8-K
SYSCO CORP (SYY)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 11, 2020
Sysco Corporation
(Exact name of registrant as specified in its charter)
| Delaware | 1-06544 | 74-1648137 |
|---|---|---|
| (State or Other Jurisdiction<br> <br>of Incorporation) | (Commission<br> <br>File Number) | (IRS Employer<br> <br>Identification No.) |
1390 Enclave Parkway, Houston, TX 77077-2099
(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):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br> <br>Symbol(s) | Name of each exchange<br> <br>on which registered |
|---|---|---|
| Common stock, $1.00 Par Value | SYY | New York Stock Exchange |
| 1.25% Notes due June 2023 | SYY23 | New York Stock Exchange |
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 August 11, 2020, Sysco Corporation (“Sysco”) issued a press release announcing its results of operations and financial condition for its fourth quarter and fiscal year ended June 27, 2020. Sysco hereby incorporates by reference herein the information set forth in its press release dated August 11, 2020 (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 June 29, 2019 and in Sysco’s Quarterly Report on Form 10-Q for the period ended March 28, 2020.
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.
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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<br> <br>Number | Description |
|---|---|
| 99.1 | Press Release dated August 11, 2020 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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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: August 11, 2020 | By: | /s/ Eve M. McFadden |
| Eve M. McFadden | ||
| Senior Vice President, Legal, General Counsel and Corporate Secretary |
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EX-99.1
Exhibit 99.1
SYSCO REPORTS FOURTH QUARTER and FULL YEAR 2020 RESULTS
THE COMPANY IS MAKING SUBSTANTIAL PROGRESS ON A BOLD TRANSFORMATION THAT WILL ENABLE THE COMPANY TO IMPROVE HOW IT SERVES CUSTOMERS,DIFFERENTIATE FROM COMPETITORS, AND TRANSFORM THE INDUSTRY
HOUSTON, August 11, 2020 - Sysco Corporation (NYSE: SYY) today announced financial results for its 13-week fourth fiscal quarter and its fiscal year ended June 27, 2020.
Fourth Quarter Fiscal 2020 Highlights
| • | Sales decreased 42.7% to $8.9 billion |
|---|---|
| • | Gross profit decreased 47.4% to $1.6 billion; gross margin decreased 159 basis points |
| --- | --- |
| • | Operating income (loss) decreased 173.8% to $(531.6) million; adjusted*^1^* operating income (loss) decreased 104.1% to $(33.9) million |
| --- | --- |
| • | Earnings (loss) per share (“EPS”) decreased $2.25 to $(1.22); adjusted¹ EPS decreased $1.39<br>to $(0.29) |
| --- | --- |
Fiscal 2020 Highlights
| • | Sales decreased 12.0% to $52.9 billion |
|---|---|
| • | Gross profit decreased 13.2% to $9.9 billion; gross margin decreased 26 basis points |
| --- | --- |
| • | Operating income decreased 67.8% to $749.5 million; adjusted*^1^* operating income decreased 37.4% to $1.7 billion |
| --- | --- |
| • | EPS decreased $2.78 to $0.42; adjusted¹ EPS decreased $1.54 to $2.01 |
| --- | --- |
“I am immensely proud of the actions taken by the Sysco team to manage our business during this time of crisis, specifically led by our associates’ focus and agility when launching strategic transformational initiatives,” said Kevin Hourican, Sysco’s president and chief executive officer. “While our fourth quarter and fiscal 2020 results were significantly impacted by the COVID-19 pandemic, we quickly responded by strengthening our balance sheet, adding new and different types of customers, and strategically committing resources to plan for the eventual return of demand. Our quarterly results came in notably better than we anticipated. More importantly, we are confident that the transformational steps we are taking better position Sysco to meet the evolving needs of our customers and the marketplace as we emerge from this crisis.”
With concerted effort, we have continued to manage through the COVID-19 pandemic by leveraging our salesforce to drive incremental business and actively prepare for the return of food-away-from-home demand. As we move forward, our leadership is turning the page and deploying substantial business transformation initiatives that will improve how we serve our customers and run our business. We are also proud to continue our charitable programs by delivering 30 million meals to help fight hunger in the communities we serve.
| ¹ | Earnings (Loss) Per Share (EPS) are shown on a diluted basis unless otherwise specified. Adjusted financialresults exclude certain items, which primarily include excess bad debt expense, goodwill impairment charges, restructuring costs, transformational project costs and acquisition-related costs. Specific to EPS, this year’s Certain Items includethe impact of an impairment on assets held for sale and last year’s Certain Items include the gain on the sale of Iowa Premium, LLC (“Iowa Premium”) and the impact of recognizing a foreign tax credit. Reconciliations of all non-GAAP measures are included at the end of this release. |
|---|
Our customers continue to face uncertainty as COVID-19 outbreaks affect their businesses. In this challenging environment, we are utilizing our strong capabilities to help restaurant partners succeed now and into the future. With our efforts, restaurants are reshaping food-away-from-home models through our restaurant resources, which include the virtual restaurant readiness tool and the bundled restaurant operator toolkits. Our tools provide solutions associated with meal kits, safety and sanitation, contactless menus, and curbside/takeout. We are proud to highlight that we have successfully helped convert over 16,000 restaurants into food marketplaces, and we believe that restaurant operators who have partnered with Sysco are better equipped to improve their sales and profitability.
Fourth Quarter Fiscal 2020 Results
U.S. FoodserviceOperations
Sales for the fourth quarter were $6.1 billion, a decrease of 42.8% compared to the same period last year. Local case volume within U.S. Broadline operations decreased 38.7% for the fourth quarter, of which a decrease of 39.4% was organic, while total case volume within U.S. Broadline operations decreased 41.5%, of which a decrease of 41.9% was organic.
Gross profit decreased 45.7% to $1.2 billion, and gross margin decreased 102 basis points to 19.1%, compared to the same period last year. Food cost inflation was relatively flat in U.S. Broadline as measured by the estimated change in Sysco’s product costs, as a result of inflationary pressure primarily in the meat category, specifically beef, offset by deflation in the poultry and frozen categories.
Operating expenses decreased $196.3 million, or 14.9%, compared to the same period last year. Adjusted operating expenses decreased $323.6 million, or 24.4%, compared to the same period last year.
Operating income was $40.6 million, a decrease of $786.0 million, or 95.1%, compared to the same period last year. Adjusted operating income was $164.9 million, a decrease of $658.7 million, or 80.0%, compared to the same period last year.
International Foodservice Operations
Sales for the fourth quarter were $1.4 billion, a decrease of 53.4% compared to the same period last year. On a constant currency basis, sales for the fourth quarter were $1.4 billion, a decrease of 51.9% compared to the same period last year. Foreign exchange rates negatively affected International Foodservice Operations sales by 1.5% and total Sysco sales by 0.3% during the quarter.
Gross profit decreased 57.7% to $263.0 million, and gross margin decreased 193 basis points to 19.3%, in each case as compared to the same period last year. On a constant currency basis, gross profit decreased 56.4% to $270.9 million. Foreign exchange rates negatively affected International Foodservice Operations gross profit by 1.3% and total Sysco gross profit by 0.3% during the quarter.
Operating expenses increased $82.1 million, or 14.7%, compared to the same period last year. Adjusted operating expenses decreased $170.3 million, or 33.8%, compared to the same period last year. On a constant currency basis, adjusted operating expenses decreased $159.3 million, or 31.6%, compared to the same period last year. Foreign exchange rates positively affected International Foodservice Operations operating expense by 2.2% and total Sysco operating expense by 0.6% during the quarter.
The international segment delivered an operating loss of $377.3 million, a decrease of $440.7 million compared to the same period last year. Adjusted operating loss was $70.0 million, a decrease of $188.3 million compared to the same period last year. On a constant currency basis, adjusted operating loss was $73.1 million, a decrease of $191.4 million, or 161.8%, compared to the same period last year.
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Foreign exchange rates positively affected International Foodservice Operations operating income by 2.6% and total Sysco operating income by 0.4% during the quarter.
Fiscal 2020 Results
U.S. Foodservice Operations
Sales for fiscal 2020 were $36.8 billion, a decrease of 10.9% compared to the prior year. Local case volume within U.S. Broadline operations decreased 9.6% for fiscal 2020, of which a decrease of 10.6% was organic, while total case volume within U.S. Broadline operations decreased 11.2%, of which a decrease of 11.7% was organic.
Gross profit decreased 12.1% to $7.3 billion, and gross margin decreased 25 basis points to 19.7%, compared in each case to the prior year. Food cost inflation was 1.8% in U.S. Broadline, as measured by the estimated change in Sysco’s product costs, primarily in the dairy and meat categories.
Operating expenses decreased $5.7 million, or 0.1%, compared to the prior year. Adjusted operating expenses decreased $246.5 million, or 4.7%, compared to the prior year.
Operating income was $2.0 billion, a decrease of $988.6 million, or 33.0%, compared to the prior year. Adjusted operating income was $2.2 billion, a decrease of $747.8 million, or 25.0%, compared to the prior year.
International Foodservice Operations
Sales for fiscal 2020 were $9.7 billion, a decrease of $1.8 billion, or 15.8%, compared to the prior year. On a constant currency basis, sales for fiscal 2020 were $9.9 billion, a decrease of 14.1% compared to the prior year. Foreign exchange rates negatively affected International Foodservice Operations sales by 1.7% and total Sysco sales by 0.5% during the year.
Gross profit decreased 18.3% to $2.0 billion, and gross margin decreased 60 basis points to 20.2%, in each case as compared to the prior year. On a constant currency basis, gross profit decreased 16.5% to $2.0 billion, as compared to the prior year.
Operating expenses increased $59.9 million, or 2.6%, compared to the prior year. Adjusted operating expenses decreased $190.2 million, or 9.3%, compared to the prior year. On a constant currency basis, adjusted operating expenses decreased $144.7 million, or 7.1%, compared to the prior year.
The international segment delivered an operating loss of $371.4 million, a decrease of $496.9 million compared to the prior year. Adjusted operating income was $108.0 million, a decrease of $246.8 million, or 69.6%, compared to the prior year. On a constant currency basis, adjusted operating income was $105.6 million, a decrease of $249.2 million, or 70.2%, compared to the prior year. Foreign exchange rates positively affected total Sysco operating income during fiscal 2020 by 0.1%.
Balance Sheet, Capital Spending and Cash Flow
Capital expenditures, net of proceeds from sales of plant and equipment, for fiscal 2020 were $20.3 million higher compared to the prior year.
Cash flow from operations was $1.6 billion for fiscal 2020, which was $792.5 million lower compared to the prior year. Free cash flow*^2^* for fiscal 2020 was $927.0 million, which was $812.8 million lower compared to the prior year.
| ^2^ | Free cash flow is a non-GAAP measure that represents net cashprovided from operating activities less purchases of plant and equipment and includes proceeds from sales of plant and equipment. Reconciliations for all non-GAAP measures are included at the end of thisrelease. |
|---|
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Conference Call & Webcast
Sysco will host a conference call to review the company’s fourth quarter fiscal 2020 financial results on Tuesday, August 11, 2020, at 10:00 a.m. Eastern. 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 | 52-Week Period Ended | |||||
|---|---|---|---|---|---|---|
| June 27, 2020 | June 27, 2020 | |||||
| Financial Comparison: | ||||||
| Sales | 8.9 billion | -42.7% | 52.9 billion | -12.0% | ||
| Gross profit | 1.6 billion | -47.4% | 9.9 billion | -13.2% | ||
| Gross Margin | 17.66% | -159 bps | 18.72% | -26 bps | ||
| GAAP: | ||||||
| Operating expenses | 2.1 billion | -7.1% | 9.2 billion | 0.8% | ||
| Certain Items | (497.7) million | NM | (962.5) million | 138.8% | ||
| Operating (Loss) Income | (531.6) million | -173.8% | 749.5 million | -67.8% | ||
| Operating Margin | (6.00)% | -1065 bps | 1.42% | -246 bps | ||
| Certain Items in Other expense (income), net | (47.0) million | -170.8% | (47.0) million | -170.8% | ||
| Net (Loss) Earnings | (618.4) million | -215.4% | 215.5 million | -87.1% | ||
| Diluted (Loss) Earnings Per Share | (1.22) | -218.4% | 0.42 | -86.9% | ||
| Non-GAAP^(1)^: | ||||||
| Operating Expenses | 1.6 billion | -26.0% | 8.2 billion | -5.6% | ||
| Operating (Loss) Income | (33.9) million | -104.1% | 1.7 billion | -37.4% | ||
| Operating Margin | (0.38)% | -567 bps | 3.24% | -131 bps | ||
| Net (Loss) Earnings | (147.8) million | -125.8% | 1.0 billion | -44.4% | ||
| Diluted (Loss) Earnings Per Share<br>^(2)^ | (0.29) | -126.4% | 2.01 | -43.4% | ||
| Case Growth: | ||||||
| U.S. Broadline | -41.5% | -11.2% | ||||
| Local | -38.7% | -9.6% | ||||
| Sysco Brand Sales as a % of Cases: | ||||||
| U.S. Broadline | 38.46% | -2 bps | 38.48% | 39 bps | ||
| Local | 45.19% | -239 bps | 46.84% | -24 bps |
All values are in US Dollars.
