# SYSCO CORP (SYY) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from SYSCO CORP's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/96021/000009602124000128/syy-20240629.htm
Accession: 0000096021-24-000128
Filing date: 2024-08-28
Report date: 2024-06-29
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/SYY/
All MD&A years: /company/SYY/mda/
Previous year: /company/SYY/mda/fy2023/ (FY 2023)
Next year: /company/SYY/mda/fy2025/ (FY 2025)

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of Sysco’s financial condition, results of operations and liquidity and capital resources for the fiscal years ended June 29, 2024 and July 1, 2023 should be read as a supplement to our Consolidated Financial Statements and the accompanying notes contained in Item 8 of this report, and in conjunction with the “Forward-looking Statements” section set forth in Part II and the “Risk Factors” section set forth in Item 1A of Part I. All discussion of changes in our results of operations from fiscal 2023 to fiscal 2022 has been omitted from this Form 10-K, but may be found in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the year ended July 1, 2023, filed with the Securities and Exchange Commission on August 25, 2023.

Overview

Sysco distributes food and related products to restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers. Our primary operations are in North America and Europe. Under the accounting provisions related to disclosures about segments of an enterprise, we have combined certain operations into three reportable segments. “Other” financial information is attributable to our other operations that do not meet the quantitative disclosure thresholds.

•U.S. Foodservice Operations – primarily includes (a) our U.S. Broadline operations, which distribute a full line of food products, including custom-cut meat, seafood, produce, specialty Italian, specialty imports and a wide variety of non-food products and (b) our U.S. Specialty operations, which include our FreshPoint fresh produce

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distribution business, our Specialty Meats and Seafood Group specialty protein operations, our growing Italian Specialty platform anchored by Greco & Sons, Inc., Edward Don, acquired in the second quarter of fiscal 2024, which distributes restaurant equipment and supplies, our Asian specialty distribution company and a number of other small specialty businesses that are not material to the operations of Sysco;

•International Foodservice Operations – includes operations outside of the United States (U.S.), which distribute a full line of food products and a wide variety of non-food products. The Americas primarily consists of operations in Canada, Bahamas, Mexico, Costa Rica and Panama, as well as our export operations that distribute to international customers. Our European operations primarily consist of operations in the United Kingdom (U.K.), France, Ireland and Sweden;

•SYGMA – our U.S. customized distribution operations serving quick-service chain restaurant customer locations; and

•Other – primarily our hotel supply operations, Guest Worldwide.

We estimate that we serve about 17% of an approximately $360 billion annual foodservice market in the U.S. based on industry data obtained from Technomic, Inc. (Technomic) as of the end of calendar year 2023. Technomic projects the market size to increase to approximately $370 billion by the end of calendar year 2024. From time to time, Technomic may revise the methodology used to calculate the size of the foodservice market and, as a result, our percentage can change not only from our sales results, but also from such revisions. We also serve certain international geographies that vary in size and amount of market share.

According to industry sources, the foodservice, or food-away-from-home, market represents approximately 56% of the total dollars spent on food purchases made at the consumer level in the U.S. as of the end of calendar year 2023.

Highlights

Our fiscal 2024 results were driven by sales growth that surpassed fiscal 2023 levels by 3.3%. Sales growth was driven by both volume growth, partially from acquisitions, and inflation. We also made continued gains in overall market share in fiscal 2024. We demonstrated continued positive operating leverage, with gross profit growing faster than operating expenses, and operating income growing faster than sales. See below for a comparison of our fiscal 2024 results to our fiscal 2023 results, both including and excluding Certain Items (as defined below).

    Below is a comparison of results from fiscal 2024 to fiscal 2023:

•Sales:

◦increased 3.3%, or $2.5 billion, to $78.8 billion;

•Operating income:

◦increased 5.4%, or $163 million, to $3.2 billion;

◦adjusted operating income increased 8.4%, or $271 million, to $3.5 billion;

•Net earnings:

◦increased 10.5%, or $185 million, to $2.0 billion;

◦adjusted net earnings increased 6.0%, or $123 million, to $2.2 billion;

•Basic earnings per share:

◦increased 11.7%, or $0.41, to $3.90 from the comparable prior year amount of $3.49 per share;

•Diluted earnings per share:

◦increased 12.1%, or $0.42, to $3.89 from the comparable prior year amount of $3.47 per share;

◦adjusted diluted earnings per share were $4.31 in fiscal 2024, a $0.30 increase from the comparable prior year amount of $4.01 per share;

•EBITDA:

◦increased 12.7%, or $457 million, to $4.0 billion; and

◦adjusted EBITDA increased 9.0%, or $346 million, to $4.2 billion.

The discussion of our results includes certain non-GAAP financial measures, including EBITDA and adjusted EBITDA, that we believe provide important perspective with respect to underlying business trends. Other than EBITDA and free cash flow, any non-GAAP financial measures will be denoted as adjusted measures to remove (1) restructuring charges; (2) expenses associated with our various transformation initiatives; (3) severance charges; and (4) acquisition-related costs consisting of: (a) intangible amortization expense and (b) acquisition costs and due diligence costs related to our acquisitions. Our results for fiscal 2023 were also impacted by a pension settlement charge that resulted from the purchase of a

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nonparticipating single premium group annuity contract that transferred defined benefit plan obligations to an insurer, adjustments to our bad debt reserve specific to aged receivables existing prior to the COVID-19 pandemic, adjustments to a product return allowance related to COVID-related personal protection equipment inventory and a gain on a litigation financing agreement.

The fiscal 2024 and fiscal 2023 items discussed above are collectively referred to as “Certain Items.” The results of our operations can be impacted by changes in exchange rates applicable to converting from local currencies to U.S. dollars. We measure our results on a constant currency basis. Our discussion below of our results includes certain non-GAAP financial measures that we believe provide important perspective with respect to underlying business trends. Other than free cash flow, any non-GAAP financial measures will be denoted as adjusted measures and exclude the impact from Certain Items, and certain metrics are stated on a constant currency basis.

Management believes that adjusting its operating expenses, operating income, other (income) 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. Additionally, it provides meaningful supplemental information to both management and investors that (1) is indicative of the performance of the company’s underlying operations, (2) facilitates comparisons on a year-over-year basis and (3) 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.

The company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes. These financial measures should not be used as a substitute for GAAP measures in assessing the company’s results of operations for periods presented. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. Any metric within this section referred to as “adjusted” will reflect the applicable impact of Certain Items. More information on the rationale for the use of these measures and reconciliations to GAAP numbers can be found under “Non-GAAP Reconciliations.”

Key Performance Indicators

Sysco seeks to meet its strategic goals by continually measuring its success in its key performance metrics that drive stakeholder value through sales growth and capital allocation and deployment. We believe the following are our most significant performance metrics in our current business environment:

•Adjusted operating income growth (non-GAAP);

•Adjusted diluted earnings per share growth (non-GAAP);

•Adjusted EBITDA (non-GAAP);

•Case volume growth for U.S. Foodservice and International Foodservice operations;

•Sysco brand penetration for U.S. Broadline operations; and

•Free cash flow (non-GAAP).

We use these financial metrics and related computations, as well as sales and gross profit growth, to evaluate our business and to plan for near and long-term operating and strategic decisions. We believe it is useful to provide investors with the same financial information that we use internally to make comparisons of our historical operating results, identify trends in our underlying operating results and evaluate our business.

Key Financial Definitions

•Sales – Sales are equal to gross sales subtracted by, (1) sales returns and (2) sales incentives that we offer to certain customers, such as upfront monies and discounts. Our sales are driven by changes in case volumes and product inflation that is reflected in the pricing of our products and mix of products sold.

•Gross profit – Gross profit is equal to our net sales subtracted by our cost of goods sold. Cost of goods sold primarily includes inventory costs (net of supplier consideration) and inbound freight. Cost of goods sold generally changes as we incur higher or lower costs from our suppliers and as our customer and product mix changes.

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Adjusted Operating Income and Adjusted Diluted Earnings per Share Growth

Adjusted operating income represents our consolidated operating income, adjusted for the impact of Certain Items that we do not consider representative of our underlying performance. Adjusted diluted earnings per share represents our consolidated diluted earnings per share, adjusted for the impact of Certain Items that we do not consider representative of our underlying performance. Sysco’s management considers growth in these metrics to be useful measures of operating efficiency and profitability as they facilitate comparison of performance on a consistent basis from period to period by providing a measurement of recurring factors and trends affecting our business.

Adjusted EBITDA

EBITDA represents net earnings plus: (1) interest expense, (2) income tax expense and benefit, (3) depreciation and (4) amortization. The net earnings component of our EBITDA calculation is impacted by Certain Items that we do not consider representative of our underlying performance. As a result, in the non-GAAP reconciliations below for each period presented, adjusted EBITDA is computed as EBITDA plus the impact of Certain Items, excluding Certain Items related to interest expense, income taxes, depreciation and amortization. Sysco’s management considers growth in this metric to be a measure of overall financial performance that provides useful information to management and investors about the profitability of the business. It facilitates comparison of performance on a consistent basis from period to period by providing a measurement of recurring factors and trends affecting our business. Additionally, it is a commonly used component metric used to inform on capital structure decisions.

Case Volume Growth for U.S. Foodservice and International Foodservice Operations

Case volume represents the volume of products sold to customers during a period of time and improvements in this metric are a primary driver of Sysco’s top line performance. We define a case as the lowest level of packaged products that are sold from our warehouses, with one case potentially containing several pieces of a product packaged in bulk. Case size does not generally vary by location or from period to period due to the design of our warehouses but can vary within our international operations. Case volume growth is calculated by dividing the change in the volume of cases sold year-over-year by the volume of cases sold in the prior year. Sysco management considers case volume growth within its U.S. Foodservice and International Foodservice operations to be a measure that provides useful information to management and investors in evaluating sales performance and as an indicator of gross margin performance. Management monitors case volume growth by customer type, with bifurcation between local customers and national customers, as this provides a measure of gross profit performance due to the pricing strategies attached to each customer type. Local customers are primarily street customers, such as independent restaurants that do not have long-term contracts, or locally managed customers, such as local chain restaurants, while national customers are the multi-unit customers requiring national coverage from a customer-centric view and are managed centrally from our Global Support Center, specific to U.S. Foodservice. Sysco management seeks to drive higher case volume growth to local customers, which allows more favorable pricing terms for these operations and generates higher gross margins as a result. National customers benefit from purchasing power as they are able to negotiate pricing agreements across multiple businesses reducing our gross profit potential, but reducing our overall cost per case, as national customers have bigger drop sizes. While overall case volume growth reflects a key component of sales growth, local customer case growth provides additional context around gross profit performance.

