Market Cap
$34,363,515,200
Enterprise Value
$47,445,515,200
Average Volume
$3,734,044
Consumer Goods
SYSCO CORP - SYY
$70.24
-0.18
(-0.26%)
Valuation & Solvency
P/Tangible Book
17.82
P/E
17.94
P/S
0.43
EV/EBITDA
12.15
EV/Sales
0.59
EV/FCF
26.17
Dividend Yield
2.90%
Payout Ratio
52.68%
Total Debt
$14,609,000,000
Cash & Marketable Securities
$1,527,000,000
Quick Ratio
0.76
Debt/Equity
7.60
Net Debt/EBITDA
3.35
Interest Coverage Ratio
5.18
About
Industry
Food Distribution
Exchange
NYSE
Country
US
Beta
0.91
Company Description
▶
Sysco Corporation, through its subsidiaries, engages in the marketing and distribution of various food and related products primarily to the foodservice or food-away-from-home industry in the United States, Canada, the United Kingdom, France, and internationally. It operates through U.S. Foodservice Operations, International Foodservice Operations, SYGMA, and Other segments. The company distributes frozen foods, such as meats, seafood, fully prepared entrées, fruits, vegetables, and desserts; canned and dry foods; fresh meats and seafood; dairy products; beverage products; imported specialties; and fresh produce. It also supplies various non-food items, including paper products comprising disposable napkins, plates, and cups; tableware consisting of China and silverware; cookware, which include pots, pans, and utensils; restaurant and kitchen equipment and supplies; and cleaning supplies. The company serves restaurants, hospitals and nursing homes, schools and colleges, hotels and motels, industrial caterers, and other foodservice venues. As of August 27, 2021, it operated 343 distribution facilities. Sysco Corporation was incorporated in 1969 and is headquartered in Houston, Texas.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM
10-Q
| (Mark One) | |||||
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended
December 28, 2024
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
Commission File Number:
1-6544
________________
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | ||||||||||
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code:
(
281
)
584-1390
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
þ
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
þ
No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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☑ | Accelerated Filer | ☐ | ||||||||
| Non-accelerated Filer | ☐ | Smaller Reporting Company |
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| (Do not check if a smaller reporting company) | Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
No
þ
1
TABLE OF CONTENTS
| PART I – FINANCIAL INFORMATION | Page No. | |||||||
| PART II – OTHER INFORMATION | ||||||||
PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In millions, except for share data)
| Dec. 28, 2024 | Jun. 29, 2024 | ||||||||||
| (unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ |
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$ |
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Accounts receivable, less allowances of $
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| Inventories |
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| Prepaid expenses and other current assets |
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| Income tax receivable |
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| Total current assets |
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| Plant and equipment at cost, less accumulated depreciation |
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| Other long-term assets | |||||||||||
| Goodwill |
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| Intangibles, less amortization |
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| Deferred income taxes |
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| Operating lease right-of-use assets, net |
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| Other assets |
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| Total other long-term assets |
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| Total assets | $ |
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$ |
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| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | $ |
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$ |
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| Accrued expenses |
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| Accrued income taxes |
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| Current operating lease liabilities |
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| Current maturities of long-term debt |
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| Total current liabilities |
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| Long-term liabilities | |||||||||||
| Long-term debt |
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| Deferred income taxes |
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| Long-term operating lease liabilities |
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| Other long-term liabilities |
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| Total long-term liabilities |
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| Noncontrolling interest |
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| Shareholders’ equity | |||||||||||
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Preferred stock, par value $
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Common stock, par value $
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| Paid-in capital |
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| Retained earnings |
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| Accumulated other comprehensive loss |
(
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(
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|||||||||
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Treasury stock at cost,
|
(
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(
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|||||||||
| Total shareholders’ equity |
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|||||||||
| Total liabilities and shareholders’ equity | $ |
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$ |
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|||||||
Note: The June 29, 2024 balance sheet has been derived from the audited financial statements at that date.
See Notes to Consolidated Financial Statements
1
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
(In millions, except for share and per share data)
| 13-Week Period Ended | 26-Week Period Ended | ||||||||||||||||||||||
| Dec. 28, 2024 | Dec. 30, 2023 | Dec. 28, 2024 | Dec. 30, 2023 | ||||||||||||||||||||
| Sales | $ |
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$ |
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$ |
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$ |
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|||||||||||||||
| Cost of sales |
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| Gross profit |
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| Operating expenses |
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| Operating income |
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| Interest expense |
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| Other expense (income), net |
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| Earnings before income taxes |
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| Income taxes |
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| Net earnings | $ |
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$ |
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$ |
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$ |
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| Net earnings: | |||||||||||||||||||||||
| Basic earnings per share | $ |
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$ |
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$ |
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$ |
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| Diluted earnings per share |
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| Average shares outstanding |
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| Diluted shares outstanding |
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See Notes to Consolidated Financial Statements
2
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(In millions)
| 13-Week Period Ended | 26-Week Period Ended | ||||||||||||||||||||||
| Dec. 28, 2024 | Dec. 30, 2023 | Dec. 28, 2024 | Dec. 30, 2023 | ||||||||||||||||||||
| Net earnings | $ |
|
$ |
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$ |
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$ |
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|||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Foreign currency translation adjustment |
(
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(
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|||||||||||||||||||
| Items presented net of tax: | |||||||||||||||||||||||
| Currency translation adjustment as a result of disposition of a foreign subsidiary |
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|||||||||||||||||||
| Amortization of cash flow hedges |
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| Change in net investment hedges |
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(
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(
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| Change in cash flow hedges |
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(
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(
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|||||||||||||||||||
| Change in excluded components of fair value hedge |
(
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(
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| Amortization of actuarial loss |
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| Net actuarial gain and other adjustments arising in current year |
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| Change in marketable securities |
(
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| Total other comprehensive income (loss) |
(
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(
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|||||||||||||||||||
| Comprehensive income | $ |
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$ |
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$ |
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$ |
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See Notes to Consolidated Financial Statements
3
Sysco Corporation and its Consolidated Subsidiaries
CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY (Unaudited)
(In millions, except for share data)
Quarter to Date
|
Accumulated
Other Comprehensive Loss |
|||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock |
Paid-in
Capital |
Retained
Earnings |
Treasury Stock | ||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amounts | Totals | |||||||||||||||||||||||||||||||||||||||||||
| Balance as of September 28, 2024 |
|
$ |
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$ |
|
$ |
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$ |
(
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$ |
(
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$ |
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|||||||||||||||||||||||||||||||||
| Net earnings |
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| Other comprehensive income (loss) |
(
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(
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Dividends declared ($
|
(
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(
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|||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock purchases |
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(
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(
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||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation awards |
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(
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|||||||||||||||||||||||||||||||||||||||||||
| Adjustments to redeemable non-controlling interest |
(
|
(
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|||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 28, 2024 |
|
$ |
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$ |
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$ |
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$ |
(
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$ |
(
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$ |
|
|||||||||||||||||||||||||||||||||
|
Accumulated
Other Comprehensive Loss |
|||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock |
Paid-in
Capital |
Retained
Earnings |
Treasury Stock | ||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amounts | Totals | |||||||||||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2023 |
|
$ |
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$ |
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$ |
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$ |
(
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$ |
(
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$ |
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|||||||||||||||||||||||||||||||||
| Net earnings |
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| Other comprehensive income (loss) |
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Dividends declared ($
|
(
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(
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|||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock purchases |
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(
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(
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||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation awards |
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(
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|||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 30, 2023 |
|
$ |
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$ |
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$ |
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$ |
(
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$ |
(
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$ |
|
|||||||||||||||||||||||||||||||||
See Notes to Consolidated Financial Statements
Year to Date
|
Accumulated
Other Comprehensive Loss |
|||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock |
Paid-in
Capital |
Retained
Earnings |
Treasury Stock | ||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amounts | Totals | |||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 29, 2024 |
|
$ |
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$ |
|
$ |
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$ |
(
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$ |
(
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$ |
|
|||||||||||||||||||||||||||||||||
| Net earnings |
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|||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) |
(
|
(
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|||||||||||||||||||||||||||||||||||||||||||||
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Dividends declared ($
|
(
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(
|
|||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock purchases |
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(
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(
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|||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation awards |
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(
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|||||||||||||||||||||||||||||||||||||||||||
| Adjustments to redeemable non-controlling interest |
(
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(
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|||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 28, 2024 |
|
$ |
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$ |
|
$ |
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$ |
(
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|
$ |
(
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$ |
|
|||||||||||||||||||||||||||||||||
|
Accumulated
Other Comprehensive Loss |
|||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock |
Paid-in
Capital |
Retained
Earnings |
Treasury Stock | ||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amounts | Totals | |||||||||||||||||||||||||||||||||||||||||||
| Balance as of July 1, 2023 |
|
$ |
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$ |
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$ |
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$ |
(
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|
$ |
(
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$ |
|
|||||||||||||||||||||||||||||||||
| Net earnings |
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| Other comprehensive income (loss) |
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Dividends declared ($
|
(
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(
|
|||||||||||||||||||||||||||||||||||||||||||||
| Treasury stock purchases |
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(
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(
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||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation awards |
|
(
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|||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 30, 2023 |
|
$ |
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$ |
|
$ |
|
$ |
(
|
|
$ |
(
|
$ |
|
|||||||||||||||||||||||||||||||||
See Notes to Consolidated Financial Statements
4
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS (Unaudited)
(In millions)
| 26-Week Period Ended | |||||||||||
| Dec. 28, 2024 | Dec. 30, 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net earnings | $ |
|
$ |
|
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| Adjustments to reconcile net earnings to cash provided by operating activities: | |||||||||||
| Share-based compensation expense |
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| Depreciation and amortization |
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| Operating lease asset amortization |
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| Amortization of debt issuance and other debt-related costs |
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| Deferred income taxes |
(
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(
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| Provision for losses on receivables |
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| Other non-cash items |
(
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(
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| Additional changes in certain assets and liabilities, net of effect of businesses acquired: | |||||||||||
| Increase in receivables |
(
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(
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| Increase in inventories |
(
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(
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| (Increase) decrease in prepaid expenses and other current assets |
(
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| Decrease in accounts payable |
(
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(
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| (Decrease) increase in accrued expenses |
(
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| Decrease in operating lease liabilities |
(
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(
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| Increase (decrease) in accrued income taxes |
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(
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| (Increase) decrease in other assets |
(
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| Increase (decrease) in other long-term liabilities |
|
(
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| Net cash provided by operating activities |
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| Cash flows from investing activities: | |||||||||||
| Additions to plant and equipment |
(
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(
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| Proceeds from sales of plant and equipment |
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| Acquisition of businesses, net of cash acquired |
(
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(
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| Purchase of marketable securities |
(
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(
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| Proceeds from sales of marketable securities |
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| Other investing activities |
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| Net cash used for investing activities |
(
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(
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| Cash flows from financing activities: | |||||||||||
| Bank and commercial paper borrowings, net |
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| Other debt borrowings including senior notes |
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| Other debt repayments including senior notes |
(
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(
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| Proceeds from stock option exercises |
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| Stock repurchases |
(
|
(
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| Dividends paid |
(
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(
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| Other financing activities |
|
(
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| Net cash (used for) provided by financing activities |
(
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|||||||||
| Effect of exchange rates on cash, cash equivalents and restricted cash |
(
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| Net (decrease) increase in cash, cash equivalents and restricted cash |
(
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| Cash, cash equivalents and restricted cash at beginning of period |
|
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| Cash, cash equivalents and restricted cash at end of period | $ |
|
$ |
|
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| Supplemental disclosures of cash flow information: | |||||||||||
| Cash paid during the period for: | |||||||||||
| Interest | $ |
|
$ |
|
|||||||
|
Income taxes, net of refunds
(1)
|
|
|
|||||||||
|
(1)
|
Cash paid for income taxes, net for the 26 weeks ended December 28, 2024 includes $
|
||||
See Notes to Consolidated Financial Statements
5
Sysco Corporation and its Consolidated Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Unless this Form 10-Q indicates otherwise or the context otherwise requires, the terms “we,” “our,” “us,” “Sysco,” or the “company” as used in this Form 10-Q refer to Sysco Corporation together with its consolidated subsidiaries and divisions.
1.
BASIS OF PRESENTATION
The consolidated financial statements have been prepared by the company, without an audit. The financial statements include consolidated balance sheets, consolidated results of operations, consolidated statements of comprehensive income, changes in consolidated shareholders’ equity and consolidated cash flows. In the opinion of management, all adjustments, which consist of normal recurring adjustments, except as otherwise disclosed, necessary to present fairly the financial position, results of operations, comprehensive income, cash flows and changes in shareholders’ equity for all periods presented have been made.
These financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended June 29, 2024. Certain footnote disclosures included in annual financial statements prepared in accordance with generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to applicable rules and regulations for interim financial statements.
Supplemental Balance Sheet Information
Supplier Financing Programs
We have agreements with third parties to provide supplier finance programs which facilitate participating suppliers’ ability to finance payment obligations from the company with designated third-party financial institutions. Participating suppliers may, at their sole discretion, make offers to finance one or more payment obligations of the company prior to their scheduled due dates at a discounted price to participating financial institutions. Obligations of the company that have been confirmed as valid require payment by Sysco upon the due date of the obligation.
Our outstanding payment obligations that suppliers financed to participating financial institutions, which are included in
on the consolidated balance sheets, are as follows:
| Dec. 28, 2024 | Jun. 29, 2024 | |||||||||||||
| (In millions) | ||||||||||||||
| Financed payment obligations | $ |
|
$ |
|
||||||||||
Accounts Receivable, Less Allowances
We utilize arrangements to sell portions of our trade accounts receivable to third-party financial institutions on a non-recourse basis in exchange for cash. The arrangements meet the requirements for the receivables transferred to be accounted for as sales and are accounted for as a reduction in trade receivables. Proceeds from the sales are reported net of negotiated discount and are recorded as a reduction to accounts receivable outstanding in the company’s consolidated balance sheets and as cash flows from operating activities in the company’s consolidated statements of cash flows. Accounts receivable sold under these arrangements were $
2.2
billion and $
1.3
billion for the second quarter of fiscal 2025 and 2024, respectively, and $
4.1
billion and $
2.4
billion for the first 26 weeks of fiscal 2025 and 2024, respectively.
In certain instances, Sysco has continuing involvement subsequent to the transfer, limited to providing certain servicing and collection actions on behalf of the purchasers of the designated trade receivables. The outstanding aggregate principal amount of receivables that has been derecognized and remain outstanding was $
204
million and $
173
million at December 28, 2024 and June 29, 2024, respectively. We continue to service the receivables post-transfer on a non-recourse basis with no participating interest.
Supplemental Cash Flow Information
The following table sets forth our reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the amounts shown in the consolidated statement of cash flows:
6
| Dec. 28, 2024 | Dec. 30, 2023 | ||||||||||
| (In millions) | |||||||||||
| Cash and cash equivalents | $ |
|
$ |
|
|||||||
|
Restricted cash
(1)
|
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|
|||||||||
| Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows | $ |
|
$ |
|
|||||||
|
(1)
|
Restricted cash primarily represents cash and cash equivalents of Sysco’s wholly owned captive insurance subsidiary, restricted for use to secure the insurer’s obligations for workers’ compensation, general liability and auto liability programs. Restricted cash is located within other assets in each consolidated balance sheet.
|
||||
The following table sets forth our non-cash investing and financing activities:
| Dec. 28, 2024 | Dec. 30, 2023 | ||||||||||
| (In millions) | |||||||||||
| Non-cash investing and financing activities: | |||||||||||
| Plant and equipment acquired through financing programs | $ |
|
$ |
|
|||||||
| Assets obtained in exchange for finance lease obligations |
|
|
|||||||||
Business Combinations
On November 27, 2023, Sysco consummated its acquisition of Edward Don & Company (Edward Don) through a merger between Edward Don and a wholly owned subsidiary of Sysco Corporation, in which Sysco acquired
100
% of the members’ equity of the acquiree for cash consideration of $
965
million. Edward Don is a leading distributor of foodservice equipment, supplies and disposables and has a robust supply chain that is expected to enable cost effective distribution of restaurant equipment and supplies across the Sysco network. The acquisition has allowed Sysco to add strategic capabilities and diversified offerings to complement its existing business and creates a specialty equipment and supplies platform that will provide better selection and service to customers.
During the second quarter of fiscal 2025, we completed the determination of the fair value of the assets acquired and liabilities assumed. We recorded certain measurement period adjustments during fiscal 2024 and 2025, none of which were individually or in aggregate material to our financial statements.
2.
NEW ACCOUNTING STANDARDS
Recent Accounting Guidance Not Yet Adopted
Segment Reporting
In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosures of a reportable segment’s profit or loss and assets. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, (our fiscal 2025), and interim periods for our fiscal years beginning after December 15, 2024, (our first quarter of fiscal 2026), and should be applied on a retrospective basis to all periods presented. Early adoption is permitted. We are currently evaluating the effect of adopting ASU 2023-07 on our disclosures.
Income Taxes
In December 2023, the FASB issued 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures to enhance income tax information primarily through changes in the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, (our fiscal 2026), on a prospective basis. Early adoption is permitted. We are currently evaluating the effect of adopting ASU 2023-09 on our disclosures.
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The standard update improves the disclosures about a public business entity’s expenses by requiring more detailed information about the types of expenses included within commonly presented income statement captions. The amendments in ASU 2024-03 are effective for annual reporting periods beginning after December 15, 2026, (our fiscal 2028), and interim reporting periods beginning after December 15, 2027, (our first quarter of fiscal 2029). Early adoption is permitted. The standard updates are to be applied prospectively with the option for retrospective application. We are currently evaluating the effect of adopting ASU 2024-03 on our disclosures.
