Item 8. Financial Statements and Supplementary Data

SYSCO CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Consolidated Financial Statements:
Report of Management on Internal Control Over Financial Reporting	48
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting	49
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements	50
Consolidated Balance Sheets	51
Consolidated Results of Operations	52
Consolidated Statements of Comprehensive Income	53
Changes in Consolidated Shareholders’ Equity	54
Consolidated Cash Flows	55
Notes to Consolidated Financial Statements	56

All schedules are omitted because they are not applicable or the information is set forth in the consolidated financial statements or notes thereto.

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Sysco Corporation (“Sysco”) is responsible for establishing and maintaining adequate internal control over financial reporting for the company. Sysco’s internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Sysco’s management assessed the effectiveness of Sysco’s internal control over financial reporting as of June 29, 2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013). Based on this assessment, management concluded that, as of June 29, 2019, Sysco’s internal control over financial reporting was effective based on those criteria.

Ernst & Young LLP, the independent registered public accounting firm that audited the company’s consolidated financial statements included in this report, has issued an audit report on the effectiveness of Sysco’s internal control over financial reporting as of June 29, 2019.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Sysco Corporation

Opinion on Internal Control over Financial Reporting

We have audited Sysco Corporation and its Consolidated Subsidiaries’ (the “Company”) internal control over financial reporting as of June 29, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Sysco Corporation and Consolidated Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of June 29, 2019, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2019 consolidated financial statements of the Company and our report dated August 23, 2019, expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Houston, Texas

August 23, 2019

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Sysco Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Sysco Corporation and its Consolidated Subsidiaries (the “Company”) as of June 29, 2019 and June 30, 2018, the related consolidated results of operations, statements of comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended June 29, 2019 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 29, 2019 and June 30, 2018, and the results of its operations and its cash flows for each of the three years in the period ended June 29, 2019, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of June 29, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated August 23, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2002.

Houston, Texas

August 23, 2019

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share data)

	June 29, 2019				June 30, 2018
ASSETS
Current assets
Cash and cash equivalents	$	513,460			$	552,325
Accounts and notes receivable, less allowances of $28,176 and $25,768	4,181,696				4,073,723
Inventories	3,216,034				3,125,413
Prepaid expenses and other current assets	210,582				187,880
Income tax receivable	19,733				64,112
Total current assets	8,141,505				8,003,453
Plant and equipment at cost, less accumulated depreciation	4,501,705				4,521,660
Other long-term assets
Goodwill	3,896,226				3,955,485
Intangibles, less amortization	857,301				979,812
Deferred income taxes	80,760				83,666
Other assets	489,025				526,328
Total other long-term assets	5,323,312				5,545,291
Total assets	$	17,966,522			$	18,070,404
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Notes payable	$	3,957			$	4,176
Accounts payable	4,314,620				4,136,482
Accrued expenses	1,729,941				1,608,966
Accrued income taxes	17,343				56,793
Current maturities of long-term debt	37,322				782,329
Total current liabilities	6,103,183				6,588,746
Long-term liabilities
Long-term debt	8,122,058				7,540,765
Deferred income taxes	172,232				319,124
Other long-term liabilities	1,031,020				1,077,163
Total long-term liabilities	9,325,310				8,937,052
Commitments and contingencies
Noncontrolling interest	35,426				37,649
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	1,457,419				1,383,619
Retained earnings	11,229,679				10,348,628
Accumulated other comprehensive loss	(1,599,729		)		(1,409,269		)
Treasury stock at cost, 252,297,926 and 244,533,248 shares	(9,349,941		)		(8,581,196		)
Total shareholders’ equity	2,502,603				2,506,957
Total liabilities and shareholders’ equity	$	17,966,522			$	18,070,404

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED RESULTS OF OPERATIONS

(In thousands, except for share and per share data)

	Year Ended
	Jun. 29, 2019				Jun. 30, 2018				Jul. 1, 2017
	(In thousands except for share and per share data)
Sales	$	60,113,922			$	58,727,324			$	55,371,139
Cost of sales	48,704,935				47,641,933				44,813,632
Gross profit	11,408,987				11,085,391				10,557,507
Operating expenses	9,078,837				8,771,335				8,502,891
Operating income	2,330,150				2,314,056				2,054,616
Interest expense	360,423				395,483				302,878
Other (income) expense, net	(36,109		)		(37,651		)		(14,492		)
Earnings before income taxes	2,005,836				1,956,224				1,766,230
Income taxes	331,565				525,458				623,727
Net earnings	$	1,674,271			$	1,430,766			$	1,142,503
Net earnings:
Basic earnings per share	$	3.24			$	2.74			$	2.10
Diluted earnings per share	3.20				2.70				2.08
Average shares outstanding	516,890,581				522,926,914				543,496,816
Diluted shares outstanding	523,381,124				529,089,854				548,545,027

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

	Year Ended
	Jun. 29, 2019				Jun. 30, 2018				Jul. 1, 2017
	(In thousands)
Net earnings	$	1,674,271			$	1,430,766			$	1,142,503
Other comprehensive (loss) income:
Foreign currency translation adjustment	(119,126		)		(22,987		)		(11,243		)
Items presented net of tax:
Amortization of cash flow hedges	8,620				8,240				7,082
Change in net investment hedges	43,839				5,791				(24,012		)
Change in cash flow hedges	(4,062		)		14,343				(6,698		)
Amortization of prior service cost	6,400				6,905				7,004
Amortization of actuarial loss	26,116				25,110				25,965
Actuarial (loss) gain	(155,074		)		52,511				97,283
Change in marketable securities	2,827				—				—
Total other comprehensive (loss) income	(190,460		)		89,913				95,381
Comprehensive income	$	1,483,811			$	1,520,679			$	1,237,884

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY

(In thousands, except for share data)

	Common Stock							Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Loss				Treasury Stock
	Shares			Amount							Shares			Amounts				Totals
	(In thousands except for share data)
Balance as of July 2, 2016	765,174,900			$	765,175			$	1,281,140			$	9,006,138			$	(1,358,118	)		205,577,484			$	(6,214,727	)		$	3,479,608
Net earnings												1,142,503															1,142,503
Foreign currency translation adjustment																(11,243		)									(11,243		)
Amortization of cash flow hedges, net of tax																7,082											7,082
Change in cash flow hedges, net of tax																(6,698		)									(6,698		)
Change in net investment hedge, net of tax																(24,012		)									(24,012		)
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax																32,969											32,969
Pension funded status adjustment, net of tax																97,283											97,283
Dividends declared ($1.30 per common share)												(700,886		)													(700,886		)
Treasury stock purchases																				36,224,078			(1,886,121		)		(1,886,121		)
Increase in ownership interest in subsidiaries								(39,991		)																	(39,991		)
Share-based compensation awards								86,217												(6,665,863	)		204,805				291,022
Balance as of July 1, 2017	765,174,900			$	765,175			$	1,327,366			$	9,447,755			$	(1,262,737	)		235,135,699			$	(7,896,043	)		$	2,381,516
Net earnings												1,430,766															1,430,766
Reclassification of accumulated other comprehensive loss to retained earnings (1)												236,445				(236,445		)									—
Foreign currency translation adjustment																(22,987		)									(22,987		)
Amortization of cash flow hedges, net of tax																8,240											8,240
Change in cash flow hedges, net of tax																14,343											14,343
Change in net investment hedge, net of tax																5,791											5,791
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax																32,015											32,015
Pension funded status adjustment, net of tax																52,511											52,511
Dividends declared ($1.41 per common share)												(735,266		)													(735,266		)
Treasury stock purchases																				17,473,973			(956,502		)		(956,502		)
Increase in ownership interest in subsidiaries												(31,072		)													(31,072		)
Share-based compensation awards								56,253												(8,076,424	)		271,349				327,602
Balance as of June 30, 2018	765,174,900			$	765,175			$	1,383,619			$	10,348,628			$	(1,409,269	)		244,533,248			$	(8,581,196	)		$	2,506,957
Net earnings												1,674,271															1,674,271
Foreign currency translation adjustment																(119,126		)									(119,126		)
Amortization of cash flow hedges, net of tax																8,620											8,620
Change in cash flow hedges, net of tax																(4,062		)									(4,062		)
Change in net investment hedges, net of tax																43,839											43,839
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax																32,516											32,516
Pension funded status adjustment, net of tax																(155,074		)									(155,074		)
Change in marketable securities, net of tax																2,827											2,827
Dividends declared ($1.53 per common share)												(793,220		)													(793,220		)
Treasury stock purchases																				14,960,390			(1,021,881		)		(1,021,881		)
Increase in ownership interest in subsidiaries								(54,877		)																	(54,877		)
Share-based compensation awards								128,677												(7,195,712	)		253,136				381,813
Balance as of June 29, 2019	765,174,900			$	765,175			$	1,457,419			$	11,229,679			$	(1,599,729	)		252,297,926			$	(9,349,941	)		$	2,502,603

(1)	Deferred taxes stranded in accumulated other comprehensive income (AOCI) as a result of the Tax Cuts and Jobs Act of 2017 (the Tax Act) were reclassified to retained earnings as a result of early adopting Accounting Standards Update (ASU) 2018-02.

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED CASH FLOWS

(In thousands)

	Year Ended
	Jun. 29, 2019				Jun. 30, 2018				Jul. 1, 2017
Cash flows from operating activities:
Net earnings	$	1,674,271			$	1,430,766			$	1,142,503
Adjustments to reconcile net earnings to cash provided by operating activities:
Share-based compensation expense	104,904				93,841				83,883
Depreciation and amortization	763,935				765,498				901,992
Amortization of debt issuance and other debt-related costs	21,382				28,474				31,852
Gain on sale of business	(66,309		)		—				—
Loss on extinguishment of debt	—				53,104				—
Deferred income taxes	(126,719		)		187,908				(51,846		)
Provision for losses on receivables	62,946				21,448				20,672
Other non-cash items	(3,172		)		3,986				6,704
Additional changes in certain assets and liabilities, net of effect of businesses acquired:
(Increase) decrease in receivables	(203,458		)		(37,457		)		20,452
(Increase) in inventories	(114,667		)		(89,737		)		(113,647		)
(Increase) decrease in prepaid expenses and other current assets	(18,535		)		(19,643		)		8,158
Increase in accounts payable	246,420				76,897				322,775
Increase (decrease) in accrued expenses	137,517				47,105				(4,476		)
Increase (decrease) in accrued income taxes	4,929				(10,652		)		(74,590		)
(Increase) in other assets	(21,346		)		(81,104		)		(43,236		)
(Decrease) in other long-term liabilities	(50,891		)		(315,054		)		(18,629		)
Net cash provided by operating activities	2,411,207				2,155,380				2,232,567
Cash flows from investing activities:
Additions to plant and equipment	(692,391		)		(687,815		)		(686,378		)
Proceeds from sales of plant and equipment	20,941				22,255				23,715
Acquisition of businesses, net of cash acquired	(106,616		)		(248,105		)		(2,921,798		)
Proceeds from sale of business	149,879				—				—
Purchase of marketable securities	(116,440		)		—				—
Other investing activities	1,772				3,252				6,787
Net cash used for investing activities	(742,855		)		(910,413		)		(3,577,674		)
Cash flows from financing activities:
Bank and commercial paper borrowings (repayments), net	132,100				(119,700		)		119,700
Other debt borrowings	388,180				1,000,599				753,834
Other debt repayments	(790,250		)		(552,036		)		(143,664		)
Tender and redemption premiums for senior notes	—				(281,762		)		—
Proceeds from stock option exercises	253,135				268,751				204,805
Treasury stock purchases	(1,022,033		)		(978,901		)		(1,886,121		)
Dividends paid	(775,430		)		(722,158		)		(698,647		)
Other financing activities	(22,976		)		(25,262		)		(32,494		)
Net cash used for financing activities	(1,837,274		)		(1,410,469		)		(1,682,587		)
Effect of exchange rates on cash, cash equivalents and restricted cash	(14,677		)		11,844				(22,104		)
Net decrease in cash, cash equivalents and restricted cash	(183,599		)		(153,658		)		(3,049,798		)
Cash, cash equivalents and restricted cash at beginning of period	715,844				869,502				3,919,300
Cash, cash equivalents and restricted cash at end of period	$	532,245			$	715,844			$	869,502
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	346,670			$	301,672			$	285,025
Income taxes	531,103				268,384				761,384

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unless this Form 10-K indicates otherwise or the context otherwise requires, the terms “we,” “our,” “us,” “Sysco,” or “the company” as used in this Form 10-K refer to Sysco Corporation together with its consolidated subsidiaries and divisions.

1. SUMMARY OF ACCOUNTING POLICIES

Business and Consolidation

Sysco Corporation, acting through its subsidiaries and divisions (Sysco or the company), is engaged in the marketing and distribution of a wide range of food and related products primarily to the foodservice or food-away-from-home industry. These services are performed for over 650,000 customers from 325 distribution facilities located throughout North America and Europe.

Sysco’s fiscal year ends on the Saturday nearest to June 30th. This resulted in a 52-week year ended June 29, 2019 for fiscal 2019, June 30, 2018 for fiscal 2018 and July 1, 2017 for fiscal 2017.

The accompanying financial statements include the accounts of Sysco and its consolidated subsidiaries. All significant intercompany transactions and account balances have been eliminated.

The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates that affect the reported amounts of assets, liabilities, sales and expenses. Actual results could differ from the estimates used.

Cash and Cash Equivalents

Cash includes cash equivalents such as cash deposits, time deposits, certificates of deposit, commercial paper, high-quality money market funds and all highly liquid instruments with original maturities of three months or less, which are recorded at fair value.

Accounts Receivable and Notes Receivable, Less Allowances

Accounts receivable consist primarily of trade receivables from customers and receivables from suppliers for marketing or incentive programs. Sysco determines the past due status of trade receivables based on contractual terms with each customer. Sysco evaluates the collectability of accounts receivable and determines the appropriate reserve for doubtful accounts based on a combination of factors. The company utilizes specific criteria to determine uncollectible receivables to be written off including whether a customer has filed for or been placed in bankruptcy, has had accounts referred to outside parties for collection or has had accounts past due over specified periods. In these instances, a specific allowance for doubtful accounts is recorded to reduce the receivable to the net amount reasonably expected to be collected. Allowances are recorded for all other receivables based on an analysis of historical trends of write-offs and recoveries.

The company utilizes arrangements to sell portions of its trade accounts receivable to third-party financial institutions on a non-recourse basis. The arrangements meet the requirements for the receivables transferred to be accounted for as sales. Proceeds from the sales are reported net of negotiated discount and are recorded as a reduction to accounts receivable outstanding in the company’s consolidated balance sheets and as cash flows from operating activities in the company’s consolidated statements of cash flows. The discounts and fees associated with these arrangements were not material for the fiscal year ended June 29, 2019. For the fiscal year ended June 29, 2019, Sysco sold, without recourse, $3.9 billion of accounts receivable under these arrangements.

In certain instances, Sysco has continuing involvement subsequent to the transfer, limited to providing certain servicing and collection actions on behalf of the purchasers of the designated trade receivables. As of June 29, 2019, the outstanding aggregate principal amount of receivables that has been derecognized was $373.8 million. Sysco continues to service the receivables post-transfer on a non-recourse basis with no participating interest. Transfers under these arrangements are treated as a sale and are accounted for as a reduction in trade receivables because the agreements transfer effective control of the receivables to the buyer.

Inventories

Inventories consisting primarily of finished goods include food and related products and lodging products held for resale and are valued at the lower of cost (first-in, first-out method) and net realizable value. Elements of costs include the purchase price

of the product and freight charges to deliver the product to the company’s warehouses and are net of certain cash received from vendors (see “Vendor Consideration”).

Plant and Equipment

Capital additions, improvements and major replacements are classified as plant and equipment and are carried at cost. Depreciation is recorded using the straight-line method, which reduces the book value of each asset in equal amounts over its estimated useful life, and is included within operating expenses in the consolidated results of operations. Maintenance, repairs and minor replacements are charged to earnings when they are incurred. Upon the disposition of an asset, its accumulated depreciation is deducted from the original cost, and any gain or loss is reflected in current earnings.

Long-Lived Assets

Management reviews long-lived assets for indicators of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Cash flows expected to be generated by the related assets are estimated over the asset’s useful life based on updated projections on an undiscounted basis. For assets held for use, Sysco groups assets and liabilities at the lowest level for which cash flows are separately identifiable. If the evaluation indicates that the carrying value of the asset may not be recoverable, the potential impairment is measured using fair value. Impairment losses for assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.

Intangibles with definite lives are amortized over their useful lives in a manner consistent with underlying cash flow, which generally ranges from two to fifteen years. Management reviews finite-lived intangibles for indicators of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Cash flows expected to be generated by the finite-lived intangibles are estimated over the intangible asset’s useful life based on updated projections on an undiscounted basis. If the evaluation indicates that the carrying value of the finite-lived intangible asset may not be recoverable, the potential impairment is measured at fair value.

Goodwill and Indefinite-Lived Intangibles

Goodwill represents the excess of cost over the fair value of net assets acquired. Goodwill and intangibles with indefinite lives are not amortized. Goodwill is assigned to the reporting units that are expected to benefit from the synergies of a business combination. The recoverability of goodwill and indefinite-lived intangibles is assessed annually, or more frequently as needed when events or changes have occurred that would suggest an impairment of carrying value, by determining whether the fair values of the applicable reporting units exceed their carrying values. This annual testing may be performed utilizing either a qualitative or quantitative assessment; however, if a qualitative assessment is performed and it is determined that the fair value of a reporting unit is more likely than not (i.e., a likelihood of more than 50 percent) to be less than its carrying amount, a quantitative test is performed.

