Item 1. Financial Statements

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Item 1. Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share data)


	Dec. 30, 2023		Jul. 1, 2023
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	962,165	$	745,201
Accounts receivable, less allowances of $79,179 and $45,599	5,291,552		5,091,970
Inventories	4,722,499		4,480,812

Prepaid expenses and other current assets	327,569		284,566

Income tax receivable	5,815		5,815
Total current assets	11,309,600		10,608,364
Plant and equipment at cost, less accumulated depreciation	5,157,150		4,915,049
Other long-term assets
Goodwill	5,255,010		4,645,754
Intangibles, less amortization	1,174,151		859,530

Deferred income taxes	444,180		420,450
Operating lease right-of-use assets, net	824,390		731,766
Other assets	576,120		640,232
Total other long-term assets	8,273,851		7,297,732
Total assets	$	24,740,601	$	22,821,145

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities

Accounts payable	$	5,737,726	$	6,025,757
Accrued expenses	2,266,062		2,251,181
Accrued income taxes	46,772		101,894
Current operating lease liabilities	119,397		99,051
Current maturities of long-term debt	84,513		62,550
Total current liabilities	8,254,470		8,540,433
Long-term liabilities
Long-term debt	12,028,122		10,347,997
Deferred income taxes	303,878		302,904
Long-term operating lease liabilities	737,354		656,269
Other long-term liabilities	979,376		931,708
Total long-term liabilities	14,048,730		12,238,878

Noncontrolling interest	33,367		33,212
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	1,877,201		1,814,681
Retained earnings	11,724,251		11,310,664
Accumulated other comprehensive loss	(1,189,753)		(1,252,590)
Treasury stock at cost, 261,472,819 and 260,062,834 shares	(10,772,840)		(10,629,308)
Total shareholders’ equity	2,404,034		2,008,622
Total liabilities and shareholders’ equity	$	24,740,601	$	22,821,145

Note: The July 1, 2023 balance sheet has been derived from the audited financial statements at that date.

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)

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


	13-Week Period Ended				26-Week Period Ended
	Dec. 30, 2023		Dec. 31, 2022		Dec. 30, 2023		Dec. 31, 2022
Sales	$	19,287,942	$	18,593,953	$	38,908,396	$	37,720,783
Cost of sales	15,774,309		15,244,337		31,746,991		30,882,312
Gross profit	3,513,633		3,349,616		7,161,405		6,838,471
Operating expenses	2,813,590		2,708,793		5,657,780		5,460,847
Operating income	700,043		640,823		1,503,625		1,377,624
Interest expense	149,680		132,042		284,014		256,192
Other expense (income), net (1) (2)	5,245		330,305		11,885		348,054
Earnings before income taxes	545,118		178,476		1,207,726		773,378
Income taxes	129,876		37,260		289,092		166,594
Net earnings	$	415,242	$	141,216	$	918,634	$	606,784

Net earnings:
Basic earnings per share	$	0.82	$	0.28	$	1.82	$	1.20
Diluted earnings per share	0.82		0.28		1.81		1.19

Average shares outstanding	504,312,633		507,609,696		504,719,562		507,594,137
Diluted shares outstanding	505,929,342		510,145,794		506,499,390		510,264,473


(1)			Gains and losses related to the disposition of fixed assets have been recognized within operating expenses. Prior year amounts have been reclassified to conform to this presentation.
(2)			Sysco’s second quarter of fiscal 2023 included a charge of $315.4 million in other expense related to pension settlement charges. See Note 9, “Company-Sponsored Employee Benefit Plans.”

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In thousands)


	13-Week Period Ended				26-Week Period Ended
	Dec. 30, 2023		Dec. 31, 2022		Dec. 30, 2023		Dec. 31, 2022
Net earnings	$	415,242	$	141,216	$	918,634	$	606,784
Other comprehensive income (loss):
Foreign currency translation adjustment	163,084		241,814		54,890		9,632
Items presented net of tax:
Amortization of cash flow hedges	2,170		2,170		4,340		4,325
Change in net investment hedges	(16,741)		(33,749)		(16,741)		(10,240)
Change in cash flow hedges	(20,225)		203		6,923		(26,187)
Changes in excluded components of fair value hedge	158		—		138		—


Amortization of prior service cost	146		74		292		148
Amortization of actuarial loss	5,011		5,628		9,993		12,519

Pension settlement charge	—		236,591		—		236,591
Net actuarial (loss) gain arising in current year	—		(67,388)		503		(67,388)
Change in marketable securities	3,444		1,194		2,499		(2,134)
Total other comprehensive income	137,047		386,537		62,837		157,266
Comprehensive income	$	552,289	$	527,753	$	981,471	$	764,050

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY (Unaudited)

(In thousands, except for share data)

Quarter to Date


									Accumulated Other Comprehensive Loss
	Common Stock			Paid-in Capital		Retained Earnings					Treasury Stock
	Shares	Amount						Shares			Amounts		Totals
Balance as of September 30, 2023	765,174,900	$	765,175	$	1,838,986	$	11,560,924		$	(1,326,800)		260,971,761		$	(10,712,486)	$	2,125,799
Net earnings						415,242										415,242



Foreign currency translation adjustment									163,084							163,084
Amortization of cash flow hedges, net of tax									2,170							2,170
Change in cash flow hedges, net of tax									(20,225)							(20,225)
Changes in excluded components of fair value hedge, net of tax									158							158
Change in net investment hedges, net of tax									(16,741)							(16,741)
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax									5,157							5,157


Change in marketable securities, net of tax									3,444							3,444

Dividends declared ($0.50 per common share)						(251,915)										(251,915)
Treasury stock purchases												1,479,720		(99,973)		(99,973)

Share-based compensation awards				38,215								(978,662)		39,619		77,834
Balance as of December 30, 2023	765,174,900	$	765,175	$	1,877,201	$	11,724,251		$	(1,189,753)		261,472,819		$	(10,772,840)	$	2,404,034

									Accumulated Other Comprehensive Loss
	Common Stock			Paid-in Capital		Retained Earnings					Treasury Stock
	Shares	Amount						Shares			Amounts		Totals
Balance as of October 1, 2022	765,174,900	$	765,175	$	1,754,409	$	10,757,136		$	(1,711,325)		258,414,989		$	(10,450,054)	$	1,115,341
Net earnings						141,216										141,216
Foreign currency translation adjustment									241,814							241,814
Amortization of cash flow hedges, net of tax									2,170							2,170
Change in cash flow hedges, net of tax									203							203
Change in net investment hedges, net of tax									(33,749)							(33,749)
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax									5,702							5,702
Pension settlement charge, net of tax									236,591							236,591
Net actuarial loss arising in current year, net of tax									(67,388)							(67,388)
Change in marketable securities, net of tax									1,194							1,194
Dividends declared ($0.49 per common share)						(249,014)										(249,014)
Increase in ownership interest in subsidiaries				(2,077)												(2,077)

