Sysco Corporation (SYY) Earnings Call Transcript & Summary

Good morning, and welcome to Sysco's 2020 Annual Meeting of Stockholders. We will begin with opening remarks and introductions. I would now like to turn the call over to Brad Halverson, Independent Lead Director. Please go ahead, sir.

Thank you, Paul. Good morning, ladies and gentlemen. I am Brad Halverson, the Independent Lead Director of Sysco Corporation's Board of Directors, and it is my pleasure to welcome all of you to Sysco's 2020 Annual Meeting of Stockholders. Thank you for joining us virtually this year, which allows us to be more inclusive and reach a greater number of our stockholders. After our opening remarks, we will conduct the business portion of our meeting and then host a question-and-answer session. Please remember that you may vote your shares at any time during this meeting prior to the closing of the polls by clicking on the Vote Here button on the web portal and following the instructions provided. Before we proceed with the formal business of the meeting, I would like to discuss some important corporate governance developments at Sysco over the past year. In January, we announced the appointment of as Kevin Hourican as Sysco's new President and CEO. Kevin is a proven business leader with expertise across key company capabilities, sales, supply chain, logistics, operations and digital technologies. The Board selected Kevin to accelerate Sysco's performance, fully capitalize on its scale advantages and drive meaningful operating improvements. Concurrently with Kevin's appointment, the Board named Ed Shirley to serve as Interim Executive Chairman to facilitate Kevin's successful transition to his new role as our CEO. And I was appointed as the new Independent Lead Director. In August, following several months during which Ed and Kevin worked closely to successfully navigate the many challenges arising from the COVID-19 pandemic, the Board decided to appoint Ed as the Independent Non-Executive Chairman of the Board to be effective upon his reelection as a director at this meeting. The various Board leadership structures employed during the past year demonstrate the Board's willingness to evaluate its leadership from time to time and make changes whenever necessary and appropriate to ensure the most effective, independent oversight of the company. I would now like to introduce Ed Shirley, the Independent Chairman of the Board elect, who will act as Chairman of the meeting.

Thank you, Brad. And I would like to personally thank you for your service as Independent Lead Director and your continued service as Chair of the Audit Committee. I would now like to begin the meeting with a couple of important announcements and acknowledgments. Here with me today, in addition to Mr. Halverson, are Kevin Hourican, President and Chief Executive Officer, who will host the question-and-answer session. Eve McFadden, Senior Vice President, Legal, General Counsel and Corporate Secretary, who will act as Secretary of the meeting; and Neil Russell, Vice President, Corporate Affairs, who will assist with the question-and-answer session. Natalie Hairston with American Election Services, LLC, who will act as the Inspector of Election. In addition to my fellow directors, Mr. Halverson and Mr. Hourican, I'd like to recognize our other Board members and nominees; Dan Brutto, Chair of the Corporate Social Responsibility Committee; John Cassaday, Chair of the Compensation and Leadership Development Committee; Josh Frank; Larry Glasscock, Chair of the Corporate Governance and Nominating Committee; John Hinshaw; Hans Koerber; Stephanie Lundquist; Nelson Peltz; Sheila Talton; and I would like to take a moment to thank Nancy Newcomb for her 14 years of service on Sysco's Board of Directors. Ms. Newcomb joined the Board in February 2006 and has made great contributions to the company while on the Audit Committee, the Finance Committee and the Corporate Social Responsibility Committee. Nancy has made several important contributions to Sysco's Financial and CSR success over the years. Her guidance and advice on these important topics is much appreciated. Prior to joining Sysco's Board, Ms. Newcomb had a diverse career with Citigroup, a major international financial services company, which provided her with the experience in the areas of leadership, corporate strategy and development, finance, risk management and international operations. She developed extensive risk management experience throughout her career, including holding the position of Citigroup's Senior Corporate Officer of Risk Management for the last 6 years of her career until her retirement in 2004. In addition to serving on Sysco's Board of Directors, Ms. Newcomb also served as a Director for DirecTV Group and Moody's Corporation and several nonprofit boards, including Woods Hole Oceanographic Institution, the New-York Historical Society, and the Van Leer Group Foundation in the Netherlands. It has been an honor and privilege to serve alongside you Nancy on the Sysco's Board of Directors. Thank you again for your generous time and leadership contributions to the company. We are also pleased to welcome our retired directors, officers and operating company executives who are participating virtually today. Ladies and gentlemen, thank you all for all you've done for Sysco. We deeply appreciate your past service and continued support. Last but not least, representatives of Ernst & Young LLP, the company's independent registered public accounting firm are also in attendance. Susanna Abbott and Justin Hummel with E&Y will be available during the question-and-answer session after the meeting to respond to appropriate questions. We appreciate your presence. Now we will commence with the business portion of the meeting. Ms. Mcfadden, would you please report on the agenda, rules and procedures for this meeting, the mailing of the notice of this meeting and the presence of a quorum.

