SYY 8-K
Sysco Corp (SYY)
8-K
2022-11-01
For: 2022-11-01
View Original
Added on
April 08, 2026
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
WASHINGTON, D.C. 20549
FORM | ||
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 1, 2022
_______________________
_______________________
(Exact name of registrant as specified in its charter)
_________________________
_________________________
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
(Address of principal executive offices) (zip code)
Registrant’s telephone number, including area code: (281 ) 584-1390
N/A
(Former name or former address, if changed since last report)
_________________________
_________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
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.
SECTION 2 – FINANCIAL INFORMATION
Item 2.02 Results of Operations and Financial Condition.
On November 1, 2022, Sysco Corporation (“Sysco”) issued a press release announcing its results of operations and financial condition for its first quarter of fiscal year 2023 which ended on October 1, 2022. Sysco hereby incorporates by reference herein the information set forth in its press release dated November 1, 2022 (the “Press Release”), a copy of which is attached hereto as Exhibit 99.1.
Except for the historical information contained in this report, the statements made by Sysco are forward looking statements that involve risks and uncertainties. All such statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. Sysco’s future financial performance could differ significantly from the expectations of management and from results expressed or implied in the Press Release. Forward-looking statements in the Press Release are subject to certain risks and uncertainties described in the Press Release. For further information on other risk factors, please refer to the “Risk Factors” contained in Sysco’s Annual Report on Form 10-K for the fiscal year ended July 2, 2022, and subsequent reports filed with the SEC.
The information in this Item 2.02 is being furnished, not filed, pursuant to Item 2.02 of Form 8-K. Accordingly, the information in Item 2.02 of this report, including the Press Release attached hereto as Exhibit 99.1, will not be incorporated by reference into any registration statement filed by Sysco under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.
- 2 -
SECTION 9 – FINANCIAL STATEMENTS AND EXHIBITS
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Shell Company Transactions.
Not applicable.
(d) Exhibits.
| Exhibit Number | Description | |||||||
| 99.1 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
- 3 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Sysco Corporation has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Sysco Corporation
Date: November 1, 2022 | By: | /s/ Gerald W. Clanton | ||||||
| Gerald W. Clanton | ||||||||
| Vice President, Legal, Deputy General Counsel and Assistant Corporate Secretary | ||||||||
- 4 -
SYSCO DELIVERS DOUBLE-DIGIT SALES AND PROFIT GROWTH
HOUSTON, November 1, 2022 - Sysco Corporation (NYSE: SYY) today announced financial results for its 13-week first fiscal quarter ended October 1, 2022.
Key highlights for the first quarter of fiscal year 2023 include:
•Continued market share gains and volume growth;
•Gross profit per case improved;
•Double-digit profit growth; and
•Continued investment for growth and return of capital to shareholders.
“Sysco began the fiscal year generating double-digit top-line and bottom-line growth, as we effectively managed inflation, increased case volume and grew market share. We remain on target to grow over 1.35 times the market for the year, as we continue to advance our Recipe For Growth strategy. Our enhanced customer-centric supply chain and selling capabilities will drive long-term returns for our investors,” said Kevin Hourican, Sysco’s President and Chief Executive Officer. “I want to thank our global colleagues for helping us to deliver on Sysco’s purpose of connecting the world to share food and care for one another.”
Key financial results for the first quarter of fiscal year 2023 include:
•Sales increased 16.2% versus the same period in fiscal year 2022;
•U.S. Foodservice volume increased 7.3% versus the same period in fiscal year 2022;
•Gross profit increased 17.4% to $3.5 billion, as compared to the same period last year;
•Operating income increased 16.3% to $734.3 million, and adjusted1 operating income increased to $770.3 million, as compared to the same period last year;
•Earnings before interest, taxes, depreciation and amortization (“EBITDA”) increased to $908.0 million, and adjusted EBITDA increased to $916.9 million, in each case as compared to the same period last year;2 and
•Earnings per share (“EPS”)3 increased to $0.91, as compared to $0.73 in the same period last year. Adjusted1 EPS increased to $0.97, as compared to $0.83 in the same period last year.
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 adjustments to a product return allowance related to COVID-related personal protection equipment inventory. Specific to adjusted EPS, last year’s Certain Items include the impact of an increase in reserves for uncertain tax positions.
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.
1
“We delivered strong financials for the first quarter by continuing to make progress with our Recipe For Growth, while addressing operational improvement opportunities and operating in a dynamic environment. We are upbeat about our business, while remaining appropriately cautious about the macro-environment, and are reaffirming our expectations to grow adjusted EPS by 26% - 35%, to $4.09 - $4.394, and to return $1.5 billion to our shareholders during fiscal year 2023,” said Aaron Alt, Sysco’s Chief Financial Officer.
First Quarter Fiscal Year 2023 Results
Total Sysco
Sales for the first quarter were $19.1 billion, an increase of 16.2% compared to the same period last year.
Gross profit increased 17.4% to $3.5 billion, gross margin increased 18 basis points to 18.2% and adjusted gross margin increased 17 basis points to 18.2%, compared in each case to the same period last year. Product cost inflation was 9.7% at the total enterprise level, as measured by the estimated change in Sysco’s product costs, primarily in the dairy and frozen categories. The increase in gross profit for the first quarter was primarily driven by higher volumes, the effective management of product cost inflation and progress against our partnership growth management initiatives.
Operating expenses increased $414.5 million, or 17.7%, compared to the same period last year, driven by increased volumes, cost inflation, continued operational pressures from the operating environment and our planned investments to drive our transformation initiatives. Adjusted operating expenses increased $429.4 million, or 18.8%, compared to the same period last year.