Note:
| ^(1)^ | A reconciliation of non-GAAP measures is included at the end of this<br>release. |
|---|---|
| ^(2)^ | Individual components in the table above may not sum to the totals due to the rounding. |
| --- | --- |
Forward-Looking Statements
Statements made in this press release or in our earnings call for the fourth quarter of fiscal 2020 that look forward in time or that express management’s beliefs, expectations or hopes are forward-looking statements within the meaning of 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: the effect, impact, potential duration or other implications of the recent outbreak of a novel strain of coronavirus (“COVID-19”) and any expectations we may have with respect thereto; our expectations regarding our ability to manage the current downturn and capitalize on our position as the industry leader as the global economy recovers; our expectations regarding future market share gains; our expectations regarding the effects of our business transformation initiatives, including on our ability to increase our share of customer spending and to increase sales in premium products, and on our ability to benefit from our efforts to centralize key customer support functions for large and/or national accounts; our belief that our transformation initiatives will drive future growth; our expectations regarding our efforts to regionalize our operations and the benefits to our company from regionalization; our expectations regarding our investment capability to build inventory and set up new customers; our plans to leverage technology improvements to enable reductions in our workforce without compromising service or quality; our expectations regarding our company, and our ability to attract and serve new customers, following the COVID-19 crisis; our plans to remove structural expense from our company’s operations; our expectations regarding savings starting in fiscal 2022 from additional cost improvement opportunities; the effects of our planned investments in digital technology; our expectations regarding the timing of improvements in the economy following the COVID-19 crisis; our expectations that our work to accelerate growth will return to pre-COVID levels as demand resurges; our expectations that our investments in technology and our business will allow for future growth and exceptional customer service; our belief that the steps undertaken as part of our management of the COVID-19 crisis to date will help us retain and win additional business from our
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independent restaurant customers beyond the pandemic; our expectations regarding the impact of our strategy on our future operations, including on the service we provide our customers and on our ability to differentiate Sysco from other companies in our industry; our expectations regarding our ability to increase profitability for SYGMA; our expectations regarding our ability to leverage operating expense growth to gross profit growth; our expectations regarding our investments across Europe, including, but not limited to, the integration of Brakes France and Davigel to Sysco France, including our ability to continue to succeed in the French marketplace; expectations regarding growth opportunities in Europe; expectations regarding growth opportunities in Latin America; our ability to deliver against our strategic priorities, which we believe will provide excellent customer service and improve our overall performance; statements regarding economic trends in the United States and abroad; our expectations regarding the amount of our capital expenditures in fiscal 2021; our expectations regarding the deployment of capital proceeds that Sysco currently holds; our expectations regarding the effects of our divestiture of our CAKE business; our plans regarding the suspension of our share buyback position throughout fiscal 2021; our expectations regarding gross margins during fiscal 2021; and our expectations regarding our overall effective tax rate in fiscal 2021.
The success of our plans and expectations regarding our operating performance are subject to the general risks associated with our business, including the risks of interruption of supplies due to lack of long-term contracts, severe weather, crop conditions, work stoppages, intense competition, technology disruptions, dependence on large, long-term regional and national customers, inflation risks, the impact of fuel prices, adverse publicity, labor issues, political or financial instability, trade restrictions, tariffs, currency exchange rates, transport capacity and costs and other factors relating to foreign trade, any or all of which could delay our receipt of product or increase our input costs. Risks and uncertainties also include the impact and effects of public health crises, pandemics and epidemics, such as the recent outbreak of COVID-19, and the adverse impact thereof on our business, financial condition and results of operations, including, but not limited to, our growth, product costs, supply chain, labor availability, logistical capabilities, customer demand for our products and industry demand generally, consumer spending, our liquidity, the price of our securities and trading markets with respect thereto, our credit ratings, our ability to maintain compliance with the covenants in our credit agreement, our ability to access capital markets, and the global economy and financial markets generally. Risks and uncertainties also include risks impacting the economy generally, including the risks that the current general economic conditions will deteriorate, or consumer confidence in the economy or consumer spending, particularly on food-away-from-home, may decline. Market conditions may not improve. Competition and the impact of GPOs may reduce our margins and make it difficult for us to maintain our market share, growth rate and profitability. We may not be able to fully compensate for increases in fuel costs, and fuel hedging arrangements intended to contain fuel costs could result in above market fuel costs. Our ability to meet our long-term strategic objectives depends on our ability to grow gross profit, leverage our supply chain costs and reduce administrative costs. This will depend largely on the success of our various business initiatives, including efforts related to revenue management, expense management, our digital e-commerce strategy and any efforts related to restructuring or the reduction of administrative costs. There are various risks related to these efforts, including the risk that if sales from our locally managed customers do not grow at the same rate as sales from regional and national customers, or if we are unable to continue to accelerate local case growth, our gross margins may decline; the risk that we are unlikely to be able to predict inflation over the long term, and lower inflation is likely to produce lower gross profit; the risk that our efforts to modify truck routing, including our small truck initiative, in order to reduce outbound transportation costs may not be effective; the risk that our efforts to mitigate increases in warehouse costs may be unsuccessful; the risk that we may not be able to accelerate and/or identify additional administrative cost savings in order to compensate for any gross profit or supply chain cost leverage challenges; the risk that these efforts may not provide the expected benefits in our anticipated time frame, if at all, and may prove costlier than expected; the risk that the actual costs of any initiatives may be greater or less than currently expected; and the risk of adverse effects to our business, results of operations and liquidity if past and future undertakings, and the associated changes to our business, do not prove to be cost effective or do not result in the cost savings and other benefits at the levels that we anticipate. Our plans related to and the timing of any initiatives are subject to change at any time based on management’s subjective evaluation of our overall business needs. If we are unable to realize the anticipated benefits from our efforts, we could become cost disadvantaged in the marketplace, and our competitiveness and our profitability could decrease. Adverse publicity about us or lack of confidence in our products could negatively impact our reputation and reduce earnings. Capital expenditures may vary based on changes in business plans and other factors, including risks related to the implementation of various initiatives, the timing and successful completion of acquisitions, construction schedules and the possibility that other cash requirements could result in delays or cancellations of capital spending. Periods of significant or prolonged inflation or deflation, either overall or in certain product categories, can have a negative impact on us and our customers, as high food costs can reduce consumer spending in the food-away-from-home market, and may negatively impact our sales, gross profit, operating income and earnings, and periods of deflation can be difficult to manage effectively. Fluctuations in inflation and deflation, as well as fluctuations in the value of foreign currencies, are beyond our control and subject to broader market forces. Expanding into international markets presents unique challenges and risks, including compliance with local laws, regulations and customs and the impact of local political and economic conditions, including the impact of Brexit and the “yellow vest” protests in France against a fuel tax increase, pension reform and the French government, and such expansion efforts may not be successful. Any business that we acquire may not perform as expected, and we may not realize the anticipated benefits of our acquisitions. Expectations regarding the financial statement impact of any acquisitions may change based on management’s subjective evaluation. A divestiture of one or more of our businesses may not provide the anticipated effects on our operations. Meeting our dividend target objectives depends on our level of earnings, available cash and the success of our various strategic initiatives. Changes in applicable tax laws or regulations and the resolution of tax disputes could negatively affect our financial results. We rely on technology in our business and any cybersecurity incident, other technology disruption or delay in implementing new technology could negatively affect our business and our relationships with customers. For a discussion of additional factors impacting Sysco’s business, see our Annual Report on Form 10-K for the year ended June 29, 2019 and our Quarterly Report on Form 10-Q for the period ended March 28, 2020, each 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.
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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 57,000 associates, the company operates approximately 326 distribution facilities worldwide and serves more than 625,000 customer locations. For fiscal 2020 that ended June 27, 2020, the company generated sales of more than $52 billion. Information about our CSR program, including Sysco’s 2019 Corporate Social Responsibility Report, can be found at sysco.com/csr2019report.
For more information, visit www.sysco.com or connect with Sysco on Facebook at www.facebook.com/SyscoCorporation or Twitter at https://twitter.com/Sysco. 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. Investors should also follow us at www.twitter.com/SyscoStock and download the Sysco IR App, available on the iTunes App Store and the Google Play Market. 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.
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Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED RESULTS OF OPERATIONS
(In Thousands,Except for Share and Per Share Data)
| 13-Week Period Ended | 52-Week Period Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Jun. 27, 2020 | Jun. 29, 2019 | Jun. 27, 2020 | Jun. 29, 2019 | ||||||||
| Sales | $ | 8,866,564 | $ | 15,474,862 | $ | 52,893,310 | $ | 60,113,922 | |||
| Cost of sales | 7,300,909 | 12,495,670 | 42,991,646 | 48,704,935 | |||||||
| Gross profit | 1,565,655 | 2,979,192 | 9,901,664 | 11,408,987 | |||||||
| Operating expenses | 2,097,235 | 2,258,662 | 9,152,159 | 9,078,837 | |||||||
| Operating (loss) income | (531,580 | ) | 720,530 | 749,505 | 2,330,150 | ||||||
| Interest expense | 164,269 | 89,780 | 408,220 | 360,423 | |||||||
| Other expense (income), net | 40,396 | (51,558 | ) | 47,901 | (36,109 | ) | |||||
| (Loss) earnings before income taxes | (736,245 | ) | 682,308 | 293,384 | 2,005,836 | ||||||
| Income taxes | (117,826 | ) | 146,542 | 77,909 | 331,565 | ||||||
| Net (loss) earnings | $ | (618,419 | ) | $ | 535,766 | $ | 215,475 | $ | 1,674,271 | ||
| Net (loss) earnings: | |||||||||||
| Basic (loss) earnings per share | $ | (1.22 | ) | $ | 1.04 | $ | 0.42 | $ | 3.24 | ||
| Diluted (loss) earnings per share | (1.22 | ) | 1.03 | 0.42 | 3.20 | ||||||
| Average shares outstanding | 508,296,452 | 514,646,741 | 510,121,071 | 516,890,581 | |||||||
| Diluted shares outstanding | 508,296,452 | 520,060,241 | 514,025,974 | 523,381,124 |
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Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except forShare Data)
| June 29, 2019 | |||||
|---|---|---|---|---|---|
| ASSETS | **** | ||||
| Current assets | |||||
| Cash and cash equivalents | 6,059,427 | $ | 513,460 | ||
| Accounts and notes receivable, less allowances of 334,810 and 28,176 | 2,893,551 | 4,181,696 | |||
| Inventories | 3,095,085 | 3,216,034 | |||
| Prepaid expenses and other current assets | 192,163 | 210,582 | |||
| Income tax receivable | 108,006 | 19,733 | |||
| Total current assets | 12,348,232 | 8,141,505 | |||
| Plant and equipment at cost, less accumulated depreciation | 4,458,567 | 4,501,705 | |||
| Other long-term assets | |||||
| Goodwill | 3,732,469 | 3,896,226 | |||
| Intangibles, less amortization | 780,172 | 857,301 | |||
| Deferred income taxes | 194,115 | 80,760 | |||
| Operating lease<br>right-of-use assets, net | 603,616 | — | |||
| Other assets | 511,095 | 489,025 | |||
| Total other long-term assets | 5,821,467 | 5,323,312 | |||
| Total assets | 22,628,266 | $ | 17,966,522 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | **** | ||||
| Current liabilities | |||||
| Notes payable | 2,266 | $ | 3,957 | ||
| Accounts payable | 3,447,065 | 4,314,620 | |||
| Accrued expenses | 1,616,289 | 1,729,941 | |||
| Accrued income taxes | 2,938 | 17,343 | |||
| Current operating lease liabilities | 107,167 | — | |||
| Current maturities of long-term debt | 1,542,128 | 37,322 | |||
| Total current liabilities | 6,717,853 | 6,103,183 | |||
| Long-term liabilities | |||||
| Long-term debt | 12,902,485 | 8,122,058 | |||
| Deferred income taxes | 86,601 | 172,232 | |||
| Long-term operating lease liabilities | 523,496 | — | |||
| Other long-term liabilities | 1,204,953 | 1,031,020 | |||
| Total long-term liabilities | 14,717,535 | 9,325,310 | |||
| Commitments and contingencies | |||||
| Noncontrolling interest | 34,265 | 35,426 | |||
| 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<br>shares | 765,175 | 765,175 | |||
| Paid-in capital | 1,506,901 | 1,457,419 | |||
| Retained earnings | 10,563,008 | 11,229,679 | |||
| Accumulated other comprehensive loss | (1,710,881 | ) | (1,599,729 | ) | |
| Treasury stock at cost, 256,915,825 and 252,297,926 shares | (9,965,590 | ) | (9,349,941 | ) | |
| Total shareholders’ equity | 1,158,613 | 2,502,603 | |||
| Total liabilities and shareholders’ equity | 22,628,266 | $ | 17,966,522 |
All values are in US Dollars.