For fiscal 2019, the company utilized a qualitative assessment for certain reporting units. For the remaining reporting units, Sysco performed a quantitative test using a combination of the income and market approaches. The evaluation of fair value requires the use of projections, estimates and assumptions as to the future performance of the operations in performing a discounted cash flow analysis, as well as assumptions regarding sales and earnings multiples that would be applied in comparable acquisitions. The company does not believe the estimates used in the analysis are reasonably likely to change materially in the future, but Sysco will continue to assess the estimates in the future based on the expectations of the reporting units. In the fiscal 2019 assessment, the estimated fair values exceeded the carrying values for two reporting units by 13% and 15%, respectively, with goodwill of $226.0 million in the aggregate as of June 29, 2019, recorded for these reporting units.

Derivative Financial Instruments

All derivatives are recognized as assets or liabilities within the consolidated balance sheets at fair value at their gross values. Gains or losses on derivative financial instruments designated as fair value hedges are recognized immediately in the consolidated results of operations, along with the offsetting gain or loss related to the underlying hedged item.

Gains or losses on derivative financial instruments designated as cash flow hedges are recorded as a separate component of shareholders’ equity from inception of the hedges and are reclassified to the Consolidated Results of Operations in conjunction with the recognition of the underlying hedged item.

For net investment hedges, the remeasurement gain or loss is recorded in AOCI and will be subsequently reclassified to net earnings when the hedged net investment is either sold or substantially liquidated.

Investments in Corporate-Owned Life Insurance

Investments in corporate-owned life insurance (COLI) policies are recorded at their cash surrender values as of each balance sheet date. Changes in the cash surrender value during the period are recorded as a gain or loss within operating expenses. Sysco has the ability and intent to hold certain of its COLI policies to maturity; therefore, the company does not record deferred tax balances related to cash surrender value gains or losses for these policies. The company invests in COLI policies relating to its executive deferred compensation plan and Supplemental Executive Retirement Plan (SERP). The total amounts related to the company’s investments in COLI policies included in other assets in the consolidated balance sheets were $168.4 million and $167.9 million at June 29, 2019 and June 30, 2018, respectively.

Treasury Stock

The company records treasury stock purchases at cost. Shares removed from treasury are valued at cost using the average cost method.

Foreign Currency Translation

The assets and liabilities of all foreign subsidiaries are translated at current exchange rates. Related translation adjustments are recorded as a component of AOCI (loss).

Revenue Recognition

On July 1, 2018, Sysco adopted ASC Topic 606 with no significant impact to its financial position or results of operations, using the modified retrospective method. There were no contracts which were not completed as of July 1, 2018. Results for reporting periods beginning after July 1, 2018 are presented under ASC Topic 606, while prior period amounts have not been restated and continue to be reported in accordance with our historic accounting under ASC Topic 605, Revenue Recognition. Sysco had no adjustment to opening retained earnings as of July 1, 2018 as a result of adopting ASC Topic 606. There was no material impact on revenues for fiscal 2019 as a result of applying ASC Topic 606. The accounting policies and other disclosures are below, as well as the disclosure of disaggregated revenues in Note 4, “Revenue.”

The company recognizes revenues when the performance obligation is satisfied, which is the point at which control of the promised goods or services are transferred to its customers, in an amount that reflects the consideration Sysco expects to be entitled to receive in exchange for those goods or services. For the majority of Sysco’s customer arrangements, control transfers to customers at a point-in-time when goods have been delivered, as that is generally when legal title, physical possession and risks and rewards of goods/services transfers to the customer. The timing of satisfaction of the performance obligation is not subject to significant judgment. While certain additional services may be identified within a contract, we have concluded that those services are individually immaterial in the context of the contract with the customer, and, therefore, not assessed as performance obligations.

Sales tax collected from customers is not included in revenue, but rather recorded as a liability due to the respective taxing authorities. Shipping and handling costs include costs associated with the selection of products and delivery to customers and are included within operating expenses.

Product Sales Revenues

Sysco generates revenue primarily from the distribution and sale of food and related products to its customers. Substantially all revenue is recognized at the point in time in which the product is delivered to the customer. The company grants certain customers sales incentives, such as rebates or discounts, which are accounted for as variable consideration. The variable consideration is based on amounts known at the time the performance obligation is satisfied and, therefore, requires minimal judgment.

Contract Balances

After completion of Sysco’s performance obligations, the company has an unconditional right to consideration as outlined in its contracts with customers. Sysco’s customer receivables will generally be collected in less than 30 days in accordance with the underlying payment terms. Customer receivables, which are included in Accounts and notes receivable, less allowances in the consolidated balance sheet, were $3.9 billion and $3.8 billion as of June 29, 2019 and June 30, 2018, respectively.

Sysco has certain customer contracts in which upfront monies are paid to its customers. These payments have become industry practice and are not related to financing of the customer’s business. They are not associated with any distinct good or service to be received from the customer and, therefore, are treated as a reduction of transaction prices. All upfront payments are capitalized in Other Assets and amortized over the life of the contract or the expected life of the relationship with the customer on a straight-line basis. As of June 29, 2019, Sysco’s contract assets were not significant. Sysco has no significant commissions paid that are directly attributable to obtaining a particular contract.

Vendor Consideration

Sysco recognizes consideration received from vendors as a reduction to cost of sales when the services performed in connection with the monies received are completed and when the related product has been sold by Sysco. There are several types of cash consideration received from vendors. In many instances, the vendor consideration is in the form of a specified amount per case or per pound. In these instances, Sysco will recognize the vendor consideration as a reduction of cost of sales when the product is sold.

Shipping and Handling Costs

Shipping and handling costs include costs associated with the selection of products and delivery to customers. Included in operating expenses are shipping and handling costs of approximately $3.5 billion, $3.6 billion and $3.4 billion in fiscal 2019, 2018 and 2017, respectively.

Insurance Program

Sysco maintains a self-insurance program covering portions of workers’ compensation, general and vehicle liability and property insurance costs. The amounts in excess of the self-insured levels are fully insured by third party insurers. In fiscal 2018, Sysco created a wholly owned captive insurance subsidiary (the Captive) with the primary purpose to enhance Sysco’s risk financing strategies by providing Sysco the opportunity to negotiate insurance premiums in the non-retail insurance market. The Captive must maintain a sufficient level of cash to fund future reserve payments and secure the insurer’s obligations for workers’ compensation, general liability and auto liability programs. The Captive holds restricted assets in order to meet solvency requirements, including a restricted investment portfolio of marketable fixed income securities, which have been classified and accounted for as available-for-sale, and cash and restricted cash equivalents held in a cash deposit account. Further, Sysco has letters of credit available to collateralize the remaining liabilities not covered by restricted cash, restricted cash equivalents and marketable securities. The company also maintains a fully self-insured group medical program. Liabilities associated with these risks are estimated in part by considering historical claims experience, medical cost trends, demographic factors, severity factors and other actuarial assumptions.

Share-Based Compensation

Sysco recognizes expense for its share-based compensation based on the fair value of the awards that are granted. The fair value of performance share unit awards is determined based on the target number of shares of common stock and the company’s stock price on the date of grant and subsequently adjusted based on actual and forecasted performance compared to planned targets. The fair value of stock options is estimated at the date of grant using the Black-Scholes option pricing model. Option pricing methods require the input of highly subjective assumptions, including the expected stock price volatility. The fair value of restricted stock and restricted stock unit awards are based on the company’s stock price on the date of grant. Measured compensation cost is recognized ratably over the vesting period of the related share-based compensation award. The method for estimating the fair value of stock options has not changed in the past three years.

During the vesting period, Sysco reduces share-based compensation expense for estimated forfeitures, which is based on analysis of historical trends reviewed on an annual basis. Sysco’s estimate of forfeitures is applied at the grant level. The estimate of forfeitures is trued up to actual forfeitures at the end of each vesting period.

Income Taxes

Sysco recognizes deferred tax assets and liabilities based on the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured pursuant to tax laws using rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The impact on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. Valuation allowances are established

when necessary to reduce deferred tax assets to the amount more likely than not to be realized. The additional U.S. federal tax burden as a result of the global intangible low taxed income (GILTI) regime is accounted for as a periodic cost.

The determination of the company’s provision for income taxes requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. The company’s provision for income taxes primarily reflects a combination of income earned and taxed in the various United States (U.S.) federal and state, as well as various foreign jurisdictions. Jurisdictional tax law changes, increases or decreases in permanent differences between book and tax items, accruals or adjustments of accruals for tax contingencies or valuation allowances, and the company’s change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.

Acquisitions

Acquisitions of businesses are accounted for using the acquisition method of accounting, and the financial statements include the results of the acquired operations from the respective dates of acquisition.

The purchase price of the acquired entities is preliminarily allocated to the net assets acquired and liabilities assumed based on the estimated fair value at the dates of acquisition, with any excess of cost over the fair value of net assets acquired, including intangibles, recognized as goodwill. Subsequent changes to preliminary amounts are made prospectively.

Basis of Presentation

The financial statements include consolidated balance sheets, consolidated results of operations, consolidated statements of comprehensive income, changes in consolidated shareholders’ equity and consolidated cash flows. In the opinion of management, all adjustments, which consist of normal recurring adjustments, except as otherwise disclosed, necessary to present fairly the financial position, results of operations, comprehensive income and cash flows for all periods presented have been made.

Sysco has interests in various jointly owned foodservice operations in Mexico, Panama and Sweden for which it consolidates the results of the operations; therefore, the financial position, results of operations and cash flows for these companies have been included in Sysco’s consolidated financial statements. The value of the noncontrolling interest in each entity is considered redeemable due to certain features of the investment agreement and has, therefore, been presented as mezzanine equity, which is outside of permanent equity, in the consolidated balance sheets. The income attributable to the noncontrolling interest is located within Other expense (income), net, in the consolidated results of operations, as this amount is not material. The non-cash add back for the change in the value of the noncontrolling interest is located within Other non-cash items on the consolidated cash flows.

Reclassifications

Prior year amounts have been reclassified to conform with the current year presentation.

Supplemental Cash Flow Information

Within the Consolidated Statement of Cash Flows, certain items have been grouped as other financing activities. These primarily includes cash paid for shares withheld to cover taxes from share-based compensation and debt issuance costs.

The following table sets forth the company’s reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Statement of Cash Flows that sum to the total of the same such amounts shown in the Consolidated Balance Sheets:

	Jun. 29, 2019				Jun. 30, 2018				Jul. 1, 2017
	(In thousands)
Cash and cash equivalents	$	513,460			$	552,325			$	869,502
Restricted cash (1)	18,785				163,519				—
Total cash, cash equivalents and restricted cash shown in the Consolidated Statement of Cash Flows	$	532,245			$	715,844			$	869,502

(1) Restricted cash primarily represents cash and cash equivalents of Sysco’s wholly owned captive insurance subsidiary, restricted for use to secure the insurer’s obligations for workers’ compensation, general liability and auto liability programs. Restricted cash is located within Other assets in each consolidated balance sheet.

2. CHANGES IN ACCOUNTING

Revenue from Contracts with Customers

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606) and has issued subsequent amendments to this guidance. This new standard superseded existing revenue recognition standards and eliminated all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The revenue recognition principle in ASU 2014-09 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Sysco adopted the new standard effective July 1, 2018, using the modified retrospective approach. The adoption of ASU 2014-09 did not have a material impact on Sysco’s consolidated balance sheet or consolidated results of operations as of the adoption date or for fiscal 2019.

Guidance in Presentation of Cash Flows - Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to address eight specific cash flow issues with the objective of reducing the existing diversity in practice. The eight specific issues are: (1) Debt Prepayment or Debt Extinguishment Costs; (2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; (3) Contingent Consideration Payments Made after a Business Combination; (4) Proceeds from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned Life Insurance Policies; (6) Distributions Received from Equity Method Invitees; (7) Beneficial Interests in Securitization Transactions; and (8) Separately Identifiable Cash and Application of the Predominance Principle. The company adopted this ASU retrospectively, effective July 1, 2018. The adoption of ASU 2016-15 did not have a material effect on the company’s consolidated cash flow statement as of the adoption date or for fiscal 2019.

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, requiring that an employer report the service cost component of pension and postretirement benefits in the same line item or items as other compensation costs. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside of a subtotal of income from operations. In addition, only the service cost component will be eligible for capitalization as applicable. The company adopted this ASU effective July 1, 2018, resulting in net cost of $35.5 million for fiscal 2019 being reported in Other expense (income), net that would have previously been included in Operating expenses. The ASU was applied retrospectively, resulting in a net benefit of $14.9 million for fiscal 2018 and a net cost of $1.4 million for fiscal 2017, reported in Other expense (income), net.

3. NEW ACCOUNTING STANDARDS

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), specifying the accounting for leases, which supersedes the leases requirements in Topic 840, Leases, and has issued subsequent amendments to Topic 842. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing and uncertainty of cash flows arising from a lease. The amended guidance requires the recognition of lease assets and lease liabilities on the balance sheet for those leases currently classified as operating leases. In addition, Topic 842 expands the disclosure requirements of lease arrangements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, which is fiscal 2020 for Sysco.

To assess the impact of the standard, the company has formed a cross-functional steering committee to review the amended guidance and subsequent clarifications in order to understand the potential impact the new standard could have on the company’s consolidated financial statements and disclosures, business processes, and internal controls. The company has substantially completed its assessment of the accounting required under Topic 842 and the estimated impact upon adoption. To facilitate the adoption of the provisions of the new standard, the company has implemented a third-party lease accounting software. The company adopted this standard on June 30, 2019, the first day of fiscal 2020. The company will elect the package of practical expedients permitted under the transition guidance within Topic 842, which, among other things, allows the company to carry forward historical

lease classifications. The estimated impact of the adoption to the Sysco’s consolidated financial statements includes the recognition of right-of-use assets and liabilities of between $500 million to $600 million related to operating leases as of June 30, 2019.

Financial Instruments - Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduces a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. The estimate of expected credit losses will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This ASU also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. This guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019, which is the first quarter of fiscal 2021 for Sysco, with early adoption permitted. The company is currently reviewing the provisions of the new standard.

Implementation Costs Incurred in a Cloud Computing Arrangement

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which aligns the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The guidance amends Accounting Standards Codification (ASC) 350 to include in its scope implementation costs of a cloud computing arrangement that is a service contract and clarifies that a customer should apply ASC 350 to determine which implementation costs should be capitalized in such a cloud computing arrangement. This guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019, which is the first quarter of fiscal 2021 for Sysco, with early adoption permitted. The company is currently reviewing the provisions of the new standard.

4. REVENUE

Disaggregation of Sales

The following tables present our sales disaggregated by reportable segment and sales mix for the company’s principal product categories for the periods presented:

		52-Week Period Ended Jun. 29, 2019
		US Foodservice Operations				International Foodservice Operations				SYGMA				Other				Total
		(In thousands)
Principal Product Categories
Fresh and frozen meats		$	8,422,126			$	1,627,392			$	1,520,907			$	—			$	11,570,425
Canned and dry products		7,344,015				2,326,584				270,651				—				9,941,250
Frozen fruits, vegetables, bakery and other		5,708,030				2,074,991				1,194,944				—				8,977,965
Dairy products		4,265,320				1,243,773				604,624				—				6,113,717
Poultry		4,121,367				833,844				892,316				—				5,847,527
Fresh produce		3,801,828				1,022,503				241,602				—				5,065,933
Paper and disposables		2,797,521				369,329				731,511				61,908				3,960,269
Seafood		2,550,524				717,703				113,746				—				3,381,973
Beverage products		1,127,701				531,247				563,401				86,845				2,309,194
Other (1)		1,149,756				745,674				110,626				939,613				2,945,669
Total Sales		$	41,288,188			$	11,493,040			$	6,244,328			$	1,088,366			$	60,113,922

(1)	Other sales relate to non-food products, including textiles and amenities for our hotel supply business, equipment and subscription sales for our Sysco Labs business, and other janitorial products, medical supplies and smallwares.

		52-Week Period Ended Jun. 30, 2018
		US Foodservice Operations				International Foodservice Operations				SYGMA				Other				Total
		(In thousands)
Principal Product Categories
Fresh and frozen meats		$	8,123,565			$	1,666,247			$	1,523,029			$	—			$	11,312,841
Canned and dry products		7,093,691				2,367,921				327,785				—				9,789,397
Frozen fruits, vegetables, bakery and other		5,327,020				2,538,265				1,160,369				—				9,025,654
Poultry		4,020,340				833,917				1,125,085				—				5,979,342
Dairy products		4,136,973				1,260,354				640,482				—				6,037,809
Fresh produce		3,642,247				1,031,796				255,192				—				4,929,235
Paper and disposables		2,639,280				400,345				739,074				59,166				3,837,865
Seafood		2,449,741				726,010				104,459				—				3,280,210
Beverage products		1,107,574				196,379				576,359				84,868				1,965,180
Other (1)		1,101,832				497,331				105,199				865,429				2,569,791
Total Sales		$	39,642,263			$	11,518,565			$	6,557,033			$	1,009,463			$	58,727,324

(1)	Other sales relate to non-food products, including textiles and amenities for our hotel supply business, equipment and subscription sales for our Sysco Labs business, and other janitorial products, medical supplies and smallwares.

		52-Week Period Ended Jul. 1, 2017
		US Foodservice Operations				International Foodservice Operations				SYGMA				Other				Total
		(In thousands)
Principal Product Categories
Fresh and frozen meats		$	7,643,653			$	1,547,790			$	1,414,235			$	—			$	10,605,678
Canned and dry products		6,812,689				1,567,714				315,426				—				8,695,829
Frozen fruits, vegetables, bakery and other		4,976,547				2,393,206				1,074,507				—				8,444,260
Poultry		3,939,048				886,528				1,048,368				—				5,873,944
Dairy products		3,870,052				1,102,625				637,424				—				5,610,101
Fresh produce		3,399,043				1,043,636				258,761				—				4,701,440
Paper and disposables		2,473,005				374,379				689,772				59,314				3,596,470
Seafood		2,358,819				633,304				97,227				—				3,089,350
Beverage products		1,077,680				353,305				548,607				79,861				2,059,453
Other (1)		1,054,162				710,572				94,582				835,298				2,694,614
Total Sales		$	37,604,698			$	10,613,059			$	6,178,909			$	974,473			$	55,371,139

(1)	Other sales relate to non-food products, including textiles and amenities for our hotel supply business, equipment and subscription sales for our Sysco Labs business, and other janitorial products, medical supplies and smallwares.

