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 March ~~28, 2020~~27, 2021


☐			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)

(IRS employer identification number)

1390 Enclave Parkway, Houston, Texas 77077-2099

(Address of principal executive offices and 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

~~507,617,963~~511,581,899 shares of common stock were outstanding as of April ~~17, 2020.~~16, 2021.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share data)


		Mar. 28, 2020		Jun. 29, 2019			Mar. 27, 2021		Jun. 27, 2020
		(unaudited)					(unaudited)
ASSETS	ASSETS									ASSETS
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	2,240,807	$	513,460	Cash and cash equivalents	$	4,895,723	$	6,059,427
Accounts and notes receivable, less allowances of $246,076 and $28,176		3,656,219		4,181,696
Accounts receivable, less allowances of $211,607 and $334,810						Accounts receivable, less allowances of $211,607 and $334,810	3,220,659		2,893,551
Inventories	Inventories	3,697,515		3,216,034		Inventories	3,218,827		3,095,085

Prepaid expenses and other current assets	Prepaid expenses and other current assets	234,857		210,582		Prepaid expenses and other current assets	250,022		192,163

Income tax receivable	Income tax receivable	28,377		19,733		Income tax receivable	1,534		108,006
Total current assets	Total current assets	9,857,775		8,141,505		Total current assets	11,586,765		12,348,232
Plant and equipment at cost, less accumulated depreciation	Plant and equipment at cost, less accumulated depreciation	4,604,618		4,501,705		Plant and equipment at cost, less accumulated depreciation	4,297,862		4,458,567
Other long-term assets	Other long-term assets					Other long-term assets
Goodwill	Goodwill	3,862,725		3,896,226		Goodwill	3,932,570		3,732,469
Intangibles, less amortization	Intangibles, less amortization	802,593		857,301		Intangibles, less amortization	769,503		780,172

Deferred income taxes	Deferred income taxes	168,496		80,760		Deferred income taxes	321,674		194,115
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net	620,556		—		Operating lease right-of-use assets, net	661,474		603,616
Other assets	Other assets	515,569		489,025		Other assets	473,433		511,095
Total other long-term assets	Total other long-term assets	5,969,939		5,323,312		Total other long-term assets	6,158,654		5,821,467
Total assets	Total assets	$	20,432,332	$	17,966,522	Total assets	$	22,043,281	$	22,628,266

LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY									LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities	Current liabilities					Current liabilities
Notes payable	Notes payable	$	4,314	$	3,957	Notes payable	$	8,315	$	2,266
Accounts payable	Accounts payable	3,969,004		4,314,620		Accounts payable	4,221,252		3,447,065
Accrued expenses	Accrued expenses	1,721,100		1,729,941		Accrued expenses	1,645,139		1,616,289
Accrued income taxes	Accrued income taxes	—		17,343		Accrued income taxes	64,159		2,938
Current operating lease liabilities	Current operating lease liabilities	102,994		—		Current operating lease liabilities	111,761		107,167
Current maturities of long-term debt	Current maturities of long-term debt	827,597		37,322		Current maturities of long-term debt	957,303		1,542,128
Total current liabilities	Total current liabilities	6,625,009		6,103,183		Total current liabilities	7,007,929		6,717,853
Long-term liabilities	Long-term liabilities					Long-term liabilities
Long-term debt	Long-term debt	10,023,250		8,122,058		Long-term debt	11,741,114		12,902,485
Deferred income taxes	Deferred income taxes	128,848		172,232		Deferred income taxes	49,426		86,601
Long-term operating lease liabilities	Long-term operating lease liabilities	543,127		—		Long-term operating lease liabilities	586,479		523,496
Other long-term liabilities	Other long-term liabilities	1,051,655		1,031,020		Other long-term liabilities	1,228,265		1,204,953
Total long-term liabilities	Total long-term liabilities	11,746,880		9,325,310		Total long-term liabilities	13,605,284		14,717,535

Noncontrolling interest	Noncontrolling interest	31,553		35,426		Noncontrolling interest	34,471		34,265
Shareholders’ equity	Shareholders’ equity					Shareholders’ equity
Preferred stock, par value $1 per share Authorized 1,500,000 shares, issued none	Preferred stock, par value $1 per share Authorized 1,500,000 shares, issued none	—		—		Preferred stock, par value $1 per share Authorized 1,500,000 shares, issued none	0		0
Common stock, par value $1 per share Authorized 2,000,000,000 shares, issued 765,174,900 shares	Common stock, par value $1 per share Authorized 2,000,000,000 shares, issued 765,174,900 shares	765,175		765,175		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	Paid-in capital	1,528,893		1,457,419		Paid-in capital	1,594,561		1,506,901
Retained earnings	Retained earnings	11,407,033		11,229,679		Retained earnings	10,241,666		10,563,008
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,665,522)		(1,599,729)		Accumulated other comprehensive loss	(1,352,446)		(1,710,881)
Treasury stock at cost, 257,976,491 and 252,297,926 shares		(10,006,689)		(9,349,941)
Treasury stock at cost, 253,817,013 and 256,915,825 shares						Treasury stock at cost, 253,817,013 and 256,915,825 shares	(9,853,359)		(9,965,590)
Total shareholders’ equity	Total shareholders’ equity	2,028,890		2,502,603		Total shareholders’ equity	1,395,597		1,158,613
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	20,432,332	$	17,966,522	Total liabilities and shareholders’ equity	$	22,043,281	$	22,628,266

Note: The June ~~29, 2019~~27, 2020 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						39-Week Period Ended							13-Week Period Ended				39-Week Period Ended
		Mar. 28, 2020		Mar. 30, 2019		Mar. 28, 2020		Mar. 30, 2019			Mar. 27, 2021		Mar. 28, 2020		Mar. 27, 2021		Mar. 28, 2020
Sales	Sales	$	13,698,699	$	14,658,074	$	44,026,746	$	44,639,060	Sales	$	11,824,589	$	13,698,699	$	35,160,950	$	44,026,746
Cost of sales	Cost of sales	11,134,459		11,903,776		35,690,737		36,209,265		Cost of sales	9,701,921		11,134,459		28,719,979		35,690,737
Gross profit	Gross profit	2,564,240		2,754,298		8,336,009		8,429,795		Gross profit	2,122,668		2,564,240		6,440,971		8,336,009
Operating expenses	Operating expenses	2,503,966		2,224,713		7,054,924		6,820,175		Operating expenses	1,886,751		2,503,966		5,573,413		7,054,924
Operating income	Operating income	60,274		529,585		1,281,085		1,609,620		Operating income	235,917		60,274		867,558		1,281,085
Interest expense	Interest expense	83,854		94,514		243,951		270,643		Interest expense	145,773		83,854		438,988		243,951
Other expense (income), net		5,200		4,120		7,505		15,449
Other (income) expense, net										Other (income) expense, net	(12,708)		5,200		(14,140)		7,505
Earnings (loss) before income taxes	Earnings (loss) before income taxes	(28,780)		430,951		1,029,629		1,323,528		Earnings (loss) before income taxes	102,852		(28,780)		442,710		1,029,629
Income taxes	Income taxes	(25,483)		(9,132)		195,735		185,023		Income taxes	13,925		(25,483)		69,594		195,735
Net earnings (loss)	Net earnings (loss)	$	(3,297)	$	440,083	$	833,894	$	1,138,505	Net earnings (loss)	$	88,927	$	(3,297)	$	373,116	$	833,894

Net earnings (loss):	Net earnings (loss):									Net earnings (loss):
Basic earnings (loss) per share	Basic earnings (loss) per share	$	(0.01)	$	0.86	$	1.63	$	2.20	Basic earnings (loss) per share	$	0.17	$	(0.01)	$	0.73	$	1.63
Diluted earnings (loss) per share	Diluted earnings (loss) per share	(0.01)		0.85		1.62		2.17		Diluted earnings (loss) per share	0.17		(0.01)		0.73		1.62

Average shares outstanding	Average shares outstanding	508,745,253		514,185,453		510,729,277		517,637,952		Average shares outstanding	511,110,670		508,745,253		510,081,610		510,729,277
Diluted shares outstanding	Diluted shares outstanding	512,657,657		519,821,311		515,632,815		524,487,510		Diluted shares outstanding	514,585,129		512,657,657		512,688,895		515,632,815

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(In thousands)


		13-Week Period Ended						39-Week Period Ended							13-Week Period Ended				39-Week Period Ended
		Mar. 28, 2020		Mar. 30, 2019		Mar. 28, 2020		Mar. 30, 2019			Mar. 27, 2021		Mar. 28, 2020		Mar. 27, 2021		Mar. 28, 2020
Net earnings (loss)	Net earnings (loss)	$	(3,297)	$	440,083	$	833,894	$	1,138,505	Net earnings (loss)	$	88,927	$	(3,297)	$	373,116	$	833,894
Other comprehensive (loss) income:
Other comprehensive income (loss):										Other comprehensive income (loss):
Foreign currency translation adjustment	Foreign currency translation adjustment	(151,143)		37,471		(122,347)		(88,989)		Foreign currency translation adjustment	9,805		(151,143)		345,452		(122,347)
Items presented net of tax:	Items presented net of tax:									Items presented net of tax:
Amortization of cash flow hedges	Amortization of cash flow hedges	2,155		2,155		6,465		6,465		Amortization of cash flow hedges	2,191		2,155		6,501		6,465
Change in net investment hedges	Change in net investment hedges	57,069		(9,466)		45,590		25,591		Change in net investment hedges	9,388		57,069		(22,539)		45,590
Change in cash flow hedges	Change in cash flow hedges	(16,751)		1,546		(22,289)		(10,246)		Change in cash flow hedges	9,135		(16,751)		8,503		(22,289)

Amortization of prior service cost	Amortization of prior service cost	1,428		1,600		4,284		4,800		Amortization of prior service cost	137		1,428		411		4,284
Amortization of actuarial loss	Amortization of actuarial loss	8,029		6,529		21,937		19,587		Amortization of actuarial loss	7,820		8,029		23,378		21,937

Actuarial loss		—		—		—		(32,511)

Change in marketable securities	Change in marketable securities	20		1,103		567		1,103		Change in marketable securities	(2,753)		20		(3,271)		567
Total other comprehensive (loss) income		(99,193)		40,938		(65,793)		(74,200)
Comprehensive (loss) income		$	(102,490)	$	481,021	$	768,101	$	1,064,305
Total other comprehensive income (loss)										Total other comprehensive income (loss)	35,723		(99,193)		358,435		(65,793)
Comprehensive income (loss)										Comprehensive income (loss)	$	124,650	$	(102,490)	$	731,551	$	768,101

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY

(In thousands, except for share data)

Quarter to Date


									Accumulated Other Comprehensive Loss																														Accumulated Other Comprehensive Loss
		Common Stock					Paid-in Capital				Retained Earnings						Treasury Stock																Common Stock								Paid-in Capital		Retained Earnings				Accumulated Other Comprehensive Loss			Treasury Stock
		Shares	Amount									Accumulated Other Comprehensive Loss					Shares					Amounts				Totals			Shares				Amount				Paid-in Capital								Shares					Amounts			Totals
Balance as of December 28, 2019		765,174,900	$	765,175	$	1,526,132	$	11,639,727	$	(1,566,329)			$	(9,837,179)			$	2,527,526
Balance as of December 26, 2020																			Balance as of December 26, 2020		765,174,900				$	765,175			$	1,565,255			$	10,383,493					$	(1,388,169)		255,176,469			$	(9,898,955)		$	1,426,799
Net earnings	Net earnings						(3,297)															(3,297)		Net earnings													88,927													88,927

Foreign currency translation adjustment	Foreign currency translation adjustment								(151,143)										(151,143)			Foreign currency translation adjustment																	9,805									9,805
Amortization of cash flow hedges, net of tax	Amortization of cash flow hedges, net of tax								2,155										2,155			Amortization of cash flow hedges, net of tax																	2,191									2,191
Change in cash flow hedges, net of tax	Change in cash flow hedges, net of tax								(16,751)										(16,751)			Change in cash flow hedges, net of tax																	9,135									9,135
Change in net investment hedges, net of tax	Change in net investment hedges, net of tax								57,069										57,069			Change in net investment hedges, net of tax																	9,388									9,388

Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax	Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax								9,457										9,457			Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax																	7,957									7,957
Change in marketable securities, net of tax																						Change in marketable securities, net of tax																	(2,753)									(2,753)

Dividends declared ($0.45 per common share)																						Dividends declared ($0.45 per common share)													(230,754)													(230,754)

Share-based compensation awards																						Share-based compensation awards									29,306											(1,359,456)			45,596			74,902
Balance as of March 27, 2021																						Balance as of March 27, 2021	765,174,900				$	765,175			$	1,594,561			$	10,241,666			$	(1,352,446)		253,817,013			$	(9,853,359)		$	1,395,597

																																							Accumulated Other Comprehensive Loss
																							Common Stock								Paid-in Capital				Retained Earnings						Treasury Stock
																							Shares				Amount										Shares				Accumulated Other Comprehensive Loss		Amounts				Totals
Balance as of December 28, 2019																						Balance as of December 28, 2019	765,174,900				$	765,175					$	1,526,132			$	11,639,727					$	(1,566,329)				$	(9,837,179)		$	2,527,526
Net loss																						Net loss													(3,297)													(3,297)
Foreign currency translation adjustment																						Foreign currency translation adjustment																	(151,143)									(151,143)
Amortization of cash flow hedges, net of tax																						Amortization of cash flow hedges, net of tax																	2,155									2,155
Change in cash flow hedges, net of tax																						Change in cash flow hedges, net of tax																	(16,751)									(16,751)
Change in net investment hedges, net of tax																						Change in net investment hedges, net of tax																	57,069									57,069
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax																						Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax																	9,457									9,457
Change in marketable securities, net of tax	Change in marketable securities, net of tax								20										20			Change in marketable securities, net of tax																	20									20

Dividends declared ($0.45 per common share)	Dividends declared ($0.45 per common share)						(229,397)												(229,397)			Dividends declared ($0.45 per common share)													(229,397)													(229,397)
Treasury stock purchases	Treasury stock purchases												2,940,960				(214,304)					(214,304)		Treasury stock purchases																			2,940,960				(214,304)			(214,304)

Share-based compensation awards	Share-based compensation awards				2,761							(1,296,857)			44,794				47,555			Share-based compensation awards									2,761											(1,296,857)			44,794			47,555
Balance as of March 28, 2020	Balance as of March 28, 2020	765,174,900	$	765,175	$	1,528,893	$	11,407,033	$	(1,665,522)		257,976,491			$	(10,006,689)			$	2,028,890		Balance as of March 28, 2020	765,174,900				$	765,175			$	1,528,893			$	11,407,033			$	(1,665,522)		257,976,491			$	(10,006,689)		$	2,028,890

									Accumulated Other Comprehensive Loss
		Common Stock					Paid-in Capital				Retained Earnings						Treasury Stock
		Shares	Amount									Accumulated Other Comprehensive Loss					Shares					Amounts				Totals
Balance as of December 29, 2018		765,174,900	$	765,175	$	1,465,461	$	10,654,711	$	(1,524,407)			$	(9,193,304)			$	2,167,636
Net earnings							440,083										440,083
Foreign currency translation adjustment									37,471										37,471
Amortization of cash flow hedges, net of tax									2,155										2,155
Change in cash flow hedges, net of tax									1,546										1,546
Change in net investment hedges, net of tax									(9,466)										(9,466)
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax									8,129										8,129
Change in marketable securities, net of tax									1,103										1,103
Dividends declared ($0.39 per common share)							(201,146)												(201,146)
Treasury stock purchases													1,835,170				(118,524)					(118,524)
Increase in ownership interest in subsidiaries					(54,877)														(54,877)
Share-based compensation awards					14,495								(2,164,427)				73,292					87,787
Balance as of March 30, 2019		765,174,900	$	765,175	$	1,425,079	$	10,893,648	$	(1,483,469)		251,329,462			$	(9,238,536)			$	2,361,897

Year to Date


									Accumulated Other Comprehensive Loss																														Accumulated Other Comprehensive Loss
		Common Stock					Paid-in Capital				Retained Earnings						Treasury Stock																Common Stock								Paid-in Capital		Retained Earnings				Accumulated Other Comprehensive Loss			Treasury Stock
		Shares	Amount									Accumulated Other Comprehensive Loss					Shares					Amounts				Totals			Shares				Amount				Paid-in Capital								Shares					Amounts			Totals
Balance as of June 29, 2019		765,174,900	$	765,175	$	1,457,419	$	11,229,679	$	(1,599,729)			$	(9,349,941)			$	2,502,603
Balance as of June 27, 2020																			Balance as of June 27, 2020		765,174,900				$	765,175			$	1,506,901			$	10,563,008					$	(1,710,881)		256,915,825			$	(9,965,590)		$	1,158,613
Net earnings	Net earnings						833,894															833,894		Net earnings													373,116													373,116

Foreign currency translation adjustment	Foreign currency translation adjustment								(122,347)													(122,347)		Foreign currency translation adjustment																	345,452									345,452
Amortization of cash flow hedges, net of tax	Amortization of cash flow hedges, net of tax								6,465										6,465			Amortization of cash flow hedges, net of tax																	6,501									6,501
Change in cash flow hedges, net of tax	Change in cash flow hedges, net of tax								(22,289)										(22,289)			Change in cash flow hedges, net of tax																	8,503									8,503
Change in net investment hedges, net of tax	Change in net investment hedges, net of tax								45,590										45,590			Change in net investment hedges, net of tax																	(22,539)									(22,539)
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax	Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax								26,221										26,221			Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax																	23,789									23,789

Change in marketable securities, net of tax	Change in marketable securities, net of tax								567										567			Change in marketable securities, net of tax																	(3,271)									(3,271)
Adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), net of tax																						Adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), net of tax													(2,068)													(2,068)
Dividends declared ($1.35 per common share)																						Dividends declared ($1.35 per common share)													(692,390)													(692,390)

Share-based compensation awards																						Share-based compensation awards									87,660											(3,098,812)			112,231			199,891
Balance as of March 27, 2021																						Balance as of March 27, 2021	765,174,900				$	765,175			$	1,594,561			$	10,241,666			$	(1,352,446)		253,817,013			$	(9,853,359)		$	1,395,597

																																							Accumulated Other Comprehensive Loss
																							Common Stock								Paid-in Capital				Retained Earnings						Treasury Stock
																							Shares				Amount										Shares				Accumulated Other Comprehensive Loss		Amounts				Totals
Balance as of June 29, 2019																						Balance as of June 29, 2019	765,174,900				$	765,175					$	1,457,419			$	11,229,679					$	(1,599,729)				$	(9,349,941)		$	2,502,603
Net earnings																						Net earnings													833,894													833,894
Foreign currency translation adjustment																						Foreign currency translation adjustment																	(122,347)									(122,347)
Amortization of cash flow hedges, net of tax																						Amortization of cash flow hedges, net of tax																	6,465									6,465
Change in cash flow hedges, net of tax																						Change in cash flow hedges, net of tax																	(22,289)									(22,289)
Change in net investment hedge, net of tax																						Change in net investment hedge, net of tax																	45,590									45,590
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax																						Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax																	26,221									26,221
Change in marketable securities, net of tax																						Change in marketable securities, net of tax																	567									567
Adoption of ASU 2016-02, Leases (Topic 842), net of tax	Adoption of ASU 2016-02, Leases (Topic 842), net of tax						1,978												1,978			Adoption of ASU 2016-02, Leases (Topic 842), net of tax													1,978													1,978
Dividends declared ($1.29 per common share)	Dividends declared ($1.29 per common share)						(658,518)												(658,518)			Dividends declared ($1.29 per common share)													(658,518)													(658,518)
Treasury stock purchases	Treasury stock purchases											11,030,287			(843,252)				(843,252)			Treasury stock purchases																				11,030,287			(843,252)			(843,252)

Share-based compensation awards	Share-based compensation awards				71,474							(5,351,722)			186,504				257,978			Share-based compensation awards									71,474											(5,351,722)			186,504			257,978
Balance as of March 28, 2020	Balance as of March 28, 2020	765,174,900	$	765,175	$	1,528,893	$	11,407,033	$	(1,665,522)		257,976,491			$	(10,006,689)			$	2,028,890		Balance as of March 28, 2020	765,174,900				$	765,175			$	1,528,893			$	11,407,033			$	(1,665,522)		257,976,491			$	(10,006,689)		$	2,028,890

									Accumulated Other Comprehensive Loss
		Common Stock					Paid-in Capital				Retained Earnings						Treasury Stock
		Shares	Amount									Accumulated Other Comprehensive Loss					Shares					Amounts				Totals
Balance as of June 30, 2018		765,174,900	$	765,175	$	1,383,619	$	10,348,628	$	(1,409,269)			$	(8,581,196)			$	2,506,957
Net earnings							1,138,505										1,138,505
Foreign currency translation adjustment									(88,989)													(88,989)
Amortization of cash flow hedges, net of tax									6,465													6,465
Change in cash flow hedges, net of tax									(10,246)										(10,246)
Change in net investment hedge, net of tax									25,591										25,591
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax									24,387										24,387
Pension funded status adjustment, net of tax									(32,511)										(32,511)
Change in marketable securities, net of tax									1,103										1,103
Dividends declared ($1.14 per common share)							(593,485)												(593,485)
Treasury stock purchases												12,850,437			(868,527)				(868,527)
Increase in ownership interest in subsidiaries					(54,877)														(54,877)
Share-based compensation awards					96,337							(6,054,223)			211,187				307,524
Balance as of March 30, 2019		765,174,900	$	765,175	$	1,425,079	$	10,893,648	$	(1,483,469)		251,329,462			$	(9,238,536)			$	2,361,897

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED CASH FLOWS (Unaudited)

(In thousands)


		39-Week Period Ended							39-Week Period Ended
		Mar. 28, 2020		Mar. 30, 2019			Mar. 27, 2021		Mar. 28, 2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net earnings	Net earnings	$	833,894	$	1,138,505	Net earnings	$	373,116	$	833,894
Adjustments to reconcile net earnings to cash provided by operating activities:	Adjustments to reconcile net earnings to cash provided by operating activities:					Adjustments to reconcile net earnings to cash provided by operating activities:
Share-based compensation expense	Share-based compensation expense	63,942		78,110		Share-based compensation expense	65,655		63,942
Depreciation and amortization	Depreciation and amortization	558,588		576,596		Depreciation and amortization	542,471		558,588
Operating lease asset amortization	Operating lease asset amortization	83,749		—		Operating lease asset amortization	81,414		83,749
Amortization of debt issuance and other debt-related costs	Amortization of debt issuance and other debt-related costs	15,247		16,244		Amortization of debt issuance and other debt-related costs	19,485		15,247

Goodwill Impairment		68,725		—
Goodwill impairment						Goodwill impairment	0		68,725
Deferred income taxes	Deferred income taxes	(145,133)		(98,206)		Deferred income taxes	(161,824)		(145,133)
Provision for losses on receivables	Provision for losses on receivables	213,769		43,791		Provision for losses on receivables	(137,670)		213,769
Loss on sale of businesses						Loss on sale of businesses	22,834		0
Other non-cash items	Other non-cash items	6,765		(7,677)		Other non-cash items	(7,507)		6,765
Additional changes in certain assets and liabilities, net of effect of businesses acquired:	Additional changes in certain assets and liabilities, net of effect of businesses acquired:					Additional changes in certain assets and liabilities, net of effect of businesses acquired:
Decrease (increase) in receivables		342,557		(317,627)
(Increase) in inventories		(497,391)		(231,732)
(Increase) in prepaid expenses and other current assets		(38,831)		(20,823)
(Decrease) increase in accounts payable		(353,836)		231,213
(Decrease) increase in accrued expenses		(28,406)		62,518
(Decrease) in operating lease liabilities		(95,861)		—
(Decrease) in accrued income taxes		(25,987)		(41,813)
Decrease (increase) in other assets		23,263		(14,819)
Increase (decrease) in other long-term liabilities		53,415		(49,055)
(Increase) decrease in receivables						(Increase) decrease in receivables	(130,403)		342,557
Increase in inventories						Increase in inventories	(82,525)		(497,391)
Increase in prepaid expenses and other current assets						Increase in prepaid expenses and other current assets	(50,833)		(38,831)
Increase (decrease) in accounts payable						Increase (decrease) in accounts payable	800,248		(353,836)
Increase (decrease) in accrued expenses						Increase (decrease) in accrued expenses	9,065		(28,406)
Decrease in operating lease liabilities						Decrease in operating lease liabilities	(94,228)		(95,861)
Increase (decrease) in accrued income taxes						Increase (decrease) in accrued income taxes	167,693		(25,987)
Decrease in other assets						Decrease in other assets	23,345		23,263
Increase in other long-term liabilities						Increase in other long-term liabilities	39,448		53,415

Net cash provided by operating activities	Net cash provided by operating activities	1,078,469		1,365,225		Net cash provided by operating activities	1,479,784		1,078,469
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Additions to plant and equipment	Additions to plant and equipment	(603,865)		(382,905)		Additions to plant and equipment	(251,167)		(603,865)
Proceeds from sales of plant and equipment	Proceeds from sales of plant and equipment	13,245		16,383		Proceeds from sales of plant and equipment	19,308		13,245
Acquisition of businesses, net of cash acquired	Acquisition of businesses, net of cash acquired	(142,780)		(97,530)		Acquisition of businesses, net of cash acquired	0		(142,780)
Purchase of marketable securities	Purchase of marketable securities	(11,424)		(115,807)		Purchase of marketable securities	(44,687)		(11,424)
Proceeds from sales of marketable securities	Proceeds from sales of marketable securities	17,465		—		Proceeds from sales of marketable securities	30,773		17,465
Other investing activities	Other investing activities	67,371		—		Other investing activities	0		67,371

Net cash used for investing activities	Net cash used for investing activities	(659,988)		(579,859)		Net cash used for investing activities	(245,773)		(659,988)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Bank and commercial paper borrowings, net		20,886		200,000
Bank and commercial paper (repayments) borrowings, net						Bank and commercial paper (repayments) borrowings, net	(411,200)		20,886
Other debt borrowings	Other debt borrowings	2,682,278		389,681		Other debt borrowings	2,943		2,682,278
Other debt repayments	Other debt repayments	(28,244)		(278,234)		Other debt repayments	(1,489,431)		(28,244)

Proceeds from stock option exercises	Proceeds from stock option exercises	186,503		211,174		Proceeds from stock option exercises	112,231		186,503

Treasury stock purchases		(844,699)		(866,714)
Stock repurchases						Stock repurchases	0		(844,699)
Dividends paid	Dividends paid	(628,056)		(575,059)		Dividends paid	(689,251)		(628,056)

Other financing activities	Other financing activities	(45,990)		(20,663)		Other financing activities	(15,024)		(45,990)
Net cash provided by (used for) for financing activities		1,342,678		(939,815)
Net cash (used for) provided by financing activities						Net cash (used for) provided by financing activities	(2,489,732)		1,342,678
Effect of exchange rates on cash, cash equivalents and restricted cash	Effect of exchange rates on cash, cash equivalents and restricted cash	(8,857)		(11,619)		Effect of exchange rates on cash, cash equivalents and restricted cash	85,183		(8,857)
Net increase (decrease) in cash, cash equivalents and restricted cash		1,752,302		(166,068)
Net (decrease) increase in cash, cash equivalents and restricted cash						Net (decrease) increase in cash, cash equivalents and restricted cash	(1,170,538)		1,752,302
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	532,245		715,844		Cash, cash equivalents and restricted cash at beginning of period	6,095,570		532,245
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	2,284,547	$	549,776	Cash, cash equivalents and restricted cash at end of period	$	4,925,032	$	2,284,547
Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest	Interest	$	247,606	$	252,377	Interest	$	386,753	$	247,606
Income taxes		358,622		379,728
Income taxes, net of refunds						Income taxes, net of refunds	71,435		358,622

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

NOTES TO 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 (loss), 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 (loss), 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 June ~~29, 2019.~~27, 2020. Sysco’s fiscal year ends on the Saturday nearest to June 30th. This results in a 53-week year ending July 3, 2021 for fiscal 2021. 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 ~~included~~reported within the ~~Consolidated Balance Sheets~~consolidated balance sheets that sum to the total of the amounts shown in the ~~Consolidated Statement~~consolidated statement of ~~Cash Flows:~~cash flows:


		Mar. 28, 2020		Mar. 30, 2019			Mar. 27, 2021		Mar. 28, 2020
		(In thousands)							(In thousands)
Cash and cash equivalents	Cash and cash equivalents	$	2,240,807	$	521,621	Cash and cash equivalents	$	4,895,723	$	2,240,807
Restricted cash ⁽¹⁾	Restricted cash ⁽¹⁾	43,740		28,155		Restricted cash (1)	29,309		43,740
Total cash, cash equivalents and restricted cash shown in the Consolidated Statement of Cash Flows		$	2,284,547	$	549,776
Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows						Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows	$	4,925,032	$	2,284,547

⁽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~~other assets in each consolidated balance sheet.

2. CHANGES IN ACCOUNTING

~~Leases~~Financial Instruments - Credit Losses

In ~~February~~June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ~~2016-02,~~ ~~Leases (Topic 842)~~, specifying the accounting for leases, which supersedes the leases requirements in Topic 840, Leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount and timing of cash flows arising from a lease. The amended guidance requires the recognition of lease assets and lease liabilities on the balance sheet for those leases currently classified as operating leases. In addition, Topic 842 expands the disclosure requirements of lease arrangements. Sysco adopted this ASU and related amendments as of June 30, 2019, the first day of fiscal 2020, under the modified retrospective approach and elected certain practical expedients permitted under the transition guidance, including to retain the historical lease classification, as well as relief from separating and allocating consideration across all categories of leases to lease and non-lease components of an agreement. For leases subject to index or rate adjustments, the most current index or rate adjustments were included in the measurement of operating lease obligations at adoption.

The adoption of this ASU and related amendments resulted in Sysco recognizing $647.2 million and $657.9 million of operating lease right-of-use (ROU) assets and operating lease liabilities, respectively, as of June 30, 2019. There were no other significant impacts to the company’s consolidated financial statements. Updated accounting policies and additional lease disclosures as a result of the adoption of this ASU are described in Note 12, “Leases.”

~~3. NEW ACCOUNTING STANDARDS~~

2016-13, Financial Instruments ~~- Credit Losses~~

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments -~~– Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,, which introduces a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. ~~The estimate~~Sysco adopted this ASU as of expected credit losses will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This ASU also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. This guidance is effective for fiscal years-and interim periods within those fiscal years beginning after December 15, 2019, which isJune 28, 2020, the first ~~quarter~~day of fiscal 2021, ~~for Sysco,~~ with ~~early adoption permitted.~~

~~The company is continuing~~no significant impact to ~~evaluate the impact of the pending adoption of this ASU on its ongoing financial reporting. Sysco does not expect that the implementation of the new standard will have a material effect on~~ the company’s financial statements. ~~The company will adopt the standard in the first quarter of fiscal 2021 using the modified retrospective method.~~

Implementation Costs Incurred in a Cloud Computing Arrangement

In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract,, which aligns the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The guidance amends Accounting Standards Codification (ASC) 350 to include in its scope implementation costs of a cloud computing arrangement that is a service contract and clarifies that a customer should apply ASC 350 to determine which implementation costs should be capitalized in such a cloud computing arrangement. ~~This guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019, which is the first quarter of fiscal 2021 for~~ Sysco ~~with early adoption permitted.~~

~~The company is continuing to evaluate the impact of the pending adoption of~~adopted this ASU on ~~its ongoing financial reporting. Sysco does not expect that the implementation of the new standard will have~~June 28, 2020 on a ~~material~~prospective basis with no effect on the company’s financial statements. ~~The company will adopt the standard in the first quarter of fiscal 2021 on a prospective basis.~~

4.3. 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. 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~~accounts receivable, less allowances in the consolidated balance sheet, were ~~$3.4~~$3.0 billion and ~~$3.9~~$2.7 billion as of March ~~28, 2020~~27, 2021 and June ~~29, 2019,~~27, 2020, 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~~other assets and amortized over the life of the contract or the expected life of the relationship with the customer. As of March ~~28, 2020,~~27, 2021, 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 Mar. 28, 2020																			13-Week Period Ended Mar. 27, 2021
		US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total			US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
		(In thousands)																			(In thousands)
Principal Product Categories	Principal Product Categories											Principal Product Categories
Fresh and frozen meats	Fresh and frozen meats	$	1,840,655	$	348,748	$	374,531	$	—	$	2,563,934	Fresh and frozen meats	$	1,585,533	$	227,350	$	425,156	$	0	$	2,238,039
Canned and dry products	Canned and dry products	1,747,522		516,841		28,804		—		2,293,167		Canned and dry products	1,513,681		338,853		46,583		0		1,899,117
Frozen fruits, vegetables, bakery and other	Frozen fruits, vegetables, bakery and other	1,316,562		479,444		244,151		—		2,040,157		Frozen fruits, vegetables, bakery and other	1,141,919		337,477		277,766		0		1,757,162
Poultry												Poultry	920,979		159,589		228,504		0		1,309,072
Dairy products	Dairy products	1,020,115		272,854		135,818		—		1,428,787		Dairy products	812,887		188,212		143,028		0		1,144,127
Poultry		953,741		177,661		179,833		—		1,311,235
Paper and disposables												Paper and disposables	752,996		93,205		189,337		10,122		1,045,660
Fresh produce	Fresh produce	926,527		223,614		57,667		—		1,207,808		Fresh produce	715,406		126,965		68,074		0		910,445
Paper and disposables		678,104		84,684		155,487		16,060		934,335
Seafood	Seafood	569,922		98,212		33,269		—		701,403		Seafood	507,446		55,873		36,553		0		599,872
Beverage products	Beverage products	253,683		111,105		132,430		18,681		515,899		Beverage products	186,211		56,963		145,704		11,080		399,958

Other ⁽¹⁾	Other ⁽¹⁾	280,174		195,479		22,121		204,200		701,974		Other (1)	223,183		138,639		19,990		139,325		521,137
Total Sales	Total Sales	$	9,587,005	$	2,508,642	$	1,364,111	$	238,941	$	13,698,699	Total Sales	$	8,360,241	$	1,723,126	$	1,580,695	$	160,527	$	11,824,589

⁽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 Mar. 28, 2020
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Fresh and frozen meats	$	1,840,655	$	348,748	$	374,531	$	0	$	2,563,934
Canned and dry products	1,747,522		516,841		28,804		0		2,293,167
Frozen fruits, vegetables, bakery and other	1,316,562		479,444		244,151		0		2,040,157
Dairy products	1,020,115		272,854		135,818		0		1,428,787
Poultry	953,741		177,661		179,833		0		1,311,235
Fresh produce	926,527		223,614		57,667		0		1,207,808
Paper and disposables	678,104		84,684		155,487		16,060		934,335
Seafood	569,922		98,212		33,269		0		701,403
Beverage products	253,683		111,105		132,430		18,681		515,899



Other (1)	280,174		195,479		22,121		204,200		701,974
Total Sales	$	9,587,005	$	2,508,642	$	1,364,111	$	238,941	$	13,698,699

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

13-Week Period Ended Mar. 30, 2019
US Foodservice Operations International Foodservice Operations SYGMA Other Total
(In thousands)
Principal Product Categories
Fresh and frozen meats $ 2,035,201 $ 389,126 $ 386,074 $ — $ 2,810,401
Canned and dry products 1,812,070 554,653 69,730 — 2,436,453
Frozen fruits, vegetables, bakery and other 1,408,601 500,999 300,725 — 2,210,325
Dairy products 1,030,209 304,315 145,460 — 1,479,984
Poultry 1,013,513 195,816 200,518 — 1,409,847
Fresh produce 936,972 245,436 56,847 — 1,239,255
Paper and disposables 686,732 88,400 178,465 14,287 967,884
Seafood 624,953 166,103 32,959 — 824,015
Beverage products 277,421 129,366 136,876 19,787 563,450
Other ⁽¹⁾
279,611 183,677 29,658 223,514 716,460
Total Sales $ 10,105,283 $ 2,757,891 $ 1,537,312 $ 257,588 $ 14,658,074


	39-Week Period Ended Mar. 27, 2021
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Fresh and frozen meats	$	4,583,392	$	809,339	$	1,256,208	$	0	$	6,648,939
Canned and dry products	4,325,880		1,113,600		109,023		11		5,548,514
Frozen fruits, vegetables, bakery and other	3,269,395		1,158,748		809,975		0		5,238,118
Poultry	2,600,235		513,184		662,759		0		3,776,178
Dairy products	2,467,961		629,376		433,023		0		3,530,360
Paper and disposables	2,149,596		276,819		550,605		30,435		3,007,455
Fresh produce	2,123,214		443,462		199,584		0		2,766,260
Seafood	1,398,098		213,874		88,036		0		1,700,008
Beverage products	535,130		207,851		436,503		33,018		1,212,502



Other (1)	753,016		488,355		79,528		411,717		1,732,616
Total Sales	$	24,205,917	$	5,854,608	$	4,625,244	$	475,181	$	35,160,950

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


		39-Week Period Ended Mar. 28, 2020																			39-Week Period Ended Mar. 28, 2020
		US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total			US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
		(In thousands)																			(In thousands)
Principal Product Categories	Principal Product Categories											Principal Product Categories
Fresh and frozen meats	Fresh and frozen meats	$	5,987,431	$	1,167,126	$	1,148,493	$	—	$	8,303,050	Fresh and frozen meats	$	5,987,431	$	1,167,126	$	1,148,493	$	0	$	8,303,050
Canned and dry products	Canned and dry products	5,508,168		1,687,732		104,646		—		7,300,546		Canned and dry products	5,508,168		1,687,732		104,646		0		7,300,546
Frozen fruits, vegetables, bakery and other	Frozen fruits, vegetables, bakery and other	4,225,248		1,610,048		765,146		—		6,600,442		Frozen fruits, vegetables, bakery and other	4,225,248		1,610,048		765,146		0		6,600,442
Dairy products												Dairy products	3,308,322		886,256		424,706		0		4,619,284
Poultry	Poultry	3,108,528		605,506		584,583		—		4,298,617		Poultry	3,108,528		605,506		584,583		0		4,298,617
Dairy products		3,308,322		886,256		424,706		—		4,619,284
Fresh produce	Fresh produce	2,877,445		734,824		177,918		—		3,790,187		Fresh produce	2,877,445		734,824		177,918		0		3,790,187
Paper and disposables	Paper and disposables	2,087,588		269,797		490,235		48,723		2,896,343		Paper and disposables	2,087,588		269,797		490,235		48,723		2,896,343
Seafood	Seafood	1,857,040		367,486		81,507		—		2,306,033		Seafood	1,857,040		367,486		81,507		0		2,306,033
Beverage products	Beverage products	821,092		366,006		415,215		63,922		1,666,235		Beverage products	821,092		366,006		415,215		63,922		1,666,235

Other ⁽¹⁾	Other ⁽¹⁾	878,353		616,300		74,549		676,807		2,246,009		Other (1)	878,353		616,300		74,549		676,807		2,246,009
Total Sales	Total Sales	$	30,659,215	$	8,311,081	$	4,266,998	$	789,452	$	44,026,746	Total Sales	$	30,659,215	$	8,311,081	$	4,266,998	$	789,452	$	44,026,746

39-Week Period Ended Mar. 30, 2019
US Foodservice Operations International Foodservice Operations SYGMA Other Total
(In thousands)
Principal Product Categories
Fresh and frozen meats $ 6,241,367 $ 1,218,668 $ 1,132,476 $ — $ 8,592,511
Canned and dry products 5,463,772 1,777,733 214,070 — 7,455,575
Frozen fruits, vegetables, bakery and other 4,249,051 1,483,735 907,718 — 6,640,504
Dairy products 3,158,050 929,025 448,369 — 4,535,444
Poultry 3,042,028 620,940 681,253 — 4,344,221
Fresh produce 2,802,548 825,000 178,745 — 3,806,293
Paper and disposables 2,079,381 280,315 548,977 44,871 2,953,544
Seafood 1,868,294 550,953 81,795 — 2,501,042
Beverage products 839,173 342,753 420,414 63,389 1,665,729
Other ⁽¹⁾
848,135 540,317 81,559 674,186 2,144,197
Total Sales $ 30,591,799 $ 8,569,439 $ 4,695,376 $ 782,446 $ 44,639,060

Credit Risk

Sysco is potentially subject to group concentrations of credit risk with respect to accounts receivable, as large amounts of the company’s trade receivables are concentrated on customers within the food away from home ~~industry across North America and Europe.~~industry. The prolonged disruption of Sysco’s customers’ businesses due to the COVID-19 pandemic has created additional bad debt risk for the company. ~~See Note 8, "Allowance~~Many of Sysco’s customers, including those in the restaurant, hospitality and education segments, have been operating at a substantially reduced volume due to governmental requirements for ~~Doubtful Accounts," for additional disclosures around the provision for bad debt.~~closures or other social-distancing measures, and a portion of Sysco’s customers have been closed. Some of these customers have ceased paying their outstanding receivables, creating uncertainty as to their collectability.

