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What changed in Sysco's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Sysco's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+337 added−332 removedSource: 10-K (2024-08-28) vs 10-K (2023-08-25)

Top changes in Sysco's 2024 10-K

337 paragraphs added · 332 removed · 274 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

37 edited+10 added−2 removed55 unchanged
Biggest changeNo single customer accounted for 10% or more of Sysco’s total sales for the fiscal year ended July 1, 2023. 2 We estimate that our sales by type of customer during the past three fiscal years were as follows: Type of Customer 2023 2022 2021 Restaurants (1) 62 % 63 % 66 % Education, government 8 8 6 Travel and leisure 8 7 5 Healthcare 7 8 9 Other (2) 15 14 14 Totals 100 % 100 % 100 % (1) Restaurants returned to a pre-pandemic percentage of total sales in fiscal year 2023.
Biggest changeWe estimate that our sales by type of customer during the past three fiscal years were as follows: Type of Customer 2024 2023 2022 Restaurants 62 % 62 % 63 % Education, government 7 8 8 Healthcare 7 7 8 Travel and leisure 6 8 7 Other (1) 18 15 14 Totals 100 % 100 % 100 % (1) Other includes cafeterias that are not stand-alone restaurants, bakeries, caterers, churches, civic and fraternal organizations, vending distributors, other distributors and international exports, as well as retail food sales and logistics services.
We use our Global DEI Advisory Council to monitor and enhance our three-year DEI Roadmap and Real Talk Dialogues which provide leaders and colleagues safe forums to have open, honest, two-way and completely voluntary conversations. Our Colleague Resource Groups (CRGs) are voluntary, colleague-led groups organized to foster a diverse, inclusive workplace at Sysco.
We use our Global DEI Advisory Council to monitor and enhance our three-year DEI Roadmap and Real Talk Dialogues which provide leaders and colleagues safe forums to have open, honest, two-way and completely voluntary conversations. Our Colleague Resource Groups (CRGs) are voluntary, 4 colleague-led groups organized to foster a diverse, inclusive workplace at Sysco.
We must comply with the safety and fitness regulations promulgated by the Federal Motor Carrier Safety Administration, including those relating to drug and alcohol testing and hours-of service. Such matters as weight and dimension of equipment also fall under federal and state regulations. We are subject to regulations of the Federal Aviation Administration covering items transported by air.
We must comply with the safety and fitness regulations promulgated by the Federal Motor Carrier Safety Administration, including those relating to drug and alcohol testing and hours of service. Such matters as weight and dimension of equipment also fall under federal and state regulations. We are subject to regulations of the Federal Aviation Administration 6 covering items transported by air.
The FDA has finalized regulations implementing the FSMA, recognizing that ensuring the safety of the food supply is a shared responsibility among many different points in the global supply chain. The FSMA rules are designed to identify specific actions that must be taken at each of these points to prevent contamination.
The FDA has finalized numerous regulations implementing FSMA, recognizing that ensuring the safety of the food supply is a shared responsibility among many different points in the global supply chain. The FSMA rules are designed to identify specific actions that must be taken at each of these points to prevent contamination.
Our operating sites offer daily delivery to certain customer locations and have the capability of delivering special orders on short notice. Through the sales and marketing representatives and support staff, we stay informed of the needs of our customers and acquaint them with new products and services.
Our operating sites offer daily delivery to certain customer locations and have the capability of delivering special orders on short notice. Through the sales and marketing representatives 2 and support staff, we stay informed of the needs of our customers and acquaint them with new products and services.
GSC team members possess experience and expertise in, among other areas, 3 customer and vendor contract administration, accounting and finance, treasury, legal, information technology, payroll and employee benefits, risk management and insurance, sales and marketing, merchandising, inbound logistics, human resources, strategy and tax compliance services.
GSC team members possess experience and expertise in, among other areas, customer and vendor contract administration, accounting and finance, treasury, legal, information technology, payroll and employee benefits, risk management and insurance, sales and marketing, merchandising, inbound logistics, human resources, strategy and tax compliance services.
For certain product lines, we are also subject to the Federal Meat Inspection Act, the Poultry Products Inspection Act, the Perishable Agricultural Commodities Act, the Packers and Stockyard Act and regulations promulgated by the U.S. Department of Agriculture (USDA) to interpret and implement these statutory provisions.
For certain product lines, we are also subject to the Federal Meat 5 Inspection Act, the Poultry Products Inspection Act, the Perishable Agricultural Commodities Act, the Packers and Stockyard Act and regulations promulgated by the U.S. Department of Agriculture (USDA) to interpret and implement these statutory provisions.
Those requirements relate to, among other things, 6 competition, product composition, packaging, labeling, advertisement (including nutrition and health claims) and the safety of food products, as well as the health, safety and working conditions of employees.
Those requirements relate to, among other things, competition, product composition, packaging, labeling, advertisement (including nutrition and health claims) and the safety of food products, as well as the health, safety and working conditions of employees.
These advantages combined with a large geographical footprint of multi-temperature warehouses, mitigates some of the impact of regional economic declines that may occur over time. Government Regulation Our company is required to comply, and it is our policy to comply, with all applicable laws and regulations in the numerous countries throughout the world in which we do business.
These advantages combined with a large geographical footprint of multi-temperature warehouses, mitigate some of the impact of regional economic declines that may occur over time. Government Regulation Our company is required to comply, and it is our policy to comply, with all applicable laws and regulations in the numerous countries throughout the world in which we do business.
These sales are reflected within the respective customer types listed in the table above, depending on the type of customer the FSM operator serves. Sources of Supply We purchase from thousands of suppliers, both domestic and international, none of which individually accounted for more than 10% of our purchases for fiscal 2023.
These sales are reflected within the respective customer types listed in the table above, depending on the type of customer the FSM operator serves. Sources of Supply We purchase from thousands of suppliers, both domestic and international, none of which individually accounted for more than 10% of our purchases for fiscal 2024.
Our locally sourced products, including produce, meats, cheese and other products, help differentiate our customers’ offerings, satisfy demands for new products, and support local communities. Merchandise is generally purchased through both centrally developed programs, domestically and internationally, and direct programs established by our various operating sites.
Our locally sourced products, including produce, meats, cheese and other products, help differentiate our customers’ offerings, satisfy demand for new products, and support local communities. Merchandise is generally purchased through both centrally developed programs, domestically and internationally, and direct programs established by our various operating sites.
We expect our capital expenditures, net of proceeds from sales of assets, to continue to approximate 1% of sales in fiscal 2024, and we expect to finance these capital expenditures from cash flows from operations and bank and other borrowings. Human Capital Resources We believe engaged and empowered colleagues are key to business success.
We expect our capital expenditures, net of proceeds from sales of assets, to continue to approximate 1% of sales in fiscal 2025, and we expect to finance these capital expenditures from cash flows from operations and bank and other borrowings. Human Capital Resources We believe engaged and empowered colleagues are key to business success.
The USDA imposes standards for product safety, quality and sanitation through the federal meat and poultry 5 inspection program. The USDA reviews and approves the labeling of these products and establishes standards for the grading and commercial acceptance of produce shipments from our suppliers.
The USDA imposes standards for product safety, quality and sanitation through the federal meat and poultry inspection program. The USDA reviews and approves the labeling of meat and poultry products and establishes standards for the grading and commercial acceptance of produce shipments from our suppliers.
We believe, based upon industry trade data, our sales to the U.S. and Canada food-away-from-home industry were the highest of any foodservice distributor during fiscal 2023.
We believe, based upon industry trade data, our sales to the U.S. and Canada food-away-from-home industry were the highest of any foodservice distributor during fiscal 2024.
We are also subject to the Public Health Security and Bioterrorism Preparedness and Response Act of 2002, which imposes certain registration and record keeping requirements on facilities that manufacture, process, pack or hold food for human or animal consumption. The Food Safety Modernization Act (FSMA) has significantly expanded our food safety requirements.
We are also subject to the Public Health Security and Bioterrorism Preparedness and Response Act of 2002, which imposes certain registration and record keeping requirements on facilities that manufacture, process, pack or hold food for human or animal consumption. The Food Safety Modernization Act (FSMA) has significantly expanded our food safety requirements, including certain mandatory safety prevention practices.
Our purpose is “Connecting the World to Share Food and Care for One Another.” We provided products and related services to approximately 725,000 customer locations, including restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers during fiscal 2023.
Our purpose is “Connecting the World to Share Food and Care for One Another.” We provided products and related services to approximately 730,000 customer locations, including restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers during fiscal 2024.
We estimate that sales to our customers in the food service management (FSM) sector, which include large customers that service cafeterias in institutions such as universities, hospitals, and sporting venues, accounted for 7% of sales in fiscal 2023, as compared to 6% of sales in fiscal 2022.
We estimate that sales to our customers in the food service management (FSM) sector, which include large customers that service cafeterias in institutions such as universities, hospitals, and sporting venues, accounted for 8% of sales in fiscal 2024, as compared to 7% of sales in fiscal 2023.
Founded in 1969, Sysco commenced operations as a public company in March 1970 when the stockholders of nine companies exchanged their stock for Sysco common stock. Since our formation, we have grown from $115 million to our all-time high of $76.3 billion in annual sales in fiscal 2023, both through internal expansion of existing operations and acquisitions.
Founded in 1969, Sysco commenced operations as a public company in March 1970 when the stockholders of nine companies exchanged their stock for Sysco common stock. Since our formation, we have grown from $115 million to our all-time high of $78.8 billion in annual sales in fiscal 2024, both through internal expansion of existing operations and acquisitions.
Sysco’s fiscal year ends on the Saturday nearest to June 30th. This resulted in a 52-week year ended July 1, 2023 for fiscal 2023, a 52-week year ended July 2, 2022 for fiscal 2022 and a 53-week year ended July 3, 2021 for fiscal 2021. We will have a 52-week year ending June 29, 2024 for fiscal 2024.
Sysco’s fiscal year ends on the Saturday nearest to June 30th. This resulted in a 52-week year ended June 29, 2024 for fiscal 2024, a 52-week year ended July 1, 2023 for fiscal 2023 and a 52-week year ended July 2, 2022 for fiscal 2022. We will have a 52-week year ending June 28, 2025 for fiscal 2025.
Capital expenditures, net of proceeds from sales of assets, as a percentage of sales during fiscal 2023, 2022 and 2021 were 1.0%, 0.9% and 0.8%, respectively. During the three years ended July 1, 2023, capital expenditures were financed primarily by internally generated funds along with bank and other borrowings.
Capital expenditures, net of proceeds from sales of assets, as a percentage of sales during fiscal 2024, 2023 and 2022 were 1.0%, 1.0% and 0.9%, respectively. During the three years ended June 29, 2024, capital expenditures were financed primarily by internally generated funds along with bank and other borrowings.
In fiscal 2023, our hourly colleagues received an average hourly wage of $24.15, and 100% of colleagues in our U.S. distribution facilities received pay above state minimum wage thresholds.
In fiscal 2024, our hourly colleagues received an average hourly wage of approximately $24, and 100% of colleagues in our U.S. distribution facilities received pay above state minimum wage thresholds.
Approximately 15% of our employees were represented by unions, primarily the International Brotherhood of Teamsters and unions in France and Sweden. Approximately 8% of our union U.S. employees and 20% of our union international employees are covered by collective bargaining agreements that are subject to renegotiation in fiscal 2024.
Approximately 15% of our employees were represented by unions, primarily the International Brotherhood of Teamsters and unions in France and Sweden. Approximately 9% of our union U.S. employees and 21% of our union international employees are covered by collective bargaining agreements that are subject to renegotiation in fiscal 2025.
The level of inventory on hand will vary by product depending on shelf-life, supplier order fulfillment lead times and customer demand. We also purchase additional volumes of certain products based on supply or pricing opportunities. We take advantage of suppliers’ cash discounts where appropriate. Otherwise, we pay our suppliers according to our payment terms.
The level of inventory on hand will vary by product depending on shelf-life, supplier order fulfillment lead times and customer demand. We also purchase additional volumes of certain products based on supply or pricing opportunities. We take advantage of suppliers’ cash discounts where appropriate.
We estimate we serve more than 17% of the approximately $350 billion annual foodservice market in the U.S., as estimated by Technomic, Inc., for calendar year 2022. Technomic projects the market size to increase to approximately $370 billion by the end of calendar 2023. We also serve certain international geographies that vary in size and amount of market share.