Share-based compensation awards				21,809								(568,017)		22,777		44,586
Balance as of December 31, 2022	765,174,900	$	765,175	$	1,774,141	$	10,649,338		$	(1,324,788)		257,846,972		$	(10,427,277)	$	1,436,589

See Notes to Consolidated Financial Statements

Year to Date


									Accumulated Other Comprehensive Loss
	Common Stock			Paid-in Capital		Retained Earnings					Treasury Stock
	Shares	Amount						Shares			Amounts		Totals
Balance as of July 1, 2023	765,174,900	$	765,175	$	1,814,681	$	11,310,664		$	(1,252,590)		260,062,834		$	(10,629,308)	$	2,008,622
Net earnings						918,634										918,634



Foreign currency translation adjustment									54,890							54,890
Amortization of cash flow hedges, net of tax									4,340							4,340
Change in cash flow hedges, net of tax									6,923							6,923
Change in net investment hedges, net of tax									(16,741)							(16,741)
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax									10,285							10,285

Net actuarial gain arising in current year, net of tax									503							503
Change in marketable securities, net of tax									2,499							2,499
Changes in excluded components of fair value hedge, net of tax									138							138
Dividends declared ($1.00 per common share)						(505,047)										(505,047)
Treasury stock purchases												2,862,667		(199,947)		(199,947)

Share-based compensation awards				62,520								(1,452,682)		56,415		118,935
Balance as of December 30, 2023	765,174,900	$	765,175	$	1,877,201	$	11,724,251		$	(1,189,753)		261,472,819		$	(10,772,840)	$	2,404,034

									Accumulated Other Comprehensive Loss
	Common Stock			Paid-in Capital		Retained Earnings					Treasury Stock
	Shares	Amount						Shares			Amounts		Totals
Balance as of July 2, 2022	765,174,900	$	765,175	$	1,766,305	$	10,539,722		$	(1,482,054)		256,531,543		$	(10,206,888)	$	1,382,260
Net earnings						606,784										606,784
Foreign currency translation adjustment									9,632							9,632
Amortization of cash flow hedges, net of tax									4,325							4,325
Change in cash flow hedges, net of tax									(26,187)							(26,187)
Change in net investment hedges, net of tax									(10,240)							(10,240)
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax									12,667							12,667
Pension settlement charge, net of tax									236,591							236,591
Net actuarial loss arising in current year, net of tax									(67,388)							(67,388)
Change in marketable securities, net of tax									(2,134)							(2,134)

Dividends declared ($0.98 per common share)						(497,168)										(497,168)
Treasury stock purchases												3,099,268		(267,727)		(267,727)
Increase in ownership interest in subsidiaries				(2,077)												(2,077)
Share-based compensation awards				9,913								(1,783,839)		47,338		57,251
Balance as of December 31, 2022	765,174,900	$	765,175	$	1,774,141	$	10,649,338		$	(1,324,788)		257,846,972		$	(10,427,277)	$	1,436,589

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED CASH FLOWS (Unaudited)

(In thousands)


	26-Week Period Ended
	Dec. 30, 2023		Dec. 31, 2022
Cash flows from operating activities:
Net earnings	$	918,634	$	606,784
Adjustments to reconcile net earnings to cash provided by operating activities:
Pension settlement charge	—		315,354
Share-based compensation expense	52,821		52,679
Depreciation and amortization	425,465		378,949
Operating lease asset amortization	59,127		55,884
Amortization of debt issuance and other debt-related costs	9,117		10,315

Deferred income taxes	(28,689)		(123,187)
Provision for losses on receivables	29,784		9,732


Other non-cash items	(3,782)		11,525
Additional changes in certain assets and liabilities, net of effect of businesses acquired:
Increase in receivables	(25,431)		(87,190)
Increase in inventories	(98,047)		(222,650)
Decrease (increase) in prepaid expenses and other current assets	3,362		(8,915)
Decrease in accounts payable	(404,411)		(390,124)
Increase (decrease) in accrued expenses	17,033		(62,779)
Decrease in operating lease liabilities	(64,112)		(57,234)
(Decrease) increase in accrued income taxes	(55,123)		3,108
Decrease in other assets	21,942		22,156
Decrease in other long-term liabilities	(1,793)		(10,941)

Net cash provided by operating activities	855,897		503,466
Cash flows from investing activities:
Additions to plant and equipment	(346,797)		(309,664)
Proceeds from sales of plant and equipment	18,347		25,493
Acquisition of businesses, net of cash acquired	(1,174,608)		(37,699)
Purchase of marketable securities	(1,878)		(14,019)
Proceeds from sales of marketable securities	—		11,641
Other investing activities	—		4,840

Net cash used for investing activities	(1,504,936)		(319,408)
Cash flows from financing activities:
Bank and commercial paper borrowings, net	500,000		155,000
Other debt borrowings including senior notes	1,132,475		140,024
Other debt repayments including senior notes	(187,720)		(57,270)


Debt issuance costs	(13,035)		—



Proceeds from stock option exercises	57,347		47,339

Stock repurchases	(199,947)		(267,727)
Dividends paid	(505,588)		(498,323)

Other financing activities	(5,775)		(46,517)
Net cash provided by (used for) financing activities	777,757		(527,474)
Effect of exchange rates on cash, cash equivalents and restricted cash	905		(2,314)
Net increase (decrease) in cash, cash equivalents and restricted cash	129,623		(345,730)
Cash, cash equivalents and restricted cash at beginning of period	966,033		931,376
Cash, cash equivalents and restricted cash at end of period	$	1,095,656	$	585,646
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	266,002	$	244,530
Income taxes, net of refunds	371,855		289,413

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

1. BASIS OF PRESENTATION

The consolidated financial statements have been prepared by the company, without an audit. 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, cash flows and changes in shareholders’ equity for all periods presented have been made.

These financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended July 1, 2023. Certain footnote disclosures included in annual financial statements prepared in accordance with generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to applicable rules and regulations for interim financial statements.

Supplemental Cash Flow Information

The following table sets forth our reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the amounts shown in the consolidated statement of cash flows:


	Dec. 30, 2023		Dec. 31, 2022
	(In thousands)
Cash and cash equivalents	$	962,165	$	500,340
Restricted cash (1)	133,491		85,306
Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows	$	1,095,656	$	585,646


(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.

The following table sets forth our non-cash investing and financing activities:


	Dec. 30, 2023		Dec. 31, 2022
	(In thousands)
Non-cash investing and financing activities:
Plant and equipment acquired through financing programs	$	158,454	$	52,360
Assets obtained in exchange for finance lease obligations	52,367		81,799

2. NEW ACCOUNTING STANDARDS

Recently Adopted Accounting Guidance

Liabilities – Supplier Financing Programs

In September 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2022-04, Liabilities—Supplier Finance Programs, Subtopic 405-50, that requires entities to disclose in the annual financial statements the key terms of the supplier finance program they use in connection with the purchase of goods and services, along with information about their obligations under such programs, including a roll forward of those obligations. Additionally, the guidance requires disclosure of the outstanding amount of the obligations as of the end of each interim period. The guidance does not affect the recognition, measurement, or financial statement presentation of supplier finance program obligations.

The guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2022, which is the first quarter of fiscal 2024 for Sysco, except for the roll forward requirement, which is effective annually for fiscal years beginning after December 15, 2023, which is fiscal year 2025 for Sysco. Early adoption is permitted. The guidance requires retrospective application to all periods in which a balance sheet is presented, except for the roll forward requirement, which will be applied prospectively.

Sysco completed its assessment of the disclosures required under ASU 2022-04 and adopted the standard, with the exception of the roll forward requirement, in the first quarter of fiscal 2024 on a retrospective basis. The company has agreements with third parties to provide supplier finance programs which facilitate participating suppliers’ ability to finance payment obligations from the company with designated third-party financial institutions. Participating suppliers may, at their sole discretion, make offers to finance one or more payment obligations of the company prior to their scheduled due dates at a discounted price to participating financial institutions. Obligations of the company that have been confirmed as valid require payment by Sysco upon the due date of the obligation.

The company’s outstanding payment obligations that suppliers financed to participating financial institutions, which are included in accounts payable on the consolidated balance sheets, are as follows:


	Dec. 30, 2023		Jul. 1, 2023		Dec. 31, 2022		Jul. 2, 2022
	(In thousands)
Financed payment obligations	$	83,528	$	99,606	$	81,018	$	90,267

Recent Accounting Guidance Not Yet Adopted

Segment Reporting

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosures of a reportable segment’s profit or loss and assets. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, which is fiscal 2025 for Sysco, and interim periods for our fiscal years beginning after December 15, 2024, which is the first quarter of fiscal 2026 for Sysco, and should be applied on a retrospective basis to all periods presented. Early adoption is permitted. We are currently evaluating the effect of adopting ASU 2023-07 on our disclosures.

Income Taxes

In December 2023, the FASB issued 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures to enhance income tax information primarily through changes in the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, which is fiscal 2026 for Sysco, on a prospective basis. Early adoption is permitted. We are currently evaluating the effect of adopting ASU 2023-09 on our disclosures.

3. REVENUE

We recognize revenues when our performance obligations are satisfied in an amount that reflects the consideration Sysco expects to be entitled to receive in exchange for those goods and services. Customer receivables, which are included in accounts receivable, less allowances in the consolidated balance sheet, were $5.0 billion and $4.7 billion as of December 30, 2023 and July 1, 2023, 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 December 30, 2023, our contract assets were not significant. We have no significant commissions paid that are directly attributable to obtaining a particular contract.

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


	13-Week Period Ended Dec. 30, 2023
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Canned and dry products	$	2,601,298	$	801,170	$	228,632	$	—	$	3,631,100
Fresh and frozen meats	2,574,453		503,387		504,102		—		3,581,942
Frozen fruits, vegetables, bakery and other	1,996,667		682,027		315,778		—		2,994,472
Dairy products	1,448,604		388,401		141,137		—		1,978,142
Poultry	1,340,095		285,312		261,300		—		1,886,707
Fresh produce	1,308,581		265,417		65,891		—		1,639,889
Paper and disposables	971,489		129,881		188,075		14,099		1,303,544
Seafood	507,958		110,121		44,056		—		662,135
Beverage products	335,748		164,368		139,137		21,330		660,583



Other (1)	409,550		266,374		25,607		247,897		949,428
Total Sales	$	13,494,443	$	3,596,458	$	1,913,715	$	283,326	$	19,287,942


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


	13-Week Period Ended Dec. 31, 2022
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Canned and dry products	$	2,502,665	$	700,622	$	236,726	$	—	$	3,440,013
Fresh and frozen meats	2,390,929		445,018		452,370		—		3,288,317
Frozen fruits, vegetables, bakery and other	1,851,344		596,100		338,379		—		2,785,823
Dairy products	1,498,039		358,639		160,753		—		2,017,431
Poultry	1,329,071		285,343		265,269		—		1,879,683

Fresh produce	1,385,083		257,641		66,099		—		1,708,823
Paper and disposables	976,231		134,507		210,691		13,484		1,334,913


Seafood	547,760		109,290		37,810		—		694,860
Beverage products	303,789		133,515		136,668		21,318		595,290



Other (1)	292,143		261,736		28,771		266,150		848,800
Total Sales	$	13,077,054	$	3,282,411	$	1,933,536	$	300,952	$	18,593,953


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


	26-Week Period Ended Dec. 30, 2023
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Canned and dry products	$	5,285,985	$	1,632,713	$	461,617	$	—	$	7,380,315
Fresh and frozen meats	5,143,634		1,023,128		984,691		—		7,151,453
Frozen fruits, vegetables, bakery and other	4,024,601		1,355,575		621,077		—		6,001,253
Dairy products	2,902,553		802,572		282,568		—		3,987,693
Poultry	2,701,790		576,635		535,008		—		3,813,433

Fresh produce	2,669,938		540,135		136,209		—		3,346,282
Paper and disposables	1,965,326		304,206		374,618		30,380		2,674,530
Seafood	1,085,593		235,145		87,572		—		1,408,310

Beverage products	698,413		334,921		285,359		45,196		1,363,889
Other (1)	740,409		474,638		51,010		515,181		1,781,238

Total Sales	$	27,218,242	$	7,279,668	$	3,819,729	$	590,757	$	38,908,396


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


	26-Week Period Ended Dec. 31, 2022
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Canned and dry products	$	5,079,917	$	1,391,996	$	472,894	$	1,931	$	6,946,738
Fresh and frozen meats	4,856,379		898,382		915,810		—		6,670,571
Frozen fruits, vegetables, bakery and other	3,694,811		1,176,132		647,576		149		5,518,668
Dairy products	3,023,521		725,486		325,401		—		4,074,408
Poultry	2,903,321		578,193		542,733		—		4,024,247

Fresh produce	2,723,003		512,378		131,343		—		3,366,724
Paper and disposables	1,999,135		278,574		420,049		28,541		2,726,299
Seafood	1,186,165		230,491		77,934		—		1,494,590
Beverage products	619,407		269,991		274,835		45,974		1,210,207



Other (1)	593,877		504,523		58,418		531,513		1,688,331
Total Sales	$	26,679,536	$	6,566,146	$	3,866,993	$	608,108	$	37,720,783


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

4. ACQUISITIONS

During the first 26 weeks of fiscal 2024, we paid cash of $1.2 billion for several acquisitions.

Edward Don & Company

On November 27, 2023, Sysco consummated its acquisition of Edward Don & Company (Edward Don or the acquiree) through a merger between Edward Don and a wholly owned subsidiary of Sysco Corporation, in which Sysco acquired 100% of the members’ equity of the acquiree for cash consideration of $969.4 million. Edward Don is a leading distributor of foodservice equipment, supplies and disposables and has a robust supply chain that is expected to enable cost effective distribution of restaurant equipment and supplies across the Sysco network. The acquisition allows Sysco to add strategic capabilities and diversified offerings to complement its existing business and create a specialty equipment and supplies platform that will provide better selection and service to customers.

