UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
Form 10-Q
(Mark One)
þ☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 30, 2017April 2, 2022
OR
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Commission File Number 1-6544
________________
 syy-logoa10.jpgsyy-20220402_g1.jpg
Sysco Corporation
(Exact name of registrant as specified in its charter)
Delaware74-1648137
(State or other jurisdiction of incorporation or organization)(IRS employer identification number)
1390 Enclave Parkway
Houston, Texas77077-2099
(Address of principal executive offices)(Zip Code)


1390 Enclave Parkway, Houston, Texas 77077-2099
(Address of principal executive offices and zip code)

Registrant’s Telephone Number, Including Area Code:
(281) 584-1390


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, $1.00 Par ValueSYYNew York Stock Exchange
1.25% Notes due June 2023SYY 23New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ    No ☐
Yes ☑    No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ    No ☐
Yes  ☑    No ☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filerþ
☑
Accelerated Filer¨
☐
Non-accelerated Filer¨
☐
Smaller Reporting Company¨
☐
(Do not check if a smaller reporting company)
Emerging growth company¨
☐


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐    No þ
Yes ☐     No ☑

521,918,747509,475,816 shares of common stock were outstanding as of January 19, 2018.


TABLE OF CONTENTS

April 22, 2022.

1

TABLE OF CONTENTS
PART I – FINANCIAL INFORMATIONPage No.
1
3027
5362
5363
PART II – OTHER INFORMATION
5464
5464
5465
5566
5566
5566
5566
5668








PART I – FINANCIAL INFORMATION
Item 1. Financial Statements


Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share data)
 Dec. 30, 2017 Jul. 1, 2017 Dec. 31, 2016
 (unaudited)  
 (unaudited)
ASSETS
Current assets 
  
  
Cash and cash equivalents$961,067
 $869,502
 $847,292
Accounts and notes receivable, less allowances of
$52,588, $31,059, and $48,612		3,953,643
 4,012,393
 3,963,458
Inventories, net3,174,012
 2,995,598
 3,031,548
Prepaid expenses and other current assets183,446
 139,185
 142,319
Income tax receivable—
 16,760
 26,589
Total current assets8,272,168
 8,033,438
 8,011,206
Plant and equipment at cost, less depreciation4,366,292
 4,377,302
 4,331,129
Long-term assets     
Goodwill4,001,020
 3,916,128
 3,714,355
Intangibles, less amortization1,056,335
 1,037,511
 1,094,927
Deferred income taxes92,950
 142,472
 193,663
Other assets430,605
 249,804
 284,786
Total long-term assets5,580,910
 5,345,915
 5,287,731
Total assets$18,219,370
 $17,756,655
 $17,630,066
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities 
  
  
Notes payable$6,629
 $3,938
 $22,600
Accounts payable3,745,817
 3,971,112
 3,549,554
Accrued expenses1,567,362
 1,576,221
 1,471,195
Accrued income taxes128,446
 14,540
 —
Current maturities of long-term debt534,716
 530,075
 8,937
Total current liabilities5,982,970
 6,095,886
 5,052,286
Long-term liabilities 
  
  
Long-term debt8,312,489
 7,660,877
 8,313,651
Deferred income taxes143,794
 161,715
 175,795
Other long-term liabilities1,477,991
 1,373,822
 1,533,390
Total long-term liabilities9,934,274
 9,196,414
 10,022,836
Commitments and contingencies

 

 

Noncontrolling interests33,524
 82,839
 78,905
Shareholders’ equity 
  
  
Preferred stock, par value $1 per share
    Authorized 1,500,000 shares, issued none		—
 —
 —
Common stock, par value $1 per share
    Authorized 2,000,000,000 shares, issued 765,174,900 shares		765,175
 765,175
 765,175
Paid-in capital1,361,471
 1,327,366
 1,320,068
Retained earnings9,708,261
 9,447,755
 9,256,137
Accumulated other comprehensive loss(1,116,028) (1,262,737) (1,582,596)
Treasury stock at cost, 243,764,879,
    235,135,699 and 224,792,348 shares		(8,450,277) (7,896,043) (7,282,745)
Total shareholders’ equity2,268,602
 2,381,516
 2,476,039
Total liabilities and shareholders’ equity$18,219,370
 $17,756,655
 $17,630,066
 Apr. 2, 2022Jul. 3, 2021
 (unaudited)
ASSETS
Current assets
Cash and cash equivalents$876,139 $3,007,123 
Accounts receivable, less allowances of $126,580 and $117,6954,777,660 3,781,510 
Inventories4,409,094 3,695,219 
Prepaid expenses and other current assets303,212 240,956 
Income tax receivable47,173 8,759 
Total current assets10,413,278 10,733,567 
Plant and equipment at cost, less accumulated depreciation4,345,098 4,326,063 
Other long-term assets
Goodwill4,703,777 3,944,139 
Intangibles, less amortization1,042,878 746,073 
Deferred income taxes393,302 352,523 
Operating lease right-of-use assets, net787,347 709,163 
Other assets637,995 602,011 
Total other long-term assets7,565,299 6,353,909 
Total assets$22,323,675 $21,413,539 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Notes payable$8,655 $8,782 
Accounts payable5,721,705 4,884,781 
Accrued expenses2,011,597 1,814,837 
Accrued income taxes19,045 22,644 
Current operating lease liabilities113,157 102,659 
Current maturities of long-term debt498,028 486,141 
Total current liabilities8,372,187 7,319,844 
Long-term liabilities
Long-term debt10,608,840 10,588,184 
Deferred income taxes195,910 147,066 
Long-term operating lease liabilities701,929 634,481 
Other long-term liabilities1,090,386 1,136,480 
Total long-term liabilities12,597,065 12,506,211 
Noncontrolling interest33,014 34,588 
Shareholders’ equity
Preferred stock, par value $1 per share Authorized 1,500,000 shares, issued none— — 
Common stock, par value $1 per share Authorized 2,000,000,000 shares, issued 765,174,900 shares765,175 765,175 
Paid-in capital1,737,301 1,619,995 
Retained earnings10,279,792 10,151,706 
Accumulated other comprehensive loss(1,299,004)(1,148,764)
Treasury stock at cost, 256,507,982 and 253,342,595 shares(10,161,855)(9,835,216)
Total shareholders’ equity1,321,409 1,552,896 
Total liabilities and shareholders’ equity$22,323,675 $21,413,539 
Note: The July 1, 20173, 2021 balance sheet has been derived from the audited financial statements at that date.

See Notes to Consolidated Financial Statements

1


Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
(In thousands, except for share and per share data)
 13-Week Period Ended39-Week Period Ended
 Apr. 2, 2022Mar. 27, 2021Apr. 2, 2022Mar. 27, 2021
Sales$16,902,139 $11,824,589 $49,678,888 $35,160,950 
Cost of sales13,888,745 9,701,921 40,802,636 28,719,979 
Gross profit3,013,394 2,122,668 8,876,252 6,440,971 
Operating expenses2,517,665 1,886,751 7,303,932 5,573,413 
Operating income495,729 235,917 1,572,320 867,558 
Interest expense124,018 145,773 495,131 438,988 
Other income, net(13,777)(12,708)(27,705)(14,140)
Earnings before income taxes385,488 102,852 1,104,894 442,710 
Income taxes82,163 13,925 256,115 69,594 
Net earnings$303,325 $88,927 $848,779 $373,116 
  
Net earnings:  
Basic earnings per share$0.60 $0.17 $1.66 $0.73 
Diluted earnings per share0.59 0.17 1.65 0.73 
Average shares outstanding508,368,159 511,110,670 510,642,876 510,081,610 
Diluted shares outstanding512,238,523 514,585,129 514,198,780 512,688,895 
 13-Week Period Ended 26-Week Period Ended
 Dec. 30, 2017 Dec. 31, 2016 Dec. 30, 2017 Dec. 31, 2016
Sales$14,411,490
 $13,457,268
 $29,061,914
 $27,425,922
Cost of sales11,712,104
 10,885,405
 23,568,860
 22,162,140
Gross profit2,699,386
 2,571,863
 5,493,054
 5,263,782
Operating expenses2,167,104
 2,079,446
 4,337,680
 4,204,532
Operating income532,282
 492,417
 1,155,374
 1,059,250
Interest expense85,986
 72,231
 166,870
 145,854
Other expense (income), net(5,432) (2,320) (9,680) (9,536)
Earnings before income taxes451,728
 422,506
 998,184
 922,932
Income taxes167,615
 147,339
 346,431
 323,878
Net earnings$284,113
 $275,167
 $651,753
 $599,054
         
Net earnings: 
  
    
Basic earnings per share$0.55
 $0.50
 $1.24
 $1.09
Diluted earnings per share0.54
 0.50
 1.23
 1.08
        
Average shares outstanding521,284,182
 545,132,762
 524,286,931
 550,285,268
Diluted shares outstanding527,249,587
 550,372,067
 530,156,510
 555,663,073
Dividends declared per common share$0.36
 $0.33
 $0.69
 $0.64


See Notes to Consolidated Financial Statements

2


Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In thousands)
 13-Week Period Ended39-Week Period Ended
 Apr. 2, 2022Mar. 27, 2021Apr. 2, 2022Mar. 27, 2021
Net earnings$303,325 $88,927 $848,779 $373,116 
Other comprehensive (loss) income:
Foreign currency translation adjustment(96,582)9,805 (210,646)345,452 
Items presented net of tax:
Amortization of cash flow hedges2,155 2,191 6,465 6,501 
Change in net investment hedges12,041 9,388 30,568 (22,539)
Change in cash flow hedges18,375 9,135 11,845 8,503 
Amortization of prior service cost74 137 222 411 
Amortization of actuarial gain6,514 7,820 18,369 23,378 
Change in marketable securities(5,323)(2,753)(7,063)(3,271)
Total other comprehensive (loss) income(62,746)35,723 (150,240)358,435 
Comprehensive income$240,579 $124,650 $698,539 $731,551 
 13-Week Period Ended 26-Week Period Ended
 Dec. 30, 2017 Dec. 31, 2016 Dec. 30, 2017 Dec. 31, 2016
Net earnings$284,113
 $275,167
 $651,753
 $599,054
Other comprehensive income (loss): 
  
  
  
Foreign currency translation adjustment19,254
 (202,195) 140,584
 (279,683)
Items presented net of tax: 
  
  
  
Amortization of cash flow hedges2,155
 1,770
 3,925
 3,540
Change in net investment hedges(4,153) 37,326
 (16,177) 25,261
Change in cash flow hedges917
 7,873
 3,118
 7,554
Amortization of prior service cost1,807
 1,752
 3,291
 3,504
Amortization of actuarial loss, net6,571
 5,818
 11,968
 15,346
Total other comprehensive income (loss)26,551
 (147,656) 146,709
 (224,478)
Comprehensive income$310,664
 $127,511
 $798,462
 $374,576


See Notes to Consolidated Financial Statements

3



Sysco Corporation and its Consolidated Subsidiaries
CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY (Unaudited)
(In thousands, except for share data)

Quarter to Date
Accumulated
Other Comprehensive
Loss
 Common StockPaid-in
Capital		Retained
Earnings		Treasury Stock 
 SharesAmountSharesAmountsTotals
Balance as of January 1, 2022765,174,900 $765,175 $1,690,487 $10,216,625 $(1,236,258)258,033,856 $(10,214,957)$1,221,072 
Net earnings303,325 303,325 
Foreign currency translation adjustment(96,582)(96,582)
Amortization of cash flow hedges, net of tax2,155 2,155 
Change in cash flow hedges, net of tax18,375 18,375 
Change in net investment hedges, net of tax12,041 12,041 
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax6,588 6,588 
Change in marketable securities, net of tax(5,323)(5,323)
Dividends declared ($0.47 per common share)(240,158)(240,158)
Share-based compensation awards46,814 (1,525,874)53,102 99,916 
Balance as of April 2, 2022765,174,900 $765,175 $1,737,301 $10,279,792 $(1,299,004)256,507,982 $(10,161,855)$1,321,409 
Accumulated
Other Comprehensive
Loss
 Common StockPaid-in
Capital		Retained
Earnings		Treasury Stock 
 SharesAmountSharesAmountsTotals
Balance as of December 26, 2020765,174,900 $765,175 $1,565,255 $10,383,493 $(1,388,169)255,176,469 $(9,898,955)$1,426,799 
Net earnings88,927 88,927 
Foreign currency translation adjustment9,805 9,805 
Amortization of cash flow hedges, net of tax2,191 2,191 
Change in cash flow hedges, net of tax9,135 9,135 
Change in net investment hedges, net of tax9,388 9,388 
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax7,957 7,957 
Change in marketable securities, net of tax(2,753)(2,753)
Dividends declared ($0.45 per common share)(230,754)(230,754)
Share-based compensation awards29,306 (1,359,456)45,596 74,902 
Balance as of March 27, 2021765,174,900 $765,175 $1,594,561 $10,241,666 $(1,352,446)253,817,013 $(9,853,359)$1,395,597 

4

Year to Date
Accumulated
Other Comprehensive
Loss
 Common StockPaid-in
Capital		Retained
Earnings		Treasury Stock 
 SharesAmountSharesAmountsTotals
Balance as of July 3, 2021765,174,900 $765,175 $1,619,995 $10,151,706 $(1,148,764)253,342,595 $(9,835,216)$1,552,896 
Net earnings   848,779    848,779 
Foreign currency translation adjustment    (210,646)  (210,646)
Amortization of cash flow hedges, net of tax    6,465   6,465 
Change in cash flow hedges, net of tax11,845 11,845 
Change in net investment hedges, net of tax30,568 30,568 
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax    18,591   18,591 
Change in marketable securities, net of tax(7,063)(7,063)
Dividends declared ($1.41 per common share)   (720,693)   (720,693)
Treasury stock purchases5,679,298 (415,824)(415,824)
Increase in ownership interest in subsidiaries(304)(304)
Share-based compensation awards  117,610   (2,513,911)89,185 206,795 
Balance as of April 2, 2022765,174,900 $765,175 $1,737,301 $10,279,792 $(1,299,004)256,507,982 $(10,161,855)$1,321,409 
Accumulated
Other Comprehensive
Loss
 Common StockPaid-in
Capital		Retained
Earnings		Treasury Stock 
 SharesAmountSharesAmountsTotals
Balance as of June 27, 2020765,174,900 $765,175 $1,506,901 $10,563,008 $(1,710,881)256,915,825 $(9,965,590)$1,158,613 
Net earnings   373,116    373,116 
Foreign currency translation adjustment    345,452   345,452 
Amortization of cash flow hedges, net of tax    6,501   6,501 
Change in cash flow hedges, net of tax    8,503   8,503 
Change in net investment hedges, net of tax(22,539)(22,539)
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax    23,789   23,789 
Change in marketable securities, net of tax(3,271)(3,271)
Adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), net of tax(2,068)(2,068)
Dividends declared ($1.35 per common share)   (692,390)   (692,390)
Share-based compensation awards  87,660   (3,098,812)112,231 199,891 
Balance as of March 27, 2021765,174,900 $765,175 $1,594,561 $10,241,666 $(1,352,446)253,817,013 $(9,853,359)$1,395,597 

See Notes to Consolidated Financial Statements

5

Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS (Unaudited)
(In thousands)
 26-Week Period Ended
 Dec. 30, 2017 Dec. 31, 2016
Cash flows from operating activities: 
  
Net earnings$651,753
 $599,054
Adjustments to reconcile net earnings to cash provided by operating activities: 
  
Share-based compensation expense51,612
 42,758
Depreciation and amortization370,316
 448,959
Amortization of debt issuance and other debt-related costs14,395
 13,143
Deferred income taxes37,005
 (18,313)
Provision for losses on receivables20,151
 7,936
Other non-cash items12,986
 663
Additional changes in certain assets and liabilities, net of effect of businesses acquired: 
  
Decrease in receivables99,713
 24,509
(Increase) in inventories(133,374) (175,184)
(Increase) decrease in prepaid expenses and other current assets(33,484) 1,491
(Decrease) in accounts payable(286,899) (51,381)
(Decrease) in accrued expenses(21,802) (132,348)
Increase (decrease) in accrued income taxes120,397
 (116,560)
(Increase) in other assets(29,508) (32,751)
Increase in other long-term liabilities59,943
 27,425
Net cash provided by operating activities933,204
 639,401
Cash flows from investing activities: 
  
Additions to plant and equipment(258,577) (285,692)
Proceeds from sales of plant and equipment3,878
 11,639
Acquisition of businesses, net of cash acquired(147,644) (2,910,461)
Net cash used for investing activities(402,343) (3,184,514)
Cash flows from financing activities: 
  
Bank and commercial paper borrowings (repayments), net630,265
 999,579
Other debt borrowings5,465
 30,939
Other debt repayments(10,368) (118,631)
Debt issuance costs(651) (5,094)
Proceeds from stock option exercises172,298
 113,921
Cash paid for shares withheld to cover taxes(9,485) (13,298)
Treasury stock purchases(750,532) (1,180,313)
Dividends paid(346,920) (343,385)
Net cash (used for) financing activities(309,928) (516,282)
Effect of exchange rates on cash and cash equivalents23,510
 (10,613)
Net increase (decrease) in cash and cash equivalents244,443
 (3,072,008)
Cash and cash equivalents at beginning of period869,502
 3,919,300
Cash and cash equivalents at end of period$1,113,945
 $847,292
Supplemental disclosures of cash flow information: 
  
Cash paid during the period for: 
  
Interest$136,279
 $128,887
Income taxes75,841
 459,681

 39-Week Period Ended
 Apr. 2, 2022Mar. 27, 2021
Cash flows from operating activities:
Net earnings$848,779 $373,116 
Adjustments to reconcile net earnings to cash provided by operating activities:
Share-based compensation expense90,667 65,655 
Depreciation and amortization571,607 542,471 
Operating lease asset amortization82,415 81,414 
Amortization of debt issuance and other debt-related costs16,160 19,485 
Deferred income taxes(110,058)(161,824)
Provision for losses on receivables572 (137,670)
Loss on extinguishment of debt115,603 — 
Loss on sale of business— 22,834 
Other non-cash items(8,945)(7,507)
Additional changes in certain assets and liabilities, net of effect of businesses acquired:
Increase in receivables(908,127)(130,403)
Increase in inventories(644,799)(82,525)
Increase in prepaid expenses and other current assets(25,391)(50,833)
Increase in accounts payable764,263 800,248 
Increase in accrued expenses131,376 9,065 
Decrease in operating lease liabilities(99,343)(94,228)
(Decrease) increase in accrued income taxes(42,013)167,693 
(Increase) decrease in other assets(6,595)23,345 
(Decrease) increase in other long-term liabilities(30,300)39,448 
Net cash provided by operating activities745,871 1,479,784 
Cash flows from investing activities:
Additions to plant and equipment(327,535)(251,167)
Proceeds from sales of plant and equipment15,946 19,308 
Acquisition of businesses, net of cash acquired(1,281,835)— 
Purchase of marketable securities(19,318)(44,687)
Proceeds from sales of marketable securities16,648 30,773 
Other investing activities12,773 — 
Net cash used for investing activities(1,583,321)(245,773)
Cash flows from financing activities:
Bank and commercial paper borrowings, net— (411,200)
Other debt borrowings including senior notes1,251,484 2,943 
Other debt repayments(38,370)(1,489,431)
Redemption premiums and repayments of senior notes(1,395,668)— 
Debt issuance costs(15,547)— 
Cash received from termination of interest rate swap agreements23,127 — 
Proceeds from stock option exercises89,185 112,231 
Stock repurchases(415,824)— 
Dividends paid(719,865)(689,251)
Other financing activities(19,456)(15,024)
Net cash used for financing activities(1,240,934)(2,489,732)
Effect of exchange rates on cash, cash equivalents and restricted cash(13,623)85,183 
Net decrease in cash, cash equivalents and restricted cash(2,092,007)(1,170,538)
Cash, cash equivalents and restricted cash at beginning of period3,037,100 6,095,570 
Cash, cash equivalents and restricted cash at end of period$945,093 $4,925,032 
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest$456,996 $386,753 
Income taxes, net of refunds395,065 71,435 
See Notes to Consolidated Financial Statements

6


Sysco Corporation and its Consolidated Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


Unless this Form 10-Q indicates otherwise or the context otherwise requires, the terms “we,” “our,” “us,” “Sysco,” or “the company” as used in this Form 10-Q refer to Sysco Corporation together with its consolidated subsidiaries and divisions.


1.  BASIS OF PRESENTATION


The consolidated financial statements have been prepared by the company, without audit, with the exception of the July 1, 2017 consolidated balance sheet, which was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended July 1, 2017 (our 2017 Form 10-K).audit. The financial statements include consolidated balance sheets, consolidated results of operations, consolidated statements of comprehensive income (loss), changes in consolidated shareholders’ equity and consolidated cash flows. In the opinion of management, all adjustments, which consist of normal recurring adjustments, except as otherwise disclosed, necessary to present fairly the financial position, results of operations, comprehensive income and(loss), cash flows and changes in shareholders’ equity for all periods presented have been made.


These financial statements should be read in conjunction with the audited financial statements and notes thereto included in our 2017Annual Report on Form 10-K.10-K for the fiscal year ended July 3, 2021. Certain footnote disclosures included in annual financial statements prepared in accordance with generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to applicable rules and regulations for interim financial statements.


Reclassifications

Prior year amounts have been reclassified to conform with the current year presentation.

Supplemental Cash Flow Information


The following table sets forth the company’s reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Statement of Cash Flowsconsolidated balance sheets that sum to the total of the same such amounts shown in the Consolidated Statementconsolidated statement of Cash Flows:cash flows:
Apr. 2, 2022Mar. 27, 2021
(In thousands)
Cash and cash equivalents$876,139 $4,895,723 
Restricted cash (1)
68,954 29,309 
Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows$945,093 $4,925,032 
(1)Restricted cash primarily represents cash and cash equivalents of Sysco’s wholly owned captive insurance subsidiary, restricted for use to secure the insurer’s obligations for workers’ compensation, general liability and auto liability programs. Restricted cash is located within other assets in each consolidated balance sheet.

2.NEW ACCOUNTING STANDARDS
 Dec. 30, 2017 Dec. 31, 2016
 (In thousands)
Cash and cash equivalents$961,067
 $847,292
Restricted cash (1)
152,878
 —
Total cash, cash equivalents and restricted cash shown in the Consolidated Statement of Cash Flows$1,113,945
 $847,292

(1) Restricted cash as of December 30, 2017 represents cash and cash equivalents of Sysco’s wholly owned captive insurance subsidiary, formed in the second quarter of fiscal 2018, restricted for use to secure the insurer’s obligations for workers’ compensation, general liability and auto liability programs. Restricted cash is located within other assets in the consolidated balance sheet as of December 30, 2017.Government Assistance


2. CHANGES IN ACCOUNTING

Income Tax Accounting Implications of the Tax Cut and Jobs Act

On December 22, 2017, the United States (U.S.) government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (the Tax Act). The Tax Act makes broad and complex changes to the U.S. tax code that will affect the company’s fiscal year ending June 30, 2018. The Securities and Exchange Commission (SEC) staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cut and Jobs Act (SAB 118), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under Accounting Standards Codification Topic 740, “Income Taxes” (ASC 740). In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete, but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. Sysco has implemented SAB 118 and has provided required disclosures in Note 11, “Income Taxes,”




Targeted Improvements to Accounting for Hedging Activities

In August 2017,November 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-12, Derivatives and Hedging2021-10, “Government Assistance (Topic 815): Targeted Improvements832),” which requires business entities to Accountingmake annual disclosures about transactions with a government that are accounted for Hedging, which expands and refines hedgeby analogizing to a grant or contribution accounting for both financial and non-financial risk components, alignsmodel. For transactions in the recognition and presentationscope of the effectsnew standard, business entities will need to provide information about the nature of hedging instrumentsthe transaction, including significant terms and hedgeconditions, as well as the amounts and specific financial statement line items affected by the transaction. The new guidance is effective for all entities for annual reporting periods beginning after December 15, 2021; however, early adoption is permitted. The guidance may be applied either prospectively to all in-scope transactions that are reflected in the financial statements and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. Sysco has early adopted the standard using the modified retrospective approach to existing hedging relationships as of the second quarter of fiscal 2018, rather than in fiscal 2020 as required by the ASU. Sysco believes that an early adoption of the hedging standard will provide a better alignment between risk management activities and hedge accounting, and reduce total cost of ownership of the risk management program. All transition requirements have been applied to hedging relationships existing onat the date of adoptioninitial application and the effect of the adoption is reflected as of the beginning of fiscal 2018. The cumulative effect of the accounting change on the opening balance of retained earnings was immaterial to Sysco’s consolidated balance sheet. All required disclosures under ASU 2017-12 have been made in Note 6, "Derivative Financial Instruments."

Restricted Cash

In August 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash (Topic 230). The ASU clarifies the presentation of restricted cash on the statement of cash flows. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling between the beginning and ending cash balances on the statement of cash flows. We have retrospectively adopted the standard in the second quarter of fiscal 2018, which is one year earlier than required. The adoption increases the ending cash balance within our statement of cash flows by the aggregate amount of our restricted cash balances and requires a new disclosure to reconcile the cash balances within our statement of cash flows to the balance sheets. See Supplemental Cash Flow Information within Note 1, “Basis of Presentation.” There were no material restricted cash balances in prior periods, and, therefore, there is no material impact to amounts reported for prior periods due to the retrospective adoption of this ASU.

Stock Compensation

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718). The ASU identifies areas for simplification involving several aspects of accounting for share-based payment transactions including the income tax consequences, classification of awards as equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The company elected to maintain the current policy to estimate forfeitures expected to occur to determine stock-based compensation expense. Further, the company adopted the provisions that have changed its accounting for excess tax benefits, or detriments. Excess tax benefits, or detriments, were previously included within additional paid-in capital in the consolidated balance sheet and were a part of the diluted share calculation. With the adoption of ASU 2016-09 on a prospective basis, excess tax benefits, or detriments, are included within income tax expense in the consolidated results of operations and are no longer a part of the diluted share calculation. In the second quarter and the first 26 weeks of fiscal 2018, the company recognized excess tax benefits of $14.8 million and $30.8 million from stock option exercises that occurred during the respective periods.

The standard also requires several presentation changes with regard to the statement of cash flows. Cash flows related to excess tax benefits or detriments are included in net cash provided by operating activities, rather than as a financing activity. Sysco chose a retrospective application of this provision; therefore, amounts presented for fiscal 2017 reflect the guidance required by this ASU. The standard further requires that cash paid by an employer, when directly withholding shares for tax withholding purposes, should be classified as a financing activity and applied retrospectively. Cash payments of $9.5 million and $13.3 million to tax authorities in connection with shares withheld to meet statutory income tax withholding requirements are presented as a financing activity in the consolidated statement of cash flows for fiscal 2018 and fiscal 2017, respectively.

Simplifying the Test for Goodwill Impairment

In January 2017, the FASB issued ASU 2017-04, Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has


the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.  The company early adopted this ASU in the first quarter of fiscal 2018.

3.  NEW ACCOUNTING STANDARDS

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), and has issued subsequent amendments to this guidance. This new standard will replace all current guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized.  The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. The guidance is effective for interim and annual periods within new fiscal years beginningentered into after December 15, 2017, which is fiscal 2019 for Sysco, and could be early adopted in fiscal 2018. The standard may be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption.

As of the end of the second quarter of fiscal 2018, the company was nearing the completion of its assessment of the accounting required under Topic 606 and is completing its documentation of these conclusions. Based on the work completed to date, Sysco does not expect that the implementation of the new standard will have a material effect on the company’s financial statements. The company will continue its assessment and will adopt the standard in the first quarter of fiscal 2019 and expects to use the modified retrospective method. Enhanced disclosures, including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition, are required.

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), specifying the accounting for leases, which supersedes the leases requirements in Topic 840, Leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. Lessees are permitted to make an accounting policy election to not recognize the asset and liability for leases with a term of twelve monthsinitial application, or less. Lessors’ accounting is largely unchanged from the previous accounting standard. In addition, Topic 842 expands the disclosure requirements of lease arrangements. Topic 842 currently requires lessees and lessors to use a modified retrospective transition approach, which includes a number of practical expedients. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, which is fiscal 2020 for Sysco, with early adoption permitted.retrospectively. The company is currently reviewing the provisions of the new standard.


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4.  ACQUISITIONS


3. REVENUE

The company recognizes revenues when its performance obligations are satisfied in an amount that reflects the consideration Sysco expects to be entitled to receive in exchange for those goods and services. Customer receivables, which are included in accounts receivable, less allowances in the consolidated balance sheet, were $4.5 billion and $3.5 billion as of April 2, 2022 and July 3, 2021, respectively, with the increase reflective of the ongoing industry recovery and increasing customer sales following the COVID-19 pandemic.

Sysco has certain customer contracts in which upfront monies are paid to its customers. These payments have become industry practice and are not related to financing of the customer’s business. They are not associated with any distinct good or service to be received from the customer and, therefore, are treated as a reduction of transaction prices. All upfront payments are capitalized in other assets and amortized over the life of the contract or the expected life of the relationship with the customer. As of April 2, 2022, Sysco’s contract assets were not significant. Sysco has no significant commissions paid that are directly attributable to obtaining a particular contract.

The following tables present our sales disaggregated by reportable segment and sales mix for the company’s principal product categories for the periods presented:
13-Week Period Ended Apr. 2, 2022
US Foodservice OperationsInternational Foodservice OperationsSYGMAOtherTotal
(In thousands)
Principal Product Categories
Fresh and frozen meats$2,295,514 $398,378 $484,082 $9 $3,177,983 
Canned and dry products2,194,073 593,156 203,184 77 2,990,490 
Frozen fruits, vegetables, bakery and other1,597,129 514,418 282,246 — 2,393,793 
Poultry1,425,320 232,456 243,927 — 1,901,703 
Dairy products1,230,092 308,260 138,414 — 1,676,766 
Fresh produce1,162,694 222,765 60,738 — 1,446,197 
Paper and disposables930,526 121,184 186,801 13,034 1,251,545 
Seafood630,833 100,312 42,667 — 773,812 
Beverage products264,087 116,590 124,058 19,218 523,953 
Other (1)
275,895 226,570 28,720 234,712 765,897 
Total Sales$12,006,163 $2,834,089 $1,794,837 $267,050 $16,902,139 
(1)Other sales relate to non-food products, including textiles and amenities for our hotel supply business, equipment, and other janitorial products, medical supplies and smallwares.

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13-Week Period Ended Mar. 27, 2021
US Foodservice OperationsInternational Foodservice OperationsSYGMAOtherTotal
(In thousands)
Principal Product Categories
Fresh and frozen meats$1,585,533 $227,350 $425,156 $— $2,238,039 
Canned and dry products1,513,681 338,853 46,583 — 1,899,117 
Frozen fruits, vegetables, bakery and other1,141,919 337,477 277,766 — 1,757,162 
Poultry920,979 159,589 228,504 — 1,309,072 
Dairy products812,887 188,212 143,028 — 1,144,127 
Paper and disposables752,996 93,205 189,337 10,122 1,045,660 
Fresh produce715,406 126,965 68,074 — 910,445 
Seafood507,446 55,873 36,553 — 599,872 
Beverage products186,211 56,963 145,704 11,080 399,958 
Other (1)
223,183 138,639 19,990 139,325 521,137 
Total Sales$8,360,241 $1,723,126 $1,580,695 $160,527 $11,824,589 
(1)Other sales relate to non-food products, including textiles and amenities for our hotel supply business, equipment, and other janitorial products, medical supplies and smallwares.

39-Week Period Ended Apr. 2, 2022
US Foodservice OperationsInternational Foodservice OperationsSYGMAOtherTotal
(In thousands)
Principal Product Categories
Fresh and frozen meats$7,143,738 $1,211,781 $1,471,877 $9 $9,827,405 
Canned and dry products6,358,629 1,735,674 496,396 107 8,590,806 
Frozen fruits, vegetables, bakery and other4,606,909 1,550,944 847,579 — 7,005,432 
Poultry4,127,709 714,412 696,633 — 5,538,754 
Dairy products3,445,668 902,752 418,373 — 4,766,793 
Fresh produce3,187,379 656,552 191,349 — 4,035,280 
Paper and disposables2,736,429 355,559 568,054 41,325 3,701,367 
Seafood1,909,559 332,114 109,871 — 2,351,544 
Beverage products766,829 340,966 393,089 60,133 1,561,017 
Other (1)
824,432 734,854 76,972 664,232 2,300,490 
Total Sales$35,107,281 $8,535,608 $5,270,193 $765,806 $49,678,888 
(1)Other sales relate to non-food products, including textiles and amenities for our hotel supply business, equipment, and other janitorial products, medical supplies and smallwares.

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39-Week Period Ended Mar. 27, 2021
US Foodservice OperationsInternational Foodservice OperationsSYGMAOtherTotal
(In thousands)
Principal Product Categories
Fresh and frozen meats$4,583,392 $809,339 $1,256,208 $— $6,648,939 
Canned and dry products4,325,880 1,113,600 109,023 11 5,548,514 
Frozen fruits, vegetables, bakery and other3,269,395 1,158,748 809,975 — 5,238,118 
Poultry2,600,235 513,184 662,759 — 3,776,178 
Dairy products2,467,961 629,376 433,023 — 3,530,360 
Paper and disposables2,149,596 276,819 550,605 30,435 3,007,455 
Fresh produce2,123,214 443,462 199,584 — 2,766,260 
Seafood1,398,098 213,874 88,036 — 1,700,008 
Beverage products535,130 207,851 436,503 33,018 1,212,502 
Other (1)
753,016 488,355 79,528 411,717 1,732,616 
Total Sales$24,205,917 $5,854,608 $4,625,244 $475,181 $35,160,950 
(1)Other sales relate to non-food products, including textiles and amenities for our hotel supply business, equipment and subscription sales for our former Sysco Labs business, and other janitorial products, medical supplies and smallwares.

4. ACQUISITIONS

During the first 2639 weeks of fiscal 2018,2022, the company paid cash of $147.6 million$1.3 billion for several acquisitions. These acquisitions did not have a material effect on the company’s operating results, cash flows or financial position. Certain acquisitions involve contingent consideration that may include earnout agreements that are typically payable over periods of up to three years in the event that certain operating results are achieved. As of December 30, 2017,April 2, 2022, aggregate contingent consideration outstanding was $20.2$89.5 million, of which $9.0$87.0 million was recorded as earnout liabilities. Earnout liabilities are all measured using unobservable inputs that are considered a Level 3 fair value measurement.


Brakes GroupGreco and Sons


On July 5, 2016,August 12, 2021, Sysco consummated its acquisition of Cucina Lux Investments Limited (a private company limited by shares organized under the laws of EnglandGreco and Wales)Sons (Greco), a holding company of the Brakes Group, pursuant to an agreement for the sale and purchase of securitiesleading independent Italian specialty distributor in the capitalUnited States, operating out of the Brakes Group, dated as10 distribution centers and servicing 22 geographies nationwide. Greco imports and distributes a full line of February 19, 2016 (the Purchase Agreement), byfood and among Sysco, entities affiliated with Bain Capital Investors, LLC, and members of management of the Brakes Group (the Brakes Acquisition). The company paid cash of $2.9 billion, net of cash acquired, for the Brakes Acquisition. Following the closing of the Brakes Acquisition, the Brakes Group became a wholly owned subsidiary of Sysco.

The Brakes Group is a large European foodservice business supplying fresh, refrigerated and frozen food products, as well as non-food products and supplies,manufactures specialty meat products. The acquisition also includes Bellissimo Foods Company, which distributes a broad selection of Italian and Mediterranean ingredients, including a proprietary branded line of products that are sold exclusively through the Bellissimo Foods Company distribution network, serving independent pizza and Italian restaurants. The purpose of the acquisition is to strengthen Sysco’s business within the Italian foodservice customers ranging from large customers, including leisure, pub, restaurant, hotelsector.