5. ACQUISITIONS

During fiscal 2019, the company paid cash of $106.6 million for acquisitions. These acquisitions did not have a material effect on the company’s operating results, cash flows or financial position. Certain acquisitions involve contingent consideration that may include earnout agreements that are typically payable over periods of up to three years in the event that certain operating results are achieved. As of June 29, 2019, aggregate contingent consideration outstanding was $18.9 million, of which $14.2 million was recorded as earnout liabilities.

Brakes Group

On July 5, 2016, Sysco consummated its acquisition of Cucina Lux Investments Limited (a private company limited by shares organized under the laws of England and Wales), a holding company of the Brakes Group, pursuant to an agreement for the sale and purchase of securities in the capital of the Brakes Group, dated as of February 19, 2016, by and among Sysco, entities affiliated with Bain Capital Investors, LLC, and members of management of the Brakes Group (the Brakes Acquisition). The company paid cash of $2.9 billion, net of cash acquired, for the Brakes Acquisition. Following the closing of the Brakes Acquisition, the Brakes Group became a wholly owned subsidiary of Sysco. Purchase accounting for this acquisition was finalized in fiscal 2017.

The Brakes Group is a large European foodservice business supplying fresh, refrigerated and frozen food products, as well as non-food products and supplies, to foodservice customers ranging from large customers, including leisure, pub, restaurant, hotel and contract catering groups, to smaller customers, including independent restaurants, hotels, fast food outlets, schools and hospitals. The Brakes Group’s largest businesses are in the U.K., France, Ireland and Sweden, in addition to a presence in Belgium, Spain and Luxembourg.

6. FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). The accounting guidance includes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are as follows:

•	Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets;

•	Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability; and

•	Level 3 – Unobservable inputs for the asset or liability, which include management’s own assumption about the assumptions market participants would use in pricing the asset or liability, including assumptions about risk.

Sysco’s policy is to invest in only high-quality investments. Cash equivalents primarily include cash deposits, time deposits, certificates of deposit, commercial paper, high-quality money market funds and all highly liquid instruments with original maturities of three months or less.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value:

•	Cash deposits included in cash equivalents are valued at amortized cost, which approximates fair value. These are included within cash equivalents as a Level 1 measurement in the tables below.

•	Time deposits and commercial paper included in cash equivalents are valued at amortized cost, which approximates fair value. These are included within cash equivalents as a Level 2 measurement in the tables below.

•	Money market funds are valued at the closing price reported by the fund sponsor from an actively traded exchange. These are included within cash equivalents as Level 1 measurements in the tables below.

•	Fixed income securities are valued using evaluated bid prices based on a compilation of observable market information or a broker quote in a non-active market. Inputs used vary by type of security, but include spreads, yields, rate benchmarks, rate of prepayment, cash flows, rating changes and collateral performance and type.

•	The interest rate swap agreements are valued using a swap valuation model that utilizes an income approach using observable market inputs including interest rates, LIBOR swap rates and credit default swap rates.

•	The foreign currency swap agreements, including cross-currency swaps, are valued using a swap valuation model that utilizes an income approach applying observable market inputs, including interest rates, LIBOR swap rates for U.S. dollars, Canadian dollars, pound sterling and euro currencies, and credit default swap rates.

•	Foreign currency forwards are valued based on exchange rates quoted by domestic and foreign banks for similar instruments.

•	Fuel swap contracts are valued based on observable market transactions of forward commodity prices.

The fair value of the company’s marketable securities are all measured using inputs that are considered a Level 2 measurement, as they are actively traded and are valued using quoted market prices in active markets. The location and the fair value of the company’s marketable securities in the consolidated balance sheet are disclosed in Note 7, “Marketable Securities.”

The fair value of the company’s derivative instruments are all measured using inputs that are considered a Level 2 measurement, as they are not actively traded and are valued using pricing models that use observable market quotations. The location and the fair value of derivative assets and liabilities designated as hedges in the consolidated balance sheet are disclosed in Note 11, “Derivative Financial Instruments.”

The following tables present the company’s assets measured at fair value on a recurring basis as of June 29, 2019 and June 30, 2018:

	Assets and Liabilities Measured at Fair Value as of Jun. 29, 2019
	Level 1				Level 2				Level 3				Total
	(In thousands)
Assets:
Cash equivalents
Cash and cash equivalents	$	72,824			$	200			$	—			$	73,024
Other assets (1)	18,785				—				—				18,785
Total assets at fair value	$	91,609			$	200			$	—			$	91,809

(1) Represents restricted cash balance recorded within other assets in the consolidated balance sheet.

	Assets and Liabilities Measured at Fair Value as of Jun. 30, 2018
	Level 1				Level 2				Level 3				Total
	(In thousands)
Assets:
Cash equivalents
Cash and cash equivalents	$	169,214			$	30,190			$	—			$	199,404
Other assets (1)	163,519				—				—				163,519
Total assets at fair value	$	332,733			$	30,190			$	—			$	362,923

(1) Represents restricted cash balance recorded within other assets in the consolidated balance sheet.

The carrying values of accounts receivable and accounts payable approximated their respective fair values due to their short-term maturities. The fair value of Sysco’s total debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the company for new debt with the same maturities as existing debt, and is considered a Level 2 measurement. The fair value of total debt was approximately $8.6 billion and $8.4 billion as of June 29, 2019 and June 30, 2018, respectively. The carrying value of total debt was $8.2 billion and $8.3 billion as of June 29, 2019 and June 30, 2018, respectively.

7. MARKETABLE SECURITIES

In March 2019, Sysco began to invest a portion of the assets held by its wholly owned captive insurance subsidiary in a restricted investment portfolio of marketable fixed income securities, which have been classified and accounted for as available-for-sale. The company includes fixed income securities maturing in less than twelve months within Prepaid expenses and other current assets and includes fixed income securities maturing in more than twelve months within Other assets in the accompanying Consolidated Balance Sheets. The company records the amounts at fair market value, which is determined using quoted market prices at the end of the reporting period. Unrealized gains and losses on marketable securities are recorded in Accumulated other comprehensive loss. The following table presents the company’s available-for-sale marketable securities as of June 29, 2019:

	June 29, 2019
	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	$	87,540			$	1,734			$	—			$	89,274			$	12,006			$	77,268
Government bonds	28,900				1,845				—				30,745				—				30,745
Total marketable securities	$	116,440			$	3,579			$	—			$	120,019			$	12,006			$	108,013

The fixed income securities held at June 29, 2019 had effective maturities ranging from less than one year to approximately eleven years. The company did not realize any gains or losses on its marketable securities during fiscal 2019.

8. ALLOWANCE FOR DOUBTFUL ACCOUNTS

A summary of the activity in the allowance for doubtful accounts appears below:

	2019				2018				2017
	(In thousands)
Balance at beginning of period	$	25,768			$	31,059			$	37,880
Charged to costs and expenses	62,946				21,448				20,672
Customer accounts written off, net of recoveries	(64,219		)		(27,120		)		(26,943		)
Other adjustments	3,681				381				(550		)
Balance at end of period	$	28,176			$	25,768			$	31,059

9. PLANT AND EQUIPMENT

A summary of plant and equipment, including the related accumulated depreciation, appears below:

	Jun. 29, 2019				Jun. 30, 2018				Estimated Useful Lives
	(In thousands)
Plant and equipment at cost:
Land	$	498,180			$	495,909
Buildings and improvements	4,545,099				4,268,687				10-30 years
Fleet and equipment	3,697,008				3,808,133				3-10 years
Computer hardware and software	1,213,942				1,628,121				3-7 years
Total plant and equipment at cost	9,954,229				10,200,850
Accumulated depreciation	(5,452,524		)		(5,679,190		)
Total plant and equipment, net	$	4,501,705			$	4,521,660

Depreciation expense, including amortization of capital leases, was $656.6 million in 2019, $614.8 million in 2018 and $765.4 million in 2017.

In fiscal 2019, Sysco recognized $39.3 million in accelerated depreciation, including facilities and equipment, due to restructuring in Europe and certain ERP systems and software platforms that the company is no longer using in the U.S. In fiscal 2017, Sysco reported accelerated depreciation of $111.3 million on its then existing ERP system as a result of shortening the useful life of these assets after announcing the company’s revised business technology strategy in fiscal 2016.

10. GOODWILL AND OTHER INTANGIBLES

The changes in the carrying amount of goodwill by reportable segment for the years presented are as follows:

	U.S. Foodservice Operations				International Foodservice Operations				SYGMA				Other				Total
	(In thousands)
Carrying amount as of July 1, 2017	$	1,231,045			$	2,432,508			$	32,607			$	219,968			$	3,916,128
Goodwill acquired during year	36,020				20,648				—				—				56,668
Currency translation/other	(6,165		)		(12,335		)		—				1,189				(17,311		)
Carrying amount as of June 30, 2018	$	1,260,900			$	2,440,821			$	32,607			$	221,157			$	3,955,485
Goodwill acquired during year	10,428				9,127				—				—				19,555
Currency translation/other	(5,843		)		(74,016		)		—				1,045				(78,814		)
Carrying amount as of June 29, 2019	$	1,265,485			$	2,375,932			$	32,607			$	222,202			$	3,896,226

Amortizable intangible assets acquired during fiscal 2019 were $14.4 million, with a weighted-average amortization period of 8.0 years. Amortizable intangible assets acquired during fiscal 2019 by category were customer relationships, non-compete, and amortized trademarks of $10.6 million, $1.6 million, and $2.2 million respectively, with a weighted-average amortization period of 7.0 years, 5.0 years, and 15.0 years respectively.

Fully amortized intangible assets have been removed in the period fully amortized in the table below, which presents the company’s amortizable intangible assets in total by category as follows:

	Jun. 29, 2019												Jun. 30, 2018
	Gross Carrying Amount				Accumulated Amortization				Net				Gross Carrying Amount				Accumulated Amortization				Net
	(In thousands)
Customer relationships	$	1,052,608			$	(358,592	)		$	694,016			$	1,119,136			$	(307,408	)		$	811,728
Non-compete agreements	11,827				(8,556		)		3,271				31,754				(28,819		)		2,935
Trademarks	14,785				(5,736		)		9,049				10,073				(7,058		)		3,015
Other	185				(148		)		37				13,623				(13,548		)		75
Total amortizable intangible assets	$	1,079,405			$	(373,032	)		$	706,373			$	1,174,586			$	(356,833	)		$	817,753

The table below presents the company’s indefinite-lived intangible assets by category as follows:

	Jun. 29, 2019				Jun. 30, 2018
	(In thousands)
Trademarks	$	149,962			$	161,093
Licenses	966				966
Total indefinite-lived intangible assets	$	150,928			$	162,059

Amortization expense for 2019, 2018 and 2017 was $92.3 million, $114.7 million and $112.9 million, respectively. The estimated future amortization expense for the next five fiscal years on intangible assets outstanding as of June 29, 2019 is shown below:

	Amount
	(In thousands)
2020	$	94,898
2021	92,562
2022	90,728
2023	87,552
2024	84,279

11. DERIVATIVE FINANCIAL INSTRUMENTS

Sysco uses derivative financial instruments to enact hedging strategies for risk mitigation purposes; however, the company does not use derivative financial instruments for trading or speculative purposes. Hedging strategies are used to manage interest rate risk, foreign currency risk and fuel price risk.

Hedging of interest rate risk

Sysco manages its debt portfolio with interest rate swaps from time to time to achieve an overall desired position of fixed and floating rates. In December 2018, the company entered into an interest rate swap agreement that effectively converted €500.0 million of fixed rate debt maturing in 2023 to floating rate debt.

Hedging of foreign currency risk

Sysco enters into cross-currency swap contracts to hedge the foreign currency transaction risk of certain intercompany loans. There are no credit-risk related contingent features associated with these swaps, which have been designated as cash flow hedges. The company also uses cross-currency swap contracts and euro-bond denominated debt to hedge the foreign currency exposure of our net investment in certain foreign operations. Additionally, Sysco’s operations in Europe have inventory purchases denominated in currencies other than their functional currency, such as the euro, U.S. dollar, Polish zloty and Danish krone. These inventory purchases give rise to foreign currency exposure between the functional currency of each entity and these currencies. The company enters into foreign currency forward swap contracts to sell the applicable entity’s functional currency and buy currencies matching the inventory purchase, which operate as cash flow hedges of the company’s foreign currency-denominated inventory purchases.

Hedging of fuel price risk

Sysco utilizes fuel commodity swap contracts to hedge against the risk of the change in the price of diesel on anticipated future purchases. These swaps have been designated as cash flow hedges.

None of the company’s hedging instruments contain credit-risk-related contingent features. Details of outstanding hedging instruments as of June 29, 2019 are below:

Maturity Date of the Hedging Instrument		Currency / Unit of Measure		Notional Value
				(In millions)
Hedging of interest rate risk
October 2020		U.S. Dollar		750
July 2021		U.S. Dollar		500
June 2023		Euro		500
March 2025		U.S. Dollar		500
Hedging of foreign currency risk
Various (July 2019 to October 2019)		Swedish Krona		229
Various (July 2019 to December 2019)		British Pound Sterling		13
June 2021		Canadian Dollar		235
July 2021		British Pound Sterling		234
August 2021		British Pound Sterling		466
June 2023		Euro		500
Hedging of fuel risk
Various (June 30, 2019 to June 2020)		Gallons		51

The location and the fair value of derivative instruments designated as hedges in the consolidated balance sheet as of June 29, 2019 and June 30, 2018 are as follows:

			Derivative Fair Value
	Balance Sheet Location		Jun. 29, 2019				Jun. 30, 2018
			(In thousands)
Fair Value Hedges:
Interest rate swaps	Other assets		$	37,396			$	—
Interest rate swaps	Other current liabilities		—				6,820
Interest rate swaps	Other long-term liabilities		9,285				49,734
Cash Flow Hedges:
Fuel Swaps	Other current assets		$	154			$	15,316
Foreign currency forwards	Other current assets		624				693
Cross currency swaps	Other current assets		—				4,284
Fuel swaps	Other assets		136				—
Cross currency swaps	Other assets		8,592				3,454
Fuel Swaps	Other current liabilities		6,537				—
Foreign currency forwards	Other current liabilities		162				71
Fuel swaps	Other long-term liabilities		239				—
Cross currency swaps	Other long-term liabilities		—				14,201
Net Investment Hedges:
Foreign currency swaps	Other assets		$	18,614			$	10,709
Foreign currency swaps	Other long-term liabilities		9,973				39,690

The location and amount of gains or losses recognized in the consolidated results of operations for fair value and cash flow hedging relationships for each of the periods, presented on a pretax basis, are as follows:

		2019
		Cost of Goods Sold				Operating Expense				Interest Expense
		(In thousands)
Total amounts of income and expense line items presented in the consolidated results of operations in which the effects of fair value or cash flow hedges are recorded		$	48,704,935			$	9,078,837			$	360,423
Gain or (loss) on fair value hedging relationships:
Interest rate swaps:
Hedged items (1)		$	—			$	—			$	(143,711	)
Derivatives designated as hedging instruments		—				—				68,689

(1)	The hedged total includes interest expense of $62.4 million and change in fair value of debt of $81.3 million.

		2018
		Cost of Goods Sold				Operating Expense				Interest Expense
		(In thousands)
Total amounts of income and expense line items presented in the consolidated results of operations in which the effects of fair value or cash flow hedges are recorded		$	47,641,933			$	8,771,335			$	395,483
Gain or (loss) on fair value hedging relationships:
Interest rate swaps:
Hedged items (1)		$	—			$	—			$	(30,418	)
Derivatives designated as hedging instruments		—				—				(39,540		)

(1)	The hedged total includes interest expense of $63.5 million and change in fair value of debt of $33.1 million.

The location and effect of cash flow and net investment hedge accounting on the consolidated statements of comprehensive income for the fiscal years ended June 29, 2019 and June 30, 2018, presented on a pretax basis, are as follows:

	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	$	(22,100	)		Operating expense		$	8,180
Foreign currency contracts	16,706				Cost of goods sold		509
Total	$	(5,394	)				$	8,689
Derivatives in net investment hedging relationships:
Foreign currency contracts	$	42,488			N/A		$	—
Foreign denominated debt	15,650				N/A		—
Total	$	58,138					$	—

	2018
	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	$	21,878			Operating expense		$	13,983
Foreign currency contracts	1,118				Cost of goods sold		1,776
Total	$	22,996					$	15,759
Derivatives in net investment hedging relationships:
Foreign currency contracts	$	(20,584	)		N/A		$	—
Foreign denominated debt	(12,700		)		N/A		—
Total	$	(33,284	)				$	—

The location and carrying amount of hedged liabilities in the consolidated balance sheet as of June 29, 2019 are as follows:

	Jun. 29, 2019
	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:
Long-term debt	$	(2,311,636	)		$	(28,616	)

The location and carrying amount of hedged liabilities in the consolidated balance sheet as of June 30, 2018 are as follows:

	Jun. 30, 2018
	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	$	(499,610	)		$	5,097
Long-term debt	(1,743,732		)		47,555

12. SELF-INSURED LIABILITIES

Sysco maintains a self-insurance program covering portions of workers’ compensation, general and vehicle liability and property insurance costs. The amounts in excess of the self-insured levels are fully insured by third party insurers. The company also maintains a fully self-insured group medical program. A summary of the activity in self-insured liabilities appears below:

	2019				2018				2017
	(In thousands)
Balance at beginning of period	$	270,986			$	245,811			$	199,059
Charged to costs and expenses	492,411				461,867				523,674
Payments	(465,580		)		(436,692		)		(476,922		)
Balance at end of period	$	297,817			$	270,986			$	245,811

The long-term portion of the self-insured liability balance was $183.6 million and $167.1 million as of June 29, 2019, and June 30, 2018, respectively.

