Sysco Delivers Over 1.3 Times U.S. Market Share Growth and Strong Profit; Positive Momentum for Fiscal Year 2023

Sysco Corporation

HOUSTON, Aug. 09, 2022 (GLOBE NEWSWIRE) -- Sysco Corporation (NYSE: SYY) today announced financial results for its 13-week fourth fiscal quarter and its 52-week fiscal year ended July 2, 2022. In fiscal year 2021, the fourth quarter included 14 weeks, and the year included 53 weeks.¹

Key highlights for the fourth quarter and full year of fiscal year 2022 include:

• Sysco growth outpaced the U.S. market by more than 1.3 times for the full year;

• Recipe For Growth advanced as planned;

• Volume growth for the quarter and year;

• Effective pass-through of rising product costs;

• Continued operating income recovery for the International segment;

• Profitable growth, strong fourth quarter results; and

• Capital allocation strategy executed, with significant investment in business, debt paid down during the quarter, and $500 million in shares repurchased for the year.
  

“Sysco generated another quarter of top-line and bottom-line improvements, topping off a strong year of financial performance, especially given the environmental conditions. This included growing more than 1.3 times the market for the year and exceeding fiscal 2019 operating income for the quarter by 6.4 percent. The strong financial performance was delivered while simultaneously investing in our Recipe For Growth strategy. We are delivering new commercial capabilities and accelerating growth in a way which will pay long-term returns for Sysco and our investors,” said Kevin Hourican, Sysco’s President and Chief Executive Officer. “I want to thank our associates around the world for their continued hard work and customer centricity.”

Key financial results for the fourth quarter of fiscal year 2022 include:

• Sales increased 17.5% versus the same period in fiscal year 2021 and, on a comparable 13-week basis, increased 26.5% to $19.0 billion. Sales increased 22.5% versus the same period in fiscal year 2019;

• U.S. Broadline volume decreased 2.1% versus the same period in fiscal year 2021 and, on a comparable 13-week basis, increased 5.4%. U.S. Broadline volume decreased 2.2% versus the same period in fiscal year 2019;

• Gross profit increased 18.1% to $3.4 billion, as compared to the same period last year, and increased 15.6%, as compared to the same period in fiscal year 2019;

• Operating income increased 34.6% to $766.7 million, and adjusted¹ operating income increased to $876.8 million, as compared to the same period last year, while operating income increased 6.4% and adjusted¹ operating income increased 7.2%, as compared to the same period in fiscal year 2019;

• Earnings before interest, taxes, depreciation and amortization (“EBITDA”) increased to $971.7 million, and adjusted EBITDA increased to $1.0 billion, in each case as compared to the same period last year. On a comparable 13-week basis, EBITDA increased 34.4% and adjusted EBITDA increased 44.5%, in each case as compared to the same period last year. EBITDA increased 1.3% and adjusted EBITDA increased 8.7%, in each case as compared to the same period in fiscal year 2019;² and

• EPS³ increased to $0.99 compared to $0.29 in the same period last year. Adjusted¹ EPS increased to $1.15 compared to $0.71 in the same period last year, and on a comparable 13-week basis, increased $0.49 or 74.2%. EPS decreased $0.04 and adjusted EPS increased $0.05, in each case as compared to the same period in fiscal year 2019.

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_{¹ Adjusted financial results, including adjusted operating income (loss), adjusted earnings per share (EPS) and adjusted EBITDA, are non-GAAP financial measures that exclude certain items, which primarily include acquisition-related costs, restructuring costs, transformational project costs, adjustments to our bad debt reserve specific to aged receivables existing prior to the COVID-19 pandemic and a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory. Specific to adjusted EPS, this year’s Certain Items include losses on the extinguishment of debt and the impact of an increase in reserves for uncertain tax positions. Specific to adjusted EPS, last year’s fourth quarter and fiscal 2021 Certain Items include the impact of a gain on sale of property and the impact of a U.K. tax law change. The fiscal 2021 Certain Items include the impact of a loss on the sale of Cake Corporation and our Spain operations. Results shown on a comparable 13 or 52 week basis are non-GAAP numbers and have been further adjusted to remove dollar amounts equal to 1/14 of the comparable 13 or 52 week basis are non-GAAP numbers and have been further adjusted to remove dollar amounts equal to 1/14 of the comparable fourth quarter non-GAAP results. Reconciliations of all non-GAAP financial measures to the nearest corresponding GAAP financial measure are included at the end of this release.
² EBITDA and adjusted EBITDA are non-GAAP financial measures. Reconciliations of all non-GAAP financial measures to the nearest corresponding GAAP financial measure are included at the end of this release.
³ Earnings per share (EPS) are shown on a diluted basis unless otherwise specified.}

Key financial results for fiscal year 2022 included:

• Sales increased 33.8% versus fiscal year 2021 and, on a comparable 52-week basis, increased 36.9% to $68.6 billion. Sales increased 14.2% versus fiscal year 2019;

