UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

Form 10-Q


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

For the quarterly period ended ~~December 26, 2020~~January 1, 2022


☐			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

~~510,411,966~~507,447,464 shares of common stock were outstanding as of January ~~15, 2021.~~21, 2022.

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)

Dec. 26, 2020 Jun. 27, 2020
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 5,767,034 $ 6,059,427
Accounts receivable, less allowances of $254,347 and $334,810 2,855,424 2,893,551
Inventories 3,100,478 3,095,085
Prepaid expenses and other current assets 223,872 192,163
Income tax receivable 44,621 108,006
Total current assets 11,991,429 12,348,232
Plant and equipment at cost, less accumulated depreciation 4,382,737 4,458,567
Other long-term assets
Goodwill 3,929,636 3,732,469
Intangibles, less amortization 798,649 780,172
Deferred income taxes 280,511 194,115
Operating lease right-of-use assets, net 635,664 603,616
Other assets 471,225 511,095
Total other long-term assets 6,115,685 5,821,467
Total assets $ 22,489,851 $ 22,628,266
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Notes payable $ 8,754 $ 2,266
Accounts payable 3,554,624 3,447,065
Accrued expenses 1,679,429 1,616,289
Accrued income taxes 0 2,938
Current operating lease liabilities 107,633 107,167
Current maturities of long-term debt 1,366,103 1,542,128
Total current liabilities 6,716,543 6,717,853
Long-term liabilities
Long-term debt 12,463,284 12,902,485
Deferred income taxes 47,780 86,601
Long-term operating lease liabilities 563,548 523,496
Other long-term liabilities 1,235,939 1,204,953
Total long-term liabilities 14,310,551 14,717,535
Noncontrolling interest 35,958 34,265
Shareholders’ equity
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 765,175 765,175
Paid-in capital 1,565,255 1,506,901
Retained earnings 10,383,493 10,563,008
Accumulated other comprehensive loss (1,388,169) (1,710,881)
Treasury stock at cost, 255,176,469 and 256,915,825 shares (9,898,955) (9,965,590)
Total shareholders’ equity 1,426,799 1,158,613
Total liabilities and shareholders’ equity $ 22,489,851 $ 22,628,266


	Jan. 1, 2022		Jul. 3, 2021
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	1,374,276	$	3,007,123
Accounts receivable, less allowances of $128,189 and $117,695	4,219,868		3,781,510
Inventories	4,115,683		3,695,219

Prepaid expenses and other current assets	252,351		240,956

Income tax receivable	100,973		8,759
Total current assets	10,063,151		10,733,567
Plant and equipment at cost, less accumulated depreciation	4,307,156		4,326,063
Other long-term assets
Goodwill	4,416,912		3,944,139
Intangibles, less amortization	906,328		746,073

Deferred income taxes	387,050		352,523
Operating lease right-of-use assets, net	724,861		709,163
Other assets	621,304		602,011
Total other long-term assets	7,056,455		6,353,909
Total assets	$	21,426,762	$	21,413,539

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Notes payable	$	8,574	$	8,782
Accounts payable	5,019,052		4,884,781
Accrued expenses	1,980,293		1,814,837
Accrued income taxes	3,631		22,644
Current operating lease liabilities	94,603		102,659
Current maturities of long-term debt	487,407		486,141
Total current liabilities	7,593,560		7,319,844
Long-term liabilities
Long-term debt	10,593,390		10,588,184
Deferred income taxes	160,718		147,066
Long-term operating lease liabilities	659,136		634,481
Other long-term liabilities	1,166,196		1,136,480
Total long-term liabilities	12,579,440		12,506,211

Noncontrolling interest	32,690		34,588
Shareholders’ equity
Preferred stock, par value $1 per share Authorized 1,500,000 shares, issued none	—		—
Common stock, par value $1 per share Authorized 2,000,000,000 shares, issued 765,174,900 shares	765,175		765,175
Paid-in capital	1,690,487		1,619,995
Retained earnings	10,216,625		10,151,706
Accumulated other comprehensive loss	(1,236,258)		(1,148,764)
Treasury stock at cost, 258,033,856 and 253,342,595 shares	(10,214,957)		(9,835,216)
Total shareholders’ equity	1,221,072		1,552,896
Total liabilities and shareholders’ equity	$	21,426,762	$	21,413,539

Note: The ~~June 27, 2020~~July 3, 2021 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 26-Week Period Ended
Dec. 26, 2020 Dec. 28, 2019 Dec. 26, 2020 Dec. 28, 2019
Sales $ 11,558,982 $ 15,025,042 $ 23,336,361 $ 30,328,047
Cost of sales 9,460,524 12,196,643 19,018,058 24,556,278
Gross profit 2,098,458 2,828,399 4,318,303 5,771,769
Operating expenses 1,886,396 2,275,906 3,686,662 4,550,958
Operating income 212,062 552,493 631,641 1,220,811
Interest expense 146,498 76,762 293,215 160,097
Other (income) expense, net (15,556) (807) (1,432) 2,305
Earnings before income taxes 81,120 476,538 339,858 1,058,409
Income taxes 13,831 93,128 55,669 221,218
Net earnings $ 67,289 $ 383,410 $ 284,189 $ 837,191

Net earnings:
Basic earnings per share $ 0.13 $ 0.75 $ 0.56 $ 1.64
Diluted earnings per share 0.13 0.74 0.56 1.62
Average shares outstanding 510,006,754 509,984,743 509,567,080 511,721,290
Diluted shares outstanding 512,742,792 515,517,792 511,740,778 517,120,395


	13-Week Period Ended				26-Week Period Ended
	Jan. 1, 2022		Dec. 26, 2020		Jan. 1, 2022		Dec. 26, 2020
Sales	$	16,320,203	$	11,558,982	$	32,776,749	$	23,336,361
Cost of sales	13,429,053		9,460,524		26,913,891		19,018,058
Gross profit	2,891,150		2,098,458		5,862,858		4,318,303
Operating expenses	2,446,241		1,886,396		4,786,267		3,686,662
Operating income	444,909		212,062		1,076,591		631,641
Interest expense	242,899		146,498		371,113		293,215
Other income, net	(10,676)		(15,556)		(13,928)		(1,432)
Earnings before income taxes	212,686		81,120		719,406		339,858
Income taxes	45,245		13,831		173,952		55,669
Net earnings	$	167,441	$	67,289	$	545,454	$	284,189

Net earnings:
Basic earnings per share	$	0.33	$	0.13	$	1.07	$	0.56
Diluted earnings per share	0.33		0.13		1.06		0.56

Average shares outstanding	511,044,400		510,006,754		511,780,234		509,567,080
Diluted shares outstanding	514,574,889		512,742,792		515,178,910		511,740,778

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(In thousands)

13-Week Period Ended 26-Week Period Ended
Dec. 26, 2020 Dec. 28, 2019 Dec. 26, 2020 Dec. 28, 2019
Net earnings $ 67,289 $ 383,410 $ 284,189 $ 837,191
Other comprehensive income:
Foreign currency translation adjustment 222,507 154,955 335,647 28,796
Items presented net of tax:
Amortization of cash flow hedges 2,155 2,155 4,310 4,310
Change in net investment hedges (20,666) (41,479) (31,927) (11,479)
Change in cash flow hedges 12,335 (14,797) (632) (5,538)
Amortization of prior service cost 137 1,428 274 2,856
Amortization of actuarial loss 7,793 7,225 15,558 13,908
Change in marketable securities (44) (386) (518) 547
Total other comprehensive income 224,217 109,101 322,712 33,400
Comprehensive income $ 291,506 $ 492,511 $ 606,901 $ 870,591


	13-Week Period Ended				26-Week Period Ended
	Jan. 1, 2022		Dec. 26, 2020		Jan. 1, 2022		Dec. 26, 2020
Net earnings	$	167,441	$	67,289	$	545,454	$	284,189
Other comprehensive (loss) income:
Foreign currency translation adjustment	(26,870)		222,507		(114,064)		335,647
Items presented net of tax:
Amortization of cash flow hedges	2,155		2,155		4,310		4,310
Change in net investment hedges	8,362		(20,666)		18,527		(31,927)
Change in cash flow hedges	(6,101)		12,335		(6,530)		(632)



Amortization of prior service cost	74		137		148		274
Amortization of actuarial gain	5,488		7,793		11,855		15,558


Change in marketable securities	(1,429)		(44)		(1,740)		(518)
Total other comprehensive (loss) income	(18,321)		224,217		(87,494)		322,712
Comprehensive income	$	149,120	$	291,506	$	457,960	$	606,901

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY (Unaudited)

(In thousands, except for share data)

Quarter to Date


													Accumulated Other Comprehensive Loss																											Accumulated Other Comprehensive Loss
		Common Stock			Paid-in Capital				Retained Earnings						Treasury Stock									Common Stock									Paid-in Capital			Retained Earnings						Treasury Stock
		Shares	Amount								Shares				Accumulated Other Comprehensive Loss		Amounts				Totals			Shares					Amount								Shares		Accumulated Other Comprehensive Loss					Amounts	Totals
Balance as of September 26, 2020		765,174,900	$	765,175			$	1,534,281			$	10,546,598					$	(1,612,386)				$	(9,933,657)				$	1,300,011
Balance as of October 2, 2021																						Balance as of October 2, 2021		765,174,900					$	765,175				$	1,655,110		$	10,288,291				$	(1,217,937)		$	(9,817,347)	$	1,673,292
Net earnings	Net earnings								67,289																67,289		Net earnings													167,441									167,441

Foreign currency translation adjustment	Foreign currency translation adjustment												222,507									222,507			Foreign currency translation adjustment															(26,870)							(26,870)
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															2,155							2,155
Change in cash flow hedges, net of tax	Change in cash flow hedges, net of tax												12,335									12,335			Change in cash flow hedges, net of tax															(6,101)							(6,101)
Change in net investment hedges, net of tax	Change in net investment hedges, net of tax												(20,666)									(20,666)			Change in net investment hedges, net of tax															8,362							8,362

Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax	Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax												7,930									7,930			Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax															5,562							5,562
Change in marketable securities, net of tax	Change in marketable securities, net of tax												(44)									(44)			Change in marketable securities, net of tax															(1,429)							(1,429)

Dividends declared ($0.45 per common share)									(230,394)													(230,394)

Dividends declared ($0.47 per common share)																									Dividends declared ($0.47 per common share)												(239,107)										(239,107)
Treasury stock purchases																									Treasury stock purchases																			5,679,298	(415,824)		(415,824)
Increase in ownership interest in subsidiaries																									Increase in ownership interest in subsidiaries									(304)													(304)
Share-based compensation awards	Share-based compensation awards				30,974											(899,303)			34,702			65,676			Share-based compensation awards									35,681										(470,522)	18,214		53,895
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
Balance as of January 1, 2022																									Balance as of January 1, 2022	765,174,900					$	765,175		$	1,690,487		$	10,216,625		$	(1,236,258)			258,033,856	$	(10,214,957)	$	1,221,072

													Accumulated Other Comprehensive Loss																											Accumulated Other Comprehensive Loss
		Common Stock			Paid-in Capital				Retained Earnings						Treasury Stock									Common Stock									Paid-in Capital			Retained Earnings						Treasury Stock
		Shares	Amount								Shares				Accumulated Other Comprehensive Loss		Amounts				Totals			Shares					Amount								Shares		Accumulated Other Comprehensive Loss					Amounts	Totals
Balance as of September 28, 2019		765,174,900	$	765,175			$	1,490,661			$	11,486,833					$	(1,675,430)				$	(9,612,491)				$	2,454,748
Balance as of September 26, 2020																						Balance as of September 26, 2020		765,174,900					$	765,175				$	1,534,281		$	10,546,598				$	(1,612,386)		$	(9,933,657)	$	1,300,011
Net earnings	Net earnings								383,410																383,410		Net earnings													67,289									67,289
Foreign currency translation adjustment	Foreign currency translation adjustment												154,955									154,955			Foreign currency translation adjustment															222,507							222,507
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															2,155							2,155
Change in cash flow hedges, net of tax	Change in cash flow hedges, net of tax												(14,797)									(14,797)			Change in cash flow hedges, net of tax															12,335							12,335
Change in net investment hedges, net of tax	Change in net investment hedges, net of tax												(41,479)									(41,479)			Change in net investment hedges, net of tax															(20,666)							(20,666)
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												8,653									8,653			Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax															7,930							7,930
Change in marketable securities, net of tax	Change in marketable securities, net of tax												(386)									(386)			Change in marketable securities, net of tax															(44)							(44)

Dividends declared ($0.45 per common share)	Dividends declared ($0.45 per common share)								(230,516)													(230,516)			Dividends declared ($0.45 per common share)												(230,394)										(230,394)
Treasury stock purchases																3,501,930			(281,081)			(281,081)

Share-based compensation awards	Share-based compensation awards				35,471											(1,480,168)			56,393			91,864			Share-based compensation awards									30,974										(899,303)	34,702		65,676
Balance as of December 28, 2019		765,174,900	$	765,175	$	1,526,132			$	11,639,727			$	(1,566,329)		256,332,388			$	(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

Year to Date

Accumulated
Other Comprehensive
Loss
Common Stock Paid-in
Capital Retained
Earnings Treasury Stock
Shares Amount Shares Amounts Totals
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 284,189 284,189
Foreign currency translation adjustment 335,647 335,647
Amortization of cash flow hedges, net of tax 4,310 4,310
Change in cash flow hedges, net of tax (632) (632)
Change in net investment hedges, net of tax (31,927) (31,927)
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax 15,832 15,832
Change in marketable securities, net of tax (518) (518)
Adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), net of tax (2,068) (2,068)
Dividends declared ($0.90 per common share) (461,636) (461,636)
Share-based compensation awards 58,354 (1,739,356) 66,635 124,989
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
Accumulated
Other Comprehensive
Loss
Common Stock Paid-in
Capital Retained
Earnings Treasury Stock
Shares Amount Shares Amounts Totals
Balance as of June 29, 2019 765,174,900 $ 765,175 $ 1,457,419 $ 11,229,679 $ (1,599,729) 252,297,926 $ (9,349,941) $ 2,502,603
Net earnings 837,191 837,191
Foreign currency translation adjustment 28,796 28,796
Amortization of cash flow hedges, net of tax 4,310 4,310
Change in cash flow hedges, net of tax (5,538) (5,538)
Change in net investment hedge, net of tax (11,479) (11,479)
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax 16,764 16,764
Change in marketable securities, net of tax 547 547
Adoption of ASU 2016-02, Leases (Topic 842), net of tax 1,978 1,978
Dividends declared ($0.84 per common share) (429,121) (429,121)
Treasury stock purchases 8,089,327 (628,948) (628,948)
Share-based compensation awards 68,713 (4,054,865) 141,710 210,423
Balance as of December 28, 2019 765,174,900 $ 765,175 $ 1,526,132 $ 11,639,727 $ (1,566,329) 256,332,388 $ (9,837,179) $ 2,527,526


								Accumulated Other Comprehensive Loss
	Common Stock			Paid-in Capital		Retained Earnings				Treasury Stock
	Shares	Amount								Shares	Amounts		Totals
Balance as of July 3, 2021	765,174,900	$	765,175	$	1,619,995	$	10,151,706	$	(1,148,764)	253,342,595	$	(9,835,216)	$	1,552,896
Net earnings						545,454							545,454


Foreign currency translation adjustment								(114,064)					(114,064)
Amortization of cash flow hedges, net of tax								4,310					4,310
Change in cash flow hedges, net of tax								(6,530)					(6,530)
Change in net investment hedges, net of tax								18,527					18,527
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax								12,003					12,003

Change in marketable securities, net of tax								(1,740)					(1,740)

Dividends declared ($0.94 per common share)						(480,535)							(480,535)
Treasury stock purchases										5,679,298	(415,824)		(415,824)
Increase in ownership interest in subsidiaries				(304)									(304)
Share-based compensation awards				70,796						(988,037)	36,083		106,879
Balance as of January 1, 2022	765,174,900	$	765,175	$	1,690,487	$	10,216,625	$	(1,236,258)	258,033,856	$	(10,214,957)	$	1,221,072

								Accumulated Other Comprehensive Loss
	Common Stock			Paid-in Capital		Retained Earnings				Treasury Stock
	Shares	Amount								Shares	Amounts		Totals
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						284,189							284,189
Foreign currency translation adjustment								335,647					335,647
Amortization of cash flow hedges, net of tax								4,310					4,310
Change in cash flow hedges, net of tax								(632)					(632)
Change in net investment hedges, net of tax								(31,927)					(31,927)
Reclassification of pension and other postretirement benefit plans amounts to net earnings, net of tax								15,832					15,832
Change in marketable securities, net of tax								(518)					(518)
Adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), net of tax						(2,068)							(2,068)
Dividends declared ($0.90 per common share)						(461,636)							(461,636)


Share-based compensation awards				58,354						(1,739,356)	66,635		124,989
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

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

CONSOLIDATED CASH FLOWS (Unaudited)

(In thousands)

26-Week Period Ended
Dec. 26, 2020 Dec. 28, 2019
Cash flows from operating activities:
Net earnings $ 284,189 $ 837,191
Adjustments to reconcile net earnings to cash provided by operating activities:
Share-based compensation expense 47,122 46,644
Depreciation and amortization 365,332 372,416
Operating lease asset amortization 55,231 53,444
Amortization of debt issuance and other debt-related costs 12,946 9,889
Deferred income taxes (107,821) (75,898)
Provision for losses on receivables (94,242) 38,418
Loss on sale of business 12,043 0
Other non-cash items (9,312) 3,239
Additional changes in certain assets and liabilities, net of effect of businesses acquired:
Decrease (increase) in receivables 192,121 (161,158)
Decrease (increase) in inventories 37,345 (279,403)
Increase in prepaid expenses and other current assets (22,519) (38,503)
Increase (decrease) in accounts payable 84,708 (191,280)
Increase (decrease) in accrued expenses 20,108 (49,866)
Decrease in operating lease liabilities (63,496) (62,101)
Increase in accrued income taxes 63,385 182,557
Decrease in other assets 20,576 13,023
Increase in other long-term liabilities 38,962 55,857
Net cash provided by operating activities 936,678 754,469
Cash flows from investing activities:
Additions to plant and equipment (163,944) (393,379)
Proceeds from sales of plant and equipment 15,510 10,293
Acquisition of businesses, net of cash acquired 0 (142,783)
Purchase of marketable securities (36,121) (11,424)
Proceeds from sales of marketable securities 20,797 9,038
Other investing activities 0 565
Net cash used for investing activities (163,758) (527,690)
Cash flows from financing activities:
Bank and commercial paper borrowings, net 6,463 721,415
Other debt borrowings 4,094 18,966
Other debt repayments (773,663) (23,234)
Proceeds from stock option exercises 66,635 141,709
Stock repurchases 0 (630,395)
Dividends paid (458,717) (399,093)
Other financing activities (873) (22,461)
Net cash used for financing activities (1,156,061) (193,093)
Effect of exchange rates on cash, cash equivalents and restricted cash 77,056 5,565
Net (decrease) increase in cash, cash equivalents and restricted cash (306,085) 39,251
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 $ 5,789,485 $ 571,496
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 290,926 $ 162,720
Income taxes 110,453 122,049


	26-Week Period Ended
	Jan. 1, 2022		Dec. 26, 2020
Cash flows from operating activities:
Net earnings	$	545,454	$	284,189
Adjustments to reconcile net earnings to cash provided by operating activities:
Share-based compensation expense	60,254		47,122
Depreciation and amortization	377,763		365,332
Operating lease asset amortization	54,856		55,231
Amortization of debt issuance and other debt-related costs	11,014		12,946

Deferred income taxes	(72,892)		(107,821)
Provision for losses on receivables	1,508		(94,242)
Loss on extinguishment of debt	115,603		—
Loss on sale of business	—		12,043
Other non-cash items	1,103		(9,312)
Additional changes in certain assets and liabilities, net of effect of businesses acquired:
(Increase) decrease in receivables	(385,179)		192,121
(Increase) decrease in inventories	(357,908)		37,345
Increase in prepaid expenses and other current assets	(12,560)		(22,519)
Increase in accounts payable	83,214		84,708
Increase in accrued expenses	95,388		20,108
Decrease in operating lease liabilities	(65,123)		(63,496)
(Decrease) increase in accrued income taxes	(111,227)		63,385
(Increase) decrease in other assets	(4,255)		20,576
Increase in other long-term liabilities	40,034		38,962

Net cash provided by operating activities	377,047		936,678
Cash flows from investing activities:
Additions to plant and equipment	(181,374)		(163,944)
Proceeds from sales of plant and equipment	5,450		15,510
Acquisition of businesses, net of cash acquired	(769,658)		—
Purchase of marketable securities	(18,539)		(36,121)
Proceeds from sales of marketable securities	16,648		20,797
Other investing activities	6,651		—

Net cash used for investing activities	(940,822)		(163,758)
Cash flows from financing activities:
Bank and commercial paper borrowings, net	—		6,463
Other debt borrowings including senior notes	1,249,995		4,094
Other debt repayments	(23,050)		(773,663)
Redemption premiums and repayments of senior notes	(1,395,668)		—

Debt issuance costs	(15,547)		—


Cash received from termination of interest rate swap agreements	23,127		—
Proceeds from stock option exercises	36,083		66,635

Stock repurchases	(415,824)		—
Dividends paid	(481,386)		(458,717)

Other financing activities	(5,297)		(873)
Net cash used for financing activities	(1,027,567)		(1,156,061)
Effect of exchange rates on cash, cash equivalents and restricted cash	(10,868)		77,056
Net decrease in cash, cash equivalents and restricted cash	(1,602,210)		(306,085)
Cash, cash equivalents and restricted cash at beginning of period	3,037,100		6,095,570
Cash, cash equivalents and restricted cash at end of period	$	1,434,890	$	5,789,485
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	258,436	$	290,926
Income taxes, net of refunds	342,628		110,453

See Notes to Consolidated Financial Statements

Sysco Corporation and its Consolidated Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Unless this Form 10-Q indicates otherwise or the context otherwise requires, the terms “we,” “our,” “us,” “Sysco,” or “the company” as used in this Form 10-Q refer to Sysco Corporation together with its consolidated subsidiaries and divisions.

1. BASIS OF PRESENTATION

The consolidated financial statements have been prepared by the company, without audit. The financial statements include consolidated balance sheets, consolidated results of operations, consolidated statements of comprehensive income (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 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 reported within the consolidated balance sheets that sum to the total of the amounts shown in the consolidated statement of cash flows:


		Dec. 26, 2020		Dec. 28, 2019			Jan. 1, 2022		Dec. 26, 2020
		(In thousands)					(In thousands)
Cash and cash equivalents	Cash and cash equivalents	$	5,767,034	$	524,578	Cash and cash equivalents	$	1,374,276	$	5,767,034
Restricted cash (1)	Restricted cash (1)	22,451		46,918		Restricted cash (1)	60,614		22,451
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	$	5,789,485	$	571,496	Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows	$	1,434,890	$	5,789,485

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

2. ~~CHANGES IN~~NEW ACCOUNTING STANDARDS

~~Financial Instruments - Credit Losses~~Government Assistance

In ~~June 2016,~~November 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ~~2016-13, Financial Instruments – Credit Losses~~2021-10, “Government Assistance (Topic ~~326): Measurement~~832),” which requires business entities to make annual disclosures about transactions with a government that are accounted for by analogizing to a grant or contribution accounting model. For transactions in the scope of ~~Credit Losses on Financial Instruments, which introduces a forward-looking approach, based on expected losses,~~the new standard, business entities will need to ~~estimate credit losses on certain types~~provide information about the nature of the transaction, including significant terms and conditions, as well as the amounts and specific financial ~~instruments, including trade receivables. Sysco adopted this ASU as of June 28, 2020,~~statement line items affected by the ~~first day of fiscal 2021, with no significant impact to the company’s financial statements.~~

~~Implementation Costs Incurred in a Cloud Computing Arrangement~~

~~In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting~~transaction. The new guidance is effective for ~~Implementation Costs Incurred in a Cloud Computing Arrangement That~~all entities for annual reporting periods beginning after December 15, 2021; however, early adoption 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.permitted. The guidance ~~amends Accounting Standards Codification (ASC) 350~~may be applied either prospectively to ~~include~~all in-scope transactions that are reflected in ~~its scope implementation costs~~the financial statements at the date of ~~a cloud computing arrangement~~initial application and to new transactions that are entered into after the date of initial application, or retrospectively. The company 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. Sysco adopted this ASU on June 28, 2020 on a prospective basis with no effect oncurrently reviewing the ~~company’s financial statements.~~provisions of the new standard.

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 receivable, less allowances in the consolidated balance sheet, were ~~$2.6~~$3.8 billion and ~~$2.7~~$3.5 billion as of ~~December 26, 2020~~January 1, 2022 and ~~June 27, 2020,~~July 3, 2021, respectively.

Sysco has certain customer contracts in which upfront monies are paid to its customers. These payments have become industry practice and are not related to financing of the customer’s business. They are not associated with any distinct good or service to be received from the customer and, therefore, are treated as a reduction of transaction prices. All upfront payments are capitalized in other assets and amortized over the life of the contract or the expected life of the relationship with the customer. As of ~~December 26, 2020,~~January 1, 2022, Sysco’s contract assets were not significant. Sysco has no significant commissions paid that are directly attributable to obtaining a particular contract.

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


		13-Week Period Ended Dec. 26, 2020											13-Week Period Ended Jan. 1, 2022
		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	$	1,500,064	$	267,817	$	402,133	$	0	$	2,170,014	Fresh and frozen meats	$	2,403,763	$	396,232	$	513,138	$	—	$	3,313,133
Canned and dry products	Canned and dry products	1,406,053		383,170		32,867		0		1,822,090		Canned and dry products	2,087,808		560,623		155,615		30		2,804,076
Frozen fruits, vegetables, bakery and other	Frozen fruits, vegetables, bakery and other	1,070,227		394,706		275,422		0		1,740,355		Frozen fruits, vegetables, bakery and other	1,508,462		518,271		292,185		—		2,318,918
Poultry	Poultry	844,377		174,717		217,621		0		1,236,715		Poultry	1,351,188		240,755		223,348		—		1,815,291
Dairy products	Dairy products	818,810		208,208		142,966		0		1,169,984		Dairy products	1,114,145		289,380		139,735		—		1,543,260
Fresh produce												Fresh produce	1,037,683		214,823		64,048		—		1,316,554
Paper and disposables	Paper and disposables	715,775		92,954		182,094		8,675		999,498		Paper and disposables	894,553		114,634		193,010		12,792		1,214,989
Fresh produce		696,879		145,565		66,528		0		908,972
Seafood	Seafood	407,955		69,680		26,387		0		504,022		Seafood	585,713		110,337		33,980		—		730,030
Beverage products	Beverage products	168,902		73,422		142,208		10,728		395,260		Beverage products	246,365		107,156		131,517		18,827		503,865

Other (1)	Other (1)	295,101		157,550		32,175		127,246		612,072		Other (1)	268,475		254,061		24,747		212,804		760,087
Total Sales	Total Sales	$	7,924,143	$	1,967,789	$	1,520,401	$	146,649	$	11,558,982	Total Sales	$	11,498,155	$	2,806,272	$	1,771,323	$	244,453	$	16,320,203

(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 Dec. 28, 2019											13-Week Period Ended Dec. 26, 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	$	2,071,447	$	409,483	$	392,584	$	0	$	2,873,514	Fresh and frozen meats	$	1,500,064	$	267,817	$	402,133	$	—	$	2,170,014
Canned and dry products	Canned and dry products	1,861,743		578,998		38,652		0		2,479,393		Canned and dry products	1,406,053		383,170		32,867		—		1,822,090
Frozen fruits, vegetables, bakery and other	Frozen fruits, vegetables, bakery and other	1,459,470		572,991		266,540		0		2,299,001		Frozen fruits, vegetables, bakery and other	1,070,227		394,706		275,422		—		1,740,355
Poultry												Poultry	844,377		174,717		217,621		—		1,236,715
Dairy products	Dairy products	1,139,820		299,830		142,967		0		1,582,617		Dairy products	818,810		208,208		142,966		—		1,169,984
Poultry		1,064,679		214,781		200,481		0		1,479,941
Paper and disposables												Paper and disposables	715,775		92,954		182,094		8,675		999,498
Fresh produce	Fresh produce	952,857		256,183		59,318		0		1,268,358		Fresh produce	696,879		145,565		66,528		—		908,972
Paper and disposables		689,890		90,778		166,313		15,290		962,271
Seafood	Seafood	601,709		129,065		23,383		0		754,157		Seafood	407,955		69,680		26,387		—		504,022
Beverage products	Beverage products	276,626		130,766		139,106		20,912		567,410		Beverage products	168,902		73,422		142,208		10,728		395,260

Other (1)	Other (1)	295,334		207,178		26,549		229,319		758,380		Other (1)	295,101		157,550		32,175		127,246		612,072
Total Sales	Total Sales	$	10,413,575	$	2,890,053	$	1,455,893	$	265,521	$	15,025,042	Total Sales	$	7,924,143	$	1,967,789	$	1,520,401	$	146,649	$	11,558,982

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


	26-Week Period Ended Jan. 1, 2022
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Fresh and frozen meats	$	4,848,224	$	813,403	$	987,794	$	—	$	6,649,421
Canned and dry products	4,164,582		1,142,518		293,212		30		5,600,342
Frozen fruits, vegetables, bakery and other	3,009,755		1,036,526		565,332		—		4,611,613
Poultry	2,702,388		481,956		452,706		—		3,637,050
Dairy products	2,215,569		594,492		279,959		—		3,090,020
Fresh produce	2,024,685		433,786		130,611		—		2,589,082
Paper and disposables	1,805,903		234,374		381,253		28,291		2,449,821
Seafood	1,278,726		231,802		67,204		—		1,577,732
Beverage products	502,750		224,377		269,032		40,916		1,037,075



Other (1)	548,536		508,285		48,253		429,519		1,534,593
Total Sales	$	23,101,118	$	5,701,519	$	3,475,356	$	498,756	$	32,776,749

26-Week Period Ended Dec. 26, 2020
US Foodservice Operations International Foodservice Operations SYGMA Other Total
(In thousands)
Principal Product Categories
Fresh and frozen meats $ 2,997,869 $ 581,989 $ 831,053 $ 0 $ 4,410,911
Canned and dry products 2,812,198 774,747 62,440 0 3,649,385
Frozen fruits, vegetables, bakery and other 2,127,476 821,271 532,209 0 3,480,956
Poultry 1,679,256 353,743 434,255 0 2,467,254
Dairy products 1,655,075 441,164 289,995 0 2,386,234
Paper and disposables 1,396,600 183,663 361,268 20,313 1,961,844
Fresh produce 1,407,799 316,103 131,510 0 1,855,412
Seafood 890,652 158,247 51,483 0 1,100,382
Beverage products 348,919 150,888 290,799 21,938 812,544
Other (1)
529,832 349,667 59,537 272,403 1,211,439
Total Sales $ 15,845,676 $ 4,131,482 $ 3,044,549 $ 314,654 $ 23,336,361
(1)Other sales relate to non-food products, including textiles and amenities for our hotel supply business, and other janitorial products, medical supplies and smallwares.