3.
REVENUE
We recognize revenues when our performance obligations are satisfied in an amount that reflects the consideration Sysco expects to be entitled to receive in exchange for those goods and services. Customer receivables, which are included in accounts receivable, less allowances in the consolidated balance sheet, were $
5.0
billion as of both December 28, 2024 and June 29, 2024.
The following tables present our sales disaggregated by reportable segment and sales mix for the company’s principal product categories for the periods presented:
| 13-Week Period Ended Dec. 28, 2024 | ||||||||||||||||||||||||||||||||
| US Foodservice Operations | International Foodservice Operations | SYGMA | Other | Total | ||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||
| Principal Product Categories | ||||||||||||||||||||||||||||||||
| Fresh and frozen meats | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Canned and dry products |
|
|
|
|
|
|||||||||||||||||||||||||||
| Frozen fruits, vegetables, bakery and other |
|
|
|
|
|
|||||||||||||||||||||||||||
| Dairy products |
|
|
|
|
|
|||||||||||||||||||||||||||
| Poultry |
|
|
|
|
|
|||||||||||||||||||||||||||
| Fresh produce |
|
|
|
|
|
|||||||||||||||||||||||||||
| Paper and disposables |
|
|
|
|
|
|||||||||||||||||||||||||||
| Beverage products |
|
|
|
|
|
|||||||||||||||||||||||||||
| Seafood |
|
|
|
|
|
|||||||||||||||||||||||||||
|
Equipment and smallwares
(1)
|
|
|
|
|
|
|||||||||||||||||||||||||||
|
Other
(2)
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Total Sales | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
|
(1)
|
Due to the acquisition of Edward Don, “Equipment and smallwares” is now presented as a separate principal product category. | ||||
|
(2)
|
Other sales relate to certain non-food products, including textiles and amenities for our hotel supply business, other janitorial products, and medical supplies.
|
||||
7
| 13-Week Period Ended Dec. 30, 2023 | ||||||||||||||||||||||||||||||||
| US Foodservice Operations | International Foodservice Operations | SYGMA | Other | Total | ||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||
| Principal Product Categories | ||||||||||||||||||||||||||||||||
| Canned and dry products | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Fresh and frozen meats |
|
|
|
|
|
|||||||||||||||||||||||||||
| Frozen fruits, vegetables, bakery and other |
|
|
|
|
|
|||||||||||||||||||||||||||
| Dairy products |
|
|
|
|
|
|||||||||||||||||||||||||||
| Poultry |
|
|
|
|
|
|||||||||||||||||||||||||||
| Fresh produce |
|
|
|
|
|
|||||||||||||||||||||||||||
| Paper and disposables |
|
|
|
|
|
|||||||||||||||||||||||||||
| Seafood |
|
|
|
|
|
|||||||||||||||||||||||||||
| Beverage products |
|
|
|
|
|
|||||||||||||||||||||||||||
|
Equipment and smallwares
(1)
|
|
|
|
|
|
|||||||||||||||||||||||||||
|
Other
(2)
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Total Sales | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
|
(1)
|
Due to the acquisition of Edward Don, “Equipment and smallwares” is now presented as a separate principal product category. | ||||
|
(2)
|
Other sales relate to certain non-food products, including textiles and amenities for our hotel supply business, other janitorial products, and medical supplies. | ||||
| 26-Week Period Ended Dec. 28, 2024 | ||||||||||||||||||||||||||||||||
| US Foodservice Operations | International Foodservice Operations | SYGMA | Other | Total | ||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||
| Principal Product Categories | ||||||||||||||||||||||||||||||||
| Fresh and frozen meats | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Canned and dry products |
|
|
|
|
|
|||||||||||||||||||||||||||
| Frozen fruits, vegetables, bakery and other |
|
|
|
|
|
|||||||||||||||||||||||||||
| Dairy products |
|
|
|
|
|
|||||||||||||||||||||||||||
| Poultry |
|
|
|
|
|
|||||||||||||||||||||||||||
| Fresh produce |
|
|
|
|
|
|||||||||||||||||||||||||||
| Paper and disposables |
|
|
|
|
|
|||||||||||||||||||||||||||
| Beverage products |
|
|
|
|
|
|||||||||||||||||||||||||||
| Seafood |
|
|
|
|
|
|||||||||||||||||||||||||||
|
Equipment and smallwares
(1)
|
|
|
|
|
|
|||||||||||||||||||||||||||
|
Other
(2)
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Total Sales | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
|
(1)
|
Due to the acquisition of Edward Don, “Equipment and smallwares” is now presented as a separate principal product category. | ||||
|
(2)
|
Other sales relate to certain non-food products, including textiles and amenities for our hotel supply business, other janitorial products, and medical supplies. | ||||
8
| 26-Week Period Ended Dec. 30, 2023 | ||||||||||||||||||||||||||||||||
| US Foodservice Operations | International Foodservice Operations | SYGMA | Other | Total | ||||||||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||||||||
| Principal Product Categories | ||||||||||||||||||||||||||||||||
| Canned and dry products | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Fresh and frozen meats |
|
|
|
|
|
|||||||||||||||||||||||||||
| Frozen fruits, vegetables, bakery and other |
|
|
|
|
|
|||||||||||||||||||||||||||
| Dairy products |
|
|
|
|
|
|||||||||||||||||||||||||||
| Poultry |
|
|
|
|
|
|||||||||||||||||||||||||||
| Fresh produce |
|
|
|
|
|
|||||||||||||||||||||||||||
| Paper and disposables |
|
|
|
|
|
|||||||||||||||||||||||||||
| Seafood |
|
|
|
|
|
|||||||||||||||||||||||||||
| Beverage products |
|
|
|
|
|
|||||||||||||||||||||||||||
|
Equipment and smallwares
(1)
|
|
|
|
|
|
|||||||||||||||||||||||||||
|
Other
(2)
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Total Sales | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
|
(1)
|
Due to the acquisition of Edward Don, “Equipment and smallwares” is now presented as a separate principal product category. | ||||
|
(2)
|
Other sales relate to certain non-food products, including textiles and amenities for our hotel supply business, other janitorial products, and medical supplies. | ||||
4.
FAIR VALUE MEASUREMENTS
Sysco’s policy is to invest only in high-quality investments. The fair values of our cash deposits and money market funds included in cash equivalents are valued using inputs that are considered a Level 1 measurement. Other cash equivalents, such as time deposits and highly liquid instruments with original maturities of three months or less, are valued using inputs that are considered a Level 2 measurement. The fair value of our marketable securities is measured using inputs that are considered a Level 2 measurement, as they rely on quoted prices in markets that are not actively traded or observable inputs over the full term of the asset. The location and the fair value of the company’s marketable securities in the consolidated balance sheet are disclosed in Note 5, “Marketable Securities.” The fair value of our derivative instruments is measured using inputs that are considered a Level 2 measurement, as they are not actively traded and are valued using pricing models that use observable market quotations. The location and the fair values of derivative assets and liabilities designated as hedges in the consolidated balance sheet are disclosed in Note 6, “Derivative Financial Instruments.”
9
The following tables present our assets measured at fair value on a recurring basis as of December 28, 2024 and June 29, 2024:
| Assets Measured at Fair Value as of Dec. 28, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents | |||||||||||||||||||||||
| Cash and cash equivalents | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
|
Other assets
(1)
|
|
|
|
|
|||||||||||||||||||
| Total assets at fair value | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
|
(1)
|
Represents restricted cash balance recorded within other assets in the consolidated balance sheet. | ||||
| Assets Measured at Fair Value as of Jun. 29, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents | |||||||||||||||||||||||
| Cash and cash equivalents | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
|
Other assets
(1)
|
|
|
|
|
|||||||||||||||||||
| Total assets at fair value | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
|
(1)
|
Represents restricted cash balance recorded within other assets in the consolidated balance sheet. | ||||
10
5.
MARKETABLE SECURITIES
Sysco invests a portion of the assets held by its wholly owned captive insurance subsidiary in a restricted investment portfolio of marketable fixed income securities, which have been classified and accounted for as available-for-sale. We include fixed income securities maturing in less than 12 months within prepaid expenses and other current assets. Fixed income securities maturing in more than 12 months are included within other assets in the accompanying consolidated balance sheets. We record the amounts at fair market value, which is determined using quoted market prices at the end of the reporting period.
Unrealized gains and any portion of a security’s unrealized loss attributable to non-credit losses are recorded in accumulated other comprehensive loss. There were
no significant credit losses recognized i
n the first 26 weeks of fiscal 2025.
The following table presents our available-for-sale marketable securities as of December 28, 2024 and June 29, 2024:
| Dec. 28, 2024 | |||||||||||||||||||||||||||||||||||
| Amortized Cost Basis | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Short-Term Marketable Securities | Long-Term Marketable Securities | ||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||
| Fixed income securities: | |||||||||||||||||||||||||||||||||||
| Corporate bonds | $ |
|
$ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Government bonds |
|
|
(
|
|
|
|
|||||||||||||||||||||||||||||
| Total marketable securities | $ |
|
$ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Jun. 29, 2024 | |||||||||||||||||||||||||||||||||||
| Amortized Cost Basis | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Short-Term Marketable Securities | Long-Term Marketable Securities | ||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||
| Fixed income securities: | |||||||||||||||||||||||||||||||||||
| Corporate bonds | $ |
|
$ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
| Government bonds |
|
|
(
|
|
|
|
|||||||||||||||||||||||||||||
| Total marketable securities | $ |
|
$ |
|
$ |
(
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||
As of December 28, 2024, the balance of available-for-sale securities by contractual maturity is shown in the following table. Within the table, maturities of fixed income securities have been allocated based upon timing of estimated cash flows. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.
| Dec. 28, 2024 | |||||
| (In millions) | |||||
| Due in one year or less | $ |
|
|||
| Due after one year through five years |
|
||||
| Due after five years |
|
||||
| Total | $ |
|
|||
There wer
e no significant realized gains or losses in
marketable securities in the first 26 weeks of fiscal 2025.
6.
DERIVATIVE FINANCIAL INSTRUMENTS
Sysco uses derivative financial instruments to enact hedging strategies for risk mitigation purposes; however, we do not use derivative financial instruments for trading or speculative purposes. Hedging strategies are used to manage interest rate risk, foreign currency risk and fuel price risk.
11
Hedging of interest rate risk
Sysco manages its debt portfolio with interest rate swaps from time to time to achieve an overall desired position of fixed and floating rates.
Hedging of foreign currency risk
Sysco’s operations in Europe have inventory purchases denominated in currencies other than their functional currency, such as the euro, U.S. dollar, British pound sterling, Polish zloty and Danish krone. These inventory purchases give rise to foreign currency exposure between the functional currency of each entity and these currencies. The company enters into foreign currency forward swap contracts to sell the applicable entity’s functional currency and buy currencies matching the inventory purchase, which operate as cash flow hedges of the company’s foreign currency-denominated inventory purchases.
Sysco has cross-currency swaps and foreign currency forwards designated as fair value hedges for the purpose of hedging foreign currency risk associated with changes in spot rates on foreign denominated intercompany loans and intercompany payables. Sysco has elected to exclude the changes in fair value of the forward points from the assessments of hedge effectiveness. Gains or losses from fair value hedges impact the same category on the consolidated statements of income as the item being hedged, including the earnings impact of the excluded components. Unrealized gains or losses on components excluded from hedge effectiveness are recorded as a component of accumulated other comprehensive income (loss) and recognized into earnings over the life of the hedged instrument. Except for the excluded components, changes in the fair value of the hedge are offset against changes in the fair value of the hedged assets or liabilities through earnings.
Sysco also has a cross-currency swap that hedges the foreign currency exposure of our net investment in certain foreign operations. This cross-currency swap is designated as a net investment hedge with gains and losses recognized within accumulated other comprehensive income (loss).
Hedging of fuel price risk
Sysco uses fuel commodity swap contracts to hedge against the risk of the change in the price of diesel fuel on anticipated future purchases. These swaps have been designated as cash flow hedges.
12
None of our hedging instruments contain credit-risk-related contingent features.
Details of outstanding hedging instruments as of December 28, 2024 are presented below:
| Maturity Date of the Hedging Instrument | Currency / Unit of Measure | Notional Value | ||||||||||||
| (In millions) | ||||||||||||||
| Hedging of interest rate risk | ||||||||||||||
| January 2034 | U.S. Dollar |
|
||||||||||||
| Hedging of foreign currency risk | ||||||||||||||
| Various (December 2024 to April 2025) | Swedish Krona |
|
||||||||||||
| Various (December 2024 to May 2025) | British Pound Sterling |
|
||||||||||||
| April 2025 | Canadian Dollar |
|
||||||||||||
| June 2025 | Canadian Dollar |
|
||||||||||||
| January 2029 | Euro |
|
||||||||||||
| Hedging of fuel risk | ||||||||||||||
| Various (December 2024 to September 2026) | Gallons |
|
||||||||||||
The location and the fair value of derivative instruments designated as hedges in the consolidated balance sheets as of December 28, 2024 and June 29, 2024 are as follows:
| Derivative Fair Value | |||||||||||||||||
| Balance Sheet location | Dec. 28, 2024 | Jun. 29, 2024 | |||||||||||||||
| (In millions) | |||||||||||||||||
| Fair Value Hedges: | |||||||||||||||||
| Interest rate swaps | Other assets | $ |
|
$ |
|
||||||||||||
| Interest rate swaps | Other current liabilities |
|
|
||||||||||||||
| Interest rate swaps | Other long-term liabilities |
|
|
||||||||||||||
| Cross currency swaps | Other current assets |
|
|
||||||||||||||
| Cross currency swaps | Other current liabilities |
|
|
||||||||||||||
| Foreign currency forwards | Other current assets |
|
|
||||||||||||||
| Cash Flow Hedges: | |||||||||||||||||
| Fuel swaps | Other current assets | $ |
|
$ |
|
||||||||||||
| Foreign currency forwards | Other current liabilities |
|
|
||||||||||||||
| Fuel swaps | Other current liabilities |
|
|
||||||||||||||
| Fuel swaps | Other assets |
|
|
||||||||||||||
| Fuel swaps | Other long-term liabilities |
|
|
||||||||||||||
| Net Investment Hedges: | |||||||||||||||||
| Cross currency swaps | Other current assets | $ |
|
$ |
|
||||||||||||
| Cross currency swaps | Other long-term liabilities |
|
|
||||||||||||||
Gains or losses recognized in the consolidated results of operations for cash flow hedging relationships are not significant for each of the periods presented.
The location and amount of gains or losses recognized in the consolidated results of operations for fair value hedging relationships for each of the periods, presented on a pretax basis, are as follows:
13
| 13-Week Period Ended | 26-Week Period Ended | |||||||||||||||||||||||||
| Dec. 28, 2024 | Dec. 30, 2023 | Dec. 28, 2024 | Dec. 30, 2023 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Total amounts of income and expense line items presented in the consolidated results of operations in which the effects of fair value hedges are recorded | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Gain or (loss) on fair value hedging relationships: | ||||||||||||||||||||||||||
| Interest rate swaps: | ||||||||||||||||||||||||||
| Hedged items | $ |
|
$ |
(
|
$ |
(
|
$ |
(
|
||||||||||||||||||
| Derivatives designated as hedging instruments |
(
|
|
(
|
|
||||||||||||||||||||||
| Cross currency swaps and foreign currency forwards: | ||||||||||||||||||||||||||
| Hedged items | $ |
|
$ |
(
|
$ |
|
$ |
|
||||||||||||||||||
| Derivatives designated as hedging instruments |
(
|
|
(
|
|
||||||||||||||||||||||
The gains and losses on the fair value hedging relationships associated with the hedged items as disclosed in the table above consist of the following components for each of the periods presented:
| 13-Week Period Ended | 26-Week Period Ended | |||||||||||||||||||||||||
| Dec. 28, 2024 | Dec. 30, 2023 | Dec. 28, 2024 | Dec. 30, 2023 | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Interest expense | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
||||||||||||||||||
| Increase (decrease) in fair value of debt |
(
|
|
(
|
|
||||||||||||||||||||||
| Foreign currency gain (loss) |
|
(
|
|
|
||||||||||||||||||||||
| Hedged items | $ |
|
$ |
(
|
$ |
(
|
$ |
(
|
||||||||||||||||||
The location and effect of cash flow, net investment, and excluded components of fair value hedges on the consolidated statements of comprehensive income for the 13-week periods ended December 28, 2024 and December 30, 2023, presented on a pretax basis, are as follows:
14
| 13-Week Period Ended Dec. 28, 2024 | |||||||||||||||||
| Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives | Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income | Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income | |||||||||||||||
| (In millions) | (In millions) | ||||||||||||||||
| Derivatives in cash flow hedging relationships: | |||||||||||||||||
| Fuel swaps | $ |
|
Operating expense | $ |
|
||||||||||||
| Derivatives in net investment hedging relationships: | |||||||||||||||||
| Cross currency contracts | $ |
|
N/A | $ |
|
||||||||||||
| Derivatives in fair value hedging relationships: | |||||||||||||||||
| Change in excluded component of fair value hedge | $ |
(
|
Other expense (income) | $ |
|
||||||||||||
| 13-Week Period Ended Dec. 30, 2023 | |||||||||||||||||
| Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives | Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income | Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income | |||||||||||||||
| (In millions) | (In millions) | ||||||||||||||||
| Derivatives in cash flow hedging relationships: | |||||||||||||||||
| Fuel swaps | $ |
(
|
Operating expense | $ |
|
||||||||||||
| Foreign currency contracts |
(
|
Cost of sales / Other income |
|
||||||||||||||
| Total | $ |
(
|
$ |
|
|||||||||||||
| Derivatives in net investment hedging relationships: | |||||||||||||||||
| Cross currency contracts | $ |
(
|
N/A | $ |
|
||||||||||||
15
The location and effect of cash flow, net investment, and excluded components of fair value hedges on the consolidated statements of comprehensive income for the 26-week periods ended December 28, 2024 and December 30, 2023, presented on a pretax basis, are as follows:
| 26-Week Period Ended Dec. 28, 2024 | |||||||||||||||||
| Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives | Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income | Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income | |||||||||||||||
| (In millions) | (In millions) | ||||||||||||||||
| Derivatives in cash flow hedging relationships: | |||||||||||||||||
| Fuel swaps | $ |
(
|
Operating expense | $ |
|
||||||||||||
| Foreign currency contracts |
(
|
Cost of sales / Other income |
|
||||||||||||||
| Total | $ |
(
|
$ |
|
|||||||||||||
| Derivatives in net investment hedging relationships: | |||||||||||||||||
| Cross currency contracts | $ |
|
N/A | $ |
|
||||||||||||
| Derivatives in fair value hedging relationships: | |||||||||||||||||
| Change in excluded component of fair value hedge | $ |
(
|
Other expense (income) | $ |
|
||||||||||||
| 26-Week Period Ended Dec. 30, 2023 | |||||||||||||||||
| Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives | Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income | Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income | |||||||||||||||
| (In millions) | (In millions) | ||||||||||||||||
| Derivatives in cash flow hedging relationships: | |||||||||||||||||
| Fuel swaps | $ |
|
Operating expense | $ |
|
||||||||||||
| Foreign currency contracts |
(
|
Cost of sales / Other income |
|
||||||||||||||
| Total | $ |
|
$ |
|
|||||||||||||
| Derivatives in net investment hedging relationships: | |||||||||||||||||
| Cross currency contracts | $ |
(
|
N/A | $ |
|
||||||||||||
16
The location and carrying amount of hedged liabilities in the consolidated balance sheet as of December 28, 2024 are as follows:
| Dec. 28, 2024 | |||||||||||
| Carrying Amount of Hedged Assets (Liabilities) | Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Assets (Liabilities) | ||||||||||
| (In millions) | |||||||||||
| Balance sheet location: | |||||||||||
| $ |
(
|
$ |
|
||||||||
The carrying amount of hedged liabilities in the consolidated balance sheet as of June 29, 2024 is $
498
million.