• U.S. Broadline volume increased 15.4% versus fiscal year 2021 and, on a comparable 52-week basis, increased 17.9%. U.S. Broadline volume decreased 3.7% versus fiscal year 2019;

• Gross profit increased 31.7% to $12.3 billion, as compared to the prior year, and increased 8.0%, as compared to fiscal year 2019;

• Operating income increased 62.7% to $2.3 billion, and adjusted¹ operating income increased to $2.6 billion, as compared to the prior year, while operating income increased 0.4%, and adjusted¹ operating income decreased 3.7%, as compared to fiscal year 2019;

• EBITDA increased to $3.1 billion, and adjusted EBITDA increased to $3.3 billion, in each case as compared to the prior year. On a comparable 52-week basis, EBITDA increased 46.4% and adjusted EBITDA increased 58.5%, in each case as compared to the prior year. EBITDA increased 0.4% and adjusted EBITDA decreased 0.7%, in each case as compared to fiscal year 2019;² and

• EPS³ increased to $2.64 compared to $1.02 in the prior year. Adjusted¹ EPS increased to $3.25 compared to $1.44 in the prior year and, on a comparable 52-week basis, increased $1.86, or 133.8%. EPS decreased $0.56, and adjusted EPS decreased $0.30, in each case as compared to fiscal year 2019.

“Sysco delivered strong financial results, growing volumes and sales, effectively managing double-digit inflation and improving profitability, all while also strengthening our balance sheet and returning $1.5 billion to our shareholders. We have many reasons to be upbeat about our business. While keeping a careful eye on macro-economic developments, we expect to grow adjusted EPS by 26% - 35%, or $4.09 - $4.39⁴, for fiscal year 2023,” said Aaron Alt, Sysco’s Chief Financial Officer.

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_{⁴ Adjusted earnings per share is a non-GAAP financial measure; however, we cannot predict with certainty the particular certain items that would be excluded from the calculation of this measure for future periods. Due to these uncertainties, we cannot provide a quantitative reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure without unreasonable effort. However, we expect to calculate adjusted earnings per share for future periods in the same manner as the reconciliations provided for the historical periods that are included at the end of this release.}

Fourth Quarter Fiscal Year 2022 Results

Total Sysco

Sales for the fourth quarter were $19.0 billion, an increase of 17.5% compared to the same period last year.

Gross profit increased 18.1% to $3.4 billion, gross margin increased 10 basis points to 18.2% and adjusted gross margin increased 33 basis points to 18.4%, compared in each case to the same period last year. The increase in gross profit for the fourth quarter was primarily driven by higher volumes and high rates of inflation that were effectively managed.

Operating expenses increased $331.5 million, or 14.1%, compared to the same period last year, driven by increased volumes and continued investments to drive our transformation initiatives. Adjusted operating expenses increased $300.5 million, or 13.0%, compared to the same period last year.

Operating income was $766.7 million, an increase of $197.0 million, or 34.6%, compared to the same period last year. Adjusted operating income was $876.8 million, an increase of $271.6 million compared to the same period last year.

U.S. Foodservice Operations

The U.S. Foodservice Operations segment generated strong sales growth, overall share gains and increased profitability.

Sales for the fourth quarter were $13.4 billion, an increase of 16.4% compared to the same period last year. Local case volume within U.S. Broadline operations decreased 7.8% for the fourth quarter, while total case volume within U.S. Broadline operations decreased 2.1%, in each case as compared to the same period last year.

Gross profit increased 17.5% to $2.6 billion, and gross margin increased 17 basis points to 19.4%, compared in each case to the same period last year. Product cost inflation was 15.3% in U.S. Broadline, as measured by the estimated change in Sysco’s product costs, primarily in the dairy, poultry and fresh produce categories.

Operating expenses increased $272.3 million, or 19.8%, compared to the same period last year. Adjusted operating expenses increased $244.9 million, or 17.5%, compared to the same period last year.

Operating income was $952.0 million, an increase of $114.6 million compared to the same period last year. Adjusted operating income was $959.5 million, an increase of $141.9 million compared to the same period last year.

International Foodservice Operations

The International Foodservice Operations segment delivered another quarter of strong sales and operating leverage, driving significant profit growth.

Sales for the fourth quarter were $3.3 billion, an increase of 30.3% compared to the same period last year. On a constant currency basis⁵, sales for the fourth quarter were $3.5 billion, an increase of 40.4% compared to the same period last year. Foreign exchange rates decreased both International Foodservice Operations sales by 10.1% and total Sysco sales by 1.6% during the quarter.

Gross profit increased 31.4% to $651.8 million, and gross margin increased 17 basis points to 20.0%, compared in each case to the same period last year. On a constant currency basis⁵, gross profit increased 42.9% to $708.9 million. Foreign exchange rates decreased both International Foodservice Operations gross profit by 11.5% and total Sysco gross profit by 2.0% during the quarter.

