西斯柯 (SYY) 2009 Q4 法說會逐字稿

Good day, everyone, and welcome to today's Sysco Corporation fourth-quarter and year-end 2009 earnings conference call. As a reminder, today's call is being recorded.

At this time, for opening remarks and introductions, I would like to turn the conference over to Mr. Neil Russell, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Darrell, and good morning, everyone. Thank you for joining us for Sysco's fourth-quarter and fiscal-year 2009 conference call. On today's call, you will hear from Bill DeLaney, our Chief Executive Officer; and Ken Spitler, our Vice Chairman, President, and Chief Operating Officer.

Before we begin, please note that statements made in the course of this presentation that state the company's or management's intentions, beliefs, expectations, or predictions of the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ in a material manner. Additional information concerning factors that could cause actual results to differ in a material manner from those in the forward looking statements is contained in the SEC filings, including but not limited to risk factors contained in the company's annual report on Form 10-K for the year ended June 28, 2008, and in the company's press release issued earlier this morning.

Please understand that all comparisons given during the call refer to changes between the fourth quarter of fiscal 2009 and the fourth quarter of fiscal 2008, or between full year fiscal 2009 and the full year of fiscal 2008, unless otherwise noted. Also, all comments about earnings per share refer to diluted earnings per share unless otherwise noted.

Lastly, we ask that you reserve December 14th and 15th on your calendars for a potential analyst day in New York. More information will be forthcoming from my office in the coming weeks. With that out of the way, I will turn the call over to our Chief Executive Officer, Bill DeLaney.

Thank you, Neil, and good morning, everyone. Earlier this morning, SYSCO reported net earnings of $315 million for the fourth quarter and nearly $1.1 billion for fiscal 2009. These results were generated through the consistent support of our customers and the dedicated efforts of our associates in the midst of the most difficult business environment that our industry has ever experienced.

While our financial performance in general does not reflect the type of year-over-year improvement that SYSCO typically produces, we are pleased both with the absolute results and our operating company's ability to compete successfully by providing excellent service and business solutions to their customers. We're particularly encouraged by our ability to manage costs effectively throughout our organization in a year when revenues declined for the first time in SYSCO's history. Ken will address this aspect of our operating performance in more detail in just a minute.

In addition to controlling costs well, we also generated strong cash flow from operations for the year and enhanced our liquidity by securing $500 million in long-term financing. As a result, we were able to invest appropriately in capital projects, modestly increase our acquisition activity over the prior year, and return a large portion of our free cash flow to shareholders. For now, I will turn it over to Ken for a discussion on operational results, and then I will come back to provide further detail on our financial results. Ken.

Thanks, Bill. Overall, I am pleased with the operational results we achieved during last year. For 2009 we sold $37 billion of product, generated $1.9 million of operating income, produced cash flow from operations of $1.6 billion, and returned $1 billion of capital to our shareholders. Without question, 2009 represented the most challenging sales year we have had in SYSCO's 40-year history. However, as has always been SYSCO's focus, our dedicated associates remain committed to serving our customers. Our cost control efforts have not only helped support operating earnings, but have positioned us well for when the economy begins to recover.

The key to our success has been improving operational efficiency. I am pleased with how our operations continue to perform. For example, in our broadline companies during 2009, our diesel gallon usage decreased 7% compared to a mileage decrease of 5%. Kilowatt hours decreased 7%, cases per trip increased 2%, warehouse cases per man hour improved 4%, and total sales per employee increased approximately 5%. Capital expenditures for 2009 totaled $465 million.

Looking ahead, we remain committed to continuing to invest in our business so as to leverage our leadership position and profitably gain market share. As a result, I expect capital spending for the next year to be in the range of $600 million to $650 million. This spending will be relatively balanced between maintenance items, such as ongoing fleet replacement and facility repairs, and growth items, such as expansions of current facilities and potential foldouts.

Also included in this amount is technology, a significant portion of which is dedicated to our ongoing ERP project. With the ERP project, we are taking the opportunity to review many of our processes and finding ways to further streamline our operation.

