UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FormFORM 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, 20172023
OR
☐
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Commission File NumberNumber: 1-6544
________________
 syy-logoa10.jpgsyylogoa03.jpg
Sysco Corporation
(Exact name of registrant as specified in its charter)
Delaware74-1648137
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)I.R.S. Employer Identification Number)


1390 Enclave Parkway, Houston, Texas                       77077-2099
(Address of principal executive offices)                     (Zip Code)

Registrant’s Telephone Number, Including Area Code: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

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 ☑

521,918,747497,829,748 shares of common stock were outstanding as of January 19, 2018.12, 2024.



1

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATIONPage No.
1
3031
5357
5358
PART II – OTHER INFORMATION
5459
5459
5459
5559
5560
5560
5560
5663








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
 Dec. 30, 2023Jul. 1, 2023
 (unaudited)
ASSETS
Current assets
Cash and cash equivalents$962,165 $745,201 
Accounts receivable, less allowances of $79,179 and $45,5995,291,552 5,091,970 
Inventories4,722,499 4,480,812 
Prepaid expenses and other current assets327,569 284,566 
Income tax receivable5,815 5,815 
Total current assets11,309,600 10,608,364 
Plant and equipment at cost, less accumulated depreciation5,157,150 4,915,049 
Other long-term assets
Goodwill5,255,010 4,645,754 
Intangibles, less amortization1,174,151 859,530 
Deferred income taxes444,180 420,450 
Operating lease right-of-use assets, net824,390 731,766 
Other assets576,120 640,232 
Total other long-term assets8,273,851 7,297,732 
Total assets$24,740,601 $22,821,145 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable$5,737,726 $6,025,757 
Accrued expenses2,266,062 2,251,181 
Accrued income taxes46,772 101,894 
Current operating lease liabilities119,397 99,051 
Current maturities of long-term debt84,513 62,550 
Total current liabilities8,254,470 8,540,433 
Long-term liabilities
Long-term debt12,028,122 10,347,997 
Deferred income taxes303,878 302,904 
Long-term operating lease liabilities737,354 656,269 
Other long-term liabilities979,376 931,708 
Total long-term liabilities14,048,730 12,238,878 
Noncontrolling interest33,367 33,212 
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 capital1,877,201 1,814,681 
Retained earnings11,724,251 11,310,664 
Accumulated other comprehensive loss(1,189,753)(1,252,590)
Treasury stock at cost, 261,472,819 and 260,062,834 shares(10,772,840)(10,629,308)
Total shareholders’ equity2,404,034 2,008,622 
Total liabilities and shareholders’ equity$24,740,601 $22,821,145 
Note: The July 1, 20172023 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 Ended26-Week Period Ended
 Dec. 30, 2023Dec. 31, 2022Dec. 30, 2023Dec. 31, 2022
Sales$19,287,942 $18,593,953 $38,908,396 $37,720,783 
Cost of sales15,774,309 15,244,337 31,746,991 30,882,312 
Gross profit3,513,633 3,349,616 7,161,405 6,838,471 
Operating expenses2,813,590 2,708,793 5,657,780 5,460,847 
Operating income700,043 640,823 1,503,625 1,377,624 
Interest expense149,680 132,042 284,014 256,192 
Other expense (income), net (1) (2)
5,245 330,305 11,885 348,054 
Earnings before income taxes545,118 178,476 1,207,726 773,378 
Income taxes129,876 37,260 289,092 166,594 
Net earnings$415,242 $141,216 $918,634 $606,784 
  
Net earnings:  
Basic earnings per share$0.82 $0.28 $1.82 $1.20 
Diluted earnings per share0.82 0.28 1.81 1.19 
Average shares outstanding504,312,633 507,609,696 504,719,562 507,594,137 
Diluted shares outstanding505,929,342 510,145,794 506,499,390 510,264,473 
(1)Gains and losses related to the disposition of fixed assets have been recognized within operating expenses. Prior year amounts have been reclassified to conform to this presentation.
(2)Sysco’s second quarter of fiscal 2023 included a charge of $315.4 million in other expense related to pension settlement charges. See Note 9, “Company-Sponsored Employee Benefit Plans.”
 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 Ended26-Week Period Ended
 Dec. 30, 2023Dec. 31, 2022Dec. 30, 2023Dec. 31, 2022
Net earnings$415,242 $141,216 $918,634 $606,784 
Other comprehensive income (loss):
Foreign currency translation adjustment163,084 241,814 54,890 9,632 
Items presented net of tax:
Amortization of cash flow hedges2,170 2,170 4,340 4,325 
Change in net investment hedges(16,741)(33,749)(16,741)(10,240)
Change in cash flow hedges(20,225)203 6,923 (26,187)
Changes in excluded components of fair value hedge158 — 138 — 
Amortization of prior service cost146 74 292 148 
Amortization of actuarial loss5,011 5,628 9,993 12,519 
Pension settlement charge— 236,591 — 236,591 
Net actuarial (loss) gain arising in current year— (67,388)503 (67,388)
Change in marketable securities3,444 1,194 2,499 (2,134)
Total other comprehensive income137,047 386,537 62,837 157,266 
Comprehensive income$552,289 $527,753 $981,471 $764,050 
 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 September 30, 2023765,174,900 $765,175 $1,838,986 $11,560,924 $(1,326,800)260,971,761 $(10,712,486)$2,125,799 
Net earnings415,242 415,242 
Foreign currency translation adjustment163,084 163,084 
Amortization of cash flow hedges, net of tax2,170 2,170 
Change in cash flow hedges, net of tax(20,225)(20,225)
Changes in excluded components of fair value hedge, net of tax158 158 
Change in net investment hedges, net of tax(16,741)(16,741)
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax5,157 5,157 
Change in marketable securities, net of tax3,444 3,444 
Dividends declared ($0.50 per common share)(251,915)(251,915)
Treasury stock purchases1,479,720 (99,973)(99,973)
Share-based compensation awards38,215 (978,662)39,619 77,834 
Balance as of December 30, 2023765,174,900 $765,175 $1,877,201 $11,724,251 $(1,189,753)261,472,819 $(10,772,840)$2,404,034 
Accumulated
Other Comprehensive
Loss
 Common StockPaid-in
Capital		Retained
Earnings		Treasury Stock 
 SharesAmountSharesAmountsTotals
Balance as of October 1, 2022765,174,900 $765,175 $1,754,409 $10,757,136 $(1,711,325)258,414,989 $(10,450,054)$1,115,341 
Net earnings141,216 141,216 
Foreign currency translation adjustment241,814 241,814 
Amortization of cash flow hedges, net of tax2,170 2,170 
Change in cash flow hedges, net of tax203 203 
Change in net investment hedges, net of tax(33,749)(33,749)
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax5,702 5,702 
Pension settlement charge, net of tax236,591 236,591 
Net actuarial loss arising in current year, net of tax(67,388)(67,388)
Change in marketable securities, net of tax1,194 1,194 
Dividends declared ($0.49 per common share)(249,014)(249,014)
Increase in ownership interest in subsidiaries(2,077)(2,077)
Share-based compensation awards21,809 (568,017)22,777 44,586 
Balance as of December 31, 2022765,174,900 $765,175 $1,774,141 $10,649,338 $(1,324,788)257,846,972 $(10,427,277)$1,436,589 

See Notes to Consolidated Financial Statements
4

Year to Date
Accumulated
Other Comprehensive
Loss
 Common StockPaid-in
Capital		Retained
Earnings		Treasury Stock 
 SharesAmountSharesAmountsTotals
Balance as of July 1, 2023765,174,900 $765,175 $1,814,681 $11,310,664 $(1,252,590)260,062,834 $(10,629,308)$2,008,622 
Net earnings   918,634    918,634 
Foreign currency translation adjustment    54,890   54,890 
Amortization of cash flow hedges, net of tax    4,340   4,340 
Change in cash flow hedges, net of tax6,923 6,923 
Change in net investment hedges, net of tax(16,741)(16,741)
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax    10,285   10,285 
Net actuarial gain arising in current year, net of tax503 503 
Change in marketable securities, net of tax2,499 2,499 
Changes in excluded components of fair value hedge, net of tax138 138 
Dividends declared ($1.00 per common share)   (505,047)   (505,047)
Treasury stock purchases2,862,667 (199,947)(199,947)
Share-based compensation awards  62,520   (1,452,682)56,415 118,935 
Balance as of December 30, 2023765,174,900 $765,175 $1,877,201 $11,724,251 $(1,189,753)261,472,819 $(10,772,840)$2,404,034 
Accumulated
Other Comprehensive
Loss
 Common StockPaid-in
Capital		Retained
Earnings		Treasury Stock 
 SharesAmountSharesAmountsTotals
Balance as of July 2, 2022765,174,900 $765,175 $1,766,305 $10,539,722 $(1,482,054)256,531,543 $(10,206,888)$1,382,260 
Net earnings   606,784    606,784 
Foreign currency translation adjustment    9,632   9,632 
Amortization of cash flow hedges, net of tax    4,325   4,325 
Change in cash flow hedges, net of tax    (26,187)  (26,187)
Change in net investment hedges, net of tax(10,240)(10,240)
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax    12,667   12,667 
Pension settlement charge, net of tax236,591 236,591 
Net actuarial loss arising in current year, net of tax(67,388)(67,388)
Change in marketable securities, net of tax(2,134)(2,134)
Dividends declared ($0.98 per common share)   (497,168)   (497,168)
Treasury stock purchases3,099,268 (267,727)(267,727)
Increase in ownership interest in subsidiaries(2,077)(2,077)
Share-based compensation awards  9,913   (1,783,839)47,338 57,251 
Balance as of December 31, 2022765,174,900 $765,175 $1,774,141 $10,649,338 $(1,324,788)257,846,972 $(10,427,277)$1,436,589 

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, 2023Dec. 31, 2022
Cash flows from operating activities:
Net earnings$918,634 $606,784 
Adjustments to reconcile net earnings to cash provided by operating activities:
Pension settlement charge— 315,354 
Share-based compensation expense52,821 52,679 
Depreciation and amortization425,465 378,949 
Operating lease asset amortization59,127 55,884 
Amortization of debt issuance and other debt-related costs9,117 10,315 
Deferred income taxes(28,689)(123,187)
Provision for losses on receivables29,784 9,732 
Other non-cash items(3,782)11,525 
Additional changes in certain assets and liabilities, net of effect of businesses acquired:
Increase in receivables(25,431)(87,190)
Increase in inventories(98,047)(222,650)
Decrease (increase) in prepaid expenses and other current assets3,362 (8,915)
Decrease in accounts payable(404,411)(390,124)
Increase (decrease) in accrued expenses17,033 (62,779)
Decrease in operating lease liabilities(64,112)(57,234)
(Decrease) increase in accrued income taxes(55,123)3,108 
Decrease in other assets21,942 22,156 
Decrease in other long-term liabilities(1,793)(10,941)
Net cash provided by operating activities855,897 503,466 
Cash flows from investing activities:
Additions to plant and equipment(346,797)(309,664)
Proceeds from sales of plant and equipment18,347 25,493 
Acquisition of businesses, net of cash acquired(1,174,608)(37,699)
Purchase of marketable securities(1,878)(14,019)
Proceeds from sales of marketable securities— 11,641 
Other investing activities— 4,840 
Net cash used for investing activities(1,504,936)(319,408)
Cash flows from financing activities:
Bank and commercial paper borrowings, net500,000 155,000 
Other debt borrowings including senior notes1,132,475 140,024 
Other debt repayments including senior notes(187,720)(57,270)
Debt issuance costs(13,035)— 
Proceeds from stock option exercises57,347 47,339 
Stock repurchases(199,947)(267,727)
Dividends paid(505,588)(498,323)
Other financing activities(5,775)(46,517)
Net cash provided by (used for) financing activities777,757 (527,474)
Effect of exchange rates on cash, cash equivalents and restricted cash905 (2,314)
Net increase (decrease) in cash, cash equivalents and restricted cash129,623 (345,730)
Cash, cash equivalents and restricted cash at beginning of period966,033 931,376 
Cash, cash equivalents and restricted cash at end of period$1,095,656 $585,646 
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest$266,002 $244,530 
Income taxes, net of refunds371,855 289,413 
 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


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”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).an audit. The financial statements include consolidated balance sheets, consolidated results of operations, consolidated statements of comprehensive income, 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 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 1, 2023. 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’sour 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:
Dec. 30, 2023Dec. 31, 2022
(In thousands)
Cash and cash equivalents$962,165 $500,340 
Restricted cash (1)
133,491 85,306 
Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows$1,095,656 $585,646 
(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.

The following table sets forth our non-cash investing and financing activities:
Dec. 30, 2023Dec. 31, 2022
(In thousands)
Non-cash investing and financing activities:
Plant and equipment acquired through financing programs$158,454 $52,360 
Assets obtained in exchange for finance lease obligations52,367 81,799 

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 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, 2017.2.NEW ACCOUNTING STANDARDS


Recently Adopted Accounting Guidance
2. CHANGES IN ACCOUNTING

Liabilities – Supplier Financing Programs
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,September 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements2022-04, Liabilities—Supplier Finance Programs, Subtopic 405-50, that requires entities to Accounting for Hedging, which expands and refines hedge accounting for bothdisclose in the annual financial and non-financial risk components, alignsstatements the recognition and presentationkey terms of the effects of hedging instruments and hedge items 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 on the date of adoption 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 assupplier finance program 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 authoritiesuse in connection with shares withheld to meet statutory income tax withholding requirements are presented asthe purchase of goods and services, along with information about their obligations under such programs, including a financing activity inroll forward of those obligations. Additionally, 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 2guidance requires disclosure 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 anoutstanding 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 beginning 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.

Asobligations 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, Syscoeach interim period. The guidance does not expect thataffect the implementationrecognition, measurement, or financial statement presentation 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.supplier finance program obligations.


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 months 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, 2018,2022, which is the first quarter of fiscal 2024 for Sysco, except for the roll forward requirement, which is effective annually for fiscal years beginning after December 15, 2023, which is fiscal 2020year 2025 for Sysco. Early adoption is permitted. The guidance requires retrospective application to all periods in which a balance sheet is presented, except for the roll forward requirement, which will be applied prospectively.

Sysco completed its assessment of the disclosures required under ASU 2022-04 and adopted the standard, with the exception of the roll forward requirement, in the first quarter of fiscal 2024 on a retrospective basis. The company has agreements with third parties to provide supplier finance programs which facilitate participating suppliers’ ability to finance payment obligations from the company with designated third-party financial institutions. Participating suppliers may, at their sole discretion, make offers to finance one or more payment obligations of the company prior to their scheduled due dates at a discounted price to participating financial institutions. Obligations of the company that have been confirmed as valid require payment by Sysco upon the due date of the obligation.

The company’s outstanding payment obligations that suppliers financed to participating financial institutions, which are included in accounts payable on the consolidated balance sheets, are as follows:
Dec. 30, 2023Jul. 1, 2023Dec. 31, 2022Jul. 2, 2022
(In thousands)
Financed payment obligations$83,528 $99,606 $81,018 $90,267 


Recent Accounting Guidance Not Yet Adopted

Segment Reporting

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosures of a reportable segment’s profit or loss and assets. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, which is fiscal 2025 for Sysco, with earlyand interim periods for our fiscal years beginning after December 15, 2024, which is the first quarter of fiscal 2026 for Sysco, and should be applied on a retrospective basis to all periods presented. Early adoption is permitted. The companyWe are currently evaluating the effect of adopting ASU 2023-07 on our disclosures.

Income Taxes

In December 2023, the FASB issued 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures to enhance income tax information primarily through changes in the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, which is fiscal 2026 for Sysco, on a prospective basis. Early adoption is permitted. We are currently reviewingevaluating the provisionseffect of adopting ASU 2023-09 on our disclosures.

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3. REVENUE

We recognize revenues when our 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 $5.0 billion and $4.7 billion as of December 30, 2023 and July 1, 2023, respectively.

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 new standard.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 on a straight-line basis. As of December 30, 2023, our contract assets were not significant. We have 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 Dec. 30, 2023
US Foodservice OperationsInternational Foodservice OperationsSYGMAOtherTotal
(In thousands)
Principal Product Categories
Canned and dry products$2,601,298 $801,170 $228,632 $— $3,631,100 
Fresh and frozen meats2,574,453 503,387 504,102 — 3,581,942 
Frozen fruits, vegetables, bakery and other1,996,667 682,027 315,778 — 2,994,472 
Dairy products1,448,604 388,401 141,137 — 1,978,142 
Poultry1,340,095 285,312 261,300 — 1,886,707 
Fresh produce1,308,581 265,417 65,891 — 1,639,889 
Paper and disposables971,489 129,881 188,075 14,099 1,303,544 
Seafood507,958 110,121 44,056 — 662,135 
Beverage products335,748 164,368 139,137 21,330 660,583 
Other (1)
409,550 266,374 25,607 247,897 949,428 
Total Sales$13,494,443 $3,596,458 $1,913,715 $283,326 $19,287,942 
(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 Dec. 31, 2022
US Foodservice OperationsInternational Foodservice OperationsSYGMAOtherTotal
(In thousands)
Principal Product Categories
Canned and dry products$2,502,665 $700,622 $236,726 $— $3,440,013 
Fresh and frozen meats2,390,929 445,018 452,370 — 3,288,317 
Frozen fruits, vegetables, bakery and other1,851,344 596,100 338,379 — 2,785,823 
Dairy products1,498,039 358,639 160,753 — 2,017,431 
Poultry1,329,071 285,343 265,269 — 1,879,683 
Fresh produce1,385,083 257,641 66,099 — 1,708,823 
Paper and disposables976,231 134,507 210,691 13,484 1,334,913 
Seafood547,760 109,290 37,810 — 694,860 
Beverage products303,789 133,515 136,668 21,318 595,290 
Other (1)
292,143 261,736 28,771 266,150 848,800 
Total Sales$13,077,054 $3,282,411 $1,933,536 $300,952 $18,593,953 
(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.