8
Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS
(In Thousands)
| 52-Week Period Ended | ||||||
|---|---|---|---|---|---|---|
| Jun. 27, 2020 | Jun. 29, 2019 | |||||
| Cash flows from operating activities: | ||||||
| Net earnings | $ | 215,475 | $ | 1,674,271 | ||
| Adjustments to reconcile net earnings to cash provided by operating activities: | ||||||
| Share-based compensation expense | 42,234 | 104,904 | ||||
| Depreciation and amortization | 805,765 | 763,935 | ||||
| Operating lease asset amortization | 108,376 | — | ||||
| Amortization of debt issuance and other debt-related costs | 22,663 | 21,382 | ||||
| Goodwill impairment | 203,206 | — | ||||
| Impairment of assets held for sale | 55,942 | — | ||||
| Gain on sale of business | — | (66,309 | ) | |||
| Deferred income taxes | (191,317 | ) | (126,719 | ) | ||
| Provision for losses on receivables | 404,158 | 62,946 | ||||
| Other non-cash items | (525 | ) | (3,172 | ) | ||
| Additional changes in certain assets and liabilities, net of effect of businesses<br>acquired: | ||||||
| Decrease (increase) in receivables | 915,717 | (203,458 | ) | |||
| Decrease (increase) in inventories | 114,563 | (114,667 | ) | |||
| Decrease (increase) in prepaid expenses and other current assets | 9,835 | (18,535 | ) | |||
| (Decrease) increase in accounts payable | (834,118 | ) | 246,420 | |||
| (Decrease) increase in accrued expenses | (139,891 | ) | 137,517 | |||
| (Decrease) in operating lease liabilities | (124,040 | ) | — | |||
| (Decrease) increase in accrued income taxes | (102,678 | ) | 4,929 | |||
| Decrease (increase) in other assets | 20,666 | (21,346 | ) | |||
| Increase (decrease) in other long-term liabilities | 92,649 | (50,891 | ) | |||
| Net cash provided by operating activities | 1,618,680 | 2,411,207 | ||||
| Cash flows from investing activities: | ||||||
| Additions to plant and equipment | (720,423 | ) | (692,391 | ) | ||
| Proceeds from sales of plant and equipment | 28,717 | 20,941 | ||||
| Acquisition of businesses, net of cash acquired | (142,780 | ) | (106,616 | ) | ||
| Proceeds from sale of business | — | 149,879 | ||||
| Purchase of marketable securities | (11,424 | ) | (116,440 | ) | ||
| Proceeds from sales of marketable securities | 20,532 | — | ||||
| Other investing activities ^(1)^ | 69,071 | 1,772 | ||||
| Net cash used for investing activities | (756,307 | ) | (742,855 | ) | ||
| Cash flows from financing activities: | ||||||
| Bank and commercial paper borrowings, net | 616,657 | 132,100 | ||||
| Other debt borrowings | 6,783,562 | 388,180 | ||||
| Other debt repayments | (1,119,232 | ) | (790,250 | ) | ||
| Proceeds from stock option exercises | 227,602 | 253,135 | ||||
| Treasury stock purchases | (844,699 | ) | (1,022,033 | ) | ||
| Dividends paid | (856,312 | ) | (775,430 | ) | ||
| Other financing activities ^(2)^ | (87,778 | ) | (22,976 | ) | ||
| Net cash provided by (used for) for financing activities | 4,719,800 | (1,837,274 | ) | |||
| Effect of exchange rates on cash, cash equivalents and restricted cash | (18,848 | ) | (14,677 | ) | ||
| Net increase (decrease) in cash and cash equivalents<br>^(3)^ | 5,563,325 | (183,599 | ) | |||
| Cash, cash equivalents and restricted cash at beginning of period | 532,245 | 715,844 | ||||
| Cash, cash equivalents and restricted cash at end of period ^(3)^ | $ | 6,095,570 | $ | 532,245 |
9
| Supplemental disclosures of cash flow information: | ||||
|---|---|---|---|---|
| Cash paid during the period for: | ||||
| Interest | $ | 325,308 | $ | 346,670 |
| Income taxes | 376,609 | 531,103 | ||
| ^(1)^ | Change primarily includes proceeds from the settlement of net investment hedges and proceeds from the<br>settlement of corporate-owned life insurance policies. | |||
| --- | --- | |||
| ^(2)^ | Change includes cash paid for shares withheld to cover taxes, debt issuance costs and other financing<br>activities. | |||
| --- | --- | |||
| ^(3)^ | Change includes restricted cash included within other assets in the Consolidated Balance Sheet.<br> | |||
| --- | --- |
10
Sysco Corporation and its Consolidated Subsidiaries
Non-GAAP Reconciliation (Unaudited)
Impact of Certain Items
Sysco’s results of operations for fiscal 2020 and fiscal 2019 were impacted by restructuring and transformational project costs consisting of: (1) expenses associated with our various transformation initiatives; (2) severance and facility closure charges; and (3) restructuring charges. All acquisition-related costs in fiscal 2020 and fiscal 2019 that have been designated as Certain Items relate to the Brakes Acquisition. These include acquisition-related intangible amortization expense. Fiscal 2020 results of operations were also negatively impacted by costs arising from the COVID-19 pandemic, the most significant including (1) excess bad debt expense, (2) goodwill impairment charges and (3) fixed asset impairment charges. Many of Sysco’s customers, including those in the restaurant, hospitality and education segments, are closed or operating at a substantially reduced volume due to governmental requirements for closures. Some of these customers have ceased paying their outstanding receivables, creating uncertainty as to their collectability. We have experienced an increase in past due receivables and have recognized additional bad debt charges. We have estimated uncollectible amounts by applying write-off percentages based on an aging of past due receivables. These write-off percentages are based in part on historical loss experience, including losses incurred during times of local and regional disasters. We have estimated the amount attributable to the impact of the COVID-19 pandemic on our customers by comparing our June allowance results to average results for periods ended prior to the onset of the COVID-19 pandemic, with excess amounts being a reasonable estimate of what the reserve for the allowance for doubtful accounts would have been for fiscal 2020, absent the impact of the COVID-19 pandemic. Because the COVID-19 pandemic is more widespread and longer in duration than historical disasters impacting our business, it is possible that actual uncollectible amounts will differ and additional charges may be required in fiscal 2021. Although Sysco traditionally incurs bad debt expense, the magnitude of such expenses that we have experienced is not indicative of our normal operations. Our adjusted results have not been normalized in a manner that would exclude the full impact of the COVID-19 pandemic on our business. As such, Sysco has not adjusted its results for lost sales, inventory write-offs or other costs associated with the COVID-19 pandemic not previously stated. Fiscal 2019 Certain Items include the gain on the sale of Iowa Premium and the impact of recognizing a foreign tax credit.
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 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, facilitating comparisons on a year-over-year basis and (2) removes those items that are difficult to predict and are often unanticipated and that, as a result, are difficult to include in analysts’ financial models and our investors’ expectations with any degree of specificity.
Although Sysco has a history of growth through acquisitions, the Brakes Group was significantly larger than the companies historically acquired by Sysco, with a proportionately greater impact on Sysco’s consolidated financial statements. Accordingly, Sysco is excluding from its non-GAAP financial measures for the relevant period solely those acquisition costs specific to the Brakes Acquisition. We believe this approach significantly enhances the comparability of Sysco’s results for fiscal 2020 and fiscal 2019.
Set forth below is a reconciliation of sales, operating expenses, operating income, interest expense, other income and 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.
11
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<br>Period EndedJun. 27, 2020 | 13-Week<br>Period EndedJun. 29, 2019 | Change inDollars | % Change | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Operating expenses (GAAP) | $ | 2,097,235 | $ | 2,258,662 | $ | (161,427 | ) | -7.1 | % | |||
| Impact of restructuring and transformational project costs ^(1)^ | (180,066 | ) | (77,753 | ) | (102,313 | ) | 131.6 | |||||
| Impact of acquisition-related costs<br>^(2)^ | (13,251 | ) | (19,789 | ) | 6,538 | -33.0 | ||||||
| Impact of excess bad debt expense | (169,903 | ) | — | (169,903 | ) | NM | ||||||
| Impact of goodwill impairment | (134,481 | ) | — | (134,481 | ) | NM | ||||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 1,599,534 | $ | 2,161,120 | $ | (561,586 | ) | -26.0 | % | |||
| Operating (loss) income (GAAP) | $ | (531,580 | ) | $ | 720,530 | $ | (1,252,110 | ) | -173.8 | % | ||
| Impact of restructuring and transformational project costs ^(1)^ | 180,066 | 77,753 | 102,313 | 131.6 | ||||||||
| Impact of acquisition-related costs<br>^(2)^ | 13,251 | 19,789 | (6,538 | ) | -33.0 | |||||||
| Impact of excess bad debt expense | 169,903 | — | 169,903 | NM | ||||||||
| Impact of goodwill impairment | 134,481 | — | 134,481 | NM | ||||||||
| Operating (loss) income adjusted for Certain Items(Non-GAAP) | $ | (33,879 | ) | $ | 818,072 | $ | (851,951 | ) | -104.1 | % | ||
| Other (income) expense (GAAP) | $ | 40,396 | $ | (51,558 | ) | $ | 91,954 | -178.4 | % | |||
| Impact of impairment on assets held for sale | (46,968 | ) | — | (46,968 | ) | NM | ||||||
| Impact of gain on sale of Iowa Premium | — | 66,309 | (66,309 | ) | NM | |||||||
| Other (income) expense (Non-GAAP) | $ | (6,572 | ) | $ | 14,751 | $ | (21,323 | ) | -144.6 | % | ||
| Net (loss) earnings (GAAP) | $ | (618,419 | ) | $ | 535,766 | $ | (1,154,185 | ) | -215.4 | % | ||
| Impact of restructuring and transformational project costs ^(1)^ | 180,066 | 77,753 | 102,313 | 131.6 | ||||||||
| Impact of acquisition-related costs<br>^(2)^ | 13,251 | 19,789 | (6,538 | ) | -33.0 | |||||||
| Impact of excess bad debt expense | 169,903 | — | 169,903 | NM | ||||||||
| Impact of goodwill impairment | 134,481 | — | 134,481 | NM | ||||||||
| Impact of impairment on assets held for sale | 46,968 | — | 46,968 | NM | ||||||||
| Impact of gain on sale of Iowa Premium | — | (66,309 | ) | 66,309 | NM | |||||||
| Tax impact of restructuring and transformational project costs ^(3)^ | (32,926 | ) | (16,891 | ) | (16,035 | ) | 94.9 | |||||
| Tax impact of acquisition-related costs<br>^(3)^ | 1,943 | (4,352 | ) | 6,295 | -144.6 | |||||||
| Tax impact of excess bad debt expense<br>^(3)^ | (30,454 | ) | — | (30,454 | ) | NM | ||||||
| Tax impact of impairment on assets held for sale<br>^(3)^ | (12,644 | ) | — | (12,644 | ) | NM | ||||||
| Tax impact of gain on sale of Iowa Premium<br>^(3)^ | — | 18,119 | (18,119 | ) | NM | |||||||
| Impact of France, U.K., and Sweden tax law changes | — | 6,464 | (6,464 | ) | NM | |||||||
| Impact of US transition tax | — | 2,631 | (2,631 | ) | NM | |||||||
| Net (loss) earnings adjusted for Certain Items(Non-GAAP) | $ | (147,831 | ) | $ | 572,970 | $ | (720,801 | ) | -125.8 | % | ||
| Diluted (loss) earnings per share (GAAP) | $ | (1.22 | ) | $ | 1.03 | $ | (2.25 | ) | -218.4 | % | ||
| Impact of restructuring and transformational project costs ^(1)^ | 0.35 | 0.15 | 0.20 | 133.3 | ||||||||
| Impact of acquisition-related costs<br>^(2)^ | 0.03 | 0.04 | (0.01 | ) | -25.0 | |||||||
| Impact of excess bad debt expense | 0.33 | — | 0.33 | NM | ||||||||
| Impact of goodwill impairment | 0.26 | — | 0.26 | NM | ||||||||
| Impact of impairment on assets held for sale | 0.09 | — | 0.09 | NM | ||||||||
| Impact of gain on sale of Iowa Premium | — | (0.13 | ) | 0.13 | NM | |||||||
| Tax impact of restructuring and transformational project costs ^(3)^ | (0.06 | ) | (0.03 | ) | (0.03 | ) | 100.0 | |||||
| Tax impact of acquisition-related costs<br>^(3)^ | — | (0.01 | ) | 0.01 | NM | |||||||
| Tax impact of excess bad debt expense<br>^(3)^ | (0.06 | ) | — | (0.06 | ) | NM | ||||||
| Tax impact of impairment on assets held for sale<br>^(3)^ | (0.02 | ) | — | (0.02 | ) | NM | ||||||
| Tax impact of gain on sale of Iowa Premium<br>^(3)^ | — | 0.03 | (0.03 | ) | NM | |||||||
| Impact of France, U.K. and Sweden tax law changes | — | 0.01 | (0.01 | ) | NM | |||||||
| Impact of US transition tax | — | 0.01 | (0.01 | ) | NM | |||||||
| Diluted EPS adjusted for Certain Items (Non-GAAP)^(4)^ | $ | (0.29 | ) | $ | 1.10 | $ | (1.39 | ) | -126.4 | % | ||
| Diluted shares outstanding | 508,296,452 | 520,060,241 |
12
| ^(1)^ | Fiscal 2020 includes $165 million related to restructuring, facility closure and severance charges, of<br>which $75 million relates to severance charges, and $15 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2019 includes $41 million related to<br>restructuring, facility closure and severance charges and $37 million related to various transformation initiative costs. |
|---|---|
| ^(2)^ | Fiscal 2020 and fiscal 2019 include $13 million and $19 million, respectively, related to intangible<br>amortization expense from the Brakes Acquisition, which is included in the results of International Foodservice. |
| --- | --- |
| ^(3)^ | The tax impact of adjustments for Certain Items are calculated by multiplying the pretax impact of each Certain<br>Item by the statutory rates in effect for each jurisdiction where the Certain Item was incurred. |
| --- | --- |
| ^(4)^ | Individual components of diluted earnings per share may not add up to the total presented due to rounding.<br>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.
