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Sysco Delivers Over 1.3 Times U.S. Market Share Growth and Strong Profit; Positive Momentum for Fiscal Year 2023

·35-min read
Sysco Corporation
Sysco Corporation

HOUSTON, Aug. 09, 2022 (GLOBE NEWSWIRE) -- Sysco Corporation (NYSE: SYY) today announced financial results for its 13-week fourth fiscal quarter and its 52-week fiscal year ended July 2, 2022. In fiscal year 2021, the fourth quarter included 14 weeks, and the year included 53 weeks.1

Key highlights for the fourth quarter and full year of fiscal year 2022 include:

  • Sysco growth outpaced the U.S. market by more than 1.3 times for the full year;

  • Recipe For Growth advanced as planned;

  • Volume growth for the quarter and year;

  • Effective pass-through of rising product costs;

  • Continued operating income recovery for the International segment;

  • Profitable growth, strong fourth quarter results; and

  • Capital allocation strategy executed, with significant investment in business, debt paid down during the quarter, and $500 million in shares repurchased for the year.

“Sysco generated another quarter of top-line and bottom-line improvements, topping off a strong year of financial performance, especially given the environmental conditions. This included growing more than 1.3 times the market for the year and exceeding fiscal 2019 operating income for the quarter by 6.4 percent. The strong financial performance was delivered while simultaneously investing in our Recipe For Growth strategy. We are delivering new commercial capabilities and accelerating growth in a way which will pay long-term returns for Sysco and our investors,” said Kevin Hourican, Sysco’s President and Chief Executive Officer. “I want to thank our associates around the world for their continued hard work and customer centricity.”

Key financial results for the fourth quarter of fiscal year 2022 include:

  • Sales increased 17.5% versus the same period in fiscal year 2021 and, on a comparable 13-week basis, increased 26.5% to $19.0 billion. Sales increased 22.5% versus the same period in fiscal year 2019;

  • U.S. Broadline volume decreased 2.1% versus the same period in fiscal year 2021 and, on a comparable 13-week basis, increased 5.4%. U.S. Broadline volume decreased 2.2% versus the same period in fiscal year 2019;

  • Gross profit increased 18.1% to $3.4 billion, as compared to the same period last year, and increased 15.6%, as compared to the same period in fiscal year 2019;

  • Operating income increased 34.6% to $766.7 million, and adjusted1 operating income increased to $876.8 million, as compared to the same period last year, while operating income increased 6.4% and adjusted1 operating income increased 7.2%, as compared to the same period in fiscal year 2019;

  • Earnings before interest, taxes, depreciation and amortization (“EBITDA”) increased to $971.7 million, and adjusted EBITDA increased to $1.0 billion, in each case as compared to the same period last year. On a comparable 13-week basis, EBITDA increased 34.4% and adjusted EBITDA increased 44.5%, in each case as compared to the same period last year. EBITDA increased 1.3% and adjusted EBITDA increased 8.7%, in each case as compared to the same period in fiscal year 2019;2 and

  • EPS3 increased to $0.99 compared to $0.29 in the same period last year. Adjusted1 EPS increased to $1.15 compared to $0.71 in the same period last year, and on a comparable 13-week basis, increased $0.49 or 74.2%. EPS decreased $0.04 and adjusted EPS increased $0.05, in each case as compared to the same period in fiscal year 2019.

_______________________
1 Adjusted financial results, including adjusted operating income (loss), adjusted earnings per share (EPS) and adjusted EBITDA, are non-GAAP financial measures that exclude certain items, which primarily include acquisition-related costs, restructuring costs, transformational project costs, adjustments to our bad debt reserve specific to aged receivables existing prior to the COVID-19 pandemic and a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory. Specific to adjusted EPS, this year’s Certain Items include losses on the extinguishment of debt and the impact of an increase in reserves for uncertain tax positions. Specific to adjusted EPS, last year’s fourth quarter and fiscal 2021 Certain Items include the impact of a gain on sale of property and the impact of a U.K. tax law change. The fiscal 2021 Certain Items include the impact of a loss on the sale of Cake Corporation and our Spain operations. Results shown on a comparable 13 or 52 week basis are non-GAAP numbers and have been further adjusted to remove dollar amounts equal to 1/14 of the comparable 13 or 52 week basis are non-GAAP numbers and have been further adjusted to remove dollar amounts equal to 1/14 of the comparable fourth quarter non-GAAP results. Reconciliations of all non-GAAP financial measures to the nearest corresponding GAAP financial measure are included at the end of this release.
EBITDA and adjusted EBITDA are non-GAAP financial measures. Reconciliations of all non-GAAP financial measures to the nearest corresponding GAAP financial measure are included at the end of this release.
3 Earnings per share (EPS) are shown on a diluted basis unless otherwise specified.

Key financial results for fiscal year 2022 included:

  • Sales increased 33.8% versus fiscal year 2021 and, on a comparable 52-week basis, increased 36.9% to $68.6 billion. Sales increased 14.2% versus fiscal year 2019;

  • U.S. Broadline volume increased 15.4% versus fiscal year 2021 and, on a comparable 52-week basis, increased 17.9%. U.S. Broadline volume decreased 3.7% versus fiscal year 2019;

  • Gross profit increased 31.7% to $12.3 billion, as compared to the prior year, and increased 8.0%, as compared to fiscal year 2019;

  • Operating income increased 62.7% to $2.3 billion, and adjusted1 operating income increased to $2.6 billion, as compared to the prior year, while operating income increased 0.4%, and adjusted1 operating income decreased 3.7%, as compared to fiscal year 2019;

  • EBITDA increased to $3.1 billion, and adjusted EBITDA increased to $3.3 billion, in each case as compared to the prior year. On a comparable 52-week basis, EBITDA increased 46.4% and adjusted EBITDA increased 58.5%, in each case as compared to the prior year. EBITDA increased 0.4% and adjusted EBITDA decreased 0.7%, in each case as compared to fiscal year 2019;2 and

  • EPS3 increased to $2.64 compared to $1.02 in the prior year. Adjusted1 EPS increased to $3.25 compared to $1.44 in the prior year and, on a comparable 52-week basis, increased $1.86, or 133.8%. EPS decreased $0.56, and adjusted EPS decreased $0.30, in each case as compared to fiscal year 2019.