Sysco Brand Penetration for U.S. Broadline Operations

Sysco management considers Sysco brand penetration to be a measure that provides useful information to management and investors in evaluating the gross profit performance of the company’s U.S. Broadline operations. Sysco offers an assortment of Sysco-branded products which are differentiated from privately branded products. These Sysco Branded products enable us to achieve higher gross margin by administering and leveraging a consolidated product procurement program for quality food and non-food products. Due to cost efficiencies, Sysco-branded products generate a higher gross margin than sales from other privately branded products. We define Sysco brand penetration as the percentage of Sysco-branded case volume sold to U.S. Broadline customers over all cases sold to U.S. Broadline customers. It is calculated by dividing Sysco-branded case volume sold to U.S. Broadline customers by total cases sold to U.S. Broadline customers. This performance indicator, also measured at the customer type level, including local and national customers, is driven by growth in the distribution of Sysco branded products to more customers and more geographies, as well as increasing Sysco branded offerings through innovation and the launch of new products.

Free Cash Flow

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Free cash flow represents net cash provided from operating activities, subtracted by purchases of plant and equipment, added to proceeds from sales of plant and equipment. Sysco management 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. Free cash flow should be considered in addition to, rather than as a substitute for, consolidated net income as a measure of our performance and net cash provided by operating activities as a measure of our liquidity. See “Liquidity and Capital Resources” for discussions of GAAP metrics, including net cash provided by operating activities and our reconciliation of this non-GAAP financial measure.

Trends

Economic and Industry Trends

During fiscal 2024, Sysco continued to outperform the foodservice market and successfully grew its market share, despite the foodservice market experiencing negative year-over-year foot traffic to restaurants. We expect negative foot traffic trends to continue into the first quarter of fiscal 2025, with modest industry traffic improvements in the second half of fiscal 2025. We believe the food-away-from-home sector is a healthy long-term market, and Sysco is diversified and well positioned as a market leader in food service.

Sales and Gross Profit Trends

Our sales and gross profit performance are influenced by multiple factors including price, volume, inflation, customer mix and product mix. The most significant factor affecting performance in fiscal 2024 was volume growth, as we experienced a 3.1% improvement in U.S. Foodservice case volume and a 1.1% improvement in local case volume within our U.S. segment in each instance as compared to fiscal 2023. U.S. Foodservice case volume increased 3.5% and local case volume within our U.S. segment increased 0.7% in the fourth quarter of fiscal 2024, as compared to the fourth quarter of fiscal 2023. This volume reflects our broadline and specialty businesses, except for our specialty meats business, which measures its volume in pounds. Edward Don positively impacted our U.S. Foodservice volumes by 2.7% and local case volumes within our U.S. segment by 1.6% in the fourth quarter of fiscal 2024. Within our International Foodservice segment, we experienced a 5.3% improvement in local case volume compared to fiscal 2023. This growth enabled us to gain market share during fiscal 2024, as we grew more than 1.75 times the market, which exceeded our target of 1.5 times.

Product cost inflation has also been a driver of our sales and gross profit performance. We experienced inflation at a rate of 1.6% and 1.5% in the fourth quarter and for fiscal 2024, respectively, at the total enterprise level, primarily driven by inflation in the poultry and meat categories. We have been successful in managing inflation, resulting in an increase in gross profit dollars. Gross margin decreased one basis point in the fourth quarter and increased 25 basis points for fiscal 2024, as compared to the corresponding prior year periods, primarily driven by higher volumes, the effective management of inflation and progress from our strategic sourcing efforts in our U.S. and International segments.

We expect to grow our revenue and earnings in fiscal 2025. We expect the rate of inflation for fiscal 2025 to be approximately 2%, which is consistent with recent trends experienced in fiscal 2024. Volume growth is expected to be in the low single-digits for fiscal 2025. In total, we expect these factors to result in net sales growth across the enterprise of 4% to 5%.

Operating Expense Trends

Total operating expenses increased 4.5% during fiscal 2024, as compared to fiscal 2023, driven by increased volumes and cost inflation. We continued to experience supply chain productivity improvements and successfully managed operating expenses at our Global Support Center, which experienced an expense decrease of 7% in the fourth quarter of fiscal 2024, as compared to the fourth quarter of fiscal 2023. We expect to have continued improvement in our operating leverage in fiscal 2025, based on a continuation of the productivity improvements from fiscal 2024 across our supply chain, including sustained retention improvements, and lower Global Support Center expenses. We believe the advancements we are making in our physical capabilities, and the investments we are making in improved training, will result in continued supply chain productivity improvements and in lowered costs to serve our customers.

Income Tax Trends

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Our provision for income taxes primarily reflects a combination of income earned and taxed in the various U.S. federal and state as well as foreign jurisdictions. Tax law changes, increases or decreases in book versus tax basis differences, accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances, and our change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate. Our effective tax rate for fiscal 2024 was 23.8% and is expected to increase to approximately 25% in fiscal 2025 due to an increase in the global minimum tax rate, geographic mix, and increases in state tax rates.

Mergers and Acquisitions

We continue to focus on mergers and acquisitions as a part of our growth strategy. We plan to grow our existing businesses, while cultivating new channels, new business lines and new capabilities.

In the first quarter of fiscal 2024, we acquired BIX Produce Company, a leading produce specialty distributor based in Minnesota. This acquisition is expected to provide a strategic opportunity for specialty produce operations to expand its geographic footprint in an area of the country where it does not currently have operations. This company’s results are included within the U.S. Foodservice Operations segment.

In the second quarter of fiscal 2024, we acquired Edward Don, one of the largest kitchen equipment and supplies distributors, based in Chicago, Illinois. Edward Don has a robust supply chain that is expected to enable cost effective distribution of restaurant equipment and supplies. This acquisition further demonstrates our Recipe for Growth strategy of focusing on building strategic specialty platforms that help us better support restaurant and hospitality customers. This company’s results are included within the U.S. Foodservice Operations segment.

In the third quarter of fiscal 2024, we acquired Ready Chef, a fresh produce distributor in Ireland. This company’s results are included within the International Foodservice Operations segment.

In the fourth quarter of fiscal 2024, we acquired Jacmar Foodservice Distribution, a premier foodservice distribution provider based in California. This company’s results are included within the U.S. Foodservice Operations segment.

The results of our acquired companies in fiscal 2024 were not material to our results.

Strategy

Our purpose is “Connecting the World to Share Food and Care for One Another.” Purpose driven companies are believed to perform better, and we believe our purpose will assist us to grow substantially faster than the foodservice distribution industry and deliver profitable growth through our “Recipe for Growth” transformation. This growth transformation is supported by strategic pillars that we believe will continue to enable us to better serve our customers, including:

•Digital – We have and will continue to enrich the customer experience through personalized digital tools that reduce friction in the purchase experience and introduce innovation to our customers.

•Products and Solutions – We are providing customer-focused marketing and merchandising solutions that inspire increased sales of our broad assortment of fair priced products and services. We continue to improve our merchandising strategies globally to secure the best possible cost for our customers.

•Supply Chain – We are efficiently and consistently serving customers with the products they need, when and how they need them, through a flexible delivery framework. We are developing a more nimble, accessible and productive supply chain that is better positioned to support our customers.

•Customer Teams – Our greatest strength is our people - people who are passionate about food and food service. Our diverse team delivers expertise and differentiated services designed to help our customers grow their businesses. We will continue to invest in the sales organization through incremental sales colleagues and intend to improve the effectiveness by leveraging data to increase the yield of the sales process.

•Future Horizons – We are committed to responsible growth. We will cultivate new channels, new segments, and new capabilities, organically and through strategic M&A, while being stewards of our company and our planet for the long term. We will fund our journey through cost-out and efficiency improvements.

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Results of Operations

The following table sets forth the components of our consolidated results of operations expressed as a percentage of sales for the periods indicated:

[[GREPCENT_TABLE]]
[["","2024","","2023"],["Sales","100.0","%","","100.0","%"],["Cost of sales","81.5","","","81.7"],["Gross profit","18.5","","","18.3"],["Operating expenses","14.5","","","14.3"],["Operating income","4.0","","","4.0"],["Interest expense","0.7","","","0.7"],["Other (income) expense, net","\u2014","","","0.3"],["Earnings before income taxes","3.3","","","3.0"],["Income taxes","0.8","","","0.7"],["Net earnings","2.5","%","","2.3","%"]]
[[/GREPCENT_TABLE]]

The following table sets forth the change in the components of our consolidated results of operations expressed as a percentage increase or decrease over the comparable period in the prior year:

[[GREPCENT_TABLE]]
[["","2024"],["Sales","3.3","%"],["Cost of sales","3.0"],["Gross profit","4.7"],["Operating expenses","4.5"],["Operating income","5.4"],["Interest expense","15.2"],["Other (income) expense, net (1)","(86.8)"],["Earnings before income taxes","12.3"],["Income taxes","18.4"],["Net earnings","10.5","%"],["Basic earnings per share","11.7","%"],["Diluted earnings per share","12.1"],["Average shares outstanding","(1.2)"],["Diluted shares outstanding","(1.3)"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Other (income) expense, net was expense of $30 million in fiscal 2024 and expense of $227 million in fiscal 2023."]]
[[/GREPCENT_TABLE]]

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Segment Results

The following represents our results by reportable segments:

[[GREPCENT_TABLE]]
[["","Year Ended Jun. 29, 2024"],["","U.S. Foodservice Operations","","International Foodservice Operations","","SYGMA","","Other","","Global Support Center","","Consolidated Totals"],["","(In millions)"],["Sales","$","55,339","","","$","14,561","","","$","7,768","","","$","1,176","","","$","\u2014","","","$","78,844"],["Sales increase (decrease)","3.1","%","","7.4","%","","(1.0)","%","","(5.1)","%","","","","3.3","%"],["Percentage of total","70.2","%","","18.5","%","","9.9","%","","1.4","%","","","","100.0","%"],["Operating income (loss)","$","3,673","","","$","375","","","$","72","","","$","40","","","$","(958)","","","$","3,202"],["Operating income increase (decrease)","2.4","%","","19.4","%","","28.6","%","","(29.8)","%","","","","5.4","%"],["Percentage of total segments","88.3","%","","9.0","%","","1.7","%","","1.0","%","","","","100.0","%"],["Operating income as a percentage of sales","6.6","%","","2.6","%","","0.9","%","","3.4","%","","","","4.1","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Year Ended Jul. 1, 2023"],["","U.S. Foodservice Operations","","International Foodservice Operations","","SYGMA","","Other","","Global Support Center","","Consolidated Totals"],["","(In millions)"],["Sales","$","53,683","","","$","13,560","","","$","7,843","","","$","1,239","","","$","\u2014","","","$","76,325"],["Percentage of total","70.3","%","","17.8","%","","10.3","%","","1.6","%","","","","100.0","%"],["Operating income (loss)","$","3,587","","","$","314","","","$","56","","","$","57","","","$","(975)","","","$","3,039"],["Percentage of total segments","89.4","%","","7.8","%","","1.4","%","","1.4","%","","","","100.0","%"],["Operating income as a percentage of sales","6.7","%","","2.3","%","","0.7","%","","4.6","%","","","","4.0","%"]]
[[/GREPCENT_TABLE]]

Our U.S. Foodservice Operations and our International Foodservice Operations segments represent a substantial majority of our total segment results when compared to other reportable segments. In fiscal 2024, U.S. Foodservice Operations and International Foodservice Operations represented approximately 70.2% and 18.5%, respectively, of Sysco’s overall sales, compared to 70.3% and 17.8%, respectively, in fiscal 2023. In fiscal 2024 and fiscal 2023, U.S. Foodservice Operations represented approximately 88.3% and 89.4%, respectively, of the total segment operating income. See Note 21, “Business Segment Information,” in the Notes to Consolidated Financial Statements in Item 8 for more information.

