Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion should be read in conjunction with our consolidated financial statements as of July 2, 2022, and for the fiscal year then ended, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, both contained in our Annual Report on Form 10-K for the fiscal year ended July 2, 2022 (our fiscal 2022 Form 10-K), as well as the consolidated financial statements (unaudited) and notes to the consolidated financial statements (unaudited) contained in this report.

Highlights

Our first quarter of fiscal 2023 results reflected continued positive momentum in our business to start the fiscal year, delivering our highest ever quarterly sales at Sysco. We generated double-digit sales and earnings growth compared to the same period last year, driven by higher volumes, effective management of inflation and market share gains. We continued to advance our Recipe For Growth strategy, including within our International Foodservice Operations segment, while addressing operational improvement opportunities. See below for a comparison of our fiscal 2023 results to our fiscal 2022 results, both including and excluding Certain Items (as defined below).

Comparisons of results from the first quarter of fiscal 2023 to the first quarter of fiscal 2022 are presented below:

• Sales:

◦increased 16.2%, or $2.7 billion, to $19.1 billion;

• Operating income:

◦increased 16.3%, or $102.7 million, to $734.3 million;

◦adjusted operating income increased 12.4%, or $85.2 million, to $770.3 million;

• Net earnings:

◦increased 23.2%, or $87.6 million, to $465.6 million;

◦adjusted net earnings increased 14.6%, or $62.7 million, to $492.6 million;

• Basic earnings per share:

◦increased 24.3%, or $0.18, to $0.92 per share;

• Diluted earnings per share:

◦increased 24.7%, or $0.18, to $0.91 per share;

◦adjusted diluted earnings per share increased 16.9%, or $0.14, to $0.97 in fiscal 2023;

• EBITDA:

◦increased 10.5%, or $86.6 million, to $908.0 million; and

◦adjusted EBITDA increased 7.5%, or $64.1 million, to $916.9 million.

The discussion of our results includes certain non-GAAP financial measures, including EBITDA and adjusted EBITDA, as we believe these metrics provide important perspective with respect to underlying business trends. Other than free cash flow, any non-GAAP financial measures will be denoted as adjusted measures to remove the impact of restructuring and transformational project costs consisting of: (1) restructuring charges, (2) expenses associated with our various transformation initiatives and (3) facility closure and severance charges; acquisition-related costs consisting of: (a) intangible amortization expense and (b) acquisition costs and due diligence costs related to our acquisitions; and the reduction of bad debt expense previously recognized in fiscal 2020 due to the impact of the COVID-19 pandemic on the collectability of our pre-pandemic trade receivable balances.

The fiscal 2023 and fiscal 2022 items discussed above are collectively referred to as “Certain Items.” The results of our foreign operations can be impacted by changes in exchange rates applicable to converting from local currencies to U.S. dollars. We measure our total Sysco and our International Foodservice Operations results on a constant currency basis.

Trends

Economic and Industry Trends

The food-away-from-home sector experienced growth in the first quarter of fiscal 2023. Restaurants continued to be resilient and our travel/hospitality and business/industry segments results posted year-over-year improvements. We are closely monitoring macro-economic conditions for signs of business slow down. At this time, we are not seeing recession concerns negatively impacting our business results. We have experienced a strong start to the year in both national and local sales, which has driven market share gains overall, as we grew more than 1.4 times the market for the period. We are on track to deliver our stated growth objective for the year, as we see continued growth opportunities, particularly in the non-commercial sector.

Sales and Gross Profit Trends

Our sales and gross profit performance are influenced by multiple factors, including price, volume, inflation, customer mix and product mix. The most significant factor affecting performance in the first quarter of fiscal 2023 was volume growth, as we experienced strong results from both national and local customers driven by a 5.4% improvement in local case volume and an 7.3% improvement in total case volume within our U.S. Foodservice segment, in each instance as compared to the first quarter of fiscal 2022. This volume reflects our broadline and specialty businesses except with our specialty meats business which measures its volume in pounds. This growth enabled us to gain market share during the first quarter of fiscal 2023. We expect to continue seeing momentum on our rate of growth and are on track to exceed our stated goal of achieving growth at a rate of 1.5 times the industry in fiscal 2024.

Product cost inflation has also been a driver of our sales and gross profit performance. We experienced inflation at a rate of 9.7% in the first quarter of fiscal 2023 at the total enterprise level, primarily driven by inflation in the dairy and frozen categories. We continue to be successful in managing our inflation, resulting in an increase in gross profit dollars. Gross margin increased 18 basis points in the first quarter of fiscal 2023, as compared to the same prior year period, primarily driven by higher volumes, the effective management of inflation and progress against our partnership growth management initiatives.

Operating Expense Trends

Total operating expenses increased 17.7% during the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022, driven by increased volumes, cost inflation, continued operational cost pressures from the operating environment and our planned investments to drive our transformation initiatives under our Recipe For Growth strategy. This quarter included transformation investments of $63.4 million, new-associate related productivity costs of $41.1 million and a sequential improvement in business recovery costs. We continued to invest in associate retention and best-in-class training, primarily for transportation and warehouse staff. Our Sysco Driver Academy is contributing to improved retention and productivity, and we expect to see this trend improve, as the percentage of drivers trained from within Sysco continues to grow. We believe the advancements we are making in our physical capabilities, and the investments we are making in improved training, will provide improved service levels to our customers and strengthen Sysco’s ability to profitably win market share in the coming quarters and years.

Pension Settlement Charge

As discussed in Note 15. “Subsequent Events,” the Sysco Corporation Retirement Plan (the Plan), entered into a commitment agreement to purchase a nonparticipating single premium group annuity contract that will transfer approximately $700 million of the Plan’s defined benefit pension obligations related to certain pension benefits. As a result of the transaction, we expect to recognize a one-time, non-cash pre-tax pension settlement charge of approximately $250 to $300 million in the second quarter of fiscal 2023. The actual charge will depend on finalization of the actuarial and other assumptions. This charge will be treated as a Certain Item. We will also compute a new amount of on-going expense for the Plan for the remainder of the fiscal year.

Mergers and Acquisitions

We continue to focus on mergers and acquisitions as a part of our growth strategy, where we plan to reinforce our existing businesses, while cultivating new channels, new segments and new capabilities. We have completed the following acquisitions thus far in fiscal 2023:

• In the first quarter of fiscal 2023, we acquired two small U.S.-based independent Italian food distributors as part of our plan to meaningfully scale our growing Italian platform.

The results of these acquisitions were not material to the consolidated results of the company for the first quarter of fiscal 2023.