Operating expenses increased $78.2 million, or 14.9%, compared to the same period last year. Adjusted operating expenses increased $61.3 million, or 12.4%, compared to the same period last year. On a constant currency basis⁵, adjusted operating expenses increased $112.7 million, or 22.7%, compared to the same period last year. Foreign exchange rates decreased both International Foodservice Operations operating expenses by 10.3% and total Sysco operating expenses by 2.4% during the quarter.

Operating income was $47.1 million, an improvement of $77.6 million compared to the same period last year. Adjusted operating income increased $94.5 million compared to the same period last year. On a constant currency basis⁵, adjusted operating income was $100.3 million, an increase of $100.2 million compared to the same period last year. Foreign exchange rates decreased both International Foodservice Operations operating income by $5.8 million and total Sysco operating income by $3.2 million during the quarter.

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_{⁵ Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on current year results. These adjusted measures are non-GAAP financial measures. Reconciliations of all non-GAAP financial measures to the nearest corresponding GAAP financial measure are included at the end of this release.}

Fiscal Year 2022 Results

Total Sysco

Sales for fiscal year 2022 were $68.6 billion, an increase of 33.8% compared to the prior year.

Gross profit increased 31.7% to $12.3 billion, and gross margin decreased 29 basis points to 18.0%, compared in each case to the prior year. The increase in gross profit for the year was primarily driven by higher volumes and high rates of inflation that were effectively managed.

Operating expenses increased $2.1 billion, or 26.0%, compared to the prior year, driven by increased volumes, expenses associated with investments to drive our transformation initiatives, and snap-back and productivity related costs. Adjusted operating expenses increased $1.9 billion, or 23.6%, compared to the prior year.

Operating income was $2.3 billion, an increase of $901.8 million, or 62.7%, compared to the prior year. Adjusted operating income was $2.6 billion, an increase of $1.2 billion, or 80.3%, compared to the prior year.

U.S. Foodservice Operations

Sales for fiscal year 2022 were $48.5 billion, an increase of 35.8% compared to the prior year. Local case volume within U.S. Broadline operations increased 10.3% for fiscal year 2022, while total case volume within U.S. Broadline operations increased 15.4%, in each case as compared to the prior year. Both increases represent organic growth.

Gross profit increased 31.2% to $9.2 billion, and gross margin decreased 67 basis points to 19.0%, compared in each case to the prior year. Product cost inflation was 15.0% in U.S. Broadline, as measured by the estimated change in Sysco’s product costs, primarily in the poultry, meat and seafood categories.

Operating expenses increased $1.5 billion, or 32.3%, compared to the prior year. Adjusted operating expenses increased $1.3 billion, or 28.0%, compared to the prior year.

Operating income was $3.2 billion, an increase of $716.2 million, or 29.2%, compared to the prior year. Adjusted operating income was $3.2 billion, an increase of $871.8 million, or 37.6%, compared to the prior year.

International Foodservice Operations

Sales for fiscal year 2022 were $11.8 billion, an increase of $3.4 billion, or 41.2%, compared to the prior year. On a constant currency basis⁵, sales for fiscal year 2022 were $12.0 billion, an increase of 43.3% compared to the prior year. Foreign exchange rates decreased both International Foodservice Operations sales by 2.1% and total Sysco sales by 0.3% during the year.

Gross profit increased 44.5% to $2.4 billion, and gross margin increased 47 basis points to 20.2%, compared in each case to the prior year. On a constant currency basis⁵, gross profit increased 47.5% to $2.4 billion, as compared to the prior year. Foreign exchange rates decreased both International Foodservice Operations gross profit by 3.0% and total Sysco gross profit by 0.5% during the year.

Operating expenses increased $396.9 million, or 21.1%, compared to the prior year. Adjusted operating expenses increased $370.0 million, or 20.9%, compared to the prior year. On a constant currency basis⁵, adjusted operating expenses increased $420.9 million, or 23.7%, compared to the prior year. Foreign exchange rates decreased both International Foodservice Operations operating expense by 2.8% and total Sysco operating expense by 0.7% during the year.

Operating income was $102.3 million, an improvement of $334.7 million compared to the prior year. Adjusted operating income increased $361.7 million compared to the prior year. On a constant currency basis⁵, adjusted operating income was $236.4 million, an increase of $365.2 million compared to the prior year. Foreign exchange rates decreased International Foodservice Operations operating income by 2.7% and increased total Sysco operating income by $0.8 million during the year.

Balance Sheet, Cash Flow and Capital Spending

As of the end of the quarter, the company had a cash balance of $867.1 million and approximately $10.6 billion of debt outstanding.

During the year, Sysco returned $1.5 billion to shareholders via $500 million of share repurchases and $959 million of dividends.