The purchase price was allocated based on the company’s preliminary estimated fair value of the assets acquired and contract catering groups,liabilities assumed, as follows:
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Preliminary Purchase Price Allocation
(In millions)
Accounts receivable, net$69 
Inventories79 
Plant and equipment24 
Other assets151 
Goodwill and other intangibles (1)
717 
Total assets1,040 
Accounts payable(73)
Accrued expenses(17)
Deferred tax liabilities(35)
Other liabilities(154)
Total consideration$761 

(1) The excess purchase price of $717.1 million was assigned to smaller customers, including independent restaurants, hotels, fast food outlets, schoolsgoodwill and hospitals. Brakes Group businesses include: Brakes, Brakes Catering Equipment, Brake France, Country Choice, Davigel, Fresh Direct, Freshfayre, M&J Seafood, Menigointangibles, a portion of which is deductible for income tax purposes. Goodwill of $491.6 million has been assigned to the U.S. Foodservice Pauley’s, Wild HarvestOperations reportable segment. Intangible assets include customer relationships of $116.0 million with a weighted average life of 8 years and Woodward Foodservice. trade names of $109.5 million with a weighted average life of 15 years. Amortization expense is being recognized on a straight-line basis and was $14.7 million for the first 39 weeks of fiscal 2022.

The Brakes Group’s largest businessesassets, liabilities and operating results of Greco are reflected in the U.K., France,company’s consolidated financial statements in accordance with Accounting Standard Codification Topic No. 805, Business Combinations, commencing from the acquisition date. In certain circumstances, the purchase price allocations may be based upon preliminary estimates and Sweden, in additionassumptions. Accordingly, the allocations are subject to a presence in Ireland, Belgium, Spainrevision until Sysco receives final information and Luxembourg.other analysis during the measurement period. These include items such as finalizing valuation of acquired tangible and intangible assets and related tax attributes.



The first 39 weeks of fiscal 2022 includes the results of operations of Greco for the period from August 12, 2021 to April 2, 2022. The results were not material to the consolidated results of the company for the first 39 weeks of fiscal 2022.


5.  FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price).  The accounting guidance includes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The three levels of the fair value hierarchy are as follows:

Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets;
Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability; and
Level 3 – Unobservable inputs for the asset or liability, which include management’s own assumption about the assumptions market participants would use in pricing the asset or liability, including assumptions about risk.


Sysco’s policy is to invest in only high-quality investments. Cash equivalents primarily include timeThe fair value of the company’s cash deposits certificates of deposit, commercial paper, high-qualityand money market funds included in cash equivalents are valued using inputs that are considered a Level 1 measurement. Other cash equivalents, such as time deposits and all highly liquid instruments with original maturities of three months or less.

less, are valued using inputs that are considered a Level 2 measurement. The following is a descriptionfair value of the valuation methodologies used for assets and liabilitiescompany’s marketable securities are all measured at fair value:

Time deposits and commercial paper included in cash equivalentsusing inputs that are valued at amortized cost, which approximates fair value.  These are included within cash equivalents asconsidered a Level 2 measurement, as they rely on quoted prices in markets that are not actively traded or observable inputs over the full term of the asset. The location and the fair value of the company’s marketable securities in the tables below.
Money market fundsconsolidated balance sheet are valued at the closing price reported by the fund sponsor from an actively traded exchange.  These are included within cash equivalents as Level 1 measurementsdisclosed in the tables below.
The interest rate swap agreements are valued using a swap valuation model that utilizes an income approach using observable market inputs including interest rates, LIBOR swap rates and credit default swap rates. 
The foreign currency swap agreements, including cross-currency swaps, are valued using a swap valuation model that utilizes an income approach applying observable market inputs including interest rates, LIBOR swap rates for U.S. dollars, pound sterling and Euro currencies, and credit default swap rates.  
Foreign currency forwards are valued based on exchange rates quoted by domestic and foreign banks for similar instruments.
Fuel swap contracts are valued based on observable market transactions of forward commodity prices.

Note 6, “Marketable Securities.” The fair value of the company’s derivative instruments are all measured using inputs that are considered a Level 2 measurement, as they are not actively traded and are valued using pricing models that use observable market quotations. The location and the fair value of derivative assets and liabilities designated as hedges in the consolidated balance sheet are disclosed in Note 6, "Derivative7, “Derivative Financial Instruments."”


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The following tables present the company’s assets measured at fair value on a recurring basis as of December 30, 2017,April 2, 2022 and July 1, 2017 and December 31, 2016:3, 2021:
 Assets Measured at Fair Value as of Apr. 2, 2022
 Level 1Level 2Level 3Total
 (In thousands)
Assets:
Cash equivalents
Cash and cash equivalents$862,187 $3 $— $862,190 
Other assets (1)
68,954 — — 68,954 
Total assets at fair value$931,141 $3 $— $931,144 
 Assets Measured at Fair Value as of Dec. 30, 2017
 Level 1 Level 2 Level 3 Total
 (In thousands)
Assets:       
Cash and cash equivalents       
Cash equivalents$241,071
 $43,191
 $—
 $284,262
Other assets145,734
 7,143
 

 152,877
Total assets at fair value$386,805
 $50,334
 $—
 $437,139


(1)Represents restricted cash balance recorded within other assets in the consolidated balance sheet.

 Assets Measured at Fair Value as of Jul. 3, 2021
 Level 1Level 2Level 3Total
 (In thousands)
Assets:
Cash equivalents
Cash and cash equivalents$2,805,961 $3 $— $2,805,964 
Other assets (1)
29,977 — — 29,977 
Total assets at fair value$2,835,938 $3 $— $2,835,941 


 Assets Measured at Fair Value as of Jul. 1, 2017
 Level 1 Level 2 Level 3 Total
 (In thousands)
Assets:       
Cash and cash equivalents       
Cash equivalents$238,954
 $49,430
 $—
 $288,384
Total assets at fair value$238,954
 $49,430
 $—
 $288,384
(1)Represents restricted cash balance recorded within other assets in the consolidated balance sheet.


 Assets Measured at Fair Value as of Dec. 31, 2016
 Level 1 Level 2 Level 3 Total
 (In thousands)
Assets:       
Cash and cash equivalents 
  
  
  
Cash equivalents$11,500
 $43,270
 $—
 $54,770
Total assets at fair value$11,500
 $43,270
 $—
 $54,770

The carrying values of accounts receivable and accounts payable approximated their respective fair values due to their short-term maturities. The fair value of Sysco’s total debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the company for new debt with the same maturities as existing debt, and is considered a Level 2 measurement. The fair value of total debt was approximately$9.2 billion, $8.6 billion and $8.6 $11.9 billion as of December 30, 2017, July 1, 2017April 2, 2022 and December 31, 2016, respectively.  The carrying value of total debt was $8.9 billion, $8.2 billion and $8.3$13.3 billion as of December 30, 2017, July 1, 20173, 2021, while the carrying value was $11.1 billion as of both April 2, 2022 and December 31, 2016, respectively.July 3, 2021.


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6. MARKETABLE SECURITIES

Sysco invests a portion of the assets held by its wholly owned captive insurance subsidiary in a restricted investment portfolio of marketable fixed income securities, which have been classified and accounted for as available-for-sale. The company includes fixed income securities maturing in less than twelve months within prepaid expenses and other current assets and includes fixed income securities maturing in more than twelve months within other assets in the accompanying consolidated balance sheets. The company records the amounts at fair market value, which is determined using quoted market prices at the end of the reporting period.

Unrealized gains and any portion of a security’s unrealized loss attributable to non-credit losses are recorded in accumulated other comprehensive loss. There were no significant credit losses recognized in the first 39 weeks of fiscal 2022. The following table presents the company’s available-for-sale marketable securities as of April 2, 2022 and July 3, 2021:
Apr. 2, 2022
Amortized Cost BasisGross Unrealized GainsGross Unrealized LossesFair ValueShort-Term Marketable SecuritiesLong-Term Marketable Securities
(In thousands)
Fixed income securities:
Corporate bonds$95,571 $265 $(4,248)$91,588 $3,025 $88,563 
Government bonds30,141 760 (124)30,777 — 30,777 
Total marketable securities$125,712 $1,025 $(4,372)$122,365 $3,025 $119,340 
Jul. 3, 2021
Amortized Cost BasisGross Unrealized GainsGross Unrealized LossesFair ValueShort-Term Marketable SecuritiesLong-Term Marketable Securities
(In thousands)
Fixed income securities:
Corporate bonds$92,547 $2,491 $(456)$94,582 $11,570 $83,012 
Government bonds31,552 3,556 — 35,108 — 35,108 
Total marketable securities$124,099 $6,047 $(456)$129,690 $11,570 $118,120 

As of April 2, 2022, the balance of available-for-sale securities by contractual maturity is shown in the following table. Within the table, maturities of fixed income securities have been allocated based upon timing of estimated cash flows. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

Apr. 2, 2022
(In thousands)
Due in one year or less$3,025 
Due after one year through five years83,747 
Due after five years through ten years35,593 
Total$122,365 

There were no significant realized gains or losses in marketable securities in the first 39 weeks of fiscal 2022.

7. DERIVATIVE FINANCIAL INSTRUMENTS


Sysco uses derivative financial instruments to enact hedging strategies for risk mitigation purposes; however, the company does not use derivative financial instruments for trading or speculative purposes. Hedging strategies are used to manage interest rate risk, foreign currency risk and fuel price risk.


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Hedging of interest rate risk


Sysco manages its debt portfolio with interest rate swaps from time to time to achieve an overall desired position of fixed and floating rates. In the second quarter of fiscal 2022, Sysco settled some of its previously held interest rate swap contracts for proceeds of $23.1 million, which had a notional value of $500 million, due to the redemption of the entire $500 million aggregate principal amount of Sysco’s outstanding 3.550% Senior Notes due 2025 in December 2021.


Hedging of foreign currency risk


In fiscal 2017, Sysco entered into cross-currency swap contracts to hedge the foreign currency transaction risk of certain pound sterling-denominated intercompany loans. There are no credit-risk related contingent features associated with these swaps, which have been designated as cash flow hedges. The company has also entered into cross-currency swap contracts and Euro-bonduses euro-bond denominated debt thatto hedge the foreign currency exposure of our net investment in certain foreign operations. Additionally, Sysco’s operations in the U.K. and SwedenEurope have inventory purchases denominated in currencies other than their functional currency, such as the Euro,euro, U.S. dollar, Polish zloty and Danish krone. These inventory purchases give rise to foreign currency exposure between the functional currency of each entity and these currencies. The company enters into foreign currency forward swap contracts to sell the applicable entity’s functional currency and buy currencies matching the inventory purchase, which operate as cash flow hedges of the company’s foreign currency-denominated inventory purchases.

Sysco uses certain foreign currency contracts to hedge the effects of fluctuations in exchange rates on outstanding intercompany loans. The company does not formally designate and document such derivative instruments as hedging instruments; however, the instruments are an effective economic hedge of the underlying foreign currency exposure. Both the gain or loss on the derivative instrument and the offsetting gain or loss on the underlying intercompany loans are recognized in earnings immediately, thereby eliminating or reducing the impact of foreign currency exchange rate fluctuations on net earnings.


Hedging of fuel price risk




In fiscal 2017, Sysco began utilizinguses fuel commodity swap contracts to hedge against the risk of the change in the price of diesel on anticipated future purchases. These swaps have been designated as cash flow hedges.

None of thesethe company’s hedging instruments contain credit-risk-related contingent features. Details of outstanding hedging instruments as of December 30, 2017April 2, 2022 are presented below:
Maturity Date of the Hedging InstrumentCurrency / Unit of MeasureNotional Value
(In millions)
Hedging of interest rate risk
February 2018June 2023U.S. DollarEuro500
April 2019U.S. Dollar500
October 2020U.S. Dollar750
July 2021U.S. Dollar500
Hedging of foreign currency risk(1)
July 2021Various (April 2022 to August 2022)Swedish Krona272
Various (April 2022 to December 2022)British Pound Sterling234
24
August 2021British Pound Sterling466
June 2023Euro500
June 2023Euro500
Hedging of fuel risk
Various (January 2018(April 2022 to November 2018)July 2023)Gallons44
58

(1) Foreign currency forward contracts used to hedge against foreign exchange exposures related to inventory purchases are not material to Sysco’s overall hedging portfolio.


The location and the fair value of derivative instruments designated as hedges in the consolidated balance sheet as of December 30, 2017,April 2, 2022 and July 1, 2017 and December 31, 20163, 2021 are as follows:
 Derivative Fair Value
 Balance Sheet locationApr. 2, 2022Jul. 3, 2021
(In thousands)
Fair Value Hedges:
Interest rate swapsOther assets$376 $43,217 
Cash Flow Hedges:
Fuel swapsOther current assets$29,682 $16,732 
Foreign currency forwardsOther current assets59 42 
Fuel swapsOther assets3,112 — 
Fuel swapsOther current liabilities116 — 
Foreign currency forwardsOther current liabilities372 46 
Fuel swapsOther long-term liabilities38 — 

14

   Derivative Fair Value
 Balance Sheet location Dec. 30, 2017 Jul. 1, 2017 Dec. 31, 2016
   (In thousands)
 Fair Value Hedges:       
Interest rate swapsOther current assets $118
 $707
 $—
Interest rate swapsOther assets —
 —
 1,149
Interest rate swapsOther long-term liabilities 33,003
 21,390
 25,391
        
Cash Flow Hedges:       
Fuel swapsOther current assets $13,678
 $717
 $3,950
Foreign currency forwardsOther current assets 555
 —
 —
Cross currency swapsOther assets —
 —
 9,027
Fuel swapsOther current liabilities —
 6,320
 —
Foreign currency forwardsOther current liabilities 351
 154
 1,048
Cross currency swapsOther long-term liabilities 21,310
 5,816
 —
        
Net Investment Hedges:       
Foreign currency swapsOther assets $7,822
 $—
 $28,395
Foreign currency swapsOther long-term liabilities 48,087
 12,308
 15,915
  Foreign denominated debtLong-term debt 600,050
 571,450
 525,950



Gains or losses recognized in the consolidated results of operations for cash flow hedging relationships are not significant for each of the periods presented. The location and amount of gains or losses recognized in the consolidated results of operations for fair value and cash flow hedging relationships for each of the periods, presented on a pretax basis, are as follows:

13-Week Period Ended39-Week Period Ended
Apr. 2, 2022Mar. 27, 2021Apr. 2, 2022Mar. 27, 2021
(In thousands)
Total amounts of income and expense line items presented in the consolidated results of operations in which the effects of fair value hedges are recorded$124,018 $145,773 $495,131 $438,988 
Gain or (loss) on fair value hedging relationships:
Interest rate swaps:
Hedged items$1,656 $2,097 $29,011 $(11,694)
Derivatives designated as hedging instruments(4,628)(6,239)(52,491)(3,078)

  13-Week Period Ended Dec. 30, 2017
  Cost of Goods Sold Operating Expense Interest Expense
  (In thousands)
Total amounts of income and expense line items presented in the consolidated results of operations in which the effects of fair value or cash flow hedges are recorded $11,712,104
 $2,167,104
 $85,986
Gain or (loss) on fair value hedging relationships:      
Interest rate swaps:      
  Hedged items (1)
 $—
 $—
 $(7,515)
  Derivatives designated as hedging instruments —
 —
 (9,942)
Gain or (loss) on cash flow hedging relationships:      
Fuel swaps:      
Gain or (loss) reclassified from AOCI into income $—
 $1,814
 $—
Foreign currency contracts:      
Gain or (loss) reclassified from AOCI into income $525
 $—
 $—
Interest rate swaps:      
Gain or (loss) reclassified from AOCI into income (2)
 $—
 $—
 $(2,873)


(1) The hedged total includes interest expense of $17,078gains and change inlosses on the fair value hedging relationships associated with the hedged items as disclosed in the table above consist of debtthe following components for each of $9,563.

(2) Losses reclassified from AOCI into income represent amortization of losses on forward starting interest rate swap agreements that were previously settled.the periods presented:
15

  26-Week Period Ended Dec. 30, 2017
  Cost of Goods Sold Operating Expense Interest Expense
  (In thousands)
Total amounts of income and expense line items presented in the consolidated results of operations in which the effects of fair value or cash flow hedges are recorded $23,568,860
 $4,337,680
 $166,870
Gain or (loss) on fair value hedging relationships:      
Interest contracts:      
Hedged items (1)
 $—
 $—
 $(22,745)
Derivatives designated as hedging instruments —
 —
 (10,989)
Gain or (loss) on cash flow hedging relationships:      
Fuel swaps:      
Gain or (loss) reclassified from AOCI into income $—
 $1,658
 $—
Foreign currency contracts:      
Gain or (loss) reclassified from AOCI into income $834
 $—
 $—
Interest contracts:      
Gain or (loss) reclassified from AOCI into income (2)
 $—
 $—
 $(5,746)
13-Week Period Ended39-Week Period Ended
Apr. 2, 2022Mar. 27, 2021Apr. 2, 2022Mar. 27, 2021
(In thousands)
Interest expense$(1,938)$(9,737)$(13,830)$(34,306)
Decrease in fair value of debt(3,594)(11,834)(42,841)(22,612)
Hedged items$1,656 $2,097 $29,011 $(11,694)

(1) The hedged total includes interest expense of $34,156 and change in fair value of debt of $11,411.

(2) Losses reclassified from AOCI into income represent amortization of losses on forward starting interest rate swap agreements that were previously settled.



The location and effect of derivatives not designated as hedging instruments on the consolidated results of operations for the 13-week period ended December 30, 2017, presented on a pretax basis, are as follows:
 13-Week Period Ended Dec. 30, 2017
 Location of Gain or (Loss) Recognized in Income on Derivative Amount of Gain or (Loss) Recognized in Income on Derivatives
Derivatives not designated as hedging instruments:(In thousands)
Foreign currency contractsOther expense (income) $(2,516)

The location and effect of derivatives not designated as hedging instruments on the consolidated results of operations for the 26-week period ended December 30, 2017, presented on a pretax basis, are as follows:
 26-Week Period Ended Dec. 30, 2017
 Location of Gain or (Loss) Recognized in Income on Derivative Amount of Gain or (Loss) Recognized in Income on Derivatives
Derivatives not designated as hedging instruments:(In thousands)
Foreign currency contractsOther expense (income) $(2,280)


The location and effect of cash flow and net investment hedge accounting on the consolidated statements of comprehensive income for the 13-week periodperiods ended December 30, 2017,April 2, 2022 and March 27, 2021, presented on a pretax basis, are as follows:

13-Week Period Ended Apr. 2, 2022
Amount of Gain or (Loss) Recognized in Other Comprehensive Income on DerivativesLocation of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into IncomeAmount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
(In thousands)(In thousands)
Derivatives in cash flow hedging relationships:
Fuel swaps$24,097 Operating expense$9,302 
Foreign currency contracts(58)Cost of sales / Other income— 
Total$24,039 $9,302 
Derivatives in net investment hedging relationships:
Foreign denominated debt$16,055 N/A$— 
Total$16,055 $— 
13-Week Period Ended Mar. 27, 2021
Amount of Gain or (Loss) Recognized in Other Comprehensive Income on DerivativesLocation of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into IncomeAmount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
(In thousands)(In thousands)
Derivatives in cash flow hedging relationships:
Fuel swaps$12,143 Operating expense$(8,745)
Foreign currency contracts(100)Cost of sales / Other income— 
Total$12,043 $(8,745)
Derivatives in net investment hedging relationships:
Foreign denominated debt$17,901 N/A$— 
Total$17,901 $— 


16
 13-Week Period Ended Dec. 30, 2017
 Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income

(In thousands)   (In thousands)
Derivatives in cash flow hedging relationships:     
Fuel swaps$8,505
 Operating income $1,814
Foreign currency contracts6,331
 Cost of goods sold 525
Total$14,836
   $2,339
      
Derivatives in net investment hedging relationships:     
Foreign currency contracts$(12,063) Other expense (income) $—
Foreign denominated debt(9,450) Other expense (income) —
Total$(21,513)   $—




The location and effect of cash flow and net investment hedge accounting on the consolidated statements of comprehensive income for the 26-week period39-week periods ended December 30, 2017,April 2, 2022 and March 27, 2021, presented on a pretax basis, are as follows:

26-Week Period Ended Dec. 30, 201739-Week Period Ended Apr. 2, 2022
Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into IncomeAmount of Gain or (Loss) Recognized in Other Comprehensive Income on DerivativesLocation of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into IncomeAmount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income

(In thousands) (In thousands)(In thousands)(In thousands)
Derivatives in cash flow hedging relationships:   Derivatives in cash flow hedging relationships:
Fuel swaps$19,706
 Operating income $1,658
Fuel swaps$16,024 Operating expense$26,882 
Foreign currency contracts(15,462) Cost of goods sold 834
Foreign currency contracts(492)Cost of sales / Other income— 
TotalTotal$15,532 $26,882 
Derivatives in net investment hedging relationships:Derivatives in net investment hedging relationships:
Foreign denominated debtForeign denominated debt$40,757 N/A$— 
TotalTotal$40,757 $— 
39-Week Period Ended Mar. 27, 2021
Amount of Gain or (Loss) Recognized in Other Comprehensive Income on DerivativesLocation of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into IncomeAmount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
(In thousands)(In thousands)
Derivatives in cash flow hedging relationships:Derivatives in cash flow hedging relationships:
Fuel swapsFuel swaps$(34,686)Operating expense$(8,688)
Foreign currency contractsForeign currency contracts5,180 Cost of sales / Other income3,626 
Total$4,244
 $2,492
Total$(29,506)$(5,062)
   
Derivatives in net investment hedging relationships:   Derivatives in net investment hedging relationships:
Foreign currency contracts$(27,957) Other expense (income) $—
Foreign currency contracts$51,354 N/A$— 
Foreign denominated debt(28,600) Other expense (income) —
Foreign denominated debt10,150 N/A— 
Total$(56,557) $—
Total$61,504 $— 



The location and carrying amount of hedged liabilities in the consolidated balance sheet as of December 30, 2017April 2, 2022 are as follows:
Apr. 2, 2022
Carrying Amount of Hedged Assets (Liabilities)Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Assets (Liabilities)
(In thousands)
Balance sheet location:
Long-term debt$(568,436)$(376)
17

 Dec. 30, 2017 Dec. 30, 2017
 Carrying Amount of Hedged Assets (Liabilities) Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Assets (Liabilities)
 (In thousands)
Balance sheet location:   
Current maturities of long-term debt$(499,960) $—
Long-term debt(1,747,194) 18,282

As of December 30, 2017, the total notional amount of Sysco’s pay-fixed/receivable-variable interest rate swaps was $2.3 billion.


The location and effectcarrying amount of derivative instruments and related hedged items onliabilities in the consolidated resultsbalance sheet as of operations for the 13-week period ending December 30, 2017, presented on a pretax basis,July 3, 2021 are as follows:
Jul. 3, 2021
Carrying Amount of Hedged Assets (Liabilities)Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Assets (Liabilities)
(In thousands)
Balance sheet location:
Long-term debt$(1,065,364)$(43,217)

 13-Week Period Ended Dec. 30, 2017
 
Location of (Gain) or Loss
Recognized (1)
 Amount of (Gain) or Loss
Recognized
   (In thousands)
Fair Value Hedge Relationships:   
Interest rate swap agreements (1)
Interest expense $379

(1) The effect of derivative instruments and related hedged items that are recorded in other comprehensive income (loss) are disclosed in Note 9, “Other Comprehensive Income.”



The location and effect of derivative instruments and related hedged items on the consolidated results of operations for the 26-week period ending December 30, 2017, presented on a pretax basis, are as follows:
 26-Week Period Ended Dec. 30, 2017
 
Location of (Gain) or Loss
Recognized (1)
 Amount of (Gain) or Loss
Recognized
   (In thousands)
Fair Value Hedge Relationships:   
Interest rate swap agreements (1)
Interest expense $(422)

(1) The effect of derivative instruments and related hedged items that are recorded in other comprehensive income (loss) are disclosed in Note 9, “Other Comprehensive Income.”

7.8. DEBT


As of April 2, 2022, the company had a $2.0 billion long-term revolving credit facility ($2.0 billion facility) that would have expired on June 28, 2024. As of April 2, 2022, there were no borrowings outstanding under this facility. This credit facility was amended in the first quarter of fiscal 2022, to (a) eliminate the covenant that had restricted (i) increases to the company’s regular quarterly dividend and (ii) share repurchases, in each case, until the earlier of September 2022 or the date on which Sysco has achieved a certain ratio of consolidated EBITDA to consolidated interest expense, and (b) adjusted the covenant requiring Sysco to maintain a certain ratio of consolidated EBITDA to consolidated interest expense.

On April 29, 2022, Sysco entered into a new long-term revolving credit facility to replace the $2.0 billion facility. The new facility includes aggregate commitments of the lenders thereunder of $3.0 billion, with an option to increase such commitments to $4.0 billion. The new facility includes a covenant requiring Sysco to maintain a ratio of consolidated EBITDA to consolidated interest expense of 3.0 to 1.0 over four consecutive fiscal quarters. This ratio is lower than the previous covenant that was included in the $2.0 billion facility. The new revolving credit facility expires on April 29, 2027.

Sysco has a U.S. commercial paper program allowing the company to issue short-term unsecured notes in an aggregate amount not to exceed $2.0 billion. As of December 30, 2017, there was $750.0 million in commercial paper issuances outstanding. Any outstanding amounts are classified within long-term debt, as the program is supported by athe long-term revolving credit facility. As of April 2, 2022, there were no commercial paper issuances outstanding under this program. During the first 2639 weeks of 2018, aggregate outstandingfiscal 2022, there were no borrowing activities under our commercial paper issuances andprograms, $2.0 billion facility or short-term bank borrowings rangednotes.

In December 2021, the company accessed favorable credit markets and undertook a refinancing of previously outstanding senior notes to increase its weighted-average maturity profile and lower its average interest rates on the company’s debt portfolio.As part of the refinancing, on December 14, 2021, Sysco issued senior notes (the “Notes”) totaling $1.25 billion. Details of the Notes are as follows:

Maturity DatePar Value
(in millions)		Coupon RatePricing
(percentage of par)
December 14, 2031 (the 2031 Notes)$450 2.45 %99.578 %
December 14, 2051 (the 2051 Notes)800 3.15 99.308 

The Notes initially are fully and unconditionally guaranteed by Sysco’s direct and indirect wholly owned subsidiaries that guarantee Sysco’s other senior notes issued under the indenture governing the Notes or any of Sysco’s other indebtedness. Interest on the Notes will be paid semi-annually in arrears on June 14 and December 14, beginning June 14, 2022. At Sysco’s option, any or all of the Notes may be redeemed, in whole or in part, at any time prior to maturity. If Sysco elects to redeem (i) the 2031 Notes before the date that is three months prior to the maturity date, or (ii) the 2051 Notes before the date that is six months prior to the maturity date, Sysco will pay an amount equal to the greater of 100% of the principal amount of the Notes to be redeemed or the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed that would be due if such senior notes matured on the applicable date described above. If Sysco elects to redeem a series of Notes on or after the applicable date described in the preceding sentence, Sysco will pay an amount equal to 100% of the principal amount of the Notes to be redeemed. Sysco will pay accrued and unpaid interest on the Notes redeemed to the redemption date.

18

On December 14, 2021, Sysco redeemed $1.25 billion in combined aggregate principal amount of its 5.650% Senior Notes due 2025 (the “5.650% Notes”) and 3.550% Senior Notes due 2025 (the “3.550% Notes”). Sysco used the net proceeds from $254.5the offering of the Notes, together with cash on hand, to fund the redemption of all of Sysco’s outstanding 5.650% Notes and 3.550% Notes. The redemption price for the senior notes of each such series that were redeemed was the principal amount of such senior notes plus a “make-whole” amount determined in accordance with the indenture governing such senior notes and accrued and unpaid interest to the applicable redemption date. The redemption was considered to be a debt extinguishment. As such, Sysco recognized a loss on extinguishment of debt of $115.6 million, which is recorded as a component of interest expense in the accompanying consolidated results of operations. Of this loss, $132.7 million was attributable to approximately $1.2 billion.the purchase premium paid to the noteholders, and $6.0 million was attributable to the write-off of unamortized debt issuance costs and debt discount associated with the redeemed notes, offset by a gain of $23.1 million attributable to the termination of interest rate swap agreements that were serving as a fair value hedge.


8.9.  EARNINGS PER SHARE


The following table sets forth the computation of basic and diluted earnings per share:
 13-Week Period Ended39-Week Period Ended
 Apr. 2, 2022Mar. 27, 2021Apr. 2, 2022Mar. 27, 2021
 (In thousands, except for share
and per share data)		(In thousands, except for share
and per share data)
Numerator:  
Net earnings$303,325 $88,927 $848,779 $373,116 
Denominator:
Weighted-average basic shares outstanding508,368,159 511,110,670 510,642,876 510,081,610 
Dilutive effect of share-based awards3,870,364 3,474,459 3,555,904 2,607,285 
Weighted-average diluted shares outstanding512,238,523 514,585,129 514,198,780 512,688,895 
Basic earnings per share$0.60 $0.17 $1.66 $0.73 
Diluted earnings per share$0.59 $0.17 $1.65 $0.73 
 13-Week Period Ended 26-Week Period Ended
 Dec. 30, 2017 Dec. 31, 2016 Dec. 30, 2017 Dec. 31, 2016
 
(In thousands, except for share
and per share data)
 (In thousands, except for share
and per share data)
Numerator:       
Net earnings$284,113
 $275,167
 $651,753
 $599,054
Denominator: 
  
    
Weighted-average basic shares outstanding521,284,182
 545,132,762
 524,286,931
 550,285,268
Dilutive effect of share-based awards5,965,405
 5,239,305
 5,869,579
 5,377,805
Weighted-average diluted shares outstanding527,249,587
 550,372,067
 530,156,510
 555,663,073
Basic earnings per share$0.55
 $0.50
 $1.24
 $1.09
Diluted earnings per share$0.54
 $0.50
 $1.23
 $1.08


The number of optionssecurities that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was approximately 2,749,000 approximately 1,105,000 and 4,900,0001,893,000 for the secondthird quarter of fiscal 20182022 and fiscal 2017,2021, respectively. The number of optionssecurities that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was approximately 4,594,000 approximately 1,731,000 and 3,500,0004,763,000 for the first 2639 weeks of fiscal 20182022 and fiscal 2017,2021, respectively.


9.10.  OTHER COMPREHENSIVE INCOME


Comprehensive income is net earnings plus certain other items that are recorded directly to shareholders’ equity, such as foreign currency translation adjustment, changes in marketable securities, amounts related to cash flowcertain hedging arrangements and certain amounts related to pension and other postretirement plans. Comprehensive income was $310.7$240.6 million and $127.5$124.7 million for the secondthird quarter of fiscal 20182022 and fiscal 2017,2021, respectively. Comprehensive income was $798.5$698.5 million and $374.6$731.6 million for the first 2639 weeks of fiscal 20182022 and fiscal 2017,2021, respectively.





19

A summary of the components of other comprehensive income (loss) and the related tax effects for each of the periods presented is as follows:
  13-Week Period Ended Apr. 2, 2022
 Location of
Expense (Income) Recognized in
Net Earnings		Before Tax
Amount		TaxNet of Tax
Amount
  (In thousands)
Pension and other postretirement benefit plans:    
Reclassification adjustments:
Amortization of prior service costOther expense, net$99 $25 $74 
Amortization of actuarial loss, netOther expense, net8,668 2,154 6,514 
Total reclassification adjustments8,767 2,179 6,588 
Foreign currency translation:
Foreign currency translation adjustmentN/A(96,582)— (96,582)
Marketable securities:
   Change in marketable securities (1)
N/A(6,738)(1,415)(5,323)
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
   Change in cash flow hedge
Operating expenses (2)
24,039 5,664 18,375 
   Change in net investment hedgeN/A16,055 4,014 12,041 
Total other comprehensive income before reclassification adjustments40,094 9,678 30,416 
Reclassification adjustments:    
Amortization of cash flow hedgesInterest expense2,874 719 2,155 
Total other comprehensive income (loss)$(51,585)$11,161 $(62,746)

(1)Realized gains or losses on marketable securities are presented within other (income) expense, net in the consolidated results of operations; however, there were no significant gains or losses realized in the third quarter of fiscal 2022.
(2)Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.



20

  13-Week Period Ended Dec. 30, 2017  13-Week Period Ended Mar. 27, 2021
Location of
Expense (Income) Recognized in
Net Earnings
 
Before Tax
Amount
 Tax 
Net of Tax
Amount
 Location of
Expense (Income) Recognized in
Net Earnings		Before Tax
Amount		TaxNet of Tax
Amount
  (In thousands)  (In thousands)
Pension and other postretirement benefit plans:   
  
  
Pension and other postretirement benefit plans:    
Reclassification adjustments:   
  
  
Reclassification adjustments:    
Amortization of prior service costOperating expenses $2,409
 $602
 $1,807
Amortization of prior service costOther expense, net$183 $46 $137 
Amortization of actuarial loss (gain), netOperating expenses 8,761
 2,190
 6,571
Amortization of actuarial loss, netAmortization of actuarial loss, netOther expense, net10,421 2,601 7,820 
Total reclassification adjustments  11,170
 2,792
 8,378
Total reclassification adjustments10,604 2,647 7,957 
Foreign currency translation:   
  
  
Foreign currency translation:
Other comprehensive income before reclassification adjustments:      
Foreign currency translation adjustmentN/A 19,254
 —
 19,254
Foreign currency translation adjustmentN/A9,805 — 9,805 
Marketable securities:Marketable securities:
Change in marketable securities (1)
Change in marketable securities (1)
N/A(3,485)(732)(2,753)
Hedging instruments:       Hedging instruments:
Other comprehensive income before reclassification adjustments:      
Change in cash flow hedgesN/A 2,944
 2,027
 917
Other comprehensive income (loss) before reclassification adjustments:Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedge Change in cash flow hedge
Operating expenses (2)
12,043 2,908 9,135 
Change in net investment hedgesN/A (6,543) (2,390) (4,153)Change in net investment hedgesN/A17,901 8,513 9,388 
Total other comprehensive income before reclassification adjustments  (3,599) (363) (3,236)Total other comprehensive income before reclassification adjustments29,944 11,421 18,523 
Reclassification adjustments:       Reclassification adjustments:
Amortization of cash flow hedgesInterest expense 2,873
 718
 2,155
Amortization of cash flow hedgesInterest expense2,921 730 2,191 
Total other comprehensive income  $29,698
 $3,147
 $26,551
Total other comprehensive income$49,789 $14,066 $35,723 



(1)Realized gains or losses on marketable securities are presented within other (income) expense, net in the consolidated results of operations; however, there were no significant gains or losses realized in the third quarter of fiscal 2021.

(2) Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.

21

   13-Week Period Ended Dec. 31, 2016
 
Location of
Expense (Income) Recognized in
Net Earnings
 
Before Tax
Amount
 Tax 
Net of Tax
Amount
   (In thousands)
Pension and other postretirement benefit plans:   
  
  
Reclassification adjustments:   
  
  
Amortization of prior service costOperating expenses $2,844
 $1,092
 $1,752
Amortization of actuarial loss (gain), netOperating expenses 9,749
 3,931
 5,818
Total reclassification adjustments  12,593
 5,023
 7,570
Foreign currency translation:       
Other comprehensive income before
   reclassification adjustments:		       
Foreign currency translation adjustmentN/A (202,195) —
 (202,195)
Hedging instruments:       
Other comprehensive income before reclassification adjustments:       
Change in cash flow hedgesInterest expense 12,058
 4,185
 7,873
Change in net investment hedgesN/A 55,445
 18,119
 37,326
Total other comprehensive income before reclassification adjustments  67,503
 22,304
 45,199
Reclassification adjustments:       
Amortization of cash flow hedgesInterest expense 2,873
 1,103
 1,770
Total other comprehensive income  $(119,226) $28,430
 $(147,656)


  39-Week Period Ended Apr. 2, 2022
 Location of
Expense (Income) Recognized in
Net Earnings		Before Tax
Amount		TaxNet of Tax
Amount
  (In thousands)
Pension and other postretirement benefit plans:    
Reclassification adjustments:
Amortization of prior service costOther expense, net$297 $75 $222 
Amortization of actuarial loss, netOther expense, net24,555 6,186 18,369 
Total reclassification adjustments24,852 6,261 18,591 
Foreign currency translation:
Other comprehensive income (loss) before reclassification adjustments:
Foreign currency translation adjustmentN/A(210,646)— (210,646)
Marketable securities:
Change in marketable securities (1)
N/A(8,939)(1,876)(7,063)
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedges
Operating expenses (2)
15,532 3,687 11,845 
Change in net investment hedgesN/A40,757 10,189 30,568 
Total other comprehensive income before reclassification adjustments56,289 13,876 42,413 
Reclassification adjustments:    
Amortization of cash flow hedgesInterest expense8,622 2,157 6,465 
Total other comprehensive income (loss)$(129,822)$20,418 $(150,240)



(1) Realized gains or losses on marketable securities are presented within other (income) expense, net in the consolidated results of operations; however, there were no significant gains or losses realized in the first 39 weeks of fiscal 2022.
(2) Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.