13
Sysco Corporation and its Consolidated Subsidiaries
Non-GAAP Reconciliation (Unaudited)
Impact of Certain Items
(Dollars in Thousands, Except for Share and Per Share Data)
| 52-Week<br>Period EndedJun. 27, 2020 | 52-Week<br>Period EndedJun. 29, 2019 | Change inDollars | % Change | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Operating expenses (GAAP) | $ | 9,152,159 | $ | 9,078,837 | $ | 73,322 | 0.8 | % | ||||
| Impact of restructuring and transformational project costs ^(1)^ | (371,088 | ) | (325,300 | ) | (45,788 | ) | 14.1 | |||||
| Impact of acquisition-related costs<br>^(2)^ | (64,793 | ) | (77,832 | ) | 13,039 | -16.8 | ||||||
| Impact of excess bad debt expense | (323,403 | ) | — | (323,403 | ) | NM | ||||||
| Impact of goodwill impairment | (203,206 | ) | — | (203,206 | ) | NM | ||||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 8,189,669 | $ | 8,675,705 | $ | (486,036 | ) | -5.6 | % | |||
| Operating income (GAAP) | $ | 749,505 | $ | 2,330,150 | $ | (1,580,645 | ) | -67.8 | % | |||
| Impact of restructuring and transformational project costs ^(1)^ | 371,088 | 325,300 | 45,788 | 14.1 | ||||||||
| Impact of acquisition-related costs<br>^(2)^ | 64,793 | 77,832 | (13,039 | ) | -16.8 | |||||||
| Impact of excess bad debt expense | 323,403 | — | 323,403 | NM | ||||||||
| Impact of goodwill impairment | 203,206 | — | 203,206 | NM | ||||||||
| Operating income adjusted for Certain Items(Non-GAAP) | $ | 1,711,995 | $ | 2,733,282 | $ | (1,021,287 | ) | -37.4 | % | |||
| Other (income) expense (GAAP) | $ | 47,901 | $ | (36,109 | ) | $ | 84,010 | -232.7 | % | |||
| Impact of impairment on assets held for sale | (46,968 | ) | — | (46,968 | ) | NM | ||||||
| Impact of gain on sale of Iowa Premium | — | 66,309 | (66,309 | ) | NM | |||||||
| Other (income) expense (Non-GAAP) | $ | 933 | $ | 30,200 | $ | (29,267 | ) | -96.9 | % | |||
| Net earnings (GAAP) | $ | 215,475 | $ | 1,674,271 | $ | (1,458,796 | ) | -87.1 | % | |||
| Impact of restructuring and transformational project costs ^(1)^ | 371,088 | 325,300 | 45,788 | 14.1 | ||||||||
| Impact of acquisition-related costs<br>^(2)^ | 64,793 | 77,832 | (13,039 | ) | -16.8 | |||||||
| Impact of excess bad debt expense | 323,403 | — | 323,403 | NM | ||||||||
| Impact of goodwill impairment | 203,206 | — | 203,206 | NM | ||||||||
| Impact of impairment on assets held for sale | 46,968 | — | 46,968 | NM | ||||||||
| Impact of gain on sale of Iowa Premium | — | (66,309 | ) | 66,309 | NM | |||||||
| Tax impact of restructuring and transformational project costs ^(3)^ | (90,683 | ) | (81,722 | ) | (8,961 | ) | 11.0 | |||||
| Tax impact of acquisition-related costs<br>^(3)^ | (13,641 | ) | (19,553 | ) | 5,912 | -30.2 | ||||||
| Tax impact of excess bad debt expense<br>^(3)^ | (76,864 | ) | — | (76,864 | ) | NM | ||||||
| Tax impact of impairment on assets held for sale<br>^(3)^ | (12,644 | ) | — | (12,644 | ) | NM | ||||||
| Tax impact of gain on sale of Iowa Premium<br>^(3)^ | — | 18,119 | (18,119 | ) | NM | |||||||
| Impact of French tax rate change | 924 | — | 924 | NM | ||||||||
| Impact of foreign tax credit benefit | — | (95,067 | ) | 95,067 | NM | |||||||
| Impact of France, U.K., and Sweden tax law changes | — | 6,464 | (6,464 | ) | NM | |||||||
| Impact of US transition tax | — | 17,516 | (17,516 | ) | NM | |||||||
| Net earnings adjusted for Certain Items(Non-GAAP) | $ | 1,032,025 | $ | 1,856,851 | $ | (824,826 | ) | -44.4 | % | |||
| Diluted earnings per share (GAAP) | $ | 0.42 | $ | 3.20 | $ | (2.78 | ) | -86.9 | % | |||
| Impact of restructuring and transformational project costs ^(1)^ | 0.72 | 0.62 | 0.10 | 16.1 | ||||||||
| Impact of acquisition-related costs<br>^(2)^ | 0.13 | 0.15 | (0.02 | ) | -13.3 | |||||||
| Impact of excess bad debt expense | 0.63 | — | 0.63 | NM | ||||||||
| Impact of goodwill impairment | 0.40 | — | 0.40 | NM | ||||||||
| Impact of impairment on assets held for sale | 0.09 | — | 0.09 | NM | ||||||||
| Impact of gain on sale of Iowa Premium | — | (0.13 | ) | 0.13 | NM | |||||||
| Tax impact of restructuring and transformational project costs ^(3)^ | (0.18 | ) | (0.16 | ) | (0.02 | ) | 12.5 | |||||
| Tax impact of acquisition-related costs<br>^(3)^ | (0.03 | ) | (0.04 | ) | 0.01 | -25.0 | ||||||
| Tax impact of excess bad debt expense<br>^(3)^ | (0.15 | ) | — | (0.15 | ) | NM | ||||||
| Tax impact of impairment on assets held for sale<br>^(3)^ | (0.02 | ) | — | (0.02 | ) | NM | ||||||
| Tax impact of gain on sale of Iowa Premium<br>^(3)^ | — | 0.03 | (0.03 | ) | NM |
14
| Impact of foreign tax credit benefit | — | (0.18 | ) | 0.18 | NM | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Impact of France, U.K. and Sweden tax law changes | — | 0.01 | (0.01 | ) | NM | |||||
| Impact of US transition tax | — | 0.03 | (0.03 | ) | NM | |||||
| Diluted EPS adjusted for Certain Items (Non-GAAP)^(4)^ | $ | 2.01 | $ | 3.55 | $ | (1.54 | ) | -43.4 | % | |
| Diluted shares outstanding | 514,025,974 | 523,381,124 | ||||||||
| ^(1)^ | Fiscal 2020 includes $265 million related to restructuring, severance and facility closure charges, of<br>which $99 million relates to severance charges. Fiscal 2020 also includes $106 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2019 includes<br>$174 million related to severance, restructuring and facility closure charges in Europe and Canada and at Corporate, of which $61 million relates to our France restructuring (i.e. our integration of Brake France and Davigel into Sysco<br>France), and $151 million related to various transformation initiatives costs, of which $18 million relates to accelerated depreciation with regard to software that was replaced. | |||||||||
| --- | --- | |||||||||
| ^(2)^ | Fiscal 2020 and fiscal 2019 include $65 million and $77 million, respectively, related to intangible<br>amortization expense from the Brakes Acquisition, which is included in the results of International Foodservice and integration costs in fiscal 2019. | |||||||||
| --- | --- | |||||||||
| ^(3)^ | The tax impact of adjustments for Certain Items are calculated by multiplying the pretax impact of each Certain<br>Item by the statutory rates in effect for each jurisdiction where the Certain Item was incurred. | |||||||||
| --- | --- | |||||||||
| ^(4)^ | Individual components of diluted earnings per share may not add up to the total presented due to rounding.<br>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.
15
Sysco Corporation and its Consolidated Subsidiaries
Segment Results
Non-GAAP Reconciliation (Unaudited)
Impact of Certain Items on Applicable Segments
(Dollars in Thousands)
| 13-WeekPeriod EndedJun. 27, 2020 | 13-Week<br>Period EndedJun. 29, 2019 | Change inDollars | %/bpsChange | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| U.S. FOODSERVICE OPERATIONS | ||||||||||||
| Sales | $ | 6,114,931 | $ | 10,696,389 | $ | (4,581,458 | ) | -42.8 | % | |||
| Gross Profit | 1,165,551 | 2,147,852 | (982,301 | ) | -45.7 | % | ||||||
| Gross Margin | 19.06 | % | 20.08 | % | -102 bps | |||||||
| Operating expenses (GAAP) | $ | 1,124,986 | $ | 1,321,306 | $ | (196,320 | ) | -14.9 | % | |||
| Impact of restructuring and transformational project costs ^(1)^ | (938 | ) | 2,927 | (3,865 | ) | -132.0 | ||||||
| Impact of excess bad debt expense | (123,424 | ) | — | (123,424 | ) | NM | ||||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 1,000,624 | $ | 1,324,233 | $ | (323,609 | ) | -24.4 | % | |||
| Operating income (GAAP) | $ | 40,565 | $ | 826,546 | $ | (785,981 | ) | -95.1 | % | |||
| Impact of restructuring and transformational project costs ^(1)^ | 938 | (2,927 | ) | 3,865 | -132.0 | |||||||
| Impact of excess bad debt expense | 123,424 | — | 123,424 | NM | ||||||||
| Operating income adjusted for Certain Items(Non-GAAP) | $ | 164,927 | $ | 823,619 | $ | (658,692 | ) | -80.0 | % | |||
| INTERNATIONAL FOODSERVICE OPERATIONS | ||||||||||||
| Sales (GAAP) | $ | 1,361,109 | $ | 2,923,601 | $ | (1,562,492 | ) | -53.4 | % | |||
| Impact of currency fluctuations ^(2)^ | 44,508 | — | 44,508 | -1.5 | ||||||||
| Comparable sales using a constant currency basis(Non-GAAP) | $ | 1,405,617 | $ | 2,923,601 | $ | (1,517,984 | ) | -51.9 | % | |||
| Gross Profit (GAAP) | $ | 263,037 | $ | 621,636 | $ | (358,599 | ) | -57.7 | % | |||
| Impact of currency fluctuations ^(2)^ | 7,887 | — | 7,887 | -1.3 | ||||||||
| Comparable gross profit using a constant currency basis(Non-GAAP) | $ | 270,924 | $ | 621,636 | $ | (350,712 | ) | -56.4 | % | |||
| Gross Margin (GAAP) | 19.33 | % | 21.26 | % | -193 bps | |||||||
| Impact of currency fluctuations ^(2)^ | (0.06 | ) | — | -6 bps | ||||||||
| Comparable gross margin using a constant currency basis(Non-GAAP) | 19.27 | % | 21.26 | % | -199 bps | |||||||
| Operating expenses (GAAP) | $ | 640,339 | $ | 558,193 | $ | 82,146 | 14.7 | % | ||||
| Impact of restructuring and transformational project costs ^(3)^ | (117,597 | ) | (35,533 | ) | (82,064 | ) | 231.0 | |||||
| Impact of acquisition-related costs<br>^(4)^ | (13,251 | ) | (19,305 | ) | 6,054 | -31.4 | ||||||
| Impact of excess bad debt expense | (42,002 | ) | — | (42,002 | ) | NM | ||||||
| Impact of goodwill impairment | (134,481 | ) | — | (134,481 | ) | NM | ||||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 333,008 | $ | 503,355 | $ | (170,347 | ) | -33.8 | % | |||
| Impact of currency fluctuations ^(2)^ | 11,058 | — | 11,058 | -2.2 | ||||||||
| Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | 344,066 | $ | 503,355 | $ | (159,289 | ) | -31.6 | % | |||
| Operating (loss) income (GAAP) | $ | (377,302 | ) | $ | 63,443 | $ | (440,745 | ) | NM | |||
| Impact of restructuring and transformational project costs ^(3)^ | 117,597 | 35,533 | 82,064 | 231.0 | ||||||||
| Impact of acquisition-related costs<br>^(4)^ | 13,251 | 19,305 | (6,054 | ) | -31.4 | |||||||
| Impact of excess bad debt expense | 42,002 | — | 42,002 | NM | ||||||||
| Impact of goodwill impairment | 134,481 | — | 134,481 | NM | ||||||||
| Operating (loss) income adjusted for Certain Items(Non-GAAP) | $ | (69,971 | ) | $ | 118,281 | $ | (188,252 | ) | -159.2 | % | ||