Cash flow from operations was $1.8 billion for fiscal year 2022. During the year, the company made purposeful investments in working capital to drive increased sales and profitability, including making significant investments in inventory, with rising sales also contributing to rising accounts receivable, offset by rising accounts payable.

Capital expenditures, net of proceeds from sales of plant and equipment, for fiscal year 2022 were $608.7 million.

Free cash flow⁶ for fiscal year 2022 was $1.2 billion.

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_{⁶ Free cash flow is a non-GAAP financial measure that represents net cash provided from operating activities less purchases of plant and equipment and includes proceeds from sales of plant and equipment. Reconciliations for all non-GAAP financial measures are included at the end of this release.}

Conference Call & Webcast

Sysco will host a conference call to review the company’s fourth quarter and full fiscal year 2022 financial results on Tuesday, August 9, 2022, at 10:00 a.m. Eastern Daylight Time. A live webcast of the call, accompanying slide presentation and a copy of this news release will be available online at investors.sysco.com.

Key Highlights:
	Fourth Quarter			Fiscal Year
			Comparable Adjusted			Comparable Adjusted
Financial Comparison:	July 2, 2022 (13 Weeks)	Change (13 vs. 14 weeks)	Change (13 vs. 13 weeks)	July 2, 2022 (52 Weeks)	Change (52 vs. 53 weeks)	Change (52 vs. 52 weeks)
GAAP:
Sales	$19.0 billion	17.5%		$68.6 billion	33.8%
Gross profit	$3.4 billion	18.1%		$12.3 billion	31.7%
Gross Margin	18.2%	10 bps		18.0%	-29 bps
Operating expenses	$2.7 billion	14.1%		$10.0 billion	26.0%
Operating Income	$766.7 million	34.6%		$2.3 billion	62.7%
Operating Margin	4.0%	51 bps		3.4%	61 bps
Net Earnings	$510.0 million	237.5%		$1.4 billion	159.2%
Diluted Earnings Per Share	$0.99	241.4%		$2.64	158.8%
Non-GAAP (1):
Sales	$19.0 billion	17.5%	26.5%	$68.6 billion	33.8%	36.9%
Gross profit	$3.5 billion	19.6%	28.8%	$12.4 billion	32.5%	35.5%
Gross Margin	18.4%	33 bps	33 bps	18.1%	-18 bps	-18 bps
Operating Expenses	$2.6 billion	13.0%	21.7%	$9.8 billion	23.6%	26.2%
Operating Income	$876.8 million	44.9%	56.0%	$2.6 billion	80.3%	85.8%
Operating Margin	4.6%	88 bps	88 bps	3.8%	99 bps	101 bps
EBITDA	$971.7 million	24.8%	34.4%	$3.1 billion	42.7%	46.4%
Adjusted EBITDA	$1.0 billion	34.2%	44.5%	$3.3 billion	54.4%	58.5%
Net Earnings	$588.3 million	60.6%	73.0%	$1.7 billion	126.0%	134.2%
Diluted Earnings Per Share (2)	$1.15	62.0%	74.2%	$3.25	125.7%	133.8%
Case Growth (3):
U.S. Broadline	-2.1%		5.4%	15.4%		17.9%
Local	-7.8%			10.3%
Sysco Brand Sales as a % of Cases:
U.S. Broadline	36.6%	0 bps		36.2%	-29 bps
Local	45.4%	78 bps		44.5%	55 bps
Note:
(1) Reconciliations of all non-GAAP financial measures to the nearest respective GAAP financial measures are included at the end of this release.
(2) Individual components in the table above may not sum to the totals due to the rounding.
(3) Case growth for 13-week and 52-week comparable columns show year-over-year growth.
NM represents that the percentage change is not meaningful.