Operating income was $734.3 million, an increase of $102.7 million, or 16.3%, compared to the same period last year. Adjusted operating income was $770.3 million, an increase of $85.2 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 improved profitability.
Sales for the first quarter were $13.6 billion, an increase of 17.2% compared to the same period last year. Local case volume within U.S. Foodservice (reported for the first time to include the local volume from the U.S. FreshPoint produce operations and U.S. Italian businesses) grew 5.4% for the first quarter, while total case volume within U.S. Foodservice (also reported to include the FreshPoint and Italian businesses) grew 7.3%, in each case as compared to the same period last year.
Gross profit increased 19.5% to $2.6 billion, and gross margin increased 37 basis points to 19.2%, compared in each case to the same period last year. Product cost inflation was 12.0% in U.S. Broadline, as measured by the estimated change in Sysco’s product costs, primarily in the dairy and frozen categories.
Operating expenses increased $320.9 million, or 23.1%, compared to the same period last year. Adjusted operating expenses increased $309.2 million, or 22.3%, compared to the same period last year.
Operating income was $903.8 million, an increase of $106.3 million compared to the same period last year. Adjusted operating income was $913.8 million, an increase of $118.0 million compared to the same period last year.
4 Adjusted EPS 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.
2
International Foodservice Operations
The International Foodservice Operations segment delivered strong sales and significant profit growth, exceeding pre-COVID 2019 profit levels.
Sales for the first quarter were $3.3 billion, an increase of 13.4% compared to the same period last year. On a constant currency basis5, sales for the first quarter were $3.6 billion, an increase of 24.3% compared to the same period last year. Foreign exchange rates decreased both International Foodservice Operations sales by 10.9% and total Sysco sales by 2.0% during the quarter.
Gross profit increased 10.2% to $649.3 million, and gross margin decreased 58 basis points to 19.8%, compared in each case to the same period last year. On a constant currency basis5, gross profit increased 22.4% to $721.0 million. Foreign exchange rates decreased both International Foodservice Operations gross profit by 12.2% and total Sysco gross profit by 2.5% during the quarter.
Operating expenses increased $9.6 million, or 1.7%, compared to the same period last year. Adjusted operating expenses increased $17.1 million, or 3.3%, compared to the same period last year. On a constant currency basis5, adjusted operating expenses increased $81.8 million, or 15.6%, compared to the same period last year. Foreign exchange rates decreased both International Foodservice Operations operating expenses by 12.3% and total Sysco operating expenses by 3.1% during the quarter.
Operating income was $87.2 million, an improvement of $50.5 million compared to the same period last year. Adjusted operating income increased $43.0 million compared to the same period last year. On a constant currency basis5, adjusted operating income was $114.2 million, an increase of $50.1 million compared to the same period last year. Foreign exchange rates decreased both International Foodservice Operations operating income by $7.1 million and total Sysco operating income by $2.3 million during the quarter.
Balance Sheet, Cash Flow and Capital Spending
As of the end of the quarter, the company had a cash balance of $437.7 million and approximately $10.8 billion of debt outstanding.
During the first 13 weeks of fiscal 2023, Sysco returned $517.0 million to shareholders via $267.7 million of share repurchases and $249.3 million of dividends.
Cash flow from operations was $158.6 million for the first 13 weeks of fiscal 2023, which was $47.8 million higher compared to the prior year period.
Capital expenditures, net of proceeds from sales of plant and equipment, for the first 13 weeks of fiscal 2023 were $144.8 million.
Free cash flow6 for the first 13 weeks of fiscal 2023 was $13.8 million.
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.
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.
3
Conference Call & Webcast
Sysco will host a conference call to review the company’s first quarter and full fiscal year 2023 financial results on Tuesday, November 1, 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: | |||||||||||
| 13-Week Period Ended | |||||||||||
| Financial Comparison: | October 1, 2022 | October 2, 2021 | Change | ||||||||
| GAAP: | |||||||||||
| Sales | $19.1 billion | $16.5 billion | 16.2% | ||||||||
| Gross profit | $3.5 billion | $3.0 billion | 17.4% | ||||||||
| Gross Margin | 18.2% | 18.1% | 18 bps | ||||||||
| Operating expenses | $2.8 billion | $2.3 billion | 17.7% | ||||||||
| Operating Income | $734.3 million | $631.7 million | 16.3% | ||||||||
| Operating Margin | 3.8% | 3.8% | 0 bps | ||||||||
| Net Earnings | $465.6 million | $378.0 million | 23.2% | ||||||||
| Diluted Earnings Per Share | $0.91 | $0.73 | 24.7% | ||||||||
Non-GAAP (1): | |||||||||||
| Gross profit | $3.5 billion | $3.0 billion | 17.3% | ||||||||
| Gross Margin | 18.2% | 18.1% | 17 bps | ||||||||
| Operating Expenses | $2.7 billion | $2.3 billion | 18.8% | ||||||||
| Operating Income | $770.3 million | $685.1 million | 12.4% | ||||||||
| Operating Margin | 4.0% | 4.2% | -13 bps | ||||||||
| EBITDA | $908.0 million | $821.4 million | 10.5% | ||||||||
| Adjusted EBITDA | $916.9 million | $852.8 million | 7.5% | ||||||||
| Net Earnings | $492.6 million | $429.9 million | 14.6% | ||||||||
Diluted Earnings Per Share (2) | $0.97 | $0.83 | 16.9% | ||||||||
| Case Growth: | |||||||||||
| U.S. Foodservice | 7.3% | 30.5% | |||||||||
| Local | 5.4% | 26.7% | |||||||||
| Sysco Brand Sales as a % of Cases: | |||||||||||
| U.S. Broadline | 37.3% | 36.9% | 44 bps | ||||||||
| Local | 46.7% | 45.3% | 137 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. | |||||||||||
| NM represents that the percentage change is not meaningful. | |||||||||||
4
| Forward-Looking Statements | ||
Statements made in this press release or in our earnings call for the first quarter of fiscal year 2023 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 first 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 2, 2022, 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. | ||
5
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.