	26-Week Period Ended Dec. 26, 2020
	US Foodservice Operations		International Foodservice Operations		SYGMA		Other		Total
	(In thousands)
Principal Product Categories
Fresh and frozen meats	$	2,997,869	$	581,989	$	831,053	$	—	$	4,410,911
Canned and dry products	2,812,198		774,747		62,440		—		3,649,385
Frozen fruits, vegetables, bakery and other	2,127,476		821,271		532,209		—		3,480,956
Poultry	1,679,256		353,743		434,255		—		2,467,254
Dairy products	1,655,075		441,164		289,995		—		2,386,234
Paper and disposables	1,396,600		183,663		361,268		20,313		1,961,844
Fresh produce	1,407,799		316,103		131,510		—		1,855,412
Seafood	890,652		158,247		51,483		—		1,100,382
Beverage products	348,919		150,888		290,799		21,938		812,544



Other (1)	529,832		349,667		59,537		272,403		1,211,439
Total Sales	$	15,845,676	$	4,131,482	$	3,044,549	$	314,654	$	23,336,361

26-Week Period Ended Dec. 28, 2019
US Foodservice Operations International Foodservice Operations SYGMA Other Total
(In thousands)
Principal Product Categories
Fresh and frozen meats $ 4,146,747 $ 821,638 $ 773,962 $ 0 $ 5,742,347
Canned and dry products 3,760,632 1,165,622 75,842 0 5,002,096
Frozen fruits, vegetables, bakery and other 2,908,688 1,125,005 520,995 0 4,554,688
Dairy products 2,288,201 612,008 288,888 0 3,189,097
Poultry 2,154,785 433,381 404,749 0 2,992,915
Fresh produce 1,951,020 513,941 120,252 0 2,585,213
Paper and disposables 1,409,431 189,120 334,748 32,663 1,965,962
Seafood 1,287,119 278,656 48,238 0 1,614,013
Beverage products 567,412 263,618 282,785 45,240 1,159,055
Other (1)
598,173 399,452 52,428 472,608 1,522,661
Total Sales $ 21,072,208 $ 5,802,441 $ 2,902,887 $ 550,511 $ 30,328,047
ACQUISITIONS

During the first 26 weeks of fiscal 2022, the company paid cash of $769.7 million for several acquisitions. Certain acquisitions involve contingent consideration that may include earnout agreements that are typically payable over periods of up to three years in the event that certain operating results are achieved. As of January 1, 2022, aggregate contingent consideration outstanding was $90.9 million, of which $88.3 million was recorded as earnout liabilities. Earnout liabilities are all measured using unobservable inputs that are considered a Level 3 measurement.

~~(1)~~

Greco and Sons

~~Other sales relate to~~

On August 12, 2021, Sysco consummated its acquisition of Greco and Sons (Greco), a leading independent Italian specialty distributor in the United States, operating out of 10 distribution centers and servicing 22 geographies nationwide. Greco imports and distributes a full line of food and non-food products and manufactures specialty meat products. The acquisition also includes Bellissimo Foods Company, which distributes a broad selection of Italian and Mediterranean ingredients, including ~~textiles~~a proprietary branded line of products that are sold exclusively through the Bellissimo Foods Company distribution network, serving independent pizza and ~~amenities for our hotel supply~~Italian restaurants. The purpose of the acquisition is to strengthen Sysco’s business ~~equipment~~within the Italian foodservice sector.

The assets, liabilities and ~~subscription sales for our~~operating results of Greco are reflected in the company’s consolidated financial statements in accordance with ASC Topic No. 805, Business Combinations, commencing from the acquisition date. In certain circumstances, the purchase price allocations may be based upon preliminary estimates and assumptions. Accordingly, the allocations are subject to revision until Sysco ~~Labs business,~~receives final information and other ~~janitorial products, medical supplies~~analysis during the measurement period. These include items such as finalizing valuation of acquired tangible and ~~smallwares.~~intangible assets and related tax attributes.

The purchase price was allocated based on the company’s preliminary estimated fair value of the assets acquired and liabilities assumed, as follows:

~~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. The prolonged disruption of Sysco’s customers’ businesses due to the COVID-19 pandemic has created additional bad debt risk for the company. Many of Sysco’s customers, including those in the restaurant, hospitality and education segments, are operating at a substantially reduced volume due to governmental requirements for closures or other social-distancing measures, and a portion of Sysco’s customers are closed. Some of these customers have ceased paying their outstanding receivables, creating uncertainty as to their collectability.

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.

In the first 26 weeks of fiscal 2021, Sysco recognized a net $94.2 million benefit on its provision for losses on receivables. In the third and fourth 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 26 weeks of fiscal 2021, collections of the company’s pre-pandemic receivables have improved, and its reserve for doubtful accounts has been reduced accordingly, resulting in a $128.9 million benefit. Additional reserves of $34.7 million were recorded in the first 26 weeks of fiscal 2021 for receivables relating to periods beginning after the onset of the COVID-19 pandemic. Below is a summary of the activity in the allowance for credit losses for trade receivables for the first 26 weeks of fiscal 2021:


	~~26-Week Period Ended~~
	~~Dec. 26, 2020~~Preliminary Purchase Price Allocation
	(In ~~thousands)~~millions)
~~Balance at beginning of period~~Accounts receivable, net	$	~~334,810~~69
~~Charged to costs and expenses~~Inventories	~~(94,242)~~79
~~Customer accounts written off, net of recoveries~~Plant and equipment	~~22,675~~24
Other ~~adjustments~~assets	~~(8,896)~~151
Goodwill and other intangibles (1)	717
~~Balance at end of period~~Total assets	1,040
Accounts payable	(73)
Accrued expenses	(17)
Deferred tax liabilities	(35)
Other liabilities	(154)
Total consideration	$	~~254,347~~761

(1) The excess purchase price of $717.1 million was assigned to goodwill and intangibles, a portion of which is deductible for income tax purposes. Goodwill of $491.6 million has been assigned to the U.S. Foodservice Operations reportable segment. Intangible assets include customer relationships of $116.0 million with a weighted average life of 8 years and trade names of $109.5 million with a weighted average life of 15 years. Amortization expense is being recognized on a straight-line basis and was $9.2 million for the first 26 weeks of fiscal 2022

The first 26 weeks of fiscal 2022 includes the results of operations of Greco for the period from August 12, 2021 to January 1, 2022. The results were not material to the consolidated results of the company for the first 26 weeks of fiscal 2022.

4.5. 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~~The fair value of the company’s cash deposits ~~time deposits, certificates of deposit, commercial paper, high-quality~~and money market funds included in cash equivalents are valued using inputs that are considered a Level 1 measurement. Other cash equivalents, such as time deposits 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~~less, are valued ~~at amortized cost, which approximates fair value. These~~using inputs that 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~~considered 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.~~

measurement. 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 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 5,6, “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 6,7, “Derivative Financial Instruments.”

1211

The following tables present the company’s assets measured at fair value on a recurring basis as of ~~December 26, 2020~~January 1, 2022 and ~~June 27, 2020:~~July 3, 2021:


		Assets Measured at Fair Value as of Dec. 26, 2020									Assets Measured at Fair Value as of Jan. 1, 2022
		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	$	4,738,442	$	489,977	$	0	$	5,228,419	Cash and cash equivalents	$	1,015,187	$	300,003	$	—	$	1,315,190

Other assets (1)	Other assets (1)	22,451		0		0		22,451		Other assets (1)	60,614		—		—		60,614

Total assets at fair value	Total assets at fair value	$	4,760,893	$	489,977	$	0	$	5,250,870	Total assets at fair value	$	1,075,801	$	300,003	$	—	$	1,375,804

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


	Assets Measured at Fair Value as of Jul. 3, 2021
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets:
Cash equivalents
Cash and cash equivalents	$	2,805,961	$	3	$	—	$	2,805,964



Other assets (1)	29,977		—		—		29,977

Total assets at fair value	$	2,835,938	$	3	$	—	$	2,835,941

(1)Represents restricted cash balance recorded within 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~~$16.5 billion and $16.3~~ $13.0 billion as of ~~December 26, 2020~~January 1, 2022 and ~~June 27, 2020, respectively. The carrying value of total debt was $13.8 billion and $14.4~~$13.3 billion as of ~~December 26, 2020~~July 3, 2021, while the carrying value was $11.1 billion as of both January 1, 2022 and ~~June 27, 2020, respectively.~~July 3, 2021.

6. 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 expenses and other current assets and includes fixed income securities maturing in more than twelve months within other assets in the accompanying

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 are recorded in accumulated other comprehensive loss. There were no significant credit losses recognized in the first 26 weeks of fiscal ~~2021.~~2022. The following table presents the company’s available-for-sale marketable securities as of ~~December 26, 2020~~January 1, 2022 and ~~June 27, 2020:~~July 3, 2021:


		Dec. 26, 2020													Jan. 1, 2022
		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	$	89,476	$	3,664	$	(68)	$	93,072	$	17,777	$	75,295	Corporate bonds	$	95,077	$	1,588	$	(1,123)	$	95,542	$	—	$	95,542
Government bonds	Government bonds	33,194		4,733		0		37,927		0		37,927		Government bonds	30,213		2,950		(24)		33,139		—		33,139
Total marketable securities	Total marketable securities	$	122,670	$	8,397	$	(68)	$	130,999	$	17,777	$	113,222	Total marketable securities	$	125,290	$	4,538	$	(1,147)	$	128,681	$	—	$	128,681

		Jun. 27, 2020													Jul. 3, 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	$	78,651	$	4,064	$	0	$	82,715	$	18,233	$	64,482	Corporate bonds	$	92,547	$	2,491	$	(456)	$	94,582	$	11,570	$	83,012
Government bonds	Government bonds	28,633		4,919		0		33,552		0		33,552		Government bonds	31,552		3,556		—		35,108		—		35,108
Total marketable securities	Total marketable securities	$	107,284	$	8,983	$	0	$	116,267	$	18,233	$	98,034	Total marketable securities	$	124,099	$	6,047	$	(456)	$	129,690	$	11,570	$	118,120

As of ~~December 26, 2020,~~January 1, 2022, the balance of available-for-sale securities by contractual maturity is shown in the following table. Within the table, maturities of fixed income securities have been allocated based upon timing of estimated cash flows. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.


	~~Dec. 26, 2020~~Jan. 1, 2022
	(In thousands)
Due in one year or less	$	~~17,777~~—
Due after one year through five years	~~60,399~~88,084
Due after five years through ten years	~~52,823~~40,597

Total	$	~~130,999~~128,681

There were 0no significant realized gains or losses in marketable securities in the ~~second quarter or the~~ first 26 weeks of fiscal ~~2021.~~2022.

6.7. 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.

1413

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~~second quarter of fiscal ~~2021,~~2022, Sysco settled some of its previously held interest rate swap contracts for proceeds of $23.1 million, which had a notional value of ~~$750~~$500 million, due to the redemption of the entire $500 million aggregate principal amount of Sysco’s ~~2.60% senior notes.~~outstanding 3.550% Senior Notes due 2025 in December 2021.

Hedging of foreign currency risk

Sysco previously entered into cross-currency swap contracts to hedge the foreign currency transaction risk of certain intercompany loans. There were no credit-risk related contingent features associated with these swaps, which 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 euro-bond denominated debt to hedge the foreign currency exposure of our net investment in certain foreign operations. 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 ~~December 26, 2020~~January 1, 2022 are presented below:

Maturity Date of the Hedging Instrument

Currency / Unit of Measure

Notional Value

(In millions)

Hedging of interest rate risk

~~July 2021~~

~~U.S. Dollar~~

~~500~~

June 2023

Euro

500

~~March 2025~~

~~U.S. Dollar~~

~~500~~

Hedging of foreign currency risk

Various ~~(December 28, 2020~~(January 2022 to ~~January 2021)~~April 2022)

Swedish Krona

64245

Various (January 2022 to June 2022)

British Pound Sterling

June 2023

Euro

500

Hedging of fuel risk

Various ~~(December 31, 2020~~(January 2022 to ~~December 2021)~~June 2022)

Gallons

3322

The location and the fair value of derivative instruments designated as hedges in the consolidated balance sheet as of ~~December 26, 2020~~January 1, 2022 and ~~June 27, 2020~~July 3, 2021 are as follows:


			Derivative Fair Value						Derivative Fair Value
		Balance Sheet location	Dec. 26, 2020		Jun. 27, 2020			Balance Sheet location	Jan. 1, 2022		Jul. 3, 2021
			(In thousands)						(In thousands)
Fair Value Hedges:	Fair Value Hedges:						Fair Value Hedges:
Interest rate swaps		Other current assets	$	2,678	$	1,388

Interest rate swaps	Interest rate swaps	Other assets	58,053		69,782		Interest rate swaps	Other assets	$	3,970	$	43,217

Cash Flow Hedges:	Cash Flow Hedges:						Cash Flow Hedges:
Fuel swaps	Fuel swaps	Other current assets	$	3,428	$	233	Fuel swaps	Other current assets	$	8,766	$	16,732
Foreign currency forwards	Foreign currency forwards	Other current assets	34		1,063		Foreign currency forwards	Other current assets	183		42

Fuel swaps		Other assets	0		1,173
Cross currency swaps		Other assets	0		19,614

Fuel swaps	Fuel swaps	Other current liabilities	6,973		28,242		Fuel swaps	Other current liabilities	102		—
Foreign currency forwards	Foreign currency forwards	Other current liabilities	163		222		Foreign currency forwards	Other current liabilities	473		46

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				26-Week Period Ended					13-Week Period Ended				26-Week Period Ended
		Dec. 26, 2020		Dec. 28, 2019		Dec. 26, 2020		Dec. 28, 2019			Jan. 1, 2022		Dec. 26, 2020		Jan. 1, 2022		Dec. 26, 2020
		(In thousands)									(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	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	$	146,498	$	76,762	$	293,215	$	160,097	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	$	242,899	$	146,498	$	371,113	$	293,215
Gain or (loss) on fair value hedging relationships:	Gain or (loss) on fair value hedging relationships:									Gain or (loss) on fair value hedging relationships:
Interest rate swaps:	Interest rate swaps:									Interest rate swaps:
Hedged items	Hedged items	$	(3,793)	$	(5,350)	$	(13,791)	$	(30,086)	Hedged items	$	29,787	$	(3,793)	$	27,355	$	(13,791)
Derivatives designated as hedging instruments	Derivatives designated as hedging instruments	(296)		(9,248)		3,161		(391)		Derivatives designated as hedging instruments	(39,473)		(296)		(47,862)		3,161

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


		13-Week Period Ended				26-Week Period Ended					13-Week Period Ended				26-Week Period Ended
		Dec. 26, 2020		Dec. 28, 2019		Dec. 26, 2020		Dec. 28, 2019			Jan. 1, 2022		Dec. 26, 2020		Jan. 1, 2022		Dec. 26, 2020
		(In thousands)									(In thousands)
Interest expense	Interest expense	$	(9,735)	$	(14,560)	$	(24,568)	$	(29,117)	Interest expense	$	(5,367)	$	(9,735)	$	(11,892)	$	(24,568)
Increase (decrease) in fair value of debt		(5,942)		(9,210)		(10,777)		969
Decrease in fair value of debt										Decrease in fair value of debt	(35,154)		(5,942)		(39,247)		(10,777)
Hedged items	Hedged items	$	(3,793)	$	(5,350)	$	(13,791)	$	(30,086)	Hedged items	$	29,787	$	(3,793)	$	27,355	$	(13,791)

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 January 1, 2022 and December 26, 2020, ~~and December 28, 2019,~~ presented on a pretax basis, are as follows:


		13-Week Period Ended Dec. 26, 2020						13-Week Period Ended Jan. 1, 2022
		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			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)			(In thousands)			(In thousands)
Derivatives in cash flow hedging relationships:	Derivatives in cash flow hedging relationships:						Derivatives in cash flow hedging relationships:
Fuel swaps	Fuel swaps	$	16,939	Operating expense	$	(7,613)	Fuel swaps	$	(7,588)	Operating expense	$	9,608
Foreign currency contracts	Foreign currency contracts	(587)		Cost of sales / Other income	0		Foreign currency contracts	(356)		Cost of sales / Other income	—

Total	Total	$	16,352		$	(7,613)	Total	$	(7,944)		$	9,608

Derivatives in net investment hedging relationships:	Derivatives in net investment hedging relationships:						Derivatives in net investment hedging relationships:

Foreign denominated debt	Foreign denominated debt	(27,554)		N/A	0		Foreign denominated debt	$	11,149	N/A	$	—
Total	Total	$	(27,554)		$	0	Total	$	11,149		$	—

		13-Week Period Ended Dec. 28, 2019						13-Week Period Ended Dec. 26, 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			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)			(In thousands)			(In thousands)
Derivatives in cash flow hedging relationships:	Derivatives in cash flow hedging relationships:						Derivatives in cash flow hedging relationships:
Fuel swaps	Fuel swaps	$	10,345	Operating expense	$	(3,213)	Fuel swaps	$	16,939	Operating expense	$	(7,613)
Foreign currency contracts	Foreign currency contracts	(29,658)		Cost of sales / Other income	3,624		Foreign currency contracts	(587)		Cost of sales / Other income	—

Total	Total	$	(19,313)		$	411	Total	$	16,352		$	(7,613)

Derivatives in net investment hedging relationships:	Derivatives in net investment hedging relationships:						Derivatives in net investment hedging relationships:
Foreign currency contracts		$	(34,639)	N/A	$	0

Foreign denominated debt	Foreign denominated debt	(11,650)		N/A	0		Foreign denominated debt	$	(27,554)	N/A	$	—
Total	Total	$	(46,289)		$	0	Total	$	(27,554)		$	—

The location and effect of cash flow and net investment hedge accounting on the consolidated statements of comprehensive income for the 26-week periods ended January 1, 2022 and December 26, 2020, ~~and December 28, 2019,~~ presented on a pretax basis, are as follows:


		26-Week Period Ended Dec. 26, 2020						26-Week Period Ended Jan. 1, 2022
		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			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)			(In thousands)			(In thousands)
Derivatives in cash flow hedging relationships:	Derivatives in cash flow hedging relationships:						Derivatives in cash flow hedging relationships:
Fuel swaps	Fuel swaps	$	19,830	Operating expense	$	(16,265)	Fuel swaps	$	(8,073)	Operating expense	$	17,580
Foreign currency contracts	Foreign currency contracts	(20,319)		Cost of sales / Other income	(2,692)		Foreign currency contracts	(434)		Cost of sales / Other income	—

Total	Total	$	(489)		$	(18,957)	Total	$	(8,507)		$	17,580

Derivatives in net investment hedging relationships:	Derivatives in net investment hedging relationships:						Derivatives in net investment hedging relationships:
Foreign currency contracts		$	0	N/A	$	0

Foreign denominated debt	Foreign denominated debt	(47,953)		N/A	0		Foreign denominated debt	$	24,702	N/A	$	—
Total	Total	$	(47,953)		$	0	Total	$	24,702		$	—

		26-Week Period Ended Dec. 28, 2019						26-Week Period Ended Dec. 26, 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			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)			(In thousands)			(In thousands)
Derivatives in cash flow hedging relationships:	Derivatives in cash flow hedging relationships:						Derivatives in cash flow hedging relationships:
Fuel swaps	Fuel swaps	$	10,689	Operating expense	$	(6,619)	Fuel swaps	$	19,830	Operating expense	$	(16,265)
Foreign currency contracts	Foreign currency contracts	(17,351)		Cost of sales / Other income	3,626		Foreign currency contracts	(20,319)		Cost of sales / Other income	(2,692)

Total	Total	$	(6,662)		$	(2,993)	Total	$	(489)		$	(18,957)

Derivatives in net investment hedging relationships:	Derivatives in net investment hedging relationships:						Derivatives in net investment hedging relationships:
Foreign currency contracts		$	(13,787)	N/A	$	0

Foreign denominated debt	Foreign denominated debt	9,800		N/A	0		Foreign denominated debt	$	(47,953)	N/A	$	—
Total	Total	$	(3,987)		$	0	Total	$	(47,953)		$	—

The location and carrying amount of hedged liabilities in the consolidated balance sheet as of ~~December 26, 2020~~January 1, 2022 are as follows:


		Dec. 26, 2020					Jan. 1, 2022
		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		$	(499,778)	$	(2,797)

Long-term debt	Long-term debt	(1,064,694)		(58,053)		Long-term debt	$	(568,272)	$	(3,970)

The location and carrying amount of hedged liabilities in the consolidated balance sheet as of ~~June 27, 2020~~July 3, 2021 are as follows:

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)
(In thousands)
Balance sheet location:
Current maturities of long-term debt $ (749,924) $ (1,388)
Long-term debt (1,563,636) (70,239)


	Jul. 3, 2021
	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:

Long-term debt	$	(1,065,364)	$	(43,217)

7.8. DEBT

The company has a $2.0 billion long-term revolving credit facility that expires on June 28, 2024, subject to extension. As of ~~December 26, 2020,~~January 1, 2022, there were ~~$700.0 million in~~no borrowings outstanding under this facility. During the first quarter of fiscal 2022, Sysco amended its revolving credit facility to (a) eliminate the covenant that had restricted (i) increases to the company’s regular quarterly dividend and (ii) share repurchases, in each case, until the earlier of September 2022 or the date on which Sysco has achieved a certain ratio of consolidated EBITDA to consolidated interest expense, and (b) adjust the covenant requiring Sysco to maintain a certain ratio of consolidated EBITDA to consolidated interest expense.

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 December 26, 2020, there were 0 commercial paper issuances 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.~~As of January 1, 2022, there were no commercial paper program for the purpose of issuing short-term, unsecured Sterling-denominated notes in an aggregate amount not to exceed £600.0 million. As of December 26, 2020, there were £600.0 million in aggregate principal amount of notesissuances outstanding under this ~~commercial paper~~ program. ~~The notes under this commercial paper program will mature through May 7, 2021 and are classified within current maturities of long-term debt.~~ During the first 26 weeks of fiscal ~~2021, aggregate outstanding~~2022, there were no borrowing activities under our commercial paper ~~issuances, borrowings under our~~programs, long-term revolving credit facility ~~and~~or short-term bank ~~borrowings ranged from approximately $1.4 billion to approximately $1.5 billion.~~notes.

~~In September 2020,~~On December 14, 2021, Sysco ~~redeemed all $750 million of its outstanding 2.60%~~issued senior notes (the “Notes”) totaling $1.25 billion. Details of the Notes are as follows:


Maturity Date	Par Value (in millions)		Coupon Rate		Pricing (percentage of par)
December 14, 2031 (the 2031 Notes)	$	450	2.45	%	99.578	%
December 14, 2051 (the 2051 Notes)	800		3.15		99.308

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 in arrears on June 14 and December 14, beginning June 14, 2022. 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 2031 Notes before the date that is three months prior to the ~~October 2020~~ maturity ~~utilizing~~date, or (ii) the 2051 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 that would be due if such senior notes matured on the applicable date described above. If Sysco elects to redeem a ~~combination~~series of ~~cash flow from operations~~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.

On December 14, 2021, Sysco redeemed $1.25 billion in combined aggregate principal amount of its 5.650% Senior Notes due 2025 (the “5.650% Notes”) and 3.550% Senior Notes due 2025 (the “3.550% Notes”). Sysco used the net proceeds from the offering of the Notes, together with cash on hand, to fund the redemption of all of Sysco’s outstanding 5.650% Notes and 3.550% Notes. The redemption price for the senior ~~note issuances~~notes of each such series that were redeemed was the principal amount of such senior notes plus a “make-whole” amount determined in ~~fiscal 2020.~~accordance with the indenture governing such senior notes and accrued and unpaid interest to the applicable redemption date. The redemption was considered to be a debt extinguishment. As such, Sysco recognized a loss on extinguishment of debt of $115.6 million, which is recorded as a component of interest expense in the accompanying consolidated results of operations. Of this loss, $132.7 million was attributable to the purchase premium paid to the noteholders, and $6.0 million was attributable to the write-off of unamortized debt issuance costs and debt discount associated with the redeemed notes, offset by a gain of $23.1 million attributable to the termination of interest rate swap agreements that were serving as a fair value hedge.

1918

8.9. EARNINGS PER SHARE

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


		13-Week Period Ended				26-Week Period Ended					13-Week Period Ended				26-Week Period Ended
		Dec. 26, 2020		Dec. 28, 2019		Dec. 26, 2020		Dec. 28, 2019			Jan. 1, 2022		Dec. 26, 2020		Jan. 1, 2022		Dec. 26, 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	Net earnings	$	67,289	$	383,410	$	284,189	$	837,191	Net earnings	$	167,441	$	67,289	$	545,454	$	284,189
Denominator:	Denominator:									Denominator:
Weighted-average basic shares outstanding	Weighted-average basic shares outstanding	510,006,754		509,984,743		509,567,080		511,721,290		Weighted-average basic shares outstanding	511,044,400		510,006,754		511,780,234		509,567,080
Dilutive effect of share-based awards	Dilutive effect of share-based awards	2,736,038		5,533,049		2,173,698		5,399,105		Dilutive effect of share-based awards	3,530,489		2,736,038		3,398,676		2,173,698
Weighted-average diluted shares outstanding	Weighted-average diluted shares outstanding	512,742,792		515,517,792		511,740,778		517,120,395		Weighted-average diluted shares outstanding	514,574,889		512,742,792		515,178,910		511,740,778
Basic earnings per share	Basic earnings per share	$	0.13	$	0.75	$	0.56	$	1.64	Basic earnings per share	$	0.33	$	0.13	$	1.07	$	0.56
Diluted earnings per share	Diluted earnings per share	$	0.13	$	0.74	$	0.56	$	1.62	Diluted earnings per share	$	0.33	$	0.13	$	1.06	$	0.56

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 ~~6,287,000~~2,124,000 and ~~2,947,000~~6,287,000 for the second quarter of fiscal ~~2021~~2022 and fiscal ~~2020,~~2021, 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 ~~6,199,000~~2,044,000 and ~~3,134,000~~6,199,000 for the first 26 weeks of fiscal ~~2021~~2022 and fiscal ~~2020,~~2021, respectively.