It is important to note that this project is about a lot more than technology. In the end, the technology is an enabler for what we are designing, which is a business transformation. We have signed a contract with SAP and continue to make progress on the design of our new technology platform. We expect to have design work completed by the end of calendar year, and we'll provide a comprehensive update on the project at the analyst day in December that Neil mentioned earlier.

The results of 2009 are also representative of our commitment to managing costs across the organization. Our headcount is down approximately 6% year-over-year, as we have improved productivity throughout the year. Expense levels also reflect our pay for performance culture, as bonuses and commissions were down substantially year-over-year. We are confident that the steps we have taken to date will better position us to fully participate to the extent economic recovery occurs during fiscal 2010.

In closing, I would like to thank all of our associates for their continued hard work to support our customers. Now I will turn it back over to Bill for a discussion of our financial results for the quarter and for the year.

Thank you, Ken. The sales decline of 6.6% in the fourth quarter reflects an ongoing reduction in volume as well as nearly 3 points less of inflation than what we experienced in the third quarter. We believe that the two-year plus trend of approximately 6% annualized inflation has now reversed and that we are currently experiencing modest levels of deflation in the early weeks of fiscal 2010. In addition, the impact of acquisitions increased sales by 0.6% in the fourth quarter, while the weakening of the Canadian dollar reduced sales by 1.3% in the quarter.

As Ken pointed out in his comments, we managed expenses very well throughout the year. However, we should note that the favorable performance of COLI investments contributed $0.03 per share to our fourth-quarter results. Conversely, for the year, unfavorable COLI investment performance reduced earnings per share by approximately $0.06 when compared to the prior year.

Our working capital management improved modestly during fiscal 2009. We're especially pleased with our ability to improve accounts receivable days outstanding from the prior year. Nevertheless, many of our customers were impacted by today's cash flow pressures, which resulted in our bad debt expense more than doubling to $74 million for the year. While significantly higher than our expense levels in normal times, this represents just 0.2% of annualized sales. We expect credit management will remain a formidable challenge again in fiscal 2010.

As we begin the new fiscal year, we are encouraged by the cautious optimism that appears to be building regarding the economy's prospects for improvement in the coming months. With that said, the likely pace and extent of such improvement remains unclear. SYSCO's sales comparisons will be particularly challenging early in the fiscal year, since we experienced 5% sales growth with 8% inflation in the first quarter of 2009. Sales trends should improve subsequent to the first quarter, assuming the anticipated gradual pickup in underlying economic conditions materializes.

Supporting our customers and enhancing productivity in all aspects of our business will remain top priorities in fiscal 2010. While we are hopeful that market conditions will improve as we approach the new calendar year, we are also confident that our industry leadership position and financial strength will permit us to successfully navigate a less favorable economic scenario. Furthermore, we will continue to invest in our business so that we are well-positioned to capitalize on those attractive market opportunities that present themselves in the years to come.

With that, operator, we'll now take questions.

Thank you. (Operator Instructions). We'll take our first question from Mark Wiltamuth with Morgan Stanley. Please go ahead.

Good morning. Thank you for taking my call. Wanted to get a little more update on the operating environment heading into the first quarter here. If you look at the Knapp-Track trends, they were certainly worse for July than what we saw in the June quarter. Talk about maybe the contrast between how the change you're doing versus your [Street] accounts?

Good morning, Mark; this is Bill. I will let Ken jump into this as well. I would say to you that in terms of what we're seeing, just on pure volume, if you look at cases which we don't specifically disclose, the rate of decline in cases is about what it has been the last quarter or so; it certainly didn't pick up in July. But I can't tell you that it's gotten a whole lot worse in terms of volume. But we are fighting the deflation more so now than we were in the fourth quarter, so in terms of top line, there is more pressure there.

That's about right. We're seeing that things are I guess calming down a bit. I am probably -- as best as I can say it, a little more optimistic at this point than I have been in the last few months.

Okay. Maybe just to dovetail onto that, how do you think about the sustainability of the control in the operating expenses throughout the year? Obviously halfway through the year you still got an opportunity, but then the second half you will start lapping some of the controls you put in for 2009.