| Impact of currency fluctuations ^(2)^ | (3,170 | ) | — | (3,170 | ) | 2.6 | ||||||
| Comparable operating (loss) income adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | (73,141 | ) | $ | 118,281 | $ | (191,422 | ) | -161.8 | % |
16
| SYGMA | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Sales | $ | 1,288,928 | $ | 1,548,952 | $ | (260,024 | ) | -16.8 | % | ||
| Gross Profit | 114,446 | 128,860 | (14,414 | ) | -11.2 | % | |||||
| Gross Margin | 8.88 | % | 8.32 | % | 56 bps | ||||||
| Operating expenses (GAAP) | $ | 105,298 | $ | 118,293 | $ | (12,995 | ) | -11.0 | % | ||
| Impact of restructuring and transformational project costs ^(5)^ | (2,131 | ) | (2,241 | ) | 110 | -4.9 | |||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 103,167 | $ | 116,052 | $ | (12,885 | ) | -11.1 | % | ||
| Operating income (GAAP) | $ | 9,148 | $ | 10,567 | $ | (1,419 | ) | -13.4 | % | ||
| Impact of restructuring and transformational project costs ^(5)^ | 2,131 | 2,241 | (110 | ) | -4.9 | ||||||
| Operating income adjusted for Certain Items(Non-GAAP) | $ | 11,279 | $ | 12,808 | $ | (1,529 | ) | -11.9 | % | ||
| OTHER | |||||||||||
| Sales | $ | 101,596 | $ | 305,920 | $ | (204,324 | ) | -66.8 | % | ||
| Gross Profit | 24,636 | 73,783 | (49,147 | ) | -66.6 | % | |||||
| Gross Margin | 24.25 | % | 24.12 | % | 13 bps | ||||||
| Operating expenses (GAAP) | $ | 46,483 | $ | 60,364 | $ | (13,881 | ) | -23.0 | % | ||
| Impact of excess bad debt expense | (4,478 | ) | — | (4,478 | ) | NM | |||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 42,005 | $ | 60,364 | (18,359 | ) | -30.4 | % | |||
| Operating (loss) income (GAAP) | $ | (21,847 | ) | $ | 13,419 | $ | (35,266 | ) | -262.8 | % | |
| Impact of excess bad debt expense | 4,478 | — | 4,478 | NM | |||||||
| Operating (loss) income adjusted for Certain Items(Non-GAAP) | $ | (17,369 | ) | $ | 13,419 | (30,788 | ) | -229.4 | % | ||
| CORPORATE | |||||||||||
| Gross Profit | $ | (2,015 | ) | $ | 7,061 | $ | (9,076 | ) | -128.5 | % | |
| Operating expenses (GAAP) | $ | 180,129 | $ | 200,506 | $ | (20,377 | ) | -10.2 | % | ||
| Impact of restructuring and transformational project costs ^(6)^ | (59,400 | ) | (42,906 | ) | (16,494 | ) | 38.4 | ||||
| Impact of acquisition-related costs<br>^(7)^ | — | (484 | ) | 484 | NM | ||||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 120,729 | $ | 157,116 | $ | (36,387 | ) | -23.2 | % | ||
| Operating loss (GAAP) | $ | (182,144 | ) | $ | (193,445 | ) | $ | 11,301 | -5.8 | % | |
| Impact of restructuring and transformational project costs ^(6)^ | 59,400 | 42,906 | 16,494 | 38.4 | |||||||
| Impact of acquisition-related costs<br>^(7)^ | — | 484 | (484 | ) | NM | ||||||
| Operating loss adjusted for Certain Items(Non-GAAP) | $ | (122,744 | ) | $ | (150,055 | ) | $ | 27,311 | -18.2 | % | |
| TOTAL SYSCO | |||||||||||
| Sales | $ | 8,866,564 | $ | 15,474,862 | $ | (6,608,298 | ) | -42.7 | % | ||
| Gross Profit | 1,565,655 | 2,979,192 | (1,413,537 | ) | -47.4 | % | |||||
| Gross Margin | 17.66 | % | 19.25 | % | -159 bps | ||||||
| Operating expenses (GAAP) | $ | 2,097,235 | $ | 2,258,662 | $ | (161,427 | ) | -7.1 | % | ||
| Impact of restructuring and transformational project costs ^(1) (3) (5) (6)^ | (180,066 | ) | (77,753 | ) | (102,313 | ) | 131.6 | ||||
| Impact of acquisition-related costs ^(4)(7)^ | (13,251 | ) | (19,789 | ) | 6,538 | -33.0 | |||||
| Impact of excess bad debt expense | (169,903 | ) | — | (169,903 | ) | NM | |||||
| Impact of goodwill impairment | (134,481 | ) | — | (134,481 | ) | NM | |||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 1,599,534 | $ | 2,161,120 | $ | (561,586 | ) | -26.0 | % | ||
| Operating (loss) income (GAAP) | $ | (531,580 | ) | $ | 720,530 | $ | (1,252,110 | ) | -173.8 | % | |
| Impact of restructuring and transformational project costs ^(1) (3) (5) (6)^ | 180,066 | 77,753 | 102,313 | 131.6 | |||||||
| Impact of acquisition-related costs ^(4)(7)^ | 13,251 | 19,789 | (6,538 | ) | -33.0 | ||||||
| Impact of excess bad debt expense | 169,903 | — | 169,903 | NM | |||||||
| Impact of goodwill impairment | 134,481 | — | 134,481 | NM | |||||||
| Operating (loss) income adjusted for Certain Items(Non-GAAP) | $ | (33,879 | ) | $ | 818,072 | $ | (851,951 | ) | -104.1 | % |
17
| ^(1)^ | Includes charges related to restructuring and business transformation projects. |
|---|---|
| ^(2)^ | Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on<br>current year results. |
| --- | --- |
| ^(3)^ | Includes restructuring, severance and facility closure costs primarily in Europe and Canada.<br> |
| --- | --- |
| ^(4)^ | Fiscal 2020 and fiscal 2019 include $13 million and $19 million, respectively, related to intangible<br>amortization expense from the Brakes Acquisition. |
| --- | --- |
| ^(5)^ | Includes charges related to transformation initiatives and other restructuring charges. |
| --- | --- |
| ^(6)^ | Fiscal 2020 and fiscal 2019 include various transformation initiative costs, primarily consisting of changes to<br>our business technology strategy and severance related to restructuring. Fiscal 2020 also includes severance charges incurred in response to the COVID-19 pandemic. |
| --- | --- |
| ^(7)^ | Fiscal 2019 includes integration costs from the Brakes Acquisition. |
| --- | --- |
NM represents that the percentage change is not meaningful.
18
Sysco Corporation and its Consolidated Subsidiaries
Segment Results
Non-GAAP Reconciliation (Unaudited)
Impact of Certain Items on Applicable Segments
(Dollars in Thousands)
| 52-Week<br>Period EndedJun. 27, 2020 | 52-Week<br>Period EndedJun. 29, 2019 | Change inDollars | %/bpsChange | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| U.S. FOODSERVICE OPERATIONS | ||||||||||||
| Sales | $ | 36,774,146 | $ | 41,288,188 | $ | (4,514,042 | ) | -10.9 | % | |||
| Gross Profit | 7,254,722 | 8,249,027 | (994,305 | ) | -12.1 | % | ||||||
| Gross Margin | 19.73 | % | 19.98 | % | -25 bps | |||||||
| Operating expenses (GAAP) | $ | 5,251,563 | $ | 5,257,233 | $ | (5,670 | ) | -0.1 | % | |||
| Impact of restructuring and transformational project costs ^(1)^ | (10,145 | ) | — | (10,145 | ) | NM | ||||||
| Impact of excess bad debt expense | (230,654 | ) | — | (230,654 | ) | NM | ||||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 5,010,764 | $ | 5,257,233 | $ | (246,469 | ) | -4.7 | % | |||
| Operating income (GAAP) | $ | 2,003,159 | $ | 2,991,794 | $ | (988,635 | ) | -33.0 | % | |||
| Impact of restructuring and transformational project costs ^(1)^ | 10,145 | — | 10,145 | NM | ||||||||
| Impact of excess bad debt expense | 230,654 | — | 230,654 | NM | ||||||||
| Operating income adjusted for Certain Items(Non-GAAP) | $ | 2,243,958 | $ | 2,991,794 | $ | (747,836 | ) | -25.0 | % | |||
| INTERNATIONAL FOODSERVICE OPERATIONS | ||||||||||||
| Sales (GAAP) | $ | 9,672,190 | $ | 11,493,040 | $ | (1,820,850 | ) | -15.8 | % | |||
| Impact of currency fluctuations ^(2)^ | 198,422 | — | 198,422 | -1.7 | ||||||||
| Comparable sales using a constant currency basis(Non-GAAP) | $ | 9,870,612 | $ | 11,493,040 | $ | (1,622,428 | ) | -14.1 | % | |||
| Gross Profit (GAAP) | $ | 1,955,190 | $ | 2,392,179 | $ | (436,989 | ) | -18.3 | % | |||
| Impact of currency fluctuations ^(2)^ | 43,076 | — | 43,076 | -1.8 | ||||||||
| Comparable gross profit using a constant currency basis(Non-GAAP) | $ | 1,998,266 | $ | 2,392,179 | $ | (393,913 | ) | -16.5 | % | |||
| Gross Margin (GAAP) | 20.21 | % | 20.81 | % | -60 bps | |||||||
| Impact of currency fluctuations ^(2)^ | (0.03 | ) | — | -3 bps | ||||||||
| Comparable gross margin using a constant currency basis(Non-GAAP) | 20.24 | % | 20.81 | % | -57 bps | |||||||
| Operating expenses (GAAP) | $ | 2,326,597 | $ | 2,266,736 | $ | 59,861 | 2.6 | % | ||||
| Impact of restructuring and transformational project costs ^(3)^ | (191,900 | ) | (152,852 | ) | (39,048 | ) | 25.5 | |||||
| Impact of acquisition-related costs<br>^(4)^ | (64,793 | ) | (76,530 | ) | 11,737 | -15.3 | ||||||
| Impact of excess bad debt expense | (88,271 | ) | — | (88,271 | ) | NM | ||||||
| Impact of goodwill impairment | (134,481 | ) | — | (134,481 | ) | NM | ||||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 1,847,152 | $ | 2,037,354 | $ | (190,202 | ) | -9.3 | % | |||
| Impact of currency fluctuations ^(2)^ | 45,493 | — | 45,493 | -2.2 | ||||||||
| Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | 1,892,645 | $ | 2,037,354 | $ | (144,709 | ) | -7.1 | % | |||
| Operating (loss) income (GAAP) | $ | (371,407 | ) | $ | 125,443 | $ | (496,850 | ) | NM | |||
| Impact of restructuring and transformational project costs ^(3)^ | 191,900 | 152,852 | 39,048 | 25.5 | ||||||||
| Impact of acquisition-related costs<br>^(4)^ | 64,793 | 76,530 | (11,737 | ) | -15.3 | |||||||
| Impact of excess bad debt expense | 88,271 | — | 88,271 | NM | ||||||||
| Impact of goodwill impairment | 134,481 | — | 134,481 | NM | ||||||||
| Operating income adjusted for Certain Items(Non-GAAP) | $ | 108,038 | $ | 354,825 | $ | (246,787 | ) | -69.6 | % | |||
| Impact of currency fluctuations ^(2)^ | (2,417 | ) | — | (2,417 | ) | 0.6 | ||||||
| Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP) | $ | 105,621 | $ | 354,825 | $ | (249,204 | ) | -70.2 | % |
19
| SYGMA | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Sales | $ | 5,555,926 | $ | 6,244,328 | $ | (688,402 | ) | -11.0 | % | ||
| Gross Profit | 483,494 | 505,638 | (22,144 | ) | -4.4 | % | |||||
| Gross Margin | 8.70 | % | 8.10 | % | 60 bps | ||||||
| Operating expenses (GAAP) | $ | 446,614 | $ | 477,858 | $ | (31,244 | ) | -6.5 | % | ||
| Impact of restructuring and transformational project costs ^(5)^ | (5,793 | ) | (2,609 | ) | (3,184 | ) | 122.0 | ||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 440,821 | $ | 475,249 | $ | (34,428 | ) | -7.2 | % | ||
| Operating income (GAAP) | $ | 36,880 | $ | 27,780 | $ | 9,100 | 32.8 | % | |||
| Impact of restructuring and transformational project costs ^(5)^ | 5,793 | 2,609 | 3,184 | 122.0 | |||||||
| Operating income adjusted for Certain Items(Non-GAAP) | $ | 42,673 | $ | 30,389 | $ | 12,284 | 40.4 | % | |||
