西斯柯 (SYY) 2005 Q3 法說會逐字稿

Good day everyone. Thank you for your patience. We'd like to welcome you to today's SYSCO Corporation third quarter fiscal year 2005 earnings release conference. At this time for opening remarks and instructions I would like to turn the conference over to Mr. John Palizza, Assistant Treasurer. Please go ahead.

Thank you, Dahlia. I would also like to welcome everyone listening to the call.

Joining me today are Rick Schnieders, our Chairman and Chief Executive Officer; Tom Lankford, our President and Chief Operating Officer; John Stubblefield, Executive Vice President, Finance and Chief Financial Officer; Larry Accardi, Executive Vice President, Contract Sales and President of Specialty Distribution Companies; Ken Spitler, Executive Vice President of Foodservice Operations, and President of North American Foodservice Operations; and Diane Day Sanders, Senior Vice President of Finance and Treasurer.

Our lineup for the call today is as follows. First, Tom Lankford will cover our operating performance during the quarter. Second, Rick Schneiders will talk about our current initiatives we have underway to build on our sales growth. And third, Ken Spitler will give an update on the national supply chain initiative. This will be followed by the question and answer session which Rick will moderate.

Before we get started with the substance of the conference call, I would like to briefly cover two items. First, a reminder that SYSCO's next analyst day will be held on November 15 and 16, 2005 in Virginia. The first day will feature management presentations and end with a great dinner. We're already working on the menu for the day. Steve Schimoler, who is in charge of our ChefEx Specialty Foods program and who is himself a chef, has agreed to do a product demonstration in the afternoon with some of the great food we make available to restaurants with ChefEx. I had a chance to sample some of the offerings recently, and I can tell you you're in for a real treat. My personal favorite is the Grafton Village aged cheddar cheese. We believe in quality food, and we're out to prove it to you. The following day, November 16, we will visit the northeast regional redistribution centers in Front Royal, Virginia. Mark your calendars now. Again, the dates are November 15 and 16, 2005.

Second, allow me to read to you our Safe Harbor language. Statements made in the course of this presentation that state the Company's or management's intentions, hopes, beliefs, expectations, or predictions of the future, are forward-looking statements. Actual results could differ materially from those projected. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the Company's SEC filings; including, but not limited to, the annual report on Form 10(K) for the fiscal year ended July 3, 2004, and in our press release issued this morning.

With that I'll turn things over to Tom Lankford.

Thank you, John.

I'd like to begin by again giving credit for our performance to the men and women of SYSCO who work so hard to make our Company a success. Foodservice industry is never easy, and as many of our associates in our northern climes can attest this quarter; and I'm continually grateful that we have such dedicated people who seem determined to overcome whatever obstacles are put in their way.

In order to put my comments in the correct context, here is a quick summary of the quarter as it compares to the same period a year ago. Sales were up 5.9%, reaching $7.437 billion; net earnings were up 11.4% to $218.2 million. And diluted earnings per share were $0.34, an increase of 13.3%.

Let's start with the sales line. Sales in the quarter were up a total of 5.9% over last year's third quarter. It's worth noting that this represents a sequential increase in sales volume over the second quarter of this fiscal year. Sales from acquisitions contributed 1% in the quarter. We currently have 7 non-comparable acquisitions, 3 of which are in the specialty produce area, Overton and Nashville Tomato in the southeast region of the United States. Piranha Produce in California. Two specialty meat companies in Toronto, Honeyman Meats and J. J. Durman [ph] Meats. A broadline distributor in Illinois, Roberts Foods, and International Food Group. Inflation is measured by the rise in our cost of goods as 3.8%.

I can bet categorize our sales environment as gradually improving. During the third quarter we sold pockets of relative strength notably in the southeast and the west. They were offset by slower growth in other parts of the country. I really hate to use weather as an excuse, however, it's quite apparent that bad weather in the northeast and midwest during almost the entire third quarter negatively affected sales expenses in those regions. In fact sales in the northeast were down slightly for the quarter as compared to the same period last year, and this was in fact in spite of the fact that weather in the northeast a year ago was also pretty severe. Northeast represents approximate the 20% of our broadline sales, so the rest of the U.S. and Canada did better than our 5.9% increase.