9.10. 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 certain hedging arrangements and amounts related to pension and other postretirement plans. Comprehensive income was ~~$291.5~~$149.1 million and ~~$492.5~~$291.5 million for the second quarter of fiscal ~~2021~~2022 and fiscal ~~2020,~~2021, respectively. Comprehensive income was ~~$606.9~~$458.0 million and ~~$870.6~~$606.9 million for the first 26 weeks of fiscal ~~2021~~2022 and fiscal ~~2020,~~2021, 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:

2019


			13-Week Period Ended Dec. 26, 2020								13-Week Period Ended Jan. 1, 2022
		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	$	183	$	46	$	137	Amortization of prior service cost	Other expense, net	$	99	$	25	$	74
Amortization of actuarial loss, net	Amortization of actuarial loss, net	Other expense, net	10,387		2,594		7,793		Amortization of actuarial loss, net	Other expense, net	7,401		1,913		5,488
Total reclassification adjustments	Total reclassification adjustments		10,570		2,640		7,930		Total reclassification adjustments		7,500		1,938		5,562
Foreign currency translation:	Foreign currency translation:								Foreign currency translation:

Foreign currency translation adjustment	Foreign currency translation adjustment	N/A	222,507		0		222,507		Foreign currency translation adjustment	N/A	(26,870)		—		(26,870)
Marketable securities:	Marketable securities:								Marketable securities:
Change in marketable securities (1)	Change in marketable securities (1)	N/A	(55)		(11)		(44)		Change in marketable securities (1)	N/A	(1,808)		(379)		(1,429)
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 hedge	Change in cash flow hedge	Operating expenses (2)	16,352		4,017		12,335		Change in cash flow hedge	Operating expenses (2)	(7,944)		(1,843)		(6,101)
Change in net investment hedge	Change in net investment hedge	N/A	(27,554)		(6,888)		(20,666)		Change in net investment hedge	N/A	11,149		2,787		8,362

Total other comprehensive income before reclassification adjustments	Total other comprehensive income before reclassification adjustments		(11,202)		(2,871)		(8,331)		Total other comprehensive income before reclassification adjustments		3,205		944		2,261
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	2,874		719		2,155

Total other comprehensive income			$	224,694	$	477	$	224,217
Total other comprehensive loss									Total other comprehensive loss		$	(15,099)	$	3,222	$	(18,321)

(1)Realized gains or losses on marketable securities are presented within other (income) expense, net in the consolidated results of operations; however, there were 0no significant gains or losses realized in the second quarter of fiscal ~~2021.~~2022.

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

2120


			13-Week Period Ended Dec. 28, 2019								13-Week Period Ended Dec. 26, 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	$	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	9,630		2,405		7,225		Amortization of actuarial loss, net	Other expense, net	10,387		2,594		7,793

Total reclassification adjustments	Total reclassification adjustments		11,535		2,882		8,653		Total reclassification adjustments		10,570		2,640		7,930
Foreign currency translation:	Foreign currency translation:								Foreign currency translation:
Foreign currency translation adjustment	Foreign currency translation adjustment	N/A	154,955		0		154,955		Foreign currency translation adjustment	N/A	222,507		—		222,507
Marketable Securities:
Marketable securities:									Marketable securities:
Change in marketable securities (1)	Change in marketable securities (1)	N/A	(489)		(103)		(386)		Change in marketable securities (1)	N/A	(55)		(11)		(44)
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)	(19,313)		(4,516)		(14,797)
Change in cash flow hedge									Change in cash flow hedge	Operating expenses (2)	16,352		4,017		12,335
Change in net investment hedges	Change in net investment hedges	N/A	(46,289)		(4,810)		(41,479)		Change in net investment hedges	N/A	(27,554)		(6,888)		(20,666)

Total other comprehensive income (loss) before reclassification adjustments			(65,602)		(9,326)		(56,276)
Total other comprehensive income before reclassification adjustments									Total other comprehensive income before reclassification adjustments		(11,202)		(2,871)		(8,331)
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	2,874		719		2,155
Total other comprehensive income (loss)			$	103,273	$	(5,828)	$	109,101
Total other comprehensive income									Total other comprehensive income		$	224,694	$	477	$	224,217

(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 second quarter of fiscal ~~2020.~~2021.

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


			26-Week Period Ended Dec. 26, 2020								26-Week Period Ended Jan. 1, 2022
		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	$	366	$	92	$	274	Amortization of prior service cost	Other expense, net	$	198	$	50	$	148
Amortization of actuarial loss, net	Amortization of actuarial loss, net	Other expense, net	20,740		5,182		15,558		Amortization of actuarial loss, net	Other expense, net	15,887		4,032		11,855
Total reclassification adjustments	Total reclassification adjustments		21,106		5,274		15,832		Total reclassification adjustments		16,085		4,082		12,003
Foreign currency translation:	Foreign currency translation:								Foreign currency translation:
Other comprehensive income (loss) before reclassification adjustments:	Other comprehensive income (loss) before reclassification adjustments:								Other comprehensive income (loss) before reclassification adjustments:
Foreign currency translation adjustment	Foreign currency translation adjustment	N/A	335,647		0		335,647		Foreign currency translation adjustment	N/A	(114,064)		—		(114,064)
Marketable securities:	Marketable securities:								Marketable securities:
Change in marketable securities (1)	Change in marketable securities (1)	N/A	(655)		(137)		(518)		Change in marketable securities (1)	N/A	(2,201)		(461)		(1,740)
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 ~~(3)~~	Change in cash flow hedges ~~(3)~~	Operating expenses (2)	(489)		143		(632)		Change in cash flow hedges ~~(3)~~	Operating expenses (2)	(8,507)		(1,977)		(6,530)
Change in net investment hedges ~~(3)~~	Change in net investment hedges ~~(3)~~	N/A	(47,953)		(16,026)		(31,927)		Change in net investment hedges ~~(3)~~	N/A	24,702		6,175		18,527

Total other comprehensive income before reclassification adjustments	Total other comprehensive income before reclassification adjustments		(48,442)		(15,883)		(32,559)		Total other comprehensive income before reclassification adjustments		16,195		4,198		11,997
Reclassification adjustments:	Reclassification adjustments:								Reclassification adjustments:
Amortization of cash flow hedges	Amortization of cash flow hedges	Interest expense	5,748		1,438		4,310		Amortization of cash flow hedges	Interest expense	5,748		1,438		4,310

Total other comprehensive income (loss)	Total other comprehensive income (loss)		$	313,404	$	(9,308)	$	322,712	Total other comprehensive income (loss)		$	(78,237)	$	9,257	$	(87,494)

(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 26 weeks of fiscal ~~2021.~~2022.

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


		26-Week Period Ended Dec. 26, 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	$	366	$	92	$	274
Amortization of actuarial loss, net	Other expense, net	20,740		5,182		15,558

Total reclassification adjustments		21,106		5,274		15,832
Foreign currency translation:

Foreign currency translation adjustment	N/A	335,647		—		335,647
Marketable securities:
Change in marketable securities (1)	N/A	(655)		(137)		(518)
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedge (3)	Operating expenses (2)	(489)		143		(632)
Change in net investment hedges	N/A	(47,953)		(16,026)		(31,927)

Total other comprehensive income before reclassification adjustments		(48,442)		(15,883)		(32,559)
Reclassification adjustments:
Amortization of cash flow hedges	Interest expense	5,748		1,438		4,310
Total other comprehensive (loss) income		$	313,404	$	(9,308)	$	322,712

(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 26 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.”~~

hedges.

26-Week Period Ended Dec. 28, 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:
Reclassification adjustments:
Amortization of prior service cost Other expense, net $ 3,810 $ 954 $ 2,856
Amortization of actuarial loss, net Other expense, net 18,572 4,664 13,908
Total reclassification adjustments 22,382 5,618 16,764
Foreign currency translation:
Foreign currency translation adjustment N/A 28,796 0 28,796
Marketable Securities:
Change in marketable securities (1)
N/A 692 145 547
Hedging instruments:
Other comprehensive income (loss) before reclassification adjustments:
Change in cash flow hedges
Operating expenses (2)
(6,662) (1,124) (5,538)
Change in net investment hedges N/A (3,987) 7,492 (11,479)
Total other comprehensive income (loss) before reclassification adjustments (10,649) 6,368 (17,017)
Reclassification adjustments:
Amortization of cash flow hedges Interest expense 5,748 1,438 4,310
Total other comprehensive income $ 46,969 $ 13,569 $ 33,400

~~(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 26 weeks of fiscal 2020.

~~(2)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~~for the periods presented:

26-Week Period Ended Dec. 26, 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 June 27, 2020 $ (1,265,714) $ (402,384) $ (49,878) $ 7,095 $ (1,710,881)
Equity adjustment from foreign currency translation — 335,647 — — 335,647
Amortization of cash flow hedges — — 4,310 — 4,310
Change in net investment hedges — — (31,927) — (31,927)
Change in cash flow hedge — — (632) — (632)
Amortization of unrecognized prior service cost 274 — — — 274
Amortization of unrecognized net actuarial losses 15,558 — — — 15,558
Change in marketable securities — — — (518) (518)
Balance as of Dec. 26, 2020 $ (1,249,882) $ (66,737) $ (78,127) $ 6,577 $ (1,388,169)


	26-Week Period Ended Jan. 1, 2022
	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 Jul. 3, 2021	$	(1,061,991)	$	(40,092)	$	(51,096)	$	4,415	$	(1,148,764)
Equity adjustment from foreign currency translation	—		(114,064)		—		—		(114,064)

Amortization of cash flow hedges	—		—		4,310		—		4,310

Change in net investment hedges	—		—		18,527		—		18,527
Change in cash flow hedge	—		—		(6,530)		—		(6,530)


Amortization of unrecognized prior service cost	148		—		—		—		148
Amortization of unrecognized net actuarial losses	11,855		—		—		—		11,855
Change in marketable securities	—		—		—		(1,740)		(1,740)
Balance as of Jan. 1, 2022	$	(1,049,988)	$	(154,156)	$	(34,789)	$	2,675	$	(1,236,258)


		26-Week Period Ended Dec. 28, 2019											26-Week Period Ended Dec. 26, 2020
		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	—		28,796		—		—		28,796		Equity adjustment from foreign currency translation	—		335,647		—		—		335,647
Amortization of cash flow hedges	Amortization of cash flow hedges	—		—		4,310		—		4,310		Amortization of cash flow hedges	—		—		4,310		—		4,310

Change in net investment hedges	Change in net investment hedges	—		—		(11,479)		—		(11,479)		Change in net investment hedges	—		—		(31,927)		—		(31,927)
Change in cash flow hedge	Change in cash flow hedge	—		—		(5,538)		—		(5,538)		Change in cash flow hedge	—		—		(632)		—		(632)

Amortization of unrecognized prior service cost	Amortization of unrecognized prior service cost	2,856		—		—		—		2,856		Amortization of unrecognized prior service cost	274		—		—		—		274
Amortization of unrecognized net actuarial losses	Amortization of unrecognized net actuarial losses	13,908		—		—		—		13,908		Amortization of unrecognized net actuarial losses	15,558		—		—		—		15,558
Change in marketable securities	Change in marketable securities	—		—		—		547		547		Change in marketable securities	—		—		—		(518)		(518)
Balance as of Dec. 28, 2019		$	(1,200,853)	$	(261,373)	$	(107,477)	$	3,374	$	(1,566,329)
Balance as of Dec. 26, 2020												Balance as of Dec. 26, 2020	$	(1,249,882)	$	(66,737)	$	(78,127)	$	6,577	$	(1,388,169)

~~10.~~11. 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 26 weeks of fiscal ~~2021,~~2022, options to purchase ~~1,943,368~~1,224,150 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 26 weeks of fiscal ~~2021~~2022 was ~~$13.63.~~$17.39.

In the first 26 weeks of fiscal ~~2021, 794,659~~2022, employees were granted 470,720 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 26 weeks of fiscal ~~2021~~2022 was ~~$58.71.~~$76.75. The PSUs will convert into shares of Sysco common stock at the end of the ~~two-year~~three-year performance period based on actual performance targets achieved, as well as the market-based return of Sysco’s common stock relative to that of each company within the S&P 500 index.

In the first 26 weeks of fiscal ~~2021, 415,910 restricted stock units~~2022, employees were granted ~~to employees.~~201,922 restricted stock units. The weighted average grant-date fair value per restricted stock unit granted during the first 26 weeks of fiscal ~~2021~~2022 was ~~$57.90.~~$76.49.

Employee Stock Purchase Plan

Plan participants purchased ~~452,013~~465,814 shares of common stock under the ~~Sysco~~ ESPP during the first 26 weeks of fiscal ~~2021.~~2022. The weighted average fair value per employee stock purchase right issued pursuant to the ESPP was ~~$3.41~~$11.78 during the first 26 weeks of fiscal ~~2021.~~2022. 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 ~~$47.1~~$60.3 million and ~~$46.6~~$47.1 million for the first 26 weeks of fiscal ~~2021~~2022 and fiscal ~~2020,~~2021, respectively.

As of ~~December 26, 2020,~~January 1, 2022, there was ~~$123.8~~$133.6 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 ~~1.91~~1.86 years.

~~11.~~12. INCOME TAXES

Effective Tax Rate

The effective tax rates for the second quarter and first 26 weeks of fiscal 2022 were 21.27% and 24.18%, respectively. As compared to the company’s statutory tax rate, the higher effective tax rate for the second quarter and first 26 weeks of fiscal 2022 was impacted by the increase in our reserve for uncertain tax positions of $12.0 million in the first quarter, partially offset by (1) the favorable impact of excess tax benefits of equity-based compensation that totaled $1.4 million and $2.9 million, respectively, and (2) the impact of corporate-owned life insurance policies that totaled an unfavorable $1.0 million in the second quarter and a favorable $1.0 million in the first 26 weeks of fiscal 2022. The effective tax rates for the second quarter and first 26 weeks of fiscal 2021 were 17.05% and 16.38%, respectively. As compared to the company’s statutory tax rate, the lower effective tax rate for the second quarter and first 26 weeks of fiscal 2021 was impacted by (1) the favorable impact of excess tax benefits of equity-based compensation that totaled $4.3 million and $6.6 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.~~United Kingdom (U.K.) of $5.5 million in the first quarter. The effective tax rates for the second quarter and first 26 weeks of fiscal 2020 were 19.54% and 20.90%, respectively. The lower effective tax rate for the second quarter and first 26 weeks of fiscal 2020 was primarily due to the favorable impact of excess tax benefits of equity-based compensation that totaled $11.8 million and $27.5 million, respectively.

Uncertain Tax Positions

As of ~~December 26, 2020,~~January 1, 2022, the gross amount of unrecognized tax benefit and related accrued interest was ~~$20.4~~$32.4 million and ~~$2.4~~$4.6 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.

~~12.~~

13. 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.

~~13.~~14. BUSINESS SEGMENT INFORMATION

~~The company has~~Sysco distributes food and related products to restaurants, healthcare and educational facilities, lodging establishments and other foodservice customers. Our primary operations are located in North America and Europe. Under the accounting provisions related to disclosures about segments of an enterprise, we have aggregated certain ~~of its~~ operating segments into 3 reportable segments. “Other” financial information is attributable to ~~the company’s~~our 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 Italian, specialty imports and a wide variety of non-food products;

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

•SYGMA – ~~the company’s~~our U.S. customized distribution ~~subsidiary;~~operations serving quick-service chain restaurant customer locations; and

•Other – primarily our hotel supply operations, Guest Worldwide. ~~Sysco sold its interests in Cake Corporation in the first quarter of fiscal 2021.~~

The accounting policies for the segments are the same as those disclosed by Sysco for its consolidated financial statements. ~~Corporate expenses~~Our Global Support Center generally ~~include~~includes all expenses of the corporate office and Sysco’s shared ~~services center.~~service operations. These also include all U.S. 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 26 weeks of fiscal 2021 reflects this change in reporting structure. The second quarter and first 26 weeks of fiscal 2020 results reflect $64.0 million and $131.8 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.~~segments:


		13-Week Period Ended				26-Week Period Ended					13-Week Period Ended				26-Week Period Ended
		Dec. 26, 2020		Dec. 28, 2019		Dec. 26, 2020		Dec. 28, 2019			Jan. 1, 2022		Dec. 26, 2020		Jan. 1, 2022		Dec. 26, 2020
Sales:	Sales:	(In thousands)				(In thousands)				Sales:	(In thousands)				(In thousands)
U.S. Foodservice Operations	U.S. Foodservice Operations	$	7,924,143	$	10,413,575	$	15,845,676	$	21,072,208	U.S. Foodservice Operations	$	11,498,155	$	7,924,143	$	23,101,118	$	15,845,676
International Foodservice Operations	International Foodservice Operations	1,967,789		2,890,053		4,131,482		5,802,441		International Foodservice Operations	2,806,272		1,967,789		5,701,519		4,131,482
SYGMA	SYGMA	1,520,401		1,455,893		3,044,549		2,902,887		SYGMA	1,771,323		1,520,401		3,475,356		3,044,549
Other	Other	146,649		265,521		314,654		550,511		Other	244,453		146,649		498,756		314,654
Total	Total	$	11,558,982	$	15,025,042	$	23,336,361	$	30,328,047	Total	$	16,320,203	$	11,558,982	$	32,776,749	$	23,336,361

		13-Week Period Ended				26-Week Period Ended					13-Week Period Ended				26-Week Period Ended
		Dec. 26, 2020		Dec. 28, 2019		Dec. 26, 2020		Dec. 28, 2019			Jan. 1, 2022		Dec. 26, 2020		Jan. 1, 2022		Dec. 26, 2020
Operating income (loss):	Operating income (loss):	(In thousands)				(In thousands)				Operating income (loss):	(In thousands)				(In thousands)
U.S. Foodservice Operations	U.S. Foodservice Operations	$	485,251	$	704,801	$	1,073,660	$	1,498,420	U.S. Foodservice Operations	$	676,822	$	485,251	$	1,474,345	$	1,073,660
International Foodservice Operations	International Foodservice Operations	(79,949)		34,881		(80,486)		89,681		International Foodservice Operations	10,745		(79,949)		47,421		(80,486)
SYGMA	SYGMA	11,328		9,861		23,020		17,431		SYGMA	(6,729)		11,328		(9,176)		23,020
Other	Other	(1,018)		9,403		(1,023)		19,540		Other	183		(1,018)		6,639		(1,023)
Total segments	Total segments	415,612		758,946		1,015,171		1,625,072		Total segments	681,021		415,612		1,519,229		1,015,171
Corporate		(203,550)		(206,453)		(383,530)		(404,261)
Global Support Center										Global Support Center	(236,112)		(203,550)		(442,638)		(383,530)
Total operating income	Total operating income	212,062		552,493		631,641		1,220,811		Total operating income	444,909		212,062		1,076,591		631,641
Interest expense	Interest expense	146,498		76,762		293,215		160,097		Interest expense	242,899		146,498		371,113		293,215
Other (income) expense, net	Other (income) expense, net	(15,556)		(807)		(1,432)		2,305		Other (income) expense, net	(10,676)		(15,556)		(13,928)		(1,432)
Earnings before income taxes	Earnings before income taxes	$	81,120	$	476,538	$	339,858	$	1,058,409	Earnings before income taxes	$	212,686	$	81,120	$	719,406	$	339,858

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 27, 2020,~~July 3, 2021, 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 27, 2020~~July 3, 2021 (our fiscal ~~2020~~2021 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 second quarter of fiscal ~~2021~~2022 results were primarily attributable to sales growth that surpassed second quarter of fiscal 2019 levels by 10.5%. We experienced sequential volume improvements through the second quarter as compared to fiscal 2019 until December, when sales began to slow down as the Omicron variant began negatively impacting our customers. We believe customers are responding positively to Sysco’s relative supply chain strength, our new purpose platform and our improving capabilities driven by our Recipe for Growth strategy. Our financial results demonstrate our ability to gain market share in this business climate. We continue to ~~be impacted~~experience double-digit product inflation and incur incremental operating expenses associated with labor challenges driven by the ~~COVID-19 pandemic; however, we achieved a profitable quarter despite a 23% reduction in sales~~current COVID environment, as well as the costs attributable to our snap back and ~~funded investments to enable~~transformation efforts. These have pressured our transformation. Our business transformation is on track as Sysco continues to manage the business through the COVID-19 pandemic and create new capabilities for our future. These capabilities will enable us to better serve our customers, differentiate ourselves from our competitors and deliver strong business results. Our strategic transformation priorities include acceleration of our work across our customer-facing tools and technology, sales transformation to improve selling effectiveness and provide a more customer-centric structure, regionalization of our U.S. Broadline business to enable us to operate with greater agility and efficiency as a company, and the permanent reduction of costs from the business. All of these efforts are expected to enable us to improve profitability and fund new sources of businessearnings growth. See below for a comparison of our ~~second quarter of~~ fiscal ~~2021~~2022 results to our ~~second quarter of~~ fiscal ~~2020~~2021 results, both including and excluding Certain ~~Items.~~Items (as defined below).

Comparisons of results from the second quarter of fiscal ~~2021~~2022 to the second quarter of fiscal ~~2020:~~2021 are presented below:

•Sales:

◦~~decreased 23.1%~~increased 41.2%, or ~~$3.5~~$4.8 billion, to ~~$11.6~~$16.3 billion;

•Operating income:

◦~~decreased 61.6%~~increased 109.8%, or ~~$340.4~~$232.8 million, to ~~$212.1~~$444.9 million;

◦adjusted operating income ~~decreased 62.7%~~increased 111.8%, or ~~$392.8~~$261.6 million, to ~~$234.1~~$495.7 million;

•Net earnings:

◦~~decreased 82.4%~~increased 148.8%, or ~~$316.1~~$100.2 million, to ~~$67.3~~$167.4 million;

◦adjusted net earnings ~~decreased 80.4%~~increased 240.0%, or ~~$351.9~~$206.1 million, to ~~$85.9~~$291.9 million;

•Basic earnings per share:

◦~~decreased 82.7%~~increased 153.8%, or ~~$0.62,~~$0.20, to ~~$0.13~~$0.33 per share;

•Diluted earnings per share:

◦~~decreased 82.4%~~increased 153.8%, or ~~$0.61,~~$0.20, to ~~$0.13~~$0.33 per share; ~~and~~

◦adjusted diluted earnings per share ~~decreased 80.0%~~increased 235.3%, or ~~$0.68,~~$0.40, to ~~$0.17 per share.~~$0.57 in fiscal 2022;

•EBITDA:

◦increased 56.8%, or $234.5 million, to $646.9 million; and

◦adjusted EBITDA increased 62.9%, or $258.9 million, to $670.7 million.

Comparisons of results from the first 26 weeks of fiscal ~~2021~~2022 to the first 26 weeks of fiscal ~~2020:~~2021 are presented below:

•Sales:

◦~~decreased 23.1%~~increased 40.5%, or ~~$7.0~~$9.4 billion, to ~~$23.3~~$32.8 billion;

•Operating income:

◦~~decreased 48.3%~~increased 70.4%, or ~~$589.2~~$445.0 million, to ~~$631.6 million;~~$1.1 billion;

◦adjusted operating income ~~decreased 56.3%~~increased 97.2%, or ~~$770.1~~$582.0 million, to ~~$598.7 million;~~$1.2 billion;

•Net earnings:

◦~~decreased 66.1%~~increased 91.9%, or ~~$553.0~~$261.3 million, to ~~$284.2 million;~~$0.5 billion;

◦adjusted net earnings ~~decreased 72.6%~~increase 178.4%, or ~~$688.8~~$462.6 million, to ~~$259.3~~$721.9 million;

•Basic earnings per share:

◦~~decreased 65.9%~~increased 91.1%, or ~~$1.08,~~$0.51, to ~~$0.56~~$1.07 per share;

•Diluted earnings per share:

◦~~decreased 65.4%~~increased 89.3%, or ~~$1.06,~~$0.50, to ~~$0.56~~$1.06 per share; and

◦adjusted diluted earnings per share ~~decreased 72.1%~~increased 174.5%, or ~~$1.32,~~$0.89, to ~~$0.51 per share.~~$1.40 in fiscal 2022;

•EBITDA:

◦increased 47.1%, or $469.9 million, to $1.5 billion; and

◦adjusted EBITDA increased 62.7%, or $587.0 million, to $1.5 billion.

~~Sysco’s~~

The discussion of our results ~~of operations for fiscal 2021~~includes certain non-GAAP financial measures, including EBITDA and ~~fiscal 2020 were impacted by~~adjusted EBITDA, that we believe provide important perspective with respect to underlying business trends. Other than free cash flow, any non-GAAP financial measures will be denoted as adjusted measures to remove the impact of restructuring and transformational project costs consisting of: (1) restructuring charges, (2) expenses associated with our various transformation ~~initiatives; (2) severance~~initiatives and (3) facility closure and severance charges; acquisition-related costs consisting of: (1) intangible amortization expense; (2) acquisition costs and ~~(3) restructuring charges. Sysco’s results for fiscal 2021 and fiscal 2020 were also impacted by intangible~~

~~amortization expense~~due diligence costs related to ~~the fiscal 2017 acquisition of Cucina Lux Investments Limited (the Brakes Acquisition). Additionally,~~ our ~~results for fiscal 2021 were impacted by the loss on the sale of Cake Corporation.~~

~~Fiscal 2021 results of operations were also positively impacted by~~significant acquisitions; and 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. 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~~the first 26 weeks of fiscal 2022 were also impacted by debt extinguishment costs ~~associated with~~and the ~~COVID-19 pandemic not previously stated.~~increase in reserves for uncertain tax positions. Our results for the first 26 weeks of fiscal 2021 were also impacted by a loss on the sale of a business.

The fiscal ~~2021~~2022 and fiscal ~~2020~~2021 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 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.”

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 office 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 fiscal 2021 reflects this change in reporting structure and prior year amounts have been reclassified to conform with 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 in our current business environment:

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

•~~Adjusted diluted earnings per share growth (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).~~

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.

Trends

Economic and Industry Trends

~~In response~~The food-away-from-home sector continues to experience an overall recovery as compared to fiscal 2021. However, beginning on the weekend after Thanksgiving, the Omicron variant of COVID-19 negatively impacted our customers due to the ~~COVID-19 pandemic, national~~reintroduction of significant restrictions on their businesses. Our business in Europe was impacted first, which affected our sales and ~~local governments have imposed substantial restrictions upon the customers we serve~~volume performance, most notably in the ~~food-away-from-home sector. Our customers~~United Kingdom and France. We have also experienced ~~increasingly restrictive conditions on their operations during~~an impact in the majority of Canada, where restaurants began closing for on-premise dining towards the end of the second quarter of fiscal ~~2021, which was most notable~~2022. While such restrictions are slowly starting to ease in ~~December when restaurant traffic~~February, these types of restrictions impact our customers’ performance and ~~sales declined. Additionally,~~ordering patterns. In the ~~International Foodservice Operations segment~~U.S., demand has ~~been impacted significantly~~declined due to ~~tougher restrictions~~changes in end-consumer behavior over concerns of vaccination breakthrough infections. We expect the ~~countries in which we operate, particularly in Europe, which went~~top-line impact from the Omicron variant to continue into ~~lockdown in December and is expected to remain in varying degrees~~the third quarter of ~~lockdown for a significant portion~~fiscal 2022. Despite the impact of the ~~second half of fiscal 2021.~~Omicron variant, Sysco ~~is helping our customers navigate this challenging environment, and~~gained market-share in the second quarter of fiscal ~~2021, as a result of these efforts, Sysco gained overall market share versus the rest of the industry, reflecting the early progress of our transformation and our success in winning new business.~~2022.

Sales and Gross Profit Trends

Our sales and gross profit performance can be influenced by multiple factors, including price, volume, inflation, customer mix and product ~~mix and the impact of the COVID-19 pandemic.~~mix. The ~~biggest~~most significant factor affecting performance in the ~~first 26 weeks~~second quarter of fiscal ~~2021~~2022 was volume growth, as we experienced strong results from both independent and chain customers, driven by a 17.6% improvement in local case volume and a 22.5% improvement in total case volume within our U.S. Broadline operations, in each instance as compared to the ~~COVID-19 pandemic due~~second quarter of fiscal 2021. Sysco continues to ~~reduced volume. In terms of customer mix,~~lead the industry in how we are supporting our customers during this challenging supply chain period, including no order minimums, when there has been industry-wide product shortages. This has enabled us to gain market share during the second quarter of fiscal ~~2021,~~2022. We expect our volumes to continue their recovery to fiscal 2019 levels relatively quickly once the Omicron variant peaks are passed and government restrictions ease. However, we added more new local customers than we have added during any quarter in the last five years. This evidences our ability to accelerate future growth. Gross margins were also adversely impacted by lower volumes in December due to restrictions on our customers resulting from thebelieve this impact of the ~~second wave~~Omicron variant and the subsequent recovery will delay our volumes reaching fiscal 2019 levels later than we originally forecast. This expectation assumes additional variants of ~~COVID-19~~concern do not arise. We are on track to exceed our stated goal of achieving growth at a rate of 1.2 times the industry in ~~different geographies. Since~~fiscal 2022, and we believe that our Recipe for Growth strategy will enable us to accelerate over the ~~beginning~~next three years and grow at 1.5 times the pace of the ~~third quarter~~industry by the end of fiscal ~~2021, however, we are seeing volume improvements in our largest businesses in North America.~~2024.

~~With~~Product cost inflation has also been a driver of our ~~focus on growing~~ sales ~~in the second quarter~~and gross profit performance. We experienced inflation at a rate of fiscal 2021, we added $200 million of net new national account business, which totals more than $1.5 billion of contracted business on an annualized basis since the beginning of the pandemic. We believe these customer additions will enable Sysco to recover faster than the market as economic conditions improve.