6
| Sysco Corporation and its Consolidated Subsidiaries CONSOLIDATED RESULTS OF OPERATIONS (Unaudited) (In Thousands, Except for Share and Per Share Data) | |||||||||||
| Quarter Ended | |||||||||||
| Oct. 1, 2022 | Oct. 2, 2021 | ||||||||||
| Sales | $ | 19,126,830 | $ | 16,456,546 | |||||||
| Cost of sales | 15,637,975 | 13,484,838 | |||||||||
| Gross profit | 3,488,855 | 2,971,708 | |||||||||
| Operating expenses | 2,754,522 | 2,340,026 | |||||||||
| Operating income | 734,333 | 631,682 | |||||||||
| Interest expense | 124,150 | 128,214 | |||||||||
| Other expense (income), net | 15,281 | (3,252) | |||||||||
| Earnings before income taxes | 594,902 | 506,720 | |||||||||
| Income taxes | 129,334 | 128,707 | |||||||||
| Net earnings | $ | 465,568 | $ | 378,013 | |||||||
| Net earnings: | |||||||||||
| Basic earnings per share | $ | 0.92 | $ | 0.74 | |||||||
| Diluted earnings per share | 0.91 | 0.73 | |||||||||
| Average shares outstanding | 507,578,576 | 512,516,067 | |||||||||
| Diluted shares outstanding | 510,383,149 | 515,782,928 | |||||||||
7
Sysco Corporation and its Consolidated Subsidiaries CONSOLIDATED BALANCE SHEETS (Unaudited) (In Thousands, Except for Share Data) | |||||||||||
| Oct. 1, 2022 | Jul. 2, 2022 | ||||||||||
| ASSETS | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 437,670 | $ | 867,086 | |||||||
| Accounts receivable, less allowances of $74,002 and $70,790 | 5,336,857 | 4,838,912 | |||||||||
| Inventories | 4,682,609 | 4,437,498 | |||||||||
| Prepaid expenses and other current assets | 310,131 | 303,789 | |||||||||
| Income tax receivable | — | 35,934 | |||||||||
| Total current assets | 10,767,267 | 10,483,219 | |||||||||
| Plant and equipment at cost, less accumulated depreciation | 4,462,608 | 4,456,420 | |||||||||
| Other long-term assets | |||||||||||
| Goodwill | 4,434,476 | 4,542,315 | |||||||||
| Intangibles, less amortization | 906,385 | 952,683 | |||||||||
| Deferred income taxes | 382,778 | 377,604 | |||||||||
| Operating lease right-of-use assets, net | 704,664 | 723,297 | |||||||||
| Other assets | 552,765 | 550,150 | |||||||||
| Total other long-term assets | 6,981,068 | 7,146,049 | |||||||||
| Total assets | $ | 22,210,943 | $ | 22,085,688 | |||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | $ | 6,018,227 | $ | 5,752,958 | |||||||
| Accrued expenses | 2,177,793 | 2,270,753 | |||||||||
| Accrued income taxes | 113,388 | 40,042 | |||||||||
| Current operating lease liabilities | 94,027 | 105,690 | |||||||||
| Current maturities of long-term debt | 555,829 | 580,611 | |||||||||
| Total current liabilities | 8,959,264 | 8,750,054 | |||||||||
| Long-term liabilities | |||||||||||
| Long-term debt | 10,263,331 | 10,066,931 | |||||||||
| Deferred income taxes | 241,748 | 250,171 | |||||||||
| Long-term operating lease liabilities | 628,861 | 636,417 | |||||||||
| Other long-term liabilities | 971,190 | 967,907 | |||||||||
| Total long-term liabilities | 12,105,130 | 11,921,426 | |||||||||
| Commitments and contingencies | |||||||||||
| Noncontrolling interest | 31,208 | 31,948 | |||||||||
| 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 | 1,754,409 | 1,766,305 | |||||||||
| Retained earnings | 10,757,136 | 10,539,722 | |||||||||
| Accumulated other comprehensive loss | (1,711,325) | (1,482,054) | |||||||||
| Treasury stock at cost, 258,414,989 and 256,531,543 shares | (10,450,054) | (10,206,888) | |||||||||
| Total shareholders’ equity | 1,115,341 | 1,382,260 | |||||||||
| Total liabilities and shareholders’ equity | $ | 22,210,943 | $ | 22,085,688 | |||||||
8
| Sysco Corporation and its Consolidated Subsidiaries CONSOLIDATED CASH FLOWS (Unaudited) (In Thousands) | |||||||||||
| Year Ended | |||||||||||
| Oct. 1, 2022 | Oct. 2, 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net earnings | $ | 465,568 | $ | 378,013 | |||||||
| Adjustments to reconcile net earnings to cash provided by operating activities: | |||||||||||
| Share-based compensation expense | 27,224 | 29,313 | |||||||||
| Depreciation and amortization | 188,924 | 186,466 | |||||||||
| Operating lease asset amortization | 27,542 | 28,221 | |||||||||
| Amortization of debt issuance and other debt-related costs | 5,435 | 5,577 | |||||||||
| Deferred income taxes | (31,226) | (30,452) | |||||||||
| Provision for losses on receivables | 3,865 | 2,097 | |||||||||
| Other non-cash items | 5,011 | (201) | |||||||||
| Additional changes in certain assets and liabilities, net of effect of businesses acquired: | |||||||||||
| Increase in receivables | (576,585) | (478,671) | |||||||||
| Increase in inventories | (283,252) | (294,517) | |||||||||
| Increase in prepaid expenses and other current assets | (28,372) | (12,528) | |||||||||
| Increase in accounts payable | 288,517 | 329,523 | |||||||||
| Decrease in accrued expenses | (10,893) | (103,483) | |||||||||
| Decrease in operating lease liabilities | (33,319) | (34,146) | |||||||||
| Increase in accrued income taxes | 109,280 | 69,256 | |||||||||
| Decrease (increase) in other assets | 17,627 | (9,345) | |||||||||