The assets, liabilities and operating results of Edward Don are reflected in our consolidated financial statements in accordance with ASC Topic No. 805, Business Combinations, commencing from the acquisition date. The purchase price was allocated based on the company’s preliminary estimated fair value of the assets acquired and liabilities assumed, and the excess was assigned to goodwill and intangibles. Goodwill of $447.6 million is assigned to the U.S. Foodservice Operations reportable segment and represents synergies and disposable, supply and foodservice equipment capabilities and offerings expected to benefit Sysco’s existing business.

In certain circumstances, purchase price allocations may be based upon preliminary estimates and assumptions. Accordingly, allocations are subject to revision until Sysco receives final information and completes its analysis during the measurement period. This includes finalizing the valuation of acquired tangible and intangible assets and related tax attributes.

5. FAIR VALUE MEASUREMENTS

Sysco’s policy is to invest in only high-quality investments. The fair values of our cash deposits and money market funds included in cash equivalents are valued using inputs that are considered a Level 1 measurement. Other cash equivalents, such as time deposits and highly liquid instruments with original maturities of three months or less, are valued using inputs that are considered a Level 2 measurement. The fair value of our marketable securities is measured using inputs that are considered a Level 2 measurement, as they rely on quoted prices in markets that are not actively traded or observable inputs over the full term of the asset. The location and the fair value of the company’s marketable securities in the consolidated balance sheet are disclosed in Note 6, “Marketable Securities.” The fair value of our derivative instruments is 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 values of derivative assets and liabilities designated as hedges in the consolidated balance sheet are disclosed in Note 7, “Derivative Financial Instruments.”

The following tables present the company’s assets measured at fair value on a recurring basis as of December 30, 2023 and July 1, 2023:


	Assets Measured at Fair Value as of Dec. 30, 2023
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash equivalents
Cash and cash equivalents	$	573,597	$	3	$	—	$	573,600

Other assets (1)	133,491		—		—		133,491







Total assets at fair value	$	707,088	$	3	$	—	$	707,091


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


	Assets Measured at Fair Value as of Jul. 1, 2023
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash equivalents
Cash and cash equivalents	$	308,952	$	10,021	$	—	$	318,973



Other assets (1)	220,831		—		—		220,831

Total assets at fair value	$	529,783	$	10,021	$	—	$	539,804


(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 our 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 $11.9 billion as of December 30, 2023 and $9.8 billion as of July 1, 2023, while the carrying value was $12.1 billion as of December 30, 2023 and $10.4 billion as of July 1, 2023.

6. MARKETABLE SECURITIES

Sysco invests 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. We include fixed income securities maturing in less than 12 months within prepaid expenses and other current assets. Fixed income securities maturing in more than 12 months are included within other assets in the accompanying consolidated balance sheets. We record the amounts at fair market value, which is determined using quoted market prices at the end of the reporting period.

Unrealized gains and any portion of a security’s unrealized loss attributable to non-credit losses are recorded in accumulated other comprehensive loss. There were no significant credit losses recognized in the first 26 weeks of fiscal 2024.

The following table presents our available-for-sale marketable securities as of December 30, 2023 and July 1, 2023:


	Dec. 30, 2023
	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	$	100,865	$	523	$	(4,585)	$	96,803	$	23,032	$	73,771
Government bonds	29,628		—		(1,368)		28,260		—		28,260
Total marketable securities	$	130,493	$	523	$	(5,953)	$	125,063	$	23,032	$	102,031

	Jul. 1, 2023
	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	$	99,501	$	96	$	(6,777)	$	92,820	$	12,767	$	80,053
Government bonds	29,777		—		(1,913)		27,864		—		27,864
Total marketable securities	$	129,278	$	96	$	(8,690)	$	120,684	$	12,767	$	107,917

As of December 30, 2023, the balance of available-for-sale securities by contractual maturity is shown in the following table. Within the table, maturities of fixed income securities have been allocated based upon timing of estimated cash flows. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.


	Dec. 30, 2023
	(In thousands)
Due in one year or less	$	23,032
Due after one year through five years	62,334
Due after five years	39,697

Total	$	125,063

There were no significant realized gains or losses in marketable securities in the first 26 weeks of fiscal 2024.

7. 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 the second quarter of fiscal 2024, we entered into forward swap agreements to trade the fixed interest rate on $500 million of 6.00% senior notes with variable rates, starting in November 2024. The interest rate swap agreements are designated as fair value hedges and valued based on an income approach using observable market inputs including Secured Overnight Financing Rate (SOFR) yield curves. The company has incorporated credit valuation adjustments to appropriately reflect the risk of default in the fair value measurements. Changes in the fair value of the hedge and the carrying value of the hedged item attributable to changes in the benchmark interest rates being hedged are recognized in interest expense.

Hedging of foreign currency risk

Sysco’s operations in Europe have inventory purchases denominated in currencies other than their functional currency, such as the euro, U.S. dollar, British pound sterling, 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.

Sysco has cross-currency swaps designated as fair value hedges for the purpose of hedging foreign currency risk associated with changes in spot rates on foreign denominated intercompany loans. Sysco has elected to exclude the changes in fair value of the forward points from the assessments of hedge effectiveness. Gains or losses from fair value hedges impact the same category on the consolidated statements of income as the item being hedged, including the earnings impact of the excluded components. Unrealized gains or losses on components excluded from hedge effectiveness are recorded as a component of accumulated other comprehensive income (loss) and recognized into earnings over the life of the hedged instrument. Except for the excluded components, changes in the fair value of the hedge are offset against changes in the fair value of the hedged assets or liabilities through earnings.

In the second quarter of fiscal 2024, Sysco entered into a cross-currency swap to hedge the foreign currency exposure of our net investment in certain foreign operations. This cross-currency swap is designated as a net investment hedge with gains and losses recognized within accumulated other comprehensive income (loss).

Cross-currency swaps are valued based on an income approach using observable market inputs including foreign currency rates and interest rates in both countries subject to the swap.