~~Our gross margin decreased 67~~14.6% and ~~53 basis points~~13.8% in the second quarter and first 26 weeks of fiscal ~~2021,~~2022, respectively, ~~compared to the respective prior year periods. For~~in our U.S. ~~Foodservice Operations segment, we typically see a seasonal decline~~Broadline operations, primarily in the meat and poultry categories. We have been successful in managing our inflation, resulting in an increase in gross profit dollars. Gross margin ~~sequentially from the first quarter to~~decreased 44 and 62 points in the second quarter ~~as we did this fiscal year. Our largest businesses, U.S. Foodservice Operations~~ and ~~SYGMA, each had a flat gross margin rates when compared to~~ the same quarter of the prior year, while the International Foodservice Operations business and businesses in our other segment showed gross margin declines in the quarter. The growth of our national accounts business at SYGMA produced a customer mix shift that resulted in overall lower margins for Sysco, as gross margin on sales to our national customers is generally lower than on sales to other types of customers due to the higher volumes we sell to these customers. In terms of the impact on pricing, we experienced inflation at a rate of 1.6% and 1.3% during the second quarter and first 26 weeks of fiscal ~~2021,~~2022, respectively, ~~primarily in~~as compared to the ~~paper and disposables, poultry and dairy products categories.~~same prior year periods, largely due to the impact of product cost inflation.

Operating Expense Trends

Total operating expenses ~~decreased 17.1%~~increased 29.7% and ~~19.0%~~29.8% during the second quarter and first 26 weeks of fiscal ~~2021,~~2022, respectively, as compared to the same periods in fiscal 2020. The largest contributor to the decrease was reduced costs from cost-out initiatives (see “Cost-out Measures” below), as well as a benefit from a reduction in our allowance for doubtful accounts resulting from the COVID-19 pandemic. Many of Sysco’s customers, including those in the restaurant, hospitality and education segments, are operating at a substantially reduced volume due to governmental requirements for closures or other social-distancing measures, and a portion of Sysco’s customers are closed. Some of these customers have ceased paying their outstanding receivables, creating uncertainty as to their collectability. We established reserves for bad debts in fiscal 2020 for these receivables; however, collections have improved in fiscal 2021 and, as a result, we have reduced our reserves on pre-pandemic receivables, recognizing a $30.3 million and $128.9 million benefit in the second quarter and first 26 weeks of fiscal 2021, ~~respectively, included~~driven by the variable costs associated with significantly increased volumes, increased labor costs stemming from supply chain issues and transformation investments towards our Recipe for Growth strategy. We have made a purposeful response to the COVID-generated labor and safety environment in which we are operating, with $73.0 million in snap back operating investments such as ~~a Certain Item. Additional reserves of $13.8 million~~recruiting costs, hiring marketing, vaccination promotion, contract labor and ~~$34.7 million were recorded~~sign-on and retention bonuses during the quarter. Omicron has also resulted in ~~the second quarter~~job absences, increasing our contract labor and first 26 weeks of fiscal 2021, respectively, for receivables relating to periods beginning after the onset of the COVID-19 pandemic, which are not included as a Certain Item. 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; however, if collections continueovertime costs. We continued to improve ~~it is also possible that additional reductions in~~ our ~~bad debt reserve could occur.~~

~~Cost-out Measures~~

The COVID-19 crisis has 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 produced savings in the second quarter and first 26 weeks of fiscal 2021. We have reduced pay-related expenses through headcount reductions across the organization, most of which occurred in fiscal 2020. Our U.S. Broadline regionalization also contributed to reduced costs, as we experienced an increase in warehouse productivity and maintained key transportation efficiency metrics despite significant changes in case volumestaffing levels in the second quarter of fiscal ~~2021.~~2022, primarily for transportation and warehouse staff. Onboarding new associates in our industry requires ample training and time to improve productivity; therefore, some of our expense increases have occurred as we have not yet achieved those additional productivity gains. We ~~brought~~expect our snap back ~~hundreds~~operating expenses to decline in the third quarter of ~~associates~~fiscal 2022 and expect to make progress on productivity over time. Our operating results in the second quarter of fiscal ~~2021 in support~~2022 included $43.5 million of operating expense investments for our Recipe for Growth strategy. We are making these necessary investments to ensure that we can serve our customers to enable us to continue increasing market share, profitably, at the national and local level; however, the higher operating expenses had a negative impact on our results for the quarter. Even with those significant snap back and transformation operating expense investments, offset by the continued benefit of our ~~business model. In~~cost-savings efforts, we leveraged our adjusted operating expense structure. We expect our operating expenses related to our investment for our Recipe for Growth to remain elevated for the ~~latter part~~remainder of the ~~third quarter of~~ fiscal 2021, we anticipate we will hire thousands of additional sales consultants, new business developers, culinary experts and operations associates in preparation for the incremental volume associated with the expected business recovery. Our operating expenses therefore are expected to increase in the third quarter of fiscal 2021 in contrast to the reduction in force efforts taken in the third quarter of fiscal 2020. We continue to make progress against our $350 million cost savings initiatives in fiscal 2021, and we continue to make purposeful investments in our capability builds in service of our transformation of pricing, customer experience, sales, vendor management and personalization. While we expect significant returns on these efforts in future quarters, the investment dollars are offsetting part of our savings in the second quarter and will do so in the second half of fiscal 2021. When combined with the impact of slower openings in our International segment, we expect our third quarter results to be more challenging than originally anticipated.

~~Status of Supply Chain Disruptions and Facility Closures~~

Although our business continues to face challenges associated with the COVID-19 crisis, to date we have not experienced any significant disruptions to our supply chain, significant distribution facility closures or disposals of significant assets or lines of business.year.

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. These effects could negatively impact our income tax expense, net earnings, and balance sheet.

~~Divestitures~~Our effective tax rate has been influenced by discrete events, such as tax law changes and excess tax benefits attributable to equity compensation exercises as discussed in Note 12, “Income Taxes,” in the Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q.

Net Earnings and Earnings per Share Trends

In a typical fiscal year prior to the COVID pandemic, our second half earnings are generally weighted around 40% in the third quarter and 60% in the fourth quarter due to the normal seasonality of our business. For fiscal 2022, we expect our second half earnings per share and adjusted earnings per share to be weighted even more to the fourth quarter. We expect a stronger fourth quarter this year, relative to the third quarter, as a result of anticipated volume recovery, lower snap-back

expenses and improved operating productivity. For these expectations, we are assuming no further COVID variant disruptions to our operating environment.

Comparisons to Fiscal 2019

In assessing our financial performance through the business recovery, Sysco’s management compared our results in fiscal 2022 against our corresponding fiscal 2019 results.

Comparisons of results from the second quarter of fiscal 2022 to the second quarter of fiscal 2019 are presented below:

•Sales:

◦increased 10.5%, or $1.6 billion, as compared to fiscal 2019;

•Operating income:

◦decreased 1.5%, or $7.0 million, as compared to fiscal 2019;

◦adjusted operating income decreased 17.8%, or $107.7 million, as compared to fiscal 2019;

•EBITDA:

◦increased 0.1%, or $0.4 million, as compared to fiscal 2019;

◦adjusted EBITDA decreased 10.8%, or $81.4 million, as compared to fiscal 2019;

•Diluted earnings per share:

◦decreased 35.3%, or $0.18, as compared to fiscal 2019; and

◦adjusted diluted earnings per share decreased 24.0%, or $0.18, as compared to fiscal 2019.

Comparisons of results from the first 26 weeks of fiscal 2022 to the first 26 weeks of fiscal 2019 are presented below:

•Sales:

◦increased 9.3%, or $2.8 billion, as compared to fiscal 2019;

•Operating income:

◦decreased 0.3%, or $3.4 million, as compared to fiscal 2019;

◦adjusted operating income decreased 8.8%, or $114.3 million, as compared to fiscal 2019;

•EBITDA:

◦increased 0.5%, or $7.2 million, as compared to fiscal 2019;

◦adjusted EBITDA decreased 5.4%, or $86.2 million, as compared to fiscal 2019;

•Diluted earnings per share:

◦decreased 20.3%, or $0.27, as compared to fiscal 2019; and

◦adjusted diluted earnings per share decreased 15.7%, or $0.26, as compared to fiscal 2019.

Key items impacting the comparability of Sysco’s results in the second quarter of fiscal 2022 to the second quarter of fiscal 2019 included the one-time and short-term expenses associated with the business recovery and the operating expense investments towards our Recipe for Growth strategy.

Mergers and Acquisitions

We continue to focus on mergers and acquisitions as a part of our growth strategy, where we plan to cultivate new channels, new segments and new capabilities. We have completed the following acquisitions thus far in fiscal 2022:

•In the first quarter of fiscal 2022, we acquired Greco and Sons, a leading independent specialty Italian distributor in the United States. We expect this acquisition to deliver over $1 billion in incremental sales to Sysco in fiscal 2022.

•In the first quarter of fiscal 2022, we acquired a specialty food distributor in the United Kingdom.

•In the second quarter of fiscal 2022, we acquired Paragon Foodservice, a regional broadline fresh produce distributor in western Pennsylvania. The acquisition will operate as part of Sysco’s U.S. specialty produce business.

Sysco ~~sold its interests in Davigel Spain,~~has entered into an agreement to acquire The Coastal Companies, a leading fresh produce distributor and value-added processer on the East Coast. The acquisition will operate as part of Sysco’s U.S. specialty produce business, and we anticipate the ~~International Foodservice Operations segment,~~closing to occur in the third quarter of fiscal 2021 and sold its interest in Cake Corporation in the first quarter of fiscal 2021. These operations were not significant to Sysco’s business, and these divestitures will facilitate our efforts to prioritize our focus and investments on our core business.2022.

Strategy

~~In response~~Our purpose is “Connecting the World to Share Food and Care for One Another,” which we believe will allow us to grow substantially faster than the ~~current environment,~~foodservice distribution industry and deliver profitable growth through our “Recipe for Growth” transformation. This growth transformation is supported by strategic pillars that 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 actions~~believe will allow us to strengthen our overall liquidity. Second, we are focused on stabilizing the business by removing costs. Third, we are creating new sources of revenue by helping our restaurant customers succeed under pandemic conditions. Fourth, we are providing products for cleaning, sanitation, and personal protection, without disruptions, so thatbetter serve our customers, ~~may continue their business operations.~~including our digital, products and solutions, supply chain, customer teams, and future horizons strategies.

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

•~~Improving service to our customers by enhancing our digital order entry platform, Sysco Shop, deploying a digital~~centralized pricing tool project, which is substantially complete for U.S. local customers, and ~~introducing~~which enables Sysco to strategically manage the high levels of inflation that we are currently experiencing. Other initiatives, such as our ~~Restaurants Rising campaign;~~

•~~Transforming~~personalization engine, continue to expand, while the sales transformation is helping our sales ~~model~~teams continue to ~~make it easier for customers~~win new business. Additionally, we are continuing to ~~do business with Sysco and to increase~~improve the ~~effectiveness~~efficiency of our ~~sales teams;~~

•~~Regionalizing our operations in the U.S. within our U.S. Broadline business; 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 second quarter of fiscal 2021, the number of customer orders placed through Sysco Shop, our mobile ordering platform that allows us to onboard new customers in less than 24 hours and drive incremental sales, continued to meaningfully increase. We believe this increase is a direct result of the improvements we are making to the Sysco Shop platform and the feedback we are soliciting from our customers and expert sales force. Additionally, the pilot program for our new pricing software is performing well in our first test region, and we intend to implement the pricing system across the country in calendar year 2021. The goal of this effort is to improve price transparency with our customers and drive incremental sales and gross profit growth by optimizing prices at the customer and item level. Additionally, by automating customer level pricing, we will free up time for our sales consultants to spend with customers on value-added activities,organization, such as ~~menu design, Sysco brand penetration, and other drivers of sales and margin. Our sales consultants are leveraging~~regionalizing the Restaurants Rising program, which eliminates order minimums and allows our sales consultants to assist their customers in optimizing operations, to retain current customers and help Sysco attract and serve new customers. We are improving our go-to-market selling strategy by transforming our sales process to create an improved, more customer-centric organizational structure. The regionalizationleadership structure of our U.S. Broadline and specialty business, ~~is complete, and~~as we reduce our structural expenses to fund our capital investments. We are in the initial stages of our Recipe for Growth, but we can already see the benefits of our developing capabilities in the new ~~structure has optimized~~customers we are winning and in the progress we are making towards gaining market share. We expect that, as our ~~inventory assortment across multiple physical sites~~Recipe for Growth matures, the impact on our top-line growth will continue to accelerate. We are committed to profitably growing 1.2 times the market for fiscal 2022 and ~~optimized~~1.5 times the ~~servicing~~market by the end of ~~key customers by ensuring~~fiscal 2024, the ~~most efficient physical location services each customer location.~~

~~See “Non-GAAP Reconciliations” below for an explanation~~third year of ~~adjusted operating income and adjusted return on invested capital, which are non-GAAP financial measures.~~our three-year strategic plan.

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				26-Week Period Ended					13-Week Period Ended				26-Week Period Ended
		Dec. 26, 2020		Dec. 28, 2019		Dec. 26, 2020		Dec. 28, 2019			Jan. 1, 2022		Dec. 26, 2020		Jan. 1, 2022		Dec. 26, 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	81.8		81.2		81.5		81.0		Cost of sales	82.3		81.8		82.1		81.5
Gross profit	Gross profit	18.2		18.8		18.5		19.0		Gross profit	17.7		18.2		17.9		18.5
Operating expenses	Operating expenses	16.3		15.1		15.8		15.0		Operating expenses	15.0		16.3		14.6		15.8
Operating income	Operating income	1.9		3.7		2.7		4.0		Operating income	2.7		1.9		3.3		2.7
Interest expense	Interest expense	1.3		0.5		1.3		0.5		Interest expense	1.5		1.3		1.1		1.3
Other (income) expense, net	Other (income) expense, net	(0.1)		—		—		—		Other (income) expense, net	(0.1)		(0.1)		—		—
Earnings before income taxes	Earnings before income taxes	0.7		3.2		1.4		3.5		Earnings before income taxes	1.3		0.7		2.2		1.4
Income taxes	Income taxes	0.1		0.6		0.2		0.7		Income taxes	0.3		0.1		0.5		0.2
Net earnings	Net earnings	0.6	%	2.6	%	1.2	%	2.8	%	Net earnings	1.0	%	0.6	%	1.7	%	1.2	%

3231

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		26-Week Period Ended			13-Week Period Ended		26-Week Period Ended
		Dec. 26, 2020		Dec. 26, 2020			Jan. 1, 2022		Jan. 1, 2022
Sales	Sales	(23.1)	%	(23.1)	%	Sales	41.2	%	40.5	%
Cost of sales	Cost of sales	(22.4)		(22.6)		Cost of sales	41.9		41.5
Gross profit	Gross profit	(25.8)		(25.2)		Gross profit	37.8		35.8
Operating expenses	Operating expenses	(17.1)		(19.0)		Operating expenses	29.7		29.8
Operating income	Operating income	(61.6)		(48.3)		Operating income	109.8		70.4
Interest expense	Interest expense	90.8		83.1		Interest expense	65.8		26.6
Other (income) expense, net (1) (2)	Other (income) expense, net (1) (2)	1,827.6		(162.1)		Other (income) expense, net (1) (2)	(31.4)		872.6
Earnings before income taxes	Earnings before income taxes	(83.0)		(67.9)		Earnings before income taxes	162.2		111.7
Income taxes	Income taxes	(85.1)		(74.8)		Income taxes	227.1		212.5
Net earnings	Net earnings	(82.4)	%	(66.1)	%	Net earnings	148.8	%	91.9	%
Basic earnings per share	Basic earnings per share	(82.7)	%	(65.9)	%	Basic earnings per share	153.8	%	91.1	%
Diluted earnings per share	Diluted earnings per share	(82.4)		(65.4)		Diluted earnings per share	153.8		89.3
Average shares outstanding	Average shares outstanding	—		(0.4)		Average shares outstanding	0.2		0.4
Diluted shares outstanding	Diluted shares outstanding	(0.5)		(1.0)		Diluted shares outstanding	0.4		0.7

(1)Other (income) expense, net was income of ~~$15.6~~$10.7 million and ~~$0.8~~income of $15.6 million in the second quarter of fiscal ~~2021~~2022 and fiscal ~~2020,~~2021, respectively.

(2)Other (income) expense, net was income of ~~$1.4~~$13.9 million and ~~expense~~income of ~~$2.3~~$1.4 million in the first 26 weeks of fiscal ~~2021~~2022 and fiscal ~~2020,~~2021, respectively.

The following tables represent our results by reportable segments:


		13-Week Period Ended Dec. 26, 2020																		13-Week Period Ended Jan. 1, 2022
		U.S. Foodservice Operations			International Foodservice Operations			SYGMA			Other			Corporate		Consolidated Totals				U.S. Foodservice Operations			International Foodservice Operations			SYGMA			Other			Global Support Center			Consolidated Totals
		(In thousands)																		(In thousands)
Sales	Sales	$	7,924,143		$	1,967,789		$	1,520,401		$	146,649		$	—	$	11,558,982		Sales	$	11,498,155		$	2,806,272		$	1,771,323		$	244,453					$	16,320,203
Sales increase (decrease)	Sales increase (decrease)	(23.9)		%	(31.9)		%	4.4		%	(44.8)		%			(23.1)		%	Sales increase (decrease)	45.1		%	42.6		%	16.5		%	66.7		%				41.2		%
Percentage of total	Percentage of total	68.6		%	17.0		%	13.2		%	1.2		%			100.0		%	Percentage of total	70.5		%	17.2		%	10.9		%	1.4		%				100.0		%

Operating income (loss)	Operating income (loss)	$	485,251		$	(79,949)		$	11,328		$	(1,018)		$	(203,550)	$	212,062		Operating income (loss)	$	676,822		$	10,745		$	(6,729)		$	183		$	(236,112)		$	444,909
Operating income (loss) increase (decrease)	Operating income (loss) increase (decrease)	(31.2)		%	NM			14.9		%	NM					(61.6)		%	Operating income (loss) increase (decrease)	39.5		%	NM			NM			NM			16.0		%	NM
Percentage of total segments	Percentage of total segments	116.8		%	(19.2)		%	2.7		%	(0.3)		%			100.0		%	Percentage of total segments	99.4		%	1.6		%	(1.0)		%	—		%				100.0		%
Operating income (loss) as a percentage of sales	Operating income (loss) as a percentage of sales	6.1		%	(4.1)		%	0.7		%	(0.7)		%			1.8		%	Operating income (loss) as a percentage of sales	5.9		%	0.4		%	(0.4)		%	0.1		%				2.7		%


		13-Week Period Ended Dec. 28, 2019																		13-Week Period Ended Dec. 26, 2020
		U.S. Foodservice Operations			International Foodservice Operations			SYGMA			Other			Corporate		Consolidated Totals				U.S. Foodservice Operations			International Foodservice Operations			SYGMA			Other			Global Support Center		Consolidated Totals
		(In thousands)																		(In thousands)
Sales	Sales	$	10,413,575		$	2,890,053		$	1,455,893		$	265,521		$	—	$	15,025,042		Sales	$	7,924,143		$	1,967,789		$	1,520,401		$	146,649		$	—	$	11,558,982

Percentage of total	Percentage of total	69.3		%	19.2		%	9.7		%	1.8		%			100.0		%	Percentage of total	68.6		%	17.0		%	13.2		%	1.2		%			100.0		%

Operating income	Operating income	$	704,801		$	34,881		$	9,861		$	9,403		$	(206,453)	$	552,493		Operating income	$	485,251		$	(79,949)		$	11,328		$	(1,018)		$	(203,550)	$	212,062

Percentage of total segments	Percentage of total segments	92.9		%	4.6		%	1.3		%	1.2		%			100.0		%	Percentage of total segments	116.8		%	(19.2)		%	2.7		%	(0.3)		%			100.0		%
Operating income as a percentage of sales	Operating income as a percentage of sales	6.8		%	1.2		%	0.7		%	3.5		%			3.7		%	Operating income as a percentage of sales	6.1		%	(4.1)		%	0.7		%	(0.7)		%			1.8		%

3332


	26-Week Period Ended Jan. 1, 2022
	U.S. Foodservice Operations			International Foodservice Operations			SYGMA			Other			Global Support Center		Consolidated Totals
	(In thousands)
Sales	$	23,101,118		$	5,701,519		$	3,475,356		$	498,695		$	61	$	32,776,749
Sales increase (decrease)	45.8		%	38.0		%	14.2		%	58.5		%			40.5		%
Percentage of total	70.5		%	17.4		%	10.6		%	1.5		%			100.0		%

Operating income	$	1,474,345		$	47,421		$	(9,176)		$	6,639		$	(442,638)	$	1,076,591
Operating income increase (decrease)	37.3		%	158.9		%	(139.9)		%	NM					70.4		%
Percentage of total segments	97.0		%	3.1		%	(0.6)		%	0.5		%			100.0		%
Operating income as a percentage of sales	6.4		%	0.8		%	(0.3)		%	1.3		%			3.3		%

26-Week Period Ended Dec. 26, 2020
U.S. Foodservice Operations International Foodservice Operations SYGMA Other Corporate Consolidated
Totals
(In thousands)
Sales $ 15,845,676 $ 4,131,482 $ 3,044,549 $ 314,654 $ — $ 23,336,361
Sales increase (decrease) (24.8) % (28.8) % 4.9 % (42.8) % (23.1) %
Percentage of total 67.9 % 17.7 % 13.0 % 1.4 % 100.0 %
Operating income $ 1,073,660 $ (80,486) $ 23,020 $ (1,023) $ (383,530) $ 631,641
Operating income increase (decrease) (28.3) % (189.7) % 32.1 % (105.2) % (48.3) %
Percentage of total segments 105.8 % (7.9) % 2.3 % (0.2) % 100.0 %
Operating income as a percentage of sales 6.8 % (1.9) % 0.8 % (0.3) % 2.7 %


		26-Week Period Ended Dec. 28, 2019																		26-Week Period Ended Dec. 26, 2020
		U.S. Foodservice Operations			International Foodservice Operations			SYGMA			Other			Corporate		Consolidated Totals				U.S. Foodservice Operations			International Foodservice Operations			SYGMA			Other			Global Support Center		Consolidated Totals
		(In thousands)																		(In thousands)
Sales	Sales	$	21,072,208		$	5,802,441		$	2,902,887		$	550,511		$	—	$	30,328,047		Sales	$	15,845,676		$	4,131,482		$	3,044,549		$	314,654		$	—	$	23,336,361

Percentage of total	Percentage of total	69.5		%	19.1		%	9.6		%	1.8		%			100.0		%	Percentage of total	67.9		%	17.7		%	13.0		%	1.4		%			100.0		%

Operating income	Operating income	$	1,498,420		$	89,681		$	17,431		$	19,540		$	(404,261)	$	1,220,811		Operating income	$	1,073,660		$	(80,486)		$	23,020		$	(1,023)		$	(383,530)	$	631,641

Percentage of total segments	Percentage of total segments	92.2		%	5.5		%	1.1		%	1.2		%			100.0		%	Percentage of total segments	105.8		%	(7.9)		%	2.3		%	(0.2)		%			100.0		%
Operating income as a percentage of sales	Operating income as a percentage of sales	7.1		%	1.5		%	0.6		%	3.5		%			4.0		%	Operating income as a percentage of sales	6.8		%	(1.9)		%	0.8		%	(0.3)		%			2.7		%

Based on information in Note ~~13,~~14, “Business Segment Information,” in the Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q, in the second quarter and first 26 weeks of fiscal ~~2021,~~2022, U.S. Foodservice Operations and International Foodservice Operations collectively represented approximately ~~85.6%~~87.6% and 87.9% of Sysco’s overall sales ~~in each period. In the second quarter~~ and ~~first 26 weeks~~101.0% and 100.2% of ~~fiscal 2021, U.S. Foodservice Operations and International Foodservice Operations collectively represented approximately 97.6% and 97.9% of the~~ total segment operating income, respectively. This illustrates that these segments represent a substantial majority of our total segment results when compared to other reportable 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 Dec. 26, 2020 13-Week Period Ended Dec. 28, 2019 Change in Dollars % Change
(Dollars in thousands)
Sales $ 7,924,143 $ 10,413,575 $ (2,489,432) (23.9) %
Gross profit 1,559,322 2,048,904 (489,582) (23.9)
Operating expenses 1,074,071 1,344,103 (270,032) (20.1)
Operating income $ 485,251 $ 704,801 $ (219,550) (31.2) %
Gross profit $ 1,559,322 $ 2,048,904 $ (489,582) (23.9) %
Adjusted operating expenses (Non-GAAP) 1,087,526 1,340,424 (252,898) (18.9)
Adjusted operating income (Non-GAAP) $ 471,796 $ 708,480 $ (236,684) (33.4) %
26-Week Period Ended Dec. 26, 2020 26-Week Period Ended Dec. 28, 2019 Change in Dollars % Change
(Dollars in thousands)
Sales $ 15,845,676 $ 21,072,208 $ (5,226,532) (24.8) %
Gross profit 3,159,029 4,193,791 (1,034,762) (24.7)
Operating expenses 2,085,369 2,695,371 (610,002) (22.6)
Operating income $ 1,073,660 $ 1,498,420 $ (424,760) (28.3) %
Gross profit $ 3,159,029 $ 4,193,791 $ (1,034,762) (24.7) %
Adjusted operating expenses (Non-GAAP) 2,184,201 2,687,566 (503,365) (18.7)
Adjusted operating income (Non-GAAP) $ 974,828 $ 1,506,225 $ (531,397) (35.3) %


	13-Week Period Ended Jan. 1, 2022		13-Week Period Ended Dec. 26, 2020		Change in Dollars		% Change
	(Dollars in thousands)
Sales	$	11,498,155	$	7,924,143	$	3,574,012	45.1	%
Gross profit	2,139,278		1,559,322		579,956		37.2
Operating expenses	1,462,456		1,074,071		388,385		36.2
Operating income	$	676,822	$	485,251	$	191,571	39.5	%

Gross profit	$	2,139,278	$	1,559,322	$	579,956	37.2	%
Adjusted operating expenses (Non-GAAP)	1,454,558		1,087,526		367,032		33.7
Adjusted operating income (Non-GAAP)	$	684,720	$	471,796	$	212,924	45.1	%

	26-Week Period Ended Jan. 1, 2022		26-Week Period Ended Dec. 26, 2020		Change in Dollars		% Change
	(Dollars in thousands)
Sales	$	23,101,118	$	15,845,676	$	7,255,442	45.8	%
Gross profit	4,324,432		3,159,029		1,165,403		36.9
Operating expenses	2,850,087		2,085,369		764,718		36.7
Operating income	$	1,474,345	$	1,073,660	$	400,685	37.3	%

Gross profit	$	4,324,432	$	3,159,029	$	1,165,403	36.9	%
Adjusted operating expenses (Non-GAAP)	2,843,952		2,184,201		659,751		30.2
Adjusted operating income (Non-GAAP)	$	1,480,480	$	974,828	$	505,652	51.9	%

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.~~change:


		Increase (Decrease)				Increase (Decrease)					Increase (Decrease)				Increase (Decrease)
		13-Week Period				26-Week Period					13-Week Period				26-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	(23.4)	%	$	(2,436.6)	(24.6)	%	$	(5,185.6)	Case volume	23.9	%	$	1,895.4	25.1	%	$	3,980.9
Inflation(1)	Inflation(1)	1.6		170.6		1.2		249.0		Inflation(1)	14.9		1,176.4		14.2		2,243.4
Acquisitions(2)	Acquisitions(2)	0.2		16.7		0.2		50.5		Acquisitions(2)	3.7		292.4		2.9		459.3
Other ~~(1)~~(3)	Other ~~(1)~~(3)	(2.3)		(240.1)		(1.6)		(340.4)		Other ~~(1)~~(3)	2.6		209.8		3.6		571.8
Total change in sales	Total change in sales	(23.9)	%	$	(2,489.4)	(24.8)	%	$	(5,226.5)	Total change in sales	45.1	%	$	3,574.0	45.8	%	$	7,255.4

(1)Includes product cost inflation of 14.6% and 13.8% for U.S. Broadline operations, respectively.

(2)Includes the impact of the Greco and Sons acquisition for both periods and the Paragon acquisition for each period.

(3)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.”

~~Sales for the second quarter of fiscal 2021 were 23.9% lower than the second quarter of fiscal 2020.~~ The primary driver of the ~~decrease~~sales increase in the second quarter and the first 26 weeks of fiscal 2022 was the significant ~~decline~~improvement 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 business recovery from the COVID-19 pandemic. Case volumes from our U.S. Broadline operations ~~including acquisitions within the last 12 months, decreased 23.7%~~increased 22.5% and 25.3% in ~~the second quarter of fiscal 2021, as compared to the second quarter of fiscal 2020, and included a 19.7% decline in locally~~

managed customer case growth along with a 28.4% decrease in national customer case volume. Sales from acquisitions within the last 12 months had no impact on locally managed customer sales for the second quarter of fiscal 2021; therefore, organic local case volume, which excludes acquisitions, declined 19.7%. We acquired a significant number of new customers and saw growth in our national accounts customer base during the second quarter of fiscal 2021.