| (Decrease) increase in other long-term liabilities | (16,740) | 45,689 | |||||||||
| Net cash provided by operating activities | 158,606 | 110,812 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Additions to plant and equipment | (167,260) | (85,019) | |||||||||
| Proceeds from sales of plant and equipment | 22,448 | 5,627 | |||||||||
| Acquisition of businesses, net of cash acquired | (32,651) | (714,010) | |||||||||
| Purchase of marketable securities | (3,296) | (9,925) | |||||||||
| Proceeds from sales of marketable securities | 2,650 | 8,700 | |||||||||
Other investing activities (1) | 3,274 | 6,022 | |||||||||
| Net cash used for investing activities | (174,835) | (788,605) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Bank and commercial paper borrowings, net | 97,000 | — | |||||||||
| Other debt borrowings including senior notes | 59,063 | 3 | |||||||||
| Other debt repayments including senior notes | (18,104) | (10,051) | |||||||||
| Proceeds from stock option exercises | 24,561 | 17,881 | |||||||||
| Stock repurchases | (267,727) | — | |||||||||
| Dividends paid | (249,294) | (240,561) | |||||||||
Other financing activities (2) | (45,851) | (5,003) | |||||||||
| Net cash used for financing activities | (400,352) | (237,731) | |||||||||
| Effect of exchange rates on cash, cash equivalents and restricted cash | (11,369) | (9,355) | |||||||||
Net decrease in cash and cash equivalents (3) | (427,950) | (924,879) | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 931,376 | 3,037,100 | |||||||||
Cash, cash equivalents and restricted cash at end of period (3) | $ | 503,426 | $ | 2,112,221 | |||||||
| Supplemental disclosures of cash flow information: | |||||||||||
| Cash paid during the period for: | |||||||||||
| Interest | $ | 84,010 | $ | 225,031 | |||||||
| Income taxes, net of refunds | 47,985 | 76,712 | |||||||||
(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. | ||||
9
| 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 and EBITDA, any non-GAAP financial measures will be denoted as adjusted measures to remove the impact of: (1) restructuring and transformational project costs consisting of: (a) restructuring charges, (b) expenses associated with our various transformation initiatives and (c) facility closure and severance charges; (2) acquisition-related costs consisting of: (a) intangible amortization expense and (b) acquisition costs and due diligence costs related to our acquisitions; and (3) 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 2023 were also impacted by adjustments to a product return allowance related to COVID-related personal protection equipment inventory. Our results for fiscal 2022 were also impacted by an increase in reserves for uncertain tax positions. | ||
| 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 2023 and fiscal 2022. | ||
| Set forth below 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 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. | ||
10
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 Oct. 1, 2022 | 13-Week Period Ended Oct. 2, 2021 | Change in Dollars | % Change | ||||||||||||||||||||
| Sales (GAAP) | $ | 19,126,830 | $ | 16,456,546 | $ | 2,670,284 | 16.2 | % | |||||||||||||||
Impact of currency fluctuations (1) | 319,162 | — | 319,162 | 2.0 | |||||||||||||||||||
| Comparable sales using a constant currency basis (Non-GAAP) | $ | 19,445,992 | $ | 16,456,546 | $ | 2,989,446 | 18.2 | % | |||||||||||||||
| Cost of sales (GAAP) | $ | 15,637,975 | $ | 13,484,838 | $ | 2,153,137 | 16.0 | % | |||||||||||||||
Impact of inventory valuation adjustment (2) | 2,571 | — | 2,571 | — | |||||||||||||||||||
| Cost of sales adjusted for Certain Items (Non-GAAP) | $ | 15,640,546 | $ | 13,484,838 | $ | 2,155,708 | 16.0 | % | |||||||||||||||
| Gross profit (GAAP) | $ | 3,488,855 | $ | 2,971,708 | $ | 517,147 | 17.4 | % | |||||||||||||||
Impact of inventory valuation adjustment (2) | (2,571) | — | (2,571) | (0.1) | |||||||||||||||||||
| Comparable gross profit adjusted for Certain Items (Non-GAAP) | 3,486,284 | 2,971,708 | 514,576 | 17.3 | |||||||||||||||||||
Impact of currency fluctuations (1) | 73,035 | — | 73,035 | 2.5 | |||||||||||||||||||
| Comparable gross profit adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | 3,559,319 | $ | 2,971,708 | $ | 587,611 | 19.8 | % | |||||||||||||||
| Gross margin (GAAP) | 18.24 | % | 18.06 | % | 18 bps | ||||||||||||||||||
Impact of inventory valuation adjustment (2) | (0.01) | — | -1 bps | ||||||||||||||||||||
| Comparable gross margin adjusted for Certain Items (Non-GAAP) | 18.23 | 18.06 | 17 bps | ||||||||||||||||||||
Impact of currency fluctuations (1) | 0.07 | — | 7 bps | ||||||||||||||||||||
| Comparable gross margin adjusted for Certain Items using a constant currency basis (Non-GAAP) | 18.30 | % | 18.06 | % | 24 bps | ||||||||||||||||||
| Operating expenses (GAAP) | $ | 2,754,522 | $ | 2,340,026 | $ | 414,496 | 17.7 | % | |||||||||||||||
