⁽¹⁾Restricted cash as of March 31, 2018 primarily 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. In addition, the restricted cash balance includes cash related to acquisitions that is held in escrow until certain obligations are met. Restricted cash is primarily located within other assets in the consolidated balance sheet as of March 31, 2018, with a lesser amount reported in other current assets.


⁽¹⁾	Restricted cash as of December 29, 2018 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 the consolidated balance sheet as of December 29, 2018.

2. CHANGES IN ACCOUNTING

~~Income Tax Accounting Implications of the Tax Cuts 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 Cuts 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, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging~~, which expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation 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 retrospectively adopted the standard in the second quarter of fiscal 2018, which was one year earlier than required. The adoption increases the ending cash balance within our statement of cash flows by the aggregate amount of our restricted cash balances and requires a new disclosure to reconcile the cash balances within our statement of cash flows to the balance sheets. See Supplemental Cash Flow Information within Note 1, “Basis of Presentation.” There were no material restricted cash balances in prior periods, and, therefore, there is no material impact to amounts reported for prior periods due to the retrospective adoption of this ASU.

~~Stock Compensation~~

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting (Topic 718)~~. The ASU identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The company elected to maintain the current policy to estimate forfeitures expected to occur to determine stock-based compensation expense. Further, the company adopted the provisions that have changed its accounting for excess tax benefits, or detriments. Excess tax benefits, or detriments, were previously included within additional paid-in capital in the consolidated balance sheet and were a part of the diluted share calculation. With the adoption of ASU 2016-09 on a prospective basis, excess tax benefits, or detriments, are included within income tax expense in the consolidated results of operations and are no longer a part of the diluted share calculation. In the third quarter and the first 39 weeks of fiscal 2018, the company recognized excess tax benefits of $14.9 million and $45.7 million from stock option exercises and restricted stock unit vestings 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 $20.7 million and $23.7 million to tax authorities in connection with shares withheld to meet statutory income tax withholding requirements are presented as a financing activity in the consolidated statement of cash flows for fiscal 2018 and fiscal 2017, respectively.

~~Simplifying the Test for Goodwill Impairment~~

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

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

~~3. NEW ACCOUNTING STANDARDS~~

~~Reporting Comprehensive Income~~

~~In February 2018, the FASB issued ASU 2018-02,~~ ~~Income Statement - Reporting Comprehensive Income (Topic 220),~~ to allow a reclassification from accumulated comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act. The amendments in this update eliminate the stranded tax effects resulting from the Tax Act; however, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, which is fiscal 2020 for Sysco, with early adoption permitted. The company is currently reviewing the provisions of the new standard.

Revenue from Contracts with Customers

In May 2014, the ~~FASB~~Financial Accounting Standards Board (FASB) issued ASU No. 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~~superseded existing revenue recognition standards and ~~eliminate~~eliminated all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The ~~core~~revenue recognition principle in ASU 2014-09 is that ~~a company~~an entity should recognize revenue to depict the transfer of ~~promised~~ goods or services to customers in an amount that reflects the consideration ~~for~~to which the entity expects to be entitled in exchange for those goods or services. Sysco adopted the new standard effective July 1, 2018 using the modified retrospective approach. The guidance is effective for interim and annual periods within new fiscal years beginning after December 15, 2017, which is fiscal 2019 for Sysco. The standard may be applied either retrospectively to each period presentedadoption of ASU 2014-09 did not have a material impact on Sysco’s consolidated balance sheet or ~~as a cumulative-effect adjustment~~consolidated results of operations as of the adoption date ~~of adoption.~~or for the period ended December 29, 2018.

Guidance in Presentation of Cash Flows - Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB issued Accounting Standards Update (ASU) 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to address eight specific cash flow issues with the objective of reducing the existing diversity in practice. The eight specific issues are: (1) Debt Prepayment or Debt Extinguishment Costs; (2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the ~~end~~Borrowing; (3) Contingent Consideration Payments Made after a Businesses Combination; (4) Proceeds from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned Life Insurance Policies; (6) Distributions Received from Equity Method Invitees; (7) Beneficial Interests in Securitization Transactions; and (8) Separately Identifiable Cash and Application of the ~~third quarter~~Predominance Principle. The company adopted this ASU retrospectively, effective July 1, 2018. The adoption of fiscal 2018, the company was nearing the completion of its assessment of the accounting required under Topic 606 and is completing its documentation of these conclusions. Based on the work completed to date, Sysco doesASU 2016-15 did not ~~expect that the implementation of the new standard will~~ have a material effect on the company’s ~~financial statements.~~consolidated cash flow statement as of the adoption date or for the period ended December 29, 2018.

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, requiring that an employer report the service cost component of pension and postretirement benefits in the same line item or items as other compensation costs. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside of a subtotal of income from operations. In addition, only the service cost component will be eligible for capitalization as applicable. The company ~~will continue its assessment and will adopt the standard~~adopted this ASU effective July 1, 2018, resulting in net cost of $8.9 million in the ~~first~~second quarter of fiscal 2019 and ~~expects to use~~net cost of $17.8 million for the ~~modified retrospective method. Enhanced disclosures, including revenue recognition policies to identify performance obligations to customers~~first 26 weeks of fiscal 2019 being reported in other expense (income), net that would have previously been included in operating expense. The ASU was applied retrospectively, resulting in net benefit of $3.7 million in the second quarter of fiscal 2019 and ~~significant judgments~~net benefit of $7.5 million for the first 26 weeks of fiscal 2018 being reported in ~~measurement and recognition, are required.~~other expense (income), net.

3. NEW ACCOUNTING STANDARDS

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~~.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 amended guidance requires the ~~asset~~recognition of lease assets and ~~liability~~lease liabilities on the balance sheet for those leases ~~with a term of twelve months or less. Lessors’ accounting is largely unchanged from the previous accounting standard.~~currently classified as operating leases. In addition, Topic 842 expands the disclosure requirements of lease arrangements. ~~Topic 842 currently requires lessees and lessors to use a modified retrospective transition approach, which includes a number of practical expedients.~~ This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, which is fiscal 2020 for Sysco, with early adoption permitted.

To assess the impact of the standard, the company has formed a cross-functional steering committee to review the amended guidance and subsequent clarifications in order to understand the potential impact the new standard could have on the company’s consolidated financial statements and disclosures, business processes, and internal controls. The company is in the process of gathering lease data, reviewing its lease portfolio, and completing an impact assessment with respect to the adoption of the provisions of the new standard. To facilitate this ongoing process, the company is currently implementing a third-party lease accounting software. The company will finalize its assessment in fiscal 2019 and adopt this standard on June 30, 2019, the first day of fiscal 2020.

Implementation Costs Incurred in a Cloud Computing Arrangement

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which aligns the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The guidance amends Accounting Standards Codification (ASC) 350 to include in its scope implementation costs of a cloud computing arrangement that is a service contract and clarifies that a customer should apply ASC 350 to determine which implementation costs should be capitalized in such a cloud computing arrangement. This guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019, which is the first quarter of fiscal 2021 for Sysco, with early adoption permitted. The company is currently reviewing the provisions of the new standard.

4. REVENUE

Adoption of ASC Topic 606, “Revenues from Contracts with Customers”

On July 1, 2018, Sysco adopted ASC Topic 606 with no significant impact to its financial position or results of operations, using the modified retrospective method. There were no contracts which were not completed as of July 1, 2018. Results for reporting periods beginning after July 1, 2018 are presented under Topic 606, while prior period amounts have not been restated and continue to be reported in accordance with our historic accounting under Topic 605. Sysco had no adjustment to opening retained earnings as of July 1, 2018 as a result of adopting ASC Topic 606. There was no material impact on revenues for the quarter and 26 weeks ended December 29, 2018 as a result of applying ASC Topic 606.

Revenue Recognition

The company recognizes revenues when the performance obligation is satisfied, which is the point at which control of the promised goods or services are transferred to its customers, in an amount that reflects the consideration Sysco expects to be entitled to receive in exchange for those goods or services. For the majority of Sysco’s customer arrangements, control transfers to customers at a point-in-time when goods have been delivered, as that is generally when legal title, physical possession and risks and rewards of goods/services transfers to the customer. The timing of satisfaction of the performance obligation is not subject to significant judgment. While certain additional services may be identified within a contract, we have concluded that those services are individually immaterial in the context of the contract with the customer, and therefore, not assessed as performance obligations.

Sales tax collected from customers is not included in revenue, but rather recorded as a liability due to the respective taxing authorities. Shipping and handling costs include costs associated with the selection of products and delivery to customers and are included within operating expenses.

Product Sales Revenues

Sysco generates revenue primarily from the distribution and sale of food and related products to its customers. Substantially all revenue is recognized at the point in time in which the product is delivered to the customer. The company grants certain customers sales incentives, such as rebates or discounts, which are accounted for as variable consideration. The variable consideration is based on amounts known at the time the performance obligation is satisfied and, therefore, requires minimal judgment.

Contract Balances

After completion of Sysco’s performance obligations, the company has an unconditional right to consideration as outlined in its contracts with customers. Sysco’s customer receivables will generally be collected in less than 30 days in accordance with the underlying payment terms. Customer receivables, which are included in Accounts and notes receivable, less allowances in the consolidated balance sheet, were $3.9 billion and $3.8 billion as of December 29, 2018 and June 30, 2018, 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 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 29, 2018, Sysco’s contract assets were immaterial. Sysco has no material commissions paid that are directly attributable to obtaining a particular contract.

Disaggregation of Sales

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. 29, 2018
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Fresh and frozen meats	$	2,084,648	$	409,086	$	374,069	$	—	$	2,867,803
Canned and dry products	1,799,535		611,609		66,719		—		2,477,863
Frozen fruits, vegetables, bakery and other	1,417,063		354,178		315,129		—		2,086,370
Dairy products	1,041,436		306,364		148,103		—		1,495,903
Poultry	1,001,579		209,542		208,674		—		1,419,795
Fresh produce	927,997		322,020		57,048		—		1,307,065
Paper and disposables	681,890		87,376		181,896		14,175		965,337
Seafood	581,655		196,413		23,451		—		801,519
Beverage products	271,182		161,317		136,244		20,422		589,165
Other ⁽¹⁾	280,120		232,693		25,274		216,800		754,887
Total Sales	$	10,087,105	$	2,890,598	$	1,536,607	$	251,397	$	14,765,707


⁽¹⁾	Other sales relate to non-food products, including textiles and amenities for our hotel supply business, equipment and subscription sales for our Sysco Labs business, and other janitorial products, medical supplies and smallwares.



	13-Week Period Ended Dec. 30, 2017
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Fresh and frozen meats	$	1,975,717	$	411,726	$	375,602	$	—	$	2,763,045
Canned and dry products	1,742,913		579,881		89,274		—		2,412,068
Frozen fruits, vegetables, bakery and other	1,316,229		645,354		289,133		—		2,250,716
Dairy products	1,019,134		308,362		162,372		—		1,489,868
Poultry	997,225		212,552		277,820		—		1,487,597
Fresh produce	902,943		256,746		63,947		—		1,223,636
Paper and disposables	637,520		98,258		183,205		13,445		932,428
Seafood	555,996		182,393		21,109		—		759,498
Beverage products	266,102		48,819		140,190		19,441		474,552
Other ⁽¹⁾	267,446		124,952		30,493		195,191		618,082
Total Sales	$	9,681,225	$	2,869,043	$	1,633,145	$	228,077	$	14,411,490


⁽¹⁾	Other sales relate to non-food products, including textiles and amenities for our hotel supply business, equipment and subscription sales for our Sysco Labs business, and other janitorial products, medical supplies and smallwares.



	26-Week Period Ended Dec. 29, 2018
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Fresh and frozen meats	$	4,206,167	$	829,542	$	746,401	$	—	$	5,782,110
Canned and dry products	3,651,702		1,223,079		144,341		—		5,019,122
Frozen fruits, vegetables, bakery and other	2,840,449		982,735		606,995		—		4,430,179
Dairy products	2,127,840		624,711		302,909		—		3,055,460
Poultry	2,028,515		425,124		480,735		—		2,934,374
Fresh produce	1,865,577		579,564		121,897		—		2,567,038
Paper and disposables	1,392,649		191,915		370,512		30,584		1,985,660
Seafood	1,243,342		384,850		48,835		—		1,677,027
Beverage products	561,752		213,388		283,538		43,601		1,102,279
Other ⁽¹⁾	568,523		356,640		51,901		450,673		1,427,737
Total Sales	$	20,486,516	$	5,811,548	$	3,158,064	$	524,858	$	29,980,986


⁽¹⁾	Other sales relate to non-food products, including textiles and amenities for our hotel supply business, equipment and subscription sales for our Sysco Labs business, and other janitorial products, medical supplies and smallwares.



	26-Week Period Ended Dec. 30, 2017
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Fresh and frozen meats	$	4,006,857	$	846,365	$	761,851	$	—	$	5,615,073
Canned and dry products	3,481,591		1,173,234		166,759		—		4,821,584
Frozen fruits, vegetables, bakery and other	2,582,958		1,271,422		561,725		—		4,416,105
Poultry	2,043,911		420,017		574,719		—		3,038,647
Dairy products	2,036,796		624,016		329,059		—		2,989,871
Fresh produce	1,826,735		522,329		129,493		—		2,478,557
Paper and disposables	1,293,829		202,368		365,034		28,835		1,890,066
Seafood	1,176,317		365,664		44,884		—		1,586,865
Beverage products	541,232		99,878		285,264		42,452		968,826
Other ⁽¹⁾	539,941		247,005		55,028		414,346		1,256,320
Total Sales	$	19,530,167	$	5,772,298	$	3,273,816	$	485,633	$	29,061,914


⁽¹⁾	Other sales relate to non-food products, including textiles and amenities for our hotel supply business, equipment and subscription sales for our Sysco Labs business, and other janitorial products, medical supplies and smallwares.