~~5. ACQUISITIONS~~Sysco determines the past due status of trade receivables based on contractual terms with each customer, evaluates the collectability of accounts receivable to determine an appropriate allowance for doubtful accounts. To calculate an allowance for doubtful accounts, the company estimates uncollectible amounts based on historical loss experience, including those experienced during times of local and regional disasters, current conditions and collection rates, and expectations regarding future losses. The COVID-19 pandemic is more widespread and longer in duration than historical events impacting Sysco’s business, and it is possible that actual uncollectible amounts will differ from historical results.

~~During~~In the first 39 weeks of fiscal 2021, Sysco recognized a net $137.7 million benefit on its allowance for credit losses on receivables. In the third and fourth quarters of fiscal 2020, the company ~~paid cash~~experienced an increase in past due receivables and recognized additional bad debt charges on its trade receivables that were outstanding at the time the pandemic caused closures among our customers in mid-March 2020. These receivables were all created in fiscal 2020 and are referred to as pre-pandemic receivables. In the first 39 weeks of ~~$142.8 million for acquisitions. These acquisitions did not have a material effect on~~fiscal 2021, collections of the company’s ~~operating results, cash flows or financial position. Certain acquisitions involve contingent consideration that may include earnout agreements that are typically payable over periods~~pre-pandemic receivables have improved, partially from restaurant reopenings, volume improvements and Sysco’s improved credit processes. As a result, the company’s allowance for credit losses has been reduced accordingly, resulting in a $162.4 million benefit. Additional allowances of ~~up to three years~~$24.7 million were recorded in the ~~event that certain operating results are achieved. As~~first 39 weeks of ~~March 28, 2020, aggregate contingent consideration outstanding was $30.5 million,~~fiscal 2021 for receivables relating to periods beginning after the onset of ~~which $25.0 million was recorded as earnout liabilities. Earnout liabilities are all measured using unobservable inputs that are considered~~the COVID-19 pandemic. Below is a ~~Level 3 measurement.~~summary of the activity in the allowance for credit losses for trade receivables for the first 39 weeks of fiscal 2021:


	39-Week Period Ended
	Mar. 27, 2021
	(In thousands)
Balance at beginning of period	$	334,810
Adjustments to costs and expenses	(137,670)
Recoveries, net of customer accounts written off	28,569
Other adjustments	(14,102)
Balance at end of period	$	211,607

6.4. FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). The accounting guidance includes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are as follows:

•Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets;

•Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability; and

•Level 3 – Unobservable inputs for the asset or liability, which include management’s own assumption about the assumptions market participants would use in pricing the asset or liability, including assumptions about risk.

Sysco’s policy is to invest in only high-quality investments. Cash equivalents primarily include cash deposits, time deposits, certificates of deposit, commercial paper, high-quality money market funds and all highly liquid instruments with original maturities of three months or less.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value:

•Cash deposits included in cash equivalents are valued at amortized cost, which approximates fair value. These are included within cash equivalents as a Level 1 measurement in the tables below.

•Time deposits and commercial paper included in cash equivalents are valued at amortized cost, which approximates fair value. These are included within cash equivalents as a Level 2 measurement in the tables below.

•Money market funds are valued at the closing price reported by the fund sponsor from an actively traded exchange. These are included within cash equivalents as Level 1 measurements in the tables below.

•Fixed income securities are valued using evaluated bid prices based on a compilation of observable market information or a broker quote in a non-active market. Inputs used vary by type of security, but include spreads, yields, rate benchmarks, rate of prepayment, cash flows, rating changes and collateral performance and type.

•The interest rate swap agreements are valued using a swap valuation model that utilizes an income approach using observable market inputs including interest rates, LIBOR swap rates and credit default swap rates.

•The foreign currency swap agreements, including cross-currency swaps, are valued using a swap valuation model that utilizes an income approach applying observable market inputs including interest rates, LIBOR swap rates for U.S. dollars, Canadian dollars, pound sterling and euro currencies, and credit default swap rates.

•Foreign currency forwards are valued based on exchange rates quoted by domestic and foreign banks for similar instruments.

•Fuel swap contracts are valued based on observable market transactions of forward commodity prices.

The fair value of the company’s marketable securities are all measured using inputs that are considered a Level 2 measurement, as they rely on quoted prices in markets that are not actively traded ~~and are valued using quoted market prices in active markets.~~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 7,5, “Marketable Securities.” The fair value of the company’s derivative instruments are all 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 value of derivative assets and liabilities designated as hedges in the consolidated balance sheet are disclosed in Note ~~10,~~6, “Derivative Financial Instruments.”

The following tables present the company’s assets measured at fair value on a recurring basis as of March ~~28, 2020~~27, 2021 and June ~~29, 2019:~~27, 2020:


		Assets Measured at Fair Value as of Mar. 28, 2020															Assets Measured at Fair Value as of Mar. 27, 2021
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
		(In thousands)															(In thousands)
Assets:	Assets:									Assets:
Cash equivalents	Cash equivalents									Cash equivalents
Cash and cash equivalents	Cash and cash equivalents	$	1,656,813	$	200,200	$	—	$	1,857,013	Cash and cash equivalents	$	4,406,267	$	150,466	$	0	$	4,556,733

Other assets ⁽¹⁾	Other assets ⁽¹⁾	43,740		—		—		43,740		Other assets (1)	29,309		0		0		29,309

Total assets at fair value	Total assets at fair value	$	1,700,553	$	200,200	$	—	$	1,900,753	Total assets at fair value	$	4,435,576	$	150,466	$	0	$	4,586,042

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

Assets Measured at Fair Value as of Jun. 29, 2019
Level 1 Level 2 Level 3 Total
(In thousands)
Assets:
Cash equivalents
Cash and cash equivalents $ 72,824 $ 200 $ — $ 73,024
Other assets ⁽¹⁾
18,785 — — 18,785
Total assets at fair value $ 91,609 $ 200 $ — $ 91,809

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


	Assets Measured at Fair Value as of Jun. 27, 2020
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash equivalents
Cash and cash equivalents	$	5,245,487	$	300,200	$	0	$	5,545,687



Other assets (1)	36,143		0		0		36,143

Total assets at fair value	$	5,281,630	$	300,200	$	0	$	5,581,830

(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 Sysco’s 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~~$10.4~~ $14.7 billion and ~~$8.6~~$16.3 billion as of March ~~28, 2020~~27, 2021 and June ~~29, 2019,~~27, 2020, respectively. The carrying value of total debt was ~~$10.9~~$12.7 billion and ~~$8.2~~$14.4 billion as of March ~~28, 2020~~27, 2021 and June ~~29, 2019,~~27, 2020, respectively.

5. 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. The company includes fixed income securities maturing in less than twelve months within ~~Prepaid~~prepaid expenses and other current assets and includes fixed income securities maturing in more than twelve months within ~~Other~~other assets in the accompanying ~~Consolidated Balance Sheets.~~consolidated balance sheets. The company records the amounts at fair market value, which is determined using quoted market prices at the end of the reporting period.

ASC 326 requires Sysco to estimate lifetime expected credit losses for all available-for-sale debt securities in an unrealized loss position by assessing credit indicators, including credit ratings, for the applicable securities. If the assessment indicates that an expected credit loss exists, the company determines the portion of the unrealized loss attributable to credit deterioration and records an allowance for the expected credit loss through the consolidated results of operations. Unrealized gains and any portion of a security’s unrealized loss attributable to non-credit losses ~~on marketable securities~~ are recorded in ~~Accumulated~~

accumulated other comprehensive loss. There were no significant credit losses recognized in the first 39 weeks of fiscal 2021. The following table presents the company’s available-for-sale marketable securities as of March ~~28, 2020~~27, 2021 and June ~~29, 2019:~~27, 2020:


		Mar. 28, 2020																							Mar. 27, 2021
		Amortized Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Short-Term Marketable Securities		Long-Term Marketable Securities			Amortized Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Short-Term Marketable Securities		Long-Term Marketable Securities
		(In thousands)																							(In thousands)
Fixed income securities:	Fixed income securities:													Fixed income securities:
Corporate bonds	Corporate bonds	$	81,760	$	885	$	(359)	$	82,286	$	11,976	$	70,310	Corporate bonds	$	89,551	$	2,560	$	(902)	$	91,209	$	14,668	$	76,541
Government bonds	Government bonds	28,700		3,770		—		32,470		—		32,470		Government bonds	31,626		3,185		0		34,811		0		34,811
Total marketable securities	Total marketable securities	$	110,460	$	4,655	$	(359)	$	114,756	$	11,976	$	102,780	Total marketable securities	$	121,177	$	5,745	$	(902)	$	126,020	$	14,668	$	111,352

		Jun. 29, 2019																							Jun. 27, 2020
		Amortized Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Short-Term Marketable Securities		Long-Term Marketable Securities			Amortized Cost Basis		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Short-Term Marketable Securities		Long-Term Marketable Securities
		(In thousands)																							(In thousands)
Fixed income securities:	Fixed income securities:													Fixed income securities:
Corporate bonds	Corporate bonds	$	87,540	$	1,734	$	—	$	89,274	$	12,006	$	77,268	Corporate bonds	$	78,651	$	4,064	$	0	$	82,715	$	18,233	$	64,482
Government bonds	Government bonds	28,900		1,845		—		30,745		—		30,745		Government bonds	28,633		4,919		0		33,552		0		33,552
Total marketable securities	Total marketable securities	$	116,440	$	3,579	$	—	$	120,019	$	12,006	$	108,013	Total marketable securities	$	107,284	$	8,983	$	0	$	116,267	$	18,233	$	98,034

~~The~~As of March 27, 2021, the balance of available-for-sale securities by contractual maturity is shown in the following table. Within the table, maturities of fixed income securities ~~held at March 28, 2020 had effective~~have been allocated based upon timing of estimated cash flows. Actual maturities ~~ranging~~may differ from ~~less than one year~~contractual maturities because the issuers of the securities may have the right to ~~approximately ten years.~~ prepay obligations without prepayment penalties.


	Mar. 27, 2021
	(In thousands)
Due in one year or less	$	14,668
Due after one year through five years	65,491
Due after five years through ten years	45,861

Total	$	126,020

There were no0 significant realized gains or losses in marketable securities in the third quarter or the first 39 weeks of fiscal ~~2020.~~2021.

8.~~ALLOWANCE FOR DOUBTFUL ACCOUNTS~~

Sysco determines the past due status of trade receivables based on contractual terms with each customer, evaluates the collectability of accounts receivable and determines the appropriate reserve for doubtful accounts or the uncollectible receivables to be written off. As a result of the COVID-19 pandemic, many of Sysco’s customers, including those in the restaurant, hospitality and education segments, are closed or operating at a substantially reduced volume due to governmental requirements for closures. Some of these customers have ceased paying their outstanding receivables, creating uncertainty as to their collectability. In the third quarter and first 39 weeks of fiscal 2020, Sysco recorded a provision for losses on receivables totaling $175.4 million and $213.8 million, respectively, a large portion of which was associated with the COVID-19 pandemic impact to its customers. To calculate the ending reserve needed as of March 28, 2020, the company estimated uncollectible amounts by applying write-off percentages based on an aging of past due receivables. These write-off percentages are based, in part, on historical loss experience, including losses incurred during times of local and regional disasters. The COVID-19 pandemic is more widespread and longer in duration than historical disasters impacting our business, and it is possible actual uncollectible amounts will differ and additional charges may be required in the fourth quarter of fiscal 2020.

~~A summary of the activity in the allowance for doubtful accounts appears below:~~


	~~Mar. 28, 2020~~
	~~(In thousands)~~
~~Balance at beginning of period~~	$	~~28,176~~
~~Charged to costs and expenses~~	~~213,769~~
~~Customer accounts written off, net of recoveries~~	~~11,474~~
~~Other adjustments~~	~~(7,343)~~
~~Balance at end of period~~	$	~~246,076~~

9.~~GOODWILL IMPAIRMENT~~

The Company had approximately $3.9 billion of goodwill at March 28, 2020. The Company tests goodwill for impairment annually in our fourth quarter, or more frequently if events or circumstances indicate they could be impaired.

Potential impairment indicators include (but are not limited to) macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant entity-specific events, specific events affecting the reporting unit or sustained decrease in share price.

During the third quarter of fiscal 2020, as a result of significant declines in macroeconomic conditions and equity valuations, as well as regulatory restrictions brought forth by the COVID-19 pandemic, the company determined that certain reporting units were more sensitive than others to these declines and that it was more likely than not that an impairment may exist within the European reporting units and the Pacific Star (our Mexico operations) and Cake reporting units. The company performed quantitative goodwill impairment tests for these reporting units using a combination of discounted cash flow and earnings or revenue multiple models and determined goodwill was impaired for Pacific Star and Cake, and not impaired for any of the European reporting units. Based upon the results of the tests, during the third quarter of fiscal 2020 the company recorded impairment charges of $34.5 million and $34.2 million for Pacific Star and Cake, respectively, which represented the full balance of goodwill for those reporting units.

In the third quarter test, impairment charges would have been applicable for 3 European reporting units if our estimates of fair value were decreased by ranges of 14% to 26%, with goodwill of $511.7 million in the aggregate as of March 28, 2020, recorded for these reporting units.

The company estimated the fair value of these reporting units using a combination of discounted cash flow and earnings or revenue multiple models. For the purposes of the discounted cash flow models, fair value was determined based on the present value of estimated future cash flows, discounted at an appropriate risk adjusted rate. The fair value conclusions as of March 28, 2020 for the reporting units are highly sensitive to changes in the assumptions used in the income approach, which include forecasted revenues, perpetual growth rates, and long-term discount rates, among others, all of which require significant judgments by management. Fair value of the reporting unit is therefore determined using significant unobservable inputs, or level 3 in the fair value hierarchy. The company has used recent historical performance, current forecasted financial information, and broad-based industry and economic statistics as a basis to estimate the key assumptions utilized in the discounted cash flow model. These key assumptions are inherently uncertain and require a high degree of estimation and judgment and are subject to change based on future changes, industry and global economic and geo-political conditions, and the timing and success of the implementation of current strategic initiatives. The impact of the COVID-19 pandemic on estimated future cash flows is uncertain and will largely depend on the outcome of future events, which could result in further goodwill impairments going forward. The company will complete its annual impairment test in the fourth quarter of fiscal 2020.

~~10.~~6. 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 first quarter of fiscal 2021, Sysco settled some of its previously held interest rate swap contracts, which had a notional value of $750 million, due to the redemption of Sysco’s 2.60% senior notes.

Hedging of foreign currency risk

Sysco ~~enters~~previously entered into cross-currency swap contracts to hedge the foreign currency transaction risk of certain intercompany loans. There ~~are~~were no credit-risk related contingent features associated with these swaps, which ~~have~~had been designated as cash flow hedges. In the first quarter of 2021, Sysco settled its cross-currency swaps, which had a notional value of £234 million. The company also uses ~~cross-currency swap contracts and~~ euro-bond denominated debt to hedge the foreign currency exposure of our net investment in certain foreign operations. ~~In the third quarter of fiscal 2020, Sysco settled some of its net investment hedges, which resulted in a gain of $56.7 million recorded in other comprehensive income (loss).~~ Additionally, Sysco’s operations in Europe have inventory purchases denominated in currencies other than their functional currency, such as the euro, U.S. dollar, 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.

Hedging of fuel price risk

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

None of the company’s hedging instruments contain credit-risk-related contingent features. Details of outstanding hedging instruments as of March ~~28, 2020~~27, 2021 are presented below:

Maturity Date of the Hedging Instrument

Currency / Unit of Measure

Notional Value

(In millions)

Hedging of interest rate risk

~~October 2020~~

~~U.S. Dollar~~

~~750~~

July 2021

U.S. Dollar

500

June 2023

Euro

500

March 2025

U.S. Dollar

500

Hedging of foreign currency risk

Various (March ~~30, 2020~~29, 2021 to ~~August 2020)~~April 2021)

Swedish Krona

~~340~~

~~Various (April 2020 to December 2020)~~

~~British Pound Sterling~~

2355

~~July 2021~~

~~British Pound Sterling~~

~~234~~

June 2023

Euro

500

Hedging of fuel risk

Various (March 31, ~~2020~~2021 to ~~May 2021)~~March 2022)

Gallons

6134

The location and the fair value of derivative instruments designated as hedges in the consolidated balance sheet as of March ~~28, 2020~~27, 2021 and June ~~29, 2019~~27, 2020 are as follows:


			Derivative Fair Value								Derivative Fair Value
		Balance Sheet location	Mar. 28, 2020		Jun. 29, 2019			Balance Sheet location	Mar. 27, 2021		Jun. 27, 2020
			(In thousands)								(In thousands)
Fair Value Hedges:	Fair Value Hedges:						Fair Value Hedges:
Interest rate swaps	Interest rate swaps	Other current assets	$	977	$	—	Interest rate swaps	Other current assets	$	1,203	$	1,388
Interest rate swaps	Interest rate swaps	Other assets	66,563		37,396		Interest rate swaps	Other assets	47,723		69,782

Interest rate swaps		Other long-term liabilities	—		9,285

Cash Flow Hedges:	Cash Flow Hedges:						Cash Flow Hedges:
Fuel swaps	Fuel swaps	Other current assets	$	—	$	154	Fuel swaps	Other current assets	$	9,258	$	233
Foreign currency forwards	Foreign currency forwards	Other current assets	2,192		624		Foreign currency forwards	Other current assets	67		1,063

Fuel swaps	Fuel swaps	Other assets	—		136		Fuel swaps	Other assets	0		1,173
Cross currency swaps	Cross currency swaps	Other assets	16,991		8,592		Cross currency swaps	Other assets	0		19,614
Fuel swaps	Fuel swaps	Other current liabilities	37,468		6,537		Fuel swaps	Other current liabilities	661		28,242
Foreign currency forwards	Foreign currency forwards	Other current liabilities	302		162		Foreign currency forwards	Other current liabilities	0		222

Fuel swaps		Other long-term liabilities	3,905		239

Net Investment Hedges:
Foreign currency swaps		Other assets	$	—	$	18,614
Foreign currency swaps		Other long-term liabilities	—		9,973

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 39-Week Period Ended
Mar. 28, 2020 Mar. 30, 2019 Mar. 28, 2020 Mar. 30, 2019
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 $ 83,854 $ 94,514 $ 243,951 $ 270,643
Gain or (loss) on fair value hedging relationships:
Interest rate swaps:
Hedged items $ (52,942) $ (41,657) $ (83,027) $ (97,164)
Derivatives designated as hedging instruments 38,923 18,865 38,532 39,556


	13-Week Period Ended				39-Week Period Ended
	Mar. 27, 2021		Mar. 28, 2020		Mar. 27, 2021		Mar. 28, 2020
	(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	$	145,773	$	83,854	$	438,988	$	243,951
Gain or (loss) on fair value hedging relationships:
Interest rate swaps:
Hedged items	$	2,097	$	(52,942)	$	(11,694)	$	(83,027)
Derivatives designated as hedging instruments	(6,239)		38,923		(3,078)		38,532

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

13-Week Period Ended 39-Week Period Ended
Mar. 28, 2020 Mar. 30, 2019 Mar. 28, 2020 Mar. 30, 2019
Interest expense $ (14,562) $ (17,051) $ (43,679) $ (47,834)
Increase (decrease) in fair value of debt 38,380 24,606 39,348 49,330
Hedged items $ (52,942) $ (41,657) $ (83,027) $ (97,164)


	13-Week Period Ended				39-Week Period Ended
	Mar. 27, 2021		Mar. 28, 2020		Mar. 27, 2021		Mar. 28, 2020
	(In thousands)
Interest expense	$	(9,737)	$	(14,562)	$	(34,306)	$	(43,679)
Increase (decrease) in fair value of debt	(11,834)		38,380		(22,612)		39,348
Hedged items	$	2,097	$	(52,942)	$	(11,694)	$	(83,027)

The location and effect of cash flow and net investment hedge accounting on the consolidated statements of comprehensive income for the 13-week periods ended March ~~28, 2020~~27, 2021 and March ~~30, 2019,~~28, 2020, presented on a pretax basis, are as follows:

13-Week Period Ended Mar. 28, 2020
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 $ (45,375) Operating expense $ (2,069)
Foreign currency contracts 22,531 Cost of sales / Other income —
Total $ (22,844) $ (2,069)
Derivatives in net investment hedging relationships:
Foreign currency contracts $ 65,141 N/A $ —
Foreign denominated debt 350 N/A —
Total $ 65,491 $ —
13-Week Period Ended Mar. 30, 2019
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 $ 16,276 Operating expense $ (961)
Foreign currency contracts (14,244) Cost of sales / Other income 14
Total $ 2,032 $ (947)
Derivatives in net investment hedging relationships:
Foreign currency contracts $ (15,387) N/A $ —
Foreign denominated debt 10,550 N/A —
Total $ (4,837) $ —

1615


	13-Week Period Ended Mar. 27, 2021
	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	$	12,143	Operating expense	$	(8,745)
Foreign currency contracts	(100)		Cost of sales / Other income	0

Total	$	12,043		$	(8,745)

Derivatives in net investment hedging relationships:

Foreign denominated debt	17,901		N/A	0
Total	$	17,901		$	0

	13-Week Period Ended Mar. 28, 2020
	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	$	(45,375)	Operating expense	$	(2,069)
Foreign currency contracts	22,531		Cost of sales / Other income	0

Total	$	(22,844)		$	(2,069)

Derivatives in net investment hedging relationships:
Foreign currency contracts	$	65,141	N/A	$	0
Foreign denominated debt	350		N/A	0
Total	$	65,491		$	0

The location and effect of cash flow and net investment hedge accounting on the consolidated statements of comprehensive income for the 39-week periods ended March ~~28, 2020~~27, 2021 and March ~~30, 2019,~~28, 2020, presented on a pretax basis, are as follows:

39-Week Period Ended Mar. 28, 2020
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 $ (34,686) Operating expense $ (8,688)
Foreign currency contracts 5,180 Cost of sales / Other income 3,626
Total $ (29,506) $ (5,062)
Derivatives in net investment hedging relationships:
Foreign currency contracts $ 51,354 N/A $ —
Foreign denominated debt 10,150 N/A —
Total $ 61,504 $ —
39-Week Period Ended Mar. 30, 2019
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 $ (19,541) Operating expense $ 8,432
Foreign currency contracts 6,416 Cost of sales / Other income 505
Total $ (13,125) $ 8,937
Derivatives in net investment hedging relationships:
Foreign currency contracts $ 18,984 N/A $ —
Foreign denominated debt 22,650 N/A —
Total $ 41,634 $ —


	39-Week Period Ended Mar. 27, 2021
	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	$	31,973	Operating expense	$	(25,010)
Foreign currency contracts	(20,419)		Cost of sales / Other income	(2,692)

Total	$	11,554		$	(27,702)

Derivatives in net investment hedging relationships:

Foreign denominated debt	(30,052)		N/A	0
Total	$	(30,052)		$	0

	39-Week Period Ended Mar. 28, 2020
	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	$	(34,686)	Operating expense	$	(8,688)
Foreign currency contracts	5,180		Cost of sales / Other income	3,626

Total	$	(29,506)		$	(5,062)

Derivatives in net investment hedging relationships:
Foreign currency contracts	$	51,354	N/A	$	0
Foreign denominated debt	10,150		N/A	0
Total	$	61,504		$	0

The location and carrying amount of hedged liabilities in the consolidated balance sheet as of March ~~28, 2020~~27, 2021 are as follows:


		Mar. 28, 2020							Mar. 27, 2021
		Carrying Amount of Hedged Assets (Liabilities)		Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Assets (Liabilities)			Carrying Amount of Hedged Assets (Liabilities)		Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Assets (Liabilities)
		(In thousands)							(In thousands)
Balance sheet location:	Balance sheet location:					Balance sheet location:
Current maturities of long-term debt	Current maturities of long-term debt	$	(749,853)	$	(977)	Current maturities of long-term debt	$	(499,878)	$	(1,292)
Long-term debt	Long-term debt	(1,563,222)		(66,987)		Long-term debt	(1,065,015)		(47,723)

The location and carrying amount of hedged liabilities in the consolidated balance sheet as of June ~~29, 2019~~27, 2020 are as follows:

Jun. 29, 2019

Jun. 27, 2020

Carrying Amount of Hedged Assets (Liabilities)

Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Assets (Liabilities)

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:

Current maturities of long-term debt

(749,924)

(1,388)

Long-term debt

(2,311,636)

(28,616)

Long-term debt

(1,563,636)

(70,239)

~~11.~~7. DEBT

The company has a $2.0 billion long-term revolving credit facility that expires on June 28, 2024, subject to extension. AsIn March 2021, Sysco paid $700 million that was outstanding on this facility; therefore, as of March ~~28, 2020,~~27, 2021, there were ~~$1.7 billion in~~0 borrowings outstanding under this facility. Sysco has a U.S. commercial paper program allowing the company to issue short-term unsecured notes in an aggregate amount not to exceed $2.0 billion. As of March ~~28, 2020,~~27, 2021, there were ~~$153.0 million in~~0 commercial paper issuances ~~outstanding.~~outstanding under this program. Any outstanding amounts are classified within long-term debt, as the program is supported by the long-term revolving credit facility.

Sysco’s United Kingdom-based subsidiary, Brake Bros Limited, has a separate U.K. commercial paper program for the purpose of issuing short-term, unsecured Sterling-denominated notes in an aggregate amount not to exceed £600.0 million. In March 2021, Sysco paid £300.0 million that was outstanding under this program; therefore, as of March 27, 2021, there were £300.0 million in aggregate principal amount of notes outstanding under this commercial paper program. In April 2021, the company repaid £200 million under this program, and the remaining notes under this commercial paper program will mature on May 7, 2021. All outstanding amounts are classified within current maturities of long-term debt.

During the first 39 weeks of fiscal ~~2020,~~2021, aggregate outstanding commercial paper issuances, borrowings under our long-term revolving credit facility and short-term bank borrowings ranged from approximately ~~$18.4~~$413.7 million to approximately ~~$1.8~~$1.5 billion.

~~Senior notes offerin~~g

~~On February 13,~~In September 2020, Sysco ~~issued~~redeemed all $750 million of its outstanding 2.60% senior notes ~~(the Notes) totaling $1.0 billion. Details~~prior to the October 2020 maturity utilizing a combination of ~~the Notes are as follows:~~

Maturity Date Par Value
(in millions) Coupon Rate Pricing
(percentage of par)
February 15, 2030 (the 2030 Notes) ⁽¹⁾
$ 500 2.40 % 99.647 %
February 15, 2050 (the 2050 Notes) 500 3.30 99.811

⁽¹⁾~~The~~cash flow from operations and net proceeds from ~~this issuance have been and will be used to fund,~~senior note issuances in whole or in part, “Eligible Projects.” “Eligible Projects” are investments and expenditures made by Sysco in new projects and projects that have received funding in the three years prior to the issuance of the 2030 notes, which meet one or more of the following categories of eligible criteria: (1) renewable energy; (2) energy efficiency; (3) clean transportation; (4) waste reduction; (5) sustainable water and wastewater management; (6) environmentally sustainable management of living natural resources and land use/food security; (7) aquatic biodiversity conservation/food security; and (8) socioeconomic advancement and empowerment.

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 on February 15 and August 15, beginning August 15,fiscal 2020. 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 2030 Notes before the date that is three months prior to the maturity date or (ii) the 2050 Notes before the date that is six

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 or the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed. 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.

~~See Note 20, “Subsequent Events” for additional information on other recent developments involving the company’s debt.~~

~~12. LEASES~~

Sysco leases certain of its distribution and warehouse facilities, office facilities, fleet vehicles, and office and warehouse equipment. The company determines if an arrangement is a lease at inception and recognizes a finance or operating lease liability and ROU asset in the consolidated balance sheets if a lease exists. Lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at the commencement date. If the borrowing rate implicit in the lease is not readily determinable, Sysco uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments.

The lease term is defined as the noncancelable period of the lease plus any options to extend or terminate the lease when it is reasonably certain that the company will exercise one of these options. Leases with an initial term of 12 months or less are not recorded in Sysco’s consolidated balance sheets, and the company recognizes expense for these leases on a straight-line basis over the lease term. Variable lease payments that do not depend on an index or a rate, such as insurance and property taxes, are excluded from the measurement of the lease liability and are recognized as variable lease cost when the obligation for that payment is incurred. For leases in which the lease and non-lease components have been combined, the variable lease expense includes expenses such as common area maintenance, utilities, and repairs and maintenance. Sysco’s leases do not contain significant residual value guarantees and do not impose significant restrictions or covenants.

~~The following table presents the location of the finance lease ROU assets and lease liabilities in the company’s Consolidated Balance Sheet at March 28, 2020:~~

~~Consolidated Balance Sheet Location~~

~~Mar. 28, 2020~~

~~(In thousands)~~

~~Finance lease right-of-use assets~~

~~Plant and equipment at cost, less accumulated depreciation~~

~~89,914~~

~~Current finance lease liabilities~~

~~Current maturities of long-term debt~~

~~29,436~~

~~Long-term finance lease liabilities~~

~~Long-term debt~~

~~65,409~~

~~The following table presents lease costs for each of the presented periods ended March 28, 2020:~~

Consolidated Results of Operations Location 13-Week Period Ended Mar. 28, 2020 39-Week Period Ended Mar. 28, 2020
(In thousands)
Operating lease cost Operating expenses $ 32,290 $ 94,632
Financing lease cost:
Amortization of right-of-use assets Operating expenses 8,657 27,613
Interest on lease obligations Interest expense 1,046 3,455
Variable lease cost Operating expenses 2,608 9,055
Short-term lease cost Operating expenses 2,285 8,455
Net lease cost $ 46,886 $ 143,210

~~Future minimum lease obligations under existing noncancelable operating and finance lease agreements by fiscal year as of March 28, 2020 are as follows:~~

Operating Leases Finance Leases
(In thousands)
Remainder of fiscal 2020 $ 31,191 $ 8,902
2021 118,673 32,333
2022 90,938 23,457
2023 75,258 16,782
2024 52,718 10,510
2025 46,088 6,077
Thereafter 337,334 5,859
Total undiscounted lease obligations 752,200 103,920
Less imputed interest (106,079) (9,075)
Present value of lease obligations $ 646,121 $ 94,845

~~Other information related to lease agreements was as follows:~~


	~~39-Week Period Ended Mar. 28, 2020~~
~~Cash Paid For Amounts Included In Measurement of Liabilities:~~	~~(Dollars in thousands)~~
~~Operating cash flows for operating leases~~	$	~~95,861~~
~~Operating cash flows for financing leases~~	~~3,424~~
~~Financing cash flows for financing leases~~	~~24,773~~

~~Supplemental Non-cash Information on Lease Liabilities:~~
~~Assets obtained in exchange for operating lease obligations~~	$	~~61,646~~
~~Assets obtained in exchange for finance lease obligations~~	~~11,797~~

~~Lease Term and Discount Rate:~~
~~Weighted-average remaining lease term (years):~~
~~Operating leases~~	~~11.55 years~~
~~Financing leases~~	~~3.99 years~~
~~Weighted-average discount rate:~~
~~Operating leases~~	~~2.46~~		%
~~Financing leases~~	~~4.60~~		%

2018

~~13.~~8. EARNINGS PER SHARE

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


		13-Week Period Ended						39-Week Period Ended							13-Week Period Ended				39-Week Period Ended
		Mar. 28, 2020		Mar. 30, 2019		Mar. 28, 2020		Mar. 30, 2019			Mar. 27, 2021		Mar. 28, 2020		Mar. 27, 2021		Mar. 28, 2020
		(In thousands, except for share and per share data)						(In thousands, except for share and per share data)							(In thousands, except for share and per share data)				(In thousands, except for share and per share data)
Numerator:	Numerator:									Numerator:
Net earnings		$	(3,297)	$	440,083	$	833,894	$	1,138,505
Net earnings (loss)										Net earnings (loss)	$	88,927	$	(3,297)	$	373,116	$	833,894
Denominator:	Denominator:									Denominator:
Weighted-average basic shares outstanding	Weighted-average basic shares outstanding	508,745,253		514,185,453		510,729,277		517,637,952		Weighted-average basic shares outstanding	511,110,670		508,745,253		510,081,610		510,729,277
Dilutive effect of share-based awards	Dilutive effect of share-based awards	3,912,404		5,635,858		4,903,538		6,849,558		Dilutive effect of share-based awards	3,474,459		3,912,404		2,607,285		4,903,538
Weighted-average diluted shares outstanding	Weighted-average diluted shares outstanding	512,657,657		519,821,311		515,632,815		524,487,510		Weighted-average diluted shares outstanding	514,585,129		512,657,657		512,688,895		515,632,815
Basic earnings per share		$	(0.01)	$	0.86	$	1.63	$	2.20
Diluted earnings per share		$	(0.01)	$	0.85	$	1.62	$	2.17
Basic earnings (loss) per share										Basic earnings (loss) per share	$	0.17	$	(0.01)	$	0.73	$	1.63
Diluted earnings (loss) per share										Diluted earnings (loss) per share	$	0.17	$	(0.01)	$	0.73	$	1.62

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 ~~4,844,000~~1,893,000 and ~~2,583,000~~4,844,000 for the third ~~quarters~~quarter of fiscal ~~2020~~2021 and fiscal ~~2019,~~2020, respectively. 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 ~~3,704,000~~4,763,000 and ~~2,260,000~~3,704,000 for the first 39 weeks of fiscal ~~2020~~2021 and fiscal ~~2019,~~2020, respectively.

~~14.~~9. 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 ~~cash flow~~certain hedging arrangements ~~certain~~and amounts related to pension and other postretirement ~~plans and changes in marketable securities.~~plans. Comprehensive ~~loss was~~ ~~$102.5 million~~ ~~for the third quarter of fiscal 2020~~ an~~d comprehensive~~ income was ~~$481.0~~$124.7 million and comprehensive loss was $102.5 million for the third quarter of fiscal ~~2019.~~2021 and fiscal 2020, respectively. Comprehensive income was ~~$768.1~~$731.6 million and ~~$1.1 billion~~$768.1 million for the first 39 weeks of fiscal ~~2020~~2021 and fiscal ~~2019,~~2020, 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:

2119


			13-Week Period Ended Mar. 28, 2020												13-Week Period Ended Mar. 27, 2021
		Location of Expense (Income) Recognized in Net Earnings	Before Tax Amount		Tax		Net of Tax Amount			Location of Expense (Income) Recognized in Net Earnings	Before Tax Amount		Tax		Net of Tax Amount
			(In thousands)												(In thousands)
Pension and other postretirement benefit plans:	Pension and other postretirement benefit plans:								Pension and other postretirement benefit plans:

Reclassification adjustments:	Reclassification adjustments:								Reclassification adjustments:

Amortization of prior service cost	Amortization of prior service cost	Other expense, net	$	1,905	$	477	$	1,428	Amortization of prior service cost	Other expense, net	$	183	$	46	$	137
Amortization of actuarial loss, net	Amortization of actuarial loss, net	Other expense, net	10,644		2,615		8,029		Amortization of actuarial loss, net	Other expense, net	10,421		2,601		7,820
Total reclassification adjustments	Total reclassification adjustments		12,549		3,092		9,457		Total reclassification adjustments		10,604		2,647		7,957
Foreign currency translation:	Foreign currency translation:								Foreign currency translation:

Foreign currency translation adjustment	Foreign currency translation adjustment	N/A	(151,143)		—		(151,143)		Foreign currency translation adjustment	N/A	9,805		0		9,805
Marketable securities:	Marketable securities:								Marketable securities:
Change in marketable securities ⁽¹⁾	Change in marketable securities ⁽¹⁾	N/A	25		5		20		Change in marketable securities (1)	N/A	(3,485)		(732)		(2,753)
Hedging instruments:	Hedging instruments:								Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:	Other comprehensive income (loss) before reclassification adjustments:								Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedges		Operating expenses ⁽²⁾	(22,844)		(6,093)		(16,751)
Change in cash flow hedge									Change in cash flow hedge	Operating expenses (2)	12,043		2,908		9,135
Change in net investment hedge ⁽³⁾	Change in net investment hedge ⁽³⁾	N/A	65,491		8,422		57,069		Change in net investment hedge ⁽³⁾	N/A	17,901		8,513		9,388

Total other comprehensive income (loss) before reclassification adjustments			42,647		2,329		40,318
Total other comprehensive income before reclassification adjustments									Total other comprehensive income before reclassification adjustments		29,944		11,421		18,523
Reclassification adjustments:	Reclassification adjustments:								Reclassification adjustments:
Amortization of cash flow hedges	Amortization of cash flow hedges	Interest expense	2,874		719		2,155		Amortization of cash flow hedges	Interest expense	2,921		730		2,191

Total other comprehensive (loss) income			$	(93,048)	$	6,145	$	(99,193)
Total other comprehensive income									Total other comprehensive income		$	49,789	$	14,066	$	35,723

⁽¹⁾Realized gains or losses on ~~marketable~~marketable securities are presented within ~~Other~~other (income) expense, net in the ~~Consolidated Results~~consolidated results of ~~Operations;~~operations; however, there were ~~no significant~~ 0 significant gains or losses realized in the third quarter of fiscal ~~2020.~~2021.

(2)

⁽²⁾Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.

⁽³⁾~~Change in net investment hedges includes the termination of some net investment hedges, as described in Note 10, “Derivative Financial Instruments.”~~

2220


			13-Week Period Ended Mar. 30, 2019												13-Week Period Ended Mar. 28, 2020
		Location of Expense (Income) Recognized in Net Earnings	Before Tax Amount		Tax		Net of Tax Amount			Location of Expense (Income) Recognized in Net Earnings	Before Tax Amount		Tax		Net of Tax Amount
			(In thousands)												(In thousands)
Pension and other postretirement benefit plans:	Pension and other postretirement benefit plans:								Pension and other postretirement benefit plans:

Reclassification adjustments:	Reclassification adjustments:								Reclassification adjustments:
Amortization of prior service cost	Amortization of prior service cost	Other expense, net	$	2,133	$	533	$	1,600	Amortization of prior service cost	Other expense, net	$	1,905	$	477	$	1,428
Amortization of actuarial loss (gain), net		Other expense, net	8,706		2,177		6,529
Amortization of actuarial loss, net									Amortization of actuarial loss, net	Other expense, net	10,644		2,615		8,029

Total reclassification adjustments	Total reclassification adjustments		10,839		2,710		8,129		Total reclassification adjustments		12,549		3,092		9,457
Foreign currency translation:	Foreign currency translation:								Foreign currency translation:
Other comprehensive income (loss) before reclassification adjustments:
Foreign currency translation adjustment	Foreign currency translation adjustment	N/A	37,471		—		37,471		Foreign currency translation adjustment	N/A	(151,143)		0		(151,143)
Marketable Securities:	Marketable Securities:								Marketable Securities:
Change in marketable securities		N/A	1,396		293		1,103
Change in marketable securities (1)									Change in marketable securities (1)	N/A	25		5		20
Hedging instruments:	Hedging instruments:								Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:	Other comprehensive income (loss) before reclassification adjustments:								Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedges	Change in cash flow hedges	Operating expenses ⁽¹⁾	2,032		486		1,546		Change in cash flow hedges	Operating expenses (2)	(22,844)		(6,093)		(16,751)
Change in net investment hedges		N/A	(4,837)		4,629		(9,466)
Change in net investment hedges (3)									Change in net investment hedges (3)	N/A	65,491		8,422		57,069

Total other comprehensive income (loss) before reclassification adjustments	Total other comprehensive income (loss) before reclassification adjustments		(2,805)		5,115		(7,920)		Total other comprehensive income (loss) before reclassification adjustments		42,647		2,329		40,318
Reclassification adjustments:	Reclassification adjustments:								Reclassification adjustments:
Amortization of cash flow hedges	Amortization of cash flow hedges	Interest expense	2,873		718		2,155		Amortization of cash flow hedges	Interest expense	2,874		719		2,155
Total other comprehensive income			$	49,774	$	8,836	$	40,938
Total other comprehensive (loss) income									Total other comprehensive (loss) income		$	(93,048)	$	6,145	$	(99,193)

⁽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 third quarter of fiscal 2020.

(2) Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.