We have still got room to keep maintaining that, and our business in a lot of ways is a 1 to 1 ratio based on the cases crossing the docks. There reaches a point where that doesn't become practical, but we haven't reached that yet.

Okay. Thank you.

We'll take our next question with Simeon Gutman with Canaccord Adams. Please go ahead.

Sales in the quarter were down about 6.5%. I think gross profit dollars were down a little bit worse, north of 7%, and I think that spread was consistent with the third quarter. Can you just talk about what's happening there? Is it just less inflation, or are there mix changes that are exacerbating it?

Actually, we're pleased with how we're hanging in there in the gross profit to be honest with you, Simeon. You don't see all of this, but in the broadline business we're pretty much holding our own on the margins. Some of the specialty companies -- Sygma had a nice year and a nice quarter, so their margins are off a little bit, but their profits are up substantially. So all in all, I think we're holding margins pretty well. The customer mix with the change growing somewhat faster than the Street does put some pressure on the margin as well as you point out, Bill. Ken, do you want to add anything to that?

Yes, we are pretty happy with holding onto the margins as we have. Some of this is also -- there's some pretty large deflationary in some areas that are affecting those margins also.

I agree. And I guess related to that, we talked about last quarter the idea of being or getting more aggressive on pricing maybe to accelerate market share gains, and I think you expressed not going to do that, that's not really the philosophy of the business. And I was curious if there ever comes a point where that does make sense, if real growth just stays negative for an extended period of time? And then secondarily, are you seeing any of your competitors starting to do that?

Yes, we are. There is a lot of competitive pressure out there based on price, and we would be willing to do that if it worked. Unfortunately, lowering your price doesn't always equal a gain in market share. We have -- that's not to say that we haven't taken a competitive posture. We have. We really have taken a posture of we will not lose any business based on the competitive pressures from price. But again, that's not our offensive posture, because producing the lowest price doesn't guarantee market share. At some point, would we ever let loose on all of the canons? It would have to get pretty tough for us to do that.

Again, Simeon, I think the key to look at this in terms of how our folks run their businesses out there is at the customer level. So to Ken's point, it is very, very competitive out there right now as much as it has ever been, and certainly where there is risk of losing significant business or deteriorating a relationship, we're going to make sure we're as competitive as anyone out there. With that said, what we have tried to say over the last couple of years is just to take a broad brush approach to reducing price. As the industry leader, we don't think that that's particularly good for us or for the industry.

Okay. And then lastly, on that topic of expenses in terms of maybe having some more room to cut if need be, just flip that around for a second. If demand does start to pick up here, do you have any thoughts -- and I guess maybe it is on the pace of a pickup, how quickly in this environment then you would rehire and reflex the model upwards? And I am just curious how the leverage will work on the other side. Is there a bigger opportunity now maybe to hire at a faster rate and take more share given the unprecedented decline in demand, or is it the normal curve out of this cycle?

Not sure what you're asking there, but I will answer it as best I can. I think that hiring right now is -- we are making an effort to maintain our marketing associate positioning so that we are positioned to take advantage of any economic upturn. What we need to do would be to hire operational employees, which are predominantly warehouse and transportation people. We're finding that relatively easy to do today, so we could ramp up very fast. And of course we still have plenty of capacity in our ability to -- with the marketing associates to take on more sales. So one of the things we have done in this economic downturn is continue to be prepared for the eventual turnaround. We're ready for that to happen right now, by the way.

Okay. Thanks.

We'll take our next question from Jason Whitmer with Cleveland Research Company. Please go ahead.

Thanks. Good morning. I know you guys aren't giving guidance, and I respect that, but I am just curious what broader financial targets you're holding yourself accountable to, either over the medium term or over the long term?

Well, it is Bill. As you said, we're not giving long-term guidance at this point in time, and I still think that's probably an appropriate stance to take. We have got a lot of things we're working on here right now, so obviously in the short term as we've said we're out there staying close to our customers, slugging it out and trying to perform as best we can and make sure our customers are well-positioned to, A, survive, and B, grow from there.