Forward-Looking Statements  

^{Statements made in this press release or in our earnings call for the fourth quarter of fiscal year 2022 that look forward in time or that express management’s beliefs, expectations or hopes are forward-looking statements under the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the views of management at the time such statements are made and are subject to a number of risks, uncertainties, estimates, and assumptions that may cause actual results to differ materially from current expectations. These statements include statements concerning: the effect, impact, potential duration or other implications of the COVID-19 pandemic and any expectations we may have with respect thereto; our expectations regarding future improvements in productivity; our belief that improvements in our organizational capabilities will deliver compelling outcomes in future periods; our expectations regarding improvements in international volume; our expectations that our transformational agenda will drive long-term growth; our expectations regarding the continuation of an inflationary environment; our expectations regarding improvements in the efficiency of our supply chain; our expectations regarding the impact of our Recipe for Growth strategy and the pace of progress in implementing the initiatives under that strategy; our expectations regarding Sysco’s ability to outperform the market in future periods; our expectations that our strategic priorities will enable us to grow faster than the market; our expectations regarding our efforts to reduce overtime rates and the incremental investments in hiring; our expectations regarding the expansion of our driver academy and our belief that the academy will enable us to provide upward career path mobility for our warehouse associates and improve associate retention; our expectations regarding the benefits of the six-day delivery model; our plans to improve the capabilities of our sales team; our expectations regarding the impact of our growth initiatives and their ability to enable Sysco to consistently outperform the market; our expectations regarding the impact of the Coastal Companies acquisition on our business; our expectations regarding our ability to grow faster than the total market in fiscal 2023 and to exceed our growth target by the end of fiscal 2024; our ability to deliver against our strategic priorities; economic trends in the United States and abroad; our plans to make continued capital investments over the next three fiscal years in our technology, fleet and buildings; our belief that there is further opportunity for profit in the future; our future growth, including growth in sales and earnings per share; our expectations regarding profits and sales in fiscal 2023; the pace of implementation of our business transformation initiatives; our expectations regarding our balanced approach to capital allocation and rewarding our shareholders; our plans to improve associate retention, training and productivity; our belief that our Recipe for Growth transformation is creating capabilities that will help us profitably grow for the long term; our expectations regarding our long-term financial outlook; and our expectations regarding additional improvements from snap-back costs and productivity expenses during the fiscal fourth quarter.}

^{It is important to note that actual results could differ materially from those projected in such forward-looking statements based on numerous factors, including those outside of Sysco’s control. For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see our Annual Report on Form 10-K for the year ended July 3, 2021, as filed with the SEC, and our subsequent filings with the SEC. We do not undertake to update our forward-looking statements, except as required by applicable law.}

About Sysco

Sysco is the global leader in selling, marketing and distributing food products to restaurants, healthcare and educational facilities, lodging establishments and other customers who prepare meals away from home. Its family of products also includes equipment and supplies for the foodservice and hospitality industries. With more than 71,000 associates, the company operates 333 distribution facilities worldwide and serves approximately 700,000 customer locations. For fiscal year 2022 that ended July 2, 2022, the company generated sales of more than $68 billion. Information about our CSR program, including Sysco’s 2021 Corporate Social Responsibility Report, can be found at sysco.com/csr2021report.

For more information, visit www.sysco.com or connect with Sysco on Facebook at www.facebook.com/SyscoFoods. For important news and information regarding Sysco, visit the Investor Relations section of the company’s Internet home page at investors.sysco.com, which Sysco plans to use as a primary channel for publishing key information to its investors, some of which may contain material and previously non-public information. In addition, investors should continue to review our news releases and filings with the SEC. It is possible that the information we disclose through any of these channels of distribution could be deemed to be material information.

Sysco Corporation and its Consolidated Subsidiaries CONSOLIDATED RESULTS OF OPERATIONS (Unaudited) (In Thousands, Except for Share and Per Share Data)
	Quarter Ended								Year Ended
	Jul. 2, 2022				Jul. 3, 2021				Jul. 2, 2022				Jul. 3, 2021
Sales	$	18,957,258			$	16,136,893			$	68,636,146			$	51,297,843
Cost of sales		15,512,986				13,221,115				56,315,622				41,941,094
Gross profit		3,444,272				2,915,778				12,320,524				9,356,749
Operating expenses		2,677,557				2,346,094				9,981,489				7,919,507
Operating income		766,715				569,684				2,339,035				1,437,242
Interest expense		128,512				441,149				623,643				880,137
Other income, net		(3,676	)			(13,483	)			(31,381	)			(27,623	)
Earnings before income taxes		641,879				142,018				1,746,773				584,728
Income tax expense (benefit)		131,890				(9,075	)			388,005				60,519
Net earnings	$	509,989			$	151,093			$	1,358,768			$	524,209
Net earnings:
Basic earnings per share	$	1.00			$	0.29			$	2.66			$	1.03
Diluted earnings per share		0.99				0.29				2.64				1.02
Average shares outstanding		510,593,953				512,423,938				510,630,645				510,696,398
Diluted shares outstanding		513,426,966				516,036,842				514,005,827				513,555,088