Impact of restructuring and transformational project costs (3) | (11,645) | (24,511) | 12,866 | 52.5 | |||||||||||||||||||
Impact of acquisition-related costs (4) | (29,454) | (35,926) | 6,472 | 18.0 | |||||||||||||||||||
Impact of bad debt reserve adjustments (5) | 2,592 | 7,061 | (4,469) | (63.3) | |||||||||||||||||||
| Operating expenses adjusted for Certain Items (Non-GAAP) | 2,716,015 | 2,286,650 | 429,365 | 18.8 | |||||||||||||||||||
Impact of currency fluctuations (1) | 70,695 | — | 70,695 | 3.1 | |||||||||||||||||||
| Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | 2,786,710 | $ | 2,286,650 | $ | 500,060 | 21.9 | % | |||||||||||||||
| Operating expense as a percentage of sales (GAAP) | 14.40 | % | 14.22 | % | 18 bps | ||||||||||||||||||
| Impact of certain item adjustments | (0.20) | (0.32) | 12 bps | ||||||||||||||||||||
| Adjusted operating expense as a percentage of sales (Non-GAAP) | 14.20 | % | 13.90 | % | 30 bps | ||||||||||||||||||
| Operating income (GAAP) | $ | 734,333 | $ | 631,682 | $ | 102,651 | 16.3 | % | |||||||||||||||
Impact of inventory valuation adjustment (2) | (2,571) | — | (2,571) | NM | |||||||||||||||||||
Impact of restructuring and transformational project costs (3) | 11,645 | 24,511 | (12,866) | (52.5) | |||||||||||||||||||
Impact of acquisition-related costs (4) | 29,454 | 35,926 | (6,472) | (18.0) | |||||||||||||||||||
Impact of bad debt reserve adjustments (5) | (2,592) | (7,061) | 4,469 | 63.3 | |||||||||||||||||||
| Operating income adjusted for Certain Items (Non-GAAP) | 770,269 | 685,058 | 85,211 | 12.4 | |||||||||||||||||||
Impact of currency fluctuations (1) | 2,340 | — | 2,340 | 0.4 | |||||||||||||||||||
| Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | 772,609 | $ | 685,058 | $ | 87,551 | 12.8 | % | |||||||||||||||
| Operating margin (GAAP) | 3.84 | % | 3.84 | % | 0 bps | ||||||||||||||||||
| Operating margin adjusted for Certain Items (Non-GAAP) | 4.03 | % | 4.16 | % | -13 bps | ||||||||||||||||||
| Operating margin adjusted for Certain Items using a constant currency basis (Non-GAAP) | 3.97 | % | 4.16 | % | -19 bps | ||||||||||||||||||
11
| Net earnings (GAAP) | $ | 465,568 | $ | 378,013 | $ | 87,555 | 23.2 | % | |||||||||||||||
Impact of inventory valuation adjustment (2) | (2,571) | — | (2,571) | NM | |||||||||||||||||||
Impact of restructuring and transformational project costs (3) | 11,645 | 24,511 | (12,866) | (52.5) | |||||||||||||||||||
Impact of acquisition-related costs (4) | 29,454 | 35,926 | (6,472) | (18.0) | |||||||||||||||||||
Impact of bad debt reserve adjustments (5) | (2,592) | (7,061) | 4,469 | 63.3 | |||||||||||||||||||
Tax impact of inventory valuation adjustment (6) | 637 | — | 637 | NM | |||||||||||||||||||
Tax impact of restructuring and transformational project costs (6) | (2,884) | (6,186) | 3,302 | 53.4 | |||||||||||||||||||
Tax impact of acquisition-related costs (6) | (7,295) | (9,066) | 1,771 | 19.5 | |||||||||||||||||||
Tax impact of bad debt reserves adjustments (6) | 642 | 1,782 | (1,140) | (64.0) | |||||||||||||||||||
| Impact of adjustments to uncertain tax positions | — | 12,000 | (12,000) | NM | |||||||||||||||||||
| Net earnings adjusted for Certain Items (Non-GAAP) | $ | 492,604 | $ | 429,919 | $ | 62,685 | 14.6 | % | |||||||||||||||
| Diluted earnings per share (GAAP) | $ | 0.91 | $ | 0.73 | $ | 0.18 | 24.7 | % | |||||||||||||||
Impact of inventory valuation adjustment (2) | (0.01) | — | (0.01) | NM | |||||||||||||||||||
Impact of restructuring and transformational project costs (3) | 0.02 | 0.05 | (0.03) | (60.0) | |||||||||||||||||||
Impact of acquisition-related costs (4) | 0.06 | 0.07 | (0.01) | (14.3) | |||||||||||||||||||
Impact of bad debt reserve adjustments (5) | (0.01) | (0.01) | — | — | |||||||||||||||||||
Tax impact of restructuring and transformational project costs (6) | (0.01) | (0.01) | — | — | |||||||||||||||||||
Tax impact of acquisition-related costs (6) | (0.01) | (0.02) | 0.01 | 50.0 | |||||||||||||||||||
| Impact of adjustments to uncertain tax positions | — | 0.02 | (0.02) | NM | |||||||||||||||||||
Diluted earnings per share adjusted for Certain Items (Non-GAAP) (7) | $ | 0.97 | $ | 0.83 | $ | 0.14 | 16.9 | % | |||||||||||||||
| Diluted shares outstanding | 510,383,149 | 515,782,928 | |||||||||||||||||||||
(1) | Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on the current year results. | ||||
(2) | Fiscal 2023 represents an adjustment to a product return allowance, related to COVID-related personal protection equipment inventory. | ||||
(3) | Fiscal 2023 includes $4 million related to restructuring, severance, and facility closure charges and $8 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2022 includes $16 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy and $8 million related to restructuring charges. | ||||
(4) | Fiscal 2023 includes $26 million of intangible amortization expense and $4 million in acquisition and due diligence costs. Fiscal 2022 includes $22 million of intangible amortization expense and $14 million in acquisition and due diligence costs, which are primarily included in Global Support Center expenses. | ||||