13. DEBT AND OTHER FINANCING ARRANGEMENTS

Sysco’s debt consists of the following:

	Jun. 29, 2019				Jun. 30, 2018
	(In thousands)
Commercial paper, interest at 2.56% as of June 29, 2019	$	132,081			$	—
Senior notes, interest at 1.90%, maturing in fiscal 2019 (1)	—				491,700
Senior notes, interest at 5.375%, maturing in fiscal 2019 (1)	—				249,701
Senior notes, interest at 2.60%, maturing in fiscal 2021 (1)	744,034				724,047
Senior notes, interest at 2.50%, maturing in fiscal 2022 (1)	494,814				477,411
Senior notes, interest at 2.60%, maturing in fiscal 2022 (1)	447,509				446,681
Senior notes, interest at 1.25%, maturing in fiscal 2023 (1)	576,771				580,196
Senior notes, interest at 3.55%, maturing in fiscal 2025 (1)	521,490				492,606
Senior notes, interest at 3.65%, maturing in fiscal 2025 (1)	379,658				—
Senior notes, interest at 3.75%, maturing in fiscal 2026 (1)	747,330				746,879
Senior notes, interest at 3.30%, maturing in fiscal 2027 (1)	993,084				992,176
Debentures, interest at 7.16%, maturing in fiscal 2027 (2)	44,272				44,276
Senior notes, interest at 3.25%, maturing in fiscal 2028 (1)	743,304				742,555
Debentures, interest at 6.50%, maturing in fiscal 2029 (2)	162,150				162,276
Senior notes, interest at 5.375%, maturing in fiscal 2036 (1)	382,250				382,010
Senior notes, interest at 6.625%, maturing in fiscal 2039 (1)	199,198				201,766
Senior notes, interest at 4.85%, maturing in fiscal 2046 (1)	495,860				495,709
Senior notes, interest at 4.50%, maturing in fiscal 2046 (1)	494,215				494,090
Senior notes, interest at 4.45%, maturing in fiscal 2048 (1)	492,579				493,165
Notes payable, capital leases, and other debt, interest averaging 4.99% and maturing at various dates to fiscal 2031 as of June 29, 2019 and 6.33% and maturing at various dates to fiscal 2026 as of June 30, 2018	112,738				110,026
Total debt	8,163,337				8,327,270
Less current maturities of long-term debt	(37,322		)		(782,329		)
Less notes payable	(3,957		)		(4,176		)
Net long-term debt	$	8,122,058			$	7,540,765

(1)	Represents senior notes that are unsecured, are not subject to any sinking fund requirement and include a redemption provision that allows Sysco to retire the debentures and notes at any time prior to maturity at the greater of par plus accrued interest or an amount designed to ensure that the debenture and note holders are not penalized by the early redemption.

(2)	This debenture is not subject to any sinking fund requirement and is no longer redeemable prior to maturity.

As of June 29, 2019, the principal payments required to be made during the next five fiscal years on long-term debt, excluding notes payable and commercial paper, are shown below:

	Amount
	(In thousands)
2020	$	35,197
2021	775,518
2022	967,931
2023	581,225
2024	8,352

In June 2019, the company’s then-current long-term revolving credit facility was terminated and a new facility in the amount of $2.0 billion was established. The new facility expires on June 28, 2024, subject to extension. As of June 29, 2019, there were no amounts outstanding under this facility.

Sysco has a commercial paper program allowing the company to issue short-term unsecured notes in an aggregate amount not to exceed $2 billion. As of June 29, 2019, there were $132.1 million in commercial paper issuances outstanding. Any outstanding amounts are classified within long-term debt, as the program is supported by a long-term revolving credit facility. During the first 52 weeks of 2019, aggregate outstanding commercial paper issuances and short-term bank borrowings ranged from zero to approximately $1.1 billion.

Senior notes offering

On September 25, 2018, Sysco’s wholly owned subsidiary, Sysco Canada Inc. (Sysco Canada), issued senior notes totaling CDN $500.0 million. The senior notes were issued in Canada with a coupon rate of 3.65% and pricing, as a percentage of par, of 99.962%. Net proceeds from the offering were used to repay internal debt that was created in fiscal 2018 when the company repatriated earnings from its Canadian operations back to Sysco Corporation, and to repay outstanding borrowings under Sysco’s commercial paper program, along with other general corporate purposes. Interest on the senior notes will be paid semi-annually on April 25 and October 25, and began on April 25, 2019. At Sysco Canada’s option, any or all of the senior notes may be redeemed, in whole or in part, at any time prior to maturity. If Sysco Canada elects to redeem the senior notes before the date that is two months prior to the maturity date, Sysco Canada will pay an amount equal to the greater of (1) 100% of the principal amount of the senior notes to be redeemed; or (2) the applicable yield price, plus, in either case, any accrued and unpaid interest on the senior notes to be redeemed to the date of redemption. If Sysco Canada elects to redeem a series of senior notes on or after the applicable date described in the preceding sentence, Sysco Canada will pay an amount equal to 100% of the principal amount of the senior notes to be redeemed plus accrued and unpaid interest on the senior notes redeemed to the redemption date.

Senior notes and debentures redemption related to the tender offer

Sysco used a portion of the net proceeds of its March 2018 senior notes offering to fund the fiscal 2018 purchase, pursuant to a tender offer, of $230.5 million in combined aggregate principal amount of the following securities: its 7.160% debentures due 2027, its 6.500% debentures due 2028, its 5.375% senior notes due 2035 and its 6.625% senior notes due 2039. Holders of securities received an early tender payment of $50 per $1,000 principal amount of securities. Holders of such securities also received accrued and unpaid interest from, and including, the last interest payment date for their tendered securities, but not including, the early settlement date, which was March 23, 2018. The tender offer transaction was considered to be a debt extinguishment. As such, Sysco recognized a loss on extinguishment of $53.1 million in fiscal 2018, which was recorded as a component of interest expense in the accompanying consolidated results of operations. Of this loss, $51.2 million was attributable to the purchase premium paid to the lenders, $1.1 million was attributable to the write-off of unamortized debt issuance costs associated with the redeemed debentures and notes, and $0.8 million was attributable to an accelerated charge on the debt discount related to these debentures and notes.

In April 2019, Sysco repaid 1.90% senior notes totaling $500.0 million at maturity utilizing a combination of cash flow from operations and commercial paper issuances.

In March 2019, Sysco repaid 5.375% senior notes totaling $250.0 million at maturity utilizing a combination of cash flow from operations and commercial paper issuances.

As of June 29, 2019 and June 30, 2018, letters of credit outstanding were $226.0 million and $221.7 million, respectively.

14. LEASES

Sysco has obligations under capital and operating leases for certain distribution facilities, vehicles, equipment and computers. Total rental expense under operating leases was $205.5 million, $184.1 million, and $170.5 million in fiscal 2019, 2018 and 2017, respectively. Contingent rentals, subleases and assets and obligations under capital leases are not significant.

Aggregate minimum lease payments by fiscal year under existing operating leases are as follows:

	Amount
	(In thousands)
2020	$	107,492
2021	99,232
2022	73,249
2023	58,287
2024	39,158
Thereafter	266,445

15. COMPANY-SPONSORED EMPLOYEE BENEFIT PLANS

Sysco has company-sponsored defined benefit and defined contribution retirement plans for its employees. Also, the company provides certain health care benefits to eligible retirees and their dependents.

Defined Contribution Plans

The company operates a defined contribution 401(k) Plan as a Safe Harbor Plan, which is a plan that treats all employees’ benefits equally within the plan, under Sections 401(k) and 401(m) of the Internal Revenue Code with respect to non-union employees and those union employees whose unions adopted the Safe Harbor Plan provisions. The company will make a non-elective contribution each pay period equal to 3% of a participant’s compensation. Additionally, the company will make matching contributions of 50% of a participant’s pretax contribution on the first 6% of the participant’s compensation contributed by the participant. Certain employees are also eligible for a transition contribution, and the company may also make discretionary contributions. For union employees who are members of unions that did not adopt the Safe Harbor Plan provisions, the plan provides that under certain circumstances the company may make matching contributions of up to 50% of the first 6% of a participant’s compensation.

The company also has a non-qualified, unfunded Management Savings Plan (MSP) available to key management personnel who are participants in the Management Incentive Plan (MIP). Participants may defer up to 50% of their annual salary and up to 90% of their annual bonus. The company will make a non-elective contribution each pay period equal to 3% of a participant’s compensation. Additionally, the company will make matching contributions of 50% of a participant’s pretax contribution on the first 6% of the participant’s eligible compensation that is deferred. Certain employees are also eligible for a transition contribution, and the company may also make discretionary contributions. All company contributions to the MSP are limited by the amounts contributed by the company to the participant’s 401(k) account.

Sysco’s expense related to its defined contribution plans was $150.4 million in fiscal 2019, $151.0 million in fiscal 2018, and $141.2 million in fiscal 2017.

Defined Benefit Plans

Sysco maintains various qualified pension plans that pay benefits to participating employees at retirement, using formulas based on a participant’s years of service and compensation. The U.S. pension plan (U.S. Retirement Plan) is frozen for all U.S.-based salaried and non-union hourly employees, as these employees are eligible for benefits under the company’s defined contribution 401(k) plan. Various defined benefit pension plans cover certain employees, primarily in the U.K., France and Sweden;

however, the U.K. pension plan (U.K. Retirement Plan) is frozen to new plan participants and future accrual of benefits. The funding policy for each plan complies with the requirements of relevant governmental laws and regulations.

In addition to receiving benefits upon retirement under the company’s U.S. Retirement Plan, certain key management personnel who were participants in the MIP are entitled to receive benefits under the SERP. This plan is a nonqualified, unfunded supplementary retirement plan. This plan is frozen to all participants, and current MIP participants are eligible to participate in the MSP.

The company also provides certain health care benefits to eligible retirees and their dependents. These health care benefits represent Sysco’s unfunded other post-retirement medical plans. The plan had benefit obligations of $10.8 million as of June 29, 2019 and $14.3 million as of June 30, 2018.

Funded Status

Accumulated pension assets measured against the obligation for pension benefits represents the funded status of a given plan. The funded status of Sysco’s company-sponsored defined benefit plans is presented in the table below. The caption “U.S. Pension Benefits” in the tables below includes both the U.S. Retirement Plan and the SERP.

	U.S. Pension Benefits								International Pension Benefits
	Jun. 29, 2019				Jun. 30, 2018				Jun. 29, 2019				Jun. 30, 2018
	(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year	$	4,043,011			$	4,224,231			$	399,000			$	420,735
Service cost	13,977				14,514				2,790				3,219
Interest cost	172,213				173,827				10,637				10,667
Amendments	—				—				3,050				(4,624		)
Plan Combinations	—				—				173				—
Actuarial (gain) loss, net	439,082				(89,253		)		20,783				(21,162		)
Total disbursements	(130,635		)		(280,308		)		(14,398		)		(13,817		)
Exchange rate changes	—				—				(15,338		)		3,982
Benefit obligation at end of year	4,537,648				4,043,011				406,697				399,000
Change in plan assets:
Fair value of plan assets at beginning of year	3,666,408				3,341,662				258,028				259,372
Actual return on plan assets	418,789				196,051				23,765				897
Employer contribution	29,592				409,003				7,612				7,960
Total disbursements	(130,635		)		(280,308		)		(14,398		)		(13,817		)
Exchange rate changes	—				—				(10,261		)		3,616
Fair value of plan assets at end of year	3,984,154				3,666,408				264,746				258,028
Funded status at end of year	$	(553,494	)		$	(376,603	)		$	(141,951	)		$	(140,972	)

As of June 29, 2019 and June 30, 2018, the SERP had benefit obligations of $468.0 million and $440.5 million, respectively. In order to meet a portion of its obligations under the SERP, Sysco has a rabbi trust that invests in COLI policies on the lives of participants and interests in corporate-owned real estate assets. These assets are not included as plan assets or in the funded status amounts in the tables above and below. The life insurance policies on the lives of the participants had carrying values of $97.7 million as of June 29, 2019 and $96.5 million as of June 30, 2018. Sysco is the sole owner and beneficiary of such policies.

The amounts recognized on Sysco’s consolidated balance sheets related to its company-sponsored defined benefit plans are as follows:

	U.S. Pension Benefits								International Pension Benefits
	Jun. 29, 2019				Jun. 30, 2018				Jun. 29, 2019				Jun. 30, 2018
	(In thousands)
Noncurrent assets (Other assets)	$	—			$	63,945			$	—			$	—
Current accrued benefit liability (Accrued expenses)	(31,652		)		(31,313		)		(1,285		)		(1,280		)
Noncurrent accrued benefit liability (Other long-term liabilities)	(521,842		)		(409,235		)		(140,666		)		(139,692		)
Net amount recognized	$	(553,494	)		$	(376,603	)		$	(141,951	)		$	(140,972	)

Accumulated other comprehensive loss (income) as of June 29, 2019 consists of the following amounts that had not, as of that date, been recognized in net benefit cost:

	U.S. Pension Benefits				International Pension Benefits				Total
	(In thousands)
Prior service cost	$	10,790			$	(588	)		$	10,202
Actuarial losses (gains)	1,599,539				(33,008		)		1,566,531
Total	$	1,610,329			$	(33,596	)		$	1,576,733

Accumulated other comprehensive loss (income) as of June 30, 2018 consists of the following amounts that had not, as of that date, been recognized in net benefit cost:

	U.S. Pension Benefits				International Pension Benefits				Total
	(In thousands)
Prior service cost	$	19,170			$	2,679			$	21,849
Actuarial losses (gains)	1,434,160				(26,106		)		1,408,054
Total	$	1,453,330			$	(23,427	)		$	1,429,903

The accumulated benefit obligation, which does not consider any salary increases for the remaining active union employees in the U.S. Retirement Plan was $4.9 billion and $4.4 billion as of June 29, 2019 and June 30, 2018, respectively.

Information for plans with accumulated benefit obligation/aggregate benefit obligation in excess of fair value of plan assets is as follows:

	U.S. Pension Benefits (1)								International Pension Benefits
	Jun. 29, 2019				Jun. 30, 2018				Jun. 29, 2019				Jun. 30, 2018
	(In thousands)
Accumulated benefit obligation/aggregate benefit obligation	$	4,524,513			$	4,034,383			$	399,966			$	392,457
Fair value of plan assets at end of year	3,984,154				3,666,408				264,746				258,028

(1)	Information under Pension Benefits as of June 29, 2019 and June 30, 2018 includes both the U.S. Retirement Plan and the SERP.

Components of Net Benefit Costs and Other Comprehensive Income

The components of net company-sponsored pension costs for each fiscal year are as follows:

	2019								2018								2017
	U.S. Pension Benefits				International Pension Benefits				U.S. Pension Benefits				International Pension Benefits				U.S. Pension Benefits				International Pension Benefits
	(In thousands)
Service cost	$	13,977			$	2,790			$	14,514			$	3,219			$	14,287			$	2,880
Interest cost	172,213				10,637				173,827				10,667				171,282				9,951
Expected return on plan assets	(180,624		)		(11,072		)		(233,987		)		(11,653		)		(222,699		)		(10,033		)
Amortization of prior service cost	8,380				(202		)		9,460				(2,003		)		11,202				(1		)
Amortization of actuarial loss	35,537				(98		)		35,696				(67		)		41,511				(38		)
Curtailment loss	—				—				—				—				—				(611		)
Settlement loss (gain) recognized	—				109				—				16				—				—
Net pension (benefits) costs	$	49,483			$	2,164			$	(490	)		$	179			$	15,583			$	2,148

The components of net company-sponsored pension costs other than the service cost component are reported in Other expense (income), net within the consolidated results of operations.

Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) related to company-sponsored pension plans for each fiscal year are as follows:

	2019								2018								2017
	U.S. Pension Benefits				International Pension Benefits				U.S. Pension Benefits				International Pension Benefits				U.S. Pension Benefits				International Pension Benefits
	(In thousands)
Amortization of prior service cost	$	8,380			$	(202	)		$	9,460			$	(2,003	)		$	11,202			$	(1	)
Amortization of actuarial loss	35,537				11				35,696				(51		)		41,511				(38		)
Prior service cost arising in current year	—				(3,050		)		—				4,624				(925		)		110
Effect of exchange rates on amounts in AOCI	—				1,163				—				(583		)		—				(1,269		)
Actuarial gain (loss) arising in current year	(163,588		)		(8,090		)		51,318				10,406				197,871				(34,623		)
Net pension costs	$	(119,671	)		$	(10,168	)		$	96,474			$	12,393			$	249,659			$	(35,821	)

Amounts included in accumulated other comprehensive loss (income) as of June 29, 2019 that are expected to be recognized as components of net company-sponsored benefit cost during fiscal 2020 are:

	U.S. Pension Benefits				International Pension Benefits				Total
	(In thousands)
Amortization of prior service cost	$	7,537			$	(82	)		$	7,455
Amortization of actuarial losses (gains)	39,483				133				39,616
Total	$	47,020			$	51			$	47,071

Employer Contributions

The company made cash contributions to its company-sponsored pension plans of $37.2 million and $415.0 million in fiscal years 2019 and 2018, respectively. There were no contributions made to the U.S. Retirement Plan in fiscal 2019, as there were no required contributions to meet ERISA minimum funding requirements in fiscal 2019. There are no required contributions to the U.S. Retirement Plan to meet ERISA minimum funding requirements in fiscal 2020. The company’s contributions to the SERP plan are made in the amounts needed to fund current year benefit payments. The estimated aggregate fiscal 2020 contribution to fund benefit payments for the SERP plan is $31.7 million. The estimated fiscal 2020 contributions to fund benefit payments for the international retirement plans are $7 million.