Cost of sales primarily includes our product costs, net of vendor consideration, and includes in-bound freight. Operating expenses include the costs of facilities, product handling, delivery, selling and general and administrative activities. Fuel surcharges are reflected within sales and gross profit; fuel costs are reflected within operating expenses. Along with sales, operating income is the most relevant measure for evaluating segment performance and allocating resources, as operating income includes cost of goods sold in addition to the costs to warehouse and deliver goods, which are significant and relevant costs when evaluating a distribution business.

Results of U.S. Foodservice Operations

In fiscal 2024, the U.S. Foodservice Operations operating results represented approximately 70.2% of Sysco’s overall sales and 88.3% of the aggregated operating income of Sysco’s reporting segments. Several factors contributed to these higher operating results as compared to the other operating segments. We invested substantial amounts in assets, operating methods, technology and management expertise in this segment. The breadth of its sales force, geographic reach of its distribution area and its purchasing power enable this segment to generate its relatively stronger results of operations.

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The following table sets forth a summary of the components of operating income and adjusted operating income expressed as a percentage increase or decrease over the prior year:

[[GREPCENT_TABLE]]
[["","2024","","2023","","Change in Dollars","","% Change"],["","(Dollars in millions)"],["Sales","$","55,339","","","$","53,683","","","$","1,656","","","3.1","%"],["Gross profit","10,708","","","10,359","","","349","","","3.4"],["Operating expenses","7,035","","","6,772","","","263","","","3.9"],["Operating income","$","3,673","","","$","3,587","","","$","86","","","2.4","%"],["Gross profit","$","10,708","","","$","10,359","","","$","349","","","3.4","%"],["Adjusted operating expenses (Non-GAAP) (1)","6,964","","","6,730","","","234","","","3.5"],["Adjusted operating income (Non-GAAP) (1)","$","3,744","","","$","3,629","","","$","115","","","3.2","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","See \u201cNon-GAAP Reconciliations\u201d below."]]
[[/GREPCENT_TABLE]]

Sales

The following table sets forth the percentage and dollar value increase or decrease in sales over the prior year in order to demonstrate the cause and magnitude of change.

[[GREPCENT_TABLE]]
[["","Increase (Decrease)"],["","2024"],["","(Dollars in millions)"],["Cause of change","Percentage","","Dollars"],["Case volume (1)","2.8","%","","$","1,491"],["Inflation","0.5","","","291"],["Other (2)","(0.2)","","","(126)"],["Total change in sales","3.1","%","","$","1,656"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Case volumes increased 3.1% compared to fiscal 2023. This volume increase resulted in a 2.8% increase in the dollar value of sales compared to fiscal 2023. Beginning in the third quarter of fiscal 2024, our volume reporting includes case volumes attributable to Edward Don."],["(2)","Case volume reflects our broadline and specialty businesses, with the exception of our specialty meats business, which measures its volume in pounds. Any impact in volumes from our specialty meats operations is included within \u201cOther.\u201d"]]
[[/GREPCENT_TABLE]]

The sales growth in our U.S. Foodservice Operations was driven by higher inflation and volume growth, inclusive of benefits from acquisitions in fiscal 2024. Case volumes from our U.S. Foodservice Operations increased 3.1%, as compared to fiscal 2023. This included a 1.1% increase in local customer case volume as compared to fiscal 2023.

Operating Income

The increase in operating income for fiscal 2024, as compared to fiscal 2023, was driven by gross profit dollar growth and case volume growth as a result of acquisitions, partially offset by an increase in operating expenses.

Gross profit dollar growth was driven primarily by case volume growth as a result of acquisitions, effective management of product cost fluctuations, and progress from our strategic sourcing efforts. The estimated change in product costs, an internal measure of inflation or deflation, increased in fiscal 2024. For fiscal 2024, this change in product costs was primarily driven by inflation in the poultry and meat categories. Sysco brand penetration for U.S. Broadline decreased by 19 basis points to 36.7% for fiscal 2024, as compared to fiscal 2023. Specific to local customers, Sysco brand penetration for U.S. Broadline improved by 11 basis points to 47.0% for fiscal 2024, as compared to fiscal 2023.

Gross margin, which is gross profit as a percentage of sales, was 19.4% in fiscal 2024. This was an increase of 5 basis points compared to gross margin of 19.3% in fiscal 2023 due to the effective management of inflation, along with specific efforts to optimize our gross profit dollars. This included pricing and sourcing improvements.

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The increase in operating expenses for fiscal 2024, as compared to fiscal 2023, was primarily driven by increased volumes and recent costs associated with severances, transformation projects, and acquisitions.

Results of International Foodservice Operations

In fiscal 2024, the International Foodservice Operations operating results represented approximately 18.5% of Sysco’s overall sales. 

The following table sets forth a summary of the components of operating income and adjusted operating income expressed as a percentage increase or decrease over the prior year:

[[GREPCENT_TABLE]]
[["","2024","","2023","","Change in Dollars","","% Change"],["","(Dollars in millions)"],["Sales","$","14,561","","","$","13,560","","","$","1,001","","","7.4","%"],["Gross profit","2,947","","","2,641","","","306","","","11.6"],["Operating expenses","2,572","","","2,327","","","245","","","10.5"],["Operating income","$","375","","","$","314","","","$","61","","","19.4","%"],["Gross profit","$","2,947","","","$","2,641","","","$","306","","","11.6","%"],["Adjusted operating expenses (Non-GAAP) (1)","2,455","","","2,243","","","212","","","9.5"],["Adjusted operating income (Non-GAAP) (1)","$","492","","","$","398","","","$","94","","","23.6","%"],["Comparable sales using a constant currency basis (Non-GAAP) (1)","$","14,305","","","$","13,560","","","$","745","","","5.5","%"],["Comparable gross profit using a constant currency basis (Non-GAAP) (1)","2,884","","","2,641","","","243","","","9.2"],["Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP) (1)","2,396","","","2,243","","","153","","","6.8"],["Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP) (1)","$","488","","","$","398","","","$","90","","","22.6","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","See \u201cNon-GAAP Reconciliations\u201d below."]]
[[/GREPCENT_TABLE]]

Sales

The following table sets forth the percentage and dollar value increase or decrease in sales over the comparable prior year period in order to demonstrate the cause and magnitude of change.

[[GREPCENT_TABLE]]
[["","Increase (Decrease)"],["","2024"],["","(Dollars in millions)"],["Cause of change","Percentage","","Dollars"],["Inflation","3.6","%","","$","482"],["Foreign currency","1.9","","","255"],["Other (1)","1.9","","","264"],["Total change in sales","7.4","%","","$","1,001"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","The impact of volumes as a component of sales growth from international operations are included within \u201cOther.\u201d"]]
[[/GREPCENT_TABLE]]

Sales in fiscal 2024 were higher due to inflation, a positive impact of foreign currency translation, and an improvement in local case volume.

Operating Income

33

The $61 million increase in operating income for fiscal 2024, as compared to fiscal 2023, was primarily a result of the continuing increase in sales and specific efforts to optimize our gross profit. This included the ability to effectively manage product cost fluctuations and progress from our strategic sourcing efforts.

The increase in gross profit dollars in fiscal 2024, as compared to fiscal 2023, was attributable to the increase in sales volume, the effective management of inflation, and progress from our strategic sourcing efforts.

The increase in operating expenses for fiscal 2024, as compared to fiscal 2023, was primarily due to increases in sales volume, inflation, and the impact of foreign currency translation.

Results of SYGMA and Other Segment

For SYGMA, sales were 1.0% lower in fiscal 2024, as compared to fiscal 2023. Operating income increased by $16 million in fiscal 2024, as compared to fiscal 2023, due to decreases in operating expenses driven by the planned exit of customers. We expect SYGMA to have both sales and operating income growth in fiscal 2025.

For the operations that are grouped within our Other segment, sales were 5.1% lower in fiscal 2024, as compared to fiscal 2023. Operating income decreased $17 million in fiscal 2024, as compared to fiscal 2023. The operations of this group mainly consist of our hospitality business, Guest Worldwide. We expect our Other segment to have modest operating income growth in fiscal 2025.

Global Support Center Expenses

Our Global Support Center generally includes all expenses of the corporate office and Sysco’s shared service operations. These expenses increased $13 million in fiscal 2024, or 1.3% as compared to fiscal 2023, primarily due to increases in self-insurance reserves, depreciation expense, miscellaneous expenses, partially offset by decreases in fuel hedging program expenses, colleague-related costs, and professional fees.

Included in Global Support Center expenses are Certain Items that totaled $81 million in fiscal 2024, as compared to $45 million in fiscal 2023. Certain Items impacting fiscal 2024 were primarily expenses associated with severances, our business technology transformation initiatives, and expenses associated with acquisitions. In fiscal 2023, Certain Items that impacted the year were primarily expenses associated with our business technology transformation initiatives.

Interest Expense

Interest expense increased $80 million for fiscal 2024, as compared to fiscal 2023, primarily due to new issuances of senior notes, an increase in commercial paper borrowing activity and increased interest rates on borrowings. This higher debt is primarily associated with our acquisition of Edward Don and share repurchases. We expect to incur $650 million in interest expense in fiscal 2025. Consistent with fiscal 2024, we expect to operate within our stated target of 2.5 to 2.75 times of net leverage in fiscal 2025.

