure

smoother transitions

for each successive

converting operating

company

On track to achieve

FY14 and FY15

objectives

All of pilot and wave

1, and the majority of

wave 2 categories,

launched in market by

end of FY14

representing:

$5-7B in annual

spend

Program effectiveness

enhanced by sharing

best practices and

greater

communication

Majority of route

optimization complete

by end of FY14

Where implemented,

planned miles

reduced 5%

Fleet

optimization

over

500 pieces retired;

1,000 more to come

Fleet and equipment

acquisition and

standardization

completed resulting in

substantially lower cost

to acquire assets

Increased focus on

operations labor

management

We are focused on

Creating value for our customers;

Driving transformational change within our company; and

US Foods merger integration planning

Expect market conditions will improve modestly for the remainder

of calendar 2014 and that Sysco’s operating performance results will

show steady improvement

Strong execution is paramount to providing best-in-class customer

service and meeting our FY14 financial objectives

Key Takeaways

Reported

Adjusted for Certain

Items Results

$ Millions, except

share data

3Q14

YOY %

Change

3Q14

YOY %

Change

Sales

$11,277

3.2%

$11,277

3.2%

Gross Profit

$1,995

2.7%

$1,995

2.7%

Operating

Expenses

$1,662

3.5%

$1,606

3.3%

Operating

Income

$333

(1.4%)

$388

0.3%

Net Earnings

$181

(10.2%)

$223

(5.0%)

Diluted EPS

$0.31

(8.8%)

$0.38

(5.0%)

3Q14 Highlights

See Non-GAAP reconciliations at the end of this presentation.

Case Growth Drives Sales Growth

(1)

(1) –

Includes Broadline and SYGMA

3.0%

5.7%

4.1%

5.0%

4.1%

3.0%

3.2%

Jan/Feb Sales +1.7% YOY

Mar Sales +5.5% YOY

4Q13

1Q14

2Q14

3Q14

Case Growth

Organic

Acquisitions

4.3%

4Q13

1Q14

2Q14

3Q14

Sales Growth

Inflation

Case Growth/Mix

3.0%

Gross Margin Pressure Moderated

($ in millions)

(32)

(19)

(28)

(60)

(68)

(60)

(9)

-110

-90

-70

-50

-30

-10

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

YOY Decline in Gross Margin (bps)

Low inflation

business;

in locally-managed

Strengthening trends

Margin management;

aided by:

margin erosion mainly

Deceleration in gross

Initiatives Continue to Drive Lower Cost per Case

retirement-related expense due to prior year restructuring

Partially offset by lower sales organization costs, and a decrease in

Increased corporate expense

and

Increased delivery and warehouse costs, including weather impact;

Increased case volume, and new costs from acquired companies;

Operating expenses increased $57 million or 3.5% due to:

Benefits generated from our transformation initiatives helped to

lower Broadline

cost-per-case $0.03 in the quarter

FY14 Retirement-Related Expenses Lower Than Expected

FY14 Guidance

Year-over-Year Variance

H (L)

(in millions)

Current

Prior

Pension & other

(121)

401(k) & other

45-55

61-71

Underlying retirement-related expense

(65-75)

(50-60)

Certain items

(20)

Total retirement-related expenses

(85-95)

(75-85)

Note: Totals may not foot due to rounding

(in millions)

3Q14

3Q13

YTD

FY14

YTD

FY13

Operating expense

$71

$83

$198

$242

Capital investment

$14

$29

$14

Cash outlay

$61

$67

$161

$201

Business Transformation Project Costs

In FY14, Business Transformation:

Expense expected to be $275-300 million

Capital expected to be $30-40 million

Cash outlay expected to be $225-275 million

Capital Expenditures

($ millions)

$373

$111

Quarter

Year-to-Date

$117

$387

In 3Q14:

Recent equipment and fleet optimization projects contributed to lower spend, and

ERP stabilization activities drove higher business transformation spend

FY 2014

FY 2013

Technology

Fleet

Facilities

FY 2014

FY 2013

Technology

Fleet

Facilities

$ Millions

YTD

FY14

YTD

FY13

% Chg

Cash Flow from Operations

$848

$759

11.7%

Capital Expenditures, net

364

361

0.8%

Free Cash Flow

$484

$398

21.5%

Dividends Paid

$498

$482

3.3%

Free Cash Flow Continues to Improve

Capital expenditures are net of proceeds from sales of plant and equipment

Free cash flow may not foot due to rounding

Integration planning efforts underway; focused on

Day one readiness;

Value creation; and

Long-term organizational design

Merger benefits our customers and helps us become more efficient

in an evolving and competitive marketplace

Customers have many choices in this fiercely competitive marketplace

Continuing dialogue with the FTC

We expect the merger to close in the third calendar quarter of

2014

Update on Proposed Merger with US Foods

Non-GAAP Reconciliations

3Q14 Non-GAAP Reconciliations

Sysco’s results of operations are impacted by certain items which include charges from restructuring our executive retirement plans, multiemployer pension charges,

severance charges, US Foods merger and integration planning costs, change in estimate of self-insurance, charges from a contingency accrual, charges from facility

closures and amortization of US Foods financing costs. Management believes that adjusting its operating expenses, operating income, interest expense, net earnings

and diluted earnings per share to remove these certain items provides an important perspective with respect to our results and provides meaningful supplemental

information to both management and investors that removes these items which are difficult to predict and are often unanticipated, and which, as a result are difficult to

include in analyst's financial models and our investors' expectations with any degree of specificity. Sysco believes the adjusted totals facilitate comparison on a year-

over-year basis.