Estimated Future Benefit Payments

Estimated future benefit payments for vested participants, based on actuarial assumptions, are as follows:

	U.S. Pension Benefits				International Pension Benefits
	(In thousands)
2020	$	149,999			$	9,938
2021	160,568				11,240
2022	171,171				11,481
2023	181,811				12,707
2024	191,850				14,280
Subsequent five years	1,097,454				86,099

Assumptions

Weighted-average assumptions used to determine benefit obligations as of year-end were:

	Jun. 29, 2019			Jun. 30, 2018
Discount rate — U.S. Retirement Plan	3.70	%		4.28	%
Discount rate — SERP	3.62			4.41
Discount rate — U.K. Retirement Plan	2.30			2.85
Rate of compensation increase — U.S. Retirement Plan	2.56			2.62

As benefit accruals under the SERP and U.K. Retirement Plan are frozen, future pay is not projected in the determination of the benefit obligation as of June 29, 2019 or June 30, 2018.

Weighted-average assumptions used to determine net company-sponsored pension costs for each fiscal year were:

	2019			2018			2017
Discount rate — U.S. Retirement Plan	4.28	%		4.19	%		4.07	%
Discount rate — SERP	4.41			4.08			3.91
Discount rate — U.K. Retirement Plan	2.85			2.60			2.80
Expected rate of return — U.S. Retirement Plan	5.00			7.00			7.25
Expected rate of return — U.K. Retirement Plan	4.55			4.55			4.15
Rate of compensation increase — U.S. Retirement Plan	2.62			2.62			2.62

For guidance in determining the discount rate for U.S. defined benefit plans, Sysco calculates the implied rate of return on a hypothetical portfolio of high-quality fixed-income investments for which the timing and amount of cash outflows approximates the estimated payouts of the company-sponsored pension plans. Sysco uses an annualized corporate bond yield curve to estimate the rate at which pension benefits could effectively be settled to estimate a discount rate for the U.K. Retirement Plan. The discount rate assumption is updated annually and revised as deemed appropriate. The discount rates to be used for the calculation of fiscal 2020 net company-sponsored benefit costs for the U.S. Retirement Plan and U.K. Retirement Plan are 3.70%

and 2.30%, respectively. The discount rate to be used for the calculation of fiscal 2020 net company-sponsored benefit costs for the SERP is 3.62%.

The expected long-term rate of return on plan assets assumption for the retirement plans are net return on assets assumption, representing gross return on assets less asset management expenses. Specific to the U.S. Retirement Plan, administrative expenses are also excluded from the gross return on assets. The expected return for the U.S. Retirement Plan is derived from a mathematical asset model that incorporates assumptions as to the various asset class returns, reflecting a combination of rigorous historical performance analysis and the forward-looking views of the financial markets regarding the yield on bonds, the historical returns of the major stock markets and returns on alternative investments. The expected return for the U.K. Retirement Plan is derived from a long-term swap yield time horizon adjusted for the expected return based on the plan’s current asset allocation and historical results. The rate of return assumption is reviewed annually and revised as deemed appropriate. The expected long-term rate of return to be used in the calculation of fiscal 2020 net company-sponsored benefit costs for the U.S. Retirement Plan and U.K. Retirement Plan are 5.0% and 4.55%, respectively.

Plan Assets

Investment Strategy

The company’s overall strategic investment objectives for the U.S. Retirement Plan are to preserve capital for future benefit payments and to balance risk and return commensurate with ongoing changes in the valuation of plan liabilities using an investment strategy that closely aligns the duration of the U.S. Retirement Plan’s assets with the duration of its liabilities. In order to accomplish these objectives, the company oversees the U.S. Retirement Plan’s investment objectives and policy design, decides proper plan asset class strategies and structures, monitors the performance of plan investment managers and investment funds and determines the proper investment allocation of pension plan contributions. The strategy results in an asset portfolio that more closely matches the behavior of the liability, thereby reducing the volatility of the U.S. Retirement Plan’s funded status. This structure ensures the U.S. Retirement Plan’s investments are diversified within each asset class, in addition to being diversified across asset classes with the intent to build asset class portfolios that are structured without strategic bias for or against any subcategories within each asset class. The company has also created a set of investment guidelines for the U.S. Retirement Plan’s investment managers to specify prohibited transactions, including borrowing of money except for real estate, private equity or hedge fund portfolios where leverage is a key component of the investment strategy and permitted in the investments’ governing documents, the purchase of securities on margin unless fully collateralized by cash or cash equivalents or short sales, pledging, mortgaging or hypothecating of any securities, except for loans of securities that are fully collateralized, market timing transactions and the direct purchase of the securities of Sysco or the investment manager. The purchase or sale of derivatives for speculation or leverage is also prohibited; however, investment managers are allowed to use derivative securities so long as they do not increase the risk profile or leverage of the manager’s portfolio.

The U.S. Retirement Plan’s target and actual investment allocation as of June 29, 2019 is as follows:

	U.S. Retirement Plan
	Target Asset Allocation			Actual Asset Allocation
Growth assets	30	%		27	%
Liability hedging assets	70			73
				100	%

Sysco’s U.S. Retirement Plan investment strategy is implemented through a combination of balanced and specialized investment managers, passive investment funds and actively managed investment funds. Growth assets include, but are not limited to, equities, alternatives, real estate, and growth fixed income intended to generate returns in excess of the liability growth rate. The Liability Hedging assets will be comprised primarily of fixed income investments, including interest rate and credit derivatives, intended to reduce funded status volatility due to changes in interest rates and credit spreads, while generating returns consistent with the projected liability growth rate. The U.S. Retirement Plan’s portfolio includes investment funds which are selected based on each fund’s stated investment strategy to align with Sysco’s overall target mix of investments. Actual asset allocation is regularly reviewed and periodically rebalanced to the target allocation when considered appropriate.

The day-to-day management of the assets of the U.K. Retirement Plan has been delegated by the plan trustee to a solvency manager who decides the composition of the asset portfolio in line with the objectives of the plan’s trustee and within specific investment guidelines agreed upon with the trustee. The primary objective for the U.K. Retirement Plan is to provide sufficient assets to pay benefits as they fall due. The U.K. Retirement Plan has a return objective that aims to achieve a return on plan assets

of 2.9% in excess of the return on the liability benchmark over rolling five-year periods. The liability benchmark is the portfolio of gilts, which are bonds issued by the British government, that best matches the liability profile of the U.K. Retirement Plan. The investment objective includes a risk statement that targets a level of investment tracking error versus the liability benchmark to be below 12% per year. The actual tracking error targeted may fluctuate over time as the composition of the portfolio changes and the levels of risk in markets change. The U.K. Retirement Plan’s Trustee and Solvency Manager seeks to achieve the Plan’s investment objectives by investing in a suitably diversified mix of assets. The U.K. Retirement Plan uses derivatives such as forwards, futures, swaps and options for risk management and for the efficient implementation of the investment strategy.

The U.K. Retirement Plan’s target and actual investment allocation as of June 29, 2019 is as follows:

	U.K. Retirement Plan
	Target Asset Allocation			Actual Asset Allocation
Common contractual fund	75	%		71	%
Liability hedging assets	25			29
				100	%

The U.K. Retirement Plan’s investment strategy is implemented primarily through a common contractual investment fund and liability hedging assets both managed by the solvency manager. The pooled investment fund consists of investment types including (1) equity investments covering a range of geographies and including investment managers that hold long and short positions and private equity investments, (2) credit investments including global investment grade and high yield bonds, loans and other debt and derivative securities, (3) property investments including global direct or indirect real estate holdings, (4) macro-oriented funds that seek to generate return by going long and short in a variety of markets and operate strategies which focus on markets rather than individual stocks and often use derivatives rather than physical assets, and (5) multi-strategy funds which combine a range of different credit, equity and macro-orientated ideas and dynamically allocate funds across asset classes. Actual asset allocation is regularly reviewed and periodically rebalanced to the target allocation when considered appropriate.

As discussed above, the retirement plans’ investments in equities, debt instruments and alternative investments provide a range of returns and also expose the plan to investment risk. However, the investment policies put in place by the trustee and solvency manager ensure diversification of plan assets across issuers, industries and countries.

Fair Value of Plan Assets

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). See Note 6, “Fair Value Measurements,” for a description of the fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The following is a description of the valuation methodologies used for assets and liabilities held by Sysco’s retirement plans measured at fair value.

Cash and cash equivalents: Valued at amortized cost, which approximates fair value due to the short-term maturities of these investments. Cash and cash equivalents is included as a Level 1 and Level 2 measurement in the table below.

Equity securities: Valued at the closing price reported on the exchange market. If a stock is not listed on a public exchange, such as an American Depository Receipt or some preferred stocks, the stock is valued using an evaluated bid price based on a compilation of observable market information. Inputs used include yields, the underlying security “best price,” adjustments for corporate actions and exchange prices of underlying and common stock of the same issuer. Equity securities valued at the closing price reported on the exchange market are classified as a Level 1 measurement in the table below.

Fixed income securities: Valued using evaluated bid prices based on a compilation of observable market information or a broker quote in a non-active market. Inputs used vary by type of security, but include spreads, yields, rate benchmarks, rate of prepayment, cash flows, rating changes and collateral performance and type. All fixed income securities are included as a Level 2 measurement in the table below.

Investment funds: Represents collective trust and funds holding debt, equity, hedge funds, private equity funds, exchange-traded real estate securities, and common contractual funds which are valued at the net asset value (NAV) provided by the manager of each fund. The NAV for funds within the U.S. and U.K Retirement Plans is calculated as the underlying net assets owned by the fund, divided by the number of shares outstanding. The NAV is based on the fair value of the underlying securities within the fund. Non-exchange traded real estate funds are valued based on the proportionate interest held by the U.S. Retirement Plan, which is based on the valuations of the underlying real estate investments held by each fund. Each real estate investment is valued on

the basis of a discounted cash flow approach. Inputs used include future rental receipts, expenses and residual values from a market participant view of the highest and best use of the real estate as rental property. The private equity funds are valued based on the proportionate interest held by the U.S. Retirement Plan, which is based on the valuations of the underlying private equity investments held by each fund. The hedge funds are valued based on the hedge funds’ proportionate share of the net assets of the underlying private investment fund as determined by the underlying private investment fund’s general partner. Indirectly held investments are valued utilizing the latest financial reports supplied by the fund’s portfolio investments. Directly held investments are valued initially based on transaction price and are adjusted utilizing available market data and investment-specific factors, such as estimates of liquidation value, prices of recent transactions in the same or similar issuer, current operating performance and future expectations of the particular investment, changes in market outlook and the financing environment.

Derivatives: Valuation method varies by type of derivative security.

•

Credit default and interest rate swaps: Valued using evaluated bid prices based on a compilation of observable market information. Inputs used for credit default swaps include spread curves and trade data about the credit quality of the counterparty. Inputs used for interest rate swaps include benchmark yields, swap curves, cash flow analysis, and interdealer broker rates. Credit default and interest rate swaps are included as a Level 2 measurement in the table below.

•	Foreign currency contracts: Valued using a standardized interpolation model that utilizes the quoted prices for standard-length forward foreign currency contracts and adjusts to the remaining term outstanding on the contract being valued. Foreign currency contracts are included as a Level 2 measurement in the table below.

•	Futures and option contracts: Valued at the closing price reported on the exchange market for exchange-traded futures and options. Over-the-counter options are valued using pricing models that are based on observable market information. Exchange-traded futures and options are included as a Level 1 measurement in the table below; over-the-counter options are included as a Level 2 measurement.

The following table presents the fair value of the U.S. Retirement Plan’s assets by major asset category as of June 29, 2019:

	Assets Measured at Fair Value as of Jun. 29, 2019
	Level 1				Level 2				Level 3				Measured at NAV (6)				Total
	(In thousands)
Cash and cash equivalents	$	39,981			$	41,266			$	—			$	—			$	81,247
Growth assets:
U.S. equity (1)	—				—				—				468,923				468,923
International equity (1)	95,296				—				—				107,197				202,493
Hedge fund of funds (2)	—				—				—				226,409				226,409
Real estate funds (3)	—				—				—				93,592				93,592
Private equity funds (4)	—				—				—				84,266				84,266
Liability hedging assets:
Corporate bonds	—				1,987,964				—				—				1,987,964
U.S. government and agency securities (1)	—				298,629				—				522,489				821,118
Other (5)	—				18,142				—				—				18,142
Total investments at fair value	$	135,277			$	2,346,001			$	—			$	1,502,876			$	3,984,154

(1)	Include direct investments in equity securities and within investment funds for which fair value is measured at NAV. There are no unfunded commitments as of June 29, 2019. The remaining investments may be redeemed once per day with advanced written notice and subject to applicable limits.

(2)	There were no unfunded commitments as of June 29, 2019, and there were no redemption restrictions as of June 29, 2019. The investment may be redeemed once per quarter.

(3)	For investments in the funds listed in this category, total unfunded commitment as of June 29, 2019 was $10.3 million. Approximately 15% of the investments cannot be redeemed. The estimate of the liquidation period for these funds varies from 2019 to 2021. The remaining investments may be redeemed quarterly with advanced written notice and subject to applicable limits.

(4)	Total unfunded commitments in the funds listed in this category as of June 29, 2019 were $17.6 million. The investments cannot be redeemed, but the fund will make distributions through liquidation. The estimate of the liquidation period varies for each fund from 2019 to 2031.

(5)	Include foreign government and state and municipal debt securities.

(6)	Include certain investments that are measured at fair value using the NAV practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

The following table presents the fair value of the U.K. Retirement Plan’s assets by major asset category as of June 29, 2019:

	Assets Measured at Fair Value as of Jun. 29, 2019
	Level 1				Level 2				Level 3				Measured at NAV (3)				Total
	(In thousands)
Liability hedging assets:
Cash and cash equivalents	$	13,372			$	—			$	—			$	—			$	13,372
U.K. government securities	—				63,363				—				—				63,363
Derivatives, net (1)	—				575				—				—				575
Investment funds:
Common contractual fund (2)	—				—				—				187,436				187,436
Total investments at fair value	$	13,372			$	63,938			$	—			$	187,436			$	264,746

(1)	Include interest rate swaps and zero coupon swaps. The fair value of asset positions totaled $9.3 million; the fair value of liability positions totaled $8.7 million.

(2)	There were $13.9 million of unfunded commitments as of June 29, 2019, and there were no redemption restrictions as of June 29, 2019. The investment may be redeemed twice per month.

(3)	Include certain investments that are measured at fair value using the NAV practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

The following table presents the fair value of the U.S. Retirement Plan’s assets by major asset category as of June 30, 2018:

	Assets Measured at Fair Value as of Jun. 30, 2018
	Level 1				Level 2				Level 3				Measured at NAV (7)				Total
	(In thousands)
Cash and cash equivalents	$	25,810			$	34,430			$	—			$	—			$	60,240
Growth assets:
U.S. equity (1)	80,719				—				—				143,701				224,420
International equity (1)	57,959				—				—				109,186				167,145
Hedge fund of funds (2)	—				—				—				388,281				388,281
Real estate funds (3)	—				—				—				146,389				146,389
Private equity funds (4)	—				—				—				84,003				84,003
Liability hedging assets:
Corporate bonds	—				1,775,324				—				—				1,775,324
U.S. government and agency securities (1)	—				277,986				—				469,868				747,854
Other (5)	—				27,324				—				—				27,324
High yield and emerging markets fixed income (6)	—				—				—				45,428				45,428
Total investments at fair value	$	164,488			$	2,115,064			$	—			$	1,386,856			$	3,666,408

(1)	Include direct investments in equity securities and within investment funds for which fair value is measured at NAV. There are no unfunded commitments as of June 30, 2018. The remaining investments may be redeemed once per day with advanced written notice and subject to applicable limits.

(2)	There were no unfunded commitments as of June 30, 2018, and there were no redemption restrictions as of June 30, 2018. The investment may be redeemed once per quarter.

(3)	The estimate of the liquidation period for these funds varies from 2018 to 2021. The remaining investments may be redeemed once per day with advanced written notice and subject to applicable limits.

(4)	Total unfunded commitment as of June 30, 2018 was $22.6 million. The investments cannot be redeemed, but the fund will make distributions through liquidation. The estimate of the liquidation period varies for each fund from 2018 to 2031.

(5)	Include foreign government and state and municipal debt securities.

(6)	There were no unfunded commitments as of June 30, 2018, and there were no redemption restrictions as of June 30, 2018. The investment may be redeemed once per day. The daily maximum withdrawal limitation is the greater of $2.0 million or 5% of the asset value.

(7)	Include certain investments that are measured at fair value using the NAV practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

The following table presents the fair value of the U.K. Retirement Plan’s assets by major asset category as of June 30, 2018:

	Assets Measured at Fair Value as of Jun. 30, 2018
	Level 1				Level 2				Level 3				Measured at NAV (3)				Total
	(In thousands)
Liability hedging assets:
Cash and cash equivalents	$	30,987			$	—			$	—			$	—			$	30,987
U.K. government securities	—				9,336				—				—				9,336
Derivatives, net (1)	—				17,658				—				—				17,658
Pooled funds	—				5,387				—				—				5,387
Investment funds:
Common contractual fund (2)	—				—				—				194,660				194,660
Total investments at fair value	$	30,987			$	32,381			$	—			$	194,660			$	258,028

(1)	Include interest rate swaps and zero coupon swaps. The fair value of asset positions totaled $45.2 million; the fair value of liability positions totaled $27.5 million.

(2)	There were $20.8 million of unfunded commitments as of June 30, 2018, and there were no redemption restrictions as of June 30, 2018. The investment may be redeemed once per week.

(3)	Include certain investments that are measured at fair value using the NAV practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

16. MULTIEMPLOYER EMPLOYEE BENEFIT PLANS

Defined Benefit Pension Plans

Sysco participates in several multiemployer defined benefit pension plans in the U.S. based on obligations arising under collective bargaining agreements covering union-represented employees. Expense is recognized at the time the contribution is made. Sysco does not directly manage these multiemployer plans, which are generally managed by boards of trustees, half of whom are appointed by the unions and the other half appointed by employers contributing to the plan. Approximately 12% of Sysco’s current employees in the U.S. are participants in such multiemployer plans as of June 29, 2019.