7.
DEBT
Sysco has a long-term revolving credit facility that includes aggregate commitments of the lenders thereunder of $
3.0
billion, with an option to increase such commitments to $
4.0
billion. As of December 28, 2024, there were
no
borrowings outstanding under this facility.
We have a U.S. commercial paper program allowing the company to issue short-term unsecured notes in an aggregate amount not to exceed $
3.0
billion. Any outstanding amounts are classified within long-term debt, as the program is supported by the long-term revolving credit facility. As of December 28, 2024, there were $
498
million in commercial paper issuances outstanding under this program. We also have a commercial paper program in Europe with borrowings not to exceed €
250
million. As of December 28, 2024, there were €
145
million (the equivalent of $
151
million) in commercial paper issuances outstanding under this program.
The total carrying value of our debt was $
12.6
billion as of December 28, 2024 and $
12.0
billion as of June 29, 2024. The increase in the carrying value of our debt during the 26-week period ended December 28, 2024 was due to new commercial paper issuances and new leases in support of plant and equipment.
Information regarding the guarantors of our registered debt securities is contained in the section captioned
Guarantor Summarized Financial Information
in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this Form 10-Q.
8.
EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share:
| 13-Week Period Ended | 26-Week Period Ended | ||||||||||||||||||||||
| Dec. 28, 2024 | Dec. 30, 2023 | Dec. 28, 2024 | Dec. 30, 2023 | ||||||||||||||||||||
|
(In millions, except for share
and per share data) |
(In millions, except for share
and per share data) |
||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net earnings | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average basic shares outstanding |
|
|
|
|
|||||||||||||||||||
| Dilutive effect of share-based awards |
|
|
|
|
|||||||||||||||||||
| Weighted-average diluted shares outstanding |
|
|
|
|
|||||||||||||||||||
| Basic earnings per share | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Diluted earnings per share | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
The number of securities that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was approximately
3,161,000
and
6,451,000
for the second quarter of fiscal 2025 and 2024, respectively, and approximately
3,249,000
and
6,219,000
for the first 26 weeks of fiscal 2025 and 2024, respectively.
17
9.
OTHER COMPREHENSIVE INCOME
Comprehensive income is net earnings plus certain other items that are recorded directly to shareholders’ equity, such as foreign currency translation adjustment, amounts related to certain hedging arrangements, amounts related to pension and other postretirement plans and changes in marketable securities. Comprehensive income was $
176
million and $
552
million for the second quarter of fiscal 2025 and fiscal 2024, respectively. Comprehensive income was $
839
million and $
982
million for the first 26 weeks of fiscal 2025 and 2024, respectively.
A summary of the components of other comprehensive
income (loss) and the related tax effects for each of the periods presented is as follows:
| 13-Week Period Ended Dec. 28, 2024 | |||||||||||||||||||||||
|
Location of
Expense (Income) Recognized in Net Earnings |
Before Tax
Amount |
Tax |
Net of Tax
Amount |
||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Foreign currency translation: | |||||||||||||||||||||||
| Foreign currency translation adjustment | N/A | $ |
(
|
$ |
|
$ |
(
|
||||||||||||||||
|
Currency translation adjustment as a result of
disposition of a foreign subsidiary |
Operating expense |
|
|
|
|||||||||||||||||||
| Hedging instruments: | |||||||||||||||||||||||
| Other comprehensive income (loss) before reclassification adjustments: | |||||||||||||||||||||||
|
Change in excluded component of fair value
hedge |
Other expense, net |
(
|
|
(
|
|||||||||||||||||||
| Change in cash flow hedges |
Operating expenses
(1)
|
|
|
|
|||||||||||||||||||
| Change in net investment hedges | N/A |
|
|
|
|||||||||||||||||||
| Total other comprehensive income before reclassification adjustments |
|
|
|
||||||||||||||||||||
| Reclassification adjustments: | |||||||||||||||||||||||
| Amortization of cash flow hedges | Interest expense |
|
|
|
|||||||||||||||||||
| Pension and other postretirement benefit plans: | |||||||||||||||||||||||
| Reclassification adjustments: | |||||||||||||||||||||||
| Amortization of actuarial loss, net | Other expense, net |
|
|
|
|||||||||||||||||||
| Total reclassification adjustments |
|
|
|
||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
|
Change in marketable securities
(2)
|
N/A |
(
|
(
|
(
|
|||||||||||||||||||
| Total other comprehensive income (loss) | $ |
(
|
$ |
|
$ |
(
|
|||||||||||||||||
|
(1)
|
Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.
|
||||
|
(2)
|
Realized gains or losses on marketa
ble securities are presented within other (income) expense, net in the consolidated results of operations; however, there were
no
significant gains or losses realized in the second
quarter
of fiscal 2025.
|
||||
18
| 13-Week Period Ended Dec. 30, 2023 | |||||||||||||||||||||||
|
Location of
Expense (Income) Recognized in Net Earnings |
Before Tax
Amount |
Tax |
Net of Tax
Amount |
||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Foreign currency translation: | |||||||||||||||||||||||
| Foreign currency translation adjustment | N/A | $ |
|
$ |
|
$ |
|
||||||||||||||||
| Hedging instruments: | |||||||||||||||||||||||
| Other comprehensive income before reclassification adjustments: | |||||||||||||||||||||||
| Change in cash flow hedges |
Operating expenses
(1)
|
(
|
(
|
(
|
|||||||||||||||||||
| Change in net investment hedges | N/A |
(
|
(
|
(
|
|||||||||||||||||||
| Total other comprehensive (loss) before reclassification adjustments |
(
|
(
|
(
|
||||||||||||||||||||
| Reclassification adjustments: | |||||||||||||||||||||||
| Amortization of cash flow hedges | Interest expense |
|
|
|
|||||||||||||||||||
| Pension and other postretirement benefit plans: | |||||||||||||||||||||||
| Reclassification adjustments: | |||||||||||||||||||||||
| Amortization of actuarial loss, net | Other expense, net |
|
|
|
|||||||||||||||||||
| Total reclassification adjustments |
|
|
|
||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
|
Change in marketable securities
(2)
|
N/A |
|
|
|
|||||||||||||||||||
| Total other comprehensive income (loss) | $ |
|
$ |
(
|
$ |
|
|||||||||||||||||
|
(1)
|
Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.
|
||||
|
(2)
|
Realized gains or losses on marketable securities are presented within other (income) expense, net in the consolidated results of operations; however, there were no significant gains or losses realized in the second quarter of fiscal 2024.
|
||||
19
| 26-Week Period Ended Dec. 28, 2024 | |||||||||||||||||||||||
|
Location of
Expense (Income) Recognized in Net Earnings |
Before Tax
Amount |
Tax |
Net of Tax
Amount |
||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Foreign currency translation: | |||||||||||||||||||||||
| Foreign currency translation adjustment | N/A | $ |
(
|
$ |
|
$ |
(
|
||||||||||||||||
|
Currency translation adjustment as a result of
disposition of a foreign subsidiary |
Operating expense |
|
|
|
|||||||||||||||||||
| Hedging instruments: | |||||||||||||||||||||||
| Other comprehensive income (loss) before reclassification adjustments: | |||||||||||||||||||||||
|
Change in excluded component of fair value
hedge |
Other expense, net |
(
|
|
(
|
|||||||||||||||||||
| Change in cash flow hedges |
Operating expenses
(1)
|
(
|
(
|
(
|
|||||||||||||||||||
| Change in net investment hedges | N/A |
|
|
|
|||||||||||||||||||
| Total other comprehensive (loss) before reclassification adjustments |
(
|
(
|
(
|
||||||||||||||||||||
| Reclassification adjustments: | |||||||||||||||||||||||
| Amortization of cash flow hedges | Interest expense |
|
|
|
|||||||||||||||||||
| Pension and other postretirement benefit plans: | |||||||||||||||||||||||
| Other comprehensive income before reclassification adjustments: | |||||||||||||||||||||||
| Net actuarial gain arising in the current year |
|
|
|
||||||||||||||||||||
| Reclassification adjustments: | |||||||||||||||||||||||
| Amortization of actuarial loss, net | Other expense, net |
|
|
|
|||||||||||||||||||
| Total reclassification adjustments |
|
|
|
||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
|
Change in marketable securities
(2)
|
N/A |
|
|
|
|||||||||||||||||||
| Total other comprehensive income (loss) | $ |
(
|
$ |
|
$ |
(
|
|||||||||||||||||
|
(1)
|
Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.
|
||||
|
(2)
|
Realized gains or losses on marketable securities are presented within other (income) expense, net in the consolidated results of operations; however, there were no significant gains or losses realized in the first 26 weeks of fiscal 2025.
|
||||
20
| 26-Week Period Ended Dec. 30, 2023 | |||||||||||||||||||||||
|
Location of
Expense (Income) Recognized in Net Earnings |
Before Tax
Amount |
Tax |
Net of Tax
Amount |
||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Foreign currency translation: | |||||||||||||||||||||||
| Foreign currency translation adjustment | N/A | $ |
|
$ |
|
$ |
|
||||||||||||||||
| Hedging instruments: | |||||||||||||||||||||||
| Other comprehensive (loss) before reclassification adjustments: | |||||||||||||||||||||||
| Change in cash flow hedges |
Operating expenses
(1)
|
|
|
|
|||||||||||||||||||
| Change in net investment hedges | N/A |
(
|
(
|
(
|
|||||||||||||||||||
| Total other comprehensive (loss) before reclassification adjustments |
(
|
(
|
(
|
||||||||||||||||||||
| Reclassification adjustments: | |||||||||||||||||||||||
| Amortization of cash flow hedges | Interest expense |
|
|
|
|||||||||||||||||||
| Pension and other postretirement benefit plans: | |||||||||||||||||||||||
| Other comprehensive income before reclassification adjustments: | |||||||||||||||||||||||
| Net actuarial gain arising in the current year |
|
|
|
||||||||||||||||||||
| Reclassification adjustments: | |||||||||||||||||||||||
| Amortization of actuarial loss, net | Other expense, net |
|
|
|
|||||||||||||||||||
| Total reclassification adjustments |
|
|
|
||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||
|
Change in marketable securities
(2)
|
N/A |
|
|
|
|||||||||||||||||||
| Total other comprehensive income | $ |
|
$ |
|
$ |
|
|||||||||||||||||
|
(1)
|
Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.
|
||||
|
(2)
|
Realized gains or losses on marketable securities are presented within other (income) expense, net in the consolidated results of operations; however, there were no significant gains or losses realized in the first 26 weeks of fiscal 2024.
|
||||
21
The following tables provide a summary of the changes in accumulated other comprehensive
(loss) income f
or the periods presented:
| 13-Week Period Ended Dec. 28, 2024 | |||||||||||||||||||||||||||||
| Foreign Currency Translation |
Hedging,
net of tax |
Pension and Other Postretirement Benefit Plans,
net of tax |
Marketable Securities, net of tax | Total | |||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Balance as of Sep. 28, 2024 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||||||
| Equity adjustment from foreign currency translation |
(
|
— | — | — |
(
|
||||||||||||||||||||||||
| Currency translation adjustment as a result of disposition of a foreign subsidiary |
|
— | — | — |
|
||||||||||||||||||||||||
| Amortization of cash flow hedges | — |
|
— | — |
|
||||||||||||||||||||||||
| Change in net investment hedges | — |
|
— | — |
|
||||||||||||||||||||||||
| Change in cash flow hedges | — |
|
— | — |
|
||||||||||||||||||||||||
| Change in excluded component of fair value hedge | — |
(
|
— | — |
(
|
||||||||||||||||||||||||
| Amortization of unrecognized net actuarial losses | — | — |
|
— |
|
||||||||||||||||||||||||
| Change in marketable securities | — | — | — |
(
|
(
|
||||||||||||||||||||||||
| Balance as of Dec. 28, 2024 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||||||
| 13-Week Period Ended Dec. 30, 2023 | |||||||||||||||||||||||||||||
| Foreign Currency Translation |
Hedging,
net of tax |
Pension and Other Postretirement Benefit Plans,
net of tax |
Marketable Securities, net of tax | Total | |||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Balance as of Sep. 30, 2023 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||||||
| Equity adjustment from foreign currency translation |
|
— | — | — |
|
||||||||||||||||||||||||
| Amortization of cash flow hedges | — |
|
— | — |
|
||||||||||||||||||||||||
| Change in net investment hedges | — |
(
|
— | — |
(
|
||||||||||||||||||||||||
| Change in cash flow hedges | — |
(
|
— | — |
(
|
||||||||||||||||||||||||
| Amortization of unrecognized prior service cost | — | — |
|
— |
|
||||||||||||||||||||||||
| Amortization of unrecognized net actuarial losses | — | — |
|
— |
|
||||||||||||||||||||||||
| Change in marketable securities | — | — | — |
|
|
||||||||||||||||||||||||
| Balance as of Dec. 30, 2023 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||||||
22
| 26-Week Period Ended Dec. 28, 2024 | |||||||||||||||||||||||||||||
| Foreign Currency Translation |
Hedging,
net of tax |
Pension and Other Postretirement Benefit Plans,
net of tax |
Marketable Securities,
net of tax |
Total | |||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Balance as of Jun. 29, 2024 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||||||
| Equity adjustment from foreign currency translation |
(
|
— | — | — |
(
|
||||||||||||||||||||||||
| Currency translation adjustment as a result of disposition of a foreign subsidiary |
|
— | — | — |
|
||||||||||||||||||||||||
| Amortization of cash flow hedges | — |
|
— | — |
|
||||||||||||||||||||||||
| Change in net investment hedges | — |
|
— | — |
|
||||||||||||||||||||||||
| Change in cash flow hedges | — |
(
|
— | — |
(
|
||||||||||||||||||||||||
| Change in excluded component of fair value hedge | — |
(
|
— | — |
(
|
||||||||||||||||||||||||
| Amortization of unrecognized net actuarial losses | — | — |
|
— |
|
||||||||||||||||||||||||
| Net actuarial gain arising in the current year | — | — |
|
— |
|
||||||||||||||||||||||||
| Change in marketable securities | — | — | — |
|
|
||||||||||||||||||||||||
| Balance as of Dec. 28, 2024 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||||||
| 26-Week Period Ended Dec. 30, 2023 | |||||||||||||||||||||||||||||
| Foreign Currency Translation |
Hedging,
net of tax |
Pension and Other Postretirement Benefit Plans,
net of tax |
Marketable Securities, net of tax | Total | |||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
| Balance as of Jul. 1, 2023 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||||||
| Equity adjustment from foreign currency translation |
|
— | — | — |
|
||||||||||||||||||||||||
| Amortization of cash flow hedges | — |
|
— | — |
|
||||||||||||||||||||||||
| Change in net investment hedges | — |
(
|
— | — |
(
|
||||||||||||||||||||||||
| Change in cash flow hedges | — |
|
— | — |
|
||||||||||||||||||||||||
| Amortization of unrecognized net actuarial losses | — | — |
|
— |
|
||||||||||||||||||||||||
| Net actuarial gain arising in the current year | — | — |
|
— |
|
||||||||||||||||||||||||
| Change in marketable securities | — | — | — |
|
|
||||||||||||||||||||||||
| Balance as of Dec. 30, 2023 | $ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
$ |
(
|
|||||||||||||||||||
10.
SHARE-BASED COMPENSATION
Sysco provides compensation benefits to employees under several share-based payment arrangements, including various long-term employee stock incentive plans and the 2015 Employee Stock Purchase Plan (ESPP).