Inflation has declined from the historically high levels a year ago, but it continues to have a bit more of an effect on our business than we would like to see. We saw inflation in 11 of the 12 product categories we track, and with the exception of medical supplies, which is less than one percent of sales. The leading influences on inflation on the quarter were paper and disposables, with our heavy reliance on petroleum resins; and meat, which continues to rise even after cycling large increases a year ago. In the area of gross profit margins, pressures in the quarter came from our broadline and SYGMA divisions, principally due to change in customer mix towards more multiunit contractual sales.

On the operating expense side of the equation, our operating companies had a good performance in spite of weather impacted costs with our expense ratios declining to 14.15% of sales for the quarter, or down 20 basis points from the third quarter of the last fiscal year. Our operating companies continue to finds ways to do things more efficiently and effectively. One of the areas that we've been paying particular attention to is fuel prices, as fuel prices have been rising and been the productivity of our running and delivery. Along those lines, our pieces per trip and pieces per mile both improved this quarter versus last year's third quarter. This means we were being more efficient in how we get our product to the customer. In fact, we drove almost 1 million fewer miles in this quarter than the third quarter a year ago. However, that was not enough to overcome the sharp rise in the cost of fuel compared to a year ago. Fuel costs, which historically have run between 30 and 40 basis points as a percent of sales, are currently at approximately 43 basis points for the last quarter.

Expenses controls have been a focus so far in fiscal 2005, and will continue to be an area of attention for us going forward. However, I'd like to talk a little bit about investing for growth. A moment ago when I talked about sales, I said that things were sequentially improving. Our assessment of the situation is that with sales starting to get better, now is the time to increase our presence with our customers and potential customers. Our operating companies will be increasing the number of associates who have direct customer contact. Our marketing associates, our business review managers, and business development managers. With increased customer contacts and an improving sales environment, we strongly believe we can generate healthy increases in sales.

Now I'll touch on the tax rate, which is one item in the quarter that's a little out of the ordinary. During the quarter, based upon additional information and supported by third party analysis, the Company came to the conclusion that a tax contingency that we had previously accrued for in the amount of 11 million was no longer probable. As a result, we reversed the accrual, which had the effect of lowering our effective tax rate during the quarter. With that, I'd like to turn things over to Rich Schnieders.

Thanks, Tom.

First, let me thank all of our customers. The food service operators of North America are a diverse and exciting group, and we really enjoy working with them. This morning, to complement Tom's comments on how we intend to grow sales at our existing facilities, I'll focus on growth through folds outs and acquisitions. In April, SYSCO opened a new fold out that will serve the Spokane, Washington, market from our new facility in Post Falls, Idaho. Just to make sure everyone understands what we mean by a fold out, it's a new SYSCO operating facility that takes over a significant sales base at the outer reaches of an existing SYSCO company's geographic coverage. For example our Post Falls, Idaho, facility will take over sales that were previously serviced from Seattle and Boise. It's been a very successful strategy for us, as it allows both the new company and the giving company to get closer to their customers. As we've been doing this since '96 -- 1996, this was our 14th broadline fold out. It represents a rate of about 1.4 fold outs per year. We've gone back and looked at the performance of our fold outs, and we've come to the conclusion that these are very good -- a very good way to grow, both from a sales growth perspective an profitability viewpoint.

With that in mind, we've decided to raise our objectives and ramp up the number of fold outs we intend to do in the future from our current rate to at least 3 per year. Already that this year we've announced plans for fold outs in the Raleigh, North Carolina market, and the Gulf Coast region of Alabama. Future targets for fold outs include the Long Island, New York, area, eastern Tennessee, Southern California, and the southern New Hampshire region. In addition to getting us closer to our customers, fold outs also represent a great opportunity for the growth of our people, and allow us to immediately install our SYSCO systems and the best practices.

We also remain committed to both strategic and tactical acquisitions. SYSCO has engaged in acquisitions since its founding, and we remain committed to our goal of an average of 3% topline sales growth per year through acquisitions. We get questions about our ability to achieve this goal by investors frequently, and the answer remains the same. We think there are plenty of opportunities in the foodservice arena that will allow to us reach our objective. You should note, however, that the nature of acquisitions is that their size and frequency are not easily predictable. Keeping in mind the tendency of investor to focus on shorter terms results, I thought it would be a good idea to remind everyone that sales contributions from acquisitions have averaged 3.5% over the last five years, and 3.2% over the last three years, right in line with our long-term objectives.