Strategy

Our purpose is “Connecting the World to Share Food and Care for One Another.” Purpose driven companies are believed to perform better, and we believe our purpose will assist us to grow substantially faster than the foodservice distribution industry and deliver profitable growth through our “Recipe for Growth” transformation. This growth transformation is supported by strategic pillars that we believe will allow us to better serve our customers, including our digital, products and solutions, supply chain, customer teams, and future horizons strategies.

Our various business transformation initiatives remain on track, such as the personalization engine that is currently under construction and has proved to be beneficial to our pilot customers. Additionally, we are improving our merchandising and marketing solutions by developing improved strategies for specific cuisine segments, and we are developing a more nimble, accessible and productive supply chain that is better positioned to support customers in their business recovery. Our strategic initiatives to increase delivery frequency and enable omni-channel inventory fulfillment remain on track. From these actions as a part of our Recipe for Growth, the benefits of our developing capabilities is apparent in the new customers we are winning and in the progress we are making towards increasing market share. We expect that, as our Recipe for Growth matures, the impact on our top-line growth will continue to accelerate. We are committed to profitably growing 1.5 times the market by the end of fiscal 2024, the third year of our three-year strategic plan.

Results of Operations

The following table sets forth the components of our consolidated results of operations expressed as a percentage of sales for the periods indicated:

			13-Week Period Ended
			Oct. 1, 2022						Oct. 2, 2021
Sales			100.0		%				100.0		%
Cost of sales			81.8						81.9
Gross profit			18.2						18.1
Operating expenses			14.4						14.2
Operating income			3.8						3.8
Interest expense			0.6						0.8
Other (income) expense, net			0.1						—
Earnings before income taxes			3.1						3.1
Income taxes			0.7						0.8
Net earnings			2.4		%				2.3		%

The following table sets forth the change in the components of our consolidated results of operations expressed as a percentage increase or decrease over the comparable period in the prior year:

			13-Week Period Ended
			Oct. 1, 2022
Sales			16.2		%
Cost of sales			16.0
Gross profit			17.4
Operating expenses			17.7
Operating income			16.3
Interest expense			(3.2)
Other (income) expense, net (1)			(569.9)
Earnings before income taxes			17.4
Income taxes			0.5
Net earnings			23.2		%
Basic earnings per share			24.3		%
Diluted earnings per share			24.7
Average shares outstanding			(1.0)
Diluted shares outstanding			(1.0)

(1)			Other (income) expense, net was expense of $15.3 million and income of $3.3 million in the first quarter of fiscal 2023 and fiscal 2022, respectively.

The following tables represent our results by reportable segments:

			13-Week Period Ended Oct. 1, 2022
			U.S. Foodservice Operations						International Foodservice Operations						SYGMA						Other						Global Support Center						Consolidated Totals
			(In thousands)
Sales			$	13,602,482					$	3,283,735					$	1,933,457					$	307,156					$	—					$	19,126,830
Sales increase			17.2		%				13.4		%				13.5		%				20.8		%										16.2		%
Percentage of total			71.1		%				17.2		%				10.1		%				1.6		%										100.0		%
Operating income (loss)			$	903,828					$	87,208					$	5,471					$	11,538					$	(273,712)					$	734,333
Operating income (loss) increase			13.3		%				137.8		%				NM						78.7		%				32.5		%				16.3		%
Percentage of total segments			89.7		%				8.7		%				0.5		%				1.1		%										100.0		%
Operating income as a percentage of sales			6.6		%				2.7		%				0.3		%				3.8		%										3.8		%

			13-Week Period Ended Oct. 2, 2021
			U.S. Foodservice Operations						International Foodservice Operations						SYGMA						Other						Global Support Center						Consolidated Totals
			(In thousands)
Sales			$	11,602,963					$	2,895,247					$	1,704,033					$	254,303					$	—					$	16,456,546
Percentage of total			70.5		%				17.6		%				10.4		%				1.5		%										100.0		%
Operating income (loss)			$	797,523					$	36,676					$	(2,447)					$	6,456					$	(206,526)					$	631,682
Percentage of total segments			95.1		%				4.4		%				(0.3)		%				0.8		%										100.0		%
Operating income (loss) as a percentage of sales			6.9		%				1.3		%				(0.1)		%				2.5		%										3.8		%

Based on information in Note 14, “Business Segment Information,” in the Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q, in the first quarter of fiscal 2023, U.S. Foodservice Operations and International Foodservice Operations collectively represented approximately 88.3% of Sysco’s overall sales and 98.4% of total segment operating income, respectively. This illustrates that these segments represent a substantial majority of our total segment results when compared to other reportable segments.

Results of U.S. Foodservice Operations

The following tables set forth a summary of the components of operating income expressed as a percentage increase or decrease over the comparable period in the prior year:

			13-Week Period Ended Oct. 1, 2022						13-Week Period Ended Oct. 2, 2021						Change in Dollars						% Change
			(Dollars in thousands)
Sales			$	13,602,482					$	11,602,963					$	1,999,519					17.2		%
Gross profit			2,612,343						2,185,154						427,189						19.5
Operating expenses			1,708,515						1,387,631						320,884						23.1
Operating income			$	903,828					$	797,523					$	106,305					13.3		%
Gross profit			$	2,612,343					$	2,185,154					$	427,189					19.5		%
Adjusted operating expenses (Non-GAAP)			1,698,570						1,389,394						309,176						22.3
Adjusted operating income (Non-GAAP)			$	913,773					$	795,760					$	118,013					14.8		%

Sales

The following table sets forth the percentage and dollar value increase or decrease in the major factors impacting sales as compared to the corresponding prior year period in order to demonstrate the cause and magnitude of change:

			Increase (Decrease)
			13-Week Period
			(Dollars in millions)
Cause of change			Percentage						Dollars
Case volume (1)			6.2		%				$	714.1
Inflation			9.8						1,137.1
Other (2)			1.2						148.3
Total change in sales			17.2		%				$	1,999.5

(1)			Case volumes increased 7.3% compared to the first quarter of fiscal 2022. This volume increase resulted in a 6.2% increase in the dollar value of sales compared to the first quarter of fiscal 2022.
(2)			Case volume reflects our broadline and specialty businesses, with the exception of our specialty meats business, which measures its volume in pounds. Any impact in volumes from these specialty meats operations is included within “Other.”