26-Week Period Ended Dec. 30, 2023
US Foodservice OperationsInternational Foodservice OperationsSYGMAOtherTotal
(In thousands)
Principal Product Categories
Canned and dry products$5,285,985 $1,632,713 $461,617 $— $7,380,315 
Fresh and frozen meats5,143,634 1,023,128 984,691 — 7,151,453 
Frozen fruits, vegetables, bakery and other4,024,601 1,355,575 621,077 — 6,001,253 
Dairy products2,902,553 802,572 282,568 — 3,987,693 
Poultry2,701,790 576,635 535,008 — 3,813,433 
Fresh produce2,669,938 540,135 136,209 — 3,346,282 
Paper and disposables1,965,326 304,206 374,618 30,380 2,674,530 
Seafood1,085,593 235,145 87,572 — 1,408,310 
Beverage products698,413 334,921 285,359 45,196 1,363,889 
Other (1)
740,409 474,638 51,010 515,181 1,781,238 
Total Sales$27,218,242 $7,279,668 $3,819,729 $590,757 $38,908,396 
(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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26-Week Period Ended Dec. 31, 2022
US Foodservice OperationsInternational Foodservice OperationsSYGMAOtherTotal
(In thousands)
Principal Product Categories
Canned and dry products$5,079,917 $1,391,996 $472,894 $1,931 $6,946,738 
Fresh and frozen meats4,856,379 898,382 915,810 — 6,670,571 
Frozen fruits, vegetables, bakery and other3,694,811 1,176,132 647,576 149 5,518,668 
Dairy products3,023,521 725,486 325,401 — 4,074,408 
Poultry2,903,321 578,193 542,733 — 4,024,247 
Fresh produce2,723,003 512,378 131,343 — 3,366,724 
Paper and disposables1,999,135 278,574 420,049 28,541 2,726,299 
Seafood1,186,165 230,491 77,934 — 1,494,590 
Beverage products619,407 269,991 274,835 45,974 1,210,207 
Other (1)
593,877 504,523 58,418 531,513 1,688,331 
Total Sales$26,679,536 $6,566,146 $3,866,993 $608,108 $37,720,783 
(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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4.  ACQUISITIONS


During the first 26 weeks of fiscal 2018, the company2024, we paid cash of $147.6 million$1.2 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, aggregate contingent consideration outstanding was $20.2 million, of which $9.0 million was recorded as earnout liabilities.


Brakes GroupEdward Don & Company


On July 5, 2016,November 27, 2023, Sysco consummated its acquisition of Cucina Lux Investments Limited (a private company limited by shares organized underEdward Don & Company (Edward Don or the laws of Englandacquiree) through a merger between Edward Don and Wales), a holding company of the Brakes Group, pursuant to an agreement for the sale and purchase of securities in the capital of the Brakes Group, dated as of February 19, 2016 (the Purchase Agreement), by 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.Sysco Corporation, in which Sysco acquired 100% of the members’ equity of the acquiree for cash consideration of $969.4 million. Edward Don is a leading distributor of foodservice equipment, supplies and disposables and has a robust supply chain that is expected to enable cost effective distribution of restaurant equipment and supplies across the Sysco network. The acquisition allows Sysco to add strategic capabilities and diversified offerings to complement its existing business and create a specialty equipment and supplies platform that will provide better selection and service to customers.


The Brakes Groupassets, liabilities and operating results of Edward Don are reflected in our consolidated financial statements in accordance with ASC Topic No. 805, Business Combinations, commencing from the acquisition date. The purchase price was allocated based on the company’s preliminary estimated fair value of the assets acquired and liabilities assumed, and the excess was assigned to goodwill and intangibles. Goodwill of $447.6 million is a large Europeanassigned to the U.S. Foodservice Operations reportable segment and represents synergies and disposable, supply and foodservice business supplying fresh, refrigeratedequipment capabilities and frozen food products, as well as non-food productsofferings expected to benefit Sysco’s existing business.

In certain circumstances, purchase price allocations may be based upon preliminary estimates and supplies,assumptions. Accordingly, allocations are subject to foodservice customers ranging from large customers, including leisure, pub, restaurant, hotelrevision until Sysco receives final information and contract catering groups, to smaller customers, including independent restaurants, hotels, fast food outlets, schoolscompletes its analysis during the measurement period. This includes finalizing the valuation of acquired tangible and hospitals. Brakes Group businesses include: Brakes, Brakes Catering Equipment, Brake France, Country Choice, Davigel, Fresh Direct, Freshfayre, M&J Seafood, Menigo Foodservice, Pauley’s, Wild Harvestintangible assets and Woodward Foodservice. The Brakes Group’s largest businesses are in the U.K., France, and Sweden, in addition to a presence in Ireland, Belgium, Spain and Luxembourg.related tax attributes.




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 values of our 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.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value:

Time deposits and commercial paper included in cash equivalentsless, are valued at amortized cost, which approximatesusing inputs that are considered a Level 2 measurement. The fair value.  Thesevalue of our marketable securities is measured using inputs that are included within cash equivalents asconsidered a Level 2 measurement, as they rely on quoted prices in the tables below.
Money market fundsmarkets that are valued at the closing price reported by the fund sponsor from annot actively traded exchange.  These are included within cash equivalents as Level 1 measurements inor observable inputs over the tables below.
full term of the asset. 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 rateslocation 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.

Thethe fair value of the company’s marketable securities in the consolidated balance sheet are disclosed in Note 6, “Marketable Securities.” The fair value of our derivative instruments are allis 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 valuevalues 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, 2017,2023 and July 1, 2017 and December 31, 2016:2023:
 Assets Measured at Fair Value as of Dec. 30, 2023
 Level 1Level 2Level 3Total
 (In thousands)
Assets:
Cash equivalents
Cash and cash equivalents$573,597 $3 $— $573,600 
Other assets (1)
133,491 — — 133,491 
Total assets at fair value$707,088 $3 $— $707,091 
 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. 1, 2023
 Level 1Level 2Level 3Total
 (In thousands)
Assets:
Cash equivalents
Cash and cash equivalents$308,952 $10,021 $— $318,973 
Other assets (1)
220,831 — — 220,831 
Total assets at fair value$529,783 $10,021 $— $539,804 

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


 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’sour 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, 2017,2023 and $9.8 billion as of July 1, 2017 and December 31, 2016, respectively.  The2023, while the carrying value of total debt was $8.9 billion, $8.2 billion and $8.3$12.1 billion as of December 30, 2017,2023 and $10.4 billion as of July 1, 20172023.

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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. We include fixed income securities maturing in less than 12 months within prepaid expenses and other current assets. Fixed income securities maturing in more than 12 months are included within other assets in the accompanying consolidated balance sheets. We record 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 26 weeks of fiscal 2024.

The following table presents our available-for-sale marketable securities as of December 31, 2016, respectively.30, 2023 and July 1, 2023:

Dec. 30, 2023
Amortized Cost BasisGross Unrealized GainsGross Unrealized LossesFair ValueShort-Term Marketable SecuritiesLong-Term Marketable Securities
(In thousands)
Fixed income securities:
Corporate bonds$100,865 $523 $(4,585)$96,803 $23,032 $73,771 
Government bonds29,628 — (1,368)28,260 — 28,260 
Total marketable securities$130,493 $523 $(5,953)$125,063 $23,032 $102,031 
Jul. 1, 2023
Amortized Cost BasisGross Unrealized GainsGross Unrealized LossesFair ValueShort-Term Marketable SecuritiesLong-Term Marketable Securities
(In thousands)
Fixed income securities:
Corporate bonds$99,501 $96 $(6,777)$92,820 $12,767 $80,053 
Government bonds29,777 — (1,913)27,864 — 27,864 
Total marketable securities$129,278 $96 $(8,690)$120,684 $12,767 $107,917 

6.As of December 30, 2023, 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.

Dec. 30, 2023
(In thousands)
Due in one year or less$23,032 
Due after one year through five years62,334 
Due after five years39,697 
Total$125,063 

There were no significant realized gains or losses in marketable securities in the first 26 weeks of fiscal 2024.

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.


14

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 2024, we entered into forward swap agreements to trade the fixed interest rate on $500 million of 6.00% senior notes with variable rates, starting in November 2024. The interest rate swap agreements are designated as fair value hedges and valued based on an income approach using observable market inputs including Secured Overnight Financing Rate (SOFR) yield curves. The company has incorporated credit valuation adjustments to appropriately reflect the risk of default in the fair value measurements. Changes in the fair value of the hedge and the carrying value of the hedged item attributable to changes in the benchmark interest rates being hedged are recognized in interest expense.


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-bond denominated debt that 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, British pound sterling, 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 certainhas cross-currency swaps designated as fair value hedges for the purpose of hedging foreign currency contractsrisk associated with changes in spot rates on foreign denominated intercompany loans. Sysco has elected to exclude the changes in fair value of the forward points from the assessments of hedge effectiveness. Gains or losses from fair value hedges impact the same category on the consolidated statements of income as the item being hedged, including the earnings impact of the excluded components. Unrealized gains or losses on components excluded from hedge effectiveness are recorded as a component of accumulated other comprehensive income (loss) and recognized into earnings over the life of the hedged instrument. Except for the excluded components, changes in the fair value of the hedge are offset against changes in the fair value of the hedged assets or liabilities through earnings.

In the second quarter of fiscal 2024, Sysco entered into a cross-currency swap 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 lossexposure of our net investment in certain foreign operations. This cross-currency swap is designated as a net investment hedge with gains and losses recognized within accumulated other comprehensive income (loss).

Cross-currency swaps are valued based 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 ofan income approach using observable market inputs including foreign currency exchange rate fluctuations on net earnings.rates and interest rates in both countries subject to the swap.


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 fuel on anticipated future purchases. These swaps have been designated as cash flow hedges.

15

None of theseour hedging instruments contain credit-risk-related contingent features. Details of outstanding hedging instruments as of December 30, 20172023 are presented below:
Maturity Date of the Hedging InstrumentCurrency / Unit of MeasureNotional Value
(In millions)
Hedging of interest rate risk
January 2034U.S. Dollar500
February 2018U.S. Dollar500
April 2019U.S. Dollar500
October 2020U.S. Dollar750
July 2021U.S. Dollar500
Hedging of foreign currency risk(1)
Various (January 2024)Swedish Krona101
July 2021Various (January 2024 to April 2024)British Pound Sterling234
17
August 2021
May 2024Mexican PesoBritish Pound Sterling466
439
June 2023April 2025Canadian DollarEuro500
180
January 2029Euro470
Hedging of fuel risk
Various (January 20182024 to November 2018)March 2026)GallonsGallons44
57

(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, 2017,2023 and July 1, 2017 and December 31, 20162023 are as follows:
 Derivative Fair Value
 Balance Sheet locationDec. 30, 2023Jul. 1, 2023
(In thousands)
Fair Value Hedges:
Cross currency swapsOther assets$1,198 $— 
Interest rate swapsOther assets24,557 — 
Cross currency swapsOther current liabilities1,497 1,262 
Cash Flow Hedges:
Fuel swapsOther current assets$168 $102 
Foreign currency forwardsOther current assets74 624 
Fuel swapsOther assets136 40 
Fuel swapsOther current liabilities10,372 17,932 
Foreign currency forwardsOther current liabilities642 404 
Fuel swapsOther long-term liabilities2,794 5,637 
Net Investment Hedges:
Cross currency swapsOther current assets$3,377 $— 
Cross currency swapsOther long-term liabilities25,738 — 
   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:

16

  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)
13-Week Period Ended26-Week Period Ended
Dec. 30, 2023Dec. 31, 2022Dec. 30, 2023Dec. 31, 2022
(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$154,925 $132,042 $295,899 $256,192 
Gain or (loss) on fair value hedging relationships:
Interest rate swaps:
Hedged items$(30,298)$(2,685)$(30,298)$(309)
Derivatives designated as hedging instruments22,066 742 22,066 (5,501)
Cross currency swaps:
Hedged items$(2,711)$— $285 $— 
Derivatives designated as hedging instruments2,711 — (285)— 


(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.the periods presented:

13-Week Period Ended26-Week Period Ended
Dec. 30, 2023Dec. 31, 2022Dec. 30, 2023Dec. 31, 2022
(In thousands)
Interest expense$(3,250)$(1,940)$(3,250)$(3,879)
Decrease in fair value of debt27,048 745 27,048 (3,570)
Foreign currency gain (loss)(2,711)— 285 — 
Hedged items$(33,009)$(2,685)$(30,013)$(309)
(2) Losses reclassified from AOCI into income represent amortization of losses on forward starting interest rate swap agreements that were previously settled.
  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)

(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 accountingand excluded components of fair value hedges on the consolidated statements of comprehensive income for the 13-week periodperiods ended December 30, 2017,2023 and December 31, 2022, presented on a pretax basis, are as follows:
17

13-Week Period Ended Dec. 30, 202313-Week Period Ended Dec. 30, 2023
Amount of Gain or (Loss) Recognized in Other Comprehensive Income on DerivativesAmount 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)
Derivatives in cash flow hedging relationships:
Fuel swaps
Fuel swaps
Fuel swaps
Foreign currency contracts
Total
Total
Total
Derivatives in net investment hedging relationships:
Derivatives in net investment hedging relationships:
Derivatives in net investment hedging relationships:
Cross currency contracts
Cross currency contracts
Cross currency contracts
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
Derivatives in fair value hedging relationships:

(In thousands) (In thousands)
Derivatives in fair value hedging relationships:
Derivatives in fair value hedging relationships:
Change in excluded component of fair value hedge
Change in excluded component of fair value hedge
Change in excluded component of fair value hedge
13-Week Period Ended Dec. 31, 2022
13-Week Period Ended Dec. 31, 2022
13-Week Period Ended Dec. 31, 2022
Amount of Gain or (Loss) Recognized in Other Comprehensive Income on DerivativesAmount 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)
Derivatives in cash flow hedging relationships:   
Fuel swaps$8,505
 Operating income $1,814
Fuel swaps
Fuel swaps
Foreign currency contracts6,331
 Cost of goods sold 525
Total
Total
Total$14,836
 $2,339
   
Derivatives in net investment hedging relationships:   
Foreign currency contracts$(12,063) Other expense (income) $—
Derivatives in net investment hedging relationships:
Derivatives in net investment hedging relationships:
Foreign denominated debt(9,450) Other expense (income) —
Total$(21,513) $—
Foreign denominated debt
Foreign denominated debt



18


The location and effect of cash flow, and net investment, hedge accountingand excluded components of fair value hedges on the consolidated statements of comprehensive income for the 26-week periodperiods ended December 30, 2017,2023 and December 31, 2022, presented on a pretax basis, are as follows:

26-Week Period Ended Dec. 30, 2023
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$9,975 Operating expense$3,003 
Foreign currency contracts(791)Cost of sales / Other income— 
Total$9,184 $3,003 
Derivatives in net investment hedging relationships:
Cross currency contracts$(22,361)N/A$— 
Derivatives in fair value hedging relationships:
Change in excluded component of fair value hedge$184 Other expense (income)$— 
26-Week Period Ended Dec. 31, 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$(35,155)Operating expense$25,362 
Foreign currency contracts335 Cost of sales / Other income— 
Total$(34,820)$25,362 
Derivatives in net investment hedging relationships:
Foreign denominated debt$(13,653)N/A$— 
19
 26-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$19,706
 Operating income $1,658
Foreign currency contracts(15,462) Cost of goods sold 834
Total$4,244
   $2,492
      
Derivatives in net investment hedging relationships:     
Foreign currency contracts$(27,957) Other expense (income) $—
Foreign denominated debt(28,600) Other expense (income) —
Total$(56,557)   $—


The location and carrying amount of hedged liabilities in the consolidated balance sheet as of December 30, 20172023 are as follows:
Dec. 30, 2023
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$(518,622)$(27,048)

The carrying amount of hedged liabilities in the consolidated balance sheet as of July 1, 2023 is zero.

