SYY 10-Q

Sysco Corp (SYY)

10-Q 2021-02-03 For: 2020-12-26

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Added on April 08, 2026

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Delaware						74-1648137
(State or other jurisdiction of incorporation or organization)						(IRS employer identification number)


Large Accelerated Filer	☑	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
(Do not check if a smaller reporting company)		Emerging growth company	☐



	PART I – FINANCIAL INFORMATION	Page No.
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	56
Item 4.	Controls and Procedures	56
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	57
Item 1A.	Risk Factors	57
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	60
Item 6.	Exhibits	60

Signatures		62


	Dec. 26, 2020		Jun. 27, 2020
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	5,767,034	$	6,059,427
Accounts receivable, less allowances of $254,347 and $334,810	2,855,424		2,893,551
Inventories	3,100,478		3,095,085

Prepaid expenses and other current assets	223,872		192,163

Income tax receivable	44,621		108,006
Total current assets	11,991,429		12,348,232
Plant and equipment at cost, less accumulated depreciation	4,382,737		4,458,567
Other long-term assets
Goodwill	3,929,636		3,732,469
Intangibles, less amortization	798,649		780,172

Deferred income taxes	280,511		194,115
Operating lease right-of-use assets, net	635,664		603,616
Other assets	471,225		511,095
Total other long-term assets	6,115,685		5,821,467
Total assets	$	22,489,851	$	22,628,266

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Notes payable	$	8,754	$	2,266
Accounts payable	3,554,624		3,447,065
Accrued expenses	1,679,429		1,616,289
Accrued income taxes	—		2,938
Current operating lease liabilities	107,633		107,167
Current maturities of long-term debt	1,366,103		1,542,128
Total current liabilities	6,716,543		6,717,853
Long-term liabilities
Long-term debt	12,463,284		12,902,485
Deferred income taxes	47,780		86,601
Long-term operating lease liabilities	563,548		523,496
Other long-term liabilities	1,235,939		1,204,953
Total long-term liabilities	14,310,551		14,717,535

Noncontrolling interest	35,958		34,265
Shareholders’ equity
Preferred stock, par value $1 per share Authorized 1,500,000 shares, issued none	—		—
Common stock, par value $1 per share Authorized 2,000,000,000 shares, issued 765,174,900 shares	765,175		765,175
Paid-in capital	1,565,255		1,506,901
Retained earnings	10,383,493		10,563,008
Accumulated other comprehensive loss	(1,388,169)		(1,710,881)
Treasury stock at cost, 255,176,469 and 256,915,825 shares	(9,898,955)		(9,965,590)
Total shareholders’ equity	1,426,799		1,158,613
Total liabilities and shareholders’ equity	$	22,489,851	$	22,628,266


	13-Week Period Ended				26-Week Period Ended
	Dec. 26, 2020		Dec. 28, 2019		Dec. 26, 2020		Dec. 28, 2019
Sales	$	11,558,982	$	15,025,042	$	23,336,361	$	30,328,047
Cost of sales	9,460,524		12,196,643		19,018,058		24,556,278
Gross profit	2,098,458		2,828,399		4,318,303		5,771,769
Operating expenses	1,886,396		2,275,906		3,686,662		4,550,958
Operating income	212,062		552,493		631,641		1,220,811
Interest expense	146,498		76,762		293,215		160,097
Other (income) expense, net	(15,556)		(807)		(1,432)		2,305
Earnings before income taxes	81,120		476,538		339,858		1,058,409
Income taxes	13,831		93,128		55,669		221,218
Net earnings	$	67,289	$	383,410	$	284,189	$	837,191

Net earnings:
Basic earnings per share	$	0.13	$	0.75	$	0.56	$	1.64
Diluted earnings per share	0.13		0.74		0.56		1.62

Average shares outstanding	510,006,754		509,984,743		509,567,080		511,721,290
Diluted shares outstanding	512,742,792		515,517,792		511,740,778		517,120,395