We estimate that we serve about 17% of an approximately $360 billion annual foodservice market in the U.S., as estimated by Technomic, Inc., for calendar year 2023. Technomic projects the market size to increase to approximately $370 billion by the end of calendar 2024. We also serve certain international geographies that vary in size and amount of market share.
The GSC also makes available supply chain expertise in warehousing, distribution, and omni-channel strategic services, which provide assistance in operational best practices, including space utilization, energy conservation, fleet management and workflow. Capital Improvements During fiscal 2023, 2022 and 2021, $793.3 million, $632.8 million and $470.7 million, respectively, were invested in facilities, technology, equipment, delivery fleet and other capital asset enhancements.
The GSC also makes available supply chain expertise in warehousing and distribution strategic services, which provide assistance in operational best practices, including space utilization, energy conservation, fleet management and workflow. Capital Improvements During fiscal 2024, 2023 and 2022, $832 million, $793 million and $633 million, respectively, were invested in facilities, technology, equipment, delivery fleet and other capital asset enhancements.
Specialty operations, which include our FreshPoint fresh produce distribution business, our Specialty Meats and Seafood Group specialty protein operations, our growing Italian Specialty platform anchored by Greco & Sons, 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.
Specialty operations, which include our FreshPoint fresh produce distribution business, our Specialty Meats and Seafood Group specialty protein operations, our growing Italian Specialty platform anchored by Greco & Sons, Inc., Edward Don & Company (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.
We are also subject to regulation by numerous federal, state and local regulatory agencies, including, but not limited to, the U.S. Department of Labor, which sets employment practice standards for workers. We are also subject to regulations by the U.S.
These customer relationships subject us to additional regulations applicable to government contractors. We are also subject to regulation by numerous federal, state and local regulatory agencies, including, but not limited to, the U.S. Department of Labor, which sets employment practice standards for workers. We are also subject to regulations by the U.S.
From time to time, we dispose of assets in the normal course of business and we consider proceeds from these asset sales to be an offset to capital expenditures. During fiscal 2023, 2022 and 2021, capital expenditures, net of proceeds from sales of assets, were $751.2 million, $608.7 million and $411.5 million, respectively.
From time to time, we dispose of assets in the normal course of business, and we consider proceeds from these asset sales to be an offset to capital expenditures. During fiscal 2024, 2023 and 2022, capital expenditures, net of proceeds from sales of assets, were $753 million, $751 million and $609 million, respectively.
As of July 1, 2023, we employed approximately 72,000 employees, including 50,000 U.S. employees and 22,000 employees outside the U.S., as compared to approximately 71,000 employees as of July 2, 2022. Also, approximately 99% of our U.S.-based colleagues are classified as full-time, defined as employees who work 30 or more hours per week.
As of June 29, 2024, we employed approximately 76,000 employees, including 51,000 U.S. employees and 25,000 employees outside the U.S., as compared to approximately 72,000 employees as of July 1, 2023. Also, approximately 99% of our U.S.-based colleagues are classified as full-time, defined as employees who work 30 or more hours per week.
Our sales do not generally fluctuate significantly on a seasonal basis; therefore, our business is not deemed to be seasonal. As of July 1, 2023, we operated 334 distribution facilities throughout North America and Europe.
Our sales do not generally fluctuate significantly on a seasonal basis; therefore, our business is not deemed to be seasonal. As of June 29, 2024, we operated 340 distribution facilities throughout North America and Europe. 7
Global Support Center Our Global Support Center (GSC) provides numerous centralized services to our operating sites and performs support activities for employees, suppliers and customers.
Otherwise, we pay our suppliers according to our payment terms. 3 Global Support Center Our Global Support Center (GSC) provides numerous centralized services to our operating sites and performs support activities for employees, suppliers and customers.
We have established and continue to maintain comprehensive, prevention-based controls across the food supply chain that are both verified and validated, as required by FDA regulations implementing FSMA. The FSMA further imposes requirements for food products imported into the U.S. and provides the FDA with mandatory recall authority.
We have established and continue to maintain comprehensive, prevention-based controls across the food supply chain that are both verified and validated, as required by FDA regulations implementing FSMA. FSMA further imposes requirements for food products imported into the U.S. All food intended for introduction into U.S. interstate commerce must be safe, sanitary, and labeled according to U.S. requirements.
A comparison of the sales mix in the principal product categories during the last three years is presented below: Principal product categories 2023 2022 2021 Canned and dry products 19 % 17 % 16 % Fresh and frozen meats 18 19 19 Frozen fruits, vegetables, bakery and other 15 14 15 Dairy products 11 10 10 Poultry 10 11 11 Fresh produce 9 8 8 Paper and disposables 7 7 8 Seafood 4 5 5 Beverage products 3 3 3 Other (1) 4 6 5 Totals 100 % 100 % 100 % (1) Other sales relate to non-food products, including textiles and amenities for our hotel supply business, equipment, other janitorial products, medical supplies and smallwares.
A comparison of the sales mix in the principal product categories during the last three years is presented below: Principal product categories 2024 2023 2022 Canned and dry products 19 % 19 % 17 % Fresh and frozen meats 18 18 19 Frozen fruits, vegetables, bakery and other 15 15 14 Dairy products 10 11 10 Poultry 10 10 11 Fresh produce 9 9 8 Paper and disposables 7 7 7 Seafood 4 4 5 Beverage products 4 3 3 Equipment and smallwares (1) 2 1 1 Other (2) 2 3 5 Totals 100 % 100 % 100 % (1) Due to the acquisition of Edward Don, a distributor of foodservice equipment and supplies, “Equipment and smallwares” is now presented as a separate principal product category.
We are also subject to the National Labor Relations Act, which governs the process for collective bargaining between employers and employees and protects the rights of both employers and employees in the workplace. Our processing and distribution facilities must be registered with the FDA biennially and are subject to periodic government agency inspections by the FDA and USDA.
We are also subject to the National Labor Relations Act, which governs the process for collective bargaining between employers and employees and protects the rights of both employers and employees in the workplace.
They are a critical element of our engagement and DEI efforts at both our headquarters and at operating sites. 4 As of July 1, 2023, our U.S. employee population possessed the gender, ethnic and racial attributes identified below: United States Employee Population (1) Male Female White Hispanic or Latino Black or African American Asian American Indian or Alaskan Native Native Hawaiian or Other Pacific Islander Two or more races Not Available Individual Contributors 81 % 19 % 42 % 26 % 23 % 4 % 1 % 1 % 2 % 1 % Management 74 26 63 16 12 5 1 1 2 — Senior Management 74 26 79 6 6 6 — — 2 1 Officers 72 28 66 5 14 5 1 — 3 6 Total Sysco 80 20 45 25 21 4 1 1 2 1 (1) Information is based on self-reported identification.
As of June 29, 2024, our U.S. employee population possessed the gender, ethnic and racial attributes identified below: United States Employee Population (1) Male Female White Hispanic or Latino Black or African American Asian American Indian or Alaskan Native Native Hawaiian or Other Pacific Islander Two or more races Not Available Individual Contributors 81 % 19 % 40 % 27 % 23 % 5 % 1 % 1 % 2 % 1 % Management 73 27 62 16 12 5 1 1 2 1 Senior Management 73 27 76 8 6 6 — — 2 2 Officers 75 25 64 7 12 2 2 — 2 11 Total Sysco 80 20 43 25 22 5 1 1 2 1 (1) Information is based on self-reported identification.
Selected financial data for each of our reportable segments, as well as financial information concerning geographic areas, can be found in Note 21, “Business Segment Information,” in the Notes to Consolidated Financial Statements in Item 8. 1 Customers and Products Sysco’s customers in the foodservice industry include restaurants, hospitals and skilled nursing facilities, schools and colleges, hotels and motels, industrial caterers and other similar venues where foodservice products are served.
Selected financial data for each of our reportable segments, as well as financial 1 information concerning geographic areas, can be found in Note 21, “Business Segment Information,” in the Notes to Consolidated Financial Statements in Item 8.
Our facilities are generally inspected at least annually by federal and/or state authorities. We also must comply with Federal Trade Commission standards with respect to any claims made about our food products in advertising and marketing materials.
We also must comply with Federal Trade Commission standards with respect to any claims made about our food products in advertising and marketing materials. Our customers include several departments of the federal government, including the Department of Defense and Department of Veterans Affairs facilities, as well as certain state and local entities.
Removed
For comparability purposes, in both fiscal years 2020 and 2019, restaurants constituted 62% of total sales. (2) Other includes cafeterias that are not stand-alone restaurants, bakeries, caterers, churches, civic and fraternal organizations, vending distributors, other distributors and international exports, as well as retail food sales and logistics services.
Added
Customers and Products Sysco’s customers in the foodservice industry include restaurants, hospitals and skilled nursing facilities, schools and colleges, hotels and motels, industrial caterers and other similar venues where foodservice products are served.
Removed
Our customers include several departments of the federal government, including the Department of Defense and Department of Veterans Affairs facilities, as well as certain state and local entities. These customer relationships subject us to additional regulations applicable to government contractors.
Added
See Note 4, “Acquisitions,” in the Notes to Consolidated Financial Statements in Item 8 for details on this acquisition. (2) Other sales relate to certain non-food products, including textiles and amenities for our hotel supply business, other janitorial products, and medical supplies.
Added
No single customer accounted for 10% or more of Sysco’s total sales for the fiscal year ended June 29, 2024.
Added
They are a critical element of our engagement and DEI efforts at both our headquarters and at operating sites.
Added
Importers can import food into the U.S. as long as the facilities that produce, store, or otherwise handle the products are registered with the FDA, and prior notice of incoming shipments is provided to the FDA.
Added
Imported food products are subject to FDA inspection at U.S. ports of entry and the FDA may detain shipments of products if the shipments are found to be non-compliant with U.S. requirements.
Added
FSMA also provides the FDA with expanded enforcement authority, including mandatory recall authority over all articles of food (other than infant formula) that are manufactured, processed, packed, or held at a food facility that is required to register with the FDA.
Added
As a marketer and distributor of various non-food products, such as food containers and utensils, kitchen equipment, and cleaning supplies, we are also subject to various laws and regulations relating to the safety, storage, transportation, sale, advertising and labeling of those non-food products, including requirements to provide information about the hazards of certain chemicals present in some of the products we distribute and regulations restricting the sale of products made with certain materials or chemicals.
Added
The Fair Labor Standards Act, which establishes minimum wages and overtime standards, among other requirements, laws that prohibit discrimination in employment based on non-merit categories, including Title VII of the Civil Rights Act and the Americans with Disabilities Act, and other laws relating to accessibility. Our workers’ compensation programs are subject to regulation by the jurisdictions in which we operate.
Added
Our processing and distribution facilities must be registered with the FDA biennially and are subject to periodic government agency inspections by the FDA and USDA. Our facilities are generally inspected at least annually by federal and/or state authorities.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

69 edited+24 added−13 removed114 unchanged
Biggest changeRetirement Plan will be impacted by the fluctuations of interest rates on high quality bonds in the public markets as these are inputs in determining our minimum funding requirements. Failure to successfully renegotiate union contracts could result in work stoppages, which could have a material adverse effect on our business, financial condition and results of operations .
Biggest changeFluctuations in asset values can cause the amount of our anticipated future contributions to the plan to increase. The projected liability of the U.S. Retirement Plan will be impacted by the fluctuations of interest rates on high quality bonds in the public markets as these are inputs in determining our minimum funding requirements.
In the course of our operations, we: operate, maintain and fuel fleet vehicles; store fuel in on-site above and underground storage tanks; operate refrigeration systems; and use and dispose of hazardous substances and food wastes.
In the course of our operations, we: operate, maintain and fuel fleet vehicles; store fuel on-site in above and underground storage tanks; operate refrigeration systems; and use and dispose of hazardous substances and food wastes.
Alternatively, if a court were to find this provision in our amended and restated bylaws to be inapplicable or unenforceable in any action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition and results of operations. 18 Item 1B. Unresolved Staff Comments None.
Alternatively, if a court were to find this provision in our amended and restated bylaws to be inapplicable or unenforceable in any action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition and results of operations. Item 1B. Unresolved Staff Comments None.