Thank you, Chairman Shirley. On the web portal, you will find both an agenda and the rules and procedures for Sysco's Annual Meeting. We will have a question-and-answer session after we adjourn the official business portion of this meeting. Only validated stockholders may ask questions via the web portal. Out of consideration for others, please limit yourself to one question. Although we may not be able to answer every question, we will endeavor to answer as many appropriate questions as possible in the time allotted. Also, no one attending via webcast or telephone is permitted to use any audio recording device. Mr. Chairman, notice of this meeting and other proxy materials were sent on October 7, 2020, to each stockholder of record as of the close of business on September 21, 2020, the record date. A list of stockholders entitled to vote at this meeting has been available at the company's headquarters for the past 10 days and is available on the web portal for examination by any stockholder desiring to do so. The bylaws of the company provide that the holders of 35% of the shares of common stock entitled to vote present in person or by proxy shall constitute a quorum for the transaction of business at the meeting. As of the record date for this meeting, there were 509,093,137 shares entitled to vote at the annual meeting. The Inspector of Election has reported to me that a count of the shares present immediately prior to the commencement of the meeting indicated that the holders of more than 456 million shares entitled to vote were present or represented by proxy at this meeting. This is approximately 90% of the shares entitled to vote. Accordingly, Chairman Shirley, a quorum is present for the conduct of business. We would like to thank all of the stockholders who returned their proxies. Those of you who returned proxies have authorized Mr. Hourican, Joel Grade and me to serve as proxies for all proposals presented at the meeting. Stockholders who have sent in proxies or voted via telephone or Internet and do not wish to change their vote, do not need to take any further action. Any stockholder who has not yet voted or wishes to change their vote may do so by clicking the Vote Here button on the web portal and following the instructions. Now Chairman Shirley will review the proposals for consideration.

We have 3 matters to put before the stockholders today. First, to elect as directors the 12 nominees named in this year's proxy statement. The Board of Directors nominated Mr. Brutto, Mr. Cassaday, Mr. Frank, Mr. Glasscock, Mr. Halverson, Mr. Hinshaw, Mr. Hourican, Dr. Koerber, Ms. Lundquist, Mr. Peltz, Mr. Shirley and Ms. Talton for election as directors of the company to serve for a 1-year term expiring at the company's 2021 Annual Meeting of Stockholders once their successors have been duly elected and qualified. All the nominees are currently serving as members of the Board. Only those people who have been nominated by the Board or by stockholders who have complied with the advanced notice provisions of our bylaws are eligible for election as directors of Sysco. Sysco did not receive notice of any other nominations. Therefore, I declare the nominations closed. Second, to provide by non-binding vote, the compensation paid to Sysco's named executive officers as disclosed in Sysco's proxy statement. And third, ratification of the appointment of Ernst & Young LLP as Sysco's independent registered public accounting firm for fiscal 2021. Any stockholder who has not yet voted or wishes to change their vote should do so now by clicking on the Vote Here button on the web portal and following the instructions provided. We will now pause for a moment to allow for any stockholders to cast their final votes. [Voting] I hereby declare that the polls are now closed. Ms. Mcfadden will now present the preliminary report of the Inspector of Election.

Chairman Shirley, the Inspector of Election, Natalie Hairston, has presented her preliminary report to me and has determined that as of the time of the report, each nominee for director has received more for than against votes. And a majority of the votes cast were voted for the compensation paid to Sysco's named executive officers as disclosed in Sysco's proxy statement, and a majority of votes cast or voted for the ratification of the appointment of Ernst & Young LLP as Sysco's independent registered public accounting firm for fiscal 2021. I have asked the Inspector of Election to make a written report of the final numbers of votes cast with respect to the proposals acted upon at this meeting. The inspector's final report will be included with the minutes of this meeting. Now Chairman Shirley will announce the voting results.

Based on the voting results reported by Sysco's Corporate Secretary, I declare that the 12 nominees proposed by the Board of Directors have been duly elected, that the proposal presented -- represented by Item 2 in the proxy statement has been approved. That the proposal represented by Item 3 in the proxy statement has also been approved. Because there is no further formal business, the 2020 Annual Meeting is hereby adjourned. This completes our formal business meeting. We will now address questions that have been submitted via the web portal. Mr. Hourican, please proceed with the Q&A.

Thank you, Chairman Shirley. We will attempt to answer as many questions as time allows, up until approximately 10:45 Central Time. We will also answer those questions that are germane to the meeting. And if multiple questions are submitted on the same topic, we may compile and summarize similar questions and respond to them on a collective basis. So Neil, please proceed with the first question.

Thank you, Kevin. Ladies and gentlemen, we have one question in the queue. Kevin, I'm going to put the question to you, please. The question is, how has the pandemic affected Sysco's supply chain? What procedures does the company have in place should the supply chain become disrupted again?