The company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes. These financial

measures should not be used as a substitute in assessing the company’s results of operations for the periods presented. An analysis of any non-GAAP financial

measure should be used in conjunction with results presented in accordance with GAAP. As a result, in the tables that follow, each period presented is adjusted to

remove the certain items noted above.

3Q14 Non-GAAP Reconciliation

13-Week

Period Ended

Mar. 29, 2014

13-Week

Period Ended

Mar. 30, 2013

13-Week

Period Change

in Dollars

13-Week

Period

% Change

Operating expenses (GAAP)

1,662,116

1,605,280

56,836

3.5

Impact of restructuring executive retirement plans

(773)

(5,444)

4,671

-85.8

Impact of MEPP charges

(40,744)

40,744

-100.0

Impact of severance charges

(1,512)

(3,595)

2,083

-57.9

Impact of US Foods merger and integration planning costs

(32,416)

Impact of contingency accrual

(20,000)

Impact of facility closure charges

(1,022)

(285)

(737)

258.6

Operating expenses adjusted for certain items (Non-GAAP)

1,606,393

1,555,212

51,181

3.3%

Operating Income (GAAP)

332,625

337,202

(4,577)

-1.4

Impact of restructuring executive retirement plans

773

5,444

(4,671)

-85.8

Impact of MEPP charges

40,744

(40,744)

-100.0

Impact of severance charges

1,512

3,595

(2,083)

-57.9

Impact of US Foods merger and integration planning costs

32,416

Impact of contingency accrual

20,000

Impact of facility closure charges

1,022

285

737

258.6

Operating income adjusted for certain items (Non-GAAP)

388,348

387,270

1,078

0.3

Interest Expense (GAAP)

32,224

34,215

(1,991)

-5.8

Impact of US Foods financing costs

(2,925)

Interest Expense (GAAP)

29,299

34,215

(4,916)

-14.4%

Net earnings (GAAP)

180,937

201,417

(20,480)

-10.2

Impact of restructuring executive retirement plans (net of tax)

471

3,579

(3,108)

-86.8

Impact of MEPP charges (net of tax)

26,784

(26,784)

-100.0

Impact of severance charges (net of tax)

922

2,363

(1,441)

-61.0

Impact of US Foods merger and integration planning costs (net of

tax)

19,769

Impact of contingency accrual (net of tax)

18,049

Impact of facility closure charges (net of tax)

623

187

436

233.2

Impact of US Foods financing costs (net of tax)

1,784

Net earnings adjusted for certain items (Non-GAAP) (1)

222,555

234,330

(11,775)

-5.0%

Diluted earnings per share (GAAP)

0.31

0.34

(0.03)

-8.8

Impact of restructuring executive retirement plans

0.01

(0.01)

-100.0

Impact of MEPP charges

0.05

(0.05)

-100.0

Impact of US Foods merger and integration planning costs

0.03

Impact of contingency accrual

0.03

Impact of facility closure charges

Impact of US Foods financing costs

Diluted EPS adjusted for certain items (Non-GAAP) (2)

0.38

0.40

(0.02)

-5.0%

Diluted shares outstanding

590,470,283

592,903,799

(1)

Tax impact of adjustments for executive retirement plans restructuring, MEPP charge, severance charges, US Foods merger and integration planning costs, charges from a contingency accrual, charges from facility

closures and amortization of US Foods financing costs was $32,029 and $17,155 for the 13-week periods ended March 29, 2014 and March 30, 2013, respectively. Amounts are calculated by multiplying the operating

income impact of each item by each quarter's effective tax rate with the exception of the impact of the charges from a contingency accrual, which has an estimated non-deductible portion.

(2)

Individual components of diluted earnings per share may not add

to the total presented due to rounding. Total diluted earnings

per share is calculated using adjusted net earnings for certain

items and adjusted net

earnings -

underlying business, both divided by diluted shares outstanding.