The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:

•	Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.

•	If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

•	If Sysco chooses to stop participating in some of its multiemployer plans in the U.S, Sysco may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

Based upon the information available from plan administrators, management believes that several of these multiemployer plans are underfunded. In addition, pension-related legislation in the U.S. requires underfunded pension plans to improve their funding ratios within prescribed intervals based on the level of their underfunding. As a result, Sysco expects its contributions to these plans to increase in the future. In addition, if a U.S. multiemployer defined benefit plan fails to satisfy certain minimum funding requirements, the Internal Revenue Service (IRS) may impose a nondeductible excise tax of 5% on the amount of the accumulated funding deficiency for those employers contributing to the fund. Under current law regarding multiemployer defined benefit plans, a plan’s termination, Sysco’s voluntary withdrawal, or the mass withdrawal of all contributing employers from any underfunded multiemployer defined benefit plan would require Sysco to make payments to the plan for Sysco’s proportionate share of the multiemployer plan’s unfunded vested liabilities.

Plan Contributions

Sysco’s contributions to multiemployer defined benefit pension plans were as follows for each fiscal year:

	2019				2018				2017
	(In thousands)
Individually significant plans	$	40,947			$	39,121			$	36,653
All other plans	7,598				7,254				7,898
Total contributions	$	48,545			$	46,375			$	44,551

Sysco’s Albany operating company withdrew from the New York State Teamsters Conference Pension and Retirement Fund in the fourth quarter of fiscal 2017. As a result, a withdrawal liability of $37.3 million was paid during fiscal 2018.

Individually Significant Plans

The information in the following tables relates to multiemployer defined benefit pension plans which Sysco has determined to be individually significant to the company. To determine individually significant plans, the company evaluated several factors, including Sysco’s significance to the plan in terms of employees and contributions, the funded status of the plan and the size of the company’s potential withdrawal liability if it were to voluntarily withdraw from the plan.

The following table provides information about the funded status of individually significant plans:

•	The “EIN-PN” column provides the Employer Identification Number (EIN) and the three-digit plan number (PN).

•

The “Pension Protection Act Zone Status” columns provide the two most recent Pension Protection Act zone statuses available from each plan. The zone status is based on information that the company received from the plan’s administrators and is certified by each plan’s actuary. Among other factors, plans in the red zone are generally less than 65% funded, plans in the orange zone are both less than 80% funded and have an accumulated funding deficiency or are expected to have a deficiency in any of the next six plan years, plans in the yellow zone are less than 80% funded and plans in the green zone are at least 80% funded. The Multiemployer Protection Act of 2014 created a new zone called “critical and declining.” Plans are generally considered “critical and declining” if they are projected to become insolvent within 15 years.

•

The “FIP/RP Status” column indicates whether a financial improvement plan (FIP) for yellow/orange zone plans or a rehabilitation plan (RP) for red zone plans is pending or implemented in the current year or was put in place in a prior year. A status of “Pending” indicates a FIP/RP has been approved but actual period covered by the FIP/RP has not begun. A status of “Implemented” means the period covered by the FIP/RP began in the current year or is ongoing.

•

The “Surcharge Imposed” column indicates whether a surcharge was paid during the most recent annual period presented for the company’s contributions to each plan in the red zone. If the company’s current collective bargaining agreement (CBA) with a plan satisfies the requirements of a pending but not yet implemented RP, then the payment of surcharges is not required and “No” will be reflected in this column. If the company’s current CBA with a plan

does not yet satisfy the requirements of a pending but not yet implemented RP, then the payment of surcharges is required and “Yes” will be reflected in this column.

				Pension Protection Act Zone Status
Pension Fund		EIN-PN		As of 12/31/19		As of 12/31/18		FIP/RP Status		Surcharge Imposed		Expiration Date(s) of CBA(s)
Western Conference of Teamsters Pension Plan		91-6145047-001		Green		Green		N/A		N/A		10/2/19 to 2/15/2026 (1)
Teamsters Pension Trust Fund of Philadelphia and Vicinity		23-1511735-001		Yellow		Yellow		Implemented		N/A		7/20/2020
Truck Drivers and Helpers Local Union No. 355 Retirement Pension Fund		52-6043608-001		Green		Yellow		Implemented		N/A		2/28/2022
Minneapolis Food Distributing Industry Pension Plan		41-6047047-001		Green		Green		Implemented		N/A		8/1/2021

(1)	Sysco is party to 22 CBAs that require contributions to the Western Conference of Teamsters Pension Trust. Each agreement covers anywhere from less than 1% to 12% of the total contributions Sysco is required to pay the fund.

The following table provides information about the company’s contributions to individually significant plans:

•	The “Sysco Contributions” columns provide contribution amounts based on Sysco’s fiscal years, which may not coincide with the plans’ fiscal years.

•	The “Sysco 5% of Total Plan Contributions” columns indicate whether Sysco was listed in the plan’s most recently filed Form 5500s as providing more than five percent of the total contributions to the plan, and the plan year-end is noted.

		Sysco Contributions												Sysco 5% of Total Plan Contributions
Pension Fund		2019				2018				2017				Year Ending 12/31/18		Year Ending 12/31/17
		(In thousands)
Western Conference of Teamsters Pension Plan		$	31,669			$	30,460			$	28,145			No		No
Teamsters Pension Trust Fund of Philadelphia and Vicinity		3,454				3,313				3,081				No		No
Truck Drivers and Helpers Local Union No. 355 Retirement Pension Fund		2,321				2,245				2,430				Yes		Yes
Minneapolis Food Distributing Industry Pension Plan		3,503				3,103				2,996				Yes		Yes

For all of the plans noted in the table above, minimum contributions outside of the agreed upon contractual rate are not required.

17. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:

	2019				2018				2017
	(In thousands, except for share and per share data)
Numerator:
Net earnings	$	1,674,271			$	1,430,766			$	1,142,503
Denominator:
Weighted-average basic shares outstanding	516,890,581				522,926,914				543,496,816
Dilutive effect of share-based awards	6,490,543				6,162,940				5,048,211
Weighted-average diluted shares outstanding	523,381,124				529,089,854				548,545,027
Basic earnings per share	$	3.24			$	2.74			$	2.10
Diluted earnings per share	$	3.20			$	2.70			$	2.08

The number of securities that were not included in the diluted earnings per share calculation because the effect would have been anti-dilutive was approximately 2,338,000, 2,303,000 and 4,194,000 for fiscal 2019, 2018 and 2017, respectively.

Dividends declared were $793.2 million, $735.3 million and $700.9 million in fiscal 2019, 2018 and 2017, respectively. Included in dividends declared for each year were dividends declared but not yet paid at year-end of approximately $200.0 million, $187.4 million and $174.9 million in fiscal 2019, 2018 and 2017, respectively.

18. OTHER COMPREHENSIVE INCOME

Comprehensive income is net earnings plus certain other items that are recorded directly to shareholders’ equity, such as foreign currency translation adjustment, changes in marketable securities, amounts related to certain hedging arrangements and amounts related to pension and other postretirement plans. Comprehensive income was $1.5 billion, $1.5 billion and $1.2 billion for fiscal 2019, 2018 and 2017, respectively.

A summary of the components of other comprehensive income (loss) and the related tax effects for each of the periods presented is as follows:

			2019
	Location of Expense (Income) Recognized in Net Earnings		Before Tax Amount				Tax				Net of Tax Amount
			(In thousands)
Pension and other postretirement benefit plans:
Other comprehensive income before reclassification adjustments:
Net actuarial gain (loss), arising in the current year			$	(200,144	)		$	(45,070	)		$	(155,074	)
Reclassification adjustments:
Amortization of prior service cost	Other expense, net		8,532				2,132				6,400
Amortization of actuarial loss, net	Other expense, net		34,824				8,708				26,116
Total reclassification adjustments			43,356				10,840				32,516
Foreign currency translation:
Foreign currency translation adjustment	N/A		(119,126		)		—				(119,126		)
Marketable securities:
Change in marketable securities	N/A		3,579				752				2,827
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedges	Operating expenses (1)		(5,394		)		(1,332		)		(4,062		)
Change in net investment hedges	N/A		58,138				14,299				43,839
Total other comprehensive income (loss) before reclassification adjustments			52,744				12,967				39,777
Reclassification adjustments:
Amortization of cash flow hedges	Interest expense		11,492				2,872				8,620
Total other comprehensive (loss) income			$	(208,099	)		$	(17,639	)		$	(190,460	)

(1)	Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.

			2018
	Location of Expense (Income) Recognized in Net Earnings		Before Tax Amount				Tax				Net of Tax Amount
			(In thousands)
Pension and other postretirement benefit plans:
Other comprehensive income before reclassification adjustments:
Net actuarial (loss) gain, net arising in the current year			$	69,476			$	16,965			$	52,511
Reclassification adjustments:
Amortization of prior service cost	Other expense, net		9,636				2,731				6,905
Amortization of actuarial loss (gain), net	Other expense, net		35,044				9,934				25,110
Total reclassification adjustments			44,680				12,665				32,015
Foreign currency translation:
Foreign currency translation adjustment	N/A		(22,987		)		—				(22,987		)
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedges	Operating expenses (1)		23,872				9,529				14,343
Change in net investment hedges	N/A		(2,443		)		(8,234		)		5,791
Total other comprehensive income (loss) before reclassification adjustments			21,429				1,295				20,134
Reclassification adjustments:
Amortization of cash flow hedges	Interest expense		11,499				3,259				8,240
Total other comprehensive income (loss)			$	124,097			$	34,184			$	89,913

(1)	Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.

			2017
	Location of Expense (Income) Recognized in Net Earnings		Before Tax Amount				Tax				Net of Tax Amount
			(In thousands)
Pension and other postretirement benefit plans:
Other comprehensive income before reclassification adjustments:
Net actuarial (loss) gain, net arising in the current year			$	168,498			$	71,215			$	97,283
Reclassification adjustments:
Amortization of prior service cost	Other expense, net		11,370				4,366				7,004
Amortization of actuarial loss (gain), net	Other expense, net		41,689				15,724				25,965
Total reclassification adjustments			53,059				20,090				32,969
Foreign currency translation:
Foreign currency translation adjustment	N/A		(11,243		)		—				(11,243		)
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedges	Operating expenses (1)		(10,871		)		(4,173		)		(6,698		)
Change in net investment hedges	N/A		(34,152		)		(10,140		)		(24,012		)
Total other comprehensive income (loss) before reclassification adjustments			(45,023		)		(14,313		)		(30,710		)
Reclassification adjustments:
Amortization of cash flow hedges	Interest expense		11,495				4,413				7,082
Total other comprehensive income (loss)			$	176,786			$	81,405			$	95,381

(1)	Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.

The following tables provide a summary of the changes in accumulated other comprehensive (loss) income (AOCI) for the periods presented:

	Pension and Other Postretirement Benefit Plans, net of tax				Foreign Currency Translation				Hedging, net of tax				Marketable Securities				Total
	(In thousands)
Balance as of Jul. 2, 2016	$	(1,104,484	)		$	(136,813	)		$	(116,821	)		$	—			$	(1,358,118	)
Other comprehensive income before reclassification adjustments	97,283				(11,243		)		(30,710		)		—				55,330
Amounts reclassified from accumulated other comprehensive loss	32,969				—				7,082				—				40,051
Balance as of Jul. 1, 2017	(974,232		)		(148,056		)		(140,449		)		—				(1,262,737		)
Other comprehensive income before reclassification adjustments	52,511				(22,987		)		20,134				—				49,658
Amounts reclassified from accumulated other comprehensive loss	32,015				—				8,240				—				40,255
Amounts reclassified to retained earnings (1)	(205,353		)		—				(31,092		)		—				(236,445		)
Balance as of Jun. 30, 2018	(1,095,059		)		(171,043		)		(143,167		)		—				(1,409,269		)
Other comprehensive income before reclassification adjustments	(155,074		)		(119,126		)		39,777				—				(234,423		)
Amounts reclassified from accumulated other comprehensive loss	32,516				—				8,620				—				41,136
Change in marketable securities	—				—				—				2,827				2,827
Jun. 29, 2019	$	(1,217,617	)		$	(290,169	)		$	(94,770	)		$	2,827			$	(1,599,729	)

(1)	Deferred taxes stranded in AOCI as a result of the Tax Act were reclassified to retained earnings as a result of early adopting ASU 2018-02.

19. SHARE-BASED COMPENSATION

Sysco provides compensation benefits to employees under several share-based payment arrangements, including various long-term employee stock incentive plans and the 2015 Employee Stock Purchase Plan (ESPP).

Stock Incentive Plans

In November 2018, Sysco’s Omnibus Incentive Plan (2018 Plan) was adopted and reserved up to 51,500,000 shares of Sysco common stock for share-based awards to employees, non-employee directors and key advisors. Of the 51,500,000 authorized shares, the full 51,500,000 shares may be issued as options or stock appreciation rights and up to 17,500,000 shares may be issued as restricted stock, restricted stock units or other types of stock-based awards. To date, Sysco has issued options, restricted stock units and performance share units under the 2018 Plan. Vesting requirements for awards under the 2018 Plan vary by individual grant and may include either time-based vesting or time-based vesting subject to acceleration based on performance criteria for fiscal periods of at least one year. The contractual life of all options granted under the 2018 Plan are and will be no greater than ten years. As of June 29, 2019, there were 50,783,126 remaining shares authorized and available for grant in total under the 2018 Plan, of which the full 50,783,126 shares may be issued as options or stock appreciation rights, or as a combination of up to 16,841,942 shares that may be issued as restricted stock, restricted stock units or other types of stock-based awards, with the remainder available for issuance as options or stock appreciation rights.

Sysco has also granted employee options under several previous employee stock option plans for which previously granted options remain outstanding as of June 29, 2019. No new options will be issued under any of the prior plans, as future grants to employees will be made through the 2018 Plan or subsequently adopted plans. Awards under these plans are subject to time-based vesting with vesting periods that vary by individual grant. The contractual life of all options granted under these plans is ten years. Sysco’s policy is to utilize treasury stock for issuing shares upon share option exercise or share unit conversion.

Performance Share Units

During fiscal 2019 and 2018, 581,174 and 895,968 performance share units (PSUs), respectively, were granted to employees. Based on the jurisdiction in which the employee resides, some of these PSUs were granted with forfeitable dividend equivalents. The fair value of each PSU award granted with a dividend equivalent is based on the company’s stock price as of the date of grant. For PSUs granted without dividend equivalents, the fair value was reduced by the present value of expected dividends during the vesting period. The weighted average grant-date fair value per performance share unit granted during fiscal 2019 and 2018 was $74.86 and $51.11, respectively. The PSUs granted will vest and convert into shares of Sysco common stock at the end of the performance periods, which conclude at the end of fiscal 2021 and fiscal 2020, respectively, based on financial performance targets consisting of Sysco’s earnings per share, compound annual growth rate and adjusted return on invested capital.

Stock Options

Sysco’s option awards are subject to graded vesting over a requisite service period with compensation cost recognized on a straight-line basis over the requisite service period over the duration of the award.

In addition, certain of Sysco’s options provide that the options continue to vest as if the optionee continued as an employee or director if the optionee meets certain age and years of service thresholds upon retirement. In these cases, Sysco will recognize compensation cost for such awards over the period from the grant date to the date the employee or director first becomes eligible to retire with the options continuing to vest after retirement.

The fair value of each option award is estimated as of the date of grant using a Black-Scholes option pricing model. Expected dividend yield is estimated based on the historical pattern of dividends and the average stock price for the year preceding the option grant. Expected volatility is based on historical volatility of Sysco’s stock, implied volatilities from traded options on Sysco’s stock and other factors. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Sysco utilizes historical data to estimate option exercise and employee termination behavior within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately in determining the expected life of awards for valuation purposes.

The weighted average assumptions discussed above are noted in the table below for relevant periods as follows:

	2019			2018			2017
Dividend yield	2.5	%		2.6	%		2.8	%
Expected volatility	16.9	%		17.5	%		16.9	%
Risk-free interest rate	2.8	%		2.0	%		1.4	%
Expected Life	7.0 years			7.0 years			7.2 years

The following summary presents information regarding outstanding options as of June 29, 2019 and changes during the fiscal year then ended with regard to options under all stock incentive plans:

	Shares Under Option			Weighted Average Exercise Price Per Share				Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding as of June 30, 2018	18,391,610			$	43.92
Granted	2,609,755			74.88
Exercised	5,796,853			40.88
Forfeited	215,235			54.29
Expired	—			—
Outstanding as of June 29, 2019	14,989,277			$	50.36			7.05		$	316,212
Vested or expected to vest as of June 29, 2019	9,018,881			$	55.01			7.71		$	152,389
Exercisable as of June 29, 2019	5,866,374			$	42.96			6.01		$	162,835

The total number of employee options granted was 2,609,755, 4,042,415 and 4,990,396 in fiscal years 2019, 2018 and 2017, respectively.

During fiscal 2019, 657,341 and 1,952,414 options were granted to 9 executive officers and approximately 179 other key employees, respectively. During fiscal 2018, 955,344 and 3,087,071 options were granted to 10 executive officers and approximately 181 other key employees, respectively. During fiscal 2017, 1,529,997 and 3,460,399 options were granted to 9 executive officers and 187 other key employees, respectively.

The weighted average grant date fair value of options granted in fiscal 2019, 2018 and 2017 was $11.70, $7.08 and $6.05, respectively. The total intrinsic value of options exercised during fiscal 2019, 2018 and 2017 was $14.0 million, $17.7 million and $22.1 million, respectively.