22

  26-Week Period Ended Dec. 30, 2017  39-Week Period Ended Mar. 27, 2021
Location of
Expense (Income) Recognized in
Net Earnings
 
Before Tax
Amount
 Tax 
Net of Tax
Amount
 Location of
Expense (Income) Recognized in
Net Earnings		Before Tax
Amount		TaxNet of Tax
Amount
  (In thousands)  (In thousands)
Pension and other postretirement benefit plans:   
  
  
Pension and other postretirement benefit plans:    
Reclassification adjustments:   
  
  
Reclassification adjustments:    
Amortization of prior service costOperating expenses $4,818
 $1,527
 $3,291
Amortization of prior service costOther expense, net$549 $138 $411 
Amortization of actuarial loss (gain), netOperating expenses 17,522
 5,554
 11,968
Amortization of actuarial loss, netAmortization of actuarial loss, netOther expense, net31,161 7,783 23,378 
Total reclassification adjustments  22,340
 7,081
 15,259
Total reclassification adjustments31,710 7,921 23,789 
Foreign currency translation:   
  
  
Foreign currency translation:
Other comprehensive income before reclassification adjustments:      
Foreign currency translation adjustmentN/A 140,584
 —
 140,584
Foreign currency translation adjustmentN/A345,452 — 345,452 
Marketable securities:Marketable securities:
Change in marketable securities (1)
Change in marketable securities (1)
N/A(4,140)(869)(3,271)
Hedging instruments:   
  
  
Hedging instruments:
Other comprehensive income before
reclassification adjustments:		      
Change in cash flow hedgesN/A 6,350
 3,232
 3,118
Change in net investment hedgeN/A (29,919) (13,741) (16,177)
Change in fuel hedgeN/A —
   —
Other comprehensive income (loss) before reclassification adjustments:Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedge (3)
Change in cash flow hedge (3)
Operating expenses (2)
11,554 3,051 8,503 
Change in net investment hedgesChange in net investment hedgesN/A(30,052)(7,513)(22,539)
Total other comprehensive income before reclassification adjustments (23,569) (10,509) (13,059)Total other comprehensive income before reclassification adjustments(18,498)(4,462)(14,036)
Reclassification adjustments:   
  
  
Reclassification adjustments:
Amortization of cash flow hedgesInterest expense 5,746
 1,821
 3,925
Amortization of cash flow hedgesInterest expense8,669 2,168 6,501 
Total other comprehensive income  $145,101
 $(1,607) $146,709
Total other comprehensive (loss) incomeTotal other comprehensive (loss) income$363,193 $4,758 $358,435 



(1)Realized gains or losses on marketable securities are presented within other (income) expense, net in the Consolidated Results of Operations; however, there were no significant gains or losses realized in the first 39 weeks of fiscal 2021.

(2)Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.
(3) Change in cash flow hedges includes the termination of some cash flow hedges.
23

   26-Week Period Ended Dec. 31, 2016
 
Location of
Expense (Income) Recognized in
Net Earnings
 
Before Tax
Amount
 Tax 
Net of Tax
Amount
   (In thousands)
Pension and other postretirement benefit plans:   
  
  
Reclassification adjustments:   
  
  
Amortization of prior service costOperating expenses $5,688
 $2,184
 $3,504
Amortization of actuarial loss (gain), netOperating expenses 23,208
 7,862
 15,346
Total reclassification adjustments  28,896
 10,046
 18,850
Foreign currency translation:   
  
  
Other comprehensive income before reclassification adjustments:       
Foreign currency translation adjustmentN/A (279,683) —
 (279,683)
Hedging instruments:       
Other comprehensive income before
reclassification adjustments:		       
Change in cash flow hedgesInterest expense 11,739
 4,185
 7,554
Change in net investment hedgeN/A 43,380
 18,119
 25,261
Total other comprehensive income before reclassification adjustments  55,119
 22,304
 32,815
Reclassification adjustments:       
Amortization of cash flow hedgesInterest expense 5,746
 2,206
 3,540
Total other comprehensive income  $(189,922) $34,556
 $(224,478)



The following tables provide a summary of the changes in accumulated other comprehensive (loss) income forfor the periods presented:
 39-Week Period Ended Apr. 2, 2022
 Pension and Other Postretirement Benefit Plans,
net of tax		Foreign Currency TranslationHedging,
net of tax		Marketable Securities,
net of tax		Total
 (In thousands)
Balance as of Jul. 3, 2021$(1,061,991)$(40,092)$(51,096)$4,415 $(1,148,764)
Equity adjustment from foreign currency translation— (210,646)— — (210,646)
Amortization of cash flow hedges— — 6,465 — 6,465 
Change in net investment hedges— — 30,568 — 30,568 
Change in cash flow hedge— — 11,845 — 11,845 
Amortization of unrecognized prior service cost222 — — — 222 
Amortization of unrecognized net actuarial losses18,369 — — — 18,369 
Change in marketable securities— — — (7,063)(7,063)
Balance as of Apr. 2, 2022$(1,043,400)$(250,738)$(2,218)$(2,648)$(1,299,004)
 39-Week Period Ended Mar. 27, 2021
 Pension and Other Postretirement Benefit Plans,
net of tax		Foreign Currency TranslationHedging,
net of tax		Marketable Securities,
net of tax		Total
 (In thousands)
Balance as of Jun. 27, 2020$(1,265,714)$(402,384)$(49,878)$7,095 $(1,710,881)
Equity adjustment from foreign currency translation— 345,452 — — 345,452 
Amortization of cash flow hedges— — 6,501 — 6,501 
Change in net investment hedges— — (22,539)— (22,539)
Change in cash flow hedge— — 8,503 — 8,503 
Amortization of unrecognized prior service cost411 — — — 411 
Amortization of unrecognized net actuarial losses23,378 — — — 23,378 
Change in marketable securities— — — (3,271)(3,271)
Balance as of Mar. 27, 2021$(1,241,925)$(56,932)$(57,413)$3,824 $(1,352,446)

 26-Week Period Ended Dec. 30, 2017
 Pension and Other Postretirement Benefit Plans,
net of tax		 Foreign Currency Translation Hedging,
net of tax		 Total
 (In thousands)
Balance as of Jul. 1, 2017$(974,232) $(148,056) $(140,449) $(1,262,737)
Equity adjustment from foreign currency translation—
 140,584
 

 140,584
Amortization of cash flow hedges—
 —
 3,925
 3,925
Change in net investment hedges—
 —
 (16,177) (16,177)
Change in cash flow hedge—
 —
 3,118
 3,118
Amortization of unrecognized prior service cost3,291
 —
 —
 3,291
Amortization of unrecognized net actuarial losses11,968
 —
 —
 11,968
Balance as of Dec. 30, 2017$(958,973) $(7,472) $(149,583) $(1,116,028)



 26-Week Period Ended Dec. 31, 2016
 Pension and Other Postretirement Benefit Plans,
net of tax		 Foreign Currency Translation Hedging,
net of tax		 Total
 (In thousands)
Balance as of Jul. 2, 2016$(1,104,484) $(136,813) $(116,821) $(1,358,118)
Equity adjustment from foreign currency translation—
 (279,683) 

 (279,683)
Amortization of cash flow hedges—
 —
 3,540
 3,540
Change in cash flow hedges—
 —
 7,554
 7,554
Change in net investment hedges—
 —
 25,261
 25,261
Amortization of unrecognized prior service cost3,504
 —
 —
 3,504
Amortization of unrecognized net actuarial losses15,346
 —
 —
 15,346
Balance as of Dec. 31, 2016$(1,085,634) $(416,496) $(80,466) $(1,582,596)

10.11.  SHARE-BASED COMPENSATION


Sysco provides compensation benefits to employees under several share-based payment arrangements, including various long-term employee stock incentive plans and the 2015 Employee Stock Purchase Plan (ESPP).


Stock Incentive Plans


In the first 2639 weeks of fiscal 2018,2022, options to purchase 4,042,4151,224,150 shares were granted to employees. The fair value of each option award is estimated as of the date of grant using a Black-Scholes option pricing model. The weighted average grant-date fair value per option granted during the first 2639 weeks of fiscal 20182022 was $7.08.$17.39.


In the first 2639 weeks of fiscal 2018, 867,6192022, employees were granted 473,355 performance share units (PSUs) were granted to employees.. Based on the jurisdiction in which the employee resides, some of these PSUs were granted with forfeitable dividend equivalents. The fair value of each PSU award granted with a dividend equivalent is based on the company’s stock price as of the date of grant. For PSUs granted without dividend equivalents, the fair value was reduced by the present value of expected dividends during the
24

vesting period. The weighted average grant-date fair value per performance share unitPSU granted during the first 2639 weeks of fiscal 20182022 was $51.10.$76.75. The PSUs will convert into shares of Sysco common stock at the end of the three-year performance period based on financialactual performance targets consistingachieved, as well as the market-based return of Sysco’s earningscommon stock relative to that of each company within the S&P 500 index.

In the first 39 weeks of fiscal 2022, employees were granted 736,709 restricted stock units. The weighted average grant-date fair value per share compound annual growth rate and adjusted return on invested capital.restricted stock unit granted during the first 39 weeks of fiscal 2022 was $80.24.


Employee Stock Purchase Plan


Plan participants purchased 591,241661,656 shares of common stock under the Sysco ESPP during the first 2639 weeks of fiscal 2018.

2022. The weighted average fair value per right of employee stock purchase rightsright issued pursuant to the ESPP was $7.83$11.92 during the first 2639 weeks of fiscal 2018.2022. The fair value of theeach stock purchase rightsright is estimated as the difference between the stock price at the date of issuance and the employee purchase price.


All Share-Based Payment Arrangements


The total share-based compensation cost that has been recognized in results of operations was $51.6$90.7 million and $42.8$65.7 million for the first 2639 weeks of fiscal 20182022 and fiscal 2017,2021, respectively.


As of December 30, 2017,April 2, 2022, there was $127.2$144.2 million of total unrecognized compensation cost related to share-based compensation arrangements. This cost is expected to be recognized over a weighted-average period of 2.031.97 years.




11.12.  INCOME TAXES


Tax Cuts and Jobs Act

On December 22, 2017, the U.S. government enacted the Tax Act. The Tax Act makes broad and complex changes to the U.S. tax code that will affect the company’s fiscal year ending June 30, 2018, including, but not limited to: (1) reducing the U.S. federal corporate tax rate; (2) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that is payable over 8 years; and (3) bonus depreciation that will allow for full expensing of qualified property placed in service after September 27, 2017. The Tax Act also establishes new tax laws that could affect Sysco in future fiscal years, including, but not limited to (1) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries; (2) a new provision designed to tax global intangible low-taxed income (GILTI); (3) creation of the base erosion anti-abuse tax (BEAT), a new minimum tax; (4) a new limitation on deductible interest; (5) repeal of the domestic production activity deduction; and (6) increased limitations on the deductibility of certain executive compensation.

The SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under Accounting Standards Codification Topic 740, “Income Taxes” (ASC 740). In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete, but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. For various reasons that are discussed in greater detail below, the company has not completed its accounting for the income tax effects of certain elements of the Tax Act. In cases where Sysco was able to make reasonable estimates of the effects of elements for which its analysis is not yet complete, the company recorded provisional adjustments. If Sysco was not yet able to make reasonable estimates of the impact of certain elements, the company has not recorded any adjustments related to those elements and has continued accounting for them in accordance with ASC 740 on the basis of the tax laws in effect before the Tax Act.

Our accounting for the following elements of the Tax Act is incomplete. However, the company was able to make reasonable estimates of certain effects and, therefore, recorded provisional adjustments of $35.8 million, which is our initial estimate of the following impacts of the Tax Act:

Reduction of U.S. federal corporate tax rate: As a result of enactment of the Tax Act, the company revised its estimated annual effective tax rate to reflect a change in the U.S. statutory tax rate. As noted above, the Tax Act reduces the U.S. federal corporate tax rate to 21% in our fiscal year; however, Section 15 of the Internal Revenue Code stipulates that the reduction in the corporate tax rate is applied to fiscal year taxpayers by computing a blended tax rate, based on the applicable tax rates before and after the effective date of the change in the statutory rate. When applied to Sysco’s fiscal year, this blended rate is estimated as 28% for fiscal 2018, a benefit of $64.7 million due to the retroactive application of this lower rate to the beginning of the company’s fiscal year. In addition, the company has recorded a provisional tax benefit of $14.5 million attributable to remeasuring Sysco’s accrued income taxes, deferred tax liabilities and deferred tax assets.

Transition Tax: The company recorded a discrete tax expense of $115.0 million attributable to the provisional impact of the transition tax. The transition tax is payable in eight annual installments beginning in our first quarter of fiscal 2019. As a result of the 8 year payment period, approximately $95.0 million attributable to the portion of the provisional transition tax not due within 12 months is located within other long-term liabilities in the consolidated balance sheet as of December 30, 2017.

Our accounting for the following elements of the Tax Act is incomplete, and we were not able to make reasonable estimates of the effects. Therefore, no provisional adjustments were recorded.

GILTI: The Tax Act creates a new requirement that certain income earned by controlled foreign corporations (CFCs) must be included currently in the gross income of the CFCs’ U.S. shareholder. GILTI is the excess of the shareholder’s “net CFC tested income” over the net deemed tangible income return, which is currently defined as the excess of (1) 10 percent of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expense taken into account in the determination of net CFC-tested income. Sysco will not be subject to the GILTI provisions until fiscal 2019. 

Because of the complexity of the new GILTI tax rules, the company is continuing to evaluate this provision of the Tax Act and the application of ASC 740. Under U.S. GAAP, the company is allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the


“period cost method”) or (2) factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method”). Sysco’s selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing our global income to determine whether the company expects to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. Because whether Sysco expects to have future U.S. inclusions in taxable income related to GILTI depends not only on our current structure and estimated future results of global operations but also the company’s intent and ability to modify its structure and/or its business, Sysco is not yet able to reasonably estimate the effect of this provision of the Tax Act. Therefore, the company has not made any adjustments related to potential GILTI tax in its financial statements and has not made a policy decision regarding whether to record deferred taxes on GILTI.

Executive Compensation Limitation: The Tax Act expands the definition under Section 162(m) of the Internal Revenue Code (“Section 162(m)”) of covered employee and provides that, for specified employees, status as a covered employee continues for all subsequent tax years, including years after the death of the individual, and, among other modifications, repeals the exception for performance-based compensation and commissions from the $1 million deduction limitation. In addition, the Tax Act provides for transitional guidance that will allow certain payments made under written and binding agreements entered into prior to November 2, 2017 to be treated as if they were made under the provisions of Section 162(m) that were in effect prior to enactment of the Tax Act. The company is in the process of gathering information on existing compensation arrangements for covered employees as well as assessing the impact of transitional guidance on the realizability of existing deferred tax assets related to compensation arrangements of its covered employees. As a result, the company has not made any adjustments related to impacts of the new executive compensation limitations in its financial statements.

Indefinite Reinvestment Assertion: The company is in the process of assessing the impact of the Tax Act on its indefinite reinvestment assertion and the company’s plans to determine any associated impact on the financial statements. Therefore, no adjustments have been made in its financial statements with respect to its indefinite reinvestment assertion.

Effective Tax Rate


Sysco’s effective tax rate is reflective of the jurisdictions where the company has operations. The effective tax rates for the secondthird quarter and first 2639 weeks of fiscal 20182022 were 37.11%21.31% and 34.71%23.18%, respectively. The As compared to the company’s statutory tax rate, the higher effective tax ratesrate for the secondthird quarter and first 2639 weeks of fiscal 2018 were negatively2022 was favorably impacted by the transition tax described above resulting from the Tax Act. These effective tax rates were impacted favorably by a net tax benefit of $79.2 million attributable to the change in the federal statutory tax rate described above, along with the impact of tax law changes in certain foreign jurisdictions and excess tax benefits of equity-based compensation that totaled $8.1$7.9 million and $14.8$10.8 million, respectively, and the impact of non-taxable corporate-owned life insurance policies that totaled $0.4 million and $1.4 million, respectively. Sysco began recognizingFor the first 39 weeks of fiscal 2022, these excesswere partially offset by the increase in our reserve for uncertain tax benefits within income tax expensepositions of $12.0 million recognized in the first quarter of fiscal 2018 due2022. The effective tax rates for the third quarter and first 39 weeks of fiscal 2021 were 13.54% and 15.72%, respectively. As compared to the adoption of ASU 2016-09. Thecompany’s statutory tax rate, the lower effective tax rate for the secondthird quarter and first 39 weeks of fiscal 2021 was impacted by the favorable impact of excess tax benefits of equity-based compensation that totaled $6.0 million and $12.6 million, respectively. The first 39 weeks of fiscal 2021 were also favorably impacted by the $7.6 million tax benefit attributable to the sale of the stock of Cake Corporation and the impact of changes in tax law in the U.K. of $5.5 million, both of which occurred in the first quarter of fiscal 2017 of 34.87% and the first 26 weeks of fiscal 2017 of 35.09% was favorably impacted by an increase in earnings in foreign jurisdictions due to the acquisition of the Brakes Group.2021.


Uncertain Tax Positions


As of December 30, 2017,April 2, 2022, the gross amount of unrecognized tax benefit and related accrued interest was $16.2$32.4 million and $11.5$5.4 million, respectively. It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain of the company’s unrecognized tax positions will increase or decrease in the next twelve months, either because Sysco prevails on positions challenged upon audit or because the company agrees to the disallowance.  Items that may cause changes to unrecognized tax benefits primarily include the consideration of various filing requirements in numerous states and the allocation of income and expense between tax jurisdictions.months. At this time, an estimate of the range of the reasonably possible change cannot be made.


Other


The determination of the company’s provision for income taxes requires judgment, the use of estimates and the interpretation and application of complex tax laws. The company’s provision for income taxes reflects a combination of income earned and taxed in the various U.S. federal and state, as well as foreign jurisdictions. Jurisdictional taxTax law changes, increases or decreases in permanent differences between book andversus tax items,basis differences, accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances, and the company’s change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.




25
12.

13.  COMMITMENTS AND CONTINGENCIES


Legal Proceedings


Sysco is engaged in various legal proceedings that have arisen but have not been fully adjudicated. The likelihood of loss for these legal proceedings, based on definitions within contingency accounting literature, ranges from remote to reasonably possible to probable. When probable and reasonably estimable, the losses have been accrued. BasedAlthough the final results of legal proceedings cannot be predicted with certainty, based on estimates of the range of potential losses associated with these matters, management does not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect upon the consolidated financial position or results of operations of the company.  However, the final results of legal proceedings cannot be predicted with certainty, and if the company failed to prevail in one or more of these legal matters, and the associated realized losses were to exceed the company’s current estimates of the range of potential losses, the company’s consolidated financial position or results of operations could be materially adversely affected in future periods.


13.14.  BUSINESS SEGMENT INFORMATION


The company hasSysco distributes food and related products to restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers. Our primary operations are located in North America and Europe. Under the accounting provisions related to disclosures about segments of an enterprise, we have aggregated certain of its operating segments into three3 reportable segments. “Other” financial information is attributable to the company’sour other operating segments that do not meet the quantitative disclosure thresholds.


•U.S. Foodservice Operations - primarily – includes (a) the company’s U.S. Broadline operations, which distribute a full line of food products, including custom-cut meat, seafood, produce, specialty Italian, specialty imports and seafood companies,a wide variety of non-food products and (b) our U.S. Specialty operations, which include our FreshPoint (ourfresh production distribution business, our Specialty Meats and Seafood Group specialty produce companies)protein operations and European Imports (aa number of small specialty import company);businesses that are not material to the operations of Sysco;
•International Foodservice Operations - primarily – includes broadline operations in Canada, Europe, Bahamas, Mexico, Costa Ricathe Americas (primarily outside of the U.S. and Panama, as well as a company that distributes to international customers;
SYGMA - our customized distribution subsidiary; and
Other - primarily our hotel supply operations and Sysco Labs,Europe), which includes our suite of technology solutions that help support the business needs of our customers and provide support for some of our business technology needs.

The Broadline operations distribute a full line of food products and a wide variety of non-food productsproducts. The Americas primarily consists of operations in Canada, Bahamas, Mexico, Costa Rica and Panama, as well as our operations that distribute to both traditionalinternational customers. Our European operations primarily consist of operations in the U.K., France, Ireland and chain restaurant customers, hospitals, schools, hotels, industrial caterers and other venues where foodservice products are served.  Sweden;
•SYGMA distributes a full line of food products and a wide variety of non-food products to certain – our U.S. customized distribution operations serving quick-service chain restaurant customer locations.locations; and

•Other – primarily our hotel supply operations, Guest Worldwide.
The accounting policies for the segments are the same as those disclosed by Sysco for its consolidated financial statements. Management evaluates the performance of each of our operating segments based on its respective operating income results. Corporate expensesOur Global Support Center generally includeincludes all expenses of the corporate office and Sysco’s shared services center.service operations. These also include all U.S. share-based compensation costs.



26


The following tables set forth certain financial information for Sysco’s reportable business segments.segments:


 13-Week Period Ended39-Week Period Ended
 Apr. 2, 2022Mar. 27, 2021Apr. 2, 2022Mar. 27, 2021
Sales:(In thousands)(In thousands)
U.S. Foodservice Operations$12,006,163 $8,360,241 $35,107,281 $24,205,917 
International Foodservice Operations2,834,089 1,723,126 8,535,608 5,854,608 
SYGMA1,794,837 1,580,695 5,270,193 4,625,244 
Other267,050 160,527 765,806 475,181 
Total$16,902,139 $11,824,589 $49,678,888 $35,160,950 
 13-Week Period Ended39-Week Period Ended
 Apr. 2, 2022Mar. 27, 2021Apr. 2, 2022Mar. 27, 2021
Operating income (loss):(In thousands)(In thousands)
U.S. Foodservice Operations$746,467 $545,502 $2,220,812 $1,619,162 
International Foodservice Operations7,760 (121,487)55,181 (201,973)
SYGMA4,362 12,937 (4,814)35,957 
Other(3,972)5,884 2,667 4,861 
Total segments754,617 442,836 2,273,846 1,458,007 
Global Support Center(258,888)(206,919)(701,526)(590,449)
Total operating income495,729 235,917 1,572,320 867,558 
Interest expense124,018 145,773 495,131 438,988 
Other (income) expense, net(13,777)(12,708)(27,705)(14,140)
Earnings before income taxes$385,488 $102,852 $1,104,894 $442,710 

 13-Week Period Ended 26-Week Period Ended
 Dec. 30, 2017 Dec. 31, 2016 Dec. 30, 2017 Dec. 31, 2016
Sales:(In thousands) (In thousands)
U.S. Foodservice Operations$9,681,225
 $9,085,565
 $19,530,167
 $18,566,681
International Foodservice Operations2,869,043
 2,625,949
 5,772,298
 5,354,310
SYGMA1,633,145
 1,520,182
 3,273,816
 3,024,874
Other228,077
 225,572
 485,633
 480,057
Total$14,411,490
 $13,457,268
 $29,061,914
 $27,425,922
        
 13-Week Period Ended 26-Week Period Ended
 Dec. 30, 2017 Dec. 31, 2016 Dec. 30, 2017 Dec. 31, 2016
Operating income:(In thousands) (In thousands)
U.S. Foodservice Operations$706,375
 $681,321
 $1,487,244
 $1,426,552
International Foodservice Operations52,438
 84,814
 129,084
 164,249
SYGMA3,353
 3,155
 8,198
 8,062
Other3,222
 3,793
 7,238
 11,794
Total segments765,388
 773,083
 1,631,764
 1,610,657
Corporate(233,106) (280,666) (476,390) (551,407)
Total operating income532,282
 492,417
 1,155,374
 1,059,250
Interest expense85,986
 72,231
 166,870
 145,854
Other expense (income), net(5,432) (2,320) (9,680) (9,536)
Earnings before income taxes$451,728
 $422,506
 $998,184
 $922,932

 Dec. 30, 2017 Jul. 1, 2017 Dec. 31, 2016
Assets:(In thousands)
U.S. Foodservice Operations$6,811,901
 $6,675,543
 $6,791,846
International Foodservice Operations6,662,574
 6,433,815
 6,143,372
SYGMA641,786
 625,653
 603,167
Other756,165
 448,885
 438,196
Total segments14,872,426
 14,183,896
 13,976,581
Corporate3,346,944
 3,572,759
 3,653,485
Total$18,219,370
 $17,756,655
 $17,630,066

14.  SUPPLEMENTAL GUARANTOR INFORMATION - SUBSIDIARY GUARANTEES

On January 19, 2011, the wholly owned U.S. Broadline subsidiaries of Sysco Corporation entered into full and unconditional guarantees of all outstanding senior notes and debentures of Sysco Corporation.  Borrowings under the company’s revolving credit facility supporting the company’s U.S. and Canadian commercial paper programs are also covered under these guarantees.  As of December 30, 2017, Sysco had a total of $8.8 billion in senior notes, debentures and commercial paper issuances outstanding that was covered by these guarantees.

All subsidiary guarantors are 100% owned by the parent company, all guarantees are full and unconditional and all guarantees are joint and several, except that the guarantee of any subsidiary guarantor with respect to a series of senior notes or debentures may be released under certain customary circumstances.  If we exercise our defeasance option with respect to the senior notes or debentures of any series, then any subsidiary guarantor effectively will be released with respect to that series.  Further, each subsidiary guarantee will remain in full force and effect until the earliest to occur of the date, if any, on which (1) the applicable


subsidiary guarantor shall consolidate with or merge into Sysco Corporation or any successor of Sysco Corporation or (2) Sysco Corporation or any successor of Sysco Corporation consolidates with or merges into the applicable subsidiary guarantor.

In conjunction with the preparation of our September 30, 2017 condensed consolidating financial statements, the company identified certain wholly owned U.S. Broadline subsidiaries that are guarantors of the outstanding senior notes and debentures of Sysco Corporation that were presented within Other Non-Guarantor Subsidiaries during fiscal 2017. The fiscal 2017 Condensed Consolidating Balance Sheet and Statements of Comprehensive Income and Cash Flows included herein have been revised to present such U.S. Broadline subsidiaries as guarantor subsidiaries.   The company assessed the materiality of the incorrect guarantor disclosures and concluded that the misstatement was not material to the financial statements as a whole, but has provided revised information below for the sake of consistency with the current period disclosures.

The following condensed consolidating financial statements present separately the financial position, comprehensive income and cash flows of the parent issuer (Sysco Corporation), the guarantors (certain of the company’s U.S. Broadline subsidiaries), and all other non-guarantor subsidiaries of Sysco (Other Non-Guarantor Subsidiaries) on a combined basis with eliminating entries.
 Condensed Consolidating Balance Sheet
 Dec. 30, 2017
 Sysco Certain U.S.
Broadline
Subsidiaries		 Other
Non-Guarantor
Subsidiaries		 Eliminations Consolidated
Totals
 (In thousands)
Current assets$189,553
 $3,803,349
 $4,279,266
 $—
 $8,272,168
Intercompany receivables2,945,188
 1,276,341
 —
 (4,221,529) —
Investment in subsidiaries7,623,839
 —
 —
 (7,623,839) —
Plant and equipment, net262,790
 2,018,365
 2,085,137
 —
 4,366,292
Other assets965,800
 55,820
 4,559,290
 —
 5,580,910
Total assets$11,987,170
 $7,153,875
 $10,923,693
 $(11,845,368) $18,219,370
Current liabilities$540,008
 $3,781,141
 $1,661,821
 $—
 $5,982,970
Intercompany payables—
 —
 4,221,529
 (4,221,529) —
Long-term debt8,239,844
 6,995
 65,650
 —
 8,312,489
Other liabilities938,716
 87,230
 595,839
 —
 1,621,785
Noncontrolling interest—
 —
 33,524
 —
 33,524
Shareholders’ equity2,268,602
 3,278,509
 4,345,330
 (7,623,839) 2,268,602
Total liabilities and shareholders’ equity$11,987,170
 $7,153,875
 $10,923,693
 $(11,845,368) $18,219,370



 Condensed Consolidating Balance Sheet
 July 1, 2017
 Sysco Certain U.S.
Broadline
Subsidiaries		 Other
Non-Guarantor
Subsidiaries		 Eliminations Consolidated
Totals
 (In thousands)
Current assets$177,495
 $3,786,055
 $4,069,888
 $—
 $8,033,438
Intercompany receivables4,444,035
 —
 —
 (4,444,035) —
Investment in subsidiaries6,451,994
 —
 —
 (6,451,994) —
Plant and equipment, net258,527
 2,039,761
 2,079,014
 —
 4,377,302
Other assets151,743
 516,126
 4,678,046
 —
 5,345,915
Total assets$11,483,794
 $6,341,942
 $10,826,948
 $(10,896,029) $17,756,655
Current liabilities$650,899
 $3,521,661
 $1,923,326
 $—
 $6,095,886
Intercompany payables—
 366,802
 4,077,233
 (4,444,035) —
Long-term debt7,588,041
 7,776
 65,060
 —
 7,660,877
Other liabilities863,338
 103,784
 568,415
 —
 1,535,537
Noncontrolling interest—
 —
 82,839
 —
 82,839
Shareholders’ equity2,381,516
 2,341,919
 4,110,075
 (6,451,994) 2,381,516
Total liabilities and shareholders’ equity$11,483,794
 $6,341,942
 $10,826,948
 $(10,896,029) $17,756,655

 Condensed Consolidating Balance Sheet
 Dec. 31, 2016
 Sysco Certain U.S.
Broadline
Subsidiaries		 Other
Non-Guarantor
Subsidiaries		 Eliminations Consolidated
Totals
 (In thousands)
Current assets$137,816
 $4,050,928
 $3,822,462
 $—
 $8,011,206
Intercompany receivables2,851,475
 —
 —
 (2,851,475) —
Investment in subsidiaries8,168,683
 —
 —
 (8,168,683) —
Plant and equipment, net364,716
 2,023,350
 1,943,063
 —
 4,331,129
Other assets408,475
 604,424
 4,274,832
 —
 5,287,731
Total assets$11,931,165
 $6,678,702
 $10,040,357
 $(11,020,158) $17,630,066
Current liabilities$286,277
 $2,307,139
 $2,458,870
 $—
 $5,052,286
Intercompany payables—
 35,463
 2,816,012
 (2,851,475) —
Long-term debt8,056,499
 6,904
 250,248
 —
 8,313,651
Other liabilities1,112,350
 163,640
 433,195
 —
 1,709,185
Noncontrolling interest—
 —
 78,905
 —
 78,905
Shareholders’ equity2,476,039
 4,165,556
 4,003,127
 (8,168,683) 2,476,039
Total liabilities and shareholders’ equity$11,931,165
 $6,678,702
 $10,040,357
 $(11,020,158) $17,630,066



 Condensed Consolidating Statement of Comprehensive Income
 For the 13-Week Period Ended Dec. 30, 2017
 Sysco Certain U.S.
Broadline
Subsidiaries		 Other
Non-Guarantor
Subsidiaries		 Eliminations Consolidated
Totals
 (In thousands)
Sales$—
 $8,754,170
 $6,169,238
 $(511,918) $14,411,490
Cost of sales—
 7,102,287
 5,121,735
 (511,918) 11,712,104
Gross profit—
 1,651,883
 1,047,503
 —
 2,699,386
Operating expenses198,800
 994,646
 973,658
 —
 2,167,104
Operating income (loss)(198,800) 657,237
 73,845
 —
 532,282
Interest expense (income) (1)
108,768
 (27,955) 5,173
 —
 85,986
Other expense (income), net(5,030) (1,137) 735
 —
 (5,432)
Earnings (losses) before income taxes(302,538) 686,329
 67,937
 —
 451,728
Income tax (benefit) provision(120,313) 262,820
 25,108
 —
 167,615
Equity in earnings of subsidiaries466,338
 —
 —
 (466,338) —
Net earnings284,113
 423,509
 42,829
 (466,338) 284,113
Other comprehensive income (loss)26,551
 —
 19,254
 (19,254) 26,551
Comprehensive income$310,664
 $423,509
 $62,083
 $(485,592) $310,664

(1)
Interest expense (income) includes $28.0 million of intercompany interest income, net, for certain of the U.S. Broadline subsidiaries, which is intercompany interest expense for Sysco Corporation for the second quarter ended December 30, 2017. There is an immaterial amount of intercompany interest expense related to Sysco Corporation for the Other Non-Guarantor Subsidiaries.

 Condensed Consolidating Statement of Comprehensive Income
 For the 13-Week Period Ended Dec. 31, 2016
 Sysco Certain U.S.
Broadline
Subsidiaries		 Other
Non-Guarantor
Subsidiaries		 Eliminations Consolidated
Totals
 (In thousands)
Sales$—
 $8,268,127
 $7,167,072
 $(1,977,931) $13,457,268
Cost of sales—
 6,676,641
 6,186,695
 (1,977,931) 10,885,405
Gross profit—
 1,591,486
 980,377
 —
 2,571,863
Operating expenses239,292
 956,196
 883,958
 —
 2,079,446
Operating income (loss)(239,292) 635,290
 96,419
 —
 492,417
Interest expense (income) (1)
100,947
 (33,610) 4,894
 —
 72,231
Other expense (income), net(5,295) (729) 3,704
 —
 (2,320)
Earnings (losses) before income taxes(334,944) 669,629
 87,821
 —
 422,506
Income tax (benefit) provision(116,996) 233,631
 30,704
 —
 147,339
Equity in earnings of subsidiaries493,115
 —
 —
 (493,115) —
Net earnings275,167
 435,998
 57,117
 (493,115) 275,167
Other comprehensive income (loss)(147,656) —
 (190,130) 190,130
 (147,656)
Comprehensive income$127,511
 $435,998
 $(133,013) $(302,985) $127,511

(1)
Interest expense (income) includes $33.6 million of intercompany interest income, net, for certain of the U.S. Broadline subsidiaries, which is intercompany interest expense for Sysco Corporation for the second quarter ended December 31, 2016. There is an immaterial amount of intercompany interest expense related to Sysco Corporation for the Other Non-Guarantor Subsidiaries.



 Condensed Consolidating Statement of Comprehensive Income
 For the 26-Week Period Ended Dec. 30, 2017
 Sysco Certain U.S.
Broadline
Subsidiaries		 Other Non-Guarantor Subsidiaries Eliminations Consolidated
Totals
 (In thousands)
Sales$—
 $17,775,826
 $12,289,551
 $(1,003,463) $29,061,914
Cost of sales—
 14,377,711
 10,194,612
 (1,003,463) 23,568,860
Gross profit—
 3,398,115
 2,094,939
 —
 5,493,054
Operating expenses396,664
 2,002,006
 1,939,010
 —
 4,337,680
Operating income (loss)(396,664) 1,396,109
 155,929
 —
 1,155,374
Interest expense (income) (1)
207,764
 (51,305) 10,411
 —
 166,870
Other expense (income), net(8,645) (1,559) 524
 —
 (9,680)
Earnings (losses) before income taxes(595,783) 1,448,973
 144,994
 —
 998,184
Income tax (benefit) provision(216,273) 512,383
 50,321
 —
 346,431
Equity in earnings of subsidiaries1,031,263
 —
 —
 (1,031,263) —
Net earnings651,753
 936,590
 94,673
 (1,031,263) 651,753
Other comprehensive income (loss)146,709
 —
 140,583
 (140,583) 146,709
Comprehensive income$798,462
 $936,590
 $235,256
 $(1,171,846) $798,462

(1)
Interest expense (income) includes $51.3 million of intercompany interest income, net, for certain of the U.S. Broadline subsidiaries, which is intercompany interest expense for Sysco Corporation. There is an immaterial amount of intercompany interest expense related to Sysco Corporation for the Other Non-Guarantor Subsidiaries.