With that, I'll turn the microphone over to Ken Spitler so that he can give everyone an update on our supply chain initiative.

Thanks, Rich.

The short summary of what I'm about to say is that our first redistribution center, the RDC, is it's on time, on budget and performing better than expected. I prefer to leave it right there, but John tells me I need to put a little detail around that. We began shipping from the first RDC on February 14, 2005, to our operating companies serving the Boston area. And since then, we've added our Connecticut, Philadelphia, and Baltimore facilities. As of today, we are shipping our central Pennsylvania facility, and we are scheduled to add two more operating companies during the month of May.

Some very interesting things have come out of our initial experience with the RDC. First, we've seen a nice pick up of productivity at the operating companies. Both in the receiving of product and the putting away. We estimate that it's at least three to four times faster to receive and put away an RDC delivery than non-RDC delivery. Additionally, a significantly high percentage of the product goes directly from the receiving dock to the picking slot, cutting down the need to place the product in excess storage and eliminating the double handling of those items. Finally, companies that are receiving shipments from the RDC are seeing significantly fewer trucks arriving at their facility each day. All of these translate into efficiency gains at the operating company level. Secondly, we have been pleasantly surprised by the inventory performance resulting from the demand planning and replenishment system that we have implemented as companies come aboard the RDC. The system, which applies both -- applies to both inventory supplied by the RDC and inventory ordered directly by the operating company has helped us to systematize our inventory forecasting and ordering. The result has been a good reduction in inventories at those companies where the systems have been turned on. In fact, we like what we see coming out of the system so much that we're not waiting for the rest of the RDC implementation before rolling out demand planning and replenishment to the rest of our broadline companies. Current plans call for more than 30 additional broadline companies to convert to the new system during 2006.

During the quarter, 14 million was expensed, which was 11 million more than the third quarter last year; a 5.5 million was -- 5.5 million was capitalized in the third quarter of this year related to the national supply chain initiative. For the total projects since inception, 95.7 million has been expensed and 184.1 million has been capitalized. To sum it up, we really like what we see coming out of the RDC so far. It's still relatively early in the roll-out process to the operating companies, but the national supply chain project is solidly on track at this point.

Now we'd like to take some questions.

Let me -- before we go to the question and answers, let me just reiterate something we've said before, and that is that this is a great industry and SYSCO is better position than it ever has been to take advantage of the foodservice business. We are excited about our future. And with that, operator, we will take questions now.

[OPERATOR INSTRUCTIONS]. John Heinbockel, Goldman Sachs.

Two questions. One on the RDC and secondly on the fold outs. On the RDC you guys made no mention of expected cost for this year and next year. Curious if that has changed at all? And then secondly, any change in you thought to what the RD -- what an average RDC might save you five years out? I know it's early, but given the experience you've had so far, any change in that, and then I'll come back on the fold out.

John, this is John Stubblefield. The guidance that we had given last quarter in terms of what our expected costs were going to be for the fiscal year '05 are still very much in line. What we saw happen in the third quarter is in line with the guidance that we gave and we would expect to see, again, that total impact for the year to be in the range of $0.04 to $0.05. We haven't given guidance yet for '06. We will do that as we get closer to the fourth quarter, accept that the guidance that we did give was that it was basically non-dilutive. It could be as much as $0.01 to $0.02 positive into '06, but still we're early on in that process.

I think, John, we said half a cent in '06.

Half a cent in '06. Okay. Then in terms of what the five-year out number looks like, we've talked about our expectations by the end of the fifth year to have a 20% return on our investment in that first RDC, and we haven't given any further guidance on that.

Okay. On the fold outs, then, maybe since it's going to be a more important part of the strategy going forward what is sort of the -- I know it may not be an average, but if you look at the last -- whatever, five to ten that you've done, what's the average volume that they're starting with? How's that changing and how quickly do they move to a profit? And if you're going to do more of them, does that mean more cannibalization of existing operating companies, or no?

Well, the average volume in fact probably has come down just a bit, John, because we've done two smaller type fold outs, one that we just opened, that was the one in Post Falls, Idaho, serving Spokane, and the other is Fargo. And those were done pretty deliberately. Those are smaller markets that we had to figure out a way to have a lower expense basis there. So they probably pulled the average down a bit. But all in all, we're starting with 125 to 150 in the fold outs, opening them up, and you mentioned cannibalization, but in fact it's -- it's really a very positive thing. Cannibalization I take to be a bit of a negative term. And I -- it's really very positive to the sourcing or the giving company. Their sales will grow faster and their profitability, even the first year after an acquisition, is excellent. So that's good for everyone. And in going forward, the three a year that we have announced recently, we anticipate to get those operations to profitability very quickly with good return on capital. They're -- it's -- the whole fold out strategy has worked exceedingly well for us.