(Mark One)
☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


								Accumulated Other Comprehensive Loss
	Common Stock			Paid-in Capital		Retained Earnings				Treasury Stock
	Shares	Amount								Shares	Amounts		Totals
Balance as of September 26, 2020	765,174,900	$	765,175	$	1,534,281	$	10,546,598	$	(1,612,386)	256,075,772	$	(9,933,657)	$	1,300,011
Net earnings						67,289							67,289



Foreign currency translation adjustment								222,507					222,507
Amortization of cash flow hedges, net of tax								2,155					2,155
Change in cash flow hedges, net of tax								12,335					12,335
Change in net investment hedges, net of tax								(20,666)					(20,666)

Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax								7,930					7,930
Change in marketable securities, net of tax								(44)					(44)

Dividends declared ($0.45 per common share)						(230,394)							(230,394)


Share-based compensation awards				30,974						(899,303)	34,702		65,676
Balance as of December 26, 2020	765,174,900	$	765,175	$	1,565,255	$	10,383,493	$	(1,388,169)	255,176,469	$	(9,898,955)	$	1,426,799

								Accumulated Other Comprehensive Loss
	Common Stock			Paid-in Capital		Retained Earnings				Treasury Stock
	Shares	Amount								Shares	Amounts		Totals
Balance as of September 28, 2019	765,174,900	$	765,175	$	1,490,661	$	11,486,833	$	(1,675,430)	254,310,626	$	(9,612,491)	$	2,454,748
Net earnings						383,410							383,410
Foreign currency translation adjustment								154,955					154,955
Amortization of cash flow hedges, net of tax								2,155					2,155
Change in cash flow hedges, net of tax								(14,797)					(14,797)
Change in net investment hedges, net of tax								(41,479)					(41,479)
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax								8,653					8,653
Change in marketable securities, net of tax								(386)					(386)

Dividends declared ($0.45 per common share)						(230,516)							(230,516)
Treasury stock purchases										3,501,930	(281,081)		(281,081)

Share-based compensation awards				35,471						(1,480,168)	56,393		91,864
Balance as of December 28, 2019	765,174,900	$	765,175	$	1,526,132	$	11,639,727	$	(1,566,329)	256,332,388	$	(9,837,179)	$	2,527,526


	Dec. 26, 2020		Dec. 28, 2019
	(In thousands)
Cash and cash equivalents	$	5,767,034	$	524,578
Restricted cash (1)	22,451		46,918
Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows	$	5,789,485	$	571,496


	13-Week Period Ended Dec. 26, 2020
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Fresh and frozen meats	$	1,500,064	$	267,817	$	402,133	$	—	$	2,170,014
Canned and dry products	1,406,053		383,170		32,867		—		1,822,090
Frozen fruits, vegetables, bakery and other	1,070,227		394,706		275,422		—		1,740,355
Poultry	844,377		174,717		217,621		—		1,236,715
Dairy products	818,810		208,208		142,966		—		1,169,984
Paper and disposables	715,775		92,954		182,094		8,675		999,498
Fresh produce	696,879		145,565		66,528		—		908,972
Seafood	407,955		69,680		26,387		—		504,022
Beverage products	168,902		73,422		142,208		10,728		395,260



Other (1)	295,101		157,550		32,175		127,246		612,072
Total Sales	$	7,924,143	$	1,967,789	$	1,520,401	$	146,649	$	11,558,982


	13-Week Period Ended Dec. 28, 2019
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Fresh and frozen meats	$	2,071,447	$	409,483	$	392,584	$	—	$	2,873,514
Canned and dry products	1,861,743		578,998		38,652		—		2,479,393
Frozen fruits, vegetables, bakery and other	1,459,470		572,991		266,540		—		2,299,001
Dairy products	1,139,820		299,830		142,967		—		1,582,617
Poultry	1,064,679		214,781		200,481		—		1,479,941
Fresh produce	952,857		256,183		59,318		—		1,268,358
Paper and disposables	689,890		90,778		166,313		15,290		962,271
Seafood	601,709		129,065		23,383		—		754,157
Beverage products	276,626		130,766		139,106		20,912		567,410