“Sysco delivered strong financial results, growing volumes and sales, effectively managing double-digit inflation and improving profitability, all while also strengthening our balance sheet and returning $1.5 billion to our shareholders. We have many reasons to be upbeat about our business. While keeping a careful eye on macro-economic developments, we expect to grow adjusted EPS by 26% - 35%, or $4.09 - $4.394, for fiscal year 2023,” said Aaron Alt, Sysco’s Chief Financial Officer.

________________________
4 Adjusted earnings per share is a non-GAAP financial measure; however, we cannot predict with certainty the particular certain items that would be excluded from the calculation of this measure for future periods. Due to these uncertainties, we cannot provide a quantitative reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure without unreasonable effort. However, we expect to calculate adjusted earnings per share for future periods in the same manner as the reconciliations provided for the historical periods that are included at the end of this release.

Fourth Quarter Fiscal Year 2022 Results

Total Sysco

Sales for the fourth quarter were $19.0 billion, an increase of 17.5% compared to the same period last year.

Gross profit increased 18.1% to $3.4 billion, gross margin increased 10 basis points to 18.2% and adjusted gross margin increased 33 basis points to 18.4%, compared in each case to the same period last year. The increase in gross profit for the fourth quarter was primarily driven by higher volumes and high rates of inflation that were effectively managed.

Operating expenses increased $331.5 million, or 14.1%, compared to the same period last year, driven by increased volumes and continued investments to drive our transformation initiatives. Adjusted operating expenses increased $300.5 million, or 13.0%, compared to the same period last year.

Operating income was $766.7 million, an increase of $197.0 million, or 34.6%, compared to the same period last year. Adjusted operating income was $876.8 million, an increase of $271.6 million compared to the same period last year.

U.S. Foodservice Operations

The U.S. Foodservice Operations segment generated strong sales growth, overall share gains and increased profitability.

Sales for the fourth quarter were $13.4 billion, an increase of 16.4% compared to the same period last year. Local case volume within U.S. Broadline operations decreased 7.8% for the fourth quarter, while total case volume within U.S. Broadline operations decreased 2.1%, in each case as compared to the same period last year.

Gross profit increased 17.5% to $2.6 billion, and gross margin increased 17 basis points to 19.4%, compared in each case to the same period last year. Product cost inflation was 15.3% in U.S. Broadline, as measured by the estimated change in Sysco’s product costs, primarily in the dairy, poultry and fresh produce categories.

Operating expenses increased $272.3 million, or 19.8%, compared to the same period last year. Adjusted operating expenses increased $244.9 million, or 17.5%, compared to the same period last year.

Operating income was $952.0 million, an increase of $114.6 million compared to the same period last year. Adjusted operating income was $959.5 million, an increase of $141.9 million compared to the same period last year.

International Foodservice Operations

The International Foodservice Operations segment delivered another quarter of strong sales and operating leverage, driving significant profit growth.

Sales for the fourth quarter were $3.3 billion, an increase of 30.3% compared to the same period last year. On a constant currency basis5, sales for the fourth quarter were $3.5 billion, an increase of 40.4% compared to the same period last year. Foreign exchange rates decreased both International Foodservice Operations sales by 10.1% and total Sysco sales by 1.6% during the quarter.

Gross profit increased 31.4% to $651.8 million, and gross margin increased 17 basis points to 20.0%, compared in each case to the same period last year. On a constant currency basis5, gross profit increased 42.9% to $708.9 million. Foreign exchange rates decreased both International Foodservice Operations gross profit by 11.5% and total Sysco gross profit by 2.0% during the quarter.

Operating expenses increased $78.2 million, or 14.9%, compared to the same period last year. Adjusted operating expenses increased $61.3 million, or 12.4%, compared to the same period last year. On a constant currency basis5, adjusted operating expenses increased $112.7 million, or 22.7%, compared to the same period last year. Foreign exchange rates decreased both International Foodservice Operations operating expenses by 10.3% and total Sysco operating expenses by 2.4% during the quarter.

Operating income was $47.1 million, an improvement of $77.6 million compared to the same period last year. Adjusted operating income increased $94.5 million compared to the same period last year. On a constant currency basis5, adjusted operating income was $100.3 million, an increase of $100.2 million compared to the same period last year. Foreign exchange rates decreased both International Foodservice Operations operating income by $5.8 million and total Sysco operating income by $3.2 million during the quarter.

________________________
5 Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on current year results. These adjusted measures are non-GAAP financial measures. Reconciliations of all non-GAAP financial measures to the nearest corresponding GAAP financial measure are included at the end of this release.

Fiscal Year 2022 Results

Total Sysco

Sales for fiscal year 2022 were $68.6 billion, an increase of 33.8% compared to the prior year.

Gross profit increased 31.7% to $12.3 billion, and gross margin decreased 29 basis points to 18.0%, compared in each case to the prior year. The increase in gross profit for the year was primarily driven by higher volumes and high rates of inflation that were effectively managed.