Restricted Stock Units

During fiscal 2019, 2018 and 2017, 617,685, 660,923 and 631,281 restricted stock units, respectively, were granted to employees, the majority of which will vest ratably over a three-year period. Some of these restricted stock units were granted with dividend equivalents. The fair value of each restricted stock unit award granted with a dividend equivalent is based on the company’s stock price as of the date of grant. For restricted stock unit awards granted without dividend equivalents, the fair value was reduced by the present value of expected dividends as of the date of grant date during the vesting period. The weighted average grant date fair value per share of restricted stock units granted during fiscal 2019, 2018 and 2017 was $63.91, $55.81 and $50.04, respectively. The total fair value of restricted stock units vested during fiscal 2019, 2018 and 2017 was $35.3 million, $40.4 million and $46.0 million, respectively. The total intrinsic value of options exercised during fiscal 2019, 2018 and 2017 was $49.8 million, $56.4 million and $65.1 million, respectively.

Non-Employee Director Awards

During fiscal 2019, 2018 and 2017, 30,870, 35,672 and 40,498 restricted equity awards, respectively, were granted to non-employee directors (NEDs), which will vest over a one-year period. NEDs may elect to receive these awards in restricted stock shares that will vest at the end of the award stated vesting period or as deferred units that convert into shares of Sysco common stock on a date subsequent to the award stated vesting date selected by the NED. The fair value of the restricted awards is based on the company’s stock price as of the date of grant. The weighted average grant date fair value of the shares granted during fiscal 2019, 2018 and 2017 was $66.22, $54.10 and $53.49, respectively. The total fair value of restricted stock shares vested and deferred units distributed during fiscal 2019, 2018 and 2017 was $2.0 million, $2.9 million and $2.0 million, respectively. Restricted stock shares are valued on their vesting date. Vested deferred units are valued on their subsequent conversion and distribution date.

NEDs may elect to receive up to 100% of their annual directors’ fees in Sysco common stock on either an annual or deferred basis. Sysco provides a matching grant of 50% of the number of shares received for the stock election subject to certain limitations. As a result of such elections, a total of 10,672, 21,478 and 22,094 shares with a weighted-average grant date fair value of $67.45, $54.69 and $51.46 per share were issued in fiscal 2019, 2018 and 2017, respectively, in the form of fully vested common stock or deferred units. The total fair value of common stock issued as a result of election shares and deferred units distributed during fiscal 2019, 2018 and 2017 was $0.7 million, $1.2 million and $1.1 million, respectively. Common stock shares are valued on their vesting date. Vested deferred units are valued on their subsequent conversion and distribution date.

As of June 29, 2019, there were 73,548 fully vested deferred units outstanding that will convert into shares of Sysco common stock upon dates selected by the respective NED.

Summary of Equity Instruments Other Than Stock Options

The following summary presents information regarding outstanding non-vested awards as of June 29, 2019 and changes during the fiscal year then ended with regard to these awards under the stock incentive plans. Award types represented include restricted stock units granted to employees, restricted awards granted to non-employee directors and PSUs.

	Shares			Weighted Average Grant Date Fair Value Per Share
Non-vested as of June 30, 2018	3,086,884			$	51.08
Granted	1,262,405			69.29
Vested	(764,762	)		48.13
Forfeited	(296,786	)		55.05
Non-vested as of June 29, 2019	3,287,741			$	58.40

2015 Employee Stock Purchase Plan

The Sysco ESPP permits employees to invest in Sysco common stock by means of periodic payroll deductions at a discount of 15% from the closing price on the last business day of each calendar quarter. The total number of shares that may be sold pursuant to the ESPP may not exceed 79,000,000 shares, of which 6,238,555 remained available as of June 29, 2019.

During fiscal 2019, 986,631 shares of Sysco common stock were purchased by the participants, as compared to 1,078,597 shares purchased in fiscal 2018 and 1,103,995 shares purchased in fiscal 2017. The weighted average fair value of employee stock purchase rights issued pursuant to the ESPP was $10.17, $8.38 and $7.73 per share during fiscal 2019, 2018 and 2017, respectively. The fair value of the stock purchase rights was calculated as the difference between the stock price at date of issuance and the employee purchase price.

All Share-Based Payment Arrangements

The total share-based compensation cost included in operating expenses in the consolidated results of operations was $104.9 million, $93.8 million and $83.9 million for fiscal 2019, 2018 and 2017, respectively. The total income tax benefit for share-based compensation arrangements was $21.7 million, $19.4 million and $30.0 million for fiscal 2019, 2018 and 2017, respectively.

As of June 29, 2019, there was $116.4 million of total unrecognized share-based compensation cost, which is expected to be recognized over a weighted-average period of 1.84 years.

Cash received from option exercises and purchases of shares under the ESPP was $253.1 million, $268.8 million and $204.8 million during fiscal 2019, 2018 and 2017, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $32.4 million, $38.4 million and $38.9 million during fiscal 2019, 2018 and 2017, respectively.

20. INCOME TAXES

Income Tax Provisions

For financial reporting purposes, earnings before income taxes consists of the following:

	2019				2018				2017
	(In thousands)
U.S.	$	1,910,549			$	1,765,793			$	1,569,073
Foreign	95,287				190,431				197,157
Total	$	2,005,836			$	1,956,224			$	1,766,230

The income tax provision for each fiscal year consists of the following:

	2019				2018				2017
	(In thousands)
U.S. federal income taxes	$	262,940			$	399,254			$	534,266
State and local income taxes	73,835				62,670				69,913
Foreign income taxes	(5,210		)		63,534				19,548
Total	$	331,565			$	525,458			$	623,727

The current and deferred components of the income tax provisions for each fiscal year are as follows:

	2019				2018				2017
	(In thousands)
Current	$	458,284			$	337,550			$	675,573
Deferred	(126,719		)		187,908				(51,846		)
Total	$	331,565			$	525,458			$	623,727

The deferred tax provisions result from the effects of net changes during the year in deferred tax assets and liabilities arising from temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Deferred Tax Assets and Liabilities

Significant components of Sysco’s deferred tax assets and liabilities are as follows:

	Jun. 29, 2019				Jun. 30, 2018
	(In thousands)
Deferred tax assets:
Net operating loss carryforwards	$	274,231			$	226,274
Pension	157,670				115,361
Share-based compensation	39,218				34,486
Deferred compensation	29,694				29,512
Receivables	17,383				13,001
Self-insured liabilities	16,496				—
Inventory	12,139				14,728
Foreign currency remeasurement losses and currency hedge	1,725				15,796
Other	32,641				33,386
Deferred tax assets before valuation allowances	581,197				482,544
Valuation allowances	(127,807		)		(123,237		)
Total deferred tax assets	453,390				359,307
Deferred tax liabilities:
Excess tax depreciation and basis differences of assets	163,123				180,950
Goodwill and intangible assets	358,847				373,041
Other	22,892				40,774
Total deferred tax liabilities	544,862				594,765
Total net deferred tax assets (liabilities)	$	(91,472	)		$	(235,458	)

The company’s deferred tax asset for net operating loss carryforwards as of June 29, 2019 and June 30, 2018 consisted of state and foreign net operating tax loss carryforwards. The state net operating loss carryforwards outstanding as of June 29, 2019 expire in fiscal years 2020 through 2038. The foreign net operating loss carryforward periods vary by jurisdiction, from 17 years to unlimited.

The company assesses the recoverability of its deferred tax assets each period by considering whether it is more likely than not that all or a portion of the deferred tax assets will not be realized. The company considers all available evidence (both positive and negative) in determining whether a valuation allowance is required. As a result of the company’s analysis, it was concluded that, as of June 29, 2019, a valuation allowance of $127.8 million should be established against the portion of the deferred tax asset attributable to certain foreign and U.S. state losses. The company will continue to monitor facts and circumstances in the reassessment of the likelihood that net operating loss carryforwards will be realized.

Tax Cuts and Jobs Act

On December 22, 2017, the U.S. government enacted the Tax Act. The Tax Act made broad and complex changes to the U.S. tax code that affected the company’s fiscal year ending June 30, 2018, including, but not limited to: (1) reducing the U.S. federal corporate tax rate; (2) requiring a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries that is payable over 8 years; and (3) bonus depreciation that will allow for full expensing of qualified property placed in service after September 27, 2017. The Tax Act also establishes new tax laws that could affect Sysco in future fiscal years, including, but not limited to (1) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries; (2) a new provision designed to tax global intangible low-taxed income (GILTI); (3) creation of the base erosion anti-abuse tax (BEAT), a new minimum tax; (4) a new limitation on deductible interest; (5) repeal of the domestic production activity deduction; and (6) increased limitations on the deductibility of certain executive compensation.

Also, in December 2017, the Securities and Exchange Commission staff issued SAB 118, which provided guidance on accounting for the tax effects of the Tax Act. SAB 118 provided a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC Topic 740, “Income Taxes” (ASC 740). In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act was incomplete, but it was able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company could not determine a provisional estimate to be included in the financial statements, it continued to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. In accordance with SAB 118, the company recognized provisional impacts related to re-measurement of deferred tax assets and liabilities and the one-time transition tax in its results for the annual period ended June 30, 2018. In the second quarter of fiscal 2019, the company completed its accounting for all aspects of the Tax Act, with a corresponding adjustment of $15.1 million to income tax expense related to transition tax, and a benefit of $3.2 million attributable to realizability of certain deferred tax assets.

Effective Tax Rates

Reconciliations of the statutory federal income tax rate to the effective income tax rates for each fiscal year are as follows:

	2019			2018			2017
U.S. statutory federal income tax rate	21.00	%		28.00	%		35.00	%
State and local income taxes, net of any applicable federal income tax benefit	3.35			2.48			2.61
Foreign income taxes	(1.42	)		0.07			(2.81	)
Uncertain tax position	(0.31	)		(0.22	)		0.01
Tax benefit of equity-based compensation	(2.07	)		(2.66	)		—
Impact of U.S. Tax Reform	(4.64	)		0.13			—
Other	0.62			(0.95	)		0.50
Effective income tax rate	16.53	%		26.85	%		35.31	%

The effective tax rate of 16.53% for fiscal 2019 was favorably impacted by the reduction of the statutory rate in the U.S. and certain foreign jurisdictions, the excess tax benefits attributable to equity compensation exercises and the favorable impact of $95.1 million of foreign tax credits included within Impacts of U.S. Tax Reform. These credits fully offset our transition tax liability*,* as well as a reduction of the statutory tax rate in the U.S. and certain foreign jurisdictions. Foreign earnings taxed at rates different than our domestic tax rate had the impact of decreasing the effective tax rate.

The effective tax rate of 26.85% for fiscal 2018 was favorably impacted by the adoption of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), as well as a reduction of the statutory tax rate in the U.S. and certain foreign jurisdictions. Foreign earnings taxed at rates different than our domestic tax rate had the impact of increasing the effective tax rate.

The effective tax rate of 35.31% for fiscal 2017 was favorably impacted by tax credits allowed against U.S. Federal and State income tax liabilities, as well as a reduction of the statutory tax rate in certain foreign jurisdictions. Indefinitely reinvested earnings taxed at foreign statutory rates less than our domestic tax rate also had the impact of reducing the effective tax rate.

Uncertain Tax Positions

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, excluding interest and penalties, is as follows:

	2019				2018
	(In thousands)
Unrecognized tax benefits at beginning of year	$	12,195			$	16,278
Additions for tax positions related to prior years	20,508				652
Reductions for tax positions related to prior years	(6,086		)		(4,033		)
Reductions due to settlements with taxing authorities	(508		)		(702		)
Unrecognized tax benefits at end of year	$	26,109			$	12,195

As of June 29, 2019, the gross amount of liability for accrued interest and penalties related to unrecognized tax benefits was $4.6 million. As of June 30, 2018, the gross amount of liability for accrued interest and penalties related to unrecognized tax benefits was $8.5 million. The expense recorded for interest and penalties related to unrecognized tax benefits was not material in any year presented.

If Sysco were to recognize all unrecognized tax benefits recorded as of June 29, 2019, approximately $24.8 million of the $26.1 million reserve would reduce the effective tax rate. If Sysco were to recognize all unrecognized tax benefits recorded as of June 30, 2018, approximately $9.6 million of the $12.2 million reserve would reduce the effective tax rate. It is reasonably possible that the amount of the unrecognized tax benefits with respect to certain of the company’s unrecognized tax positions will increase or decrease in the next twelve months either because Sysco’s positions are sustained on audit or because the company agrees to their disallowance. Items that may cause changes to unrecognized tax benefits primarily include the consideration of various filing requirements in various jurisdictions and the allocation of income and expense between tax jurisdictions. In addition, the amount of unrecognized tax benefits recognized within the next twelve months may decrease due to the expiration of the statute of limitations for certain years in various jurisdictions; however, it is possible that a jurisdiction may open an audit on one of these years prior to the statute of limitations expiring. Sysco anticipates an immaterial decrease to the reserve within twelve months as a result of lapse of statutes.

Sysco’s federal tax returns for 2018 and subsequent tax years have statutes of limitations that remain open for audit. As of June 29, 2019, Sysco’s tax returns in the majority of the state and local and material foreign jurisdictions are no longer subject to audit for the years before 2011.

Other

Undistributed income of certain consolidated foreign subsidiaries at June 29, 2019 amounted to $384.8 million, for which no deferred U.S. income tax provision has been recorded because Sysco intends to indefinitely reinvest such income in those foreign operations. An estimate of any U.S. income or foreign withholding taxes that may be applicable upon actual or deemed repatriation is not practical due to the complexities associated with the hypothetical calculation.

21. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

Sysco is engaged in various legal proceedings that have arisen but have not been fully adjudicated. The likelihood of loss for these legal proceedings, based on definitions within contingency accounting literature, ranges from remote to reasonably possible to probable. When probable and reasonably estimable, the losses have been accrued. Although the final results of legal proceedings cannot be predicted with certainty, based on estimates of the range of potential losses associated with these matters, management does not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect upon the consolidated financial position or results of operations of the company.

Other Commitments

Sysco has committed to aggregate product purchases for resale in order to benefit from a centralized approach to purchasing. A majority of these agreements expire within one year; however, certain agreements have terms through fiscal 2024. These agreements commit the company to a minimum volume at various pricing terms, including fixed pricing, variable pricing or a combination thereof. Minimum amounts committed to as of June 29, 2019 totaled approximately $2.6 billion. Minimum amounts committed to by year are as follows:

	Amount
	(In thousands)
2020	$	1,716,184
2021	391,136
2022	178,308
2023	175,750
2024	171,757

Sysco has contracts with various third-party service providers to receive information technology services. The services have been committed for periods up to fiscal 2024 and may be extended. As of June 29, 2019, the total remaining cost of the services over that period is expected to be approximately $459.2 million. A portion of this committed amount may be reduced by Sysco utilizing less than estimated resources and can be increased by Sysco utilizing more than estimated resources. Certain agreements allow adjustments for inflation. Sysco may also cancel a portion or all of the services provided subject to termination fees that decrease over time. If Sysco were to terminate all of the services in fiscal 2020, the estimated termination fees incurred in fiscal 2020 would be approximately $48.7 million.

22. BUSINESS SEGMENT INFORMATION

The company has aggregated certain of its operating segments into three reportable segments. “Other” financial information is attributable to the company’s other operating segments that do not meet the quantitative disclosure thresholds.

•	U.S. Foodservice Operations - primarily includes U.S. Broadline operations, which distribute a full line of food products, including custom-cut meat, seafood, specialty produce, specialty imports and a wide variety of non-food products;

•

International Foodservice Operations - includes operations in the Americas and Europe, which distribute a full line of food products and a wide variety of non-food products. The Americas primarily consists of operations in Canada, Bahamas, Mexico, Costa Rica and Panama, as well as the company’s operations that distribute to international customers. The company’s European operations primarily consist of operations in the United Kingdom (U.K.), France, Ireland and Sweden;

•	SYGMA - the company’s U.S. customized distribution subsidiary; and

•	Other - primarily the company’s hotel supply operations and Sysco Labs, which includes the company’s suite of technology solutions that help support the business needs of the company’s customers and provide support for some of the company’s business technology needs.

The accounting policies for the segments are the same as those disclosed by Sysco for its consolidated financial statements. Corporate expenses generally include all expenses of the corporate office and Sysco’s shared services center. These also include all share-based compensation costs.

The following tables set forth certain financial information for Sysco’s business segments.

	Fiscal Year
	2019				2018				2017
Sales:	(In thousands)
U.S. Foodservice Operations	$	41,288,188			$	39,642,263			$	37,604,698
International Foodservice Operations	11,493,040				11,518,565				10,613,059
SYGMA	6,244,328				6,557,033				6,178,909
Other	1,088,366				1,009,463				974,473
Total	$	60,113,922			$	58,727,324			$	55,371,139
	Fiscal Year
	2019				2018				2017
Operating income:	(In thousands)
U.S. Foodservice Operations	$	3,192,816			$	3,056,817			$	2,896,357
International Foodservice Operations	125,443				193,864				243,790
SYGMA	27,780				24,318				23,299
Other	35,848				39,485				30,217
Total segments	3,381,887				3,314,484				3,193,663
Corporate	(1,051,737		)		(1,000,428		)		(1,139,047		)
Total operating income	2,330,150				2,314,056				2,054,616
Interest expense	360,423				395,483				302,878
Other expense (income), net	(36,109		)		(37,651		)		(14,492		)
Earnings before income taxes	$	2,005,836			$	1,956,224			$	1,766,230
	Fiscal Year
	2019				2018				2017
Depreciation and amortization:	(In thousands)
U.S. Foodservice Operations	$	342,277			$	348,041			$	266,024
International Foodservice Operations	248,914				258,156				243,628
SYGMA	35,473				36,367				34,890
Other	10,868				9,599				10,678
Total segments	637,532				652,163				555,220
Corporate	126,403				113,335				346,772
Total	$	763,935			$	765,498			$	901,992
	Fiscal Year
	2019				2018				2017
Capital Expenditures:	(In thousands)
U.S. Foodservice Operations	$	327,005			$	262,887			$	194,714
International Foodservice Operations	249,527				157,139				228,564
SYGMA	36,396				45,132				50,722
Other	25,003				11,406				13,237
Total segments	637,931				476,564				487,237
Corporate	54,460				211,251				199,141
Total	$	692,391			$	687,815			$	686,378

	Fiscal Year
	2019				2018				2017
Assets:	(In thousands)
U.S. Foodservice Operations	$	7,238,309			$	7,039,354			$	6,675,543
International Foodservice Operations	5,888,275				6,112,666				6,433,815
SYGMA	624,720				662,290				625,653
Other	477,038				452,426				448,885
Total segments	14,228,342				14,266,736				14,183,896
Corporate	3,738,180				3,803,668				3,572,759
Total	$	17,966,522			$	18,070,404			$	17,756,655

Information concerning geographic areas is as follows:

	Fiscal Year
	2019				2018				2017
	(In thousands)
Sales:
United States	$	48,257,385			$	46,812,297			$	44,395,765
Canada	4,660,030				4,661,615				4,346,894
United Kingdom	3,133,793				3,176,069				2,974,133
France	1,581,663				1,625,407				1,426,973
Other	2,481,051				2,451,936				2,227,374
Total	$	60,113,922			$	58,727,324			$	55,371,139
Long-lived assets:
United States	$	3,361,629			$	3,448,164			$	3,252,980
Canada	334,177				318,410				329,090
France	329,923				240,507				284,611
United Kingdom	270,613				319,664				303,178
Other	205,363				194,915				207,443
Total	$	4,501,705			$	4,521,660			$	4,377,302

The sales mix for the principal product categories by segment is disclosed in Note 4, “Revenue.”