4.5. ACQUISITIONS

~~During~~There were no new acquisitions in the first 3926 weeks of fiscal ~~2018, the company paid cash of $203.6 million for acquisitions. These acquisitions did not have a material effect on the company’s operating results, cash flows or financial position.~~2019. 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 ~~March 31,~~December 29, 2018, aggregate contingent consideration outstanding was ~~$13.1~~$14.1 million, of which ~~$9.7~~$9.4 million was recorded as earnout liabilities. Earnout liabilities are all measured using unobservable inputs that are considered a Level 3 measurement.

~~Brakes Group~~

On July 5, 2016, Sysco consummated its acquisition of Cucina Lux Investments Limited (a private company limited by shares organized under the laws of England 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, 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.

The Brakes Group is a large European foodservice business supplying fresh, refrigerated and frozen food products, as well as non-food products and supplies, to foodservice customers ranging from large customers, including leisure, pub, restaurant, hotel and contract catering groups, to smaller customers, including independent restaurants, hotels, fast food outlets, schools 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 Harvest and Woodward Foodservice. The Brakes Group’s largest businesses are in the United Kingdom (U.K.), France, and Sweden, in addition to a presence in Ireland, Belgium, Spain and Luxembourg.

5.6. 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 cash deposits, time deposits, certificates of deposit, commercial paper, high-quality money market funds 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:

Cash deposits included in cash equivalents are valued at amortized cost, which approximates fair value. These are included within cash equivalents as a Level 1 measurement in the tables below.

Time deposits and commercial paper included in cash equivalents are valued at amortized cost, which approximates fair value. These are included within cash equivalents as a Level 2 measurement in the tables below.

Money market funds are valued at the closing price reported by the fund sponsor from an actively traded exchange. These are included within cash equivalents as Level 1 measurements in the tables below.

The interest rate swap agreements are valued using a swap valuation model that utilizes an income approach using observable market inputs including interest rates, LIBOR swap rates and credit default swap rates.

The foreign currency swap agreements, including cross-currency swaps, are valued using a swap valuation model that utilizes an income approach applying observable market inputs including interest rates, LIBOR swap rates for U.S. dollars, Canadian dollars, pound sterling and ~~Euro~~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.

The fair value of the company’s derivative instruments are all measured using inputs that are considered a Level 2 measurement, as they are not actively traded and are valued using pricing models that use observable market quotations. The location and the fair value of derivative assets and liabilities designated as hedges in the consolidated balance sheet are disclosed in Note 6,7, “Derivative Financial Instruments.”

The following tables present the company’s assets measured at fair value on a recurring basis as of ~~March 31,~~December 29, 2018, ~~July 1, 2017~~June 30, 2018 and ~~April 1,~~December 30, 2017:


	Assets Measured at Fair Value as of Mar. 31, 2018									Assets and Liabilities Measured at Fair Value as of Dec. 29, 2018
	Level 1		Level 2		Level 3			Total		Level 1		Level 2		Level 3		Total
	(In thousands)									(In thousands)
Assets:
Cash equivalents							��
Cash and cash equivalents	$	384,528	$	49,190	$	—		$	433,718	$	298,461	$	200	$	—	$	298,661
Prepaid expenses and other current assets ⁽¹⁾	43,364		—		—			43,364
Other assets ⁽¹⁾	102,211		—		—			102,211		152,178		—		—		152,178
Total assets at fair value	$	530,103	$	49,190	$	—		$	579,293	$	450,639	$	200	$	—	$	450,839

Results of SYGMA and Other Segment

For SYGMA, sales were ~~4.6%~~5.9% and ~~7.0% higher~~3.5% lower in the ~~third~~second quarter and first 3926 weeks of fiscal ~~2018,~~2019, respectively, as compared to the ~~third~~second quarter and first 39 weeks of fiscal 2017, primarily from case growth and product cost inflation. Case growth was primarily due to increased volume from existing customers. SYGMA experienced product cost inflation at a rate of 1.7% and 2.8% for the third quarter and first 3926 weeks of fiscal 2018, ~~respectively.~~primarily from a modest decline in case volume from some larger customers, along with the exit of certain customers during the quarter, as we continue to take a disciplined approach toward increased profitability. Operating income decreased by ~~$2.9~~$0.2 million and $2.7 million in the ~~third~~second quarter and first 3926 weeks of fiscal ~~2018,~~2019, respectively, as compared to the ~~third~~second quarter and first 3926 weeks of fiscal ~~2017,~~2018, due to increased expenses, including ~~inbound freight issues and increased~~ transportation costs ~~due~~in supply chain driven by costs related to labor, driver ~~challenges~~staffing and ~~outsourced delivery costs~~accelerated fleet purchases. We continue to ~~meet~~optimize our business in the ~~high service level expectations of~~segment and remain focused on improving our ~~customers.~~operational performance.

For the operations that are grouped within Other, operating income decreased ~~2.2%~~7.5%, or ~~$0.1 million, and 26.3%, or $4.7~~$0.5 million, in the ~~third~~second quarter ~~and first 39 weeks~~ of fiscal ~~2018, respectively,~~2019, as compared to the ~~third~~second quarter of fiscal 2018. Operating income increased 22.4%, $2.9 million, in the first 26 weeks of fiscal 2019, as compared to the first 26 weeks of fiscal 2018. Guest Supply gross profit grew 5.2% and 6.7% respectively, in the second quarter and first 3926 weeks of fiscal ~~2017.~~ 2019; however, the business continued to experience cost challenges, due to the impact of tariffs, product availability and increased cost of shipping products to our customers.

Corporate Expenses

Corporate expenses in the ~~third~~second quarter of fiscal 2019 increased $33.5 million, or 13.9%, as compared to the second quarter of fiscal 2018, due primarily to an increase in expenses related to our business technology initiatives, including depreciation on certain enterprise resource planning (ERP) systems and software platforms, along with higher pay-related expenses. Corporate expenses in the first 3926 weeks of fiscal 2019 increased $47.7 million, or 9.7%, as compared to the first 26 weeks of fiscal 2018, ~~decreased $56.0 million, or 19.7%, and $128.6 million, or 15.5%, respectively, as compared to the third quarter and first 39 weeks of fiscal 2017,~~ due primarily to the favorable comparison of depreciation expense. During the third quarter and first 39 weeks of fiscal 2017, we incurred $45.9 million and $138.2 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 expenses related to our business technology ~~costs in the first 39 weeks of fiscal 2018.~~initiatives, including depreciation on certain ERP systems and software platforms that we are no longer using, along with higher pay-related expenses, partly driven by higher severance and relocation charges. Corporate expenses, on an adjusted basis, ~~decreased $38.4~~increased $0.7 million, or ~~15.7%~~0.3%, and ~~$77.2~~$0.4 million, or ~~10.8%~~0.1%, as compared to the ~~third~~second quarter and first 3926 weeks of fiscal 2017, respectively, primarily due to lower business technology costs, partially attributable to reduced depreciation expense. Reduced expenses from management incentives are also contributing to the decrease in corporate expenses specific to third quarter of fiscal 2018, ~~as compared to the third quarter of fiscal 2017.~~respectively.

Included in corporate expenses are Certain Items that totaled ~~$22.9~~$53.5 million and ~~$64.1~~$88.4 million in the ~~third~~second quarter and first 3926 weeks of fiscal ~~2018,~~2019, respectively, as compared to ~~$40.5~~$20.8 million and ~~$115.4~~$41.2 million in the ~~third~~second quarter and first 3926 weeks of fiscal ~~2017.~~2018. Certain Items impacting the ~~third~~second quarter of fiscal 2019 were primarily expenses associated with our business transformation initiatives. Certain Items impacting the first 26 weeks of fiscal 2019 were primarily expenses associated with our business transformation initiatives along with severance charges. Certain Items in the second quarter and first 3926 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 third quarter and first 39 weeks of fiscal 2017 primarily included $27.7 million and $83.6 million, respectively, of accelerated depreciation on our previously existing ERP system, in addition to Brakes integration costs, costs incurred to convert to legacy systems in conjunction with our revised business technology strategy, and expenses related to professional fees on three-year financial objectives.

Interest Expense

Interest expense increased ~~$55.1~~$1.1 million and ~~$76.2~~$9.3 million for the ~~third~~second quarter and first 26 weeks of fiscal 2019, as compared to the second quarter and first 3926 weeks of fiscal 2018, respectively, ~~as compared to the third quarter and first 39 weeks of fiscal 2017,~~ primarily due to ~~the partial redemption~~higher floating interest rates and a higher average balance of the senior notes and debentures due 2027, 2028, 2035 and 2039 pursuant to a tender offer in the third quarter of fiscal 2018. Interest charges related to the redemption costs noted above are considered Certain Items. Our interest expense, excluding Certain Items, increased $2.0 million and $23.1 million for the third quarter and the first 39 weeks of fiscal 2018, respectively, as compared to the third quarter and the first 39 weeks of fiscal 2017, due to higher borrowing levels from senior notes that were issued in fiscal 2017 primarily to pay off a portion of our outstanding commercial paper borrowings.fixed rate debt.

Net Earnings

Net earnings decreased 5.9% and increased ~~38.5% and 17.3%~~7.2% in the ~~third~~second quarter and first 3926 weeks of fiscal ~~2018,~~2019, respectively, as compared to the ~~third~~second quarter and first 3926 weeks of the prior year, due primarily to the items noted above for operating income and interest expense, as well as items impacting our income taxes that are discussed in Note ~~2, “Changes in Accounting,” and Note 11,~~12, “Income Taxes.” These included lower tax rates enacted from the Tax Cuts and Job Act (Tax Act), the favorable impact of excess tax benefits of equity-based compensation, partially offset by the unfavorable impact attributable to certain provisions of the Tax Act. In the second quarter of fiscal 2018, lower U.S. tax rates from the Tax Act were not yet fully applicable; however, we recorded a retroactive benefit back

to the beginning of fiscal 2018. While U.S. tax rates are lower in fiscal 2019 as compared to fiscal 2018, the retroactive benefit resulted in a larger benefit in the second quarter of fiscal 2018 as compared to the second quarter of fiscal 2019.

Adjusted net earnings, excluding Certain Items, decreased 4.5% in the second quarter of fiscal 2019, primarily due to an unfavorable tax expense comparison to the prior year. Adjusted net earnings, excluding Certain Items, increased ~~28.9% and 19.7%~~8.2% in the ~~third quarter and~~ first 3926 weeks of fiscal ~~2018, respectively,~~2019, primarily from gross profit growth and favorable expense ~~comparisons,~~growth, as well as tax benefits.

Earnings Per Share

Basic earnings per share in the ~~third~~second quarter of fiscal ~~2018~~2019 were ~~$0.63,~~$0.52, a ~~43.2% increase~~5.5% decrease from the comparable prior year period amount of ~~$0.44~~$0.55 per share. Diluted earnings per share in the ~~third~~second quarter of fiscal ~~2018~~2019 were ~~$0.63,~~$0.51, a ~~43.2% increase~~5.6% decrease from the comparable prior year period amount of ~~$0.44~~$0.54 per share. Adjusted diluted earnings per share, excluding Certain Items, in the ~~third~~

second quarter of fiscal ~~2018~~2019 were ~~$0.67,~~$0.75, a ~~31.4% increase~~4.0% decrease from the comparable prior year period amount of ~~$0.51~~$0.78 per share. These results were primarily attributable to the factors discussed above related to net earnings in the ~~third~~second quarter of fiscal 2019, including the retroactive benefit we recorded in the second quarter of fiscal 2018, ~~including~~which resulted in a ~~three cent per share~~larger benefit ~~from excess tax benefits~~as compared to the second quarter of ~~equity-based compensation.~~fiscal 2019.

Basic earnings per share in the first 3926 weeks of fiscal ~~2018~~2019 were ~~$1.88, a 22.9%~~$1.34, an 8.1% increase from the comparable prior year period amount of ~~$1.53~~$1.24 per share. Diluted earnings per share in the first 3926 weeks of fiscal ~~2018~~2019 were ~~$1.85, a 21.7%~~$1.33, an 8.1% increase from the comparable prior year period amount of ~~$1.52~~$1.23 per share. Adjusted diluted earnings per share, excluding Certain Items, in the first 3926 weeks of fiscal ~~2018~~2019 were ~~$2.19,~~$1.66, a ~~24.4%~~9.0% increase from the comparable prior year period amount of ~~$1.76~~$1.52 per share. These results were primarily attributable to the factors discussed above related to net earnings in the first 3926 weeks of fiscal 2019, including the retroactive benefit we recorded in the first 26 weeks of fiscal 2018, ~~including~~which resulted in a ~~nine cent per share~~larger benefit ~~from excess tax benefits~~as compared to the first 26 weeks 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.~~2019.

Non-GAAP Reconciliations

Sysco’s results of operations for fiscal ~~2018~~2019 and ~~2017~~2018 are impacted by restructuring and transformational project 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;various transformation initiatives; (2) ~~professional fees related to our three-year strategic plan; (3) restructuring expenses within our Brakes Group operations;~~severance and ~~(4) severance charges related to restructuring. In addition, fiscal 2018 results of operations are impacted by business technology transformation initiative costs,~~ facility closure ~~charges, MEPP withdrawal charges~~charges; and ~~debt extinguishment~~(3) restructuring charges. Our results of operations for fiscal ~~2018~~2019 and ~~2017~~2018 are also impacted by the following acquisition-related items: (1) intangible amortization expense and (2) integration costs. All acquisition-related costs in fiscal ~~2018~~2019 and ~~2017~~2018 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~~Brakes Acquisition.

The fiscal 2019 and fiscal 2018 ~~are also impacted by reform~~items described above and excluded from our non-GAAP 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; (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; and (3) a benefit from contributions made to fund the Pension Plan. These fiscal 2018 and fiscal 2017 items are collectively referred to as “Certain Items.”

Management believes that adjusting its operating expenses, operating income, ~~interest expense,~~ net earnings and diluted earnings per share to remove these Certain Items, 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 iswas 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.~~Acquisition. We believe this approach significantly enhances the comparability of Sysco’s results for fiscal ~~2018~~2019 and fiscal ~~2017.~~2018.