Hedging of fuel price risk

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

None of our hedging instruments contain credit-risk-related contingent features. Details of outstanding hedging instruments as of December 30, 2023 are presented below:


Maturity Date of the Hedging Instrument	Currency / Unit of Measure	Notional Value
		(In millions)
Hedging of interest rate risk

January 2034	U.S. Dollar	500

Hedging of foreign currency risk
Various (January 2024)	Swedish Krona	101
Various (January 2024 to April 2024)	British Pound Sterling	17



May 2024	Mexican Peso	439
April 2025	Canadian Dollar	180
January 2029	Euro	470

Hedging of fuel risk
Various (January 2024 to March 2026)	Gallons	57

The location and the fair value of derivative instruments designated as hedges in the consolidated balance sheet as of December 30, 2023 and July 1, 2023 are as follows:


		Derivative Fair Value
	Balance Sheet location	Dec. 30, 2023		Jul. 1, 2023
		(In thousands)
Fair Value Hedges:

Cross currency swaps	Other assets	$	1,198	$	—
Interest rate swaps	Other assets	24,557		—


Cross currency swaps	Other current liabilities	1,497		1,262


Cash Flow Hedges:
Fuel swaps	Other current assets	$	168	$	102
Foreign currency forwards	Other current assets	74		624

Fuel swaps	Other assets	136		40

Fuel swaps	Other current liabilities	10,372		17,932
Foreign currency forwards	Other current liabilities	642		404
Fuel swaps	Other long-term liabilities	2,794		5,637

Net Investment Hedges:
Cross currency swaps	Other current assets	$	3,377	$	—
Cross currency swaps	Other long-term liabilities	25,738		—

Gains or losses recognized in the consolidated results of operations for cash flow hedging relationships are not significant for each of the periods presented. The location and amount of gains or losses recognized in the consolidated results of operations for fair value hedging relationships for each of the periods, presented on a pretax basis, are as follows:


	13-Week Period Ended				26-Week Period Ended
	Dec. 30, 2023		Dec. 31, 2022		Dec. 30, 2023		Dec. 31, 2022
	(In thousands)
Total amounts of income and expense line items presented in the consolidated results of operations in which the effects of fair value hedges are recorded	$	154,925	$	132,042	$	295,899	$	256,192
Gain or (loss) on fair value hedging relationships:
Interest rate swaps:
Hedged items	$	(30,298)	$	(2,685)	$	(30,298)	$	(309)
Derivatives designated as hedging instruments	22,066		742		22,066		(5,501)
Cross currency swaps:
Hedged items	$	(2,711)	$	—	$	285	$	—
Derivatives designated as hedging instruments	2,711		—		(285)		—

The gains and losses on the fair value hedging relationships associated with the hedged items as disclosed in the table above consist of the following components for each of the periods presented:


	13-Week Period Ended				26-Week Period Ended
	Dec. 30, 2023		Dec. 31, 2022		Dec. 30, 2023		Dec. 31, 2022
	(In thousands)
Interest expense	$	(3,250)	$	(1,940)	$	(3,250)	$	(3,879)
Decrease in fair value of debt	27,048		745		27,048		(3,570)
Foreign currency gain (loss)	(2,711)		—		285		—
Hedged items	$	(33,009)	$	(2,685)	$	(30,013)	$	(309)

The location and effect of cash flow, net investment, and excluded components of fair value hedges on the consolidated statements of comprehensive income for the 13-week periods ended December 30, 2023 and December 31, 2022, presented on a pretax basis, are as follows:


	13-Week Period Ended Dec. 30, 2023
	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	$	(24,524)	Operating expense	$	669
Foreign currency contracts	(507)		Cost of sales / Other income	—

Total	$	(25,031)		$	669

Derivatives in net investment hedging relationships:
Cross currency contracts	$	(22,361)	N/A	$	—




Derivatives in fair value hedging relationships:
Change in excluded component of fair value hedge	$	210	Other expense (income)	$	—

	13-Week Period Ended Dec. 31, 2022
	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	$	1,140	Operating expense	$	12,377
Foreign currency contracts	49		Cost of sales / Other income	—

Total	$	1,189		$	12,377

Derivatives in net investment hedging relationships:

Foreign denominated debt	$	(44,999)	N/A	$	—

The location and effect of cash flow, net investment, and excluded components of fair value hedges on the consolidated statements of comprehensive income for the 26-week periods ended December 30, 2023 and December 31, 2022, presented on a pretax basis, are as follows:


	26-Week Period Ended Dec. 30, 2023
	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	$	9,975	Operating expense	$	3,003
Foreign currency contracts	(791)		Cost of sales / Other income	—

Total	$	9,184		$	3,003

Derivatives in net investment hedging relationships:
Cross currency contracts	$	(22,361)	N/A	$	—




Derivatives in fair value hedging relationships:
Change in excluded component of fair value hedge	$	184	Other expense (income)	$	—

	26-Week Period Ended Dec. 31, 2022
	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	$	(35,155)	Operating expense	$	25,362
Foreign currency contracts	335		Cost of sales / Other income	—

Total	$	(34,820)		$	25,362

Derivatives in net investment hedging relationships:

Foreign denominated debt	$	(13,653)	N/A	$	—

The location and carrying amount of hedged liabilities in the consolidated balance sheet as of December 30, 2023 are as follows:


	Dec. 30, 2023
	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	$	(518,622)	$	(27,048)

The carrying amount of hedged liabilities in the consolidated balance sheet as of July 1, 2023 is zero.

8. DEBT

Sysco has a long-term revolving credit facility that includes aggregate commitments of the lenders thereunder of $3.0 billion, with an option to increase such commitments to $4.0 billion. As of December 30, 2023, there were no borrowings outstanding under this facility.

We have a U.S commercial paper program allowing the company to issue short-term unsecured notes in an aggregate amount not to exceed $3.0 billion. Any outstanding amounts are classified within long-term debt, as the program is supported by the long-term revolving credit facility. As of December 30, 2023, there were $500.0 million in commercial paper issuances outstanding under this program.

On November 17, 2023, Sysco issued senior notes (the Notes) totaling $1.0 billion. Details of the Notes are as follows:


Maturity Date	Par Value (in millions)		Coupon Rate		Pricing (percentage of par)
January 17, 2029 (the 2029 Notes)	$	500	5.75	%	99.784	%
January 17, 2034 (the 2034 Notes)	500		6.00		99.037

The Notes initially are fully and unconditionally guaranteed by Sysco’s direct and indirect wholly owned subsidiaries that guarantee Sysco’s other senior notes issued under the indenture governing the Notes or any of Sysco’s other indebtedness. Interest on the Notes will be paid semi-annually in arrears on July 17 and January 17, beginning July 17, 2024. At Sysco’s option, any or all of the Notes may be redeemed, in whole or in part, at any time prior to maturity. If Sysco elects to redeem (i) the 2029 Notes before the date that is one month prior to the maturity date, or (ii) the 2034 Notes before the date that is three months prior to the maturity date, Sysco will pay an amount equal to the greater of 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest or the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed that would be due if such senior notes matured on the applicable date described above. If Sysco elects to redeem a series of Notes on or after the applicable date described in the preceding sentence, Sysco will pay an amount equal to 100% of the principal amount of the Notes to be redeemed. Sysco will pay accrued and unpaid interest on the Notes redeemed to the redemption date.

The total carrying value of our debt was $12.1 billion as of December 30, 2023 and $10.4 billion as of July 1, 2023. The increase in the carrying value of our debt from the prior year was due to the issuance of senior notes, new borrowings under our commercial paper program and new financing leases in support of equipment.

On October 17, 2023, we entered into a new commercial paper dealer agreement in Europe for a commercial paper program with borrowings not to exceed €250 million. As of December 30, 2023, there were no commercial paper issuances outstanding under this program.