Other income and expense

Other expense decreased $197 million for fiscal 2024, as compared to fiscal 2023, primarily due to fiscal 2023 consisting of a pension settlement charge, partially offset by a gain on a litigation financing agreement.

Net Earnings

Net earnings increased 10.5% in fiscal 2024, as compared to fiscal 2023, due primarily to the items noted previously for operating income and interest expense, as well as items impacting our income taxes that are discussed in Note 19, “Income Taxes,” in the Notes to Consolidated Financial Statements in Item 8. Adjusted net earnings, excluding Certain Items, increased 6.0% in fiscal 2024, primarily due to an increase in sales volume as a result of acquisitions.

34

Earnings Per Share

Basic earnings per share in fiscal 2024 were $3.90, an 11.7% increase from the comparable prior year period amount of $3.49 per share. Diluted earnings per share in fiscal 2024 were $3.89, a 12.1% increase from the comparable prior year period amount of $3.47 per share. Adjusted diluted earnings per share, excluding Certain Items (which is a non-GAAP financial measure for which a reconciliation is provided in “Non-GAAP Reconciliations” on the subsequent page), in fiscal 2024 were $4.31, a 7.5% increase from the comparable prior year period amount of $4.01 per share. These results were primarily attributable to the factors discussed previously related to net earnings in fiscal 2024.

35

Non-GAAP Reconciliations

[[GREPCENT_TABLE]]
[["The discussion of our results includes certain non-GAAP financial measures, including EBITDA and adjusted EBITDA, that we believe provide important perspective with respect to underlying business trends. Other than EBITDA and free cash flow, any non-GAAP financial measures will be denoted as adjusted measures to remove (1) restructuring charges; (2) expenses associated with our various transformation initiatives; (3) severance charges; and (4) acquisition-related costs consisting of: (a) intangible amortization expense and (b) acquisition costs and due diligence costs related to our acquisitions. Our results for fiscal 2023 were also impacted by a pension settlement charge that resulted from the purchase of a nonparticipating single premium group annuity contract that transferred defined benefit plan obligations to an insurer, adjustments to our bad debt reserve specific to aged receivables existing prior to the COVID-19 pandemic, adjustments to a product return allowance related to COVID-related personal protection equipment inventory and a gain on a litigation financing agreement."],["The results of our operations can be impacted due to changes in exchange rates applicable in converting local currencies to U.S. dollars. We measure our results on a constant currency basis. Constant currency operating results are calculated by translating current-period local currency operating results with the currency exchange rates used to translate the financial statements in the comparable prior-year period to determine what the current-period U.S. dollar operating results would have been if the currency exchange rate had not changed from the comparable prior-year period."],["Management believes that adjusting its operating expenses, operating income, other (income) expense, net earnings and diluted earnings per share to remove these Certain Items and presenting its results on a constant currency basis provides an important perspective with respect to our underlying business trends and results. It provides meaningful supplemental information to both management and investors that (1) is indicative of the performance of the company\u2019s underlying operations and (2) facilitates comparisons on a year-over-year basis."],["Sysco has a history of growth through acquisitions and excludes from its non-GAAP financial measures the impact of acquisition-related intangible amortization, acquisition costs and due diligence costs for those acquisitions. We believe this approach significantly enhances the comparability of Sysco\u2019s results for fiscal year 2024 and fiscal year 2023."],["Set forth on the following page is a reconciliation of sales, operating expenses, operating income, other (income) expense, net earnings and diluted earnings per share to adjusted results for these measures for the periods presented. Individual components of diluted earnings per share may not be equal to the total presented when added due to rounding. Adjusted diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding."]]
[[/GREPCENT_TABLE]]

36

[[GREPCENT_TABLE]]
[["","2024","","2023","","Change in Dollars","","%/bps Change"],["","(In millions, except for share and per share data)"],["Sales (GAAP)","$","78,844","","","$","76,325","","","$","2,519","","","3.3","%"],["Impact of currency fluctuations (1)","(253)","","","","","(253)","","","(0.3)"],["Comparable sales using a constant currency basis (Non-GAAP)","$","78,591","","","$","76,325","","","$","2,266","","","3.0","%"],["Cost of sales (GAAP)","$","64,236","","","$","62,370","","","$","1,866","","","3.0","%"],["Impact of inventory valuation adjustment (2)","\u2014","","","3","","","(3)","","","\u2014"],["Cost of sales adjusted for Certain Items (Non-GAAP)","$","64,236","","","$","62,373","","","$","1,863","","","3.0","%"],["Gross profit (GAAP)","$","14,608","","","$","13,955","","","$","653","","","4.7","%"],["Impact of inventory valuation adjustment (2)","\u2014","","","(3)","","","3","","","\u2014"],["Gross profit adjusted for Certain Items (Non-GAAP)","14,608","","","13,952","","","656","","","4.7"],["Impact of currency fluctuations (1)","(62)","","","","","(62)","","","(0.4)"],["Comparable gross profit adjusted for Certain Items using a constant currency basis (Non-GAAP)","$","14,546","","","$","13,952","","","$","594","","","4.3","%"],["Gross margin (GAAP)","18.53","%","","18.28","%","","","","25 bps"],["Impact of inventory valuation adjustment (2)","\u2014","","","\u2014","","","","","0 bps"],["Gross margin adjusted for Certain Items (Non-GAAP)","18.53","","","18.28","","","","","25 bps"],["Impact of currency fluctuations (1)","(0.02)","","","","","","","-2 bps"],["Comparable gross margin adjusted for Certain Items using a constant currency basis (Non-GAAP)","18.51","%","","18.28","%","","","","23 bps"],["Operating expenses (GAAP)","$","11,406","","","$","10,916","","","$","490","","","4.5","%"],["Impact of restructuring and transformational project costs (3)","(120)","","","(63)","","","(57)","","","(90.5)"],["Impact of acquisition-related costs (4)","(159)","","","(116)","","","(43)","","","(37.1)"],["Impact of bad debt reserve adjustments (5)","\u2014","","","5","","","(5)","","","NM"],["Operating expenses adjusted for Certain Items (Non-GAAP)","11,127","","","10,742","","","385","","","3.6"],["Impact of currency fluctuations (1)","(61)","","","","","(61)","","","(0.6)"],["Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)","$","11,066","","","$","10,742","","","$","324","","","3.0","%"],["Operating expense as a percentage of sales (GAAP)","14.47","%","","14.30","%","","","","17 bps"],["Impact of certain item adjustments","(0.36)","","","(0.23)","","","","","-13 bps"],["Adjusted operating expense as a percentage of sales (Non-GAAP)","14.11","%","","14.07","%","","","","4 bps"],["Operating income (GAAP)","$","3,202","","","$","3,039","","","$","163","","","5.4","%"],["Impact of inventory valuation adjustment (2)","\u2014","","","(3)","","","3","","","NM"],["Impact of restructuring and transformational project costs (3)","120","","","63","","","57","","","90.5"],["Impact of acquisition-related costs (4)","159","","","116","","","43","","","37.1"],["Impact of bad debt reserve adjustments (5)","\u2014","","","(5)","","","5","","","NM"],["Operating income adjusted for Certain Items (Non-GAAP)","3,481","","","3,210","","","271","","","8.4"],["Impact of currency fluctuations (1)","(1)","","","","","(1)","","","\u2014"],["Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP)","$","3,480","","","$","3,210","","","$","270","","","8.4","%"],["Operating margin (GAAP)","4.06","%","","3.98","%","","","","8 bps"],["Operating margin adjusted for Certain Items (Non-GAAP)","4.42","%","","4.21","%","","","","21 bps"],["Operating margin adjusted for Certain Items using a constant currency basis (Non-GAAP)","4.43","%","","4.21","%","","","","22 bps"],["Other expense (GAAP)","$","30","","","$","227","","","$","(197)","","","(86.8)","%"],["Impact of other non-routine gains and losses (6)","\u2014","","","(194)","","","194","","","NM"],["Other expense adjusted for Certain Items (Non-GAAP)","$","30","","","$","33","","","$","(3)","","","(9.1)","%"]]
[[/GREPCENT_TABLE]]

37

[[GREPCENT_TABLE]]
[["","2024","","2023","","Change in Dollars","","%/bps Change"],["","(In millions, except for share and per share data)"],["Net earnings (GAAP)","$","1,955","","","$","1,770","","","$","185","","","10.5","%"],["Impact of inventory valuation adjustment (2)","\u2014","","","(3)","","","3","","","NM"],["Impact of restructuring and transformational project costs (3)","120","","","63","","","57","","","90.5"],["Impact of acquisition-related costs (4)","159","","","116","","","43","","","37.1"],["Impact of bad debt reserve adjustments (5)","\u2014","","","(5)","","","5","","","NM"],["Impact of other non-routine gains and losses (6)","\u2014","","","194","","","(194)","","","NM"],["Tax impact of inventory valuation adjustment (7)","\u2014","","","1","","","(1)","","","NM"],["Tax impact of restructuring and transformational project costs (7)","(29)","","","(15)","","","(14)","","","(93.3)"],["Tax impact of acquisition-related costs (7)","(38)","","","(29)","","","(9)","","","(31.0)"],["Tax impact of bad debt reserves adjustments (7)","\u2014","","","1","","","(1)","","","NM"],["Tax impact of other non-routine gains and losses (7)","\u2014","","","(49)","","","49","","","NM"],["Net earnings adjusted for Certain Items (Non-GAAP)","$","2,167","","","$","2,044","","","$","123","","","6.0","%"],["Diluted earnings per share (GAAP)","$","3.89","","","$","3.47","","","$","0.42","","","12.1","%"],["Impact of inventory valuation adjustment (2)","\u2014","","","(0.01)","","","0.01","","","NM"],["Impact of restructuring and transformational project costs (3)","0.24","","","0.12","","","0.12","","","100.0"],["Impact of acquisition-related costs (4)","0.32","","","0.23","","","0.09","","","39.1"],["Impact of bad debt reserve adjustments (5)","\u2014","","","(0.01)","","","0.01","","","NM"],["Impact of other non-routine gains and losses (6)","\u2014","","","0.38","","","(0.38)","","","NM"],["Tax impact of restructuring and transformational project costs (7)","(0.06)","","","(0.03)","","","(0.03)","","","(100.0)"],["Tax impact of acquisition-related costs (7)","(0.08)","","","(0.06)","","","(0.02)","","","(33.3)"],["Tax impact of other non-routine gains and losses (7)","\u2014","","","(0.10)","","","0.10","","","NM"],["Diluted earnings per share adjusted for Certain Items (Non-GAAP) (8)","$","4.31","","","$","4.01","","","$","0.30","","","7.5","%"],["Diluted shares outstanding","503,096,086","","509,719,756"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Represents a constant currency adjustment which eliminates the impact of foreign currency fluctuations on the current year results."],["(2)","Fiscal 2023 represents an adjustment to a product return allowance related to COVID-related personal protection equipment inventory."],["(3)","Fiscal 2024 includes $56 million related to restructuring and severance charges and $64 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2023 includes $20 million related to restructuring and severance charges and $43 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy."],["(4)","Fiscal 2024 includes $128 million of intangible amortization expense and $31 million in acquisition and due diligence costs. Fiscal 2023 includes $105 million of intangible amortization expense and $10 million in acquisition and due diligence costs."],["(5)","Fiscal 2023 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020."],["(6)","Fiscal 2023 primarily includes a pension settlement charge of $315 million that resulted from the purchase of a nonparticipating single premium group annuity contract that transferred defined benefit plan obligations to an insurer and $122 million in income from a litigation financing agreement."],["(7)","The tax impact of adjustments for Certain Items is calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction where the Certain Item was incurred."],["(8)","Individual components of diluted earnings per share may not add up to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding."],["NM","Represents that the percentage change is not meaningful."]]
[[/GREPCENT_TABLE]]

