UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

FORM 10-Q

(Mark One)
☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-6544

________________

Sysco Corporation

(Exact name of registrant as specified in its charter)

Delaware	74-1648137
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

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:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, $1.00 Par Value	SYY	New York Stock Exchange
1.25% Notes due June 2023	SYY 23	New York Stock Exchange

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.

Large Accelerated Filer	☑	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
(Do not check if a smaller reporting company)		Emerging growth company	☐

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

507,604,019 shares of common stock were outstanding as of January 13, 2023.

1

TABLE OF CONTENTS

	PART I – FINANCIAL INFORMATION	Page No.
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	57
Item 4.	Controls and Procedures	57
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	59
Item 6.	Exhibits	59
Signatures		61

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share data)

	Dec. 31, 2022		Jul. 2, 2022
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	500,340	$	867,086
Accounts receivable, less allowances of $84,646 and $70,790	4,907,836		4,838,912
Inventories	4,661,516		4,437,498
Prepaid expenses and other current assets	300,513		303,789
Income tax receivable	25,801		35,934
Total current assets	10,396,006		10,483,219
Plant and equipment at cost, less accumulated depreciation	4,562,435		4,456,420
Other long-term assets
Goodwill	4,576,898		4,542,315
Intangibles, less amortization	911,196		952,683
Deferred income taxes	435,183		377,604
Operating lease right-of-use assets, net	708,535		723,297
Other assets	496,978		550,150
Total other long-term assets	7,128,790		7,146,049
Total assets	$	22,087,231	$	22,085,688
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	5,420,422	$	5,752,958
Accrued expenses	2,128,945		2,270,753
Accrued income taxes	33,017		40,042
Current operating lease liabilities	104,070		105,690
Current maturities of long-term debt	702,067		580,611
Total current liabilities	8,388,521		8,750,054
Long-term liabilities
Long-term debt	10,349,913		10,066,931
Deferred income taxes	232,444		250,171
Long-term operating lease liabilities	633,824		636,417
Other long-term liabilities	1,012,634		967,907
Total long-term liabilities	12,228,815		11,921,426
Noncontrolling interest	33,306		31,948
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	1,774,141		1,766,305
Retained earnings	10,649,338		10,539,722
Accumulated other comprehensive loss	(1,324,788)		(1,482,054)
Treasury stock at cost, 257,846,972 and 256,531,543 shares	(10,427,277)		(10,206,888)
Total shareholders’ equity	1,436,589		1,382,260
Total liabilities and shareholders’ equity	$	22,087,231	$	22,085,688

Note: The July 2, 2022 balance sheet has been derived from the audited financial statements at that date.

See Notes to Consolidated Financial Statements

1

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. 31, 2022		Jan. 1, 2022		Dec. 31, 2022		Jan. 1, 2022
Sales	$	18,593,953	$	16,320,203	$	37,720,783	$	32,776,749
Cost of sales	15,244,337		13,429,053		30,882,312		26,913,891
Gross profit	3,349,616		2,891,150		6,838,471		5,862,858
Operating expenses	2,708,974		2,446,241		5,463,496		4,786,267
Operating income	640,642		444,909		1,374,975		1,076,591
Interest expense	132,042		242,899		256,192		371,113
Other expense (income), net (1)	330,124		(10,676)		345,405		(13,928)
Earnings before income taxes	178,476		212,686		773,378		719,406
Income taxes	37,260		45,245		166,594		173,952
Net earnings	$	141,216	$	167,441	$	606,784	$	545,454
Net earnings:
Basic earnings per share	$	0.28	$	0.33	$	1.20	$	1.07
Diluted earnings per share	0.28		0.33		1.19		1.06
Average shares outstanding	507,609,696		511,044,400		507,594,137		511,780,234
Diluted shares outstanding	510,145,794		514,574,889		510,264,473		515,178,910

(1) Sysco’s second quarter of fiscal 2023 included a charge for $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

2

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In thousands)