Thank you.

Thank you.

Mark Husson, HSBC.

Yes. Good morning. Could I ask a couple of questions about the gross margin, which was down a bit more than I had expected. A couple of things. Firstly, if you -- obviously there's a lot more SYGMA in there which is a lower margin business, but if you looked at the businesses on a stand-alone basis, SYGMA, broadline, and other, what are the gross margin trends in those three segments sort of directionally? And then the other thing is it looks like private brand as a percentage of sales has gone down, and is that just a function of the SYGMA mix as well, or something else?

SYGMA has grown this quarter more rapidly than the rest of our businesses and continues to do -- they're doing very well. We're looking through our notes right now. The SYSCO brand percentages, last year were 57.50, this is MA served, and this year 56.62. Which, it is a change, a negative change, but a fairly small one and would be attributable mostly to the national brand of the chain accounts business. I would say, however, and we've talked about this before, Mark, but the -- when we have big programs we put into the SYSCO brand the last big program was Butcher's Block, which was a boxed beef program, that really lifts the number, and if you don't have those kinds of big programs coming into SYSCO brand, it's harder to keep up with the growth in SYSCO brand percentage as a total. Having said that, we have just introduced two huge new programs. One is Portico Seafood, which is a line of 1400 SKUs of frozen seafood that we're very, very excited about. And from just a pure volume standpoint we've also introduced Ranch & Grill, which is a beef line. Butcher's Block was the choice of premium product. This is a line that very effectively addresses that next layer of product and broadens the customer reach with our beef product. So we're excited about that, and we don't see this slight decline as anything that's a trend in our business.

Okay. And then just another question on the --you're hiring a lot more marketing associates now to increase the points of touch, I guess, with the marketplace. But given you've got something like a 20% turnover in marketing associates, I mean how easy or difficult it is to find people of good quality to replace that in terms of turnover, and what's your kind of outlook for a percentage increase in marketing associates this year?

Let me just -- a bit of a change in terminology for us, we have talked now -- we're beginning to talk now about customer contact rather than just marketing associates. Although we will have a net gain in marketing associates and as you've indicated, with some turnover, you've got to work hard. You've got to run pretty fast to stay ahead, but we do. I think our operating companies can effectively increase the number of marketing associates. And as important as that is, it's also very important to us as we've seen the business review and business development process really produce some very nice results. It's important that we see our operating companies also increase those customer contact folks, to business review and business development managers out there. And in fact they have done that and as we've stated, our plans are to increase the total customer contact force, which would be marketing associates, district sales managers, business review managers, business development managers, and specialty -- and product specialties.

So your -- your kinds of contact you're having with the customers are increasingly not just sales based contacts on a daily basis, but you're having these kind of strategic contacts. Do they do more than control costs? Do they actually increase sales with these accounts?

Oh, absolutely. We're seeing more than double the sales increase when we have our business review process. And just -- and we don't want to go into this in too much detail, but a business review is where we'll bring an individual customer into one of our offices and we'll spend three, four hours with them, sometimes more, talking with them about their business and how we can help them, whether it's in the area of labor, whether it's in the area of menu reengineering, and those reviews have been very, very well-received. As you might expect, when you're doing -- when you're taking that much attention with a customer, you are somewhat limited in terms of the numbers of customers that we can address. But every operating company has a goal of 10 to 12 reviews per week next year; and in fact, I'm comfortable that they will get to that number. Which means on average, we're doing 2 to 300 business reviews a day out there across SYSCO. And I will tell you, again, that the results have been phenomenally successful.

We should do more of those at HSBC. Thanks very much.

We would be glad to tell you our thoughts on it.

Eric Larson, Piper Jaffray.

Good morning, everyone. My question's really, your sales performance in the northeast. Obviously weather was big factor, but underneath all of the other fundamentals of weather are you seeing better fundamentals there and is there any competitive activity that may have impacted the quarterly sales up there as well?