As Ken alluded to in his comments, the CRP project is a more medium term-oriented opportunity for us, and we're going to talk to you a lot more about that towards the tail end of the calendar year when we've had a chance to go through the design phase and share our thoughts with our board and all of that type of thing. So I think I would like to defer any longer term projections or guidance until, A, we see a little more stability in the economy, and, B, we've had a chance to continue to develop our thoughts.

But in the short term, we're looking at this year -- by the way, just as an administrative point, this is a 53-week year for us. But if you look at it 52 to 52, I am talking about 2010, we have a very modest plan for growth this year, and it is going to have to be somewhat back-end loaded. We're going to have to see some improvement in the economy. And to Ken's point, in terms of our tack that we're taking on headcount, we're going to continue to examine all of the work that we do, all the activities that we perform, and adjust headcount accordingly as we go through this and manage our expenses.

With that said, on the sales and marketing side, we're going to be a little bit more focused on maintaining and potentially growing those numbers as well, because you do require some lead time there. So we're hoping to put up some modest growth numbers for the new year, but again it is going to be somewhat of a function of how the economy performs. We'll continue to manage the expenses well.

Do you have any specific initiatives or targets within your sales and marketing initiatives that are different this year versus last year to try to drive those cases?

Yes, we have our own stimulus package working right now. It is directed at moving really commodity type cases across our docks in an effort to help our customers and in an effort to help ourselves.

That's helpful. And economy aside, any variations there, what do you think changes the most in the next twelve months particularly within the controllables of your business?

Could you say that again?

Sure. Take the economy variations aside, what do you think could change the most in the next twelve months in the core part of your business, especially on the controllables?

What could change?

I don't think a lot. That's a huge caveat there. I think the economy and specifically what its impact is on the consumer and their confidence level and willingness to spend. Our belief continues to be like it has been for years. Even though we have seen slowing in growth rates in our industry which are well documented, we certainly have talked about it -- going out to eat is still a fairly low price ticket or low cost item for most American families. So while we are certainly participating in this situation right now, we do think that as the economy improves and as people get more comfortable that they have got a job and they're going to not have their pay cut too much next year, going back out to eat, the margin is a lot less expensive than buying a car or buying a house or those types of things. So that is a meaningful swing factor for us as we go through the year. And to Ken's earlier point, if we get just a little bit of a pickup, we're very well-positioned right now to leverage that.

Jay, the one thing we don't want to see escalate is the fuel price, because that has a bad effect on our customers and a bad effect on us. So we would love to see the fuel, diesel, gasoline prices down a bit more and stabilize there.

That's helpful. Before I sign off, any update on the CFO search?

Yes. We're searching. Look, Jay, we're obviously taking this very serious, and we're fortunate to have some strong people we're looking at both internally and externally. And I expect it will take several months, and we're still in the midst of it. But we'll hopefully have an announcement here for you in the next couple months.

Great. Thank you much.

We'll take our next question with Meredith Adler with Barclays Capital. Please go ahead.

Thanks for taking my question. Could you just -- you were talking just now about fuel costs. Can you comment at all about what happened with fuel expense this quarter, the actual expense on the income statement versus the prior year?

We can. I am going to start with round numbers, and we can go from there, Meredith. We'll have all that for you in the K, but the fuel expense was actually down for the quarter as we projected it would be, but then we didn't have the fuel surcharges last year that we had. So if you were to net the two together, the net fuel impact probably hurt us a little bit, maybe by about $0.01. But in terms of pure expense, it was down.

Okay. And then maybe you could just talk a little bit about CapEx? It was pretty low this year, certainly lower than you had anticipated. Could you just talk a little bit about how you invested it this year and is there any chance of getting buckets for next year? Did you say it is about 50/50 for maintenance type items and then other stuff? Is that the right way to think of this coming year?