Set forth below is a reconciliation of sales, operating expenses, operating income, interest expense, net earnings and diluted earnings per share to adjusted results for these measures for the periods presented. Individual components of diluted earnings per share may not add 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 Mar. 31, 2018 13-Week Period Ended Apr. 1, 2017 Change in Dollars % Change
(In thousands, except for share and per share data)
Operating expenses (GAAP) $ 2,189,695
$ 2,098,173
$ 91,522
4.4 %
Impact of MEPP charge (1,700 ) —
(1,700 ) NM
Impact of restructuring costs ⁽¹⁾
(22,781 ) (40,064 ) 17,283
(43.1 )
Impact of acquisition-related costs ⁽²⁾
(25,361 ) (24,273 ) (1,088 ) 4.5
Operating expenses adjusted for certain items (Non-GAAP) $ 2,139,853
$ 2,033,836
$ 106,017
5.2 %

Operating income (GAAP) $ 485,933
$ 435,962
$ 49,971
11.5 %
Impact of MEPP charge 1,700
—
1,700
NM
Impact of restructuring costs ⁽¹⁾
22,781
40,064
(17,283 ) (43.1 )
Impact of acquisition-related costs ⁽²⁾
25,361
24,273
1,088
4.5
Operating income adjusted for certain items (Non-GAAP) $ 535,775
$ 500,299
$ 35,476
7.1 %

Interest expense (GAAP) $ 136,145
$ 81,004
$ 55,141
68.1 %
Impact of loss on extinguishment of debt (53,104 ) —
(53,104 ) NM
Interest expense adjusted for certain items (Non-GAAP) $ 83,041
$ 81,004
$ 2,037
2.5 %

Net earnings (GAAP) $ 330,085
$ 238,278
$ 91,807
38.5 %
Impact of MEPP charge 1,700
—
1,700
NM
Impact of restructuring costs ⁽¹⁾
22,781
40,064
(17,283 ) (43.1 )
Impact of acquisition-related costs ⁽²⁾
25,361
24,273
1,088
4.5
Impact of loss on extinguishment of debt 53,104
—
53,104
NM
Tax impact of MEPP charge (585 ) —
(585 ) NM
Tax impact of restructuring costs ⁽³⁾
(7,571 ) (17,524 ) 9,953
(56.8 )
Tax impact of acquisition-related costs ⁽³⁾
(6,633 ) (9,229 ) 2,596
(28.1 )
Tax impact of loss on extinguishment of debt (18,225 ) —
(18,225 ) NM
Tax impact of retirement plan contribution (44,424 ) —
(44,424 ) NM
Net earnings adjusted for certain items (Non-GAAP) $ 355,593
$ 275,862
$ 79,731
28.9 %

Diluted earnings per share (GAAP) $ 0.63
$ 0.44
$ 0.19
43.2 %
Impact of restructuring costs ⁽¹⁾
0.04
0.07
(0.03 ) (42.9 )
Impact of acquisition-related costs ⁽²⁾
0.05
0.04
0.01
25.0
Impact of loss on extinguishment of debt 0.10
—
0.10
NM
Tax impact of restructuring costs ⁽³⁾
(0.01 ) (0.03 ) 0.02
(66.7 )
Tax impact of acquisition-related costs ⁽³⁾
(0.01 ) (0.02 ) 0.01
(50.0 )
Tax impact of loss on extinguishment of debt (0.03 ) —
(0.03 ) NM
Tax impact of retirement plan contribution (0.08 ) —
(0.08 ) NM
Diluted EPS adjusted for certain items (Non-GAAP) ⁽⁴⁾
$ 0.67
$ 0.51
$ 0.16
31.4 %



	13-Week Period Ended Dec. 29, 2018			13-Week Period Ended Dec. 30, 2017			Change in Dollars			% Change
	(In thousands, except for share and per share data)
Operating expenses (GAAP)	$	2,319,817		$	2,170,834		$	148,983		6.9	%
Impact of restructuring and transformational project costs ⁽¹⁾	(134,436		)	(21,377		)	(113,059		)	NM
Impact of acquisition-related costs ⁽²⁾	(17,008		)	(25,799		)	8,791			(34.1	)
Operating expenses adjusted for Certain Items (Non-GAAP)	$	2,168,373		$	2,123,658		$	44,715		2.1	%

Operating income (GAAP)	$	451,895		$	528,552		$	(76,657	)	(14.5	)%
Impact of restructuring and transformational project costs ⁽¹⁾	134,436			21,377			113,059			NM
Impact of acquisition-related costs ⁽²⁾	17,008			25,799			(8,791		)	(34.1	)
Operating income adjusted for Certain Items (Non-GAAP)	$	603,339		$	575,728		$	27,611		4.8	%

Net earnings (GAAP)	$	267,380		$	284,113		$	(16,733	)	(5.9	)%
Impact of restructuring and transformational project costs ⁽¹⁾	134,436			21,377			113,059			NM
Impact of acquisition-related costs ⁽²⁾	17,008			25,799			(8,791		)	(34.1	)
Tax impact of restructuring and transformational project costs ⁽³⁾	(34,886		)	(5,691		)	(29,195		)	NM
Tax impact of acquisition-related costs ⁽³⁾	(5,611		)	(6,110		)	499			(8.2	)
Impact of U.S. transition tax	15,154			115,000			(99,846		)	(86.8	)
Impact of U.S. 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)	$	393,481		$	411,874		$	(18,393	)	(4.5	)%

Diluted earnings per share (GAAP)	$	0.51		$	0.54		$	(0.03	)	(5.6	)%
Impact of restructuring and transformational project costs ⁽¹⁾	0.26			0.04			0.22			NM
Impact of acquisition-related costs ⁽²⁾	0.03			0.05			(0.02		)	(40.0	)
Tax impact of restructuring and transformational project costs ⁽³⁾	(0.07		)	(0.01		)	(0.06		)	NM
Tax impact of acquisition-related costs ⁽³⁾	(0.01		)	(0.01		)	—			—
Impact of U.S. transition tax	0.03			0.22			(0.19		)	(86.4	)
Impact of U.S. 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⁾	$	0.75		$	0.78		$	(0.03	)	(4.0	)%

⁽¹⁾

Fiscal 2019 includes $53 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy, of which $17 million relates to accelerated depreciation related to software that is being replaced, and $81 million related to severance, restructuring and facility closure charges in Europe and Canada, of which $55 million relates to our France restructuring as part of our integration of Brake France and Davigel into Sysco France. Fiscal 2018 includes $16 million related to business technology ~~transformation initiative~~ costs and professional fees on three-year financial objectives ~~restructuring expenses within our Brakes operations, costs to convert to legacy systems in conjunction with our revised business technology strategy, severance charges related to restructuring,~~ and ~~facility closure charges. Fiscal 2017 includes $28 million in accelerated depreciation associated with our revised business technology strategy and $12~~$6 million related to restructuring expenses within our Brakes operations, costs to convert to legacy systems in conjunction with our revised business technology strategy, severance charges related to restructuring and professional fees on three-year financial objectives.charges.


⁽²⁾	Fiscal ~~2018~~2019 and fiscal ~~2017~~2018 include ~~$20~~$18 million and $19 million, respectively, related to intangible amortization expense from the Brakes Acquisition, which is included in the results of ~~Brakes, and $4~~Brakes. Fiscal 2018 includes $5 million ~~and $7 million, respectively,~~ 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~~represents that the percentage change is not meaningful.



	26-Week Period Ended Dec. 29, 2018			26-Week Period Ended Dec. 30, 2017			Change in Dollars			% Change
	(In thousands, except for share and per share data)
Operating expenses (GAAP)	$	4,595,462		$	4,345,137		$	250,325		5.8	%
Impact of restructuring and transformational project costs ⁽¹⁾	(175,339		)	(40,430		)	(134,909		)	NM
Impact of acquisition-related costs ⁽²⁾	(39,645		)	(45,545		)	5,900			(13.0	)
Operating expenses adjusted for Certain Items (Non-GAAP)	$	4,380,478		$	4,259,162		$	121,316		2.8	%

Operating income (GAAP)	$	1,080,035		$	1,147,917		$	(67,882	)	(5.9	)%
Impact of restructuring and transformational project costs ⁽¹⁾	175,339			40,430			134,909			NM
Impact of acquisition-related costs ⁽²⁾	39,645			45,545			(5,900		)	(13.0	)
Operating income adjusted for Certain Items (Non-GAAP)	$	1,295,019		$	1,233,892		$	61,127		5.0	%

Net earnings (GAAP)	$	698,422		$	651,753		$	46,669		7.2	%
Impact of restructuring and transformational project costs ⁽¹⁾	175,339			40,430			134,909			NM
Impact of acquisition-related costs ⁽²⁾	39,645			45,545			(5,900		)	(13.0	)
Tax impact of restructuring and transformational project costs ⁽³⁾	(45,560		)	(12,634		)	(32,926		)	NM
Tax impact of acquisition-related costs ⁽³⁾	(10,302		)	(11,108		)	806			(7.3	)
Impact of U.S. transition tax	15,154			115,000			(99,846		)	(86.8	)
Impact of U.S. 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)	$	872,698		$	806,372		$	66,326		8.2	%

Diluted earnings per share (GAAP)	$	1.33		$	1.23		$	0.10		8.1	%
Impact of restructuring and transformational project costs ⁽¹⁾	0.33			0.08			0.25			NM
Impact of acquisition-related costs ⁽²⁾	0.08			0.09			(0.01		)	(11.1	)
Tax impact of restructuring and transformational project costs ⁽³⁾	(0.09		)	(0.02		)	(0.07		)	NM
Tax impact of acquisition-related costs ⁽³⁾	(0.02		)	(0.02		)	—			—
Impact of U.S. transition tax	0.03			0.22			(0.19		)	(86.4	)
Impact of U.S. 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⁾	$	1.66		$	1.52		$	0.14		9.0	%

39-Week Period Ended Mar. 31, 2018 39-Week Period Ended Apr. 1, 2017 Change in Dollars % Change
(In thousands, except for share and per share data)
Operating expenses (GAAP) $ 6,527,375
$ 6,302,705
$ 224,670
3.6 %
Impact of MEPP charge (1,700 ) —
(1,700 ) NM
Impact of restructuring costs ⁽¹⁾
(63,211 ) (118,438 ) 55,227
(46.6 )
Impact of acquisition-related costs ⁽²⁾
(70,906 ) (71,352 ) 446
(0.6 )
Operating expenses adjusted for certain items (Non-GAAP) $ 6,391,558
$ 6,112,915
$ 278,643
4.6 %

Operating income (GAAP) $ 1,641,307
$ 1,495,212
$ 146,095
9.8 %
Impact of MEPP charge 1,700
—
1,700
NM
Impact of restructuring costs ⁽¹⁾
63,211
118,438
(55,227 ) (46.6 )
Impact of acquisition-related costs ⁽²⁾
70,906
71,352
(446 ) (0.6 )
Operating income adjusted for certain items (Non-GAAP) $ 1,777,124
$ 1,685,002
$ 92,122
5.5 %

Interest expense (GAAP) $ 303,015
$ 226,858
$ 76,157
33.6 %
Impact of loss on extinguishment of debt (53,104 ) —
(53,104 ) NM
Interest expense adjusted for certain items (Non-GAAP) $ 249,911
$ 226,858
$ 23,053
10.2 %

Net earnings (GAAP) $ 981,838
$ 837,332
$ 144,506
17.3 %
Impact of MEPP charge 1,700
—
1,700
NM
Impact of restructuring costs ⁽¹⁾
63,211
118,438
(55,227 ) (46.6 )
Impact of acquisition-related costs ⁽²⁾
70,906
71,352
(446 ) (0.6 )
Impact of loss on extinguishment of debt 53,104
—
53,104
NM
Tax impact of MEPP charge (582 ) —
(582 ) NM
Tax impact of restructuring costs ⁽³⁾
(20,170 ) (36,840 ) 16,670
(45.2 )
Tax impact of acquisition-related costs ⁽³⁾
(17,778 ) (19,515 ) 1,737
(8.9 )
Tax impact of loss on extinguishment of debt (18,225 ) —
(18,225 ) NM
Impact of U.S. transition tax 115,000
—
115,000
NM
Impact of U.S. 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
Tax impact of retirement plan contribution (44,424 ) —
(44,424 ) NM
Net earnings adjusted for certain items (Non-GAAP) $ 1,161,966
$ 970,767
$ 191,199
19.7 %

Diluted earnings per share (GAAP) $ 1.85
$ 1.52
$ 0.33
21.7 %
Impact of restructuring costs ⁽¹⁾
0.12
0.21
(0.09 ) (42.9 )
Impact of acquisition-related costs ⁽²⁾
0.13
0.13
—
NM
Impact of loss on extinguishment of debt 0.10
—
0.10
NM
Tax impact of acquisition-related costs ⁽³⁾
(0.04 ) (0.07 ) 0.03
(42.9 )
Tax impact of acquisition financing costs ⁽³⁾
(0.03 ) (0.04 ) 0.01
(25.0 )
Tax impact of loss on extinguishment of debt (0.03 ) —
(0.03 ) NM
Impact of U.S. transition tax 0.22
—
0.22
NM
Impact of U.S. 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
Tax impact of retirement plan contribution (0.08 ) —
(0.08 ) NM
Diluted EPS adjusted for certain items (Non-GAAP) ⁽⁴⁾
$ 2.19
$ 1.76
$ 0.43
24.4 %

⁽¹⁾

Fiscal 2019 includes $79 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy, of which $17 million relates to accelerated depreciation related to software that is being replaced, and $96 million related to severance, restructuring and facility closure charges in Europe and Canada, of which $56 million relates to our France restructuring as part of our integration of Brake France and Davigel into Sysco France. Fiscal 2018 includes $29 million related to business technology ~~transformation initiative~~ costs and professional fees on three-year financial objectives ~~restructuring expenses within our Brakes operations, costs to convert to legacy systems in conjunction with our revised business technology strategy, severance charges~~and $11 million related to restructuring ~~and facility closure~~ charges. ~~Fiscal 2017 includes $84 million~~

in accelerated depreciation associated with our revised business technology strategy and $35 million related to professional fees on 3-year financial objectives, restructuring expenses within our Brakes operations, costs to convert to legacy systems in conjunction with our revised business technology strategy and severance charges.