8. DEBT
 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


Sysco has a long-term revolving credit facility that includes aggregate commitments of the lenders thereunder of $3.0 billion, with an option to increase such commitments to $4.0 billion. As of December 30, 2017, the total notional amount of Sysco’s pay-fixed/receivable-variable interest rate swaps was $2.3 billion.2023, there were no borrowings outstanding under this facility.


The location and effect of derivative instruments and related hedged items on the consolidated results of operations for the 13-week period ending December 30, 2017, presented onWe have a pretax basis, are as follows:
 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.  DEBT

Sysco has aU.S commercial paper program allowing the company to issue short-term unsecured notes in an aggregate amount not to exceed $2.0$3.0 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. During the first 26 weeksAs of 2018, aggregate outstandingDecember 30, 2023, there were $500.0 million in commercial paper issuances outstanding under this program.

On November 17, 2023, Sysco issued senior notes (the Notes) totaling $1.0 billion. Details of the Notes are as follows:

Maturity DatePar Value
(in millions)		Coupon RatePricing
(percentage of par)
January 17, 2029 (the 2029 Notes)$500 5.75 %99.784 %
January 17, 2034 (the 2034 Notes)500 6.00 99.037 

The Notes initially are fully and short-term bankunconditionally 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 July 17 and January 17, beginning July 17, 2024. 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 2029 Notes before the date that is one month prior to the maturity date, or (ii) the 2034 Notes before the date that is three 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 plus accrued and unpaid interest 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.

The total carrying value of our debt was $12.1 billion as of December 30, 2023 and $10.4 billion as of July 1, 2023. The increase in the carrying value of our debt from the prior year was due to the issuance of senior notes, new borrowings ranged from $254.5under our commercial paper program and new financing leases in support of equipment.

On October 17, 2023, we entered into a new commercial paper dealer agreement in Europe for a commercial paper program with borrowings not to exceed €250 million. As of December 30, 2023, there were no commercial paper issuances outstanding under this program.

Information regarding the guarantors of our registered debt securities is contained in the section captioned Guarantor Summarized Financial Information in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this Form 10-Q.

9. COMPANY-SPONSORED EMPLOYEE BENEFIT PLANS

20

Sysco has company-sponsored defined benefit and defined contribution retirement plans for its employees. We also provide certain health care benefits to eligible retirees and their dependents.

On October 25, 2022, the Sysco Corporation Retirement Plan (the Plan) executed an agreement with Massachusetts Mutual Life Insurance Company (the Insurer). Under this agreement, the Plan purchased a nonparticipating single premium group annuity contract using Plan assets that transferred to the Insurer $695.0 million of the Plan’s defined benefit pension obligations related to certain pension benefits. The contract covers approximately $1.2 billion.10,000 Sysco participants and beneficiaries (the Transferred Participants) in the U.S. pension plan (the U.S. Retirement Plan). Under the group annuity contract, the Insurer made an unconditional and irrevocable commitment to pay the pension benefits of each Transferred Participant that were due on or after January 1, 2023. The transaction resulted in no changes to the amount of benefits payable to the Transferred Participants.


As a result of the transaction, we recognized a one-time, non-cash pre-tax pension settlement charge of $315.4 million in the second quarter of fiscal 2023 primarily related to the accelerated recognition of actuarial losses included within accumulated other comprehensive loss in the statement of changes in consolidated shareholders’ equity. The transaction also required us to remeasure the benefit obligations and plan assets of the U.S. Retirement Plan. The remeasurement reflected the use of an updated discount rate and an expected rate of return on plan assets as of October 31, 2022, applying the practical expedient to remeasure plan assets and obligations as of the nearest calendar month-end date.
8.
Components of Net Benefit Costs

The components of net company-sponsored benefit cost for the U.S. Retirement Plan are as follows:

 13-Week Period26-Week Period
   Ended (1)
   Ended (1)
 Dec. 31, 2022Dec. 31, 2022
(In thousands)(In thousands)
Service cost$2,034 $4,357 
Interest cost38,103 80,604 
Expected return on plan assets(36,957)(76,977)
Amortization of prior service cost98 197 
Amortization of actuarial loss7,661 16,609 
Settlement loss recognized315,354 315,354 
Net pension costs$326,293 $340,144 
(1)Net pension costs were not material for the second quarter and first 26 weeks of fiscal 2024.

The components of net company-sponsored benefit costs other than the service cost component are reported in other expense (income), net within the consolidated results of operations.
21


10.  EARNINGS PER SHARE


The following table sets forth the computation of basic and diluted earnings per share:
 13-Week Period Ended26-Week Period Ended
 Dec. 30, 2023Dec. 31, 2022Dec. 30, 2023Dec. 31, 2022
 (In thousands, except for share
and per share data)		(In thousands, except for share
and per share data)
Numerator:  
Net earnings$415,242 $141,216 $918,634 $606,784 
Denominator:
Weighted-average basic shares outstanding504,312,633 507,609,696 504,719,562 507,594,137 
Dilutive effect of share-based awards1,616,709 2,536,098 1,779,828 2,670,336 
Weighted-average diluted shares outstanding505,929,342 510,145,794 506,499,390 510,264,473 
Basic earnings per share$0.82 $0.28 $1.82 $1.20 
Diluted earnings per share$0.82 $0.28 $1.81 $1.19 
 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 2,749,0006,451,000 and 4,900,0001,848,000 for the second quarter of fiscal 20182024 and fiscal 2017, respectively. The number of options that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was2023, respectively, and approximately 4,594,0006,219,000 and 3,500,0001,620,000 for the first 26 weeks of fiscal 20182024 and fiscal 2017,2023, respectively.


Accelerated Share Repurchase Program
9.
On December 15, 2023, we entered into a Master Confirmation and Supplemental Confirmation (collectively, the ASR Agreement) with Goldman, Sachs & Co. (Goldman) relating to an accelerated share repurchase program (the ASR Program). Pursuant to the terms of the ASR Agreement, effective January 3, 2024, we agreed to repurchase $500 million of our common stock from Goldman under the share repurchase program authorized by our Board of Directors in May 2021.

In connection with the ASR Program, we paid $500 million to Goldman on January 11, 2024, in exchange for 6,026,110 shares of Sysco’s outstanding common stock, which represents a substantial majority of the shares owed to Sysco by Goldman; however, the number of shares ultimately delivered to us by Goldman is subject to adjustment based on the volume-weighted average share price of Sysco’s common stock during the term of the ASR Agreement, less an agreed discount. We expect all purchases under the ASR Program to be completed by the end of March 2024, although the exact date of completion will depend on whether or when Goldman exercises an acceleration option that it has under the ASR Agreement. At settlement, we may be entitled to receive additional shares of common stock from Goldman or, under certain circumstances, may be required to issue additional shares or make a payment to Goldman at our option. In the third quarter of fiscal 2024, the shares received will be recognized in treasury stock and reduce the number of weighted average shares outstanding. The incremental consideration to be received or issued upon settlement of the ASR Program was evaluated as an unsettled forward contract indexed to our common stock and will be classified within stockholders’ equity in the third quarter of fiscal 2024, if the ASR Program has not concluded by the end of the third quarter of fiscal 2024.

The ASR Agreement contains the principal terms and provisions governing the ASR Program, including, but not limited to, the mechanism used to determine the number of shares that will be delivered, the required timing of delivery of the shares, the specific circumstances under which Goldman may delay any date of valuation or settlement under the ASR Program (such as upon the occurrence of certain market disruptions), the specific circumstances under which Goldman is permitted to make adjustments to the terms of the ASR Program or to terminate the ASR Program (such as upon the announcement of certain fundamental transactions affecting Sysco), and various acknowledgments, representations and warranties made by Sysco and Goldman to one another.

22

11.  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$552.3 million and $127.5$527.8 million for the second quarter of fiscal 20182024 and fiscal 2017,2023, respectively. Comprehensive income was $798.5$981.5 million and $374.6$764.1 million for the first 26 weeks of fiscal 20182024 and fiscal 2017,2023, respectively.




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 Dec. 30, 2023
 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$195 $49 $146 
Amortization of actuarial loss, netOther expense, net6,676 1,665 5,011 
Total reclassification adjustments6,871 1,714 5,157 
Foreign currency translation:
Foreign currency translation adjustmentN/A163,084 — 163,084 
Marketable securities:
   Change in marketable securities (1)
N/A4,359 915 3,444 
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
Change in excluded component of fair value
  hedge		Other expense, net210 52 158 
Change in cash flow hedges
Operating expenses (2)
(25,031)(4,806)(20,225)
Change in net investment hedgesN/A(22,361)(5,620)(16,741)
Total other comprehensive (loss) before reclassification adjustments(47,182)(10,374)(36,808)
Reclassification adjustments:    
Amortization of cash flow hedgesInterest expense2,893 723 2,170 
Total other comprehensive income (loss)$130,025 $(7,022)$137,047 
(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 second quarter of fiscal 2024.
(2)Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.





23

  13-Week Period Ended Dec. 30, 2017  13-Week Period Ended Dec. 31, 2022
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:  
Other comprehensive income before reclassification adjustments:
Net actuarial gain, arising in the current year
Net actuarial gain, arising in the current year
Net actuarial gain, arising in the current year
Settlements
Total other comprehensive income before reclassification adjustments
Reclassification adjustments:   
  
  
Reclassification adjustments:  
Amortization of prior service costOperating expenses $2,409
 $602
 $1,807
Amortization of actuarial loss (gain), netOperating expenses 8,761
 2,190
 6,571
Amortization of actuarial loss, net
Total reclassification adjustments
Total reclassification adjustments
Total reclassification adjustments  11,170
 2,792
 8,378
Foreign currency translation:   
  
  
Other comprehensive income before reclassification adjustments:      
Foreign currency translation adjustmentN/A 19,254
 —
 19,254
Foreign currency translation adjustment
Foreign currency translation adjustment
Marketable securities:
Change in marketable securities (1)
Change in marketable securities (1)
Change in marketable securities (1)
Hedging instruments:       
Other comprehensive income before reclassification adjustments:      
Other comprehensive income (loss) before reclassification adjustments:
Other comprehensive income (loss) before reclassification adjustments:
Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedges
Change in cash flow hedges
Change in cash flow hedgesN/A 2,944
 2,027
 917
Change in net investment hedgesN/A (6,543) (2,390) (4,153)
Total other comprehensive income before reclassification adjustments  (3,599) (363) (3,236)
Total other comprehensive (loss) before reclassification adjustments
Total other comprehensive (loss) before reclassification adjustments
Total other comprehensive (loss) before reclassification adjustments
Reclassification adjustments:       
Amortization of cash flow hedgesInterest expense 2,873
 718
 2,155
Amortization of cash flow hedges
Amortization of cash flow hedges
Total other comprehensive income  $29,698
 $3,147
 $26,551

(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 second quarter of fiscal 2023.
(2)Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.



24
   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)


  26-Week Period Ended Dec. 30, 2023
 Location of
Expense (Income) Recognized in
Net Earnings		Before Tax
Amount		TaxNet of Tax
Amount
  (In thousands)
Pension and other postretirement benefit plans:
Other comprehensive income before reclassification adjustments:
Net actuarial loss, arising in the current yearOther expense, net$672 $169 $503 
Reclassification adjustments:
Amortization of prior service costOther expense, net390 98 292 
Amortization of actuarial loss, netOther expense, net13,317 3,324 9,993 
Total reclassification adjustments13,707 3,422 10,285 
Foreign currency translation:
Foreign currency translation adjustmentN/A54,890 — 54,890 
Marketable securities:
Change in marketable securities (1)
N/A3,163 664 2,499 
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
Change in excluded component of fair value
  hedge		Other expense, net184 46 138 
Change in cash flow hedges
Operating expenses (2)
9,184 2,261 6,923 
Change in net investment hedgesN/A(22,361)(5,620)(16,741)
Total other comprehensive (loss) before reclassification adjustments(12,993)(3,313)(9,680)
Reclassification adjustments:
Amortization of cash flow hedgesInterest expense5,786 1,446 4,340 
Total other comprehensive income$65,225 $2,388 $62,837 

(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 26 weeks of fiscal 2024.
(2)Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.


25

  26-Week Period Ended Dec. 30, 2017  26-Week Period Ended Dec. 31, 2022
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:   
  
  
Other comprehensive income before reclassification adjustments:
Other comprehensive income before reclassification adjustments:
Other comprehensive income before reclassification adjustments:
Net actuarial loss, arising in the current year
Net actuarial loss, arising in the current year
Net actuarial loss, arising in the current year
Settlements
Total other comprehensive income before reclassification adjustments
Reclassification adjustments:   
  
  
Amortization of prior service costOperating expenses $4,818
 $1,527
 $3,291
Amortization of actuarial loss (gain), netOperating expenses 17,522
 5,554
 11,968
Amortization of prior service cost
Amortization of prior service cost
Amortization of actuarial loss, net
Total reclassification adjustments  22,340
 7,081
 15,259
Foreign currency translation:   
  
  
Other comprehensive income before reclassification adjustments:      
Foreign currency translation:
Foreign currency translation:
Foreign currency translation adjustmentN/A 140,584
 —
 140,584
Foreign currency translation adjustment
Foreign currency translation adjustment
Marketable securities:
Change in marketable securities (1)
Change in marketable securities (1)
Change in marketable securities (1)
Hedging instruments:   
  
  
Other comprehensive income before
reclassification adjustments:		      
Other comprehensive (loss) before reclassification adjustments:
Other comprehensive (loss) before reclassification adjustments:
Other comprehensive (loss) 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 —
   —
Total other comprehensive income before reclassification adjustments (23,569) (10,509) (13,059)
Change in cash flow hedges
Change in cash flow hedges
Change in net investment hedges
Total other comprehensive (loss) before reclassification adjustments
Reclassification adjustments:
Reclassification adjustments:
Reclassification adjustments:   
  
  
Amortization of cash flow hedgesInterest expense 5,746
 1,821
 3,925
Amortization of cash flow hedges
Amortization of cash flow hedges
Total other comprehensive income  $145,101
 $(1,607) $146,709



(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 26 weeks of fiscal 2023.
(2)Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.
26
   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:
 26-Week Period Ended Dec. 30, 2023
 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. 1, 2023$(839,541)$(374,290)$(31,966)$(6,793)$(1,252,590)
Net actuarial loss arising in the current year503 — — — 503 
Equity adjustment from foreign currency translation— 54,890 — — 54,890 
Amortization of cash flow hedges— — 4,340 — 4,340 
Change in net investment hedges(16,741)(16,741)
Change in excluded component of fair value hedge— — 138 — 138 
Change in cash flow hedge— — 6,923 — 6,923 
Amortization of unrecognized prior service cost292 — — — 292 
Amortization of unrecognized net actuarial losses9,993 — — — 9,993 
Change in marketable securities— — — 2,499 2,499 
Balance as of Dec. 30, 2023$(828,753)$(319,400)$(37,306)$(4,294)$(1,189,753)

 26-Week Period Ended Dec. 31, 2022
 Pension and Other Postretirement Benefit Plans,
net of tax		Foreign Currency TranslationHedging,
net of tax		Marketable SecuritiesTotal
 (In thousands)
Balance as of Jul. 2, 2022$(1,011,335)$(501,517)$35,770 $(4,972)$(1,482,054)
Net actuarial loss arising in the current year(67,388)— — — (67,388)
Settlements236,591 — — — 236,591 
Equity adjustment from foreign currency translation— 9,632 — — 9,632 
Amortization of cash flow hedges— — 4,325 — 4,325 
Change in net investment hedges— — (10,240)— (10,240)
Change in cash flow hedges— — (26,187)— (26,187)
Amortization of unrecognized prior service cost148 — — — 148 
Amortization of unrecognized net actuarial losses12,519 — — — 12,519 
Change in marketable securities— — — (2,134)(2,134)
Balance as of Dec. 31, 2022$(829,465)$(491,885)$3,668 $(7,106)$(1,324,788)

 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)

10.12.  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).


27

Stock Incentive Plans


In the first 26 weeks of fiscal 2018,2024, options to purchase 4,042,415808,279 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 26 weeks of fiscal 20182024 was $7.08.$19.27.


In the first 26 weeks of fiscal 2018, 867,6192024, employees were granted 521,082 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 vesting period. The weighted average grant-date fair value per PSU granted during the first 26 weeks of fiscal 2024 was $73.58. The PSUs will convert into shares of Sysco’s common stock at the end of the three-year performance shareperiod based on actual performance targets achieved, as well as the market-based return of Sysco’s common stock relative to that of each company within the S&P 500 index.

In the first 26 weeks of fiscal 2024, employees were granted 366,883 restricted stock units. The weighted average grant-date fair value per restricted stock unit granted during the first 26 weeks of fiscal 20182024 was $51.10.  The PSUs will convert into shares of Sysco common stock at the end of the performance period based on financial performance targets consisting of Sysco’s earnings per share compound annual growth rate and adjusted return on invested capital.$71.93.


Employee Stock Purchase Plan


Plan participants purchased 591,241594,056 shares of common stock under the Sysco ESPP during the first 26 weeks of fiscal 2018.