| OTHER | |||||||||||
| Sales | $ | 891,048 | $ | 1,088,366 | $ | (197,318 | ) | -18.1 | % | ||
| Gross Profit | 218,884 | 272,697 | (53,813 | ) | -19.7 | % | |||||
| Gross Margin | 24.56 | % | 25.06 | % | -50 bps | ||||||
| Operating expenses (GAAP) | $ | 240,245 | $ | 236,849 | $ | 3,396 | 1.4 | % | |||
| Impact of excess bad debt expense | (4,478 | ) | — | (4,478 | ) | NM | |||||
| Impact of goodwill impairment | (11,660 | ) | — | (11,660 | ) | NM | |||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 224,107 | $ | 236,849 | $ | (12,742 | ) | -5.4 | % | ||
| Operating (loss) income (GAAP) | $ | (21,361 | ) | $ | 35,848 | $ | (57,209 | ) | -159.6 | % | |
| Impact of excess bad debt expense | 4,478 | — | 4,478 | NM | |||||||
| Impact of goodwill impairment | 11,660 | — | 11,660 | NM | |||||||
| Operating (loss) income adjusted for Certain Items(Non-GAAP) | $ | (5,223 | ) | $ | 35,848 | (41,071 | ) | -114.6 | % | ||
| CORPORATE | |||||||||||
| Gross Profit | $ | (10,626 | ) | $ | (10,554 | ) | $ | (72 | ) | 0.7 | % |
| Operating expenses (GAAP) | $ | 887,140 | $ | 840,161 | $ | 46,979 | 5.6 | % | |||
| Impact of restructuring and transformational project costs ^(6)^ | (163,249 | ) | (169,838 | ) | 6,589 | -3.9 | |||||
| Impact of acquisition-related costs<br>^(7)^ | — | (1,302 | ) | 1,302 | NM | ||||||
| Impact of goodwill impairment | (57,066 | ) | — | (57,066 | ) | NM | |||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 666,825 | $ | 669,021 | $ | (2,196 | ) | -0.3 | % | ||
| Operating loss (GAAP) | $ | (897,766 | ) | $ | (850,715 | ) | $ | (47,051 | ) | 5.5 | % |
| Impact of restructuring and transformational project costs ^(6)^ | 163,249 | 169,838 | (6,589 | ) | -3.9 | ||||||
| Impact of acquisition-related costs<br>^(7)^ | — | 1,302 | (1,302 | ) | NM | ||||||
| Impact of goodwill impairment | 57,066 | — | 57,066 | NM | |||||||
| Operating loss adjusted for Certain Items(Non-GAAP) | $ | (677,451 | ) | $ | (679,575 | ) | $ | 2,124 | -0.3 | % | |
| TOTAL SYSCO | |||||||||||
| Sales | $ | 52,893,310 | $ | 60,113,922 | $ | (7,220,612 | ) | -12.0 | % | ||
| Gross Profit | 9,901,664 | 11,408,987 | (1,507,323 | ) | -13.2 | % | |||||
| Gross Margin | 18.72 | % | 18.98 | % | -26 bps | ||||||
| Operating expenses (GAAP) | $ | 9,152,159 | $ | 9,078,837 | $ | 73,322 | 0.8 | % | |||
| Impact of restructuring and transformational project costs ^(1) (3) (5) (6)^ | (371,088 | ) | (325,300 | ) | (45,788 | ) | 14.1 | ||||
| Impact of acquisition-related costs ^(4)(7)^ | (64,793 | ) | (77,832 | ) | 13,039 | -16.8 | |||||
| Impact of excess bad debt expense | (323,403 | ) | — | (323,403 | ) | NM | |||||
| Impact of goodwill impairment | (203,206 | ) | — | (203,206 | ) | NM | |||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 8,189,669 | $ | 8,675,705 | $ | (486,036 | ) | -5.6 | % |
20
| Operating income (GAAP) | $ | 749,505 | $ | 2,330,150 | $ | (1,580,645 | ) | -67.8 | % |
|---|---|---|---|---|---|---|---|---|---|
| Impact of restructuring and transformational project costs ^(1) (3) (5) (6)^ | 371,088 | 325,300 | 45,788 | 14.1 | |||||
| Impact of acquisition-related costs ^(4)(7)^ | 64,793 | 77,832 | (13,039 | ) | -16.8 | ||||
| Impact of excess bad debt expense | 323,403 | — | 323,403 | NM | |||||
| Impact of goodwill impairment | 203,206 | — | 203,206 | NM | |||||
| Operating income adjusted for Certain Items(Non-GAAP) | $ | 1,711,995 | $ | 2,733,282 | $ | (1,021,287 | ) | -37.4 | % |
| ^(1)^ | Includes charges related to restructuring and business transformation projects. | ||||||||
| --- | --- | ||||||||
| ^(2)^ | Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on<br>current year results. | ||||||||
| --- | --- | ||||||||
| ^(3)^ | Includes restructuring, severance and facility closure costs in Europe and Canada. | ||||||||
| --- | --- | ||||||||
| ^(4)^ | Fiscal 2020 and fiscal 2019 include $65 million and $77 million, respectively, related to intangible<br>amortization expense from the Brakes Acquisition. | ||||||||
| --- | --- | ||||||||
| ^(5)^ | Includes charges related to facility closures and other restructuring charges. | ||||||||
| --- | --- | ||||||||
| ^(6)^ | Fiscal 2020 and fiscal 2019 include various transformation initiative costs, primarily consisting of changes to<br>our business technology strategy and severance related to restructuring. Fiscal 2019 includes $18 million of accelerated depreciation on software that was replaced and severance charges related to restructuring. Fiscal 2020 also includes<br>severance charges incurred in response to the COVID-19 pandemic. | ||||||||
| --- | --- | ||||||||
| ^(7)^ | Fiscal 2019 includes integration costs from the Brakes Acquisition. | ||||||||
| --- | --- |
NM represents that the percentage change is not meaningful.
21
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 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.
| 52-WeekPeriod EndedJun. 27, 2020 | 52-WeekPeriod EndedJun. 29, 2019 | 52-WeekPeriod Changein Dollars | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Net cash provided by operating activities (GAAP) | $ | 1,618,680 | $ | 2,411,207 | $ | (792,527 | ) | ||
| Additions to plant and equipment | (720,423 | ) | (692,391 | ) | (28,032 | ) | |||
| Proceeds from sales of plant and equipment | 28,717 | 20,941 | 7,776 | ||||||
| Free Cash Flow (Non-GAAP) | $ | 926,974 | $ | 1,739,757 | $ | (812,783 | ) |
22
Sysco Corporation and its Consolidated Subsidiaries
Segment Results
Non-GAAP Reconciliation (Unaudited)
Impact of Certain Items on Applicable Segments
(Dollars in Thousands)
During the fourth quarter of fiscal 2020, Sysco revised the way performance is assessed for the U.S. Foodservice Operations segment. As a result of this change, charges incurred by the company’s corporate and shared services center to provide direct support functions to the U.S. Foodservice Operations reportable segment have been reclassified from Corporate expenses into the U.S. Foodservice reportable segment. The segment information disclosed for fiscal 2020 reflects this change in reporting structure and prior year amounts have been reclassified to conform with the current year presentation.
| As Reclassified | AsReclassified | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 13-Week Period Ended | 52-WeekPeriod Ended | ||||||||||||||
| Sep. 28, 2019 | Dec. 28, 2019 | Mar. 28, 2020 | Jun. 27, 2020 | Jun. 27, 2020 | |||||||||||
| U.S. FOODSERVICE OPERATIONS | |||||||||||||||
| Sales (GAAP) | $ | 10,658,633 | $ | 10,413,576 | $ | 9,587,006 | $ | 6,114,931 | $ | 36,774,146 | |||||
| Gross Profit (GAAP) | 2,144,886 | 2,048,905 | 1,895,380 | 1,165,551 | 7,254,722 | ||||||||||
| Gross Margin (GAAP) | 20.12 | % | 19.68 | % | 19.77 | % | 19.06 | % | 19.73 | % | |||||
| Operating expenses (GAAP) | $ | 1,351,269 | $ | 1,344,103 | $ | 1,431,205 | $ | 1,124,986 | $ | 5,251,563 | |||||
| Impact of restructuring and transformational project costs ^(1)^ | (4,126 | ) | (3,679 | ) | (1,402 | ) | (938 | ) | (10,145 | ) | |||||
| Impact of excess bad debt expense | — | — | (107,230 | ) | (123,424 | ) | (230,654 | ) | |||||||
| Operating expenses adjusted for Certain Items (Non-GAAP) | $ | 1,347,143 | $ | 1,340,424 | $ | 1,322,573 | $ | 1,000,624 | $ | 5,010,764 | |||||
| Operating income (GAAP) | $ | 793,617 | $ | 704,802 | $ | 464,175 | $ | 40,565 | $ | 2,003,159 | |||||
| Impact of restructuring and transformational project costs ^(1)^ | 4,126 | 3,679 | 1,402 | 938 | 10,145 | ||||||||||
| Impact of excess bad debt expense | — | — | 107,230 | 123,424 | 230,654 | ||||||||||
| Operating income adjusted for Certain Items (Non-GAAP) | $ | 797,743 | $ | 708,481 | $ | 572,807 | $ | 164,927 | $ | 2,243,958 | |||||
| INTERNATIONAL FOODSERVICE OPERATIONS | |||||||||||||||
| Sales (GAAP) | $ | 2,912,387 | $ | 2,890,052 | $ | 2,508,642 | $ | 1,361,109 | $ | 9,672,190 | |||||
| Gross Profit (GAAP) | 605,185 | 586,039 | 500,929 | 263,037 | 1,955,190 | ||||||||||
| Gross Margin (GAAP) | 20.78 | % | 20.28 | % | 19.97 | % | 19.33 | % | 20.21 | % | |||||
| Operating expenses (GAAP) | $ | 550,385 | $ | 551,158 | $ | 584,715 | $ | 640,339 | $ | 2,326,597 | |||||
| Impact of restructuring and transformational project costs ^(2)^ | (27,273 | ) | (21,850 | ) | (25,180 | ) | (117,597 | ) | (191,900 | ) | |||||
| Impact of acquisition-related costs ^(3)^ | (16,909 | ) | (17,312 | ) | (17,321 | ) | (13,251 | ) | (64,793 | ) | |||||
| Impact of excess bad debt expense | — | — | (46,269 | ) | (42,002 | ) | (88,271 | ) | |||||||
| Impact of goodwill impairment | — | — | — | (134,481 | ) | (134,481 | ) | ||||||||
| Operating expenses adjusted for Certain Items (Non-GAAP) | $ | 506,203 | $ | 511,996 | $ | 495,945 | $ | 333,008 | $ | 1,847,152 | |||||
| Operating income (loss) (GAAP) | $ | 54,800 | $ | 34,881 | $ | (83,786 | ) | $ | (377,302 | ) | $ | (371,407 | ) | ||
| Impact of restructuring and transformational project costs ^(2)^ | 27,273 | 21,850 | 25,180 | 117,597 | 191,900 | ||||||||||
| Impact of acquisition-related costs ^(3)^ | 16,909 | 17,312 | 17,321 | 13,251 | 64,793 | ||||||||||
| Impact of excess bad debt expense | — | — | 46,269 | 42,002 | 88,271 | ||||||||||
| Impact of goodwill impairment | — | — | — | 134,481 | 134,481 | ||||||||||
| Operating income (loss) adjusted for Certain Items(Non-GAAP) | $ | 98,982 | $ | 74,043 | $ | 4,984 | $ | (69,971 | ) | $ | 108,038 |
23
| SYGMA | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Sales (GAAP) | $ | 1,446,994 | $ | 1,455,893 | $ | 1,364,111 | $ | 1,288,928 | $ | 5,555,926 | |||||
| Gross Profit (GAAP) | 125,918 | 124,239 | 118,891 | 114,446 | 483,494 | ||||||||||
| Gross Margin (GAAP) | 8.70 | % | 8.53 | % | 8.72 | % | 8.88 | % | 8.70 | % | |||||
| Operating expenses (GAAP) | $ | 118,348 | $ | 114,378 | $ | 108,590 | $ | 105,298 | $ | 446,614 | |||||
| Impact of restructuring and transformational project costs ^(4)^ | (2,584 | ) | (956 | ) | (122 | ) | (2,131 | ) | (5,793 | ) | |||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 115,764 | $ | 113,422 | $ | 108,468 | $ | 103,167 | $ | 440,821 | |||||