Stock Incentive Plans
In the first 26 weeks of fiscal 2025, options to purchase
733,352
shares were granted to employees. The fair value of each option award is estimated as of the date of grant using a Black-Scholes option pricing model. The weighted average grant-date fair value per option granted during the first 26 weeks of fiscal 2025 was $
18.50
.
23
In the first 26 weeks of fiscal 2025, employees were granted
466,716
performance share units (PSUs). Based on the jurisdiction in which the employee resides, some of these PSUs were granted with forfeitable dividend equivalents. The fair value of each PSU award granted with a dividend equivalent is based on the company’s stock price as of the date of grant. For PSUs granted without dividend equivalents, the fair value was reduced by the present value of expected dividends during the vesting period. The weighted average grant-date fair value per PSU granted during the first 26 weeks of fiscal 2025 was $
82.63
. The PSUs will convert into shares of Sysco’s common stock at the end of the
three-year
performance period based on actual performance targets achieved, as well as the market-based return of Sysco’s common stock relative to that of each company within the S&P 500 index.
In the first 26 weeks of fiscal 2025, employees were granted
353,552
restricted stock units. The weighted average grant-date fair value per restricted stock unit granted during the first 26 weeks of fiscal 2025 was $
75.96
.
Employee Stock Purchase Plan
Plan participants purchased
537,998
shares of common stock under the ESPP during the first 26 weeks of fiscal 2025. The weighted average fair value per employee stock purchase right issued pursuant to the ESPP was $
11.60
during the first 26 weeks of fiscal 2025. The fair value of each stock purchase right is estimated as the difference between the stock price at the date of issuance and the employee purchase price.
All Share-Based Payment Arrangements
The total share-based compensation cost that has been recognized in results of operations was $
60
million and $
53
million for the first 26 weeks of fiscal 2025 and fiscal 2024, respectively.
As of December 28, 2024, there was a total of $
152
million of unrecognized compensation cost related to share-based compensation arrangements. This cost is expected to be recognized over a weighted-average period of
1.93
years.
11.
INCOME TAXES
Effective Tax Rate
The effective tax rate for both the second quarter and first 26 weeks of fiscal 2025 was
23.8
%, which is higher than the company’s 21.0% statutory tax rate primarily as a result of state income taxes, partially offset by a foreign income tax benefit and equity-based compensation excess tax benefits.
The effective tax rates for the second quarter and first 26 weeks of fiscal 2024 were
23.8
% and
23.9
%, respectively, which are higher than the company’s statutory tax rate primarily as a result of state income taxes, partially offset by a foreign income tax benefit and equity-based compensation excess tax benefits.
Uncertain Tax Positions
As of December 28, 2024, the gross amount of unrecognized tax benefit and related accrued interest was $
35
million and $
13
million, respectively. It is reasonably possible the amount of the unrecognized tax benefit with respect to certain unrecognized tax positions of the company will increase or decrease in the next 12 months. At this time, an estimate of the range of the reasonably possible change cannot be made.
During the third quarter of fiscal 2023, Sysco received a Statutory Notice of Deficiency from the Internal Revenue Service, mainly related to foreign tax credits generated in fiscal 2018 from repatriated earnings primarily from our Canadian operations. In the fourth quarter of fiscal 2023, the company filed suit in the U.S. Tax Court challenging the validity of certain tax regulations related to the one-time transition tax on unrepatriated foreign earnings, which were enacted as part of the Tax Cuts and Jobs Act of 2017 (TCJA). The lawsuit seeks to have the court invalidate these regulations, which would affirm the company’s position regarding its foreign tax credits. Sysco has previously recorded a benefit of $
131
million attributable to its interpretation of the TCJA and the Internal Revenue Code. If we are ultimately unsuccessful in defending our position, we may be required to reverse all, or some portion, of the benefit previously recorded.
24
Other
On October 8, 2021, the Organization for Economic Co-operation and Development (OECD) announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which provides for a two-pillar solution to address tax challenges arising from the digitalization of the economy. Pillar One expands a country’s authority to tax profits from companies that make sales into their country but do not have a physical location in the country. Pillar Two includes an agreement on international tax reform, including rules to ensure that large corporations pay a minimum rate of corporate income tax. On December 20, 2021, the OECD released Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large corporations at a minimum rate of 15%. Pillar Two became effective for Sysco at the beginning of fiscal 2025.
The determination of our provision for income taxes requires judgment, the use of estimates and the interpretation and application of complex tax laws. Our provision for income taxes reflects income earned and taxed in the various U.S. federal and state, as well as foreign jurisdictions. Tax law changes, increases or decreases in permanent book versus tax basis differences, accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances, and our change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.
12.
COMMITMENTS AND CONTINGENCIES
Legal Proceedings
Sysco is engaged in various legal proceedings that have arisen but have not been fully adjudicated. The likelihood of loss for these legal proceedings, based on definitions within contingency accounting literature, ranges from remote to reasonably possible to probable. When probable and reasonably estimable, the losses have been accrued. Although the final results of legal proceedings cannot be predicted with certainty, based on estimates of the range of potential losses associated with these matters, management does not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect upon the consolidated financial position or results of operations of the company.
13.
BUSINESS SEGMENT INFORMATION
Sysco distributes food and related products to restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers. Our primary operations are located in North America and Europe. Under the accounting provisions related to disclosures about segments of an enterprise, we have aggregated certain operating segments into
three
reportable segments. “Other” financial information is attributable to our other operating segments that do not meet the quantitative disclosure thresholds.
•
U.S. Foodservice Operations
– primarily includes (a) our U.S. Broadline operations, which distribute a full line of food products, including custom-cut meat, seafood, produce, specialty Italian, specialty imports and a wide variety of non-food products and (b) our U.S. 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 and Sons, Inc., our Edward Don restaurant equipment and supplies distribution business, our Asian specialty distribution company and a number of other small specialty businesses that are not material to our operations;
•
International Foodservice Operations
– includes operations outside of the U.S., which distribute a full line of food products and a wide variety of non-food products. The Americas primarily consists of operations in Canada, Bahamas, Costa Rica and Panama, as well as our export operations that distribute to international customers. Our European operations primarily consist of operations in the United Kingdom, France, Ireland and Sweden;
•
SYGMA
– our U.S. customized distribution operations serving quick-service chain restaurant customer locations; and
•
Other
– primarily our hotel supply operations, Guest Worldwide.
The accounting policies for the segments are the same as those disclosed by Sysco for its consolidated financial statements. Our Global Support Center generally includes all expenses of the corporate office and Sysco’s shared service operations. These also include all U.S. share-based compensation costs.
25
The following tables set forth certain financial information for Sysco’s reportable business segments:
| 13-Week Period Ended | 26-Week Period Ended | ||||||||||||||||||||||
| Dec. 28, 2024 | Dec. 30, 2023 | Dec. 28, 2024 | Dec. 30, 2023 | ||||||||||||||||||||
| Sales: | (In millions) | (In millions) | |||||||||||||||||||||
| U.S. Foodservice Operations | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| International Foodservice Operations |
|
|
|
|
|||||||||||||||||||
| SYGMA |
|
|
|
|
|||||||||||||||||||
| Other |
|
|
|
|
|||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| 13-Week Period Ended | 26-Week Period Ended | ||||||||||||||||||||||
| Dec. 28, 2024 | Dec. 30, 2023 | Dec. 28, 2024 | Dec. 30, 2023 | ||||||||||||||||||||
| Operating income (loss): | (In millions) | (In millions) | |||||||||||||||||||||
| U.S. Foodservice Operations | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| International Foodservice Operations |
|
|
|
|
|||||||||||||||||||
| SYGMA |
|
|
|
|
|||||||||||||||||||
| Other |
|
|
|
|
|||||||||||||||||||
| Total segments |
|
|
|
|
|||||||||||||||||||
| Global Support Center |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Total operating income |
|
|
|
|
|||||||||||||||||||
| Interest expense |
|
|
|
|
|||||||||||||||||||
| Other expense, net |
|
|
|
|
|||||||||||||||||||
| Earnings before income taxes | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
26
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion should be read in conjunction with our consolidated financial statements as of June 29, 2024, and for the fiscal year then ended, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, both contained in our Annual Report on Form 10-K for the fiscal year ended June 29, 2024 (our “fiscal 2024 Form 10-K”), as well as the consolidated financial statements (unaudited) and notes to the consolidated financial statements (unaudited) contained in this report.
Highlights
Our second quarter of fiscal 2025 results included sales growth of 4.5% as compared to the second quarter of fiscal 2024 primarily due to U.S. Foodservice Operations volume growth and moderate inflation. Our gross profit grew 3.9% compared to the second quarter of fiscal 2024, due to volume growth and the effective management of product inflation. Operating income increased 1.7% as compared to the second quarter of fiscal 2024. Adjusted operating income increased 5.1% as compared to the second quarter of fiscal 2024 primarily due to continued positive momentum within our International Foodservice Operations. Our net earnings for the second quarter of fiscal 2025 decreased by $9 million as compared to the second quarter of fiscal 2024 due to increased restructuring and transformational project costs and acquisition-related costs. We consider these “Certain Item” expenses (as defined below). Excluding Certain Item expenses, adjusted net earnings increased by $9 million. See below for a comparison of our fiscal 2025 results to our fiscal 2024 results, both including and excluding Certain Items.
Comparisons of results from the second quarter of fiscal 2025 to the second quarter of fiscal 2024 are presented below:
•
Sales:
◦
increased 4.5%, or $863 million, to $20.2 billion;
•
Operating income:
◦
increased 1.7%, or $12 million, to $712 million;
◦
adjusted operating income increased 5.1%, or $38 million, to $783 million;
•
Net earnings:
◦
decreased 2.2%, or $9 million, to $406 million;
◦
adjusted net earnings increased 2.0%, or $9 million, to $458 million;
•
Basic earnings per share:
◦
increased 1.2%, or $0.01, to $0.83 per share;
•
Diluted earnings per share:
◦
unchanged, at $0.82 per share;
◦
adjusted diluted earnings per share increased 4.5%, or $0.04, to $0.93;
•
EBITDA:
◦
increased 1.9%, or $17 million, to $931 million; and
◦
adjusted EBITDA increased 4.4%, or $41 million, to $969 million.
Comparisons of results from the first 26 weeks of fiscal 2025 to the first 26 weeks of fiscal 2024 are presented below:
•
Sales:
◦
increased 4.4%, or $1.7 billion, to $40.6 billion;
•
Operating income:
◦
increased 1.0%, or $15 million, to $1.5 billion;
◦
adjusted operating income increased 3.5%, or $56 million, to $1.7 billion;
•
Net earnings:
◦
decreased 2.5%, or $23 million, to $896 million;
◦
adjusted net earnings increased 0.6%, or $6 million, to $997 million;
•
Basic earnings per share:
◦
unchanged, at $1.82 per share;
•
Diluted earnings per share:
◦
increased 0.6%, or $0.01, to $1.82 per share; and
◦
adjusted diluted earnings per share increased 3.1%, or $0.06, to $2.02;
•
EBITDA:
◦
increased 2.6%, or $50 million, to $2.0 billion; and
◦
adjusted EBITDA increased 4.4%, or $85 million, to $2.0 billion.
27
The discussion of our results includes certain non-GAAP financial measures, including EBITDA and adjusted EBITDA, that we believe provide important perspective with respect to underlying business trends. Other than EBITDA and free cash flow, any non-GAAP financial measures will be denoted as adjusted measures to remove: (1) restructuring charges; (2) expenses associated with our various transformation initiatives; (3) severance charges; and (4) acquisition-related costs consisting of (a) intangible amortization expense and (b) acquisition costs and due diligence costs related to our acquisitions.
The fiscal 2025 and fiscal 2024 items discussed above are collectively referred to as “Certain Items.” The results of our operations can be impacted by changes in exchange rates applicable to converting from local currencies to U.S. dollars. We measure our results on a constant currency basis.
Trends
Economic and Industry Trends
Foot traffic to restaurants decreased approximately 2% for the second quarter of fiscal 2025, which represents a moderate improvement compared to the decrease of 3.6% experienced in the first quarter of fiscal 2025. We expect to see continued improvements in foot traffic trends in the second half of fiscal 2025. Despite the current macroeconomic landscape, we expect to grow both sales and net earnings in fiscal 2025. We believe the food-away-from-home sector is a healthy long-term growth market, and Sysco is diversified and well positioned as a market leader in food service.
Sales and Gross Profit Trends
Our sales and gross profit performance are influenced by multiple factors, including price, volume, inflation, customer mix and product mix. We experienced a 1.4% and 2.1% improvement in U.S. Foodservice Operations case volume in the second quarter and first 26 weeks of fiscal 2025, respectively, as compared to the second quarter and first 26 weeks of fiscal 2024. Our volume growth was primarily attributable to national volume growth of 4.3% and 4.9% in the second quarter and first 26 weeks of fiscal 2025, respectively, as compared to the second quarter and first 26 weeks of fiscal 2024. Our volume reflects our broadline and specialty businesses, except for our specialty meats business, which measures its volume in pounds.
We experienced inflation at a rate of 2.1% in the second quarter of fiscal 2025, at the total enterprise level, primarily driven by inflation in the dairy and poultry categories. We continued to be successful in managing this inflation, resulting in an increase in gross profit dollars. Gross margin decreased 11 and 18 basis points in the second quarter and first 26 weeks of fiscal 2025, respectively, as compared to the second quarter and first 26 weeks of fiscal 2024, primarily due to a shift in our customer mix driven by national volume growth, a decrease in Sysco brand penetration, and the timing of benefits from strategic sourcing initiatives.
Operating Expense Trends
Total operating expenses increased 4.4% and 4.0% during the second quarter and first 26 weeks of fiscal 2025, respectively, as compared to the second quarter and first 26 weeks of fiscal 2024. Total adjusted operating expenses increased 3.5% and 3.3% during the second quarter and first 26 weeks of fiscal 2025, respectively, as compared to the second quarter and first 26 weeks of fiscal 2024. Operating expenses increased primarily due to an increase in volumes. In addition, higher pay-related expenses, which includes investments in our business, including sales professionals, and depreciation expense related to new facilities also resulted in an increase in operating expenses in the second quarter and first 26 weeks of fiscal 2025. Adjusted operating expenses were 14.2% of sales during both the second quarter and first 26 weeks of fiscal 2025, which is a 13-basis point and 15-basis point improvement from the second quarter and first 26 weeks of fiscal 2024, respectively, due to supply chain and Global Support Center efficiencies and gains from sale leaseback transactions.
Divestitures
In the second quarter of fiscal 2025, we sold our interest in our joint venture partnership in Mexico, which was a part of our International Foodservice Operations. This operation was not significant to Sysco’s business, and the divestiture will facilitate our efforts to improve our return on invested capital position.
Mergers and Acquisitions
In the second quarter of fiscal 2025, we acquired Campbells Prime Meat, a leading specialty meat business based in Scotland. By combining the Campbells Prime Meat product offering with our broadline business, this acquisition provides a
28
strategic opportunity to enable total team selling in this region. This company’s results are included within International Foodservice Operations and were not material to our results for the second quarter and first 26 weeks of fiscal 2025.
Strategy
Our purpose is “Connecting the World to Share Food and Care for One Another.” Purpose-driven companies are believed to perform better. We believe our purpose will assist us to grow substantially faster than the foodservice distribution industry and deliver profitable growth through our Recipe for Growth transformation. This growth transformation is supported by strategic pillars that we believe will allow us to better serve our customers, including our digital, products and solutions, supply chain, customer teams, and future horizons strategies.
Our business transformation initiatives are progressing, which include promoting our specialty programs for produce, protein and Italian products, and our customer growth initiatives. From these actions, as a part of our Recipe for Growth, the benefits of our developing capabilities are apparent in the new customers we are winning and in the progress we are making toward increasing market share. We expect that, as our Recipe for Growth matures, the impact on our top-line growth will deliver profitable and consistent growth.