	13-Week Period Ended				26-Week Period Ended
	Dec. 31, 2022		Jan. 1, 2022		Dec. 31, 2022		Jan. 1, 2022
Net earnings	$	141,216	$	167,441	$	606,784	$	545,454
Other comprehensive income (loss):
Foreign currency translation adjustment	241,814		(26,870)		9,632		(114,064)
Items presented net of tax:
Amortization of cash flow hedges	2,170		2,155		4,325		4,310
Change in net investment hedges	(33,749)		8,362		(10,240)		18,527
Change in cash flow hedges	203		(6,101)		(26,187)		(6,530)
Reclassification adjustment for loss included in net income	22		—		22		—
Amortization of prior service cost	74		74		148		148
Amortization of actuarial loss	5,628		5,488		12,519		11,855
Pension settlement charge	236,591		—		236,591		—
Net actuarial loss arising in current year	(67,388)		—		(67,388)		—
Change in marketable securities	1,172		(1,429)		(2,156)		(1,740)
Total other comprehensive income (loss)	386,537		(18,321)		157,266		(87,494)
Comprehensive income	$	527,753	$	149,120	$	764,050	$	457,960

See Notes to Consolidated Financial Statements

3

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 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								(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
								Accumulated Other Comprehensive Loss
	Common Stock			Paid-in Capital		Retained Earnings				Treasury Stock
	Shares	Amount								Shares	Amounts		Totals
Balance as of October 2, 2021	765,174,900	$	765,175	$	1,655,110	$	10,288,291	$	(1,217,937)	252,825,080	$	(9,817,347)	$	1,673,292
Net earnings						167,441							167,441
Foreign currency translation adjustment								(26,870)					(26,870)
Amortization of cash flow hedges, net of tax								2,155					2,155
Change in cash flow hedges, net of tax								(6,101)					(6,101)
Change in net investment hedges, net of tax								8,362					8,362
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax								5,562					5,562
Change in marketable securities, net of tax								(1,429)					(1,429)
Dividends declared ($0.47 per common share)						(239,107)							(239,107)
Treasury stock purchases										5,679,298	(415,824)		(415,824)
Increase in ownership interest in subsidiaries				(304)									(304)
Share-based compensation awards				35,681						(470,522)	18,214		53,895
Balance as of January 1, 2022	765,174,900	$	765,175	$	1,690,487	$	10,216,625	$	(1,236,258)	258,033,856	$	(10,214,957)	$	1,221,072

4

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 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								(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
								Accumulated Other Comprehensive Loss
	Common Stock			Paid-in Capital		Retained Earnings				Treasury Stock
	Shares	Amount								Shares	Amounts		Totals
Balance as of July 3, 2021	765,174,900	$	765,175	$	1,619,995	$	10,151,706	$	(1,148,764)	253,342,595	$	(9,835,216)	$	1,552,896
Net earnings						545,454							545,454
Foreign currency translation adjustment								(114,064)					(114,064)
Amortization of cash flow hedges, net of tax								4,310					4,310
Change in cash flow hedges, net of tax								(6,530)					(6,530)
Change in net investment hedges, net of tax								18,527					18,527
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax								12,003					12,003
Change in marketable securities, net of tax								(1,740)					(1,740)
Dividends declared ($0.94 per common share)						(480,535)							(480,535)
Treasury stock purchases										5,679,298	(415,824)		(415,824)
Increase in ownership interest in subsidiaries				(304)									(304)
Share-based compensation awards				70,796						(988,037)	36,083		106,879
Balance as of January 1, 2022	765,174,900	$	765,175	$	1,690,487	$	10,216,625	$	(1,236,258)	258,033,856	$	(10,214,957)	$	1,221,072

See Notes to Consolidated Financial Statements

5

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED CASH FLOWS (Unaudited)

(In thousands)