(5) | Fiscal 2023 and fiscal 2022 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020. | ||||
(6) | 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. | ||||
(7) | 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. | |||||
12
Sysco Corporation and its Consolidated Subsidiaries Segment Results Non-GAAP Reconciliation (Unaudited) Impact of Certain Items on Applicable Segments (Dollars in Thousands) | |||||||||||||||||||||||
| 13-Week Period Ended Oct. 1, 2022 | 13-Week Period Ended Oct. 2, 2021 | Change in Dollars | %/bps Change | ||||||||||||||||||||
| U.S. FOODSERVICE OPERATIONS | |||||||||||||||||||||||
| Sales (GAAP) | $ | 13,602,482 | $ | 11,602,963 | $ | 1,999,519 | 17.2 | % | |||||||||||||||
| Gross profit (GAAP) | 2,612,343 | 2,185,154 | 427,189 | 19.5 | % | ||||||||||||||||||
| Gross margin (GAAP) | 19.20 | % | 18.83 | % | 37 bps | ||||||||||||||||||
| Operating expenses (GAAP) | $ | 1,708,515 | $ | 1,387,631 | $ | 320,884 | 23.1 | % | |||||||||||||||
| Impact of restructuring and transformational project costs | 48 | (3) | 51 | NM | |||||||||||||||||||
Impact of acquisition-related costs (1) | (12,585) | (4,654) | (7,931) | NM | |||||||||||||||||||
Impact of bad debt reserve adjustments (2) | 2,592 | 6,420 | (3,828) | (59.6) | |||||||||||||||||||
| Operating expenses adjusted for Certain Items (Non-GAAP) | $ | 1,698,570 | $ | 1,389,394 | $ | 309,176 | 22.3 | % | |||||||||||||||
| Operating income (GAAP) | $ | 903,828 | $ | 797,523 | $ | 106,305 | 13.3 | % | |||||||||||||||
| Impact of restructuring and transformational project costs | (48) | 3 | (51) | NM | |||||||||||||||||||
Impact of acquisition-related costs (1) | 12,585 | 4,654 | 7,931 | NM | |||||||||||||||||||
Impact of bad debt reserve adjustments (2) | (2,592) | (6,420) | 3,828 | 59.6 | |||||||||||||||||||
| Operating income adjusted for Certain Items (Non-GAAP) | $ | 913,773 | $ | 795,760 | $ | 118,013 | 14.8 | % | |||||||||||||||
| INTERNATIONAL FOODSERVICE OPERATIONS | |||||||||||||||||||||||
| Sales (GAAP) | $ | 3,283,735 | $ | 2,895,247 | $ | 388,488 | 13.4 | % | |||||||||||||||
Impact of currency fluctuations (3) | 315,451 | — | 315,451 | 10.9 | |||||||||||||||||||
| Comparable sales using a constant currency basis (Non-GAAP) | $ | 3,599,186 | $ | 2,895,247 | $ | 703,939 | 24.3 | % | |||||||||||||||
| Gross profit (GAAP) | $ | 649,265 | $ | 589,134 | $ | 60,131 | 10.2 | % | |||||||||||||||
Impact of currency fluctuations (3) | 71,760 | — | 71,760 | 12.2 | |||||||||||||||||||
| Comparable gross profit using a constant currency basis (Non-GAAP) | $ | 721,025 | $ | 589,134 | $ | 131,891 | 22.4 | % | |||||||||||||||
| Gross margin (GAAP) | 19.77 | % | 20.35 | % | -58 bps | ||||||||||||||||||
Impact of currency fluctuations (3) | 0.26 | — | 26 bps | ||||||||||||||||||||
| Comparable gross margin using a constant currency basis (Non-GAAP) | 20.03 | % | 20.35 | % | -32 bps | ||||||||||||||||||
| Operating expenses (GAAP) | $ | 562,057 | $ | 552,458 | $ | 9,599 | 1.7 | % | |||||||||||||||
Impact of restructuring and transformational project costs (4) | (3,907) | (9,426) | 5,519 | 58.6 | |||||||||||||||||||
Impact of acquisition-related costs (5) | (16,014) | (18,656) | 2,642 | 14.2 | |||||||||||||||||||
Impact of bad debt reserve adjustments (2) | — | 641 | (641) | NM | |||||||||||||||||||
| Operating expenses adjusted for Certain Items (Non-GAAP) | 542,136 | 525,017 | 17,119 | 3.3 | |||||||||||||||||||
Impact of currency fluctuations (3) | 64,707 | — | 64,707 | 12.3 | |||||||||||||||||||
| Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | 606,843 | $ | 525,017 | $ | 81,826 | 15.6 | % | |||||||||||||||
| Operating income (GAAP) | $ | 87,208 | $ | 36,676 | $ | 50,532 | NM | ||||||||||||||||
Impact of restructuring and transformational project costs (4) | 3,907 | 9,426 | (5,519) | (58.6) | |||||||||||||||||||
Impact of acquisition-related costs (5) | 16,014 | 18,656 | (2,642) | (14.2) | |||||||||||||||||||
Impact of bad debt reserve adjustments (2) | — | (641) | 641 | NM | |||||||||||||||||||
| Operating income adjusted for Certain Items (Non-GAAP) | 107,129 | 64,117 | 43,012 | 67.1 | |||||||||||||||||||
Impact of currency fluctuations (3) | 7,053 | — | 7,053 | 11.0 | |||||||||||||||||||
| Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | 114,182 | $ | 64,117 | $ | 50,065 | 78.1 | % | |||||||||||||||
13
| SYGMA | |||||||||||||||||||||||
| Sales (GAAP) | $ | 1,933,457 | $ | 1,704,033 | $ | 229,424 | 13.5 | % | |||||||||||||||
| Gross profit (GAAP) | 153,893 | 138,157 | 15,736 | 11.4 | % | ||||||||||||||||||
| Gross margin (GAAP) | 7.96 | % | 8.11 | % | -15 bps | ||||||||||||||||||
| Operating expenses (GAAP) | $ | 148,422 | $ | 140,604 | $ | 7,818 | 5.6 | % | |||||||||||||||
| Operating income (loss) (GAAP) | 5,471 | (2,447) | 7,918 | NM | |||||||||||||||||||
| OTHER | |||||||||||||||||||||||
| Sales (GAAP) | $ | 307,156 | $ | 254,303 | $ | 52,853 | 20.8 | % | |||||||||||||||