The primary drivers of the sales increase in the first quarter of fiscal 2023 were inflation, along with an improvement in case volume in our U.S. Foodservice Operations, which was largely the result of the impact of our Recipe for Growth initiatives. Case volumes from our U.S. Foodservice Operations increased 7.3% in the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022. This included a 5.4% increase in local customer case volume in the first quarter of fiscal 2023.

Operating Income

The increase in operating income for the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022, was driven by gross profit dollar growth and partially offset by an increase in operating expenses.

Gross profit dollar growth in the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022, was driven primarily by the improvement in local cases stemming from: (1) the impact of our Recipe for Growth initiatives, (2) management of higher inflation and (3) optimization of our business processes and performance. The estimated change in product costs, an internal measure of inflation or deflation, for the first quarter of fiscal 2023 for our U.S. Broadline operations was 12.0%. For the first quarter of fiscal 2023, this change in product costs was primarily driven by inflation in the dairy and frozen categories. Gross margin, which is gross profit as a percentage of sales, was 19.2% in the first quarter of fiscal 2023 for our U.S. Foodservice Operations, which was an increase of 37 basis points compared to gross margin of 18.8% in the first quarter of fiscal 2022.

The increase in operating expenses for the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022, was primarily driven by variable costs associated with increased volumes and costs for employee training and retention designed to improve productivity.

Results of International Foodservice Operations

The following table sets forth a summary of the components of operating income and adjusted operating income expressed as a percentage increase or decrease over the comparable period in the prior year:

			13-Week Period Ended Oct. 1, 2022						13-Week Period Ended Oct. 2, 2021						Change in Dollars						% Change
			(Dollars in thousands)
Sales			$	3,283,735					$	2,895,247					$	388,488					13.4		%
Gross profit			649,265						589,134						60,131						10.2
Operating expenses			562,057						552,458						9,599						1.7
Operating income			$	87,208					$	36,676					$	50,532					137.8		%
Gross profit			$	649,265					$	589,134					$	60,131					10.2		%
Adjusted operating expenses (Non-GAAP)			542,136						525,017						17,119						3.3
Adjusted operating income (Non-GAAP)			$	107,129					$	64,117					$	43,012					67.1		%
Sales on a constant currency basis (Non-GAAP)			$	3,599,186					$	2,895,247					$	703,939					24.3		%
Gross profit on a constant currency basis (Non-GAAP)			721,025						589,134						131,891						22.4
Adjusted operating expenses on a constant currency basis (Non-GAAP)			606,843						525,017						81,826						15.6
Adjusted operating income (Non-GAAP)			$	114,182					$	64,117					$	50,065					78.1		%

Sales

The following tables set forth the percentage and dollar value increase or decrease in the major components impacting sales as compared to the corresponding prior year period in order to demonstrate the cause and magnitude of change.

			Increase (Decrease)
			13-Week Period
			(Dollars in millions)
Cause of change			Percentage						Dollars
Inflation			14.5		%				$	418.5
Foreign currency			(10.9)						(315.5)
Other (1)			9.8						285.5
Total change in sales			13.4		%				$	388.5

(1)			The impact of volumes as a component of sales growth from international operations are included within “Other.” Volume in our foreign operations includes volume metrics that differ from country to country and cannot be aggregated on a consistent, comparable basis.

Sales for the first quarter of fiscal 2023 were higher, as compared to the first quarter of fiscal 2022, primarily due to inflation along with an improvement in volume, some of which was attributable to our Recipe for Growth initiatives. Partially offsetting these increases was the negative impact of foreign currency translation.

Operating Income

The increase in operating income for the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022, was due to the continuing increase in sales volumes, along with specific efforts to optimize our gross profit while addressing our increased operating expenses.

The increase in gross profit dollars in the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022, was attributable to the increase in sales volume and the management of inflation, along with specific efforts to optimize our gross profit dollars.

The increase in operating expenses for the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022, was primarily due to increased volume.

Results of SYGMA and Other Segment

For SYGMA, sales were 13.5% higher in the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022, primarily from an increase in case volumes driven by the success of national and regional quick service restaurants and inflation. Operating income increased by $7.9 million in the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022, primarily due to the increase in case volumes and fee increases to customers.

For the operations that are grouped within Other, operating income increased $5.1 million in the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022, primarily due to the recovery of our hospitality business, Guest Worldwide. Volume for this business has improved, as hospitality occupancy rates have grown from prior year levels.

Global Support Center Expenses

Our Global Support Center generally includes all expenses of the corporate office and Sysco’s shared service operations. These expenses in the first quarter of fiscal 2023 increased $59.5 million, or 28.8%, as compared to the first quarter of fiscal 2022, primarily due to investments for our Recipe for Growth strategy, higher associate-related expenses, partially from centralization of certain functions, and an increase in self-insurance reserves.

Included in Global Support Center expenses are Certain Items that totaled $6.1 million in the first quarter of fiscal 2023, as compared to $27.7 million in the first quarter of fiscal 2022. Certain Items impacting the first quarter of fiscal 2023 were primarily expenses associated with our business technology transformation initiatives. Certain Items impacting the first quarter of fiscal 2022 were primarily expenses associated with our business technology transformation initiatives and expenses associated with acquisitions.

Interest Expense

Interest expense decreased $4.1 million for the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022, primarily attributable to lower debt levels.

Other income and expense

Other (income) expense, net was expense of $15.3 million and income of $3.3 million in the first quarter of fiscal 2023 and fiscal 2022, respectively. The expense in the first quarter of fiscal 2023 was primarily attributable to expenses from our U.S. Sysco Corporation Retirement Plan due to increased interest rates and lower plan asset values as compared to fiscal 2022.

Net Earnings

Net earnings increased 23.2% in the first quarter of fiscal 2023, as compared to the first quarter of fiscal 2022, due primarily to the items noted above for operating income and interest expense, as well as items impacting our income taxes that are discussed in Note 12, “Income Taxes,” in the Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q. Adjusted net earnings, excluding Certain Items, increased 14.6% in the first quarter of fiscal 2023, primarily due to an increase in sales volume, partially offset by an unfavorable tax expense compared to the prior year.

Earnings Per Share

Basic earnings per share in the first quarter of fiscal 2023 were $0.92, a 24.3% increase from the comparable prior year amount of $0.74 per share. Diluted earnings per share in the first quarter of fiscal 2023 were $0.91, a 24.7% increase from the comparable prior year period amount of $0.73 per share. Adjusted diluted earnings per share, excluding Certain Items, in the first quarter of fiscal 2023 were $0.97, a 16.9% increase from the comparable prior year amount of $0.83 per share.