This year and next year look about the same. We continue to purchase and take old trucks out of our fleet to bring in our new trucks. That's just we have guidelines there, certain years, and certain amount of mileage we move those trucks on. So every year those kind of costs are about the same, and every year you want to continue to do that, or there is a bubble year that's bad for you. So that expense remains the same.

Usually when you see these fluctuations, it is in the timing of how we spend money in terms on new facilities, or in construction, meaningful construction, on existing facilities. So sometimes those dollars run from one year to the next. So the big fluctuation between what we spent this year, which was down mostly because we did not -- almost all of it was in a building that we were going to build, and then we did not like the location and the cost of getting the ground ready. So we stopped that and moved the location, which for your information was Philadelphia, and it was going to cost us too much to get the land ready. So we moved it. So that's that fluctuation that you see this year and caused a great deal of the cost to go down.

What about the RDCs? What's the plan for that?

We're looking -- of course the RDCs, as we've said many times, depend on a certain amount of cases going across that. Right now, the lowered case movement does not dictate for us to go forward with the one in the Midwest. However, we'll be taking a close look at that in September. That's our decision month for that. If we see some positive signs in the economy, the design is ready, then we go out to bid the contract. We're still prepared to do that. But, again, we need positive cases to make that work the way we want it.

Meredith, we're tap dancing here a little bit with you, but I know last couple of years we haven't spent what we thought, and Ken took you through examples of why that happens. We're more optimistic, I guess if that's the right word, that we will spend the $600 million this year because -- I am not going to get into buckets with you today, but a meaningful piece of that number would be on the technology side. It is just we're in an awkward situation now where we're going through the design phase, and obviously there's an internal approval process. So I do think as we get deeper into the year, we might be able to give you a little more color commentary on the components of the CapEx.

That's great. My final question -- with the bad debt number you mentioned, clearly there are closures of restaurants. Do you have any insight into whether there is a reduction in the capacity on the distribution side -- distributors, smaller distributors going out of business at a faster pace than in the past?

No. We haven't seen that. We -- really we're pretty up speed on all of those closures, and there has only been a couple.

Okay.

I can't say what this year will bring. Certainly as in the past, that has not occurred.

Thank you very much.

Thank you.

We'll take our next question with John Heinbockel with Goldman Sachs. Go ahead.

Guys, it sounds like you do think when we round the horn on the consumer hitting the wall that we'll see some type of growth in real volume cases probably as we get toward year end. Is that fair?

We're certainly hopeful, John. We have crafted this presentation today in a very balanced way. So we have got some tough comparisons here in the fourth quarter that we just completed in the first. We need a little bit of a pickup to see that, but certainly our plan is predicated on the conditions improving as we get toward the calendar year.

This is unchartered territory for everybody. What happens if you get -- if you cycle those mid-single digit declines in cases, and I don't think you decline additionally off that. But let's say volumes are instead flat and end up being flat for a little while. What do you do if anything? And is there I guess there is room to on the cost side to cut a little more if you had to to offset that? Is that fair?

That's fair. That's about right.

And how do you -- it has got to be very difficult to put a budget together in this environment, because it is not clear whether there is going to be 2% growth or 4% or 0% right when you cycle October and November of this year.

Yes. It is difficult. The good news, John, is we have a lot of practice of putting together aggressive budgets and then managing if things don't go quite as well as what we would like. This year it was different. We took a more deliberate approach. We got more people involved, not just with the OpCo, but even here in terms of sanity checks and running different scenarios. So you're always balancing in terms of the internal part of this, wanting to maximize what you can do with the reality that you don't control all of the factors either. So the spirit of our budget is we're going to go out and try to make a number, and we have got to get a little bit of growth and a little bit of help to do that. As we said a couple of times now, if we just get a little bit of case growth as the year goes along, we're well-positioned.

There is some of these unusual items that we speak to. Might be a good time for me to just remind you where we are in some of that, so you want to make sure you understand. Obviously we have that table we put in each earnings period just to identify the items we think are somewhat volatile and, in the short term, items that is we don't really control or have the ability to impact that much. So the COLI clearly hurt us this year. If the markets were to be flat even that would help us next year.