Operating expenses increased $2.1 billion, or 26.0%, compared to the prior year, driven by increased volumes, expenses associated with investments to drive our transformation initiatives, and snap-back and productivity related costs. Adjusted operating expenses increased $1.9 billion, or 23.6%, compared to the prior year.

Operating income was $2.3 billion, an increase of $901.8 million, or 62.7%, compared to the prior year. Adjusted operating income was $2.6 billion, an increase of $1.2 billion, or 80.3%, compared to the prior year.

U.S. Foodservice Operations

Sales for fiscal year 2022 were $48.5 billion, an increase of 35.8% compared to the prior year. Local case volume within U.S. Broadline operations increased 10.3% for fiscal year 2022, while total case volume within U.S. Broadline operations increased 15.4%, in each case as compared to the prior year. Both increases represent organic growth.

Gross profit increased 31.2% to $9.2 billion, and gross margin decreased 67 basis points to 19.0%, compared in each case to the prior year. Product cost inflation was 15.0% in U.S. Broadline, as measured by the estimated change in Sysco’s product costs, primarily in the poultry, meat and seafood categories.

Operating expenses increased $1.5 billion, or 32.3%, compared to the prior year. Adjusted operating expenses increased $1.3 billion, or 28.0%, compared to the prior year.

Operating income was $3.2 billion, an increase of $716.2 million, or 29.2%, compared to the prior year. Adjusted operating income was $3.2 billion, an increase of $871.8 million, or 37.6%, compared to the prior year.

International Foodservice Operations

Sales for fiscal year 2022 were $11.8 billion, an increase of $3.4 billion, or 41.2%, compared to the prior year. On a constant currency basis5, sales for fiscal year 2022 were $12.0 billion, an increase of 43.3% compared to the prior year. Foreign exchange rates decreased both International Foodservice Operations sales by 2.1% and total Sysco sales by 0.3% during the year.

Gross profit increased 44.5% to $2.4 billion, and gross margin increased 47 basis points to 20.2%, compared in each case to the prior year. On a constant currency basis5, gross profit increased 47.5% to $2.4 billion, as compared to the prior year. Foreign exchange rates decreased both International Foodservice Operations gross profit by 3.0% and total Sysco gross profit by 0.5% during the year.

Operating expenses increased $396.9 million, or 21.1%, compared to the prior year. Adjusted operating expenses increased $370.0 million, or 20.9%, compared to the prior year. On a constant currency basis5, adjusted operating expenses increased $420.9 million, or 23.7%, compared to the prior year. Foreign exchange rates decreased both International Foodservice Operations operating expense by 2.8% and total Sysco operating expense by 0.7% during the year.

Operating income was $102.3 million, an improvement of $334.7 million compared to the prior year. Adjusted operating income increased $361.7 million compared to the prior year. On a constant currency basis5, adjusted operating income was $236.4 million, an increase of $365.2 million compared to the prior year. Foreign exchange rates decreased International Foodservice Operations operating income by 2.7% and increased total Sysco operating income by $0.8 million during the year.

Balance Sheet, Cash Flow and Capital Spending

As of the end of the quarter, the company had a cash balance of $867.1 million and approximately $10.6 billion of debt outstanding.

During the year, Sysco returned $1.5 billion to shareholders via $500 million of share repurchases and $959 million of dividends.

Cash flow from operations was $1.8 billion for fiscal year 2022. During the year, the company made purposeful investments in working capital to drive increased sales and profitability, including making significant investments in inventory, with rising sales also contributing to rising accounts receivable, offset by rising accounts payable.

Capital expenditures, net of proceeds from sales of plant and equipment, for fiscal year 2022 were $608.7 million.

Free cash flow6 for fiscal year 2022 was $1.2 billion.

________________________
6 Free cash flow is a non-GAAP financial measure that represents net cash provided from operating activities less purchases of plant and equipment and includes proceeds from sales of plant and equipment. Reconciliations for all non-GAAP financial measures are included at the end of this release.

Conference Call & Webcast

Sysco will host a conference call to review the company’s fourth quarter and full fiscal year 2022 financial results on Tuesday, August 9, 2022, at 10:00 a.m. Eastern Daylight Time. A live webcast of the call, accompanying slide presentation and a copy of this news release will be available online at investors.sysco.com.

Key Highlights:

 

Fourth Quarter

Fiscal Year

 

 

 

Comparable
Adjusted

 

 

Comparable
Adjusted

Financial Comparison:

July 2, 2022
(13 Weeks)

Change
(13 vs. 14
weeks)

Change
(13 vs. 13
weeks)

July 2, 2022
(52 Weeks)

Change
(52 vs. 53
weeks)

Change
(52 vs. 52
weeks)

GAAP:

 

 

 

 

 

 

Sales

$19.0 billion

17.5%

 

$68.6 billion

33.8%

 

Gross profit

$3.4 billion

18.1%

 

$12.3 billion

31.7%

 

Gross Margin

18.2%

10 bps

 

18.0%

-29 bps

 

Operating expenses

$2.7 billion

14.1%

 

$10.0 billion

26.0%

 

Operating Income

$766.7 million

34.6%

 

$2.3 billion

62.7%

 

Operating Margin

4.0%

51 bps

 

3.4%

61 bps

 

Net Earnings

$510.0 million

237.5%

 

$1.4 billion

159.2%

 

Diluted Earnings Per Share

$0.99

241.4%

 

$2.64

158.8%

 

 

 

 

 

 

 

 

Non-GAAP (1):

 

 

 

 

 

 