2321

39-Week Period Ended Mar. 28, 2020
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 $ 5,715 $ 1,431 $ 4,284
Amortization of actuarial loss, net Other expense, net 29,216 7,279 21,937
Total reclassification adjustments 34,931 8,710 26,221
Foreign currency translation:
Other comprehensive income (loss) before reclassification adjustments:
Foreign currency translation adjustment N/A (122,347) — (122,347)
Marketable securities:
Change in marketable securities ⁽¹⁾
N/A 717 150 567
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedges
Operating expenses ⁽²⁾
(29,506) (7,217) (22,289)
Change in net investment hedge ⁽³⁾
N/A 61,504 15,914 45,590
Total other comprehensive income (loss) before reclassification adjustments 31,998 8,697 23,301
Reclassification adjustments:
Amortization of cash flow hedges Interest expense 8,622 2,157 6,465
Total other comprehensive (loss) income $ (46,079) �� $ 19,714 $ (65,793)

^{39-Week Period Ended Mar. 27, 2021
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 $ 549 $ 138 $ 411
Amortization of actuarial loss, net Other expense, net 31,161 7,783 23,378
Total reclassification adjustments 31,710 7,921 23,789
Foreign currency translation:
Other comprehensive income (loss) before reclassification adjustments:
Foreign currency translation adjustment N/A 345,452 0 345,452
Marketable securities:
Change in marketable securities (1) N/A (4,140) (869) (3,271)
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedges (3) Operating expenses (2) 11,554 3,051 8,503
Change in net investment hedges N/A (30,052) (7,513) (22,539)
Total other comprehensive income before reclassification adjustments (18,498) (4,462) (14,036)
Reclassification adjustments:
Amortization of cash flow hedges Interest expense 8,669 2,168 6,501
Total other comprehensive income (loss) $ 363,193 $ 4,758 $ 358,435}

(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 39 weeks of fiscal 2021.

(2) Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.

(3) Change in cash flow hedges includes the termination of some cash flow hedges, as described in Note 6, “Derivative Financial Instruments.”


		39-Week Period Ended Mar. 28, 2020
	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	$	5,715	$	1,431	$	4,284
Amortization of actuarial loss, net	Other expense, net	29,216		7,279		21,937

Total reclassification adjustments		34,931		8,710		26,221
Foreign currency translation:

Foreign currency translation adjustment	N/A	(122,347)		0		(122,347)
Marketable Securities:
Change in marketable securities (1)	N/A	717		150		567
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedges	Operating expenses (2)	(29,506)		(7,217)		(22,289)
Change in net investment hedges (3)	N/A	61,504		15,914		45,590

Total other comprehensive income (loss) before reclassification adjustments		31,998		8,697		23,301
Reclassification adjustments:
Amortization of cash flow hedges	Interest expense	8,622		2,157		6,465
Total other comprehensive (loss) income		$	(46,079)	$	19,714	$	(65,793)

(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 39 weeks of fiscal ~~2020.~~2020.

(2)

⁽²⁾Amount partially impacts operating expense for fuel swaps accounted for as cash flow hedges.

(3)

⁽³⁾Change in net investment hedges includes the termination of some net investment ~~hedges, as described in Note 10, “Derivative Financial Instruments.”~~

39-Week Period Ended Mar. 30, 2019
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) gain, net arising in the current year $ (36,891) $ (4,380) $ (32,511)
Reclassification adjustments:
Amortization of prior service cost Other expense, net 6,399 1,599 4,800
Amortization of actuarial loss (gain), net Other expense, net 26,118 6,531 19,587
Total reclassification adjustments 32,517 8,130 24,387
Foreign currency translation:
Foreign currency translation adjustment N/A (88,989) — (88,989)
Marketable Securities:
Change in marketable securities N/A 1,396 293 1,103
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedges
Operating expenses ⁽¹⁾
(13,125) (2,879) (10,246)
Change in net investment hedges N/A 41,634 16,043 25,591
Total other comprehensive income (loss) before reclassification adjustments 28,509 13,164 15,345
Reclassification adjustments:
Amortization of cash flow hedges Interest expense 8,619 2,154 6,465
Total other comprehensive (loss) income $ (54,839) $ 19,361 $ (74,200)

⁽¹⁾~~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:


		39-Week Period Ended Mar. 28, 2020																			39-Week Period Ended Mar. 27, 2021
		Pension and Other Postretirement Benefit Plans, net of tax		Foreign Currency Translation		Hedging, net of tax		Marketable Securities, net of tax		Total			Pension and Other Postretirement Benefit Plans, net of tax		Foreign Currency Translation		Hedging, net of tax		Marketable Securities, net of tax		Total
		(In thousands)																			(In thousands)
Balance as of Jun. 29, 2019		$	(1,217,617)	$	(290,169)	$	(94,770)	$	2,827	$	(1,599,729)
Balance as of Jun. 27, 2020												Balance as of Jun. 27, 2020	$	(1,265,714)	$	(402,384)	$	(49,878)	$	7,095	$	(1,710,881)
Equity adjustment from foreign currency translation	Equity adjustment from foreign currency translation	—		(122,347)		—		—		(122,347)		Equity adjustment from foreign currency translation	—		345,452		—		—		345,452

Amortization of cash flow hedges	Amortization of cash flow hedges	—		—		6,465		—		6,465		Amortization of cash flow hedges	—		—		6,501		—		6,501

Change in net investment hedges	Change in net investment hedges	—		—		45,590		—		45,590		Change in net investment hedges	—		—		(22,539)		—		(22,539)
Change in cash flow hedge	Change in cash flow hedge	—		—		(22,289)		—		(22,289)		Change in cash flow hedge	—		—		8,503		—		8,503

Amortization of unrecognized prior service cost	Amortization of unrecognized prior service cost	4,284		—		—		—		4,284		Amortization of unrecognized prior service cost	411		—		—		—		411
Amortization of unrecognized net actuarial losses	Amortization of unrecognized net actuarial losses	21,937		—		—		—		21,937		Amortization of unrecognized net actuarial losses	23,378		—		—		—		23,378
Change in marketable securities	Change in marketable securities	—		—		—		567		567		Change in marketable securities	—		—		—		(3,271)		(3,271)
Balance as of Mar. 28, 2020		$	(1,191,396)	$	(412,516)	$	(65,004)	$	3,394	$	(1,665,522)
Balance as of Mar. 27, 2021												Balance as of Mar. 27, 2021	$	(1,241,925)	$	(56,932)	$	(57,413)	$	3,824	$	(1,352,446)

39-Week Period Ended Mar. 30, 2019
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 Jun. 30, 2018 $ (1,095,059) $ (171,043) $ (143,167) — $ (1,409,269)
Equity adjustment from foreign currency translation — (88,989) — — (88,989)
Amortization of cash flow hedges — — 6,465 — 6,465
Change in net investment hedges — — 25,591 — 25,591
Change in cash flow hedges — — (10,246) — (10,246)
Net actuarial loss (32,511) — — — (32,511)
Amortization of unrecognized prior service cost 4,800 — — — 4,800
Amortization of unrecognized net actuarial losses 19,587 — — — 19,587
Change in marketable securities — — — 1,103 1,103
Balance as of Mar. 30, 2019 $ (1,103,183) $ (260,032) $ (121,357) $ 1,103 $ (1,483,469)


	39-Week Period Ended Mar. 28, 2020
	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 Jun. 29, 2019	$	(1,217,617)	$	(290,169)	$	(94,770)	$	2,827	$	(1,599,729)

Equity adjustment from foreign currency translation	—		(122,347)		—		—		(122,347)
Amortization of cash flow hedges	—		—		6,465		—		6,465

Change in net investment hedges	—		—		45,590		—		45,590
Change in cash flow hedge	—		—		(22,289)		—		(22,289)

Amortization of unrecognized prior service cost	4,284		—		—		—		4,284
Amortization of unrecognized net actuarial losses	21,937		—		—		—		21,937
Change in marketable securities	—		—		—		567		567
Balance as of Mar. 28, 2020	$	(1,191,396)	$	(412,516)	$	(65,004)	$	3,394	$	(1,665,522)

~~15.~~10. 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 39 weeks of fiscal ~~2020,~~2021, options to ~~purchase 3,184,042~~purchase 1,975,413 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 39 weeks of fiscal ~~2020~~2021 was ~~$10.69.~~ $13.72.

In the first 39 weeks of fiscal ~~2020,~~ ~~667,335 performance~~2021, 812,512 performance share units (PSUs) were granted to employees. 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 39 weeks of fiscal ~~2020~~2021 was ~~$73.64.~~ $59.00. The PSUs will convert into shares of Sysco common stock at the end of the two-year performance period based on ~~financial~~actual performance targets ~~consisting~~achieved, as well as the market-based return of Sysco’s ~~adjusted earnings per share compound annual growth rate and adjusted return on invested capital.~~common stock relative to that of each company within the S&P 500 index.

In the first 39 weeks of fiscal ~~2020, 651,100 restricted~~2021, 945,723 restricted stock units were granted to employees. The weighted average grant-date fair value per restricted stock unit granted during the first 39 weeks of fiscal ~~2020~~2021 was ~~$73.17~~.$66.09.

Employee Stock Purchase Plan

Plan participants ~~purchased 710,394 shares~~purchased 588,347 shares of common stock under the Sysco ESPP during the first 39 weeks of fiscal ~~2020.~~2021. The weighted average fair value per employee stock purchase right issued pursuant to the ESPP was ~~$11.73 during~~ $3.55 during the first 39 weeks of fiscal ~~2020.~~2021. 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 $65.7 million and $63.9 ~~million~~ ~~and $78.1~~ million for the first 39 weeks of fiscal ~~2020~~2021 and fiscal ~~2019,~~2020, respectively.

As of March ~~28, 2020,~~27, 2021, there was ~~$143.8~~$138.8 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 ~~2.01 years~~. 1.92 years.

~~16.~~

11. INCOME TAXES

Effective Tax Rate

The effective tax rates for the third quarter and first 39 weeks of fiscal 2021 were 13.54% and 15.72%, respectively. As compared to the company’s statutory tax rate, the lower effective tax rate for the third quarter and first 39 weeks of fiscal 2021 was impacted by (1) the favorable impact of excess tax benefits of equity-based compensation that totaled $6.0 million and $12.6 million, respectively, (2) the $7.6 million tax benefit attributable to the sale of the stock of Cake Corporation in the first quarter, and (3) the impact of changes in tax law in the U.K. of $5.5 million in the first quarter. The effective tax rates for the third quarter and first 39 weeks of fiscal 2020 were 88.54% and 19.01%, respectively. As compared to the company’s statutory tax rate, the effective tax rates for the third quarter and the first 39 weeks of fiscal 2020 were impacted by (1) the favorable impact of excess tax benefits of equity-based compensation that totaled $6.8 million and $34.3 million, respectively, and (2) the unfavorable tax effect of goodwill impairments ~~in the third quarter~~ of $17.7 million. The effective tax rates for the third quarter and first 39 weeks of fiscal 2019 were (2.12)% and 13.98%, respectively. The lower effective tax rates for the third quarter and first 39 weeks of fiscal 2019 were primarily due to Sysco’s determinationmillion in the third quarter of fiscal 2019 to recognize the favorable impact of $95.1 million of foreign tax credits, which fully offset its transition tax liability and the favorable impact of excess tax benefits of equity-based compensation that totaled $11.3 million and $33.2 million for the third quarter and first 39 weeks of fiscal 2019, respectively.2020.

Uncertain Tax Positions

As of March ~~28, 2020,~~27, 2021, the gross amount of unrecognized tax benefit and related accrued interest was ~~$23.9~~$20.4 million and ~~$4.6~~$2.7 million, respectively. It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain of the company’s unrecognized tax positions will increase or decrease in the next twelve months. At this time, an estimate of the range of the reasonably possible change cannot be made.

Other

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.

~~17.~~12. 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.

The company is pursuing claims against a variety of vendors from which the company purchased products. These matters are at different stages of the litigation process. Amounts, if any, realized from the defendants would represent gain contingencies. We account for gain contingencies in accordance with the provisions of ASC 450, Contingencies, and therefore, we do not recognize income until realized.

~~18.~~

To mitigate the risk of incurring significant legal fees on these claims without any ultimate gain, in calendar 2019 and 2020, the company entered into separate agreements with a third party whereby the company secured a minimum amount of cash proceeds from the third party in exchange for assigning to the third party the rights to a portion of the future litigation proceeds. In the meantime, the company must continue to pursue the specific vendor litigation, as identified in the agreement with the third party.

As part of these arrangements, cash proceeds received from the third party are included in “Other long-term liabilities.” The portion of litigation proceeds in excess of the minimum that may be payable to the third party under each agreement represents a financial instrument that is measured at fair value each reporting period in accordance with the provisions of ASC 820, Fair Value Measurements, with changes recorded in the consolidated results of operations.

13. BUSINESS SEGMENT INFORMATION

The company has aggregated certain of its operating segments into 3 reportable segments. “Other” financial information is attributable to the company’s other operating segments that do not meet the quantitative disclosure thresholds.

•U.S. Foodservice Operations -– primarily includes U.S. Broadline operations, which distribute a full line of food products including custom-cut meat, seafood, specialty produce, specialty imports and a wide variety of non-food products;

•International Foodservice Operations ~~- primarily~~– includes operations ~~that~~in the ~~company has grouped into Canada, Latin America~~Americas and Europe, which distribute a full line of food products and a wide variety of non-food products. ~~Latin America~~The Americas primarily consists of operations in Canada, Bahamas, Mexico, Costa Rica and Panama, as well as ~~our~~the company’s operations that distribute to international customers. ~~Our~~The company’s European operations primarily consist of operations in the United Kingdom (U.K.), France, Ireland and Sweden;

•SYGMA ~~- our~~– the company’s U.S. customized distribution subsidiary; and

•Other -– primarily our hotel supply operations, ~~and~~Guest Worldwide. Sysco ~~Labs, which includes our suite~~sold its interests in Cake Corporation in the first quarter of ~~technology solutions that help support the business needs of our customers and provide support for some of our business technology needs.~~fiscal 2021.

The accounting policies for the segments are the same as those disclosed by Sysco for its consolidated financial statements. Corporate expenses generally include all expenses of the corporate office and Sysco’s shared services center. These ~~expenses~~ also include all share-based compensation costs. During the fourth quarter of fiscal 2020, Sysco revised the way performance is assessed for the U.S. Foodservice Operations segment. As a result of this change, charges incurred by the company’s corporate and shared services center, to provide direct support functions to the U.S. Foodservice Operations reportable segment, have been reclassified from Corporate expenses into the U.S. Foodservice reportable segment. The segment information disclosed for the first 39 weeks of fiscal 2021 reflects this change in reporting structure. The third quarter and first 39 weeks of fiscal 2020 results reflect $63.9 million and $195.6 million, respectively, of corporate expense reclassifications to conform with the current year presentation.

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

13-Week Period Ended 39-Week Period Ended
Mar. 28, 2020 Mar. 30, 2019 Mar. 28, 2020 Mar. 30, 2019
Sales: (In thousands) (In thousands)
U.S. Foodservice Operations $ 9,587,005 $ 10,105,283 $ 30,659,215 $ 30,591,799
International Foodservice Operations 2,508,642 2,757,891 8,311,081 8,569,439
SYGMA 1,364,111 1,537,312 4,266,998 4,695,376
Other 238,941 257,588 789,452 782,446
Total $ 13,698,699 $ 14,658,074 $ 44,026,746 $ 44,639,060
13-Week Period Ended 39-Week Period Ended
Mar. 28, 2020 Mar. 30, 2019 Mar. 28, 2020 Mar. 30, 2019
Operating income: (In thousands) (In thousands)
U.S. Foodservice Operations $ 528,025 $ 765,425 $ 2,158,211 $ 2,318,660
International Foodservice Operations (83,786) 10,145 5,895 62,000
SYGMA 10,301 11,668 27,732 17,213
Other (19,051) 6,376 486 22,429
Total segments 435,489 793,614 2,192,324 2,420,302
Corporate (375,215) (264,029) (911,239) (810,682)
Total operating income 60,274 529,585 1,281,085 1,609,620
Interest expense 83,854 94,514 243,951 270,643
Other expense (income), net 5,200 4,120 7,505 15,449
Earnings (loss) before income taxes $ (28,780) $ 430,951 $ 1,029,629 $ 1,323,528


	13-Week Period Ended				39-Week Period Ended
	Mar. 27, 2021		Mar. 28, 2020		Mar. 27, 2021		Mar. 28, 2020
Sales:	(In thousands)				(In thousands)
U.S. Foodservice Operations	$	8,360,241	$	9,587,005	$	24,205,917	$	30,659,215
International Foodservice Operations	1,723,126		2,508,642		5,854,608		8,311,081
SYGMA	1,580,695		1,364,111		4,625,244		4,266,998
Other	160,527		238,941		475,181		789,452
Total	$	11,824,589	$	13,698,699	$	35,160,950	$	44,026,746

	13-Week Period Ended				39-Week Period Ended
	Mar. 27, 2021		Mar. 28, 2020		Mar. 27, 2021		Mar. 28, 2020
Operating income (loss):	(In thousands)				(In thousands)
U.S. Foodservice Operations	$	545,502	$	464,173	$	1,619,162	$	1,962,595
International Foodservice Operations	(121,487)		(83,786)		(201,973)		5,895
SYGMA	12,937		10,301		35,957		27,732
Other	5,884		(19,051)		4,861		486
Total segments	442,836		371,637		1,458,007		1,996,708
Corporate	(206,919)		(311,363)		(590,449)		(715,623)
Total operating income	235,917		60,274		867,558		1,281,085
Interest expense	145,773		83,854		438,988		243,951
Other (income) expense, net	(12,708)		5,200		(14,140)		7,505
Earnings (loss) before income taxes	$	102,852	$	(28,780)	$	442,710	$	1,029,629

~~19. SUPPLEMENTAL GUARANTOR INFORMATION - SUBSIDIARY GUARANTEES~~

On January 19, 2011, the wholly owned U.S. Broadline subsidiaries of Sysco Corporation at that time entered into full and unconditional guarantees of all outstanding senior notes and debentures of Sysco Corporation. All subsequent issuances of senior notes and debentures in the U.S. and borrowings under the company’s $2.0 billion long-term revolving credit facility have also been guaranteed by these subsidiaries. As of March 28, 2020, Sysco had a total of $10.2 billion in senior notes, debentures and borrowings under the long-term revolving credit facility that were covered by these guarantees.

All subsidiary guarantors are 100% owned by the parent company, all guarantees are full and unconditional, and all guarantees are joint and several, except that the guarantee of any subsidiary guarantor with respect to a series of senior notes or debentures may be released under certain customary circumstances. If we exercise our defeasance option with respect to the senior notes or debentures of any series, then any subsidiary guarantor effectively will be released with respect to that series. Further, each subsidiary guarantee will remain in full force and effect until the earliest to occur of the date, if any, on which (1) the applicable subsidiary guarantor shall consolidate with or merge into Sysco Corporation or any successor of Sysco Corporation or (2) Sysco Corporation or any successor of Sysco Corporation consolidates with or merges into the applicable subsidiary guarantor.

The following condensed consolidating financial statements present separately the financial position, comprehensive income and cash flows of the parent issuer (Sysco Corporation), the guarantors (certain of the company’s U.S. Broadline subsidiaries), and all other non-guarantor subsidiaries of Sysco (Other Non-Guarantor Subsidiaries) on a combined basis with eliminating entries.

Condensed Consolidated Balance Sheet
Mar. 28, 2020
Sysco Certain U.S.
Broadline
Subsidiaries Other
Non-Guarantor
Subsidiaries Eliminations Consolidated
Totals
(In thousands)
Current assets $ 1,914,935 $ 4,242,407 $ 3,700,433 $ — $ 9,857,775
Intercompany receivables 7,642,333 46,037 4,628,264 (12,316,634) —
Investment in subsidiaries 6,091,917 — 1,332,048 (7,423,965) —
Plant and equipment, net 245,678 2,241,821 2,117,119 — 4,604,618
Other assets 859,731 733,274 4,930,759 (553,825) 5,969,939
Total assets $ 16,754,594 $ 7,263,539 $ 16,708,623 $ (20,294,424) $ 20,432,332
Current liabilities $ 1,255,999 $ 989,820 $ 4,379,190 $ — $ 6,625,009
Intercompany payables 3,179,796 2,627,223 6,509,615 (12,316,634) —
Long-term debt 9,593,045 9,099 421,106 — 10,023,250
Other liabilities 696,864 536,503 1,044,088 (553,825) 1,723,630
Noncontrolling interest — — 31,553 — 31,553
Shareholders’ equity 2,028,890 3,100,894 4,323,071 (7,423,965) 2,028,890
Total liabilities and shareholders’ equity $ 16,754,594 $ 7,263,539 $ 16,708,623 $ (20,294,424) $ 20,432,332

2926

Condensed Consolidated Balance Sheet
Jun. 29, 2019
Sysco Certain U.S.
Broadline
Subsidiaries Other
Non-Guarantor
Subsidiaries Eliminations Consolidated
Totals
(In thousands)
Current assets $ 121,993 $ 4,195,543 $ 3,823,969 $ — $ 8,141,505
Intercompany receivables 6,162,303 30,469 3,220,237 (9,413,009) —
Investment in subsidiaries 4,680,530 — 1,126,315 (5,806,845) —
Plant and equipment, net 252,101 2,162,668 2,086,936 — 4,501,705
Other assets 787,986 718,600 4,372,725 (555,999) 5,323,312
Total assets $ 12,004,913 $ 7,107,280 $ 14,630,182 $ (15,775,853) $ 17,966,522
Current liabilities $ 465,101 $ 1,018,650 $ 4,619,432 $ — $ 6,103,183
Intercompany payables 686,116 3,443,182 5,283,711 (9,413,009) —
Long-term debt 7,668,314 7,938 445,806 — 8,122,058
Other liabilities 682,779 545,391 531,081 (555,999) 1,203,252
Noncontrolling interest — — 35,426 — 35,426
Shareholders’ equity 2,502,603 2,092,119 3,714,726 (5,806,845) 2,502,603
Total liabilities and shareholders’ equity $ 12,004,913 $ 7,107,280 $ 14,630,182 $ (15,775,853) $ 17,966,522

Condensed Consolidated Statement of Comprehensive Income
For the 13-Week Period Ended Mar. 28, 2020
Sysco Certain U.S.
Broadline
Subsidiaries Other
Non-Guarantor
Subsidiaries Eliminations Consolidated
Totals
(In thousands)
Sales $ — $ 8,722,745 $ 5,493,011 $ (517,057) $ 13,698,699
Cost of sales — 7,070,961 4,580,555 (517,057) 11,134,459
Gross profit — 1,651,784 912,456 — 2,564,240
Operating expenses 295,242 1,141,038 1,067,686 — 2,503,966
Operating income (loss) (295,242) 510,746 (155,230) — 60,274
Interest expense (income) ⁽¹⁾
120,302 (28,747) (7,701) — 83,854
Other expense (income), net 2,513 (84) 2,771 — 5,200
Earnings (losses) before income taxes (418,057) 539,577 (150,300) — (28,780)
Income tax (benefit) provision (49,263) 137,143 (113,363) — (25,483)
Equity in earnings of subsidiaries 365,497 — 87,631 (453,128) —
Net earnings (3,297) 402,434 50,694 (453,128) (3,297)
Other comprehensive income (loss) (99,193) — (151,143) 151,143 (99,193)
Comprehensive income $ (102,490) $ 402,434 $ (100,449) $ (301,985) $ (102,490)

⁽¹⁾Interest expense (income) includes $28.7 million of intercompany interest income, net, for certain of the U.S. Broadline subsidiaries, which is intercompany interest expense for Sysco Corporation for the third quarter ended March 28, 2020. There is an immaterial amount of intercompany interest expense related to Sysco Corporation for the Other Non-Guarantor Subsidiaries.

Condensed Consolidated Statement of Comprehensive Income
For the 13-Week Period Ended Mar. 30, 2019
Sysco Certain U.S.
Broadline
Subsidiaries Other
Non-Guarantor
Subsidiaries Eliminations Consolidated
Totals
(In thousands)
Sales $ — $ 9,135,852 $ 6,098,725 $ (576,503) $ 14,658,074
Cost of sales — 7,392,718 5,087,561 (576,503) 11,903,776
Gross profit — 1,743,134 1,011,164 — 2,754,298
Operating expenses 206,795 1,025,383 992,535 — 2,224,713
Operating income (loss) (206,795) 717,751 18,629 — 529,585
Interest expense (income) ⁽¹⁾
55,925 (43,056) 81,645 — 94,514
Other expense (income), net (1,730) (80) 5,930 — 4,120
Earnings (losses) before income taxes (260,990) 760,887 (68,946) — 430,951
Income tax (benefit) provision (183,601) 188,703 (14,234) — (9,132)
Equity in earnings of subsidiaries 517,472 — 107,865 (625,337) —
Net earnings 440,083 572,184 53,153 (625,337) 440,083
Other comprehensive income (loss) 40,938 — 37,471 (37,471) 40,938
Comprehensive income $ 481,021 $ 572,184 $ 90,624 $ (662,808) $ 481,021

⁽¹⁾Interest expense (income) includes $43.1 million of intercompany interest income, net, for certain of the U.S. Broadline subsidiaries, which is intercompany interest expense for Sysco Corporation for the third quarter ended March 30, 2019. There is an immaterial amount of intercompany interest expense related to Sysco Corporation for the Other Non-Guarantor Subsidiaries.

Condensed Consolidated Statement of Comprehensive Income
For the 39-Week Period Ended Mar. 28, 2020
Sysco Certain U.S.
Broadline
Subsidiaries Other
Non-Guarantor
Subsidiaries Eliminations Consolidated
Totals
(In thousands)
Sales $ — $ 28,022,282 $ 17,671,368 $ (1,666,904) $ 44,026,746
Cost of sales — 22,694,007 14,663,634 (1,666,904) 35,690,737
Gross profit — 5,328,275 3,007,734 — 8,336,009
Operating expenses 701,003 3,269,879 3,084,042 — 7,054,924
Operating income (loss) (701,003) 2,058,396 (76,308) — 1,281,085
Interest expense (income) ⁽¹⁾
338,459 (73,268) (21,240) — 243,951
Other expense (income), net 8,954 (434) (1,015) — 7,505
Earnings (losses) before income taxes (1,048,416) 2,132,098 (54,053) — 1,029,629
Income tax (benefit) provision (254,669) 538,598 (88,194) — 195,735
Equity in earnings of subsidiaries 1,627,641 — 330,332 (1,957,973) —
Net earnings 833,894 1,593,500 364,473 (1,957,973) 833,894
Other comprehensive income (loss) (65,793) — (122,347) 122,347 (65,793)
Comprehensive income $ 768,101 $ 1,593,500 $ 242,126 $ (1,835,626) $ 768,101

⁽¹⁾Interest expense (income) includes $73.3 million of intercompany interest income, net, for certain of the U.S. Broadline subsidiaries, which is intercompany interest expense for Sysco Corporation. There is an immaterial amount of intercompany interest expense related to Sysco Corporation for the Other Non-Guarantor Subsidiaries.

Condensed Consolidated Statement of Comprehensive Income
For the 39-Week Period Ended Mar. 30, 2019
Sysco Certain U.S.
Broadline
Subsidiaries Other
Non-Guarantor
Subsidiaries Eliminations Consolidated
Totals
(In thousands)
Sales $ — $ 27,716,772 $ 18,662,548 $ (1,740,260) $ 44,639,060
Cost of sales — 22,434,604 15,514,921 (1,740,260) 36,209,265
Gross profit — 5,282,168 3,147,627 — 8,429,795
Operating expenses 659,697 3,113,409 3,047,069 — 6,820,175
Operating income (loss) (659,697) 2,168,759 100,558 — 1,609,620
Interest expense (income) ⁽¹⁾
160,830 (73,515) 183,328 — 270,643
Other expense (income), net 8,642 (220) 7,027 — 15,449
Earnings (losses) before income taxes (829,169) 2,242,494 (89,797) — 1,323,528
Income tax (benefit) provision (350,246) 556,107 (20,838) — 185,023
Equity in earnings of subsidiaries 1,617,428 — 330,236 (1,947,664) —
Net earnings 1,138,505 1,686,387 261,277 (1,947,664) 1,138,505
Other comprehensive income (loss) (74,200) — (88,989) 88,989 (74,200)
Comprehensive income $ 1,064,305 $ 1,686,387 $ 172,288 $ (1,858,675) $ 1,064,305

⁽¹⁾Interest expense (income) includes $73.5 million of intercompany interest income, net, for certain of the U.S. Broadline subsidiaries, which is intercompany interest expense for Sysco Corporation. There is an immaterial amount of intercompany interest expense related to Sysco Corporation for the Other Non-Guarantor Subsidiaries.

Condensed Consolidated Cash Flows
For the 39-Week Period Ended Mar. 28, 2020
Sysco Certain U.S.
Broadline
Subsidiaries Other
Non-Guarantor
Subsidiaries
Elimination ⁽¹⁾
Consolidated
Totals
(In thousands)
Cash flows provided by (used for):
Operating activities $ 517,337 $ 256,752 $ 304,380 $ — $ 1,078,469
Investing activities (122,409) (281,927) (357,681) 102,029 (659,988)
Financing activities 1,378,241 (6,816) 73,282 (102,029) 1,342,678
Effect of exchange rates on cash — — (8,857) — (8,857)
Net increase (decrease) in cash, cash equivalents and restricted cash 1,773,169 (31,991) 11,124 — 1,752,302
Cash, cash equivalents and restricted cash at the beginning of period 29,868 117,643 384,734 — 532,245
Cash, cash equivalents and restricted cash at the end of period $ 1,803,037 $ 85,652 $ 395,858 $ — $ 2,284,547

⁽¹⁾~~Represents primarily intercompany loans between the subsidiaries and the parent, Sysco Corporation.~~

Condensed Consolidated Cash Flows
For the 39-Week Period Ended Mar. 30, 2019
Sysco Certain U.S.
Broadline
Subsidiaries Other
Non-Guarantor
Subsidiaries
Elimination ⁽¹⁾
Consolidated
Totals
(In thousands)
Cash flows provided by (used for):
Operating activities $ 976,731 $ 132,990 $ 255,504 $ — $ 1,365,225
Investing activities 349,816 (133,190) (293,088) (503,397) (579,859)
Financing activities (1,338,077) (6,850) (98,285) 503,397 (939,815)
Effect of exchange rates on cash — — (11,619) — (11,619)
Net increase (decrease) in cash, cash equivalents and restricted cash (11,530) (7,050) (147,488) — (166,068)
Cash, cash equivalents and restricted cash at the beginning of period 29,144 111,843 574,857 — 715,844
Cash, cash equivalents and restricted cash at the end of period $ 17,614 $ 104,793 $ 427,369 $ — $ 549,776

⁽¹⁾~~Represents primarily intercompany loans between the subsidiaries and the parent, Sysco Corporation.~~

~~20.SUBSEQUENT EVENTS~~

Towards the end of March 2020, Sysco’s business declined significantly from the time that federal, regional, state and local governments issued shelter in place orders related to the COVID-19 pandemic. Many of Sysco’s customers, including those in the restaurant, hospitality and education segments, ceased operating due to governmental requirements for closures to help curb the spread of COVID-19, and there are no assurances as to how long these closures may remain in effect. Furthermore, even after reopening, there can be no assurance as to the time required to regain operations and sales volume at prior levels. Given the dynamic nature of this situation, the company cannot reasonably estimate the impacts of COVID-19 on its financial condition, results of operations or cash flows for the foreseeable future. However, Sysco expects the COVID-19 pandemic will have a material, adverse impact on future revenue growth, as well as overall profitability, and may lead to higher bad debt expense, higher inventory spoilage charges, the impairment of goodwill, intangible assets or fixed assets, the write-off of contract balances and a volatile effective tax rate driven by changes in the mix of earnings across the areas in which Sysco operates.

~~Senior Notes Offering~~

On April 2, 2020, which is in Sysco's fourth quarter of fiscal 2020, Sysco issued senior notes (Senior Notes) totaling $4.0 billion in aggregate principal amount in order to enhance the company’s liquidity position in response to the COVID-19 pandemic. Details of the senior notes are as follows:

Maturity Date Par Value
(in millions) Coupon Rate Pricing
(percentage of par)
April 1, 2025 (the 5.650% Senior Notes due 2025) 750 5.65 % 99.931 %
April 1, 2030 (the 5.950% Senior Notes due 2030) 1,250 5.95 99.792
April 1, 2040 (the 6.600% Senior Notes due 2040) 750 6.60 99.802
April 1, 2050 (the 6.600% Senior Notes due 2050) 1,250 6.60 99.767

Sysco anticipates using the net proceeds from the offering to payoff its commercial paper borrowings and to redeem its $750 million aggregate principal amount of Senior Notes due October 2020. The Senior Notes initially are fully and unconditionally guaranteed by Sysco’s direct and indirect wholly owned subsidiaries that guarantee Sysco’s other senior notes. Interest on the Senior Notes will be paid semi-annually in arrears on April 1 and October 1, beginning October 1, 2020. At Sysco’s option, any or all of the Senior Notes may be redeemed, in whole or in part, at any time prior to maturity. If Sysco elects to redeem (i) the Senior Notes maturing in 2025 before the date that is one month prior to the maturity date, (ii) the Senior Notes maturing in 2030 before the date that is three months prior to the maturity date, (iii) the Senior Notes maturing in 2040 before the date that is six months prior to the maturity date or (iv) the Senior Notes maturing in 2050 before the date that is six months prior to the maturity date, Sysco will pay an amount equal to the greater of 100% of the principal amount of the Senior Notes to be redeemed or the sum of the present values of the remaining scheduled payments of principal and interest on the Senior 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 Senior 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 Senior Notes to be redeemed. Sysco will pay accrued and unpaid interest on the Senior Notes redeemed to the redemption date. The interest rate payable on each series of Senior Notes will be subject to adjustment from time to time if either Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (or, in either case, a substitute rating agency), downgrades (or subsequently upgrades) its rating assigned to the Senior Notes, as set forth in the supplemental indentures under which the Senior Notes were issued.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion should be read in conjunction with our consolidated financial statements as of June ~~29, 2019,~~27, 2020, 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 June ~~29, 2019~~27, 2020 (our ~~2019~~fiscal 2020 Form 10-K), as well as the consolidated financial statements (unaudited) and notes to the consolidated financial statements (unaudited) contained in this report. Sysco’s fiscal year ends on the Saturday nearest to June 30th. This results in a 53-week year ending July 3, 2021 for fiscal 2021.

Highlights

Our third quarter of fiscal 2021 results were strong despite the COVID-19 pandemic’s impact on market conditions, due to improved sales and disciplined expense management. Our industry’s business recovery is here and the pace of recovery is accelerating, especially in our domestic U.S. business. We are making excellent progress in our business transformation to better serve our customers and differentiate from our competition. We are growing market share at the national and local customer level, and we achieved a profitable quarter, despite a 14% reduction in sales, as compared to fiscal 2020. We continue to make strategic investments in preparation for the business recovery and have focused our investments on our customers, our people, our inventory, our technology, and our communities. These investments have helped position Sysco for the return of foodservice demand. See below for a comparison of our third quarter of fiscal 2021 results to our third quarter of fiscal 2020 results, both including and excluding Certain Items.

Comparisons of results from the third quarter of fiscal 2021 to the third quarter of fiscal 2020:

•Sales:

◦decreased 13.7%, or $1.9 billion, to $11.8 billion;

•Operating income:

◦increased $175.6 million, to $235.9 million;

◦adjusted operating income decreased $120.8 million, to $256.2 million;

•Net earnings:

◦increased $92.2 million, to $88.9 million;

◦adjusted net earnings decreased $117.0 million, to $114.8 million;

•Basic earnings per share:

◦increased $0.18, to $0.17 per share;

•Diluted earnings per share:

◦increased $0.18, to $0.17 per share; and

◦adjusted diluted earnings per share decreased $0.23, to $0.22 per share.

•EBITDA:

◦increased 76.5%, or $184.5 million, to $425.8 million; and

◦adjusted EBITDA decreased 18.7%, or $100.7 million, to $437.4 million.

Comparisons of results from the first 39 weeks of fiscal 2021 to the first 39 weeks of fiscal 2020:

•Sales:

◦decreased 20.1%, or $8.9 billion, to $35.2 billion;

•Operating income:

◦decreased 32.3%, or $413.5 million, to $867.6 million;

◦adjusted operating income decreased 51.0%, or $890.9 million, to $855.0 million;

•Net earnings:

◦decreased 55.3%, or $460.8 million, to $373.1 million;

◦adjusted net earnings decreased 68.3%, or $805.7 million, to $374.1 million;

•Basic earnings per share:

◦decreased 55.2%, or $0.90, to $0.73 per share;

•Diluted earnings per share:

◦decreased 54.9%, or $0.89, to $0.73 per share; and

◦adjusted diluted earnings per share decreased 68.1%, or $1.56, to $0.73 per share.

•EBITDA:

◦decreased 22.3%, or $408.0 million, to $1.4 billion; and

◦adjusted EBITDA decreased 38.3%, or $854.6 million, to $1.4 billion.

EBITDA and adjusted EBITDA are non-GAAP financial measures. More information on the rationale for the use of non-GAAP financial measures and reconciliations to the most directly comparable numbers calculated in accordance with U.S. generally accepted accounting principles (GAAP) can be found under “Non-GAAP Reconciliations.”

Sysco’s results of operations for fiscal ~~2020~~2021 and fiscal ~~2019~~2020 were impacted by restructuring and transformational project costs consisting of: (1) restructuring charges; (2) expenses associated with our various transformation initiatives; ~~(2) severance~~ and (3) facility closure ~~charges;~~ and ~~(3) restructuring~~severance charges. ~~All acquisition-related costs in~~Sysco’s results for fiscal 2021 and fiscal 2020 ~~and fiscal 2019 that have been designated as Certain Items relate~~were also impacted by intangible amortization expense related to the fiscal 2017 acquisition of Cucina Lux Investments Limited (the Brakes Acquisition). ~~These include acquisition-related intangible amortization expense.~~Additionally, our results for fiscal 2021 were impacted by loss on the sale of businesses.

Fiscal 2021 results of operations were also positively impacted by the reduction of bad debt expense previously recognized in fiscal 2020 due to the unexpected impact of the COVID-19 pandemic on the collectability of our pre-pandemic trade receivable balances. Fiscal 2020 results of operations were also negatively impacted by costs arising from the COVID-19

pandemic, the most significant ~~including~~of which were (1) excess bad debt expense, and (2) goodwill impairment charges. Many of Sysco’s customers, including those in the restaurant, hospitality and education segments, are closed or operating at a substantially reduced volume due to governmental requirements for closures. Some of these customers have ceased paying their outstanding receivables, creating uncertainty as ~~to their collectability. We have~~we experienced an increase in past due receivables and ~~have~~ recognized additional bad debt charges. We have estimated uncollectible amounts by applying write-off percentages based on an aging of past due receivables. These write-off percentages are based in part on historical loss experience, including losses incurred during times of localcharges, and regional disasters. The COVID-19 pandemic is more widespread and longer in duration than historical disasters impacting our business, and it is possible that actual uncollectible amounts will differ and additional charges may be required in the fourth quarter of fiscal 2020.(2) goodwill impairment charges. While Sysco traditionally incurs bad debt expense, the magnitude of such expenses and benefits that we have experienced since the onset of the COVID-19 pandemic is not indicative of our normal operations. Our adjusted results have not been normalized in a manner that would exclude the full impact of the COVID-19 pandemic on our business. As such, Sysco has not adjusted its results for lost sales, inventory write-offs or other costs associated with the COVID-19 pandemic not previously stated. ~~In addition,~~

The fiscal ~~2019 results of operations were negatively affected by acquisition-related integration costs specific to the Brakes Acquisition~~2021 and ~~the impact of recognizing a foreign tax credit. These~~ fiscal 2020 ~~and fiscal 2019~~ items discussed above are collectively referred to as “Certain Items.” The results of our foreign operations can be impacted by changes in exchange rates applicable to converting from local currencies to U.S. dollars. We measure our total Sysco and our International Foodservice Operations results on a constant currency basis. Our discussion below of our results includes certain non-GAAP financial measures 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 and exclude the impact from Certain Items, and certain metrics are stated on a constant currency basis.

~~More information on~~During the ~~rationale~~fourth quarter of fiscal 2020, Sysco revised the way performance is assessed for the ~~use~~U.S. Foodservice Operations segment. As a result of ~~non-GAAP financial measures and reconciliations~~this change, charges incurred by the company’s corporate office to provide direct support functions to the ~~most directly comparable numbers calculated~~U.S. Foodservice Operations reportable segment have been reclassified from Corporate expenses into the U.S. Foodservice reportable segment. The segment information disclosed for fiscal 2021 reflects this change in ~~accordance~~reporting structure and prior year amounts have been reclassified to conform with ~~U.S. generally accepted accounting principles (GAAP) can be found under “Non-GAAP Reconciliations.”~~the current year presentation.

Key Performance Indicators

Sysco seeks to meet its strategic goals by continually measuring its success in its key performance metrics that drive stakeholder value through sales growth and capital allocation and deployment. The COVID-19 pandemic has significantly impacted the financial metrics used by management to evaluate the business, and certain metrics continue to be a near- and long-term focus, while other metrics do not provide meaningful comparable information in the near-term. We believe the following are our most significant performance ~~metrics:~~metrics in our current business environment:

•Adjusted operating income growth ~~and adjusted operating income leverage~~ (non-GAAP);

•Adjusted diluted earnings per share growth (non-GAAP);

•Adjusted EBITDA (non-GAAP);

•Case volume growth by customer type for U.S. Broadline operations;

•Sysco brand penetration for U.S. Broadline operations; and

•Free cash flow (non-GAAP)~~; and~~.