| Operating income (GAAP) | $ | 7,570 | $ | 9,861 | $ | 10,301 | $ | 9,148 | $ | 36,880 | |||||
| Impact of restructuring and transformational project costs ^(4)^ | 2,584 | 956 | 122 | 2,131 | 5,793 | ||||||||||
| Operating income adjusted for Certain Items(Non-GAAP) | $ | 10,154 | $ | 10,817 | $ | 10,423 | $ | 11,279 | $ | 42,673 | |||||
| OTHER | |||||||||||||||
| Sales (GAAP) | $ | 284,990 | $ | 265,521 | $ | 238,941 | $ | 101,596 | $ | 891,048 | |||||
| Gross Profit (GAAP) | 71,744 | 66,506 | 56,000 | 24,636 | 218,884 | ||||||||||
| Gross Margin (GAAP) | 25.17 | % | 25.05 | % | 23.44 | % | 24.25 | % | 24.56 | % | |||||
| Operating expenses (GAAP) | $ | 61,607 | $ | 57,104 | $ | 75,051 | $ | 46,483 | $ | 240,245 | |||||
| Impact of excess bad debt expense | — | — | — | (4,478 | ) | (4,478 | ) | ||||||||
| Impact of goodwill impairment | — | — | (11,660 | ) | — | (11,660 | ) | ||||||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 61,607 | $ | 57,104 | $ | 63,391 | $ | 42,005 | $ | 224,107 | |||||
| Operating income (loss) (GAAP) | $ | 10,137 | $ | 9,400 | $ | (19,051 | ) | $ | (21,847 | ) | $ | (21,361 | ) | ||
| Impact of excess bad debt expense | — | — | — | 4,478 | 4,478 | ||||||||||
| Impact of goodwill impairment | — | — | 11,660 | — | 11,660 | ||||||||||
| Operating income (loss) adjusted for Certain Items(Non-GAAP) | $ | 10,137 | $ | 9,400 | $ | (7,391 | ) | $ | (17,369 | ) | $ | 5,223 | |||
| CORPORATE | |||||||||||||||
| Gross Profit (GAAP) | $ | (4,363 | ) | $ | 2,710 | $ | (6,958 | ) | $ | (2,015 | ) | $ | (10,626 | ) | |
| Operating expenses (GAAP) | $ | 193,444 | $ | 209,162 | $ | 304,405 | $ | 180,129 | $ | 887,140 | |||||
| Impact of restructuring and transformational project costs ^(5)^ | (22,739 | ) | (30,621 | ) | (50,489 | ) | (59,400 | ) | (163,249 | ) | |||||
| Impact of goodwill impairment | — | — | (57,066 | ) | — | (57,066 | ) | ||||||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 170,705 | $ | 178,541 | $ | 196,850 | $ | 120,729 | $ | 666,825 | |||||
| Operating loss (GAAP) | $ | (197,807 | ) | $ | (206,452 | ) | $ | (311,363 | ) | $ | (182,144 | ) | $ | (897,766 | ) |
| Impact of restructuring and transformational project costs ^(5)^ | 22,739 | 30,621 | 50,489 | 59,400 | 163,249 | ||||||||||
| Impact of goodwill impairment | — | — | 57,066 | — | 57,066 | ||||||||||
| Operating loss adjusted for Certain Items (Non-GAAP) | $ | (175,068 | ) | $ | (175,831 | ) | $ | (203,808 | ) | $ | (122,744 | ) | $ | (677,451 | ) |
| TOTAL SYSCO | |||||||||||||||
| Sales (GAAP) | $ | 15,303,004 | $ | 15,025,042 | $ | 13,698,700 | $ | 8,866,564 | $ | 52,893,310 | |||||
| Gross Profit (GAAP) | 2,943,369 | 2,828,398 | 2,564,242 | 1,565,655 | 9,901,664 | ||||||||||
| Gross Margin (GAAP) | 19.23 | % | 18.82 | % | 18.72 | % | 17.66 | % | 18.72 | % | |||||
| Operating expenses (GAAP) | $ | 2,275,053 | $ | 2,275,906 | $ | 2,503,966 | $ | 2,097,235 | $ | 9,152,160 | |||||
| Impact of restructuring and transformational project costs ^(1)(2)(4)(5)^ | (56,722 | ) | (57,106 | ) | (77,194 | ) | (180,066 | ) | (371,088 | ) | |||||
| Impact of acquisition-related costs ^(3)^ | (16,909 | ) | (17,312 | ) | (17,321 | ) | (13,251 | ) | (64,793 | ) | |||||
| Impact of excess bad debt expense | — | — | (153,500 | ) | (169,903 | ) | (323,403 | ) | |||||||
| Impact of goodwill impairment | — | — | (68,725 | ) | (134,481 | ) | (203,206 | ) | |||||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 2,201,422 | $ | 2,201,488 | $ | 2,187,226 | $ | 1,599,534 | $ | 8,189,670 |
24
| Operating income (loss) (GAAP) | $ | 668,317 | $ | 552,492 | $ | 60,276 | $ | (531,580 | ) | $ | 749,505 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Impact of restructuring and transformational project costs ^(1)(2)(4)(5)^ | $ | 56,722 | $ | 57,106 | $ | 77,194 | $ | 180,066 | $ | 371,088 | |
| Impact of acquisition-related costs ^(3)^ | 16,909 | 17,312 | 17,321 | 13,251 | 64,793 | ||||||
| Impact of excess bad debt expense | — | — | 153,500 | 169,903 | 323,403 | ||||||
| Impact of goodwill impairment | — | — | 68,725 | 134,481 | 203,206 | ||||||
| Operating income (loss) adjusted for Certain Items(Non-GAAP) | $ | 741,948 | $ | 626,910 | $ | 377,016 | $ | (33,879 | ) | $ | 1,711,995 |
| * | Segment has no applicable Certain items | ||||||||||
| --- | --- | ||||||||||
| ^(1)^ | Includes charges related to additional benefits provided to employees in response to the COVID-19 pandemic, restructuring and business transformation projects. | ||||||||||
| --- | --- | ||||||||||
| ^(2)^ | Includes restructuring, severance and facility closure costs in Europe and Canada. | ||||||||||
| --- | --- | ||||||||||
| ^(3)^ | Includes intangible amortization expense from the Brakes Acquisition. | ||||||||||
| --- | --- | ||||||||||
| ^(4)^ | Includes charges related to facility closures and other restructuring charges. | ||||||||||
| --- | --- | ||||||||||
| ^(5)^ | Includes various transformation initiative costs, primarily consisting of changes to our business technology<br>strategy, severance related to restructuring and severance charges incurred in response to the COVID-19 pandemic. | ||||||||||
| --- | --- |
25
Sysco Corporation and its Consolidated Subsidiaries
Segment Results
Non-GAAP Reconciliation (Unaudited)
Impact of Certain Items on Applicable Segments
(Dollars in Thousands)
| As Reclassified | AsReclassified | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 13-Week Period Ended | 52-WeekPeriod Ended | ||||||||||||||
| Sep. 29, 2018 | Dec. 29, 2018 | Mar. 30, 2019 | Jun. 29, 2019 | Jun. 29, 2019 | |||||||||||
| U.S. FOODSERVICE OPERATIONS | |||||||||||||||
| Sales (GAAP) | $ | 10,399,411 | $ | 10,087,105 | $ | 10,105,283 | $ | 10,696,389 | $ | 41,288,188 | |||||
| Gross Profit (GAAP) | 2,090,227 | 2,001,819 | 2,009,129 | 2,147,852 | 8,249,027 | ||||||||||
| Gross Margin (GAAP) | 20.10 | % | 19.85 | % | 19.88 | % | 20.08 | % | 19.98 | % | |||||
| Operating expenses (GAAP) | $ | 1,325,111 | $ | 1,317,517 | $ | 1,293,299 | $ | 1,321,306 | $ | 5,257,233 | |||||
| Impact of restructuring and transformational project costs ^(1)^ | — | — | (2,927 | ) | 2,927 | — | |||||||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 1,325,111 | $ | 1,317,517 | $ | 1,290,372 | $ | 1,324,233 | $ | 5,257,233 | |||||
| Operating income (GAAP) | $ | 765,116 | $ | 684,302 | $ | 715,830 | $ | 826,546 | $ | 2,991,794 | |||||
| Impact of restructuring and transformational project costs ^(1)^ | — | — | 2,927 | (2,927 | ) | — | |||||||||
| Operating income adjusted for Certain Items(Non-GAAP) | $ | 765,116 | $ | 684,302 | $ | 718,757 | $ | 823,619 | $ | 2,991,794 | |||||
| INTERNATIONAL FOODSERVICE OPERATIONS | |||||||||||||||
| Sales (GAAP) | $ | 2,920,950 | $ | 2,890,598 | $ | 2,757,891 | $ | 2,923,601 | $ | 11,493,040 | |||||
| Gross Profit (GAAP) | 615,505 | 589,922 | 565,116 | 621,636 | 2,392,179 | ||||||||||
| Gross Margin (GAAP) | 21.07 | % | 20.41 | % | 20.49 | % | 21.26 | % | 20.81 | % | |||||
| Operating expenses (GAAP) | $ | 548,733 | $ | 604,839 | $ | 554,971 | $ | 558,193 | $ | 2,266,736 | |||||
| Impact of restructuring and transformational project costs ^(2)^ | (6,727 | ) | (81,020 | ) | (29,572 | ) | (35,533 | ) | (152,852 | ) | |||||
| Impact of acquisition-related costs<br>^(3)^ | (21,899 | ) | (16,947 | ) | (18,379 | ) | (19,305 | ) | (76,530 | ) | |||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 520,107 | $ | 506,872 | $ | 507,020 | $ | 503,355 | $ | 2,037,354 | |||||
| Operating income (loss) (GAAP) | $ | 66,772 | $ | (14,917 | ) | $ | 10,145 | $ | 63,443 | $ | 125,443 | ||||
| Impact of restructuring and transformational project costs ^(2)^ | 6,727 | 81,020 | 29,572 | 35,533 | 152,852 | ||||||||||
| Impact of acquisition-related costs<br>^(3)^ | 21,899 | 16,947 | 18,379 | 19,305 | 76,530 | ||||||||||
| Operating income adjusted for Certain Items(Non-GAAP) | $ | 95,398 | $ | 83,050 | $ | 58,096 | $ | 118,281 | $ | 354,825 | |||||
| SYGMA | |||||||||||||||
| Sales (GAAP) | $ | 1,621,457 | $ | 1,536,607 | $ | 1,537,312 | $ | 1,548,952 | $ | 6,244,328 | |||||
| Gross Profit (GAAP) | 129,326 | 121,537 | 125,915 | 128,860 | 505,638 | ||||||||||
| Gross Margin (GAAP) | 7.98 | % | 7.91 | % | 8.19 | % | 8.32 | % | 8.10 | % | |||||
| Operating expenses (GAAP) | $ | 126,895 | $ | 118,423 | $ | 114,247 | $ | 118,293 | $ | 477,858 | |||||
| Impact of restructuring and transformational project costs ^(4)^ | — | — | (368 | ) | (2,241 | ) | (2,609 | ) | |||||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 126,895 | $ | 118,423 | $ | 113,879 | $ | 116,052 | $ | 475,249 | |||||
| Operating income (GAAP) | $ | 2,431 | $ | 3,114 | $ | 11,668 | $ | 10,567 | $ | 27,780 | |||||
| Impact of restructuring and transformational project costs ^(4)^ | — | — | 368 | 2,241 | 2,609 | ||||||||||
| Operating income adjusted for Certain Items(Non-GAAP) | $ | 2,431 | $ | 3,114 | $ | 12,036 | $ | 12,808 | $ | 30,389 |
26
| OTHER * | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Sales (GAAP) | $ | 273,461 | $ | 251,397 | $ | 257,588 | $ | 305,920 | $ | 1,088,366 | |||||
| Gross Profit (GAAP) | 71,535 | 63,501 | 63,878 | 73,783 | 272,697 | ||||||||||
| Gross Margin (GAAP) | 26.16 | % | 25.26 | % | 24.80 | % | 24.12 | % | 25.06 | % | |||||
| Operating expenses (GAAP) | $ | 61,200 | $ | 57,783 | $ | 57,502 | $ | 60,364 | $ | 236,849 | |||||
| Operating income (loss) (GAAP) | 10,335 | 5,718 | 6,376 | 13,419 | 35,848 | ||||||||||
| CORPORATE | |||||||||||||||
| Gross Profit (GAAP) | $ | (2,808 | ) | $ | (5,067 | ) | $ | (9,740 | ) | $ | 7,061 | $ | (10,554 | ) | |
| Operating expenses (GAAP) | $ | 213,706 | $ | 221,255 | $ | 204,694 | $ | 200,506 | $ | 840,161 | |||||
| Impact of restructuring and transformational project costs ^(5)^ | (34,177 | ) | (53,417 | ) | (39,338 | ) | (42,906 | ) | (169,838 | ) | |||||
| Impact of acquisition-related costs<br>^(6)^ | (737 | ) | (61 | ) | (20 | ) | (484 | ) | (1,302 | ) | |||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 178,792 | $ | 167,777 | $ | 165,336 | $ | 157,116 | $ | 669,021 | |||||
| Operating loss (GAAP) | $ | (216,514 | ) | $ | (226,322 | ) | $ | (214,434 | ) | $ | (193,445 | ) | $ | (850,715 | ) |