| Gross profit (GAAP) | 80,838 | 59,021 | 21,817 | 37.0 | % | ||||||||||||||||||
| Gross margin (GAAP) | 26.32 | % | 23.21 | % | 311 bps | ||||||||||||||||||
| Operating expenses (GAAP) | $ | 69,300 | $ | 52,565 | $ | 16,735 | 31.8 | % | |||||||||||||||
| Operating income (GAAP) | 11,538 | 6,456 | 5,082 | 78.7 | % | ||||||||||||||||||
| GLOBAL SUPPORT CENTER | |||||||||||||||||||||||
| Gross (loss) profit (GAAP) | $ | (7,484) | $ | 242 | $ | (7,726) | NM | ||||||||||||||||
Impact of inventory valuation adjustment (6) | (2,571) | — | (2,571) | NM | |||||||||||||||||||
| Comparable gross profit (loss) adjusted for Certain Items (Non-GAAP) | $ | (10,055) | $ | 242 | $ | (10,297) | NM | ||||||||||||||||
| Operating expenses (GAAP) | $ | 266,228 | $ | 206,768 | $ | 59,460 | 28.8 | % | |||||||||||||||
Impact of restructuring and transformational project costs (7) | (7,786) | (15,082) | 7,296 | 48.4 | |||||||||||||||||||
Impact of acquisition-related costs (8) | (855) | (12,616) | 11,761 | 93.2 | |||||||||||||||||||
| Operating expenses adjusted for Certain Items (Non-GAAP) | $ | 257,587 | $ | 179,070 | $ | 78,517 | 43.8 | % | |||||||||||||||
| Operating loss (GAAP) | $ | (273,712) | $ | (206,526) | $ | (67,186) | (32.5) | % | |||||||||||||||
Impact of inventory valuation adjustment (6) | (2,571) | — | (2,571) | NM | |||||||||||||||||||
Impact of restructuring and transformational project costs (7) | 7,786 | 15,082 | (7,296) | (48.4) | |||||||||||||||||||
Impact of acquisition-related costs (8) | 855 | 12,616 | (11,761) | (93.2) | |||||||||||||||||||
| Operating loss adjusted for Certain Items (Non-GAAP) | $ | (267,642) | $ | (178,828) | $ | (88,814) | (49.7) | % | |||||||||||||||
| TOTAL SYSCO | |||||||||||||||||||||||
| Sales (GAAP) | $ | 19,126,830 | $ | 16,456,546 | $ | 2,670,284 | 16.2 | % | |||||||||||||||
| Gross profit (GAAP) | 3,488,855 | 2,971,708 | 517,147 | 17.4 | % | ||||||||||||||||||
| Gross margin (GAAP) | 18.24 | % | 18.06 | % | 18 bps | ||||||||||||||||||
| Operating expenses (GAAP) | $ | 2,754,522 | $ | 2,340,026 | $ | 414,496 | 17.7 | % | |||||||||||||||
Impact of restructuring and transformational project costs (4) (7) | (11,645) | (24,511) | 12,866 | 52.5 | |||||||||||||||||||
Impact of acquisition-related costs (1) (5) (8) | (29,454) | (35,926) | 6,472 | 18.0 | |||||||||||||||||||
Impact of bad debt reserve adjustments (2) | 2,592 | 7,061 | (4,469) | (63.3) | |||||||||||||||||||
| Operating expenses adjusted for Certain Items (Non-GAAP) | $ | 2,716,015 | $ | 2,286,650 | $ | 429,365 | 18.8 | % | |||||||||||||||
| Operating income (GAAP) | $ | 734,333 | $ | 631,682 | $ | 102,651 | 16.3 | % | |||||||||||||||
Impact of inventory valuation adjustment (6) | (2,571) | — | (2,571) | NM | |||||||||||||||||||
Impact of restructuring and transformational project costs (4) (7) | 11,645 | 24,511 | (12,866) | (52.5) | |||||||||||||||||||
Impact of acquisition-related costs (1) (5) (8) | 29,454 | 35,926 | (6,472) | (18.0) | |||||||||||||||||||
Impact of bad debt reserve adjustments (2) | (2,592) | (7,061) | 4,469 | 63.3 | |||||||||||||||||||
14
| Operating income adjusted for Certain Items (Non-GAAP) | $ | 770,269 | $ | 685,058 | $ | 85,211 | 12.4 | % | |||||||||||||||
(1) | Fiscal 2023 and fiscal 2022 include intangible amortization expense and acquisition costs. | ||||
(2) | Fiscal 2023 and fiscal 2022 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020. | ||||
(3) | Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on current year results. | ||||
(4) | Includes restructuring and facility closure costs primarily in Europe. | ||||
(5) | Represents intangible amortization expense. | ||||
(6) | Fiscal 2023 represents an adjustment to a product return allowance, related to COVID-related personal protection equipment inventory. | ||||
(7) | Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy. | ||||
(8) | Represents due diligence costs. | ||||
| NM represents that the percentage change is not meaningful. | |||||
15
Sysco Corporation and its Consolidated Subsidiaries
Non-GAAP Reconciliation (Unaudited)
Free Cash Flow
(In Thousands)
Free cash flow represents net cash provided from operating activities less purchases of plant and equipment and includes proceeds from sales of plant and equipment. Sysco considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after the purchases and sales of buildings, fleet, equipment and technology, which may potentially be used to pay for, among other things, strategic uses of cash including dividend payments, share repurchases and acquisitions. However, free cash flow may not be available for discretionary expenditures, as it may be necessary that we use it to make mandatory debt service or other payments. Free cash flow should not be used as a substitute for the most comparable GAAP financial measure in assessing the company’s liquidity for the periods presented. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. In the table that follows, free cash flow for each period presented is reconciled to net cash provided by operating activities.