With that said, pension probably will be up about $40 million. We'll have a more fine-tuned number for you as we draft the K. Stock comp could be up a little bit, $5 million to $10 million, because we have got a restricted stock plan going in, that type of thing. The multi-employer number, if we don't have any more situations like we've had the last couple of years, that could help us by about $10 million or so.

That and the COLI are hard to predict. We have got some headwinds on pension in particular. Fuel should help us in particular the second half of the year, couple pennies, maybe $0.03. The net in the first half should not be that significant. So that's a long way of saying, John, bad debt we think will be tough again this year. I don't know that it will be any worse, but we took a big hit this year, and a long way of saying that a lot of that stuff for now in terms of the plan -- we've documented it, we're going to presume that it roughly offsets we have got to go out and grow cases as the year goes along.

Keep in mind too that we produce a weekly P&L to last year and to plan. So we run our business very tightly and we run it on a weekly basis. Whenever we see trends that are favorable or unfavorable, we're on a week to week basis to be able to react to it.

All right. Your CapEx number does not include any acquisitions, I assume?

No.

Correct.

There is no bucket in there for just to kind of the placeholders, so that would be incremental?

Yes.

Right.

What's the thought on use of free cash now? Because it looks like build cash on the balance sheet, use it for acquisitions, and maybe get ready to pay down some debt down the road. But what's the thought process on using the cash that you have?

I think admittedly over the last eight to 10 months, we've certainly wanted to make sure we had enough cash and more than ample access to debt if the conditions continued to deteriorate or if some contingency manifested itself that we needed to deal with. So we've been I guess erring on the side conservatism here, and we feel like that certainly has been the right approach. So at this point, we're hoping to see opportunities and acquisitions. We're not seeing a lot as we speak, and we're certainly being as proactive as we can there.

Like we said earlier, the CapEx budget I think will probably approach the $600 million, maybe a little bit more this year. Then you have seen us pull back on the share repurchase program, and I don't think you will see us be real active there in the next couple quarters anyway, John, until we see how things settle out in the economy. And then we'll obviously later in the year we'll be talking with our board about the dividend.

All right. Finally, do you think we finally get the IRS thing settled this fiscal year or no?

We're working really hard on it. We're having some productive discussions, and I tell you, John, as soon as we know, we'll be happy to tell you about it. I feel better about the progress than I did a year ago.

All right. Thanks.

We'll take our next question from Greg Badishkanian with Citi.

This is Alvin Concepcion in for Greg. A question on market share. Do you think you're gaining share on a unit basis or is it too hard to know?

Are we gaining share, is that the question, Al?

That's right.

I think the honest answer is any time in short-term, it is hard to tell. We certainly think we're holding our own out there. It is a slippery slope right now. There is some business out there that isn't necessarily great business. It brings with it higher risk, and our folks are pretty good at sorting through that. So we certainly feel we're holding our own, and we'll probably be able to better tell you more about that as the year goes along and we see some more updated industry numbers. But I think the industry conditions right now are a little bit tougher than what some of the early projections were coming out of Technomic and people like that.

Just to follow up on the competitive environment, has it become more promotional this quarter versus last quarter and also have there been any changes in July?

Yes, we have some -- we are increasing our promotional. We have our own stimulus package going on for our operating companies. It is a little bit different than July.

Okay. And then assuming there is no change in the cost of commodities, would you expect the deflation trends you saw this quarter to continue?

The what trends?

Deflation?

That's a harder call. Like I said in my comments, we're seeing some modest deflation right now, in particular in the dairy category. It is down almost 20% for what we're looking at right now. So we would think that will subside to some extent, and that would help us a little bit, but I would say for now we expect to see some pricing pressure.

That's what we're hearing from the industry.

Okay. Thank you.

We'll take our next question with John Ivankoe with JPMorgan. Please go ahead.

Hi. Almost done with questions for me, but if you could comment with what you're seeing in terms of rate of openings and rate of closures in the industry, if the current quarter is static relative to what it was in the last quarter, whether you're actually seeing an acceleration in closures, whatever you're seeing on a local level?