•

Adjusted ~~return~~EBITDA

EBITDA represents net earnings (loss) plus (1) interest expense, (2) income tax expense and benefit, (3) depreciation and (4) amortization. The net earnings (loss) component of our EBITDA calculation is impacted by Certain Items that we do not consider representative of our underlying performance. As a result, in the non-GAAP reconciliations below for each period presented, adjusted EBITDA is computed as EBITDA plus the impact of Certain Items, excluding Certain Items related to interest expense, income taxes, depreciation and amortization. Sysco’s management considers growth in this metric to be a measure of overall financial performance that provides useful information to management and investors about the profitability of the business, as it facilitates comparison of performance on ~~invested capital.~~a consistent basis from period to period by providing a

measurement of recurring factors and trends affecting our business. Additionally, it is a commonly used component metric used to inform on capital structure decisions.

We use these financial metrics and related computations, as well as sales and gross profit growth, to evaluate our business and to plan for near-and long-term operating and strategic decisions. We believe it is useful to provide investors with the same financial information that we use internally to make comparisons of our historical operating results, identify trends in our underlying operating results and evaluate our business.

~~Key Financial Definitions~~

Trends

•Economic and Industry TrendsSales – Sales is equal to gross sales, minus (i) sales returns and (ii) sales incentives that we offer to certain customers, such as upfront monies and discounts. Our sales are driven by changes in case volumes, product inflation that is reflected in the pricing of our products and mix of products sold.

•Gross profit - Gross profit is equal to our net sales minus our cost of goods sold. Cost of goods sold primarily includes inventory costs (net of supplier consideration) and inbound freight. Cost of goods sold generally changes as we incur higher or lower costs from our suppliers and as our customer and product mix changes.

~~Adjusted Operating Income, Adjusted Operating Income Leverage and Adjusted Diluted Earnings per Share Growth~~

Adjusted operating income represents our consolidated operating income, adjusted for the impact of Certain Items that we do not consider representative of our underlying performance. Adjusted operating income leverage represents the variance between our gross profit growth financial measure, on a percentage basis, and our adjusted operating expense growth, on a percentage basis, where management expects gross profit growth to exceed adjusted operating expense growth. Adjusted diluted earnings per share represents our consolidated diluted earnings per share, adjusted for the impact of Certain Items that we do not consider representative of our underlying performance. Sysco’s management considers growth in these metrics to be useful measures of operating efficiency and profitability, as they facilitate comparison of performance on a consistent basis from period to period by providing a measurement of recurring factors and trends affecting our business.

~~Case Volume Growth by Customer Type for U.S. Broadline Operations~~

Case volume represents the volume of product sold to customers during a period of time, and improvements in this metric are a primary driver of Sysco’s top line performance. We define a case, specifically for our U.S. Broadline operations, as the lowest level of packaged products that are sold from our warehouses, with one case potentially containing several pieces of a product packaged in bulk. Case size does not generally vary by location or from period to period, due to the design of our warehouses. Case volume growth is calculated by dividing the change in the volume of cases sold year-over-year by the volume of cases sold in the prior year. Sysco management considers case volume growth within its U.S. Broadline operations to be a measure that provides useful information to management and investors in evaluating sales performance and as an indicator of gross margin performance. Management monitors case volume growth by customer type, with bifurcation between local customers and national customers, as this provides a measure of gross profit performance due to the pricing strategies attached to each customer type. Local customers are primarily street customers, such as independent restaurants that do not have long-term contracts, or locally managed customers, such as local chain restaurants, while national customers are the multi-unit customers requiring national coverage from a customer centric view and are managed centrally from the Corporate office. Sysco management seeks to drive higher case volume growth to local customers, which allows more favorable pricing terms for our U.S. Broadline operations and generates higher gross margins as a result. National customers benefit from purchasing power, as they are able to negotiate pricing agreements across multiple businesses, reducing our gross profit potential but reducing our overall cost per case, as national customers have bigger drop sizes. While overall case volume growth reflects a key component of sales growth, local customer case growth provides additional context around gross profit performance.

~~Sysco Brand Penetration for U.S. Broadline Operations~~

Sysco management considers Sysco brand penetration to be a measure that provides useful information to management and investors in evaluating the gross profit performance of the company’s U.S. Broadline operations. Sysco offers an assortment of Sysco-branded products that can be differentiated from privately branded products, which enables us to achieve higher gross margin by administering and leveraging a consolidated product procurement program for quality food and non-food products. Due to cost efficiencies, Sysco-branded products generate a higher gross margin than sales from other privately branded products. We define Sysco brand penetration as the percentage of Sysco-branded case volume sold to U.S. Broadline customers over all cases sold to U.S. Broadline customers. This performance indicator, also measured at the customer type level, including local and national customers, is driven by growth in the distribution of branded products to more customers and more geographies, as well as increasing branded offerings through innovation and launch of new products.

~~Free Cash Flow~~

Free cash flow represents net cash provided from operating activities, less purchases of plant and equipment, plus proceeds from sales of plant and equipment. Sysco management considers free cash flow to be a non-GAAP liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after the purchases and sales of buildings, fleet, equipment and technology, which may potentially be used to pay for, among other things, strategic uses of cash, including dividend payments, share repurchases and acquisitions. However, free cash flow may not be available for discretionary expenditures, as it may be necessary that we use it to make mandatory debt service or other payments. Free cash flow should be considered in addition to, rather than as a substitute for, consolidated net income as a

measure of our performance and net cash provided by operating activities as a measure of our liquidity. See “Liquidity and Capital Resources” for discussions of GAAP metrics, including net cash provided by operating activities and our reconciliation of this non-GAAP financial measure.

~~Adjusted Return on Invested Capital~~

Although adjusted return on invested capital (ROIC) is considered a non-GAAP financial measure, Sysco management considers adjusted ROIC to be a measure that provides useful information to management and investors in evaluating the efficiency and effectiveness of the company’s long-term capital investments. We calculate adjusted ROIC as adjusted net earnings divided by (i) stockholders’ equity, computed as the average of adjusted stockholders’ equity at the beginning of the year and at the end of each fiscal quarter during the year; and (ii) long-term debt, computed as the average of the long-term debt at the beginning of the year and at the end of each fiscal quarter during the year. Trends in ROIC can fluctuate over time as management balances long-term strategic initiatives with possible short-term impacts. Reconciliations to the most directly comparable GAAP financial measures can be found under “Non-GAAP Reconciliations.”

~~Business Update from the COVID-19 Pandemic~~

During the last couple of weeks of the third quarter of fiscal 2020, our business declined significantly from the time that the shelter in place orders were issued related to the COVID-19 pandemic. We experienced declines in sales to the majority of our customers, with the exception of certain customers in the healthcare segment. Total sales were down approximately 60% during the last two weeks of the third quarter of fiscal 2020. In our U.S. Foodservice Operations, sales were down approximately 60%, SYGMA sales declined approximately 50%, and International was down approximately 70%. Recent trends have shown an approximate 15 basis point increase compared to the end of March 2020. We have experienced sequential weekly improvements and expect this trend to continue, with certain states opening in-restaurant dining and, therefore, we expect continued improvements in May 2020. Our SYGMA business had less of an impact to sales and volumes, as quick-service restaurants experienced less of a downturn compared to other restaurant types. In April 2020, we had the opportunity during this crisis to win new business, valued at more than $500 million, as a competing distributor was confronted with financial challenges. Our sales in Europe experienced a steeper decline, as countries had issued stay-at-home orders sooner and restaurant traffic decreased as a result. Our U.K. business is shipping approximately 200,000 meal kits per week on the behalf of U.K. ministerial department, which is providing much needed food to those in need and increasing our sales volumes.

In response to the ~~current environment, we~~COVID-19 pandemic, national and local governments have identified four key areas of focus as our critical priorities. First, we have taken actions to strengthen our overall liquidity. As of May 5, 2020, the company has more than $6.0 billion in cash and available liquidity. This will help us endure this crisis and maintain financial flexibility and the ability to invest in inventory and serviceimposed substantial restrictions upon the ~~return of demand to foodservice.~~

~~Second,~~customers we are focusing on stabilizing the business by removing costs. We have reduced our expenses to correspond to a lower level of sales volume, and, as a result, we are taking appropriate steps to manage costs during the downturn. We have removed more than $500 million of expenses from the business specific to our fourth quarter of fiscal 2020, which reflects, in part, the reduction to our staffing levels by approximately 33% through temporary workforce furloughs and permanent reductions in force. Additionally, we have substantially reduced miles driven by re-routing our transportation fleet, and are implementing productivity improvements in our operating companies. We plan to leverage technology improvements to enable those structural changes without compromising service or quality. The benefits of these changes are expected to occur beginning with our fourth quarter of fiscal 2020, and the permanent changes are expected to deliver an annualized benefit of approximately $300 million. In the fourth quarter of fiscal 2020, the expense reductions will be more than offset by the sales volume decrease we are experiencing. We believe our fourth quarter of fiscal 2020 will produce an operating loss as a result of the crisis; however, based on recent improving trends and certain states re-opening, we do not expect quarterly losses, if any, to be of the same magnitude in fiscal 2021. Additionally, we have reduced capital expenditures to only business-critical transformation projects. A significant number of physical projects, such as building expansions and fleet purchases, have been put on hold. Our capital investments will focus on things that will improve Sysco’s capabilities and allow us to win market share. By focusing on a narrower set of strategic initiatives, we will accelerate the pace of change at Sysco and expect to complete key projects more rapidly than previously planned. Examples of these efforts include: improving the capability of “SHOP”, our customer ordering platform for our U.S. Broadline business, increasing the effectiveness of our salesforce selling tool, and the implementation of a pricing tool that will improve management of margin for the long-term and increase the percentage of time our salesforce can spend on consultative selling as compared to administrative tasks. Collectively, these capabilities will enable our sales team to visit more customers, with the potential for these customers to purchase more from Sysco. These investments in digital technology will allow us to improve the effectiveness in our salesforce and increase their efficiency.

Third, we are working to leverage the upside that exists during this crisis by capturing new business opportunities and pivoting our support with current and new customers. Sysco serves a broad spectrum of the foodservice industry. Prior to the COVID-19 pandemic, approximately 50% of food consumption within the U.S. had been occurring away from home, and the remainder had been taking place inside the home. The COVID-19 pandemic has changed the balance and shifted more purchases to the retail grocery channel. As a result, we have pivoted our distribution model to include retail, grocer, and new supply chain partnerships, sectors that we essentially did not serve prior to the COVID-19 crisis. We are working with some of the best retail companies in the world, in an agile manner, to meet the rapidly evolving needs of our associates and communities through both supply chain and labor services partnerships. Since late March 2020, Sysco has shifted sales of products to regional and national retailers to help alleviate strain in the food supply chain due to a surge in demand at retail stores and shifts within the economy. In addition, we have undertaken the following initiatives:

•~~We are partnering with government agencies across the global regions we service to provide much needed food to communities in need;~~

•Sysco has also become a supplier of product to retail grocers, a business we were essentially not in prior to the COVID-19 pandemic. We have shipped hundreds of truckloads of protein, fresh product, and bulk consumables to select retail partners. We expect the majority of this work to be transitory in nature, with the potential for select partnerships to have staying power;

•We have increased our level of support to our healthcare customers, where sales have increased 15-20%, as we continue to arrange for deliveries of critical products, including personal protective equipment, to hospitals, urgent care facilities, and long-term care facilities, in a manner that is safe for our associates and our healthcare customers;

•On the logistics side, Sysco is now offering supply chain services contracts, such as carrier services, cross docking, and freight brokerage. We have entered into over 50 contracts with national and regional companies to provide third-party logistics services through utilization of Sysco's vast transportation fleet and logistics capabilities; and

•Sysco has entered into labor-sharing agreements with select retailers to provide temporary work opportunities for furloughed Sysco associates, which is providing work to our associates and enables Sysco to call back furloughed associates as volume returns.

~~While retail and logistics opportunities are significant and show our ability to quickly adapt to the changing environment, these opportunities do not fully off-set our volume declines~~ in the food-away-from-home ~~space. At risk are~~sector. We see pent up demand in the ~~numerous small business customers that we serve. Sysco has implemented several actions to assist both new~~sector, and ~~existing customers during this difficult time:~~

•Sysco is delivering more products and solutions, including Sysco Knows Fresh, an expansive product assortment that includes fresh meats and seafood, produce, dairy and refrigerated specialty items. We are open for business across all product lines;

•We developed a COVID-19 “selling bundle” and leveraged our SHOP platform to introduce it to our customers; this bundle features a combination of cleaning products, take-out containers, paper goods and personal protection equipment. These bundled solutions are quickly delivered critical goods that are intended to help our customers maintain seamless business operations. By keeping our customers in-stock with these essential items, we are helping enable their businesses to adapt to take-out and delivery, while keeping their kitchens safe and clean. We remain in-stock on these crucial products;

•We are assisting thousands of customers with website development for takeout and delivery solutions throughout the outbreak of COVID-19. Many of our smaller customers do not have these capabilities in-house. Sysco has helped provide tools, tips and solutions to develop digital platforms that drive customer engagement and increase traffic, while also helping provide ancillary services, such as home delivery, menu design, to-go containers, and other considerations during this unique environment;

•We are offering training webinars and education programs to help customers navigate the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and help small businesses retain employees during the pandemic; and

•We helped thousands of restaurants create product marketplaces, or “Groceraunts”, which includes transforming dining areas into pop-up shops where customers can shop for essential pantry items, such as eggs, condiments, bread, toilet paper, and paper towels. These additional products are not only helping communities, but are also helping the restaurant industry increase traffic and protect jobs.

~~Sysco is helping its customers stay in business, run their business and transform their businesses, which~~ we believe will help us retain and win additional business from them well beyond the current pandemic conditions. In addition to helping our restaurant customers, Sysco has started direct to consumer sales, an area of business that we did not offer before the onset of the pandemic. Our Buckhead Meat and FreshPoint companies held several pop-up events that sell specialty meat and produce direct to consumers. Furthermore, through Sysco's new websites, Onthefly.com in the U.S. and Sysco@Home in Canada, consumers ~~can purchase restaurant-quality steaks to be delivered direct to their home.~~

We have expanded existing will call opportunities from our physical locations through web enabled orders. If customers prefer, they can purchase products directly from an operating company and pick the product up themselves. Lastly, within the consumer sales space, we have partnered with third-party logistics service providers to offer prepackaged meal boxes, featuring a box of specialty produce delivered straight to the consumer’s front door. We are learning in these direct-to-consumer concepts, and we are leveraging these learning opportunities to better serve our customers and keep the food supply chain running.

Fourth, we are preparing for the time period when demand returns, including integrated supply chain planning with our customers and suppliers to ensure inventory levels will match the business recovery. Our strong relationships with our key suppliers will enable Sysco to stay in-stock for our customers during the recovery period and as we gain new customers. We are transforming our sales structure to be more focused, aligning the incentives of the sales force more closely with our business objectives, and increasing the partnership of our sales team across our multiple lines of business. When our customers begin to reopen restaurants, Sysco believes that it will have the ability and the inventory to help ensure that deliveries are made on-time, and in full capacity, to capitalize on the upside and to position ourselves to gain new business. We believe that demand for food-away-from-home will return over time, and we are ready to ~~support~~eat at restaurants once restrictions are reduced. Strong sales results and long wait times are common in restaurants operating within geographies that ~~demand and continue to be~~have limited restrictions. Our customers faced meaningfully tight restrictions during the winter COVID-19 lockdown, while a substantial winter storm in February 2021 adversely affected performance in our ~~customers’ most valued business partner. We have~~strongest domestic markets. Nevertheless, there has been a ~~strong balance sheet that will allow us to invest at~~notable improvement in the ~~appropriate time.~~

~~Highlights and Trends~~

~~Highlights~~

~~Our third quarter of fiscal 2020 performance partially reflects the impact~~southern portion of the ~~COVID-19 pandemic~~U.S., where reduced restrictions and warmer weather are generating strong performance results. These results in reopened markets present a positive sign of things to come as the northern regions begin to benefit from easing restrictions that currently remain largely in place. The International Foodservice Operations segment has been significantly adversely impacted due to tougher restrictions in the countries in which we operate, particularly in Europe, which are experiencing even stronger restrictions than those experienced in the United States and are making slower progress on vaccination. Demand in Europe, Canada and Latin America regressed in the third quarter of fiscal ~~2020,~~2021 as ~~compared~~a result of strict lockdowns that are expected to continue, and are expected to negatively affect our fourth quarter of fiscal 2021 results for our International Foodservice Operations segment. The impact of these lockdowns may carry into the early quarters of fiscal 2022, depending on vaccination progress by country. However, we see positive trends in the recent reopening taking place in the United Kingdom. In addition to softer European performance, our business in the travel, hospitality and Food Service Management sector remains down. Our business penetration in Europe and Foodservice Management pre-COVID is creating a lingering delay in the full recovery of our business results in comparison to other distributors. Although we expect these sectors to recover, their recovery will be at a slower pace than our core restaurant sector. Our sales teams are actively engaged with new customers and are helping existing customers maximize their business during this recovery period. In the third quarter of fiscal ~~2019, both including and excluding Certain Items.~~2021, as a result of these efforts, Sysco gained overall market share versus the rest of the industry, reflecting the progress of our investments.

~~Comparisons of results from the third quarter of fiscal 2020 to the third quarter of fiscal 2019:~~

•~~Sales:~~

◦~~decreased 6.5%, or $959.4 million, to $13.7 billion;~~

•~~Operating income:~~

◦~~decreased 88.6%, or $469.3 million, to $60.3 million;~~

◦~~adjusted operating income decreased 39.2%, or $243.2 million, to $377.0 million;~~

•~~Net earnings:~~

◦~~decreased 100.7%, or $443.4 million, to a net loss of $3.3 million;~~

◦~~adjusted net earnings decreased 43.6%, or $179.4 million, to $231.8 million;~~

•~~Basic earnings per share:~~

◦~~decreased 101.2%, or $0.87, to a loss of $0.01 per share;~~

•~~Diluted earnings per share:~~

◦~~decreased 101.2%, or $0.86, to a loss of $0.01 per share;~~Sales and

◦~~adjusted diluted earnings per share decreased 43.0%, or $0.34, to $0.45 per share.~~

~~Comparisons of results from the first 39 weeks of fiscal 2020 to the first 39 weeks of fiscal 2019:~~

•~~Sales:~~

◦~~decreased 1.4%, or $612.3 million, to $44.0 billion;~~

•~~Operating income:~~

◦~~decreased 20.4%, or $328.5 million, to $1.3 billion;~~

◦~~adjusted operating income decreased 8.8%, or $169.3 million, to $1.7 billion;~~

•~~Net earnings:~~

◦~~decreased 26.8%, or $304.6 million, to $833.9 million;~~

◦~~adjusted net earnings decreased 8.1%, or $104.0 million, to $1.2 billion;~~

•~~Basic earnings per share:~~

◦~~decreased 25.9%, or $0.57, to $1.63 per share;~~

•~~Diluted earnings per share:~~

◦~~decreased 25.3%, or $0.55, to $1.62 per share; and~~

◦~~adjusted diluted earnings per share decreased 6.5%, or $0.16, to $2.29 per share.~~

See “Non-GAAP Reconciliations” below for an explanation of adjusted operating income, adjusted net earnings and adjusted diluted earnings per share, which are non-GAAP financial measures, and reconciliations to the most directly comparable GAAP financial measures.

Gross Profit Trends

The COVID-19 pandemic has significantly negatively affected economic and industry trends, primarily in the form of increased unemployment and significantly lower levels of activity in the food-away-from home market.

Our sales and gross profit ~~decline~~performance can be influenced by multiple factors, including price, volume, customer mix, product mix and the impact of the COVID-19 pandemic. The biggest factor affecting performance in the first 39 weeks of fiscal 2021 was ~~driven by reduced sales to our customers due to~~ the COVID-19 pandemic ~~the divestiture of Iowa Premium, LLC (Iowa Premium)~~due to reduced volume. Sales and gross profits were also adversely impacted by lower volumes in the ~~fourth~~beginning of the third quarter of fiscal ~~2019 and~~2021 due to restrictions on our customers resulting from the ~~negative~~ impact of ~~foreign exchange rates. Partially offsetting~~the second wave of COVID-19 in different geographies. Since the beginning of March 2021, however, we have begun seeing volume improvements in our largest businesses in North America.

In terms of customer mix, during the third quarter of fiscal 2021, we added more new local customers than we have added during any quarter in the last five years. We believe these ~~declines,~~efforts demonstrate our ability to accelerate future growth. We continue to win business at the national and contract sales level. We have added over $1.8 billion of net new national account business on an annualized basis since the beginning of the pandemic, with another strong quarter of new contracts signed. The contracts being written are at historical profit margins, as we ~~experienced continued~~are winning new business due to our supply chain and service capabilities. Sysco is currently serving more local customers than before the COVID-19 pandemic, and due to our increased customer count, we anticipate growing our market share as business returns to the food-away-from-home sector in fiscal 2022 and beyond. Given the strong growth in ~~penetration~~our SYGMA segment over the past year, but the lower margin profile of this business, we continue to be diligent in our ~~Sysco brand portfolio. A strengthening U.S. dollar negatively affected total Sysco sales growth by 0.2%~~contract review and ~~0.3% for~~approval process. As a result, during our fiscal fourth quarter, we plan to transition away from a large existing SYGMA customer.

Our gross margin decreased 77 and 62 basis points in the third quarter and first 39 weeks of fiscal ~~2020,~~2021, respectively, ~~and negatively impacted sales growth for our International Foodservice Operations by 1.3% and 1.8%~~compared to the respective prior year periods. The primary reason for the ~~third quarter and first 39 weeks~~gross margin dilution at the enterprise level is business mix. Our sales in our generally higher margin European business were down, while our sales in our lower margin SYGMA business were up, resulting in lower margins for the enterprise. In terms of ~~fiscal 2020, respectively, as~~the impact on pricing, we ~~translated our foreign sales due to foreign currency exchange rate changes. We~~ experienced inflation at a rate of ~~1.3% during the third quarter of fiscal 2020, primarily in the dairy products~~3.5% and beef categories. We expect a continued decline in sales growth for the remainder of fiscal 2020 as a result of the effects of the COVID-19 pandemic; however, we are actively pursuing new sources of revenue by leveraging our supply chain expertise to provide services to the retail grocery sector. This new business is expected to help mitigate some of the declines in our traditional sales channels and also position Sysco to capitalize on growth opportunities after the COVID-19 crisis subsides. We have taken steps to adapt inventory levels to align with sales volumes trends. While we have experienced some elevated levels of spoilage, a combination of our transition to retail business and product donation has alleviated some of the food spoilage impact.

~~Total operating expenses increased 12.6% and 3.4%~~2.0% during the third quarter and first 39 weeks of fiscal ~~2020,~~2021, respectively, ~~as compared to~~primarily in the paper and disposables, poultry and meat categories.

Operating Expense Trends

Total operating expenses decreased 24.6% and 21.0% during the third quarter and first 39 weeks of fiscal ~~2019.~~2021, respectively, as compared to the same periods in fiscal 2020, and we saw a modest improvement in operating expense leverage. The largest contributor to the ~~increase~~decrease was ~~an additional charge for~~reduced costs from the achievement of cost-out initiatives (see “Cost-out Measures” below), as well as a benefit from a reduction in our allowance for doubtful accounts ~~as a result of~~resulting from the COVID-19 pandemic. Many of Sysco’s customers ~~including those in the restaurant, hospitality and education segments, are closed or~~have been operating at a substantially reduced volume due to governmental requirements for ~~closures.~~closures or other social-distancing measures, and a portion of Sysco’s customers have been closed. Some of these customers have ceased paying their outstanding receivables, creating uncertainty as to their collectability. We ~~have experienced an increase~~established reserves for bad debts in ~~past due receivables and have recognized additional bad debt charges. In the third quarter of~~ fiscal 2020 for these receivables; however, collections have improved in fiscal 2021 partially from restaurant reopenings, volume improvements and Sysco’s improved credit processes. As a result, we ~~recorded~~have reduced our reserves on pre-pandemic receivables, recognizing a ~~provision for losses on receivables totaling $175.4~~$33.5 million ~~of which we believe approximately $153.5~~and $162.4 million is due to the impact of the COVID-19 pandemic on our customers, calculated by comparing our March allowance results to the prior three-month average, with excess amounts being a reasonable estimate of what the reserve for the allowance for doubtful accounts would have been forbenefit in the third quarter and first 39 weeks of fiscal ~~2020, absent~~2021, respectively, included as a Certain Item. We recorded a reduction of $10.0 million on our reserves relating to periods beginning after the ~~impact~~onset of the COVID-19 ~~pandemic. We expect to see an increase~~pandemic in ~~bankruptcies of customers, which may contribute to a significant increase in bad debt expense to be recorded for the fiscal fourth quarter.~~

~~During~~ the third quarter of fiscal ~~2020,~~2021, which are not included as a ~~result~~Certain Item. Additional reserves of ~~significant worsening~~$24.7 million were recorded in the first 39 weeks of ~~macroeconomic conditions and declines in equity valuations, as well as regulatory restrictions adopted in response~~fiscal 2021 for receivables relating to periods beginning after the onset of the COVID-19 pandemic, ~~the company performed quantitative goodwill impairment tests on its European reporting units~~which are not included as a Certain Item. The COVID-19 pandemic is more widespread and ~~the Pacific Star (our Mexico operations)~~longer in duration than historical disasters impacting our business, and ~~Cake reporting units. Based upon the results of the tests, during the third quarter of fiscal 2020, the company recorded impairment~~it is possible that actual uncollectible amounts will differ and additional charges ~~of $34.5 million and $34.2 million for Pacific Star and Cake, respectively, which represented the full balance of goodwill for those reporting units. No impairment was applicable for~~may be required; however, if collections continue to improve, it is also possible that additional reductions in our ~~European reporting units.~~bad debt reserve could occur.

Cost-out Measures

The ~~impact of the~~ COVID-19 crisis has ~~caused~~compelled us to take action to reduce costs by reducing variable expenses in response to reduced customer demand, aligning inventory to current sales trends, reducing capital expenditures to only urgent projects and targeted investments and tightly managing receivables. These actions ~~will produce~~produced savings in the ~~fourth~~third quarter and first 39 weeks of fiscal ~~2020.~~2021. We ~~expect to reduce~~have reduced pay-related expenses through ~~temporary and permanent layoffs~~headcount reductions across the organization, most of which occurred ~~late~~ in ~~third quarter of fiscal 2020, with smaller numbers in April 2020. This resulted in an increase in severance charges in the third quarter of~~ fiscal 2020. ~~We may incur inventory write-down charges during~~With the ~~remainder of fiscal 2020, as~~improvement in sales volume, we ~~manage working capital through this environment; however, the magnitude of these charges was not significant in the third quarter of fiscal 2020.~~

~~To date~~anticipate that we will hire additional sales consultants, new business developers, culinary experts and operations associates in the fourth quarter of fiscal ~~2020, we have removed more than $500~~2021. We are on track to surpass our fiscal 2021 goal of $350 million of ~~expenses from the business specific~~cost savings, and we expect to drive continued cost savings opportunities to help fuel our fourth quarter of fiscal 2020, which reflects, in part, the reduction to our staffing levels by approximately 33% through temporary workforce furloughs and permanent reductions in force. Additionally, we have substantially reduced miles driven by re-routing our transportation fleet, and are implementing productivity improvements in our operating companies. We plan to leverage technology improvements to enable those structural changes without compromising service or quality. The benefits of these changes are expected to occur beginning with our fourth quarter of fiscal 2020, and the permanent changes are

expected to deliver an annualized benefit of approximately $300 million. In the fourth quarter of fiscal 2020, the expense reductions will be more than offset by the sales volume decrease we are experiencing. We believe our fourth quarter of fiscal 2020 will produce an operating loss as a result of the crisis; however, based on recent improving trends and the reopening of economic activity in certain states, we do not expect quarterly losses, if any, to be of the same magnitude in fiscal 2021.future growth agenda.

Status of Supply Chain Disruptions and Facility Closures

We are experiencing pressure and constraints in the supply chain, as select suppliers struggle with meeting increased demand levels. We anticipated this constraint and have been partnering with our top suppliers to preposition inventory at our warehouses, which creates an opportunity for us to grow our business and take additional market share. Although our business continues to face challenges associated with ~~decreased customer demand and increased costs directly related to~~ the ~~global~~ COVID-19 crisis, to date we have not experienced any significant disruptions to our supply chain, or significant distribution facility closures. The foodservice distribution industry is considered to be an essential industry and, as such, we expect our supply chain and facilities to remain in place and operational in the current environment and in the eventclosures or disposals of ~~a prolonged downturn.~~significant assets or lines of business.

Income Tax Trends

Our provision for income taxes primarily reflects a combination of income earned and taxed in the various U.S. federal and state, as well as foreign, jurisdictions. Tax law changes, increases or decreases in book versus tax basis differences, accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances, and our change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate. The impact of the COVID-19 pandemic may change our mix of earnings by jurisdiction and has increased the risk that operating losses may occur within certain of our jurisdictions that could lead to the recognition of valuation allowances against certain deferred tax assets in the future, if these losses are prolonged beyond our current expectations. ~~This would~~These effects could negatively impact our income tax expense, net earnings, and balance sheet.

Divestitures

Sysco sold its interests in ~~Iowa Premium~~Davigel Spain, part of the International Foodservice Operations segment, in the ~~fourth~~third quarter of fiscal ~~2019,~~2021 and ~~therefore, our operating results for the first 39 weeks of fiscal 2020, as compared to the first 39 weeks of fiscal 2019, reflect decreases that relate to the divestiture of that business.~~

~~We have completed the following new acquisitions thus far~~sold its interest in ~~fiscal 2020 within our U.S. Foodservice Operations:~~

•InCake Corporation in the first quarter of fiscal ~~2020, we acquired J. Kings Food Service Professionals, a New York broadline distributor with approximately $150 million in annual revenue.~~

•~~In the second quarter of fiscal 2020, we acquired Armstrong Produce~~2021. These operations were not significant to Sysco’s business, and ~~Kula Produce, a Hawaii-based broadline fresh produce wholesaler~~these divestitures will facilitate our efforts to prioritize our focus and ~~distributor with approximately $155 million in combined annual revenue.~~investments on our core business.

Strategy

Fiscal 2020 is the third year in our three-year plan that was established in fiscal 2018 and included our strategic and financial objectives through fiscal 2020. During the third quarter of fiscal 2020, the company experienced a significant reduction in customer demand resulting from the continued spread of COVID-19. Due to the rapidly evolving impact of the COVID-19 pandemic on our financial results and the uncertainty related to its duration, we have withdrawn our guidance for the remainder of our three-year plan ending fiscal 2020, and we are not providing an updated outlook at this time.

In response to the current environment, we ~~have~~ identified four key areas of focus as we manage the business in the near-term and prepare the company for recovery once the COVID-19 crisis subsides. First, we ~~have taken~~took actions to strengthen our overall ~~liquidity.~~liquidity, and now we are reducing our debt levels in anticipation of the business recovery. Second, we ~~are~~ focused on stabilizing the business by removing costs. Third, we ~~are working to leverage the upside that exists during this crisis~~created new sources of revenue by ~~capturing new business opportunities and pivoting~~helping our ~~support with current and new customers.~~restaurant customers succeed under pandemic conditions. Fourth, we ~~are preparing~~provided, and continue to provide, products for ~~the time period when demand returns, including integrated supply chain planning with~~cleaning, sanitation, and personal protection, without disruptions, so that our customers may continue their business operations.

While our response to the COVID-19 pandemic has been a primary focus, we have also accelerated our transformation initiatives that improve how we serve our customers, differentiate Sysco from our competitors and ~~suppliers~~transform the foodservice distribution industry. These include:

•Improving service to ~~ensure inventory levels will match~~our customers by enhancing our digital order entry platform, Sysco Shop, deploying a digital pricing tool and introducing our Restaurants Rising campaign;

•Transforming our sales model to make it easier for customers to do business with Sysco and to increase the effectiveness of our sales teams;

•Regionalizing our operations in the U.S. within our U.S. Broadline and FreshPoint businesses; and

•Removing structural fixed costs from our business and becoming a more efficient company to return value to shareholders and to fund our continued growth plans.

Throughout the third quarter of fiscal 2021, we have increased our strategic investments in preparation for the business recovery. Our investments in our customers include our Restaurants Rising campaign, which is intended to help restaurants to succeed and strengthen their business for the future by waiving delivery minimums and making it easier to do business with Sysco. We are making investments in our people, including increasing our efforts to proactively staff in advance of the business recovery. By the end of fiscal 2021, we believe we will have hired over 6,000 new associates, including warehouse selectors and drivers. While ~~retail and logistics opportunities~~this hiring investment will increase our operating expenses in the short-term, over the long-term, it will help ensure that Sysco is able to maximize our market share gains during the business recovery. We are ~~significant and show~~also making investments in inventory to properly position our warehouses to support customer demand. Our ability to ~~quickly adapt to~~ship product on time and in full during the ~~changing environment, these opportunities do not fully off-set our~~upcoming period of anticipated volume ~~declines~~recovery makes Sysco the strongest broadline distributor in the ~~food-away-from-home space.~~industry. Due to our strong balance sheet, we are uniquely positioned to make investments in inventory, allowing Sysco to accelerate growth and remain ahead of the pace of the overall business recovery. We are continuing our strategic investments in our technology to improve the customer experience and our technology platform is being meaningfully improved so that we can better service our customers. We are making it easier for our customers to order products through our Sysco Shop platform and we are implementing a new pricing software.

See “Non-GAAP Reconciliations” below for an explanation of adjusted operating income, ~~and adjusted return on invested capital,~~ which ~~are~~is a non-GAAP financial ~~measures.~~measure.

4131

Results of Operations

The following table sets forth the components of our consolidated results of operations expressed as a percentage of sales for the periods indicated:


		13-Week Period Ended						39-Week Period Ended							13-Week Period Ended				39-Week Period Ended
		Mar. 28, 2020		Mar. 30, 2019		Mar. 28, 2020		Mar. 30, 2019			Mar. 27, 2021		Mar. 28, 2020		Mar. 27, 2021		Mar. 28, 2020
Sales	Sales	100.0	%	100.0	%	100.0	%	100.0	%	Sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	Cost of sales	81.3		81.2		81.1		81.1		Cost of sales	82.0		81.3		81.7		81.1
Gross profit	Gross profit	18.7		18.8		18.9		18.9		Gross profit	18.0		18.7		18.3		18.9
Operating expenses	Operating expenses	18.3		15.2		16.0		15.3		Operating expenses	16.0		18.3		15.8		16.0
Operating income	Operating income	0.4		3.6		2.9		3.6		Operating income	2.0		0.4		2.5		2.9
Interest expense	Interest expense	0.6		0.6		0.6		0.6		Interest expense	1.2		0.6		1.2		0.6
Other expense (income), net		—		0.1		—		—
Other (income) expense, net										Other (income) expense, net	(0.1)		—		—		—
Earnings before income taxes	Earnings before income taxes	(0.2)		2.9		2.3		3.0		Earnings before income taxes	0.9		(0.2)		1.3		2.3
Income taxes	Income taxes	(0.2)		(0.1)		0.4		0.4		Income taxes	0.1		(0.2)		0.2		0.4
Net earnings	Net earnings	—	%	3.0	%	1.9	%	2.6	%	Net earnings	0.8	%	—	%	1.1	%	1.9	%

The following table sets forth the change in the components of our consolidated results of operations expressed as a percentage increase or decrease over the comparable period in the prior year:


		13-Week Period Ended		39-Week Period Ended			13-Week Period Ended		39-Week Period Ended
		Mar. 28, 2020		Mar. 28, 2020			Mar. 27, 2021		Mar. 27, 2021
Sales	Sales	(6.5)	%	(1.4)	%	Sales	(13.7)	%	(20.1)	%
Cost of sales	Cost of sales	(6.5)		(1.4)		Cost of sales	(12.9)		(19.5)
Gross profit	Gross profit	(6.9)		(1.1)		Gross profit	(17.2)		(22.7)
Operating expenses	Operating expenses	12.6		3.4		Operating expenses	(24.6)		(21.0)
Operating income	Operating income	(88.6)		(20.4)		Operating income	291.4		(32.3)
Interest expense	Interest expense	(11.3)		(9.9)		Interest expense	73.8		79.9
Other expense (income), net ^{(1) (2)}		26.2		(51.4)
Other (income) expense, net (1) (2)						Other (income) expense, net (1) (2)	(344.4)		(288.4)
Earnings before income taxes	Earnings before income taxes	(106.7)		(22.2)		Earnings before income taxes	(457.4)		(57.0)
Income taxes	Income taxes	179.1		5.8		Income taxes	(154.6)		(64.4)
Net earnings	Net earnings	(100.7)	%	(26.8)	%	Net earnings	2,797.2	%	(55.3)	%
Basic earnings per share	Basic earnings per share	(101.2)	%	(25.9)	%	Basic earnings per share	1,800.0	%	(55.2)	%
Diluted earnings per share	Diluted earnings per share	(101.2)		(25.3)		Diluted earnings per share	1,800.0		(54.9)
Average shares outstanding	Average shares outstanding	(1.1)		(1.3)		Average shares outstanding	0.5		(0.1)
Diluted shares outstanding	Diluted shares outstanding	(1.4)		(1.7)		Diluted shares outstanding	0.4		(0.6)

⁽¹⁾Other (income) expense, ~~(income),~~ net was income of $12.7 million and expense of $5.2 ~~million and $4.1~~ million in the third quarter of fiscal ~~2020~~2021 and fiscal ~~2019,~~2020, respectively.

(2)

⁽²⁾Other (income) expense, ~~(income),~~ net was income of $14.1 million and expense of $7.5 ~~million and $15.4~~ million in the first 39 weeks of fiscal ~~2020~~2021 and fiscal ~~2019,~~2020, respectively.