Sales for the first 26 weeks of fiscal 2021 were 24.8% lower than the first 26 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. Case volumes from our U.S. Broadline operations, including acquisitions within the last 12 months, decreased 24.8% in the first 26 weeks of fiscal 2021, as compared to the first 26 weeks of fiscal 2020, and included a 20.6% decline in locally managed customer case growth along with a 29.8% decrease in national customer case volume. Sales from acquisitions within the last 12 months favorably impacted locally managed customer sales by 0.1% for the first 26 weeks of fiscal 2021; therefore, organic local case volume, which excludes acquisitions, declined 20.7%.

~~Operating Income~~

~~Operating income decreased 31.2% and 28.3% for~~ the second quarter and first 26 weeks of fiscal ~~2021,~~2022, respectively, as compared to the second quarter and first 26 weeks of fiscal ~~2020.~~

~~Gross profit dollars decreased 23.9%~~2021. This included a 17.6% and ~~24.7%~~20.8% improvement in local customer case growth in the second quarter and first 26 weeks of fiscal ~~2021,~~2022, respectively, along with a 28.8% and 31.3% increase in national customer case volume in the second quarter and first 26 weeks of fiscal 2022, respectively. The increases in U.S. Broadline case volumes represent organic growth.

Operating Income

The increase in operating income for the second quarter and first 26 weeks of fiscal 2022, as compared to the second quarter and first 26 weeks of fiscal ~~2020,~~2021, was driven by gross profit dollar growth and partially offset by an increase in operating expenses.

Gross profit dollar growth in the second quarter and first 26 weeks of fiscal 2022, as compared to the second quarter and first 26 weeks of fiscal 2021, was driven primarily by the ~~decline~~improvement in local cases and ~~a decline in Sysco-branded products, which reflected changes in customer mix and product mix and the addition~~management of ~~new customers. The decrease was partially offset by~~ higher inflation. The estimated change in product costs, an internal measure of inflation or deflation, for the second quarter and first 26 weeks of fiscal ~~2021~~2022 for our U.S. Broadline operations was inflation of ~~1.6%~~14.6% and ~~1.3%~~13.8%, respectively. For the second quarter ~~and first 26 weeks~~ of fiscal ~~2021,~~2022, this change in product costs was primarily driven by inflation in the ~~paper~~meat and ~~disposables,~~ poultry ~~and dairy products~~ categories. Our Sysco brand sales as a percentage of total U.S. cases decreased 165 basis points and 77 basis points, respectively, for the second quarter and first 26 weeks of fiscal 2021, which was driven by customer and product mix shift. Sysco brand sales as a percentage of local U.S. cases decreased by approximately 455 basis points and 288 basis points, respectively, for the second quarter and first 26 weeks of fiscal 2021, which was driven by product mix shifting into pre-packaged and takeaway ready products. Gross margin, which is gross profit as a percentage of sales, was ~~19.68%~~18.61% and ~~19.94%~~18.72% in the second quarter and first 26 weeks of fiscal ~~2021,~~2022, respectively, which was ~~flat~~a decrease of 107 basis points compared to gross margin of 19.68% in the second quarter of fiscal 2021, and ~~an increase~~a decrease of 3122 basis points compared to ~~the~~ gross margin of ~~19.90%~~19.94% in the first 26 weeks of fiscal ~~2020,~~2021 primarily attributable to ~~inflation.~~inflationary pressure.

~~Operating~~The increase in operating expenses for the second quarter and first 26 weeks of fiscal ~~2021 decreased 20.1%, or $270.0 million, and 22.6%, or $610.0 million, respectively,~~2022, as compared to the second quarter and first 26 weeks of fiscal ~~2020,~~2021, was primarily driven by ~~a decrease in pay-related~~variable costs associated with ~~permanent headcount reductions made~~increased volumes and largely from short-term expenses associated with the business recovery, including increases in costs for associates, which included recruiting costs, hiring marketing, vaccination promotion, contract labor and sign-on and retention bonuses. Omicron has also resulted in job absences, increasing our contract labor and overtime costs. We have also experienced an increase in operating expenses due to investments for our Recipe for Growth strategy. Additionally, we experienced a $74.1 million unfavorable comparison of bad debt expense in the first 26 weeks of fiscal ~~2020 in response~~2022, as compared to the COVID-19 pandemic and the reduction of reserves on pre-pandemic receivables. Operating expenses, on an adjusted basis (which is a non-GAAP financial measure for which a reconciliation is provided below), for the second quarter and first 26 weeks of fiscal 2021, ~~decreased 18.9%, or $252.9 million, and 18.7%, or $503.4 million, respectively, compared~~which included a net bad debt benefit due to the ~~second quarter and first 26 weeks~~significant reduction of reserves on pre-pandemic receivables that were collected in fiscal ~~2020.~~2021. Excluding the impact of these pre-pandemic receivables, our year-over-year comparison of bad debt expense has not been significant.

3635

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 Jan. 1, 2022		13-Week Period Ended Dec. 26, 2020		Change in Dollars		% Change
											(Dollars in thousands)
Sales										Sales	$	2,806,272	$	1,967,789	$	838,483	42.6	%
Gross profit										Gross profit	565,931		373,840		192,091		51.4
Operating expenses										Operating expenses	555,186		453,789		101,397		22.3
Operating income (loss)										Operating income (loss)	$	10,745	$	(79,949)	$	90,694	NM

Gross profit										Gross profit	$	565,931	$	373,840	$	192,091	51.4	%
Adjusted operating expenses (Non-GAAP)										Adjusted operating expenses (Non-GAAP)	526,281		429,056		97,225		22.7
Adjusted operating income (Non-GAAP)										Adjusted operating income (Non-GAAP)	$	39,650	$	(55,216)	$	94,866	(171.8)	%

Sales on a constant currency basis (Non-GAAP)										Sales on a constant currency basis (Non-GAAP)	$	2,772,211	$	1,967,789	$	804,422	40.9	%
Gross profit on a constant currency basis (Non-GAAP)										Gross profit on a constant currency basis (Non-GAAP)	561,898		373,840		188,058		50.3
Adjusted operating expenses on a constant currency basis (Non-GAAP)										Adjusted operating expenses on a constant currency basis (Non-GAAP)	523,087		429,056		94,031		21.9
Adjusted operating income (Non-GAAP)										Adjusted operating income (Non-GAAP)	$	38,811	$	(55,216)	$	94,027	(170.3)	%

		13-Week Period Ended Dec. 26, 2020		13-Week Period Ended Dec. 28, 2019		Change in Dollars		% Change			26-Week Period Ended Jan. 1, 2022		26-Week Period Ended Dec. 26, 2020		Change in Dollars		% Change
		(Dollars in thousands)									(Dollars in thousands)
Sales	Sales	$	1,967,789	$	2,890,053	$	(922,264)	(31.9)	%	Sales	$	5,701,519	$	4,131,482	$	1,570,037	38.0	%
Gross profit	Gross profit	373,840		586,039		(212,199)		(36.2)		Gross profit	1,155,065		824,238		330,827		40.1
Operating expenses	Operating expenses	453,789		551,158		(97,369)		(17.7)		Operating expenses	1,107,644		904,724		202,920		22.4
Operating (loss) income	Operating (loss) income	$	(79,949)	$	34,881	$	(114,830)	NM		Operating (loss) income	$	47,421	$	(80,486)	$	127,907	(158.9)	%

Gross profit	Gross profit	$	373,840	$	586,039	$	(212,199)	(36.2)	%	Gross profit	$	1,155,065	$	824,238	$	330,827	40.1	%
Adjusted operating expenses (Non-GAAP)	Adjusted operating expenses (Non-GAAP)	429,056		511,996		(82,940)		(16.2)		Adjusted operating expenses (Non-GAAP)	1,051,297		860,673		190,624		22.1
Adjusted operating (loss) income (Non-GAAP)	Adjusted operating (loss) income (Non-GAAP)	$	(55,216)	$	74,043	$	(129,259)	(174.6)	%	Adjusted operating (loss) income (Non-GAAP)	$	103,768	$	(36,435)	$	140,203	(384.8)	%

Sales on a constant currency basis (Non-GAAP)	Sales on a constant currency basis (Non-GAAP)	$	1,914,387	$	2,890,053	$	(975,666)	(33.8)	%	Sales on a constant currency basis (Non-GAAP)	$	5,701,519	$	4,131,482	$	1,570,037	38.0	%
Gross profit on a constant currency basis (Non-GAAP)	Gross profit on a constant currency basis (Non-GAAP)	362,382		586,039		(223,657)		(38.2)		Gross profit on a constant currency basis (Non-GAAP)	1,128,298		824,238		304,060		36.9
Adjusted operating expenses on a constant currency basis (Non-GAAP)	Adjusted operating expenses on a constant currency basis (Non-GAAP)	413,933		511,996		(98,063)		(19.2)		Adjusted operating expenses on a constant currency basis (Non-GAAP)	1,051,297		860,673		190,624		22.1
Adjusted operating (loss) income on a constant currency basis (Non-GAAP)	Adjusted operating (loss) income on a constant currency basis (Non-GAAP)	$	(51,551)	$	74,043	$	(125,594)	(169.6)	%	Adjusted operating (loss) income on a constant currency basis (Non-GAAP)	$	103,768	$	(36,435)	$	140,203	NM

		26-Week Period Ended Dec. 26, 2020		26-Week Period Ended Dec. 28, 2019		Change in Dollars		% Change
		(Dollars in thousands)
Sales		$	4,131,482	$	5,802,441	$	(1,670,959)	(28.8)	%
Gross profit		824,238		1,191,224		(366,986)		(30.8)
Operating expenses		904,724		1,101,543		(196,819)		(17.9)
Operating (loss) income		$	(80,486)	$	89,681	$	(170,167)	(189.7)	%

Gross profit		$	824,238	$	1,191,224	$	(366,986)	(30.8)	%
Adjusted operating expenses (Non-GAAP)		860,673		1,018,199		(157,526)		(15.5)
Adjusted operating (loss) income (Non-GAAP)		$	(36,435)	$	173,025	$	(209,460)	(121.1)	%

Sales on a constant currency basis (Non-GAAP)		$	4,037,440	$	5,802,441	$	(1,765,001)	(30.4)	%
Gross profit on a constant currency basis (Non-GAAP)		801,267		1,191,224		(389,957)		(32.7)
Adjusted operating expenses on a constant currency basis (Non-GAAP)		833,221		1,018,199		(184,978)		(18.2)
Adjusted operating (loss) income on a constant currency basis (Non-GAAP)		$	(31,954)	$	173,025	$	(204,979)	(118.5)	%

3736

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)					Increase (Decrease)				Increase (Decrease)
		13-Week Period				26-Week Period					13-Week Period				26-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
Inflation	Inflation	1.7	%	$	49.5	1.3	%	$	73.1	Inflation	6.2	%	$	121.1	7.1	%	$	293.9

Foreign currency	Foreign currency	1.9		54.4		(1.6)		(95.0)		Foreign currency	1.8		34.9		3.8		157.8
Other (1)	Other (1)	(35.5)		(1,026.2)		(28.5)		(1,649.1)		Other (1)	34.6		682.5		27.1		1,118.3
Total change in sales	Total change in sales	(31.9)	%	$	(922.3)	(28.8)	%	$	(1,671.0)	Total change in sales	42.6	%	$	838.5	38.0	%	$	1,570.0

(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 second quarter and first 26 weeks of fiscal ~~2021~~2022 were ~~31.9% and 28.8% lower, respectively,~~higher, as compared to the second quarter and first 26 weeks of fiscal ~~2020,~~2021, primarily due to the significant ~~decline~~improvement in ~~volume,~~volume. Volume trends were accelerating prior to the onset of the Omicron variant of COVID-19, which resulted in increased restrictions in key markets such as ~~our European, Canadian and Latin American businesses have been substantially impacted by recent lockdowns, which are more aggressive than the lockdowns in~~ the United ~~States. In~~Kingdom and Canada. We continue to monitor the ~~second quarter of fiscal 2021, changes~~impact to our customers and our business as international restrictions are starting to ease, including in ~~foreign exchange rates positively affected sales by 1.8%, resulting in a 33.8% decrease in adjusted gross profit on a constant currency basis. In~~Ireland and the ~~first 26 weeks of fiscal 2021, changes in foreign exchange rates positively affected sales by 1.6%, resulting in a 30.4% decrease in sales on a constant currency basis.~~United Kingdom.

Operating Income

~~Operating~~The increase in operating income ~~decreased by $114.8 million and $170.2 million~~ for the second quarter and first 26 weeks of fiscal ~~2021, respectively,~~2022, as compared to the second quarter and first 26 weeks of fiscal ~~2020,~~2021, was primarily due to the ~~decline~~continuing increase in business resulting from the reductions in our customers’ business in response to the COVID-19 pandemic and from ongoing restructuring and transformation projects in our European operations. Operating income, on an adjusted basis, decreased by $129.3 million, or 174.6%, for the second quarter of fiscal 2021, as compared to the second quarter of fiscal 2020. In the second quarter of fiscal 2021, changes in foreign exchange rates negatively affected operating income by 4.9%, resulting in a 169.6% decrease in adjusted operating income on a constant currency basis. Operating income, on an adjusted basis, decreased by $209.5 million, or 121.1%, for the first 26 weeks of fiscal 2021, as compared to the first 26 weeks of fiscal 2020. In the first 26 weeks of fiscal 2021, changes in foreign exchange rates negatively affected operating income by 2.6%, resulting in a 118.5% decrease in adjusted operating income on a constant currency basis.sales volumes.

~~Gross~~The increase in gross profit dollars decreased by 36.2% in the second quarter of fiscal 2021, as compared to the second quarter of fiscal 2020, primarily attributable to the decline in sales. In the second quarter of fiscal 2021, changes in foreign exchange rates positively affected gross profit by 2.0%, resulting in a 38.2% decrease in adjusted gross profit on a constant currency basis. Gross profit dollars decreased by 30.8% in the first 26 weeks of fiscal 2021, as compared to the first 26 weeks of fiscal 2020, primarily attributable to the decline in sales. In the first 26 weeks of fiscal 2021, changes in foreign exchange rates positively affected gross profit by 1.9%, resulting in a 32.7% decrease in adjusted gross profit on a constant currency basis. Gross margin was 19.00% and 19.95% in the second quarter and first 26 weeks of fiscal 2021, respectively, which was a decrease of 128 and 58 basis points compared to the gross margin of 20.28% and 20.53% in the second quarter and first 26 weeks of fiscal 2020, respectively, primarily as a result of adverse customer mix, product mix and aged inventory.

~~Operating expenses for the second quarter and first 26 weeks of fiscal 2021 decreased 17.7%, or $97.4 million, and 17.9%, or $196.8 million, respectively,~~2022, as compared to the second quarter and first 26 weeks of fiscal ~~2020,~~2021, was 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 in Europe contributedattributable to the ~~decrease. Operating~~increase in sales volume and inflation.

The increase in operating expenses ~~on an adjusted basis,~~ for the second quarter and first 26 weeks of fiscal ~~2021 decreased 16.2%, or $82.9 million,~~2022, as compared to the second quarter of fiscal 2020. Changes in foreign exchange rates used to translate our foreign operating expenses into U.S. dollars increased operating expenses during the period by 3.0%, resulting in a 19.2% decrease in adjusted operating expenses on a constant currency basis. Operating expenses, on an adjusted basis, for the

and first 26 weeks of fiscal 2021, ~~decreased 15.5%, or $157.5 million, compared~~was primarily due to an increase in costs for associates including overtime and hiring associates to manage the ~~first 26 weeks~~business recovery. Additionally, we had an unfavorable comparison of bad debt expense, as fiscal 2020. Changes in foreign exchange rates used to translate our foreign operating expenses into U.S. dollars increased operating expenses during the period by 2.7%, resulting in an 18.2% decrease in adjusted operating expenses2021 included a reduction of reserves on ~~a constant currency basis.~~pre-pandemic receivables.

Results of SYGMA and Other Segment

For SYGMA, sales were ~~4.4%~~16.5% and ~~4.9%~~14.2% higher in the second quarter and first 26 weeks of fiscal ~~2021,~~2022, respectively, as compared to the second quarter and first 26 weeks of fiscal ~~2020,~~2021, primarily from an increase in case volume driven by the success of national and regional ~~quick service~~quick-service restaurants, ~~servicing drive-through traffic.~~partially offset by a decrease in volume due to the planned exit of a large regional customer. Operating income ~~increased~~decreased by ~~$1.5~~$18.1 million and ~~$5.6~~$32.2 million in the second quarter and first 26 weeks of fiscal ~~2021,~~2022, respectively, as compared to the second quarter and first 26 weeks of fiscal ~~2020,~~2021, as our increased investments in business recovery staffing drove an increase in operating expenses to exceed gross profit dollar growth from increased case ~~volume exceeded~~volume. SYGMA operated at a loss in the ~~increase~~second quarter and first 26 weeks of fiscal 2022, primarily due to higher than expected labor costs, which will be offset in ~~expenses.~~future quarters by actions already taken.

For the operations that are grouped within Other, operating income ~~decreased $10.4~~increased $1.2 million and ~~$20.6~~$7.7 million in the second quarter and first 26 weeks of fiscal ~~2021,~~2022, respectively, as compared to the second quarter and first 26 weeks of fiscal ~~2020. Our~~2021, primarily due to the recovery of our hospitality business, Guest ~~Worldwide, had a gross profit decrease~~Worldwide. This business has improved as hospitality occupancy rates have grown from prior year levels.

Global Support Center Expenses

Our Global Support Center generally includes all expenses of ~~42.7%~~the corporate office and ~~46.7%~~Sysco’s shared service operations. These expenses in the second quarter of fiscal 2022 increased $26.5 million, or 13.0%, as compared to the second quarter of fiscal 2021, primarily due to an increase in self-insurance reserves and investments for our Recipe for Growth strategy. These expenses in the first 26 weeks of fiscal 2022 increased $55.5 million, or 14.6%, as compared to the first 26 weeks of fiscal 2021, primarily due to acquisition and due diligence costs, investments for our Recipe for Growth strategy, higher associate-related expenses and an increase in self-insurance reserves.

Included in Global Support Center expenses are Certain Items that totaled $14.0 million and $41.7 million in the second quarter and first 26 weeks of fiscal 2021, respectively. This business remains challenged, as the customers in the hospitality segment continue to see lower occupancy rates compared to prior year levels. Despite operating in a difficult hospitality environment, the business improved its underlying profitability during the second quarter. During the first quarter of fiscal 2021, we sold a non-core asset, Cake Corporation, as we chose to narrow our business focus.

~~Corporate Expenses~~

~~Corporate expenses in the second quarter of fiscal 2021 decreased $5.4 million, or 2.6%,~~2022, as compared to the second quarter of fiscal 2020, primarily due to lower charges for professional fees and other business transformation initiatives. Corporate expenses in the first 26 weeks of fiscal 2021 decreased $21.1 million, or 5.2%, as compared to the first 26 weeks of fiscal 2020, primarily due to a reduction in pay-related costs associated with permanent headcount reductions made in the third and fourth quarters of fiscal 2020 in response to the COVID-19 pandemic. Lower charges for professional fees and other business transformation initiatives also contributed to the decrease. Corporate expenses, on an adjusted basis, increased $13.3 million, or 7.4%, and $8.3 million, or 2.4%, respectively, as compared to the second quarter and first 26 weeks of fiscal 2020. Higher investments in our business transformation contributed to the increase in Corporate expenses, on an adjusted basis in the second quarter and first 26 weeks of fiscal 2021.

~~Included in Corporate expenses are Certain Items that totaled~~ $12.0 million and $24.0 million in the second quarter and first 26 weeks of fiscal 2021, ~~respectively, as compared to $30.6 million and $53.4 million in the second quarter and first 26 weeks of fiscal 2020.~~respectively. Certain Items impacting the second quarter and first 26 weeks of fiscal ~~2021~~2022 were primarily expenses associated with our business technology transformation initiatives and expenses associated with acquisitions. Certain Items impacting the second quarter and first 26 weeks of fiscal ~~2020~~2021 were primarily expenses associated with our business technology transformation initiatives.

Interest Expense

Interest expense increased ~~$69.7~~$96.4 million and ~~$133.1~~$77.9 million for the second quarter and first 26 weeks of fiscal ~~2021,~~2022, respectively, as compared to the second quarter and first 26 weeks of fiscal ~~2020,~~2021, primarily attributable to ~~higher fixed~~a loss on extinguishment of debt ~~volume,~~of $115.6 million for the redemption of $1.25 billion in combined aggregate principal amount of our senior notes in the second quarter of fiscal 2022, partially offset by lower ~~floating interest rates.~~debt volume.

Net Earnings

Net earnings ~~decreased 82.4%~~increased 148.8% and ~~66.1%~~91.9% in the second quarter and first 26 weeks of fiscal ~~2021,~~2022, respectively, as compared to the second quarter and first 26 weeks of fiscal ~~2020,~~2021, 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 ~~11,~~12, “Income Taxes,” in the Notes to Consolidated Financial Statements in Item 1 of Part I.

I of this Form 10-Q. Adjusted net earnings, excluding Certain Items, ~~decreased 80.4%~~increased 240.0% and ~~72.6%~~178.4% in the second quarter and first 26 weeks of fiscal ~~2021,~~2022, respectively, primarily due to a significant ~~decrease~~increase in sales volume, partially offset by ~~a favorable~~an unfavorable tax expense compared to the prior year.

Earnings Per Share

Basic earnings per share in the second quarter of fiscal ~~2021~~2022 were ~~$0.13,~~$0.33, a ~~82.7% decrease~~153.8% increase from the comparable prior year ~~period~~ amount of ~~$0.75~~$0.13 per share. Diluted earnings per share in the second quarter of fiscal ~~2021~~2022 were ~~$0.13,~~$0.33, a ~~82.4% decrease~~153.8% increase from the comparable prior year period amount of ~~$0.74~~$0.13 per share. Adjusted diluted earnings per share, excluding

Certain Items, in the second quarter of fiscal ~~2021~~2022 were ~~$0.17,~~$0.57, a ~~80.0% decrease~~235.3% increase from the comparable prior year ~~period~~ amount of ~~$0.85~~$0.17 per share. ~~These results were primarily attributable to the factors discussed above related to net earnings in the second quarter of fiscal 2021.~~

Basic earnings per share in the first 26 weeks of fiscal ~~2021~~2022 were ~~$0.56,~~$1.07, a ~~65.9% decrease~~91.1% increase from the comparable prior year ~~period~~ amount of ~~$1.64~~$0.51 per share. Diluted earnings per share in the first 26 weeks of fiscal ~~2021~~2022 were ~~$0.56, a 65.4% decrease~~$1.06, an 89.3% increase from the comparable prior year period amount of ~~$1.62~~$0.50 per share. Adjusted diluted earnings per share, excluding Certain Items, in the first 26 weeks of fiscal ~~2021~~2022 were ~~$0.51,~~$1.40, a ~~72.1% decrease~~174.5% increase from the comparable prior year ~~period~~ amount of ~~$1.83~~$0.89 per share. ~~These results were primarily attributable to the factors discussed above related to net earnings in the first 26 weeks of fiscal 2021.~~

4038

Non-GAAP Reconciliations


~~Sysco’s~~Our discussion of our results ~~of operations for fiscal 2021~~includes certain non-GAAP financial measures, including EBITDA and ~~fiscal 2020 were impacted by~~adjusted EBITDA, that we believe provide important perspective with respect to underlying business trends. Other than free cash flow, any non-GAAP financial measures will be denoted as adjusted measures to remove the impact of restructuring and transformational project costs consisting of: (1) restructuring ~~charges;~~charges, (2) expenses associated with our various transformation ~~initiatives;~~initiatives and (3) facility closure and severance ~~charges. Sysco’s results for fiscal 2021 and fiscal 2020 were also impacted by~~charges; acquisition-related costs consisting of: (1) intangible amortization expense and (2) acquisition costs and due diligence costs related to ~~the fiscal 2017 acquisition of Cucina Lux Investments Limited (the Brakes Acquisition). Additionally,~~ our ~~results for fiscal 2021 were impacted by the loss on the sale of Cake Corporation.~~

~~Fiscal 2021 results of operations were also positively impacted by~~acquisitions; and 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. ~~Many of Sysco’s customers, including those in~~Our results for fiscal 2022 were also impacted by debt extinguishment costs and the restaurant, hospitality and education segments, are operating at a substantially reduced volume due to governmental requirements for closures or other social-distancing measures and a portion of Sysco’s customers are closed. Some of these customers ceased paying their outstanding receivables, creating uncertainty as to their collectability. We experienced an increase in ~~past due receivables and recognized additional bad debt charges in~~reserves for uncertain tax positions. Our results for the ~~third and fourth quarters~~first 26 weeks of fiscal ~~2020; however, collections have improved in fiscal 2021. We have estimated uncollectible amounts based~~2021 were also impacted by a loss on the ~~current collection experience and by applying write-off percentages based on historical loss experience, including loss experience during times~~sale 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 that actual uncollectible amounts will differ and additional charges may be required; however, if collections continue to improve, it is also possible that additional reductions in 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.~~

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 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 excludingand excludes from its non-GAAP financial measures ~~for the relevant period~~ the impact of acquisition-related intangible amortization, ~~specific to the Brakes Acquisition.~~acquisition costs and due-diligence costs for those acquisitions. We believe this approach significantly enhances the comparability of Sysco’s results for fiscal ~~2021~~2022 and fiscal ~~2020.~~2021.

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.