NM represents that the percentage change is not meaningful

more -

3Q14 Non-GAAP Reconciliation

39-Week

Period Ended

Mar. 29, 2014

39-Week

Period Ended

Mar. 30, 2013

39-Week

Period Change

in Dollars

39-Week

Period

% Change

Operating expenses (GAAP)

4,862,579

4,725,752

136,827

2.9

Impact of restructuring executive retirement plans

(2,323)

(17,608)

15,285

-86.8

Impact of MEPP charge

(1,451)

(43,201)

41,750

-96.6

Impact of severance charges

(5,109)

(15,341)

10,232

-66.7

Impact of US Foods merger and integration planning costs

(36,769)

Impact of change in estimate of self insurance

(23,841)

Impact of contingency accrual

(20,000)

Impact of facility closure charges

(2,497)

(1,974)

(523)

26.5

Operating expenses adjusted for certain items (Non-GAAP)

4,770,589

4,647,628

122,961

2.6%

Operating Income (GAAP)

1,162,600

1,198,635

(36,035)

-3.0%

Impact of restructuring executive retirement plans

2,323

17,608

(15,285)

-86.8

Impact of MEPP charge

1,451

43,201

(41,750)

-96.6

Impact of severance charges

5,109

15,341

(10,232)

-66.7

Impact of US Foods merger and integration planning costs

36,769

Impact of change in estimate of self insurance

23,841

Impact of contingency accrual

20,000

Impact of facility closure charges

2,497

1,974

523

26.5

Operating income adjusted for certain items (Non-GAAP)

1,254,590

1,276,759

(22,169)

-1.7%

Interest Expense (GAAP)

92,536

97,325

(4,789)

-4.9%

Impact of US Foods financing costs

(3,093)

Interest Expense (GAAP)

89,443

97,325

(7,882)

-8.1%

Net earnings (GAAP)

677,362

709,384

(32,022)

-4.5%

Impact of restructuring executive retirement plans (net of tax)

1,464

11,264

(9,800)

-87.0

Impact of MEPP charge (net of tax)

914

27,635

(26,721)

-96.7

Impact of severance charges (net of tax)

3,219

9,813

(6,594)

-67.2

Impact of US Foods merger and integration planning costs (net of

tax)

23,166

Impact of change in estimate of self insurance (net of tax)

15,021

Impact of contingency accrual (net of tax)

18,150

Impact of facility closure charges (net of tax)

1,573

1,263

310

24.5

Impact of US Foods financing costs (net of tax)

1,949

Net earnings adjusted for certain items (Non-GAAP) (1)

742,818

759,359

(16,541)

-2.2%

Diluted earnings per share (GAAP)

1.15

1.20

(0.05)

-4.2%

Impact of restructuring executive retirement plans

0.02

(0.02)

-100.0

Impact of MEPP charge

0.05

(0.05)

-100.0

Impact of severance charges

0.01

0.02

(0.01)

-50.0

Impact of US Foods merger and integration planning costs

0.04

0.0

Impact of change in estimate of self insurance

0.03

Impact of contingency accrual

0.03

Impact of facility closure charges

Impact of US Foods financing costs

Diluted EPS adjusted for certain items (Non-GAAP) (2)

1.26

1.28

(0.02)

-1.6

Diluted shares outstanding

589,834,321

591,054,506

(1)

Tax impact of adjustments for executive retirement plans restructuring, MEPP charge, severance charges, US Foods merger costs, change in estimate of self insurance, charges from a contingency

accrual, charges from

facility closures and amortization of US Foods financing costs was $44,627 and $28,149 for the 39-week periods ended March 29, 2014 and March 30, 2013, respectively. Amounts are calculated by multiplying the

operating income impact of each item by each 39-week period's effective tax rate with the exception of the impact of the charges from a contingency accrual, which has an estimated non-deductible portion.

(2)

Individual components of diluted earnings per share may not add

to the total presented due to rounding. Total diluted earnings

per share is calculated using adjusted net earnings for certain

items and adjusted net

earnings -

underlying business, both divided by diluted shares outstanding.

NM represents that the percentage change is not meaningful

more -

3Q14 Non-GAAP Reconciliation

Free cash flow represents net cash provided from operating activities less purchases of plant and equipment and includes proceeds from sales of plant and

equipment. Sysco considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash

generated by the business after the purchases and sales of buildings, fleet, equipment and technology, which may potentially be used to pay for, among other

things, strategic uses of cash including dividend payments, share repurchases and acquisitions. We do not mean to imply that free cash flow is necessarily

available

for

discretionary

expenditures,

however,

may

necessary

that

use

make

mandatory

debt

service

other

payments.

Free

cash

flow

should not be used as a substitute in assessing the company’s liquidity for the periods presented. An analysis of any non-GAAP financial measure should be

used in conjunction with results presented in accordance with GAAP. In the table that follows, free cash flow for each period presented is reconciled to net

cash provided by operating activities.

39-Week

Period Ended

Mar. 29, 2014

39-Week

Period Ended Mar.

30, 2013

39-Week

Period Change

in Dollars

39-Week

Period

% Change

Net cash provided by operating activities (GAAP)

848,064

759,408

88,656

11.7

Additions to plant and equipment

(387,451)

(373,048)

(14,403)

-3.9

Proceeds from sales of plant and equipment

23,695

12,115

11,580

95.6

Free Cash Flow (Non-GAAP)

484,308

398,475

85,833

21.5