Sales

$19.0 billion

17.5%

26.5%

$68.6 billion

33.8%

36.9%

Gross profit

$3.5 billion

19.6%

28.8%

$12.4 billion

32.5%

35.5%

Gross Margin

18.4%

33 bps

33 bps

18.1%

-18 bps

-18 bps

Operating Expenses

$2.6 billion

13.0%

21.7%

$9.8 billion

23.6%

26.2%

Operating Income

$876.8 million

44.9%

56.0%

$2.6 billion

80.3%

85.8%

Operating Margin

4.6%

88 bps

88 bps

3.8%

99 bps

101 bps

EBITDA

$971.7 million

24.8%

34.4%

$3.1 billion

42.7%

46.4%

Adjusted EBITDA

$1.0 billion

34.2%

44.5%

$3.3 billion

54.4%

58.5%

Net Earnings

$588.3 million

60.6%

73.0%

$1.7 billion

126.0%

134.2%

Diluted Earnings Per Share (2)

$1.15

62.0%

74.2%

$3.25

125.7%

133.8%

 

 

 

 

 

 

 

Case Growth (3):

 

 

 

 

 

 

U.S. Broadline

-2.1%

 

5.4%

15.4%

 

17.9%

Local

-7.8%

 

 

10.3%

 

 

 

 

 

 

 

 

 

Sysco Brand Sales as a % of Cases:

 

 

 

 

 

 

U.S. Broadline

36.6%

0 bps

 

36.2%

-29 bps

 

Local

45.4%

78 bps

 

44.5%

55 bps

 

Note:

(1) Reconciliations of all non-GAAP financial measures to the nearest respective GAAP financial measures are included at the end of this release.

(2) Individual components in the table above may not sum to the totals due to the rounding.

(3) Case growth for 13-week and 52-week comparable columns show year-over-year growth.

NM represents that the percentage change is not meaningful.

Forward-Looking Statements  

Statements made in this press release or in our earnings call for the fourth quarter of fiscal year 2022 that look forward in time or that express management’s beliefs, expectations or hopes are forward-looking statements under the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the views of management at the time such statements are made and are subject to a number of risks, uncertainties, estimates, and assumptions that may cause actual results to differ materially from current expectations. These statements include statements concerning: the effect, impact, potential duration or other implications of the COVID-19 pandemic and any expectations we may have with respect thereto; our expectations regarding future improvements in productivity; our belief that improvements in our organizational capabilities will deliver compelling outcomes in future periods; our expectations regarding improvements in international volume; our expectations that our transformational agenda will drive long-term growth; our expectations regarding the continuation of an inflationary environment; our expectations regarding improvements in the efficiency of our supply chain; our expectations regarding the impact of our Recipe for Growth strategy and the pace of progress in implementing the initiatives under that strategy; our expectations regarding Sysco’s ability to outperform the market in future periods; our expectations that our strategic priorities will enable us to grow faster than the market; our expectations regarding our efforts to reduce overtime rates and the incremental investments in hiring; our expectations regarding the expansion of our driver academy and our belief that the academy will enable us to provide upward career path mobility for our warehouse associates and improve associate retention; our expectations regarding the benefits of the six-day delivery model; our plans to improve the capabilities of our sales team; our expectations regarding the impact of our growth initiatives and their ability to enable Sysco to consistently outperform the market; our expectations regarding the impact of the Coastal Companies acquisition on our business; our expectations regarding our ability to grow faster than the total market in fiscal 2023 and to exceed our growth target by the end of fiscal 2024; our ability to deliver against our strategic priorities; economic trends in the United States and abroad; our plans to make continued capital investments over the next three fiscal years in our technology, fleet and buildings; our belief that there is further opportunity for profit in the future; our future growth, including growth in sales and earnings per share; our expectations regarding profits and sales in fiscal 2023; the pace of implementation of our business transformation initiatives; our expectations regarding our balanced approach to capital allocation and rewarding our shareholders; our plans to improve associate retention, training and productivity; our belief that our Recipe for Growth transformation is creating capabilities that will help us profitably grow for the long term; our expectations regarding our long-term financial outlook; and our expectations regarding additional improvements from snap-back costs and productivity expenses during the fiscal fourth quarter.

It is important to note that actual results could differ materially from those projected in such forward-looking statements based on numerous factors, including those outside of Sysco’s control. For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see our Annual Report on Form 10-K for the year ended July 3, 2021, as filed with the SEC, and our subsequent filings with the SEC. We do not undertake to update our forward-looking statements, except as required by applicable law.

About Sysco

Sysco is the global leader in selling, marketing and distributing food products to restaurants, healthcare and educational facilities, lodging establishments and other customers who prepare meals away from home. Its family of products also includes equipment and supplies for the foodservice and hospitality industries. With more than 71,000 associates, the company operates 333 distribution facilities worldwide and serves approximately 700,000 customer locations. For fiscal year 2022 that ended July 2, 2022, the company generated sales of more than $68 billion. Information about our CSR program, including Sysco’s 2021 Corporate Social Responsibility Report, can be found at sysco.com/csr2021report.

For more information, visit www.sysco.com or connect with Sysco on Facebook at www.facebook.com/SyscoFoods. For important news and information regarding Sysco, visit the Investor Relations section of the company’s Internet home page at investors.sysco.com, which Sysco plans to use as a primary channel for publishing key information to its investors, some of which may contain material and previously non-public information. In addition, investors should continue to review our news releases and filings with the SEC. It is possible that the information we disclose through any of these channels of distribution could be deemed to be material information.

Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED RESULTS OF OPERATIONS (Unaudited)
(In Thousands, Except for Share and Per Share Data)

 

Quarter Ended

 

Year Ended

 

Jul. 2, 2022

 

Jul. 3, 2021

 

Jul. 2, 2022

 

Jul. 3, 2021

 

 

 

 

 

 

 

 

Sales

$

18,957,258

 

 

$

16,136,893

 

 

$

68,636,146

 

 

$

51,297,843

 

Cost of sales

 

15,512,986

 

 

 

13,221,115

 

 

 

56,315,622

 

 

 

41,941,094

 

Gross profit

 

3,444,272

 

 

 

2,915,778

 

 

 

12,320,524

 

 

 

9,356,749

 

Operating expenses

 

2,677,557

 

 

 

2,346,094

 

 

 

9,981,489

 

 

 

7,919,507

 

Operating income

 

766,715

 

 

 

569,684

 

 

 

2,339,035

 

 

 

1,437,242

 

Interest expense

 

128,512

 

 

 

441,149

 

 

 

623,643

 

 

 

880,137

 

Other income, net

 

(3,676

)

 

 

(13,483

)

 

 

(31,381

)

 

 

(27,623

)

Earnings before income taxes

 

641,879

 

 

 

142,018

 

 

 

1,746,773

 

 

 

584,728

 

Income tax expense (benefit)

 

131,890

 

 

 

(9,075

)

 

 

388,005

 

 

 

60,519

 

Net earnings

$

509,989

 

 

$

151,093

 

 

$

1,358,768

 

 

$

524,209

 

 

 

 

 

 

 

 

 

Net earnings:

 

 

 

 

 

 

 

Basic earnings per share

$

1.00

 

 

$

0.29

 

 

$

2.66

 

 

$

1.03

 

Diluted earnings per share

 

0.99

 

 

 

0.29

 

 

 

2.64

 

 

 

1.02

 

 

 

 

 

 

 

 

 

Average shares outstanding

 

510,593,953

 

 

 

512,423,938

 

 

 

510,630,645

 

 

 

510,696,398

 

Diluted shares outstanding

 

513,426,966

 

 

 

516,036,842

 

 

 

514,005,827

 

 

 

513,555,088

 


Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In Thousands, Except for Share Data)

 

Jul. 2, 2022

 

Jul. 3, 2021

 

 

 

 

ASSETS

Current assets

 

 

 

Cash and cash equivalents

$

867,086

 

 

$

3,007,123

 

Accounts receivable, less allowances of $70,790 and $117,695

 

4,868,779

 

 

 

3,781,510

 

Inventories

 

4,448,154

 

 

 

3,695,219

 

Prepaid expenses and other current assets

 

303,789

 

 

 

240,956

 

Income tax receivable

 

35,934

 

 

 

8,759

 

Total current assets

 

10,523,742

 

 

 

10,733,567

 

Plant and equipment at cost, less accumulated depreciation

 

4,456,420

 

 

 

4,326,063

 

Other long-term assets

 

 

 

Goodwill

 

4,542,315

 

 

 

3,944,139

 

Intangibles, less amortization

 

952,683

 

 

 

746,073

 

Deferred income taxes

 

377,604

 

 

 

352,523

 

Operating lease right-of-use assets, net

 

723,297

 

 

 

709,163

 

Other assets

 

550,150

 

 

 

602,011

 

Total other long-term assets

 

7,146,049

 

 

 

6,353,909

 

Total assets

$

22,126,211

 

 

$

21,413,539

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

 

 

 

Accounts payable

$

5,793,481

 

 

$

4,884,781

 

Accrued expenses

 

2,270,753

 

 

 

1,814,837

 

Accrued income taxes

 

40,042

 

 

 

22,644

 

Current operating lease liabilities

 

105,690

 

 

 

102,659

 

Current maturities of long-term debt

 

580,611

 

 

 

494,923

 

Total current liabilities

 

8,790,577

 

 

 

7,319,844

 

Long-term liabilities

 

 

 

Long-term debt

 

10,066,931

 

 

 

10,588,184

 

Deferred income taxes

 

250,171

 

 

 

147,066

 

Long-term operating lease liabilities

 

636,417

 

 

 

634,481

 

Other long-term liabilities

 

967,907

 

 

 

1,136,480

 

Total long-term liabilities

 

11,921,426

 

 

 

12,506,211

 

Commitments and contingencies

 

 

 

Noncontrolling interest

 

31,948

 

 

 

34,588

 

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

 

1,766,305

 

 

 

1,619,995

 

Retained earnings

 

10,539,722

 

 

 

10,151,706

 

Accumulated other comprehensive loss

 

(1,482,054

)

 

 

(1,148,764

)

Treasury stock at cost, 256,531,543 and 253,342,595 shares

 

(10,206,888

)

 

 

(9,835,216

)

Total shareholders’ equity

 

1,382,260

 

 

 

1,552,896

 

Total liabilities and shareholders’ equity

$

22,126,211

 

 

$

21,413,539

 


Sysco Corporation and its Consolidated Subsidiaries
CONSOLIDATED CASH FLOWS (Unaudited)
(In Thousands)

 

Year Ended

 

Jul. 2, 2022

 

Jul. 3, 2021

Cash flows from operating activities:

 

 

 

Net earnings

$

1,358,768

 

 

$

524,209

 

Adjustments to reconcile net earnings to cash provided by operating activities:

 

 

 

Share-based compensation expense

 

122,315

 

 

 

95,815

 

Depreciation and amortization

 

772,881

 

 

 

737,916

 

Operating lease asset amortization

 

108,052

 

 

 

113,906

 

Amortization of debt issuance and other debt-related costs

 

22,305

 

 

 

26,115

 

Deferred income taxes

 

(64,454

)

 

 

(157,864

)

Provision for losses on receivables

 

(15,494

)

 

 

(152,740

)

Loss on extinguishment of debt

 

115,603

 

 

 

293,897

 

Loss on sale of business

 

 

 

 

22,737

 

Other non-cash items

 