Other (1)	295,334		207,178		26,549		229,319		758,380
Total Sales	$	10,413,575	$	2,890,053	$	1,455,893	$	265,521	$	15,025,042


	26-Week Period Ended Dec. 26, 2020
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Fresh and frozen meats	$	2,997,869	$	581,989	$	831,053	$	—	$	4,410,911
Canned and dry products	2,812,198		774,747		62,440		—		3,649,385
Frozen fruits, vegetables, bakery and other	2,127,476		821,271		532,209		—		3,480,956
Poultry	1,679,256		353,743		434,255		—		2,467,254
Dairy products	1,655,075		441,164		289,995		—		2,386,234
Paper and disposables	1,396,600		183,663		361,268		20,313		1,961,844
Fresh produce	1,407,799		316,103		131,510		—		1,855,412
Seafood	890,652		158,247		51,483		—		1,100,382
Beverage products	348,919		150,888		290,799		21,938		812,544



Other (1)	529,832		349,667		59,537		272,403		1,211,439
Total Sales	$	15,845,676	$	4,131,482	$	3,044,549	$	314,654	$	23,336,361


	26-Week Period Ended Dec. 28, 2019
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Fresh and frozen meats	$	4,146,747	$	821,638	$	773,962	$	—	$	5,742,347
Canned and dry products	3,760,632		1,165,622		75,842		—		5,002,096
Frozen fruits, vegetables, bakery and other	2,908,688		1,125,005		520,995		—		4,554,688
Dairy products	2,288,201		612,008		288,888		—		3,189,097
Poultry	2,154,785		433,381		404,749		—		2,992,915
Fresh produce	1,951,020		513,941		120,252		—		2,585,213
Paper and disposables	1,409,431		189,120		334,748		32,663		1,965,962
Seafood	1,287,119		278,656		48,238		—		1,614,013
Beverage products	567,412		263,618		282,785		45,240		1,159,055



Other (1)	598,173		399,452		52,428		472,608		1,522,661
Total Sales	$	21,072,208	$	5,802,441	$	2,902,887	$	550,511	$	30,328,047


	Assets Measured at Fair Value as of Dec. 26, 2020
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash equivalents
Cash and cash equivalents	$	4,738,442	$	489,977	$	—	$	5,228,419

Other assets (1)	22,451		—		—		22,451







Total assets at fair value	$	4,760,893	$	489,977	$	—	$	5,250,870


	Assets Measured at Fair Value as of Jun. 27, 2020
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash equivalents
Cash and cash equivalents	$	5,245,487	$	300,200	$	—	$	5,545,687



Other assets (1)	36,143		—		—		36,143

Total assets at fair value	$	5,281,630	$	300,200	$	—	$	5,581,830


	26-Week Period Ended
	Dec. 26, 2020		Dec. 28, 2019
Cash flows from operating activities:
Net earnings	$	284,189	$	837,191
Adjustments to reconcile net earnings to cash provided by operating activities:
Share-based compensation expense	47,122		46,644
Depreciation and amortization	365,332		372,416
Operating lease asset amortization	55,231		53,444
Amortization of debt issuance and other debt-related costs	12,946		9,889


Deferred income taxes	(107,821)		(75,898)
Provision for losses on receivables	(94,242)		38,418
Loss on sale of business	12,043		—
Other non-cash items	(9,312)		3,239
Additional changes in certain assets and liabilities, net of effect of businesses acquired:
Decrease (increase) in receivables	192,121		(161,158)
Decrease (increase) in inventories	37,345		(279,403)
Increase in prepaid expenses and other current assets	(22,519)		(38,503)
Increase (decrease) in accounts payable	84,708		(191,280)
Increase (decrease) in accrued expenses	20,108		(49,866)
Decrease in operating lease liabilities	(63,496)		(62,101)
Increase in accrued income taxes	63,385		182,557
Decrease in other assets	20,576		13,023
Increase in other long-term liabilities	38,962		55,857