The price and supply of fuel can fluctuate significantly based on international, political and economic circumstances (such as the invasion of Ukraine by the Russian Federation (Russia)) as well as other factors outside our control, such as actions by the Organization of the Petroleum Exporting Countries (OPEC) and other oil and gas producers, regional production patterns, weather conditions and environmental concerns.
The price and supply of fuel can fluctuate significantly based on international, political 9 and economic circumstances (such as the invasion of Ukraine by the Russian Federation (Russia)) as well as other factors outside our control, such as actions by the Organization of the Petroleum Exporting Countries (OPEC) and other oil and gas producers, regional production patterns, weather conditions and environmental concerns.
Certain suppliers are struggling to meet demand for our orders and may also be affected by higher costs to source or 10 produce and transport products, which impairs our ability to deliver products and services to our customers. Prolonged future supply shortages could have an adverse effect on our financial condition and results of operations.
Certain suppliers are struggling to meet demand for our orders and may also be affected by higher costs to source or produce and transport products, which impairs our ability to deliver products and services to our customers. Prolonged future supply shortages could have an adverse effect on our financial condition and results of operations.
Additionally, information technology systems continue to evolve and, in order to remain competitive, we must implement new technologies in a timely and efficient manner. For example, we may incorporate emerging artificial intelligence (AI) solutions into our platform, offerings, services and features, and these applications may become important in our operations over time.
Additionally, information technology systems continue to evolve and, in order to remain competitive, we must implement new technologies in a timely and efficient manner. For example, we may incorporate emerging artificial intelligence solutions into our platform, offerings, services and features, and these applications may become important in our operations over time.
Therefore, a future loss of sales to the larger of these multi-unit customers could have a material negative impact on our results of operations and financial condition. Additionally, as a result of our greater dependence on these customers, 11 these customers could pressure us to lower our prices and/or offer expanded or additional services at the same prices.
Therefore, a future loss of sales to the larger of these multi-unit customers could have a material negative impact on our results of operations and financial condition. Additionally, as a result of our greater dependence on these customers, these customers could pressure us to lower our prices and/or offer expanded or additional services at the same prices.
Unsuccessful recruiting and retention efforts as a result of such continuing shortages for a prolonged period of time could have a material adverse effect on our financial condition and results of operations. Labor shortages also likely lead to higher wages for employees and higher costs to purchase the services of third parties.
Unsuccessful recruiting and retention efforts as a result of such shortages for a prolonged period of time could have a material adverse effect on our financial condition and results of operations. Labor shortages also likely lead to higher wages for employees and higher costs to purchase the services of third parties.
Risks inherent in branching out into such complementary markets also include the costs and difficulties of managing operations outside of our core business, which may require additional skills and competencies, as well as difficulties in identifying and gaining access to suppliers or customers in new markets.
Risks inherent in branching out into such complementary markets also 13 include the costs and difficulties of managing operations outside of our core business, which may require additional skills and competencies, as well as difficulties in identifying and gaining access to suppliers or customers in new markets.
We generally seek contractual indemnification and insurance coverage from parties supplying our products, but this indemnification or insurance coverage is limited, as a practical matter, to the creditworthiness of the indemnifying party and the insured limits of any insurance provided by suppliers.
We generally seek contractual indemnification and insurance coverage from parties supplying our products, but this indemnification or insurance coverage is limited, as a practical matter, to 14 the creditworthiness of the indemnifying party and the insured limits of any insurance provided by suppliers.
Due to the lack of current information, management believes Sysco’s current share of the withdrawal liability could materially differ from this estimate. A significant increase to funding requirements could adversely affect our financial condition, results of operations and cash flows.
Due to the lack of current information, management believes Sysco’s current share of the withdrawal liability could materially differ from this estimate. A significant increase in funding requirements could adversely affect our financial condition, results of operations and cash flows.
In addition, periods of rapidly increasing 7 inflation may adversely affect our results of operations due to the impact of such inflation on discretionary spending by consumers and our limited ability to increase prices in the current, highly competitive environment.
In addition, periods of rapidly increasing inflation may adversely affect our results of operations due to the impact of such inflation on discretionary spending by consumers and our limited ability to increase prices in the current, highly competitive environment.
The loss of one or more of our major customers could adversely affect our business, financial condition, and results of operations. Our anticipated change to the mix of locally managed customers versus multi-unit customers could reduce our gross and operating margins.
The loss of one or more of our major customers could adversely affect our business, financial condition, and results of operations. 12 Our anticipated change to the mix of locally managed customers versus multi-unit customers could reduce our gross and operating margins.
Sysco also notified federal law enforcement and provided other required notifications. To date, these cybersecurity incidents have not had a material impact on our financial condition, results of operations or liquidity.
Sysco also notified federal law enforcement and provided other required notifications. To date, cybersecurity incidents have not had a material impact on our financial condition, results of operations or liquidity.
If we do not have 13 adequate insurance or contractual indemnification available, product liability relating to defective products could materially adversely affect our results of operations and financial condition.
If we do not have adequate insurance or contractual indemnification available, product liability relating to defective products could materially adversely affect our results of operations and financial condition.
Under federal law, significant underfunding experienced by a given plan generally results in increased contribution obligations in the form of surcharges and supplemental contribution obligations.
Under federal law, significant underfunding experienced by a given plan generally results in 18 increased contribution obligations in the form of surcharges and supplemental contribution obligations.
Such shortages frequently result in increased costs from certain temporary wage actions, such as hiring, referral, and retention bonus programs. See the discussion under “Human Capital Resources” in Item 1, “Business” for additional information regarding our talent acquisition and talent management efforts in the context of these labor shortages.
Such shortages may result in increased costs from certain temporary wage actions, such as hiring, referral, and retention bonus programs. See the discussion under “Human Capital Resources” in Item 1, “Business” for additional information regarding our talent acquisition and talent management efforts in the context of these labor shortages.
However, there is no assurance that there will not be a material adverse effect in the future, especially if the amount of insurance coverage we maintain is not sufficient to cover claims or liabilities relating to an incident.
However, there is no assurance that there will not be a material adverse effect in the future, especially if, for example, the amount of insurance coverage we maintain is not sufficient to cover claims or liabilities relating to an incident.
We have also outsourced several information technology support services and administrative functions to third-party service providers, including cloud-based service providers, and may outsource other functions in the future to achieve cost savings and 15 efficiencies.
We 16 have also outsourced several information technology support services and administrative functions to third-party service providers, including cloud-based service providers, and may outsource other functions in the future to achieve cost savings and efficiencies.
These conditions include shortages of qualified labor for our suppliers, work slowdowns, work interruptions, strikes or other job actions by employees of suppliers, short-term weather conditions or more prolonged climate change, crop and other agricultural conditions, water shortages, transportation interruptions (such as shortages of ocean cargo containers), unavailability of fuel or increases in fuel costs, product recalls, competitive demands, civil insurrection or social unrest, terrorist attacks or international hostilities (such as the invasion of Ukraine by Russia) and natural disasters, epidemics, pandemics (such as the COVID-19 pandemic) or other human or animal disease outbreaks or other catastrophic events (including, but not limited to, foodborne illnesses).
These conditions include shortages of qualified labor for our suppliers, work slowdowns, work interruptions, strikes or other job actions by employees of suppliers, short-term weather conditions or more prolonged climate change, crop and other agricultural conditions, water shortages, transportation interruptions (such as shortages of ocean cargo containers), unavailability of fuel or increases in fuel costs, product recalls, competitive demands, civil insurrection or social unrest, terrorist attacks or international hostilities (such as the invasion of Ukraine by Russia and the Israel-Hamas War) and natural disasters, epidemics, pandemics or other human or animal disease outbreaks or other catastrophic events (including, but not limited to, foodborne illnesses).
Fear of COVID-19 or similar events may further alter consumer confidence, behavior and spending patterns, and could adversely affect the economies and financial markets of many countries (or globally), resulting in an economic downturn that could affect customers’ demand for our products.
Fear of these or similar events may further alter consumer confidence, behavior and spending patterns, and could adversely affect the economies and financial markets of many countries (or globally), resulting in an economic downturn that could affect customers’ demand for our products.
Additionally, we procure products from suppliers outside of the U.S., and we are subject to the risks associated with political or financial instability, military conflict, trade restrictions, tariffs, currency exchange rates, transport capacity and costs and other factors relating to foreign trade, including health and safety restrictions related to epidemics and pandemics (such as the COVID-19 pandemic), any or all of which could delay our receipt of products or increase our input costs.
Additionally, we procure products from suppliers outside of the U.S., and we are subject to the risks associated with political or financial instability, military conflict, trade restrictions, tariffs, currency exchange rates, transport capacity and costs and other factors relating to foreign trade, including health and safety restrictions related to epidemics and pandemics, any or all of which could delay our receipt of products or increase our input costs.
Continued state by state introduction of privacy laws can be expected to lead to significantly greater complexity in our compliance requirements globally, which could result in complaints from data subjects and/or action from regulators.
Continued state by state introduction of privacy laws can be expected to lead to significantly greater complexity in our compliance requirements globally, which could result in complaints from data subjects and/or action from regulators and potential litigation claims.
Our ability to successfully operate in these new markets may be adversely affected by political, economic and social conditions beyond our control, public health crises, epidemics and pandemics (such as the COVID-19 pandemic), local laws and customs, and legal and regulatory constraints, including compliance with applicable anti-corruption and currency laws and regulations, of the countries or regions in which we currently operate or intend to operate in the future.
Our ability to successfully operate in these new markets may be adversely affected by political, economic and social conditions beyond our control, public health crises, epidemics and pandemics, local laws and customs, and legal and regulatory constraints, including compliance with applicable anti-corruption and currency laws and regulations, of the countries or regions in which we currently operate or intend to operate in the future.
Although our business has not been materially impacted to date by the ongoing invasion of Ukraine by Russia, it is impossible to predict the extent to which our operations, or those of our suppliers and customers, will be impacted in the short 9 and long term, or the ways in which the conflict may impact our business.
Although our business has not been materially impacted to date by the ongoing invasion of Ukraine by Russia or the Israel-Hamas War, it is impossible to predict the extent to which our operations, or those of our suppliers and customers, will be impacted in the short and long term, or the ways in which the conflict may impact our business.
If we are unable to effectively differentiate ourselves from our competitors, our results of operations could be adversely impacted. In addition, even if we are able to effectively differentiate ourselves, we may only be able to do so through increased expenditures or decreased prices, which could also adversely impact our results of operations.
In addition, even if we are able to effectively differentiate ourselves, we may only be able to do so through increased expenditures or decreased prices, which could also adversely impact our results of operations.
Further, increased frequency or duration of extreme weather conditions, which may be from climate change, could also impair production capabilities, disrupt our supply chain or adversely affect demand for our products. At any time, input costs could increase for a prolonged period for a large portion of the products that we sell.
Further, increased frequency, severity, or duration of extreme weather conditions or other natural or man-made disasters, which may be from climate change, could also impair production capabilities, disrupt our supply chain or adversely affect demand for our products. At any time, input costs could increase for a prolonged period for a large portion of the products that we sell.
Similar future trade or labor disruptions or disputes could have a negative impact on our operations in the EU and other parts of the world. In addition, military conflicts, such as the invasion of Ukraine by Russia, can negatively impact global demand.
Similar future trade or labor disruptions or disputes could have a negative impact on our operations in the EU and other parts of the world. In addition, military conflicts, such as the invasion of Ukraine by Russia and the Israel-Hamas War, or other geopolitical events, can negatively impact global demand.
Failure to effectively renegotiate these contracts could result in work stoppages. We believe our operating sites have good relationships with their unions, but a work stoppage due to failure of multiple operating subsidiaries to renegotiate union contracts could have a material adverse effect on our business, financial condition and results of operations.
We believe our operating sites have good relationships with their unions, but a work stoppage due to failure of multiple operating subsidiaries to renegotiate union contracts could have a material adverse effect on our business, financial condition and results of operations.
As a result, a shortage of qualified labor could adversely affect our business, decrease our ability to effectively serve our customers, and achieve our strategic objectives. We are experiencing a shortage of qualified labor in certain geographies, particularly in the area of warehouse workers and drivers.
As a result, a shortage of qualified labor could adversely affect our business, decrease our ability to effectively serve our customers, and achieve our strategic objectives. We periodically experience shortages of qualified labor in certain geographies, particularly in the area of warehouse workers and drivers.
Millennials, the largest demographic group in terms of spend, seek new and different, as well as more ethnic, menu options and menu innovation.