(12,692

)

 

 

(16,502

)

Additional changes in certain assets and liabilities, net of effect of businesses acquired:

 

 

 

Increase in receivables

 

(1,001,037

)

 

 

(662,345

)

Increase in inventories

 

(719,266

)

 

 

(551,405

)

Decrease (increase) in prepaid expenses and other current assets

 

4,805

 

 

 

(32,577

)

Increase in accounts payable

 

850,974

 

 

 

1,459,222

 

Increase in accrued expenses

 

423,429

 

 

 

167,181

 

Decrease in operating lease liabilities

 

(125,741

)

 

 

(142,351

)

(Decrease) increase in accrued income taxes

 

(9,775

)

 

 

118,953

 

(Increase) decrease in other assets

 

(1,082

)

 

 

18,822

 

(Decrease) increase in other long-term liabilities

 

(38,305

)

 

 

40,853

 

Net cash provided by operating activities

 

1,791,286

 

 

 

1,903,842

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Additions to plant and equipment

 

(632,802

)

 

 

(470,676

)

Proceeds from sales of plant and equipment

 

24,144

 

 

 

59,147

 

Acquisition of businesses, net of cash acquired

 

(1,281,137

)

 

 

 

Purchase of marketable securities

 

(19,318

)

 

 

(53,148

)

Proceeds from sales of marketable securities

 

16,648

 

 

 

35,979

 

Other investing activities (1)

 

14,259

 

 

 

 

Net cash used for investing activities

 

(1,878,206

)

 

 

(428,698

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Bank and commercial paper (repayments) borrowings, net

 

 

 

 

(826,182

)

Other debt borrowings including senior notes

 

1,248,207

 

 

 

1,484

 

Other debt repayments including senior notes

 

(494,585

)

 

 

(2,003,135

)

Redemption premiums and repayments for senior notes

 

(1,395,668

)

 

 

(999,996

)

Cash received from termination of interest rate swap agreements

 

23,127

 

 

 

 

Proceeds from stock option exercises

 

128,167

 

 

 

130,374

 

Stock repurchases

 

(499,825

)

 

 

 

Dividends paid

 

(958,937

)

 

 

(917,564

)

Other financing activities (2)

 

(37,384

)

 

 

(13,209

)

Net cash (used for) provided by financing activities

 

(1,986,898

)

 

 

(4,628,228

)

 

 

 

 

Effect of exchange rates on cash, cash equivalents and restricted cash

 

(31,906

)

 

 

94,614

 

 

 

 

 

Net decrease in cash and cash equivalents (3)

 

(2,105,724

)

 

 

(3,058,470

)

Cash, cash equivalents and restricted cash at beginning of period

 

3,037,100

 

 

 

6,095,570

 

Cash, cash equivalents and restricted cash at end of period (3)

$

931,376

 

 

$

3,037,100

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

Cash paid during the period for:

 

 

 

Interest

$

498,349

 

 

$

877,512

 

Income taxes, net of refunds

 

450,148

 

 

 

103,547

 


(1)

Change primarily includes proceeds from the settlement of corporate-owned life insurance policies.

(2)

Change includes cash paid for shares withheld to cover taxes, settlement of interest rate hedges and other financing activities.

(3)

Change includes restricted cash included within other assets in the Consolidated Balance Sheet.


Sysco Corporation and its Consolidated Subsidiaries
Non-GAAP Reconciliation (Unaudited)
Impact of Certain Items

 

Our discussion of our results includes certain non-GAAP financial measures, such as EBITDA and adjusted EBITDA, that we believe provide important perspective with respect to underlying business trends. Other than free cash flow, any non-GAAP financial measures will be denoted as adjusted measures to remove the impact of (A) restructuring and transformational project costs consisting of: (1) restructuring charges, (2) expenses associated with our various transformation initiatives and (3) facility closure and severance charges; acquisition-related costs consisting of: (1) intangible amortization expense and (B) acquisition costs and due diligence costs related to our acquisitions; and (C) the reduction of bad debt expense previously recognized in fiscal 2020 due to the impact of the COVID-19 pandemic on the collectability of our pre-pandemic trade receivable balances. Our results for fiscal 2022 were also impacted by: (1) a write-down of COVID-related personal protection equipment inventory due to the reduction in the net realizable value of inventory, (2) debt extinguishment costs and (3) the increase in reserves for uncertain tax positions. Our results for fiscal 2021 were also impacted by losses on the sale of businesses.

 

The results of our foreign operations can be impacted due to changes in exchange rates applicable in converting local currencies to U.S. dollars. We measure our total Sysco and our International Foodservice Operations results on a constant currency basis. Constant currency operating results are calculated by translating current-period local currency operating results with the currency exchange rates used to translate the financial statements in the comparable prior-year period to determine what the current-period U.S. dollar operating results would have been if the currency exchange rate had not changed from the comparable prior-year period.

 

Management believes that adjusting its operating expenses, operating income, net earnings and diluted earnings per share to remove these Certain Items and presenting its International Foodservice Operations results on a constant currency basis, provides an important perspective with respect to our underlying business trends and results and provides meaningful supplemental information to both management and investors that (1) is indicative of the performance of the company’s underlying operations and (2) facilitates comparisons on a year-over-year basis.

 

Sysco has a history of growth through acquisitions and excludes from its non-GAAP financial measures the impact of acquisition-related intangible amortization, acquisition costs and due-diligence costs for those acquisitions. We believe this approach significantly enhances the comparability of Sysco’s results for fiscal 2022 and fiscal 2021.

 

Set forth below is a reconciliation of sales, operating expenses, operating income, other (income) expense, net earnings and diluted earnings per share to adjusted results for these measures for the periods presented. Individual components of diluted earnings per share may not add up to the total presented due to rounding. Adjusted diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.