 Condensed Consolidating Statement of Comprehensive Income
 For the 52-Week Period Ended Jul. 1, 2017
 Sysco Certain U.S.
Broadline
Subsidiaries		 Other Non-Guarantor Subsidiaries Eliminations Consolidated
Totals
 (In thousands)
Sales$—
 $34,325,884
 $22,862,131
 $(1,816,876) $55,371,139
Cost of sales—
 27,690,469
 18,940,039
 (1,816,876) 44,813,632
Gross profit—
 6,635,415
 3,922,092
 —
 10,557,507
Operating expenses931,498
 3,907,829
 3,665,009
 —
 8,504,336
Operating income (loss)(931,498) 2,727,586
 257,083
 —
 2,053,171
Interest expense (income) (1)
405,030
 (122,012) 19,860
 —
 302,878
Other expense (income), net(23,740) (1,116) 8,919
 —
 (15,937)
Earnings (losses) before income taxes(1,312,788) 2,850,714
 228,304
 —
 1,766,230
Income tax (benefit) provision(463,598) 1,006,703
 80,622
 —
 623,727
Equity in earnings of subsidiaries1,991,693
 —
 —
 (1,991,693) —
Net earnings1,142,503
 1,844,011
 147,682
 (1,991,693) 1,142,503
Other comprehensive income (loss)95,381
 —
 (9,317) 9,317
 95,381
Comprehensive income$1,237,884
 $1,844,011
 $138,365
 $(1,982,376) $1,237,884

(1)
Interest expense (income) includes $135.9 million of intercompany interest income, net, for certain of the U.S. Broadline subsidiaries, which is intercompany interest expense for Sysco Corporation. There is an immaterial amount of intercompany interest expense related to Sysco Corporation for the Other Non-Guarantor Subsidiaries.



 Condensed Consolidating Statement of Comprehensive Income
 For the 26-Week Period Ended Dec. 31, 2016
 Sysco Certain U.S.
Broadline
Subsidiaries		 Other Non-Guarantor Subsidiaries Eliminations Consolidated
Totals
 (In thousands)
Sales$—
 $16,974,279
 $12,874,491
 $(2,422,848) $27,425,922
Cost of sales—
 13,689,355
 10,895,633
 (2,422,848) 22,162,140
Gross profit—
 3,284,924
 1,978,858
 —
 5,263,782
Operating expenses457,195
 1,939,269
 1,808,068
 —
 4,204,532
Operating income (loss)(457,195) 1,345,655
 170,790
 —
 1,059,250
Interest expense (income) (1)
191,105
 (54,820) 9,569
 —
 145,854
Other expense (income), net(20,186) (969) 11,619
 —
 (9,536)
Earnings (losses) before income taxes(628,114) 1,401,444
 149,602
 —
 922,932
Income tax (benefit) provision(220,420) 491,799
 52,499
 —
 323,878
Equity in earnings of subsidiaries1,006,748
 —
 —
 (1,006,748) —
Net earnings599,054
 909,645
 97,103
 (1,006,748) 599,054
Other comprehensive income (loss)(224,478) —
 (279,683) 279,683
 (224,478)
Comprehensive income$374,576
 $909,645
 $(182,580) $(727,065) $374,576

(1)
Interest expense (income) includes $54.8 million of intercompany interest income, net, for certain of the U.S. Broadline subsidiaries, which is intercompany interest expense for Sysco Corporation. There is an immaterial amount of intercompany interest expense related to Sysco Corporation for the Other Non-Guarantor Subsidiaries.

 Condensed Consolidating Cash Flows
 For the 26-Week Period Ended Dec. 30, 2017
 Sysco Certain U.S.
 Broadline
Subsidiaries		 Other
Non-Guarantor
Subsidiaries		 Eliminations Consolidated
Totals
 (In thousands)
Cash flows provided by (used for):         
Operating activities$252,770
 $195,650
 $484,784
 $—
 $933,204
Investing activities(104,914) (112,513) (332,538) 147,622
 (402,343)
Financing activities(159,309) (3,890) 893
 (147,622) (309,928)
Effect of exchange rates on cash—
 —
 23,510
 —
 23,510
Net increase (decrease) in cash and cash equivalents(11,453) 79,247
 176,649
 —
 244,443
Cash and cash equivalents at the beginning of period111,576
 18,788
 739,138
 —
 869,502
Cash and cash equivalents at the end of period$100,123
 $98,035
 $915,787
 $—
 $1,113,945



 Condensed Consolidating Cash Flows
 For the 52-Week Period Ended Jul. 1, 2017
 Sysco Certain U.S.
 Broadline
Subsidiaries		 Other
Non-Guarantor
Subsidiaries		 
Eliminations (1)
 Consolidated
Totals
 (In thousands)
Cash flows provided by (used for):         
Operating activities$1,535,775
 $3,023,400
 $658,229
 $(2,978,000) $2,239,404
Investing activities(3,274,566) (261,330) (175,565) 127,000
 (3,584,461)
Financing activities(1,526,045) (2,777,661) (229,931) 2,851,000
 (1,682,637)
Effect of exchange rates on cash—
 —
 (22,104) —
 (22,104)
Net increase (decrease) in cash and cash equivalents(3,264,836) (15,591) 230,629
 —
 (3,049,798)
Cash and cash equivalents at the beginning of period3,376,412
 34,379
 508,509
 —
 3,919,300
Cash and cash equivalents at the end of period$111,576
 $18,788
 $739,138
 $—
 $869,502

(1)
Represents primarily inter-company dividends paid from the subsidiaries to the parent, Sysco Corporation.

 Condensed Consolidating Cash Flows
 For the 26-Week Period Ended Dec. 31, 2016
 Sysco Certain U.S.
 Broadline
Subsidiaries		 Other
Non-Guarantor
Subsidiaries		 Consolidated
Totals
 (In thousands)
Cash flows provided by (used for):       
Operating activities$292,547
 $143,092
 $203,762
 $639,401
Investing activities(3,127,225) (102,923) 45,634
 (3,184,514)
Financing activities(430,216) (17,815) (68,251) (516,282)
Effect of exchange rates on cash—
 —
 (10,613) (10,613)
Net increase (decrease) in cash and cash equivalents(3,264,894) 22,354
 170,532
 (3,072,008)
Cash and cash equivalents at the beginning of period3,376,412
 34,379
 508,509
 3,919,300
Cash and cash equivalents at the end of period$111,518
 $56,733
 $679,041
 $847,292


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations


This discussion should be read in conjunction with our consolidated financial statements as of July 1, 2017,3, 2021, and for the fiscal year then ended, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, both contained in our Annual Report on Form 10-K for the fiscal year ended July 1, 20173, 2021 (our 2017fiscal 2021 Form 10-K), as well as the consolidated financial statements (unaudited) and notes to the consolidated financial statements (unaudited) contained in this report.


Sysco’s results of operations for fiscal 2018 and 2017 are impacted by restructuring costs consisting of (1) expenses associated with our revised business technology strategy announced in fiscal 2016, as a result of which we incurred costs to convert to a modernized version of our established platform as opposed to completing the implementation of an Enterprise Resource Planning system (ERP) , (2) professional fees related to our three-year strategic plan, (3) restructuring expenses within our Brakes Group operations, and (4) severance charges related to restructuring. In addition, fiscal 2018 results of operations are impacted by business technology transformation initiative costs.
Highlights

Our results of operations for fiscal 2018 and 2017 are also impacted by the following acquisition-related items: (1) intangible amortization expense and (2) integration costs. All acquisition-related costs in fiscal 2018 and 2017 that have been excluded relate to the fiscal 2017 acquisition of Cucina Lux Investments Limited (the Brakes Acquisition), discussed in Note 4, "Acquisitions." The Brakes Acquisition also resulted in non-recurring tax expense in fiscal 2017, primarily from non-deductible integration costs. Sysco’s results of operations for fiscal 2018 are also impacted by reform measures passed as part of the Tax Cuts and Jobs Act of 2017 (the Tax Act) passed on December 22, 2017 by the United States (U.S.) government. The impact for fiscal 2018 includes (1) a provisional estimate of a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries and (2) a net benefit from remeasuring Sysco’s accrued income taxes, deferred tax liabilities and deferred tax assets due to the changes in tax rates. These fiscal 2018 and fiscal 2017 items are collectively referred to as "Certain Items."

Sysco is also providing net earnings and diluted earnings per share that are further adjusted due to changes in the statutory tax rate that resulted from the Tax Act. The Tax Act reduces the U.S. federal corporate tax rate to 21% in our fiscal year; however, Section 15 of the Internal Revenue Code stipulates that the reduction in the corporate tax rate is applied to fiscal year taxpayers by computing a blended tax rate, based on the applicable tax rates before and after the effective date of the change in the statutory rate. When applied to Sysco’s fiscal year, this blended rate is estimated as 28% for fiscal 2018 and produced a one-time estimated net tax benefit of $64.7 million that was recorded in the secondthird quarter of fiscal 2018 due2022 results were strong, reflecting sequential sales growth improvements and accelerating market share gains. Our share gains in the U.S. and International segments continued to retroactive applicationaccelerate and demonstrated the impact of the 28% rateour Recipe for Growth strategy on our business. Additionally, our teams made significant improvements in operating expense leverage, with lower business recovery costs, good progress in our operations productivity performance efforts and continued re-investments to the beginningdrive profitable growth. See below for a comparison of our fiscal year.

More information on the rationale for the use of these items and reconciliations2022 results to generally accepted accounting principles (GAAP) numbers can be found under “Non-GAAP Reconciliations.”

Highlights and Trends

Highlights

Sysco’sour fiscal 2021 results, for the second quarter of fiscal 2018 represent continued momentum in our local case growth and overall sales results achieved while balancing some gross profit and expense challenges. Our results also include significant charges, as well as benefits, due to U.S. tax reform. Our operating income, net earnings and earnings per share, both including and excluding Certain Items increased for the second quarter of fiscal 2018, as compared to the corresponding period in fiscal 2017, primarily due to these factors. We remain confident in our ability to meet our full-year fiscal 2018 financial targets.(as defined below).




Comparisons of results from the secondthird quarter of fiscal 20182022 to the secondthird quarter of fiscal 2017:2021 are presented below:


•Sales:
◦increased 7.1%, or $1.0 billion, to $14.4 billion;
◦increased 42.9%, or $5.1 billion, to $16.9 billion;
•Operating income:
◦increased 8.1%, or $39.9 million, to $532.3 million;
◦adjusted operating income increased 3.9%, or $21.6 million, to $579.5 million;
◦increased 110.1%, or $259.8 million, to $495.7 million;
◦adjusted operating income increased 124.6%, or $319.2 million, to $575.4 million;
•Net earnings:
◦increased 3.3%, or $8.9 million, to $284.1 million;
◦adjusted net earnings increased 29.2%, or $93.1 million, to $411.9 million;
◦after further adjusting for the one-time benefit related to the tax rate change, adjusted net earnings increased 8.9%, or $28.4 million, to $347.1 million;
◦increased 241.1%, or $214.4 million, to $303.3 million;
◦adjusted net earnings increased 216.1%, or $248.1 million, to $362.9 million;
•Basic earnings per share:
◦increased 10.0%, or $0.05, to $0.55 per share;
27

◦increased 252.9%, or $0.43, to $0.60 per share;
•Diluted earnings per share:
◦increased 8.0%, or $0.04, to $0.54 per share;
◦adjusted diluted earnings per share increased 34.5%, or $0.20, to $0.78 per share; and
◦after further adjusting for the one-time benefit related to the tax rate change, adjusted diluted earnings per share increased 13.8%, or $0.08, to $0.66 per share.

◦increased 247.1%, or $0.42, to $0.59 per share;
◦adjusted diluted earnings per share increased 222.7%, or $0.49, to $0.71 in fiscal 2022;
•EBITDA:
◦increased 65.2%, or $277.6 million, to $703.3 million; and
◦adjusted EBITDA increased 72.8%, or $318.4 million, to $755.8 million.

Comparisons of results from the first 2639 weeks of fiscal 20182022 to the first 2639 weeks of fiscal 2017:2021 are presented below:

•Sales:
◦increased 6.0%, or $1.6 billion, to $29.1 billion;
◦increased 41.3%, or $14.5 billion, to $49.7 billion;
•Operating income:
◦increased 9.1%, or $96.1 million, to $1.2 billion;
◦adjusted operating income increased 4.8%, or $56.6 million, to $1.2 billion;
◦increased 81.2%, or $704.8 million, to $1.6 billion;
◦adjusted operating income increased 105.4%, or $901.2 million, to $1.8 billion;
•Net earnings:
◦increased 8.8%, or $52.7 million, to $651.8 million; 
◦adjusted net earnings increased 16.0%, or $111.5 million, to $806.4 million;
◦after further adjusting for the one-time benefit related to the tax rate change, adjusted net earnings increased 6.7%, or $46.7 million, to $741.6 million;
◦increased 127.5%, or $475.7 million, to $848.8 million;
◦adjusted net earnings increased 189.9%, or $710.6 million, to $1.1 billion;
•Basic earnings per share:
◦increased 13.8%, or $0.15, to $1.24 per share;
◦increased 127.4%, or $0.93, to $1.66 per share;
•Diluted earnings per share:
◦increased 13.9%, or 0.15, to 1.23 per share;
◦adjusted diluted earnings per share increased 21.6% , or $0.27, to $1.52 per share; and
◦after further adjusting for the one-time benefit related to the tax rate change, adjusted diluted earnings per share increased 12.0%, or $0.15, to $1.40 per share.

See “Non-GAAP Reconciliations” for an explanation◦increased 126.0%, or $0.92, to $1.65 per share; and
◦adjusted diluted earnings per share increased 189.0%, or $1.38, to $2.11 in fiscal 2022;
•EBITDA:
◦increased 52.5%, or $747.5 million, to $2.2 billion; and
◦adjusted EBITDA increased 65.9%, or $905.4 million, to $2.3 billion.

The discussion of theour results includes certain non-GAAP financial measures, listed above.including EBITDA and adjusted EBITDA, that we believe provide important perspective with respect to underlying business trends. Other than free cash flow, any non-GAAP financial measures will be denoted as adjusted measures to remove the impact of restructuring and transformational project costs consisting of: (1) restructuring charges, (2) expenses associated with our various transformation initiatives and (3) facility closure and severance charges; acquisition-related costs consisting of: (1) intangible amortization expense and (2) acquisition costs and due diligence costs related to our acquisitions; and the reduction of bad debt expense previously recognized in fiscal 2020 due to the impact of the COVID-19 pandemic on the collectability of our pre-pandemic trade receivable balances. Our results for the first 39 weeks of fiscal 2022 were also impacted by (1) a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory (2) debt extinguishment costs and (3) the increase in reserves for uncertain tax positions. Our results for the first 39 weeks of fiscal 2021 were also impacted by losses on the sale of businesses.


The fiscal 2022 and fiscal 2021 items discussed above are collectively referred to as “Certain Items.” The results of our foreign operations can be impacted by changes in exchange rates applicable to converting from local currencies to U.S. dollars. We measure our total Sysco and our International Foodservice Operations results on a constant currency basis.

Trends


A favorable macro-economic environment propelledEconomic and Industry Trends

The food-away-from-home sector continues to experience an overall recovery as compared to fiscal 2021. Our third quarter began with disruptions from the Omicron variant of COVID-19, which negatively impacted consumer demand and our customers due to the reintroduction of significant restrictions on their businesses. These conditions persisted through February; however, we experienced a strong market rebound beginning in late February and during March, as the impact of this variant lessened and restrictions eased.

Sales and Gross Profit Trends

28

Our sales and gross profit performance can be influenced by steady spending from businessesmultiple factors, including price, volume, inflation, customer mix and households has led to improved gross domestic product trendsmix. The most significant factor affecting performance in the Unites States. Currentthird quarter of fiscal 2022 was volume growth, as we experienced strong results from both independent and chain customers, driven by a 14.1% improvement in local case volume and an 18.8% improvement in total case volume within our U.S. Broadline operations, in each instance as compared to the third quarter of fiscal 2021. This growth enabled us to gain market conditionsshare during the third quarter of fiscal 2022. We have two customer business segments that remain impacted by the COVID-19 pandemic, namely “Business and Industry” (which includes, for example, office cafeterias) and “Travel and Hospitality.” We anticipate that both of these segments will make progress in their recovery in future quarters, which will contribute to our continued volume growth. We are on track to exceed our stated goal of achieving growth at a rate of 1.2 times the industry in fiscal 2022, and we believe that our Recipe for Growth strategy will enable us to accelerate over the next three years and grow at 1.5 times the pace of the industry by the end of fiscal 2024.

Product cost inflation has also been a driver of our sales and gross profit performance. We experienced inflation at a rate of 15.8% and 14.4% in the third quarter and first 39 weeks of fiscal 2022, respectively, in our U.S. for foodservice operators remain somewhat favorable, as sales at restaurants continue to rise, offsetting lower traffic counts. Economic growthBroadline operations, primarily driven by inflation in the international marketspoultry, produce and dairy categories. We have been successful in managing our inflation, resulting in an increase in gross profit dollars. Gross margin decreased 12 and 45 basis points in the third quarter and the first 39 weeks of fiscal 2022, respectively, as compared to the same prior year periods, largely due to the impact of product cost inflation. We are concerned about the long-term effect of elevated inflation, and we are taking actions to address it. We are actively working to improve our cost of goods sold to Sysco, so that we can pass along value to our customers. We are also pursuing Sysco brand penetration, as we believe that Sysco products can save our customers money. Lastly, we are working with our customers to help them with their menu design and locate product alternatives to avoid highly inflationary items and sub-categories.

Operating Expense Trends

Total operating expenses increased 33.4% and 31.0% during the third quarter and first 39 weeks of fiscal 2022, respectively, as compared to the third quarter and first 39 weeks of fiscal 2021, driven by the variable costs associated with significantly increased volumes, our transformation initiatives under our Recipe for Growth strategy, investments in business recovery costs and expenses due to lower productivity resulting from high turnover in our teams. Our operating results in the third quarter and first 39 weeks of fiscal 2022 included $48 million and $116 million, respectively, of operating expense investments for our Recipe for Growth strategy. We are making these necessary investments to ensure that we can serve our customers to enable us to continue increasing market share, profitably, at the national and local level. We have made a purposeful response to the COVID-generated labor and safety environment in which we operate is mostly positive, including modest growthare operating, with $35 million and $165 million in business recovery operating investments such as recruiting costs, hiring marketing, vaccination promotion, contract labor and sign-on and retention bonuses during the third quarter and first 39 weeks of fiscal 2022, respectively. We continued to improve our staffing levels in the foodservice markets. Food cost inflationthird quarter of fiscal 2022, primarily for transportation and warehouse staff. Incremental training and overtime costs were approximately $30 million in our United Kingdom (U.K.) business continues to pressure our pricing,the third quarter of fiscal 2022, which has impacted our volume growth and gross margins.

Our operating income and net earnings duringis lower than the approximately $40 million for these same costs in the second quarter of fiscal 2018 have been affected by a challenging in-bound freight environment, which imposes cost pressures on2022. These efforts, along with productivity improvements from prior quarters, are lowering our gross profit dollars. The industry is facing driver availability challenges, leadingbusiness recovery costs, and we expect these expenses to increased lane rates from carriers. As a result, our expenses have increased, as we have utilized more spot ratescontinue to transport goods. We are actively working to mitigate these risks by providing a long-term solution and ensuring that we are a preferred customer for various carriers. Our U.S. Broadline operations experienced product cost inflation at a rate of 3.3% fordecline in the secondfourth quarter of fiscal 2018, which increased sales2022. Even with those significant business recovery and gross profits. The pacetransformation operating expense investments, offset by the continued benefit of inflationour cost-savings efforts, we leveraged our adjusted operating expense structure.

Income Tax Trends

Our provision for income taxes primarily reflects a combination of income earned and taxed in the various U.S. federal and state, as well as foreign, jurisdictions. Tax law changes, increases or decreases in book versus tax basis differences, accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances, and our change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.

Our effective tax rate has been greaterinfluenced by discrete events, such as tax law changes and excess tax benefits attributable to equity compensation exercises as discussed in meat, dairy and produce categories. Our operating expenses have increased dueNote 12, “Income Taxes,” in the Notes to increased investmentConsolidated Financial Statements in Item 1 of Part I of this Form 10-Q.

Comparisons to Fiscal 2019

In assessing our salesforce and national customer start-up costs infinancial performance through the business recovery, Sysco’s management compared our U.S. operations. Our continued transformation investments and integration costs in Europe have also resulted


in increased operating expense. Fuel prices are increasingresults in fiscal 20182022 against our corresponding fiscal 2019 results.

Comparisons of results from the third quarter of fiscal 2022 to the third quarter of fiscal 2019 are presented below:

•Sales:
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◦increased 15.3%, or $2.2 billion, as compared to fiscal 2017 which has led to increased fuel expenses. Partially offsetting these increases was a decline in our depreciation expense, as our former ERP system was fully depreciated by the end of fiscal 2017. We expect to see a benefit of approximately $502019;
•Operating income:
◦decreased 6.4%, or $33.9 million, in reduced depreciation expense, net, throughout fiscal 2018 as compared to fiscal 2017.2019;

◦adjusted operating income decreased 7.2%, or $44.8 million, as compared to fiscal 2019;
•EBITDA:
◦decreased 0.9%, or $6.3 million, as compared to fiscal 2019;
◦adjusted EBITDA decreased 2.7%, or $21.1 million, as compared to fiscal 2019;
•Diluted earnings per share:
◦decreased 30.6%, or $0.26, as compared to fiscal 2019; and
◦adjusted diluted earnings per share decreased 10.1%, or $0.08, as compared to fiscal 2019.

Comparisons of results from the first 39 weeks of fiscal 2022 to the first 39 weeks of fiscal 2019 are presented below:

•Sales:
◦increased 11.3%, or $5.0 billion, as compared to fiscal 2019;
•Operating income:
◦decreased 2.3%, or $37.3 million, as compared to fiscal 2019;
◦adjusted operating income decreased 8.3%, or $159.0 million, as compared to fiscal 2019;
•EBITDA:
◦increased 0.04%, or $0.9 million, as compared to fiscal 2019;
◦adjusted EBITDA decreased 4.5%, or $107.3 million, as compared to fiscal 2019;
•Diluted earnings per share:
◦decreased 24.0%, or $0.52, as compared to fiscal 2019; and
◦adjusted diluted earnings per share decreased 13.9%, or $0.34, as compared to fiscal 2019.

Key items impacting the comparability of Sysco’s results in the third quarter of fiscal 2022 to the third quarter of fiscal 2019 included the one-time and short-term expenses associated with the business recovery and the operating expense investments towards our Recipe for Growth strategy.

Mergers and Acquisitions

We continue to focus on mergers and acquisitions as a part of our growth strategy, where we plan to reinforce our existing businesses, while cultivating new channels, new segments and new capabilities. We have completed the following acquisitions thus far in fiscal 2022:

•In the first quarter of fiscal 2022, we acquired Greco and Sons, a leading independent specialty Italian distributor in the United States.
•In the first quarter of fiscal 2022, we acquired a specialty food distributor in the United Kingdom.
•In the second quarter of fiscal 2018,2022, we acquired Paragon Foodservice, a regional broadline fresh produce distributor in western Pennsylvania. The acquisition will operate as part of Sysco’s U.S. specialty produce business.
•In the U.S. government enactedthird quarter of fiscal 2022, we acquired The Coastal Companies, a leading fresh produce distributor and value-added processer on the Tax Act, comprehensive tax legislation, that decreasedEast Coast.

Strategy

Our purpose is “Connecting the federal corporate tax rate from 35%World to 21%. As a result of the tax reform measures,Share Food and Care for One Another,” which we revised our estimated annual effective tax rate to reflect the change in the enacted federal statutory rate, effective retroactive to July 2, 2017. Sysco uses a 28% rate rather than 21% because the law was enacted during the midpoint of the company’s fiscal year, requiringbelieve will allow us to use a blended average rate. The effectgrow substantially faster than the foodservice distribution industry and deliver profitable growth through our “Recipe for Growth” transformation. This growth transformation is supported by strategic pillars that we believe will allow us to better serve our customers, including our digital, products and solutions, supply chain, customer teams, and future horizons strategies.

Our various business transformation initiatives remain on track, such as the centralized pricing tool project, which is substantially complete for U.S. local customers, and which enables Sysco to strategically manage the high levels of this change in the estimated annual effective tax rate was to decrease our income tax expense for the second quarter and first 26 weeks of fiscal 2018 by $64.7 million. We expectinflation that the company’s U.S. federal statutory tax rate in future years will be 21%. This will contribute to a lower overall effective tax rate. We expect the second half of our fiscal 2018 earnings per share to be positively impacted by $0.09 per share to $0.13 per share as a result of tax reform changes related to the on going effective tax rate. As discussed in Note 11, “Income Taxes,” we have recorded provisional estimates for some components of the Tax Act and will refine estimates and determine applicability for other components in future periods.

In the first 26 weeks of fiscal 2018, we prospectively adopted a new accounting standard related to improvements in share-based payment accounting. As discussed in Note 2, "Changes in Accounting," excess tax benefits, or detriments, of equity-based compensation are now recorded within income tax expense in the consolidated results of operations. In the first 26 weeks of fiscal 2018, we recognized tax benefits that totaled $30.8 million or $0.06 on a per share basis, primarily from stock option exercises that occurred during this period. These tax benefits are difficult to predict and depend on factorscurrently experiencing. Other initiatives, such as our stock pricepersonalization engine, continue to expand, while the sales transformation is helping our sales teams continue to win new business. Additionally, we are continuing to improve the efficiency of our organization, such as regionalizing the leadership structure of our U.S. Broadline and option exercise activity.

specialty business, as we reduce our structural expenses to fund our capital investments. In the secondthird quarter of fiscal 2018,2022, we acquired Kerr Pacific Corporation d/b/converted our U.S. broadline operations from an industry traditional five-day work week to a HFM Foodservice (HFM),full six-day delivery model, which provides a Hawaii-based broadline distributor with approximately $290 millionbetter schedule for our associates, increases efficiency in annual sales. HFM has been providing quality serviceour operations, increases weekly throughput without the need for additional
30

trucks or building expansions and increases our ability to Hawaii and Guam for over 50 years. Acquiring HFM provides Sysco with direct accessdeliver to the growing Hawaiian market and is in clear alignment with our strategy for disciplined, profitable growth of the business. HFM iscustomers on time. From these actions as a part of our U.S. Foodservice Operations.

InRecipe for Growth, we can see the second quarterbenefits of our developing capabilities in the new customers we are winning and in the progress we are making towards increasing market share. We expect that, as our Recipe for Growth matures, the impact on our top-line growth will continue to accelerate. We are committed to profitably growing 1.2 times the market for fiscal 2022 and 1.5 times the market by the end of fiscal 2018, we acquired2024, the remaining 50% interest in our joint venture in Costa Rica. Sysco initially acquired a 50% interest in the foodservice company in fiscal 2015.

Strategy

Fiscal 2018 is the finalthird year in a three-year plan that was established in fiscal 2016. This initial three-year plan excludes the results of the Brakes Group. In the second quarter of fiscal 2018, we outlined our new three-year plan, including our financial objectives through fiscal 2020, which will enable us to continue transforming our business, while improving the customer experience of doing business with Sysco. Our new three-year plan includes the results of the Brakes Group. Our key strategic priorities are: enriching the customer experience, delivering operational excellence, optimizing the business and activating the power of our people. These strategies will help us achieve our new target financial objectives, including (1) reaching $650 million to $700 million of adjusted operating income growth as compared to fiscal 2017, (2) growing earnings per share faster than operating income, and (3) achieving 16% in adjusted return on invested capital for existing businesses. We do not expect our improvements to occur evenly on a quarterly basis. In accomplishing these goals, we believe by fiscal 2020 we could also achieve (1) sales growth of 4% to 4.5%, (2) adjusted operating income growth of 9%, (3) adjusted net earnings improvement of 9%, and (4) adjusted diluted earnings per share results in the range of $3.40 to $3.50 in fiscal 2020. The key levers to achieve these targets include an emphasis on accelerating locally managed customer case growth and driving leverage between gross profit growth and expense growth. Our operating income goal was established on an adjusted basis given Certain Item charges that were applicable in fiscal 2018, which primarily were due to restructuring and Brakes-related acquisitions costs. The objectives targeted in our new three-year plan are subject to change, as we continue to assess the impact of the recently enacted U.S. tax reform; however, we anticipate our three-year plan earnings’ targets will be positively impacted.strategic plan.


See “Non-GAAP Reconciliations” for an explanation of these non-GAAP financial measures.


Resultsof Operations


The following table sets forth the components of our consolidated results of operations expressed as a percentage of sales for the periods indicated:
 13-Week Period Ended39-Week Period Ended
 Apr. 2, 2022Mar. 27, 2021Apr. 2, 2022Mar. 27, 2021
Sales100.0 %100.0 %100.0 %100.0 %
Cost of sales82.2 82.0 82.1 81.7 
Gross profit17.8 18.0 17.9 18.3 
Operating expenses14.9 16.0 14.7 15.8 
Operating income2.9 2.0 3.2 2.5 
Interest expense0.7 1.2 1.0 1.2 
Other (income) expense, net(0.1)(0.1)— — 
Earnings before income taxes2.3 0.9 2.2 1.3 
Income taxes0.5 0.1 0.5 0.2 
Net earnings1.8 %0.8 %1.7 %1.1 %
 13-Week Period Ended 26-Week Period Ended
 Dec. 30, 2017 Dec. 31, 2016 Dec. 30, 2017 Dec. 31, 2016
Sales100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales81.3
 80.9
 81.1
 80.8
Gross profit18.7
 19.1
 18.9
 19.2
Operating expenses15.0
 15.5
 14.9
 15.3
Operating income3.7
 3.7
 4.0
 3.9
Interest expense0.6
 0.5
 0.6
 0.5
Other expense (income), net—
 —
 —
 —
Earnings before income taxes3.1
 3.1
 3.4
 3.4
Income taxes1.2
 1.1
 1.2
 1.2
Net earnings2.0 % 2.0 % 2.2 % 2.2 %


The following table sets forth the change in the components of our consolidated results of operations expressed as a percentage increase or decrease over the comparable period in the prior year:
 13-Week Period Ended 26-Week Period Ended
Sales7.1 % 6.0 %
Cost of sales7.6
 6.3
Gross profit5.0
 4.4
Operating expenses4.2
 3.2
Operating income8.1
 9.1
Interest expense19.0
 14.4
Other expense (income), net (1) (2)
134.1
 1.5
Earnings before income taxes6.9
 8.2
Income taxes13.8
 7.0
Net earnings3.3 % 8.8 %
Basic earnings per share10.0 % 13.8 %
Diluted earnings per share8.0
 13.9
Average shares outstanding(4.4) (4.7)
Diluted shares outstanding(4.2) (4.6)
(1)
Other expense (income), net was income of $5.4 million in the second quarter of fiscal 2018 and income of $2.3 million in the second quarter of fiscal 2017.
(2)
Other expense (income), net was income of $9.7 million in the first 26 weeks of fiscal 2018 and income of $9.5 million in the first 26 weeks of fiscal 2017.

 13-Week Period Ended39-Week Period Ended
Apr. 2, 2022Apr. 2, 2022
Sales42.9 %41.3 %
Cost of sales43.2 42.1 
Gross profit42.0 37.8 
Operating expenses33.4 31.0 
Operating income110.1 81.2 
Interest expense(14.9)12.8 
Other (income) expense, net (1) (2)
8.4 95.9 
Earnings before income taxes274.8 149.6 
Income taxes490.0 268.0 
Net earnings241.1 %127.5 %
Basic earnings per share252.9 %127.4 %
Diluted earnings per share247.1 126.0 
Average shares outstanding(0.5)0.1 
Diluted shares outstanding(0.5)0.3 



(1)Other (income) expense, net was income of $13.8 million and income of $12.7 million in the third quarter of fiscal 2022 and fiscal 2021, respectively.
(2)Other (income) expense, net was income of $27.7 million and income of $14.1 million in the first 39 weeks of fiscal 2022 and fiscal 2021, respectively.

31


The following representstables represent our results by reportable segments:
 13-Week Period Ended Apr. 2, 2022
 U.S. Foodservice OperationsInternational Foodservice OperationsSYGMAOtherGlobal Support CenterConsolidated
Totals
 (In thousands)
Sales$12,006,163 $2,834,089 $1,794,837 $267,050 $— $16,902,139 
Sales increase (decrease)43.6 %64.5 %13.5 %66.4 %42.9 %
Percentage of total71.0 %16.8 %10.6 %1.5 %99.9 %
Operating income (loss)$746,467 $7,760 $4,362 $(3,972)$(258,888)$495,729 
Operating income (loss) increase (decrease)36.8 %NM(66.3)%NM25.1 %NM
Percentage of total segments98.9 %1.0 %0.6 %(0.5)%100.0 %
Operating income (loss) as a percentage of sales6.2 %0.3 %0.2 %(1.5)%2.9 %
 13-Week Period Ended Dec. 30, 2017
 U.S. Foodservice Operations International Foodservice Operations SYGMA Other Corporate Consolidated
Totals
 (In thousands)
Sales$9,681,225
 $2,869,043
 $1,633,145
 $228,077
 $—
 $14,411,490
Sales increase (decrease)6.6% 9.3 % 7.4% 1.1 %   7.1%
Percentage of total67.2% 19.9 % 11.3% 1.6 %   100.0%
            
Operating income$706,375
 $52,438
 $3,353
 $3,222
 $(233,106) $532,282
Operating income increase (decrease)3.7% (38.2)% 6.3% (15.1)%   8.1%
Percentage of total segments92.3% 6.9 % 0.4% 0.4 %   100.0%
Operating income as a percentage of sales7.3% 1.8 % 0.2% 1.4 %   3.7%


 13-Week Period Ended Mar. 27, 2021
 U.S. Foodservice OperationsInternational Foodservice OperationsSYGMAOtherGlobal Support CenterConsolidated
Totals
 (In thousands)
Sales$8,360,241 $1,723,126 $1,580,695 $160,527 $— $11,824,589 
Percentage of total70.7 %14.6 %13.4 %1.3 %100.0 %
Operating income (loss)$545,502 $(121,487)$12,937 $5,884 $(206,919)$235,917 
Percentage of total segments123.2 %(27.4)%2.9 %1.3 %100.0 %
Operating income as a percentage of sales6.5 %(7.1)%0.8 %3.7 %2.0 %

 39-Week Period Ended Apr. 2, 2022
 U.S. Foodservice OperationsInternational Foodservice OperationsSYGMAOtherGlobal Support CenterConsolidated
Totals
 (In thousands)
Sales$35,107,281 $8,535,608 $5,270,193 $765,806 $— $49,678,888 
Sales increase (decrease)45.0 %45.8 %13.9 %61.2 %41.3 %
Percentage of total70.7 %17.2 %10.6 %1.5 %100.0 %
Operating income (loss)$2,220,812 $55,181 $(4,814)$2,667 $(701,526)$1,572,320 
Operating income increase (decrease)37.2 %127.3 %(113.4)%(45.1)%81.2 %
Percentage of total segments97.7 %2.4 %(0.2)%0.1 %100.0 %
Operating income as a percentage of sales6.3 %0.6 %(0.1)%0.3 %3.2 %
 39-Week Period Ended Mar. 27, 2021
 U.S. Foodservice OperationsInternational Foodservice OperationsSYGMAOtherGlobal Support CenterConsolidated
Totals
 (In thousands)
Sales$24,205,917 $5,854,608 $4,625,244 $475,181 $— $35,160,950 
Percentage of total68.8 %16.7 %13.2 %1.3 %100.0 %
Operating income (loss)$1,619,162 $(201,973)$35,957 $4,861 $(590,449)$867,558 
Percentage of total segments111.1 %(13.9)%2.5 %0.3 %100.0 %
Operating income as a percentage of sales6.7 %(3.4)%0.8 %1.0 %2.5 %

32
 13-Week Period Ended Dec. 31, 2016
 U.S. Foodservice Operations International Foodservice Operations SYGMA Other Corporate Consolidated
Totals
 (In thousands)
Sales$9,085,565
 $2,625,949
 $1,520,182
 $225,572
 $—
 $13,457,268
Percentage of total67.5% 19.5% 11.3% 1.7%   100.0%
            
Operating income$681,321
 $84,814
 $3,155
 $3,793
 $(280,666) $492,417
Percentage of total segments88.1% 11.0% 0.4% 0.5%   100.0%
Operating income as a percentage of sales7.5% 3.2% 0.2% 1.7%   3.7%


 26-Week Period Ended Dec. 30, 2017
 U.S. Foodservice Operations International Foodservice Operations SYGMA Other Corporate 
Consolidated
Totals
 (In thousands)
Sales$19,530,167
 $5,772,298
 $3,273,816
 $485,633
 $—
 $29,061,914
Sales increase (decrease)5.2% 7.8 % 8.2% 1.2 %   6.0%
Percentage of total67.2% 19.9 % 11.3% 1.6 %   100.0%
            
Operating income$1,487,244
 $129,084
 $8,198
 $7,238
 $(476,390) $1,155,374
Operating income increase (decrease)4.3% (21.4)% 1.7% (38.6)%   1.3%
Percentage of total segments91.1% 7.9 % 0.5% 0.5 %   100.0%
Operating income as a percentage of sales7.6% 2.2 % 0.3% 1.5 %   4.0%

 26-Week Period Ended Dec. 31, 2016
 U.S. Foodservice Operations International Foodservice Operations SYGMA Other Corporate 
Consolidated
Totals
 (In thousands)
Sales$18,566,681
 $5,354,310
 $3,024,874
 $480,057
 $—
 $27,425,922
Percentage of total67.7% 19.5% 11.0% 1.7%   100.0%
            
Operating income$1,426,552
 $164,249
 $8,062
 $11,794
 $(551,407) $1,059,250
Percentage of total segments88.6% 10.2% 0.5% 0.7%   100.0%
Operating income as a percentage of sales7.7% 3.1% 0.3% 2.5%   3.9%



Based on information in Note 13 "Business14, “Business Segment Information"Information,” in the secondNotes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q, in the third quarter and first 2639 weeks of fiscal 2018,2022, U.S. Foodservice Operations and International Foodservice Operations collectively represented approximately 87.1%87.8% and 87.8% of Sysco’s overall sales. In the second quartersales and first 26 weeks99.9% and 100.1% of fiscal 2018, U.S. Foodservice Operations and International Foodservice Operations collectively represented approximately 99.2% and 99.0% of the total segment operating income, respectively. This illustrates that these segments represent thea substantial majority of our total segment results when compared to the other reportable segment.segments.