Millennials, the largest demographic group in terms of consumer spending, seek new and different, as well as more ethnic, menu options and menu innovation.
This estimate is based on the information available from plan administrators, which had valuation dates between February 1, 2020 and December 31, 2022. As the valuation dates for all of the plans was between February 1, 2020 and December 31, 2022, the company’s estimate reflects the condition of the financial markets as of this date range.
This estimate is based on the information available from plan administrators, which had valuation dates between February 1, 2020 and October 31, 2023. As the valuation dates for all of the plans were between February 1, 2020 and October 31, 2023, the company’s estimate reflects the condition of the financial markets as of this date range.
Such reductions in the number of employees participating in these plans could occur as a result of changes in our business operations, such as facility closures or consolidations. We estimate our share of the aggregate withdrawal liability on the multiemployer plans in which we participate could have been as much as $142.6 million as of August 18, 2023.
Such reductions in the number of employees participating in these plans could occur as a result of changes in our business operations, such as facility closures or consolidations. We estimate our share of the aggregate withdrawal liability on the multiemployer plans in which we participate could have been as much as $141 million as of August 16, 2024.
We and our third-party providers experience cybersecurity incidents of varying degrees from time-to-time, including ransomware and phishing attacks, as well as distributed denial of service attacks and the theft of data.
In the normal course of business, we and our third-party providers experience cybersecurity threats and incidents of varying degrees from time-to-time, including ransomware and phishing attacks, as well as distributed denial of service attacks and the theft of data.
If these service providers do not perform effectively due to breach or system failure, we may not be able to achieve the expected benefits and our business may be disrupted. The COVID-19 pandemic has resulted in many of our employees, contractors and other corporate partners working remotely, increasing reliance on information technology systems that are outside our direct control.
If these service providers do not perform effectively due to breach or system failure, we may not be able to achieve the expected benefits and our business may be disrupted. Many of our employees, contractors and other corporate partners now work remotely, increasing reliance on information technology systems that are outside our direct control.
Additionally, there continues to be significant uncertainty with respect to the California Consumer Privacy Act of 2018 (the CCPA), which went into effect on January 1, 2020, and imposes additional obligations on companies regarding the handling of personal information and provides certain individual privacy rights to persons whose information is collected.
There continues to be a growing trend of other countries adopting similar laws. 17 Additionally, there continues to be significant uncertainty with respect to the California Consumer Privacy Act of 2018 (the CCPA), which went into effect on January 1, 2020, and imposes additional obligations on companies regarding the handling of personal information and provides certain individual privacy rights to persons whose information is collected.
Historically, a portion of our growth has come through acquisitions. If we are unable to integrate acquired businesses successfully or realize anticipated economic, operational and other benefits and synergies in a timely manner, our results of operations may be materially adversely affected.
If we are unable to integrate acquired businesses successfully or realize anticipated economic, operational and other benefits and synergies in a timely manner, our results of operations may be materially adversely affected.
In fiscal 2023, our total contributions to these plans were approximately $52.6 million. The costs of providing benefits through such plans have increased in recent years.
In fiscal 2024, our total contributions to these plans were approximately $63 million. The costs of providing benefits through such plans have increased in recent years.
In periods of significant product cost inflation, if we are unable to pass on all or a portion of such product cost increases to our customers in a timely manner, our results of operations would be adversely affected.
Volatile food costs have a direct impact on our industry. In periods of significant product cost inflation, if we are unable to pass on all or a portion of such product cost increases to our customers in a timely manner, our results of operations would be adversely affected.
If we do not provide sufficient resources to ensure we are able to respond, adapt and implement the necessary requirements to respond to the various forthcoming changes, which could include federal data privacy requirements in the US, while continuing to maintain our compliance with global data privacy laws, this could adversely impact our reputation and we could face exposure to fines levied by regulators, which could have a significant financial impact on our business. 16 Our level of indebtedness and the terms of our indebtedness could adversely affect our business and liquidity position .
If we do not provide sufficient resources to ensure we are able to respond, adapt and implement the necessary requirements to respond, or we do not respond sufficiently to the various forthcoming changes, which could include federal data privacy requirements in the US, while continuing to maintain our compliance with global data privacy laws, this could adversely impact our reputation and we could face exposure to fines levied by regulators and class action and similar litigation risks, which could have a significant financial impact on our business.
For example, the coronavirus (COVID-19) pandemic adversely impacted our business, results of operations and financial condition directly and disrupted the operations of our business partners, suppliers and customers.
Public health crises, pandemics and epidemics could adversely affect our business, financial condition and results of operations. For example, the coronavirus (COVID-19) pandemic adversely impacted our business, results of operations and financial condition directly and disrupted the operations of our business partners, suppliers and customers.
While our operations have generally stabilized since the peak of the COVID-19 pandemic, we cannot predict with certainty the extent to which our operations may be impacted in the future by any continuing effects of COVID-19 on us or on our business partners, suppliers and customers.
While our operations have generally stabilized since the peak of the COVID-19 pandemic, we cannot predict with certainty the extent to which our operations may be impacted in the future by any similar effects of a more severe variant of COVID-19 or other public health crises, pandemics, or epidemics on us or on our business partners, suppliers and customers.
The future outbreak of a public health crisis (including the reemergence of COVID-19) that adversely affects our business, results of operations and financial condition, could also have the effect of heightening many of the other risks described in this Annual Report on Form 10-K and subsequent filings with the SEC, such as those risks relating to our level of indebtedness, and may have an adverse effect on the price of our common stock. 8 Unfavorable macroeconomic conditions, as well as unfavorable conditions in particular local markets, may adversely affect our results of operations and financial condition.
Any future outbreak of a public health crisis, pandemic, or epidemic that adversely affects our business, results of operations and financial condition, could also have the effect of heightening many of the other risks described in this Annual Report on Form 10-K and subsequent filings with the SEC, such as those risks relating to our level of indebtedness, and may have an adverse effect on the price of our common stock.
We are subject to various federal, state, provincial, regional and local laws, rules and regulations in the countries in which we operate with respect to many aspects of our business, such as food safety and sanitation, ethical business practices, transportation, minimum wage, overtime, wage payment, wage and hour and employment discrimination, immigration, human health and safety.
We are subject to various federal, state, provincial, regional and local laws, rules and regulations, including the Foreign Corrupt Practices Act and other anti-bribery laws, anti-money laundering laws, import restrictions, responsible sourcing, and sanctions programs, in the countries in which we operate with respect to many aspects of our business, such as food safety and sanitation, ethical business practices, transportation, minimum wage, overtime, wage payment, wage and hour and employment discrimination, immigration, human health and safety.
If additional portions of our workforce became subject to collective bargaining agreements, this could result in increased costs of doing business as we would become subject to mandatory, binding arbitration or labor scheduling, costs and standards, which may reduce our operating flexibility.
If additional portions of our workforce became subject to collective bargaining agreements, this could result in increased costs of doing business as we would become subject to mandatory, binding arbitration or labor scheduling, costs and standards, which may reduce our operating flexibility. 8 Global health developments and economic uncertainty resulting from global public health crises may adversely affect our business, financial condition and results of operations.
While our operations have generally stabilized since the peak of the COVID-19 pandemic, we cannot predict with certainty the extent that our operations may continue to be impacted by any continuing effects of COVID-19 on us or on our business partners, suppliers and customers. Customer demand is currently outpacing available supply in certain categories.
We cannot predict with certainty the extent that our operations may continue to be impacted by any similar effects of public health crises, pandemics, or epidemics on us or on our business partners, suppliers and customers. Customer demand is currently outpacing available supply in certain categories.
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
As a result, hostile takeover attempts that might result in an acquisition of Sysco, which could otherwise have been financially beneficial to our stockholders, could be deterred. 19 Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Cyber threats are constantly evolving, are becoming more sophisticated and are being made by groups and individuals with a wide range of expertise and motives, and this increases the difficulty of detecting and successfully defending against them.
Cyber threats are constantly evolving, are becoming more sophisticated and frequent, including through the introduction of viruses and malware (such as ransomware) and the use of artificial intelligence by the threat actors, and are being made by groups and individuals with a wide range of expertise and motives, and this increases the difficulty of detecting and successfully defending against them.
Reports, whether true or not, of foodborne illnesses or injuries caused by food tampering could also severely injure our reputation or reduce public confidence in our products.
In addition, it may be difficult to address such negative publicity across media channels. Reports, whether true or not, of foodborne illnesses or injuries caused by food tampering could also severely injure our reputation or reduce public confidence in our products.
Given the complexity of these laws and the often-onerous requirements they place on businesses regarding the collection, storage, handling, use, disclosure, transfer, and security of personal data, it is important for us to understand their impact and respond accordingly. Failure to comply with data privacy laws can result in substantial fines or penalties, legal liability and / or reputational damage.
Given the complexity of these laws, uncertainty regarding their interpretation, application, and enforcement and the often-onerous requirements they place on businesses regarding the collection, storage, handling, use, disclosure, transfer, and security of personal data, it is important for us to understand their impact and respond accordingly.
We are continuing to evaluate the potential impact on future periods of the Pillar Two Framework, pending legislative adoption by individual countries. Further, in the ordinary course of a global business, there are many intercompany transactions and calculations where the ultimate tax determination could change if tax laws or tax rulings were to be modified.
Further, in the ordinary course of a global business, there are many intercompany transactions and calculations where the ultimate tax determination could change if tax laws or tax rulings were to be modified.
Additionally, increased competition from non-traditional sources (such as club stores and commercial wholesale outlets with lower cost structures), online direct food wholesalers and cash and carry operations have served to further increase pressure on the industry’s profit margins. Continued margin pressure within the industry may have a material adverse effect on our results of operations.
Additionally, increased competition from non-traditional sources (such as club stores and commercial wholesale outlets with lower cost structures), online direct food wholesalers, cash and carry operations, and competitors that are utilizing technology, including artificial intelligence and machine learning technologies, have served to further increase pressure on the industry’s profit margins.
Such conditions and high levels of uncertainty make it difficult to predict when, or if, a recession may occur. In fact, some commentators have suggested that the U.S. is already in a recession.
Such conditions and high levels of uncertainty make it difficult to predict when, or if, a recession may occur.
Retirement Plan’s assets and discount rates used to calculate the plan’s liability. In fiscal 2018, we made voluntary contributions of $380 million to the U.S. Retirement Plan, allowing us to set an investment strategy that more closely aligns the duration of the U.S. Retirement Plan’s assets with the duration of its liabilities. As a result, our U.S.
Retirement Plan’s assets and discount rates used to calculate the plan’s liability. We have set an investment strategy that closely aligns the duration of the U.S. Retirement Plan’s assets with the duration of its liabilities. As a result, our U.S. Retirement Plan holds a greater amount of investments in fixed income securities, but also holds equity securities.
Moreover, some of our customers purchase their products from us through group purchasing organizations (GPOs) in an effort to lower the prices paid by these customers on their foodservice orders. GPOs have a relatively larger presence in the healthcare, lodging and foodservice management customer segments.
Continued margin pressure within the industry may have a material adverse effect on our results of operations. Moreover, some of our customers purchase their products from us through group purchasing organizations (GPOs) in an effort to lower the prices paid by these customers on their foodservice orders.
On December 20, 2021, the OECD released Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large corporations at a minimum rate of 15%. The OECD continues to release additional guidance on the two-pillar framework, with widespread implementation anticipated by 2024.
On December 20, 2021, the OECD released Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large corporations at a minimum rate of 15%. For Sysco, Pillar Two will be effective at the beginning of fiscal 2025.
Proposed or recently enacted legal requirements, such as those requiring the phase-out of certain ozone-depleting substances, and proposals for the regulation of greenhouse gas emissions, may require us to upgrade or replace equipment, or may increase our transportation or other operating costs. 14 If we are unable to finance and integrate acquired businesses effectively, our earnings per share could be materially adversely affected .
In addition, many of our facilities have propane and battery-powered forklifts. Proposed or recently enacted legal requirements, such as those requiring the phase- 15 out of certain ozone-depleting substances, and proposals for the regulation of greenhouse gas emissions, may require us to upgrade or replace equipment, or may increase our transportation or other operating costs.
Our failure to implement timely and/or successfully new technologies, including AI, may adversely affect our competitiveness and, consequently, our results of operations. Our failure to comply with data privacy regulations could adversely affect our business.