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:
| 13-Week Period Ended | 26-Week Period Ended | ||||||||||||||||||||||
| Dec. 28, 2024 | Dec. 30, 2023 | Dec. 28, 2024 | Dec. 30, 2023 | ||||||||||||||||||||
| Sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| Cost of sales | 81.9 | 81.8 | 81.8 | 81.6 | |||||||||||||||||||
| Gross profit | 18.1 | 18.2 | 18.2 | 18.4 | |||||||||||||||||||
| Operating expenses | 14.6 | 14.6 | 14.5 | 14.5 | |||||||||||||||||||
| Operating income | 3.5 | 3.6 | 3.7 | 3.9 | |||||||||||||||||||
| Interest expense | 0.8 | 0.8 | 0.8 | 0.8 | |||||||||||||||||||
| Other expense (income), net | 0.1 | — | — | — | |||||||||||||||||||
| Earnings before income taxes | 2.6 | 2.8 | 2.9 | 3.1 | |||||||||||||||||||
| Income taxes | 0.6 | 0.6 | 0.7 | 0.7 | |||||||||||||||||||
| Net earnings | 2.0 | % | 2.2 | % | 2.2 | % | 2.4 | % | |||||||||||||||
29
The following table sets forth the change in the components of our consolidated results of operations expressed as a percentage increase or decrease over the comparable period in the prior year:
| 13-Week Period Ended | 26-Week Period Ended | ||||||||||
| Dec. 28, 2024 | Dec. 28, 2024 | ||||||||||
| Sales | 4.5 | % | 4.4 | % | |||||||
| Cost of sales | 4.6 | 4.7 | |||||||||
| Gross profit | 3.9 | 3.4 | |||||||||
| Operating expenses | 4.4 | 4.0 | |||||||||
| Operating income | 1.7 | 1.0 | |||||||||
| Interest expense | 6.7 | 12.3 | |||||||||
|
Other expense (income), net
(1) (2)
|
280.0 | 108.3 | |||||||||
| Earnings before income taxes | (2.2) | (2.7) | |||||||||
| Income taxes | (2.3) | (3.5) | |||||||||
| Net earnings | (2.2) | % | (2.5) | % | |||||||
| Basic earnings per share | 1.2 | % | — | % | |||||||
| Diluted earnings per share | — | 0.6 | |||||||||
| Average shares outstanding | (2.7) | (2.6) | |||||||||
| Diluted shares outstanding | (2.6) | (2.6) | |||||||||
|
(1)
|
Other expense (income), net was expense of $19 million and $5 million in the second quarter of fiscal 2025 and fiscal 2024, respectively.
|
||||
|
(2)
|
Other expense (income), net was expense of $25 million and $12 million in the first 26 weeks of fiscal 2025 and fiscal 2024, respectively.
|
||||
The following tables represent our results by reportable segments:
| 13-Week Period Ended Dec. 28, 2024 | |||||||||||||||||||||||||||||||||||
| U.S. Foodservice Operations | International Foodservice Operations | SYGMA | Other | Global Support Center |
Consolidated
Totals |
||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||
| Sales | $ | 14,044 | $ | 3,728 | $ | 2,116 | $ | 263 | $ | — | $ | 20,151 | |||||||||||||||||||||||
| Sales increase (decrease) | 4.1 | % | 3.6 | % | 10.6 | % | (7.1) | % | 4.5 | % | |||||||||||||||||||||||||
| Percentage of total | 69.7 | % | 18.5 | % | 10.5 | % | 1.3 | % | 100.0 | % | |||||||||||||||||||||||||
| Operating income (loss) | $ | 834 | $ | 95 | $ | 19 | $ | 4 | $ | (240) | $ | 712 | |||||||||||||||||||||||
| Operating income (loss) increase (decrease) | (0.6) | % | 14.5 | % | 11.8 | % | (50.0) | % | (2.8) | % | 1.7 | % | |||||||||||||||||||||||
| Percentage of total segments | 87.6 | % | 10.0 | % | 2.0 | % | 0.4 | % | 100.0 | % | |||||||||||||||||||||||||
| Operating income as a percentage of sales | 5.9 | % | 2.5 | % | 0.9 | % | 1.5 | % | 3.5 | % | |||||||||||||||||||||||||
| 13-Week Period Ended Dec. 30, 2023 | |||||||||||||||||||||||||||||||||||
| U.S. Foodservice Operations | International Foodservice Operations | SYGMA | Other | Global Support Center |
Consolidated
Totals |
||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||
| Sales | $ | 13,494 | $ | 3,597 | $ | 1,914 | $ | 283 | $ | — | $ | 19,288 | |||||||||||||||||||||||
| Percentage of total | 70.0 | % | 18.6 | % | 9.9 | % | 1.5 | % | 100.0 | % | |||||||||||||||||||||||||
| Operating income (loss) | $ | 839 | $ | 83 | $ | 17 | $ | 8 | $ | (247) | $ | 700 | |||||||||||||||||||||||
| Percentage of total segments | 88.6 | % | 8.8 | % | 1.7 | % | 0.9 | % | 100.0 | % | |||||||||||||||||||||||||
| Operating income as a percentage of sales | 6.2 | % | 2.3 | % | 0.9 | % | 3.0 | % | 3.6 | % | |||||||||||||||||||||||||
30
| 26-Week Period Ended Dec. 28, 2024 | |||||||||||||||||||||||||||||||||||
| U.S. Foodservice Operations | International Foodservice Operations | SYGMA | Other | Global Support Center |
Consolidated
Totals |
||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||
| Sales | $ | 28,406 | $ | 7,521 | $ | 4,162 | $ | 545 | $ | — | $ | 40,634 | |||||||||||||||||||||||
| Sales increase (decrease) | 4.4 | % | 3.3 | % | 9.0 | % | (7.8) | % | 4.4 | % | |||||||||||||||||||||||||
| Percentage of total | 69.9 | % | 18.5 | % | 10.2 | % | 1.4 | % | 100.0 | % | |||||||||||||||||||||||||
| Operating income (loss) | $ | 1,742 | $ | 196 | $ | 37 | $ | 12 | $ | (468) | $ | 1,519 | |||||||||||||||||||||||
| Operating income (loss) increase (decrease) | (2.1) | % | 11.4 | % | 23.3 | % | (40.0) | % | (6.8) | % | 1.0 | % | |||||||||||||||||||||||
| Percentage of total segments | 87.6 | % | 9.9 | % | 1.9 | % | 0.6 | % | 100.0 | % | |||||||||||||||||||||||||
| Operating income as a percentage of sales | 6.1 | % | 2.6 | % | 0.9 | % | 2.2 | % | 3.7 | % | |||||||||||||||||||||||||
| 26-Week Period Ended Dec. 30, 2023 | |||||||||||||||||||||||||||||||||||
| U.S. Foodservice Operations | International Foodservice Operations | SYGMA | Other | Global Support Center |
Consolidated
Totals |
||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||
| Sales | $ | 27,218 | $ | 7,279 | $ | 3,820 | $ | 591 | $ | — | $ | 38,908 | |||||||||||||||||||||||
| Percentage of total | 70.0 | % | 18.7 | % | 9.8 | % | 1.5 | % | 100.0 | % | |||||||||||||||||||||||||
| Operating income (loss) | $ | 1,780 | $ | 176 | $ | 30 | $ | 20 | $ | (502) | $ | 1,504 | |||||||||||||||||||||||
| Percentage of total segments | 88.7 | % | 8.8 | % | 1.5 | % | 1.0 | % | 100.0 | % | |||||||||||||||||||||||||
| Operating income as a percentage of sales | 6.5 | % | 2.4 | % | 0.8 | % | 3.4 | % | 3.9 | % | |||||||||||||||||||||||||
Based on information in Note 13, “Business Segment Information,” in the Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q, U.S. Foodservice Operations and International Foodservice Operations, collectively, represented approximately 88.2% and 88.4% of Sysco’s overall sales in the second quarter and first 26 weeks of fiscal 2025, respectively. U.S. Foodservice Operations and International Foodservice Operations, collectively, represented approximately 97.6% and 97.5% of total segment operating income, in the second quarter and first 26 weeks of fiscal 2025, respectively. This illustrates that these segments represent a substantial majority of our total segment results when compared to other reportable segments.
Results of U.S. Foodservice Operations
The following tables set forth a summary of the components of operating income expressed as a percentage increase or decrease over the comparable period in the prior year:
31
| 13-Week Period Ended Dec. 28, 2024 | 13-Week Period Ended Dec. 30, 2023 | Change in Dollars | % Change | ||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||
| Sales | $ | 14,044 | $ | 13,494 | $ | 550 | 4.1 | % | |||||||||||||||
| Gross profit | 2,654 | 2,578 | 76 | 2.9 | |||||||||||||||||||
| Operating expenses | 1,820 | 1,739 | 81 | 4.7 | |||||||||||||||||||
| Operating income | $ | 834 | $ | 839 | $ | (5) | (0.6) | % | |||||||||||||||
| Gross profit | $ | 2,654 | $ | 2,578 | $ | 76 | 2.9 | % | |||||||||||||||
| Adjusted operating expenses (Non-GAAP) | 1,795 | 1,727 | 68 | 3.9 | |||||||||||||||||||
| Adjusted operating income (Non-GAAP) | $ | 859 | $ | 851 | $ | 8 | 0.9 | % | |||||||||||||||
| 26-Week Period Ended Dec. 28, 2024 | 26-Week Period Ended Dec. 30, 2023 | Change in Dollars | % Change | ||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||
| Sales | $ | 28,406 | $ | 27,218 | $ | 1,188 | 4.4 | % | |||||||||||||||
| Gross profit | 5,401 | 5,262 | 139 | 2.6 | |||||||||||||||||||
| Operating expenses | 3,659 | 3,482 | 177 | 5.1 | |||||||||||||||||||
| Operating income | $ | 1,742 | $ | 1,780 | $ | (38) | (2.1) | % | |||||||||||||||
| Gross profit | $ | 5,401 | $ | 5,262 | $ | 139 | 2.6 | % | |||||||||||||||
| Adjusted operating expenses (Non-GAAP) | 3,616 | 3,458 | 158 | 4.6 | |||||||||||||||||||
| Adjusted operating income (Non-GAAP) | $ | 1,785 | $ | 1,804 | $ | (19) | (1.1) | % | |||||||||||||||
Sales
The following table sets forth the percentage and dollar value increase or decrease in the major factors impacting sales as compared to the corresponding prior year period in order to demonstrate the cause and magnitude of change:
| Increase (Decrease) | Increase (Decrease) | ||||||||||||||||||||||
| 13-Week Period | 26-Week Period | ||||||||||||||||||||||
| (Dollars in millions) | (Dollars in millions) | ||||||||||||||||||||||
| Cause of change | Percentage | Dollars | Percentage | Dollars | |||||||||||||||||||
|
Case volume
(1)
|
1.4 | % | $ | 195 | 1.8 | % | $ | 506 | |||||||||||||||
| Inflation | 2.7 | 363 | 2.6 | 708 | |||||||||||||||||||
|
Other
(2)
|
— | (8) | — | (26) | |||||||||||||||||||
| Total change in sales | 4.1 | % | $ | 550 | 4.4 | % | $ | 1,188 | |||||||||||||||
| (1) |
Case volumes increased 1.4% and 2.1% compared to the second quarter and first 26 weeks of fiscal 2024, respectively. This volume increase resulted in a 1.4% and 1.8% increase in the dollar value of sales compared to the second quarter and first 26 weeks of fiscal 2024, respectively.
|
||||
|
(2)
|
Case volume reflects our broadline and specialty businesses, with the exception of our specialty meats business, which measures its volume in pounds. Any impact in volumes from these operations are included within “Other.”
|
||||
The sales growth in our U.S. Foodservice Operations was driven by higher inflation and volume growth, inclusive of benefits from acquisitions. Case volumes from our U.S. Foodservice Operations increased 1.4% and 2.1% in the second quarter and first 26 weeks of fiscal 2025, respectively, as compared to the second quarter and first 26 weeks of fiscal 2024. This included a 0.9% decrease in local customer case volume in the second quarter of fiscal 2025 and a 0.3% decrease in the first 26 weeks of fiscal 2025. Our Edward Don acquisition, completed in the second quarter of fiscal 2024, positively impacted volumes by 1.6% and local volumes by 1.0% in the second quarter of fiscal 2025. Our national customer volume has grown faster than local customer volume and is the result of contract renewals with existing customers and the addition of new customers.
32
Operating Income
The decrease in operating income for the second quarter and first 26 weeks of fiscal 2025, respectively, as compared to the second quarter and first 26 weeks of fiscal 2024, was driven by an increase in operating expenses, partially offset by gross profit dollar growth and case volume growth, inclusive of benefits from acquisitions.
Gross profit dollar growth in the second quarter and first 26 weeks of fiscal 2025, as compared to the second quarter and first 26 weeks of fiscal 2024, was driven primarily by case volume growth as a result of acquisitions and effective management of product cost fluctuations. The estimated change in product costs, an internal measure of inflation or deflation, increased in the second quarter and first 26 weeks of fiscal 2025. Gross margin, which is gross profit as a percentage of sales, was 18.9% and 19.0% in the second quarter and first 26 weeks of fiscal 2025, respectively, for our U.S. Foodservice Operations, which was a decrease of 20 basis points compared to gross margin of 19.1% in the second quarter of fiscal 2024, and a decrease of 32 basis points compared to a gross margin of 19.3% in the first 26 weeks of fiscal 2024, primarily due to a change in customer mix, a decrease in Sysco brand penetration, and timing of benefits from strategic sourcing initiatives.
The increase in operating expenses for the second quarter and first 26 weeks of fiscal 2025, as compared to the second quarter and first 26 weeks of fiscal 2024, was primarily driven by increases in colleague-related costs and freight costs, which are largely correlated with the increase in volumes, depreciation expense, and bad debt expense, partially offset by gains related to sale leaseback transactions.
33
Results of International Foodservice Operations
The following table sets forth a summary of the components of operating income and adjusted operating income expressed as a percentage increase or decrease over the comparable period in the prior year:
| 13-Week Period Ended Dec. 28, 2024 | 13-Week Period Ended Dec. 30, 2023 | Change in Dollars | % Change | ||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||
| Sales | $ | 3,728 | $ | 3,597 | $ | 131 | 3.6 | % | |||||||||||||||
| Gross profit | 760 | 708 | 52 | 7.3 | |||||||||||||||||||
| Operating expenses | 665 | 625 | 40 | 6.4 | |||||||||||||||||||
| Operating income | $ | 95 | $ | 83 | $ | 12 | 14.5 | % | |||||||||||||||
| Gross profit | $ | 760 | $ | 708 | $ | 52 | 7.3 | % | |||||||||||||||
| Adjusted operating expenses (Non-GAAP) | 631 | 606 | 25 | 4.1 | |||||||||||||||||||
| Adjusted operating income (Non-GAAP) | $ | 129 | $ | 102 | $ | 27 | 26.5 | % | |||||||||||||||
| Sales on a constant currency basis (Non-GAAP) | $ | 3,748 | $ | 3,597 | $ | 151 | 4.2 | % | |||||||||||||||
| Gross profit on a constant currency basis (Non-GAAP) | 760 | 708 | 52 | 7.3 | |||||||||||||||||||
| Adjusted operating expenses on a constant currency basis (Non-GAAP) | 630 | 606 | 24 | 4.0 | |||||||||||||||||||
| Adjusted operating income on a constant currency basis (Non-GAAP) | $ | 130 | $ | 102 | $ | 28 | 27.5 | % | |||||||||||||||
| 26-Week Period Ended Dec. 28, 2024 | 26-Week Period Ended Dec. 30, 2023 | Change in Dollars | % Change | ||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||
| Sales | $ | 7,521 | $ | 7,279 | $ | 242 | 3.3 | % | |||||||||||||||
| Gross profit | 1,534 | 1,440 | 94 | 6.5 | |||||||||||||||||||
| Operating expenses | 1,338 | 1,264 | 74 | 5.9 | |||||||||||||||||||
| Operating income | $ | 196 | $ | 176 | $ | 20 | 11.4 | % | |||||||||||||||
| Gross profit | $ | 1,534 | $ | 1,440 | $ | 94 | 6.5 | % | |||||||||||||||
| Adjusted operating expenses (Non-GAAP) | 1,275 | 1,222 | 53 | 4.3 | |||||||||||||||||||
| Adjusted operating income (Non-GAAP) | $ | 259 | $ | 218 | $ | 41 | 18.8 | % | |||||||||||||||
| Sales on a constant currency basis (Non-GAAP) | $ | 7,536 | $ | 7,279 | $ | 257 | 3.5 | % | |||||||||||||||
| Gross profit on a constant currency basis (Non-GAAP) | 1,530 | 1,440 | 90 | 6.3 | |||||||||||||||||||
| Adjusted operating expenses on a constant currency basis (Non-GAAP) | 1,270 | 1,222 | 48 | 3.9 | |||||||||||||||||||
| Adjusted operating income on a constant currency basis (Non-GAAP) | $ | 260 | $ | 218 | $ | 42 | 19.3 | % | |||||||||||||||
34
Sales
The following tables set forth the percentage and dollar value increase or decrease in the major components impacting sales as compared to the corresponding prior year period in order to demonstrate the cause and magnitude of change.
| Increase (Decrease) | Increase (Decrease) | ||||||||||||||||||||||
| 13-Week Period | 26-Week Period | ||||||||||||||||||||||
| (Dollars in millions) | (Dollars in millions) | ||||||||||||||||||||||
| Cause of change | Percentage | Dollars | Percentage | Dollars | |||||||||||||||||||
| Inflation | 1.1 | % | $ | 39 | 1.1 | % | $ | 80 | |||||||||||||||
| Foreign currency | (0.6) | (20) | (0.2) | (15) | |||||||||||||||||||
|
Other
(1)
|
3.1 | 112 | 2.4 | 177 | |||||||||||||||||||
| Total change in sales | 3.6 | % | $ | 131 | 3.3 | % | $ | 242 | |||||||||||||||
|
(1)
|
The impact of volumes as a component of sales growth from international operations are included within “Other.”
|
||||
Sales for the second quarter and first 26 weeks of fiscal 2025 were higher, as compared to the second quarter and first 26 weeks of fiscal 2024, due to an improvement in volume and higher inflation.
Operating Income
The increase in operating income for the second quarter and first 26 weeks of fiscal 2025, as compared to the second quarter and first 26 weeks of fiscal 2024, was primarily due to growth in local case volumes, success in our strategic sourcing program, and positive contributions from our recent mergers and acquisitions efforts, partially offset by an increase in operating expenses.
The increase in gross profit dollars in the second quarter and first 26 weeks of fiscal 2025, as compared to the second quarter and first 26 weeks of fiscal 2024, was attributable to increases in sales volumes, success in our strategic sourcing program, and positive contributions from our recent mergers and acquisitions efforts.
The increase in operating expenses for the second quarter and first 26 weeks of fiscal 2025, as compared to the second quarter and first 26 weeks of fiscal 2024, was primarily driven by increases in colleague-related costs and freight costs, which are largely correlated with the increase in volumes, depreciation expense, and other miscellaneous costs.
Results of SYGMA and Other Segment
For SYGMA, sales were 10.6% and 9.0% higher in the second quarter and first 26 weeks of fiscal 2025, respectively, as compared to the second quarter and first 26 weeks of fiscal 2024, primarily driven by the growth of new customers. Operating income increased by $2 million and $7 million in the second quarter and first 26 weeks of fiscal 2025, respectively, as compared to the second quarter and first 26 weeks of fiscal 2024, primarily due to the growth of new customers and the improvement of profits from strengthening productivity.