Results of U.S. Foodservice Operations


The following table setstables set forth a summary of the components of operating income expressed as a percentage increase or decrease over the comparable period in the prior year:

 13-Week Period Ended Apr. 2, 202213-Week Period Ended Mar. 27, 2021Change in Dollars% Change
 (Dollars in thousands)
Sales$12,006,163 $8,360,241 $3,645,922 43.6 %
Gross profit2,270,045 1,634,837 635,208 38.9 
Operating expenses1,523,578 1,089,335 434,243 39.9 
Operating income$746,467 $545,502 $200,965 36.8 %
Gross profit$2,270,045 $1,634,837 $635,208 38.9 %
Adjusted operating expenses (Non-GAAP)1,520,676 1,109,719 410,957 37.0 
Adjusted operating income (Non-GAAP)$749,369 $525,118 $224,251 42.7 %
 39-Week Period Ended Apr. 2, 202239-Week Period Ended Mar. 27, 2021Change in Dollars % Change
 (Dollars in thousands)
Sales$35,107,281 $24,205,917 $10,901,364 45.0 %
Gross profit6,594,477 4,793,866 1,800,611 37.6 
Operating expenses4,373,665 3,174,704 1,198,961 37.8 
Operating income$2,220,812 $1,619,162 $601,650 37.2 %
Gross profit$6,594,477 $4,793,866 $1,800,611 37.6 %
Adjusted operating expenses (Non-GAAP)4,364,629 3,293,919 1,070,710 32.5 
Adjusted operating income (Non-GAAP)$2,229,848 $1,499,947 $729,901 48.7 %

33
 13-Week Period Ended Dec. 30, 2017 13-Week Period Ended Dec. 31, 2016 13-Week Period Ended Change in Dollars 13-Week Period % Change
 (In thousands)
Sales$9,681,225
 $9,085,565
 $595,660
 6.6%
Gross profit1,915,466
 1,823,023
 92,443
 5.1
Operating expenses1,209,091
 1,141,702
 67,389
 5.9
Operating income$706,375
 $681,321
 $25,054
 3.7%
        
 26-Week Period Ended Dec. 30, 2017 26-Week Period Ended Dec. 31, 2016 26-Week Period Ended Change in Dollars 26-Week Period % Change
 (In thousands)
Sales$19,530,167
 $18,566,681
 $963,486
 5.2%
Gross profit3,901,749
 3,736,138
 165,611
 4.4
Operating expenses2,414,505
 2,309,586
 104,919
 4.5
Operating income$1,487,244
 $1,426,552
 $60,692
 4.3%




Sales

The following table sets forth the percentage and dollar value increase or decrease in the major factors impacting sales as compared to the comparablecorresponding prior year period in order to demonstrate the cause and magnitude of change.change:
Increase (Decrease)Increase (Decrease)
13-Week Period39-Week Period
(Dollars in millions)(Dollars in millions)
Cause of changePercentageDollarsPercentageDollars
Case volume20.0 %$1,668.1 23.0 %$5,568.0 
Inflation (1)
16.7 1,392.0 15.3 3,692.1 
Acquisitions (2)
4.5 373.6 3.4 832.9 
Other (3)
2.4 212.2 3.3 808.4 
Total change in sales43.6 %$3,645.9 45.0 %$10,901.4 
 Increase (Decrease)
 13-Week Period
 (Dollars in millions)
Cause of changePercentage Dollars
Case volume3.0 % $273.3
Inflation3.3
 300.3
Acquisitions0.6
 50.6
Other (1)
(0.3) (28.5)
Total sales increase6.6 % $595.7
    
 Increase (Decrease)
 26-Week Period
 (Dollars in millions)
Cause of changePercentage Dollars
Case volume1.7 % $314.8
Inflation3.6
 659.8
Acquisitions0.3
 50.6
Other(0.4) (61.7)
Total sales increase5.2 % $963.5


(1)Represents product cost inflation for our U.S. Foodservice Operations, which includes product cost inflation of 15.8% and 14.4% for U.S. Broadline operations, respectively.
(1)(2)Includes the impact of our fiscal 2022 acquisitions.
(3)Case volume excludes the volume impact from our custom-cut meat companies that do not measure volume in cases. Any impact in volumes from these operations is included within “Other.”


Sales forThe primary driver of the secondsales increase in the third quarter and the first 39 weeks of fiscal 2018 were 6.6% higher than2022 was the second quarter of fiscal 2017. The largest drivers of the increase were the impact of product cost inflationsignificant improvement in case volume in our U.S. Broadline operations as a result of two factors: (a) the ongoing business recovery from the COVID-19 pandemic and case volume growth(b) the impact of our Recipe for Growth initiatives. Case volumes from our U.S. Broadline operations which increased 3.5%18.8% and 23.1% in the secondthird quarter of fiscal 2018 compared to the second quarter of fiscal 2017. Case growth for locally managed customers increased 4.8% along with an increase of 1.9% in case volumes for our multi-unit business, including chain restaurants and multi-locational restaurants. Sales for the first 2639 weeks of fiscal 2018 were 5.2% higher than the first 26 weeks of fiscal 2017. The largest drivers of the increase were the impact of product cost inflation in our U.S. Broadline operations for the first 26 weeks of fiscal 2018 and case volume growth from our U.S. Broadline operations, which improved 1.8% in the first 26 weeks of fiscal 2018 compared to the first 26 weeks of fiscal 2017, and included a 3.8% improvement in locally managed customer case volume. We have proactively managed our business in a more disciplined and profitable manner with our multi-unit customers and have added new customers in the second quarter of fiscal 2018. We expect to see multi-unit growth continuing in the second half of the year.

Operating income increased 3.7% for the second quarter of fiscal 2018, as compared to the second quarter of fiscal 2017. Operating income for the first 26 weeks of fiscal 2018 increased 4.3%, or $60.7 million, compared to the first 26 weeks of fiscal 2017.

Gross profit dollars increased 5.1% and 4.4% in the second quarter and first 26 weeks of fiscal 2018,2022, respectively, as compared to the secondthird quarter and first 2639 weeks of fiscal 2017. These results reflect (1)2021. This included a 14.1% and 18.5% improvement in local customer case volume that grew at a pace greater than our multi-unit business and (2) volume growth of new customers recently added. Our Sysco brand sales to local customers increased by approximately 37 and 60 basis points forin the secondthird quarter and first 2639 weeks of fiscal 2018,2022, respectively, along with a 24.7% and 29.0% increase in national customer case volume in the third quarter and first 39 weeks of fiscal 2022, respectively. The increases in U.S. Broadline case volumes represent organic growth.

Operating Income

The increase in operating income for the third quarter and first 39 weeks of fiscal 2022, as compared to the third quarter and first 39 weeks of fiscal 2021, was driven by gross profit dollar growth and partially offset by an increase in operating expenses.

Gross profit dollar growth in the third quarter and first 39 weeks of fiscal 2022, as compared to the third quarter and first 39 weeks of fiscal 2021, was driven primarily by the improvement in local cases stemming from (a) the ongoing business recovery from the COVID-19 pandemic, (b) the impact of our Recipe for Growth initiative, (c) management of higher inflation and (d) optimization of our business processes and performance. The estimated change in product costs, an internal measure of inflation or deflation, for the secondthird quarter and first 2639 weeks of fiscal 20182022 for our U.S. Broadline operations was inflation of 3.3%15.8% and 3.6%14.4%, respectively. Inflation inFor the secondthird quarter of fiscal 2018 occurred2022, this change in product costs was primarily driven by inflation in the meat,poultry, produce and dairy and produce categories. Partially offsetting our gross profit growth were cost pressures from our inbound freight. Our industry is facing driver availability challenges, leading to increased lane rates from carriers. As a result, our costs have increased, as we have utilized more spot rates to transport goods. We are actively working to mitigate these risks by providing a long-term solution and ensuring that we are a preferred customer for various carriers. Gross margin, which is gross profit as a percentage of sales, was 19.8%18.91% and 20.0%18.78% in the secondthird quarter and first 2639 weeks of fiscal


2018, 2022, respectively, which was a declinedecrease of 28 and 1464 basis points from thecompared to gross margin of 20.1%19.55% in both the secondthird quarter of fiscal 2021, and a decrease of 102 basis points compared to gross margin of 19.80% in the first 39 weeks of fiscal 2021, primarily attributable to inflationary pressure.

The increase in operating expenses for the third quarter and first 2639 weeks of fiscal 2017. This decline was largely attributable2022, as compared to the inflationary environment, new customers added atthird quarter and first 39 weeks of fiscal 2021, was primarily driven by variable costs associated with increased volumes and largely from short-term expenses associated with the ongoing business recovery, including increases in costs for associates, which included recruiting costs, overtime costs, hiring marketing, vaccination promotion, contract labor and sign-on and retention bonuses. These business recovery costs were lower margin rates and cost pressures from inbound freight.

Operating expenses forin the third quarter than the second quarter of fiscal 2018 increased 5.9%, or $67.4 million, compared2022 due to the second quarter of fiscal 2017. The increasesimproved staffing levels and productivity increases. We have also experienced an increase in operating expenses due to investments for the period resulted primarily from a $44.0 million increaseour Recipe for Growth strategy in pay-related expenses and increased transportation expenses. Operating expenses for the first 2639 weeks of 2018 increased 4.5%, or $104.9fiscal 2022. Additionally, we experienced a $108.4 million unfavorable comparison of bad debt expense in the first 39 weeks of fiscal 2022, as compared to the first 2639 weeks of fiscal 2017.  The increases in operating expenses for the period resulted primarily from2021, which included a $61.3 million increase in pay-related expenses and increased supply chain expenses. Pay-related expenses have primarily increasednet bad debt benefit due to volume growth and investing in our salesforce. Our increase in supply chain costs included start-up costs related to newly obtained national account business.  Fuel prices are increasingthe significant reduction of reserves on pre-pandemic receivables that were collected in fiscal 2018 as compared to fiscal 2017 which has led to increased fuel expenses. These are partially offset by improvements2021. Excluding the impact of these pre-pandemic receivables, our year-over-year change in productivity as a result of re-engineering the delivery process to be more efficient, while also providing higher quality and service levels.bad debt expense was not significant.

34


Results of International Foodservice Operations


The following table sets forth a summary of the components of operating income and adjusted operating income expressed as a percentage increase or decrease over the comparable period in the prior year:
 13-Week Period Ended Apr. 2, 202213-Week Period Ended Mar. 27, 2021Change in Dollars% Change
 (Dollars in thousands)
Sales$2,834,089 $1,723,126 $1,110,963 64.5 %
Gross profit570,241 325,200 245,041 75.4 
Operating expenses562,481 446,687 115,794 25.9 
Operating income (loss)$7,760 $(121,487)$129,247 106.4 %
Gross profit$570,241 $325,200 $245,041 75.4 %
Adjusted operating expenses (Non-GAAP)535,617 417,575 118,042 28.3 
Adjusted operating income (loss) (Non-GAAP)$34,624 $(92,375)$126,999 137.5 %
Sales on a constant currency basis (Non-GAAP)$2,917,767 $1,723,126 $1,194,641 69.3 %
Gross profit on a constant currency basis (Non-GAAP)590,595 325,200 265,395 81.6 
Adjusted operating expenses on a constant currency basis (Non-GAAP)555,721 417,575 138,146 33.1 
Adjusted operating income (loss) (Non-GAAP)$34,874 $(92,375)$127,249 137.8 %
 39-Week Period Ended Apr. 2, 202239-Week Period Ended Mar. 27, 2021Change in Dollars % Change
 (Dollars in thousands)
Sales$8,535,608 $5,854,608 $2,681,000 45.8 %
Gross profit1,725,306 1,149,438 575,868 50.1 
Operating expenses1,670,125 1,351,411 318,714 23.6 
Operating (loss) income$55,181 $(201,973)$257,154 127.3 %
Gross profit$1,725,306 $1,149,438 $575,868 50.1 %
Adjusted operating expenses (Non-GAAP)1,586,914 1,278,247 308,667 24.1 
Adjusted operating (loss) income (Non-GAAP)$138,392 $(128,809)$267,201 207.4 %
Sales on a constant currency basis (Non-GAAP)$8,463,829 $5,854,608 $2,609,221 44.6 %
Gross profit on a constant currency basis (Non-GAAP)1,718,893 1,149,438 569,455 49.5 
Adjusted operating expenses on a constant currency basis (Non-GAAP)1,582,750 1,278,247 304,503 23.8 
Adjusted operating (loss) income on a constant currency basis (Non-GAAP)$136,143 $(128,809)$264,952 205.7 %

35
 13-Week Period Ended Dec. 30, 2017 13-Week Period Ended Dec. 31, 2016 13-Week Period Ended Change in Dollars 13-Week Period % Change
 (In thousands)
Sales$2,869,043
 $2,625,949
 $243,094
 9.3 %
Gross profit599,647
 576,215
 23,432
 4.1
Operating expenses547,209
 491,401
 55,808
 11.4
Operating income$52,438
 $84,814
 $(32,376) (38.2)%
 

 

    
Gross profit$599,647
 $576,215
 $23,432
 4.1 %
Adjusted operating expenses (Non-GAAP)520,798
 465,518
 55,280
 11.9
Adjusted operating income (Non-GAAP)$78,849
 $110,697
 $(31,848) (28.8)%
        
 26-Week Period Ended Dec. 30, 2017 26-Week Period Ended Dec. 31, 2016 26-Week Period Ended Change in Dollars 26-Week Period
% Change
 (In thousands)
Sales$5,772,298
 $5,354,310
 $417,988
 7.8 %
Gross profit1,214,750
 1,174,621
 40,129
 3.4
Operating expenses1,085,666
 1,010,372
 75,294
 7.5
Operating income$129,084
 $164,249
 $(35,165) (21.4)%
        
Gross profit$1,214,750
 $1,174,621
 $40,129
 3.4 %
Adjusted operating expenses (Non-GAAP)1,040,843
 960,311
 80,532
 8.4
Adjusted operating income (Non-GAAP)$173,907
 $214,310
 $(40,403) (18.9)%




Sales


The following table setstables set forth the percentage and dollar value increase or decrease in the major components impacting sales as compared to the comparablecorresponding prior year period in order to demonstrate the cause and magnitude of change.
Increase (Decrease)Increase (Decrease)
13-Week Period39-Week Period
(Dollars in millions)(Dollars in millions)
Cause of changePercentageDollarsPercentageDollars
Inflation7.9 %$136.1 7.5 %$440.0 
Foreign currency(4.9)(83.8)1.3 74.0 
Other (1)
61.5 1,058.7 37.0 2,167.0 
Total change in sales64.5 %$1,111.0 45.8 %$2,681.0 
 Increase (Decrease)
 13-Week Period
 (Dollars in millions)
Cause of changePercentage Dollars
Case volume1.8 % $46.5
Inflation2.5
 66.8
Acquisitions0.3
 7.6
Foreign currency5.8
 151.0
Other(1.1) (28.8)
Total sales increase9.3 % $243.1
    
 Increase (Decrease)
 26-Week Period
 (Dollars in millions)
Cause of changePercentage Dollars
Case volume0.7 % $36.9
Inflation4.1
 219.8
Acquisitions0.3
 15.2
Foreign currency3.6
 195.0
Other(0.9) (48.9)
Total sales increase7.8 % $418.0


(1)The impact of volumes as a component of sales growth from international operations are included within “Other.” Volume in our foreign operations includes volume metrics that differ from country to country and cannot be aggregated on a consistent, comparable basis.

Sales for the secondthird quarter of fiscal 2018 were 9.3% higher than the second quarter of fiscal 2017, primarily due to favorable changes in exchange rates used to translate our foreign sales into U.S. dollars, as well as product cost inflation in Canada and Europe. Sales for the first 2639 weeks of fiscal 20182022 were 7.8% higher, than the first 26 weeks of fiscal 2017, primarily due to product cost inflation in Canada and Europe and favorable changes in exchange rates. We experienced sales growth in Canada for the second quarter and first 26 weeks of fiscal 2018 due to a focused approach to local customers, which has translated into accelerated local case growth. The U.K. continues to experience inflation due to weakness in the pound sterling, which contributed to a portion of the high food cost inflation of approximately 6% during the second quarter of fiscal 2018. An acquisition in Sweden has contributed to sales growth.

Operating income decreased by $32.4 million and $35.2 million, or 38.2% and 21.4%, for the second quarter and first 26 weeks of fiscal 2018, respectively, as compared to the secondthird quarter and first 2639 weeks of fiscal 2017. The decreases were2021, primarily attributable to softer results in the European business due to lower gross marginsthe significant improvement in volume. Volume trends accelerated primarily due to fewer cases of the Omicron variant of COVID-19 and increased operating expenses.the easing of government-imposed restrictions. The U.K. is experiencing increased competition, and we are investing in supply chain transformationimpact of our Recipe for Growth initiatives also contributed to deliver multi-temperature facilities and fleet and other initiatives to enrich the customer experience. We believe this will position us for future growth, but will contribute to increased operating expense in the near term. Our operations in France and Ireland are performing well. volume growth.

Operating Income

The decreasesincrease in operating income were partially offset by improvements in our Canadian operations, which arefor the result of continued implementation of strategic initiatives, such as revenue management, administrative and supply chain productivity improvements, and differentiated customer solutions, including online ordering improvements. Our Latin American operations continue to present growth opportunities. We continue to see strong growth in Costa Rica and are expanding our cash and carry operations. In Mexico, we are absorbing the cost of adding a new customer and are due to annualize that addition next quarter.

Gross profit dollars increased by 4.1% and 3.4% in the secondthird quarter and first 2639 weeks of fiscal 2018, respectively,2022, as compared to the secondthird quarter and first 2639 weeks of fiscal 2017, primarily attributable2021, was due to local case growththe continuing increase in sales volumes, along with specific efforts to optimize our Canadian operations. Growthgross profit while addressing our increased operating expenses.

The increase in gross profit dollars was partially offset by a decline in higher margin sales to independent customers in the U.K. duethird quarter and first 39 weeks of fiscal 2022, as compared to significant food costthe third quarter and first 39 weeks of fiscal 2021, was attributable to the increase in sales volume and the pass through of inflation, which has impactedalong with specific efforts to optimize our volume growth and gross margins. A change from a calendar year to Sysco’s fiscal year has also resultedprofit dollars.

The increase in a negative impact in the year-over-year comparisons.



Operatingoperating expenses for the secondthird quarter and first 2639 weeks of fiscal 2018 increased 11.4% and 7.5%, or $55.8 million and $75.3 million, respectively,2022, as compared to the secondthird quarter and first 2639 weeks of fiscal 2017.  The2021, was primarily due to an increase in costs for associates including overtime and hiring associates to manage the ongoing business recovery. Additionally, we had an unfavorable comparison of bad debt expense, as fiscal 2021 included a reduction of reserves on pre-pandemic receivables Excluding the impact of these pre-pandemic receivables, our year-over-year change in bad debt expense was driven primarily by our European operations and resulted from increased transportation costs, depreciation expense and investments in our supply chain transformation initiatives. Certain Items applicable to this segment include Brakes Acquisition-related costs and restructuring costs within our European and Canadian operations. A change from a calendar year to Sysco’s fiscal year has also resulted in a negative impact in the year-over-year comparisons.not significant.


Results of SYGMA and Other Segment


For SYGMA, sales were 7.4%13.5% and 8.2%13.9% higher in the secondthird quarter and first 2639 weeks of fiscal 2018,2022, respectively, as compared to the secondthird quarter and first 2639 weeks of fiscal 2017,2021, primarily from case growthinflation and product cost inflation.  Case growth was primarilyfee increases, partially offset by a decrease in volume due to increased volume from existing customers. SYGMA experienced product cost inflation atthe planned exit of a rate of 3.0%large regional customer, as announced during fiscal 2021. Operating income decreased by $8.6 million and 3.4% for$40.8 million in the secondthird quarter and first 2639 weeks of fiscal 2018, respectively. Operating income increased by $0.2 million and $0.1 million in the second quarter and first 26 weeks of fiscal 2018,2022, respectively, as compared to the secondthird quarter and first 2639 weeks of fiscal 2017. We are focused on continuing2021, as our increased investments in business recovery staffing drove an increase in operating expenses. SYGMA operated at a profit in the third quarter, primarily from fee increases to improve operational performance that will contributecustomers, but operated at a loss for the first 39 weeks of fiscal 2022, primarily due to long-term operating income growth.higher than expected transportation costs.


For the operations that are grouped within Other, operating income decreased 15.1%, or $0.6$9.9 million and 38.6%, or $4.6$2.2 million in the secondthird quarter and first 2639 weeks of fiscal 2018,2022, respectively, as compared to the secondthird quarter and first 2639 weeks of fiscal 2017.  These decreases are largely2021, operating at a loss in the resultthird quarter, but reflecting a profit for the first 39 weeks of fiscal 2022. Volume for this business has improved as hospitality occupancy rates have grown from prior year levels, and the loss for the third quarter is attributable to one-time costs related to the ongoing business recovery.

36

Global Support Center Expenses

Our Global Support Center generally includes all expenses of the performance of our hotel lodging supply company.

Corporate Expenses

Corporatecorporate office and Sysco’s shared service operations. These expenses in the secondthird quarter and first 26 weeks of fiscal 2018 decreased $46.82022 increased $31.2 million, or 16.7%, and $72.6 million, or 13.3%, respectively, as compared to the second quarter and first 26 weeks of fiscal 2017, due primarily to the favorable comparison of depreciation expense. During the second quarter and first 26 weeks of fiscal 2017, we incurred $45.9 million and $92.3 million, respectively, of depreciation on our previously existing ERP system, which became fully depreciated at the end of fiscal 2017. A portion of this depreciation expense was included in Certain Items during fiscal 2017. The decrease in expenses was partially offset by an increase in business technology costs in the first 26 weeks of fiscal 2018. Corporate expenses, on an adjusted basis, decreased $28.5 million, or 11.8%, and $38.8 million, or 8.2%15.7%, as compared to the secondthird quarter of fiscal 2021, primarily due to investments for our Recipe for Growth strategy and higher associate-related expenses. These expenses in the first 2639 weeks of fiscal 2017, respectively,2022 increased $86.7 million, or 15.0%, as compared to the first 39 weeks of fiscal 2021, primarily due to lower business technologyacquisition and due diligence costs, partially attributable to reduced depreciation expense.investments for our Recipe for Growth strategy, higher associate-related expenses and an increase in self-insurance reserves.


Included in corporateGlobal Support Center expenses are Certain Items that totaled $20.8$49.9 million and $41.2$91.6 million in the secondthird quarter and first 2639 weeks of fiscal 2018, respectively,2022, as compared to $39.1$15.0 million and $74.9$39.0 million in the secondthird quarter and first 2639 weeks of fiscal 2017.2021, respectively. Certain Items impacting the secondthird quarter and first 2639 weeks of fiscal 20182022 were primarily expenses associated with our business technology transformation initiatives Brakes integration costs, professional fees on three-year financial objectives and severance charges.expenses associated with acquisitions. Certain Items forimpacting the secondthird quarter and first 2639 weeks of fiscal 20172021 were primarily included $27.7 million and $55.9 million, respectively, of accelerated depreciation on our previously existing ERP system, in addition to expenses related to professional fees on three-year financial objectives, Brakes integration costs and costs incurred to convert to legacy systems in conjunctionassociated with our revised business technology strategy.transformation initiatives.


Interest Expense


Interest expense decreased $21.8 million and increased $13.8$56.1 million for the secondthird quarter and first 39 weeks of fiscal 2018,2022, respectively, as compared to the secondthird quarter and first 39 weeks of fiscal 2017, due2021, primarily attributable to higher relativea loss on extinguishment of debt levelsof $115.6 million for the redemption of $1.25 billion in combined aggregate principal amount of our senior notes in the second quarter of fiscal 2018 related to senior notes that were issued in fiscal 2017. Interest expense increased $21.0 million for the first 26 weeks of fiscal 2018, as compared to the first 26 weeks of fiscal 2017, due to higher relative2022, partially offset by lower debt levels in the first 26 weeks of fiscal 2018.volume.


Net Earnings


Net earnings increased 3.3%241.1% and 8.8%127.5% in the secondthird quarter and first 2639 weeks of fiscal 2018,2022, respectively, as compared to the secondthird quarter and first 2639 weeks of the prior yearfiscal 2021, due primarily to the items noted above for operating income and interest expense, as well as items impacting our income taxes that are discussed in Note 2, “Changes12, “Income Taxes,” in Accounting,” and Note 11, "Income Taxes."the Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q. Adjusted net earnings, excluding Certain Items, increased 29.2%216.1% and 16.0%189.9% in the secondthird quarter and first 2639 weeks of fiscal 2018,2022, respectively, primarily from gross profit growth and favorabledue to a significant increase in sales volume, partially offset by an unfavorable tax expense comparisons, as well as the one-time second quarter benefit relatedcompared to the reduction in our U.S. statutory tax rate as applied retroactively to July 2, 2017. Further adjusting to remove the impact of the one-time second quarter charge related to the U.S. statutory tax rate reduction, adjusted net earnings increased 8.9% and 6.7% in the second quarterprior year.


and first 26 weeks of fiscal 2018, respectively, primarily from gross profit growth and favorable expense comparisons, as well as excess tax benefits of equity-based compensation. Partially offsetting these increases was increased interest expense.


Earnings Per Share


Basic earnings per share in the secondthird quarter of fiscal 20182022 were $0.55,$0.60, a 10.0%252.9% increase from the comparable prior periodyear amount of $0.50$0.17 per share. Diluted earnings per share in the secondthird quarter of fiscal 20182022 were $0.54, an 8.0%$0.59, a 247.1% increase from the comparable prior year period amount of $0.50$0.17 per share. Adjusted diluted earnings per share, excluding Certain Items, in the secondthird quarter of fiscal 20182022 were $0.78,$0.71, a 34.5%222.7% increase from the comparable prior periodyear amount of $0.58 per share.  These results were primarily attributable to the factors discussed above related to net earnings in the second quarter of fiscal 2018, including a three cent per share benefit from excess tax benefits of equity-based compensation. We recorded various estimates related to U.S. tax reform and the reduction of our U.S. statutory tax rate to a blended rate of 28% for fiscal 2018. For the second quarter of fiscal 2018, we have recorded a one-time 12 cent benefit related to the U.S. statutory tax rate reduction. Further adjusting to remove the impact of this one-time benefit related to the U.S. statutory tax rate reduction, adjusted diluted earnings per share increased 13.8% in the second quarter to $0.66$0.22 per share.


Basic earnings per share in the first 2639 weeks of fiscal 20182022 were $1.24,$1.66, a 13.8%127.4% increase from the comparable prior periodyear amount of $1.09$0.73 per share. Diluted earnings per share in the first 2639 weeks of fiscal 20182022 were $1.23, a 13.9%$1.65, an 126.0% increase from the comparable prior year period amount of $1.080.73 per share. Adjusted diluted earnings per share, excluding Certain Items, in the first 2639 weeks of fiscal 20182022 were $1.52,$2.11, a 21.6%189.0% increase from the comparable prior periodyear amount of $1.25 per share. These results were primarily attributable to the factors discussed above related to net earnings in the first 26 weeks of fiscal 2018, including a six cent per share benefit from excess tax benefits of equity-based compensation. For the first 26 weeks of fiscal 2018, we have recorded a one-time 12 cent benefit related to the reduced U.S. statutory tax rate. Further adjusting to remove the impact of this one-time benefit related to the U.S. statutory tax rate reduction, adjusted diluted earnings per share increased 12.0% in the first 26 weeks of fiscal 2018 to $1.40$0.73 per share.


37


Non-GAAP Reconciliations


Sysco’s results of operations for fiscal 2018
Our discussion of our results includes certain non-GAAP financial measures, including EBITDA and adjusted EBITDA, that we believe provide important perspective with respect to underlying business trends. Other than free cash flow, any non-GAAP financial measures will be denoted as adjusted measures to remove the impact of restructuring and transformational project costs consisting of: (1) restructuring charges, (2) expenses associated with our various transformation initiatives and (3) facility closure and severance charges; acquisition-related costs consisting of: (1) intangible amortization expense and (2) acquisition costs and due diligence costs related to our acquisitions; and the reduction of bad debt expense previously recognized in fiscal 2020 due to the impact of the COVID-19 pandemic on the collectability of our pre-pandemic trade receivable balances. Our results for fiscal 2022 were also impacted by: (1) a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory, (2) debt extinguishment costs and (3) the increase in reserves for uncertain tax positions. Our results for the first 39 weeks of fiscal 2021 were also impacted by losses on the sale of businesses.
The results of our foreign operations can be impacted due to changes in exchange rates applicable in converting local currencies to U.S. dollars. We measure our total Sysco and our International Foodservice Operations results on a constant currency basis. Constant currency operating results are calculated by translating current-period local currency operating results with the currency exchange rates used to translate the financial statements in the comparable prior-year period to determine what the current-period U.S. dollar operating results would have been if the currency exchange rate had not changed from the comparable prior-year period.
Management believes that adjusting its operating expenses, operating income, net earnings and diluted earnings per share to remove these Certain Items and presenting its International Foodservice Operations results on a constant currency basis, provides an important perspective with respect to our underlying business trends and results and provides meaningful supplemental information to both management and investors that (1) is indicative of the performance of the company’s underlying operations and (2) facilitates comparisons on a year-over-year basis.
Sysco has a history of growth through acquisitions and excludes from its non-GAAP financial measures the impact of acquisition-related intangible amortization, acquisition costs and due-diligence costs for those acquisitions. We believe this approach significantly enhances the comparability of Sysco’s results for fiscal 2022 and fiscal 2021.
Set forth below is a reconciliation of sales, operating expenses, operating income, other (income) expense, net earnings and diluted earnings per share to adjusted results for these measures for the periods presented. Individual components of diluted earnings per share may not add up to the total presented due to rounding. Adjusted diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.
38

13-Week Period Ended Apr. 2, 202213-Week Period Ended Mar. 27, 2021Change in Dollars% Change
Sales (GAAP)$16,902,139 $11,824,589 $5,077,550 42.9 %
Impact of currency fluctuations (1)
83,760 — 83,760 0.7 
Comparable sales using a constant currency basis (Non-GAAP)$16,985,899 $11,824,589 $5,161,310 43.6 %
Cost of sales (GAAP)$13,888,745 $9,701,921 $4,186,824 43.2 %
Impact of inventory valuation adjustment (2)
(29,550)— (29,550)(0.3)
Cost of sales adjusted for Certain Items (Non-GAAP)$13,859,195 $9,701,921 $4,157,274 42.9 %
Gross profit (GAAP)$3,013,394 $2,122,668 $890,726 42.0 %
Impact of inventory valuation adjustment (2)
29,550 — 29,550 1.4 
Comparable gross profit adjusted for Certain Items (Non-GAAP)3,042,944 2,122,668 920,276 43.4 
Impact of currency fluctuations (1)
20,426 — 20,426 0.9 
Comparable gross profit adjusted for Certain Items using a constant currency basis (Non-GAAP)$3,063,370 $2,122,668 $940,702 44.3 %
Gross margin (GAAP)17.83 %17.95 %-12 bps
Impact of inventory valuation adjustment (2)
0.17 — 17 bps
Comparable Gross margin adjusted for Certain Items (Non-GAAP)18.00 %17.95 %5 bps
Impact of currency fluctuations (1)
0.03 — 3 bps
Comparable gross margin adjusted for Certain Items using a constant currency basis (Non-GAAP)18.03 %17.95 %8 bps
Operating expenses (GAAP)$2,517,665 $1,886,751 $630,914 33.4 %
Impact of restructuring and transformational project costs (3)
(19,171)(34,953)15,782 45.2 
Impact of acquisition-related costs (4)
(36,699)(18,834)(17,865)(94.9)
Impact of bad debt reserve adjustments (5)
5,717 33,473 (27,756)(82.9)
Operating expenses adjusted for Certain Items (Non-GAAP)2,467,512 1,866,437 601,075 32.2 
Impact of currency fluctuations (1)
21,006 — 21,006 1.1 
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)$2,488,518 $1,866,437 $622,081 33.3 %
Operating income (GAAP)$495,729 $235,917 $259,812 110.1 %
Impact of inventory valuation adjustment (2)
29,550 — 29,550 NM
Impact of restructuring and transformational project costs (3)
19,171 34,953 (15,782)(45.2)
Impact of acquisition-related costs (4)
36,699 18,834 17,865 94.9 
Impact of bad debt reserve adjustments (5)
(5,717)(33,473)27,756 82.9 
Operating income adjusted for Certain Items (Non-GAAP)575,432 256,231 319,201 124.6 
Impact of currency fluctuations (1)
(581)— (581)(0.2)
Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP)$574,851 $256,231 $318,620 124.4 %
Other income (GAAP)$(13,777)$(12,708)$(1,069)(8.4)%
Impact of loss on sale of business— (10,790)10,790 NM
Other income adjusted for Certain Items (Non-GAAP)$(13,777)$(23,498)$9,721 41.4 %
Net earnings (GAAP)$303,325 $88,927 $214,398 241.1 %
39

Impact of inventory valuation adjustment (2)
29,550 — 29,550 NM
Impact of restructuring and transformational project costs (3)
19,171 34,953 (15,782)(45.2)
Impact of acquisition-related costs (4)
36,699 18,834 17,865 94.9 
Impact of bad debt reserve adjustments (5)
(5,717)(33,473)27,756 82.9 
Impact of loss on sale of business— 10,790 (10,790)NM
Tax impact of inventory valuation adjustment (6)
(7,449)— (7,449)NM
Tax impact of restructuring and transformational project costs (6)
(5,579)(10,300)4,721 45.8 
Tax impact of acquisition-related costs (6)
(8,537)(5,573)(2,964)(53.2)
Tax impact of bad debt reserves adjustments (6)
1,445 10,354 (8,909)(86.0)
Tax impact of loss on sale of business (6)
— 301 (301)NM
Net earnings adjusted for Certain Items (Non-GAAP)$362,908 $114,813 $248,095 216.1 %
Diluted earnings per share (GAAP)$0.59 $0.17 $0.42 247.1 %
Impact of inventory valuation adjustment (2)
0.06 — 0.06 NM
Impact of restructuring and transformational project costs (3)
0.04 0.07 (0.03)(42.9)
Impact of acquisition-related costs (4)
0.07 0.04 0.03 75.0 
Impact of bad debt reserve adjustments (5)
(0.01)(0.07)0.06 85.7 
Impact of loss on sale of business— 0.02 (0.02)NM
Tax impact of inventory valuation adjustment (6)
(0.01)— (0.01)NM
Tax impact of restructuring and transformational project costs (6)
(0.01)(0.02)0.01 50.0 
Tax impact of acquisition-related costs (6)
(0.02)(0.01)(0.01)(100.0)
Tax impact of bad debt reserves adjustments (6)
— 0.02 (0.02)NM
Diluted earnings per share adjusted for Certain Items (Non-GAAP) (7)
$0.71 $0.22 $0.49 222.7 %
(1)Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on the current year results.
(2)Represents a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory.
(3)Fiscal 2022 includes $7 million related to restructuring, severance, and facility closure charges and $12 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2021 includes $21 million related to restructuring charges and $14 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy.
(4)Fiscal 2022 includes $27 million of intangible amortization expense and $10 million in acquisition and due diligence costs. Fiscal 2021 represents intangible amortization expense.
(5)Fiscal 2022 and fiscal 2021 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(6)The tax impact of adjustments for Certain Items are calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction where the Certain Item was incurred.
(7)Individual components of diluted earnings per share may not add up to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.
NM represents that the percentage change is not meaningful.