38

Set forth below is a reconciliation by segment of actual operating expenses and operating income to adjusted results for these measures for the periods presented (dollars in millions):

[[GREPCENT_TABLE]]
[["","2024","","2023","","Change in Dollars","","%/bps Change"],["U.S. FOODSERVICE OPERATIONS"],["Sales (GAAP)","$","55,339","","","$","53,683","","","$","1,656","","","3.1","%"],["Gross profit (GAAP)","10,708","","","10,359","","","349","","","3.4","%"],["Gross margin (GAAP)","19.35","%","","19.30","%","","","","5 bps"],["Operating expenses (GAAP)","$","7,035","","","$","6,772","","","$","263","","","3.9","%"],["Impact of restructuring and transformational project costs (1)","(10)","","","(1)","","","(9)","","","NM"],["Impact of acquisition-related costs (2)","(61)","","","(46)","","","(15)","","","(32.6)"],["Impact of bad debt reserve adjustments (3)","\u2014","","","5","","","(5)","","","NM"],["Operating expenses adjusted for Certain Items (Non-GAAP)","$","6,964","","","$","6,730","","","$","234","","","3.5","%"],["Operating income (GAAP)","$","3,673","","","$","3,587","","","$","86","","","2.4","%"],["Impact of restructuring and transformational project costs (1)","10","","","1","","","9","","","NM"],["Impact of acquisition-related costs (2)","61","","","46","","","15","","","32.6"],["Impact of bad debt reserve adjustments (3)","\u2014","","","(5)","","","5","","","NM"],["Operating income adjusted for Certain Items (Non-GAAP)","$","3,744","","","$","3,629","","","$","115","","","3.2","%"],["INTERNATIONAL FOODSERVICE OPERATIONS"],["Sales (GAAP)","$","14,561","","","$","13,560","","","$","1,001","","","7.4","%"],["Impact of currency fluctuations (4)","(256)","","","","","(256)","","","(1.9)"],["Comparable sales using a constant currency basis (Non-GAAP)","$","14,305","","","$","13,560","","","$","745","","","5.5","%"],["Gross profit (GAAP)","$","2,947","","","$","2,641","","","$","306","","","11.6","%"],["Impact of currency fluctuations (4)","(63)","","","","","(63)","","","(2.4)"],["Comparable gross profit using a constant currency basis (Non-GAAP)","$","2,884","","","$","2,641","","","$","243","","","9.2","%"],["Gross margin (GAAP)","20.24","%","","19.48","%","","","","76 bps"],["Impact of currency fluctuations (4)","(0.08)","","","","","","","-8 bps"],["Comparable gross margin using a constant currency basis (Non-GAAP)","20.16","%","","19.48","%","","","","68 bps"],["Operating expenses (GAAP)","$","2,572","","","$","2,327","","","$","245","","","10.5","%"],["Impact of restructuring and transformational project costs (5)","(45)","","","(19)","","","(26)","","","NM"],["Impact of acquisition-related costs (6)","(72)","","","(65)","","","(7)","","","(10.8)"],["Operating expenses adjusted for Certain Items (Non-GAAP)","2,455","","","2,243","","","212","","","9.5"],["Impact of currency fluctuations (4)","(59)","","","","","(59)","","","(2.7)"],["Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)","$","2,396","","","$","2,243","","","$","153","","","6.8","%"],["Operating income (GAAP)","$","375","","","$","314","","","$","61","","","19.4","%"],["Impact of restructuring and transformational project costs (5)","45","","","19","","","26","","","NM"],["Impact of acquisition-related costs (6)","72","","","65","","","7","","","10.8"],["Operating income adjusted for Certain Items (Non-GAAP)","492","","","398","","","94","","","23.6"],["Impact of currency fluctuations (4)","(4)","","","","","(4)","","","(1.0)"],["Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP)","$","488","","","$","398","","","$","90","","","22.6","%"],["SYGMA"],["Sales (GAAP)","$","7,768","","","$","7,843","","","$","(75)","","","(1.0)","%"]]
[[/GREPCENT_TABLE]]

39

[[GREPCENT_TABLE]]
[["","2024","","2023","","Change in Dollars","","%/bps Change"],["Gross profit (GAAP)","617","","","631","","","(14)","","","(2.2)","%"],["Gross margin (GAAP)","7.94","%","","8.05","%","","","","-11 bps"],["Operating expenses (GAAP)","$","545","","","$","575","","","$","(30)","","","(5.2)","%"],["Operating income (GAAP)","72","","","56","","","16","","","28.6","%"],["OTHER"],["Sales (GAAP)","$","1,176","","","$","1,239","","","$","(63)","","","(5.1)","%"],["Gross profit (GAAP)","307","","","326","","","(19)","","","(5.8)","%"],["Gross margin (GAAP)","26.11","%","","26.31","%","","","","-20 bps"],["Operating expenses (GAAP)","$","267","","","$","269","","","$","(2)","","","(0.7)","%"],["Impact of restructuring and transformational project costs (7)","(10)","","","\u2014","","","(10)","","","NM"],["Operating expenses adjusted for Certain Items (Non-GAAP)","$","257","","","$","269","","","$","(12)","","","(4.5)","%"],["Operating income (GAAP)","$","40","","","$","57","","","$","(17)","","","(29.8)","%"],["Impact of restructuring and transformational project costs (7)","10","","","\u2014","","","10","","","NM"],["Operating income adjusted for Certain Items (Non-GAAP)","$","50","","","$","57","","","$","(7)","","","(12.3)","%"],["GLOBAL SUPPORT CENTER"],["Gross loss (GAAP)","$","28","","","$","(2)","","","$","30","","","NM"],["Impact of inventory valuation adjustment (8)","\u2014","","","(3)","","","3","","","NM"],["Gross loss adjusted for Certain Items (Non-GAAP)","$","28","","","$","(5)","","","$","33","","","NM"],["Operating expenses (GAAP)","$","986","","","$","973","","","$","13","","","1.3","%"],["Impact of restructuring and transformational project costs (9)","(55)","","","(43)","","","(12)","","","(27.9)","%"],["Impact of acquisition-related costs (10)","(26)","","","(5)","","","(21)","","","NM"],["Operating expenses adjusted for Certain Items (Non-GAAP)","$","905","","","$","925","","","$","(20)","","","(2.2)","%"],["Operating loss (GAAP)","$","(958)","","","$","(975)","","","$","17","","","1.7","%"],["Impact of inventory valuation adjustment (8)","\u2014","","","(3)","","","3","","","NM"],["Impact of restructuring and transformational project costs (9)","55","","","43","","","12","","","27.9","%"],["Impact of acquisition-related costs (10)","26","","","5","","","21","","","NM"],["Operating loss adjusted for Certain Items (Non-GAAP)","$","(877)","","","$","(930)","","","$","53","","","5.7","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Primarily represents severance and transformation costs."],["(2)","Primarily represents intangible amortization expense and acquisition costs."],["(3)","Fiscal 2023 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020."],["(4)","Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on current year results."],["(5)","Includes restructuring and transformation costs primarily in Europe."],["(6)","Represents intangible amortization expense."],["(7)","Primarily represents restructuring costs."],["(8)","Fiscal 2023 represents an adjustment to a product return allowance related to COVID-related personal protection equipment inventory."],["(9)","Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy."],["(10)","Represents due diligence costs."],["NM","Represents that the percentage change is not meaningful."]]
[[/GREPCENT_TABLE]]

40

EBITDA and Adjusted EBITDA

EBITDA and adjusted EBITDA should not be used as a substitute for the most comparable GAAP measure in assessing Sysco’s overall financial performance for the periods presented. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. See “Key Performance Indicators” for further discussion regarding this non-GAAP financial measure. Set forth below is a reconciliation of actual net earnings (loss) to EBITDA and to adjusted EBITDA results for the periods presented (dollars in millions):

[[GREPCENT_TABLE]]
[["","2024","","2023","","Change in Dollars","","% Change"],["Net earnings (GAAP)","$","1,955","","","$","1,770","","","$","185","","","10.5","%"],["Interest (GAAP)","607","","","527","","","80","","","15.2"],["Income taxes (GAAP)","610","","","515","","","95","","","18.4"],["Depreciation and amortization (GAAP)","873","","","776","","","97","","","12.5"],["EBITDA (Non-GAAP)","$","4,045","","","$","3,588","","","$","457","","","12.7","%"],["Certain Item adjustments:"],["Impact of inventory valuation adjustment (1)","$","\u2014","","","$","(3)","","","$","3","","","NM"],["Impact of restructuring and transformational project costs (2)","116","","","61","","","55","","","90.2"],["Impact of acquisition-related costs (3)","31","","","10","","","21","","","NM"],["Impact of bad debt reserve adjustments (4)","\u2014","","","(4)","","","4","","","NM"],["Impact of other non-routine gains and losses (5)","\u2014","","","194","","","(194)","","","NM"],["EBITDA adjusted for Certain Items (Non-GAAP) (6)","$","4,192","","","$","3,846","","","$","346","","","9.0","%"],["Other expense (income), net, as adjusted (Non-GAAP) (7)","30","","","33","","","(3)","","","(9.1)"],["Depreciation and amortization, as adjusted (Non-GAAP) (8)","(741)","","","(669)","","","(72)","","","(10.8)"],["Operating income adjusted for Certain Items (Non-GAAP)","$","3,481","","","$","3,210","","","$","271","","","8.4","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Fiscal 2023 represents an adjustment to a product return allowance related to COVID-related personal protection equipment inventory."],["(2)","Fiscal 2024 and 2023 include charges related to restructuring and severance, as well as various transformation initiative costs, primarily consisting of changes to our business technology strategy and exclude charges related to accelerated depreciation."],["(3)","Fiscal 2024 and 2023 include acquisition and due diligence costs."],["(4)","Fiscal 2023 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020."],["(5)","Fiscal 2023 primarily includes a pension settlement charge of $315 million that resulted from the purchase of a nonparticipating single premium group annuity contract that transferred defined benefit plan obligations to an insurer and $122 million in income from a litigation financing agreement."],["(6)","In arriving at adjusted EBITDA, Sysco does not exclude interest income of $38 million and $24 million or non-cash stock compensation expense of $104 million and $95 million for fiscal 2024 and fiscal 2023, respectively."],["(7)","Fiscal 2024 represents $30 million in GAAP other expense (income), net. Fiscal 2023 represents $227 million in GAAP other expense (income), net less $315 million due to the certain items impact of a pension settlement charge that resulted from the purchase of a nonparticipating single premium group annuity contract that transferred defined benefit plan obligations to an insurer and $122 million in income from a litigation financing agreement."],["(8)","Fiscal 2024 includes $873 million in GAAP depreciation and amortization expense, less $132 million of Non-GAAP depreciation and amortization expense primarily related to acquisitions. Fiscal 2023 includes $776 million in GAAP depreciation and amortization expense, less $107 million of Non-GAAP depreciation and amortization expense primarily related to acquisitions."],["NM","Represents that the percentage change is not meaningful."]]
[[/GREPCENT_TABLE]]