Yes, that's really pretty difficult to answer. I wouldn't say that -- we are having some restaurant openings that we haven't seen in probably the past three months, but it is really that is incidental. And I would say that I feel better about the industry than I did three months ago, and that we're seeing positive signs, and I want to qualify that by saying that maybe I am looking for positive signs. But I am feeling much better about that, the industry as a whole.

I think just to add on that, we said this before, and I don't mean to be trite, but we are somewhat encouraged right now that more and more people are encouraged. And a lot of this is somewhat psychological in terms of the consumer, as well as the restaurateur, and the feedback we're getting is people are increasingly optimistic generally. At the same time, some of the restaurateurs are still struggling with volume and that type of thing. So anything we would give on you openings and closings right now would be somewhat anecdotal right now, but the underlying sentiment seems to be a little bit more favorable right now.

Maybe it is an observation, but it's also a question. I think a lot of questions of what people have been asking on this call has been related to restaurant trends even over the last six weeks, because so much of what we have been hearing coming out of the casual dining companies, the quick service companies, was actually a pretty marked slowdown from May to June and July. But broadly across your businesses, is that something you're just not seeing? A lot of us are trying to struggle in terms of -- if it is happening in the chains why it wouldn't be happening with independents?

We're seeing it. I think what we're saying is I don't know that our filtering process is that good from one month to the next, and we have been seeing quite a bit of it since March, April, May. And I think all we're saying is in July, we certainly didn't see a rebound, but I can't sit here and tell you that the falloff was any worse in July than it was in June, if you look at cases. The challenge is the pricing. The other thing obviously to keep in mind here, John, is our business mix, which is about 63% to 65% restaurants and a good portion of it is healthcare and colleges, universities. So maybe that's buffering it for us a little bit right now.

Okay, fair enough, and finally, and I am sorry if this point just got over me. The stimulus package that you have for your operating companies, can you -- what exactly is that?

It is just something that we named that -- we named it the stimulus package. It is just promotion. We're just promoting some products on a regular basis throughout the OpCos driving it from here.

We didn't get any TARP money or anything.

No, of course, no, I understand. So you're offering products at lower prices than what you normally would, is your -- ?

That's the size of it.

I got you.

I don't mean to give you the impression it is a really big deal. It is just something a little different, and we just are trying to stimulate some sales growth with [help] from the President. Thank you.

(Operator Instructions) We'll take our next question with Bob Cummins with Shields and Company. Please go ahead.

Thank you very much. It seems to me that undoubtedly you're doing a lot better currently despite the difficult conditions than most of your smaller competitors around the country, and you mentioned very briefly a little while ago acquisitions. I would like to just follow up on that and see if you're taking a more proactive view toward buying people up in this environment, or are you leery about doing that for fear of problems you might find? What's your general approach there at a time when it would seem there must be a lot of distribution businesses for sale?

Good morning, Bob. Proactive is the right word. Certainly we are being proactive. It is a mixed bag right now. We get a lot of calls, and we work through all of them and we're calling people where it makes sense and that type of thing.

The reality is, at least from my take is, we're not seeing I guess what I would call realistic expectations as much as what we might like to see. And generally there is two types of sellers. One is as a seller that if they get the right price and they run a really good business, then they're open to selling. And the other is the type that has some catalyst that's bringing them to the table, either a family situation or a capital structure situation, that type of thing.

So where the folks have capital structure issues, there is a little more interest there, and part of our challenge there is get to them before they do go out of business. The other folks where they're running good businesses, this probably isn't the best environment to be selling a business. So it is somewhat of a mixed bag. I can assure you we're being very proactive.

Thank you.

We'd take you to run our traps, there is not just much in them.

Just a quick follow-up. Was there any contribution from acquisitions either in your quarter or fiscal year numbers?

Small.

A little bit for the quarter. 0.6% on the sales line. It was negligible for the year.

Okay. Thank you.

That concludes the question and answer session for today. I would like to thank everyone for joining us. You may now disconnect.