⁽²⁾	Fiscal ~~2018~~2019 and fiscal ~~2017~~2018 include ~~$51~~$39 million and ~~$57~~$31 million, respectively, related to intangible amortization expense from the Brakes Acquisition, which is included in the results of Brakes, and ~~$14~~$1 million and ~~$15~~$10 million, inrespectively, related to integration ~~costs, respectively.~~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~~represents 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 Mar. 31, 2018 13-Week Period Ended Apr. 1, 2017 Change in Dollars % Change
U.S. FOODSERVICE OPERATIONS
Operating expenses $ 1,216,240
$ 1,147,016
$ 69,224
6.0 %
Impact of MEPP charge (1,700 ) —
(1,700 ) NM
Operating expenses adjusted for certain items (Non-GAAP) $ 1,214,540
$ 1,147,016
$ 67,524
5.9 %

Operating income $ 695,464
$ 689,210
$ 6,254
0.9 %
Impact of MEPP charge 1,700
—
1,700
NM
Operating income adjusted for certain items (Non-GAAP) $ 697,164
$ 689,210
$ 7,954
1.2 %

INTERNATIONAL FOODSERVICE OPERATIONS

Operating expenses (GAAP) $ 563,907
$ 500,672
$ 63,235
12.6 %
Impact of restructuring costs ⁽¹⁾
(3,552 ) (6,779 ) 3,227
(47.6 )
Impact of acquisition-related costs ⁽²⁾
(21,679 ) (17,048 ) (4,631 ) 27.2
Operating expenses adjusted for certain items (Non-GAAP) $ 538,676
$ 476,845
$ 61,831
13.0 %

Operating income (GAAP) $ 19,319
$ 16,076
$ 3,243
20.2 %
Impact of restructuring costs ⁽¹⁾
3,552
6,779
(3,227 ) (47.6 )
Impact of acquisition related costs ⁽²⁾
21,679
17,048
4,631
27.2
Operating income adjusted for certain items (Non-GAAP) $ 44,550
$ 39,903
$ 4,647
11.6 %

CORPORATE
Operating expenses (GAAP) $ 228,371
$ 284,330
$ (55,959 ) (19.7 )%
Impact of restructuring costs ⁽³⁾
(19,229 ) (33,286 ) 14,057
(42.2 )
Impact of acquisition-related costs ⁽⁴⁾
(3,682 ) (7,224 ) 3,542
(49.0 )
Operating expenses adjusted for certain items (Non-GAAP) $ 205,460
$ 243,820
$ (38,360 ) (15.7 )%

Operating income (GAAP) $ (239,272 ) $ (282,746 ) $ 43,474
(15.4 )%
Impact of restructuring costs ⁽³⁾
19,229
33,286
(14,057 ) (42.2 )
Impact of acquisition-related costs ⁽⁴⁾
3,682
7,224
(3,542 ) (49.0 )
Operating income adjusted for certain items (Non-GAAP) $ (216,361 ) $ (242,236 ) $ 25,875
(10.7 )%



	13-Week Period Ended Dec. 29, 2018			13-Week Period Ended Dec. 30, 2017			Change in Dollars			% Change
	(In thousands)
INTERNATIONAL FOODSERVICE OPERATIONS
Operating expenses (GAAP)	$	604,839		$	547,053		$	57,786		10.6	%
Impact of restructuring and transformational project costs ⁽¹⁾	(81,020		)	(5,602		)	(75,418		)	NM
Impact of acquisition-related costs ⁽²⁾	(16,947		)	(20,809		)	3,862			(18.6	)
Operating expenses adjusted for Certain Items (Non-GAAP)	$	506,872		$	520,642		$	(13,770	)	(2.6	)%

Operating income (GAAP)	$	(14,917	)	$	52,594		$	(67,511	)	NM
Impact of restructuring and transformational project costs ⁽¹⁾	81,020			5,602			75,418			NM
Impact of acquisition related costs ⁽²⁾	16,947			20,809			(3,862		)	(18.6	)
Operating income adjusted for Certain Items (Non-GAAP)	$	83,050		$	79,005		$	4,045		5.1	%

CORPORATE
Operating expenses (GAAP)	$	274,430		$	240,972		$	33,458		13.9	%
Impact of restructuring and transformational project costs ⁽³⁾	(53,417		)	(15,775		)	(37,642		)	NM
Impact of acquisition-related costs ⁽⁴⁾	(61		)	(4,990		)	4,929			(98.8	)
Operating expenses adjusted for Certain Items (Non-GAAP)	$	220,952		$	220,207		$	745		0.3	%

Operating income (GAAP)	$	(279,497	)	$	(241,157	)	$	(38,340	)	15.9	%
Impact of restructuring and transformational project costs ⁽³⁾	53,417			15,775			37,642			NM
Impact of acquisition-related costs ⁽⁴⁾	61			4,990			(4,929		)	(98.8	)
Operating income adjusted for Certain Items (Non-GAAP)	$	(226,019	)	$	(220,392	)	$	(5,627	)	2.6	%


⁽¹⁾	Includes ~~Brakes Acquisition-related~~$55 million of restructuring charges in France and other restructuring, severance and facility closure ~~charges~~costs in Europe and ~~other severance charges related to restructuring.~~Canada.


⁽²⁾	Fiscal ~~2018~~2019 and fiscal ~~2017~~2018 include ~~$20~~$18 million and $19 million, respectively, related to intangible amortization expense from the Brakes ~~Acquisition, which is included in the results of the Brakes Group.~~Acquisition.

⁽³⁾

Fiscal 2019 and fiscal 2018 ~~includes business technology~~include various transformation initiative costs, ~~professional fees on three-year financial objectives, costs~~primarily consisting of changes to ~~convert to legacy systems in conjunction with~~ our ~~revised~~ business technology strategy, ~~and severance charges related to restructuring. Fiscal 2017 includes $28~~including $17 million inof accelerated depreciation ~~associated with our revised business technology strategy and $6 million related to costs to convert to legacy systems in conjunction with our revised business technology strategy, professional fees~~ on ~~three-year financial objectives~~software that is being replaced, and severance charges related to restructuring.


⁽⁴⁾	Fiscal 2018 included $5 million in integration costs from the Brakes Acquisition.

NM represents that the percentage change is not meaningful.



	26-Week Period Ended Dec. 29, 2018			26-Week Period Ended Dec. 30, 2017			Change in Dollars			% Change
	(In thousands)
INTERNATIONAL FOODSERVICE OPERATIONS
Operating expenses (GAAP)	$	1,153,572		$	1,085,352		$	68,220		6.3	%
Impact of restructuring and transformational project costs ⁽¹⁾	(87,746		)	(9,500		)	(78,246		)	NM
Impact of acquisition-related costs ⁽²⁾	(38,846		)	(35,323		)	(3,523		)	10.0
Operating expenses adjusted for Certain Items (Non-GAAP)	$	1,026,980		$	1,040,529		$	(13,549	)	(1.3	)%

Operating income (GAAP)	$	51,855		$	129,398		$	(77,543	)	(59.9	)%
Impact of restructuring and transformational project costs ⁽¹⁾	87,746			9,500			78,246			NM
Impact of acquisition related costs ⁽²⁾	38,846			35,323			3,523			10.0
Operating income adjusted for Certain Items (Non-GAAP)	$	178,447		$	174,221		$	4,226		2.4	%

CORPORATE
Operating expenses (GAAP)	$	538,778		$	491,111		$	47,667		9.7	%
Impact of restructuring and transformational project costs ⁽³⁾	(87,593		)	(30,930		)	(56,663		)	NM
Impact of acquisition-related costs ⁽⁴⁾	(799		)	(10,222		)	9,423			(92.2	)
Operating expenses adjusted for Certain Items (Non-GAAP)	$	450,386		$	449,959		$	427		0.1	%

Operating income (GAAP)	$	(546,653	)	$	(492,448	)	$	(54,205	)	11.0	%
Impact of restructuring and transformational project costs ⁽³⁾	87,593			30,930			56,663			NM
Impact of acquisition-related costs ⁽⁴⁾	799			10,222			(9,423		)	(92.2	)
Operating income adjusted for Certain Items (Non-GAAP)	$	(458,261	)	$	(451,296	)	$	(6,965	)	1.5	%


⁽¹⁾	Includes $56 million of restructuring charges in France and other restructuring, severance and facility closure costs in Europe and Canada.


⁽²⁾	Fiscal 2019 and fiscal ~~2017~~2018 include $4$39 million and $7$31 million, respectively, related to intangible amortization expense from the Brakes Acquisition.


⁽³⁾	Fiscal 2019 and fiscal 2018 include various transformation initiative costs, primarily consisting of changes to our business technology strategy, including $17 million of accelerated depreciation on software that is being replaced, and severance charges related to restructuring.


⁽⁴⁾	Fiscal 2019 and fiscal 2018 include $1 million and $10 million, respectively, related to integration costs from the Brakes Acquisition.

NM represents that the percentage change is not meaningful.

39-Week Period Ended Mar. 31, 2018 39-Week Period Ended Apr. 1, 2017 Change in Dollars % Change
U.S. FOODSERVICE OPERATIONS
Operating expenses $ 3,630,745
$ 3,456,602
$ 174,143
5.0 %
Impact of MEPP charge (1,700 ) —
(1,700 ) NM
Impact of restructuring costs —
(470 ) 470
NM
Operating expenses adjusted for certain items (Non-GAAP) $ 3,629,045
$ 3,456,132
$ 172,913
5.0 %

Operating income $ 2,182,708
$ 2,115,762
$ 66,946
3.2 %
Impact of MEPP charge 1,700
—
1,700
NM
Impact of restructuring costs —
470
(470 ) NM
Operating income adjusted for certain items (Non-GAAP) $ 2,184,408
$ 2,116,232
$ 68,176
3.2 %

INTERNATIONAL FOODSERVICE OPERATIONS
Operating expenses (GAAP) $ 1,649,573
$ 1,511,044
$ 138,529
9.2 %
Impact of restructuring costs ⁽¹⁾
(13,052 ) (17,049 ) 3,997
(23.4 )
Impact of acquisition-related costs ⁽²⁾
(57,001 ) (56,838 ) (163 ) 0.3
Operating expenses adjusted for certain items (Non-GAAP) $ 1,579,520
$ 1,437,157
$ 142,363
9.9 %

Operating income (GAAP) $ 148,403
$ 180,324
$ (31,921 ) (17.7 )%
Impact of restructuring costs ⁽¹⁾
13,052
17,049
(3,997 ) (23.4 )
Impact of acquisition related costs ⁽²⁾
57,001
56,838
163
0.3
Operating income adjusted for certain items (Non-GAAP) $ 218,456
$ 254,211
$ (35,755 ) (14.1 )%

CORPORATE
Operating expenses (GAAP) $ 703,425
$ 831,976
$ (128,551 ) (15.5 )%
Impact of restructuring costs ⁽³⁾
(50,159 ) (100,919 ) 50,760
(50.3 )
Impact of acquisition-related costs ⁽⁴⁾
(13,904 ) (14,514 ) 610
(4.2 )
Operating expenses adjusted for certain items (Non-GAAP) $ 639,362
$ 716,543
$ (77,181 ) (10.8 )%

Operating income (GAAP) $ (715,660 ) $ (834,154 ) $ 118,494
(14.2 )%
Impact of restructuring costs ⁽³⁾
50,159
100,919
(50,760 ) (50.3 )
Impact of acquisition-related costs ⁽⁴⁾
13,904
14,514
(610 ) (4.2 )
Operating income adjusted for certain items (Non-GAAP) $ (651,597 ) $ (718,721 ) $ 67,124
(9.3 )%


⁽¹⁾	~~Includes Brakes Acquisition-related restructuring charges, facility closure charges and other severance charges related to restructuring.~~


⁽²⁾	~~Fiscal 2018 and 2017 include $51 million and $57 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, costs to convert to legacy systems in conjunction with our revised business technology strategy and severance charges related to restructuring. Fiscal 2017 includes $84 million in accelerated depreciation associated with our revised business technology strategy and $17 million related to professional fees on 3-year financial objectives, costs to convert to legacy systems in conjunction with our revised business technology strategy and severance charges.


⁽⁴⁾	~~Fiscal 2018 and 2017 include $14 million and $15 million, respectively, related to integration costs from the Brakes Acquisition.~~

Three-Year Financial Targets

Sysco management considers adjusted ~~ROIC~~return on invested capital (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 whether or when we will achieve these results or whether the calculation of our ROIC in such future ~~period~~periods 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)~~(Non-GAAP)

Return on invested capital (GAAP)

Return on invested 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, if applicable, 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~~

We are halfway into the three-year period under our strategic plan and are measuring our operating income performance against our targets ~~for fiscal 2018 were developed assuming U.S. statutory tax rates would not change. In order~~on an adjusted basis. The following reconciles operating income cumulative growth from an adjusted 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.~~a GAAP basis.