Non-GAAP Reconciliations

Our discussion of our results includes certain non-GAAP financial measures, such as EBITDA and adjusted EBITDA, that we believe provide important perspective with respect to underlying business trends. Other than free cash flow and EBITDA, any non-GAAP financial measures will be denoted as adjusted measures to remove the impact of: (1) restructuring and transformational project costs consisting of: (a) restructuring charges, (b) expenses associated with our various transformation initiatives and (c) facility closure and severance charges; (2) acquisition-related costs consisting of: (a) intangible amortization expense and (b) acquisition costs and due diligence costs related to our acquisitions; and (3) the reduction of bad debt expense previously recognized in fiscal 2020 due to the impact of the COVID-19 pandemic on the collectability of our pre-pandemic trade receivable balances. Our results for fiscal 2023 were also impacted by adjustments to a product return allowance related to COVID-related personal protection equipment inventory. Our results for fiscal 2022 were also impacted by an increase in reserves for uncertain tax positions.
The results of our foreign operations can be impacted due to changes in exchange rates applicable in converting local currencies to U.S. dollars. We measure our total Sysco and our International Foodservice Operations results on a constant currency basis. Constant currency operating results are calculated by translating current-period local currency operating results with the currency exchange rates used to translate the financial statements in the comparable prior-year period to determine what the current-period U.S. dollar operating results would have been if the currency exchange rate had not changed from the comparable prior-year period.
Management believes that adjusting its operating expenses, operating income, net earnings and diluted earnings per share to remove these Certain Items and presenting its International Foodservice Operations results on a constant currency basis, provides an important perspective with respect to our underlying business trends and results and provides meaningful supplemental information to both management and investors that (1) is indicative of the performance of the company’s underlying operations and (2) facilitates comparisons on a year-over-year basis.
Sysco has a history of growth through acquisitions and excludes from its non-GAAP financial measures the impact of acquisition-related intangible amortization, acquisition costs and due-diligence costs for those acquisitions. We believe this approach significantly enhances the comparability of Sysco’s results for fiscal 2023 and fiscal 2022.
Set forth below is a reconciliation of sales, operating expenses, operating income, net earnings and diluted earnings per share to adjusted results for these measures for the periods presented. Individual components of diluted earnings per share may not add up to the total presented due to rounding. Adjusted diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.

			13-Week Period Ended Oct. 1, 2022						13-Week Period Ended Oct. 2, 2021						Change in Dollars						% Change
Sales (GAAP)			$	19,126,830					$	16,456,546					$	2,670,284					16.2		%
Impact of currency fluctuations (1)			319,162						—						319,162						2.0
Comparable sales using a constant currency basis (Non-GAAP)			$	19,445,992					$	16,456,546					$	2,989,446					18.2		%
Cost of sales (GAAP)			$	15,637,975					$	13,484,838					$	2,153,137					16.0		%
Impact of inventory valuation adjustment (2)			2,571						—						2,571						—
Cost of sales adjusted for Certain Items (Non-GAAP)			$	15,640,546					$	13,484,838					$	2,155,708					16.0		%
Gross profit (GAAP)			$	3,488,855					$	2,971,708					$	517,147					17.4		%
Impact of inventory valuation adjustment (2)			(2,571)						—						(2,571)						(0.1)
Comparable gross profit adjusted for Certain Items (Non-GAAP)			3,486,284						2,971,708						514,576						17.3
Impact of currency fluctuations (1)			73,035						—						73,035						2.5
Comparable gross profit adjusted for Certain Items using a constant currency basis (Non-GAAP)			$	3,559,319					$	2,971,708					$	587,611					19.8		%
Gross margin (GAAP)			18.24		%				18.06		%										18 bps
Impact of inventory valuation adjustment (2)			(0.01)		%				—		%										-1 bps
Comparable gross margin adjusted for Certain Items (Non-GAAP)			18.23		%				18.06		%										17 bps
Impact of currency fluctuations (1)			0.07						—												7 bps
Comparable gross margin adjusted for Certain Items using a constant currency basis (Non-GAAP)			18.30		%				18.06		%										24 bps
Operating expenses (GAAP)			$	2,754,522					$	2,340,026					$	414,496					17.7		%
Impact of restructuring and transformational project costs (3)			(11,645)						(24,511)						12,866						52.5
Impact of acquisition-related costs (4)			(29,454)						(35,926)						6,472						18.0
Impact of bad debt reserve adjustments (5)			2,592						7,061						(4,469)						(63.3)
Operating expenses adjusted for Certain Items (Non-GAAP)			2,716,015						2,286,650						429,365						18.8
Impact of currency fluctuations (1)			70,695						—						70,695						3.1
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)			$	2,786,710					$	2,286,650					$	500,060					21.9		%
Operating expense as a percentage of sales (GAAP)			14.40		%				14.22		%										18 bps
Impact of certain item adjustments			(0.20)		%				(0.32)		%										12 bps
Adjusted operating expense as a percentage of sales (Non-GAAP)			14.20		%				13.90		%										30 bps
Operating income (GAAP)			$	734,333					$	631,682					$	102,651					16.3		%
Impact of inventory valuation adjustment (2)			(2,571)						—						(2,571)						NM
Impact of restructuring and transformational project costs (3)			11,645						24,511						(12,866)						(52.5)
Impact of acquisition-related costs (4)			29,454						35,926						(6,472)						(18.0)
Impact of bad debt reserve adjustments (5)			(2,592)						(7,061)						4,469						63.3
Operating income adjusted for Certain Items (Non-GAAP)			770,269						685,058						85,211						12.4
Impact of currency fluctuations (1)			2,340						—						2,340						0.4
Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP)			$	772,609					$	685,058					$	87,551					12.8		%
Operating margin (GAAP)			3.84		%				3.84		%										0 bps

