In this section, we provide an overview of our philosophy and objectives of our executive compensation program and describe the material components of our executive compensation program for our fiscal 2014 named executive officers, or “NEOs,” whose compensation is set forth in the 2014 Summary Compensation Table and other compensation tables contained in this proxy statement:
SYSCO CORPORATION - 2014 Proxy Statement 35 Plan Category
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in First Column)
Equity compensation plans approved by security holders 27,469,911 $ 29.59 52,077,346
(1)
Equity compensation plans not approved by security
holders — — —
TOTAL 27,469,911 $ 29.59 52,077,346
(1)
(1) Includes 49,207,002 shares issuable pursuant to our 2013 Long-Term Incentive Plan, of which 16,272,900 shares are eligible to be granted as full value awards;
415,412 shares issuable pursuant to our 2009 Non-Employee Directors Stock Plan; and 2,454,932 shares issuable pursuant to our Employees’ Stock Purchase Plan as of June 28, 2014. Does not reflect the issuance of 315,856 shares in July 2014 pursuant to the completion of the quarterly purchase under our Employees’ Stock Purchase Plan.
• William J. DeLaney, our Chief Executive Officer;
• Robert C. Kreidler, our Executive Vice President and Chief Financial Officer;
• Thomas L. Bené, our Executive Vice President and Chief Commercial Officer;
• Michael W. Green, our Executive Vice President and President of Foodservice Operations;
• Wayne R. Shurts, our Executive Vice President and Chief Technology Officer; and
In addition, we explain how and why the Compensation Committee of our Board (the “Committee”) arrives at compensation policies and decisions involving the NEOs. For purposes of this Compensation Discussion and Analysis and the related disclosures that follow under the heading “Executive Compensation” below, the term “current NEOs” excludes Mr. Fernandez. As further discussed herein, Mr. Fernandez’s compensation was the subject of a different process than that which applied to Messrs. DeLaney, Kreidler, Bené, Green and Shurts. For more details, see “Compensation of the Former Executive Chairman” below.
Executive Summary
Sysco is the global leader in selling, marketing and distributing food products, equipment and supplies to the foodservice industry. As such, our long- term success depends on our ability to attract, engage, motivate and retain highly talented individuals who are committed to Sysco’s vision and strategy. One of the key objectives of our executive compensation program is to link executives’ pay to their performance and their advancement of Sysco’s overall annual and long-term performance and business strategies.
Other objectives include aligning the executives’ interests with those of stockholders and encouraging high-performing executives to remain with Sysco over the course of their careers. We believe that the amount of compensation for each NEO reflects extensive management experience, high performance and exceptional service to Sysco and our stockholders. We also believe that Sysco’s compensation strategies have been effective in attracting executive talent and promoting performance and retention.
Business Highlights
The foodservice industry remained under pressure in fiscal 2014. While the economy continues to slowly recover, the magnitude of recovery is modest and the outlook for certain fundamental drivers of the economy is mixed. This creates a challenging business environment for us and our customers; however, we continue to implement transformational change on a broad scale which is enhancing the products and services we provide our customers and helping us to operate more efficiently. Our sales and gross profits grew modestly, and our expense management performance was favorable overall despite cost pressures in our delivery operations. Our improvements largely resulted from our Business Transformation Project initiatives, which helped drive our North American Broadline cost per case lower than in fiscal 2013.
Financial highlights from fiscal 2014 include the following:
*(For more detail please see our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”). Our discussion of our results herein includes certain non-GAAP financial measures that we believe provide important perspective with respect to underlying business trends and results and provides meaningful supplemental information to both management and investors that is indicative of the performance of the company’s underlying operations and facilitates comparison on a year-over-year basis. Other than free cash flow, any non-GAAP financial measure will be denoted as an adjusted measure and, except for measures provided pursuant to benefit plan formulas will exclude expenses from executive retirement plan restructuring, multiemployer pension withdrawals, severance charges, merger and integration costs associated with our pending USF merger, change in estimate for self-insurance costs, charges from a liability for a settlement, facility closure charges, amortization of US Foods financing costs and an acquisition related charge specific to fiscal 2013. More information on the rationale for the use of these measures and reconciliations to GAAP numbers can be found in Annex I - Non-GAAP Reconciliations.)
Say on Pay – Stockholder Feedback
At last year’s Annual Meeting, 90% of the stockholders who cast a vote for or against the proposal voted in favor of the Company’s “Say on Pay” proposal on executive compensation. Further, throughout the year, management engaged in dialogue with our largest investors to solicit their feedback and gather information on their views and opinions on various operations and governance issues, including executive compensation practices. The Company did not take specific action in response to the 2013 “Say on Pay” vote. However, based on the results and our ongoing dialogue with our stockholders, the Committee and our Board concluded that, even though our overall executive compensation policies and practices enjoy favorable stockholder support, it was appropriate to continue to adjust the compensation mix of our named executive officers to ensure that fixed and variable compensation components and target total direct compensation are set at levels that ensure that earned compensation awards are reflective of Sysco’s performance relative to its peers and our internal pay philosophy.
The Committee carefully considers feedback from our stockholders regarding our executive compensation program. In addition to the annual “Say on Pay” advisory vote on NEO compensation, stockholders are invited to express their views to the Committee as described under the heading “Corporate Governance– Communicating with the Board.”
• Sales of $46.5 billion.
• Operating income of $1.6 billion.
• Net earnings of approximately $932 million.
• Diluted earnings per share was $1.58. Adjusted* diluted earnings per share was $1.76.
• Reduced the operating cost per case of our North American Broadline companies by $0.10 in fiscal 2014 as compared to fiscal 2013. Our adjusted cost per case calculated on a non-GAAP basis decreased $0.06 in fiscal 2014 as compared to fiscal 2013. See “Non-GAAP Reconciliations” below for an explanation of this non-GAAP financial measure.
• Increased our annual dividend, paying nearly $670 million to our stockholders in dividend payments and repurchasing more than $330 million in stock.