Eric, we're not seeing anything strategic by any competitors in the northeast. It's -- the weather was absolutely 100% -- we're sure 100% of the impact up there. The weather came in almost like clock work on the weekends which is of course a big part of the week in terms of percentage of business done by those restaurants. So, No. We don't -- we don't see anything. We're confident that the sales trends will be throughout the organization, if you ex out the weather and, of course, we're in the fourth quarter now, and we're not seeing that kind of impact right now.

Sure. Okay. And then just a final question, tax rate in the -- obviously in the quarter you had your $11 million accrual. Should we be using a 38 -- should we be using the tax rate you had in your first half as the rate going forward again?

This is John Stubblefield. Yes, that is correct. The forecasted tax rate for this next quarter is the 38.25.

Okay. Thank you.

Jeffrey, Wachovia.

Thanks. It's Jeff Omohundro. With these nice improvements in operating efficiencies in areas like your pieces per trip, are you actually stopping the trucks less, and if so, what's your sense of customer satisfaction? How does that track?

Well, we're -- we're probably stopping the trucks somewhat less frequently, but in terms of customer satisfaction it kind of goes back to the question we talked with Mark about, and that is the business review, business development. And that's understanding better our customers and making sure that we're giving optimum service to those customers that require it. So we do it very diligently. It's not like we on our own go out and not deliver to a particular city or to a particular customer on a given day. So we're really -- we're really very careful about that. So I don't see any customer satisfaction implications.

Jeffrey, another one that enters into this is as we get into these business reviews, not only are we talking about what makes our -- what we can do to help our customers, but they get a better understanding of our business and sometimes realize that they only need two deliveries a weak instead of three or whatever, because they understand how that impacts our business.

And are you incentivizing them to take fewer deliveries per week?

In many instances we would be.

Great. Thank you.

Thank you.

[OPERATOR INSTRUCTIONS]. Ajay Jain, UBS.

My first question is for John Stubblefield. It looks like had you a positive swing in cash flow of around 17% this quarter and at least some of that appears to be related to pension cost. Is there any updated pension guidance you can provide on -- just based on the current funding status? In the last filing, I think you'd indicated that you don't anticipate any additional contributions to the pension plan over the balance of fiscal '05, and assuming that's -- that's still the case, do you have any preliminary guidelines for '06?

You're right. The guidance is still the same in terms of what our pension expectations are for '05, and we're in the process of developing our expectations for '06 which we will communicate at the end of the year. We are still very pleased with the performance of the plan, and what we're seeing on the economic side as relates to that. So we're -- we're still optimistic going forward.

Okay. And then I just had were one follow-up question. It looks like the stock based compensation has been the equivalent of around 6 to 7% of the reported earnings over the past couple of years. And I'm sure you know the expensing of options -- it's now been pushed out to calendar '06. I'm just wondering in order to offset the earnings of impact of options, do you anticipate any significant changes down the road in executive compensation in terms of the level options grant to -- to senior management, or is that something your board will make a determination on?

You have to go back to the proxy statement that we issued this last fall. We did make some changes going forward in terms of the number of options that we will be granting. Now, just to clarify things, in our case, we will begin option expensing in our first quarter of '06. So we will give you some guidance on that, also, as we come to the end of the fourth quarter. That will impact us this year for our fiscal year '06 as opposed to the calendar year companies, which have been pushed out.

Okay. But as far as thoughts on any material changes in the granting of options?

I think you can look at what we did for '05 and use that as guidance going forward.

Okay. Thank you.

Jack Russo, A.G. Edwards.

Hi, guys. I had a couple of questions. Just first of all on the food inflation front, the number was 3.8%, and it looked like it didn't change much from 2Q, and I know you mentioned in the past that was a detriment to your earnings when the number's that high. Can you talk about whether that was true again in the third quarter, and do you expect that to moderate as we go forward for the rest of the calendar year?

Yes, and I think just for clarification I don't have the number right in front of me --

Roughly 2% -- 2% less.

Yes. 2% less this quarter. So it's -- it is down some. We're double-checking that number here. It was the same as last --?

Same as quarter, but down about 1.5 to 2% from a year ago.

And you've said that the -- a detriment in periods past. Was that true again in terms earning this quarter, and how do you expect that to improve the rest of the year, guys?