Sysco Corporation and its Consolidated Subsidiaries CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands, Except for Share Data)
	Jul. 2, 2022				Jul. 3, 2021
ASSETS
Current assets
Cash and cash equivalents	$	867,086			$	3,007,123
Accounts receivable, less allowances of $70,790 and $117,695		4,868,779				3,781,510
Inventories		4,448,154				3,695,219
Prepaid expenses and other current assets		303,789				240,956
Income tax receivable		35,934				8,759
Total current assets		10,523,742				10,733,567
Plant and equipment at cost, less accumulated depreciation		4,456,420				4,326,063
Other long-term assets
Goodwill		4,542,315				3,944,139
Intangibles, less amortization		952,683				746,073
Deferred income taxes		377,604				352,523
Operating lease right-of-use assets, net		723,297				709,163
Other assets		550,150				602,011
Total other long-term assets		7,146,049				6,353,909
Total assets	$	22,126,211			$	21,413,539
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	5,793,481			$	4,884,781
Accrued expenses		2,270,753				1,814,837
Accrued income taxes		40,042				22,644
Current operating lease liabilities		105,690				102,659
Current maturities of long-term debt		580,611				494,923
Total current liabilities		8,790,577				7,319,844
Long-term liabilities
Long-term debt		10,066,931				10,588,184
Deferred income taxes		250,171				147,066
Long-term operating lease liabilities		636,417				634,481
Other long-term liabilities		967,907				1,136,480
Total long-term liabilities		11,921,426				12,506,211
Commitments and contingencies
Noncontrolling interest		31,948				34,588
Shareholders’ equity
Preferred stock, par value $1 per share Authorized 1,500,000 shares, issued none		—				—
Common stock, par value $1 per share Authorized 2,000,000,000 shares, issued 765,174,900 shares		765,175				765,175
Paid-in capital		1,766,305				1,619,995
Retained earnings		10,539,722				10,151,706
Accumulated other comprehensive loss		(1,482,054	)			(1,148,764	)
Treasury stock at cost, 256,531,543 and 253,342,595 shares		(10,206,888	)			(9,835,216	)
Total shareholders’ equity		1,382,260				1,552,896
Total liabilities and shareholders’ equity	$	22,126,211			$	21,413,539

Sysco Corporation and its Consolidated Subsidiaries CONSOLIDATED CASH FLOWS (Unaudited) (In Thousands)
	Year Ended
	Jul. 2, 2022				Jul. 3, 2021
Cash flows from operating activities:
Net earnings	$	1,358,768			$	524,209
Adjustments to reconcile net earnings to cash provided by operating activities:
Share-based compensation expense		122,315				95,815
Depreciation and amortization		772,881				737,916
Operating lease asset amortization		108,052				113,906
Amortization of debt issuance and other debt-related costs		22,305				26,115
Deferred income taxes		(64,454	)			(157,864	)
Provision for losses on receivables		(15,494	)			(152,740	)
Loss on extinguishment of debt		115,603				293,897
Loss on sale of business		—				22,737
Other non-cash items		(12,692	)			(16,502	)
Additional changes in certain assets and liabilities, net of effect of businesses acquired:
Increase in receivables		(1,001,037	)			(662,345	)
Increase in inventories		(719,266	)			(551,405	)
Decrease (increase) in prepaid expenses and other current assets		4,805				(32,577	)
Increase in accounts payable		850,974				1,459,222
Increase in accrued expenses		423,429				167,181
Decrease in operating lease liabilities		(125,741	)			(142,351	)
(Decrease) increase in accrued income taxes		(9,775	)			118,953
(Increase) decrease in other assets		(1,082	)			18,822
(Decrease) increase in other long-term liabilities		(38,305	)			40,853
Net cash provided by operating activities		1,791,286				1,903,842
Cash flows from investing activities:
Additions to plant and equipment		(632,802	)			(470,676	)
Proceeds from sales of plant and equipment		24,144				59,147
Acquisition of businesses, net of cash acquired		(1,281,137	)			—
Purchase of marketable securities		(19,318	)			(53,148	)
Proceeds from sales of marketable securities		16,648				35,979
Other investing activities (1)		14,259				—
Net cash used for investing activities		(1,878,206	)			(428,698	)
Cash flows from financing activities:
Bank and commercial paper (repayments) borrowings, net		—				(826,182	)
Other debt borrowings including senior notes		1,248,207				1,484
Other debt repayments including senior notes		(494,585	)			(2,003,135	)
Redemption premiums and repayments for senior notes		(1,395,668	)			(999,996	)
Cash received from termination of interest rate swap agreements		23,127				—
Proceeds from stock option exercises		128,167				130,374
Stock repurchases		(499,825	)			—
Dividends paid		(958,937	)			(917,564	)
Other financing activities (2)		(37,384	)			(13,209	)
Net cash (used for) provided by financing activities		(1,986,898	)			(4,628,228	)
Effect of exchange rates on cash, cash equivalents and restricted cash		(31,906	)			94,614
Net decrease in cash and cash equivalents (3)		(2,105,724	)			(3,058,470	)
Cash, cash equivalents and restricted cash at beginning of period		3,037,100				6,095,570
Cash, cash equivalents and restricted cash at end of period (3)	$	931,376			$	3,037,100
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	498,349			$	877,512
Income taxes, net of refunds		450,148				103,547

(1)	Change primarily includes proceeds from the settlement of corporate-owned life insurance policies.
(2)	Change includes cash paid for shares withheld to cover taxes, settlement of interest rate hedges and other financing activities.
(3)	Change includes restricted cash included within other assets in the Consolidated Balance Sheet.