For the operations that are grouped within Other, operating income decreased $4 million and $8 million in the second quarter and first 26 weeks of fiscal 2025, respectively, as compared to the second quarter and first 26 weeks of fiscal 2024. The operations of this group primarily consist of our hospitality business, Guest Worldwide.
Global Support Center Expenses
Our Global Support Center generally includes all expenses of the corporate office and Sysco’s shared service operations. These expenses in the second quarter of fiscal 2025 decreased $5 million, or 2.0%, as compared to the second quarter of fiscal 2024, primarily due to decreases in colleague-related costs, fuel hedging program expenses, and other miscellaneous costs. These expenses in the first 26 weeks of fiscal 2025 decreased $35 million, or 6.9%, as compared to the first 26 weeks of fiscal 2024, primarily due to decreases in colleague-related costs and fuel hedging program expenses.
35
Included in Global Support Center expenses are Certain Items that totaled $12 million and $30 million in the second quarter and first 26 weeks of fiscal 2025, as compared to $14 million and $29 million in the second quarter and first 26 weeks of fiscal 2024, respectively. Certain Items impacting the second quarter and first 26 of fiscal 2025 were primarily expenses associated with our business technology transformation initiatives and expenses associated with acquisitions. Certain Items impacting the second quarter and first 26 weeks of fiscal 2024 were primarily expenses associated with our business technology transformation initiatives and expenses associated with acquisitions.
Interest Expense
Interest expense increased $10 million and $35 million for the second quarter and first 26 weeks of fiscal 2025, respectively, as compared to the second quarter and first 26 weeks of fiscal 2024. The increase was primarily due to interest on new senior notes that were issued in the second quarter of fiscal 2024, as well as an increase in outstanding commercial paper balances.
Net Earnings
Net earnings decreased 2.2% and 2.5% in the second quarter and first 26 weeks of fiscal 2025, respectively, as compared to the second quarter and first 26 weeks of fiscal 2024, primarily due to the items noted above for operating income, and interest expense, as well as items impacting our income taxes that are discussed in Note 11, “Income Taxes,” in the Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q. Adjusted net earnings, excluding Certain Items, increased 2.0% and 0.6% in the second quarter and first 26 weeks of fiscal 2025, respectively, primarily due to an increase in sales volume.
Earnings Per Share
Basic earnings per share in the second quarter of fiscal 2025 were $0.83, a 1.2% increase from the comparable prior year period amount of $0.82 per share. Diluted earnings per share in the second quarter of fiscal 2025 were $0.82, which is unchanged from the comparable prior year period amount of $0.82 per share. Adjusted diluted earnings per share, excluding Certain Items, in the second quarter of fiscal 2025 were $0.93, a 4.5% increase from the comparable prior year amount of $0.89 per share.
Basic earnings per share in the first 26 weeks of fiscal 2025 were $1.82, which is unchanged from the comparable prior year amount of $1.82 per share. Diluted earnings per share in the first 26 weeks of fiscal 2025 were $1.82, a 0.6% increase from the comparable prior year period amount of $1.81 per share. Adjusted diluted earnings per share, excluding Certain Items, in the first 26 weeks of fiscal 2025 were $2.02, a 3.1% increase from the comparable prior year amount of $1.96 per share.
36
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. Other than EBITDA and free cash flow, any non-GAAP financial measures will be denoted as adjusted measures to remove: (1) restructuring charges; (2) expenses associated with our various transformation initiatives; (3) severance charges; and (4) acquisition-related costs consisting of (a) intangible amortization expense and (b) acquisition costs and due diligence costs related to our acquisitions.
|
||
| The results of our operations can be impacted due to changes in exchange rates applicable in converting local currencies to U.S. dollars. We measure our results on a constant currency basis. Constant currency operating results are calculated by translating current-period local currency operating results with the currency exchange rates used to translate the financial statements in the comparable prior-year period to determine what the current-period U.S. dollar operating results would have been if the currency exchange rate had not changed from the comparable prior-year period. | ||
| Management believes that adjusting its operating expenses, operating income, operating margin, net earnings and diluted earnings per share to remove these Certain Items and presenting its results on a constant currency basis provides an important perspective with respect to our underlying business trends and results. It provides meaningful supplemental information to both management and investors that (1) is indicative of the performance of the company’s underlying operations and (2) facilitates comparisons on a year-over-year basis. | ||
| Sysco has a history of growth through acquisitions and excludes from its non-GAAP financial measures the impact of acquisition-related intangible amortization, acquisition costs and due diligence costs for those acquisitions. We believe this approach significantly enhances the comparability of Sysco’s results for fiscal year 2025 and fiscal year 2024. | ||
| Set forth on the following page is a reconciliation of sales, operating expenses, operating income, net earnings and diluted earnings per share to adjusted results for these measures for the periods presented. Individual components of diluted earnings per share may not be equal to the total presented when added due to rounding. Adjusted diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding. | ||
| 13-Week Period Ended Dec. 28, 2024 | 13-Week Period Ended Dec. 30, 2023 | Change in Dollars | %/bps Change | ||||||||||||||||||||
| Sales (GAAP) | $ | 20,151 | $ | 19,288 | $ | 863 | 4.5 | % | |||||||||||||||
|
Impact of currency fluctuations
(1)
|
21 | 21 | 0.1 | ||||||||||||||||||||
| Comparable sales using a constant currency basis (Non-GAAP) | $ | 20,172 | $ | 19,288 | $ | 884 | 4.6 | % | |||||||||||||||
| Cost of sales (GAAP) | $ | 16,501 | $ | 15,774 | $ | 727 | 4.6 | % | |||||||||||||||
| Gross profit (GAAP) | $ | 3,650 | $ | 3,514 | $ | 136 | 3.9 | % | |||||||||||||||
|
Impact of currency fluctuations
(1)
|
1 | 1 | — | ||||||||||||||||||||
| Comparable gross profit adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | 3,651 | $ | 3,514 | $ | 137 | 3.9 | % | |||||||||||||||
| Gross margin (GAAP) | 18.11 | % | 18.22 | % | -11 bps | ||||||||||||||||||
|
Impact of currency fluctuations
(1)
|
(0.01) | -1 bp | |||||||||||||||||||||
| Comparable gross margin adjusted for Certain Items using a constant currency basis (Non-GAAP) | 18.10 | % | 18.22 | % | -12 bps | ||||||||||||||||||
| Operating expenses (GAAP) | $ | 2,938 | $ | 2,814 | $ | 124 | 4.4 | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(2)
|
(31) | (14) | (17) | NM | |||||||||||||||||||
|
Impact of acquisition-related costs
(3)
|
(40) | (31) | (9) | (29.0) | |||||||||||||||||||
| Operating expenses adjusted for Certain Items (Non-GAAP) | 2,867 | 2,769 | 98 | 3.5 | |||||||||||||||||||
|
Impact of currency fluctuations
(1)
|
(1) | (1) | — | ||||||||||||||||||||
| Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | 2,866 | $ | 2,769 | $ | 97 | 3.5 | % | |||||||||||||||
37
| 13-Week Period Ended Dec. 28, 2024 | 13-Week Period Ended Dec. 30, 2023 | Change in Dollars | %/bps Change | ||||||||||||||||||||
| Operating expense as a percentage of sales (GAAP) | 14.58 | % | 14.59 | % | -1 bp | ||||||||||||||||||
| Impact of certain item adjustments | (0.35) | (0.23) | -12 bps | ||||||||||||||||||||
| Adjusted operating expense as a percentage of sales (Non-GAAP) | 14.23 | % | 14.36 | % | -13 bps | ||||||||||||||||||
| Operating income (GAAP) | $ | 712 | $ | 700 | $ | 12 | 1.7 | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(2)
|
31 | 14 | 17 | NM | |||||||||||||||||||
|
Impact of acquisition-related costs
(3)
|
40 | 31 | 9 | 29.0 | |||||||||||||||||||
| Operating income adjusted for Certain Items (Non-GAAP) | 783 | 745 | 38 | 5.1 | |||||||||||||||||||
|
Impact of currency fluctuations
(1)
|
2 | 2 | 0.3 | ||||||||||||||||||||
| Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | 785 | $ | 745 | $ | 40 | 5.4 | % | |||||||||||||||
| Operating margin (GAAP) | 3.53 | % | 3.63 | % | -10 bps | ||||||||||||||||||
| Operating margin adjusted for Certain Items (Non-GAAP) | 3.89 | % | 3.86 | % | 3 bps | ||||||||||||||||||
| Operating margin adjusted for Certain Items using a constant currency basis (Non-GAAP) | 3.89 | % | 3.86 | % | 3 bps | ||||||||||||||||||
| Net earnings (GAAP) | $ | 406 | $ | 415 | $ | (9) | (2.2) | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(2)
|
31 | 14 | 17 | NM | |||||||||||||||||||
|
Impact of acquisition-related costs
(3)
|
40 | 31 | 9 | 29.0 | |||||||||||||||||||
|
Tax impact of restructuring and transformational project costs
(4)
|
(8) | (3) | (5) | NM | |||||||||||||||||||
|
Tax impact of acquisition-related costs
(4)
|
(11) | (8) | (3) | (37.5) | |||||||||||||||||||
| Net earnings adjusted for Certain Items (Non-GAAP) | $ | 458 | $ | 449 | $ | 9 | 2.0 | % | |||||||||||||||
| Diluted earnings per share (GAAP) | $ | 0.82 | $ | 0.82 | $ | — | — | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(2)
|
0.06 | 0.03 | 0.03 | 100.0 | |||||||||||||||||||
|
Impact of acquisition-related costs
(3)
|
0.08 | 0.06 | 0.02 | 33.3 | |||||||||||||||||||
|
Tax impact of restructuring and transformational project costs
(4)
|
(0.02) | (0.01) | (0.01) | (100.0) | |||||||||||||||||||
|
Tax impact of acquisition-related costs
(4)
|
(0.02) | (0.02) | — | — | |||||||||||||||||||
|
Diluted earnings per share adjusted for Certain Items (Non-GAAP)
(5)
|
$ | 0.93 | $ | 0.89 | $ | 0.04 | 4.5 | % | |||||||||||||||
|
(1)
|
Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on the current year results.
|
||||
|
(2)
|
Fiscal 2025 includes $12 million related to restructuring and severance charges and $19 million related to various transformation initiative costs, primarily consisting of supply chain transformation costs and changes to our business technology strategy. Fiscal 2024 includes $2 million related to restructuring and severance charges and $11 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy.
|
||||
|
(3)
|
Fiscal 2025 includes $32 million of intangible amortization expense and $8 million in acquisition and due diligence costs. Fiscal 2024 includes $29 million of intangible amortization expense and $2 million in acquisition and due diligence costs.
|
||||
|
(4)
|
The tax impact of adjustments for Certain Items are calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction where the Certain Item was incurred.
|
||||
|
(5)
|
Individual components of diluted earnings per share may not equal the total presented when added due to rounding. Total diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding. | ||||
| NM | Represents that the percentage change is not meaningful. | ||||
38
| 26-Week Period Ended Dec. 28, 2024 | 26-Week Period Ended Dec. 30, 2023 | Change in Dollars | %/bps Change | ||||||||||||||||||||
| Sales (GAAP) | $ | 40,634 | $ | 38,908 | $ | 1,726 | 4.4 | % | |||||||||||||||
|
Impact of currency fluctuations
(1)
|
16 | 16 | 0.1 | ||||||||||||||||||||
| Comparable sales using a constant currency basis (Non-GAAP) | $ | 40,650 | $ | 38,908 | $ | 1,742 | 4.5 | % | |||||||||||||||
| Cost of sales (GAAP) | $ | 33,231 | $ | 31,747 | $ | 1,484 | 4.7 | % | |||||||||||||||
| Gross profit (GAAP) | $ | 7,403 | $ | 7,161 | $ | 242 | 3.4 | % | |||||||||||||||
|
Impact of currency fluctuations
(1)
|
(4) | (4) | (0.1) | ||||||||||||||||||||
| Comparable gross profit adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | 7,399 | $ | 7,161 | $ | 238 | 3.3 | % | |||||||||||||||
| Gross margin (GAAP) | 18.22 | % | 18.40 | % | -18 bps | ||||||||||||||||||
|
Impact of currency fluctuations
(1)
|
(0.02) | -2 bps | |||||||||||||||||||||
| Comparable gross margin adjusted for Certain Items using a constant currency basis (Non-GAAP) | 18.20 | % | 18.40 | % | -20 bps | ||||||||||||||||||
| Operating expenses (GAAP) | $ | 5,884 | $ | 5,657 | $ | 227 | 4.0 | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(2)
|
(57) | (33) | (24) | (72.7) | |||||||||||||||||||
|
Impact of acquisition-related costs
(3)
|
(79) | (62) | (17) | (27.4) | |||||||||||||||||||
| Operating expenses adjusted for Certain Items (Non-GAAP) | 5,748 | 5,562 | 186 | 3.3 | |||||||||||||||||||
|
Impact of currency fluctuations
(1)
|
(6) | (6) | (0.1) | ||||||||||||||||||||
| Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | 5,742 | $ | 5,562 | $ | 180 | 3.2 | % | |||||||||||||||
| Operating expense as a percentage of sales (GAAP) | 14.48 | % | 14.54 | % | -6 bps | ||||||||||||||||||
| Impact of certain item adjustments | (0.33) | (0.24) | -9 bps | ||||||||||||||||||||
| Adjusted operating expense as a percentage of sales (Non-GAAP) | 14.15 | % | 14.30 | % | -15 bps | ||||||||||||||||||
| Operating income (GAAP) | $ | 1,519 | $ | 1,504 | $ | 15 | 1.0 | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(2)
|
57 | 33 | 24 | 72.7 | |||||||||||||||||||
|
Impact of acquisition-related costs
(3)
|
79 | 62 | 17 | 27.4 | |||||||||||||||||||
| Operating income adjusted for Certain Items (Non-GAAP) | 1,655 | 1,599 | 56 | 3.5 | |||||||||||||||||||
|
Impact of currency fluctuations
(1)
|
2 | 2 | 0.1 | ||||||||||||||||||||
| Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | 1,657 | $ | 1,599 | $ | 58 | 3.6 | % | |||||||||||||||
| Net earnings (GAAP) | $ | 896 | $ | 919 | $ | (23) | (2.5) | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(2)
|
57 | 33 | 24 | 72.7 | |||||||||||||||||||
|
Impact of acquisition-related costs
(3)
|
79 | 62 | 17 | 27.4 | |||||||||||||||||||
|
Tax impact of restructuring and transformational project costs
(4)
|
(15) | (8) | (7) | (87.5) | |||||||||||||||||||
|
Tax impact of acquisition-related costs
(4)
|
(20) | (15) | (5) | (33.3) | |||||||||||||||||||
| Net earnings adjusted for Certain Items (Non-GAAP) | $ | 997 | $ | 991 | $ | 6 | 0.6 | % | |||||||||||||||
| Diluted earnings per share (GAAP) | $ | 1.82 | $ | 1.81 | $ | 0.01 | 0.6 | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(2)
|
0.12 | 0.07 | 0.05 | 71.4 | |||||||||||||||||||
|
Impact of acquisition-related costs
(3)
|
0.16 | 0.12 | 0.04 | 33.3 | |||||||||||||||||||
39
| 26-Week Period Ended Dec. 28, 2024 | 26-Week Period Ended Dec. 30, 2023 | Change in Dollars | %/bps Change | ||||||||||||||||||||
|
Tax impact of restructuring and transformational project costs
(4)
|
(0.03) | (0.02) | (0.01) | (50.0) | |||||||||||||||||||
|
Tax impact of acquisition-related costs
(4)
|
(0.04) | (0.03) | (0.01) | (33.3) | |||||||||||||||||||
|
Diluted earnings per share adjusted for Certain Items (Non-GAAP)
(5)
|
$ | 2.02 | $ | 1.96 | $ | 0.06 | 3.1 | % | |||||||||||||||
|
(1)
|
Represents a constant currency adjustment which eliminates the impact of foreign currency fluctuations on the current year results.
|
||||
|
(2)
|
Fiscal 2025 includes $16 million related to restructuring and severance charges and $41 million related to various transformation initiative costs, primarily consisting of supply chain transformation costs and changes to our business technology strategy. Fiscal 2024 includes $8 million related to restructuring and severance charges and $25 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. | ||||
|
(3)
|
Fiscal 2025 includes $65 million of intangible amortization expense and $14 million in acquisition and due diligence costs. Fiscal 2024 includes $57 million of intangible amortization expense and $5 million in acquisition and due diligence costs.
|
||||
|
(4)
|
The tax impact of adjustments for Certain Items is calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction where the Certain Item was incurred.
|
||||
|
(5)
|
Individual components of diluted earnings per share may not add up to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.