Sysco Corporation and its Consolidated Subsidiaries
Non-GAAP Reconciliation (Unaudited)
Impact of Certain Items
(Dollars in Thousands, Except for Share and Per Share Data)

 

 

13-Week
Period Ended
Jul. 2, 2022

 

14-Week
Period Ended
Jul. 3, 2021

 

Change in
Dollars

 

% Change

Sales (GAAP) (A)

 

$

18,957,258

 

 

$

16,136,893

 

 

$

2,820,365

 

 

17.5

%

Impact of currency fluctuations (1)

 

 

255,672

 

 

 

 

 

 

255,672

 

 

1.6

 

Comparable sales using a constant currency basis (Non-GAAP)

 

 

19,212,930

 

 

 

16,136,893

 

 

 

3,076,037

 

 

19.1

 

Less 1 week fourth quarter sales (B)

 

 

 

 

 

(1,152,635

)

 

 

1,152,635

 

 

9.1

 

Comparable sales using a constant currency and a 13 week basis (Non-GAAP)

 

 

19,212,930

 

 

 

14,984,258

 

 

 

4,228,672

 

 

28.2

 

Comparable sales using a 13 week basis (Non-GAAP) (C)(D)

 

$

18,957,258

 

 

$

14,984,258

 

 

$

3,973,000

 

 

26.5

%

 

 

 

 

 

 

 

 

 

Cost of sales (GAAP)

 

$

15,512,986

 

 

$

13,221,115

 

 

$

2,291,871

 

 

17.3

%

Impact of inventory valuation adjustment (2)

 

 

(43,673

)

 

 

 

 

 

(43,673

)

 

(0.3

)

Cost of sales adjusted for Certain Items (Non-GAAP)

 

 

15,469,313

 

 

 

13,221,115

 

 

 

2,248,198

 

 

17.0

 

Less 1 week fourth quarter cost of sales

 

 

 

 

 

(944,365

)

 

 

944,365

 

 

9.0

 

Comparable cost of sales adjusted for a 13 week basis (Non-GAAP)

 

$

15,469,313

 

 

$

12,276,750

 

 

$

3,192,563

 

 

26.0

%

 

 

 

 

 

 

 

 

 

Gross profit (GAAP)

 

$

3,444,272

 

 

$

2,915,778

 

 

$

528,494

 

 

18.1

%

Impact of inventory valuation adjustment (2)

 

 

43,673

 

 

 

 

 

 

43,673

 

 

1.5

 

Comparable gross profit adjusted for Certain Items (Non-GAAP) (A)

 

 

3,487,945

 

 

 

2,915,778

 

 

 

572,167

 

 

19.6

 

Impact of currency fluctuations (1)

 

 

58,256

 

 

 

 

 

 

58,256

 

 

2.0

 

Comparable gross profit adjusted for Certain Items using a constant currency basis (Non-GAAP)

 

 

3,546,201

 

 

 

2,915,778

 

 

 

630,423

 

 

21.6

 

Less 1 week fourth quarter gross profit (B)

 

 

 

 

 

(208,270

)

 

 

208,270

 

 

9.4

 

Comparable gross profit adjusted for Certain Items using a constant currency and a 13 week basis (Non-GAAP)

 

 

3,546,201

 

 

 

2,707,508

 

 

 

838,693

 

 

31.0

 

Comparable gross profit adjusted for Certain Items using a 13 week basis (Non-GAAP) (C)

 

$

3,487,945

 

 

$

2,707,508

 

 

$

780,437

 

 

28.8

%

 

 

 

 

 

 

 

 

 

Gross margin (GAAP)

 

 

18.17

%

 

 

18.07

%

 

 

 

10 bps

Impact of inventory valuation adjustment (2)

 

 

0.23

 

 

 

 

 

 

 

23 bps

Comparable gross margin adjusted for Certain Items (Non-GAAP) (A)

 

 

18.40

 

 

 

18.07

 

 

 

 

33 bps

Impact of currency fluctuations (1)

 

 

0.06

 

 

 

 

 

 

 

6 bps

Comparable gross margin adjusted for Certain Items using a constant currency basis (Non-GAAP)

 

 

18.46

 

 

 

18.07

 

 

 

 

39 bps

Less 1 week fourth quarter gross margin (B)

 

 

 

 

 

 

 

 

 

0 bps

Comparable gross margin adjusted for Certain Items using a constant currency and a 13 week basis (Non-GAAP)

 

 

18.46

 

 

 

18.07

 

 

 

 

39 bps

Comparable gross margin adjusted for Certain Items using a 13 week basis (Non-GAAP) (C)

 

 

18.40

%

 

 

18.07

%

 

 

 

33 bps

 

 

 

 

 

 

 

 

 

Operating expenses (GAAP)

 

$

2,677,557

 

 

$

2,346,094

 

 

$

331,463

 

 

14.1

%

Impact of restructuring and transformational project costs (3)

 

 

(39,474

)

 

 

(33,110

)

 

 

(6,364

)

 

(19.2

)

Impact of acquisition-related costs (4)

 

 

(35,724

)

 

 

(24,826

)

 

 

(10,898

)

 

(43.9

)

Impact of bad debt reserve adjustments (5)

 

 

8,783

 

 

 

22,441

 

 

 

(13,658

)

 

(60.9

)

Operating expenses adjusted for Certain Items (Non-GAAP) (A)

 

 

2,611,142

 

 

 

2,310,599

 

 

 

300,543

 

 

13.0

 

Impact of currency fluctuations (1)

 

 

55,085

 

 

 

 

 

 

55,085

 