Information regarding the guarantors of our registered debt securities is contained in the section captioned Guarantor Summarized Financial Information in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this Form 10-Q.

9. COMPANY-SPONSORED EMPLOYEE BENEFIT PLANS

Sysco has company-sponsored defined benefit and defined contribution retirement plans for its employees. We also provide certain health care benefits to eligible retirees and their dependents.

On October 25, 2022, the Sysco Corporation Retirement Plan (the Plan) executed an agreement with Massachusetts Mutual Life Insurance Company (the Insurer). Under this agreement, the Plan purchased a nonparticipating single premium group annuity contract using Plan assets that transferred to the Insurer $695.0 million of the Plan’s defined benefit pension obligations related to certain pension benefits. The contract covers approximately 10,000 Sysco participants and beneficiaries (the Transferred Participants) in the U.S. pension plan (the U.S. Retirement Plan). Under the group annuity contract, the Insurer made an unconditional and irrevocable commitment to pay the pension benefits of each Transferred Participant that were due on or after January 1, 2023. The transaction resulted in no changes to the amount of benefits payable to the Transferred Participants.

As a result of the transaction, we recognized a one-time, non-cash pre-tax pension settlement charge of $315.4 million in the second quarter of fiscal 2023 primarily related to the accelerated recognition of actuarial losses included within accumulated other comprehensive loss in the statement of changes in consolidated shareholders’ equity. The transaction also required us to remeasure the benefit obligations and plan assets of the U.S. Retirement Plan. The remeasurement reflected the use of an updated discount rate and an expected rate of return on plan assets as of October 31, 2022, applying the practical expedient to remeasure plan assets and obligations as of the nearest calendar month-end date.

Components of Net Benefit Costs

The components of net company-sponsored benefit cost for the U.S. Retirement Plan are as follows:


	13-Week Period			26-Week Period
		Ended (1)		Ended (1)
		Dec. 31, 2022		Dec. 31, 2022
	(In thousands)			(In thousands)
Service cost		$	2,034	$	4,357
Interest cost		38,103		80,604
Expected return on plan assets		(36,957)		(76,977)
Amortization of prior service cost		98		197
Amortization of actuarial loss		7,661		16,609
Settlement loss recognized		315,354		315,354
Net pension costs		$	326,293	$	340,144



(1)			Net pension costs were not material for the second quarter and first 26 weeks of fiscal 2024.

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

10. EARNINGS PER SHARE

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


	13-Week Period Ended				26-Week Period Ended
	Dec. 30, 2023		Dec. 31, 2022		Dec. 30, 2023		Dec. 31, 2022
	(In thousands, except for share and per share data)				(In thousands, except for share and per share data)
Numerator:
Net earnings	$	415,242	$	141,216	$	918,634	$	606,784
Denominator:
Weighted-average basic shares outstanding	504,312,633		507,609,696		504,719,562		507,594,137
Dilutive effect of share-based awards	1,616,709		2,536,098		1,779,828		2,670,336
Weighted-average diluted shares outstanding	505,929,342		510,145,794		506,499,390		510,264,473
Basic earnings per share	$	0.82	$	0.28	$	1.82	$	1.20
Diluted earnings per share	$	0.82	$	0.28	$	1.81	$	1.19

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 6,451,000 and 1,848,000 for the second quarter of fiscal 2024 and 2023, respectively, and approximately 6,219,000 and 1,620,000 for the first 26 weeks of fiscal 2024 and 2023, respectively.

Accelerated Share Repurchase Program

On December 15, 2023, we entered into a Master Confirmation and Supplemental Confirmation (collectively, the ASR Agreement) with Goldman, Sachs & Co. (Goldman) relating to an accelerated share repurchase program (the ASR Program). Pursuant to the terms of the ASR Agreement, effective January 3, 2024, we agreed to repurchase $500 million of our common stock from Goldman under the share repurchase program authorized by our Board of Directors in May 2021.

In connection with the ASR Program, we paid $500 million to Goldman on January 11, 2024, in exchange for 6,026,110 shares of Sysco’s outstanding common stock, which represents a substantial majority of the shares owed to Sysco by Goldman; however, the number of shares ultimately delivered to us by Goldman is subject to adjustment based on the volume-weighted average share price of Sysco’s common stock during the term of the ASR Agreement, less an agreed discount. We expect all purchases under the ASR Program to be completed by the end of March 2024, although the exact date of completion will depend on whether or when Goldman exercises an acceleration option that it has under the ASR Agreement. At settlement, we may be entitled to receive additional shares of common stock from Goldman or, under certain circumstances, may be required to issue additional shares or make a payment to Goldman at our option. In the third quarter of fiscal 2024, the shares received will be recognized in treasury stock and reduce the number of weighted average shares outstanding. The incremental consideration to be received or issued upon settlement of the ASR Program was evaluated as an unsettled forward contract indexed to our common stock and will be classified within stockholders’ equity in the third quarter of fiscal 2024, if the ASR Program has not concluded by the end of the third quarter of fiscal 2024.

The ASR Agreement contains the principal terms and provisions governing the ASR Program, including, but not limited to, the mechanism used to determine the number of shares that will be delivered, the required timing of delivery of the shares, the specific circumstances under which Goldman may delay any date of valuation or settlement under the ASR Program (such as upon the occurrence of certain market disruptions), the specific circumstances under which Goldman is permitted to make adjustments to the terms of the ASR Program or to terminate the ASR Program (such as upon the announcement of certain fundamental transactions affecting Sysco), and various acknowledgments, representations and warranties made by Sysco and Goldman to one another.

11. 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 $552.3 million and $527.8 million for the second quarter of fiscal 2024 and fiscal 2023, respectively. Comprehensive income was $981.5 million and $764.1 million for the first 26 weeks of fiscal 2024 and fiscal 2023, 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:


		13-Week Period Ended Dec. 30, 2023
	Location of Expense (Income) Recognized in Net Earnings	Before Tax Amount		Tax		Net of Tax Amount
		(In thousands)
Pension and other postretirement benefit plans:







Reclassification adjustments:
Amortization of prior service cost	Other expense, net	$	195	$	49	$	146
Amortization of actuarial loss, net	Other expense, net	6,676		1,665		5,011
Total reclassification adjustments		6,871		1,714		5,157
Foreign currency translation:

Foreign currency translation adjustment	N/A	163,084		—		163,084
Marketable securities:
Change in marketable securities (1)	N/A	4,359		915		3,444
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
Change in excluded component of fair value hedge	Other expense, net	210		52		158
Change in cash flow hedges	Operating expenses (2)	(25,031)		(4,806)		(20,225)
Change in net investment hedges	N/A	(22,361)		(5,620)		(16,741)

Total other comprehensive (loss) before reclassification adjustments		(47,182)		(10,374)		(36,808)
Reclassification adjustments:
Amortization of cash flow hedges	Interest expense	2,893		723		2,170

Total other comprehensive income (loss)		$	130,025	$	(7,022)	$	137,047


(1)			Realized gains or losses on marketable securities are presented within other (income) expense, net in the consolidated results of operations; however, there were no significant gains or losses realized in the second quarter of fiscal 2024.
(2)			Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.