	13-Week Period Ended Jan. 1, 2022			13-Week Period Ended Dec. 26, 2020			Change in Dollars		% Change
Sales (GAAP)	$	16,320,203		$	11,558,982		$	4,761,221	41.2	%


Impact of currency fluctuations (1)	(36,077)			—			(36,077)		(0.3)
Comparable sales using a constant currency basis (Non-GAAP)	$	16,284,126		$	11,558,982		$	4,725,144	40.9	%

Gross profit (GAAP)	$	2,891,150		$	2,098,458		$	792,692	37.8	%


Impact of currency fluctuations (1)	(4,687)			—			(4,687)		(0.2)
Comparable gross profit using a constant currency basis (Non-GAAP)	$	2,886,463		$	2,098,458		$	788,005	37.6	%





Gross margin (GAAP)	17.72		%	18.15		%			-44 bps
Impact of currency fluctuations (1)	0.01			—					1 bps
Comparable Gross margin using a constant currency basis (Non-GAAP)	17.73		%	18.15		%			-43 bps

Operating expenses (GAAP)	$	2,446,241		$	1,886,396		$	559,845	29.7	%
Impact of restructuring and transformational project costs (2)	(23,469)			(34,160)			10,691		31.3
Impact of acquisition-related costs (3)	(33,732)			(18,125)			(15,607)		(86.1)
Impact of bad debt reserve adjustments (4)	6,438			30,271			(23,833)		(78.7)

Operating expenses adjusted for Certain Items (Non-GAAP)	2,395,478			1,864,382			531,096		28.5


Impact of currency fluctuations (1)	(3,433)			—			(3,433)		(0.2)
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)	$	2,392,045		$	1,864,382		$	527,663	28.3	%

Operating income (GAAP)	$	444,909		$	212,062		$	232,847	109.8	%
Impact of restructuring and transformational project costs (2)	23,469			34,160			(10,691)		(31.3)
Impact of acquisition-related costs (3)	33,732			18,125			15,607		86.1
Impact of bad debt reserve adjustments (4)	(6,438)			(30,271)			23,833		78.7

Operating income adjusted for Certain Items (Non-GAAP)	495,672			234,076			261,596		111.8	%


Impact of currency fluctuations (1)	(1,255)			—			(1,255)		(0.5)
Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP)	$	494,417		$	234,076		$	260,341	111.2	%




Interest expense (GAAP)	$	242,899		$	146,498		$	96,401	65.8	%
Impact of loss on extinguishment of debt	(115,603)			—			(115,603)		NM
Interest expense adjusted for Certain Items (Non-GAAP)	$	127,296		$	146,498		$	(19,202)	(13.1)	%









Net earnings (GAAP)	$	167,441		$	67,289		$	100,152	148.8	%
Impact of restructuring and transformational project costs (2)	23,469			34,160			(10,691)		(31.3)
Impact of acquisition-related costs (3)	33,732			18,125			15,607		86.1
Impact of bad debt reserve adjustments (4)	(6,438)			(30,271)			23,833		78.7

Impact of loss on extinguishment of debt	115,603			—			115,603		NM

Tax impact of restructuring and transformational project costs (5)	(5,897)			(10,666)			4,769		44.7
Tax impact of acquisition-related costs (5)	(8,475)			(5,850)			(2,625)		(44.9)
Tax impact of bad debt reserves adjustments (5)	1,617			13,071			(11,454)		(87.6)
Tax impact of loss on extinguishment of debt (5)	(29,111)			—			(29,111)		NM



Net earnings adjusted for Certain Items (Non-GAAP)	$	291,941		$	85,858		$	206,083	240.0	%



Diluted earnings per share (GAAP)	$	0.33		$	0.13		$	0.20	153.8	%

4140

13-Week Period Ended Dec. 26, 2020 13-Week Period Ended Dec. 28, 2019 Change in Dollars % Change
(Dollars in thousands, except for per share data)
Operating expenses (GAAP) $ 1,886,396 $ 2,275,906 $ (389,510) (17.1) %
Impact of restructuring and transformational project costs (1)
(34,160) (57,105) 22,945 (40.2)
Impact of acquisition-related intangible amortization (2)
(18,125) (17,312) (813) 4.7
Impact of bad debt reserve adjustments (3)
30,271 — 30,271 NM
Operating expenses adjusted for Certain Items (Non-GAAP) $ 1,864,382 $ 2,201,489 $ (337,107) (15.3) %
Operating income (GAAP) $ 212,062 $ 552,493 $ (340,431) (61.6) %
Impact of restructuring and transformational project costs (1)
34,160 57,105 (22,945) (40.2)
Impact of acquisition-related intangible amortization (2)
18,125 17,312 813 4.7
Impact of bad debt reserve adjustments (3)
(30,271) — (30,271) NM
Operating income adjusted for Certain Items (Non-GAAP) $ 234,076 $ 626,910 $ (392,834) (62.7) %
Net earnings (GAAP) $ 67,289 $ 383,410 $ (316,121) (82.4) %
Impact of restructuring and transformational project costs (1)
34,160 57,105 (22,945) (40.2)
Impact of acquisition-related intangible amortization (2)
18,125 17,312 813 4.7
Impact of bad debt reserve adjustments (3)
(30,271) — (30,271) NM
Tax impact of restructuring and transformational project costs (4)
(10,666) (15,372) 4,706 (30.6)
Tax impact of acquisition-related intangible amortization (4)
(5,850) (4,658) (1,192) 25.6
Tax impact of bad debt reserve adjustments (4)
13,071 — 13,071 NM
Net earnings adjusted for Certain Items (Non-GAAP) $ 85,858 $ 437,797 $ (351,939) (80.4) %
Diluted earnings per share (GAAP) $ 0.13 $ 0.74 $ (0.61) (82.4) %
Impact of restructuring and transformational project costs (1)
0.07 0.11 (0.04) (36.4)
Impact of acquisition-related intangible amortization (2)
0.04 0.03 0.01 33.3
Impact of bad debt reserve adjustments (3)
(0.06) — (0.06) NM
Tax impact of restructuring and transformational project costs (4)
(0.02) (0.03) 0.01 (33.3)
Tax impact of acquisition-related intangible amortization (4)
(0.01) (0.01) — 0.0
Tax impact of bad debt reserve adjustments (4)
0.03 — 0.03 NM
Diluted EPS adjusted for Certain Items (Non-GAAP) (5)
$ 0.17 $ 0.85 $ (0.68) (80.0) %


Impact of restructuring and transformational project costs (2)	0.05		0.07		(0.02)		(28.6)
Impact of acquisition-related costs (3)	0.07		0.04		0.03		75.0
Impact of bad debt reserve adjustments (4)	(0.01)		(0.06)		0.05		83.3

Impact of loss on extinguishment of debt	0.22		—		0.22		NM

Tax impact of restructuring and transformational project costs (5)	(0.01)		(0.02)		0.01		50.0
Tax impact of acquisition-related costs (5)	(0.02)		(0.01)		(0.01)		(100.0)
Tax impact of bad debt reserves adjustments (5)	—		0.03		(0.03)		NM
Tax impact of loss on extinguishment of debt (5)	(0.06)		—		(0.06)		NM



Diluted earnings per share adjusted for Certain Items (Non-GAAP) (6)	$	0.57	$	0.17	$	0.40	235.3	%


(1)			Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on the current year results.
(2)			Fiscal 2022 includes $12 million related to restructuring, severance, and facility closure charges and $12 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2021 includes $22 million related to restructuring charges and $12 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2020 includes $34 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy and $23 million related to restructuring, facility closure and severance charges.
~~(2)~~(3)			~~Represents~~Fiscal 2022 includes $27 million of intangible amortization expense ~~from the Brakes Acquisition, which is included~~and $7 million in ~~the results of International Foodservice.~~acquisition and due diligence costs. Fiscal 2021 represents intangible amortization expense.
~~(3)~~(4)			~~Represents~~Fiscal 2022 and fiscal 2021 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
~~(4)~~(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.


	13-Week Period Ended Jan. 1, 2022			13-Week Period Ended Dec. 29, 2018			Change in Dollars		% Change
Sales (GAAP)	$	16,320,203		$	14,765,707		$	1,554,496	10.5	%
Gross profit (GAAP)	2,891,150			2,771,712			119,438		4.3
Gross margin (GAAP)	17.72		%	18.77		%			-106 bps

Operating expenses (GAAP)	$	2,446,241		$	2,319,817		$	126,424	5.4	%
Impact of restructuring and transformational project costs (1)	(23,469)			(134,436)			110,967		82.5
Impact of acquisition-related costs (2)	(33,732)			(17,008)			(16,724)		(98.3)
Impact of bad debt reserve adjustments (3)	6,438			—			6,438		NM
Comparable operating expenses adjusted for Certain Items (Non-GAAP)	$	2,395,478		$	2,168,373		$	227,105	10.5	%

Operating income (GAAP)	$	444,909		$	451,895		$	(6,986)	1.5	%
Impact of restructuring and transformational project costs (1)	23,469			134,436			(110,967)		(82.5)
Impact of acquisition-related costs (2)	33,732			17,008			16,724		98.3
Impact of bad debt reserve adjustments (3)	(6,438)			—			(6,438)		NM
Operating income adjusted for Certain Items (Non-GAAP)	$	495,672		$	603,339		$	(107,667)	(17.8)	%

Interest expense (GAAP)	$	242,899		$	87,113		$	155,786	65.8	%
Impact of loss on extinguishment of debt	(115,603)			—			(115,603)		NM
Interest expense adjusted for Certain Items (Non-GAAP)	$	127,296		$	87,113		$	(19,202)	(13.1)	%





Net earnings (GAAP)	$	167,441		$	267,380		$	(99,939)	(37.4)	%
Impact of restructuring and transformational project costs (1)	23,469			134,436			(110,967)		(82.5)
Impact of acquisition-related costs (2)	33,732			17,008			16,724		98.3
Impact of bad debt reserve adjustments (3)	(6,438)			—			(6,438)		NM
Impact of loss on extinguishment of debt	115,603			—			115,603		NM
Tax impact of restructuring and transformational project costs (4)	(5,897)			(34,886)			28,989		83.1
Tax impact of acquisition-related costs (4)	(8,475)			(5,611)			(2,864)		(51.0)
Tax impact of bad debt reserves adjustments (4)	1,617			—			1,617		NM
Tax impact of loss on extinguishment of debt (4)	(29,111)			—			(29,111)		NM
Impact of adjustments to uncertain tax positions	—			15,154			(15,154)		NM
Net earnings adjusted for Certain Items (Non-GAAP)	$	291,941		$	393,481		$	(101,540)	(25.8)	%

Diluted earnings per share (GAAP)	$	0.33		$	0.51		$	(0.18)	(35.3)	%
Impact of restructuring and transformational project costs (1)	0.05			0.26			(0.21)		(80.8)
Impact of acquisition-related costs (2)	0.07			0.03			0.04		133.3
Impact of bad debt reserve adjustments (3)	(0.01)			—			(0.01)		NM
Impact of loss on extinguishment of debt	0.22			—			0.22		NM
Tax impact of restructuring and transformational project costs (4)	(0.01)			(0.07)			0.06		85.7
Tax impact of acquisition-related costs (4)	(0.02)			(0.01)			(0.01)		(100.0)
Tax impact of bad debt reserves adjustments (4)	—			—			—		NM
Tax impact of loss on extinguishment of debt (4)	(0.06)			—			(0.06)		NM
Impact of adjustments to uncertain tax positions	—			0.03			(0.03)		NM
Diluted earnings per share adjusted for Certain Items (Non-GAAP) (5)	$	0.57		$	0.75		$	(0.18)	(24.0)	%


(1)			Fiscal 2022 includes $12 million related to restructuring, severance, and facility closure charges and $12 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2019 includes $53 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy, of which $17 million relates to accelerated depreciation related to software that is being replaced, and $81 million related to severance, restructuring and facility closure charges in Europe and Canada, of which $55 million relates to our France restructuring as part of our integration of Brake France and Davigel into Sysco France.
(2)			Fiscal 2022 includes $27 million of intangible amortization expense and $7 million in acquisition and due diligence costs. Fiscal 2019 includes intangible amortization expense.
(3)			Fiscal 2022 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(4)			The tax impact of adjustments for Certain Items is 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.
			NM represents that the percentage change is not meaningful.

26-Week Period Ended Dec. 26, 2020 26-Week Period Ended Dec. 28, 2019 Change in Dollars % Change
(Dollars in thousands, except for share and per share data)
Operating expenses (GAAP) $ 3,686,662 $ 4,550,958 $ (864,296) (19.0) %
Impact of restructuring and transformational project costs (1)
(60,124) (113,827) 53,703 (47.2)
Impact of acquisition-related intangible amortization (2)
(35,880) (34,222) (1,658) 4.8
Impact of bad debt reserve adjustments (3)
128,899 — 128,899 NM
Operating expenses adjusted for Certain Items (Non-GAAP) $ 3,719,557 $ 4,402,909 $ (683,352) (15.5) %
Operating income (GAAP) $ 631,641 $ 1,220,811 $ (589,170) (48.3) %
Impact of restructuring and transformational project costs (1)
60,124 113,827 (53,703) (47.2)
Impact of acquisition-related intangible amortization (2)
35,880 34,222 1,658 4.8
Impact of bad debt reserve adjustments (3)
(128,899) — (128,899) NM
Operating income adjusted for Certain Items (Non-GAAP) $ 598,746 $ 1,368,860 $ (770,114) (56.3) %
Other (income) expense (GAAP) $ (1,432) $ 2,305 $ (3,737) (162.1) %
Impact of loss on sale of a business (12,043) — (12,043) NM
Other (income) expense (Non-GAAP) $ (13,475) $ 2,305 $ (15,780) NM
Net earnings (GAAP) $ 284,189 $ 837,191 $ (553,002) (66.1) %
Impact of restructuring and transformational project costs (1)
60,124 113,827 (53,703) (47.2)
Impact of acquisition-related intangible amortization (2)
35,880 34,222 1,658 4.8
Impact of bad debt reserve adjustments (3)
(128,899) — (128,899) NM
Impact of loss on sale of a business 12,043 — 12,043 NM
Tax impact of restructuring and transformational project costs (4)
(16,586) (29,294) 12,708 (43.4)
Tax impact of acquisition-related intangible amortization (4)
(9,898) (8,807) (1,091) 12.4
Tax impact of bad debt reserve adjustments (4)
35,559 — 35,559 NM
Tax impact of loss on sale of a business
(7,553) — (7,553) NM
Impact of foreign tax rate change (5,548) 924 (6,472) NM
Net earnings adjusted for Certain Items (Non-GAAP) $ 259,311 $ 948,063 $ (688,752) (72.6) %
Diluted earnings per share (GAAP) $ 0.56 $ 1.62 $ (1.06) (65.4) %
Impact of restructuring and transformational project costs (1)
0.12 0.22 (0.10) (45.5)
Impact of acquisition-related intangible amortization (2)
0.07 0.07 — 0.0
Impact of bad debt reserve adjustments (3)
(0.25) — (0.25) NM
Impact of loss on sale of a business 0.02 — 0.02 NM
Tax impact of restructuring and transformational project costs (4)
(0.03) (0.06) 0.03 (50.0)
Tax impact of acquisition-related intangible amortization (4)
(0.02) (0.02) — 0.0
Tax impact of bad debt reserve adjustments (4)
0.07 — 0.07 NM
Tax impact loss on sale of a business (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)
$ 0.51 $ 1.83 $ (1.32) (72.1) %


	26-Week Period Ended Jan. 1, 2022			26-Week Period Ended Dec. 26, 2020			Change in Dollars		% Change
Sales (GAAP)	$	32,776,749		$	23,336,361		$	9,440,388	40.5	%


Impact of currency fluctuations (1)	(160,803)			—			(160,803)		(0.7)
Comparable sales using a constant currency basis (Non-GAAP)	$	32,615,946		$	23,336,361		$	9,279,585	39.8	%

Gross profit (GAAP)	$	5,862,858		$	4,318,303		$	1,544,555	35.8	%


Impact of currency fluctuations (1)	(28,551)			—			(28,551)		(0.7)
Comparable gross profit using a constant currency basis (Non-GAAP)	$	5,834,307		$	4,318,303		$	1,516,004	35.1	%





Gross margin (GAAP)	17.89		%	18.50		%			-62 bps
Impact of currency fluctuations (1)	—			—					0 bps
Comparable Gross margin using a constant currency basis (Non-GAAP)	17.89		%	18.50		%			-62 bps

Operating expenses (GAAP)	$	4,786,267		$	3,686,662		$	1,099,605	29.8	%
Impact of restructuring and transformational project costs (2)	(47,980)			(60,124)			12,144		20.2
Impact of acquisition-related costs (3)	(69,658)			(35,880)			(33,778)		(94.1)
Impact of bad debt reserve adjustments (4)	13,499			128,899			(115,400)		(89.5)

Operating expenses adjusted for Certain Items (Non-GAAP)	$	4,682,128		$	3,719,557		$	962,571	25.9	%


Impact of currency fluctuations (1)	(25,184)			—			(25,184)		(0.7)
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)	$	4,656,944		$	3,719,557		$	937,387	25.2	%

Operating income (GAAP)	$	1,076,591		$	631,641		$	444,950	70.4	%
Impact of restructuring and transformational project costs (2)	47,980			60,124			(12,144)		(20.2)
Impact of acquisition-related costs (3)	69,658			35,880			33,778		94.1
Impact of bad debt reserve adjustments (4)	(13,499)			(128,899)			115,400		89.5

Operating income adjusted for Certain Items (Non-GAAP)	$	1,180,730		$	598,746		$	581,984	97.2	%


Impact of currency fluctuations (1)	(3,367)			—			(3,367)		0.6
Comparable operating income adjusted for Certain Items using a constant currency basis (Non-GAAP)	$	1,177,363		$	598,746		$	578,617	96.6	%




Interest expense (GAAP)	$	371,113		$	293,215		$	77,898	26.6	%
Impact of loss on extinguishment of debt	(115,603)			—			(115,603)		NM
Interest expense adjusted for Certain Items (Non-GAAP)	$	255,510		$	293,215		$	(37,705)	(12.9)	%



Other income (GAAP)	$	(13,928)		$	(1,432)		$	(12,496)	NM
Impact of loss on sale of business	—			(12,043)			12,043		NM
Other income adjusted for Certain Items (Non-GAAP)	$	(13,928)		$	(13,475)		$	(453)	(3.4)	%



Net earnings (GAAP)	$	545,454		$	284,189		$	261,265	91.9	%
Impact of restructuring and transformational project costs (2)	47,980			60,124			(12,144)		(20.2)
Impact of acquisition-related costs (3)	69,658			35,880			33,778		94.1
Impact of bad debt reserve adjustments (4)	(13,499)			(128,899)			115,400		89.5

Impact of loss on extinguishment of debt	115,603			—			115,603		NM
Impact of loss on sale of business	—			12,043			(12,043)		NM


Tax impact of restructuring and transformational project costs (5)	(12,082)		(16,586)		4,504		27.2
Tax impact of acquisition-related costs (5)	(17,541)		(9,898)		(7,643)		(77.2)
Tax impact of bad debt reserves adjustments (5)	3,399		35,559		(32,160)		(90.4)
Tax impact of loss on extinguishment of debt (5)	(29,111)		—		(29,111)		NM
Tax impact of loss on sale of business (5)	—		(7,553)		7,553		NM
Impact of adjustments to uncertain tax positions	12,000		—		$	12,000	NM
Impact of foreign tax rate change	—		(5,548)		5,548		NM
Net earnings adjusted for Certain Items (Non-GAAP)	$	721,861	$	259,311	$	462,550	178.4	%



Diluted earnings per share (GAAP)	$	1.06	$	0.56	$	0.50	89.3	%
Impact of restructuring and transformational project costs (2)	0.09		0.12		(0.03)		(25.0)
Impact of acquisition-related costs (3)	0.14		0.07		0.07		100.0
Impact of bad debt reserve adjustments (4)	(0.03)		(0.25)		0.22		88.0

Impact of loss on extinguishment of debt	0.22		—		0.22		NM
Impact of loss on sale of business	—		0.02		(0.02)		NM
Tax impact of restructuring and transformational project costs (5)	(0.02)		(0.03)		0.01		33.3
Tax impact of acquisition-related costs (5)	(0.03)		(0.02)		(0.01)		(50.0)
Tax impact of bad debt reserves adjustments (5)	0.01		0.07		(0.06)		(85.7)
Tax impact of loss on extinguishment of debt (5)	(0.06)		—		(0.06)		NM
Tax impact of Impact of loss on sale of business (5)	—		(0.01)		0.01		NM
Impact of adjustments to uncertain tax positions	0.02		—		0.02		NM
Impact of foreign tax rate change	—		(0.01)		0.01		NM
Diluted earnings per share adjusted for Certain Items (Non-GAAP) (6)	$	1.40	$	0.51	$	0.89	174.5	%


(1)			Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on the current year results.
(2)			Fiscal ~~2021~~2022 includes $34 million related to restructuring, severance and facility closure charges, and $26 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy. Fiscal 2020 includes $62$28 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy and ~~$52~~$20 million related to restructuring charges, severance ~~restructuring~~ and facility closure charges. Fiscal 2021 includes $33 million related to restructuring, severance and facility closure charges, and $27 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy.
~~(2)~~(3)			~~Represents~~Fiscal 2022 includes $48 million of intangible amortization expense ~~from the Brakes Acquisition, which is included~~and $21 million in ~~the results of International Foodservice.~~acquisition and due diligence costs. Fiscal 2021 represents intangible amortization expense.
~~(3)~~(4)			~~Represents~~Fiscal 2022 and fiscal 2021 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
~~(4)~~(5)			The tax impact of adjustments for Certain Items ~~are~~is 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.


	26-Week Period Ended Jan. 1, 2022			26-Week Period Ended Dec. 29, 2018			Change in Dollars		% Change
Sales (GAAP)	$	32,776,749		$	29,980,986		$	2,795,763	9.3	%
Gross profit (GAAP)	5,862,858			5,675,497			187,361		3.3
Gross margin (GAAP)	17.89		%	18.93		%			-104 bps

Operating expenses (GAAP)	$	4,786,267		$	4,595,462		$	190,805	4.2	%
Impact of restructuring and transformational project costs (1)	(47,980)			(175,339)			127,359		72.6
Impact of acquisition-related costs (2)	(69,658)			(39,645)			(30,013)		(75.7)
Impact of bad debt reserve adjustments (3)	13,499			—			13,499		NM
Comparable operating expenses adjusted for Certain Items (Non-GAAP)	$	4,682,128		$	4,380,478		$	301,650	6.9	%

Operating income (GAAP)	$	1,076,591		$	1,080,035		$	(3,444)	(0.3)	%
Impact of restructuring and transformational project costs (1)	47,980			175,339			(127,359)		(72.6)
Impact of acquisition-related costs (2)	69,658			39,645			30,013		75.7
Impact of bad debt reserve adjustments (3)	(13,499)			—			(13,499)		NM
Operating income adjusted for Certain Items (Non-GAAP)	$	1,180,730		$	1,295,019		$	(114,289)	(8.8)	%

Interest expense (GAAP)	$	371,113		$	176,129		$	194,984	110.7	%
Impact of loss on extinguishment of debt	(115,603)			—			(115,603)		NM
Interest expense adjusted for Certain Items (Non-GAAP)	$	255,510		$	176,129		$	79,381	45.1	%





Net earnings (GAAP)	$	545,454		$	698,422		$	(152,968)	(21.9)	%
Impact of restructuring and transformational project costs (1)	47,980			175,339			(127,359)		(72.6)
Impact of acquisition-related costs (2)	69,658			39,645			30,013		75.7
Impact of bad debt reserve adjustments (3)	(13,499)			—			(13,499)		NM
Impact of loss on extinguishment of debt	115,603			—			115,603		NM
Tax impact of restructuring and transformational project costs (4)	(12,082)			(45,560)			33,478		73.5
Tax impact of acquisition-related costs (4)	(17,541)			(10,302)			(7,239)		(70.3)
Tax impact of bad debt reserves adjustments (4)	3,399			—			3,399		NM
Tax impact of loss on extinguishment of debt (4)	(29,111)			—			(29,111)		NM
Impact of adjustments to uncertain tax positions	12,000			15,154			(3,154)		(20.8)
Net earnings adjusted for Certain Items (Non-GAAP)	$	721,861		$	872,698		$	(150,837)	(17.3)	%

Diluted earnings per share (GAAP)	$	1.06		$	1.33		$	(0.27)	(20.3)	%
Impact of restructuring and transformational project costs (1)	0.09			0.33			(0.24)		(72.7)
Impact of acquisition-related costs (2)	0.14			0.08			0.06		75.0
Impact of bad debt reserve adjustments (3)	(0.03)			—			(0.03)		NM
Impact of loss on extinguishment of debt	0.22			—			0.22		NM
Tax impact of restructuring and transformational project costs (4)	(0.02)			(0.09)			0.07		77.8
Tax impact of acquisition-related costs (4)	(0.03)			(0.02)			(0.01)		(50.0)
Tax impact of bad debt reserves adjustments (4)	0.01			—			0.01		NM
Tax impact of loss on extinguishment of debt (4)	(0.06)			—			(0.06)		NM
Impact of adjustments to uncertain tax positions	0.02			0.03			(0.01)		(33.3)
Diluted earnings per share adjusted for Certain Items (Non-GAAP) (5)	$	1.40		$	1.66		$	(0.26)	(15.7)	%


(1)			Fiscal 2022 includes $28 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy and $20 million related to restructuring charges, severance and facility closure charges. Fiscal 2019 includes $79 million related to various transformation initiative costs, primarily consisting of changes to our business technology strategy, of which $17 million relates to accelerated depreciation related to software that is being replaced, and $96 million related to severance, restructuring and facility closure charges in Europe and Canada, of which $56 million relates to our France restructuring as part of our integration of Brake France and Davigel into Sysco France.
(2)			Fiscal 2022 includes $48 million of intangible amortization expense and $21 million in acquisition and due diligence costs. Fiscal 2019 includes $39 million of intangible amortization expense and $1 million of acquisition costs.
(3)			Fiscal 2022 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(4)			The tax impact of adjustments for Certain Items is 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.
			NM represents that the percentage change is not meaningful.

4447

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 Dec. 26, 2020			13-Week Period Ended Dec. 28, 2019			Change in Dollars		% Change			13-Week Period Ended Jan. 1, 2022			13-Week Period Ended Dec. 26, 2020			Change in Dollars		%/bps Change
U.S. FOODSERVICE OPERATIONS	U.S. FOODSERVICE OPERATIONS											U.S. FOODSERVICE OPERATIONS

Operating expenses (GAAP)	Operating expenses (GAAP)	$	1,074,071		$	1,344,103		$	(270,032)	(20.1)	%	Operating expenses (GAAP)	$	1,462,456		$	1,074,071		$	388,385	36.2	%
Impact of restructuring and transformational project costs (1)		(1,784)			(3,679)			1,895		(51.5)
Impact of restructuring and transformational project costs												Impact of restructuring and transformational project costs	(16)			(1,784)			1,768		99.1
Impact of acquisition-related costs (1)												Impact of acquisition-related costs (1)	(13,131)			—			(13,131)		NM
Impact of bad debt reserve adjustments (2)	Impact of bad debt reserve adjustments (2)	15,239			—			15,239		NM		Impact of bad debt reserve adjustments (2)	5,249			15,239			(9,990)		(65.6)

Impact of goodwill impairment												Impact of goodwill impairment	—			—			—		NM
Operating expenses adjusted for Certain Items (Non-GAAP)	Operating expenses adjusted for Certain Items (Non-GAAP)	$	1,087,526		$	1,340,424		$	(252,898)	(18.9)	%	Operating expenses adjusted for Certain Items (Non-GAAP)	$	1,454,558		$	1,087,526		$	367,032	33.7	%

Operating income (GAAP)	Operating income (GAAP)	$	485,251		$	704,801		$	(219,550)	(31.2)	%	Operating income (GAAP)	$	676,822		$	485,251		$	191,571	39.5	%
Impact of restructuring and transformational project costs (1)		1,784			3,679			(1,895)		(51.5)
Impact of restructuring and transformational project costs												Impact of restructuring and transformational project costs	16			1,784			(1,768)		(99.1)
Impact of acquisition-related costs (1)												Impact of acquisition-related costs (1)	13,131			—			13,131		NM
Impact of bad debt reserve adjustments (2)	Impact of bad debt reserve adjustments (2)	(15,239)			—			(15,239)		NM		Impact of bad debt reserve adjustments (2)	(5,249)			(15,239)			9,990		65.6

Operating income adjusted for Certain Items (Non-GAAP)	Operating income adjusted for Certain Items (Non-GAAP)	$	471,796		$	708,480		$	(236,684)	(33.4)	%	Operating income adjusted for Certain Items (Non-GAAP)	$	684,720		$	471,796		$	212,924	45.1	%

INTERNATIONAL FOODSERVICE OPERATIONS	INTERNATIONAL FOODSERVICE OPERATIONS											INTERNATIONAL FOODSERVICE OPERATIONS
Sales (GAAP)	Sales (GAAP)	$	1,967,789		$	2,890,053		$	(922,264)	(31.9)	%	Sales (GAAP)	$	2,806,272		$	1,967,789		$	838,483	42.6	%

Impact of currency fluctuations (3)	Impact of currency fluctuations (3)	(53,402)			—			(53,402)		1.8		Impact of currency fluctuations (3)	(34,061)			—			(34,061)		(1.7)
Comparable sales using a constant currency basis (Non-GAAP)	Comparable sales using a constant currency basis (Non-GAAP)	$	1,914,387		$	2,890,053		$	(975,666)	(33.8)	%	Comparable sales using a constant currency basis (Non-GAAP)	$	2,772,211		$	1,967,789		$	804,422	40.9	%

Gross Profit (GAAP)		$	373,840		$	586,039		$	(212,199)	(36.2)	%
Gross profit (GAAP)												Gross profit (GAAP)	$	565,931		$	373,840		$	192,091	51.4	%

Impact of currency fluctuations (3)	Impact of currency fluctuations (3)	(11,458)			—			(11,458)		2.0		Impact of currency fluctuations (3)	(4,033)			—			(4,033)		(1.1)
Comparable gross profit using a constant currency basis (Non-GAAP)	Comparable gross profit using a constant currency basis (Non-GAAP)	$	362,382		$	586,039		$	(223,657)	(38.2)	%	Comparable gross profit using a constant currency basis (Non-GAAP)	$	561,898		$	373,840		$	188,058	50.3	%

Gross Margin (GAAP)		19.00		%	20.28		%			-128 bps

Gross margin (GAAP)												Gross margin (GAAP)	20.17		%	19.00		%			116 bps
Impact of currency fluctuations (3)	Impact of currency fluctuations (3)	0.07			—					7 bps		Impact of currency fluctuations (3)	(0.10)			—					-10 bps
Comparable gross margin using a constant currency basis (Non-GAAP)	Comparable gross margin using a constant currency basis (Non-GAAP)	18.93		%	20.28		%			-135 bps		Comparable gross margin using a constant currency basis (Non-GAAP)	20.27		%	19.00		%			127 bps

Operating expenses (GAAP)	Operating expenses (GAAP)	$	453,789		$	551,158		$	(97,369)	(17.7)	%	Operating expenses (GAAP)	$	555,186		$	453,789		$	101,397	22.3	%
Impact of restructuring and transformational project costs (4)	Impact of restructuring and transformational project costs (4)	(20,405)			(21,850)			1,445		(6.6)		Impact of restructuring and transformational project costs (4)	(11,621)			(20,405)			8,784		43.0
Impact of acquisition-related intangible amortization (5)		(18,125)			(17,312)			(813)		4.7
Impact of acquisition-related costs (5)												Impact of acquisition-related costs (5)	(18,475)			(18,125)			(350)		(1.9)
Impact of bad debt reserve adjustments (2)	Impact of bad debt reserve adjustments (2)	13,797			—			13,797		NM		Impact of bad debt reserve adjustments (2)	1,191			13,797			(12,606)		(91.4)

Operating expenses adjusted for Certain Items (Non-GAAP)	Operating expenses adjusted for Certain Items (Non-GAAP)	429,056			511,996			(82,940)		(16.2)		Operating expenses adjusted for Certain Items (Non-GAAP)	526,281			429,056			97,225		22.7

Impact of currency fluctuations (3)	Impact of currency fluctuations (3)	(15,123)			—			(15,123)		3.0		Impact of currency fluctuations (3)	(3,194)			—			(3,194)		(0.7)
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)	Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)	$	413,933		$	511,996		$	(98,063)	(19.2)	%	Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)	$	523,087		$	429,056		$	94,031	21.9	%