			13-Week Period Ended Oct. 1, 2022						13-Week Period Ended Oct. 2, 2021						Change in Dollars						% Change
Operating margin adjusted for Certain Items (Non-GAAP)			4.03		%				4.16		%										-13 bps
Operating margin adjusted for Certain Items using a constant currency basis (Non-GAAP)			3.97		%				4.16		%										-19 bps
Net earnings (GAAP)			$	465,568					$	378,013					$	87,555					23.2		%
Impact of inventory valuation adjustment (2)			(2,571)						—						(2,571)						NM
Impact of restructuring and transformational project costs (3)			11,645						24,511						(12,866)						(52.5)
Impact of acquisition-related costs (4)			29,454						35,926						(6,472)						(18.0)
Impact of bad debt reserve adjustments (5)			(2,592)						(7,061)						4,469						63.3
Tax impact of inventory valuation adjustment (6)			637						—						637						NM
Tax impact of restructuring and transformational project costs (6)			(2,884)						(6,186)						3,302						53.4
Tax impact of acquisition-related costs (6)			(7,295)						(9,066)						1,771						19.5
Tax impact of bad debt reserves adjustments (6)			642						1,782						(1,140)						(64.0)
Impact of adjustments to uncertain tax positions			—						12,000						(12,000)						NM
Net earnings adjusted for Certain Items (Non-GAAP)			$	492,604					$	429,919					$	62,685					14.6		%
Diluted earnings per share (GAAP)			$	0.91					$	0.73					$	0.18					24.7		%
Impact of inventory valuation adjustment (2)			(0.01)						—						(0.01)						NM
Impact of restructuring and transformational project costs (3)			0.02						0.05						(0.03)						(60.0)
Impact of acquisition-related costs (4)			0.06						0.07						(0.01)						(14.3)
Impact of bad debt reserve adjustments (5)			(0.01)						(0.01)						—						—
Tax impact of restructuring and transformational project costs (6)			(0.01)						(0.01)						—						—
Tax impact of acquisition-related costs (6)			(0.01)						(0.02)						0.01						50.0
Impact of adjustments to uncertain tax positions			—						0.02						(0.02)						NM
Diluted earnings per share adjusted for Certain Items (Non-GAAP) (7)			$	0.97					$	0.83					$	0.14					16.9		%

(1)			Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on the current year results.
(2)			Fiscal 2023 represents an adjustment to a product return allowance, related to COVID-related personal protection equipment inventory.
(3)			Fiscal 2023 includes $4 million related to restructuring, severance, and facility closure charges and $8 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2022 includes $16 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy and $8 million related to restructuring charges.
(4)			Fiscal 2023 includes $26 million of intangible amortization expense and $4 million in acquisition and due diligence costs. Fiscal 2022 includes $22 million of intangible amortization expense and $14 million in acquisition and due diligence costs, which are primarily included in Global Support Center expenses.
(5)			Fiscal 2023 and fiscal 2022 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(6)			The tax impact of adjustments for Certain Items are calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction where the Certain Item was incurred.
(7)			Individual components of diluted earnings per share may not add up to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.
			NM represents that the percentage change is not meaningful.

			13-Week Period Ended Oct. 1, 2022						13-Week Period Ended Oct. 2, 2021						Change in Dollars						%/bps Change
U.S. FOODSERVICE OPERATIONS
Operating expenses (GAAP)			$	1,708,515					$	1,387,631					$	320,884					23.1		%
Impact of restructuring and transformational project costs			48						(3)						51						NM
Impact of acquisition-related costs (1)			(12,585)						(4,654)						(7,931)						NM
Impact of bad debt reserve adjustments (2)			2,592						6,420						(3,828)						(59.6)
Operating expenses adjusted for Certain Items (Non-GAAP)			$	1,698,570					$	1,389,394					$	309,176					22.3		%
Operating income (GAAP)			$	903,828					$	797,523					$	106,305					13.3		%
Impact of restructuring and transformational project costs			(48)						3						(51)						NM
Impact of acquisition-related costs (1)			12,585						4,654						7,931						NM
Impact of bad debt reserve adjustments (2)			(2,592)						(6,420)						3,828						59.6
Operating income adjusted for Certain Items (Non-GAAP)			$	913,773					$	795,760					$	118,013					14.8		%
INTERNATIONAL FOODSERVICE OPERATIONS
Sales (GAAP)			$	3,283,735					$	2,895,247					$	388,488					13.4		%
Impact of currency fluctuations (3)			315,451						—						315,451						10.9
Comparable sales using a constant currency basis (Non-GAAP)			$	3,599,186					$	2,895,247					$	703,939					24.3		%
Gross profit (GAAP)			$	649,265					$	589,134					$	60,131					10.2		%
Impact of currency fluctuations (3)			71,760						—						71,760						12.2
Comparable gross profit using a constant currency basis (Non-GAAP)			$	721,025					$	589,134					$	131,891					22.4		%
Gross margin (GAAP)			19.77		%				20.35		%										-58 bps
Impact of currency fluctuations (3)			0.26						—												26 bps
Comparable gross margin using a constant currency basis (Non-GAAP)			20.03		%				20.35		%										-32 bps
Operating expenses (GAAP)			$	562,057					$	552,458					$	9,599					1.7		%
Impact of restructuring and transformational project costs (4)			(3,907)						(9,426)						5,519						58.6
Impact of acquisition-related costs (5)			(16,014)						(18,656)						2,642						14.2
Impact of bad debt reserve adjustments (2)			—						641						(641)						NM
Operating expenses adjusted for Certain Items (Non-GAAP)			542,136						525,017						17,119						3.3
Impact of currency fluctuations (3)			64,707						—						64,707						12.3
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)			$	606,843					$	525,017					$	81,826					15.6		%
Operating income (GAAP)			$	87,208					$	36,676					$	50,532					NM
Impact of restructuring and transformational project costs (4)			3,907						9,426						(5,519)						(58.6)
Impact of acquisition-related costs (5)			16,014						18,656						(2,642)						(14.2)
Impact of bad debt reserve adjustments (2)			—						(641)						641						NM
Operating income adjusted for Certain Items (Non-GAAP)			107,129						64,117						43,012						67.1
Impact of currency fluctuations (3)			7,053						—						7,053						11.0
Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP)			$	114,182					$	64,117					$	50,065					78.1		%
SYGMA
Operating expenses (GAAP)			$	148,422					$	140,604					$	7,818					5.6		%
Operating (loss) income (GAAP)			5,471						(2,447)						7,918						NM
OTHER
Operating expenses (GAAP)			$	69,300					$	52,565					$	16,735					31.8		%
Operating income (GAAP)			11,538						6,456						5,082						78.7