2024. The weighted average fair value per right of employee stock purchase rightsright issued pursuant to the ESPP was $7.83$10.33 during the first 26 weeks of fiscal 2018.2024. 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$52.8 million and $42.8$52.7 million for the first 26 weeks of fiscal 20182024 and fiscal 2017,2023, respectively.


As of December 30, 2017,2023, there was $127.2$143.6 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 2.031.95 years.




11.13.  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 second quarter and first 26 weeks of fiscal 20182024 were 37.11%23.83% and 34.71%23.94%, respectively. These rates are higher than the company’s 21.00% statutory tax rate primarily because of state income taxes. The rates are partially offset by a foreign income tax benefit and the equity-based compensation excess tax benefits.

The effective tax rates for the second quarter and first 26 weeks of fiscal 20182023 were negatively20.88% and 21.54%, respectively. The second quarter 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 $79.2the pension buyout of $4.9 million attributable to the change in the federal statutory tax rate described above, along with the impactand excess benefits of tax law changes in certain foreign jurisdictions andequity-based compensation, which totaled $1.4 million. The first 26 weeks of fiscal 2023 were favorably impacted by excess tax benefits of equity-based compensation, thatwhich totaled $8.1 million and $14.8 million, respectively. Sysco began recognizing these excess tax benefits within income tax expense in the first quarter of fiscal 2018 due to the adoption of ASU 2016-09. The effective tax rate for the second 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.$10.3 million.


Uncertain Tax Positions


As of December 30, 2017,2023, the gross amount of unrecognized tax benefit and related accrued interest was $16.2$32.4 million and $11.5$9.7 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 of the company 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.12 months. At this time, an estimate of the range of the reasonably possible change cannot be made.


During the third quarter of fiscal 2023, Sysco received a Statutory Notice of Deficiency from the Internal Revenue Service, mainly related to foreign tax credits generated in fiscal 2018 from repatriated earnings primarily from our Canadian operations. In the fourth quarter of fiscal 2023, the company filed suit in the U.S. Tax Court challenging the validity of certain tax regulations related to the one-time transition tax on unrepatriated foreign earnings, which were enacted as part of the Tax Cuts and Jobs Act of 2017 (TCJA). The lawsuit seeks to have the court invalidate these regulations, which would affirm the company’s position regarding its foreign tax credits. Sysco has previously recorded a benefit of $131.0 million attributable to its
28

interpretation of the TCJA and the Internal Revenue Code. If we are ultimately unsuccessful in defending our position, we may be required to reverse all, or some portion, of the benefit previously recorded.

Other


On October 8, 2021, the Organization for Economic Co-operation and Development (OECD) announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which provides for a two-pillar solution to address tax challenges arising from the digitalization of the economy. Pillar One expands a country’s authority to tax profits from companies that make sales into their country but do not have a physical location in the country. Pillar Two includes an agreement on international tax reform, including rules to ensure that large corporations pay a minimum rate of corporate income tax. On December 20, 2021, the OECD released Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large corporations at a minimum rate of 15%. The OECD continues to release additional guidance on the two-pillar framework, with widespread implementation anticipated by 2024. We are continuing to evaluate the potential impact on future periods of the Pillar Two Framework, pending legislation adoption and/or guidance by individual countries, with the rules being effective for tax years beginning on or after January 1, 2024. For Sysco, Pillar Two will be effective in fiscal 2025.

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.




12.14.  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.


13.15.  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 three 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) our 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 produce distribution business, our Specialty Meats and Seafood Group specialty produce companies)protein operations, our growing Italian Specialty platform anchored by Greco & Sons, Edward Don, acquired in the second quarter of fiscal 2024, which distributes restaurant equipment and European Imports (asupplies, our Asian specialty import company);distribution company and a number of other small specialty businesses that are not material to our operations;
•International Foodservice Operations - primarily – includes broadline operations in Canada, Europe, Bahamas, Mexico, Costa Rica 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,outside of the U.S., 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 export operations that distribute to both traditionalinternational customers. Our European operations primarily consist of operations in the United Kingdom, 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.
29

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.




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


 13-Week Period Ended26-Week Period Ended
 Dec. 30, 2023Dec. 31, 2022Dec. 30, 2023Dec. 31, 2022
Sales:(In thousands)(In thousands)
U.S. Foodservice Operations$13,494,443 $13,077,054 $27,218,242 $26,679,536 
International Foodservice Operations3,596,458 3,282,411 7,279,668 6,566,146 
SYGMA1,913,715 1,933,536 3,819,729 3,866,993 
Other283,326 300,952 590,757 608,108 
Total$19,287,942 $18,593,953 $38,908,396 $37,720,783 
 13-Week Period Ended26-Week Period Ended
 Dec. 30, 2023Dec. 31, 2022Dec. 30, 2023Dec. 31, 2022
Operating income (loss):(In thousands)(In thousands)
U.S. Foodservice Operations$839,036 $780,968 $1,780,007 $1,686,679 
International Foodservice Operations82,930 57,413 176,413 144,393 
SYGMA16,346 6,847 29,113 12,544 
Other8,387 9,870 20,210 21,408 
Total segments946,699 855,098 2,005,743 1,865,024 
Global Support Center(246,656)(214,275)(502,118)(487,400)
Total operating income700,043 640,823 1,503,625 1,377,624 
Interest expense149,680 132,042 284,014 256,192 
Other expense, net5,245 330,305 11,885 348,054 
Earnings before income taxes$545,118 $178,476 $1,207,726 $773,378 

30
 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, 2017,2023, 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, 20172023 (our 2017fiscal 2023 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 theimproved second quarter of fiscal 2018 due2024 results were attributable to retroactive application of the 28% rate to the beginning of our fiscal year.

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

Highlights and Trends

Highlights

Sysco’s results for thesales growth that surpassed second quarter of fiscal 2018 represent continued momentum2023 levels by 3.7%. The increase in our localsales was driven by a combination of positive case volume growth and overall sales results achieved while balancing someproduct cost inflation. Our gross profit andgrowth this quarter outpaced operating expense challenges. Our results also include significant charges, as well as benefits, due to U.S. tax reform. Our operating income, net earningseffective management of product cost fluctuations, strategic sourcing, progress achieved in improving the performance of our supply chain, and earnings per share,delivery of our cost-out measures. See below for a comparison of our fiscal 2024 results to our fiscal 2023 results, 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 second quarter of fiscal 20182024 to the second quarter of fiscal 2017:2023 are presented below:


•Sales:
◦increased 7.1%, or $1.0 billion, to $14.4 billion;
◦increased 3.7%, or $694.0 million, to $19.3 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 9.2%, or $59.2 million, to $700.0 million;
◦adjusted operating income increased 9.2%, or $62.6 million, to $744.9 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 194.0%, or $274.0 million, to $415.2 million;
◦adjusted net earnings increased 10.1%, or $41.1 million, to $449.0 million;
•Basic earnings per share:
◦increased 10.0%, or $0.05, to $0.55 per share;
◦increased 192.9%, or $0.54, to $0.82 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 192.9%, or $0.54, to $0.82 per share;
◦adjusted diluted earnings per share increased 11.3%, or $0.09, to $0.89;
•EBITDA:
◦increased 82.7%, or $413.7 million, to $914.3 million; and
◦adjusted EBITDA increased 11.6%, or $96.2 million, to $927.5 million.

Comparisons of results from the first 26 weeks of fiscal 20182024 to the first 26 weeks of fiscal 2017:2023 are presented below:

•Sales:
◦increased 6.0%, or $1.6 billion, to $29.1 billion;
◦increased 3.1%, or $1.2 billion, to $38.9 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 9.1%, or $126.0 million, to $1.5 billion;
◦adjusted operating income increased 9.9%, or $144.2 million, to $1.6 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 51.4%, or $311.9 million, to $918.6 million;
◦adjusted net earnings increased 10.0%, or $90.1 million, to $1.0 billion;
•Basic earnings per share:
◦increased 13.8%, or $0.15, to $1.24 per share;
◦increased 51.7%, or $0.62, to $1.82 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 52.1%, or $0.62, to $1.81 per share;
◦adjusted diluted earnings per share increased 11.4%, or $0.20, to $1.96;
•EBITDA:
◦increased 36.1%, or $508.7 million, to $1.9 billion; and
◦adjusted EBITDA increased 11.7%, or $203.7 million, to $2.0 billion.

31

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 EBITDA and free cash flow, any non-GAAP financial measures will be denoted as adjusted measures to remove (1) restructuring charges; (2) expenses associated with our various transformation initiatives; (3) severance charges; and (4) acquisition-related costs consisting of: (a) intangible amortization expense and (b) acquisition costs and due diligence costs related to our acquisitions. Our results for fiscal 2023 were also impacted by adjustments to a product return allowance pertaining to COVID-related personal protection equipment inventory, a pension settlement charge that resulted from the purchase of a nonparticipating single premium group annuity contract that transferred defined benefit plan obligations to an insurer 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.


The fiscal 2024 and fiscal 2023 items discussed above are collectively referred to as “Certain Items.” The results of our operations can be impacted by changes in exchange rates applicable to converting from local currencies to U.S. dollars. We measure our results on a constant currency basis.

Trends


A favorable macro-economic environment propelledEconomic and Industry Trends

Sysco continues to outperform the foodservice market. The food-away-from-home sector is a healthy, long-term growth market. Sysco is diversified and well positioned as a market leader in food service. We expect slightly positive rates of industry volume growth for fiscal 2024.

Sales and Gross Profit Trends

Our sales and gross profit performance are 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. Current market conditionssecond quarter and first 26 weeks of fiscal 2024 was volume growth. We experienced a 3.4% and 2.5% improvement in U.S. Foodservice case volume in the second quarter and first 26 weeks of fiscal 2024, respectively, as compared to the second quarter and first 26 weeks of fiscal 2023. Local case volume within our U.S. for foodservice operators remain somewhat favorable, as sales at restaurants continue to rise, offsetting lower traffic counts. Economic growthFoodservice segment increased 2.9% and 1.3% in the international marketssecond quarter and first 26 weeks of fiscal 2024, respectively, as compared to the second quarter and first 26 weeks of fiscal 2023. This volume reflects our broadline and specialty businesses, except for our specialty meats and equipment businesses which are measured in which we operate is mostly positive, including modest growthdifferent units.

We experienced inflation at a rate of 1.1% in the foodservice markets. Food cost inflation in our United Kingdom (U.K.) business continues to pressure our pricing, which has impacted our volume growth and gross margins.

Our operating income and net earnings during the second quarter of fiscal 2018 have been affected2024, at the total enterprise level, primarily driven by a challenging in-bound freight environment, which imposes cost pressures oninflation in the meat and frozen categories. We continued to be successful in managing our inflation, resulting in an increase in gross profit dollars. The industry is facing driver availability challenges, leading toGross margin increased lane rates from carriers. As a result, our expenses 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 solution21 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% for28 basis points in the second quarter and first 26 weeks of fiscal 2018, which increased sales2024, respectively, as compared to the second quarter and gross profits. The pacefirst 26 weeks of fiscal 2023. This was primarily driven by higher volumes, the effective management of product cost fluctuations and progress from our strategic sourcing efforts. We expect total enterprise level inflation has been greaterto be slightly positive in meat, dairy and produce categories. Ourfiscal 2024.

Operating Expense Trends

Total operating expenses have increased due3.9% and 3.6% during the second quarter and first 26 weeks of fiscal 2024, respectively, as compared to the second quarter and first 26 weeks of fiscal 2023, driven by increased investmentvolumes. We continued to improve the performance of our supply chain, while investing in colleague retention and training. These efficiency efforts are expected to continue to improve in fiscal 2024. We believe the advancements we are making in our salesforcephysical capabilities, and national customer start-up coststhe investments we are making in improved training, will provide higher service levels to our U.S. operations. Our continued transformation investmentscustomers and integration costs in Europe have also resultedstrengthen Sysco’s ability to profitably increase market share.



Interest Expense Trends
in increased operating expense. Fuel prices are increasing in
Interest expense for fiscal 20182024 is expected to increase by approximately $70 million, as compared to fiscal 2017 which has led2023, primarily due to increased fuel expenses. Partially offsetting these increases washigher debt associated with our acquisition of Edward Don.

Mergers and Acquisitions

We continue to focus on mergers and acquisitions as a decline inpart of our depreciation expense, asgrowth strategy, where we plan to reinforce our former ERP system was fully depreciated by the end of fiscal 2017. We expect to see a benefit of approximately $50 million in reduced depreciation expense, net, throughout fiscal 2018 as compared to fiscal 2017.existing businesses, while cultivating new channels, new segments and new capabilities.


32

In the secondfirst quarter of fiscal 2018, the U.S. government enacted the Tax Act, comprehensive tax legislation, that decreased the federal corporate tax rate from 35%2024, we acquired BIX Produce Company, a leading produce specialty distributor based in Minnesota. This acquisition is expected to 21%. Asprovide a resultstrategic opportunity for specialty produce operations to expand its geographic footprint in an area of the tax reform measures, we revisedcountry where it does not currently have operations. This company’s results are included within U.S. Foodservice Operations and were not material to 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, requiring us to use a blended average rate. The effect of this change in the estimated annual effective tax rate was to decrease our income tax expenseresults for the second quarter and first 26 weeks of fiscal 2018 by $64.7 million. We expect 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.2024.

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 factors such as our stock price and option exercise activity.


In the second quarter of fiscal 2018,2024, we acquired Kerr Pacific Corporation d/b/Edward Don, one of the largest kitchen equipment and supplies distributors, based out of Chicago. Edward Don has a HFMrobust supply chain that is expected to enable cost effective distribution of restaurant equipment and supplies. This acquisition further demonstrates our Recipe for Growth strategy of focusing on building strategic specialty platforms that help us better support restaurant and hospitality customers. This company’s results are included within the U.S. Foodservice (HFM), a Hawaii-based broadline distributor with approximately $290 million in annual sales. HFM has been providing quality serviceOperations segment and were not material to Hawaiiour results for the second quarter and Guamfirst 26 weeks of fiscal 2024.


Strategy

Our purpose is “Connecting the World to Share Food and Care for over 50 years. Acquiring HFM provides Sysco with direct accessOne Another.” Purpose driven companies are believed to perform better. We believe our purpose will assist us to grow substantially faster than the growing Hawaiian marketfoodservice distribution industry and is in clear alignment with our strategy for disciplined,deliver profitable growth of the business. HFMthrough 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, including promoting our specialty programs for produce, protein and Italian products and our customer growth initiatives. Our strategic initiative to enable omni-channel inventory fulfillment is operating in our first test region, and we have made progress in expanding to deliveries six days a week. From these actions as a part of our U.S. Foodservice Operations.

InRecipe for Growth, the second quarterbenefits of fiscal 2018, we acquired the remaining 50% interest in our joint venture in Costa Rica. Sysco initially acquired a 50% interestdeveloping capabilities are apparent in the foodservice company in fiscal 2015.

Strategy

Fiscal 2018 is the final 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,new customers 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 businessare winning 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 chargesprogress we are making toward increasing market share. We expect that, were applicable in fiscal 2018, which primarily were due to restructuring and Brakes-related acquisitions costs. The objectives targeted inas our new three-year plan are subject to change, as we continue to assessRecipe for Growth matures, the impact of the recently enacted U.S. tax reform; however, we anticipateon our three-year plan earnings’ targetstop-line growth will be positively impacted.deliver profitable and consistent growth.


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 Ended26-Week Period Ended
 Dec. 30, 2023Dec. 31, 2022Dec. 30, 2023Dec. 31, 2022
Sales100.0 %100.0 %100.0 %100.0 %
Cost of sales81.8 82.0 81.6 81.9 
Gross profit18.2 18.0 18.4 18.1 
Operating expenses14.6 14.6 14.5 14.5 
Operating income3.6 3.4 3.9 3.6 
Interest expense0.8 0.7 0.8 0.7 
Other expense (income), net— 1.7 — 0.8 
Earnings before income taxes2.8 1.0 3.1 2.1 
Income taxes0.6 0.2 0.7 0.5 
Net earnings2.2 %0.8 %2.4 %1.6 %

33
 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 Ended26-Week Period Ended
Dec. 30, 2023Dec. 30, 2023
Sales3.7 %3.1 %
Cost of sales3.5 2.8 
Gross profit4.9 4.7 
Operating expenses3.9 3.6 
Operating income9.2 9.1 
Interest expense13.4 10.9 
Other expense (income), net (1) (2)
(98.4)(96.6)
Earnings before income taxes205.4 56.2 
Income taxes248.6 73.5 
Net earnings194.0 %51.4 %
Basic earnings per share192.9 %51.7 %
Diluted earnings per share192.9 52.1 
Average shares outstanding(0.6)(0.6)
Diluted shares outstanding(0.8)(0.7)
 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 incomeexpense of $5.4$5.2 million and $330.3 million in the second quarter of fiscal 20182024 and income of $2.3 million in the second quarter of fiscal 2017.
2023, respectively.
(2)
Other expense (income), net was incomeexpense of $9.7$11.9 million and $348.1 million in the first 26 weeks of fiscal 20182024 and income of $9.5 million in the first 26 weeks of fiscal 2017.2023, respectively.