Operating (loss) income (GAAP)		$	(79,949)		$	34,881		$	(114,830)	NM
Operating income (loss) (GAAP)												Operating income (loss) (GAAP)	$	10,745		$	(79,949)		$	90,694	113.4	%
Impact of restructuring and transformational project costs (4)	Impact of restructuring and transformational project costs (4)	20,405			21,850			(1,445)		(6.6)		Impact of restructuring and transformational project costs (4)	11,621			20,405			(8,784)		(43.0)
Impact of acquisition-related intangible amortization (5)		18,125			17,312			813		4.7
Impact of acquisition-related costs (5)												Impact of acquisition-related costs (5)	18,475			18,125			350		1.9
Impact of bad debt reserve adjustments (2)	Impact of bad debt reserve adjustments (2)	(13,797)			—			(13,797)		NM		Impact of bad debt reserve adjustments (2)	(1,191)			(13,797)			12,606		91.4
Operating (loss) income adjusted for Certain Items (Non-GAAP)		(55,216)			74,043			(129,259)		(174.6)

Operating income (loss) adjusted for Certain Items (Non-GAAP)												Operating income (loss) adjusted for Certain Items (Non-GAAP)	39,650			(55,216)			94,866		171.8

Impact of currency fluctuations (3)	Impact of currency fluctuations (3)	3,665			—			3,665		(4.9)		Impact of currency fluctuations (3)	(839)			—			(839)		(1.5)
Comparable operating (loss) income adjusted for Certain Items using a constant currency basis (Non-GAAP)		$	(51,551)		$	74,043		$	(125,594)	(169.6)	%
Comparable operating income (loss) adjusted for Certain Items using a constant currency basis (Non-GAAP)												Comparable operating income (loss) adjusted for Certain Items using a constant currency basis (Non-GAAP)	$	38,811		$	(55,216)		$	94,027	170.3	%

SYGMA												SYGMA

Operating expenses (GAAP)												Operating expenses (GAAP)	$	143,681		$	117,971		$	25,710	21.8	%
Impact of restructuring and transformational project costs												Impact of restructuring and transformational project costs	—			6			(6)		NM

Operating expenses adjusted for Certain Items (Non-GAAP)												Operating expenses adjusted for Certain Items (Non-GAAP)	$	143,681		$	117,977		$	25,704	21.8	%

4548


SYGMA
Operating (loss) income (GAAP)										Operating (loss) income (GAAP)	$	(6,729)	$	11,328	$	(18,057)	(159.4)	%
Impact of restructuring and transformational project costs										Impact of restructuring and transformational project costs	—		(6)		6		NM

Operating (loss) income adjusted for Certain Items (Non-GAAP)										Operating (loss) income adjusted for Certain Items (Non-GAAP)	$	(6,729)	$	11,322	$	(18,051)	(159.4)	%

OTHER										OTHER

Operating expenses (GAAP)	Operating expenses (GAAP)	$	117,971	$	114,378	$	3,593	3.1	%	Operating expenses (GAAP)	$	54,626	$	36,785	$	17,841	48.5	%
Impact of restructuring and transformational project costs (1)		6		(956)		962		(100.6)

Impact of bad debt reserve adjustments (2)										Impact of bad debt reserve adjustments (2)	(2)		1,235		(1,237)		-100.2

Operating expenses adjusted for Certain Items (Non-GAAP)	Operating expenses adjusted for Certain Items (Non-GAAP)	$	117,977	$	113,422	$	4,555	4.0	%	Operating expenses adjusted for Certain Items (Non-GAAP)	$	54,624	$	38,020	$	16,604	43.7	%

Operating income (GAAP)		$	11,328	$	9,861	$	1,467	14.9	%
Impact of restructuring and transformational project costs (1)		(6)		956		(962)		(100.6)

Operating income adjusted for Certain Items (Non-GAAP)		$	11,322	$	10,817	$	505	4.7	%

OTHER
Operating income (loss) (GAAP)										Operating income (loss) (GAAP)	$	183	$	(1,018)	$	1,201	118.0	%

Impact of bad debt reserve adjustments (2)										Impact of bad debt reserve adjustments (2)	2		(1,235)		1,237		100.2

Operating income (loss) adjusted for Certain Items (Non-GAAP)										Operating income (loss) adjusted for Certain Items (Non-GAAP)	$	185	$	(2,253)	$	2,438	108.2	%

GLOBAL SUPPORT CENTER										GLOBAL SUPPORT CENTER

Operating expenses (GAAP)	Operating expenses (GAAP)	$	36,785	$	57,104	$	(20,319)	(35.6)	%	Operating expenses (GAAP)	$	230,292	$	203,780	$	26,512	13.0	%

Impact of bad debt reserve adjustments (2)		1,234		—		1,234		NM
Operating expenses adjusted for Certain Items (Non-GAAP)		$	38,019	$	57,104	$	(19,085)	(33.4)	%

Operating (loss) income (GAAP)		$	(1,018)	$	9,403	$	(10,421)	(110.8)	%

Impact of bad debt reserve adjustments (2)		(1,234)		—		(1,234)		NM
Operating (loss) income adjusted for Certain Items (Non-GAAP)		$	(2,252)	$	9,403	$	(11,655)	(123.9)	%

CORPORATE

Operating expenses (GAAP)		$	203,780	$	209,163	$	(5,383)	(2.6)	%
Impact of restructuring and transformational project costs (6)	Impact of restructuring and transformational project costs (6)	(11,977)		(30,620)		18,643		(60.9)		Impact of restructuring and transformational project costs (6)	(11,832)		(11,977)		145		1.2
Impact of acquisition-related costs (7)										Impact of acquisition-related costs (7)	(2,126)		—		(2,126)		NM

Operating expenses adjusted for Certain Items (Non-GAAP)	Operating expenses adjusted for Certain Items (Non-GAAP)	$	191,803	$	178,543	$	13,260	7.4	%	Operating expenses adjusted for Certain Items (Non-GAAP)	$	216,334	$	191,803	$	24,531	12.8	%

Operating loss (GAAP)	Operating loss (GAAP)	$	(203,550)	$	(206,453)	$	2,903	(1.4)	%	Operating loss (GAAP)	$	(236,112)	$	(203,550)	$	(32,562)	(16.0)	%
Impact of restructuring and transformational project costs (6)	Impact of restructuring and transformational project costs (6)	11,977		30,620		(18,643)		(60.9)		Impact of restructuring and transformational project costs (6)	11,832		11,977		(145)		(1.2)
Impact of acquisition-related costs (7)										Impact of acquisition-related costs (7)	2,126		—		2,126		NM

Operating loss adjusted for Certain Items (Non-GAAP)	Operating loss adjusted for Certain Items (Non-GAAP)	$	(191,573)	$	(175,833)	$	(15,740)	9.0	%	Operating loss adjusted for Certain Items (Non-GAAP)	$	(222,154)	$	(191,573)	$	(30,581)	(16.0)	%



(1)			~~Includes charges related to restructuring~~Fiscal 2022 includes intangible amortization expense and ~~business transformation projects.~~acquisition costs.
(2)			~~Represents~~Fiscal 2022 and fiscal 2021 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(3)			Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on current year results.
(4)			Includes restructuring and facility closure costs primarily in Europe.
(5)			Represents intangible amortization expense.
(6)			Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy.
(7)			Represents due diligence costs.

			NM represents that the percentage change is not meaningful.


U.S. FOODSERVICE OPERATIONS	26-Week Period Ended Jan. 1, 2022			26-Week Period Ended Dec. 26, 2020			Change in Dollars		% Change












Operating expenses (GAAP)	$	2,850,087		$	2,085,369		$	764,718	36.7	%
Impact of restructuring and transformational project costs	(19)			(2,724)			2,705		99.3
Impact of acquisition-related costs (1)	(17,785)			—			(17,785)		NM
Impact of bad debt reserve adjustments (2)	11,669			101,556			(89,887)		(88.5)

Operating expenses adjusted for Certain Items (Non-GAAP)	$	2,843,952		$	2,184,201		$	659,751	30.2	%



Operating income (GAAP)	$	1,474,345		$	1,073,660		$	400,685	37.3	%
Impact of restructuring and transformational project costs	19			2,724			(2,705)		(99.3)
Impact of acquisition-related costs (1)	17,785			—			17,785		NM
Impact of bad debt reserve adjustments (2)	(11,669)			(101,556)			89,887		88.5

Operating income adjusted for Certain Items (Non-GAAP)	$	1,480,480		$	974,828		$	505,652	51.9	%



INTERNATIONAL FOODSERVICE OPERATIONS
Sales (GAAP)	$	5,701,519		$	4,131,482		$	1,570,037	38.0	%


Impact of currency fluctuations (3)	(155,456)			—			(155,456)		(3.8)
Comparable sales using a constant currency basis (Non-GAAP)	$	5,546,063		$	4,131,482		$	1,414,581	34.2	%

Gross profit (GAAP)	$	1,155,065		$	824,238		$	330,827	40.1	%


Impact of currency fluctuations (3)	(26,767)			—			(26,767)		(3.2)
Comparable gross profit using a constant currency basis (Non-GAAP)	$	1,128,298		$	824,238		$	304,060	36.9	%





Gross margin (GAAP)	20.26		%	19.95		%			31 bps
Impact of currency fluctuations (3)	(0.09)			—					9 bps
Comparable gross margin using a constant currency basis (Non-GAAP)	20.34		%	19.95		%			39 bps

Operating expenses (GAAP)	$	1,107,644		$	904,724		$	202,920	22.4	%
Impact of restructuring and transformational project costs (4)	(21,047)			(33,398)			12,351		37.0
Impact of acquisition-related costs (5)	(37,131)			(35,880)			(1,251)		(3.5)
Impact of bad debt reserve adjustments (2)	1,831			25,227			(23,396)		(92.7)

Operating expenses adjusted for Certain Items (Non-GAAP)	1,051,297			860,673			190,624		22.1


Impact of currency fluctuations (3)	(24,268)			—			(24,268)		(2.8)
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP)	$	1,027,029		$	860,673		$	166,356	19.3	%

Operating loss (GAAP)	$	47,421		$	(80,486)		$	127,907	158.9	%
Impact of restructuring and transformational project costs (4)	21,047			33,398			(12,351)		(37.0)
Impact of acquisition-related costs (5)	37,131			35,880			1,251		3.5
Impact of bad debt reserve adjustments (2)	(1,831)			(25,227)			23,396		92.7

Operating income (loss) adjusted for Certain Items (Non-GAAP)	103,768			(36,435)			140,203		NM


Impact of currency fluctuations (3)	(2,499)			—			(2,499)		NM
Comparable operating income (loss) adjusted for Certain Items using a constant currency basis (Non-GAAP)	$	101,269		$	(36,435)		$	137,704	NM

SYGMA


Operating expenses (GAAP)	$	284,285	$	237,820	$	46,465	19.5	%
Impact of restructuring and transformational project costs	—		(7)		7		NM



Operating expenses adjusted for Certain Items (Non-GAAP)	$	284,285	$	237,813	$	46,472	19.5	%



Operating (loss) income (GAAP)	$	(9,176)	$	23,020	$	(32,196)	(139.9)	%
Impact of restructuring and transformational project costs	—		7		(7)		NM



Operating (loss) income adjusted for Certain Items (Non-GAAP)	$	(9,176)	$	23,027	$	(32,203)	(139.8)	%



OTHER












Operating expenses (GAAP)	$	107,191	$	77,220	$	29,971	38.8	%


Impact of bad debt reserve adjustments (2)	(1)		2,116		(2,117)		(100.0)

Operating expenses adjusted for Certain Items (Non-GAAP)	$	107,190	$	79,336	$	27,854	35.1	%



Operating income (loss) (GAAP)	$	6,639	$	(1,023)	$	7,662	NM


Impact of bad debt reserve adjustments (2)	1		(2,116)		2,117		100.0

Operating income (loss) adjusted for Certain Items (Non-GAAP)	$	6,640	$	(3,139)	$	9,779	NM



GLOBAL SUPPORT CENTER




Operating expenses (GAAP)	$	437,060	$	381,529	$	55,531	14.6	%
Impact of restructuring and transformational project costs (6)	(26,914)		(23,995)		(2,919)		(12.2)
Impact of acquisition-related costs (7)	(14,742)		—		(14,742)		NM


Operating expenses adjusted for Certain Items (Non-GAAP)	$	395,404	$	357,534	$	37,870	10.6	%



Operating loss (GAAP)	$	(442,638)	$	(383,530)	$	(59,108)	(15.4)	%
Impact of restructuring and transformational project costs (6)	26,914		23,995		2,919		12.2
Impact of acquisition-related costs (7)	14,742		—		14,742		NM


Operating loss adjusted for Certain Items (Non-GAAP)	$	(400,982)	$	(359,535)	$	(41,447)	(11.5)	%


(1)			Fiscal 2022 includes intangible amortization expense and acquisition costs.
(2)			Fiscal 2022 and fiscal 2021 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(3)			Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on current year results.
(4)			Includes restructuring, severance and facility closure costs primarily in Europe.
(5)			Represents intangible amortization ~~expense from the Brakes Acquisition.~~
			expense.
(6)			Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy.
(7)			Represents due diligence costs.

			NM represents that the percentage change is not meaningful.

EBITDA and 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 Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Performance Indicators” contained in our fiscal 2021 Form 10-K for discussions around this non-GAAP performance metric. Set forth below is a reconciliation of actual net earnings to EBITDA and to adjusted EBITDA results for the periods presented (dollars in thousands):


	13-Week Period Ended Jan. 1, 2022		13-Week Period Ended Dec. 26, 2020		Change in Dollars		% Change
Net earnings (GAAP)	$	167,441	$	67,289	$	100,152	148.8	%
Interest (GAAP)	242,899		146,498		96,401		65.8
Income taxes (GAAP)	45,245		13,831		31,414		227.1
Depreciation and amortization (GAAP)	191,297		184,811		6,486		3.5
EBITDA (Non-GAAP)	$	646,882	$	412,429	$	234,453	56.8	%
Certain Item adjustments:
Impact of restructuring and transformational project costs (1)	23,193		29,674		(6,481)		(21.8)
Impact of acquisition-related costs (2)	7,085		—		7,085		NM
Impact of bad debt reserve adjustments (3)	(6,438)		(30,271)		23,833		78.7


EBITDA adjusted for Certain Items (Non-GAAP) (4)	$	670,722	$	411,832	$	258,890	62.9	%


(1)			Fiscal 2022 and fiscal 2021 includes charges related to restructuring, severance, and facility closures, as well as various transformation initiative costs, primarily consisting of changes to our business technology strategy, excluding charges related to accelerated depreciation.
(2)			Fiscal 2022 includes acquisition and due diligence costs.
(3)			Fiscal 2022 and fiscal 2021 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(4)			In arriving at adjusted EBITDA, Sysco does not adjust out interest income of $1 million and $3 million for fiscal 2022 and fiscal 2021, respectively, or non-cash stock compensation expense of $31 million and $20 million for fiscal 2022 and fiscal 2021, respectively.
			NM represents that the percentage change is not meaningful.


	13-Week Period Ended Jan. 1, 2022		13-Week Period Ended Dec. 29, 2018		Change in Dollars		% Change
Net earnings (GAAP)	$	167,441	$	267,380	$	(99,939)	(37.4)	%
Interest (GAAP)	242,899		87,113		155,786		178.8
Income taxes (GAAP)	45,245		87,205		(41,960)		(48.1)
Depreciation and amortization (GAAP)	191,297		204,786		(13,489)		(6.6)
EBITDA (Non-GAAP)	$	646,882	$	646,484	$	398	0.1	%
Certain Item adjustments:
Impact of restructuring and transformational project costs (1)	23,193		106,881		(83,688)		(78.3)
Impact of acquisition-related costs (2)	7,085		(1,250)		8,335		NM
Impact of bad debt reserve adjustments (3)	(6,438)		—		(6,438)		NM
EBITDA adjusted for Certain Items (Non-GAAP) (4)	$	670,722	$	752,115	$	(81,393)	(10.8)	%


(1)			Fiscal 2022 includes charges related to restructuring, severance, and facility closures, as well as various transformation initiative costs, primarily consisting of changes to our business technology strategy, excluding charges related to accelerated depreciation. Fiscal 2019 includes $81 million related to severance, restructuring and facility closure charges, as well as various transformation initiative costs, excluding charges related to accelerated depreciation.
(2)			Fiscal 2022 includes acquisition and due diligence costs. Fiscal 2019 represents acquisition costs.
(3)			Fiscal 2022 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(4)			In arriving at adjusted EBITDA, Sysco does not adjust out interest income of $1 million and $1 million for fiscal 2022 and fiscal 2019, respectively, or non-cash stock compensation expense of $31 million and $25 million in fiscal 2022 and fiscal 2019, respectively.
			NM represents that the percentage change is not meaningful.


	26-Week Period Ended Jan. 1, 2022		26-Week Period Ended Dec. 26, 2020		Change in Dollars		% Change
Net earnings (GAAP)	$	545,454	$	284,189	$	261,265	91.9	%
Interest (GAAP)	371,113		293,215		77,898		26.6
Income taxes (GAAP)	173,952		55,669		118,283		212.5
Depreciation and amortization (GAAP)	377,763		365,332		12,431		3.4
EBITDA (Non-GAAP)	$	1,468,282	$	998,405	$	469,877	47.1	%
Certain Item adjustments:
Impact of restructuring and transformational project costs (1)	47,440		54,951		(7,511)		(13.7)
Impact of acquisition-related costs (2)	21,306		—		21,306		NM
Impact of bad debt reserve adjustments (3)	(13,499)		(128,899)		115,400		(89.5)

Impact of loss on sale of business	—		12,043		(12,043)		NM
EBITDA adjusted for Certain Items (Non-GAAP) (4)	$	1,523,529	$	936,500	$	587,029	62.7	%


(1)			Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy, excluding charges related to accelerated depreciation.
(2)			Fiscal 2022 includes acquisition and due diligence costs.
(3)			Fiscal 2022 and fiscal 2021 represent the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(4)			In arriving at adjusted EBITDA, Sysco does not adjust out interest income of $3 million and $7 million or non-cash stock compensation expense of $60 million and $46 million for fiscal 2022 and fiscal 2021, respectively.
			NM represents that the percentage change is not meaningful.


	26-Week Period Ended Jan. 1, 2022		26-Week Period Ended Dec. 29, 2018		Change in Dollars		% Change
Net earnings (GAAP)	$	545,454	$	698,422	$	(152,968)	(21.9)	%
Interest (GAAP)	371,113		176,129		194,984		110.7
Income taxes (GAAP)	173,952		194,155		(20,203)		(10.4)
Depreciation and amortization (GAAP)	377,763		392,413		(14,650)		(3.7)
EBITDA (Non-GAAP)	$	1,468,282	$	1,461,119	$	7,163	0.5	%
Certain Item adjustments:
Impact of restructuring and transformational project costs (1)	47,440		147,784		(100,344)		(67.9)
Impact of acquisition-related costs (2)	21,306		805		20,501		NM
Impact of bad debt reserve adjustments (3)	(13,499)		—		(13,499)		NM
EBITDA adjusted for Certain Items (Non-GAAP) (4)	$	1,523,529	$	1,609,708	$	(86,179)	(5.4)	%


(1)			Fiscal 2022 includes various transformation initiative costs, primarily consisting of changes to our business technology strategy, excluding charges related to accelerated depreciation. Fiscal 2019 includes $96 million related to severance, restructuring and facility closure charges as well as various transformation initiative costs, excluding charges related to accelerated depreciation.
(2)			Fiscal 2022 includes acquisition and due diligence costs. Fiscal 2019 represents acquisition costs.
(3)			Fiscal 2022 represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.
(4)			In arriving at adjusted EBITDA, Sysco does not adjust out interest income of $3 million and $2 million or non-cash stock compensation expense of $60 million and $54 million for fiscal 2022 and fiscal 2019, respectively.
			NM represents that the percentage change is not meaningful.

26-Week Period Ended Dec. 26, 2020 26-Week Period Ended Dec. 28, 2019 Change in Dollars % Change
U.S. FOODSERVICE OPERATIONS
Operating expenses (GAAP) $ 2,085,369 $ 2,695,371 $ (610,002) (22.6) %
Impact of restructuring and transformational project costs (1)
(2,724) (7,805) 5,081 (65.1)
Impact of bad debt reserve adjustments (2)
101,556 — 101,556 NM
Operating expenses adjusted for Certain Items (Non-GAAP) $ 2,184,201 $ 2,687,566 $ (503,365) (18.7) %
Operating income (GAAP) $ 1,073,660 $ 1,498,420 $ (424,760) (28.3) %
Impact of restructuring and transformational project costs (1)
2,724 7,805 (5,081) (65.1)
Impact of bad debt reserve adjustments (2)
(101,556) — (101,556) NM
Operating income adjusted for Certain Items (Non-GAAP) $ 974,828 $ 1,506,225 $ (531,397) (35.3) %
INTERNATIONAL FOODSERVICE OPERATIONS
Sales (GAAP) $ 4,131,482 $ 5,802,441 $ (1,670,959) (28.8) %
Impact of currency fluctuations (3)
(94,042) — (94,042) 1.6
Comparable sales using a constant currency basis (Non-GAAP) $ 4,037,440 $ 5,802,441 $ (1,765,001) (30.4) %
Gross Profit (GAAP) $ 824,238 $ 1,191,224 $ (366,986) (30.8) %
Impact of currency fluctuations (3)
(22,971) — (22,971) 1.9
Comparable gross profit using a constant currency basis (Non-GAAP) $ 801,267 $ 1,191,224 $ (389,957) (32.7) %
Gross Margin (GAAP) 19.95 % 20.53 % -58 bps
Impact of currency fluctuations (3)
0.10 — 10 bps
Comparable gross margin using a constant currency basis (Non-GAAP) 19.85 % 20.53 % -68 bps
Operating expenses (GAAP) $ 904,724 $ 1,101,543 $ (196,819) (17.9) %
Impact of restructuring and transformational project costs (4)
(33,398) (49,122) 15,724 (32.0)
Impact of acquisition-related intangible amortization (5)
(35,880) (34,222) (1,658) 4.8
Impact of bad debt reserve adjustments (2)
25,227 — 25,227 NM
Operating expenses adjusted for Certain Items (Non-GAAP) 860,673 1,018,199 (157,526) (15.5)
Impact of currency fluctuations (3)
(27,452) — (27,452) 2.7
Comparable operating expenses adjusted for Certain Items using a constant currency basis (Non-GAAP) $ 833,221 $ 1,018,199 $ (184,978) (18.2) %
Operating (loss) income (GAAP) $ (80,486) $ 89,681 $ (170,167) (189.7) %
Impact of restructuring and transformational project costs (4)
33,398 49,122 (15,724) (32.0)
Impact of acquisition-related intangible amortization (5)
35,880 34,222 1,658 4.8
Impact of bad debt reserve adjustments (2)
(25,227) — (25,227) NM
Operating (loss) income adjusted for Certain Items (Non-GAAP) (36,435) 173,025 (209,460) (121.1)
Impact of currency fluctuations (3)
4,481 — 4,481 (2.6)
Comparable operating (loss) income adjusted for Certain Items using a constant currency basis (Non-GAAP) $ (31,954) $ 173,025 $ (204,979) (118.5) %
SYGMA
Operating expenses (GAAP) $ 237,820 $ 232,726 $ 5,094 2.2 %

Impact of restructuring and transformational project costs (1)
(7) (3,540) 3,533 (99.8) %
Operating expenses adjusted for Certain Items (Non-GAAP) $ 237,813 $ 229,186 $ 8,627 3.8 %
Operating income (GAAP) $ 23,020 $ 17,431 $ 5,589 32.1 %
Impact of restructuring and transformational project costs (1)
7 3,540 (3,533) (99.8) %
Operating income adjusted for Certain Items (Non-GAAP) $ 23,027 $ 20,971 $ 2,056 9.8 %
OTHER
Operating expenses (GAAP) $ 77,220 $ 118,711 $ (41,491) (35.0) %
Impact of bad debt reserve adjustments (2)
2,116 — 2,116 NM
Operating expenses adjusted for Certain Items (Non-GAAP) $ 79,336 $ 118,711 $ (39,375) (33.2) %
Operating (loss) income (GAAP) $ (1,023) $ 19,540 $ (20,563) (105.2) %
Impact of bad debt reserve adjustments (2)
(2,116) — (2,116) —
Operating (loss) income adjusted for Certain Items (Non-GAAP) $ (3,139) $ 19,540 $ (22,679) (116.1) %
CORPORATE
Operating expenses (GAAP) $ 381,529 $ 402,607 $ (21,078) (5.2) %
Impact of restructuring and transformational project costs (6)
(23,995) (53,360) 29,365 (55.0)
Operating expenses adjusted for Certain Items (Non-GAAP) $ 357,534 $ 349,247 $ 8,287 2.4 %
Operating loss (GAAP) $ (383,530) $ (404,261) $ 20,731 (5.1) %
Impact of restructuring and transformational project costs (6)
23,995 53,360 (29,365) (55.0)
Operating loss adjusted for Certain Items (Non-GAAP) $ (359,535) $ (350,901) $ (8,634) 2.5 %


~~(1)~~			~~Includes charges related to restructuring and business transformation projects.~~
~~(2)~~			~~Represents the reduction of bad debt charges previously taken on pre-pandemic trade receivable balances in fiscal 2020.~~
~~(3)~~			~~Represents a constant currency adjustment, which eliminates the impact of foreign currency fluctuations on current year results.~~
~~(4)~~			~~Includes restructuring, severance and facility closure costs primarily in Europe.~~
~~(5)~~			~~Represents intangible amortization expense from the Brakes Acquisition.~~

~~(6)~~			~~Includes various transformation initiative costs, primarily consisting of changes to our business technology strategy.~~


			~~NM represents that the percentage change is not meaningful.~~

4854

Liquidity and Capital Resources

Highlights

~~Below are~~As of January 1, 2022, we had $1.4 billion in cash and cash equivalents. We produced positive free cash flow in a period of higher working capital investments, one-time and short-term costs related to the business recovery and investments towards our Recipe for Growth strategy. Our results for the first 26 weeks of fiscal 2022 also reflect incremental progress against our capital allocation priorities, as we were able to refinance debt at more attractive interest rates with later maturities in the second quarter. In the table that follows, free cash flow for each period presented is reconciled to net cash provided by operating activities and comparisons of the significant cash flows from the first 26 weeks of fiscal ~~2021~~2022 to the first 26 weeks of fiscal ~~2020:~~2021 are provided.

•~~Cash flows from operations were $936.7 million in fiscal 2021, compared to $754.5 million in fiscal 2020;~~


	26-Week Period Ended Jan. 1, 2022		26-Week Period Ended Dec. 26, 2020
	(In thousands)
Net cash provided by operating activities (GAAP)	$	377,047	$	936,678
Additions to plant and equipment	(181,374)		(163,944)
Proceeds from sales of plant and equipment	5,450		15,510
Free Cash Flow (Non-GAAP) (1)	$	201,123	$	788,244

Acquisition of businesses, net of cash acquired	$	(769,658)	$	—

Debt borrowings (repayments), net	1,226,945		(763,106)
Redemption premiums and repayments of senior notes	(1,395,668)		—
Stock repurchases	(415,824)		—
Dividends paid	(481,386)		(458,717)

•~~Net capital expenditures totaled $148.4 million in fiscal 2021, compared to $383.1 million in fiscal 2020;~~

•Free cash flow was $788.2 million in fiscal 2021, compared to free cash flow of $371.4 million in fiscal 2020 (see below under the heading “Free Cash Flow” for an explanation of this non-GAAP financial measure);

•~~There were $6.5 million of net bank borrowings in fiscal 2021, compared to $721.4 million of commercial paper issuances and net bank borrowings in fiscal 2020;~~

•~~Dividends paid were $458.7 million in fiscal 2021, compared to $399.1 million in fiscal 2020; and~~

•~~There were no stock repurchases in fiscal 2021. Cash paid for stock repurchases was $630.4 million in fiscal 2020.~~


(1)			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 Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Performance Indicators” contained in our fiscal 2021 Form 10-K for discussions around this non-GAAP performance metric.

~~We redeemed senior notes in the amount of $750.0 million in fiscal 2021 using cash flow from operations.~~

In response to the COVID-19 pandemic and its impact on our working capital, as well as the uncertainty regarding our ability to generate cash flow in the near term, we took steps to increase our liquidity in the second half of fiscal 2020 including the issuance of senior notes, borrowings under our long-term revolving credit facility and borrowings under our U.K. commercial paper program. As of December 26, 2020, there were $700.0 million and £600.0 million in borrowings outstanding under our long-term revolving credit facility and the U.K. commercial paper program, respectively. In the fourth quarter of fiscal 2020, we entered into an amendment to our long-term revolving credit facility, which requires us to suspend share repurchases and dividend increases through fiscal 2021. As of January 23, 2021, the company had approximately $7.8 billion in cash and available liquidity.