			13-Week Period Ended Oct. 1, 2022						13-Week Period Ended Oct. 2, 2021						Change in Dollars						%/bps Change
GLOBAL SUPPORT CENTER
Gross (loss) profit (GAAP)			$	(7,484)					$	242					$	(7,726)					NM
Impact of inventory valuation adjustment (6)			(2,571)						—						(2,571)						NM
Comparable gross profit (loss) adjusted for Certain Items (Non-GAAP)			$	(10,055)					$	242					$	(10,297)					NM
Operating expenses (GAAP)			$	266,228					$	206,768					$	59,460					28.8		%
Impact of restructuring and transformational project costs (7)			(7,786)						(15,082)						7,296						48.4
Impact of acquisition-related costs (8)			(855)						(12,616)						11,761						93.2
Operating expenses adjusted for Certain Items (Non-GAAP)			$	257,587					$	179,070					$	78,517					43.8		%
Operating loss (GAAP)			$	(273,712)					$	(206,526)					$	(67,186)					(32.5)		%
Impact of inventory valuation adjustment (6)			(2,571)						—						(2,571)						NM
Impact of restructuring and transformational project costs (7)			7,786						15,082						(7,296)						(48.4)
Impact of acquisition-related costs (8)			855						12,616						(11,761)						(93.2)
Operating loss adjusted for Certain Items (Non-GAAP)			$	(267,642)					$	(178,828)					$	(88,814)					(49.7)		%

(1)			Fiscal 2023 and fiscal 2022 include intangible amortization expense and acquisition costs.
(2)			Fiscal 2023 and fiscal 2022 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(3)			Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on current year results.
(4)			Includes restructuring and facility closure costs primarily in Europe.
(5)			Represents intangible amortization expense.
(6)			Fiscal 2023 represents an adjustment to a product return allowance, related to COVID-related personal protection equipment inventory.
(7)			Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy.
(8)			Represents due diligence costs.
			NM represents that the percentage change is not meaningful.

EBITDA and Adjusted EBITDA

EBITDA and adjusted EBITDA should not be used as a substitute for the most comparable GAAP measure in assessing Sysco’s overall financial performance for the periods presented. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Performance Indicators” contained in our fiscal 2022 Form 10-K for discussions regarding this non-GAAP performance metric. Set forth below is a reconciliation of actual net earnings to EBITDA and to adjusted EBITDA results for the periods presented (dollars in thousands):

			13-Week Period Ended Oct. 1, 2022						13-Week Period Ended Oct. 2, 2021						Change in Dollars						% Change
Net earnings (GAAP)			$	465,568					$	378,013					$	87,555					23.2		%
Interest (GAAP)			124,150						128,214						(4,064)						(3.2)
Income taxes (GAAP)			129,334						128,707						627						0.5
Depreciation and amortization (GAAP)			188,924						186,466						2,458						1.3
EBITDA (Non-GAAP)			$	907,976					$	821,400					$	86,576					10.5		%
Certain Item adjustments:
Impact of inventory valuation adjustment (1)			$	(2,571)					$	—					$	(2,571)					NM
Impact of restructuring and transformational project costs (2)			10,509						24,247						(13,738)						(56.7)
Impact of acquisition-related costs (3)			3,546						14,221						(10,675)						(75.1)
Impact of bad debt reserve adjustments (4)			(2,592)						(7,061)						4,469						63.3
EBITDA adjusted for Certain Items (Non-GAAP) (5)			$	916,868					$	852,807					$	64,061					7.5		%

(1)			Fiscal 2023 represents an adjustment to a product return allowance, related to COVID-related personal protection equipment inventory.
(2)			Fiscal 2023 and fiscal 2022 include charges related to restructuring, severance, and facility closures, as well as various transformation initiative costs, primarily consisting of changes to our business technology strategy, excluding charges related to accelerated depreciation.
(3)			Fiscal 2023 and fiscal 2022 include acquisition and due diligence costs.
(4)			Fiscal 2023 and fiscal 2022 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(5)			In arriving at adjusted EBITDA, Sysco does not adjust out interest income of $3 million and $2 million or non-cash stock compensation expense of $27 million and $29 million in fiscal 2023 and fiscal 2022, respectively.
			NM represents that the percentage change is not meaningful.

Liquidity and Capital Resources

Highlights

As of October 1, 2022, we had $437.7 million in cash and cash equivalents. We produced positive free cash flow in a period of higher working capital investments, capital expenditures and investments towards our Recipe for Growth strategy. In the table that follows, free cash flow for each period presented is reconciled to net cash provided by operating activities and comparisons of the significant cash flows from the first 13 weeks of fiscal 2023 to the first 13 weeks of fiscal 2022 are provided.

On September 2, 2022, we upsized our commercial paper program to $3.0 billion. The commercial paper program allows the company to issue short-term, senior unsecured notes. The notes are pari passu with the company’s other senior unsecured debt, including its senior notes and revolving credit facility. We intend to use any proceeds from the commercial paper program for general corporate purposes.

			13-Week Period Ended Oct. 1, 2022						13-Week Period Ended Oct. 2, 2021
Source of cash (use of cash)			(In thousands)
Net cash provided by operating activities (GAAP)			$	158,606					$	110,812
Additions to plant and equipment			(167,260)						(85,019)
Proceeds from sales of plant and equipment			22,448						5,627
Free Cash Flow (Non-GAAP) (1)			$	13,794					$	31,420
Acquisition of businesses, net of cash acquired			$	(32,651)					$	(714,010)
Debt borrowings (repayments), net			137,959						(10,048)
Stock repurchases			(267,727)						—
Dividends paid			(249,294)						(240,561)

(1)			Free cash flow should not be used as a substitute for the most comparable GAAP measure in assessing the company’s liquidity for the periods presented. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Performance Indicators” contained in our fiscal 2022 Form 10-K for discussions regarding this non-GAAP performance metric.

Sources and Uses of Cash

Sysco generates cash in the U.S and internationally. As of October 1, 2022, we had $437.7 million in cash and cash equivalents, approximately 85% of which was held by our international subsidiaries. Sysco’s strategic objectives are funded primarily by cash from operations and, to a lesser extent, external borrowings. Traditionally, our operations have produced significant cash flow and, due to our strong financial position, we believe that we will continue to be able to effectively access capital markets, as needed. Cash is generally allocated to working capital requirements, investments compatible with our overall growth strategy (organic and inorganic), debt management, and shareholder return. Remaining cash balances are invested in high-quality, short-term instruments.

We believe our cash flow from operations, the availability of liquidity under our commercial paper program and our revolving credit facility, and our ability to access capital from financial markets will be sufficient to meet our anticipated cash requirements for more than the next twelve months, while maintaining sufficient liquidity for normal operating purposes.

Cash Flows

Operating Activities

We generated $158.6 million in cash flows from operations in the first 13 weeks of fiscal 2023, compared to cash flows from operations of $110.8 million in the first 13 weeks of fiscal 2022. In the first 13 weeks of fiscal 2023, these amounts included year-over-year unfavorable comparisons on working capital due to higher accounts receivables and a decrease in accounts payable. Changes in working capital had a negative impact of $127.7 million on cash flows from operations period-over-period.