|
||||
| NM | Represents that the percentage change is not meaningful. | ||||
40
| 13-Week Period Ended Dec. 28, 2024 | 13-Week Period Ended Dec. 30, 2023 | Change in Dollars | %/bps Change | ||||||||||||||||||||
| U.S. FOODSERVICE OPERATIONS | |||||||||||||||||||||||
| Operating expenses (GAAP) | $ | 1,820 | $ | 1,739 | $ | 81 | 4.7 | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(1)
|
(5) | — | (5) | NM | |||||||||||||||||||
|
Impact of acquisition-related costs
(2)
|
(20) | (12) | (8) | (66.7) | |||||||||||||||||||
| Operating expenses adjusted for Certain Items (Non-GAAP) | $ | 1,795 | $ | 1,727 | $ | 68 | 3.9 | % | |||||||||||||||
| Operating income (GAAP) | $ | 834 | $ | 839 | $ | (5) | (0.6) | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(1)
|
5 | — | 5 | NM | |||||||||||||||||||
|
Impact of acquisition-related costs
(2)
|
20 | 12 | 8 | 66.7 | |||||||||||||||||||
| Operating income adjusted for Certain Items (Non-GAAP) | $ | 859 | $ | 851 | $ | 8 | 0.9 | % | |||||||||||||||
| INTERNATIONAL FOODSERVICE OPERATIONS | |||||||||||||||||||||||
| Sales (GAAP) | $ | 3,728 | $ | 3,597 | $ | 131 | 3.6 | % | |||||||||||||||
|
Impact of currency fluctuations
(3)
|
20 | 20 | 0.6 | ||||||||||||||||||||
| Comparable sales using a constant currency basis (Non-GAAP) | $ | 3,748 | $ | 3,597 | $ | 151 | 4.2 | % | |||||||||||||||
| Gross profit (GAAP) | $ | 760 | $ | 708 | $ | 52 | 7.3 | % | |||||||||||||||
|
Impact of currency fluctuations
(3)
|
— | — | — | ||||||||||||||||||||
| Comparable gross profit using a constant currency basis (Non-GAAP) | $ | 760 | $ | 708 | $ | 52 | 7.3 | % | |||||||||||||||
| Gross margin (GAAP) | 20.39 | % | 19.68 | % | 71 bps | ||||||||||||||||||
|
Impact of currency fluctuations
(3)
|
(0.11) | -11 bps | |||||||||||||||||||||
| Comparable gross margin using a constant currency basis (Non-GAAP) | 20.28 | % | 19.68 | % | 60 bps | ||||||||||||||||||
| Operating expenses (GAAP) | $ | 665 | $ | 625 | $ | 40 | 6.4 | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(4)
|
(15) | (2) | (13) | NM | |||||||||||||||||||
|
Impact of acquisition-related costs
(5)
|
(19) | (17) | (2) | (11.8) | |||||||||||||||||||
| Operating expenses adjusted for Certain Items (Non-GAAP) | 631 | 606 | 25 | 4.1 | |||||||||||||||||||
|
Impact of currency fluctuations
(3)
|
(1) | (1) | (0.1) | ||||||||||||||||||||
| Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | 630 | $ | 606 | $ | 24 | 4.0 | % | |||||||||||||||
| Operating income (GAAP) | $ | 95 | $ | 83 | $ | 12 | 14.5 | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(4)
|
15 | 2 | 13 | NM | |||||||||||||||||||
|
Impact of acquisition-related costs
(5)
|
19 | 17 | 2 | 11.8 | |||||||||||||||||||
| Operating income adjusted for Certain Items (Non-GAAP) | 129 | 102 | 27 | 26.5 | |||||||||||||||||||
|
Impact of currency fluctuations
(3)
|
1 | 1 | 1.0 | ||||||||||||||||||||
| Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | 130 | $ | 102 | $ | 28 | 27.5 | % | |||||||||||||||
| SYGMA | |||||||||||||||||||||||
| Operating expenses (GAAP) | $ | 144 | $ | 132 | $ | 12 | 9.1 | % | |||||||||||||||
| Operating income (GAAP) | 19 | 17 | 2 | 11.8 | |||||||||||||||||||
| OTHER | |||||||||||||||||||||||
| Operating expenses (GAAP) | $ | 61 | $ | 65 | $ | (4) | (6.2) | % | |||||||||||||||
| Operating income (GAAP) | 4 | 8 | (4) | (50.0) | |||||||||||||||||||
| GLOBAL SUPPORT CENTER | |||||||||||||||||||||||
| Gross profit (GAAP) | $ | 8 | $ | 6 | $ | 2 | 33.3 | % | |||||||||||||||
41
| 13-Week Period Ended Dec. 28, 2024 | 13-Week Period Ended Dec. 30, 2023 | Change in Dollars | %/bps Change | ||||||||||||||||||||
| Operating expenses (GAAP) | $ | 248 | $ | 253 | $ | (5) | (2.0) | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(6)
|
(11) | (12) | 1 | 8.3 | |||||||||||||||||||
|
Impact of acquisition-related costs
(7)
|
(1) | (2) | 1 | 50.0 | |||||||||||||||||||
| Operating expenses adjusted for Certain Items (Non-GAAP) | $ | 236 | $ | 239 | $ | (3) | (1.3) | % | |||||||||||||||
| Operating loss (GAAP) | $ | (240) | $ | (247) | $ | 7 | 2.8 | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(6)
|
11 | 12 | (1) | (8.3) | |||||||||||||||||||
|
Impact of acquisition-related costs
(7)
|
1 | 2 | (1) | (50.0) | |||||||||||||||||||
| Operating loss adjusted for Certain Items (Non-GAAP) | $ | (228) | $ | (233) | $ | 5 | 2.1 | % | |||||||||||||||
|
(1)
|
Primarily represents severance and transformation initiative costs. | ||||
|
(2)
|
Fiscal 2025 and fiscal 2024 include intangible amortization expense and acquisition costs.
|
||||
|
(3)
|
Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on current year results. | ||||
|
(4)
|
Includes restructuring and transformation costs primarily in Europe. | ||||
|
(5)
|
Primarily represents intangible amortization expense and acquisition costs.
|
||||
|
(6)
|
Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy. | ||||
|
(7)
|
Represents due diligence costs. | ||||
| NM | Represents that the percentage change is not meaningful. | ||||
42
| 26-Week Period Ended Dec. 28, 2024 | 26-Week Period Ended Dec. 30, 2023 | Change in Dollars | %/bps Change | ||||||||||||||||||||
| U.S. FOODSERVICE OPERATIONS | |||||||||||||||||||||||
| Operating expenses (GAAP) | $ | 3,659 | $ | 3,482 | $ | 177 | 5.1 | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(1)
|
(11) | — | (11) | NM | |||||||||||||||||||
|
Impact of acquisition-related costs
(2)
|
(32) | (24) | (8) | (33.3) | |||||||||||||||||||
| Operating expenses adjusted for Certain Items (Non-GAAP) | $ | 3,616 | $ | 3,458 | $ | 158 | 4.6 | % | |||||||||||||||
| Operating income (GAAP) | $ | 1,742 | $ | 1,780 | $ | (38) | (2.1) | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(1)
|
11 | — | 11 | NM | |||||||||||||||||||
|
Impact of acquisition-related costs
(2)
|
32 | 24 | 8 | 33.3 | |||||||||||||||||||
| Operating income adjusted for Certain Items (Non-GAAP) | $ | 1,785 | $ | 1,804 | $ | (19) | (1.1) | % | |||||||||||||||
| INTERNATIONAL FOODSERVICE OPERATIONS | |||||||||||||||||||||||
| Sales (GAAP) | $ | 7,521 | $ | 7,279 | $ | 242 | 3.3 | % | |||||||||||||||
|
Impact of currency fluctuations
(3)
|
15 | 15 | 0.2 | ||||||||||||||||||||
| Comparable sales using a constant currency basis (Non-GAAP) | $ | 7,536 | $ | 7,279 | $ | 257 | 3.5 | % | |||||||||||||||
| Gross profit (GAAP) | $ | 1,534 | $ | 1,440 | $ | 94 | 6.5 | % | |||||||||||||||
|
Impact of currency fluctuations
(3)
|
(4) | (4) | (0.2) | ||||||||||||||||||||
| Comparable gross profit using a constant currency basis (Non-GAAP) | $ | 1,530 | $ | 1,440 | $ | 90 | 6.3 | % | |||||||||||||||
| Gross margin (GAAP) | 20.40 | % | 19.78 | % | 62 bps | ||||||||||||||||||
|
Impact of currency fluctuations
(3)
|
(0.10) | -10 bps | |||||||||||||||||||||
| Comparable gross margin using a constant currency basis (Non-GAAP) | 20.30 | % | 19.78 | % | 52 bps | ||||||||||||||||||
| Operating expenses (GAAP) | $ | 1,338 | $ | 1,264 | $ | 74 | 5.9 | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(4)
|
(26) | (8) | (18) | NM | |||||||||||||||||||
|
Impact of acquisition-related costs
(5)
|
(37) | (34) | (3) | (8.8) | |||||||||||||||||||
| Operating expenses adjusted for Certain Items (Non-GAAP) | 1,275 | 1,222 | 53 | 4.3 | |||||||||||||||||||
|
Impact of currency fluctuations
(3)
|
(5) | (5) | (0.4) | ||||||||||||||||||||
| Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | 1,270 | $ | 1,222 | $ | 48 | 3.9 | % | |||||||||||||||
| Operating income (GAAP) | $ | 196 | $ | 176 | $ | 20 | 11.4 | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(4)
|
26 | 8 | 18 | NM | |||||||||||||||||||
|
Impact of acquisition-related costs
(5)
|
37 | 34 | 3 | 8.8 | |||||||||||||||||||
| Operating income adjusted for Certain Items (Non-GAAP) | 259 | 218 | 41 | 18.8 | |||||||||||||||||||
|
Impact of currency fluctuations
(3)
|
1 | 1 | 0.5 | ||||||||||||||||||||
| Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | 260 | $ | 218 | $ | 42 | 19.3 | % | |||||||||||||||
| SYGMA | |||||||||||||||||||||||
| Sales (GAAP) | $ | 4,162 | $ | 3,820 | $ | 342 | 9.0 | % | |||||||||||||||
| Gross profit (GAAP) | 326 | 302 | 24 | 7.9 | |||||||||||||||||||
| Gross margin (GAAP) | 7.83 | % | 7.91 | % | -8 bps | ||||||||||||||||||
43
| 26-Week Period Ended Dec. 28, 2024 | 26-Week Period Ended Dec. 30, 2023 | Change in Dollars | %/bps Change | ||||||||||||||||||||
| Operating expenses (GAAP) | $ | 289 | $ | 272 | $ | 17 | 6.3 | % | |||||||||||||||
| Operating income (GAAP) | 37 | 30 | 7 | 23.3 | % | ||||||||||||||||||
| OTHER | |||||||||||||||||||||||
| Operating expenses (GAAP) | $ | 125 | $ | 131 | $ | (6) | (4.6) | % | |||||||||||||||
| Operating income (GAAP) | 12 | 20 | (8) | (40.0) | % | ||||||||||||||||||
| GLOBAL SUPPORT CENTER | |||||||||||||||||||||||
| Gross profit (GAAP) | $ | 5 | $ | 6 | $ | (1) | (16.7) | % | |||||||||||||||
| Operating expenses (GAAP) | $ | 473 | $ | 508 | $ | (35) | (6.9) | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(6)
|
(20) | (25) | 5 | 20.0 | |||||||||||||||||||
|
Impact of acquisition-related costs
(7)
|
(10) | (4) | (6) | NM | |||||||||||||||||||
| Operating expenses adjusted for Certain Items (Non-GAAP) | $ | 443 | $ | 479 | $ | (36) | (7.5) | % | |||||||||||||||
| Operating loss (GAAP) | $ | (468) | $ | (502) | $ | 34 | 6.8 | % | |||||||||||||||
|
Impact of restructuring and transformational project costs
(6)
|
20 | 25 | (5) | (20.0) | |||||||||||||||||||
|
Impact of acquisition-related costs
(7)
|
10 | 4 | 6 | NM | |||||||||||||||||||
| Operating loss adjusted for Certain Items (Non-GAAP) | $ | (438) | $ | (473) | $ | 35 | 7.4 | % | |||||||||||||||
|
(1)
|
Primarily represents severance and transformation costs. | ||||
|
(2)
|
Fiscal 2025 and fiscal 2024 include intangible amortization expense and acquisition costs.
|
||||
|
(3)
|
Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on current year results.
|
||||
|
(4)
|
Includes restructuring and transformation costs primarily in Europe.
|
||||
|
(5)
|
Primarily represents intangible amortization expense and acquisition costs.
|
||||
|
(6)
|
Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy.
|
||||
|
(7)
|
Represents due diligence costs.
|
||||
| NM | Represents that the percentage change is not meaningful. | ||||
EBITDA and Adjusted EBITDA
EBITDA and adjusted EBITDA should not be used as a substitute for the most comparable GAAP measure in assessing Sysco’s overall financial performance for the periods presented. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Performance Indicators” contained in our fiscal 2024 Form 10-K for discussions regarding this non-GAAP performance metric. Set forth below is a reconciliation of actual net earnings to EBITDA and to adjusted EBITDA results for the periods presented (dollars in millions):
44
| 13-Week Period Ended Dec. 28, 2024 | 13-Week Period Ended Dec. 30, 2023 | Change in Dollars | % Change | ||||||||||||||||||||
| Net earnings (GAAP) | $ | 406 | $ | 415 | $ | (9) | (2.2) | % | |||||||||||||||
| Interest (GAAP) | 160 | 150 | 10 | 6.7 | |||||||||||||||||||
| Income taxes (GAAP) | 127 | 130 | (3) | (2.3) | |||||||||||||||||||
| Depreciation and amortization (GAAP) | 238 | 219 | 19 | 8.7 | |||||||||||||||||||
| EBITDA (Non-GAAP) | $ | 931 | $ | 914 | $ | 17 | 1.9 | % | |||||||||||||||
| Certain Item adjustments: | |||||||||||||||||||||||
|
Impact of restructuring and transformational project costs
(1)
|
$ | 30 | $ | 11 | $ | 19 | NM | ||||||||||||||||
|
Impact of acquisition-related costs
(2)
|
8 | 3 | 5 | NM | |||||||||||||||||||
|
EBITDA adjusted for Certain Items (Non-GAAP)
(3)
|
$ | 969 | $ | 928 | $ | 41 | 4.4 | % | |||||||||||||||
|
Other expense (income), net
(4)
|
19 | 5 | 14 | NM | |||||||||||||||||||
|
Depreciation and amortization, as adjusted (Non-GAAP)
(5)
|
(205) | (188) | (17) | (9.0) | |||||||||||||||||||
| Operating income adjusted for Certain Items (Non-GAAP) | $ | 783 | $ | 745 | $ | 38 | 5.1 | % | |||||||||||||||
|
(1)
|
Fiscal 2025 and fiscal 2024 include charges related to restructuring and severance, as well as various transformation initiative costs, primarily consisting of supply chain transformation costs and changes to our business technology strategy, excluding charges related to accelerated depreciation.
|
||||
|
(2)
|
Fiscal 2025 and fiscal 2024 include acquisition and due diligence costs.
|
||||
|
(3)
|
In arriving at adjusted EBITDA, Sysco does not adjust out interest income of $7 million and $9 million or non-cash stock compensation expense of $30 million and $29 million in fiscal 2025 and fiscal 2024, respectively.
|
||||
|
(4)
|
Fiscal 2025 represents $19 million in GAAP other expense (income), net. Fiscal 2024 represents $5 million in GAAP other expense (income), net.
|
||||
|
(5)
|
Fiscal 2025 includes $238 million in GAAP depreciation and amortization expense, less $33 million of Non-GAAP depreciation and amortization expense primarily related to acquisitions. Fiscal 2024 includes $219 million in GAAP depreciation and amortization expense, less $32 million of Non-GAAP depreciation and amortization expense primarily related to acquisitions.
|
||||
| NM | Represents that the percentage change is not meaningful. | ||||
| 26-Week Period Ended Dec. 28, 2024 | 26-Week Period Ended Dec. 30, 2023 | Change in Dollars | % Change | ||||||||||||||||||||
| Net earnings (GAAP) | $ | 896 | $ | 919 | $ | (23) | (2.5) | % | |||||||||||||||
| Interest (GAAP) | 319 | 284 | 35 | 12.3 | |||||||||||||||||||
| Income taxes (GAAP) | 279 | 289 | (10) | (3.5) | |||||||||||||||||||
| Depreciation and amortization (GAAP) | 473 | 425 | 48 | 11.3 | |||||||||||||||||||
| EBITDA (Non-GAAP) | $ | 1,967 | $ | 1,917 | $ | 50 | 2.6 | % | |||||||||||||||
| Certain Item adjustments: | |||||||||||||||||||||||
|
Impact of restructuring and transformational project costs
(1)
|
56 | 30 | 26 | 86.7 | |||||||||||||||||||
|
Impact of acquisition-related costs
(2)
|
14 | 5 | 9 | NM | |||||||||||||||||||
|
EBITDA adjusted for Certain Items (Non-GAAP)
(3)
|
$ | 2,037 | $ | 1,952 | $ | 85 | 4.4 | % | |||||||||||||||
|
Other expense (income), net, as adjusted (Non-GAAP)
(4)
|
25 | 12 | 13 | NM | |||||||||||||||||||
|
Depreciation and amortization, as adjusted (Non-GAAP)
(5)
|
(407) | (365) | (42) | (11.5) | |||||||||||||||||||
| Operating income adjusted for Certain Items (Non-GAAP) | $ | 1,655 | $ | 1,599 | $ | 56 | 3.5 | % | |||||||||||||||
45
|
(1)
|
Fiscal 2025 and 2024 include charges related to restructuring and severance, as well as various transformation initiative costs, primarily consisting of supply chain transformation costs and changes to our business technology strategy, excluding charges related to accelerated depreciation.
|
||||
|
(2)
|
Fiscal 2025 and 2024 include acquisition and due diligence costs.
|
||||
|
(3)
|
In arriving at adjusted EBITDA, Sysco does not exclude interest income of $14 million and $20 million or non-cash stock compensation expense of $60 million and $53 million for fiscal 2025 and fiscal 2024, respectively.
|
||||
|
(4)
|
Fiscal 2025 represents $25 million in GAAP other expense (income), net. Fiscal 2024 represents $12 million in GAAP other expense (income), net.
|
||||
|
(5)
|
Fiscal 2025 includes $473 million in GAAP depreciation and amortization expense, less $66 million of Non-GAAP depreciation and amortization expense primarily related to acquisitions. Fiscal 2024 includes $425 million in GAAP depreciation and amortization expense, less $61 million of Non-GAAP depreciation and amortization expense primarily related to acquisitions.
|
||||
| NM | Represents that the percentage change is not meaningful. | ||||
Liquidity and Capital Resources
Highlights
We produced positive free cash flow of $331 million in the first 26 weeks of fiscal 2025, as compared to positive free cash flow of $527 million in the first 26 weeks of fiscal 2024. The decrease in free cash flow is attributable to a decrease in cash provided by operating activities, partially offset by an increase in proceeds from sales of plant and equipment and a decrease in capital expenditures. In the table that follows, free cash flow for each period presented is reconciled to net cash provided by operating activities and comparisons of the significant cash flows from the first 26 weeks of fiscal 2025 to the first 26 weeks of fiscal 2024 are provided.
| 26-Week Period Ended Dec. 28, 2024 | 26-Week Period Ended Dec. 30, 2023 | ||||||||||
| Source of cash (use of cash) | (In millions) | ||||||||||
| Net cash provided by operating activities (GAAP) | $ | 498 | $ | 856 | |||||||
| Additions to plant and equipment | (333) | (347) | |||||||||
| Proceeds from sales of plant and equipment | 166 | 18 | |||||||||
|
Free Cash Flow (Non-GAAP)
(1)
|
$ | 331 | $ | 527 | |||||||
| Acquisition of businesses, net of cash acquired | $ | (40) | $ | (1,175) | |||||||
| Debt borrowings (repayments), net | 371 | 1,445 | |||||||||
| Stock repurchases | (300) | (200) | |||||||||
| Dividends paid | (503) | (506) | |||||||||
|
(1)
|
Free cash flow should not be used as a substitute for the most comparable GAAP measure in assessing the company’s liquidity for the periods presented. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Performance Indicators” contained in our fiscal 2024 Form 10-K for discussions regarding this non-GAAP performance metric.
|
||||
Sources and Uses of Cash
Sysco generates cash in the U.S. and internationally. As of December 28, 2024, we had $793 million in cash and cash equivalents, approximately 92% of which was held by our international subsidiaries. Sysco’s strategic objectives are funded primarily by cash from operations and external borrowings. Traditionally, our operations have produced significant cash flow. Due to our strong financial position, we believe we will continue to be able to effectively access capital markets, as needed. Cash is generally allocated to working capital requirements, investments compatible with our overall growth strategy (organic and inorganic), debt management, and shareholder return. The remaining cash balances are invested in high-quality, short-term instruments.