Liquidity and Capital Resources

Highlights

Below are comparisons of the cash flows from fiscal 2024 to fiscal 2023:

•Cash flows from operations were $3.0 billion in fiscal 2024, compared to $2.9 billion in fiscal 2023;

•Net capital expenditures totaled $753 million in fiscal 2024, compared to $751 million in fiscal 2023;

•Free cash flow was $2.2 billion in fiscal 2024, compared to $2.1 billion in fiscal 2023 (see “Cash Flows – Free Cash Flow – Non-GAAP Reconciliation” below for an explanation of this non-GAAP financial measure);

•Cash used for acquisition of businesses was $1.2 billion in fiscal 2024, compared to $37 million in fiscal 2023;

41

•Dividends paid were $1.0 billion in fiscal 2024, compared to $996 million in fiscal 2023;

•Cash paid for treasury stock repurchases was $1.2 billion in fiscal 2024, compared to $500 million in fiscal 2023;

•We issued senior notes totaling $1.0 billion in fiscal 2024. We repaid senior notes in the amount of $549 million in fiscal 2023; and

•The commercial paper amount outstanding as of the end of fiscal 2024 was $200 million. There were no commercial paper amounts outstanding as of the end of fiscal 2023.

As of June 29, 2024, there were no borrowings outstanding under our long-term revolving credit facility and the company had approximately $3.5 billion in cash and available liquidity. As of August 16, 2024, the company had approximately $2.5 billion in cash and available liquidity.

Sources and Uses of Cash

Sysco generates cash in the U.S. and internationally. Sysco’s strategic objectives include continuous investment in our business; these investments are funded primarily by cash from operations and, to a lesser extent, external borrowings. Traditionally, our operations have produced significant cash flow and, due to our strong financial position, we believe that we will continue to be able to effectively access capital markets, as needed. Cash generated from operations is generally allocated to:

•working capital-investments;

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

•acquisitions consistent with our growth strategy;

•debt repayments;

•cash dividends; and

•share repurchases.

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 be in a strong financial position based on our balance sheet and operating cash flows; however, our liquidity and capital resources can be influenced by macro-economic trends and conditions that impact our results of operations. We believe our mechanisms to manage working capital, such as actively working with customers to receive payments on receivables, optimizing inventory levels and maximizing payment terms with vendors, have been sufficient to limit a significant unfavorable impact on our cash flows from operations. We believe these mechanisms will continue to mitigate any unfavorable impact on our cash flows from operations arising from macro-economic trends and conditions.

We extend credit terms to some of our customers based on our assessment of each customer’s creditworthiness. We monitor each customer’s account and will suspend shipments if necessary. In the ordinary course of business, customers periodically negotiate extended payment terms on trade accounts receivable. The company may utilize purchase arrangements with third-party financial institutions to transfer portions of our trade accounts receivable balance on a non-recourse basis in order to extend terms for the customer without negatively impacting our cash flow. The arrangements meet the requirements for the receivables transferred to be accounted for as sales. See Note 1, “Summary of Accounting Policies,” in the Notes to Consolidated Financial Statements in Item 8 for additional information.

As of June 29, 2024, we had $696 million in cash and cash equivalents, approximately 91% of which was held by our international subsidiaries and 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. Additionally, Sysco Corporation has provided intercompany loans to certain of its international subsidiaries. When interest and principal payments are made, some of this cash will move to the U.S.

42

Our wholly owned captive insurance subsidiary (the Captive) must maintain a sufficient level of liquidity to fund future reserve payments. As of June 29, 2024, the Captive held $126 million of fixed income marketable securities and $249 million of restricted cash and restricted cash equivalents in a restricted investment portfolio in order to meet solvency requirements. We purchased $33 million in marketable securities in fiscal 2024 and received $29 million in proceeds from the sale of marketable securities in the period.

Cash Requirements

Our cash requirements within the next twelve months include accounts payable and accrued liabilities, current maturities of long-term debt, other current liabilities, purchase commitments and other obligations. We expect the cash required to meet these obligations to be primarily generated through a combination of cash from operations and access to capital from financial markets.

Our long-term cash requirements under our various contractual obligations and commitments include:

•Debt Obligations and Interest Payments – See Note 12, “Debt and Other Financing Arrangements,” in the Notes to Consolidated Financial Statements in Item 8 for further detail of our debt and the timing of expected future principal and interest payments.

•Operating and Finance Leases – See Note 13, “Leases,” in the Notes to Consolidated Financial Statements in Item 8 for further detail of our obligations and the timing of expected future payments.

•Deferred Compensation – The estimate of the timing of future payments under the Executive Deferred Compensation Plan and Management Savings Plan involves the use of certain assumptions, including retirement ages and payout periods. See Note 14, “Company-Sponsored Employee Benefit Plans,” in the Notes to Consolidated Financial Statements in Item 8 for further detail of our obligations and the timing of expected future payments.

•Purchase and Other Obligations – Purchase obligations include agreements for purchases of product in the normal course of business for which all significant terms have been confirmed, including minimum quantities resulting from our category management process. Such amounts are based on estimates. Purchase obligations also include amounts committed with various third-party service providers to provide information technology services and warehouse management services for periods up to fiscal 2036. See discussion under Note 20, “Commitments and Contingencies,” in the Notes to Consolidated Financial Statements in Item 8. Purchase obligations exclude full requirements electricity contracts where no stated minimum purchase volume is required.

•Other Liabilities – These include other long-term liabilities reflected in our consolidated balance sheets as of June 29, 2024, including obligations associated with certain employee benefit programs, unrecognized tax benefits and various long-term liabilities which have some inherent uncertainty in the timing of these payments.

•Contingent Consideration – Certain acquisitions involve contingent consideration typically payable only if certain operating results are attained or certain outstanding contingencies are resolved.

We believe the following sources will be sufficient to meet our anticipated cash requirements for at least 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

•our ability to access capital from financial markets, including issuances of debt securities, either privately or under our shelf registration statement filed with the 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.

43

Cash Flows

Operating Activities

We generated $3.0 billion in cash flows from operations in fiscal 2024, compared to cash flows from operations of $2.9 billion in fiscal 2023. In fiscal 2024, these amounts included year-over-year favorable comparisons on working capital of $21 million due to a favorable comparison on accounts receivable of $161 million, partially offset by an unfavorable comparison on accounts payable and inventory of $92 million and $48 million, respectively. Accrued expenses also had an unfavorable comparison of $34 million, primarily related to accrued payroll and earnout liabilities. Income taxes negatively impacted cash flows from operations by $36 million, as estimated payments made were higher than in fiscal 2023.

Tax relief provided by the IRS related to the effects of severe storms in Texas that began on April 26, 2024 resulted in the deferral of approximately $85 million of fiscal 2024 fourth quarter U.S. federal estimated tax payments to the second quarter of fiscal 2025.

Investing Activities

Fiscal 2024 and Fiscal 2023 capital expenditures included:

•buildings and building improvements;

•fleet replacements;

•investments in technology; and

•warehouse equipment.

The following table sets forth the company’s total plant and equipment additions:

[[GREPCENT_TABLE]]
[["","2024","","2023"],["","(In millions)"],["Net cash capital expenditures","$","753","","","$","751"],["Plant and equipment acquired through financing programs","402","","","197"],["Assets obtained in exchange for finance lease obligations","115","","","114"],["Total net plant and equipment additions","$","1,270","","","$","1,062"]]
[[/GREPCENT_TABLE]]

Our capital expenditures in fiscal 2024 were $39 million higher than in fiscal 2023, as we made investments to advance our Recipe for Growth strategy. Consistent with fiscal 2024, we expect our capital expenditures in fiscal 2025 to be approximately 1.0% of sales.

During fiscal 2024, we paid $1.2 billion, net of cash acquired, for acquisitions. During fiscal 2023, we paid $37 million, net of cash acquired, for acquisitions.

Free Cash Flow

Our free cash flow for fiscal 2024 increased by $119 million, to $2.2 billion, as compared to fiscal 2023, principally as a result of an increase in cash flows from operations, partially offset by a year-over-year increase in capital expenditures.

44

Non-GAAP Reconciliation

Free cash flow should not be used as a substitute for the most comparable GAAP measure in assessing the company’s liquidity for the periods presented. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. See “Key Performance Indicators” for further discussion regarding this non-GAAP financial measure. In the table that follows, free cash flow for each period presented is reconciled to net cash provided by operating activities.