Our failure to implement timely and/or successfully new technologies, including artificial intelligence, may adversely affect our competitiveness and, consequently, our results of operations. Our growing use of artificial intelligence systems in our operations poses inherent risks and could adversely affect our results of operations.
We do not expect to meet the CAMT threshold in the near term. • On October 8, 2021, the Organization for Economic Co-operation and Development (OECD) announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which provides for a two-pillar solution to address tax challenges arising from the digitalization of the economy.
For example: • The U.S. and many countries where we do business are actively considering or have recently enacted changes in relevant tax, accounting and other laws, regulations and interpretations, including changes to tax laws applicable to corporate multinationals. • On October 8, 2021, the Organization for Economic Co-operation and Development (OECD) announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which provides for a two-pillar solution to address tax challenges arising from the digitalization of the economy.
Our funding requirements for our company-sponsored qualified pension plan may increase should financial markets experience future declines, which could adversely affect our financial condition, results of operations and cash flows . 17 We had a pension obligation of $2.6 billion, as compared to assets totaling $2.6 billion, as of July 1, 2023, both of which have sensitivity to financial market factors that could impact our funding requirements.
Our funding requirements for our company-sponsored qualified pension plan may increase should financial markets experience future declines, which could adversely affect our financial condition, results of operations and cash flows .
As described in Note 12, “Debt and Other Financing Arrangements,” in the Notes to Consolidated Financial Statements in Item 8, as of July 1, 2023, we had approximately $10.4 billion of total indebtedness, which primarily includes our outstanding senior notes. Additionally, we have the ability to borrow under our revolving credit facility, which supports our U.S. commercial paper program.
Our level of indebtedness and the terms of our indebtedness could adversely affect our business and liquidity position . As described in Note 12, “Debt and Other Financing Arrangements,” in the Notes to Consolidated Financial Statements in Item 8, as of June 29, 2024, we had approximately $12.0 billion of total indebtedness, which primarily includes our outstanding senior notes.
Our results of operations are susceptible to regional, national and international economic trends and uncertainties.
Unfavorable macroeconomic conditions, as well as unfavorable conditions in particular local markets, may adversely affect our results of operations and financial condition. Our results of operations are susceptible to regional, national and international economic trends and uncertainties.
Furthermore, since 2020, several other U.S. states have enacted (and additional U.S. states are considering enacting) stringent consumer privacy laws, which may impose varying standards and requirements on our data collection, use and processing activities.
Most notably, employee and business data were brought into scope, which raises the compliance requirements for us significantly, in terms of internal controls, processes and governance requirements. Furthermore, since 2020, numerous other U.S. states have enacted, or are considering more stringent privacy laws, which may impose varying standards and requirements on our data collection, use and processing activities.
In the UK and Europe, the General Data Protection Regulation (the GDPR), which came into effect in 2018, places stringent requirements on companies when handling personal data. There continues to be a growing trend of other countries adopting similar laws.
Failure to comply with data privacy laws can result in substantial fines or penalties, legal liability and / or reputational damage and litigation. In the UK and Europe, the General Data Protection Regulation (the GDPR), which came into effect in 2018, places stringent requirements on companies when handling personal data.
For example, we are experiencing ongoing operational challenges related to our efforts to integrate two businesses in France, adversely affecting our ability to drive growth in sales. Integration of an acquired business may be more difficult when we acquire a business in a market in which we have limited expertise, or with a culture different from Sysco’s.
Integration of an acquired business may be more difficult when we acquire a business in a market in which we have limited expertise, or with a culture different from Sysco’s. A significant expansion of our business and operations, in terms of geography or magnitude, could strain our administrative and operational resources.
If these GPOs are able to add a significant number of our customers as members, our business, financial condition and results of operations may be adversely affected. Finally, demand for food-away-from-home products is volatile and price sensitive, imposing limits on our customers’ ability to absorb cost increases.
GPOs have a relatively larger presence in the healthcare, lodging and foodservice management customer segments. If these GPOs are able to add a significant number of our customers as members, our business, financial condition and results of operations may be adversely affected.
As of July 1, 2023, we had approximately 72,000 employees, approximately 15% of whom were represented by unions, primarily the International Brotherhood of Teamsters and unions in France and Sweden. Approximately 15% of our union employees are covered by collective bargaining agreements that are subject to renegotiation in fiscal 2024.
Failure to successfully renegotiate union contracts could result in work stoppages, which could have a material adverse effect on our business, financial condition and results of operations . As of June 29, 2024, we had approximately 76,000 employees, approximately 15% of whom were represented by unions, primarily the International Brotherhood of Teamsters and unions in France and Sweden.
New and increasing competitive sources may result in increased focus on pricing and on limiting price increases or may require increased discounting or other concessions. Such competition or other industry pressures may result in margin erosion and/or make it difficult for us to attract and retain customers.
Finally, demand for food-away-from-home products is volatile and price sensitive, imposing limits on our customers’ ability to absorb cost increases. New and increasing competitive sources may result in increased focus on pricing and on 10 limiting price increases or may require increased discounting or other concessions.
Mutations of the virus have arisen, and may arise in the future, some of which could prove to be particularly aggressive variants, causing some governmental authorities to reintroduce certain restrictions in the future, which could adversely affect demand in the foodservice industry.
The future outbreak of a public health crisis, pandemic, or epidemic could cause some governmental authorities to reintroduce similar restrictions in the future, which could adversely affect demand in the foodservice industry.
Removed
Volatile food costs have a direct impact on our industry. We experienced an elevated inflation rate of approximately 6.1% in our total company operations during fiscal 2023, primarily in the dairy, frozen and canned and dry categories.
Added
Such competition or other industry pressures may result in margin erosion and/or make it difficult for us to attract and retain customers. If we are unable to effectively differentiate ourselves from our competitors, our results of operations could be adversely impacted.
Removed
Global health developments and economic uncertainty resulting from the COVID-19 pandemic or other future public health crises may continue to adversely affect our business, financial condition and results of operations. Public health crises, pandemics and epidemics could adversely affect our business, financial condition and results of operations.
Added
Climate change, or the legal, regulatory or market measures being implemented to address climate change, may have an adverse impact on our business, results of operations and financial condition. The effects of climate change may create financial and operational risks to our business, both directly and indirectly.
Removed
In addition, in response to the COVID-19 pandemic and the related economic downturn, many consumers preferred to eat at home rather than consume food away from home. If these preferences return and consumers choose to avoid gathering in public places in large groups, the demand for our products and services could be adversely affected.
Added
There is an increased focus around the world by regulatory and legislative bodies at all levels towards policies relating to climate change and the impact of global warming, including the regulation of greenhouse gas (GHG) emissions, energy usage and sustainability efforts.
Removed
Moreover, if governmental restrictions were to resume, it is unclear how quickly customers will return to their prior eating habits, which may be a function of continued concerns over safety or depressed consumer sentiment due to adverse economic conditions, including job losses.
Added
Increased compliance costs and expenses due to the impacts of climate change on our business, as well as additional legal or regulatory requirements regarding climate change or designed to reduce or mitigate the effects of carbon dioxide and other GHG emissions on the environment, may cause disruptions in, or an increase in the costs associated with, the running of our business, particularly with regard to our distribution and supply chain operations.
Removed
For example: 12 • The U.S. and many countries where we do business are actively considering or have recently enacted changes in relevant tax, accounting and other laws, regulations and interpretations, including changes to tax laws applicable to corporate multinationals. • On August 16, 2022, the U.S.
Added
Moreover, compliance with any such legal or regulatory requirements may require that we implement changes to our business operations and strategy, which would require us to devote substantial time and attention to these matters and cause us to incur additional costs.
Removed
Congress passed the Inflation Reduction Act of 2022 (Inflation Reduction Act), which, among other provisions, creates a new corporate alternative minimum tax (CAMT) of at least 15% for certain large corporations that have at least an average of $1 billion in adjusted financial statement income over a consecutive three-year period effective after December 31, 2022.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFoodservice (U), International Foodservice (I), SYGMA (S), and Other (O). (2) California, Florida, Texas, and Illinois account for 24, 16, 14, and 11 respectively, of the facilities located in the U.S. (3) Using a comparable definition based on facility size, fiscal 2022 included 333 facilities.
Biggest changeFoodservice (U), International Foodservice (I), SYGMA (S), and Other (O). (2) California, Florida, Texas, and Illinois account for 27, 18, 15, and 12 respectively, of the facilities located in the U.S.
Item 2. Properties The table below shows the number of distribution facilities occupied by Sysco in each country and the aggregate square footage devoted to cold and dry storage as of July 1, 2023.
Item 2. Properties The table below shows the number of distribution facilities occupied by Sysco in each country and the aggregate square footage devoted to cold and dry storage as of June 29, 2024.
We own approximately 40,100,000 square feet of our distribution facilities (or 74.4% of the total square feet), and the remainder is occupied under leases expiring at various dates from fiscal 2024 to fiscal 2049, exclusive of renewal options.
We own approximately 40,100,000 square feet of our distribution facilities (or 70.8% of the total square feet), and the remainder is occupied under leases expiring at various dates from fiscal 2025 to fiscal 2050, exclusive of renewal options.
As of July 1, 2023, our fleet of approximately 17,000 delivery vehicles consisted of tractor and trailer combinations, vans and panel trucks, most of which are either wholly or partially refrigerated for the transportation of frozen or perishable foods. We own approximately 89% of these vehicles and lease the remainder.
As of June 29, 2024, our fleet of approximately 18,000 delivery vehicles consisted of tractor and trailer combinations, vans and panel trucks, most of which are either wholly or partially refrigerated for the transportation of frozen or perishable foods. We own approximately 90% of these vehicles and lease the remainder.
Location Number of Facilities Square Feet (in thousands) Segment Served (1) Bahamas 1 192 I Belgium 1 200 I Canada 28 4,220 I, O Costa Rica 1 188 I France 41 3,004 I Ireland and Northern Ireland 8 656 I Mexico 6 288 I Panama 1 44 I Sweden 7 948 I United Kingdom 48 2,644 I United States and its territories (2) 192 41,583 U, I, S, O Totals (3) 334 53,967 (1) Segments served include U.S.
Location Number of Facilities Square Feet (in thousands) Segment Served (1) Bahamas 1 192 I Belgium 1 200 I Canada 28 4,250 I, O Costa Rica 1 188 I France 42 3,015 I Ireland and Northern Ireland 8 833 I Mexico 6 288 I Panama 1 44 I Sweden 6 934 I United Kingdom 42 2,435 I United States and its territories (2) 204 44,226 U, I, S, O Totals 340 56,605 (1) Segments served include U.S.
We are currently constructing expansions or build-outs for various distribution facilities in the United States and Northern Ireland. The various operating sites undergoing significant construction, in the aggregate, contributed approximately 6% of fiscal 2023 sales.
We own our approximately 634,000 square foot headquarters office complex in Houston, Texas. 21 We are currently constructing expansions or build-outs for various distribution facilities in the United States and Europe. The various operating sites undergoing significant construction, in the aggregate, contributed approximately 6% of fiscal 2024 sales.
Within our Latin American operations, we operate 17 cash and carry facilities and 5 warehouse and storage facilities in Costa Rica and 5 cash and carry facilities and 1 warehouse and storage facility in Panama. We own our approximately 634,000 square foot headquarters office complex in Houston, Texas.
Within our Latin American operations, we operate 17 cash and carry facilities and five warehouse and storage facilities in Costa Rica and six cash and carry facilities and one warehouse and storage facility in Panama.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changePursuant to this item, Sysco has chosen a reporting threshold for such proceedings of $1 million. Applying this 19 threshold, there are no environmental matters to disclose for this period, nor does the company expect a material adverse effect on its business or financial condition.
Biggest changePursuant to this item, Sysco has chosen a reporting threshold for such proceedings of $1 million. Applying this threshold, there are no environmental matters to disclose for this period, nor does the company expect a material adverse effect on its business or financial condition.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe made the following share repurchases during the fourth quarter of fiscal 2023: ISSUER PURCHASES OF EQUITY SECURITIES Period (a) Total Number of Shares Purchased (1) (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) (d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs Month #1 April 2 - April 29 77,017 $ 77.24 77,017 — Month #2 April 30 - May 27 566,283 73.46 566,283 — Month #3 May 28 - July 1 1,035,491 72.16 1,035,491 — Totals 1,678,791 $ 72.83 1,678,791 — (1) The total number of shares repurchased includes no shares tendered by individuals in connection with stock option exercises in Month #1, Month #2 and Month #3.