The following representstables represent our results by reportable segments:
 13-Week Period Ended Dec. 30, 2023
 U.S. Foodservice OperationsInternational Foodservice OperationsSYGMAOtherGlobal Support CenterConsolidated
Totals
 (In thousands)
Sales$13,494,443 $3,596,458 $1,913,715 $283,326 $— $19,287,942 
Sales increase (decrease)3.2 %9.6 %(1.0)%(5.9)%3.7 %
Percentage of total70.0 %18.6 %9.9 %1.5 %100.0 %
Operating income (loss)$839,036 $82,930 $16,346 $8,387 $(246,656)$700,043 
Operating income (loss) increase (decrease)7.4 %44.4 %NM(15.0)%15.1 %9.2 %
Percentage of total segments88.6 %8.8 %1.7 %0.9 %100.0 %
Operating income as a percentage of sales6.2 %2.3 %0.9 %3.0 %3.6 %

 13-Week Period Ended Dec. 31, 2022
 U.S. Foodservice OperationsInternational Foodservice OperationsSYGMAOtherGlobal Support CenterConsolidated
Totals
 (In thousands)
Sales$13,077,054 $3,282,411 $1,933,536 $300,952 $— $18,593,953 
Percentage of total70.3 %17.7 %10.4 %1.6 %100.0 %
Operating income (loss)$780,968 $57,413 $6,847 $9,870 $(214,275)$640,823 
Percentage of total segments91.3 %6.7 %0.8 %1.2 %100.0 %
Operating income as a percentage of sales6.0 %1.7 %0.4 %3.3 %3.4 %
34
 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 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, 2023
 U.S. Foodservice OperationsInternational Foodservice OperationsSYGMAOtherGlobal Support CenterConsolidated
Totals
 (In thousands)
Sales$27,218,242 $7,279,668 $3,819,729 $590,757 $— $38,908,396 
Sales increase (decrease)2.0 %10.9 %(1.2)%(2.9)%3.1 %
Percentage of total70.0 %18.7 %9.8 %1.5 %100.0 %
Operating income (loss)$1,780,007 $176,413 $29,113 $20,210 $(502,118)$1,503,625 
Operating income (loss) increase (decrease)5.5 %22.2 %NM(5.6)%3.0 %9.1 %
Percentage of total segments88.7 %8.8 %1.5 %1.0 %100.0 %
Operating income as a percentage of sales6.5 %2.4 %0.8 %3.4 %3.9 %
 26-Week Period Ended Dec. 31, 2022
 U.S. Foodservice OperationsInternational Foodservice OperationsSYGMAOtherGlobal Support CenterConsolidated
Totals
 (In thousands)
Sales$26,679,536 $6,566,146 $3,866,993 $608,108 $— $37,720,783 
Percentage of total70.7 %17.4 %10.3 %1.6 %100.0 %
Operating income (loss)$1,686,679 $144,393 $12,544 $21,408 $(487,400)$1,377,624 
Percentage of total segments90.4 %7.8 %0.7 %1.1 %100.0 %
Operating income as a percentage of sales6.3 %2.2 %0.3 %3.5 %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 "Business15, “Business Segment Information"Information,” in the Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q, in the second quarter and first 26 weeks of fiscal 2018,2024, U.S. Foodservice Operations and International Foodservice Operations, collectively, represented approximately 87.1%88.6% and 88.7% of Sysco’s overall sales. In the second quartersales and first 26 weeks97.4% and 97.5% 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:

35

13-Week Period Ended Dec. 30, 202313-Week Period Ended Dec. 31, 2022Change in Dollars% Change
(Dollars in thousands)
SalesSales$13,494,443 $13,077,054 $417,389 3.2 %
Gross profit
Operating expenses
Operating incomeOperating income$839,036 $780,968 $58,068 7.4 %
Gross profit
Gross profit
Gross profit$2,577,694 $2,493,089 $84,605 3.4 %
Adjusted operating expenses (Non-GAAP)
Adjusted operating income (Non-GAAP)Adjusted operating income (Non-GAAP)$851,126 $790,916 $60,210 7.6 %
13-Week Period Ended Dec. 30, 2017 13-Week Period Ended Dec. 31, 2016 13-Week Period Ended Change in Dollars 13-Week Period % Change26-Week Period Ended Dec. 30, 202326-Week Period Ended Dec. 31, 2022Change in Dollars % Change
(In thousands) (Dollars in thousands)
Sales$9,681,225
 $9,085,565
 $595,660
 6.6%Sales$27,218,242 $$26,679,536 $$538,706 2.0 2.0 %
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%Operating income$1,780,007 $$1,686,679 $$93,328 5.5 5.5 %
       
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%
Gross profit
Gross profit$5,262,469 $5,105,432 $157,037 3.1 %
Adjusted operating expenses (Non-GAAP)
Adjusted operating income (Non-GAAP)Adjusted operating income (Non-GAAP)$1,804,699 $1,706,573 $98,126 5.7 %




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 Period26-Week Period
(Dollars in millions)(Dollars in millions)
Cause of changePercentageDollarsPercentageDollars
Case volume (1)
4.2 %$541.4 2.7 %$728.9 
Deflation(0.7)(94.2)(0.5)(139.3)
Other (2)
(0.3)(29.8)(0.2)(50.9)
Total change in sales3.2 %$417.4 2.0 %$538.7 
 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)Case volumes increased 3.4% and 2.5% compared to the second quarter and first 26 weeks of fiscal 2023, respectively. This volume increase resulted in a 4.2% and 2.7% increase in the dollar value of sales compared to the second quarter and first 26 weeks of fiscal 2023, respectively.
(2)Case volume reflects our broadline and specialty businesses, with the exception of our specialty meats business, which measures its volume in pounds, and Edward Don. Any impact in volumes from these operations are included within “Other.”


(1) 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 for the second quarter of fiscal 2018 were 6.6% higher than the second quarter of fiscal 2017. The largest drivers of the increase were the impact of product cost inflationsales growth in our U.S. Broadline operations and caseFoodservice Operations was fueled by volume growthgrowth. Case volumes from our U.S. Broadline operations, whichFoodservice Operations increased 3.5% in the second 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 restaurants3.4% and multi-locational restaurants. Sales for the first 26 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%2.5% in the second quarter and first 26 weeks of fiscal 2018,2024, respectively, as compared to the second quarter and first 26 weeks of fiscal 2017. These results reflect (1)2023. This included a 2.9% increase in local customer case volume that grew atin the second quarter of fiscal 2024 and a pace greater than our multi-unit business and (2) volume growth1.3% increase in the first 26 weeks of new customers recently added. Our Sysco brand sales to local customers increased by approximately 37 and 60 basis pointsfiscal 2024.

36

Operating Income

The increase in operating income for the second quarter and first 26 weeks of fiscal 2018, respectively.2024, respectively, as compared to the second quarter and first 26 weeks of fiscal 2023, was driven by gross profit dollar growth and case volume growth, partially offset by an increase in operating expenses.

Gross profit dollar growth in the second quarter and first 26 weeks of fiscal 2024, as compared to the second quarter and first 26 weeks of fiscal 2023, was driven primarily by case volume growth, improvements in supply chain productivity and our strategic sourcing efforts. The estimated change in product costs, an internal measure of inflation or deflation, fordecreased in the second quarter and first 26 weeks of fiscal 2018 for our U.S. Broadline operations was inflation of 3.3% and 3.6%, respectively. Inflation in the second quarter of fiscal 2018 occurred primarily in the meat, 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.2024. Gross margin, which is gross profit as a percentage of sales, was 19.8%19.1% and 20.0%19.3% in the second quarter and first 26 weeks of fiscal


2018, 2024, respectively, a declinefor our U.S. Foodservice Operations, which was an increase of 28 and 144 basis points from thecompared to gross margin of 20.1%19.1% in boththe second quarter of fiscal 2023, and an increase of 19 basis points compared to gross margin of 19.1% in the first 26 weeks of fiscal 2023.

The increase in operating expenses for the second quarter and first 26 weeks of fiscal 2017. This decline was largely attributable to the inflationary environment, new customers added at lower margin rates and cost pressures from inbound freight.

Operating expenses for the second quarter of fiscal 2018 increased 5.9%, or $67.4 million,2024, as compared to the second quarter of fiscal 2017. The increases in operating expenses for the period resulted primarily from a $44.0 million increase in pay-related expenses and increased transportation expenses. Operating expenses for the first 26 weeks of 2018 increased 4.5%, or $104.9 million, compared to the first 26 weeks of fiscal 2017.  The increases in operating expenses for the period resulted2023, was primarily from a $61.3 million increase in pay-related expenses anddriven by increased supply chain expenses. Pay-related expenses have primarily increased 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 increasing in fiscal 2018 as compared to fiscal 2017 which has led to increased fuel expenses. These are partially offset by improvements in productivity as a result of re-engineering the delivery process to be more efficient, while also providing higher quality and service levels.volumes.


37

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 Dec. 30, 202313-Week Period Ended Dec. 31, 2022Change in Dollars% Change
 (Dollars in thousands)
Sales$3,596,458 $3,282,411 $314,047 9.6 %
Gross profit708,100 624,460 83,640 13.4 
Operating expenses625,170 567,047 58,123 10.3 
Operating income$82,930 $57,413 $25,517 44.4 %
Gross profit$708,100 $624,460 $83,640 13.4 %
Adjusted operating expenses (Non-GAAP)605,720 545,789 59,931 11.0 
Adjusted operating income (Non-GAAP)$102,380 $78,671 $23,709 30.1 %
Sales on a constant currency basis (Non-GAAP)$3,491,860 $3,282,411 $209,449 6.4 %
Gross profit on a constant currency basis (Non-GAAP)683,974 624,460 59,514 9.5 
Adjusted operating expenses on a constant currency basis (Non-GAAP)583,393 545,789 37,604 6.9 
Adjusted operating income on a constant currency basis (Non-GAAP)$100,581 $78,671 $21,910 27.9 %
 26-Week Period Ended Dec. 30, 202326-Week Period Ended Dec. 31, 2022Change in Dollars % Change
 (Dollars in thousands)
Sales$7,279,668 $6,566,146 $713,522 10.9 %
Gross profit1,440,139 1,273,725 166,414 13.1 
Operating expenses1,263,726 1,129,332 134,394 11.9 
Operating income$176,413 $144,393 $32,020 22.2 %
Gross profit$1,440,139 $1,273,725 $166,414 13.1 %
Adjusted operating expenses (Non-GAAP)1,221,576 1,088,153 133,423 12.3 
Adjusted operating income (Non-GAAP)$218,563 $185,572 $32,991 17.8 %
Sales on a constant currency basis (Non-GAAP)$7,069,567 $6,566,146 $503,421 7.7 %
Gross profit on a constant currency basis (Non-GAAP)1,389,302 1,273,725 115,577 9.1 
Adjusted operating expenses on a constant currency basis (Non-GAAP)1,173,833 1,088,153 85,680 7.9 
Adjusted operating income on a constant currency basis (Non-GAAP)$215,469 $185,572 $29,897 16.1 %

38
 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 Period26-Week Period
(Dollars in millions)(Dollars in millions)
Cause of changePercentageDollarsPercentageDollars
Inflation3.7 %$122.4 5.6 %$370.6 
Foreign currency3.2 104.6 3.2 210.1 
Other (1)
2.7 87.0 2.1 132.8 
Total change in sales9.6 %$314.0 10.9 %$713.5 
 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 second 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 26 weeks of fiscal 2018 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 due2024 were higher, as compared 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 and first 26 weeks of fiscal 2018. An acquisition2023, due to inflation, a positive impact of foreign currency translation, and an improvement in Sweden has contributedvolume primarily attributable to sales growth.our Recipe for Growth initiatives.


Operating Income

The increase in 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 2018,2024, as compared to the second quarter and first 26 weeks of fiscal 2023, was due to the continuing increase in sales volumes, along with specific efforts to optimize our gross profit, including the ability to effectively manage product cost fluctuations, incremental progress from our strategic sourcing efforts and local case volume growth.

The increase in gross profit dollars in the second quarter and first 26 weeks of fiscal 2024, as compared to the second quarter and first 26 weeks of fiscal 2023, was attributable to the increase in sales volume and the management of inflation, along with specific efforts to optimize our gross profit dollars.

The increase in operating expenses for the second quarter and first 26 weeks of fiscal 2024, as compared to the second quarter and first 26 weeks of fiscal 2023, was primarily due to increased volumes, colleague-related costs and the impact of foreign currency translation.

Results of SYGMA and Other Segment

For SYGMA, sales were 1.0% and 1.2% lower in the second quarter and first 26 weeks of fiscal 2024, respectively, as compared to the second quarter and first 26 weeks of fiscal 2017. The decreases were2023, primarily attributable to softer results indriven by the European business due to lower gross margins and increased operating expenses. The U.K. is experiencing increased competition, and we are investing in supply chain transformation 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. The decreases in operatingplanned exit of customers that did not meet our disciplined profit thresholds. Operating income were partially offset by improvements in our Canadian operations, which are 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%$9.5 million and 3.4%$16.6 million in the second quarter and first 26 weeks of fiscal 2018,2024, respectively, as compared to the second quarter and first 26 weeks of fiscal 2017, primarily attributable to local case growth in our Canadian operations. Growth in gross profit dollars was partially offset by a decline in higher margin sales to independent customers in the U.K.2023, due to significant food cost inflation, which has impacted our volume growth and gross margins. A change from a calendar year to Sysco’s fiscal year has also resulteddecreases in a negative impact inoperating expenses driven by the year-over-year comparisons.planned exit of customers.




Operating expenses forFor the second quarter and first 26 weeks of fiscal 2018 increased 11.4% and 7.5%, or $55.8operations that are grouped within Other, operating income decreased $1.5 million and $75.3$1.2 million respectively, compared to the second quarter and first 26 weeks of fiscal 2017.  The increase 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.

Results of SYGMA and Other Segment

For SYGMA, sales were 7.4% and 8.2% higher in the second quarter and first 26 weeks of fiscal 2018,2024, respectively, as compared to the second quarter and first 26 weeks of fiscal 2017, primarily from case growth2023. The operations of this group mainly consist of our hospitality business, Guest Worldwide.

Global Support Center Expenses

Our Global Support Center generally includes all expenses of the corporate office and product cost inflation.  Case growth wasSysco’s shared service operations. These expenses in the second quarter of fiscal 2024 increased $34.4 million, or 15.7%, as compared to the second quarter of fiscal 2023, primarily due to increased volume from existing customers. SYGMA experienced product cost inflation at a rate of 3.0%increases in self-insurance reserves and 3.4% forcolleague-related costs. These expenses in the second quarter and first 26 weeks of fiscal 2018, respectively. Operating income2024 increased $24.4 million, or 5.0%, as compared to the first 26 weeks of fiscal 2023, primarily due to increases in self-insurance reserves, colleague-related costs, and depreciation expense, partially offset by $0.2decreases in fuel hedging program expenses.

39

Included in Global Support Center expenses are Certain Items that totaled $13.3 million and $0.1$28.7 million in the second quarter and first 26 weeks of fiscal 2018,2024, as compared to $10.2 million and $16.3 million in the second quarter and first 26 weeks of fiscal 2023, respectively. Certain Items impacting the second quarter and first 26 weeks of fiscal 2024 were primarily expenses associated with our business technology transformation initiatives and expenses associated with acquisitions. Certain Items impacting the second quarter and the first 26 weeks of fiscal 2023 were primarily expenses associated with our business technology transformation initiatives.

Interest Expense

Interest expense increased $17.6 million and $27.8 million for the second quarter and first 26 weeks of fiscal 2024, respectively, as compared to the second quarter and first 26 weeks of fiscal 2017. We are focused2023. The increase was primarily due to new issuances of senior notes, an increase in commercial paper borrowing activity and increased interest rates on continuing to improve operational performance that will contribute to long-term operatingborrowings.

Other income growth.and expense


For the operations that are grouped within Other operating incomeexpense, net decreased 15.1%, or $0.6$325.1 million and 38.6%, or $4.6$336.2 million infor the second quarter and first 26 weeks of fiscal 2018,2024, respectively, as compared to the second quarter and first 26 weeks of fiscal 2017.  These decreases are largely the result of the performance of our hotel lodging supply company.

Corporate Expenses

Corporate expenses2023, primarily due to a one-time pension settlement charge that was incurred in the second quarter and first 26 weeks of fiscal 2018 decreased $46.8 million, or 16.7%,2023 and $72.6 million, or 13.3%,an increase in interest income earned in the second quarter and first 26 weeks of fiscal 2024.

Net Earnings

Net earnings increased 194.0% and 51.4% in the second quarter and first 26 weeks of fiscal 2024, 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%, as compared to the second quarter and first 26 weeks of fiscal 2017, respectively,2023, primarily due to lower business technology costs, partially attributable to reduced depreciation expense.