Net cash provided by operating activities	936,678		754,469
Cash flows from investing activities:
Additions to plant and equipment	(163,944)		(393,379)
Proceeds from sales of plant and equipment	15,510		10,293
Acquisition of businesses, net of cash acquired	—		(142,783)
Purchase of marketable securities	(36,121)		(11,424)
Proceeds from sales of marketable securities	20,797		9,038
Other investing activities	—		565

Net cash used for investing activities	(163,758)		(527,690)
Cash flows from financing activities:
Bank and commercial paper borrowings, net	6,463		721,415
Other debt borrowings	4,094		18,966


	26-Week Period Ended
	Dec. 26, 2020
	(In thousands)
Balance at beginning of period	$	334,810
Charged to costs and expenses	(94,242)
Customer accounts written off, net of recoveries	22,675
Other adjustments	(8,896)
Balance at end of period	$	254,347


	Dec. 26, 2020
	Amortized Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Short-Term Marketable Securities		Long-Term Marketable Securities
	(In thousands)
Fixed income securities:
Corporate bonds	$	89,476	$	3,664	$	(68)	$	93,072	$	17,777	$	75,295
Government bonds	33,194		4,733		—		37,927		—		37,927
Total marketable securities	$	122,670	$	8,397	$	(68)	$	130,999	$	17,777	$	113,222

	Jun. 27, 2020
	Amortized Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Short-Term Marketable Securities		Long-Term Marketable Securities
	(In thousands)
Fixed income securities:
Corporate bonds	$	78,651	$	4,064	$	—	$	82,715	$	18,233	$	64,482
Government bonds	28,633		4,919		—		33,552		—		33,552
Total marketable securities	$	107,284	$	8,983	$	—	$	116,267	$	18,233	$	98,034


	Dec. 26, 2020
	(In thousands)
Due in one year or less	$	17,777
Due after one year through five years	60,399
Due after five years through ten years	52,823

Total	$	130,999


		Derivative Fair Value
	Balance Sheet location	Dec. 26, 2020		Jun. 27, 2020
		(In thousands)
Fair Value Hedges:
Interest rate swaps	Other current assets	$	2,678	$	1,388
Interest rate swaps	Other assets	58,053		69,782



Cash Flow Hedges:
Fuel swaps	Other current assets	$	3,428	$	233
Foreign currency forwards	Other current assets	34		1,063

Fuel swaps	Other assets	—		1,173
Cross currency swaps	Other assets	—		19,614
Fuel swaps	Other current liabilities	6,973		28,242
Foreign currency forwards	Other current liabilities	163		222


	13-Week Period Ended Dec. 26, 2020
	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives		Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
	(In thousands)			(In thousands)
Derivatives in cash flow hedging relationships:
Fuel swaps	$	16,939	Operating expense	$	(7,613)
Foreign currency contracts	(587)		Cost of sales / Other income	—

Total	$	16,352		$	(7,613)

Derivatives in net investment hedging relationships:

Foreign denominated debt	(27,554)		N/A	—
Total	$	(27,554)		$	—

	13-Week Period Ended Dec. 28, 2019
	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives		Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
	(In thousands)			(In thousands)
Derivatives in cash flow hedging relationships:
Fuel swaps	$	10,345	Operating expense	$	(3,213)
Foreign currency contracts	(29,658)		Cost of sales / Other income	3,624

Total	$	(19,313)		$	411

Derivatives in net investment hedging relationships:
Foreign currency contracts	$	(34,639)	N/A	$	—
Foreign denominated debt	(11,650)		N/A	—
Total	$	(46,289)		$	—


	Dec. 26, 2020
	Carrying Amount of Hedged Assets (Liabilities)		Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Assets (Liabilities)
	(In thousands)
Balance sheet location:
Current maturities of long-term debt	$	(499,778)	$	(2,797)
Long-term debt	(1,064,694)		(58,053)


		13-Week Period Ended Dec. 26, 2020
	Location of Expense (Income) Recognized in Net Earnings	Before Tax Amount		Tax		Net of Tax Amount
		(In thousands)
Pension and other postretirement benefit plans:


Reclassification adjustments:



Amortization of prior service cost	Other expense, net	$	183	$	46	$	137
Amortization of actuarial loss, net	Other expense, net	10,387		2,594		7,793
Total reclassification adjustments		10,570		2,640		7,930
Foreign currency translation:

Foreign currency translation adjustment	N/A	222,507		—		222,507
Marketable securities:
Change in marketable securities (1)	N/A	(55)		(11)		(44)
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedge	Operating expenses (2)	16,352		4,017		12,335
Change in net investment hedge	N/A	(27,554)		(6,888)		(20,666)

Total other comprehensive income before reclassification adjustments		(11,202)		(2,871)		(8,331)
Reclassification adjustments:
Amortization of cash flow hedges	Interest expense	2,874		719		2,155

Total other comprehensive income		$	224,694	$	477	$	224,217


	26-Week Period Ended Dec. 26, 2020
	Pension and Other Postretirement Benefit Plans, net of tax		Foreign Currency Translation		Hedging, net of tax		Marketable Securities, net of tax		Total
	(In thousands)
Balance as of June 27, 2020	$	(1,265,714)	$	(402,384)	$	(49,878)	$	7,095	$	(1,710,881)
Equity adjustment from foreign currency translation	—		335,647		—		—		335,647

Amortization of cash flow hedges	—		—		4,310		—		4,310

Change in net investment hedges	—		—		(31,927)		—		(31,927)
Change in cash flow hedge	—		—		(632)		—		(632)


Amortization of unrecognized prior service cost	274		—		—		—		274
Amortization of unrecognized net actuarial losses	15,558		—		—		—		15,558
Change in marketable securities	—		—		—		(518)		(518)
Balance as of Dec. 26, 2020	$	(1,249,882)	$	(66,737)	$	(78,127)	$	6,577	$	(1,388,169)


	13-Week Period Ended Dec. 26, 2020
	U.S. Foodservice Operations			International Foodservice Operations			SYGMA			Other			Corporate		Consolidated Totals
	(In thousands)
Sales	$	7,924,143		$	1,967,789		$	1,520,401		$	146,649		$	—	$	11,558,982
Sales increase (decrease)	(23.9)		%	(31.9)		%	4.4		%	(44.8)		%			(23.1)		%
Percentage of total	68.6		%	17.0		%	13.2		%	1.2		%			100.0		%

Operating income (loss)	$	485,251		$	(79,949)		$	11,328		$	(1,018)		$	(203,550)	$	212,062
Operating income (loss) increase (decrease)	(31.2)		%	NM			14.9		%	NM					(61.6)		%
Percentage of total segments	116.8		%	(19.2)		%	2.7		%	(0.3)		%			100.0		%
Operating income (loss) as a percentage of sales	6.1		%	(4.1)		%	0.7		%	(0.7)		%			1.8		%


	13-Week Period Ended Dec. 26, 2020		13-Week Period Ended Dec. 28, 2019		Change in Dollars		% Change
	(Dollars in thousands)
Sales	$	7,924,143	$	10,413,575	$	(2,489,432)	(23.9)	%
Gross profit	1,559,322		2,048,904		(489,582)		(23.9)
Operating expenses	1,074,071		1,344,103		(270,032)		(20.1)
Operating income	$	485,251	$	704,801	$	(219,550)	(31.2)	%

Gross profit	$	1,559,322	$	2,048,904	$	(489,582)	(23.9)	%
Adjusted operating expenses (Non-GAAP)	1,087,526		1,340,424		(252,898)		(18.9)
Adjusted operating income (Non-GAAP)	$	471,796	$	708,480	$	(236,684)	(33.4)	%

	26-Week Period Ended Dec. 26, 2020		26-Week Period Ended Dec. 28, 2019		Change in Dollars		% Change
	(Dollars in thousands)
Sales	$	15,845,676	$	21,072,208	$	(5,226,532)	(24.8)	%
Gross profit	3,159,029		4,193,791		(1,034,762)		(24.7)
Operating expenses	2,085,369		2,695,371		(610,002)		(22.6)
Operating income	$	1,073,660	$	1,498,420	$	(424,760)	(28.3)	%