[[GREPCENT_TABLE]]
[["","2024","","2023","","Change in Dollars","","% Change"],["","(In millions)"],["Net cash provided by operating activities (GAAP)","$","2,989","","","$","2,868","","","$","121","","","4.2","%"],["Additions to plant and equipment","(832)","","","(793)","","","(39)","","","(4.9)"],["Proceeds from sales of plant and equipment","79","","","42","","","37","","","88.1"],["Free Cash Flow (Non-GAAP)","$","2,236","","","$","2,117","","","$","119","","","5.6","%"]]
[[/GREPCENT_TABLE]]

Financing Activities

Equity Transactions

Proceeds from exercises of share-based compensation awards were $120 million and $79 million in fiscal 2024 and fiscal 2023, respectively. 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 have traditionally engaged in share repurchase programs to allow Sysco to continue offsetting dilution resulting from shares issued under the company’s benefit plans and to make opportunistic repurchases. In May 2021, our Board of Directors approved a share repurchase program to authorize the repurchase of up to $5.0 billion of the company’s common stock which will remain available until fully utilized. We repurchased 16,128,932 shares for $1.2 billion during fiscal 2024. As of June 29, 2024, we had a remaining authorization of approximately $2.8 billion. We expect to complete approximately $1 billion in share repurchases in fiscal 2025. As of August 16, 2024, we have repurchased 862,718 additional shares for approximately $63 million under this authorization.

We have made dividend payments to our shareholders in each fiscal year since our company’s inception. Dividends paid in fiscal 2024 were $1.0 billion, or $2.00 per share, as compared to $996 million, or $1.96 per share, in fiscal 2023. In April 2024, we declared our regular quarterly dividend for the fourth quarter of fiscal 2024 of $0.51 per share, a $0.01 per share increase from the prior quarter, which was paid in July 2024.

In August 2021, we filed a universal shelf registration statement with the SEC under which we, as a well-known seasoned issuer, have the ability to issue and sell an indeterminate amount of various types of debt and equity securities. The specific terms of any securities we issue under this registration statement, which we expect to replace with a new universal shelf registration statement to be filed shortly after this Form 10-K, will be provided in the applicable prospectus supplements.

In November 2000, we filed with the SEC a shelf registration statement covering 30,000,000 shares of common stock to be offered from time to time in connection with acquisitions. As of August 16, 2024, 29,477,835 shares remained available for issuance under this registration statement.

Debt Activity and Borrowing Availability

Our debt activity, including issuances and repayments, and our borrowing availability is described in Note 12, “Debt and Other Financing Arrangements,” in the Notes to Consolidated Financial Statements in Item 8. Our outstanding borrowings at June 29, 2024, and repayment activity since the end of fiscal 2024 are disclosed within those notes. Updated amounts at August 16, 2024, include:

•No outstanding borrowings from the long-term revolving credit facility supporting our commercial paper programs;

•$1.0 billion outstanding borrowings under our U.S. commercial paper program; and

•$132 million outstanding borrowings under our commercial paper program in Europe.

45

Our aggregate commercial paper issuances and short-term bank borrowings had weighted average interest rates of 5.49% for fiscal 2024 and 4.10% for fiscal 2023.

The availability of financing in the form of debt is influenced by many factors, including our profitability, free cash flows, debt levels, credit ratings, debt covenants and economic and market conditions. As of August 16, 2024, Moody’s Investors Service has assigned us an unsecured debt credit rating of Baa1 and a ratings outlook of “stable.” Standard & Poor’s has assigned us an unsecured debt credit rating of BBB and a ratings outlook of “stable.” Fitch Ratings Inc. has assigned us an unsecured debt credit rating of BBB and a ratings outlook of “stable.” A significant downgrade in our credit ratings or adverse conditions in the capital markets may increase the cost of borrowing for us or limit our access to capital. To date, we have not experienced difficulty accessing the credit markets. As of August 16, 2024, the company had approximately $2.5 billion in cash and available liquidity.

Our long-term revolving credit facility includes aggregate commitments of the lenders thereunder of $3.0 billion with an option to increase such commitments to $4.0 billion. The facility includes a covenant, among others, requiring Sysco to maintain a ratio of consolidated EBITDA to consolidated interest expense of 3.0 to 1.0 over four consecutive fiscal quarters. The revolving credit facility expires on April 29, 2027. As of June 29, 2024, Sysco was in compliance with all of its debt covenants and the company expects to remain in compliance through the next twelve months.

Sysco’s U.S. commercial paper dealer agreement includes an issuance allowance for an aggregate amount not to exceed $3.0 billion. Our commercial paper dealer agreement in Europe includes an issuance allowance for an aggregate amount not to exceed €250 million. Any outstanding commercial paper balances are classified within long-term debt, as the programs are supported by the long-term revolving credit facility.

Guarantor Summarized Financial Information

On January 19, 2011, the wholly owned U.S. Broadline subsidiaries of Sysco Corporation, which distribute a full line of food products and a wide variety of non-food products, entered into full and unconditional guarantees of all outstanding senior notes and debentures of Sysco Corporation. A list of the current guarantors is included in Exhibit 22 to this Form 10-K. All subsequent issuances of senior notes and debentures in the U.S. and borrowings under the company’s $3.0 billion long-term revolving credit facility have also been guaranteed by these subsidiaries, as discussed in Note 12, “Debt and Other Financing Arrangements,” in the Notes to Consolidated Financial Statements in Item 8. As of June 29, 2024, Sysco had a total of $10.5 billion in senior notes, debentures and borrowings under the long-term revolving credit facility that were guaranteed by these subsidiary guarantors. Our remaining consolidated subsidiaries (non-guarantor subsidiaries) are not obligated under the senior notes indenture, debentures indenture or our long-term revolving credit facility.

All subsidiary guarantors are 100% owned by the parent company, all guarantees are full and unconditional, and all guarantees are joint and several. The guarantees rank equally and ratably in right of payment with all other existing and future unsecured and unsubordinated indebtedness of the respective guarantors.

The assets of Sysco Corporation consist principally of the stock of its subsidiaries. Therefore, the rights of Sysco Corporation and the rights of its creditors to participate in the assets of any subsidiary upon liquidation, recapitalization or otherwise will be subject to the prior claims of that subsidiary’s creditors, except to the extent that claims of Sysco Corporation itself and/or the claims of those creditors themselves may be recognized as creditor claims of the subsidiary. Furthermore, the ability of Sysco Corporation to service its indebtedness and other obligations is dependent upon the earnings and cash flow of its subsidiaries and the distribution or other payment to it of such earnings or cash flow. If any of Sysco Corporation’s subsidiaries becomes insolvent, the direct creditors of that subsidiary will have a prior claim on its assets. Sysco Corporation’s rights and the rights of its creditors, including the rights of a holder of senior notes as an owner of debt securities, will be subject to that prior claim unless Sysco Corporation or such noteholder, if such noteholder’s debt securities are guaranteed by such subsidiary, also is a direct creditor of that subsidiary.

The guarantee of any subsidiary guarantor with respect to a series of senior notes or debentures may be released under certain customary circumstances. If we exercise our defeasance option with respect to the senior notes or debentures of any series, then any subsidiary guarantor effectively will be released with respect to that series. Further, each subsidiary guarantee will remain in full force and effect until the earliest to occur of the date, if any, on which (1) the applicable subsidiary guarantor shall consolidate with or merge into Sysco Corporation or any successor of Sysco Corporation or (2) Sysco Corporation or any successor of Sysco Corporation consolidates with or merges into the applicable subsidiary guarantor.

46

Basis of Preparation of the Summarized Financial Information

The summarized financial information of Sysco Corporation (issuer), and certain wholly owned U.S. Broadline subsidiaries (guarantors) (together, the obligor group) is presented on a combined basis with intercompany balances and transactions between entities in the obligor group eliminated. Investments in and equity in the earnings of our non-guarantor subsidiaries, which are not members of the obligor group, have been excluded from the summarized financial information. The obligor group’s amounts due to, amounts due from and transactions with non-guarantor subsidiaries have been presented in separate line items, if they are material to the obligor financials. The following table includes summarized financial information of the obligor group for the periods presented.

[[GREPCENT_TABLE]]
[["Combined Parent and Guarantor Subsidiaries Summarized Balance Sheet","","Jun. 29, 2024"],["","","(In millions)"],["ASSETS"],["Receivables due from non-obligor subsidiaries","","$","428"],["Current assets","","5,417"],["Total current assets","","$","5,845"],["Notes receivable from non-obligor subsidiaries","","$","78"],["Other noncurrent assets","","4,714"],["Total noncurrent assets","","$","4,792"],["LIABILITIES"],["Payables due to non-obligor subsidiaries","","$","215"],["Other current liabilities","","2,396"],["Total current liabilities","","$","2,611"],["Notes payable to non-obligor subsidiaries","","$","250"],["Long-term debt","","11,276"],["Other noncurrent liabilities","","1,334"],["Total noncurrent liabilities","","$","12,860"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Combined Parent and Guarantor Subsidiaries Summarized Results of Operations","","2024"],["","","(In millions)"],["Sales","","$","48,648"],["Gross profit","","8,796"],["Operating income","","2,596"],["Interest expense from non-obligor subsidiaries","","64"],["Net earnings","","1,616"]]
[[/GREPCENT_TABLE]]

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses in the accompanying financial statements. Significant accounting policies employed by Sysco are presented in the notes to the financial statements.

Critical accounting 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 estimates and this related disclosure. Our most critical accounting estimates pertain to the goodwill and intangible assets, income taxes and company-sponsored pension plans.

47

Goodwill and Intangible Assets

We account for acquired businesses using the acquisition method of accounting, which requires that once control of a business is obtained, 100% of the assets acquired and liabilities assumed are recorded at the date of acquisition at their respective fair values. We use multiple valuation methods to determine the fair value of assets acquired and liabilities assumed. For intangible assets, we generally use the income method which uses a forecast of the expected future net cash flows associated with each asset. These cash flows are then adjusted to present value by applying an appropriate discount rate that reflects the risk factors associated with the cash flow streams. Some of the more significant estimates and assumptions inherent in the income method or other methods include the amount and timing of projected future cash flows and the discount rate selected to measure the risks inherent in the future cash flows. Determining the useful life of an intangible asset also requires judgment, as different types of intangible assets will have different useful lives. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. More information on our acquisitions can be found in Note 4, “Acquisitions,” in the Notes to Consolidated Financial Statements in Item 8.

Annually in our fiscal fourth quarter, we assess the recoverability of goodwill and indefinite-lived intangibles by determining whether the fair values exceed the carrying values of these assets. Impairment reviews, outside our annual review time frame, are performed if events or circumstances occur that include changes in macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant entity-specific events, specific events affecting the reporting unit or sustained decrease in share price. Our testing may be performed utilizing either a qualitative or quantitative assessment; however, if a qualitative assessment is performed and we determine that the fair value of a reporting unit is more likely than not (i.e., a likelihood of more than 50 percent) to be less than its carrying amount, a quantitative test is performed.