Included in corporate expenses are Certain Items that totaled $20.8 million and $41.2 million in the second quarter and first 26 weeks of fiscal 2018, respectively, as compared to $39.1 million and $74.9 million in the second quarter and first 26 weeks of fiscal 2017. Certain Items impacting the second quarter and first 26 weeks of fiscal 2018 were primarily expenses associated with our business technology transformation initiatives, Brakes integration costs, professional fees on three-year financial objectives and severance charges. Certain Items for the second quarter and first 26 weeks of fiscal 2017 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 conjunction with our revised business technology strategy.

Interest Expense

Interest expense increased $13.8 million for the second quarter of fiscal 2018, as compared to the second quarter of fiscal 2017, due to higher relative debt levels 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 relative debt levels in the first 26 weeks of fiscal 2018.

Net Earnings

Net earnings increased 3.3% and 8.8% in the second quarter and first 26 weeks of fiscal 2018, respectively, as compared to the second quarter and first 26 weeks of the prior year due primarily to the items noted above for operating income and other expense, as well as items impacting our income taxes that are discussed in Note 2, “Changes13, “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%10.1% and 16.0%10.0% in the second quarter and first 26 weeks of fiscal 2018,2024, respectively, primarily from gross profit growth and favorable expense comparisons, as well as the one-time second quarter benefit relateddue to the reductionan increase 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 quartersales volume.


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 second quarter of fiscal 20182024 were $0.55,$0.82, a 10.0%192.9% increase from the comparable prior periodyear amount of $0.50$0.28 per share. Diluted earnings per share in the second quarter of fiscal 20182024 were $0.54, an 8.0%$0.82, a 192.9% increase from the comparable prior year period amount of $0.50$0.28 per share. Adjusted diluted earnings per share, excluding Certain Items, in the second quarter of fiscal 20182024 were $0.78, a 34.5%$0.89, an 11.3% 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$0.80 per share.


Basic earnings per share in the first 26 weeks of fiscal 20182024 were $1.24,$1.82, a 13.8%51.7% increase from the comparable prior periodyear amount of $1.09$1.20 per share. Diluted earnings per share in the first 26 weeks of fiscal 20182024 were $1.23,$1.81, a 13.9%52.1% increase from the comparable prior periodyear amount of $1.08$1.19 per share. Adjusted diluted earnings per share, excluding Certain Items, in the first 26 weeks of fiscal 20182024 were $1.52, a 21.6%$1.96, an 11.4% 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$1.76 per share.



40

Non-GAAP Reconciliations


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 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."

The 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 EBITDA and free cash flow, any non-GAAP financial measures will be denoted as adjusted measures to remove (1) restructuring charges; (2) expenses associated with our various transformation initiatives; (3) severance charges; and (4) acquisition-related costs consisting of: (a) intangible amortization expense and (b) acquisition costs and due diligence costs related to our acquisitions. Our results for fiscal 2023 were also impacted by adjustments to a product return allowance pertaining to COVID-related personal protection equipment inventory, a pension settlement charge that resulted from the purchase of a nonparticipating single premium group annuity contract that transferred defined benefit plan obligations to an insurer 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.
The results of our operations can be impacted due to changes in exchange rates applicable in converting local currencies to U.S. dollars. We measure our 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, but not for the impact 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 measures for the relevant period solely those acquisition costs specific to the Brakes acquisition. We believe 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 operating expenses, operating income, net earnings and diluted earnings per share to remove these Certain Items and presenting its results on a constant currency basis provides an important perspective with respect to our underlying business trends and results. It 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 year 2024 and fiscal year 2023.
Set forth on the following page 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 be equal to the total presented when added due to rounding. Adjusted diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.
41

13-Week Period Ended Dec. 30, 202313-Week Period Ended Dec. 31, 2022Change in Dollars%/bps Change
Sales (GAAP)$19,287,942 $18,593,953 $693,989 3.7 %
Impact of currency fluctuations (1)
(104,758)— (104,758)(0.5)
Comparable sales using a constant currency basis (Non-GAAP)$19,183,184 $18,593,953 $589,231 3.2 %
Cost of sales (GAAP)$15,774,309 $15,244,337 $529,972 3.5 %
Gross profit (GAAP)$3,513,633 $3,349,616 $164,017 4.9 %
Impact of currency fluctuations (1)
(24,183)— (24,183)(0.7)
Comparable gross profit adjusted for Certain Items using a constant currency basis (Non-GAAP)$3,489,450 $3,349,616 $139,834 4.2 %
Gross margin (GAAP)18.22 %18.01 %21 bps
Impact of currency fluctuations (1)
(0.03)— -3 bps
Comparable gross margin adjusted for Certain Items using a constant currency basis (Non-GAAP)18.19 %18.01 %18 bps
Operating expenses (GAAP)$2,813,590 $2,708,793 $104,797 3.9 %
Impact of restructuring and transformational project costs (2)
(13,500)(14,388)888 6.2 
Impact of acquisition-related costs (3)
(31,341)(28,960)(2,381)(8.2)
Impact of bad debt reserve adjustments (4)
— 1,923 (1,923)NM
Operating expenses adjusted for Certain Items (Non-GAAP)2,768,749 2,667,368 101,381 3.8 
Impact of currency fluctuations (1)
(23,102)— (23,102)(0.9)
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)$2,745,647 $2,667,368 $78,279 2.9 %
Operating expense as a percentage of sales (GAAP)14.59 %14.57 %2 bps
Impact of certain item adjustments(0.24)(0.22)-2 bps
Adjusted operating expense as a percentage of sales (Non-GAAP)14.35 %14.35 %0 bps
Operating income (GAAP)$700,043 $640,823 $59,220 9.2 %
Impact of restructuring and transformational project costs (2)
13,500 14,388 (888)(6.2)
Impact of acquisition-related costs (3)
31,341 28,960 2,381 8.2 
Impact of bad debt reserve adjustments (4)
— (1,923)1,923 NM
Operating income adjusted for Certain Items (Non-GAAP)744,884 682,248 62,636 9.2 
Impact of currency fluctuations (1)
(1,081)— (1,081)(0.2)
Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP)$743,803 $682,248 $61,555 9.0 %
Operating margin (GAAP)3.63 %3.45 %18 bps
Operating margin adjusted for Certain Items (Non-GAAP)3.86 %3.67 %19 bps
Operating margin adjusted for Certain Items using a constant currency basis (Non-GAAP)3.88 %3.67 %21 bps
Other expense (GAAP)$5,245 $330,305 $(325,060)(98.4)%
Impact of other non-routine gains and losses (5)
— (314,878)314,878 NM
Other expense adjusted for Certain Items (Non-GAAP)$5,245 $15,427 $(10,182)(66.0)%
42

13-Week Period Ended Dec. 30, 202313-Week Period Ended Dec. 31, 2022Change in Dollars%/bps Change
Net earnings (GAAP)$415,242 $141,216 $274,026 NM
Impact of restructuring and transformational project costs (2)
13,500 14,388 (888)(6.2)
Impact of acquisition-related costs (3)
31,341 28,960 2,381 8.2 
Impact of bad debt reserve adjustments (4)
— (1,923)1,923 NM
Impact of other non-routine gains and losses (5)
— 314,878 (314,878)NM
Tax impact of restructuring and transformational project costs (6)
(3,335)(3,618)283 7.8 
Tax impact of acquisition-related costs (6)
(7,744)(7,283)(461)(6.3)
Tax impact of bad debt reserves adjustments (6)
— 484 (484)NM
Tax impact of other non-routine gains and losses (6)
— (79,185)79,185 NM
Net earnings adjusted for Certain Items (Non-GAAP)$449,004 $407,917 $41,087 10.1 %
Diluted earnings per share (GAAP)$0.82 $0.28 $0.54 NM
Impact of restructuring and transformational project costs (2)
0.03 0.03 — — 
Impact of acquisition-related costs (3)
0.06 0.06 — — 
Impact of other non-routine gains and losses (5)
— 0.62 (0.62)NM
Tax impact of restructuring and transformational project costs (6)
(0.01)(0.01)— — 
Tax impact of acquisition-related costs (6)
(0.02)(0.01)(0.01)(100.0)
Tax impact of other non-routine gains and losses (6)
— (0.16)0.16 NM
Diluted earnings per share adjusted for Certain Items (Non-GAAP) (7)
$0.89 $0.80 $0.09 11.3 %
43

(1)Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on the current year results.
(2)Fiscal 2024 includes $2 million related to restructuring and severance charges and $11 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2023 includes $5 million related to restructuring and severance charges and $9 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy.
(3)Fiscal 2024 includes $29 million of intangible amortization expense and $2 million in acquisition and due diligence costs. Fiscal 2023 includes $26 million of intangible amortization expense and $3 million in acquisition and due diligence costs.
(4)Fiscal 2023 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(5)Fiscal 2023 primarily represents a pension settlement charge of $315 million that resulted from the purchase of a nonparticipating single premium group annuity contract that transferred defined benefit plan obligations to an insurer.
(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 equal the total presented when added due to rounding. Total diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.
NMRepresents that the percentage change is not meaningful.
44


26-Week Period Ended Dec. 30, 202326-Week Period Ended Dec. 31, 2022Change in Dollars%/bps Change
Sales (GAAP)$38,908,396 $37,720,783 $1,187,613 3.1 %
Impact of currency fluctuations (1)
(208,824)— (208,824)(0.5)
Comparable sales using a constant currency basis (Non-GAAP)$38,699,572 $37,720,783 $978,789 2.6 %
Cost of sales (GAAP)$31,746,991 $30,882,312 $864,679 2.8 %
Impact of inventory valuation adjustment (2)
— 2,571 (2,571)— 
Cost of sales adjusted for Certain Items (Non-GAAP)$31,746,991 $30,884,883 $862,108 2.8 %
Gross profit (GAAP)$7,161,405 $6,838,471 $322,934 4.7 %
Impact of inventory valuation adjustment (2)
— (2,571)2,571 0.1 
Gross profit adjusted for Certain Items (Non-GAAP)7,161,405 6,835,900 325,505 4.8 
Impact of currency fluctuations (1)
(50,367)— (50,367)(0.8)
Comparable gross profit adjusted for Certain Items using a constant currency basis (Non-GAAP)$7,111,038 $6,835,900 $275,138 4.0 %
Gross margin (GAAP)18.41 %18.13 %28 bps
Impact of inventory valuation adjustment (2)
— (0.01)1 bps
Gross margin adjusted for Certain Items (Non-GAAP)18.41 18.12 29 bps
Impact of currency fluctuations (1)
(0.04)— -4 bps
Comparable gross margin adjusted for Certain Items using a constant currency basis (Non-GAAP)18.37 %18.12 %25 bps
Operating expenses (GAAP)$5,657,780 $5,460,847 $196,933 3.6 %
Impact of restructuring and transformational project costs (3)
(33,175)(26,034)(7,141)(27.4)
Impact of acquisition-related costs (4)
(62,379)(58,415)(3,964)(6.8)
Impact of bad debt reserve adjustments (5)
— 4,515 (4,515)NM
Operating expenses adjusted for Certain Items (Non-GAAP)5,562,226 5,380,913 181,313 3.4 
Impact of currency fluctuations (1)
(48,940)— (48,940)(0.9)
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)$5,513,286 $5,380,913 $132,373 2.5 %
Operating expense as a percentage of sales (GAAP)14.54 %14.48 %6 bps
Impact of certain item adjustments(0.24)(0.21)-3 bps
Adjusted operating expense as a percentage of sales (Non-GAAP)14.30 %14.27 %3 bps
Operating income (GAAP)$1,503,625 $1,377,624 $126,001 9.1 %
Impact of inventory valuation adjustment (2)
— (2,571)2,571 NM
Impact of restructuring and transformational project costs (3)
33,175 26,034 7,141 27.4 
Impact of acquisition-related costs (4)
62,379 58,415 3,964 6.8 
Impact of bad debt reserve adjustments (5)
— (4,515)4,515 NM
Operating income adjusted for Certain Items (Non-GAAP)1,599,179 1,454,987 144,192 9.9 
Impact of currency fluctuations (1)
(1,427)— (1,427)(0.1)
Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP)$1,597,752 $1,454,987 $142,765 9.8 %
45

26-Week Period Ended Dec. 30, 202326-Week Period Ended Dec. 31, 2022Change in Dollars%/bps Change
Other expense (GAAP)$11,885 $348,054 $(336,169)(96.6)%
Impact of other non-routine gains and losses (6)
— (314,878)314,878 NM
Other expense adjusted for Certain Items (Non-GAAP)$11,885 $33,176 $(21,291)(64.2)%
Net earnings (GAAP)$918,634 $606,784 $311,850 51.4 %
Impact of inventory valuation adjustment (2)
— (2,571)2,571 NM
Impact of restructuring and transformational project costs (3)
33,175 26,034 7,141 27.4 
Impact of acquisition-related costs (4)
62,379 58,415 3,964 6.8 
Impact of bad debt reserve adjustments (5)
— (4,515)4,515 NM
Impact of other non-routine gains and losses (6)
— 314,878 (314,878)NM
Tax impact of inventory valuation adjustment (7)
— 646 (646)NM
Tax impact of restructuring and transformational project costs (7)
(8,184)(6,538)(1,646)(25.2)
Tax impact of acquisition-related costs (7)
(15,388)(14,670)(718)(4.9)
Tax impact of bad debt reserves adjustments (7)
— 1,134 (1,134)NM
Tax impact of other non-routine gains and losses (7)
— (79,075)79,075 NM
Net earnings adjusted for Certain Items (Non-GAAP)$990,616 $900,522 $90,094 10.0 %
Diluted earnings per share (GAAP)$1.81 $1.19 $0.62 52.1 %
Impact of inventory valuation adjustment (2)
— (0.01)0.01 NM
Impact of restructuring and transformational project costs (3)
0.07 0.05 0.02 40.0 
Impact of acquisition-related costs (4)
0.12 0.11 0.01 9.1 
Impact of bad debt reserve adjustments (5)
— (0.01)0.01 NM
Impact of other non-routine gains and losses (6)
— 0.62 (0.62)NM
Tax impact of restructuring and transformational project costs (7)
(0.02)(0.01)(0.01)(100.0)
Tax impact of acquisition-related costs (7)
(0.03)(0.03)— — 
Tax impact of other non-routine gains and losses (7)
— (0.15)0.15 NM
Diluted earnings per share adjusted for Certain Items (Non-GAAP) (8)
$1.96 $1.76 $0.20 11.4 %
(1)Represents a constant currency adjustment which eliminates the impact of foreign currency fluctuations on the current year results.
(2)Fiscal 2023 represents an adjustment to a product return allowance related to COVID-related personal protection equipment inventory.
(3)Fiscal 2024 includes $8 million related to restructuring and severance charges and $25 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2023 includes $10 million related to restructuring and severance charges and $16 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy.
(4)Fiscal 2024 includes $57 million of intangible amortization expense and $5 million in acquisition and due diligence costs. Fiscal 2023 includes $52 million of intangible amortization expense and $6 million in acquisition and due diligence costs.
(5)Fiscal 2023 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(6)Fiscal 2023 primarily includes a pension settlement charge of $315 million that resulted from the purchase of a nonparticipating single premium group annuity contract that transferred defined benefit plan obligations to an insurer.
(7)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.
(8)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.
NMRepresents that the percentage change is not meaningful.

