UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 30, 2024

OR

Commission File Number: 1-6544

Sysco Corporation

(Exact name of registrant as specified in its charter)

1390 Enclave Parkway, Houston, Texas 77077-2099

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:

(281) 584-1390

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

497,982,485 shares of common stock were outstanding as of April 12, 2024.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share data)

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)

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This discussion should be read in conjunction with our consolidated financial statements as of July 1, 2023, 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 1, 2023 (our fiscal 2023 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 third quarter of fiscal 2024 results were driven by sales growth that surpassed third quarter of fiscal 2023 levels by 2.7%. The increase in sales was driven by inflation at the enterprise level and sales from recent acquisitions. Our gross profit growth this quarter outpaced adjusted operating expense growth due to effective management of product cost fluctuations through margin management, incremental progress from our strategic sourcing efforts, disciplined and rational pricing, and delivery of our cost-out measures. See below for a comparison of our fiscal 2024 results to our fiscal 2023 results, both including and excluding Certain Items (as defined below).

Comparisons of results from the third quarter of fiscal 2024 to the third quarter of fiscal 2023 are presented below:

• Sales:

◦increased 2.7%, or $503.8 million, to $19.4 billion;

• Operating income:

◦increased 3.8%, or $26.3 million, to $722.0 million;

◦adjusted operating income increased 8.4%, or $62.2 million, to $799.3 million;

• Net earnings:

◦decreased 1.1%, or $4.9 million, to $424.7 million;

◦adjusted net earnings increased 5.0%, or $22.9 million, to $483.4 million;

• Basic earnings per share:

◦unchanged, at $0.85 per share;

• Diluted earnings per share:

◦increased 1.2%, or $0.01, to $0.85 per share;

◦adjusted diluted earnings per share increased 6.7%, or $0.06, to $0.96;

• EBITDA:

◦increased 5.4%, or $48.1 million, to $933.0 million; and

◦adjusted EBITDA increased 8.5%, or $76.9 million, to $976.6 million.

Comparisons of results from the first 39 weeks of fiscal 2024 to the first 39 weeks of fiscal 2023 are presented below:

• Sales:

◦increased 3.0%, or $1.7 billion, to $58.3 billion;

• Operating income:

◦increased 7.3%, or $152.3 million, to $2.2 billion;

◦adjusted operating income increased 9.4%, or $206.4 million, to $2.4 billion;

• Net earnings:

◦increased 29.6%, or $306.9 million, to $1.3 billion;

◦adjusted net earnings increased 8.3%, or $113.0 million, to $1.5 billion;

• Basic earnings per share:

◦increased 30.9%, or $0.63, to $2.67 per share;

• Diluted earnings per share:

◦increased 31.0%, or $0.63, to $2.66 per share;

◦adjusted diluted earnings per share increased 9.4%, or $0.25, to $2.92;

• EBITDA:

◦increased 24.3%, or $556.8 million, to $2.9 billion; and

◦adjusted EBITDA increased 10.6%, or $280.6 million, to $2.9 billion.

The discussion of our results includes certain non-GAAP financial measures, including EBITDA and adjusted EBITDA, that we believe provide important perspective with respect to underlying business trends. Other than EBITDA and free cash flow, any non-GAAP financial measures will be denoted as adjusted measures to remove (1) restructuring charges; (2) expenses associated with our various transformation initiatives; (3) severance charges; and (4) acquisition-related costs consisting of: (a) intangible amortization expense and (b) acquisition costs and due diligence costs related to our acquisitions. Our results for fiscal 2023 were also impacted by adjustments to a product return allowance pertaining to COVID-related personal protection equipment inventory, a pension settlement charge that resulted from the purchase of a nonparticipating single premium group annuity contract that transferred defined benefit plan obligations to an insurer 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 2024 and fiscal 2023 items discussed above are collectively referred to as “Certain Items.” The results of our operations can be impacted by changes in exchange rates applicable to converting from local currencies to U.S. dollars. We measure our results on a constant currency basis.

Trends

Economic and Industry Trends

Sysco continues to outperform the foodservice market and successfully grew its market share in the third quarter of fiscal 2024. The food-away-from-home sector is a healthy, long-term growth market. Sysco is diversified and well positioned as a market leader in food service. Softer industry trends during the quarter were impacted by unfavorable weather in January across the U.S and restaurant traffic that was lower in the most recent quarter as compared to fiscal 2023.