Gross profit	$	3,159,029	$	4,193,791	$	(1,034,762)	(24.7)	%
Adjusted operating expenses (Non-GAAP)	2,184,201		2,687,566		(503,365)		(18.7)
Adjusted operating income (Non-GAAP)	$	974,828	$	1,506,225	$	(531,397)	(35.3)	%


	Increase (Decrease)				Increase (Decrease)
	13-Week Period				26-Week Period
	(Dollars in millions)				(Dollars in millions)
Cause of change	Percentage		Dollars		Percentage		Dollars
Case volume	(23.4)	%	$	(2,436.6)	(24.6)	%	$	(5,185.6)
Inflation	1.6		170.6		1.2		249.0
Acquisitions	0.2		16.7		0.2		50.5
Other (1)	(2.3)		(240.1)		(1.6)		(340.4)
Total change in sales	(23.9)	%	$	(2,489.4)	(24.8)	%	$	(5,226.5)


Sysco’s results of operations for fiscal 2021 and fiscal 2020 were impacted by restructuring and transformational project costs consisting of: (1) restructuring charges; (2) expenses associated with our various transformation initiatives; and (3) facility closure and severance charges. Sysco’s results for fiscal 2021 and fiscal 2020 were also impacted by intangible amortization expense related to the fiscal 2017 acquisition of Cucina Lux Investments Limited (the Brakes Acquisition). Additionally, our results for fiscal 2021 were impacted by the loss on the sale of Cake Corporation.

Fiscal 2021 results of operations were also positively impacted by the reduction of bad debt expense previously recognized in fiscal 2020 due to the unexpected impact of the COVID-19 pandemic on the collectability of our pre-pandemic trade receivable balances. Many of Sysco’s customers, including those in the restaurant, hospitality and education segments, are operating at a substantially reduced volume due to governmental requirements for closures or other social-distancing measures and a portion of Sysco’s customers are closed. Some of these customers ceased paying their outstanding receivables, creating uncertainty as to their collectability. We experienced an increase in past due receivables and recognized additional bad debt charges in the third and fourth quarters of fiscal 2020; however, collections have improved in fiscal 2021. We have estimated uncollectible amounts based on the current collection experience and by applying write-off percentages based on historical loss experience, including loss experience during times of local and regional disasters. The COVID-19 pandemic is more widespread and longer in duration than historical disasters impacting our business, and it is possible that actual uncollectible amounts will differ and additional charges may be required; however, if collections continue to improve, it is also possible that additional reductions in our bad debt reserve could occur. While Sysco traditionally incurs bad debt expense, the magnitude of such expenses and benefits, 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.

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. The constant currency impact on our adjusted International Foodservice Operations results are disclosed when the impact exceeds a defined threshold of greater than 1% on the growth metric. If the amount does not exceed this threshold, a disclosure will be made that the impact of the currency change was not significant.

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 the impact of acquisition-related intangible amortization specific to the Brakes Acquisition. We believe this approach significantly enhances the comparability of Sysco’s results for fiscal 2021 and fiscal 2020.

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


(1)			Fiscal 2021 includes $22 million related to restructuring charges and $12 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2020 includes $34 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy and $23 million related to restructuring, facility closure and severance charges.
(2)			Represents intangible amortization expense from the Brakes Acquisition, which is included in the results of International Foodservice.
(3)			Represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(4)			The tax impact of adjustments for Certain Items are calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction where the Certain Item was incurred.
(5)			Individual components of diluted earnings per share may not add up to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.
			NM represents that the percentage change is not meaningful.


(1)			Fiscal 2021 includes $34 million related to restructuring, severance and facility closure charges, and $26 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2020 includes $62 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy, and $52 million related to severance, restructuring and facility closure charges.
(2)			Represents intangible amortization expense from the Brakes Acquisition, which is included in the results of International Foodservice.
(3)			Represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(4)			The tax impact of adjustments for Certain Items are calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction where the Certain Item was incurred.
(5)			Individual components of diluted earnings per share may not add up to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.
			NM represents that the percentage change is not meaningful.