| Impact of restructuring and transformational project costs ^(5)^ | 34,177 | 53,417 | 39,338 | 42,906 | 169,838 | ||||||||||
| Impact of acquisition-related costs<br>^(6)^ | 737 | 61 | 20 | 484 | 1,302 | ||||||||||
| Operating loss adjusted for Certain Items(Non-GAAP) | $ | (181,600 | ) | $ | (172,844 | ) | $ | (175,076 | ) | $ | (150,055 | ) | $ | (679,575 | ) |
| TOTAL SYSCO | |||||||||||||||
| Sales (GAAP) | $ | 15,215,279 | $ | 14,765,707 | $ | 14,658,074 | $ | 15,474,862 | $ | 60,113,922 | |||||
| Gross Profit (GAAP) | 2,903,785 | 2,771,712 | 2,754,298 | 2,979,192 | 11,408,987 | ||||||||||
| Gross Margin (GAAP) | 19.08 | % | 18.77 | % | 18.79 | % | 19.25 | % | 18.98 | % | |||||
| Operating expenses (GAAP) | $ | 2,275,645 | $ | 2,319,817 | $ | 2,224,713 | $ | 2,258,662 | $ | 9,078,837 | |||||
| Impact of restructuring and transformational project costs ^(1)(2)(4)(5)^ | (40,904 | ) | (134,437 | ) | (72,206 | ) | (77,753 | ) | (325,300 | ) | |||||
| Impact of acquisition-related costs ^(3)(6)^ | (22,636 | ) | (17,008 | ) | (18,399 | ) | (19,789 | ) | (77,832 | ) | |||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 2,212,105 | $ | 2,168,372 | $ | 2,134,108 | $ | 2,161,120 | $ | 8,675,705 | |||||
| Operating income (GAAP) | $ | 628,140 | $ | 451,895 | $ | 529,585 | $ | 720,530 | $ | 2,330,150 | |||||
| Impact of restructuring and transformational project costs ^(1)(2)(4)(5)^ | $ | 40,904 | $ | 134,437 | $ | 72,206 | $ | 77,753 | $ | 325,300 | |||||
| Impact of acquisition-related costs<br>^(3)(6)^ | 22,636 | 17,008 | 18,399 | 19,789 | 77,832 | ||||||||||
| Operating income adjusted for Certain Items(Non-GAAP) | $ | 691,680 | $ | 603,340 | $ | 620,190 | $ | 818,072 | $ | 2,733,282 | |||||
| * | Segment has no applicable Certain items | ||||||||||||||
| --- | --- | ||||||||||||||
| ^(1)^ | Includes charges related to business transformation projects. | ||||||||||||||
| --- | --- | ||||||||||||||
| ^(2)^ | Includes restructuring charges in France and other restructuring, severance and facility closure costs in<br>Europe and Canada. | ||||||||||||||
| --- | --- | ||||||||||||||
| ^(3)^ | Includes intangible amortization expense from the Brakes Acquisition. | ||||||||||||||
| --- | --- | ||||||||||||||
| ^(4)^ | Includes charges related to facility closures and other restructuring charges. | ||||||||||||||
| --- | --- | ||||||||||||||
| ^(5)^ | Includes various transformation initiative costs, primarily consisting of changes to our business technology<br>strategy, including accelerated depreciation on software that was being replaced, and severance charges related to restructuring. | ||||||||||||||
| --- | --- | ||||||||||||||
| ^(6)^ | Includes integration costs from the Brakes Acquisition. | ||||||||||||||
| --- | --- |
27
Sysco Corporation and its Consolidated Subsidiaries
Segment Results
Non-GAAP Reconciliation (Unaudited)
Impact of Certain Items on Applicable Segments
(Dollars in Thousands)
| As Reclassified | AsReclassified | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 13-Week Period Ended | 52-WeekPeriod Ended | ||||||||||||||
| Sep. 30, 2017 | Dec. 30, 2017 | Mar. 31, 2018 | Jun. 30, 2018 | Jun. 30, 2018 | |||||||||||
| U.S. FOODSERVICE OPERATIONS | |||||||||||||||
| Sales (GAAP) | $ | 9,848,942 | $ | 9,681,225 | $ | 9,704,495 | $ | 10,407,601 | $ | 39,642,263 | |||||
| Gross Profit (GAAP) | 1,986,283 | 1,915,466 | 1,911,704 | 2,086,823 | 7,900,276 | ||||||||||
| Gross Margin (GAAP) | 20.17 | % | 19.79 | % | 19.70 | % | 20.05 | % | 19.93 | % | |||||
| Operating expenses (GAAP) | $ | 1,256,265 | $ | 1,251,004 | $ | 1,264,674 | $ | 1,268,521 | $ | 5,040,464 | |||||
| Impact of MEPP charge | — | — | (1,700 | ) | — | (1,700 | ) | ||||||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 1,256,265 | $ | 1,251,004 | $ | 1,262,974 | $ | 1,268,521 | $ | 5,038,764 | |||||
| Operating income (GAAP) | $ | 730,018 | $ | 664,462 | $ | 647,030 | $ | 818,302 | $ | 2,859,812 | |||||
| Impact of MEPP charge | — | — | 1,700 | — | 1,700 | ||||||||||
| Operating income adjusted for Certain Items(Non-GAAP) | $ | 730,018 | $ | 664,462 | $ | 648,730 | $ | 818,302 | $ | 2,861,512 | |||||
| INTERNATIONAL FOODSERVICE OPERATIONS | |||||||||||||||
| Sales (GAAP) | $ | 2,903,255 | $ | 2,869,043 | $ | 2,799,251 | $ | 2,947,016 | $ | 11,518,565 | |||||
| Gross Profit (GAAP) | 615,103 | 599,647 | 583,226 | 638,992 | 2,436,968 | ||||||||||
| Gross Margin (GAAP) | 21.19 | % | 20.90 | % | 20.84 | % | 21.68 | % | 21.16 | % | |||||
| Operating expenses (GAAP) | $ | 538,299 | $ | 547,053 | $ | 563,750 | $ | 594,002 | $ | 2,243,104 | |||||
| Impact of restructuring costs ^(1)^ | (3,898 | ) | (5,602 | ) | (3,552 | ) | (23,615 | ) | (36,667 | ) | |||||
| Impact of acquisition-related costs<br>^(2)^ | (14,514 | ) | (20,809 | ) | (21,679 | ) | (33,002 | ) | (90,004 | ) | |||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 519,887 | $ | 520,642 | $ | 538,519 | $ | 537,385 | $ | 2,116,433 | |||||
| Operating income (GAAP) | $ | 76,804 | $ | 52,594 | $ | 19,476 | $ | 44,990 | $ | 193,864 | |||||
| Impact of restructuring costs ^(1)^ | 3,898 | 5,602 | 3,552 | 23,615 | 36,667 | ||||||||||
| Impact of acquisition-related costs<br>^(2)^ | 14,514 | 20,809 | 21,679 | 33,002 | 90,004 | ||||||||||
| Operating income adjusted for Certain Items(Non-GAAP) | $ | 95,216 | $ | 79,005 | $ | 44,707 | $ | 101,607 | $ | 320,535 | |||||
| SYGMA * | |||||||||||||||
| Sales (GAAP) | $ | 1,640,671 | $ | 1,633,145 | $ | 1,605,753 | $ | 1,677,464 | $ | 6,557,033 | |||||
| Gross Profit (GAAP) | 125,607 | 122,760 | 127,074 | 135,837 | 511,278 | ||||||||||
| Gross Margin (GAAP) | 7.66 | % | 7.52 | % | 7.91 | % | 8.10 | % | 7.80 | % | |||||
| Operating expenses (GAAP) | $ | 120,762 | $ | 119,407 | $ | 122,597 | $ | 124,194 | $ | 486,960 | |||||
| Operating income (GAAP) | 4,845 | 3,353 | 4,477 | 11,643 | 24,318 | ||||||||||
| OTHER * | |||||||||||||||
| Sales (GAAP) | $ | 257,556 | $ | 228,077 | $ | 240,005 | $ | 283,825 | $ | 1,009,463 | |||||
| Gross Profit (GAAP) | 67,827 | 61,697 | 64,524 | 69,315 | 263,363 | ||||||||||
| Gross Margin (GAAP) | 26.33 | % | 27.05 | % | 26.88 | % | 24.42 | % | 26.09 | % | |||||
| Operating expenses (GAAP) | $ | 60,895 | $ | 55,517 | $ | 55,563 | $ | 51,903 | $ | 223,878 | |||||
| Operating income (loss) (GAAP) | 6,932 | 6,180 | 8,961 | 17,412 | 39,485 | ||||||||||
| CORPORATE | |||||||||||||||
| Gross Profit (GAAP) | $ | 1,152 | $ | (184 | ) | $ | (10,900 | ) | $ | (14,258 | ) | $ | (26,494 | ) |
28
| Operating expenses (GAAP) | $ | 198,082 | $ | 197,853 | $ | 186,841 | $ | 194,153 | $ | 776,929 | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Impact of restructuring costs ^(3)^ | (15,154 | ) | (15,775 | ) | (19,229 | ) | (22,699 | ) | (72,857 | ) | |||||
| Impact of acquisition-related costs<br>^(4)^ | (5,232 | ) | (4,990 | ) | (3,682 | ) | (4,228 | ) | (18,132 | ) | |||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 177,696 | $ | 177,088 | $ | 163,930 | $ | 167,226 | $ | 685,940 | |||||
| Operating loss (GAAP) | $ | (199,234 | ) | $ | (198,037 | ) | $ | (197,741 | ) | $ | (208,411 | ) | $ | (803,423 | ) |
| Impact of restructuring costs ^(3)^ | 15,154 | 15,775 | 19,229 | 22,699 | 72,857 | ||||||||||
| Impact of acquisition-related costs<br>^(4)^ | 5,232 | 4,990 | 3,682 | 4,228 | 18,132 | ||||||||||
| Operating loss adjusted for Certain Items(Non-GAAP) | $ | (178,848 | ) | $ | (177,272 | ) | $ | (174,830 | ) | $ | (181,484 | ) | $ | (712,434 | ) |
| TOTAL SYSCO | |||||||||||||||
| Sales (GAAP) | $ | 14,650,424 | $ | 14,411,490 | $ | 14,349,504 | $ | 15,315,906 | $ | 58,727,324 | |||||
| Gross Profit (GAAP) | 2,793,668 | 2,699,386 | 2,675,628 | 2,916,709 | 11,085,391 | ||||||||||
| Gross Margin (GAAP) | 19.07 | % | 18.73 | % | 18.65 | % | 19.04 | % | 18.88 | % | |||||
| Operating expenses (GAAP) | $ | 2,174,303 | $ | 2,170,834 | $ | 2,193,425 | $ | 2,232,773 | $ | 8,771,335 | |||||
| Impact of MEPP charge | — | — | (1,700 | ) | — | (1,700 | ) | ||||||||
| Impact of restructuring costs ^(1)(3)^ | (19,053 | ) | (21,377 | ) | (22,781 | ) | (46,313 | ) | (109,524 | ) | |||||
| Impact of acquisition-related costs<br>^(2)(4)^ | (19,745 | ) | (25,799 | ) | (25,361 | ) | (37,231 | ) | (108,136 | ) | |||||
| Operating expenses adjusted for Certain Items(Non-GAAP) | $ | 2,135,505 | $ | 2,123,658 | $ | 2,143,583 | $ | 2,149,229 | $ | 8,551,975 | |||||
| Operating income (GAAP) | $ | 619,365 | $ | 528,552 | $ | 482,203 | $ | 683,936 | $ | 2,314,056 | |||||
| Impact of MEPP charge | — | — | 1,700 | — | 1,700 | ||||||||||
| Impact of restructuring and transformational project costs ^(1)(3)^ | 19,053 | 21,377 | 22,781 | 46,313 | 109,524 | ||||||||||
| Impact of acquisition-related costs^(2)(4)^ | 19,745 | 25,799 | 25,361 | 37,231 | 108,136 | ||||||||||
| Operating income adjusted for Certain Items(Non-GAAP) | $ | 658,163 | $ | 575,728 | $ | 532,045 | $ | 767,480 | $ | 2,533,416 | |||||
| * | Segment has no applicable Certain items | ||||||||||||||
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| ^(1)^ | Includes Brakes Acquisition-related restructuring charges, facility closure charges and other severance charges<br>related to restructuring. | ||||||||||||||
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| ^(2)^ | Includes intangible amortization expense from the Brakes Acquisition, which is included in the results of Sysco<br>Europe and integration costs, and a write-off for an intangible asset due to restructuring in France. | ||||||||||||||
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| ^(3)^ | Fiscal 2018 includes business technology transformation initiative costs, professional fees on three-year<br>financial objectives, severance charges related to restructuring, costs to convert to legacy systems in conjunction with our revised business technology strategy and facility closure charges. | ||||||||||||||
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| ^(4)^ | Includes integration costs from the Brakes Acquisition. | ||||||||||||||
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