REVENUE

Adoption of ASC Topic 606, “Revenues from Contracts with Customers”

On July 1, 2018, Sysco adopted ASC Topic 606 with no significant impact to its financial position or results of operations, using the modified retrospective method. There were no contracts which were not completed as of July 1, 2018. Results for reporting periods beginning after July 1, 2018 are presented under Topic 606, while prior period amounts have not been restated and continue to be reported in accordance with our historic accounting under Topic 605. Sysco had no adjustment to opening retained earnings as of July 1, 2018 as a result of adopting ASC Topic 606. There was no impact to revenues for the quarter ended September 29, 2018 as a result of applying ASC Topic 606.

Revenue Recognition

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

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

Product Sales Revenues

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

Contract Balances

After completion of Sysco’s performance obligations, the company has an unconditional right to consideration as outlined in its contracts with customers. Sysco’s customer receivables will generally be collected in less than 30 days in accordance with the underlying payment terms. Customer receivables, which are included in Accounts and notes receivable, less allowances in the consolidated balance sheet, were $4.0 billion and $3.8 billion as of September 29, 2018 and June 30, 2018, respectively.

Sysco has certain customer contracts in which upfront monies are paid to its customers. These payments have become industry practice and are not related to financing of the customer’s business. They are not associated with any distinct good or service to be received from the customer and, therefore, are treated as a reduction of transaction prices. All upfront payments are capitalized in Other Assets and amortized over the life of the contract or the expected life of the relationship with the customer on a straight-line basis. As of September 29, 2018, Sysco’s contract assets were immaterial. Sysco has no material commissions paid that are directly attributable to obtaining a particular contract.

Disaggregation of Revenues

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



	13-Week Period Ended Sep. 29, 2018
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Fresh and frozen meats	$	2,121,517	$	420,456	$	372,334	$	—	$	2,914,307
Canned and dry products	1,852,168		611,470		77,621		—		2,541,259
Frozen fruits, vegetables, bakery and other	1,423,386		628,559		291,864		—		2,343,809
Dairy products	1,086,404		318,347		154,806		—		1,559,557
Poultry	1,026,936		215,582		272,061		—		1,514,579
Fresh produce	937,580		257,544		64,849		—		1,259,973
Paper and disposables	710,759		104,539		188,616		16,409		1,020,323
Seafood	661,687		188,436		25,385		—		875,508
Beverage products	290,571		52,069		147,294		23,180		513,114
Other ⁽¹⁾	288,403		123,948		26,627		233,872		672,850
Total Revenue	$	10,399,411	$	2,920,950	$	1,621,457	$	273,461	$	15,215,279


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



	13-Week Period Ended Sep. 30, 2017
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Fresh and frozen meats	$	2,031,141	$	434,639	$	386,248	$	—	$	2,852,028
Canned and dry products	1,738,677		593,354		77,485		—		2,409,516
Frozen fruits, vegetables, bakery and other	1,266,732		626,065		272,592		—		2,165,389
Poultry	1,046,686		207,465		296,899		—		1,551,050
Dairy products	1,017,661		315,654		166,688		—		1,500,003
Fresh produce	923,792		265,583		65,546		—		1,254,921
Paper and disposables	656,309		104,110		181,829		15,390		957,638
Seafood	620,321		183,272		23,774		—		827,367
Beverage products	275,130		51,059		145,074		23,011		494,274
Other ⁽¹⁾	272,493		122,054		24,536		219,155		638,238
Total Revenue	$	9,848,942	$	2,903,255	$	1,640,671	$	257,556	$	14,650,424


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