The following tables represent our results by reportable segments:

13-Week Period Ended Mar. 28, 2020
U.S. Foodservice Operations International Foodservice Operations SYGMA Other Corporate Consolidated
Totals
(In thousands)
Sales $ 9,587,005 $ 2,508,642 $ 1,364,111 $ 238,941 $ — $ 13,698,699
Sales increase (decrease) (5.1) % (9.0) % (11.3) % (7.2) % (6.5) %
Percentage of total 70.0 % 18.3 % 10.0 % 1.7 % 100.0 %
Operating income (loss) $ 528,025 $ (83,786) $ 10,301 $ (19,051) $ (375,215) $ 60,274
Operating income (loss) increase (decrease) (31.0) % NM (11.7) % NM (88.6) %
Percentage of total segments 121.2 % (19.2) % 2.4 % (4.4) % 100.0 %
Operating income (loss) as a percentage of sales 5.5 % (3.3) % 0.8 % (8.0) % 0.4 %


	13-Week Period Ended Mar. 27, 2021
	U.S. Foodservice Operations			International Foodservice Operations			SYGMA			Other			Corporate		Consolidated Totals
	(In thousands)
Sales	$	8,360,241		$	1,723,126		$	1,580,695		$	160,527		$	—	$	11,824,589
Sales increase (decrease)	(12.8)		%	(31.3)		%	15.9		%	(32.8)		%			(13.7)		%
Percentage of total	70.7		%	14.6		%	13.4		%	1.3		%			100.0		%

Operating income (loss)	$	545,502		$	(121,487)		$	12,937		$	5,884		$	(206,919)	$	235,917
Operating income (loss) increase (decrease)	17.5		%	45.0		%	25.6		%	NM					NM
Percentage of total segments	123.2		%	(27.4)		%	2.9		%	1.3		%			100.0		%
Operating income (loss) as a percentage of sales	6.5		%	(7.1)		%	0.8		%	3.7		%			2.0		%


		13-Week Period Ended Mar. 30, 2019																																13-Week Period Ended Mar. 28, 2020
		U.S. Foodservice Operations			International Foodservice Operations			SYGMA			Other			Corporate		Consolidated Totals				U.S. Foodservice Operations			International Foodservice Operations			SYGMA			Other			Corporate		Consolidated Totals
		(In thousands)																																(In thousands)
Sales	Sales	$	10,105,283		$	2,757,891		$	1,537,312		$	257,588		$	—	$	14,658,074		Sales	$	9,587,005		$	2,508,642		$	1,364,111		$	238,941		$	—	$	13,698,699

Percentage of total	Percentage of total	68.9		%	18.8		%	10.5		%	1.8		%			100.0		%	Percentage of total	70.0		%	18.3		%	10.0		%	1.7		%			100.0		%

Operating income	Operating income	$	765,425		$	10,145		$	11,668		$	6,376		$	(264,029)	$	529,585		Operating income	$	464,173		$	(83,786)		$	10,301		$	(19,051)		$	(311,363)	$	60,274

Percentage of total segments	Percentage of total segments	96.4		%	1.3		%	1.5		%	0.8		%			100.0		%	Percentage of total segments	124.9		%	(22.5)		%	2.8		%	(5.1)		%			100.0		%
Operating income as a percentage of sales	Operating income as a percentage of sales	7.6		%	0.4		%	0.8		%	2.5		%			3.6		%	Operating income as a percentage of sales	4.8		%	(3.3)		%	0.8		%	(8.0)		%			0.4		%


	39-Week Period Ended Mar. 27, 2021
	U.S. Foodservice Operations			International Foodservice Operations			SYGMA			Other			Corporate		Consolidated Totals
	(In thousands)
Sales	$	24,205,917		$	5,854,608		$	4,625,244		$	475,181		$	—	$	35,160,950
Sales increase (decrease)	(21.0)		%	(29.6)		%	8.4		%	(39.8)		%			(20.1)		%
Percentage of total	68.8		%	16.7		%	13.2		%	1.3		%			100.0		%

Operating income	$	1,619,162		$	(201,973)		$	35,957		$	4,861		$	(590,449)	$	867,558
Operating income increase (decrease)	(17.5)		%	NM			29.7		%	NM					(32.3)		%
Percentage of total segments	111.1		%	(13.9)		%	2.5		%	0.3		%			100.0		%
Operating income as a percentage of sales	6.7		%	(3.4)		%	0.8		%	1.0		%			2.5		%


	39-Week Period Ended Mar. 28, 2020
	U.S. Foodservice Operations			International Foodservice Operations			SYGMA			Other			Corporate		Consolidated Totals
	(In thousands)
Sales	$	30,659,215		$	8,311,081		$	4,266,998		$	789,452		$	—	$	44,026,746

Percentage of total	69.6		%	18.9		%	9.7		%	1.8		%			100.0		%

Operating income	$	1,962,595		$	5,895		$	27,732		$	486		$	(715,623)	$	1,281,085

Percentage of total segments	98.3		%	0.3		%	1.4		%	—		%			100.0		%
Operating income as a percentage of sales	6.4		%	0.1		%	0.6		%	0.1		%			2.9		%

39-Week Period Ended Mar. 28, 2020
U.S. Foodservice Operations International Foodservice Operations SYGMA Other Corporate Consolidated
Totals
(In thousands)
Sales $ 30,659,215 $ 8,311,081 $ 4,266,998 $ 789,452 $ — $ 44,026,746
Sales increase (decrease) 0.2 % (3.0) % (9.1) % 0.9 % (1.4) %
Percentage of total 69.6 % 18.9 % 9.7 % 1.8 % 100.0 %
Operating income $ 2,158,211 $ 5,895 $ 27,732 $ 486 $ (911,239) $ 1,281,085
Operating income increase (decrease) (6.9) % (90.5) % 61.1 % (97.8) % (20.4) %
Percentage of total segments 98.4 % 0.3 % 1.3 % — % 100.0 %
Operating income as a percentage of sales 7.0 % 0.1 % 0.6 % 0.1 % 2.9 %

39-Week Period Ended Mar. 30, 2019
U.S. Foodservice Operations International Foodservice Operations SYGMA Other Corporate Consolidated
Totals
(In thousands)
Sales $ 30,591,799 $ 8,569,439 $ 4,695,376 $ 782,446 $ — $ 44,639,060
Percentage of total 68.5 % 19.2 % 10.5 % 1.8 % 100.0 %
Operating income $ 2,318,660 $ 62,000 $ 17,213 $ 22,429 $ (810,682) $ 1,609,620
Percentage of total segments 95.8 % 2.6 % 0.7 % 0.9 % 100.0 %
Operating income as a percentage of sales 7.6 % 0.7 % 0.4 % 2.9 % 3.6 %

Based on information in Note ~~18,~~13, “Business Segment Information,” in the Notes to Consolidated Financial Statements in Item 1 of Part I, in the third quarter and first 39 weeks of fiscal ~~2020,~~2021, U.S. Foodservice Operations and International Foodservice Operations collectively represented approximately ~~88.3%~~85.3% and ~~88.5%~~85.5% of Sysco’s overall sales ~~respectively.~~in each period. In the third quarter and first 39 weeks of fiscal ~~2020,~~2021, U.S. Foodservice Operations and International Foodservice Operations collectively represented approximately ~~102.0%~~95.7% and ~~98.7%~~97.2% of the total segment operating income, respectively. This illustrates that these segments represent ~~the~~a substantial majority of our total segment results when compared to ~~the~~ other reportable ~~segment.~~segments.

Results of U.S. Foodservice Operations

The following tables set forth a summary of the components of operating income expressed as a percentage increase or decrease over the comparable period in the prior year:


		13-Week Period Ended Mar. 28, 2020		13-Week Period Ended Mar. 30, 2019		Change in Dollars		% Change			13-Week Period Ended Mar. 27, 2021		13-Week Period Ended Mar. 28, 2020		Change in Dollars		% Change
		(Dollars in thousands)															(Dollars in thousands)
Sales	Sales	$	9,587,005	$	10,105,283	$	(518,278)	(5.1)	%	Sales	$	8,360,241	$	9,587,005	$	(1,226,764)	(12.8)	%
Gross profit	Gross profit	1,895,378		2,009,129		(113,751)		(5.7)		Gross profit	1,634,837		1,895,378		(260,541)		(13.7)
Operating expenses	Operating expenses	1,367,353		1,243,704		123,649		9.9		Operating expenses	1,089,335		1,431,205		(341,870)		(23.9)
Operating income	Operating income	$	528,025	$	765,425	$	(237,400)	(31.0)	%	Operating income	$	545,502	$	464,173	$	81,329	17.5	%

Gross profit	Gross profit	$	1,895,378	$	2,009,129	$	(113,751)	(5.7)	%	Gross profit	$	1,634,837	$	1,895,378	$	(260,541)	(13.7)	%
Adjusted operating expenses (Non-GAAP)	Adjusted operating expenses (Non-GAAP)	1,258,721		1,240,777		17,944		1.4		Adjusted operating expenses (Non-GAAP)	1,109,719		1,322,572		(212,853)		(16.1)
Adjusted operating income (Non-GAAP)	Adjusted operating income (Non-GAAP)	$	636,657	$	768,352	$	(131,695)	(17.1)	%	Adjusted operating income (Non-GAAP)	$	525,118	$	572,806	$	(47,688)	(8.3)	%

		39-Week Period Ended Mar. 28, 2020		39-Week Period Ended Mar. 30, 2019		Change in Dollars		% Change			39-Week Period Ended Mar. 27, 2021		39-Week Period Ended Mar. 28, 2020		Change in Dollars		% Change
		(Dollars in thousands)															(Dollars in thousands)
Sales	Sales	$	30,659,215	$	30,591,799	$	67,416	0.2	%	Sales	$	24,205,917	$	30,659,215	$	(6,453,298)	(21.0)	%
Gross profit	Gross profit	6,089,171		6,101,175		(12,004)		(0.2)		Gross profit	4,793,866		6,089,171		(1,295,305)		(21.3)
Operating expenses	Operating expenses	3,930,960		3,782,515		148,445		3.9		Operating expenses	3,174,704		4,126,576		(951,872)		(23.1)
Operating income	Operating income	$	2,158,211	$	2,318,660	$	(160,449)	(6.9)	%	Operating income	$	1,619,162	$	1,962,595	$	(343,433)	(17.5)	%

Gross profit	Gross profit	$	6,089,171	$	6,101,175	$	(12,004)	(0.2)	%	Gross profit	$	4,793,866	$	6,089,171	$	(1,295,305)	(21.3)	%
Adjusted operating expenses (Non-GAAP)	Adjusted operating expenses (Non-GAAP)	3,814,522		3,779,657		34,865		0.9		Adjusted operating expenses (Non-GAAP)	3,293,919		4,010,138		(716,219)		(17.9)
Adjusted operating income (Non-GAAP)	Adjusted operating income (Non-GAAP)	$	2,274,649	$	2,321,518	$	(46,869)	(2.0)	%	Adjusted operating income (Non-GAAP)	$	1,499,947	$	2,079,033	$	(579,086)	(27.9)	%

Sales

The following table sets forth the percentage and dollar value increase or decrease in the major factors impacting sales as compared to the corresponding prior year period in order to demonstrate the cause and magnitude of change.


		Increase (Decrease)						Increase (Decrease)							Increase (Decrease)				Increase (Decrease)
		13-Week Period						39-Week Period							13-Week Period				39-Week Period
		(Dollars in millions)						(Dollars in millions)							(Dollars in millions)				(Dollars in millions)
Cause of change	Cause of change	Percentage		Dollars		Percentage		Dollars		Cause of change	Percentage		Dollars		Percentage		Dollars
Case volume	Case volume	(5.9)	%	$	(594.2)	(1.4)	%	$	(425.2)	Case volume	(14.2)	%	$	(1,364.6)	(21.3)	%	$	(6,540.5)
Inflation	Inflation	1.5		150.6		2.3		701.5		Inflation	3.2		302.3		1.8		563.6
Acquisitions	Acquisitions	0.8		85.2		0.7		199.1		Acquisitions	—		—		0.2		50.5
Other ^{(1) (2)}		(1.5)		(159.9)		(1.4)		(408.0)
Total sales increase		(5.1)	%	$	(518.3)	0.2	%	$	67.4
Other (1)										Other (1)	(1.8)		(164.5)		(1.7)		(526.9)
Total change in sales										Total change in sales	(12.8)	%	$	(1,226.8)	(21.0)	%	$	(6,453.3)

⁽¹⁾Case volume excludes the volume impact from our custom-cut meat companies that do not measure volume in cases. Any impact in volumes from these operations is included within “Other.”

⁽²⁾Approximately $107 million and $342 million of this decrease for the third quarter and first 39 weeks of fiscal 2020, respectively, results from Sysco’s sale of its interest in Iowa Premium in the fourth quarter of fiscal 2019.

Sales for the third quarter of fiscal ~~2020~~2021 were ~~5.1%~~12.8% lower than the third quarter of fiscal ~~2019.~~2020. The primary driver of the decrease was the significant decline in case volume in our U.S. Broadline operations as a result of some of our customers closing and many other customers operating at a substantially reduced volume in response ~~due~~ to the COVID-19 pandemic.

Case volumes from our U.S. Broadline operations, including acquisitions within the last 12 months, decreased ~~5.2%~~14.1% in the third quarter of fiscal ~~2020,~~2021, as compared to the third quarter of fiscal ~~2019,~~2020, and included a ~~4.1%~~9.7% decline in locally managed customer case growth, along with a ~~6.6%~~19.2% decrease in national customer case volume. Sales from acquisitions within the last 12 months had no impact on locally managed customer sales for the third quarter of fiscal 2021; therefore, organic local case volume, which excludes acquisitions, declined 9.7%. We acquired a significant number of new customers and saw growth in our national accounts customer base during the third quarter of fiscal 2021.

Sales for the first 39 weeks of fiscal 2021 were 21.0% lower than the first 39 weeks of fiscal 2020. The primary driver of the decrease was the significant decline in case volume in our U.S. Broadline operations as a result of some of our customers closing and many other customers operating at a substantially reduced volume in response to the COVID-19 pandemic. Our sales have progressively improved throughout the first 39 weeks of fiscal 2021 due to volume improvements commensurate with an easing of restrictions on our customers. Case volumes from our U.S. Broadline operations, including acquisitions within the last 12 months, decreased 21.4% in the first 39 weeks of fiscal 2021, as compared to the first 39 weeks of fiscal 2020, and included a 17.2% decline in locally managed customer case growth along with a 26.4% decrease in national customer case volume. Sales from acquisitions within the last 12 months favorably impacted locally managed customer sales by ~~1.1%~~0.1% for the ~~third quarter~~first 39 weeks of fiscal ~~2020;~~2021; therefore, organic local case volume, which excludes acquisitions, declined 5.2%. The loss of less profitable business and the divestiture of Iowa Premium in the fourth quarter of fiscal 2019 also contributed to the overall decline in case volume, which was partially offset by inflation.

Sales for the first 39 weeks of fiscal 2020 were 0.2% higher than the first 39 weeks of fiscal 2019. The primary drivers of the increase were inflation and the impact of acquisitions, largely offset by significant declines in national customer case volume in our U.S. Broadline operations. Case volumes from our U.S. Broadline operations, including acquisitions within the last 12 months, decreased 0.8% in the first 39 weeks of fiscal 2020, compared to the first 39 weeks of fiscal 2019, and included a decrease of 2.4% in national customer case volume, partially offset by a 0.6% improvement in locally managed customer case growth. Sales from acquisitions within the last 12 months favorably impacted locally managed customer sales by 1.0% for the first 39 weeks of fiscal 2020; therefore, organic local case volume, which excludes acquisitions, decreased 0.4%17.3%.

Operating Income

Operating income increased 17.5% for the third quarter of fiscal 2021, as compared to the third quarter of fiscal 2020, and decreased ~~31.0%~~17.5% for the first 39 weeks of fiscal 2021, as compared to the first 39 weeks of fiscal 2020.

Gross profit dollars decreased 13.7% and ~~6.9% for~~21.3% in the third quarter and first 39 weeks of fiscal ~~2020,~~2021, respectively, as compared to the third quarter and first 39 weeks of fiscal ~~2019.~~

~~Gross profit dollars~~2020, driven primarily by the decline in local cases and a decline in Sysco-branded products. The decrease was partially offset by higher inflation. Our Sysco brand sales as a percentage of total U.S. cases decreased ~~5.7%~~116 basis points and ~~0.2% in~~92 basis points, respectively, for the third quarter and first 39 weeks of fiscal ~~2020,~~2021, which was driven by customer and product mix shift. Sysco brand sales as a percentage of local U.S. cases decreased by approximately 234 basis points and 274 basis points, respectively, ~~as compared to~~for the third quarter and first 39 weeks of fiscal ~~2019,~~2021, which was driven ~~primarily~~ by ~~the decline in local cases. The decrease was largely offset by higher inflation~~product mix shifting into pre-packaged and ~~growth in Sysco-branded~~takeaway ready products. The estimated change in product costs, an internal measure of inflation or deflation, for the third quarter and first 39 weeks of fiscal ~~2020~~2021 for our U.S. Broadline operations was inflation of ~~1.3%~~3.5% and ~~2.2%~~2.0%, respectively. For the third quarter and first 39 weeks of fiscal ~~2020,~~2021, this change in product costs was primarily driven by inflation in the ~~dairy products~~paper and disposables, poultry and meat categories. ~~Our Sysco brand sales to local customers increased by approximately 37 basis points and 29 basis points for the third quarter and first 39 weeks of fiscal 2020, respectively.~~ Gross margin, which is gross profit as a percentage of sales, was 19.55% and 19.80% in the third quarter and first 39 weeks of fiscal 2021, respectively, which was a decrease of 22 basis points and 6 basis points, respectively, compared to gross margin of 19.77% and 19.86% in the third quarter and first 39 weeks of fiscal 2020, respectively, ~~which was a decrease of 11 and 8 basis points from the gross margin of 19.88% and 19.94% in~~primarily attributable to inflation.

Operating expenses for the third quarter and first 39 weeks of fiscal ~~2019, respectively, primarily attributable to inflation that we were unable to efficiently pass through to our customers and to a reduction in fuel surcharges.~~

~~Operating expenses for the third quarter of fiscal 2020 increased 9.9%~~2021 decreased 23.9%, or ~~$123.6~~$341.9 million, and 23.1%, or $951.9 million, respectively, as compared to the third quarter and first 39 weeks of fiscal ~~2019,~~2020, primarily driven by ~~an increase in~~a favorable comparison of bad debt expense, including the reduction of ~~which $107.2 million resulted from~~reserves on pre-pandemic receivables, and a ~~significant increase~~decrease in ~~past due receivables from customers impacted by~~pay-related costs associated with permanent headcount reductions made in fiscal 2020 in response to the COVID-19 pandemic. Operating expenses, on an adjusted basis (which is a non-GAAP financial measure for which a reconciliation is provided ~~above)~~below), for the third quarter and first 39 weeks of fiscal ~~2020, increased 1.4%~~2021, decreased 16.1%, or ~~$17.9~~$212.9 million, and 17.9%, or $716.2 million, respectively, compared to the third quarter ~~of fiscal 2019. Operating expenses for the~~and first 39 weeks of fiscal 2020 increased 3.9%, or $148.4 million, compared to the first 39 weeks of fiscal 2019. Our operating expense growth during the third quarter of fiscal 2020 was primarily driven by an increase in bad debt expense. Operating expenses, on an adjusted basis (which is a non-GAAP financial measure for which a reconciliation is provided above), for the first 39 weeks of fiscal 2020 increased 0.9%, or $34.9 million, compared to the first 39 weeks of fiscal 2019. These increases were partially offset by decreases in operating expenses associated with the divestiture of Iowa Premium in the fourth quarter of fiscal 2019.2020.

Results of International Foodservice Operations

The following table sets forth a summary of the components of operating income and adjusted operating income expressed as a percentage increase or decrease over the comparable period in the prior year:


											13-Week Period Ended Mar. 27, 2021		13-Week Period Ended Mar. 28, 2020		Change in Dollars		% Change
											(Dollars in thousands)
Sales										Sales	$	1,723,126	$	2,508,642	$	(785,516)	(31.3)	%
Gross profit										Gross profit	325,200		500,929		(175,729)		(35.1)
Operating expenses										Operating expenses	446,687		584,715		(138,028)		(23.6)
Operating loss										Operating loss	$	(121,487)	$	(83,786)	$	(37,701)	45.0	%

Gross profit										Gross profit	$	325,200	$	500,929	$	(175,729)	(35.1)	%
Adjusted operating expenses (Non-GAAP)										Adjusted operating expenses (Non-GAAP)	417,575		495,945		(78,370)		(15.8)
Adjusted operating (loss) income (Non-GAAP)										Adjusted operating (loss) income (Non-GAAP)	$	(92,375)	$	4,984	$	(97,359)	(1,953.4)	%

Sales on a constant currency basis (Non-GAAP)										Sales on a constant currency basis (Non-GAAP)	$	1,619,788	$	2,508,642	$	(888,854)	(35.4)	%
Gross profit on a constant currency basis (Non-GAAP)										Gross profit on a constant currency basis (Non-GAAP)	304,540		500,929		(196,389)		(39.2)
Adjusted operating expenses on a constant currency basis (Non-GAAP)										Adjusted operating expenses on a constant currency basis (Non-GAAP)	388,764		495,945		(107,181)		(21.6)
Adjusted operating (loss) income on a constant currency basis (Non-GAAP)										Adjusted operating (loss) income on a constant currency basis (Non-GAAP)	$	(84,224)	$	4,984	$	(89,208)	(1,789.9)	%

		13-Week Period Ended Mar. 28, 2020		13-Week Period Ended Mar. 30, 2019		Change in Dollars		% Change			39-Week Period Ended Mar. 27, 2021		39-Week Period Ended Mar. 28, 2020		Change in Dollars		% Change
		(Dollars in thousands)															(Dollars in thousands)
Sales	Sales	$	2,508,642	$	2,757,891	$	(249,249)	(9.0)	%	Sales	$	5,854,608	$	8,311,081	$	(2,456,473)	(29.6)	%
Gross profit	Gross profit	500,929		565,116		(64,187)		(11.4)		Gross profit	1,149,438		1,692,153		(542,715)		(32.1)
Operating expenses	Operating expenses	584,715		554,971		29,744		5.4		Operating expenses	1,351,411		1,686,258		(334,847)		(19.9)
Operating (loss) income	Operating (loss) income	$	(83,786)	$	10,145	$	(93,931)	NM		Operating (loss) income	$	(201,973)	$	5,895	$	(207,868)	(3,526.2)	%

Gross profit	Gross profit	$	500,929	$	565,116	$	(64,187)	(11.4)	%	Gross profit	$	1,149,438	$	1,692,153	$	(542,715)	(32.1)	%
Adjusted operating expenses (Non-GAAP)	Adjusted operating expenses (Non-GAAP)	495,945		507,018		(11,073)		(2.2)		Adjusted operating expenses (Non-GAAP)	1,278,247		1,514,144		(235,897)		(15.6)
Adjusted operating income (Non-GAAP)		$	4,984	$	58,098	$	(53,114)	(91.4)	%
Adjusted operating (loss) income (Non-GAAP)										Adjusted operating (loss) income (Non-GAAP)	$	(128,809)	$	178,009	$	(306,818)	(172.4)	%

Sales on a constant currency basis (Non-GAAP)	Sales on a constant currency basis (Non-GAAP)	$	2,543,937	$	2,757,891	$	(213,954)	(7.8)	%	Sales on a constant currency basis (Non-GAAP)	$	5,657,228	$	8,311,081	$	(2,653,853)	(31.9)	%
Gross profit on a constant currency basis (Non-GAAP)	Gross profit on a constant currency basis (Non-GAAP)	508,471		565,116		(56,645)		(10.0)		Gross profit on a constant currency basis (Non-GAAP)	1,105,807		1,692,153		(586,346)		(34.7)
Adjusted operating expenses on a constant currency basis (Non-GAAP)	Adjusted operating expenses on a constant currency basis (Non-GAAP)	504,686		507,018		(2,332)		(0.5)		Adjusted operating expenses on a constant currency basis (Non-GAAP)	1,221,984		1,514,144		(292,160)		(19.3)
Adjusted operating income on a constant currency basis (Non-GAAP)		$	3,785	$	58,098	$	(54,313)	(93.5)	%

		39-Week Period Ended Mar. 28, 2020		39-Week Period Ended Mar. 30, 2019		Change in Dollars		% Change
		(Dollars in thousands)
Sales		$	8,311,081	$	8,569,439	$	(258,358)	(3.0)	%
Gross profit		1,692,153		1,770,543		(78,390)		(4.4)
Operating expenses		1,686,258		1,708,543		(22,285)		(1.3)
Operating income		$	5,895	$	62,000	$	(56,105)	(90.5)	%

Gross profit		$	1,692,153	$	1,770,543	$	(78,390)	(4.4)	%
Adjusted operating expenses (Non-GAAP)		1,514,144		1,533,928		(19,784)		(1.3)
Adjusted operating income (Non-GAAP)		$	178,009	$	236,615	$	(58,606)	(24.8)	%

Sales on a constant currency basis (Non-GAAP)		$	8,464,995	$	8,569,439	$	(104,444)	(1.2)	%
Gross profit on a constant currency basis (Non-GAAP)		1,727,342		1,770,543		(43,201)		(2.4)
Adjusted operating expenses on a constant currency basis (Non-GAAP)		1,548,580		1,533,928		14,652		1.0
Adjusted operating income on a constant currency basis (Non-GAAP)		$	178,762	$	236,615	$	(57,853)	(24.5)	%
Adjusted operating (loss) income on a constant currency basis (Non-GAAP)										Adjusted operating (loss) income on a constant currency basis (Non-GAAP)	$	(116,177)	$	178,009	$	(294,186)	(165.3)	%

4736

Sales

The following tables set forth the percentage and dollar value increase or decrease in the major components impacting sales as compared to the corresponding prior year period in order to demonstrate the cause and magnitude of change.

Increase (Decrease) Increase (Decrease)
13-Week Period 39-Week Period
(Dollars in millions) (Dollars in millions)
Cause of change Percentage Dollars Percentage Dollars
Inflation (0.3) % $ (8.0) 0.4 % $ 30.6
Acquisitions 0.2 5.1 0.4 32.5
Foreign currency — (0.9) — (0.5)
Other ⁽¹⁾
(8.9) (245.5) (3.8) (321.0)
Total sales increase (9.0) % $ (249.3) (3.0) % $ (258.4)


	Increase (Decrease)				Increase (Decrease)
	13-Week Period				39-Week Period
	(Dollars in millions)				(Dollars in millions)
Cause of change	Percentage		Dollars		Percentage		Dollars
Inflation	0.9	%	$	23.4	2.3	%	$	188.6

Foreign currency	4.1		103.3		2.4		197.4
Other (1)	(36.3)		(912.2)		(34.3)		(2,842.5)
Total change in sales	(31.3)	%	$	(785.5)	(29.6)	%	$	(2,456.5)

⁽¹⁾The impact of volumes as a component of sales growth from international operations are included within “Other.” Volume in our foreign operations includes volume metrics that differ from country to country and cannot be aggregated on a consistent, comparable basis.

Sales for the third quarter and first 39 weeks of fiscal ~~2020~~2021 were ~~9.0%~~31.3% and ~~3.0%~~29.6% lower, respectively, as compared to the third quarter and first 39 weeks of fiscal ~~2019,~~2020, primarily due to the significant decline in volume, inas our ~~Europe~~European, Canadian and Canada operations as a result of some of our customers closing and many other customers operating at a substantially reduced volume in response due to COVID-19 pandemic. Our business in Europe has decreased significantly, as governments have issued “stay-at-home” orders and restaurant traffic has decreased as a result. Restaurant sales in Canada have decreased as consumers are practicing isolation measures to protect health and safety. For our Latin American businesses have been substantially impacted by recent lockdowns, which are more aggressive than the ~~impact~~lockdowns in the United States. In the third quarter of ~~COVID-19 has been most prominent~~fiscal 2021, changes in ~~Mexico, where~~foreign exchange rates positively affected sales ~~decreased more rapidly. In Costa Rica, our cash and carry stores are helping to offset the~~by 4.1%, resulting in a 35.4% decrease in sales ~~from restaurants.~~on a constant currency basis. In the first 39 weeks of fiscal 2021, changes in foreign exchange rates positively affected sales by 2.4%, resulting in a 31.9% decrease in sales on a constant currency basis.

Operating Income

Operating income decreased by ~~$93.9~~$37.7 million and ~~$56.1~~$207.9 million for the third quarter and first 39 weeks of fiscal ~~2020,~~2021, respectively, as compared to the third quarter and first 39 weeks of fiscal ~~2019. Our operating income decreased during the third quarter and first 39 weeks of fiscal~~ 2020, primarily due to the decline in business resulting from the reductions in our customers’ business in response to the COVID-19 pandemic and from ongoing restructuring and integration work in our European operations and facility consolidations in our Canadian operations. Our business in France continued to experience operational challenges arising from our integration efforts between our two businesses in France. Restructuring and business transformation charges also negatively affected our U.K. operations as we continue our efforts related to modernizing the business and growing our customer base.pandemic. Operating income, on an adjusted basis, decreased by ~~$53.1~~$97.4 million ~~or 91.4%,~~ for the third quarter of fiscal ~~2020,~~2021, as compared to the third quarter of fiscal ~~2019. Foreign~~2020. In the third quarter of fiscal 2021, changes in foreign exchange rates ~~positively~~negatively affected operating income by ~~2.1%,~~$8.2 million, resulting in ~~a 93.5%~~an $89.2 million decrease in adjusted operating income on a constant currency basis. Operating income, on an adjusted basis, decreased by ~~$58.6~~$306.8 million, or ~~24.8%~~172.4%, for the first 39 weeks of fiscal ~~2020,~~2021, as compared to the first 39 weeks of fiscal ~~2019. Foreign~~2020. In the first 39 weeks of fiscal 2021, changes in foreign exchange rates negatively affected operating income by ~~0.3%~~7.1%, resulting in a ~~24.5%~~$294.2 million decrease in adjusted operating income on a constant currency basis.

Gross profit dollars decreased by ~~11.4%~~35.1% in the third quarter of fiscal ~~2020,~~2021, as compared to the third quarter of fiscal ~~2019,~~2020, primarily attributable to the decline in sales. ~~Changes~~In the third quarter of fiscal 2021, changes in foreign exchange rates ~~that negatively~~positively affected gross profit by ~~1.3%~~4.1%, resulting in a ~~10.0%~~39.2% decrease in ~~adjusted~~ gross profit on a constant currency basis. Gross profit dollars decreased by ~~4.4%~~32.1% in the first 39 weeks of fiscal ~~2020,~~2021, as compared to the first 39 weeks of fiscal ~~2019,~~2020, primarily attributable to ~~decreased~~the decline in sales. ~~Changes~~In the first 39 weeks of fiscal 2021, changes in foreign exchange rates ~~that negatively~~positively affected gross profit by ~~2.0%~~2.6%, resulting in a ~~2.4% increase~~34.7% decrease in ~~adjusted~~ gross profit on a constant currency basis. Gross margin was 18.87% and 19.63% in the third quarter and first 39 weeks of fiscal 2021, respectively, which was a decrease of 110 and 73 basis points compared to the gross margin of 19.97% and 20.36% in the third quarter and first 39 weeks of fiscal 2020, respectively, primarily as a result of adverse country mix, customer mix and product mix.

Operating expenses for the third quarter and first 39 weeks of fiscal ~~2020 increased 5.4%~~2021 decreased 23.6%, or ~~$29.7~~$138.0 million, and 19.9%, or $334.8 million, respectively, as compared to the third quarter ~~of fiscal 2019, primarily due to reduced restructuring~~ and ~~integration charges being incurred in France. Operating expenses for the~~ first 39 weeks of fiscal 2020, ~~decreased 1.3%, or $22.3 million, as compared to the first 39 weeks of fiscal 2019,~~ primarily due to a decrease in pay-related costs associated with permanent workforce reductions made in fiscal 2020 as a result of the COVID-19 pandemic. Additionally, the reduction of reserves on pre-pandemic receivables and reduced restructuring and integration charges ~~being incurred~~ in France. We incurred restructuring charges of $74.3 million primarily relating to restructuring and integration in France and the U.K. and the ongoing facility consolidation efforts in our Canadian operations during the first 39 weeks of fiscal 2020, as compared to $117.4 million of restructuring charges in the first 39 weeks of fiscal 2019. Additionally, we incurred $46.3 million of excess bad debt expense

~~related~~Europe contributed to the ~~COVID-19 pandemic.~~decrease. Operating expenses, on an adjusted basis, for the third quarter of fiscal ~~2020~~2021 decreased ~~2.2%~~15.8%, or ~~$11.1~~$78.4 million, compared to the third quarter of fiscal ~~2019.~~2020. Changes in foreign exchange rates used to translate our foreign operating expenses into U.S. dollars ~~positively affected~~increased operating expenses during the period by ~~1.7%~~5.8%, resulting in a ~~0.5%~~21.6% decrease in adjusted operating expenses on a constant currency basis. Operating expenses, on an adjusted basis, for the first 39 weeks of fiscal ~~2020,~~2021 decreased ~~1.3%~~15.6%, or ~~$19.8~~$235.9 million, compared to the first 39 weeks of fiscal ~~2019.~~2020. Changes in foreign exchange rates used to translate our foreign operating expenses into U.S. dollars ~~positively affected~~increased operating expenses during the period by ~~2.2%~~3.7%, resulting in ~~a 1.0% increase~~an 19.3% decrease in adjusted operating expenses on a constant currency basis.

Results of SYGMA and Other Segment

For SYGMA, sales were ~~11.3%~~15.9% and ~~9.1% lower~~8.4% higher in the third quarter and first 39 weeks of fiscal ~~2020,~~2021, respectively, as compared to the third quarter and first 39 weeks of fiscal ~~2019,~~2020, primarily from ~~a decline~~an increase in case volume ~~due to~~driven by the ~~decrease in customer demand as a result~~success of ~~the effects of the COVID-19 pandemic.~~national and regional quick service restaurants servicing drive-through traffic. Operating income ~~decreased~~increased by ~~$1.4 million~~25.6% and 29.7% in the third quarter and first 39 weeks of fiscal ~~2020,~~2021, respectively, as compared to the third quarter ~~of fiscal 2019, as our decline in case volume exceeded the decrease in expenses realized from our focus on business~~ and ~~routing optimization. Operating income increased by $10.5 million in the~~ first 39 weeks of fiscal 2020, as ~~compared to~~our increase in gross profit from increased case volume exceeded the ~~first 39 weeks of fiscal 2019 due to our focus on expense reductions through business and routing optimization.~~increase in operating expenses.

For the operations that are grouped within Other, operating income ~~decreased $25.4~~increased $24.9 million in the third quarter of fiscal 2020, as compared to the third quarter of fiscal 2019. Operating income decreased $21.9 million in the first 39 weeks of fiscal 2020, as compared to the first 39 weeks of fiscal 2019. Guest Supply gross profit decreased 13.0% and 2.8% in the third quarter and first 39 weeks of fiscal 2020, respectively, as the business faced challenges resulting from the significant impact of the COVID-19 pandemic on the hotel industry. Additionally, Cake incurred a goodwill impairment charge of $11.7$4.4 million in the third quarter and first 39 weeks of fiscal ~~2020.~~2021, respectively, as compared to the third quarter and first 39 weeks of fiscal 2020 primarily due to reduced operating expenses, as we sold a non-core asset, Cake Corporation, in the first quarter of fiscal 2021. Our hospitality business, Guest Worldwide, had a gross profit decrease of 27.6% and 41.2% in the third quarter and first 39 weeks of fiscal 2021, respectively. This business remains challenged, as hospitality occupancy rates remain low compared to prior year levels. Despite operating in a difficult hospitality environment, the business improved its underlying profitability during the third quarter. Additionally, our Guest Worldwide business signed a substantial new customer contract during the third quarter of fiscal 2021 that we expect to be beneficial to the segment as the travel and hospitality sector recovers.

Corporate Expenses

Corporate expenses in the third quarter of fiscal ~~2020 increased $114.0~~2021 decreased $106.2 million, or ~~44.8%~~34.9%, as compared to the third quarter of fiscal ~~2019,~~2020, primarily due to lower costs associated ~~the business impact of~~with the COVID-19 ~~crisis, including~~pandemic, as the third quarter of fiscal 2020 included $57.1 million of ~~the remaining~~ goodwill impairment charges for the Pacific Star and Cake reporting units and $18.6 million of severance charges related to permanent workforce reductions. ~~Charges~~Lower charges for professional fees and other business transformation initiatives ~~increased liability claims and expenses associated with our recent leadership change~~ also contributed to the ~~increase.~~decrease. Corporate expenses in the first 39 weeks of fiscal ~~2020 increased $109.6~~2021 decreased $127.3 million, or ~~13.8%~~18.0%, as compared to the first 39 weeks of fiscal ~~2019,~~2020, primarily due to a reduction in pay-related costs associated with permanent headcount reductions made in the ~~business impact~~third and fourth quarters of fiscal 2020 in response to the COVID-19 ~~crisis, including~~pandemic, as well as $57.1 million of goodwill impairment charges for the Pacific Star and Cake reporting units and $18.6 million of severance charges ~~related to permanent workforce reductions. Charges~~recognized in the first 39 weeks of fiscal 2020. Lower charges for professional fees and other business transformation initiatives ~~increased liability claims and expenses associated with our recent leadership change~~ also contributed to the ~~increase.~~decrease. Corporate expenses, on an adjusted basis, ~~increased $45.8~~decreased $13.7 million, or ~~21.3%~~7.0%, and ~~$76.4~~$5.4 million, or ~~11.5%~~1.0%, respectively, as compared to the third quarter and first 39 weeks of fiscal ~~2019, respectively.~~2020. Lower investments in our business transformation contributed to the decrease in Corporate expenses, on an adjusted basis, in the third quarter and first 39 weeks of fiscal 2021.

Included in ~~corporate~~Corporate expenses are Certain Items that totaled $15.0 million and $39.0 million in the third quarter and first 39 weeks of fiscal 2021, respectively, as compared to $107.6 million and $160.9 million in the third quarter and first 39 weeks of fiscal ~~2020, respectively, as compared to $39.4 million and $127.7 million in the third quarter and first 39 weeks of fiscal 2019, respectively.~~2020. Certain Items impacting the third quarter and first 39 weeks of fiscal ~~2020~~2021 were primarily expenses associated with our business technology transformation initiatives. Certain Items impacting the third quarter and first 39 weeks of fiscal ~~2019~~2020 were primarily goodwill impairment charges, severance charges arising from the COVID-19 pandemic and expenses associated with our various transformation initiatives.

Interest Expense

Interest expense ~~decreased $10.7~~increased $61.9 million and ~~$26.7~~$195.0 million for the third quarter and first 39 weeks of fiscal ~~2020,~~2021, respectively, as compared to the third quarter and first 39 weeks of fiscal ~~2019, respectively,~~2020, primarily ~~due~~attributable to ~~a favorable comparison to the prior year attributable to~~higher fixed debt volume, partially offset by lower floating interest ~~rates and lower fixed debt volume.~~rates.

Net Earnings

Net earnings increased $92.2 million in the third quarter of fiscal 2021 and decreased ~~100.7% and 26.8%~~$460.8 million, or 55.3%, in the first 39 weeks of fiscal 2021, as compared to the third quarter and first 39 weeks of fiscal 2020, respectively, ~~as compared to the third quarter and first 39 weeks of the prior year,~~ due primarily to the items noted above for operating income and interest expense, as well as items impacting our income taxes that are discussed in Note ~~16,~~11, “Income Taxes,” in the Notes to Consolidated Financial Statements in Item 1 of Part I.

Adjusted net earnings, excluding Certain Items, decreased ~~43.6%~~50.5% and 68.3% in the third quarter ~~of fiscal 2020, primarily due to gross profit growth~~ and ~~a decline in operating expense, partially offset by an unfavorable tax expense comparison to the prior year. Adjusted net earnings, excluding Certain Items, decreased 8.1% in the~~ first 39 weeks of fiscal ~~2020,~~2021, respectively, primarily due to a significant decrease in sales volume, partially offset by a favorable tax expense ~~comparison~~compared to the prior year.

Earnings ~~(Loss)~~ Per Share

Basic earnings ~~(loss)~~ per share in the third quarter of fiscal ~~2020~~2021 were ~~$(0.01), a 101.2% decrease~~$0.17, an $0.18 increase from the comparable prior year period ~~amount~~loss of ~~$0.86~~$0.01 per share. Diluted earnings ~~(loss)~~ per share in the third quarter of fiscal ~~2020~~2021 were ~~$(0.01), a 101.2% decrease~~$0.17, an $0.18 increase from the comparable prior year period ~~amount~~loss of ~~$0.85~~$0.01 per share. Adjusted diluted earnings per share, excluding Certain Items, in the third quarter of fiscal ~~2020~~2021 were ~~$0.45,~~$0.22, a ~~43.0%~~51.1% decrease from the comparable prior year period amount of ~~$0.79~~$0.45 per share. These results were primarily attributable to the factors discussed above related to net earnings in the third quarter of fiscal ~~2020.~~2021.

Basic earnings per share in the first 39 weeks of fiscal ~~2020~~2021 were ~~$1.63,~~$0.73, a ~~25.9%~~55.2% decrease from the comparable prior year period amount of ~~$2.20~~$1.63 per share. Diluted earnings per share in the first 39 weeks of fiscal ~~2020~~2021 were ~~$1.62,~~$0.73, a ~~25.3%~~54.9% decrease from the comparable prior year period amount of ~~$2.17~~$1.62 per share. Adjusted diluted earnings per share, excluding Certain Items, in the first 39 weeks of fiscal ~~2020~~2021 were ~~$2.29,~~$0.73, a ~~6.5%~~68.1% decrease from the comparable prior year period amount of ~~$2.45~~$2.29 per share. These results were primarily attributable to the factors discussed above related to net earnings in the first 39 weeks of fiscal ~~2020.~~2021.

5039

Non-GAAP Reconciliations


Sysco’s results of operations for fiscal ~~2020~~2021 and fiscal ~~2019~~2020 were impacted by restructuring and transformational project costs consisting of: (1) restructuring charges; (2) expenses associated with our various transformation initiatives; ~~(2) severance~~ and (3) facility closure ~~charges;~~ and ~~(3) restructuring~~severance charges. ~~All acquisition-related costs in the first 39 weeks of~~Sysco’s results for fiscal 2021 and fiscal 2020 ~~and fiscal 2019 that have been designated as Certain Items relate~~were also impacted by intangible amortization expense related to the fiscal 2017 acquisition of Cucina Lux Investments Limited (the Brakes ~~Acquisition. These include acquisition-related intangible amortization expense.~~Acquisition). Additionally, our results for fiscal 2021 were impacted by loss on the sale of businesses.

Fiscal 2021 results of operations were also positively impacted by the reduction of bad debt expense previously recognized in fiscal 2020 due to the unexpected impact of the COVID-19 pandemic on the collectability of our pre-pandemic trade receivable balances. Fiscal 2020 results of operations were also negatively impacted by costs arising from the COVID-19 pandemic, the most significant ~~including~~of which were (1) excess bad debt expense, as we experienced an increase in past due receivables and recognized additional bad debt charges, and (2) goodwill impairment charges. Many of Sysco’s customers, including those in the restaurant, hospitality and education segments, are ~~closed or~~ operating at a substantially reduced volume due to governmental requirements for ~~closures.~~closures or other social-distancing measures and a portion of Sysco’s customers have been closed. Some of these customers ~~have~~ ceased paying their outstanding receivables, creating uncertainty as to their collectability. We ~~have~~ experienced an increase in past due receivables and ~~have~~ recognized additional bad debt ~~charges.~~charges in the third and fourth quarters of fiscal 2020; however, collections have improved in fiscal 2021, partially from restaurant reopenings, volumes improvements and Sysco’s improved credit processes. We have estimated uncollectible amounts based on the current collection experience and by applying write-off percentages based on ~~an aging of past due receivables. These write-off percentages are based in part on~~ historical loss experience, including ~~losses incurred~~loss experience during times of local and regional disasters. We have estimated the amount attributable to the impact of the COVID-19 pandemic on our customers by comparing our March allowance results to the prior three-month average, with excess amounts being a reasonable estimate of what the reserve for the allowance for doubtful accounts would have been for the third quarterdisasters, current conditions and ~~first 39 weeks of fiscal 2020, absent the impact of the COVID-19 pandemic. Because the~~collection rates, and expectations regarding future losses. The COVID-19 pandemic is more widespread and longer in duration than historical disasters impacting our business, and it is possible that actual uncollectible amounts will differ and additional charges may be ~~required~~required; however, if collections continue to improve, it is also possible that additional reductions in ~~the fourth quarter of fiscal 2020. Although~~our bad debt reserve could occur. While Sysco traditionally incurs bad debt expense, the magnitude of such expenses and benefits, that we have experienced is not indicative of our normal operations. Our adjusted results have not been normalized in a manner that would exclude the full impact of the COVID-19 pandemic on our business. As such, Sysco has not adjusted its results for lost sales, inventory write-offs or other costs associated with the COVID-19 pandemic not previously stated. In addition, results of operations in the first 39 weeks of fiscal 2019 were negatively affected by acquisition-related integration costs specific to the Brakes Acquisition and the impact of recognizing a foreign tax credit.