Biggest changeWe made the following share repurchases during the fourth quarter of fiscal 2024: ISSUER PURCHASES OF EQUITY SECURITIES Period (a) Total Number of Shares Purchased (1) (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) (d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs Month #1 March 31 - April 27 1,983,915 $ 77.12 1,983,915 — Month #2 April 28 - May 25 2,251,129 75.52 2,251,129 — Month #3 May 26 - June 29 3,005,111 72.50 3,005,111 — Totals 7,240,155 $ 74.70 7,240,155 — (1) The total number of shares repurchased includes no shares tendered by individuals in connection with stock option exercises in Month #1, Month #2 and Month #3.
The graph assumes that the value of the investment in our Common Stock, the S&P 500 Index, and the S&P 500 Food/Staple Retail Index was $100 on the last trading day of fiscal 2018, and that all dividends were reinvested.
The graph assumes that the value of the investment in our Common Stock, the S&P 500 Index, and the S&P 500 Food/Staple Retail Index was $100 on the last trading day of fiscal 2019, and that all dividends were reinvested.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The principal market for Sysco’s common stock (SYY) is the New York Stock Exchange. The number of record owners of Sysco’s common stock as of August 8, 2023 was 7,365.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The principal market for Sysco’s common stock (SYY) is the New York Stock Exchange. The number of record owners of Sysco’s common stock as of August 16, 2024 was 6,992.
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 6,231,071 shares for $500.1 million during fiscal 2023. As of July 1, 2023, we had a remaining authorization of approximately $4.0 billion.
In May 2021, our Board of Directors approved a share repurchase program to authorize the repurchase of up to $5 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.
Performance data for Sysco, the S&P 500 Index and the S&P 500 Food/Staple Retail Index is provided as of the last trading day of each of our last five fiscal years. 21 6/30/2018 6/29/2019 6/27/2020 7/3/2021 7/2/2022 7/1/2023 Sysco Corporation $100 $106 $80 $122 $140 $123 S&P 500 100 110 115 169 151 179 S&P 500 Food/Staple Retail Index 100 118 125 162 170 184 Item 6. [Reserved]
Performance data for Sysco, the S&P 500 Index and the S&P 500 Food/Staple Retail Index is provided as of the last trading day of each of our last five fiscal years. 23 6/29/2019 6/27/2020 7/3/2021 7/2/2022 7/1/2023 6/29/2024 Sysco Corporation $100 $76 $115 $133 $116 $115 S&P 500 100 104 153 137 162 202 S&P 500 Food/Staple Retail Index 100 106 137 144 156 202 Item 6. [Reserved]
We purchased 552,463 additional shares under our authorization through August 8, 2023.
We purchased 862,718 additional shares under our authorization through August 16, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAdjusted diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding. 34 2023 2022 Change in Dollars %/bps Change (In thousands, except for share and per share data) Sales (GAAP) $ 76,324,675 $ 68,636,146 $ 7,688,529 11.2 % Impact of currency fluctuations (1) 910,290 — 910,290 1.3 Comparable sales using a constant currency basis (Non-GAAP) $ 77,234,965 $ 68,636,146 $ 8,598,819 12.5 % Cost of sales (GAAP) $ 62,369,678 $ 56,315,622 $ 6,054,056 10.8 % Impact of inventory valuation adjustment (2) 2,571 (73,224) 75,795 0.1 Cost of sales adjusted for Certain Items (Non-GAAP) $ 62,372,249 $ 56,242,398 $ 6,129,851 10.9 % Gross profit (GAAP) $ 13,954,997 $ 12,320,524 $ 1,634,473 13.3 % Impact of inventory valuation adjustment (2) (2,571) 73,224 (75,795) (0.7) Gross profit adjusted for Certain Items (Non-GAAP) 13,952,426 12,393,748 1,558,678 12.6 Impact of currency fluctuations (1) 188,796 — 188,796 1.5 Comparable gross profit adjusted for Certain Items using a constant currency basis (Non-GAAP) $ 14,141,222 $ 12,393,748 $ 1,747,474 14.1 % Gross margin (GAAP) 18.28 % 17.95 % 33 bps Impact of inventory valuation adjustment (2) — 0.11 -11 bps Gross margin adjusted for Certain Items (Non-GAAP) 18.28 18.06 22 bps Impact of currency fluctuations (1) 0.03 — 3 bps Comparable gross margin adjusted for Certain Items using a constant currency basis (Non-GAAP) 18.31 % 18.06 % 25 bps Operating expenses (GAAP) $ 10,916,448 $ 9,974,024 $ 942,424 9.4 % Impact of restructuring and transformational project costs (3) (62,965) (107,475) 44,510 41.4 Impact of acquisition-related costs (4) (115,889) (139,173) 23,284 16.7 Impact of bad debt reserve adjustments (5) 4,425 27,999 (23,574) (84.2) Operating expenses adjusted for Certain Items (Non-GAAP) 10,742,019 9,755,375 986,644 10.1 Impact of currency fluctuations (1) 182,873 — 182,873 1.9 Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP) $ 10,924,892 $ 9,755,375 $ 1,169,517 12.0 % Operating expense as a percentage of sales (GAAP) 14.30 % 14.53 % -23 bps Impact of certain item adjustments (0.23) (0.32) 9 bps Adjusted operating expense as a percentage of sales (Non-GAAP) 14.07 % 14.21 % -14 bps Operating income (GAAP) $ 3,038,549 $ 2,346,500 $ 692,049 29.5 % Impact of inventory valuation adjustment (2) (2,571) 73,224 (75,795) NM Impact of restructuring and transformational project costs (3) 62,965 107,475 (44,510) (41.4) Impact of acquisition-related costs (4) 115,889 139,173 (23,284) (16.7) Impact of bad debt reserve adjustments (5) (4,425) (27,999) 23,574 84.2 Operating income adjusted for Certain Items (Non-GAAP) 3,210,407 2,638,373 572,034 21.7 Impact of currency fluctuations (1) 5,923 — 5,923 0.2 Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP) $ 3,216,330 $ 2,638,373 $ 577,957 21.9 % Operating margin (GAAP) 3.98 % 3.42 % 56 bps Operating margin adjusted for Certain Items (Non-GAAP) 4.21 % 3.84 % 37 bps Operating margin adjusted for Certain Items using a constant currency basis (Non-GAAP) 4.16 % 3.83 % 33 bps Interest expense (GAAP) $ 526,752 $ 623,643 $ (96,891) (15.5) % Impact of loss on extinguishment of debt — (115,603) 115,603 NM 35 2023 2022 Change in Dollars %/bps Change (In thousands, except for share and per share data) Interest expense adjusted for Certain Items (Non-GAAP) $ 526,752 $ 508,040 $ 18,712 3.7 % Other expense (income) (GAAP) $ 226,442 $ (23,916) $ 250,358 NM Impact of other non-routine gains and losses (6) (194,459) — (194,459) NM Other expense (income) adjusted for Certain Items (Non-GAAP) $ 31,983 $ (23,916) $ 55,899 NM Net earnings (GAAP) $ 1,770,124 $ 1,358,768 $ 411,356 30.3 % Impact of inventory valuation adjustment (2) (2,571) 73,224 (75,795) NM Impact of restructuring and transformational project costs (3) 62,965 107,475 (44,510) (41.4) Impact of acquisition-related costs (4) 115,889 139,173 (23,284) (16.7) Impact of bad debt reserve adjustments (5) (4,425) (27,999) 23,574 84.2 Impact of loss on extinguishment of debt — 115,603 (115,603) NM Impact of other non-routine gains and losses (6) 194,459 — 194,459 NM Tax impact of inventory valuation adjustment (7) 647 (18,902) 19,549 NM Tax impact of restructuring and transformational project costs (7) (15,847) (27,743) 11,896 42.9 Tax impact of acquisition-related costs (7) (29,166) (35,926) 6,760 18.8 Tax impact of bad debt reserves adjustments (7) 1,114 7,228 (6,114) (84.6) Tax impact of loss on extinguishment of debt (7) — (29,841) 29,841 NM Tax impact of other non-routine gains and losses (7) (48,941) — (48,941) NM Impact of adjustments to uncertain tax positions — 12,000 (12,000) NM Net earnings adjusted for Certain Items (Non-GAAP) $ 2,044,248 $ 1,673,060 $ 371,188 22.2 % Diluted earnings per share (GAAP) $ 3.47 $ 2.64 $ 0.83 31.4 % Impact of inventory valuation adjustment (2) (0.01) 0.14 (0.15) NM Impact of restructuring and transformational project costs (3) 0.12 0.21 (0.09) (42.9) Impact of acquisition-related costs (4) 0.23 0.27 (0.04) (14.8) Impact of bad debt reserve adjustments (5) (0.01) (0.05) 0.04 80.0 Impact of loss on extinguishment of debt — 0.22 (0.22) NM Impact of other non-routine gains and losses (6) 0.38 — 0.38 NM Tax impact of inventory valuation adjustment (7) — (0.04) 0.04 NM Tax impact of restructuring and transformational project costs (7) (0.03) (0.05) 0.02 40.0 Tax impact of acquisition-related costs (7) (0.06) (0.07) 0.01 14.3 Tax impact of bad debt reserves adjustments (7) — 0.01 (0.01) NM Tax impact of loss on extinguishment of debt (7) — (0.06) 0.06 NM Tax impact of other non-routine gains and losses (7) (0.10) — (0.10) NM Impact of adjustments to uncertain tax positions — 0.02 (0.02) NM Diluted earnings per share adjusted for Certain Items (Non-GAAP) (8) $ 4.01 $ 3.25 $ 0.76 23.4 % Diluted shares outstanding 509,719,756 514,005,827 36 (1) Represents a constant currency adjustment which eliminates the impact of foreign currency fluctuations on the current year results.
Biggest changeAdjusted diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding. 36 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) — 3 (3) — 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) — (3) 3 — 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) — — 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) — 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) — (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) — (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) — 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) — (194) 194 NM Other expense adjusted for Certain Items (Non-GAAP) $ 30 $ 33 $ (3) (9.1) % 37 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) — (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) — (5) 5 NM Impact of other non-routine gains and losses (6) — 194 (194) NM Tax impact of inventory valuation adjustment (7) — 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) — 1 (1) NM Tax impact of other non-routine gains and losses (7) — (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) — (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) — (0.01) 0.01 NM Impact of other non-routine gains and losses (6) — 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) — (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 (1) Represents a constant currency adjustment which eliminates the impact of foreign currency fluctuations on the current year results.
Our sales are driven by changes in case volumes, 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.
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.
Critical accounting policies and estimates are those that are most important to the portrayal of our financial position and results of operations. These policies require our most subjective or complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain.
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.
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; 50 • the risk that competition in our industry and the impact of GPOs may adversely impact our margins and our ability to retain customers and make it difficult for us to maintain our market share, growth rate and profitability; • the risk that our relationships with long-term customers may be materially diminished or terminated; • the risk that changes in consumer eating habits could materially and adversely affect our business, financial condition, or results of operations; • the impact and effects of public health crises, pandemics and epidemics, such as the recent outbreak of COVID-19, and the adverse impact thereof on our business, financial condition and results of operations; • the risk that changes in applicable tax laws or regulations and the resolution of tax disputes could negatively affect our financial results; • the risk that we may not be able to fully compensate for increases in fuel costs, and forward purchase commitments intended to contain fuel costs could result in above market fuel costs; • the risk of interruption of supplies and increase in product costs as a result of conditions beyond our control; • the potential impact on our reputation and earnings of adverse publicity or lack of confidence in our products; • risks related to unfavorable changes to the mix of locally managed customers versus corporate-managed customers; • the risk that we may not realize anticipated benefits from our operating cost reduction efforts; • difficulties in successfully expanding into international markets and complimentary lines of business; • the potential impact of product liability claims; • the risk that we fail to comply with requirements imposed by applicable law or government regulations; • 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; 51 • 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.
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; 51 • 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.
Sysco management considers free cash flow to be a non-GAAP liquidity 25 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.
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.
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. Broadline, 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.
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.
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. Our wholly owned captive insurance subsidiary (the Captive) must maintain a sufficient level of liquidity to fund future reserve payments.
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.
Sysco previously recorded a benefit of $131.0 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.
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.
Management believes that adjusting its operating expenses, operating income, interest expense, 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.