Sysco Corporation and its Consolidated Subsidiaries Non-GAAP Reconciliation (Unaudited) Impact of Certain Items

Our discussion of our results includes certain non-GAAP financial measures, such as EBITDA and adjusted EBITDA, that we believe provide important perspective with respect to underlying business trends. Other than free cash flow, any non-GAAP financial measures will be denoted as adjusted measures to remove the impact of (A) restructuring and transformational project costs consisting of: (1) restructuring charges, (2) expenses associated with our various transformation initiatives and (3) facility closure and severance charges; acquisition-related costs consisting of: (1) intangible amortization expense and (B) acquisition costs and due diligence costs related to our acquisitions; and (C) the reduction of bad debt expense previously recognized in fiscal 2020 due to the impact of the COVID-19 pandemic on the collectability of our pre-pandemic trade receivable balances. Our results for fiscal 2022 were also impacted by: (1) a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory, (2) debt extinguishment costs and (3) the increase in reserves for uncertain tax positions. Our results for fiscal 2021 were also impacted by losses on the sale of businesses.

The results of our foreign operations can be impacted due to changes in exchange rates applicable in converting local currencies to U.S. dollars. We measure our total Sysco and our International Foodservice Operations results on a constant currency basis. Constant currency operating results are calculated by translating current-period local currency operating results with the currency exchange rates used to translate the financial statements in the comparable prior-year period to determine what the current-period U.S. dollar operating results would have been if the currency exchange rate had not changed from the comparable prior-year period.

Management believes that adjusting its operating expenses, operating income, net earnings and diluted earnings per share to remove these Certain Items and presenting its International Foodservice Operations results on a constant currency basis, provides an important perspective with respect to our underlying business trends and results and provides meaningful supplemental information to both management and investors that (1) is indicative of the performance of the company’s underlying operations 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 2022 and fiscal 2021.

Set forth below is a reconciliation of sales, operating expenses, operating income, other (income) expense, net earnings and diluted earnings per share to adjusted results for these measures for the periods presented. Individual components of diluted earnings per share may not add up to the total presented due to rounding. Adjusted diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.