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. The constant currency impact on our adjusted total Sysco and our adjusted International Foodservice Operations results are disclosed when the impact exceeds a defined threshold of greater than 1% on the growth metric. If the amount does not exceed this threshold, a disclosure will be made that the impact of the currency change was not significant.

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 ~~facilitating~~and (2) facilitates comparisons on a year-over-year basis and (2) removes those items that are difficult to predict and are often unanticipated and that, as a result, are difficult to include in analysts’ financial models and our investors’ expectations with any degree of specificity.basis.

Although Sysco has a history of growth through acquisitions, the Brakes Group was significantly larger than the companies historically acquired by Sysco, with a proportionately greater impact on Sysco’s consolidated financial statements. Accordingly, Sysco is excluding from its non-GAAP financial measures for the relevant period ~~solely those acquisition costs~~the impact of acquisition-related intangible amortization specific to the Brakes Acquisition. We believe this approach significantly enhances the comparability of Sysco’s results for fiscal ~~2020~~2021 and fiscal ~~2019.~~2020.

Set forth below is a reconciliation of sales, operating expenses, operating income, interest expense, 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.

5140

13-Week Period Ended Mar. 28, 2020 13-Week Period Ended Mar. 30, 2019 Change in Dollars % Change
(Dollars in thousands, except for per share data)
Operating expenses (GAAP) $ 2,503,966 $ 2,224,713 $ 279,253 12.6 %
Impact of restructuring and transformational project costs ⁽¹⁾
(77,195) (72,207) (4,988) 6.9
Impact of acquisition-related costs ⁽²⁾
(17,321) (18,398) 1,077 (5.9)
Impact of excess bad debt expense (153,499) — (153,499) NM
Impact of goodwill impairment (68,725) — (68,725) NM
Operating expenses adjusted for Certain Items (Non-GAAP) $ 2,187,226 $ 2,134,108 $ 53,118 2.5 %
Operating income (GAAP) $ 60,274 $ 529,585 $ (469,311) (88.6) %
Impact of restructuring and transformational project costs ⁽¹⁾
77,195 72,207 4,988 6.9
Impact of acquisition-related costs ⁽²⁾
17,321 18,398 (1,077) (5.9)
Impact of excess bad debt expense 153,499 — 153,499 NM
Impact of goodwill impairment 68,725 — 68,725 NM
Operating income adjusted for Certain Items (Non-GAAP) $ 377,014 $ 620,190 $ (243,176) (39.2) %
Net earnings (GAAP) $ (3,297) $ 440,083 $ (443,380) NM
Impact of restructuring and transformational project costs ⁽¹⁾
77,195 72,207 4,988 6.9
Impact of acquisition-related costs ⁽²⁾
17,321 18,398 (1,077) (5.9)
Impact of excess bad debt expense 153,499 — 153,499 NM
Impact of goodwill impairment 68,725 — 68,725 NM
Tax impact of restructuring and transformational project costs ⁽³⁾
(28,461) (19,271) (9,190) 47.7
Tax impact of acquisition-related costs ⁽³⁾
(6,777) (4,899) (1,878) 38.3
Tax impact of excess bad debt expense ⁽³⁾
(46,410) — 95,067 NM
Impact of foreign tax credit benefit — (95,067) 95,067 NM
Impact of US transition tax — (269) 269 NM
Net earnings adjusted for Certain Items (Non-GAAP) $ 231,795 $ 411,182 $ (179,387) (43.6) %
Diluted earnings per share (GAAP) $ (0.01) $ 0.85 $ (0.86) NM
Impact of restructuring and transformational project costs ⁽¹⁾
0.15 0.14 0.01 7.1
Impact of acquisition-related costs ⁽²⁾
0.03 0.04 (0.01) (25.0)
Impact of excess bad debt expense 0.30 — 0.30 NM
Impact of goodwill impairment 0.13 — 0.13 NM
Tax impact of restructuring and transformational project costs ⁽³⁾
(0.06) (0.04) (0.02) 50.0
Tax impact of acquisition-related costs ⁽³⁾
(0.01) (0.01) — NM
Tax impact of excess bad debt expense ⁽³⁾
(0.09) — (0.09) NM
Impact of foreign tax credit benefit — (0.18) 0.18 NM
Diluted EPS adjusted for Certain Items (Non-GAAP)⁽⁴⁾
$ 0.45 $ 0.79 $ (0.34) (43.0) %


	13-Week Period Ended Mar. 27, 2021		13-Week Period Ended Mar. 28, 2020		Change in Dollars		% Change
	(Dollars in thousands, except for per share data)












Operating expenses (GAAP)	$	1,886,751	$	2,503,966	$	(617,215)	(24.6)	%
Impact of restructuring and transformational project costs (1)	(34,953)		(77,195)		42,242		(54.7)
Impact of acquisition-related intangible amortization (2)	(18,834)		(17,321)		(1,513)		8.7
Impact of bad debt reserve adjustments (3)	33,473		(153,499)		186,972		(121.8)
Impact of goodwill impairment	—		(68,725)		68,725		NM
Operating expenses adjusted for Certain Items (Non-GAAP)	1,866,437		2,187,226		(320,789)		(14.7)
Impact of currency fluctuations (4)	(29,659)		—		(29,659)		(1.3)

Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)	$	1,836,778	$	2,187,226	$	(350,448)	(16.0)	%

Operating income (GAAP)	$	235,917	$	60,274	$	175,643	291.4	%
Impact of restructuring and transformational project costs (1)	34,953		77,195		(42,242)		(54.7)
Impact of acquisition-related intangible amortization (2)	18,834		17,321		1,513		8.7
Impact of bad debt reserve adjustments (3)	(33,473)		153,499		(186,972)		(121.8)
Impact of goodwill impairment	—		68,725		(68,725)		NM
Operating income adjusted for Certain Items (Non-GAAP)	256,231		377,014		(120,783)		(32.0)
Impact of currency fluctuations (4)	8,029		—		8,029		(2.1)

Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP)	$	264,260	$	377,014	$	(112,754)	(29.9)	%









Other (income) expense (GAAP)	$	(12,708)	$	5,200	$	(17,908)	NM
Impact of loss on sale of businesses	(10,790)		—		(10,790)		NM
Other (income) expense (Non-GAAP)	$	(23,498)	$	5,200	$	(28,698)	NM

Net earnings (loss) (GAAP)	$	88,927	$	(3,297)	$	92,224	NM
Impact of restructuring and transformational project costs (1)	34,953		77,195		(42,242)		(54.7)	%
Impact of acquisition-related intangible amortization (2)	18,834		17,321		1,513		8.7
Impact of bad debt reserve adjustments (3)	(33,473)		153,499		(186,972)		(121.8)
Impact of goodwill impairment	—		68,725		(68,725)		NM
Impact of loss on sale of businesses	10,790		—		10,790		NM
Tax impact of restructuring and transformational project costs (5)	(10,300)		(28,461)		18,161		(63.8)
Tax impact of acquisition-related intangible amortization (5)	(5,573)		(6,777)		1,204		(17.8)

Tax impact of bad debt reserve adjustments (5)	10,354		(46,410)		56,764		(122.3)
Tax impact of loss on sale of businesses	301		—		301		NM




Net earnings adjusted for Certain Items (Non-GAAP)	$	114,813	$	231,795	$	(116,982)	(50.5)	%



Diluted earnings (loss) per share (GAAP)	$	0.17	$	(0.01)	$	0.18	NM
Impact of restructuring and transformational project costs (1)	0.07		0.15		(0.08)		(53.3)	%
Impact of acquisition-related intangible amortization (2)	0.04		0.03		0.01		33.3
Impact of bad debt reserve adjustments (3)	(0.07)		0.30		(0.37)		(123.3)
Impact of goodwill impairment	—		0.13		(0.13)		NM
Impact of loss on sale of businesses	0.02		—		0.02		NM
Tax impact of restructuring and transformational project costs (5)	(0.02)		(0.06)		0.04		(66.7)
Tax impact of acquisition-related intangible amortization (5)	(0.01)		(0.01)		—		0.0
Tax impact of bad debt reserve adjustments (5)	0.02		(0.09)		0.11		(122.2)






Diluted EPS adjusted for Certain Items (Non-GAAP) (6)	$	0.22	$	0.45	$	(0.23)	(51.1)	%

5241


⁽¹⁾			Fiscal 2021 includes $21 million related to restructuring charges and $14 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2020 includes $48 million related to restructuring, facility closure and ~~severance charges, of which $21 million relates to Corporate~~ severance charges and $30 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. ~~Fiscal 2019 includes $37 million related to restructuring, facility closure and severance and $35 million related to various transformation initiative costs.~~
⁽²⁾			~~Fiscal 2020 and fiscal 2019 include $17 million and $18 million, respectively, related to~~Represents intangible amortization expense from the Brakes Acquisition, which is included in the results of International Foodservice.
⁽³⁾			Fiscal 2021 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020. Fiscal 2020 represents excess bad debt charges recognized on the increase in past due receivables arising from the COVID-19 pandemic.
(4)			Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on current year results.
(5)			The tax impact of adjustments for Certain Items are calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction where the Certain Item was incurred.
(6)			Individual components of diluted earnings per share may not add up to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.
			NM represents that the percentage change is not meaningful.


	39-Week Period Ended Mar. 27, 2021		39-Week Period Ended Mar. 28, 2020		Change in Dollars		% Change
	(Dollars in thousands, except for share and per share data)






Operating expenses (GAAP)	$	5,573,413	$	7,054,924	$	(1,481,511)	(21.0)	%
Impact of restructuring and transformational project costs (1)	(95,078)		(191,022)		95,944		(50.2)
Impact of acquisition-related intangible amortization (2)	(54,714)		(51,543)		(3,171)		6.2
Impact of bad debt reserve adjustments (3)	162,372		(153,499)		315,871		(205.8)
Impact of goodwill impairment	—		(68,725)		68,725		NM
Operating expenses adjusted for Certain Items (Non-GAAP)*	$	5,585,993	$	6,590,135	$	(1,004,142)	(15.2)	%

Operating income (GAAP)	$	867,558	$	1,281,085	$	(413,527)	(32.3)	%
Impact of restructuring and transformational project costs (1)	95,078		191,022		(95,944)		(50.2)
Impact of acquisition-related intangible amortization (2)	54,714		51,543		3,171		6.2
Impact of bad debt reserve adjustments (3)	(162,372)		153,499		(315,871)		(205.8)
Impact of goodwill impairment	—		68,725		(68,725)		NM
Operating income adjusted for Certain Items (Non-GAAP)*	$	854,978	$	1,745,874	$	(890,896)	(51.0)	%

Other (income) expense (GAAP)	$	(14,140)	$	7,505	$	(21,645)	(288.4)	%
Impact of loss on sale of businesses	(22,834)		—		(22,834)		NM

Other (income) expense (Non-GAAP)	$	(36,974)	$	7,505	$	(44,479)	NM










Net earnings (GAAP)	$	373,116	$	833,894	$	(460,778)	(55.3)	%
Impact of restructuring and transformational project costs (1)	95,078		191,022		(95,944)		(50.2)
Impact of acquisition-related intangible amortization (2)	54,714		51,543		3,171		6.2
Impact of bad debt reserve adjustments (3)	(162,372)		153,499		(315,871)		(205.8)
Impact of goodwill impairment	—		68,725		(68,725)		NM

Impact of loss on sale of businesses	22,834		—		22,834		NM
Tax impact of restructuring and transformational project costs (4)	(26,886)		(57,756)		30,870		(53.4)
Tax impact of acquisition-related intangible amortization (4)	(15,471)		(15,584)		113		(0.7)

Tax impact of bad debt reserve adjustments (4)	45,913		(46,410)		92,323		(198.9)
Tax impact of loss on sale of businesses	(7,251)		—		(7,251)		NM
Impact of foreign tax rate change	(5,548)		924		(6,472)		NM
Net earnings adjusted for Certain Items (Non-GAAP)	$	374,127	$	1,179,857	$	(805,730)	(68.3)	%



Diluted earnings per share (GAAP)	$	0.73	$	1.62	$	(0.89)	(54.9)	%
Impact of restructuring and transformational project costs (1)	0.19		0.37		(0.18)		(48.6)
Impact of acquisition-related intangible amortization (2)	0.11		0.10		0.01		10.0
Impact of bad debt reserve adjustments (3)	(0.32)		0.30		(0.62)		(206.7)
Impact of goodwill impairment	—		0.13		(0.13)		NM
Impact of loss on sale of businesses	0.04		—		0.04		NM
Tax impact of restructuring and transformational project costs (4)	(0.05)		(0.11)		0.06		(54.5)
Tax impact of acquisition-related intangible amortization (4)	(0.03)		(0.03)		—		0.0
Tax impact of bad debt reserve adjustments (4)	0.09		(0.09)		0.18		(200.0)
Tax impact of loss on sale of businesses	(0.01)		—		(0.01)		NM
Tax impact of foreign tax rate change	(0.01)		—		(0.01)		NM
Diluted EPS adjusted for Certain Items (Non-GAAP) (5)	$	0.73	$	2.29	$	(1.56)	(68.1)	%

^{(1) Fiscal 2021 includes $56 million related to restructuring, severance and facility closure charges, and $39 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2020 includes $100 million related to restructuring, severance, and facility closure charges and $91 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy.
(2) Represents intangible amortization expense from the Brakes Acquisition, which is included in the results of International Foodservice.
(3) Fiscal 2021 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020. Fiscal 2020 represents excess bad debt charges recognized on the increase in past due receivables arising from the COVID-19 pandemic.
(4) The tax impact of adjustments for Certain Items are calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction where the Certain Item was incurred.
(5) Individual components of diluted earnings per share may not add up to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.
* Foreign exchange rates did not have a meaningful impact during the period; therefore, the constant currency adjustment is not disclosed.
NM represents that the percentage change is not meaningful.}

5344

39-Week Period Ended Mar. 28, 2020 39-Week Period Ended Mar. 30, 2019 Change in Dollars % Change
(Dollars in thousands, except for share and per share data)
Operating expenses (GAAP) $ 7,054,924 $ 6,820,175 $ 234,749 3.4 %
Impact of restructuring and transformational project costs ⁽¹⁾
(191,022) (247,547) 56,525 (22.8)
Impact of acquisition-related costs ⁽²⁾
(51,543) (58,042) 6,499 (11.2)
Impact of excess bad debt expense (153,499) — (153,499) NM
Impact of goodwill impairment (68,725) — (68,725) NM
Operating expenses adjusted for Certain Items (Non-GAAP) $ 6,590,135 $ 6,514,586 $ 75,549 1.2 %
Operating income (GAAP) $ 1,281,085 $ 1,609,620 $ (328,535) (20.4) %
Impact of restructuring and transformational project costs ⁽¹⁾
191,022 247,547 (56,525) (22.8)
Impact of acquisition-related costs ⁽²⁾
51,543 58,042 (6,499) (11.2)
Impact of excess bad debt expense 153,499 — 153,499 NM
Impact of goodwill impairment 68,725 — 68,725 NM
Operating income adjusted for Certain Items (Non-GAAP) $ 1,745,874 $ 1,915,209 $ (169,335) (8.8) %
Net earnings (GAAP) $ 833,894 $ 1,138,505 $ (304,611) (26.8) %
Impact of restructuring and transformational project costs ⁽¹⁾
191,022 247,547 (56,525) (22.8)
Impact of acquisition-related costs ⁽²⁾
51,543 58,042 (6,499) (11.2)
Impact of excess bad debt expense 153,499 — 153,499 NM
Impact of goodwill impairment 68,725 — 68,725 NM
Tax impact of restructuring and transformational project costs ⁽³⁾
(57,756) (64,831) 7,075 (10.9)
Tax impact of acquisition-related costs ⁽³⁾
(15,584) (15,201) (383) 2.5
Tax impact of excess bad debt expense ⁽³⁾
(46,410) — (46,410) NM
Impact of French tax rate change 924 — 924 NM
Impact of foreign tax credit benefit — (95,067) 95,067 NM
Impact of US transition tax — 14,885 (14,885) NM
Net earnings adjusted for Certain Items (Non-GAAP) $ 1,179,857 $ 1,283,880 $ (104,023) (8.1) %
Diluted earnings per share (GAAP) $ 1.62 $ 2.17 $ (0.55) (25.3) %
Impact of restructuring and transformational project costs ⁽¹⁾
0.37 0.47 (0.10) (21.3)
Impact of acquisition-related costs ⁽²⁾
0.10 0.11 (0.01) (9.1)
Impact of excess bad debt expense 0.30 — 0.30 NM
Impact of goodwill impairment 0.13 — 0.13 NM
Tax impact of restructuring and transformational project costs ⁽³⁾
(0.11) (0.12) 0.01 (8.3)
Tax impact of acquisition-related costs ⁽³⁾
(0.03) (0.03) — NM
Tax impact of excess bad debt expense ⁽³⁾
(0.09) — (0.09) NM
Impact of foreign tax credit benefit — (0.18) 0.18 NM
Impact of US transition tax — 0.03 (0.03) NM
Diluted EPS adjusted for Certain Items (Non-GAAP)⁽⁴⁾
$ 2.29 $ 2.45 $ (0.16) (6.5) %


⁽¹⁾			Fiscal 2020 includes $100 million related to severance, restructuring and facility closure charges, of which $37 million relates to our integration of Brake France and Davigel into Sysco France and $21 million relates to Corporate severance charges. Fiscal 2020 also includes $91 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2019 includes $133 million related to severance, restructuring and facility closure charges in Europe, Canada and at Corporate, of which $58 million relates to our France restructuring as part of our integration of Brake France and Davigel into Sysco France, and $114 million related to various transformation initiative costs, of which $17 million relates to accelerated depreciation with regard to software that was replaced.
⁽²⁾			Fiscal 2020 and fiscal 2019 include $52 million and $57 million, respectively, related to intangible amortization expense from the Brakes Acquisition, which is included in the results of International Foodservice and integration costs in fiscal 2019.
⁽³⁾			The tax impact of adjustments for Certain Items are calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction where the Certain Item was incurred.
⁽⁴⁾			Individual components of diluted earnings per share may not add up to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.
			~~NM represents that the percentage change is not meaningful.~~

Set forth below is a reconciliation by segment of actual operating expenses and operating income to adjusted results for these measures for applicable segments and corporate for the periods presented (dollars in thousands):

13-Week Period Ended Mar. 28, 2020 13-Week Period Ended Mar. 30, 2019 Change in Dollars % Change
U.S. FOODSERVICE OPERATIONS
Operating expenses (GAAP) $ 1,367,353 $ 1,243,704 $ 123,649 9.9 %
Impact of restructuring and transformational project costs ⁽¹⁾
(1,402) (2,927) 1,525 (52.1)
Impact of excess bad debt expense (107,230) — (107,230) NM
Operating expenses adjusted for Certain Items (Non-GAAP) $ 1,258,721 $ 1,240,777 $ 17,944 1.4 %
Operating income (GAAP) $ 528,025 $ 765,425 $ (237,400) (31.0) %
Impact of restructuring and transformational project costs ⁽¹⁾
1,402 2,927 (1,525) (52.1)
Impact of excess bad debt expense 107,230 — 107,230 NM
Operating income adjusted for Certain Items (Non-GAAP) $ 636,657 $ 768,352 $ (131,695) (17.1) %
INTERNATIONAL FOODSERVICE OPERATIONS
Sales (GAAP) $ 2,508,642 $ 2,757,891 $ (249,249) (9.0) %
Impact of currency fluctuations ⁽²⁾
35,295 — 35,295 1.3
Comparable sales using a constant currency basis (Non-GAAP) $ 2,543,937 $ 2,757,891 $ (213,954) (7.8) %
Gross Profit (GAAP) $ 500,929 $ 565,116 $ (64,187) (11.4) %
Impact of currency fluctuations ⁽²⁾
7,542 — 7,542 1.3
Comparable gross profit using a constant currency basis (Non-GAAP) $ 508,471 $ 565,116 $ (56,645) (10.0) %
Gross Margin (GAAP) 19.97 % 20.49 % -52 bps
Impact of currency fluctuations ⁽²⁾
0.02 — 2 bps
Comparable gross margin using a constant currency basis (Non-GAAP) 19.99 % 20.49 % -50 bps
Operating expenses (GAAP) $ 584,715 $ 554,971 $ 29,744 5.4 %
Impact of restructuring and transformational project costs ⁽³⁾
(25,180) (29,574) 4,394 (14.9)
Impact of acquisition-related costs ⁽⁴⁾
(17,321) (18,379) 1,058 (5.8)
Impact of excess bad debt expense (46,269) — (46,269) NM
Operating expenses adjusted for Certain Items (Non-GAAP) 495,945 507,018 (11,073) (2.2)
Impact of currency fluctuations ⁽²⁾
8,741 — 8,741 1.7
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP) $ 504,686 $ 507,018 $ (2,332) (0.5) %
Operating income (GAAP) $ (83,786) $ 10,145 $ (93,931) NM
Impact of restructuring and transformational project costs ⁽³⁾
25,180 29,574 (4,394) (14.9)
Impact of acquisition-related costs ⁽⁴⁾
17,321 18,379 (1,058) (5.8)
Impact of excess bad debt expense 46,269 — 46,269 NM
Operating income adjusted for Certain Items (Non-GAAP) 4,984 58,098 (53,114) (91.4)
Impact of currency fluctuations ⁽²⁾
(1,199) — (1,199) (2.1)
Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP) $ 3,785 $ 58,098 $ (54,313) (93.5) %


	13-Week Period Ended Mar. 27, 2021			13-Week Period Ended Mar. 28, 2020			Change in Dollars		% Change
U.S. FOODSERVICE OPERATIONS




Operating expenses (GAAP)	$	1,089,335		$	1,431,205		$	(341,870)	(23.9)	%
Impact of restructuring and transformational project costs (1)	(1,285)			(1,403)			118		(8.4)
Impact of bad debt reserve adjustments (2)	21,669			(107,230)			128,899		(120.2)

Operating expenses adjusted for Certain Items (Non-GAAP)	$	1,109,719		$	1,322,572		$	(212,853)	(16.1)	%

Operating income (GAAP)	$	545,502		$	464,173		$	81,329	17.5	%
Impact of restructuring and transformational project costs (1)	1,285			1,403			(118)		(8.4)
Impact of bad debt reserve adjustments (2)	(21,669)			107,230			(128,899)		(120.2)

Operating income adjusted for Certain Items (Non-GAAP)	$	525,118		$	572,806		$	(47,688)	(8.3)	%

INTERNATIONAL FOODSERVICE OPERATIONS
Sales (GAAP)	$	1,723,126		$	2,508,642		$	(785,516)	(31.3)	%
Impact of currency fluctuations (3)	(103,338)			—			(103,338)		4.1
Comparable sales using a constant currency basis (Non-GAAP)	$	1,619,788		$	2,508,642		$	(888,854)	(35.4)	%

Gross Profit (GAAP)	$	325,200		$	500,929		$	(175,729)	(35.1)	%
Impact of currency fluctuations (3)	(20,660)			—			(20,660)		4.1
Comparable gross profit using a constant currency basis (Non-GAAP)	$	304,540		$	500,929		$	(196,389)	(39.2)	%

Gross Margin (GAAP)	18.87		%	19.97		%			-110 bps
Impact of currency fluctuations (3)	0.07			—					7 bps
Comparable gross margin using a constant currency basis (Non-GAAP)	18.80		%	19.97		%			-117 bps

Operating expenses (GAAP)	$	446,687		$	584,715		$	(138,028)	(23.6)	%
Impact of restructuring and transformational project costs (4)	(18,635)			(25,180)			6,545		(26.0)
Impact of acquisition-related intangible amortization (5)	(18,834)			(17,321)			(1,513)		8.7
Impact of bad debt reserve adjustments (2)	8,357			(46,269)			54,626		(118.1)
Operating expenses adjusted for Certain Items (Non-GAAP)	417,575			495,945			(78,370)		(15.8)
Impact of currency fluctuations (3)	(28,811)			—			(28,811)		5.8
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)	$	388,764		$	495,945		$	(107,181)	(21.6)	%

Operating loss (GAAP)	$	(121,487)		$	(83,786)		$	(37,701)	(45.0)	%
Impact of restructuring and transformational project costs (4)	18,635			25,180			(6,545)		(26.0)
Impact of acquisition-related intangible amortization (5)	18,834			17,321			1,513		8.7
Impact of bad debt reserve adjustments (2)	(8,357)			46,269			(54,626)		(118.1)
Operating (loss) income adjusted for Certain Items (Non-GAAP)	(92,375)			4,984			(97,359)		NM
Impact of currency fluctuations (3)	8,151			—			8,151		NM
Comparable operating (loss) income adjusted for Certain Items using a constant currency basis (Non-GAAP)	$	(84,224)		$	4,984		$	(89,208)	NM

5645


SYGMA	SYGMA									SYGMA

Operating expenses (GAAP)	Operating expenses (GAAP)	$	108,590	$	114,247	$	(5,657)	(5.0)	%	Operating expenses (GAAP)	$	120,541	$	108,590	$	11,951	11.0	%
Impact of restructuring and transformational project costs ⁽⁵⁾		(122)		(369)		247		(66.9)
Impact of restructuring and transformational project costs (1)										Impact of restructuring and transformational project costs (1)	—		(122)		122		NM

Operating expenses adjusted for Certain Items (Non-GAAP)	Operating expenses adjusted for Certain Items (Non-GAAP)	$	108,468	$	113,878	$	(5,410)	(4.8)	%	Operating expenses adjusted for Certain Items (Non-GAAP)	$	120,541	$	108,468	$	12,073	11.1	%

Operating income (GAAP)	Operating income (GAAP)	$	10,301	$	11,668	$	(1,367)	(11.7)	%	Operating income (GAAP)	$	12,937	$	10,301	$	2,636	25.6	%
Impact of restructuring and transformational project costs ⁽⁵⁾		122		369		(247)		(66.9)
Impact of restructuring and transformational project costs (1)										Impact of restructuring and transformational project costs (1)	—		122		(122)		NM

Operating income adjusted for Certain Items (Non-GAAP)	Operating income adjusted for Certain Items (Non-GAAP)	$	10,423	$	12,037	$	(1,614)	(13.4)	%	Operating income adjusted for Certain Items (Non-GAAP)	$	12,937	$	10,423	$	2,514	24.1	%

OTHER	OTHER									OTHER

Operating expenses (GAAP)	Operating expenses (GAAP)	$	75,051	$	57,502	17,549		30.5	%	Operating expenses (GAAP)	$	32,027	$	75,051	$	(43,024)	(57.3)	%
Impact of bad debt reserve adjustments (2)										Impact of bad debt reserve adjustments (2)	3,447		—		3,447		NM
Impact of goodwill impairment	Impact of goodwill impairment	(11,660)		—		(11,660)		NM		Impact of goodwill impairment	—		(11,660)		11,660		NM
Operating expenses adjusted for Certain Items (Non-GAAP)	Operating expenses adjusted for Certain Items (Non-GAAP)	$	63,391	$	57,502	$	5,889	10.2	%	Operating expenses adjusted for Certain Items (Non-GAAP)	$	35,474	$	63,391	$	(27,917)	(44.0)	%

Operating income (GAAP)		$	(19,051)	$	6,376	(25,427)		NM
Operating (loss) income (GAAP)										Operating (loss) income (GAAP)	$	5,884	$	(19,051)	$	24,935	130.9	%
Impact of bad debt reserve adjustments (2)										Impact of bad debt reserve adjustments (2)	(3,447)		—		(3,447)		NM
Impact of goodwill impairment	Impact of goodwill impairment	11,660		—		11,660		NM		Impact of goodwill impairment	—		11,660		(11,660)		NM
Operating income adjusted for Certain Items (Non-GAAP)		$	(7,391)	$	6,376	$	(13,767)	NM
Operating (loss) income adjusted for Certain Items (Non-GAAP)										Operating (loss) income adjusted for Certain Items (Non-GAAP)	$	2,437	$	(7,391)	$	9,828	133.0	%

CORPORATE	CORPORATE									CORPORATE

Operating expenses (GAAP)	Operating expenses (GAAP)	$	368,257	$	254,289	$	113,968	44.8	%	Operating expenses (GAAP)	$	198,161	$	304,405	$	(106,244)	(34.9)	%
Impact of restructuring and transformational project costs ⁽⁶⁾	Impact of restructuring and transformational project costs ⁽⁶⁾	(50,490)		(39,337)		(11,153)		28.4		Impact of restructuring and transformational project costs (6)	(15,033)		(50,490)		35,457		(70.2)
Impact of acquisition-related costs ⁽⁷⁾		—		(19)		19		NM

Impact of goodwill impairment	Impact of goodwill impairment	(57,066)		—		(57,066)		NM		Impact of goodwill impairment	—		(57,065)		57,065		NM
Operating expenses adjusted for Certain Items (Non-GAAP)	Operating expenses adjusted for Certain Items (Non-GAAP)	$	260,701	$	214,933	$	45,768	21.3	%	Operating expenses adjusted for Certain Items (Non-GAAP)	$	183,128	$	196,850	$	(13,722)	(7.0)	%

Operating income (GAAP)		$	(375,215)	$	(264,029)	$	(111,186)	42.1	%
Operating loss (GAAP)										Operating loss (GAAP)	$	(206,919)	$	(311,363)	$	104,444	33.5	%
Impact of restructuring and transformational project costs ⁽⁶⁾	Impact of restructuring and transformational project costs ⁽⁶⁾	50,490		39,337		11,153		28.4		Impact of restructuring and transformational project costs (6)	15,033		50,490		(35,457)		(70.2)
Impact of acquisition-related costs ⁽⁷⁾		—		19		(19)		NM

Impact of goodwill impairment	Impact of goodwill impairment	57,066		—		57,066		NM		Impact of goodwill impairment	—		57,065		(57,065)		NM
Operating income adjusted for Certain Items (Non-GAAP)		$	(267,659)	$	(224,673)	$	(42,986)	19.1	%
Operating loss adjusted for Certain Items (Non-GAAP)										Operating loss adjusted for Certain Items (Non-GAAP)	$	(191,886)	$	(203,808)	$	11,922	5.8	%



⁽¹⁾			Includes charges related to restructuring and business transformation ~~projects and other restructuring charges.~~projects.
⁽²⁾			Fiscal 2021 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020. Fiscal 2020 represents excess bad debt charges recognized on the increase in past due receivables arising from the COVID-19 pandemic.
(3)			Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on current year results.
⁽³⁾ (4)			Includes restructuring, severance ~~restructuring~~ and facility closure costs primarily in ~~Europe and Canada.~~Europe.
⁽⁴⁾ (5)			~~Fiscal 2020 and fiscal 2019 include $17 million and $18 million, respectively, related to~~Represents intangible amortization expense from the Brakes Acquisition.
⁽⁵⁾			~~Includes charges related to transformation initiatives, severance and other restructuring charges.~~
⁽⁶⁾			~~Fiscal 2020 and fiscal 2019 include~~Includes various transformation initiative costs, primarily consisting of changes to our business technology ~~strategy and severance related to restructuring. Fiscal 2019 includes $17 million of accelerated depreciation on software that was replaced.~~strategy.
⁽⁷⁾			~~Fiscal 2019 includes integration costs from the Brakes Acquisition.~~

			NM represents that the percentage change is not meaningful.

~~39-Week Period Ended Mar. 28, 2020~~

~~39-Week Period Ended Mar. 30, 2019~~

~~Change in Dollars~~

~~% Change~~

~~U.S. FOODSERVICE OPERATIONS~~

5746

Operating expenses (GAAP) $ 3,930,960 $ 3,782,515 $ 148,445 3.9 %
Impact of restructuring and transformational project costs ⁽¹⁾
(9,208) (2,858) (6,350) NM
Impact of excess bad debt expense (107,230) — (107,230) NM
Operating expenses adjusted for Certain Items (Non-GAAP) $ 3,814,522 $ 3,779,657 $ 34,865 0.9 %
Operating income (GAAP) $ 2,158,211 $ 2,318,660 $ (160,449) (6.9) %
Impact of restructuring and transformational project costs ⁽¹⁾
9,208 2,858 6,350 NM
Impact of excess bad debt expense 107,230 — 107,230 NM
Operating income adjusted for Certain Items (Non-GAAP) $ 2,274,649 $ 2,321,518 $ (46,869) (2.0) %
INTERNATIONAL FOODSERVICE OPERATIONS
Sales (GAAP) $ 8,311,081 $ 8,569,439 $ (258,358) (3.0) %
Impact of currency fluctuations ⁽²⁾
153,914 — 153,914 1.8
Comparable sales using a constant currency basis (Non-GAAP) $ 8,464,995 $ 8,569,439 $ (104,444) (1.2) %
Gross Profit (GAAP) $ 1,692,153 $ 1,770,543 $ (78,390) (4.4) %
Impact of currency fluctuations ⁽²⁾
35,189 — 35,189 2.0
Comparable gross profit using a constant currency basis (Non-GAAP) $ 1,727,342 $ 1,770,543 $ (43,201) (2.4) %
Gross Margin (GAAP) 20.36 % 20.66 % -30 bps
Impact of currency fluctuations ⁽²⁾
(0.05) — -5 bps
Comparable gross margin using a constant currency basis (Non-GAAP) 20.41 % 20.66 % -25 bps
Operating expenses (GAAP) $ 1,686,258 $ 1,708,543 $ (22,285) (1.3) %
Impact of restructuring and transformational project costs ⁽³⁾
(74,302) (117,390) 43,088 (36.7)
Impact of acquisition-related costs ⁽⁴⁾
(51,543) (57,225) 5,682 (9.9)
Impact of excess bad debt expense (46,269) — (46,269) NM
Operating expenses adjusted for Certain Items (Non-GAAP) 1,514,144 1,533,928 (19,784) (1.3)
Impact of currency fluctuations ⁽²⁾
34,436 — 34,436 2.2
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP) $ 1,548,580 $ 1,533,928 $ 14,652 1.0 %
Operating income (GAAP) $ 5,895 $ 62,000 $ (56,105) (90.5) %
Impact of restructuring and transformational project costs ⁽³⁾
74,302 117,390 (43,088) (36.7)
Impact of acquisition-related costs ⁽⁴⁾
51,543 57,225 (5,682) (9.9)
Impact of excess bad debt expense 46,269 — 11,274 19.7
Operating income adjusted for Certain Items (Non-GAAP) 178,009 236,615 (58,606) (24.8)
Impact of currency fluctuations ⁽²⁾
753 — 753 0.3
Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP) $ 178,762 $ 236,615 $ (57,853) (24.5) %
SYGMA
Operating expenses (GAAP) $ 341,316 $ 359,565 $ (18,249) (5.1) %
Impact of restructuring and transformational project costs ⁽⁵⁾
(3,662) (369) (3,293) NM
Operating expenses adjusted for Certain Items (Non-GAAP) $ 337,654 $ 359,196 $ (21,542) (6.0) %
Operating income (GAAP) $ 27,732 $ 17,213 $ 10,519 61.1 %
Impact of restructuring and transformational project costs ⁽⁵⁾
3,662 369 3,293 NM


	39-Week Period Ended Mar. 27, 2021			39-Week Period Ended Mar. 28, 2020			Change in Dollars		% Change
U.S. FOODSERVICE OPERATIONS




Operating expenses (GAAP)	$	3,174,704		$	4,126,576		$	(951,872)	(23.1)	%
Impact of restructuring and transformational project costs (1)	(4,010)			(9,208)			5,198		(56.5)
Impact of bad debt reserve adjustments (2)	123,225			(107,230)			230,455		(214.9)
Operating expenses adjusted for Certain Items (Non-GAAP)	$	3,293,919		$	4,010,138		$	(716,219)	(17.9)	%

Operating income (GAAP)	$	1,619,162		$	1,962,595		$	(343,433)	(17.5)	%
Impact of restructuring and transformational project costs (1)	4,010			9,208			(5,198)		(56.5)
Impact of bad debt reserve adjustments (2)	(123,225)			107,230			(230,455)		(214.9)
Operating income adjusted for Certain Items (Non-GAAP)	$	1,499,947		$	2,079,033		$	(579,086)	(27.9)	%

INTERNATIONAL FOODSERVICE OPERATIONS
Sales (GAAP)	$	5,854,608		$	8,311,081		$	(2,456,473)	(29.6)	%
Impact of currency fluctuations (3)	(197,380)			—			(197,380)		2.4

Comparable sales using a constant currency basis (Non-GAAP)	$	5,657,228		$	8,311,081		$	(2,653,853)	(31.9)	%

Gross Profit (GAAP)	$	1,149,438		$	1,692,153		$	(542,715)	(32.1)	%
Impact of currency fluctuations (3)	(43,631)			—			(43,631)		2.6

Comparable gross profit using a constant currency basis (Non-GAAP)	$	1,105,807		$	1,692,153		$	(586,346)	(34.7)	%

Gross Margin (GAAP)	19.63		%	20.36		%			-73 bps
Impact of currency fluctuations (3)	0.09			—					9 bps

Comparable gross margin using a constant currency basis (Non-GAAP)	19.55		%	20.36		%			-81 bps

Operating expenses (GAAP)	$	1,351,411		$	1,686,258		$	(334,847)	(19.9)	%
Impact of restructuring and transformational project costs (4)	(52,033)			(74,302)			22,269		(30.0)
Impact of acquisition-related intangible amortization (5)	(54,714)			(51,543)			(3,171)		6.2
Impact of bad debt reserve adjustments (2)	33,583			(46,269)			79,852		(172.6)

Operating expenses adjusted for Certain Items (Non-GAAP)	1,278,247			1,514,144			(235,897)		(15.6)
Impact of currency fluctuations (3)	(56,263)			—			(56,263)		3.7

Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)	$	1,221,984		$	1,514,144		$	(292,160)	(19.3)	%

Operating (loss) income (GAAP)	$	(201,973)		$	5,895		$	(207,868)	NM
Impact of restructuring and transformational project costs (4)	52,033			74,302			(22,269)		(30.0)	%
Impact of acquisition-related intangible amortization (5)	54,714			51,543			3,171		6.2
Impact of bad debt reserve adjustments (2)	(33,583)			46,269			(79,852)		(172.6)

Operating (loss) income adjusted for Certain Items (Non-GAAP)	(128,809)			178,009			(306,818)		(172.4)
Impact of currency fluctuations (3)	12,632			—			12,632		(7.1)

Comparable operating (loss) income adjusted for Certain Items using a constant currency basis (Non-GAAP)	$	(116,177)		$	178,009		$	(294,186)	(165.3)	%

SYGMA

5847


Operating expenses (GAAP)										Operating expenses (GAAP)	$	358,361	$	341,316	$	17,045	5.0	%
Impact of restructuring and transformational project costs (1)										Impact of restructuring and transformational project costs (1)	(7)		(3,662)		3,655		(99.8)

Operating expenses adjusted for Certain Items (Non-GAAP)										Operating expenses adjusted for Certain Items (Non-GAAP)	$	358,354	$	337,654	$	20,700	6.1	%

Operating income (GAAP)										Operating income (GAAP)	$	35,957	$	27,732	$	8,225	29.7	%
Impact of restructuring and transformational project costs (1)										Impact of restructuring and transformational project costs (1)	7		3,662		(3,655)		(99.8)

Operating income adjusted for Certain Items (Non-GAAP)	Operating income adjusted for Certain Items (Non-GAAP)	$	31,394	$	17,582	$	13,812	78.6	%	Operating income adjusted for Certain Items (Non-GAAP)	$	35,964	$	31,394	$	4,570	14.6	%

OTHER	OTHER									OTHER

Operating expenses (GAAP)	Operating expenses (GAAP)	$	193,762	$	176,485	17,277		9.8	%	Operating expenses (GAAP)	$	109,247	$	193,762	$	(84,515)	(43.6)	%
Impact of bad debt reserve adjustments (2)										Impact of bad debt reserve adjustments (2)	5,564		—		5,564		NM
Impact of goodwill impairment	Impact of goodwill impairment	(11,660)		—		(11,660)		NM		Impact of goodwill impairment	—		(11,660)		11,660		NM
Operating expenses adjusted for Certain Items (Non-GAAP)	Operating expenses adjusted for Certain Items (Non-GAAP)	$	182,102	$	176,485	$	5,617	3.2	%	Operating expenses adjusted for Certain Items (Non-GAAP)	$	114,811	$	182,102	$	(67,291)	(37.0)	%

Operating income (GAAP)	Operating income (GAAP)	$	486	$	22,429	$	(21,943)	(97.8)	%	Operating income (GAAP)	$	4,861	$	486	$	4,375	NM
Impact of bad debt reserve adjustments (2)										Impact of bad debt reserve adjustments (2)	(5,564)		—		(5,564)		NM
Impact of goodwill impairment	Impact of goodwill impairment	11,660		—		11,660		NM		Impact of goodwill impairment	—		11,660		(11,660)		NM
Operating income adjusted for Certain Items (Non-GAAP)		$	12,146	$	22,429	$	(10,283)	(45.8)	%
Operating (loss) income adjusted for Certain Items (Non-GAAP)										Operating (loss) income adjusted for Certain Items (Non-GAAP)	$	(703)	$	12,146	$	(12,849)	(105.8)	%

CORPORATE	CORPORATE									CORPORATE

Gross Profit										Gross Profit	$	(10,759)	$	(8,611)	$	(2,148)	(24.9)	%

Operating expenses (GAAP)	Operating expenses (GAAP)	$	902,628	$	793,067	$	109,561	13.8	%	Operating expenses (GAAP)	$	579,690	$	707,012	$	(127,322)	(18.0)
Impact of restructuring and transformational project costs ⁽⁶⁾	Impact of restructuring and transformational project costs ⁽⁶⁾	(103,850)		(126,930)		23,080		(18.2)		Impact of restructuring and transformational project costs (6)	(39,028)		(103,850)		64,822		(62.4)
Impact of acquisition-related costs ⁽⁷⁾		—		(817)		817		NM
Impact of goodwill impairment										Impact of goodwill impairment	—		(57,065)		57,065		NM

Impact of goodwill impairment		(57,066)		—		(57,066)		NM
Operating expenses adjusted for Certain Items (Non-GAAP)	Operating expenses adjusted for Certain Items (Non-GAAP)	$	741,712	$	665,320	$	76,392	11.5	%	Operating expenses adjusted for Certain Items (Non-GAAP)	$	540,662	$	546,097	$	(5,435)	(1.0)	%

Operating income (GAAP)		$	(911,239)	$	(810,682)	$	(100,557)	12.4	%
Operating loss (GAAP)										Operating loss (GAAP)	$	(590,449)	$	(715,623)	$	125,174	17.5	%
Impact of restructuring and transformational project costs ⁽⁶⁾	Impact of restructuring and transformational project costs ⁽⁶⁾	103,850		126,930		(23,080)		(18.2)		Impact of restructuring and transformational project costs (6)	39,028		103,850		(64,822)		(62.4)
Impact of acquisition-related costs ⁽⁷⁾		—		817		(817)		NM
Impact of goodwill impairment										Impact of goodwill impairment	—		57,065		(57,065)		NM

Impact of goodwill impairment		57,066		—		57,066		NM
Operating income adjusted for Certain Items (Non-GAAP)		$	(750,323)	$	(682,935)	$	(67,388)	9.9	%
Operating loss adjusted for Certain Items (Non-GAAP)										Operating loss adjusted for Certain Items (Non-GAAP)	$	(551,421)	$	(554,708)	$	3,287	0.6	%



⁽¹⁾			Includes charges related to restructuring and business transformation ~~projects and other restructuring charges.~~projects.
⁽²⁾			Fiscal 2021 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020. Fiscal 2020 represents excess bad debt charges recognized on the increase in past due receivables arising from the COVID-19 pandemic.
(3)			Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on current year results.
⁽³⁾ (4)			Includes restructuring, severance and facility closure costs primarily in ~~Europe and Canada.~~Europe.
⁽⁴⁾ (5)			~~Fiscal 2020 and fiscal 2019 include $51 million and $57 million, respectively, related to~~Represents intangible amortization expense from the Brakes Acquisition.
⁽⁵⁾			~~Includes charges related to facility closures and other restructuring charges.~~
⁽⁶⁾			~~Fiscal 2020 and fiscal 2019 include~~Includes various transformation initiative costs, primarily consisting of changes to our business technology ~~strategy and severance related to restructuring. Fiscal 2019 includes $17 million of accelerated depreciation on software that was replaced and severance charges related to restructuring.~~strategy.
⁽⁷⁾			~~Fiscal 2019 includes integration costs from the Brakes Acquisition.~~

			NM represents that the percentage change is not meaningful.