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.
Retirement Plan; • the sufficiency of our available liquidity to sustain our operations for multiple years; • estimates regarding the outcome of legal proceedings; 49 • 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 2024; • the sufficiency of our mechanisms for managing working capital and competitive pressures, and our beliefs regarding the impact of these mechanisms; • our ability to meet future cash requirements, including the ability to access financial markets effectively, including issuances of debt securities, and maintain sufficient liquidity; • our expectations regarding the payment of dividends, and the growth of our dividend, in the future; • our expectations regarding future activity under our share repurchase program; • future compliance with the covenants under our revolving credit facility; • our ability to effectively access the commercial paper market and long-term capital markets; • 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.
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; 50 • 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.
Income Tax Trends Our provision for income taxes primarily reflects a combination of income earned and taxed in the various U.S. federal and state as well as foreign jurisdictions.
Income Tax Trends 28 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.
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. 45 Basis of Preparation of the Summarized Financial Information The summarized financial information of Sysco Corporation (issuer), and certain wholly owned U.S.
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.
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.
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.
Cost of goods sold generally changes as we incur higher or lower costs from our suppliers and as our customer and product mix changes. 24 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.
Cost of goods sold generally changes as we incur higher or lower costs from our suppliers and as our customer and product mix changes. 26 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.
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 2023, the U.S.
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.
The fiscal 2023 and fiscal 2022 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.
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.
Free Cash Flow 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.
Free Cash Flow 27 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.
NM represents that the percentage change is not meaningful. 39 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.
NM Represents that the percentage change is not meaningful. 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.
We have reviewed with the Audit Committee of the Board of Directors the development and selection of the critical accounting policies and estimates and this related disclosure.
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.
Management believes that adjusting its operating expenses, operating income, net earnings and diluted earnings per share to remove these Certain Items and presenting its results on a constant currency basis, provides an important perspective with respect to our underlying business trends and results.
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.
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. Broadline, Canada Broadline or SYGMA reporting units.
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.
Fair value of the reporting unit is: therefore, determined using significant unobservable inputs, or level 3 in the fair value hierarchy. The company has 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.
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.
We believe this approach significantly enhances the comparability of Sysco’s results for fiscal 2023 and fiscal 2022. 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.
We believe this approach significantly enhances the comparability of Sysco’s results for fiscal year 2024 and fiscal year 2023. Set forth on the following page is a reconciliation of sales, operating expenses, operating income, other (income) expense, net earnings and diluted earnings per share to adjusted results for these measures for the periods presented.
Key Financial Definitions • Sales – Sales is 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.
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.
The primary assumptions used in these various models include estimated earnings multiples of comparable acquisitions in the industry, including control premiums, earnings or revenue multiples on acquisitions completed by Sysco in the past, future cash flow estimates of the reporting units which are dependent on internal forecasts and projected growth rates, and weighted average cost of capital, along with working capital and capital expenditure requirements.
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.
A s of August 8, 2023, 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.
A s 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.
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 July 1, 2023 and July 2, 2022 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.
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.
Such amounts are based on estimates. Purchase obligations also include amounts committed with various third-party service providers to provide information technology services for periods up to fiscal 2029. See discussion under Note 20, “Commitments and Contingencies,” in the Notes to Consolidated Financial Statements in Item 8.
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 July 1, 2023, 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.
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.
These results were primarily attributable to the factors discussed previously related to net earnings in fiscal 2023. 33 Non-GAAP Reconciliations 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.
These results were primarily attributable to the factors discussed previously related to net earnings in fiscal 2024. 35 Non-GAAP Reconciliations 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.
Foodservice Operations operating results represented approximately 70.3% of Sysco’s overall sales and 89.4% 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.
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.
Our most critical accounting policies and estimates pertain to the goodwill and intangible assets, income taxes, company-sponsored pension plans and inventory valuation. 46 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.
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.
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 8, 2023, 29,477,835 shares remained available for issuance under this registration statement.
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.
We estimate that we serve about 17% of an approximately $350 billion annual foodservice market in the U.S. based on industry data obtained from Technomic, Inc. (Technomic) as of the end of calendar year 2022. Technomic projects the market size to increase to approximately $370 billion by the end of calendar year 2023.
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.
(2) Fiscal 2023 and fiscal 2022 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020. (3) Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on current year results. (4) Includes restructuring and severance costs, primarily in Europe. (5) Represents intangible amortization expense.
(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.
A 25 basis point increase (decrease) in the assumed rate of return in the Plan for fiscal 2024 would decrease (increase) Sysco’s net company-sponsored pension costs for fiscal 2024 by approximately $6.0 million.
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.
These key assumptions are inherently uncertain and require a high degree of estimation and judgment and are subject to change based on future changes, industry and global economic and geo-political conditions, and the timing and success of the implementation of current strategic initiatives.
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 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 5.50% for fiscal 2024.
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.
All discussion of changes in our results of operations from fiscal 2022 to fiscal 2021 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 2, 2022, filed with the Securities and Exchange Commission on August 26, 2022.
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.
Critical Accounting Policies and Estimates The preparation of financial statements in conformity with 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 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.
Additionally, it is a commonly used component metric used to inform on capital structure decisions. Case Volume Growth by Customer Type for U.S. Foodservice Operations Case volume represents the volume of product sold to customers during a period of time and improvements in this metric are a primary driver of Sysco’s top line performance.
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.
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 July 1, 2023, and repayment activity since the end of fiscal 2023 are disclosed within those notes.
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.
Net Earnings Net earnings increased 30.3% in fiscal 2023, as compared to fiscal 2022, 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.
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.
Examples of forward-looking statements include, but are not limited to, statements about: • our expectations of an improving market over the course of fiscal 2024; • 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 2024 sales and our rate of sales growth in fiscal 2024 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 2024; • our plans regarding cost savings, including our target for cost savings through fiscal 2024 and the impact of costs savings on the company; • our belief that our purpose will allow us to grow substantially faster than the foodservice distribution industry and deliver profitable growth 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 effect, impact, potential duration or other implications of the COVID-19 pandemic and any expectations we may have with respect thereto, including our ability to withstand and recover from the crisis; • the expected long-term rate of return on plan assets of the U.S.
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.
NM represents that the percentage change is not meaningful. 37 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 thousands): 2023 2022 Change in Dollars %/bps Change U.S.
NM Represents that the percentage change is not meaningful. 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): 2024 2023 Change in Dollars %/bps Change U.S.
To date, we have not experienced difficulty accessing the credit markets. As of August 8, 2023, the company had approximately $3.1 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.
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.
Consistent with fiscal 2023, we expect our capital expenditures in fiscal 2024 to be approximately 1.0% of sales. During fiscal 2023, we paid $37.4 million, net of cash acquired, for acquisitions. During fiscal 2022, we paid $1.3 billion, net of cash acquired, for acquisitions.
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.
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 Shared Center.
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.
Free Cash Flow Our free cash flow for fiscal 2023 increased by $933.8 million, to $2.1 billion, as compared to fiscal 2022, principally as a result of an increase in cash flows from operations, offset by a year-over-year increase in capital expenditures. 43 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.
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.
Sysco management seeks to drive higher case volume growth to local customers, which allows more favorable pricing terms for our U.S. Foodservice operations and generates higher gross margins as a result.
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.
(4) Fiscal 2023 includes $105 million of intangible amortization expense and $10 million in acquisition and due diligence costs. Fiscal 2022 includes $106 million of intangible amortization expense and $33 million in acquisition and due diligence costs. (5) Fiscal 2023 and fiscal 2022 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
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.
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. 42 Cash Flows Operating Activities We generated $2.9 billion in cash flows from operations in fiscal 2023, compared to cash flows from operations of $1.8 billion in fiscal 2022.
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.
As of July 1, 2023, Sysco had a total of $9.5 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.
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.
As of July 1, 2023, 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 commercial paper dealer agreement includes an issuance allowance for an aggregate amount not to exceed $3.0 billion.
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.
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 2023 were $4.01, a 23.4% increase from the comparable prior year period amount of $3.25 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.
The fair value conclusions as of July 1, 2023 for the reporting units are highly 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.
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.
This was an increase of 35 basis points compared to gross margin of 19.0% in fiscal 2022 due to the effective management of inflation, along with specific efforts to optimize our gross profit dollars.
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.
We define a case, specifically for our U.S. Foodservice operations, 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.
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.
As of July 1, 2023, we had $745.2 million in cash and cash equivalents, approximately 83% 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.
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.
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 by customer type for U.S. Foodservice operations; • Sysco brand penetration for U.S.
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).
Other income and expense Other income decreased $250.4 million for fiscal 2023, as compared to fiscal 2022, primarily due to a pension settlement charge partially offset by a gain on a litigation financing agreement.
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.
Our results for fiscal 2023 were also impacted by adjustments to a product return allowance pertaining to COVID-related personal protection equipment inventory, a pension settlement charge that resulted from the purchase of a nonparticipating single premium group annuity contract that transferred defined benefit plan obligations to an insurer, and a litigation financing agreement.
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.
Specialty operations, which include our FreshPoint fresh produce 22 distribution business, our Specialty Meats and Seafood Group specialty protein operations, our growing Italian Specialty platform anchored by Greco & Sons, 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.
Specialty operations, which include our FreshPoint fresh produce 24 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.
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 will be provided in the applicable prospectus supplements.
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.
Our results for fiscal 2023 were also impacted by adjustments to a product return allowance pertaining to COVID-related personal protection equipment inventory, a pension settlement charge that resulted from the purchase of a nonparticipating single premium group annuity contract that transferred defined benefit plan obligations to an insurer, and a litigation financing agreement.
Our results for fiscal 2023 were also impacted by a pension settlement charge that resulted from the purchase of a 25 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.
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 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.
Due to the low level of active employees in our retirement plans, our assumption for the rate of increase in future compensation is n ot a critical assumption. The expected long-term rate of return on plan assets of the U.S. Retirement Plan was 4.50% for the period of July 2022 to October 2022.
Due to the low level of active employees in our retirement plans, our assumption for the rate of increase in future compensation is n ot a critical assumption. The expected long-term rate of return on plan assets was 5.50% for fiscal 2024.
We purchased $16.2 million in marketable securities in fiscal 2023 and received $11.6 million in proceeds from the sale of marketable securities in the period. 41 Cash Requirements The Company’s 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 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.
Updated amounts at August 8, 2023, include: • No outstanding borrowings from the long-term revolving credit facility supporting our U.S. commercial paper program; and • $339.0 million outstanding borrowings under our U.S. commercial paper program. 44 Our aggregate commercial paper issuances and short-term bank borrowings had weighted average interest rates of 4.10% for fiscal 2023 and 1.35% for fiscal 2022.
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 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 $839.5 million.
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.
We continue to improve our merchandising strategies globally to secure the best possible cost for our customers and in fiscal 2023, we stood up a Sysco Brand team to accelerate progress within our owned-brands. • 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 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.
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 6,231,071 shares for $500.1 million during fiscal 2023. As of July 1, 2023, we had a remaining authorization of approximately $4.0 billion.
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.
Included in Global Support Center expenses are Certain Items that totaled $44.9 million in fiscal 2023, as compared to $146.8 million in fiscal 2022. Certain Items impacting fiscal 2023 were primarily expenses associated with our business technology transformation initiatives.
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.
According to industry sources, the foodservice, or food-away-from-home, market represents approximately 53% of the total dollars spent on food purchases made at the consumer level in the U.S. as of the end of calendar year 2022. Highlights Our fiscal 2023 results were strong, reflecting growth in volumes and 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%.
This included a 3.3% increase in local customer case volume as compared to fiscal 2022. 30 Operating Income The increase in operating income for fiscal 2023, as compared to fiscal 2022, was driven by gross profit dollar growth and partially offset by an increase in operating expenses.
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.
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.
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.
Broadline improved by 118 basis points to 46.8% for fiscal 2023, as compared to fiscal 2022. Gross margin, which is gross profit as a percentage of sales, was 19.3% in fiscal 2023.
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.
The following table sets forth the company’s total plant and equipment additions: 2023 2022 (In thousands) Net cash capital expenditures $ 751,178 $ 608,658 Plant and equipment acquired through financing programs 197,096 — Assets obtained in exchange for finance lease obligations 114,098 191,523 Total net plant and equipment additions $ 1,062,372 $ 800,181 Our capital expenditures in fiscal 2023 were $160.5 million higher than in fiscal 2022, as we made investments to advance our Recipe for Growth strategy.