Included in the change in accrued expenses were positive comparisons, primarily from accrued interest, earnout liabilities, and self-insurance in the first 13 weeks of fiscal 2023 in comparison to the first 13 weeks of fiscal 2022.

Income taxes positively impacted cash flows from operations, as estimated payments made in the first quarter of fiscal 2023 were lower than in fiscal 2022 due to overpayments in the prior year.

Investing Activities

Our capital expenditures in the first 13 weeks of fiscal 2023 consisted primarily of investments in buildings and building improvements, technology equipment, warehouse equipment, and fleet. Our capital expenditures in the first 13 weeks of fiscal 2023 were $82.2 million higher than in the first 13 weeks of fiscal 2022, as we made investments to advance our Recipe for Growth strategy.

During the first 13 weeks of fiscal 2023, we paid $32.7 million, net of cash acquired, for acquisitions compared to $714.0 million in acquisitions made in the first 13 weeks of fiscal 2022.

Financing Activities

Equity Transactions

Proceeds from exercises of share-based compensation awards were $24.6 million in the first 13 weeks of fiscal 2023, as compared to $17.9 million in the first 13 weeks of fiscal 2022. The level of option exercises, and thus proceeds, will vary from period to period and is largely dependent on movements in our stock price and the time remaining before option grants expire.

In May 2021, our Board of Directors approved a share repurchase program to authorize the repurchase of up to $5.0 billion of the company’s common stock, which will remain available until fully utilized. We commenced our share repurchase program during the second quarter of fiscal 2022. We repurchased 3.1 million shares for $267.7 million during the first 13 weeks of fiscal 2023. As of October 1, 2022, we had a remaining authorization of approximately $4.2 billion.

Dividends paid in the first quarter of fiscal 2023 were $249.3 million, or $0.49 per share, as compared to $240.6 million, or $0.47 per share, in the first quarter of fiscal 2022. In August 2022, we declared our regular quarterly dividend for the first quarter of fiscal 2023 of $0.49 per share, which was paid in October 2022.

Debt Activity and Borrowing Availability

Our debt activity, including issuances and repayments, if any, and our borrowing availability are described in Note 8, “Debt,” in the Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q. Our outstanding borrowings at October 1, 2022 are disclosed within that note.

Guarantor Summarized Financial Information

On January 19, 2011, the wholly owned U.S. Broadline subsidiaries of Sysco Corporation, which distribute a full line of food products and a wide variety of non-food products, 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. and borrowings under the company’s now $3.0 billion long-term revolving credit facility have also been guaranteed by these subsidiaries. As of October 1, 2022, Sysco had a total of $10.0 billion in senior notes, debentures and borrowings under the long-term revolving credit facility that were guaranteed by these subsidiary guarantors. Our remaining consolidated subsidiaries (non-guarantor subsidiaries) are not obligated under the senior notes indenture, debentures indenture or our long-term revolving credit facility. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” contained in our fiscal 2022 Form 10-K for additional information regarding the terms of the guarantees.

Basis of Preparation of the Summarized Financial Information

The summarized financial information of Sysco Corporation (issuer), and certain wholly owned U.S. Broadline subsidiaries (guarantors) (together, the obligor group) is presented on a combined basis with intercompany balances and transactions between entities in the obligor group eliminated. Investments in and equity in the earnings of our non-guarantor

subsidiaries, which are not members of the obligor group, have been excluded from the summarized financial information. The obligor group’s amounts due to, amounts due from and transactions with non-guarantor subsidiaries have been presented in separate line items, if they are material to the obligor financials. The following tables include summarized financial information of the obligor group for the periods presented.

Combined Parent and Guarantor Subsidiaries Summarized Balance Sheet						Oct. 1, 2022						Jul. 2, 2022
						(In thousands)
ASSETS
Receivables due from non-obligor subsidiaries						$	218,392					$	264,378
Current assets						5,714,872						5,658,972
Total current assets						$	5,933,264					$	5,923,350
Notes receivable from non-obligor subsidiaries						$	91,138					$	91,067
Other noncurrent assets						3,969,771						3,910,951
Total noncurrent assets						$	4,060,909					$	4,002,018
LIABILITIES
Payables due to non-obligor subsidiaries						$	60,283					$	62,441
Other current liabilities						2,826,594						2,765,756
Total current liabilities						$	2,886,877					$	2,828,197
Notes payable to non-obligor subsidiaries						$	272,099					$	315,753
Long-term debt						9,718,645						9,501,842
Other noncurrent liabilities						1,206,767						1,190,177
Total noncurrent liabilities						$	11,197,511					$	11,007,772

Combined Parent and Guarantor Subsidiaries Summarized Results of Operations						13-Week Period Ended Oct. 1, 2022
			(In thousands)
Sales						$	12,200,611
Gross profit						2,216,571
Operating income						630,507
Interest expense from non-obligor subsidiaries						5,588
Net earnings						375,655

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are those that are most important to the portrayal of our financial position and results of operations. These policies require our most subjective or complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. We have reviewed with the Audit Committee of the Board of Directors the development and selection of the critical accounting policies and estimates and this related disclosure. Our most critical accounting policies and estimates pertain to goodwill and intangible assets, income taxes, company-sponsored pension plans, allowance for doubtful accounts and inventory valuation, which are described in Item 7 of our fiscal 2022 Form 10-K.

Forward-Looking Statements

Certain statements made herein that look forward in time or express management’s expectations or beliefs with respect to the occurrence of future events are forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” “projected,” “continues,” “continuously,” variations of such terms, and similar terms and phrases denoting anticipated or expected occurrences or results. Examples of forward-looking statements include, but are not limited to, statements about:

• the effect, impact, potential duration or other implications of the COVID-19 pandemic and any expectations we may have with respect thereto, including our ability to withstand and recover from the crisis;

• our expectations of an improving market over the course of fiscal 2023;

• our expectations regarding the ability of our supply chain and facilities to remain in place and operational;

• our plans regarding our transformation initiatives and the expected effects from such initiatives, including the Sysco Driver Academy;

• statements regarding uncollectible accounts, including that if collections continue to improve, additional reductions in bad debt expense could occur;

• our expectations that our Recipe for Growth strategy will allow us to better serve our customers and differentiate Sysco from our competition;

• our expectations regarding our fiscal 2023 sales and our rate of sales growth in fiscal 2023 and the three years of our long-range plan;

• our expectations regarding the impact of inflation on sales, gross margin rates and gross profit dollars;