Well, it is hard. Back particularly when we were talking -- at one point we had an 8% inflation during one month, and we've had -- we had 6.2, 6.3% inflation for the quarter. So I -- that is -- it makes it a little harder to operate in, but I would think it would be very difficult for us to put a number as to what impact that had on our earnings for the third quarter. Going forward, we would anticipate not much change, frankly. We think that the paper disposable industry with the higher cost of the resins that go into a lot of the products I think that we'll continue to see those numbers high. Beef -- beef is the other big one, and it's kind of anybody's guess, but at this point I wouldn't see a significant change. So I -- I would anticipate that we'll be above historical levels, and historical levels being 2 to 2.5%. So we're probably going to operate in a range that's at least 1% higher than we have historically.

And when -- Rick, when you say a detriment you just mean the ability to pass it along to customers? Is that what you're talking about, when it's higher than that 2 to 2.5%?

Yes, it's -- it just takes a little longer to get it all through the system, that's right.

Rick, last thing I was going to ask was you've talked in the past about the independent business being healthy and so forth. When we look at the numbers again this quarter, though, we see SYGMA up so much more than broadline and I know there's some street business in SYGMA but can you just walk us through again? I mean it looks to all of us as if the chain business is really quite a bit stronger than the street business. Can you just walk us through what you're seeing that indicates to you that maybe that's -- it's not as obscure a relationship as it seems, because it seems like there's really a big difference between the two groups, and if you look at your numbers, the last three, four, five quarters. And can you just walk us through that again what you're seeing differently?

Jack, it's -- most of the growth at SYGMA's new customers, so it's not on a chain by chain basis. In fact, if we look at the independent business versus the chain business, we see the growth rate's about the same. We don't see a significant difference in that.

If you -- if you leave out new customers was what you're saying.

Yes, that's right, I'm sorry.

Okay.

If you leave those out. And we have at least anecdotal evidence that the growth in the independents is robust as ever. In fact, we're seeing more new independent restaurants open than we have in two or three years. Now, let me -- let me kind of define those restaurants in a given market, take Kansas City, we'll have a good customer who has an independent -- an -- a single standing independent restaurant and they open a second restaurant. In some cases, they'll open a third. And in fact, in a lot of cities, you'll have operators with five restaurants. We wouldn't categorize those as chain restaurants, those would still be independents to us, so that's where we're seeing some pretty nice growth. The other area that we're seeing nice growth in is smaller emerging chains, kind of on the chain side of the business. But if you take all that and put in a pot, I think that you end up that independents are growing nicely right now and the chain business is growing at about the same rate.

Thanks, guys.

Elena Mills, Atlantic Equities.

Good morning, everybody. Just a couple of questions, first a housekeeping question, really. If you could just remind us of the impact of your extra week in last year's fourth quarter so that we can focus on that as we forecast your performance going forward.

Well, it was roughly mathematically 6 to 7% additional topline growth that needs to be factored into the equation.

And roughly the same amount of earnings as well.

Thank you for that.

For the quarter.

For the quarter, yes, thanks for that. Actually, most of my question have been answered so I suppose I'll have to ask a more sort of strategic question, perhaps to Rick. You recently announced the creation of a post of vice president, organizational development and strategy and a new appointment. And I was wondering whether you could elaborate a little bit on what this role really means for your organization and how you expect your strategy to evolve given this new appointment?

Well, it's a great question, and we're working diligently through the process right now, but I guess it would be most accurate to say that we feel like our strategy and strategies will be more focused in the future. And the kind of basic definition of strategy is -- revolves around choosing what you're going to do and what you're not going to do. And we've done some of that in the past, as you know, in terms of stratifying our customers. And -- so I think that what we'll see going forward is more focused, much more clarity and better communication to all of our associates across SYSCO about what indeed our strategies are, and allowing them to do an even better job in the field of planning their day-to-day work, so, if that's helpful.

It is helpful, thanks, Rick. And do you think that this appointment could perhaps allow you to adopt a more aggressive acquisition strategy going forward? I mean, I know you've talked a lot about your 3% topline target in terms of the contribution from acquisitions but obviously I think Amanda's backgrounds being what it is, investors may be curious as to whether this signals, perhaps, a more proactive acquisition strategy?

No, I don't think it would -- we're going to still stand by our 3%. In some years that may be higher, and some years, as we've talked about earlier, it may not be quite as high. But I think what it will do is make sure that we -- the acquisitions themselves align well with our long-term strategy.