	26-Week Period Ended
	Dec. 31, 2022		Jan. 1, 2022
Cash flows from operating activities:
Net earnings	$	606,784	$	545,454
Adjustments to reconcile net earnings to cash provided by operating activities:
Pension settlement charge	315,354		—
Share-based compensation expense	52,679		60,254
Depreciation and amortization	378,949		377,763
Operating lease asset amortization	55,884		54,856
Amortization of debt issuance and other debt-related costs	10,315		11,014
Deferred income taxes	(123,187)		(72,892)
Provision for losses on receivables	9,732		1,508
Loss on extinguishment of debt	—		115,603
Other non-cash items	11,525		1,103
Additional changes in certain assets and liabilities, net of effect of businesses acquired:
Increase in receivables	(87,190)		(385,179)
Increase in inventories	(222,650)		(357,908)
Increase in prepaid expenses and other current assets	(8,915)		(12,560)
(Decrease) increase in accounts payable	(390,124)		83,214
(Decrease) increase in accrued expenses	(62,779)		95,388
Decrease in operating lease liabilities	(57,234)		(65,123)
Increase (decrease) in accrued income taxes	3,108		(111,227)
Decrease (increase) in other assets	22,156		(4,255)
(Decrease) increase in other long-term liabilities	(10,941)		40,034
Net cash provided by operating activities	503,466		377,047
Cash flows from investing activities:
Additions to plant and equipment	(309,664)		(181,374)
Proceeds from sales of plant and equipment	25,493		5,450
Acquisition of businesses, net of cash acquired	(37,699)		(769,658)
Purchase of marketable securities	(14,019)		(18,539)
Proceeds from sales of marketable securities	11,641		16,648
Other investing activities	4,840		6,651
Net cash used for investing activities	(319,408)		(940,822)
Cash flows from financing activities:
Bank and commercial paper borrowings, net	155,000		—
Other debt borrowings including senior notes	140,024		1,249,995
Other debt repayments including senior notes	(57,270)		(23,050)
Redemption premiums and repayments for senior notes	—		(1,395,668)
Debt issuance costs	—		(15,547)
Cash received from termination of interest rate swap agreements	—		23,127
Proceeds from stock option exercises	47,339		36,083
Stock repurchases	(267,727)		(415,824)
Dividends paid	(498,323)		(481,386)
Other financing activities	(46,517)		(5,297)
Net cash used for financing activities	(527,474)		(1,027,567)
Effect of exchange rates on cash, cash equivalents and restricted cash	(2,314)		(10,868)
Net decrease in cash, cash equivalents and restricted cash	(345,730)		(1,602,210)
Cash, cash equivalents and restricted cash at beginning of period	931,376		3,037,100
Cash, cash equivalents and restricted cash at end of period	$	585,646	$	1,434,890
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	244,530	$	258,436
Income taxes, net of refunds	289,413		342,628

See Notes to Consolidated Financial Statements

6

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 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 2, 2022. 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 the company’s 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. 31, 2022		Jan. 1, 2022
	(In thousands)
Cash and cash equivalents	$	500,340	$	1,374,276
Restricted cash (1)	85,306		60,614
Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows	$	585,646	$	1,434,890

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

2. NEW ACCOUNTING STANDARDS

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 supplier finance programs they use in connection with the purchase of goods and services, along with information about their obligations under these programs, including a rollforward 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 rollforward 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 rollforward requirement, which will be applied prospectively. The company is currently reviewing the provisions of the new standard.

7

3. REVENUE

The company recognizes revenues when its 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, was $4.6 billion as of both December 31, 2022 and July 2, 2022.

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. As of December 31, 2022, Sysco’s contract assets were not significant. Sysco has 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. 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.

8

	13-Week Period Ended Jan. 1, 2022
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Fresh and frozen meats	$	2,403,763	$	396,232	$	513,138	$	—	$	3,313,133
Canned and dry products	2,087,808		560,623		155,615		30		2,804,076
Frozen fruits, vegetables, bakery and other	1,508,462		518,271		292,185		—		2,318,918