When using a quantitative test, we arrive at our estimates of fair value using a combination of discounted cash flow and earnings or revenue multiple models. The results from each of these models are then weighted and combined into a single estimate of fair value for each reporting unit. We use a higher weighting for our discounted cash flow valuation compared to the earnings multiple models because the forecasted operating results that serve as a basis for the analysis incorporate management’s outlook and anticipated changes for the businesses consistent with a market participant. The primary assumptions used in these various models include future cash flow estimates of the reporting units which are dependent on internal forecasts and projected growth rates, weighted average cost of capital, working capital and capital expenditure requirements, along with earnings multiples of acquisitions completed by Sysco and those estimated of comparable acquisitions in the industry, including control premiums. When possible, we use observable market inputs in our models to arrive at the fair values of our reporting units.

Certain reporting units have a greater proportion of goodwill recorded to estimated fair value as compared to the U.S. Foodservice Operations, Canada Broadline or SYGMA reporting units. This is primarily due to these businesses having been more recently acquired, and as a result there has been less history of organic growth than in the U.S. Foodservice Operations, Canadian Broadline and SYGMA reporting units. As such, these reporting units have a greater risk of future impairment if their operations were to suffer a significant downturn. Goodwill totals $3.1 billion for our U.S. Foodservice Operations, Canada Broadline and SYGMA reporting units, with $2.1 billion remaining for our other reporting units. In our annual fiscal 2024 assessment, we concluded that all reporting units had a fair value that exceeded book value, and no reporting units were at risk of impairment.

We estimated the fair value of these reporting units using a combination of discounted cash flow and earnings or revenue multiple models. For the purposes of the discounted cash flow models, fair value was determined based on the present value of estimated future cash flows, discounted at an appropriate risk adjusted rate. Our fair value conclusions as of June 29, 2024 for the reporting units are sensitive to changes in the assumptions used in the income approach which include forecasted revenues, perpetual growth rates, and long-term discount rates, among others, all of which require significant judgments by management. Fair value of the reporting unit is, therefore, determined using significant unobservable inputs, or level 3 in the fair value hierarchy. We used recent historical performance, current forecasted financial information, and broad-based industry and economic statistics as a basis to estimate the key assumptions utilized in the discounted cash flow model. These key assumptions are inherently uncertain and require a high degree of estimation and judgment and are subject to change based on actual results, industry and global economic and geo-political conditions, and the timing and success of the implementation of current strategic initiatives. The fair value estimates of two of our more significant reporting units, with total goodwill of $1.4 billion, are more sensitive to changes in significant assumptions, including changes in projected cash flows or weighted average cost of capital.

48

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. Tax law changes, increases or decreases in book versus tax basis differences, accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances, and our change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate. Certain of our operations have carryforward attributes, such as operating losses. If these operations do not produce sufficient income, it could lead to the recognition of valuation allowances against certain deferred tax assets in the future if losses occur or growth is insufficient beyond our current expectations. This would negatively impact our income tax expense, net earnings, and balance sheet.

Our liability for unrecognized tax benefits contains uncertainties because management is required to make assumptions and to apply judgment in estimating the exposures associated with our various filing positions. We believe that the judgments and estimates discussed herein are reasonable; however, actual results could differ, and we may be exposed to losses or gains that could be material. To the extent we prevail in matters for which a liability has been established, or pay amounts in excess of recorded liabilities, our effective income tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement generally would require use of our cash and may result in an increase in our effective income tax rate in the period of resolution. A favorable tax settlement may be recognized as a reduction in our effective income tax rate in the period of resolution. During the third quarter of fiscal 2023, Sysco received a Statutory Notice of Deficiency from the Internal Revenue Service, mainly related to foreign tax credits generated in fiscal 2018 from repatriated earnings primarily from our Canadian operations. On April 18, 2023, during the company’s fourth fiscal quarter, the company filed suit in the U.S. Tax Court challenging the validity of certain tax regulations related to the one-time transition tax on unrepatriated foreign earnings, which was enacted as part of the Tax Cuts and Jobs Act of 2017 (TCJA). The lawsuit seeks to have the court invalidate these regulations, which would affirm the company’s position regarding its foreign tax credits. Sysco previously recorded a benefit of $131 million attributable to its interpretation of the TCJA and the Internal Revenue Code. If the company is ultimately unsuccessful in defending its position, it may be required to reverse all, or some portion, of the benefit previously recorded.

Company-Sponsored Pension Plans

Amounts related to defined benefit plans recognized in the financial statements are determined on an actuarial basis. Two of the more critical assumptions in the actuarial calculations are the discount rate for determining the current value of plan benefits and the expected rate of return on plan assets. Our U.S. Retirement Plan is largely frozen and is only open to a small number of employees. Our Supplemental Executive Retirement Plan (SERP) is frozen and is not open to any employees. None of these plans have a significant sensitivity to changes in discount rates specific to our results of operations, but such changes could impact our balance sheet due to a change in our funded status. Due to the low level of active employees in our retirement plans, our assumption for the rate of increase in future compensation is not a critical assumption.

The expected long-term rate of return on plan assets was 5.50% for fiscal 2024. The expectations of future returns are derived from a mathematical asset model that incorporates assumptions as to the various asset class returns reflecting a combination of historical performance analysis, the forward-looking views of the financial markets regarding the yield on bonds, historical returns of the major stock markets, and returns on alternative investments. The rate of return assumption is reviewed annually and revised as deemed appropriate.

The expected return on plan assets impacts the recorded amount of net pension costs. The expected long-term rate of return on plan assets of the U.S. Retirement Plan is 5.63% for fiscal 2025. A 25 basis point increase (decrease) in the assumed rate of return in the Plan for fiscal 2025 would decrease (increase) Sysco’s net company-sponsored pension costs for fiscal 2025 by approximately $6 million.

Pension accounting standards require the recognition of the funded status of our defined benefit plans in the Statement of Financial Position, with a corresponding adjustment to accumulated other comprehensive income, net of tax. The amount reflected in accumulated other comprehensive loss related to the recognition of the funded status of our defined benefit plans as of June 29, 2024 was a charge, net of tax, of $917 million. The amount reflected in accumulated other comprehensive loss related to the recognition of the funded status of our defined benefit plans as of July 1, 2023 was a charge, net of tax, of $840 million.

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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 of an improving market over the course of fiscal 2025;

•our expectations regarding the ability of our supply chain and facilities to remain in place and operational;

•our plans regarding our transformation initiatives and the expected effects from such initiatives, including the Sysco Driver Academy;

•statements regarding uncollectible accounts, including that if collections continue to improve, additional reductions in bad debt expense could occur;

•our expectations that our Recipe for Growth strategy will allow us to better serve our customers and differentiate Sysco from our competition;

•our expectations regarding our fiscal 2025 sales and our rate of sales growth in fiscal 2025 and the three years of our long-range plan;

•our expectations regarding the impact of inflation on sales, gross margin rates and gross profit dollars;

•our expectations regarding gross margins in fiscal 2025;

•our plans regarding cost savings, including our target for cost savings through fiscal 2025 and the impact of costs savings on the company;

•our belief that our purpose will allow us to grow substantially faster than the foodservice distribution industry and deliver profitable growth through our Recipe for Growth transformation, and statements regarding our plans with respect to our strategic pillars that support this growth transformation;

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

•the expected long-term rate of return on plan assets of the U.S. Retirement Plan;

•the sufficiency of our available liquidity to sustain our operations for multiple years;

•estimates regarding the outcome of legal proceedings;

•the impact of seasonal trends on our free cash flow;

•estimates regarding our capital expenditures and the sources of financing for our capital expenditures;

•our expectations regarding the impact of potential acquisitions and sales of assets on our liquidity, borrowing capacity, leverage ratios and capital availability;

•our expectations regarding real sales growth in the U.S. foodservice market and trends in produce markets;

•our expectations regarding the calculation of adjusted return on invested capital, adjusted operating income, adjusted net earnings and adjusted diluted earnings per share;

•our expectations regarding the impact of future Certain Items on our projected future non-GAAP and GAAP results;

•our expectations regarding our effective tax rate in fiscal 2025;

•the sufficiency of our mechanisms for managing working capital and competitive pressures, and our beliefs regarding the impact of these mechanisms;

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•our ability to meet future cash requirements, including the ability to access financial markets effectively, including issuances of debt securities, and maintain sufficient liquidity;

•our expectations regarding the payment of dividends, and the growth of our dividend, in the future;

•our expectations regarding future activity under our share repurchase program;

•future compliance with the covenants under our revolving credit facility;

•our ability to effectively access the commercial paper market and long-term capital markets; and

•our 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.

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 and those within Part I, Item 1A of this document:

•the risk that if sales from our locally managed customers do not grow at the same rate as sales from multi-unit customers, our gross margins may decline;

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

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

•the risk that our efforts to modify truck routing, including our small truck initiative, in order to reduce outbound transportation costs may be unsuccessful;

•the risk that we may not be able to accelerate and/or identify additional administrative cost savings in order to compensate for any gross profit or supply chain cost leverage challenges;

•risks related to unfavorable conditions in the Americas and Europe and the impact on our results of operations and financial condition;

•the risks related to our efforts to implement our transformation initiatives and meet our other long-term strategic objectives, including the risk that these efforts may not provide the expected benefits in our anticipated time frame, if at all, and may prove costlier than expected;

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

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

•the risk that competition in our industry and the impact of GPOs may adversely impact our margins and our ability to retain customers and make it difficult for us to maintain our market share, growth rate and profitability;

•the risk that our relationships with long-term customers may be materially diminished or terminated;

•the risk that changes in consumer eating habits could materially and adversely affect our business, financial condition, or results of operations;

•the impact and effects of public health crises, pandemics and epidemics, and the adverse impact thereof on our business, financial condition and results of operations;

•the risk that changes in applicable tax laws or regulations and the resolution of tax disputes could negatively affect our financial results;

•the risk that we may not be able to fully compensate for increases in fuel costs, and forward purchase commitments intended to contain fuel costs could result in above market fuel costs;

•the risk of interruption of supplies and increase in product costs as a result of conditions beyond our control;

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•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 divestiture of one or more of our businesses may not provide the anticipated effects on our operations;

•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 EU generally;

•the risk that factors beyond management’s control, including fluctuations in the stock market, as well as management’s future subjective evaluation of the company’s needs, would impact the timing of share repurchases;

•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 of negative impacts to our business and our relationships with customers from a cybersecurity incident and/or other technology disruptions;

•the risk that changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect interest expense related to outstanding debt;

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

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

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

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

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

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

You should carefully consider these risks, as well as the additional risks described in other documents we file with the Securities and Exchange Commission. New risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements.

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In light of the significant risks and uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. Except as required by law, we undertake no obligation to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. You should read this Annual Report on Form 10-K and the documents we file with the SEC, with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by the cautionary statements referenced above.