We believe our cash flow from operations, the availability of liquidity under our commercial paper programs and our revolving credit facility, and our ability to access capital from financial markets will be sufficient to meet our anticipated cash requirements for more than the next 12 months, while maintaining sufficient liquidity for normal operating purposes.
46
Cash Flows
Operating Activities
We generated $498 million in cash flows from operations in the first 26 weeks of fiscal 2025, compared to cash flows from operations of $856 million in the first 26 weeks of fiscal 2024. In the first 26 weeks of fiscal 2025, these amounts included year-over-year unfavorable comparisons on working capital of $360 million due to unfavorable comparisons on inventory, accounts receivable, and accounts payable, partially due to timing. Accrued expenses also had an unfavorable comparison, primarily related to accrued payroll in the first 26 weeks of fiscal 2025 in comparison to the first 26 weeks of fiscal 2024. Income taxes positively impacted cash flows from operations, as estimated payments made in the first 26 weeks of fiscal 2025 were lower compared to the first 26 weeks of fiscal 2024.
Tax relief provided by the IRS related to the effects of Hurricane Beryl that began on July 5, 2024 resulted in the deferral of approximately $28 million of fiscal 2024 U.S. federal extension payments to the third quarter of fiscal 2025. Our first and second quarter U.S. estimated payments were also deferred to the third quarter of fiscal 2025.
Investing Activities
Our capital expenditures in the first 26 weeks of fiscal 2025 consisted primarily of investments in buildings and building improvements, technology equipment, warehouse equipment, and fleet. Our capital expenditures in the first 26 weeks of fiscal 2025 were $14 million lower than in the first 26 weeks of fiscal 2024 due to reduced spending in investments to advance our Recipe for Growth strategy.
During the first 26 weeks of fiscal 2025, we paid $40 million, net of cash acquired, for the acquisition of Campbells Prime Meat. The first 26 weeks of fiscal 2024 includes $1.2 billion of cash paid for the acquisitions of BIX Produce Company and Edward Don.
During the first 26 weeks of fiscal 2025, we received $166 million in proceeds from sales of plant and equipment, which is primarily attributable to proceeds received from sale leaseback transactions. During the first 26 weeks of fiscal 2024, we received $18 million in proceeds from sales of plant and equipment.
Financing Activities
Equity Transactions
Proceeds from exercises of share-based compensation awards were $67 million in the first 26 weeks of fiscal 2025, as compared to $57 million in the first 26 weeks of fiscal 2024. The level of option exercises, and thus proceeds, will vary from period to period and is largely dependent on movements in our stock price and the time remaining before option grants expire.
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 3,949,641 shares for $300 million during the first 26 weeks of fiscal 2025 and intend to repurchase up to a total of $1.25 billion in fiscal 2025. As of December 28, 2024, we had a remaining authorization of approximately $2.5 billion. We repurchased 286,506 additional shares for $21 million under our authorization from the end of our fiscal second quarter through January 10, 2025.
Dividends paid in the first 26 weeks of fiscal 2025 were $503 million, or $1.02 per share, as compared to $506 million, or $1.00 per share, in the first 26 weeks of fiscal 2024. In November 2024, we declared our regular quarterly dividend for the second quarter of fiscal 2025 of $0.51 per share, which was paid in January 2025.
Debt Activity and Borrowing Availability
Our debt activity, including issuances and repayments, if any, and our borrowing availability are described in Note 7, “Debt,” in the Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q. Our outstanding borrowings as of December 28, 2024 are also disclosed within that note.
Guarantor Summarized Financial Information
47
On January 19, 2011, the wholly owned U.S. Broadline subsidiaries of Sysco Corporation, which distribute a full line of food products and a wide variety of non-food products, entered into full and unconditional guarantees of all outstanding senior notes and debentures of Sysco Corporation. All subsequent issuances of senior notes and debentures in the U.S. and borrowings under the company’s $3.0 billion long-term revolving credit facility have also been guaranteed by these subsidiaries. As of December 28, 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. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” contained in our fiscal 2024 Form 10-K for additional information regarding the terms of the guarantees.
Basis of Preparation of the Summarized Financial Information
The summarized financial information of Sysco Corporation (issuer), and certain wholly owned U.S. Broadline subsidiaries (guarantors) (together, the obligor group) is presented on a combined basis with intercompany balances and transactions between entities in the obligor group eliminated. Investments in and equity in the earnings of our non-guarantor subsidiaries, which are not members of the obligor group, have been excluded from the summarized financial information. The obligor group’s amounts due to, amounts due from and transactions with non-guarantor subsidiaries have been presented in separate line items, if they are material to the obligor financials.
The following tables include summarized financial information of the obligor group for the periods presented.
| Combined Parent and Guarantor Subsidiaries Summarized Balance Sheet | Dec. 28, 2024 | Jun. 29, 2024 | ||||||||||||
| (In millions) | ||||||||||||||
| ASSETS | ||||||||||||||
| Receivables due from non-obligor subsidiaries | $ | 304 | $ | 428 | ||||||||||
| Current assets | 5,681 | 5,417 | ||||||||||||
| Total current assets | $ | 5,985 | $ | 5,845 | ||||||||||
| Notes receivable from non-obligor subsidiaries | $ | 54 | $ | 78 | ||||||||||
| Other noncurrent assets | 4,938 | 4,714 | ||||||||||||
| Total noncurrent assets | $ | 4,992 | $ | 4,792 | ||||||||||
| LIABILITIES | ||||||||||||||
| Payables due to non-obligor subsidiaries | $ | 218 | $ | 215 | ||||||||||
| Other current liabilities | 3,098 | 2,396 | ||||||||||||
| Total current liabilities | $ | 3,316 | $ | 2,611 | ||||||||||
| Notes payable to non-obligor subsidiaries | $ | 402 | $ | 250 | ||||||||||
| Long-term debt | 11,004 | 11,276 | ||||||||||||
| Other noncurrent liabilities | 1,389 | 1,334 | ||||||||||||
| Total noncurrent liabilities | $ | 12,795 | $ | 12,860 | ||||||||||
| Combined Parent and Guarantor Subsidiaries Summarized Results of Operations | 26-Week Period Ended Dec. 28, 2024 | |||||||
| (In millions) | ||||||||
| Sales | $ | 24,722 | ||||||
| Gross profit | 4,381 | |||||||
| Operating income | 1,280 | |||||||
| Interest expense from non-obligor subsidiaries | 42 | |||||||
| Net earnings | 734 | |||||||
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Critical Accounting Estimates
Critical accounting estimates are those that are most important to the portrayal of our financial position and results of operations. These require our most subjective or complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. We have reviewed with the Audit Committee of the Board of Directors the development and selection of the critical accounting estimates and this related disclosure. Our most critical accounting estimates pertain to goodwill and intangible assets, income taxes and company-sponsored pension plans, which are described in Item 7 of our fiscal 2024 Form 10-K.
Forward-Looking Statements
Certain statements made herein that look forward in time or express management’s expectations or beliefs with respect to the occurrence of future events are forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” “projected,” “continues,” “continuously,” variations of such terms, and similar terms and phrases denoting anticipated or expected occurrences or results. Examples of forward-looking statements include, but are not limited to, statements about:
•
our expectations of an improving market over the course of fiscal 2025;
•
our expectations regarding the ability of our supply chain and facilities to remain in place and operational;
•
our plans regarding our transformation initiatives and the expected effects from such initiatives;
•
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, including our expectations regarding the positive impact of our acquisitions;
•
the expected long-term rate of return on plan assets of the U.S. Retirement Plan;
•
the sufficiency of our available liquidity to sustain our operations for multiple years;
•
estimates regarding the outcome of legal proceedings;
•
the impact of seasonal trends on our free cash flow;
•
estimates regarding our capital expenditures and the sources of financing for our capital expenditures;
•
our expectations regarding the impact of potential acquisitions and sales of assets on our liquidity, borrowing capacity, leverage ratios and capital availability;
•
our expectations regarding real sales growth in the U.S. foodservice market and trends in produce markets;
49
•
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;
•
our ability to meet future cash requirements, including the ability to access financial markets effectively, including issuances of debt securities, and maintain sufficient liquidity;
•
our expectations regarding the payment of dividends, and the growth of our dividend, in the future;
•
our expectations regarding future activity under our share repurchase program;
•
future compliance with the covenants under our revolving credit facility;
•
our ability to effectively access the commercial paper market and long-term capital markets; and
•
our intention to repay our long-term debt with cash on hand, cash flow from operations, issuances of commercial paper, issuances of senior notes, or a combination thereof.
These statements are based on management’s current expectations and estimates; actual results may differ materially due in part to the risk factors set forth below, those within Part II, Item 1A of this Form 10-Q and those discussed in Item 1A of our fiscal 2024 Form 10-K:
•
the impact of geopolitical, economic and market conditions and developments, including the impact of the U.S. presidential election;
•
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;
50
•
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 natural disasters or adverse weather conditions, such as Hurricanes Helene and Milton;
•
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;
•
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 Brakes France and Davigel into Sysco France and our operations in France and the European Union generally;
•
the risk that factors beyond management’s control, including fluctuations in the stock market, as well as management’s future subjective evaluation of the company’s needs, would impact the timing of share repurchases;
•
due to our reliance on technology, any technology disruption or delay in implementing new technology could have a material negative impact on our business;
•
the risk of negative impacts to our business and our relationships with customers from a cybersecurity incident and/or other technology disruptions;
•
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;
51
•
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.
For a more detailed discussion of factors that could cause actual results to differ from those contained in the forward-looking statements, see the risk factors discussion contained in Item 1A of our fiscal 2024 Form 10-K and in Item 1A of Part II of this Form 10-Q.
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
Our market risks consist of interest rate risk, foreign currency exchange rate risk, fuel price risk and investment risk. For a discussion on our exposure to market risk, see Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risks” in our fiscal 2024 Form 10-K. There have been no significant changes to our market risks since June 29, 2024.
Item 4.
Controls and Procedures
Sysco’s management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 28, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding the required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Sysco’s disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. Based on the evaluation of our disclosure controls and procedures as of December 28, 2024, our chief executive officer and chief financial officer concluded that, as of such date, Sysco’s disclosure controls and procedures were effective at the reasonable assurance level.
There have been no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the fiscal quarter ended December 28, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1.
Legal Proceedings
Environmental Matters
Item 103 of SEC Regulation S-K requires disclosure of certain environmental proceedings in which a governmental authority is a party to and when such proceedings involve potential monetary sanctions that Sysco’s management reasonably believes will exceed a specified threshold. Pursuant to recent SEC amendments to this Item, Sysco has chosen a reporting threshold for such proceedings of $1 million. Applying this threshold, there are no material environmental matters to disclose for this reporting period.
From time to time, we may be party to legal proceedings that arise in the ordinary course of our business. We do not believe there are any pending legal proceedings that, individually or in the aggregate, will have a material adverse effect on the company’s financial condition, results of operations or cash flows.
Item 1A.
Risk Factors
For a discussion of our risk factors, see the section entitled “Risk Factors” in our fiscal 2024 Form 10-K.
Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
We made the following share repurchases during the second quarter of fiscal 2025:
| ISSUER PURCHASES OF EQUITY SECURITIES | |||||||||||||||||||||||
| Period |
Total Number of Shares Purchased
(1)
|
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(2)
|
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | |||||||||||||||||||
| Month #1 | |||||||||||||||||||||||
| September 29 - October 26 | 460,224 | $ | 75.27 | 460,224 | — | ||||||||||||||||||
| Month #2 | |||||||||||||||||||||||
| October 27 - November 23 | 972,190 | 75.63 | 972,190 | — | |||||||||||||||||||
| Month #3 | |||||||||||||||||||||||
| November 24 - December 28 | 1,082,127 | 78.34 | 1,082,127 | — | |||||||||||||||||||
| Totals | 2,514,541 | $ | 76.73 | 2,514,541 | — | ||||||||||||||||||
|
(1)
|
The total number of shares purchased includes 0, 780, and 3,772 shares tendered by individuals in connection with stock option exercises Month #1, Month #2 and Month #3, respectively.
|
||||
|
(2)
|
See the discussion in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Equity Transactions” for additional information regarding Sysco’s share repurchase program.
|
||||
On May 20, 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, in which the program will remain available until fully utilized.
We repurchased 3,949,641 shares for $300 million during the first 26 weeks of fiscal 2025. As of December 28, 2024, we had a remaining authorization of approximately $2.5 billion. We repurchased 286,506 additional shares under our authorization from the end of our fiscal second quarter through January 10, 2025.
Item 3.
Defaults Upon Senior Securities
None.
53
Item 4.
Mine Safety Disclosures
Not applicable.
Item 5.
Other Information
Insider Trading Arrangements and Policies
The table below shows the plans or other arrangements
adopted
or
terminated
during the quarter ended December 28, 2024 providing for the purchase and/or sale of Sysco securities by Sysco’s directors and Section 16 officers:
| Name | Title | Action | Date | Trading Arrangement | Number of Securities Covered |
Expiration Date
(3)
|
|||||||||||||||||
|
Rule 10b5-1
(1)
|
Non-Rule 10b5-1
(2)
|
||||||||||||||||||||||
|
|
|
|
|
X |
|
|
|||||||||||||||||
|
(1)
|
Intended to satisfy the affirmative defense conditions of SEC Rule 10b5-1(c). | ||||
|
(2)
|
Non-Rule 10b5-1 trading arrangement as defined in Item 408 of Regulation S-K. | ||||
|
(3)
|
Each Plan terminates on the earlier of: (i) the expiration date listed in the table above; (ii) the first date on which all trades set forth in the Plan have been executed; or (iii) such date the Plan is otherwise terminated according to its terms. | ||||
Item 6.
Exhibits
The exhibits listed on the Exhibit Index below are filed as a part of this Quarterly Report on Form 10-Q.
54
EXHIBIT INDEX
| 3.1 | — | |||||||
| 3.2 | — | |||||||
| 3.3 | — | |||||||
| 3.4 | — | |||||||
| 10.1†# | — | |||||||
| 10.2†# | — | |||||||
| 10.3†# | — | |||||||
| 10.4†# | — | |||||||
| 22.1 | — | |||||||
| 31.1# | — | |||||||
| 31.2# | — | |||||||
| 32.1* | — | |||||||
| 32.2* | — | |||||||
| 101.SCH# | — | Inline XBRL Taxonomy Extension Schema Document | ||||||
| 101.CAL# | — | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||||
| 101.DEF# | — | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||||
| 101.LAB# | — | Inline XBRL Taxonomy Extension Labels Linkbase Document | ||||||
| 101.PRE# | — | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||||||
| 104 | — | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ||||||
___________
†
Executive Compensation Arrangement pursuant to 601(b)(10)(iii)(A) of Regulation S-K
# Filed herewith
55
* Furnished, not filed.
56
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Sysco Corporation | ||||||||
| (Registrant) | ||||||||
| Date: January 28, 2025 | By: | /s/ KEVIN P. HOURICAN | ||||||
| Kevin P. Hourican | ||||||||
| Chair of the Board and | ||||||||
| Chief Executive Officer | ||||||||
| Date: January 28, 2025 | By: | /s/ KENNY K. CHEUNG | ||||||
| Kenny K. Cheung | ||||||||
| Executive Vice President and | ||||||||
| Chief Financial Officer | ||||||||
| Date: January 28, 2025 | By: | /s/ JENNIFER L. JOHNSON | ||||||
| Jennifer L. Johnson | ||||||||
| Senior Vice President and | ||||||||
| Chief Accounting Officer | ||||||||
57