| 13-Week Period Ended Oct. 1, 2022 | 13-Week Period Ended Oct. 2, 2021 | 13-Week Period Change in Dollars | |||||||||||||||
| Net cash provided by operating activities (GAAP) | $ | 158,606 | $ | 110,812 | $ | 47,794 | |||||||||||
| Additions to plant and equipment | (167,260) | (85,019) | (82,241) | ||||||||||||||
| Proceeds from sales of plant and equipment | 22,448 | 5,627 | 16,821 | ||||||||||||||
| Free Cash Flow (Non-GAAP) | $ | 13,794 | $ | 31,420 | $ | (17,626) | |||||||||||
16
Sysco Corporation and its Consolidated Subsidiaries
Non-GAAP Reconciliation (Unaudited)
Impact of Certain Items on Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
(Dollars in Thousands)
EBITDA represents net earnings (loss) plus (i) interest expense, (ii) income tax expense and benefit, (iii) depreciation and (iv) amortization. The net earnings (loss) component of our EBITDA calculation is impacted by Certain Items that we do not consider representative of our underlying performance. As a result, in the non-GAAP reconciliations below for each period presented, adjusted EBITDA is computed as EBITDA plus the impact of Certain Items, excluding certain items related to interest expense, income taxes, depreciation and amortization. Sysco's management considers growth in this metric to be a measure of overall financial performance that provides useful information to management and investors about the profitability of the business, as it facilitates comparison of performance on a consistent basis from period to period by providing a measurement of recurring factors and trends affecting our business. Additionally, it is a commonly used component metric used to inform on capital structure decisions. Adjusted EBITDA should not be used as a substitute for the most comparable GAAP financial measure in assessing the company’s 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. In the tables that follow, adjusted EBITDA for each period presented is reconciled to net earnings.
| 13-Week Period Ended Oct. 1, 2022 | 13-Week Period Ended Oct. 2, 2021 | Change in Dollars | % Change | ||||||||||||||||||||
| Net earnings (GAAP) | $ | 465,568 | $ | 378,013 | $ | 87,555 | 23.2 | % | |||||||||||||||
| Interest (GAAP) | 124,150 | 128,214 | (4,064) | (3.2) | |||||||||||||||||||
| Income taxes (GAAP) | 129,334 | 128,707 | 627 | 0.5 | |||||||||||||||||||
| Depreciation and amortization (GAAP) | 188,924 | 186,466 | 2,458 | 1.3 | |||||||||||||||||||
| EBITDA (Non-GAAP) | $ | 907,976 | $ | 821,400 | $ | 86,576 | 10.5 | % | |||||||||||||||
| Certain Item adjustments: | |||||||||||||||||||||||
Impact of inventory valuation adjustment (1) | (2,571) | — | (2,571) | NM | |||||||||||||||||||
Impact of restructuring and transformational project costs (2) | 10,509 | 24,247 | (13,738) | (56.7) | |||||||||||||||||||
Impact of acquisition-related costs (3) | 3,546 | 14,221 | (10,675) | (75.1) | |||||||||||||||||||
Impact of bad debt reserve adjustments (4) | (2,592) | (7,061) | 4,469 | 63.3 | |||||||||||||||||||
EBITDA adjusted for Certain Items (Non-GAAP) (5) | $ | 916,868 | $ | 852,807 | $ | 64,061 | 7.5 | % | |||||||||||||||
(1) | Fiscal 2023 represents an adjustment to a product return allowance, related to COVID-related personal protection equipment inventory. | ||||
(2) | Fiscal 2023 and fiscal 2022 include charges related to restructuring, severance, and facility closures, as well as various transformation initiative costs, primarily consisting of changes to our business technology strategy, excluding charges related to accelerated depreciation. | ||||
(3) | Fiscal 2023 and fiscal 2022 include acquisition and due diligence costs. | ||||
(4) | Fiscal 2023 and fiscal 2022 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020. | ||||
(5) | In arriving at adjusted EBITDA, Sysco does not adjust out interest income of $3 million and $2 million or non-cash stock compensation expense of $27 million and $29 million in fiscal 2023 and fiscal 2022, respectively. | ||||
| NM represents that the percentage change is not meaningful. | |||||
17
Projected Adjusted EPS Guidance
Adjusted earnings per share is a non-GAAP financial measure; however, we cannot predict with certainty certain items that would be included in the most directly comparable GAAP measure for the relevant future periods. Due to these uncertainties, we cannot provide a quantitative reconciliation of projected adjusted EPS 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 herein.
18