46


13-Week Period Ended Dec. 30, 202313-Week Period Ended Dec. 31, 2022Change in Dollars%/bps Change
U.S. FOODSERVICE OPERATIONS
Operating expenses (GAAP)$1,738,658 $1,712,121 $26,537 1.5 %
Impact of restructuring and transformational project costs(65)(92)27 29.3 
Impact of acquisition-related costs (1)
(12,025)(11,514)(511)(4.4)
Impact of bad debt reserve adjustments (2)
— 1,658 (1,658)NM
Operating expenses adjusted for Certain Items (Non-GAAP)$1,726,568 $1,702,173 $24,395 1.4 %
Operating income (GAAP)$839,036 $780,968 $58,068 7.4 %
Impact of restructuring and transformational project costs65 92 (27)(29.3)
Impact of acquisition-related costs (1)
12,025 11,514 511 4.4 
Impact of bad debt reserve adjustments (2)
— (1,658)1,658 NM
Operating income adjusted for Certain Items (Non-GAAP)$851,126 $790,916 $60,210 7.6 %
INTERNATIONAL FOODSERVICE OPERATIONS
Sales (GAAP)$3,596,458 $3,282,411 $314,047 9.6 %
Impact of currency fluctuations (3)
(104,598)— (104,598)(3.2)
Comparable sales using a constant currency basis (Non-GAAP)$3,491,860 $3,282,411 $209,449 6.4 %
Gross profit (GAAP)$708,100 $624,460 $83,640 13.4 %
Impact of currency fluctuations (3)
(24,126)— (24,126)(3.9)
Comparable gross profit using a constant currency basis (Non-GAAP)$683,974 $624,460 $59,514 9.5 %
Gross margin (GAAP)19.69 %19.02 %67 bps
Impact of currency fluctuations (3)
(0.10)— -10 bps
Comparable gross margin using a constant currency basis (Non-GAAP)19.59 %19.02 %57 bps
Operating expenses (GAAP)$625,170 $567,047 $58,123 10.3 %
Impact of restructuring and transformational project costs (4)
(2,603)(5,588)2,985 53.4 
Impact of acquisition-related costs (5)
(16,847)(15,935)(912)(5.7)
Impact of bad debt reserve adjustments (2)
— 265 (265)NM
Operating expenses adjusted for Certain Items (Non-GAAP)605,720 545,789 59,931 11.0 
Impact of currency fluctuations (3)
(22,327)— (22,327)(4.1)
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)$583,393 $545,789 $37,604 6.9 %
Operating income (GAAP)$82,930 $57,413 $25,517 44.4 %
Impact of restructuring and transformational project costs (4)
2,603 5,588 (2,985)(53.4)
Impact of acquisition-related costs (5)
16,847 15,935 912 5.7 
Impact of bad debt reserve adjustments (2)
— (265)265 NM
Operating income adjusted for Certain Items (Non-GAAP)102,380 78,671 23,709 30.1 
Impact of currency fluctuations (3)
(1,799)— (1,799)(2.2)
Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP)$100,581 $78,671 $21,910 27.9 %
SYGMA
Operating expenses (GAAP)$132,161 $143,614 $(11,453)(8.0)%
Operating income (GAAP)16,346 6,847 9,499 NM
OTHER
Operating expenses (GAAP)$64,620 $67,441 $(2,821)(4.2)%
Operating income (GAAP)8,387 9,870 (1,483)(15.0)
47

13-Week Period Ended Dec. 30, 202313-Week Period Ended Dec. 31, 2022Change in Dollars%/bps Change
GLOBAL SUPPORT CENTER
Gross profit (GAAP)$6,325 $4,295 $2,030 47.3 %
Operating expenses (GAAP)$252,981 $218,570 $34,411 15.7 %
Impact of restructuring and transformational project costs (6)
(10,832)(8,708)(2,124)(24.4)
Impact of acquisition-related costs (7)
(2,469)(1,511)(958)(63.4)
Operating expenses adjusted for Certain Items (Non-GAAP)$239,680 $208,351 $31,329 15.0 %
Operating loss (GAAP)$(246,656)$(214,275)$(32,381)(15.1)%
Impact of restructuring and transformational project costs (6)
10,832 8,708 2,124 24.4 
Impact of acquisition-related costs (7)
2,469 1,511 958 63.4 
Operating loss adjusted for Certain Items (Non-GAAP)$(233,355)$(204,056)$(29,299)(14.4)%
(1)Fiscal 2024 and fiscal 2023 include intangible amortization expense and acquisition costs.
(2)Fiscal 2023 represents 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 costs primarily in Europe.
(5)Represents intangible amortization expense.
(6)Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy.
(7)Represents due diligence costs.
NMRepresents that the percentage change is not meaningful.

48


26-Week Period Ended Dec. 30, 202326-Week Period Ended Dec. 31, 2022Change in Dollars%/bps Change
U.S. FOODSERVICE OPERATIONS
Operating expenses (GAAP)$3,482,462 $3,418,753 $63,709 1.9 %
Impact of restructuring and transformational project costs(120)(44)(76)NM
Impact of acquisition-related costs (1)
(24,572)(24,100)(472)(2.0)
Impact of bad debt reserve adjustments (2)
— 4,250 (4,250)NM
Operating expenses adjusted for Certain Items (Non-GAAP)$3,457,770 $3,398,859 $58,911 1.7 %
Operating income (GAAP)$1,780,007 $1,686,679 $93,328 5.5 %
Impact of restructuring and transformational project costs120 44 76 NM
Impact of acquisition-related costs (1)
24,572 24,100 472 2.0 
Impact of bad debt reserve adjustments (2)
— (4,250)4,250 NM
Operating income adjusted for Certain Items (Non-GAAP)$1,804,699 $1,706,573 $98,126 5.7 %
INTERNATIONAL FOODSERVICE OPERATIONS
Sales (GAAP)$7,279,668 $6,566,146 $713,522 10.9 %
Impact of currency fluctuations (3)
(210,101)— (210,101)(3.2)
Comparable sales using a constant currency basis (Non-GAAP)$7,069,567 $6,566,146 $503,421 7.7 %
Gross profit (GAAP)$1,440,139 $1,273,725 $166,414 13.1 %
Impact of currency fluctuations (3)
(50,837)— (50,837)(4.0)
Comparable gross profit using a constant currency basis (Non-GAAP)$1,389,302 $1,273,725 $115,577 9.1 %
Gross margin (GAAP)19.78 %19.40 %38 bps
Impact of currency fluctuations (3)
(0.13)— -13 bps
Comparable gross margin using a constant currency basis (Non-GAAP)19.65 %19.40 %25 bps
Operating expenses (GAAP)$1,263,726 $1,129,332 $134,394 11.9 %
Impact of restructuring and transformational project costs (4)
(8,406)(9,495)1,089 11.5 
Impact of acquisition-related costs (5)
(33,744)(31,949)(1,795)(5.6)
Impact of bad debt reserve adjustments (2)
— 265 (265)NM
Operating expenses adjusted for Certain Items (Non-GAAP)1,221,576 1,088,153 133,423 12.3 
Impact of currency fluctuations (3)
(47,743)— (47,743)(4.4)
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)$1,173,833 $1,088,153 $85,680 7.9 %
Operating income (GAAP)$176,413 $144,393 $32,020 22.2 %
Impact of restructuring and transformational project costs (4)
8,406 9,495 (1,089)(11.5)
Impact of acquisition-related costs (5)
33,744 31,949 1,795 5.6 
Impact of bad debt reserve adjustments (2)
— (265)265 NM
Operating income adjusted for Certain Items (Non-GAAP)218,563 185,572 32,991 17.8 
Impact of currency fluctuations (3)
(3,094)— (3,094)(1.7)
Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP)$215,469 $185,572 $29,897 16.1 %
49

26-Week Period Ended Dec. 30, 202326-Week Period Ended Dec. 31, 2022Change in Dollars%/bps Change
SYGMA
Sales (GAAP)$3,819,729 $3,866,993 $(47,264)(1.2)%
Gross profit (GAAP)301,317 304,354 (3,037)(1.0)
Gross margin (GAAP)7.89 %7.87 %2 bps
Operating expenses (GAAP)$272,204 $291,810 $(19,606)(6.7)%
Operating income (GAAP)29,113 12,544 16,569 NM
OTHER
Operating expenses (GAAP)$130,772 $136,741 $(5,969)(4.4)%
Operating income (GAAP)20,210 21,408 (1,198)(5.6)
GLOBAL SUPPORT CENTER
Gross profit (loss) (GAAP)$6,498 $(3,189)$9,687 NM
Impact of inventory valuation adjustment (6)
— (2,571)2,571 NM
Comparable gross profit (loss) adjusted for Certain Items (Non-GAAP)$6,498 $(5,760)$12,258 NM
Operating expenses (GAAP)$508,616 $484,211 $24,405 5.0 %
Impact of restructuring and transformational project costs (7)
(24,649)(16,495)(8,154)(49.4)
Impact of acquisition-related costs (8)
(4,063)(2,365)(1,698)(71.8)
Operating expenses adjusted for Certain Items (Non-GAAP)$479,904 $465,351 $14,553 3.1 %
Operating loss (GAAP)$(502,118)$(487,400)$(14,718)(3.0)%
Impact of inventory valuation adjustment (6)
— (2,571)2,571 NM
Impact of restructuring and transformational project costs (7)
24,649 16,495 8,154 49.4 
Impact of acquisition-related costs (8)
4,063 2,365 1,698 71.8 
Operating loss adjusted for Certain Items (Non-GAAP)$(473,406)$(471,111)$(2,295)(0.5)%
(1)Fiscal 2024 and fiscal 2023 include intangible amortization expense and acquisition costs.
(2)Fiscal 2023 represents 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 severance costs, primarily in Europe.
(5)Represents intangible amortization expense.
(6)Fiscal 2023 represents an adjustment to a product return allowance related to COVID-related personal protection equipment inventory.
(7)Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy.
(8)Represents due diligence costs.
NMRepresents that the percentage change is not meaningful.

EBITDA and Adjusted EBITDA

EBITDA 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 underlying 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.

Set forth below is a reconciliation of sales, operating expenses, operating income, 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 to the total presented due to rounding.  Adjusted diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.


 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.



Form of calculation:
Net earnings (GAAP)
Impact of Certain Items on net earnings
Adjusted net earnings (Non-GAAP)
Invested Capital (GAAP)
Adjustments to invested capital
Adjusted Invested capital (GAAP)
Return on investment capital (GAAP)
Return on investment capital (Non-GAAP)

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.

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, we had $961.1 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 to free cash flow of between $55 million and $60 million due to accelerated tax deductibility of the initial premium paid 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 cash 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 meet our anticipated cash requirements 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 26 weeks of fiscal 2018, compared to cash flows of $639.4 million 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 flowEBITDA should not be used as a substitute for the most comparable GAAP measure in assessing the company’s liquiditySysco’s overall financial performance 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 2023 Form 10-K for discussions regarding this non-GAAP performance metric. Set forth below is a reconciliation of actual net earnings to EBITDA and to adjusted EBITDA results for the periods presented (dollars in thousands):
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13-Week Period Ended Dec. 30, 202313-Week Period Ended Dec. 31, 2022Change in Dollars% Change
Net earnings (GAAP)$415,242 $141,216 $274,026 NM
Interest (GAAP)149,680 132,042 17,638 13.4 
Income taxes (GAAP)129,876 37,260 92,616 NM
Depreciation and amortization (GAAP)219,458 190,025 29,433 15.5 
EBITDA (Non-GAAP)$914,256 $500,543 $413,713 82.7 %
Certain Item adjustments:
Impact of restructuring and transformational project costs (1)
10,910 14,793 (3,883)(26.2)
Impact of acquisition-related costs (2)
2,332 3,049 (717)(23.5)
Impact of bad debt reserve adjustments (3)
— (1,923)1,923 NM
Impact of other non-routine gains and losses (4)
— 314,878 (314,878)NM
EBITDA adjusted for Certain Items (Non-GAAP) (5)
$927,498 $831,340 $96,158 11.6 %
Other expense (income), net, as adjusted (Non-GAAP) (6)
5,245 15,427 (10,182)(66.0)
Depreciation and amortization, as adjusted (Non-GAAP) (7)
(187,859)(164,519)(23,340)(14.2)
Operating income adjusted for Certain Items (Non-GAAP)$744,884 $682,248 $62,636 9.2 %
(1)Fiscal 2024 and fiscal 2023 include charges related to restructuring and severance, as well as various transformation initiative costs, primarily consisting of changes to our business technology strategy, excluding charges related to accelerated depreciation.
(2)Fiscal 2024 and fiscal 2023 include acquisition and due diligence costs.
(3)Fiscal 2023 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(4)Fiscal 2023 primarily represents a pension settlement charge of $315 million that resulted from the purchase of a nonparticipating single premium group annuity contract that transferred defined benefit plan obligations to an insurer.
(5)In arriving at adjusted EBITDA, Sysco does not adjust out interest income of $9 million and $5 million or non-cash stock compensation expense of $29 million and $24 million in fiscal 2024 and fiscal 2023, respectively.
(6)Fiscal 2024 represents $5 million in GAAP other expense (income), net. Fiscal 2023 represents $330 million in GAAP other expense (income), net less $315 million due to the certain items impact of a pension settlement charge that resulted from the purchase of a nonparticipating single premium group annuity contract that transferred defined benefit plan obligations to an insurer.
(7)Fiscal 2024 includes $219 million in GAAP depreciation and amortization expense, less $32 million of Non-GAAP depreciation and amortization expense primarily related to acquisitions. Fiscal 2023 includes $190 million in GAAP depreciation and amortization expense, less $26 million of Non-GAAP depreciation and amortization expense primarily related to acquisitions.
NMRepresents that the percentage change is not meaningful.

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26-Week Period Ended Dec. 30, 202326-Week Period Ended Dec. 31, 2022Change in Dollars% Change
Net earnings (GAAP)$918,634 $606,784 $311,850 51.4 %
Interest (GAAP)284,014 256,192 27,822 10.9 
Income taxes (GAAP)289,092 166,594 122,498 73.5 
Depreciation and amortization (GAAP)425,465 378,949 46,516 12.3 
EBITDA (Non-GAAP)$1,917,205 $1,408,519 $508,686 36.1 %
Certain Item adjustments:
Impact of inventory valuation adjustment (1)
$— $(2,571)$2,571 NM
Impact of restructuring and transformational project costs (2)
29,743 25,302 4,441 17.6 
Impact of acquisition-related costs (3)
4,961 6,595 (1,634)(24.8)
Impact of bad debt reserve adjustments (4)
— (4,515)4,515 NM
Impact of other non-routine gains and losses (5)
— 314,878 (314,878)NM
EBITDA adjusted for Certain Items (Non-GAAP) (6)
$1,951,909 $1,748,208 $203,701 11.7 %
Other expense (income), net, as adjusted (Non-GAAP) (7)
11,885 33,176 (21,291)(64.2)
Depreciation and amortization, as adjusted (Non-GAAP) (8)
(364,615)(326,397)(38,218)(11.7)
Operating income adjusted for Certain Items (Non-GAAP)$1,599,179 $1,454,987 $144,192 9.9 %
(1)Fiscal 2023 represents an adjustment to a product return allowance related to COVID-related personal protection equipment inventory.
(2)Fiscal 2024 and 2023 include charges related to restructuring and severance, as well as various transformation initiative costs, primarily consisting of changes to our business technology strategy and exclude charges related to accelerated depreciation.
(3)Fiscal 2024 and 2023 include acquisition and due diligence costs.
(4)Fiscal 2023 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(5)Fiscal 2023 primarily represents a pension settlement charge of $315 million that resulted from the purchase of a nonparticipating single premium group annuity contract that transferred defined benefit plan obligations to an insurer.
(6)In arriving at adjusted EBITDA, Sysco does not exclude interest income of $20 million and $8 million or non-cash stock compensation expense of $53 million and $52 million for fiscal 2024 and fiscal 2023, respectively.
(7)Fiscal 2024 represents $12 million in GAAP other expense (income), net. Fiscal 2023 represents $348 million in GAAP other expense (income), net less $315 million due to the certain items impact of a pension settlement charge that resulted from the purchase of a nonparticipating single premium group annuity contract that transferred defined benefit plan obligations to an insurer.
(8)Fiscal 2024 includes $425 million in GAAP depreciation and amortization expense, less $61 million of Non-GAAP depreciation and amortization expense primarily related to acquisitions. Fiscal 2023 includes $379 million in GAAP depreciation and amortization expense, less $53 million of Non-GAAP depreciation and amortization expense primarily related to acquisitions.
NMRepresents that the percentage change is not meaningful.

Liquidity and Capital Resources

Highlights

We produced positive free cash flow, impacted by higher capital expenditures, timing and historical seasonality, and investments toward our Recipe for Growth strategy. 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 26 weeks of fiscal 2024 to the first 26 weeks of fiscal 2023 are provided.

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 26-Week Period Ended Dec. 30, 2017 26-Week Period Ended Dec. 31, 2016
 (In thousands)
Net cash provided by operating activities (GAAP)$933,204
 $639,401
Additions to plant and equipment(258,577) (285,692)
Proceeds from sales of plant and equipment3,878
 11,639
Free Cash Flow (Non-GAAP)$678,505
 $365,348


 26-Week Period Ended Dec. 30, 202326-Week Period Ended Dec. 31, 2022
Source of cash (use of cash)(In thousands)
Net cash provided by operating activities (GAAP)$855,897 $503,466 
Additions to plant and equipment(346,797)(309,664)
Proceeds from sales of plant and equipment18,347 25,493 
Free Cash Flow (Non-GAAP) (1)
$527,447 $219,295 
Acquisition of businesses, net of cash acquired$(1,174,608)$(37,699)
Debt borrowings (repayments), net1,444,755 237,754 
Stock repurchases(199,947)(267,727)
Dividends paid(505,588)(498,323)
Seasonal trends also impact
(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 2023 Form 10-K for discussions regarding this non-GAAP performance metric.

We are increasing our freeshare repurchase expectations from the prior guidance of $750.0 million to $1.25 billion for fiscal 2024. Including both share repurchases and dividends, Sysco is expected to return $2.25 billion to its shareholders in fiscal 2024.

Sources and Uses of Cash

Sysco generates cash flow, as we use more cash earlier in the fiscal yearU.S. and then see larger, sequential quarterly increases throughout the remainderinternationally. As of the year. December 30, 2023, we had $962.2 million in cash and cash equivalents, approximately 57% of which was held by our international subsidiaries. Sysco’s strategic objectives are funded primarily by cash from operations and external borrowings. Traditionally, our operations have produced significant cash flow. Due to our strong financial position, we believe we will continue to be able to effectively access capital markets, as needed. Cash is generally allocated to working capital requirements, investments compatible with our overall growth strategy (organic and inorganic), debt management, and shareholder return. The remaining cash balances are invested in high-quality, short-term instruments.