	Year Ended									26-Week Period Ended
	June 30, 2018			July 1, 2017			Cumulative 4-Quarter Growth			December 29, 2018			December 30, 2017			Cumulative 2-Quarter Growth			Cumulative 6-Quarter Growth
Sales	$	58,727,324		$	55,371,139		$	3,356,185		$	29,980,986		$	29,061,914		$	919,072

Gross profit	$	11,085,391		$	10,557,507		$	527,884		$	5,675,497		$	5,493,054		$	182,443
Gross margin	18.88		%	19.07		%	(0.19		)%	18.93		%	18.90		%	0.03		%

Operating expenses (GAAP)	$	8,771,335		$	8,502,891		$	268,444		$	4,595,462		$	4,345,137		$	250,325
MEPP Charge	(1,700		)	(35,600		)	33,900			—			—			—
Impact of restructuring and transformational project costs ⁽¹⁾	(109,524		)	(161,011		)	51,487			(175,339		)	(40,430		)	(134,909		)
Impact of acquisition-related costs ⁽²⁾	(108,136		)	(102,049		)	(6,087		)	(39,645		)	(45,545		)	5,900
Operating expenses adjusted for Certain Items (Non-GAAP)	$	8,551,975		$	8,204,231		$	347,744		$	4,380,478		$	4,259,162		$	121,316

Operating income (GAAP)	$	2,314,056		$	2,054,616		$	259,440		$	1,080,035		$	1,147,917		$	(67,882	)	$	191,558
MEPP Charge	1,700			35,600			(33,900		)	—			—			—			(33,900		)
Impact of restructuring and transformational project costs ⁽¹⁾	109,524			161,011			(51,487		)	175,339			40,430			134,909			83,422
Impact of acquisition-related costs ⁽²⁾	108,136			102,049			6,087			39,645			45,545			(5,900		)	187
Operating income adjusted for Certain Items (Non-GAAP)	$	2,533,416		$	2,353,276		$	180,140		$	1,295,019		$	1,233,892		$	61,127		$	241,267

⁽¹⁾

Fiscal 2019 includes $79 million related to various transformation initiative costs, of which $17 million pertains to accelerated depreciation related to software that is being replaced, and $96 million related to severance, restructuring and facility closure charges, of which $56 million relates to our France restructuring. Fiscal 2018 includes $29 million related to business technology costs and professional fees on three-year financial objectives and $11 million related to restructuring charges.


⁽²⁾	Fiscal 2019 and fiscal 2018 include $39 million and $31 million, respectively, related to intangible amortization expense from the Brakes Acquisition, which is included in the results of Brakes, and $1 million and $10 million, respectively, in integration costs.

Liquidity and Capital Resources

Highlights

Comparisons of the cash flows from the first 3926 weeks of fiscal ~~2018~~2019 to the first 3926 weeks of fiscal ~~2017:~~2018:

Cash flows from operations were ~~$1.1 billion in fiscal 2018 and fiscal 2017;~~

~~Capital expenditures totaled $372.6~~$917.8 million in fiscal ~~2018,~~2019, compared to ~~$413.8~~$933.2 million in fiscal ~~2017;~~2018;

Net capital expenditures totaled $216.9 million in fiscal 2019, compared to $254.7 million in fiscal 2018;

Free cash flow was ~~$768.5~~$700.9 million in fiscal 2019, compared to free cash flow of $678.5 million in fiscal 2018 ~~compared to $687.7 million in fiscal 2017,~~ (see ~~“Non-GAAP Reconciliations”~~ below under the heading “Free Cash Flow”) for an explanation of this non-GAAP financial measure);

~~Cash used for acquisition~~There were $109.9 million of ~~businesses, net of cash received, was $203.6 million in fiscal 2018, compared to $2.9 billion in fiscal 2017;~~

~~Commercial~~commercial paper issuances ~~and~~or net bank borrowings ~~were $638.3 million~~ in fiscal ~~2018,~~2019, compared to ~~$1.3 billion~~$630.3 million of commercial paper issuances and net bank borrowings in fiscal ~~2017;~~2018;

Dividends paid were ~~$534.7~~$379.2 million in fiscal ~~2018,~~2019, compared to ~~$521.8~~$346.9 million in fiscal ~~2017;~~2018; and

Cash paid for treasury stock repurchases was ~~$911.0~~$739.2 million in fiscal ~~2018,~~2019, compared to ~~$1.5 billion~~$750.5 million in fiscal ~~2017.~~2018.

In addition, ~~for~~with regard to our senior notes:

We issued ~~an aggregate of $1.0 billion~~CDN $500.0 million in new senior notes in the first 26 weeks of fiscal ~~2018; and~~2019 within a Canadian subsidiary.

We repaid senior notes in the amount of $500.0 million and redeemed senior notes and debentures in the amount of $230.5 million in fiscal 2018, using cash on hand, proceeds from borrowings under our commercial paper program and a portion of net proceeds from our senior notes offering.

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 cash savings from lower taxes as a result of the Tax Act. We invested a portion of those savings in our employees through increased contributions to Sysco’s retirement plans. We will continue to evaluate our options with regard to how best to utilize the balance of these savings and will do so consistent with 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 ~~March 31,~~December 29, 2018, we had ~~$901.6~~$744.8 million in cash and cash equivalents, approximately ~~72.0%~~39% 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,~~obligations. Additionally, Sysco Corporation has provided intercompany loans to certain of its international subsidiaries, and when interest and principal payments are made, some of 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~~cash will ~~continue to be assessed due~~move to the ~~recent enactment of the Tax Act.~~U.S.

~~In December 2017, Sysco established a~~Our wholly owned captive insurance subsidiary (the 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 Captive, must maintain a sufficient level of cash to fund future reserve payments. As of ~~March 31,~~December 29, 2018, we had ~~$102.2~~$152.2 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 ~~$1.1 billion~~$917.8 million in cash flows from operations in the first 3926 weeks of fiscal ~~2018 and~~2019, compared to cash flows of $933.2 million in the first 26 weeks of fiscal ~~2017.~~2018. These ~~comparable~~ amounts include year-over-year unfavorable comparisons on income taxes, partially offset by favorable comparisons on accrued ~~income taxes, accrued expense and higher operating results, partially offset by a $330 million pension contribution that allowed us to fund the Pension Plan in the third quarter of fiscal 2018,~~expenses, as well as increased working capital.

Total tax payments have ~~decreased~~increased by ~~$455.0~~$252.7 million in the first 3926 weeks of fiscal ~~2018,~~2019, as compared to the first 3926 weeks of fiscal ~~2017.~~2018. The ~~decrease was~~first 26 weeks of fiscal 2018 included a deferral of tax payments due to ~~savings from the decrease~~relief provided in ~~the tax rates, as well as $136.7 million from deductions related to our pension contribution and $59.9 million savings from a deduction resulting from our formation of the Captive.~~connection with Hurricane Harvey.

The positive comparison on accrued expenses was primarily due to a ~~$65.7~~$66.4 million ~~decrease from incentive payments. Our annual incentive payments from the prior fiscal year are paid~~increase in ~~the first quarter of each fiscal year. Our fiscal 2017 performance resulted~~accrued severance primarily related to restructuring in ~~lower incentive payments, paid~~our European operations, and a $30.3 million increase 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. There was also a $55.1 million decrease in other accruals, such as corporate business technology accruals, professional fee accrualsaccrued taxes and ~~acquisition costs, as well as a $49.7 million decrease in interest payments.~~

Included in the change in other long-term liabilities was a negative comparison primarily from pension contributions. Pension contributions were $401.6 million in fiscal 2018, including a $330 million contribution that allowed us to fund and de-risk the Pension Plan in the third quarter of fiscal 2018.licenses.

Changes in working capital, ~~specifically accounts receivable, inventory and~~primarily accounts payable, had a ~~negative~~positive impact of ~~$193.8~~$110.5 million on ~~the period-over-period change in~~ cash flow from ~~operations. This~~operations period-over-period. There was ~~primarily from~~a favorable comparison on accounts payable, which was partially offset by unfavorable comparisons on receivables and inventory. The net increase in working capital ~~investments in support of sales growth.~~

~~Seasonal trends also impact our~~is attributable to working capital initiatives enabling slower payments to suppliers and quicker cash ~~flows~~collections 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.customers year-over-year.

Investing Activities

Our capital expenditures in the first 3926 weeks of fiscal ~~2018~~2019 primarily consisted of facility replacements and expansions, technology equipment, fleet ~~technology~~ and warehouse ~~equipment, including supply chain opportunities involving Sysco Europe.~~equipment. Our capital expenditures in the first 3926 weeks of fiscal ~~2018~~2019 were ~~higher~~lower by ~~$41.2~~$34.8 million, as compared to the first 3926 weeks of fiscal 2017. We previously forecasted investment, expressed as a percentage of sales, of 1.4 % to 1.5% for fiscal 2018, as we anticipated moving spend from fiscal 2019 to fiscal 2018; however, we currently estimate that our capital expenditures for fiscal 2018, net of proceeds from sales of assets, will be lower than originally planned.

2018.

During the first 3926 weeks of fiscal 2018, we paid ~~$203.6~~$147.6 million ~~net of cash acquired,~~ for acquisitions made during fiscal 2018, net of cash acquired primarily for the acquisitions, including HFM and ~~Doerle. Additionally, we purchased~~ the remaining 50% interest in our joint venture in Costa Rica. There were no such acquisitions made in the first 26 weeks of fiscal 2019.

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 3926 weeks of fiscal ~~2018~~2019 increased by ~~$80.7~~$22.4 million, to ~~$768.5~~$700.9 million, as compared to the first 3926 weeks of fiscal ~~2017,~~2018, principally as a result of a year-over-year ~~increase~~reduction in capital expenditures, partially offset by a decrease in cash flows from operations, ~~and reduced capital expenditures.~~which includes the impact deferring tax payments in the first 26 weeks of fiscal 2018 due to relief provided in connection with Hurricane Harvey.

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. In the table that follows, free cash flow for each period presented is reconciled to net cash provided by operating activities.


	39-Week Period Ended Mar. 31, 2018			39-Week Period Ended Apr. 1, 2017			26-Week Period Ended Dec. 29, 2018			26-Week Period Ended Dec. 30, 2017
	(In thousands)						(In thousands)
Net cash provided by operating activities (GAAP)	$	1,124,187		$	1,082,424		$	917,790		$	933,204
Additions to plant and equipment	(372,612		)	(413,776		)	(223,825		)	(258,577		)
Proceeds from sales of plant and equipment	16,910			19,091			6,901			3,878
Free Cash Flow (Non-GAAP)	$	768,485		$	687,739		$	700,866		$	678,505

Seasonal trends also impact our free cash flow, as we typically use more cash earlier in the fiscal year and then see larger, sequential quarterly increases throughout the remainder of the year. We believe our free cash flow for fiscal 2018 will be generally consistent with the results achieved in fiscal 2017 and, therefore, anticipate that we will experience free cash flow growth over the remainder of the fiscal year.

Financing Activities

Equity Transactions

Proceeds from exercises of share-based compensation awards were ~~$238.4~~$137.9 million in the first 3926 weeks of fiscal ~~2018,~~2019, as compared to ~~$175.3~~$172.3 million in the first 3926 weeks of fiscal ~~2017.~~2018. The level of option exercises, and thus proceeds, will vary from period to period and is largely dependent on movements in our stock price and the time remaining before option grants expire.

We routinely engage in share repurchase ~~programs. The number of~~programs to allow Sysco to continue offsetting dilution resulting from shares acquired and their cost during the first 39 weeks of fiscal 2018 were 16.9 million shares for $911.0 million, with 29.1 million shares repurchased in the first 39 weeks of fiscal 2017 for $1.5 billion. We repurchased 0.2 million additional shares for $14.2 million through April 20, 2018. In February 2017, our Board of Directors approved a repurchase program authorizing the repurchase of shares ofissued under the company’s ~~common stock not~~benefit plans and to ~~exceed $1.0 billion through the end of fiscal 2019.~~make opportunistic repurchases. 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~~The number of shares acquired and their cost during the first 26 weeks of fiscal 2019 were 10.8 million shares for $739.2 million, compared to 14.2 million shares repurchased in the first 26 weeks of fiscal 2018 for $750.5 million. Given that our share repurchases are ~~intended to allow Sysco to continue offsetting dilution resulting from~~based on a set dollar amount program and with the increase in our share price, fewer shares ~~issued under~~are being repurchased than during the ~~company’s benefit plans and to make opportunistic repurchases. All~~same period last year. The aggregate dollar amount of share repurchases in the first 3926 weeks of fiscal 2019 is less than the first 26 weeks of fiscal 2018 ~~were made under these authorizations.~~due to timing. We repurchased approximately 646,000 additional shares for $40.1 million through January 18, 2019, resulting in a remaining authorization of approximately $730.3 million. The number of shares we repurchase during the remainder of fiscal ~~2018~~2019 will be dependent on many factors, including the level of future stock option exercises, as well as competing uses for available cash.

Dividends paid in the first 3926 weeks of fiscal ~~2018~~2019 were ~~$534.7~~$379.2 million, or ~~$1.02~~$0.72 per share, as compared to ~~$521.8~~$346.9 million, or ~~$0.95~~$0.66 per share, in the first 3926 weeks of fiscal ~~2017.~~2018. In ~~February~~November 2018, we declared our regular quarterly dividend for the ~~third~~second quarter of fiscal ~~2018~~2019 of ~~$0.36~~$0.39 per share, which was paid in ~~April 2018.~~

January 2019.

Debt Activity and Borrowing Availability

Our debt activity, including issuances and repayments, and our borrowing availability is described in Note 7,8, “Debt.” Our outstanding borrowings at ~~March 31,~~December 29, 2018, and repayment activity since the close of the ~~third~~second quarter of fiscal ~~2018,~~2019, are disclosed within that note. Updated amounts through ~~April 20, 2018,~~January 18, 2019, include:

$~~844.3~~271.5 million 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 3926 weeks of fiscal ~~2018~~2019 and ~~2017,~~2018, our aggregate commercial paper issuances and short-term bank borrowings had weighted average interest rates of ~~1.58%~~2.23% and ~~0.85%~~1.44%, respectively.

Included in current maturities of long-term debt as of ~~March 31,~~December 29, 2018 are ~~the 5.38%~~ senior notes totaling $250 million, which mature in March 2019 and senior notes totaling $500 million, which mature in April 2019. ~~It is our intention to fund the repayment~~Repayment of these notes at maturity could be funded through cash on hand, cash flow from operations, issuances of commercial paper, issuances of senior notes or a combination thereof.