		13-Week Period Ended Dec. 31, 2022
	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, arising in the current year	Other expense, net	$	(89,851)	$	(22,463)	$	(67,388)
Settlements	Other expense, net	315,455		78,864		236,591
Total other comprehensive income before reclassification adjustments		225,604		56,401		169,203
Reclassification adjustments:
Amortization of prior service cost	Other expense, net	99		25		74
Amortization of actuarial loss, net	Other expense, net	7,500		1,872		5,628

Total reclassification adjustments		7,599		1,897		5,702
Foreign currency translation:
Foreign currency translation adjustment	N/A	241,814		—		241,814
Marketable securities:
Change in marketable securities (1)	N/A	1,511		317		1,194
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedges	Operating expenses (2)	1,189		986		203
Change in net investment hedges	N/A	(44,999)		(11,250)		(33,749)

Total other comprehensive (loss) before reclassification adjustments		(43,810)		(10,264)		(33,546)
Reclassification adjustments:
Amortization of cash flow hedges	Interest expense	2,893		723		2,170
Total other comprehensive income		$	435,611	$	49,074	$	386,537


(1)			Realized gains or losses on marketable securities are presented within other (income) expense, net in the consolidated results of operations; however, there were no significant gains or losses realized in the second quarter of fiscal 2023.
(2)			Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.


		26-Week Period Ended Dec. 30, 2023
	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, arising in the current year	Other expense, net	$	672	$	169	$	503


Reclassification adjustments:
Amortization of prior service cost	Other expense, net	390		98		292
Amortization of actuarial loss, net	Other expense, net	13,317		3,324		9,993
Total reclassification adjustments		13,707		3,422		10,285




Foreign currency translation:

Foreign currency translation adjustment	N/A	54,890		—		54,890
Marketable securities:
Change in marketable securities (1)	N/A	3,163		664		2,499
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
Change in excluded component of fair value hedge	Other expense, net	184		46		138
Change in cash flow hedges	Operating expenses (2)	9,184		2,261		6,923
Change in net investment hedges	N/A	(22,361)		(5,620)		(16,741)
Total other comprehensive (loss) before reclassification adjustments		(12,993)		(3,313)		(9,680)

Reclassification adjustments:
Amortization of cash flow hedges	Interest expense	5,786		1,446		4,340
Total other comprehensive income		$	65,225	$	2,388	$	62,837


(1)			Realized gains or losses on marketable securities are presented within other (income) expense, net in the consolidated results of operations; however, there were no significant gains or losses realized in the first 26 weeks of fiscal 2024.
(2)			Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.


		26-Week Period Ended Dec. 31, 2022
	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, arising in the current year	Other expense, net	$	(89,851)	$	(22,463)	$	(67,388)
Settlements	Other expense, net	315,455		78,864		236,591
Total other comprehensive income before reclassification adjustments		225,604		56,401		169,203
Reclassification adjustments:
Amortization of prior service cost	Other expense, net	198		50		148
Amortization of actuarial loss, net	Other expense, net	16,686		4,167		12,519
Total reclassification adjustments		16,884		4,217		12,667




Foreign currency translation:

Foreign currency translation adjustment	N/A	9,632		—		9,632
Marketable securities:
Change in marketable securities (1)	N/A	(2,701)		(567)		(2,134)
Hedging instruments:
Other comprehensive (loss) before reclassification adjustments:
Change in cash flow hedges	Operating expenses (2)	(34,820)		(8,633)		(26,187)
Change in net investment hedges	N/A	(13,653)		(3,413)		(10,240)
Total other comprehensive (loss) before reclassification adjustments		(48,473)		(12,046)		(36,427)

Reclassification adjustments:
Amortization of cash flow hedges	Interest expense	5,767		1,442		4,325
Total other comprehensive income		$	206,713	$	49,447	$	157,266


(1)			Realized gains or losses on marketable securities are presented within other (income) expense, net in the consolidated results of operations; however, there were no significant gains or losses realized in the first 26 weeks of fiscal 2023.
(2)			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 for the periods presented:


	26-Week Period Ended Dec. 30, 2023
	Pension and Other Postretirement Benefit Plans, net of tax		Foreign Currency Translation		Hedging, net of tax		Marketable Securities, net of tax		Total
	(In thousands)
Balance as of Jul. 1, 2023	$	(839,541)	$	(374,290)	$	(31,966)	$	(6,793)	$	(1,252,590)

Net actuarial loss arising in the current year	503		—		—		—		503

Equity adjustment from foreign currency translation	—		54,890		—		—		54,890
Amortization of cash flow hedges	—		—		4,340		—		4,340

Change in net investment hedges					(16,741)				(16,741)
Change in excluded component of fair value hedge	—		—		138		—		138
Change in cash flow hedge	—		—		6,923		—		6,923


Amortization of unrecognized prior service cost	292		—		—		—		292
Amortization of unrecognized net actuarial losses	9,993		—		—		—		9,993
Change in marketable securities	—		—		—		2,499		2,499
Balance as of Dec. 30, 2023	$	(828,753)	$	(319,400)	$	(37,306)	$	(4,294)	$	(1,189,753)


	26-Week Period Ended Dec. 31, 2022
	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, 2022	$	(1,011,335)	$	(501,517)	$	35,770	$	(4,972)	$	(1,482,054)
Net actuarial loss arising in the current year	(67,388)		—		—		—		(67,388)
Settlements	236,591		—		—		—		236,591
Equity adjustment from foreign currency translation	—		9,632		—		—		9,632
Amortization of cash flow hedges	—		—		4,325		—		4,325
Change in net investment hedges	—		—		(10,240)		—		(10,240)

Change in cash flow hedges	—		—		(26,187)		—		(26,187)

Amortization of unrecognized prior service cost	148		—		—		—		148
Amortization of unrecognized net actuarial losses	12,519		—		—		—		12,519
Change in marketable securities	—		—		—		(2,134)		(2,134)
Balance as of Dec. 31, 2022	$	(829,465)	$	(491,885)	$	3,668	$	(7,106)	$	(1,324,788)

12. 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 the first 26 weeks of fiscal 2024, options to purchase 808,279 shares were granted to employees. The fair value of each option award is estimated as of the date of grant using a Black-Scholes option pricing model. The weighted average grant-date fair value per option granted during the first 26 weeks of fiscal 2024 was $19.27.

In the first 26 weeks of fiscal 2024, employees were granted 521,082 performance share units (PSUs). 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 PSU granted during the first 26 weeks of fiscal 2024 was $73.58. The PSUs will convert into shares of Sysco’s common stock at the end of the three-year performance period based on actual performance targets achieved, as well as the market-based return of Sysco’s common stock relative to that of each company within the S&P 500 index.