23. SUPPLEMENTAL GUARANTOR INFORMATION - SUBSIDIARY GUARANTEES

On January 19, 2011, the wholly owned U.S. Broadline subsidiaries of Sysco Corporation at that time entered into full and unconditional guarantees of all outstanding senior notes and debentures of Sysco Corporation. All subsequent issuances of senior notes and debentures in the U.S. have also been guaranteed by these subsidiaries. As of June 29, 2019, Sysco had a total of $7.8 billion in senior notes and debentures that was covered by these guarantees.

All subsidiary guarantors are 100% owned by the parent company, all guarantees are full and unconditional and all guarantees are joint and several, except that the guarantee of any subsidiary guarantor with respect to a series of senior notes or debentures may be released under certain customary circumstances. If we exercise our defeasance option with respect to the senior notes or debentures of any series, then any subsidiary guarantor effectively will be released with respect to that series. Further, each subsidiary guarantee will remain in full force and effect until the earliest to occur of the date, if any, on which (1) the applicable subsidiary guarantor shall consolidate with or merge into Sysco Corporation or any successor of Sysco Corporation or (2) Sysco Corporation or any successor of Sysco Corporation consolidates with or merges into the applicable subsidiary guarantor.

The following condensed consolidating financial statements present separately the financial position, comprehensive income and cash flows of the parent issuer (Sysco Corporation), the guarantors (certain of the company’s U.S. Broadline subsidiaries), and all other non-guarantor subsidiaries of Sysco (Other Non-Guarantor Subsidiaries) on a combined basis with eliminating entries.

	Condensed Consolidated Balance Sheet
	Jun. 29, 2019
	Sysco				Certain U.S. Broadline Subsidiaries				Other Non-Guarantor Subsidiaries				Eliminations				Consolidated Totals
	(In thousands)
Current assets	$	121,993			$	4,195,543			$	3,823,969			$	—			$	8,141,505
Intercompany receivables	6,162,303				30,469				3,220,237				(9,413,009		)		—
Investment in subsidiaries	4,680,530				—				1,126,315				(5,806,845		)		—
Plant and equipment, net	252,101				2,162,668				2,086,936				—				4,501,705
Other assets	787,986				718,600				4,372,725				(555,999		)		5,323,312
Total assets	$	12,004,913			$	7,107,280			$	14,630,182			$	(15,775,853	)		$	17,966,522
Current liabilities	$	465,101			$	1,018,650			$	4,619,432			$	—			$	6,103,183
Intercompany payables	686,116				3,443,182				5,283,711				(9,413,009		)		—
Long-term debt	7,668,314				7,938				445,806				—				8,122,058
Other liabilities	682,779				545,391				531,081				(555,999		)		1,203,252
Noncontrolling interest	—				—				35,426				—				35,426
Shareholders’ equity	2,502,603				2,092,119				3,714,726				(5,806,845		)		2,502,603
Total liabilities and shareholders’ equity	$	12,004,913			$	7,107,280			$	14,630,182			$	(15,775,853	)		$	17,966,522

	Condensed Consolidated Balance Sheet
	Jun. 30, 2018
	Sysco				Certain U.S. Broadline Subsidiaries				Other Non-Guarantor Subsidiaries				Eliminations				Consolidated Totals
	(In thousands)
Current assets	$	157,994			$	4,018,444			$	3,827,015			$	—			$	8,003,453
Intercompany receivables	6,621,438				270,748				5,793,352				(12,685,538		)		—
Investment in subsidiaries	4,896,004				—				983,625				(5,879,629		)		—
Plant and equipment, net	278,855				2,181,576				2,061,229				—				4,521,660
Other assets	788,473				611,004				4,593,537				(447,723		)		5,545,291
Total assets	$	12,742,764			$	7,081,772			$	17,258,758			$	(19,012,890	)		$	18,070,404
Current liabilities	$	1,233,541			$	886,305			$	4,468,900			$	—			$	6,588,746
Intercompany payables	882,487				3,798,134				8,004,917				(12,685,538		)		—
Long-term debt	7,470,334				8,285				62,146				—				7,540,765
Other liabilities	649,445				508,387				686,178				(447,723		)		1,396,287
Noncontrolling interest	—				—				37,649				—				37,649
Shareholders’ equity	2,506,957				1,880,661				3,998,968				(5,879,629		)		2,506,957
Total liabilities and shareholders’ equity	$	12,742,764			$	7,081,772			$	17,258,758			$	(19,012,890	)		$	18,070,404

	Condensed Consolidated Statement of Comprehensive Income
	For the 52-Week Period Ended Jun. 29, 2019
	Sysco				Certain U.S. Broadline Subsidiaries				Other Non-Guarantor Subsidiaries				Eliminations				Consolidated Totals
	(In thousands)
Sales	$	—			$	37,453,729			$	25,002,655			$	(2,342,462	)		$	60,113,922
Cost of sales	—				30,282,665				20,764,732				(2,342,462		)		48,704,935
Gross profit	—				7,171,064				4,237,923				—				11,408,987
Operating expenses	861,914				4,163,261				4,053,662				—				9,078,837
Operating income (loss)	(861,914		)		3,007,803				184,261				—				2,330,150
Interest expense (income) (1)	193,457				(104,341		)		271,307				—				360,423
Other expense (income), net	(38,360		)		(489		)		2,740				—				(36,109		)
Earnings (losses) before income taxes	(1,017,011		)		3,112,633				(89,786		)		—				2,005,836
Income tax (benefit) provision	(454,578		)		792,542				(6,399		)		—				331,565
Equity in earnings of subsidiaries	2,236,704				—				464,701				(2,701,405		)		—
Net earnings	1,674,271				2,320,091				381,314				(2,701,405		)		1,674,271
Other comprehensive income (loss)	(190,460		)		—				(119,126		)		119,126				(190,460		)
Comprehensive income	$	1,483,811			$	2,320,091			$	262,188			$	(2,582,279	)		$	1,483,811

(1)	Interest expense (income) includes $104.3 million of intercompany interest income, net, for certain of the U.S. Broadline subsidiaries, which is intercompany interest expense for Sysco Corporation. There is an immaterial amount of intercompany interest expense related to Sysco Corporation for the Other Non-Guarantor Subsidiaries.

	Condensed Consolidated Statement of Comprehensive Income
	For the 52-Week Period Ended Jun. 30, 2018
	Sysco				Certain U.S. Broadline Subsidiaries				Other Non-Guarantor Subsidiaries				Eliminations				Consolidated Totals
	(In thousands)
Sales	$	—			$	35,963,053			$	24,784,842			$	(2,020,571	)		$	58,727,324
Cost of sales	—				29,102,278				20,560,226				(2,020,571		)		47,641,933
Gross profit	—				6,860,775				4,224,616				—				11,085,391
Operating expenses	804,202				4,007,565				3,959,568				—				8,771,335
Operating income (loss)	(804,202		)		2,853,210				265,048				—				2,314,056
Interest expense (income) (1)	294,401				(110,715		)		211,797				—				395,483
Other expense (income), net	(39,503		)		2,270				(418		)		—				(37,651		)
Earnings (losses) before income taxes	(1,059,100		)		2,961,655				53,669				—				1,956,224
Income tax (benefit) provision	(135,385		)		655,824				5,019				—				525,458
Equity in earnings of subsidiaries	2,354,481				—				—				(2,354,481		)		—
Net earnings	1,430,766				2,305,831				48,650				(2,354,481		)		1,430,766
Other comprehensive income (loss)	89,913				—				(22,987		)		22,987				89,913
Comprehensive income	$	1,520,679			$	2,305,831			$	25,663			$	(2,331,494	)		$	1,520,679

(1)	Interest expense (income) includes $110.7 million of intercompany interest income, net, for certain of the U.S. Broadline subsidiaries, which is intercompany interest expense for Sysco Corporation. There is an immaterial amount of intercompany interest expense related to Sysco Corporation for the Other Non-Guarantor Subsidiaries.

	Condensed Consolidated Statement of Comprehensive Income
	For the 52-Week Period Ended Jul. 1, 2017
	Sysco				Certain U.S. Broadline Subsidiaries				Other Non-Guarantor Subsidiaries				Eliminations				Consolidated Totals
	(In thousands)
Sales	$	—			$	34,325,884			$	22,862,131			$	(1,816,876	)		$	55,371,139
Cost of sales	—				27,690,469				18,940,039				(1,816,876		)		44,813,632
Gross profit	—				6,635,415				3,922,092				—				10,557,507
Operating expenses	935,472				3,903,183				3,664,236				—				8,502,891
Operating income (loss)	(935,472		)		2,732,232				257,856				—				2,054,616
Interest expense (income) (1)	405,030				(122,012		)		19,860				—				302,878
Other expense (income), net	(27,713		)		3,530				9,691				—				(14,492		)
Earnings (losses) before income taxes	(1,312,789		)		2,850,714				228,305				—				1,766,230
Income tax (benefit) provision	(463,598		)		1,006,703				80,622				—				623,727
Equity in earnings of subsidiaries	1,991,694				—				—				(1,991,694		)		—
Net earnings	1,142,503				1,844,011				147,683				(1,991,694		)		1,142,503
Other comprehensive income (loss)	95,381				—				(9,317		)		9,317				95,381
Comprehensive income	$	1,237,884			$	1,844,011			$	138,366			$	(1,982,377	)		$	1,237,884

(1)	Interest expense (income) includes $122.0 million of intercompany interest income, net, for certain of the U.S. Broadline subsidiaries, which is intercompany interest expense for Sysco Corporation. There is an immaterial amount of intercompany interest expense related to Sysco Corporation for the Other Non-Guarantor Subsidiaries.

	Condensed Consolidated Cash Flows
	For the 52-Week Period Ended Jun. 29, 2019
	Sysco				Certain U.S. Broadline Subsidiaries				Other Non-Guarantor Subsidiaries				Elimination (1)				Consolidated Totals
	(In thousands)
Cash flows provided by (used for):
Operating activities	$	1,683,417			$	1,755,756			$	1,092,034			$	(2,120,000	)		$	2,411,207
Investing activities	544,149				(263,029		)		(440,743		)		(583,232		)		(742,855		)
Financing activities	(2,226,842		)		(1,486,927		)		(826,737		)		2,703,232				(1,837,274		)
Effect of exchange rates on cash	—				—				(14,677		)		—				(14,677		)
Net increase (decrease) in cash, cash equivalents and restricted cash	724				5,800				(190,123		)		—				(183,599		)
Cash, cash equivalents and restricted cash at the beginning of period	29,144				111,843				574,857				—				715,844
Cash, cash equivalents and restricted cash at the end of period	$	29,868			$	117,643			$	384,734			$	—			$	532,245

(1)	Represents primarily inter-company dividends paid from the subsidiaries to the parent, Sysco Corporation, partially offset by intercompany loans issued.

	Condensed Consolidated Cash Flows
	For the 52-Week Period Ended Jun. 30, 2018
	Sysco				Certain U.S. Broadline Subsidiaries				Other Non-Guarantor Subsidiaries				Elimination (1)				Consolidated Totals
	(In thousands)
Cash flows provided by (used for):
Operating activities	$	1,051,976			$	2,548,139			$	799,062			$	(2,243,797	)		$	2,155,380
Investing activities	58,864				(439,178		)		(503,745		)		(26,354		)		(910,413		)
Financing activities	(1,193,272		)		(2,015,906		)		(471,442		)		2,270,151				(1,410,469		)
Effect of exchange rates on cash	—				—				11,844				—				11,844
Net increase (decrease) in cash, cash equivalents and restricted cash	(82,432		)		93,055				(164,281		)		—				(153,658		)
Cash, cash equivalents and restricted cash at the beginning of period	111,576				18,788				739,138				—				869,502
Cash, cash equivalents and restricted cash at the end of period	$	29,144			$	111,843			$	574,857			$	—			$	715,844

(1)	Represents primarily inter-company dividends paid from the subsidiaries to the parent, Sysco Corporation.

	Condensed Consolidated Cash Flows
	For the 52-Week Period Ended Jul. 1, 2017
	Sysco				Certain U.S. Broadline Subsidiaries				Other Non-Guarantor Subsidiaries				Elimination (1)				Consolidated Totals
	(In thousands)
Cash flows provided by (used for):
Operating activities	$	1,523,519			$	3,028,819			$	658,229			$	(2,978,000	)		$	2,232,567
Investing activities	(3,267,779		)		(261,330		)		(175,565		)		127,000				(3,577,674		)
Financing activities	(1,525,995		)		(2,777,661		)		(229,931		)		2,851,000				(1,682,587		)
Effect of exchange rates on cash	—				—				(22,104		)		—				(22,104		)
Net increase (decrease) in cash and cash equivalents	(3,270,255		)		(10,172		)		230,629				—				(3,049,798		)
Cash and cash equivalents at the beginning of period	3,376,412				34,379				508,509				—				3,919,300
Cash and cash equivalents at the end of period	$	106,157			$	24,207			$	739,138			$	—			$	869,502

(1)	Represents primarily inter-company dividends paid from the subsidiaries to the parent, Sysco Corporation.

24. QUARTERLY RESULTS (UNAUDITED)

Sysco’s fiscal year includes four quarterly periods that are comprised of thirteen weeks each. Financial information for each 13-week period in the fiscal years ended June 29, 2019 and June 30, 2018 is set forth below:

	Fiscal 2019 Quarter Ended
	September 29				December 29				March 30 (1)				June 29 (2)				Fiscal Year
	(In thousands except for per share data)
Sales	$	15,215,279			$	14,765,707			$	14,658,074			$	15,474,862			$	60,113,922
Cost of sales	12,311,494				11,993,995				11,903,776				12,495,670				48,704,935
Gross profit	2,903,785				2,771,712				2,754,298				2,979,192				11,408,987
Operating expenses	2,275,645				2,319,817				2,224,713				2,258,662				9,078,837
Operating income	628,140				451,895				529,585				720,530				2,330,150
Interest expense	89,016				87,113				94,514				89,780				360,423
Other expense (income), net	1,132				10,197				4,120				(51,558		)		(36,109		)
Earnings before income taxes	537,992				354,585				430,951				682,308				2,005,836
Income taxes	106,950				87,205				(9,132		)		146,542				331,565
Net earnings	$	431,042			$	267,380			$	440,083			$	535,766			$	1,674,271
Per share:
Basic net earnings	$	0.83			$	0.52			$	0.86			$	1.04			$	3.24
Diluted net earnings	0.81				0.51				0.85				1.03				3.20
Dividends declared	0.36				0.39				0.39				0.39				1.53

(1)	Sysco’s third quarter of fiscal 2019 results included the recognition of $95.1 million of foreign tax credits generated as a result of distributions to Sysco from its foreign operations at the end of fiscal 2018. See Note 20, “Income Taxes.”

(2)	Sysco’s fourth quarter of fiscal 2019 results included a $66.3 million gain on the sale of Iowa Premium, LLC.

	Fiscal 2018 Quarter Ended
	September 30				December 30				March 31 (1)				June 30				Fiscal Year
	(In thousands except for per share data)
Sales	$	14,650,424			$	14,411,490			$	14,349,504			$	15,315,906			$	58,727,324
Cost of sales	11,856,756				11,712,104				11,673,876				12,399,197				47,641,933
Gross profit	2,793,668				2,699,386				2,675,628				2,916,709				11,085,391
Operating expenses	2,174,303				2,170,834				2,193,425				2,232,773				8,771,335
Operating income	619,365				528,552				482,203				683,936				2,314,056
Interest expense	80,884				85,986				136,145				92,468				395,483
Other expense (income), net	(7,975		)		(9,162		)		(18,826		)		(1,688		)		(37,651		)
Earnings before income taxes	546,456				451,728				364,884				593,156				1,956,224
Income taxes	178,816				167,615				34,799				144,228				525,458
Net earnings	$	367,640			$	284,113			$	330,085			$	448,928			$	1,430,766
Per share:
Basic net earnings	$	0.70			$	0.55			$	0.63			$	0.86			$	2.74
Diluted net earnings	0.69				0.54				0.63				0.85				2.70
Dividends declared	0.33				0.36				0.36				0.36				1.41

(1)	Sysco’s third quarter of fiscal 2018 included a charge for $53.1 million in interest expense related to the redemption of senior notes as well as tax benefits derived from our $380.0 million contribution to our U.S. Retirement Plan. See Note 13, “Debt and Other Financing Arrangements” and Note 20, “Income Taxes.”