 

2.4

 

Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)

 

 

2,666,227

 

 

 

2,310,599

 

 

 

355,628

 

 

15.4

 

Less 1 week fourth quarter operating expenses (B)

 

 

 

 

 

(165,043

)

 

 

165,043

 

 

8.9

 

Comparable operating expenses adjusted for Certain Items using a constant currency and a 13 week basis (Non-GAAP)

 

 

2,666,227

 

 

 

2,145,556

 

 

 

520,671

 

 

24.3

 

Comparable operating expenses adjusted for Certain Items using a 13 week basis (Non-GAAP) (C)

 

$

2,611,142

 

 

$

2,145,556

 

 

$

465,586

 

 

21.7

%

 

 

 

 

 

 

 

 

 

Operating expense as a percentage of sales (GAAP)

 

 

14.12

%

 

 

14.54

%

 

 

 

-42 bps

Impact of certain item adjustments

 

 

(0.35

)

 

 

(0.22

)

 

 

 

-13 bps

Adjusted operating expense as a percentage of sales (Non-GAAP)

 

 

13.77

%

 

 

14.32

%

 

 

 

-55 bps

 

 

 

 

 

 

 

 

 

Operating income (GAAP)

 

$

766,715

 

 

$

569,684

 

 

$

197,031

 

 

34.6

%

Impact of inventory valuation adjustment (2)

 

 

43,673

 

 

 

 

 

 

43,673

 

 

NM

Impact of restructuring and transformational project costs (3)

 

 

39,474

 

 

 

33,110

 

 

 

6,364

 

 

19.2

 

Impact of acquisition-related costs (4)

 

 

35,724

 

 

 

24,826

 

 

 

10,898

 

 

43.9

 

Impact of bad debt reserve adjustments (5)

 

 

(8,783

)

 

 

(22,441

)

 

 

13,658

 

 

60.9

 

Operating income adjusted for Certain Items (Non-GAAP) (A)

 

 

876,803

 

 

 

605,179

 

 

 

271,624

 

 

44.9

 

Impact of currency fluctuations (1)

 

 

3,171

 

 

 

 

 

 

3,171

 

 

0.5

 

Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP)

 

 

879,974

 

 

 

605,179

 

 

 

274,795

 

 

45.4

 

Less 1 week fourth quarter operating income (B)

 

 

 

 

 

(43,227

)

 

 

43,227

 

 

11.2

 

Comparable operating income adjusted for Certain Items using a constant currency and a 13 week basis (Non-GAAP)

 

 

879,974

 

 

 

561,952

 

 

 

318,022

 

 

56.6

 

Comparable operating income adjusted for Certain Items using a 13 week basis (Non-GAAP) (C)(E)

 

$

876,803

 

 

$

561,952

 

 

$

314,851

 

 

56.0

%

 

 

 

 

 

 

 

 

 

Operating margin (GAAP)

 

 

4.04

%

 

 

3.53

%

 

 

 

51 bps

Operating margin adjusted for Certain Items (Non-GAAP)

 

 

4.63

%

 

 

3.75

%

 

 

 

88 bps

Operating margin adjusted for Certain Items using a constant currency basis (Non-GAAP)

 

 

4.58

%

 

 

3.75

%

 

 

 

83 bps

Operating margin excluding Certain Items using a constant currency and a 13 week basis (Non-GAAP)

 

 

4.58

%

 

 

3.75

%

 

 

 

83 bps

Operating margin adjusted for Certain Items using a 13 week basis (Non-GAAP) (F)

 

 

4.63

%

 

 

3.75

%

 

 

 

88 bps

 

 

 

 

 

 

 

 

 

Interest expense (GAAP)

 

$

128,512

 

 

$

441,149

 

 

$

(312,637

)

 

(70.9

)%

Impact of loss on extinguishment of debt

 

 

 

 

 

(293,897

)

 

 

293,897

 

 

NM

Interest expense adjusted for Certain Items (Non-GAAP)

 

 

128,512

 

 

 

147,252

 

 

 

(18,740

)

 

(12.7

)

Less 1 week fourth quarter interest expense

 

 

 

 

 

(10,518

)

 

 

10,518

 

 

6.7

 

Interest expense adjusted for Certain Items using a 13 week basis (Non-GAAP)

 

$

128,512

 

 

$

136,734

 

 

$

(8,222

)

 

(6.0

)%

 

 

 

 

 

 

 

 

 

Other income (GAAP)

 

$

(3,676

)

 

$

(13,483

)

 

$

9,807

 

 

72.7

%

Impact of other non-routine gains and losses

 

 

2,057

 

 

 

12,374

 

 

 

(10,317

)

 

(83.4

)

Other income adjusted for Certain Items (Non-GAAP)

 

 

(1,619

)

 

 

(1,109

)

 

 

(510

)

 

(46.0

)

Less 1 week fourth quarter other income

 

 

 

 

 

79

 

 

 

(79

)

 

(11.2

)

Other income adjusted for Certain Items using a 13 week basis (Non-GAAP)

 

$

(1,619

)

 

$

(1,030

)

 

$

(589

)

 

(57.2

)%

 

 

 

 

 

 

 

 

 

Net earnings (GAAP)

 

$

509,989

 

 

$

151,093

 

 

$

358,896

 

 

237.5

%

Impact of inventory valuation adjustment (2)

 

 

43,673

 

 

 

 

 

 

43,673

 

 

NM

Impact of restructuring and transformational project costs (3)

 

 

39,474

 

 

 

33,110

 

 

 

6,364

 

 

19.2

 

Impact of acquisition-related costs (4)

 

 

35,724

 

 

 

24,826

 

 

 

10,898

 

 

43.9