Contractual Obligations

Our ~~2017~~2018 Form 10-K contains a table that summarizes our obligations and commitments to make specified contractual future cash payments as of ~~July 1, 2017.~~June 30, 2018. Since ~~July 1, 2017,~~June 30, 2018, the only material change to our specified contractual obligations relates to the one-time transition tax ~~liability that we are required~~liability. The company elected to pay ~~over~~the net tax liability in eight installments. Due to certain Internal Revenue Service procedures, an ~~eight-year period beginning in~~overpayment reflected on the tax return for fiscal 2018 is applied to the first ~~quarter of fiscal 2019~~six installments. As a result, the next installment payment is due to the provisions enacted as part of the Tax Act and as it relates to changes in our senior notes, as outlined in Note 7, “Debt.” As noted in Note 11, “Income Taxes,” our transition tax liability is currently a provisional estimate.September 2025. The following table sets forth, as of ~~March 31,~~December 29, 2018, certain information ofregarding our transition tax liability, updating the contractual obligations and commitments to make contractual future payments disclosed in our ~~2017~~2018 Form 10-K:


	Payments Due by Period										Payments Due by Period
									More Than										More Than
	Total		< 1 Year		1-3 Years		3-5 Years		5 Years		Total		< 1 Year		1-3 Years		3-5 Years		5 Years
	(In thousands)										(In thousands)
Recorded Contractual Obligations:
One-time transition tax liability	$	115,000	$	19,761	$	16,563	$	16,563	$	62,113	$	37,842	$	—	$	—	$	—	$	37,842

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 goodwill and intangible assets, the company-sponsored pension plans, income taxes ~~goodwill and intangible assets~~ and share-based compensation, which are described in Item 7 of our ~~2017~~2018 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 an 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;~~ability to increase profitability for SYGMA;

our expectations ~~with respect~~regarding improved operating income performance in the second half of fiscal 2019;

our expectations regarding multiple transformation initiatives, including (i) the Finance Transformation Roadmap and our expectation that we will receive financial benefits from this initiative, (ii) Smart Spending and our expectation that this initiative will provide unprecedented visibility, ownership and performance management in all areas of our business, (iii) Canadian Regionalization and our expectation that this initiative will contribute to ~~achieving~~increased cost savings and (iv) Administrative Expenses and our expectation that this initiative will drive costs out of the business to drive growth, and our expectation that we will receive financial benefits from these initiatives in the second half of fiscal 2019;

our expectations regarding our ability to effectively centralize and standardize our business, including leveraging technology and strengthening Sysco overall;

our expectations that our four strategic priorities, which include the customer experience, delivering operational excellence, optimizing the business and activating the power of our people, will accelerate our current growth and guide us into the future;

projections of future performance under our three-year strategic financial ~~targets through~~plan, including, but not limited to, our expectation that we will reach $650 to $700 million of adjusted operating income growth as compared to fiscal ~~2018~~2017, our goal of growing earnings per share faster than operating income, achieving 16% in adjusted return on invested capital improvement for existing businesses, and our ~~new three-year financial objectives through~~goals of sales growth of 4% to 4.5%, adjusted operating growth of 9% and adjusted diluted earnings per share results in the range of $3.85 to $3.95 in fiscal 2020;

our ~~expectations~~expectation regarding ~~product inflation~~the acceleration of locally managed customer case growth and ~~other economic trends in the U.S.~~driving leverage between gross profit and ~~abroad;~~adjusted expense growth;

our expectations regarding the ~~rise of restaurant sales;~~

accelerated investments we are making related to our long-term strategic growth plans in Europe, and our expectations ~~regarding local~~that such investments will enrich the customer ~~growth~~experience and ~~customer experience;~~position us well in the European market;

~~our expectations regarding investments in our supply chain transformation across Europe;~~

~~our expectations regarding our effective tax rate, our accounting for~~ the ~~income tax effects of the Tax Act and the positive~~ impact of ~~the Tax Act generally, including~~seasonal trends on our free cash ~~savings and our use thereof, on our earnings per share, and on our three-year financial plan earnings targets;~~flow;

our expectations regarding the use of remaining cash generated from operations;

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 the calculation of adjusted return on invested capital, adjusted operating income, adjusted net earnings and adjusted 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 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 ability to effectively access the commercial paper market and long-term capital markets;

our ~~expectations regarding operating cash flow, capital expenditures, net of proceeds from sales of assets, 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; and

our expectations regarding share repurchases.

These statements are based on management’s current expectations and estimates; actual results may differ materially due in part to the risk factors set forth below, those within Part II, Item 1A of this document and those discussed in Item 1A of our ~~2017~~2018 Form ~~10-K~~10-K:

the risk that if sales from our locally managed customers do not grow at the same rate as sales from regional and ~~subsequent filings with~~ national customers, or if we are unable to continue to accelerate local case growth, our gross margins may decline;

the ~~SEC:~~risk that we are unlikely to be able to predict inflation over the long term, and lower inflation is likely to produce lower gross profit;

periods of significant or prolonged inflation or deflation and their impact on our product costs and ~~profitability;~~profitability generally;

the risk that 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. economy~~North America and ~~local markets~~Europe and the impact on our results of operations and financial condition;

the risks related to our efforts to meet our long-term strategic objectives, including the risk that these efforts may not provide the expected benefits in our anticipated time frame, if at all, and may prove costlier than expected; the risk that the actual costs of any initiatives may be greater or less than currently expected; and the risk of adverse effects to us if past and future undertakings and the associated changes to our business do not prove to be cost effective or do not result in the level of cost savings and other benefits that we anticipated;

the impact of unexpected future changes to our business initiatives based on management’s subjective evaluation of our overall business needs;

the risk that the actual costs of any business initiatives may be greater or less than currently expected;

the risk that competition in our industry and the impact of 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 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;

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 the U.K.’s anticipated exit from the European Union, commonly referred to as Brexit, may adversely impact our operations in the U.K., including those of the Brakes Group;

the risk that future labor disruptions or disputes could disrupt the integration of Brake France and Davigel into Sysco France and our operations in France and the European Union 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 impact our business and our relationships with customers;

the potential requirement to pay material amounts under our multiemployer defined benefit pension plans;

our funding requirements for our company-sponsored qualified pension plan may increase should financial markets experience future declines;

labor issues, including the renegotiation of union contracts and shortage of qualified labor;

capital expenditures may vary based on changes in business plans and other factors, including risks related to the implementation of various initiatives, the timing and successful completion of acquisitions, construction schedules and the possibility that other cash requirements could result in delays or cancellations of capital spending; and

the risk that the anti-takeover benefits provided by our preferred stock may not be viewed as beneficial to stockholders.

For a more detailed discussion of factors that could cause actual results to differ from those contained in the forward-looking statements, see the risk factors discussion contained in Item 1A of our ~~2017~~2018 Form 10-K and ~~subsequent filings with~~ the ~~Securities and Exchange Commission.~~risk factor discussion contained in Part II, Item 1A of this document.

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 on~~2018 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,~~June 30, 2018, except as noted below.

Interest Rate Risk

At ~~March 31,~~December 29, 2018, there ~~were $758.0~~was $109.9 million in aggregate commercial paper issuances outstanding. Total debt as of ~~March 31,~~December 29, 2018 was ~~$9.1~~$8.8 billion, of which approximately ~~73%~~67% 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 39 weeks of fiscal 2018 and fiscal 2017, fuel~~Fuel costs related to outbound deliveries represented approximately 0.5% of sales ~~in both periods.~~during the first 26 weeks of fiscal 2019 and fiscal 2018.

Our activities to mitigate fuel costs include routing optimization with the goal of reducing miles driven, improving fleet utilization by adjusting idling time and maximum speeds and using fuel surcharges that primarily track with the change in market prices of fuel. We use diesel fuel swap contracts to fix the price of a portion of our projected monthly diesel fuel requirements. As of ~~March 31,~~December 29, 2018, we had diesel fuel swaps with a total notional amount of approximately 1352 million gallons through ~~June 2018.~~

December 2019. These swaps will lock in the price of approximately ~~55% to 65%~~60% of our projected fuel purchase needs for fiscal ~~2018.~~2019. Additional swaps have been entered into for hedging activity in fiscal ~~2019.~~2020. As of ~~March 31,~~December 29, 2018, we had diesel fuel swaps with a total notional amount of approximately 2928 million gallons specific to fiscal ~~2019.~~2020. 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 ~~March 31,~~December 29, 2018. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under 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 ~~March 31,~~December 29, 2018, 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~~Sysco is currently deploying a financial system to support its business processes across the organization. Through the second quarter of fiscal 2019, this system has been ~~no changes in~~implemented at our corporate office and within our shared business services center. The activities at these locations are significant enough to Sysco’s total financial results that the implementation of the new system required us to materially modify our internal ~~control~~controls over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) ~~under~~of the Exchange Act). There were no other changes in our internal control over financial reporting that occurred during the fiscal quarter ended ~~March 31,~~December 29, 2018, that ~~has~~have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A. Risk Factors

The information set forth in this report should be read in conjunction with the risk factors discussed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended ~~July 1, 2017,~~June 30, 2018 and ~~subsequent filings~~as set forth below.

Economic and political instability and potential unfavorable changes in laws and regulations in international markets could adversely affect our results of operations and financial condition.

Our international operations subject us to certain risks, including economic and political instability and potential unfavorable changes in laws and regulations in international markets in which we operate. For example, the U.K.’s anticipated exit from the EU (commonly referred to as “Brexit”) and the resulting significant change to the U.K.’s relationship with the ~~Securities~~EU and with countries outside the EU (and the laws, regulations and trade deals impacting business conducted between them) could disrupt the overall economic growth or stability of the U.K. and the EU and otherwise negatively impact our European operations. The U.K. is currently negotiating the terms of Brexit, with the U.K. due to exit the EU on March 29, 2019. In November 2018, the U.K. and the EU agreed upon a draft Withdrawal Agreement that set out the terms governing the U.K.’s departure, including, among other things, a transition period to allow for a future trade deal to be agreed upon. As the draft Withdrawal Agreement was rejected by the U.K. Parliament on January 15, 2019, there is significant uncertainty about the terms and timing under which the U.K. will leave the EU. It is possible that Brexit will result in our U.K. and EU operations becoming subject to materially different, and potentially conflicting, laws, regulations or tariffs which could require costly new compliance initiatives or changes to legal entity structures or operating practices. Furthermore, in the event the U.K. leaves the EU with no agreement (a “hard Brexit”), there may be additional adverse impacts on immigration and trade between the U.K. and the EU or countries outside the EU. Such impacts may directly increase our costs or could decrease demand for our goods and services by adversely impacting the business of restaurants or other customers in the foodservice distribution industry.

The completion of Brexit could also adversely affect the value of our euro- and pound-denominated assets and obligations. Exchange ~~Commission.~~rates related to the British pound sterling have been more volatile since the U.K. announced it would exit the EU and such volatility may continue in the future. Future fluctuations in the exchange rate between the British pound sterling and the local currencies of our suppliers may have the effect of increasing our cost of goods sold in the U.K., which increases we may not be able to pass on to our customers. In addition, Brexit could cause financial and capital markets within and outside the U.K. or the EU to constrict, thereby negatively impacting our ability to finance our business, and could cause a substantial dip in consumer confidence and spending that could negatively impact the foodservice distribution industry. Any one of these impacts could have an adverse effect on our results of operations and financial condition.

Additionally, the “yellow vest” protests in France against a fuel tax increase and the French government negatively impacted our sales in France over the 2018 year-end holiday period. Similarly, future labor disruptions or disputes could disrupt the integration of Brake France and Davigel into Sysco France and our operations in France and the EU generally. In addition, if changes occur in laws and regulations impacting the flow of goods, services and workers in either the U.K or France or in other parts of the EU, with respect to Brexit or otherwise, our European operations could also be negatively impacted.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

None

Issuer Purchases of Equity Securities

We made the following share repurchases during the ~~first 39 weeks~~second quarter of fiscal ~~2018:~~2019:

											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	(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
December 31 - January 27	908,968	$	61.76	903,760	—
September 30 – October 27						1,569,826	$	71.35	1,568,432	—
Month #2
January 28 - February 24	1,264,306	59.80		1,264,306	—
October 28 – November 24						2,359,138	67.48		2,357,634	—
Month #3
February 25 - March 31	488,344	59.82		485,014	—
Total	2,661,618	$	60.47	2,653,080	—
November 25 – December 29						4,074,114	64.84		4,064,574	—
Totals						8,003,078	$	66.90	7,990,640	—



Delaware	74-1648137
(State or other jurisdiction of incorporation or organization)	(IRS employer identification number)

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



Large Accelerated Filer þ		Accelerated Filer ¨
Non-accelerated Filer ¨		Smaller Reporting Company ¨
(Do not check if a smaller reporting company)		Emerging growth company ¨




	PART I – FINANCIAL INFORMATION	Page No.
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3231
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	55
Item 4.	Controls and Procedures	5655
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	5756
Item 1A.	Risk Factors	5756
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5756
Item 3.	Defaults Upon Senior Securities	57
Item 4.	Mine Safety Disclosures	5857
Item 5.	Other Information	5857
Item 6.	Exhibits	5857