We believe our free cash flow for fiscal 2018from operations, the availability of liquidity under our commercial paper programs and 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 results achievednext 12 months, while maintaining sufficient liquidity for normal operating purposes.

Cash Flows

Operating Activities

We generated $855.9 million in cash flows from operations in the first 26 weeks of fiscal 20172024, compared to cash flows from operations of $503.5 million in the first 26 weeks of fiscal 2023. In the first 26 weeks of fiscal 2024, these amounts included year-over-year favorable comparisons on working capital of $172.1 million due to a favorable comparison on inventory and therefore, anticipate thataccounts receivable, partially offset by an unfavorable comparison on accounts payable. Accrued expenses also had a favorable comparison, primarily from accrued payroll in the first 26 weeks of fiscal 2024 in comparison to the first 26 weeks of fiscal 2023. Income taxes negatively impacted cash flows from operations, as estimated payments made in the first 26 weeks of fiscal 2024 increased compared to the first 26 weeks of fiscal 2023.

Investing Activities

Our capital expenditures in the first 26 weeks of fiscal 2024 consisted primarily of investments in buildings and building improvements, technology equipment, warehouse equipment, and fleet. Our capital expenditures in the first 26 weeks of fiscal 2024 were $37.1 million higher than in the first 26 weeks of fiscal 2023, as we will experience freemade investments to advance our Recipe for Growth strategy.
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During the first 26 weeks of fiscal 2024, we paid $1.2 billion, net of cash flow growth overacquired, for acquisitions compared to $37.7 million in acquisitions made in the remainderfirst 26 weeks of fiscal 2023. These payments increased in the first 26 weeks of fiscal year.2024 compared to the first 26 weeks of fiscal 2023 primarily due to the acquisition of Edward Don.




Financing Activities


Equity Transactions


Proceeds from exercises of share-based compensation awards were $172.3$57.3 million in the first 26 weeks of fiscal 2018,2024, as compared to $113.9$47.3 million in the first 26 weeks of fiscal 2017.2023. 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 inIn May 2021, our Board of Directors approved a share repurchase programs.  The numberprogram to authorize the repurchase of up to $5.0 billion of the company’s common stock, which will remain available until fully utilized. We repurchased 2,862,667 shares acquired and their costfor $199.9 million during the first 26 weeks of fiscal 2018 were 14.2 million shares for $750.5 million, with 22.7 million shares repurchased2024, and intend to repurchase $1.25 billion in the first 26 weeksfiscal 2024. As of fiscal 2017 for $1.2December 30, 2023, we had a remaining authorization of approximately $3.8 billion. We repurchased 0.7 million6,026,110 additional shares for $41.7$500.0 million under our authorization through January 19, 2018. 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. All share repurchases in the first 26 weeks of fiscal 2018 were made under these authorizations. 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 2018.12, 2024.


Dividends paid in the first 26 weeks of fiscal 20182024 were $346.9$505.6 million, or $0.66$1.00 per share, as compared to $343.4$498.3 million, or $0.62$0.98 per share, in the first 26 weeks of fiscal 2017.2023. In November 2017,2023, we declared our regular quarterly dividend for the second quarter of fiscal 20182024 of $0.36$0.50 per share, which was paid in January 2018.2024.


Debt Activity and Borrowing Availability


Our debt activity, including issuances and repayments, if any, and our borrowing availability isare 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 atas of December 30, 2017, and repayment activity since the close of the second quarter of fiscal 2018,2023 are disclosed within that note.  Updated amounts through

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, 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 or a combination thereof.

Contractual Obligations

Our 2017 Form 10-K contains a table that summarizes our obligations and commitments to make specified contractual future cash payments as of July 1, 2017. Since July 1, 2017, the only 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 beginningdebentures in the first quarter of fiscal 2019 due toU.S. and borrowings under the provisions enacted as part of the Tax Act.company’s $3.0 billion long-term revolving credit facility have also been guaranteed by these subsidiaries. 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 updating2023, Sysco had a total of $10.5 billion in senior notes, debentures and borrowings under the contractual obligationslong-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 our long-term revolving credit facility. See Item 7, “Management’s Discussion and commitments to make contractual future payments disclosedAnalysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” contained in our 2017fiscal 2023 Form 10-K:10-K for 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 combined basis with intercompany balances and transactions between entities in the obligor group eliminated. Investments in and equity in the earnings of our non-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 transactions with non-guarantor subsidiaries have been presented in separate line items, if they are material to the obligor financials.The following tables include summarized financial information of the obligor group for the 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 SheetDec. 30, 2023Jul. 1, 2023
(In thousands)
ASSETS
Receivables due from non-obligor subsidiaries$190,948 $321,476 
Current assets5,761,746 5,149,509 
Total current assets$5,952,694 $5,470,985 
Notes receivable from non-obligor subsidiaries$94,103 $108,380 
Other noncurrent assets4,442,629 4,254,145 
Total noncurrent assets$4,536,732 $4,362,525 
LIABILITIES
Payables due to non-obligor subsidiaries$200,696 $71,175 
Other current liabilities2,019,075 2,305,435 
Total current liabilities$2,219,771 $2,376,610 
Notes payable to non-obligor subsidiaries$239,035 $240,874 
Long-term debt11,452,539 9,793,541 
Other noncurrent liabilities1,187,496 1,121,884 
Total noncurrent liabilities$12,879,070 $11,156,299 



Combined Parent and Guarantor Subsidiaries Summarized Results of Operations26-Week Period Ended Dec. 30, 2023
(In thousands)
Sales$24,197,326 
Gross profit4,380,114 
Operating income1,235,310 
Interest expense from non-obligor subsidiaries11,781 
Net earnings699,757 


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, income taxes, company-sponsored pension plans and share-based compensation,inventory valuation, which are described in Item 7 of our 2017fiscal 2023 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 expectations and beliefs regarding our fair value estimates;of an improving market over the course of fiscal 2024;
our expectations with respect to achieving our three-year financial targets through fiscal 2018 and our new three-year financial objectives through fiscal 2020;
the impact of general economic conditions on our business and our industry in the Unites States and abroad;
•our expectations regarding inflationthe ability of our supply chain and other economic trendsfacilities to remain in place and operational;
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•our plans regarding our transformation initiatives and the United Statesexpected effects from such initiatives, including the Sysco Driver Academy;
•statements regarding uncollectible accounts, including that if collections continue to improve, additional reductions in bad debt expense could occur;
•our expectations that our Recipe for Growth strategy will allow us to better serve our customers and abroad;differentiate Sysco from our competition;
changes in future depreciation expense;
•our expectations regarding our effective taxfiscal 2024 sales and our rate of sales growth in fiscal 2024 and the positive impactthree years of the Tax Act generally and on our three-year financial plan earnings targets;long-range plan;
•our expectations regarding multi-unit customer growth;the impact of inflation on sales, gross margin rates and gross profit dollars;
•our expectations regarding future performancegross margins in fiscal 2024;
•our plans regarding cost savings, including our target for cost savings through fiscal 2024 and the impact of costs savings on the company;
•our belief that our purpose will allow us to grow substantially faster than the foodservice distribution industry and deliver profitable growth including operating performancethrough our Recipe for Growth transformation, and operating income growth;statements regarding our plans with respect to our strategic pillars that support this growth transformation;
•our expectations regarding operating expense;the use and investment of remaining cash generated from operations;
•the implications of the COVID-19 pandemic and any expectations we may have with respect thereto, including our ability to withstand and recover from the crisis;
•the expected long-term rate of return on plan assets of the U.S. Retirement Plan;
•the sufficiency of our available liquidity to sustain our operations for multiple years;
•estimates regarding the outcome of legal proceedings;
•the impact of seasonal trends on our free cash flow;
•estimates regarding our capital expenditures and the sources of financing for our capital expenditures;
•our expectations regarding the impact of potential acquisitions and sales of assets on our liquidity, borrowing capacity, leverage ratios and capital availability;
•our expectations regarding real sales growth in the U.S. foodservice market and trends in produce markets;
•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 the impact of future Certain Items on our projected future non-GAAP and GAAP results;
•our expectations regarding our capital allocation priorities;effective tax rate in fiscal 2024;
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;
•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;
•future compliance with the covenants under our revolving credit facility;
•our ability to effectively access the commercial paper market and long-term capital markets; and
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;thereof.
our expectations regarding 2018 fuel prices; and
56

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 Form 10-Q and those discussed in Item 1A of our 2017fiscal 2023 Form 10-K and 10-K:

•the updated 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 multi-unit customers, our gross margins may decline;
•periods of significant or prolonged inflation or deflation and their impact on our product costs and profitability;profitability generally;
•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;
•the risk that our efforts to modify truck routing, including our small truck initiative, in order to reduce outbound transportation costs may be unsuccessful;
•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. economyAmericas and local marketsEurope and the impact on our results of operations and financial condition;
•the risks related to our efforts to implement our transformation initiatives and meet our other 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 GPOs 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 impact and effects of public health crises, pandemics and epidemics, such as the outbreak of COVID-19, and the adverse impact thereof on our business, financial condition and 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 complimentary 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;
57

•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 U.K.’s anticipated exit fromeffects on our operations;
•the risk that future labor disruptions or disputes could disrupt the integration of Brakes France and Davigel into Sysco France and our operations in France and the European Union commonly referred to as Brexit, may adversely impact our operations in the U.K., including those of the Brakes Group;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;
•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 impactof negative impacts to our business and our relationships with customers;customers from a cybersecurity incident and/or other technology disruptions;
•the risk that changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect interest expense related to outstanding debt;
•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.stockholders; and

•the risk that the exclusive forum provisions in our amended and restated bylaws could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.



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 2023 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 2023 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, except as noted below.2023.


Interest Rate Risk

58
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 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, fuel costs related to outbound deliveries represented approximately 0.5% and 0.4% of sales, respectively.

We use diesel fuel swap contracts to fix the price of a portion of our projected monthly diesel fuel requirements.  As of December 30, 2017, we had diesel fuel swaps with a total notional amount of approximately 24 million gallons through June 2018.  These swaps will lock in the price of approximately 55% to 60% of our projected fuel purchase needs for fiscal 2018. Additional swaps have been entered into for hedging activity in fiscal 2019. As of December 30, 2017, we had diesel fuel swaps with a total notional amount of approximately 20 million gallons specific to fiscal 2019. Our remaining fuel purchase needs will occur at market rates unless contracted for a fixed price or hedged at a later date.

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, 2017.2023. 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, 2017,2023, 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, 2017,2023, that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

59


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 with theFor a discussion of our risk factors, discussedsee the section entitled “Risk Factors” in Item 1A of our 2023 Annual Report on Form 10-K for the fiscal year ended July 1, 2017, in addition to the updated risk noted below.10-K.


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

As a multinational corporation, 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 countries in the EU where 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, due to, among other things, changes in interpretations 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. We are also subject to non-income based taxes, such as payroll, sales, use, value-added, net worth, property and goods 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 determination of tax audits or tax disputes will not be different from what is reflected in our historical income tax provisions and accruals.

Given the breadth and complexity of the Tax Act, as well as the unpredictability of possible further changes to the U.S. or foreign tax laws and regulations and their potential interdependency, it is very difficult to predict the cumulative effect of such tax laws and regulations on our results of operations and cash flow, but such laws and regulations (and changes thereto) could materially adversely impact our financial results.

Item 2.  Unregistered Sales of Equity Securities and Use ofProceeds


Recent Sales of Unregistered Securities


None


Issuer Purchases of Equity Securities


We made the following share repurchases during the first 26 weekssecond quarter of fiscal 2018:2024:



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    
October 1 - October 28569,405 $64.48 569,405 — 
Month #2
October 29 - November 25574,847 67.62 574,847 — 
Month #3
November 26 - December 30338,707 72.61 338,707 — 
Totals1,482,959 $67.56 1,482,959 — 

(1)The total number of shares purchased includes 0, 1,637 and 1,602 shares tendered by individuals in connection with stock option exercises in Month #1, Month #2 and Month #3, respectively.
(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 program.

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, 11,556 and 0 shares tendered by individuals in connection with stock option exercises in Month #1, Month #2 and Month #3, respectively.

We routinely engage in share repurchase programs. 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 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.”which will remain available until fully utilized.


We repurchased 14.22,862,667 shares for $199.9 million shares during the first 26 weeksfiscal 2024. As of fiscal 2018, resulting inDecember 30, 2023, we had a remaining authorization under this program of approximately $1.7$3.8 billion. We purchased 22.7 million shares in the first 26 weeks of fiscal 2017. We purchased approximately 680,0006,026,110 additional shares under these authorizationsour authorization 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 2018.12, 2024.


Item 3.  Defaults Upon Senior Securities


None

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Item 4.  Mine Safety Disclosures


Not applicable


Item 5.  Other Information


NoneInsider Trading Arrangements and Policies


The table below shows the plans or other arrangements (each, a (Plan)) adopted or terminated during the quarter ended December 30, 2023 providing for the purchase and/or sale of Sysco securities by Sysco’s directors and Section 16 officers:
NameTitleActionDateTrading ArrangementNumber of Securities Covered
Expiration Date (3)
Rule 10b5-1 (1)
Non-Rule 10b5-1 (2)
Kevin HouricanPresident and Chief Executive OfficerAdoptDecember 13, 2023X75,019 shares to be soldDecember 31, 2024
Neil RussellSenior Vice President,
Corporate Affairs and Chief Administrative Officer		AdoptDecember 7, 2023X5,129 shares to be soldDecember 31, 2024
Chris JasperSenior Vice President and President, U.S. Broadline and Foodservice OperationsAdoptDecember 13, 2023X4,000 shares to be soldDecember 31, 2024
(1)Intended to satisfy the affirmative defense conditions of SEC Rule 10b5-1(c).
(2)Non-Rule Rule 10b5-1 trading arrangement as defined in Item 408 of Regulation S-K.
(3)Each Plan terminates on the earlier of: (i) the expiration date listed in the table above; (ii) the first date on which all trades set forth in the Plan have been executed; or (iii) such date the Plan is otherwise terminated according to its terms.

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.


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.


61

EXHIBIT INDEX
3.1—
Sysco Corporation
(Registrant)
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
3.1—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 26, 2016,June 21, 2023, incorporated by reference to Exhibit 3.23.1 to the Form 10-K filed on June 23, 2023 (File No. 1-6544).
4.1—
Forty-Fourth Supplemental Indenture, dated as of November 17, 2023, among Sysco Corporation, the guarantors named therein and U.S. Bank National Association, as Trustee, to the 5.750% Senior Notes due 2029 (including the Form of 5.750% Senior Note), incorporated by reference to Exhibit 4.1 to the Form 8-K filed on August 31, 2016November 17, 2023 (File No. 1-6544).
10.1#†—
Amendment 2018-1 to the Sysco Corporation Management Savings Plan.
10.2#†4.2—
Amendment 2017-1Forty-Fifth Supplemental Indenture, dated as of November 17, 2023, among Sysco Corporation, the guarantors named therein and U.S. Bank National Association, as Trustee, relating to the Sysco Corporation 2007 Long-Term Incentive Plan.6.000% Senior Notes due 2034 (including the Form of 6.000% Senior Note), incorporated by reference to Exhibit 4.2 to the Form 8-K filed on November 17, 2023 (File No. 1-6544).
10.3#†10.1†#—
Sysco Corporation Non-Employee Directors Stock Election Policy.
10.4#†—
Form of Restricted Stock Award Agreement for Directors (2023) pursuant to the 2013 Long-TermSysco Corporation 2018 Omnibus Incentive Plan.
10.5#†10.2†#—
Form of Restricted Stock Award Agreement for Directors (2023) pursuant to the 2013 Long-TermSysco Corporation 2018 Omnibus Incentive Plan for(for directors who electelected to defer receipt of shares under the 2009 Board of Directors Stock Deferral Plan.Plan).
12.1#10.3†#—
Statement regarding ComputationDescription of Ratio of Earnings to Fixed Charges.Compensation Arrangements with Non-Employee Directors.
22.1—Subsidiary Guarantors and Issuers of Guaranteed Securities, incorporated by reference to Exhibit 22.1 to the Form 10-K for the year ended July 1, 2023 filed on August 25, 2023 (File No. 1-6544).
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#101.SCH#—
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 inInline 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.
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

62

104—Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
___________
† Executive Compensation Arrangement pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K
# Filed herewith

63
57SIGNATURES

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: January 30, 2024By:/s/ KEVIN P. HOURICAN
Kevin P. Hourican
President and Chief Executive Officer
Date: January 30, 2024By:/s/ KENNY K. CHEUNG
Kenny K. Cheung
Executive Vice President and
Chief Financial Officer
Date: January 30, 2024By:/s/ JENNIFER L. JOHNSON
Jennifer L. Johnson
Senior Vice President and
Chief Accounting Officer