SYGMA





Operating expenses (GAAP)	$	117,971	$	114,378	$	3,593	3.1	%
Impact of restructuring and transformational project costs (1)	6		(956)		962		(100.6)

Operating expenses adjusted for Certain Items (Non-GAAP)	$	117,977	$	113,422	$	4,555	4.0	%

Operating income (GAAP)	$	11,328	$	9,861	$	1,467	14.9	%
Impact of restructuring and transformational project costs (1)	(6)		956		(962)		(100.6)

Operating income adjusted for Certain Items (Non-GAAP)	$	11,322	$	10,817	$	505	4.7	%

OTHER




Operating expenses (GAAP)	$	36,785	$	57,104	$	(20,319)	(35.6)	%

Impact of bad debt reserve adjustments (2)	1,234		—		1,234		NM
Operating expenses adjusted for Certain Items (Non-GAAP)	$	38,019	$	57,104	$	(19,085)	(33.4)	%

Operating (loss) income (GAAP)	$	(1,018)	$	9,403	$	(10,421)	(110.8)	%

Impact of bad debt reserve adjustments (2)	(1,234)		—		(1,234)		NM
Operating (loss) income adjusted for Certain Items (Non-GAAP)	$	(2,252)	$	9,403	$	(11,655)	(123.9)	%

CORPORATE


Operating expenses (GAAP)	$	203,780	$	209,163	$	(5,383)	(2.6)	%
Impact of restructuring and transformational project costs (6)	(11,977)		(30,620)		18,643		(60.9)


Operating expenses adjusted for Certain Items (Non-GAAP)	$	191,803	$	178,543	$	13,260	7.4	%

Operating loss (GAAP)	$	(203,550)	$	(206,453)	$	2,903	(1.4)	%
Impact of restructuring and transformational project costs (6)	11,977		30,620		(18,643)		(60.9)


Operating loss adjusted for Certain Items (Non-GAAP)	$	(191,573)	$	(175,833)	$	(15,740)	9.0	%



(1)			Includes charges related to restructuring and business transformation projects.
(2)			Represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(3)			Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on current year results.
(4)			Includes restructuring, severance and facility closure costs primarily in Europe.
(5)			Represents intangible amortization expense from the Brakes Acquisition.

(6)			Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy.


			NM represents that the percentage change is not meaningful.


Impact of restructuring and transformational project costs (1)	(7)		(3,540)		3,533		(99.8)	%

Operating expenses adjusted for Certain Items (Non-GAAP)	$	237,813	$	229,186	$	8,627	3.8	%

Operating income (GAAP)	$	23,020	$	17,431	$	5,589	32.1	%
Impact of restructuring and transformational project costs (1)	7		3,540		(3,533)		(99.8)	%

Operating income adjusted for Certain Items (Non-GAAP)	$	23,027	$	20,971	$	2,056	9.8	%

OTHER




Operating expenses (GAAP)	$	77,220	$	118,711	$	(41,491)	(35.0)	%
Impact of bad debt reserve adjustments (2)	2,116		—		2,116		NM
Operating expenses adjusted for Certain Items (Non-GAAP)	$	79,336	$	118,711	$	(39,375)	(33.2)	%

Operating (loss) income (GAAP)	$	(1,023)	$	19,540	$	(20,563)	(105.2)	%
Impact of bad debt reserve adjustments (2)	(2,116)		—		(2,116)		—
Operating (loss) income adjusted for Certain Items (Non-GAAP)	$	(3,139)	$	19,540	$	(22,679)	(116.1)	%

CORPORATE


Operating expenses (GAAP)	$	381,529	$	402,607	$	(21,078)	(5.2)	%
Impact of restructuring and transformational project costs (6)	(23,995)		(53,360)		29,365		(55.0)

Operating expenses adjusted for Certain Items (Non-GAAP)	$	357,534	$	349,247	$	8,287	2.4	%