Signatures		5958


	Mar. 31, 2018			Jul. 1, 2017			Apr. 1, 2017			Dec. 29, 2018			Jun. 30, 2018			Dec. 30, 2017
	(unaudited)						(unaudited)			(unaudited)						(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	901,551		$	869,502		$	855,133		$	744,808		$	552,325		$	961,067
Accounts and notes receivable, less allowances of $65,647, $31,059, and $56,525	4,227,743			4,012,393			4,282,038
Accounts and notes receivable, less allowances of $44,418, $25,768 and $52,588										4,147,367			4,073,723			3,953,643
Inventories, net	3,259,771			2,995,598			2,944,327			3,310,312			3,125,413			3,174,012
Prepaid expenses and other current assets	231,064			139,185			139,298			212,289			187,880			183,446
Income tax receivable	95,742			16,760			104,765			23,007			64,112			—
Total current assets	8,715,871			8,033,438			8,325,561			8,437,783			8,003,453			8,272,168
Plant and equipment at cost, less depreciation	4,392,158			4,377,302			4,271,707			4,375,550			4,521,660			4,366,292
Other long-term assets
Goodwill	4,066,186			3,916,128			3,767,906			3,875,973			3,955,485			4,001,020
Intangibles, less amortization	1,056,068			1,037,511			1,085,946			899,939			979,812			1,056,335
Deferred income taxes	4,289			142,472			190,145			77,191			83,666			92,950
Other assets	394,570			249,804			279,635			527,740			526,328			430,605
Total other long-term assets	5,521,113			5,345,915			5,323,632			5,380,843			5,545,291			5,580,910
Total assets	$	18,629,142		$	17,756,655		$	17,920,900		$	18,194,176		$	18,070,404		$	18,219,370
LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES AND SHAREHOLDERS’ EQUITY										LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Notes payable	$	6,606		$	3,938		$	24,676		$	6,101		$	4,176		$	6,629
Accounts payable	4,235,856			3,971,112			3,849,670			4,230,215			4,136,482			3,745,817
Accrued expenses	1,515,682			1,576,221			1,328,773			1,723,246			1,608,966			1,567,362
Accrued income taxes	—			14,540			—			4,571			56,793			128,446
Current maturities of long-term debt	288,055			530,075			526,691			786,037			782,329			534,716
Total current liabilities	6,046,199			6,095,886			5,729,810			6,750,170			6,588,746			5,982,970
Long-term liabilities
Long-term debt	8,835,156			7,660,877			8,026,617			8,019,846			7,540,765			8,312,489
Deferred income taxes	161,193			161,715			185,178			233,601			319,124			143,794
Other long-term liabilities	1,199,472			1,373,822			1,568,523			987,566			1,077,163			1,477,991
Total long-term liabilities	10,195,821			9,196,414			9,780,318			9,241,013			8,937,052			9,934,274
Commitments and contingencies
Noncontrolling interests	35,909			82,839			80,244
Shareholders' equity
Noncontrolling interest										35,357			37,649			33,524
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			765,175			765,175			765,175
Paid-in capital	1,357,399			1,327,366			1,307,914			1,465,461			1,383,619			1,361,471
Retained earnings	9,850,739			9,447,755			9,317,377			10,654,711			10,348,628			9,708,261
Accumulated other comprehensive loss	(1,075,484		)	(1,262,737		)	(1,505,437		)	(1,524,407		)	(1,409,269		)	(1,116,028		)
Treasury stock at cost, 244,419,011, 235,135,699 and 229,075,540 shares	(8,546,616		)	(7,896,043		)	(7,554,501		)
Total shareholders' equity	2,351,213			2,381,516			2,330,528
Treasury stock at cost, 251,658,719, 244,533,248 and 243,764,879 shares										(9,193,304		)	(8,581,196		)	(8,450,277		)
Total shareholders’ equity										2,167,636			2,506,957			2,268,602
Total liabilities and shareholders' equity	$	18,629,142		$	17,756,655		$	17,920,900		$	18,194,176		$	18,070,404		$	18,219,370


	13-Week Period Ended						39-Week Period Ended						13-Week Period Ended						26-Week Period Ended
	Mar. 31, 2018			Apr. 1, 2017			Mar. 31, 2018			Apr. 1, 2017			Dec. 29, 2018			Dec. 30, 2017			Dec. 29, 2018			Dec. 30, 2017
Net earnings	$	330,085		$	238,278		$	981,838		$	837,332		$	267,380		$	284,113		$	698,422		$	651,753
Other comprehensive income (loss):
Foreign currency translation adjustment	72,010			89,799			212,594			(189,884		)	(101,533		)	19,254			(126,460		)	140,584
Items presented net of tax:
Amortization of cash flow hedges	2,155			1,770			6,080			5,310			2,155			2,155			4,310			3,925
Change in net investment hedges	(31,526		)	(16,464		)	(47,703		)	8,797			26,469			(4,153		)	35,057			(16,177		)
Change in cash flow hedges	(10,473		)	(4,711		)	(7,355		)	2,843			(8,784		)	917			(11,792		)	3,118
Amortization of prior service cost	1,807			1,752			5,098			5,256			1,600			1,807			3,200			3,291
Amortization of actuarial loss, net	6,571			5,013			18,539			20,359			6,529			6,571			13,058			11,968
Total other comprehensive income (loss)	40,544			77,159			187,253			(147,319		)
Actuarial loss, net													—			—			(32,511		)	—
Total other comprehensive (loss) income													(73,564		)	26,551			(115,138		)	146,709
Comprehensive income	$	370,629		$	315,437		$	1,169,091		$	690,013		$	193,816		$	310,664		$	583,284		$	798,462



(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


⁽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 equivalents
Cash and 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 Apr. 1, 2017								Assets and Liabilities Measured at Fair Value as of Dec. 30, 2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(In thousands)								(In thousands)
Assets:
Cash equivalents
Cash and cash equivalents	$	91	$	44,270	$	—	$	44,361	$	241,071	$	43,191	$	—	$	284,262
Other assets ⁽¹⁾									145,734		7,143		—		152,877
Total assets at fair value	$	91	$	44,270	$	—	$	44,361	$	386,805	$	50,334	$	—	$	437,139



Maturity Date of the Hedging Instrument	Currency / Unit of Measure	Notional Value
		(In millions)
Hedging of interest rate risk
April 2019	U.S. Dollar	500
October 2020	U.S. Dollar	750
July 2021	U.S. Dollar	500
June 2023	Euro	500
March 2025	U.S. Dollar	500

Hedging of foreign currency risk⁽¹⁾
Various (January 2019 to April 2019)	Swedish Krona	261
Various (January 2019 to October 2019)	British Pound Sterling	20
Various (January 2019 to December 2019)	U.S. Dollar	1
June 2021	Canadian Dollar	300
July 2021	British Pound Sterling	234
August 2021	British Pound Sterling	466
June 2023	Euro	500

Hedging of fuel risk
Various ~~(April~~(December 31, 2018 to ~~January~~December 2019)	Gallons	41	52


⁽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.~~


		Derivative Fair Value							Derivative Fair Value
	Balance Sheet location	Mar. 31, 2018		Jul. 1, 2017		Apr. 1, 2017		Balance Sheet location	Dec. 29, 2018		Jun. 30, 2018		Dec. 30, 2017
		(In thousands)							(In thousands)
Fair Value Hedges:
Interest rate swaps	Other current assets	$	—	$	707	$	659	Other current assets	$	—	$	—	$	118
Interest rate swaps	Other assets	1,800		—		—		Other assets	5,207		—		—
Interest rate swaps	Other long-term liabilities	49,256		21,390		28,062		Other current liabilities	2,180		6,820		—
Interest rate swaps								Other long-term liabilities	31,488		49,734		33,003

Cash Flow Hedges:
Fuel swaps	Other current assets	$	12,381	$	717	$	—
Fuel Swaps								Other current assets	$	—	$	15,316	$	13,678
Foreign currency forwards	Other current assets	533		—		—		Other current assets	246		693		555
Fuel swaps	Other assets	—		—		831
Cross currency swaps	Other assets	—		—		4,211		Other current assets	—		4,284		—
Fuel swaps	Other current liabilities	—		6,160		—
Foreign currency forwards	Other current liabilities	88		154		—
Cross currency swaps								Other assets	13,773		3,454		—
Fuel Swaps								Other current liabilities	19,548		—		—
Foreign currency forwards	Other long-term liabilities	—		—		431		Other current liabilities	226		71		351
Fuel swaps	Other long-term liabilities	—		160		—		Other long-term liabilities	742		—		—
Cross currency swaps	Other long-term liabilities	34,690		5,816		—		Other long-term liabilities	—		14,201		21,310

Net Investment Hedges:
Foreign currency swaps	Other assets	$	7,946	$	—	$	26,691	Other assets	$	23,349	$	10,709	$	7,822
Foreign currency swaps	Other long-term liabilities	71,784		12,308		22,693		Other long-term liabilities	20,361		39,690		48,087
Foreign denominated debt	Long-term debt	616,450		571,450		532,750


	13-Week Period Ended Mar. 31, 2018							13-Week Period Ended Dec. 29, 2018
	Cost of Goods Sold		Operating Expense		Interest Expense			Cost of Goods Sold		Operating Expense		Interest Expense
	(In thousands)							(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	$	11,673,876	$	2,189,695	$	136,145		$	11,993,995	$	2,319,817	$	87,113
Gain or (loss) on fair value hedging relationships:
Interest rate swaps:
Hedged items ⁽¹⁾	$	—	$	—	$	419		$	—	$	—	$	(46,919	)
Derivatives designated as hedging instruments	—		—		(15,740		)	—		—		31,550
Gain or (loss) on cash flow hedging relationships:
Fuel swaps:
Gain or (loss) reclassified from AOCI into income	$	—	$	4,438	$	—
Foreign currency contracts:
Gain or (loss) reclassified from AOCI into income	$	348	$	—	$	—
Interest rate swaps:
Gain or (loss) reclassified from AOCI into income⁽²⁾	$	—	$	—	$	(2,873	)


⁽¹⁾	The hedged total includes interest expense of ~~$13.6~~$15.7 million and change in fair value of debt of ~~$14.1~~$31.3 million.


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


⁽²⁾⁽¹⁾	~~Losses reclassified from AOCI into income represent amortization~~The hedged total includes interest expense of ~~losses on forward starting interest rate swap agreements that were previously settled.~~$30.8 million and change in fair value of debt of $24.7 million.



	13-Week Period Ended Mar. 31, 2018
	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 contracts	Other expense (income)	$	(6,743	)


	13-Week Period Ended Mar. 31, 2018						13-Week Period Ended Dec. 29, 2018
	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		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)		(In thousands)				(In thousands)
Derivatives in cash flow hedging relationships:
Fuel swaps	$	(1,195	)	Operating income	$	4,438	$	(36,843	)	Operating expense	$	5,040
Foreign currency contracts	(12,875		)	Cost of goods sold	348		25,463			Cost of goods sold	8
Total	$	(14,070	)		$	4,786	$	(11,380	)		$	5,048

Derivatives in net investment hedging relationships:
Foreign currency contracts	$	(24,420	)	Other expense (income)	$	—	$	27,143		N/A	$	—
Foreign denominated debt	(16,400		)	Other expense (income)	—		8,150			N/A	—
Total	$	(40,820	)		$	—	$	35,293			$	—

							13-Week Period Ended Dec. 30, 2017
							Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives			Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
							(In thousands)				(In thousands)
Derivatives in cash flow hedging relationships:
Fuel swaps							$	8,505		Operating expense	$	1,814
Foreign currency contracts							6,331			Cost of goods sold	525
Total							$	14,836			$	2,339

Derivatives in net investment hedging relationships:
Foreign currency contracts							$	(12,063	)	N/A	$	—
Foreign denominated debt							(9,450		)	N/A	—
Total							$	(21,513	)		$	—



	Mar. 31, 2018			Mar. 31, 2018
	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	$	(2,242,904	)	$	45,030



	13-Week Period Ended Mar. 31, 2018
	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	$	1,690


⁽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.”~~



Maturity Date	Par Value (in millions)		Coupon Rate		Pricing (percentage of par)
March 15, 2025 (the 2025 Notes)	$	500	3.55	%	99.480	%
March 15, 2048 (the 2048 Notes)	500		4.45		99.378



Maturity Date	Par Value		Coupon Rate		Principal amount tendered		Remaining Par Value after tender offer		Cash amount paid (including interest)
	(Dollars in millions)
April 15, 2027	$	50	7.160	%	$	5.7	$	44.3	$	7.4
August 1, 2028	225		6.500		61.9		163.1		77.3
September 21, 2035	500		5.375		115.9		384.1		134.3
March 17, 2039	250		6.625		47.0		203.0		63.7


		13-Week Period Ended Mar. 31, 2018										13-Week Period Ended Dec. 29, 2018
	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			Tax			Net of Tax Amount
		(In thousands)										(In thousands)
Pension and other postretirement benefit plans:
Reclassification adjustments:
Amortization of prior service cost	Operating expenses	$	2,409		$	602		$	1,807		Other expense, net	$	2,133		$	533		$	1,600
Amortization of actuarial loss (gain), net	Operating expenses	8,761			2,190			6,571			Other expense, net	8,706			2,177			6,529
Total reclassification adjustments		11,170			2,792			8,378				10,839			2,710			8,129
Foreign currency translation:
Other comprehensive income (loss) before reclassification adjustments:
Foreign currency translation adjustment	N/A	72,010			—			72,010			N/A	(101,533		)	—			(101,533		)
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedges	N/A	(14,070		)	(3,597		)	(10,473		)	Operating expenses ⁽¹⁾	(11,380		)	(2,596		)	(8,784		)
Change in net investment hedges	N/A	(40,820		)	(9,294		)	(31,526		)	N/A	35,293			8,824			26,469
Total other comprehensive income (loss) before reclassification adjustments		(54,890		)	(12,891		)	(41,999		)		23,913			6,228			17,685
Reclassification adjustments:
Amortization of cash flow hedges	Interest expense	2,873			718			2,155			Interest expense	2,873			718			2,155
Total other comprehensive income (loss)		$	31,163		$	(9,381	)	$	40,544			$	(63,908	)	$	9,656		$	(73,564	)


⁽¹⁾	Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.