Sources and Uses of Cash

~~Sysco’s strategic objectives include continuous investment~~Sysco generates cash in ~~our business; these investments are funded by a combination of cash from operations~~the U.S 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 can be influenced by economic trends and conditions that impact our results of operations. We believe our mechanisms to manage working capital, such as actively working with customers to receive payments on receivables, optimizing inventory levels and maximizing payment terms with vendors, have been sufficient to limit a significant unfavorable impact on our cash flows from operations. We believe these mechanisms will continue to prevent a significant unfavorable impact on our cash flows from operations.

internationally. As of ~~December 26, 2020,~~January 1, 2022, we had ~~$5.8~~$1.4 billion in cash and cash equivalents, approximately ~~20%~~44% of which was held by our international ~~subsidiaries~~subsidiaries. Sysco’s strategic objectives are funded primarily by cash from operations and, ~~generated from~~to a lesser extent, external borrowings. Traditionally, our ~~earnings from international operations. If the~~operations have produced significant cash flow and, ~~cash equivalents attributable~~due to our ~~earnings were~~strong financial position, we believe that we will continue to be ~~transferred among countries or repatriated~~able to ~~the U.S.~~effectively access capital markets, as needed. Cash is generally allocated to working capital requirements, investments compatible with our overall growth strategy (organic and inorganic), ~~such amounts may become subject to withholding~~debt management, and ~~additional foreign tax obligations. Additionally, Sysco Corporation has provided intercompany loans to certain of its international subsidiaries, and when interest and principal payments~~shareholder return. Remaining cash balances are ~~made, some of this cash will be transferred to the U.S.~~

Our wholly owned captive insurance subsidiary (the Captive), must maintain a sufficient level of liquidity to fund future reserve payments. As of December 26, 2020, the Captive held $131.0 million of fixed income marketable securities and $22.5 million of restricted cash and restricted cash equivalentsinvested in a restricted investment portfolio in order to meet solvency requirements. We purchased $36.1 million in marketable securities in the first 26 weeks of fiscal 2021 and received $20.8 million in proceeds from the sale of marketable securities in that period.high-quality, short-term instruments.

We believe our cash flow from operations, the ~~following sources~~availability of liquidity under our revolving credit facility, and our ability to access capital from financial markets 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.~~purposes.

Cash Flows

Operating Activities

We generated ~~$936.7~~$377.0 million in cash flows from operations in the first 26 weeks of fiscal ~~2021,~~2022, compared to cash flows from operating activities of ~~$754.5~~$936.7 million in the first 26 weeks of fiscal ~~2020.~~2021. These amounts include year-over-year ~~favorable~~unfavorable comparisons on working capital and accrued income taxes, partially offset by ~~lower~~higher operating results and ~~an unfavorable~~a favorable comparison on accrued ~~income taxes.~~expenses.

Changes in working capital had a ~~positive~~negative impact of ~~$946.0~~$974.0 million on cash flow from operations period-over-period. There were ~~favorable~~unfavorable comparisons primarily on ~~accounts payable, inventories,~~receivables and accounts receivable. Accounts payable has increased, primarily due to supplier term extensions. Both accounts receivable and inventory balances have increased during the first 26 weeks of fiscal 2021 as our business recovery continues.inventories. The ~~favorable~~unfavorable comparison in cash flows from accounts receivables is primarily due to ~~faster than anticipated collections on~~ our ~~pre-pandemic accounts receivables and adhering~~customers beginning to ~~tighter terms on new~~purchase more in the first 26 weeks of fiscal 2022, coupled with significantly lower sales ~~to certain customers.~~in the first 26 weeks of fiscal 2021 resulting from the COVID-19 pandemic. In the first 26 weeks of fiscal 2021, we recorded a net credit to the provision for losses on receivables totaling $94.2 million, which reflects a benefit on the reduction of our allowance for pre-pandemic receivable balances, as collection rates ~~have~~ exceeded our expectations. In the ~~company’s expectations. We continue to work with our customers to collect past due balances, including through the use~~first 26 weeks of ~~payment plans. We have also discontinued charging interest on past due balances. We are beginning to make investments~~fiscal 2022, we invested heavily in inventory, ~~to position~~which has helped us ship product on time and in full during the ~~right products, in the right locations, in preparation for the expected business recovery.~~recovery from COVID-19.

Income taxes negatively impacted cash flow from operations, as ~~estimate~~estimated payments were made in the second quarter of fiscal ~~2021.~~2022. Tax payments in the first 26 weeks of fiscal ~~2021~~2022 were higher than in the first 26 weeks of fiscal ~~2020~~2021 due to ~~relief provided in connection with~~higher earnings compared to the ~~impact of Tropical Storm Imelda in~~ prior year.

~~Other long-term liabilities include benefits provided~~Included in the ~~provisions~~change in accrued expenses was a positive comparison, primarily from favorable comparisons of ~~the Coronavirus Aid, Relief, and Economic Security Act (CARES Act)~~earnout liabilities related to our acquisitions in the first 26 weeks of fiscal ~~2021,~~2022 and customer rebate payments resulting from an increase in volume purchase incentives earned by our customers, as ~~we have deferred U.S. social security tax to future~~sales volumes increased through the first half of fiscal ~~years, which has favorably impacted our cash flows from operations.~~2022.

Investing Activities

Our capital expenditures in the first 26 weeks of fiscal ~~2021~~2022 primarily consisted of investments in buildings and building improvements, technology equipment, warehouse equipment, and fleet. Our capital expenditures in the first 26 weeks of fiscal ~~2021~~2022 were ~~lower by $229.4~~$17.4 million ~~as compared to~~

higher than in the first 26 weeks of fiscal ~~2020, primarily because~~2021, as we ~~eliminated~~made investments to advance our Recipe for Growth strategy. Our capital ~~projects not urgently needed for our business~~expenditures have been lower than planned due to increased lead times on fleet and ~~targeted investments in order to preserve our liquidity in response to the COVID-19 crisis.~~equipment.

During the first 26 weeks of fiscal ~~2020,~~2022, we paid ~~$142.8~~$769.7 million, net of cash acquired, for acquisitions.

~~Free Cash Flow~~

~~Our free cash flow for~~ There were no such acquisitions made in the first 26 weeks of fiscal 2021 increased by $416.9 million, to $788.2 million, as compared to the first 26 weeks of fiscal 2020, principally as a result of year-over-year decreased capital expenditures and an increase in cash flows from operations.

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 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.

26-Week Period Ended Dec. 26, 2020 26-Week Period Ended Dec. 28, 2019
(In thousands)
Net cash provided by operating activities (GAAP) $ 936,678 $ 754,469
Additions to plant and equipment (163,944) (393,379)
Proceeds from sales of plant and equipment 15,510 10,293
Free Cash Flow (Non-GAAP) $ 788,244 $ 371,383
2021.

Financing Activities

Equity Transactions

Proceeds from exercises of share-based compensation awards were $36.1 million in the first 26 weeks of fiscal 2022, as compared to $66.6 million in the first 26 weeks of fiscal ~~2021, as compared to $141.7 million in the first 26 weeks of fiscal 2020.~~2021. 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 ~~August 2019,~~May 2021, our Board of Directors approved a share repurchase program to authorize the repurchase of up to $5.0 billion of the company’s common stock, ~~not to exceed $2.5 billion through~~which will remain available until fully utilized. We commenced our share repurchase program during the ~~end~~second quarter of fiscal ~~2021. During March 2020, however, we discontinued share repurchases under this program, and pursuant to~~2022. We repurchased 5.7 million shares for $415.8 million during the ~~amendment to our long-term revolving credit facility, we do not anticipate making any repurchases for the remainder~~first 26 weeks of fiscal ~~2021.~~2022. As of ~~December 26, 2020,~~January 1, 2022, we had a remaining authorization of approximately ~~$2.1~~$4.6 billion.

Dividends paid in the first 26 weeks of fiscal ~~2021~~2022 were $481.4 million, or $0.94 per share, as compared to $458.7 million, or $0.90 per share, ~~as compared to $399.1 million, or $0.78 per share,~~ in the ~~first 26 weeks~~second quarter of fiscal ~~2020.~~2021. In November, ~~2020,~~ we declared our regular quarterly dividend for the second quarter of fiscal ~~2021~~2022 of ~~$0.45~~$0.47 per share, which was paid in January ~~2021. Although we expect to continue making quarterly dividend payments, we do not expect to continue to grow our dividend in fiscal 2021.~~2022.

Debt Activity and Borrowing Availability

Our debt activity, including issuances and repayments, if any, and our borrowing availability is described in Note 7,8, “Debt,” in the Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q. Our outstanding borrowings at ~~December 26, 2020, and repayment activity since the close of the second quarter of fiscal 2021,~~January 1, 2022 are disclosed within that note. ~~Updated amounts through January 15, 2021, include:~~

•~~$700.0 million outstanding from the credit facility supporting our commercial paper program;~~

•~~No outstanding borrowings from our U.S. commercial paper program; and~~

•~~£600.0 million outstanding from our U.K. commercial paper programs.~~

During the first 26 weeks of fiscal ~~2021~~2022, we amended our revolving credit facility to (a) eliminate the covenant that had restricted (i) increases to Sysco’s regular quarterly dividend and ~~fiscal 2020, our aggregate commercial paper issuances~~(ii) share repurchases, in each case, until the earlier of September 2022 or the date on which Sysco has achieved a certain ratio of consolidated EBITDA to consolidated interest expense, and ~~short-term bank borrowings had weighted average~~(b) adjust the covenant requiring Sysco to maintain a certain ratio of consolidated EBITDA to consolidated interest ~~rates of 0.51% and 2.09%, respectively.~~

In the next 12 months, our £600.0 million 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 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 January 23, 2021, the company had approximately $7.8 billion in cash and available liquidity; and we believe this amount would be sufficient to sustain our operations for an extended period, including through an impact much worse than we are currently experiencing or expecting.expense.

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 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 company’s $2.0 billion long-term revolving credit facility have also been guaranteed by these subsidiaries. As of ~~December 26, 2020,~~January 1, 2022, Sysco had a total of ~~$12.5~~$10.5 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 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~~2021 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 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.The following tables include summarized financial information of the obligor group for the periods presented.


Combined Parent and Guarantor Subsidiaries Summarized Balance Sheet	Jan. 1, 2022		Jul. 3, 2021
	(In thousands)
ASSETS
Receivables due from non-obligor subsidiaries	$	118,561	$	171,718
Current assets	5,469,809		6,661,284
Total current assets	$	5,588,370	$	6,833,002
Notes receivable from non-obligor subsidiaries	$	82,833	$	83,457
Other noncurrent assets	3,926,680		3,933,833
Total noncurrent assets	$	4,009,513	$	4,017,290

LIABILITIES
Payables due to non-obligor subsidiaries	$	49,591	$	203,365
Other current liabilities	2,436,064		2,299,674
Total current liabilities	$	2,485,655	$	2,503,039
Notes payable to non-obligor subsidiaries	$	194,365	$	269,709
Long-term debt	10,072,559		10,139,596
Other noncurrent liabilities	1,298,851		1,209,598
Total noncurrent liabilities	$	11,565,775	$	11,618,903

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Combined Parent and Guarantor Subsidiaries Summarized Balance Sheet Dec. 26, 2020 Jun. 27, 2020
(In thousands)
ASSETS
Receivables due from non-obligor subsidiaries $ 96,596 $ 133,195
Current assets 8,004,804 8,644,084
Total current assets $ 8,101,400 $ 8,777,279
Notes receivable from non-obligor subsidiaries $ 83,482 $ 671,500
Other noncurrent assets 3,867,458 4,036,312
Total noncurrent assets $ 3,950,940 $ 4,707,812
LIABILITIES
Payables due to non-obligor subsidiaries $ 36,212 $ 48,923
Other current liabilities 1,946,408 2,200,422
Total current liabilities $ 1,982,620 $ 2,249,345
Notes payable to non-obligor subsidiaries $ 196,097 $ 233,158
Long-term debt 12,021,840 12,478,453
Other noncurrent liabilities 1,278,574 1,356,781
Total noncurrent liabilities $ 13,496,511 $ 14,068,392

Combined Parent and Guarantor Subsidiaries Summarized Results of Operations

26-Week Period Ended ~~Dec. 26, 2020~~Jan. 1, 2022

(In thousands)

Sales

~~14,616,325~~20,994,095

Gross profit

~~2,786,667~~3,764,529

Operating income

~~754,571~~1,079,080

Interest expense from non-obligor subsidiaries

~~26,671~~32,239

Net earnings

~~403,186~~522,457

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, which are described in Item 7 of our fiscal ~~2020~~2021 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;

•~~the expected extent and duration of lockdowns in Europe during fiscal 2021;~~

•~~expectations regarding the impact of cost-saving measures undertaken in response to the COVID-19 pandemic;~~

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

•our expectations regarding the top-line impact of the ~~COVID-19 pandemic on our mix~~Omicron variant in the third quarter of ~~earnings by jurisdiction;~~fiscal 2022;

•our ~~anticipated hiring~~expectations that volumes will continue their recovery to fiscal 2019 levels relatively quickly once the Omicron variant peaks are passed and government restrictions ease;

•our belief that the impact of ~~new employees in preparation for~~ the ~~expected business recovery,~~Omicron variant and the ~~expected impact on~~subsequent recovery will delay the return of our volumes to fiscal 2019 levels;

•our expectations regarding our ability to meet our stated growth rate goals for fiscal 2022;

•our belief that our Recipe for Growth strategy will enable us to accelerate over the next three years to meet our growth target by the end of fiscal 2024;

•our expectations regarding our snap back operating expenses in the third quarter of fiscal ~~2021;~~2022;

•our expectations regarding improvements in our productivity;

•our expectations regarding our ~~results~~operating expenses related to our investment for ~~the third quarter of fiscal 2021;~~our Recipe for Growth;

•our ~~belief~~expectations regarding inflation;

•our expectations regarding our earnings per share and adjusted earnings per share in the second half of fiscal 2022;

•our expectations that our performance in the ~~tightening or loosening~~fourth quarter of ~~restrictions on customers~~fiscal 2022 will ~~continue~~be stronger relative to be the ~~primary driver~~third quarter as a result of anticipated volume recovery, lower snap-back expenses and improved operating productivity;

•our plans regarding mergers and acquisitions and our growth strategy;

•our expectations regarding the impact of the ~~pace~~acquisition of ~~business recovery until vaccines are available;~~Greco and Sons on incremental sales in fiscal 2022;

•our expectations regarding the timing of the closing of the acquisition of The Coastal Companies;

•our ability to grow substantially faster than the foodservice distribution industry and deliver profitable growth through our Recipe for Growth transformation;

•our belief that our ~~new customer additions~~growth transformation will ~~enable Sysco~~allow us to ~~recover faster than~~better serve our customers;

•our expectations that as our Recipe for Growth matures, the ~~market as economic conditions improve;~~impact on our top-line growth will continue to accelerate;

•our expectations regarding ~~the ability of our supply chain and facilities to remain in place and operational;~~labor costs;

•our plans regarding our transformation initiatives, including acceleration of our work across our customer-facing tools and technology, sales transformation and the regionalization of our operations in the U.S., and the expected effects, returns and benefits from such initiatives;

•~~our belief that we will continue to experience risk in fiscal 2021 relating to uncollectible accounts, our~~ expectations regarding ~~the level of uncollectible accounts~~growth in customers and ~~bad debt reserves, and our expectations regarding the timing of our collection of the unreserved balance of accounts receivable held prior to the onset of the COVID-19 crisis;~~

•~~our belief that our actions undertaken to receive payments on receivables will help to partially affect the unfavorable impact of the COVID-19 pandemic;~~

•~~our belief that our available liquidity would be sufficient to sustain our operations for an extended period, including through an impact much worse than we are currently experiencing or expecting;~~gains in market share;

•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;

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

•~~our expectations that our divestitures in the first and third quarters of fiscal 2021 will facilitate our efforts to prioritize our focus and investments on our core business;~~

•~~our belief that the increase in customer orders through Sysco Shop is a direct result of the improvements we are making to the platform;~~

•~~our intent to implement our new pricing software across the U.S. in calendar year 2021;~~

•our belief in our 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;~~2022;

•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 and their effectiveness in preventing a significant unfavorable impact on our cash flows from operations;

•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;~~ and

•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 a combination of cash flow from operations and cash on hand.~~markets.

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 fiscal ~~2020~~2021 Form 10-K:

•the impact and effects of public health crises, pandemics and epidemics, such as the ~~recent outbreak of~~ COVID-19 pandemic, 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 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~~group purchasing organizations 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~~complementary 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 fiscal ~~2020~~2021 Form 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 fiscal ~~2020~~2021 Form ~~10-K and the risk factor discussion contained in Part II, Item 1A of this report.~~10-K. There have been no significant changes to our market risks since ~~June 27, 2020, except as noted below.~~

~~Interest Rate Risk~~

At December 26, 2020, there were no commercial paper issuances outstanding under our U.S. commercial paper program, and we had £600.0 million outstanding under our U.K. commercial paper program. Total debt as of December 26, 2020 was $13.8 billion, of which approximately 83% was at fixed rates of interest, including the impact of our interest rate swap agreements.

~~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 26 weeks of fiscal 2021 and fiscal 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 December 26, 2020, we had diesel fuel swaps with a total notional amount of approximately 33 million gallons through DecemberJuly 3, 2021. These swaps are expected to lock in the price of approximately 65% of our projected fuel purchase needs for fiscal 2021. Additional swaps have been entered into for hedging activity in fiscal 2022. As of December 26, 2020, we had diesel fuel swaps with a total notional amount of approximately 11 million gallons specific to fiscal 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 ~~December 26, 2020.~~January 1, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding the required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Sysco’s disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives. Based on the evaluation of our disclosure controls and procedures as

of ~~December 26, 2020,~~January 1, 2022, 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 ~~December 26, 2020,~~January 1, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

5661

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

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 material environmental matters to disclose for this period.

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

Item 1A. Risk Factors

Except as provided below, there were no material changes from the risk factors disclosed in Item 1A of our fiscal ~~2020~~2021 Form 10-K.

~~Industry and General Economic Risks~~Changes in the method of determining London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with an alternative reference rate, may adversely affect interest expense related to outstanding debt.

~~Global health developments~~Amounts drawn under our revolving credit facility may bear interest rates in relation to LIBOR, depending on our selection of repayment options. In addition, certain of our outstanding interest rate swap agreements have a floating interest rate in relation to three-month LIBOR. On March 5, 2021, the Financial Conduct Authority in the U.K. announced that immediately after (a) December 31, 2021, in the case of all sterling, euro, Swiss franc, and ~~economic uncertainty resulting from~~Japanese yen settings, and the ~~COVID-19 pandemic~~one week and two month U.S. dollar LIBOR settings, and (b) June 30, 2023, in the case of all other U.S. dollar LIBOR settings, such LIBOR settings will either cease to be provided by the administrator or will no longer be representative. Despite this deferral for certain U.S. dollar LIBOR tenors, the LIBOR administrator has advised that no new contracts using U.S. dollar LIBOR should be entered into after December 31, 2021. These actions indicate that the continuation of U.S. LIBOR on the current basis cannot be guaranteed after June 30, 2023. Moreover, it is possible that U.S. LIBOR for such tenors will be discontinued or modified prior to June 30, 2023. On July 29, 2021, the Alternative Reference Rates Committee, a steering committee consisting of large U.S. financial institutions convened by the Federal Reserve Board, formally recommended replacing U.S. dollar LIBOR with forward-looking Secured Overnight Financing Rate (SOFR) term rates. As a result of the discontinuation of the remaining U.S. dollar LIBOR tenors, we may need to renegotiate our credit facility and certain interest rate swap agreements, and we may not be able to do so with terms that are favorable to us.

In connection with the discontinuation of LIBOR, (a) we adhered to the ISDA 2020 IBOR Fallbacks Protocol and (b) on October 14, 2021, we entered into an amendment to our revolving credit facility that replaced (i) sterling LIBOR with the Sterling Overnight Index Average (SONIA) and (ii) euro LIBOR with the Euro Short Term Rate (ESTR).

Alternative reference rates, such as SOFR, SONIA, and ESTR, could be higher or more volatile than LIBOR, which could result in an increase in the cost of our indebtedness, impacting our financial condition and results of operations. The overall financing market may be disrupted as a result of the phase-out or replacement of LIBOR. Disruption in the financial market or the inability to renegotiate our credit facility or our interest rate swap agreements with favorable terms could have ~~adversely affected,~~a material adverse effect on our business, financial position, and ~~are expected to~~operating results. We continue to ~~adversely affect,~~evaluate the potential impact of the replacement of the LIBOR benchmark interest rate; however, we are not able to predict the impact a transition to an alternative reference rate may have on our business, financial condition, and results of operations.

Public health crises, pandemics and epidemics, such as the COVID-19 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 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.

In response to the 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, 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 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 may see an increase in bankruptcies of customers, which could contribute to an increase in bad debt expense recorded in fiscal 2021. In the first 26 weeks of fiscal 2021, Sysco recognized a net $94.2 million benefit on its provision for losses on receivables. In the third and fourth 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 26 weeks of fiscal 2021, collections of the company’s pre-pandemic receivables have improved, and its reserve for doubtful accounts has been reduced accordingly, resulting in a $128.9 million benefit. Additional reserves of $34.7 million were recorded in the first 26 weeks of fiscal 2021 for receivables relating to 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 the future, which may place constraints on our ability to 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. 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.

Sustained 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-19 pandemic 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 and subsequent filings with the SEC, such as those risks relating to our level of indebtedness, and may have an adverse effect on 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, in June 2016, the U.K.~~’s exit from~~ held a referendum in which voters approved Brexit. The U.K. exited 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 established the terms governing the U.K.’s departure provided that, among other things, there would be an ongoing~~a transition period ~~under which the U.K. remained a part of the EU customs and regulatory area until~~that ended on December 31, 2020. On January 1, 2021, the U.K. left the EU Single Market and Customs Union, as well as all EU policies and international agreements. As a result, the free movement of persons, goods, services and capital between the U.K. and the EU ended, and the 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”).~~EU. The ~~Trade Agreement~~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~~quotas (subject to rules of origin requirements). Uncertainty exists regarding the ~~U.K. and~~ultimate impact of this trade agreement, as well as 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~~extent of ~~the Trade Agreement will have on our business and our customers, and it is~~ possible ~~that new terms may adversely affect our 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 have on our U.K. and European business operations. This uncertainty also includes the impact on our customers’ business operations 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

5862

~~sterling~~legal implications of Brexit. Brexit also contributes to global political and ~~the local currencies~~economic uncertainty, which may cause, among other consequences, volatility in exchange rates and interest rates, and changes in regulations. These effects of Brexit, among others, could adversely affect 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 future disruptions. 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 ourposition, results of operations ~~and financial condition.~~

~~As an~~or cash flows. In addition, labor or other political disputes or general unrest can have a negative impact on our operations. For example, ~~of political instability,~~ in fiscal 2020, the “yellow vest” protests in France against a fuel tax increase, pension reform and the French government negatively impacted our sales in France. ~~Similarly, future~~Future labor disruptions or disputes could ~~disrupt the integration of Brake France and Davigel into Sysco France and~~have a negative impact on 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.~~world.

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

Recent Sales of Unregistered Securities

None

Issuer Purchases of Equity Securities

We made the following share repurchases during the second quarter of fiscal ~~2021:~~2022:


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 (2)	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
Month #1	Month #1						Month #1
September 27 - October 24		—	$	—	—	—
October 3 - October 30							October 3 - October 30	7,059	$	83.27	587,789	—
Month #2	Month #2						Month #2
October 25 - November 21		4,538	74.76		339,256	—
October 31 - November 27							October 31 - November 27	1,796,269	75.87		136,285,833	—
Month #3	Month #3						Month #3
November 22 - December 26		3,249	75.79		246,245	—
November 28 - January 1							November 28 - January 1	3,883,029	71.99		279,538,437	—
Totals	Totals	7,787	$	75.19	585,501	—	Totals	5,686,357	$	73.23	416,412,059	—

(1)The total number of shares purchased includes 7,059, 0 ~~4,538~~ and ~~3,249~~0 shares tendered by individuals in connection with stock option exercises in Month #1, Month #2 and Month #3, respectively.

(2)

~~We have routinely engaged~~See the discussion in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Equity Transactions” for additional information regarding Sysco’s 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 August 2019, our Board of Directors approved a 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.” During March 2020, however, we discontinued share repurchases under this program, and pursuant to the amendment to our long-term revolving credit facility, we do not anticipate making any repurchases for the remainder of fiscal 2021. As of December 26, 2020, we had a remaining authorization of approximately $2.1 billion.program.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

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.

6063

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,~~27, 2021, incorporated by reference to Exhibit ~~3.2~~3.4 to the Form 10-K for the year ended July 3, 2021 filed on August 30, 2021 (File No. 1-6544).

4.1	—	Forty-Second Supplemental Indenture dated as of December 14, 2021 among Sysco Corporation, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 2.450% Senior Notes due 2031, incorporated by reference to Exhibit 4.1 to the Form 8-K filed on ~~August 31, 2016~~December 14, 2021 (File No. 1-6544).

4.2	—	Forty-Third Supplemental Indenture dated as of December 14, 2021 among Sysco Corporation, the Guarantors named therein and U.S. Bank National Association, as Trustee, relating to the 3.150% Senior Notes due 2051, incorporated by reference to Exhibit 4.3 to the Form 8-K filed on December 14, 2021 (File No. 1-6544).

10.1†#	—	~~Letter Agreement, dated as of November 12, 2020, by and between Aaron E. Alt and Sysco Corporation.~~

~~10.2†#~~	—	Form of Restricted Stock Award Agreement for Directors (2021) pursuant to the Sysco Corporation 2018 Omnibus Incentive Plan.

~~10.3†~~10.2†#	—	Form of Restricted Stock Award Agreement for Directors (2021) pursuant to the Sysco Corporation 2018 Omnibus Incentive Plan (for directors who elect to defer receipt of shares under the 2009 Board of Directors Stock Deferral Plan).

~~10.4†~~10.3†#	—	Description of Compensation Arrangements with Non-Employee Directors.

~~22.1~~22.1#	—	Subsidiary Guarantors and Issuers of Guaranteed Securities ~~incorporated by reference to Exhibit 22.1 to the Form 10-K for the year ended June 27, 2020 filed on 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

6165

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: February ~~2, 2021~~8, 2022	By:	/s/ KEVIN P. HOURICAN
		Kevin P. Hourican
		President and Chief Executive Officer

Date: February ~~2, 2021~~8, 2022	By:	/s/ AARON E. ALT
		Aaron E. Alt
		Executive Vice President and
		Chief Financial Officer

Date: February ~~2, 2021~~8, 2022	By:	/s/ ANITA A. ZIELINSKI
		Anita A. Zielinski
		Senior Vice President and
		Chief Accounting Officer

6266



	PART I – FINANCIAL INFORMATION	Page No.
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2827
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5661
Item 4.	Controls and Procedures	5661
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	5762
Item 1A.	Risk Factors	5762
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5963
Item 3.	Defaults Upon Senior Securities	5963
Item 4.	Mine Safety Disclosures	5963
Item 5.	Other Information	6063
Item 6.	Exhibits	6063

Signatures		6266


Impact of restructuring and transformational project costs (1)	(7)		(3,540)		3,533		(99.8)	%

Operating expenses adjusted for Certain Items (Non-GAAP)	$	237,813	$	229,186	$	8,627	3.8	%

Operating income (GAAP)	$	23,020	$	17,431	$	5,589	32.1	%
Impact of restructuring and transformational project costs (1)	7		3,540		(3,533)		(99.8)	%

Operating income adjusted for Certain Items (Non-GAAP)	$	23,027	$	20,971	$	2,056	9.8	%

OTHER




Operating expenses (GAAP)	$	77,220	$	118,711	$	(41,491)	(35.0)	%
Impact of bad debt reserve adjustments (2)	2,116		—		2,116		NM
Operating expenses adjusted for Certain Items (Non-GAAP)	$	79,336	$	118,711	$	(39,375)	(33.2)	%

Operating (loss) income (GAAP)	$	(1,023)	$	19,540	$	(20,563)	(105.2)	%
Impact of bad debt reserve adjustments (2)	(2,116)		—		(2,116)		—
Operating (loss) income adjusted for Certain Items (Non-GAAP)	$	(3,139)	$	19,540	$	(22,679)	(116.1)	%

CORPORATE


Operating expenses (GAAP)	$	381,529	$	402,607	$	(21,078)	(5.2)	%
Impact of restructuring and transformational project costs (6)	(23,995)		(53,360)		29,365		(55.0)

Operating expenses adjusted for Certain Items (Non-GAAP)	$	357,534	$	349,247	$	8,287	2.4	%

Operating loss (GAAP)	$	(383,530)	$	(404,261)	$	20,731	(5.1)	%
Impact of restructuring and transformational project costs (6)	23,995		53,360		(29,365)		(55.0)

Operating loss adjusted for Certain Items (Non-GAAP)	$	(359,535)	$	(350,901)	$	(8,634)	2.5	%