• our expectations regarding gross margins in fiscal 2023;

• our plans regarding cost savings, including our target for cost savings through fiscal 2024 and the impact of costs savings on the company;

• our belief that our purpose will allow us to grow substantially faster than the foodservice distribution industry and deliver profitable growth through our Recipe for Growth transformation, and statements regarding our plans with respect to our strategic pillars that support this growth transformation;

• our expectations regarding the use and investment of remaining cash generated from operations;

• the expected long-term rate of return on plan assets of the U.S. Retirement Plan;

• the sufficiency of our available liquidity to sustain our operations for multiple years;

• estimates regarding the outcome of legal proceedings;

• the impact of seasonal trends on our free cash flow;

• estimates regarding our capital expenditures and the sources of financing for our capital expenditures;

• our expectations regarding the impact of potential acquisitions and sales of assets on our liquidity, borrowing capacity, leverage ratios and capital availability;

• our expectations regarding real sales growth in the U.S. foodservice market and trends in produce markets;

• our expectations regarding the calculation of adjusted return on invested capital, adjusted operating income, adjusted net earnings and adjusted diluted earnings per share;

• our expectations regarding the impact of future Certain Items on our projected future non-GAAP and GAAP results;

• our expectations regarding our effective tax rate in fiscal 2023;

• the sufficiency of our mechanisms for managing working capital and competitive pressures, and our beliefs regarding the impact of these mechanisms;

• our ability to meet future cash requirements, including the ability to access financial markets effectively, including issuances of debt securities, and maintain sufficient liquidity;

• our expectations regarding the payment of dividends, and the growth of our dividend, in the future;

• our expectations regarding future activity under our share repurchase program;

• future compliance with the covenants under our revolving credit facility;

• our ability to effectively access the commercial paper market and long-term capital markets;

• the expected maturity of $482.3 million of debt in the next 12 months;

• our intention to repay our long-term debt with cash on hand, cash flow from operations, issuances of commercial paper, issuances of senior notes, or a combination thereof.

These statements are based on management’s current expectations and estimates; actual results may differ materially due in part to the risk factors set forth below, those within Part II, Item 1A of this document and those discussed in Item 1A of our fiscal 2022 Form 10-K:

• the impact and effects of public health crises, pandemics and epidemics, such as the recent outbreak of COVID-19, and the adverse impact thereof on our business, financial condition and results of operations;

• the risk that if sales from our locally managed customers do not grow at the same rate as sales from multi-unit customers, our gross margins may decline;

• periods of significant or prolonged inflation or deflation and their impact on our product costs and profitability generally;

• the risk that we are unlikely to be able to predict inflation over the long term, and lower inflation is likely to produce lower gross profit;

• the risk that our efforts to modify truck routing, including our small truck initiative, in order to reduce outbound transportation costs may be unsuccessful;

• the risk that we may not be able to accelerate and/or identify additional administrative cost savings in order to compensate for any gross profit or supply chain cost leverage challenges;

• risks related to unfavorable conditions in the Americas and Europe and the impact on our results of operations and financial condition;

• the risks related to our efforts to implement our transformation initiatives and meet our other long-term strategic objectives, including the risk that these efforts may not provide the expected benefits in our anticipated time frame, if at all, and may prove costlier than expected;

• the impact of unexpected future changes to our business initiatives based on management’s subjective evaluation of our overall business needs;

• the risk that the actual costs of any business initiatives may be greater or less than currently expected;

• the risk that competition in our industry and the impact of GPOs may adversely impact our margins and our ability to retain customers and make it difficult for us to maintain our market share, growth rate and profitability;

• the risk that our relationships with long-term customers may be materially diminished or terminated;

• the risk that changes in consumer eating habits could materially and adversely affect our business, financial condition, or results of operations;

• the risk that changes in applicable tax laws or regulations and the resolution of tax disputes could negatively affect our financial results;

• the risk that we may not be able to fully compensate for increases in fuel costs, and forward purchase commitments intended to contain fuel costs could result in above market fuel costs;

• the risk of interruption of supplies and increase in product costs as a result of conditions beyond our control;

• the potential impact on our reputation and earnings of adverse publicity or lack of confidence in our products;

• risks related to unfavorable changes to the mix of locally managed customers versus corporate-managed customers;

• the risk that we may not realize anticipated benefits from our operating cost reduction efforts;

• difficulties in successfully expanding into international markets and complimentary lines of business;

• the potential impact of product liability claims;

• the risk that we fail to comply with requirements imposed by applicable law or government regulations;

• risks related to our ability to effectively finance and integrate acquired businesses;

• risks related to our access to borrowed funds in order to grow and any default by us under our indebtedness that could have a material adverse impact on cash flow and liquidity;

• our level of indebtedness and the terms of our indebtedness could adversely affect our business and liquidity position;

• the risk that the implementation of various initiatives, the timing and successful completion of acquisitions, construction schedules and the possibility that other cash requirements could result in delays or cancellations of capital spending;

• the risk that divestiture of one or more of our businesses may not provide the anticipated effects on our operations;

• the risk that Brexit may adversely impact our operations in the U.K., including those of the Brakes Group;

• the risk that future labor disruptions or disputes could disrupt the integration of Brake France and Davigel into Sysco France and our operations in France and the EU generally;

• the risk that factors beyond management’s control, including fluctuations in the stock market, as well as management’s future subjective evaluation of the company’s needs, would impact the timing of share repurchases;

• due to our reliance on technology, any technology disruption or delay in implementing new technology could have a material negative impact on our business;

• the risk that a cybersecurity incident and other technology disruptions could negatively impact our business and our relationships with customers;

• the risk that changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect interest expense related to outstanding debt;

• the potential requirement to pay material amounts under our multiemployer defined benefit pension plans;

• our funding requirements for our company-sponsored qualified pension plan may increase should financial markets experience future declines;

• labor issues, including the renegotiation of union contracts and shortage of qualified labor;

• capital expenditures may vary based on changes in business plans and other factors, including risks related to the implementation of various initiatives, the timing and successful completion of acquisitions, construction schedules and the possibility that other cash requirements could result in delays or cancellations of capital spending;

• the risk that the anti-takeover benefits provided by our preferred stock may not be viewed as beneficial to stockholders; and

• the risk that the exclusive forum provisions in our amended and restated bylaws could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

For a more detailed discussion of factors that could cause actual results to differ from those contained in the forward-looking statements, see the risk factors discussion contained in Item 1A of our fiscal 2022 Form 10-K and in Item 1A of Part II of this Form 10-Q.