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. We experienced a 2.9% and 3.0% improvement in U.S. Foodservice case volume in the third quarter and first 39 weeks of fiscal 2024, respectively, as compared to the third quarter and first 39 weeks of fiscal 2023. Local case volume within our U.S. Foodservice Operations segment increased 0.4% and 1.3% in the third quarter and first 39 weeks of fiscal 2024, respectively, as compared to the third quarter and first 39 weeks of fiscal 2023. Our volume growth for the third quarter was primarily from acquisitions. Our volume reflects our broadline and specialty businesses, except for our specialty meats business, which measures its volume in pounds.

We experienced inflation at a rate of 1.9% in the third quarter of fiscal 2024, at the total enterprise level, primarily driven by inflation in the meat and frozen categories. We continued to be successful in managing our inflation, resulting in an increase in gross profit dollars. Gross margin increased 44 and 33 basis points in the third quarter and first 39 weeks of fiscal 2024, respectively, as compared to the third quarter and first 39 weeks of fiscal 2023. This was primarily driven by effective management of product cost fluctuations, progress from our strategic sourcing efforts, disciplined and rational pricing, and improved penetration from Sysco Brand products within our local customer base.

Operating Expense Trends

Total operating expenses increased 5.5% and 4.2% during the third quarter and first 39 weeks of fiscal 2024, respectively, as compared to the third quarter and first 39 weeks of fiscal 2023, primarily due to volumes and recent costs associated with severances, transformation projects, and acquisitions. We have been successful in managing expenses through supply chain improvements, continued improvements with retention and productivity, successful labor planning, and delivery of our cost-out measures.

Interest Expense Trends

Interest expense for fiscal 2024 is expected to increase by approximately $70 million, as compared to fiscal 2023, primarily due to higher debt associated with our acquisition of Edward Don and share repurchases.

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 growth opportunities.

In the first quarter of fiscal 2024, we acquired BIX Produce Company, a leading produce specialty distributor based in Minnesota. This acquisition is expected to provide a strategic opportunity for specialty produce operations to expand its geographic footprint in an area of the country where it does not currently have operations. This company’s results are included within the U.S. Foodservice Operations.

In the second quarter of fiscal 2024, we acquired Edward Don, one of the largest kitchen equipment and supplies distributors, based out of Chicago. Edward Don has a robust supply chain that is expected to enable cost effective

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Our market risks consist of interest rate risk, foreign currency exchange rate risk, fuel price risk and investment risk. For a discussion on our exposure to market risk, see Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risks” in our fiscal 2023 Form 10-K. There have been no significant changes to our market risks since July 1, 2023.

Sysco’s management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 30, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding the required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Sysco’s disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. Based on the evaluation of our disclosure controls and procedures as of March 30, 2024, our chief executive officer and chief financial officer concluded that, as of such date, Sysco’s disclosure controls and procedures were effective at the reasonable assurance level.

There have been no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the fiscal quarter ended March 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

Environmental Matters

Item 103 of SEC Regulation S-K requires disclosure of certain environmental proceedings in which a governmental authority is a party to and when such proceedings involve potential monetary sanctions that Sysco’s management reasonably believes will exceed a specified threshold. Pursuant to recent SEC amendments to this Item, Sysco has chosen a reporting threshold for such proceedings of $1 million. Applying this threshold, there are no material environmental matters to disclose for this reporting period.

From time to time, we may be party to legal proceedings that arise in the ordinary course of our business. We do not believe there are any pending legal proceedings that, individually or in the aggregate, will have a material adverse effect on the company’s financial condition, results of operations or cash flows.

For a discussion of our risk factors, see the section entitled “Risk Factors” in our 2023 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

We made the following share repurchases during the third quarter of fiscal 2024:

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, in which the program will remain available until fully utilized.

We repurchased 8,888,777 shares for $699.9 million during fiscal 2024. As of March 30, 2024, we had a remaining authorization of approximately $3.3 billion. We repurchased 1,092,409 additional shares under our authorization through April 12, 2024.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Insider Trading Arrangements and Policies

During the quarter ended March 30, 2024, no director or officer of Sysco adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (each term as defined in Item 408(a) of Regulation S-K).

The exhibits listed on the Exhibit Index below are filed as a part of this Quarterly Report on Form 10-Q.

EXHIBIT INDEX

Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.