The following table sets forth the company’s total plant and equipment additions: 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 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.
(6) Fiscal 2023 represents an adjustment to a product return allowance related to COVID-related personal protection equipment inventory. Fiscal 2022 represents a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory. (7) Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy. (8) Represents due diligence costs.
(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.
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: 2023 2022 Sales 100.0 % 100.0 % Cost of sales 81.7 82.0 Gross profit 18.3 18.0 Operating expenses 14.3 14.6 Operating income 4.0 3.4 Interest expense 0.7 0.9 Other (income) expense, net 0.3 — Earnings before income taxes 3.0 2.5 Income taxes 0.7 0.5 Net earnings 2.3 % 2.0 % 28 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: 2023 Sales 11.2 % Cost of sales 10.8 Gross profit 13.3 Operating expenses 9.4 Operating income 29.5 Interest expense (15.5) Other (income) expense, net (1) (1,046.8) Earnings before income taxes 30.8 Income taxes 32.8 Net earnings 30.3 % Basic earnings per share 31.2 % Diluted earnings per share 31.4 Average shares outstanding (0.6) Diluted shares outstanding (0.8) (1) Other (income) expense, net was expense of $226.4 million in fiscal 2023 and income of $23.9 million in fiscal 2022.
We will fund our journey through cost-out and efficiency improvements. 29 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: 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 — 0.3 Earnings before income taxes 3.3 3.0 Income taxes 0.8 0.7 Net earnings 2.5 % 2.3 % 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: 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) (1) Other (income) expense, net was expense of $30 million in fiscal 2024 and expense of $227 million in fiscal 2023. 30 Segment Results The following represents our results by reportable segments: Year Ended Jun. 29, 2024 U.S.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

16 edited+3 added−2 removed12 unchanged
Biggest changeChanges in the value of these items resulting from fluctuations in the underlying exchange rates to U.S. Dollar exchange rates were recorded as foreign currency translation adjustments within Accumulated other comprehensive income (loss).
Biggest changeDollar exchange rates were recorded as foreign currency translation adjustments within Accumulated other comprehensive income (loss). Additionally, we periodically enter into agreements to hedge foreign currency risk associated with changes in spot rates on foreign denominated debt instruments, which are designated as fair value hedges.
Unrealized gains or losses on components excluded from hedge effectiveness are recorded as a component of Accumulated other comprehensive income and recognized into earnings over the life of the hedged instrument. Fuel Price Risk Due to the nature of our distribution business, we are exposed to potential volatility in fuel prices.
Unrealized gains or losses on components excluded from hedge effectiveness are recorded as a component of Accumulated other comprehensive income and recognized into earnings over the life of the hedged instrument. 54 Fuel Price Risk Due to the nature of our distribution business, we are exposed to potential volatility in fuel prices.
Using current, published quarterly market price projections for diesel and estimates of fuel consumption, a 10% unfavorable change in diesel prices from the market price would result in a potential increase of approximately $6.1 million in our fuel costs on our non-contracted volumes. Investment Risk Our U.S.
Using current, published quarterly market price projections for diesel and estimates of fuel consumption, a 10% unfavorable change in diesel prices from the market price would result in a potential increase of approximately $6 million in our fuel costs on our non-contracted volumes. Investment Risk Our U.S.
These swaps are expected to lock in the price of approximately 80% of our bulk fuel purchases for fiscal 2024, or 70% of our total projected fuel purchase needs for fiscal 2024. Our remaining fuel purchase needs will occur at market rates unless contracted for a fixed price or hedged at a later date.
These swaps are expected to lock in the price of approximately 80% of our bulk fuel purchases for fiscal 2025, or 70% of our total projected fuel purchase needs for fiscal 2025. Our remaining fuel purchase needs will occur at market rates unless contracted for a fixed price or hedged at a later date.
A 10% unfavorable change in the fiscal 2023 weighted year-to-date exchange rate and the resulting impact on our financial statements would have negatively affected fiscal 2023 sales by 1.7% and would not have materially affected our operating income, net earnings and earnings per share.
A 10% unfavorable change in the fiscal 2024 weighted year-to-date exchange rate and the resulting impact on our financial statements would have negatively affected fiscal 2024 sales by 1.6% and would not have materially affected our operating income, net earnings and earnings per share.
Third, increased fuel costs impact the costs we incur to deliver product to our customers. Fuel costs related to outbound deliveries represented approximately 0.6% of sales during fiscal 2023 and 0.5% of sales in fiscal 2022 and fiscal 2021.
Third, increased fuel costs impact the costs we incur to deliver products to our customers. Fuel costs related to outbound deliveries represented approximately 0.5% of sales during fiscal 2024, 0.6% of sales in fiscal 2023, and 0.5% of sales in fiscal 2022.
A 10% unfavorable change in the value of the investments held by our company-sponsored retirement plans at the plans’ fiscal year end (December 31, 2022) would not have a material impact on our anticipated future contributions for fiscal 2024; however, such an unfavorable change would increase our pension expense for fiscal 2024 by $23.4 million and would reduce our shareholders’ equity on our balance sheet as of July 1, 2023 by $264.1 million. 53
A 10% unfavorable change in the value of the investments held by our company-sponsored retirement plans at the plans’ fiscal year end (December 31, 2023) would not have a material impact on our anticipated future contributions for fiscal 2025; however, such an unfavorable change would increase our pension expense for fiscal 2025 by $23 million and would reduce our shareholders’ equity on our balance sheet as of June 29, 2024 by $250 million. 55
We use diesel fuel swap contracts to fix the price of a portion of our projected monthly diesel fuel requirements. As of July 1, 2023, we had diesel fuel swaps with a total notional amount of approximately 71 million gallons through September 2025.
We use diesel fuel swap contracts to fix the price of a portion of our projected monthly diesel fuel requirements. As of June 29, 2024, we had diesel fuel swaps with a total notional amount of approximately 61 million gallons through March 2026.
Total debt as of July 1, 2023 was $10.4 billion, of which approximately 100% was at fixed rates of interest. At July 2, 2022, there were no commercial paper issuances outstanding under our U.S. commercial paper program.
At June 29, 2024, there were $200 million in commercial paper issuances outstanding under our U.S. commercial paper program. Total debt as of June 29, 2024 was $12.0 billion, of which approximately 98% was at fixed rates of interest. At July 1, 2023, there were no commercial paper issuances outstanding under our U.S. commercial paper program.
Our largest currency exposures are with Canadian dollars, British pound sterling and Euro currencies. Our income statement trends may be impacted by the translation of the income statements of our 52 foreign subsidiaries into U.S. dollars.
Our largest currency exposures are with Canadian dollars, British pound sterling and Euro currencies. Our income statement trends may be impacted by the translation of the income statements of our foreign subsidiaries into U.S. dollars. The exchange rates used to translate our foreign sales into U.S. dollars positively affected sales by 0.3% in fiscal 2024 when compared to fiscal 2023.
The major risks from interest rate derivatives include changes in the interest rates affecting the fair value of such instruments, potential increases in interest expense due to market increases in floating interest rates and the creditworthiness of the counterparties in such transactions. At July 1, 2023, there were no commercial paper issuances outstanding under our U.S. commercial paper program.
The major risks from interest rate derivatives include changes in the interest rates affecting the fair value of such instruments, potential increases in interest expense due to market increases in floating interest rates and the creditworthiness of the counterparties in such transactions.
Interest Rate Position as of July 1, 2023 Principal Amount by Expected Maturity Average Interest Rate 2024 2025 2026 2027 2028 Thereafter Total Fair Value (Dollars in thousands) U.S.
All amounts are stated in U.S. dollar equivalents. Interest Rate Position as of June 29, 2024 Principal Amount by Expected Maturity Average Interest Rate 2025 2026 2027 2028 2029 Thereafter Total Fair Value (Dollars in millions) U.S.
The exchange rates used to translate our foreign sales into U.S. dollars negatively affected sales by 1.3% in fiscal 2023 when compared to fiscal 2022. The exchange rate used to translate our foreign sales into U.S. dollars negatively affected sales by 0.3% in fiscal 2022 when compared to fiscal 2021.
The exchange rate used to translate our foreign sales into U.S. dollars negatively affected sales by 1.3% in fiscal 2023 when compared to fiscal 2022. The impact on our operating income, net earnings and earnings per share was not material in fiscal 2024 or fiscal 2023.
Additionally, we periodically enter into agreements to hedge foreign currency risk associated with changes in spot rates on foreign denominated debt instruments, which are designated as fair value hedges. Gains or losses from fair value hedges impact the same category on the consolidated statements of income as the item being hedged, including the earnings impact of the excluded components.
Gains or losses from fair value hedges impact the same category on the consolidated statements of income as the item being hedged, including the earnings impact of the excluded components.
In the fourth quarter of fiscal 2023, we extinguished €500 million of Euro notes issued in June 2016 as a hedge of a portion of our net investment in Euro-denominated foreign operations to reduce foreign currency risk associated with the investment in these operations.
In fiscal 2024, we entered into a cross-currency swap to hedge a portion of our net investment in Euro-denominated foreign operations to reduce foreign currency risk associated with the investment in these operations. Changes in the value of these items resulting from fluctuations in the underlying exchange rates to U.S.
Total debt as of July 2, 2022 was $10.6 billion, of which approximately 95% was at fixed rates of interest, including the impact of our interest rate swap agreements. The following tables present our interest rate position as of July 1, 2023. All amounts are stated in U.S. dollar equivalents.
Total debt as of July 1, 2023 was $10.4 billion, of which approximately 100% was at fixed rates of interest.
Removed
Dollar Denominated: Fixed Rate Debt $ — $ — $ 750,000 $ 1,043,176 $ 750,000 $ 7,038,879 $ 9,582,055 $ 8,942,071 Average Interest Rate — % — % 3.75 % 3.46 % 3.25 % 4.82 % 4.47 % Canadian Dollar Denominated: Fixed Rate Debt $ — $ 377,815 $ — $ — $ — $ — $ 377,815 $ 365,385 Average Interest Rate — % 3.65 % — % — % — % — % 3.65 % Foreign Currency Exchange Rate Risk The majority of our foreign subsidiaries use their local currency as their functional currency.
Added
Details of our outstanding swap agreements as of June 29, 2024 are below: Maturity Date of Swap Notional Value (in millions) Fixed Coupon Rate on Hedged Debt Floating Interest Rate on Swap Floating Rate Reset Terms Location of Fair Value on Balance Sheet Fair Value of Asset (Liability) (in millions) January 17, 2034 $ 500 6.00 % USD-SOFR Compound USD-SOFR-OIS Compound Every six months on the last day of each calculation period Other assets $ 6 Other current liabilities (1) Effective November 2024, we will receive or pay amounts on these interest rate swap agreements on a semi-annual basis. 53 The following tables present our interest rate position as of June 29, 2024.
Removed
The impact to our operating income, net earnings and earnings per share was not material in fiscal 2023 or fiscal 2022.
Added
Dollar Denominated: Fixed Rate Debt (1) $ — $ 750 $ 1,043 $ 750 $ 655 $ 7,384 $ 10,582 $ 9,950 Average Interest Rate — % 3.75 % 3.46 % 3.25 % 5.93 % 4.87 % 4.60 % Canadian Dollar Denominated: Fixed Rate Debt $ 365 $ — $ — $ — $ — $ — $ 365 $ 362 Average Interest Rate 3.65 % — % — % — % — % — % 3.65 % (1) Includes fixed rate debt that will convert to floating rate debt in fiscal year 2025.
Added
Interest Rate Position as of June 29, 2024 Notional Amount by Expected Maturity Average Interest Swap Rate 2025 2026 2027 2028 2029 Thereafter Total Fair Value (Dollars in millions) Interest Rate Swaps Related To Debt: Pay Variable/Receive Fixed $ — $ — $ — $ — $ — $ 500 $ 500 $ 6 Average Variable Rate Paid: Rate A Plus — % — % — % — % — % 1.88 % 1.88 % Fixed Rate Received — % — % — % — % — % 6.00 % 6.00 % Rate A – six-month USD-SOFR Compound and USD-SOFR-OIS Compound Foreign Currency Exchange Rate Risk The majority of our foreign subsidiaries use their local currency as their functional currency.

Other SYY 10-K year-over-year comparisons