In the first 26 weeks of fiscal 2024, employees were granted 366,883 restricted stock units. The weighted average grant-date fair value per restricted stock unit granted during the first 26 weeks of fiscal 2024 was $71.93.

Employee Stock Purchase Plan

Plan participants purchased 594,056 shares of common stock under the ESPP during the first 26 weeks of fiscal 2024. The weighted average fair value per employee stock purchase right issued pursuant to the ESPP was $10.33 during the first 26 weeks of fiscal 2024. The fair value of each stock purchase right is estimated as the difference between the stock price at the date of issuance and the employee purchase price.

All Share-Based Payment Arrangements

The total share-based compensation cost that has been recognized in results of operations was $52.8 million and $52.7 million for the first 26 weeks of fiscal 2024 and fiscal 2023, respectively.

As of December 30, 2023, there was $143.6 million of total unrecognized compensation cost related to share-based compensation arrangements. This cost is expected to be recognized over a weighted-average period of 1.95 years.

13. INCOME TAXES

Effective Tax Rate

The effective tax rates for the second quarter and first 26 weeks of fiscal 2024 were 23.83% and 23.94%, respectively. These rates are higher than the company’s 21.00% statutory tax rate primarily because of state income taxes. The rates are partially offset by a foreign income tax benefit and the equity-based compensation excess tax benefits.

The effective tax rates for the second quarter and first 26 weeks of fiscal 2023 were 20.88% and 21.54%, respectively. The second quarter was favorably impacted by the benefit of the pension buyout of $4.9 million and excess benefits of equity-based compensation, which totaled $1.4 million. The first 26 weeks of fiscal 2023 were favorably impacted by excess tax benefits of equity-based compensation, which totaled $10.3 million.

Uncertain Tax Positions

As of December 30, 2023, the gross amount of unrecognized tax benefit and related accrued interest was $32.4 million and $9.7 million, respectively. It is reasonably possible the amount of the unrecognized tax benefit with respect to certain unrecognized tax positions of the company will increase or decrease in the next 12 months. At this time, an estimate of the range of the reasonably possible change cannot be made.

During the third quarter of fiscal 2023, Sysco received a Statutory Notice of Deficiency from the Internal Revenue Service, mainly related to foreign tax credits generated in fiscal 2018 from repatriated earnings primarily from our Canadian operations. In the fourth quarter of fiscal 2023, the company filed suit in the U.S. Tax Court challenging the validity of certain tax regulations related to the one-time transition tax on unrepatriated foreign earnings, which were enacted as part of the Tax Cuts and Jobs Act of 2017 (TCJA). The lawsuit seeks to have the court invalidate these regulations, which would affirm the company’s position regarding its foreign tax credits. Sysco has previously recorded a benefit of $131.0 million attributable to its

interpretation of the TCJA and the Internal Revenue Code. If we are ultimately unsuccessful in defending our position, we may be required to reverse all, or some portion, of the benefit previously recorded.

Other

On October 8, 2021, the Organization for Economic Co-operation and Development (OECD) announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which provides for a two-pillar solution to address tax challenges arising from the digitalization of the economy. Pillar One expands a country’s authority to tax profits from companies that make sales into their country but do not have a physical location in the country. Pillar Two includes an agreement on international tax reform, including rules to ensure that large corporations pay a minimum rate of corporate income tax. On December 20, 2021, the OECD released Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large corporations at a minimum rate of 15%. The OECD continues to release additional guidance on the two-pillar framework, with widespread implementation anticipated by 2024. We are continuing to evaluate the potential impact on future periods of the Pillar Two Framework, pending legislation adoption and/or guidance by individual countries, with the rules being effective for tax years beginning on or after January 1, 2024. For Sysco, Pillar Two will be effective in fiscal 2025.

The determination of the company’s provision for income taxes requires judgment, the use of estimates and the interpretation and application of complex tax laws. The company’s provision for income taxes reflects income earned and taxed in the various U.S. federal and state, as well as foreign jurisdictions. Tax law changes, increases or decreases in permanent book versus tax basis differences, accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances, and the company’s change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate.

14. 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.

15. BUSINESS SEGMENT INFORMATION

Sysco distributes food and related products to restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers. Our primary operations are located in North America and Europe. Under the accounting provisions related to disclosures about segments of an enterprise, we have aggregated certain operating segments into three reportable segments. “Other” financial information is attributable to our other operating segments that do not meet the quantitative disclosure thresholds.

U.S. Foodservice Operations – primarily includes (a) our U.S. Broadline operations, which distribute a full line of food products, including custom-cut meat, seafood, produce, specialty Italian, specialty imports and a wide variety of non-food products and (b) our U.S. Specialty operations, which include our FreshPoint fresh produce distribution business, our Specialty Meats and Seafood Group specialty protein operations, our growing Italian Specialty platform anchored by Greco & Sons, Edward Don, acquired in the second quarter of fiscal 2024, which distributes restaurant equipment and supplies, our Asian specialty distribution company and a number of other small specialty businesses that are not material to our operations;
International Foodservice Operations – includes operations outside of the U.S., 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 our export operations that distribute to international customers. Our European operations primarily consist of operations in the United Kingdom, France, Ireland and Sweden;
SYGMA – our U.S. customized distribution operations serving quick-service chain restaurant customer locations; and
Other – primarily our hotel supply operations, Guest Worldwide.

The accounting policies for the segments are the same as those disclosed by Sysco for its consolidated financial statements. Our Global Support Center generally includes all expenses of the corporate office and Sysco’s shared service operations. These also include all U.S. share-based compensation costs.

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


	13-Week Period Ended				26-Week Period Ended
	Dec. 30, 2023		Dec. 31, 2022		Dec. 30, 2023		Dec. 31, 2022
Sales:	(In thousands)				(In thousands)
U.S. Foodservice Operations	$	13,494,443	$	13,077,054	$	27,218,242	$	26,679,536
International Foodservice Operations	3,596,458		3,282,411		7,279,668		6,566,146
SYGMA	1,913,715		1,933,536		3,819,729		3,866,993
Other	283,326		300,952		590,757		608,108
Total	$	19,287,942	$	18,593,953	$	38,908,396	$	37,720,783

	13-Week Period Ended				26-Week Period Ended
	Dec. 30, 2023		Dec. 31, 2022		Dec. 30, 2023		Dec. 31, 2022
Operating income (loss):	(In thousands)				(In thousands)
U.S. Foodservice Operations	$	839,036	$	780,968	$	1,780,007	$	1,686,679
International Foodservice Operations	82,930		57,413		176,413		144,393
SYGMA	16,346		6,847		29,113		12,544
Other	8,387		9,870		20,210		21,408
Total segments	946,699		855,098		2,005,743		1,865,024
Global Support Center	(246,656)		(214,275)		(502,118)		(487,400)
Total operating income	700,043		640,823		1,503,625		1,377,624
Interest expense	149,680		132,042		284,014		256,192
Other expense, net	5,245		330,305		11,885		348,054
Earnings before income taxes	$	545,118	$	178,476	$	1,207,726	$	773,378

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