		13-Week Period Ended Apr. 1, 2017										26-Week Period Ended Dec. 29, 2018
	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			Tax			Net of Tax Amount
		(In thousands)										(In thousands)
Pension and other postretirement benefit plans:
Other comprehensive income before reclassification adjustments:
Net actuarial loss												$	(36,891	)	$	(4,380	)	$	(32,511	)
Reclassification adjustments:
Amortization of prior service cost	Operating expenses	$	2,844		$	1,092		$	1,752		Other expense, net	4,266			1,066			3,200
Amortization of actuarial loss (gain), net	Operating expenses	8,944			3,931			5,013			Other expense, net	17,412			4,354			13,058
Total reclassification adjustments		11,788			5,023			6,765				21,678			5,420			16,258
Foreign currency translation:
Other comprehensive income (loss) before reclassification adjustments:
Foreign currency translation adjustment	N/A	89,799			—			89,799			N/A	(126,460		)	—			(126,460		)
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedges	Interest expense	(7,647		)	(2,936		)	(4,711		)	Operating expenses ⁽¹⁾	(15,157		)	(3,365		)	(11,792		)
Change in net investment hedges	N/A	(12,775		)	3,689			(16,464		)	N/A	46,471			11,414			35,057
Total other comprehensive income (loss) before reclassification adjustments		(20,422		)	753			(21,175		)		31,314			8,049			23,265
Reclassification adjustments:
Amortization of cash flow hedges	Interest expense	2,873			1,103			1,770			Interest expense	5,746			1,436			4,310
Total other comprehensive income		$	84,038		$	6,879		$	77,159
Total other comprehensive income (loss)												$	(104,613	)	$	10,525		$	(115,138	)



	Condensed Consolidated Balance Sheet
	Dec. 29, 2018
	Sysco		Certain U.S. Broadline Subsidiaries		Other Non-Guarantor Subsidiaries		Eliminations			Consolidated Totals
	(In thousands)
Current assets	$	138,324	$	4,087,103	$	4,212,356	$	—		$	8,437,783
Intercompany receivables	7,062,518		110,889		2,433,329		(9,606,736		)	—
Investment in subsidiaries	5,864,415		—		1,210,579		(7,074,994		)	—
Plant and equipment, net	254,187		2,122,911		1,998,452		—			4,375,550
Other assets	745,923		684,276		4,465,022		(514,378		)	5,380,843
Total assets	$	14,065,367	$	7,005,179	$	14,319,738	$	(17,196,108	)	$	18,194,176
Current liabilities	$	1,211,568	$	928,505	$	4,610,097	$	—		$	6,750,170
Intercompany payables	2,514,212		2,535,827		4,556,697		(9,606,736		)	—
Long-term debt	7,593,478		9,605		416,763		—			8,019,846
Other liabilities	578,475		536,378		620,692		(514,378		)	1,221,167
Noncontrolling interest	—		—		35,357		—			35,357
Shareholders’ equity	2,167,634		2,994,864		4,080,132		(7,074,994		)	2,167,636
Total liabilities and shareholders’ equity	$	14,065,367	$	7,005,179	$	14,319,738	$	(17,196,108	)	$	18,194,176



	Condensed Consolidating Balance Sheet
	Mar. 31, 2018
	Sysco		Certain U.S. Broadline Subsidiaries		Other Non-Guarantor Subsidiaries		Eliminations			Consolidated Totals
	(In thousands)
Current assets	$	273,948	$	4,093,321	$	4,348,602	$	—		$	8,715,871
Intercompany receivables	3,344,142		590,025		—		(3,934,167		)	—
Investment in subsidiaries	7,771,987		—		—		(7,771,987		)	—
Plant and equipment, net	263,472		2,047,608		2,081,078		—			4,392,158
Other assets	891,242		553,270		4,761,664		(685,063		)	5,521,113
Total assets	$	12,544,791	$	7,284,224	$	11,191,344	$	(12,391,217	)	$	18,629,142
Current liabilities	$	623,141	$	3,704,927	$	1,718,131	$	—		$	6,046,199
Intercompany payables	—		—		3,934,167		(3,934,167		)	—
Long-term debt	8,761,475		6,429		67,252		—			8,835,156
Other liabilities	808,962		531,480		705,286		(685,063		)	1,360,665
Noncontrolling interest	—		—		35,909		—			35,909
Shareholders’ equity	2,351,213		3,041,388		4,730,599		(7,771,987		)	2,351,213
Total liabilities and shareholders’ equity	$	12,544,791	$	7,284,224	$	11,191,344	$	(12,391,217	)	$	18,629,142


	Condensed Consolidating Statement of Comprehensive Income															Condensed Consolidated Statement of Comprehensive Income
	For the 13-Week Period Ended Mar. 31, 2018															For the 13-Week Period Ended Dec. 29, 2018
	Sysco			Certain U.S. Broadline Subsidiaries			Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Totals			Sysco			Certain U.S. Broadline Subsidiaries			Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Totals
	(In thousands)															(In thousands)
Sales	$	—		$	8,762,013		$	6,078,876		$	(491,385	)	$	14,349,504		$	—		$	9,101,114		$	6,329,665		$	(665,072	)	$	14,765,707
Cost of sales	—			7,105,014			5,060,247			(491,385		)	11,673,876			—			7,381,785			5,277,282			(665,072		)	11,993,995
Gross profit	—			1,656,999			1,018,629			—			2,675,628			—			1,719,329			1,052,383			—			2,771,712
Operating expenses	187,360			1,004,057			998,278			—			2,189,695			232,621			1,035,676			1,051,520			—			2,319,817
Operating income (loss)	(187,360		)	652,942			20,351			—			485,933			(232,621		)	683,653			863			—			451,895
Interest expense (income) ⁽¹⁾	160,333			(28,742		)	4,554			—			136,145			63,491			(8,920		)	32,542			—			87,113
Other expense (income), net	(3,652		)	(593		)	(10,851		)	—			(15,096		)	3,772			(86		)	6,511			—			10,197
Earnings (losses) before income taxes	(344,041		)	682,277			26,648			—			364,884			(299,884		)	692,659			(38,190		)	—			354,585
Income tax (benefit) provision	(117,286		)	151,090			995			—			34,799			(73,057		)	170,960			(10,698		)	—			87,205
Equity in earnings of subsidiaries	556,840			—			—			(556,840		)	—			494,207			—			128,030			(622,237		)	—
Net earnings	330,085			531,187			25,653			(556,840		)	330,085			267,380			521,699			100,538			(622,237		)	267,380
Other comprehensive income (loss)	40,544			—			72,010			(72,010		)	40,544			(73,564		)	—			(101,533		)	101,533			(73,564		)
Comprehensive income	$	370,629		$	531,187		$	97,663		$	(628,850	)	$	370,629		$	193,816		$	521,699		$	(995	)	$	(520,704	)	$	193,816


	Condensed Consolidating Statement of Comprehensive Income															Condensed Consolidated Statement of Comprehensive Income
	For the 13-Week Period Ended Apr. 1, 2017															For the 13-Week Period Ended Dec. 30, 2017
	Sysco			Certain U.S. Broadline Subsidiaries			Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Totals			Sysco			Certain U.S. Broadline Subsidiaries			Other Non-Guarantor Subsidiaries		Eliminations			Consolidated Totals
	(In thousands)															(In thousands)
Sales	$	—		$	8,412,869		$	6,070,555		$	(959,252	)	$	13,524,172		$	—		$	8,754,169		$	6,169,239	$	(511,918	)	$	14,411,490
Cost of sales	—			6,800,302			5,148,987			(959,252		)	10,990,037			—			7,102,287			5,121,735		(511,918		)	11,712,104
Gross profit	—			1,612,567			921,568			—			2,534,135			—			1,651,882			1,047,504		—			2,699,386
Operating expenses	255,394			957,521			885,258			—			2,098,173			203,892			993,440			973,502		—			2,170,834
Operating income (loss)	(255,394		)	655,046			36,310			—			435,962			(203,892		)	658,442			74,002		—			528,552
Interest expense (income) ⁽¹⁾	112,779			(36,434		)	4,659			—			81,004			108,768			(27,955		)	5,173		—			85,986
Other expense (income), net	(3,484		)	(930		)	(401		)	—			(4,815		)	(10,122		)	69			891		—			(9,162		)
Earnings (losses) before income taxes	(364,689		)	692,410			32,052			—			359,773			(302,538		)	686,328			67,938		—			451,728
Income tax (benefit) provision	(173,169		)	297,542			(2,878		)	—			121,495			(120,315		)	262,822			25,108		—			167,615
Equity in earnings of subsidiaries	429,798			—			—			(429,798		)	—			466,336			—			—		(466,336		)	—
Net earnings	238,278			394,868			34,930			(429,798		)	238,278			284,113			423,506			42,830		(466,336		)	284,113
Other comprehensive income (loss)	77,159			—			89,799			(89,799		)	77,159			26,551			—			19,254		(19,254		)	26,551
Comprehensive income	$	315,437		$	394,868		$	124,729		$	(519,597	)	$	315,437		$	310,664		$	423,506		$	62,084	$	(485,590	)	$	310,664



	Condensed Consolidated Statement of Comprehensive Income
	For the 26-Week Period Ended Dec. 29, 2018
	Sysco			Certain U.S. Broadline Subsidiaries			Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Totals
	(In thousands)
Sales	$	—		$	18,580,920		$	12,563,823		$	(1,163,757	)	$	29,980,986
Cost of sales	—			15,041,886			10,427,360			(1,163,757		)	24,305,489
Gross profit	—			3,539,034			2,136,463			—			5,675,497
Operating expenses	452,902			2,088,027			2,054,533			—			4,595,462
Operating income (loss)	(452,902		)	1,451,007			81,930			—			1,080,035
Interest expense (income) ⁽¹⁾	104,905			(30,459		)	101,683			—			176,129
Other expense (income), net	10,372			(140		)	1,097			—			11,329
Earnings (losses) before income taxes	(568,179		)	1,481,606			(20,850		)	—			892,577
Income tax (benefit) provision	(166,645		)	367,404			(6,604		)	—			194,155
Equity in earnings of subsidiaries	1,099,956			—			222,371			(1,322,327		)	—
Net earnings	698,422			1,114,202			208,125			(1,322,327		)	698,422
Other comprehensive income (loss)	(115,138		)	—			(126,460		)	126,460			(115,138		)
Comprehensive income	$	583,284		$	1,114,202		$	81,665		$	(1,195,867	)	$	583,284



	Condensed Consolidating Statement of Comprehensive Income
	For the 39-Week Period Ended Mar. 31, 2018
	Sysco			Certain U.S. Broadline Subsidiaries			Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Totals
	(In thousands)
Sales	$	—		$	26,537,840		$	18,368,427		$	(1,494,849	)	$	43,411,418
Cost of sales	—			21,482,727			15,254,858			(1,494,849		)	35,242,736
Gross profit	—			5,055,113			3,113,569			—			8,168,682
Operating expenses	584,024			3,006,064			2,937,287			—			6,527,375
Operating income (loss)	(584,024		)	2,049,049			176,282			—			1,641,307
Interest expense (income) ⁽¹⁾	368,099			(80,048		)	14,964			—			303,015
Other expense (income), net	(12,297		)	(2,152		)	(10,327		)	—			(24,776		)
Earnings (losses) before income taxes	(939,826		)	2,131,249			171,645			—			1,363,068
Income tax (benefit) provision	(333,562		)	663,476			51,316			—			381,230
Equity in earnings of subsidiaries	1,588,102			—			—			(1,588,102		)	—
Net earnings	981,838			1,467,773			120,329			(1,588,102		)	981,838
Other comprehensive income (loss)	187,253			—			212,594			(212,594		)	187,253
Comprehensive income	$	1,169,091		$	1,467,773		$	332,923		$	(1,800,696	)	$	1,169,091


⁽¹⁾	Interest expense (income) includes ~~$80.0~~$30.5 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															Condensed Consolidated Statement of Comprehensive Income
	For the 52-Week Period Ended Jul. 1, 2017															For the 26-Week Period Ended Dec. 30, 2017
	Sysco			Certain U.S. Broadline Subsidiaries			Other Non-Guarantor Subsidiaries			Eliminations			Consolidated Totals			Sysco			Certain U.S. Broadline Subsidiaries			Other Non-Guarantor Subsidiaries		Eliminations			Consolidated Totals
	(In thousands)															(In thousands)
Sales	$	—		$	34,325,884		$	22,862,131		$	(1,816,876	)	$	55,371,139		$	—		$	17,775,826		$	12,289,551	$	(1,003,463	)	$	29,061,914
Cost of sales	—			27,690,469			18,940,039			(1,816,876		)	44,813,632			—			14,377,711			10,194,612		(1,003,463		)	23,568,860
Gross profit	—			6,635,415			3,922,092			—			10,557,507			—			3,398,115			2,094,939		—			5,493,054
Operating expenses	931,498			3,907,829			3,665,009			—			8,504,336			406,848			1,999,593			1,938,696		—			4,345,137
Operating income (loss)	(931,498		)	2,727,586			257,083			—			2,053,171			(406,848		)	1,398,522			156,243		—			1,147,917
Interest expense (income) ⁽¹⁾	405,030			(122,012		)	19,860			—			302,878			207,764			(51,306		)	10,412		—			166,870
Other expense (income), net	(23,740		)	(1,116		)	8,919			—			(15,937		)	(18,829		)	854			838		—			(17,137		)
Earnings (losses) before income taxes	(1,312,788		)	2,850,714			228,304			—			1,766,230			(595,783		)	1,448,974			144,993		—			998,184
Income tax (benefit) provision	(463,598		)	1,006,703			80,622			—			623,727			(216,273		)	512,383			50,321		—			346,431
Equity in earnings of subsidiaries	1,991,693			—			—			(1,991,693		)	—			1,031,263			—			—		(1,031,263		)	—
Net earnings	1,142,503			1,844,011			147,682			(1,991,693		)	1,142,503			651,753			936,591			94,672		(1,031,263		)	651,753
Other comprehensive income (loss)	95,381			—			(9,317		)	9,317			95,381			146,709			—			140,583		(140,583		)	146,709
Comprehensive income	$	1,237,884		$	1,844,011		$	138,365		$	(1,982,376	)	$	1,237,884		$	798,462		$	936,591		$	235,255	$	(1,171,846	)	$	798,462