Operating loss (GAAP)	$	(383,530)	$	(404,261)	$	20,731	(5.1)	%
Impact of restructuring and transformational project costs (6)	23,995		53,360		(29,365)		(55.0)

Operating loss adjusted for Certain Items (Non-GAAP)	$	(359,535)	$	(350,901)	$	(8,634)	2.5	%


Combined Parent and Guarantor Subsidiaries Summarized Balance Sheet	Dec. 26, 2020		Jun. 27, 2020
	(In thousands)
ASSETS
Receivables due from non-obligor subsidiaries	$	96,596	$	133,195
Current assets	8,004,804		8,644,084
Total current assets	$	8,101,400	$	8,777,279
Notes receivable from non-obligor subsidiaries	$	83,482	$	671,500
Other noncurrent assets	3,867,458		4,036,312
Total noncurrent assets	$	3,950,940	$	4,707,812

LIABILITIES
Payables due to non-obligor subsidiaries	$	36,212	$	48,923
Other current liabilities	1,946,408		2,200,422
Total current liabilities	$	1,982,620	$	2,249,345
Notes payable to non-obligor subsidiaries	$	196,097	$	233,158
Long-term debt	12,021,840		12,478,453
Other noncurrent liabilities	1,278,574		1,356,781
Total noncurrent liabilities	$	13,496,511	$	14,068,392


ISSUER PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
Month #1
September 27 - October 24	—	$	—	—	—
Month #2
October 25 - November 21	4,538	74.76		339,256	—
Month #3
November 22 - December 26	3,249	75.79		246,245	—
Totals	7,787	$	75.19	585,501	—


3.1	—	Restated Certificate of Incorporation, incorporated by reference to Exhibit 3(a) to Form 10-K for the year ended June 28, 1997 (File No. 1-6544).

3.2	—	Certificate of Amendment to Restated Certificate of Incorporation increasing authorized shares, incorporated by reference to Exhibit 3(e) to Form 10-Q for the quarter ended December 27, 2003 (File No. 1-6544).

3.3	—	Form of Amended Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock, incorporated by reference to Exhibit 3(c) to Form 10-K for the year ended June 29, 1996 (File No. 1-6544).

3.4	—	Amended and Restated Bylaws of Sysco Corporation dated August 26, 2016, incorporated by reference to Exhibit 3.2 to Form 8-K filed on August 31, 2016 (File No. 1-6544).

10.1†#	—	Letter Agreement, dated as of November 12, 2020, by and between Aaron E. Alt and Sysco Corporation.

10.2†#	—	Form of Restricted Stock Award Agreement for Directors pursuant to the Sysco Corporation 2018 Omnibus Incentive Plan.

10.3†#	—	Form of Restricted Stock Award Agreement for Directors pursuant to the Sysco Corporation 2018 Omnibus Incentive Plan (for directors who elect to defer receipt of shares under the 2009 Board of Directors Stock Deferral Plan).

10.4†#	—	Description of Compensation Arrangements with Non-Employee Directors.

22.1	—	Subsidiary Guarantors and Issuers of Guaranteed Securities, incorporated by reference to Exhibit 22.1 to the Form 10-K for the year ended June 27, 2020 filed on August 26, 2020 (File No. 1-6544).

31.1#	—	CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2#	—	CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1#	—	CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2#	—	CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.SCH#	—	Inline XBRL Taxonomy Extension Schema Document

101.CAL#	—	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF#	—	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB#	—	Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE#	—	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	—	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


		Sysco Corporation
		(Registrant)


Date: February 2, 2021	By:	/s/ KEVIN P. HOURICAN
		Kevin P. Hourican
		President and Chief Executive Officer

Date: February 2, 2021	By:	/s/ AARON E. ALT
		Aaron E. Alt
		Executive Vice President and
		Chief Financial Officer

Date: February 2, 2021	By:	/s/ ANITA A. ZIELINSKI
		Anita A. Zielinski
		Senior Vice President and
		Chief Accounting Officer