40

13-Week Period Ended Apr. 2, 202213-Week Period Ended Mar. 30, 2019Change in Dollars% Change
Sales (GAAP)$16,902,139 $14,658,074 $2,244,065 15.3 %
Cost of sales (GAAP)$13,888,745 $11,903,776 $1,984,969 16.7 %
Impact of inventory valuation adjustment (1)
(29,550)— (29,550)(0.3)
Cost of sales adjusted for Certain Items (Non-GAAP)$13,859,195 $11,903,776 $1,955,419 16.4 %
Gross profit (GAAP)$3,013,394 $2,754,298 $259,096 9.4 %
Impact of inventory valuation adjustment (1)
29,550 — 29,550 1.1 
Comparable gross profit adjusted for Certain Items (Non-GAAP)$3,042,944 $2,754,298 $288,646 10.5 %
Gross margin (GAAP)17.83 %18.79 %-96 bps
Impact of inventory valuation adjustment (1)
0.17 — 17 bps
Comparable Gross margin adjusted for Certain Items (Non-GAAP)18.00 %18.79 %-79 bps
Operating expenses (GAAP)$2,517,665 $2,224,713 $292,952 13.2 %
Impact of restructuring and transformational project costs (2)
(19,171)(72,207)53,036 73.4 
Impact of acquisition-related costs (3)
(36,699)(18,398)(18,301)(99.5)
Impact of bad debt reserve adjustments (4)
5,717 — 5,717 NM
Comparable operating expenses adjusted for Certain Items (Non-GAAP)$2,467,512 $2,134,108 $333,404 15.6 %
Operating income (GAAP)$495,729 $529,585 $(33,856)(6.4)%
Impact of inventory valuation adjustment (1)
29,550 — 29,550 NM
Impact of restructuring and transformational project costs (2)
19,171 72,207 (53,036)(73.4)
Impact of acquisition-related costs (3)
36,699 18,398 18,301 99.5 
Impact of bad debt reserve adjustments (4)
(5,717)— (5,717)NM
Operating income adjusted for Certain Items (Non-GAAP)$575,432 $620,190 $(44,758)(7.2)%
Net earnings (GAAP)$303,325 $440,083 $(136,758)(31.1)%
Impact of inventory valuation adjustment (1)
29,550 — 29,550 NM
Impact of restructuring and transformational project costs (2)
19,171 72,207 (53,036)(73.4)
Impact of acquisition-related costs (3)
36,699 18,398 18,301 99.5 
Impact of bad debt reserve adjustments (4)
(5,717)— (5,717)NM
Tax impact of inventory valuation adjustment (5)
(7,449)— (7,449)NM
Tax impact of restructuring and transformational project costs (5)
(5,579)(19,271)13,692 71.0 
Tax impact of acquisition-related costs (5)
(8,537)(4,899)(3,638)(74.3)
Tax impact of bad debt reserves adjustments (5)
1,445 — 1,445 NM
Impact of foreign tax credit benefit— (95,067)95,067 NM
Impact of US transition tax— (269)269 NM
Net earnings adjusted for Certain Items (Non-GAAP)$362,908 $411,182 $(48,274)(11.7)%
Diluted earnings per share (GAAP)$0.59 $0.85 $(0.26)(30.6)%
Impact of inventory valuation adjustment (1)
0.06 — 0.06 NM
Impact of restructuring and transformational project costs (2)
0.04 0.14 (0.10)(71.4)
Impact of acquisition-related costs (3)
0.07 0.04 0.03 75.0 
Impact of bad debt reserve adjustments (4)
(0.01)— (0.01)NM
41

Tax impact of inventory valuation adjustment (5)
(0.01)— (0.01)NM
Tax impact of restructuring and transformational project costs (5)
(0.01)(0.04)0.03 75.0 
Tax impact of acquisition-related costs (5)
(0.02)(0.01)(0.01)(100.0)
Impact of foreign tax credit benefit— (0.18)0.18 NM
Diluted earnings per share adjusted for Certain Items (Non-GAAP) (6)
$0.71 $0.79 $(0.08)(10.1)%
(1)Represents a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory.
(2)Fiscal 2022 includes $7 million related to restructuring, severance, and facility closure charges and $12 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2019 includes $35 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy and $37 million related to restructuring, facility closure and severance charges.
(3)Fiscal 2022 includes $27 million of intangible amortization expense and $10 million in acquisition and due diligence costs. Fiscal 2019 includes intangible amortization expense.
(4)Fiscal 2022 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(5)The tax impact of adjustments for Certain Items is calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction where the Certain Item was incurred.
(6)Individual components of diluted earnings per share may not add up to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.
NM represents that the percentage change is not meaningful.

42


39-Week Period Ended Apr. 2, 202239-Week Period Ended Mar. 27, 2021Change in Dollars% Change
Sales (GAAP)$49,678,888 $35,160,950 $14,517,938 41.3 %
Impact of currency fluctuations (1)
(77,043)— (77,043)(0.2)
Comparable sales using a constant currency basis (Non-GAAP)$49,601,845 $35,160,950 $14,440,895 41.1 %
Cost of sales (GAAP)$40,802,636 $28,719,979 $12,082,657 42.1 %
Impact of inventory valuation adjustment (2)
(29,550)— (29,550)(0.1)
Cost of sales adjusted for Certain Items (Non-GAAP)$40,773,086 $28,719,979 $12,053,107 42.0 %
Gross profit (GAAP)$8,876,252 $6,440,971 $2,435,281 37.8 %
Impact of inventory valuation adjustment (2)
29,550 — 29,550 0.5 
Comparable gross profit adjusted for Certain Items (Non-GAAP)8,905,802 6,440,971 2,464,831 38.3 %
Impact of currency fluctuations (1)
(8,125)— (8,125)(0.2)
Comparable gross profit adjusted for Certain Items using a constant currency basis (Non-GAAP)$8,897,677 $6,440,971 $2,456,706 38.1 %
Gross margin (GAAP)17.87 %18.32 %-45 bps
Impact of inventory valuation adjustment (2)
0.06 — 6 bps
Comparable Gross margin adjusted for Certain Items (Non-GAAP)17.93 %18.32 %-39 bps
Impact of currency fluctuations (1)
0.01 — 1 bps
Comparable gross margin adjusted for Certain Items using a constant currency basis (Non-GAAP)17.94 %18.32 %-38 bps
Operating expenses (GAAP)$7,303,932 $5,573,413 $1,730,519 31.0 %
Impact of restructuring and transformational project costs (3)
(70,058)(95,078)25,020 26.3 
Impact of acquisition-related costs (4)
(103,449)(54,714)(48,735)(89.1)
Impact of bad debt reserve adjustments (5)
19,216 162,372 (143,156)(88.2)
Operating expenses adjusted for Certain Items (Non-GAAP)$7,149,641 $5,585,993 $1,563,648 28.0 %
Impact of currency fluctuations (1)
(4,177)— (4,177)(0.1)
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)$7,145,464 $5,585,993 $1,559,471 27.9 %
Operating income (GAAP)$1,572,320 $867,558 $704,762 81.2 %
Impact of inventory valuation adjustment (2)
29,550 — 29,550 NM
Impact of restructuring and transformational project costs (3)
70,058 95,078 (25,020)(26.3)
Impact of acquisition-related costs (4)
103,449 54,714 48,735 89.1 
Impact of bad debt reserve adjustments (5)
(19,216)(162,372)143,156 88.2 
Operating income adjusted for Certain Items (Non-GAAP)$1,756,161 $854,978 $901,183 105.4 %
Impact of currency fluctuations (1)
(3,947)— (3,947)(0.5)
Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP)$1,752,214 $854,978 $897,236 104.9 %
Interest expense (GAAP)$495,131 $438,988 $56,143 12.8 %
Impact of loss on extinguishment of debt(115,603)— (115,603)NM
Interest expense adjusted for Certain Items (Non-GAAP)$379,528 $438,988 $(59,460)(13.5)%
Other income (GAAP)$(27,705)$(14,140)$(13,565)(95.9)%
43

Impact of loss on sale of business— (22,834)22,834 NM
Other income adjusted for Certain Items (Non-GAAP)$(27,705)$(36,974)$9,269 25.1 %
Net earnings (GAAP)$848,779 $373,116 $475,663 127.5 %
Impact of inventory valuation adjustment (2)
29,550 — 29,550 NM
Impact of restructuring and transformational project costs (3)
70,058 95,078 (25,020)(26.3)
Impact of acquisition-related costs (4)
103,449 54,714 48,735 89.1 
Impact of bad debt reserve adjustments (5)
(19,216)(162,372)143,156 88.2 
Impact of loss on extinguishment of debt115,603 — 115,603 NM
Impact of loss on sale of business— 22,834 (22,834)NM
Tax impact of inventory valuation adjustment (6)
(7,449)— (7,449)NM
Tax impact of restructuring and transformational project costs (6)
(17,661)(26,886)9,225 34.3 
Tax impact of acquisition-related costs (6)
(26,079)(15,471)(10,608)(68.6)
Tax impact of bad debt reserves adjustments (6)
4,844 45,913 (41,069)(89.4)
Tax impact of loss on extinguishment of debt (6)
(29,143)— (29,143)NM
Tax impact of loss on sale of business (6)
— (7,251)7,251 NM
Impact of adjustments to uncertain tax positions12,000 — 12,000 NM
Impact of foreign tax rate change— (5,548)5,548 NM
Net earnings adjusted for Certain Items (Non-GAAP)$1,084,735 $374,127 $710,608 189.9 %
Diluted earnings per share (GAAP)$1.65 $0.73 $0.92 126.0 %
Impact of inventory valuation adjustment (2)
0.06 — 0.06 NM
Impact of restructuring and transformational project costs (3)
0.14 0.19 (0.05)(26.3)
Impact of acquisition-related costs (4)
0.20 0.11 0.09 81.8 
Impact of bad debt reserve adjustments (5)
(0.04)(0.32)0.28 87.5 
Impact of loss on extinguishment of debt0.22 — 0.22 NM
Impact of loss on sale of business— 0.04 (0.04)NM
Tax impact of inventory valuation adjustment (6)
(0.01)— (0.01)NM
Tax impact of restructuring and transformational project costs (6)
(0.03)(0.05)0.02 40.0 
Tax impact of acquisition-related costs (6)
(0.05)(0.03)(0.02)(66.7)
Tax impact of bad debt reserves adjustments (6)
0.01 0.09 (0.08)(88.9)
Tax impact of loss on extinguishment of debt (6)
(0.06)— (0.06)NM
Tax impact of loss on sale of business (6)
— (0.01)0.01 NM
Impact of adjustments to uncertain tax positions0.02 — 0.02 NM
Impact of foreign tax rate change— (0.01)0.01 NM
Diluted earnings per share adjusted for Certain Items (Non-GAAP) (7)
$2.11 $0.73 $1.38 189.0 %
44

(1)Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on the current year results.
(2)Represents a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory.
(3)Fiscal 2022 includes $39 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy and $31 million related to restructuring charges, severance and facility closure charges. Fiscal 2021 includes $56 million related to restructuring, severance and facility closure charges, and $39 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy.
(4)Fiscal 2022 includes $75 million of intangible amortization expense and $28 million in acquisition and due diligence costs. Fiscal 2021 represents intangible amortization expense.
(5)Fiscal 2022 and fiscal 2021 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(6)The tax impact of adjustments for Certain Items is calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction where the Certain Item was incurred.
(7)Individual components of diluted earnings per share may not add up to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.
NM represents that the percentage change is not meaningful.

45


39-Week Period Ended Apr. 2, 202239-Week Period Ended Mar. 30, 2019Change in Dollars% Change
Sales (GAAP)$49,678,888 $44,639,060 $5,039,828 11.3 %
Cost of sales (GAAP)$40,802,636 $36,209,265 $4,593,371 12.7 %
Impact of inventory valuation adjustment (1)
(29,550)— (29,550)NM
Cost of sales adjusted for Certain Items (Non-GAAP)$40,773,086 $36,209,265 $4,563,821 12.6 %
Gross profit (GAAP)$8,876,252 $8,429,795 $446,457 5.3 %
Impact of inventory valuation adjustment (1)
29,550 — 29,550 NM
Comparable gross profit adjusted for Certain Items (Non-GAAP)$8,905,802 $8,429,795 $476,007 5.7 %
Gross margin (GAAP)17.87 %18.88 %-101 bps
Impact of inventory valuation adjustment (1)
0.06 — 6 bps
Comparable Gross margin adjusted for Certain Items (Non-GAAP)17.93 %18.88 %-95 bps
Operating expenses (GAAP)$7,303,932 $6,820,175 $483,757 7.1 %
Impact of restructuring and transformational project costs (2)
(70,058)(247,547)177,489 71.7 
Impact of acquisition-related costs (3)
(103,449)(58,042)(45,407)(78.2)
Impact of bad debt reserve adjustments (4)
19,216 — 19,216 NM
Comparable operating expenses adjusted for Certain Items (Non-GAAP)$7,149,641 $6,514,586 $635,055 9.7 %
Operating income (GAAP)$1,572,320 $1,609,620 $(37,300)(2.3)%
Impact of inventory valuation adjustment (1)
29,550 — 29,550 NM
Impact of restructuring and transformational project costs (2)
70,058 247,547 (177,489)(71.7)
Impact of acquisition-related costs (3)
103,449 58,042 45,407 78.2 
Impact of bad debt reserve adjustments (4)
(19,216)— (19,216)NM
Operating income adjusted for Certain Items (Non-GAAP)$1,756,161 $1,915,209 $(159,048)(8.3)%
Interest expense (GAAP)$495,131 $270,643 $224,488 82.9 %
Impact of loss on extinguishment of debt(115,603)— (115,603)NM
Interest expense adjusted for Certain Items (Non-GAAP)$379,528 $270,643 $108,885 40.2 %
Net earnings (GAAP)$848,779 $1,138,505 $(289,726)(25.4)%
Impact of inventory valuation adjustment (1)
29,550 — 29,550 NM
Impact of restructuring and transformational project costs (2)
70,058 247,547 (177,489)(71.7)
Impact of acquisition-related costs (3)
103,449 58,042 45,407 78.2 
Impact of bad debt reserve adjustments (4)
(19,216)— (19,216)NM
Impact of loss on extinguishment of debt115,603 — 115,603 NM
Tax impact of inventory valuation adjustment (5)
(7,449)— (7,449)NM
Tax impact of restructuring and transformational project costs (5)
(17,661)(64,831)47,170 72.8 
Tax impact of acquisition-related costs (5)
(26,079)(15,201)(10,878)(71.6)
Tax impact of bad debt reserves adjustments (5)
4,844 — 4,844 NM
Tax impact of loss on extinguishment of debt (5)
(29,143)— (29,143)NM
Impact of foreign tax credit benefit— (95,067)95,067 NM
46

Impact of adjustments to uncertain tax positions12,000 — 12,000 NM
Impact of US transition tax— 14,885 (14,885)NM
Net earnings adjusted for Certain Items (Non-GAAP)$1,084,735 $1,283,880 $(199,145)(15.5)%
Diluted earnings per share (GAAP)$1.65 $2.17 $(0.52)(24.0)%
Impact of inventory valuation adjustment (1)
0.06 — 0.06 NM
Impact of restructuring and transformational project costs (2)
0.14 0.47 (0.33)(70.2)
Impact of acquisition-related costs (3)
0.20 0.11 0.09 81.8 
Impact of bad debt reserve adjustments (4)
(0.04)— (0.04)NM
Impact of loss on extinguishment of debt0.22 — 0.22 NM
Tax impact of inventory valuation adjustment (5)
(0.01)— (0.01)NM
Tax impact of restructuring and transformational project costs (5)
(0.03)(0.12)0.09 75.0 
Tax impact of acquisition-related costs (5)
(0.05)(0.03)(0.02)(66.7)
Tax impact of bad debt reserves adjustments (5)
0.01 — 0.01 NM
Tax impact of loss on extinguishment of debt (5)
(0.06)— (0.06)NM
Impact of foreign tax credit benefit— (0.18)0.18 NM
Impact of adjustments to uncertain tax positions0.02 — 0.02 NM
Impact of US transition tax— 0.03 (0.03)NM
Diluted earnings per share adjusted for Certain Items (Non-GAAP) (6)
$2.11 $2.45 $(0.34)(13.9)%
(1)Represents a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory.
(2)Fiscal 2022 includes $39 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy and $31 million related to restructuring charges, severance and facility closure charges. Fiscal 2019 includes $114 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy, of which $17 million relates to accelerated depreciation related to software that is being replaced, and $133 million related to severance, restructuring and facility closure charges in Europe, Canada and at our Global Support Center, of which $58 million relates to our France restructuring as part of our integration of Brake France and Davigel into Sysco France.
(3)Fiscal 2022 includes $75 million of intangible amortization expense and $28 million in acquisition and due diligence costs. Fiscal 2019 includes $57 million of intangible amortization expense and $1 million related to integration costs.
(4)Fiscal 2022 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(5)The tax impact of adjustments for Certain Items is calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction where the Certain Item was incurred.
(6)Individual components of diluted earnings per share may not add up to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.
NM represents that the percentage change is not meaningful.
47


13-Week Period Ended Apr. 2, 202213-Week Period Ended Mar. 27, 2021Change in Dollars%/bps Change
U.S. FOODSERVICE OPERATIONS
Operating expenses (GAAP)$1,523,578 $1,089,335 $434,243 39.9 %
Impact of restructuring and transformational project costs2,543 (1,285)3,828 297.9 
Impact of acquisition-related costs (1)
(10,505)— (10,505)NM
Impact of bad debt reserve adjustments (2)
5,060 21,669 (16,609)(76.6)
Operating expenses adjusted for Certain Items (Non-GAAP)$1,520,676 $1,109,719 $410,957 37.0 %
Operating income (GAAP)$746,467 $545,502 $200,965 36.8 %
Impact of restructuring and transformational project costs(2,543)1,285 (3,828)(297.9)
Impact of acquisition-related costs (1)
10,505 — 10,505 NM
Impact of bad debt reserve adjustments (2)
(5,060)(21,669)16,609 76.6 
Operating income adjusted for Certain Items (Non-GAAP)$749,369 $525,118 $224,251 42.7 %
INTERNATIONAL FOODSERVICE OPERATIONS
Sales (GAAP)$2,834,089 $1,723,126 $1,110,963 64.5 %
Impact of currency fluctuations (3)
83,678 — 83,678 4.8 
Comparable sales using a constant currency basis (Non-GAAP)$2,917,767 $1,723,126 $1,194,641 69.3 %
Gross profit (GAAP)$570,241 $325,200 $245,041 75.4 %
Impact of currency fluctuations (3)
20,354 — 20,354 6.2 
Comparable gross profit using a constant currency basis (Non-GAAP)$590,595 $325,200 $265,395 81.6 %
Gross margin (GAAP)20.12 %18.87 %125 bps
Impact of currency fluctuations (3)
0.12 — 12 bps
Comparable gross margin using a constant currency basis (Non-GAAP)20.24 %18.87 %137 bps
Operating expenses (GAAP)$562,481 $446,687 $115,794 25.9 %
Impact of restructuring and transformational project costs (4)
(9,379)(18,635)9,256 49.7 
Impact of acquisition-related costs (5)
(18,142)(18,834)692 3.7 
Impact of bad debt reserve adjustments (2)
657 8,357 (7,700)(92.1)
Operating expenses adjusted for Certain Items (Non-GAAP)535,617 417,575 118,042 28.3 
Impact of currency fluctuations (3)
20,104 — 20,104 4.8 
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)$555,721 $417,575 $138,146 33.1 %
Operating income (loss) (GAAP)$7,760 $(121,487)$129,247 106.4 %
Impact of restructuring and transformational project costs (4)
9,379 18,635 (9,256)(49.7)
Impact of acquisition-related costs (5)
18,142 18,834 (692)(3.7)
Impact of bad debt reserve adjustments (2)
(657)(8,357)7,700 92.1 
Operating income (loss) adjusted for Certain Items (Non-GAAP)34,624 (92,375)126,999 137.5 
Impact of currency fluctuations (3)
250 — 250 0.3 
Comparable operating income (loss) adjusted for Certain Items using a constant currency basis (Non-GAAP)$34,874 $(92,375)$127,249 137.8 %
SYGMA
Operating expenses (GAAP)$142,883 $120,541 $22,342 18.5 %
Operating income (GAAP)4,362 12,937 (8,575)(66.3)
OTHER
Operating expenses (GAAP)$59,369 $32,027 $27,342 85.4 %
48

Impact of bad debt reserve adjustments (2)
— 3,447 (3,447)NM
Operating expenses adjusted for Certain Items (Non-GAAP)$59,369 $35,474 $23,895 67.4 %
Operating (loss) income (GAAP)$(3,972)$5,884 $(9,856)(167.5)%
Impact of bad debt reserve adjustments (2)
— (3,447)3,447 NM
Operating (loss) income adjusted for Certain Items (Non-GAAP)$(3,972)$2,437 $(6,409)(263.0)%
GLOBAL SUPPORT CENTER
Gross loss (GAAP)$(29,534)$(8,758)$(20,776)(237.2)%
Impact of inventory valuation adjustment (6)
29,550 — 29,550 337.4 
Comparable gross profit (loss) adjusted for Certain Items (Non-GAAP)$16 $(8,758)$8,774 100.2 %
Operating expenses (GAAP)$229,354 $198,161 $31,193 15.7 %
Impact of restructuring and transformational project costs (7)
(12,335)(15,033)2,698 17.9 
Impact of acquisition-related costs (8)
(8,052)— (8,052)NM
Operating expenses adjusted for Certain Items (Non-GAAP)$208,967 $183,128 $25,839 14.1 %
Operating loss (GAAP)$(258,888)$(206,919)$(51,969)(25.1)%
Impact of inventory valuation adjustment (6)
29,550 — 29,550 NM
Impact of restructuring and transformational project costs (7)
12,335 15,033 (2,698)(17.9)
Impact of acquisition-related costs (8)
8,052 — 8,052 NM
Operating loss adjusted for Certain Items (Non-GAAP)$(208,951)$(191,886)$(17,065)(8.9)%
(1)Fiscal 2022 includes intangible amortization expense and acquisition costs.
(2)Fiscal 2022 and fiscal 2021 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(3)Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on current year results.
(4)Includes restructuring and facility closure costs primarily in Europe.
(5)Represents intangible amortization expense.
(6)Represents a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory.
(7)Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy.
(8)Represents due diligence costs.
NM represents that the percentage change is not meaningful.

49


U.S. FOODSERVICE OPERATIONS39-Week Period Ended Apr. 2, 202239-Week Period Ended Mar. 27, 2021Change in Dollars% Change
Operating expenses (GAAP)$4,373,665 $3,174,704 $1,198,961 37.8 %
Impact of restructuring and transformational project costs(383)(4,010)3,627 90.4 
Impact of acquisition-related costs (1)
(25,382)— (25,382)NM
Impact of bad debt reserve adjustments (2)
16,729 123,225 (106,496)(86.4)
Operating expenses adjusted for Certain Items (Non-GAAP)$4,364,629 $3,293,919 $1,070,710 32.5 %
Operating income (GAAP)$2,220,812 $1,619,162 $601,650 37.2 %
Impact of restructuring and transformational project costs383 4,010 (3,627)(90.4)
Impact of acquisition-related costs (1)
25,382 — 25,382 NM
Impact of bad debt reserve adjustments (2)
(16,729)(123,225)106,496 86.4 
Operating income adjusted for Certain Items (Non-GAAP)$2,229,848 $1,499,947 $729,901 48.7 %
INTERNATIONAL FOODSERVICE OPERATIONS
Sales (GAAP)$8,535,608 $5,854,608 $2,681,000 45.8 %
Impact of currency fluctuations (3)
(71,779)— (71,779)(1.2)
Comparable sales using a constant currency basis (Non-GAAP)$8,463,829 $5,854,608 $2,609,221 44.6 %
Gross profit (GAAP)$1,725,306 $1,149,438 $575,868 50.1 %
Impact of currency fluctuations (3)
(6,413)— (6,413)(0.6)
Comparable gross profit using a constant currency basis (Non-GAAP)$1,718,893 $1,149,438 $569,455 49.5 %
Gross margin (GAAP)20.21 %19.63 %58 bps
Impact of currency fluctuations (3)
0.10 — 10 bps
Comparable gross margin using a constant currency basis (Non-GAAP)20.31 %19.63 %68 bps
Operating expenses (GAAP)$1,670,125 $1,351,411 $318,714 23.6 %
Impact of restructuring and transformational project costs (4)
(30,426)(52,033)21,607 41.5 
Impact of acquisition-related costs (5)
(55,273)(54,714)(559)(1.0)
Impact of bad debt reserve adjustments (2)
2,488 33,583 (31,095)(92.6)
Operating expenses adjusted for Certain Items (Non-GAAP)1,586,914 1,278,247 308,667 24.1 
Impact of currency fluctuations (3)
(4,164)— (4,164)(0.3)
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)$1,582,750 $1,278,247 $304,503 23.8 %
Operating income (loss) (GAAP)$55,181 $(201,973)$257,154 127.3 %
Impact of restructuring and transformational project costs (4)
30,426 52,033 (21,607)(41.5)
Impact of acquisition-related costs (5)
55,273 54,714 559 1.0 
Impact of bad debt reserve adjustments (2)
(2,488)(33,583)31,095 92.6 
Operating income (loss) adjusted for Certain Items (Non-GAAP)138,392 (128,809)267,201 207.4 
Impact of currency fluctuations (3)
(2,249)— (2,249)NM
Comparable operating income (loss) adjusted for Certain Items using a constant currency basis (Non-GAAP)$136,143 $(128,809)$264,952 205.7 %
SYGMA
50

Operating expenses (GAAP)$427,168 $358,361 $68,807 19.2 %
Impact of restructuring and transformational project costs— (7)7 NM
Operating expenses adjusted for Certain Items (Non-GAAP)$427,168 $358,354 $68,814 19.2 %
Operating (loss) income (GAAP)$(4,814)$35,957 $(40,771)(113.4)%
Impact of restructuring and transformational project costs— 7 (7)NM
Operating (loss) income adjusted for Certain Items (Non-GAAP)$(4,814)$35,964 $(40,778)(113.4)%
OTHER
Operating expenses (GAAP)$166,560 $109,247 $57,313 52.5 %
Impact of bad debt reserve adjustments (2)
(1)5,564 (5,565)(100.0)
Operating expenses adjusted for Certain Items (Non-GAAP)$166,559 $114,811 $51,748 45.1 %
Operating (loss) income (GAAP)$2,667 $4,861 $(2,194)(45.1)%
Impact of bad debt reserve adjustments (2)
1 (5,564)5,565 100.0 
Operating (loss) income adjusted for Certain Items (Non-GAAP)$2,668 $(703)$3,371 NM
GLOBAL SUPPORT CENTER
Gross loss (GAAP)$(35,112)$(10,759)$(24,353)(226.4)%
Impact of inventory valuation adjustment (6)
29,550 — 29,550 NM
Comparable gross profit (loss) adjusted for Certain Items (Non-GAAP)$(5,562)$(10,759)$5,197 48.3 %
Operating expenses (GAAP)$666,414 $579,690 $86,724 15.0 %
Impact of restructuring and transformational project costs (7)
(39,249)(39,028)(221)(0.6)
Impact of acquisition-related costs (8)
(22,794)— (22,794)NM
Operating expenses adjusted for Certain Items (Non-GAAP)$604,371 $540,662 $63,709 11.8 %
Operating loss (GAAP)$(701,526)$(590,449)$(111,077)(18.8)%
Impact of inventory valuation adjustment (6)
29,550 — 29,550 NM
Impact of restructuring and transformational project costs (7)
39,249 39,028 221 0.6 
Impact of acquisition-related costs (8)
22,794 — 22,794 NM
Operating loss adjusted for Certain Items (Non-GAAP)$(609,933)$(551,421)$(58,512)(10.6)%
(1)Fiscal 2022 includes intangible amortization expense and acquisition costs.
(2)Fiscal 2022 and fiscal 2021 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(3)Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on current year results.
(4)Includes restructuring, severance and facility closure costs primarily in Europe.
(5)Represents intangible amortization expense.
(6)Represents a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory.
(7)Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy.
(8)Represents due diligence costs.
NM represents that the percentage change is not meaningful.
51



EBITDA and 2017 are impacted by restructuring costs consisting of: (1) expenses associated with our revised business technology strategy announced in fiscal 2016,Adjusted EBITDA

EBITDA and adjusted EBITDA should not be used as a result of which we incurred costs to convert to a modernized version of our established platform as opposed to completing the implementation of an ERP; (2) professional fees related to our three-year strategic plan; (3) restructuring expenses within our Brakes Group operations; and (4) severance charges related to restructuring. In addition, fiscal 2018 results of operations are impacted by business technology transformation initiative costs. Our results of operations for fiscal 2018 and 2017 are also impacted by the following acquisition-related items: (1) intangible amortization expense and (2) integration costs. All acquisition-related costs in fiscal 2018 and 2017 that have been excluded relate to the Brakes acquisition.  The Brakes acquisition also resulted in non-recurring tax expense in fiscal 2017, primarily from non-deductible transaction costs. Sysco’s results of operations for fiscal 2018 are also impacted by reform measures from the Tax Act enacted on December 22, 2017. The impact for fiscal 2018 includes: (1) a provisional estimate of a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries and (2) a net benefit from remeasuring Sysco’s accrued income taxes, deferred tax liabilities and deferred tax assets due to the changes in tax rates. These fiscal 2018 and fiscal 2017 items are collectively referred to as "Certain Items."

Management believes that adjusting its operating expenses, operating income, net earnings and diluted earnings per share to remove these Certain Items, but notsubstitute for the impactmost comparable GAAP measure in assessing Sysco’s overall financial performance for the periods presented. An analysis of the tax rate reduction, provides an important perspective with respect to our underlying business trends and results and provides meaningful supplemental information to both management and investors that (1) is indicative of the performance of the company's underlying operations, facilitating comparisons on a year-over-year basis and (2) removes those items that are difficult to predict and are often unanticipated and that, as a result, are difficult to include in analysts' financial models and our investors' expectations with any degree of specificity.

Although Sysco has a history of growth through acquisitions, the Brakes Group is significantly larger than the companies historically acquired by Sysco, with a proportionately greater impact on Sysco’s consolidated financial statements. Accordingly, Sysco is excluding from its non-GAAP financial measuresmeasure should be used in conjunction with results presented in accordance with GAAP. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Performance Indicators” contained in our fiscal 2021 Form 10-K for the relevant period solely those acquisition costs specific to the Brakes acquisition. We believediscussions around this approach significantly enhances the comparability of Sysco’s results for fiscal 2018 and fiscal 2017.

Sysco is also disclosing net earnings and diluted earnings per share that are further adjusted due to changes in the U.S. statutory tax rate that resulted from the Tax Act. The U.S. statutory tax rate changed to 21% effective January 1, 2018; however, because Sysco was at the midpoint of its fiscal year when the Tax Act became effective, the blended U.S. statutory tax rate applicable to Sysco for fiscal 2018 is 28%. This produced an estimated, one-time net tax benefit of $64.7 million that was recorded in the


second quarter of fiscal 2018 due to retroactive application of the 28% blended rate to our earnings for the first half of fiscal 2018, an adjustment addressing the fact that reported earnings in the first quarter were calculated based on the prior, higher statutory rate and that rate has been applied retroactively to all earnings from July 1, 2017 through the date of adoption of the Tax Act.