Great. That's very helpful. And if I could just ask one final sort of short question. In terms of the SYSCO brand portfolio, I mean, obviously, we've seen the impact of higher raw materials prices in terms of the costs and respective pricing strategies of some of your competitors, more on the retail space. And I was just wondering if you could comment on whether you're still able to fully recover the impact of input cost inflation through higher pricing on SYSCO brand product, and what impact that has had on the relative value proposition of the SYSCO brands against some of the competing products that you're really trying to market the SYSCO brand against?

Yes. I would say that there's not any real difference in terms of our ability to recoup those increased costs, whether it's in packaging, whether it's in the product itself. Whether it's SYSCO brand or a non-SYSCO brand. So I think that we effectively monitor that and make sure that we react when we see changes in the marketplace.

Thanks very much.

Thank you.

[OPERATOR INSTRUCTIONS]. Bob Cummins, Shields & Company.

Thank you. Good morning, everybody.

Good morning, Bob.

With the success so far of your first RDC, can you bring us up to date on your expansion plans there? Have you selected a site for the second operation? What's the timetable as to when that might be on stream? And update us on your plans for expanding nationwide over the next several years?

We plan to be -- well, yes, we have the second location. We're under -- actually we're under -- we're looking for -- conclude the lands deals on the second and third in the next couple of months. We plan to have -- once we conclude the land deal, it takes us about 14 to 18 months to get one up and running. So the next one will be southeast -- southeast and then the midwest. We hope to have it completely finished by 2011.

Okay.

We would hope to do -- once we get comfortable with the process, we will do more than one per year of the RDC.

Thank you very much.

Thank you, Bob.

Andy Wolf, BB&T Capital Markets.

Hi. I was placed in the call a little late, so I heard -- I missed the beginning of your presentation. Sounded like you alluded to do weather effect, the winter weather. I don't know if you quantified that, but if you didn't could you tell us how much that might have hurt sales? Conversely, I think the calendar year helped you a little with New Years Day not being in this quarter this year. How much that might have helped.

We did talk about the weather, Andy. We did not give specifics. However, in the script itself we talked about the fact that if the entire company, the overall Company grew at 5.9% with the really horrendous weather we had in the northeast and not quite as bad in midwest, the rest of the country obviously grew faster. So the northeast dragged down that 5% -- 5.9% number somewhat. Canada continues to look quite robust also, even though in the far eastern part of Canada they did have some weather impact for part of the quarter. So we don't -- we -- so we've tried to come up with a number that said it was down whatever, and we just -- it's very, very hard to do. It's an unknown. But suffice it to say we feel like because that weather hit on the weekends for almost the entire quarter in the northeast it had a real impact on our business.

Okay. Did you -- or could you speak to any change in the rate of sales growth intra quarter and into April?

April is about -- is two weeks -- two weeks old for us in terms of the numbers that we see, and I don't know -- I don't think we would at this point speak to -- it'd be mere speculation at this point.

How about within the quarter? Did you see, once the weather got better in the end later in the quarter, assuming it did, did you see any change?

Yes. Really, I mean, it did not. It was just not a very good quarter in terms of weather in the upper midwest and northeast. So it was pretty much start to finish.

Okay. Just wanted to ask if a few RDC questions. First, is it possible to, on the 14 million expensed, to kind of decompose that between the D&A and the other costs?

It's really too soon to be giving that kind of analysis on this. We're still very much in the start up mode and we're doing it very gradually. So it wouldn't be reflective of what an ongoing operation looks like.

Just to clarify, I think, John, earlier you might have said it was 4 to $0.05 hit this year. Did you not lower that to 3 to $0.04?

We did.

We did.

Okay. My last question is on inbound freight and put away. On average, how many trucks arrive on an average facility per day to be put away?

Well, there's -- I can't give you an average, but let's just take a big one like a Hall-Smith that would average 200 trucks a day. So -- what we're speculating fully ramped up on both sides, meaning the RDC's got all the product and Hall-Smith's receiving all of it, that we would expect to see 40 less trucks.

Okay. Thank you.

Thank you, Andy.

And that will conclude today's question and answer session. At this time I'll turn the conference back over to Mr. Palizza for any additional or closing remarks.

Thank, operator. Thanks everybody for joining us on the call. Further questions can be addressed to me, you can call me at (281)584-1308. Thanks again, and have a good day.

That does conclude today's conference call. Thank you for your participation.