Adjusted EBITDA

EBITDA and adjusted EBITDA should not be used as a substitute for the most comparable GAAP measure in assessing Sysco’s overall financial performance for the periods presented. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. See “Key Performance Indicators” for further discussion regarding this non-GAAP financial measure. Set forth below is a reconciliation of actual net earnings (loss) to EBITDA and to adjusted EBITDA results for the periods presented (dollars in thousands):


	13-Week Period Ended Mar. 27, 2021		13-Week Period Ended Mar. 28, 2020		Change in Dollars		% Change
Net earnings (loss) (GAAP)	$	88,927	$	(3,297)	$	92,224	NM
Interest (GAAP)	145,773		83,854		61,919		73.8	%
Income taxes (GAAP)	13,925		(25,483)		39,408		(154.6)
Depreciation and amortization (GAAP)	177,139		186,172		(9,033)		(4.9)
EBITDA (Non-GAAP)	$	425,764	$	241,246	$	184,518	76.5	%
Certain Item adjustments:
Impact of restructuring and transformational project costs (1)	34,301		74,656		(40,355)		(54.1)
Impact of bad debt reserve adjustments (2)	(33,473)		153,499		(186,972)		(121.8)
Impact of goodwill impairment	—		68,725		(68,725)		NM
Impact of loss on sale of businesses	10,790		—		10,790		NM
EBITDA adjusted for Certain Items (Non-GAAP)	$	437,382	$	538,126	$	(100,744)	(18.7)	%


(1)			Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy, excluding charges related to accelerated depreciation.
(2)			Fiscal 2021 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020. Fiscal 2020 represents excess bad debt charges recognized on the increase in past due receivables arising from the COVID-19 pandemic.


	39-Week Period Ended Mar. 27, 2021		39-Week Period Ended Mar. 28, 2020		Change in Dollars		% Change
Net earnings (GAAP)	$	373,116	$	833,894	$	(460,778)	(55.3)	%
Interest (GAAP)	438,988		243,951		195,037		79.9
Income taxes (GAAP)	69,594		195,735		(126,141)		(64.4)
Depreciation and amortization (GAAP)	542,471		558,588		(16,117)		(2.9)
EBITDA (Non-GAAP)	$	1,424,169	$	1,832,168	$	(407,999)	(22.3)	%
Certain Item adjustments:
Impact of restructuring and transformational project costs (1)	89,253		174,066		(84,813)		(48.7)
Impact of bad debt reserve adjustments (2)	(162,372)		153,499		(315,871)		(205.8)
Impact of goodwill impairment	—		68,725		(68,725)		NM
Impact of loss on sale of businesses	22,834		—		22,834		NM
EBITDA adjusted for Certain Items (Non-GAAP)	$	1,373,884	$	2,228,458	$	(854,574)	(38.3)	%


(1)			Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy, excluding charges related to accelerated depreciation.
(2)			Fiscal 2021 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020. Fiscal 2020 represents excess bad debt charges recognized on the increase in past due receivables arising from the COVID-19 pandemic.


	13-Week Period Ended						39-Week Period Ended
	Sep. 26, 2020		Dec. 26, 2020		Mar. 27, 2021		Mar. 27, 2021
Net earnings (GAAP)	$	216,900	$	67,289	$	88,927	$	373,116
Interest (GAAP)	146,717		146,498		145,773		438,988
Income taxes (GAAP)	41,838		13,831		13,925		69,594
Depreciation and amortization (GAAP)	180,521		184,811		177,139		542,471
EBITDA (Non-GAAP)	$	585,976	$	412,429	$	425,764	$	1,424,169
Certain Item adjustments:
Impact of restructuring and transformational project costs (1)	25,278		29,674		34,301		89,253
Impact of bad debt reserve adjustments (2)	(98,628)		(30,271)		(33,473)		(162,372)

Impact of loss on sale of businesses	12,044		—		10,790		22,834
EBITDA adjusted for certain items (Non-GAAP)	$	524,670	$	411,832	$	437,382	$	1,373,884


(1)			Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy, excluding charges related to accelerated depreciation.
(2)			Fiscal 2021 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.


	13-Week Period Ended								52-Week Period Ended
	Sep. 28, 2019		Dec. 28, 2019		Mar. 28, 2020		June 27, 2020		June 27, 2020
Net earnings (loss) (GAAP)	$	453,781	$	383,410	$	(3,297)	$	(618,419)	$	215,475
Interest (GAAP)	83,335		76,762		83,854		164,269		408,220
Income taxes (GAAP)	128,090		93,128		(25,483)		(117,826)		77,909
Depreciation and amortization (GAAP)	187,405		185,011		186,172		247,177		805,765
EBITDA (Non-GAAP)	$	852,611	$	738,311	$	241,246	$	(324,799)	$	1,507,369
Certain Item adjustments :
Impact of restructuring and transformational project costs (1)	45,546		53,864		74,656		116,218		290,284
Impact of bad debt reserve adjustments (2)	—		—		153,499		169,903		323,402
Impact of goodwill impairment	—		—		68,725		134,481		203,206
Impact of loss on assets held for sale	—		—		—		46,968		46,968
EBITDA adjusted for certain items (Non-GAAP)	$	898,157	$	792,175	$	538,126	$	142,771	$	2,371,229


(1)			Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy, excluding charges related to accelerated depreciation.
(2)			Fiscal 2020 represents excess bad debt charges recognized on the increase in past due receivables arising from the COVID-19 pandemic.

Liquidity and Capital Resources

Highlights

Below are comparisons of the cash flows from the first 39 weeks of fiscal ~~2020~~2021 to the first 39 weeks of fiscal ~~2019:~~2020:

•Cash flows from operations were $1.5 billion in fiscal 2021, compared to $1.1 billion in fiscal ~~2020, compared to $1.4 billion in fiscal 2019;~~2020;

•Net capital expenditures totaled $231.9 million in fiscal 2021, compared to $590.6 million in fiscal ~~2020, compared to $366.5 million in fiscal 2019;~~2020;

•Free cash flow was ~~$487.8 million~~$1.2 billion in fiscal ~~2020,~~2021, compared to free cash flow of ~~$998.7~~$487.8 million in fiscal ~~2019~~2020 (see below under the heading “Free Cash Flow” for an explanation of this non-GAAP financial measure);

•There were $411.2 million of bank and commercial paper repayments, net, including $417.3 million of commercial paper repayments and $6.1 million of net bank borrowings in fiscal 2021, compared to $20.9 million of commercial paper issuances and net bank borrowings in fiscal ~~2020, compared to $200.0 million commercial paper issuances and net bank borrowings in fiscal 2019;~~2020;

•Dividends paid were $689.3 million in fiscal 2021, compared to $628.1 million in fiscal ~~2020, compared to $575.1 million in fiscal 2019;~~2020; and

•There were no stock repurchases in fiscal 2021. Cash paid for ~~treasury~~ stock repurchases was $844.7 million in fiscal ~~2020, compared to $866.7 million in fiscal 2019.~~2020.

~~In addition, with respect our senior notes:~~

•We ~~issued an aggregate of $1.0 billion in new senior notes; and~~

•~~We commenced the offering of an additional $4.0 billion in new~~redeemed senior notes ~~and completed the offering~~ in the ~~fourth quarter~~amount of $750.0 million in fiscal ~~2020.~~2021 using cash on hand.

In response to the ~~ongoing~~ COVID-19 ~~crisis~~pandemic and ~~the~~its impact on our working capital, ~~and~~as well as the uncertainty ~~with regard to~~regarding our ability to generate cash flow in the near term, we ~~withdrew a total~~took steps to increase our liquidity in the second half of ~~$1.7 billion~~fiscal 2020 including the issuance of senior notes, borrowings under our long-term revolving credit ~~facility.~~facility and borrowings under our U.K. commercial paper program. In the fourth quarter of fiscal 2020, we entered into ~~a new~~an amendment to our long-term revolving credit facility, which requires us to suspend share repurchases and dividend increases through fiscal 2021. In March 2021, we continued to reduce our debt levels, and have paid down $1.1 billion of debt, including $700 million of borrowings against our long-term revolving credit facility and £300.0 million of borrowings against our U.K. commercial paper program. As of March 27, 2021, there were no borrowings outstanding under our long-term revolving credit facility and £300.0 million in aggregate principal amount of notes outstanding under the U.K. commercial paper program. In April 2021, we repaid £200 million under this commercial paper program, inand the ~~U.K. In~~remaining £100.0 million of notes under the ~~third quarter of fiscal 2020, Sysco suspended its treasury stock repurchases and reduced capital spending.~~program will mature on May 7, 2021. As of ~~May 5, 2020,~~April 24, 2021, the company ~~has~~had approximately ~~$6.0~~$7.2 billion in cash and available liquidity.

Sources and Uses of Cash

Sysco’s strategic objectives include continuous investment in our business; these investments are funded by a combination of cash from operations and access to capital from financial markets. Our operations historically have produced significant cash flow. Cash generated from operations is generally allocated to:

•working capital requirements;

•investments in facilities, systems, fleet, other equipment and technology;

•cash dividends;

•acquisitions compatible with our overall growth strategy;

•contributions to our various retirement plans;

•debt repayments; and

•share repurchases, which are currently suspended.

Any remaining cash generated from operations or excess borrowings are invested in high-quality, short-term instruments. As a part of our ongoing strategic analysis, we regularly evaluate business opportunities, including potential acquisitions and sales of assets and businesses, and our overall capital structure. Any transactions resulting from these evaluations may materially impact our liquidity, borrowing capacity, leverage ratios and capital availability.

We continue to be in a strong financial position based on our balance sheet and operating cash flows; however, our liquidity and capital resources ~~have been significantly~~can be influenced by economic trends and ~~negatively impacted by the reduction in volume resulting from the COVID-19 pandemic. Our~~conditions that impact our results of operations. We believe our mechanisms to manage working capital, ~~needs have been reduced and continue to decline due to decreased demand, and we are~~such as actively working with customers to receive payments on receivables, optimizing inventory levels and maximizing payment terms with ~~vendors.~~vendors, have been sufficient to limit a significant

unfavorable impact on our cash flows from operations. We believe these ~~actions~~mechanisms will ~~help partially offset the~~continue to prevent a significant unfavorable impact on our cash flows from operations.

As of March ~~28, 2020,~~27, 2021, we had ~~$2.2~~$4.9 billion in cash and cash equivalents, approximately ~~13%~~12% of which was held by our international subsidiaries and generated from our earnings offrom international operations. If the cash and cash equivalents attributable to our earnings were to be transferred among countries or repatriated to the U.S., such amounts may become subject to withholding and additional foreign tax obligations. Additionally, Sysco Corporation has provided intercompany loans to certain of its international subsidiaries, and when interest and principal payments are made, some of this cash will be transferred to the U.S.

Our ~~wholly-owned~~wholly owned captive insurance subsidiary (the Captive), must maintain a sufficient level of liquidity to fund future reserve payments. As of March ~~28, 2020,~~27, 2021, the Captive held ~~$114.8~~$126.0 million of fixed income marketable securities and ~~$43.7~~$29.3 million of restricted cash and restricted cash equivalents in a restricted investment portfolio in order to meet solvency requirements. We purchased ~~$11.4~~$44.7 million in marketable securities in the first 39 weeks of fiscal ~~2020~~2021 and received ~~$17.5~~$30.8 million in proceeds from the sale of marketable securities in that period.

We believe the following sources will be sufficient to meet our anticipated cash requirements for more than the next twelve months, while maintaining sufficient liquidity for normal operating purposes:

•our cash flows from operations;

•the availability of additional capital under our existing commercial paper programs, supported by our revolving credit facility and bank line of credit; and

•our ability to access capital from financial markets, including issuances of debt securities, either privately or under our shelf registration statement filed with the Securities and Exchange Commission.

Due to our strong financial position, we believe that we will continue to be able to effectively access the commercial paper market and long-term capital markets, if necessary.

Cash Flows

Operating Activities

We generated ~~$1.1~~$1.5 billion in cash flows from operations in the first 39 weeks of fiscal ~~2020,~~2021, compared to cash flows of ~~$1.4~~$1.1 billion in the first 39 weeks of fiscal ~~2019.~~2020. These amounts include year-over-year ~~unfavorable~~favorable comparisons on working capital ~~as well as~~and accrued income taxes, partially offset by lower operating results.

Changes in working capital had a ~~negative~~positive impact of ~~$190.5 million~~$1.1 billion on cash flow from operations period-over-period. There ~~was~~were favorable comparisons on accounts payable and inventories, partially offset by an unfavorable comparison on accounts receivable. Accounts payable has increased, as we continue our business recovery efforts and ~~inventories, which was partially offset by~~investments in inventory. In the third quarter of fiscal 2021, we have invested heavily in inventory, and we ended the quarter with inventory on-hand and inventory on-order in a ~~favorable~~combined amount that exceeds our pre-COVID-19 levels. This positions us to be able to ship product on time and in full during the upcoming period of volume recovery. The unfavorable comparison ~~on accounts receivable. Both~~in cash flows from accounts receivables ~~and accounts payable have decreased,~~is primarily due to our customers beginning to purchase more in the third quarter of fiscal 2021, coupled with significantly lower sales in the latter half of March 2020 resulting from the COVID-19 pandemic. We had not fully adjusted our purchases to align with reduced volumes and, as a result, our inventories increased. We are actively adjusting our replenishment to adapt to lower volumes, while still maintaining appropriate levels of products that are critically needed in the current pandemic environment. Many of Sysco’s customers, including those in the restaurant, hospitality and education segments, are closed or operating at a substantially reduced volume due to governmental requirements for closures. Some of these customers have ceased paying their outstanding receivables, creating uncertainty as to their collectability. In the first 39 weeks of fiscal ~~2020,~~2021, we recorded a net credit to the provision for losses on receivables totaling ~~$213.8~~$137.7 million, which reflects a benefit on the reduction of ~~which we believe approximately $153.5 million is due to the impact of the COVID-19 pandemic on~~ our ~~customers, calculated by comparing our March allowance results to the prior three-month average, with excess amounts being a reasonable estimate of what reserve for the~~ allowance for ~~doubtful accounts would~~pre-pandemic receivable balances, as we have ~~been for the first 39 weeks of fiscal 2020, absent the impact of the COVID-19 pandemic.~~made excellent progress on obtaining timely payments from our customers. We ~~are working~~continue to work with our customers to collect past due balances, including through the use of payment plans. We have also discontinued charging interest on past due balances. ~~We believe that we will continue to experience risk in~~

Income taxes positively impacted cash flow from operations, as third quarter federal estimated payments were deferred until the fourth quarter of fiscal ~~2020 relating to uncollectible accounts.~~

~~Provisions~~2021 as a result of ~~the CARES Act are expected to provide benefits to us~~a February winter storm and a $50 million federal income tax refund from fiscal 2019 received in the ~~fourth~~third quarter of fiscal 2021. Tax payments in the first 39 weeks of fiscal 2021 were lower than in the first 39 weeks of fiscal 2020 ~~as we will defer U.S. social security tax~~due to ~~future fiscal years, which will favorably~~relief provided in connection with the impact ~~our cash flows from operations. We are also implementing certain types of pay primarily with our warehouse and delivery associates that, under the provisions~~ of the ~~CARES Act, will generate additional payroll tax credits.~~winter storm in the current year and the federal refund received.

~~We do not intend to seek assistance from the U.S government; however, we are encouraging our customers to seek assistance where appropriate.~~

Investing Activities

Our capital expenditures in the first 39 weeks of fiscal ~~2020~~2021 primarily consisted of ~~facility replacements and expansions, fleet,~~ technology equipment, warehouse equipment, and ~~warehouse equipment.~~buildings and building improvements. Our capital expenditures in the first 39 weeks of fiscal ~~2020~~2021 were ~~higher~~lower by ~~$221.0~~$352.7 million, as compared to the first 39 weeks of fiscal ~~2019,~~2020, primarily ~~due to timing of~~because we eliminated capital ~~expenditures~~projects not urgently needed for our business and targeted investments in ~~the first 39 weeks of fiscal 2019.~~

We expect our capital expenditures, net of proceeds from sales of assets, in fiscal 2020 to decline in the fourth quarter. In the fourth quarter of fiscal 2019, our capital expenditures, net of proceeds from sales of assets, were $305 million. We expect our capital expenditures for the fourth quarter of fiscal 2020 to be $200 million lower than the amount expended in the fourth quarter of fiscal 2019. This is a decrease from our prior expectations; however,order to preserve our liquidity in response to the COVID-19 ~~crisis, we have reduced our capital expenditures by eliminating capital projects that were not urgently needed for our business and were not significantly underway.~~crisis.

During the first 39 weeks of fiscal 2020, ~~and 2019,~~ we paid $142.8 ~~million and $97.5~~ million, net of cash acquired, for ~~acquisitions, respectively.~~acquisitions.

Free Cash Flow

Our free cash flow for the first 39 weeks of fiscal ~~2020 decreased~~2021 increased by ~~$510.9~~$760.1 million, to ~~$487.8 million,~~$1.2 billion, as compared to the first 39 weeks of fiscal ~~2019,~~2020, principally as a result of ~~a decrease~~an increase in cash flows from operations and year-over-year ~~increased~~decreased capital expenditures.

Free cash flow should not be used as a substitute for the most comparable GAAP measure in assessing the company’s liquidity for the periods presented. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP. See ~~“Key~~Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Performance Indicators” contained in our fiscal 2020 Form 10-K for discussions around this non-GAAP performance metric. In the table that follows, free cash flow for each period presented is reconciled to net cash provided by operating activities.


		39-Week Period Ended Mar. 28, 2020		39-Week Period Ended Mar. 30, 2019			39-Week Period Ended Mar. 27, 2021		39-Week Period Ended Mar. 28, 2020
		(In thousands)							(In thousands)
Net cash provided by operating activities (GAAP)	Net cash provided by operating activities (GAAP)	$	1,078,469	$	1,365,225	Net cash provided by operating activities (GAAP)	$	1,479,784	$	1,078,469
Additions to plant and equipment	Additions to plant and equipment	(603,865)		(382,905)		Additions to plant and equipment	(251,167)		(603,865)
Proceeds from sales of plant and equipment	Proceeds from sales of plant and equipment	13,245		16,383		Proceeds from sales of plant and equipment	19,308		13,245
Free Cash Flow (Non-GAAP)	Free Cash Flow (Non-GAAP)	$	487,849	$	998,703	Free Cash Flow (Non-GAAP)	$	1,247,925	$	487,849

We expect that the fourth quarter of fiscal 2021 will require a significant investment in working capital, as we continue to invest in inventory and as the payables that provided us with benefit in the third quarter of fiscal 2021 come due in the fourth quarter. As a result, we expect cash flows from operating activities and free cash flow for the fourth quarter of fiscal 2021 to be approximately flat.

Financing Activities

Equity Transactions

Proceeds from exercises of share-based compensation awards were $112.2 million in the first 39 weeks of fiscal 2021, as compared to $186.5 million in the first 39 weeks of fiscal ~~2020, as compared to $211.2 million in the first 39 weeks of fiscal 2019.~~2020. The level of option exercises, and thus proceeds, will vary from period to period and is largely dependent on movements in our stock price and the time remaining before option grants expire.

We have routinely engaged in share repurchase programs to allow Sysco to continue offsetting dilution resulting from shares issued under the company’s benefit plans and to make opportunistic repurchases. In ~~November 2017, our Board of Directors approved a repurchase program to authorize the repurchase of the company’s common stock not to exceed $1.5 billion through the end of fiscal 2020. In~~ August 2019, our Board of Directors approved a ~~separate~~ repurchase program to authorize the repurchase of the company’s common stock not to exceed $2.5 billion through the end of fiscal 2021. ~~We repurchased 11.1 million shares for $844.7 million during the first 39 weeks of fiscal 2020, compared to 12.8 million shares repurchased in the first 39 weeks of fiscal 2019 for $866.7 million.~~ During March 2020, however, we discontinued share repurchases under ~~the~~this program, and pursuant to the amendment to our long-term revolving credit facility, we do not anticipate making any ~~further~~ repurchases for the remainder of fiscal ~~2020.~~2021. As of March ~~28, 2020,~~27, 2021, we had a remaining authorization of approximately $2.1 billion.

Dividends paid in the first 39 weeks of fiscal ~~2020~~2021 were ~~$628.1~~$689.3 million, or ~~$1.23~~$1.35 per share, as compared to ~~$575.1~~$628.1 million, or ~~$1.11~~$1.23 per share, in the first 39 weeks of fiscal ~~2019.~~2020. In February ~~2020,~~2021, we declared our regular quarterly dividend for the third quarter of fiscal ~~2020~~2021 of $0.45 per share, which was paid in April ~~2020. We intend to continue to pay dividends without any planned changes. If needed, we will evaluate this approach quarterly.~~2021.

Debt Activity and Borrowing Availability

Our debt activity, including issuances and repayments, and our borrowing availability is described in Note ~~11,~~7, “Debt,” ~~and Note 20, “Subsequent Events”~~ in the Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q. Our outstanding borrowings at March ~~28, 2020,~~27, 2021, and repayment activity since the close of the third quarter of fiscal ~~2020,~~2021, are disclosed within that note. Updated amounts through April ~~17, 2020,~~16, 2021, include:

•~~$4.0 billion~~£200.0 million outstanding ~~from~~under our ~~senior notes offering that closed on April 2, 2020;~~U.K. commercial paper program;

•~~$1.5 billion~~No outstanding ~~from the credit facility supporting~~borrowings under our U.S. commercial paper program; and

•~~$8.0 million~~No outstanding ~~from~~borrowings under the credit facility supporting our commercial paper program.

During the first 39 weeks of fiscal ~~2020~~2021 and ~~2019,~~fiscal 2020, our aggregate commercial paper issuances and short-term bank borrowings had weighted average interest rates of ~~2.01%~~0.99% and ~~2.36%~~2.01%, respectively.

Effective May 4, 2020, Sysco’s United Kingdom-based subsidiary, Brake Bros Limited, established a commercial paper program for the purpose of issuing short-term, unsecured Sterling-denominated notes that are eligible for purchase under the Joint HM Treasury and Bank of England Covid Corporate Financing Facility in an aggregate amount not to exceed £600.0 million. On May 5, 2020, we launched the offering of £300.0 million aggregate principal amount of notes pursuant to the Program, with settlement expected to occur on May 7, 2020. The notes will bear interest at a rate of 0.468% and mature on March 17, 2021.

In the ~~next~~ 12 months ~~$750~~subsequent to March 27, 2021, our remaining £300.0 million under the U.K. commercial paper program and $500.0 million of long-term debt will mature. We expect to fund these repayments with a combination of cash flow from operations and ~~the proceeds from issuances of commercial paper and long-term debt.~~cash on hand.

The availability of financing in the form of debt is influenced by many factors, including our profitability, free cash flows, debt levels, credit ratings, debt covenants and economic and market conditions. For example, a significant downgrade in our credit ratings or adverse conditions in the capital markets may increase the cost of borrowing for us or limit our access to capital. To date, we have not experienced difficulty accessing the credit markets. As of March 28, 2020, Sysco was in compliance with all of its debt covenants. Sysco is nearing the completion of a change in its EBITDA to interest expense ratio covenant to help ensure ongoing compliance with this covenant, even if the COVID-19 pandemic impacts were to continue beyond our current expectations. We expect this change to be completed in May 2020. As of May 5, 2020,April 24, 2021, the company ~~has~~had approximately ~~$6.0~~$7.2 billion in cash and available ~~liquidity;~~liquidity.

Guarantor Summarized Financial Information

On January 19, 2011, the wholly owned U.S. Broadline subsidiaries of Sysco Corporation, which distribute a full line of food products and ~~we believe this amount would be sufficient to sustain our operations for multiple years~~a wide variety of non-food products, at that time entered into full and unconditional guarantees of all outstanding senior notes and debentures of Sysco Corporation. All subsequent issuances of senior notes and debentures in the U.S. and borrowings under the ~~hypothetical worst-case assumption~~company’s $2.0 billion long-term revolving credit facility have also been guaranteed by these subsidiaries. As of March 27, 2021, Sysco had a total of $11.8 billion in senior notes, debentures and borrowings under the long-term revolving credit facility that were guaranteed by these subsidiary guarantors. Our remaining consolidated subsidiaries (non-guarantor subsidiaries) are not obligated under the senior notes indenture, debentures indenture or our ~~case volumes remain unchanged~~long-term revolving credit facility.

All subsidiary guarantors are 100% owned by the parent company, all guarantees are full and unconditional, and all guarantees are joint and several. The guarantees rank equally and ratably in right of payment with all other existing and future unsecured and unsubordinated indebtedness of the respective guarantors. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” contained in our fiscal 2020 Form 10-K for additional information regarding the terms of the guarantees.

Basis of Preparation of the Summarized Financial Information

The following tables include summarized financial information of Sysco Corporation (issuer), and certain wholly owned U.S. Broadline subsidiaries (guarantors) (together, the obligor group). The summarized financial information of the obligor group is presented on a combined basis with intercompany balances and transactions between entities in the obligor group eliminated. Investments in and equity in the earnings of our non-guarantor subsidiaries, which are not members of the obligor group, have been excluded from ~~current levels.~~the summarized financial information.

The obligor group’s amounts due to, amounts due from and transactions with non-guarantor subsidiaries have been presented in separate line items, if they are material to the obligor financials.


Combined Parent and Guarantor Subsidiaries Summarized Balance Sheet	Mar. 27, 2021		Jun. 27, 2020
	(In thousands)
ASSETS
Receivables due from non-obligor subsidiaries	$	95,909	$	133,195
Current assets	8,014,301		8,644,084
Total current assets	$	8,110,210	$	8,777,279
Notes receivable from non-obligor subsidiaries	$	83,237	$	671,500
Other noncurrent assets	3,829,511		4,036,312
Total noncurrent assets	$	3,912,748	$	4,707,812

LIABILITIES
Payables due to non-obligor subsidiaries	$	60,157	$	48,923
Other current liabilities	2,092,572		2,200,422
Total current liabilities	$	2,152,729	$	2,249,345
Notes payable to non-obligor subsidiaries	$	174,721	$	233,158
Long-term debt	11,294,864		12,478,453
Other noncurrent liabilities	1,293,973		1,356,781
Total noncurrent liabilities	$	12,763,558	$	14,068,392

~~Contractual Obligations~~


Combined Parent and Guarantor Subsidiaries Summarized Results of Operations		39-Week Period Ended Mar. 27, 2021
	(In thousands)
Sales		$	22,330,517
Gross profit		4,235,396
Operating income		1,138,838
Interest expense from non-obligor subsidiaries		41,594
Net earnings		603,804

During the third quarter of fiscal 2020, we issued $1.0 billion of senior notes in the normal course of business, all of which is payable in more than five years, and borrowed $1.7 billion under our long-term revolving credit facility to increase liquidity, which is payable between three and five years. See Note 11, “Debt” and Note 20, “Subsequent Events” in the Notes to the Consolidated Financial Statements in Part I of this form 10-Q for additional information on changes in debt.

Our 2019 Form 10-K contains a table that summarizes our obligations and commitments to make specified contractual future cash payments as of June 29, 2019. Other than as described in this Form 10-Q, there have been no material changes to our specified contractual obligations through March 28, 2020.

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are those that are most important to the portrayal of our financial position and results of operations. These policies require our most subjective or complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. We have reviewed with the Audit Committee of the Board of Directors the development and selection of the critical accounting policies and estimates and this related disclosure. Our most critical accounting policies and estimates pertain to goodwill and intangible assets, allowance for doubtful accounts, income taxes, share-based compensation and the company-sponsored pension plans, ~~income taxes and share-based compensation,~~ which are described in Item 7 of our ~~2019 Form 10-K and updated below.~~

~~Goodwill and Intangible Assets~~

We account for acquired businesses using the acquisition method of accounting, which requires that, once control of a business is obtained, all of the assets acquired and liabilities assumed are recorded at the date of acquisition at their respective fair values. We use multiple valuation methods to determine the fair value of assets acquired and liabilities assumed. For intangible assets, we generally use the income method, which uses a forecast of the expected future net cash flows associated with each asset. These cash flows are then adjusted to present value by applying an appropriate discount rate that reflects the risk factors associated with the cash flow streams. Some of the more significant estimates and assumptions inherent in the income method or other methods include the amount and timing of projected future cash flows and the discount rate selected to measure the risks inherent in the future cash flows. Determining the useful life of an intangible asset also requires judgment, as different types of intangible assets will have different useful lives. Any excess of the purchase price over the estimated fair

values of the net assets acquired is recorded as goodwill. More information on our acquisitions can be found in Note 5, “Acquisitions,” in the Notes to Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q.

Annually in our fourth quarter, we assess the recoverability of goodwill and indefinite-lived intangibles by determining whether the fair values exceed the carrying values of these assets. Impairment reviews, outside our annual review time frame, are performed if events or circumstances occur that include changes in macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant entity-specific events, specific events affecting the reporting unit or sustained decrease in share price. Our testing may be performed utilizing either a qualitative or quantitative assessment; however, if a qualitative assessment is performed and we determine that the fair value of a reporting unit is more likely than not (i.e., a likelihood of more than 50 percent) to be less than its carrying amount, a quantitative test is performed.

When using a quantitative test, we arrive at our estimates of fair value using a combination of discounted cash flow and earnings or revenue multiple models. The results from each of these models are then weighted and combined into a single estimate of fair value for each reporting unit. We use a higher weighting for our discounted cash flow valuation compared to the earnings multiple models because the forecasted operating results that serve as a basis for the analysis incorporate management’s outlook and anticipated changes for the businesses consistent with a market participant. The primary assumptions used in these various models include estimated earnings multiples of comparable acquisitions in the industry, including control premiums, earnings or revenue multiples on acquisitions completed by Sysco in the past, future cash flow estimates of the reporting units, which are dependent on internal forecasts and projected growth rates, and weighted average cost of capital, along with working capital and capital expenditure requirements. When possible, we use observable market inputs in our models to arrive at the fair values of our reporting units.

Certain reporting units have a greater proportion of goodwill recorded to estimated fair value as compared to the U.S. Broadline, Canada Broadline or SYGMA reporting units. This is primarily due to these businesses having been more recently acquired, and as a result there has been less history of organic growth than in the U.S. Broadline, Canadian Broadline and SYGMA reporting units. As such, these reporting units have a greater risk of future impairment if their operations were to suffer a significant downturn.

~~During the third quarter of~~ fiscal 2020 as a result of significant declines in macroeconomic conditions and equity valuations as well as regulatory restrictions brought forth by the COVID-19 pandemic, the company determined that certain reporting units were more sensitive than others to these declines and it was more likely than not that an impairment may exist within the European reporting units and the Pacific Star (our Mexico operations) and Cake reporting units. The company performed quantitative goodwill impairment tests for these reporting units and determined goodwill was impaired for Pacific Star and Cake, and not impaired for any of the European reporting units. Based upon the results of the tests, during the third quarter of fiscal 2020 the company recorded impairment charges of $34.5 million and $34.2 million for Pacific Star and Cake, respectively, which represented the full balance of goodwill for those reporting units.

In the third quarter test, impairment charges would have been applicable for three European reporting units if our estimates of fair value were decreased by ranges of 14% to 26%, with goodwill of $511.7 million in the aggregate as of March 28, 2020, recorded for these reporting units.

The company estimated the fair value of these reporting units using a combination of discounted cash flow and earnings or revenue multiple models. For the purposes of the discounted cash flow models, fair value was determined based on the present value of estimated future cash flows, discounted at an appropriate risk adjusted rate. The fair value conclusions as of March 28, 2020 for the reporting units are highly sensitive to changes in the assumptions used in the income approach which include forecasted revenues, gross profit margins, operating income margins, working capital cash flow, forecasted capital expenditures, perpetual growth rates, and long-term discount rates, among others, all of which require significant judgments by management. Fair value of the reporting unit is therefore determined using significant unobservable inputs, or level 3 in the fair value hierarchy. The company has used recent historical performance, current forecasted financial information, and broad-based industry and economic statistics as a basis to estimate the key assumptions utilized in the discounted cash flow model. These key assumptions are inherently uncertain and require a high degree of estimation and judgment and are subject to change based on future changes, industry and global economic and geo-political conditions, and the timing and success of the implementation of current strategic initiatives. The impact of the COVID-19 pandemic and the timing of its recovery on estimated future cash flows is uncertain and will largely depend on the outcome of future events which could result in further goodwill impairments going forward. We will complete our annual impairment test in the fourth quarter of fiscal 2020.

~~Income Taxes~~

The determination of our provision for income taxes requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. Our provision for income taxes primarily reflects a combination of income earned and taxed in the various U.S. federal and state, as well as foreign, jurisdictions. Tax law changes, increases or decreases in book versus tax basis differences, accruals or adjustments of accruals for unrecognized tax benefits or valuation allowances, and our change in the mix of earnings from these taxing jurisdictions all affect the overall effective tax rate. The impact of the COVID-19 pandemic may change our mix of earnings by jurisdiction and has increased the risk that operating losses may occur within certain of our jurisdictions that could lead to the recognition of valuation allowances against certain deferred tax assets in the future, if these losses are prolonged beyond our current expectations. This would negatively impact our income tax expense, net earnings, and balance sheet.

Our liability for unrecognized tax benefits contains uncertainties because management is required to make assumptions and to apply judgment in estimating the exposures associated with our various filing positions. We believe that the judgments and estimates discussed herein are reasonable; however, actual results could differ, and we may be exposed to losses or gains that could be material. To the extent we prevail in matters for which a liability has been established, or pay amounts in excess of recorded liabilities, our effective income tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement generally would require use of our cash and may result in an increase in our effective income tax rate in the period of resolution. A favorable tax settlement may be recognized as a reduction in our effective income tax rate in the period of resolution.Form 10-K.

Forward-Looking Statements

Certain statements made herein that look forward in time or express management’s expectations or beliefs with respect to the occurrence of future events are forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” “projected,” “continues,” “continuously,” variations of such terms, and similar terms and phrases denoting anticipated or expected occurrences or results. Examples of forward-looking statements include, but are not limited to, statements about:

•the effect, impact, potential duration or other implications of the COVID-19 pandemic and any expectations we may have with respect thereto, including our ability to withstand the crisis;

•~~expectations regarding~~ the ~~impact~~expected extent and duration of ~~cost-saving measures undertaken~~lockdowns in ~~response to the COVID-19 pandemic;~~Europe, Canada and Latin America during fiscal 2021 and fiscal 2022, and their effect on our fourth quarter of fiscal 2021 results for our International Foodservice Operations segment;

•our expectations regarding continued cost-saving opportunities to help fuel our future growth agenda;

•our expectations regarding our business and the economic recovery generally as the COVID-19 pandemic ~~subsides;~~subsides, including beliefs regarding future customer activity and the timing of the recovery;

•our belief that consumers are ready to eat at restaurants once restrictions are reduced;

•our expectations regarding ~~fourth quarter~~the impact of the COVID-19 pandemic on our mix of earnings by jurisdiction;

•our expectations regarding the recovery of our travel, hospitality and Food Service Management sector;

•our expectations that we will have hired over 6,000 new associates by the end of fiscal ~~2020~~2021, and the expected impact on operating ~~income and anticipated operating income performance~~expenses in ~~fiscal 2021;~~the short term;

•our expectations regarding the impact of a substantial new customer contract signed by our Guest Worldwide business;

•our expectations regarding our ~~ability to effectively centralize and standardize our business, including leveraging technology and strengthening Sysco overall;~~results for the fourth quarter of fiscal 2021;

•the ~~sufficiency of~~possibility that actual uncollectible amounts will differ from historical results;

•our belief that our available liquidity would be sufficient to sustain our operations for ~~multiple years;~~

•~~expectations regarding the benefits to us of the CARES Act;~~

•~~our intention not to seek assistance from the U.S. government outside of the CARES Act;~~an extended period, including through an impact much worse than we are currently experiencing or expecting;

•estimates regarding the outcome of legal proceedings;

•the impact of seasonal trends on our free cash flow;

•our expectations regarding the use of remaining cash generated from operations;

•~~estimates regarding our capital expenditures;~~

•our expectations regarding the impact of potential acquisitions and sales of assets on our liquidity, borrowing capacity, leverage ratios and capital availability;

•our expectations ~~regarding~~that our divestitures in the ~~impact~~first and third quarters of fiscal 2021 will facilitate our efforts to prioritize our focus and investments on our ~~performance of the operational challenges facing our business in France;~~core business;

•our ~~plans to focus on accelerating~~belief in our ~~business;~~

•~~our expectations regarding the impact of costs associated with the senior leadership change;~~

•~~our expectations regarding future accelerated growth and performance, and expectations regarding the impact on adjusted operating income of investment spending to achieve those goals;~~

•~~our expectations regarding trends in produce markets;~~strong financial position;

•our expectations regarding the calculation of adjusted return on invested capital, adjusted operating income, adjusted net earnings and adjusted diluted earnings per share;

•our expectations regarding the impact of future Certain Items on our projected future non-GAAP and GAAP results;

•our expectations regarding our effective tax rate for the remainder of fiscal 2021;

•our expectations regarding the amount of the unrecognized tax benefit with respect to certain of the company’s unrecognized tax positions;

•our expectations regarding the recognition of compensation costs related to share-based compensation arrangements;

•the sufficiency of our mechanisms for managing working capital and competitive pressures, and our beliefs regarding the impact of these ~~mechanisms;~~mechanisms and their effectiveness in preventing a significant unfavorable impact on our cash flows from operations;

•our expectations that the fourth quarter of fiscal 2021 will require a significant investment in working capital;

•our expectations regarding cash flows from operating activities and free cash flow for the fourth quarter of fiscal 2021;

•our ability to meet future cash requirements, including the ability to access financial markets effectively, including issuances of debt securities, and maintain sufficient liquidity;

•our expectations regarding the payment of dividends, and the growth of our dividend, in the future;

•our expectations regarding future activity under our share repurchase program;

•future compliance with the covenants under our revolving credit facility;

•our ability to effectively access the commercial paper market and long-term capital markets; and

•our intention to repay our U.K. commercial paper program and long-term debt with ~~cash on hand,~~a combination of cash flow from operations ~~issuances of commercial paper, issuances of senior notes, or a combination thereof;~~ and

•~~our expectations regarding share repurchases.~~ cash on hand.