Management believes that further adjusting its adjusted net earnings and adjusted diluted earnings per share to remove the impact of the U.S. statutory tax rate change provides an important additional perspective with respect to our underlying business trends and results and provides meaningful supplemental information to both management and investors that better reflects the underlyingnon-GAAP performance of the company and provides for better comparability quarter to quarter, by excluding the impacts of not only the Certain Items described above, but also the impact of the reduction in the U.S. statutory tax rate, which will continue to impact our financial results, and which impacts would have been difficult for analysts or investors to anticipate, for purposes of their financial models or otherwise, with any degree of specificity. Management also made this further adjustment to compare Sysco’s underlying financial performance to internal budgets and forecasts that did not include the impact of the U.S. statutory tax rate change that occurred as a result of the Tax Act.

metric. Set forth below is a reconciliation of sales, operating expenses, operating income,actual net earnings to EBITDA and diluted earnings per share to adjusted EBITDA results for these measures for the periods presented. Individual components of diluted earnings per share may not add to the total presented due to rounding.  Adjusted diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.(dollars in thousands):



 13-Week Period Ended Dec. 30, 2017 13-Week Period Ended Dec. 31, 2016 Change in Dollars %/bps Change
 (In thousands, except for share and per share data)
Operating expenses (GAAP)$2,167,104
 $2,079,446
 $87,658
 4.2 %
Impact of restructuring costs (1)
(21,377) (40,089) 18,712
 (46.7)
Impact of acquisition-related costs (2)
(25,799) (25,370) (429) 1.7
Operating expenses adjusted for certain items (Non-GAAP)$2,119,928
 $2,013,987
 $105,941
 5.3 %
        
Operating income (GAAP)$532,282
 $492,417
 $39,865
 8.1 %
Impact of restructuring costs (1)
21,377
 40,089
 (18,712) (46.7)
Impact of acquisition-related costs (2)
25,799
 25,370
 429
 1.7
Operating income adjusted for certain items (Non-GAAP)$579,458
 $557,876
 $21,582
 3.9 %
        
Net earnings (GAAP)$284,113
 $275,167
 $8,946
 3.3 %
Impact of restructuring costs (1)
21,377
 40,089
 (18,712) (46.7)
Impact of acquisition-related costs (2)
25,799
 25,370
 429
 1.7
Tax impact of restructuring costs (3)
(5,691) (15,111) 9,420
 (62.3)
Tax impact of acquisition-related costs (3)
(6,110) (6,726) 616
 (9.2)
Impact of US transition tax115,000
 —
 115,000
 NM
Impact of US balance sheet remeasurement from tax law change(14,477) —
 (14,477) NM
Impact of France and U.K. tax law changes(8,137) —
 (8,137) NM
Net earnings adjusted for certain items (Non-GAAP)411,874
 318,789
 93,085
 29.2
Impact of US tax rate change(64,731) —
 (64,731) NM
Net earnings further adjusted (Non-GAAP)$347,143
 $318,789
 $28,354
 8.9 %
        
Diluted earnings per share (GAAP)$0.54
 $0.50
 $0.04
 8.0 %
Impact of restructuring costs (1)
0.04
 0.07
 (0.03) (42.9)
Impact of acquisition-related costs (2)
0.05
 0.05
 —
 —
Tax impact of restructuring costs (3)
(0.01) (0.03) 0.02
 (66.7)
Tax impact of acquisition-related costs (3)
(0.01) (0.01) —
 —
Impact of US transition tax0.22
 —
 0.22
 NM
Impact of US balance sheet remeasurement from tax law change(0.03) —
 (0.03) NM
Impact of France and U.K. tax law changes(0.02) —
 (0.02) NM
Diluted EPS adjusted for certain items (Non-GAAP) (4)
$0.78
 $0.58
 $0.20
 34.5 %
Impact of US tax rate change(0.12) —
 (0.12) NM
Diluted EPS further adjusted (Non-GAAP) (4)
$0.66
 $0.58
 $0.08
 13.8 %

(1) Fiscal 2018 includes business technology transformation initiative costs, restructuring expenses within our Brakes operations, professional fees on three-year financial objectives and severance charges related to restructuring. Fiscal 2017 includes $28 million in accelerated depreciation associated with our revised business technology strategy and $12 million related to severance charges pertaining to restructuring, professional fees on three-year financial objectives, costs to convert to legacy systems in conjunction with our revised business technology strategy and restructuring expenses within our Brakes operations.
(2) Fiscal 2018 and fiscal 2017 each include $19 million related to intangible amortization expense from the Brakes Acquisition, which is included in the results of Brakes, and $5 million in integration costs.
(3) The tax impact of adjustments for Certain Items are calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction where the Certain Item was incurred. The Brakes Acquisition also resulted in non-recurring tax expense in fiscal 2017, primarily from non-deductible transaction costs.
(4) Individual components of diluted earnings per share may not add to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.
NM represent that the percentage change is not meaningful.



 26-Week Period Ended Dec. 30, 2017 26-Week Period Ended Dec. 31, 2016 Change in Dollars %/bps Change
 (In thousands, except for share and per share data)
Operating expenses (GAAP)$4,337,680
 $4,204,532
 $133,148
 3.2 %
Impact of restructuring costs (1)
(40,430) (78,374) 37,944
 (48.4)
Impact of acquisition-related costs (2)
(45,545) (47,079) 1,534
 (3.3)
Operating expenses adjusted for certain items (Non-GAAP)$4,251,705
 $4,079,079
 $172,626
 4.2 %
        
Operating income (GAAP)$1,155,374
 $1,059,250
 $96,124
 9.1 %
Impact of restructuring costs (1)
40,430
 78,374
 (37,944) (48.4)
Impact of acquisition-related costs (2)
45,545
 47,079
 (1,534) (3.3)
Operating income adjusted for certain items (Non-GAAP)$1,241,349
 $1,184,703
 $56,646
 4.8 %
        
Net earnings (GAAP)$651,753
 $599,054
 $52,699
 8.8 %
Impact of restructuring costs (1)
40,430
 78,374
 (37,944) (48.4)
Impact of acquisition-related costs (2)
45,545
 47,079
 (1,534) (3.3)
Tax impact of restructuring costs (3)
(12,654) (19,072) 6,418
 (33.7)
Tax impact of acquisition-related costs (3)
(11,088) (10,528) (560) 5.3
Impact of US transition tax115,000
 —
 115,000
 NM
Impact of US balance sheet remeasurement from tax law change(14,477) —
 (14,477) NM
Impact of France and U.K. tax law changes(8,137) —
 (8,137) NM
Net earnings adjusted for certain items (Non-GAAP)806,372
 694,907
 111,465
 16.0
Impact of US tax rate change(64,731) —
 (64,731) NM
Net earnings further adjusted (Non-GAAP)$741,641
 $694,907
 $46,734
 6.7 %
        
Diluted earnings per share (GAAP)$1.23
 $1.08
 $0.15
 13.9 %
Impact of restructuring costs (1)
0.08
 0.14
 (0.06) (42.9)
Impact of acquisition-related costs (2)
0.09
 0.08
 0.01
 12.5
Tax impact of acquisition-related costs (3)
(0.02) (0.03) 0.01
 (33.3)
Tax impact of acquisition financing costs (3)
(0.02) (0.02) —
 —
Impact of US transition tax0.22
 —
 0.22
 NM
Impact of US balance sheet remeasurement from tax law change(0.03) —
 (0.03) NM
Impact of France and U.K. tax law changes(0.02) —
 (0.02) NM
Diluted EPS adjusted for certain items (Non-GAAP) (4)
1.52
 1.25
 0.27
 21.6 %
Impact of US tax rate change(0.12) —
 (0.12) NM
Diluted EPS further adjusted (Non-GAAP) (4)
$1.40
 $1.25
 $0.15
 12.0 %

(1) Fiscal 2018 includes business technology transformation initiative costs, professional fees on three-year financial objectives, restructuring expenses within our Brakes operations and severance charges related to restructuring. Fiscal 2017 includes $56 million in accelerated depreciation associated with our revised business technology strategy and $22 million related to professional fees on 3-year financial objectives, restructuring expenses within our Brakes operations, severance charges and costs to convert to legacy systems in conjunction with our revised business technology strategy.
(2) Fiscal 2018 and fiscal 2017 include $31 million and $38 million, respectively, related to intangible amortization expense from the Brakes Acquisition, which is included in the results of Brakes, and $10 million and $7 million in integration costs, respectively.
(3) The tax impact of adjustments for Certain Items are calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction where the Certain Item was incurred. The Brakes Acquisition also resulted in non-recurring tax expense in fiscal 2017, primarily from non-deductible transaction costs.
(4) Individual components of diluted earnings per share may not add to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.


NM represent that the percentage change is not meaningful.

Set forth below is a reconciliation by segment of actual operating expenses and operating income to adjusted results for these measures for applicable segments and corporate for the periods presented:
 13-Week Period Ended Dec. 30, 2017 13-Week Period Ended Dec. 31, 2016 Change in Dollars %/bps Change
INTERNATIONAL FOODSERVICE OPERATIONS

 

 

 

Operating expenses (GAAP)$547,209
 $491,401
 $55,808
 11.4 %
Impact of restructuring costs (1)
(5,602) (5,590) (12) 0.2
Impact of acquisition-related costs (2)
(20,809) (20,293) (516) 2.5
Operating expenses adjusted for certain items (Non-GAAP)$520,798
 $465,518
 $55,280
 11.9 %



 

 

 

Operating income (GAAP)$52,438
 $84,814
 $(32,376) (38.2)%
Impact of restructuring costs (1)
5,602
 5,590
 12
 0.2
Impact of acquisition related costs (2)
20,809
 20,293
 516
 2.5
Operating income adjusted for certain items (Non-GAAP)$78,849
 $110,697
 $(31,848) (28.8)%
        
CORPORATE       
Operating expenses (GAAP)$232,921
 $279,765
 $(46,844) (16.7)%
Impact of restructuring costs (3)
(15,775) (34,029) 18,254
 (53.6)
Impact of acquisition-related costs (4)
(4,990) (5,078) 88
 (1.7)
Operating expenses adjusted for certain items (Non-GAAP)$212,156
 $240,658
 $(28,502) (11.8)%
        
Operating income (GAAP)$(233,106) $(280,666) $47,560
 (16.9)%
Impact of restructuring costs (3)
15,775
 34,029
 (18,254) (53.6)
Impact of acquisition-related costs (4)
4,990
 5,078
 (88) (1.7)
Operating income adjusted for certain items (Non-GAAP)$(212,341) $(241,559) $29,218
 (12.1)%

(1) Includes Brakes Acquisition-related restructuring charges and other severance charges related to restructuring.
(2) Fiscal 2018 and fiscal 2017 include $19 million related to intangible amortization expense from the Brakes Acquisition, which is included in the results of the Brakes Group.
(3) Fiscal 2018 includes business technology transformation initiative costs, professional fees on three-year financial objectives and severance charges related to restructuring. Fiscal 2017 includes $28 million in accelerated depreciation associated with our revised business technology strategy and $10 million in severance charges related to restructuring, professional fees on three-year financial objectives and costs to convert to legacy systems in conjunction with our revised business technology strategy.
(4) Fiscal 2018 and fiscal 2017 include $5 million related to integration costs from the Brakes Acquisition.
NM represent that the percentage change is not meaningful.



 26-Week Period Ended Dec. 30, 2017 26-Week Period Ended Dec. 31, 2016 Change in Dollars %/bps Change
INTERNATIONAL FOODSERVICE OPERATIONS       
Operating expenses (GAAP)$1,085,666
 $1,010,372
 $75,294
 7.5 %
Impact of restructuring costs (1)
(9,500) (10,271) 771
 (7.5)
Impact of acquisition-related costs (2)
(35,323) (39,790) 4,467
 (11.2)
Operating expenses adjusted for certain items (Non-GAAP)$1,040,843
 $960,311
 $80,533
 8.4 %
        
Operating income (GAAP)$129,084
 $164,249
 $(35,165) (21.4)%
Impact of restructuring costs (1)
9,500
 10,271
 (771) (7.5)
Impact of acquisition related costs (2)
35,323
 39,790
 (4,467) (11.2)
Operating income adjusted for certain items (Non-GAAP)$173,907
 $214,310
 $(40,403) (18.9)%
        
CORPORATE       
Operating expenses (GAAP)$475,053
 $547,645
 $(72,592) (13.3)%
Impact of restructuring costs (3)
(30,930) (67,633) 36,703
 (54.3)
Impact of acquisition-related costs (4)
(10,222) (7,290) (2,932) 40.2
Operating expenses adjusted for certain items (Non-GAAP)$433,901
 $472,722
 $(38,821) (8.2)%
        
Operating income (GAAP)$(476,390) $(551,407) $75,017
 (13.6)%
Impact of restructuring costs (3)
30,930
 67,633
 (36,703) (54.3)
Impact of acquisition-related costs (4)
10,222
 7,290
 2,932
 40.2
Operating income adjusted for certain items (Non-GAAP)$(435,238) $(476,484) $41,246
 (8.7)%

(1) Includes Brakes Acquisition-related restructuring charges and other severance charges pertaining to restructuring.
(2) Fiscal 2018 and 2017 include $31 million and $38 million, respectively, related to intangible amortization expense from the Brakes Acquisition, which is included in the results of the Brakes Group.
(3) Fiscal 2018 includes business technology transformation initiative costs, professional fees on three-year financial objectives and severance charges related to restructuring. Fiscal 2017 includes $56 million in accelerated depreciation associated with our revised business technology strategy and $18 million in professional fees on three-year financial objectives, severance charges related to restructuring and costs to convert to legacy systems in conjunction with our revised business technology strategy.
(4) Fiscal 2018 and 2017 include $10 million and $7 million, respectively, related to integration costs from the Brakes Acquisition.
NM represent that the percentage change is not meaningful.

Three-Year Financial Targets

Sysco management considers adjusted ROIC to be a measure that provides useful information to management and investors in evaluating the efficiency and effectiveness of the company’s long-term capital investments. In addition, we have targets and expectations that are based on adjusted results, including an adjusted ROIC target of 15% under our current three-year plan and 16% under our new three-year plan. We cannot predict with certainty when we will achieve these results or whether the calculation of our ROIC in such future period will be on an adjusted basis due to the effect of Certain Items, which would be excluded from such calculation. Due to these uncertainties, to the extent our future calculation of ROIC is on an adjusted basis excluding Certain Items, we cannot provide a quantitative reconciliation of this non-GAAP measure to the most directly comparable GAAP measure without unreasonable effort. However, we would expect to calculate adjusted ROIC, if applicable, in the same manner as we have calculated this historically. All components of our adjusted ROIC calculation would be impacted by Certain Items. We calculate adjusted ROIC as adjusted net earnings divided by (i) stockholders’ equity, computed as the average of adjusted stockholders’ equity at the beginning of the year and at the end of each fiscal quarter during the year; and (ii) long-term debt, computed as the average of the long-term debt at the beginning of the year and at the end of each fiscal quarter during the year.



13-Week Period Ended Apr. 2, 202213-Week Period Ended Mar. 27, 2021Change in Dollars% Change
Net earnings (GAAP)$303,325 $88,927 $214,398 241.1 %
Interest (GAAP)124,018 145,773 (21,755)(14.9)
Income taxes (GAAP)82,163 13,925 68,238 NM
Depreciation and amortization (GAAP)193,843 177,139 16,704 9.4 
EBITDA (Non-GAAP)$703,349 $425,764 $277,585 65.2 %
Certain Item adjustments:
Impact of inventory valuation adjustment (1)
$29,550 $— $29,550 NM
Impact of restructuring and transformational project costs (2)
18,746 34,301 (15,555)(45.3)
Impact of acquisition-related costs (3)
9,861 — 9,861 NM
Impact of bad debt reserve adjustments (4)
(5,717)(33,473)27,756 82.9 
Impact of loss on sale of business— 10,790 (10,790)NM
EBITDA adjusted for Certain Items (Non-GAAP) (5)
$755,789 $437,382 $318,407 72.8 %
Form(1)Represents a write-down of calculation:COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory.
Net earnings (GAAP)(2)Fiscal 2022 and fiscal 2021 include charges related to restructuring, severance, and facility closures, as well as various transformation initiative costs, primarily consisting of changes to our business technology strategy, excluding charges related to accelerated depreciation.
Impact of Certain Items on net earnings(3)Fiscal 2022 includes acquisition and due diligence costs.
Adjusted net earnings (Non-GAAP)(4)Fiscal 2022 and fiscal 2021 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(5)In arriving at adjusted EBITDA, Sysco does not adjust out interest income of $2 million and $5 million for fiscal 2022 and fiscal 2021, respectively, or non-cash stock compensation expense of $30 million and $19 million in fiscal 2022 and fiscal 2021, respectively.
Invested Capital (GAAP)
Adjustments to invested capital
Adjusted Invested capital (GAAP)
Return on investment capital (GAAP)
Return on investment capital (Non-GAAP)NM represents that the percentage change is not meaningful.


Additional targets and expectations include our adjusted operating income target that we expect to achieve by the end of fiscal 2018 under our current three-year plan and fiscal 2020 under our new three-year plan. Our fiscal 2020 three-year plan further includes target amounts for adjusted net earnings and adjusted diluted earnings per share. Due to uncertainties in projecting Certain Items, we cannot provide a quantitative reconciliation of these non-GAAP measures to the most directly comparable GAAP measures without unreasonable effort. However, we would expect to calculate these adjusted results in the same manner as the reconciliations provided for the historical periods that are presented herein. The impact of future Certain Items could cause projected non-GAAP amounts to differ significantly from our GAAP results. Sysco’s three-year targets for fiscal 2018 were developed assuming U.S. statutory tax rates would not change. In order to communicate the final fiscal 2018 results as compared to these targets, Sysco will provide results that exclude the impact of U.S. tax reform. The objectives targeted in our new three-year plan that concludes in fiscal 2020 are subject to change, as we continue to assess the impact of the recently enacted U.S. tax reform; however, we anticipate our three-year plan earnings targets will be positively impacted.
52


13-Week Period Ended Apr. 2, 202213-Week Period Ended Mar. 30, 2019Change in Dollars% Change
Net earnings (GAAP)$303,325 $440,083 $(136,758)(31.1)%
Interest (GAAP)124,018 94,514 29,504 31.2 
Income taxes (GAAP)82,163 (9,132)91,295 NM
Depreciation and amortization (GAAP)193,843 184,183 9,660 5.2 
EBITDA (Non-GAAP)$703,349 $709,648 $(6,299)(0.9)%
Certain Item adjustments:
Impact of inventory valuation adjustment (1)
$29,550 $— $29,550 NM
Impact of restructuring and transformational project costs (2)
18,746 67,266 (48,520)(72.1)
Impact of acquisition-related costs (3)
9,861 19 9,842 NM
Impact of bad debt reserve adjustments (4)
(5,717)— (5,717)NM
EBITDA adjusted for Certain Items (Non-GAAP) (5)
$755,789 $776,933 $(21,144)(2.7)%
(1)Represents a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory.
(2)Fiscal 2022 and fiscal 2019 include charges related to restructuring, severance, and facility closures, as well as various transformation initiative costs, primarily consisting of changes to our business technology strategy, excluding charges related to accelerated depreciation.
(3)Fiscal 2022 includes acquisition and due diligence costs. Fiscal 2019 represents acquisition costs.
(4)Fiscal 2022 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(5)In arriving at adjusted EBITDA, Sysco does not adjust out interest income of $2 million and $5 million for fiscal 2022 and fiscal 2019, respectively, or non-cash stock compensation expense of $30 million and $24 million in fiscal 2022 and fiscal 2019, respectively.
NM represents that the percentage change is not meaningful.


53

39-Week Period Ended Apr. 2, 202239-Week Period Ended Mar. 27, 2021Change in Dollars% Change
Net earnings (GAAP)$848,779 $373,116 $475,663 127.5 %
Interest (GAAP)495,131 438,988 56,143 12.8 
Income taxes (GAAP)256,115 69,594 186,521 268.0 
Depreciation and amortization (GAAP)571,606 542,471 29,135 5.4 
EBITDA (Non-GAAP)$2,171,631 $1,424,169 $747,462 52.5 %
Certain Item adjustments:
Impact of inventory valuation adjustment (1)
$29,550 $— $29,550 NM
Impact of restructuring and transformational project costs (2)
69,093 89,253 (20,160)(22.6)
Impact of acquisition-related costs (3)
28,260 — 28,260 NM
Impact of bad debt reserve adjustments (4)
(19,216)(162,372)143,156 88.2 
Impact of loss on sale of business— 22,834 (22,834)NM
EBITDA adjusted for Certain Items (Non-GAAP) (5)$2,279,318 $1,373,884 $905,434 65.9 %
(1)Represents a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory.
(2)Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy, excluding charges related to accelerated depreciation.
(3)Fiscal 2022 includes acquisition and due diligence costs.
(4)Fiscal 2022 and fiscal 2021 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(5)In arriving at adjusted EBITDA, Sysco does not adjust out interest income of $5 million and $12 million or non-cash stock compensation expense of $91 million and $65 million for fiscal 2022 and fiscal 2021, respectively.
NM represents that the percentage change is not meaningful.


54

39-Week Period Ended Apr. 2, 202239-Week Period Ended Mar. 30, 2019Change in Dollars% Change
Net earnings (GAAP)$848,779 $1,138,505 $(289,726)(25.4)%
Interest (GAAP)495,131 270,643 224,488 82.9 
Income taxes (GAAP)256,115 185,023 71,092 38.4 
Depreciation and amortization (GAAP)571,606 576,596 (4,990)(0.9)
EBITDA (Non-GAAP)$2,171,631 $2,170,767 $864 0.04 %
Certain Item adjustments:
Impact of inventory valuation adjustment (1)
$29,550 $— $29,550 NM
Impact of restructuring and transformational project costs (2)
69,093 215,051 (145,958)(67.9)
Impact of acquisition-related costs (3)
28,260 824 27,436 NM
Impact of bad debt reserve adjustments (4)
(19,216)— (19,216)NM
EBITDA adjusted for Certain Items (Non-GAAP) (5)
$2,279,318 $2,386,642 $(107,324)(4.5)%
(1)Represents a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory.
(2)Fiscal 2022 and fiscal 2019 include charges related to restructuring, severance, and facility closures, as well as various transformation initiative costs, primarily consisting of changes to our business technology strategy, excluding charges related to accelerated depreciation.
(3)Fiscal 2022 includes acquisition and due diligence costs. Fiscal 2019 represents acquisition costs.
(4)Fiscal 2022 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(5)In arriving at adjusted EBITDA, Sysco does not adjust out interest income of $5 million and $4 million or non-cash stock compensation expense of $91 million and $78 million for fiscal 2022 and fiscal 2019, respectively.
NM represents that the percentage change is not meaningful.



55

Liquidity and Capital Resources


Highlights

Comparisons of the cash flows from the first 26 weeks of fiscal 2018 to the first 26 weeks of fiscal 2017:

Cash flows from operations were $933.2 million in 2018, compared to $639.4 million in 2017, primarily due to lower tax payments resulting from relief provided in connection with the impact of Hurricane Harvey;
Capital expenditures totaled $258.6 million in 2018, compared to $285.7 million in 2017;
Free cash flow was $678.5 million in 2018, compared to $365.3 million in 2017, primarily due to lower tax payments resulting from relief provided in connection with the impact of Hurricane Harvey; (see “Non-GAAP Reconciliations” below under the heading “Free Cash Flow”);
Cash used for acquisition of businesses, net of cash received, was $147.6 million in 2018, compared to $2.9 billion in 2017;
Commercial paper issuances and net bank borrowings were $630.3 million in 2018, compared to $1.0 billion of commercial paper issuances and bank borrowings in 2017;
Dividends paid were $346.9 million in 2018, compared to $343.4 million in 2017; and
Cash paid for treasury stock repurchases was $750.5 million in 2018, compared to $1.2 billion in 2017.

Sources and Uses of Cash

Sysco’s strategic objectives include continuous investment in our business; these investments are funded by a combination of cash from operations and access to capital from financial markets.  Our operations historically have produced significant cash flow.  Cash generated from operations is generally allocated to:

working capital requirements;
investments in facilities, systems, fleet, other equipment and technology;


cash dividends;
acquisitions compatible with our overall growth strategy;
contributions to our various retirement plans; and
debt repayments and share repurchases.

We currently estimate $200 million to $300 million in annual savings from lower taxes as a result of the Tax Act. We will continue to evaluate our options with regard to how best to utilize these savings and will maintain our capital allocation priorities. We believe this is an opportunity to reinvest in our business and further strengthen our competitive advantage. 

Any remaining cash generated from operations may be invested in high-quality, short-term instruments.  As a part of our ongoing strategic analysis, we regularly evaluate business opportunities, including potential acquisitions and sales of assets and businesses, and our overall capital structure.  Any transactions resulting from these evaluations may materially impact our liquidity, borrowing capacity, leverage ratios and capital availability.

We continue to generate substantial cash flows from operations and remain in a strong financial position; however, our liquidity and capital resources can be influenced by economic trends and conditions that impact our results of operations.  We believe our mechanisms to manage working capital, such as credit monitoring, optimizing inventory levels and maximizing payment terms with vendors, and our mechanisms to manage the items impacting our gross profits have been sufficient to limit a significant unfavorable impact on our cash flows from operations.  We believe these mechanisms will continue to prevent a significant unfavorable impact on our cash flows from operations.  Seasonal trends also impact our cash flows from operations and free cash flow, as we use more cash earlier in the fiscal year and then see larger, sequential quarterly increases throughout the remainder of the year.


As of December 30, 2017,April 2, 2022, we had $961.1$876.1 million in cash and cash equivalents, approximately 72.0% of which was held by our international subsidiaries generated from our earnings of international operations.  If these earnings were transferred among countries or repatriated to the U.S., such amounts may be subject to withholding and additional foreign tax obligations; however, this potential tax obligation has not been accrued for as a result of the company’s ability and intent to not repatriate this cash. This assertion will continue to be assessed due to the recent enactment of the Tax Act. 

In December 2017, Sysco established a wholly owned captive insurance subsidiary (Captive). The primary purpose of the Captive is to enhance Sysco’s risk financing strategies by providing Sysco the opportunity to negotiate insurance premiums in the non-retail insurance market. The formation of the Captive will result in a one-time benefit toequivalents. We produced positive free cash flow in a period of between $55 millionhigher working capital investments, one-time and $60 million due to accelerated tax deductibility of the initial premium paidshort-term costs related to the Captive in the last half of fiscal 2018. Further, the Captive must maintain a sufficient level of cash to fund future reserve payments. As of December 30, 2017, we had $152.9 million of restricted cashbusiness recovery and restricted cash equivalents primarily held by the Captive in a cash deposit account in order to meet solvency requirements.

We believe the following sources will be sufficient to meetinvestments towards our anticipated cash requirementsRecipe for Growth strategy. Our results for the next twelve months, while maintaining sufficient liquidity for normal operating purposes:

our cash flows from operations;
the availability of additional capital under our existing commercial paper programs, supported by our revolving credit facility and bank line of credit; and
our ability to access capital from financial markets, including issuances of debt securities, either privately or under our shelf registration statement filed with the Securities and Exchange Commission (SEC).

Due to our strong financial position, we believe that we will continue to be able to effectively access the commercial paper market and long-term capital markets, if necessary.

Cash Flows

Operating Activities

We generated $933.2 million in cash flows from operations in the first 2639 weeks of fiscal 2018, compared2022 also reflect incremental progress against our capital allocation priorities, as we were able to cash flows of $639.4 millionrefinance debt at more attractive interest rates with later maturities in the first 26 weeks of fiscal 2017. This increase of $293.8 million year-over-year was largely due to favorable comparison on accrued expense, accrued income taxes and higher operating results, partially offset by working capital.



Changes in working capital, specifically accounts receivable, inventory and accounts payable, had a negative impact of $118.5 million on the period-over-period change in cash flow from operations. This was primarily from working capital investments in support of sales growth.

The positive comparison on accrued expenses was primarily due to a $70.2 million decrease in other accruals, such as corporate business technology accruals and professional fee accruals. There was also a $52.5 million decrease from incentive payments. Our annual incentive payments from the prior fiscal year are paid in the first quarter of each fiscal year. Our fiscal 2017 performance resulted in lower incentive payments, paid in the first quarter of fiscal 2018, as compared to our payments in the first quarter of fiscal 2017, that resulted from our fiscal 2016 performance.

In fiscal 2018, due to relief provided in connection with the impact of Hurricane Harvey, our tax payments will not be made until our third quarter of fiscal 2018, resulting in a favorable variance in the first 26 weeks of fiscal 2018 as compared to the same period in fiscal 2017. Total tax payments have decreased by $383.8 million. Our tax payments will likely resume in the third quarter of fiscal 2018.

Seasonal trends also impact our cash flows from operations, as we use more cash earlier in the fiscal year and then see larger, sequential quarterly increases throughout the remainder of the year. We believe our operating cash flows for fiscal 2018 will be generally consistent with the results achieved in fiscal 2017.

Investing Activities

Our capital expenditures in the first 26 weeks of fiscal 2018 primarily consisted of facility replacements and expansions, fleet, technology and warehouse equipment, including supply chain opportunities involving Sysco Europe. Our capital expenditures in the first 26 weeks of fiscal 2018 were higher by $27.1 million as compared to the first 26 weeks of fiscal 2017.

During the first 26 weeks of fiscal 2018, we paid $147.6 million for acquisitions made during fiscal 2018, net of cash acquired primarily for the acquisitions, including HFM and the remaining 50% interest in our joint venture in Costa Rica.

Free Cash Flow

Free cash flow represents net cash provided from operating activities, less purchases of plant and equipment, plus proceeds from sales of plant and equipment.  Sysco considers free cash flow to be a non-GAAP liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after the purchases and sales of buildings, fleet, equipment and technology, which may potentially be used to pay for, among other things, strategic uses of cash, including dividend payments, share repurchases and acquisitions.  However, free cash flow may not be available for discretionary expenditures, as it may be necessary that we use it to make mandatory debt service or other payments.  Our free cash flow for the first 26 weeks of fiscal 2018 increased by $313.2 million, to $678.5 million, as compared to the first 26 weeks of fiscal 2017, principally as a result of a year-over-year increase in accrued expenses and accrued income taxes.

Free cash flow should not be used as a substitute for the most comparable GAAP measure in assessing the company’s liquidity for the periods presented.  An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP.second quarter. In the table that follows, free cash flow for each period presented is reconciled to net cash provided by operating activities.activities and comparisons of the significant cash flows from the first 39 weeks of fiscal 2022 to the first 39 weeks of fiscal 2021 are provided.

26-Week Period Ended Dec. 30, 2017 26-Week Period Ended Dec. 31, 2016 39-Week Period Ended Apr. 2, 202239-Week Period Ended Mar. 27, 2021
(In thousands) (In thousands)
Net cash provided by operating activities (GAAP)$933,204
 $639,401
Net cash provided by operating activities (GAAP)$745,871 $1,479,784 
Additions to plant and equipment(258,577) (285,692)Additions to plant and equipment(327,535)(251,167)
Proceeds from sales of plant and equipment3,878
 11,639
Proceeds from sales of plant and equipment15,946 19,308 
Free Cash Flow (Non-GAAP)$678,505
 $365,348
Free Cash Flow (Non-GAAP) (1)
Free Cash Flow (Non-GAAP) (1)
$434,282 $1,247,925 
Acquisition of businesses, net of cash acquiredAcquisition of businesses, net of cash acquired$(1,281,835)$— 
Debt borrowings (repayments), netDebt borrowings (repayments), net1,213,114 (1,897,688)
Redemption premiums and repayments of senior notesRedemption premiums and repayments of senior notes(1,395,668)— 
Stock repurchasesStock repurchases(415,824)— 
Dividends paidDividends paid(719,865)(689,251)

(1)Free cash flow should not be used as a substitute for the most comparable GAAP measure in assessing the company’s liquidity for the periods presented. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Performance Indicators” contained in our fiscal 2021 Form 10-K for discussions around this non-GAAP performance metric.
Seasonal trends also impact
Sources and Uses of Cash

Sysco generates cash in the U.S and internationally. As of April 2, 2022, we had $876.1 million in cash and cash equivalents, approximately 38% of which was held by our freeinternational subsidiaries. Sysco’s strategic objectives are funded primarily by cash from operations and, to a lesser extent, external borrowings. Traditionally, our operations have produced significant cash flow and, due to our strong financial position, we believe that we will continue to be able to effectively access capital markets, as we use moreneeded. Cash is generally allocated to working capital requirements, investments compatible with our overall growth strategy (organic and inorganic), debt management, and shareholder return. Remaining cash earlierbalances are invested in the fiscal year and then see larger, sequential quarterly increases throughout the remainder of the year. high-quality, short-term instruments.

We believe our free cash flow for fiscal 2018from operations, the availability of liquidity under our revolving credit facility, and our ability to access capital from financial markets will be generally consistent withsufficient to meet our anticipated cash requirements for more than the next twelve months, while maintaining sufficient liquidity for normal operating purposes.

56

Cash Flows

Operating Activities

We generated $745.9 million in cash flows from operations in the first 39 weeks of fiscal 2022, compared to cash flows from operating activities of $1.5 billion in the first 39 weeks of fiscal 2021. In the first 39 weeks of fiscal 2022, these amounts included year-over-year unfavorable comparisons on working capital due to investment in business recovery and accrued income taxes, partially offset by higher operating results achievedand a favorable comparison on accrued expenses. In the first 39 weeks of fiscal 2021, these amounts included year-over-year favorable comparisons on working capital and accrued income taxes, partially offset by lower operating results.

Changes in fiscal 2017 and, therefore, anticipate that we will experience freeworking capital had a negative impact of $1.4 billion on cash flow growth overfrom operations period-over-period. There were unfavorable comparisons primarily on receivables and inventories. The unfavorable comparison in cash flows from accounts receivables is primarily due to our customers beginning to purchase more in the remainderfirst 39 weeks of fiscal 2022, coupled with significantly lower sales in the first 39 weeks of fiscal 2021 resulting from the COVID-19 pandemic. In the first 39 weeks of fiscal 2021, we recorded a net credit to the provision for losses on receivables totaling $137.7 million, which reflects a benefit on the reduction of our allowance for pre-pandemic receivable balances, as collection rates exceeded our expectations. In the first 39 weeks of fiscal 2022, we invested heavily in inventory, which has helped us ship product on time and in full during the ongoing business recovery from the COVID-19 pandemic.

Income taxes negatively impacted cash flow from operations, as estimated payments were made in the third quarter of fiscal 2022. Tax payments in the first 39 weeks of fiscal 2022 were higher than in the first 39 weeks of fiscal 2021 due to higher earnings compared to the prior year.



Included in the change in accrued expenses was a positive comparison, primarily from favorable comparisons of incentive payment accruals, earnout liabilities related to our acquisitions in the first 39 weeks of fiscal 2022 and customer rebate payments resulting from an increase in volume purchase incentives earned by our customers, as sales volumes increased through the first 39 weeks of fiscal 2022.


Investing Activities

Our capital expenditures in the first 39 weeks of fiscal 2022 primarily consisted of investments in buildings and building improvements, technology equipment, warehouse equipment, and fleet. Our capital expenditures in the first 39 weeks of fiscal 2022 were $76.4 million higher than in the first 39 weeks of fiscal 2021, as we made investments to advance our Recipe for Growth strategy. Our capital expenditures have been lower than planned due to increased lead times on fleet and equipment.

During the first 39 weeks of fiscal 2022, we paid $1.3 billion, net of cash acquired, for acquisitions. There were no such acquisitions made in the first 39 weeks of fiscal 2021.

Financing Activities


Equity Transactions


Proceeds from exercises of share-based compensation awards were $172.3$89.2 million in the first 2639 weeks of fiscal 2018,2022, as compared to $113.9$112.2 million in the first 2639 weeks of fiscal 2017.2021. The level of option exercises, and thus proceeds, will vary from period to period and is largely dependent on movements in our stock price and the time remaining before option grants expire.


We routinely engage in share repurchase programs.  The number of shares acquired and their cost during the first 26 weeks of fiscal 2018 were 14.2 million shares for $750.5 million, with 22.7 million shares repurchased in the first 26 weeks of fiscal 2017 for $1.2 billion. We repurchased 0.7 million additional shares for $41.7 million through January 19, 2018. In February 2017,May 2021, our Board of Directors approved a repurchase program authorizing the repurchase of shares of the company’s common stock not to exceed $1.0 billion through the end of fiscal 2019. In November 2017, our Board of Directors approved ashare repurchase program to authorize the repurchase of up to $5.0 billion of the company’s common stock, not to exceed $1.5 billion throughwhich will remain available until fully utilized. We commenced our share repurchase program during the endsecond quarter of fiscal 2020. These repurchase programs are intended to allow Sysco to continue offsetting dilution resulting from2022. We repurchased 5.7 million shares issued under the company’s benefit plans and to make opportunistic repurchases. All share repurchases infor $415.8 million during the first 2639 weeks of fiscal 2018 were made under these authorizations. The number2022. As of sharesApril 2, 2022, we repurchase during the remainderhad a remaining authorization of fiscal 2018 will be dependent on many factors, including the level of future stock option exercises, as well as competing uses for available cash. At this time, we do not expect our repurchase activity to match the pace of repurchases that occurred in the first half of fiscal 2018.approximately $4.6 billion.


Dividends paid in the first 2639 weeks of fiscal 20182022 were $346.9$719.9 million, or $0.66$1.41 per share, as compared to $343.4$689.3 million, or $0.62$1.35 per share, in the first 26 weeksthird quarter of fiscal 2017.2021. In November 2017,February 2022, we declared our regular quarterly dividend for the secondthird quarter of fiscal 20182022 of $0.36$0.47 per share, which was paid in January 2018.April. In April 2022, we declared our regular quarterly dividend for the fourth quarter of fiscal 2022 of $0.49 per share, representing an increase of $0.02 per share. We intend to maintain our quarterly dividend payout at this amount until the fourth quarter of fiscal 2023, when it will be reassessed.