Sysco Corporation and its Consolidated Subsidiaries Non-GAAP Reconciliation (Unaudited) Impact of Certain Items (Dollars in Thousands, Except for Share and Per Share Data)
		13-Week Period Ended Jul. 2, 2022				14-Week Period Ended Jul. 3, 2021				Change in Dollars				% Change
Sales (GAAP) (A)		$	18,957,258			$	16,136,893			$	2,820,365			17.5	%
Impact of currency fluctuations (1)			255,672				—				255,672			1.6
Comparable sales using a constant currency basis (Non-GAAP)			19,212,930				16,136,893				3,076,037			19.1
Less 1 week fourth quarter sales (B)			—				(1,152,635	)			1,152,635			9.1
Comparable sales using a constant currency and a 13 week basis (Non-GAAP)			19,212,930				14,984,258				4,228,672			28.2
Comparable sales using a 13 week basis (Non-GAAP) (C)(D)		$	18,957,258			$	14,984,258			$	3,973,000			26.5	%
Cost of sales (GAAP)		$	15,512,986			$	13,221,115			$	2,291,871			17.3	%
Impact of inventory valuation adjustment (2)			(43,673	)			—				(43,673	)		(0.3	)
Cost of sales adjusted for Certain Items (Non-GAAP)			15,469,313				13,221,115				2,248,198			17.0
Less 1 week fourth quarter cost of sales			—				(944,365	)			944,365			9.0
Comparable cost of sales adjusted for a 13 week basis (Non-GAAP)		$	15,469,313			$	12,276,750			$	3,192,563			26.0	%
Gross profit (GAAP)		$	3,444,272			$	2,915,778			$	528,494			18.1	%
Impact of inventory valuation adjustment (2)			43,673				—				43,673			1.5
Comparable gross profit adjusted for Certain Items (Non-GAAP) (A)			3,487,945				2,915,778				572,167			19.6
Impact of currency fluctuations (1)			58,256				—				58,256			2.0
Comparable gross profit adjusted for Certain Items using a constant currency basis (Non-GAAP)			3,546,201				2,915,778				630,423			21.6
Less 1 week fourth quarter gross profit (B)			—				(208,270	)			208,270			9.4
Comparable gross profit adjusted for Certain Items using a constant currency and a 13 week basis (Non-GAAP)			3,546,201				2,707,508				838,693			31.0
Comparable gross profit adjusted for Certain Items using a 13 week basis (Non-GAAP) (C)		$	3,487,945			$	2,707,508			$	780,437			28.8	%
Gross margin (GAAP)			18.17	%			18.07	%						10 bps
Impact of inventory valuation adjustment (2)			0.23				—							23 bps
Comparable gross margin adjusted for Certain Items (Non-GAAP) (A)			18.40				18.07							33 bps
Impact of currency fluctuations (1)			0.06				—							6 bps
Comparable gross margin adjusted for Certain Items using a constant currency basis (Non-GAAP)			18.46				18.07							39 bps
Less 1 week fourth quarter gross margin (B)			—				—							0 bps
Comparable gross margin adjusted for Certain Items using a constant currency and a 13 week basis (Non-GAAP)			18.46				18.07							39 bps
Comparable gross margin adjusted for Certain Items using a 13 week basis (Non-GAAP) (C)			18.40	%			18.07	%						33 bps
Operating expenses (GAAP)		$	2,677,557			$	2,346,094			$	331,463			14.1	%
Impact of restructuring and transformational project costs (3)			(39,474	)			(33,110	)			(6,364	)		(19.2	)
Impact of acquisition-related costs (4)			(35,724	)			(24,826	)			(10,898	)		(43.9	)
Impact of bad debt reserve adjustments (5)			8,783				22,441				(13,658	)		(60.9	)
Operating expenses adjusted for Certain Items (Non-GAAP) (A)			2,611,142				2,310,599				300,543			13.0
Impact of currency fluctuations (1)			55,085				—				55,085			2.4
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)			2,666,227				2,310,599				355,628			15.4
Less 1 week fourth quarter operating expenses (B)			—				(165,043	)			165,043			8.9
Comparable operating expenses adjusted for Certain Items using a constant currency and a 13 week basis (Non-GAAP)			2,666,227				2,145,556				520,671			24.3
Comparable operating expenses adjusted for Certain Items using a 13 week basis (Non-GAAP) (C)		$	2,611,142			$	2,145,556			$	465,586			21.7	%
Operating expense as a percentage of sales (GAAP)			14.12	%			14.54	%						-42 bps
Impact of certain item adjustments			(0.35	)			(0.22	)						-13 bps
Adjusted operating expense as a percentage of sales (Non-GAAP)			13.77	%			14.32	%						-55 bps
Operating income (GAAP)		$	766,715			$	569,684			$	197,031			34.6	%
Impact of inventory valuation adjustment (2)			43,673				—				43,673			NM
Impact of restructuring and transformational project costs (3)			39,474				33,110				6,364			19.2
Impact of acquisition-related costs (4)			35,724				24,826				10,898			43.9
Impact of bad debt reserve adjustments (5)			(8,783	)			(22,441	)			13,658			60.9
Operating income adjusted for Certain Items (Non-GAAP) (A)			876,803				605,179				271,624			44.9
Impact of currency fluctuations (1)			3,171				—				3,171			0.5
Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP)			879,974				605,179				274,795			45.4
Less 1 week fourth quarter operating income (B)			—				(43,227	)			43,227			11.2
Comparable operating income adjusted for Certain Items using a constant currency and a 13 week basis (Non-GAAP)			879,974				561,952				318,022			56.6
Comparable operating income adjusted for Certain Items using a 13 week basis (Non-GAAP) (C)(E)		$	876,803			$	561,952			$	314,851			56.0	%
Operating margin (GAAP)			4.04	%			3.53	%						51 bps
Operating margin adjusted for Certain Items (Non-GAAP)			4.63	%			3.75	%						88 bps
Operating margin adjusted for Certain Items using a constant currency basis (Non-GAAP)			4.58	%			3.75	%						83 bps
Operating margin excluding Certain Items using a constant currency and a 13 week basis (Non-GAAP)			4.58	%			3.75	%						83 bps
Operating margin adjusted for Certain Items using a 13 week basis (Non-GAAP) (F)			4.63	%			3.75	%						88 bps
Interest expense (GAAP)		$	128,512			$	441,149			$	(312,637	)		(70.9	)%
Impact of loss on extinguishment of debt			—				(293,897	)			293,897			NM
Interest expense adjusted for Certain Items (Non-GAAP)			128,512				147,252				(18,740	)		(12.7	)
Less 1 week fourth quarter interest expense			—				(10,518	)			10,518			6.7
Interest expense adjusted for Certain Items using a 13 week basis (Non-GAAP)		$	128,512			$	136,734			$	(8,222	)		(6.0	)%
Other income (GAAP)		$	(3,676	)		$	(13,483	)		$	9,807			72.7	%
Impact of other non-routine gains and losses			2,057				12,374				(10,317	)		(83.4	)
Other income adjusted for Certain Items (Non-GAAP)			(1,619	)			(1,109	)			(510	)		(46.0	)
Less 1 week fourth quarter other income			—				79				(79	)		(11.2	)
Other income adjusted for Certain Items using a 13 week basis (Non-GAAP)		$	(1,619	)		$	(1,030	)		$	(589	)		(57.2	)%
Net earnings (GAAP)		$	509,989			$	151,093			$	358,896			237.5	%
Impact of inventory valuation adjustment (2)			43,673				—				43,673			NM
Impact of restructuring and transformational project costs (3)			39,474				33,110				6,364			19.2
Impact of acquisition-related costs (4)			35,724				24,826				10,898			43.9