These statements are based on management’s current expectations and estimates; actual results may differ materially due in part to the risk factors set forth below, those within Part II, Item 1A of this document and those discussed in Item 1A of our ~~2019~~fiscal 2020 Form 10-K:

•the impact and effects of public health crises, pandemics and epidemics, such as the recent outbreak of COVID-19, and the adverse impact thereof on our business, financial condition and results of operations, including, but not limited to, our growth, product costs, supply chain, labor availability, logistical capabilities, customer demand for our products and industry demand generally, consumer spending, our liquidity, the price of our securities and trading markets with respect thereto, our ability to access capital markets, and the global economy and financial markets generally;

•the risk that if sales from our locally managed customers do not grow at the same rate as sales from regional and national customers, or if we are unable to continue to accelerate local case growth, our gross margins may decline;

•the risk that we are unlikely to be able to predict inflation over the long term, and lower inflation is likely to produce lower gross profit;

•periods of significant or prolonged inflation or deflation and their impact on our product costs and profitability generally;

•the risk that ~~our efforts to modify truck routing, including our small truck initiative, in order to reduce outbound transportation costs may be unsuccessful;~~

•~~the risk that~~ we may not be able to accelerate and/or identify additional administrative cost savings in order to compensate for any gross profit or supply chain cost leverage challenges;

•risks related to unfavorable conditions in North America and Europe and the impact on our results of operations and financial condition;

•the risks related to our efforts to meet our long-term strategic objectives, including the risk that these efforts may not provide the expected benefits in our anticipated time frame, if at all, and may prove costlier than expected; the risk that the actual costs of any initiatives may be greater or less than currently expected; and the risk of adverse effects to us if past and future undertakings and the associated changes to our business do not prove to be cost effective or do not result in the level of cost savings and other benefits that we anticipated;

•the impact of unexpected future changes to our business initiatives based on management’s subjective evaluation of our overall business needs;

•the risk that the actual costs of any business initiatives may be greater or less than currently expected;

•the risk that competition in our industry and the impact of GPOs may adversely impact our margins and our ability to retain customers and make it difficult for us to maintain our market share, growth rate and profitability;

•the risk that our relationships with long-term customers may be materially diminished or terminated;

•the risk that changes in consumer eating habits could materially and adversely affect our business, financial condition, or results of operations;

•the risk that changes in applicable tax laws or regulations and the resolution of tax disputes could negatively affect our financial results;

•the risk that we may not be able to fully compensate for increases in fuel costs, and forward purchase commitments intended to contain fuel costs could result in above market fuel costs;

•the risk of interruption of supplies and increase in product costs as a result of conditions beyond our control;

•the potential impact on our reputation and earnings of adverse publicity or lack of confidence in our products;

•risks related to unfavorable changes to the mix of locally managed customers versus corporate-managed customers;

•the risk that we may not realize anticipated benefits from our operating cost reduction efforts;

•difficulties in successfully expanding into international markets and complimentary lines of business;

•the potential impact of product liability claims;

•the risk that we fail to comply with requirements imposed by applicable law or government regulations;

•risks related to our ability to effectively finance and integrate acquired businesses;

•risks related to our access to borrowed funds in order to grow and any default by us under our indebtedness that could have a material adverse impact on cash flow and liquidity;

•our level of indebtedness and the terms of our indebtedness could adversely affect our business and liquidity position;

•the risk that the implementation of various initiatives, the timing and successful completion of acquisitions, construction schedules and the possibility that other cash requirements could result in delays or cancellations of capital spending;

•the risk that divestiture of one or more of our businesses may not provide the anticipated effects on our operations;

•the risk that the U.K.’s exit from the European Union (EU) on January 31, 2020, commonly referred to as Brexit, may adversely impact our operations in the U.K., including those of the Brakes Group;

•the risk that future labor disruptions or disputes could disrupt the integration of Brake France and Davigel into Sysco France and our operations in France and the EU generally;

•the risk that factors beyond management’s control, including fluctuations in the stock market, as well as management’s future subjective evaluation of the company’s needs, would impact the timing of share repurchases;

•due to our reliance on technology, any technology disruption or delay in implementing new technology could have a material negative impact on our business;

•the risk that a cybersecurity incident and other technology disruptions could negatively impact our business and our relationships with customers;

•the potential requirement to pay material amounts under our multiemployer defined benefit pension plans;

•our funding requirements for our company-sponsored qualified pension plan may increase should financial markets experience future declines;

•labor issues, including the renegotiation of union contracts and shortage of qualified labor;

•capital expenditures may vary based on changes in business plans and other factors, including risks related to the implementation of various initiatives, the timing and successful completion of acquisitions, construction schedules and the possibility that other cash requirements could result in delays or cancellations of capital spending; and

•the risk that the anti-takeover benefits provided by our preferred stock may not be viewed as beneficial to stockholders.

For a more detailed discussion of factors that could cause actual results to differ from those contained in the forward-looking statements, see the risk factors discussion contained in Item 1A of our ~~2019~~fiscal 2020 Form ~~10-K and the risk factor discussion contained in Part II, Item 1A of this document.~~10-K.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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 ~~2019~~fiscal 2020 Form ~~10-K.~~10-K and the risk factor discussion contained in Part II, Item 1A of this report. There have been no significant changes to our market risks since June ~~29, 2019,~~27, 2020, except as noted below.

Interest Rate Risk

At March ~~28, 2020,~~27, 2021, there ~~was $153.0 million in aggregate~~were no commercial paper issuances ~~outstanding.~~outstanding under our U.S. commercial paper program, and we had £300.0 million outstanding under our U.K. commercial paper program. Total debt as of March ~~28, 2020~~27, 2021 was ~~$10.9~~$12.7 billion, of which approximately ~~62%~~87% was at fixed rates of interest, including the impact of our interest rate swap agreements. In April 2020, we issued an additional $4.0 billion in aggregate principal amount of senior notes (Senior Notes). The interest rate payable on each series of Senior Notes will be subject to adjustment from time to time if either Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (or, in either case, a substitute rating agency), downgrades (or subsequently upgrades) its rating assigned to the Senior Notes, as set forth in the supplemental indentures under which the Senior Notes were issued.

Fuel Price Risk

Due to the nature of our distribution business, we are exposed to potential volatility in fuel prices. The price and availability of diesel fuel fluctuates due to changes in production, seasonality and other market factors generally outside of our control. Increased fuel costs may have a negative impact on our results of operations in three areas. First, the high cost of fuel can negatively impact consumer confidence and discretionary spending and thus reduce the frequency and amount spent by consumers for food-away-from-home purchases. Second, the high cost of fuel can increase the price we pay for product purchases and we may not be able to pass these costs fully to our customers. Third, increased fuel costs impact the costs we incur to deliver product to our customers. Fuel costs related to outbound deliveries represented approximately 0.5% of sales during the first 39 weeks of fiscal ~~2020~~2021 and fiscal ~~2019.~~2020.

Our activities to mitigate fuel costs include routing optimization with the goal of reducing miles driven, improving fleet utilization by adjusting idling time and maximum speeds and using fuel surcharges that primarily track with the change in market prices of fuel. We use diesel fuel swap contracts to fix the price of a portion of our projected monthly diesel fuel requirements. As of March ~~28, 2020,~~27, 2021, we had diesel fuel swaps with a total notional amount of approximately 6134 million gallons through ~~May 2021.~~March 2022. These swaps are expected to lock in the price of approximately ~~75%~~50% of our projected fuel purchase needs for fiscal ~~2020.~~2021. Additional swaps have been entered into for hedging activity in fiscal ~~2021.~~2022. As of March ~~28, 2020,~~27, 2021, we had

diesel fuel swaps with a total notional amount of approximately 4823 million gallons specific to fiscal ~~2021.~~2022. Our remaining fuel purchase needs will occur at market rates unless contracted for a fixed price or hedged at a later date.

Item 4. Controls and Procedures

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 ~~28, 2020.~~27, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under 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 ~~28, 2020,~~27, 2021, 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 ~~28, 2020,~~27, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

6958

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

~~None~~Environmental Matters

Item 103 of SEC Regulation S-K requires disclosure of certain environmental matters in which a governmental authority is a party to the proceedings and when such proceedings involve the potential for 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 environmental matters to disclose for this period.

Item 1A. Risk Factors

~~The information set forth in this report should be read in conjunction with~~Except as provided below, there were no material changes from the risk factors ~~discussed~~disclosed in Item 1A of our ~~Annual Report on~~fiscal 2020 Form ~~10-K for the fiscal year ended June 29, 2019 and as set forth below.~~10-K.

~~The impact~~Industry and ~~effects of public~~General Economic Risks

Global health ~~crises, pandemics~~developments and ~~epidemics, such as~~economic uncertainty resulting from the ~~recent outbreak of~~ COVID-19 ~~could~~pandemic have adversely affected, and are expected to continue to adversely affect, our business, financial condition and results of operations.

Public health crises, pandemics and epidemics, such as the ~~recent outbreak of~~ COVID-19 ~~may impact~~pandemic, have impacted our operations directly and are expected to continue to impact us directly, or may continue to disrupt the operations of our business partners, suppliers and customers in ways that could have an adverse effect on our business, results of operations and financial condition. Fear of such events ~~might also~~may further alter consumer confidence, behavior and spending patterns, and could adversely affect the economies and financial markets of many countries (or globally), resulting in an economic downturn that could affect customers’ demand for our products.

~~For instance, in~~In response to the ~~recent~~ outbreak of COVID-19 and its development into a pandemic, governmental authorities in many countries in which we operate, and in which our customers are present and suppliers operate, have imposed mandatory closures, sought voluntary closures and imposed restrictions on, or advisories with respect to, travel, business operations and public gatherings or interactions. Among other matters, these actions have required or strongly urged various venues where foodservice products are served, including restaurants, schools, ~~hotel~~hotels and cruise liners, to reduce or discontinue operations, which have adversely affected and will continue to adversely affect demand in the foodservice industry, including demand for our products and services. In addition, some consumers are choosing to stay home due to the perceived risk of infection and health risk associated with COVID-19, which is adversely affecting demand in the foodservice industry, including demand for our products and ~~the illness of many individuals across the globe, is resulting in many of the same effects intended by such governmental authorities to stop the spread of COVID-19.~~services.

These events have had, and could continue to have, an adverse impact on numerous aspects of our business, financial condition and results of operations including, but not limited to, our growth, product costs, supply chain disruptions and the potential for inventory spoilage, labor shortages, logistics constraints, customer demand for our products and industry demand generally, difficulties in collecting our accounts receivables and corresponding increases in our bad debt exposure, consumer spending, our liquidity, the price of our securities and trading markets with respect thereto, our ability to access capital markets, and the global economy and financial markets generally. A prolonged or deeper economic downturn that adversely affects our business, financial condition or results of operations could affect our ability to access the credit markets for additional liquidity. A significant downgrade in our credit ratings or adverse conditions in the capital markets may increase the cost of borrowing for us or limit our access to capital. As a result, we may be unable to continue to comply with the debt covenants that are specific to our revolving credit facility, which could result in an event of default. We ~~expect to~~may see an increase in bankruptcies of customers, which ~~is expected to~~could contribute to ~~a significant~~an increase in bad debt expense recorded in fiscal 2021. In the first 39 weeks of fiscal 2021, Sysco recognized a net $137.7 million benefit on its provision for losses on receivables. In the ~~fiscal~~ third and fourth ~~quarters. Additionally, these events~~quarters of fiscal 2020, the company experienced an increase in past due receivables and recognized additional bad debt charges on its trade receivables that were outstanding at the time the pandemic caused closures among our customers in mid-March 2020. These receivables were all created in fiscal 2020 and are referred to as pre-pandemic receivables. In the first 39 weeks of fiscal 2021, collections of the company’s pre-pandemic receivables have ~~caused us~~improved, and its reserve for doubtful accounts has been reduced accordingly, resulting in a $162.4 million benefit. Additional reserves of $24.7 million were recorded in the first 39 weeks of fiscal 2021 for receivables relating to ~~incur $18.6 million~~periods beginning after the onset of the COVID-19 pandemic.

We have implemented employee safety measures, based on guidance from the Centers for Disease Control and Prevention and World Health Organization, across all our supply chain facilities, including proper hygiene, social distancing, mask use, and temperature screenings. These measures may not be sufficient to prevent the spread of COVID-19 among our employees. Illness, travel restrictions, absenteeism, or other workforce disruptions could negatively affect our supply chain, distribution, or other business processes. We may face additional production disruptions in ~~severance expenses during~~ the ~~fiscal third quarter related~~future, which may place constraints on our ability to ~~actions to reduce the workforce through the implementation of hiring freezes, furloughs and other headcount reductions.~~distribute products in a timely manner or may increase our costs.

The ultimate extent of the impact of COVID-19 on our business, financial condition and results of operations will depend largely on future developments, including the duration and spread of the outbreak ~~within the U.S. and Europe~~ and the related impact on consumer confidence and spending, all of which are highly uncertain and cannot be predicted with certainty at this time. ~~However, we currently expect the COVID-19 pandemic to have a significant and adverse impact on our total sales for the fiscal fourth quarter ending June 27, 2020.~~ Even after the COVID-19 pandemic subsides, we could experience a longer-term impact on our business, such as costs associated with enhanced health, safety and hygiene requirements in one or more regions in attempts to counteract future outbreaks or the possibility that venues where foodservice products are served are slow to reopen and/or experience reduced customer traffic after reopening.

The impact of the COVID-19 pandemic may change our mix of earnings by jurisdiction and has increased the risk that operating losses may occur within certain of our jurisdictions that could lead to the recognition of valuation allowances against certain deferred tax assets in the future, if these losses are prolonged beyond our current expectations. This would negatively impact our income tax expense, net earnings, and balance sheet.

70Sustained adverse impacts to our company, certain suppliers, and customers may also affect our future valuation of certain assets, and therefore, may increase the likelihood of an impairment charge, write-off, or reserve associated with such assets, including goodwill, long-lived intangible assets, property and equipment, inventories, accounts receivable, tax assets and other assets.

To the extent the COVID-19pandemic continues to adversely affect our business, results of operations and financial condition, it may also have the effect of heightening many of the other risks described in our Annual Report on Form 10-K ~~for~~and subsequent filings with the ~~year ended June 29, 2019,~~SEC, such as those risks relating to our level of indebtedness, and may have an adverse effect on the price of our common stock. We may pursue alternatives to further increase our liquidity, including additional debt or equity financings, which may increase our interest expense, result in additional dilution, subject us to additional operating restrictions or negatively affect the price of our common stock.

Economic and political instability and potential unfavorable changes in laws and regulations in international markets could adversely affect our results of operations and financial condition.

Our international operations subject us to certain risks, including economic and political instability and potential unfavorable changes in laws and regulations in international markets in which we operate. For example, the U.K.’s exit from the EU, which occurred on January 31, 2020 (commonly referred to as “Brexit”), and the resulting significant change to the U.K.’s relationship with the EU and with countries outside the EU (and the laws, regulations and trade deals impacting business conducted between them) could disrupt the overall economic growth or stability of the U.K. and the EU and otherwise negatively impact our European operations.

The Withdrawal Agreement between the U.K. and the EU that ~~establishes~~established the terms governing the U.K.’s departure ~~provides~~provided that, among other things, there iswould be an ongoing transition period under which the U.K. ~~remains~~remained a part of the EU customs and regulatory area until December 31, ~~2020 (which may potentially be extended until December 31, 2022 at the latest). During this time,~~2020. On January 1, 2021, the U.K. ~~and~~left the EU ~~are negotiating their future trading relationship, which under current U.K. Government policy is anticipated to take the form of a free trade agreement.~~Single Market and Customs Union, as well as all EU policies and international agreements. As a result, ~~there continues to be significant uncertainty about~~ the ~~terms under which the U.K. will continue to trade with the EU after the end~~free movement of ~~the transition period,~~persons, goods, services and the date on which these terms will take effect. It is possible that Brexit will result in our U.K. and EU operations becoming subject to materially different, and potentially conflicting, laws, regulations or tariffs, which could require costly new compliance initiatives or changes to legal entity structures or operating practices. Furthermore, if the transition period were to expire without an agreement (a “no-deal Brexit”), there may be additional adverse impacts on immigration and tradecapital between the U.K. and the EU ~~or countries outside~~ended, and the ~~EU. Such impacts~~EU and the U.K. formed two separate markets and two distinct regulatory and legal spaces. On December 24, 2020, the European Commission reached a trade agreement with the U.K. on the terms of its future cooperation with the EU (the “Trade Agreement”). The Trade Agreement offers U.K. and EU companies preferential access to each other’s markets, ensuring imported goods will be free of tariffs and quotas; however, economic relations between the U.K. and the EU will now be on more restricted terms than existed previously. At this time, we cannot predict the impact that the Trade Agreement and any future agreements contemplated under the terms of the Trade Agreement will have on our business and our customers, and it is possible that new terms may ~~directly increase~~adversely affect our ~~costs or~~operations and financial results. We are currently in the process of evaluating our own risks and uncertainties to ascertain what financial, trade, regulatory and legal implications the Trade Agreement could ~~decrease demand for~~have on our ~~goods~~U.K. and ~~services by adversely impacting~~European business operations. This uncertainty also includes the impact on our customers’ business ofoperations and capital planning, as well as the overall impact on restaurants or other customers in the foodservice distribution industry.

The completion of Brexit could also adversely affect the value of our euro- and pound-denominated assets and obligations. Exchange rates related to the British pound sterling have been more volatile since the U.K. announced it would exit the EU and such volatility may continue in the future. Future fluctuations in the exchange rate between the British pound

sterling and the local currencies of our suppliers may have the effect of increasing our cost of goods sold in the U.K., which increases we may not be able to pass on to our customers. Uncertainty surrounding Brexit has contributed to recent fluctuations in the U.K. economy and could ~~experience~~result in future ~~disruptions.~~disruptions in economic activity in the U.K., Europe or globally, which could adversely affect our operating results and growth prospects. In addition, Brexit could cause financial and capital markets within and outside the U.K. or the EU to constrict, thereby negatively impacting our ability to finance our business, and could cause a substantial dip in consumer confidence and spending that could negatively impact the foodservice distribution industry. Any one of these impacts could have an adverse effect on our results of operations and financial condition.

~~Additionally,~~As an example of political instability, in fiscal 2020, the “yellow vest” protests in France against a fuel tax increase, pension reform and the French government ~~have~~ negatively impacted our sales in ~~France and may continue to do so.~~France. Similarly, future labor disruptions or disputes could disrupt the integration of Brake France and Davigel into Sysco France and our operations in France and the EU generally. In addition, if changes occur in laws and regulations impacting the flow of goods, services and workers in either the U.K or France or in other parts of the EU, with respect to Brexit or otherwise, our European operations could also be negatively impacted.

~~Conditions beyond our control can interrupt our supplies and increase our product costs.~~

We obtain substantially all of our foodservice and related products from third-party suppliers. Although our purchasing volume can provide benefits when dealing with suppliers, suppliers may not be able to provide the foodservice products and supplies that we need in the quantities and at the prices that we request. We are also subject to delays caused by interruptions in production and increases in product costs based on conditions outside of our control. These conditions include shortages of qualified labor for our suppliers, work slowdowns, work interruptions, strikes or other job actions by employees of suppliers, short-term weather conditions or more prolonged climate change, crop and other agricultural conditions, water shortages, pandemics or other human or animal disease outbreaks, transportation interruptions, unavailability of fuel or increases in fuel costs, product recalls, competitive demands, terrorist attacks or international hostilities and natural disasters or other catastrophic events (including, but not limited to, foodborne illnesses). Further, increased frequency or duration of extreme weather conditions could also impair production capabilities, disrupt our supply chain or adversely affect demand for our

products. At any time, input costs could increase for a prolonged period for a large portion of the products that we sell. Additionally, we procure products from suppliers outside of the U.S., and we are subject to the risks associated with political or financial instability, trade restrictions, tariffs, currency exchange rates, transport capacity and costs and other factors relating to foreign trade, any or all of which could delay our receipt of products or increase our input costs. Our inability to obtain adequate supplies of foodservice and related products as a result of any of the foregoing factors or otherwise could mean that we could not fulfill our obligations to customers, and customers may turn to other distributors.

~~In addition, as a foodservice distributor, it is necessary for us to maintain an inventory of products. Declines in product~~

pricing levels between the time we purchase a product from our suppliers and the time we sell the product to our customers could reduce our margin on that inventory, adversely affecting our results of operations.

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

Recent Sales of Unregistered Securities

None

Issuer Purchases of Equity Securities

As we made ~~the following~~no share repurchases during the third quarter of fiscal ~~2020:~~2021, the following table represents shares tendered during the period:


ISSUER PURCHASES OF EQUITY SECURITIES	ISSUER PURCHASES OF EQUITY SECURITIES												ISSUER PURCHASES OF EQUITY SECURITIES
Period	Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs	Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
Month #1	Month #1						Month #1
December 29 - January 25		764,359	$	84.01	64,212,706	—
December 27 - January 23							December 27 - January 23	1,673	$	72.77	121,744	—
Month #2	Month #2						Month #2
January 25 - February 22		687,190	79.75		54,805,979	—
January 24 - February 20							January 24 - February 20	—	—		—	—
Month #3	Month #3						Month #3
February 23 - March 28		1,492,410	64.10		95,529,591	—
February 21 - March 27							February 21 - March 27	2,461	81.20		199,843	—
Totals	Totals	2,943,959	$	72.88	214,548,276	—	Totals	4,134	$	77.79	321,587	—

⁽¹⁾The total number of shares purchased includes ~~2,449,~~1,673, 0 and ~~550~~2,461 shares tendered by individuals in connection with stock option exercises in Month #1, Month #2 and Month #3, respectively.

We have routinely ~~engage~~engaged in share repurchase ~~programs. In November 2017, our Board of Directors approved a repurchase program~~programs to ~~authorize the repurchase of~~allow Sysco to continue offsetting dilution resulting from shares issued under the company’s ~~common stock not~~benefit plans and to ~~exceed $1.5 billion through the end of fiscal 2020. We executed all $1.5 billion under this authorization through November 2019.~~make opportunistic repurchases. In August 2019, our Board of Directors approved a ~~separate~~ repurchase program to authorize the repurchase of the company’s common stock not to exceed $2.5 billion through the end of fiscal 2021. This repurchase program is intended to allow Sysco to continue offsetting dilution resulting from shares issued under the company’s benefit plans and to make opportunistic repurchases. The share repurchase program was approved using a dollar value limit and, therefore, are not included in the table above for “Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs.”

~~We repurchased 11.1 million shares during the first 39 weeks of fiscal 2020 resulting in a remaining authorization under our program of approximately $2.1 billion.~~ During March 2020, however, we discontinued share repurchases under ~~the~~this program, and pursuant to the amendment to our long-term revolving credit facility, we do not anticipate making any ~~further~~ repurchases for the remainder of fiscal ~~2020.~~2021. As of March 27, 2021, we had a remaining authorization of approximately $2.1 billion.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

Effective May 4, 2020, Sysco’s United Kingdom-based subsidiary, Brake Bros Limited (Brake), established a commercial paper program (the Program) for the purpose of issuing short-term, unsecured Sterling-denominated notes that are eligible for purchase under the Joint HM Treasury and Bank of England Covid Corporate Financing Facility in an aggregate amount not to exceed £600.0 million (which may be increased from time to time as provided in the Dealer Agreement (as defined below)). We anticipate that the Program will allow Brake to obtain more favorable short-term borrowing rates than it would obtain otherwise.

In connection with the Program, Brake entered into an Issuing and Paying Agency Agreement with Deutsche Bank AG, London Branch, for the facilitation of the Program, a copy of which agreement is filed with this Form 10-Q as Exhibit 10.1 and is incorporated herein by reference. Brake also entered into a Commercial Paper Dealer Agreement (the Dealer Agreement) with Barclays Bank PLC (Barclays) under which Barclays may act as dealer of Brake’s commercial paper issued under the Program. A copy of the Dealer Agreement is filed with this Form 10-Q as Exhibit 10.2 and is incorporated herein by reference. Each of the Dealer Agreement and the Issuing and Paying Agency Agreement require Brake to indemnify and hold harmless the paying agent, the dealer and their affiliates under certain circumstances.

On May 5, 2020, Brake launched the offering of £300.0 million aggregate principal amount of notes pursuant to the Program, with settlement expected to occur on May 7, 2020. The notes will bear interest at a rate of 0.468% and mature on March 17, 2021.

The foregoing descriptions of the Issuing and Paying Agency Agreement and the Dealer Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the Issuing and Paying Agency Agreement and the Dealer Agreement, which are filed as exhibits to this Form 10-Q.

From time-to-time, the paying agent, the dealer and certain of their affiliates have provided, and may in the future provide, investment banking services to Sysco and Brake or may act as lenders or members of a syndicate of lenders to Sysco or Brake.None

Item 6. Exhibits

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

7362

EXHIBIT INDEX


3.1		—		Restated Certificate of Incorporation, incorporated by reference to Exhibit 3(a) to Form 10-K for the year ended June 28, 1997 (File No. 1-6544).

3.2		—		Certificate of Amendment to Restated Certificate of Incorporation increasing authorized shares, incorporated by reference to Exhibit 3(e) to Form 10-Q for the quarter ended December 27, 2003 (File No. 1-6544).

3.3		—		Form of Amended Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock, incorporated by reference to Exhibit 3(c) to Form 10-K for the year ended June 29, 1996 (File No. 1-6544).

3.4		—		Amended and Restated Bylaws of Sysco Corporation dated August 26, 2016, incorporated by reference to Exhibit 3.2 to Form 8-K filed on August 31, 2016 (File No. 1-6544).

~~4.1~~22.1	—		~~Thirty-Fourth Supplemental Indenture dated as~~Subsidiary Guarantors and Issuers of ~~February 13, 2020 among Sysco Corporation, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 2.400% Senior Notes due 2030,~~Guaranteed Securities, incorporated by reference to Exhibit ~~4.1~~22.1 to the Form ~~8-K~~10-K for the year ended June 27, 2020 filed on ~~February 13, 2020 (File No. 1-6544).~~

~~4.2~~	—		Thirty-Fifth Supplemental Indenture dated as of February 13, 2020 among Sysco Corporation, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 3.300% Senior Notes due 2050, incorporated by reference to Exhibit 4.3 to the Form 8-K filed on February 13, 2020 (File No. 1-6544).

~~4.3~~	—		Thirty-Sixth Supplemental Indenture dated as of April 2, 2020 among Sysco Corporation, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 5.650% Senior Notes due 2025, incorporated by reference to Exhibit 4.1 to the Form 8-K filed on April 2, 2020 (File No. 1-6544).

~~4.4~~	—		Thirty-Seventh Supplemental Indenture dated as of April 2, 2020 among Sysco Corporation, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 5.950% Senior Notes due 2030, incorporated by reference to Exhibit 4.3 to the Form 8-K filed on April 2, 2020 (File No. 1-6544).

~~4.5~~	—		Thirty-Eighth Supplemental Indenture dated as of April 2, 2020 among Sysco Corporation, the Guarantors named therein and U.S. Bank National Association, as Trustee relating to the 6.600% Senior Notes due 2040, incorporated by reference to Exhibit 4.5 to the Form 8-K filed on April 2, 2020 (File No. 1-6544).

~~4.6~~	—		Thirty-Ninth Supplemental Indenture dated as of April 2, 2020 among Sysco Corporation, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 6.600% Senior Notes due 2050, incorporated by reference to Exhibit 4.7 to the Form 8-K filed on April 2, 2020 (File No. 1-6544).

~~10.1#~~	—		~~Issuing and Paying Agency Agreement dated April 30, 2020 between Brake Bros. Limited, as Issuer, and Deutsche Bank AG, London Branch, as Issuing and Paying Agent.~~

~~10.2#~~	—		~~Dealer Agreement dated April 30, 2020 between Brake Bros. Limited, as Issuer, and Barclays Bank PLC, as Arranger, and Barclays Bank PLC, as Dealer.~~

~~10.3†~~	—		Letter Agreement, dated as of January 10, 2020, by and between Kevin P. Hourican and Sysco Corporation, incorporated by reference to Exhibit 10.1 to the Form 8-K filed on January 16, 2020 (File No. 1-6544).

~~10.4†~~	—		~~Separation Agreement, dated as of January 12, 2020, by and between Thomas L. Bené and Sysco Corporation, incorporated by reference to Exhibit 10.2 to the Form 8-K filed on January 16,~~August 26, 2020 (File No. 1-6544).

31.1#	—		CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2#	—		CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



32.1#	—	CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2#	—	CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.SCH#	—	Inline XBRL Taxonomy Extension Schema Document

101.CAL#	—	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF#	—	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB#	—	Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE#	—	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	—	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

___________

~~† Executive Compensation Arrangement pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K~~

# Filed herewith

7563

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.


		Sysco Corporation
		(Registrant)


Date: May ~~5, 2020~~4, 2021	By:	/s/ KEVIN P. HOURICAN
		Kevin P. Hourican
		President and Chief Executive Officer

Date: May ~~5, 2020~~4, 2021	By:	/s/ ~~JOEL T. GRADE~~AARON E. ALT
		~~Joel T. Grade~~Aaron E. Alt
		Executive Vice President and
		Chief Financial Officer

Date: May ~~5, 2020~~4, 2021	By:	/s/ ANITA A. ZIELINSKI
		Anita A. Zielinski
		Senior Vice President and
		Chief Accounting Officer

7664



	PART I – FINANCIAL INFORMATION	Page No.
Item 1.	Financial Statements	31
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3527
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	6858
Item 4.	Controls and Procedures	6958
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	7059
Item 1A.	Risk Factors	7059
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7261
Item 3.	Defaults Upon Senior Securities	7261
Item 4.	Mine Safety Disclosures	7262
Item 5.	Other Information	7362
Item 6.	Exhibits	7362

Signatures		7664


Maturity Date	Par Value (in millions)		Coupon Rate		Pricing (percentage of par)
February 15, 2030 (the 2030 Notes) ⁽¹⁾	$	500	2.40	%	99.647	%
February 15, 2050 (the 2050 Notes)	500		3.30		99.811


	Operating Leases		Finance Leases
	(In thousands)
Remainder of fiscal 2020	$	31,191	$	8,902
2021	118,673		32,333
2022	90,938		23,457
2023	75,258		16,782
2024	52,718		10,510
2025	46,088		6,077
Thereafter	337,334		5,859
Total undiscounted lease obligations	752,200		103,920
Less imputed interest	(106,079)		(9,075)
Present value of lease obligations	$	646,121	$	94,845


	Condensed Consolidated Balance Sheet
	Mar. 28, 2020
	Sysco		Certain U.S. Broadline Subsidiaries		Other Non-Guarantor Subsidiaries		Eliminations		Consolidated Totals
	(In thousands)
Current assets	$	1,914,935	$	4,242,407	$	3,700,433	$	—	$	9,857,775
Intercompany receivables	7,642,333		46,037		4,628,264		(12,316,634)		—
Investment in subsidiaries	6,091,917		—		1,332,048		(7,423,965)		—
Plant and equipment, net	245,678		2,241,821		2,117,119		—		4,604,618
Other assets	859,731		733,274		4,930,759		(553,825)		5,969,939
Total assets	$	16,754,594	$	7,263,539	$	16,708,623	$	(20,294,424)	$	20,432,332
Current liabilities	$	1,255,999	$	989,820	$	4,379,190	$	—	$	6,625,009
Intercompany payables	3,179,796		2,627,223		6,509,615		(12,316,634)		—
Long-term debt	9,593,045		9,099		421,106		—		10,023,250
Other liabilities	696,864		536,503		1,044,088		(553,825)		1,723,630
Noncontrolling interest	—		—		31,553		—		31,553
Shareholders’ equity	2,028,890		3,100,894		4,323,071		(7,423,965)		2,028,890
Total liabilities and shareholders’ equity	$	16,754,594	$	7,263,539	$	16,708,623	$	(20,294,424)	$	20,432,332


	Condensed Consolidated Statement of Comprehensive Income
	For the 13-Week Period Ended Mar. 28, 2020
	Sysco		Certain U.S. Broadline Subsidiaries		Other Non-Guarantor Subsidiaries		Eliminations		Consolidated Totals
	(In thousands)
Sales	$	—	$	8,722,745	$	5,493,011	$	(517,057)	$	13,698,699
Cost of sales	—		7,070,961		4,580,555		(517,057)		11,134,459
Gross profit	—		1,651,784		912,456		—		2,564,240
Operating expenses	295,242		1,141,038		1,067,686		—		2,503,966
Operating income (loss)	(295,242)		510,746		(155,230)		—		60,274
Interest expense (income) ⁽¹⁾	120,302		(28,747)		(7,701)		—		83,854
Other expense (income), net	2,513		(84)		2,771		—		5,200
Earnings (losses) before income taxes	(418,057)		539,577		(150,300)		—		(28,780)
Income tax (benefit) provision	(49,263)		137,143		(113,363)		—		(25,483)
Equity in earnings of subsidiaries	365,497		—		87,631		(453,128)		—
Net earnings	(3,297)		402,434		50,694		(453,128)		(3,297)
Other comprehensive income (loss)	(99,193)		—		(151,143)		151,143		(99,193)
Comprehensive income	$	(102,490)	$	402,434	$	(100,449)	$	(301,985)	$	(102,490)


	Condensed Consolidated Statement of Comprehensive Income
	For the 13-Week Period Ended Mar. 30, 2019
	Sysco		Certain U.S. Broadline Subsidiaries		Other Non-Guarantor Subsidiaries		Eliminations		Consolidated Totals
	(In thousands)
Sales	$	—	$	9,135,852	$	6,098,725	$	(576,503)	$	14,658,074
Cost of sales	—		7,392,718		5,087,561		(576,503)		11,903,776
Gross profit	—		1,743,134		1,011,164		—		2,754,298
Operating expenses	206,795		1,025,383		992,535		—		2,224,713
Operating income (loss)	(206,795)		717,751		18,629		—		529,585
Interest expense (income) ⁽¹⁾	55,925		(43,056)		81,645		—		94,514
Other expense (income), net	(1,730)		(80)		5,930		—		4,120
Earnings (losses) before income taxes	(260,990)		760,887		(68,946)		—		430,951
Income tax (benefit) provision	(183,601)		188,703		(14,234)		—		(9,132)
Equity in earnings of subsidiaries	517,472		—		107,865		(625,337)		—
Net earnings	440,083		572,184		53,153		(625,337)		440,083
Other comprehensive income (loss)	40,938		—		37,471		(37,471)		40,938
Comprehensive income	$	481,021	$	572,184	$	90,624	$	(662,808)	$	481,021


	Condensed Consolidated Statement of Comprehensive Income
	For the 39-Week Period Ended Mar. 28, 2020
	Sysco		Certain U.S. Broadline Subsidiaries		Other Non-Guarantor Subsidiaries		Eliminations		Consolidated Totals
	(In thousands)
Sales	$	—	$	28,022,282	$	17,671,368	$	(1,666,904)	$	44,026,746
Cost of sales	—		22,694,007		14,663,634		(1,666,904)		35,690,737
Gross profit	—		5,328,275		3,007,734		—		8,336,009
Operating expenses	701,003		3,269,879		3,084,042		—		7,054,924
Operating income (loss)	(701,003)		2,058,396		(76,308)		—		1,281,085
Interest expense (income) ⁽¹⁾	338,459		(73,268)		(21,240)		—		243,951
Other expense (income), net	8,954		(434)		(1,015)		—		7,505
Earnings (losses) before income taxes	(1,048,416)		2,132,098		(54,053)		—		1,029,629
Income tax (benefit) provision	(254,669)		538,598		(88,194)		—		195,735
Equity in earnings of subsidiaries	1,627,641		—		330,332		(1,957,973)		—
Net earnings	833,894		1,593,500		364,473		(1,957,973)		833,894
Other comprehensive income (loss)	(65,793)		—		(122,347)		122,347		(65,793)
Comprehensive income	$	768,101	$	1,593,500	$	242,126	$	(1,835,626)	$	768,101


	Condensed Consolidated Statement of Comprehensive Income
	For the 39-Week Period Ended Mar. 30, 2019
	Sysco		Certain U.S. Broadline Subsidiaries		Other Non-Guarantor Subsidiaries		Eliminations		Consolidated Totals
	(In thousands)
Sales	$	—	$	27,716,772	$	18,662,548	$	(1,740,260)	$	44,639,060
Cost of sales	—		22,434,604		15,514,921		(1,740,260)		36,209,265
Gross profit	—		5,282,168		3,147,627		—		8,429,795
Operating expenses	659,697		3,113,409		3,047,069		—		6,820,175
Operating income (loss)	(659,697)		2,168,759		100,558		—		1,609,620
Interest expense (income) ⁽¹⁾	160,830		(73,515)		183,328		—		270,643
Other expense (income), net	8,642		(220)		7,027		—		15,449
Earnings (losses) before income taxes	(829,169)		2,242,494		(89,797)		—		1,323,528
Income tax (benefit) provision	(350,246)		556,107		(20,838)		—		185,023
Equity in earnings of subsidiaries	1,617,428		—		330,236		(1,947,664)		—
Net earnings	1,138,505		1,686,387		261,277		(1,947,664)		1,138,505
Other comprehensive income (loss)	(74,200)		—		(88,989)		88,989		(74,200)
Comprehensive income	$	1,064,305	$	1,686,387	$	172,288	$	(1,858,675)	$	1,064,305


	Condensed Consolidated Cash Flows
	For the 39-Week Period Ended Mar. 28, 2020
	Sysco		Certain U.S. Broadline Subsidiaries		Other Non-Guarantor Subsidiaries		Elimination ⁽¹⁾		Consolidated Totals
	(In thousands)
Cash flows provided by (used for):
Operating activities	$	517,337	$	256,752	$	304,380	$	—	$	1,078,469
Investing activities	(122,409)		(281,927)		(357,681)		102,029		(659,988)
Financing activities	1,378,241		(6,816)		73,282		(102,029)		1,342,678
Effect of exchange rates on cash	—		—		(8,857)		—		(8,857)

Net increase (decrease) in cash, cash equivalents and restricted cash	1,773,169		(31,991)		11,124		—		1,752,302
Cash, cash equivalents and restricted cash at the beginning of period	29,868		117,643		384,734		—		532,245
Cash, cash equivalents and restricted cash at the end of period	$	1,803,037	$	85,652	$	395,858	$	—	$	2,284,547


(1)			Fiscal 2021 includes $56 million related to restructuring, severance and facility closure charges, and $39 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2020 includes $100 million related to restructuring, severance, and facility closure charges and $91 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy.
(2)			Represents intangible amortization expense from the Brakes Acquisition, which is included in the results of International Foodservice.
(3)			Fiscal 2021 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020. Fiscal 2020 represents excess bad debt charges recognized on the increase in past due receivables arising from the COVID-19 pandemic.
(4)			The tax impact of adjustments for Certain Items are calculated by multiplying the pretax impact of each Certain Item by the statutory rates in effect for each jurisdiction where the Certain Item was incurred.
(5)			Individual components of diluted earnings per share may not add up to the total presented due to rounding. Total diluted earnings per share is calculated using adjusted net earnings divided by diluted shares outstanding.
*			Foreign exchange rates did not have a meaningful impact during the period; therefore, the constant currency adjustment is not disclosed.
			NM represents that the percentage change is not meaningful.