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Debt Activity and Borrowing Availability


Our debt activity, including issuances and repayments, if any, and our borrowing availability is described in Note 7, "Debt."8, “Debt,” in the Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q. Our outstanding borrowings at December 30, 2017, and repayment activity since the close of the second quarter of fiscal 2018,April 2, 2022 are disclosed within that note.  Updated amounts throughnote, which also provides details regarding our issuance of $800 million in senior notes with an interest rate of 3.15% that mature on December 14, 2051. We achieved an all-time low in financing costs for a thirty-year tenor issuance by Sysco, in advance of an increase in global interest rates.

On April 29, 2022, Sysco entered into a new long-term revolving credit facility to replace the $2.0 billion facility. The new facility includes aggregate commitments of the lenders thereunder of $3.0 billion, with an option to increase such commitments to $4.0 billion. The new facility includes a covenant requiring Sysco to maintain a ratio of consolidated EBITDA to consolidated interest expense of 3.0 to 1.0 over four consecutive fiscal quarters. This ratio is lower than the previous covenant that was included in the $2.0 billion facility. The new revolving credit facility expires on April 29, 2027.

Guarantor Summarized Financial Information

On January 19, 2018, include:

$788.3 million2011, the wholly owned U.S. Broadline subsidiaries of Sysco Corporation, which distribute a full line of food products and a wide variety of non-food products, at that time entered into full and unconditional guarantees of all outstanding from our commercial paper program; and
No amounts outstanding from the credit facility supporting the company’s U.S. commercial paper program.

During the first 26 weeks of fiscal 2018 and 2017, our aggregate commercial paper issuances and short-term bank borrowings had weighted average interest rates of 1.44% and 0.71%, respectively.

Included in current maturities of long-term debt as of December 30, 2017 are the 5.25% senior notes totaling $500 million, which mature in February 2018. It is our intention to fund the repaymentand debentures of these notes at maturity through cash on hand, cash flow from operations, issuances of commercial paper,Sysco Corporation. All subsequent issuances of senior notes and debentures in the U.S. and borrowings under the company’s now $3.0 billion long-term revolving credit facility have also been guaranteed by these subsidiaries. As of April 2, 2022, Sysco had a total of $10.5 billion in senior notes, debentures and borrowings under the long-term revolving credit facility that were guaranteed by these subsidiary guarantors. Our remaining consolidated subsidiaries (non-guarantor subsidiaries) are not obligated under the senior notes indenture, debentures indenture or a combination thereof.

Contractual Obligations

Our 2017our long-term revolving credit facility. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” contained in our fiscal 2021 Form 10-K containsfor additional information regarding the terms of the guarantees.

Basis of Preparation of the Summarized Financial Information

The summarized financial information of Sysco Corporation (issuer), and certain wholly owned U.S. Broadline subsidiaries (guarantors) (together, the obligor group) is presented on a table that summarizescombined basis with intercompany balances and transactions between entities in the obligor group eliminated. Investments in and equity in the earnings of our obligationsnon-guarantor subsidiaries, which are not members of the obligor group, have been excluded from the summarized financial information. The obligor group’s amounts due to, amounts due from and commitments to make specified contractual future cash payments as of July 1, 2017. Since July 1, 2017, the onlytransactions with non-guarantor subsidiaries have been presented in separate line items, if they are material change to our specified contractual obligations relates to the one-time transition tax liability that we are required to pay over an eight-year period beginning in the first quarter of fiscal 2019 due to the provisions enacted as partobligor financials.The following tables include summarized financial information of the Tax Act. As noted in Note 11, "Income Taxes," our transition tax liability is currently a provisional estimate. The following table sets forth, as of December 30, 2017, certain information updatingobligor group for the contractual obligations and commitments to make contractual future payments disclosed in our 2017 Form 10-K:periods presented.


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 Payments Due by Period
         More Than
 Total < 1 Year 1-3 Years 3-5 Years 5 Years
 (In thousands)
Recorded Contractual Obligations:         
One-time transition tax liability$115,000
 $19,761
 $16,563
 $16,563
 $62,113
Combined Parent and Guarantor Subsidiaries Summarized Balance SheetApr. 2, 2022Jul. 3, 2021
(In thousands)
ASSETS
Receivables due from non-obligor subsidiaries$503,761 $171,718 
Current assets5,617,406 6,661,284 
Total current assets$6,121,167 $6,833,002 
Notes receivable from non-obligor subsidiaries$85,520 $83,457 
Other noncurrent assets3,936,594 3,933,833 
Total noncurrent assets$4,022,114 $4,017,290 
LIABILITIES
Payables due to non-obligor subsidiaries$54,625 $203,365 
Other current liabilities2,471,341 2,299,674 
Total current liabilities$2,525,966 $2,503,039 
Notes payable to non-obligor subsidiaries$166,211 $269,709 
Long-term debt10,053,274 10,139,596 
Other noncurrent liabilities1,253,153 1,209,598 
Total noncurrent liabilities$11,472,638 $11,618,903 



Combined Parent and Guarantor Subsidiaries Summarized Results of Operations39-Week Period Ended Apr. 2, 2022
(In thousands)
Sales$31,739,026 
Gross profit5,677,552 
Operating income1,588,760 
Interest expense from non-obligor subsidiaries45,904 
Net earnings824,163 


Critical Accounting Policies and Estimates


Critical accounting policies and estimates are those that are most important to the portrayal of our financial position and results of operations. These policies require our most subjective or complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. We have reviewed with the Audit Committee of the Board of Directors the development and selection of the critical accounting policies and estimates and this related disclosure. Our most critical accounting policies and estimates pertain to the company-sponsored pension plans, income taxes, goodwill and intangible assets, andallowance for doubtful accounts, income taxes, share-based compensation and the company-sponsored pension plans, which are described in Item 7 of our 2017fiscal 2021 Form 10-K.


Goodwill and Intangible Assets

In the first quarter of fiscal 2018, two reporting units within Ireland combined as a result of the integration of Sysco’s Ireland operations with the Ireland operations acquired in the Brakes Acquisition. As a result of this combination, the company performed an interim impairment test of the goodwill attributable to these reporting units. Each of the reporting units was tested separately using qualitative assessments. A quantitative test was completed for the combined reporting unit and no impairment charges were applicable.

Our estimates of fair value contain uncertainties requiring management to make assumptions and to apply judgment to estimate industry economic factors and the profitability of future business strategies. Actual results could differ from these assumptions and projections, resulting in the company revising its assumptions and, if required, recognizing an impairment loss.  There was no impairment recorded as a result of assessment in the first quarter of fiscal 2018.  We do not believe the estimates used in the analysis are reasonably likely to change materially in the future, but we will continue to assess the estimates in the future based on the expectations of the combined reporting unit.

Income Taxes

The determination of our provision for income taxes requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. Our provision for income taxes primarily reflects a combination of income earned and taxed in the various U.S. federal and state, as well as foreign, jurisdictions. Jurisdictional tax law changes, increases or decreases in permanent differences between book and tax items, accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances, and our change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.

As discussed in Note 11, “Income Taxes,” on December 22, 2017, the U.S. government enacted the Tax Act. The Tax Act makes broad and complex changes to the U.S. tax code that will affect the company’s fiscal year ending June 30, 2018. Also, in December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cut and Jobs Act (SAB 118), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under Accounting Standards Codification Topic 740, “Income Taxes” (ASC 740). In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete, but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. The company has not completed its accounting for the income tax effects of certain elements of the Tax Act, as indicated in Note 11, “Income Taxes.” Once Sysco has completed its accounting for the income tax effects of the Tax Act, the ultimate impact may differ from the provisional amounts recorded due to additional analysis, changes in interpretations and assumptions the company has made, additional regulatory guidance that may be issued, and actions the company may take as a result of the Tax Act. The accounting is not expected to extend beyond one year from the Tax Act enactment date.



Forward-Looking Statements


Certain statements made herein that look forward in time or express management’s expectations or beliefs with respect to the occurrence of future events are forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” “projected,” “continues,” “continuously,” variations of such terms, and similar terms and phrases denoting anticipated or expected occurrences or results. Examples of forward-looking statements include, but are not limited to, statements about:
our
•the effect, impact, potential duration or other implications of the COVID-19 pandemic and any expectations and beliefs regarding our fair value estimates;
our expectationswe may have with respect thereto, including our ability to achieving our three-year financial targets through fiscal 2018 and our new three-year financial objectives through fiscal 2020;withstand the crisis;
the impact of general economic conditions on our business and our industry in the Unites States and abroad;
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our expectations regarding inflation and other economic trends in the United States and abroad;
changes in future depreciation expense;
•our expectations regarding our effective tax ratebusiness and the positive impacteconomic recovery generally as the COVID-19 pandemic subsides, including beliefs regarding future customer activity and the timing of the Tax Act generallyrecovery;
•our targeted growth rates compared to the industry for fiscal 2022 and on fiscal 2024;
•our three-year financial plan earnings targets;belief that our Recipe for Growth strategy will enable us to accelerate over the next three years to meet our growth target by the end of fiscal 2024;
•our expectations regarding multi-unit customer growth;our business recovery operating expenses in the fourth quarter of fiscal 2022;
•our expectations regarding future performance and growth, including operating performance and operating income growth;improvements in our productivity;
•our expectations regarding our operating expense;expenses related to our investment for our Recipe for Growth;
•our expectations regarding that our Business and Industry and Travel and Hospitality segments will make progress in their recovery in future quarters, which will continue to our continued volume growth;
•our expectations regarding inflation;
•our plans regarding mergers and acquisitions and our growth strategy;
•our ability to grow substantially faster than the foodservice distribution industry and deliver profitable growth through our Recipe for Growth transformation;
•our belief that our growth transformation will allow us to better serve our customers;
•our expectations that as our Recipe for Growth matures, the impact on our top-line growth will continue to accelerate;
•our expectations regarding labor costs;
•our expectations regarding growth in customers and gains in market share;
•estimates regarding the outcome of legal proceedings;
•our expectations regarding the impact of potential acquisitions and sales of assets on our liquidity, borrowing capacity, leverage ratios and capital availability;
•our belief in our strong financial position;
•our expectations regarding the calculation of adjusted return on invested capital, adjusted operating income, adjusted net earnings and adjusted operating income;diluted earnings per share;
•our expectations regarding our capital allocation priorities;
our expectations regarding cash held by international subsidiaries, including our need to repatriate cash held outside of the U.S. in a tax-efficient manner;
the sufficiency of our mechanisms for managing working capital and competitive pressures, and our beliefs regarding the impact of these mechanisms;future Certain Items on our projected future non-GAAP and GAAP results;
•our expectations regarding the amount of the unrecognized tax benefit with respect to certain of the company’s unrecognized tax positions;
•our expectations regarding the recognition of compensation costs related to share-based compensation arrangements;
•our ability to meet future cash requirements, including the ability to access financial markets effectively, including issuances of debt securities, and maintain sufficient liquidity;
•our expectations regarding the payment of dividends, and the growth of our dividend, in the future;
•our expectations regarding future activity under our share repurchase program; and
•our ability to effectively access the commercial paper market and long-term capital markets;markets.
our expectations regarding operating cash flow, cash flow growth and free cash flow;
our intention to repay our long-term debt with cash on hand, cash flow from operations, issuances of commercial paper, issuances of senior notes, or a combination thereof;
our expectations regarding 2018 fuel prices; and
our expectations regarding share repurchases.


These statements are based on management’s current expectations and estimates; actual results may differ materially due in part to the risk factors set forth below, those within Part II, Item 1A of this document and those discussed in Item 1A of our 2017fiscal 2021 Form 10-K10-K:

•the impact and effects of public health crises, pandemics and epidemics, such as the COVID-19 pandemic, and the updatedadverse impact thereof on our business, financial condition and results of operations, including, but not limited to, our growth, product costs, supply chain, labor availability, logistical capabilities, customer demand for our products and industry demand generally, consumer spending, our liquidity, the price of our securities and trading markets with respect thereto, our ability to access capital markets, and the global economy and financial markets generally;
•the risk factor discussed in Part II, Item 1A of this Quarterly Report on Form 10-Q:that if sales from our locally managed customers do not grow at the same rate as sales from regional and national customers, or if we are unable to continue to accelerate local case growth, our gross margins may decline;
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•the risk that we are unlikely to be able to predict inflation over the long term, and lower inflation is likely to produce lower gross profit;
•periods of significant or prolonged inflation or deflation and their impact on our product costs and profitability;profitability generally;
•the risk that we may not be able to accelerate and/or identify additional administrative cost savings in order to compensate for any gross profit or supply chain cost leverage challenges;
•risks related to unfavorable conditions in the U.S. economyNorth America and local marketsEurope and the impact on our results of operations and financial condition;
•the risks related to our efforts to meet our long-term strategic objectives, including the risk that these efforts may not provide the expected benefits in our anticipated time frame, if at all, and may prove costlier than expected; the


risk that the actual costs of any initiatives may be greater or less than currently expected; and the risk of adverse effects to us if past and future undertakings and the associated changes to our business do not prove to be cost effective or do not result in the level of cost savings and other benefits that we anticipated;
•the impact of unexpected future changes to our business initiatives based on management’s subjective evaluation of our overall business needs;
•the risk that the actual costs of any business initiatives may be greater or less than currently expected;
•the risk that competition in our industry and the impact of group purchasing organizations may adversely impact our margins and our ability to retain customers and make it difficult for us to maintain our market share, growth rate and profitability;
•the risk that our relationships with long-term customers may be materially diminished or terminated;
•the risk that changes in consumer eating habits could materially and adversely affect our business, financial condition, or results of operations;
•the risk that changes in applicable tax laws or regulations and the resolution of tax disputes could negatively affect our financial results;
•the risk that we may not be able to fully compensate for increases in fuel costs, and forward purchase commitments intended to contain fuel costs could result in above market fuel costs;
•the risk of interruption of supplies and increase in product costs as a result of conditions beyond our control;
•the potential impact on our reputation and earnings of adverse publicity or lack of confidence in our products;
•risks related to unfavorable changes to the mix of locally managed customers versus corporate-managed customers;
•the risk that we may not realize anticipated benefits from our operating cost reduction efforts;
•difficulties in successfully expanding into international markets and complimentarycomplementary lines of business;
•the potential impact of product liability claims;
•the risk that we fail to comply with requirements imposed by applicable law or government regulations;
•risks related to our ability to effectively finance and integrate acquired businesses;
•risks related to our access to borrowed funds in order to grow and any default by us under our indebtedness that could have a material adverse impact on cash flow and liquidity;
•our level of indebtedness and the terms of our indebtedness could adversely affect our business and liquidity position;
•the risk that the implementation of various initiatives, the timing and successful completion of acquisitions, construction schedules and the possibility that other cash requirements could result in delays or cancellations of capital spending;
•the risk that divestiture of one or more of our businesses may not provide the anticipated effects on our operations;
•the risk that the U.K.’s anticipated exit from the European Union (EU) on January 31, 2020, commonly referred to as Brexit, may adversely impact our operations in the U.K., including those of the Brakes Group;
•the risk that future labor disruptions or disputes could disrupt the integration of Brake France into Sysco France and our operations in France and the EU generally;
•the risk that factors beyond management’s control, including fluctuations in the stock market, as well as management’s future subjective evaluation of the company’s needs, would impact the timing of share repurchases;
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•due to our reliance on technology, any technology disruption or delay in implementing new technology could have a material negative impact on our business;
•the risk that a cybersecurity incident and other technology disruptions could negatively impact our business and our relationships with customers;
•the potential requirement to pay material amounts under our multiemployer defined benefit pension plans;
•our funding requirements for our company-sponsored qualified pension plan may increase should financial markets experience future declines;
•labor issues, including the renegotiation of union contracts and shortage of qualified labor;
•capital expenditures may vary based on changes in business plans and other factors, including risks related to the implementation of various initiatives, the timing and successful completion of acquisitions, construction schedules and the possibility that other cash requirements could result in delays or cancellations of capital spending; and
•the risk that the anti-takeover benefits provided by our preferred stock may not be viewed as beneficial to stockholders.




For a more detailed discussion of factors that could cause actual results to differ from those contained in the forward-looking statements, see the risk factors discussion contained in Item 1A of our 2017fiscal 2021 Form 10-K and the updated risk factor discussed in Part II. Item 1A of Part II of this Quarterly Report on Form 10-Q.


Item 3. Quantitative and Qualitative Disclosures about Market Risk


Our market risks consist of interest rate risk, foreign currency exchange rate risk, fuel price risk and investment risk. For a discussion on our exposure to market risk, see Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risks” in our Annual Report onfiscal 2021 Form 10-K for the fiscal year ended July 1, 2017.10-K. There have been no significant changes to our market risks since July 1, 2017,3, 2021, except as noted below.


Interest Rate Risk

At December 30, 2017, there were $750.0 million in commercial paper issuances outstanding.  Total debt as of December 30, 2017 was $8.8 billion, of which approximately 66% was at fixed rates of interest, including the impact of our interest rate swap agreements.

Fuel Price Risk


Due to the nature of our distribution business, we are exposed to potential volatility in fuel prices. The price and availability of diesel fuel fluctuates due to changes in production, seasonality, and other market factors that are generally outside of our control. Increased fuel costs may have a negative impact on our results of operations in three areas. First, the high cost of fuel can negatively impact consumer confidence and discretionary spending and, thus, reduce the frequency and amount spent by consumers for food-away-from-home purchases. Second, the high cost of fuel can increase the price we pay for product purchases, and we may not be able to pass these costs fully to our customers. Third, increased fuel costs impact the costs we incur to deliver product to our customers. During the first 26 weeks of fiscal 2018 and fiscal 2017, fuelFuel costs related to outbound deliveries represented approximately 0.5% and 0.4% of sales respectively.during the first 39 weeks of fiscal 2022 and fiscal 2021.


Our activities to mitigate fuel costs include routing optimization with the goal of reducing miles driven, improving fleet utilization by adjusting idling time and maximum speeds and using fuel surcharges that primarily track with the change in market prices of fuel. We use diesel fuel swap contracts to fix the price of a portion of our projected monthly diesel fuel requirements.requirements, typically 80% to 90% of our projected bulk fuel purchases. As of December 30, 2017,April 2, 2022, we had diesel fuel swaps with a total notional amount of approximately 2458 million gallons through June 2018.July 2023. These swaps willare expected to lock in the price of approximately 55% to 60% of our projected fuel purchase needs for the remainder of fiscal 2018.2022. Additional swaps have been entered into for hedging activity in fiscal 2019.2023. As of December 30, 2017,April 2, 2022, we had diesel fuel swaps with a total notional amount of approximately 2046 million gallons specific to fiscal 2019.2023, which target 80% of our bulk fuel forecasted purchases during this time period. Our remaining fuel purchase needs will occur at market rates, unless contracted for a fixed price or hedged at a later date.


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Item 4.  Controls and Procedures


Sysco’s management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 30, 2017.April 2, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding the required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Sysco’s disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. Based on the evaluation of our disclosure controls and procedures as of December 30, 2017,April 2, 2022, our chief executive officer and chief financial officer concluded that, as of such date, Sysco’s disclosure controls and procedures were effective at the reasonable assurance level.


There have been no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) underof the Exchange Act) that occurred during the fiscal quarter ended December 30, 2017,April 2, 2022, that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION


Item 1.  Legal Proceedings


NoneEnvironmental Matters


Item 103 of SEC Regulation S-K requires disclosure of certain environmental matters in which a governmental authority is a party to the proceedings and when such proceedings involve the potential for monetary sanctions that Sysco’s management reasonably believes will exceed a specified threshold. Pursuant to recent SEC amendments to this item, Sysco has chosen a reporting threshold for such proceedings of $1 million. Applying this threshold, there are no material environmental matters to disclose for this period.

From time to time, we may be party to legal proceedings that arise in the ordinary course of our business. We do not believe there are any pending legal proceedings that, individually or in the aggregate, will have a material adverse effect on the company’s financial condition, results of operations or cash flows.

Item 1A.  Risk Factors


The information set forth in this report should be read in conjunction withExcept as provided below, there were no material changes from the risk factors discusseddisclosed in Item 1A of our Annual Report onfiscal 2021 Form 10-K for10-K.

Conditions beyond our control can interrupt our supplies, increase our product costs and impair our ability to deliver products and services to our customers.

We obtain substantially all of our foodservice and related products from third-party suppliers. Although our purchasing volume can provide benefits when dealing with suppliers, suppliers may not be able to provide the fiscal year ended July 1, 2017, in addition to the updated risk noted below.

Changes in applicable tax laws or regulationsfoodservice products and the resolution of tax disputes could negatively affect our financial results.

As a multinational corporation,supplies that we are subject to income taxes, as well as non-income based taxes, in both the U.S. and various foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and other tax liabilities. Changes in tax laws or tax rulings may have a significant adverse impact on our effective tax rate. For example, the U.S. and many countriesneed in the EU wherequantities and at the prices that we do business are actively considering or have recently enacted changes in relevant tax, accounting and other laws, regulations and interpretations, including changes to tax laws applicable to corporate multinationals.

In particular, the U.S. government enacted on December 22, 2017, comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the Tax Act). The Tax Act makes broad and complex changes to the U.S. tax code, the estimated impacts of which are disclosed elsewhere in this report. The final effects of the Tax Act may differ materially from our estimates,request due to among other things, changes in interpretationsconditions outside of the Tax Act, any further legislative actions to address questions that arise because of the Tax Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Act, and/or any updates to estimates the company has utilized to calculate the effects. In addition, as discussed more fully at Note 11, “Income Taxes,” our accounting for certain elements of the Tax Act is incomplete, and we were not able to make reasonable estimates of the effects of those elements in our financial statements included in this Report on Form 10-Q. Completion of our accounting for such elements could result in charges or other adjustments that materially adversely impact our financial results for fiscal 2018.

Further, in the ordinary course of a global business, there are many intercompany transactions and calculations where the ultimate tax determination could change if tax laws or tax rulings were to be modified.their control. We are also subject to non-incomedelays caused by interruptions in production and increases in product costs based taxes,on conditions outside of our control. These conditions include shortages of qualified labor for our suppliers, work slowdowns, work interruptions, strikes or other job actions by employees of suppliers, short-term weather conditions or more prolonged climate change, crop and other agricultural conditions, water shortages, transportation interruptions (such as shortages of ocean cargo containers), unavailability of fuel or increases in fuel costs, product recalls, competitive demands, civil insurrection or social unrest, terrorist attacks or international hostilities and natural disasters, epidemics, pandemics (such as the COVID-19 pandemic) or other human or animal disease outbreaks or other catastrophic events (including, but not limited to, foodborne illnesses). Many of these conditions outside of our control could also impair our ability to provide our products and services to our customers or increase the cost of doing so. Our current operating environment is constantly shifting in response to COVID-19, placing significant pressure on the food-away-from-home supply chain. Customer demand is currently outpacing available supply in certain categories. Certain suppliers are struggling to meet demand for our orders. Future supply shortages could have an adverse effect on the company’s financial condition and results of operations.

In addition, the global economy has been negatively impacted by the military conflict between Russia and Ukraine. Meanwhile, governments in the U.S., United Kingdom, and European Union have imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia. Although our business has not been materially impacted by the ongoing military conflict between Russia and Ukraine to date, it is impossible to predict the extent to which our operations, or those of our suppliers and customers, will be impacted in the short and long term, or the ways in which the conflict may impact our business. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Further escalation of geopolitical tensions related to the military conflict, including increased trade barriers or restrictions on global trade, could result in, among other things, cyberattacks, supply disruptions, lower consumer demand, and changes to foreign exchange rates and financial markets. Any or all of these factors could disrupt our business directly and could disrupt the business of our customers, which could have an adverse effect on our business and results of operations. Any such disruptions may also magnify the impact of other risks described in this Form 10-Q and our fiscal 2021 Form 10-K.

Further, increased frequency or duration of extreme weather conditions, whether due to global climate change or otherwise, could also impair production capabilities, disrupt our supply chain or adversely affect demand for our products. At any time, input costs could increase for a prolonged period for a large portion of the products that we sell. Additionally, we procure products from suppliers outside of the U.S., and we are subject to the risks associated with political or financial instability, military conflict, trade restrictions, tariffs, currency exchange rates, transport capacity and costs and other factors relating to foreign trade, including health and safety restrictions related to epidemics and pandemics (such as the COVID-19 pandemic), any or all of which could delay our receipt of products or increase our input costs.

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Our inability to obtain adequate supplies of foodservice and related products and/or to timely provide our products and services and fulfill our other obligations to our customers, whether as a result of any of the foregoing factors or otherwise could mean that we could not fulfill our obligations to customers, could have an adverse effect on our business, results of operations and financial condition, as our customers may turn to other distributors.

In addition, as a foodservice distributor, it is necessary for us to maintain an inventory of products. Declines in product pricing levels between the time we purchase a product from our suppliers and the time we sell the product to our customers could reduce our margin on that inventory, adversely affecting our results of operations.

Changes in the method of determining London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with an alternative reference rate, may adversely affect interest expense related to outstanding debt.

Amounts drawn under our revolving credit facility may bear interest rates in relation to LIBOR, depending on our selection of repayment options. In addition, certain of our outstanding interest rate swap agreements have a floating interest rate in relation to three-month LIBOR. On March 5, 2021, the Financial Conduct Authority in the U.K. announced that immediately after (a) December 31, 2021, in the case of all sterling, euro, Swiss franc, and Japanese yen settings, and the one week and two month U.S. dollar LIBOR settings, and (b) June 30, 2023, in the case of all other U.S. dollar LIBOR settings, such LIBOR settings will either cease to be provided by the administrator or will no longer be representative. Despite this deferral for certain U.S. dollar LIBOR tenors, the LIBOR administrator has advised that no new contracts using U.S. dollar LIBOR should be entered into after December 31, 2021. These actions indicate that the continuation of U.S. LIBOR on the current basis cannot be guaranteed after June 30, 2023. Moreover, it is possible that U.S. LIBOR for such tenors will be discontinued or modified prior to June 30, 2023. On July 29, 2021, the Alternative Reference Rates Committee, a steering committee consisting of large U.S. financial institutions convened by the Federal Reserve Board, formally recommended replacing U.S. dollar LIBOR with forward-looking Secured Overnight Financing Rate (SOFR) term rates. As a result of the discontinuation of the remaining U.S. dollar LIBOR tenors, we may need to renegotiate our credit facility and certain interest rate swap agreements, and we may not be able to do so with terms that are favorable to us.

In connection with the discontinuation of LIBOR, (a) we adhered to the ISDA 2020 IBOR Fallbacks Protocol and (b) on October 14, 2021, we entered into an amendment to our revolving credit facility that replaced (i) sterling LIBOR with the Sterling Overnight Index Average (SONIA) and (ii) euro LIBOR with the Euro Short Term Rate (ESTR).

Alternative reference rates, such as payroll, sales, use, value-added, net worth, propertySOFR, SONIA, and goodsESTR, could be higher or more volatile than LIBOR, which could result in an increase in the cost of our indebtedness, impacting our financial condition and services taxes, in both the U.S. and various foreign jurisdictions. Although we believe that our income and non-income based tax estimates are appropriate, there is no assurance that the final determinationresults of tax audits or tax disputes will notoperations. The overall financing market may be different from what is reflected in our historical income tax provisions and accruals.

Given the breadth and complexitydisrupted as a result of the Tax Act, as well asphase-out or replacement of LIBOR. Disruption in the unpredictabilityfinancial market or the inability to renegotiate our credit facility or our interest rate swap agreements with favorable terms could have a material adverse effect on our business, financial position, and operating results. We continue to evaluate the potential impact of possible furtherthe replacement of the LIBOR benchmark interest rate; however, we are not able to predict the impact a transition to an alternative reference rate may have on our business, financial condition, and results of operations.

Economic and political instability and potential unfavorable changes to the U.S. or foreign taxin laws and regulations and their potential interdependency, it is very difficult to predict the cumulative effect of such tax laws and regulations onin international markets could adversely affect our results of operations and cash flow, but suchfinancial condition.

Our international operations subject us to certain risks, including economic and political instability and potential unfavorable changes in laws and regulations (andin international markets in which we operate. For example, in June 2016, the U.K. held a referendum in which voters approved Brexit. The U.K. exited the EU on January 31, 2020, with a transition period that ended on December 31, 2020. On December 24, 2020, the European Commission reached a trade agreement with the U.K. on the terms of its future cooperation with the EU. The trade agreement offers U.K. and EU companies preferential access to each other’s markets, ensuring imported goods will be free of tariffs and quotas (subject to rules of origin requirements). Uncertainty exists regarding the ultimate impact of this trade agreement, as well as the extent of possible financial, trade, regulatory and legal implications of Brexit. Brexit also contributes to global political and economic uncertainty, which may cause, among other consequences, volatility in exchange rates and interest rates, and changes thereto)in regulations. These effects of Brexit, among others, could materially adversely impactaffect our financial results.position, results of operations or cash flows. In addition, labor or other political disputes or general unrest can have a negative impact on our operations. For example, in fiscal 2020, the “yellow vest” protests in France against a fuel tax increase, pension reform and the French government negatively impacted our sales in France. Future labor disruptions or disputes could have a negative impact on our operations in the EU and other parts of the world.


Item 2.  Unregistered Sales of Equity Securities and Use ofProceeds


Recent Sales of Unregistered Securities


None


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Issuer Purchases of Equity Securities


We made the following share repurchases during the first 26 weeksthird quarter of fiscal 2018:2022:



ISSUER PURCHASES OF EQUITY SECURITIES
Period
Total Number of Shares Purchased (1)
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
Month #1    
January 2 - January 291,297 $77.07 99,960 — 
Month #2
January 30 - February 264,932 83.80 413,303 — 
Month #3
February 27 - April 2— — — — 
Totals6,229 $82.40 513,263 — 


ISSUER PURCHASES OF EQUITY SECURITIES
Period
(a) Total Number of Shares Purchased (1)
 (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
Month #1       
October 1 - October 282,612,212
 $54.39
 2,610,098
 —
Month #2     
  
October 29 - November 251,074,356
 55.02
 1,062,800
 —
Month #3     
  
November 26 - December 30—
 —
 —
 —
Total3,686,568
 $54.57
 3,672,898
 —

(1)The total number of shares purchased includes 2,114, 11,5561,297, 4,932 and 0 shares tendered by individuals in connection with stock option exercises in Month #1, Month #2 and Month #3, respectively.

We routinely engage(2)See the discussion in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Equity Transactions” for additional information regarding Sysco’s share repurchase programs. In February 2017, our Board of Directors approved a repurchase program authorizing the repurchase of shares of the company’s common stock not to exceed $1.0 billion through the end of fiscal 2019. In November 2017, our Board of Directors approved a repurchase program to authorize the repurchase of the company’s common stock not to exceed $1.5 billion through the end of fiscal 2020. These repurchase programs are intended to allow Sysco to continue offsetting dilution resulting from shares issued under the company’s benefit plans and to make opportunistic repurchases. These share repurchase programs were approved using a dollar value limit and, therefore, is not included in the table above for “Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs.”program.


We repurchased 14.2 million shares during the first 26 weeks of fiscal 2018, resulting in a remaining authorization under this program of approximately $1.7 billion. We purchased 22.7 million shares in the first 26 weeks of fiscal 2017. We purchased approximately 680,000 additional shares under these authorizations through January 19, 2018. The number of shares we repurchase during the remainder of fiscal 2018 will be dependent on many factors, including the level of future stock option exercises, as well as competing uses for available cash. At this time, we do not expect our repurchase activity to match the pace of repurchases that occurred in the first half of fiscal 2018.

Item 3.  Defaults Upon Senior Securities


None


Item 4.  Mine Safety Disclosures


Not applicable


Item 5.  Other Information


None


Item 6.  Exhibits


The exhibits listed on the Exhibit Index immediately preceding such exhibits, which is incorporated herein by reference,below are filed or furnished as a part of this Quarterly Report on Form 10-Q.

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EXHIBIT INDEX
3.1—
Restated Certificate of Incorporation, incorporated by reference to Exhibit 3(a) to Form 10-K for the year ended June 28, 1997 (File No. 1-6544).
3.2—
Certificate of Amendment to Restated Certificate of Incorporation increasing authorized shares, incorporated by reference to Exhibit 3(e) to Form 10-Q for the quarter ended December 27, 2003 (File No. 1-6544).
3.3—
Form of Amended Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock, incorporated by reference to Exhibit 3(c) to Form 10-K for the year ended June 29, 1996 (File No. 1-6544).
3.4—
Amended and Restated Bylaws of Sysco Corporation dated August 27, 2021, incorporated by reference to Exhibit 3.4 to the Form 10-K for the year ended July 3, 2021 filed on August 30, 2021 (File No. 1-6544).
22.1#—
Subsidiary Guarantors and Issuers of Guaranteed Securities.
31.1#—
CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2#—
CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1#—
CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2#—
CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.SCH#—Inline XBRL Taxonomy Extension Schema Document
101.CAL#—Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF#—Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB#—Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE#—Inline XBRL Taxonomy Extension Presentation Linkbase Document
104—Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
___________
# Filed herewith
67

SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Sysco Corporation
(Registrant)
Date: May 10, 2022By:Sysco Corporation/s/ KEVIN P. HOURICAN
(Registrant)Kevin P. Hourican
Date: February 5, 2018By:/s/ THOMAS L. BENÉ
Thomas L. Bené
President and Chief Executive Officer
Date: February 5, 2018By:/s/ JOEL T. GRADE
Joel T. Grade
Executive Vice President and
Chief Financial Officer
Date: February 5, 2018By:/s/ ANITA A. ZIELINSKI
Anita A. Zielinski
Senior Vice President and
Chief Accounting Officer


EXHIBIT INDEX
3.1Date: May 10, 2022—By:Restated Certificate of Incorporation, incorporated by reference to Exhibit 3(a) to Form 10-K for the year ended June 28, 1997 (File No. 1-6544)./s/ AARON E. ALT
Aaron E. Alt
3.2—Certificate of Amendment to Restated Certificate of Incorporation increasing authorized shares, incorporated by reference to Exhibit 3(e) to Form 10-Q for the quarter ended December 27, 2003 (File No. 1-6544).Executive Vice President and
Chief Financial Officer
3.3—Form of Amended Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock, incorporated by reference to Exhibit 3(c) to Form 10-K for the year ended June 29, 1996 (File No. 1-6544).
Date: May 10, 2022By:/s/ ANITA A. ZIELINSKI
3.4—Amended and Restated Bylaws of Sysco Corporation dated August 26, 2016, incorporated by reference to Exhibit 3.2 to Form 8-K filed on August 31, 2016 (File No. 1-6544).Anita A. Zielinski
Senior Vice President and
10.1#†—
Amendment 2018-1 to the Sysco Corporation Management Savings Plan.
10.2#†—
Amendment 2017-1 to the Sysco Corporation 2007 Long-Term Incentive Plan.
10.3#†—
Sysco Corporation Non-Employee Directors Stock Election Policy.
10.4#†—
Form of Restricted Stock Award Agreement for Directors pursuant to the 2013 Long-Term Incentive Plan.
10.5#†—
Form of Restricted Stock Award Agreement for Directors pursuant to the 2013 Long-Term Incentive Plan for directors who elect to defer receipt of shares under the 2009 Board of Directors Stock Deferral Plan.
12.1#—
Statement regarding Computation of Ratio of Earnings to Fixed Charges.
31.1#—
CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2#—
CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1#—
CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2#—
CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1#—
The following financial information from Sysco Corporation’s Quarterly Report on Form 10-Q for the quarter ended December 30, 2017 filed with the SEC on February 5, 2018, formatted in XBRL includes:  (i) Consolidated Balance Sheets as of December 30, 2017, July 1, 2017 and December 31, 2016, (ii) Consolidated Results of Operations for the thirteen and twenty six week periods ended December 30, 2017 and December 31, 2016, (iii) Consolidated Statements of Comprehensive Income for the thirteen and twenty six week periods ended December 30, 2017 and December 31, 2016, (iv) Consolidated Cash Flows for the twenty six week periods ended December 30, 2017 and December 31, 2016, and (v) the Notes to Consolidated Financial Statements.
Chief Accounting Officer

___________
† Executive Compensation Arrangement pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K
# Filed herewith


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